Garmin 2002 Annual Report Download

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Table of contents

  • Page 1

  • Page 2
    ... technology Garmin's growth in 2002 Products for an active world Expanding opportunities Investing in people Innovative technologies born of the best resources Commitment to quality Growth initiatives for 2003 Financial summary Market for the company's common stock Selected financial data Management...

  • Page 3
    2002 Highlights Introduced 22 new products Revenue of $465.1M, up 26% Net income of $142.8M, up 36% Opened new flight test and certification facility near Olathe, Kansas Announced plans for a major facility expansion in Olathe, Kansas Expanded distribution through new retail outlets 2

  • Page 4
    ... completion of our new flight test and certification facility near Olathe, Kansas, and the expansion of our product development capabilities in our Taiwan facility are tangible examples of our commitment to R&D. Garmin will hold to the solid business principles on which the company was founded while...

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    ...United States, Europe and Asia, Garmin designs, manufactures and markets navigation, communication and information devices. Many of these products are enabled by GPS (Global Positioning System) technology, which uses satellites to locate a user's position, display it on an electronic map and provide...

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    ... plotters, along with the new dual-frequency Fishfinder Blue series, have allowed Garmin to broaden our presence in the offshore market. Updates to cartography products - including BlueChart® for offshore detail and Fishing Hot Spots® for inland data - allowed Garmin to expand our mapping coverage...

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    ... routing and turn-by-turn guidance have been on the market for over a year, and we saw increased market acceptance of these products in 2002. These systems are making inroads in regions where we've developed MapSource® cartography for enhanced mapping detail, including Australia, South Africa...

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    ... West Marine. In 2002, Garmin added Circuit City and Target to its growing family of retailers. Some of the leading boat manufacturers continue to make Garmin fishfinders and combination GPS chartplotter/sounder products part of their standard equipment package. Last year, Garmin signed agreements...

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    ...avionics systems with pilot-friendly operations. On the marine side, associates include fishing pros and boating enthusiasts whose first-hand experience aids them in developing and testing sonar and GPS chartplotter products. And having plenty of outdoor enthusiasts on staff has helped Garmin design...

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    ...of our recreational, marine and automotive products. Beyond buildings and equipment, Garmin initiated plans in 2002 for upgrading its MRPII (manufacturing resource planning) system. Over the next couple of years, Garmin will implement Oracle's E-Business suite, a fully integrated enterprise suite of...

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    ... include dealer resource pages where Garmin dealers can access promotional materials and information, download product images and more. Our Web site also makes it easier for customers to research the Garmin products that best suit their needs through product comparison charts and online gift guides...

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    ... urban canyon. For our marine product line, Garmin will design products that offer superior color and feature sets at a competitive price. Marine customers also desire more offshore cartography, so Garmin will continue expanding the coverage areas of our BlueChart digital marine charts. We will also...

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  • Page 22
    21 GARMIN, BlueChart, StreetPilot, eTrex, GPSMAP, TracBack, MapSource and NavTalk are registered trademarks and Rino, Geko and iQue are trademarks of Garmin Ltd. or its subsidiaries. All other trademarks referred to in this Annual Report are the property of their respective owners.

  • Page 23
    ... and therefore does not currently anticipate paying any cash dividends. The range of high and low closing sales prices of the Company's common shares as reported on the Nasdaq Stock Market for each fiscal quarter of fiscal years 2001 and 2002 was as follows: Year Ended December 28, 2002 High First...

  • Page 24
    ... actual number of shares outstanding at the time of the dividend, as adjusted for the 1.12379256 for 1 stock split of our common shares, effected through a stock dividend on November 6, 2000. There were no cash dividends issued during 2002 or 2001. (5) Total debt consists of notes payable and long...

  • Page 25
    ... portable GPS receivers and accessories for marine, recreation, land and automotive applications sold primarily to retail outlets. Our aviation products are portable and panel-mount avionics for Visual Flight Rules and Instrument Flight Rules navigation and are sold primarily to retail outlets and...

  • Page 26
    ... payments, additional allowances may be required. Warranties The Company's products sold are generally covered by a warranty for periods ranging from one to two years. The Company accrues a warranty reserve for estimated costs to provide warranty services. The Company's estimate of costs to service...

  • Page 27
    ... Reserves Historically the Company has not experienced losses related to general or product liability claims, therefore no loss reserves have been created. Accounting Terms and Characteristics Net Sales Our net sales are primarily generated through sales to our global dealer and distributor network...

  • Page 28
    ... of: • salaries for sales and marketing personnel; • salaries and related costs for executives and administrative personnel; • advertising, marketing, and other brand building costs; • accounting and legal costs; • information systems and infrastructure costs; • travel and related costs...

  • Page 29
    ...item in the table, the total of the consumer and aviation segments' amounts equals the amount in the consolidated statements of income. Fiscal Years Ended Dec. 28, 2002 Consumer Net sales Cost of goods sold Gross profit Operating expenses: Selling, general and administrative Research and development...

  • Page 30
    ... products as total units sold were up 17.1%. It is management's belief that the continued demand for the Company's consumer products is due to the emergence of the GPS market in general, and overall increased consumer awareness of the capabilities and applications of GPS. Net sales for the aviation...

  • Page 31
    ... of 22 new products, and the addition of 67 new engineers to our staff during fiscal 2002. Management believes that one of the key strategic initiatives for future growth and success of the Company is continuous innovation, development, and introduction of new products. Management expects that...

  • Page 32
    ... pilots are current to fly utilizing Instrument Flight Rules (IFR). These restrictions impacted our revenues since many general aviation aircraft were grounded and were unable to fly to aviation dealers to buy our products. As a result of the factors indicated above, total aviation units sold...

  • Page 33
    ...in the aviation segment. The increase in expense was primarily attributable to increases in employment generally across the organization (net increase of 32 employees), increased advertising costs (up 27.6%) associated with new product releases, increased costs associated with being a public company...

  • Page 34
    ...) located at the New Century Airport near Olathe, Kansas, and for general corporate purposes. The expenditures in fiscal 2000 were incurred primarily to increase our manufacturing capacity both in the United States and in Taiwan. We financed these capital expenditures through net operating cash flow...

  • Page 35
    ...completed a $9.5 million 30-year Tax-Exempt Industrial Revenue Bond issuance for the construction of its new corporate headquarters located in Olathe, Kansas. Upon completion of the project in 1996, Garmin International retired bonds totaling $0.2 million. During May of fiscal 2002, the remainder of...

  • Page 36
    period pro forma disclosures if stock-based compensation is accounted for under the intrinsic value method in any period presented. The expanded annual disclosure requirements and the transition provisions are effective for the Company's fiscal year 2002. The new interim period disclosures are ...

  • Page 37
    ... currency involved is the New Taiwan Dollar. Garmin Corporation, located 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...

  • Page 38
    ...Garmin Ltd. and Subsidiaries Years Ended December 28, 2002, December 29, 2001, and December 30, 2000 Contents Report of Independent Auditors...38 Consolidated Balance... Years Ended December 28, 2002, December 29, 2001, and December 30, 2000 ...41 Consolidated Statements of Cash Flows for the Years ...

  • Page 39
    ... have audited the accompanying consolidated balance sheets of Garmin Ltd. and subsidiaries (the Company) as of December 28, 2002 and December 29, 2001, and the related consolidated statements of income, stockholders' equity, and cash flows for each of the three years in the period ended December 28...

  • Page 40
    ... depreciation Restricted cash (Notes 5 and 6) Marketable securities (Note 3) License agreements, net Other intangible assets Total assets Liabilities and stockholders' equity Current liabilities: Accounts payable Salaries and benefits payable Accrued warranty costs Accrued sales program costs Other...

  • Page 41
    Garmin Ltd. and Subsidiaries Consolidated Statements of Income (In Thousands, Except Per Share Information) Year Ended December 28, 2002 Net sales Cost of goods sold Gross profit Selling, general, and administrative expenses Research and development expense Operating income Other income (expense): ...

  • Page 42
    ... common stock through stock purchase plan Purchase and retirement of common stock Balance at December 29, 2001 Net income Translation adjustment Adjustment related to effective portion of cash flow hedges, net of income tax effects of $170 Adjustment related to unrealized gains on available-for-sale...

  • Page 43
    ...-term debt Principal payments on notes payable Purchases of common stock Net cash (used in) provided by financing activities Effect of exchange rate changes on cash Net increase (decrease) in cash and cash equivalents Cash and cash equivalents at beginning of year Cash and cash equivalents at end of...

  • Page 44
    ...the year for interest, net of $405 of capitalized interest in 2000 Supplemental disclosures of non-cash investing and financing activities Change in liability recognized in accrued expenses related to cash flow hedges and charge to accumulated other comprehensive loss Change in marketable securities...

  • Page 45
    ... in Taiwan, Republic of China on January 16, 1990. GARMIN is primarily responsible for the manufacturing and distribution of the Company's products to Garmin International, Inc. (GII) and Garmin (Europe) Limited (GEL) and, to a lesser extent, new product development and sales and marketing of...

  • Page 46
    ... to the prior and subsequent 52-week fiscal years and the associated quarters having only 13 weeks. Fiscal 2002 and 2001 included 52 weeks while fiscal 2000 was comprised of 53 weeks. Foreign Currency Translation GARMIN utilizes the New Taiwan Dollar as its functional currency. Prior to 2001...

  • Page 47
    ...lives: Buildings and improvements...8-55 years Office furniture and equipment ...3-8 years Manufacturing and engineering equipment ...3-8 years Vehicles ...3-5 years Long-Lived Assets In accordance with SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets, the Company reviews...

  • Page 48
    ... at the time of purchase and reevaluates such designation as of each balance sheet date. Debt securities not classified as held-to-maturity and marketable equity securities not classified as trading are classified as available-for-sale. All of the Company's marketable securities are considered...

  • Page 49
    ... to the customer and title has transferred. The Company assumes no remaining significant obligations associated with the product sale other than that related to its warranty programs discussed below. Shipping and Handling Costs Shipping and handling costs are included in cost of goods sold in the...

  • Page 50
    ... of APB Opinion No. 25, Accounting for Stock Issued to Employees, and related Interpretations. No stock-based employee compensation cost is reflected in net income, as all options granted under those plans had an exercise price equal to the market value of the underlying common stock on the date of...

  • Page 51
    ... the Company to make interim-period pro forma disclosures if stock-based compensation is accounted for under the intrinsic value method in any period presented. The expanded annual disclosure requirements and the transition provisions are effective for the Company's fiscal year 2002. The new interim...

  • Page 52
    ...GII retired the remaining Bonds totaling $9,345. During 1999, GARMIN borrowed $18,040 to finance the purchase of land and a new manufacturing facility in Taiwan. The balance was due in 60 equal payment of principal plus interest beginning in November 2001. Through November 2001, interest was payable...

  • Page 53
    ...the years ended December 28, 2002, December 29, 2001, and December 30, 2000, expense related to these plans of $1,467, $1,172, and $1,144, respectively, was charged to operations. Additionally, GII has a defined contribution money purchase plan (the MPP Plan) which covers substantially all employees...

  • Page 54
    ...03, and $0.05 per weighted-average common share outstanding for the years ended December 28, 2002, December 29, 2001, and December 30, 2000, respectively. The Company currently expects to benefit from the incentives and credits being offered by Taiwan through 2007, at which time these tax benefits...

  • Page 55
    ...tax purposes. Significant components of the Company's deferred tax assets and liabilities are as follows: December 28, 2002 Deferred tax assets: Product warranty accruals Allowance for doubtful accounts Inventory carrying value Sales program allowances Vacation accrual Interest rate swaps Unrealized...

  • Page 56
    ... system (GPS) receivers and accessories for marine, recreation, land, and automotive use sold primarily to retail outlets. The Company's aviation products are portable and panel mount avionics for Visual Flight Rules and Instrument Flight Rules navigation and are sold primarily to aviation dealers...

  • Page 57
    ..., and identifiable assets for each of the Company's reportable segments are presented below: Year Ended December 28, 2002 Consumer Net sales to external customers Allocated interest income Allocated interest expense Income before income taxes Assets: Accounts receivable Inventory 43,942 43,360 14...

  • Page 58
    ...stock split. Note 13. Stock Compensation Plans The Company sponsors several stock compensation plans. The Company accounts for all of these plans under APB Opinion No. 25, Accounting for Stock Issued to Employees, and related interpretations. Accordingly, as all awards are granted at the fair market...

  • Page 59
    .... During 2002 and 2001, options to purchase 5,058 and 5,325 shares were granted under this plan. A summary of the Company's stock option activity and related information under the Equity Incentive Plan and 2000 Nonemployee Directors' Option Plan for the years ended December 28, 2002 and December 29...

  • Page 60
    ... or 85% of the fair market value on the enrollment date. The ESPP is intended to qualify as an "employee stock purchase plan" under Section 423 of the Internal Revenue Code. During 2002 and 2001, 70,000 and 123,007 shares were purchased under the plan for a total purchase price of $1,265 and $1,464...

  • Page 61
    ... (the "Rights Plan"). Pursuant to the Rights Plan, the Board declared a dividend of one preferred share purchase right on each outstanding common share of Garmin to shareholders of record as of November 1, 2001. The rights trade together with Garmin's common shares. The rights generally will become...

  • Page 62
    ...garmin.com/stock. Offices Garmin Ltd. P.O. Box 30464 SMB 5th Floor, Harbour Place 103 South Church Street Grand Cayman, Cayman Islands Garmin International, Inc. 1200 East 151st Street Olathe, Kansas 66062, U.S.A. Garmin Corporation No. 68, Jangshu 2nd Rd. Shijr, Taipei County, Taiwan Garmin (Europe...

  • Page 63
    Garmin's continual product innovation and company growth have not come at the exclusion of our core belief, which is creating technology that touches people. We invite you to relive the experiences of our customers around the globe as they discover "Adventures in GPS."

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    ©2003 Garmin Ltd. Garmin Ltd. P.O. Box 30464 SMB 5th Floor, Harbour Place 103 South Church Street Grand Cayman, Cayman Islands (345) 946-5203 www.garmin.com M00-60096-00

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    ...motorcycle, Michael relies on Garmin GPS products to get him there. He uses GNS 430s on the planes, StreetPilot III on his bike. And when he's not at work, training pilots on DHC-6 aircraft, or crossing the big pond between his office in Switzerland and home in Toronto, Michael manages to do what he...

  • Page 68
    ...water. We also had the second-largest hogfish ever turned in. In 2002, we won first-place grouper for the third year in a row, and took third-place amberjack in the Alabama Open. I started running exclusive spearfishing charters in 2001 and have added a Garmin GPSMAP 76 handheld and a VHF 720 radio...

  • Page 69
    ... for a geoscience consulting company based in Edmonton, Alberta, Canada. Most of the work we do takes place in very remote regions of Canada and the Canadian Arctic. We use Garmin handheld GPS units extensively in the field (orientation in the field, marking sample locations and for drop off...

  • Page 70
    ... simply make the wrong turn. The eTrex permitted our group to take walks in small streets of China to meet Chinese people where they live and go back to our hotel without any problems. The eTrex showed us that we climbed the equivalent of a 57-story building during our three-hour visit to the Great...

  • Page 71
    additional photos China is a huge and beautiful country to visit, and if not for the benefit of our Garmin GPS, finding our way could have been intimidating. We enjoyed nice hotels, huge visits, the experience of the Chinese cuisine and great shopping. China is a country to visit.

  • Page 72
    ...'s no way he could tread water for this long, he thought. But the man overboard kept treading, and when Reese spotted a dot on the horizon, he found the strength to keep going. Aboard the Summer Girl, Steve was the first to spot Reese, bobbing in the two- to three-foot waves. He radioed the Coast...

  • Page 73
    ... has saved lives by enabling me to get to a location quickly. On one occasion, I had left a home and was tasked to another location some 75 miles away. I managed to enter the address and pressed the GoTo button. As I neared the location, I was able to zoom in to 300 feet and the GPS system was...

  • Page 74
    ... Command Post saw my Garmin GPS unit and was so impressed that he made a recommendation to the department to order Garmin GPS units for his team. I cannot believe all the years I worked without such a valuable tool. The StreetPilot III should be standard equipment in every police vehicle in America.

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    M 00-60097-00