Garmin 2005 Annual Report Download - page 53

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manufacturer automotive and sensor board applications, we may experience a decline in our overall gross margins
from sales of these potentially high volume but low margin product lines.
Our quarterly operating results are subject to fluctuations and seasonality.
Our operating results are difficult to predict. Our future quarterly operating results may fluctuate
significantly. If this occurs, the price of our stock would likely decline. As we expand our operations, our operating
expenses, particularly our sales, marketing 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.
Historically, our revenues have usually been weaker in the first and third quarters of each fiscal year and
have, from time to time, been lower than the preceding quarter. Our devices are highly consumer-oriented, and
consumer buying is traditionally lower in these quarters. Sales of certain of our consumer products tend to be higher
in our second fiscal quarter due to increased consumer spending for such products during the recreational marine
and fishing season. Sales of certain of our consumer products also tend to be 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.
Our quarterly financial statements will reflect fluctuations in foreign currency translation.
Our Taiwan subsidiary holds, and is expected to continue to hold, significant cash, cash equivalents, and
marketable securities and receivables denominated in U.S. Dollars. Because the U.S. Dollar is the primary currency
for our business and in order to substantially reduce the economic consequence of any variation in the exchange rate
for the U.S. Dollar and the New Taiwan Dollar on these assets, management expects that the Taiwan subsidiary will
continue to hold the majority of these assets in U.S. Dollar or U.S. Dollar denominated instruments. Nonetheless,
U.S. GAAP requires the Company at the end of each accounting period to translate into New Taiwan dollars all such
U.S. Dollar denominated assets held by our Taiwan subsidiary. This translation is required because the New 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 New 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.
If we are unable to compete effectively with existing or new competitors, our resulting loss of competitive
position could result in price reductions, fewer customer orders, reduced margins and loss of market share.
The markets for our products are highly competitive, and we expect competition to increase in the future.
Some of our competitors have significantly greater financial, technical and marketing resources than we do. These
competitors may be able to respond more rapidly to new or emerging technologies or changes in customer
requirements. They may also be able to devote greater resources to the development, promotion and sale of their
products. Increased competition could result in price reductions, fewer customer orders, reduced margins and loss
of market share. Our failure to compete successfully against current or future competitors could seriously harm our
business, financial condition and results of operations.
Our intellectual property rights are important to our operations, and we could suffer loss if they infringe
upon other’s rights or are infringed upon by others.
We rely on a combination of patents, copyrights, trademarks and trade secrets, confidentiality provisions
and licensing arrangements to establish and protect our proprietary rights. To this end, we hold rights to a number
of patents and registered trademarks and regularly file applications to attempt to protect our rights in new technology
and trademarks. However, there is no guarantee that our patent applications will become issued patents, or that our