Garmin Ltd. first quarter total revenue was $322.3 million, up 67% from $192.7 million in first quarter 2005. Earnings per share increased 86% to 80 cents from 43 cents in 2005; excluding foreign exchange, EPS increased 65% to 86 cents from 52 cents in 2005.
Automotive/Mobile segment revenue increased 252% to $150.7 million in first quarter 2006. Outdoor/Fitness segment revenue increased 21% to $63.7 million in the first quarter 2006. Marine segment revenue increased 21% to $50.7 million in first quarter 2006 while Aviation segment revenue increased 4% to $57.2 million.
All geographic areas experienced significant growth – North America revenue was $202.7 million compared to $132.6 million, up 53%; Europe revenue was $101.9 million compared to $50.3 million, up 102%; Asia revenue was $17.7 million compared to $9.7 million, up 83%. Mix of revenue continues to shift, with revenue from Europe and revenue from automotive/mobile continuing to become a larger piece of the total company.
Business highlights include Strong sales in automotive/mobile, outdoor/fitness, and marine segments, putting them on track to meet or exceed full year guidance. 921,000 units were sold in the first quarter of 2006, up 58% from the same quarter in 2005. The company Delivered 34 new products in the quarter, setting the stage for additional growth as the year progresses and completed the purchase of its second Taiwan manufacturing facility and expects to begin production in May 2006.
Garmin expanded advertising campaign in the U.S. strengthened our leadership position in the face of growing competition and continued advertising campaign across Europe, which resulted in greater brand awareness and strong growth, particularly for portable navigation devices (PND's).
Garmin Introduced many new marine products that include new offshore and inland cartography and new digital fishfinders.
Garmin Enhanced its position as the leader in GPS-enabled fitness devices as the Edge(TM) bicycle product and new Forerunner® 205/305 models became more widely available in our distribution channels and were well-received. In addition Garmin Completed certification of Columbia model 400 aircraft, with aircraft shipments to begin in second quarter 2006.
Executive overview from Dr. Min Kao, Chairman and Chief Executive Officer:
“The first quarter was another exciting quarter for Garmin. We are delighted to have delivered a record number (34) of innovative new products. These products, which include many automotive/mobile, outdoor/fitness, marine, and aviation products, have been well received by the market. We also look forward to the sell-through of our new automotive/mobile products scheduled for retail delivery in the second quarter of 2006.
“We experienced triple digit growth in our automotive/mobile product line, which demonstrates that our products continue to be well-positioned to take advantage of the growing demand for portable navigation devices both in the U.S. and in Europe. Solid growth in both our outdoor/fitness and marine segments has positioned us to meet or exceed our 2006 guidance for these segments.
“Through continuous innovation, we will provide compelling, competitive features like Bluetooth hands-free and creative products like the strong- selling c-series and very popular nuvi(TM), which combines navigation with industry leading features like a language translator, travel guide, MP3 player, and more. We have the focus and commitment to continue our leadership position in the rapidly expanding U.S. automotive market through 2006 and continue to grow our European market share as well.
“To meet our growth goals, we continue to expand our worldwide marketing and sales efforts. We have also increased our manufacturing capacity to meet future demand and compete effectively in the global marketplace, with our new manufacturing facility anticipated to begin production in May 2006.”
Financial overview from Kevin Rauckman, Chief Financial Officer:
“We are very pleased with our financial results for the first quarter of 2006,” said Kevin Rauckman, chief financial officer of Garmin Ltd. “Our revenue and earnings per share during 2005 grew 67% and 86% respectively, exceeding our expectations. Outdoor/fitness and marine segments performed well, benefiting from new product introductions, and the automotive/mobile segment revenues increased over two and a half times compared to the prior year, when sales were somewhat slow due to the release of c-series products in mid-March 2005. Aviation revenues were up 4% in comparison to last year, when aviation revenues grew strongly driven by strong sales of TAWs enabled products required to meet the FAA equipage mandate. In addition, certification of the Columbia aircraft came later in the first quarter of 2006 than anticipated and resulted in initial shipments of the aircraft by Columbia in the second quarter of this year instead of in the first quarter.
“Gross margin and operating margin improved in our outdoor/fitness and marine segments and declined in our automotive/mobile and aviation segments when compared with the year-ago quarter. Total operating margin of 31.1% for the first quarter of 2006 remained strong at 30 basis points above Q4 2005 levels. These results were in line with our expectations.
“We also generated $41.3 million of free cash flow in the first quarter of 2006, resulting in cash and marketable securities balance of $764.7 million at the end of the quarter.”
Garmin remains optimistic about the future success of its business as new products are coming to the market during the second quarter as they enter a strong PND selling season. General business expectations for 2006, including new segments, are updated as follows:
- We anticipate overall revenue to exceed $1.4 billion in 2006, and
earnings per share to exceed $3.40. We assume our 2006 effective tax
rate will be approximately 16% and estimate an earnings per share
impact of $0.07 in 2006 due to the effects of implementing FAS123®.
The impact of FAS123® has been included in our guidance.
- We anticipate revenue growth rates within our aviation, outdoor
fitness and marine segments to be 20 percent, 15 percent, and
10 percent, respectively, in 2006. We expect short-term margins
within these segments to be relatively stable despite the possibility
of quarter-to-quarter variability due to product mix and the timing of
new product introductions.
- We anticipate automotive/mobile revenues to grow above 75 percent in
2006, with declining operating margins due to product mix and a
continued transition toward mass market levels.
- We continue to look forward to introducing a total of 60 new products
in 2006, with new product announcements to fall more heavily in the
first half of 2006 in preparation for fall deliveries and the holiday
- With the expansion of Taiwan manufacturing to meet growing demand for
our products; we will be able to double our production capacity within
the automotive/mobile, outdoor/fitness, and marine segments.
- Increased focus on the development of European opportunities; growth
will be supported with a planned expansion of our European
headquarters and distribution center and continued emphasis on
advertising to enhance awareness of the Garmin brand.
The Garmin Board of Directors has approved a two-for-one split of Garmin's Common Shares, subject to shareholder approval. If approved by the shareholders, the stock split would be effected by the subdivision of each outstanding Common Share of a par value of $0.01 each into two Common Shares of a par value of $0.005 each and a proportional amendment of the authorized share capital. A special meeting of shareholders will be convened for the purpose of considering a resolution to approve the stock split.
The Garmin Board of Directors has also approved a post-stock split annual cash dividend of $0.50 per share (equivalent to a pre-stock split cash dividend of $1.00 per share) payable to shareholders of record on December 1, 2006. This dividend will be paid on December 15, 2006.
Garmin Ltd. And Subsidiaries Condensed Consolidated Statements of Income (Unaudited) (In thousands, except per share information) 13-Weeks Ended April 1, March 26, 2006 2005 Net sales $322,311 $192,651 Cost of goods sold 159,521 89,453 Gross profit 162,790 103,198 Selling, general and administrative expenses 37,764 20,518 Research and development expense 24,913 16,928 62,677 37,446 Operating income 100,113 65,752 Other income (expense): Interest income 7,305 3,901 Interest expense (8) (2) Foreign currency (7,446) (11,138) Other 3,605 297 3,456 (6,942) Income before income taxes 103,569 58,810 Income tax provision 16,053 11,409 Net income $87,516 $47,401 Net income per share: Basic $0.81 $0.44 Diluted $0.80 $0.43 Weighted average common shares outstanding: Basic 108,185 108,408 Diluted 109,161 109,421