10-QPeriod: Q2 FY2014

GARMIN LTD Quarterly Report for Q2 Ended Jun 28, 2014

Filed July 30, 2014For Securities:GRMN

Summary

Garmin Ltd. reported solid financial results for the quarter ended June 28, 2014, with net sales increasing by 12% year-over-year to $777.8 million. This growth was driven by strong performance in the Fitness, Aviation, and Marine segments, with the Fitness segment experiencing a remarkable 79% surge in sales, largely attributed to new product introductions like the vívofit. The company demonstrated improved profitability, with operating income rising by 29% to $218.8 million. This was supported by an increase in gross profit margin to 57% and a reduction in operating expenses as a percentage of revenue. Diluted earnings per share also saw a healthy increase to $0.93. Garmin continues to manage its cash effectively, showing a significant increase in net cash provided by investing activities due to the collection of a loan receivable, alongside substantial cash used in financing activities for share repurchases and dividends.

Financial Highlights

50 data points
Beta

Revenue

$777.85M

57.1% Gross Margin

Net Income

$181.98M

23.4% Net Margin

EPS (Diluted)

$0.93

Total Assets

$4.74B

Cash & Equivalents

$1.23B

Free Cash Flow

$142.96M

Financial Statements
Beta
Revenue$777.85M
Cost of Revenue$333.36M
Gross Profit$444.49M
R&D Expenses$98.40M
SG&A Expenses$92.41M
Operating Expenses$225.73M
Operating Income$218.75M
Net Income$181.98M
EPS (Basic)$0.94
EPS (Diluted)$0.93
Shares Outstanding (Basic)194K
Shares Outstanding (Diluted)195K

Key Highlights

  • 1Net sales grew 12% year-over-year to $777.8 million for the quarter.
  • 2Fitness segment sales surged by 79% to $150.7 million, indicating strong market reception of new products.
  • 3Operating income increased by 29% to $218.8 million, reflecting improved operational efficiency and gross margins.
  • 4Gross profit margin improved to 57% from 55% in the prior year's quarter.
  • 5Diluted earnings per share rose to $0.93 from $0.88 year-over-year.
  • 6The company reported strong cash flow from investing activities, largely due to the repayment of a loan receivable.
  • 7Garmin returned capital to shareholders through dividends and significant share repurchases.

Frequently Asked Questions

Garmin's revenue growth was primarily driven by strong performance in its Fitness segment, which saw a 79% increase due to new product launches like the vívofit. The Aviation segment also contributed with an 11% increase, and the Marine segment grew by 1%. The Automotive/Mobile segment showed modest growth of 2%.

Garmin's profitability improved significantly. Operating income increased by 29% to $218.8 million, and the operating margin expanded from 24% to 28%. This was supported by an increase in the gross profit margin to 57% and effective management of operating expenses.

As of June 28, 2014, Garmin had repurchased approximately $220.9 million of its common shares under its $300 million authorization, with approximately $79.1 million remaining available for future repurchases. Share repurchases are part of the company's strategy to return capital to shareholders.

Foreign currency exchange rates had a notable impact, resulting in a foreign currency loss of $20.4 million for the quarter, primarily due to the weakening of the U.S. Dollar against the Taiwan Dollar. This contrasts with a gain of $27.5 million in the same period last year.