Garmin announced a record fourth quarter and fiscal year ended December 25, 2004. Revenue and net income both exceeded the guidance previously given by the company. The company’s consumer segment experienced 27% revenue growth during the fourth quarter and 31% during 2004. The aviation segment also contributed revenue growth of 42 percent for the quarter and for the full year, which led to overall revenue growth of 33 percent for the year.
“2004 was another good year for Garmin. We introduced a record number (50) of new products in 2004. These products, which
include many recreational and automotive units with beautiful TFT color displays, and a marine network system, which integrated
our chart plotters, sounders, XM satellite weather receivers and radar, have all been very well received by the market,” said
Dr. Min Kao, CEO of Garmin Ltd. “Consumer awareness and interest in the utility of GPS navigation continue to grow, and we
experienced strong demand across all product lines.”
More than 2.3 million Garmin products were shipped in 2004, raising the company’s total to over 10 million shipped to date,
which is an important benchmark of the strength of the Garmin brand. The company also completed certification of its G1000
integrated cockpit for a total of six aircraft models (the Cessna 182 and 206, Diamond DA40 and DA42, and Mooney Ovation2
and Bravo) and started shipping this acclaimed integrated avionics system during the year.
“I am pleased to report that, with much hard work and additional investment in people and equipment, we have overcome most
of the component shortage and product delivery challenges that were experienced during 2004. We were able to meet most of
the product demands in the fourth quarter and have additionally replenished our inventory to meet the anticipated demands
for the coming marine and spring seasons,” added Dr. Kao.
Fourth Quarter 2004
Revenue for the quarter increased 30% to $220.9 million from $170.1 million in the year-ago quarter, above guidance
given of $200-$204 million. Net income decreased to $47.6 million, or $0.44 diluted earnings per share, compared to $54.6
million or $0.50 diluted earnings per share in the year-ago quarter. Fourth quarter net income included a $25.3 million foreign
currency loss as a result of a weaker U.S. dollar compared to the New Taiwan dollar. Excluding the effects of foreign currency,
diluted EPS for the quarter was $0.63 compared to $0.47 in the year-ago quarter, exceeding quarterly guidance of $0.50 – $0.54.
Consumer revenue for the fourth quarter totaled $173.7 million — a 27 percent growth compared to the fourth quarter of 2003.
Aviation revenue totaled $47.2 million — a 42 percent increase compared to the year-ago quarter. Total units sold for the
quarter increased to 718,000 from 591,000 — representing an increase of 21 percent.
Revenue increased across North American and European regions during the fourth quarter of fiscal 2003 when compared to the
year-ago quarter:
-- North America revenue was $164.0 million compared to $130.0 million,
up 26 percent.
-- Europe revenue was $47.8 million compared to $34.0 million, up
41 percent.
-- Asia revenue was $9.1 million compared to $6.1 million, up 49 percent.
“We are pleased with our financial results for the fourth quarter and fiscal year 2004,” said Kevin Rauckman, chief financial
officer of Garmin Ltd. “Our consumer business has now logged its thirteenth consecutive quarter of year-over-year revenue
growth in excess of 20 percent. Gross margins came in above our expectations at 54.7 percent for the fourth quarter. We
also generated $37.2 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 $573.6 million at the end of fiscal
2004.”
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 2004 Results
Revenue for the fiscal year ending December 25, 2004 was $762.5 million — up 33 percent from the $573 million generated in
the year-ago period, above guidance given of $742 – $746 million. Net income increased to $205.7 million, or $1.89 diluted
earnings per share, compared to $178.6 million or $1.64 diluted earnings per share in the year-ago period. On a year-to-date
basis, foreign currency fluctuations in 2004 resulted in a $24.8 million currency loss. Excluding the effects of foreign
currency, diluted EPS for 2004 was $2.07, which exceeded annual guidance of $1.95-$1.98.
Consumer revenue for the fiscal year totaled $591.0 million — a 31 percent growth compared to fiscal 2003. Aviation revenue
totaled $171.5 million — a 42 percent increase compared to fiscal 2003. Total units sold for the period increased to 2,306,000
from 2,066,000 — representing an increase of 12 percent.
Revenue increased across all geographic regions during fiscal 2004 when compared to 2003:
-- North America revenue was $531.5 million compared to $414.6 million, up
28 percent.
-- Europe revenue was $196.9 million compared to $133.2 million, up
48 percent.
-- Asia revenue was $34.1 million compared to $25.2 million, up
35 percent.
Foreign Currency Translation-Non-GAAP Measures
Management believes that earnings per share before the impact of foreign currency translation gain or loss is an important
measure. The majority of the company’s consolidated foreign currency translation gain or loss results from translation into
New Taiwan dollars at the end of each reporting period of the significant cash and marketable securities, receivables and
payables held in U.S. dollars by the company’s Taiwan subsidiary. Such translation is required under GAAP because the functional
currency of this subsidiary is New Taiwan dollars. However, there is minimal cash impact from such foreign currency translation
and management expects that the Taiwan subsidiary will continue to hold the majority of its cash, cash equivalents and marketable
securities in U.S. dollars. Accordingly, earnings per share before the impact of foreign currency translation gain or loss
allows an assessment of the company’s operating performance before the non-cash impact of the position of the U.S. dollar
versus the New Taiwan dollar, which permits a consistent comparison of results between periods.
2005 Outlook
Garmin looks forward to the following growth opportunities in 2005:
-- The introduction of approximately 60 new products during 2005 across
our consumer and aviation segments.
-- Our recently announced partnership with Chrysler's MOPAR division to
provide the Navus premium auto navigation product to a number of
Chrysler, Dodge, and Jeep models.
-- Continued solid growth in the aviation segment, spurred by a full year
of G1000 avionics sales into popular general aviation aircraft models
from Cessna, Diamond, and Mooney as well as additional aircraft models
scheduled for certification during 2005.
Diluted EPS for fiscal year 2005, excluding effects of foreign currency, is estimated to be in the range of $2.30 to $2.38
on estimated revenues of $890 million to $915 million. Due to the desire to focus more on the long- term results of the
company, management has elected to discontinue the practice of providing specific quarterly revenue, margin, and EPS guidance.
Management will continue to provide annual guidance updates and progress reports on a quarterly basis.
Garmin Ltd. And Subsidiaries
Condensed Consolidated Statements of Income
(In thousands, except per share information)
13-Weeks Ended
Dec. 25, Dec. 27,
2004 2003
Net sales $220,948 $170,144
Cost of goods sold 100,151 74,624
Gross profit 120,797 95,520
Selling, general and
administrative expenses 23,089 19,284
Research and development expense 17,956 13,571
41,045 32,855
Operating income 79,752 62,665
Other income / (expense) (A) (22,164) 6,430
Income before income taxes 57,588 69,095
Income tax provision 9,986 14,510
Net income $47,602 $54,585
Net income per share:
Basic $0.44 $0.51
Diluted $0.44 $0.50
