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United States
Securities and Exchange Commission
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 28, 2002
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ____ to ____
Commission file number 0-31983
________________
GARMIN LTD.
(Exact name of Company as specified in its charter)
Cayman Islands 98-0229227
(State or other jurisdiction (I.R.S. Employer identification no.)
of incorporation or organization)
5th Floor, Harbour Place, P.O. Box 30464 SMB, N/A
103 South Church Street (Zip Code)
George Town, Grand Cayman, Cayman Islands
(Address of principal executive offices)
Company's telephone number, including area code: (345) 946-5203*
No Changes
Former name,former address and former fiscal year, if changed since last report)
Indicate by check mark whether the Company (1) has filed all reports required to
be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Company was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. YES [x] NO [ ]
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act). YES [x] NO [ ]
Number of shares outstanding of the Company's common shares as of
November 5, 2002:
Common Shares, $.01 par value - 107,805,027
*The executive offices of the Registrant's principal United States subsidiary
are located at 1200 East 151st Street, Olathe, Kansas 66062. The telephone
number there is (913) 397-8200.
Garmin Ltd.
Form 10-Q
Quarter Ended September 28, 2002
Table of Contents
Part I - Financial Information Page
Item 1. Condensed Consolidated Financial Statements (unaudited)
Introductory Comments 3
Condensed Consolidated Balance Sheets at September
28, 2002 and December 29, 200 4
Condensed Consolidated Statements of Income for the
13 weeks ended September 28, 2002 and September 29, 2001
and the 39 weeks ended September 28, 2002 and
September 29, 2001 5
Condensed Consolidated Statements of Cash Flows for the
39-weeks ended September 28, 2002 and September 29, 2001 6
Notes to Condensed Consolidated Financial Statements -
September 28, 2002 7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 11
Item 3. Quantitative and Qualitative Disclosures About
Market Risk 19
Item 4. Controls and procedures 20
Part II - Other Information
Item 1. Legal Proceedings 21
Item 2. Changes in Securities and Use of Proceeds 21
Item 3. Defaults Upon Senior Securities 21
Item 4. Submission of Matters to a Vote of Security Holders 21
Item 5. Other Information 21
Item 6. Exhibits and Reports on Form 8-K 21
Signature Page 22
Garmin Ltd.
Form 10-Q
Quarter Ended September 28, 2002
Part I - Financial Information
Item 1. Condensed Consolidated Financial Statements (unaudited)
Introductory Comments
The Condensed Consolidated Financial Statements of Garmin Ltd. and
subsidiaries ('Garmin' or the 'Company') included herein have been prepared by
the Company, without audit, pursuant to the rules and regulations of the United
States Securities and Exchange Commission. Certain information and note
disclosures normally included in financial statements prepared in accordance
with accounting principles generally accepted in the United States of America
have been condensed or omitted pursuant to such rules and regulations, although
the Company believes that the disclosures are adequate to enable a reasonable
understanding of the information presented. These Condensed Consolidated
Financial Statements should be read in conjunction with the audited financial
statements and the notes thereto for the year ended December 29, 2001.
Additionally, the Condensed Consolidated Financial Statements should be read in
conjunction with Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations included in this Form 10-Q.
The results of operations for the 13 and 39-week periods ended September
28, 2002 are not necessarily indicative of the results to be expected for the
full year 2002.
Garmin Ltd. And Subsidiaries
Condensed Consolidated Balance Sheets
(In thousands, except share information)
---------------------------------------
(Unaudited)
September 28, December 29,
2002 2001
Assets
Current assets:
Cash and cash equivalents $194,444 $192,842
Marketable securities 77,555 40,835
Accounts receivable, net 44,916 47,998
Inventories 50,109 61,132
Deferred income taxes 6,963 7,007
Prepaid expenses and other current assets 5,135 2,921
------------------ ---------------
Total current assets 379,122 352,735
Property and equipment, net 71,644 70,086
Marketable securities 151,020 90,749
Restricted cash 1,458 1,600
Other assets, net 25,594 16,985
------------------ ---------------
Total assets $628,838 $532,155
================== ===============
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $22,069 $18,837
Salaries and benfits payable 3,993 3,308
Warranty reserve 3,802 4,777
Other accrued expenses 9,409 5,485
Income taxes payable 7,490 12,444
Current portion of long-term debt 1,334 4,177
------------------ ---------------
Total current liabilities 48,097 49,028
Long-term debt, less current portion 18,666 28,011
Deferred income taxes 1,075 1,147
Stockholders' equity:
Preferred stock, $1.00 par value, 1,000,000 authorized, none issued - -
Common stock, $0.01 par value, 500,000,000, share authorized:
Issued and outstanding shares - 107,774,918 in 2001 and 107,777,796 in 2002 1,078 1,078
Additional paid-in capital 127,349 127,131
Retained earnings 462,422 365,087
Accumulated other comprehensive loss (29,849) (39,327)
------------------ ---------------
Total stockholders' equity 561,000 453,969
------------------ ---------------
Total liabilities and stockholders' equity $628,838 $532,155
================== ===============
The accompanying notes are an integral part of these condensed consolidated
financial statements.
Garmin Ltd. And Subsidiaries
Condensed Consolidated Statements of Income (Unaudited)
(In thousands, except per share information)
13-Weeks Ended 39-Weeks Ended
------------------------------------- -------------------------------------
September 28, September 29, September 28, September 29,
2002 2001 2002 2001
------------------------------------- -------------------------------------
Net sales $107,756 $86,930 $331,450 $276,098
Cost of goods sold 48,705 39,201 150,245 127,401
--------------- ---------------- ---------------- ---------------
Gross profit 59,051 47,729 181,205 148,697
Selling, general and
administrative expenses 11,055 9,663 33,393 28,723
Research and development
expense 7,954 7,306 23,403 20,367
--------------- ---------------- ---------------- ---------------
19,009 16,969 56,796 49,090
--------------- ---------------- ---------------- ---------------
Operating income 40,042 30,760 124,409 99,607
Other income (expense):
Interest income 1,483 3,018 4,864 8,948
Interest expense (334) (522) (1,051) (1,749)
Foreign currency 9,592 335 (146) 7,651
Other (19) (89) 146 12
--------------- ---------------- ---------------- ---------------
10,722 2,742 3,813 14,862
--------------- ---------------- ---------------- ---------------
Income before income taxes 50,764 33,502 128,222 114,469
Income tax provision 12,336 8,501 30,887 29,066
--------------- ---------------- ---------------- ---------------
Net income $38,428 $25,001 $97,335 $85,403
=============== ================ ================ ===============
Net income per share:
Basic $0.36 $0.23 $0.90 $0.79
Diluted $0.36 $0.23 $0.90 $0.79
Weighted average common
shares outstanding:
Basic 107,798 108,242 107,788 108,242
Diluted 108,139 108,599 108,193 108,621
The accompanying notes are an integral part of these condensed consolidated
financial statements.
Garmin Ltd. And Subsidiaries
Condensed Consolidated Statements of Cash Flows (Unaudited)
(In thousands)
39-Weeks Ended
-------------------------------------------
September 28, September 29,
2002 2001
-------------------------------------------
Operating Activities:
Net income $97,335 $85,403
Depreciation and amortization 9,683 6,793
Gain on sale of property and equipment (165) (45)
Provision for doubtful accounts 557 229
Deferred income taxes 638 (685)
Foreign currency transaction gains (416) (2,611)
Changes in operating assets and liabilities:
Accounts receivable 2,525 (11,679)
Inventories 11,021 23,014
Other current assets (2,214) (3,179)
Accounts payable 3,231 (7,948)
Other current liabilities 3,754 1,726
Income taxes 3,932 4,599
------------------ ------------------
Net cash provided by operating activities 129,882 95,617
Investing activities:
Purchases of property and equipment (6,917) (10,823)
Purchase of intangible assets (13,189) -
Purchase of marketable securities, net (96,991) -
Change in restricted cash 142 5,920
Other 220 (12,112)
------------------ ------------------
Net cash used in investing activities (116,735) (17,015)
Financing activities:
Payments on long term debt (12,188) (11,006)
Repurchase of common stock 388 (150)
------------------ ------------------
Net cash used in financing activities (11,800) (11,156)
Effect of exchange rate changes on cash 255 (5,908)
------------------ ------------------
Net increase in cash 1,602 61,538
Cash and cash equivalents at beginning of period 192,842 251,731
------------------ ------------------
Cash and cash equivalents at end of period $194,444 $313,269
================== ==================
The accompanying notes are an integral part of these condensed consolidated
financial statements.
Garmin Ltd. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Unaudited)
September 28, 2002
(In thousands, except share and per share information)
1. Basis of Presentation
The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary for a fair presentation have
been included. Operating results for the 13 and 39-week periods ended September
28, 2002 are not necessarily indicative of the results that may be expected for
the year ended December 28, 2002.
The condensed consolidated balance sheet at December 29, 2001 has been derived
from the audited financial statements at that date but does not include all of
the information and footnotes required by generally accepted accounting
principles for complete financial statements. For further information, refer to
the consolidated financial statements and footnotes thereto included in the
Company's Annual Report on Form 10-K for the year ended December 29, 2001.
The company's fiscal year is based on a 52-53 week period ending on the last
Saturday of the calendar year. Therefore the financial results of certain fiscal
years, and the associated 14-week quarters, will not be exactly comparable to
the prior and subsequent 52-week fiscal years and the associated quarters having
only 13 weeks. The quarters ended September 28, 2002 and September 29, 2001 both
contain operating results for 13 weeks.
2. Recent Pronouncements
In August 2001, the FASB issued SFAS No. 144, Accounting for the Impairment or
Disposal of Long-Lived Assets, which addresses financial accounting and
reporting for the impairment or disposal of long-lived assets and supersedes
SFAS No. 121, Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed Of, and the accounting and reporting provisions
of APB Opinion No. 30, Reporting the Results of Operations, for a disposal of a
segment of a business. SFAS No. 144 is effective for fiscal years beginning
after December 15, 2001, with earlier application encouraged. The Company
adopted SFAS No. 144 as of December 30, 2001, and the adoption of the statement
has not had any impact on the Company's financial position and results of
operations.
In June 2001, the FASB issued SFAS No. 141, Business Combinations, and SFAS No.
142, Goodwill and Other Intangible Assets. SFAS No. 141 supercedes APB Opinion
No. 16, Business Combinations, and FASB Statement No. 38, Accounting for
Preacquisition Contingencies of Purchased Enterprises. This statement requires
accounting for all business combinations using the purchase method, and changes
the criteria for recognizing intangible assets apart from goodwill. This
statement is effective for all business combinations initiated after June 30,
2001. SFAS No. 142 supercedes APB Opinion No. 17, Intangible Assets, and
addresses how purchased intangibles should be accounted for upon acquisition.
The statement also addresses how goodwill and other intangible assets should be
accounted for after they have been initially recognized in the financial
statements. All intangibles will be subject to periodic impairment testing and,
if impaired, will be written down to fair value.
The Company adopted SFAS No. 142 beginning in the first quarter of 2002.
Application of the nonamortization and impairment provisions of the statement
has not had a significant impact on the Company's financial position and results
of operations.
3. Inventories
The components of inventories consist of the following:
September 28, 2002 December 29, 2001
-------------------------------------------------
Raw materials $24,551 $26,381
Work-in-process 10,139 9,582
Finished goods 20,905 34,723
Inventory reserves (5,486) (9,554)
------------- ----------------
Inventory, net of reserves $50,109 $61,132
============= ================
--------------------------------------------------
4. Long-Term Debt
On January 1, 1995, Garmin International, Inc. completed a $9.5 million 30-year
tax-exempt Industrial Revenue Bond issuance for the construction of its
corporate headquarters located in Olathe, Kansas. Upon completion of the project
in 1996, Garmin International retired bonds totaling $0.2 million. As of May 1,
2002, Garmin International, Inc. purchased all $9.3 million of its outstanding
1995 Series tax-exempt Industrial Revenue Bonds to further decrease its
long-term debt. At September 28, 2002 and September 29, 2001, outstanding
principal under the Bonds totaled $0.0 million and $9.3 million, respectively.
Interest on the Bonds was payable monthly at a variable interest rate (3.9% at
September 29, 2001), which was adjusted weekly to the current market rate as
determined by the remarketing agent for the Bonds.
5. Stock Repurchase Plan
On September 24, 2001, Garmin announced that its Board of Directors approved a
share repurchase program authorizing Garmin to purchase up to five million
common shares of Garmin Ltd. as market and business conditions warrant. The
purchases may be made from time to time on the open market or in negotiated
transactions in compliance with Rule 10b-18 promulgated by the Securities and
Exchange Commission. The timing and amounts of any purchases will be determined
by Garmin's management depending on market conditions and other factors deemed
relevant. The share repurchase authorization expires on December 31, 2002. As of
September 28, 2002, Garmin had purchased a total of 595,200 shares pursuant to
this share repurchase authorization at a total cost of $9.8 million. All such
purchased shares have been cancelled and now form part of the authorized but
unissued capital of Garmin, since Cayman Islands law does not permit a company
to hold its own shares. There were no shares repurchased during the 13 and
39-week periods ended September 28, 2002.
6. Initial Public Offering
On December 8, 2000, the Company completed an underwritten initial public
offering of 12,075,000 shares (including shares sold pursuant to the
underwriters' over-allotment option) of its common shares, of which 8,242,111
shares were offered by the Company and 3,832,889 were offered by selling
shareholders (the Offering) at an offering price of $14.00 per share. Prior to,
but in connection with the Offering, the Board of Directors approved a
1.12379256-for-1 stock split of the Company's common shares, effected through a
stock dividend on November 6, 2000.
7. Earnings Per Share
The following tables set forth the computation of basic and diluted net income
per share (in thousands, except per share information):
13-Weeks Ended
----------------------------
September 28, September 29,
2002 2001
----------------------------
Numerator:
Numerator for basic and diluted net income
per share - net income $38,428 $25,001
============================
Denominator (in thousands):
Denominator for basic net income per share-
weighted-average common shares 107,798 108,242
Effect of dilutive securities - employee
stock options 341 357
----------------------------
Denominator for diluted net income per
share - adjusted weighted-average common
shares 108,139 108,599
============================
Basic net income per share $0.36 $0.23
============================
Diluted net income per share $0.36 $0.23
============================
39-Weeks Ended
----------------------------
September 28, September 29,
2002 2001
----------------------------
Numerator:
Numerator for basic and diluted net income
per share - net income $97,335 $85,403
============================
Denominator (in thousands):
Denominator for basic net income per share-
weighted-average common shares 107,788 108,242
Effect of dilutive securities - employee
stock options 405 379
----------------------------
Denominator for diluted net income per
share - adjusted weighted-average common
shares 108,193 108,621
============================
Basic net income per share $0.90 $0.79
============================
Diluted net income per share $0.90 $0.79
=============================
Certain options to purchase shares of common stock were outstanding during 2002
but were not included in the computation of diluted earnings per share because
the options' exercise price was greater than the average market price of the
common shares and, therefore, the effect would be antidilutive.
8. Comprehensive Income
Comprehensive income is comprised of the following:
13-Weeks Ended
---------------------------------------------------------
September 28, 2002 September 29, 2001
---------------------------------------------------------
(in thousands)
Net income $38,428 $25,001
Translation adjustment (5,789) 2,425
Change in fair value of available for sale securities 238 -
------------- -------------
Comprehensive income $32,877 $27,426
============= =============
39-Weeks Ended
---------------------------------------------------------
September 28, 2002 September 29, 2001
---------------------------------------------------------
(in thousands)
Net income $97,335 $85,403
Translation adjustment 9,081 (9,217)
Change in fair value of effective portion of
cash flow hedges 159 -
Change in fair value of available for sale securities 238 -
------------- -------------
Comprehensive income $106,813 $76,186
============= =============
9. Segment Information
Revenues and income before income taxes for each of the Company's reportable
segments are presented below:
13-Weeks Ended
------------------------------------------------------------------------------
September 28, 2002 September 29, 2001
------------------------------------------------------------------------------
Consumer Aviation Consumer Aviation
(in thousands)
Sales to external
customers $80,218 $27,538 $64,165 $22,765
Income before
income taxes $39,407 $11,357 $23,442 $10,060
39-Weeks Ended
------------------------------------------------------------------------------
September 28, 2002 September 29, 2001
------------------------------------------------------------------------------
Consumer Aviation Consumer Aviation
(in thousands)
Sales to external
customers $248,710 $82,740 $193,516 $82,582
Income before
income taxes $94,122 $34,100 $75,177 $39,292
Revenues and long-lived assets (property and equipment) by geographic area are
as follows as of and for the 39-week periods ended September 28, 2002 and
September 29, 2001:
North America Asia Europe Total
--------------------------------------------------------------------------------
September 28, 2002 (in thousands)
Sales to external customers $239,343 $16,142 $75,965 $331,450
Long-lived assets $40,600 $30,553 $491 $71,644
September 29, 2001 (in thousands)
Sales to external customers $207,821 $9,822 $58,455 $276,098
Long-lived assets $39,079 $29,254 $457 $68,790
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
The discussion set forth below, as well as other portions of this Quarterly
Report, contains statements concerning potential future events. Such
forward-looking statements are based upon assumptions by our management, as of
the date of this Quarterly Report, including assumptions about risks and
uncertainties faced by the Company. Readers can identify these forward-looking
statements by their use of such verbs as expects, anticipates, believes or
similar verbs or conjugations of such verbs. If any of our assumptions prove
incorrect or should unanticipated circumstances arise, our actual results could
materially differ from those anticipated by such forward-looking statements. The
differences could be caused by a number of factors or combination of factors
including, but not limited to, those factors identified in the Company's Annual
Report on Form 10-K for the year ended December 29, 2001. This report has been
filed with the Securities and Exchange Commission (the "SEC" or the
"Commission") in Washington, D.C. and can be obtained by contacting the SEC's
public reference operations or obtaining it through the SEC's web site on the
World Wide Web at http://www.sec.gov. Readers are strongly encouraged to
consider those factors when evaluating any forward-looking statement concerning
the Company. The Company will not update any forward-looking statements in this
Quarterly Report to reflect future events or developments.
The information contained in this Management's Discussion and Analysis of
Financial Condition and Results of Operations should be read in conjunction with
the Condensed Consolidated Financial Statements and Notes thereto included in
this Form 10-Q and the audited financial statements and notes thereto in the
Company's Annual Report on Form 10-K for the year ended December 29, 2001.
The Company is a leading worldwide provider of navigation, communications
and information devices, most of which are enabled by Global Positioning System,
or GPS, technology. We operate in two business segments, the consumer and
aviation markets. Both of our segments offer products through our network of
independent dealers and distributors. However, the nature of products and types
of customers for the two segments vary significantly. As such, the segments are
managed separately. Our consumer segment includes portable GPS receivers and
accessories for marine, recreation, land and automotive use sold primarily to
retail outlets. Our aviation products are portable and panel-mount avionics for
Visual Flight Rules and Instrument Flight Rules navigation and are sold
primarily to retail outlets and certain aircraft manufacturers.
Results of Operations
The following table sets forth our results of operations as a percentage of
net sales during the periods shown:
13-Weeks Ended
---------------------------------------------------------
September 28, 2002 September 29, 2001
---------------------------------------------------------
Net sales 100.0% 100.0%
Cost of goods sold 45.2% 45.1%
------------- -------------
Gross profit 54.8% 54.9%
Selling, general and administrative 10.3% 11.1%
Research and development 7.4% 8.4%
------------- -------------
Total operating expenses 17.6% 19.5%
------------- -------------
Operating income 37.2% 35.4%
Other income, net 10.0% 3.2%
------------- -------------
Income before income taxes 47.1% 38.5%
Income taxes 11.4% 9.8%
------------- -------------
Net income 35.7% 28.8%
============= =============
39-Weeks Ended
---------------------------------------------------------
September 28, 2002 September 29, 2001
---------------------------------------------------------
Net sales 100.0% 100.0%
Cost of good sold 45.3% 46.1%
------------- -------------
Gross profit 54.7% 53.9%
Selling, general and administrative 10.1% 10.4%
Research and development 7.1% 7.4%
------------- -------------
Total operating expenses 17.1% 17.8%
------------- -------------
Operating income 37.5% 36.1%
Other income, net 1.2% 5.4%
------------- -------------
Income before income taxes 38.7% 41.5%
Income taxes 9.3% 10.5%
------------- -------------
Net income 29.4% 30.9%
============= =============
The following table sets forth our results of operations for each of our
two segments through income before income taxes during the periods shown. For
each line item in the table, the total of the consumer and aviation segments'
amounts equals the amount in the condensed consolidated statements of income
included in Item 1.
13-Weeks Ended
---------------------------------------------------------------------------
September 28, 2002 September 29, 2001
(in thousands) (in thousands)
---------------------------------------------------------------------------
Consumer Aviation Consumer Aviation
Net sales $80,218 $27,538 $64,165 $22,765
Cost of goods sold 38,008 10,697 30,796 8,405
---------------- --------------- ----------------- ---------------
Gross profit 42,210 16,841 33,369 14,360
Operating expenses:
Selling, general and
administrative 8,285 2,770 7,306 2,357
Research and development 4,453 3,501 4,683 2,623
---------------- --------------- ----------------- ---------------
Total operating expenses 12,738 6,271 11,989 4,980
Operating income 29,472 10,570 21,380 9,380
Other income, net 9,935 787 2,062 680
---------------- --------------- ----------------- ---------------
Income before income taxes $39,407 $11,357 $23,442 $10,060
================ =============== ================= ===============
39-Weeks Ended
---------------------------------------------------------------------------
September 28, 2002 September 29, 2001
(in thousands) (in thousands)
---------------------------------------------------------------------------
Consumer Aviation Consumer Aviation
Net sales $248,710 $82,740 $193,516 $82,582
Cost of goods sold 118,142 32,103 96,061 31,340
---------------- --------------- ----------------- ---------------
Gross Profit 130,568 50,637 97,455 51,242
Operating expenses:
Selling, general and
administrative 25,774 7,619 21,042 7,681
Research and development 13,675 9,728 13,292 7,075
---------------- --------------- ----------------- ---------------
Total operating expenses 39,448 17,347 34,334 14,756
Operating income 91,120 33,290 63,121 36,486
Other income, net 3,003 810 12,056 2,806
---------------- --------------- ----------------- ---------------
Income before income taxes $94,123 $34,100 $75,177 $39,292
================ =============== ================= ===============
Comparison of 13-Weeks Ended September 28, 2002 and September 29, 2001
Net Sales
Net sales increased $20.9 million, or 24%, to $107.8 million for the
13-week period ended September 28, 2002, from $86.9 million for the 13-week
period ended September 29, 2001. The increase for the 13-week period ended
September 28, 2002 was primarily due to the success of the new marine and
automotive products that were introduced during the last 21 months and overall
demand for our consumer products. Sales from our consumer products accounted for
74.4% of net sales for the third quarter of 2002 compared to 73.8% during the
third quarter of 2001. Sales from our aviation products accounted for 25.6% for
the third quarter of 2002 compared to 26.2% during the third quarter of 2001.
Total consumer and aviation units sold increased 22% to 378,000 in 2002 from
311,000 in 2001.
Net sales for the consumer segment increased $16 million, or 25%, to $80.2
million for the 13-week period ended September 28, 2002, from $64.2 million for
the 13-week period ended September 29, 2001. The increase for the 13-week period
ended September 28, 2002 was due to the success of a majority of our new
consumer products that were introduced during the last 21 months and overall
demand for our consumer products.
Net sales for the aviation segment increased $4.8 million, or 21%, to $27.5
million for the 13-week period ended September 28, 2002, from $22.8 million for
the 13-week period ended September 29, 2001. The increase for the 13-week period
ended September 28, 2002 was due to revenues from new product releases as well
as comparison to a weak third quarter of 2001, which was impacted by the events
of September 11, 2001. The aviation segment exhibited a sequential revenue
decrease of $1.6 million, or 5.3%, to $27.5 million during the quarter compared
to $29.1 million during the second quarter of fiscal year 2002. We believe that
this sequential revenue decrease in our aviation segment is a signal of the
continued challenges faced by the general aviation market due to the current
weak economic environment.
Gross Profit
Gross profit increased $11.3 million, or 23.7%, to $59.1 million for the
13-week period ended September 28, 2002, from $47.7 million for the 13-week
period ended September 29, 2001. This increase was primarily attributable to an
increase in revenues due to continued strong sell-through of new products that
were introduced during the last 18 months. Gross profit as a percentage of net
sales was 54.8% for the 13-week period ended September 28, 2002 which was
consistent with 54.9% for the 13-week period ended September 29, 2001.
Gross profit for the consumer segment increased $8.8 million, or 26.5%, to
$42.2 million for the 13-week period ended September 28, 2002, from $33.4
million for the 13-week period ended September 29, 2001. This increase is
primarily attributable to the increase in consumer segment revenue, driven by
strong automotive and marine sales. Gross profit as a percentage of net sales
increased 60 basis points to 52.6% for the 13-week period ended September 28,
2002 compared to 52.0% for the 13-week period ended September 29, 2001.
Gross profit for the aviation segment increased $2.5 million, or 17.3%, to
$16.8 million for the 13-week period ended September 28, 2002, from $14.4
million for the 13-week period ended September 29, 2001. This increase is
associated with an increase in revenues in our aviation segment during the
quarter. Gross profit as a percentage of net sales decreased to 61.2% for the
13-week period ended September 28, 2002 from 63.1% for the 13-week period ended
September 29, 2001. This decrease as a percentage of net sales was primarily due
to product mix between panel mount and handheld units during 2002 when compared
to 2001.
Selling, General and Administrative Expenses
Selling, general and administrative expenses increased $1.4 million, or
14.4%, to $11.1 million (10.3% of net sales) for the 13-week period ended
September 28, 2002, from $9.7 million (11.1% of net sales) for the 13-week
period ended September 29, 2001. Selling, general and administrative expenses
increased $1.0 million, or 13.4%, in the consumer segment and increased $0.4
million, or 17.5% in the aviation segment. The increase in expense was primarily
attributable to increases in employment generally across the organization,
increased advertising costs (up 6%) associated with new product releases,
increased administrative expenses due to marketing support, and airport
infrastructure expenses associated with our 25,000 sq.ft. flight test and
certification facility located at New Century Airport near our Olathe, Kansas
facility.
Research and Development Expense
Research and development expenses increased $0.6 million, or 8.9%, to $8.0
million (7.4% of net sales) for the 13-week period ended September 28, 2002,
from $7.3 million (8.4% of net sales) for the 13-week period ended September 29,
2001. Research and development expenses decreased $0.2 million, or (4.9%), in
the consumer segment due to the timing of program costs (non-staff expense)
across several products in development. The increase in our aviation segment
research and development was primarily attributable to continued costs
associated with our future integrated cockpit project. We added 11 new
engineering personnel to our staff during the quarter as a result of our
continued emphasis on product innovation.
Operating Income
Operating income for the 13-week period ended September 28, 2002 increased
30.2% to $40.0 million from $30.8 million for the 13-week period ended September
29, 2001. Operating income as a percentage of net sales increased to 37.2% for
the 13-week period ended September 28, 2002, from 35.4% for the 13-week period
ended September 29, 2001 as a result of strong consumer sales and increased
gross profits, primarily within the consumer segment.
Other Income (Expense)
Other income (expense) principally consists of interest income, interest
expense and foreign currency exchange gains and losses. Other income for the
13-week period ended September 28, 2002 totaled $10.7 million compared to other
income of $2.7 million for the 13-week period ended September 29, 2001. Interest
income for the 13-week period ended September 28, 2002 amounted to $1.5 million
compared to $3.0 million for the 13-week period ended September 29, 2001, the
decrease being attributable to the reduction in interest rates. The average
taxable equivalent interest rate return on invested cash and cash equivalents
during the quarter was 1.75% compared to 4.02% during the third fiscal quarter
of 2001. Interest expense decreased to $0.3 million for the 13-week period ended
September 28, 2002 from $0.5 million for the 13-week period ended September 29,
2001 due to the retirement of debt associated with our Taiwan facility, the
purchase of our 1995 Olathe industrial revenue bonds, and a lower interest rate
environment.
We recognized a foreign currency exchange gain of $9.6 million for the
13-week period ended September 28, 2002 compared to a gain of $0.3 million for
the 13-week period ended September 29, 2001. The $9.6 million gain was due to
the strength of the U.S. Dollar compared to the Taiwan Dollar during the third
quarter of fiscal 2002, when the exchange rate increased to 34.95 TD/USD at
September 28, 2002 from 33.56 TD/USD at June 29, 2002. The $0.3 million gain was
due to the strength of the U.S. Dollar compared to the Taiwan Dollar during the
third quarter of fiscal 2001, when the exchange rate increased to 34.52 TD/USD
at September 29, 2001 from 34.50 TD/USD at June 30, 2001.
Income Tax Provision
Income tax expense increased by $3.8 million, to $12.3 million, for the
13-week period ended September 28, 2002 from $8.5 million for the 13-week period
ended September 29, 2001 due to our higher taxable income. The effective tax
rate decreased to 24.3% during the 13-week period ended September 28, 2002 from
25.4% during the 13-week period ended September 29, 2001 due to additional tax
incentives within our Taiwan subsidiary during fiscal 2002.
Net Income
As a result of the above, net income increased 53.7% for the 13-week period
ended September 28, 2002 to $38.4 million compared to $25.0 million for the
13-week period ended September 29, 2001.
Comparison of 39-weeks Ended September 28, 2002 and September 29, 2001
Net Sales
Net sales increased $55.3 million, or 20%, to $331.5 million for the
39-week period ended September 28, 2002, from $276.1 million for the 39-week
period ended September 29, 2001. The increase for the 39-week period ended
September 28, 2002 was primarily due to the success of the new marine and
automotive products that were introduced during the last 21 months and overall
demand for our consumer products. Sales from our consumer products accounted for
75% of net sales for the 39-week period in 2002 compared to 70% during the same
period in 2001. Sales from our aviation products accounted for 25% for the
39-week period in 2002 compared to 30% during the same period in 2001. Total
consumer and aviation units sold increased 9% to 1,079,000 in 2002 from 993,000
in 2001.
Net sales for the consumer segment increased $55.2 million, or 28.5%, to
$248.7 million for the 39-week period ended September 28, 2002, from $193.5
million for the 39-week period ended September 29, 2001. The increase for the
39-week period ended September 28, 2002 was primarily due to the success of the
new marine and automotive products introduced during the last 21 months and
overall demand for our consumer products.
Net sales for the aviation segment increased $0.2 million, or 0.2%, to
$82.7 million for the 39-week period ended September 28, 2002, from $82.5
million for the 39-week period ended September 29, 2001. The small increase for
the 39-week period ended September 28, 2002 was primarily due to the continued
economic challenges faced by the general aviation market after the events of
September 11, 2001.
Gross Profit
Gross profit increased $32.5 million, or 21.9%, to $181.2 million for the
39-week period ended September 28, 2002, from $148.7 million for the 39-week
period ended September 29, 2001. This increase was primarily attributable to an
increase in revenues due to strong demand for consumer GPS products that were
introduced during the last 18 months, improved manufacturing efficiencies, and a
reduction of raw material costs. Gross profit as a percentage of net sales
increased 80 basis points to 54.7% for the 39-week period ended September 28,
2002 compared to 53.9% for the 39-week period ended September 29, 2001.
Gross profit for the consumer segment increased $33.1 million, or 34%, to
$130.6 million for the 39-week period ended September 28, 2002, from $97.5
million for the 39-week period ended September 29, 2001. This increase is
primarily attributable to the increase in consumer segment revenue, improved
manufacturing efficiencies on many of our new products introduced during the
last 18 months, and a reduction of raw material costs. Gross profit as a
percentage of net sales increased 210 basis points to 52.5% for the 39-week
period ended September 28, 2002 compared to 50.4% for the 39-week period ended
September 29, 2001.
Gross profit for the aviation segment decreased $0.6 million, or -1.2%, to
$50.6 million for the 39-week period ended September 28, 2002, from $51.2
million for the 39-week period ended September 29, 2001. This decrease is
associated with product mix between our panel mount and handheld units. Gross
profit as a percentage of net sales decreased 80 basis points to 61.2% for the
39-week period ended September 28, 2002 from 62.0% for the 39-week period ended
September 29, 2001. This decrease as a percentage of net sales was primarily due
to product mix changes between panel mount and handheld units sold during 2002
when compared to 2001.
Selling, General and Administrative Expenses
Selling, general and administrative expenses increased $4.7 million, or
16.3%, to $33.4 million (10.1% of net sales) for the 39-week period ended
September 28, 2002, from $28.7 million (10.4% of net sales) for the 39-week
period ended September 29, 2001. Selling, general and administrative expenses
increased $4.7 million, or 22.5%, in the consumer segment and decreased $0.06
million, or -0.8%, in the aviation segment. The increase in expense was
primarily attributable to increase in employment generally across the
organization, increased advertising costs (up 6%) associated with new product
releases, increased administrative expenses due to marketing support, and
airport infrastructure expenses associated with our 25,000 sq.ft. flight test
and certification facility located at New Century Airport near our Olathe,
Kansas facility.
Research and Development Expense
Research and development expenses increased $3.0 million, or 14.9%, to
$23.4 million (7.1% of net sales) for the 39-week period ended September 28,
2002, from $20.4 million (7.4% of net sales) for the 39-week period ended
September 29, 2001. Research and development expenses increased $0.4 million, or
2.9%, in the consumer segment and $2.7 million, or 37.5%, in the aviation
segment. The increase in expense was primarily due to the continued development
of our future integrated cockpit within our aviation segment and the addition of
50 new engineering personnel to our staff within the last 9 months as a result
of our continued emphasis on product innovation.
Operating Income
Operating income for the 39-week period ended September 28, 2002 increased
24.9% to $124.4 million, from $99.6 million for the 39-week period ended
September 29, 2001. Operating income as a percentage of net sales increased to
37.5% for the 39-week period ended September 28, 2002, from 36.1% for the
39-week period ended September 29, 2001 as a result of strong consumer product
sales and increased gross profits, primarily within the consumer segment.
Other Income (Expense)
Other income for the 39-week period ended September 28, 2002 totaled $3.8
million compared to other income of $14.9 million for the 39-week period ended
September 29, 2001. Interest income for the 39-week period ended September 28,
2002 amounted to $4.9 million compared to $8.9 million for the 39-week period
ended September 29, 2001, the decrease being attributable to the reduction in
interest rates. The average taxable equivalent interest rate return on invested
cash and cash equivalents during the 39-week period ended September 28, 2002 was
1.90% compared to 4.26% during the 39-week period ended September 29, 200l.
Interest expense decreased to $1.1 million for the 39-week period ended
September 28, 2002 from $1.7 million for the 39-week period ended September 29,
2001, due to the retirement of debt associated with our Taiwan facility, the
purchase of our 1995 Olathe industrial revenue bonds, and a lower interest rate
environment.
We recognized a foreign currency exchange loss of $0.1 million for the
39-week period ended September 28, 2002 compared to a gain of $7.7 million for
the 39-week period ended September 29, 2001. The $0.1 million loss was due to
positive and negative currency moves of similar magnitude of the U.S. Dollar
compared to the Taiwan Dollar during the 39-week period ended September 28,
2002, when the exchange rate decreased to 34.95 TD/USD at September 28, 2002
from 35.17 TD/USD at December 29, 2001. The $7.7 million gain was due to the
strength of the U.S. Dollar compared to the Taiwan Dollar during the 39-week
period ended September 29, 2001, when the exchange rate increased to 34.52
TD/USD at September 29, 2001 from 33.01 TD/USD at December 30, 2000.
Income Tax Provision
Income tax expense increased by $1.8 million, to $30.9 million, for the
39-week period ended September 28, 2002 from $29.1 million for the 39-week
period ended September 29, 2001 due to our higher taxable income. The effective
tax rate decreased to 24.1% during the 39-week period ended September 28, 2002
from 25.4% during the 39-week period ended September 29, 2001 due to additional
tax incentives within our Taiwan subsidiary during fiscal 2002.
Net Income
As a result of the above, net income increased 14% for the 39-week period
ended September 28, 2002 to $97.3 million compared to $85.4 million for the
39-week period ended September 29, 2001.
Liquidity and Capital Resources
Net cash generated by operating activities was $129.9 million for the
39-week period ended September 28, 2002 compared to $95.6 million for the
39-week period ended September 29, 2001. We operate with a strong customer
driven approach and therefore carry sufficient inventory to meet customer
demand. Because we desire to respond quickly to our customers and minimize order
fulfillment time, our inventory levels are generally adequate to meet most
demand. We also attempt to carry sufficient inventory levels on key components
so that potential supplier shortages have as minimal an impact as possible on
our ability to deliver our finished products. We experienced an $11 million
reduction in inventory at September 28, 2002 when compared to fiscal year-end
December 29, 2001 due to a reduction in finished goods inventory associated with
strong customer demand during the year. We increased inventory levels at the end
of fiscal year 2000 due partially to industry shortages of certain raw
materials. These raw material shortages have since normalized and we believe
that it is not necessary at this time to carry a higher level of raw material
inventory.
Cash flow from investing activities during the 39-week period ending
September 28, 2002 was a $116.7 million use of cash. Cash flow used in investing
activities principally relates to $13.2 million in purchases of intangible
assets, $6.9 million in capital expenditures, and the purchase of $97.0 million
of fixed income securities. It is management's goal to invest the on-hand cash
consistent with the Company's investment policy, which has been approved by the
Board of Directors. The investment policy's primary purpose is to preserve
capital, maintain an acceptable degree of liquidity, and maximize yield within
the constraint of maximum safety. The Company's average taxable equivalent
return on its investments during the 39-week period ended September 28, 2002 was
approximately 1.90%.
Cash flow from financing activities during the 39-week period ending
September 28, 2002 was a $11.8 million use of cash due to the retirement of debt
associated with our Taiwan facility and our 1995 industrial revenue bond
issuance.
We currently use cash flow from operations to fund our capital
expenditures, to repay debt and to support our working capital requirements. We
expect that future cash requirements will principally be for capital
expenditures, repayment of indebtedness and working capital requirements.
We believe that our existing cash balances and cash flow from operations
will be sufficient to meet our projected capital expenditures, working capital
and other cash requirements at least through the next 12 months.
Contractual Obligations and Commercial Commitments
On March 23, 2000, Garmin completed a $20.0 million 20-year Taxable
Industrial Revenue Bond issuance for the expansion of its Olathe, Kansas
facility. At September 28, 2002 and September 29, 2001, outstanding principal
under the 2000 Bonds totaled $20.0 million. Interest on the 2000 Bonds is
payable monthly at a variable interest rate (1.95% and 3.9% at September 28,
2002 and September 29, 2001, respectively), which is adjusted weekly to the
current market rate as determined by the remarketing agent of the 2000 Bonds
with principal due upon maturity on April 15, 2020.
The 2000 Bonds are secured by an irrevocable letter of credit totaling
$20.3 million with facility fees of 0.75%. This renewable letter of credit
initially expires on September 20, 2004. The bank has the option of requiring
Garmin to establish a sinking fund related to the principal balance outstanding
on the Bonds, which it had not exercised through September 28, 2002. The letter
of credit is secured by a mortgage on all assets financed with the proceeds of
the Bonds.
On January 1, 1995, Garmin completed a $9.5 million 30-year tax-exempt
Industrial Revenue Bond issuance for the construction of its corporate
headquarters located in Olathe, Kansas. Upon completion of the project in 1996,
Garmin retired bonds totaling $0.2 million. As of May 1, 2002, Garmin purchased
all $9.3 million of its remaining outstanding 1995 Series tax-exempt Industrial
Revenue Bonds to further decrease its long-term debt. At September 28, 2002 and
September 29, 2001, outstanding principal under the Bonds totaled $0.0 million
and $9.3 million, respectively. Interest on the Bonds is payable monthly at a
variable interest rate (1.95% and 3.9% at September 28, 2002 and September 29,
2001, respectively), which is adjusted weekly to the current market rate as
determined by the remarketing agent for the Bonds with principal due upon
maturity on January 1, 2025.
Our reimbursement agreements contain restrictive covenants, which include,
among other things, financial covenants requiring minimum cash flow leverage,
maximum capitalization, minimum tangible net worth, and other affirmative and
negative covenants. We do not expect these limitations to have a material effect
on our business or results of operations. We are in compliance with all
covenants contained in the reimbursement agreements.
During 1999, Garmin borrowed $18.0 million to finance the purchase of land
and a new manufacturing facility in Shijr, Taiwan. The remaining debt associated
with this facility was retired during the first quarter of fiscal 2002.
We utilize interest rate swap agreements to manage interest rate exposure.
The principal objective of such financial derivative contracts is to moderate
the effect of fluctuations in interest rates. We, as a matter of policy, do not
speculate in financial markets and therefore do not hold these contracts for
trading purposes. We utilize what are considered simple instruments, such as
non-leveraged interest rate swaps, to accomplish our objectives.
The Company has the option at any time during the year to retire a portion
or all of its long-term debt.
Off-Balance Sheet Arrangements
We do not have any off-balance sheet arrangements.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
Market Sensitivity
We have market risk primarily in connection with the pricing of our
products and services and the purchase of raw materials. Product pricing and raw
material costs are both significantly influenced by semiconductor market
conditions. Historically, during cyclical industry downturns, we have been able
to offset pricing declines for our products through a combination of improved
product mix and success in obtaining price reductions in raw material costs.
Inflation
We do not believe that inflation has had a material effect on our business,
financial condition or results of operations. If our costs were to become
subject to significant inflationary pressures, we may not be able to fully
offset such higher costs through price increases. Our inability or failure to do
so could adversely affect our business, financial condition and results of
operations.
Foreign Currency Exchange Rate Risk
The operation of the Company's subsidiaries in international markets
results in exposure to movements in foreign currency exchange rates. We
generally have not been significantly affected by foreign exchange fluctuations
because, until recently, the exchange rate between the Taiwan Dollar and the
U.S. Dollar has proven to be relatively stable. However, within the last two
years we have experienced significant foreign currency gains and losses due to
fluctuations in the value of the U.S. dollar. The potential of volatile foreign
exchange rate fluctuations in the future could have a significant effect on our
results of operations.
The principal foreign currency resulting in foreign currency exchange rate
risk is the Taiwan Dollar. Garmin Corporation, located in Shijr, Taiwan uses the
local currency as the functional currency. The Company translates all assets and
liabilities at year-end exchange rates and income and expense accounts at
average rates during the year. In order to minimize the effect of the currency
exchange fluctuations on our operations, we have elected to retain most of our
cash and cash equivalents at our Taiwan subsidiary in U.S. dollars. As discussed
above, the exchange rate increased 4% during the third quarter of fiscal 2002
and resulted in a foreign currency gain of $9.6 million. If the exchange rate
increased by a similar percentage, a comparable foreign currency loss would be
recognized.
Interest Rate Risk
As of September 28, 2002, we have interest rate risk in connection with our
industrial revenue bonds that bear interest at a floating rate. Garmin
International, Inc. entered into two interest rate swap agreements, one on July
1, 2000 ($10.0 million) and another on February 6, 2001 ($5.0 million), totaling
$15.0 million to modify the characteristics of its outstanding long-term debt
from a floating rate to a fixed rate basis. These agreements involve the receipt
of floating rate amounts in exchange for fixed rate interest payments over the
life of the agreements without an exchange of the underlying principal amount.
The estimated fair value of the interest swap agreements of $0.8 million is the
amount we would be required to pay to terminate the swap agreements at September
28, 2002. A 10% positive or negative change in the floating counterparty
interest rates associated with the swaps would change the estimated fair value
of the interest rate swap agreements to $0.7 million (positive 10% change) or
$0.9 million (negative 10% change), respectively.
The Company's average outstanding debt during the 13-week period ended
September 28, 2002 was approximately $20.0 million. The average interest rate on
debt during the quarter was approximately 4.6%. A 10% positive or negative
change in the average interest rate during the quarter would have resulted in
interest expense of $0.4 million (positive 10% change) or $0.2 million (negative
10% change), respectively. This compares to the actual interest expense of $0.3
million during the third quarter of fiscal 2002.
Item 4. Controls and Procedures
Within 90 days prior to the filing date of this report, the Company's Chief
Executive Officer and Chief Financial Officer evaluated the effectiveness of the
design and operation of the Company's disclosure controls and procedures and,
based upon this evaluation, have concluded that the disclosure controls and
procedures are effective.
There have been no significant changes in the Company's internal controls
or in other factors that could significantly affect these internal controls
subsequent to the completion of their evaluation.
Part II - Other Information
Item 1. Legal Proceedings
- -----------------------------------------
From time to time the Company may be involved in litigation arising
in the course of its operations. As of November 13, 2002, the Company
was not a party to any material legal proceedings.
Item 2. Changes in Securities and Use of Proceeds
- -----------------------------------------
None
Item 3. Defaults Upon Senior Securities
- -----------------------------------------
None
Item 4. Submission of Matters to a Vote of Security Holders
- -----------------------------------------
None
Item 5. Other Information
- -----------------------------------------
Not applicable
Item 6. Exhibits and Reports on Form 8-K
- -----------------------------------------
a. Exhibits
Exhibit 99.1 Certification Pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002 (filed herewith)
b. Reports on Form 8-K
The Company furnished under Item 9 of Form 8-K the Company's Form 8-K dated July
31, 2002 reporting the announcement of financial results for the fiscal quarter
ended June 29, 2002 and reporting the announcement of the execution of Rule
10b5-1 selling programs by two shareholders.
The Company furnished under Item 9 of Form 8-K the Company's Form 8-K dated
August 21, 2002 reporting the announcement of the retirement of Gary Burrell as
co-CEO and Board changes.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Company
has duly caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
GARMIN LTD.
By /s/ Kevin Rauckman
Kevin Rauckman
Chief Financial Officer
(Principal Financial Officer and
Principal Accounting Officer)
Dated: November 13, 2002
Certification
I, Min H. Kao, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Garmin Ltd.;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report;.
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated subsidiaries,
is made known to us by others within those entities particularly during the
period in which this quarterly report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the 'Evaluation Date'); and
c) presented in this quarterly report our conclusions about the effectiveness of
the disclosure controls and procedures based on our evaluation as of the
Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on our
most recent evaluation, to the registrant's auditors and the audit committee of
registrant's board of directors (or persons performing the equivalent function):
a) all significant deficiencies in the design or operation of internal controls
which could adversely affect the registrant's ability to record, process,
summarize and report financial data and have identified for the registrant's
auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal controls; and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.
Date: November 13, 2002 By /s/ Min H. Kao
Min H. Kao
Co-Chairman and Chief
Executive Officer
Certification
I, Kevin Rauckman, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Garmin Ltd.;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report;.
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated subsidiaries,
is made known to us by others within those entities particularly during the
period in which this quarterly report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the 'Evaluation Date'); and c) presented in this quarterly
report our conclusions about the effectiveness of the disclosure controls and
procedures based on our evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on our
most recent evaluation, to the registrant's auditors and the audit committee of
registrant's board of directors (or persons performing the equivalent function):
a) all significant deficiencies in the design or operation of internal controls
which could adversely affect the registrant's ability to record, process,
summarize and report financial data and have identified for the registrant's
auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal controls; and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.
Date: November 13, 2002 By /s/ Kevin Rauckman
Kevin Rauckman
Chief Financial Officer
Exhibit 99.1
Certification
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
(Subsections (a) and (b) of Section 1350, Chapter 63 of Title 18,
United States Code)
Pursuant to section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and
(b) of Section 1350, Chapter 63 of Title 18, United States Code), each of the
undersigned officers of Garmin Ltd. (the 'Company') does hereby certify that:
(1) The Quarterly Report on Form 10-Q for the quarter ended September 28, 2002
(the 'Form 10-Q') of the Company fully complies with the requirements of
Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) the information contained in the Form 10-Q fairly presents, in all material
respects, the financial condition and results of operations of the Company.
Dated: November 13, 2002 /s/ Min H. Kao
Min H. Kao
Co-Chairman and Chief Executive Officer
Dated: November 13, 2002 /s/ Kevin Rauckman
Kevin Rauckman
Chief Financial Officer
This certification accompanies the Form 10-Q pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002 and shall not, except to the extent required by the
Sarbanes-Oxley Act of 2002, be deemed filed by the Company for purposes of
Section 18 of the Securities Exchange Act of 1934, as amended.