Garmin 2008 Annual Report Download - page 73

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51
Contractual Obligations and Commercial Commitments
Future commitments of Garmin, as of December 27, 2008, aggregated by type of contractual obligation,
are:
Payments due by period
Less than More than
Contractual Obligations Total 1 year 1-3 years 3-5 years 5 years
Operating Leases $44,048 $7,957 $13,789 $11,061 $11,241
Purchase Obligations 51,471 47,966 2,265 1,240 0
Total $95,519 $55,923 $16,054 $12,301 $11,241
Operating leases describes lease obligations associated with Garmin facilities located in the U.S., Taiwan,
Europe, and Canada. Purchase obligations are the aggregate of those purchase orders that were outstanding on
December 27, 2008; these obligations are created and then paid off within 3 months during the normal course of our
manufacturing business.
We may be required to make significant cash outlays related to unrecognized tax benefits. However, due to
the uncertainty of the timing of future cash flows associated with our unrecognized tax benefits, we are unable to
make reasonably reliable estimates of the period of cash settlement, if any, with the respective taxing authorities.
Accordingly, unrecognized tax benefits of $214.4 million as of December 27, 2008, have been excluded from the
contractual obligations table above. For further information related to unrecognized tax benefits, see Note 2,
“Income Taxes”, to the consolidated financial statements included in this Report.
Off-Balance Sheet Arrangements
We do not have any off-balance sheet arrangements.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Market Sensitivity
We have market risk primarily in connection with the pricing of our products and services and the purchase
of raw materials. Product pricing and raw materials costs are both significantly influenced by semiconductor market
conditions. Historically, during cyclical industry downturns, we have been able to offset pricing declines for our
products through a combination of improved product mix and success in obtaining price reductions in raw materials
costs.
Inflation
We do not believe that inflation has had a material effect on our business, financial condition or results of
operations. If our costs were to become subject to significant inflationary pressures, we may not be able to fully
offset such higher costs through price increases. Our inability or failure to do so could adversely affect our business,
financial condition and results of operations.
Foreign Currency Exchange Rate Risk
The operation of Garmin’s subsidiaries in international markets results in exposure to movements in
currency exchange rates. We have experienced significant foreign currency gains and losses due to the
strengthening and weakening of the U.S. dollar. The potential of volatile foreign exchange rate fluctuations in the
future could have a significant effect on our results of operations.
The currencies that create a majority of the Company’s exchange rate exposure are the Taiwan Dollar, the
Euro, and British Pound Sterling. Garmin Corporation, headquartered 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