Garmin 2005 Annual Report Download - page 49

Download and view the complete annual report

Please find page 49 of the 2005 Garmin annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 120

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112
  • 113
  • 114
  • 115
  • 116
  • 117
  • 118
  • 119
  • 120

19
Item 1A. Risk Factors
The risks described below are not the only ones facing our company. Additional risks and uncertainties not
presently known to us or that we currently believe to be immaterial may also impair our business operations. If any
of the following risks occur, our business, financial condition or operating results could be materially adversely
affected.
Risks Related to the Company
Our Global Positioning System products depend upon satellites maintained by the United States Department
of Defense. If a significant number of these satellites become inoperable, unavailable or are not replaced or if
the policies of the United States government for the use of the Global Positioning System without charge are
changed or if there is interference with Global Positioning System signals, our business will suffer.
The Global Positioning System is a satellite-based navigation and positioning system consisting of a
constellation of orbiting satellites. The satellites and their ground control and monitoring stations are maintained
and operated by the United States Department of Defense. The Department of Defense does not currently charge
users for access to the satellite signals. These satellites and their ground support systems are complex electronic
systems subject to electronic and mechanical failures and possible sabotage. The satellites were originally designed
to have lives of 7.5 years and are subject to damage by the hostile space environment in which they operate.
However, of the current deployment of satellites in place, some have been operating for more than 13 years.
If a significant number of satellites were to become inoperable, unavailable or are not replaced, it would
impair the current utility of our Global Positioning System products and would have a material negative effect on
our business. In addition, there can be no assurance that the U.S. government will remain committed to the
operation and maintenance of Global Positioning System satellites over a long period, or that the policies of the U.S.
government that provide for the use of the Global Positioning System without charge and without accuracy
degradation will remain unchanged. Because of the increasing commercial applications of the Global Positioning
System, other U.S. government agencies may become involved in the administration or the regulation of the use of
Global Positioning System signals. However, in a presidential policy statement issued in December 2004, the Bush
administration stated that the U.S. is committed to supporting and improving the Global Positioning System and will
continue providing it free from direct user fees.
Some of our products also use signals from systems that augment GPS, such as the Wide Area
Augmentation System (WAAS). WAAS is operated by the Federal Aviation Administration. Any curtailment of the
operating capability of WAAS could result in decreased user capability for many of our aviation products, thereby
impacting our markets.
Any of the foregoing factors could affect the willingness of buyers of our products to select Global
Positioning System-based products instead of products based on competing technologies.
A shut down of U.S. airspace or imposition of restrictions on general aviation would harm our business.
On September 11, 2001, terrorists hijacked and crashed four passenger aircraft operated by commercial air
carriers, resulting in major loss of life and property. Following the terrorist attacks, the Federal Aviation
Administration (“FAA”) ordered all aircraft operating in the U.S. to be grounded for several days. In addition to this
shut down of U.S. airspace, the general aviation industry was further impacted by the additional restrictions
implemented by the FAA on those flights that fly utilizing Visual Flight Rules (VFR). The FAA restricted VFR
flight inside 30 enhanced Class B (a 20-25 mile radius around the 30 largest metropolitan areas in the USA) airspace
areas. The Aircraft Owners and Pilots Association (AOPA) estimated that these restrictions affected approximately
41,800 general aviation aircraft based at 282 airports inside the 30 enhanced Class B airspace areas. The AOPA
estimates that approximately 90% of all general aviation flights are conducted VFR, and that only 15% of general
aviation pilots are current to fly utilizing Instrument Flight Rules (IFR).