Garmin Reports Fourth Quarter Results with Continued Strength in Outdoor/Fitness, Aviation and Marine Businesses

Note: In accordance with GAAP, the Company is deferring significant revenue and the related costs associated with high margin sales of lifetime maps, connected services and premium traffic over their economic lives. In the fourth quarter, the Company deferred, net of amortization of previous deferrals, $64 million of revenue, $22 million of costs, and approximately $0.19 of diluted EPS, net of taxes, into future years. For the full year, the Company deferred, net of amortization of previous deferrals, $131 million of revenue, $31 million of costs, and approximately $0.42 of diluted EPS, net of taxes, into future years. A table outlining the impact of this net deferral in both 2010 and 2009 is included for reference. Results have not been adjusted unless specifically stated as such.

Business highlights:

  • Achieved significant full year revenue and operating income growth in outdoor/fitness, marine and aviation. These growth segments generated 61% of the total operating income in 2010.
  • Sold over 16 million units in 2010 with unit growth in outdoor/fitness and automotive OEM partially offsetting declines in personal navigation devices (PND).
  • Continued to be the world-wide PND market share leader with gains in Europe and Asia.
  • Sustained revenue growth in the outdoor/fitness segment as our fitness products continue to penetrate within the growing category.
  • Continued to innovate across our product portfolio with enhanced offerings for over-the-road truck drivers and mariners to further our competitive position in each of these markets.
  • Announced our expanding relationship with Chrysler on the UConnect Touch, developed in conjunction with Panasonic and available on numerous models including the Chrysler 300, Dodge Durango and Dodge Charger. Our relationship with Chrysler now extends to 15 makes and models.
  • Introduced the GTU™ 10 GPS locator and web-based Garmin Tracker™ which represents a new product category for Garmin and is designed to serve the needs of many diverse markets – parents, pet owners, cyclists and runners to name just a few.
  • Launched a suite of Garmin applications for iPhone and Android powered devices including StreetPilot® for iPhone, Garmin Tracker, myMechanic, and My-Cast® Lite.
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One-time tax adjustments for 2010 totaled $98.7 million and include the release of uncertain tax position reserves from 2006 to 2008 related to our settlement in the US, offset by the amount of our settlement for the 2007 tax year in the US and Taiwan surtax expense due to the release of reserves. Normalized effective tax rate has been adjusted accordingly.

Executive overview from Dr. Min Kao, Chairman and Chief Executive Officer:

“While 2010 represented a year of adversity for our PND business and our handset initiative, we exit the year with a growing presence in outdoor/fitness, aviation, marine and auto OEM that give us confidence in the long-term outlook for Garmin,” said Dr. Min Kao, chairman and chief executive officer of Garmin Ltd. “Strong revenue and operating income performance in these segments was a highlight for the year and a foundation on which we hope to grow. The business generated free cash flow of $738 million which further strengthened our debt-free balance sheet and afforded us the opportunity to return significant value to shareholders in 2010 through a dividend and share repurchases.

The automotive/mobile segment revenues declined 31% on a year-over-year basis in the fourth quarter as the PND market declined from the 2009 holiday season, ASPs continued to decline, and significant revenues from bundled lifetime map products were deferred into future periods. We expect the PND market to continue to decline in 2011 with moderating ASPs and an increasing impact of revenue deferrals as bundled lifetime maps constitute a higher percentage of our product mix. Despite the challenging headwinds, our strategy is to manage the business to maintain our market leadership and maximize profitability. In addition, we have accelerated our investment in the auto OEM category in response to increasing opportunities in this market segment. Our broad strengths and capabilities, including vertical integration, user interface design, development agility, and high reliability solutions for other OEM applications, differentiate Garmin from the competition.

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