10-Q 1 grmn-20220326.htm 10-Q 10-Q
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United States

Securities and Exchange Commission

Washington, D.C. 20549

 

 

FORM 10-Q

 

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended March 26, 2022

 

or

 

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 001-41118

 

 

GARMIN LTD.

(Exact name of Company as specified in its charter)

 

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)

 

Company’s telephone number, including area code: +41 52 630 1600

 

Securities registered pursuant to Section 12(b) of the Act:

 

Registered Shares, CHF 0.10 Per Share Par Value

 

GRMN

 

New York Stock Exchange

(Title of each class)

 

(Trading Symbol)

 

(Name of each exchange on which registered)

 

Indicate by check mark whether the Company (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 Company was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

YesNO

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

YesNO

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large Accelerated Filer

 

Accelerated Filer

Non-accelerated Filer

 

Smaller reporting company

 

 

 

Emerging growth company

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. YES NO

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

YES NO

 

Number of shares outstanding of the registrant’s common shares as of April 22, 2022

Registered Shares, CHF 0.10 par value: 193,125,036 (excluding treasury shares)

 

 

 

 


 

Garmin Ltd.

Form 10-Q

Quarter Ended March 26, 2022

 

Table of Contents

 

 

 

 

 

Page

 

 

 

 

 

Part I - Financial Information

 

1

 

 

 

 

 

Item 1.

 

Condensed Consolidated Financial Statements

 

1

 

 

 

 

 

 

 

Condensed Consolidated Balance Sheets at March 26, 2022 and December 25, 2021 (Unaudited)

 

1

 

 

 

 

 

 

 

Condensed Consolidated Statements of Income for the 13-Weeks ended March 26, 2022 and March 27, 2021 (Unaudited)

 

2

 

 

 

 

 

 

 

Condensed Consolidated Statements of Comprehensive Income for the 13-Weeks ended March 26, 2022 and March 27, 2021 (Unaudited)

 

3

 

 

 

 

 

 

 

Condensed Consolidated Statements of Stockholders’ Equity for the 13-Weeks ended March 26, 2022 and March 27, 2021 (Unaudited)

 

4

 

 

 

 

 

 

 

Condensed Consolidated Statements of Cash Flows for the 13-Weeks ended March 26, 2022 and March 27, 2021 (Unaudited)

 

5

 

 

 

 

 

 

 

Notes to Condensed Consolidated Financial Statements (Unaudited)

 

6

 

 

 

 

 

Item 2.

 

Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

13

 

 

 

 

 

Item 3.

 

Quantitative and Qualitative Disclosures About Market Risk

 

18

 

 

 

 

 

Item 4.

 

Controls and Procedures

 

18

 

 

 

 

 

Part II - Other Information

 

19

 

 

 

 

 

Item 1.

 

Legal Proceedings

 

19

 

 

 

 

 

Item 1A.

 

Risk Factors

 

19

 

 

 

 

 

Item 2.

 

Unregistered Sales of Equity Securities and Use of Proceeds

 

19

 

 

 

 

 

Item 3.

 

Defaults Upon Senior Securities

 

19

 

 

 

 

 

Item 4.

 

Mine Safety Disclosures

 

19

 

 

 

 

 

Item 5.

 

Other Information

 

19

 

 

 

 

 

Item 6.

 

Exhibits

 

20

 

 

 

 

 

Signature Page

 

21

 

 

i


 

Part I - Financial Information

Item I - Condensed Consolidated Financial Statements

Garmin Ltd. and Subsidiaries

 

Condensed Consolidated Balance Sheets (Unaudited)

(In thousands, except per share information)

 

 

 

March 26,
2022

 

 

December 25,
2021

 

Assets

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

1,417,531

 

 

$

1,498,058

 

Marketable securities

 

 

375,237

 

 

 

347,980

 

Accounts receivable, net

 

 

599,733

 

 

 

843,445

 

Inventories

 

 

1,339,530

 

 

 

1,227,609

 

Deferred costs

 

 

15,003

 

 

 

15,961

 

Prepaid expenses and other current assets

 

 

335,169

 

 

 

328,719

 

Total current assets

 

 

4,082,203

 

 

 

4,261,772

 

 

 

 

 

 

 

 

Property and equipment, net

 

 

1,092,520

 

 

 

1,067,478

 

Operating lease right-of-use assets

 

 

101,198

 

 

 

89,457

 

Noncurrent marketable securities

 

 

1,238,500

 

 

 

1,268,698

 

Deferred income tax assets

 

 

301,718

 

 

 

260,205

 

Noncurrent deferred costs

 

 

11,396

 

 

 

12,361

 

Goodwill

 

 

572,996

 

 

 

575,080

 

Other intangible assets, net

 

 

209,325

 

 

 

215,993

 

Other noncurrent assets

 

 

93,393

 

 

 

103,383

 

Total assets

 

$

7,703,249

 

 

$

7,854,427

 

 

 

 

 

 

 

 

Liabilities and Stockholders’ Equity

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Accounts payable

 

$

298,992

 

 

$

370,048

 

Salaries and benefits payable

 

 

170,835

 

 

 

211,371

 

Accrued warranty costs

 

 

40,698

 

 

 

45,467

 

Accrued sales program costs

 

 

68,715

 

 

 

121,514

 

Other accrued expenses

 

 

209,155

 

 

 

225,988

 

Deferred revenue

 

 

86,444

 

 

 

87,654

 

Income taxes payable

 

 

148,268

 

 

 

128,083

 

Dividend payable

 

 

129,394

 

 

 

258,023

 

Total current liabilities

 

 

1,152,501

 

 

 

1,448,148

 

 

 

 

 

 

 

 

Deferred income tax liabilities

 

 

117,649

 

 

 

117,595

 

Noncurrent income taxes payable

 

 

62,732

 

 

 

62,539

 

Noncurrent deferred revenue

 

 

39,061

 

 

 

41,618

 

Noncurrent operating lease liabilities

 

 

82,127

 

 

 

70,044

 

Other noncurrent liabilities

 

 

337

 

 

 

324

 

 

 

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

 

 

Shares, CHF 0.10 par value, 198,077 shares authorized and issued; 193,125
   shares outstanding at March 26, 2022 and
192,608 shares outstanding
   at December 25, 2021

 

 

17,979

 

 

 

17,979

 

Additional paid-in capital

 

 

1,982,561

 

 

 

1,960,722

 

Treasury stock

 

 

(294,711

)

 

 

(303,114

)

Retained earnings

 

 

4,532,102

 

 

 

4,320,737

 

Accumulated other comprehensive income

 

 

10,911

 

 

 

117,835

 

Total stockholders’ equity

 

 

6,248,842

 

 

 

6,114,159

 

Total liabilities and stockholders’ equity

 

$

7,703,249

 

 

$

7,854,427

 

 

See accompanying notes.

1


 

Garmin Ltd. and Subsidiaries

Condensed Consolidated Statements of Income (Unaudited)

(In thousands, except per share information)

 

 

 

13-Weeks Ended

 

 

 

March 26,
2022

 

 

March 27,
2021

 

Net sales

 

$

1,172,662

 

 

$

1,072,327

 

Cost of goods sold

 

 

510,183

 

 

 

430,771

 

Gross profit

 

 

662,479

 

 

 

641,556

 

 

 

 

 

 

 

 

Advertising expense

 

 

34,133

 

 

 

31,061

 

Selling, general and administrative expenses

 

 

190,784

 

 

 

171,987

 

Research and development expense

 

 

209,006

 

 

 

188,849

 

Total operating expense

 

 

433,923

 

 

 

391,897

 

 

 

 

 

 

 

 

Operating income

 

 

228,556

 

 

 

249,659

 

Other income (expense):

 

 

 

 

 

 

Interest income

 

 

7,553

 

 

 

7,652

 

Foreign currency losses

 

 

(3,506

)

 

 

(8,281

)

Other income

 

 

3,261

 

 

 

1,484

 

Total other income (expense)

 

 

7,308

 

 

 

855

 

 

 

 

 

 

 

 

Income before income taxes

 

 

235,864

 

 

 

250,514

 

Income tax provision

 

 

24,272

 

 

 

30,485

 

Net income

 

$

211,592

 

 

$

220,029

 

 

 

 

 

 

 

 

Net income per share:

 

 

 

 

 

 

Basic

 

$

1.10

 

 

$

1.15

 

Diluted

 

$

1.09

 

 

$

1.14

 

 

 

 

 

 

 

 

Weighted average common shares outstanding:

 

 

 

 

 

 

Basic

 

 

192,887

 

 

 

191,896

 

Diluted

 

 

193,579

 

 

 

192,810

 

 

See accompanying notes.

2


 

Garmin Ltd. and Subsidiaries

Condensed Consolidated Statements of Comprehensive Income (Unaudited)

(In thousands)

 

 

 

13-Weeks Ended

 

 

 

March 26,
2022

 

 

March 27,
2021

 

Net income

 

$

211,592

 

 

$

220,029

 

Foreign currency translation adjustment

 

 

(56,912

)

 

 

(35,291

)

Change in fair value of available-for-sale marketable securities, net of deferred taxes

 

 

(50,012

)

 

 

(7,884

)

Comprehensive income

 

$

104,668

 

 

$

176,854

 

 

 

See accompanying notes.

3


 

Garmin Ltd. and Subsidiaries

Condensed Consolidated Statements of Stockholders’ Equity (Unaudited)

For the 13-Weeks Ended March 26, 2022 and March 27, 2021

(In thousands, except per share information)

 

 

 

 

Common
Stock

 

 

Additional
Paid-In
Capital

 

 

Treasury
Stock

 

 

Retained
Earnings

 

 

Accumulated
Other
Comprehensive
Income (Loss)

 

 

Total

 

Balance at December 26, 2020

 

$

17,979

 

 

$

1,880,354

 

 

$

(320,016

)

 

$

3,754,372

 

 

$

183,427

 

 

$

5,516,116

 

Net income

 

 

 

 

 

 

 

 

 

 

 

220,029

 

 

 

 

 

 

220,029

 

Translation adjustment

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(35,291

)

 

 

(35,291

)

Adjustment related to unrealized gains (losses) on available-for-sale securities net of income tax effects of $2,231

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(7,884

)

 

 

(7,884

)

Comprehensive income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

176,854

 

Dividends declared

 

 

 

 

 

 

 

 

 

 

 

(217

)

 

 

 

 

 

(217

)

Issuance of treasury stock related to equity awards

 

 

 

 

 

(10,118

)

 

 

27,775

 

 

 

 

 

 

 

 

 

17,657

 

Stock compensation

 

 

 

 

 

22,698

 

 

 

 

 

 

 

 

 

 

 

 

22,698

 

Purchase of treasury stock related to equity awards

 

 

 

 

 

 

 

 

(17,281

)

 

 

 

 

 

 

 

 

(17,281

)

Balance at March 27, 2021

 

$

17,979

 

 

$

1,892,934

 

 

$

(309,522

)

 

$

3,974,184

 

 

$

140,252

 

 

$

5,715,827

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common
Stock

 

 

Additional
Paid-In
Capital

 

 

Treasury
Stock

 

 

Retained
Earnings

 

 

Accumulated
Other
Comprehensive
Income (Loss)

 

 

Total

 

Balance at December 25, 2021

 

$

17,979

 

 

$

1,960,722

 

 

$

(303,114

)

 

$

4,320,737

 

 

$

117,835

 

 

$

6,114,159

 

Net income

 

 

 

 

 

 

 

 

 

 

 

211,592

 

 

 

 

 

 

211,592

 

Translation adjustment

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(56,912

)

 

 

(56,912

)

Adjustment related to unrealized gains (losses) on available-for-sale securities net of income tax effects of $14,701

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(50,012

)

 

 

(50,012

)

Comprehensive income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

104,668

 

Dividends declared

 

 

 

 

 

 

 

 

 

 

 

(227

)

 

 

 

 

 

(227

)

Issuance of treasury stock related to equity awards

 

 

 

 

 

(2,867

)

 

 

23,013

 

 

 

 

 

 

 

 

 

20,146

 

Stock compensation

 

 

 

 

 

24,706

 

 

 

 

 

 

 

 

 

 

 

 

24,706

 

Purchase of treasury stock related to equity awards

 

 

 

 

 

 

 

 

(14,610

)

 

 

 

 

 

 

 

 

(14,610

)

Balance at March 26, 2022

 

$

17,979

 

 

$

1,982,561

 

 

$

(294,711

)

 

$

4,532,102

 

 

$

10,911

 

 

$

6,248,842

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

See accompanying notes.

4


 

Garmin Ltd. and Subsidiaries

Condensed Consolidated Statements of Cash Flows (Unaudited)

(In thousands)

 

 

 

13-Weeks Ended

 

 

 

March 26,
2022

 

 

March 27,
2021

 

Operating Activities:

 

 

 

 

 

 

Net income

 

$

211,592

 

 

$

220,029

 

Adjustments to reconcile net income to net cash provided by
   operating activities:

 

 

 

 

 

 

Depreciation

 

 

28,984

 

 

 

23,988

 

Amortization

 

 

12,228

 

 

 

12,902

 

(Gain) loss on sale or disposal of property and equipment

 

 

(1,129

)

 

 

133

 

Unrealized foreign currency (gains) losses

 

 

(5,113

)

 

 

7,277

 

Deferred income taxes

 

 

(25,996

)

 

 

497

 

Stock compensation expense

 

 

24,706

 

 

 

22,698

 

Realized (gain) loss on marketable securities

 

 

(2

)

 

 

22

 

Changes in operating assets and liabilities, net of acquisitions:

 

 

 

 

 

 

Accounts receivable, net of allowance for doubtful accounts

 

 

238,134

 

 

 

281,524

 

Inventories

 

 

(134,807

)

 

 

(87,450

)

Other current and noncurrent assets

 

 

(1,628

)

 

 

(13,710

)

Accounts payable

 

 

(61,939

)

 

 

(3,470

)

Other current and noncurrent liabilities

 

 

(119,159

)

 

 

(95,977

)

Deferred revenue

 

 

(3,704

)

 

 

(7,998

)

Deferred costs

 

 

1,904

 

 

 

3,945

 

Income taxes

 

 

21,563

 

 

 

3,952

 

Net cash provided by operating activities

 

 

185,634

 

 

 

368,362

 

 

 

 

 

 

 

 

Investing activities:

 

 

 

 

 

 

Purchases of property and equipment

 

 

(59,715

)

 

 

(36,894

)

Proceeds from sale of property and equipment

 

 

1,131

 

 

 

 

Purchase of intangible assets

 

 

(547

)

 

 

(760

)

Purchase of marketable securities

 

 

(497,526

)

 

 

(404,599

)

Redemption of marketable securities

 

 

431,604

 

 

 

354,039

 

Acquisitions, net of cash acquired

 

 

(10,828

)

 

 

(15,893

)

Net cash used in investing activities

 

 

(135,881

)

 

 

(104,107

)

 

 

 

 

 

 

 

Financing activities:

 

 

 

 

 

 

Dividends

 

 

(128,856

)

 

 

(116,655

)

Proceeds from issuance of treasury stock related to equity awards

 

 

20,146

 

 

 

17,657

 

Purchase of treasury stock related to equity awards

 

 

(14,610

)

 

 

(17,281

)

Net cash used in financing activities

 

 

(123,320

)

 

 

(116,279

)

 

 

 

 

 

 

 

Effect of exchange rate changes on cash and cash equivalents

 

 

(6,960

)

 

 

(6,488

)

 

 

 

 

 

 

 

Net (decrease) increase in cash, cash equivalents, and restricted cash

 

 

(80,527

)

 

 

141,488

 

Cash, cash equivalents, and restricted cash at beginning of period

 

 

1,498,843

 

 

 

1,458,748

 

Cash, cash equivalents, and restricted cash at end of period

 

$

1,418,316

 

 

$

1,600,236

 

 

See accompanying notes.

5


 

Garmin Ltd. and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Unaudited)

March 26, 2022

(In thousands, except per share information)

 

1. Accounting Policies

 

Basis of Presentation and Principles of Consolidation

 

The accompanying unaudited condensed consolidated financial statements include the accounts of Garmin Ltd. and wholly-owned subsidiaries (collectively, the “Company” or “Garmin”). Intercompany balances and transactions have been eliminated.

 

The condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. The condensed consolidated balance sheet at December 25, 2021 has been derived from the audited financial statements at that date, but does not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. Additionally, the condensed consolidated financial statements should be read in conjunction with Part I, Item 2, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of this Form 10-Q, and the Company’s Annual Report on Form 10-K for the year ended December 25, 2021. Operating results for the 13-week period ended March 26, 2022 are not necessarily indicative of the results that may be expected for the year ending December 31, 2022.

 

The Company’s fiscal year is based on a 52- or 53-week period ending on the last Saturday of the calendar year. Therefore, the financial results of certain 53-week fiscal years, and the associated 14-week quarters, will not be exactly comparable to the prior and subsequent 52-week fiscal years and the associated 13-week quarters. The quarters ended March 26, 2022 and March 27, 2021 both contain operating results for 13 weeks.

 

Changes in Classification and Allocation

 

Certain prior period amounts have been reclassified or presented to conform to the current period presentation.

 

In the first quarter of fiscal 2022, the Company refined the methodology used in classifying certain indirect costs in accordance with the way the Company's management is now using the information in decision making, which management believes provides a more meaningful representation of costs incurred to support research and development activities. As a result, the Company’s condensed consolidated statements of income have been recast for the three months ended March 27, 2021 to reflect a reclassification of $14,365 from research and development expense to selling, general, and administrative expense.

 

Additionally, in the first quarter of fiscal 2022, the methodology used to allocate certain selling, general, and administrative expenses to the segments was refined to allocate these expenses in a more direct manner to provide the Company's Chief Operating Decision Maker (CODM) with a more meaningful representation of segment profit or loss. The Company’s composition of operating segments and reportable segments did not change.

 

These changes in classification and allocation had no effect on the Company’s consolidated operating or net income.

 

Significant Accounting Policies

 

For a description of the significant accounting policies and methods used in the preparation of the Company’s condensed consolidated financial statements, refer to Note 2, “Summary of Significant Accounting Policies” in the Notes to the Consolidated Financial Statements in Part II, Item 8 of the Company’s Annual Report on Form 10-K for the fiscal year ended December 25, 2021. There were no material changes to the Company’s significant accounting policies during the 13-week period ended March 26, 2022.

 

6


 

Recently Issued Accounting Standards and Pronouncements

 

Recently adopted accounting standards and recently issued accounting pronouncements not yet adopted are not expected to have a material impact on the Company’s consolidated financial statements, accounting policies, processes, or systems.

 

2. Inventories

 

The components of inventories consist of the following:

 

 

 

March 26,
2022

 

 

December 25, 2021

 

Raw materials

 

$

545,668

 

 

$

509,435

 

Work-in-process

 

 

207,340

 

 

 

213,801

 

Finished goods

 

 

586,522

 

 

 

504,373

 

Inventories

 

$

1,339,530

 

 

$

1,227,609

 

 

3. Earnings Per Share

 

The following table sets forth the computation of basic and diluted net income per share. Stock options, stock appreciation rights, and restricted stock units are collectively referred to as “equity awards”.

 

 

 

13-Weeks Ended

 

 

 

March 26, 2022

 

 

March 27, 2021

 

Numerator:

 

 

 

 

 

 

Numerator for basic and diluted net income per share – net income

 

$

211,592

 

 

$

220,029

 

 

 

 

 

 

 

 

Denominator:

 

 

 

 

 

 

Denominator for basic net income per share – weighted-average common shares

 

 

192,887

 

 

 

191,896

 

 

 

 

 

 

 

 

Effect of dilutive equity awards

 

 

692

 

 

 

914

 

 

 

 

 

 

 

 

Denominator for diluted net income per share – adjusted weighted-average common shares

 

 

193,579

 

 

 

192,810

 

 

 

 

 

 

 

 

Basic net income per share

 

$

1.10

 

 

$

1.15

 

 

 

 

 

 

 

 

Diluted net income per share

 

$

1.09

 

 

$

1.14

 

 

 

 

 

 

 

 

Shares excluded from diluted net income per share calculation: