Garmin 2005 Annual Report Download - page 84

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GARMIN LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In Thousands, Except Share and Per Share Information)
December 31, 2005 and December 25, 2004
1. Organization
On July 24, 2000, the stockholders of Garmin Corporation (GARMIN) incorporated Garmin Ltd. (the
Company) under the laws of the Cayman Islands. Subsequently, the stockholders of GARMIN executed a
Shareholder’s Agreement to exchange with Garmin Ltd. their investments in 88,988,394 shares of common stock of
GARMIN for 100,000,000 shares of common stock of Garmin Ltd., which closed on September 22, 2000. This
exchange was accounted for at historical cost similar to that in pooling-of-interests accounting. Until April 15,
2002, one share of GARMIN stock was held by each of six shareholders as nominees under nominee trusts in order
to comply with Article 2 of the Company Law of Taiwan which required that, as a “company limited by stock,”
GARMIN have at least seven shareholders, and 4,000 shares of GARMIN were held by two shareholders who did
not convert their GARMIN shares to common shares of the Company. These 4,006 shares represented
approximately 0.004% of the outstanding shares of GARMIN. Taiwan company law was subsequently changed to
remove the requirement that a Taiwan company have a minimum of seven shareholders and to permit single
shareholder companies. As of April 15, 2002, the Company acquired the 4,000 shares of GARMIN that were held
by the two shareholders and the six nominee shareholders each transferred their own share of GARMIN stock to the
Company. As a result, the Company now owns all of the outstanding shares of GARMIN. Garmin Ltd. completed
an initial public offering of its common stock in December 2000.
History of Business
Garmin Ltd. and subsidiaries (together, the “Company”) manufacture, market, and distribute Global
Positioning System-enabled products and other related products. GARMIN was incorporated in Taiwan, Republic
of China on January 16, 1990. GARMIN, wholly-owned by Garmin Ltd., is primarily responsible for the
manufacturing and distribution of the Company’s products to Garmin International, Inc. (GII), a wholly-owned
subsidiary of GARMIN, and Garmin (Europe) Limited (GEL), a wholly-owned subsidiary of Garmin Ltd., and, to a
lesser extent, new product development and sales and marketing of the Company’s products in Asia and the Far East
was incorporated in the United States in April 1990. GII is primarily responsible for sales and marketing of the
Company’s products in many international markets and in the United States as well as research and new product
development. GII also manufactures certain products for the Company’s aviation segment. During June 1992, GII
formed GEL as a United Kingdom subsidiary to sell its products principally within the European market. During
2000, GII sold its interest in GEL to Garmin Ltd. Also during 2000, Garmin Realty LLC was formed by GII to hold
certain real estate. In December 2001, GII formed Garmin USA as a sales organization. During August 2003, GII
acquired all the outstanding capital stock of UPS Aviation Technologies, Inc. for $38 million in cash and renamed
the company Garmin AT, Inc. (GAT). See Note 14. In January 2005, Garmin Ltd. formed Garmin N.V., a wholly
owned Netherlands Antilles N.V. In February 2005, Garmin N.V. formed Garmin B.V., a wholly owned
Netherlands B.V. In August 2005, Garmin Ltd. sold its shares in its Taiwan subsidiary, Garmin Corporation to
Garmin N.V. in exchange for debt.
2. Summary of Significant Accounting Policies
Basis of Presentation and Principles of Consolidation
The accompanying consolidated financial statements have been prepared in accordance with accounting
principles generally accepted in the United States. The accompanying consolidated financial statements reflect the
accounts of Garmin Ltd. and its wholly owned subsidiaries. All significant inter-company balances and transactions
have been eliminated.