Garmin announced a record first quarter ended March 26, 2005. The company's consumer segment experienced 11% revenue growth during the first quarter of 2005. The aviation segment also achieved 59% revenue growth for the quarter, which led to overall revenue growth of 22%.
“The first quarter of 2005 was another good quarter for Garmin. We introduced sixteen new products during the quarter, adding to all categories of our product portfolio. These new products, which include aviation, recreational, fitness, marine and automotive units 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 solid demand across nearly all product lines,” continued Dr. Kao. Over 584,000 units were shipped in the first quarter of 2005, demonstrating the growing strength of the Garmin brand. The company also began shipping the acclaimed G1000 integrated avionics system for the Cessna 172, the seventh aircraft model to be certified to date.
“I am pleased to report that we have continued to strengthen our inventory position to meet the anticipated demand for the coming marine and spring seasons, and have begun to ramp up production for delivery of newly released products such as the StreetPilot 'c-series',” said Dr. Kao. “These products have generated a great deal of interest. Therefore, we expect a higher consumer segment growth rate in the second quarter and beyond.”
Revenue for the quarter increased 22 percent to $192.7 million from $158.3 million in the year-ago quarter. Net income increased to $47.4 million, or 43 cents diluted earnings per share, compared to $34.7 million or 32 cents diluted earnings per share in the year-ago quarter. First quarter net income included a $11.1 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 51 cents compared to 37 centsin the year-ago quarter.
Consumer revenue for the first quarter totaled $137.5 million — an 11 percent growth compared to the first quarter of 2004. Aviation revenue totaled $55.2 million — a 59 percent increase compared to the year-ago quarter. Total units sold for the quarter increased to 584,000 from 478,000 — representing an increase of 22 percent.
Revenue increased across North American and European regions during the first quarter of fiscal 2004 when compared to the year-ago quarter:
- North America revenue was $132.7 million compared to $107.3 million,
up 24 percent. - Europe revenue was $50.3 million compared to $43.9 million, up
15 percent. - Asia revenue was $9.7 million compared to $7.1 million, up 37 percent.
“We are pleased with our financial results for the first quarter 2005, and believe we are on track to meet our 2005 full year guidance,” said Kevin Rauckman, chief financial officer of Garmin Ltd. “Gross margins were in line with our expectations at 53.6 percent for the first quarter. We also generated $31.1 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 $601.3 million at the end of the first quarter 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.
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
In addition to the sixteen products introduced during the first quarter, a number of additional new products are expected to be released during the second quarter, which should position the Company well for the remainder of 2005.
The Company affirms its current fiscal year guidance. 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. 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)
(Unaudited)13-Weeks Ended
March 26, March 27,
2005 2004Net sales $192,651 $158,329
Cost of goods sold 89,453 77,878
Gross profit 103,198 80,451
Selling, general and
administrative expenses 20,518 16,642Research and development expense 16,928 14,220
37,446 30,862Operating income 65,752 49,589
Other income(expense) (A) (6,942) (5,721)
Income before income taxes 58,810 43,868
Income tax provision 11,409 9,212
Net income $47,401 $34,656
Net income per share:
Basic $0.44 $0.32
Diluted $0.43 $0.32Weighted average common
shares outstanding:
Basic 108,408 108,197
Diluted 109,421 109,182
