Exhibit 99.1

 

 

 

Garmin Reports EPS Growth in Fourth Quarter 2013 with Strong Margin Performance; Proposes Dividend Increase; Announces CFO Transition

 

Schaffhausen, Switzerland / February 19, 2014/ Business Wire

 

Garmin Ltd. (Nasdaq: GRMN – News) today announced results for the fiscal year and quarter ended December 28, 2013.

 

Highlights in the quarter include:

 

·

Total revenue of $760 million in fourth quarter 2013 with non-automotive/mobile segments of outdoor, fitness, aviation and marine delivering 50% of total revenues and growing 14% over the year ago quarter

·

Operating margin of 23% with 69% of operating profit from outdoor, fitness, aviation and marine

·

Introduced new watches across a range of categories including the tactix, designed with law enforcement and special operations in mind; the D2™, designed for aviators; and the Approach® S4, a feature-rich golf watch

·

Announced a series of new marine products for 2014 led by DownVü and SideVü scanning sonar, an important feature for the fishing market

·

Generated $135 million of free cash flow in fourth quarter 2013

 

Highlights for the fiscal year include:

 

·

Total revenue of $2,632 million in 2013 with outdoor, fitness, aviation and marine growing a combined 9% over 2012

·

Operating margin stable at 22% partially driven by a decline in operating expenses

·

Entered new markets and expanded offering within existing markets allowing for a continued diversification of revenue and profitability sources

·

Generated $574 million of free cash flow in 2013

  

(in thousands,		13-Weeks Ended												52-Weeks Ended
except per share data)		Dec 28,				Dec 29,				Yr over Yr				Dec 28,				Dec 29,				Yr over Yr
		2013				2012				Change				2013				2012				Change
Net sales		$	759,694			$	768,548				-1	%		$	2,631,851			$	2,715,675				-3	%
Automotive/Mobile			382,504				436,654				-12	%			1,302,314				1,492,440				-13	%
Outdoor			126,617				118,517				7	%			410,989				401,747				2	%
Aviation			87,367				69,888				25	%			339,337				291,564				16	%
Fitness			118,623				103,973				14	%			356,283				321,788				11	%
Marine			44,583				39,516				13	%			222,928				208,136				7	%
Gross profit %			52	%			49	%							53	%			53	%
Operating profit %			23	%			19	%							22	%			22	%
Pro forma diluted EPS (1)		$	0.76			$	0.68				12	%		$	2.62			$	2.85				-8	%

 

Note: YTD 2012 results include one-time royalty fee benefit of $21 million recorded in second quarter 2012 impacting gross margin.

(1)

See attached table for reconciliation of GAAP EPS to pro forma diluted EPS

 

 

 

 

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

 

“With strong fourth quarter revenue growth in outdoor, fitness, aviation and marine, we generated record annual sales in those segments,” said Cliff Pemble, president and chief executive officer (CEO) of Garmin Ltd.  “In the fourth quarter, we also achieved operating income growth in all five segments. This success serves as a solid starting point for 2014 and highlights the strength of our diversified product portfolio. We are excited about the future and the numerous new categories Garmin will serve.”

 

Outdoor:

 

The outdoor segment posted revenue growth of 7% in the quarter generating revenue of over $410 million for the full year. Gross and operating margins within the segment remained strong at 62% and 38%, respectively, in the quarter. We have recently updated our golf offerings with the fourth quarter launch of the Approach S4 and the recent announcement of the Approach G7 and G8. These devices offer advanced features that we believe further differentiate our products and will allow us to expand our market share lead in the golf category. These products, along with the VIRB™ series of action cameras and further penetration in the sport dog and pet market, are expected to drive growth in 2014.

 

Fitness:

 

The fitness segment posted revenue growth of 14% in the quarter driven by our full portfolio of products. New launches, including the Forerunner® 220 and 620, the Vector power meter and the Edge® Touring device, were strong contributors in the holiday quarter. Both gross and operating margins improved in the quarter as product mix shifted to new products. At CES (Consumer Electronics Show) in January, we announced a new product category with our vívofit™ and vívokí™. The vívofit is a fitness band for the consumer market which differentiates from competitors by providing personalized daily goals, connectivity to the newly overhauled Garmin Connect™, an LCD display and industry-leading battery life of one year. Vívokí is a lower priced alternative for the corporate wellness market which has been underserved to date. With these exciting products and our strong cycling and running line-up, we enter 2014 with an expectation for continued growth.

  

Aviation:

 

The aviation segment posted revenue growth of 25% in the quarter as both OEM and aftermarket contributed to revenue improvement. For the full year, the aviation segment delivered $339 million of revenue which exceeded our pre-recession record revenue of $323 million posted in 2008. The gross and operating margins in aviation were strong at 74% and 26%, respectively. During the quarter, we were pleased to support LearJet and Cessna in final certification of the G5000 integrated flight deck, as well as the G3000 with Cessna. We continue to invest in upcoming certifications with numerous OEM partners, while also developing new products and technologies which will allow for long-term market share gains across numerous aviation categories.

 

 

Marine:

 

The marine segment posted revenue growth of 13% in the quarter with strong demand for many of our products including autopilot solutions, chartplotters, and radars. Gross margins improved both sequentially and year-over-year to 53% in the quarter with product mix shifting toward new products with higher margin profiles. In the quarter, we announced the 2014 availability of DownVü and SideVü scanning sonar, which delivers high-resolution images of what’s below and beside the boat. This technology will be integrated into both existing Garmin products via a software update, as well as new offerings. We are now experiencing revenue and profitability improvement as a result of our significant investment in recent years and expect both metrics to continue to improve in 2014 as we continue to focus on innovation, while closely managing costs and efficiency.

 

Auto/Mobile:

 

The automotive/mobile segment posted a revenue decline of 12% as PND sales continued to decline as forecasted. Gross and operating margins in the quarter were 40% and 14%, respectively, representing an improvement over the prior year. We continue to innovate in the segment as evidenced by the new product introductions at CES where we launched the Dash Cam™ and nüvi® models with larger screens and integrated back-up cameras. We also introduced an interactive head-up display for the OEM market. These innovations allow us to capture niche opportunities and continue to expand our global market share in the profitable PND industry.

Additional Financial Information:

 

Total operating expenses in the quarter were $222 million, a 1% decrease from the prior year. Decreased spending in advertising was driven primarily by reduced media spending and lower cooperative advertising, which is directly related to sales. This was offset by growing research and development investment in each of our segments excluding marine, which declined slightly. We continue to invest in research and development to foster both near-term and long-term revenue growth opportunities.

 

The effective tax rate in fourth quarter 2013 was 20.0% compared to 16.5% in the prior year due to changes in income mix by tax jurisdiction, as well as reduced tax incentives in Taiwan.

 

In the fourth quarter, we generated $135 million of free cash flow which continues to fund our quarterly dividend of approximately $88 million and our share repurchase activity which totaled $31 million in the current quarter. We have $241 million remaining in the share repurchase program authorized through December 31, 2014. We ended the quarter with cash and marketable securities of over $2.8 billion.

 

2014 Guidance:

  

		2014 Guidance
Revenue			$2.6 - $2.7 B
Gross Margin			54 – 55%
Operating Income			$530 - $565 M
Operating Margin			~21%
Tax Rate			17%
EPS (Pro Forma)			$2.50 - $2.60

 

 

 

We expect 2014 revenue of $2.6 - $2.7 billion as growth in the outdoor, fitness, marine and aviation segments largely offset ongoing declines in the PND market. We anticipate gross margins will improve to 54-55% as segment mix continues to shift toward higher margin segments. Operating margins are forecasted to decline slightly to 21% due to ongoing research and development investment. This results in a currently forecasted 2014 EPS range of $2.50 - $2.60. (This EPS range assumes a full-year EUR/USD currency exchange rate of 1.35.)

 

Dividend Recommendation:

 

The Board intends to recommend to the shareholders for approval at the annual meeting to be held on June 6, 2014 a cash dividend in the amount of $1.92 per share (subject to possible adjustment based on the total amount of the dividend in Swiss Francs as approved at the annual meeting), payable in four equal installments on dates to be determined by the Board. The Board currently anticipates the scheduling of the dividend in four installments as follows:

 

Dividend Date		Record Date		$s per share
June 30, 2014		June 17, 2014		$0.48
September 30, 2014		September 15, 2014		$0.48
December 31, 2014		December 15, 2014		$0.48
March 31, 2015		March 16, 2015		$0.48

 

The Garmin Ltd. board of directors has established March 31, 2014 as the payment date for the next dividend installment of $0.45 per share with a record date of March 17, 2014, per the approval previously provided at the 2013 annual shareholders’ meeting. At the 2013 annual meeting Garmin shareholders, in accordance with Swiss corporate law, approved a cash dividend in the total amount of $1.80 per share (subject to possible adjustment based on the total amount of the dividend in Swiss Francs), payable in four equal installments on dates to be determined by the board in its discretion. The first, second and third payments were made on June 28, 2013, September 30, 2013, and December 31, 2013, respectively.

 

Chief Financial Officer Transition:

 

Kevin Rauckman, chief financial officer (CFO) and treasurer, has made a personal decision to change the cadence of his professional career and will leave Garmin within the next year. Rauckman has been with Garmin for 15 years and has served as CFO and treasurer since the company went public in 2000. The Company will initiate a search for a new CFO; however, the exact date of Rauckman’s departure will depend on the timing of finding a successor. “Kevin has made significant and lasting contributions to Garmin, playing a crucial role in the development of the company over the past 15 years. Kevin is highly respected both inside and outside of the organization and we will deeply miss him as he closes this chapter in his professional career,” said president and CEO, Cliff Pemble.

 

“My tenure at Garmin has been extremely rewarding, and I have enjoyed working with so many dedicated and talented colleagues,” Rauckman said. “I intend to support Garmin during this period of transition then look forward to pursuing other life goals thereafter.”

 

 

Webcast Information/Forward-Looking Statements:

 

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

 

When: Wednesday, February 19, 2014 at 10:30 a.m. Eastern

Where: http://www.garmin.com/aboutGarmin/invRelations/irCalendar.html

How: Simply log on to the web at the address above or call to listen in at 888-300-2343`

 

An archive of the live webcast will be available until March 28, 2014 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. Any statements regarding the Company’s estimated earnings and revenue for fiscal 2014, the Company’s expected segment revenue growth rate, margins, new products to be introduced in 2014 and the Company’s plans and objectives are forward-looking statements. The forward-looking events and circumstances discussed in this release may not occur and actual results could differ materially as a result of risk factors affecting Garmin, including, but not limited to, the risk factors that are described in the Annual Report on Form 10-K for the year ended December 29, 2012 filed by Garmin with the Securities and Exchange Commission (Commission file number 0-31983). A copy of Garmin’s 2012 Form 10-K can be downloaded from http://www.garmin.com/aboutGarmin/invRelations/finReports.html.

 

Garmin, Approach, Forerunner, Edge and nüvi are registered trademarks and D2, VIRB, vívofit, vívokí and Garmin Connect 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.

 

Investor Relations Contact:	Media Relations Contact:
Kerri Thurston	Ted Gartner
913/397-8200	913/397-8200
investor.relations@garmin.com	media.relations@garmin.com

 

 

 

Garmin Ltd. And Subsidiaries
Condensed Consolidated Statements of Income (Unaudited)
(In thousands, except per share information)
		13-Weeks Ended								52-Weeks Ended
		Dec 28,				Dec 29,				Dec 28,				Dec 29,
		2013				2012				2013				2012
Net sales		$	759,694			$	768,548			$	2,631,851			$	2,715,675
Cost  of goods sold			365,057				394,694				1,224,551				1,277,195
Gross profit			394,637				373,854				1,407,300				1,438,480
Advertising expense			34,922				46,806				112,905				138,757
Selling, general and administrative expense			94,671				94,026				355,440				369,790
Research and development expense			92,573				83,263				364,923				325,773
Total operating expense			222,166				224,095				833,268				834,320
Operating income			172,471				149,759				574,032				604,160
Other income (expense):
Interest income			9,759				8,830				35,271				35,108
Foreign currency gains (losses)			17,258				(3,898	)			35,538				(20,022	)
Other			5,051				219				8,717				5,282
Total other income (expense)			32,068				5,151				79,526				20,368
Income before income taxes			204,539				154,910				653,558				624,528
Income tax provision			40,954				25,616				41,146				82,125
Net income		$	163,585			$	129,294			$	612,412			$	542,403
Net income per share:
Basic		$	0.84			$	0.66			$	3.13			$	2.78
Diluted		$	0.83			$	0.66			$	3.12			$	2.76
Weighted average common
shares outstanding:
Basic			195,181				195,101				195,411				194,909
Diluted			196,338				196,275				196,339				196,213

 

 

 

 

Garmin Ltd. And Subsidiaries
Condensed Consolidated Balance Sheets
(In thousands, except share information)
			Dec 28,				Dec 29,
			2013				2012
Assets
Current assets:
Cash and cash equivalents		$	1,179,149			$	1,231,180
Marketable securities			149,862				153,083
Accounts receivable, net			564,586				603,673
Inventories, net			382,226				389,931
Deferred income taxes			69,823				68,785
Deferred costs			57,368				53,948
Loan receivable			137,379				–
Prepaid expenses and other current assets			55,243				35,520
Total current assets			2,595,636				2,536,120
Property and equipment, net			414,848				409,751
Marketable securities			1,502,106				1,488,312
Restricted cash			249				836
Noncurrent deferred income tax			88,324				93,920
Noncurrent deferred costs			41,157				42,359
Other intangible assets, net			219,494				232,597
Other assets			17,789				15,229
Total assets		$	4,879,603			$	4,819,124
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable		$	146,582			$	131,263
Salaries and benefits payable			59,794				55,969
Accrued warranty costs			26,767				37,301
Accrued sales program costs			50,903				57,080
Deferred revenue			256,908				252,375
Accrued royalty costs			64,538				71,745
Accrued advertising expense			19,448				25,192
Other accrued expenses			65,657				69,806
Deferred income taxes			989				332
Income taxes payable			38,043				32,031
Dividend payable			175,675				175,932
Total current liabilities			905,304				909,026
Deferred income taxes			1,758				2,467
Non-current income taxes			140,933				181,754
Non-current deferred revenue			171,012				193,047
Other liabilities			890				1,034
Stockholders' equity:
Shares, CHF 10 par value, 208,077,418 shares authorized and issued;
195,150,102 shares outstanding at December 28, 2013
and 195,591,854 shares outstanding at December 29, 2012			1,797,435				1,797,435
Additional paid-in capital			79,263				72,462
Treasury stock			(120,620	)			(81,280	)
Retained earnings			1,865,587				1,604,625
Accumulated other comprehensive income			38,041				138,554
Total stockholders' equity			3,659,706				3,531,796
Total liabilities and stockholders' equity		$	4,879,603			$	4,819,124

 

 

 

Garmin Ltd. And Subsidiaries

Condensed Consolidated Statements of Cash Flows (Unaudited)

(In thousands)

 

		52-Weeks Ended
		Dec 28,				Dec 29,
		2013				2012
Operating Activities:
Net income		$	612,412			$	542,403
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation			48,476				52,632
Amortization			30,328				37,835
Gain on sale of property and equipment			(724	)			(367	)
Provision for doubtful accounts			1,553				2,947
Deferred income taxes			7,931				(32,080	)
Unrealized foreign currency (gains)/losses			(40,120	)			40,042
Provision for obsolete and slow moving inventories			20,891				11,003
Stock compensation expense			22,592				29,274
Realized gains on marketable securities			(5,877	)			(2,980	)
Changes in operating assets and liabilities, net of acquisitions:
Accounts receivable			38,589				10,808
Inventories			(17,593	)			3,997
Other current and non-current assets			(22,013	)			39,717
Accounts payable			18,043				(38,929	)
Other current and non-current liabilities			(31,775	)			(33,235	)
Deferred revenue			(16,150	)			67,931
Deferred cost			(2,204	)			(15,441	)
Income taxes payable			(34,275	)			(30,812	)
Net cash provided by operating activities			630,084				684,745
Investing activities:
Purchases of property and equipment			(56,083	)			(38,445	)
Proceeds from sale of property and equipment			885				757
Purchase of intangible assets			(1,122	)			(6,783	)
Purchase of marketable securities			(909,151	)			(1,429,593	)
Redemption of marketable securities			833,491				985,598
Advances under loan receivable commitment			(137,369	)			–
Change in restricted cash			587				(65	)
Acquisitions, net of cash acquired			(5,680	)			(7,697	)
Net cash used in investing activities			(274,442	)			(496,228	)
Financing activities:
Dividends paid			(351,707	)			(253,386	)
Purchase of treasury stock under share repurchase plan			(58,422	)			–
Purchase of treasury stock related to equity awards			(24,063	)			(18,745	)
Proceeds from issuance of treasury stock related to equity awards			22,770				22,798
Tax benefit from issuance of equity awards			4,584				(516	)
Net cash used in financing activities			(406,838	)			(249,849	)
Effect of exchange rate changes on cash and cash equivalents			(835	)			5,352
Net decrease in cash and cash equivalents			(52,031	)			(55,980	)
Cash and cash equivalents at beginning of period			1,231,180				1,287,160
Cash and cash equivalents at end of period		$	1,179,149			$	1,231,180

 

 

 

Garmin Ltd. And Subsidiaries
Revenue, Gross Profit, and Operating Income by Segment (Unaudited)
			Reporting Segments
															Auto/
			Outdoor				Fitness				Marine				Mobile				Aviation				Total
13-Weeks Ended Dec 28, 2013
Net sales		$	126,617			$	118,623			$	44,583			$	382,504			$	87,367			$	759,694
Gross profit		$	78,196			$	73,557			$	23,542			$	154,734			$	64,608			$	394,637
Operating income		$	48,659			$	44,224			$	2,404			$	54,193			$	22,991			$	172,471
13-Weeks Ended Dec 29, 2012
Net sales		$	118,517			$	103,973			$	39,516			$	436,654			$	69,888			$	768,548
Gross profit		$	73,990			$	62,570			$	19,995			$	166,153			$	51,146			$	373,854
Operating income/(loss)		$	46,579			$	35,791			($	1,583	)		$	50,557			$	18,415			$	149,759
52-Weeks Ended Dec 28, 2013
Net sales		$	410,989			$	356,283			$	222,928			$	1,302,314			$	339,337			$	2,631,851
Gross profit		$	262,529			$	222,925			$	115,091			$	565,083				241,672			$	1,407,300
Operating income		$	159,197			$	120,250			$	18,493			$	188,517			$	87,575			$	574,032
52-Weeks Ended Dec 29, 2012
Net sales		$	401,747			$	321,788			$	208,136			$	1,492,440			$	291,564			$	2,715,675
Gross profit		$	260,564			$	204,615			$	125,201			$	642,913			$	205,187			$	1,438,480
Operating income		$	164,611			$	111,807			$	34,000			$	220,766			$	72,976			$	604,160

 

 

Garmin Ltd. And Subsidiaries
Revenue by Geography (Unaudited)
		13-Weeks Ended												52-Weeks Ended
		Dec 28,				Dec 29,				Yr over Yr				Dec 28,				Dec 29,				Yr over Yr
		2013				2012				Change				2013				2012				Change
Net sales		$	759,694			$	768,548				-1	%		$	2,631,851			$	2,715,675				-3	%
Americas			430,099				445,167				-3	%			1,432,895				1,513,457				-5	%
EMEA			263,063				252,664				4	%			955,900				945,336				1	%
APAC			66,532				70,717				-6	%			243,056				256,882				-5	%

 

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

Non-GAAP Financial Information

 

Pro Forma net income (earnings) per share

 

Management believes that net income per share before the impact of foreign currency translation gain or loss and income tax adjustments that materially impact the effective tax rate due to completion of tax audits and/or expiration of statutes is an important measure. The majority of the Company’s consolidated foreign currency gain or loss result from transactions involving the Euro, the British Pound Sterling and the Taiwan Dollar and from the exchange rate impact of the significant cash and marketable securities, receivables and payables held in U.S. dollars at the end of each reporting period by the Company’s various non-U.S. subsidiaries. Such gain or loss is required under GAAP because the functional currency of the subsidiaries differs from the currency in which various assets and liabilities are held. However, there is minimal cash impact from such foreign currency gain or loss. The Company’s income tax expense is periodically impacted by material reserve releases related to completion of audits and/or the expiration of statutes effecting prior periods. Thus, reported income tax expense is not reflective of the income tax expense that is incurred related to the current period earnings. The release of other uncertain tax position reserves, amounting to approximately $11 million in the 2013 periods and $13 million in the 2012 periods, have not been included as pro forma adjustments in the following presentation of pro forma net income as such amounts have been considered immaterial, tend to be more recurring in nature and are comparable between periods. Accordingly, earnings per share before the impact of foreign currency translation gain or loss and income tax adjustments that materially impact the effective tax rate due to completion of tax audits and/or expiration of statutes permits a consistent comparison of the Company’s operating performance between periods.

 

Garmin Ltd. And Subsidiaries
Net income per share (Pro Forma)
(in thousands, except per share information)
		13-Weeks Ended								52-weeks Ended
		Dec 28,				Dec 29,				Dec 28,				Dec 29,
		2013				2012				2013				2012
Net Income (GAAP)		$	163,585			$	129,294			$	612,412			$	542,403
Foreign currency (gain) / loss, net of tax effects		$	(13,802	)		$	3,254			$	(29,564	)		$	17,389
Income tax benefit due to completion of tax audits
and/or expiration of statutes			–				–			$	(68,716	)			–
Net income (Pro Forma)		$	149,783			$	132,548			$	514,132			$	559,792
Net income per share (GAAP):
Basic		$	0.84			$	0.66			$	3.13			$	2.78
Diluted		$	0.83			$	0.66			$	3.12			$	2.76
Net income per share (Pro Forma):
Basic		$	0.77			$	0.68			$	2.63			$	2.87
Diluted		$	0.76			$	0.68			$	2.62			$	2.85
Weighted average common shares outstanding:
Basic			195,181				195,101				195,411				194,909
Diluted			196,338				196,275				196,339				196,213

 

 

 

Free cash flow

 

Management believes that free cash flow is an important financial measure because it represents the amount of cash provided by operations that is available for investing and defines it as operating cash flow less capital expenditures for property and equipment.

  

Garmin Ltd. And Subsidiaries
Free Cash Flow
(in thousands)
		13-Weeks Ended								52-weeks Ended
		Dec 28,				Dec 29,				Dec 28,				Dec 29,
		2013				2012				2013				2012
Net cash provided by operating activities		$	149,813			$	174,711			$	630,084			$	684,745
Less: purchases of property and equipment		$	(14,758	)		$	(11,564	)		$	(56,083	)		$	(38,445	)
Free Cash Flow		$	135,055			$	163,147			$	574,001			$	646,300