Garmin Reports Strong First Quarter 2016 Sales

Garmin Ltd. (Nasdaq: GRMN – News) today announced results for the first
quarter ended March 26, 2016.

Highlights in the quarter include:

  • Total revenue of $624 million, growing 7% over the prior year, with
    outdoor, fitness, aviation and marine collectively growing 17% over
    the year ago quarter and contributing 69% of total revenue
  • Gross and operating margins of 54.5% and 16.6%, respectively
  • GAAP EPS of $0.46 and Pro forma EPS(1) of $0.49 for first
    quarter 2016
  • Completed the acquisition of DeLorme, the pioneer of the inReach®
    series of affordable two-way satellite communication devices for the
    consumer adding both device and recurring service revenue to our
    outdoor segment
  • Started shipments of recently announced activity trackers including
    the vívoactive® HR with Garmin Elevate™ wrist heart rate technology
    and the vívofit® 3 with an industry leading one year battery life
(in thousands, 13-Weeks Ended
except per share data) Mar 26, Mar 28, Yr over Yr
2016 2015 (2) Change
Net sales $624,040 $585,394 7%
Auto 195,599 219,226 -11%
Fitness 142,418 130,994 9%
Outdoor 96,827 72,815 33%
Aviation 106,316 98,062 8%
Marine 82,880 64,297 29%
Gross profit % 54.5% 58.8%
Operating profit % 16.6% 19.1%
GAAP diluted EPS $0.46 $0.35 31%
Pro forma diluted EPS (1) $0.49 $0.55 -11%
(1) See attached table for reconciliation of non-GAAP measures
including pro forma diluted EPS
(2) Action camera related net sales for the 13-weeks ended March 28,
2015 have been recast from the
Outdoor segment to the Auto segment to conform to the current year

Executive Overview from Cliff Pemble, President
and Chief Executive Officer:

“We started out 2016 strong with total revenue growth of 7% led by
robust double digit growth in our marine and outdoor segments, and high
single digit growth in our fitness and aviation segments,” said Cliff
Pemble, president and chief executive officer (CEO) of Garmin Ltd. “With
the majority of the year still ahead of us, we recognize that there are
many challenges and uncertainties yet to be encountered. We will
continue to focus on innovation and execution to deliver compelling
products to the markets we serve.”


The fitness segment posted revenue growth of 9% in the quarter
reflecting strong growth of our Garmin Elevate™ wrist heart rate
technology products within our activity tracker and running categories,
offset by lower multisport revenues. On a year-over-year basis, gross
margin and operating margin declined to 51% and 12%, respectively. The
gross margin decline was driven by product mix within the quarter. The
operating margin decline reflects the continued investment in
advertising and research and development to support our long-term goals
in the segment. Our recently launched vívoactive HR and vívofit 3 are
shipping and we feel we are well positioned with our 2016 product


The outdoor segment posted robust revenue growth of 33% driven by the
strength of our fēnix® line of wearables as well as our dog products.
Our recently introduced Approach® S20 and G10, and TruSwing™ have
brought new energy to our golf product line in a challenging industry.
Gross and operating margins were down from a year ago, but remained
strong at 61% and 29%, respectively, and resulted in a 17% increase in
operating income. Within the quarter, we completed the DeLorme
acquisition and will see a full quarter of sales contribution beginning
in the second quarter. With the strong start to 2016 we are poised to
execute our plan of continued innovations within the outdoor markets.


The marine segment posted robust revenue growth of 29% on the strength
of our chartplotter and fish finder product lines. Gross margins
declined year-over-year to 53% while operating margin increased to 12%
as we leveraged our operating investments resulting in strong operating
income growth of 125%. Our recently launched GPSMap® 8400/8600 are the
largest plotters we have produced at 17-, 22-, and 24-inch displays and
have a resolution of 1920 x 1280, which is the highest screen resolution
available on the market. We remain focused on innovation and product
portfolio expansion throughout 2016.


The aviation segment posted revenue growth of 8% in the quarter with
both OEM and aftermarket contributing to revenue improvement. Both the
gross margin and operating margin were strong at 74% and 29%,
respectively, and improved compared to the year ago quarter resulting in
a 16% increase in operating income. During the quarter we were chosen to
provide the avionics to two lifesaving organizations, with the AirEvac’s
fleet of Bell helicopters and the U.S. Forest Service’s fleet of Sherpa
aircraft. In addition, we introduced two new products for the
experimental aviation market bringing quality audio and additional
backup displays to the cockpit. We will continue to invest in new
products and aircraft certifications for both OEM and aftermarket


The auto segment posted a revenue decline of 11% primarily due to the
ongoing PND market contraction and headwinds caused by additional
revenue deferrals. Gross and operating margins were 44% and 9%,
respectively. We began shipping the Garmin Drive line of PND devices
with good initial customer response. Within OEM, we experienced strong
growth of our infotainment business within the APAC and Middle East
regions, and we delivered production release software for the new 2017
Mercedes E-class.

Additional Financial Information:

Total operating expenses in the quarter were $236 million, a 2% increase
from the prior year. Research and development investment increased 2%,
with growth primarily focused on aviation and active lifestyle products
in fitness and outdoor. Advertising increased 16%, driven primarily by a
year-over-year increase in fitness advertising to support wearables.
Selling, general and administrative expense decreased by 3%, driven
primarily by a decrease in year-over-year litigation related costs.

The effective tax rate in the first quarter of 2016 was 18.1% compared
to an effective tax rate of 12.3% in the prior year. The increase in the
effective tax rate is primarily due to projected income mix by
jurisdiction compared to the prior year.

We continued to return cash to shareholders with our quarterly dividend
of approximately $97 million and our share repurchase activity, which
totaled approximately $20 million in the first quarter. We have $149
million remaining in the share repurchase program authorized through
December 31, 2016, and expect to repurchase as business and market
conditions warrant. We ended the quarter with cash and marketable
securities of about $2.3 billion.

As announced in February, the Board will recommend to the shareholders
for approval at the annual meeting to be held on June 10, 2016 a cash
dividend in the total amount of $2.04 per share (subject to possible
adjustment based on the total amount of the dividend in Swiss Francs)
payable in quarterly installments.

2016 Guidance:

We are maintaining the guidance issued in February of approximately
$2.82 billion of revenue and approximately $2.25 of pro forma EPS as our
performance thus far is consistent with our expectations.

Webcast Information/Forward-Looking Statements:

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

When: Wednesday, April 27, 2016 at 10:30 a.m. Eastern

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 June 23, 2016 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 that are commonly
identified by words such as “would,” “may,” “expects,” “estimates,”
“plans,” “intends,” “projects,” and other words or phrases with similar
Any statements regarding the Company’s GAAP and pro
forma estimated earnings, EPS and revenue for fiscal 2016, the Company’s
expected segment revenue growth rates, margins, currency movements,
expenses, pricing, new products to be introduced in 2016 and the
Company’s plans and objectives are forward-looking statements.
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 the Annual Report on Form
10-K for the year ended December 26, 2015 filed by Garmin with the
Securities and Exchange Commission (Commission file number 0-31983). A
copy of Garmin’s 2015 Form 10-K can be downloaded from

Garmin, the Garmin logo, the Garmin delta, Approach, GPSMap, vívoactive,
vívofit and fēnix® are trademarks of Garmin Ltd. or its subsidiaries and
are registered in one or more countries, including the U.S.; Garmin
Drive, Garmin Elevate, and TruSwing are trademarks of, or exclusively
licensed to, 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
Mar 26, Mar 28,
2016 2015
Net sales $624,040 $585,394
Cost of goods sold 284,190 241,272
Gross profit 339,850 344,122
Advertising expense 32,233 27,672
Selling, general and administrative expense 95,610 98,750
Research and development expense 108,204 106,002
Total operating expense 236,047 232,424
Operating income 103,803 111,698
Other income (expense):
Interest income 7,428 8,024
Foreign currency (losses) (4,839 ) (44,264 )
Other income 1,155 738
Total other income (expense) 3,744 (35,502 )
Income before income taxes 107,547 76,196
Income tax provision 19,455 9,403
Net income $88,092 $66,793
Net income per share:
Basic $0.46 $0.35
Diluted $0.46 $0.35
Weighted average common
shares outstanding:
Basic 189,497 191,762
Diluted 189,651 192,341
Garmin Ltd. And Subsidiaries
Condensed Consolidated Balance Sheets
(In thousands, except per share information)
Mar 26, Dec 26,
2016 2015
Current assets:
Cash and cash equivalents $857,679 $833,070
Marketable securities 198,147 215,161
Accounts receivable, net 408,283 531,481
Inventories, net 517,767 500,554
Deferred costs 50,861 49,176
Prepaid expenses and other current assets 96,396 81,645
Total current assets 2,129,133 2,211,087
Property and equipment, net 448,967 446,089
Marketable securities 1,279,799 1,343,387
Restricted cash 261 259
Noncurrent deferred income tax 117,467 116,518
Noncurrent deferred costs 39,663 38,769
Intangible assets, net 306,303 245,552
Other assets 88,731 97,730
Total assets $4,410,324 $4,499,391
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable $137,162 $178,905
Salaries and benefits payable 75,862 70,601
Accrued warranty costs 31,407 30,449
Accrued sales program costs 49,236 67,613
Deferred revenue 154,965 164,982
Accrued royalty costs 25,737 30,310
Accrued advertising expense 20,185 33,547
Other accrued expenses 75,217 74,926
Income taxes payable 14,524 21,674
Dividend payable 96,425 192,991
Total current liabilities 680,720 865,998
Deferred income taxes 60,915 56,210
Non-current income taxes 103,035 101,689
Non-current deferred revenue 126,731 128,731
Other liabilities 1,676 1,637
Stockholders’ equity:
Shares, CHF 10 par value, 208,077 shares authorized and issued;
189,193 shares outstanding at March 26, 2016
and 189,722 shares outstanding at December 26, 2015 1,797,435 1,797,435
Additional paid-in capital 70,413 62,239
Treasury stock (434,346 ) (414,637 )
Retained earnings 2,018,609 1,930,517
Accumulated other comprehensive income (14,864 ) (30,428 )
Total stockholders’ equity 3,437,247 3,345,126
Total liabilities and stockholders’ equity 4,410,324 $4,499,391
Garmin Ltd. And Subsidiaries
Condensed Consolidated Statements of Cash Flows (Unaudited)
(In thousands)
13-Weeks Ended
Mar 26, Mar 28,
2016 2015
Operating Activities:
Net income $88,092 $66,793
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 13,078 12,280
Amortization 7,115 6,584
Loss on sale or disposal of property and equipment 38 24
Provision for doubtful accounts 285 (1,080 )
Deferred income taxes 3,906 (3,647 )
Unrealized foreign currency (gain) loss (5,412 ) 47,877
Provision for obsolete and slow moving inventories 8,026 4,344
Stock compensation expense 8,172 7,769
Realized gain on marketable securities (452 ) (340 )
Changes in operating assets and liabilities:
Accounts receivable 130,036 129,448
Inventories (18,873 ) (56,897 )
Other current and non-current assets (3,937 ) (11,537 )
Accounts payable (45,515 ) (25,957 )
Other current and non-current liabilities (31,606 ) (73,408 )
Deferred revenue (12,337 ) (29,870 )
Deferred cost (2,496 ) 6,470
Income taxes payable (8,733 ) 2,802
Net cash provided by operating activities 129,387 81,655
Investing activities:
Purchases of property and equipment (13,908 ) (18,143 )
Proceeds from sale of property and equipment 664
Purchase of intangible assets (1,716 ) (717 )
Purchase of marketable securities (151,070 ) (254,741 )
Redemption of marketable securities 237,464 308,751
Change in restricted cash (2 ) (5 )
Acquisitions, net of cash acquired (62,137 ) (12,632 )
Net cash provided by investing activities 8,631 23,177
Financing activities:
Dividends paid (96,566 ) (91,964 )
Purchase of treasury stock under share repurchase plan (19,796 ) (16,260 )
Purchase of treasury stock related to equity awards (16 ) (89 )
Proceeds from issuance of treasury stock related to equity awards 103 246
Tax benefit from issuance of equity awards 2 399
Net cash used in financing activities (116,273 ) (107,668 )
Effect of exchange rate changes on cash and cash equivalents 2,864 (22,044 )
Net increase (decrease) in cash and cash equivalents 24,609 (24,880 )
Cash and cash equivalents at beginning of period 833,070 1,196,268
Cash and cash equivalents at end of period $857,679 $1,171,388
Net Sales, Gross Profit, and Operating Income by Segment
(In thousands)
Reporting Segments
Outdoor Fitness Marine Auto Aviation Total
13-Weeks Ended March 26, 2016
Net sales $96,827 $142,418 $82,880 $195,599 $106,316 $624,040
Gross profit $58,932 $72,294 $44,149 $86,144 $78,331 $339,850
Operating income $27,885 $16,573 $10,293 $18,566 $30,486 $103,803
13-Weeks Ended March 28, 2015 (3)
Net sales $72,815 $130,994 $64,297 $219,226 $98,062 $585,394
Gross profit $49,064 $83,075 $35,513 $104,959 $71,511 $344,122
Operating income $23,770 $34,638 $4,566 $22,544 $26,180 $111,698
(3) Action camera related operating results for the 13-weeks ended
March 28, 2015 have been recast from the Outdoor segment to
the Auto segment to conform to the current year presentation.
Garmin Ltd. And Subsidiaries
Net Sales by Geography (Unaudited)
(In thousands)
13-Weeks Ended
Mar 26, Mar 28, Yr over Yr
2016 2015 Change
Net sales $624,040 $585,394 7%
Americas 317,957 305,261 4%
EMEA 225,728 208,351 8%
APAC 80,355 71,782 12%
EMEA – Europe, Middle East and Africa; APAC – Asia Pacific

Non-GAAP Financial Information

Pro Forma net income (earnings) per share

Management believes that net income per share before the impact of
foreign currency translation gain or loss and income tax adjustments
that materially impact the effective tax rate, as discussed below, is an
important measure. The majority of the Company’s consolidated foreign
currency gain or loss result from balances involving the Euro and the
Taiwan Dollar and from the exchange rate impact of the significant cash
and marketable securities, receivables and payables held in a currency
other than the functional currency at one of the Company’s subsidiaries.
However, there is minimal cash impact from such foreign currency gain or
loss. The Company’s income tax expense is periodically impacted by
material net releases of reserves primarily related to completion of
audits and/or the expiration of statutes effecting prior periods. Thus,
reported income tax expense is not reflective of the income tax expense
that is incurred related to the current period earnings. The net release
of other uncertain tax position reserves, amounting to approximately
$3.8 million and $5.3 million in first quarter 2016 and 2015,
respectively, have not been included as pro forma adjustments in the
following presentation of pro forma net income as such amounts have been
considered immaterial, tend to be more recurring in nature and are
comparable between periods. Accordingly, earnings per share before the
impact of foreign currency translation gain or loss and income tax
adjustments that materially impact the effective tax rate permits a
consistent comparison of the Company’s operating performance between

Garmin Ltd. And Subsidiaries
Net income per share (Pro Forma)
(in thousands, except per share information)
13-Weeks Ended
Mar 26, Mar 28,
2016 2015
Net Income (GAAP) $88,092 $66,793
Foreign currency loss, net of tax effects $3,963 $38,801
Net income (Pro Forma) $92,055 $105,594
Net income per share (GAAP):
Basic $0.46 $0.35
Diluted $0.46 $0.35
Net income per share (Pro Forma):
Basic $0.49 $0.55
Diluted $0.49 $0.55
Weighted average common shares outstanding:
Basic 189,497 191,762
Diluted (GAAP) 189,651 192,341

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.

Garmin Ltd. And Subsidiaries
Free Cash Flow
(in thousands)
13-Weeks Ended
Mar 26, Mar 28,



Net cash provided by operating activities $129,387 $81,655
Less: purchases of property and equipment ($13,908 ) ($18,143 )
Free Cash Flow $115,479 $63,512



Garmin Ltd.Investor Relations Contact:Teri Seck, [email protected] Relations Contact:Ted Gartner, [email protected]