10-QPeriod: Q3 FY2013

GARMIN LTD Quarterly Report for Q3 Ended Sep 28, 2013

Filed October 30, 2013For Securities:GRMN

Summary

Garmin Ltd. reported net sales of $643.6 million for the third quarter of 2013, a decrease of 4% compared to the prior year period. This decline was primarily driven by a 16% decrease in the automotive/mobile segment, which still represented the largest portion of revenue at 50%. Despite the overall sales dip, the fitness segment saw a significant 25% increase in revenue, and the marine and aviation segments also experienced growth. Operating income for the quarter was $151.7 million, down 5% year-over-year, impacted by lower revenues and increased R&D spending, particularly in aviation. Net income, however, rose by a notable 34% to $187.7 million, largely due to a significant tax benefit of $52.2 million stemming from the release of uncertain tax position reserves. The company ended the quarter with a strong cash position of $1.07 billion.

Financial Highlights

50 data points
Beta

Revenue

$643.64M

54.8% Gross Margin

Net Income

$187.67M

29.2% Net Margin

EPS (Diluted)

$0.96

Total Assets

$4.82B

Cash & Equivalents

$1.07B

Free Cash Flow

$205.01M

Financial Statements
Beta
Revenue$643.64M
Cost of Revenue$290.75M
Gross Profit$352.89M
R&D Expenses$88.43M
SG&A Expenses$86.46M
Operating Expenses$201.14M
Operating Income$151.75M
Net Income$187.67M
EPS (Basic)$0.96
EPS (Diluted)$0.96
Shares Outstanding (Basic)195.32M
Shares Outstanding (Diluted)196.30M

Key Highlights

  • 1Net sales decreased 4% to $643.6 million in Q3 2013, primarily due to a 16% drop in the automotive/mobile segment.
  • 2Fitness segment revenue grew by a robust 25%, and Marine and Aviation segments also showed positive year-over-year growth.
  • 3Operating income declined 5% to $151.7 million, impacted by lower sales and increased R&D expenses.
  • 4Net income saw a substantial increase of 34% to $187.7 million, largely driven by a significant tax benefit related to reserve releases.
  • 5The company maintained a strong liquidity position with $1.07 billion in cash and cash equivalents at the end of the quarter.
  • 6Garmin initiated a new share repurchase program, authorizing up to $300 million, with $26.9 million repurchased year-to-date.
  • 7Research and Development expenses increased by 7% across the company, with significant investments in aviation and exploration of new product categories.

Frequently Asked Questions

The primary driver for the 4% decrease in net sales to $643.6 million was a significant 16% decline in the automotive/mobile segment. While this segment still represents half of Garmin's revenue, its performance was a drag on overall sales.

Performance varied by segment. The automotive/mobile segment declined significantly (-16%). However, the fitness segment showed strong growth (+25%), and the marine (+24%) and aviation (+15%) segments also experienced positive revenue growth. The outdoor segment saw a slight decrease of 4%.

The substantial 34% increase in net income to $187.7 million was primarily due to a one-time tax benefit of $52.2 million recognized in the quarter, which resulted from the release of uncertain tax position reserves. Excluding this benefit, the year-over-year increase in net income would have been different.

Garmin maintains a strong financial position, with cash and cash equivalents totaling $1.07 billion at the end of the quarter. The company generated positive cash flow from operations and has sufficient resources to meet its obligations, including planned capital expenditures, dividends, and share repurchases.