10-KPeriod: FY2008

GARMIN LTD Annual Report, Year Ended Dec 27, 2008

Filed February 25, 2009For Securities:GRMN

Summary

Garmin Ltd. (GRMN) reported strong revenue growth in its 2008 fiscal year, driven by its diverse product portfolio across automotive/mobile, outdoor/fitness, marine, and aviation segments. Despite a challenging macroeconomic environment, particularly in the latter half of the year, the company saw a significant increase in net sales, largely fueled by its popular nüvi personal navigation devices and expansion in the outdoor/fitness and aviation sectors. The company also made strategic acquisitions of European distributors to bolster its market presence. However, Garmin acknowledged the increasing economic headwinds, anticipating that these conditions would likely dampen or eliminate revenue growth in 2009. Management highlighted the automotive/mobile segment's maturity and increasing competition from smartphone navigation and factory-installed systems as a risk factor, noting a decline in gross margins for this segment. The company also emphasized its commitment to research and development to maintain a competitive edge through continuous product innovation.

Financial Highlights

45 data points
Beta

Revenue

$3.49B

44.5% Gross Margin

Net Income

$732.85M

21.0% Net Margin

EPS (Diluted)

$3.48

Total Assets

$2.93B

Cash & Equivalents

$696.34M

Free Cash Flow

$862.16M

Financial Statements
Beta
Revenue$3.49B
Cost of Revenue$1.94B
Gross Profit$1.55B
R&D Expenses$206.11M
SG&A Expenses$277.21M
Operating Expenses$691.50M
Operating Income$862.02M
Interest Expense$607K
Net Income$732.85M
EPS (Basic)$3.51
EPS (Diluted)$3.48

Key Highlights

  • 1Total net sales increased by 9.9% to $3.49 billion in fiscal year 2008, with significant growth in Outdoor/Fitness and Aviation segments, while Automotive/Mobile remained the largest segment.
  • 2The company acquired six European distributors during 2008 to strengthen its market presence in the region.
  • 3Gross profit margin decreased to 44.5% in 2008 from 46.0% in 2007, primarily due to declining average selling prices and a product mix shift towards lower-margin automotive/mobile products.
  • 4Research and Development expenses increased by 29.3% to $206.1 million, reflecting continued investment in new product development and increased engineering personnel.
  • 5The company repurchased approximately 17.1 million shares of common stock in 2008 for $671.8 million.
  • 6Garmin faces risks related to the economic downturn, increasing competition from smartphones and integrated automotive navigation systems, and potential product obsolescence.
  • 7The nüvi product line continued to be a strong performer, contributing significantly to the automotive/mobile segment's revenue growth.

Frequently Asked Questions

Garmin's revenue growth in fiscal year 2008 was primarily driven by its Outdoor/Fitness segment, which saw strong performance due to new product introductions like the Colorado and Oregon series. The Automotive/Mobile segment remained the largest contributor to revenue, led by the popular nüvi product line, and the Aviation segment also showed continued growth, particularly with the G1000 cockpit system. Total net sales increased by 9.9% year-over-year.

Garmin faced challenges stemming from a worsening macroeconomic environment, which it anticipated would dampen growth in 2009. Specifically, the automotive/mobile segment experienced declining gross margins due to price reductions and a shift in product mix. The company also noted increased selling, general, and administrative expenses, partly due to acquisitions and bad debt expense related to customer bankruptcies like Circuit City.

Garmin increased its Research and Development (R&D) expenses by 29.3% to $206.1 million in fiscal year 2008. This increase was attributed to ongoing development for new products, the addition of approximately 350 new engineering personnel, and increased engineering program costs. Management views R&D as a critical strategic initiative for future growth and maintaining a competitive advantage.

Garmin anticipates that the prevailing macroeconomic conditions will dampen or eliminate revenue growth across all segments in fiscal year 2009. Management plans to manage this by decreasing selling, general, and administrative expenses, particularly advertising and marketing, to better match anticipated demand and support operating margins.