10-QPeriod: Q2 FY2009

GARMIN LTD Quarterly Report for Q2 Ended Jun 27, 2009

Filed August 5, 2009For Securities:GRMN

Summary

Garmin Ltd. reported a notable decline in net sales for the second quarter and first half of 2009 compared to the prior year, primarily driven by a significant slowdown in the automotive/mobile and aviation segments due to prevailing macroeconomic conditions. Despite the revenue contraction, the company demonstrated improved gross profit margins across most segments, signaling effective cost management and favorable product mix shifts in certain areas. Operating income also declined year-over-year, impacted by reduced sales and increased R&D investments, although operating margins showed improvement on a percentage basis. The company maintained a strong liquidity position with a substantial increase in cash and cash equivalents driven by robust operating cash flow. Garmin also managed its inventories effectively, reducing levels while maintaining adequate stock. While facing revenue challenges in key segments, Garmin continues to invest in product innovation, evidenced by increased R&D spending.

Financial Highlights

43 data points
Beta

Revenue

$669.10M

52.5% Gross Margin

Net Income

$161.87M

24.2% Net Margin

EPS (Diluted)

$0.81

Total Assets

$3.14B

Cash & Equivalents

$958.91M

Free Cash Flow

$256.27M

Financial Statements
Beta
Revenue$669.10M
Cost of Revenue$317.49M
Gross Profit$351.61M
R&D Expenses$56.25M
SG&A Expenses$62.19M
Operating Expenses$152.46M
Operating Income$199.15M
Net Income$161.87M
EPS (Basic)$0.81
EPS (Diluted)$0.81
Shares Outstanding (Basic)200.30M
Shares Outstanding (Diluted)200.85M

Key Highlights

  • 1Net sales decreased by 26.6% for the 13-week period ended June 27, 2009, and by 29.8% for the 26-week period ended June 27, 2009, compared to the prior year periods.
  • 2Gross profit margin improved year-over-year, increasing by 680 basis points to 52.6% in Q2 2009 and by 270 basis points to 49.5% in the first half of 2009.
  • 3Operating income for the 13-week period decreased by 16.5% and for the 26-week period by 37.5% compared to the prior year.
  • 4Net cash provided by operating activities significantly increased to $555.7 million for the first half of 2009, up from $280.2 million in the prior year.
  • 5Cash and cash equivalents increased to $958.9 million as of June 27, 2009, from $696.3 million as of December 27, 2008.
  • 6Research and development expenses increased by 5.0% for the quarter and 7.9% for the first half of 2009, reflecting continued investment in product innovation.
  • 7The company declared an annual cash dividend of $0.75 per share, payable in December 2009.

Frequently Asked Questions

The primary driver of the decrease in net sales is the challenging macroeconomic environment, which has particularly impacted the automotive/mobile and aviation segments. This has led to reduced demand and volume declines across these and other segments.

Garmin has improved its gross profit margins by focusing on cost reductions, including lower cost of goods sold as a percentage of revenue, and favorable shifts in product mix. The company also benefited from efforts to reduce advertising expenses and manage SG&A costs, although R&D expenses increased to support product innovation.

Garmin's cash position is strong, with cash and cash equivalents increasing significantly to $958.9 million as of June 27, 2009. This increase is supported by robust cash flow from operations. The company's investment policy focuses on preserving capital, maintaining liquidity, and maximizing yield while prioritizing safety.

Garmin expects to fund future capital expenditures, working capital requirements, share repurchases, and dividends through existing cash balances and operating cash flow. The company is committed to investing in product innovation, as evidenced by the increase in R&D expenses.