Garmin reports second quarter revenue and earnings growth; Raises guidance for 2018

Revenue Standard Adoption

We adopted the new revenue standard in the first quarter of 2018. The prior periods presented have been restated to reflect adoption of this new standard.

Webcast Information/Forward-Looking Statements:

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

      When:   Wednesday, August 1, 2018 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 July 31, 2019 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 effective tax rate, and the Company’s expected segment revenue growth rates, consolidated revenue, gross margins, operating margins, currency movements, expenses, pricing, new products to be introduced in 2018, statements relating to possible future dividends 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 30, 2017 filed by Garmin with the Securities and Exchange Commission (Commission file number 0-31983). A copy of Garmin’s 2017 Form 10-K can be downloaded from https://www.garmin.com/en-US/company/investors/sec/form-10-K/.

Non-GAAP Financial Measures

This release and the attachments contain non-GAAP financial measures. A reconciliation to the nearest GAAP measure and a discussion of the Company's use of these measures are included in the attachments.

Garmin, the Garmin logo, the Garmin delta, vívoactive, Edge, Navionics, fēnix and inReach are trademarks of Garmin Ltd. or its subsidiaries and are registered in one or more countries, including the U.S.; Garmin Pay, GFC, G3000H, Panoptix LiveScope and Varia 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

   

26-Weeks Ended

June 30, July 1, June 30, July 1,
2018 2017 2018   2017
Net sales $ 894,452 $ 831,486 $ 1,605,325 $ 1,472,996
 
Cost of goods sold   371,182   347,356   655,520   616,060  
 
Gross profit 523,270 484,130 949,805 856,936
 
Advertising expense 43,549 42,009 68,861 73,533
Selling, general and administrative expense 120,500 105,251 237,564 207,303
Research and development expense   141,713   127,248   283,670   249,450  
Total operating expense   305,762   274,508   590,095   530,286  
 
Operating income 217,508 209,622 359,710 326,650
 
Other income (expense):
Interest income 10,995 9,281 21,222 17,724
Foreign currency gains (losses) 2,647 15,110 3,463 (22,387 )
Other income   4,918   314   5,653   715  
Total other income (expense)   18,560   24,705   30,338   (3,948 )
 
Income before income taxes 236,068 234,327 390,048 322,702
 
Income tax provision (benefit)   45,726   57,348   70,333   (92,680 )
 
Net income $ 190,342 $ 176,979 $ 319,715 $ 415,382  
 
Net income per share:
Basic $ 1.01 $ 0.94 $ 1.70 $ 2.21
Diluted $ 1.00 $ 0.94 $ 1.69 $ 2.20
 
Weighted average common
shares outstanding:
Basic 188,542 187,757 188,432 187,974
Diluted 189,461 188,492 189,377 188,691
 
Garmin Ltd. And Subsidiaries
Condensed Consolidated Balance Sheets (Unaudited)
(In thousands, except per share information)
         
June 30,     December 30,
2018 2017
Assets
Current assets:
Cash and cash equivalents $ 946,656 $ 891,488
Marketable securities 173,318 161,687
Accounts receivable, net 533,076 590,882
Inventories 501,490 517,644
Deferred costs 31,924 30,525
Prepaid expenses and other current assets   137,118     153,912  
Total current assets 2,323,582 2,346,138
 
Property and equipment, net 637,245 595,684
 
Restricted cash 211 271
Marketable securities 1,302,447 1,260,033
Deferred income taxes 188,101 195,981
Noncurrent deferred costs 30,663 33,029
Intangible assets, net 409,459 409,801
Other assets   97,012     107,352  
Total assets $ 4,988,720   $ 4,948,289  
 
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $ 166,499 $ 169,640
Salaries and benefits payable 95,969 102,802
Accrued warranty costs 38,429 36,827
Accrued sales program costs 65,477 93,250
Deferred revenue 98,526 103,140
Accrued royalty costs 28,209 32,204
Accrued advertising expense 29,059 30,987
Other accrued expenses 66,776 93,652
Income taxes payable 40,016 33,638
Dividend payable   300,187     95,975  
Total current liabilities 929,147 792,115
 
Deferred income taxes 74,092 76,612
Noncurrent income taxes 140,584 138,295
Noncurrent deferred revenue 84,156 87,060
Other liabilities 1,860 1,788
 
Stockholders' equity:
Shares, CHF 0.10 par value, 198,077 shares authorized and issued; 188,797 shares
outstanding at June 30, 2018 and 188,189 shares outstanding at December 30, 2017 17,979 17,979
Additional paid-in capital 1,828,515 1,828,386
Treasury stock (433,959 ) (468,818 )
Retained earnings 2,336,614 2,418,444
Accumulated other comprehensive income   9,732     56,428  
Total stockholders' equity   3,758,881     3,852,419  
Total liabilities and stockholders' equity $ 4,988,720   $ 4,948,289  
 
Garmin Ltd. And Subsidiaries
Condensed Consolidated Statements of Cash Flows (Unaudited)
(In thousands)
       
26-Weeks Ended
June 30, July 1,
2018 2017
Operating activities:
Net income $ 319,715 $ 415,382
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 31,800 29,558
Amortization 16,420 13,273
Gain on sale or disposal of property and equipment (1,042 ) (56 )
Provision for doubtful accounts 616 351
Provision for obsolete and slow moving inventories 11,725 11,072
Unrealized foreign currency loss 2,401 26,325
Deferred income taxes 11,000 (159,384 )
Stock compensation expense 27,747 20,385
Realized losses on marketable securities 231 584
Changes in operating assets and liabilities, net of acquisitions:
Accounts receivable 48,099 23,785
Inventories (4,666 ) (34,621 )
Other current and non-current assets (4,841 ) (6,328 )
Accounts payable 1,618 (20,942 )
Other current and non-current liabilities (49,237 ) (48,162 )
Deferred revenue (7,483 ) (15,637 )
Deferred costs 962 2,890
Income taxes payable   32,998     5,352  
Net cash provided by operating activities 438,063 263,827
 
Investing activities:
Purchases of property and equipment (93,072 ) (39,812 )
Proceeds from sale of property and equipment 1,282 121
Purchase of intangible assets (2,452 ) (6,336 )
Purchase of marketable securities (209,387 ) (243,880 )
Redemption of marketable securities 127,152 278,719
Acquisitions, net of cash acquired   (9,417 )   (7,500 )
Net cash used in investing activities (185,894 ) (18,688 )
 
Financing activities:
Dividends (196,086 ) (191,691 )
Proceeds from issuance of treasury stock related to equity awards 14,142 10,316
Purchase of treasury stock related to equity awards (6,900 ) (3,582 )
Purchase of treasury stock under share repurchase plan   -     (63,957 )
Net cash used in financing activities (188,844 ) (248,914 )
 
Effect of exchange rate changes on cash, cash equivalents, and restricted cash (8,217 ) 16,456
   
Net increase in cash, cash equivalents, and restricted cash 55,108 12,681
Cash, cash equivalents, and restricted cash at beginning of period   891,759     846,996  
Cash, cash equivalents, and restricted cash at end of period $ 946,867   $ 859,677  
 
Garmin Ltd. And Subsidiaries
Net Sales, Gross Profit and Operating Income by Segment (Unaudited)
(in thousands)
 
    Reportable Segments
         
Outdoor Fitness Marine Auto Aviation Total
 
13-Weeks Ended June 30, 2018
 
Net sales $ 201,640 $ 225,095 $ 134,583 $ 180,128 $ 153,006 $ 894,452
Gross profit 128,872 126,431 78,785 75,452 113,730 523,270
Operating income 71,916 52,548 27,768 12,612 52,664 217,508
 
13-Weeks Ended July 1, 2017
 
Net sales $ 194,776 $ 181,022 $ 108,545 $ 223,083 $ 124,060 $ 831,486
Gross profit 127,813 102,139 62,368 99,309 92,501 484,130
Operating income 74,284 37,487 24,295 34,198 39,358 209,622
 
      Garmin Ltd. And Subsidiaries
Net Sales by Geography (Unaudited)
(In thousands)
 
  13-Weeks Ended         26-Weeks Ended    
June 30,     July 1,   Yr over Yr June 30,     July 1,   Yr over Yr
2018 2017   Change 2018 2017   Change
Net sales $ 894,452 $ 831,486 8 % $ 1,605,325 $ 1,472,996 9 %
Americas 437,116 401,409 9 % 783,091 726,038 8 %
EMEA 309,116 314,649 -2 % 555,029 539,984 3 %
APAC 148,220 115,428 28 % 267,205 206,974 29 %
 
EMEA - Europe, Middle East and Africa; APAC - Asia Pacific and Australian Continent
 

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