10-KPeriod: FY2009

GARMIN LTD Annual Report, Year Ended Dec 26, 2009

Filed February 24, 2010For Securities:GRMN

Summary

Garmin Ltd. reported a decline in net sales and net income for the fiscal year ended December 26, 2009, compared to the previous year, largely attributed to macroeconomic conditions impacting its Automotive/Mobile and Aviation segments. Despite a 15.7% decrease in overall net sales, the company saw a 9.6% increase in its Outdoor/Fitness segment, driven by new product introductions. Gross profit margins improved across all segments, leading to a 4.5% increase in the overall gross profit margin percentage, particularly benefiting from cost reductions in the Automotive/Mobile segment. In 2009, Garmin continued to invest heavily in research and development, increasing R&D spending by 15.7% to support new product initiatives, including mobile handsets. The company also focused on cost management, reducing advertising and selling, general, and administrative expenses. Garmin's strong balance sheet remained a key strength, with substantial cash and marketable securities. The company anticipates moderate revenue growth in 2010, driven by new product launches and a potential recovery in market conditions.

Financial Highlights

52 data points
Beta

Revenue

$2.95B

49.0% Gross Margin

Net Income

$703.95M

23.9% Net Margin

EPS (Diluted)

$3.50

Total Assets

$3.83B

Cash & Equivalents

$1.09B

Free Cash Flow

$1.05B

Financial Statements
Beta
Revenue$2.95B
Cost of Revenue$1.50B
Gross Profit$1.44B
R&D Expenses$238.38M
SG&A Expenses$264.20M
Operating Expenses$658.10M
Operating Income$786.01M
Interest Expense$0
Net Income$703.95M
EPS (Basic)$3.51
EPS (Diluted)$3.50
Shares Outstanding (Basic)200.40M
Shares Outstanding (Diluted)201.16M

Key Highlights

  • 1Net sales decreased by 15.7% year-over-year to $2.95 billion, primarily due to a significant drop in the Automotive/Mobile (-19.1%) and Aviation (-24.0%) segments.
  • 2The Outdoor/Fitness segment showed resilience with a 9.6% increase in net sales, reaching $469 million, driven by new product introductions.
  • 3Overall gross profit margin improved by 450 basis points to 49.0%, with the Automotive/Mobile segment experiencing a notable 350 basis point expansion due to cost reductions.
  • 4Research and Development (R&D) expenses increased by 15.7% to $238 million, reflecting continued investment in innovation and new product development, notably mobile handsets.
  • 5The company maintained a strong cash position, with cash and cash equivalents increasing to $1.09 billion from $696 million in the prior year.
  • 6Advertising expenses were reduced by 25.3% year-over-year to $156 million, reflecting cost-saving measures amidst revenue decline.
  • 7Despite overall revenue decline, Garmin paid a consistent quarterly dividend of $0.75 per share.

Frequently Asked Questions

Garmin's primary revenue driver in 2009 was the Automotive/Mobile segment, which accounted for 69.7% of total net sales. However, this segment experienced a significant decline of 19.1% year-over-year, attributed to a competitive market leading to average selling price reductions and a 2% decrease in volumes.

Garmin increased its investment in Research and Development (R&D) by 15.7% to $238.4 million in 2009. The focus was on continuous innovation and the development of new products, including a significant push into mobile handsets, which were slated for fiscal year 2010.

Garmin anticipated revenue growth between 0-5% for fiscal year 2010. This growth was expected to be driven by new mobile product initiatives and continued expansion in the Outdoor/Fitness, Aviation, and Marine segments. Management emphasized that continuous innovation and new product introductions are considered essential for future revenue growth.

Garmin highlighted several risks, including the potential for demand in Personal Navigation Devices (PNDs) to be eroded by mobile handsets and factory-installed automotive systems. The company also noted its high dependence on the Automotive/Mobile segment, which might be maturing. Economic conditions, gross margin erosion due to competition and price reductions, and reliance on key suppliers were also identified as significant risks.