Garmin 2005 Annual Report Download - page 56

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acquired companies may result in problems related to integration of technology and inexperienced management
teams. In addition, the key personnel of the acquired company may decide not to work for us. Our management has
had limited experience in assimilating acquired organizations and products into our operations. We may not
successfully integrate any operations, personnel or products that we may acquire in the future. If we fail to
successfully integrate such transactions, our business could be materially harmed.
We have benefited in the past from Taiwan government tax incentives offered on certain high technology
capital investments that may not always be available.
Our effective tax rate is lower than the U.S. Federal statutory rate, because we have benefited from
incentives offered in Taiwan related to our high technology investments in Taiwan. The loss of these tax benefits
could have a significant effect on our financial results in the future.
Changes in our United States federal income tax classification or in applicable tax law could result in adverse
tax consequences to our shareholders.
We do not believe that we (or any of our non-United States subsidiaries) are currently a ‘‘passive foreign
investment company’’ for United States federal income tax purposes. We do not expect to become a passive foreign
investment company. However, because the passive foreign investment company determination is made annually
on the basis of facts and circumstances that may be beyond our control and because the principles for applying the
passive foreign investment company tests are not entirely clear, we cannot assure that we will not become a passive
foreign investment company. If we are a passive foreign investment company in any year, then any of our
shareholders that is a United States person could be liable to pay tax at ordinary income tax rates plus an interest
charge upon some distributions by us or when that shareholder sells our common shares at a gain. Further, if we are
classified as a passive foreign investment company in any year in which a United States person is a shareholder, we
generally will continue to be treated as a passive foreign investment company with respect to such shareholder in all
succeeding years, regardless of whether we continue to satisfy the income or asset tests described above. Additional
tax considerations would apply if we or any of our subsidiaries were a controlled foreign corporation.
Risks Relating to Our Shares
The volatility of our stock price could adversely affect investment in our common shares.
The market price of our common shares has been, and may continue to be, highly volatile. During 2005, the
closing price of our common shares ranged from a low of $39.50 to a high of $70.41. A variety of factors could
cause the price of our common shares to fluctuate, perhaps substantially, including:
•announcements and rumors of developments related to our business or the
industry in which we compete;
•quarterly fluctuations in our actual or anticipated operating results;
•the availability, pricing and timeliness of delivery of components, such as flash memory and liquid
crystal displays, used in our products
•general conditions in the worldwide economy, including fluctuations in
interest rates;
•announcements of technological innovations;
•new products or product enhancements by us or our competitors;
•product obsolescence and our ability to manage product transitions
•developments in patents or other intellectual property rights and
litigation;
•developments in our relationships with our customers and suppliers; and
•any significant acts of terrorism against the United States, Taiwan or significant markets where we sell
our products.