Information about http://www8.garmin.com/aboutGarmin/invRelations/releases/Q22008EarningsPressRelease.pdf
INVESTOR CONTACT: MEDIA CONTACT:…
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Created: Wed Jul 30 08:10:08 2008
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INVESTOR CONTACT: MEDIA CONTACT:
Kerri Thurston Ted Gartner
Phone | 913/397-8200 Phone | 913/397-8200
E-Mail | investor.relations@garmin.com E-Mail | media.relations@garmin.com
Garmin Reports Record Second Quarter Revenues on Strength of Automotive/Mobile and
Outdoor/Fitness Segments
Cayman Islands/July 30, 2008/PR Newswire
Garmin Ltd. (Nasdaq: GRMN - news) today announced a record quarter ended June 28, 2008.
Second Quarter 2008 Financial highlights:
· Total revenue of $912 million, up 23% from $742 million in second quarter 2007
· Automotive/Mobile segment revenue increased 24% to $632 million in second quarter 2008
· Outdoor/Fitness segment revenue increased 54% to $119 million in second quarter 2008
· Aviation segment revenue increased 15% to $90 million in second quarter 2008
· Marine segment revenue decreased 11% to $71 million in second quarter 2008
· North America and Europe continued to experience growth:
· North America revenue was $576 million compared to $455 million, up 27%
· Europe revenue was $307 million compared to $257 million, up 19%
· Asia revenue was $29 million compared to $31 million, down 6%
· Gross margin remained solid at 45.8% compared to 48.2% in first quarter 2008 and 50.5% in second
quarter 2007
· Operating margin was up 20 basis points sequentially to 26.2% in first quarter 2008 and was down
compared to 32.5% in second quarter of 2007
· Diluted earnings per share increased 21% to $1.19 from $0.98 in second quarter 2007; excluding
foreign exchange, EPS increased 18% to $1.18 from $1.00 in the same quarter in 2007. EPS includes
$0.25 related to a gain of $66 million from the tender of our Tele Atlas N.V. shares.
Year-to-Date 2008 Financial highlights:
· Total revenue of $1.58 billion, up 28% from $1.23 billion year-to-date 2007
· Automotive/Mobile segment revenue increased 31% to $1.08 billion in year-to-date 2008
· Outdoor/Fitness segment revenue increased 38% to $190 million in year-to-date 2008
· Aviation segment revenue increased 17% to $175 million in year-to-date 2008
· Marine segment revenue increased 4% to $127 million in year-to-date 2008
· All geographic areas experienced growth:
· North America revenue was $988 million compared to $777 million, up 27%
· Europe revenue was $517 million compared to $405 million, up 28%
· Asia revenue was $71 million compared to $53 million, up 34%
· Diluted earnings per share increased 15% to $1.86 from $1.62 in year-to-date 2007; excluding
foreign exchange, EPS increased 18% to $1.87 from $1.59 in year-to-date 2007. EPS includes $0.27
related to a gain of $72 million from the tender of our Tele Atlas N.V. shares.
Business highlights:
· Strong sales in our automotive/mobile, aviation, and outdoor/fitness segments put them on track for
double-digit revenue growth again in 2008.
· 3.9 million units sold in the second quarter of 2008, up 54% from the same quarter in 2007; year-to-
date units sold increased 64% from the same period in 2007.
· Independent market share research indicates that we have expanded our leadership position in the
North American PND market with approximately 55% share, which is up sequentially from 43% in
first quarter. We maintained a market share of approximately 20% in Europe. Garmin continues to
lead in world-wide PND market share.
· We have begun work to expand our principal North American aviation production facility in Olathe,
Kansas with expected completion in Q4 2009.
· Targeted advertising and promotional programs for the spring season drove solid second quarter
sales. We also announced our title sponsorship of Team Garmin/Chipotle which competed in the
Tour de France using the Edge® 705.
· Completed the acquisition of our Belgian/Luxembourg and Finnish distributors in second quarter, and
announced our intent to acquire our distributors in Austria and Portugal. These activities are part of
our ongoing efforts to further improve our market share in Europe.
· Repurchased 5.2 million shares of GRMN in the second quarter.
Executive overview from Dr. Min Kao, Chairman and Chief Executive Officer:
"Despite the challenging macro economic conditions, Garmin experienced another quarter of growth in
2008 and continues to demonstrate our solid leadership position in the industry. Our strength in the
automotive/mobile segment in the face of a slowing economy demonstrated that our products continue
to be well-positioned to take advantage of the ongoing demand for portable navigation devices. The
®
latest nüvi 2x5 products delivered during the second quarter provide yet more features for cost-
conscious consumers including picture navigation and compatibility with MSN Direct's real time content
®
service. We also delivered the high-end nüvi 800 series in the second quarter which offers industry-
®
leading speech recognition in the personal navigation sector. Our nüvi product offerings continue to
support our strategy of extensive market segmentation, drawing in customers with compelling,
competitive features, and useful content integrated into easy-to-use products at many attractive price
points. We believe this approach will continue to garner growing market share and drive strong results
throughout the remainder of 2008. Although we continue to earn industry-leading market share, the
sector is not growing as rapidly as earlier anticipated and consumers appear to be more cost-conscious
than ever; therefore, we will be lowering our full year revenue growth expectations.
Revenue in our outdoor/fitness segment grew rapidly when compared to the year ago quarter due to the
strength of our product introductions in the quarter including the ColoradoTM series, the Forerunner® 405
and the Edge® 705. We look forward to increased sales generated by our recently announced title
sponsorship of Team Garmin/Chipotle which just completed the Tour de France, as well as our new
OregonTM series which provides rugged and durable touch screen products to the outdoor market. We
still see considerable growth opportunities for this segment during the second half of 2008 and are
raising revenue growth estimates accordingly.
Our aviation segment continued to drive growth in the business during the quarter, as positive response
®
to our G1000 cockpit continued. We were pleased to announce our relationship with Cirrus Design
Corp. in the second quarter and look forward to the substantial growth this offers to our aviation
segment. This cockpit win is especially important as we are starting to see lower aircraft production
levels and weaker demand for our aftermarket and portable products. While we believe our aviation
segment will continue to grow in the second half of 2008, we will be reducing the full year revenue
guidance due to the macroeconomic conditions facing this segment, specifically high fuel prices.
Garmin's delivery of revolutionary new marine products and cartography had sheltered us from the
general downturn that the marine industry had faced throughout 2007 and the first quarter of 2008 but
the second quarter saw revenues decline in this segment as fuel prices and the economy kept boaters
away from new purchases. We believe that our products are the best in the market today and look
forward to building relationships with the OEMs in the marine segment. However, we now believe the
marine segment will be flat year-over-year as we continue to face high fuel prices and soft consumer
spending."
Financial overview from Kevin Rauckman, Chief Financial Officer:
"We are pleased with our financial results for the second quarter given the economic conditions facing
the consumer electronics segment," said Kevin Rauckman, chief financial officer of Garmin Ltd. "Our
revenue and earnings per share during the quarter grew 23% and 21% respectively. Excluding the
impact of foreign exchange, EPS for the quarter grew 18%, from $1.00 to $1.18.
Gross margin for the overall business remained strong in the second quarter at 45.8%. The
automotive/mobile segment gross margin continued to be sound at 39% as PND pricing declines
moderated and we continued to get benefit from material cost reductions and improved operating
efficiencies. Gross margin for the other three segments remained solid when compared with the year-
ago quarter with aviation and outdoor/fitness increasing as we took advantage of the strength of the
product offerings delivered to the market over the past year.
Operating margin grew 20 basis points sequentially but did show a decline of 630 basis points from the
year-ago quarter. The sequential operating margin expansion occurred within the outdoor/fitness and
aviation segments as we continued to roll out new products. Our auto/mobile operating margin
performance reflects the price declines in PND offset by favorable cost reductions during the quarter.
During the second half of 2008, we anticipate that PND margins will fall further but not as significantly as
earlier anticipated due to the better than expected pricing environment.
We also generated $34 million of free cash flow in the second quarter of 2008, resulting in a cash and
marketable securities balance of just over $1.0 billion at the end of the quarter."
Fiscal 2008 Outlook
While we remain optimistic about the future success of our business based on growing demand for
navigational products and our leadership position in the industry, we recognize that macroeconomic
conditions and high fuel prices have had an impact on our growth. With this in mind, we are updating
our guidance as follows:
· We anticipate overall revenue to be $3.9 billion in 2008, and earnings per share of $4.13
(excluding FX) including the $0.27 related to the tender of our Tele Atlas N.V. shares.
· We anticipate segment revenue growth rates for our automotive/mobile, outdoor/fitness, and
aviation segments to be 25%, 30%, and 15%, respectively. We remain optimistic regarding our
long-term growth opportunities in the marine segment but due to the macroeconomic conditions
and high fuel prices are now forecasting revenues to be flat in 2008.
· We anticipate operating margins to be approximately 25% for the full year 2008.
· Our effective tax rate should remain approximately 19%.
Nüvifone Update
The nüvifone will not be available in fourth quarter as previously announced. While we had hoped to
have carrier launches in the fourth quarter, we have found that meeting some of the carrier specific
requirements will take longer than anticipated. We remain pleased with carrier interest in the device and
are working toward making necessary design changes to meet their requirements. We anticipate
launching the product during the first half of 2009.
Dividend and Share Repurchase Program
As previously announced on June 6, 2008, the Garmin Board of Directors approved an annual cash
dividend of $0.75 per share. The dividend is payable to shareholders of record on December 1, 2008,
and will be paid on December 15, 2008.
During the second quarter, the Company was able to repurchase 5.2 million shares. The shares
represented 3.6 million to complete the 5.0 million share repurchase program authorized by the board of
directors in February 2008. In addition, the Company repurchased 1.6 million shares during the quarter
under a Rule 10b5-1 plan based on the June 2008 board of directors' authorization to repurchase 10.0
million shares. Subsequent to the close of the quarter, the Company repurchased the remaining 3.4
million shares under a Rule 10b5-1 plan. This leaves an additional 5.0 million shares to be repurchased
as market and business conditions warrant.
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 company's 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 company's
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 company's 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 26-weeks Ended
June 28, June 30, June 28, June 30,
2008 2007 2008 2007
Net Income (GAAP) $256,092 $214,377 $403,871 $354,237
(1)
Foreign currency (gain) / loss, net of tax effects ($909) $5,289 $2,330 ($6,187)
Net income, excluding FX $255,183 $219,666 $406,201 $348,050
Net income per share (GAAP):
Basic $1.20 $0.99 $1.88 $1.64
Diluted $1.19 $0.98 $1.86 $1.62
Net income per share, excluding FX:
Basic $1.19 $1.02 $1.89 $1.61
Diluted $1.18 $1.00 $1.87 $1.59
Weighted average common shares outstanding:
Basic 213,756 216,380 215,130 216,298
Diluted 215,572 219,078 217,274 218,925
(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 26-Weeks Ended
June 28, June 30, June 28, June 30,
2008 2007 2008 2007
Net cash provided by operating activities $87,716 $253,469 $280,181 $422,139
Less: purchases of property and equipment ($53,227) ($99,621) ($79,917) ($112,020)
Free Cash Flow $34,489 $153,848 $200,264 $310,119
Earnings Call Information
The information for Garmin Ltd.'s earnings call is as follows:
When: Wednesday, July 30, 2008 at 11:00 a.m. Eastern
Where: http://www.garmin.com/aboutGarmin/invRelations/irCalendar.html
How: Simply log on to the web at the address above or call to listen in at
800-891-6383.
Contact: investor.relations@garmin.com
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 52745456. An archive of the
live webcast will be available until August 29, 2008 on the Garmin website at http://www.garmin.com.
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 company's estimated earnings and revenue for fiscal 2008, the
Company's expected segment revenue growth rate, margins, the number of new products to be
introduced in 2008 and the company's 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
Garmin's 2007 Form 10-K can be downloaded from
http://www.garmin.com/aboutGarmin/invRelations/finReports.html.
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. Garmin's 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 www.garmin.com/pressroom or contact the
Media Relations department at 913-397-8200. Garmin, nüvi, Edge and Forerunner are registered
trademarks, and nüvifone, Oregon and Colorado 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 (Unaudited)
(In thousands, except share information)
June 28, December 29,
2008 2007
Assets
Current assets:
Cash and cash equivalents $624,482 $707,689
Marketable securities 36,335 37,551
Accounts receivable, net 679,789 952,513
Inventories, net 656,018 505,467
Deferred income taxes 93,235 107,376
Prepaid expenses and other current assets 27,712 22,179
Total current assets 2,117,571 2,332,775
Property and equipment, net 449,727 374,147
Marketable securities 348,997 386,954
Restricted cash 1,550 1,554
Licensing agreements, net 3,863 14,672
Other intangible assets, net 210,323 181,358
Total assets $3,132,031 $3,291,460
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $179,212 $341,053
Salaries and benefits payable 35,081 31,696
Accrued warranty costs 83,918 71,636
Other accrued expenses 166,655 280,603
Income taxes payable 51,104 76,895
Dividend payable 157,498 -
Total current liabilities 673,468 801,883
Deferred income taxes 11,748 11,935
Non-current taxes 136,137 126,593
Other liabilities 1,025 435
Stockholders' equity:
Common stock, $0.005 par value, 1,000,000,000 shares authorized:
Issued and outstanding shares - 210,648,000 as of
June 28, 2008 and 216,980,000 as of
December 29, 2007 1,054 1,086
Additional paid-in capital 0 132,264
Retained earnings 2,258,730 2,171,134
Accumulated other comprehensive income 49,869 46,130
Total stockholders' equity 2,309,653 2,350,614
Total liabilities and stockholders' equity $3,132,031 $3,291,460
Garmin Ltd. And Subsidiaries
Condensed Consolidated Statements of Income (Unaudited)
(In thousands, except per share information)
13-Weeks Ended 26-Weeks Ended
June 28, June 30, June 28, June 30,
2008 2007 2008 2007
Net sales $911,671 $742,466 $1,575,476 $1,234,625
Cost of goods sold 494,543 367,799 838,233 622,206
Gross profit 417,128 374,667 737,243 612,419
Selling, general and administrative expense 125,028 95,373 222,853 161,297
Research and development expense 53,597 37,727 103,154 71,230
178,625 133,100 326,007 232,527
Operating income 238,503 241,567 411,236 379,892
Other income (expense):
Interest income 9,656 10,841 18,060 20,199
Interest expense 145 (23) 67 (55)
Foreign currency 21,561 (6,086) 17,562 7,119
Other 46,298 338 51,681 389
77,660 5,070 87,370 27,652
Income before income taxes 316,163 246,637 498,606 407,544
Income tax provision 60,071 32,260 94,735 53,307
Net income $256,092 $214,377 $403,871 $354,237
Net income per share:
Basic $1.20 $0.99 $1.88 $1.64
Diluted $1.19 $0.98 $1.86 $1.62
Weighted average common
shares outstanding:
Basic 213,756 216,380 215,130 216,298
Diluted 215,572 219,078 217,274 218,925
Garmin Ltd. And Subsidiaries
Condensed Consolidated Statements of Cash Flows (Unaudited)
(In thousands)
26-Weeks Ended
June 28, June 30,
2008 2007
Operating Activities:
Net income $403,871 $354,237
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 18,690 13,479
Amortization 8,430 15,856
Loss (gain) on sale of property and equipment (208) 18
Provision for doubtful accounts 3,977 1,808
Deferred income taxes 17,342 (725)
Foreign currency transaction gains/losses 25,428 (10,358)
Provision for obsolete and slow moving inventories 28,326 17,309
Stock compensation expense 18,253 7,196
Realized gains on marketable securities (72,445) -
Changes in operating assets and liabilities, net of acquisitions:
Accounts receivable 307,580 (88,405)
Inventories (141,180) (33,406)
Other current assets 8,110 9,059
Accounts payable (213,507) 63,472
Other current and non-current liabilities (102,909) 101,826
Income taxes payable (25,341) (6,937)
Purchase of licenses (4,236) (22,290)
Net cash provided by operating activities 280,181 422,139
Investing activities:
Purchases of property and equipment (79,917) (112,020)
Proceeds from sale of property and equipment 8 -
Purchase of intangible assets (997) (1,881)
Purchase of marketable securities (344,119) (378,909)
Redemption of marketable securities 390,179 455,598
Change in restricted cash 14 (33)
Acquisitions, net of cash acquired (34,768) (68,902)
Net cash used in investing activities (69,600) (106,147)
Financing activities:
Proceeds from issuance of common stock 7,194 7,534
Stock repurchase (318,471) -
Payments on long term debt - (248)
Tax benefit related to stock option exercise 1,965 7,360
Net cash provided by/(used in) financing activities (309,312) 14,646
Effect of exchange rate changes on cash and cash equivalents 15,524 (288)
Net increase/(decrease) in cash and cash equivalents (83,207) 330,350
Cash and cash equivalents at beginning of period 707,689 337,321
Cash and cash equivalents at end of period $624,482 $667,671
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 June 28, 2008
Net sales $119,147 $71,178 $631,883 $89,463 $911,671
Gross profit $67,908 $40,120 $243,720 $65,380 $417,128
Operating income $45,445 $24,068 $129,190 $39,800 $238,503
13-Weeks Ended June 30, 2007
Net sales $77,163 $79,771 $507,895 $77,637 $742,466
Gross profit $43,648 $46,381 $233,520 $51,118 $374,667
Operating income $28,600 $33,115 $149,067 $30,785 $241,567
26-Weeks Ended June 28, 2008
Net sales $189,641 $127,185 $1,083,742 $174,908 $1,575,476
Gross profit $105,347 $72,583 $439,614 $119,699 $737,243
Operating income $64,756 $41,904 $236,831 $67,745 $411,236
26-Weeks Ended June 30, 2007
Net sales $137,690 $122,775 $824,520 $149,640 $1,234,625
Gross profit $77,063 $67,534 $370,251 $97,571 $612,419
Operating income $49,809 $44,410 $228,591 $57,082 $379,892