Summary
Garmin Ltd.'s first quarter 2013 report shows a 4% decrease in net sales to $531.96 million compared to the prior year's quarter, primarily driven by declines in the automotive/mobile and marine segments. Despite the revenue dip, net income saw a slight increase of 2% to $88.67 million, largely due to a favorable income tax provision resulting from the release of uncertain tax reserves and the recognition of R&D tax credits. The company experienced a significant increase in cash used in financing activities, mainly due to higher dividend payments.
Financial Highlights
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Financial Statements
Beta
| Revenue | $531.96M |
| Cost of Revenue | $255.82M |
| Gross Profit | $276.13M |
| R&D Expenses | $87.69M |
| SG&A Expenses | $86.27M |
| Operating Expenses | $196.21M |
| Operating Income | $79.93M |
| Net Income | $88.67M |
| EPS (Basic) | $0.45 |
| EPS (Diluted) | $0.45 |
| Shares Outstanding (Basic) | 196K |
| Shares Outstanding (Diluted) | 196K |
Key Highlights
- 1Net sales decreased by 4% to $531.96 million for the quarter ended March 30, 2013, compared to $556.60 million in the prior year.
- 2Net income increased by 2% to $88.67 million from $86.86 million year-over-year.
- 3Operating income decreased by 12% to $79.93 million, impacted by lower revenues and increased R&D expenses.
- 4Automotive/Mobile and Marine segments experienced revenue declines of 10%, while Aviation saw a 10% increase.
- 5Research and Development expenses increased by 10% to $87.69 million, reflecting investment in new products and personnel.
- 6Cash provided by operating activities significantly decreased by $62.9 million to $59.36 million, primarily due to changes in working capital.
- 7The company announced a $300 million share repurchase program in February 2013 but had not repurchased any shares as of March 30, 2013.
Frequently Asked Questions
The primary driver for the decrease in net sales was a 10% decline in both the automotive/mobile and marine segments. This was partially offset by growth in the fitness and aviation segments.
Garmin managed to increase net income due to a significant favorable shift in its income tax provision, which turned into a benefit of $7.03 million from an expense of $12.70 million. This was primarily driven by the release of uncertain tax position reserves and the recognition of research and development tax credits.
Garmin expects its existing cash balances and cash flow from operations to be sufficient to meet its projected capital expenditures, working capital needs, and other cash requirements at least through the end of fiscal 2013. The company also has a $300 million share repurchase program authorized.
Garmin is involved in several legal proceedings, primarily related to patent infringement claims. While the company believes these claims are without merit and intends to defend itself vigorously, management cannot guarantee that an unfavorable outcome would not have a material adverse effect on its financial position or results of operations. However, management does not currently expect any of these proceedings to have a material adverse effect.