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