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United States

Securities and Exchange Commission

Washington, D.C. 20549

 

 

FORM 10-Q

 

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

 

For the quarterly period ended September 30, 2023

 

or

 

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

 

For the transition period from to

 

Commission file number 001-41118

 

 

GARMIN LTD.

(Exact name of Company as specified in its charter)

 

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)

 

Company’s telephone number, including area code: +41 52 630 1600

 

Securities registered pursuant to Section 12(b) of the Act:

 

Registered Shares, $0.10 Per Share Par Value

 

GRMN

 

New York Stock Exchange

(Title of each class)

 

(Trading Symbol)

 

(Name of each exchange on which registered)

 

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.

YesNO

 

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).

YesNO

 

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.

 

Large Accelerated Filer

 

Accelerated Filer

Non-accelerated Filer

 

Smaller reporting company

 

 

 

Emerging growth company

 

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).

YES NO

 

Number of shares outstanding of the registrant’s common shares as of October 27, 2023

Registered Shares, $0.10 par value: 191,331,077 (excluding treasury shares)

 

 

 


 

Garmin Ltd.

Form 10-Q

Quarter Ended September 30, 2023

 

Table of Contents

 

Page

Part I - Financial Information

1

 

Item 1.

Condensed Consolidated Financial Statements

1

 

Condensed Consolidated Statements of Income for the 13-Weeks and 39-Weeks ended September 30, 2023 and September 24, 2022 (Unaudited)

1

 

Condensed Consolidated Statements of Comprehensive Income for the 13-Weeks and 39-Weeks ended September 30, 2023 and September 24, 2022 (Unaudited)

2

 

 

 

Condensed Consolidated Balance Sheets at September 30, 2023 and December 31, 2022 (Unaudited)

 

3

 

Condensed Consolidated Statements of Cash Flows for the 39-Weeks ended September 30, 2023 and September 24, 2022 (Unaudited)

4

 

 

 

Condensed Consolidated Statements of Stockholders’ Equity for the 13-Weeks and 39-Weeks ended September 30, 2023 and September 24, 2022 (Unaudited)

 

5

 

 

 

 

 

Notes to Condensed Consolidated Financial Statements (Unaudited)

7

 

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

16

 

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

24

 

Item 4.

Controls and Procedures

24

 

Part II - Other Information

25

 

Item 1.

Legal Proceedings

25

 

Item 1A.

Risk Factors

25

 

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

25

 

Item 3.

Defaults Upon Senior Securities

25

 

Item 4.

Mine Safety Disclosures

25

 

Item 5.

Other Information

26

 

Item 6.

Exhibits

27

 

Signature Page

28

 

 

i


 

Part I - Financial Information

Item I - Condensed Consolidated Financial Statements

 

Garmin Ltd. and Subsidiaries

Condensed Consolidated Statements of Income (Unaudited)

(In thousands, except per share information)

 

 

13-Weeks Ended

 

 

39-Weeks Ended

 

 

 

September 30,
2023

 

 

September 24,
2022

 

 

September 30,
2023

 

 

September 24,
2022

 

Net sales

 

$

1,277,531

 

 

$

1,140,434

 

 

$

3,745,751

 

 

$

3,553,931

 

Cost of goods sold

 

 

548,962

 

 

 

469,935

 

 

 

1,604,945

 

 

 

1,492,126

 

Gross profit

 

 

728,569

 

 

 

670,499

 

 

 

2,140,806

 

 

 

2,061,805

 

 

 

 

 

 

 

 

 

 

 

 

 

Advertising expense

 

 

35,158

 

 

 

32,888

 

 

 

111,849

 

 

 

110,378

 

Selling, general and administrative expenses

 

 

201,470

 

 

 

189,546

 

 

 

609,800

 

 

 

571,541

 

Research and development expense

 

 

221,572

 

 

 

208,692

 

 

 

667,451

 

 

 

619,215

 

Total operating expense

 

 

458,200

 

 

 

431,126

 

 

 

1,389,100

 

 

 

1,301,134

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating income

 

 

270,369

 

 

 

239,373

 

 

 

751,706

 

 

 

760,671

 

Other income (expense):

 

 

 

 

 

 

 

 

 

 

 

 

Interest income

 

 

19,803

 

 

 

10,472

 

 

 

54,461

 

 

 

26,520

 

Foreign currency gains (losses)

 

 

(11,539

)

 

 

(29,863

)

 

 

6,946

 

 

 

(55,809

)

Other income

 

 

938

 

 

 

285

 

 

 

4,206

 

 

 

3,716

 

Total other income (expense)

 

 

9,202

 

 

 

(19,106

)

 

 

65,613

 

 

 

(25,573

)

 

 

 

 

 

 

 

 

 

 

 

 

Income before income taxes

 

 

279,571

 

 

 

220,267

 

 

 

817,319

 

 

 

735,098

 

Income tax provision

 

 

22,328

 

 

 

9,419

 

 

 

69,810

 

 

 

54,785

 

Net income

 

$

257,243

 

 

$

210,848

 

 

$

747,509

 

 

$

680,313

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income per share:

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

1.34

 

 

$

1.09

 

 

$

3.91

 

 

$

3.53

 

Diluted

 

$

1.34

 

 

$

1.09

 

 

$

3.90

 

 

$

3.52

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average common shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

191,435

 

 

 

192,672

 

 

 

191,409

 

 

 

192,878

 

Diluted

 

 

191,868

 

 

 

193,105

 

 

 

191,772

 

 

 

193,378

 

 

See accompanying notes.

1


 

Garmin Ltd. and Subsidiaries

Condensed Consolidated Statements of Comprehensive Income (Unaudited)

(In thousands)

 

 

 

13-Weeks Ended

 

 

39-Weeks Ended

 

 

 

September 30,
2023

 

 

September 24,
2022

 

 

September 30,
2023

 

 

September 24,
2022

 

Net income

 

$

257,243

 

 

$

210,848

 

 

$

747,509

 

 

$

680,313

 

Foreign currency translation adjustment

 

 

(48,342

)

 

 

(117,360

)

 

 

(56,793

)

 

 

(239,167

)

Change in fair value of available-for-sale marketable securities, net of deferred taxes

 

 

2,815

 

 

 

(18,867

)

 

 

10,499

 

 

 

(85,507

)

Comprehensive income

 

$

211,716

 

 

$

74,621

 

 

$

701,215

 

 

$

355,639

 

 

See accompanying notes.

2


 

Garmin Ltd. and Subsidiaries

Condensed Consolidated Balance Sheets (Unaudited)

(In thousands)

 

 

 

September 30,
2023

 

 

December 31,
2022

 

Assets

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

1,422,855

 

 

$

1,279,194

 

Marketable securities

 

 

273,050

 

 

 

173,288

 

Accounts receivable, net

 

 

721,137

 

 

 

656,847

 

Inventories

 

 

1,439,894

 

 

 

1,515,045

 

Deferred costs

 

 

15,296

 

 

 

14,862

 

Prepaid expenses and other current assets

 

 

284,682

 

 

 

315,915

 

Total current assets

 

 

4,156,914

 

 

 

3,955,151

 

 

 

 

 

 

 

Property and equipment, net of accumulated depreciation of $982,405 and $904,922

 

 

1,187,375

 

 

 

1,147,005

 

Operating lease right-of-use assets

 

 

140,635

 

 

 

138,040

 

Noncurrent marketable securities

 

 

1,081,674

 

 

 

1,208,360

 

Deferred income tax assets

 

 

514,876

 

 

 

441,071

 

Noncurrent deferred costs

 

 

10,538

 

 

 

9,831

 

Goodwill

 

 

594,449

 

 

 

567,994

 

Other intangible assets, net

 

 

185,835

 

 

 

178,461

 

Other noncurrent assets

 

 

92,726

 

 

 

85,257

 

Total assets

 

$

7,965,022

 

 

$

7,731,170

 

 

 

 

 

 

 

Liabilities and Stockholders’ Equity

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Accounts payable

 

$

268,030

 

 

$

212,417

 

Salaries and benefits payable

 

 

196,665

 

 

 

176,114

 

Accrued warranty costs

 

 

53,533

 

 

 

50,952

 

Accrued sales program costs

 

 

71,558

 

 

 

97,772

 

Other accrued expenses

 

 

208,717

 

 

 

197,376

 

Deferred revenue

 

 

98,289

 

 

 

91,092

 

Income taxes payable

 

 

151,559

 

 

 

246,180

 

Dividend payable

 

 

279,447

 

 

 

139,732

 

Total current liabilities

 

 

1,327,798

 

 

 

1,211,635

 

 

 

 

 

 

 

Deferred income tax liabilities

 

 

116,419

 

 

 

129,965

 

Noncurrent income taxes payable

 

 

24,577

 

 

 

34,627

 

Noncurrent deferred revenue

 

 

35,525

 

 

 

35,702

 

Noncurrent operating lease liabilities

 

 

111,035

 

 

 

114,541

 

Other noncurrent liabilities

 

 

388

 

 

 

360

 

 

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

 

 

Shares (195,880 and 198,077 shares authorized and issued;
    
191,387 and 191,623 shares outstanding)

 

 

19,588

 

 

 

17,979

 

Additional paid-in capital

 

 

2,100,357

 

 

 

2,042,472

 

Treasury stock (4,493 and 6,454 shares)

 

 

(331,393

)

 

 

(475,095

)

Retained earnings

 

 

4,721,555

 

 

 

4,733,517

 

Accumulated other comprehensive income (loss)

 

 

(160,827

)

 

 

(114,533

)

Total stockholders’ equity

 

 

6,349,280

 

 

 

6,204,340

 

Total liabilities and stockholders’ equity

 

$

7,965,022

 

 

$

7,731,170

 

 

See accompanying notes.

3


 

Garmin Ltd. and Subsidiaries

Condensed Consolidated Statements of Cash Flows (Unaudited)

(In thousands)

 

 

 

39-Weeks Ended

 

 

 

September 30,
2023

 

 

September 24,
2022

 

Operating Activities:

 

 

 

 

 

 

Net income

 

$

747,509

 

 

$

680,313

 

Adjustments to reconcile net income to net cash provided by
   operating activities:

 

 

 

 

 

 

Depreciation

 

 

98,483

 

 

 

88,005

 

Amortization

 

 

33,751

 

 

 

34,349

 

Gain on sale or disposal of property and equipment

 

 

(50

)

 

 

(1,652

)

Unrealized foreign currency losses

 

 

9,927

 

 

 

45,498

 

Deferred income taxes

 

 

(90,214

)

 

 

(101,133

)

Stock compensation expense

 

 

66,214

 

 

 

57,871

 

Realized loss on marketable securities

 

 

56

 

 

 

982

 

Changes in operating assets and liabilities, net of acquisitions:

 

 

 

 

 

 

Accounts receivable, net of allowance for doubtful accounts

 

 

(54,756

)

 

 

156,666

 

Inventories

 

 

111,459

 

 

 

(442,312

)

Other current and noncurrent assets

 

 

28,288

 

 

 

29,299

 

Accounts payable

 

 

55,340

 

 

 

(64,199

)

Other current and noncurrent liabilities

 

 

430

 

 

 

(84,287

)

Deferred revenue

 

 

7,063

 

 

 

(3,299

)

Deferred costs

 

 

(1,152

)

 

 

3,426

 

Income taxes

 

 

(102,024

)

 

 

20,067

 

Net cash provided by operating activities

 

 

910,324

 

 

 

419,594

 

 

 

 

 

 

 

Investing activities:

 

 

 

 

 

 

Purchases of property and equipment

 

 

(144,876

)

 

 

(184,928

)

Proceeds from sale of property and equipment

 

 

157

 

 

 

1,693

 

Purchase of intangible assets

 

 

(1,175

)

 

 

(1,411

)

Purchase of marketable securities

 

 

(116,039

)

 

 

(1,044,942

)

Redemption of marketable securities

 

 

145,094

 

 

 

923,894

 

Acquisitions, net of cash acquired

 

 

(150,853

)

 

 

(13,455

)

Net cash used in investing activities

 

 

(267,692

)

 

 

(319,149

)

 

 

 

 

 

 

Financing activities:

 

 

 

 

 

 

Dividends

 

 

(419,166

)

 

 

(399,074

)

Proceeds from issuance of treasury stock related to equity awards

 

 

21,946

 

 

 

41,052

 

Purchase of treasury stock related to equity awards

 

 

(9,397

)

 

 

(14,750

)

Purchase of treasury stock under share repurchase plan

 

 

(79,533

)

 

 

(105,206

)

Net cash used in financing activities

 

 

(486,150

)

 

 

(477,978

)

 

 

 

 

 

 

Effect of exchange rate changes on cash and cash equivalents

 

 

(12,854

)

 

 

(38,265

)

 

 

 

 

 

 

Net increase (decrease) in cash, cash equivalents, and restricted cash

 

 

143,628

 

 

 

(415,798

)

Cash, cash equivalents, and restricted cash at beginning of period

 

 

1,279,912

 

 

 

1,498,843

 

Cash, cash equivalents, and restricted cash at end of period

 

$

1,423,540

 

 

$

1,083,045

 

 

See accompanying notes.

4


 

Garmin Ltd. and Subsidiaries

Condensed Consolidated Statements of Stockholders’ Equity (Unaudited)

For the 13-Weeks Ended September 30, 2023 and September 24, 2022

(In thousands)

 

 

Common
Stock

 

 

Additional
Paid-In
Capital

 

 

Treasury
Stock

 

 

Retained
Earnings

 

 

Accumulated
Other
Comprehensive
Income (Loss)

 

 

Total

 

Balance at June 25, 2022

 

$

17,979

 

 

$

2,008,931

 

 

$

(315,886

)

 

$

4,225,521

 

 

$

(70,612

)

 

$

5,865,933

 

Net income

 

 

 

 

 

 

 

 

 

 

 

210,848

 

 

 

 

 

 

210,848

 

Translation adjustment

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(117,360

)

 

 

(117,360

)

Adjustment related to unrealized gains (losses) on available-for-sale securities net of income tax effects of $5,744

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(18,867

)

 

 

(18,867

)

Comprehensive income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

74,621

 

Dividends

 

 

 

 

 

 

 

 

 

 

 

2,635

 

 

 

 

 

 

2,635

 

Issuance of treasury stock related to equity awards

 

 

 

 

 

(28

)

 

 

28

 

 

 

 

 

 

 

 

 

 

Stock compensation

 

 

 

 

 

18,116

 

 

 

 

 

 

 

 

 

 

 

 

18,116

 

Purchase of treasury stock related to equity awards

 

 

 

 

 

 

 

 

(27

)

 

 

 

 

 

 

 

 

(27

)

Purchase of treasury stock under share repurchase plan, including any associated excise tax

 

 

 

 

 

 

 

 

(83,089

)

 

 

 

 

 

 

 

 

(83,089

)

Balance at September 24, 2022

 

$

17,979

 

 

$

2,027,019

 

 

$

(398,974

)

 

$

4,439,004

 

 

$

(206,839

)

 

$

5,878,189

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common
Stock

 

 

Additional
Paid-In
Capital

 

 

Treasury
Stock

 

 

Retained
Earnings

 

 

Accumulated
Other
Comprehensive
Income (Loss)

 

 

Total

 

Balance at July 1, 2023

 

$

19,588

 

 

$

2,077,540

 

 

$

(322,688

)

 

$

4,464,682

 

 

$

(115,300

)

 

$

6,123,822

 

Net income

 

 

 

 

 

 

 

 

 

 

 

257,243

 

 

 

 

 

 

257,243

 

Translation adjustment

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(48,342

)

 

 

(48,342

)

Adjustment related to unrealized gains (losses) on available-for-sale securities net of income tax effects of $686

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2,815

 

 

 

2,815

 

Comprehensive income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

211,716

 

Dividends

 

 

 

 

 

 

 

 

 

 

 

(370

)

 

 

 

 

 

(370

)

Issuance of treasury stock related to equity awards

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock compensation

 

 

 

 

 

22,817

 

 

 

 

 

 

 

 

 

 

 

 

22,817

 

Purchase of treasury stock related to equity awards

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Purchase of treasury stock under share repurchase plan, including any associated excise tax

 

 

 

 

 

 

 

 

(8,705

)

 

 

 

 

 

 

 

 

(8,705

)

Cancellation of treasury stock

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Share capital currency change

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at September 30, 2023

 

$

19,588

 

 

$

2,100,357

 

 

$

(331,393

)

 

$

4,721,555

 

 

$

(160,827

)

 

$

6,349,280

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

See accompanying notes.

5


 

Garmin Ltd. and Subsidiaries

Condensed Consolidated Statements of Stockholders’ Equity (Unaudited)

For the 39-Weeks Ended September 30, 2023 and September 24, 2022

(In thousands)

 

 

 

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

 

 

 

 

 

 

 

 

 

 

 

680,313

 

 

 

 

 

 

680,313

 

Translation adjustment

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(239,167

)

 

 

(239,167

)

Adjustment related to unrealized gains (losses) on available-for-sale securities net of income tax effects of $25,202