Garmin 2007 Annual Report Download - page 74

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48
Research and Development Expenses
Research & Research &
Development % of Revenues Development % of Revenues $ Change % Change
Outdoor/Fitness $16,697 5.9% $14,873 6.3% $1,824 12.3%
Marine 13,121 7.9% 8,137 5.1% 4,984 61.2%
Automotive/Mobile 37,125 3.4% 17,466 4.3% 19,659 112.6%
Aviation 46,371 19.9% 34,403 15.0% 11,968 34.8%
Total $113,314 6.4% $74,879 7.3% $38,435 51.3%
Fiscal year ended December 30, 2006 Fiscal year ended December 31, 2005
Year over Year
The increase in research and development expense was primarily attributable to the addition of over 250
associates to our research and development team during fiscal 2006. A key strategic initiative for future growth and
success of Garmin is continuous innovation, development, and introduction of new products, which was facilitated
by these additions to research and development staff.
Other Income (Expense)
Fiscal year ended Fiscal year ended
December 30, 2006 December 31, 2005
Interest income $35,897 $19,586
Interest expense (41) (48)
Foreign currency gain 596 15,265
Other 3,543 (373)
Total $39,995 $34,430
Other income (expense) principally consists of interest income, interest expense and foreign currency
exchange gains and losses. Other income (expense) was higher in fiscal 2006 relative to fiscal 2005, with the
majority of this difference caused by increased interest income in 2006. Interest income for fiscal 2006 increased
due to higher interest rates and larger cash and marketable securities balances during the year, increasing the returns
on the Company’s cash and cash equivalents.
During fiscal 2006, the Company experienced foreign currency exchange gains of $0.6 million, although
the U.S. Dollar weakened slightly versus the Taiwan Dollar and British Pound ($32.60 TD/USD and $0.51
GBP/USD) relative to the end of fiscal 2005 ($32.84 TD/USD and $0.58 GBP/USD). During fiscal 2005, the
Company experienced foreign currency exchange gains of $15.3 million, as the U.S. Dollar strengthened versus the
Taiwan Dollar and British Pound ($32.84 TD/USD and $0.58 GBP/USD) relative to the end of fiscal 2004 (32.19
TD/USD and $0.52 GBP/USD).
Income Tax Provision
Income tax expense increased by $19.0 million, to $80.4 million, for fiscal year 2006 from $61.4 million
for fiscal year 2005, due to our higher taxable income. The effective tax rate was 13.5% for fiscal 2006 versus
16.5% for fiscal 2005. The decrease in tax rate is due to additional tax benefits received from Taiwan as a result of
our continued capital investment in our manufacturing facilities in Taiwan, tax credits resulting from our decision to
repatriate certain of our Taiwan earnings to our parent company, and the increased contribution to our income from
lower tax jurisdictions during 2006 relative to 2005. This lower effective tax rate resulted in a decrease in the ratio
of income tax as a percentage of revenue of approximately 1.4% from fiscal 2005 to fiscal 2006.
Net Income
As a result of the various factors noted above, net income increased 65% to $514.1 million for fiscal year
2006 compared to $311.2 million for fiscal year 2005.