Garmin 2003 Annual Report Download - page 35

34
Selling, General and Administrative Expenses
The increase in expense was primarily attributable to increases in employment generally across the organization (net increase
of approximately 300 non-engineering employees), significantly increased advertising costs (up 32%) associated primarily with
consumer products, ORACLE software implementation costs, and additional staffing in our customer call center. In the past, selling,
general and administrative expenses increased at a lower rate than revenues due to strong demand for newly introduced and existing
consumer products. Management expects that in spite of strong demand for our products, selling, general and administrative expenses
will remain flat or increase slightly as a percentage of sales during fiscal 2004.
Research and Development Expenses
The increase in research and development expense was primarily attributable to the addition of 50 UPS Aviation
Technologies engineering associates to our aviation research and development team and the addition of 100 new engineers to our
research and development teams during fiscal 2003. 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 its
research and development expenses will increase approximately 20% to 25% during fiscal 2004 on an absolute dollar basis due to the
anticipated introduction of approximately 45 new products for fiscal 2004. Management expects to continue to invest in the research
and development of new products and technology in order to maintain the Company’s competitive advantage in the markets in which
it competes.
Other Income (Expense)
Other income (expense) principally consists of interest income, interest expense and foreign currency exchange gains and
losses. Other income was significantly lower in fiscal 2003, relative to fiscal year 2002, with the majority of this difference caused by
foreign currency losses in 2003. Interest income for fiscal 2003 increased due to larger cash and marketable securities balances during
the year, increasing the returns on the Company’s cash and cash equivalents. Interest expense decreased 60% for fiscal 2003 relative
to fiscal 2002, due primarily to the retirement of $20 million of outstanding long-term debt during fiscal 2003.
During fiscal 2003 the Company experienced foreign currency exchange losses of $6.7 million, as the U.S. Dollar weakened
versus the New Taiwan Dollar (34.05 NTD/USD) relative to the end of fiscal 2002 (34.90 NTD/USD). During fiscal 2002 the
Company’s position was neutral with regard to foreign currency exchange gains and losses, and the U.S. Dollar was at approximately
the same level at the beginning of 2002 relative to the New Taiwan Dollar ($35.17 NTD/USD) as it was at the end of fiscal 2002
($34.90 NTD/USD).
2003 2002
Interest Income $7,473 $6,466
Interest Expense (534) (1,329)
Foreign Currency Exchange (6,699) 11
Other (1,297) 146
Total ($1,057) $5,294
2003 2002 Year over Year
Selling, % of Selling, % of
Gen. & Admin. Net Sales Gen. & Admin. Net Sales $ change % change
Consumer $47,113 10.4% $35,114 10.0% $11,999 34.2%
Aviation 12,722 10.6% 10,339 9.0% 2,383 23.0%
Total $59,835 10.4% $45,453 9.8% $14,382 31.6%
Research % of Research % of
& Development Net Sales & Development Net Sales $ change % change
Consumer $22,195 4.9% $18,863 5.4% $3,332 17.7%
Aviation 21,511 17.8% 13,300 11.6% 8,211 61.7%
Total $43,706 7.6% $32,163 6.9% $11,543 35.9%