Garmin Announces Record Fourth Quarter Revenues Above $611 Million; EPS Increases Over 100% to $0.82
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Garmin Announces Record Fourth Quarter Revenues Above $611 Million; EPS Increases Over 100% to $0.82

CAYMAN ISLANDS, Feb. 14 /PRNewswire-FirstCall/ -- Garmin Ltd. (NASDAQ: GRMN) today announced a record fourth quarter and fiscal year ended December 30, 2006. Highlights of the quarter and full year include:

    (Logo: 
http://www.newscom.com/cgi-bin/prnh/20061026/CGTH082LOGO )

    Fourth Quarter 2006 Financial Highlights:

    --  Total revenue of $611 million, up 92% from $319 million in fourth
        quarter 2005
        --  Auto/mobile segment revenue increased 173% to $445 million in
            fourth quarter 2006
        --  Outdoor/fitness segment revenue increased 16% to $80 million in
            fourth quarter 2006
        --  Marine segment revenue declined 10% to $25 million in fourth
            quarter 2006
        --  Aviation segment revenue increased 3% to $61 million in fourth
            quarter 2006
    --  All geographic areas experienced solid growth:
        --  North America revenue was $393 million compared to $211 million,
            up 86 percent
        --  Europe revenue was $194 million compared to $93 million, up 109
            percent
        --  Asia revenue was $24 million compared to $15 million, up 60
            percent
    --  Earnings per share increased 105% to $0.82 from $0.40 in 2005;
        excluding foreign exchange, EPS increased 102% to $0.87 from $0.43 in
        2005
    --  Fourth quarter 2006 results include a $0.07 favorable impact to
        earnings per share due to credits achieved by reaching higher unit
        volume levels during the period


    Business Highlights:

    --  Strong holiday season, solid sell-through, leaving channel inventories
        clean
    --  Inventory drawn down significantly, as anticipated
    --  Margins improved through contributions from increased production
        volumes and operating leverage across the business
    --  Manufacturing facilities fulfilled strong holiday demand for product
        effectively and efficiently, with no component shortages
    --  Two million units sold in the fourth quarter of 2006, up 100% from the
        same quarter in 2005
    --  Seasonal promotion campaigns and product displays, multi-media
        advertising, and cooperative advertising activities stimulated sales
        solidified our leadership position in the U.S. and increased our brand
        awareness in Europe


    FY 2006 Financial Highlights:

    --  Total revenue of $1.77 billion, up 73% from $1.03 billion in fiscal
        2005
        --  Auto/mobile segment revenue increased 170% to $1.1 billion in 2006
        --  Outdoor/fitness segment revenue increased 20% to $285 million in
            2006
        --  Marine segment revenue increased 5% to $167 million in 2006
        --  Aviation segment revenue increased 2% to $233 million in 2006
    --  All geographic areas experienced solid growth:
        --  North America revenue was $1.1 billion compared to $661 million,
            up 66 percent
        --  Europe revenue was $593 million compared to $316 million, up 88
            percent
        --  Asia revenue was $87 million compared to $50 million, up 74
            percent
        --  Earnings per share increased 64% to $2.35 from $1.43 in 2005;
            excluding foreign exchange, EPS increased 72% to $2.35 from $1.37
            in 2005


    Business Highlights:

    --  Introduced over 70 new products in 2006, expanding our portable
        automotive product line and refreshing a number of product categories
        across all of our business segments
    --  5.4 million units sold in 2006, up 80% from 2005, raising the
        Company's total to over nineteen million units shipped to date, an
        important benchmark of the strength of the Garmin brand
    --  Created innovative and exciting portable automotive navigation
        products which drove triple-digit growth in this segment, allowing
        Garmin to command a #1 market share position in the U.S. and a solid
        #2 market share position in Europe
    --  Expanded relationships with car rental companies to seven of the eight
        major rental car companies in the U.S., increasing brand awareness and
        creating important product trial opportunities among prospective
        customers
    --  Expanded leadership role as a partner with motorcycle manufacturers
        and enthusiasts, providing both custom solutions and full-featured
        off-the-shelf products for the aftermarket
    --  Solidified our position as the leader in GPS-enabled fitness devices
        with the introduction of the Edge bicycle product and the updated
        ForeRunner product
    --  Completed our first very light jet certification, the Cessna Mustang,
        and continued to expand technologies like WAAS, RADAR, and digital
        autopilot, further increasing our leadership position in the
        integrated cockpit market for general aviation
    --  Expanded advertising campaigns and better product positioning in U.S.
        retailers strengthened our leadership position in the face of growing
        competition
    --  Expansion of sales and marketing resources and aggressive advertising
        campaigns resulted in greater brand awareness, improving market share,
        and broader distribution in Europe
    --  Opened our first retail store in Chicago's premier shopping district,
        the Magnificent Mile, in time to participate in the holiday shopping
        season


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

"2006 was truly a remarkable year for Garmin. We are delighted to have introduced over 70 innovative new products. These products -- which include many automotive, recreational, fitness, marine, and aviation products -- have been enthusiastically received by the market. We also look forward to our customers' reactions to exciting products we have scheduled for delivery in early 2007.

"We experienced triple digit growth in our automotive product line, clearly demonstrating that our strategy effectively positions us to take advantage of the growing demand for portable navigation devices both in the U.S. and in Europe. We look forward to ongoing success from our broad portfolio of automotive products. Through continuous innovation, we will provide compelling, competitive and creative products like the highly acclaimed nuvi(TM), which provide high-quality navigation coupled with features like traffic, Bluetooth hands-free calling, real-time gas prices, weather, movie times, and more. We have the focus, drive, and commitment to continue our leadership position in the rapidly expanding automotive market through 2007 and beyond.

"Additionally, our outdoor/fitness line continues to show strong growth as we create exciting new products for outdoor and fitness enthusiasts. While our marine and aviation segment revenues were not as strong as we had hoped for in 2006, both segments are well-positioned for strong growth in 2007. Our innovative marine cartography and a new suite of marine products should drive growth in this segment. In addition, as Mustang cockpit shipments, WAAS upgrades, new retrofit products, and other exciting developments unfold in 2007, our aviation segment will once again post solid growth.

"To reach our goals, we have significantly expanded our worldwide marketing and sales efforts. We have also increased our distribution and manufacturing capacities to meet future demand and compete effectively in the global marketplace. In addition, we have recently made three acquisitions that will allow us to continue to develop exciting new technologies and expand distribution of our products."

Financial Overview from Kevin Rauckman, Chief Financial Officer:

"We are obviously pleased with our financial results for the fourth quarter and fiscal year 2006," said Kevin Rauckman, chief financial officer of Garmin Ltd. "Our revenue and earnings per share during 2006 grew 73% and 64% respectively, exceeding our expectations. Garmin has now completed six years as a public company and has consistently generated top line and bottom line growth, with a 6-year compounded annual growth rate of revenue and earnings per share of 30% and 28%, respectively.

"Our gross and operating margins held strong, exceeding our expectations, coming in at 50% and 31% respectively. We also generated $269 million of free cash flow in 2006, resulting in unrestricted cash and marketable securities balance of $818 million at the end of the fiscal year. Our return on invested capital (ROIC) was 69% during fiscal 2006."

Fiscal 2007 Outlook

We remain optimistic about the future success of our business and our ability to serve customers and distributors around the world. General perspective on overall business expectations for 2007, including our four business segments, are:

    --  We anticipate overall revenue to exceed $2.5 billion in 2007, and
        earnings per share to exceed $2.70 assuming an effective tax rate of
        approximately 15 percent.
    --  We anticipate aviation revenues to grow 20 percent in 2007. Growth is
        expected to occur within both G1000 OEM and aviation aftermarket
        shipments.
    --  We anticipate marine revenues to grow 20 percent in 2007.  Growth will
        come from our innovative next generation offshore and inland marine
        cartography that will be introduced across our exciting new marine
        chartplotter lines.
    --  We anticipate outdoor/fitness segment revenues to grow 20 percent in
        2007 led by new outdoor products with enhanced features, high
        sensitivity GPS receivers, expandable memory and unique functionality,
        like our recently announced dog-tracker product, the Astro.  Fitness
        product enhancements slated for our fitness line and better
        penetration of targeted fitness markets will drive revenue growth as
        well.
    --  We anticipate automotive/mobile revenues to grow 50 percent in 2007,
        with declining operating margins due to product mix and a continued
        transition toward mass market levels.
    --  We look forward to introducing many innovative product lines this
        year.  2007 product introductions began with new auto, outdoor, and
        wireless products introduced during January's very successful Consumer
        Electronics Show in Las Vegas.
    --  We expect continued expansion of our Jhongli manufacturing facility to
        meet growing demand for our products in 2007.
    --  We will maintain our focus on new opportunities and expansion of
        distribution throughout Europe; growth will be supported through the
        recent acquisition of our French distributor, continued improvement of
        our distribution systems within Europe, and continued emphasis on
        advertising to enhance awareness of the Garmin brand.


    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  14-Weeks  52-Weeks  53-Weeks
                                         Ended     Ended     Ended     Ended
                                        December  December  December  December
                                           30,       31,       30,       31,
                                          2006      2005      2006      2005

    Net Income (GAAP)                   $180,345  $87,135  $514,123  $311,219
    Foreign currency (gain) / loss,
     net of tax effects                   $8,850   $7,761     ($516) ($12,746)
    Net income, excluding FX            $189,195  $94,896  $513,607  $298,473

    Net income per share (GAAP):
        Basic                              $0.84    $0.40     $2.38     $1.44
        Diluted                            $0.82    $0.40     $2.35     $1.43

    Net income per share, excluding FX:
        Basic                              $0.88    $0.44     $2.37     $1.38
        Diluted                            $0.87    $0.43     $2.35     $1.37

    Weighted average common shares
     outstanding:
        Basic                            215,857  215,894   216,340   216,294
        Diluted                          218,630  218,304   218,845   218,236


    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)

                                             52-Weeks Ended    53-Weeks Ended
                                               December 30,      December 31,
                                                      2006              2005

    Net cash provided by operating
     activities                                   $361,854          $247,005
    Less: purchases of property and
     equipment                                     (92,906)          (27,130)
    Free Cash Flow                                $268,948          $219,875



    Return on invested capital (ROIC)

Management defines return on invested capital (ROIC) as net operating profit after taxes divided by operating invested capital. Management believes that ROIC provides greater visibility into how effectively Garmin deploys capital. ROIC is not a measure of financial performance under accounting principles generally accepted in the United States (GAAP), and may not be defined and calculated by other companies in the same manner as Garmin does. ROIC should not be considered in isolation or as an alternative to net income as an indicator of company performance.


    The following table contains a GAAP reconciliation of return on invested
capital.


                         Garmin Ltd. and Subsidiaries
                      Return on Invested Capital (ROIC)
                                (in thousands)

                                             52-Weeks Ended    53-Weeks Ended
                                               December 30,      December 31,
                                                      2006              2005

    Net Operating Profit After Taxes
     (NOPAT):
         Operating Income (EBIT)                  $554,559          $338,170
         Less:  Taxes on Operating Income          (80,431)          (61,381)
         Net Operating Profit after Taxes
          (NOPAT)                                 $474,128          $276,789

    Invested Capital (IC)
         Total Assets                           $1,897,020        $1,362,235
         Less:  Cash & Marketable
          Securities                               818,197           711,075
         Less:  Deferred Income Taxes               55,996            29,615
         Less:  Non-Interest Bearing
          Current Liabilities                      337,682           195,485
    Operating Invested Capital (IC)               $685,145          $426,060

    Return on Invested Capital                          69%               65%



    2007 Annual Meeting

Garmin Ltd. also announced that its annual shareholders meeting will be held at 10:00 a.m., Central Time, on June 8, 2007 at the headquarters of Garmin International, Inc., 1200 E. 151st Street, Olathe, Kansas, 66062. The record date for shareholders entitled to vote at the annual meeting is April 16, 2007.

    Earnings Call Information
    The information for Garmin Ltd.'s earnings call is as follows:

      When:    Wednesday, February 14, 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: 
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 5543997. An archive of the live webcast will be available until March 16, 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 25, 2005 filed by Garmin with the Securities and Exchange Commission (Commission file number 0-31983). A copy of Garmin's 2005 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)


                                   13-Weeks  14-Weeks   52-Weeks    53-Weeks
                                    Ended     Ended       Ended       Ended
                                   December  December    December    December
                                      30,       31,         30,         31,
                                     2006      2005        2006        2005

    Net sales                      $611,224  $319,296  $1,774,000  $1,027,773

    Cost of goods sold              306,771   156,857     891,614     492,703

    Gross profit                    304,453   162,439     882,386     535,070

    Selling, general and
         administrative expense      74,346    44,230     214,513     122,021

    Research and development
         expense                     31,209    20,017     113,314      74,879
    Operating expense               105,555    64,247     327,827     196,900

    Operating income                198,898    98,192     554,559     338,170

    Other income(expense)  (A)          653    (2,581)     39,995      34,430

    Income before income taxes      199,551    95,611     594,554     372,600

    Income tax provision             19,206     8,476      80,431      61,381

    Net income                     $180,345   $87,135    $514,123    $311,219

    Net income per share:
         Basic                        $0.84     $0.40       $2.38       $1.44
         Diluted                      $0.82     $0.40       $2.35       $1.43

    Weighted average common
     shares outstanding:
         Basic                      215,857   215,894     216,340     216,294
         Diluted                    218,630   218,304     218,845     218,236


    (A)  Includes $9.8 million of foreign currency losses in Q4 2006 and $8.5
         million of foreign currency losses in Q4 2005; includes $0.6 million
         of foreign currency gains in FY 2006 and $15.3 million of foreign
         currency gains in FY 2005.



                              Garmin Ltd. And Subsidiaries
                          Condensed Consolidated Balance Sheets
                                     (In thousands)


                                               December 30,      December 31,
                                                      2006              2005

            Assets
            Current assets:
                 Cash and cash equivalents        $337,321          $334,352
                 Marketable securities              73,033            32,050
                 Accounts receivable, net          403,524           170,997
                 Inventories                       271,008           199,841
                 Deferred income taxes              55,996            29,615
                 Prepaid expenses and
                  other current assets              28,202            34,312

            Total current assets                 1,169,084           801,167

            Property and equipment, net            250,988           179,173

            Restricted cash                          1,525             1,356
            Marketable securities                  407,843           344,673
            Other assets, net                       67,580            35,866

            Total assets                        $1,897,020        $1,362,235

            Liabilities and Stockholders'
             Equity
            Current liabilities:
                 Accounts payable                  $88,375           $76,516
                 Other accrued expenses            154,639            55,815
                 Income taxes payable               94,668            63,154

            Total current liabilities              337,682           195,485

            Long-term debt (less current
             portion)                                  248               -

            Deferred income taxes                    1,191             9,486

            Stockholders' equity:
                 Common stock                        1,082             1,081
                 Additional paid-in capital         83,438            96,242
                 Retained earnings               1,478,655         1,072,454
                 Accumulated other
                  comprehensive gain                (5,276)          (12,513)

            Total stockholders' equity           1,557,899         1,157,264
            Total liabilities and
             stockholders' equity               $1,897,020        $1,362,235



                             Garmin Ltd. And Subsidiaries
                    Condensed Consolidated Statements of Cash Flows
                                    (In thousands)

                                              52-Weeks Ended    53-Weeks Ended
                                                December 30,      December 31,
                                                       2006              2005
         Operating activities:
         Net income                                $514,123          $311,219
         Adjustments to reconcile net
          income to net cash provided by
          operating activities:
             Depreciation                            21,535            18,693
             Amortization                            22,940            24,903
             Loss on sale of property and
              equipment                                  67                37
             Provision for doubtful
              accounts                                  955               445
             Deferred income taxes                  (35,060)            8,833
             Foreign currency translation
              (gains)/losses                           (344)          (13,957)
             Purchase of licenses                    (2,950)           (4,192)
             Provision for obsolete and
              slow-moving inventories                23,245            14,755
             Stock compensation expense              11,913               925
             Realized gains on marketable
              securities                             (3,852)              -
         Changes in operating assets and
          liabilities:
             Accounts receivable                   (230,111)          (61,607)
             Inventories                            (92,708)          (61,262)
             Other current assets                    (4,357)          (16,021)
             Accounts payable                        10,187            24,127
             Other current liabilities               97,167             4,283
             Income taxes payable                    29,105            (4,176)
         Net cash provided by operating
          activities                                361,855           247,005

         Investing activities:
         Purchases of property and
          equipment                                 (92,906)          (27,130)
         Purchase of intangible assets               (3,115)           (3,560)
         Proceeds from sale of property
          and equipment                                  76               -
         Purchase of marketable securities         (453,085)         (342,359)
         Sale of marketable securities              359,313           283,253
         Change in restricted cash                     (169)               98
         Purchase of
          MotionBased/Dynastream                    (36,499)           (1,483)
         Net cash used in investing
          activities                               (226,385)          (91,181)

         Financing activities:
         Dividends                                 (107,923)          (53,974)
         Tax benefit related to stock
          option exercise                             9,660               -
         Payments on long-term debt                     (11)              -
         Proceeds from issuance of common
          stock through stock purchase plan           3,569             2,824
         Proceeds from issuance of common
          stock from exercise of stock options       12,505             6,866
         Purchase of common stock                   (50,450)          (26,653)
         Net cash used in financing
          activities                               (132,650)          (70,937)

         Effect of exchange rate changes
          on cash and cash equivalents                  149              (444)

         Net increase in cash and cash
          equivalents                                 2,969            84,443
         Cash and cash equivalents at
          beginning of period                       334,352           249,909
         Cash and cash equivalents at end
          of period                                $337,321          $334,352

Web site: http://www.garmin.com/


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