Garmin announces fourth quarter and fiscal year 2021 results

Company reports record full year revenue and operating income and proposes dividend increase

Garmin® Ltd. (NYSE: GRMN), today announced results for the fourth quarter and fiscal year ended December 25, 2021.

Highlights for fourth quarter 2021 include:

  • Record consolidated revenue of $1.39 billion, a 3% increase over the prior year quarter with three of our segments posting strong double digit growth
  • Gross and operating margins were 55.5% and 22.6%, respectively
  • Operating income of $315 million, a 15% decrease compared to the prior year quarter
  • GAAP EPS was $1.48 and pro forma EPS(1) was $1.55
  • Garmin Descent Mk2i dive computer and Descent T1 transmitter named one of 2021’s greatest innovations by Popular Science
  • Named a supplier of the year by Embraer for seventh consecutive year
  • Garmin Surround View Camera System was awarded the prestigious DAME design award
  • Recently announced the acquisition of Vesper Marine, a leading provider of marine communication equipment and services
  • Introduced the new Garmin DriveSmart series of portable car navigators with a range of large displays up to 8”

Highlights for fiscal year 2021 include:

  • Sixth consecutive year of revenue growth with each of our five segments posting double digit growth over the prior year
  • Record consolidated revenue of $4.98 billion, a 19% increase over the prior year
  • Gross margin of 58.0% compared to 59.3% in the prior year
  • Operating margin of 24.5% compared to 25.2% in the prior year
  • Record operating income of $1.22 billion, increasing 16% over the prior year
  • GAAP EPS was $5.61 and pro forma EPS(1) was $5.82, representing 13% growth over the prior year pro forma EPS

(In thousands, except per share information)

 

13-Weeks Ended

 

 

52-Weeks Ended

 

 

 

December 25,

 

 

December 26,

 

 

YoY

 

 

December 25,

 

 

December 26,

 

 

YoY

 

 

 

2021

 

 

2020

 

 

Change

 

 

2021

 

 

2020

 

 

Change

 

Net sales

 

$

1,391,589

 

 

$

1,351,405

 

 

 

3

%

 

$

4,982,795

 

 

$

4,186,573

 

 

 

19

%

Fitness

 

 

470,146

 

 

 

470,811

 

 

 

(0

)%

 

 

1,533,788

 

 

 

1,317,498

 

 

 

16

%

Outdoor

 

 

378,218

 

 

 

411,935

 

 

 

(8

)%

 

 

1,281,933

 

 

 

1,128,081

 

 

 

14

%

Aviation

 

 

177,582

 

 

 

156,969

 

 

 

13

%

 

 

712,468

 

 

 

622,820

 

 

 

14

%

Marine

 

 

196,454

 

 

 

171,579

 

 

 

14

%

 

 

875,151

 

 

 

657,848

 

 

 

33

%

Auto

 

 

169,189

 

 

 

140,111

 

 

 

21

%

 

 

579,455

 

 

 

460,326

 

 

 

26

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross margin %

 

 

55.5

%

 

 

58.5

%

 

 

 

 

 

 

58.0

%

 

 

59.3

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating income %

 

 

22.6

%

 

 

27.5

%

 

 

 

 

 

 

24.5

%

 

 

25.2

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GAAP diluted EPS

 

$

1.48

 

 

$

1.73

 

 

 

(14

)%

 

$

5.61

 

 

$

5.17

 

 

 

9

%

Pro forma diluted EPS (1)

 

$

1.55

 

 

$

1.73

 

 

 

(10

)%

 

$

5.82

 

 

$

5.14

 

 

 

13

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1) See attached Non-GAAP Financial Information for discussion and reconciliation of non-GAAP financial measures, including pro forma diluted EPS

 

Executive Overview from Cliff Pemble, President and Chief Executive Officer:

“2021 was another remarkable year as demand for our products led to strong double digit annual revenue growth in each of our five segments,” said Cliff Pemble, President and CEO of Garmin. “We are entering 2022 with a great lineup of recently introduced products and have more exciting product introductions planned throughout the year. I am very proud of what we have accomplished in 2021 and look forward to the opportunities and challenges of the new year.”

Fitness:

Revenue from the fitness segment was flat in the fourth quarter, with growth in advanced wearable products offset by reduced sales of cycling products. Gross margin and operating margins were 49% and 22%, respectively, resulting in $104 million of operating income. During the quarter, we announced multiyear sponsorship agreements at both the high school and collegiate levels to showcase the power and utility of our running watches. We also recently released our 2021 Connect Fitness Report which shows double digit growth in nearly every activity category, demonstrating the unique active lifestyle focus of our customer base.

Outdoor:

Revenue from the outdoor segment decreased 8% in the fourth quarter primarily due to component constraints that limited the number of orders we could fulfill for our traditional handhelds and dog products. Gross margin and operating margins were 65% and 37%, respectively, resulting in $142 million of operating income. The Garmin Descent Mk2i dive computer and Descent T1 transmitter featuring our revolutionary SubWave sonar-based communication were named one of 2021’s greatest innovations by Popular Science.

Aviation:

Revenue from the aviation segment grew 13% in the fourth quarter primarily driven by the OEM category. Gross margin and operating margins were 73% and 25%, respectively, resulting in $45 million of operating income. During the quarter the G3000 integrated flight deck was selected by Heart Aerospace for the all-electric ES-19 regional airliner. We also announced additional certifications for our GFC 500/600 autopilot, bringing the performance and safety enhancing benefits of our flight control technology to more aircraft models. Also in the quarter, Embraer presented Garmin with its seventh consecutive Supplier of the Year award. Over the past decade, Embraer has presented Garmin with a total of 12 supplier awards across various categories, including: Electric and Electronics Systems, Technical Support to Operators, Electro- Mechanical Systems, and Material Support to Operator, recognizing our achievement in designing, manufacturing, and supporting the most innovative flight deck solutions.

Marine:

Revenue from the marine segment grew 14% in the fourth quarter with growth across multiple categories led by strong demand for our chartplotters. Gross margin and operating margins were 54% and 20%, respectively, resulting in $39 million of operating income. During the quarter, we launched the new GPSMAP 79 marine handheld series, equipping mariners with easy-to-use navigation tools in the palm of their hand. We also launched the new GMR Fantom range, the most powerful solid-state dome radars in their class. These high-powered radars offer a broad range from 20 feet to 48 nautical miles, improved target detection and features to enhance situational awareness on the water. Also during the quarter, our Surround View Camera System was named the 2021 DAME Design award winner as the industry first intelligent camera system delivering unprecedented situational awareness and convenience on the water.

Auto:

Revenue from the auto segment grew 21% during the fourth quarter driven by growth in both auto OEM programs and consumer auto products. Gross margin was 36%, and we recorded an operating loss of $15 million in the quarter driven by ongoing investments in auto OEM programs. During the quarter, we began shipments of the new lineup of Drive navigators for the consumer market, bringing larger displays and more connected features to our customers.

Additional Financial Information:

Total operating expenses in the fourth quarter were $457 million, a 9% increase over the prior year. Research and development increased by 11%, primarily due to engineering personnel costs. Selling, general and administrative expenses increased 10%, driven primarily by personnel related expenses and information technology costs. Advertising expenses were consistent with the prior year quarter.

The effective tax rate in the fourth quarter of 2021 was 7.4% compared to the GAAP effective tax rate of 14.8% and pro forma effective tax rate(1) of 12.0% in the prior year quarter. The year-over-year decrease in the pro forma effective tax rate is primarily due to uncertain tax position reserves recorded in the prior year.

In the fourth quarter of 2021, we generated approximately $49 million of free cash flow(1), and paid a quarterly dividend of approximately $129 million. We ended the quarter with cash and marketable securities of approximately $3.1 billion.

(1) See attached Non-GAAP Financial Information for discussion and reconciliation of non-GAAP financial measures, including pro forma effective tax rate and free cash flow.

2022 Fiscal Year Guidance(2):

We expect full year 2022 revenue of approximately $5.5 billion, an increase of approximately 10% over 2021. We expect our full year pro forma EPS to be approximately $5.90 based upon gross margin of approximately 57.5%, operating margin of approximately 22.8% and pro forma effective tax rate of approximately 10.5%.

 

 

2022 Guidance

Revenue

 

$5.5B

Gross Margin

 

57.5%

Operating Margin

 

22.8%

Pro forma Effective Tax Rate

 

10.5%

Pro forma EPS

 

$5.90

 

(2) All amounts and %s in the above 2022 Guidance table are approximate. Also, see attached discussion on Forward-looking Financial Measures.

Dividend Recommendation:

The board of directors intends to recommend to the shareholders for approval at the annual meeting to be held on June 10, 2022, a cash dividend in the amount of $2.92 per share (subject to possible adjustment based on the total amount of the dividend in Swiss Francs as approved at the annual meeting), payable in four equal installments on dates to be determined by the board. The board currently anticipates the scheduling of the dividend in four installments as follows:

 

Dividend Date

 

Record Date

 

$s per share

June 30, 2022

 

June 20, 2022

 

$0.73

September 30, 2022

 

September 15, 2022

 

$0.73

December 30, 2022

 

December 15, 2022

 

$0.73

March 31, 2023

 

March 15, 2023

 

$0.73

In addition, the board has established March 31, 2022 as the payment date and March 15, 2022 as the record date for the final dividend installment of $0.67 per share, per the prior approval at the 2021 annual shareholders’ meeting. The first, second and third payments of $0.67 per share were made on June 30, 2021, September 30, 2021, and December 31, 2021, respectively.

Webcast Information/Forward-Looking Statements:

The information for Garmin Ltd.’s earnings call is as follows:

When: Wednesday, February 16, 2022 at 10:30 a.m. Eastern

Where: https://www.garmin.com/en-US/investors/events/

How: Simply log on to the web at the address above or call to listen in at 855-757-3897

An archive of the live webcast will be available until February 15, 2023 on the Garmin website at www.garmin.com. To access the replay, click on the Investors link and click over to the Events Calendar page.

This release includes projections and other forward-looking statements regarding Garmin Ltd. and its business that are commonly identified by words such as “anticipates,” “would,” “may,” “expects,” “estimates,” “plans,” “intends,” “projects,” and other words or phrases with similar meanings. Any statements regarding the Company’s expected fiscal 2022 GAAP and pro forma estimated earnings, EPS, and effective tax rate, and the Company’s expected segment revenue growth rates, consolidated revenue, gross margins, operating margins, potential future acquisitions, currency movements, expenses, pricing, new products launches, market reach, statements relating to possible future dividends, and the Company’s plans and objectives are forward-looking statements. The forward-looking events and circumstances discussed in this release may not occur and actual results could differ materially as a result of risk factors and uncertainties affecting Garmin, including, but not limited to, the risk factors that are described in the Annual Report on Form 10-K for the year ended December 25, 2021 filed by Garmin with the Securities and Exchange Commission (Commission file number 001-41118). A copy of Garmin’s 2021 Form 10-K can be downloaded from https://www.garmin.com/en-US/investors/sec/. All information provided in this release and in the attachments is as of December 25, 2021. Undue reliance should not be placed on the forward-looking statements in this press release, which are based on information available to us on the date hereof. We undertake no duty to update this information unless required by law.

This release and the attachments contain non-GAAP financial measures. A reconciliation to the nearest GAAP measure and a discussion of the Company's use of these measures are included in the attachments.

Garmin, the Garmin logo and the Garmin delta, G3000 and GPSMAP are trademarks of Garmin Ltd. or its subsidiaries and are registered in one or more countries, including the U.S. Drive, DriveSmart, Descent, GFC, GMR Fantom and SubWave are trademarks of Garmin Ltd. or its subsidiaries. All other brands, product names, company names, trademarks and service marks are the properties of their respective owners. All rights reserved.

Garmin Ltd. and Subsidiaries

 

Condensed Consolidated Statements of Income (Unaudited)

 

(In thousands, except per share information)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

13-Weeks Ended

 

 

52-Weeks Ended

 

 

 

December 25,

 

 

December 26,

 

 

December 25,

 

 

December 26,

 

 

 

2021

 

 

2020

 

 

2021

 

 

2020

 

Net sales

 

$

1,391,589

 

 

$

1,351,405

 

 

$

4,982,795

 

 

$

4,186,573

 

Cost of goods sold

 

 

619,484

 

 

 

560,422

 

 

 

2,092,336

 

 

 

1,705,237

 

Gross profit

 

 

772,105

 

 

 

790,983

 

 

 

2,890,459

 

 

 

2,481,336

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Advertising expense

 

 

61,124

 

 

 

61,135

 

 

 

171,829

 

 

 

151,166

 

Selling, general and administrative expense

 

 

174,090

 

 

 

158,910

 

 

 

659,986

 

 

 

570,245

 

Research and development expense

 

 

221,772

 

 

 

199,672

 

 

 

840,024

 

 

 

705,685

 

Total operating expenses

 

 

456,986

 

 

 

419,717

 

 

 

1,671,839

 

 

 

1,427,096

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating income

 

 

315,119

 

 

 

371,266

 

 

 

1,218,620

 

 

 

1,054,240

 

Other income (expense):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest income

 

 

7,005

 

 

 

6,744

 

 

 

28,573

 

 

 

37,002

 

Foreign currency (losses) gains

 

 

(14,642

)

 

 

12,627

 

 

 

(45,263

)

 

 

2,825

 

Other income

 

 

1,355

 

 

 

828

 

 

 

4,866

 

 

 

9,343

 

Total other income (expense)

 

 

(6,282

)

 

 

20,199

 

 

 

(11,824

)

 

 

49,170

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income before income taxes

 

 

308,837

 

 

 

391,465

 

 

 

1,206,796

 

 

 

1,103,410

 

Income tax provision

 

 

22,702

 

 

 

57,918

 

 

 

124,596

 

 

 

111,086

 

Net income

 

$

286,135

 

 

$

333,547

 

 

$

1,082,200

 

 

$

992,324

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income per share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

1.49

 

 

$

1.74

 

 

$

5.63

 

 

$

5.19

 

Diluted

 

$

1.48

 

 

$

1.73

 

 

$

5.61

 

 

$

5.17

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average common shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

192,353

 

 

 

191,278

 

 

 

192,180

 

 

 

191,085

 

Diluted

 

 

193,306

 

 

 

192,303

 

 

 

193,043

 

 

 

191,895

 

Garmin Ltd. and Subsidiaries

 

Condensed Consolidated Balance Sheets (Unaudited)

 

(In thousands, except per share information)

 

 

 

 

 

 

 

 

 

 

 

 

December 25,

 

 

December 26,

 

2021

2020

Assets

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

1,498,058

 

 

$

1,458,442

 

Marketable securities

 

 

347,980

 

 

 

387,642

 

Accounts receivable, net

 

 

843,445

 

 

 

849,469

 

Inventories

 

 

1,227,609

 

 

 

762,084

 

Deferred costs

 

 

15,961

 

 

 

20,145

 

Prepaid expenses and other current assets

 

 

328,719

 

 

 

191,569

 

Total current assets

 

 

4,261,772

 

 

 

3,669,351

 

 

 

 

 

 

 

 

 

 

Property and equipment, net

 

 

1,067,478

 

 

 

855,539

 

Operating lease right-of-use assets

 

 

89,457

 

 

 

94,626

 

Noncurrent marketable securities

 

 

1,268,698

 

 

 

1,131,175

 

Deferred income tax assets

 

 

260,205

 

 

 

245,455

 

Noncurrent deferred costs

 

 

12,361

 

 

 

16,510

 

Intangible assets, net

 

 

791,073

 

 

 

828,566

 

Other noncurrent assets

 

 

103,383

 

 

 

190,151

 

Total assets

 

$

7,854,427

 

 

$

7,031,373

 

 

 

 

 

 

 

 

 

 

Liabilities and Stockholders’ Equity

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Accounts payable

 

$

370,048

 

 

$

258,885

 

Salaries and benefits payable

 

 

211,371

 

 

 

181,937

 

Accrued warranty costs

 

 

45,467

 

 

 

42,643

 

Accrued sales program costs

 

 

121,514

 

 

 

109,891

 

Other accrued expenses

 

 

225,988

 

 

 

181,767

 

Deferred revenue

 

 

87,654

 

 

 

86,865

 

Income taxes payable

 

 

128,083

 

 

 

68,585

 

Dividend payable

 

 

258,023

 

 

 

233,644

 

Total current liabilities

 

 

1,448,148

 

 

 

1,164,217

 

 

 

 

 

 

 

 

 

 

Deferred income tax liabilities

 

 

117,595

 

 

 

116,844

 

Noncurrent income taxes payable

 

 

62,539

 

 

 

92,810

 

Noncurrent deferred revenue

 

 

41,618

 

 

 

49,934

 

Noncurrent operating lease liabilities

 

 

70,044

 

 

 

75,958

 

Other noncurrent liabilities

 

 

324

 

 

 

15,494

 

 

 

 

 

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

 

 

 

 

Shares, CHF 0.10 par value, 198,077 shares authorized and issued, 192,608 shares outstanding at December 25, 2021; and 191,571 shares outstanding at December 26, 2020

 

 

17,979

 

 

 

17,979

 

Additional paid-in capital

 

 

1,960,722

 

 

 

1,880,354

 

Treasury stock

 

 

(303,114

)

 

 

(320,016

)

Retained earnings

 

 

4,320,737

 

 

 

3,754,372

 

Accumulated other comprehensive income

 

 

117,835

 

 

 

183,427

 

Total stockholders’ equity

 

 

6,114,159

 

 

 

5,516,116

 

Total liabilities and stockholders’ equity

 

$

7,854,427

 

 

$

7,031,373

 

Garmin Ltd. and Subsidiaries

 

Consolidated Statements of Cash Flows

 

(In thousands)

 

 

 

 

 

 

 

 

 

 

 

 

52-Weeks Ended

 

 

 

December 25,

 

 

December 26,

 

2021

2020

Operating Activities:

 

 

 

 

 

 

 

 

Net income

 

$

1,082,200

 

 

$

992,324

 

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

 

 

 

 

 

 

 

 

Depreciation

 

 

103,498

 

 

 

78,121

 

Amortization

 

 

51,320

 

 

 

48,594

 

Loss (gain) on sale of property and equipment

 

 

298

 

 

 

(1,799

)

Unrealized foreign currency losses (gains)

 

 

36,385

 

 

 

(9,873

)

Deferred income taxes

 

 

(5,368

)

 

 

6,931

 

Stock compensation expense

 

 

92,522

 

 

 

80,885

 

Realized gains on marketable securities

 

 

(622

)

 

 

(1,392

)

Changes in operating assets and liabilities, net of acquisitions:

 

 

 

 

 

 

 

 

Accounts receivable, net of allowance for doubtful accounts

 

 

(19,106

)

 

 

(108,859

)

Inventories

 

 

(476,454

)

 

 

28,726

 

Other current and noncurrent assets

 

 

(38,004

)

 

 

(33,690

)

Accounts payable

 

 

108,946

 

 

 

1,447

 

Other current and noncurrent liabilities

 

 

70,007

 

 

 

87,761

 

Deferred revenue

 

 

(7,377

)

 

 

(25,211

)

Deferred costs

 

 

8,288

 

 

 

11,973

 

Income taxes

 

 

5,894

 

 

 

(20,671

)

Net cash provided by operating activities

 

 

1,012,427

 

 

 

1,135,267

 

 

 

 

 

 

 

 

 

 

Investing activities:

 

 

 

 

 

 

 

 

Purchases of property and equipment

 

 

(307,645

)

 

 

(185,401

)

Proceeds from sale of property and equipment

 

 

35

 

 

 

1,977

 

Purchase of intangible assets

 

 

(1,942

)

 

 

(2,065

)

Purchase of marketable securities

 

 

(1,508,712

)

 

 

(1,052,640

)

Redemption of marketable securities

 

 

1,363,070

 

 

 

1,126,253

 

Acquisitions, net of cash acquired

 

 

(20,175

)

 

 

(148,648

)

Net cash used in investing activities

 

 

(475,369

)

 

 

(260,524

)

 

 

 

 

 

 

 

 

 

Financing activities:

 

 

 

 

 

 

 

 

Dividends

 

 

(491,457

)

 

 

(450,631

)

Proceeds from issuance of treasury stock related to equity awards

 

 

35,733

 

 

 

15,201

 

Purchase of treasury stock related to equity awards

 

 

(30,985

)

 

 

(26,330

)

Net cash used in financing activities

 

 

(486,709

)

 

 

(461,760

)

 

 

 

 

 

 

 

 

 

Effect of exchange rate changes on cash and cash equivalents

 

 

(10,254

)

 

 

18,127

 

 

 

 

 

 

 

 

 

 

Net increase in cash, cash equivalents, and restricted cash

 

 

40,095

 

 

 

431,110

 

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

 

 

1,458,748

 

 

 

1,027,638

 

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

 

$

1,498,843

 

 

$

1,458,748

 

The following table includes supplemental financial information for the consumer auto and auto OEM operating segments that management believes is useful.

Garmin Ltd. and Subsidiaries

 

Net Sales, Gross Profit and Operating Income by Segment

 

(In thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Auto

 

 

 

 

 

 

 

Fitness

 

 

Outdoor

 

 

Aviation

 

 

Marine

 

 

Total

Auto

 

 

Consumer

Auto

 

 

Auto

OEM

 

 

Total

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

13-Weeks Ended December 25, 2021

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net sales

 

$

470,146

 

 

$

378,218

 

 

$

177,582

 

 

$

196,454

 

 

$

169,189

 

 

$

93,143

 

 

$

76,046

 

 

$

1,391,589

 

Gross profit

 

 

231,560

 

 

 

244,482

 

 

 

130,445

 

 

 

105,170

 

 

 

60,448

 

 

 

40,257

 

 

 

20,191

 

 

 

772,105

 

Operating income (loss)

 

 

104,085

 

 

 

141,747

 

 

 

44,800

 

 

 

39,158

 

 

 

(14,671

)

 

 

10,213

 

 

 

(24,884

)

 

 

315,119

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

13-Weeks Ended December 26, 2020

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net sales

 

$

470,811

 

 

$

411,935

 

 

$

156,969

 

 

$

171,579

 

 

$

140,111

 

 

$

78,552

 

 

$

61,559

 

 

$

1,351,405

 

Gross profit

 

 

250,603

 

 

 

270,627

 

 

 

114,237

 

 

 

96,347

 

 

 

59,169

 

 

 

41,516

 

 

 

17,653

 

 

 

790,983

 

Operating income (loss)

 

 

128,809

 

 

 

179,028

 

 

 

33,718

 

 

 

41,530

 

 

 

(11,819

)

 

 

15,836

 

 

 

(27,655

)

 

 

371,266

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

52-Weeks Ended December 25, 2021

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net sales

 

$

1,533,788

 

 

$

1,281,933

 

 

$

712,468

 

 

$

875,151

 

 

$

579,455

 

 

$

324,731

 

 

$

254,724

 

 

$

4,982,795

 

Gross profit

 

 

813,325

 

 

 

834,837

 

 

 

519,821

 

 

 

495,310

 

 

 

227,166

 

 

 

153,825

 

 

 

73,341

 

 

 

2,890,459

 

Operating income (loss)

 

 

372,575

 

 

 

480,777

 

 

 

191,775

 

 

 

244,199

 

 

 

(70,706

)

 

 

45,603

 

 

 

(116,309

)

 

 

1,218,620

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

52-Weeks Ended December 26, 2020

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net sales

 

$

1,317,498

 

 

$

1,128,081

 

 

$

622,820

 

 

$

657,848

 

 

$

460,326

 

 

$

275,493

 

 

$

184,833

 

 

$

4,186,573

 

Gross profit

 

 

697,539

 

 

 

739,777

 

 

 

453,008

 

 

 

384,450

 

 

 

206,562

 

 

 

139,864

 

 

 

66,698

 

 

 

2,481,336

 

Operating income (loss)

 

 

318,884

 

 

 

441,085

 

 

 

137,203

 

 

 

175,724

 

 

 

(18,656

)

 

 

41,464

 

 

 

(60,120

)

 

 

1,054,240

 

Garmin Ltd. and Subsidiaries

 

Net Sales by Geography

 

(In thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

13-Weeks Ended

 

 

52-Weeks Ended

 

 

 

December 25,

 

 

December 26,

 

 

YoY

 

 

December 25,

 

 

December 26,

 

 

YoY

 

 

 

2021

 

 

2020

 

 

Change

 

 

2021

 

 

2020

 

 

Change

 

Net sales

 

$

1,391,589

 

 

$

1,351,405

 

 

3%

 

 

$

4,982,795

 

 

$

4,186,573

 

 

19%

 

Americas

 

 

626,099

 

 

 

595,720

 

 

5%

 

 

 

2,349,515

 

 

 

1,968,080

 

 

19%

 

EMEA

 

 

528,053

 

 

 

536,822

 

 

(2)%

 

 

 

1,858,907

 

 

 

1,579,749

 

 

18%

 

APAC

 

 

237,437

 

 

 

218,863

 

 

8%

 

 

 

774,373

 

 

 

638,744

 

 

21%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

EMEA - Europe, Middle East and Africa

 

APAC - Asia Pacific and Australian Continent

 

Changes in Expense Classification and Segment Allocation Methodologies

Beginning with reports filed in the first quarter of fiscal 2022, the Company will reflect a refined methodology used in classifying certain indirect costs in accordance with the way the Company's management will use the information in decision making, which we believe will provide a more meaningful representation of costs incurred to support research and development activities. Future reports will also reflect a refined methodology used to allocate certain selling, general, and administrative expenses to the segments in a more direct manner to provide a more meaningful representation of segment profit or loss.

These changes in classification and allocation had no effect on the Company's consolidated operating or net income or on the Company's composition of operating segments and reportable segments. The Company expects to report its financial results in accordance with these changes beginning with the Company's first quarter 2022 Form 10-Q and will recast prior periods to conform to the revised presentation.

We estimate the expense classification change will result in a decrease to research and development expense of approximately $61 million, with a corresponding increase to selling, general, and administrative expenses, for the recast fiscal year ended December 25, 2021.

We estimate the segment allocation change will result in the following impacts to segment operating income for the recast fiscal year ended December 25, 2021:

 

 

52-Weeks Ended December 25, 2021

(In millions)

 

 

 

 

 

 

 

 

 

 

Auto

 

 

 

 

Fitness

 

Outdoor

 

Aviation

 

Marine

 

Total

Auto

 

Consumer

Auto

 

Auto

OEM

 

Total

Operating income (decrease) increase

 

$ (13)

 

$ (5)

 

$ 1

 

$ 6

 

$ 11

 

$ 3

 

$ 8

 

$ —

Non-GAAP Financial Information

To supplement our financial results presented in accordance with GAAP, this release includes the following measures defined by the Securities and Exchange Commission as non-GAAP financial measures: pro forma effective tax rate, pro forma net income (earnings) per share and free cash flow. These non-GAAP measures are not based on any comprehensive set of accounting rules or principles and should not be considered a substitute for, or superior to, financial measures calculated in accordance with GAAP, and may be different from non-GAAP measures used by other companies, limiting the usefulness of the measures for comparison with other companies. Management believes providing investors with an operating view consistent with how it manages the Company provides enhanced transparency into the operating results of the Company, as described in more detail by category below.

The tables below provide reconciliations between the GAAP and non-GAAP measures.

Pro forma effective tax rate

The Company’s income tax expense is periodically impacted by discrete tax items that are not reflective of income tax expense incurred as a result of current period earnings. Therefore, management believes disclosure of the effective tax rate and income tax provision before the effect of certain discrete tax items are important measures to permit investors' consistent comparison between periods.

(In thousands, except ETR information)

 

13-Weeks Ended

 

 

52-Weeks Ended

 

 

 

December 25,

 

 

December 26,

 

 

December 25,

 

 

December 26,

 

 

 

2021

 

 

2020

 

 

2021

 

 

2020

 

 

 

$

 

 

ETR(1)

 

 

$

 

 

ETR(1)

 

 

$

 

 

ETR(1)

 

 

$

 

 

ETR(1)

 

U.S GAAP income tax provision

 

$

22,702

 

 

7.4%

 

 

$

57,918

 

 

14.8%

 

 

$

124,596

 

 

10.3%

 

 

$

111,086

 

 

10.1%

 

Pro forma discrete tax items:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Uncertain tax reserve release (2)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

14,308

 

 

 

 

 

Switzerland deferred tax assets (3)

 

 

 

 

 

 

 

 

 

 

(11,016

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(11,016

)

 

 

 

 

Pro forma income tax provision

 

$

22,702

 

 

7.4%

 

 

$

46,902

 

 

12.0%

 

 

$

124,596

 

 

10.3%

 

 

$

114,378

 

 

10.4%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1) Effective tax rate is calculated by taking the income tax provision divided by income before taxes, as presented on the face of the Condensed Consolidated Statements of Income.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(2) In second quarter 2020, the Company recognized a $14.3 million income tax benefit due to the release of uncertain tax position reserves associated with the 2014 intercompany restructuring, which was a pro forma adjustment in 2014. The second quarter 2020 impact of the reserve release is not reflective of income tax expense incurred as a result of current period earnings and therefore affects period-to-period comparability.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(3) Certain Switzerland deferred tax assets related to the enactment of Switzerland Federal and Schaffhausen cantonal tax reform and related transitional measures were revalued in the fourth quarter of 2020 resulting in $11.0 million income tax expense. The impact of the revaluation of these Switzerland deferred tax assets is not reflective of income tax expense incurred as a result of current period earnings and therefore affects period-to-period comparability.

 

Pro forma net income (earnings) per share

Management believes that net income (earnings) per share before the impact of foreign currency gains or losses and certain discrete income tax items, as discussed above, is an important measure in order to permit a consistent comparison of the Company’s performance between periods.

(In thousands, except per share information)

 

13-Weeks Ended

 

 

52-Weeks Ended

 

 

 

December 25,

 

 

December 26,

 

 

December 25,

 

 

December 26,

 

 

 

2021

 

 

2020

 

 

2021

 

 

2020

 

GAAP net income

 

$

286,135

 

 

$

333,547

 

 

$

1,082,200

 

 

$

992,324

 

Foreign currency gains / losses (1)

 

 

14,642

 

 

 

(12,627

)

 

 

45,263

 

 

 

(2,825

)

Tax effect of foreign currency gains / losses (2)

 

 

(1,076

)

 

 

1,513

 

 

 

(4,673

)

 

 

293

 

Pro forma discrete tax items (3)

 

 

 

 

 

 

11,016

 

 

 

 

 

 

 

(3,292

)

Pro forma net income

 

$

299,701

 

 

$

333,449

 

 

$

1,122,790

 

 

$

986,500

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GAAP net income per share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

1.49

 

 

$

1.74

 

 

$

5.63

 

 

$

5.19

 

Diluted

 

$

1.48

 

 

$

1.73

 

 

$

5.61

 

 

$

5.17

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Pro forma net income per share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

1.56

 

 

$

1.74

 

 

$

5.84

 

 

$

5.16

 

Diluted

 

$

1.55

 

 

$

1.73

 

 

$

5.82

 

 

$

5.14

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average common shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

192,353

 

 

 

191,278

 

 

 

192,180

 

 

 

191,085

 

Diluted

 

 

193,306

 

 

 

192,303

 

 

 

193,043

 

 

 

191,895

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1) Foreign currency gains and losses for the Company are driven by movements of a number of currencies in relation to the U.S. Dollar and the related exchange rate impact on the significant cash, receivables, and payables held in a currency other than the functional currency at a given legal entity. However, there is minimal cash impact from such foreign currency gains and losses.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(2) The tax effect of foreign currency gains and losses was calculated using the pro forma effective tax rate of 7.4% and 10.3% for the 13-weeks and fiscal year ended December 25, 2021, respectively, and the pro forma effective tax rate of 12.0% and 10.4% for the 13-weeks and fiscal year ended December 26, 2020, respectively.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(3) The 2020 discrete tax items are discussed in the pro forma effective tax rate section above.

 

Free cash flow

Management believes that free cash flow is an important liquidity measure because it represents the amount of cash provided by operations that is available for investing and defines it as operating cash flows less capital expenditures for property and equipment. Management believes that excluding purchases of property and equipment provides a better understanding of the underlying trends in the Company’s operations and allows more accurate comparisons of the Company’s results between periods. This metric may also be useful to investors, but should not be considered in isolation as it is not a measure of cash flow available for discretionary expenditures. The most comparable GAAP measure is net cash provided by operating activities.

(In thousands)

 

13-Weeks Ended

 

 

52-Weeks Ended

 

 

 

December 25,

 

 

December 26,

 

 

December 25,

 

 

December 26,

 

 

 

2021

 

 

2020

 

 

2021

 

 

2020

 

Net cash provided by operating activities

 

$

168,962

 

 

$

435,818

 

 

$

1,012,427

 

 

$

1,135,267

 

Less: purchases of property and equipment

 

 

(119,685

)

 

 

(48,329

)

 

 

(307,645

)

 

 

(185,401

)

Free Cash Flow

 

$

49,277

 

 

$

387,489

 

 

$

704,782

 

 

$

949,866

 

Forward-looking Financial Measures

The forward-looking financial measures in our 2022 guidance provided above do not consider the potential future net effect of foreign currency exchange gains and losses, certain discrete tax items and any other impacts that may be identified as pro forma adjustments in calculating the non-GAAP measures described above.

The estimated impact of foreign currency gains and losses cannot be reasonably estimated on a forward-looking basis due to the high variability and low visibility with respect to non-operating foreign currency exchange gains and losses and the related tax effects of such gains and losses. The impact on diluted net income per share of foreign currency gains and losses, net of tax effects, was $0.21 per share for the 52-weeks ended December 25, 2021.

At this time, management is unable to determine whether or not significant discrete tax items will occur in fiscal 2022 or anticipate the impact of any other events that may be considered in the calculation of non-GAAP financial measures.

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