Garmin 2009 Annual Report Download - page 79

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OperatingleasesdescribesleaseobligationsassociatedwithGarminfacilitieslocatedintheU.S.,Taiwan,
Europe,andCanada.Purchaseobligationsaretheaggregateofthosepurchaseordersthatwereoutstandingon
December26,2009;theseobligationsarecreatedandthenpaidoffwithin3monthsduringthenormalcourseof
ourmanufacturingbusiness.
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Wemayberequiredtomakesignificantcashoutlaysrelatedtounrecognizedtaxbenefits.However,due
totheuncertaintyofthetimingoffuturecashflowsassociatedwithourunrecognizedtaxbenefits,weareunable
tomakereasonablyreliableestimatesoftheperiodofcashsettlement,ifany,withtherespectivetaxing
authorities.Accordingly,unrecognizedtaxbenefitsof$255.7millionasofDecember26,2009,havebeen
excludedfromthecontractualobligationstableabove.Forfurtherinformationrelatedtounrecognizedtax
benefits,seeNote2,“IncomeTaxes”,totheconsolidatedfinancialstatementsincludedinthisReport.
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Off‐BalanceSheetArrangements
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Wedonothaveanyoff‐balancesheetarrangements.
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Item7A.QuantitativeandQualitativeDisclosuresAboutMarketRisk
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MarketSensitivity
Wehavemarketriskprimarilyinconnectionwiththepricingofourproductsandservicesandthe
purchaseofrawmaterials.Productpricingandrawmaterialscostsarebothsignificantlyinfluencedby
semiconductormarketconditions.Historically,duringcyclicalindustrydownturns,wehavebeenabletooffset
pricingdeclinesforourproductsthroughacombinationofimprovedproductmixandsuccessinobtainingprice
reductionsinrawmaterialscosts.
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Inflation
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Wedonotbelievethatinflationhashadamaterialeffectonourbusiness,financialconditionorresultsof
operations.Ifourcostsweretobecomesubjecttosignificantinflationarypressures,wemaynotbeabletofully
offsetsuchhighercoststhroughpriceincreases.Ourinabilityorfailuretodosocouldadverselyaffectour
business,financialconditionandresultsofoperations.
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ForeignCurrencyExchangeRateRisk
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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.In2009,theTaiwanDollarstrengthened2.3%relativetothe
U.S.Dollarwhichresultedinanetforeigncurrencylossof$16.1millionatGarminCorporationduring2009.
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AllEuropeansubsidiariesexcludingGarmin(Europe)Ltd.,GarminDanmarkandGarminSwedenusethe
Euroasthefunctionalcurrency.ThefunctionalcurrencyofourlargestEuropeansubsidiary,Garmin(Europe)Ltd.
remainstheU.S.dollar,andassometransactionsoccurredinBritishPoundsSterlingorEuros,foreigncurrency