Summary
Garmin Ltd. reported its financial results for the second quarter ended June 25, 2011, showing a decrease in net sales and operating income compared to the same period in the prior year. This decline was primarily driven by a significant reduction in the Automotive/Mobile segment, which experienced both lower sales volumes and average selling prices. However, the company saw growth in its Fitness and Aviation segments, indicating a strategic shift and diversification. Despite the overall revenue dip, Garmin maintained a strong cash position and generated healthy cash flow from operations. The company also made progress in managing its expenses, though Selling, General, and Administrative costs saw an increase as a percentage of revenue. Garmin's effective tax rate saw a notable decrease due to favorable audit outcomes and reserve releases, positively impacting net income. The company also completed two acquisitions post-quarter end, Navigon AG and Tri-Tronics Inc., signaling a forward-looking growth strategy through mergers and acquisitions. Investors should note the ongoing legal proceedings, particularly patent infringement cases, which represent a potential risk. The company also faces risks related to foreign currency exchange rate fluctuations. Management expressed confidence in the company's ability to meet its financial obligations through existing cash and operational cash flow.
Financial Highlights
49 data points| Revenue | $674.10M |
| Cost of Revenue | $352.00M |
| Gross Profit | $322.10M |
| R&D Expenses | $70.52M |
| SG&A Expenses | $85.90M |
| Operating Expenses | $190.51M |
| Operating Income | $131.59M |
| Net Income | $109.48M |
| EPS (Basic) | $0.56 |
| EPS (Diluted) | $0.56 |
| Shares Outstanding (Basic) | 194.05M |
| Shares Outstanding (Diluted) | 194.88M |
Key Highlights
- 1Total net sales decreased by 8% year-over-year for the second quarter of 2011, primarily due to a 19% decline in the Automotive/Mobile segment.
- 2Operating income for the quarter decreased by 35% year-over-year, largely impacted by reduced gross margins and increased SG&A expenses as a percentage of revenue.
- 3The Fitness and Aviation segments showed strong revenue growth of 25% and 13%, respectively, indicating a positive trend in these diversification areas.
- 4Net income for the quarter was $109.5 million, a decrease from $134.8 million in the prior year, but the diluted EPS remained stable at $0.56 for the quarter.
- 5Garmin's cash and cash equivalents increased to $1.42 billion as of June 25, 2011, with net cash provided by operating activities at $410.9 million for the first half of the year.
- 6The company's effective tax rate decreased significantly to 13.8% in Q2 2011 from 18.0% in Q2 2010 due to favorable tax adjustments.
- 7Garmin completed two acquisitions shortly after the quarter end: Navigon AG (navigation provider) and Tri-Tronics Inc. (electronic dog training equipment).