2007'11.23.Fri
Garmin Reports Record Third Quarter, Raises Guidance; Announces Management Appointment; Announces Intention to Make Offer to Purchase all the Outstanding Shares of Tele Atlas N.V.
October 31, 2007
CAYMAN ISLANDS, Oct. 31 /Xinhua-PRNewswire/ -- Garmin
Ltd. (Nasdaq: GRMN) today announced a record quarter ended
September 29, 2007.
Third Quarter 2007 Financial highlights:
-- Total revenue of $729 million, up 79% from $408
million in third
quarter 2006
-- Automotive/Mobile segment revenue increased 118% to
$519 million in
third quarter 2007
-- Aviation segment revenue increased 27% to $74
million in third quarter
2007
-- Outdoor/Fitness segment revenue increased 24% to $88
million in third
quarter 2007
-- Marine segment revenue increased 17% to $48 million
in third quarter
2007
-- All geographic areas experienced significant
growth:
- North America revenue was $454 million compared to
$265 million, up
71%
- Europe revenue was $227 million compared to $120
million, up 89%
- Asia revenue was $48 million compared to $23
million, up 109%
-- Revenue from our automotive/mobile segment continued
to become a larger
portion of total company revenues when compared with
the same quarter
in 2006, at 71% of total revenues.
-- Diluted earnings per share increased 57% to $0.88
from $0.56 in third
quarter 2006; excluding foreign exchange, EPS
increased 78% to $0.89
from $0.50 in the same quarter in 2006.
Year-to-Date 2007 Financial highlights:
-- Total revenue of $1.96 billion, up 69% from $1.16
billion year-to-date
2006
-- Automotive/Mobile segment revenue increased 109% to
$1.34 billion in
year-to-date 2007
-- Aviation segment revenue increased 30% to $224
million in year-to-date
2007
-- Outdoor/Fitness segment revenue increased 10% to
$225 million in year-
to-date 2007
-- Marine segment revenue increased 21% to $170 million
in year-to-date
2007
-- All geographic areas experienced significant
growth:
- North America revenue was $1.23 billion compared
to $700 million, up
76%
- Europe revenue was $631 million compared to $400
million, up 58%
- Asia revenue was $101 million compared to $63
million, up 60%
-- Diluted earnings per share increased 64% to $2.50
from $1.52 in year-
to-date 2006; excluding foreign exchange, EPS
increased 68% to $2.48
from $1.48 in the same period in 2006.
Business highlights:
-- Strong sales in our automotive/mobile segment
continue to exceed our
expectations and drive our increased guidance for
the remainder of
2007.
-- Aviation and marine segment results put them on
track to meet or exceed
earlier full year guidance for these segments.
Given improving sales
in our outdoor/fitness segment, we continue to
anticipate this segment
will reach our full year guidance with seasonally
strong holiday sales.
-- 2.69 million units sold in the third quarter of
2007, up 119% from the
same quarter in 2006; year-to-date units sold
increased 97% from the
same period in 2006.
-- Completed the initial build-out of our third Taiwan
manufacturing
facility, increasing the number of production lines
from 31 to 37, and
production capacity at the end of the third quarter
to an annual run
rate of approximately 16 million units. Expansion
of our R&D and
other office space in Taiwan continues.
-- Expansion of our North American warehouse in Olathe,
Kansas continues,
with expected completion in Q1 2008.
-- We continued to work to increase our retail
penetration and broaden our
distribution as retailers laid the groundwork for
the upcoming holiday
selling season. Our initial order book for the
holiday season is
strong, as PNDs are positioned to be a popular item
during the holiday
season.
-- Due diligence work continues on previously announced
acquisitions of
distributors in Spain, Italy, and Denmark. These
activities are part
of our ongoing efforts to improve our market share
in Europe.
( Logo:
http://www.newscom.com/cgi-bin/prnh/20061026/CGTH082LOGO )
Executive overview from Dr. Min Kao, Chairman and Chief
Executive Officer:
"Garmin experienced a solid third quarter. Our
continued strong growth in the automotive/mobile segment
demonstrated that our products are well-positioned to take
advantage of the growing interest in portable navigation
devices. Independent market research indicates we have
maintained a strong leadership position in North America
with approximately fifty percent PND market share, and our
market position in Europe continues to improve as well.
As we head into the holiday season, we believe we are
prepared to meet the growing demand for our products. We
have increased our manufacturing capacity and grown total
inventories over $200 million since the end of the second
quarter of 2007. Our order book is strong, and we believe
our strategy of extensive market segmentation using both our
popular nuvi(TM) and c-series product offerings will drive
positive results. Useful content and competitive features
integrated into reliable, easy-to-use products at attractive
price points are what customers want - and what they receive
when they choose Garmin.
Our aviation segment continued to grow steadily during
the quarter. Positive response to our WAAS and GMX200
product offerings and growth in the sale of our G1000
cockpit continued. In the third quarter we announced
additional wins for our G1000 cockpit for future Cessna
Caravan, Socata TBM 850 as well as the new PiperJet and a
G1000 retrofit for the King Air 200/B200. Also during the
3rd quarter, Cessna announced that our new G300 cockpit
display system was selected for its new Skycatcher light
sport aircraft. We continue to believe the aviation
segment is positioned to meet our 2007 guidance for this
segment.
Our marine segment also showed steady growth, as
customer interest in our revolutionary new marine products
and cartography continued to drive revenues for the
quarter. While typical marine segment revenues decline
sequentially in third and fourth quarter each year, results
remain seasonally strong. We continue to believe the marine
segment is positioned to meet our 2007 guidance.
Third quarter revenue for our outdoor/fitness segment
was strong compared to the year ago quarter. Increased
sales generated by the new Astro dog tracking product, as
well as new eTrex and Rino products with high-sensitivity
GPS drove this growth. We see continued growth
opportunities for this segment and believe the
outdoor/fitness segment is positioned to meet our 2007
guidance for the segment."
Financial overview from Kevin Rauckman, Chief Financial
Officer:
"Our financial results for the third quarter were
strong and in line with our expectations. Our retail
orders are strong, and we look forward to a solid 2007
holiday season," said Kevin Rauckman, chief financial
officer of Garmin Ltd. "Our revenue and earnings per
share during the quarter grew 79% and 57% respectively,
exceeding our expectations. Excluding the impact of
foreign exchange, EPS for the quarter grew 78%, from $0.50
to $0.89.
Gross margin for the overall business declined modestly
in the third quarter, down 180 basis points from the
year-ago quarter. The automotive/mobile segment gross
margin improved 70 basis points during the quarter due to a
seasonal, favorable product mix shift towards higher-margin
North American product, and PND pricing declined more
slowly than we expected. The aviation segment also
improved 180 basis points as a function of favorable
product mix. Gross margin for the marine segment declined
50 basis points during the quarter when compared to the
year-ago quarter as a function of product mix, and the
outdoor/fitness segments declined 320 basis points,
reflecting a product mix shift and the transition of the
eTrex product line.
Operating margin remained relatively stable, declining
just 30 basis points from the year-ago quarter. This
stability reflected an anticipated decline in gross margin
offset by operating leverage as revenues outpaced increased
spending in advertising and research and development
expenses during the quarter. While we are pleased with
these results, we anticipate more significant margin
compression during the fourth quarter of 2007.
We also generated $117 million of free cash flow in the
third quarter of 2007, resulting in a cash and marketable
securities balance of $1.03 billion at the end of the
quarter."
Fiscal 2007 Outlook
We remain optimistic about the future success of our
business and our ability to serve customers and
distributors around the world. With this in mind, we are
updating our guidance as follows:
-- We anticipate overall revenue to exceed $2.9 billion
in 2007, and
earnings per share to exceed $3.40.
-- We anticipate segment revenue growth rates for our
automotive/mobile,
aviation, marine, and outdoor/fitness segments to be
90%, 30%, 20%, and
10%, respectively
-- We anticipate operating margins to be approximately
27% for the full
year 2007
-- Our effective tax rate should remain approximately
13%
Announcement of Management Appointment
Given our anticipated ongoing business growth, Cliff
Pemble will be assuming the new positions of Chief
Operating Officer (COO) and President of Garmin Ltd. In
addition, he will assume direct supervision of all North
American Garmin subsidiaries, including Garmin AT,
Dynastream, and Digital Cyclone. Dr. Kao will continue in
his role as Chairman and CEO of Garmin Ltd. but will now be
able to devote more time to business development, strategic
planning, and the development of our Asia-Pacific business
initiatives.
Announcement of Intent to Make an Offer to Acquire all
the Outstanding Shares in Tele Atlas N.V.
Early this morning we announced our intention to make
an offer to acquire all the outstanding shares in Tele
Atlas N.V. Garmin has established itself as a leader in
navigation technology by consistently delivering
award-winning, reliable, easy to use products with rich
content and competitive features at attractive prices.
This acquisition is consistent with our vision as a leader
in our market and our vertical integration strategy.
Advanced mapping data is an essential ingredient for the
continued growth of the navigation industry and this
acquisition provides a means for Garmin to contribute more
broadly to the development and growth of this market. We
will discuss this important announcement more fully on our
earnings call this morning.
Non-GAAP Measures
Net income (earnings) per share, excluding foreign
currency
Management believes that net income per share before
the impact of foreign currency translation gain or loss is
an important measure. The majority of the company's
consolidated foreign currency translation gain or loss
results from translation into New Taiwan dollars at the end
of each reporting period of the significant cash and
marketable securities, receivables and payables held in
U.S. dollars by the company's Taiwan subsidiary. Such
translation is required under GAAP because the functional
currency of this subsidiary is New Taiwan dollars.
However, there is minimal cash impact from such foreign
currency translation and management expects that the Taiwan
subsidiary will continue to hold the majority of its cash,
cash equivalents and marketable securities in U.S. dollars.
Accordingly, earnings per share before the impact of
foreign currency translation gain or loss allows an
assessment of the company's operating performance before
the non-cash impact of the position of the U.S. dollar
versus the New Taiwan dollar, which permits a consistent
comparison of results between periods.
The following table contains a reconciliation of GAAP
net income per share to net income per share excluding the
impact of foreign currency translation gain or loss.
Garmin Ltd. And Subsidiaries
Net income per share, excluding FX
(in thousands, except per share information)
13-Weeks Ended
39-weeks Ended
September 29, September 30,
September 29, September 30,
2007 2006 2007
2006
Net Income (GAAP) $193,507 $122,978
$547,744 $333,778
Foreign currency
(gain) / loss,
net of tax
effects $3,151 ($12,569)
($3,036) ($8,776)
Net income,
excluding FX $196,658 $110,409
$544,708 $325,002
Net income per share (GAAP):
Basic $0.89 $0.57
$2.53 $1.54
Diluted $0.88 $0.56
$2.50 $1.52
Net income per share, excluding FX:
Basic $0.91 $0.51
$2.52 $1.50
Diluted $0.89 $0.50
$2.48 $1.48
Weighted average common shares outstanding:
Basic 216,773 216,317
216,456 216,502
Diluted 220,644 218,866
219,482 218,878
Free cash flow
Management believes that free cash flow is an important
financial measure because it represents the amount of cash
provided by operations that is available for investing and
defines it as operating cash flow less capital expenditures
for property and equipment.
The following table contains a reconciliation of GAAP
net cash provided by operating activities to free cash
flow.
Garmin Ltd. And Subsidiaries
Free Cash Flow
(in thousands)
13-Weeks Ended
39-Weeks Ended
September 29, September 30, September
29, September 30,
2007 2006 2007
2006
Net cash provided
by operating
activities $133,766 $116,750
$555,905 $249,125
Less: purchases
of property and
equipment ($16,873) ($18,865)
($128,893) ($45,476)
Free Cash Flow $116,893 $97,885
$427,012 $203,649
Earnings Call Information
The information for Garmin Ltd.'s earnings call is as
follows:
When: Wednesday, October 31, 2007 at 11:00 a.m.
Eastern
Where:
http://www.garmin.com/aboutGarmin/invRelations/irCalendar.html
How: Simply log on to the web at the address above
or call to listen
in at 800-883-9537.
Contact: investor.relations@garmin.com
A phone recording will be available for five business
days following the earnings call and can be accessed by
dialing 800-642-1687 or (706) 645-9291 and utilizing the
access code 19218207. An archive of the live webcast will
be available until November 30, 2007 on the Garmin website
at http://www.garmin.com. To access the replay, click on
the Investor Relations link and click over to the Events
Calendar page.
This release includes projections and other
forward-looking statements regarding Garmin Ltd. and its
business. Any statements regarding the company's estimated
earnings and revenue for fiscal 2007, the Company's expected
segment revenue growth rate, margins, the number of new
products to be introduced in 2007 and the company's plans
and objectives are forward-looking statements. The
forward-looking events and circumstances discussed in this
release may not occur and actual results could differ
materially as a result of risk factors affecting Garmin,
including, but not limited to, the risk factors that are
described in the Annual Report on Form 10-K for the year
ended December 30, 2006 filed by Garmin with the Securities
and Exchange Commission (Commission file number 0-31983). A
copy of Garmin's 2006 Form 10-K can be downloaded from
http://www.garmin.com/aboutGarmin/invRelations/finReports.html
.
Through its operating subsidiaries, Garmin Ltd.
designs, manufactures, and markets navigation,
communications and information devices, most of which are
enabled by GPS technology. Garmin is a leader in the
general aviation and consumer markets and its products
serve aviation, marine, outdoor, fitness, automotive,
mobile and OEM applications. Garmin Ltd. is incorporated
in the Cayman Islands, and its principal subsidiaries are
located in the United States, Taiwan and United Kingdom.
For more information, visit the investor relations site of
Garmin Ltd. at www.garmin.com or contact the Investor
Relations department at 913-397-8200. Garmin and
Forerunner are registered trademarks, and Edge is a
trademark of Garmin Ltd. or its subsidiaries.
Garmin Ltd. And Subsidiaries
Condensed Consolidated Balance Sheets (Unaudited)
(In thousands, except share information)
September
29, December 30,
2007 2006
Assets
Current assets:
Cash and cash equivalents
$703,749 $337,321
Marketable securities
58,668 73,033
Accounts receivable, net
520,538 403,524
Inventories, net
493,739 271,008
Deferred income taxes
57,700 55,996
Prepaid expenses and other current assets
23,538 28,202
Total current assets
1,857,932 1,169,084
Property and equipment, net
358,578 250,988
Marketable securities
263,735 407,843
Restricted cash
1,580 1,525
Licensing agreements, net
14,398 3,307
Other intangible assets, net
149,277 64,273
Total assets
$2,645,500 $1,897,020
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable
$236,044 $88,375
Salaries and benefits payable
32,524 16,268
Warranty reserve
55,225 37,639
Other accrued expenses
209,136 100,732
Income taxes payable
35,033 94,668
Total current liabilities
567,962 337,682
Long-term debt, less current portion
603 248
Deferred income taxes
1,219 1,191
Other liabilities
90,505 -
Stockholders' equity:
Common stock
1,086 1,082
Additional paid-in capital
123,025 83,438
Retained earnings
1,863,867 1,478,654
Accumulated other comprehensive loss
(2,767) (5,275)
Total stockholders' equity
1,985,211 1,557,899
Total liabilities and stockholders' equity
$2,645,500 $1,897,020
Garmin Ltd. And Subsidiaries
Condensed Consolidated Statements of Income (Unaudited)
(In thousands, except per share information)
13-Weeks Ended
39-Weeks Ended
September 29, September 30,
September 29, September 30,
2007 2006 2007
2006
Net sales $728,673 $407,997
$1,963,298 $1,162,776
Cost of goods sold 386,822 209,137
1,009,028 584,843
Gross profit 341,851 198,860
954,270 577,933
Selling, general and
administrative
expenses 87,060 47,489
248,358 140,167
Research and development
expense 40,634 30,399
111,863 82,105
127,694 77,888
360,221 222,272
Operating income 214,157 120,972
594,049 355,661
Other income (expense):
Interest income 11,798 9,622
31,997 25,464
Interest expense (273) (2)
(328) (14)
Foreign currency (3,626) 14,874
3,493 10,386
Other 570 70
959 3,507
8,469 24,564
36,121 39,343
Income before income
taxes 222,626 145,536
630,170 395,004
Income tax provision 29,119 22,558
82,426 61,226
Net income $193,507 $122,978
$547,744 $333,778
Net income per share:
Basic $0.89 $0.57
$2.53 $1.54
Diluted $0.88 $0.56
$2.50 $1.52
Weighted average common
shares outstanding:
Basic 216,773 216,317
216,456 216,502
Diluted 220,644 218,866
219,482 218,878
Garmin Ltd. And Subsidiaries
Condensed Consolidated Statements of Cash Flows
(Unaudited)
(In thousands)
39-Weeks Ended
September 29,
September 30,
2007
2006
Operating Activities:
Net income $547,744
$333,778
Adjustments to reconcile net income
to net cash
provided by operating activities:
Depreciation 22,786
15,447
Amortization 18,803
19,844
Loss (gain) on sale of property
and equipment 71
(8)
Provision for doubtful accounts 3,467
796
Deferred income taxes (1,157)
(29,867)
Foreign currency transaction
gains/losses 3,232
(19,724)
Provision for obsolete and slow
moving inventories 21,502
15,260
Stock compensation expense 8,830
8,378
Realized gains on marketable
securities -
(3,852)
Changes in operating assets and
liabilities:
Accounts receivable (90,497)
(79,648)
Inventories (234,920)
(148,891)
Other current assets 4,510
(1,192)
Accounts payable 117,034
48,720
Other current and non-current
liabilities 147,608
69,704
Income taxes 9,486
22,866
Purchase of licenses (22,594)
(2,486)
Net cash provided by operating
activities 555,905
249,125
Investing activities:
Purchases of property and equipment (128,893)
(45,476)
Purchase of intangible assets (2,481)
(1,513)
Purchase of marketable securities (983,716)
(348,621)
Redemption of marketable securities 1,141,431
197,008
Change in restricted cash (56)
(104)
Proceeds from asset sale 4
75
Net cash paid for acquisition of
businesses and other intangibles (84,126)
-
Net cash used in investing activities (57,837)
(198,631)
Financing activities:
Proceeds from issuance of common
stock 15,358
10,042
Dividends (162,531)
-
Stock repurchase -
(50,451)
Payments on long term debt (218)
-
Tax benefit related to stock option
exercise 15,776
7,453
Net cash used in financing activities (131,615)
(32,956)
Effect of exchange rate changes on
cash and cash equivalents (25)
(167)
Net increase in cash and cash
equivalents 366,428
17,371
Cash and cash equivalents at
beginning of period 337,321
334,352
Cash and cash equivalents at end of
period $703,749
$351,723
Garmin Ltd. And Subsidiaries
Revenue, Gross Profit, and Operating Income by Segment
(Unaudited)
Reporting Segments
Outdoor/ Auto/
Fitness Marine Mobile
Aviation Total
13-Weeks Ended
September 29, 2007
Net sales $87,747 $47,659 $518,939
$74,328 $728,673
Gross profit $46,553 $25,170 $221,148
$48,980 $341,851
Operating income $30,178 $15,623 $141,855
$26,501 $214,157
13-Weeks Ended
September 30, 2006
Net sales $70,651 $40,588 $237,981
$58,777 $407,997
Gross profit $39,803 $21,645 $99,708
$37,704 $198,860
Operating income $28,817 $13,659 $59,517
$18,979 $120,972
39-Weeks Ended
September 29, 2007
Net sales $225,437 $170,433 $1,343,460
$223,968 $1,963,298
Gross profit $123,616 $92,704 $591,400
$146,550 $954,270
Operating income $79,986 $60,033 $370,448
$83,582 $594,049
39-Weeks Ended
September 30, 2006
Net sales $205,412 $141,406 $644,097
$171,861 $1,162,776
Gross profit $118,615 $79,484 $269,855
$109,979 $577,933
Operating income $85,116 $53,718 $155,782
$61,045 $355,661
For more information, please contact:
INVESTOR CONTACT:
Polly Schwerdt
Garmin Ltd.
Tel: +1-913-397-8200
Email: investor.relations@garmin.com
MEDIA CONTACT:
Ted Gartner
Garmin Ltd.
Tel: +1-913-397-8200
Email: media.relations@garmin.com
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