SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
10-K
x
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ANNUAL
REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE
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SECURITIES
EXCHANGE ACT OF 1934
For the
fiscal year ended December 26, 2009
or
o
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TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE
|
SECURITIES
EXCHANGE ACT OF 1934
For the
transition period from
to _____
Commission
file number 0-31983
GARMIN LTD
.
(Exact
name of registrant as
specified in its charter)
Cayman
Islands
(State
or other jurisdiction
of
incorporation or organization)
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98-0229227
(I.R.S.
Employer Identification No.)
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P.O.
Box 10670, Grand Cayman KY1-1006
Suite
3206B, 45 Market Street, Gardenia Court
Camana
Bay, Cayman Islands
(Address
of principal executive offices)
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N/A
(Zip
Code)
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Registrant’s
telephone number, including area code:
(345) 640-9050
Securities
registered pursuant to Section 12(b) of the Act:
Common
Shares, $0.005 Per Share Par Value
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NASDAQ
Global Select Market
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(Title
of each class)
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(Name
of each exchange on which
registered)
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Securities
registered pursuant to Section 12(g) of the Act:
None
Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in
Rule 405 of the Securities Act. YES
þ
NO
o
Indicate
by check mark if the registrant is not required to file reports pursuant to
Section 13 or Section 15(d) of the Act. YES
o
NO
þ
Indicate
by check mark whether the registrant (1) has filed all reports required to
be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. YES
þ
NO
o
Indicate
by check mark if disclosure of delinquent filers pursuant to Item 405 of
Regulation S-K is not contained herein, and will not be contained, to the
best of registrant’s knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K.
þ
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting
company. See the definitions of “large accelerated filer”,
“accelerated filer” and “smaller reporting company” in Rule 12b-2 of the
Exchange Act.
Large
Accelerated Filer
þ
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Accelerated
Filer
o
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Non-accelerated
Filer
o
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Smaller
reporting company
o
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(Do
not check if a smaller reporting
company)
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Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act).
YES
o
NO
þ
Aggregate market value of the common
shares held by non-affiliates of the registrant as of June 27, 2009 (based on
the closing price of the registrant's common shares on the Nasdaq Stock Market
for that date) was $2,975,580,700.
Number of
shares outstanding of the registrant’s common shares as of February 22,
2010:
Common
Shares, $.005 par value – 200,344,095
Documents
incorporated by reference:
Portions
of the following document are incorporated herein by reference into Part III of
the Form 10-K as indicated:
Document
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Part of Form 10-K into
which Incorporated
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Company's Definitive Proxy Statement
for the 2010 Annual Meeting of Shareholders which will be filed no later
than 120 days after December 26, 2009.
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Part
III
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Garmin
Ltd.
2009
Form 10-K Annual Report
Table
of Contents
Cautionary
Statement With Respect To Forward-Looking Comments
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3
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Part
I
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Item
1.
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Business
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3
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Item
1A.
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Risk
Factors
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23
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Item
1B.
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Unresolved
Staff Comments
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34
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Item
2.
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Properties
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34
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Item
3.
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Legal
Proceedings
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35
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Item
4.
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Submission
of Matters to a Vote of Security Holders
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38
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Executive
Officers of the Registrant
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38
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Part
II
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Item
5.
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Market
for Registrant’s Common Equity, Related Stockholder Matters and Issuer
Purchases of
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Equity
Securities
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40
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Item
6.
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Selected
Financial Data
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42
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Item
7.
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Management's
Discussion and Analysis of Financial Condition and Results
of
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Operations
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44
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Item
7A.
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Quantitative
and Qualitative Disclosures About Market Risk
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60
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Item
8.
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Financial
Statements and Supplementary Data
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62
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Item
9.
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Changes
in and Disagreements with Accountants on Accounting and
Financial
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Disclosure
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90
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Item
9A.
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Controls
and Procedures
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91
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Item
9B.
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Other
Information
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93
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Part
III
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Item
10.
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Directors,
Executive Officers and Corporate Governance
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94
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Item
11.
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Executive
Compensation
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95
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Item
12.
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Security
Ownership of Certain Beneficial Owners and Management and Related
Stockholder
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Matters
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95
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Item
13.
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Certain
Relationships and Related Transactions, and Director
Independence
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96
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Item
14.
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Principal
Accounting Fees and Services
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96
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Part
IV
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Item
15.
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Exhibits,
Financial Statement Schedules
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97
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Signatures
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102
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CAUTIONARY
STATEMENT WITH RESPECT TO FORWARD-LOOKING COMMENTS
The discussions set forth in this
Annual Report on Form 10-K contain statements concerning potential future
events. Such forward-looking statements are based upon assumptions by
the Company's management, as of the date of this Annual Report, including
assumptions about risks and uncertainties faced by the Company. In addition,
management may make forward-looking statements orally or in other writings,
including, but not limited to, in press releases, in the annual report to
shareholders and in the Company’s other filings with the Securities and Exchange
Commission. Readers can identify these forward-looking statements by their use
of such verbs as “expects,” “anticipates,” “believes” or similar verbs or
conjugations of such verbs. Forward-looking statements include any discussion of
the trends and other factors that drive our business and future results in “Item
7. Management’s Discussion and Analysis of Financial Conditions and
Results of Operations.” Readers are cautioned not to place
undue reliance on these forward-looking statements, which speak only as of their
date. If any of management's assumptions prove incorrect or should unanticipated
circumstances arise, the Company's actual results could materially differ from
those anticipated by such forward-looking statements. The differences
could be caused by a number of factors or combination of factors including, but
not limited to, those factors identified under Item 1A “Risk
Factors.” Readers are strongly encouraged to consider those factors
when evaluating any forward-looking statements concerning the
Company. The Company does not undertake to update any forward-looking
statements in this Annual Report to reflect future events or
developments.
Part
I
This
discussion of the business of Garmin Ltd. ("Garmin" or the "Company") should be
read in conjunction with, and is qualified by reference to, “Management's
Discussion and Analysis of Financial Condition and Results of Operations” under
Item 7 herein and the information set forth in response to Item 101 of
Regulation S-K in such Item 7 is incorporated herein by reference in partial
response to this Item 1. Garmin has four business segments: Marine,
Automotive/Mobile, Outdoor/Fitness, and Aviation. The segment
and geographic information included in Item 8, “Financial Statements and
Supplementary Data,” under Note 8 is incorporated herein by reference in partial
response to this Item 1.
Garmin
was incorporated in the Cayman Islands on July 24, 2000 as a holding company for
Garmin Corporation, a Taiwan corporation, in order to facilitate a public
offering of Garmin shares in the United States. Garmin owns, directly or
indirectly, all of the operating companies in the Garmin group.
Garmin’s
annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on
Form 8-K, proxy statement and Forms 3, 4 and 5 filed by Garmin’s directors and
executive officers and all amendments to those reports will be made available
free of charge through the Investor Relations section of Garmin’s Internet
website (http://www.garmin.com) as soon as reasonably practicable after such
material is electronically filed with, or furnished to, the Securities and
Exchange Commission.
The
reference to Garmin’s website address does not constitute incorporation by
reference of the information contained on this website, and such information
should not be considered part of this report on
Form 10-K.
Company
Overview
Garmin is
a leading, worldwide provider of navigation, communication and information
devices and applications, most of which are enabled by Global Positioning System
(“GPS”) technology. Garmin designs, develops, manufactures and markets a diverse
family of hand-held, portable and fixed-mount GPS-enabled products and other
navigation, communications and information products for the automotive/mobile,
outdoor/fitness, marine, and general aviation markets.
Overview
of the Global Positioning System
The
Global Positioning System is a worldwide navigation system which enables the
precise determination of geographic location using established satellite
technology. The system consists of a constellation of orbiting satellites. The
satellites and their ground control and monitoring stations are maintained and
operated by the United States Department of Defense, which maintains an ongoing
satellite replenishment program to ensure continuous global system
coverage. Access to the system is provided free of charge by
the U.S. government.
Prior to
May 2000, the U.S. Department of Defense intentionally degraded the accuracy of
civilian GPS signals in a process known as Selective Availability (‘‘SA’’) for
national security purposes. SA variably degraded GPS position accuracy to a
radius of 100 meters. On May 2, 2000, the U.S. Department of Defense
discontinued SA. In a presidential policy statement issued in December 2004, the
Bush administration indicated that the U.S. does not intend to implement SA
again and is committed to preventing hostile use of GPS through regional denial
of service, minimizing the impact to peaceful users. With SA removed, a GPS
receiver can calculate its position to an accuracy of approximately 10 meters or
less, enhancing the utility of GPS for most applications.
The
accuracy and utility of GPS can be enhanced through augmentation techniques
which compute any remaining errors in the signal and broadcast these corrections
to a GPS device. The Federal Aviation Administration (“FAA”) has developed a
Wide Area Augmentation System (‘‘WAAS’’) comprising ground reference stations
and additional satellites that improve the accuracy of GPS positioning available
in the United States and portions of Canada and Mexico to approximately 3
meters. WAAS supports the use of GPS as the primary means of enroute, terminal
and approach navigation for aviation in the United States. The increased
accuracy offered by WAAS also enhances the utility of WAAS-enabled GPS receivers
for consumer applications. The FAA announced on July 11, 2003 that the WAAS
system had achieved initial operating capability and that the system was
available for instrument flight use with appropriately certified avionics
equipment. Since that time, the FAA has installed additional ground reference
stations and has launched additional WAAS satellites.
Recent
Developments in the Company’s Business
Since the
inception of its business, Garmin has delivered over 65 million products, which
includes the delivery of nearly 17 million products during
2009.
Automotive/Mobile
Product Introductions
Garmin
introduced a number of new versions of Garmin’s popular
nüvi®
personal
navigation device (PND) product line in 2009, including the nüvi 1690, a premium
PND with a built-in wireless module that lets customers access Garmin’s nüLink!™
service, which provides direct links to certain online information such as
Google™ local search, traffic, weather, fuel prices, movie listings, flight
status, local events, white page telephone listings and the Ciao!™ friend
finding application, the nüvi 1490T, a premium PND that has a large, 5-inch
touchscreen and sleek body style that is 25-percent slimmer than most nüvi
models, the nüvi 1200 and 1300 series with a new ultra-thin design that are the
first nüvi devices to offer pedestrian capability enabled through optional
CityExplorer™ maps, and the nüvi 885T, which is a voice-activated PND that
includes lane assist with junction view. Garmin also introduced
in 2009 the nüvi 465T, which is the first PND designed exclusively for over the
road long-haul navigation and delivery trucks. The nüvi 465T supports
multiple truck profiles and features advanced routing and guidance to support
truck-related road restrictions such as height, width, length, weight and
hazardous materials.
In
February 2009 Garmin and ASUSTek Computer Inc. announced a strategic alliance to
leverage the companies’ navigation and mobile telephony expertise to design,
manufacture and distribute co-branded location-centric mobile phones, to be
known as the Garmin-Asus nüvifone
TM
series. Throughout the summer and fall of 2009, the
nüvifone
G60
and M20 models were made available in select countries in Asia, Europe and North
America through retail channels and carriers. The nüvifone G60 was
first available in July 2009 in Taiwan. The nüvifone M20 became
available in August 2009 in Taiwan, Hong Kong, Singapore, Thailand and
Malaysia. The North America launch of the nüvifone G60 occurred in
October 2009 when AT&T announced that it would offer the device to its
customers in the United States. This was followed by the first
western European carrier launch of the nüvifone G60 with Sunrise in
Switzerland. Garmin also announced in 2009 that several other
nüvifone models are under development for 2010, including
devices with the Android
operating system. In addition, in 2009 Garmin introduced the zūmo® 660, which is
a new motorcycl
e device that integrates the slim and sleek design of the
nüvi with specific features made exclusively for motorcyclists.
Garmin
introduced nüMaps Lifetime™ in January 2009, which is a single fee program that,
subject to the program’s terms and conditions, enables customers to download the
latest map and point of interest information every quarter for the useful life
of their PND.
Outdoor/
Fitness Product Introductions
Garmin expanded its Forerunner® line of
products for the fitness market in 2009 with the Forerunner 310XT, which is a
GPS-enabled trainer that is water-resistant to 50m, tracks bike and run data and
sends it wirelessly to your computer. This multi-sport device has up to 20 hours
of battery life, and goes from wrist to bike in seconds. In April
2009 Garmin also introduced the Forerunner 405CX, which adds heart-rate based
calorie computation and improved comfort to the numerous features available on
the Forerunner 405.
Garmin
also expanded its Edge® line of cycling GPS products in 2009 with the Edge 500,
which weighs only two ounces, features a high-sensitivity GPS receiver, requires
no calibration, can be switched quickly and easily between bicycles and connects
wirelessly with ANT+™ compatible third-party power meters.
To help
promote its full line of fitness products, in October 2009 Garmin extended for
an additional three years its title sponsorship of Team Garmin-Transitions, a
ProTour cycling team.
In June
2009 Garmin introduced the Dakota™ series of handheld GPS devices, which are
compact, waterproof devices with up to 20 hours of battery life that include a
high sensitivity GPS receiver, worldwide basemap and color touchscreen display.
Garmin also expanded its Oregon™ series of touchscreen handheld GPS devices by
introducing the Oregon 550 and 550t, which integrate a 3.2 megapixel digital
camera that creates geotagged images and a 3-axis compass into the Oregon series
of devices, as well as the Oregon 450 and 450t.
Garmin
also updated the eTrex® series of value-priced handheld GPS devices in 2009 by
introducing the eTrex Legend H and the eTrex Vista H, which include a high
sensitivity GPS receiver, a USB interface, and 24 megabytes of internal memory
for loading detailed topographic maps. The eTrex Vista H also
includes an electronic compass and barometric altimeter.
Garmin
also introduced the Approach™ G5 in January 2009, which is its first touchscreen
handheld GPS product designed exclusively for the golf course. The
Approach G5 is a rugged, waterproof, touchscreen golf GPS packed with thousands
of preloaded golf course maps. It uses a high-sensitivity GPS receiver to, among
many other features, measure individual shot distances and show the exact
yardage to fairways, hazards and greens.
Marine
Product Introductions
In 2009
Garmin introduced the GPS 72H, which is a value-priced lightweight, waterproof
handheld GPS that floats, features a high-sensitivity GPS, a USB connection and
a large screen. Garmin also introduced HomePort™, an
application that allows mariners to plan and manage trips, routes, tracks and
waypoints and transfer them between a personal computer and applicable Garmin
chartplotter. In July 2009 Garmin introduced the VHF 300, which is a
high-end marine radio with premium features such as multi-station support, a
space-saving black box configuration, and options such as an integrated
dual-band AIS receiver.
In July
2009 Garmin introduced its next generation of open-array digital radar scanners
– the GMR™ 1204/1206 xHD and the GMR 604 xHD, which provide up to eight times
more sampling data that Garmin’s current open-array digital radar scanner
products. In November 2009 Garmin introduced the GPSMAP® 6000 and
GPSMAP 7000 series of large-format multi-function displays with G Motion™
technology.
Aviation Product Introductions
and Certifications
In March
2009 Garmin received Federal Aviation Administration (FAA) Supplemental Type
Certification (STC) for the G1000® avionics suite in the King Air 200 and
B200.
In April 2009 Garmin received European
Aviation Safety Agency’s (EASA) European Technical Standard Order (ETSO)
approval for the GDU 620 display/control unit, which is the display unit for the
G600 flight display system. Because the other components of the G600 have
already received EASA’s ETSO approval, this announcement indicates the GDU 620
is eligible for installation in European registered aircraft with a
certification weight up to 5,700 kgs.
In July
2009 Garmin received FAA Approved Model List Supplemental Type Certification
(AML STC) for the G500, a new avionics suite for normal and utility category
Part 23 Class I and Class II aircraft.
In
October 2009 Garmin announced the G3000, its first touchscreen-controlled
integrated flight deck for Part 23 turbine aircraft.
In November 2009 Garmin introduced the
aera™, an aviation handheld series that is touchscreen and multi-mode so that it
can transition between aviation to automotive mode with one touch.
In December 2009 the FAA granted AML
STC for Garmin’s new TAS and TCAS I traffic systems, the GTS™ 800, GTS 820 and
GTS 850.
Products
Garmin
has achieved a leading market position and a history of consistent growth in
revenues and profits by offering ergonomically designed, user-friendly products
with innovative features and designs covering a broad range of applications and
price points. Garmin’s target markets are currently broken down into
its four main business segments – automotive/mobile, outdoor/fitness, marine and
aviation.
Automotive/Mobile
Garmin offers a broad range of
automotive navigation products, as well as a variety of products and
applications designed for the mobile GPS market. Garmin believes that
its products are known for their value, high performance, ease of use,
innovation, and ergonomics. The table below includes a sampling of
the automotive and mobile products that Garmin currently offers to consumers
around the world
.
nüvi®
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(25
models)
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The
nüvi is Garmin’s popular thin-profile personal navigation device
(PND). All nüvi models combine a full-featured GPS navigator
(with built-in maps) with a currency and measurement converter, world
clock and digital photo organizer. Different nüvi models and
optional add-ons offer different feature sets, including a wide screen
display, integrated traffic receiver for traffic data, spoken street
names, voice recognition, speed limit indication, lane assist, 3-D
building view, , junction view, Bluetooth® hands-free capability, MP3
player, built-in maps of Europe, and the ability to add custom points of
interest. The nüvi model 1690 offers Garmin’s nüLink!™ service,
which is a subscription service (a free two-year subscription is provided
with the nüvi 1690) that provides certain real-time information delivered
wirelessly to the device, including Google™ local search, traffic
information, weather, fuel prices, movie listings, flight status, local
events, and white page telephone listings. Numerous newer nüvi
models also offer a feature called ecoRoute™, which is a feature designed
to help improve the vehicle’s fuel efficiency by suggesting route
calculations based upon less fuel usage and a driving challenge program
that helps reinforce fuel-efficient driving practices. In fiscal years
2009, 2008, and 2007, the nüvi class of products represented approximately
63%, 64%, and 52% respectively of Garmin’s total consolidated
revenues.
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nüvifone
™
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(2
models)
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The
nüvifone
TM
G60
— a touchscreen smartphone that integrates a mobile phone, web browser and
PND all in one device — was introduced in 2009 by Garmin and ASUSTek
Computer Inc. through the Garmin-Asus alliance, a co-branded alliance
between Garmin and ASUSTek Computer Inc. AT&T is the
exclusive mobile phone carrier for the nüvifone G60 in the United
States. It is also available for purchase in Belgium, France,
Switzerland, Poland, Czech Republic, Taiwan, Singapore and
Malaysia. The nüvifone M20 smartphone operates on a Windows
Mobile® 6.5 operating system and is sold in Taiwan and Hong
Kong.
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z
ūmo
®
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(4
models)
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Motorcycle-specific
navigators with features including a glove-friendly touch screen with high
bright sunlight-readable display, motorcycle mount, vibration-tested
design, and Bluetooth wireless technology. An SD (secure
digital) card sl
ot allows riders to share their favorite places and
rides with fellow zūmo riders. The zūmo 660 features 3-D
building view and lane assist and a digital fuel gauge. The
zūmo 220 and 665 were announced in January 2010 as the latest zūmo models
(expected delivery of first quarter 2010). The zūmo 220 offers
a smaller form factor than previous models, while the 665 includes an
antenna for XM Satellite Radio®, XM NavWeather® and XM NavTraffic®
(subscription is required for XM content).
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Garmin
Mobile
®
for
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BlackBerry
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Garmin
Mobile for BlackBerry is a subscription-based software application that
lets compatible BlackBerry devices function as versatile GPS
navigators.
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Garmin
Mobile XT
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Garmin
Mobile XT is a data card that turns many smartphones into full-featured
navigators. Users can simply plug the microSD card into a
compatible phone and begin navigating. No network coverage or
subscription is
required.
|
Outdoor/Fitness
The table below includes a sampling of
the fitness and outdoor products that Garmin currently offers to consumers
around the world
.
Forerunner®
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(9
models)
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Compact,
lightweight training assistants for athletes with integrated GPS sensor
(except for FR60 fitness watch) that provide time, speed, distance, pace
and other data. Some models also offer a heart rate monitoring function.
The Forerunner 60 is an entry-level advanced fitness watch that allows
runners and walkers to track their workouts and automatically upload their
data (via a wireless USB ANT™ Stick) to a personal
computer. The Forerunner 405 is a compact-sized, wrist-worn
GPS-enabled device that allows runners and joggers to track their speed,
distance, heart rate and location, access their training history or
challenge a Virtual Partner™ and automatically upload their data
wirelessly to a personal computer. The Forerunner 405CX adds
heart-rate based calorie computation and improved comfort to the numerous
features available on the Forerunner 405. The Forerunner 310XT
model, which was designed specifically for triathletes, is water-resistant
to 50m and tracks biking and running data (and optional heart rate
data).
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Edge®
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(5
models)
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Integrated
personal training systems designed for cyclists. The Edge 205 measures
speed, distance, time, calories burned, climb and descent, altitude and
more. The Edge 305 adds a heart rate monitor and/or wireless
speed/pedaling cadence sensor. The Edge 605 and 705 provide
mapping capabilities (including street navigation) and a 2.2” color
display in addition to tracking vertical profiles, climb and descent,
altitude, speed, distance, and time. The newest model — the
Edge 500 — is geared toward performance-driven cyclists by offering the
ability to track even more performance data in a streamlined form
factor.
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Dakota™
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(2
models)
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|
The
Dakota series is Garmin’s entry level series of handheld GPS navigators
with built-in mapping. The Dakota 10 is a rugged, palm-sized
navigator that offers a touchscreen display, high-sensitivity GPS, and a
built-in worldwide basemap. The Dakota 20 adds a barometric
altimeter, 3-axis electronic compass, and a microSD™ card slot for
optional customized maps. The 20 model also allows a user to
share waypoints, tracks, routes and geocaches wirelessly with other
compatible Dakota, Foretrex®, Oregon® and Colorado®
users.
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Colorado®
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|
(4
models)
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|
The
Colorado series features Garmin’s Rock ‘n Roller™ wheel, which
allows the user to operate many of the units’ features with the user’s
thumb. The Colorado 300 features a worldwide basemap with
shaded relief. The Colorado 400c provides marine chart coverage
for the coastal U.S. and Bahamas. The Colorado 400i offers
shoreline details, depth contours and boat ramps for U.S. inland lakes and
rivers. The Colorado 400t gives hikers 3-D elevation perspective and
preloaded U.S. topographic maps. All Colorado models are equipped with a
barometric altimeter and electronic compass.
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Oregon®
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(9
models)
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|
The
Oregon series combines a bright 3 inch color touchscreen, rugged design
and a variety of preloaded mapping options. The entry-level Oregon 200
comes with a built-in Worldwide basemap. The Oregon 300
includes a worldwide basemap with shaded relief. The Oregon
400t gives hikers preloaded U.S. topographic maps with 3-D elevation
perspective. The Oregon 400i offers shoreline details, depth contours and
boat ramps for U.S. inland lakes and navigable rivers. The Oregon 400c
features chart coverage for the coastal U.S. and Bahamas. The high-end
Oregon 550 and 550t each come with a built-in 3.2 megapixel autofocus
digital camera with 4x digital zoom, and each photo taken by these devices
is automatically geotagged with the location of where it was taken,
allowing the user to navigate back to that exact spot in the
future. In January 2010, Garmin announced the Oregon 450 and
Oregon 450t, the newest members of the Oregon product family (expected
availability of first quarter 2010). The 450 and 450t do not
include the built-in camera, but offer many other upgrades over other
Oregon models, including an easier-to-read display and enhanced track
navigation.
|
Rino®
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|
(5
models)
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Handheld
two-way Family Radio Service (FRS) and General Mobile Radio Service (GMRS)
radios that integrate two-way voice communications with GPS
navigation. Features include patented “peer-to-peer position
reporting” so you can transmit your location to another Rino
radio. The Rino 110 offers an FRS/GMRS radio plus basic GPS
navigator. The Rino 120 adds an internal basemap and MapSource
compatibility for street-level mapping. The Rino 130 has 24 MB
of internal memory, built-in electronic compass, barometric sensor, and
National Oceanic and Atmospheric Administration (NOAA) weather radio
receiver. The Rino 520HCx has a high sensitivity GPS receiver,
5 watts of transmit power, color display, mini-USB interface, and a
turn-by turn automatic route calculation for use in
automobiles. The Rino 530HCx has all of the features of the
Rino 520HCx, plus a seven-channel weather receiver, electronic compass,
and barometric altimeter.
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|
|
|
Approach™
G5
|
|
|
(2
models)
|
|
The
Approach G5 is a waterproof, touchscreen, handheld GPS for golfers that
features over 12,000 preloaded golf course maps. Approach G5 uses a
high-sensitivity GPS receiver to measure individual shot distances and
show the exact yardage to fairways, hazards and greens. The
Approach G3 was announced in January 2010 as a smaller, lighter version of
the Approach, yet still offers over 12,000 preloaded
courses. Neither model requires any ongoing subscription
fees.
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|
|
|
Astro®
|
|
High
sensitivity GPS-enabled dog tracking system. The Astro is
designed to pinpoint up to ten dogs’ positions at one time through
all-weather collars and a handheld system. The system also
provides a Dog Tracker page and a Covey Counter
tm
to assist the hunter. It is loaded with many of the
features of our outdoor devices including: barometric
altimeter, electronic compass, microSD slot, area calculator and a
waterproof
exterior.
|
Marine
Garmin’s
marine lineup includes network products and multifunction displays, fixed-mount
GPS/chartplotter products, instruments, radar, autopilots, and sounder
products. The table below includes a sampling of some of
the marine products that Garmin currently offers to consumers.
Marine
Chartplotters and Networking Products
GPSMAP®
7000
series
|
|
|
|
|
The
latest generation in Garmin’s large-format multi-function
displays. The GPSMAP 7000 series introduced Garmin’s G Motion
technology, which represents an upgrade in speed, smoothness and clarity
over prior plotters. G Motion technology delivers ultra-smooth
map panning and zooming with virtually seamless graphical updating in all
dimensions. The 7000 series chartplotters also feature a
low-level backlight display and a backlit keypad for use in low-light
conditions without compromising vision. The GPSMAP 7x15 series
offers a huge 15-inch diagonal XGA (1024 x 768 pixel) sunlight readable
touchscreen display, and is offered in two models – the GPSMAP 7015 with
an enhanced worldwide satellite imagery basemap; and the GPSMAP 7215,
which comes pre-loaded with highly detailed U.S. coastal charts and
Explorer Charts for the Bahamas. Mariners can also opt for the same
XGA resolution in a 12-inch diagonal screen configuration with the GPSMAP
7012 and GPSMAP 7212 models, which offer a worldwide basemap and coastal
charts respectively. All models are compatible with an optional
wireless remote and a wireless mouse for additional flexibility and also
offer expanded “plug-and-play” access to onboard sensors, with NMEA 2000
and Garmin Marine Network connectivity (the Garmin Marine Network is a
system that combines GPS, radar, XM WX Satellite Weather, sonar, and other
data).
|
GPSMAP®
6000
series
|
|
|
(4
models)
|
|
Like
the 7000 series, the 6000 series models also offer Garmin’s new G Motion
technology and the features to improve visibility in low-light
conditions. The GPSMAP 6x12 series features a traditional
soft-key interface with an alphanumeric keypad and a 12-inch diagonal XGA
(1024 x 768 pixel) sunlight readable display. Within this
family, Garmin offers the GPSMAP 6012 with an enhanced worldwide satellite
imagery basemap; and the GPSMAP 6212 with highly detailed U.S. coastal
charts and Explorer Charts for the Bahamas preloaded. For a
smaller display, the GPSMAP 6x08 series offers an 8-inch VGA (640 x 480)
sunlight readable display with a soft-key interface. The models
in the GPSMAP 6000 series are all compatible with an optional wireless
remote and also offer expanded “plug-and-play” access to onboard sensors,
with NMEA 2000 and Garmin Marine Network connectivity.
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|
|
|
GPSMAP®
5000 series
|
|
|
(6
models)
|
|
These
touch-screen multifunction displays for the Garmin Marine Network (a
system that combines GPS, radar, XM WX Satellite Weather, sonar, and other
data) offer ease of use and video-quality resolution and
color. The 5212 and 5208 come pre-loaded with detailed U.S.
coastal charts, including Explorer Charts, and are compatible with
Garmin’s BlueChart® g2 Vision™ charts (sold separately) which offer
high-resolution satellite imagery, 3-D map perspective, aerial reference
photos, and auto guidance. The 5215 and 5015 offer 15-inch
diagonal sunlight-readable touchscreen displays.
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|
|
|
GPSMAP®
4000 series/
|
|
|
4200
series (6 models)
|
|
These
multifunction displays for the Garmin Marine Network offer ease of use and
video-quality resolution and color. The 4212 and 4208 come
pre-loaded with detailed U.S. coastal charts, including Explorer Charts,
and are compatible with Garmin’s BlueChart® g2 Vision™ charts (sold
separately) which offer high-resolution satellite imagery, 3-D map
perspective, aerial reference photos, and auto guidance. The
4210 and 4010 feature 10.4-inch diagonal sunlight- readable displays and
Garmin’s new marine user interface.
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|
|
|
GPSMAP®
3000
|
|
|
(2
models)
|
|
These
configurable chartplotter/multifunction displays (MFDs) are
network-enabled and come in either a 10.4” or 6.4”
display.
|
|
|
|
GPSMAP®
4x0 and 5x0
|
|
|
and
7x0 series
|
|
|
(5
models)
|
|
The
4x0 and 5x0 chartplotters and chartplotter/sonar units
feature highly-detailed pre-loaded marine cartography and offer
a wide variety of display sizes and networking options. All
units are compatible with Garmin’s BlueChart® g2™ data cards. The 7x0
models are the newest in this family of products and are the first
touchscreen controlled stand-alone marine chartplotters to offer radar
capability and built-in sonar at an affordable
price.
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GPSMAP®
5x6 and 5x1
|
|
|
series
(6 models)
|
|
Building
upon the success of the GPSMAP 400 and 500 series, the new chartplotters
in the GPSMAP 5x6, 5x1 and 4x1 series come standard with an internal
high-sensitivity GPS receiver that allows for faster acquisition times and
better satellite tracking so that boaters are able to acquire and maintain
a GPS fix more easily. In addition, these units boast an improved,
high-speed digital design that will increase map drawing and panning
speeds. Many of the new models in this series are also NMEA
2000 certified and can interface with Garmin’s full lineup of NMEA 2000
marine sensors and autopilots, as well as many other third-party
sensors.
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|
|
|
GPSMAP®
4x1
|
|
|
series
(3 models)
|
|
With
a 4-inch QVGA sunlight-readable display, the GPSMAP 4x1 series was
designed for the boater who wants high performance in a small
package. These units feature a high-sensitivity GPS receiver
and faster processors, and are offered with the same cartography
configuration as the GPSMAP 5x1 series. Likewise, the GPSMAP 4x1s series
is also available with a built-in sonar with a 500-watt RMS dual-frequency
transducer for offshore use and a 400-watt RMS with a dual beam transducer
for inland use. For satellite weather and radio data, the
GPSMAP 441 and 421 are also compatible with the GXM 51
receiver.
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|
|
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GSD
21 and 22
|
|
These
“black-box” sounders interface with Garmin display units and chartplotters
and enhance their utility by providing the depth sounder and fish finder
functions in a remote mounted package.
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|
|
|
GMS
10
|
|
The
GMS 10 Network Port Expander is the "nerve center" of the Garmin Marine
Network. This 100-Mbit switch is designed to support the
connection of multiple sensors to the Garmin Marine
Network.
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|
|
|
Other
Marine Products
|
|
|
|
GMI
10
|
|
The
GMI 10 is a NMEA 2000 and NMEA 0183 compliant instrument that displays
data from multiple remote sensors on one screen. Mariners can
use the GMI 10 to display instrument data such as depth, speed through the
water, water temperature, fuel flow rate, engine data, fuel level, wind
direction and more, depending upon what sensors are
connected.
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|
|
|
VHF
Marine Radios
|
|
|
(4
models)
|
|
This
series of marine radios offers differing feature sets for the radio needs
of all types of mariners. The VHF 100 is an entry-level, NMEA
0183 compatible VHF marine radio. The VHF 200 is NMEA 2000
compatible. The next step up is the VHF 300, which is designed
for 35+ foot boats and is NMEA 2000 and NMEA 0183 compatible and offers
multi-station support. Also designed for 35+ foot boats, the
VHF 300 AIS is NMEA 2000 and NMEA 0183 compatible, offers multi-station
support, and monitors all AIS channels at the same
time.
|
Marine
|
|
|
Autopilot
Systems
|
|
|
(3
models)
|
|
The
GHP 10’s patented Shadow Drive™ technology automatically disengages the
autopilot if the helm is turned, allowing the helmsman to maneuver the
boat. The autopilot automatically re-engages when a steady course is held
by the helmsman. The TR-1 Gold Marine Autopilot offers worry-free remote
steering and speed control to operators of small gasoline outboard motor
boats up to 20 horsepower. Finally, the GHP 10V Autopilot
System for Volvo Penta IPS and Sterndrive Joystick Systems is approved for
use with boats that have an integrated Volvo Penta IPS steering and
propulsion system and features Garmin’s proven and innovative Shadow
Drive™ technology – a patented capability that automatically disengages
the autopilot if the helm is turned, allowing for quick and safe manual
maneuvers without manually disengaging the autopilot.
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|
|
|
Fishfinders
|
|
|
(5
models)
|
|
Garmin
offers five different fishfinder options spanning various price points.
All models feature Garmin’s Ultrascroll™ technology, which allows boaters
to get a faster refresh rate on their sonar display, and dual-beam
transducer operation. Four of the models offer color
displays. The Fishfinder 400C comes with dual beam or dual
frequency transducers for easy adaptability to either freshwater or
saltwater fishing. It also offers a new, easy-to-use interface
and built in CANet connectivity to enable sonar data to be shared with
compatible Garmin chartplotters.
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|
|
|
Radar
|
|
|
(11
models)
|
|
Garmin
offers both radomes and open array radar products with compatibility to
any network-compatible Garmin chartplotter so that the chartplotter can
double as the radar screen. The GMR™ 18 and 24 models are
digital radome products in various sizes and power
specifications. The GMR 404 and 406 open array radar scanners
provide even greater clarity and a 72 nautical mile range. The
GMR 18 HD and GMR 24 HD radomes feature digital signal processing
providing sharper radar imagery and improved target separation. The newest
generation of open-array digital radar scanners and the GMR™ 1204/1206 xHD
and the GMR 604/606 xHD models, which transmit with 12 and 6 kilowatts of
power respectively. All four of these open-array scanners have
a maximum effective range of 72 nautical miles and offer selectable
rotation speeds from 24 RPM to 48 RPM for rapid target
updates. These new xHD scanners provide up to eight times more
sampling data than Garmin’s current open-array
offerings,
|
Aviation
Garmin’s
product line includes GPS-enabled navigation, VHF communications
transmitters/receivers, multi-function displays, electronic flight
instrumentation systems (EFIS), traffic advisory systems and traffic collision
avoidance systems, instrument landing system (ILS) receivers, surveillance
products, marker beacon receivers and audio panels.
Garmin’s
aviation products have won prestigious awards throughout the industry for their
innovative features and ease of use. The GNS 430/530W offers multiple
features and capabilities integrated into a single product. This high level of
integration minimizes the use of precious space in the cockpit, enhances the
quality and safety of flight through the use of modern designs and components
and reduces the cost of equipping an aircraft with modern
electronics. The GNS 430 was recognized by
Flying
Magazine as the
Editor’s Choice Product of the Year for 1998. In 1994, and again in
2000, Garmin earned recognition from the Aircraft Electronics Association for
outstanding contribution to the general aviation electronics
industry. The GPSMAP 295 won
Aviation Consumer
Magazine’s
Gear of the Year award for best aviation portable product in 2000 and again in
2001.
Flying
Magazine’s
editors awarded the GPSMAP 396 with a 2005 Editors’ Choice Award for outstanding
achievements. The GPSMAP 496, introduced in 2006, won the “2006 Gear
of the Year” award from
Aviation Consumer
magazine.
Flying
Magazine’s editors
awarded Garmin a 2007
Flying
Editors’ Choice Award for making the safety and precision of WAAS (Wide
Area Augmentation System) available in its GPS navigation
systems. Garmin was ranked No. 1 among aviation electronics
manufacturers for operation, presentation, technical advancement, information,
construction and satisfaction in
Professional Pilot
magazine’s
survey of its readers in 2003, 2004 and 2005 and was ranked No. 2 in 2006 and
2007. Garmin has been ranked No. 1 among cockpit avionics manufacturers for
avionics product support in
Professional Pilot
magazine’s
survey of its readers in each of the last six survey years.
Aviation International News
also ranked Garmin the highest among cockpit avionics manufacturers in
product support in 2009, making it the sixth consecutive year that Garmin has
earned that distinction. Garmin received the Airline Technology
Achievement Award from
Air
Transport World Magazine
in January 2005 for championing the development
of Automatic Dependent Surveillance-Broadcast (ADS-B) technology, an enabling
technology for air traffic management.
Garmin’s
aviation products are sold in both new aircraft and the retrofit market where
existing aircraft are fitted with the latest electronics from Garmin’s broad
product line.
Garmin
has also expanded its range of avionics offerings to leading General Aviation
aircraft manufacturers such as the Cessna Aircraft Company, Cirrus Aircraft,
Hawker Beechcraft Corporation, Diamond Aircraft Industries, Mooney Airplane
Company, Piper Aircraft, Inc., DAHER- SOCATA and Quest
Aircraft through the installation of the G1000 integrated flight deck
as original equipment aboard new aircraft. This system integrates attitude,
heading, air data, navigation, communication, engine monitoring, and other
aircraft functions into a single cohesive system which interfaces with the
flight crew using a set of large, bright TFT displays. The G1000 also
includes an integrated autopilot – the GFC700. Garmin also has
expanded its G1000 certifications to the business jet segment, such as Cessna’s
Citation Mustang jet and Embraer’s Phenom 100 and Phenom 300. Garmin
also announced its next generation integrated flight deck system, the G3000, at
the National Business Aircraft Association (NBAA) trade show in October
2009. Both Honda Aircraft Corporation and Piper Aircraft
simultaneously announced that the G3000 has been selected for the HondaJet and
PiperJet respectively.
The table
below includes a sampling of some of the aviation products currently offered by
Garmin:
Handheld
and portable aviation products:
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|
|
|
aera™
series
|
|
|
(4
models)
|
|
Garmin’s
newest aviation handheld series combines the latest aviation portable with
a full-featured automotive GPS, allowing pilots to transition between
aviation to automotive mode with one touch. Featuring a crisp
4.3-inch QVGA wide-format display with touchscreen interface, all four
aera models come with preloaded automotive maps, a built-in
terrain/obstacles aviation database, patented Panel Page instrument
display, and other features. When in aviation mode, pilots see
colorful icons that use intuitive pictures and labels to indicate their
function. The exterior of each aera model (500, 510, 550 and 560) are
identical, but the software features of each model are tailored to those
seeking an entry, mid or high-level aviation handheld.
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|
|
|
GPSMAP
495/496
|
|
The
GPSMAP 496 expands on the GPSMAP 396 by adding such additional features as
Garmin’s SafeTaxi™ airport diagrams, Aircraft Owners and Pilots
Association (AOPA) Airport directory data, Garmin’s Smart Airspace
enhanced high-resolution terrain database, accelerated GPS update rate,
and pre-loaded automotive maps of North America. The GPSMAP 495 offers
many of the same features as the GPSMAP 496 at a lower price
point.
|
|
|
|
GPSMAP
695/696
|
|
The
GPSMAP 696 expands on the features of the GPSMAP 496 by adding a 7 inch
screen, preloaded detailed electronic charts, preloaded airways and IFR
map mode. The GPSMAP 696 has a receiver for XM radio and XM WX Satellite
Weather (U.S. customers only) that gives next generation radar (NEXRAD),
aviation routine weather reports (METARs), terminal aerodrome forecasts
(TAFs), temporary flight restrictions (TFRs), lightning, winds aloft,
turbulence forecasts, and several other important weather products. The
GPSMAP 695 has the same features except for XM radio and
weather.
|
Pilot
My-Cast
SM
|
|
Pilot
My-Cast by Garmin is a premium flight planning, flight plan filing, and
pre-flight weather application for display on compatible mobile
phones. Compared to other aviation weather cell phone
applications, Pilot My-Cast is unique because it receives aviation data
directly from the National Weather Service, Environment Canada, and
Federal Aviation Administration.
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|
|
|
Integrated
avionics systems:
|
|
|
|
G3000
™
|
|
Announced
in October 2009, the G3000, which is designed for use in FAR Part 23
turbine aircraft, is the first touchscreen-controlled integrated
flightdeck for light turbine aircraft. It features extra-wide
14.1-inch displays with split-screen MFD viewing functionality and PFD
terrain simulation in 3-D perspective with SVT™ Synthetic Vision
Technology.
|
|
|
|
G1000
®
|
|
The
G1000 integrates navigation, communication, attitude, weather, terrain,
traffic, surveillance and engine information on large high-resolution
color displays. The G1000 offers general aviation airplane manufacturers
an easy-to-install solution for flight displays and provides the aircraft
owner the benefits of a state-of-the-art avionics system which relies on
modern technologies such as solid state components and bright,
sunlight-readable TFT displays.
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|
|
|
G600™
|
|
The
G600 brings the style and function of an all-glass integrated avionics
suite to the retrofit market for FAR Part 23 Class I, II or III
aircraft. The G600 incorporates two individual displays – a PFD
and MFD – in a customized package specifically designed for easy retrofit
installation. The G600 is designed to communicate and integrate with
Garmin’s WAAS enabled panel mount products, and provides essential
information such as attitude, air data, weather, terrain and
traffic. Garmin has received the FAA’s Approved Model List
Supplemental Type Certification (AML STC) for the G600, which will
simplify certification for over 300 different aircraft
models.
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|
|
|
G500™
|
|
Designed
specifically for FAR Part 23 Class I/Class II aircraft (singles and twins
under 6,000 lbs.), the G500 is an affordable, dual-screen electronic
flight display that works with a pilot’s separate Garmin avionics stack to
provide a fully TSO’d “glass cockpit” retrofit option. The G500
does not include all of the same standard functionality as the G600 (for
example, the G500 does not offer SVT (Synthetic Vision Technology) or a
standard GAD 43 interface adapter.
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|
|
|
G900X™
|
|
An
all-glass integrated avionics system specifically designed for kitplane
builders of the Lancair and Van’s RV-series aircraft.G3X™ The G3X is a
fully-customizable glass cockpit for installation in experimental/kitbuilt
and light sport aircraft. The G3X offers a customizable PFD/MFD
combination that features one, two or three all-glass displays;
magnetometer; ADAHRS (combined air data and AHRS unit) and engine
monitoring.
|
GDU
370/375
|
|
Multifunction
displays for the light sport retrofit and experimental aircraft markets
(expected to be available in the second quarter of
2009).
|
|
|
|
Panel-mount
aviation products:
|
|
|
|
400W
Series
|
|
|
(3
models)
|
|
The
GNS 430W is the Wide Area Augmentation System (WAAS) successor to Garmin’s
popular GNS 430, which was the world’s first ‘‘all-in-one’’ IFR certified
GPS navigation receiver/traditional VHF navigation receiver/instrument
landing systems receiver and VHF communication transmitter/receiver.
Features available in different 400 series models include 4-color map
graphics, GPS, communication and navigation
capabilities. .
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|
|
|
500
W Series
|
|
|
(2
models)
|
|
These
units combine the features of the 400W series along with a larger 5” color
display. The 530W Series comes standard with Wide Area
Augmentation System (WAAS) capability and may be ordered with or upgraded
to Class B Terrain Awareness and Warning System (TAWS-B)
capability.
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|
|
|
GTS™
TAS and
|
|
|
TCAS
I Systems
|
|
The
GTS 800 series of traffic avoidance products combines active and passive
surveillance data to pinpoint specific traffic threats. The systems use
Garmin’s patent-pending CLEAR CAS™ technology and correlates automatic
dependent surveillance broadcast (ADS-B) with radar targets.
The GTS 800 TAS is a
lower-cost system, offering 40 watts of transmit power and a range of up
to 12 nautical miles. The GTS 820 TAS delivers 250 watts of transmit power
and up to 40 nautical miles of interrogation range. The GTS 850 TCAS I
satisfies all TCAS I collision avoidance criteria for higher-capability
turboprops and jets. It features the same 250 watt performance
as the GTS 820, and also meets the FAA’s TCAS I certification
criteria
|
|
|
|
GI-102A
& 106A
|
|
Course
deviation indicators (CDIs). The GI-106A features an instrument landing
system receiver to aid in landing.
|
|
|
|
GMA
240, 340 & 347
|
|
The
GMA 340 is a feature-rich audio panel with six-place stereo intercom and
independent pilot/co-pilot communications capabilities. The GMA
347 has automatic squelch, digital clearance recorder, and a full-duplex
telephone interface. The GMA 240 is a versatile, non-TSO’d
audio panel designed for experimental and light sport
aircraft.
|
|
|
|
GTX™
330 & 330D
|
|
FAA-certified
Mode S transponders with data link capability, including local air traffic
information at FAA radar sites equipped with Traffic Information Service
(TIS). These transponders may also be optionally upgraded to
provide 1090 MHz Extended Squitter (ES) transmission capabilities, which
will increase situational awareness once the Automatic Dependent
Surveillance-Broadcast (ADS-B) system is fully
implemented.
|
|
|
|
GTX
320A,327 & 328
|
|
FAA-certified
transponders which transmit altitude or flight identification to air
traffic control radar systems or other aircraft’s air traffic avoidance
devices and feature solid-state construction for longer
life. The GTX 327 offers a digital display with timing
functions. The 328 is designed exclusively for Europe and
satisfies the European requirement for a Mode S solution that meets the
reduced certification requirements for the VFR Mode S
mandate.
|
GDL
90
|
|
The
GDL 90 is the first airborne Automatic Dependent Surveillance-Broadcast
(ADS-B) product certified by the FAA to TSO C145A
standards. The GDL 90 allows pilots in the cockpit and air
traffic controllers on the ground to “see” aircraft traffic with much more
precision than has ever been possible before without the costly
infrastructure of ground based tracking radar. The GDL 90
relies on the infrastructure that is part of the FAA’s Safe Flight 21
program. This program is currently under development with
implementation of the ground-based portion of the ADS-B network taking
place along the East Coast and other selected areas of the
U.S.A. Additional installations of the ADS-B ground stations
are planned. The ground stations can track aircraft movement
and eventually are expected to be used to broadcast traffic and weather
services. Pilots equipped with the GDL 90 and operating within
the ground station coverage area will receive aircraft traffic and
real-time weather information free of charge.
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|
|
|
GDL
69 and 69A
|
|
The
GDL 69 offers the ability to provide real-time weather information to the
aircraft which can be displayed on one of several panel-mounted devices,
such as the GNS 430, GNS 530, MX20, and G1000 systems. The GDL 69 and GDL
69A receive real-time weather information broadcast by the XM WX Satellite
radio system. In addition, the GDL 69A expands the utility of
the system by providing CD quality audio provided by XM Satellite Radio
(separate subscriptions for weather data and audio
required).
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|
|
|
GMX
200™
|
|
A
large (6.5 inch) sunlight-readable, high-resolution, multi-function
display.
|
|
|
|
SL
30 and SL 40
|
|
The
SL30 is a compact VHF navigation and communications unit that combines a
760-channel VHF communications radio with 200-channel glideslope and
localizer receivers. The SL40 is a 760-channel VHF
communications radio only. Both the SL30 and SL40 feature 10
watt communications transmitters.
|
|
|
|
GWX™
68
|
|
The
GWX 68 is an all-in-one antenna/receiver/transmitter that brings real-time
weather to Garmin’s newest multi-function
displays.
|
Sales
and Marketing
Garmin’s
non-aviation products are sold through a worldwide network of approximately
3,000 independent dealers and distributors in approximately 100 countries who
meet our sales and customer service qualifications. Best Buy was the only
customer whose purchases represented 10% or more of Garmin’s consolidated
revenues in the fiscal year ended December 26, 2009 (Best Buy’s purchases
totaled 13.4% of Garmin’s 2009 consolidated revenues). Marketing
support is provided geographically from Garmin’s offices in Olathe, Kansas
(North, South and Central America
),
in the U.K. (Eastern Europe,
Middle East and Africa) France, Germany, Italy, Spain, Portugal, Austria,
Sweden, Denmark, Finland, Belgium, Australia (also covering New Zealand) and in
Taiwan (Asia). Garmin’s distribution strategy is intended to increase
Garmin’s global penetration and presence while maintaining high quality
standards to ensure end-user satisfaction.
Garmin’s
U.S. consumer product sales are handled through its network of dealers and
distributors who are serviced by a staff of regional sales managers and in-house
sales associates. Some of Garmin’s larger consumer products dealers and
distributors include:
|
·
|
Best Buy
—one of the
largest U.S. and Canadian electronics
retailers;
|
|
·
|
Amazon.com
—internet
retailer;
|
|
·
|
Costco
—an international
chain of membership warehouses that carry quality, brand name
merchandise;
|
|
·
|
Halford’s
—a large
European retailer specializing in car parts and
accessories;
|
|
·
|
Petra
—a large
distributor who sells to a wide range of
dealers;
|
|
·
|
Target
— one of the
nation’s largest general merchandise
retailers;
|
|
·
|
Wal-Mart
—the world’s
largest mass retailer; and
|
|
·
|
Wynit
—a large
distributor who sells to a wide range of dealers, including Radio
Shack.
|
Garmin’s
Europe, Middle East, Australia/New Zealand and Africa consumer product sales are
handled through our in-country subsidiaries or local distributors who resell to
dealers. Working closely with Garmin’s in-house sales and marketing staff in the
U.K. and U.S., these in-country subsidiaries or independent distributors are
responsible for inventory levels and staff training requirements at each retail
location. Garmin’s Taiwan-based marketing team handles the Company’s Asia sales
and marketing effort.
Garmin’s
panel-mount aviation products are sold through aviation distributors around the
world. Garmin’s largest aviation distributors include Sportsman’s Market,
Aircraft Spruce and Specialty Co., Gulf Coast Avionics, Pacific Coast Avionics,
and Sarasota Avionics. These distributors have the training, equipment and
certified staff required for at-airport installation of Garmin’s avionics
equipment. Garmin’s portable aviation products are sold through distributors and
through catalogs.
In
addition to the traditional distribution channels mentioned, Garmin has many
relationships with original equipment manufacturers (OEMs). In the
consumer market, Garmin’s products are sold to certain automotive and motorcycle
OEMs, such as Chrysler/Mopar, Toyota, Suzuki, Volkswagen, Harley-Davidson, Ford,
BMW and BMW Motorrad, Honda Access, Mercedes Benz, Smart Car, Peugeot, Hyundai,
Mazda, Nissan, Volvo, Bombardier, and Polaris, for dealer-installed aftermarket
accessory programs. Garmin also has a factory-installed program with
Honda Motorcycles and also factory-installed automotive programs with BMW, Ford
and Suzuki for the sale of PND products that are factory-installed by these
automobile OEMs in certain models of vehicles . In addition, Garmin
also sells products and applications to Kenwood for bundling with Kenwood’s OEM
products, and in 2008 Garmin announced a relationship with Panasonic Automotive
Systems to supply products and applications to Panasonic for automotive OEM
sales. Garmin also has relationships with certain rental car
companies including Dollar/Thrifty, Enterprise, Avis, Budget, National,
Europcar, Alamo, and Hertz (Europe). Garmin has also developed
promotional relationships with certain automotive dealerships in certain
countries including BMW, Southeast Toyota, Penske, Mazda, Saab and
Ford. Garmin’s products are also standard equipment on various models
of boats manufactured by Edgewater Boats, Bennington Marine, Cigarette Racing
Team, Inc., Cobalt Boats, G3 Boats, Gulf Craft, Inc., Fairline Boats, Ltd. and
Regal Marine Industries, Inc. and are optional equipment on boats manufactured
by Chaparral Boats, Inc., Grand Banks Yachts, Ltd., Mainship Corp. (Luhrs
Corp.), Maritimo Offshore Pty Ltd., Mastercraft Boat Company, LLC and Zodiac
Hurricane Technologies, Inc. In the aviation market, Garmin’s
avionics are standard equipment on various models of aircraft built by Bell
Helicopter, Cessna Aircraft Company, Embraer, Cirrus Aircraft Corporation,
DAHER-SOCATA, Diamond Aircraft Industries, Eurocopter, Mooney Aircraft
Corporation, Hawker Beechcraft Aircraft Company, Robinson Helicopter, Piper
Aircraft Company, and Quest Aircraft Company. Other aircraft
manufacturers offer Garmin’s products as optional equipment.
Competition
The
market for navigation, communications and information products is highly
competitive. Garmin believes the principal competitive factors
impacting the market for its products are design, functionality, quality and
reliability, customer service, brand, price, time-to-market and
availability. Garmin believes that it generally competes favorably in
each of these areas.
Garmin
believes that its principal competitors for portable automotive products are
TomTom N.V. and MiTAC Digital Corporation (“MiTAC”) (which
distributes products under the brand names of Magellan, Mio, and Navman) and
Navigon AG. Garmin believes that its principal competitors for outdoor product
lines are Magellan, a subsidiary of MiTAC, Lowrance Electronics,
Inc., a subsidiary of Navico (“Lowrance”) and Delorme and that its principal
competitors for fitness products are Nike, Inc., Polar Electro Oy, Suunto Oy and
Timex Corp. For marine chartplotter products, Garmin believes that
its principal competitors are Raymarine Ltd. (“Raymarine”), Furuno Electronic
Company (“Furuno”), and Simrad and Lowrance (subsidiaries of
Navico). For Garmin’s fishfinder/depth sounder product lines, Garmin
believes that its principal competitors are Lowrance, Raymarine, the Hummingbird
division of Johnson Outdoors, Inc., and Furuno. For Garmin’s general aviation
product lines, Garmin considers its principal competitors to be Honeywell, Inc.,
Avidyne Corporation, L-3 Avionics Systems, Rockwell Collins, Inc., Universal
Avionics Systems Corporation, Chelton Flight Systems, Aspen Avionics, and Free
Flight Systems for panel-mount GPS and display units. For Garmin’s
Family Radio Service and General Mobile Radio Service product line, Garmin
believes that its principal competitors are Motorola, Inc. (“Motorola”), Cobra
Electronics Corporation and Midland Radio Corporation. Garmin
believes that its principal competitors for smartphones are Apple, Inc., HTC
Corporation, Nokia Oyj, Samsung Corporation, Sony Ericsson Mobile Communications
AB, Google, Inc., Motorola, LG Electronics, Palm, Inc., and Research in Motion,
Ltd.
Research
and Development
Garmin’s
product innovations are driven by its strong emphasis on research and
development and the close partnership between Garmin’s engineering and
manufacturing teams. Garmin’s products are created by its engineering
and development staff, which numbered 1,969 people worldwide as of December 26,
2009. Garmin’s manufacturing staff includes manufacturing process
engineers who work closely with Garmin’s design engineers to ensure
manufacturability and manufacturing cost control for its products. Garmin’s
development staff includes industrial designers, as well as software engineers,
electrical engineers, mechanical engineers and cartographic
engineers. Garmin believes the industrial design of its products has
played an important role in Garmin’s success. Once a development
project is initiated and approved, a multi-disciplinary team is created to
design the product and transition it into manufacturing.
Below is
a table of Garmin’s expenditures on research and development over the last three
fiscal years.
|
|
December
26,
|
|
|
December
27,
|
|
|
December
29,
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
($'s
in thousands)
|
|
|
|
|
|
|
|
|
|
Research
and development
|
|
$
|
238,378
|
|
|
$
|
206,109
|
|
|
$
|
159,406
|
|
Percent
of net sales
|
|
|
8.1
|
%
|
|
|
5.9
|
%
|
|
|
5.0
|
%
|
Manufacturing
and Operations
Garmin
believes that one of its core competencies is its manufacturing capability at
its Shijr, Jhongli and LinKou, Taiwan facilities, its Olathe, Kansas facility,
and its Salem, Oregon facility. Garmin believes that its vertically
integrated approach has provided it the following benefits with respect to all
products other than the nüvifone products, which are manufactured by one or more
third parties as part of the Garmin-Asus strategic alliance, and our accessory
products, which are also manufactured by one or more third
parties:
Reduced
time-to-market.
Utilizing concurrent engineering techniques, Garmin’s
products are introduced to production at an early development stage and the
feedback provided by manufacturing is incorporated into the design before mass
production begins. In this manner, Garmin attempts to reduce the time
required to move a product from its design phase to mass production deliveries,
with improved quality and yields.
Design and
process optimization.
Garmin uses its manufacturing resources
to rapidly prototype design concepts, products and processes in order to achieve
higher efficiency, lower cost and better value for
customers. Garmin’s ability to fully explore product design and
manufacturing process concepts has enabled it to optimize its designs to
minimize size and weight in GPS devices that are functional, waterproof, and
rugged.
Logistical
agility.
Operating its own manufacturing facilities
helps Garmin minimize problems, such as component shortages and long component
lead times which are common in the electronics industry. Many
products can be re-engineered to bypass component shortages or reduce cost and
the new designs can be delivered to market quickly. Garmin reacts
rapidly to changes in market demand by striving to maintain a safety stock of
long-lead components and by rescheduling components from one product line to
another.
Garmin’s
design, manufacturing, distribution, and servicing processes in our US, Taiwan,
and UK facilities are certified to ISO 9001, an international quality standard
developed by the International Organization for Standardization. Garmin’s Taiwan
manufacturing facilities have also achieved TS 16949 certification, a quality
standard for automotive suppliers. In addition, Garmin’s aviation
operations have achieved certification to AS9100, the quality standard for the
aviation industry.
Garmin
(Europe) Ltd and Garmin Corporation have also achieved certification of their
environmental management systems to the ISO14001 standard. This
certification recognizes that Garmin’s UK and Taiwan subsidiaries have systems
and processes in place to minimize or prevent harmful effects on the environment
and to strive continually to improve its environmental performance.
Materials
Although
most components essential to the Company’s business are generally available from
multiple sources, Certain key components including but not limited to
microprocessors, certain liquid crystal displays (“LCDs”), and certain
application-specific integrated circuits (“ASICs”) are currently obtained
by the Company from single or limited sources, which subjects the Company
to supply and pricing risks. Many of these and other key components that
are available from multiple sources including but not limited to NAND flash
memory, dynamic random access memory (“DRAM”), GPS chipsets and certain LCDs,
are subject at times to industry-wide shortages and commodity pricing
fluctuations.
The Company and other participants in
the personal computer, mobile communication and consumer
electronics industries also compete for various components with other
industries that have experienced increased demand for their products. In
addition, the Company uses some custom components that are not common to the
rest of the personal computer, mobile communication and consumer
electronics industries, and new products introduced by the Company often
utilize custom components available from only one source until the Company has
evaluated whether there is a need for, and subsequently qualifies,
additional suppliers. When a component or product uses new technologies,
initial capacity constraints may exist until the suppliers’ yields have matured
or manufacturing capacity has increased. If the Company’s supply of a key
single-sourced component for a new or existing product were delayed or
constrained, if such components were available only at significantly higher
prices, or if a key manufacturing vendor delayed shipments of completed products
to the Company, the Company’s financial condition and operating results could be
materially adversely affected. The Company’s business and financial performance
could also be adversely affected depending on the time required to obtain
sufficient quantities from the original source, or to identify and obtain
sufficient quantities from an alternative source. Continued availability of
these components at acceptable prices, or at all, may be affected if those
suppliers decided to concentrate on the production of common components instead
of components customized to meet the Company’s requirements.
Seasonality
Our sales are subject to significant
seasonal fluctuation. Sales of our consumer products are generally
significantly higher in the fourth quarter, due to increased demand for
automotive/mobile products during the holiday buying season, and, to a lesser
extent, the second quarter, due to increased demand during the spring and summer
marine season and the Father’s Day/graduation buying season. Sales of
consumer products are also influenced by the timing of the release of new
products. Our aviation products do not experience much seasonal
variation, but are more influenced by the timing of the release of new products
when the initial demand is typically the strongest.
Backlog
Our sales are generally of a consumer
nature and there is a relatively short cycle between order and
shipment. Therefore, we believe that backlog information is not
material to the understanding of our business. We typically ship most
orders within 72 hours of receipt.
Intellectual
Property
Our
success and ability to compete is dependent in part on our proprietary
technology. We rely on a combination of patent, copyright, trademark
and trade secret laws, as well as confidentiality agreements, to establish and
protect our proprietary rights. In addition, Garmin often relies on licenses of
intellectual property for use in its business. For example, Garmin obtains
licenses for digital cartography technology for use in our products from various
sources.
As
of January 21, 2010, Garmin’s worldwide IP portfolio includes over 400 patents
and 250 trademark registrations. Garmin was selected as a constituent of
the 2009 Ocean Tomo® 300 Patent Index and the 2009 Wall Street Journal®
Electronic & Instruments Patent Scorecard, both of which are indices that
recognize companies with high intellectual property value. We believe that our
continued success depends on the intellectual skills of our employees and their
ability to continue to innovate. Garmin will continue to file and
prosecute patent applications when appropriate to attempt to protect Garmin’s
rights in its proprietary technologies.
There is
no assurance that our current patents, or patents which we may later acquire,
may successfully withstand any challenge, in whole or in part. It is also
possible that any patent issued to us may not provide us with any competitive
advantages, or that the patents of others will preclude us from manufacturing
and marketing certain products. Despite our efforts to protect our proprietary
rights, unauthorized parties may attempt to copy aspects of our products or to
obtain and use information that we regard as proprietary. Litigation
may be necessary in the future to enforce our intellectual property rights, to
protect our trade secrets, to determine the validity and scope of the
proprietary rights of others or to defend against claims of infringement or
invalidity.
Regulations
The
telecommunications industry is highly regulated, and the regulatory environment
in which Garmin operates is subject to change. In accordance with
Federal Communications Commission (“FCC”) rules and regulations, wireless
transceiver and cellular handset products are required to be certified by the
FCC and comparable authorities in foreign countries where they are
sold. Garmin’s products sold in Europe are required to comply with
relevant directives of the European Commission. A delay in receiving
required certifications for new products, or enhancements to Garmin’s products,
or losing certification for Garmin’s existing products could adversely affect
our business. In addition, aviation products that are
intended for installation in “type certificated aircraft” are required to be
certified by the FAA, its European counterpart, the European Aviation Safety
Agency, and other comparable organizations before they can be used in an
aircraft.
Because
Garmin Corporation, one of the Company’s principal subsidiaries, is located in
Taiwan, foreign exchange control laws and regulations of Taiwan with respect to
remittances into and out of Taiwan may have an impact on Garmin’s
operations. The Taiwan Foreign Exchange Control Statute, and
regulations thereunder, provide that all foreign exchange transactions must be
executed by banks designated to handle such business by the Ministry of Finance
of Taiwan and by the Central Bank of the Republic of China (Taiwan), also
referred to as the CBC. Current regulations favor trade-related
foreign exchange transactions. Consequently, foreign currency earned from
exports of merchandise and services may now be retained and used freely by
exporters, while all foreign currency needed for the import of merchandise and
services may be purchased freely from the designated foreign exchange
banks. Aside from trade-related foreign exchange transactions, Taiwan
companies and residents may, without foreign exchange approval, remit outside
and into Taiwan foreign currencies of up to $50 million and $5 million
respectively, or their equivalent, each calendar year. Currency
conversions within the limits are processed by the designated banks and do not
have to be reviewed and approved by the CBC. The above limits apply
to remittances involving a conversion between New Taiwan Dollars and U.S.
Dollars or other foreign currencies. The CBC typically approves
foreign exchange in excess of the limits if a party applies with the CBC for
review and presents legitimate business reasons justifying the currency
conversion. A requirement is also imposed on all enterprises to
register all medium and long-term foreign debt with the CBC.
Environmental
Matters
The
European Union (“EU”) enacted the Restriction of the Use of Certain Hazardous
Substances in Electrical and Electronic Equipment Directive ("RoHS Directive")
and the Waste Electrical and Electronic Equipment Directive (“WEEE Directive”).
The RoHS Directive requires EU member states to enact laws prohibiting the use
of certain substances, including lead, mercury, cadmium and hexavalent chromium,
in certain electronic products put on the market after July 1, 2006. The WEEE
Directive requires EU member states to enact laws that were to go into effect by
August 13, 2005 regulating the collection, recovery and recycling of waste from
certain electronic products. We modified the design of our products and our
manufacturing processes and are participating in the collection and recycling
programs in order to comply with such laws and regulations. The EU is
reviewing the RoHS Directive, and an amended version – “RoHS II” – is expected
to be adopted in the Spring of 2010. While the basic objective should
remain the same, it is expected that RoHS II will provide clearer directives and
complement other EU legislation by using similar methodologies.
The EU
has also enacted the Registration, Evaluation, Authorization and Restriction of
Chemicals (“REACH”) regulation. REACH requires manufacturers and importers
of articles to register the substances contained in the articles if the
substances are intended to be released under normal or reasonably foreseeable
conditions of use. Because the substances contained in our products are
not intended to be released under normal or reasonably foreseeable conditions of
use, we do not believe we or the importers of our products have an obligation
under REACH to register those substances. It is possible, however, that
Garmin could participate in the REACH regulations as necessary to support
possible REACH registration requirements of the recyclers of our products.
REACH also imposes notification and restriction requirements on manufacturers
and importers of articles if the articles contain “substances of very high
concern.” We have established a program in order to comply when and to the
extent necessary. In January 2010, the European Chemicals Agency (ECHA)
formally added 14 chemicals to the REACH Candidate List of Substances of Very
High Concern (SVHC), which brings the total number of chemicals on the SVHC
Candidate List to 28. Under the REACH regulations, producers and
importers of a chemical on the Candidate List whose quantities in the
produced/imported articles are above 1 metric ton in total per year and in a
concentration that exceeds 0.1% weight by weight (w/w) will be required to
notify the European Chemical Agency with information pertaining to its use by
June 1, 2011. Garmin is currently gathering information from its suppliers as to
whether any of the chemicals listed on the January 2010 SVHC list are contained
in any articles purchased from such suppliers. Garmin is continuing
an ongoing effort to obtain information necessary for Garmin to evaluate any
possible notification responsibilities.
AC/DC
adapters included as an accessory with certain Garmin products or sold as an
option for battery charging of many portable Garmin products will require
submissions of energy-use profiles in accordance with the EU EuP (Energy Using
Products) Directive. Garmin is modifying the design and energy-use
profiles of our adapters in order to comply with applicable laws and
regulations. Additionally, the U.S. Department of Energy has
promulgated a regulation pertaining to external power supplies and compliance
with the energy efficiency standards that were established under the Energy
Independence and Security Act of 2007. We will be addressing these
requirements as necessary.
Garmin
products may also become subject to further energy efficiency requirements if
and when required under U.S. Federal climate change legislation.
In June
2009 the California Air Resources Board adopted proposed regulations to reduce
greenhouse gas emissions which would begin phasing in starting with
2012 model-year vehicles that would require vehicles sold in
California to have solar reflective window glazing that may interfere with
the reception of GPS satellite signals by portable navigation
devices.
The
People’s Republic of China has enacted legislation which is widely known as
“China RoHS”. The first phase of China RoHS took effect on March 1,
2007 and requires the disclosure and marking of certain substances, including
lead, mercury, cadmium and hexavalent chromium in certain electronic
products. We have established a program in order to comply with the
first phase of China RoHS.
Other
states and countries have promulgated or proposed legislation similar to the
RoHS Directive and/or the WEEE Directive. The need for and cost of
our compliance with such legislation cannot yet be fully determined but the cost
could be substantial.
Several
states have enacted laws pertaining to the reduction of mercury in products and
the labeling of mercury-containing products, including the member states of the
Interstate Mercury Education and Reduction Clearinghouse
(IMERC). Some of these laws, including those in Connecticut, New
York, Vermont and Louisiana, are applicable to certain of Garmin’s GPS
products. We have established an ongoing compliance program to ensure
that we are fulfilling the notice and labeling requirements set forth in the
relevant mercury legislation.
Garmin
has implemented multiple Environmental Management System (“EMS”) policies in
accordance with the International Organization for Standardization (ISO) 14001
standard for Environmental Health and Safety Management. Garmin’s EMS
policies set forth practices, standards, and procedures to ensure compliance
with applicable environmental laws and regulations at Garmin’s Kansas
headquarters facility, Garmin’s European headquarters facility, and Garmin’s
Taiwan manufacturing facility.
Regulatory
and “Green Procurement” demands from our customers are also increasing,
particularly in the areas of restricted substance use and
environmentally-friendly design and manufacture initiatives. The
overall impacts of these customer requirements cannot yet be
established. Garmin is committed to improving our products and
processes to meet our customer needs.
Employees
As of
December 31, 2009, Garmin had 8,437 full and part-time employees worldwide,
of whom 2,948 were in the United States, 68 were in Canada, 4,727 were in
Taiwan, 623 were in Europe, and 71 were in other global
locations. Except for some of Garmin’s employees in Brazil,
Iceland and Sweden, none of Garmin’s employees are represented by a labor
union and none of Garmin's North American or Taiwan employees are covered by a
collective bargaining agreement. Garmin considers its employee
relations to be good.
Item
1A. Risk Factors
The
risks described below are not the only ones facing our
company. Additional risks and uncertainties not presently known to us
or that we currently believe to be immaterial may also impair our business
operations. If any of the following risks occur, our business,
financial condition or operating results could be materially adversely
affected.
Risks
Related to the Company
The
demand for personal navigation devices (PNDs) may be eroded by replacement
technologies becoming available on mobile handsets and factory-installed systems
in new autos.
We
have experienced substantial growth in the automotive/mobile segment which has
resulted in GPS/navigation technologies being incorporated into competing
devices such as mobile handsets and new automobiles through factory-installed
systems. Mobile handsets are frequently GPS-enabled and many
companies are now offering navigation software for mobile
devices. The acceptance of this technology by consumers could slow
our growth and further reduce margins. Navigation systems are also
becoming more prevalent as optional equipment on new
automobiles. Increased navigation penetration on new automobiles
could slow our growth and further reduce margins.
Our
financial results are highly dependent on the automotive/mobile segment, which
now represents approximately 70% of our revenues and may be maturing leading to
lesser growth than we have experienced in the past.
We
have experienced substantial growth in the automotive/mobile segment of our
business in recent years as the products have become mass-market consumer
electronics in both Europe and North America. This market growth may
now be slowing as penetration rates increase and competing technologies
emerge. Slowing growth, along with the significant price reductions
that have occurred during the past three years, could result in lower
revenues. As margins have also declined in this segment, slowing
growth may also result in lower earnings per share.
Economic
conditions and uncertainty could adversely affect our revenue and
margins
Our
revenue and margins depend significantly on general economic conditions and the
demand for products in the markets in which we compete. The current
economic weakness and constrained consumer and business spending has resulted in
decreased revenue and may in the future result in decreased revenue and problems
with our ability to manage inventory levels and collect customer receivables. In
addition, financial difficulties experienced by our retailer and OEM customers
have resulted, and could result in the future, in significant bad debt
write-offs and additions to reserves in our receivables and could have an
adverse affect on our results of operations.
Gross
margins for our products may fluctuate or erode.
Gross
margins on our automotive/mobile products were declining prior to 2009 and are
expected to decline in 2010 due to price reductions in the increasingly
competitive market for personal navigation devices (PNDs) that are not offset by
material cost reductions. In addition, our overall gross margin may fluctuate
from period to period due to a number of factors, including product mix,
competition and unit volumes. In particular, the average selling
prices of a specific product tend to decrease over that product’s
life. To offset such decreases, we intend to rely primarily on
component cost reduction, obtaining yield improvements and corresponding cost
reductions in the manufacture of existing products and on introducing new
products that incorporate advanced features and therefore can be sold at higher
average selling prices. However, there can be no assurance that we
will be able to obtain any such yield improvements or cost reductions or
introduce any such new products in the future. To the extent that
such cost reductions and new product introductions do not occur in a timely
manner or our products do not achieve market acceptance, our business, financial
condition and results of operations could be materially adversely
affected.
Changes
in our United States federal income tax classification or in applicable tax law
could result in adverse tax consequences to our shareholders.
We do not
believe that we (or any of our non-United States subsidiaries) are currently a
‘‘passive foreign investment company’’ for United States federal income tax
purposes. We do not expect to become a passive foreign investment
company. However, because the passive foreign investment company
determination is made annually based on whether the company’s income or assets
meet certain thresholds as determined under United States federal tax principles
which are based on facts and circumstances that may be beyond our control, we
cannot assure that we will not become a passive foreign investment company in
the future. If we are a passive foreign investment company in any year,
then any of our shareholders that is a United States person could be liable to
pay tax on their pro rata share of our income plus an interest charge upon some
distributions by us or when that shareholder sells our common shares at a
gain. Further, if we are classified as a passive foreign investment
company in any year in which a United States person is a shareholder, we
generally will continue to be treated as a passive foreign investment company
with respect to such shareholder in all succeeding years, regardless of whether
we continue to satisfy the income or asset tests mentioned above.
We do not
believe that we (or any of our non-United States subsidiaries) are currently a
Controlled Foreign Corporation (CFC) for United States federal income tax
purposes. We do not expect to become a CFC. The CFC
determination is made daily based on whether the United States shareholders own
more than fifty percent of the voting power or value of the
Company. Only United States persons that own ten percent or more of
the voting power of the Company’s shares qualify as United States
shareholders. If the Company were to be classified as a CFC for an
uninterrupted thirty day period in any year, the Company’s shareholders that
qualify as United States shareholders could be liable to pay US income tax at
ordinary income tax rates on their pro-rata share of certain categories of the
Company’s income for the period in which the Company is classified as a CFC. As
the Company cannot control the ownership of the Company’s stock nor can the
Company control which shareholders participate in the Company’s stock buyback
program, ownership changes could result that create United States shareholders
which increase the risk of Garmin being treated as a CFC.
Legislative
proposals have been considered in the United States within the past year that
could increase the United States tax burden of corporations with international
operations and could broaden the circumstances under which foreign corporations
could be considered resident in the United States Our tax
position could be adversely impacted by changes in United States or foreign tax
laws, tax treaties or tax regulations or the interpretation or enforcement
thereof by any tax authority. We cannot predict the outcome of any specific
legislative proposals.
Best
Buy is a significant customer, representing over 10% of net sales.
Accordingly, our revenues and profitability will be adversely impacted if Best
Buy’s business declines or if Best Buy is unable to pay us amounts owed
timely.
Best Buy
is our largest customer and accounted for 13.4% and 12.0% of our total net sales
in 2009 and 2008, respectively. If Best Buy’s business declines due to the
economic conditions, market share losses or other factors, our revenues and
profitability will be adversely impacted. In addition, if Best Buy’s
liquidity erodes for any of the reasons discussed above or a tightening in the
credit markets and they are unwilling or unable to pay us amounts owed timely,
our profitability will be adversely impacted.
If
we are not successful in the continued development, introduction or timely
manufacture of new products, demand for our products could
decrease.
We expect
that a significant portion of our future revenue will continue to be derived
from sales of newly introduced products. The market for our products
is characterized by rapidly changing technology, evolving industry standards and
changes in customer needs. If we fail to introduce new products, or
to modify or improve our existing products, in response to changes in
technology, industry standards or customer needs, our products could rapidly
become less competitive or obsolete. We must continue to make
significant investments in research and development in order to continue to
develop new products, enhance existing products and achieve market acceptance
for such products. However, there can be no assurance that
development stage products will be successfully completed or, if developed, will
achieve significant customer acceptance.
If we are
unable to successfully develop and introduce competitive new products, and
enhance our existing products, our future results of operations would be
adversely affected. Our pursuit of necessary technology may require
substantial time and expense. We may need to license new technologies
to respond to technological change. These licenses may not be
available to us on terms that we can accept or may materially change the gross
profits that we are able to obtain on our products. We may not succeed in
adapting our products to new technologies as they emerge. Development
and manufacturing schedules for technology products are difficult to predict,
and there can be no assurance that we will achieve timely initial customer
shipments of new products. The timely availability of these products
in volume and their acceptance by customers are important to our future
success. From time to time we have experienced delays in shipping
certain of our new products and any future delays, whether due to product
development delays, manufacturing delays, lack of market acceptance, delays in
regulatory approval, or otherwise, could have a material adverse effect on our
results of operations.
If
we are unable to compete effectively with existing or new competitors, our
resulting loss of competitive position could result in price reductions, fewer
customer orders, reduced margins and loss of market share.
The
markets for our products are highly competitive, and we expect competition to
increase in the future. Some of our competitors have significantly greater
financial, technical and marketing resources than we do. These
competitors may be able to respond more rapidly to new or emerging technologies
or changes in customer requirements. They may also be able to devote
greater resources to the development, promotion and sale of their
products. Increased competition could result in price reductions,
fewer customer orders, reduced margins and loss of market share. Our
failure to compete successfully against current or future competitors could
seriously harm our business, financial condition and results of
operations.
We
rely on independent dealers and distributors to sell our products, and
disruption to these channels would harm our business.
Because
we sell a majority of our products to independent dealers and distributors, we
are subject to many risks, including risks related to their inventory levels and
support for our products. In particular, our dealers and distributors
maintain significant levels of our products in their inventories. If
dealers and distributors attempt to reduce their levels of inventory or if they
do not maintain sufficient levels to meet customer demand, our sales could be
negatively impacted.
Many of
our dealers and distributors also sell products offered by our
competitors. If our competitors offer our dealers and distributors
more favorable terms, those dealers and distributors may de-emphasize or decline
to carry our products. In the future, we may not be able to retain or attract a
sufficient number of qualified dealers and distributors. If we are
unable to maintain successful relationships with dealers and distributors or to
expand our distribution channels, our business will suffer.
Our
quarterly operating results are subject to fluctuations and
seasonality.
Our
operating results are difficult to predict. Our future quarterly operating
results may fluctuate significantly. If such operating results
decline, the price of our stock would likely decline. As we expand
our operations, our operating expenses, particularly our advertising and
research and development costs, may increase as a percentage of our
sales. If revenues decrease and we are unable to reduce those costs
rapidly, our operating results would be negatively affected.
Historically,
our revenues have been weaker in the first quarter of each fiscal year and have
recently been lower than the preceding fourth quarter. Our devices
are highly consumer-oriented, and consumer buying is traditionally lower in
these quarters. Sales of certain of our marine and automotive
products tend to be
higher in our second fiscal quarter due to increased consumer spending for such
products during the recreational marine, fishing, and travel
season. Sales of our automotive/mobile products also have been higher
in our fourth fiscal quarter due to increased consumer spending patterns on
electronic devices during the holiday season.
In addition, we attempt
to time our new product releases to coincide with relatively higher consumer
spending in the second and fourth fiscal quarters, which contributes to these
seasonal variations.
Our
quarterly financial statements will reflect fluctuations in foreign currency
translation.
The
operation of Garmin’s subsidiaries in international markets results in exposure
to movements in currency exchange rates. We have experienced
significant foreign currency gains and losses due to the strengthening and
weakening of the U.S. dollar. The potential of volatile foreign
exchange rate fluctuations in the future could have a significant effect on our
results of operations.
The currencies that create a majority
of the Company’s exchange rate exposure are the Taiwan Dollar, Euro, and British
Pound Sterling. Garmin Corporation, headquartered in Shijr, Taiwan,
uses the local currency as the functional currency. The Company
translates all assets and liabilities at year-end exchange rates and income and
expense accounts at average rates during the year. In order to
minimize the effect of the currency exchange fluctuations on our net assets, we
have elected to retain most of our Taiwan subsidiary’s cash and investments in
marketable securities denominated in U.S. dollars.
Nonetheless, U.S. GAAP requires the
Company at the end of each accounting period to translate into Taiwan Dollars
all such U.S. Dollar denominated assets held by our Taiwan
subsidiary. This translation is required because the Taiwan Dollar is
the functional currency of the subsidiary. This U.S. GAAP-mandated
translation will cause us to recognize gain or loss on our financial statements
as the Taiwan Dollar/U.S. Dollar exchange rate varies. Such gain or
loss will create variations in our earnings per share. Because there
is minimal cash impact caused by such exchange rate variations, management will
continue to focus on the Company’s operating performance before the impact of
the foreign currency translation.
If
we do not correctly anticipate demand for our products, we may not be able to
secure sufficient quantities or cost-effective production of our products or we
could have costly excess production or inventories.
We have
generally been able to increase production to meet this increasing
demand. However, the demand for our products depends on many factors
and will be difficult to forecast. We expect that it will become more
difficult to forecast demand as we introduce and support multiple products, as
competition in the market for our products intensifies and as the markets for
some of our products mature to the mass market category. Significant
unanticipated fluctuations in demand could cause the following problems in our
operations:
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If
demand increases beyond what we forecast, we would have to rapidly
increase production. We would depend on suppliers to provide additional
volumes of components and those suppliers might not be able to increase
production rapidly enough to meet unexpected
demand.
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Rapid increases in
production levels to meet unanticipated demand could result in higher
costs for manufacturing and supply of components and other
expenses. These higher costs could lower our profit
margins. Further, if production is increased rapidly,
manufacturing quality could decline, which may also lower our margins and
reduce customer
satisfaction.
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If
forecasted demand does not develop, we could have excess production
resulting in higher inventories of finished products and components, which
would use cash and could lead to write-offs of some or all of the excess
inventories. Lower than forecasted demand could also result in
excess manufacturing capacity or reduced manufacturing efficiencies at our
facilities, which could result in lower
margins.
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We
have benefited in the past from Taiwan government tax incentives offered on
certain high technology capital investments that may not always be
available.
Our
effective tax rate is lower than the U.S. federal statutory rate, because we
have benefited from incentives offered in Taiwan related to our high technology
investments in Taiwan. The loss of these tax benefits could have a
significant effect on our financial results in the future.
We
may experience unique economic and political risks associated with companies
that operate in Taiwan.
Relations
between Taiwan and the People’s Republic of China, also referred to as the PRC,
and other factors affecting the political or economic conditions of Taiwan in
the future could materially adversely affect our business, financial condition
and results of operations and the market price and the liquidity of our
shares. Our principal manufacturing facilities where we manufacture
all of our products, except our panel-mounted aviation products, are located in
Taiwan.
Taiwan
has a unique international political status. The PRC asserts
sovereignty over all of China, including Taiwan, certain other islands and all
of mainland China. The PRC government does not recognize the
legitimacy of the Taiwan government. Although significant economic
and cultural relations have been established during recent years between Taiwan
and the PRC, the PRC government has indicated that it may use military force to
gain control over Taiwan in certain circumstances, such as the declaration of
independence by Taiwan. Relations between Taiwan and the PRC have on
occasion adversely affected the market value of Taiwanese companies and could
negatively affect our operations in Taiwan in the future.
Our
intellectual property rights are important to our operations, and we could
suffer loss if they infringe upon other’s rights or are infringed upon by
others.
We rely
on a combination of patents, copyrights, trademarks and trade secrets,
confidentiality provisions and licensing arrangements to establish and protect
our proprietary rights. To this end, we hold rights to a number of
patents and registered trademarks and regularly file applications to attempt to
protect our rights in new technology and trademarks. However, there
is no guarantee that our patent applications will become issued patents, or that
our trademark applications will become registered
trademarks. Moreover, even if approved, our patents or trademarks may
thereafter be successfully challenged by others or otherwise become invalidated
for a variety of reasons. Thus, any patents or trademarks we
currently have or may later acquire may not provide us a significant competitive
advantage.
Third
parties may claim that we are infringing their intellectual property
rights. Such claims could have a material adverse effect on our
business and financial condition. From time to time we receive
letters alleging infringement of patents, trademarks or other intellectual
property rights. Litigation concerning patents or other intellectual
property is costly and time consuming. We may seek licenses from such
parties, but they could refuse to grant us a license or demand commercially
unreasonable terms. We might not have sufficient resources to pay for
the licenses. Such infringement claims could also cause us to incur
substantial liabilities and to suspend or permanently cease the use of critical
technologies or processes or the production or sale of major
products.
We
may become subject to significant product liability costs.
If our
aviation products malfunction or contain errors or defects, airplane collisions
or crashes could occur resulting in property damage, personal injury or
death. Malfunctions or errors or defects in our marine navigational
products could cause boats to run aground or cause other wreckage, personal
injury or death. If our automotive or marine products contain defects
or errors in the mapping supplied by third-party map providers or if our users
do not heed our warnings about the proper use of these products, collisions or
accidents could occur resulting in property damage, personal injury or
death. If any of these events occurs, we could be subject to
significant liability for personal injury and property damage and under certain
circumstances could be subject to a judgment for punitive damages. We
maintain insurance against accident-related risks involving our
products. However, there can be no assurance that such insurance
would be sufficient to cover the cost of damages to others or that such
insurance will continue to be available at commercially reasonable
rates. In addition, insurance coverage generally will not cover
awards of punitive damages and may not cover the cost of associated legal fees
and defense costs, which could result in lower margins. If we are
unable to maintain sufficient insurance to cover product liability costs or if
our insurance coverage does not cover the award, this could have a materially
adverse impact on our business, financial condition and results of
operations.
We
depend on our suppliers, some of which are the sole source for specific
components, and our production would be seriously harmed if these suppliers are
not able to meet our demand and alternative sources are not available, or if the
costs of components rise.
We are
dependent on third party suppliers for various components used in our current
products. Some of the components that we procure from third party
suppliers include semiconductors and electroluminescent panels, liquid crystal
displays, memory chips, batteries and microprocessors. The cost,
quality and availability of components are essential to the successful
production and sale of our products. Some components we use are from
sole source suppliers. Certain application-specific integrated circuits
incorporating our proprietary designs are manufactured for us by sole source
suppliers. Alternative sources may not be currently available for
these sole source components.
In the
past we have experienced shortages of liquid crystal displays and other
components. In addition, if there are shortages in supply of
components, the costs of such components may rise. If suppliers are unable to
meet our demand for components on a timely basis and if we are unable to obtain
an alternative source or if the price of the alternative source is prohibitive,
or if the costs of components rise, our ability to maintain timely and
cost-effective production of our products would be seriously
harmed.
We
depend on third party licensors for the digital map data contained in our
automotive/mobile products, and our business and/or gross margins could be
harmed if we become unable to continue licensing such mapping data or if the
royalty costs for such data rise.
We
license digital mapping data for use in our products from various
sources. There are only a limited number of suppliers of mapping data
for each geographical region. The two largest digital map suppliers
are NAVTEQ Corporation and Tele Atlas N.V. NAVTEQ Corporation is
owned by Nokia Oyj and Tele Atlas N.V. is owned by TomTom N.V. Nokia
and TomTom are both competitors of Garmin.
Although
we do not foresee difficulty in continuing to license data at favorable pricing
due to the long term license extension signed between Garmin and NAVTEQ in
November 2007 (extending our NAVTEQ license agreement through 2015 with an
option to extend through 2019), if we are unable to continue licensing such
mapping data and are unable to obtain an alternative source, or if the nature of
our relationships with NAVTEQ changes detrimentally, our ability to supply
mapping data for use in our products would be seriously harmed.
We
may pursue strategic acquisitions, investments, strategic partnerships or other
ventures, and our business could be materially harmed if we fail to successfully
identify, complete and integrate such transactions.
We intend
to evaluate acquisition opportunities and opportunities to make investments in
complementary businesses, technologies, services or products, or to enter into
strategic partnerships with parties who can provide access to those assets,
additional product or services offerings, additional distribution or marketing
synergies or additional industry expertise. We may not be able to
identify suitable acquisition, investment or strategic partnership candidates,
or if we do identify suitable candidates in the future, we may not be able to
complete those transactions on commercially favorable terms, or at
all.
Any past
or future acquisitions could also result in difficulties assimilating acquired
employees (including cultural differences with foreign acquisitions),
operations, and products and diversion of capital and management’s attention
away from other business issues and opportunities. Integration of
acquired companies may result in problems related to integration of technology
and inexperienced management teams. In addition, the key personnel of the
acquired company may decide not to work for us. We may not
successfully integrate internal controls, compliance under the Sarbanes-Oxley
Act of 2002 and other corporate governance matters, operations, personnel or
products related to acquisitions we have made in previous years or
may make in the future. If we fail to successfully integrate such
transactions, our business could be materially harmed.
We
may have additional tax liabilities.
We are
subject to income taxes in both the United States and numerous foreign
jurisdictions. Significant judgment is required in determining our worldwide
provision for income taxes. In the ordinary course of our business, there are
many transactions and calculations where the ultimate tax determination is
uncertain. We are regularly under audit by tax authorities. Although we believe
our tax estimates are reasonable, the final determination of tax audits and any
related litigation could be materially different from our historical income tax
provisions and accruals. The results of an audit or litigation could have a
material effect on our income tax provision, net income or cash flows in the
period or periods for which that determination is made.
Our
shareholders may face difficulties in protecting their interests because we are
incorporated under Cayman Islands law.
Our
corporate affairs are governed by our Memorandum and Articles of Association, as
amended, and by the Companies Law (2009 Revision) and the common law of the
Cayman Islands. The rights of our shareholders and the fiduciary
responsibilities of our directors under Cayman Islands law are not as clearly
established as under statutes or judicial precedent in existence in
jurisdictions in the United States. Therefore, you may have more
difficulty in protecting your interests in the face of actions by the
management, directors or our controlling shareholders than would shareholders of
a corporation incorporated in a jurisdiction in the United States, due to the
comparatively less developed nature of Cayman Islands law in this
area.
Shareholders
of Cayman Islands exempted companies such as Garmin have no general rights under
Cayman Islands law to inspect corporate records and accounts or to obtain copies
of lists of shareholders of the company. This may make it more difficult for you
to obtain the information needed to establish any facts necessary for a
shareholder motion or to solicit proxies from other shareholders in connection
with a proxy contest.
Subject
to limited exceptions, under Cayman Islands law, a minority shareholder may not
bring a derivative action against the board of directors. Our Cayman Islands
counsel has advised that they are not aware of any reported class action or
derivative action having been brought in a Cayman Islands court.
Failure
to obtain required certifications of our products on a timely basis could harm
our business.
We have
certain products, especially in our aviation segment, that are subject to
governmental and similar certifications before they can be sold. For
example, FAA certification is required for all of our aviation products that are
intended for installation in type certificated aircraft. To the
extent required, certification is an expensive and time-consuming process that
requires significant focus and resources. An inability to obtain, or
excessive delay in obtaining, such certifications could have an adverse effect
on our ability to introduce new products and, for certain aviation OEM products,
our customers’ ability to sell airplanes. Therefore, such inabilities
or delays could adversely affect our operating results.
In addition, we cannot
assure you that our certified products will not be decertified. Any
such decertification could have an adverse effect on our operating
results.
Our
business may suffer if we are not able to hire and retain sufficient qualified
personnel or if we lose our key personnel.
Our
future success depends partly on the continued contribution of our key
executive, engineering, sales, marketing, manufacturing and administrative
personnel. We currently do not have employment agreements with any of
our key executive officers. We do not have key man life insurance on
any of our key executive officers and do not currently intend to obtain such
insurance. The loss of the services of any of our senior level
management, or other key employees, could harm our
business. Recruiting and retaining the skilled personnel we require
to maintain and grow our market position may be difficult. For
example, in some recent years there has been a nationwide shortage of qualified
electrical engineers and software engineers who are necessary for us to design
and develop new products, and therefore, it has sometimes been challenging to
recruit such personnel. If we fail to hire and retain qualified
employees, we may not be able to maintain and expand our business.
There
is uncertainty as to our shareholders’ ability to enforce certain foreign civil
liabilities in the Cayman Islands and Taiwan.
We are a
Cayman Islands company and a substantial portion of our assets are located
outside the United States, particularly in Taiwan. As a result, it
may be difficult to effect service of process within the United States upon
us. In addition, there is uncertainty as to whether the courts of the
Cayman Islands or Taiwan would recognize or enforce judgments of United States
courts obtained against us predicated upon the civil liability provisions of the
securities laws of the United States or any state thereof, or be competent to
hear original actions brought in the Cayman Islands or Taiwan against us
predicated upon the securities laws of the United States or any state
thereof.
A
shut down of U.S. airspace or imposition of restrictions on general aviation
would harm our business.
Following the September 11, 2001
terrorist attacks, the FAA ordered all aircraft operating in the U.S. to be
grounded for several days. In addition to this shut down of U.S.
airspace, the general aviation industry was further impacted by the additional
restrictions implemented by the FAA on those flights that fly utilizing Visual
Flight Rules (VFR). The FAA restricted VFR flight inside 30 enhanced
Class B (a 20-25 mile radius around the 30 largest metropolitan areas in the
USA) airspace areas. The Aircraft Owners and Pilots Association
(AOPA) estimated that these restrictions affected approximately 41,800 general
aviation aircraft based at 282 airports inside the 30 enhanced Class B airspace
areas. The AOPA estimates that approximately 90% of all general
aviation flights are conducted VFR, and that only 15% of general aviation pilots
are current to fly utilizing Instrument Flight Rules (IFR).
The shutdown of U.S. airspace following
September 11, 2001 caused reduced sales of our general aviation products and
delays in the shipment of our products manufactured in our Taiwan manufacturing
facility to our distribution facility in Olathe, Kansas, thereby adversely
affecting our ability to supply new and existing products to our dealers and
distributors.
Any
future shut down of U.S. airspace or imposition of restrictions on general
aviation could have a material adverse effect on our business and financial
results.
Many
of our products rely on the Global Positioning System
The
Global Positioning System is a satellite-based navigation and positioning system
consisting of a constellation of orbiting satellites. The satellites
and their ground control and monitoring stations are maintained and operated by
the United States Department of Defense. The Department of Defense
does not currently charge users for access to the satellite
signals. These satellites and their ground support systems are
complex electronic systems subject to electronic and mechanical failures and
possible sabotage. The satellites were originally designed to have lives of 7.5
years and are subject to damage by the hostile space environment in which they
operate. However, of the current deployment of satellites in place,
some have been operating for more than 12 years.
If a
significant number of satellites were to become inoperable, unavailable or are
not replaced, it would impair the current utility of our Global Positioning
System products and would have a material negative effect on our
business. In addition, there can be no assurance that the U.S.
government will remain committed to the operation and maintenance of Global
Positioning System satellites over a long period, or that the policies of the
U.S. government that provide for the use of the Global Positioning System
without charge and without accuracy degradation will remain
unchanged. Because of the increasing commercial applications of the
Global Positioning System, other U.S. government agencies may become involved in
the administration or the regulation of the use of Global Positioning System
signals. However, in a presidential policy statement
issued in December 2004, the Bush administration indicated that the U.S. is
committed to supporting and improving the Global Positioning System and will
continue providing it free from direct user fees.
Some of
our products also use signals from systems that augment GPS, such as the Wide
Area Augmentation System (WAAS). WAAS is operated by the FAA. Any
curtailment of the operating capability of WAAS could result in decreased user
capability for many of our aviation products, thereby impacting our
markets.
Any of
the foregoing factors could affect the willingness of buyers of our products to
select Global Positioning System-based products instead of products based on
competing technologies.
Any
reallocation of radio frequency spectrum could cause interference with the
reception of Global Positioning System signals. This interference could harm our
business.
Our
Global Positioning System technology is dependent on the use of the Standard
Positioning Service (SPS) provided by the U.S. Government’s Global Positioning
System satellites. The Global Positioning System operates in radio
frequency bands that are globally allocated for radio navigation satellite
services. The assignment of spectrum is controlled by an
international organization known as the International Telecommunications Union
(‘‘ITU’’). The Federal Communications Commission (‘‘FCC’’) is
responsible for the assignment of spectrum for non-government use in the United
States in accordance with ITU regulations. Any ITU or FCC
reallocation of radio frequency spectrum, including frequency band segmentation
or sharing of spectrum, could cause interference with the reception of Global
Positioning System signals and may materially and adversely affect the utility
and reliability of our products, which would, in turn, have a material adverse
effect on our operating results. In addition, emissions from mobile
satellite service and other equipment operating in adjacent frequency bands or
inband may materially and adversely affect the utility and reliability of our
products, which could result in a material adverse effect on our operating
results.
The FCC continually receives proposals for new
technologies and services, such as
ultra-wideband technologies, which may seek to operate in,
or across, the radio frequency bands currently
used by the GPS SPS. Adverse decisions by the FCC that
result in harmful interference to the delivery of the GPS SPS
may materially and adversely affect
the utility and reliability of
our products, which could result in
a material adverse effect on our business and financial condition.
Our
business is subject to disruptions and uncertainties caused by war or
terrorism
Acts of
war or acts of terrorism, especially any directed at the GPS signals, could have
a material adverse impact on our business, operating results, and financial
condition. The threat of terrorism and war and heightened security and military
response to this threat, or any future acts of terrorism, may cause a
redeployment of the satellites used in GPS or interruptions of the system. To
the extent that such interruptions have an effect on sales of our products, this
could have a material adverse effect on our business, results of operations, and
financial condition.
We
may be exposed to certain regulatory and financial risks related to climate
change.
Climate
change is receiving increasing attention worldwide. Some scientists,
legislators and others attribute global warming to increased levels of
greenhouse gases, including carbon dioxide, which has led to significant
legislative and regulatory efforts to limit greenhouse gas
emissions.
There are
a number of pending legislative and regulatory proposals to address greenhouse
gas emissions. For example, in June 2009 the U.S. House of Representatives
passed the American Clean Energy and Security Act that would phase-in
significant reductions in greenhouse gas emissions if enacted into law. The U.S.
Senate is considering a different bill, and it is uncertain whether, when and in
what form a federal mandatory carbon dioxide emissions reduction program may be
adopted. Similarly, certain countries have adopted the Kyoto Protocol. These
actions could increase costs associated with our operations, including costs for
components used in the manufacture of our products and freight
costs.
In June 2009 the California Air Resources Board adopted proposed regulations to
reduce greenhouse gas emissions which would begin phasing in starting with 2012
model-year vehicles that would require vehicles sold in California to have solar
reflective window glazing that may interfere with the reception of GPS satellite
signals by portable navigation devices.
Because
it is uncertain what laws and regulations will be enacted, we cannot predict the
potential impact of such laws and regulations on our future consolidated
financial condition, results of operations or cash flows.
Risks
Relating to Our Shares
The
volatility of our stock price could adversely affect investment in our common
shares.
The
market price of our common shares has been, and may continue to be, highly
volatile. During 2009, the price of our common shares ranged from a
low of $15.17 to a high of $39.58. A variety of factors could cause the price of
our common shares to fluctuate, perhaps substantially, including:
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announcements
and rumors of developments related to our business, our competitors, our
suppliers or the markets in which we
compete;
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quarterly
fluctuations in our actual or anticipated operating
results;
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the
availability, pricing and timeliness of delivery of components, such as
flash memory and liquid crystal displays, used in
our products;
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general
conditions in the worldwide economy, including fluctuations in interest
rates;
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announcements
of technological innovations;
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new
products or product enhancements by us or our
competitors;
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product
obsolescence and our ability to manage product
transitions;
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developments
in patents or other intellectual property rights and
litigation;
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developments
in our relationships with our customers and
suppliers;
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research
reports or opinions issued by securities analysts or brokerage houses
related to Garmin, our competitors, our suppliers or our customers;
and
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any
significant acts of terrorism against the United States, Taiwan or
significant markets where we sell our
products.
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In
addition, in recent years the stock market in general and the markets for shares
of technology companies in particular, have experienced extreme price
fluctuations which have often been unrelated to the operating performance of
affected companies. Any such fluctuations in the future could
adversely affect the market price of our common shares, and the market price of
our common shares may decline.
Our
officers and directors exert substantial influence over us.
As of
January 25, 2010 members and former members of our Board of Directors and our
executive officers, together with members of their families and entities that
may be deemed affiliates of or related to such persons or entities, beneficially
owned approximately 43.3% of our outstanding common
shares. Accordingly, these shareholders may be able to determine the
outcome of corporate actions requiring shareholder approval, such as mergers and
acquisitions. This level of ownership may have a significant effect
in delaying, deferring or preventing a change in control of Garmin and may
adversely affect the voting and other rights of other holders of our common
shares.
Provisions
in our shareholder rights plan and our charter documents might deter, delay or
prevent a third party from acquiring us and Cayman Islands corporate law may
impede a takeover, which could decrease the value of our shares.
Our Board
of Directors has the authority to issue up to 1,000,000 preferred shares and to
determine the price, rights, preferences, privileges and restrictions, including
voting rights, of those shares without any further vote or action by the
shareholders. This could have an adverse impact on the market price
of our common shares. We have no present plans to issue any preferred
shares, but we may do so. The rights of the holders of common shares
may be subject to, and adversely affected by, the rights of the holders of any
preferred shares that may be issued in the future. In addition, we
have adopted a classified board of directors. Our shareholders are
unable to remove any director or the entire board of directors without a super
majority vote. In addition, a super majority vote is required to
approve transactions with interested shareholders. Shareholders do
not have the right to call a shareholders’ meeting. We have adopted a
shareholders’ rights plan which under certain circumstances would significantly
impair the ability of third parties to acquire control of us without prior
approval of our Board of Directors. This shareholders’ rights plan
and the provisions in our charter documents could make it more difficult for a
third party to acquire us, even if doing so would benefit our
shareholders.
The
Cayman Islands have recently introduced provisions to the Companies Law (2009
Revision) to facilitate mergers and consolidations between Cayman Islands
companies and non-Cayman Islands companies. These provisions,
contained within Part XVI of the Companies Law (2009 Revision), are broadly
similar to the merger provisions as provided for under Delaware
Law.
There are
however a number of important material differences that could impede a takeover.
First, the thresholds for approval of the merger plan by shareholders are
higher. The thresholds are (a) a shareholder resolution by majority in number
representing 75% in value of the shareholders voting together as one class or
(b) if the shares to be issued to each shareholder in the consolidated or
surviving company are to have the same rights and economic value as the shares
held in the constituent company, a special resolution of the shareholders (being
75% of those present in person in person or by proxy and voting) voting together
as one class.
As it is
would not be expected that the shares would have the same rights and economic
value following a takeover by way of merger, it is expected that the first test
is the one which would commonly apply. This threshold essentially has three
requirements. First "a majority in number" of the shareholders must approve;
secondly such majority must hold 75% "in value" of all the outstanding shares
and thirdly the shareholders must vote together as one class.
Secondly
the consent of each holder of a fixed or floating security interest (in essence
a documented security interest as opposed to one arising by operation of law) is
required to be obtained unless the Grand Court of the Cayman Islands waives such
requirement.
The
merger provisions contained within Part XVI of the Companies Law (2009 Revision)
do contain shareholder appraisal rights similar to that as provided for under
Delaware law. Such rights are limited to a merger under Part XVI and
do apply to schemes of arrangement as discussed below.
The
Companies Law (2009 Revision) also contains separate statutory provisions that
provide for the merger, reconstruction and amalgamation of companies, which are
commonly referred to in the Cayman Islands as a “scheme of
arrangement.” The procedural and legal requirements necessary to
consummate these transactions are more rigorous and take longer to complete than
the procedures typically required to consummate a merger in the United States.
Under Cayman Islands law and practice, a scheme of arrangement in relation to a
solvent Cayman Islands exempted company must be approved at a shareholders’
meeting by a majority of each class of the company’s shareholders who are
present and voting (either in person or by proxy) at such meeting. The shares
voted in favor of the scheme of arrangement must also represent at least 75% of
the value of each relevant class of the company’s shareholders (excluding the
shares owned by the parties to the scheme of arrangement) present and voting at
the meeting. The Grand Court of the Cayman Islands must also sanction the
convening of these meetings and the terms of the amalgamation. Although there is
no requirement to seek the consent of the creditors of the parties involved in
the scheme of arrangement, the Grand Court typically seeks to ensure that the
creditors have consented to the transfer of their liabilities to the surviving
entity or that the scheme of arrangement does not otherwise materially adversely
affect the creditors’ interests. Furthermore, the Grand Court will only approve
a scheme of arrangement if it is satisfied that:
|
•
|
the
statutory provisions as to majority vote have been complied
with;
|
|
•
|
the
shareholders have been fairly represented at the meeting in
question;
|
|
•
|
the
scheme of arrangement is such as a businessman would reasonably approve;
and
|
|
•
|
the
scheme of arrangement is not one that would more properly be sanctioned
under some other provision of the Companies Law (2009
Revision)
|
If the
scheme of arrangement is approved, the dissenting shareholder would have no
rights comparable to appraisal rights, which would otherwise ordinarily be
available to dissenting shareholders of U.S. corporations, providing rights to
receive payment in cash for the judicially determined value of the
shares.
In
addition, if an offer by a third party to purchase shares in us has been
approved by the holders of at least 90% of our outstanding shares (not including
such third party) pursuant to an offer within a four-month period of making such
an offer, the purchaser may, during the two months following expiration of the
four-month period, require the holders of the remaining shares to transfer their
shares on the same terms on which the purchaser acquired the first 90% of our
outstanding shares. An objection can be made to the Grand Court of the Cayman
Islands, but this is unlikely to succeed unless there is evidence of fraud, bad
faith, collusion or inequitable treatment of the shareholders.
Item
1B. Unresolved Staff Comments
None.
Item
2. Properties
The
following are the principal properties owned or leased by the Company and its
subsidiaries:
Garmin
International, Inc. and Garmin USA, Inc. occupy a facility of approximately
1,120,000 square feet on 42 acres in Olathe, Kansas, where the majority of
product design and development work is conducted, the majority of aviation
panel-mount products are manufactured and products are warehoused, distributed,
and supported for North, Central and South America. Garmin’s
subsidiary, Garmin Realty, LLC also owns an additional 46 acres of land on the
Olathe site for future expansion. In connection with the bond
financings for the facility in Olathe and the previous expansion of that
facility, the City of Olathe holds the legal title to the Olathe facility which
is leased to Garmin’s subsidiaries by the City. Upon the payment in
full of the outstanding bonds, the City of Olathe is obligated to transfer title
to Garmin’s subsidiaries for the aggregate sum of $200. Garmin
International, Inc. has purchased all the outstanding bonds and continues to
hold the bonds until maturity in order to benefit from property tax
abatement.
Garmin
Corporation owns and occupies a 249,326 square foot facility in Sijhih, Taipei
County, Taiwan, a 223,469 square foot facility in Jhongli, Tao-Yang County,
Taiwan, and an approximately 580,000 square foot facility in LinKou, Tao-Yang
County, Taiwan. In these three facilities Garmin Corporation manufactures all of
Garmin’s consumer and portable aviation products and warehouses, markets and
supports products for the Pacific Rim countries.
Garmin
AT, Inc. leases approximately 15 acres of land in Salem, Oregon under a ground
lease. This ground lease expires in 2030 but Garmin AT has the option
to extend the ground lease until 2050. Garmin AT, Inc. owns and
occupies a 115,000 square foot facility for office, development and
manufacturing use and a 33,000 square foot aircraft hangar, flight test and
certification facility on this land.
Garmin
International, Inc. leases 148,320 square feet of land at New Century Airport in
Gardner, Kansas under a ground lease which expires in 2026. Garmin
International, Inc. owns and occupies a 47,254 square foot aircraft hangar,
flight test and certification facility on this land which is used in development
and certification of aviation products.
Garmin
International, Inc. leases approximately 15,000 square feet of space at 669
North Michigan Avenue in Chicago, Illinois which is used as a retail store and
showroom for Garmin products. This lease expires in November
2016.
Garmin
International, Inc. also leases an additional: (i) 18,392 square feet of office
space in Kansas City, Missouri for a call center operation; (ii) 48,625 square
feet of office space in Olathe, Kansas for a call center operation; (iii) 24,748
square feet of aggregate office space in two buildings in Tempe, Arizona for
software development; (iv) 5,509 square feet of office space in San Francisco,
CA for its Garmin Connect division; (v) 8,183 square feet of office space in
Diamond Bar, California for software development; (vi) 5,952 square feet of
office space (and 17,536 square feet of land on which the premises sits) in
Wichita, Kansas for aviation development and support; and (vii) 5,700
square feet in Newport, Oregon for the former Nautamatic (now TR-1) marine
autopilot operations.
Garmin
(Europe) Ltd. owns and occupies a 155,000 square foot building located in
Totton, Southampton, England.
Item
3. Legal Proceedings
Encyclopaedia
Britannica, Inc. v. Alpine Electronics of America, Inc., Alpine Electronics,
Inc., Denso Corporation, Toyota Motor Sales, U.S.A., Inc., American Honda Motor
Co., Inc., and Garmin International, Inc.
On May
16, 2005, Encyclopaedia Britannica, Inc. (“Encyclopaedia Britannica”) filed suit
in the United States District Court for the Western District of Texas, Austin
Division, against Garmin International, Inc. and five other unrelated companies,
alleging infringement of U.S. Patent No. 5,241,671 (“the ’671 patent”). On
December 30, 2005, Garmin International filed a Motion for Summary Judgment for
Claim Invalidity Based on Indefiniteness. On September 30, 2008, the court
issued a Memorandum Opinion and Order granting Garmin International’s Motion for
Summary Judgment for Claim Invalidity Based on Indefiniteness with respect to
the ’671 patent. On October 8, 2008, the court issued an Amended Final Judgment
ordering that Encyclopaedia Britannica take nothing from its action against
Garmin International with respect to the ’671 patent and closed that case. On
November 12, 2008, Encyclopaedia Britannica filed a Notice of Appeal to the
Federal Circuit Court of Appeals. On December 4, 2009, the Federal Circuit
issued its decision affirming the district court’s judgment.
On May
23, 2006, Encyclopaedia Britannica filed an amended complaint claiming that
Garmin International and the other defendants also infringe U.S. Patent No.
7,051,018 (“the ‘018 patent”), a continuation patent of the ‘671 patent, which
issued on May 23, 2006. On July 25, 2006, Encyclopaedia Britannica filed a new
complaint claiming that Garmin International and the other defendants also
infringe U.S. Patent No. 7,082,437 (“the ‘437 patent”), a continuation patent of
the ‘671 patent, which issued on July 25, 2006. Encyclopaedia Britannica also
asserted the ’018 and ’437 patents against other parties in a separate lawsuit,
Encyclopaedia Britannica v.
Magellan Navigation, Inc
., et al., Case No. 07-CA-787 (LY)(W.D.
Tex).
On
February 6, 2009, the court entered a scheduling order enabling all defendants
in these cases to file a consolidated Joint Motion for Summary Judgment of
Invalidity of the ’018 and ’437 patents and stayed all proceedings pending the
court’s ruling on the joint motion for summary judgment. On February 20, 2009,
the defendants filed a consolidated Joint Motion for Summary Judgment of
Invalidity of the ’018 and ’437 patents. On August 3, 2009, the court issued a
Memorandum Opinion and Order granting the defendants’ consolidated Joint Motion
for Summary Judgment of Invalidity of the ’018 and ’437 patents and holding that
these patents are invalid. On August 24, 2009, Encyclopaedia Britannica filed a
Notice of Appeal to the Federal Circuit Court of
Appeals. Garmin International believes the Federal
Circuit will affirm the district court’s judgment.
SP
Technologies, LLC v. Garmin Ltd., Garmin International, Inc., TomTom, Inc., and
Magellan Navigation, Inc.
On June
5, 2008, SP Technologies, LLC filed suit in the United States District Court for
the Northern District of Illinois against Garmin Ltd. and Garmin International,
Inc. alleging infringement of U.S. Patent No. 6,784,873 (“the ’873 patent”). On
July 7, 2008, SP Technologies, LLC filed an amended complaint removing all
claims against Garmin Ltd. and alleging infringement of the ’873 patent against
additional defendants TomTom, Inc. and Magellan Navigation, Inc. Garmin believes
that it should not be found liable for infringement of the ’873 patent and
additionally that the ’873 patent is invalid. On August 18, 2008, Garmin filed
its answer to the amended complaint along with a motion for dismissal of SP
Technologies, LLC’s claims of willful and inducement infringement of the ’873
patent. On October 16, 2008, the court granted Garmin’s motion for partial
dismissal, striking the willful and inducement infringement allegations from the
amended complaint.
On
January 7, 2009, Garmin filed an Amended Answer and Counterclaims asserting the
’873 patent is not infringed, is invalid, and that the plaintiff committed
inequitable conduct resulting in unenforceability of the ’873 patent. On
February 2, 2009, codefendant TomTom, Inc. filed a Motion for Summary Judgment
of Unenforceability of the ’873 Patent Due to Inequitable Conduct. On September
30, 2009, the Court denied TomTom, Inc.’s Motion for Summary Judgment. On
October 9, 2009, the Court issued an order construing the claims of the ’873
patent. On October 28, 2009, Garmin filed a Motion for Summary Judgment of
Invalidity of the ’873 Patent. On January 6, 2010, SP Technologies,
LLC filed its response and on January 20, 2010, Garmin filed its
reply. The parties await the court’s ruling on Garmin’s
motion. Although there can be no assurance that an unfavorable
outcome of this litigation would not have a material adverse effect on our
operating results, liquidity or financial position, Garmin believes that the
claims are without merit and intends to vigorously defend this
lawsuit.
Traffic
Information, LLC v. Sony Electronics Inc., Asus Computer International, Best Buy
Stores, L.P., Kenwood U.S.A. Corporation, Nextar, Inc., American Suzuki Motor
Corporation, TGSP, L.P. d/b/a Empire Suzuki, and Garmin International,
Inc.
On July
1, 2009, Traffic Information, LLC filed suit in the United States District Court
for the Eastern District of Texas against Garmin International, Inc. along with
Sony Electronics Inc., Asus Computer International, Best Buy Stores, L.P.,
Kenwood U.S.A. Corporation, Nextar, Inc., American Suzuki Motor Corporation, and
TGSP, L.P. d/b/a Empire Suzuki. The complaint against Garmin International, Inc.
alleges infringement of U.S. Patent No. 6,785,606 (“the ’606
patent”). On August 28, 2009, Garmin International, Inc. filed its
Answer and Counterclaims asserting the ’606 patent is invalid and not
infringed. Although there can be no assurance that an
unfavorable outcome of this litigation would not have a material adverse effect
on our operating results, liquidity or financial position, Garmin International,
Inc. believes that the claims are without merit and intends to vigorously defend
this action.
Ambato
Media, LLC v. Clarion Co., Ltd., Clarion Corporation of America, Delphi
Corporation, Fujitsu Limited, Fujitsu Ten Corporation of America, Garmin Ltd.,
Garmin International, Inc., Victor Company of Japan Ltd., JVC Americas
Corporation, JVC Kenwood Holdings, Inc., J&K Car Electronics Corporation, LG
Electronics, Inc., LG Electronics USA, Inc., MiTAC International Corporation,
MiTAC Digital Corporation, Mio Technology USA Ltd., Navigon, Inc. Nextar Inc.,
Panasonic Corporation, Panasonic Corporation of North America, Pioneer
Corporation, Pioneer Electronics (USA) Inc., Sanyo Electric Co., Ltd., Sanyo
North America Corporation, Sanyo Electronic Device (U.S.A.) Corporation, TomTom
N.V., TomTom International B.V., and TomTom, Inc.
On August
14, 2009, Ambato Media, LLC filed suit in the United States District Court for
the Eastern District of Texas against Garmin Ltd. and Garmin International, Inc.
along with several codefendants alleging infringement of U.S. Patent No.
5,432,542 (“the ’542 patent”). On September 28, 2009, Garmin filed
its Answer and Counterclaims asserting the ’542 patent is invalid and not
infringed. Although there can be no assurance that an
unfavorable outcome of this litigation would not have a material adverse effect
on our operating results, liquidity or financial position, Garmin believes that
the claims are without merit and intends to vigorously defend this
action.
Pioneer
Corporation v. Garmin Deutschland GmbH, Garmin Ltd., Garmin International, Inc.,
Garmin (Europe Ltd. and Garmin Corporation
On
October 9, 2009, Pioneer Corporation filed suit in the District Court in
Düsseldorf, Germany against Garmin Deutschland GmbH, Garmin Ltd., Garmin
International, Inc., Garmin Corporation and Garmin (Europe) Ltd. alleging
infringement of European Patent No. 775 892 (“the ‘892 Patent”) and European
Patent No. 508 681 (“the ‘681 Patent”). Garmin believes that none of Garmin’s
products infringe either of these patents. Garmin has filed separate lawsuits in
the German Federal Patent Court in Munich seeking declaratory judgments of
invalidity of the ‘892 Patent and the ‘681 Patent. Although there can
be no assurance that an unfavorable outcome of this litigation would not have a
material adverse effect on our operating results, liquidity or financial
position, Garmin believes that the claims are without merit and intends to
vigorously defend this action.
In
the Matter of Certain Multimedia Display and Navigation Devices and Systems,
Components Thereof, and Products Containing the Same.
On
November 13, 2009, Pioneer Corporation filed a complaint with the United States
International Trade Commission against Garmin International, Inc., Garmin
Corporation, and Honeywell International Inc. alleging infringement of U.S.
Patent No. 5,365,448 (“the ’448 patent”), U.S. Patent No. 6,122,592 (“the ’592
patent”), and U.S. Patent No. 5,424,951 (“the ’951 patent”). On
January 12, 2010, Garmin filed its Answer asserting the ’448 patent, the ’592
patent, and the ’951 patent are invalid and not infringed. Although
there can be no assurance that an unfavorable outcome of this litigation would
not have a material adverse effect on our operating results, liquidity or
financial position, Garmin believes these claims are without merit and intends
to vigorously defend this action.
Vehicle
IP, LLC v. AT&T Mobility LLC, Cellco Partnership, Garmin International,
Inc., Garmin USA, Inc., Networks in Motion, Inc., Telecommunication Systems,
Inc., Telenav Inc., United Parcel Service, Inc., and UPS Logistics Technologies,
Inc.
On
December 31, 2009, Vehicle IP, LLC filed suit in the United States District
Court for the District of Delaware against Garmin International, Inc. and Garmin
USA, Inc. along with several codefendants alleging infringement of U.S. Patent
No. 5,987,377 (“the ’377 patent”). Garmin believes the ’377 patent is
invalid and not infringed. Although there can be no assurance that an
unfavorable outcome of this litigation would not have a material adverse effect
on our operating results, liquidity or financial position, Garmin believes these
claims are without merit and intends to vigorously defend this
action.
Nazomi
Communications, Inc. v. Nokia Corporation, Nokia Inc., Microsoft Corporation,
Amazon.com, Inc., Western Digital Corporation, Western Digital Technologies,
Inc., Garmin Ltd., Garmin Corporation, Garmin International, Inc., Garmin USA,
Inc., Sling Media, Inc., VIZIO, Inc., and Iomega Corporation.
On February 8, 2010, Nazomi
Communications, Inc. filed suit in the United States District Court for the
Central District of California against Garmin Ltd., Garmin Corporation, Garmin
International, Inc., and Garmin USA, Inc. along with several codefendants
alleging infringement of U.S. Patent No. 7,080,362 (“the ’362 patent”) and U.S.
Patent No. 7,225,436 (“the ’436 patent”). Garmin believes the ’362
patent and the ’436 patent are not infringed. Although there can be
no assurance that an unfavorable outcome of this litigation would not have a
material adverse effect on our operating results, liquidity or financial
position, Garmin believes these claims are without merit and intends to
vigorously defend this action.
Visteon
Global Technologies, Inc. and Visteon Technologies LLC v. Garmin International,
Inc.
On February 10, 2010, Visteon Global Technologies, Inc. and Visteon
Technologies LLC filed suit in the United States District Court for the Eastern
District of Michigan, Southern Division, against Garmin International, Inc.
alleging infringement of U.S. Patent No. 5,544,060 (“the ‘060 patent”), U.S.
Patent No. 5,654,892 (“the ‘892 patent”), U.S. Patent No. 5,832, 408 (“the ‘408
patent”), U.S. Patent No 5,987,375 (“the ‘375 patent”) and U.S. Patent No
6,097,316 (“the ‘316 patent”). Garmin believes that each claim of the ‘060
patent, the ‘892 patent, the ‘408 patent and the ‘375 patent is not infringed
and/or invalid. Although there can be no assurance that an unfavorable outcome
of this litigation would not have a material adverse effect on our operating
results, liquidity or financial position, Garmin believes these claims are
without merit and intends to vigorously defend this action.
From time
to time Garmin is involved in other legal actions arising in the ordinary course
of our business. We believe that the ultimate outcome of these actions will not
have a material adverse effect on our business, financial condition and results
of operations.
Item
4. Submission of Matters to a Vote of Security Holders
No matters were submitted to a vote of
shareholders of Garmin during the fourth fiscal quarter of 2009.
Executive
Officers of the Registrant
Pursuant to General Instruction G(3) of
Form 10-K and instruction 3 to paragraph (b) of Item 401 of Regulation S-K, the
following list is included as an unnumbered Item in Part I of this Annual Report
on Form 10-K in lieu of being included in the Company’s Definitive Proxy
Statement in connection with its annual meeting of shareholders scheduled for
May 20, 2010.
Dr. Min H. Kao
, age 61, has
served as Chairman of Garmin Ltd. since August 2004 and was previously
Co-Chairman of Garmin Ltd. from August 2000 to August 2004. He has
served as Chief Executive Officer of Garmin Ltd. since August 2002 and
previously served as Co-Chief Executive Officer from August 2000 to August
2002. Dr. Kao has served as a director and officer of various
subsidiaries of the Company since August 1990. Dr. Kao holds Ph.D.
and MS degrees in Electrical Engineering from the University of Tennessee and a
BS degree in Electrical Engineering from National Taiwan
University.
Clifton A. Pemble
, age 44, has
served as a director of Garmin Ltd. since August 2004, and as President and
Chief Operating Officer of Garmin Ltd. since October 2007. Mr. Pemble has served
as a director and officer of various Garmin subsidiaries since August 2003.
Previously, he was Vice President, Engineering of Garmin International, Inc.
from 2005 to October 2007, Director of Engineering of Garmin International, Inc.
from 2003 to 2005, and Software Engineering Manager of Garmin International,
Inc. from 1995 to 2002 and a Software Engineer with Garmin International, Inc.
from 1989 to 1995. Mr. Pemble holds BA degrees in Mathematics and
Computer Science from MidAmerica Nazarene University.
Kevin S. Rauckman
, age 47, has
served as Chief Financial Officer and Treasurer of Garmin Ltd. since August
2000. He previously served as Director of Finance and Treasurer of
Garmin International, Inc. since January 1999 and has served as a director and
officer of various subsidiaries of the Company since April 2001. Mr. Rauckman
holds BS and MBA degrees in Business from the University of Kansas.
Andrew R. Etkind
, age 54, has
served as Vice President, General Counsel and Secretary of Garmin Ltd. since
June 2008. He was previously General Counsel and Secretary of Garmin Ltd. from
August 2000 to June 2008. He has been Vice President and General
Counsel of Garmin International, Inc. since July 2007, General Counsel since
February 1998, and Secretary since October 1998. Mr. Etkind has served as a
director and officer of various Garmin subsidiaries since December
2001. Mr. Etkind holds BA, MA and LLM degrees from Cambridge
University, England and a JD degree from the University of Michigan Law
School.
Brian J. Pokorny,
age 46, has
been Vice President, Operations of Garmin International, Inc. since 2005.
Previously, he was Director of Operations of Garmin International, Inc. from
1997 to 2005 and Production Planning Manager of Garmin International, Inc. from
1995 to 1997. Mr. Pokorny holds a BS degree in Business Management
and a MBA from the University of Nebraska - Lincoln and holds the professional
certification of CPIM (Certified in Production and Inventory
Management).
Danny J. Bartel
, age 60, has
been Vice President, Worldwide Sales of Garmin International, Inc. since
2006. Previously, he was Technical/Survey Sales Manager of
Garmin International, Inc. from 1992 to 1993, Director, Europe, Middle East and
Africa of Garmin (Europe) Ltd. from 1994 to 1999, and Director of Consumer
Electronic Sales of Garmin International, Inc. from 1999 to 2006. He has been a
director of Garmin (Europe) Ltd. since July 2004. Mr. Bartel holds a
BS in Electrical Engineering from South Dakota State University and a BA in
Management from Central Michigan University.
Gary V. Kelley
, age 63,
has been Vice
President, Marketing of Garmin International, Inc. since 2005. Previously, he
was Director of Marketing of Garmin International, Inc. from 1992 to 2005. He
has also been Director of Marketing of Garmin USA, Inc. since January 2002. Mr.
Kelley was a director of Garmin (Europe) Ltd. from 1993 to
2004. Mr. Kelley holds a BBA degree from Baker
University. He also holds a commercial pilot license with instrument
and flight instructor ratings.
All executive officers are elected by
and serve at the discretion of the Company’s Board of Directors. None
of the executive officers has an employment agreement with the
Company. There are no arrangements or understandings between the
executive officers and any other person pursuant to which he or she was or is to
be selected as an officer. There is no family relationship among any of the
executive officers. Dr. Min H. Kao is the brother of Ruey-Jeng Kao,
who is a supervisor of Garmin Corporation, Garmin’s Taiwan subsidiary, who
serves as an ex-officio member of Garmin Corporation’s Board of
Directors.
PART
II
Item
5. Market for the Company’s Common Shares, Related Shareholder
Matters and Issuer Purchases of Equity Securities
Garmin’s common shares have traded on
the Nasdaq National Market under the symbol “GRMN” since its initial public
offering on December 8, 2000 (the “IPO”). As of February 19, 2010,
there were 293 shareholders of record.
The range of high and low closing sales
prices of Garmin’s common shares as reported on the Nasdaq Stock Market for each
fiscal quarter of fiscal years 2009 and 2008 was as follows:
|
|
Year Ended
|
|
|
|
December 26, 2009
|
|
|
December 27, 2008
|
|
|
|
High
|
|
|
Low
|
|
|
High
|
|
|
Low
|
|
First
Quarter
|
|
$
|
23.48
|
|
|
$
|
15.17
|
|
|
$
|
97.00
|
|
|
$
|
53.10
|
|
Second
Quarter
|
|
$
|
25.99
|
|
|
$
|
19.74
|
|
|
$
|
56.41
|
|
|
$
|
40.90
|
|
Third
Quarter
|
|
$
|
37.23
|
|
|
$
|
22.67
|
|
|
$
|
48.70
|
|
|
$
|
32.11
|
|
Fourth
Quarter
|
|
$
|
39.58
|
|
|
$
|
26.84
|
|
|
$
|
34.34
|
|
|
$
|
15.22
|
|
The Board of Directors declared a cash
dividend of $0.75 per common share to shareholders of record on December 1, 2009
which was paid on December 15, 2009. The Board of Directors declared a cash
dividend of $0.75 per common share to shareholders of record on December 1, 2008
which was paid on December 15, 2008. Garmin currently expects
to pay a cash dividend in 2010. The decision whether to pay a dividend and the
amount of the dividend will be made closer to the payment date based on the
Company’s cash balance, cash requirements and cash flow generation.
The Board
of Directors approved a share repurchase program on October 22, 2008,
authorizing the Company to repurchase up to $300 million of the Company’s shares
as market and business conditions warrant. This share
repurchase authorization expired on December 31, 2009.
|
|
|
|
|
|
|
|
Maximum Number of Shares (or
|
|
|
|
|
|
|
|
|
|
Approx. Dollar Value of Shares
|
|
|
|
Total # of
|
|
|
Average Price
|
|
|
in Thousands) That May Yet Be
|
|
Period
|
|
Shares
Purchased
|
|
|
Paid Per Share
|
|
|
Purchased Under the Plans or
Programs
|
|
October 2009
|
|
|
-
|
|
|
|
-
|
|
|
$
|
256,469
|
|
November
2009
|
|
|
590,000
|
|
|
$
|
27.95
|
|
|
$
|
239,978
|
|
December 2009
|
|
|
-
|
|
|
|
-
|
|
|
$
|
-
|
|
Total
|
|
|
590,000
|
|
|
$
|
27.95
|
|
|
$
|
-
|
|
We refer you to Item 12 of this report
under the caption “Equity Compensation Plan Information” for certain equity plan
information required to be disclosed by Item 201(d) of Regulation
S-K.
Stock
Performance Graph
|
This
performance graph shall not be deemed ‘‘filed’’ with the SEC or subject to
Section 18 of the Securities Exchange Act of 1934, nor shall it be deemed
incorporated by reference in any of our filings under the Securities Act
of 1933, as amended.
|
The
following graph illustrates the cumulative total shareholder return (rounded to
the nearest whole dollar) of Garmin common shares during the period from
December 31, 2004 through December 31, 2009, and compares it to the cumulative
total return on the NASDAQ Composite Index and the NASDAQ 100
Index. Garmin is one of the constituent companies of the NASDAQ 100
Index. The comparison assumes a $100 investment on December 31, 2004, in Garmin
common shares and in each of the foregoing indexes and assumes reinvestment of
dividends.
|
|
|
12/04
|
|
|
|
12/05
|
|
|
|
12/06
|
|
|
|
12/07
|
|
|
|
12/08
|
|
|
|
12/09
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Garmin
Ltd.
|
|
|
100.00
|
|
|
|
110.03
|
|
|
|
186.45
|
|
|
|
327.36
|
|
|
|
67.55
|
|
|
|
110.79
|
|
NASDAQ
Composite
|
|
|
100.00
|
|
|
|
101.33
|
|
|
|
114.01
|
|
|
|
123.71
|
|
|
|
73.11
|
|
|
|
105.61
|
|
NASDAQ-100
|
|
|
100.00
|
|
|
|
100.18
|
|
|
|
112.25
|
|
|
|
134.51
|
|
|
|
81.33
|
|
|
|
122.06
|
|
The
stock price performance included in this graph is not necessarily indicative of
future stock price performance.
Item
6. Selected Financial Data
The
following table sets forth selected consolidated financial data of the
Company. The selected consolidated balance sheet data as of December
26, 2009 and December 27, 2008 and the selected consolidated statement of income
data for the years ended December 26, 2009, December 27, 2008, and December 29,
2007 were derived from the Company’s audited consolidated financial statements
and the related notes thereto which are included in Item 8 of this annual report
on Form 10-K. The selected consolidated balance sheet data as
of December 29, 2007, December 30, 2006, and December 31, 2005 and
the selected consolidated statement of income data for the years ended December
30, 2006 and December 31, 2005 were derived from the Company’s audited
consolidated financial statements, not included herein.
The
information set forth below is not necessarily indicative of the results of
future operations and should be read together with "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and the consolidated
financial statements and notes to those statements included in Items 7 and 8 in
Part II of this Form 10-K.
|
|
Years ended (1)
|
|
|
|
Dec. 26,
2009
|
|
|
Dec. 27,
2008
|
|
|
Dec. 29,
2007
|
|
|
Dec. 30,
2006
|
|
|
Dec. 31,
2005
|
|
|
|
(in thousands, except per share data)
|
|
Consolidated
Statements of
Income Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
sales
|
|
$
|
2,946,440
|
|
|
$
|
3,494,077
|
|
|
$
|
3,180,319
|
|
|
$
|
1,774,000
|
|
|
$
|
1,027,773
|
|
Cost
of goods sold
|
|
|
1,502,329
|
|
|
|
1,940,562
|
|
|
|
1,717,064
|
|
|
|
891,614
|
|
|
|
492,703
|
|
Gross
profit
|
|
|
1,444,111
|
|
|
|
1,553,515
|
|
|
|
1,463,255
|
|
|
|
882,386
|
|
|
|
535,070
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Advertising
expense
|
|
|
155,521
|
|
|
|
208,177
|
|
|
|
206,948
|
|
|
|
114,749
|
|
|
|
59,309
|
|
Selling,
general and administrative
|
|
|
264,202
|
|
|
|
277,212
|
|
|
|
189,550
|
|
|
|
99,764
|
|
|
|
62,712
|
|
Research
and development
|
|
|
238,378
|
|
|
|
206,109
|
|
|
|
159,406
|
|
|
|
113,314
|
|
|
|
74,879
|
|
Total
operating expenses
|
|
|
658,101
|
|
|
|
691,498
|
|
|
|
555,904
|
|
|
|
327,827
|
|
|
|
196,900
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
income
|
|
|
786,010
|
|
|
|
862,017
|
|
|
|
907,351
|
|
|
|
554,559
|
|
|
|
338,170
|
|
Other
income/(expense), net (2), (3), (4)
|
|
|
22,641
|
|
|
|
52,349
|
|
|
|
70,922
|
|
|
|
39,995
|
|
|
|
34,430
|
|
Income
before income taxes
|
|
|
808,651
|
|
|
|
914,366
|
|
|
|
978,273
|
|
|
|
594,554
|
|
|
|
372,600
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
tax provision
|
|
|
104,701
|
|
|
|
181,518
|
|
|
|
123,262
|
|
|
|
80,431
|
|
|
|
61,381
|
|
Net
income
|
|
$
|
703,950
|
|
|
$
|
732,848
|
|
|
$
|
855,011
|
|
|
$
|
514,123
|
|
|
$
|
311,219
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income per share: (5)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
3.51
|
|
|
$
|
3.51
|
|
|
$
|
3.95
|
|
|
$
|
2.38
|
|
|
$
|
1.44
|
|
Diluted
|
|
$
|
3.50
|
|
|
$
|
3.48
|
|
|
$
|
3.89
|
|
|
$
|
2.35
|
|
|
$
|
1.43
|
|
Weighted
average common shares outstanding: (5)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
200,395
|
|
|
|
208,993
|
|
|
|
216,524
|
|
|
|
216,340
|
|
|
|
216,294
|
|
Diluted
|
|
|
201,161
|
|
|
|
210,680
|
|
|
|
219,875
|
|
|
|
218,845
|
|
|
|
218,236
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
dividends per share (5)
|
|
$
|
0.75
|
|
|
$
|
0.75
|
|
|
$
|
0.75
|
|
|
$
|
0.50
|
|
|
$
|
0.25
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
Sheet Data (at end of Period):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
and cash equivalents
|
|
$
|
1,091,581
|
|
|
$
|
696,335
|
|
|
$
|
707,689
|
|
|
$
|
337,321
|
|
|
$
|
334,352
|
|
Marketable
securities
|
|
|
766,047
|
|
|
|
274,895
|
|
|
|
424,505
|
|
|
|
480,876
|
|
|
|
376,723
|
|
Total
assets
|
|
|
3,825,874
|
|
|
|
2,934,421
|
|
|
|
3,291,460
|
|
|
|
1,897,020
|
|
|
|
1,362,235
|
|
Total
debt
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
248
|
|
|
|
-
|
|
Total
stockholders' equity
|
|
|
2,836,447
|
|
|
|
2,225,854
|
|
|
|
2,350,614
|
|
|
|
1,557,899
|
|
|
|
1,157,264
|
|
(1)
|
Our
fiscal year-end is the last Saturday of the calendar year and does not
always fall on December
31.
|
(2)
|
Other
income/(expense), net mainly consists of gain and/or loss on sale of
equity securities, interest income, interest expense, and foreign currency
gain (loss)
|
(3)
|
Includes
$23.0 million, $0.6 million and $15.3 million for foreign currency gains
in 2007, 2006 and 2005 respectively, and $6.0 million and $35.3 million
for foreign currency losses in 2009 and 2008
respectively.
|
(4)
|
Includes
a $72.4 million gain on sale of equity securities primarily related to the
sale of our equity interest in Tele Atlas N.V. and related foreign
currency exchange effects in
2008.
|
(5)
|
All
prior period common stock and applicable share and per share amounts have
been retroactively adjusted to reflect a 2-for-1 split of the Company's
common stock effective August 15,
2006.
|
Item
7. Management’s Discussion and Analysis of Financial Condition and
Results of Operations
The
following discussion and analysis of our financial condition and results of
operations focuses on and is intended to clarify the results of our operations,
certain changes in our financial position, liquidity, capital structure and
business developments for the periods covered by the consolidated financial
statements included in this Form 10-K. This discussion should be read
in conjunction with, and is qualified by reference to, the other related
information including, but not limited to, the audited consolidated financial
statements (including the notes thereto), the description of our business, all
as set forth in this Form 10-K, as well as the risk factors discussed above in
Item 1A.
As
previously noted, the discussion set forth below, as well as other portions of
this Form 10-K, contain statements concerning potential future
events. Readers can identify these forward-looking statements by
their use of such verbs as “expects,” “anticipates,” “believes” or similar verbs
or conjugations of such verbs. If any of our assumptions on which the
statements are based prove incorrect or should unanticipated circumstances
arise, our actual results could materially differ from those anticipated by such
forward-looking statements. The differences could be caused by a
number of factors or combination of factors including, but not limited to, those
discussed above in Item 1A. Readers are strongly encouraged to
consider those factors when evaluating any such forward-looking
statement. We do not undertake to update any forward-looking
statements in this Form 10-K.
Garmin’s fiscal year is a 52-53 week
period ending on the last Saturday of the calendar year. Fiscal year
2005 contained 53 weeks compared to 52 weeks for fiscal years 2009, 2008, 2007,
and 2006. Unless otherwise stated, all years and dates refer to the
Company’s fiscal year and fiscal periods. Unless the context
otherwise requires, references in this document to "we," "us," "our" and similar
terms refer to Garmin Ltd. and its subsidiaries.
Unless otherwise indicated, dollar
amounts set forth in the tables are in thousands, except per share
data.
Overview
We are a leading worldwide provider of
navigation, communications and information devices, most of which are enabled by
Global Positioning System, or GPS, technology. We operate in four
business segments, which serve the marine, outdoor/fitness, automotive/mobile,
and aviation markets. Our segments offer products through our network
of subsidiary distributors and independent dealers and
distributors. However, the nature of products and types of customers
for the four segments can vary significantly. As such, the segments
are managed separately. Our portable GPS receivers and accessories
for marine, recreation/fitness and automotive/mobile segments are sold primarily
to retail outlets. Our aviation products are portable and panel-mount
avionics for Visual Flight Rules and Instrument Flight Rules navigation and are
sold primarily to retail outlets and certain aircraft
manufacturers.
Since our first products were delivered
in 1991, we have generated positive income from operations each year and have
funded our growth from these profits. Our sales have increased at a
compounded annual growth rate of 30% since 2005 and our net income has increased
at a compounded annual growth rate of 23% since 2005. The vast
majority of this growth has been organic; only a very small amount of new
revenue occurred as a result of the acquisition of MotionBased Technologies LLC
in 2005, Dynastream Innovations Inc. in 2006, Digital Cyclone, Inc. and the
assets of Nautamatic Marine Systems, Inc. in 2007, and ten European distributors
in 2007 and 2008. These acquisitions had no significant impact on net
income for those years.
Since our principal locations are in
the United States, Taiwan and the U.K., we experience some foreign currency
fluctuations in our operating results. While the U.S. Dollar remains
the functional currency of Garmin (Europe) Ltd., the functional currency of all
other European operations excluding Garmin Danmark and Garmin Sweden is the Euro
(effective July 2007) and the functional currency of Garmin Corporation,
headquartered in Taiwan, is the Taiwan Dollar. Approximately 79% of
sales by our European subsidiaries are now denominated in British Pounds
Sterling or the Euro. We experienced ($6.0) million, ($35.3) million,
and $23.0 million in foreign currency gains (losses) during fiscal years 2009,
2008, and 2007, respectively. The 2008 foreign currency loss includes
a realized gain of $21.5 million due to the strengthening of the Euro between
the date we purchased shares in Tele Atlas N.V. in October 2007 and the tender
of shares in February, March, and June 2008. To date, we have not
entered into hedging transactions with the Euro, the British Pound Sterling, or
the Taiwan Dollar, and we do not currently plan to utilize hedging transactions
in the future.
Critical
Accounting Policies and Estimates
General
Garmin’s discussion and analysis of its
financial condition and results of operations are based upon Garmin’s
consolidated financial statements, which have been prepared in accordance with
accounting principles generally accepted in the United States. The
presentation of these financial statements requires Garmin to make estimates and
judgments that affect the reported amounts of assets, liabilities, revenues and
expenses, and related disclosure of contingent assets and
liabilities. On an on-going basis, Garmin evaluates its estimates,
including those related to customer sales programs and incentives, product
returns, bad debts, inventories, investments, intangible assets, income taxes,
warranty obligations, and contingencies and litigation. Garmin bases
its estimates on historical experience and on various other assumptions that are
believed to be reasonable under the circumstances, the results of which form the
basis for making judgments about the carrying value of assets and liabilities
that are not readily apparent from other sources. Actual results may
differ from these estimates under different assumptions or
conditions.
Revenue
Recognition
Garmin recognizes revenue when
persuasive evidence of an arrangement exists, delivery has occurred, the sales
price is fixed or determinable, and collection is probable. For the large
majority of Garmin’s sales, these criteria are met once product has shipped and
title and risk of loss have transferred to the customer. The Company
recognizes revenue from the sale of hardware products and software bundled with
hardware that is essential to the functionality of the hardware in accordance
with general revenue recognition accounting guidance. The Company recognizes
revenue in accordance with industry specific software accounting guidance for
standalone sales of software products and sales of software bundled with
hardware not essential to the functionality of the hardware. The Company
generally does not offer specified or unspecified upgrade rights to its
customers in connection with software sales.
Garmin
introduced nüMaps Lifetime™ in January 2009, which is a single fee program that,
subject to the program’s terms and conditions, enables customers to download the
latest map and point of interest information every quarter for the useful life
of their PND. The revenue and associated cost of royalties for sales of
nüMaps Lifetime™ products are deferred at the time of sale and recognized
ratably on a straight-line basis over the currently estimated three-year life of
the products.
For multi-element arrangements that
include tangible products that contain software that is essential to the
tangible product’s functionality and undelivered software elements that relate
to the tangible product’s essential software, the Company allocates revenue to
all deliverables based on their relative selling prices. In such circumstances,
the new accounting principles establish a hierarchy to determine the selling
price to be used for allocating revenue to deliverables as follows:
(i) vendor-specific objective evidence of fair value (“VSOE”),
(ii) third-party evidence of selling price (“TPE”), and (iii) best
estimate of the selling price (“ESP”). VSOE generally exists only when the
Company sells the deliverable separately and is the price actually charged by
the Company for that deliverable.
In 2009,
Garmin introduced the nüvi 1690, a premium PND with a built‐in wireless module
that lets customers access Garmin’s nüLink!™ service, which provides direct
links to certain online information. The Company has identified two
deliverables contained in arrangements involving the sale of the nüvi 1690. The
first deliverable is the hardware and software essential to the functionality of
the hardware device delivered at the time of sale, and the second deliverable is
the nüLink service. The Company has allocated revenue between these two
deliverables using the relative selling price method determined using VSOE.
Amounts allocated to the delivered hardware and the related
essential software are recognized at the time of sale provided the other
conditions for revenue recognition have been met. Amounts allocated to the
nüLink services are deferred and recognized on a straight-line basis over the
24-month life of the service.
Garmin
records estimated reductions to revenue 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. 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
Garmin’s operating results. These incentives are reviewed
periodically and, with the exceptions of price protection and certain other
promotions, are accrued for on a percentage of sales basis. If
market conditions were to decline, Garmin may take actions to increase customer
incentive offerings possibly resulting in an incremental reduction of revenue at
the time the incentive is offered.
Garmin records reductions to revenue
for expected future product returns based on Garmin’s historical
experience.
Trade
Accounts Receivable
We sell
our products to retailers, wholesalers, and other customers and extend credit
based on our evaluation of the customer’s financial condition. Potential
losses on receivables are dependent on each individual customer’s financial
condition. We carry our trade accounts receivable at net realizable value.
Typically, our accounts receivable are collected within 60 days and do not bear
interest. We monitor our exposure to losses on receivables and maintain
allowances for potential losses or adjustments. We determine these allowances by
(1) evaluating the aging of our receivables; and (2) reviewing our high-risk
customers. Past due receivable balances are written off when our internal
collection efforts have been unsuccessful in collecting the amount
due.
Warranties
Garmin’s products are generally covered
by a warranty for periods ranging from one to two years. Garmin accrues a
warranty reserve for estimated costs to provide warranty
services. Garmin’s estimate of costs to service its warranty
obligations is based on historical experience and expectation of future
conditions. To the extent Garmin experiences increased warranty claim
activity or increased costs associated with servicing those claims, its warranty
accrual will increase, resulting in decreased gross profit.
Inventory
Garmin writes down its inventory for
estimated obsolescence or unmarketable inventory equal to the difference between
the cost of inventory and the estimated market 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.
Investments
Investments
are classified as available for sale and recorded at fair value, and unrealized
investment gains and losses are reflected in stockholders’
equity. Investment income is recorded when earned, and capital
gains and losses are recognized when investments are sold. Fair
value of investments in auction rate securities are determined using third party
estimates which followed an income approach valuation
methodology. 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
capital loss is recognized at the date of determination.
Testing
for impairment of investments also 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.
Income
Taxes
Garmin provides deferred tax assets and
liabilities based on the difference between the tax basis of assets and
liabilities and their carrying amount for financial reporting purposes as
measured by the enacted tax rates and laws that will be in effect when the
differences are expected to reverse. It is Garmin’s
policy to record a valuation allowance to reduce its deferred tax assets to an
amount that it believes is more likely than not to be realized. While
Garmin has considered future taxable income and ongoing prudent and feasible tax
planning strategies in assessing the need for the valuation allowance, in the
event Garmin were to determine that it would not be able to realize all or part
of its net deferred tax assets in the future, an adjustment to the deferred tax
assets would be charged to income in the period such determination is
made. Likewise, should Garmin determine that it would be able to
realize its deferred tax assets in the future in excess of its net recorded
amount, an adjustment to the deferred tax assets would increase income in the
period such determination is made.
In addition, the calculation of our tax
liabilities involves dealing with uncertainties in the application of complex
tax regulations. We recognize liabilities for tax audit issues in the
U.S. and other tax jurisdictions based on our estimate of whether, and the
extent to which, additional taxes will be due. If payment of these
amounts ultimately proves to be unnecessary, the reversal of the liabilities
would result in tax benefits being recognized in the period when we determine
the liabilities are no longer necessary. If our estimate of tax
liabilities proves to be less than the ultimate assessment, a further charge to
expense would result.
Stock
Based Compensation
Garmin awards stock options, stock
appreciation rights (“SARs”), restricted stock units (“RSUs”) and/or performance
shares each year as part of Garmin’s compensation package for
employees. Employees with certain levels of responsibility within
Garmin are eligible for stock options, SAR grants, RSU grants and/or performance
shares but the granting of options, SARs, RSUs and/or performance shares is at
the discretion of the Compensation Committee of the Board of Directors and is
not a contractual obligation.
Stock-based compensation cost is
measured at the grant date based on the fair value of the award and is
recognized as expense over the requisite service period. Determining the fair
value of stock-based awards at the grant date requires judgment, including
estimating expected dividends. In addition, judgment is also required in
estimating the amount of stock-based awards that are expected to be forfeited.
If actual results differ significantly from these estimates, stock-based
compensation expense could be impacted.
Stock
compensation plans are discussed in detail in Note 9 of the Notes to
Consolidated Financial Statements.
Accounting
Terms and Characteristics
Net
Sales
Our net sales are primarily generated
through sales to our global dealer and distributor network and to original
equipment manufacturers. Refer to the Revenue Recognition discussion
above. Our sales are largely of a consumer nature; therefore backlog levels
are not necessarily indicative of our future sales results. We aim to
achieve a quick turnaround on orders we receive, and we typically ship most
orders within 72 hours.
Net sales are subject to seasonal
fluctuation. Typically, sales of our consumer products are highest in
the second quarter, due to increased demand during the spring and summer season,
and in the fourth quarter, due to increased demand during the holiday buying
season. Our aviation products do not experience much seasonal
variation, but are more influenced by the timing of the release of new products
when the initial demand is typically the strongest.
Raw material costs are our most
significant component of cost of goods sold. In 2009, gross margin
for our automotive/mobile segment increased 350 basis points as benefits from
raw material price declines and operating efficiencies exceeded the average
selling price decline. In 2008, gross margin for our
automotive/mobile segment declined 310 basis points as the average selling price
continued to decline and we experienced further shift in product mix to
lower-margin product groups. These impacts were somewhat offset by
raw material price declines, most significantly flash memory. In the
first half of 2007, we experienced favorable product mix and product pricing,
which allowed us to hold margins in our automotive/mobile segment steady; margin
declines in the second half of 2007 were primarily a result of average selling
price declines, coupled with raw materials price increases, most notably the
costs for flash memory, in late second quarter and through the third quarter of
2007 when we were purchasing these components for our holiday production runs,
resulting in margin declines as these components were sold, primarily in the
fourth quarter of 2007. Gross margins for the aviation, marine,
and outdoor/fitness segments are more stable. Our long-term gross
margin targets are 65%, 55% and 55%, respectively, for these
segments.
Our
existing practice of performing the design and manufacture of our products
in-house has enabled us to utilize alternative lower cost components from
different suppliers and, where possible, to redesign our products to permit us
to use these lower cost components. We believe that because of our
practice of performing the design, manufacture and marketing of our products
in-house, our Shijr, Jhongli, and Lin-Kou manufacturing plants in Taiwan, our
Olathe, Kansas, and Salem, Oregon manufacturing plants have experienced
relatively low costs of manufacturing. In general, products
manufactured in Taiwan have been our highest volume products. Our
manufacturing labor costs historically have been lower in Taiwan than in Olathe
and Salem.
Sales price variability has had and can
be expected to have an effect on our gross profit. In the past,
prices of our devices sold into the automotive/mobile market have declined due
to market pressures and introduction of new products sold at lower price
points. The average selling prices of our aviation, outdoor/fitness,
and marine products have increased due to product mix and the introduction of
more advanced products sold at higher prices. The effect of the sales
price differences inherent within the mix of GPS-enabled products sold could
have a significant impact on our gross profit.
Advertising
Expense
Our advertising expenses consist of
costs for both media advertising and cooperative advertising with our retail
partners. As revenues grew in 2005-2008, advertising expense also
increased. In 2009, we reduced our advertising expense as revenues
declined and the public became more aware of GPS technology. The
reduction did not have a negative impact on our market share. We
expect advertising costs to increase in 2010 as revenues grow.
Selling,
General and Administrative Expenses
Our selling, general and administrative
expenses consist primarily of:
|
·
|
salaries
for sales and marketing personnel;
|
|
·
|
salaries
and related costs for executives and administrative
personnel;
|
|
·
|
marketing,
and other brand building costs;
|
|
·
|
accounting
and legal costs;
|
|
·
|
information
systems and infrastructure costs;
|
|
·
|
travel
and related costs; and
|
|
·
|
occupancy
and other overhead costs.
|
Due to the economic pressure on our
consumer-oriented business, we decreased selling, general and administrative
expenses in 2009. As revenues grew in 2005-2008, selling, general and
administrative expenses also increased. We expect selling, general
and administrative costs, excluding advertising, to increase in 2010 as revenues
grow.
Research
and Development
The majority of our research and
development costs represent salaries for our engineers, costs for high
technology components and costs of test equipment used in product and prototype
development. Approximately 85% of the research and
development of our products is performed in North America. The
remainder of our research and development activities is performed by our Taiwan
engineering group, which has increased in size in recent years.
We are committed to increasing the
level of innovative design and development of new products as we strive for
expanded ability to serve our existing consumer and aviation markets as well as
new markets for GPS-enabled devices. We continue to grow our research
and development budget in absolute terms.
Customers
Best Buy accounted for 13.4% of our net
sales in the year ended December 26, 2009. Our top ten customers have
contributed between 27% and 43% of net sales since 2005. We have
experienced average sales days in our customer accounts receivable of between 49
and 75 days since 2005. We have experienced an increase in the level
of customer accounts receivable days due to changes in product mix, longer
payment terms, and macroeconomic conditions. We expect to reduce the
level of customer accounts receivable days as we negotiate shorter payment terms
with our customers.
Income
Taxes
We have experienced a relatively low
effective corporate tax rate due to the proportion of our revenue generated by
entities in tax jurisdictions with low statutory rates. In
particular, the profit entitlement afforded our parent company based
on its intellectual property rights ownership of our consumer products along
with substantial tax incentives offered by the Taiwanese government on certain
high-technology capital investments have continued to reduce our tax
rate. As a result, our consolidated effective tax rate was
approximately 12.9% during 2009. This is a decrease from 19.9% during
2008 due to a more favorable mix of taxable income among the tax jurisdictions
in which the Company operates and the release of income tax reserves for which
the statute of limitations has expired. We have taken advantage of
the tax benefit in Taiwan since our inception and we expect to continue to
benefit from lower effective tax rates at least through
2013. We plan on applying for additional incentives for years
beyond 2013 based on capital investments we expect to make in the
future. However, there can be no assurance that such tax incentives
will be available indefinitely or that we will receive the incentives for which
we apply.
Management believes that
due to lower operating margins predicted for fiscal 2010, there may be slightly
less revenue recognized by entities in lower tax rate jurisdictions.
Therefore, the effective tax rate for fiscal 2010 is expected to be slightly
higher than fiscal 2009. The actual effective tax rate will be dependent
upon the operating margins, production volume, additional capital investments
made during fiscal 2010, and the composition of our
earnings.
Results
of Operations
The following table sets forth our
results of operations as a percentage of net sales during the periods
shown:
|
|
Fiscal
Years Ended
|
|
|
|
Dec.
26,
|
|
|
Dec.
27,
|
|
|
Dec.29,
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
Net
sales
|
|
|
100.0
|
%
|
|
|
100.0
|
%
|
|
|
100.0
|
%
|
Cost
of goods sold
|
|
|
51.0
|
%
|
|
|
55.5
|
%
|
|
|
54.0
|
%
|
Gross
profit
|
|
|
49.0
|
%
|
|
|
44.5
|
%
|
|
|
46.0
|
%
|
Operating
expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
Advertising
|
|
|
5.3
|
%
|
|
|
6.0
|
%
|
|
|
6.5
|
%
|
Selling,
general and administrative
|
|
|
8.9
|
%
|
|
|
7.9
|
%
|
|
|
6.0
|
%
|
Research
and development
|
|
|
8.1
|
%
|
|
|
5.9
|
%
|
|
|
5.0
|
%
|
Total
operating expenses
|
|
|
22.3
|
%
|
|
|
19.8
|
%
|
|
|
17.5
|
%
|
Operating
income
|
|
|
26.7
|
%
|
|
|
24.7
|
%
|
|
|
28.5
|
%
|
Other
income / (expense) , net
|
|
|
0.7
|
%
|
|
|
1.5
|
%
|
|
|
2.2
|
%
|
Income
before income taxes
|
|
|
27.4
|
%
|
|
|
26.2
|
%
|
|
|
30.7
|
%
|
Provision
for income taxes
|
|
|
3.5
|
%
|
|
|
5.2
|
%
|
|
|
3.9
|
%
|
Net
income
|
|
|
23.9
|
%
|
|
|
21.0
|
%
|
|
|
26.8
|
%
|
The following table sets forth our
results of operations through income before income taxes for each of our four
segments during the period shown. For each line item in the
table the total of the segments’ amounts equals the amount in the consolidated
statements of income data included in Item 6.
|
|
Outdoor/
|
|
|
|
|
|
Automotive/
|
|
|
|
|
Fiscal
year ended December 26, 2009
|
|
Fitness
|
|
|
Marine
|
|
|
Mobile
|
|
|
Aviation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
sales
|
|
$
|
468,924
|
|
|
$
|
177,644
|
|
|
$
|
2,054,127
|
|
|
$
|
245,745
|
|
Cost
of goods sold
|
|
|
162,082
|
|
|
|
72,429
|
|
|
|
1,192,227
|
|
|
|
75,591
|
|
Gross
profit
|
|
|
306,842
|
|
|
|
105,215
|
|
|
|
861,900
|
|
|
|
170,154
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Advertising
|
|
|
23,262
|
|
|
|
9,682
|
|
|
|
118,713
|
|
|
|
3,864
|
|
Research
and development
|
|
|
23,776
|
|
|
|
21,448
|
|
|
|
110,907
|
|
|
|
82,247
|
|
Selling,
general and administrative expenses
|
|
|
47,799
|
|
|
|
18,177
|
|
|
|
172,473
|
|
|
|
25,753
|
|
Total
expenses
|
|
|
94,837
|
|
|
|
49,307
|
|
|
|
402,093
|
|
|
|
111,864
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
income
|
|
|
212,005
|
|
|
|
55,908
|
|
|
|
459,807
|
|
|
|
58,290
|
|
Other
income / (expense), net
|
|
|
(5,963
|
)
|
|
|
1,522
|
|
|
|
28,777
|
|
|
|
(1,695
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
before income taxes
|
|
$
|
206,042
|
|
|
$
|
57,430
|
|
|
$
|
488,584
|
|
|
$
|
56,595
|
|
|
|
Outdoor/
|
|
|
|
|
|
Automotive/
|
|
|
|
|
Fiscal
year ended December 27, 2008
|
|
Fitness
|
|
|
Marine
|
|
|
Mobile
|
|
|
Aviation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
sales
|
|
$
|
427,783
|
|
|
$
|
204,477
|
|
|
$
|
2,538,411
|
|
|
$
|
323,406
|
|
Cost
of goods sold
|
|
|
181,037
|
|
|
|
93,052
|
|
|
|
1,560,816
|
|
|
|
105,657
|
|
Gross
profit
|
|
|
246,746
|
|
|
|
111,425
|
|
|
|
977,595
|
|
|
|
217,749
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Advertising
|
|
|
27,932
|
|
|
|
14,532
|
|
|
|
160,926
|
|
|
|
4,787
|
|
Research
and development
|
|
|
25,419
|
|
|
|
19,374
|
|
|
|
85,610
|
|
|
|
75,706
|
|
Selling,
general and administrative expenses
|
|
|
32,800
|
|
|
|
17,536
|
|
|
|
206,954
|
|
|
|
19,922
|
|
Total
expenses
|
|
|
86,151
|
|
|
|
51,442
|
|
|
|
453,490
|
|
|
|
100,415
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
income
|
|
|
160,595
|
|
|
|
59,983
|
|
|
|
524,105
|
|
|
|
117,334
|
|
Other
income / (expense), net
|
|
|
5,391
|
|
|
|
3,921
|
|
|
|
41,634
|
|
|
|
1,403
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
before income taxes
|
|
$
|
165,986
|
|
|
$
|
63,904
|
|
|
$
|
565,739
|
|
|
$
|
118,737
|
|
|
|
Outdoor/
|
|
|
|
|
|
Automotive/
|
|
|
|
|
Fiscal
year ended December 29, 2007
|
|
Fitness
|
|
|
Marine
|
|
|
Mobile
|
|
|
Aviation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
sales
|
|
$
|
339,741
|
|
|
$
|
203,399
|
|
|
$
|
2,342,184
|
|
|
$
|
294,995
|
|
Cost
of goods sold
|
|
|
155,086
|
|
|
|
93,230
|
|
|
|
1,368,979
|
|
|
|
99,769
|
|
Gross
profit
|
|
|
184,655
|
|
|
|
110,169
|
|
|
|
973,205
|
|
|
|
195,226
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Advertising
|
|
|
17,170
|
|
|
|
11,387
|
|
|
|
172,910
|
|
|
|
5,481
|
|
Research
and development
|
|
|
23,302
|
|
|
|
16,879
|
|
|
|
59,390
|
|
|
|
59,835
|
|
Selling,
general and administrative expenses
|
|
|
23,949
|
|
|
|
14,527
|
|
|
|
132,155
|
|
|
|
18,919
|
|
Total
expenses
|
|
|
64,421
|
|
|
|
42,793
|
|
|
|
364,455
|
|
|
|
84,235
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
income
|
|
|
120,234
|
|
|
|
67,376
|
|
|
|
608,750
|
|
|
|
110,991
|
|
Other
income / (expense), net
|
|
|
7,570
|
|
|
|
4,544
|
|
|
|
56,392
|
|
|
|
2,416
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
before income taxes
|
|
$
|
127,804
|
|
|
$
|
71,920
|
|
|
$
|
665,142
|
|
|
$
|
113,407
|
|
Comparison
of 52-Weeks Ended December 26, 2009 and December 27, 2008
Net
Sales
|
|
52-weeks
ended
December
26, 2009
|
|
|
52-weeks
ended
December
27, 2008
|
|
|
Year
over Year
|
|
|
|
Net
Sales
|
|
|
%
of Revenues
|
|
|
Net
Sales
|
|
|
%
of Revenues
|
|
|
$
Change
|
|
|
%
Change
|
|
Outdoor/Fitness
|
|
$
|
468,924
|
|
|
|
15.9
|
%
|
|
$
|
427,783
|
|
|
|
12.2
|
%
|
|
$
|
41,141
|
|
|
|
9.6
|
%
|
Marine
|
|
|
177,644
|
|
|
|
6.0
|
%
|
|
|
204,477
|
|
|
|
5.9
|
%
|
|
|
(26,833
|
)
|
|
|
-13.1
|
%
|
Automotive/Mobile
|
|
|
2,054,127
|
|
|
|
69.7
|
%
|
|
|
2,538,411
|
|
|
|
72.6
|
%
|
|
|
(484,284
|
)
|
|
|
-19.1
|
%
|
Aviation
|
|
|
245,745
|
|
|
|
8.4
|
%
|
|
|
323,406
|
|
|
|
9.3
|
%
|
|
|
(77,661
|
)
|
|
|
-24.0
|
%
|
Total
|
|
$
|
2,946,440
|
|
|
|
100.0
|
%
|
|
$
|
3,494,077
|
|
|
|
100.0
|
%
|
|
$
|
(547,637
|
)
|
|
|
-15.7
|
%
|
Net sales
decreased 15.7% in 2009 when compared to the year-ago period. The decrease
occurred across all segments, except outdoor/fitness, with the greatest
decreases in the automotive/mobile and aviation segments. Automotive/mobile
revenue remains the largest portion of our revenue mix, but declined from 72.6%
in 2008 to 69.7% in 2009.
Total
unit sales decreased 2% to 16.6 million in 2009 from 16.9 million in 2008. The
lower unit sales volume was attributable to declining volumes across all
segments, excluding outdoor/fitness, with the greatest percentage declines
occurring in aviation and marine. The lower volumes were driven primarily by the
macroeconomic conditions and reduced inventory levels with many of our retail
partners.
Automotive/mobile
segment revenue declined 19.1% in 2009 as the average selling price declined 18%
and volumes declined 2%. Average selling price declines continue to be
attributable to the competitive environment in which our automotive/mobile
products compete. The aviation and marine segments declined 24.0% and
13.1%, respectively in 2009, as both industries experienced significant
slowdowns associated with the macroeconomic
conditions. Outdoor/fitness segment revenue increased 9.6% due to new
product introductions, including the Dakota™ series, the Forerunner® 405CX, the
Forerunner® 310XT and Edge® 500, and increasing global penetration of the
fitness category. All segments showed improving trends in the second
half of 2009 as the macroeconomic conditions improved.
The
Company anticipates revenue growth between 0-5% in 2010 driven by mobile product
initiatives and growth in the outdoor/fitness, aviation and marine
segments. In general, management believes that continuous innovation
and the introduction of new products are essential for future revenue
growth.
Gross
Profit
|
|
52-weeks ended
December 26, 2009
|
|
|
52-weeks ended
December 27, 2008
|
|
|
Year over Year
|
|
|
|
Gross
Profit
|
|
|
%
of Revenues
|
|
|
Gross
Profit
|
|
|
%
of Revenues
|
|
|
$
Change
|
|
|
%
Change
|
|
Outdoor/Fitness
|
|
$
|
306,842
|
|
|
|
65.4
|
%
|
|
$
|
246,746
|
|
|
|
57.7
|
%
|
|
$
|
60,096
|
|
|
|
24.4
|
%
|
Marine
|
|
|
105,215
|
|
|
|
59.2
|
%
|
|
|
111,425
|
|
|
|
54.5
|
%
|
|
|
(6,210
|
)
|
|
|
-5.6
|
%
|
Automotive/Mobile
|
|
|
861,900
|
|
|
|
42.0
|
%
|
|
|
977,595
|
|
|
|
38.5
|
%
|
|
|
(115,695
|
)
|
|
|
-11.8
|
%
|
Aviation
|
|
|
170,154
|
|
|
|
69.2
|
%
|
|
|
217,749
|
|
|
|
67.3
|
%
|
|
|
(47,595
|
)
|
|
|
-21.9
|
%
|
Total
|
|
$
|
1,444,111
|
|
|
|
49.0
|
%
|
|
$
|
1,553,515
|
|
|
|
44.5
|
%
|
|
$
|
(109,404
|
)
|
|
|
-7.0
|
%
|
The decrease in gross profit dollars
was primarily attributable to the automotive/mobile and aviation segments where
the effects of revenue declines were partially offset by the improved gross
margins earned. Gross profit margin percentage for the Company
overall increased 450 basis points as margins expanded in all
segments.
The
automotive/mobile segment gross profit margin percentage increase of 350 basis
points was driven by material costs reductions partially offset by inventory
reserves associated with the mobile handset initiative and price
declines. Management believes that gross margins for this segment
will decline in 2010 due to ongoing price declines outpacing product cost
declines. Outdoor/fitness gross margin increased principally due to a
newer suite of higher margin products. Gross profit margin percentage
for marine and aviation increased compared to 2008 due to increased average
selling price and decreases in per unit costs driven by product mix and material
cost reductions.
Advertising
Expenses
|
|
52-weeks
ended
December
26, 2009
|
|
|
52-weeks
ended
December
27, 2008
|
|
|
|
|
|
|
|
|
|
Advertising
|
|
|
|
|
|
Advertising
|
|
|
|
|
|
Year
over Year
|
|
|
|
Expense
|
|
|
%
of Revenues
|
|
|
Expense
|
|
|
%
of Revenues
|
|
|
$
Change
|
|
|
%
Change
|
|
Outdoor/Fitness
|
|
$
|
23,262
|
|
|
|
5.0
|
%
|
|
$
|
27,932
|
|
|
|
6.5
|
%
|
|
$
|
(4,670
|
)
|
|
|
-16.7
|
%
|
Marine
|
|
|
9,682
|
|
|
|
5.5
|
%
|
|
|
14,532
|
|
|
|
7.1
|
%
|
|
|
(4,850
|
)
|
|
|
-33.4
|
%
|
Automotive/Mobile
|
|
|
118,713
|
|
|
|
5.8
|
%
|
|
|
160,926
|
|
|
|
6.3
|
%
|
|
|
(42,213
|
)
|
|
|
-26.2
|
%
|
Aviation
|
|
|
3,864
|
|
|
|
1.6
|
%
|
|
|
4,787
|
|
|
|
1.5
|
%
|
|
|
(923
|
)
|
|
|
-19.3
|
%
|
Total
|
|
$
|
155,521
|
|
|
|
5.3
|
%
|
|
$
|
208,177
|
|
|
|
6.0
|
%
|
|
$
|
(52,656
|
)
|
|
|
-25.3
|
%
|
Advertising expense decreased both as a
percentage of sales and in absolute dollars when compared to 2008. As
a percent of sales, advertising expenses declined to 5.3% in 2009 compared to
6.0% in 2008. The decrease was a result of actions taken by the
company to reduce costs as the macroeconomic conditions impacted sales across
our segments and around the world combined with lower cooperative advertising
which is tied to net sales levels. Management expects to maintain
advertising as a percentage of sales constant in 2010.
Selling,
General and Administrative Expenses
|
|
52-weeks
ended
December
26, 2009
|
|
|
52-weeks
ended
December
27, 2008
|
|
|
|
|
|
|
|
|
|
Selling,
General &
|
|
|
|
|
|
Selling,
General &
|
|
|
|
|
|
Year
over Year
|
|
|
|
Admin.
Expenses
|
|
|
%
of Revenues
|
|
|
Admin.
Expenses
|
|
|
%
of Revenues
|
|
|
$
Change
|
|
|
%
Change
|
|
Outdoor/Fitness
|
|
$
|
47,799
|
|
|
|
10.2
|
%
|
|
$
|
32,800
|
|
|
|
7.7
|
%
|
|
$
|
14,999
|
|
|
|
45.7
|
%
|
Marine
|
|
|
18,177
|
|
|
|
10.2
|
%
|
|
|
17,536
|
|
|
|
8.6
|
%
|
|
|
641
|
|
|
|
3.7
|
%
|
Automotive/Mobile
|
|
|
172,473
|
|
|
|
8.4
|
%
|
|
|
206,954
|
|
|
|
8.2
|
%
|
|
|
(34,481
|
)
|
|
|
-16.7
|
%
|
Aviation
|
|
|
25,753
|
|
|
|
10.5
|
%
|
|
|
19,922
|
|
|
|
6.2
|
%
|
|
|
5,831
|
|
|
|
29.3
|
%
|
Total
|
|
$
|
264,202
|
|
|
|
9.0
|
%
|
|
$
|
277,212
|
|
|
|
7.9
|
%
|
|
$
|
(13,010
|
)
|
|
|
-4.7
|
%
|
Selling, general and administrative
expense decreased 4.7% in 2009 while it increased as a percentage of sales
compared to 2008 as costs throughout the Company were reduced but not as rapidly
as the revenue declines. The decline in costs was primarily related
to a reduction in bad debt expense due to specific reserves recorded in 2008 as
a result of vendor bankruptcies offset by increased costs for product support
and information technology as our installed base of users continues to
grow. The increased expense for the outdoor/fitness segment and the
decreased expense for the automotive/mobile segment were driven by the
allocation of costs based on revenues. As outdoor/fitness revenues
have increased as a percentage of revenues, additional selling, general and
administrative expenses are shifted to the segment. As a percent of
sales, selling, general and administrative expenses increased from 7.9% in 2008
to 9.0% of sales in 2009, as revenues declined. Management expects to
maintain selling, general and administrative expenses as a percentage of sales
constant in 2010.
Research
and Development Expense
|
|
52-weeks
ended
December
26, 2009
|
|
|
52-weeks
ended
December
27, 2008
|
|
|
|
|
|
|
|
|
|
Research
&
|
|
|
|
|
|
Research
&
|
|
|
|
|
|
Year
over Year
|
|
|
|
Development
|
|
|
%
of Revenues
|
|
|
Development
|
|
|
%
of Revenues
|
|
|
$
Change
|
|
|
%
Change
|
|
Outdoor/Fitness
|
|
$
|
23,776
|
|
|
|
5.1
|
%
|
|
$
|
25,419
|
|
|
|
5.9
|
%
|
|
$
|
(1,643
|
)
|
|
|
-6.5
|
%
|
Marine
|
|
|
21,448
|
|
|
|
12.1
|
%
|
|
|
19,374
|
|
|
|
9.5
|
%
|
|
|
2,074
|
|
|
|
10.7
|
%
|
Automotive/Mobile
|
|
|
110,907
|
|
|
|
5.4
|
%
|
|
|
85,610
|
|
|
|
3.4
|
%
|
|
|
25,297
|
|
|
|
29.5
|
%
|
Aviation
|
|
|
82,247
|
|
|
|
33.5
|
%
|
|
|
75,706
|
|
|
|
23.4
|
%
|
|
|
6,541
|
|
|
|
8.6
|
%
|
Total
|
|
$
|
238,378
|
|
|
|
8.1
|
%
|
|
$
|
206,109
|
|
|
|
5.9
|
%
|
|
$
|
32,269
|
|
|
|
15.7
|
%
|
The increase in research and
development expense dollars was due to ongoing development activities for new
products including the mobile handset initiative, the addition of 230 new
engineering personnel to our staff during the period, and an increase in
engineering program costs in 2009 as a result of our continued emphasis on
product innovation. Management believes that one of the key strategic
initiatives for future growth and success of Garmin is continuous innovation,
development, and introduction of new products. Management expects
that its research and development expenses will increase approximately 20%
during fiscal 2010 on an absolute dollar basis due to the anticipated
introduction of a strong portfolio of new products including mobile handsets
slated for fiscal 2010. Management expects to continue to invest in
the research and development of new products and technology in order to maintain
Garmin’s competitive advantage in the markets in which it competes.
Other
Income (Expense)
|
|
52-weeks
ended
|
|
|
52-weeks
ended
|
|
|
|
December
26, 2009
|
|
|
December
27, 2008
|
|
Interest
Income
|
|
$
|
23,519
|
|
|
$
|
35,535
|
|
Foreign
Currency Exchange
|
|
|
(6,040
|
)
|
|
|
(35,286
|
)
|
Gain
on sale of equity securities
|
|
|
-
|
|
|
|
50,884
|
|
Other
|
|
|
5,162
|
|
|
|
1,216
|
|
Total
|
|
$
|
22,641
|
|
|
$
|
52,349
|
|
Other
income (expense) principally consists of interest income and foreign currency
exchange gains and losses. Other income (expense) was lower in fiscal
2009 relative to fiscal 2008, with the majority of this difference caused by a
large gain on sale of equity securities in 2008. Interest income for
fiscal 2009 decreased due to lower interest rates, partially offset by higher
cash and marketable securities balances.
Foreign
currency gains and losses for the Company are primarily tied to movements by the
Taiwan Dollar, the Euro, and the British Pound Sterling. The
U.S. Dollar remains the functional currency of Garmin (Europe)
Ltd. The Euro is the functional currency of all other European
subsidiaries excluding Garmin Danmark and Garmin Sweden. As these
entities have grown, Euro currency moves generated material gains and
losses. Additionally, Euro-based inter-company transactions in
Garmin Ltd. can also generate currency gains and losses. The Canadian
dollar, Danish Krone, Swedish Krona and Australian Dollar are the functional
currency of Dynastream Innovations, Inc., Garmin Danmark, Garmin Sweden, and
Garmin Australasia respectively; due to these entities’ relative size, currency
moves are not expected to have a material impact on the Company’s financial
statements.
The $6.0
million currency loss in 2009 was due to the weakening of the U.S. Dollar
compared to the Euro, the British Pound Sterling and the Taiwan
Dollar. During 2009, the U.S. Dollar weakened 2.4% and 8.3% compared
to the Euro and the British Pound Sterling, respectively, resulting in a gain of
$5.8 million. A loss of $16.1 million resulted due to the U.S. Dollar
weakening 2.3% against the Taiwan Dollar. The relative weakness of
the Taiwan Dollar and Euro/British Pound Sterling have offsetting impacts due to
the use of the Taiwan Dollar for manufacturing costs while the Euro and British
Pound Sterling transactions relate to revenue. The remaining net currency gain
of $4.3 million related to other currencies and timing of
transactions.
The $35.3
million currency loss in 2008 was related to the strengthening of the U.S.
Dollar offset by a gain associated with the sales and tender of our Tele Atlas
N.V. shares. During 2008, the Taiwan Dollar weakened 1.6% in
comparison to the U.S. Dollar, resulting in a $20.8 million gain. The
Euro weakened 4.1% and the British Pound Sterling weakened 26.1% relative to the
U.S. Dollar in 2008 which resulted in a $77.3 million loss. Offsetting
this net loss was a realized gain of $21.5 million due to the strengthening of
the Euro between the date of purchase of the Tele Atlas N.V. shares in October
2007 to the dates of tender in February, March, and June 2008. Other
net currency losses and the timing of transactions created the remaining loss of
$0.3 million.
Gain on
sale of equity of securities of $50.9 million in 2008 was primarily generated
from the sale of our equity interest in Tele Atlas N.V. which we acquired in
2007 in connection with our announced intent to make a cash offer for all
outstanding shares, which was subsequently abandoned.
Income
Tax Provision
Our
fiscal 2009 earnings before taxes fell 11.6% when compared to 2008, while our
income tax expense decreased 42.3%. Income taxes fell $76.8 million,
to $104.7 million, for fiscal year 2009 from $181.5 million for fiscal year
2008, due to a lower effective tax rate and the reduced earnings before
taxes. The effective tax rate was 12.9% for fiscal 2009 compared to
19.9% for fiscal 2008. The decrease in tax rate is due to the
favorable mix of taxable income among the tax jurisdictions in which the Company
operates and the release of income tax reserves for which the statute of
limitations has expired.
Net
Income
As a
result of the various factors noted above, net income decreased 3.9% to $704.0
million for fiscal year 2009 compared to $732.8 million for fiscal year
2008.
Comparison
of 52-Weeks Ended December 27, 2008 and December 29, 2007
Net
Sales
|
|
52-weeks
ended
December
27, 2008
|
|
|
52-weeks
ended
December
29, 2007
|
|
|
Year
over Year
|
|
|
|
Net
Sales
|
|
|
%
of Revenues
|
|
|
Net
Sales
|
|
|
%
of Revenues
|
|
|
$
Change
|
|
|
%
Change
|
|
Outdoor/Fitness
|
|
$
|
427,783
|
|
|
|
12.2
|
%
|
|
$
|
339,741
|
|
|
|
10.7
|
%
|
|
$
|
88,042
|
|
|
|
25.9
|
%
|
Marine
|
|
|
204,477
|
|
|
|
5.9
|
%
|
|
|
203,399
|
|
|
|
6.4
|
%
|
|
|
1,078
|
|
|
|
0.5
|
%
|
Automotive/Mobile
|
|
|
2,538,411
|
|
|
|
72.6
|
%
|
|
|
2,342,184
|
|
|
|
73.6
|
%
|
|
|
196,227
|
|
|
|
8.4
|
%
|
Aviation
|
|
|
323,406
|
|
|
|
9.3
|
%
|
|
|
294,995
|
|
|
|
9.3
|
%
|
|
|
28,411
|
|
|
|
9.6
|
%
|
Total
|
|
$
|
3,494,077
|
|
|
|
100.0
|
%
|
|
$
|
3,180,319
|
|
|
|
100.0
|
%
|
|
$
|
313,758
|
|
|
|
9.9
|
%
|
The
increase in total net sales for 2008 was primarily driven by outdoor/fitness,
automotive/mobile and aviation product offerings. Automotive/mobile
revenue remains a significantly larger portion of our revenue mix, decreasing
slightly from 73.6% in 2007 to 72.6% in 2008. Total unit sales
increased 38% to 16.9 million in 2008 from 12.3 million in
2007. The higher unit sales volume in 2008 was primarily
attributable to strong sales of automotive products, particularly in North
America, and outdoor/fitness products. In general, management
believes that continuous innovation and the introduction of new products are
essential for future revenue growth.
Automotive/mobile
segment revenue grew 8.4% in 2008, on the strength of the nuvi
®
series
of personal navigation devices (PNDs), as well as increased consumer awareness
of the capabilities and applications of GPS. On a percentage
basis, revenues in our outdoor/fitness segment grew faster than any other
segment from the year ago period due to the introduction of the Colorado™
series, the Oregon ™ series, the Forerunner
®
405 and
Edge
®
705 which offer enhanced form factors and cartography. Our
aviation segment continued to grow on the strength of our G1000 cockpit as an
OEM (original equipment manufacturer) solution. This growth slowed
significantly in the second half of 2008 as the macroeconomic conditions
influenced purchasing decisions and slowed OEM production
schedules. Marine revenues were slightly higher than the prior
year due to strong growth in the first quarter of 2008 offset by flat to
declining revenue in the remainder of the year due to macroeconomic conditions
and fuel prices.
Gross
Profit
|
|
52-weeks
ended
December
27, 2008
|
|
|
52-weeks
ended
December
29, 2007
|
|
|
Year
over Year
|
|
|
|
Gross
Profit
|
|
|
%
of Revenues
|
|
|
Gross
Profit
|
|
|
%
of Revenues
|
|
|
$
Change
|
|
|
%
Change
|
|
Outdoor/Fitness
|
|
$
|
246,746
|
|
|
|
57.7
|
%
|
|
$
|
184,655
|
|
|
|
54.4
|
%
|
|
$
|
62,091
|
|
|
|
33.6
|
%
|
Marine
|
|
|
111,425
|
|
|
|
54.5
|
%
|
|
|
110,169
|
|
|
|
54.2
|
%
|
|
|
1,256
|
|
|
|
1.1
|
%
|
Automotive/Mobile
|
|
|
977,595
|
|
|
|
38.5
|
%
|
|
|
973,205
|
|
|
|
41.6
|
%
|
|
|
4,390
|
|
|
|
0.5
|
%
|
Aviation
|
|
|
217,749
|
|
|
|
67.3
|
%
|
|
|
195,226
|
|
|
|
66.2
|
%
|
|
|
22,523
|
|
|
|
11.5
|
%
|
Total
|
|
$
|
1,553,515
|
|
|
|
44.5
|
%
|
|
$
|
1,463,255
|
|
|
|
46.0
|
%
|
|
$
|
90,260
|
|
|
|
6.2
|
%
|
The increase in gross profit dollars
was primarily attributable to the outdoor/fitness and aviation segments where
revenue growth and consistent margins contributed. Gross profit
margin percentage for the Company overall decreased 150 basis points as a result
of the automotive/mobile segment decline of 310 basis points offset to some
extent by strong gross margins in our other three segments. The
automotive/mobile segment is by nature a lower-margin business and the Company
has begun to see the impacts expected on gross margin due to falling prices and
a product mix shift toward lower end PNDs. Outdoor/fitness gross
margin has increased due to a newer suite of products. A product mix
favoring the high margin G1000 in the aviation segment resulted in favorable
gross margins for the aviation segment in 2008. Marine gross
margin remained relatively stable and within historic ranges.
Advertising
Expenses
|
|
52-weeks
ended
December
27, 2008
|
|
|
52-weeks
ended
December
29, 2007
|
|
|
|
|
|
|
|
|
|
Advertising
|
|
|
|
|
|
Advertising
|
|
|
|
|
|
Year
over Year
|
|
|
|
Expense
|
|
|
%
of Revenues
|
|
|
Expense
|
|
|
%
of Revenues
|
|
|
$
Change
|
|
|
%
Change
|
|
Outdoor/Fitness
|
|
$
|
27,932
|
|
|
|
6.5
|
%
|
|
$
|
17,170
|
|
|
|
5.1
|
%
|
|
$
|
10,762
|
|
|
|
62.7
|
%
|
Marine
|
|
|
14,532
|
|
|
|
7.1
|
%
|
|
|
11,387
|
|
|
|
5.6
|
%
|
|
|
3,145
|
|
|
|
27.6
|
%
|
Automotive/Mobile
|
|
|
160,926
|
|
|
|
6.3
|
%
|
|
|
172,910
|
|
|
|
7.4
|
%
|
|
|
(11,984
|
)
|
|
|
-6.9
|
%
|
Aviation
|
|
|
4,787
|
|
|
|
1.5
|
%
|
|
|
5,481
|
|
|
|
1.9
|
%
|
|
|
(694
|
)
|
|
|
-12.7
|
%
|
Total
|
|
$
|
208,177
|
|
|
|
6.0
|
%
|
|
$
|
206,948
|
|
|
|
6.5
|
%
|
|
$
|
1,229
|
|
|
|
0.6
|
%
|
Advertising
expenses increased by $1.2 million on a year-over-year basis as we reduced
activities during the second half of the year due to moderating growth
associated with the macroeconomic pressures.
Selling,
General and Administrative Expenses
|
|
52-weeks
ended
December
27, 2008
|
|
|
52-weeks
ended
December
29, 2007
|
|
|
|
|
|
|
|
|
|
Selling,
General &
|
|
|
|
|
|
Selling,
General &
|
|
|
|
|
|
Year
over Year
|
|
|
|
Admin.
Expenses
|
|
|
%
of Revenues
|
|
|
Admin.
Expenses
|
|
|
%
of Revenues
|
|
|
$
Change
|
|
|
%
Change
|
|
Outdoor/Fitness
|
|
$
|
32,800
|
|
|
|
7.7
|
%
|
|
$
|
23,949
|
|
|
|
7.0
|
%
|
|
$
|
8,851
|
|
|
|
37.0
|
%
|
Marine
|
|
|
17,536
|
|
|
|
8.6
|
%
|
|
|
14,527
|
|
|
|
7.1
|
%
|
|
|
3,009
|
|
|
|
20.7
|
%
|
Automotive/Mobile
|
|
|
206,954
|
|
|
|
8.2
|
%
|
|
|
132,155
|
|
|
|
5.6
|
%
|
|
|
74,799
|
|
|
|
56.6
|
%
|
Aviation
|
|
|
19,922
|
|
|
|
6.2
|
%
|
|
|
18,919
|
|
|
|
6.4
|
%
|
|
|
1,003
|
|
|
|
5.3
|
%
|
Total
|
|
$
|
277,212
|
|
|
|
7.9
|
%
|
|
$
|
189,550
|
|
|
|
6.0
|
%
|
|
$
|
87,662
|
|
|
|
46.2
|
%
|
The increase in selling, general and
administrative expense was driven primarily by costs associated with the
European distributors acquired in 2007 and 2008, increased staffing to support
our growth and bad debt expense. Selling, general and
administrative expenses excluding advertising increased by $87.7 million in 2008
due to the acquired European distributors, information technology, call center
operations, and other administrative areas to support the growth of our
businesses, as well as bad debt expense due to the bankruptcy of Circuit
City.
Research
and Development Expense
|
|
52-weeks
ended
December
27, 2008
|
|
|
52-weeks
ended
December
29, 2007
|
|
|
|
|
|
|
|
|
|
Research
&
|
|
|
|
|
|
Research
&
|
|
|
|
|
|
Year
over Year
|
|
|
|
Development
|
|
|
%
of Revenues
|
|
|
Development
|
|
|
%
of Revenues
|
|
|
$
Change
|
|
|
%
Change
|
|
Outdoor/Fitness
|
|
$
|
25,419
|
|
|
|
5.9
|
%
|
|
$
|
23,302
|
|
|
|
6.9
|
%
|
|
$
|
2,117
|
|
|
|
9.1
|
%
|
Marine
|
|
|
19,374
|
|
|
|
9.5
|
%
|
|
|
16,879
|
|
|
|
8.3
|
%
|
|
|
2,495
|
|
|
|
14.8
|
%
|
Automotive/Mobile
|
|
|
85,610
|
|
|
|
3.4
|
%
|
|
|
59,390
|
|
|
|
2.5
|
%
|
|
|
26,220
|
|
|
|
44.1
|
%
|
Aviation
|
|
|
75,706
|
|
|
|
23.4
|
%
|
|
|
59,835
|
|
|
|
20.3
|
%
|
|
|
15,871
|
|
|
|
26.5
|
%
|
Total
|
|
$
|
206,109
|
|
|
|
5.9
|
%
|
|
$
|
159,406
|
|
|
|
5.0
|
%
|
|
$
|
46,703
|
|
|
|
29.3
|
%
|
The increase in research and
development expense dollars was due to ongoing development activities for new
products, the addition of 350 new engineering personnel to our staff during the
period, and an increase in engineering program costs in 2008 as a result of our
continued emphasis on product innovation.
Other
Income (Expense)
|
|
52-weeks
ended
|
|
|
52-weeks
ended
|
|
|
|
December
27, 2008
|
|
|
December
29, 2007
|
|
Interest
Income
|
|
$
|
35,535
|
|
|
$
|
41,995
|
|
Foreign
Currency Exchange
|
|
|
(35,286
|
)
|
|
|
22,964
|
|
Gain
on sale of equity securities
|
|
|
50,884
|
|
|
|
5,101
|
|
Other
|
|
|
1,216
|
|
|
|
862
|
|
Total
|
|
$
|
52,349
|
|
|
$
|
70,922
|
|
Other
income (expense) principally consists of interest income and foreign currency
exchange gains and losses. Other income (expense) was lower in fiscal
2008 relative to fiscal 2007, with the majority of this difference caused by a
large foreign currency loss in 2008. Interest income for fiscal 2008
decreased due to lower interest rates and a decline in our cash and marketable
securities balances during the year.
Foreign
currency gains and losses for the Company are primarily tied to movements by the
Taiwan Dollar, the Euro, and the British Pound Sterling. The
U.S. Dollar remains the functional currency of Garmin (Europe)
Ltd. The Euro is the functional currency of all other European
subsidiaries excluding Garmin Danmark and Garmin Sweden. As these
entities have grown, Euro currency moves generated material gains and
losses. Additionally, Euro-based inter-company transactions in
Garmin Ltd. can also generate currency gains and losses. The Canadian
dollar, Danish Krone, Swedish Krona and Australian Dollar are the functional
currency of Dynastream Innovations, Inc., Garmin Danmark, Garmin Sweden, and
Garmin Australasia respectively; due to these entities’ relative size, currency
moves are not expected to have a material impact on the Company’s financial
statements.
The $35.3
million currency loss in 2008 was related to the strengthening of the U.S.
Dollar offset by a gain associated with the sales and tender of our Tele Atlas
N.V. shares. During 2008, the Taiwan Dollar weakened 1.6% in
comparison to the U.S. Dollar, resulting in a $20.8 million gain. The
Euro weakened 4.1% and the British Pound Sterling weakened 26.1% relative to the
U.S. Dollar in 2008 which resulted in a $77.3 million loss. Offsetting
this net loss was a realized gain of $21.5 million due to the strengthening of
the Euro between the date of purchase of the Tele Atlas N.V. shares in October
2007 to the dates of tender in February, March, and June 2008. Other
net currency losses and the timing of transactions created the remaining loss of
$0.3 million.
The
majority of the $23.0 million currency gain in fiscal 2007 was due to the
weakening of the U.S. Dollar compared to the Euro and the British Pound
Sterling. During fiscal 2007, the Taiwan Dollar strengthened
relative to the U.S. Dollar, resulting in a $2.5 million
loss. The British Pound Sterling and the Euro strengthened 2%
and 11.4% respectively, relative to the U.S. Dollar during fiscal 2007, which
resulted in a $25.6 million gain. Other net currency gains and
the timing of transactions created the remaining loss of $0.1
million.
Other
income of $50.9 million in 2008 was primarily generated from the sale of our
equity interest in Tele Atlas N.V. which we acquired in 2007 in connection with
our announced intent to make a cash offer for all outstanding shares, which was
subsequently abandoned.
Income
Tax Provision
Our
earnings before taxes fell 6.5% when compared to 2007, yet our income tax
expense increased by $58.2 million, to $181.5 million, for fiscal year 2008 from
$123.3 million for fiscal year 2007, due to a higher effective tax
rate. The effective tax rate was 19.9% for fiscal 2008 compared to
12.6% for fiscal 2007. The increase in tax rate is due to a change in
tax law related to the repatriation of earnings from our Taiwan subsidiary and
the unfavorable mix of taxable income among the tax jurisdictions in which the
Company operates.
Net
Income
As a
result of the various factors noted above, net income decreased 14% to $732.8
million for fiscal year 2008 compared to $855.0 million for fiscal year
2007.
Liquidity
and Capital Resources
Net cash
generated by operations was $1,094.5 million, $862.2 million, and $682.1 million
for fiscal years 2009, 2008, and 2007, respectively. In general, cash
from operations has been derived from strong income levels and improved working
capital management. The increase in 2009 was principally related
to reductions in inventories and increases in deferred revenues
and accrued expenses offset by the cash flow effects of increased accounts
receivable due to the seasonally strong fourth quarter. Deferred
revenues relate to the nüMaps Lifetime™ offering as discussed in critical
accounting policies. Accrued expenses increased primarily due to the
timing of license fee payments. With regard to inventory, we operate
with a customer-oriented approach and seek to maintain sufficient inventory to
meet customer demand. Because we desire to respond quickly to our
customers and minimize order fulfillment time, our inventory levels are
generally substantial enough to meet most demand. We also attempt to
carry sufficient inventory levels of key components so that potential supplier
shortages have as minimal an impact as possible on our ability to deliver our
finished products. We do not plan to further reduce inventory levels
in 2010.
Capital expenditures in 2009 totaled
$49.2 million, a decrease of $70.4 million from fiscal 2008. This
amount in 2009 is related to business operations and maintenance
activities. This amount in 2008 reflects the build-out of additional
manufacturing lines in Lin-Kou, Taiwan, completion of our expanded North
American distribution facility and maintenance activities. Capital
expenditures in 2007 totaled $156.8 million. This amount in
2007 reflects the purchase and build-out of an additional manufacturing facility
in Lin-Kou, Taiwan, continued expansion of research and development facilities
in our Taiwan facilities, as well as ordinary capital expenditures for fiscal
2007.
We have budgeted approximately $50
million of capital expenditures during fiscal 2010 to include normal ongoing
capital expenditures and maintenance activities.
In addition to capital expenditures,
2009 cash flow used in investing activities related to the net investment in
fixed income securities of our on-hand cash balances of $491.0 million and the
purchase of intangible assets for $7.6 million. Garmin’s average
return on its investment during 2009 was approximately 1.7%. This is
a decrease from returns in prior years due to lower interest rates available in
the market. In addition to capital expenditures, 2008 cash flow used
in investing related to the purchase of European distributors for a total of
$60.1 million, the net sale of $130.7 million of fixed income securities
associated with the investment of our on-hand cash balances and the purchase of
$7.0 million of intangible assets. The net sale of fixed income
securities was primarily related to $239.3 million of cash generated from the
tender of our shares of Tele Atlas N.V. Garmin’s average return on
its investments during fiscal 2008 was approximately
3.4%. In addition to capital expenditures, 2007 cash flow
used in investing related to the purchase of Digital Cyclone, Inc., Garmin
France SAS, Garmin Deutschland GmbH, Garmin Iberia S.A., Garmin Italia S.p.A.,
and the assets of Nautamatic Marine Systems, Inc. for a total of $128.8 million,
the net sale of $112.8 million of fixed income securities associated with the
investment of our on-hand cash balances and the purchase of $2.9 million of
intangible assets. The $112.8 million net sale of fixed income
securities includes the purchase of $188.2 million of Tele Atlas N.V.
outstanding shares in connection with our announced intent to make a cash offer
for all outstanding shares which was subsequently abandoned. Garmin’s
average return on its investments during fiscal 2007 was approximately
4.3%. It is management’s goal to invest the on-hand cash consistent
with Garmin’s investment policy, which has been approved by the Board of
Directors. The investment policy’s primary purpose is to preserve
capital, maintain an acceptable degree of liquidity, and maximize yield within
the constraint of low credit risk.
Net cash
used by financing activities during 2009 was $161.2 million resulting from the
use of $149.8 million for the payment of a dividend and $20.3 million for the
purchase of stock offset by $8.9 million from the issuance of common shares
related to the exercise of employee stock options and stock appreciation rights
and the related tax benefit. During 2009, Garmin repurchased 707,600
of its common shares under the $300 million stock repurchase program that was
approved by the Board of Directors on October 22, 2008 and expired on December
31, 2009. Refer to “Item 5. Market for the Company’s
Common Shares, Related Shareholder Matters and Issuer Purchases of Equity
Securities” for additional discussion regarding the 2008 share repurchase
programs.
Net cash
used by financing activities during 2008 was $808.1 million resulting from the
use of $671.8 million for the stock repurchases and $150.3 million for the
payment of a dividend offset by $14.0 million from the issuance of common shares
related to the exercise of employee stock options and stock appreciation rights
and the related tax benefit. The $671.8 million of share repurchases
represented 17.1 million common shares. Cash flow related to
financing activities resulted in a net use of cash in 2007 of $136.1
million. During 2007, Garmin repurchased 57,235 of its common
shares under the 3,000,000-share stock repurchase program that was approved by
the Board of Directors on August 3, 2006 and expired on December 31,
2007. Sources and uses in financing activities during 2007
related primarily to a use for the payment of a dividend ($162.5 million) and
the purchase of stock ($7.8 million), and a source of cash from the issuance of
common shares related to the exercise of employee stock options and stock
appreciation rights the related tax benefit, and the employee stock purchase
plan ($34.4 million).
Cash
dividends paid to shareholders were $149.8 million, $150.3 million, and $162.5
million during fiscal years 2009, 2008, and 2007, respectively.
We currently use cash flow from
operations to fund our capital expenditures, to support our working capital
requirements and to repurchase shares. We expect that future cash
requirements will principally be for capital expenditures, working capital,
repurchase of shares, payment of dividends declared, and the funding of
strategic acquisitions.
We
believe that our existing cash balances and cash flow from operations will be
sufficient to meet our projected capital expenditures, working capital and other
cash requirements at least through the end of fiscal 2010.
Contractual
Obligations and Commercial Commitments
Future commitments of Garmin, as of
December 26, 2009, aggregated by type of contractual obligation,
are:
|
|
Payments
due by period
|
|
|
|
|
|
|
Less
than
|
|
|
|
|
|
|
|
|
More
than
|
|
Contractual
Obligations
|
|
Total
|
|
|
1
year
|
|
|
1-3
years
|
|
|
3-5
years
|
|
|
5
years
|
|
Operating
Leases
|
|
$
|
41,343
|
|
|
$
|
9,105
|
|
|
$
|
14,476
|
|
|
$
|
10,906
|
|
|
$
|
6,856
|
|
Purchase
Obligations
|
|
$
|
30,560
|
|
|
$
|
25,681
|
|
|
$
|
2,307
|
|
|
$
|
2,572
|
|
|
$
|
0
|
|
Total
|
|
$
|
71,903
|
|
|
$
|
34,787
|
|
|
$
|
16,783
|
|
|
$
|
13,478
|
|
|
$
|
6,856
|
|
Operating
leases describes lease obligations associated with Garmin facilities located in
the U.S., Taiwan, Europe, and Canada. Purchase obligations are
the aggregate of those purchase orders that were outstanding on December 26,
2009; these obligations are created and then paid off within 3 months during the
normal course of our manufacturing business.
We may be
required to make significant cash outlays related to unrecognized tax
benefits. However, due to the uncertainty of the timing of future
cash flows associated with our unrecognized tax benefits, we are unable to make
reasonably reliable estimates of the period of cash settlement, if any, with the
respective taxing authorities. Accordingly, unrecognized tax benefits
of $255.7 million as of December 26, 2009, have been excluded from the
contractual obligations table above. For further information related
to unrecognized tax benefits, see Note 2, “Income Taxes”, to the consolidated
financial statements included in this Report.
Off-Balance
Sheet Arrangements
We do not have any off-balance sheet
arrangements.
Item
7A. Quantitative and Qualitative Disclosures About Market
Risk
Market Sensitivity
We have market risk primarily in
connection with the pricing of our products and services and the purchase of raw
materials. Product pricing and raw materials costs are both
significantly influenced by semiconductor market
conditions. Historically, during cyclical industry downturns, we have
been able to offset pricing declines for our products through a combination of
improved product mix and success in obtaining price reductions in raw materials
costs.
Inflation
We do not believe that inflation has
had a material effect on our business, financial condition or results of
operations. If our costs were to become subject to significant
inflationary pressures, we may not be able to fully offset such higher costs
through price increases. Our inability or failure to do so could
adversely affect our business, financial condition and results of
operations.
Foreign Currency Exchange Rate
Risk
The
operation of Garmin’s subsidiaries in international markets results in exposure
to movements in currency exchange rates. We have experienced
significant foreign currency gains and losses due to the strengthening and
weakening of the U.S. dollar. The potential of volatile foreign
exchange rate fluctuations in the future could have a significant effect on our
results of operations.
The currencies that create a majority
of the Company’s exchange rate exposure are the Taiwan Dollar, Euro, and British
Pound Sterling. Garmin Corporation, headquartered in Shijr, Taiwan,
uses the local currency as the functional currency. The Company
translates all assets and liabilities at year-end exchange rates and income and
expense accounts at average rates during the year. In order to
minimize the effect of the currency exchange fluctuations on our net assets, we
have elected to retain most of our Taiwan subsidiary’s cash and investments in
marketable securities denominated in U.S. dollars. In 2009, the
Taiwan Dollar strengthened 2.3% relative to the U.S. Dollar which resulted in a
net foreign currency loss of $16.1 million at Garmin Corporation during
2009.
All
European subsidiaries excluding Garmin (Europe) Ltd., Garmin Danmark and Garmin
Sweden use the Euro as the functional currency
.
The functional
currency of our largest European subsidiary, Garmin (Europe) Ltd. remains the
U.S. dollar, and as some transactions occurred in British Pounds Sterling or
Euros, foreign currency gains or losses have been realized historically related
to the movements of those currencies relative to the U.S. dollar. The
Company believes that gains and losses will become more material in the future
as our European presence grows. In 2009, the Euro strengthened 2.4%
relative to the U.S. dollar and the British Pound Sterling strengthened 8.3%
relative to the U.S. dollar. These currency moves resulted in a
foreign currency gain of $5.8 million in Garmin Ltd. and our European
subsidiaries. The net result of these currency moves combined with
other gains of $4.3 million, and the timing of transactions during the year was
a net loss of $6.0 million for the Company and a cumulative translation
adjustment of $9.3 million at the end of fiscal 2009.
Interest
Rate Risk
We have
no outstanding long-term debt as of December 26, 2009. We,
therefore, have no meaningful debt-related interest rate risk.
We are
exposed to interest rate risk in connection with our investments in marketable
securities. As interest rates change, the unrealized gains and
losses associated with those securities will fluctuate accordingly. A
hypothetical change of 10% in interest rates would not have a material effect on
such unrealized gains or losses. At December 26, 2009, cumulative
unrealized losses on those securities were $21.8 million.
Item
8. Financial Statements and Supplementary Data
CONSOLIDATED
FINANCIAL STATEMENTS
Garmin
Ltd. and Subsidiaries
Years
Ended December 26, 2009, December 27, 2008 and December 29, 2007
Contents
Report
of Ernst & Young LLP, Independent Registered Public Accounting
Firm
|
63
|
Consolidated
Balance Sheets at December 26, 2009 and December 27, 2008
|
64
|
Consolidated
Statements of Income for the Years Ended December 26, 2009, December 27,
2008 and December 29, 2007
|
65
|
Consolidated
Statements of Stockholders’ Equity for the Years Ended December 26, 2009,
December 27, 2008 and December 29, 2007
|
66
|
Consolidated
Statements of Cash Flows for the Years December 26, 2009, December 27,
2008 and December 29, 2007
|
67
|
Notes
to Consolidated Financial Statements
|
69
|
Report
of Ernst & Young LLP
Independent
Registered Public Accounting Firm
The Board
of Directors and Shareholders
Garmin
Ltd.
We have
audited the accompanying consolidated balance sheets of Garmin Ltd. and
Subsidiaries (the Company) as of December 26, 2009 and December 27, 2008 and the
related consolidated statements of income, stockholders' equity, and cash flows
for each of the three years in the period ended December 26,
2009. Our audits also included the financial statement schedule
listed in the index at Item 15(a)(2). These financial statements and
schedule are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements and
schedule based on our audits.
We
conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our
opinion, the financial statements referred to above present fairly, in all
material respects, the consolidated financial position of Garmin Ltd. and
Subsidiaries at December 26, 2009 and December 27, 2008 and the consolidated
results of their operations and their cash flows for each of the three years in
the period ended December 26, 2009, in conformity with U.S. generally accepted
accounting principles. Also, in our opinion, the related financial
statement schedule, when considered in relation to the basic financial
statements taken as a whole, presents fairly in all material respects the
information set forth therein.
We also
have audited, in accordance with the standards of the Public Company Accounting
Oversight Board (United States), Garmin Ltd.’s internal control over financial
reporting as of December 26, 2009, based on criteria established in the Internal
Control-Integrated Framework issued by the Committee of Sponsoring Organizations
of the Treadway Commission and our report dated February 24, 2010 expressed an
unqualified opinion thereon.
Kansas
City, Missouri
February
24, 2010
Garmin
Ltd. And Subsidiaries
Consolidated
Balance Sheets
(In
thousands, except share information)
|
|
December 26,
|
|
|
December 27,
|
|
|
|
2009
|
|
|
2008
|
|
Assets
|
|
|
|
|
|
|
Current
assets:
|
|
|
|
|
|
|
Cash
and cash equivalents
|
|
$
|
1,091,581
|
|
|
$
|
696,335
|
|
Marketable
securities
( Note
3)
|
|
|
19,583
|
|
|
|
12,886
|
|
Accounts
receivable, less allowance for doubtful accounts of $36,673 in 2009
and $42,409 in 2008
|
|
|
874,110
|
|
|
|
741,321
|
|
Inventories,
net
|
|
|
309,938
|
|
|
|
425,312
|
|
Deferred
income taxes
(Note
6)
|
|
|
59,189
|
|
|
|
49,825
|
|
Prepaid
expenses and other current assets
|
|
|
39,470
|
|
|
|
58,746
|
|
Total
current assets
|
|
|
2,393,871
|
|
|
|
1,984,425
|
|
|
|
|
|
|
|
|
|
|
Property
and equipment, net
|
|
|
|
|
|
|
|
|
Land
and improvements
|
|
|
92,088
|
|
|
|
88,272
|
|
Building
and improvements
|
|
|
268,011
|
|
|
|
244,804
|
|
Office
furniture and equipment
|
|
|
84,544
|
|
|
|
72,665
|
|
Manufacturing
equipment
|
|
|
115,179
|
|
|
|
113,956
|
|
Engineering
equipment
|
|
|
65,240
|
|
|
|
59,009
|
|
Vehicles
|
|
|
15,247
|
|
|
|
14,698
|
|
|
|
|
640,309
|
|
|
|
593,404
|
|
Accumulated
depreciation
|
|
|
(198,971
|
)
|
|
|
(148,152
|
)
|
|
|
|
441,338
|
|
|
|
445,252
|
|
|
|
|
|
|
|
|
|
|
Restricted
cash
(Note
4)
|
|
|
2,047
|
|
|
|
1,941
|
|
Marketable
securities
(Note
3)
|
|
|
746,464
|
|
|
|
262,009
|
|
License
agreements, net
|
|
|
15,400
|
|
|
|
16,013
|
|
Noncurrent
deferred income tax
(Note
6)
|
|
|
20,498
|
|
|
|
9,840
|
|
Other
intangible assets
|
|
|
206,256
|
|
|
|
214,941
|
|
Total
assets
|
|
$
|
3,825,874
|
|
|
$
|
2,934,421
|
|
|
|
|
|
|
|
|
|
|
Liabilities
and Stockholders' Equity
|
|
|
|
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
|
|
|
|
Accounts
payable
|
|
$
|
203,388
|
|
|
$
|
160,094
|
|
Salaries
and benefits payable
|
|
|
45,236
|
|
|
|
34,241
|
|
Accrued
warranty costs
|
|
|
87,424
|
|
|
|
87,408
|
|
Accrued
sales program costs
|
|
|
119,150
|
|
|
|
90,337
|
|
Deferred
revenue
|
|
|
27,910
|
|
|
|
680
|
|
Accrued
royalty costs
|
|
|
103,195
|
|
|
|
30,941
|
|
Accrued
advertising expense
|
|
|
34,146
|
|
|
|
31,071
|
|
Other
accrued expenses
|
|
|
40,373
|
|
|
|
24,329
|
|
Income
taxes payable
|
|
|
22,846
|
|
|
|
20,075
|
|
Total
current liabilities
|
|
|
683,668
|
|
|
|
479,176
|
|
|
|
|
|
|
|
|
|
|
Deferred
income taxes
(Note
6)
|
|
|
10,170
|
|
|
|
13,910
|
|
Non-current
income taxes
|
|
|
255,748
|
|
|
|
214,366
|
|
Non-current
deferred revenue
|
|
|
38,574
|
|
|
|
-
|
|
Other
liabilities
|
|
|
1,267
|
|
|
|
1,115
|
|
|
|
|
|
|
|
|
|
|
Stockholders'
equity:
|
|
|
|
|
|
|
|
|
Common
stock, $0.005 par value, 1,000,000,000 shares authorized
(Notes 9, 10, and
11)
:
|
|
|
|
|
|
|
|
|
Issued
and outstanding shares - 200,274,000 in 2009, and 200,363,000 in
2008
|
|
|
1,001
|
|
|
|
1,002
|
|
Additional
paid-in capital
|
|
|
32,221
|
|
|
|
-
|
|
Retained
earnings
(Note 2)
|
|
|
2,816,607
|
|
|
|
2,262,503
|
|
Accumulated
other comprehensive gain/(loss)
|
|
|
(13,382
|
)
|
|
|
(37,651
|
)
|
Total
stockholders' equity
|
|
|
2,836,447
|
|
|
|
2,225,854
|
|
Total
liabilities and stockholders' equity
|
|
$
|
3,825,874
|
|
|
$
|
2,934,421
|
|
See
accompanying notes.
Garmin
Ltd. And Subsidiaries
Consolidated
Statements of Income
(In
Thousands, Except Per Share Information)
|
|
Fiscal Year Ended
|
|
|
|
December 26,
|
|
|
December 27,
|
|
|
December 29,
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
|
|
|
|
|
|
|
|
|
Net
sales
|
|
$
|
2,946,440
|
|
|
$
|
3,494,077
|
|
|
$
|
3,180,319
|
|
Cost of
goods sold
|
|
|
1,502,329
|
|
|
|
1,940,562
|
|
|
|
1,717,064
|
|
Gross
profit
|
|
|
1,444,111
|
|
|
|
1,553,515
|
|
|
|
1,463,255
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Advertising
expense
|
|
|
155,521
|
|
|
|
208,177
|
|
|
|
206,948
|
|
Selling,
general and administrative expenses
|
|
|
264,202
|
|
|
|
277,212
|
|
|
|
189,550
|
|
Research
and development expense
|
|
|
238,378
|
|
|
|
206,109
|
|
|
|
159,406
|
|
|
|
|
658,101
|
|
|
|
691,498
|
|
|
|
555,904
|
|
Operating
income
|
|
|
786,010
|
|
|
|
862,017
|
|
|
|
907,351
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
income (expense):
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
income
|
|
|
23,519
|
|
|
|
35,535
|
|
|
|
41,995
|
|
Interest
expense
|
|
|
-
|
|
|
|
(607
|
)
|
|
|
(207
|
)
|
Foreign
currency
|
|
|
(6,040
|
)
|
|
|
(35,286
|
)
|
|
|
22,964
|
|
Gain
on sale of equity securities
|
|
|
2,741
|
|
|
|
50,884
|
|
|
|
5,101
|
|
Other
|
|
|
2,421
|
|
|
|
1,823
|
|
|
|
1,069
|
|
|
|
|
22,641
|
|
|
|
52,349
|
|
|
|
70,922
|
|
Income
before income taxes
|
|
|
808,651
|
|
|
|
914,366
|
|
|
|
978,273
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
tax provision (benefit):
(Note
6)
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
|
|
|
128,036
|
|
|
|
136,252
|
|
|
|
179,355
|
|
Deferred
|
|
|
(23,335
|
)
|
|
|
45,266
|
|
|
|
(56,093
|
)
|
|
|
|
104,701
|
|
|
|
181,518
|
|
|
|
123,262
|
|
Net
income
|
|
$
|
703,950
|
|
|
$
|
732,848
|
|
|
$
|
855,011
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
net income per share
(Note 10)
|
|
$
|
3.51
|
|
|
$
|
3.51
|
|
|
$
|
3.95
|
|
Diluted
net income per share
(Note 10)
|
|
$
|
3.50
|
|
|
$
|
3.48
|
|
|
$
|
3.89
|
|
See
accompanying notes.
Garmin
Ltd. And Subsidiaries
Consolidated
Statements of Stockholders' Equity
(In
Thousands, Except Share and Per Share Information)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional
|
|
|
|
|
|
Other
|
|
|
|
|
|
|
Common Stock
|
|
|
Paid-In
|
|
|
Retained
|
|
|
Comprehensive
|
|
|
|
|
|
|
Shares
|
|
|
Dollars
|
|
|
Capital
|
|
|
Earnings
|
|
|
Gain/(Loss)
|
|
|
Total
|
|
Balance
at December 30, 2006
|
|
|
216,098
|
|
|
$
|
1,082
|
|
|
$
|
83,438
|
|
|
$
|
1,478,654
|
|
|
$
|
(5,275
|
)
|
|
$
|
1,557,899
|
|
Net
income
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
855,011
|
|
|
|
–
|
|
|
|
855,011
|
|
Translation
adjustment
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
992
|
|
|
|
992
|
|
Adjustment
related to unrealized gains (losses) on available-for-sale securities, net
of income tax effects of $31
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
50,413
|
|
|
|
50,413
|
|
Comprehensive
income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
906,415
|
|
Dividends
paid
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
(162,531
|
)
|
|
|
–
|
|
|
|
(162,531
|
)
|
Tax
benefit from exercise of employee stock options
|
|
|
–
|
|
|
|
–
|
|
|
|
17,434
|
|
|
|
–
|
|
|
|
–
|
|
|
|
17,434
|
|
Issuance
of common stock from exercise of stock options
|
|
|
819
|
|
|
|
4
|
|
|
|
11,278
|
|
|
|
–
|
|
|
|
–
|
|
|
|
11,282
|
|
Stock
appreciation rights
|
|
|
–
|
|
|
|
–
|
|
|
|
22,164
|
|
|
|
–
|
|
|
|
–
|
|
|
|
22,164
|
|
Purchase
and retirement of common stock
|
|
|
(57
|
)
|
|
|
–
|
|
|
|
(7,780
|
)
|
|
|
–
|
|
|
|
–
|
|
|
|
(7,780
|
)
|
Issuance
of common stock through stock purchase plan
|
|
|
120
|
|
|
|
–
|
|
|
|
5,730
|
|
|
|
–
|
|
|
|
–
|
|
|
|
5,730
|
|
Balance
at December 29, 2007
|
|
|
216,980
|
|
|
$
|
1,086
|
|
|
$
|
132,264
|
|
|
$
|
2,171,134
|
|
|
$
|
46,130
|
|
|
$
|
2,350,614
|
|
Net
income
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
732,848
|
|
|
|
–
|
|
|
|
732,848
|
|
Translation
adjustment
|
|
|
–
|
|
|
|
–
|
|
|
|
(3,053
|
)
|
|
|
(1,595
|
)
|
|
|
(14,991
|
)
|
|
|
(19,639
|
)
|
Adjustment
related to unrealized gains (losses) on available-for-sale securities, net
of income tax effects of $150
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
(68,790
|
)
|
|
|
(68,790
|
)
|
Comprehensive
income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
644,419
|
|
Dividends
paid
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
(150,251
|
)
|
|
|
–
|
|
|
|
(150,251
|
)
|
Tax
benefit from exercise of employee stock options
|
|
|
–
|
|
|
|
–
|
|
|
|
2,143
|
|
|
|
–
|
|
|
|
–
|
|
|
|
2,143
|
|
Issuance
of common stock from exercise of stock options
|
|
|
158
|
|
|
|
2
|
|
|
|
2,873
|
|
|
|
–
|
|
|
|
–
|
|
|
|
2,875
|
|
Stock
appreciation rights
|
|
|
–
|
|
|
|
–
|
|
|
|
38,872
|
|
|
|
–
|
|
|
|
–
|
|
|
|
38,872
|
|
Purchase
and retirement of common stock
|
|
|
(17,138
|
)
|
|
|
(86
|
)
|
|
|
(182,128
|
)
|
|
|
(489,633
|
)
|
|
|
–
|
|
|
|
(671,847
|
)
|
Issuance
of common stock through stock purchase plan
|
|
|
363
|
|
|
|
–
|
|
|
|
9,029
|
|
|
|
–
|
|
|
|
–
|
|
|
|
9,029
|
|
Balance
at December 27, 2008
|
|
|
200,363
|
|
|
$
|
1,002
|
|
|
$
|
0
|
|
|
$
|
2,262,503
|
|
|
$
|
(37,651
|
)
|
|
$
|
2,225,854
|
|
Net
income
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
703,950
|
|
|
|
–
|
|
|
|
703,950
|
|
Translation
adjustment
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
24,537
|
|
|
|
24,537
|
|
Adjustment
related to unrealized gains (losses) on available-for-sale securities, net
of income tax effects of $150
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
(268
|
)
|
|
|
(268
|
)
|
Comprehensive
income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
728,219
|
|
Dividends
paid
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
(149,846
|
)
|
|
|
–
|
|
|
|
(149,846
|
)
|
Tax
benefit from exercise of employee stock options
|
|
|
–
|
|
|
|
–
|
|
|
|
1,366
|
|
|
|
–
|
|
|
|
–
|
|
|
|
1,366
|
|
Issuance
of common stock from exercise of stock options
|
|
|
409
|
|
|
|
3
|
|
|
|
3,781
|
|
|
|
–
|
|
|
|
–
|
|
|
|
3,784
|
|
Stock
appreciation rights
|
|
|
–
|
|
|
|
–
|
|
|
|
43,616
|
|
|
|
–
|
|
|
|
–
|
|
|
|
43,616
|
|
Purchase
and retirement of common stock
|
|
|
(708
|
)
|
|
|
(4
|
)
|
|
|
(20,254
|
)
|
|
|
–
|
|
|
|
–
|
|
|
|
(20,258
|
)
|
Issuance
of common stock through stock purchase plan
|
|
|
210
|
|
|
|
–
|
|
|
|
3,712
|
|
|
|
–
|
|
|
|
–
|
|
|
|
3,712
|
|
Balance
at December 26, 2009
|
|
|
200,274
|
|
|
$
|
1,001
|
|
|
$
|
32,221
|
|
|
$
|
2,816,607
|
|
|
$
|
(13,382
|
)
|
|
$
|
2,836,447
|
|
See
accompanying notes.
Garmin
Ltd. And Subsidiaries
Consolidated
Statements of Cash Flows
(In
Thousands)
|
|
Fiscal
Year
Ended
|
|
|
|
December 26,
|
|
|
December 27,
|
|
|
December 29,
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
Operating
Activities:
|
|
|
|
|
|
|
|
|
|
Net
income
|
|
$
|
703,950
|
|
|
$
|
732,848
|
|
|
$
|
855,011
|
|
Adjustments
to reconcile net income to net cash provided by operating
activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation
|
|
|
56,695
|
|
|
|
46,910
|
|
|
|
35,524
|
|
Amortization
|
|
|
39,791
|
|
|
|
31,507
|
|
|
|
28,513
|
|
Loss
on sale of property and equipment
|
|
|
(14
|
)
|
|
|
124
|
|
|
|
560
|
|
Provision
for doubtful accounts
|
|
|
(1,332
|
)
|
|
|
32,355
|
|
|
|
3,617
|
|
Provision
for obsolete and slow-moving inventories
|
|
|
61,323
|
|
|
|
24,461
|
|
|
|
34,975
|
|
Unrealized
foreign currency losses/(gains)
|
|
|
7,480
|
|
|
|
15,887
|
|
|
|
(926
|
)
|
Deferred
income taxes
|
|
|
(25,096
|
)
|
|
|
50,887
|
|
|
|
(57,843
|
)
|
Stock
compensation
|
|
|
43,616
|
|
|
|
38,872
|
|
|
|
22,164
|
|
Realized
gains on marketable securities
|
|
|
(2,741
|
)
|
|
|
(50,884
|
)
|
|
|
(5,101
|
)
|
Changes
in operating assets and liabilities, net of acquisition:
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts
receivable
|
|
|
(131,978
|
)
|
|
|
206,101
|
|
|
|
(477,108
|
)
|
Inventories
|
|
|
61,189
|
|
|
|
83,035
|
|
|
|
(224,180
|
)
|
Prepaid
expenses and other current assets
|
|
|
2,740
|
|
|
|
(4,356
|
)
|
|
|
6,213
|
|
License
fees
|
|
|
(13,735
|
)
|
|
|
(15,289
|
)
|
|
|
(23,569
|
)
|
Accounts
payable
|
|
|
38,875
|
|
|
|
(236,287
|
)
|
|
|
174,781
|
|
Other
current and non-current liabilities
|
|
|
172,215
|
|
|
|
(4,507
|
)
|
|
|
253,909
|
|
Deferred
revenue
|
|
|
65,706
|
|
|
|
680
|
|
|
|
-
|
|
Income
taxes payable
|
|
|
15,772
|
|
|
|
(90,180
|
)
|
|
|
55,548
|
|
Net
cash provided by operating activities
|
|
|
1,094,456
|
|
|
|
862,164
|
|
|
|
682,088
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investing
activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchases
of property and equipment
|
|
|
(49,199
|
)
|
|
|
(119,623
|
)
|
|
|
(156,777
|
)
|
Proceeds
from sale of property and equipment
|
|
|
5
|
|
|
|
19
|
|
|
|
5
|
|
Purchase
of intangible assets
|
|
|
(7,573
|
)
|
|
|
(6,971
|
)
|
|
|
(2,918
|
)
|
Purchase
of marketable securities
|
|
|
(776,966
|
)
|
|
|
(373,580
|
)
|
|
|
(1,672,041
|
)
|
Redemption
of marketable securities
|
|
|
285,970
|
|
|
|
504,324
|
|
|
|
1,784,816
|
|
Acquistions,
net of cash acquired
|
|
|
-
|
|
|
|
(60,131
|
)
|
|
|
(128,751
|
)
|
Change
in restricted cash
|
|
|
(106
|
)
|
|
|
(387
|
)
|
|
|
(29
|
)
|
Net
cash used in investing activities
|
|
|
(547,869
|
)
|
|
|
(56,349
|
)
|
|
|
(175,695
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financing
activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends
|
|
|
(149,846
|
)
|
|
|
(150,251
|
)
|
|
|
(162,531
|
)
|
Payment
on long-term debt
|
|
|
-
|
|
|
|
-
|
|
|
|
(248
|
)
|
Proceeds
from issuance of common stock through stock purchase
plan
|
|
|
3,712
|
|
|
|
9,029
|
|
|
|
5,730
|
|
Proceeds
from issuance of common stock from
|
|
|
|
|
|
|
|
|
|
|
|
|
exercise
of stock options
|
|
|
3,783
|
|
|
|
2,875
|
|
|
|
11,278
|
|
Tax
benefit related to stock option exercise
|
|
|
1,366
|
|
|
|
2,143
|
|
|
|
17,434
|
|
Purchase
of common stock
|
|
|
(20,258
|
)
|
|
|
(671,847
|
)
|
|
|
(7,780
|
)
|
Net
cash used in financing activities
|
|
|
(161,243
|
)
|
|
|
(808,051
|
)
|
|
|
(136,117
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect
of exchange rate changes on cash and cash equivalents
|
|
|
9,902
|
|
|
|
(9,118
|
)
|
|
|
92
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
increase/(decrease) in cash and cash equivalents
|
|
|
395,246
|
|
|
|
(11,354
|
)
|
|
|
370,368
|
|
Cash
and cash equivalents at beginning of year
|
|
|
696,335
|
|
|
|
707,689
|
|
|
|
337,321
|
|
Cash
and cash equivalents at end of year
|
|
$
|
1,091,581
|
|
|
$
|
696,335
|
|
|
$
|
707,689
|
|
See
accompanying notes.
Garmin
Ltd. And Subsidiaries
Consolidated
Statements of Cash Flows (continued)
(In
Thousands)
|
|
Fiscal Year Ended
|
|
|
|
December 26,
|
|
|
December 27,
|
|
|
December 29,
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental
disclosures of cash flow information
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
paid during the year for income taxes
|
|
$
|
69,186
|
|
|
$
|
134,421
|
|
|
$
|
54,963
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
received during the year from income tax refunds
|
|
$
|
2,934
|
|
|
$
|
177
|
|
|
$
|
779
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
paid during the year for interest
|
|
$
|
-
|
|
|
$
|
607
|
|
|
$
|
207
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental
disclosure of non-cash investing and financing activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change
in marketable securities related to unrealized appreciation
(depreciation)
|
|
$
|
408
|
|
|
$
|
(68,668
|
)
|
|
$
|
51,210
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair
value of assets acquired
|
|
$
|
-
|
|
|
$
|
136,952
|
|
|
$
|
256,609
|
|
Liabilities
assumed
|
|
|
-
|
|
|
|
(60,336
|
)
|
|
|
(106,654
|
)
|
Less: cash
acquired
|
|
|
-
|
|
|
|
(16,485
|
)
|
|
|
(21,204
|
)
|
Net
cash paid
|
|
$
|
-
|
|
|
$
|
60,131
|
|
|
$
|
128,751
|
|
See
accompanying notes.
GARMIN
LTD. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
(In
Thousands, Except Share and Per Share Information)
December
26, 2009 and December 27, 2008
1.
Description of the Business
Garmin
Ltd. and subsidiaries (together, the “Company”) manufacture, market, and
distribute Global Positioning System-enabled products and other related
products. Garmin Corporation (GC), wholly-owned by Garmin Ltd.,
is primarily responsible for the manufacturing and distribution of the Company’s
products to Garmin International, Inc. (GII), a wholly-owned subsidiary of GC,
and Garmin (Europe) Limited (GEL), a wholly-owned subsidiary of Garmin Ltd.,
and, to a lesser extent, new product development and sales and marketing of the
Company’s products in Asia and the Far East. GII is primarily
responsible for sales and marketing of the Company’s products in many
international markets and in the United States as well as research and new
product development. GII also manufactures certain products for the Company’s
aviation segment. GEL is responsible for sales and marketing of
the Company’s products, principally within the European
market. In addition, the Company acquired ten European
distributors in 2007 and 2008 which distribute Garmin product throughout
Europe.
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. Prior
year reclassifications have been made between noncurrent deferred tax
liabilities and noncurrent deferred tax assets to reflect the net tax position
in various jurisdictions and between deferred revenue and other accrued expenses
to reflect the 2008 balance. The change was not material.
Fiscal
Year
The
Company has adopted 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 fiscal years, and the associated 14-week fourth quarter, will
not be entirely comparable to the prior and subsequent 52-week fiscal years and
the associated quarters having only 13 weeks. Fiscal 2009,
2008, and 2007 included 52 weeks.
Foreign
Currency Translation
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 GII, 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 translation adjustments of $9,231 and ($15,306) as of December 26,
2009 and December 27, 2008, respectively, net of related taxes, have been
included in accumulated other comprehensive gain/(loss) 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. All
differences are recorded in results of operations and amounted to exchange
gains/(losses) of ($6,040), ($35,286), and $22,964 for the years ended December
26, 2009, December 27, 2008, and December 29, 2007, respectively. The
loss in fiscal 2009 was primarily the result of the weakening of the USD against
the Taiwan Dollar offset by the weakening of the USD against the Euro and the
British Pound Sterling. The loss in fiscal 2008 was the result of the
strengthening of the USD offset by a gain associated with the sale and tender of
our Tele Atlas N.V. shares. The gain in fiscal 2007 was the result of
the strengthening of the Euro and British Pound Sterling relative to the USD
experienced by our European companies.
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 stock
options has been reduced by the number of shares which could have been purchased
from the proceeds of the exercise at the average market price of the Company’s
stock during the period the options were outstanding. See Note 10.
Cash
and Cash Equivalents
For
purposes of reporting cash flows, cash and cash equivalents include cash on
hand, operating accounts, money market funds, 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.
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 60 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 its internal collection efforts have
been unsuccessful in collecting the amount due.
Inventories
Inventories
are stated at the lower of cost or market. Cost is determined using the
weighted-average method (which approximates the first-in, first-out (FIFO)
method) by GC and the FIFO method by GII, GAT and
GEL. Inventories consisted of the following:
|
|
December 26,
|
|
|
December 27,
|
|
|
|
2009
|
|
|
2008
|
|
|
|
|
|
|
|
|
Raw
materials
|
|
$
|
80,963
|
|
|
$
|
151,132
|
|
Work-in-process
|
|
|
32,587
|
|
|
|
28,759
|
|
Finished
goods
|
|
|
235,286
|
|
|
|
268,625
|
|
Inventory
reserves
|
|
|
(38,898
|
)
|
|
|
(23,204
|
)
|
|
|
$
|
309,938
|
|
|
$
|
425,312
|
|
Property
and Equipment
Property
and equipment are recorded at cost and depreciated using the straight-line
method over the following estimated useful lives:
Buildings
and improvements
|
|
|
39
|
|
Office
furniture and equipment
|
|
|
5
|
|
Manufacturing
and engineering equipment
|
|
|
5
|
|
Vehicles
|
|
|
5
|
|
Long-Lived
Assets
As
required by the
Property,
Plant and Equipment
topic of the FASB ASC, the Company reviews long-lived
assets for impairment whenever events or changes in circumstances indicate the
carrying amount of an asset 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.
The
Intangibles – Goodwill and
Other
topic of the FASB ASC 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 did not recognize
any goodwill or intangible asset impairment charges in 2009, 2008, or 2007. The
Company established reporting units based on its current reporting structure.
For purposes of testing goodwill for impairment, goodwill has been allocated to
these reporting units to the extent it relates to each reporting unit. The
accounting guidance also requires that intangible assets with definite lives be
amortized over their estimated useful lives and reviewed for impairment. The
Company is currently amortizing its acquired intangible assets with definite
lives over periods ranging from 3 to 10 years.
Dividends
On July
30, 2009 the Board of Directors declared a dividend of $0.75 per share to be
paid on December 15, 2009 to shareholders of record on December 1,
2009. The Company paid out a dividend in the amount of
$149,846. The dividend has been reported as a reduction of retained
earnings.
On June
6, 2008 the Board of Directors declared a dividend of $0.75 per share to be paid
on December 15, 2008 to shareholders of record on December 1,
2008. The Company paid out a dividend in the amount of
$150,251. The dividend has been reported as a reduction of retained
earnings.
On August
1, 2007 the Board of Directors declared a dividend of $0.75 per share to be paid
on September 14, 2007 to shareholders of record on August 15,
2007. The Company paid out a dividend in the amount of
$162,531. The dividend has been reported as a reduction of retained
earnings.
Approximately
$199,549 and $186,383 of retained earnings are indefinitely restricted from
distribution to stockholders pursuant to the laws of Taiwan at December 26, 2009
and December 27, 2008, respectively.
Intangible
Assets
At
December 26, 2009 and December 27, 2008, the Company had patents, license
agreements, customer related intangibles and other identifiable finite-lived
intangible assets recorded at a cost of $173,018 and $152,104,
respectively. The Company’s excess purchase cost over fair value of
net assets acquired (goodwill) was $129,066 at December 26, 2009 and $127,429 at
December 27, 2008.
Identifiable,
finite-lived intangible assets are amortized over their estimated useful lives
on a straight-line basis over three to ten years. Accumulated
amortization was $80,428 and $48,579 at December 26, 2009 and December 27, 2008
respectively. Amortization expense was $37,444, $30,874, and $26,942,
for the years ended December 26, 2009, December 27, 2008, and December 29, 2007,
respectively. In the next five years, the amortization expense is
estimated to be $41,025, $24,945, $13,933, $4,572, and $2,539,
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 are considered available-for-sale at
December 26, 2009. See Note 3. Available-for-sale securities are
stated at fair value, with the unrealized gains and losses, net of tax, reported
in other comprehensive gain/(loss). At December 26, 2009 and December
27, 2008, cumulative unrealized gains/(losses) of ($22,613) and ($22,345),
respectively, were reported accumulated in other comprehensive gain/(loss), net
of related taxes.
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 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.
Income
Taxes
The
Company accounts for income taxes using the liability method in accordance with
the FASB ASC 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 by the enacted tax rates and laws that will be in effect when the
differences are expected to reverse. Income taxes of $171,097 and $153,170 at
December 26, 2009 and December 27, 2008, respectively, have not been accrued by
the Company for the unremitted earnings of several of its subsidiaries because
such earnings are intended to be reinvested in the subsidiaries
indefinitely.
The Company adopted the applicable
guidance included in the FASB ASC topic
Income Taxes
related to
accounting for uncertainty in income taxes on December 31, 2006, the beginning
of fiscal year 2007. The total amount of unrecognized tax benefits
as of December 26, 2009 was $255.7 million including interest of $20.1
million. A reconciliation of the beginning and ending amount of
unrecognized tax benefits for years ending December 26, 2009 and December 27,
2008 is as follows (in $millions):
|
|
December 26,
|
|
|
December 27,
|
|
|
|
2009
|
|
|
2008
|
|
Balance
at beginning of year
|
|
$
|
214.4
|
|
|
$
|
126.6
|
|
Additions
based on tax positions related to prior years
|
|
|
14.2
|
|
|
|
14.2
|
|
Reductions
based on tax positions related to prior years
|
|
|
(16.2
|
)
|
|
|
(4.6
|
)
|
Additions
based on tax positions related to current period
|
|
|
63.1
|
|
|
|
83.8
|
|
Reductions
based on tax positions related to current period
|
|
|
-
|
|
|
|
-
|
|
Reductions
related to settelements with tax authorities
|
|
|
-
|
|
|
|
-
|
|
Expiration
of statute of limitations
|
|
|
(19.8
|
)
|
|
|
(5.6
|
)
|
Balance
at end of year
|
|
$
|
255.7
|
|
|
$
|
214.4
|
|
The
December 26, 2009 balance of $255.7 million of 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.
Accounting
guidance requires unrecognized tax benefits to be classified as non-current
liabilities, except for the portion that is expected to be paid within one year
of the balance sheet date. The entire $255.7 million and $214.4 million
are required to be classified as non-current at December 26, 2009 and December
27, 2008, respectively.
Interest
expense and penalties, if any, accrued on the unrecognized tax benefits are
reflected in income tax expense. At December 26, 2009 and December 27,
2008, the Company had accrued approximately $20.1 and $11.1 million respectively
for interest. Interest expense included in income tax expense
for the years ending December 26, 2009 and December 27, 2008 are $9.0 million
and $6.4 million, respectively. The Company had no amounts accrued
for penalties as the nature of the unrecognized tax benefits, if recognized,
would not warrant the imposition of penalties.
The
Company files income tax returns in the U.S. federal jurisdiction, and various
state, local and foreign jurisdictions. The Company is no longer subject
to U.S. federal, state, or local tax examinations by tax authorities for years
prior to 2006. The Company is no longer subject to Taiwan income tax
examinations by tax authorities for years prior to 2004. The Company is no
longer subject to United Kingdom tax examinations by tax authorities for years
prior to 2008.
The Company believes that it is
reasonably possible that approximately $30 million of its reserves for certain
unrecognized tax benefits will decrease within the next 12 months as the result
of the expiration of statute of limitations. This potential decrease
in unrecognized tax benefits would impact the Company’s effective tax rate
within the next 12 months.
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.
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. Credit risk has become more
significant in fiscal 2009 due to the macro economic conditions but the Company
is managing credit terms and balances accordingly. 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.
Revenue
Recognition
Garmin
recognizes revenue when persuasive evidence of an arrangement exists, delivery
has occurred, the sales price is fixed or determinable, and collection is
probable. For the large majority of Garmin’s sales, these criteria are met
once product has shipped and title and risk of loss have transferred to the
customer. The Company recognizes revenue from the sale of hardware
products and software bundled with hardware that is essential to the
functionality of the hardware in accordance with general revenue recognition
accounting guidance. The Company recognizes revenue in accordance with industry
specific software accounting guidance for standalone sales of software products
and sales of software bundled with hardware not essential to the functionality
of the hardware. The Company generally does not offer specified or
unspecified upgrade rights to its customers in connection with software
sales.
Garmin
introduced nüMaps Lifetime™ in January 2009, which is a single fee program that,
subject to the program’s terms and conditions, enables customers to download the
latest map and point of interest information every quarter for the useful life
of their PND. The revenue and associated cost of royalties for sales of
nüMaps Lifetime™ products are deferred at the time of sale and recognized
ratably on a straight-line basis over the currently estimated three-year life of
the products.
For multi-element arrangements that
include tangible products that contain software that is essential to the
tangible product’s functionality and undelivered software elements that relate
to the tangible product’s essential software, the Company allocates revenue to
all deliverables based on their relative selling prices. In such circumstances,
the new accounting principles establish a hierarchy to determine the selling
price to be used for allocating revenue to deliverables as follows:
(i) vendor-specific objective evidence of fair value (“VSOE”),
(ii) third-party evidence of selling price (“TPE”), and (iii) best
estimate of the selling price (“ESP”). VSOE generally exists only when the
Company sells the deliverable separately and is the price actually charged by
the Company for that deliverable.
In 2009,
Garmin introduced the nüvi 1690, a premium PND with a built‐in wireless module
that lets customers access Garmin’s nüLink!™ service, which provides direct
links to certain online information. The Company has identified two
deliverables contained in arrangements involving the sale of the nüvi 1690. The
first deliverable is the hardware and software essential to the functionality of
the hardware device delivered at the time of sale, and the second deliverable is
the nüLink service. The Company has allocated revenue between these two
deliverables using the relative selling price method determined using VSOE.
Amounts allocated to the delivered hardware and the related
essential software are recognized at the time of sale provided the other
conditions for revenue recognition have been met. Amounts allocated to the
nüLink services are deferred and recognized on a straight-line basis over the
24-month life of the service.
The Company records reductions to
revenue for expected future product returns based on the Company’s historical
experience.
Shipping
and Handling Costs
Shipping
and handling costs are included in cost of goods sold in the accompanying
consolidated financial statements.
Product
Warranty
The
Company provides for estimated warranty costs at the time of sale. The warranty
period is generally for one year from date of shipment with the exception of
certain aviation products for which the warranty period is two years from the
date of installation and certain marine products for which the warranty period
is three years from the date of shipment
.
Sales
Programs
The
Company provides certain monthly and quarterly incentives for its dealers and
distributors based on various factors including dealer purchasing volume and
growth. Additionally, from time to time, the Company provides rebates to end
users on certain products. Estimated rebates and incentives payable to dealers
and distributors are regularly reviewed and recorded as accrued expenses on a
monthly basis. In addition, the Company provides dealers and
distributors with product discounts termed “price protection” to assist these
customers in clearing older products from their inventories in advance of new
product releases. Each price protection discount is tied to a specific product
and can be applied to all customers who have purchased the price protected
product or a special price protection discount may be agreed to on an individual
customer basis. These rebates, incentives, and price protections are
recorded as reductions to net sales in the accompanying consolidated statements
of income in the period the Company has sold the product.
Advertising
Costs
The
Company expenses advertising costs as incurred. Advertising expense amounted to
approximately $155,521, $208,177, and $206,948 for the years ended December 26,
2009, December 27, 2008, and December 29, 2007, 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 expensed as incurred, amounted
to approximately $238,378, $206,109, and $159,406 for the years ended December
26, 2009, December 27, 2008, and December 29, 2007,
respectively.
Customer
Service and Technical Support
Customer
service and technical support costs are included on the selling, general and
administrative expense line on our statements of operations. Customer service
and technical support costs include costs associated with performing order
processing, answering customer inquiries by telephone and through Web sites,
e-mail and other electronic means, and providing free technical support
assistance to customers. The technical support is 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. Our 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 we incur 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 on our
statement of operations.
Accounting
for Stock-Based Compensation
The
Company currently sponsors three 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. See Note 9.
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 expenses over the requisite service period in the
Company’s consolidated financial statements.
As
stock-based compensation expenses recognized in the accompanying consolidated
statement 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.
Recently
Issued Accounting Pronouncements
In May
2008, the FASB issued EITF 07‐1, Accounting for Collaborative Arrangements which
was subsequently codified. EITF Issue 07‐1 requires entities entering into
collaborative arrangements in which two or more parties actively participate in
a joint operating activity and are exposed to significant risks and rewards that
depend on the commercial success of the joint operating activity to make
specific disclosures regarding that arrangement. Garmin announced a strategic
alliance with ASUSTeK Computer Inc. on February 4, 2009 to leverage the
companies’ navigation and mobile telephony expertise to design, manufacture and
distribute co‐branded location‐centric mobile phones. The mobile phone product
line is known as the Garmin‐Asus nüvifone series. The Company has adopted EITF
Issue 07‐1 and the strategic alliance did not have a material impact on the
Company’s financial condition or operating results in 2009.
In
January 2009, the FASB released Proposed Staff Position SFAS 107-b and
Accounting Principles Board (APB) Opinion No. 28-a, “Interim Disclosures about
Fair Value of Financial Instruments” (SFAS 107-b and APB 28-a), both of which
were subsequently codified. This proposal amends FASB Statement No.
107, “Disclosures about Fair Values of Financial Instruments,” to require
disclosures about fair value of financial instruments in interim financial
statements as well as in annual financial statements. The proposal
also amends APB Opinion No. 28, “Interim Financial Reporting,” to require those
disclosures in all interim financial statements. This proposal is
effective for interim periods ending after June 15, 2009, but early adoption is
permitted for interim periods ending after March 15, 2009. The
Company has adopted SFAS 107-b and APB 28-a and the guidance did not have a
material impact on the Company’s financial condition or operating results in
2009.
In April
2009, the FASB issued FSP No. FAS 157-4 (“FSP FAS 157-4”), “Determining Fair
Value When the Volume and Level of Activity for the Asset or Liability has
Significantly Decreased and Identifying Transactions That Are Not Orderly” and
FSP No. FAS 115-2 and FAS 124-2 (“FSP FAS 115-2”), “Recognition and Presentation
of Other-Than-Temporary Impairments”, both of which were subsequently
codified. These two FSPs were issued to provide additional guidance
about (1) measuring the fair value of financial instruments when the markets
become inactive and quoted prices may reflect distressed transactions, and (2)
recording impairment charges on investments in debt
instruments. Additionally, the FASB issued FSP No. FAS 107-1 and APB
28-1 (“FSP FAS 107-1”), “Interim Disclosures about Fair Value of Financial
Instruments,” to require disclosures of fair value of certain financial
instruments in interim financial statements. These FSPs are
effective for financial statements issued for interim and annual reporting
periods ending after June 15, 2009. The Company has adopted the FSPs and
the guidance did not have a material impact on the Company’s financial condition
or operating results in 2009.
In May
2009, the FASB issued SFAS No. 165, “Subsequent Events” (“SFAS 165”) which was
subsequently codified. SFAS 165 establishes general standards of
accounting for and disclosure of events that occur after the balance sheet date
but before financial statements are issued or are available to be
issued. SFAS 165 is effective for interim or annual financial
periods ending after June 15, 2009. The Company adopted the provisions of
SFAS 165 for the quarter ended June 27, 2009. The adoption of this
standard did not have a material effect on the Company’s financial
statements.
In June
2009, the FASB issued SFAS No. 168, “The FASB Accounting Standards
CodificationTM and the Hierarchy of Generally Accepted Accounting Principles a
replacement of FASB Statement No. 162” (“SFAS 168”) which was subsequently
codified. SFAS 168 provides for the FASB Accounting Standards
CodificationTM (the “ASC”) to become the single official source of
authoritative, nongovernmental U.S. generally accepted accounting principles
(GAAP). The Codification did not change GAAP but reorganizes the
literature. SFAS 168 is effective for interim and annual periods
ending after September 15, 2009. The adoption of this standard did
not have a material effect on our financial statements.
In
October 2009, the FASB issued Accounting Standard Update No. 2009-13, Revenue
Recognition (Topic 605): Multiple-Deliverable Revenue Arrangements which was
subsequently codified. This guidance modifies the fair value requirements
of ASC subtopic 605-25 Revenue Recognition-Multiple Element Arrangements by
allowing the use of the “best estimate of selling price” in addition to Vendor
Specific Objective Evidence (“VSOE”) and third-party evidence (“TPE”) for
determining the selling price of a deliverable. A vendor is now required to use
its best estimate of the selling price when VSOE or TPE of the selling price
cannot be determined. In addition, the residual method of allocating arrangement
consideration is no longer permitted. The amendments included in this update
will be effective prospectively for revenue arrangements entered into or
materially modified in fiscal years beginning on or after June 15, 2010.
Early adoption is permitted. The Company has adopted this guidance and it
did not have a material impact on the Company’s financial condition or operating
results in 2009, as the Company does not have a significant amount of sales that
contain multiple elements.
In
October 2009, the FASB issued Accounting Standard Update No. 2009-14, Software
(Topic 985): Certain Revenue Arrangements That Include Software Elements
which was subsequently codified. This guidance modifies the scope
of ASC subtopic 965-605 Software-Revenue Recognition to exclude from its
requirements (a) non-software components of tangible products and
(b) software components of tangible products that are sold, licensed, or
leased with tangible products when the software components and non-software
components of the tangible product function together to deliver the tangible
product’s essential functionality. The amendments included in this
update will be effective prospectively for revenue arrangements entered into or
materially modified in fiscal years beginning on or after June 15, 2010.
Early adoption is permitted. The Company has adopted this guidance and it
did not have a material impact on the Company’s financial condition or operating
results in 2009, as the Company does not have a significant amount of sales that
contain undelivered software components that are not essential to the product’s
functionality.
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
|
Unadjusted
quoted prices in active markets for similar assets or liabilities, or
Unadjusted quoted prices for identical or similar
assets
|
Level
3
|
Unobservable
inputs for the asset or liability
|
The Company endeavors to utilize the
best available information in measuring fair value. Financial assets
and liabilities are classified in their entirety based on the lowest level of
input that is significant to the fair value measurement.
For fair value measurements using
significant unobservable inputs, an independent third party provided the
valuation. The inputs used in the valuations used the following
methodology. The collateral composition was used to estimate Weighted
Average Life based on historical and projected payment
information. Cash flows were projected for the issuing trusts, taking
into account underlying loan principal, bonds outstanding, and payout
formulas. Taking this information into account, assumptions were made
as to the yields likely to be required, based upon then current market
conditions for comparable or similar term Asset Based Securities as well as
other fixed income securities.
Assets
and liabilities measured at estimated fair value on a recurring basis are
summarized below:
|
|
Fair Value Measurements as
|
|
|
|
of December 26, 2009
|
|
Description
|
|
Total
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Available
for-sale securities
|
|
$
|
695,795
|
|
|
$
|
695,795
|
|
|
$
|
-
|
|
|
$
|
-
|
|
Failed
Auction rate securities
|
|
$
|
70,252
|
|
|
|
|
|
|
|
|
|
|
$
|
70,252
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
766,047
|
|
|
$
|
695,795
|
|
|
$
|
-
|
|
|
$
|
70,252
|
|
|
|
Fair Value Measurements as
|
|
|
|
of December 27, 2008
|
|
Description
|
|
Total
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Available
for-sale securities
|
|
$
|
203,592
|
|
|
$
|
203,592
|
|
|
$
|
-
|
|
|
$
|
-
|
|
Failed
Auction rate securities
|
|
$
|
71,303
|
|
|
|
|
|
|
|
|
|
|
$
|
71,303
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
274,895
|
|
|
$
|
203,592
|
|
|
$
|
-
|
|
|
$
|
71,303
|
|
All Level
3 investments have been in a continuous unrealized loss position for 12 months
or longer. For assets and liabilities measured at fair value on a
recurring basis using significant unobservable inputs (Level 3) during the
period, the accounting guidance requires a reconciliation of the beginning and
ending balances, separately for each major category of assets. The
reconciliation is as follows:
|
|
Fair Value Measurements Using
|
|
|
|
Significant
Unobservable
Inputs
(Level
3)
|
|
|
|
52-Weeks Ended
|
|
|
52-Weeks Ended
|
|
|
|
December
27,
2008
|
|
|
December
26,
2009
|
|
|
|
|
|
|
|
|
Beginning
balance of auction rate securities
|
|
$
|
0
|
|
|
$
|
71,303
|
|
Total
unrealized gains included in other comprehensive income
|
|
|
92,850
|
|
|
|
99
|
|
Purchases
in and/or out of Level 3
|
|
|
(21,547
|
)
|
|
|
(1,150
|
)
|
Transfers
in and/or out of Level 3
|
|
|
-
|
|
|
|
-
|
|
Ending
balance of auction rate securities
|
|
$
|
71,303
|
|
|
$
|
70,252
|
|
The following is a summary of the
company’s marketable securities classified as available-for-sale securities at
December 26, 2009:
|
|
|
|
|
Gross
|
|
|
Gross
|
|
|
Other Than
|
|
|
Estimated Fair
|
|
|
|
|
|
|
Unrealized
|
|
|
Unrealized
|
|
|
Temporary
|
|
|
Value (Net
|
|
|
|
Amortized Cost
|
|
|
Gains
|
|
|
Losses
|
|
|
Impairment
|
|
|
Carrying Amount)
|
|
Mortgage-backed
securities
|
|
$
|
515,200
|
|
|
$
|
2,682
|
|
|
$
|
(4,674
|
)
|
|
$
|
-
|
|
|
$
|
513,208
|
|
Auction
Rate Securities
|
|
|
91,700
|
|
|
|
-
|
|
|
|
(21,448
|
)
|
|
|
-
|
|
|
$
|
70,252
|
|
Obligations
of states and political subdivisions
|
|
|
112,419
|
|
|
|
908
|
|
|
|
(181
|
)
|
|
|
-
|
|
|
$
|
113,146
|
|
U.S.
corporate bonds
|
|
|
35,883
|
|
|
|
768
|
|
|
|
(701
|
)
|
|
|
(1,274
|
)
|
|
$
|
34,676
|
|
Other
|
|
|
33,903
|
|
|
|
1,070
|
|
|
|
(208
|
)
|
|
|
-
|
|
|
$
|
34,765
|
|
Total
|
|
$
|
789,105
|
|
|
$
|
5,428
|
|
|
$
|
(27,212
|
)
|
|
$
|
(1,274
|
)
|
|
$
|
766,047
|
|
The
following is a summary of the company’s marketable securities classified as
available-for-sale securities at December 27, 2008:
|
|
|
|
|
|
|
|
Gross
|
|
|
Other Than
|
|
|
Estimated Fair
|
|
|
|
|
|
|
Gross
|
|
|
Unrealized
|
|
|
Temporary
|
|
|
Value (Net Carrying
|
|
|
|
Amortized Cost
|
|
|
Unrealized Gains
|
|
|
Losses
|
|
|
Impairment
|
|
|
Amount)
|
|
Mortgage-backed
securities
|
|
$
|
137,854
|
|
|
$
|
1,184
|
|
|
$
|
(140
|
)
|
|
$
|
-
|
|
|
$
|
138,898
|
|
Auction
Rate Securities
|
|
|
92,850
|
|
|
|
-
|
|
|
|
(21,547
|
)
|
|
|
-
|
|
|
$
|
71,303
|
|
Obligations
of states and political subdivisions
|
|
|
40,336
|
|
|
|
960
|
|
|
|
(12
|
)
|
|
|
-
|
|
|
$
|
41,284
|
|
U.S.
corporate bonds
|
|
|
16,545
|
|
|
|
200
|
|
|
|
(2,707
|
)
|
|
|
-
|
|
|
$
|
14,038
|
|
Other
|
|
|
9,502
|
|
|
|
79
|
|
|
|
(209
|
)
|
|
|
-
|
|
|
$
|
9,372
|
|
Total
|
|
$
|
297,087
|
|
|
$
|
2,423
|
|
|
$
|
(24,615
|
)
|
|
$
|
-
|
|
|
$
|
274,895
|
|
The cost
of securities sold is based on the specific identification method.
The
unrealized losses on the Company’s investments in 2008 and 2009 were caused
primarily by changes in interest rates, specifically, widening credit
spreads. The Company’s investment policy requires investments to be
rated A or better with the objective of minimizing the potential risk of
principal loss. Therefore, the Company considers the declines to be
temporary in nature. Fair values were determined for each individual
security in the investment portfolio. When evaluating the investments
for other-than-temporary impairment, the Company reviews factors such as the
length of time and extent to which fair value has been below cost basis, the
financial condition of the issuer, and the Company’s ability and intent to hold
the investment for a period of time, which may be sufficient for anticipated
recovery in market value. During 2008 and 2009, the Company did not
record any material impairment charges on its outstanding
securities.
The
amortized cost and estimated fair value of marketable securities at December 26,
2009, by contractual maturity, are shown below. Expected maturities will differ
from contractual maturities because the issuers of the securities may have the
right to prepay obligations without prepayment penalties.
|
|
|
|
|
Estimated
|
|
|
|
Cost
|
|
|
Fair
Value
|
|
|
|
|
|
|
|
|
Due
in one year or less (2010)
|
|
$
|
19,426
|
|
|
$
|
19,583
|
|
Due
after one year through five years (2011-2015)
|
|
|
252,535
|
|
|
|
252,849
|
|
Due
after five years through ten years (2016-2020)
|
|
|
215,618
|
|
|
|
213,511
|
|
Due
after ten years (2021 and thereafter)
|
|
|
277,662
|
|
|
|
255,310
|
|
Other
(No contractual maturity dates)
|
|
|
23,864
|
|
|
|
24,794
|
|
|
|
$
|
789,105
|
|
|
$
|
766,047
|
|
For certain of the Company’s financial
instruments, including accounts receivable, accounts payable and other accrued
liabilities, the carrying amounts approximate fair value due to their short
maturities.
4.
Commitments and Contingencies
Rental
expense related to office, equipment, warehouse space and real estate amounted
to $10,293, $8,419, and $5,546 for the years ended December 26, 2009, December
27, 2008, and December 29, 2007, respectively.
Future
minimum lease payments are as follows:
Year
|
|
Amount
|
|
|
|
|
|
2010
|
|
$
|
9,105
|
|
2011
|
|
|
7,789
|
|
2012
|
|
|
6,687
|
|
2013
|
|
|
5,882
|
|
2014
|
|
|
5,024
|
|
Thereafter
|
|
|
6,856
|
|
Total
|
|
$
|
41,343
|
|
Certain
cash balances of GEL are held as collateral by a bank securing payment of the
United Kingdom value-added tax requirements. The total amount of
restricted cash balances were $2,047 and $1,941 at December 26, 2009 and
December 27, 2008, respectively.
In the
normal course of business, the Company and its subsidiaries are parties to
various legal claims, actions, and complaints, including matters involving
patent infringement and other intellectual property claims and various other
risks. It is not possible to predict with certainty whether or not the
Company and its subsidiaries will ultimately be successful in any of these legal
matters, or if not, what the impact might be. However, the Company’s
management does not expect that the results in any of these legal proceedings
will have a material adverse effect on the Company’s results of operations,
financial position or cash flows.
5.
Employee Benefit Plans
GII
sponsors a defined contribution employee retirement plan under which its
employees may contribute up to 50% of their annual compensation subject to
Internal Revenue Code maximum limitations and to which GII contributes a
specified percentage of each participant’s annual compensation up to certain
limits as defined in the Plan. Additionally, GEL has a defined
contribution plan under which its employees may contribute up to 7.5% of their
annual compensation. Both GII and GEL contribute an amount determined annually
at the discretion of the Board of Directors. During the years ended December 26,
2009, December 27, 2008, and December 29, 2007, expense related to these plans
of $16,399, $14,927, and $11,412, 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 26, 2009, December 27, 2008, and December 29, 2007, were
significant.
6.
Income Taxes
The
Company’s income tax provision (benefit) consists of the following:
|
|
Fiscal
Year
Ended
|
|
|
|
December 26,
|
|
|
December 27,
|
|
|
December 29,
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
Federal:
|
|
|
|
|
|
|
|
|
|
Current
|
|
$
|
104,186
|
|
|
$
|
90,655
|
|
|
$
|
132,452
|
|
Deferred
|
|
|
(12,021
|
)
|
|
|
23,639
|
|
|
|
(42,193
|
)
|
|
|
|
92,165
|
|
|
|
114,294
|
|
|
|
90,259
|
|
State:
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
|
|
|
5,381
|
|
|
|
1,318
|
|
|
|
12,569
|
|
Deferred
|
|
|
(947
|
)
|
|
|
1,090
|
|
|
|
(2,916
|
)
|
|
|
|
4,434
|
|
|
|
2,408
|
|
|
|
9,653
|
|
Foreign:
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
|
|
|
18,469
|
|
|
|
44,279
|
|
|
|
34,334
|
|
Deferred
|
|
|
(10,367
|
)
|
|
|
20,537
|
|
|
|
(10,984
|
)
|
|
|
|
8,102
|
|
|
|
64,816
|
|
|
|
23,350
|
|
Total
|
|
$
|
104,701
|
|
|
$
|
181,518
|
|
|
$
|
123,262
|
|
The income tax provision differs from
the amount computed by applying the 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 26,
|
|
|
December 27,
|
|
|
December 29,
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
Federal
income tax expense at U.S. statutory rate
|
|
$
|
287,228
|
|
|
$
|
332,278
|
|
|
$
|
342,396
|
|
State
income tax expense, net of federal tax effect
|
|
|
2,604
|
|
|
|
2,030
|
|
|
|
5,922
|
|
Foreign
tax rate differential
|
|
|
(219,482
|
)
|
|
|
(233,928
|
)
|
|
|
(230,243
|
)
|
Taiwan
tax holiday benefit
|
|
|
(18,556
|
)
|
|
|
(24,904
|
)
|
|
|
(44,128
|
)
|
Net
change in uncertain tax postions
|
|
|
41,400
|
|
|
|
87,800
|
|
|
|
56,100
|
|
Other
foreign taxes less incentives and credits
|
|
|
10,379
|
|
|
|
20,428
|
|
|
|
(117
|
)
|
Other,
net
|
|
|
1,128
|
|
|
|
(2,186
|
)
|
|
|
(6,668
|
)
|
Income
tax expense
|
|
$
|
104,701
|
|
|
$
|
181,518
|
|
|
$
|
123,262
|
|
The
Company’s income before income taxes attributable to non-U.S. operations was
$678,868, $823,364, and $850,102, for the years ended December 26, 2009,
December 27, 2008, and December 29, 2007, respectively. The Taiwan tax holiday
benefits included in the table above reflect $0.09, $0.12, and $0.20 per
weighted-average common share outstanding for the years ended December 26, 2009,
December 27, 2008, and December 29, 2007, respectively. The Company
currently expects to benefit from these Taiwan tax holidays through 2013, at
which time these tax benefits expire.
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 26,
|
|
|
December 27,
|
|
|
December 29,
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
Deferred
tax assets:
|
|
|
|
|
|
|
|
|
|
Product
warranty accruals
|
|
$
|
1,642
|
|
|
$
|
1,696
|
|
|
$
|
18,975
|
|
Allowance
for doubtful accounts
|
|
|
15,346
|
|
|
|
15,098
|
|
|
|
2,430
|
|
Inventory
reserves
|
|
|
10,145
|
|
|
|
5,331
|
|
|
|
7,699
|
|
Sales
program allowances
|
|
|
12,902
|
|
|
|
14,471
|
|
|
|
42,832
|
|
Reserve
for sales returns
|
|
|
-
|
|
|
|
2,914
|
|
|
|
5,565
|
|
Other
accruals
|
|
|
5,414
|
|
|
|
5,411
|
|
|
|
3,911
|
|
Unrealized
intercompany profit in inventory
|
|
|
12,967
|
|
|
|
3,601
|
|
|
|
30,006
|
|
Unrealized
foreign currency loss
|
|
|
248
|
|
|
|
-
|
|
|
|
-
|
|
Stock
option compensation
|
|
|
31,034
|
|
|
|
20,375
|
|
|
|
8,887
|
|
Tax
credit carryforwards, net
|
|
|
36,834
|
|
|
|
36,406
|
|
|
|
15,198
|
|
Net
operating losses of subsidiaries
|
|
|
3,480
|
|
|
|
2,809
|
|
|
|
1,800
|
|
Other
|
|
|
3,211
|
|
|
|
5,022
|
|
|
|
4,649
|
|
Valuation
allowance related to loss carryforward and tax credits
|
|
|
(35,617
|
)
|
|
|
(34,487
|
)
|
|
|
(15,491
|
)
|
|
|
|
97,606
|
|
|
|
78,647
|
|
|
|
126,461
|
|
Deferred
tax liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation
|
|
|
13,839
|
|
|
|
12,872
|
|
|
|
9,209
|
|
Prepaid
expenses
|
|
|
2,014
|
|
|
|
3,031
|
|
|
|
6,498
|
|
Unrealized
foreign currency loss
|
|
|
-
|
|
|
|
522
|
|
|
|
161
|
|
Book
basis in excess of tax basis for acquired entities
|
|
|
11,201
|
|
|
|
15,936
|
|
|
|
14,867
|
|
Unrealized
investment gain
|
|
|
833
|
|
|
|
153
|
|
|
|
31
|
|
Other
|
|
|
202
|
|
|
|
378
|
|
|
|
254
|
|
|
|
|
28,089
|
|
|
|
32,892
|
|
|
|
31,020
|
|
Net
deferred tax assets
|
|
$
|
69,517
|
|
|
$
|
45,755
|
|
|
$
|
95,441
|
|
At
December 26, 2009, the company had $36.8 million of tax credit carryover which
includes $32.2 million of Taiwan surtax credit with no expiration. There
is a full valuation allowance for the Taiwan surtax credits. Additionally,
the Company had $3.5 million in Taiwan investment credit which will expire in
2012.
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
26,
2009
|
|
|
December
27,
2008
|
|
|
|
Carrying
|
|
|
Fair
|
|
|
Carrying
|
|
|
Fair
|
|
|
|
Amount
|
|
|
Value
|
|
|
Amount
|
|
|
Value
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
and cash equivalents
|
|
$
|
1,091,581
|
|
|
$
|
1,091,581
|
|
|
$
|
696,335
|
|
|
$
|
696,335
|
|
Restricted
cash
|
|
|
2,047
|
|
|
|
2,047
|
|
|
|
1,941
|
|
|
|
1,941
|
|
Marketable
securities
|
|
|
766,047
|
|
|
|
766,047
|
|
|
|
274,895
|
|
|
|
274,895
|
|
For
certain of the Company’s financial instruments, including accounts receivable,
accounts payable and other accrued liabilities, the carrying amounts approximate
fair value due to their short maturities.
8.
Segment Information
The Company operates within its
targeted markets through four reportable segments, those being related to
products sold into the marine, automotive/mobile, outdoor/fitness, and aviation
markets. For external reporting purposes, we aggregate operating segments which
have similar economic characteristics, products, production processes, types or
classes of customers and distribution methods into reportable segments.
All of the Company’s reportable segments offer products through the Company’s
network of independent dealers and distributors as well as through OEM’s.
However, the nature of products and types of customers for the four reportable
segments vary significantly. The Company’s marine, automotive/mobile, and
outdoor/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 Chief Operating
Decision Maker (CODM). The CODM evaluates performance and allocates resources
based on income before income taxes of each segment.
Income before income
taxes represents net sales less operating expenses including certain allocated
general and administrative costs, interest income and expense, foreign currency
adjustments, and other non-operating corporate expenses. 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
identifiable assets associated with each reportable segment reviewed by the CODM
include accounts receivable and inventories. The Company does not report
property and equipment, intangible assets, depreciation and amortization, or
capital expenditures by segment to the CODM.
Revenues,
interest income and interest expense, income before income taxes, and
identifiable assets for each of the Company’s reportable segments are presented
below:
|
|
Fiscal
Year
Ended
December
26,
2009
|
|
|
|
|
|
|
Outdoor/
|
|
|
|
|
|
Auto/
|
|
|
|
|
|
|
Aviation
|
|
|
Fitness
|
|
|
Marine
|
|
|
Mobile
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
sales to external customers
|
|
$
|
245,745
|
|
|
$
|
468,924
|
|
|
$
|
177,644
|
|
|
$
|
2,054,127
|
|
|
$
|
2,946,440
|
|
Allocated
interest income
|
|
|
737
|
|
|
|
1,836
|
|
|
|
1,469
|
|
|
|
19,477
|
|
|
|
23,519
|
|
Allocated
interest expense
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
Income
before income taxes
|
|
|
56,595
|
|
|
|
206,042
|
|
|
|
57,430
|
|
|
|
488,584
|
|
|
|
808,651
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts
receivable
|
|
|
72,904
|
|
|
|
139,114
|
|
|
|
52,701
|
|
|
|
609,391
|
|
|
|
874,110
|
|
Inventories
|
|
|
25,850
|
|
|
|
49,326
|
|
|
|
18,687
|
|
|
|
216,075
|
|
|
|
309,938
|
|
|
|
Fiscal
Year
Ended
December
27,
2008
|
|
|
|
|
|
|
Outdoor/
|
|
|
|
|
|
Auto/
|
|
|
|
|
|
|
Aviation
|
|
|
Fitness
|
|
|
Marine
|
|
|
Mobile
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
sales to external customers
|
|
$
|
323,406
|
|
|
$
|
427,783
|
|
|
$
|
204,477
|
|
|
$
|
2,538,411
|
|
|
$
|
3,494,077
|
|
Allocated
interest income
|
|
|
957
|
|
|
|
5,006
|
|
|
|
1,867
|
|
|
|
27,705
|
|
|
|
35,535
|
|
Allocated
interest expense
|
|
|
(109
|
)
|
|
|
(23
|
)
|
|
|
(104
|
)
|
|
|
(371
|
)
|
|
|
(607
|
)
|
Income
before income taxes
|
|
|
118,737
|
|
|
|
165,986
|
|
|
|
63,904
|
|
|
|
565,739
|
|
|
|
914,366
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts
receivable
|
|
|
68,615
|
|
|
|
90,761
|
|
|
|
43,383
|
|
|
|
538,562
|
|
|
|
741,321
|
|
Inventories
|
|
|
39,366
|
|
|
|
52,071
|
|
|
|
24,890
|
|
|
|
308,985
|
|
|
|
425,312
|
|
|
|
Fiscal
Year
Ended
December
29,
2007
|
|
|
|
|
|
|
Outdoor/
|
|
|
|
|
|
Auto/
|
|
|
|
|
|
|
Aviation
|
|
|
Fitness
|
|
|
Marine
|
|
|
Mobile
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
sales to external customers
|
|
$
|
294,995
|
|
|
$
|
339,741
|
|
|
$
|
203,399
|
|
|
$
|
2,342,184
|
|
|
$
|
3,180,319
|
|
Allocated
interest income
|
|
|
2,258
|
|
|
|
4,661
|
|
|
|
3,127
|
|
|
|
31,949
|
|
|
|
41,995
|
|
Allocated
interest expense
|
|
|
(3
|
)
|
|
|
(92
|
)
|
|
|
(10
|
)
|
|
|
(102
|
)
|
|
|
(207
|
)
|
Income
before income taxes
|
|
|
113,407
|
|
|
|
127,804
|
|
|
|
71,920
|
|
|
|
665,142
|
|
|
|
978,273
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts
receivable
|
|
|
88,352
|
|
|
|
101,753
|
|
|
|
60,918
|
|
|
|
701,490
|
|
|
|
952,513
|
|
Inventories
|
|
|
46,885
|
|
|
|
53,997
|
|
|
|
32,327
|
|
|
|
372,258
|
|
|
|
505,467
|
|
Net
sales, long-lived assets (property and equipment), and net assets by geographic
area are as follows as of and for the years ended December 26, 2009, December
27, 2008, and December 29, 2007:
|
|
North
|
|
|
|
|
|
|
|
|
|
|
|
|
America
|
|
|
Asia
|
|
|
Europe
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December
26, 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
sales to external customers
|
|
$
|
1,972,451
|
|
|
$
|
149,920
|
|
|
$
|
824,069
|
|
|
$
|
2,946,440
|
|
Long
lived assets
|
|
|
233,573
|
|
|
|
153,878
|
|
|
|
53,887
|
|
|
|
441,338
|
|
Net
assets
|
|
|
1,177,849
|
|
|
|
1,467,903
|
|
|
|
190,695
|
|
|
|
2,836,447
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December
27, 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
sales to external customers
|
|
$
|
2,333,585
|
|
|
$
|
144,740
|
|
|
$
|
1,015,752
|
|
|
$
|
3,494,077
|
|
Long
lived assets
|
|
|
221,158
|
|
|
|
168,528
|
|
|
|
55,566
|
|
|
|
445,252
|
|
Net
assets
|
|
|
687,638
|
|
|
|
1,371,240
|
|
|
|
166,976
|
|
|
|
2,225,854
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December
29, 2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
sales to external customers
|
|
$
|
2,066,823
|
|
|
$
|
144,155
|
|
|
$
|
969,341
|
|
|
$
|
3,180,319
|
|
Long-lived
assets
|
|
|
185,838
|
|
|
|
143,181
|
|
|
|
45,128
|
|
|
|
374,147
|
|
Net
assets
|
|
|
908,267
|
|
|
|
1,309,783
|
|
|
|
132,564
|
|
|
|
2,350,614
|
|
Best Buy,
a customer in the outdoor/fitness, marine, and auto/mobile segments, accounted
for 13.4% and 12.0% of the Company’s consolidated net sales in the year ended
December 26, 2009 and December 27, 2008, respectively.
9.
Stock Compensation Plans
Accounting
for Stock-Based Compensation
The
various Company stock compensation plans are summarized below:
2005
Equity Incentive Plan
In June
2005, the shareholders adopted an equity incentive plan (the “2005 Plan”)
providing for grants of incentive and nonqualified stock options, stock
appreciation rights (“SARs”), restricted stock units (“RSUs”) and/or performance
shares to employees of the Company and its subsidiaries, pursuant to which up to
10,000,000 common shares were available for issuance. The stock options and
stock appreciation rights vest evenly over a period of five years or as
otherwise determined by the Board of Directors or the Compensation Committee and
generally expire ten years from the date of grant, if not exercised.
During 2009, 2008 and 2007, the Company granted 0, 1,454,050 and 2,838,200
stock appreciation rights, respectively. During 2009, 2008 and 2007,
470,950, 1,043,800, and 0 restricted stock units were granted under the 2005
Plan. In 2009, 2008, and 2007, 0, 30,000 and 0 performance shares were
also granted under the 2005 Plan.
2000
Equity Incentive Plan
In
October 2000, the shareholders adopted an equity incentive plan (the “2000
Plan”) providing for grants of incentive and nonqualified stock options, stock
appreciation rights (“SARs”), restricted stock units (“RSUs”) and/or performance
shares to employees of the Company and its subsidiaries, pursuant to which up to
7,000,000 common shares were available for issuance. The stock options and stock
appreciation rights vest evenly over a period of five years or as otherwise
determined by the Board of Directors or the Compensation Committee and generally
expire ten years from the date of grant, if not exercised. During
2009, 2008, and 2007, the Company granted 0, 0, and 20,000 stock appreciation
rights.
2000
Non-employee Directors’ Option Plan
Also in
October 2000, the stockholders adopted a stock option plan for non-employee
directors (the Directors Plan) providing for grants of options for up to 100,000
common shares. The term of each award is ten years. All awards vest evenly over
a three-year period. During 2009, 2008 and 2007, options to purchase 34,648,
15,696, and 5,562 shares, respectively, were granted under this plan. In 2009,
the stockholders approved an additional 150,000 shares to the plan, making the
total shares authorized under the plan 250,000.
Stock-Based
Compensation Activity
A summary
of the Company’s stock-based compensation activity and related information under
the 2005 Equity Incentive Plan, the 2000 Equity Incentive Plan and the 2000
Non-employee Directors’ Option Plan for the years ended December 26, 2009,
December 27, 2008, and December 29, 2007 is provided below:
|
|
Stock Options and SARs
|
|
|
|
Weighted-Average
|
|
|
|
|
|
|
Exercise
Price
|
|
|
Number
of
Shares
|
|
|
|
|
|
|
(In Thousands)
|
|
|
|
|
|
|
|
|
Outstanding
at December 30, 2006
|
|
$
|
29.24
|
|
|
|
7,726
|
|
Granted
|
|
$
|
84.61
|
|
|
|
2,864
|
|
Exercised
|
|
$
|
18.29
|
|
|
|
(934
|
)
|
Forfeited
|
|
$
|
38.11
|
|
|
|
(125
|
)
|
Outstanding
at December 29, 2007
|
|
$
|
46.82
|
|
|
|
9,531
|
|
Granted
|
|
$
|
51.00
|
|
|
|
1,470
|
|
Exercised
|
|
$
|
22.35
|
|
|
|
(226
|
)
|
Forfeited
|
|
$
|
53.89
|
|
|
|
(249
|
)
|
Outstanding
at December 27, 2008
|
|
$
|
47.76
|
|
|
|
10,526
|
|
Granted
|
|
$
|
23.09
|
|
|
|
35
|
|
Exercised
|
|
$
|
18.08
|
|
|
|
(278
|
)
|
Forfeited
|
|
$
|
59.55
|
|
|
|
(174
|
)
|
Outstanding
at December 26, 2009
|
|
$
|
48.28
|
|
|
|
10,109
|
|
Exercisable
at December 26, 2009
|
|
$
|
39.37
|
|
|
|
6,148
|
|
Stock
Options
and
SARs
as
of
December
26,
2009
|
|
Exercise
|
|
Options
|
|
|
Remaining
|
|
|
Options
|
|
Price
|
|
Outstanding
|
|
|
Life
(Years)
|
|
|
Exercisable
|
|
|
|
(In Thousands)
|
|
|
|
|
|
(In Thousands)
|
|
|
|
|
|
|
|
|
|
|
|
$7.00
-$20.00
|
|
|
1,801
|
|
|
|
3.42
|
|
|
|
1,797
|
|
$20.01
- $40.00
|
|
|
2,069
|
|
|
|
5.21
|
|
|
|
1,728
|
|
$40.01
- $60.00
|
|
|
3,548
|
|
|
|
7.33
|
|
|
|
1,546
|
|
$60.01
- $80.00
|
|
|
1,314
|
|
|
|
7.36
|
|
|
|
526
|
|
$80.01
- $100.00
|
|
|
7
|
|
|
|
7.81
|
|
|
|
3
|
|
$100.01
- $120.00
|
|
|
1,366
|
|
|
|
7.88
|
|
|
|
547
|
|
$120.01
- $140.00
|
|
|
4
|
|
|
|
7.78
|
|
|
|
1
|
|
|
|
|
10,109
|
|
|
|
6.28
|
|
|
|
6,148
|
|
|
|
Restricted Stock Units
|
|
|
|
Weighted-Average
|
|
|
|
|
|
|
Grant/Release
Price
|
|
|
Number
of
Shares
|
|
|
|
|
|
|
(In Thousands)
|
|
|
|
|
|
|
|
|
Outstanding
at December 29, 2007
|
|
|
-
|
|
|
|
-
|
|
Granted
|
|
$
|
19.59
|
|
|
|
1,044
|
|
Released
|
|
|
-
|
|
|
|
-
|
|
Cancelled
|
|
|
-
|
|
|
|
(1
|
)
|
Outstanding
at December 27, 2008
|
|
$
|
19.59
|
|
|
|
1,043
|
|
Granted
|
|
$
|
30.44
|
|
|
|
501
|
|
Released
|
|
$
|
30.14
|
|
|
|
(204
|
)
|
Cancelled
|
|
|
-
|
|
|
|
(24
|
)
|
Outstanding
at December 26, 2009
|
|
|
|
|
|
|
1,316
|
|
The
weighted-average remaining contract life for options outstanding and exercisable
at December 26, 2009 is 6.28 and 5.49 years, respectively.
The fair
value for these options was estimated at the date of grant using a Black-Scholes
option pricing model with the following weighted-average assumptions for 2009,
2008, and 2007:
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
Weighted
average fair value of options granted
|
|
$
|
7.32
|
|
|
$
|
18.47
|
|
|
$
|
33.81
|
|
Expected
volatility
|
|
|
0.4286
|
|
|
|
0.3845
|
|
|
|
0.3677
|
|
Dividend
yield
|
|
|
2.42
|
%
|
|
|
3.75
|
%
|
|
|
0.76
|
%
|
Expected
life of options in years
|
|
|
6.2
|
|
|
|
6.0
|
|
|
|
6.0
|
|
Risk-free
interest rate
|
|
|
3
|
%
|
|
|
2
|
%
|
|
|
4
|
%
|
The
Black-Scholes option valuation model was developed for use in estimating the
fair value of traded options which have no vesting restrictions and are fully
transferable. In addition, option valuation models require the input of highly
subjective assumptions, including the expected stock price volatility. Because
the Company’s employee stock options have characteristics significantly
different from those of traded options, and because changes in the subjective
input assumptions can materially affect the fair value estimate, in management’s
opinion, the existing models do not necessarily provide a reliable single
measure of the fair value of its employee stock options. The
weighted-average fair value for awards granted during 2009, 2008, and 2007 was
$29.20, $37.96 and $84.61, respectively.
The total
fair value of awards vested during 2009, 2008, and 2007 was $41,527, $35,384,
and $17,840, respectively. The aggregate intrinsic values of options
outstanding and exercisable at December 26, 2009 were $36.3 million and $34.6
million, respectively. The aggregate intrinsic value of options exercised during
the year ended December 26, 2009 was $3.7 million. Aggregate intrinsic value
represents the positive difference between the Company’s closing stock price on
the last trading day of the fiscal period, which was $30.98 on December 26,
2009, and the exercise price multiplied by the number of options exercised. As
of December 26, 2009, there was $111.5 million of total unrecognized
compensation cost related to unvested share-based compensation awards granted to
employees under the stock compensation plans. That cost is expected to be
recognized over a period of five years.
Employee
Stock Purchase Plan
The
shareholders also adopted an employee stock purchase plan (ESPP). Up to
2,000,000 shares of common stock have been reserved for the ESPP. Shares
will be offered to employees at a price equal to the lesser of 85% of the fair
market value of the stock on the date of purchase or 85% of the fair market
value on the enrollment date. The ESPP is intended to qualify as an “employee
stock purchase plan” under Section 423 of the Internal Revenue Code.
During 2009, 2008, and 2007, 209,416, 362,902, and 120,230 shares, respectively
were purchased under the plan for a total purchase price of $3,874, $8,782, and
$5,730, respectively. At December 26, 2009, approximately 424,637
shares were available for future issuance.
10.
Earnings Per Share
The
following table sets forth the computation of basic and diluted net income per
share:
|
|
Fiscal
Year
Ended
|
|
|
|
December 26,
|
|
|
December 27,
|
|
|
December 29,
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
Numerator
(in thousands):
|
|
|
|
|
|
|
|
|
|
Numerator
for basic and diluted net income per share - net income
|
|
$
|
703,950
|
|
|
$
|
732,848
|
|
|
$
|
855,011
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Denominator
(in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
Denominator
for basic net income per share -weighted-average common
shares
|
|
|
200,395
|
|
|
|
208,993
|
|
|
|
216,524
|
|
Effect
of dilutive securities -employee stock-based awards
|
|
|
766
|
|
|
|
1,687
|
|
|
|
3,351
|
|
Denominator
for diluted net income per share -weighted-average common
shares
|
|
|
201,161
|
|
|
|
210,680
|
|
|
|
219,875
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
net income per share
|
|
$
|
3.51
|
|
|
$
|
3.51
|
|
|
$
|
3.95
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
net income per share
|
|
$
|
3.50
|
|
|
$
|
3.48
|
|
|
$
|
3.89
|
|
Options
to purchase 7,814,000, 5,846,000, and 886,000 common shares were outstanding
during 2009, 2008, and 2007 respectively, but were not included in the
computation of diluted earnings per share because the effect was
antidilutive.
11.
Share Repurchase Program
The Board
of Directors approved a share repurchase program on October 22, 2008,
authorizing the Company to purchase up to $300 million of its common shares as
market and business conditions warrant. The share repurchase
authorization expired on December 31, 2009. From inception to
expiration, $60 million of common shares were repurchased and retired under this
plan.
The Board
of Directors approved a share repurchase program on June 6, 2008, authorizing
the Company to purchase up to 10,000,000 of its common shares as market and
business conditions warrant. The share repurchase authorization
expired on December 31, 2009. During fiscal 2008, 10,000,000 shares
were repurchased and retired under this plan.
The Board
of Directors approved a share repurchase program on February 4, 2008,
authorizing the Company to purchase up to 5,000,000 of its common shares as
market and business conditions warrant. The share repurchase
authorization expired on December 31, 2009. During fiscal 2008,
5,000,000 shares were repurchased and retired under this plan.
The Board
of Directors approved a share repurchase program on August 3, 2006, authorizing
the Company to purchase up to 3,000,000 of its common shares as market and
business conditions warrant. The share repurchase authorization
expired on December 31, 2007. From inception to expiration,
1,212,535 shares were repurchased and retired under this plan.
12.
Shareholder Rights Plan
On
October 24, 2001, Garmin’s Board of Directors adopted a shareholder rights plan
(the “Rights Plan”). Pursuant to the Rights Plan, the Board declared a dividend
of one preferred share purchase right on each outstanding common share of Garmin
to shareholders of record as of November 1, 2001. The rights trade together with
Garmin’s common shares. The rights generally will become exercisable if a person
or group acquires or announces an intention to acquire 15% or more of Garmin’s
outstanding common shares. Each right (other than those held by the new 15%
shareholder) will then be exercisable to purchase preferred shares of Garmin (or
in certain instances other securities of Garmin) having at that time a market
value equal to two times the then current exercise price. Garmin’s Board of
Directors may redeem the rights at $0.001 per right at any time before the
rights become exercisable. The rights expire on October 31, 2011.
13.
Selected Quarterly Information (Unaudited)
|
|
Fiscal
Year
Ended
December
26,
2009
|
|
|
|
Quarter
Ending
|
|
|
|
March
28
|
|
|
June
27
|
|
|
September
26
|
|
|
December
26
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
sales
|
|
$
|
436,699
|
|
|
$
|
669,104
|
|
|
$
|
781,254
|
|
|
$
|
1,059,383
|
|
Gross
profit
|
|
|
195,995
|
|
|
|
351,614
|
|
|
|
409,742
|
|
|
|
486,760
|
|
Net
income
|
|
|
48,538
|
|
|
|
161,871
|
|
|
|
215,133
|
|
|
|
278,408
|
|
Basic
net income per share
|
|
$
|
0.24
|
|
|
$
|
0.81
|
|
|
$
|
1.07
|
|
|
$
|
1.39
|
|
|
|
Fiscal
Year
Ended
December
27,
2008
|
|
|
|
Quarter
Ending
|
|
|
|
March
29
|
|
|
June
28
|
|
|
September
27
|
|
|
December
27
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
sales
|
|
$
|
663,805
|
|
|
$
|
911,671
|
|
|
$
|
870,355
|
|
|
$
|
1,048,246
|
|
Gross
profit
|
|
|
320,115
|
|
|
|
417,128
|
|
|
|
385,639
|
|
|
|
430,633
|
|
Net
income
|
|
|
147,779
|
|
|
|
256,092
|
|
|
|
171,244
|
|
|
|
157,733
|
|
Basic
net income per share
|
|
$
|
0.68
|
|
|
$
|
1.20
|
|
|
$
|
0.83
|
|
|
$
|
0.78
|
|
The above
quarterly financial data is unaudited, but in the opinion of management, all
adjustments necessary for a fair presentation of the selected data for these
interim periods presented have been included. These results are not
necessarily indicative of future quarterly results.
14.
Warranty Reserves
The
Company’s products sold are generally covered by a warranty for periods ranging
from one to two years. The Company’s estimate of costs to service
its warranty obligations are based on historical experience and expectation of
future conditions and are recorded as a liability on the balance sheet.
The following reconciliation provides an illustration of changes in the
aggregate warranty reserve:
|
|
Fiscal Year Ended
|
|
|
|
December
26,
|
|
|
December
27,
|
|
|
December
29,
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
|
|
|
|
|
|
|
|
|
Balance
- beginning of period
|
|
$
|
87,408
|
|
|
$
|
71,636
|
|
|
$
|
37,639
|
|
Accrual
for products sold during the period
|
|
|
164,909
|
|
|
|
132,644
|
|
|
|
98,702
|
|
Expenditures
|
|
|
(164,893
|
)
|
|
|
(116,872
|
)
|
|
|
(64,705
|
)
|
Balance
- end of period
|
|
$
|
87,424
|
|
|
$
|
87,408
|
|
|
$
|
71,636
|
|
15.
Subsequent Events
On February 12, 2010, the Board of
Directors approved a share repurchase program authorizing the Company to
repurchase up to $300 million of the common shares of Garmin Ltd. The
repurchases may be made from time to time as market and business conditions
warrant on the open market or in negotiated transactions in compliance with the
SEC’s Rule 10b-18. The timing and amounts of any repurchases will be determined
by the Company’s management depending on market conditions and other factors
including price, regulatory requirements and capital availability. The program
does not require the purchase of any minimum number of shares and may be
suspended or discontinued at any time. The share repurchase authorization
expires on December 31, 2010.
The Company evaluated subsequent events
through the time of filing this Annual Report on Form 10-K on February 24,
2010.
Item
9. Changes in and Disagreements with Accountants on Accounting and Financial
Disclosure
None.
Item
9A. Controls and Procedures
(a)
Conclusion Regarding the Effectiveness of Disclosure Controls and
Procedures
Under the
supervision and with the participation of our management, including the Chief
Executive Officer and Chief Financial Officer, we have evaluated the
effectiveness of the design and operation of our disclosure controls and
procedures pursuant to Exchange Act Rule 13a-15(b) as of the end of the period
covered by this report. Based on the evaluation, the Chief Executive Officer and
Chief Financial Officer have concluded that these disclosure controls and
procedures are effective.
(b)
Management’s Report on Internal Control over Financial Reporting
Management
of the Company is responsible for establishing and maintaining adequate internal
control over financial reporting for the Company. The Company’s internal control
over financial reporting is a process designed to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with generally accepted
accounting principles.
Because
of its inherent limitations, internal control over financial reporting may not
prevent or detect misstatements. Also, projections of any evaluation of
effectiveness to future periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree of compliance
with the policies or procedures may deteriorate.
Management’s
assessment of and conclusion on the effectiveness of internal control over
financial reporting are included as Exhibits 31.1, 31.2, 32.1 and
32.2.
Management
of the Company assessed the effectiveness of the Company’s internal control over
financial reporting as of December 26, 2009. In making this assessment,
management used the criteria set forth by the Committee of Sponsoring
Organizations of the Treadway Commission (COSO) in “Internal Control-Integrated
Framework”.
Based on
such assessment and those criteria, management believes that the Company
maintained effective internal control over financial reporting as of December
26, 2009.
Ernst
& Young LLP, the independent registered public accounting firm that audited
the Company’s consolidated financial statements, issued an attestation report on
management’s effectiveness of the Company’s internal control over financial
reporting as of December 26, 2009, as stated in their report which is included
herein. That attestation report appears below.
(c)
Attestation Report of the
Independent Registered Public Accounting Firm
Report
of Independent Registered Public Accounting Firm
The Board
of Directors and Shareholders
Garmin
Ltd.
We have
audited Garmin Ltd.’s internal control over financial reporting as of December
26, 2009, based on criteria established in Internal Control—Integrated Framework
issued by the Committee of Sponsoring Organizations of the Treadway Commission
(the COSO criteria). Garmin Ltd.’s management is responsible for maintaining
effective internal control over financial reporting, and for its assessment of
the effectiveness of internal control over financial reporting included in the
accompanying Management’s Report on Internal Control over Financial Reporting.
Our responsibility is to express an opinion on the company’s internal control
over financial reporting based on our audit.
We
conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether effective
internal control over financial reporting was maintained in all material
respects. Our audit included obtaining an understanding of internal control over
financial reporting, assessing the risk that a material weakness exists, testing
and evaluating the design and operating effectiveness of internal control based
on the assessed risk, and performing such other procedures as we considered
necessary in the circumstances. We believe that our audit provides a reasonable
basis for our opinion.
A
company’s internal control over financial reporting is a process designed to
provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance
with generally accepted accounting principles. A company’s internal control over
financial reporting includes those policies and procedures that (1) pertain to
the maintenance of records that, in reasonable detail, accurately and fairly
reflect the transactions and dispositions of the assets of the company; (2)
provide reasonable assurance that transactions are recorded as necessary to
permit preparation of financial statements in accordance with generally accepted
accounting principles, and that receipts and expenditures of the company are
being made only in accordance with authorizations of management and directors of
the company; and (3) provide reasonable assurance regarding prevention or timely
detection of unauthorized acquisition, use or disposition of the company’s
assets that could have a material effect on the financial
statements.
Because
of its inherent limitations, internal control over financial reporting may not
prevent or detect misstatements. Also, projections of any evaluation of
effectiveness to future periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree of compliance
with the policies or procedures may deteriorate.
In our
opinion, Garmin Ltd. maintained, in all material respects, effective internal
control over financial reporting as of December 26, 2009, based on the COSO
criteria.
We have
also audited, in accordance with the standards of the Public Company Accounting
Oversight Board (United States), the consolidated balance sheets of
Garmin Ltd. and
Subsidiaries
as of
December 26, 2009 and December 27, 2008 and the related consolidated statements
of income, stockholders’ equity, and cash flows for each of the three years in
the period ended December 26, 2009 and our report dated February 24, 2010
expressed an unqualified opinion thereon.
/s/ Ernst
& Young LLP
Kansas
City, Missouri
February
24, 2010
(d)
Changes in Internal Control over Financial Reporting
There
were no changes in our internal control over financial reporting during the year
ended December 26, 2009 that have materially affected, or are reasonably likely
to materially affect, our internal control over financial reporting
Item
9B. Other Information
Not
applicable.
PART
III
Item
10. Directors, Executive Officers and Corporate Governance
Garmin
has incorporated by reference certain information in response or partial
response to the Items under this Part III of this Annual Report on Form 10-K
pursuant to General Instruction G(3) of this Form 10-K and Rule 12b-23 under the
Exchange Act. Garmin’s definitive proxy statement in connection with its annual
meeting of shareholders scheduled for May 20, 2010 (the “Proxy Statement”) will
be filed with the Securities and Exchange Commission no later than 120 days
after December 26, 2009.
(a)
|
Directors
of the Company
|
The
information set forth in response to Item 401 of Regulation S-K under the
headings “Proposal 1 - Election of Two Directors” and “The Board of Directors”
in the Proxy Statement is hereby incorporated herein by reference in partial
response to this Item 10.
(b)
|
Executive
Officers of the Company
|
The
information set forth in response to Item 401 of Regulation S-K under the
heading “Executive Officers of the Registrant” in Part I of this Form 10-K is
incorporated herein by reference in partial response to this Item
10.
(c)
|
Compliance
with Section 16(a) of the Exchange
Act
|
The
information set forth in response to Item 405 of Regulation S-K under the
heading “Section 16(a) Beneficial Ownership Reporting Compliance” in the Proxy
Statement is hereby incorporated herein by reference in partial response to this
Item 10.
(d)
|
Audit
Committee and Audit Committee Financial
Expert
|
The information set forth in response
to Item 402 of Regulation S-K under the heading “The Board of Directors — Audit
Committee” in the Proxy Statement is hereby incorporated herein by reference in
partial response to this Item 10.
Garmin’s Board of Directors has
determined that Gene M. Betts, Charles W. Peffer, and Thomas A. McDonnell,
members of Garmin’s Audit Committee, are “audit committee financial experts” as
defined by the SEC regulations implementing Section 407 of the Sarbanes-Oxley
Act of 2002. Mr. Betts, Mr. Peffer and Mr. McDonnell are each “independent” as
defined by current listing standards of the Nasdaq Stock Market.
Garmin’s
Board of Directors has adopted the Code of Conduct of Garmin Ltd. and
Subsidiaries (the “Code”). The Code is applicable to all Garmin employees
including the Chairman and Chief Executive Officer, the President and Chief
Operating Officer, the Chief Financial Officer, the Controller and other
officers. A copy of the Code is filed as Exhibit 14.1 to this Annual Report on
Form 10-K. If any amendments to the Code are made, or any waivers with respect
to the Code are granted to the Chief Executive Officer, Chief Financial Officer
or Controller, such amendment or waiver will be disclosed in a Form 8-K filed
with the Securities and Exchange Commission.
Item
11. Executive Compensation
The information set forth in response
to Item 402 of Regulation S-K under the headings “Executive Compensation
Matters” and “The Board of Directors – Non-Management Director Compensation” in
the Proxy Statement is hereby incorporated herein by reference in partial
response to this Item 11.
The information set forth in response
to Item 407(e)(4) of Regulation S-K under the heading “The Board of Directors —
Compensation Committee Interlocks and Insider Participation; Certain
Relationships” in the Proxy Statement is hereby incorporated herein by reference
in partial response to this Item 11.
The information set forth in response
to Item 407(e)(5) of Regulation S-K under the heading “Executive Compensation
Matters – Report of Compensation Committee” in the Proxy Statement is hereby
incorporated herein by reference in partial response to this Item
11.
Item
12. Security Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters
The
information set forth in response to Item 403 of Regulation S-K under the
heading “Stock Ownership of Certain Beneficial Owners and Management” in the
Proxy Statement is hereby incorporated herein by reference in partial response
to this Item 12.
Equity
Compensation Plan Information
The following table gives information
as of December 26, 2009 about the Garmin common shares that may be issued under
all of the Company’s existing equity compensation plans, as adjusted for stock
splits.
|
|
A
|
|
|
B
|
|
|
C
|
|
|
|
|
|
|
|
|
|
Number of securities
|
|
|
|
|
|
|
|
|
|
remaining available for
|
|
Plan Category
|
|
Number of securities to be
|
|
|
Weighted-average
|
|
|
future issuance under
|
|
|
|
issued upon exercise of
|
|
|
exercise price of
|
|
|
equity compensation
|
|
|
|
outstanding options,
|
|
|
outstanding options,
|
|
|
plans (excluding
|
|
|
|
warrants and rights
|
|
|
warrants and rights
|
|
|
securities reflected in
|
|
|
|
|
|
|
|
|
|
column
A)
|
|
Equity
compensation plans approved by shareholders
|
|
|
10,109,311
|
|
|
$
|
48.28
|
|
|
|
2,183,757
|
|
Equity
compensation plans not approved by shareholders
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
10,109,311
|
|
|
$
|
48.28
|
|
|
|
2,183,757
|
|
(1)
Consists of the Garmin Ltd. 2005 Equity Incentive Plan (as Amended and Restated
Effective June 5, 2009), the Garmin Ltd. 2000 Equity Incentive Plan, the Garmin
Ltd. Amended and Restated 2000 Non-Employee Directors’ Option Plan, effective
June 5, 2009, and the Garmin Ltd. Amended and Restated Employee Stock Purchase
Plan, effective January 1, 2010.
The
Company has no knowledge of any arrangement, the operation of which may at a
subsequent date result in a change in control of the Company.
Item
13. Certain Relationships and Related Transactions, and Director
Independence
The
information set forth in response to Item 404 of Regulation S-K under the
heading “Compensation Committee Interlocks and Insider Participation; Certain
Relationships” in the Proxy Statement is incorporated herein by reference in
partial response to this Item 13.
The
information set forth in response to Item 407(a) of Regulation S-K under the
headings “Proposal One— Election of Two Directors” and “The Board of Directors”
in the Proxy Statement is hereby incorporated herein by reference in partial
response to this Item 13.
Item
14. Principal Accounting Fees and Services
The
information set forth under the headings “Audit Matters — Independent Registered
Public Accounting Firm Fees” and “Pre-Approval of Services Provided by the
Independent Auditor” in the Proxy Statement is hereby incorporated by reference
in response to this Item 14.
PART
IV
Item 15.
Exhibits, and Financial Statement
Schedules
(a)
|
List
of Documents filed as part of this
Report
|
|
(1)
|
Consolidated
Financial Statements
|
The
consolidated financial statements and related notes, together with the report of
Ernst & Young LLP, appear in Part II, Item 8 “Financial Statements and
Supplementary Data” of this Form 10-K.
|
(2)
|
Schedule
II Valuation and Qualifying
Accounts
|
All other
schedules have been omitted because they are not applicable, are insignificant
or the required information is shown in the consolidated financial statements or
notes thereto.
|
(3)
|
Exhibits
— The following exhibits are filed as part of, or incorporated by
reference into, this Annual Report on Form
10-K:
|
EXHIBIT
|
|
|
NUMBER
|
|
DESCRIPTION
|
|
|
|
3.1
|
|
Memorandum
and Articles of Association of Garmin Ltd. and Notice of Resolution
(incorporated by reference to Exhibit 3.1 of the Registrant’s Quarterly
Report on Form 10-Q filed on August 9, 2006 ).
|
|
|
|
4.1
|
|
Specimen
share certificate (incorporated by reference to Exhibit 4.1 of the
Registrant’s Registration Statement on Form S-1 filed December 6, 2000
(Commission File No. 333-45514)).
|
|
|
|
4.2
|
|
Shareholder
Rights Agreement (incorporated by reference to Exhibit 4 of the
Registrant’s Current Report on Form 8-K filed on October 26,
2001).
|
|
|
|
4.3
|
|
Amendment
to Shareholder Rights Agreement (incorporated by reference to Exhibit 1.1
of the Registrant’s Amendment No.1 to Registration Statement on Form
8-A12G/A filed on November 14, 2005).
|
|
|
|
10.1
|
|
Garmin
Ltd. 2000 Equity Incentive Plan (incorporated by reference to Exhibit 10.1
of the Registrant’s Registration Statement on Form S-1 filed December 6,
2000 (Commission File No. 333-45514)).
|
|
|
|
10.2
|
|
Form
of Stock Option Agreement pursuant to the Garmin Ltd. 2000 Equity
Incentive Plan for Employees of Garmin International, Inc. (incorporated
by reference to Exhibit 10.1of the Registrant’s Current Report on Form 8-K
filed on September 7, 2004).
|
|
|
|
10.3
|
|
Form
of Stock Option Agreement pursuant to the Garmin Ltd. 2000 Equity
Incentive Plan for Employees of Garmin Corporation (incorporated by
reference to Exhibit 10.3 of the Registrant’s Current Report on Form 8-K
filed on September 7, 2004).
|
|
|
|
10.4
|
|
Form
of Stock Option Agreement pursuant to the Garmin Ltd. 2000 Equity
Incentive Plan for UK-Approved Stock Options for Employees of Garmin
(Europe) Ltd. (incorporated by reference to Exhibit 10.4 of the
Registrant’s Current Report on Form 8-K filed on September 7,
2004).
|
10.5
|
|
Form
of Stock Option Agreement pursuant to the Garmin Ltd. 2000 Equity
Incentive Plan for Non UK-Approved Stock Options for Employees of Garmin
(Europe) Ltd. (incorporated by reference to Exhibit 10.5 of the
Registrant’s Current Report on Form 8-K filed on September 7,
2004).
|
|
|
|
10.6
|
|
Garmin
Ltd. 2000 Non-Employee Directors’ Option Plan (incorporated by reference
to Exhibit 10.2 of the Registrant’s Registration Statement on Form S-1
filed December 6, 2000 (Commission File No.
333-45514)).
|
|
|
|
10.7
|
|
Form
of Stock Option Agreement pursuant to the Garmin Ltd. Non-Employee
Directors’ Option Plan for Non-Employee Directors of Garmin Ltd.
(incorporated by reference to Exhibit 10.2 of the Registrant’s Current
Report on Form 8-K filed on September 7, 2004).
|
|
|
|
10.8
|
|
Garmin
Ltd. Amended and Restated Employee Stock Purchase Plan (incorporated by
reference to Exhibit 10.1 of the Registrant’s Quarterly Report on Form
10-Q filed August 9, 2006).
|
|
|
|
10.9
|
|
First
Amendment to Garmin Ltd. Employee Stock Purchase Plan (incorporated by
reference to Exhibit 10.4 of the Registrant’s Annual Report on Form 10-K
filed on March 27, 2002).
|
|
|
|
10.10
|
|
Second
Amendment to Garmin Ltd. Employee Stock Purchase Plan (incorporated by
reference to Exhibit 10.1 of the Registrant’s Quarterly Report on Form
10-Q filed on August 13, 2003).
|
|
|
|
10.11
|
|
Garmin
Ltd. 2005 Equity Incentive Plan (incorporated by reference to Exhibit 10.1
of the Registrant’s Current Report on Form 8-K filed on June 7,
2005).
|
|
|
|
10.12
|
|
Form
of Stock Option Agreement pursuant to the Garmin Ltd. 2005 Equity
Incentive Plan (incorporated by reference to Exhibit 10.2 of the
Registrant’s Current Report on Form 8-K filed on June 7,
2005).
|
|
|
|
10.13
|
|
Form
of Stock Appreciation Rights Agreement pursuant to the Garmin Ltd. 2005
Equity Incentive Plan (incorporated by reference to Exhibit 10.3 of the
Registrant’s Current Report on Form 8-K filed on June 7,
2005).
|
|
|
|
10.14
|
|
Form
of Stock Appreciation Rights Agreement pursuant to the Garmin Ltd. 2000
Equity Incentive Plan (incorporated by reference to Exhibit 10.4 of the
Registrant’s Quarterly Report on Form 10-Q filed on May 8,
2007).
|
|
|
|
10.15
|
|
Amended
and Restated Garmin Ltd. Employee Stock Purchase Plan effective January 1,
2008 (incorporated by reference to Exhibit 10.15 of the Registrant’s
Annual Report on Form 10-K filed on February 25, 2009).
|
|
|
|
10.16
|
|
Form
of Time Vested Restricted Stock Unit Award Agreement under the Garmin Ltd.
2005 Equity Incentive Plan (incorporated by reference to Exhibit 10.1 of
the Registrant’s Current Report on Form 8-K filed on December 17,
2008).
|
|
|
|
10.17
|
|
Form
of Performance Shares Award Agreement under the Garmin Ltd. 2005 Equity
Incentive Plan (incorporated by reference to Exhibit 10.2 of the
Registrant’s Current Report on Form 8-K filed on December 17,
2008).
|
10.18
|
|
Garmin
Ltd. 2009 Cash Incentive Bonus Plan (incorporated by reference to Exhibit
10.18 of the Registrant’s Annual Report on Form 10-K filed on February 25,
2009).
|
|
|
|
10.19
|
|
Vendor
Agreement dated February 27, 2004 between Best Buy Purchasing LLC and
Garmin USA, Inc. (incorporated by reference to Exhibit 10.19 of the
Registrant’s Annual Report on Form 10-K filed on February 25,
2009).
|
|
|
|
10.20
|
|
Best
Buy Vendor Program Agreement dated February 29, 2008 (incorporated by
reference to Exhibit 10.20 of the Registrant’s Annual Report on Form 10-K
filed on February 25, 2009).
|
|
|
|
10.21
|
|
Best
Buy Vendor Program Agreement and Addendum thereto dated March 30, 2009
(incorporated by reference to Exhibit 10.1 of the Registrant’s Quarterly
Report on Form 10-Q filed on August 5, 2009).
|
|
|
|
10.22
|
|
Amended
and Restated Garmin Ltd. Employee Stock Purchase Plan, effective January
1, 2010.
|
|
|
|
10.23
|
|
Form
of Time Vested Restricted Stock Unit Award Agreement under the Garmin Ltd.
2005 Equity Incentive Plan, as revised by the Registrant’s Board of
Directors on December 11, 2009.
|
|
|
|
10.24
|
|
Form
of Performance Shares Award Agreement under the Garmin Ltd. 2005 Equity
Incentive Plan, as revised by the Registrant’s Board of Directors on
December 11, 2009.
|
|
|
|
10.25
|
|
Garmin
Ltd. 2005 Equity Incentive Plan (as Amended and Restated Effective June 5,
2009) (incorporated by reference to Schedule 1 of the Registrant’s Proxy
Statement on Schedule 14A filed on April 21, 2009).
|
|
|
|
10.26
|
|
Garmin
Ltd. Amended and Restated 2000 Non-Employee Directors’ Option Plan,
Effective June 5, 2009 (incorporated by reference to Schedule 2 of the
Registrant’s Proxy Statement on Schedule 14A filed on April 21,
2009).
|
|
|
|
14.1
|
|
Code
of Conduct of Garmin Ltd. and Subsidiaries (incorporated by reference to
Exhibit 14.1 of the Registrant’s Annual Report on Form 10-K filed on
February 25, 2009).
|
|
|
|
21.1
|
|
List
of subsidiaries
|
|
|
|
23.1
|
|
Consent
of Ernst & Young LLP
|
|
|
|
24.1
|
|
Power
of Attorney (included in signature page)
|
|
|
|
31.1
|
|
Chief
Executive Officer’s Certification pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.
|
|
|
|
31.2
|
|
Chief
Financial Officer’s Certification pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.
|
|
|
|
32.1
|
|
Chief
Executive Officer’s Certification pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
|
|
|
|
32.2
|
|
Chief
Financial Officer’s Certification pursuant to Section 906 of the
Sarbanes-Oxley Act of
2002.
|
Exhibit
101.INS
|
XBRL
Instance Document
|
|
|
Exhibit
101.SCH
|
XBRL
Taxonomy Extension Schema
|
|
|
Exhibit
101.CAL
|
XBRL
Taxonomy Extension Calculation Linkbase
|
|
|
Exhibit
101.LAB
|
XBRL
Taxonomy Extension Label Linkbase
|
|
|
Exhibit
101.PRE
|
XBRL
Taxonomy Extension Presentation Linkbase
|
|
|
Exhibit
101.DEF
|
XBRL
Taxonomy Extension Definition
Linkbase
|
The
exhibits listed on the accompanying Exhibit Index in Item 15(a)(3) are filed as
part of, or are incorporated by reference into, this Annual Report on Form
10-K.
(c)
|
Financial Statement
Schedules
.
|
Reference
is made to Item 15(a)(2) above.
SCHEDULE
II - VALUATION AND QUALIFYING ACCOUNTS
Garmin
Ltd. and Subsidiaries
(
In thousands
)
|
|
|
|
|
Additions
|
|
|
|
|
|
|
|
|
|
Balance at
|
|
|
Charged to
|
|
|
Charged to
|
|
|
|
|
|
Balance at
|
|
|
|
Beginning of
|
|
|
Costs and
|
|
|
Other
|
|
|
|
|
|
End of
|
|
Description
|
|
Period
|
|
|
Expenses
|
|
|
Accounts
|
|
|
Deductions
|
|
|
Period
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year
Ended December 26, 2009:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deducted
from asset accounts
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance
for doubtful accounts
|
|
$
|
42,409
|
|
|
$
|
(1,332
|
)
|
|
|
-
|
|
|
$
|
(4,404
|
)
|
|
$
|
36,673
|
|
Inventory
reserve
|
|
|
23,204
|
|
|
|
61,324
|
|
|
|
-
|
|
|
|
(45,630
|
)
|
|
$
|
38,898
|
|
Deferred
tax asset
|
|
|
34,487
|
|
|
|
1,468
|
|
|
|
-
|
|
|
|
(338
|
)
|
|
|
35,617
|
|
Total
|
|
$
|
100,100
|
|
|
$
|
61,460
|
|
|
|
-
|
|
|
$
|
(50,372
|
)
|
|
$
|
111,188
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year
Ended December 27, 2008:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deducted
from asset accounts
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance
for doubtful accounts
|
|
$
|
10,246
|
|
|
$
|
32,355
|
|
|
|
-
|
|
|
$
|
(192
|
)
|
|
$
|
42,409
|
|
Inventory
reserve
|
|
|
31,186
|
|
|
|
24,461
|
|
|
|
-
|
|
|
|
(32,443
|
)
|
|
|
23,204
|
|
Deferred
tax asset
|
|
|
15,491
|
|
|
|
18,996
|
|
|
|
-
|
|
|
|
-
|
|
|
|
34,487
|
|
Total
|
|
$
|
56,923
|
|
|
$
|
75,812
|
|
|
|
-
|
|
|
$
|
(32,635
|
)
|
|
$
|
100,100
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year
Ended December 29, 2007:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deducted
from asset accounts
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance
for doubtful accounts
|
|
$
|
5,340
|
|
|
$
|
3,617
|
|
|
|
-
|
|
|
$
|
1,289
|
|
|
$
|
10,246
|
|
Inventory
reserve
|
|
|
19,768
|
|
|
|
34,975
|
|
|
|
-
|
|
|
|
(23,557
|
)
|
|
|
31,186
|
|
Deferred
tax asset
|
|
|
28,301
|
|
|
|
1,486
|
|
|
|
-
|
|
|
|
(14,296
|
)
|
|
|
15,491
|
|
Total
|
|
$
|
53,409
|
|
|
$
|
40,078
|
|
|
|
-
|
|
|
$
|
(36,564
|
)
|
|
$
|
56,923
|
|
SIGNATURES
Pursuant
to the requirements of Section 13 or 15(d) of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.
|
GARMIN
LTD.
|
|
|
|
|
|
By
|
/s/
Min H. Kao
|
|
|
Min
H. Kao
|
|
|
Chief
Executive Officer
|
Dated: February
24, 2010
POWER
OF ATTORNEY
Know all
persons by these presents, that each person whose signature appears below
constitutes and appoints Min H. Kao and Kevin Rauckman and Andrew R.
Etkind, and each of them, as his attorney-in-fact, with the power of
substitution, for him in any and all capacities, to sign any amendments to this
Annual Report on Form 10-K, and to file the same, with exhibits thereto and
other documents in connection therewith, with the Securities and Exchange
Commission, hereby ratifying and confirming all that said attorney-in-fact, or
his substitute or substitutes, may do or cause to be done by virtue
hereof.
Pursuant
to the requirements of the Securities Exchange Act of 1934, this report on Form
10-K has been signed below by the following persons on behalf of the registrant
and in the capacities indicated on February 24, 2010.
/s/ Min H. Kao
|
|
|
/s/
Gene M. Betts
|
|
Min H. Kao
|
|
Gene M. Betts
|
Chairman,
Chief
|
|
Director
|
Executive
Officer and Director
|
|
|
(Principal
Executive Officer)
|
|
|
|
|
|
|
|
|
/s/
Kevin Rauckman
|
|
|
/s/Donald
H. Eller
|
|
Kevin
Rauckman
|
|
Donald
H. Eller
|
(Principal Financial Officer and Principal Accounting Officer)
|
|
Director
|
Chief
Financial Officer and Treasurer
|
|
|
|
|
|
/s/
Charles W. Peffer
|
|
|
/s/
Thomas A. McDonnell
|
|
Charles W. Peffer
|
|
Thomas
A. McDonnell
|
Director
|
|
Director
|
|
|
|
/s/
Clifton A. Pemble.
|
|
|
|
Clifton A Pemble
|
|
|
Director
|
|
|
Garmin
Ltd.
2009
Form 10-K Annual Report
Exhibit
Index
The following exhibits are attached
hereto. See Part IV of this Annual Report on Form 10-K for a complete
list of exhibits.
Exhibit
|
|
|
Number
|
|
Document
|
|
|
|
10.22
|
|
Amended
and Restated Garmin Ltd. Employee Stock Purchase Plan, effective January
1, 2010.
|
|
|
|
10.23
|
|
Form
of Time Vested Restricted Stock Unit Award Agreement under the Garmin Ltd.
2005 Equity Incentive Plan, as revised by the Registrant’s Board of
Directors on December 11, 2009.
|
|
|
|
10.24
|
|
Form
of Performance Shares Award Agreement under the Garmin Ltd. 2005 Equity
Incentive Plan, as revised by the Registrant’s Board of Directors on
December 11, 2009.
|
|
|
|
21.1
|
|
List
of subsidiaries
|
|
|
|
23.1
|
|
Consent
of Ernst & Young LLP
|
|
|
|
31.1
|
|
Chief
Executive Officer’s Certification pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002
|
|
|
|
31.2
|
|
Chief
Financial Officer’s Certification pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002
|
|
|
|
32.1
|
|
Chief
Executive Officer’s Certification pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002
|
|
|
|
32.2
|
|
Chief
Financial Officer’s Certification pursuant to Section 906 of the
Sarbanes-Oxley Act of
2002
|
Exhibit
101.INS
|
XBRL
Instance Document
|
|
|
Exhibit
101.SCH
|
XBRL
Taxonomy Extension Schema
|
|
|
Exhibit
101.CAL
|
XBRL
Taxonomy Extension Calculation Linkbase
|
|
|
Exhibit
101.LAB
|
XBRL
Taxonomy Extension Label Linkbase
|
|
|
Exhibit
101.PRE
|
XBRL
Taxonomy Extension Presentation Linkbase
|
|
|
Exhibit
101.DEF
|
XBRL
Taxonomy Extension Definition
Linkbase
|
GARMIN
LTD.
EMPLOYEE
STOCK PURCHASE PLAN
Amended
and Restated
Effective
January 1, 2010
GARMIN
LTD.
EMPLOYEE
STOCK PURCHASE PLAN
(Amended
and Restated)
I.
Purpose and Effective
Date
1.1 The
purpose of the Garmin Ltd. Employee Stock Purchase Plan is to provide an
opportunity for eligible employees to acquire a proprietary interest in Garmin
Ltd. through accumulated payroll deductions. It is the intent of the
Company to have the Plan qualify as an "employee stock purchase plan" under
Section 423 of the Code. The provisions of the Plan shall be
construed to extend and limit participation in a manner consistent with the
requirements of Section 423 of the Code.
1.2 The
Plan was initially approved by the Company’s Board on October 20, 2000 and
approved by the Company's stockholders on October 24, 2000. This
amended and restated Plan is effective on January 1, 2010. No option
shall be granted under the Plan after the date as of which the Plan is
terminated by the Board in accordance with Section 11.7 of the
Plan.
II.
Definitions
The following words and phrases, when
used in this Plan, unless their context clearly indicates otherwise, shall have
the following respective meanings:
2.1 "
Account
" means a
recordkeeping account maintained for a Participant to which payroll deductions
are credited in accordance with Article VIII of the Plan.
2.2 "
Administrator
" means
the persons or committee appointed under Section 3.1 to administer the
Plan.
2.3 "
Article
" means an
Article of this Plan.
2.4 "
Accumulation Period
"
means, as to the Company or a Participating Subsidiary, a period of six months
commencing with the first regular payroll period commencing on or after each
successive January 1 and ending on each successive June 30 and a period of six
months commencing with the first regular payroll period commencing on or after
each successive July 1 and ending on each successive December 31. The
Committee may modify (including increasing or decreasing the length of time
covered) or suspend Accumulation Periods at anytime and from time to
time.
2.5 "
Base Earnings
" means
base salary and wages payable by the Company or a Participating Subsidiary to an
Eligible Employee, prior to pre-tax deductions for contributions to qualified or
non-qualified (under the Code) benefit plans or arrangements, and excluding
bonuses, incentives and overtime pay but including commissions.
2.6 "
Board
" means the
Board of Directors of the Company.
2.7 "
Code
" means the
Internal Revenue Code of 1986, as amended.
2.8 "
Company
" means Garmin
Ltd., a Cayman Islands corporation.
2.9 "
Cut-Off Date
" means
the date established by the Administrator from time to time by which enrollment
forms must be received with respect to an Accumulation Period.
2.10 "
Eligible Employee
"
means an Employee, including an employee on an Authorized Leave of Absence (as
defined in Section 10.3), eligible to participate in the Plan in accordance with
Article V.
2.11 "
Employee
" means an
individual who performs services for the Company or a Participating Subsidiary
pursuant to an employment relationship described in Treasury Regulations Section
31.3401(c)-1 or any successor provision, or an individual who would be
performing such services but for such individual’s Authorized Leave of Absence
(as defined in Section 10.3).
2.12 "
Enrollment Date
"
means the first Trading Day of an Accumulation Period beginning on or after
January 1, 20010.
2.13 "
Exchange Act
" means
the Securities Exchange Act of 1934.
2.14 "
Fair Market Value
"
means, as of any applicable date:
(a) If
the security is listed on any established stock exchange or traded on the Nasdaq
Global Select Market or the Nasdaq Global Market (formerly the Nasdaq National
Market), the closing price, regular way, of the security on such exchange, or if
no such reported sale of the security shall have occurred on such date, on the
latest preceding date on which there was such a reported sale, in all cases, as
reported in
The Wall
Street Journal
or such other source as the Board deems
reliable.
(b) If
the security is listed or traded on the Nasdaq Capital Market (formerly the
Nasdaq SmallCap Market), the mean between the bid and asked prices for the
security on the date of determination, as reported in The Wall Street Journal or
such other source as the Board deems reliable. Unless otherwise provided by the
Board, if there is no closing sales price (or closing bid if no sales were
reported) for the security on the date of determination, then the Fair Market
Value shall be the mean between the bid and asked prices for the security on the
last preceding date for which such quotation exists.
(c) In
the absence of such markets for the security, the value determined by the Board
in good faith.
2.15 "
Participant
" means an
Eligible Employee who has enrolled in the Plan pursuant to Article
VI. A Participant shall remain a Participant until the applicable
date set forth in Article X.
2.16 "
Participating
Subsidiary
" means a Subsidiary incorporated under the laws of any state
in the United States, a territory of the United States, Puerto Rico, or the
District of Columbia, or such foreign Subsidiary approved under Section 3.3,
which has adopted the Plan as a Participating Subsidiary by action of its board
of directors and which has been designated by the Board in accordance with
Section 3.3 as covered by the Plan, subject to the requirements of Section 423
of the Code except as noted in Section 3.3.
2.17 "
Plan
" means the
Garmin Ltd. Employee Stock Purchase Plan as set forth herein and as from time to
time amended.
2.18 "
Purchase Date
" means
the specific Trading Day during an Accumulation Period on which Shares are
purchased under the Plan in accordance with Article IX. For each
Accumulation Period, the Purchase Date shall be the last Trading Day occurring
in such Accumulation Period. The Administrator may, in its
discretion, designate a different Purchase Date with respect to any Accumulation
Period.
2.19 "
Qualified Military
Leave
” means an absence due to service in the uniformed services of the
United States (as defined in Chapter 43 of Title 38 of the United States Code)
by an individual employee of the Company or a Participating Subsidiary, provided
the individual’s rights to reemployment under the Uniformed Services Employment
and Reemployment Rights Act of 1994 have not expired or terminated.
2.20 "
Section
" means a
section of this Plan, unless indicated otherwise.
2.21 "
Securities Act
" means
the Securities Act of 1933, as amended.
2.22 "
Share
" means a common
share, $.005 par value, of Garmin Ltd.
2.23 "
Subsidiary
" means any
corporation in an unbroken chain of corporations beginning with the Company if,
as of the applicable Enrollment Date, each of the corporations other than the
last corporation in the chain owns stock possessing 50% or more of the total
combined voting power of all classes of stock in one of the other corporations
in the chain.
2.24 "
Trading Day
" means a
day the national exchange on which the Shares are listed for trading or, if not
so listed, a day the New York Stock Exchange is open for trading.
III.
Administration
3.1 Subject
to Section 11.7, the Plan shall be administered by the Board, or committee
("Committee") appointed by the Board. The Committee shall consist of
at least one Board member, but may additionally consist of individuals who are
not members of the Board. The Committee shall serve at the pleasure
of the Board. If the Board does not so appoint a Committee, the Board
shall administer the Plan. Any references herein to "Administrator"
are, except as the context requires otherwise, references to the Board or the
Committee, as applicable.
3.2 If
appointed under Section 3.1, the Committee may select one of its members as
chairman and may appoint a secretary. The Committee shall make such
rules and regulations for the conduct of its business as it shall deem
advisable; provided, however, that all determinations of the Committee shall be
made by a majority of its members.
3.3 The
Administrator shall have the power, in addition to the powers set forth
elsewhere in the Plan, and subject to and within the limits of the express
provisions of the Plan, to construe and interpret the Plan and options granted
under it; to establish, amend and revoke rules and regulations for
administration of the Plan; to determine all questions of policy and expediency
that may arise in the administration of the Plan; to allocate and delegate such
of its powers as it deems desirable to facilitate the administration and
operation of the Plan; and, generally, to exercise such powers and perform such
acts as it deems necessary or expedient to promote the best interests of the
Company. The Administrator's determinations as to the interpretation
and operation of this Plan shall be final and conclusive.
The Board may designate from time to
time which Subsidiaries of the Company shall be Participating
Subsidiaries. Without amending the Plan, the Board may adopt special
or different rules for the operation of the Plan which allow employees of any
foreign Subsidiary to participate in the purposes of the Plan. In
furtherance of such purposes, the Board may approve such modifications,
procedures, rules or sub-plans as it deems necessary or desirable, including
those deemed necessary or desirable to comply with any foreign laws or to
realize tax benefits under foreign law. Any such different or special
rules for employees of any foreign Subsidiary shall not be subject to Code
Section 423 and for purposes of the Code shall be treated as separate and apart
from the balance of the Plan.
3.4 This
Article III relating to the administration of the Plan may be amended by the
Board from time to time as may be desirable to satisfy any requirements of or
under the federal securities and/or other applicable laws of the United States,
or to obtain any exemption under such laws.
IV.
Number of
Shares
4.1 Two
million (2,000,000) Shares are reserved for sales and authorized for
issuance pursuant to the Plan. Shares sold under the Plan may be
newly-issued Shares, outstanding Shares reacquired in private transactions or
open market purchases, or any combination of the foregoing. If any
option granted under the Plan shall for any reason terminate without having been
exercised, the Shares not purchased under such option shall again become
available for the Plan.
4.2 In
the event of any reorganization, recapitalization, stock split, reverse stock
split, stock dividend, combination of shares, merger, consolidation, acquisition
of property or shares, separation, asset spin-off, stock rights offering,
liquidation or other similar change in the capital structure of the Company, the
Board shall make such adjustment, if any, as it deems appropriate in the number,
kind and purchase price of the Shares available for purchase under the
Plan. In the event that, at a time when options are outstanding
hereunder, there occurs a dissolution or liquidation of the Company, except
pursuant to a transaction to which Section 424(a) of the Code applies, each
option to purchase Shares shall terminate, but the Participant holding such
option shall have the right to exercise his or her option prior to such
termination of the option upon the dissolution or liquidation. The
Company reserves the right to reduce the number of Shares which Employees may
purchase pursuant to their enrollment in the Plan.
V.
Eligibility
Requirements
5.1 Except
as provided in Section 5.2, each individual who is an Eligible Employee of the
Company or a Participating Subsidiary on the applicable Cut-Off Date shall
become eligible to participate in the Plan in accordance with Article VI as of
the first Enrollment Date following the date the individual becomes an Employee
of the Company or a Participating Subsidiary, provided that the individual
remains an Eligible Employee on the first day of the Accumulation Period
associated with such Enrollment Date. Participation in the Plan is
entirely voluntary.
5.2 Employees
meeting any of the following restrictions are not eligible to participate in the
Plan:
(a) Employees
who, immediately upon enrollment in the Plan or upon grant of an Option would
own directly or indirectly, or hold options or rights to acquire, an aggregate
of 5% or more of the total combined voting power or value of all outstanding
shares of all classes of stock of the Company or any Subsidiary (and for
purposes of this paragraph, the rules of Code Section 424(d) shall apply, and
stock which the Employee may purchase under outstanding options shall be treated
as stock owned by the Employee);
(b) Employees
(other than individuals on Authorized Leave of Absence (as defined in Section
10.3)) who are customarily employed by the Company or a Participating Subsidiary
for not more than 20 hours per week; or
(c) Employees
(other than individuals on Authorized Leave of Absence (as defined in Section
10.3)) who are customarily employed by the Company or a Participating Subsidiary
for not more than five (5) months in any calendar year.
5.3 The
Plan is intended to conform to the extent necessary with all provisions of the
Securities Act and the Exchange Act and any and all regulations and rules
promulgated by the Securities and Exchange Commission
thereunder. Notwithstanding anything herein to the contrary, the Plan
shall be administered, and the options shall be granted and may be exercised,
only in such a manner as to conform to such laws, rules and
regulations. To the extent permitted by applicable law, the Plan and
the options granted hereunder shall be deemed amended to the extent necessary to
conform to such laws, rules and regulations.
VI.
Enrollment
6.1 Eligible
Employees will be automatically enrolled in the Plan on the first day of each
Accumulation Period. Any Eligible Employee may consent to enrollment
in the Plan for an Accumulation Period by completing and signing an enrollment
form (which authorizes payroll deductions during such Accumulation Period in
accordance with Section 8.1) and submitting such enrollment form to the Company
or the Participating Subsidiary on or before the Cut-Off Date specified by the
Administrator. Payroll deductions pursuant to the enrollment form
shall be effective as of the first payroll period with a pay day after the
Enrollment Date for the Accumulation Period to which the enrollment form
relates, and shall continue in effect until the earliest of:
(a) the
end of the last payroll period with a payday in the Accumulation
Period;
(b) the
date during the Accumulation Period as of which the Employee elects to cease his
or her enrollment in accordance with Section 8.3; and
(c) the
date during the Accumulation Period as of which the Employee withdraws from the
Plan or has a termination of employment in accordance with Article
X.
VII.
Grant of Options on
Enrollment
7.1 The
automatic enrollment by an Eligible Employee in the Plan as of an Enrollment
Date will constitute the grant as of such Enrollment Date by the Company to such
Participant of an option to purchase Shares from the Company pursuant to the
Plan.
7.2 An
option granted to a Participant pursuant to this Plan shall expire, if not
terminated earlier for any reason, on the earliest to occur
of: (a) the end of the Purchase Date with respect to the
Accumulation Period in which such option was granted; (b) the completion of
the purchase of Shares under the option under Article IX; or (c) the date
on which participation of such Participant in the Plan terminates for any
reason.
7.3 As
of each Enrollment Date, each Participant shall automatically be granted an
option to purchase a maximum number of Shares, subject to the terms of the Plan,
equal to the quotient of $25,000 divided by the Fair Market Value of a Share on
the Enrollment Date.
7.4 Notwithstanding
any other provision of this Plan, no Employee may be granted an option which
permits his or her rights to purchase Shares under the Plan and any other Code
Section 423 employee stock purchase plan of the Company or any of its
Subsidiaries or parent companies to accrue (when the option first becomes
exercisable) at a rate which exceeds $25,000 of Fair Market Value of such Shares
(determined at the time such option is granted) for each calendar year in which
such option is outstanding at any time. For purposes of administering
this accrual limitation, the Administrator shall limit purchases under the Plan
as follows:
(a) The
number of Shares that may be purchasable by an Employee during his or her first
Accumulation Period during a calendar year may not exceed a number of Shares
determined by dividing $25,000 by the Fair Market Value of a Share on the
Enrollment Date for that Accumulation Period.
(b) The
number of Shares that may be purchasable by an Employee during any subsequent
Accumulation Period during the same calendar year (if any) shall not exceed the
number of Shares determined by performing the calculation below:
(i) First,
the number of Shares purchased by the Employee during any previous Accumulation
Period during the same calendar year shall be multiplied by the Fair Market
Value of a Share on the Enrollment Date of such previous Accumulation
Period.
(ii) Second,
the amount determined under (i) above shall be subtracted from
$25,000.
(iii) Third,
the amount determined under (ii) above shall be divided by the Fair Market Value
of a Share on the Enrollment Date for such subsequent Accumulation Period (for
which the maximum number of Shares purchasable is being determined by this
calculation) occurs. The quotient thus obtained shall be the maximum
number of Shares that may be purchased by any Employee for such subsequent
Accumulation Period.
VIII.
Payroll
Deductions
8.1 An
Employee who files an enrollment form pursuant to Article VI shall elect and
authorize in such form to have deductions made from his or her pay on each
payday he or she receives a paycheck during the Accumulation Period to which the
enrollment form relates, and he or she shall designate in such form the
percentage (in whole percentages) of Base Earnings to be deducted each payday
during such Accumulation Period. The minimum an Employee may elect
and authorize to have deducted is 1% of his or her Base Earnings paid per pay
period in such Accumulation Period, and the maximum is 10% of his or her Base
Earnings paid per pay period in such Accumulation Period (or such larger or
smaller percentage as the Administrator may designate from time to
time).
8.2 Except
as provided in the last paragraph of Section 6.1, deductions from a
Participant’s Base Earnings shall commence upon the first payday on or after the
commencement of the Accumulation Period, and shall continue until the date on
which such authorization ceases to be effective in accordance with Article
VI. The amount of each deduction made for a Participant shall be
credited to the Participant’s Account. All payroll deductions
received or held by the Company or a Participating Subsidiary may be, but are
not required to be, used by the Company or Participating Subsidiary for any
corporate purpose, and the Company or Participating Subsidiary shall not be
obligated to segregate such payroll deductions, but may do so at the discretion
of the Board.
8.3 As
of the last day of any month during an Accumulation Period, a Participant may
elect to cease (but not to increase or decrease) payroll deductions made on his
or her behalf for the remainder of such Accumulation Period by filing the
applicable election with the Company or Participating Subsidiary in such form
and manner and at such time as may be permitted by the
Administrator. A Participant who has ceased payroll deductions may
have the amount which was credited to his or her Account prior to such cessation
applied to the purchase of Shares as of the Purchase Date, in accordance with
Section 9.1, and receive the balance of the Account with respect to which the
enrollment is ceased, if any, in cash. A Participant who has ceased
payroll deductions may also voluntarily withdraw from the Plan pursuant to
Section 10.1. Any Participant who ceases payroll deductions for an
Accumulation Period may re-enroll in the Plan on the next subsequent Enrollment
Date following the cessation in accordance with the provisions of Article
VI. A Participant who ceases to be employed by the Company or any
Participating Subsidiary will cease to be a Participant in accordance with
Section 10.2.
8.4 A
Participant may not make any separate or additional contributions to his Account
under the Plan. Neither the Company nor any Participating Subsidiary
shall make separate or additional contributions to any Participant’s Account
under the Plan.
IX.
Purchase of
Shares
9.1 Subject
to Section 9.2, any option held by the Participant which was granted under this
Plan and which remains outstanding as of a Purchase Date shall be deemed to have
been exercised on such Purchase Date for the purchase of the number of whole
Shares which the funds accumulated in his or her Account as of the Purchase Date
will purchase at the applicable purchase price (but not in excess of the number
of Shares for which options have been granted to the Participant pursuant to
Section 7.3). No Shares will be purchased on behalf of any
Participant who fails to file an enrollment form authorizing payroll deductions
for an Accumulation Period.
9.2 A
Participant who holds an outstanding option as of a Purchase Date shall not be
deemed to have exercised such option if the Participant elected not to exercise
the option by withdrawing from the Plan in accordance with Section
10.1.
9.3 If,
after a Participant’s exercise of an option under Section 9.1, an amount remains
credited to the Participant’s Account as of a Purchase Date, then the remaining
amount shall be distributed to the Participant in cash as soon as
administratively practical after such Purchase Date.
9.4 Except
as otherwise set forth in this Section 9.4, the purchase price for each Share
purchased under any option shall be 85% of the lower of:
(a) the
Fair Market Value of a Share on the Enrollment Date on which such option is
granted; or
(b) the
Fair Market Value of a Share on the Purchase Date.
Notwithstanding
the above, the Board may establish a different purchase price for each Share
purchased under any option provided that such purchase price is determined at
least thirty (30) days prior to the Accumulation Period for which it is
applicable and provided that such purchase price may not be less than the
purchase price set forth above.
9.5 If
Shares are purchased by a Participant pursuant to Section 9.1, then such Shares
shall be held in non-certificated form at a bank or other appropriate
institution selected by the Administrator until the earlier of the Participant’s
termination of employment or the time a Participant requests delivery of
certificates representing such shares. If any law governing corporate
or securities matters, or any applicable regulation of the Securities and
Exchange Commission or other body having jurisdiction with respect to such
matters, shall require that the Company or the Participant take any action in
connection with the Shares being purchased under the option, delivery of the
certificate or certificates for such Shares shall be postponed until the
necessary action shall have been completed, which action shall be taken by the
Company at its own expense, without unreasonable delay.
Certificates delivered pursuant to this
Section 9.5 shall be registered in the name of the Participant or, if the
Participant so elects, in the names of the Participant and one or more such
other persons as may be designated by the Participant in joint tenancy with
rights of survivorship or in tenancy by the entireties or as spousal community
property, or in such forms of trust as may be approved by the Administrator, to
the extent permitted by law.
9.6 In
the case of Participants employed by a Participating Subsidiary, the Board may
provide for Shares to be sold through the Subsidiary to such Participants, to
the extent consistent with and governed by Section 423 of the Code.
9.7 If
the total number of Shares for which an option is exercised on any Purchase Date
in accordance with this Article IX, when aggregated with all Shares previously
granted under this Plan, exceeds the maximum number of Shares reserved in
Section 4.1, the Administrator shall make a pro rata allocation of the Shares
available for delivery and distribution in as nearly a uniform manner as shall
be practicable and as it shall determine to be equitable, and the balance of the
cash amount credited to the Account of each Participant under the Plan shall be
returned to him or her as promptly as administratively practical.
9.8 If
a Participant or former Participant sells, transfers, or otherwise makes a
disposition of Shares purchased pursuant to an option granted under the Plan
within two years after the date such option is granted or within one year after
the Purchase Date to which such option relates, or if the Participant or former
Participant otherwise has a taxable event relating to Shares purchased under the
Plan, and if such Participant or former Participant is subject to U.S. federal
income tax, then such Participant or former Participant shall notify the Company
or Participating Subsidiary in writing of any such sale, transfer or other
disposition within 10 days of the consummation of such sale, transfer or other
disposition, and shall remit to the Company or Participating Subsidiary or
authorize the Company or Participating Subsidiary to withhold from other sources
such amount as the Company may determine to be necessary to satisfy any federal,
state or local tax withholding obligations of the Company or Participating
Subsidiary. A Participant must reply to a written request, within 10
days of the receipt of such written request, from the Company, Participating
Subsidiary, or Administrator regarding whether such a sale, transfer or other
disposition has occurred.
The Administrator may from time to time
establish rules and procedures (including but not limited to postponing delivery
of Shares until the earlier of the expiration of the two-year or one-year period
or the disposition of such Shares by the Participant) to cause the withholding
requirements to be satisfied.
X.
Withdrawal From the Plan;
Termination of Employment; Leave of Absence; Death
10.1
Withdrawal from the
Plan
. Effective as of the last day of any calendar quarter
during an Accumulation Period, a Participant may withdraw from the Plan in full
(but not in part) by delivering a notice of withdrawal to the Company (in a
manner prescribed by the Administrator) at least ten business days prior to the
end of such calendar quarter (but in no event later than the June 1 or December
1 immediately preceding the Purchase Date for the Plan's two Accumulation
Periods, respectively). Upon such withdrawal from participation in
the Plan, all funds then accumulated in the Participant’s Account shall not be
used to purchase Shares, but shall instead be distributed to the Participant as
soon as administratively practical after the end of such calendar quarter, and
the Participant’s payroll deductions shall cease as of the end of such calendar
quarter. An Employee who has withdrawn during an Accumulation Period
may not return funds to the Company or a Participating Subsidiary during the
same Accumulation Period and require the Company or Participating Subsidiary to
apply those funds to the purchase of Shares, nor may such Participant’s payroll
deductions continue, in accordance with Article VI. Any Eligible
Employee who has withdrawn from the Plan may, however, re-enroll in the Plan on
the next subsequent Enrollment Date following withdrawal in accordance with the
provisions of Article VI.
10.2
Termination of
Employment
. Participation in the Plan terminates immediately
when a Participant ceases to be employed by the Company or any Participating
Subsidiary for any reason whatsoever, including but not limited to termination
of employment, whether voluntary or involuntary, or on account of disability, or
retirement, but not including death, or if the participating Subsidiary
employing the Participant ceases for any reason to be a Participating
Subsidiary. Participation in the Plan also terminates immediately
when a Participant ceases to be an Eligible Employee under Article V or
withdraws from the Plan. Upon termination of participation such
terminated Participant’s outstanding options shall thereupon
terminate. As soon as administratively practical after termination of
participation, the Company shall pay to the Participant or legal representative
all amounts accumulated in the Participant’s Account and held by the Company at
the time of termination of participation, and any Participating Subsidiary shall
pay to the Participant or legal representative all amounts accumulated in the
Participant's Account and held by the Participating Subsidiary at the time of
termination of participation.
10.3
Leaves of
Absence
.
(a) If
a Participant takes a leave of absence (other than an Authorized Leave of
Absence) without terminating employment, such Participant will be deemed to have
discontinued contributions to the Plan in accordance with Section 8.3, but will
remain a Participant in the Plan through the balance of the Accumulation Period
in which his or her leave of absence begins, so long as such leave of absence
does not exceed 90 days. If a Participant takes a leave of absence
(other than an Authorized Leave of Absence) without terminating employment, such
Participant will be deemed to have withdrawn from the Plan in accordance with
Section 10.1 if such leave of absence exceeds 90 days.
(b) An
Employee on an Authorized Leave of Absence shall remain a Participant in the
Plan and, in the case of a paid Authorized Leave of Absence, shall have
deductions made under Section 8.1 from payments that would, but for the
Authorized Leave of Absence, be Base Earnings. An Employee who does
not return from an Authorized Leave of Absence on the scheduled date (or, in the
case of Qualified Military Leave, prior to the date such individual’s
reemployment rights under the Uniformed Services Employment and Reemployment
Rights Act of 1994 have expired or terminated) shall be deemed to have
terminated employment on the last day of such Authorized Leave of Absence (or,
in the case of Qualified Military Leave, the date such reemployment rights
expire or are terminated).
(c) An
“Authorized Leave of Absence” means (a) a Qualified Military Leave, and (b) an
Employee’s absence of more than 90 days which has been authorized, either
pursuant to a policy of the Company or the Participating Subsidiary that employs
the Employee, or pursuant to a written agreement between the employer and the
Employee, which policy or written agreement guarantees the Employee’s rights to
return to employment.
10.4
Death
. As
soon as administratively feasible after the death of a Participant, amounts
accumulated in his or her Account shall be paid in cash to the beneficiary or
beneficiaries designated by the Participant on a beneficiary designation form
approved by the Board, but if the Participant does not make an effective
beneficiary designation then such amounts shall be paid in cash to the
Participant’s spouse if the Participant has a spouse, or, if the Participant
does not have a spouse, to the executor, administrator or other legal
representative of the Participant’s estate. Such payment shall
relieve the Company and the Participating Subsidiary of further liability with
respect to the Plan on account of the deceased Participant. If more
than one beneficiary is designated, each beneficiary shall receive an equal
portion of the Account unless the Participant has given express contrary
instructions. None of the Participant’s beneficiary, spouse,
executor, administrator or other legal representative of the Participant’s
estate shall, prior to the death of the Participant by whom he has been
designated, acquire any interest in the amounts credited to the Participant’s
Account under the Plan.
XI.
Miscellaneous
11.1
Interest
. Interest
or earnings will not be paid on any Employee Accounts.
11.2
Restrictions on
Transfer
. The rights of a Participant under the Plan shall not
be assignable or transferable by such Participant, and an option granted under
the Plan may not be exercised during a Participant’s lifetime other than by the
Participant. Any such attempt at assignment, transfer, pledge or
other disposition shall be without effect, except that the Company may treat
such act as an election to withdraw from the Plan in accordance with Section
10.1.
11.3
Administrative
Assistance
. If the Administrator in its discretion so elects,
it may retain a brokerage firm, bank, other financial institution or other
appropriate agent to assist in the purchase of Shares, delivery of reports or
other administrative aspects of the Plan. If the Administrator so
elects, each Participant shall (unless prohibited by applicable law) be deemed
upon enrollment in the Plan to have authorized the establishment of an account
on his or her behalf at such institution. Shares purchased by a
Participant under the Plan shall be held in the account in the Participant’s
name, or if the Participant so indicates in the enrollment form, in the
Participant’s name together with the name of one or more other persons in joint
tenancy with right of survivorship or in tenancy by the entireties or as spousal
community property, or in such forms of trust as may be approved by the
Administrator, to the extent permitted by law.
11.4
Costs
. All
costs and expenses incurred in administering the Plan shall be paid by the
Company or Participating Subsidiaries, including any brokerage fees on the
purchased Shares; excepting that any stamp duties, transfer taxes, fees to issue
stock certificates, and any brokerage fees on the sale price applicable to
participation in the Plan after the initial purchase of the Shares on the
Purchase Date shall be charged to the Account or brokerage account of such
Participant.
11.5
Equal Rights and
Privileges
. All Eligible Employees shall have equal rights and
privileges with respect to the Plan so that the Plan qualifies as an "employee
stock purchase plan" within the meaning of Section 423 or any successor
provision of the Code and the related regulations. Notwithstanding
the express terms of the Plan, any provision of the Plan which is inconsistent
with Section 423 or any successor provision of the Code shall without
further act or amendment by the Company or the Board be reformed to comply with
the requirements of Code Section 423. This Section 11.5
shall take precedence over all other provisions in the Plan.
11.6
Applicable
Law
. The Plan shall be governed by the substantive laws
(excluding the conflict of laws rules) of the State of Kansas.
11.7
Amendment and
Termination
. The Board may amend, alter or terminate the Plan
at any time; provided, however, that no amendment which would amend or modify
the Plan in a manner requiring stockholder approval under Code Section 423 or
the requirements of any securities exchange on which the Shares are traded shall
be effective unless, within one year after it is adopted by the Board, it is
approved by the holders of a majority of the voting power of the Company’s
outstanding shares. In addition, the Committee (if appointed under
Section 3.1) may amend the Plan as provided in Section 3.3, subject to the
conditions set forth therein and in this Section 11.7.
If the Plan is terminated, the Board
may elect to terminate all outstanding options either prior to their expiration
or upon completion of the purchase of Shares on the next Purchase Date, or may
elect to permit options to expire in accordance with the terms of this Plan (and
participation to continue through such expiration dates). If the
options are terminated prior to expiration, all funds accumulated in
Participants’ Accounts as of the date the options are terminated shall be
returned to the Participants as soon as administratively feasible.
11.8
No Right of
Employment
. Neither the grant nor the exercise of any rights to purchase
Shares under this Plan nor anything in this Plan shall impose upon the Company
or Participating Subsidiary any obligation to employ or continue to employ any
employee. The right of the Company or Participating Subsidiary to
terminate any employee shall not be diminished or affected because any rights to
purchase Shares have been granted to such employee.
11.9
Requirements of
Law
. The Company shall not be required to sell, issue, or
deliver any Shares under this Plan if such sale, issuance, or delivery might
constitute a violation by the Company or the Participant of any provision of
law. Unless a registration statement under the Securities Act is in
effect with respect to the Shares proposed to be delivered under the Plan, the
Company shall not be required to issue such Shares if, in the opinion of the
Company or its counsel, such issuance would violate the Securities
Act. Regardless of whether such Shares have been registered under the
Securities Act or registered or qualified under the securities laws of any
state, the Company may impose restrictions upon the hypothecation or further
sale or transfer of such shares (including the placement of appropriate legends
on stock certificates) if, in the judgment of the Company or its counsel, such
restrictions are necessary or desirable to achieve compliance with the
provisions of the Securities Act, the securities laws of any state, or any other
law or are otherwise in the best interests of the Company. Any
determination by the Company or its counsel in connection with any of the
foregoing shall be final and binding on all parties.
If, in the opinion of the Company and
its counsel, any legend placed on a stock certificate representing Shares issued
under the Plan is no longer required in order to comply with applicable
securities or other laws, the holder of such certificate shall be entitled to
exchange such certificate for a certificate representing a like number of shares
lacking such legend.
The Company may, but shall not be
obligated to, register or qualify any securities covered by the
Plan. The Company shall not be obligated to take any other
affirmative action in order to cause the grant or exercise of any right or the
issuance, sale, or deliver of Shares pursuant to the exercise of any right to
comply with any law.
11.10
Gender
. When
used herein, masculine terms shall be deemed to include the feminine, except
when the context indicates to the contrary.
11.11
Withholding of
Taxes
. The Company or Participating Subsidiary may withhold
from any purchase of Shares under this Plan or any sale, transfer or other
disposition thereof any local, state, federal or foreign taxes, employment
taxes, or other taxes at such times and from such other amounts as it deems
appropriate. The Company or Participating Subsidiary may require the
Participant to remit an amount in cash sufficient to satisfy any required
withholding amounts to the Company or Participating Subsidiary, as the case may
be.
Executed this 8th day of December,
2009.
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GARMIN LTD.
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By:
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/s/ Min
H. Kao
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Min
H. Kao
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Chairman
and CEO
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GARMIN
LTD.
2005
EQUITY INCENTIVE PLAN
PERFORMANCE
SHARES AWARD AGREEMENT
To:
_______________________
("you" or the "Grantee")
Date of
Grant:
______________________________
NOTICE OF
GRANT
:
You have
been granted performance shares ("Performance Shares") relating to the common
shares, $0.005 par value per share, of Garmin Ltd. ("Shares"), subject to the
terms and conditions of the Garmin Ltd. 2005 Equity Incentive Plan, as amended
and restated on June 5, 2009 (the "Plan"), and the Award Agreement between you
and Garmin Ltd. (the "Company"), attached as Exhibit A. Provided you
satisfy the conditions set forth in this Notice of Grant and Exhibit A, the
Company agrees to pay you Shares as follows:
Number
of Performance Shares Granted:
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______________
Shares
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Performance
Condition Required
for
Grantee To Receive Award
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For
the period commencing _______ and ending __________, (the "Performance
Period"), the growth in the Company's Operating Income (as presented in
the Company’s annual audited consolidated financial statements included in
its annual reports on Form 10-K) must equal or exceed
__%.
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Date
Grantee Must Be Employed To Receive Award:
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______________,
2012
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Date
Payable:
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______________,
2012
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In order
to fully understand your rights under the Plan (a copy of which is attached) and
the Award Agreement (the "Award Agreement"), attached as Exhibit A, you are
encouraged to read the Plan and this document carefully. Please refer
to the Plan document for the definition of capitalized terms used in this
Agreement.
To
properly accept these Performance Shares, you must enter your E*Trade password
and click the "Accept" button on the previous screen. Acceptances shall be made
electronically within ten (10) days of your receipt of this Notice and Award
Agreement.
By
accepting these Performance Shares, you are also agreeing to be bound by Exhibit
A, including the restrictive covenants in Section 6 of Exhibit A
.
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GARMIN LTD.
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By:
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Name:
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Min
H. Kao
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Title:
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Chairman
and CEO
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EXHIBIT
A
AGREEMENT:
In
consideration of the mutual promises and covenants contained herein and other
good and valuable consideration paid by the Grantee to the Company, the Grantee
and the Company agree as follows:
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Section 1.
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Incorporation of
Plan
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All
provisions of this Award Agreement and the rights of the Grantee hereunder are
subject in all respects to the provisions of the Plan and the powers of the
Board therein provided. Capitalized terms used in this Award
Agreement but not defined shall have the meaning set forth in the
Plan.
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Section 2.
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Grant of Performance
Shares
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As of the
Date of Grant identified above, the Company grants to you, subject to the terms
and conditions set forth herein and in the Plan, the opportunity to receive that
number of unrestricted Shares identified opposite the heading "Number of
Performance Shares Granted" (the "Performance Shares") on the Notice of
Grant. All Performance Shares are forfeitable until such time as they
become nonforfeitable as provided herein. Provided (1) that
performance condition above identified opposite the heading "Performance
Condition Required for Grantee To Receive Award" on the Notice of Grant is
satisfied and (2) you are employed (and at all times since the Date of Grant
have been employed) by the Company on a Full-Time Basis (which, for purposes of
this Award Agreement, means regularly scheduled to work 30 hours or more per
week) and, unless your right to receive the Performance Shares has been
forfeited pursuant to Section 3 below, your Performance Shares will become
nonforeitable and you will be paid a number of unrestricted Shares (subject to
Section 12 below) equal to the aggregate number of Performance Shares on the
date above identified opposite the heading "Date Payable" on the Notice of
Grant.
1
For purposes of this
Agreement, except where the Board otherwise determines, a Grantee who,
immediately before taking a Company-approved leave of absence, was employed on a
Full-Time Basis will be considered employed on a Full-Time Basis during the
period of such Company-approved leave.
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Section 3.
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Effect of Termination
of Affiliation or Cessation as Full-Time
Employee
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If you
have a Termination of Affiliation or cease to be employed on a Full-Time Basis
for any reason, including termination by the Company with or without Cause,
voluntary resignation, change in employment status from full-time to part-time,
death, or Disability, the effect of such Termination of Affiliation or ceasing
to be employed on a Full-Time Basis on all or any portion of the Performance
Shares is as provided below.
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(a)
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If
at the end of the applicable Performance Period, the Performance Condition
set forth on the Notice of Grant is achieved but you incurred a
Termination of Affiliation on account of death or Disability, the
Performance Shares shall thereupon become nonforfeitable and the Company
shall, promptly settle all Performance Shares by delivery to you (or,
after your death, to your personal representative or designated
beneficiary) a number of unrestricted Shares equal to the number of your
Performance Shares.
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1 If on
the Date Payable, the Company has not had sufficient time to make a
determination of whether the applicable performance condition has been
satisfied, the Date Payable may be extended by the Company for up to 90-days
after the original Date Payable. In addition, if the Date Payable (as
extended, if applicable) is a Saturday or Sunday or any other non-business day,
then the Performance Shares payable to you on that date will be paid to you on
the next business day.
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(b)
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If
you have a Termination of Affiliation during the period ("Change of
Control Period") commencing on a Change of Control and ending on the first
anniversary of the Change of Control, which Termination of Affiliation is
initiated by the Company or a Subsidiary other than for Cause, or
initiated by the Grantee for Good Reason, then your Performance Shares
that were forfeitable shall thereupon become nonforfeitable and the
Company shall immediately settle all Performance Shares by delivery to you
a number of unrestricted Shares equal to the number of your Performance
Shares.
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(c)
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If
you have a Termination of Affiliation for Cause or for any reason other
than for death or Disability, or under the circumstances described
immediately above in Section 3(b), your Performance Shares, to the extent
forfeitable immediately before such Termination of Affiliation, shall
thereupon automatically be forfeited and you shall have no further rights
under this Award Agreement.
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(d)
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If
you cease to be employed on a Full-Time Basis for any reason other than
for death or Disability, your Performance Shares, to the extent
forfeitable immediately before such cessation of employment on a Full-Time
Basis, shall thereupon automatically be forfeited and you shall have no
further rights under this Award
Agreement.
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Section 4.
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Investment
Intent
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The
Grantee agrees that the Shares acquired pursuant to the vesting of one or more
tranches of Performance Shares shall be acquired for his/her own account for
investment only and not with a view to, or for resale in connection with, any
distribution or public offering thereof within the meaning of the Securities Act
of 1933 (the "1933 Act") or other applicable securities laws. If the Board so
determines, any share certificates issued pursuant to this Award Agreement shall
bear a legend to the effect that the Shares have been so
acquired. The Company may, but in no event shall be required to, bear
any expenses of complying with the 1933 Act, other applicable securities laws or
the rules and regulations of any national securities exchange or other
regulatory authority in connection with the registration, qualification, or
transfer, as the case may be, of this Award Agreement or any Shares acquired
hereunder. The foregoing restrictions on the transfer of the Shares shall be
inoperative if (a) the Company previously shall have been furnished with an
opinion of counsel, satisfactory to it, to the effect that such transfer will
not involve any violation of the 1933 Act and other applicable securities laws
or (b) the Shares shall have been duly registered in compliance with the 1933
Act and other applicable state or federal securities laws. If this Award
Agreement, or the Shares subject to this Award Agreement, are so registered
under the 1933 Act, the Grantee agrees that he will not make a public offering
of the said Shares except on a national securities exchange on which the common
shares of the Company are then listed.
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Section 5.
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Nontransferability of
Performance Shares
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No rights
under this Award Agreement relating to the Performance Shares may be sold,
transferred, pledged, assigned, or otherwise alienated or hypothecated,
including, unless specifically approved by the Company, any purported transfer
to a current spouse or former spouse in connection with a legal separation or
divorce proceeding. All rights with respect to the Performance Shares granted to
the Grantee shall be available during his or her lifetime only to the
Grantee.
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Section 6.
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Restrictive
Covenants
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As a
condition of this Award Agreement, the Grantee's right to the Performance
Shares, and in addition to any restrictive agreements the Grantee may have
entered into with the Company, the Grantee accepts and agrees to be bound as
follows:
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(a)
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Nondisclosure
of Award Agreement Terms
.
The Grantee
agrees not to disclose or cause to be disclosed at any time, nor authorize
anyone to disclose any information concerning this Award Agreement except
(i) as required by law, or (ii) to the Grantee's legal and financial
advisors who agree to be bound by this Paragraph
6(a).
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(b)
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Noncompetition.
During
the Grantee's employment and until one year after the Grantee ceases being
employed by or acting as a consultant or independent contractor to the
Company or any Subsidiary, the Grantee will not perform services as an
employee, director, officer, consultant, independent contractor or
advisor, or invest in, whether in the form of equity or debt, or otherwise
have an ownership interest in any company, entity or person that directly
competes anywhere in the United States, the United Kingdom, Taiwan, or in
any other location outside the United States, the United Kingdom or Taiwan
where the Company or a Subsidiary conducts or (to the Grantee's knowledge)
plans to conduct business. Nothing in this Section 6(b) shall,
however, restrict the Grantee from making an investment in and owning up
to one-percent (1%) of the common stock of any company whose stock is
listed on a national securities exchange or actively traded in an
over-the-counter market; provided that such investment does not give the
Grantee the right or ability to control or influence the policy decisions
of any direct competitor of the Company or a
Subsidiary.
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(c)
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Noninterference.
During
the Grantee's employment and until one year after the Grantee ceases being
employed by or acting as a consultant or independent contractor to the
Company or any Subsidiary, the Grantee will not, either directly or
indirectly through another business or person, solicit, entice away, or
otherwise interfere with any employee, customer, prospective customer,
vendor, prospective vendor, supplier or other similar business relation or
(to the Grantee's knowledge) prospective business relation of the Company
or any Subsidiary.
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(d)
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Nonsolicitation.
During
the Grantee's employment and until one year after the Grantee ceases being
employed by or acting as a consultant or independent contractor to the
Company or any Subsidiary, the Grantee will not, either directly or
indirectly through another business or person, hire, recruit, employ, or
attempt to hire, recruit or employ, or facilitate any such acts by others,
any person then currently employed by the Company or any
Subsidiary.
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(e)
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Confidentiality.
The
Grantee acknowledges that it is the policy of the Company and its
subsidiaries to maintain as secret and confidential all valuable and
unique information and techniques acquired, developed or used by the
Company and its subsidiaries relating to their businesses, operations,
employees and customers ("Confidential Information"). The
Grantee recognizes that the Confidential Information is the sole and
exclusive property of the Company and its subsidiaries, and that
disclosure of Confidential Information would cause damage to the Company
and its subsidiaries. The Grantee shall not at any time
disclose or authorize anyone else to disclose any Confidential Information
or proprietary information that (A) is disclosed to or known by the
Grantee as a result or as a consequence of or through the Grantee's
performance of services for the Company or any Subsidiary, (B) is not
publicly or generally known outside the Company and (C) relates in any
manner to the Company's business. This obligation will continue
even though the Grantee's employment with the Company or a Subsidiary may
have terminated. This paragraph 6(e) shall apply in addition
to, and not in derogation of any other confidentiality agreements that may
exist, now or in the future, between the Grantee and the Company or any
Subsidiary.
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(f)
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No
Detrimental Communications.
The Grantee agrees not to
disclose or cause to be disclosed at any time any untrue, negative,
adverse or derogatory comments or information about the Company or any
Subsidiary, about any product or service provided by the Company or any
Subsidiary, or about prospects for the future of the Company or any
Subsidiary.
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(g)
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Remedy.
The
Grantee acknowledges the consideration provided herein (absent the
Grantee's agreement to this Section 6) is more than the Company is
obligated to pay, and the Grantee further acknowledges that irreparable
harm would result from any breach of this Section and monetary damages
would not provide adequate relief or remedy. Accordingly, the Grantee
specifically agrees that, if the Grantee breaches any of the Grantee's
obligations under this Section 6, the Company and any Subsidiary shall be
entitled to injunctive relief therefor, and in particular, without
limiting the generality of the foregoing, neither the Company nor any
Subsidiary shall be precluded from pursuing any and all remedies they may
have at law or in equity for breach of such obligations. In
addition, this Award Agreement and all of Grantee's right hereunder shall
terminate immediately the first date on which the Grantee engages in such
activity and the Board shall be entitled on or after the first date on
which the Grantee engages in such activity to require the Grantee to
return any Shares obtained by the Grantee's upon vesting of any
Performance Shares to the Company and to require the Grantee to repay any
proceeds received at any time from the sale of Shares obtained by the
Grantee pursuant to the vesting of any Performance Shares (plus interest
on such amount from the date received at a rate equal to the prime lending
rate as announced from time to time in
The Wall Street
Journal
) and to recover all reasonable attorneys' fees and expenses
incurred in terminating this Award Agreement and recovering such Shares
and proceeds.
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Section 7.
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Status of the
Grantee
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The
Grantee shall not be deemed a shareholder of the Company with respect to any of
the Shares subject to this Award Agreement until such time as the underlying
Shares shall have been issued to him or her. The Company shall not be required
to issue or transfer any certificates for Shares pursuant to this Award
Agreement until all applicable requirements of law have been complied with and
such Shares shall have been duly listed on any securities exchange on which the
Shares may then be listed. Grantee (i) is not entitled to receive any
dividends or dividend equivalents, whether such dividends would be paid in cash
or in kind, or receive any other distributions made with respect to the
Performance Shares and (ii) does not have nor may he or she exercise any voting
rights with respect to any of the Performance Shares, in both cases (i) and (ii)
above, unless and until the actual Shares underlying the Performance Shares have
been delivered pursuant to this Award Agreement.
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Section 8.
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No Effect on Capital
Structure
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This
Award Agreement shall not affect the right of the Company to reclassify,
recapitalize or otherwise change its capital or debt structure or to merge,
consolidate, convey any or all of its assets, dissolve, liquidate, windup, or
otherwise reorganize.
Notwithstanding
any provision herein to the contrary, in the event of any change in the number
of outstanding Shares effected without receipt of consideration therefor by the
Company, by reason of a merger, reorganization, consolidation, recapitalization,
separation, liquidation, stock dividend, stock split, share combination or other
change in the corporate structure of the Company affecting the Shares, the
aggregate number and class of Shares subject to this Award Agreement shall be
automatically adjusted to accurately and equitably reflect the effect thereon of
such change; provided, however, that any fractional share resulting from such
adjustment shall be eliminated. In the event of a dispute concerning such
adjustment, the decision of the Board shall be conclusive.
This
Award Agreement may be amended only by a writing executed by the Company and the
Grantee which specifically states that it is amending this Award Agreement;
provided that this Award Agreement is subject to the power of the Board to amend
the Plan as provided therein. Except as otherwise provided in the
Plan, no such amendment shall materially adversely affect the Grantee's rights
under this Award Agreement without the Grantee's consent.
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Section
11.
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Board
Authority
|
Any
questions concerning the interpretation of this Award Agreement, any adjustments
required to be made under Sections 9 or 10 of this Award Agreement, and any
controversy which arises under this Award Agreement shall be settled by the
Board in its sole discretion.
At the
time the Performance Shares are delivered to you pursuant to this Award
Agreement, the Company will be obligated to pay withholding taxes on your
behalf. Accordingly, the Company shall have the power to withhold, or
require you to remit to the Company, an amount sufficient to satisfy any such
federal, state, local or foreign withholding tax requirements. At the
Company's discretion, withholding may be taken from other compensation payable
to you or may be satisfied by reducing the number of Performance Shares
deliverable to you. If the Company elects to reduce the number of
Performance Shares deliverable to you and less than the full value of a
Performance Share is needed to satisfy any applicable withholding taxes, the
Company will distribute to you the value of the remaining fractional share in
cash in an amount equal to the Fair Market Value of a Share as of the Date
Payable multiplied by the remaining fractional Performance Share.
Whenever
any notice is required or permitted hereunder, such notice must be given in
writing by (a) personal delivery, or (b) expedited, recognized delivery service
with proof of delivery, or (c) United States Mail, postage prepaid, certified
mail, return receipt requested, or (d) telecopy or email (provided that the
telecopy or email is confirmed). Any notice required or permitted to
be delivered hereunder shall be deemed to be delivered on the date which it was
personally delivered, sent to the intended addressee, or, whether actually
received or not, on the third business day after it is deposited in the United
States mail, certified or registered, postage prepaid, addressed to the person
who is to receive it at the address which such person has theretofore specified
by written notice delivered in accordance herewith. The Company or the Grantee
may change, at any time and from time to time, by written notice to the other,
the address specified for receiving notices. Until changed in
accordance herewith, the Company's address for receiving notices shall be Garmin
Ltd., Attention: General Counsel, 1200 East 151st Street, Olathe, KS
66062. Unless changed, the Grantee's address for receiving notices
shall be the last known address of the Grantee on the Company's
records. It shall be the Grantee's sole responsibility to notify the
Company as to any change in his or her address. Such notification
shall be made in accordance with this Section 13.
If any
part of this Award Agreement is declared by any court or governmental authority
to be unlawful or invalid, such unlawfulness or invalidity shall not serve to
invalidate any part of this Award Agreement not declared to be unlawful or
invalid. Any part so declared unlawful or invalid shall, if possible,
be construed in a manner which gives effect to the terms of such part to the
fullest extent possible while remaining lawful and
valid. Additionally, if any of the covenants in Section 6 are
determined by a court to be unenforceable in whole or in part because of such
covenant's duration or geographical or other scope, such court shall have the
power to modify the duration or scope of such provision as the case may be, so
as to cause such covenant, as so modified, to be enforceable.
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Section
15.
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Binding
Effect
|
This
Award Agreement shall bind, and, except as specifically provided herein, shall
inure to the benefit of the respective heirs, legal representatives, successors
and assigns of the parties hereto.
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Section
16.
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Governing
Law
|
This
Award Agreement and the rights of all persons claiming hereunder shall be
construed and determined in accordance with the laws of the State of Kansas
without giving effect to the principles of the Conflict of Laws to the
contrary.