Garmin 2005 Annual Report Download - page 72

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42
The increase in total net sales during fiscal 2004 was primarily due to the introduction of 50 new products
and overall demand for our consumer and aviation products. Total consumer and aviation units sold increased
12.0% to 2,306,000 in 2004 from 2,066,000 in 2003.
The Company’s revenues are normally seasonal, with the fiscal second and fourth quarter revenues
meaningfully higher than the first and third fiscal quarters. In 2004, however, revenues increased each consecutive
quarter due to the impact of new product releases across all product lines. The revenue increase in third quarter was
primarily attributable to initial G1000 cockpit sales, the onset of the marine selling season and Father’s Day
purchases. The increase in revenues in the third quarter was due to new product releases and delivery of backorders
placed during the second quarter. The revenue increase in the fourth quarter was primarily attributable to new
product releases and sales associated with the traditional holiday selling season. Revenues can also be impacted in
any given quarter by the timing of new product introductions.
The increase in net sales to consumers was primarily due to the introduction of 35 new consumer products
and overall demand for our consumer products as total units sold were up 12%. It is management’s belief that the
continued demand for the Company’s consumer products was due to the emergence of the GPS market in general,
and overall increased consumer awareness of the capabilities and applications of GPS.
The increase in aviation sales for fiscal 2004 was primarily due to increased sales from panel mount
products sold into the OEM (original equipment manufacturers) and retrofit markets and sales from Garmin AT,
Inc., which was acquired during the third quarter of 2003.
Gross Profit
The increase in gross profit dollars was primarily attributable to the introduction of 35 new products and
overall demand for our consumer products. The reduction in gross margin percentage was primarily due to reduced
prices on older products in advance of new product releases, a change in product mix towards certain lower gross
margin product lines and increases in certain raw material costs early in the fiscal year. Upward pricing pressure on
certain raw materials components in early 2004 generally abated by the end of the year.
The decrease in consumer gross margin was attributable to higher component costs early in the year, higher
than normal price reductions on older products in advance of the release of 35 new products during the year, and a
shift in product mix, as automotive products became a larger portion of revenue for our consumer products segment.
The decrease 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 selling into new aircraft.
Selling, General and Administrative Expenses
2004 2003 Year over Year
% of % of
Net Sales Net Sales Net Sales Net Sales $ change % change
Consumer $591,023 77.5% $452,437 79.0% $138,586 30.6%
Aviation 171,526 22.5% 120,552 21.0% 50,974 42.3%
Total $762,549 100.0% $572,989 100.0% $189,560 33.1%
2004 2003 Year over Year
Gross % of Gross % of
Profit Net Sales Profit Net Sales $ change % change
Consumer $304,217 51.5% $253,153 56.0% $51,064 20.2%
Aviation 107,022 62.4% 77,388 64.2% 29,634 38.3%
Total $411,239 53.9% $330,541 57.7% $80,698 24.4%