Garmin 2007 Annual Report Download - page 48

22
we are able to obtain on our products. We may not succeed in adapting our products to new technologies as they
emerge. Development and manufacturing schedules for technology products are difficult to predict, and there can
be no assurance that we will achieve timely initial customer shipments of new products. The timely availability of
these products in volume and their acceptance by customers are important to our future success. From time to time
we have experienced delays in shipping certain of our new products and any future delays, whether due to product
development delays, manufacturing delays, lack of market acceptance, delays in regulatory approval, or otherwise,
could have a material adverse effect on our results of operations.
If we do not correctly anticipate demand for our products, we may not be able to secure sufficient quantities
or cost-effective production of our products or we could have costly excess production or inventories.
Historically, we have experienced steady increases in demand for our products although we did experience a
decline in demand for our aviation products in 2001 due to declining economic conditions and the shut down of U.S.
airspace as a result of the terrorist attacks that occurred on September 11, 2001. We have generally been able to
increase production to meet this increasing demand. However, the demand for our products depends on many
factors and will be difficult to forecast. We expect that it will become more difficult to forecast demand as we
introduce and support multiple products, as competition in the market for our products intensifies and as the markets
for some of our products mature to the mass market category. Significant unanticipated fluctuations in demand
could cause the following problems in our operations:
y If demand increases beyond what we forecast, we would have to rapidly increase production. We would
depend on suppliers to provide additional volumes of components and those suppliers might not be able
to increase production rapidly enough to meet unexpected demand.
y Rapid increases in production levels to meet unanticipated demand could result in higher costs for
manufacturing and supply of components and other expenses. These higher costs could lower our profit
margins. Further, if production is increased rapidly, manufacturing quality could decline, which may also
lower our margins and reduce customer satisfaction.
y If forecasted demand does not develop, we could have excess production resulting in higher inventories
of finished products and components, which would use cash and could lead to write-offs of some or all of
the excess inventories. Lower than forecasted demand could also result in excess manufacturing capacity
or reduced manufacturing efficiencies at our facilities, which could result in lower margins.
We may become subject to significant product liability costs.
If our aviation products malfunction or contain errors or defects, airplane collisions or crashes could occur
resulting in property damage, personal injury or death. Malfunctions or errors or defects in our marine navigational
products could cause boats to run aground or cause other wreckage, personal injury or death. If our automotive or
marine products contain defects or errors in the mapping supplied by third-party map providers or if our users do not
heed our warnings about the proper use of these products, collisions or accidents could occur resulting in property
damage, personal injury or death. If any of these events occurs, we could be subject to significant liability for
personal injury and property damage and under certain circumstances could be subject to a judgment for punitive
damages. We maintain insurance against accident-related risks involving our products. However, there can be no
assurance that such insurance would be sufficient to cover the cost of damages to others or that such insurance will
continue to be available at commercially reasonable rates. In addition, insurance coverage generally will not cover
awards of punitive damages and may not cover the cost of associated legal fees and defense costs, which could
result in lower margins. If we are unable to maintain sufficient insurance to cover product liability costs or if our
insurance coverage does not cover the award, this could have a materially adverse impact on our business, financial
condition and results of operations.