Garmin reports record third quarter operating results; issues fiscal 2020 guidance

Webcast Information/Forward-Looking Statements:

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

When:

Wednesday, October 28, 2020 at 10:30 a.m. Eastern

Where:

https://www.garmin.com/en-US/investors/events/

How:

Simply log on to the web at the address above or call to listen in at 855-757-3897

An archive of the live webcast will be available until October 28, 2021 on the Garmin website at www.garmin.com. To access the replay, click on the Investors link and click over to the Events Calendar page.

This release includes projections and other forward-looking statements regarding Garmin Ltd. and its business that are commonly identified by words such as “anticipates,” “would,” “may,” “expects,” “estimates,” “plans,” “intends,” “projects,” and other words or phrases with similar meanings. Any statements regarding the Company’s expected fiscal 2020 GAAP and pro forma estimated earnings, EPS, and effective tax rate, and the Company’s expected segment revenue growth rates, consolidated revenue, gross margins, operating margins, potential future acquisitions, currency movements, expenses, pricing, new products to be introduced, statements relating to possible future dividends, statements related to the ongoing impact of the COVID-19 pandemic, 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 and uncertainties affecting Garmin, including, but not limited to, the risk factors that are described in both the Annual Report on Form 10-K for the year ended December 28, 2019 and the Quarterly Report on Form 10-Q for the quarter ended September 26, 2020 filed by Garmin with the Securities and Exchange Commission (Commission file number 0-31983). A copy of Garmin’s 2019 Form 10-K and the Q3 2020 Form 10-Q can be downloaded from https://www.garmin.com/en-US/investors/sec/. All information provided in this release and in the attachments is as of October 28, 2020. Undue reliance should not be placed on the forward-looking statements in this press release, which are based on information available to us on the date hereof. We undertake no duty to update this information unless required by law.

This release and the attachments contain non-GAAP financial measures. A reconciliation to the nearest GAAP measure and a discussion of the Company's use of these measures are included in the attachments.

Garmin, the Garmin logo and the Garmin delta, Forerunner, Venu, inReach and Montana are trademarks of Garmin Ltd. or its subsidiaries and are registered in one or more countries, including the U.S. Garmin Catalyst, Fantom, Garmin OnDeck, and Panoptix, 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 Statements of Income (Unaudited)

(In thousands, except per share information)

 

 

 

13-Weeks Ended

 

39-Weeks Ended

 

 

September 26,

 

September 28,

 

September 26,

 

September 28,

 

 

2020

 

2019

 

2020

 

2019

Net sales

$

1,109,194

$

934,383

 

$

2,835,168

 

$

2,655,273

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost of goods sold

 

441,211

 

366,925

 

 

1,144,816

 

 

1,060,752

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross profit

 

667,983

 

567,458

 

 

1,690,352

 

 

1,594,521

 

 

 

 

 

 

 

 

 

 

 

 

 

Advertising expense

 

33,866

 

32,668

 

 

90,031

 

 

101,808

 

Selling, general and administrative expense

 

142,134

 

124,769

 

 

411,335

 

 

380,289

 

Research and development expense

 

174,882

 

148,561

 

 

506,013

 

 

443,361

 

Total operating expense

 

350,882

 

305,998

 

 

1,007,379

 

 

925,458

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating income

 

317,101

 

261,460

 

 

682,973

 

 

669,063

 

 

 

 

 

 

 

 

 

 

 

 

 

Other income (expense):

 

 

 

 

 

 

 

 

 

 

 

Interest income

 

7,777

 

12,309

 

 

30,258

 

 

39,748

 

Foreign currency gains (losses)

 

10,113

 

(16,296

)

 

(9,802

)

 

(12,568

)

Other income (expense)

 

1,726

 

294

 

 

8,515

 

 

3,567

 

Total other income (expense)

 

19,616

 

(3,693

)

 

28,971

 

 

30,747

 

 

 

 

 

 

 

 

 

 

 

 

 

Income before income taxes

 

336,717

 

257,767

 

 

711,944

 

 

699,810

 

 

 

 

 

 

 

 

 

 

 

 

 

Income tax provision

 

23,300

 

29,901

 

 

53,168

 

 

108,115

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

$

313,417

$

227,866

 

$

658,776

 

$

591,695

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income per share:

 

 

 

 

 

 

 

 

 

 

 

Basic

$

1.64

$

1.20

 

$

3.45

 

$

3.12

 

Diluted

$

1.63

$

1.19

 

$

3.44

 

$

3.10

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average common shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

Basic

 

191,234

 

190,102

 

 

191,021

 

 

189,853

 

Diluted

 

191,998

 

190,962

 

 

191,760

 

 

190,790

 

 

Garmin Ltd. And Subsidiaries

Condensed Consolidated Balance Sheets (Unaudited)

(In thousands, except per share information)

 

 

September 26
2020

December 28
2019

Assets

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

$

1,223,516

 

$

1,027,567

 

Marketable securities

 

430,164

 

 

376,463

 

Accounts receivable, net

 

658,000

 

 

706,763

 

Inventories

 

821,377

 

 

752,908

 

Deferred costs

 

21,067

 

 

25,105

 

Prepaid expenses and other current assets

 

187,746

 

 

169,044

 

Total current assets

 

3,341,870

 

 

3,057,850

 

 

 

 

 

 

 

 

Property and equipment, net

 

813,561

 

 

728,921

 

Operating lease right-of-use assets

 

74,949

 

 

63,589

 

 

 

 

 

 

 

 

Restricted cash

 

293

 

 

71

 

Marketable securities

 

1,058,103

 

 

1,205,475

 

Deferred income taxes

 

247,502

 

 

268,518

 

Noncurrent deferred costs

 

17,676

 

 

23,493

 

Intangible assets, net

 

818,781

 

 

659,629

 

Other assets

 

177,934

 

 

159,253

 

Total assets

$

6,550,669

 

$

6,166,799

 

 

 

 

 

 

 

 

Liabilities and Stockholders’ Equity

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Accounts payable

$

235,467

 

$

240,831

 

Salaries and benefits payable

 

137,859

 

 

128,426

 

Accrued warranty costs

 

40,002

 

 

39,758

 

Accrued sales program costs

 

76,255

 

 

112,578

 

Deferred revenue

 

88,042

 

 

94,562

 

Accrued royalty costs

 

15,389

 

 

15,401

 

Accrued advertising expense

 

25,905

 

 

35,142

 

Other accrued expenses

 

105,731

 

 

95,060

 

Income taxes payable

 

48,342

 

 

56,913

 

Dividend payable

 

349,964

 

 

217,262

 

Total current liabilities

 

1,122,956

 

 

1,035,933

 

 

 

 

 

 

 

 

Deferred income taxes

 

124,746

 

 

114,754

 

Noncurrent income taxes

 

75,186

 

 

105,771

 

Noncurrent deferred revenue

 

52,715

 

 

67,329

 

Noncurrent operating lease liabilities

 

58,416

 

 

49,238

 

Other liabilities

 

12,309

 

 

278

 

 

 

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

 

 

Shares, CHF 0.10 par value, 198,077 shares authorized and issued; 191,237
shares outstanding at September 26, 2020 and 190,686 shares outstanding
at December 28, 2019

 

17,979

 

 

17,979

 

Additional paid-in capital

 

1,872,519

 

 

1,835,622

 

Treasury stock

 

(326,294

)

 

(345,040

)

Retained earnings

 

3,421,159

 

 

3,229,061

 

Accumulated other comprehensive income

 

118,978

 

 

55,874

 

Total stockholders’ equity

 

5,104,341

 

 

4,793,496

 

Total liabilities and stockholders’ equity

$

6,550,669

 

$

6,166,799

 

 

Garmin Ltd. And Subsidiaries

Condensed Consolidated Statements of Cash Flows (Unaudited)

(In thousands)

 

 

 

39-Weeks Ended

 

 

September 26,
2020

 

September 28,
2019

Operating Activities:

 

 

 

 

 

 

Net income

$

658,776

 

$

591,695

 

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

 

 

 

 

Depreciation

 

57,141

 

 

52,503

 

Amortization

 

32,969

 

 

25,112

 

Gain on sale of property and equipment

 

(1,815

)

 

(5

)

Unrealized foreign currency losses

 

4,384

 

 

14,653

 

Deferred income taxes

 

14,353

 

 

18,012

 

Stock compensation expense

 

53,515

 

 

47,553

 

Realized gain on marketable securities

 

(1,316

)

 

(213

)

Changes in operating assets and liabilities, net of acquisitions:

 

 

 

 

 

 

Accounts receivable, net of allowance for doubtful accounts

 

59,474

 

 

15,244

 

Inventories

 

(56,063

)

 

(178,121

)

Other current and non-current assets

 

(27,019

)

 

(86,538

)

Accounts payable

 

(11,939

)

 

27,523

 

Other current and non-current liabilities

 

(18,299

)

 

(54,401

)

Deferred revenue

 

(21,148

)

 

(7,750

)

Deferred costs

 

9,855

 

 

6,326

 

Income taxes payable

 

(53,419

)

 

(7,423

)

Net cash provided by operating activities

 

699,449

 

 

464,170

 

 

 

 

 

 

 

 

Investing activities:

 

 

 

 

 

 

Purchases of property and equipment

 

(137,072

)

 

(91,469

)

Proceeds from sale of property and equipment

 

1,965

 

 

370

 

Purchase of intangible assets

 

(1,643

)

 

(1,862

)

Purchase of marketable securities

 

(702,487

)

 

(333,320

)

Redemption of marketable securities

 

808,554

 

 

333,783

 

Acquisitions, net of cash acquired

 

(148,648

)

 

(275,310

)

Net cash used in investing activities

 

(179,331

)

 

(367,808

)

 

 

 

 

 

 

 

Financing activities:

 

 

 

 

 

 

Dividends

 

(333,975

)

 

(308,905

)

Proceeds from issuance of treasury stock related to equity awards

 

15,202

 

 

12,982

 

Purchase of treasury stock related to equity awards

 

(13,074

)

 

(12,972

)

Net cash used in financing activities

 

(331,847

)

 

(308,895

)

 

 

 

 

 

 

 

Effect of exchange rate changes on cash and cash equivalents

 

7,900

 

 

(11,834

)

 

 

 

 

 

 

 

Net increase (decrease) in cash, cash equivalents, and restricted cash

 

196,171

 

 

(224,367

)

Cash, cash equivalents, and restricted cash at beginning of period

 

1,027,638

 

 

1,201,805

 

Cash, cash equivalents, and restricted cash at end of period

$

1,223,809

 

$

977,438

 

 

Garmin Ltd. And Subsidiaries

Net Sales, Gross Profit and Operating Income by Segment (Unaudited)

(In thousands)

 

 

 

Reportable Segments

 

 

Marine

 

Fitness

 

Outdoor

 

Auto

 

Aviation

 

Total

13-Weeks Ended September 26, 2020

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net sales

$

165,437

$

328,446

$

334,844

$

129,355

 

$

151,112

$

1,109,194

Gross profit

 

100,423

 

177,794

 

223,704

 

58,135

 

 

107,927

 

667,983

Operating income

 

50,482

 

87,083

 

147,477

 

3,462

 

 

28,597

 

317,101

 

 

 

 

 

 

 

 

 

 

 

 

 

 

13-Weeks Ended September 28, 2019

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net sales

$

107,694

$

243,099

$

258,294

$

137,722

 

$

187,574

$

934,383

Gross profit

 

64,275

 

126,835

 

170,846

 

65,814

 

 

139,688

 

567,458

Operating income

 

20,008

 

49,831

 

105,051

 

20,857

 

 

65,713

 

261,460

 

 

 

 

 

 

 

 

 

 

 

 

 

 

39-Weeks Ended September 26, 2020

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net sales

$

486,269

$

846,688

$

716,146

$

320,215

 

$

465,850

$

2,835,168

Gross profit

 

288,103

 

446,936

 

469,150

 

147,393

 

 

338,770

 

1,690,352

Operating income

 

134,195

 

190,075

 

262,057

 

(6,837

)

 

103,483

 

682,973

 

 

 

 

 

 

 

 

 

 

 

 

 

 

39-Weeks Ended September 28, 2019

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net sales

$

393,070

$

675,007

$

622,748

$

422,132

 

$

542,316

$

2,655,273

Gross profit

 

234,014

 

352,805

 

403,842

 

198,012

 

 

405,848

 

1,594,521

Operating income

 

88,212

 

118,369

 

218,340

 

53,978

 

 

190,164

 

669,063

 

Garmin Ltd. And Subsidiaries

Net Sales by Geography (Unaudited)

(In thousands)

 

 

 

 

 

 

 

 

 

 

 

 

13-Weeks Ended

 

39-Weeks Ended

 

September 26,

 

September 28,

 

YoY

 

September 26,

 

September 28,

 

YoY

 

2020

 

2019

 

Change

 

2020

 

2019

 

Change

Net sales

$

1,109,194

$

934,383

19

%

$

2,835,168

$

2,655,273

7

%

Americas

 

521,869

 

439,113

19

%

 

1,372,360

 

1,289,409

6

%

EMEA

 

407,859

 

344,010

19

%

 

1,042,928

 

942,625

11

%

APAC

 

179,466

 

151,260

19

%

 

419,880

 

423,239

(1

)%

 

 

 

 

 

 

 

 

 

 

 

EMEA - Europe, Middle East and Africa; APAC - Asia Pacific and Australian Continent


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