Garmin Reports Strong Fiscal 2014 Revenue and Pro Forma EPS Growth; Proposes Dividend Increase and Announces Share Repurchase Plan

Garmin Ltd. (Nasdaq: GRMN – News) today announced results for the fiscal
year and quarter ended December 27, 2014.

Highlights in the quarter include:

• Total revenue of $803 million in fourth quarter 2014 with
  non-automotive/mobile segments of outdoor, fitness, aviation and
  marine delivering 58% of total revenues
• Gross and operating margins of 54% and 22%, respectively
• Gained market share across a broad range of product categories
  including activity trackers and PNDs

Highlights for the fiscal year include:

• Total revenue of $2,871 million in 2014 with non-automotive/mobile
  segments of outdoor, fitness, aviation and marine growing a combined
  23% over 2013 and contributing 57% of total revenue
• Gross and operating margins of 56% and 24%, respectively, improving
  from 2013 levels
• Continued diversification of revenue and profitability sources as we
  entered new product categories, broadened our range of offerings and
  grew market share
• Returned $602 million of cash to shareholders with quarterly dividends
  totaling $360 million and share repurchases of $242 million

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

“Through an intense focus on innovation and execution, we posted four
consecutive quarters of revenue and pro forma EPS growth in 2014. We
have redefined our earnings power as a company and further diversified
our operating profit base,” said Cliff Pemble, president and chief
executive officer (CEO) of Garmin Ltd. “I am pleased with everything
that we have accomplished in 2014. Yet, we recognize that significant
opportunities and challenges lie ahead of us. We will not be complacent.
We believe that we are well positioned to gain share in categories that
we are currently serving, while also launching products into new
categories in the future. 2014 serves as a solid foundation from which
to build and we plan to do just that.”

Fitness:

The fitness segment posted revenue growth of 70% in the quarter,
confirming the strength of our product portfolio across a broad spectrum
of price points and categories. Gross margin in the quarter remained
strong at 61% while operating margin declined to 29% due to our
aggressive spending for advertising and point of sale displays. This
investment allowed us to establish a solid market share position and
retail presence in the growing activity tracker market in just our first
year serving the category. We will further leverage these investments to
drive growth in 2015. We believe that fitness will again be the largest
contributor of growth in 2015, and we have launched important new
products at CES to strengthen our position in the segment. New products
include the vívoactive™ and vívofit® 2. The vívoactive is a GPS-enabled
smartwatch that delivers unparalleled capabilities for those with an
active lifestyle, while vivofit 2 adds a backlight and vibration alert
to the already popular vívofit. With these exciting products and new
things yet to come in cycling and running, we enter 2015 with high
expectations for continued success.

Outdoor:

The outdoor segment posted a revenue decline of 8% in the quarter, while
gross and operating margins remained strong at 62% and 35%,
respectively. For the full year, we were able to deliver revenue growth
of 4%, even though we have faced a number of headwinds in the outdoor
segment including maturity of our traditional handheld business and a
slowdown in the golf industry. We have overcome these challenges with
strong offerings in wearables and dog tracking and training, which
continue to be growth categories. As we enter 2015, we are dedicated to
delivering compelling, feature-rich products, that will capture new and
repeat customers. Fēnix® 3 and epix™, both of which launched at CES
(Consumer Electronics Show), are those types of products and we expect
to deliver products in other outdoor categories as the year progresses.

Aviation:

The aviation segment posted revenue growth of 7% in the quarter with
contributions from both OEM and aftermarket. While this represents a
slowdown from prior quarters, it follows a very strong fourth quarter
2013 when revenues grew 25%. Gross and operating margins softened
slightly in the quarter due to product mix, but for the full year
improved to 73% and 28%, respectively. This strong full year margin
performance allowed the aviation segment to deliver 22% operating income
growth in 2014. We recently announced a new relationship with
Gulfstream, which has selected Garmin to provide an all-inclusive ADS-B
solution for the G150 business jet. This type of win confirms our
strategy of continued research and development investment in aviation to
support upcoming certifications with OEM partners in 2015 and beyond, as
well as ongoing opportunities for long-term market share gains across
numerous aviation categories.

Marine:

The marine segment posted revenue growth of 18% in the quarter with
strong demand for chartplotters, and contribution from our July
acquisition of Fusion® Electronics. Gross margins declined
year-over-year to 47% in the quarter due to the lower margin profile of
the entertainment products and highly competitive pricing dynamics in
aftermarket marine electronics. This led to a slight operating loss in
the seasonally weak fourth quarter. We continue to forge ahead with
innovative products that we believe will improve our profitability and
competitive position going forward. As such, we announced the 2015
availability of numerous products incorporating our industry-leading
scanning sonar technology, along with new radar and autopilot offerings.
We are planning for revenue and operating profit improvement in 2015 as
we continue to focus on innovation and market share gains, while
managing costs and driving efficiencies at Fusion.

Auto/Mobile:

The automotive/mobile segment posted a revenue decline of 11% as PND
sales continued to decline. Gross and operating margins in the quarter
were 43% and 17%, respectively, representing an improvement over the
prior year. While the PND industry does continue to slow, we have noted
global improvement in the trajectory throughout 2014 and are
anticipating PND industry unit declines of 10-15% with stable pricing in
2015. The segment delivers solid profits; thus, we will continue to
innovate with disciplined investment levels to grow market share and
maintain profitability in the segment. On the OEM side, we have started
delivering content to Mercedes and Honda. We remain excited about the
expanded partnerships that we have secured in 2014, and we will build on
this success in 2015.

Additional Financial Information:

Total operating expenses in the quarter were $255 million, a 15%
increase from the prior year. We invested heavily in advertising during
the quarter to build improved point of sale presence and brand
awareness. The strategy yielded market share gains for our family of
activity trackers and now provides a strong position from which to grow
in 2015. We also grew research and development investment in each of our
segments excluding automotive/mobile, which declined slightly. We
continue to invest in research and development to stimulate both
near-term and long-term revenue growth opportunities.

Our fourth quarter income tax benefit was $10 million, including the
impact of a $49 million income tax benefit associated with net releases
of reserves primarily associated with completion of audits. Adjusting
for this item, our pro forma effective tax rate in fourth quarter 2014
was 19.1% compared to 20.0% in the prior year quarter. The decreased
rate resulted from the approval of the 2014 U.S. research and
development credit offset by unfavorable income mix by tax jurisdiction
caused by foreign currency fluctuations, as well as reduced tax
incentives in Taiwan.

In 2014, we generated $528 million of free cash flow and returned over
100% of it to shareholders via the dividend and share repurchase. We
ended the quarter with cash and marketable securities of almost $2.8
billion.

2015 Guidance:

We expect 2015 revenue of approximately $2.9 billion as growth in the
fitness, marine and aviation segments offset ongoing declines in the PND
market. This level of revenue assumes a EUR/USD exchange rate of 1.15,
which created a material year-over-year headwind when compared to the
average rate of 1.33 in 2014. We expect gross margins to remain
relatively stable at approximately 56% due to the anticipated segment
and product mix. Operating margins are forecasted to decline slightly to
23% due primarily to ongoing research and development investment. Though
currency volatility is expected to slow our revenue growth in 2015, we
do not want to forgo growth in our R&D investment which could negatively
impact both current and future product development plans. With an
expected tax rate of 16-17%, we currently forecast 2015 EPS of
approximately $3.10.

Dividend Recommendation and Share Repurchase
Program:

The board of directors intends to recommend to the shareholders for
approval at the annual meeting to be held on June 5, 2015, a cash
dividend in the amount of $2.04 per share (subject to possible
adjustment based on the total amount of the dividend in Swiss Francs as
approved at the annual meeting), payable in four equal installments on
dates to be determined by the Board. The Board currently anticipates the
scheduling of the dividend in four installments as follows:

In addition, the board of directors has established March 31, 2015 as
the payment date for the final dividend installment of $0.48 per share,
with a record date of March 16, 2015, per the prior approval at the 2014
annual shareholders’ meeting. The first, second and third payments of
$0.48 per share were made on June 30, 2014, September 30, 2014, and
December 31, 2014, respectively.

On February 13, 2015, our board of directors authorized the Company to
repurchase up to $300 million of the Company’s shares as market and
business conditions warrant through December 31, 2016. The repurchases
may be made from time to time on the open market at prevailing market
prices or in negotiated transactions off the market. The Company views
the stock repurchase as an appropriate use of cash given the long-term
growth prospects of the Company and ongoing free cash flow generation.

Webcast Information/Forward-Looking Statements:

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

An archive of the live webcast will be available until March 27, 2015 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. Any statements regarding the
Company’s estimated earnings and revenue for fiscal 2015, the Company’s
expected segment revenue growth rate, margins, new products to be
introduced in 2015 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 28, 2013 filed by Garmin with
the Securities and Exchange Commission (Commission file number 0-31983).
A copy of Garmin’s 2013 Form 10-K can be downloaded from http://www.garmin.com/aboutGarmin/invRelations/finReports.html.

Garmin, fēnix and vívofit are registered trademarks and epix and
vívoactive 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.

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 transactions involving the Euro, the
British Pound Sterling and the Taiwan Dollar and from the exchange rate
impact of the significant cash and marketable securities, receivables
and payables held in U.S. dollars at the end of each reporting period by
the Company’s various non-U.S. subsidiaries. Such gain or loss is
required under GAAP because the functional currency of the subsidiaries
differs from the currency in which various assets and liabilities are
held. 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 $11
million in both 2014 and 2013, 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. In the third
quarter of 2014, the company incurred tax expense of $308 million
associated with an inter-company restructuring. As this is a one-time
transaction and not reflective of income tax expense incurred related to
the current period earnings, it has been excluded from pro forma net
income (earnings) per share. 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
periods.

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
plus one-time cash payments associated with our inter-company
restructuring less capital expenditures for property and equipment.