Garmin 2010 Annual Report Download - page 37

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because the 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 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
aused  suh ehage ate aiatios, aageet ill otiue to fous o the Copas operating
performance before the impact of the foreign currency translation.
If we do not correctly anticipate demand for our products, we may not be able to secure sufficient quantities or
cost-effective production of our products or we could have costly excess production or inventories.
We have generally been able to increase production to meet this increasing demand. However, the
demand for our products depends on many factors and will be difficult to forecast. We expect that it will become
more difficult to forecast demand as we introduce and support multiple products, as competition in the market for
our products intensifies and as the markets for some of our products mature to the mass market category.
Significant unanticipated fluctuations in demand could cause the following problems in our operations:
 If demand increases beyond what we forecast, we would have to rapidly increase production. We would
depend on suppliers to provide additional volumes of components and those suppliers might not be
able to increase production rapidly enough to meet unexpected demand.
 Rapid increases in production levels to meet unanticipated demand could result in higher costs for
manufacturing and supply of components and other expenses. These higher costs could lower our
profit margins. Further, if production is increased rapidly, manufacturing quality could decline, which
may also lower our margins and reduce customer satisfaction.
 If forecasted demand does not develop, we could have excess production resulting in higher inventories
of finished products and components, which would use cash and could lead to write-offs of some or all
of the excess inventories. Lower than forecasted demand could also result in excess manufacturing
capacity or reduced manufacturing efficiencies at our facilities, which could result in lower margins.
We have benefited in the past from Taiwan government tax incentives offered on certain high technology
capital investments that may not always be available.
Our effective tax rate is lower than the U.S. federal statutory rate, in part because we have benefited from
incentives offered in Taiwan related to our high technology investments in Taiwan. The loss of these tax benefits
could have a significant effect on our financial results in the future.
We may experience unique economic and political risks associated with companies that operate in Taiwan.
Relatios etee Taia ad the Peoples Republic of China, also referred to as the PRC, and other
factors affecting the political or economic conditions of Taiwan in the future could materially adversely affect our
business, financial condition and results of operations and the market price and the liquidity of our shares. Our
principal manufacturing facilities where we manufacture all of our products, except our panel-mounted aviation
products, are located in Taiwan.
Taiwan has a unique international political status. The PRC asserts sovereignty over all of China, including
Taiwan, certain other islands and all of mainland China. The PRC government does not recognize the legitimacy of
the Taiwan government. Although significant economic and cultural relations have been established during recent
years between Taiwan and the PRC, the PRC government has indicated that it may use military force to gain
control over Taiwan in certain circumstances, such as the declaration of independence by Taiwan. Relations
between Taiwan and the PRC have on occasion adversely affected the market value of Taiwanese companies and
could negatively affect our operations in Taiwan in the future.