01—Abstract
Summary
Summary of the 10-Q filed May 4, 2011. Cited figures are marked; the original filing is the authoritative source.
Garmin Ltd. reported a strong first quarter for 2011, with net sales increasing by 18% year-over-year to $507.8 milliona.
This growth was driven by robust performance across most segments, particularly Fitness and Marine, which saw substantial percentage gains, and continued strength in the dominant Auto/Mobile segment. Net income more than doubled, reaching $95.5 millionb, a 156% increase compared to the prior year's first quarter, largely due to significant positive foreign currency exchange rate movements and a lower effective tax rate. Despite an increase in cost of goods sold driven by higher volumes and a one-time warranty benefit in the prior year, the company managed to grow gross profit dollars, though the gross profit margin decreased due to the prior year's benefit and increased per-unit costs in the Auto/Mobile segment.
Liquidity remains strong, with $1.2 billionc in cash and cash equivalents and a substantial increase in cash generated from operating activities. The company's investment strategy focuses on preserving capital and maintaining liquidity.
While facing numerous ongoing patent litigation cases, management believes these claims are without merit and intends to defend them vigorously. The company anticipates its existing cash and operational cash flow will be sufficient to cover its financial needs through fiscal year 2011.
02—Key points
Key Highlights
- Net sales grew 18% to $507.8 million in Q1 2011 compared to Q1 2010.
- Net income more than doubled, increasing 156% to $95.5 million.
- Operating income decreased by 10% to $74.8 million, primarily due to a large warranty benefit in the prior year.
- Significant positive impact from foreign currency exchange gains ($12.1 million) compared to a loss in the prior year (-$46.5 million).
- Effective tax rate decreased significantly to 1.5% from 18.0% due to release of reserves and favorable audits.
- Cash and cash equivalents remained strong at $1.21 billion.
- The company is involved in multiple patent litigations but believes the claims are without merit.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q1 FY2011, Garmin Ltd kept $0.19.
- Revenue$507.8M100.0%
- Cost of revenue−$269.5M53.1%
- Gross profit$238.4M46.9%
- Operating costs−$163.6M32.2%
- Operating income$74.8M14.7%
- Interest, other & tax$20.7M4.1%
- Net income$95.5M18.8%
04—Financials
Financial Highlights
Figures from 10-QQ1 FY2011filed May 4, 2011Financial Statements
Q1 FY2011 against Q1 FY2010
| Line item | Q1 FY2011Q1 FY2010 | Change |
|---|---|---|
| Revenue | $507.83M$431.07M | +17.8% |
| Cost of Revenue | $269.46M$200.16M | +34.6% |
| Gross Profit | $238.37M$230.91M | +3.2% |
| R&D Expenses | $70.48M$62.48M | +12.8% |
| SG&A Expenses | $73.19M$67.68M | +8.1% |
| Operating Expenses | $163.62M$147.56M | +10.9% |
| Operating Income | $74.75M$83.35M | −10.3% |
| Net Income | $95.48M$37.33M | +155.8% |
| EPS (Basic) | $0.49$0.19 | +157.9% |
| EPS (Diluted) | $0.49$0.19 | +157.9% |
| Shares Outstanding (Basic) | 193.92M199.93M | −3.0% |
| Shares Outstanding (Diluted) | 194.72M201.09M | −3.2% |
05—Questions
Frequently Asked Questions
How did Garmin's revenue perform in the first quarter of 2011?
Garmin's net sales increased by 18% to $507.8 million in the first quarter of 2011, compared to $431.1 million in the same period of 2010. This growth was broad-based across most segments, with notable percentage increases in Fitness and Marine.
What was the primary driver for the significant increase in net income?
The substantial 156% increase in net income to $95.5 million was driven by several factors, including strong revenue growth, a significant positive swing in foreign currency exchange rates (from a loss in Q1 2010 to a gain in Q1 2011), and a considerably lower effective tax rate due to the release of reserves and favorable audits.
What is the company's liquidity position?
Garmin maintained a strong liquidity position, ending the quarter with $1.21 billion in cash and cash equivalents. Net cash generated from operating activities was robust at $207.6 million for the quarter, indicating healthy cash flow generation.
How is Garmin impacted by foreign currency fluctuations?
Garmin operates internationally, exposing it to foreign currency exchange rate risk. In Q1 2011, the company benefited from a $12.1 million foreign currency gain, primarily due to the weakening of the U.S. Dollar against the Euro and other global currencies. This contrasts with a $46.5 million loss in the prior year's comparable quarter, highlighting the significant impact currency movements can have on its results.
06—Continue