Garmin 2009 Annual Report Download - page 69

51
IncomeTaxes
Wehaveexperiencedarelativelyloweffectivecorporatetaxrateduetotheproportionofourrevenue
generatedbyentitiesintaxjurisdictionswithlowstatutoryrates.Inparticular,theprofitentitlementafforded
ourparentcompanybasedonitsintellectualpropertyrightsownershipofourconsumerproductsalongwith
substantialtaxincentivesofferedbytheTaiwanesegovernmentoncertainhigh‐technologycapitalinvestments
havecontinuedtoreduceourtaxrate.Asaresult,ourconsolidatedeffectivetaxratewasapproximately12.9%
during2009.Thisisadecreasefrom19.9%during2008duetoamorefavorablemixoftaxableincomeamongthe
taxjurisdictionsinwhichtheCompanyoperatesandthereleaseofincometaxreservesforwhichthestatuteof
limitationshasexpired.WehavetakenadvantageofthetaxbenefitinTaiwansinceourinceptionandweexpect
tocontinuetobenefitfromlowereffectivetaxratesatleastthrough2013.Weplanonapplyingforadditional
incentivesforyearsbeyond2013basedoncapitalinvestmentsweexpecttomakeinthefuture.However,there
canbenoassurancethatsuchtaxincentiveswillbeavailableindefinitelyorthatwewillreceivetheincentivesfor
whichweapply.Managementbelievesthatduetoloweroperatingmarginspredictedforfiscal2010,theremay
beslightlylessrevenuerecognizedbyentitiesinlowertaxratejurisdictions.Therefore,theeffectivetaxratefor
fiscal2010isexpectedtobeslightlyhigherthanfiscal2009.Theactualeffectivetaxratewillbedependentupon
theoperatingmargins,productionvolume,additionalcapitalinvestmentsmadeduringfiscal2010,andthe
compositionofourearnings.


ResultsofOperations

Thefollowingtablesetsforthourresultsofoperationsasapercentageofnetsalesduringtheperiods
shown:

Dec. 26, Dec. 27, Dec.29,
2009 2008 2007
Net sales 100.0% 100.0% 100.0%
Cost of goods sold 51.0% 55.5% 54.0%
Gross profit 49.0% 44.5% 46.0%
Operating expenses:
Advertising 5.3% 6.0% 6.5%
Selling, general and administrative 8.9% 7.9% 6.0%
Research and development 8.1% 5.9% 5.0%
Total operating expenses 22.3% 19.8% 17.5%
Operating income 26.7% 24.7% 28.5%
Other income / (expense) , net 0.7% 1.5% 2.2%
Income before income taxes 27.4% 26.2% 30.7%
Provision for income taxes 3.5% 5.2% 3.9%
Net income 23.9% 21.0% 26.8%
Fiscal Years Ended


Thefollowingtablesetsforthourresultsofoperationsthroughincomebeforeincometaxesforeachof
ourfoursegmentsduringtheperiodshown.Foreachlineiteminthetablethetotalofthesegments’amounts
equalstheamountintheconsolidatedstatementsofincomedataincludedinItem6.
