10-KPeriod: FY2010

GARMIN LTD Annual Report, Year Ended Dec 25, 2010

Filed February 23, 2011For Securities:GRMN

Summary

Garmin Ltd. reported a 9% decrease in net sales for the fiscal year 2010 compared to 2009, primarily driven by a significant 19% decline in its largest segment, Automotive/Mobile. This decline was attributed to market saturation and the increasing prevalence of GPS technology in mobile handsets and factory-installed automotive systems, which also led to lower average selling prices and margins in this segment. Despite the overall revenue dip, Garmin experienced robust growth in its Outdoor/Fitness segment (up 19%), Marine (up 12%), and Aviation (up 7%) segments, indicating diversification and resilience. The company's strategic focus on innovation is evident in its continued investment in research and development, which increased by 16% in 2010. Garmin's strong balance sheet, with substantial cash and marketable securities, and its generation of positive operating cash flow provide a solid foundation for future investments and shareholder returns, including dividends and share repurchases. The company anticipates ongoing revenue pressure in the Automotive/Mobile segment for 2011 but expects growth in other segments to partially offset this.

Financial Highlights

53 data points
Beta

Revenue

$2.69B

50.1% Gross Margin

Net Income

$584.60M

21.7% Net Margin

EPS (Diluted)

$2.95

Total Assets

$3.99B

Cash & Equivalents

$1.26B

Free Cash Flow

$738.40M

Financial Statements
Beta
Revenue$2.69B
Cost of Revenue$1.34B
Gross Profit$1.35B
R&D Expenses$277.26M
SG&A Expenses$287.82M
Operating Expenses$709.70M
Operating Income$636.68M
Interest Expense$1.25M
Net Income$584.60M
EPS (Basic)$2.97
EPS (Diluted)$2.95
Shares Outstanding (Basic)196.98M
Shares Outstanding (Diluted)198.01M

Key Highlights

  • 1Garmin's net sales decreased by 9% to $2.69 billion in 2010, primarily due to a 19% decline in the Automotive/Mobile segment, which now represents 62% of total revenue.
  • 2The Outdoor/Fitness segment showed strong performance, with net sales increasing by 19% in 2010, driven by new product introductions and global market penetration.
  • 3Research and Development expenses increased by 16% to $277.3 million in 2010, highlighting the company's commitment to innovation.
  • 4Gross profit margin improved by 110 basis points to 50% in 2010, despite the decline in Automotive/Mobile segment margins, due to stronger performance in other segments.
  • 5The company generated strong operating cash flow of $770.6 million in 2010.
  • 6Garmin's balance sheet remained strong, with $1.26 billion in cash and cash equivalents and $801.8 million in marketable securities as of December 25, 2010.
  • 7The company declared a cash dividend of $1.50 per share in 2010 and had an active share repurchase program.

Frequently Asked Questions

The primary driver of Garmin's 9% decrease in net sales for fiscal year 2010 was a significant 19% decline in its Automotive/Mobile segment. This was attributed to increased market saturation, the growing adoption of GPS technology in mobile phones, and factory-installed navigation systems in new vehicles, which led to reduced sales volumes and pricing pressure for portable navigation devices.

Garmin experienced growth in three of its four business segments in 2010. The Outdoor/Fitness segment saw the most significant increase with a 19% rise in net sales. The Marine segment also grew by 12%, and the Aviation segment increased by 7%. These segments helped to offset the decline in the Automotive/Mobile segment.

Garmin is focusing on innovation and new product development across all its segments to counter the challenges in the Automotive/Mobile market. While the report indicates continued revenue pressure in this segment for 2011, the company's investment in R&D and the strength of its other business segments suggest a strategy of diversification and leveraging its technological expertise in new and growing areas.

Garmin demonstrated strong financial health at the end of fiscal year 2010. The company reported $1.26 billion in cash and cash equivalents and $801.8 million in marketable securities, indicating substantial liquidity. Furthermore, it generated robust operating cash flow of $770.6 million, underscoring its ability to self-fund operations, investments, and shareholder returns.