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.
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)|
|March 27,||March 28,|
|Cost of goods sold||200,158||240,704|
|Selling, general and administrative expense||67,678||59,777|
|Research and development expense||62,483||55,034|
|Total operating expense||147,561||138,036|
|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 per share:|