Garmin 2001 Annual Report Download

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Table of contents

  • Page 1

  • Page 2
    ...of contents 2001 Highlights Letter to shareholders Products for an active world 2001: A year of growth A look ahead Growing our distribution M ore people, bigger spaces Our commitment to quality Financial summary M arket for the company's common stock Selected financial data M anagement's discussion...

  • Page 3
    ... new products Increased revenue 7 percent to $369.1 million Achieved net income of $113.4 million Reduced inventory by $29 million Expanded distribution and OEM relationships Received QS 9000 certification for our Shijr, Taiwan factory M aintained FAA and ISO 9001 certification at our Olathe, Kansas...

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    3

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    ... s (original equipment manufacturers). And we maintained the ISO 9001 certification of our Olathe, Kansas factory. We are committed to maintaining our customer-focused approach to product design with the goal of providing superior product innovation, operational features, quality and lower cost of...

  • Page 6
    Products for an active w orld StreetPilot III portable GPS w ith auto routing and voice 5

  • Page 7
    ... on the move. When your customers are pilots, hikers, bikers, mariners, fishing enthusiasts and travelers, product design integrity is essential. We're talking busy people who demand products that are fast, reliable, convenient and accurate. All the more reason they love their Garmin electronics. 6

  • Page 8
    ... States, Europe and Asia, we design, manufacture and market navigation, communication and information devices. M any of our products are enabled by GPS (Global Positioning System) technology, w hich uses satellites to locate a user's position, display it on an electronic map and provide guidance to...

  • Page 9
    Its compact design and two-way screen orientation (vertical or horizontal), makes this product ideal for recreational uses as w ell, including biking and hiking. result of GPS technology. Geocaching participants use our products to navigate to a hidden " cache." Many families have taken up ...

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    9

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    ... that will give us a technological edge and allow us to continue to provide better products for our customers. Garmin will enter the Family Radio Service (FRS) application with our newly announced Rino â„¢ series - a combination two-way radio and GPS receiver. The Rino units are designed to offer...

  • Page 12
    NavTalk GSM phone/GPS w ith electronic organizer functions

  • Page 13
    ... and communication products. Likewise, we will apply our aviation electronics integration skills to develop additional services and capabilities for automotive, motorcycle and other applications. West M arine. We added Radio Shack Canada, Dixons, Staples Europe, The Sharper Image, Good Guys and...

  • Page 14
    ... This facility, located at nearby New Century Airport, w ill support future development of aviation products. We also completed the expansion of our Olathe facility from 103,000 to 240,000 square feet, which more than doubled manufacturing and warehouse space and tripled engineering space. Thanks to...

  • Page 15
    Garmin's avionics " stack" featuring the GM A 340 audio panel, GNS 530, GNS 430 and GTX 330 transponder 14

  • Page 16
    ...that end resulted in the development of a worldwide aviation service directory. This tool helps customers locate Garmin-authorized aviation service centers anywhere in the world. With strategically positioned parts inventories and qualified repair Our commitment to quality As a leader in the design...

  • Page 17
    ... as a virtual pressroom, investor relations page, product buying guide, dow nloadable softw are updates and online map view er help our audiences find the answ ers or support they need. Going forw ard Considering the successful product launches and strategic alliances Garmin made in 2001, w e are...

  • Page 18
    17

  • Page 19
    ... anticipate paying any cash dividends in the foreseeable future. The date of the Company's initial public offering was December 8, 2000. The range of high and low closing sales prices of the Company's common shares as reported on the Nasdaq Stock Market for each fiscal quarter of fiscal years 2000...

  • Page 20
    ... Statements of Income Data: Net sales Cost of goods sold Gross profit Operating expenses; Selling, general and administrative Research and development Total operating expenses Operating income Other income, net (2), (3) Income before income taxes Income tax provision Net income Net income per share...

  • Page 21
    ..., recreation, land and automotive applications sold primarily to retail outlets. Our aviation products are portable and panel-mount avionics for Visual Flight Rules and Instrument Flight Rules navigation and are sold primarily to retail outlets and certain aircraft manufacturers. Since our first...

  • Page 22
    ... differ from these estimates under different assumptions or conditions. Revenue Recognition The Company records estimated reductions to revenue for customer sales programs and incentive offerings including rebates, price protection, promotions and other volume-based incentives. If market conditions...

  • Page 23
    ... mix of GPS-enabled products sold could have a significant impact on our gross profit. Selling, General and Administrative Expenses Our selling, general and administrative expenses consist primarily of: • salaries for sales and marketing personnel; • salaries and related costs for executives and...

  • Page 24
    ... impact our financial results in 2002 and subsequent periods. Research and Development The majority of our research and development costs represent salaries for our engineers, costs for high technology components used in product and prototype development, and costs of test equipment needed during...

  • Page 25
    ... and aviation segments' amounts equals the amount in the consolidated statements of income included in this annual report. Fiscal Years Ended Dec. 29, 2001 Consumer Net sales Cost of goods sold Gross profit Operating expenses: Selling, general and administrative Research and development Total...

  • Page 26
    ...in the aviation segment. The increase in expense was primarily attributable to increases in employment generally across the organization (net increase of 32 employees), increased advertising costs (up 27.6%) associated with new product releases, increased costs associated with being a public company...

  • Page 27
    ... that the withdrawal of this degradation has helped drive increased demand for and sales of consumer GPS devices in 2000. The aviation sales growth was driven by new products introduced in early 2000 and continued strong demand of our panel mount aviation products that were introduced in early 1999...

  • Page 28
    ... segment and $2.3 million, or 36%, in the aviation segment. The increase in expense reflects increased employment generally across the organization but also specifically in the areas of customer service and marketing, in support of our increased sales in both segments. The percentage increase was...

  • Page 29
    ... to increase our manufacturing capacity both in the United States and in Taiwan. We financed these capital expenditures through net operating cash flow and debt from outside financial institutions. The fiscal 2000 capital expenditures were primarily for our Olathe, Kansas building and land expansion...

  • Page 30
    ...the Bonds and is guaranteed by Garmin Corporation. Our reimbursement agreements contain restrictive covenants, which include, among other things, financial covenants requiring minimum cash flow leverage, maximum capitalization, minimum tangible net worth, and other affirmative and negative covenants...

  • Page 31
    ...its present value each period and the capitalized costs are depreciated over the useful life of the associated asset. This statement is effective for fiscal years beginning after June 15, 2002, and is not expected to have a material impact on our financial statements. In June 2001, the (FASB) issued...

  • Page 32
    ...currency involved is the Taiwan Dollar. Garmin Corporation, located in Shijr, Taiwan uses the local currency as the functional currency. The Company translates all assets and liabilities at year-end exchange rates and income and expense accounts at average rates during the year. In order to minimize...

  • Page 33
    Financial Statements and Supplementary Data Garmin Ltd. and Subsidiaries INDEX TO CONSOLIDATED FINANCIAL STATEMENTS Contents Report of Independent Auditors...33 Consolidated Balance Sheets at December 29, 2001 and December 30, 2000 ...34 Consolidated Statements of Income for the Years Ended ...

  • Page 34
    ... their cash flows for each of the three years in the period ended December 29, 2001, in conformity with accounting principles generally accepted in the United States. Also, in our opinion, the related financial statement schedule, when considered in relation to the basic financial statements taken...

  • Page 35
    ... assets Total current assets Property and equipment (Note 5): Land and improvements Building and improvements Office furniture and equipment Manufacturing equipment Engineering equipment Vehicles Accumulated depreciation 20,414 32,864 11,365 17,282 11,671 1,671 95,267 25,181 70,086 Restricted cash...

  • Page 36
    Garmin Ltd. and Subsidiaries Consolidated Statements of Income (In Thousands, Except Share and Per Share Information) Year Ended December 29, 2001 Net sales Cost of goods sold Gross profit Selling, general, and administrative expenses Research and development expense Operating income Other income (...

  • Page 37
    ... adjustment Comprehensive income Cash dividend ($0.29 per share) Issuance of common stock in initial public offering, net of offering costs Balance at December 30, 2000 Net income Translation adjustment Adjustment related to effective portion of cash flow hedges, net of deferred taxes of $579...

  • Page 38
    ... debt Principal payments on notes payable Purchases of common stock Net cash (used in) provided by financing activities Effect of exchange rate changes on cash Net (decrease) increase in cash and cash equivalents Cash and cash equivalents at beginning of year Cash and cash equivalents at end of year...

  • Page 39
    Garmin Ltd. and Subsidiaries Consolidated Statements of Cash Flows (continued) (In Thousands) Year Ended December 29, 2001 December 30, 2000 December 25, 1999 Supplemental disclosures of cash flow information Cash paid during the year for income taxes Cash received during the year from income tax ...

  • Page 40
    ... responsible for sales and marketing of the Company's products in many international markets and in the United States as well as research and new product development. GII also manufactures certain products for the Company's aviation segment. During June 1992, GII formed Garmin (Europe) Limited (GEL...

  • Page 41
    GARMIN LTD. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) Note 2. Summary of Significant Accounting Policies (continued) Fiscal Year The Company has adopted a 52-53-week period ending on the last Saturday of the calendar year. Due to the fact that there are not exactly 52 ...

  • Page 42
    ...Equipment Property and equipment are recorded at cost and depreciated using the straight-line method over the following estimated useful lives: Buildings and improvements...8-55 years Office furniture and equipment ...3-8 years Manufacturing and engineering equipment ...3-8 years Vehicles ...3 years...

  • Page 43
    GARMIN LTD. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) Note 2. Summary of Significant Accounting Policies (continued) Intangible Assets Intangible assets principally consist of costs incurred with certain licensing agreements totaling approximately $11,400 and $4,700 at ...

  • Page 44
    ... related to its warranty programs discussed below. Shipping and handling costs are included in cost of sales in the accompanying consolidated financial statements. Product Warranty The Company provides for estimated warranty costs at the time of sale. The warranty period is generally for one year...

  • Page 45
    ... measures compensation cost as the excess, if any, of the quoted market price of Company common stock at the grant date over the amount the employee must pay for the stock. Required pro forma disclosures of compensation expense determined under the fair value method of SFAS No. 123, Accounting for...

  • Page 46
    ...2000, the Company renewed a line of credit agreement with a bank providing for maximum borrowings of $5,000 less indirect borrowings under certain standby letters of credit which totaled approximately $4,000 at December 30, 2000. There were no direct or indirect borrowings outstanding under the line...

  • Page 47
    ... agreement entered into with the bank, GII is required to comply with various covenants, including minimum tangible net worth requirements of both GARMIN and GII and various financial performance ratios. During 1999, GARMIN borrowed $18,040 to finance the purchase of land and a new manufacturing...

  • Page 48
    ... 1999, respectively. Future minimum lease payments on the related lease are $236 per year through 2006. In the years 2007 through lease expiration in 2015, total future minimum lease payments are $2,122. At December 29, 2001 and December 30, 2000, standby letters of credit amounting to $871 and $869...

  • Page 49
    ... of the following: Year Ended December 29, 2001 Federal: Current Deferred State: Current Deferred Foreign: Current Deferred Total 21,336 5,218 26...credits received from Taiwan included in the table above reflect $0.03, $0.05, and $0.04 per weighted-average common share outstanding for the years ended...

  • Page 50
    ...: December 29, 2001 Deferred tax assets: Product warranty accruals Allowance for doubtful accounts Inventory carrying value Sales program allowances Vacation accrual Interest-rate swaps Other Deferred tax liabilities: Unrealized foreign currency gains Depreciation Net deferred tax assets 844 1,017...

  • Page 51
    ... outlets. The Company's aviation products are portable and panel mount avionics for Visual Flight Rules and Instrument Flight Rules navigation and are sold primarily to retail outlets and certain aircraft manufacturers. The Company's Co-Chief Executive Officers have been identified as the Chief...

  • Page 52
    ... FINANCIAL STATEMENTS (CONTINUED) Note 11. Segment Information (continued) The identifiable assets associated with each reportable segment reviewed by CODM include accounts receivable and inventories. The Company does not report property and equipment, depreciation and amortization, or capital...

  • Page 53
    GARMIN LTD. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) Note 11. Segment Information (continued) Net sales and long-lived assets (property and equipment) by geographic area are as follows as of and for the years ended December 29, 2001, December 30, 2000, and December 25,...

  • Page 54
    ... the Company's stock option activity and related information under the Equity Incentive Plan and 2000 Nonemployee Directors' Plan for the years ended December 29, 2001 and December 30, 2000 is provided below: Weighted-Average Exercise Price Outstanding at December 25, 1999 Granted Exercised Canceled...

  • Page 55
    ...the fair market value on the enrollment date. The ESPP is intended to qualify as an "employee stock purchase plan" under Section 423 of the Internal Revenue Code. During 2001, 123,007 shares were purchased under the plan for a total purchase price of $1,464. No shares were purchased during 2000. 54

  • Page 56
    ... Board declared a dividend of one preferred share purchase right on each outstanding common share of Garmin to shareholders of record as of November 1, 2001. The rights trade together with Garmin's common shares. The rights generally will become exercisable if a person or group acquires or announces...

  • Page 57
    GARMIN LTD. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) Note 17. Selected Quarterly Information (Unaudited) Year Ended December 29, 2001 Quarter Ended March 31 Net sales Gross profit Net income Net income per share $85,534 45,918 23,799 $ 0.22 June 30 $103,634 55,050 36,...

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    NOTES 57

  • Page 59
    ...and Chief Executive Officer DST Systems, Inc. Transfer Agent UM B Bank, NA PO Box 410064 Kansas City, M O 64141-0064 Independent Accountants Ernst & Young LLP M arket Information The Common Shares of the Company are traded on the Nasdaq National M arket under the symbol GRM N. Executive Officers...

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    © 2002 Garmin Ltd. Garmin Ltd. P .O. Box 30464 SM B 5th Floor, Harbour Place 103 South Church Street Grand Cayman, Cayman Islands (345) 946-5203 www.garmin.com M 00-60065-00