Garmin Reports Fourth Quarter Results with Increased Global Market Share and Significant Inventory Reduction -- CAYMAN ISLANDS-- Garmin Ltd. (Nasdaq: GRMN) today announced fourth quarter results for the period ended December 27, 2008. 

Garmin has moved the earnings call to Monday, February 23, 2009 at 11:00 a.m. Eastern. Details regarding the call and webcast are available under the heading “Earnings Call Information.”

Fourth Quarter 2008 Financial Summary:
 
-- Total revenue of $1.048 billion, down 14% from $1.217 billion in fourth quarter 2007
-- Automotive/Mobile segment revenue decreased 17% to $828 million in fourth quarter 2008
-- Outdoor/Fitness segment revenue increased 5% to $120 million in fourth quarter 2008
-- Aviation segment revenue decreased 5% to $67 million in fourth quarter 2008
-- Marine segment revenue was flat at $33 million in fourth quarter 2008
-- All geographies slowed as poor economic conditions weighed on the business:

-- North America revenue was $761 million compared to $836 million, down 9%
-- Europe revenue was $251 million compared to $338 million, down 26%
-- Asia revenue was $36 million compared to $43 million, down 17%
-- Healthy gross margin of 41.1% compared to 44.3% in third quarter 2008 and 41.8% in fourth quarter 2007
-- Operating margin of 22.6% compared to 24.6% in third quarter 2008 and 25.7% in fourth quarter of 2007
-- Effective tax rate was 22.8% compared to 11.7% in fourth quarter 2007 resulting in a negative EPS impact of $0.11
-- Diluted earnings per share of $0.78 compared to $1.39 in fourth quarter 2007; excluding foreign exchange, EPS was $0.93 compared to $1.31 in the same quarter in 2007
-- Generated $340 million of free cash flow in the fourth quarter for a cash and marketable securities balance of just over $973 million
-- Significant inventory reduction from third quarter 2008 of $274 million resulting in year-end 2008 inventory of $425 million.

Fiscal Year 2008 Financial Summary:
 
-- Total revenue of $3.49 billion, up 10% from $3.18 billion in 2007
-- Automotive/Mobile segment revenue increased 8% to $2.54 billion in 2008
-- Outdoor/Fitness segment revenue increased 26% to $428 million in 2008
-- Aviation segment revenue increased 10% to $323 million in 2008
-- Marine segment revenue increased 1% to $204 million in 2008
-- All geographic areas experienced growth:
-- North America revenue was $2.34 billion compared to $2.07 billion, up 13%
-- Europe revenue was $1.01 billion compared to $969 million, up 5%
-- Asia revenue was $145 million compared to $144 million, up 1%
-- Solid 44.5% gross margin and 24.7% operating margin for the full year were better than expected
-- Generated $743 million of free cash flow with a debt-free balance sheet
-- Effective tax rate was 19.9% compared to 12.6% in 2007 resulting in a negative EPS impact of $0.31
-- Diluted earnings per share of $3.48 compared to $3.89 in 2007; excluding foreign exchange, EPS decreased 3% to $3.69 from $3.80 in 2007. Fiscal year EPS includes $0.27 related to a gain of $72 million from the sale and tender of our Tele Atlas N.V. shares.

Business highlights:

    * Achieved full year revenue growth in all four segments on the strength of new products and continued market share gains.
    * Sold 6.4 million units in the fourth quarter of 2008, up 15% from the same quarter in 2007; 16.9 million units sold in the fiscal year, an increase of 38% from 2007.
    * Achieved significant inventory reduction of $274 million demonstrating the agility of our supply chain and scalability of our business.
    * Introduced nüMaps™ Lifetime and ecoRoute™ for our PND customers allowing for lifetime quarterly map updates for a single fee and a fuel conservation software update for free.
    * Introduced the GPSMAP® 695 and 696, portable aviation navigation devices, incorporating new capabilities such as airways, electronic charts and expanded weather on a screen that is three times larger than its predecessor.
    * Introduced new marine products including the GHP™ 10 Autopilot and the next generation of BlueChart® g2 technology allowing us to further solidify our technology leadership in this segment.
    * Completed the acquisition of our Swedish distributor bringing the total to ten European distributors acquired. These acquisitions have helped us achieve market share gains and operating efficiencies in Europe.
    * Repurchased 2.4 million common shares in the fourth quarter.

Executive overview from Dr. Min Kao, Chairman and Chief Executive Officer:

“A significant highlight for 2008 is our gross margin performance of 44.5% which is down just 150 basis points from 2007. We also achieved a strong operating margin of 24.7% which exceeded our earlier expectations. Throughout 2008, we maintained our strong cash position with free cash flow generation of $743 million which was enhanced by the significant reduction in inventory during the quarter. This cash flow allowed us to fund our stock repurchase plan, pay a $0.75 per share dividend, and remain a debt-free company.

We continued to experience a challenging economic environment in the fourth quarter with worsening trends throughout the period. However, we were able to demonstrate the power and agility of our vertical integration business model by responding quickly to the changes and scaling our production outputs to match demand. This allowed us to maintain healthy margins in the quarter, as well as significantly reduce inventory levels. The inventory reduction of $274 million was a great achievement for our organization given the extremely volatile environment that we are currently experiencing. This was accomplished in part by eliminating overtime labor and contract workers within our Taiwan factories, proving we can scale manufacturing as needed.

While the PND market has slowed, we continued to experience unit growth in both the North American and Asia-Pacific regions in the fourth quarter and were pleased with our market share gains around the globe. According to an independent market research report, our global PND market share stood at approximately 35% at the end of the third quarter and according to internal estimates our market share increased further in the fourth quarter.

Revenue in our outdoor/fitness segment continued to grow though not on the same trajectory as the first three quarters of the year. We have been delighted by the consumer response to the new products across this segment and look forward to building on that momentum in 2009. In addition, we are excited about our entry into the golf market with the Approach™ G5 which offers a touch screen handheld with preloaded course maps.

Our aviation segment did show weakness due to deteriorating economic conditions as revenues fell in the quarter. The strong launch of our portable GPSMAP 600 series products was a bright spot and helped offset the significant slowdown in our retrofit business. Many of our OEM partners are cutting their production schedules leading to a shrinking market in 2009. During this time, we will continue to focus our efforts on further cockpit certifications and other long-term growth strategies.

Our marine segment revenue was up 1% on a year-over-year basis which is a tribute to the strength of our product portfolio and our market share gains during a year in which the marine industry suffered significantly. While we expect 2009 to be a very difficult year for the marine industry, we are pleased with the progress that we have made toward offering a full network of marine products and the OEM opportunities associated with our growing product portfolio. We will continue to commit research and development resources to be the leader in the marine electronics market.”

Financial overview from Kevin Rauckman, Chief Financial Officer:

“Given the economic situation facing consumers in the fourth quarter, we were pleased with our overall results; especially our ability to maintain margins, reduce inventories and grow market share,” said Kevin Rauckman, chief financial officer of Garmin Ltd. “Even with these positives, our revenue fell 14% during the quarter. Excluding the impact of foreign currency exchange, EPS for the quarter fell $0.38, from $1.31 to $0.93. Full year revenues grew 10% with each of our four segments posting growth. EPS for 2008, excluding the impact of foreign currency exchange and including a $0.27 gain from the sale of Tele Atlas N.V. shares, was $3.69 compared to $3.80 in 2007. Revenue during the quarter was negatively impacted by $38 million due to continued weakness of the Euro and other foreign currencies.

Gross margin for the overall business remained solid in the fourth quarter at 41.1%, a 320 basis point decline sequentially that can be primarily attributed to the average selling price reductions associated with the holiday season. The automotive/mobile segment gross margin exceeded our expectations as we gained significant benefit from material cost reductions and improved operating efficiencies. Gross margin for the remaining segments remained on-target versus our long-term goals of 65% in aviation and 55% in marine and outdoor/fitness.

Operating margin fell 310 basis points from the year-ago quarter. The primary drivers of year-over-year growth in operating expenses include the acquired European distributors and the $14 million write-off of the Circuit City receivable.

We generated $340 million of free cash flow in the fourth quarter of 2008, resulting in a cash and marketable securities balance of just over $973 million at the end of the quarter. This equates to $4.83 of cash per basic share outstanding. We remain confident that this level of liquidity, along with our debt-free balance sheet, will allow us to grow market share through the economic downturn while continuing to invest in research and development for our long-term success. Our return on invested capital (ROIC) was 48% during fiscal 2008.”

Fiscal 2009 Outlook

We recognize that 2009 is going to be a difficult year and we are prepared to manage our business accordingly. While economic conditions are very challenging and are affecting most of our markets, we continue to see opportunities to invest selectively and grow our business through new product development and market share gains. Our goal is to maintain healthy margins and a strong balance sheet during the year. In addition, we will continue to manage our inventory carefully in order to scale it to the proper level to support our business in light of these challenging economic conditions. We continue to closely monitor the global economic developments and our business situation. We are evaluating making adjustments in certain areas of our business in order to increase cost efficiency and match operations to market demand over the near to intermediate term.

In light of the uncertainties and dynamic conditions, we will not offer specific guidance for 2009 until the outlook for the year becomes clearer.

Nüvifone Update

Garmin announced its strategic alliance with Asus earlier this month. The alliance will be known as Garmin-Asus and will allow the two organizations to utilize their core competencies and complementary resources to design, build and market the nüvifone products around the world. Our previously announced G60 model will be cobranded Garmin-Asus. In addition, we introduced the all-new M20, a Windows Mobile-based smartphone with custom LBS applications and functionality never before provided in a Windows Mobile device. Both the G60 and M20 will launch in selected markets during the first half of 2009.

Share Repurchase Program

During the fourth quarter, Garmin repurchased 2.4 million shares. This repurchase completes the 10 million shares approved by the Board of Directors in June 2008. In addition, the Company spent $42 million to repurchase shares under the October 2008 authorization allowing for $300 million through December 31, 2009. Going forward, the repurchases may be made from time to time on the open market at prevailing market prices, in negotiated transactions off the market, or pursuant to a Rule 10b5-1 plan adopted by the Company which permits the Company to repurchase its shares during periods in which the Company may be in possession of material non-public information or self-imposed insider trading blackout periods. The Company continues to view stock repurchases as an appropriate use of cash given the long-term growth prospects of the Company, ongoing free cash flow generation and the need to maintain adequate cash reserves for strategic acquisitions.

Non-GAAP Measures

Net income (earnings) per share, excluding foreign currency

Management believes that net income per share before the impact of foreign currency translation gain or loss is an important measure. The majority of the Company’s consolidated foreign currency translation gain or loss results from translations involving the Euro, the British Pound Sterling and the Taiwan Dollar at the end of each reporting period of the significant cash and marketable securities, receivables and payables held in U.S. dollars by the various subsidiaries. Such translation is required under GAAP because the functional currency of the subsidiaries differs from the currency in which various assets and liabilities are hold. However, there is minimal cash impact from such foreign currency translation. Accordingly, earnings per share before the impact of foreign currency translation gain or loss allows an assessment of the Company’s operating performance before the non-cash impact of the position of the U.S. Dollar versus other currencies, which permits a consistent comparison of results between periods. 

  The information for Garmin Ltd.’s earnings call is as follows:
 When:           Monday, February 23, 2009 at 11:00 a.m. Eastern
 Where:        
 
 http://www.garmin.com/aboutGarmin/invRelations/irCalendar.html
 How:         Simply log on to the web at the address above or call to listen in at 800-891-6383.
 Contact: