Garmin reports record third quarter operating results; issues

Garmin reports record third quarter operating results; issues fiscal 2020 guidance

Webcast Information/Forward-Looking Statements:

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

		When:		Wednesday, October 28, 2020 at 10:30 a.m. Eastern
		Where:		https://www.garmin.com/en-US/investors/events/
		How:		Simply log on to the web at the address above or call to listen in at 855-757-3897

An archive of the live webcast will be available until October 28, 2021 on the Garmin website at www.garmin.com. To access the replay, click on the Investors link and click over to the Events Calendar page.

This release includes projections and other forward-looking statements regarding Garmin Ltd. and its business that are commonly identified by words such as “anticipates,” “would,” “may,” “expects,” “estimates,” “plans,” “intends,” “projects,” and other words or phrases with similar meanings. Any statements regarding the Company’s expected fiscal 2020 GAAP and pro forma estimated earnings, EPS, and effective tax rate, and the Company’s expected segment revenue growth rates, consolidated revenue, gross margins, operating margins, potential future acquisitions, currency movements, expenses, pricing, new products to be introduced, statements relating to possible future dividends, statements related to the ongoing impact of the COVID-19 pandemic, 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 and uncertainties affecting Garmin, including, but not limited to, the risk factors that are described in both the Annual Report on Form 10-K for the year ended December 28, 2019 and the Quarterly Report on Form 10-Q for the quarter ended September 26, 2020 filed by Garmin with the Securities and Exchange Commission (Commission file number 0-31983). A copy of Garmin’s 2019 Form 10-K and the Q3 2020 Form 10-Q can be downloaded from https://www.garmin.com/en-US/investors/sec/. All information provided in this release and in the attachments is as of October 28, 2020. Undue reliance should not be placed on the forward-looking statements in this press release, which are based on information available to us on the date hereof. We undertake no duty to update this information unless required by law.

This release and the attachments contain non-GAAP financial measures. A reconciliation to the nearest GAAP measure and a discussion of the Company's use of these measures are included in the attachments.

Garmin, the Garmin logo and the Garmin delta, Forerunner, Venu, inReach and Montana are trademarks of Garmin Ltd. or its subsidiaries and are registered in one or more countries, including the U.S. Garmin Catalyst, Fantom, Garmin OnDeck, and Panoptix, 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					39-Weeks Ended
	September 26,		September 28,			September 26,			September 28,
	2020		2019			2020			2019
Net sales	$	1,109,194	$	934,383		$	2,835,168		$	2,655,273

Cost of goods sold		441,211		366,925			1,144,816			1,060,752

Gross profit		667,983		567,458			1,690,352			1,594,521

Advertising expense		33,866		32,668			90,031			101,808
Selling, general and administrative expense		142,134		124,769			411,335			380,289
Research and development expense		174,882		148,561			506,013			443,361
Total operating expense		350,882		305,998			1,007,379			925,458

Operating income		317,101		261,460			682,973			669,063

Other income (expense):
Interest income		7,777		12,309			30,258			39,748
Foreign currency gains (losses)		10,113		(16,296	)		(9,802	)		(12,568	)
Other income (expense)		1,726		294			8,515			3,567
Total other income (expense)		19,616		(3,693	)		28,971			30,747

Income before income taxes		336,717		257,767			711,944			699,810

Income tax provision		23,300		29,901			53,168			108,115

Net income	$	313,417	$	227,866		$	658,776		$	591,695

Net income per share:
Basic	$	1.64	$	1.20		$	3.45		$	3.12
Diluted	$	1.63	$	1.19		$	3.44		$	3.10

Weighted average common shares outstanding:
Basic		191,234		190,102			191,021			189,853
Diluted		191,998		190,962			191,760			190,790

Garmin Ltd. And Subsidiaries
Condensed Consolidated Balance Sheets (Unaudited)
*(In thousands, except per share information)*

	September 26 2020			December 28 2019
Assets
Current assets:
Cash and cash equivalents	$	1,223,516		$	1,027,567
Marketable securities		430,164			376,463
Accounts receivable, net		658,000			706,763
Inventories		821,377			752,908
Deferred costs		21,067			25,105
Prepaid expenses and other current assets		187,746			169,044
Total current assets		3,341,870			3,057,850

Property and equipment, net		813,561			728,921
Operating lease right-of-use assets		74,949			63,589

Restricted cash		293			71
Marketable securities		1,058,103			1,205,475
Deferred income taxes		247,502			268,518
Noncurrent deferred costs		17,676			23,493
Intangible assets, net		818,781			659,629
Other assets		177,934			159,253
Total assets	$	6,550,669		$	6,166,799

Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	235,467		$	240,831
Salaries and benefits payable		137,859			128,426
Accrued warranty costs		40,002			39,758
Accrued sales program costs		76,255			112,578
Deferred revenue		88,042			94,562
Accrued royalty costs		15,389			15,401
Accrued advertising expense		25,905			35,142
Other accrued expenses		105,731			95,060
Income taxes payable		48,342			56,913
Dividend payable		349,964			217,262
Total current liabilities		1,122,956			1,035,933

Deferred income taxes		124,746			114,754
Noncurrent income taxes		75,186			105,771
Noncurrent deferred revenue		52,715			67,329
Noncurrent operating lease liabilities		58,416			49,238
Other liabilities		12,309			278

Stockholders’ equity:
Shares, CHF 0.10 par value, 198,077 shares authorized and issued; 191,237 shares outstanding at September 26, 2020 and 190,686 shares outstanding at December 28, 2019		17,979			17,979
Additional paid-in capital		1,872,519			1,835,622
Treasury stock		(326,294	)		(345,040	)
Retained earnings		3,421,159			3,229,061
Accumulated other comprehensive income		118,978			55,874
Total stockholders’ equity		5,104,341			4,793,496
Total liabilities and stockholders’ equity	$	6,550,669		$	6,166,799

Garmin Ltd. And Subsidiaries
Condensed Consolidated Statements of Cash Flows (Unaudited)
*(In thousands)*

	39-Weeks Ended
	September 26, 2020			September 28, 2019
Operating Activities:
Net income	$	658,776		$	591,695
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation		57,141			52,503
Amortization		32,969			25,112
Gain on sale of property and equipment		(1,815	)		(5	)
Unrealized foreign currency losses		4,384			14,653
Deferred income taxes		14,353			18,012
Stock compensation expense		53,515			47,553
Realized gain on marketable securities		(1,316	)		(213	)
Changes in operating assets and liabilities, net of acquisitions:
Accounts receivable, net of allowance for doubtful accounts		59,474			15,244
Inventories		(56,063	)		(178,121	)
Other current and non-current assets		(27,019	)		(86,538	)
Accounts payable		(11,939	)		27,523
Other current and non-current liabilities		(18,299	)		(54,401	)
Deferred revenue		(21,148	)		(7,750	)
Deferred costs		9,855			6,326
Income taxes payable		(53,419	)		(7,423	)
Net cash provided by operating activities		699,449			464,170

Investing activities:
Purchases of property and equipment		(137,072	)		(91,469	)
Proceeds from sale of property and equipment		1,965			370
Purchase of intangible assets		(1,643	)		(1,862	)
Purchase of marketable securities		(702,487	)		(333,320	)
Redemption of marketable securities		808,554			333,783
Acquisitions, net of cash acquired		(148,648	)		(275,310	)
Net cash used in investing activities		(179,331	)		(367,808	)

Financing activities:
Dividends		(333,975	)		(308,905	)
Proceeds from issuance of treasury stock related to equity awards		15,202			12,982
Purchase of treasury stock related to equity awards		(13,074	)		(12,972	)
Net cash used in financing activities		(331,847	)		(308,895	)

Effect of exchange rate changes on cash and cash equivalents		7,900			(11,834	)

Net increase (decrease) in cash, cash equivalents, and restricted cash		196,171			(224,367	)
Cash, cash equivalents, and restricted cash at beginning of period		1,027,638			1,201,805
Cash, cash equivalents, and restricted cash at end of period	$	1,223,809		$	977,438

Garmin Ltd. And Subsidiaries
Net Sales, Gross Profit and Operating Income by Segment (Unaudited)
*(In thousands)*

	Reportable Segments
	Marine		Fitness		Outdoor		Auto			Aviation		Total
13-Weeks Ended September 26, 2020

Net sales	$	165,437	$	328,446	$	334,844	$	129,355		$	151,112	$	1,109,194
Gross profit		100,423		177,794		223,704		58,135			107,927		667,983
Operating income		50,482		87,083		147,477		3,462			28,597		317,101

13-Weeks Ended September 28, 2019

Net sales	$	107,694	$	243,099	$	258,294	$	137,722		$	187,574	$	934,383
Gross profit		64,275		126,835		170,846		65,814			139,688		567,458
Operating income		20,008		49,831		105,051		20,857			65,713		261,460

39-Weeks Ended September 26, 2020

Net sales	$	486,269	$	846,688	$	716,146	$	320,215		$	465,850	$	2,835,168
Gross profit		288,103		446,936		469,150		147,393			338,770		1,690,352
Operating income		134,195		190,075		262,057		(6,837	)		103,483		682,973

39-Weeks Ended September 28, 2019

Net sales	$	393,070	$	675,007	$	622,748	$	422,132		$	542,316	$	2,655,273
Gross profit		234,014		352,805		403,842		198,012			405,848		1,594,521
Operating income		88,212		118,369		218,340		53,978			190,164		669,063

Garmin Ltd. And Subsidiaries
Net Sales by Geography (Unaudited)
*(In thousands)*

	13-Weeks Ended						39-Weeks Ended
	September 26,		September 28,		YoY		September 26,		September 28,		YoY
	2020		2019		Change		2020		2019		Change
Net sales	$	1,109,194	$	934,383	19	%	$	2,835,168	$	2,655,273	7	%
Americas		521,869		439,113	19	%		1,372,360		1,289,409	6	%
EMEA		407,859		344,010	19	%		1,042,928		942,625	11	%
APAC		179,466		151,260	19	%		419,880		423,239	(1	)%

EMEA - Europe, Middle East and Africa; APAC - Asia Pacific and Australian Continent

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