Garmin Reports Third Quarter Revenue and EPS Growth; Raises Guidance

Webcast Information/Forward-Looking Statements:

The information for Garmin Ltd.’s earnings call is as follows:

  When:   Wednesday, October 26, 2016 at 10:30 a.m. Eastern
Where:

http://www.garmin.com/en-US/company/investors/events/

How: Simply log on to the web at the address above or call to listen in at 855-757-3897
 

An archive of the live webcast will be available until December 29, 2016 on the Garmin website at www.garmin.com. To access the replay, click on the Investor Relations link and click over to the Events Calendar page.

This release includes projections and other forward-looking statements regarding Garmin Ltd. and its business that are commonly identified by words such as “would,” “may,” “expects,” “estimates,” “plans,” “intends,” “projects,” and other words or phrases with similar meanings. Any statements regarding the Company’s GAAP and pro forma estimated earnings, EPS and revenue for fiscal 2016, the Company’s expected segment revenue growth rates, margins, currency movements, expenses, pricing, new products to be introduced in 2016 and the Company’s plans and objectives are forward-looking statements. The forward-looking events and circumstances discussed in this release may not occur and actual results could differ materially as a result of risk factors and uncertainties affecting Garmin, including, but not limited to, the risk factors that are described in the Annual Report on Form 10-K for the year ended December 26, 2015 filed by Garmin with the Securities and Exchange Commission (Commission file number 0-31983). A copy of Garmin’s 2015 Form 10-K can be downloaded from http://www.garmin.com/aboutGarmin/invRelations/finReports.html.

Garmin, the Garmin logo, the Garmin delta, fēnix, Forerunner, vívofit, vívosmart and VIRB are trademarks of Garmin Ltd. or its subsidiaries and are registered in one or more countries, including the U.S.; Garmin Elevate, Fantom and G5000, are trademarks of Garmin Ltd. or its subsidiaries. All other brands, product names, company names, trademarks and service marks are the properties of their respective owners. All rights reserved.

       
Garmin Ltd. And Subsidiaries
Condensed Consolidated Statements of Income (Unaudited)
(In thousands, except per share information)
 
13-Weeks Ended 39-Weeks Ended
Sept 24, Sept 26, Sept 24, Sept 26,
  2016       2015   2016       2015  
Net sales $ 722,250 $ 679,690 $ 2,157,898 $ 2,038,913
 
Cost of goods sold   316,270     317,500   949,110     913,352  
 
Gross profit 405,980 362,190 1,208,788 1,125,561
 
Advertising expense 32,956 36,887 109,441 110,352
Selling, general and administrative expense 96,959 94,057 296,246 290,359
Research and development expense   116,449     105,789   339,008     321,031  
Total operating expense   246,364     236,733   744,695     721,742  
 
Operating income 159,616 125,457 464,093 403,819
 
Other income (expense):
Interest income 8,226 6,851 24,109 22,295
Foreign currency gains (losses) (19,421 ) 30,573 (30,003 ) (14,177 )
Other income   1,344     2,010   2,914     2,707  
Total other income (expense)   (9,851 )   39,434   (2,980 )   10,825  
 
Income before income taxes 149,765 164,891 461,113 414,644
 
Income tax provision   24,711     45,592   86,904     90,800  
 
Net income $ 125,054   $ 119,299 $ 374,209   $ 323,844  
 
Net income per share:
Basic $ 0.66 $ 0.63 $ 1.98 $ 1.69
Diluted $ 0.66 $ 0.63 $ 1.98 $ 1.69
 
Weighted average common
shares outstanding:
Basic 188,692 190,342 189,027 191,068
Diluted 189,238 190,822 189,376 191,523
 
Garmin Ltd. And Subsidiaries
Condensed Consolidated Balance Sheets
(In thousands, except per share information)
       
(Unaudited)  
Sept 24, December 26,
  2016       2015  
Assets
Current assets:
Cash and cash equivalents $ 912,559 $ 833,070
Marketable securities 201,560 215,161
Accounts receivable, net 461,355 531,481
Inventories, net 534,683 500,554
Deferred costs 46,569 49,176
Prepaid expenses and other current assets   90,733     81,645  
Total current assets 2,247,459 2,211,087
 
Property and equipment, net 454,246 446,089
 
Marketable securities 1,327,347 1,343,387
Restricted cash 265 259
Noncurrent deferred income tax 121,084 116,518
Noncurrent deferred costs 51,395 38,769
Intangible assets, net 301,983 245,552
Other assets   88,127     97,730  
Total assets $ 4,591,906   $ 4,499,391  
 
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $ 148,030 $ 178,905
Salaries and benefits payable 86,104 70,601
Accrued warranty costs 38,872 30,449
Accrued sales program costs 49,172 67,613
Deferred revenue 146,384 164,982
Accrued royalty costs 34,801 30,310
Accrued advertising expense 22,775 33,547
Other accrued expenses 81,313 74,926
Income taxes payable 24,004 21,674
Dividend payable   288,540     192,991  
Total current liabilities 919,995 865,998
 
Deferred income taxes 56,463 56,210
Non-current income taxes 117,276 101,689
Non-current deferred revenue 134,236 128,731
Other liabilities 1,707 1,637
 
Stockholders' equity:
Shares, CHF 0.10 par value, 198,077 shares authorized and issued;
and 188,446 shares outstanding at September 24, 2016
Shares, CHF 10.00 par value, 208,077 shares authorized and issued;
and 189,722 shares outstanding at December 26, 2015 17,979 1,797,435
Additional paid-in capital 1,862,801 62,239
Treasury stock (464,163 ) (414,637 )
Retained earnings 1,919,846 1,930,517
Accumulated other comprehensive income   25,766     (30,428 )
Total stockholders' equity   3,362,229     3,345,126  
Total liabilities and stockholders' equity $ 4,591,906   $ 4,499,391  
 
Garmin Ltd. And Subsidiaries
Condensed Consolidated Statements of Cash Flows (Unaudited)
(In thousands)
     
39-Weeks Ended
Sept 24, Sept 26,
  2016     2015  
Operating activities:
Net income $ 374,209 $ 323,844
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 40,327 37,936
Amortization 22,215 20,447
Loss (gain) on sale or disposal of property and equipment 155 (190 )
Provision for doubtful accounts 2,559 (1,781 )
Deferred income taxes (6,821 ) 5,796
Unrealized foreign currency loss 19,536 30,473
Provision for obsolete and slow moving inventories 20,943 9,925
Stock compensation expense 29,211 19,596
Realized gain on marketable securities (1,068 ) (76 )
Changes in operating assets and liabilities:
Accounts receivable 76,372 123,875
Inventories (41,002 ) (111,008 )
Other current and non-current assets 3,400 (110,695 )
Accounts payable (40,694 ) 16,864
Other current and non-current liabilities 1,942 (44,636 )
Deferred revenue (13,660 ) (49,790 )
Deferred cost (9,906 ) 7,080
Income taxes payable   14,648     (155,529 )
Net cash provided by operating activities 492,366 122,131
 
Investing activities:
Purchases of property and equipment (42,157 ) (53,297 )
Proceeds from sale of property and equipment 15 670
Purchase of intangible assets (4,706 ) (2,817 )
Purchase of marketable securities (739,676 ) (649,881 )
Redemption of marketable securities 772,733 720,717
Change in restricted cash (6 ) 48
Acquisitions, net of cash acquired   (62,137 )   (12,632 )
Net cash (used in) provided by investing activities (75,934 ) 2,808
 
Financing activities:
Dividends paid (289,331 ) (281,247 )
Purchase of treasury stock under share repurchase plan (65,221 ) (108,057 )
Purchase of treasury stock related to equity awards (184 ) (241 )
Proceeds from issuance of treasury stock related to equity awards 10,210 8,554
Tax benefit from issuance of equity awards   365     1,257  
Net cash used in financing activities (344,161 ) (379,734 )
 
Effect of exchange rate changes on cash and cash equivalents 7,218 (26,566 )
   
Net increase (decrease) in cash and cash equivalents 79,489 (281,361 )
Cash and cash equivalents at beginning of period   833,070     1,196,268  
Cash and cash equivalents at end of period $ 912,559   $ 914,907  
 
Garmin Ltd. And Subsidiaries
Net Sales, Gross Profit, and Operating Income by Segment (Unaudited)
(In thousands)
  Reporting Segments
Outdoor   Fitness   Marine   Auto   Aviation   Total
 
13-Weeks Ended September 24, 2016
 
Net sales $ 141,006 $ 189,161 $ 70,010 $ 214,637 $ 107,436 $ 722,250
Gross profit $ 88,497 $ 103,363 $ 39,891 $ 93,638 $ 80,591 $ 405,980
Operating income $ 49,271 $ 44,774 $ 10,332 $ 24,795 $ 30,444 $ 159,616
 
13-Weeks Ended September 26, 2015 (3)
 
Net sales $ 109,863 $ 143,216 $ 62,315 $ 270,064 $ 94,232 $ 679,690
Gross profit $ 66,442 $ 77,261 $ 34,115 $ 114,331 $ 70,041 $ 362,190
Operating income $ 37,409 $ 26,577 $ 5,737 $ 32,012 $ 23,722 $ 125,457
 
 
39-Weeks Ended September 24, 2016
 
Net sales $ 370,929 $ 544,434 $ 264,489 $ 655,963 $ 322,083 $ 2,157,898
Gross profit $ 232,652 $ 295,463 $ 148,554 $ 292,770 $ 239,349 $ 1,208,788
Operating income $ 125,721 $ 114,422 $ 49,172 $ 82,984 $ 91,794 $ 464,093
 
39-Weeks Ended September 26, 2015 (3)
 
Net sales $ 291,299 $ 432,859 $ 230,325 $ 789,870 $ 294,560 $ 2,038,913
Gross profit $ 181,525 $ 248,795 $ 128,204 $ 351,223 $ 215,814 $ 1,125,561
Operating income $ 98,135 $ 94,286 $ 34,204 $ 99,887 $ 77,307 $ 403,819
(3) Action camera related operating results for the 13-weeks and 39-weeks ended September 26, 2015 have been recast from the Outdoor segment to the Auto segment to conform to the current year presentation.
 
Garmin Ltd. And Subsidiaries
Net Sales by Geography (Unaudited)
(In thousands)
  13-Weeks Ended   39-Weeks Ended
Sept 24,   Sept 26,   Yr over Yr Sept 24,   Sept 26,   Yr over Yr
  2016   2015   Change   2016   2015   Change
Net sales $ 722,250 $ 679,690 6 % $ 2,157,898 $ 2,038,913 6 %
Americas 348,637 335,041 4 % 1,073,610 1,057,359 2 %
EMEA 274,756 261,548 5 % 810,205 744,352 9 %
APAC 98,857 83,101 19 % 274,083 237,202 16 %
 
EMEA - Europe, Middle East and Africa; APAC - Asia Pacific and Australian Continent
 

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