Garmin Reports Solid Third Quarter 2013 Results and Raises Full Year Outlook

We have increased our 2013 guidance to reflect the strong third quarter performance. We now anticipate operating income of approximately $530 million partially offset by a higher effective tax rate resulting in a pro forma EPS range of $2.40 - $2.45.

Webcast Information/Forward-Looking Statements:

The information for Garmin Ltd.’s earnings call is as follows:

When:     Wednesday, October 30, 2013 at 10:30 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 888-389-5997

An archive of the live webcast will be available until December 27, 2013 on the Garmin website at 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 2013, the Company’s expected segment revenue growth rate, margins, new products to be introduced in 2013 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 29, 2012 filed by Garmin with the Securities and Exchange Commission (Commission file number 0-31983). A copy of Garmin’s 2012 Form 10-K can be downloaded from http://www.garmin.com/aboutGarmin/invRelations/finReports.html.

Garmin, Edge, Approach and Forerunner are registered trademarks and VIRB and G5000 are trademarks of Garmin Ltd. or its subsidiaries. All other brands, product names, company names, trademarks and service marks are the properties of their respective owners. All rights reserved.

 
Garmin Ltd. And Subsidiaries
Condensed Consolidated Statements of Income (Unaudited)
(In thousands, except per share information)
       
13-Weeks Ended 39-Weeks Ended
Sept 28, Sept 29, Sept 28, Sept 29,
2013 2012 2013 2012
Net sales $643,637 $672,376 $1,872,156 $1,947,127
 
Cost of goods sold 290,748   313,321   859,494 882,501  
 
Gross profit 352,889 359,055 1,012,662 1,064,626
 
Advertising expense 26,251 30,102 77,983 91,952
Selling, general and administrative expense 86,462 86,402 260,769 275,763
Research and development expense 88,427   82,489   272,349 242,510  
Total operating expense 201,140   198,993   611,101 610,225  
 
Operating income 151,749 160,062 401,561 454,401
 
Other income (expense):
Interest income 8,435 7,987 25,512 26,278
Foreign currency gains (losses) (822 ) (6,364 ) 18,280 (16,124 )
Other 1,438   942   3,666 5,064  
Total other income (expense) 9,051   2,565   47,458 15,218  
 
Income before income taxes 160,800 162,627 449,019 469,619
 
Income tax (benefit) provision (26,869 ) 22,279   192 56,510  
 
Net income $187,669   $140,348   $448,827 $413,109  
 
Net income per share:
Basic $0.96 $0.72 $2.30 $2.12
Diluted $0.96 $0.72 $2.29 $2.11
 

Weighted average common shares outstanding:

Basic 195,325 194,912 195,488 194,834
Diluted 196,300 196,161 196,312 196,171
 
   
Garmin Ltd. And Subsidiaries
Condensed Consolidated Balance Sheets
(In thousands, except share information)
     
(Unaudited)
Sept 28, December 29,
2013   2012
Assets
Current assets:
Cash and cash equivalents $1,068,700 $1,231,180
Marketable securities 134,253 153,083
Accounts receivable, net 475,707 603,673
Inventories, net 416,725 389,931
Deferred income taxes 67,437 68,785
Deferred costs 56,749 53,948
Prepaid expenses and other current assets 225,067   35,520  
Total current assets 2,444,638 2,536,120
 
Property and equipment, net 413,675 409,751
 
Marketable securities 1,594,144 1,488,312
Restricted cash 252 836
Noncurrent deferred income tax 94,734 93,920
Noncurrent deferred costs 39,625 42,359
Other intangible assets, net 221,979 232,597
Other assets 14,179   15,229  
Total assets $4,823,226   $4,819,124  
 
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $151,798 $131,263
Salaries and benefits payable 63,064 55,969
Accrued warranty costs 34,639 37,301
Accrued sales program costs 36,487 57,080
Deferred revenue 255,830 252,375
Accrued royalty costs 34,285 71,745
Accrued advertising expense 16,862 25,192
Other accrued expenses 73,241 69,806
Deferred income taxes 63 332
Income taxes payable 44,060 32,031
Dividend payable 263,704   175,932  
Total current liabilities 974,033 909,026
 
Deferred income taxes 3,516 2,467
Non-current income taxes 121,091 181,754
Non-current deferred revenue 166,165 193,047
Other liabilities 917 1,034
 
Stockholders' equity:

Shares, CHF 10 par value, 208,077,418 shares authorized and issued; 195,221,791 shares outstanding at September 28, 2013 and 195,591,854 shares outstanding at December 29, 2012

1,797,435 1,797,435
Additional paid-in capital 87,377 72,462
Treasury stock (100,912 ) (81,280 )
Retained earnings 1,701,823 1,604,625
Accumulated other comprehensive income 71,781   138,554  
Total stockholders' equity 3,557,504   3,531,796  
Total liabilities and stockholders' equity $4,823,226   $4,819,124  
 
   
Garmin Ltd. And Subsidiaries
Condensed Consolidated Statements of Cash Flows (Unaudited)
(In thousands)
39-Weeks Ended
Sept 28, Sept 29,
2013 2012
Operating Activities:
Net income $448,827 $413,109

Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation 36,840 40,025
Amortization 23,629 21,192
(Gain)/Loss on sale of property and equipment 41 (17 )
Provision for doubtful accounts 1,023 2,786
Deferred income taxes 2,851 (7,384 )
Unrealized foreign currency losses/(gains) (17,273 ) 24,974
Provision for obsolete and slow moving inventories 15,965 3,795
Stock compensation expense 15,608 26,364
Realized gains on marketable securities (2,963 ) (1,647 )
Changes in operating assets and liabilities, net of acquisitions:
Accounts receivable 128,098 103,039
Inventories (44,337 ) (44,761 )
Other current and non-current assets (18,329 ) 14,051
Accounts payable 21,936 (20,271 )
Other current and non-current liabilities (60,719 ) (63,839 )
Deferred revenue (22,613 ) 35,277
Deferred cost (57 ) (8,561 )
Income taxes payable (48,256 ) (28,098 )
Net cash provided by operating activities 480,271 510,034
 
Investing activities:
Purchases of property and equipment (41,325 ) (26,881 )
Proceeds from sale of property and equipment 65 25
Purchase of intangible assets (1,574 ) (5,174 )
Purchase of marketable securities (716,226 ) (1,004,021 )
Redemption of marketable securities 578,464 735,521
Advances under loan receivable commitment (173,708 ) -
Change in restricted cash 584 (59 )
Acquisitions, net of cash acquired (5,686 ) (4,010 )
Net cash used in investing activities (359,406 ) (304,599 )
 
Financing activities:
Dividends paid (263,857 ) (253,386 )
Purchase of treasury stock under share repurchase plan (26,926 ) -
Purchase of treasury stock related to equity awards (7,430 ) (6,542 )
Proceeds from issuance of treasury stock related to equity awards 13,620 10,971
Tax benefit from issuance of equity awards 411   1,810  
Net cash used in financing activities (284,182 ) (247,147 )
 
Effect of exchange rate changes on cash and cash equivalents 837 1,625
   
Net increase/(decrease) in cash and cash equivalents (162,480 ) (40,087 )
Cash and cash equivalents at beginning of period 1,231,180   1,287,160  
Cash and cash equivalents at end of period $1,068,700   $1,247,073  
 
               
Garmin Ltd. And Subsidiaries
Revenue, Gross Profit, and Operating Income by Segment (Unaudited)
       
Reporting Segments
Auto/

Outdoor

Fitness

Marine

Mobile

Aviation

Total

 
13-Weeks Ended Sept 28, 2013
 
Net sales $101,350 $81,007 $55,301 $322,520 $83,459 $643,637
Gross profit $69,471 $49,328 $27,265 $147,866 $58,959 $352,889
Operating income $44,107 $26,493 $4,118 $53,848 $23,183 $151,749
 
13-Weeks Ended Sept 29, 2012
 
Net sales $105,572 $64,788 $44,766 $384,393 $72,857 $672,376
Gross profit $72,420 $41,885 $28,572 $166,007 $50,171 $359,055
Operating income $48,384 $21,219 $8,378 $65,165 $16,916 $160,062
 
 
39-Weeks Ended Sept 28, 2013
 
Net sales $284,372 $237,660 $178,344 $919,810 $251,970 $1,872,156
Gross profit $184,333 $149,368 $91,550 $410,348 177,063 $1,012,662
Operating income $110,538 $76,026 $16,089 $134,324 $64,584 $401,561
 
39-Weeks Ended Sept 29, 2012
 
Net sales $283,230 $217,815 $168,620 $1,055,786 $221,676 $1,947,127
Gross profit $186,574 $142,045 $105,205 $476,761 $154,041 $1,064,626
Operating income $118,032 $76,016 $35,584 $170,208 $54,561 $454,401
 
           
Garmin Ltd. And Subsidiaries
Revenue by Geography (Unaudited)
 
13-Weeks Ended 39-Weeks Ended
Sept 28, Sept 29, Yr over Yr Sept 28, Sept 29, Yr over Yr
2013 2012 Change 2013 2012 Change
Net sales $643,637 $672,376

-4%

$1,872,156 $1,947,127 -4%
Americas 333,448 380,452 -12% 1,002,796 1,068,289 -6%
EMEA 245,659 224,642 9% 692,836 692,673 0%
APAC 64,530 67,282 -4% 176,524 186,165 -5%
 
EMEA - Europe, Middle East and Africa; APAC - Asia Pacific
 

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