01—Abstract
Summary
Summary of the 10-K filed February 23, 2011. Cited figures are marked; the original filing is the authoritative source.
Garmin Ltd. reported a 9%a 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%b), 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.
02—Key points
Key Highlights
- Garmin'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.
- The Outdoor/Fitness segment showed strong performance, with net sales increasing by 19% in 2010, driven by new product introductions and global market penetration.
- Research and Development expenses increased by 16% to $277.3 million in 2010, highlighting the company's commitment to innovation.
- Gross 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.
- The company generated strong operating cash flow of $770.6 million in 2010.
- Garmin'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.
- The company declared a cash dividend of $1.50 per share in 2010 and had an active share repurchase program.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2010, Garmin Ltd kept $0.22.
- Revenue$2.69B100.0%
- Cost of revenue−$1.34B49.9%
- Gross profit$1.35B50.1%
- Operating costs−$709.7M26.4%
- Operating income$636.7M23.7%
- Interest, other & tax−$52.1M1.9%
- Net income$584.6M21.7%
Where FY2010 revenue went
$2.69B- Cost of revenue: $1.34B, 50% of revenue
- Net income: $584.6M, 22% of revenue
- R&D: $277.3M, 10% of revenue
- SG&A: $287.8M, 11% of revenue
- Other operating costs: $144.6M, 5.4% of revenue
- Interest, other & tax: $52.1M, 1.9% of revenue
Kept 22% as net incomeInterest, other & tax $52.1M · 1.9%
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2010filed February 23, 2011Financial Statements
FY2010 against FY2009
| Line item | FY2010FY2009 | Change |
|---|---|---|
| Revenue | $2.69B$2.95B | −8.7% |
| Cost of Revenue | $1.34B$1.50B | −10.6% |
| Gross Profit | $1.35B$1.44B | −6.8% |
| R&D Expenses | $277.26M$238.38M | +16.3% |
| SG&A Expenses | $287.82M$264.20M | +8.9% |
| Operating Expenses | $709.70M$658.10M | +7.8% |
| Operating Income | $636.68M$786.01M | −19.0% |
| Interest Expense | $1.25M$0 | — |
| Net Income | $584.60M$703.95M | −17.0% |
| EPS (Basic) | $2.97$3.51 | −15.4% |
| EPS (Diluted) | $2.95$3.50 | −15.7% |
| Shares Outstanding (Basic) | 196.98M200.40M | −1.7% |
| Shares Outstanding (Diluted) | 198.01M201.16M | −1.6% |
05—Questions
Frequently Asked Questions
What was the main driver of Garmin's revenue decline in 2010?
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.
Which segments of Garmin's business showed growth in 2010?
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.
How is Garmin managing the challenges in the Automotive/Mobile market?
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.
What is Garmin's financial health and capital position?
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.
06—Continue