BusinessWire

Garmin® reports strong second quarter 2020 revenue and income during the COVID-19 pandemic

SCHAFFHAUSEN, Switzerland--(BUSINESS WIRE)--Garmin Ltd. (Nasdaq: GRMN – News) today announced results for the second quarter ended June 27, 2020.


Highlights for second quarter 2020 include:

  • Total revenue of $870 million, a 9% year-over-year decrease, as strength in fitness and marine partially offset declines in outdoor, aviation, and automotive
  • Gross margin and operating margin were 59.3% and 21.7%, respectively
  • GAAP EPS was $0.96 and pro forma EPS(1) was $0.91
  • Recently announced the acquisition of Firstbeat Analytics, a leading provider of physiological analytics technology for health, fitness and athletic performance
  • Introduced solar charging technology into our Instinct® product line dramatically increasing its battery life, and added solar charging technology to additional fēnix® 6 models
  • Garmin Autoland achieved Federal Aviation Administration (FAA) certification for general aviation aircraft in the Piper M600, marking the beginning of a new era in general aviation safety technology
  • Expanded our exclusive relationship with Regulator Marine, adding Fusion® Entertainment as standard equipment
  • Launched new series of oversized dēzl™ truck navigators

(in thousands, except per share data)

 

13-Weeks Ended

 

 

26-Weeks Ended

 

 

 

June 27,

 

 

June 29,

 

 

YoY

 

 

June 27,

 

 

June 29,

 

 

YoY

 

 

 

2020

 

 

2019

 

 

Change

 

 

2020

 

 

2019

 

 

Change

 

Net sales

 

$

869,867

 

 

$

954,840

 

 

(9)%

 

 

$

1,725,975

 

 

$

1,720,890

 

 

0%

 

Fitness

 

 

294,642

 

 

 

251,653

 

 

17%

 

 

 

518,242

 

 

 

431,908

 

 

20%

 

Marine

 

 

157,827

 

 

 

151,407

 

 

4%

 

 

 

320,832

 

 

 

285,376

 

 

12%

 

Outdoor

 

 

206,200

 

 

 

210,404

 

 

(2)%

 

 

 

381,302

 

 

 

364,455

 

 

5%

 

Aviation

 

 

126,140

 

 

 

183,965

 

 

(31)%

 

 

 

314,739

 

 

 

354,741

 

 

(11)%

 

Auto

 

 

85,058

 

 

 

157,411

 

 

(46)%

 

 

 

190,860

 

 

 

284,410

 

 

(33)%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross margin %

 

59.3%

 

 

60.3%

 

 

 

 

 

 

59.2%

 

 

59.7%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating income %

 

21.7%

 

 

26.8%

 

 

 

 

 

 

21.2%

 

 

23.7%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GAAP diluted EPS

 

$

0.96

 

 

$

1.17

 

 

(18)%

 

 

$

1.80

 

 

$

1.91

 

 

(6)%

 

Pro forma diluted EPS(1)

 

$

0.91

 

 

$

1.16

 

 

(22)%

 

 

$

1.82

 

 

$

1.89

 

 

(4)%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1) See attached Non-GAAP Financial Information for discussion and reconciliation of non-GAAP financial measures, including pro forma diluted EPS

 

Executive Overview from Cliff Pemble, President and Chief Executive Officer:

“Garmin delivered strong second quarter financial results in a period filled with unprecedented challenges,” said Cliff Pemble, president and chief executive officer of Garmin Ltd. “Business conditions rapidly improved from April lows driven by popular fitness, marine, and outdoor products. We believe these results affirm the resilient nature of our business and the strong utility of our products.”

Fitness:

Revenue from the fitness segment grew 17% in the second quarter driven by strong demand for our advanced wearables and cycling products. Gross margin and operating margin were 53% and 24%, respectively. We launched new Edge® cycling products that add performance insights, safety and tracking features to monitor health stats and provide training guidance to our cycling customers. We recently acquired Firstbeat Analytics, establishing Garmin as a global leader in physiological analytics. We continue to see opportunities for innovative and compelling new products within the fitness segment.

Marine:

Revenue from the marine segment grew 4% in the second quarter across multiple categories led by chartplotters and Panoptix™ sonar technology. Gross margin and operating margin were 59% and 28%, respectively. Regulator Marine expanded its exclusive relationship with Garmin, selecting the Fusion Apollo series stereos as standard equipment on its offshore sportfishing center console boats. Also, we launched quatix® solar, our first marine smartwatch featuring solar charging technology. We remain focused on providing leading edge, high quality products and systems with the latest technology that our customers demand.

Outdoor:

Revenue from the outdoor segment decreased 2% in the second quarter as declines in handhelds were mostly offset by strong demand of adventure watches. Gross margin and operating margin were 65% and 33%, respectively. We recently expanded our solar charging technology to the Instinct, fēnix 6 and 6S and tactix® Delta adventure watches allowing customers to “Do What They Love Longer” through significantly increased battery life and new purpose-built functionality. Looking forward, our outdoor segment remains focused on providing compelling new products and new categories that enable and enrich the outdoor experiences of our customers.

Aviation:

Revenue from the aviation segment declined 31% in the second quarter, as the pandemic negatively impacted OEM and aftermarket product categories, and the ADS-B market rapidly matured. Gross margin and operating margin were 73% and 12%, respectively. During the quarter, we received FAA certification for the Garmin Autoland system in the Piper M600, marking the beginning of a new era for general aviation safety technology. We continue to invest in additional certifications and new products that will make general aviation safer and more accessible.

Auto:

Revenue from the auto segment declined 46% during the second quarter, as the pandemic significantly impacted driving activity and production of new vehicles. Gross margin was 47%, and we experienced an operating loss of $10 million in the quarter. During the quarter, we launched the oversized dēzl GPS truck navigators featuring large, easy-to-read HD touchscreens, industry-best load-to-dock guidance and popular truck routing for professional truck drivers. We also launched the RV 890 navigator specifically geared for the RV and camping lifestyle, with a large high-resolution touchscreen display and revamped voice assistant which simplifies overall interaction with the navigator. Looking forward, our auto segment is committed to enhancing the automotive experience through compelling aftermarket products for adventure, professional and daily drivers, and becoming a respected tier 1 supplier of innovative electronic solutions for a broad range of vehicles.

Additional Financial Information:

Total operating expenses in the second quarter were $327 million, a 2% increase over the prior year. Research and development increased 11%, primarily due to engineering personnel costs. Selling, general and administrative expenses increased 3%, driven primarily by personnel related expenses. Advertising decreased 29%, driven by lower media spend in the quarter.

The effective tax rate in the second quarter of 2020 was 6.8%. Excluding the impact of a $14 million income tax benefit due to the release of uncertain tax position reserves associated with the 2014 intercompany restructuring, our pro forma effective tax rate in the second quarter 2020 was 14.0% compared to 18.9% in the prior year quarter. The decrease in the pro forma effective tax rate is primarily due to the intellectual property migration transaction.

In the second quarter of 2020, we generated approximately $142 million of free cash flow(1), and paid a quarterly dividend of approximately $109 million. We ended the quarter with cash and marketable securities of approximately $2.7 billion.

(1) See attached Non-GAAP Financial Information for discussion and reconciliation of non-GAAP financial measures, including free cash flow.

Webcast Information/Forward-Looking Statements:

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

When:

Wednesday, July 29, 2020 at 10:30 a.m. Eastern

Where:

https://www.garmin.com/en-US/investors/events/

How:

Simply log on to the web at the address above or call to listen in at 855-757-3897

An archive of the live webcast will be available until July 29, 2021 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 that are commonly identified by words such as “anticipates”, “would,” “may,” “expects,” “estimates,” “plans,” “intends,” “projects,” and other words or phrases with similar meanings. Any statements regarding the Company’s GAAP and pro forma estimated earnings, EPS, and effective tax rate, and the Company’s expected segment revenue growth rates, consolidated revenue, gross margins, operating margins, potential future acquisitions, currency movements, expenses, pricing, new products to be introduced in 2020, statements relating to possible future dividends, statements related to the ongoing impact of the COVID-19 pandemic, 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 and uncertainties affecting Garmin, including, but not limited to, the risk factors that are described in both the Annual Report on Form 10-K for the year ended December 28, 2019 and the Quarterly Report on Form 10-Q for the quarter ended June 27, 2020 filed by Garmin with the Securities and Exchange Commission (Commission file number 0-31983). A copy of Garmin’s 2019 Form 10-K and the Q2 2020 Form 10-Q can be downloaded from https://www.garmin.com/en-US/investors/sec/

This release and the attachments contain non-GAAP financial measures. A reconciliation to the nearest GAAP measure and a discussion of the Company's use of these measures are included in the attachments.

Garmin, the Garmin logo and the Garmin delta, Edge, fēnix, Fusion, Instinct, quatix and tactix are trademarks of Garmin Ltd. or its subsidiaries and are registered in one or more countries, including the U.S. dezl, and Panoptix, 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

 

 

26-Weeks Ended

 

 

 

June 27,

 

 

June 29,

 

 

June 27,

 

 

June 29,

 

 

 

2020

 

 

2019

 

 

2020

 

 

2019

 

Net sales

 

$

869,867

 

 

$

954,840

 

 

$

1,725,975

 

 

$

1,720,890

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost of goods sold

 

 

354,437

 

 

 

379,475

 

 

 

703,605

 

 

 

693,827

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross profit

 

 

515,430

 

 

 

575,365

 

 

 

1,022,370

 

 

 

1,027,063

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Advertising expense

 

 

29,285

 

 

 

41,523

 

 

 

56,165

 

 

 

69,139

 

Selling, general and administrative expense

 

 

132,016

 

 

 

128,738

 

 

 

269,202

 

 

 

255,519

 

Research and development expense

 

 

165,740

 

 

 

148,883

 

 

 

331,131

 

 

 

294,801

 

Total operating expense

 

 

327,041

 

 

 

319,144

 

 

 

656,498

 

 

 

619,459

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating income

 

 

188,389

 

 

 

256,221

 

 

 

365,872

 

 

 

407,604

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other income (expense):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest income

 

 

10,455

 

 

 

13,735

 

 

 

22,481

 

 

 

27,439

 

Foreign currency (losses) gains

 

 

(4,493

)

 

 

3,413

 

 

 

(19,916

)

 

 

3,727

 

Other income

 

 

3,241

 

 

 

2,409

 

 

 

6,789

 

 

 

3,273

 

Total other income (expense)

 

 

9,203

 

 

 

19,557

 

 

 

9,354

 

 

 

34,439

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income before income taxes

 

 

197,592

 

 

 

275,778

 

 

 

375,226

 

 

 

442,043

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income tax provision

 

 

13,412

 

 

 

52,122

 

 

 

29,866

 

 

 

78,214

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

$

184,180

 

 

$

223,656

 

 

$

345,360

 

 

$

363,829

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income per share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

0.96

 

 

$

1.18

 

 

$

1.81

 

 

$

1.92

 

Diluted

 

$

0.96

 

 

$

1.17

 

 

$

1.80

 

 

$

1.91

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average common shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

191,024

 

 

 

189,855

 

 

 

190,914

 

 

 

189,728

 

Diluted

 

 

191,597

 

 

 

190,714

 

 

 

191,640

 

 

 

190,657

 

Garmin Ltd. And Subsidiaries

 

Condensed Consolidated Balance Sheets (Unaudited)

 

(In thousands, except per share information)

 

 

 

 

 

 

 

 

 

 

 

 

June 27,

2020

 

 

December 28,
2019

 

Assets

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

1,354,924

 

 

$

1,027,567

 

Marketable securities

 

 

380,880

 

 

 

376,463

 

Accounts receivable, net

 

 

523,901

 

 

 

706,763

 

Inventories

 

 

813,243

 

 

 

752,908

 

Deferred costs

 

 

22,033

 

 

 

25,105

 

Prepaid expenses and other current assets

 

 

163,458

 

 

 

169,044

 

Total current assets

 

 

3,258,439

 

 

 

3,057,850

 

 

 

 

 

 

 

 

 

 

Property and equipment, net

 

 

791,175

 

 

 

728,921

 

Operating lease right-of-use assets

 

 

76,214

 

 

 

63,589

 

 

 

 

 

 

 

 

 

 

Restricted cash

 

 

283

 

 

 

71

 

Marketable securities

 

 

993,021

 

 

 

1,205,475

 

Deferred income taxes

 

 

254,202

 

 

 

268,518

 

Noncurrent deferred costs

 

 

18,748

 

 

 

23,493

 

Intangible assets, net

 

 

656,898

 

 

 

659,629

 

Other assets

 

 

171,062

 

 

 

159,253

 

Total assets

 

$

6,220,042

 

 

$

6,166,799

 

 

 

 

 

 

 

 

 

 

Liabilities and Stockholders’ Equity

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Accounts payable

 

$

193,216

 

 

$

240,831

 

Salaries and benefits payable

 

 

123,404

 

 

 

128,426

 

Accrued warranty costs

 

 

39,293

 

 

 

39,758

 

Accrued sales program costs

 

 

66,696

 

 

 

112,578

 

Deferred revenue

 

 

87,727

 

 

 

94,562

 

Accrued royalty costs

 

 

10,833

 

 

 

15,401

 

Accrued advertising expense

 

 

23,302

 

 

 

35,142

 

Other accrued expenses

 

 

98,097

 

 

 

95,060

 

Income taxes payable

 

 

54,894

 

 

 

56,913

 

Dividend payable

 

 

466,465

 

 

 

217,262

 

Total current liabilities

 

 

1,163,927

 

 

 

1,035,933

 

 

 

 

 

 

 

 

 

 

Deferred income taxes

 

 

103,583

 

 

 

114,754

 

Noncurrent income taxes

 

 

92,120

 

 

 

105,771

 

Noncurrent deferred revenue

 

 

54,860

 

 

 

67,329

 

Noncurrent operating lease liabilities

 

 

60,000

 

 

 

49,238

 

Other liabilities

 

 

4,691

 

 

 

278

 

 

 

 

 

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

 

 

 

 

Shares, CHF 0.10 par value, 198,077 shares authorized and issued; 191,223

shares outstanding at June 27, 2020 and 190,686 shares outstanding

at December 28, 2019

 

 

17,979

 

 

 

17,979

 

Additional paid-in capital

 

 

1,851,695

 

 

 

1,835,622

 

Treasury stock

 

 

(326,310

)

 

 

(345,040

)

Retained earnings

 

 

3,107,768

 

 

 

3,229,061

 

Accumulated other comprehensive income

 

 

89,729

 

 

 

55,874

 

Total stockholders’ equity

 

 

4,740,861

 

 

 

4,793,496

 

Total liabilities and stockholders’ equity

 

$

6,220,042

 

 

$

6,166,799

 

Garmin Ltd. And Subsidiaries

 

Condensed Consolidated Statements of Cash Flows (Unaudited)

 

(In thousands)

 

 

 

 

 

 

 

 

 

 

 

 

26-Weeks Ended

 

 

 

June 27, 2020

 

 

June 29, 2019

 

Operating Activities:

 

 

 

 

 

 

 

 

Net income

 

$

345,360

 

 

$

363,829

 

Adjustments to reconcile net income to net cash provided by

operating activities:

 

 

 

 

 

 

 

 

Depreciation

 

 

37,030

 

 

 

34,526

 

Amortization

 

 

20,502

 

 

 

16,208

 

(Gain) loss on sale of property and equipment

 

 

(1,807

)

 

 

94

 

Unrealized foreign currency losses

 

 

16,678

 

 

 

(6,811

)

Deferred income taxes

 

 

272

 

 

 

7,077

 

Stock compensation expense

 

 

31,484

 

 

 

30,961

 

Realized gain on marketable securities

 

 

(331

)

 

 

(60

)

Changes in operating assets and liabilities, net of acquisitions:

 

 

 

 

 

 

 

 

Accounts receivable, net of allowance for doubtful accounts

 

 

178,120

 

 

 

6,189

 

Inventories

 

 

(57,126

)

 

 

(68,217

)

Other current and non-current assets

 

 

(10,427

)

 

 

(68,370

)

Accounts payable

 

 

(51,463

)

 

 

5,960

 

Other current and non-current liabilities

 

 

(58,662

)

 

 

(33,001

)

Deferred revenue

 

 

(19,301

)

 

 

(6,252

)

Deferred costs

 

 

7,817

 

 

 

3,876

 

Income taxes payable

 

 

(13,035

)

 

 

(10,791

)

Net cash provided by operating activities

 

 

425,111

 

 

 

275,218

 

 

 

 

 

 

 

 

 

 

Investing activities:

 

 

 

 

 

 

 

 

Purchases of property and equipment

 

 

(98,270

)

 

 

(60,495

)

Proceeds from sale of property and equipment

 

 

1,916

 

 

 

271

 

Purchase of intangible assets

 

 

(1,374

)

 

 

(853

)

Purchase of marketable securities

 

 

(346,129

)

 

 

(192,168

)

Redemption of marketable securities

 

 

566,688

 

 

 

182,860

 

Acquisitions, net of cash acquired

 

 

(7,893

)

 

 

(276,014

)

Net cash provided by (used in) investing activities

 

 

114,938

 

 

 

(346,399

)

 

 

 

 

 

 

 

 

 

Financing activities:

 

 

 

 

 

 

 

 

Dividends

 

 

(217,450

)

 

 

(308,905

)

Proceeds from issuance of treasury stock related to equity awards

 

 

15,202

 

 

 

12,982

 

Purchase of treasury stock related to equity awards

 

 

(11,883

)

 

 

(12,954

)

Net cash used in financing activities

 

 

(214,131

)

 

 

(308,877

)

 

 

 

 

 

 

 

 

 

Effect of exchange rate changes on cash and cash equivalents

 

 

1,651

 

 

 

(1,493

)

 

 

 

 

 

 

 

 

 

Net increase (decrease) in cash, cash equivalents, and restricted cash

 

 

327,569

 

 

 

(381,551

)

Cash, cash equivalents, and restricted cash at beginning of period

 

 

1,027,638

 

 

 

1,201,805

 

Cash, cash equivalents, and restricted cash at end of period

 

$

1,355,207

 

 

$

820,254

 

Garmin Ltd. And Subsidiaries

 

Net Sales, Gross Profit and Operating Income by Segment (Unaudited)

 

(In thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Reportable Segments

 

 

 

Fitness

 

 

Marine

 

 

Outdoor

 

 

Aviation

 

 

Auto

 

 

Total

 

13-Weeks Ended June 27, 2020

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net sales

 

$

294,642

 

 

$

157,827

 

 

$

206,200

 

 

$

126,140

 

 

$

85,058

 

 

$

869,867

 

Gross profit

 

 

156,817

 

 

 

93,470

 

 

 

133,189

 

 

 

92,036

 

 

 

39,918

 

 

 

515,430

 

Operating income

 

 

71,981

 

 

 

43,553

 

 

 

67,414

 

 

 

15,566

 

 

 

(10,125

)

 

 

188,389

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

13-Weeks Ended June 29, 2019

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net sales

 

$

251,653

 

 

$

151,407

 

 

$

210,404

 

 

$

183,965

 

 

$

157,411

 

 

$

954,840

 

Gross profit

 

 

135,136

 

 

 

91,683

 

 

 

135,508

 

 

 

138,177

 

 

 

74,861

 

 

 

575,365

 

Operating income

 

 

50,413

 

 

 

42,730

 

 

 

71,336

 

 

 

66,834

 

 

 

24,908

 

 

 

256,221

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

26-Weeks Ended June 27, 2020

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net sales

 

$

518,242

 

 

$

320,832

 

 

$

381,302

 

 

$

314,739

 

 

$

190,860

 

 

$

1,725,975

 

Gross profit

 

 

269,142

 

 

 

187,680

 

 

 

245,447

 

 

 

230,844

 

 

 

89,257

 

 

 

1,022,370

 

Operating income

 

 

102,992

 

 

 

83,712

 

 

 

114,581

 

 

 

74,887

 

 

 

(10,300

)

 

 

365,872

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

26-Weeks Ended June 29, 2019

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net sales

 

$

431,908

 

 

$

285,376

 

 

$

364,455

 

 

$

354,741

 

 

$

284,410

 

 

$

1,720,890

 

Gross profit

 

 

225,970

 

 

 

169,739

 

 

 

232,996

 

 

 

266,160

 

 

 

132,198

 

 

 

1,027,063

 

Operating income

 

 

68,537

 

 

 

68,205

 

 

 

113,290

 

 

 

124,451

 

 

 

33,121

 

 

 

407,604

 

Garmin Ltd. And Subsidiaries

 

Net Sales by Geography (Unaudited)

 

(In thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

13-Weeks Ended

 

 

26-Weeks Ended

 

 

 

June 27,

 

 

June 29,

 

 

YoY

 

 

June 27,

 

 

June 29,

 

 

YoY

 

 

 

2020

 

 

2019

 

 

Change

 

 

2020

 

 

2019

 

 

Change

 

Net sales

 

$

869,867

 

 

$

954,840

 

 

(9)%

 

 

$

1,725,975

 

 

$

1,720,890

 

 

0%

 

Americas

 

 

423,091

 

 

 

470,840

 

 

(10)%

 

 

 

850,491

 

 

 

850,296

 

 

0%

 

EMEA

 

 

335,201

 

 

 

338,595

 

 

(1)%

 

 

 

635,069

 

 

 

598,615

 

 

6%

 

APAC

 

 

111,575

 

 

 

145,405

 

 

(23)%

 

 

 

240,415

 

 

 

271,979

 

 

(12)%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

EMEA - Europe, Middle East and Africa; APAC - Asia Pacific and Australian Continent

 

Non-GAAP Financial Information

To supplement our financial results presented in accordance with GAAP, this release includes the following measures defined by the Securities and Exchange Commission as non-GAAP financial measures: pro forma net income (earnings) per share, pro forma effective tax rate and free cash flow. These non-GAAP measures are not based on any comprehensive set of accounting rules or principles and should not be considered a substitute for, or superior to, financial measures calculated in accordance with GAAP, and may be different from non-GAAP measures used by other companies, limiting the usefulness of the measures for comparison with other companies. Management believes providing investors with an operating view consistent with how it manages the Company provides enhanced transparency into the operating results of the Company, as described in more detail by category below.

The tables below provide reconciliations between the GAAP and non-GAAP measures.

Pro forma effective tax rate

The Company’s income tax expense is periodically impacted by discrete tax items that are not reflective of income tax expense incurred as a result of current period earnings. Therefore, management believes disclosure of the effective tax rate and income tax provision before the effect of certain discrete tax items are important measures to permit investors' consistent comparison between periods. In the first quarter 2020 and the first half of 2019, there were no such discrete tax items identified.

Garmin Ltd. And Subsidiaries

 

Pro Forma Effective Tax Rate

 

(In thousands, except effective tax rate (ETR) information)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

13-Weeks Ended

 

 

26-Weeks Ended

 

 

 

June 27,

 

 

June 27,

 

 

 

2020

 

 

2020

 

 

 

$

 

 

ETR(1)

 

 

$

 

 

ETR(1)

 

U.S GAAP income tax provision

 

$

13,412

 

 

 

6.8

%

 

$

29,866

 

 

 

8.0

%

Pro forma discrete tax item:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Uncertain Tax Reserve Release(2)

 

 

14,308

 

 

 

 

 

 

 

14,308

 

 

 

 

 

Pro forma income tax provision

 

$

27,720

 

 

 

14.0

%

 

$

44,174

 

 

 

11.8

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1) Effective tax rate is calculated by taking the income tax provision divided by income before taxes, as presented on the face of the Condensed Consolidated Statements of Income.

 

(2) In second quarter 2020, the Company recognized a $14 million income tax benefit due to the release of uncertain tax position reserves associated with the 2014 intercompany restructuring, which was a pro forma adjustment in 2014. The second quarter 2020 impact of the reserve release is not reflective of income tax expense incurred as a result of current period earnings and therefore affects period-to-period comparability.

 

The net release of other uncertain tax position reserves, amounting to approximately $4.1 million and $6.7 million in the 26 weeks ended June 27, 2020 and June 29, 2019, respectively, have not been identified as pro forma adjustments as such items tend to be more recurring in nature.

Pro forma net income (earnings) per share

Management believes that net income (earnings) per share before the impact of foreign currency gains or losses and certain discrete income tax items, as discussed above, is an important measure in order to permit a consistent comparison of the Company’s performance between periods.

Garmin Ltd. And Subsidiaries

 

Pro Forma Net Income (Earnings) Per Share

 

(In thousands, except per share information)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

13-Weeks Ended

 

 

26-Weeks Ended

 

 

 

June 27,

 

 

June 29,

 

 

June 27,

 

 

June 29,

 

 

 

2020

 

 

2019

 

 

2020

 

 

2019

 

GAAP net income

 

$

184,180

 

 

$

223,656

 

 

$

345,360

 

 

$

363,829

 

Foreign currency gains / losses(1)

 

 

4,493

 

 

 

(3,413

)

 

 

19,916

 

 

 

(3,727

)

Tax effect of foreign currency gains / losses(2)

 

 

(630

)

 

 

645

 

 

 

(2,345

)

 

 

660

 

Uncertain Tax Reserve Release(3)

 

 

(14,308

)

 

 

 

 

 

(14,308

)

 

 

 

Pro forma net income

 

$

173,735

 

 

$

220,888

 

 

$

348,623

 

 

$

360,762

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GAAP net income per share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

0.96

 

 

$

1.18

 

 

$

1.81

 

 

$

1.92

 

Diluted

 

$

0.96

 

 

$

1.17

 

 

$

1.80

 

 

$

1.91

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Pro forma net income per share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

0.91

 

 

$

1.16

 

 

$

1.83

 

 

$

1.90

 

Diluted

 

$

0.91

 

 

$

1.16

 

 

$

1.82

 

 

$

1.89

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average common shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

191,024

 

 

 

189,855

 

 

 

190,914

 

 

 

189,728

 

Diluted

 

 

191,597

 

 

 

190,714

 

 

 

191,640

 

 

 

190,657

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1) Foreign currency gains and losses for the Company are driven by movements of a number of currencies in relation to the U.S. Dollar and the related exchange rate impact on the significant cash, receivables, and payables held in a currency other than the functional currency at a given legal entity. However, there is minimal cash impact from such foreign currency gains and losses.

 

(2) The tax effect of foreign currency gains and losses was calculated using the pro forma effective tax rate of 14.0% and 11.8% for the 13-weeks and 26-weeks ended June 27, 2020, respectively, and an effective tax rate of 18.9% and 17.7% for the 13-weeks and 26-weeks ended June 29, 2019, respectively.

 

(3) The discrete tax item is discussed in the pro forma effective tax rate section above.

 


Contacts

Investor Relations Contact:
Teri Seck
913/397-8200
investor.relations@garmin.com

Media Relations Contact:
Carly Hysell
913/397-8200
media.relations@garmin.com

 


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