To supplement our financial results presented in accordance with GAAP, this release includes the following measures defined by the Securities and Exchange Commission as non-GAAP financial measures: pro forma net income (earnings) per share, pro forma effective tax rate and free cash flow. These non-GAAP measures are not based on any comprehensive set of accounting rules or principles and should not be considered a substitute for, or superior to, financial measures calculated in accordance with GAAP, and may be different from non-GAAP measures used by other companies, limiting the usefulness of the measures for comparison with other companies. Management believes providing investors with an operating view consistent with how it manages the Company provides enhanced transparency into the operating results of the Company, as described in more detail by category below.
The tables below provide reconciliations between the GAAP and non-GAAP measures.
Pro forma effective tax rate
The Company’s income tax expense is periodically impacted by discrete tax items that are not reflective of income tax expense incurred as a result of current period earnings. Therefore, management believes disclosure of the effective tax rate and income tax provision before the effect of certain discrete tax items are important measures to permit investors' consistent comparison between periods. In the first quarter 2020 and 2019, there were no such discrete tax items identified. The net release of uncertain tax position reserves, amounting to approximately $4.1 million and $4.4 million in the first quarter 2020 and 2019, respectively, have not been included as pro forma adjustments as such items tend to be more recurring in nature.
Pro forma net income (earnings) per share
Management believes that net income (earnings) per share before the impact of foreign currency gains or losses and certain discrete income tax items, as discussed above, is an important measure in order to permit a consistent comparison of the Company’s performance between periods.
Garmin Ltd. And Subsidiaries |
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Pro Forma Net Income (Earnings) Per Share |
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(In thousands, except per share information) |
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13-Weeks Ended |
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March 28, |
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March 30, |
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2020 |
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2019 |
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GAAP net income |
|
$ |
161,180 |
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$ |
140,173 |
|
Foreign currency gains / losses(1) |
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15,423 |
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|
(314 |
) |
Tax effect of foreign currency gains / losses(2) |
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(1,429 |
) |
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49 |
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Pro forma net income |
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$ |
175,174 |
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$ |
139,908 |
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| GAAP net income per share: |
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| Basic |
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$ |
0.84 |
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$ |
0.74 |
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| Diluted |
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$ |
0.84 |
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$ |
0.74 |
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| Pro forma net income per share: |
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| Basic |
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$ |
0.92 |
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$ |
0.74 |
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| Diluted |
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$ |
0.91 |
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$ |
0.73 |
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| Weighted average common shares outstanding: |
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| Basic |
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190,803 |
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189,601 |
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| Diluted |
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191,684 |
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190,599 |
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| (1) Foreign currency gains and losses for the Company are driven by movements of a number of currencies in relation to the U.S. Dollar and the related exchange rate impact on the significant cash, receivables, and payables held in a currency other than the functional currency at a given legal entity. However, there is minimal cash impact from such foreign currency gains and losses. |
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| (2) The tax effect of foreign currency gains and losses was calculated using the effective tax rate of 9.3% and 15.7% for the first quarter ended March 28, 2020 and March 30, 2019, respectively. |
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