Garmin Ltd. fourth quarter 2005 revenue was $319.3 million, up 45% from $220.9 million in fourth quarter 2004. The consumer segment revenue increased 50% to $260.2 million in fourth quarter 2005. All geographic areas experienced solid growth with North America revenue at $211.4 million compared to $164.0 million, up 29%. Europe revenue was $92.9 million compared to $47.8 million, up
94%. Asia revenue was $15.0 million compared to $9.1 million, up 65%.
Earnings per share increased 82% to $0.80 from $0.44 in 2004; excluding foreign exchange, EPS increased 38% to $0.87 from $0.63 in 2004.
Garmin reported a strong holiday season, requiring three-shift, full-capacity production at its Taiwan manufacturing facility to meet demand for product. 1.03 million units sold in the fourth quarter of 2005, up 43% from the same quarter in 2004. Seasonal promotion campaigns, multi-media advertising, and cooperative advertising activities stimulated sales. Intense multi-media marketing and advertising campaign in Europe resulted in greater brand awareness.
For fiscal year 2005, Garmin reported total revenue of $1.03 billion, up 35% from $762.5 million in fiscal 2004.
The Consumer segment revenue increased 35% to $798.6 million in 2005. Aviation segment revenue increased 34% to $229.2 million in 2005. All geographic areas experienced solid growth with North America revenue hitting $661.1 million compared to $531.5 million, up 24%. Europe revenue was $316.2 million compared to $196.9 million, up 61%. Asia revenue was $50.5 million compared to $34.1 million, up 48%.
Earnings per share increased 51% to $2.85 from $1.89 in 2004; excluding foreign exchange, EPS increased 32% to $2.74 from $2.07 in 2004
Garmin introduced 55 new products in 2005, expanding the portable automotive product line and refreshing a number of product categories. 3.03 million units were sold in 2005, up 31% from 2004, raising the Company's total to over fourteen million units shipped to date, an important benchmark of the strength of the Garmin brand.
Garmin expanded its advertising campaign in the U.S. to strengthen its position in the face of growing competition and launched an aggressive marketing and advertising throughout Europe, which resulted in greater awareness
Executive overview from Dr. Min Kao, Chairman and Chief Executive Officer:
“2005 was another remarkable year for Garmin. We are delighted to have introduced a record number (55) of innovative new products. These products, which include many automotive, recreational, fitness, and marine products, have been well received by the market. We also look forward to our customers' reactions to the many recently announced products scheduled for retail delivery in early 2006.
We experienced triple digit growth in our automotive product line, which demonstrates that our products are well-positioned to take advantage of the growing demand for portable navigation devices both in the U.S. and in Europe. In addition, 2005 aviation sales were also strong due to increased OEM shipments of G1000 integrated cockpit systems and continued interest in other panel-mount and portable products.
We look forward to continued success from the popular StreetPilot c-series and i-series automotive products during 2006. Through continuous innovation, we will provide compelling, competitive and creative products like the highly acclaimed nuvi, which combines navigation with 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 automotive market through 2006 and beyond.”
To satisfy these growth goals, Garmin has significantly expanded worldwide marketing and sales efforts. The company has also increased our manufacturing capacity to meet future demand and compete effectively in the global marketplace.”
Financial overview from Kevin Rauckman, Chief Financial Officer:
“We are very pleased with our financial results for the fourth quarter and fiscal year 2005,” said Kevin Rauckman, chief financial officer of Garmin Ltd. “Our revenue and earnings per share during 2005 grew 35% and 32% respectively, exceeding our expectations. Garmin has recently completed five years as a public company and has consistently generated top line and bottom line growth with a 5-year compounded annual growth rate of revenue and earnings per share of 24% and 23%, respectively.
“We also generated $219.9 million of free cash flow in 2005, resulting in cash and marketable securities balance of $711.1 million at the end of the fiscal year. Our return on invested capital (ROIC) exceeded 65% during fiscal 2005.”
Garmin has made a policy change with regard to segment reporting and providing future earnings guidance. In SEC filings beginning with the first quarter of fiscal 2006, the company will provide segment data for four business segments – aviation, marine, outdoor/fitness, and automotive/mobile segments.
Garmin management believe that additional segmentation of the company's results is in line with our recent focused approach to each of the markets that is now served. Increasingly, Garmin is optimizing engineering, marketing, and production teams to take advantage of these rapidly expanding opportunities for growth. Garmin also believes that the investment community wishes to have increased visibility into the business with more information about each of these four segments.
We remain optimistic about the future success of our business and our ability to serve customers and distributors around the world. General perspective on the business expectations for 2006, including our new segments are:
- We anticipate overall revenue to exceed $1.3 billion in 2006, and
earnings per share to exceed $3.19. We assume our 2006 effective tax
rate will be approximately 16% and have included an earnings per share
impact of $0.07 in our estimate due to the effects of implementing
FAS123®. - We anticipate aviation revenues to grow at least 20 percent in 2006.
Growth is expected to occur within both G1000 OEM and aviation
aftermarket shipments. - We anticipate marine revenues to grow at least 10 percent in 2006.
Growth will come from exciting dual-beam and digital fishfinder
products and next generation offshore and inland marine cartography
that will be introduced across our new marine chartplotter lines. - We anticipate outdoor/fitness segment revenues to grow at least
15 percent in 2006 led by Fitness products like the new Forerunner with
watch-like styling, and the Edge designed specifically for the
cycling enthusiasts. In addition, new outdoor products with high
sensitivity GPS receivers and pre-programmed mapping data cards will
drive additional growth in this segment during 2006. - We anticipate automotive/mobile revenues to grow above 60 percent in
2006, with declining operating margins due to product mix and a
continued transition toward mass market levels. - We look forward to introducing between 50 and 60 new products in 2006;
ten new products introduced so far in 2006, many during January's very
successful Consumer Electronics Show in Las Vegas. - Expansion of Taiwan manufacturing to meet growing demand for our
products with the purchase of a new manufacturing facility in January
2006, significantly expanding our future manufacturing capacity. - 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.
Management believes that net income 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.
The following table contains a reconciliation of GAAP net income per share
to net income per share excluding the impact of foreign currency translation
gain or loss.
Garmin Ltd. And Subsidiaries
Net income per share, excluding FX
(in thousands, except per share information)
14-Weeks Ended 13-Weeks Ended 53-Weeks Ended 52-Weeks Ended
December 31, December 25, December 31, December 25,
2005 2004 2005 2004
Net Income
(GAAP) $87,135 $47,602 $311,219 $205,700
Foreign currency
(gain) / loss,
net of tax
effects $7,761 $20,914 ($12,746) $20,004
Net income,
excluding FX $94,896 $68,516 $298,473 $225,704
Net income per
share (GAAP):
Basic $0.81 $0.44 $2.88 $1.90
Diluted $0.80 $0.44 $2.85 $1.89
Net income per share,
excluding FX:
Basic $0.88 $0.63 $2.76 $2.09
Diluted $0.87 $0.63 $2.74 $2.07
Weighted average
common shares
outstanding:
Basic 107,947 108,162 108,147 108,161
Diluted 109,152 109,233 109,118 109,030
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.
The following table contains a reconciliation of GAAP net cash provided by operating activities to free cash flow.
Garmin Ltd. And Subsidiaries
Free Cash Flow
(in thousands)
53-Weeks Ended 52-Weeks Ended
December 31, December 25,
2005 2004
Net cash provided by operating activities $247,005 $208,936
Less: purchases of property and equipment ($27,130) ($78,145)
Free Cash Flow $219,875 $130,791
Garmin Ltd. And Subsidiaries
Return on Invested Capital (ROIC)
(in thousands)
53-Weeks Ended 52-Weeks Ended
December 31, December 25,
2005 2004
Net Operating Profit After Taxes (NOPAT):
Operating Income (EBIT) $338,170 $270,668
Less: Taxes on Operating Income ($61,381) ($49,511)
Net Operating Profit after Taxes (NOPAT) $276,789 $221,157
Invested Capital (IC):
Total Assets $1,364,341 $1,117,391
Less: Cash & Marketable Securities ($711,075) ($572,124)
Less: Deferred Income Taxes ($31,721) ($38,527)
Less: Non-Interest Bearing Current
Liabilities ($195,485) ($176,267)
Operating Invested Capital (IC) $426,060 $330,473
Return on Invested Capital 65% 67%
Garmin Ltd. And Subsidiaries
Condensed Consolidated Statements of Income
(In thousands, except per share information)
14-Weeks 13-Weeks 53-Weeks 52-Weeks
Ended Ended Ended Ended
December 31 December 25 December 31 December 25
2005 2004 2005 2004
Net sales $319,296 $220,948 $1,027,773 $762,549
Cost of goods sold 156,857 100,151 492,703 351,310
Gross profit 162,439 120,797 535,070 411,239
Selling, general and
administrative
expense 44,230 23,089 122,021 78,991
Research and
development expense 20,017 17,956 74,879 61,580
Operating expense 64,247 41,045 196,900 140,571
Operating income 98,192 79,752 338,170 270,668
Other income
(expense)(A) (2,581) (22,164) 34,430 (15,457)
Income before income
taxes 95,611 57,588 372,600 255,211
Income tax provision 8,476 9,986 61,381 49,511
Net income $87,135 $47,602 $311,219 $205,700
Net income per share:
Basic $0.81 $0.44 $2.88 $1.90
Diluted $0.80 $0.44 $2.85 $1.89
Weighted average common
shares outstanding:
Basic 107,947 108,162 108,147 108,161
Diluted 109,152 109,233 109,118 109,030
