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Document and Entity Information - USD ($)
$ in Thousands
 12 Months Ended
Dec. 29, 2018
Feb. 15, 2019
Jun. 30, 2018
Document And Entity Information      
Entity Registrant Name GARMIN LTD    
Entity Central Index Key 0001121788    
Document Type 10-K    
Trading Symbol GRMN    
Document Period End Date Dec. 29, 2018    
Amendment Flag false    
Current Fiscal Year End Date --12-29    
Entity a Well-known Seasoned Issuer Yes    
Entity a Voluntary Filer No    
Entity's Reporting Status Current Yes    
Entity Small Business false    
Entity Filer Category Large Accelerated Filer    
Entity Emerging Growth Company false    
Entity Ex Transition Period false    
Entity Shell Company false    
Entity Public Float     $ 7,753,502,173
Entity Common Stock, Shares Outstanding   198,077,418  
Document Fiscal Period Focus FY    
Document Fiscal Year Focus 2018    
Consolidated Balance Sheets - USD ($)
$ in Thousands
Dec. 29, 2018
Dec. 30, 2017
Current assets:    
Cash and cash equivalents $ 1,201,732 $ 891,488
Marketable securities (Note 3) 182,989 161,687
Accounts receivable, less allowance for doubtful accounts of $5,487 in 2018 and $4,168 in 2017 569,833 590,882
Inventories 561,840 517,644
Deferred costs 28,462 30,525
Prepaid expenses and other current assets 120,512 153,912
Total current assets 2,665,368 2,346,138
Property and equipment, net    
Land and improvements 131,689 114,701
Building and improvements 539,177 482,794
Office furniture and equipment 264,818 246,107
Manufacturing equipment 162,077 156,119
Engineering equipment 154,742 141,321
Vehicles 20,991 21,115
Property and equipment, gross 1,273,494 1,162,157
Accumulated depreciation (609,967) (566,473)
Property and equipment, net 663,527 595,684
Restricted cash (Note 4) 73 271
Marketable securities (Note 3) 1,330,123 1,260,033
Deferred income taxes (Note 6) 176,959 195,981
Noncurrent deferred costs 29,473 33,029
Intangible assets, net 417,080 409,801
Other assets 100,255 107,352
Total assets 5,382,858 4,948,289
Current liabilities:    
Accounts payable 204,985 169,640
Salaries and benefits payable 113,087 102,802
Accrued warranty costs 38,276 36,827
Accrued sales program costs 90,388 93,250
Deferred revenue 96,372 103,140
Accrued royalty costs 24,646 32,204
Accrued advertising expense 31,657 30,987
Other accrued expenses 69,777 93,652
Income taxes payable 51,642 33,638
Dividend payable 200,483 95,975
Total current liabilities 921,313 792,115
Deferred income taxes (Note 6) 92,944 76,612
Noncurrent income taxes 127,211 138,295
Noncurrent deferred revenue 76,566 87,060
Other liabilities 1,850 1,788
Stockholders' equity:    
Shares, CHF 0.10 par value, 198,077 shares authorized and issued, 189,461 shares outstanding at December 29, 2018; and 188,189 shares outstanding at December 30, 2017; (Notes 9, 10, and 11): 17,979 17,979
Additional paid-in capital 1,823,638 1,828,386
Treasury stock (397,692) (468,818)
Retained earnings 2,710,619 2,418,444
Accumulated other comprehensive income 8,430 56,428
Total stockholders' equity 4,162,974 3,852,419
Total liabilities and stockholders' equity $ 5,382,858 $ 4,948,289
Consolidated Balance Sheets (Parenthetical)
$ in Thousands
Dec. 29, 2018
USD ($)
shares
Dec. 29, 2018
SFr / shares
Dec. 30, 2017
USD ($)
shares
Dec. 30, 2017
SFr / shares
Allowance for doubtful accounts | $ $ 5,487   $ 4,168  
Common shares, authorized 198,077   198,077  
Common shares, issued 198,077   198,077  
Common shares, outstanding 189,461   188,189  
CHF [Member]        
Common shares, par value (in swiss francs per share) | SFr / shares   SFr 0.10   SFr 0.10
Consolidated Statements of Income - USD ($)
$ in Thousands
 12 Months Ended
Dec. 29, 2018
Dec. 30, 2017
Dec. 31, 2016
Income Statement [Abstract]      
Net sales [1] $ 3,347,444 $ 3,121,560 $ 3,045,797
Cost of goods sold 1,367,725 1,323,619 1,357,272
Gross profit 1,979,719 1,797,941 1,688,525
Advertising expense 155,394 164,693 177,143
Selling, general and administrative expenses 478,177 437,977 410,558
Research and development expense 567,805 511,634 467,960
Total operating expense 1,201,376 1,114,304 1,055,661
Operating income 778,343 683,637 632,864
Other income (expense):      
Interest income 47,147 36,925 33,406
Foreign currency losses (7,616) (22,579) (31,651)
Other income (expense) 5,373 (912) 4,006
Total other income (expense) 44,904 13,434 5,761
Income before income taxes 823,247 697,071 638,625
Income tax provision (benefit): (Note 6)      
Current 93,424 79,234 117,842
Deferred 35,743 (91,170) 3,059
Income tax provision (benefit) 129,167 (11,936) 120,901
Net income $ 694,080 $ 709,007 $ 517,724
Basic net income per share (Note 10) (in dollars per share) $ 3.68 $ 3.77 $ 2.74
Diluted net income per share (Note 10) (in dollars per share) $ 3.66 $ 3.76 $ 2.73
[1] The U.S. is the only country which constitutes greater than 10% of net sales to external customers.
Consolidated Statements of Comprehensive Income - USD ($)
$ in Thousands
 12 Months Ended
Dec. 29, 2018
Dec. 30, 2017
Dec. 31, 2016
Statement of Comprehensive Income [Abstract]      
Net income $ 694,080 $ 709,007 $ 517,724
Foreign currency translation adjustment (31,965) 88,965 4,434
Change in fair value of available-for-sale marketable securities, net of deferred taxes (15,581) 4,486 (11,029)
Comprehensive income $ 646,534 $ 802,458 $ 511,129
Consolidated Statements of Stockholders' Equity - USD ($)
$ in Thousands
Common Stock [Member]
Additional Paid-In Capital [Member]
Treasury Stock [Member]
Retained Earnings [Member]
Accumulated Other Comprehensive Income (Loss) [Member]
Total
Balance at beginning at Dec. 26, 2015 $ 1,797,435 $ 62,239 $ (414,637) $ 1,959,125 $ (30,428) $ 3,373,734
Increase (Decrease) in Stockholders' Equity [Roll Forward]            
Net income 517,724 517,724
Translation adjustment 4,434 4,434
Adjustment related to unrealized gains (losses) on available-for-sale securities net of income tax effects (11,029) (11,029)
Comprehensive income           511,129
Dividends declared (384,629) (384,629)
Tax benefit from issuance of equity awards (6,309) (6,309)
Issuance of treasury stock related to equity awards (40,589) 59,237 18,648
Stock compensation 41,250 41,250
Purchase of treasury stock related to equity awards (7,331) (7,331)
Purchase of treasury stock under share repurchase plan (93,233) (93,233)
Reduction in par value of Common Stock (1,779,456) 1,779,456
Balance at end at Dec. 31, 2016 17,979 1,836,047 (455,964) 2,092,220 (37,023) 3,453,259
Increase (Decrease) in Stockholders' Equity [Roll Forward]            
Net income 709,007 709,007
Translation adjustment 88,965 88,965
Adjustment related to unrealized gains (losses) on available-for-sale securities net of income tax effects 4,486 4,486
Comprehensive income           802,458
Dividends declared (382,783) (382,783)
Issuance of treasury stock related to equity awards (52,581) 74,442 21,861
Stock compensation 44,735 44,735
Purchase of treasury stock related to equity awards 185 (12,773) (12,588)
Purchase of treasury stock under share repurchase plan (74,523) (74,523)
Balance at end at Dec. 30, 2017 17,979 1,828,386 (468,818) 2,418,444 56,428 3,852,419
Increase (Decrease) in Stockholders' Equity [Roll Forward]            
Net income 694,080 694,080
Translation adjustment (31,965) (31,965)
Adjustment related to unrealized gains (losses) on available-for-sale securities net of income tax effects (15,581) (15,581)
Comprehensive income           646,534
Dividends declared (400,657) (400,657)
Issuance of treasury stock related to equity awards (61,139) 87,781 26,642
Stock compensation 56,391 56,391
Purchase of treasury stock related to equity awards (16,655) (16,655)
Reclassification under ASU (Accounting Standards Update 2016-16 [Member]) at Dec. 29, 2018 (1,700) (1,700)
Reclassification under ASU (Accounting Standards Update 2018-02 [Member]) at Dec. 29, 2018 452 (452)
Balance at end at Dec. 29, 2018 $ 17,979 $ 1,823,638 $ (397,692) $ 2,710,619 $ 8,430 $ 4,162,974
Consolidated Statements of Stockholders' Equity (Parenthetical) - USD ($)
$ in Thousands
 12 Months Ended
Dec. 29, 2018
Dec. 30, 2017
Dec. 31, 2016
Statement of Stockholders' Equity [Abstract]      
Adjustment related to unrealized gains (losses) on available-for-sale securities income tax effects $ 2,174 $ 493 $ 1,094
Consolidated Statements of Cash Flows - USD ($)
$ in Thousands
 12 Months Ended
Dec. 29, 2018
Dec. 30, 2017
Dec. 31, 2016
Operating Activities:      
Net income $ 694,080 $ 709,007 $ 517,724
Adjustments to reconcile net income to net cash provided by operating activities:      
Depreciation 64,798 59,895 55,796
Amortization 31,396 26,357 30,544
Gain on sale of property and equipment (479) (230) (503)
Provision for doubtful accounts 2,123 1,021 4,136
Provision for obsolete and slow-moving inventories 24,579 31,071 26,458
Unrealized foreign currency losses 13,790 21,681 13,125
Deferred income taxes 38,978 (90,000) 3,745
Stock compensation expense 56,391 44,735 41,250
Realized losses (gains) on marketable securities 827 991 (822)
Changes in operating assets and liabilities, net of acquisitions:      
Accounts receivable 5,167 (40,088) 9,000
Inventories (82,316) (38,575) (2,455)
Other current and non-current assets 7,358 (21,608) 2,234
Accounts payable 40,628 (17,240) (11,496)
Other current and non-current liabilities (1,323) 5,627 44,766
Deferred revenue (17,208) (20,754) (32,733)
Deferred costs 5,611 2,395 1,896
Income taxes payable 35,120 (13,443) 3,017
Net cash provided by operating activities 919,520 660,842 705,682
Investing activities:      
Purchases of property and equipment (155,755) (139,696) (90,960)
Proceeds from sale of property and equipment 1,600 361 676
Purchase of intangible assets (4,600) (12,232) (5,715)
Purchase of marketable securities (403,181) (587,656) (905,089)
Redemption of marketable securities 283,603 635,311 957,350
Acquisitions, net of cash acquired (29,170) (90,471) (77,945)
Net cash used in investing activities (307,503) (194,383) (121,683)
Financing activities:      
Dividends (296,148) (382,976) (481,452)
Tax benefit from issuance of equity awards 1,692
Proceeds from issuance of treasury stock related to equity awards 26,642 21,860 18,648
Purchase of treasury stock related to equity awards (16,655) (12,773) (7,331)
Purchase of treasury stock under share repurchase plan (74,523) (93,233)
Net cash used in financing activities (286,161) (448,412) (561,676)
Effect of exchange rate changes on cash and cash equivalents (15,810) 26,716 (8,656)
Net increase in cash, cash equivalents, and restricted cash 310,046 44,763 13,667
Cash, cash equivalents, and restricted cash at beginning of year 891,759 846,996 833,329
Cash, cash equivalents, and restricted cash at end of year 1,201,805 891,759 846,996
Supplemental disclosures of cash flow information      
Cash paid during the year for income taxes 67,592 106,146 115,548
Cash received during the year from income tax refunds 6,122 3,806 4,275
Supplemental disclosure of non-cash investing and financing activities      
(Decrease) increase in accrued capital expenditures related to purchases of property and equipment (14,647) 13,864 2,154
Change in marketable securities related to unrealized (depreciation) appreciation (17,755) 4,979 (12,123)
Fair value of assets acquired 31,920 128,190 91,620
Liabilities assumed (2,273) (29,587) (6,344)
Less: cash acquired (477) (8,132) (7,331)
Cash paid for acquisitions, net of cash acquired $ 29,170 $ 90,471 $ 77,945
Description of the Business
 12 Months Ended
Dec. 29, 2018
Organization, Consolidation and Presentation of Financial Statements [Abstract]  
Description of the Business

1. Description of the Business

 

Garmin Ltd. and subsidiaries (together, the “Company”) design, develop, manufacture, market, and distribute a diverse family of hand-held, wrist-based, portable, and fixed-mount Global Positioning System (GPS)-enabled products and other navigation, communications, information and sensor-based products. Garmin Corporation (GC) is primarily responsible for the manufacturing and distribution of the Company’s products to the Company’s subsidiaries and, to a lesser extent, new product development and sales and marketing of the Company’s products in Asia and the Far East. Garmin International, Inc. (GII) is primarily responsible for sales and marketing of the Company’s products in the Americas region and for most of the Company’s research and new product development. GII also manufactures most of the Company’s products in the aviation segment. Garmin (Europe) Ltd. (GEL) is responsible for sales and marketing of the Company’s products in Europe, the Middle East and Africa (EMEA). Many of GEL’s sales are to other Company-owned distributors in the EMEA region.
Summary of Significant Accounting Policies
 12 Months Ended
Dec. 29, 2018
Accounting Policies [Abstract]  
Summary of Significant Accounting Policies

2. Summary of Significant Accounting Policies

 

Basis of Presentation and Principles of Consolidation

 

The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States. The accompanying consolidated financial statements reflect the accounts of Garmin Ltd. and its wholly-owned subsidiaries. All significant inter-company balances and transactions have been eliminated.

 

As previously announced and discussed below within the “Recently Adopted Accounting Standards” section of this footnote, effective beginning in the 2018 fiscal year, we adopted the requirements of Accounting Standards Update (“ASU”) No. 2014-09, Revenue from Contracts with Customers (Topic 606), using the full retrospective method. All amounts and disclosures set forth in this Form 10-K reflect these changes. Further, as a result of the adoption of certain other accounting standards described below, effective beginning in the 2018 fiscal year, certain amounts in prior periods have been reclassified to conform to the current period presentation.

 

Fiscal Year

 

The Company’s fiscal year is based on a 52-53-week period ending on the last Saturday of the calendar year. Due to the fact that there are not exactly 52 weeks in a calendar year, and there is slightly more than one additional day per year (not including the effects of leap year) in each calendar year as compared to a 52-week fiscal year, the Company will have a fiscal year comprising 53 weeks in certain fiscal years, as determined by when the last Saturday of the calendar year occurs.

 

In those resulting fiscal years that have 53 weeks, the Company will record an extra week of sales, costs, and related financial activity. Therefore, the financial results of those 53-week fiscal years, and the associated 14-week fourth quarters, will not be entirely comparable to the prior and subsequent 52-week fiscal years and the associated 13-week quarters. Fiscal years 2018 and 2017 included 52 weeks while fiscal 2016 included 53 weeks.

 

Use of Estimates

 

The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results could differ from those estimates.

  

Foreign Currency

 

Many Garmin Ltd. subsidiaries utilize currencies other than the United States Dollar (USD) as their functional currency. As required by the Foreign Currency Matters topic of the Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC), the financial statements of these subsidiaries for all periods presented have been translated into USD, the functional currency of Garmin Ltd., and the reporting currency herein, for purposes of consolidation at rates prevailing during the year for sales, costs, and expenses and at end-of-year rates for all assets and liabilities. The effect of this translation is recorded in a separate component of stockholders’ equity. Cumulative currency translation adjustments of $47,327 and $79,292 as of December 29, 2018 and December 30, 2017, respectively, have been included in accumulated other comprehensive income in the accompanying consolidated balance sheets.

 

Transactions in foreign currencies are recorded at the approximate rate of exchange at the transaction date. Assets and liabilities resulting from these transactions are translated at the rate of exchange in effect at the balance sheet date. The majority of the Company’s consolidated foreign currency gain or loss is typically driven by the significant cash and marketable securities, receivables, and payables held in a currency other than the functional currency at a given legal entity. Net foreign currency losses recorded in results of operations were $7,616, $22,579, and $31,651 for the years ended December 29, 2018, December 30, 2017, and December 31, 2016, respectively. The loss in fiscal 2018 was due primarily to the USD strengthening against the Euro and British Pound Sterling, offset by the USD strengthening against the Taiwan Dollar. The loss in fiscal 2017 was due primarily to the USD weakening against the Taiwan Dollar, which was partially offset by the USD weakening against the Euro and British Pound Sterling. The loss in fiscal 2016 was due primarily to the USD weakening against the Taiwan Dollar and the USD strengthening against the Euro and British Pound Sterling.

 

Earnings Per Share

 

Basic earnings per share amounts are computed based on the weighted-average number of common shares outstanding. For purposes of diluted earnings per share, the number of shares that would be issued from the exercise of dilutive share-based compensation awards has been reduced by the number of shares which could have been purchased from the proceeds of the exercise or release at the average market price of the Company’s stock during the period the awards were outstanding. See Note 10.

 

Cash, Cash Equivalents, and Restricted Cash

 

Cash and cash equivalents include cash on hand, operating accounts, money market funds, deposits readily convertible to known amounts of cash, and securities with maturities of three months or less when purchased. The carrying amount of cash and cash equivalents approximates fair value, given the short maturity of those instruments. Restricted cash is reported separately from cash and cash equivalents on the consolidated balance sheets. See Note 4 for additional information on restricted cash.

 

The total of cash and cash equivalents and restricted cash balances presented on the consolidated balance sheet reconciles to the total cash, cash equivalents, and restricted cash shown in the consolidated statements of cash flows.

 

Trade Accounts Receivable

 

The Company sells its products to retailers, wholesalers, and other customers and extends credit based on its evaluation of the customer’s financial condition.  Potential losses on receivables are dependent on each individual customer’s financial condition. The Company carries its trade accounts receivable at net realizable value. Typically, its accounts receivable are collected within 80 days and do not bear interest. The Company monitors its exposure to losses on receivables and maintains allowances for potential losses or adjustments. The Company determines these allowances by (1) evaluating the aging of its receivables and (2) reviewing its high-risk customers. Past due receivable balances are written off when internal collection efforts have been unsuccessful in collecting the amount due. The Company maintains trade credit insurance to provide security against large losses.

 

Concentration of Credit Risk

 

The Company grants credit to certain customers who meet the Company’s pre-established credit requirements. Generally, the Company does not require security when trade credit is granted to customers. Credit losses are provided for in the Company’s consolidated financial statements and typically have been within management’s expectations. Certain customers are allowed extended terms consistent with normal industry practice. Most of these extended terms can be classified as either relating to seasonal sales variations or to the timing of new product releases by the Company.

 

The Company’s top ten customers have contributed between 21% and 24% of net sales annually since 2016. None of the Company’s customers accounted for more than or equal to 10% of consolidated net sales in the years ended December 29, 2018, December 30, 2017, and December 31, 2016, respectively.

 

Inventories

 

Inventories are stated at the lower of cost or market with cost being determined on a first-in, first-out (FIFO) basis. The Company writes down its inventory for estimated obsolescence or unmarketable inventory equal to the difference between the cost of inventory and the estimated net realizable value based upon assumptions about future demand and market conditions. If actual market conditions are less favorable than those projected by management, additional inventory write-downs may be required. Inventories consisted of the following:

 

    December 29, 2018     December 30, 2017  
Raw materials   $ 205,696     $ 179,659  
Work-in-process     96,564       75,754  
Finished goods     259,580       262,231  
Inventories   $ 561,840     $ 517,644  

  

Property and Equipment

 

Property and equipment are recorded at cost and typically depreciated using the straight-line method over the following estimated useful lives:

 

Buildings and improvements 39-50
Office furniture and equipment 3-5
Manufacturing and engineering equipment 5-10
Vehicles 5

 

As required by the Property, Plant and Equipment topic of the FASB ASC, the Company reviews property and equipment assets for impairment whenever events or changes in circumstances indicate the carrying amount of an asset or asset group may not be fully recoverable. The carrying amount of a long-lived asset is not recoverable if it exceeds the sum of the undiscounted cash flows expected to result from the use and eventual disposition of the asset. That assessment is based on the carrying amount of the asset at the date it is tested for recoverability. An impairment loss is measured as the amount by which the carrying amount of a long-lived asset exceeds its fair value.

 

Intangible Assets

 

At December 29, 2018, and December 30, 2017, the Company had patents, customer related intangibles and other identifiable finite-lived intangible assets recorded at a cost of $330,532 and $316,705, respectively. Identifiable, finite-lived intangible assets are amortized over their estimated useful lives on a straight-line basis typically over three to ten years. Accumulated amortization was $214,469 and $193,886 at December 29, 2018 and December 30, 2017, respectively. Amortization expense on these intangible assets was $21,796, $20,863, and $14,319 for the years ended December 29, 2018, December 30, 2017, and December 31, 2016, respectively. In the next five years, the amortization expense is estimated to be $17,107, $15,125, $11,674, $9,390, and $8,452, respectively.

  

The Company’s excess purchase cost over fair value of net assets acquired (goodwill) was $301,017 at December 29, 2018, and $286,982 at December 30, 2017.

  

    December 29, 2018     December 30, 2017  
Goodwill balance at beginning of year   $ 286,982     $ 224,553  
Acquisitions     16,768       58,332  
Finalization of purchase price allocations and effect of foreign currency translation     (2,733 )     4,097  
Goodwill balance at end of year   $ 301,017     $ 286,982  

 

The Intangibles – Goodwill and Other topic of the FASB ASC (ASC Topic 350) requires that goodwill and intangible assets with indefinite useful lives should not be amortized but rather be tested for impairment at least annually or sooner whenever events or changes in circumstances indicate that they may be impaired. The Company performs its annual goodwill and intangible asset impairment tests in the fourth quarter of each year. ASC Topic 350 allows management to first perform a qualitative assessment (“step zero”) by assessing the qualitative factors of relevant events and circumstances at the reporting unit level to determine if it is necessary to perform the quantitative goodwill impairment test (“step one”). If factors indicate that it is more likely than not that the fair value of the reporting unit is less than the carrying amount, then the step one assessment will be performed. If the fair value of the reporting unit is less than the carrying amount in step one, then goodwill impairment will be recognized, and the charge is determined through the “step two” analysis.

 

Each of the Company’s operating segments (auto PND, auto OEM, aviation, marine, outdoor, and fitness) represents a distinct reporting unit. The auto PND market has declined in recent years as competing technologies have emerged and market saturation has occurred. This has resulted in periods of lower revenues and profits for the Company’s auto PND reporting unit. Considering these qualitative factors, management performed a step one quantitative goodwill impairment assessment of the auto PND reporting unit in the fourth quarter of 2018. Management determined that the fair value of the reporting unit was substantially in excess of its carrying amount, and a step two analysis was therefore not performed. However, considering the uncertainty of future operating results and/or market conditions deteriorating faster or more drastically than the forecasts utilized in management’s estimation of fair value, management believes some or all of the approximately $80 million of goodwill associated with the Company’s auto PND reporting unit is at risk of future impairment. Management concluded that no other reporting units are currently at risk of impairment.

 

The Company did not recognize any material goodwill or intangible asset impairment charges in 2018, 2017, or 2016.

 

Dividends

 

Under Swiss corporate law, dividends must be approved by shareholders at the general meeting of the Company’s shareholders.

 

On June 8, 2018, the shareholders approved a dividend of $2.12 per share (of which, $1.06 was paid in the Company’s 2018 fiscal year) payable in four equal installments on dates determined by the Board of Directors. The dates determined by the Board were as follows:

  

Dividend Date   Record Date   $s per share  
June 29, 2018   June 18, 2018   $ 0.53  
September 28, 2018   September 14, 2018   $ 0.53  
December 31, 2018   December 14, 2018   $ 0.53  
March 29, 2019   March 15, 2019   $ 0.53  

 

The Company paid dividends in 2018 in the amount of $296,148, which included three dividend distributions in the fiscal year. Both the dividends paid and the remaining dividend payable were reported as a reduction of retained earnings.

 

On June 9, 2017, the shareholders approved a dividend of $2.04 per share (of which, $1.53 was paid in the Company’s 2017 fiscal year) payable in four equal installments on dates determined by the Board of Directors. The dates determined by the Board were as follows:

  

Dividend Date   Record Date   $s per share  
June 30, 2017   June 19, 2017   $ 0.51  
September 29, 2017   September 15, 2017   $ 0.51  
December 29, 2017   December 15, 2017   $ 0.51  
March 30, 2018   March 15, 2018   $ 0.51  

 

The Company paid dividends in 2017 in the amount of $382,976, which included four dividend distributions in the fiscal year. Both the dividends paid and the remaining dividend payable were reported as a reduction of retained earnings.

 

On June 10, 2016, the shareholders approved a dividend of $2.04 per share (of which, $1.53 was paid in the Company’s 2016 fiscal year) payable in four equal installments on dates determined by the Board of Directors. The dates determined by the Board were as follows:

 

Dividend Date   Record Date   $s per share  
June 30, 2016   June 16, 2016   $ 0.51  
September 30, 2016   September 15, 2016   $ 0.51  
December 30, 2016   December 14, 2016   $ 0.51  
March 31, 2017   March 15, 2017   $ 0.51  

 

The Company paid dividends in 2016 in the amount of $481,452, which included five dividend distributions in the fiscal year. Both the dividends paid and the remaining dividend payable were reported as a reduction of retained earnings.

 

Approximately $61,129 and $304,674 of retained earnings was indefinitely restricted from distribution to stockholders pursuant to the laws of Taiwan at December 29, 2018 and December 30, 2017, respectively.

 

Marketable Securities

 

Management determines the appropriate classification of marketable securities at the time of purchase and reevaluates such designation as of each balance sheet date.

 

All of the Company’s marketable securities were considered available-for-sale at December 29, 2018. Available-for-sale securities are stated at fair value, with the unrealized gains and losses, net of tax, reported in other comprehensive income. At December 29, 2018 and December 30, 2017, cumulative unrealized net losses of $38,897 and $22,864, respectively, were reported in accumulated other comprehensive income, net of related taxes.

 

Investments are reviewed periodically to determine if they have suffered an impairment of value that is considered other than temporary. If investments are determined to be impaired, a loss is recognized at the date of determination.

 

Testing for impairment of investments requires significant management judgment. The identification of potentially impaired investments, the determination of their fair value, and the assessment of whether any decline in value is other than temporary are the key judgment elements. The discovery of new information and the passage of time can significantly change these judgments. Revisions of impairment judgments are made when new information becomes known, and any resulting impairment adjustments are made at that time. The economic environment and volatility of securities markets increase the difficulty of determining fair value and assessing investment impairment.

 

The amortized cost of debt securities classified as available-for-sale is adjusted for amortization of premiums and accretion of discounts to maturity, or in the case of mortgage-backed securities, over the estimated life of the security. Such amortization is included in interest income from investments. Realized gains and losses, and credit declines in value judged to be other-than-temporary are included in other income. The cost of securities sold is based on the specific identification method.

 

Investments are discussed in detail in Note 3 of the Notes to Consolidated Financial Statements.

 

Income Taxes

 

The Company accounts for income taxes using the liability method in accordance with the FASB ASC 740 topic Income Taxes. The liability method provides that deferred tax assets and liabilities are recorded based on the difference between the tax bases of assets and liabilities and their carrying amount for financial reporting purposes as measured based on the enacted tax rates and laws that will be in effect when the differences are expected to reverse. The Company records a valuation allowance to reduce deferred tax assets to the amount that is believed more likely than not to be realized.

 

The Company accounts for uncertainty in income taxes in accordance with the FASB ASC 740 topic Income Taxes.  The Company recognizes liabilities based on our estimate of whether, and the extent to which, additional taxes will be due. If payment of these amounts ultimately proves not to be required, the reversal of the liabilities would result in tax benefits being recognized in the period when the Company determines the liabilities are no longer necessary. If the Company’s estimate of tax liabilities proves to be less than the ultimate assessment, a further charge to expense would result.

 

Income taxes are discussed in detail in Note 6 of the Notes to Consolidated Financial Statements.

 

Revenue Recognition

 

The Company recognizes revenue upon the transfer of control of promised products or services to the customer in an amount that depicts the consideration the Company expects to be entitled to for the related products or services.   For the large majority of the Company’s sales, transfer of control occurs once product has shipped and title and risk of loss have transferred to the customer. The Company offers certain tangible products with ongoing services promised over a period of time, typically the useful life of the related tangible product. When we have identified such services as both capable of being distinct and separately identifiable from the related tangible product, the associated revenue allocated to such services is recognized over time.  The Company generally does not offer specified or unspecified upgrade rights to its customers in connection with software sales.

 

For products that include tangible hardware that contains software essential to the tangible product’s functionality and ongoing services identified as separately identifiable performance obligations, the Company allocates revenue to all performance obligations based on their relative standalone selling prices (“SSP”), with the amounts allocated to ongoing services deferred and recognized over a period of time. These ongoing services primarily consist of the Company’s contractual promises to provide personal navigation device (PND) users with lifetime map updates (LMU) and server-based traffic services. In addition, we provide map update services (map care) over a contractual period in certain hardware and software contracts with original equipment manufacturers (OEMs). The Company has determined that directly observable prices do not exist for LMU, map care, or server-based traffic, as stand-alone and unbundled unit sales do not occur on more than a limited basis. Therefore, the Company uses the expected cost plus a margin as the primary indicator to calculate relative SSP of the LMU, map care, and traffic performance obligations. The revenue and associated costs allocated to the LMU, map care, and/or the server-based traffic service are deferred and recognized ratably over the estimated life of the products of approximately 3 years for PNDs, or the estimated map care period in OEM contracts of 3-10 years as we believe our efforts related to providing these services are spread evenly throughout the performance period. In addition to the products listed above, the Company has offered certain other products with ongoing performance obligations including mobile applications, incremental navigation and/or communication service subscriptions, aviation database subscriptions, and extended warranties that are individually immaterial.

  

The Company records revenue net of sales tax and variable consideration such as trade discounts and customer returns.  Payment is due typically within 90 days or less of shipment of product, or upon the grant of a given software license (as applicable). The Company records estimated reductions to revenue in the form of variable consideration for customer sales programs, returns, and incentive offerings including rebates, price protection (product discounts offered to retailers to assist in clearing older products from their inventories in advance of new product releases), promotions, and other volume-based incentives.  Cooperative advertising incentives payable to dealers and distributors are recorded as reductions of revenue unless we obtain proof of a distinct advertising service, in which case we record the incentive as advertising expense. The reductions to revenue are based on estimates and judgments using historical experience and expectation of future conditions.  Changes in these estimates could negatively affect the Company’s operating results.  These incentives are reviewed periodically and, with the exceptions of price protection and certain other promotions, typically accrued for on a percentage of sales basis.

 

Deferred Revenues and Costs

 

At December 29, 2018 and December 30, 2017, the Company had deferred revenues totaling $172,938 and $190,200, respectively, and related deferred costs totaling $57,935 and $63,554, respectively.

 

Deferred revenue consists primarily of the transaction price allocated to performance obligations that are recognized over a period of time basis as discussed in the Revenue Recognition portion of this footnote. Billings associated with such items are typically completed upon the transfer of control of promised products or services to the customer and recorded to accounts receivable until payment is received. Deferred costs primarily refer to the royalties incurred by the Company associated with the aforementioned unsatisfied performance obligations, which are amortized over the same period as the revenue is recognized. The Company typically pays the associated royalties either monthly or quarterly in arrears, on a per item shipped or installed basis.

 

The Company applies a practical expedient, as permitted within ASC 340, to expense as incurred the incremental costs to obtain a contract when the amortization period of the asset that would have otherwise been recognized is one year or less.

 

Shipping and Handling Costs

 

Shipping and handling activities are typically performed before the customer obtains control of the good, and the related costs are therefore expensed as incurred. Shipping and handling costs are included in cost of goods sold in the accompanying consolidated financial statements.

 

Product Warranty

 

The Company accrues for estimated future warranty costs at the time products are sold.  The Company’s standard warranty obligation to retail partners generally provides for a right of return of any product for a full refund in the event that such product is not merchantable, is damaged, or is defective.  The Company’s historical experience is that these types of warranty obligations are generally fulfilled within 5 months from time of sale.  The Company’s standard warranty obligation to its end-users provides for a period of one to two years from date of shipment while certain aviation, marine, and auto OEM products have a warranty period of two years or more from the date of installation.  The Company’s estimates of costs to service its warranty obligations are based on historical experience and management’s expectations and judgments of future conditions.  To the extent the Company experiences increased warranty claim activity or increased costs associated with servicing those claims, its warranty accrual will increase, resulting in decreased gross profit. The following reconciliation provides an illustration of changes in the aggregate warranty accrual:

 

    Fiscal Year Ended  
    December 29,     December 30,     December 31,  
    2018     2017     2016  
                   
Balance - beginning of period   $ 36,827     $ 37,233     $ 30,449  
Accrual for products sold(1)     59,374       56,360       61,578  
Expenditures     (57,925 )     (56,766 )     (54,794 )
Balance - end of period   $ 38,276     $ 36,827     $ 37,233  

 

  (1) Changes in cost estimates related to pre-existing warranties are not material and aggregated with accruals for new warranty contracts in the ‘accrual for products sold’ line.

 

Advertising Costs

 

The Company expenses advertising costs as incurred. Advertising expense amounted to approximately $155,394, $164,693, and $177,143 for the years ended December 29, 2018, December 30, 2017, and December 31, 2016, respectively.

 

Research and Development

 

A majority of the Company’s research and development is performed in the United States. Research and development costs, which are typically expensed as incurred, amounted to approximately $567,805, $511,634, and $467,960 for the years ended December 29, 2018, December 30, 2017, and December 31, 2016, respectively.

 

Customer Service and Technical Support

 

Customer service and technical support costs are included as selling, general and administrative expenses in the accompanying consolidated statements of income. Customer service and technical support costs include costs associated with performing order processing, answering customer inquiries by telephone and through websites, e-mail and other electronic means, and providing free technical support assistance to customers. The technical support is typically provided within one year after the associated revenue is recognized. The related cost of providing this free support is not material.

 

Software Development Costs

 

The FASB ASC topic entitled Software requires companies to expense software development costs as they incur them until technological feasibility has been established, at which time those costs are capitalized until the product is available for general release to customers. The Company’s capitalized software development costs are not significant as the time elapsed from working model to release is typically short. As required by the Research and Development topic of the FASB ASC, costs incurred to enhance our existing products or after the general release of the service using the product are expensed in the period they are incurred and included in research and development costs in the accompanying consolidated statements of income.

 

Accounting for Stock-Based Compensation

 

The Company currently sponsors four stock-based employee compensation plans. The FASB ASC topic entitled Compensation – Stock Compensation requires the measurement and recognition of compensation expenses for all share-based payment awards made to employees and directors, including employee stock options and restricted stock, based on estimated fair values.

 

Accounting guidance requires companies to estimate the fair value of share-based payment awards on the date of grant using an option-pricing model. The value of the portion of the award that is ultimately expected to vest is recognized as stock-based compensation expense over the requisite service period in the Company’s consolidated financial statements.

 

As stock-based compensation expenses recognized in the accompanying consolidated statements of income are based on awards ultimately expected to vest, they have been reduced for estimated forfeitures. Accounting guidance requires forfeitures to be estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates. Forfeitures were estimated based on historical experience and management’s estimates.

 

In March 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update No. 2016-09, Compensation—Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting (“ASU 2016-09”), which is intended to simplify the accounting for share-based payment awards. The Company adopted ASU 2016-09 on a prospective basis during the quarter ended April 1, 2017. ASU 2016-09 requires excess tax benefits or deficiencies from stock-based compensation to be recognized in the income tax provision. The Company previously recorded these amounts to additional paid-in capital. Additionally, under ASU 2016-09, excess tax benefits and deficiencies are not estimated in the effective tax rate, rather, they are recorded as discrete tax items in the period in which they occur. Excess income tax benefits from stock-based compensation arrangements are classified as a cash flow from operations under ASU 2016-09, rather than as a cash flow from financing activities.

 

Stock compensation plans are discussed in detail in Note 9 of the Notes to Consolidated Financial Statements.

 

Recently Adopted Accounting Standards

 

Revenue from Contracts with Customers

 

In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606) (“ASU 2014-09”), which supersedes previous revenue recognition guidance. The FASB issued several updates amending or relating to ASU 2014-09 (collectively, the “new revenue standard”). The Company has adopted the new revenue standard effective beginning in the 2018 fiscal year using the full retrospective method, which requires the Company to restate each prior reporting period presented in future financial statement issuances. The impacts of adopting the new revenue standard relate to our accounting for certain arrangements within the auto segment.

 

A portion of the Company’s auto segment contracts have historically been accounted for under Accounting Standards Codification (ASC) Topic 985-605 Software-Revenue Recognition (Topic 985-605). Under Topic 985-605, the Company deferred revenue and associated costs of all elements of multiple-element software arrangements if vendor-specific objective evidence of fair value (VSOE) could not be established for an undelivered element (e.g. map updates). In applying the new revenue standard to certain contracts that include both software licenses and map updates, we now recognize the portion of revenue and costs related to the software license at the time of delivery rather than ratably over the map update period.

 

Additionally, for certain multiple-element arrangements within the Company’s auto segment, the Company’s policy had been to allocate consideration to traffic services and recognize the revenue and associated cost of royalties ratably over the estimated life of the underlying product. Under the new revenue standard, we recognize revenue and associated costs of royalties related to certain broadcast traffic services at the time of hardware and/or software delivery. Specifically, the new revenue standard emphasizes the timing of the Company’s performance, and upon delivery of the navigation device and/or software, the Company has fully performed its obligation with respect to the design and production of the product to receive and interpret the broadcast traffic signal for the benefit of the end user.

  

The changes in accounting policy described above collectively result in reductions to deferred costs (asset) and deferred revenue (liability) balances, and accelerate the recognition of revenue and deferred costs in the auto segment going forward.

 

Summarized financial information depicting the impact of the new revenue standard is presented below. The Company’s historical net cash flows provided by or used in operating, investing, and financing activities are not impacted by adoption of the new revenue standard.

 

    December 30, 2017     December 31, 2016  
                                       
    As reported     Restated(1)     Impact     As reported     Restated(1)     Impact  
Current assets:                                                
Deferred costs   $ 48,312     $ 30,525     $ (17,787 )   $ 47,395     $ 34,665     $ (12,730 )
Total current assets     2,363,925       2,346,138       (17,787 )     2,263,016       2,250,286       (12,730 )
Deferred income taxes     199,343       195,981       (3,362 )     110,293       107,655       (2,638 )
Noncurrent deferred costs     73,851       33,029       (40,822 )     56,151       30,934       (25,217 )
Total assets   $ 5,010,260     $ 4,948,289     $ (61,971 )   $ 4,525,133     $ 4,484,549     $ (40,584 )
Current liabilities:                                                
Deferred revenue     139,681       103,140       (36,541 )     146,564       118,496       (28,068 )
Total current liabilities     828,656       792,115       (36,541 )     782,735       754,667       (28,068 )
Deferred income taxes     75,215       76,612       1,397       61,220       62,617       1,397  
Non-current deferred revenue     163,840       87,060       (76,780 )     140,407       91,238       (49,169 )
Retained earnings     2,368,874       2,418,444       49,570       2,056,702       2,092,221       35,519  
Accumulated other comprehensive income     56,045       56,428       383       (36,761 )     (37,024 )     (263 )
Total stockholders’ equity     3,802,466       3,852,419       49,953       3,418,003       3,453,259       35,256  
Total liabilities and stockholders’ equity   $ 5,010,260     $ 4,948,289     $ (61,971 )   $ 4,525,133     $ 4,484,549     $ (40,584 )

 

 

    52-Weeks Ended December 30, 2017     53-Weeks Ended December 31, 2016  
                                     
      As reported       Restated(1)       Impact       As reported       Restated(1)       Impact  
Net sales   $ 3,087,004     $ 3,121,560     $ 34,556     $ 3,018,665     $ 3,045,797     $ 27,132  
Gross profit     1,783,164       1,797,941       14,777       1,679,570       1,688,525       8,955  
Operating income     668,860       683,637       14,777       623,909       632,864       8,955  
Income tax (benefit) provision     (12,661 )     (11,936 )     725       118,856       120,901       2,045  
Net income   $ 694,955     $ 709,007     $ 14,052     $ 510,814     $ 517,724     $ 6,910  
Diluted net income per share   $ 3.68     $ 3.76     $ 0.08     $ 2.70     $ 2.73     $ 0.03  

 

  (1) The Restated results presented above are restated under ASC Topic 606. Amounts related to the income tax effect of the new standard that were previously disclosed as the anticipated adoption impact in Note 2, Summary of Significant Accounting Policies, in the notes to the consolidated financial statements of our fiscal 2017 Annual Report on Form 10-K filed with the SEC on February 21, 2018 have been revised in this Note by immaterial amounts in connection with our adoption of ASC Topic 606.

 

Financial Instruments – Recognition, Measurement, Presentation, and Disclosure

 

In January 2016, the FASB issued Accounting Standards Update No. 2016-01, Financial Instruments—Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities (“ASU 2016-01”). The standard addresses certain aspects of recognition, measurement, presentation, and disclosure of financial instruments. The Company has adopted the new standard effective beginning in the 2018 fiscal year. The adoption did not have a material impact on the Company’s financial position or results of operations.

 

Statement of Cash Flows

 

In August 2016, the FASB issued Accounting Standards Update No. 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments (“ASU 2016-15”), which adds or clarifies guidance on the classification of certain cash receipts and payments in the statement of cash flows. The standard addresses eight specific cash flow issues with the objective of reducing diversity in practice. In November 2016, the FASB issued Accounting Standards Update No. 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash (“ASU 2016-18”), which requires restricted cash and restricted cash equivalents to be included with cash and cash equivalents when reconciling changes in the total amounts within the statement of cash flows. The Company has adopted the new standards effective beginning in the 2018 fiscal year. The adoption of ASU 2016-15 did not have a material impact to the Company’s statements of cash flows. The amendments of ASU 2016-18 were applied using a retrospective transition method, resulting in immaterial changes to the presentation of the Company’s statements of cash flows.

 

Income Taxes

 

In October 2016, the FASB issued Accounting Standards Update No. 2016-16, Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other than Inventory (“ASU 2016-16”), which requires recognition of the income tax consequences of an intra-entity transfer of an asset other than inventory when the transfer occurs. The Company has adopted the new standard effective beginning in the 2018 fiscal year, which resulted in a reclassification of approximately $1,700 of certain prepaid tax balances in a cumulative effect to retained earnings as of the date of adoption.

 

Income Statement – Reporting Comprehensive Income

 

In February 2018, the FASB issued Accounting Standards Update No. 2018-02, Income Statement – Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income (“ASU 2018-02”), which allows for stranded tax effects in accumulated other comprehensive income resulting from the U.S. Tax Cuts and Jobs Act to be reclassified to retained earnings. The Company has elected to early adopt the new standard effective beginning in the 2018 fiscal year, resulting in reclassification of approximately $452 from accumulated other comprehensive income into retained earnings. The tax effects that were reclassified only relate to amounts resulting from the U.S. Tax Cuts and Jobs Act.
Marketable Securities
 12 Months Ended
Dec. 29, 2018
Investments, Debt and Equity Securities [Abstract]  
Marketable Securities

3. Marketable Securities

 

The FASB ASC topic entitled Fair Value Measurements and Disclosures 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 accounting guidance 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 Observable inputs for the asset or liability, either directly or indirectly, such as quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, or inputs other than quoted prices that are observable for the asset or liability
 
  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. Valuation is based on prices obtained from an independent pricing vendor using both market and income approaches. The primary inputs to the valuation include quoted prices for similar assets in active markets, quoted prices for identical or similar assets in markets that are not active, contractual cash flows, benchmark yields, and credit spreads. 

 

The method described above may produce a fair value calculation that may not be indicative of net realizable value or reflective of future fair values. Furthermore, while the Company believes its valuation methods are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different fair value measurement at the reporting date.

 

Available-for-sale securities measured at fair value on a recurring basis are summarized below: 

 

    Fair Value Measurements as
of December 29, 2018		  
    Total     Level 1     Level 2     Level 3  
U.S. Treasury securities   $ 22,128     $ —     $ 22,128     $ —  
Agency securities     59,116       —       59,116       —  
Mortgage-backed securities     135,865       —       135,865       —  
Corporate securities     980,524       —       980,524       —  
Municipal securities     173,137       —       173,137       —  
Other     142,342       —       142,342       —  
Total   $ 1,513,112     $ —     $ 1,513,112     $ —  

   

    Fair Value Measurements as
of December 30, 2017		  
    Total     Level 1     Level 2     Level 3  
U.S. Treasury securities   $ 19,337     $ —     $ 19,337     $ —  
Agency securities     43,361       —       43,361       —  
Mortgage-backed securities     174,615       —       174,615       —  
Corporate securities     816,793       —       816,793       —  
Municipal securities     186,105       —       186,105       —  
Other     181,509       —       181,509       —  
Total   $ 1,421,720     $ —     $ 1,421,720     $ —  

 

Marketable securities classified as available-for-sale securities are summarized below:  

 

    Available-For-Sale Securities as
of December 29, 2018		  
       
    Amortized Cost     Gross Unrealized Gains     Gross Unrealized Losses     Fair Value  
U.S. Treasury securities   $ 22,485     $ —     $ (357 )   $ 22,128  
Agency securities     60,088       28       (1,000 )     59,116  
Mortgage-backed securities     142,176       1       (6,312 )     135,865  
Corporate securities     1,010,590       33       (30,099 )     980,524  
Municipal securities     175,630       73       (2,566 )     173,137  
Other     144,606       0       (2,264 )     142,342  
Total   $ 1,555,575     $ 135     $ (42,598 )   $ 1,513,112  

  

    Available-For-Sale Securities as
of December 30, 2017		  
                         
      Amortized Cost       Gross Unrealized Gains       Gross Unrealized Losses       Fair Value  
U.S. Treasury securities   $ 19,591     $ —     $ (254 )   $ 19,337  
Agency securities     44,191       1       (831 )     43,361  
Mortgage-backed securities     180,470       13       (5,868 )     174,615  
Corporate securities     830,447       136       (13,790 )     816,793  
Municipal securities     187,999       110       (2,004 )     186,105  
Other     183,730       2       (2,223 )     181,509  
Total   $ 1,446,428     $ 262     $ (24,970 )   $ 1,421,720  

 

The Company’s investment policy targets low risk investments with the objective of minimizing the potential risk of principal loss. The fair value of our securities varies from period to period due to changes in interest rates, in the performance of the underlying collateral and in the credit performance of the underlying issuer, among other factors. The Company does not intend to sell the securities that have an unrealized loss shown in the table above, and it is not more likely than not that the Company will be required to sell a security before recovery of its amortized cost basis, which may be maturity.

 

The Company recognizes the credit component of other-than-temporary impairments of debt securities in “Other Income” and the noncredit component in “Other comprehensive income” for those securities that we do not intend to sell and for which it is not more likely than not that we will be required to sell before recovery.  During 2018 and 2017, the Company did not record any material impairment charges on its outstanding securities.

 

The amortized cost and fair value of the securities at an unrealized loss position at December 29, 2018 were $1,488,514 and $1,445,916 respectively. Approximately 86% of securities in our portfolio were at an unrealized loss position at December 29, 2018. We have the ability to hold these securities until maturity or their value is recovered. We do not consider these unrealized losses to be other than temporary credit losses because there has been no material deterioration in credit quality and no change in the cash flows of the underlying securities. We do not intend to sell the securities and it is not more likely than not that we will be required to sell the securities; therefore, no material impairment has been recorded in the accompanying consolidated statement of income.

 

The cost of securities sold is based on the specific identification method.

 

The following tables display additional information regarding gross unrealized losses and fair value by major security type for available-for-sale securities in an unrealized loss position as of December 29, 2018 and December 30, 2017. 

 

    As of December 29, 2018  
    Less than 12 Consecutive Months     12 Consecutive Months or Longer  
             
    Gross Unrealized Losses     Fair Value     Gross Unrealized Losses     Fair Value  
U.S. Treasury securities   $ (3 )   $ 3,975     $ (354 )   $ 18,153  
Agency securities     (5 )     4,656       (995 )     40,508  
Mortgage-backed securities     (1 )     361       (6,311 )     135,323  
Corporate securities     (4,028 )     323,633       (26,071 )     640,439  
Municipal securities     (454 )     38,371       (2,112 )     118,362  
Other     (102 )     8,015       (2,162 )     114,120  
Total   $ (4,593 )   $ 379,011     $ (38,005 )   $ 1,066,905  

 

    As of December 30, 2017  
    Less than 12 Consecutive Months     12 Consecutive Months or Longer  
             
    Gross Unrealized Losses     Fair Value     Gross Unrealized Losses     Fair Value  
U.S. Treasury securities   $ (111 )   $ 12,966     $ (143 )   $ 6,371  
Agency securities     (168 )     16,097       (663 )     25,972  
Mortgage-backed securities     (503 )     19,628       (5,365 )     153,835  
Corporate securities     (4,562 )     439,174       (9,228 )     347,052  
Municipal securities     (1,027 )     125,819       (977 )     38,167  
Other     (2,219 )     136,147       (4 )     2,579  
Total   $ (8,590 )   $ 749,831     $ (16,380 )   $ 573,976  

 

The amortized cost and fair value of marketable securities at December 29, 2018, 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. 

 

    Amortized Cost     Fair Value  
             
Due in one year or less   $ 183,894     $ 182,989  
Due after one year through five years     1,261,083       1,227,551  
Due after five years through ten years     110,598       102,572  
    $ 1,555,575     $ 1,513,112  
Commitments and Contingencies
 12 Months Ended
Dec. 29, 2018
Commitments and Contingencies Disclosure [Abstract]  
Commitments and Contingencies

4. Commitments and Contingencies

 

Commitments

 

Rental expense related to real estate, equipment, and vehicles amounted to $21,096, $18,915, and $19,657 for the years ended December 29, 2018, December 30, 2017, and December 31, 2016, respectively. The Company recognizes rental expense on a straight-line basis over the lease term.

 

Future minimum rental payments are as follows: 

 

Year     Amount  
2019     $ 17,170  
2020       13,961  
2021       10,559  
2022       7,290  
2023       6,947  
Thereafter       13,910  
Total     $ 69,837  

 

Certain cash balances are held as collateral in relation to bank guarantees.  The total amount of restricted cash was $73 and $271 at December 29, 2018 and December 30, 2017, respectively.

 

The Company is party to certain commitments, which include purchases of raw materials, advertising expenditures, and other indirect purchases in connection with conducting our business. The aggregate amount of purchase orders and other commitments open as of December 29, 2018 was approximately $354,553. We cannot determine the aggregate amount of such purchase orders that represent contractual obligations because purchase orders may represent authorizations to purchase rather than binding agreements. Our purchase orders are based on our current needs and are fulfilled by our suppliers, contract manufacturers, and logistics providers within short periods of time. 

 

Contingencies

 

In the normal course of business, the Company and its subsidiaries are parties to various legal claims, investigations and complaints, including matters alleging patent infringement and other intellectual property claims. The Company evaluates, on a quarterly and annual basis, developments in legal proceedings, investigations, claims, and other loss contingencies that could affect any required accrual or disclosure or estimate of reasonably possible loss or range of loss. An estimated loss from a loss contingency is accrued by a charge to income if it is probable that an asset has been impaired or a liability has been incurred and the amount of the loss can be reasonably estimated. If a range of loss is estimated, and some amount within that range appears to be a better estimate than any other amount within that range, then that amount is accrued. If no amount within the range can be identified as a better estimate than any other amount, the Company accrues the minimum amount in the range.

 

If an outcome unfavorable to the Company is determined to be probable, but the amount of loss cannot be reasonably estimated or is determined to be reasonably possible, but not probable, we disclose the nature of the contingency and an estimate of the possible loss or range of loss or a statement that such an estimate cannot be made. The Company’s aggregate range of reasonably possible losses includes (1) matters where a liability has been accrued and there is a reasonably possible loss in excess of the amount accrued for that liability, and (2) matters where a loss is believed to be reasonably possible, but not probable, and a liability therefore has not been accrued. This aggregate range only represents the Company’s estimate of reasonably possible losses and does not represent the Company’s maximum loss exposure. The assessment regarding whether a loss is probable or reasonably possible, and whether the loss or a range of loss is estimable, often involves a series of complex judgments about future events. In assessing the probability of an outcome in a lawsuit, claim or assessment that could be unfavorable to the Company, we consider the following factors, among others: a) the nature of the litigation, claim, or assessment; b) the progress of the case; c) the opinions or views of legal counsel and other advisers; d) our experience in similar cases; e) the experience of other entities in similar cases; and f) how we intend to respond to the lawsuit, claim, or assessment. Costs incurred in defending lawsuits, claims or assessments are expensed as incurred.

 

Management of the Company currently does not believe it is reasonably possible that the Company may have incurred a material loss, or a material loss in excess of recorded accruals, with respect to loss contingencies in the aggregate, for the fiscal year ended December 29, 2018. The results of legal proceedings, investigations and claims, however, cannot be predicted with certainty. An adverse resolution of one or more of such matters in excess of management’s expectations could have a material adverse effect in the particular quarter or fiscal year in which a loss is recorded, but based on information currently known, the Company does not believe it is likely that losses from such matters would have a material adverse effect on the Company’s business or its consolidated financial position, results of operations or cash flows.

 

The Company settled or resolved certain legal matters during the fiscal years ended December 29, 2018, December 30, 2017, and December 31, 2016 that did not individually or in the aggregate have a material impact on the Company’s business or its consolidated financial position, results of operations or cash flows.
Employee Benefit Plans
 12 Months Ended
Dec. 29, 2018
Retirement Benefits [Abstract]  
Employee Benefit Plans

5. Employee Benefit Plans

 

GII and the Company’s other U.S.-based subsidiaries sponsor a defined contribution employee retirement plan under which their employees may contribute up to 50% of their annual compensation subject to Internal Revenue Code maximum limitations and to which the subsidiaries contribute a specified percentage of each participant’s annual compensation up to certain limits as defined in the retirement plan. During the years ended December 29, 2018, December 30, 2017, and December 31, 2016, expense related to this and other defined contribution plans of $52,232, $43,826, and $40,844, respectively, was charged to operations.

 

Certain of the Company’s foreign subsidiaries participate in local defined benefit pension plans. Contributions are calculated by formulas that consider final pensionable salaries. Neither obligations nor contributions for the years ended December 29, 2018, December 30, 2017, and December 31, 2016 were significant.
Income Taxes
 12 Months Ended
Dec. 29, 2018
Income Tax Disclosure [Abstract]  
Income Taxes

6. Income Taxes

 

The Company’s income tax provision (benefit) consists of the following:

 

      Fiscal Year Ended  
      December 29,     December 30,     December 31,  
      2018     2017     2016  
Federal:                    
    Current     $ 26,784     $ 31,343     $ 66,627  
    Deferred       13,249       50,724       4,522  
      $ 40,033     $ 82,067     $ 71,149  
State:                          
    Current     $ 13,015     $ 4,203     $ 8,809  
    Deferred       (1,599 )     11,684       (3,933 )
      $ 11,416     $ 15,887     $ 4,876  
Foreign:                          
    Current     $ 53,625     $ 43,688     $ 42,406  
    Deferred       24,093       (153,578 )     2,470  
      $ 77,718     $ (109,890 )   $ 44,876  
                           
Total     $ 129,167     $ (11,936 )   $ 120,901  

 

The income tax provision differs from the amount computed by applying the U.S. statutory federal income tax rate to income before taxes. The sources and tax effects of the differences, including the impact of establishing tax contingency accruals, are as follows:

 

    Fiscal Year Ended  
    December 29,     December 30,     December 31,  
    2018     2017     2016  
Federal income tax expense at U.S. statutory rate   $ 172,882     $ 243,975     $ 223,519  
State income tax expense, net of federal tax effect     5,339       5,977       2,749  
Foreign-Derived Intangible Income Deduction     (4,666 )     —       —  
Foreign tax rate differential     (38,563 )     (106,763 )     (113,078 )
Other foreign taxes less incentives and credits     (12,841 )     (4,646 )     (16,593 )
Withholding Tax     33,306       14,632       17,447  
Net Change in Uncertain Tax Positions     (13,728 )     5,363       17,328  
Federal Domestic Production Activities Deduction     —       (3,895 )     (5,528 )
Federal Research and Development Credit     (16,562 )     (10,851 )     (8,548 )
Switzerland Corporate Tax Election     —       (180,034 )     —  
Share Based Compensation     (2,747 )     19,916       —  
Other, net     6,747       4,390       3,605  
Income tax expense (benefit)   $ 129,167     $ (11,936 )   $ 120,901  

 

The Company recorded income tax benefit of $11,936 in the year ended December 30, 2017, which included an income tax benefit of $180,034 primarily related to the revaluation of certain Switzerland deferred tax assets resulting from the Company’s election in the first quarter of 2017 to align certain Switzerland corporate tax positions with international tax initiatives.

 

The Company’s statutory federal income tax rate in Switzerland, the Company’s place of incorporation since the Redomestication, effective June 27, 2010, is 7.83%. If the Company reconciled taxes at the Swiss holding company federal statutory tax rate to the reported income tax for 2018 as presented above, the amounts related to tax at the statutory rate would be approximately $108,000 lower, or $65,000, and the foreign tax rate differential would be adjusted by a similar amount to approximately $65,000. For 2017, the amounts related to tax at the statutory rate would be approximately $186,000 lower, or $53,600, and the foreign tax rate differential would be adjusted by a similar amount to approximately $77,000. For 2016, the amount related to tax at the statutory rate would be approximately $171,000 lower, or $49,000, and the foreign tax differential would be reduced by a similar amount to approximately $55,000. All other amounts would remain substantially unchanged.

 

The Company’s income before income taxes attributable to non-U.S. operations was $532,657, $461,436, and $453,729, for the years ended December 29, 2018, December 30, 2017, and December 31, 2016, respectively.

 

Income taxes of $36,800, $45,534, and $45,291 at December 29, 2018, December 30, 2017, and December 31, 2016, respectively, have not been accrued by the Company for the unremitted earnings of several of its foreign subsidiaries because such earnings are intended to be reinvested in the subsidiaries indefinitely.

 

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of the Company’s deferred tax assets and liabilities are as follows:

  

    December 29,     December 30,  
    2018     2017  
Deferred tax assets:                
Product warranty accruals   $ 2,468     $ 2,202  
Allowance for doubtful accounts     3,964       5,129  
Inventory reserves     6,023       6,920  
Sales program allowances     1,657       910  
Reserve for sales returns     1,368       816  
Accrued vacation     8,179       7,121  
Other accruals     3,336       3,601  
Share based compensation     6,744       6,261  
Tax credit carryforwards     9,697       8,413  
Amortization     147,674       165,162  
Net operating losses     3,580       8,799  
Benefit related to uncertain tax positions     5,852       5,383  
Other     4,543       3,677  
Valuation allowance related to loss carryforward and tax credits     (4,568 )     (7,267 )
    $ 200,517     $ 217,127  
Deferred tax liabilities:                
Depreciation     17,543       11,674  
Prepaid Expenses     2,257       3,147  
Book basis in excess of tax basis for acquired entities     14,068       17,364  
Withholding tax     79,660       60,555  
Other     2,974       5,018  
      116,502       97,758  
Net deferred tax assets   $ 84,015     $ 119,369  

 

At December 29, 2018, the Company had $9,697 of tax credit carryover compared to $8,413 at December 30, 2017.

 

At December 29, 2018, the Company had a deferred tax asset of $3,580 related to the future tax benefit on net operating loss (NOL) carryforwards of $15,604. Included in the NOL carryforwards is $1,437 that relates to Finland and expires in varying amounts between 2025 and 2028, $1,889 that relates to various United States state jurisdictions and expires in varying amounts between 2022 and 2037, $1,353 that relates to the Netherlands and expires in 2026, and $10,925 that relates to various other jurisdictions and has no expiration date. The Company has recorded a valuation allowance for a portion of its deferred tax asset relating to various tax attributes that it does not believe are more likely than not to be realized. In the future, if the Company determines, based on existence of sufficient evidence, that it should realize more or less of its deferred tax assets, an adjustment to the valuation allowance will be made in the period such a determination is made.

 

On December 22, 2017, the Tax Cuts and Jobs Act was enacted into law in the United States. Due to the complexities of the new tax legislation, the SEC issued Staff Accounting Bulletin No. 118 (“SAB 118”) which allowed for the recognition of provisional amounts during a measurement period. The Company recorded a provisional remeasurement of its deferred tax assets and liabilities in the fourth quarter of 2017. The Company filed its U.S. federal and state income tax returns during the third and fourth quarters of 2018, which did not result in adjustments of its provisional remeasurement of deferred tax assets and liabilities.

 

The total amount of gross unrecognized tax benefits as of December 29, 2018 was $118,287. A reconciliation of the beginning and ending amount of gross unrecognized tax benefits for years ended December 29, 2018, December 30, 2017, and December 31, 2016 is as follows:

 

    December 29,     December 30,     December 31,  
    2018     2017     2016  
Balance beginning of year   $ 130,798     $ 115,090     $ 97,904  
Additions based on tax positions related to prior years     1,138       8,564       489  
Reductions based on tax positions related to prior years     (5,340 )     (983 )     (940 )
Additions based on tax positions related to current period     19,368       26,295       28,859  
Reductions related to settlements with tax authorities     (527 )     —       (134 )
Expiration of statute of limitations     (27,150 )     (18,168 )     (11,088 )
Balance at end of year   $ 118,287     $ 130,798     $ 115,090  

 

 Accounting guidance requires unrecognized tax benefits to be classified as noncurrent liabilities, except for the portion that is expected to be paid within one year of the balance sheet date. The entire balance of net unrecognized benefits of $114,682, $127,306 and $109,667 are required to be classified as noncurrent at December 29, 2018, December 30, 2017, and December 31, 2016, respectively. The net unrecognized tax benefits, if recognized, would reduce the effective tax rate. None of the unrecognized tax benefits are due to uncertainty in the timing of deductibility.

 

Interest and penalties, if any, accrued on the unrecognized tax benefits are reflected in income tax expense. At December 29, 2018, December 30, 2017, and December 31, 2016, the Company had accrued approximately $6,613, $5,605, and $3,901, respectively, for interest. The interest component of the reserve increased income tax expense for the years ending December 29, 2018, December 30, 2017, and December 31, 2016, by $1,008, $1,704, and $1,422 respectively. The Company did not have significant amounts accrued for penalties for the years ending December 29, 2018, December 30, 2017, and December 31, 2016.

 

The Company files income tax returns in Switzerland, U.S. federal jurisdiction, as well as various states, local, and foreign jurisdictions. In its major tax jurisdictions, Switzerland, Taiwan, United Kingdom, and U.S. federal and various states, the Company is no longer subject to income tax examinations by tax authorities, with few exceptions, for years prior to 2014, 2013, 2016, and 2015, respectively.

 

The Company recognized a reduction of income tax expense of $27,106, $17,918, and $11,151 in fiscal years ended December 29, 2018, December 30, 2017, and December 31, 2016, respectively, to reflect the expiration of statutes of limitations and releases due to audit settlement in various jurisdictions.

 

The Company believes that it is reasonably possible that approximately $20,000 to $25,000 of its reserves for certain unrecognized tax benefits will decrease within the next 12 months as the result of the expiration of statutes of limitations. This potential decrease in unrecognized tax benefits would impact the Company’s effective tax rate within the next 12 months.
Fair Value of Financial Instruments
 12 Months Ended
Dec. 29, 2018
Fair Value Disclosures [Abstract]  
Fair Value of Financial Instruments

7. Fair Value of Financial Instruments

 

As required by the Financial Instruments topic of the FASB ASC, the following summarizes required information about the fair value of certain financial instruments for which it is currently practicable to estimate such value. None of the financial instruments are held or issued for trading purposes. The carrying amounts and fair values of the Company’s financial instruments are as follows:

 

    December 29, 2018     December 30, 2017  
    Carrying     Fair     Carrying     Fair  
    Amount     Value     Amount     Value  
Cash and cash equivalents   $ 1,201,732     $ 1,201,732     $ 891,488     $ 891,488  
Restricted cash   $ 73     $ 73     $ 271     $ 271  
Marketable securities   $ 1,513,112     $ 1,513,112     $ 1,421,720     $ 1,421,720  

 

For certain of the Company’s financial instruments, including accounts receivable, loan receivable, accounts payable and other accrued liabilities, the carrying amounts approximate fair value due to their short maturities.
Segment Information
 12 Months Ended
Dec. 29, 2018
Segment Reporting [Abstract]  
Segment Information

8. Segment Information

 

The Company has identified five reportable segments – auto, aviation, marine, outdoor and fitness. There are two operating segments (auto PND and auto OEM) that are not reported separately but aggregated within the auto reportable segment. Each operating segment is individually reviewed and evaluated by the Chief Operating Decision Maker (CODM), who allocates resources and assesses performance of each segment individually.

 

All of the Company’s reportable segments offer products through the Company’s network of independent dealers and distributors as well as through OEMs. However, the nature of products and types of customers for the five reportable segments vary. The Company’s marine, auto, outdoor, and fitness segments include portable global positioning system (GPS) receivers and accessories sold primarily to retail outlets. These products are produced primarily by the Company’s subsidiary in Taiwan. The Company’s aviation products are portable and panel mount avionics for Visual Flight Rules and Instrument Flight Rules navigation and are sold primarily to aviation dealers and certain aircraft manufacturers.

 

The Company’s Chief Executive Officer has been identified as the CODM. The CODM uses operating income as the measure of profit or loss to assess segment performance and allocate resources. Operating income represents net sales less costs of goods sold and operating expenses. Net sales are directly attributed to each segment. Most costs of goods sold and the majority of operating expenses are also directly attributed to each segment, while certain other costs of goods sold and operating expenses are allocated to the segments in a manner appropriate to the specific facts and circumstances of the expenses being allocated. The accounting policies of the reportable segments are the same as those described in the summary of significant accounting policies. There are no inter-segment sales or transfers.

 

The Company’s reportable segments share many common resources, infrastructures and assets in the normal course of business. Thus, the Company does not report accounts receivable, inventories, property and equipment, intangible assets, or capital expenditures by segment to the CODM.

 

Net sales (“revenue”), gross profit, and operating income for each of the Company’s reportable segments are presented below.

 

    Reportable Segments  
                                                 
52-Weeks Ended December 29, 2018   Outdoor     Fitness     Marine     Auto     Aviation     Total  
                                                 
Net sales   $ 809,883     $ 858,329     $ 441,560     $ 634,213     $ 603,459     $ 3,347,444  
Gross profit     528,254       471,764       258,756       270,793       450,152       1,979,719  
Operating income     290,510       181,745       63,344       37,998       204,746       778,343  
                                                 
52-Weeks Ended December 30, 2017                                                
                                                 
Net sales   $ 698,867     $ 762,194     $ 374,001     $ 785,139     $ 501,359     $ 3,1221,560  
Gross profit     448,410       422,636       212,592       342,698       371,605       1,797,941  
Operating income     249,867       146,765       50,328       82,744       153,933       683,637  
                                                 
53-Weeks Ended December 31, 2016                                                
                                                 
Net sales   $ 546,326     $ 818,486     $ 331,947     $ 909,690     $ 439,348     $ 3,045,797  
Gross profit     340,504       437,205       183,709       397,702       329,405       1,688,525  
Operating income     184,035       160,596       52,167       111,302       124,764       632,864  

 

Net sales, property and equipment, and net assets by geographic area are as shown below for the years ended December 29, 2018, December 30, 2017, and December 31, 2016. Note that APAC includes Asia Pacific and Australian Continent, and EMEA includes Europe, the Middle East and Africa.

   

    Americas     APAC