Harman Kardon 2011 Annual Report Download - page 62

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We presently estimate the effect on projected 2012 income before income taxes, based upon a recent
estimate of foreign exchange translation exposure (translating the operating performance of our foreign
subsidiaries into U.S. Dollars), of a uniform strengthening or weakening of the U.S. Dollar by 10 percent, would
be to increase or decrease income from continuing operations before income taxes by approximately $20.9
million.
Changes in currency exchange rates, principally the change in the value of the Euro compared to the
U.S. dollar have an impact on our reported results when the financial statements of foreign subsidiaries are
translated into U.S. dollars. Over half our sales are denominated in Euros. The average exchange rate for the
Euro versus the U.S. dollar for the fiscal year ended June 30, 2011 increased 1.9 percent from the same period in
the prior fiscal year.
Competitive conditions in the markets in which we operate may limit our ability to increase prices in the
event of adverse changes in currency exchange rates. For example, certain products made in Europe are sold in
the U.S. Sales of these products are affected by the value of the U.S. Dollar relative to the Euro. Any weakening
of the U.S. Dollar could depress the demand for these European manufactured products in the U.S. and reduce
sales. However, due to the multiple currencies involved in our business and the netting effect of various
simultaneous transactions, our foreign currency positions are partially offsetting. In addition, our foreign
currency hedging program is designed to limit our exposure.
Actual gains and losses in the future may differ materially from the hypothetical gains and losses discussed
above based on changes in the timing and amount of interest rate and foreign currency exchange rate movements
and our actual exposure and hedging transactions.
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