Garmin 2009 Annual Report Download - page 45

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dealersanddistributors.Ifweareunabletomaintainsuccessfulrelationshipswithdealersanddistributorsorto
expandourdistributionchannels,ourbusinesswillsuffer.
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Ourquarterlyoperatingresultsaresubjecttofluctuationsandseasonality.
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Ouroperatingresultsaredifficulttopredict.Ourfuturequarterlyoperatingresultsmayfluctuate
significantly.Ifsuchoperatingresultsdecline,thepriceofourstockwouldlikelydecline.Asweexpandour
operations,ouroperatingexpenses,particularlyouradvertisingandresearchanddevelopmentcosts,may
increaseasapercentageofoursales.Ifrevenuesdecreaseandweareunabletoreducethosecostsrapidly,our
operatingresultswouldbenegativelyaffected.
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Historically,ourrevenueshavebeenweakerinthefirstquarterofeachfiscalyearandhaverecentlybeen
lowerthantheprecedingfourthquarter.Ourdevicesarehighlyconsumer‐oriented,andconsumerbuyingis
traditionallylowerinthesequarters.Salesofcertainofourmarineandautomotiveproductstendtobehigherin
oursecondfiscalquarterduetoincreasedconsumerspendingforsuchproductsduringtherecreationalmarine,
fishing,andtravelseason.Salesofourautomotive/mobileproductsalsohavebeenhigherinourfourthfiscal
quarterduetoincreasedconsumerspendingpatternsonelectronicdevicesduringtheholidayseason.Inaddition,
weattempttotimeournewproductreleasestocoincidewithrelativelyhigherconsumerspendinginthesecond
andfourthfiscalquarters,whichcontributestotheseseasonalvariations.
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Ourquarterlyfinancialstatementswillreflectfluctuationsinforeigncurrencytranslation.
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TheoperationofGarmin’ssubsidiariesininternationalmarketsresultsinexposuretomovementsin
currencyexchangerates.Wehaveexperiencedsignificantforeigncurrencygainsandlossesduetothe
strengtheningandweakeningoftheU.S.dollar.Thepotentialofvolatileforeignexchangeratefluctuationsinthe
futurecouldhaveasignificanteffectonourresultsofoperations.
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ThecurrenciesthatcreateamajorityoftheCompany’sexchangerateexposurearetheTaiwanDollar,
Euro,andBritishPoundSterling.GarminCorporation,headquarteredinShijr,Taiwan,usesthelocalcurrencyas
thefunctionalcurrency.TheCompanytranslatesallassetsandliabilitiesatyear‐endexchangeratesandincome
andexpenseaccountsataverageratesduringtheyear.Inordertominimizetheeffectofthecurrencyexchange
fluctuationsonournetassets,wehaveelectedtoretainmostofourTaiwansubsidiary’scashandinvestmentsin
marketablesecuritiesdenominatedinU.S.dollars.
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Nonetheless,U.S.GAAPrequirestheCompanyattheendofeachaccountingperiodtotranslateinto
TaiwanDollarsallsuchU.S.DollardenominatedassetsheldbyourTaiwansubsidiary.Thistranslationisrequired
becausetheTaiwanDollaristhefunctionalcurrencyofthesubsidiary.ThisU.S.GAAP‐mandatedtranslationwill
causeustorecognizegainorlossonourfinancialstatementsastheTaiwanDollar/U.S.Dollarexchangerate
varies.Suchgainorlosswillcreatevariationsinourearningspershare.Becausethereisminimalcashimpact
causedbysuchexchangeratevariations,managementwillcontinuetofocusontheCompany’soperating
performancebeforetheimpactoftheforeigncurrencytranslation.
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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.
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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:
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