10-Q

Indicate by check mark whether the Company (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Company was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. YES ☐ NO ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Number of shares outstanding of the registrant’s common shares as of April 28, 2023

1. Accounting Policies

Basis of Presentation and Principles of Consolidation

The accompanying unaudited condensed consolidated financial statements include the accounts of Garmin Ltd. and wholly-owned subsidiaries (collectively, the “Company” or “Garmin”). Intercompany balances and transactions have been eliminated.

The condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, the condensed consolidated financial statements reflect all adjustments, which are normal and recurring in nature, necessary for fair financial statement presentation. The condensed consolidated balance sheet at December 31, 2022 has been derived from the audited financial statements at that date, but does not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. Additionally, the condensed consolidated financial statements should be read in conjunction with Part I, Item 2, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of this Form 10-Q, and the Company’s Annual Report on Form 10-K for the year ended December 31, 2022.

Our operating results are subject to fluctuations associated with seasonal demand for consumer products, the timing of new product introductions, and OEM customer production schedules. Therefore, operating results for the 13-week period ended April 1, 2023 are not necessarily indicative of the results that may be expected for the year ending December 30, 2023.

The Company’s fiscal year is based on a 52- or 53-week period ending on the last Saturday of the calendar year. Therefore, the financial results of certain 53-week fiscal years, and the associated 14-week quarters, will not be exactly comparable to the prior and subsequent 52-week fiscal years and the associated 13-week quarters. The quarters ended April 1, 2023 and March 26, 2022 both contain operating results for 13 weeks.

Changes in Classification and Allocation

Certain prior period amounts have been reclassified or presented to conform to the current period presentation.

The Company announced an organization realignment in January 2023, which combined the consumer auto operating segment with the outdoor operating segment. As a result, the Company’s operating segments, which also represent our reportable segments, are fitness, outdoor, aviation, marine, and auto OEM. Results for the 13-week period ended March 26, 2022 have been recast herein to conform to the current period presentation. This change had no effect on the Company’s consolidated results of operations.

Significant Accounting Policies

For a description of the significant accounting policies and methods used in the preparation of the Company’s condensed consolidated financial statements, refer to Note 1, “Summary of Significant Accounting Policies” in the Notes to the Consolidated Financial Statements in Part II, Item 8 of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2022. There were no material changes to the Company’s significant accounting policies during the 13-week period ended April 1, 2023.

Recently Issued Accounting Standards and Pronouncements

Recently adopted accounting standards and recently issued accounting pronouncements not yet adopted are not expected to have a material impact on the Company’s consolidated financial statements, accounting policies, processes, or systems.

2. Revenue

In order to further depict how the nature, amount, timing and uncertainty of our revenue and cash flows are affected by economic factors, we disaggregate revenue (“net sales”) by geographic region, major product category, and pattern of recognition.

Disaggregated revenue by geographic region (Americas, APAC, and EMEA) is presented in Note 11 – Segment Information and Geographic Data. Note 11 also contains disaggregated revenue information of the five major product categories identified by the Company – fitness, outdoor, aviation, marine, and auto OEM.

A large majority of the Company’s sales are recognized on a point in time basis, usually once the product is shipped and title and risk of loss have transferred to the customer. Sales recognized over a period of time are primarily within the outdoor, aviation, and auto OEM segments and relate to performance obligations that are satisfied over the estimated life of the product or contractual service period. Revenue disaggregated by the timing of transfer of the goods or services is presented in the table below:


	13-Weeks Ended
	April 1, 2023		March 26, 2022
Point in time	$	1,081,068	$	1,114,200
Over time		66,356		58,462
Net sales	$	1,147,424	$	1,172,662

Transaction price and costs associated with the Company’s unsatisfied performance obligations are reflected as deferred revenue and deferred costs, respectively, on the Company’s condensed consolidated balance sheets. Such amounts are recognized ratably over the applicable service period or estimated useful life. Changes in deferred revenue and costs during the 13-week period ended April 1, 2023 are presented below:


		13-Weeks Ended April 1, 2023


Switzerland		98-0229227
(State or other jurisdiction		(I.R.S. Employer
of incorporation or organization)		identification no.)

Mühlentalstrasse 2
8200 Schaffhausen
Switzerland		N/A
(Address of principal executive offices)		(Zip Code)


Registered Shares, CHF 0.10 Per Share Par Value	GRMN	New York Stock Exchange
(Title of each class)	(Trading Symbol)	(Name of each exchange on which registered)


Large Accelerated Filer	☑	Accelerated Filer	☐
Non-accelerated Filer	☐	Smaller reporting company	☐
		Emerging growth company	☐


		Page

Part I - Financial Information		1

Item 1.	Condensed Consolidated Financial Statements	1

	Condensed Consolidated Statements of Income for the 13-Weeks ended April 1, 2023 and March 26, 2022 (Unaudited)	1

	Condensed Consolidated Statements of Comprehensive Income for the 13-Weeks ended April 1, 2023 and March 26, 2022 (Unaudited)	2

	Condensed Consolidated Balance Sheets at April 1, 2023 and December 31, 2022 (Unaudited)	3

	Condensed Consolidated Statements of Cash Flows for the 13-Weeks ended April 1, 2023 and March 26, 2022 (Unaudited)	4

	Condensed Consolidated Statements of Stockholders’ Equity for the 13-Weeks ended April 1, 2023 and March 26, 2022 (Unaudited)	5

	Notes to Condensed Consolidated Financial Statements (Unaudited)	6

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	14

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	19

Item 4.	Controls and Procedures	19

Part II - Other Information		20

Item 1.	Legal Proceedings	20

Item 1A.	Risk Factors	20

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	20

Item 3.	Defaults Upon Senior Securities	20

Item 4.	Mine Safety Disclosures	20

Item 5.	Other Information	20

Item 6.	Exhibits	21

Signature Page		22


	13-Weeks Ended
	April 1, 2023		March 26, 2022
Net sales	$	1,147,424	$	1,172,662
Cost of goods sold		494,630		510,183
Gross profit		652,794		662,479

Advertising expense		30,347		34,133
Selling, general and administrative expenses		203,980		190,784
Research and development expense		221,485		209,006
Total operating expense		455,812		433,923

Operating income		196,982		228,556
Other income (expense):
Interest income		15,899		7,553
Foreign currency gains (losses)		7,688		(3,506	)
Other income		1,203		3,261
Total other income (expense)		24,790		7,308

Income before income taxes		221,772		235,864
Income tax provision		19,445		24,272
Net income	$	202,327	$	211,592

Net income per share:
Basic	$	1.06	$	1.10
Diluted	$	1.05	$	1.09

Weighted average common shares outstanding:
Basic		191,498		192,887
Diluted		191,886		193,579


☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


	April 1, 2023			December 31, 2022
Assets
Current assets:
Cash and cash equivalents	$	1,361,593		$	1,279,194
Marketable securities		188,878			173,288
Accounts receivable, net		610,654			656,847
Inventories		1,478,997			1,515,045
Deferred costs		14,573			14,862
Prepaid expenses and other current assets		309,303			315,915
Total current assets		3,963,998			3,955,151

Property and equipment, net of accumulated depreciation of $934,438 and $904,922, respectively		1,165,035			1,147,005
Operating lease right-of-use assets		134,569			138,040
Noncurrent marketable securities		1,163,989			1,208,360
Deferred income tax assets		455,095			441,071
Noncurrent deferred costs		9,504			9,831
Goodwill		571,534			567,994
Other intangible assets, net		172,685			178,461
Other noncurrent assets		89,622			85,257
Total assets	$	7,726,031		$	7,731,170

Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	208,796		$	212,417
Salaries and benefits payable		164,812			176,114
Accrued warranty costs		52,675			50,952
Accrued sales program costs		58,332			97,772
Other accrued expenses		178,264			197,376
Deferred revenue		90,568			91,092
Income taxes payable		254,753			246,180
Dividend payable		—			139,732
Total current liabilities		1,008,200			1,211,635

Deferred income tax liabilities		131,753			129,965
Noncurrent income taxes payable		34,936			34,627
Noncurrent deferred revenue		34,378			35,702
Noncurrent operating lease liabilities		111,388			114,541
Other noncurrent liabilities		372			360

Stockholders’ equity:
Shares, CHF 0.10 par value, 198,077 shares authorized and issued; 191,450 shares outstanding at April 1, 2023 and 191,623 shares outstanding at December 31, 2022		17,979			17,979
Additional paid-in capital		2,048,339			2,042,472
Treasury stock (6,627 and 6,454 shares, respectively)		(510,478	)		(475,095	)
Retained earnings		4,935,730			4,733,517
Accumulated other comprehensive (loss) income		(86,566	)		(114,533	)
Total stockholders’ equity		6,405,004			6,204,340
Total liabilities and stockholders’ equity	$	7,726,031		$	7,731,170


	Common Stock		Additional Paid-In Capital			Treasury Stock			Retained Earnings			Accumulated Other Comprehensive Income (Loss)			Total
Balance at December 25, 2021	$	17,979	$	1,960,722		$	(303,114	)	$	4,320,737		$	117,835		$	6,114,159
Net income		—		—			—			211,592			—			211,592
Translation adjustment		—		—			—			—			(56,912	)		(56,912	)
Adjustment related to unrealized gains (losses) on available-for-sale securities net of income tax effects of $14,701		—		—			—			—			(50,012	)		(50,012	)
Comprehensive income																104,668
Dividends		—		—			—			(227	)		—			(227	)
Issuance of treasury stock related to equity awards		—		(2,867	)		23,013			—			—			20,146
Stock compensation		—		24,706			—			—			—			24,706
Purchase of treasury stock related to equity awards		—		—			(14,610	)		—			—			(14,610	)
Balance at March 26, 2022	$	17,979	$	1,982,561		$	(294,711	)	$	4,532,102		$	10,911		$	6,248,842

	Common Stock		Additional Paid-In Capital			Treasury Stock			Retained Earnings			Accumulated Other Comprehensive Income (Loss)			Total
Balance at December 31, 2022	$	17,979	$	2,042,472		$	(475,095	)	$	4,733,517		$	(114,533	)	$	6,204,340
Net income		—		—			—			202,327			—			202,327
Translation adjustment		—		—			—			—			16,891			16,891
Adjustment related to unrealized gains (losses) on available-for-sale securities net of income tax effects of $2,613		—		—			—			—			11,076			11,076
Comprehensive income																230,294
Dividends		—		—			—			(114	)		—			(114	)
Issuance of treasury stock related to equity awards		—		(14,865	)		14,865			—			—			—
Stock compensation		—		20,732			—			—			—			20,732
Purchase of treasury stock related to equity awards		—		—			(9,169	)		—			—			(9,169	)
Purchase of treasury stock under share repurchase plan, including any associated excise tax		—		—			(41,079	)		—			—			(41,079	)
Balance at April 1, 2023	$	17,979	$	2,048,339		$	(510,478	)	$	4,935,730		$	(86,566	)	$	6,405,004