10-Q 1 grmn-20240330.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 30, 2024

 

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, $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 26, 2024

Registered Shares, $0.10 par value: 192,077,718 (excluding treasury shares)

 

 

 


 

Garmin Ltd.

Form 10-Q

Quarter Ended March 30, 2024

 

Table of Contents

 

Page

Part I - Financial Information

1

 

Item 1.

Condensed Consolidated Financial Statements

1

 

Condensed Consolidated Statements of Income for the 13-Weeks ended March 30, 2024 and April 1, 2023 (Unaudited)

1

 

Condensed Consolidated Statements of Comprehensive Income for the 13-Weeks ended March 30, 2024 and April 1, 2023 (Unaudited)

2

 

 

 

Condensed Consolidated Balance Sheets at March 30, 2024 and December 30, 2023 (Unaudited)

 

3

 

Condensed Consolidated Statements of Cash Flows for the 13-Weeks ended March 30, 2024 and April 1, 2023 (Unaudited)

4

 

 

 

Condensed Consolidated Statements of Stockholders’ Equity for the 13-Weeks ended March 30, 2024 and April 1, 2023 (Unaudited)

 

5

 

 

 

 

 

Notes to Condensed Consolidated Financial Statements (Unaudited)

6

 

Item 2.

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

14

 

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

19

 

Item 4.

Controls and Procedures

19

 

Part II - Other Information

20

 

Item 1.

Legal Proceedings

20

 

Item 1A.

Risk Factors

20

 

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

20

 

Item 3.

Defaults Upon Senior Securities

20

 

Item 4.

Mine Safety Disclosures

20

 

Item 5.

Other Information

21

 

Item 6.

Exhibits

22

 

Signature Page

23

 

 

i


 

Part I - Financial Information

Item I - Condensed Consolidated Financial Statements

 

Garmin Ltd. and Subsidiaries

Condensed Consolidated Statements of Income (Unaudited)

(In thousands, except per share information)

 

 

13-Weeks Ended

 

 

 

March 30,
2024

 

 

April 1,
2023

 

Net sales

 

$

1,381,649

 

 

$

1,147,424

 

Cost of goods sold

 

 

579,510

 

 

 

494,630

 

Gross profit

 

 

802,139

 

 

 

652,794

 

 

 

 

 

 

 

Research and development expense

 

 

242,535

 

 

 

221,485

 

Selling, general and administrative expenses

 

 

261,194

 

 

 

234,327

 

Total operating expense

 

 

503,729

 

 

 

455,812

 

 

 

 

 

 

 

Operating income

 

 

298,410

 

 

 

196,982

 

Other income (expense):

 

 

 

 

 

 

Interest income

 

 

25,027

 

 

 

15,899

 

Foreign currency gains

 

 

2,282

 

 

 

7,688

 

Other income

 

 

1,321

 

 

 

1,203

 

Total other income (expense)

 

 

28,630

 

 

 

24,790

 

 

 

 

 

 

 

Income before income taxes

 

 

327,040

 

 

 

221,772

 

Income tax provision

 

 

51,079

 

 

 

19,445

 

Net income

 

$

275,961

 

 

$

202,327

 

 

 

 

 

 

 

Net income per share:

 

 

 

 

 

 

Basic

 

$

1.44

 

 

$

1.06

 

Diluted

 

$

1.43

 

 

$

1.05

 

 

 

 

 

 

 

Weighted average common shares outstanding:

 

 

 

 

 

 

Basic

 

 

191,890

 

 

 

191,498

 

Diluted

 

 

192,698

 

 

 

191,886

 

 

See accompanying notes.

1


 

Garmin Ltd. and Subsidiaries

Condensed Consolidated Statements of Comprehensive Income (Unaudited)

(In thousands)

 

 

 

13-Weeks Ended

 

 

 

March 30,
2024

 

 

April 1,
2023

 

Net income

 

$

275,961

 

 

$

202,327

 

Foreign currency translation adjustment

 

 

(59,055

)

 

 

16,891

 

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

 

 

2,613

 

 

 

11,076

 

Comprehensive income

 

$

219,519

 

 

$

230,294

 

 

See accompanying notes.

2


 

Garmin Ltd. and Subsidiaries

Condensed Consolidated Balance Sheets (Unaudited)

(In thousands)

 

 

 

March 30,
2024

 

 

December 30,
2023

 

Assets

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

1,921,782

 

 

$

1,693,452

 

Marketable securities

 

 

274,579

 

 

 

274,618

 

Accounts receivable, net

 

 

694,690

 

 

 

815,243

 

Inventories

 

 

1,302,230

 

 

 

1,345,955

 

Deferred costs

 

 

18,329

 

 

 

16,316

 

Prepaid expenses and other current assets

 

 

305,674

 

 

 

318,556

 

Total current assets

 

 

4,517,284

 

 

 

4,464,140

 

 

 

 

 

 

 

Property and equipment, net of accumulated depreciation of $1,048,936 and $1,030,588

 

 

1,206,401

 

 

 

1,224,097

 

Operating lease right-of-use assets

 

 

136,285

 

 

 

143,724

 

Noncurrent marketable securities

 

 

1,133,958

 

 

 

1,125,191

 

Deferred income tax assets

 

 

763,083

 

 

 

754,635

 

Noncurrent deferred costs

 

 

10,480

 

 

 

11,057

 

Goodwill

 

 

601,618

 

 

 

608,474

 

Other intangible assets, net

 

 

176,647

 

 

 

186,601

 

Other noncurrent assets

 

 

88,124

 

 

 

85,650

 

Total assets

 

$

8,633,880

 

 

$

8,603,569

 

 

 

 

 

 

 

Liabilities and Stockholders’ Equity

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Accounts payable

 

$

243,087

 

 

$

253,790

 

Salaries and benefits payable

 

 

192,832

 

 

 

190,014

 

Accrued warranty costs

 

 

55,219

 

 

 

55,738

 

Accrued sales program costs

 

 

77,592

 

 

 

98,610

 

Other accrued expenses

 

 

191,474

 

 

 

245,874

 

Deferred revenue

 

 

100,740

 

 

 

101,189

 

Income taxes payable

 

 

256,442

 

 

 

225,475

 

Dividend payable

 

 

 

 

 

139,997

 

Total current liabilities

 

 

1,117,386

 

 

 

1,310,687

 

 

 

 

 

 

 

Deferred income tax liabilities

 

 

113,932

 

 

 

114,682

 

Noncurrent income taxes payable

 

 

16,128

 

 

 

16,521

 

Noncurrent deferred revenue

 

 

33,928

 

 

 

36,148

 

Noncurrent operating lease liabilities

 

 

105,859

 

 

 

113,035

 

Other noncurrent liabilities

 

 

550

 

 

 

436

 

 

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

 

 

Common shares (194,901 and 195,880 shares authorized and issued;
    
192,079 and 191,777 shares outstanding)

 

 

19,490

 

 

 

19,588

 

Additional paid-in capital

 

 

2,135,384

 

 

 

2,125,467

 

Treasury shares (2,822 and 4,103 shares)

 

 

(226,921

)

 

 

(330,909

)

Retained earnings

 

 

5,440,200

 

 

 

5,263,528

 

Accumulated other comprehensive income (loss)

 

 

(122,056

)

 

 

(65,614

)

Total stockholders’ equity

 

 

7,246,097

 

 

 

7,012,060

 

Total liabilities and stockholders’ equity

 

$

8,633,880

 

 

$

8,603,569

 

 

See accompanying notes.

3


 

Garmin Ltd. and Subsidiaries

Condensed Consolidated Statements of Cash Flows (Unaudited)

(In thousands)

 

 

 

13-Weeks Ended

 

 

 

March 30,
2024

 

 

April 1,
2023

 

Operating Activities:

 

 

 

 

 

 

Net income

 

$

275,961

 

 

$

202,327

 

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

 

 

 

 

 

 

Depreciation

 

 

33,892

 

 

 

31,952

 

Amortization

 

 

10,933

 

 

 

11,463

 

Gain on sale or disposal of property and equipment

 

 

(12

)

 

 

(129

)

Unrealized foreign currency losses (gains)

 

 

2,974

 

 

 

(867

)

Deferred income taxes

 

 

(9,611

)

 

 

(15,713

)

Stock compensation expense

 

 

30,719

 

 

 

20,732

 

Realized loss on marketable securities

 

 

 

 

 

20

 

Changes in operating assets and liabilities, net of acquisitions:

 

 

 

 

 

 

Accounts receivable, net of allowance for doubtful accounts

 

 

108,453

 

 

 

46,873

 

Inventories

 

 

16,545

 

 

 

43,712

 

Other current and noncurrent assets

 

 

2,117

 

 

 

4,780

 

Accounts payable

 

 

(1,281

)

 

 

(4,202

)

Other current and noncurrent liabilities

 

 

(64,699

)

 

 

(67,405

)

Deferred revenue

 

 

(2,549

)

 

 

(1,876

)

Deferred costs

 

 

(1,451

)

 

 

622

 

Income taxes

 

 

33,314

 

 

 

6,921

 

Net cash provided by operating activities

 

 

435,305

 

 

 

279,210

 

 

 

 

 

 

 

Investing activities:

 

 

 

 

 

 

Purchases of property and equipment

 

 

(33,168

)

 

 

(46,814

)

Purchase of marketable securities

 

 

(85,626

)

 

 

(18,684

)

Redemption of marketable securities

 

 

77,131

 

 

 

57,789

 

Net cash from (payments for) acquisitions

 

 

5,011

 

 

 

 

Other investing activities, net

 

 

(223

)

 

 

(190

)

Net cash used in investing activities

 

 

(36,875

)

 

 

(7,899

)

 

 

 

 

 

 

Financing activities:

 

 

 

 

 

 

Dividends

 

 

(140,212

)

 

 

(139,847

)

Purchase of treasury shares related to equity awards

 

 

(15,987

)

 

 

(9,169

)

Purchase of treasury shares under share repurchase plan

 

 

 

 

 

(43,273

)

Net cash used in financing activities

 

 

(156,199

)

 

 

(192,289

)

 

 

 

 

 

 

Effect of exchange rate changes on cash and cash equivalents

 

 

(13,913

)

 

 

3,387

 

 

 

 

 

 

 

Net increase in cash, cash equivalents, and restricted cash

 

 

228,318

 

 

 

82,409

 

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

 

 

1,694,156

 

 

 

1,279,912

 

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

 

$

1,922,474

 

 

$

1,362,321

 

 

See accompanying notes.

4


 

Garmin Ltd. and Subsidiaries

Condensed Consolidated Statements of Stockholders’ Equity (Unaudited)

For the 13-Weeks Ended March 30, 2024 and April 1, 2023

(In thousands)

 

 

Common
Shares

 

 

Additional
Paid-In
Capital

 

 

Treasury
Shares

 

 

Retained
Earnings

 

 

Accumulated
Other
Comprehensive
Income (Loss)

 

 

Total

 

Balance at December 31, 2022

 

$

17,979

 

 

$

2,042,472

 

 

$

(475,095

)

 

$

4,733,517

 

 

$

(114,533

)

 

$

6,204,340

 

Net income

 

 

 

 

 

 

 

 

 

 

 

202,327

 

 

 

 

 

 

202,327

 

Translation adjustment

 

 

 

 

 

 

 

 

 

 

 

 

 

 

16,891

 

 

 

16,891

 

Adjustment related to unrealized gains (losses) on available-for-sale securities net of income tax effects of $2,613

 

 

 

 

 

 

 

 

 

 

 

 

 

 

11,076

 

 

 

11,076

 

Comprehensive income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

230,294

 

Dividends

 

 

 

 

 

 

 

 

 

 

 

(114

)

 

 

 

 

 

(114

)

Issuance of treasury shares related to equity awards

 

 

 

 

 

(14,865

)

 

 

14,865

 

 

 

 

 

 

 

 

 

 

Stock compensation

 

 

 

 

 

20,732

 

 

 

 

 

 

 

 

 

 

 

 

20,732

 

Purchase of treasury shares related to equity awards

 

 

 

 

 

 

 

 

(9,169

)

 

 

 

 

 

 

 

 

(9,169

)

Purchase of treasury shares under share repurchase plan, including any associated excise tax

 

 

 

 

 

 

 

 

(41,079

)

 

 

 

 

 

 

 

 

(41,079

)

Balance at April 1, 2023

 

$

17,979

 

 

$

2,048,339

 

 

$

(510,478

)

 

$

4,935,730

 

 

$

(86,566

)

 

$

6,405,004

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common
Shares

 

 

Additional
Paid-In
Capital

 

 

Treasury
Shares

 

 

Retained
Earnings

 

 

Accumulated
Other
Comprehensive
Income (Loss)

 

 

Total

 

Balance at December 30, 2023

 

$

19,588

 

 

$

2,125,467

 

 

$

(330,909

)

 

$

5,263,528

 

 

$

(65,614

)

 

$

7,012,060

 

Net income

 

 

 

 

 

 

 

 

 

 

 

275,961

 

 

 

 

 

 

275,961

 

Translation adjustment

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(59,055

)

 

 

(59,055

)

Adjustment related to unrealized gains (losses) on available-for-sale securities net of income tax effects of $812

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2,613

 

 

 

2,613

 

Comprehensive income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

219,519

 

Dividends

 

 

 

 

 

 

 

 

 

 

 

(214

)

 

 

 

 

 

(214

)

Issuance of treasury shares related to equity awards

 

 

 

 

 

(20,802

)

 

 

20,802

 

 

 

 

 

 

 

 

 

 

Stock compensation

 

 

 

 

 

30,719

 

 

 

 

 

 

 

 

 

 

 

 

30,719

 

Purchase of treasury shares related to equity awards

 

 

 

 

 

 

 

 

(15,987

)

 

 

 

 

 

 

 

 

(15,987

)

Purchase of treasury shares under share repurchase plan, including any associated excise tax

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cancellation of treasury shares

 

 

(98

)

 

 

 

 

 

99,173

 

 

 

(99,075

)

 

 

 

 

 

 

Balance at March 30, 2024

 

$

19,490

 

 

$

2,135,384

 

 

$

(226,921

)

 

$

5,440,200

 

 

$

(122,056

)

 

$

7,246,097

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

See accompanying notes.

5


 

Garmin Ltd. and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Unaudited)

March 30, 2024

(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 its wholly-owned subsidiaries (collectively, we, our, us, 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, the condensed consolidated financial statements reflect all adjustments, which are normal and recurring in nature, necessary for fair financial statement presentation. The condensed consolidated balance sheet at December 30, 2023 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 30, 2023.

 

The Company's operating results are subject to fluctuations associated with seasonal demand for consumer products, the timing of new product introductions, and original equipment manufacturer (OEM) customer production schedules. Therefore, operating results for the 13-week period ended March 30, 2024 are not necessarily indicative of the results that may be expected for the year ending December 28, 2024.

 

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 30, 2024 and April 1, 2023 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 2024, the Company changed the presentation of operating expense to include advertising expense within selling, general and administrative expenses on the Company's condensed consolidated statements of income, which management believes to be a more meaningful presentation. As a result, the Company’s condensed consolidated statements of income have been recast for the 13-week period ended April 1, 2023 to conform with the current period presentation. This change 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 1, “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 30, 2023. There were no material changes to the Company’s significant accounting policies during the 13-week period ended March 30, 2024.

 

Recently Adopted Accounting Standards

 

There are no recently adopted accounting standards that have a material impact on the Company’s consolidated financial statements, accounting policies, processes, or systems.

 

 

6


 

Recently Issued Accounting Pronouncements Not Yet Adopted

Income Taxes

 

In December 2023, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures (“ASU 2023-09”) to enhance the transparency and decision usefulness of income tax disclosures, primarily related to the rate reconciliation and income taxes paid. ASU 2023-09 is effective for annual periods beginning after December 15, 2024. Early adoption is permitted. The Company is currently evaluating the impact that the updated standard will have on its financial statement disclosures.

 

Segment Reporting

 

In November 2023, the FASB issued Accounting Standards Update No. 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures (“ASU 2023-07”) to improve reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses. ASU 2023-07 is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. Early adoption is permitted. The Company is currently evaluating the impact that the updated standard will have on its financial statement disclosures.

 

2. Revenue

 

In order to further depict how the nature, amount, timing and uncertainty of the Company's revenue and cash flows are affected by economic factors, we disaggregate revenue (“net sales”) by geographic region, major product category, and pattern of recognition.

Disaggregated revenue by geographic region (Americas, APAC, and EMEA) is presented in Note 11 – Segment Information and Geographic Data. Note 11 also contains disaggregated revenue information of the five major product categories identified by the Company – fitness, outdoor, aviation, marine, and auto OEM.

A large majority of the Company’s sales are recognized on a point in time basis, usually once the product is shipped and title and risk of loss have transferred to the customer. Sales recognized over a period of time are primarily within the outdoor, aviation, and auto OEM segments and relate to performance obligations that are satisfied over the estimated life of the product or contractual service period. Revenue disaggregated by the timing of transfer of the goods or services is presented in the table below:

 

 

13-Weeks Ended

 

 

 

March 30, 2024

 

 

April 1, 2023

 

Point in time

 

$

1,306,447

 

 

$

1,081,068

 

Over time

 

 

75,202

 

 

 

66,356

 

Net sales

 

$

1,381,649

 

 

$

1,147,424

 

 

Transaction price and costs associated with the Company’s unsatisfied performance obligations are reflected as deferred revenue and deferred costs, respectively, on the Company’s condensed consolidated balance sheets. Such amounts are recognized ratably over the applicable service period or estimated useful life. Changes in deferred revenue and costs during the 13-week period ended March 30, 2024 are presented below:

 

 

13-Weeks Ended
March 30, 2024

 

 

 

Deferred
 Revenue
(1)

 

 

Deferred
Costs
(2)

 

Balance, beginning of period

 

$

137,337

 

 

$

27,373

 

Deferrals in period

 

 

72,533

 

 

 

13,474

 

Recognition of deferrals in period

 

 

(75,202

)

 

 

(12,038

)

Balance, end of period

 

$

134,668

 

 

$

28,809

 

(1) Deferred revenue is comprised of both deferred revenue and noncurrent deferred revenue per the condensed consolidated balance sheets.

 

(2) Deferred costs are comprised of both deferred costs and noncurrent deferred costs per the condensed consolidated balance sheets.

7


 

Of the $75,202 of deferred revenue recognized in the 13-week period ended March 30, 2024, approximately $39,000 was deferred as of the beginning of the period. Of the $134,668 of deferred revenue as of March 30, 2024, the Company expects to recognize approximately 85% percent ratably over a total period of three years or less.

 

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 30,
2024

 

 

April 1,
2023

 

Numerator:

 

 

 

 

 

 

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

 

$

275,961

 

 

$

202,327

 

 

 

 

 

 

 

Denominator:

 

 

 

 

 

 

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

 

 

191,890

 

 

 

191,498

 

 

 

 

 

 

 

Effect of dilutive equity awards

 

 

808

 

 

 

388

 

 

 

 

 

 

 

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

 

 

192,698

 

 

 

191,886

 

 

 

 

 

 

 

Basic net income per share

 

$

1.44

 

 

$

1.06

 

 

 

 

 

 

 

Diluted net income per share

 

$

1.43

 

 

$

1.05

 

 

 

 

 

 

 

Shares excluded from diluted net income per share calculation:

 

 

 

 

 

 

Anti-dilutive equity awards

 

 

 

 

 

218

 

 

4. Marketable Securities

 

Accounting Standards Codification Topic 820, 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 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

 

 

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. Valuation is based on prices obtained from an independent pricing vendor using both market and income approaches. The primary inputs to the valuation include quoted prices for similar assets in active markets, quoted prices for identical or similar assets in markets that are not active, contractual cash flows, benchmark yields, and credit spreads.

 

The method described above may produce a fair value calculation that may not be indicative of net realizable value or reflective of future fair values. Furthermore, while the Company believes its valuation methods are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different fair value measurement at the reporting date.

 

8


 

Marketable securities classified as available-for-sale securities are summarized below:

 

 

 

Available-For-Sale Securities
as of March 30, 2024

 

 

 

Fair Value Level

 

Amortized Cost

 

 

Gross Unrealized
Gains

 

 

Gross Unrealized
Losses

 

 

Fair Value

 

U.S. Treasury securities

 

Level 2

 

$

3,446

 

 

$

 

 

$

 

 

$

3,446

 

Agency securities

 

Level 2

 

 

20,695

 

 

 

21

 

 

 

(598

)

 

 

20,118

 

Mortgage-backed securities

 

Level 2

 

 

37,510

 

 

 

 

 

 

(4,516

)

 

 

32,994

 

Corporate debt securities

 

Level 2

 

 

1,111,977

 

 

 

732

 

 

 

(43,402

)

 

 

1,069,307

 

Municipal securities

 

Level 2

 

 

296,722

 

 

 

49

 

 

 

(17,069

)

 

 

279,702

 

Other

 

Level 2

 

 

3,193

 

 

 

 

 

 

(223

)

 

 

2,970

 

Total

 

 

 

$

1,473,543

 

 

$

802

 

 

$

(65,808

)

 

$

1,408,537

 

 

 

 

Available-For-Sale Securities
as of December 30, 2023

 

 

 

Fair Value Level

 

Amortized Cost

 

 

Gross Unrealized
Gains

 

 

Gross Unrealized
Losses

 

 

Fair Value

 

U.S. Treasury securities

 

Level 2

 

$

2,971

 

 

$

1

 

 

$

 

 

$

2,972

 

Agency securities

 

Level 2

 

 

23,692

 

 

 

32

 

 

 

(585

)

 

 

23,139

 

Mortgage-backed securities

 

Level 2

 

 

38,743

 

 

 

 

 

 

(4,731

)

 

 

34,012

 

Corporate debt securities

 

Level 2

 

 

1,104,834

 

 

 

1,680

 

 

 

(46,073

)

 

 

1,060,441

 

Municipal securities

 

Level 2

 

 

294,240

 

 

 

98

 

 

 

(18,430

)

 

 

275,908

 

Other

 

Level 2

 

 

3,760

 

 

 

 

 

 

(423

)

 

 

3,337

 

Total

 

 

 

$

1,468,240

 

 

$

1,811

 

 

$

(70,242

)

 

$

1,399,809

 

 

The primary objectives of the Company’s investment policy are to preserve capital, maintain an acceptable degree of liquidity, and maximize yield within the constraint of low credit risk. The fair value of securities varies from period to period due to changes in interest rates, the performance of the underlying collateral, and the credit performance of the underlying issuer, among other factors.

 

Accrued interest receivable, which totaled $11,852 as of March 30, 2024, is excluded from both the fair value and amortized cost basis of available-for-sale securities and is included within prepaid expenses and other current assets on the Company’s condensed consolidated balance sheets. The Company writes off impaired accrued interest on a timely basis, generally within 30 days of the due date, by reversing interest income. No accrued interest was written off during the 13-week period ended March 30, 2024.

 

The Company recognizes impairments relating to credit losses of available-for-sale securities through an allowance for credit losses and other income (expense) on the Company’s condensed consolidated statements of income. Impairment not relating to credit losses is recorded in accumulated other comprehensive income (loss) on the Company’s condensed consolidated balance sheets. The cost of securities sold is based on the specific identification method. Approximately 95% of securities in the Company’s portfolio were at an unrealized loss position as of March 30, 2024.

 

The following tables display additional information regarding gross unrealized losses and fair value by major security type for available-for-sale securities in an unrealized loss position as of March 30, 2024 and December 30, 2023.

 

 

 

As of March 30, 2024

 

 

 

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

 

Agency securities

 

 

(38

)

 

 

7,919

 

 

 

(560

)

 

 

6,440

 

 

 

(598

)

 

 

14,359

 

Mortgage-backed securities

 

 

 

 

 

 

 

 

(4,516

)

 

 

32,994

 

 

 

(4,516

)

 

 

32,994

 

Corporate debt securities

 

 

(1,634

)

 

 

153,897

 

 

 

(41,768

)

 

 

835,475

 

 

 

(43,402

)

 

 

989,372

 

Municipal securities

 

 

(47

)

 

 

10,640

 

 

 

(17,022

)

 

 

260,669

 

 

 

(17,069

)

 

 

271,309

 

Other

 

 

 

 

 

 

 

 

(223

)

 

 

2,970

 

 

 

(223

)

 

 

2,970

 

Total

 

$

(1,719

)

 

$

172,456

 

 

$

(64,089

)

 

$

1,138,548

 

 

$

(65,808

)

 

$

1,311,004

 

 

9


 

 

 

 

As of December 30, 2023

 

 

 

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

 

Agency securities

 

 

(31

)

 

 

10,923

 

 

 

(554

)

 

 

6,446

 

 

 

(585

)

 

 

17,369

 

Mortgage-backed securities

 

 

 

 

 

 

 

 

(4,731

)

 

 

34,012

 

 

 

(4,731

)

 

 

34,012

 

Corporate debt securities

 

 

(702

)

 

 

64,637

 

 

 

(