10-QPeriod: Q2 FY2008

GARMIN LTD Quarterly Report for Q2 Ended Jun 28, 2008

Filed August 6, 2008For Securities:GRMN

Summary

Garmin Ltd. reported robust financial performance for the quarter ended June 28, 2008, showcasing significant year-over-year growth in both net sales and net income. Net sales increased by 22.8% to $911.7 million, driven primarily by strong demand in the automotive/mobile and outdoor/fitness segments. The automotive/mobile segment, in particular, saw substantial revenue growth due to the popularity of its personal navigation devices (PNDs), becoming an even larger portion of the company's revenue mix. Profitability also improved, with net income rising 19.5% to $256.1 million for the quarter. While gross profit margin saw a slight decrease primarily due to a shift in product mix towards lower-margin automotive products and increased costs, the company demonstrated strong operational execution. Investments in research and development increased to support innovation, particularly in the automotive and aviation sectors, reflecting Garmin's commitment to future growth and product development. The company also announced a new stock repurchase program and a quarterly cash dividend, signaling confidence in its financial health and commitment to shareholder returns.

Financial Highlights

25 data points
Beta

Revenue

$911.67M

45.8% Gross Margin

Net Income

$256.09M

28.1% Net Margin

EPS (Diluted)

$1.19

Cash & Equivalents

$624.48M

Free Cash Flow

$280.18M

Financial Statements
Beta
Revenue$911.67M
Cost of Revenue$494.54M
Gross Profit$417.13M
R&D Expenses$53.60M
SG&A Expenses$66.70M
Operating Expenses$178.63M
Operating Income$238.50M
Net Income$256.09M
EPS (Basic)$1.20
EPS (Diluted)$1.19
Shares Outstanding (Basic)213.76M
Shares Outstanding (Diluted)215.57M

Key Highlights

  • 1Garmin reported a significant 22.8% increase in net sales to $911.7 million for the thirteen-week period ended June 28, 2008, compared to the prior year.
  • 2Net income grew by 19.5% to $256.1 million for the same period, indicating strong profitability.
  • 3The Automotive/Mobile segment was the largest revenue driver, growing 24.4% year-over-year, largely due to strong sales of personal navigation devices (PNDs).
  • 4The Outdoor/Fitness segment experienced the fastest growth at 54.4%, driven by new product introductions.
  • 5Gross profit margin decreased by 470 basis points to 45.8%, primarily impacted by a shift in product mix towards lower-margin automotive products and increased costs.
  • 6Operating income saw a slight decrease of 1.3% to $238.5 million, impacted by lower gross margins and increased operating expenses, including R&D and SG&A.
  • 7The company announced a quarterly cash dividend of $0.75 per share, payable in December 2008, and initiated new stock repurchase programs.

Frequently Asked Questions

The primary driver of Garmin's revenue growth was strong performance in the Automotive/Mobile segment, fueled by high demand for its personal navigation devices (PNDs), along with significant growth in the Outdoor/Fitness segment due to new product launches.

The gross profit margin declined primarily due to a shift in the product mix towards lower-margin automotive products and an increase in the cost of goods sold. While sales increased, the profitability of each dollar sold was slightly lower.

Garmin increased its investment in research and development by 42.1% compared to the same period last year. This increase was driven by ongoing new product development, the addition of engineering personnel, and higher engineering program costs, reflecting a continued focus on innovation.

Garmin reported strong cash flow from operations and believes its existing cash balances and operational cash flow will be sufficient to meet its projected capital expenditures, working capital requirements, share repurchases, and dividend payments at least through the end of fiscal 2008. The company has no off-balance sheet arrangements.