Garmin 2008 Annual Report Download - page 49

Download and view the complete annual report

Please find page 49 of the 2008 Garmin annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 114

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112
  • 113
  • 114

27
suitable acquisition, investment or strategic partnership candidates, or if we do identify suitable candidates in the
future, we may not be able to complete those transactions on commercially favorable terms, or at all.
Any past or future acquisitions could also result in difficulties assimilating acquired employees (including
cultural differences with foreign acquisitions), operations, and products and diversion of capital and management’s
attention away from other business issues and opportunities. Integration of 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 internal
controls, compliance under the Sarbanes-Oxley Act of 2002 and other corporate governance matters, operations,
personnel or products related to acquisitions we made in 2008 or may make 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
based on whether the company’s income or assets meet certain thresholds as determined under United States federal
tax principles which are based on facts and circumstances that may be beyond our control, we cannot assure that we
will not become a passive foreign investment company in the future. 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 on their
pro rata share of our income 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 mentioned above.
We do not believe that we (or any of our non-United States subsidiaries) are currently a Controlled Foreign
Corporation (CFC) for United States federal income tax purposes. We do not expect to become a CFC. The CFC
determination is made daily based on whether the United States shareholders own more than fifty percent of the
voting power or value of the Company. Only United States persons that own ten percent or more of the voting
power of the Company’s shares qualify as United States shareholders. If the Company were to be classified as a
CFC for an uninterrupted thirty day period in any year, the Company’s shareholders that qualify as United States
shareholders could be liable to pay US income tax at ordinary income tax rates on their pro-rata share of certain
categories of the Company’s income for the period in which the Company is classified as a CFC. As the Company
cannot control the ownership of the Company’s stock nor can the Company control which shareholders participate
in the Company’s stock buyback program, ownership changes could result that create United States shareholders
which increase the risk of Garmin being treated as a CFC.
We may have additional tax liabilities.
We are subject to income taxes in both the United States and numerous foreign jurisdictions. Significant
judgment is required in determining our worldwide provision for income taxes. In the ordinary course of our
business, there are many transactions and calculations where the ultimate tax determination is uncertain. We are
regularly under audit by tax authorities. Although we believe our tax estimates are reasonable, the final
determination of tax audits and any related litigation could be materially different from our historical income tax