01—Abstract
Summary
Summary of the 10-Q filed May 6, 2009. Cited figures are marked; the original filing is the authoritative source.
Garmin Ltd. reported a significant decline in its financial performance for the first quarter ended March 28, 2009, compared to the same period in the previous year.
Net sales decreased by 34.2% to $436.7 milliona, driven primarily by a sharp downturn in the automotive/mobile segment, which saw a 42.6% drop in revenue. The aviation and marine segments also experienced considerable declines, while the outdoor/fitness segment showed resilience with a 13.5% increase in sales. This revenue contraction led to a substantial decrease in profitability.
Gross profit fell by 38.8%, and operating income dropped by 66.4%. Net income for the quarter was $48.5 millionb, a 67.2% decrease from the prior year's $147.8 million.
Despite the challenging market conditions, the company maintained a strong liquidity position, with cash and cash equivalents increasing to $922.3 millionc. Garmin also continued its share repurchase program, buying back $1.8 million worth of shares during the quarter.
02—Key points
Key Highlights
- Net sales declined significantly by 34.2% year-over-year to $436.7 million, heavily impacted by a 42.6% decrease in the Automotive/Mobile segment.
- Net income dropped sharply by 67.2% to $48.5 million, or $0.24 per diluted share, compared to $147.8 million, or $0.67 per diluted share, in the prior year's quarter.
- Gross profit margin decreased by 330 basis points to 44.9%, primarily due to margin compression in the Automotive/Mobile segment.
- Operating income saw a substantial decrease of 66.4% to $58.0 million, resulting in a lower operating margin of 13.3% from 26.0% in the prior year.
- The Outdoor/Fitness segment was a bright spot, with net sales increasing by 13.5% and operating income growing by 47.6%.
- The company maintained a strong cash position, with cash and cash equivalents increasing to $922.3 million from $696.3 million at the end of the previous year.
- Garmin repurchased $1.8 million of its common stock under its authorized share repurchase program.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q1 FY2009, Garmin Ltd kept $0.11.
- Revenue$436.7M100.0%
- Cost of revenue−$240.7M55.1%
- Gross profit$196.0M44.9%
- Operating costs−$138.0M31.6%
- Operating income$58.0M13.3%
- Interest, other & tax−$9.4M2.2%
- Net income$48.5M11.1%
04—Financials
Financial Highlights
Figures from 10-QQ1 FY2009filed May 6, 2009Financial Statements
| Revenue | $436.70M |
| Cost of Revenue | $240.70M |
| Gross Profit | $196.00M |
| R&D Expenses | $55.03M |
| SG&A Expenses | $59.78M |
| Operating Expenses | $138.04M |
| Operating Income | $57.96M |
| Net Income | $48.54M |
| EPS (Basic) | $0.24 |
| EPS (Diluted) | $0.24 |
| Shares Outstanding (Basic) | 200.35M |
| Shares Outstanding (Diluted) | 200.72M |
05—Questions
Frequently Asked Questions
What were the primary drivers of the significant revenue decline in the first quarter of 2009?
The primary driver of the revenue decline was the Automotive/Mobile segment, which experienced a 42.6% drop due to factors like price protection credits offered to retail partners, retailers reducing inventory levels, and the broader impact of global macroeconomic conditions. The Aviation and Marine segments also saw significant declines (30.8% and 32.1%, respectively), while the Outdoor/Fitness segment was a positive contributor with a 13.5% sales increase.
How did the company's profitability change compared to the previous year?
Profitability was significantly impacted by the revenue decline. Gross profit decreased by 38.8% and gross margin fell by 330 basis points, largely due to margin pressure in the Automotive/Mobile segment. Consequently, operating income dropped by 66.4%, and net income fell by 67.2% year-over-year.
What is the company's liquidity and cash flow situation?
Garmin maintained a strong liquidity position. Cash and cash equivalents increased to $922.3 million. Net cash provided by operating activities was robust at $299.4 million, which was sufficient to fund investing activities ($66.0 million used) and financing activities ($1.7 million used), including share repurchases. The company expects its current cash and cash flow to be sufficient to meet its obligations through fiscal year 2009.
Are there any significant ongoing legal proceedings that could impact the company?
Garmin is involved in several patent infringement lawsuits, including cases with Encyclopaedia Britannica and SP Technologies. While the company believes its claims are without merit and intends to defend vigorously, it acknowledges that an unfavorable outcome could have a material adverse effect on its operating results, liquidity, or financial position. However, management believes that the ultimate outcome of other legal actions arising in the ordinary course of business will not have a material adverse effect.
06—Continue