Garmin boosted their sales by 32.2% during the second quarter to $189.7 million. The consumer division accounted for 78% of Garmins sales for the quarter, and reported $148.5 million in revenue, a 30% increase compared to the second quarter of 2003. Most of the gains were attributed to the companys large array of new products released during the quarter 36 new releases during the first half.
Gross margins for the quarter were 51.8%, a 650 basis point decrease over the 58.3% posted last year. This drastic decline was attributed to several factors, including “severe component availability constraints” and the higher costs associated with the new products.
Dr. Min Kao, co-chairperson and CEO, told analysts in a conference call, “Customer awareness and interest in GPS technology continue to grow We are also near the completion of a major product transition phase, and consequently look forward to some improvement in our margins.”
SG&A expenses as a percentage of sales increased by 50 basis points to 10.2%, or $19.4 million, compared to $13.9 million last year. The R&D budget increased 110 basis points to 7.8% of sales and was 58% above last year on a dollar basis. This was due primarily to the addition of 30 new engineers, bringing the total to 553.
In spite of the additional expenses, net income continued to rise, jumping 19.3% to $56.3 million, compared to $47.2 million last year.
Apparently the supply constraints not only affected margins, but also sales. Kevin Rauckman, Garmins CFO told analysts, “We could have shipped more product if in fact we were able to get all of the components we had in our demand.”
