Garmin Reports 2012 Results; Initiates $300 Million Share Repurchase Program

Note: In accordance with GAAP, the Company is deferring significant revenue and the related costs associated with high margin sales of lifetime maps, connected services and premium traffic over their estimated economic life. A table outlining the impact of this net deferral in both 2012 and 2011 is included for reference. Results have not been adjusted unless specifically stated as such.

Business highlights:

  • Achieved full year gross and operating margin expansion allowing for EPS growth.
  • Sold almost 15.4 million units in 2012 with unit growth in outdoor, fitness, and automotive OEM largely offsetting declines in personal navigation devices (PND).
  • Continued to be the world-wide PND market share leader with market share gains globally.
  • Honored as a new addition to the S&P 500 on December 12.
  • Unveiled our next-generation infotainment system, K2, featuring a digital cockpit providing drivers a safe and intuitive way to stay connected and access all the functions they need while on the road.
  • Introduced the 2013 nüvi® lineup in January 2013 with improved form factors and features, including Real Directions™, to appeal across a broad spectrum of customers.
  • Launched the Edge® 510 and 810 for cyclists providing the accuracy and reliability expected from Garmin with the additional benefit of real-time connectivity.

Executive overview from Cliff Pemble, President and Chief Executive Officer:

“Entering 2012, we forecasted $2.7-2.8 billion of revenue and $2.45-2.60 of EPS. I am pleased to say that we met or exceeded those targets through a combination of solid execution by our associates and ongoing market share gains across our diverse set of products and geographies,” said Cliff Pemble, president and chief executive officer of Garmin Ltd. “Though business trends decelerated in the fourth quarter, we remain focused on new product development and market share gains to offset the secular declines in the PND industry and the continued generation of long-term shareholder value.

The automotive/mobile segment revenues declined 6% and 25% for the full year and fourth quarter, respectively. We experienced steeper declines in the quarter as our consistent market share gains could no longer offset the industry declines. Though the PND market size continued to decline in 2012, we again emerge from the year with increased market share and strong profitability. As we look at long-term opportunities within the segment, we remain focused on capturing market share in the OEM infotainment industry. Our K2 digital cockpit for the auto OEM market was well-received at the recent Consumer Electronics Show garnering a nomination for CNET’s Best of Show. We continue to pursue business opportunities in this high growth segment with our innovative solutions.

The outdoor segment posted a slight revenue decline in the fourth quarter as we compared against fourth quarter 2011 when growth was 35%. For the full year, the segment grew 11% and contributed $165 million of operating income. We continued to see strong results from our golf portfolio, as well as our dog-focused products. As we enter 2013, we are excited to offer additional products in each of those niches with the Approach® S2 for the golf community and the BarkLimiter™ and the Delta™ series designed for both the pet and sport dog markets. These products, along with other compelling introductions to come later in the year, are expected to contribute to growth in 2013.

The fitness segment posted revenue growth of 10% in the quarter and full-year growth of 8%, contributing $112 million of full year operating income. Growth in the segment fell slightly short of our full-year expectations due to product delays but strong fourth quarter results point to ongoing growth opportunities within the category. As we had anticipated, the Forerunner® 10 was a popular holiday gift and we expect the momentum from that product to continue in 2013. In addition, we recently launched the connected Edge 510 and 810 for the cycling community which offer live tracking capabilities. The product pipeline is robust driving our expectations for growth in 2013.

Aviation segment revenues decreased slightly in the fourth quarter but increased 2% on a full year basis, contributing $73 million of full year operating income. While the general aviation market remains challenging with OEM production showing few signs of recovery, we are investing for the future and looking forward to significant certification completions with both LearJet and Cessna in 2013. We have also introduced new aftermarket products that we expect to drive increased demand in 2013 including VHF radios and FAA certified traffic solutions, covering both airborne and ground-based traffic. We anticipate that these events will lead to stronger growth in 2013.

The marine segment posted full year and fourth quarter revenue declines of 6% and 9%, respectively. The marine industry, like aviation, has been slow to recover and economic turmoil in southern Europe has worsened the situation. We have continued to invest heavily in research and development for our marine segment causing a significant decline in operating margins and profits. While this is difficult in the near-term, we do believe that it is justified by the long-term opportunities presented in terms of both market share gains and industry improvement. New chartplotters, fishfinders and a marine-focused watch are a result of this investment and should allow us to return to revenue growth in 2013.”

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