Garmin Ltd 10-Q for FY2020 Q1

Garmin Ltd (GRMN)

10-Q 2020-04-29 For: 2020-03-28

Added on April 10, 2026

About this 10-Q

Garmin Ltd filed this 10-Q on April 29, 2020, covering the quarter ended March 28, 2020 (FY2020 Q1).

Headline figures

Quarter ended March 28, 2020, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $856.11M; up 11.8% from $766.05M a year earlier
Net income: $161.18M; up 15.0% from net income of $140.17M a year earlier
Diluted EPS: $0.84; up 13.5% from $0.74 a year earlier

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Switzerland		98-0229227
(State or other jurisdiction		(I.R.S. Employer
of incorporation or organization)		identification no.)

Mühlentalstrasse 2
8200 Schaffhausen
Switzerland		N/A
(Address of principal executive offices)		(Zip Code)

Registered Shares, CHF 0.10 Per Share Par Value		GRMN		The Nasdaq Stock Market, LLC
(Title of each class)		(Trading Symbol)		(Name of each exchange on which registered)

Large Accelerated Filer	☑	Accelerated Filer	☐
Non-accelerated Filer	☐	Smaller reporting company	☐
		Emerging growth company	☐

		Page

Part I - Financial Information		1

Item 1.	Condensed Consolidated Financial Statements	1

	Condensed Consolidated Balance Sheets at March 28, 2020 and December 28, 2019 (Unaudited)	1

	Condensed Consolidated Statements of Income for the 13-Weeks ended March 28, 2020 and March 30, 2019 (Unaudited)	2

	Condensed Consolidated Statements of Comprehensive Income for the 13-Weeks ended March 28, 2020 and March 30, 2019 (Unaudited)	3

	Condensed Consolidated Statements of Stockholders’ Equity for the 13-Weeks ended March 28, 2020 and March 30, 2019 (Unaudited)	4

	Condensed Consolidated Statements of Cash Flows for the 13-Weeks ended March 28, 2020 and March 30, 2019 (Unaudited)	5

	Notes to Condensed Consolidated Financial Statements (Unaudited)	6

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	15

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	21

Item 4.	Controls and Procedures	21

Part II - Other Information		22

Item 1.	Legal Proceedings	22

Item 1A.	Risk Factors	22

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	23

Item 3.	Defaults Upon Senior Securities	23

Item 4.	Mine Safety Disclosures	23

Item 5.	Other Information	23

Item 6.	Exhibits	24

Signature Page		25

Index to Exhibits		26

	March 28, 2020			December 28, 2019
Assets
Current assets:
Cash and cash equivalents	$	1,048,604		$	1,027,567
Marketable securities		391,646			376,463
Accounts receivable, net		500,242			706,763
Inventories		790,180			752,908
Deferred costs		23,650			25,105
Prepaid expenses and other current assets		174,564			169,044
Total current assets		2,928,886			3,057,850

Property and equipment, net		754,549			728,921
Operating lease right-of-use assets		66,497			63,589

Restricted cash		283			71
Marketable securities		1,199,613			1,205,475
Deferred income taxes		263,687			268,518
Noncurrent deferred costs		21,436			23,493
Intangible assets, net		658,777			659,629
Other assets		160,265			159,253
Total assets	$	6,053,993		$	6,166,799

Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	200,281		$	240,831
Salaries and benefits payable		110,611			128,426
Accrued warranty costs		39,368			39,758
Accrued sales program costs		58,678			112,578
Deferred revenue		89,817			94,562
Accrued royalty costs		5,259			15,401
Accrued advertising expense		19,752			35,142
Other accrued expenses		94,760			95,060
Income taxes payable		54,466			56,913
Dividend payable		108,880			217,262
Total current liabilities		781,872			1,035,933

Deferred income taxes		117,792			114,754
Noncurrent income taxes		104,853			105,771
Noncurrent deferred revenue		61,992			67,329
Noncurrent operating lease liabilities		52,834			49,238
Other liabilities		250			278

Stockholders’ equity:
Shares, CHF 0.10 par value, 198,077 shares authorized and issued; 191,017 shares outstanding at March 28, 2020 and 190,686 shares outstanding at December 28, 2019		17,979			17,979
Additional paid-in capital		1,830,052			1,835,622
Treasury stock		(335,491	)		(345,040	)
Retained earnings		3,390,053			3,229,061
Accumulated other comprehensive income		31,807			55,874
Total stockholders’ equity		4,934,400			4,793,496
Total liabilities and stockholders’ equity	$	6,053,993		$	6,166,799

	13-Weeks Ended
	March 28, 2020			March 30, 2019
Net sales	$	856,108		$	766,050
Cost of goods sold		349,168			314,352
Gross profit		506,940			451,698

Advertising expense		26,880			27,615
Selling, general and administrative expenses		137,186			126,781
Research and development expense		165,392			145,919
Total operating expense		329,458			300,315

Operating income		177,482			151,383

Other income (expense):
Interest income		12,026			13,704
Foreign currency (losses) gains		(15,423	)		314
Other income (expense)		3,550			864
Total other income:		153			14,882

Income before income taxes		177,635			166,265

Income tax provision		16,455			26,092

Net income	$	161,180		$	140,173

Net income per share:
Basic	$	0.84		$	0.74
Diluted	$	0.84		$	0.74

Weighted average common shares outstanding:
Basic		190,803			189,601
Diluted		191,684			190,599

	Common Stock		Additional Paid-In Capital			Treasury Stock			Retained Earnings			Accumulated Other Comprehensive Income (Loss)			Total
Balance at December 29, 2018	$	17,979	$	1,823,638		$	(397,692	)	$	2,710,619		$	8,430		$	4,162,974
Net income		—		—			—			140,173			—			140,173
Translation adjustment		—		—			—			—			(9,235	)		(9,235	)
Adjustment related to unrealized gains (losses) on available-for-sale securities net of income tax effects of $2,905		—		—			—			—			19,143			19,143
Comprehensive income																150,081
Dividends declared		—		—			—			(204	)		—			(204	)
Issuance of treasury stock related to equity awards		—		(28,571	)		28,571			—			—			—
Stock compensation		—		15,129			—			—			—			15,129
Purchase of treasury stock related to equity awards		—					(12,694	)		—			—			(12,694	)
Balance at March 30, 2019	$	17,979	$	1,810,196		$	(381,815	)	$	2,850,588		$	18,338		$	4,315,286

	Common Stock		Additional Paid-In Capital			Treasury Stock			Retained Earnings			Accumulated Other Comprehensive Income (Loss)			Total
Balance at December 28, 2019	$	17,979	$	1,835,622		$	(345,040	)	$	3,229,061		$	55,874		$	4,793,496
Net income		—		—			—			161,180			—			161,180
Translation adjustment		—		—			—			—			(6,176	)		(6,176	)
Adjustment related to unrealized gains (losses) on available-for-sale securities net of income tax effects of $2,807		—		—			—			—			(17,891	)		(17,891	)
Comprehensive income																137,113
Dividends declared		—		—			—			(188	)		—			(188	)
Issuance of treasury stock related to equity awards		—		(21,129	)		21,129			—			—			—
Stock compensation		—		15,559			—			—			—			15,559
Purchase of treasury stock related to equity awards		—					(11,580	)		—			—			(11,580	)
Balance at March 28, 2020	$	17,979	$	1,830,052		$	(335,491	)	$	3,390,053		$	31,807		$	4,934,400

	March 28, 2020		December 28, 2019
Raw materials	$	256,594	$	260,070
Work-in-process		133,872		133,157
Finished goods		399,714		359,681
Inventories	$	790,180	$	752,908

	13-Weeks Ended
	March 28, 2020		March 30, 2019
Numerator:
Numerator for basic and diluted net income per share - net income	$	161,180	$	140,173

Denominator:
Denominator for basic net income per share – weighted-average common shares		190,803		189,601

Effect of dilutive securities – employee stock options and stock appreciation rights		881		998

Denominator for diluted net income per share – adjusted weighted-average common shares		191,684		190,599

Basic net income per share	$	0.84	$	0.74

Diluted net income per share	$	0.84	$	0.74

	Reportable Segments
	Fitness		Outdoor		Aviation		Auto			Marine		Total
13-Weeks Ended March 28, 2020
Net sales	$	223,601	$	175,102	$	188,599	$	105,801		$	163,005	$	856,108
Gross profit		112,325		112,258		138,808		49,339			94,210		506,940
Operating income		31,011		47,166		59,321		(175	)		40,159		177,482

13-Weeks Ended March 30, 2019
Net sales	$	180,256	$	154,051	$	170,776	$	126,999		$	133,968	$	766,050
Gross profit		90,835		97,488		127,983		57,337			78,055		451,698
Operating income		18,126		41,953		57,618		8,213			25,473		151,383

	Americas		APAC		EMEA		Total
March 28, 2020
Property and equipment, net	$	454,637	$	230,369	$	69,543	$	754,549

March 30, 2019
Property and equipment, net	$	413,632	$	212,933	$	45,734	$	672,299


	Level 1	Unadjusted quoted prices in active markets for the identical asset or liability


	Level 2	Observable inputs for the asset or liability, either directly or indirectly, such as quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, or inputs other than quoted prices that are observable for the asset or liability

	Available-For-Sale Securities as of March 28, 2020
	Fair Value Level	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
U.S. Treasury securities	Level 2	$	15,174	$	103	$	—		$	15,277
Agency securities	Level 2		39,743		213		—			39,956
Mortgage-backed securities	Level 2		289,553		1,646		(1,344	)		289,855
Corporate securities	Level 2		1,000,670		4,792		(19,800	)		985,662
Municipal securities	Level 2		178,002		1,589		(497	)		179,094
Other	Level 2		85,812		63		(4,460	)		81,415
Total		$	1,608,954	$	8,406	$	(26,101	)	$	1,591,259

	Available-For-Sale Securities as of December 28, 2019
	Fair Value Level	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
U.S. Treasury securities	Level 2	$	15,204	$	5	$	(30	)	$	15,179
Agency securities	Level 2		64,582		120		(27	)		64,675
Mortgage-backed securities	Level 2		256,417		90		(2,485	)		254,022
Corporate securities	Level 2		980,590		8,806		(3,746	)		985,650
Municipal securities	Level 2		163,898		1,092		(235	)		164,755
Other	Level 2		98,246		111		(700	)		97,657
Total		$	1,578,937	$	10,224	$	(7,223	)	$	1,581,938

	13-Weeks Ended
	March 28, 2020			March 30, 2019
Operating Activities:
Net income	$	161,180		$	140,173
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation		18,198			16,832
Amortization		10,006			7,179
(Gain) loss on sale of property and equipment		(1,846	)		227
Unrealized foreign currency losses		16,856			3,124
Deferred income taxes		10,378			9,105
Stock compensation expense		15,559			15,129
Realized (gain) loss on marketable securities		(272	)		60
Changes in operating assets and liabilities, net of acquisitions:
Accounts receivable, net of allowance for doubtful accounts		197,157			112,896
Inventories		(47,318	)		(39,067	)
Other current and non-current assets		(4,367	)		2,930
Accounts payable		(39,851	)		(32,786	)
Other current and non-current liabilities		(98,219	)		(76,030	)
Deferred revenue		(10,078	)		(6,744	)
Deferred costs		3,511			1,938
Income taxes payable		(5,020	)		9,616
Net cash provided by operating activities		225,874			164,582

Investing activities:
Purchases of property and equipment		(41,361	)		(30,094	)
Proceeds from sale of property and equipment		1,907			47
Purchase of intangible assets		(953	)		(413	)
Purchase of marketable securities		(344,342	)		(83,068	)
Redemption of marketable securities		311,935			80,907
Acquisitions, net of cash acquired		(6,058	)		—
Net cash used in investing activities		(78,872	)		(32,621	)

Financing activities:
Dividends		(108,571	)		(200,687	)
Purchase of treasury stock related to equity awards		(11,580	)		(12,694	)
Net cash used in financing activities		(120,151	)		(213,381	)

Effect of exchange rate changes on cash and cash equivalents		(5,602	)		(4,286	)

Net increase (decrease) in cash, cash equivalents, and restricted cash		21,249			(85,706	)

	Amortized Cost		Fair Value
Due in one year or less	$	392,059	$	391,646
Due after one year through five years		1,044,059		1,033,884
Due after five years through ten years		162,618		156,442
Due after ten years		10,218		9,287
	$	1,608,954	$	1,591,259

	13-Weeks Ended
	March 28, 2020
	Deferred Revenue ⁽¹⁾			Deferred Costs ⁽²⁾
Balance, beginning of period	$	161,891		$	48,598
Deferrals in period		35,730			4,697
Recognition of deferrals in period		(45,812	)		(8,209	)
Balance, end of period	$	151,809		$	45,086

	As of March 28, 2020
	Less than 12 Consecutive Months					12 Consecutive Months or Longer					Total
	Gross Unrealized Losses			Fair Value		Gross Unrealized Losses			Fair Value		Gross Unrealized Losses			Fair Value
U.S. Treasury securities	$	—		$	—	$	—		$	—	$	—		$	—
Agency securities		—			—		—			—		—			—
Mortgage-backed securities		(1,249	)		107,097		(95	)		3,551		(1,344	)		110,648
Corporate securities		(18,300	)		640,058		(1,500	)		18,036		(19,800	)		658,094
Municipal securities		(497	)		54,695		—			—		(497	)		54,695
Other		(4,032	)		58,885		(428	)		4,972		(4,460	)		63,857
Total	$	(24,078	)	$	860,735	$	(2,023	)	$	26,559	$	(26,101	)	$	887,294

	As of December 28, 2019
	Less than 12 Consecutive Months					12 Consecutive Months or Longer					Total
	Gross Unrealized Losses			Fair Value		Gross Unrealized Losses			Fair Value		Gross Unrealized Losses			Fair Value
U.S. Treasury securities	$	—		$	—	$	(30	)	$	13,087	$	(30	)	$	13,087
Agency securities		(16	)		20,808		(11	)		20,812		(27	)		41,620
Mortgage-backed securities		(745	)		79,007		(1,740	)		86,392		(2,485	)		165,399
Corporate securities		(1,585	)		183,691		(2,161	)		100,926		(3,746	)		284,617
Municipal securities		(218	)		34,165		(17	)		9,522		(235	)		43,687
Other		(410	)		34,540		(290	)		21,559		(700	)		56,099
Total	$	(2,974	)	$	352,211	$	(4,249	)	$	252,298	$	(7,223	)	$	604,509

	13-Weeks Ended March 28, 2020
	Foreign currency translation adjustment			Net gains (losses) on available-for-sale securities			Total
Balance - beginning of period	$	55,289		$	585		$	55,874
Other comprehensive income before reclassification, net of income tax benefit of $2,764		(6,176	)		(17,662	)		(23,838	)
Amounts reclassified from Accumulated other comprehensive income to Other income (expense), net of income tax expense of $43 included in Income tax provision		—			(229	)		(229	)
Net current-period other comprehensive income		(6,176	)		(17,891	)		(24,067	)
Balance - end of period	$	49,113		$	(17,306	)	$	31,807

	Auto Revenue by Major Product Category
	13-Weeks Ended
	March 28, 2020			March 30, 2019
Auto PND		56	%		59	%
Auto OEM		44	%		41	%

Net Sales	13-Weeks Ended March 28, 2020			Year-over-Year Change			13-Weeks Ended March 30, 2019
Fitness	$	223,601			24	%	$	180,256
Percentage of Total Net Sales		26	%					24	%
Outdoor		175,102			14	%		154,051
Percentage of Total Net Sales		21	%					20	%
Aviation		188,599			10	%		170,776
Percentage of Total Net Sales		22	%					22	%
Auto		105,801			(17	%)		126,999
Percentage of Total Net Sales		12	%					17	%
Marine		163,005			22	%		133,968
Percentage of Total Net Sales		19	%					17	%
Total	$	856,108			12	%	$	766,050

Advertising	13-Weeks Ended March 28, 2020			Year-over-Year Change			13-Weeks Ended March 30, 2019
Fitness	$	10,139			2	%	$	9,989
Percentage of Segment Net Sales		5	%					6	%
Outdoor		6,908			(4	%)		7,171
Percentage of Segment Net Sales		4	%					5	%
Aviation		1,311			7	%		1,222
Percentage of Segment Net Sales		1	%					1	%
Auto		2,380			(18	%)		2,902
Percentage of Segment Net Sales		2	%					2	%
Marine		6,142			(3	%)		6,331
Percentage of Segment Net Sales		4	%					5	%
Total	$	26,880			(3	%)	$	27,615
Percentage of Total Net Sales		3	%					4	%

Selling, General & Admin. Expenses	13-Weeks Ended March 28, 2020			Year-over-Year Change			13-Weeks Ended March 30, 2019
Fitness	$	42,652			14	%	$	37,573
Percentage of Segment Net Sales		19	%					21	%
Outdoor		33,070			17	%		28,302
Percentage of Segment Net Sales		19	%					18	%
Aviation		18,776			20	%		15,628
Percentage of Segment Net Sales		10	%					9	%
Auto		17,307			(10	%)		19,295
Percentage of Segment Net Sales		16	%					15	%
Marine		25,381			(2	%)		25,983
Percentage of Segment Net Sales		16	%					19	%
Total	$	137,186			8	%	$	126,781
Percentage of Total Net Sales		16	%					17	%

Research & Development	13-Weeks Ended March 28, 2020			Year-over-Year Change			13-Weeks Ended March 30, 2019
Fitness	$	28,523			13	%	$	25,147
Percentage of Segment Net Sales		13	%					14	%
Outdoor		25,114			25	%		20,062
Percentage of Segment Net Sales		14	%					13	%
Aviation		59,400			11	%		53,515
Percentage of Segment Net Sales		31	%					31	%
Auto		29,827			11	%		26,927
Percentage of Segment Net Sales		28	%					21	%
Marine		22,528			11	%		20,268
Percentage of Segment Net Sales		14	%					15	%
Total	$	165,392			13	%	$	145,919
Percentage of Total Net Sales		19	%					19	%

Exhibit 31.1		Certification of Chief Executive Officer pursuant to Exchange Act Rule 13a-14(a) or 15d-14(a).

Exhibit 31.2		Certification of Chief Financial Officer pursuant to Exchange Act Rule 13a-14(a) or 15d-14(a).

Exhibit 32.1		Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

Exhibit 32.2		Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

Exhibit 101.INS		XBRL Instance Document – the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.

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Exhibit 101.CAL		Inline XBRL Taxonomy Extension Calculation Linkbase

Exhibit 101.DEF		Inline XBRL Taxonomy Extension Definition Linkbase

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Exhibit 104		Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

	GARMIN LTD.

	By	/s/ Douglas G. Boessen
		Douglas G. Boessen
		Chief Financial Officer
		(Principal Financial Officer and
		Principal Accounting Officer)

Exhibit No.		Description

Exhibit 31.1		Certification of Chief Executive Officer pursuant to Exchange Act Rule 13a-14(a) or 15d-14(a).

Exhibit 31.2		Certification of Chief Financial Officer pursuant to Exchange Act Rule 13a-14(a) or 15d-14(a).

Exhibit 32.1		Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

Exhibit 32.2		Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

Exhibit 101.INS		XBRL Instance Document – the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.

Exhibit 101.SCH		Inline XBRL Taxonomy Extension Schema

Exhibit 101.CAL		Inline XBRL Taxonomy Extension Calculation Linkbase

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Exhibit 101.PRE		Inline XBRL Taxonomy Extension Presentation Linkbase

Exhibit 104		Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)