To supplement our financial results presented in accordance with GAAP, this release includes the following measures defined by the Securities and Exchange Commission as non-GAAP financial measures: pro forma effective tax rate, pro forma net income (earnings) per share and free cash flow. These non-GAAP measures are not based on any comprehensive set of accounting rules or principles and should not be considered a substitute for, or superior to, financial measures calculated in accordance with GAAP, and may be different from non-GAAP measures used by other companies, limiting the usefulness of the measures for comparison with other companies. Management believes providing investors with an operating view consistent with how it manages the Company provides enhanced transparency into the operating results of the Company, as described in more detail by category below.
The tables below provide reconciliations between the GAAP and non-GAAP measures.
Pro forma effective tax rate
The Company’s income tax expense is periodically impacted by discrete tax items that are not reflective of income tax expense incurred as a result of current period earnings. Therefore, management believes disclosure of the effective tax rate and income tax provision before the effect of certain discrete tax items are important measures to permit investors' consistent comparison between periods.
Garmin Ltd. And Subsidiaries |
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Pro Forma Effective Tax Rate |
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(In thousands, except effective tax rate (ETR) information) |
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13-Weeks Ended |
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52-Weeks Ended |
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December 26, |
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December 28, |
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December 26, |
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December 28, |
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2020 |
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2019 |
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2020 |
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2019 |
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$ |
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ETR(1) |
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$ |
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ETR (1) |
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$ |
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ETR (1) |
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$ |
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ETR (1) |
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| U.S GAAP income tax provision (benefit) |
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$ |
57,918 |
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14.8% |
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$ |
(73,379 |
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(25.5)% |
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$ |
111,086 |
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10.1% |
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$ |
34,736 |
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3.5% |
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| Pro forma discrete tax items: |
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| Uncertain Tax Reserve Release (2) |
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14,308 |
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| Switzerland deferred tax assets (3) |
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(11,016 |
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117,989 |
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(11,016 |
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117,989 |
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| Pro forma income tax provision |
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$ |
46,902 |
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12.0% |
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$ |
44,610 |
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15.5% |
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$ |
114,378 |
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10.4% |
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$ |
152,725 |
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15.5% |
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| (1) Effective tax rate is calculated by taking the income tax provision divided by income before taxes, as presented on the face of the Condensed Consolidated Statements of Income. |
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| (2) In second quarter 2020, the Company recognized a $14.3 million income tax benefit due to the release of uncertain tax position reserves associated with the 2014 intercompany restructuring, which was a pro forma adjustment in 2014. The impact of the reserve release is not reflective of income tax expense incurred as a result of current period earnings and therefore affects period-to-period comparability. |
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| (3) In fourth quarter 2019, a $118 million income tax benefit was recognized resulting from the revaluation and step-up of certain Switzerland deferred tax assets as a result of the enactment of Switzerland Federal and Schaffhausen cantonal tax reform and related transitional measures. In fourth quarter 2020, certain Switzerland deferred tax assets related to the Switzerland tax reform transitional measures were revalued resulting in an $11 million income tax expense. The impact of the revaluation of these Switzerland deferred tax assets is not reflective of income tax expense incurred as a result of current period earnings and therefore affects period-to-period comparability. |
