Harman Kardon 2011 Annual Report Download - page 33

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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 BMW, Audi/Volkswagen, Daimler AG and Toyota/
Lexus, will continue to account for a significant portion of our sales for the foreseeable future. However, none of
BMW, Audi/Volkswagen, Daimler AG, Toyota/Lexus or our other automotive customers are obligated to any
long-term purchases of our products. The loss of sales to BMW, Audi/Volkswagen, Daimler AG, Toyota/Lexus
or to any of our other significant automotive customers would have a material adverse effect on our consolidated
net sales, results of operations and financial condition.
Strategic decisions by our customers to move to dual sourcing arrangements could have an adverse effect on
our operations.
Automakers customarily maintain dual sourcing arrangements and we cannot assure you that our customers
will not further expand dual sourcing arrangements in the future, which could have a material adverse effect on
our consolidated net sales, results of operations and financial condition.
Failure to deliver products on time to our automotive customers could adversely affect our financial results.
We have products in various stages of development for our automotive customers. If we do not complete
our development efforts in time to meet our customers’ vehicle production requirements, we could be subject to
monetary penalties and damage our customer relationships, which could have a material adverse effect on our
consolidated sales, results of operations and financial condition.
Natural disasters could impact our business.
Natural disasters, such as the recent earthquakes and tsunami that struck Japan in March 2011, have created
uncertain economic and market conditions. Such events may disrupt local infrastructure, damaging electricity, oil
and gas supply and manufacturing facilities. Any significant impact on consumer demand could negatively
impact our net sales. Additionally, Automotive customers may continue to experience production facility
shutdowns due to disruption in their supply chain, therefore reducing demand for our products. If any unexpected
effects of the Japan earthquakes and tsunami continue, the demand for our products may be reduced or our
production cycles could be disrupted, which could have a material adverse effect on our business, financial
condition or results of operations.
Bankruptcy of a significant customer could have a material adverse effect on our liquidity, financial condition
and results of operations.
A significant portion of our revenues are derived from sales to customers in the automotive industry, where
companies have experienced financial difficulties. As part of the bankruptcy process, our pre-petition receivables
may not be realized, customer manufacturing sites may be closed or contracts voided. The bankruptcy of a major
customer could have a material adverse effect on our liquidity, financial condition and results of operations.
The financial distress of our suppliers could harm our results of operations.
Recent automotive industry conditions have adversely affected our supplier base. Lower production levels
for some of our key customers and increases in certain raw material, commodity and energy costs have resulted
in severe financial distress among many companies within the automotive supply base. Several large suppliers
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