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Corporate earnings
Wednesday, 2 May 2018, 12:00 am CDT

Garmin reports record first quarter revenue and double-digit earnings growth

Garmin Ltd. (Nasdaq: GRMN) today announced results for the first quarter
ended March 31, 2018.

Highlights for the first quarter 2018 include:

  • Total revenue of $711 million, growing 11% over the prior year, with
    outdoor, fitness, aviation, and marine collectively growing 18% over
    the prior year quarter and contributing 80% of total revenue
  • Gross margin improved to 60.0% compared to 58.1% in the prior year
    quarter
  • Operating margin improved to 20.0% compared to 18.2% in the prior year
    quarter
  • Operating income grew 22%
  • GAAP and pro forma EPS(1) was $0.68
  • Launched the G500H TXi, a new generation of touchscreen flight decks
    for helicopters
  • Began shipping the Forerunner® 645M, our first GPS running watch with
    integrated music and Garmin Pay contactless payments
  • Recently held our second annual Connect IQ™ Summit hosting developers
    from around the world
(in thousands, 13-Weeks Ended
except per share data) March 31, April 1, Yr over Yr
2018 2017 Change
Net sales $ 710,872 $ 641,510 11%
Outdoor 144,258 115,875 24%
Fitness 166,035 137,831 20%
Aviation 145,713 122,871 19%
Marine 113,554 104,445 9%
Auto 141,312 160,488 -12%
Gross margin % 60.0% 58.1%
Operating income % 20.0% 18.2%
GAAP diluted EPS $ 0.68 $ 1.26 -46%
Pro forma diluted EPS (1) $ 0.68 $ 0.52 31%
(1) See attached table for reconciliation of non-GAAP measures including
pro forma diluted EPS


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

“We achieved record first quarter revenue with double digit consolidated
growth led by strong growth in our outdoor, fitness, aviation and marine
segments,” said Cliff Pemble, president and chief executive officer of
Garmin Ltd. “Both the outdoor and fitness segments delivered solid,
double digit revenue growth, and we remain confident in our wearable
product offerings. We are pleased with our first quarter results and
look forward to launching new, compelling products throughout the
remainder of the year.”


Outdoor:

During the first quarter of 2018, the outdoor segment grew 24% with
significant contributions from our fēnix® adventure line of wearables.
Gross margin improved to 65% while operating margin remained strong at
30%, resulting in operating income growth of 27%. We introduced the
tactix® Charlie, a tactical themed GPS wearable, and began shipping the
Descent™ dive watch, bringing an attractive design to underwater
adventurers. Looking forward, we remain focused on opportunities in
wearables and other product categories within the outdoor market.


Fitness:

During the first quarter of 2018, the fitness segment posted revenue
growth of 20% primarily driven by our advanced wearables. Gross and
operating margins increased year-over-year to 58% and 20%, respectively,
resulting in an operating income growth of 81%. During the first
quarter, we started shipping our first GPS running watch with integrated
music and Garmin Pay contactless payments. We recently introduced the
Edge® 130, a compact GPS cycling computer, the Edge 520 Plus, an
advanced cycling computer, and the Varia™ RTL510 rearview radar. Both
computers allow cyclists to plan and download their route in advance and
brings connectivity to riders. The updated Varia radar enhances the
safety features from the first generation and the new design easily
mounts to most road-use bikes. Even though the market for basic activity
trackers has continued to rapidly mature, we continue to see
opportunities for advanced wearables within the fitness segment.


Aviation:

The aviation segment posted solid first quarter revenue growth of 19%.
Gross and operating margins were strong at 75% and 33%, respectively,
resulting in operating income growth of 25%. During the quarter, we
started delivering the G500/600 TXi flight decks including the G500H TXi
helicopter variant. We continue to invest in upcoming certifications
with our OEM partners, and ongoing aftermarket opportunities.


Marine:

The marine segment posted revenue growth of 9% driven by our recent
Navionics® acquisition. Gross margin increased year-over-year to 59%,
while operating margin declined to 12%. During the first quarter of
2018, we introduced the GCV 20 ultra-high definition scanning sonar that
delivers higher resolution imaging at greater depths. Additionally, we
were selected as the exclusive marine electronics supplier to the
Independent Boat Builders, Inc., the industry’s largest purchasing
cooperative network of leading boat brands. We remain focused on
innovations and achieving market share gains within the inland fishing
category.


Auto:

The auto segment recorded a revenue decline of 12% in the first quarter
of 2018, primarily due to the ongoing PND market contraction somewhat
offset by growth in certain niche product lines. Gross and operating
margins were 43% and 2%, respectively. During the quarter, we announced
a new generation dēzl™ 780, with built in Wi-Fi® and dash cam
capabilities bringing advanced safety features and alerts to the
trucking industry. Looking forward, we are focused on disciplined
execution to bring desired innovation to the market and to optimize
profitability in this segment.


Additional Financial Information:

Total operating expenses in the quarter were $284 million, an 11%
increase from the prior year. Research and development increased 16%
driven by the incremental costs associated with acquisitions,
investments in the outdoor and fitness segments for the development of
advanced wearable products and continued innovation in the aviation
segment. Selling, general and administrative expenses increased 15%
driven primarily by personnel related expenses and incremental costs
associated with acquisitions. Advertising expenses decreased 20% year
over year primarily due to reduced media spending and lower cooperative
advertising.

The effective tax rate in the first quarter of 2018 was 16.0% compared
to the pro forma effective tax rate of 21.2% (see attached table for
reconciliation of this non-GAAP measure) in the prior year quarter. The
decrease in the effective tax rate is primarily due to the benefits from
the U.S. tax reform and the impact of the release of reserves.

In the first quarter of 2018, we generated $188 million of free cash
flow (see attached table for reconciliation of this non-GAAP measure).
We continued to return cash to shareholders with our quarterly dividend
of approximately $96 million. We ended the quarter with cash and
marketable securities of approximately $2.4 billion.

As announced in February 2018, the Board will recommend to the
shareholders for approval at the annual meeting to be held on June 8,
2018 a cash dividend in the total amount of $2.12 per share (subject to
adjustment in the event that the Swiss Franc weakens more than 35%
relative to the USD), payable in four equal installments on dates to be
approved by the Board.


2018 Guidance:

We are maintaining our 2018 guidance for revenue of approximately $3.2
billion and pro forma EPS of $3.05 (see attachment for reconciliation of
this non-GAAP measure).


Revenue Standard Adoption

We adopted the new revenue standard in the first quarter of 2018. The
prior periods presented here have been restated to reflect adoption of
this new standard. See Appendix A for further discussion of the new
revenue standard.


Webcast Information/Forward-Looking Statements:

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

When: Wednesday, May 2, 2018 at 10:30 a.m. Eastern
Where:

http://www.garmin.com/en-US/company/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 May 1, 2019 on
the Garmin website at 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 that are commonly
identified by words such as “would,” “may,” “expects,” “estimates,”
“plans,” “intends,” “projects,” and other words or phrases with similar
meanings. Any statements regarding the Company’s 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, currency movements, expenses, pricing, new
products to be introduced in 2018, statements relating to possible
future dividends 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 the Annual Report on Form 10-K for the year ended
December 31, 2017 filed by Garmin with the Securities and Exchange
Commission (Commission file number 0-31983). A copy of Garmin’s 2017
Form 10-K can be downloaded from

http://www.garmin.com/aboutGarmin/invRelations/finReports.html

.


Non-GAAP Financial Measures

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, the Garmin delta, fēnix, Edge, Forerunner, and
tactix, are trademarks of Garmin Ltd. or its subsidiaries and are
registered in one or more countries, including the U.S.; Connect IQ,
Descent, dēzl and Varia are trademarks of Garmin Ltd. or its
subsidiaries. Wi-Fi is a registered trademark of the Wi-Fi Alliance. 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
March 31, April 1,
2018 2017
Net sales $ 710,872 $ 641,510
Cost of goods sold 284,337 268,704
Gross profit 426,535 372,806
Advertising expense 25,311 31,525
Selling, general and administrative expense 117,065 102,051
Research and development expense 141,957 122,202
Total operating expense 284,333 255,778
Operating income 142,202 117,028
Other income (expense):
Interest income 10,227 8,444
Foreign currency gains (losses) 816 (37,497 )
Other income 735 400
Total other income (expense) 11,778 (28,653 )
Income before income taxes 153,980 88,375
Income tax provision (benefit) 24,606 (150,029 )
Net income $ 129,374 $ 238,404
Net income per share:
Basic $ 0.69 $ 1.27
Diluted $ 0.68 $ 1.26
Weighted average common
shares outstanding:
Basic 188,322 188,333
Diluted 189,292 189,031
Garmin Ltd. And Subsidiaries
Condensed Consolidated Balance Sheets (Unaudited)
(In thousands, except per share information)
March 31, December 30,
2018 2017
Assets
Current assets:
Cash and cash equivalents $ 898,981 $ 891,488
Marketable securities 167,745 161,687
Accounts receivable, net 409,704 590,882
Inventories, net 547,412 517,644
Deferred costs 29,327 30,525
Prepaid expenses and other current assets 138,114 153,912
Total current assets 2,191,283 2,346,138
Property and equipment, net 604,813 595,684
Restricted cash 279 271
Marketable securities 1,309,185 1,260,033
Deferred income taxes 199,090 195,981
Noncurrent deferred costs 32,428 33,029
Intangible assets, net 421,006 409,801
Other assets 97,138 107,352
Total assets $ 4,855,222 $ 4,948,289
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable $ 136,132 $ 169,640
Salaries and benefits payable 90,137 102,802
Accrued warranty costs 35,422 36,827
Accrued sales program costs 56,266 93,250
Deferred revenue 98,660 103,140
Accrued royalty costs 17,445 32,204
Accrued advertising expense 16,007 30,987
Other accrued expenses 69,949 93,652
Income taxes payable 37,825 33,638
Dividend payable – 95,975
Total current liabilities 557,843 792,115
Deferred income taxes 74,714 76,612
Noncurrent income taxes 140,368 138,295
Noncurrent deferred revenue 83,222 87,060
Other liabilities 1,882 1,788
Stockholders’ equity:
Shares, CHF 0.10 par value, 198,077 shares authorized and issued;
188,521 shares
outstanding at March 31, 2018 and 188,189 shares outstanding at
December 30, 2017 		17,979 17,979
Additional paid-in capital 1,818,532 1,828,386
Treasury stock (450,160 ) (468,818 )
Retained earnings 2,546,400 2,418,444
Accumulated other comprehensive income 64,442 56,428
Total stockholders’ equity 3,997,193 3,852,419
Total liabilities and stockholders’ equity $ 4,855,222 $ 4,948,289
Garmin Ltd. And Subsidiaries
Condensed Consolidated Statements of Cash Flows (Unaudited)
(In thousands)
13-Weeks Ended
March 31, April 1,
2018 2017
Operating activities:
Net income $ 129,374 $ 238,404
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 16,014 14,658
Amortization 7,132 7,070
(Gain) loss on sale or disposal of property and equipment (15 ) 8
Provision for doubtful accounts 57 (294 )
Provision for obsolete and slow moving inventories 3,959 7,193
Unrealized foreign currency (gain) loss (517 ) 42,571
Deferred income taxes 416 (171,432 )
Stock compensation expense 13,440 8,206
Realized losses on marketable securities 196 291
Changes in operating assets and liabilities, net of acquisitions:
Accounts receivable 187,693 135,253
Inventories (26,455 ) (41,398 )
Other current and non-current assets 9,037 7,534
Accounts payable (36,708 ) (44,180 )
Other current and non-current liabilities (99,935 ) (81,038 )
Deferred revenue (8,368 ) (12,041 )
Deferred costs 1,807 2,647
Income taxes payable 17,063 6,943
Net cash provided by operating activities 214,190 120,395
Investing activities:
Purchases of property and equipment (26,336 ) (25,538 )
Proceeds from sale of property and equipment 121 7
Purchase of intangible assets (1,622 ) (1,222 )
Purchase of marketable securities (140,623 ) (96,049 )
Redemption of marketable securities 65,253 109,526
Acquisitions, net of cash acquired (9,417 ) –
Net cash used in investing activities (112,624 ) (13,276 )
Financing activities:
Dividends (96,146 ) (96,028 )
Proceeds from issuance of treasury stock related to equity awards 1,926 –
Purchase of treasury stock related to equity awards (6,562 ) (3,452 )
Purchase of treasury stock under share repurchase plan – (27,873 )
Net cash used in financing activities (100,782 ) (127,353 )
Effect of exchange rate changes on cash, cash equivalents, and
restricted cash 		6,717 6,932
Net increase (decrease) in cash, cash equivalents, and restricted
cash 		7,501 (13,302 )
Cash, cash equivalents, and restricted cash at beginning of period 891,759 846,996
Cash, cash equivalents, and restricted cash at end of period $ 899,260 $ 833,694
Garmin Ltd. And Subsidiaries
Net Sales, Gross Profit and Operating Income by Segment
(Unaudited)
Reportable Segments

Outdoor
Fitness
Marine
Auto
Aviation
Total
13-Weeks Ended March 31, 2018
Net sales $ 144,258 $ 166,035 $ 113,554 $ 141,312 $ 145,713 $ 710,872
Gross profit 93,285 96,601 66,683 61,012 108,954 426,535
Operating income 43,822 33,374 13,131 3,468 48,407 142,202
13-Weeks Ended April 1, 2017
Net sales $ 115,875 $ 137,831 $ 104,445 $ 160,488 $ 122,871 $ 641,510
Gross profit 73,469 77,741 59,747 70,616 91,233 372,806
Operating income 34,451 18,472 18,145 7,352 38,608 117,028
Garmin Ltd. And Subsidiaries
Net Sales by Geography (Unaudited)
(In thousands)
13-Weeks Ended
March 31, April 1, Yr over Yr
2018 2017 Change
Net sales $ 710,872 $ 641,510 11 %
Americas 345,975 324,630 7 %
EMEA 245,912 225,335 9 %
APAC 118,985 91,545 30 %

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

Non-GAAP Financial Information

To supplement our financial results presented in accordance with GAAP,
this release includes the following measures defined by the Securities
and Exchange Commission as non-GAAP financial measures: pro forma net
income (earnings) per share, forward-looking pro forma earnings per
share, pro forma effective tax rate, forward-looking pro forma effective
tax rate and free cash flow. These non-GAAP measures are not based on
any comprehensive set of accounting rules or principles and should not
be considered a substitute for, or superior to, financial measures
calculated in accordance with GAAP, and may be different from non-GAAP
measures used by other companies, limiting the usefulness of the
measures for comparison with other companies. Management believes
providing investors with an operating view consistent with how it
manages the Company provides enhanced transparency into the operating
results of the Company, as described in more detail by category below.

The tables below provide reconciliations between the GAAP and non-GAAP
measures.


Pro forma effective tax rate

The Company’s income tax expense is periodically impacted by discrete
tax items that are not reflective of income tax expense incurred as a
result of current period earnings. Therefore, management believes
disclosure of the effective tax rate and income tax provision before the
effect of such discrete tax items are important measures to permit
investors’ consistent comparison between periods. In the first quarter
2018, there were no such discrete tax items identified.

Garmin Ltd. And Subsidiaries
Pro Forma Effective Tax Rate
(in thousands, except effective tax rate (ETR) information)
13-Weeks Ended
April 1,
2017
$ ETR
(1)
U.S. GAAP income tax provision (benefit) $ (150,029 ) (169.8 %)
Pro forma discrete tax items:
Switzerland corporate tax election(2)

168,755

Total pro forma discrete tax items

168,755

Income tax provision (Pro Forma) $ 18,726 21.2 %
(1) Effective tax rate is calculated by taking the Income
tax provision divided by Income before taxes, as presented on the
face of the Condensed Consolidated statements of Income.

(2) In first quarter 2017, a $169 million tax benefit
was recognized resulting from the revaluation of certain
Switzerland deferred tax assets. The revaluation is due to the
Company’s election in February 2017 to align certain Switzerland
corporate tax positions with global tax initiatives. As this
revaluation is not reflective of income tax expense incurred
related to the current period earnings, and therefore affects
period to period comparability, it has been identified as a
discrete pro forma tax item.

The net release of uncertain tax position reserves, amounting to
approximately $3.5 million and $1.0 million in the first quarter 2018
and 2017, respectively, have not been included as pro forma adjustments
in the above presentation as such amounts tend to be more recurring in
nature, and do not affect comparability between periods.


Pro forma net income (earnings) per share

Management believes that net income (earnings) per share before the
impact of foreign currency gains or losses and certain discrete income
tax items, as discussed above, is an important measure in order to
permit a consistent comparison of the Company’s performance between
periods.

Garmin Ltd. And Subsidiaries
Pro Forma Net Income (Earnings) Per Share
(in thousands, except per share information)
13-Weeks Ended
March 31, April 1,
2018 2017
Net income (GAAP) $ 129,374 $ 238,404
Foreign currency gains / losses(1) (816 ) 37,497
Tax effect of foreign currency gains / losses(2) 130 (7,945 )
Discrete tax items(3) – (168,755 )
Net income (Pro Forma) $ 128,688 $ 99,201
Net income per share (GAAP):
Basic $ 0.69 $ 1.27
Diluted $ 0.68 $ 1.26
Net income per share (Pro Forma):
Basic $ 0.68 $ 0.53
Diluted $ 0.68 $ 0.52
Weighted average common shares outstanding:
Basic 188,322 188,333
Diluted 189,292 189,031
(1) The majority of the Company’s consolidated foreign currency
losses are driven by movements in the Taiwan Dollar, Euro, and
British Pound Sterling in relation to the U.S. Dollar and the
related exchange rate impact on the significant cash, 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 losses.
(2) The tax effect of foreign currency gains/losses were calculated
using the effective tax rate of 16.0% and a pro forma effective tax
rate of 21.2% for the first quarter 2018 and 2017, respectively.
(3) The discrete tax items are discussed in the pro forma effective
tax rate section above.


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 less
capital expenditures for property and equipment. Management believes
that excluding purchases of property and equipment provides a better
understanding of the underlying trends in the Company’s operating
performance and allows more accurate comparisons of the Company’s
operating results to historical performance. This metric may also be
useful to investors, but should not be considered in isolation as it is
not a measure of cash flow available for discretionary expenditures. The
most comparable GAAP measure is cash provided by operating activities.

Garmin Ltd. And Subsidiaries
Free Cash Flow
(in thousands)
13-Weeks Ended
March 31, April 1,
2018 2017
Net cash provided by operating activities $ 214,190 $ 120,395
Less: purchases of property and equipment (26,336 ) (25,538 )
Free Cash Flow $ 187,854 $ 94,857


Forward-looking pro forma tax rate

Forward-looking pro forma tax rate and pro forma earnings per share are
calculated before the effect of certain discrete tax items. Management
believes certain discrete tax items may not be reflective of income tax
expense incurred as a result of current period earnings. Therefore, in
order to permit consistent comparison between periods, the tax rate and
earnings per share before the effect of such discrete tax items are
important measures. At this time management is unable to determine
whether or not significant discrete tax items will be identified in
fiscal 2018.


Forward-looking pro forma earnings per share (EPS)

In addition to the discrete tax items discussed in the forward-looking
pro forma effective tax rate section above, our 2018 pro forma EPS
excludes foreign currency exchange gains and losses. The estimated
impact of such foreign currency gains and losses cannot be reasonably
estimated on a forward-looking basis due to the high variability and low
visibility with respect to non-operating foreign currency exchange gains
and losses and the related tax effects of such gains and losses. The
impact of such foreign currency gains and losses, net of tax effects,
was less than $0.01 for the 13-weeks ended March 31, 2018.

APPENDIX A – New revenue standard

In the first quarter of 2018 we adopted Accounting Standards
Codification Topic 606, Revenue from Contracts with Customers (“ASC
Topic 606”), the new revenue standard. ASC Topic 606 replaces existing
revenue recognition rules with a comprehensive revenue measurement and
recognition standard. The Company adopted the new revenue standard
utilizing the full retrospective method. Under this method, the new
revenue standard is applied to each prior period reported in the
forthcoming 2018 Form 10-Q and Form 10-K filings. This adoption approach
enhances comparability, as all periods presented in the forthcoming
filings are reported under the new standard.

The following tables contain restated summarized financial information
resulting from the adoption of ASC Topic 606. Amounts related to the
income tax effect of the new standard that were previously disclosed as
the anticipated adoption impact in our fourth quarter 2017 press release
attached as Exhibit 99.1 to our Current Report on Form 8-K and in Note 2
of our fiscal 2017 Annual Report on Form 10-K filed with the Securities
and Exchange Commission (SEC) on February 21, 2018 have been revised in
the tables below and in Note 1 of the Company’s first quarter 2018 Form
10-Q filing by immaterial amounts in connection with our adoption of ASC
Topic 606. Restated revenue, gross profit and operating income were not
affected by this revision. Finalized balance sheet information can be
found within Note 1 of the Company’s first quarter 2018 Form 10-Q
filing. Historical net cash flows provided by or used in operating,
investing, and financing activities were not impacted by adoption of the
new revenue standard. Within this appendix, the references to periods
such as “FY 17”or “Q1 17” refer to the corresponding periods as reported
in the applicable Form 10-K or Form 10-Q filings.

Garmin Ltd. And Subsidiaries
Condensed Consolidated Statements of Income (Unaudited)
(In thousands)

Restated
(1)
FY 16 Q1 17 Q2 17 Q3 17 Q4 17 FY 17
Net sales $ 3,045,797 $ 641,510 $ 831,486 $ 751,244 $ 897,319 $ 3,121,560
Cost of goods sold 1,357,272 268,704 347,356 313,721 393,837 1,323,619
Gross profit 1,688,525 372,806 484,130 437,523 503,482 1,797,941
Total operating expense 1,055,661 255,778 274,508 263,875 320,142 1,114,304
Operating income 632,864 117,028 209,622 173,648 183,340 683,637
Total other income (expense) 5,761 (28,653 ) 24,705 16,266 1,115 13,434
Income before income taxes 638,625 88,375 234,327 189,914 184,455 697,071
Income tax provision (benefit) 120,901 (150,029 ) 57,348 38,840 41,905 (11,936 )
Net income $ 517,724 $ 238,404 $ 176,979 $ 151,074 $ 142,550 $ 709,007
(1) Effective for the fiscal year ending December 29, 2018, we have
adopted ASC Topic 606. The results above are restated under ASC
Topic 606.
Garmin Ltd. And Subsidiaries
Pro Forma Effective Tax Rate
(In thousands, except effective tax rate (ETR) information)

Restated
(1)
FY 16 Q1 17 Q2 17 Q3 17 Q4 17 FY 17
Income before income taxes $ 638,625 $ 88,375 $ 234,327 $ 189,914 $ 184,455 $ 697,071
Income tax provision (benefit) 120,901 (150,029 ) 57,348 38,840 41,905 (11,936 )

U.S. GAAP ETR(2)

 18.9 % (169.8 %) 24.5 % 20.5 % 22.7 % (1.7 %)
Pro forma discrete tax items:

Switzerland corporate tax election(3)

 – 168,755 – – 11,279 180,034

Impact of share-based award expirations(4)

 – – (7,275 ) – (15,345 ) (22,620 )
Total pro forma discrete tax items – 168,755 (7,275 ) – (4,066 ) 157,414

Income tax provision adjusted for pro forma discrete tax items

$ 120,901 $ 18,726 $ 50,073 $ 38,840 $ 37,839 $ 145,478

Pro Forma ETR(2)

 18.9 % 21.2 % 21.4 % 20.5 % 20.5 % 20.9 %

(1)

Effective for the fiscal year ending December 29, 2018, we have
adopted ASC Topic 606. The results above are restated under ASC
Topic 606.

(2)

U.S. GAAP ETR is calculated by taking the Income tax provision
(benefit) divided by Income before income taxes. Pro Forma ETR is
calculated by taking the Income tax provision adjusted for Pro
forma discrete tax items divided by Income before income taxes.

(3)

In first quarter 2017, a $169 million tax benefit was recognized
resulting from the revaluation of certain Switzerland deferred tax
assets. The revaluation is due to the Company’s election in
February 2017 to align certain Switzerland corporate tax positions
with international tax initiatives. In the fourth quarter 2017, an
additional $11 million benefit was recognized as a result of this
Switzerland election. These impacts during the transitional period
following the election are not reflective of current income tax
expense incurred and therefore affect period-to-period
comparability.

(4)

Following adoption in fiscal 2017 of Accounting Standards Update
No. 2016-09, Compensation – Stock Compensation (Topic 718):
Improvements to Employee Share-Based Payment Accounting (“ASU
2016-09”), the Company may periodically incur tax expense
resulting from stock options and stock appreciation rights (SARs)
expiring unexercised. New grants of stock options and SARs no
longer comprise a significant component of the Company’s
compensation arrangements. As the tax expense from expired awards
is not related to current period earnings or compensation
activities, and affects period-to-period comparability, it has
been identified as a pro forma adjustment.

Garmin Ltd. And Subsidiaries
Pro Forma Net Income (Earnings) Per Share
(in thousands, except per share information)

Restated
(1)
FY 16 Q1 17 Q2 17 Q3 17 Q4 17 FY 17
Net income (GAAP) $ 517,724 $ 238,404 $ 176,979 $ 151,074 $ 142,550 $ 709,007

Foreign currency gains / losses(2)

 31,651 37,497 (15,110 ) (8,579 ) 8,772 22,579

Tax effect of foreign currency gains / losses(3)

 (5,992 ) (7,945 ) 3,229 1,755 (1,799 ) (4,712 )

Discrete tax items(4)

 – (168,755 ) 7,275 – 4,066 (157,414 )
Net income (Pro Forma) $ 543,383 $ 99,201 $ 172,373 $ 144,250 $ 153,589 $ 569,460
Diluted earnings per share (GAAP) $ 2.73 $ 1.26 $ 0.94 $ 0.80 $ 0.75 $ 3.76
Diluted earnings per share (Pro Forma) $ 2.87 $ 0.52 $ 0.91 $ 0.77 $ 0.81 $ 3.02
Weighted average common shares outstanding:
Diluted 189,343 189,031 188,492 188,490 188,915 188,732

(1)

Effective for the fiscal year ending December 29, 2018, we have
adopted ASC Topic 606. The results above are restated under ASC
Topic 606.

(2)

The majority of the Company’s consolidated foreign currency gains
and losses are typically driven by movements in the Taiwan Dollar,
Euro, and British Pound Sterling in relation to the U.S. Dollar
and the related exchange rate impact on the significant cash,
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 gains and
losses.

(3)

The tax effect of foreign currency gains and losses is calculated
using the pro forma ETR for the respective period, as presented
above. The quarterly tax effects may not cross-foot to the annual
tax effect due to quarterly variances in pro forma ETR.

(4)

The discrete tax items are discussed in the pro forma effective
tax rate section above.

 

Contacts

Garmin Investor Relations Contact: Teri Seck, 913-397-8200 [email protected] or Media Relations Contact: Ted Gartner, 913-397-8200 [email protected]