Garmin Ltd. announced a record second quarter ended June 25, 2005. The company's consumer segment experienced 42% revenue growth during the second quarter of 2005. The aviation segment achieved 31% revenue growth for the quarter, which led to overall revenue growth of 39% for the quarter.
“We are pleased with the results during the second quarter. The StreetPilot C-series products have been well received by the market. We experienced significant growth in our automotive navigation sales globally, which is proof that our automotive growth strategy is working,” said Dr. Min Kao, CEO of Garmin Ltd. “Consumer awareness and interest in the utility of GPS navigation continues to grow, and we look forward to continuing success from the popular C-series and the recently introduced new product lines. With a full-range of new products at every price point and state-of-the-art technologies such as real-time traffic and street-name speaking capability, we are positioned to penetrate further the rapidly expanding automotive market through the remainder of the year,” continued Dr. Kao. “We shipped over 707,000 units in the second quarter of 2005, demonstrating the growing strength of the Garmin brand.”
Revenue for the quarter increased 39% to $264.5 million from $189.7 million in the year-ago quarter. Net income increased to $74.2 million, or 68 cents diluted earnings per share, compared to $56.3 million or 52 cents diluted earnings per share in the year-ago quarter. Second quarter net income included a $1.5 million foreign currency loss as a result of a weaker U.S. dollar compared to the Taiwan dollar. Excluding the effects of foreign currency, diluted EPS for the quarter was 69 cents compared to 49 cents in the year-ago quarter.
Consumer revenue for the second quarter totaled $210.3 million — a 42% growth compared to the second quarter of 2004. Aviation revenue totaled $54.2 million — a 31% increase compared to the year-ago quarter. Total units sold for the quarter increased to 707,000 from 569,000 — representing an increase of 24%.
Revenue increased across all geographic regions during the second quarter of fiscal 2005 when compared to the year-ago quarter. North America revenue was $154.0 million compared to $125.7 million, up 23%. Europe revenue was $97.4 million compared to $56.3 million, up 73%. Asia revenue was $13.1 million compared to $7.7 million, up 70%.
Revenue year to date increased 31% to $457.1 million from $348.0 million in the year-ago period. Net income increased to $121.6 million, or $1.11 diluted earnings per share, compared to $91.0 million or 83 cents diluted earnings per share in the year-ago period. Year to date net income included a $12.6 million foreign currency loss as a result of a weaker U.S. dollar compared to the Taiwan dollar. Excluding the effects of foreign currency, diluted EPS for the period was $1.21 compared to 86 cents in the year- ago period.
Consumer revenue year to date totaled $347.7 million — a 28% growth compared to the same period in 2004. Aviation revenue totaled $109.4 million — a 44% increase compared to the year-ago period. Total units sold for the period increased to 1,290,000 from 1,048,000 — representing an increase of 23%.
Revenue increased across all geographic regions during the first half of fiscal 2005 when compared to the year-ago period. North America revenue was $286.7 million compared to $233.0 million, up 23%. Europe revenue was $147.7 million compared to $100.2 million, up 47%. Asia revenue was $22.8 million compared to $14.8 million, up 54%.
“We are extremely pleased with our financial results for the first half of 2005, and look forward to continued growth throughout the remainder of the year,” said Kevin Rauckman, chief financial officer of Garmin Ltd. “Gross margins were in line with our expectations at 53% year to date. As expected, inventory moved through the channel well during the quarter, resulting in a reduction in both dollars and days of inventory. We also generated $42.6 million of free cash flow (defined as operating cash flow less capital expenditures for property, plant, and equipment) for the quarter, resulting in a cash and marketable securities balance of $634.7 million at the end of the first half of 2005.” The company believes that free cash flow is an important measure because management uses it as a measure of the company's quality of earnings and its ability to reinvest in the business.
Fiscal 2005 Outlook / Updated Guidance
Garmin remains committed to expansion of its growing range of products and its ability to serve distributors and customers around the world. The Company continues to expect to introduce a total of approximately 60 new products during fiscal year 2005.
Given strong results in the first half of 2005, the Company is updating previous fiscal year guidance. Diluted EPS for fiscal year 2005, excluding effects of foreign currency, is estimated to be in the range of $2.43 to $2.48 on estimated revenues of $950 million to $975 million. Management will continue to provide annual guidance updates and progress reports on a quarterly basis.
Dividend Declaration
“We are also pleased to report that the Garmin Board of Directors has approved a 50 cents per share annual cash dividend payable to shareholders of record on December 1, 2005,” announced Dr. Kao. “This dividend will be paid on December 15, 2005.” The payment of future dividends will be at the discretion of the Board of Directors after taking into account various factors including operating results, anticipated needs and plans for acquisition or expansion.
Garmin Ltd. And Subsidiaries
Condensed Consolidated Statements of Income
(In thousands, except per share information)
(Unaudited)
13-Weeks Ended 26-Weeks Ended
June 25, June 26, June 25, June 26,
2005 2004 2005 2004
Net sales $264,497 $189,655 $457,148 $347,984
Cost of goods sold 124,516 91,336 213,969 169,214
Gross profit 139,981 98,319 243,179 178,770
Selling, general and
administrative expenses 33,093 19,401 53,610 36,043
Research and development
expense 17,818 14,710 34,747 28,929
50,911 34,111 88,357 64,972
Operating income 89,070 64,208 154,822 113,798
Other income(expense) (A) 2,982 5,637 (3,960) (85)
Income before income taxes 92,052 69,845 150,862 113,713
Income tax provision 17,858 13,530 29,267 22,743
Net income $74,194 $56,315 $121,595 $90,970
Net income per share:
Basic $0.68 $0.52 $1.12 $0.84
Diluted $0.68 $0.52 $1.11 $0.83
