Garmin Reports Record Third Quarter Revenues with Strong Operating Margin and Increased Market Share
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Garmin Reports Record Third Quarter Revenues with Strong Operating Margin and Increased Market Share

CAYMAN ISLANDS—(BUSINESS WIRE)—October 29, 2008— Garmin Ltd. (Nasdaq: GRMN) today announced third quarter results for the period ended September 27, 2008.

Third Quarter 2008 Financial highlights:

Year-to-Date 2008 Financial highlights:

Business highlights:

Executive overview from Dr. Min Kao, Chairman and Chief Executive Officer:

We are experiencing challenging macroeconomic conditions, yet Garmins products continued to attract consumers, generating revenue growth and allowing us to expand our global leadership position in the industry during the third quarter. While most of our segments continue to grow, we are cognizant of the continued economic slowdown and business climate. As such, we are actively taking steps to manage our business appropriately. These include scaling our operations to better match current business conditions and changes to inventory planning that will allow us to reduce inventory levels by approximately $150 million by the end of the year. In addition, we will be more focused in our advertising spending as the economy and PND market change.

The strength of our product line-up in the automotive/mobile segment is unsurpassed and we were excited to introduce the new holiday products including the updates to our popular nüvi® 2x5 and nüvi® 7x5 series. These products deliver free lifetime traffic to the consumer through advertising sponsorships which is a first for the industry. The latest nüvi® 7x5 products also deliver lane assist which provides drivers with a clear illustration of what lies ahead on their route and 3-D views of buildings in some areas which further enhances the consumer experience.

Revenue in our outdoor/fitness segment continued to grow rapidly when compared to the year ago quarter due to the strength of our product line-up and an expanding fitness market. Specific growth drivers include the Colorado series, the Forerunner® 405, the Edge® 705, and the Oregon series, which was just released in the third quarter. We believe this category will continue to perform well during the holidays due to the gift appeal of both the outdoor and fitness products.

Our aviation segment continued to drive growth in the business during the quarter, though at a slower rate due to challenging macroeconomic conditions. Revenue contribution from our newly certified G600 and shipments of integrated cockpits to our new OEM partners, namely Cirrus and Embraer, have offset the slowdown in demand for portable and retrofit products and production cuts from our existing base of OEM partners.

Our marine segment saw declining revenue for the second straight quarter on a year-over-year basis due to the severe impact on this industry of macroeconomic conditions and high fuel prices. However, we continue to focus on innovation and on delivering a full suite of products to marine OEMs, including our new GHP10 autopilot which just recently began shipping and the VHF radios that were announced this month. Garmins diverse business composition allows us to endure the downturn in the boating industry while still making appropriate levels of research and development investment for the future.

Financial overview from Kevin Rauckman, Chief Financial Officer:

We were pleased with our financial results which were in-line with our expectations, as well as the overall demand for Garmins products during the third quarter given the economic conditions facing consumers, said Kevin Rauckman, chief financial officer of Garmin Ltd. Our revenue grew 19% during the quarter. Excluding the impact of foreign currency exchange, EPS for the quarter fell $0.02, from $0.89 to $0.87.

Gross margin for the overall business remained solid in the third quarter at 44.3%, a 150 basis point decline sequentially that can be primarily attributed to the weakening of the Euro against the US dollar. The automotive/mobile segment gross margin continued to be sound at 38% as PND pricing declines moderated and we continued to get benefit from material cost reductions and improved operating efficiencies. Gross margin for the aviation and outdoor/fitness segments remained on target when compared to our long-term targets at 65% and 63%, respectively. The gross margin for the marine segment fell to 49% as we entered into a slower marine season. We continue to believe that a 55% gross margin is a sustainable target for the marine segment long-term.

Operating margin fell 480 basis points from the year-ago quarter. The primary driver of year-over-year growth in operating expenses is the acquired European distributors but we plan to gain some operating leverage during fourth quarter as sales grow during the holiday season.

We also generated $202 million of free cash flow in the third quarter of 2008, resulting in a cash and marketable securities balance of just over $850 million at the end of the quarter. This equates to $4.12 of cash per basic share outstanding. This level of liquidity, along with our debt-free balance sheet, is an important competitive advantage in the current environment.

Fiscal 2008 Outlook

While we believe Garmin is offering the most compelling and competitive products in the marketplace, we also recognize that some markets are slowing in these difficult economic times. Due to the continued deterioration of the economic conditions, its impact on consumers worldwide, and the continued weakening of the Euro against the US dollar, we are revising our full-year guidance.

Nüvifone Update

Development of the nüvifone is on target for a first half of 2009 launch. We have signed letters of intent or agreements with certain carriers which we expect will lead to carrier lab entry in early 2009. We do not plan any specific announcements until closer to the launch date.

Share Repurchase Program

During the third quarter, Garmin was able to repurchase 8.2 million shares. The shares represented those authorized by the board of directors in June 2008. This leaves an additional 0.2 million shares of the 10 million approved in June 2008 to be repurchased. In addition, on October 22, the board of directors authorized the Company to repurchase up to $300M of the companys shares as market and business conditions warrant through December 31, 2009. The repurchases may be made from time to time on the open market at prevailing market prices, in negotiated transactions off the market, or pursuant to a Rule 10b5-1 plan adopted by the Company which permits the Company to repurchase its shares during periods in which the Company may be in possession of material non-public information or self-imposed insider trading blackout periods. The company continues to view the stock repurchase as an appropriate use of cash given the long-term growth prospects of the company, ongoing free cash flow generation and the need to maintain adequate cash reserves for strategic acquisitions.

Non-GAAP Measures

Net income (earnings) per share, excluding foreign currency

Management believes that net income per share before the impact of foreign currency translation gain or loss is an important measure. The majority of the companys consolidated foreign currency translation gain or loss results from translation into New Taiwan dollars at the end of each reporting period of the significant cash and marketable securities, receivables and payables held in U.S. dollars by the companys Taiwan subsidiary. Such translation is required under GAAP because the functional currency of this subsidiary is New Taiwan dollars. However, there is minimal cash impact from such foreign currency translation and management expects that the Taiwan subsidiary will continue to hold the majority of its cash, cash equivalents and marketable securities in U.S. dollars. Accordingly, earnings per share before the impact of foreign currency translation gain or loss allows an assessment of the companys operating performance before the non-cash impact of the position of the U.S. dollar versus the New Taiwan dollar, which permits a consistent comparison of results between periods.

The following table contains a reconciliation of GAAP net income per share to net income per share excluding the impact of foreign currency translation gain or loss.

Garmin Ltd. And Subsidiaries
Net income per share, excluding FX
(in thousands, except per share information)
13-Weeks Ended 39-weeks Ended
September 27, September 29, September 27, September 29,
2008 2007 2008 2007  
Net Income (GAAP) $171,244 $193,507 $575,115 $547,744
Foreign currency (gain) / loss, net of tax effects (1) $10,322 $3,151 $12,653 ($3,036 )
Net income, excluding FX $181,566 $196,658 $587,768 $544,708  
Net income per share (GAAP):
Basic $0.83 $0.89 $2.71 $2.53
Diluted $0.82 $0.88 $2.68 $2.50
Net income per share, excluding FX:
Basic $0.88 $0.91 $2.77 $2.52
Diluted $0.87 $0.89 $2.74 $2.48
Weighted average common shares outstanding:
Basic 206,634 216,773 212,299 216,456
Diluted 208,107 220,644 214,252 219,482
(1) Excludes the FX related to the tender of our Tele Atlas N.V. shares

Free cash flow

Management believes that free cash flow is an important financial measure because it represents the amount of cash provided by operations that is available for investing and defines it as operating cash flow less capital expenditures for property and equipment.

The following table contains a reconciliation of GAAP net cash provided by operating activities to free cash flow.

Garmin Ltd. And Subsidiaries
Free Cash Flow
(in thousands)
13-Weeks Ended 39-weeks Ended
September 27, September 29, September 27, September 29,
2008     2007   2008     2007  
Net cash provided by operating activities $232,522 $133,766 $512,703 $555,905
Less: purchases of property and equipment ($30,563 ) ($16,873 ) ($110,480 ) ($128,893 )
Free Cash Flow $201,959   $116,893   $402,223   $427,012  

Earnings Call Information

The information for Garmin Ltd.s earnings call is as follows:

When:   Wednesday, October 29, 2008 at 11:00 a.m. Eastern


Simply log on to the web at the address above or call to listen in at 800-891-6383.


A phone recording will be available for five business days following the earnings call and can be accessed by dialing 800-642-1687 or (706) 645-9291 and utilizing the access code 67156061. An archive of the live webcast will be available until November 28, 2008 on the Garmin website at To access the replay, click on the Investor Relations link and click over to the Events Calendar page.

This release includes projections and other forward-looking statements regarding Garmin Ltd. and its business. Any statements regarding the companys estimated earnings and revenue for fiscal 2008, the Companys expected segment revenue growth rate, margins, the number of new products to be introduced in 2008 and the companys plans and objectives are forward-looking statements. The forward-looking events and circumstances discussed in this release may not occur and actual results could differ materially as a result of risk factors affecting Garmin, including, but not limited to, the risk factors that are described in the Annual Report on Form 10-K for the year ended December 29, 2007 filed by Garmin with the Securities and Exchange Commission (Commission file number 0-31983). A copy of Garmins 2007 Form 10-K can be downloaded from

The global leader in satellite navigation, Garmin Ltd. and its subsidiaries have designed, manufactured, marketed and sold navigation, communication and information devices and applications since 1989 most of which are enabled by GPS technology. Garmins products serve automotive, mobile, wireless, outdoor recreation, marine, aviation, and OEM applications. Garmin Ltd. is incorporated in the Cayman Islands, and its principal subsidiaries are located in the United States, Taiwan and the United Kingdom. For more information, visit Garmin's virtual pressroom at or contact the Media Relations department at 913-397-8200. Garmin, nüvi, Edge and Forerunner are registered trademarks, and nüvifone, Oregon, Colorado and GHP are trademarks of Garmin Ltd. or its subsidiaries.

All other brands, product names, company names, trademarks and service marks are the properties of their respective owners. All rights reserved.

Garmin Ltd. And Subsidiaries
Condensed Consolidated Balance Sheets
(In thousands, except share information)
September 27, December 29,
2008     2007
Current assets:
Cash and cash equivalents $521,540 $707,689
Marketable securities 18,048 37,551
Accounts receivable, net 678,750 952,513
Inventories, net 698,927 505,467
Deferred income taxes 87,109 107,376
Prepaid expenses and other current assets 32,204   22,179
Total current assets 2,036,578 2,332,775
Property and equipment, net 453,419 374,147
Marketable securities 309,492 386,954
Restricted cash 1,452 1,554
Licensing agreements, net 6,483 14,672
Other intangible assets, net 207,889   181,358
Total assets $3,015,313   $3,291,460
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $217,122 $341,053
Salaries and benefits payable 41,633 31,696
Accrued warranty costs 81,291 71,636
Other accrued expenses 154,102 280,603
Income taxes payable 50,994 76,895
Dividend payable 151,900   -
Total current liabilities 697,042 801,883
Deferred income taxes 11,298 11,935
Non-current taxes 166,075 126,593
Other liabilities 1,058 435
Stockholders' equity:
Common stock, $0.005 par value, 1,000,000,000 shares authorized:

Issued and outstanding shares - 202,533,000 as of September 27, 2008 and 216,980,000 as of December 29, 2007

1,511 1,086
Additional paid-in capital 0 132,264
Retained earnings 2,139,214 2,171,134
Accumulated other comprehensive income (885 ) 46,130
Total stockholders' equity 2,139,840   2,350,614
Total liabilities and stockholders' equity $3,015,313   $3,291,460
See accompanying notes.
Garmin Ltd. And Subsidiaries
Condensed Consolidated Statements of Income (Unaudited)
(In thousands, except per share information)
13-Weeks Ended 39-Weeks Ended
September 27, September 29, September 27, September 29,
2008 2007 2008 2007
Net sales $870,355 $728,673 $2,445,830 $1,963,298
Cost of goods sold 484,716   386,822   1,322,948 1,009,028
Gross profit 385,639 341,851 1,122,882 954,270
Selling, general and administrative expense 118,527 87,060 341,380 248,358
Research and development expense 52,749   40,634   155,904 111,863
171,276   127,694   497,284 360,221
Operating income 214,363 214,157 625,598 594,049
Other income (expense):
Interest income 8,770 11,798 26,830 31,997
Foreign currency (12,744 ) (3,626 ) 4,818 3,493
Gain on sale of equity securities 0 - 50,949 -
Other 1,023   297   1,824 631
(2,951 ) 8,469   84,421 36,121
Income before income taxes 211,412 222,626 710,019 630,170
Income tax provision 40,168   29,119   134,904 82,426
Net income $171,244   $193,507   $575,115 $547,744
Net income per share:
Basic $0.83 $0.89 $2.71 $2.53
Diluted $0.82 $0.88 $2.68 $2.50
Weighted average common
shares outstanding:
Basic 206,634 216,773 212,299 216,456
Diluted 208,107 220,644 214,252 219,482
See accompanying notes.
Garmin Ltd. And Subsidiaries
Condensed Consolidated Statements of Cash Flows (Unaudited)
(In thousands)
  39-Weeks Ended
September 27,   September 29,
2008 2007
Operating Activities:
Net income $575,115 $547,744
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 33,797 22,786
Amortization 20,823 18,803
Loss (gain) on sale of property and equipment (243 ) 71
Provision for doubtful accounts 4,289 3,467
Deferred income taxes 28,623 (1,157 )
Foreign currency transaction gains/losses 11,266 3,232
Provision for obsolete and slow moving inventories 29,439 21,502
Stock compensation expense 28,815 8,830
Realized gains on marketable securities (50,884 ) 0
Changes in operating assets and liabilities, net of acquisitions:
Accounts receivable 302,012 (90,497 )
Inventories (196,471 ) (234,920 )
Other current assets (977 ) 4,510
Accounts payable (175,715 ) 117,034
Other current and non-current liabilities (95,588 ) 147,608
Income taxes payable 1,593 9,486
Purchase of licenses (3,191 ) (22,594 )
Net cash provided by operating activities 512,703 555,905
Investing activities:
Purchases of property and equipment (110,480 ) (128,893 )
Proceeds from sale of property and equipment 8 4
Purchase of intangible assets (4,061 ) (2,481 )
Purchase of marketable securities (366,336 ) (983,716 )
Redemption of marketable securities 444,102 1,141,431
Change in restricted cash 106 (56 )
Acquisitions, net of cash acquired (50,497 ) (84,126 )
Net cash used in investing activities (87,158 ) (57,837 )
Financing activities:
Proceeds from issuance of common stock 7,703 15,358
Stock repurchase (624,688 ) -
Dividends 0 (162,531 )
Payments on long term debt - (218 )
Tax benefit related to stock option exercise 2,309   15,776  
Net cash used in financing activities (614,676 ) (131,617 )
Effect of exchange rate changes on cash and cash equivalents 2,982 (25 )
Net (decrease)/increase in cash and cash equivalents (186,149 ) 366,428
Cash and cash equivalents at beginning of period 707,689   337,321  
Cash and cash equivalents at end of period $521,540   $703,749  
See accompanying notes.
Garmin Ltd. And Subsidiaries
Revenue, Gross Profit, and Operating Income by Segment (Unaudited)
Reporting Segments
Outdoor/ Auto/
Fitness Marine Mobile Aviation Total
13-Weeks Ended September 27, 2008
Net sales $118,614 $44,048 $626,506 $81,187 $870,355
Gross profit $74,487 $21,714 $236,339 $53,099 $385,639
Operating income $52,136 $10,606 $124,359 $27,262 $214,363
13-Weeks Ended September 29, 2007
Net sales $87,747 $47,659 $518,939 $74,328 $728,673
Gross profit $46,553 $25,170 $221,148 $48,980 $341,851
Operating income $30,178 $15,623 $141,855 $26,501 $214,157
39-Weeks Ended September 27, 2008
Net sales $308,255 $171,232 $1,710,248 $256,095 $2,445,830
Gross profit $179,834 $94,296 $675,953 $172,799 $1,122,882
Operating income $116,892 $52,510 $361,190 $95,006 $625,598
39-Weeks Ended September 29, 2007
Net sales $225,437 $170,433 $1,343,460 $223,968 $1,963,298
Gross profit $123,616 $92,704 $591,400 $146,550 $954,270
Operating income $79,986 $60,033 $370,448 $83,582 $594,049


Investor Contact:
Kerri Thurston, 913-397-8200
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Media Contact:
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