Garmin 2001 Annual Report Download - page 27

Research and Development Expenses
Research and development expenses increased $6.4 million, or 29.4%, to $28.2 million (7.6% of net revenues) for fiscal year 2001
from $21.8 million (6.3% of net revenues) for fiscal year 2000. Research and development expenses increased $4.0 million, or 28.1%,
in the consumer segment and increased $2.4 million, or 31.9%, in the aviation segment. The increase in expense was primarily
attributable to the development and introduction of 25 new products, and the addition of 50 new engineers to our staff during
fiscal 2001. Management believes that one of the key strategic initiatives for future growth and success of the Company is continuous
innovation, development, and introduction of new products. Management expects that its research and development expenses
will increase approximately 25% to 30% during fiscal 2002 on an absolute dollar basis due to the anticipated introduction of
new products for fiscal 2002. Management expects to continue to invest in the research and development of new products and
technology in order to maintain the Company’s competitive advantage in the markets in which it competes.
Other Income (Expense)
Other income (expense) principally consists of interest income, interest expense and foreign currency exchange gains and losses.
Other income for fiscal year 2001 amounted to $20.7 million compared to other income of $11.6 million for fiscal year 2000.
Interest income for fiscal 2001 amounted to $11.2 million compared to $6.9 million for fiscal 2000, the increase being attributable
to the growth of the Company’s cash and cash equivalents from profitable operations during the period on which interest income
is earned. Interest expense decreased to $2.2 million for fiscal 2001 from $2.3 million for fiscal 2000, due primarily to the reduction
of debt and a lower interest rate environment during fiscal 2001.
We recognized a foreign currency exchange gain of $11.6 million for fiscal 2001 compared to a gain of $7.0 million for fiscal 2000.
The $11.6 million gain was due to the significantly increased strength of the U.S. Dollar compared to the Taiwan Dollar during
2001, when the exchange rate increased to 35.17 TD/USD at December 29, 2001 from 33.01 TD/USD at December 30, 2000. The
$7.0 million gain during 2000 was due to the significantly increased strength of the U.S. Dollar compared to the Taiwan Dollar
during 2000, when the exchange rate increased to 33.01 TD/USD at December 30, 2000 from 31.30 TD/USD at December 25, 1999.
Income Tax Provision
Income tax expense increased by $3.3 million, to $38.6 million, for fiscal year 2001 from $35.3 million for fiscal year 2000 due to
our higher taxable income. The effective tax rate was 25.4% for fiscal 2001 versus 25.0% for fiscal 2000. The increase is attributable
to the source of taxable income between each of our subsidiaries changing slightly during 2001. Management believes that the
effective tax rate for fiscal 2002 will be comparable to fiscal 2001.
Net Income
As a result of the above, net income increased 7.4% to $113.4 million for fiscal year 2001 compared to $105.7 million for fiscal year 2000.
Comparison of Fiscal Years Ended December 30, 2000 and December 25, 1999
Net Sales
Our net sales were $345.7 million in fiscal 2000, a 49% increase over net sales of $232.6 million in fiscal 1999. The increase in sales
during this period was driven by increased demand across nearly all product lines which reflects the overall growth of the GPS
market. Sales from our consumer products accounted for 66.6% of net sales in fiscal 2000 compared to 72.7% of net sales in fiscal
1999. Sales from our aviation products accounted for 33.4% of net sales in fiscal 2000 compared to 27.3% of net sales in fiscal 1999.
Net sales increased $61.0 million, or 36%, in the consumer segment and $52.1 million, or 82%, in the aviation segment. In May
2000, President Clinton withdrew the prior government degradation placed on GPS accuracy. Although difficult to quantify,
management believes 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.
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