Document and Entity Information
v2.2.0.25
Document and Entity Information
3 Months Ended
Mar. 26, 2011
May 02, 2011
Document and Entity Information    
Document Type 10-Q  
Amendment Flag false  
Document Period End Date Mar. 26, 2011
Document Fiscal Period Focus Q1  
Document Fiscal Year Focus 2011  
Entity Registrant Name GARMIN LTD  
Entity Central Index Key 0001121788  
Current Fiscal Year End Date --12-30  
Entity Filer Category Large Accelerated Filer  
Entity Common Stock, Shares Outstanding   208,077,418

Condensed Consolidated Balance Sheets
v2.2.0.25
Condensed Consolidated Balance Sheets (USD $)
In Thousands
Mar. 26, 2011
Dec. 25, 2010
Assets    
Cash and cash equivalents $ 1,210,615 $ 1,260,936
Marketable securities 41,723 24,418
Accounts receivable, net 434,935 747,249
Inventories, net 411,021 387,577
Deferred income taxes 33,582 33,628
Deferred costs 22,943 20,053
Prepaid expenses and other current assets 38,018 24,894
Total current assets 2,192,837 2,498,755
Property and equipment, net 427,110 427,805
Marketable securities 1,027,381 777,401
Restricted cash 1,389 1,277
Licensing agreements, net 4,658 1,800
Noncurrent deferred income tax 73,613 73,613
Noncurrent deferred costs 25,700 24,685
Other intangible assets, net 184,821 183,352
Total assets 3,937,509 3,988,688
Liabilities and Stockholders' Equity    
Accounts payable 118,845 132,348
Salaries and benefits payable 34,811 49,288
Accrued warranty costs 44,030 49,885
Accrued sales program costs 49,463 107,261
Deferred revenue 104,818 89,711
Accrued royalty costs 7,769 95,086
Accrued advertising expense 17,626 21,587
Other accrued expenses 58,164 63,043
Deferred income taxes 4,428 4,800
Income taxes payable 29,959 56,028
Total current liabilities 469,913 669,037
Deferred income taxes 11,068 6,986
Non-current income taxes 147,047 153,621
Non-current deferred revenue 114,795 108,076
Other liabilities 1,457 1,406
Stockholders' equity:    
Shares, CHF 10 par value, 208,077,418 shares authorized and issued; 194,014,900 shares outstanding at March 26, 2011; and 194,358,038 shares outstanding at December 25, 2010; 1,797,435 1,797,435
Additional paid-in capital 45,435 38,268
Treasury stock (118,018) (106,758)
Retained earnings 1,377,007 1,264,613
Accumulated other comprehensive income 91,370 56,004
Total stockholders' equity 3,193,229 3,049,562
Total liabilities and stockholders' equity $ 3,937,509 $ 3,988,688

Condensed Consolidated Balance Sheets (Parenthetical)
v2.2.0.25
Condensed Consolidated Balance Sheets (Parenthetical)
Mar. 26, 2011
CHF
Dec. 25, 2010
CHF
Condensed Consolidated Balance Sheets    
Common stock, par value 10 10
Common stock, shares authorized 208,077,418 208,077,418
Common stock, shares issued 208,077,418 208,077,418
Common stock, shares outstanding 194,014,900 194,358,038

Condensed Consolidated Statements of Income
v2.2.0.25
Condensed Consolidated Statements of Income (USD $)
In Thousands, except Per Share data
3 Months Ended
Mar. 26, 2011
Mar. 27, 2010
Condensed Consolidated Statements of Income    
Net sales $ 507,834 $ 431,067
Cost of goods sold 269,460 200,158
Gross profit 238,374 230,909
Advertising expense 19,956 17,400
Selling, general and administrative expense 73,187 67,678
Research and development expense 70,478 62,483
Total operating expense 163,621 147,561
Operating income 74,753 83,348
Other income (expense):    
Interest income 7,214 6,879
Foreign currency gains (losses) 12,140 (46,537)
Other 2,819 1,833
Total other income (expense) 22,173 (37,825)
Income before income taxes 96,926 45,523
Income tax provision 1,444 8,194
Net income $ 95,482 $ 37,329
Net income per share:    
Basic $ 0.49 $ 0.19
Diluted $ 0.49 $ 0.19
Weighted average common shares outstanding:    
Basic 193,922 199,926
Diluted 194,720 201,091
Dividends declared per share   $ 1.5

Condensed Consolidated Statements of Cash Flows
v2.2.0.25
Condensed Consolidated Statements of Cash Flows (USD $)
In Thousands
3 Months Ended
Mar. 26, 2011
Mar. 27, 2010
Operating Activities:    
Net income $ 95,482 $ 37,329
Adjustments to reconcile net income to net cash provided by operating activities:    
Depreciation 13,839 13,543
Amortization 8,583 8,334
Gain on sale of property and equipment (2) (6)
Provision for doubtful accounts (858) (1,260)
Deferred income taxes 1,023 (1,546)
Unrealized foreign currency losses 867 47,773
Provision for obsolete and slow moving inventories (4,349) 3,140
Stock compensation expense 8,666 9,700
Realized gains on marketable securities (1,492) (805)
Changes in operating assets and liabilities, net of acquisitions:    
Accounts receivable 327,151 436,446
Inventories (11,067) (50,168)
Other current assets (20,372) 2,146
Accounts payable (17,573) (94,717)
Other current and non-current liabilities (190,770) (216,868)
Deferred revenue 21,826 14,286
Deferred cost (3,905) (2,752)
Income taxes payable (16,550) (4,048)
License fees (2,900) (396)
Net cash provided by operating activities 207,599 200,131
Investing activities:    
Purchases of property and equipment (7,178) (3,935)
Purchase of intangible assets (2,626) (5,029)
Purchase of marketable securities (363,263) (74,303)
Redemption of marketable securities 98,614 146,073
Change in restricted cash (112) 1,106
Net cash (used in)/provided by investing activities (274,565) 63,912
Financing activities:    
Proceeds from issuance of common stock through stock purchase plan 3,041 2,725
Stock repurchase   (47,206)
Tax benefit related to stock option exercise 787 1,408
Net cash provided by/(used in) financing activities 3,828 (43,073)
Effect of exchange rate changes on cash and cash equivalents 12,817 (21,208)
Net (decrease)/increase in cash and cash equivalents (50,321) 199,762
Cash and cash equivalents at beginning of period 1,260,936 1,091,581
Cash and cash equivalents at end of period $ 1,210,615 $ 1,291,343

Basis of Presentation
v2.2.0.25
Basis of Presentation
3 Months Ended
Mar. 26, 2011
Basis of Presentation  
Basis of Presentation
1.
Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X.  Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements.  In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included.  Operating results for the 13-week period ended March 26, 2011 is not necessarily indicative of the results that may be expected for the year ending December 31, 2011.

The condensed consolidated balance sheet at December 25, 2010 has been derived from the audited financial statements at that date but does not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements.  For further information, refer to the consolidated financial statements and footnotes thereto included in the Company's Annual Report on Form 10-K for the year ended December 25, 2010.

The Company's fiscal year is based on a 52-53 week period ending on the last Saturday of the calendar year.  Therefore the financial results of certain fiscal years, and the associated 14-week quarters, will not be exactly comparable to the prior and subsequent 52-week fiscal years and the associated quarters having only 13-weeks.  The quarters ended March 26, 2011 and March 27, 2010 both contain operating results for 13-weeks.

Inventories
v2.2.0.25
Inventories
3 Months Ended
Mar. 26, 2011
Inventories  
Inventories
2.
Inventories

The components of inventories consist of the following:

   
March 26, 2011
   
December 25, 2010
 
             
Raw Materials
  $ 135,277     $ 103,277  
Work-in-process
    42,207       43,507  
Finished goods
    264,761       278,513  
Inventory Reserves
    (31,224 )     (37,720 )
Inventory, net of reserves
  $ 411,021     $ 387,577  

Share Repurchase Plan
v2.2.0.25
Share Repurchase Plan
3 Months Ended
Mar. 26, 2011
Share Repurchase Plan  
Share Repurchase Plan
3.
Share Repurchase Plan

The Board of Directors approved a share repurchase program on February 12, 2010, authorizing the Company to purchase up to $300,000 of its common shares as market and business conditions warrant on the open market or in negotiated transactions in compliance with the SEC's Rule 10b-18.   The share repurchase authorization expires on December 31, 2011.   As of March 26, 2011, the Company had repurchased 7,366,646 shares using cash of $223,149 with all purchases made prior to fiscal 2011.  There remains approximately $76,851 available for repurchase under this authorization.
 
In addition, 522,856 shares repurchased for $16,723 prior to the Company's redomestication to Switzerland on June 27, 2010, but for which transactions settled after that date, were treated as retired when such shares were still in treasury.  These shares are reflected as additional treasury shares during the 13-weeks ended March 26, 2011 with a corresponding increase to retained earnings.

Earnings Per Share
v2.2.0.25
Earnings Per Share
3 Months Ended
Mar. 26, 2011
Earnings Per Share  
Earnings Per Share
4.
Earnings Per Share

The following table sets forth the computation of basic and diluted net income per share:
 
   
13-Weeks Ended
 
   
March 26,
   
March 27,
 
   
2011
   
2010
 
Numerator:
           
Numerator for basic and diluted net income per share - net income
  $ 95,482     $ 37,329  
                 
Denominator:
               
Denominator for basic net income per share –weighted-average common shares
    193,922       199,926  
                 
Effect of dilutive securities – employee stock options and stock appreciation rights
    798       1,165  
                 
Denominator for diluted net income per share –adjusted weighted-average common shares
    194,720       201,091  
                 
Basic net income per share
  $ 0.49     $ 0.19  
                 
Diluted net income per share
  $ 0.49     $ 0.19  
                 

There were 6,048,590 anti-dilutive options for the 13-week period ended March 26, 2011.   There were 6,239,755 anti-dilutive options for the 13-week period ended March 27, 2010.

There were 179,371 shares issued as a result of exercises of stock appreciation rights and stock options for the 13-week period ended March 26, 2011.  There were 291,714 shares issued as a result of exercises of stock appreciation rights and stock options for the 13-week period ended March 27, 2010.

Comprehensive Income
v2.2.0.25
Comprehensive Income
3 Months Ended
Mar. 26, 2011
Comprehensive Income  
Comprehensive Income
5.
Comprehensive Income

Comprehensive income is comprised of the following:

   
13-Weeks Ended
 
   
March 26,
   
March 27,
 
   
2011
   
2010
 
Net income
  $ 95,482     $ 37,329  
Translation adjustment
    32,752       8,039  
Change in fair value of available-for-sale marketable securities, net of deferred taxes
    2,614       6,364  
Comprehensive income
  $ 130,848     $ 51,732  

Segment Information
v2.2.0.25
Segment Information
3 Months Ended
Mar. 26, 2011
Segment Information  
Segment Information
6.
Segment Information

Beginning in 2011, for external reporting purposes, the Company has identified five operating segments – Auto/Mobile, Aviation, Marine, Outdoor and Fitness.  Each operating segment is individually reviewed and evaluated by our Chief Operating Decision Maker, who allocates resources and assesses performance of each segment individually.  Prior to 2011, the Outdoor and Fitness operating segments were combined into a single reportable segment due to the similar nature of those products, their production processes, the types of customers served, their distribution processes, and similar economic conditions.  Management re-evaluated the combination of these operating segments and determined that based on the growth of these segments they should now be reported as two distinct reportable segments.

Net sales, operating income, and income before taxes for each of the Company's reportable segments are presented below:
 
   
Reportable Segments
 
                     
Auto/
             
   
Outdoor
   
Fitness
   
Marine
   
Mobile
   
Aviation
   
Total
 
13-Weeks Ended March 26, 2011
                                   
                                     
Net sales
  $ 66,450     $ 56,367     $ 51,308     $ 264,550     $ 69,159     $ 507,834  
Operating income
  $ 24,807     $ 15,457     $ 15,133     $ 1,595     $ 17,761     $ 74,753  
Income before taxes
  $ 28,187     $ 18,497     $ 18,430     $ 11,656     $ 20,156     $ 96,926  
                                                 
13-Weeks Ended March 27, 2010
                                               
                                                 
Net sales
  $ 59,386     $ 43,350     $ 41,314     $ 220,924     $ 66,093     $ 431,067  
Operating income
  $ 24,369     $ 14,199     $ 8,929     $ 16,982     $ 18,869     $ 83,348  
Income/(loss) before taxes
  $ 20,106     $ 11,059     $ 6,628     $ (10,256 )   $ 17,986     $ 45,523  

Allocation of certain research and development expenses, and selling, general, and administrative expenses are made to each segment on a percent of revenue basis.

Net sales and property and equipment, net by geographic area are as follows as of and for the 13-week periods ended March 26, 2011 and March 27, 2010:

   
North
                   
   
America
   
Asia
   
Europe
   
Total
 
March 26, 2011
                       
Net sales to external customers
  $ 279,967     $ 57,127     $ 170,740     $ 507,834  
Long lived assets
  $ 231,021     $ 146,425     $ 49,664     $ 427,110  
                                 
March 27, 2010
                               
Net sales to external customers
  $ 243,407     $ 42,683     $ 144,977     $ 431,067  
Long lived assets
  $ 230,072     $ 150,682     $ 51,852     $ 432,606  

Warranty Reserves
v2.2.0.25
Warranty Reserves
3 Months Ended
Mar. 26, 2011
Warranty Reserves  
Warranty Reserves
7.
Warranty Reserves
 
The Company's products sold are generally covered by a warranty for periods ranging from one to three years.   The Company's estimate of costs to service its warranty obligations are based on historical experience and expectation of future conditions and are recorded as a liability on the balance sheet.   The following reconciliation provides an illustration of changes in the aggregate warranty reserve.
 
   
13-Weeks Ended
 
   
March 26,
   
March 27,
 
   
2011
   
2010
 
             
Balance - beginning of the period
  $ 49,885     $ 87,424  
Accrual for products sold during the period
    20,391       14,914  
Expenditures
    (26,246 )     (21,748 )
Change in accrual for products sold in prior periods
    -       (21,776 )
Balance - end of the period
  $ 44,030     $ 58,814  

The 13-weeks ended March 27, 2010 include the effect of a change in estimate in the warranty reserves which decreased the accrual for the period by $21,776.

Income Taxes
v2.2.0.25
Income Taxes
3 Months Ended
Mar. 26, 2011
Income Taxes  
Income Taxes
8.     Income Taxes

Our earnings before taxes increased 113% when compared to the same quarter in 2010, while our income tax expense decreased by $6,750, to $1,444 for the 13-week period ended March 26, 2011, from $8,194 for the 13-week period ended March 27, 2010.  The effective tax rate was 1.5% in the first quarter of 2011 and 18.0% in the first quarter of 2010.  The change in the effective tax rate was primarily driven by the release of reserves related to the expiration of certain statutes for Garmin and lower U.S reserves provided in 2011 following favorable audits in both 2010 and 2011.

Fair Value Measurements
v2.2.0.25
Fair Value Measurements
3 Months Ended
Mar. 26, 2011
Fair Value Measurements  
Fair Value Measurements
9.   Fair Value Measurements

 
The Accounting Standards Codification (ASC) defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (exit price).  The ASC classifies the inputs used to measure fair value into the following hierarchy:
 
Level 1
Unadjusted quoted prices in active markets for identical assets or liability
 
Level 2
Unadjusted quoted prices in active markets for similar assets or liabilities
 
Level 3
Unobservable inputs for the asset or liability
 
The Company endeavors to utilize the best available information in measuring fair value.  Financial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement.
 
For fair value measurements using significant unobservable inputs, an independent third party provided the valuation.  The collateral composition was used to estimate weighted average life based on historical and projected payment information.  Cash flows were projected for the issuing trusts, taking into account underlying loan principal, bonds outstanding, and payout formulas.  Taking this information into account, assumptions were made as to the yields likely to be required, based upon then current market conditions for comparable or similar term asset based securities as well as other fixed income securities.
 
Assets and liabilities measured at estimated fair value on a recurring basis are summarized below:
 
   
Fair Value Measurements as of March 26, 2011
 
Description
 
Total
   
Level 1
   
Level 2
   
Level 3
 
Available for-sale securities
  $ 1,048,552     $ 1,048,552     $ -     $ -  
Failed Auction rate securities
    20,552       -       -       20,552  
Total
  $ 1,069,104     $ 1,048,552     $ -     $ 20,552  
                                 
   
Fair Value Measurements as of December 25, 2010
 
Description
 
Total
   
Level 1
   
Level 2
   
Level 3
 
Available for-sale securities
  $ 781,257     $ 781,257     $ -     $ -  
Failed Auction rate securities
    20,562       -       -       20,562  
Total
  $ 801,819     $ 781,257     $ -     $ 20,562  
 
All Level 3 investments have been in a continuous unrealized loss position for 12 months or longer.  However, it is the Company's intent to hold these securities until they recover their value.  For assets and liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) during the period, the ASC requires a reconciliation of the beginning and ending balances, separately for each major category of assets.  The reconciliation is as follows:

   
Fair Value Measurements Using
Significant Unobservable Inputs
(Level 3)
 
   
13 weeks Ended March 26, 2011
 
Beginning balance of auction rate securities
  $ 20,562  
Purchases in and/or sales out of Level 3
    (250 )
Total unrealized gains/(losses) included in other comprehensive income
    240  
Transfers in and/or out of Level 3
    -  
Ending balance of auction rate securities
  $ 20,552  
 
The following is a summary of the company's marketable securities classified as available-for-sale securities at March 26, 2011:
 
   
Amortized Cost
   
Gross Unrealized
Gains
   
Gross
Unrealized
Losses
   
Other Than
Temporary
Impairment
   
Estimated Fair
Value (Net
Carrying
Amount)
 
Mortgage-backed securities
  $ 601,784     $ 2,838     $ -     $ -     $ 604,622  
Auction Rate Securities
    25,423       -       (4,871 )     -       20,552  
Obligations of states and political subdivisions
    316,081       626       (3,622 )     -       313,085  
U.S. corporate bonds
    88,962       1,241       (204 )     (1,274 )     88,725  
Other
    39,587       2,533       -       -       42,120  
Total
  $ 1,071,837     $ 7,238     $ (8,697 )   $ (1,274 )   $ 1,069,104  
 
The following is a summary of the company's marketable securities classified as available-for-sale securities at December 25, 2010:
  
   
Amortized Cost
   
Gross Unrealized
Gains
   
Gross
Unrealized
Losses
   
Other Than
Temporary
Impairment
   
Estimated Fair
Value (Net
Carrying
Amount)
 
Mortgage-backed securities
  $ 527,249     $ 1,913     $ (1,520 )   $ -     $ 527,642  
Auction Rate Securities
    25,599       -       (5,037 )     -       20,562  
Obligations of states and political subdivisions
    160,618       347       (3,340 )     -       157,625  
U.S. corporate bonds
    54,348       637       (185 )     (1,274 )     53,526  
Other
    39,838       2,626       -       -       42,464  
Total
  $ 807,652     $ 5,523     $ (10,082 )   $ (1,274 )   $ 801,819  
 
The cost of securities sold is based on the specific identification method.
 
The amortized cost and estimated fair value of marketable securities at March 26, 2011, by contractual maturity, are shown below. Expected maturities will differ from contractual maturities because the issuers of the securities may have the right to prepay obligations without prepayment penalties.
 
         
Estimated
 
   
Cost
   
Fair Value
 
             
Due in one year or less
  $ 41,377     $ 41,722  
Due after one year through five years
    359,637       360,035  
Due after five years through ten years
    273,169       268,983  
Due after ten years
    362,909       361,450  
Other (No contractual maturity dates)
    34,744       36,914  
    $ 1,071,836     $ 1,069,104  

Subsequent Events
v2.2.0.25
Subsequent Events
3 Months Ended
Mar. 26, 2011
Subsequent Events  
Subsequent Events
10. Subsequent Events
 
On April 26, 2011, Garmin Ltd. announced its intent to acquire Garmin Distribution Africa (Pty) Ltd. (GDA), the distributor of Garmin's automotive, outdoor recreation, fitness and marine products in Southern Africa.  This acquisition is not expected to be material.