Garmin 2005 Annual Report Download - page 70

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40
(TFR's) continue to impact general aviation, the flying community is adapting to these changes and returning to the
skies in greater numbers. Should the Federal Aviation Administration (FAA) impose more restrictions, or elect to
shutdown U.S. airspace in the future, these factors could have a material adverse effect on our business.
Gross Profit
Gross Profit % of Revenues Gross Profit % of Revenues $ Change % Change
Consumer $383,380 48.0% $304,217 51.5% $79,163 26.0%
Aviation 151,690 66.2% 107,022 62.4% 44,668 41.7%
Total $535,070 52.1% $411,239 53.9% $123,831 30.1%
53-weeks ended December 31, 2005 52-weeks ended December 25, 2004 Period over Period
The increase in gross profit dollars was primarily attributable to the introduction of 40 new consumer
products and overall demand for our consumer and aviation products. The reduction in gross margin percentage was
primarily due to reduced prices on older consumer products in advance of new product releases, a change in product
mix towards certain lower gross margin consumer product lines such as the automotive product line, and reduced
prices on certain consumer products due to increased competition. Management believes that the trend to lower
consumer gross margin percentages will continue in the future as net sales of automotive products increase at a
faster rate than the rest of the consumer segment.
The increase in aviation gross margin was primarily due to a shift in product mix within our OEM and
retrofit products as the G1000 product line began a second year of selling into new aircraft and program costs were
no longer a significant cost in this business segment.
Selling, General and Administrative Expenses
Selling, General & Selling, General &
Admin. Expenses % of Revenues Admin. Expenses % of Revenues $ Change % Change
Consumer $100,182 12.5% $60,942 10.3% $39,240 64.4%
Aviation $21,839 9.5% 18,049 10.5% 3,790 21.0%
Total $122,021 11.9% $78,991 10.4% $43,030 54.5%
53-weeks ended December 31, 2005 52-weeks ended December 25, 2004
Period over Period
The increase in expense was primarily attributable to increases in employment generally across the
organization (net increase of over 400 non-engineering employees), significantly increased advertising costs (up
101%) associated primarily with consumer products, increased information technology staffing and support costs,
increased staffing in our sales and marketing group to increase focus on specific target markets, and additional
staffing in our customer call center. Management expects that in spite of strong demand for our products, selling,
general and administrative expenses will remain relatively flat as a percentage of sales during fiscal 2006 due to
increased advertising and marketing activities intended to build awareness of the Garmin brand and demand for
Garmin product worldwide.
Research and Development Expenses
Research & Research &
Development % of Revenues Development % of Revenues $ Change % Change
Consumer $40,476 5.1% $31,684 5.4% $8,792 27.8%
Aviation 34,403 15.0% 29,896 17.4% $4,507 15.1%
Total $74,879 7.3% $61,580 8.0% $13,299 21.6%
53-weeks ended December 31, 2005 52-weeks ended December 25, 2004
Period over Period
The increase in research and development expense was primarily attributable to the addition of 142
associates to our research and development team during fiscal 2005. Management believes that one of the key