Garmin Reports Best Quarter and Best Year in Company History, Announces Share Repurchase Program, Offers 2008 Guidance
[ Back ]   [ More News ]   [ Home ]
Garmin Reports Best Quarter and Best Year in Company History, Announces Share Repurchase Program, Offers 2008 Guidance

CAYMAN ISLANDS, Feb. 20 /PRNewswire-FirstCall/ -- Garmin Ltd. (NASDAQ: GRMN) today announced a record quarter ended December 29, 2007, reporting the highest quarterly and annual revenue and earnings in the Company's history.

    (Logo:  
http://www.newscom.com/cgi-bin/prnh/20061026/CGTH082LOGO)

    Fourth Quarter 2007 Financial highlights:

    -- Total revenue of $1.217 billion, up 99% from $611 million in fourth
       quarter 2006
    -- Automotive/Mobile segment revenue increased 124% to $999 million in
       fourth quarter 2007
    -- Aviation segment revenue increased 16% to $71 million in fourth quarter
       2007
    -- Outdoor/Fitness segment revenue increased 43% to $114 million in fourth
       quarter 2007
    -- Marine segment revenue increased 31% to $33 million in fourth quarter
       2007
    -- All geographic areas experienced significant growth:
        * North America revenue was $836 million compared to $393 million, up
          113%
        * Europe revenue was $338 million compared to $194 million, up 74%
        * Asia revenue was $43 million compared to $24 million, up 79%
    -- Diluted earnings per share increased 70% to $1.39 from $0.82 in fourth
       quarter 2006; excluding foreign exchange, EPS increased 51% to $1.31
       from $0.87 in the same quarter in 2006.


    Fiscal Year 2007 Financial highlights:

    -- Total revenue of $3.18 billion, up 79% from $1.77 billion in 2006
    -- Automotive/Mobile segment revenue increased 115% to $2.34 billion in
       2007
    -- Aviation segment revenue increased 27% to $295 million in 2007
    -- Marine segment revenue increased 22% to $203 million in 2007
    -- Outdoor/Fitness segment revenue increased 19% to $340 million in 2007
    -- Revenue from our automotive/mobile segment continued to become a larger
       portion of total company revenues when compared with 2006, at 74% of
       total revenues.
    -- All geographic areas experienced significant growth:
        * North America revenue was $2.067 billion compared to $1.094 billion,
          up 89%
        * Europe revenue was $969 million compared to $593 million, up 63%
        * Asia revenue was $144 million compared to $87 million, up 66%
    -- Diluted earnings per share increased 66% to $3.89 from $2.35 in 2006;
       excluding foreign exchange, EPS increased 62% to $3.80 from $2.35 in
       2006.
    -- Over 12 million units sold during fiscal 2007 -- a new and exciting
       benchmark -- which brings the total Garmin units sold worldwide to over
       31 million units.


    Business highlights:

    -- Strong sales in our automotive/mobile segment continued to exceed our
       expectations and are expected to drive much of our growth during 2008.
    -- Aviation, marine, and outdoor/fitness segments all posted double-digit
       growth in 2007, and we anticipate stronger performance in 2008.
    -- Strong holiday sales drove unit sales in the fourth quarter to over 5.5
       million units -- just slightly less than the total number of units sold
       in all of 2006.  These unit sales reflect an increase of 177% from the
       same quarter in 2006.
    -- We continue to build out our third Taiwan manufacturing facility,
       increasing the number of production lines to 36 and production capacity
       at the end of the fourth quarter to an annual run rate of nearly 20
       million units.  Expansion of our engineering and office space in Taiwan
       continues.
    -- We continue work on the expansion of our North American warehouse in
       Olathe, Kansas, with expected completion in March 2008.  We have also
       begun planning to expand our headquarters and research and development
       facilities in Olathe.
    -- Acquisitions of distributors in France, Germany, Spain, and Italy were
       completed in 2007.  In early 2008 we completed the acquisition of our
       distributor in Denmark as well.  These activities are part of our
       ongoing efforts to increase our market share in Europe.

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

"Garmin experienced an exciting fourth quarter, which brought a strong finish to fiscal 2007. The strong holiday season demand we experienced clearly demonstrated that our products are well-positioned to take advantage of the growing interest in portable navigation devices. Independent market research indicates we have maintained a strong leadership position in North America, and our market position in Europe continues to improve as well.

"We were prepared to meet the strong demand for our automotive/mobile products. We effectively managed inventory to meet holiday demand; as anticipated, we ended 2007 with appropriate inventory levels in our retail channels. We remain committed to proper inventory planning as we enter 2008. As the automotive/mobile segment continues to become a larger portion of our business, we expect our business to experience even stronger seasonality for 2008 and beyond. As such, we intend to more effectively level our production requirements and our inventory levels throughout the year. We believe our strategy of extensive market segmentation using our popular nuvi(R) product offerings will continue to drive positive results. Useful content and competitive features integrated into reliable, easy-to-use products at attractive price points are what customers want -- and what they receive when they choose Garmin. Given growth in our existing markets and opportunities we see in new markets during 2008, we anticipate automotive/mobile segment revenues will grow 45% in 2008.

"Our aviation segment grew steadily throughout 2007. Positive response to our WAAS and GMX200 product offerings and growth in the sales of our G1000(R) cockpit continued. Wins for our G1000 cockpit for future microjets and business jet as well as retrofit opportunities are expected to continue to create additional strength in this segment during the second half of 2008. We anticipate aviation segment revenue is positioned to grow 30% in 2008.

"Our marine segment also showed steady growth in 2007, as our revolutionary new marine products and cartography created opportunities to draw customers to our products. While marine segment revenues typically decline sequentially in third and fourth quarter each year, in 2007, results continued to be seasonally strong during these quarters. We expect our exciting suite of marine products, as well as additional new products to be released this year, will allow the marine segment to post revenue growth of 25% in 2008.

"Holiday season demand for our outdoor/fitness products was strong, as we posted over 40% revenue growth for this segment when compared with the same quarter in 2006. Increased sales generated by the new Astro(TM) dog tracking product, as well as new products with high-sensitivity GPS drove growth in the latter part of 2007. We see continued growth opportunities for this segment and anticipate that outdoor/fitness segment revenue is positioned to grow 25% in 2008."

Financial overview from Kevin Rauckman, Chief Financial Officer:

"We are clearly very pleased with our financial results for the fourth quarter and fiscal year 2007," said Kevin Rauckman, chief financial officer of Garmin Ltd. "Our revenue and earnings per share during 2007 grew 79% and 66% respectively, exceeding our expectations. Garmin has now completed seven years as a public company and has consistently generated top line and bottom line growth, with a 7-year compounded annual growth rate of revenue and earnings per share of 37% and 33%, respectively.

"Our gross and operating margins held strong, exceeding our expectations, coming in at 46% and 29% respectively. We also generated $525 million of free cash flow in 2007, resulting in unrestricted cash and marketable securities balance of $1.1 billion at the end of the fiscal year. Our return on invested capital (ROIC) was 63% during fiscal 2007."

Fiscal 2008 Outlook

We remain optimistic about the future success of our business and our ability to serve customers and distributors around the world. General perspective on overall business expectations for 2008, including our four business segments are:

    -- We anticipate overall revenue to exceed $4.5 billion in 2008, and
       earnings per share to exceed $4.40 assuming an effective tax rate of
       approximately 12 percent.
    -- We anticipate automotive/mobile revenues to grow 45 percent in 2008,
       with declining gross and operating margins due to product mix and a
       continued transition toward mass market levels.
    -- We anticipate aviation revenues to grow 30 percent in 2008. Growth is
       expected to occur within both G1000 OEM and aviation aftermarket
       shipments.
    -- We anticipate marine revenues to grow 25 percent in 2008.  Growth will
       come from our innovative offshore and inland marine cartography and
       additional new product releases.
    -- We anticipate outdoor/fitness segment revenues to grow 25 percent in
       2008 led by new outdoor products with enhanced features, high
       sensitivity GPS receivers, built-in cartography and unique
       functionality.  Exciting new products for our fitness line and better
       penetration of targeted fitness markets are expected to drive revenue
       growth as well.
    -- We expect the recently announced nuvifone(TM) to be released during Q3
       2008 and will see initial unit shipments of this new category for
       Garmin during the second half of the year.
    -- We look forward to introducing many innovative product lines again this
       year.  2008 product introductions began with new auto, outdoor, fitness
       and wireless products introduced during January's Consumer Electronics
       Show in Las Vegas and our recent media event in New York City.
    -- We expect continued expansion of our LinKou, Taiwan manufacturing
       facility to meet growing demand for our products in 2008.
    -- We will maintain our focus on new opportunities and expansion of
       distribution throughout Europe; growth will be supported through the
       distributors we have acquired, continued improvement of our
       distribution systems within Europe, and continued emphasis on
       advertising to enhance awareness of the Garmin brand.

    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 because it removes the fluctuations attributable to the functional currency versus the transactional currencies of the non-U.S. subsidiaries. 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 impact of the position of the U.S. dollar versus other currencies, which permits a consistent comparison of operating 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      52-weeks Ended
                                       December  December  December   December
                                       29, 2007  30, 2006  29, 2007   30, 2006

    Net Income (GAAP)                  $307,267  $180,345  $855,011  $514,123
    Foreign currency (gain) / loss,
     net of tax effects                ($17,017)   $8,850  ($20,070)    ($516)
    Net income, excluding FX           $290,250  $189,195  $834,941  $513,607

    Net income per share (GAAP):
       Basic                              $1.42     $0.84     $3.95     $2.38
       Diluted                            $1.39     $0.82     $3.89     $2.35

    Net income per share, excluding
     FX:
       Basic                              $1.34     $0.88     $3.86     $2.37
       Diluted                            $1.31     $0.87     $3.80     $2.35

    Weighted average common shares
     outstanding:
       Basic                            216,859   215,857   216,524   216,340
       Diluted                          220,918   218,630   219,875   218,845


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)

                                                       52-Weeks Ended
                                                December 29,      December 30,
                                                       2007              2006

    Net cash provided by operating
     activities                                    $682,088          $361,855
    Less: purchases of property and
     equipment                                    ($156,778)         ($92,906)
    Free Cash Flow                                 $525,310          $268,949


Return on invested capital (ROIC)

Management defines return on invested capital (ROIC) as net operating profit after taxes divided by operating invested capital. Management believes that ROIC provides greater visibility into how effectively Garmin deploys capital. ROIC is not a measure of financial performance under accounting principles generally accepted in the United States (GAAP), and may not be defined and calculated by other companies in the same manner as Garmin does. ROIC should not be considered in isolation or as an alternative to net income as an indicator of company performance.

    The following table contains a GAAP reconciliation of return on invested
capital.



                         Garmin Ltd. And Subsidiaries
                      Return on Invested Capital (ROIC)
                                (In thousands)

                                                    52-Weeks Ended
                                                December 29,      December 30,
                                                       2007              2006

    Net Operating Profit After Taxes (NOPAT):
       Operating Income (EBIT)                     $907,351          $554,559
       Less: Taxes on Operating Income            ($123,262)         ($80,431)
    Net Operating Profit after Taxes
     (NOPAT)                                       $784,089          $474,128

    Invested Capital (IC):
       Total Assets                              $3,291,460        $1,897,020
       Less:  Cash & Marketable
        Securities                              ($1,132,194)        ($818,197)
       Less:  Deferred Income Taxes               ($107,376)         ($55,996)
       Less: Non-Interest Bearing Current
        Liabilities                               ($801,883)        ($337,682)
    Operating Invested Capital (IC)              $1,250,007          $685,145

    Return on Invested Capital                           63%               69%


Share Repurchase Program

Garmin Ltd. also announced that its board of directors approved a share repurchase program authorizing the Company to purchase up to 5 million common shares of Garmin Ltd. as market and business conditions warrant. The purchases may be made from time to time on the open market or in negotiated transactions in compliance with the SEC's Rule 10b-18. The timing and amounts of any purchases will be determined by the company's management depending on market conditions and other factors including price, regulatory requirements and capital availability. The program does not require the purchase of any minimum number of shares and may be suspended or discontinued at any time. The share repurchase authorization expires on December 31, 2009.

2008 Annual Meeting

Garmin Ltd. also announced that its annual shareholders meeting will be held at 10:00 a.m., Central Time, on June 6, 2008 at the headquarters of Garmin International, Inc., 1200 E. 151st Street, Olathe, Kansas, 66062. The record date for shareholders entitled to vote at the annual meeting is April 10, 2008.

    Earnings Call Information
    The information for Garmin Ltd.'s earnings call is as follows:

    When:     Wednesday, February 20, 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 800-883-9537.
    Contact:  
Email Contact

A phone recording will be available for three business days following the earnings call and can be accessed by dialing 800-642-1687 or (706) 645-9291 and utilizing the access code 31169439. An archive of the live webcast will be available until March 21, 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, Garmin's expected segment revenue growth rate, margins, Garmin's plans to repurchase up to 5.0 million of its common shares 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, continued competitive pressures in the automotive/mobile marketplace; the effect competitive and economic factors may have on consumer buying decisions with respect to Garmin's products; the ability of Garmin to make timely delivery of new products and successful technological innovations to the marketplace; the continued availability on acceptable terms of components essential to Garmin's business Garmin's ability to have available resources and cash flows to repurchase its shares, changing market and economic conditions and the risk factors that are described in the Annual Report on Form 10-K for the year ended December 30, 2006 filed by Garmin with the Securities and Exchange Commission (Commission file number 0-31983). A copy of Garmin's 2006 Form 10-K can be downloaded from http://www.garmin.com/aboutGarmin/invRelations/finReports.html. The Company assumes no obligation to update any forward-looking statements or information, which speak as of their respective dates.

Through its operating subsidiaries, Garmin Ltd. designs, manufactures, and markets navigation, communications and information devices, most of which are enabled by GPS technology. Garmin is a leader in the general aviation and consumer markets and its products serve aviation, marine, outdoor, fitness, automotive, mobile and OEM applications. Garmin Ltd. is incorporated in the Cayman Islands, and its principal subsidiaries are located in the United States, Taiwan and United Kingdom. For more information, visit the investor relations site of Garmin Ltd. at http://www.garmin.com or contact the Investor Relations department at 913-397-8200. Garmin, G1000 and nuvi are registered trademarks, and Astro and nuvifone are trademarks of Garmin Ltd. or its subsidiaries.



                         Garmin Ltd. And Subsidiaries
                         Consolidated Balance Sheets
                   (In thousands, except share information)

                                                December 29,      December 30,
                                                    2007              2006
    Assets
    Current assets:
         Cash and cash equivalents                $707,689          $337,321
         Marketable securities                      37,551            73,033
         Accounts receivable                       952,513           403,524
         Inventories, net                          505,467           271,008
         Deferred income taxes                     107,376            55,996
         Prepaid expenses and other
          current assets                            22,179            28,202
    Total current assets                         2,332,775         1,169,084

    Property and equipment, net                    374,147           250,988

    Restricted cash                                  1,554             1,525
    Marketable securities                          386,954           407,843
    License agreements, net                         14,672             3,307
    Other intangible assets                        181,358            64,273
    Total assets                                $3,291,460        $1,897,020

    Liabilities and Stockholders' Equity
    Current liabilities:
         Accounts payable                         $341,053           $88,375
         Salaries and benefits payable              31,696            16,268
         Accrued warranty costs                     71,636            37,639
         Accrued sales program costs               142,360            32,560
         Other accrued expenses                    138,244            68,172
         Income taxes payable                       76,895            94,668
    Total current liabilities                      801,883           337,682

    Long-term debt, less current portion                 -               248
    Deferred income taxes                           11,935             1,191
    Other liabilities                              127,028                 -

    Stockholders' equity:
         Common stock                                1,086             1,082
         Additional paid-in capital                132,264            83,438
         Retained earnings                       2,171,134         1,478,654
         Accumulated other comprehensive
          gain/(loss)                               46,130            (5,275)
    Total stockholders' equity                   2,350,614         1,557,899
    Total liabilities and stockholders'
     equity                                     $3,291,460        $1,897,020



                         Garmin Ltd. And Subsidiaries
                      Consolidated Statements of Income
                 (In Thousands, Except Per Share Information)

                                   13-Weeks Ended         Fiscal Year Ended
                                 December   December     December    December
                                 29, 2007   30, 2006     29, 2007    30, 2006

    Net sales                  $1,217,021   $611,224   $3,180,319  $1,774,000
    Cost  of goods sold           708,036    306,771    1,717,064     891,614
    Gross profit                  508,985    304,453    1,463,255     882,386

    Selling, general and
     administrative expenses      148,140     74,346      396,498     214,513
    Research and development
     expense                       47,543     31,209      159,406     113,314
                                  195,683    105,555      555,904     327,827

    Operating income              313,302    198,898      907,351     554,559

    Other income (expense):
         Interest income            9,999     10,432       41,995      35,897
         Interest expense             121        (27)        (207)        (41)
         Foreign currency          19,471     (9,790)      22,964         596
         Other                      5,210         38        6,170       3,543
                                   34,801        653       70,922      39,995
    Income before income taxes    348,103    199,551      978,273     594,554

    Income tax provision:          40,836     19,206      123,262      80,431
    Net income                   $307,267   $180,345     $855,011    $514,123

    Basic net income per share      $1.42      $0.84        $3.95       $2.38
    Diluted net income per share    $1.39      $0.82        $3.89       $2.35



                         Garmin Ltd. And Subsidiaries
                    Consolidated Statements of Cash Flows
                                (In Thousands)

                                                   Fiscal Year Ended
                                              December 29,      December 30,
                                                  2007              2006
    Operating Activities:
    Net income                                  $855,011          $514,123
    Adjustments to reconcile net income
     to net cash provided
       by operating activities:
       Depreciation                               35,524            21,535
       Amortization                               28,513            22,940
       Gain on sale of property and
        equipment                                    560                67
       Provision for doubtful accounts             3,617               955
       Provision for obsolete and slow-
        moving inventories                        34,975            23,245
       Foreign currency transaction
        gains/losses                                (926)             (344)
       Deferred income taxes                     (57,843)          (35,060)
       Stock appreciation rights                  22,164            11,913
       Realized gains on marketable
        securities                                (5,101)           (3,852)
       Changes in operating assets and
        liabilities, net of acquisition:
           Accounts receivable                  (477,108)         (230,111)
           Inventories                          (224,180)          (92,708)
           Prepaid expenses and other
            current assets                         6,213            (4,357)
           Purchase of licenses                  (23,569)           (2,950)
           Accounts payable                      174,781            10,187
           Accrued expenses                      253,909            97,167
           Income taxes payable                   55,548            29,105
    Net cash provided by operating
     activities                                  682,088           361,855

    Investing activities:
    Purchases of property and equipment         (156,778)          (92,906)
    Proceeds from sale of property and
     equipment                                         5                76
    Purchase of intangible assets                 (2,918)           (3,115)
    Purchase of marketable securities         (1,672,041)         (453,085)
    Sales of marketable securities             1,784,816           359,313
    Purchase of Dynastream                             -           (36,499)
    Net cash paid for acquisition of
     businesses and other intangibles           (128,751)                -
    Change in restricted cash                        (29)             (169)
    Net cash used in investing activities       (175,696)         (226,385)

    Financing activities:
    Dividends                                   (162,530)         (107,923)
    Payment on long-term debt                       (248)              (11)
    Proceeds from issuance of common
     stock through
       stock purchase plan                         5,730             3,569
    Proceeds from issuance of common
     stock from
       exercise of stock options                  11,278            12,505
    Tax benefit related to stock option
     exercise                                     17,434             9,660
    Purchase of common stock                      (7,780)          (50,450)
    Net cash used in financing activities       (136,116)        ($132,650)

    Effect of exchange rate changes on
     cash and cash equivalents                        92               149

    Net increase/(decrease) in cash and
     cash equivalents                            370,368             2,969
    Cash and cash equivalents at
     beginning of year                           337,321           334,352
    Cash and cash equivalents at end of year    $707,689          $337,321



                         Garmin Ltd. And Subsidiaries
      Revenue, Gross Profit, and Operating Income by Segment (Unaudited)

                                          Reporting Segments
                        Outdoor/                Auto/
                         Fitness    Marine     Mobile    Aviation     Total

    52-Weeks Ended
     December 29, 2007
    Net sales           $339,741   $203,399  $2,342,184  $294,995  $3,180,319
    Gross profit        $184,654   $110,169    $973,206  $195,226  $1,463,255
    Operating income    $120,233    $67,376    $608,751  $110,991    $907,351

    52-Weeks Ended
     December 30, 2006
    Net sales           $285,362   $166,639  $1,089,093  $232,906  $1,774,000
    Gross profit        $163,638    $92,952    $475,191  $150,605    $882,386
    Operating income    $116,766    $60,525    $292,951   $84,317    $554,559

Web site: http://www.garmin.com/