Garmin’s Q1 Revenues Climb 10 Percent

Total revenue was $557 million, up 10 percent from $508 million in first quarter of 2011. 

• Automotive/Mobile segment revenue increased 6 percent to $280 million

• Outdoor segment revenue increased 16 percent to $77 million

• Fitness segment revenue increased 26 percent to $71 million

• Marine segment revenue increased 9 percent to $56 million

• Aviation segment revenue increased 5 percent to $73 million

All geographies posted revenue growth:

• North America revenue was $296 million compared to $280 million in the year-ago period, up 6 percent

• Europe revenue was $199 million compared to $171 million, up 16 percent

• Asia revenue was $62 million compared to $57 million, up 8 percent

• Gross
  margin improved both sequentially and year-over-year to 51 percent for
  first quarter 2012 from 48 percent in fourth quarter 2011 and 47 percent
  in first quarter 2011

• Operating margin increased year-over-year to 16 percent, compared to 15 percent in first quarter 2011

• Effective tax rate increased to 12.8 percent in first quarter of 2012 compared to 1.5 percent in first quarter 2011

• Diluted
  earnings per share (EPS) decreased to $0.44 from $0.49 in first quarter
  2011 due to the increased effective tax rate; pro forma diluted EPS
  increased 5% to $0.45 from $0.43 in the same quarter in 2011 (Pro forma
  earnings per share excludes the impact of foreign currency transaction
  gain or loss)

• Generated $116 million of free cash flow in first quarter 2012

Note:
In accordance with GAAP, the company is deferring significant revenue
and the related costs associated with high margin sales of lifetime
maps, connected services and premium traffic over their economic lives.

Recent Business Highlights:

The
company posted revenue growth in every segment, with significant growth
in fitness and outdoor during first quarter, while selling 2.7 million
units in first quarter 2012, a 7 percent increase over the first quarter
of 2011. It also announced its first factory-installed auto OEM
relationship with Suzuki, providing infotainment systems to many of
their 2013 models.

• Delivered the Forerunner 910XT, the much anticipated second generation triathlon-focused watch.

• Supported
  the successful first flight of the Cessna M2 including the G3000
  cockpit, which is slated to begin deliveries in the second half of 2013.

• Announced marine OEM relationships with Teleflex and Viking at the 2012 Miami International Boat Show.

• Launched
  the Approach S3, a touchscreen GPS golf watch, providing a premium
  wristwatch solution for golfers with integrated digital scorecard.

Executive Overview from Dr. Min Kao, Chairman and Chief Executive Officer:

“The
first quarter of 2012 provided strong revenue performance as each of
our business segments contributed to 10 percent revenue growth,” said
Dr. Min Kao, chairman and chief executive officer of Garmin Ltd. “This
is a great way to start the year; yet, we remain cautious regarding the
PND industry as much of our strength was related to global market share
gains. The revenue growth of our core business segments of outdoor,
fitness, aviation and marine was 14 percent, highlighting the continued
diversification in our business model. We continue to grow our research
and development investment in these segments, as well as auto OEM, in
order to capitalize on the numerous long-term growth initiatives in each
of them.

The outdoor segment posted revenue growth of 16 percent
in the quarter as our golf product portfolio continued to perform well,
along with dog tracking and training systems. We expect our latest golf
introduction, the Approach S3 – a touchscreen GPS golf watch, to
further our market share gains in this popular category.

The
fitness segment posted revenue growth of 26 percent in the quarter as
the much anticipated Forerunner 910XT, designed for multi-sport
operation, began to ship. We believe the fitness category remains
under-penetrated at both the high-end and low-end, which represent
significant growth opportunities going forward. We intend to continue to
innovate in both running and cycling to drive broader adoption of GPS
technology across the price spectrum.

The aviation segment posted
revenue growth of 5 percent as the retrofit market continues to be
strong, while the OEM market recovery lags. Our focus continues to be on
investment to achieve our long-term strategic initiatives of expanding
our presence in the business jet and helicopter markets where we have a
number of certifications underway. While our investment in these new
opportunities grows, we remain committed to retaining our strong market
share in the single engine and turboprop markets as well. These existing
relationships are critical to us and are expected to provide another
opportunity for growth when these OEM markets begin to recover.

In
the marine segment, revenues grew 9 percent year-over-year and 30
percent sequentially as warm weather signaled an early start to the
marine season. The boating industry is again showing signs of recovery
but much uncertainty remains with high fuel prices and continued tight
credit for luxury items. As we have previously highlighted, this will be
a year of investment and thus, reduced operating margins. This
near-term investment should deliver revenue growth, along with margin
expansion, in 2013.

Looking finally at the auto/mobile segment,
we posted revenue growth of 6 percent as we continued to gain market
share in the PND category. Though pleased with the first quarter
results, we do not expect PND revenue to continue to grow year over year
due to industry-wide declines. However, we remain focused on our goals
of market leadership and profitability in the PND market as evidenced by
the stabilization of our ASPs and market share gains.

We were
excited to announce our first factory installed auto OEM relationship
with Suzuki in April. This represents a significant milestone for Garmin
as we build relationships and credibility in this industry. The Suzuki
infotainment system offers enhanced features and our intuitive user
interface which we believe will set a benchmark for the quality and
ease-of-use that Garmin can deliver.”

Financial Overview from Kevin Rauckman, Chief Financial Officer:

“We
posted our second straight quarter of revenue and operating income
growth, as trends across many of our segments continued to be positive,”
said Kevin Rauckman, chief financial officer of Garmin Ltd. “The year
has started well for us. We are now tasked with continuing the positive
sales momentum and market share gains while also focusing on
profitability.

Gross margin for the overall business was 51
percent in the first quarter improving from 47% in the prior year
largely driven by the automotive/mobile segment, where gross margin
improved to 39 percent, partially driven by the amortization of
previously deferred high margin revenues, a reduced per unit deferral
rate as discussed in the company's 10K for December 31, 2011 filed with
the Securities and Exchange Commission and product mix. Segment mix
contributed to the overall strong gross margin. The strong
automotive/mobile and fitness gross margins were partially offset by a
500 basis point decline in marine gross margin due to product mix
shifting toward fish finders and low-priced marine handhelds.

Operating
margin for the overall business improved to 16 percent when compared
with 15 percent in the year-ago quarter with the gross margin
improvement partially offset by an increase in operating expenses as a
percentage of sales. Total operating expenses increased $30 million
year-over-year and by 250 basis points as a percent of sales.
Advertising and research and development expense increased by $4 million
and $9 million, respectively, as we continue to invest for future
growth. Marine and aviation research and development increased 31
percent and 15 percent, respectively, as long-term OEM opportunities are
funded. Other selling, general and administrative costs increased by
$17 million on a year-over-year basis. The increase was primarily due to
acquisitions made in the second half of 2011. As in prior years, we
believe that the first quarter will represent the low point for
operating margins and with increased sales volumes during the remainder
of the year, profitability levels are expected to improve.

Our
tax rate in the first quarter was 12.8 percent compared to 1.5 percent
in the first quarter of 2011 when we benefitted from the release of
reserves related to the expiration of certain statutes for Garmin
Europe. We expect the 2012 full year tax rate to be approximately 13
percent.

Free cash flow generation continued to be strong with
$116 million generated in the quarter. We had a cash and marketable
securities balance of over $2.5 billion at the end of the quarter. We
intend to continue to fund our quarterly dividend and future
acquisitions with our strong cash position.”