Garmin 2005 Annual Report Download - page 71

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41
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 25% - 30% during fiscal 2006 on an absolute dollar basis due to the anticipated introduction of
approximately 50 new products for fiscal 2006. 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)
53-weeks ended 52-weeks ended
December 31, 2005 December 25, 2004
Interest Income $19,586 $9,419
Interest Expense (48) (38)
Foreign Currency Exchange 15,265 (24,819)
Other (373) (19)
Total $34,430 ($15,457)
Other income (expense) principally consists of interest income, interest expense and foreign currency
exchange gains and losses. Other income (expense) was significantly higher in fiscal 2005 relative to fiscal 2004,
with the majority of this difference caused by increased interest income and foreign currency gains in 2005. Interest
income for fiscal 2005 increased due to higher interest rates and larger cash and marketable securities balances
during the year, increasing the returns on the Company’s cash and cash equivalents.
During fiscal 2005, the Company experienced foreign currency exchange gains of $15.3 million, as the
U.S. Dollar strengthened versus the New Taiwan Dollar ($32.84 NTD/USD) relative to the end of fiscal 2004 (32.19
NTD/USD). During fiscal 2004, the Company experienced foreign currency exchange losses of $24.8 million, as
the U.S. Dollar weakened versus the New Taiwan Dollar (32.19 NTD/USD) relative to the end of fiscal 2003 (34.05
NTD/USD).
Income Tax Provision
Income tax expense increased by $11.9 million, to $61.4 million, for fiscal year 2005 from $49.5 million
for fiscal year 2004 due to our higher taxable income. The effective tax rate was 16.5% for fiscal 2005 versus
19.4% for fiscal 2004. The decrease in tax rate is due to additional tax benefits received from Taiwan as a result of
our continued capital investment in our manufacturing facilities in Taiwan, tax credits resulting from our decision to
repatriate certain of our Taiwan earnings to our parent company, and the increased contribution to our income from
lower tax jurisdictions during 2005 relative to 2004. This lower effective tax rate resulted in a decrease in the ratio
of income tax as a percentage of revenue of approximately 0.5% from fiscal 2004 to fiscal 2005.
Net Income
As a result of the various factors noted above, net income increased 51% to $311.2 million for fiscal year
2005 compared to $205.7 million for fiscal year 2004
Comparison of Fiscal Years Ended December 25, 2004 and December 27, 2003
Net Sales