"The first quarter of 2005 was another good quarter for Garmin. We introduced sixteen new products during the quarter, adding to all categories of our product portfolio. These new products, which include aviation, recreational, fitness, marine and automotive units have all been very well received by the market," said Dr. Min Kao, CEO of Garmin Ltd. "Consumer awareness and interest in the utility of GPS navigation continue to grow, and we experienced solid demand across nearly all product lines," continued Dr. Kao. Over 584,000 units were shipped in the first quarter of 2005, demonstrating the growing strength of the Garmin brand. The company also began shipping the acclaimed G1000 integrated avionics system for the Cessna 172, the seventh aircraft model to be certified to date.
"I am pleased to report that we have continued to strengthen our inventory position to meet the anticipated demand for the coming marine and spring seasons, and have begun to ramp up production for delivery of newly released products such as the StreetPilot 'c-series'," said Dr. Kao. "These products have generated a great deal of interest. Therefore, we expect a higher consumer segment growth rate in the second quarter and beyond."
First Quarter 2005
Revenue for the quarter increased 22 percent to $192.7 million from $158.3 million in the year-ago quarter. Net income increased to $47.4 million, or $0.43 diluted earnings per share, compared to $34.7 million or $0.32 diluted earnings per share in the year-ago quarter. First quarter net income included a $11.1 million foreign currency loss as a result of a weaker U.S. dollar compared to the Taiwan dollar. Excluding the effects of foreign currency, diluted EPS for the quarter was $0.51 compared to $0.37 in the year-ago quarter.
Consumer revenue for the first quarter totaled $137.5 million -- an 11 percent growth compared to the first quarter of 2004. Aviation revenue totaled $55.2 million -- a 59 percent increase compared to the year-ago quarter. Total units sold for the quarter increased to 584,000 from 478,000 -- representing an increase of 22 percent.
Revenue increased across North American and European regions during the first quarter of fiscal 2004 when compared to the year-ago quarter:
-- North America revenue was $132.7 million compared to $107.3 million, up 24 percent. -- Europe revenue was $50.3 million compared to $43.9 million, up 15 percent. -- Asia revenue was $9.7 million compared to $7.1 million, up 37 percent.
"We are pleased with our financial results for the first quarter 2005, and believe we are on track to meet our 2005 full year guidance," said Kevin Rauckman, chief financial officer of Garmin Ltd. "Gross margins were in line with our expectations at 53.6 percent for the first quarter. We also generated $31.1 million of free cash flow (defined as operating cash flow less capital expenditures for property, plant, and equipment) for the quarter, resulting in a cash and marketable securities balance of $601.3 million at the end of the first quarter of 2005." The company believes that free cash flow is an important measure because management uses it as a measure of the company's quality of earnings and its ability to reinvest in the business.
Foreign Currency Translation - Non-GAAP Measures
Management believes that earnings 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.
Fiscal 2005 Outlook
Garmin remains committed to expansion of its growing range of products and its ability to serve distributors and customers around the world. In addition to the sixteen products introduced during the first quarter, a number of additional new products are expected to be released during the second quarter, which should position the Company well for the remainder of 2005.
The Company affirms its current fiscal year guidance. Diluted EPS for fiscal year 2005, excluding effects of foreign currency, is estimated to be in the range of $2.30 to $2.38 on estimated revenues of $890 million to $915 million. Management will continue to provide annual guidance updates and progress reports on a quarterly basis.
Earnings Call Information The information for Garmin Ltd.'s earnings call is as follows: When: Wednesday, April 27, 2005 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: Email Contact
A phone recording will be available for 24 hours following the earnings call and can be accessed by dialing 800-642-1687 utilizing the access code 4988638. An archive of the live webcast will be available until May 27, 2005 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 2005, the Company's expected consumer segment growth rate 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 25, 2004 filed by Garmin with the Securities and Exchange Commission (Commission file number 0-31983). A copy of Garmin's 2004 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, general recreation, automotive, wireless 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 http://www.garmin.com/ or contact the Investor Relations department at 913-397-8200.
Garmin Ltd. And Subsidiaries Condensed Consolidated Statements of Income (In thousands, except per share information) (Unaudited) 13-Weeks Ended March 26, March 27, 2005 2004 Net sales $192,651 $158,329 Cost of goods sold 89,453 77,878 Gross profit 103,198 80,451 Selling, general and administrative expenses 20,518 16,642 Research and development expense 16,928 14,220 37,446 30,862 Operating income 65,752 49,589 Other income(expense) (A) (6,942) (5,721) Income before income taxes 58,810 43,868 Income tax provision 11,409 9,212 Net income $47,401 $34,656 Net income per share: Basic $0.44 $0.32 Diluted $0.43 $0.32 Weighted average common shares outstanding: Basic 108,408 108,197 Diluted 109,421 109,182 (A) Includes $11.1 million of foreign currency losses in Q1 2005 and $7.6 million of foreign currency losses in Q1 2004. Garmin Ltd. And Subsidiaries Condensed Consolidated Balance Sheets (In thousands) (Unaudited) March 26, December 25, 2005 2004 Assets Current assets: Cash and cash equivalents $249,193 $249,909 Marketable securities 52,270 64,367 Accounts receivable, net 101,720 110,119 Inventories 166,429 154,980 Deferred income taxes 36,962 38,527 Prepaid expenses and other current assets 16,991 19,069 Total current assets 623,565 636,971 Property and equipment, net 180,342 171,630 Restricted cash 1,482 1,457 Marketable securities 299,850 257,848 Other assets, net 47,992 49,485 Total assets $1,153,231 $1,117,391 Liabilities and Stockholders' Equity Current liabilities: Accounts payable $40,321 $53,673 Other accrued expenses 41,254 51,661 Income taxes payable 65,975 70,933 Total current liabilities 147,550 176,267 Deferred income taxes 5,334 5,267 Stockholders' equity: Common stock 1,085 1,084 Additional paid-in capital 110,853 108,949 Retained earnings 862,610 815,209 Accumulated other comprehensive loss 25,799 10,615 Total stockholders' equity 1,000,347 935,857 Total liabilities and stockholders' equity $1,153,231 $1,117,391