Garmin Ltd. announced a record third quarter ended September 24, 2005. The company's consumer segment experienced 31% revenue growth during the third quarter of 2005. The aviation segment achieved 26% revenue growth for the quarter, which led to overall revenue growth of 30% for the quarter.
“We are pleased with the results during the third quarter. Our StreetPilot products have been well received by the market. 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,” said Dr. Min Kao, CEO of Garmin Ltd. “We look forward to continued success from the popular C-series and I-series during the holiday season, and with a full range of new products at every price point, we hope to continue to penetrate further the rapidly expanding automotive market through the remainder of the year and beyond,” said Dr. Kao. “Aviation sales were also strong during the third quarter due to growth in G1000 cockpit shipments and other panel-mount and portable products. We shipped a total of over 708,000 units in the third quarter of 2005, demonstrating the growing strength of the Garmin brand.”
Revenue for the quarter increased 30% to $251.3 million from $193.6 million in the year-ago quarter. Net income increased to $102.5 million, or 94 cents diluted earnings per share, compared to $67.1 million or 62 cents diluted earnings per share in the year-ago quarter. Third quarter net income included a $36.4 million foreign currency gain as a result of a stronger U.S. dollar compared to the Taiwan dollar. Excluding the effects of foreign currency, diluted EPS for the quarter was 67 cents compared to 58 cents in the year-ago quarter.
Consumer revenue for the third quarter totaled $190.7 million – a 31% growth compared to the third quarter of 2004. Aviation revenue totaled $60.6 million – a 26% increase compared to the year-ago quarter. Total units sold for the quarter increased to 708,000 from 540,000 – representing an increase of 31%.
Revenue increased across all geographic regions during the third quarter of fiscal 2005 when compared to the year-ago quarter:
- North America revenue was $163.0 million compared to $134.4 million, up 21%. - Europe revenue was $75.6 million compared to $49.0 million, up 54%. - Asia revenue was $12.7 million compared to $10.2 million, up 25%.
Revenue year to date increased 31% to $708.5 million from $541.6 million in the year-ago period. Net income increased to $224.1 million, or $2.05 diluted earnings per share, compared to $158.1 million or $1.45 diluted earnings per share in the year-ago period. Year to date net income included a $23.8 million foreign currency gain as a result of a stronger U.S. dollar compared to the Taiwan dollar. Excluding the effects of foreign currency, diluted EPS for the period was $1.88 compared to $1.44 in the year-ago period.
Consumer revenue year to date totaled $538.4 million – a 29% growth compared to the same period in 2004. Aviation revenue totaled $170.1 million – a 37% increase compared to the year-ago period. Total units sold for the period increased to 1,999,000 from 1,587,000 – representing an increase of 26%.
Revenue increased across all geographic regions during the nine months ending September 24, 2005 when compared to the year-ago period:
- North America revenue was $449.7 million compared to $367.5 million, up 22%. - Europe revenue was $223.3 million compared to $149.1 million, up 50%. - Asia revenue was $35.5 million compared to $25.0 million, up 42%.
“We are extremely pleased with our financial results year to date, 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 52.6% year to date. As expected, inventory build occurred in preparation for seasonal holiday demand, resulting in an increase in dollars of inventory, while days of inventory remained essentially flat. We also generated $81.2 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 $700.9 million at the end of the third quarter 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.
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.
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 has now introduced forty-six new products to the market through the end of September and expects to introduce a total of approximately sixty new products during fiscal year 2005.
Given strong results in the nine months ending September 24, 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 $2.53 to $2.58 on estimated revenues of $1.0 billion to $1.02 billion. Management will continue to provide annual guidance updates and progress reports on a quarterly basis.
As previously announced, the Garmin Board of Directors approved a $0.50/share annual cash dividend payable to shareholders of record on December 1, 2005. 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, plans for acquisition or expansion and tax rates applicable to dividends.
Garmin Ltd. And Subsidiaries Condensed Consolidated Statements of Income (In thousands, except per share information) (Unaudited) 13-Weeks Ended 39-Weeks Ended Sept. 24, Sept. 25, Sept. 24, Sept 25, 2005 2004 2005 2004 Net sales $251,329 $193,616 $708,477 $541,601 Cost of goods sold 121,877 81,945 335,846 251,160 Gross profit 129,452 111,671 372,631 290,441 Selling, general and administrative expenses 24,180 19,859 77,790 55,902 Research and development expense 20,116 14,695 54,862 43,625 44,296 34,554 132,652 99,527 Operating income 85,156 77,117 239,979 190,914 Other income(expense)(A) 40,971 6,793 37,011 6,708 Income before income taxes 126,127 83,910 276,990 197,622 Income tax provision 23,637 16,782 52,905 39,523 Net income $102,490 $67,128 $224,085 $158,099 Net income per share: Basic $0.95 $0.62 $2.07 $1.46 Diluted $0.94 $0.62 $2.05 $1.45 Weighted average common shares outstanding: Basic 107,845 108,119 108,214 108,159 Diluted 108,930 108,879 109,159 108,989 Dividends declared per share $0.50 $0.50 $0.50 $0.50 (A) Includes $36.4 million of foreign currency gains in Q3 2005 and $4.4 million of foreign currency gains in Q3 2004; includes $23.8 million of foreign currency gains YTD 2005 and $0.5 million of foreign currency gains YTD 2004.