Garmin Reports First Quarter 2010 Results with Strong Margins and Pro Forma Earnings Growth

CAYMAN ISLANDS — (BUSINESS WIRE) — May 5, 2010 — Garmin Ltd. (Nasdaq: GRMN) today announced results for the fiscal quarter ended March 27, 2010.

First Quarter 2010 Financial Summary:

  • Total revenue of $431 million, down 1% from $437 million in first quarter 2009
    • Automotive/Mobile segment revenue decreased 15% to $221 million
    • Outdoor/Fitness segment revenue increased 28% to $103 million
    • Marine segment revenue increased 9% to $41 million
    • Aviation segment revenue increased 12% to $66 million
  • Europe and Asia revenues grew, while North America revenues declined:
    • North America revenue was $243 million compared to $265 million, down 8%
    • Europe revenue was $145 million compared to $144 million, up 1%
    • Asia revenue was $43 million compared to $28 million, up 54%
  • Gross margin increased both sequentially and year-over-year to 54% for first quarter 2010 from 46% in fourth quarter 2009 and 45% in first quarter 2009
  • Operating margin increased year-over-year to 19%, compared to 13% in first quarter 2009
  • Earnings per share decreased 21% to $0.19 from $0.24 in first quarter 2009; pro forma EPS increased 52% to $0.38 from $0.25 in the same quarter in 2009 (Pro forma earnings per share excludes the impact of foreign currency transaction gain or loss)
  • Generated $196 million of free cash flow in first quarter 2010

Business Highlights:

  • Improved margins allowing us to post pro forma earnings growth in a period of declining revenue.
  • Posted strong growth in the outdoor/fitness segment as we continued to expand the product category in this market.
  • Recorded year-over-year growth in both aviation and marine as these markets have begun to show signs of stabilization.
  • Announced the Forerunner® 110 – the newest of our fitness watches which provides essential real-time workout data at an affordable price for runners, joggers and walkers.
  • Launched the GPSMAP 6000 and 7000 series chartplotters featuring Garmin G Motion™ technology with superior map panning and zooming
  • Announced our proposed redomestication to Switzerland pending shareholder approval on May 20th.
  • Announced our 2010 annual cash dividend in the amount of $1.50 per share representing a one-time increase from $0.75 per share.
  • Repurchased 1.4 million shares of GRMN in the first quarter.

Executive overview from Dr. Min Kao, Chairman and Chief Executive Officer:

“The first quarter of 2010 provided mixed results but we view the overall trends in the business as positive indicators for the remainder of the year,” said Dr. Min Kao, chairman and chief executive officer of Garmin Ltd. “While excess channel inventory led to a decline in the sell-in of PNDs, sell-through trends of our major United States retail partners continued to show year-over-year growth. In addition, we generated strong revenue and margins in our outdoor/fitness, aviation and marine segments which allowed us to post pro forma earnings per share growth of 52% in the quarter.

Looking specifically at the auto/mobile segment, we believe that inventory levels normalized toward the end of first quarter and that sell-in to the retail channel has begun to more closely align to sell-through trends in the second quarter. We anticipate that this segment will improve sequentially throughout the remainder of 2010. The Asian market improved significantly in the first quarter with 51% PND unit growth. We experienced strong results throughout much of the region and plan to build on this success in this growing market. Pricing was a positive indicator in the quarter, with the average selling price (ASP) improving both year-over-year and sequentially. Moving into the second quarter, we believe that we are well-positioned in the industry with new product introductions and promotional activities for the “dads and grads” selling season.

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