Garmin’s Fitness Segment Revenues Up 19% in 2010

The outdoor/fitness segment posted strong year-over-year revenue growth of 15% in the fourth quarter with gross margins of 66%. The strong margin performance allowed the segment to contribute $251 million of operating income in 2010. Beginning in the first quarter of 2011, Garmin will report the financial results of the outdoor and fitness segments separately.

“We are excited about the innovative products that we will be delivering in both the outdoor and fitness segments this year,” said Dr. Min Kao, chairman and chief executive officer of Garmin Ltd. “The launch of the GTU 10 brings Garmin into the tracking market with an affordably priced solution for a variety of applications and provides incremental revenue opportunity in the outdoor business. In the fitness category, we are well positioned as the leader in the GPS- enabled running market offering products designed to meet the needs of both the elite athlete and the value-conscious runner or cyclist. Our fitness product development pipeline is full of exciting offerings that will be announced during the course of the year.”

“While 2010 represented a year of adversity for our PND business and our handset initiative, we exit the year with a growing presence in outdoor/fitness, aviation, marine and auto OEM that give us confidence in the long-term outlook for Garmin,” Min Kao continued. “The business generated free cash flow of $738 million which further strengthened our debt-free balance sheet and afforded us the opportunity to return significant value to shareholders in 2010 through a dividend and share repurchases.

By contrast, revenues from Garmin’s much larger automotive/mobile segment declined 31% on a year-over-year basis in the fourth quarter as the PND market declined from the 2009 holiday season, ASPs continued to decline, and significant revenues from bundled lifetime map products were deferred into future periods. The company expects the PND market to continue to decline in 2011 with moderating ASPs and an increasing impact of revenue deferrals as bundled lifetime maps constitute a higher percentage of its product mix.

“Despite the challenging headwinds, our strategy is to manage the business to maintain our market leadership and maximize profitability,” said Min Kao. “In addition, we have accelerated our investment in the auto OEM category in response to increasing opportunities in this market segment.”

Garmin’s forecast calls for revenues to decline in 2011 as the growth in the outdoor, fitness, marine and aviation segments, as well as auto OEM opportunities, is offset by ongoing declines in the PND market. We anticipate gross margins to be stable and operating margins to decline slightly from the strong margins generated in 2010. The operating margin declines will be primarily driven by ongoing investment in the business. These factors and an anticipated effective tax rate of 20% result in a forecasted 2011 earnings per share range of $2.25 – $2.50.