Garmin Reports Strong Fiscal 2014 Revenue and Pro Forma EPS Growth; Proposes Dividend Increase and Announces Share Repurchase Plan

We expect 2015 revenue of approximately $2.9 billion as growth in the fitness, marine and aviation segments offset ongoing declines in the PND market. This level of revenue assumes a EUR/USD exchange rate of 1.15, which created a material year-over-year headwind when compared to the average rate of 1.33 in 2014. We expect gross margins to remain relatively stable at approximately 56% due to the anticipated segment and product mix. Operating margins are forecasted to decline slightly to 23% due primarily to ongoing research and development investment. Though currency volatility is expected to slow our revenue growth in 2015, we do not want to forgo growth in our R&D investment which could negatively impact both current and future product development plans. With an expected tax rate of 16-17%, we currently forecast 2015 EPS of approximately $3.10.

Dividend Recommendation and Share Repurchase Program:

The board of directors intends to recommend to the shareholders for approval at the annual meeting to be held on June 5, 2015, a cash dividend in the amount of $2.04 per share (subject to possible adjustment based on the total amount of the dividend in Swiss Francs as approved at the annual meeting), payable in four equal installments on dates to be determined by the Board. The Board currently anticipates the scheduling of the dividend in four installments as follows:

                             
      Dividend Date       Record Date       $s per share      
      June 30, 2015       June 16, 2015       $0.51      
      September 30, 2015       September 15, 2015       $0.51      
      December 31, 2015       December 15, 2015       $0.51      
      March 31, 2016       March 15, 2016       $0.51      
                             

In addition, the board of directors has established March 31, 2015 as the payment date for the final dividend installment of $0.48 per share, with a record date of March 16, 2015, per the prior approval at the 2014 annual shareholders’ meeting. The first, second and third payments of $0.48 per share were made on June 30, 2014, September 30, 2014, and December 31, 2014, respectively.

On February 13, 2015, our board of directors authorized the Company to repurchase up to $300 million of the Company’s shares as market and business conditions warrant through December 31, 2016. The repurchases may be made from time to time on the open market at prevailing market prices or in negotiated transactions off the market. The Company views the stock repurchase as an appropriate use of cash given the long-term growth prospects of the Company and ongoing free cash flow generation.

Webcast Information/Forward-Looking Statements:

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

               
      When:       Wednesday, February 18, 2015 at 10:30 a.m. Eastern
      Where:      

http://www.garmin.com/aboutGarmin/invRelations/irCalendar.html

      How:       Simply log on to the web at the address above or call to listen in at 888-461-2011
               

An archive of the live webcast will be available until March 27, 2015 on the Garmin website at www.garmin.com. To access the replay, click on the Investor Relations link and click over to the Events Calendar page.

This release includes projections and other forward-looking statements regarding Garmin Ltd. and its business. Any statements regarding the Company’s estimated earnings and revenue for fiscal 2015, the Company’s expected segment revenue growth rate, margins, new products to be introduced in 2015 and the Company’s plans and objectives are forward-looking statements. The forward-looking events and circumstances discussed in this release may not occur and actual results could differ materially as a result of risk factors affecting Garmin, including, but not limited to, the risk factors that are described in the Annual Report on Form 10-K for the year ended December 28, 2013 filed by Garmin with the Securities and Exchange Commission (Commission file number 0-31983). A copy of Garmin’s 2013 Form 10-K can be downloaded from http://www.garmin.com/aboutGarmin/invRelations/finReports.html.

Garmin, fēnix and vívofit are registered trademarks and epix and vívoactive are trademarks of Garmin Ltd. or its subsidiaries.All other brands, product names, company names, trademarks and service marks are the properties of their respective owners. All rights reserved.

 
Garmin Ltd. And Subsidiaries
Condensed Consolidated Statements of Income (Unaudited)
(In thousands, except per share information)
                   
    13-Weeks Ended     52-Weeks Ended
    Dec 27,   Dec 28,     Dec 27,   Dec 28,
    2014   2013     2014   2013
Net sales   $ 803,306     $ 759,694     $ 2,870,658     $ 2,631,851
                   
Cost of goods sold     372,458       365,057       1,266,246       1,224,551
                   
Gross profit     430,848       394,637       1,604,412       1,407,300
                   
Advertising expense     54,175       34,922       146,633       112,905
Selling, general and administrative expense     99,119       94,671       372,032       355,440
Research and development expense     101,554       92,573       395,121       364,923
Total operating expense     254,848       222,166       913,786       833,268
                   
Operating income     176,000       172,471       690,626       574,032
                   
Other income (expense):                  
Interest income     6,803       9,759       35,584       35,271
Foreign currency gains (losses)     15,967       17,258       (4,299 )     35,538
Other     1,126       5,051       1,834       8,717
Total other income (expense)     23,896       32,068       33,119       79,526
                   
Income before income taxes     199,896       204,539       723,745       653,558
                   
Income tax provision (benefit)     (10,349 )     40,954       359,534       41,146
                   
Net income   $ 210,245     $ 163,585     $ 364,211     $ 612,412
                   
Net income (loss) per share:                  
Basic   $ 1.10     $ 0.84     $ 1.89     $ 3.13
Diluted   $ 1.09     $ 0.83     $ 1.88     $ 3.12
                   
Weighted average common                  
shares outstanding:                  
Basic     191,322       195,181       193,106       195,411
Diluted     192,356       196,338       194,165       196,339
                               
Garmin Ltd. And Subsidiaries
Condensed Consolidated Balance Sheets
(In thousands)
         
    Dec 27,   December 28,
    2014   2013
Assets        
Current assets:        
Cash and cash equivalents   $ 1,196,268     $ 1,179,149  
Marketable securities   $ 167,989       149,862  
Accounts receivable, net   $ 570,191       564,586  
Inventories, net   $ 420,475       382,226  
Deferred income taxes   $ 56,102       69,823  
Deferred costs   $ 51,336       57,368  
Loan receivable     -       137,379  
Prepaid expenses and other current assets   $ 48,615       55,243  
Total current assets     2,510,976       2,595,636  
         
Property and equipment, net     430,887       414,848  
         
Marketable securities     1,407,344       1,502,106  
Restricted cash     308       249  
Noncurrent deferred income tax     67,712       88,324  
Noncurrent deferred costs     36,140       41,157  
Intangible assets, net     218,083       219,494  
Other assets     21,853       17,789  
Total assets   $ 4,693,303     $ 4,879,603  
         
Liabilities and Stockholders' Equity        
Current liabilities:        
Accounts payable   $ 149,094     $ 146,582  
Salaries and benefits payable     62,764       59,794  
Accrued warranty costs     27,609       26,767  
Accrued sales program costs     58,934       50,903  
Deferred revenue     203,598       256,908  
Accrued royalty costs     51,889       64,538  
Accrued advertising expense     26,334       19,448  
Other accrued expenses     67,780       65,657  
Deferred income taxes     17,673       989  
Income taxes payable     182,260       38,043  
Dividend payable     185,326       175,675  
Total current liabilities     1,033,261       905,304  
         
Deferred income taxes     39,497       1,758  
Non-current income taxes     80,611       140,933  
Non-current deferred revenue     135,130       171,012  
Other liabilities     1,437       890  
         
Stockholders' equity:        
Shares, CHF 10 par value, 208,077 shares authorized and issued;        
191,815 shares outstanding at December 27, 2014        
and 195,150 shares outstanding at December 28, 2013     1,797,435       1,797,435  
Additional paid-in capital     73,521       79,263  
Treasury stock     (330,132 )     (120,620 )
Retained earnings     1,859,972       1,865,587  
Accumulated other comprehensive income     2,571       38,041  
Total stockholders' equity     3,403,367       3,659,706  
Total liabilities and stockholders' equity   $ 4,693,303     $ 4,879,603  
                 
Garmin Ltd. And Subsidiaries
Condensed Consolidated Statements of Cash Flows (Unaudited)
(In thousands)
      52-Weeks Ended
      Dec 27,     Dec 28,
        2014         2013  
Operating Activities:          
Net income   $ 364,211       $ 612,412  
Adjustments to reconcile net income to net cash          
provided by operating activities:          
  Depreciation     48,433         48,476  
  Amortization     28,582         30,328  
  Gain on sale of property and equipment     (306 )       (724 )
  Provision for doubtful accounts     66         1,553  
  Deferred income taxes     89,828         7,931  
  Unrealized foreign currency gain     573         (40,120 )
  Provision for obsolete and slow moving inventories     25,903         20,891  
  Stock compensation expense     24,293         22,592  
  Realized gain on marketable securities     (505 )       (5,877 )
Changes in operating assets and liabilities:          
  Accounts receivable     (27,398 )       38,589  
  Inventories     (76,491 )       (17,593 )
  Other current and non-current assets     627         (22,013 )
  Accounts payable     8,981         18,043  
  Other current and non-current liabilities     16,467         (31,775 )
  Deferred revenue     (87,543 )       (16,150 )
  Deferred cost     11,029         (2,204 )
  Income taxes payable     95,961         (34,275 )
Net cash provided by operating activities     522,711         630,084  
             
Investing activities:          
Purchases of property and equipment     (73,339 )       (56,083 )
Proceeds from sale of property and equipment     748         885  
Purchase of intangible assets     (4,720 )       (1,122 )
Purchase of marketable securities     (1,006,482 )       (909,151 )
Redemption of marketable securities     1,096,676         833,491  
Proceeds from repayment (advances) on loan receivable     137,379         (137,369 )
Change in restricted cash     (59 )       587  
Acquisitions, net of cash acquired     (18,871 )       (5,680 )
Net cash provided by (used in) investing activities     131,332         (274,442 )
             
Financing activities:          
Dividends paid     (360,075 )       (351,707 )
Purchase of treasury stock under share repurchase plan     (241,578 )       (58,422 )
Purchase of treasury stock related to equity awards     (18,638 )       (24,063 )
Proceeds from issuance of treasury stock related to equity awards     20,753         22,770  
Tax benefit from issuance of equity awards     (84 )       4,584  
Net cash used in financing activities     (599,622 )       (406,838 )
             
Effect of exchange rate changes on cash and cash equivalents     (37,302 )       (835 )
             
Net decrease in cash and cash equivalents     17,119         (52,031 )
Cash and cash equivalents at beginning of period     1,179,149         1,231,180  
Cash and cash equivalents at end of period   $ 1,196,268       $ 1,179,149  
                   
Garmin Ltd. And Subsidiaries
Revenue, Gross Profit, and Operating Income by Segment (Unaudited)
                         
    Reporting Segments
                Auto/        
    Outdoor   Fitness   Marine   Mobile   Aviation   Total
                         
13-Weeks Ended Dec 27, 2014                        
                         
Net sales   $116,432   $201,303   $52,460   $339,832   $93,279   $803,306
Gross profit   $71,745   $122,083   $24,612   $147,073   $65,335   $430,848
Operating income/(loss)   $40,709   $57,629   ($687)   $57,431   $20,918   $176,000
                         
13-Weeks Ended Dec 28, 2013                        
                         
Net sales   $126,617   $118,623   $44,583   $382,504   $87,367   $759,694
Gross profit   $78,196   $73,557   $23,542   $154,734   $64,608   $394,637
Operating income   $48,659   $44,224   $2,404   $54,193   $22,991   $172,471
                         
                         
52-Weeks Ended Dec 27, 2014                        
                         
Net sales   $427,555   $568,440   $248,371   $1,240,377   $385,915   $2,870,658
Gross profit   $266,550   $358,287   $129,710   $569,452   280,413   $1,604,412
Operating income   $151,055   $190,682   $26,232   $215,679   $106,978   $690,626
                         
52-Weeks Ended Dec 28, 2013                        
                         
Net sales   $410,989   $356,283   $222,928   $1,302,314   $339,337   $2,631,851
Gross profit   $262,529   $222,925   $115,091   $565,083   $241,672   $1,407,300
Operating income   $159,197   $120,250   $18,493   $188,517   $87,575   $574,032
                         
Garmin Ltd. And Subsidiaries
Revenue by Geography (Unaudited)
                           
    13-Weeks Ended     52-Weeks Ended
    Dec 27,   Dec 28,   Yr over Yr     Dec 27,   Dec 28,   Yr over Yr
    2014   2013   Change     2014   2013   Change
Net sales   $ 803,306   $ 759,694   6 %     $ 2,870,658   $ 2,631,851   9 %
Americas     448,055     430,099   4 %       1,538,322     1,432,895   7 %
EMEA     272,384     263,063   4 %       1,054,244     955,900   10 %
APAC     82,867     66,532   25 %       278,092     243,056   14 %
                           
EMEA - Europe, Middle East and Africa; APAC - Asia Pacific
 

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