Garmin Ltd. said sales of its outdoor/fitness segment rose 28% to $103 million, but that total revenues declined 1% in the first quarter ended March 27, 2010, due to poor sales in its larger auto/mobile segment.
Sales declined 15% in the auto/mobile segment, but rose 9% in its marine segment and 12% in its aviation segment. The result was a 1% decline in total revenues to $431 million.
Revenues edged up 1% in Europe to $145 million, jumped 54% in Asia to $43 million and slid 8% in North America to $243 million.
The company said gross margin increased both sequentially and year-over-year to 54% for first quarter 2010 from 46% in fourth quarter 2009 and 45% in first quarter 2009. Operating margin increased year-over-year to 19%, compared to 13% in first quarter 2009. This allowed the company to post pro forma earnings per share growth of 52% excluding currency gains. On a GAAP basis, which excluded the currency gains, net income dropped 21% to 19 cents per share from 24 cents in first quarter 2009.
Growth in the outdoor/fitness segment reflected introduction of new products, including the Forerunner 110-the newest of Garmin’s fitness watches. The watch provides essential real-time workout data at an affordable price for runners, joggers and walkers.
The outdoor/fitness segment posted revenue growth of 28% in the quarter on the heels of 10% growth during 2009, said Dr. Min Kao, chairman and chief executive officer of Garmin Ltd.. We are excited about the global growth we have experienced for our well-respected products and will continue to build on these successes. Around the globe and across the segment, we will continue to invest and innovate in this opportunity-rich market.
Kao said inventory levels are normalizing in the auto/mobile market, where sell-in to the retail channel has begun to more closely align to sell-through trends in the second quarter. We anticipate that this segment will improve sequentially throughout the remainder of 2010, he said.
CFO Kevin Rauckman reaffirmed Garmins full-year guidance.
While top line results for the first quarter reflect some excess inventory challenges at retailers in the PND category, we still expect to achieve our full-year forecast previously provided for both revenues and EPS, Rauckman said. This is a result of a number of trends that we experienced in first quarter 2010. Sell-through of PNDs in the North American market grew and ASPs increased during the first quarter.
| Garmin Ltd. And Subsidiaries | |||||||||||||||||||
| Condensed Consolidated Statements of Income (Unaudited) | |||||||||||||||||||
| (In thousands, except per share information) | |||||||||||||||||||
| 13-Weeks Ended | |||||||||||||||||||
| March 27, | March 28, | ||||||||||||||||||
| 2010 | 2009 | ||||||||||||||||||
| Net sales | $ | 431,067 | $ | 436,699 | |||||||||||||||
| Cost of goods sold | 200,158 | 240,704 | |||||||||||||||||
| Gross profit | 230,909 | 195,995 | |||||||||||||||||
| Advertising expense | 17,400 | 23,225 | |||||||||||||||||
| Selling, general and administrative expense | 67,678 | 59,777 | |||||||||||||||||
| Research and development expense | 62,483 | 55,034 | |||||||||||||||||
| Total operating expense | 147,561 | 138,036 | |||||||||||||||||
| Operating income | 83,348 | 57,959 | |||||||||||||||||
| Interest income | 6,879 | 5,097 | |||||||||||||||||
| Foreign currency | (46,537 | ) | (2,438 | ) | |||||||||||||||
| Other | 1,833 | (694 | ) | ||||||||||||||||
| Total other income (expense) | (37,825 | ) | 1,965 | ||||||||||||||||
| Income before income taxes | 45,523 | 59,924 | |||||||||||||||||
| Income tax provision | 8,194 | 11,386 | |||||||||||||||||
| Net income | $ | 37,329 | $ | 48,538 | |||||||||||||||
| Net income per share: | |||||||||||||||||||
| Basic | $ | 0.19 | $ | 0.24 | |||||||||||||||
| Diluted | $ | 0.19 | $ | 0.24 | |||||||||||||||
