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

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

For the quarterly period ended March 30,September 28, 2019

or

☐

TRANSITION 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

For the transition period from _______ to _______

Commission file number 0-31983

 

GARMIN LTD. 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)

98-0229227

(I.R.S. Employer

identification no.)

Mühlentalstrasse 2

8200 Schaffhausen

Switzerland

N/A
(Address of principal executive offices)

N/A

(Zip Code)

Company’s telephone number, including area code: +41 52630 1600

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

Registered Shares, CHF 0.10 Per Share Par ValueGRMNThe Nasdaq Stock Market, LLC
(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.

YES ☑þ  NO  ☐

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).

YES ☑þ  NO  ☐

 

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 FilerþAccelerated Filer☐
Non-accelerated Filer☐Smaller reporting company☐
Emerging growth company☐

Large Accelerated Filer ☑ Accelerated Filer ☐ Non-accelerated Filer ☐ (Do not check if a smaller reporting company) 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 ☑þ

Number of shares outstanding of the registrant’s common shares as of April 29,October 28, 2019

Registered Shares, CHF 0.10 par value:  198,077,418 (including treasury shares)

 


Garmin Ltd.

Form 10-Q

Quarter Ended March 30,September 28, 2019

Table of Contents

Part I - Financial InformationPage
   
Part I - Financial Information
Item 1.Condensed Consolidated Financial Statements31
   
 Condensed Consolidated Balance Sheets at March 30,September 28, 2019 and December 29, 2018 (Unaudited)31
   
 Condensed Consolidated Statements of Income for the 13-Weeks and 39-Weeks ended March 30,September 28, 2019 and March 31,September 29, 2018 (Unaudited)42
   
 Condensed Consolidated Statements of Comprehensive Income for the  13-Weeks and 39-Weeks ended March 30,September 28, 2019  and March 31,September 29, 2018 (Unaudited)53
   
 Condensed Consolidated Statements of Stockholders’ Equity for the  13-Weeks and 39-Weeks ended March 30,September 28, 2019  and March 31,September 29, 2018 (Unaudited)64 - 5
   
 Condensed Consolidated Statements of Cash Flows for the  13-Weeks39-Weeks ended March 30,September 28, 2019 and March 31,September 29, 2018 (Unaudited)6
Notes to Condensed Consolidated Financial Statements (Unaudited)7
   
Notes to Condensed Consolidated Financial Statements (Unaudited)8
  
Item 2.Management’s Discussion and Analysis of Financial Condition and Results of Operations1920
   
Item 3.Quantitative and Qualitative Disclosures About Market Risk2530
   
Item 4.Controls and Procedures2630
   
Part II - Other Information 
   
Item 1.Legal Proceedings2731
   
Item 1A.Risk Factors2731
   
Item 2.Unregistered Sales of Equity Securities and Use of Proceeds2731
   
Item 3.Defaults Upon Senior Securities2731
   
Item 4.Mine Safety Disclosures2731
   
Item 5.Other Information2731
   
Item 6.Exhibits27Exhibits32
   
Signature Page2933
  
Index to Exhibits3034


i

Part I - Financial Information

Item I - Condensed Consolidated Financial Statements

Garmin Ltd. And Subsidiaries

Condensed Consolidated Balance Sheets (Unaudited)

(In thousands, except per share information)

     
 March 30, December 29, 
 2019 2018 
Assets      
Current assets:      
Cash and cash equivalents$1,115,951 $1,201,732 
 Marketable securities 197,385  182,989 
Accounts receivable, net 453,069  569,833 
Inventories 598,387  561,840 
Deferred costs 27,567  28,462 
Prepaid expenses and other current assets 119,778  120,512 
Total current assets 2,512,137  2,665,368 
       
Property and equipment, net 672,299  663,527 
Operating lease right-of-use assets 54,978  — 
       
Restricted cash 148  73 
Marketable securities 1,337,771  1,330,123 
Deferred income taxes 170,935  176,959 
Noncurrent deferred costs 28,428  29,473 
Intangible assets, net 411,162  417,080 
Other assets  92,287  100,255 
Total assets$5,280,145 $5,382,858 
       
Liabilities and Stockholders’ Equity      
Current liabilities:      
Accounts payable$170,474 $204,985 
Salaries and benefits payable 95,881  113,087 
Accrued warranty costs 35,042  38,276 
Accrued sales program costs 54,597  90,388 
Deferred revenue 93,653  96,372 
Accrued royalty costs 16,768  24,646 
Accrued advertising expense 18,263  31,657 
Other accrued expenses 81,919  69,777 
Income taxes payable 55,929  51,642 
Dividend payable —  200,483 
Total current liabilities 622,526  921,313 
       
Deferred income taxes 98,959  92,944 
Noncurrent income taxes 127,339  127,211 
Noncurrent deferred revenue 72,531  76,566 
Noncurrent operating lease liabilities 43,277  — 
Other liabilities 227  1,850 
       
Stockholders’ equity:      
Shares, CHF 0.10 par value, 198,077 shares authorized and issued; 189,847 shares outstanding at March 30, 2019; and 189,461 shares outstanding at December 29, 2018; 17,979  17,979 
Additional paid-in capital 1,810,196  1,823,638 
Treasury stock (381,815) (397,692)
Retained earnings 2,850,588  2,710,619 
Accumulated other comprehensive income 18,338  8,430 
Total stockholders’ equity 4,315,286  4,162,974 
Total liabilities and stockholders’ equity$5,280,145 $5,382,858 

  September 28,  December 29, 
  2019  2018 
Assets      
Current assets:      
Cash and cash equivalents $976,402  $1,201,732 
Marketable securities  300,542   182,989 
Accounts receivable, net  558,299   569,833 
Inventories  749,825   561,840 
Deferred costs  26,450   28,462 
Prepaid expenses and other current assets  146,325   120,512 
Total current assets  2,757,843   2,665,368 
         
Property and equipment, net  710,591   663,527 
Operating lease right-of-use assets  55,399   - 
         
Restricted cash  1,036   73 
Marketable securities  1,252,219   1,330,123 
Deferred income taxes  158,963   176,959 
Noncurrent deferred costs  25,156   29,473 
Intangible assets, net  637,716   417,080 
Other assets  156,182   100,255 
Total assets $5,755,105  $5,382,858 
         
Liabilities and Stockholders’ Equity        
Current liabilities:        
Accounts payable $235,548  $204,985 
Salaries and benefits payable  109,323   113,087 
Accrued warranty costs  37,998   38,276 
Accrued sales program costs  58,459   90,388 
Deferred revenue  95,572   96,372 
Accrued royalty costs  11,673   24,646 
Accrued advertising expense  21,246   31,657 
Other accrued expenses  87,333   69,777 
Income taxes payable  60,728   51,642 
Dividend payable  325,075   200,483 
Total current liabilities  1,042,955   921,313 
         
Deferred income taxes  113,225   92,944 
Noncurrent income taxes  105,309   127,211 
Noncurrent deferred revenue  69,600   76,566 
Noncurrent operating lease liabilities  42,855   - 
Other liabilities  267   1,850 
         
Stockholders’ equity:        
Shares, CHF 0.10 par value, 198,077 shares authorized and issued; 190,103 shares outstanding at September 28, 2019; and 189,461 shares outstanding at December 29, 2018;  17,979   17,979 
Additional paid-in capital  1,841,696   1,823,638 
Treasury stock  (368,187)  (397,692)
Retained earnings  2,868,816   2,710,619 
Accumulated other comprehensive income  20,590   8,430 
Total stockholders’ equity  4,380,894   4,162,974 
Total liabilities and stockholders’ equity $5,755,105  $5,382,858 

See accompanying notes.


1

Garmin Ltd. And Subsidiaries

Condensed Consolidated Statements of Income (Unaudited)

(In thousands, except per share information)

            
13-Weeks Ended  13-Weeks Ended  39-Weeks Ended 
March 30, March 31,  September 28, September 29, September 28, September 29, 
2019 2018  2019  2018  2019  2018 
Net sales$766,050 $710,872  $934,383  $810,011  $2,655,273  $2,415,336 
                     
Cost of goods sold 314,352  284,337   366,925   329,264   1,060,752   984,783 
                     
Gross profit 451,698 426,535   567,458   480,747   1,594,521   1,430,553 
                     
Advertising expense 27,615 25,311   32,668   31,140   101,808   100,000 
Selling, general and administrative expense 126,781 117,065   124,769   114,669   380,289   352,234 
Research and development expense 145,919  141,957   148,561   138,979   443,361   422,649 
Total operating expense 300,315  284,333   305,998   284,788   925,458   874,883 
                     
Operating income 151,383 142,202   261,460   195,959   669,063   555,670 
                     
Other income:     
Other income (expense):                
Interest income 13,704 10,227   12,309   11,089   39,748   32,310 
Foreign currency gains 314 816 
Foreign currency losses  (16,296)  (6,868)  (12,568)  (3,405)
Other income 864  735   294   1,147   3,567   6,800 
Total other income 14,882  11,778 
Total other income (expense)  (3,693)  5,368   30,747   35,705 
                     
Income before income taxes 166,265 153,980   257,767   201,327   699,810   591,375 
                     
Income tax provision 26,092  24,606   29,901   17,113   108,115   87,445 
                     
Net income$140,173 $129,374  $227,866  $184,214  $591,695  $503,930 
                     
Net income per share:                     
Basic$0.74 $0.69  $1.20  $0.98  $3.12  $2.67 
Diluted$0.74 $0.68  $1.19  $0.97  $3.10  $2.66 
                     
Weighted average common shares outstanding:                     
Basic 189,601 188,322   190,102   188,799   189,853   188,554 
Diluted 190,599 189,292   190,962   190,005   190,790   189,586 

See accompanying notes.

 


2

 

Garmin Ltd. And Subsidiaries

Condensed Consolidated Statements of Comprehensive Income (Unaudited)

(In thousands)

            
13-Weeks Ended  13-Weeks Ended  39-Weeks Ended 
March 30, March 31,  September 28, September 29, September 28, September 29, 
2019 2018  2019  2018  2019  2018 
Net income$140,173 $129,374  $227,866  $184,214  $591,695  $503,930 
Foreign currency translation adjustment (9,235) 23,500   (18,885)  (3,940)  (27,805)  (30,308)
Change in fair value of available-for-sale marketable securities, net of deferred taxes 19,143  (15,034)  4,794   (1,168)  39,965   (21,044)
Comprehensive income$150,081 $137,840  $213,775  $179,106  $603,855  $452,578 

See accompanying notes.

3

 


Garmin Ltd. And Subsidiaries

Condensed Consolidated Statements of Stockholders’ Equity (Unaudited)

For the 13-Weeks Ended September 28, 2019 and September 29, 2018

(In thousands)thousands, except per share information)

Common Stock

Additional Paid-In Capital

Treasury Stock

Retained Earnings

Accumulated Other Comprehensive Income (Loss)

 

         Accumulated   
   Additional     Other   
 Common Paid-In Treasury Retained Comprehensive   
 Stock Capital Stock Earnings Income (Loss) Total 
Balance at December 30, 2017$17,979 $1,828,386 $(468,818)$2,418,444 $56,428 $3,852,419 
Net income —  —  —  129,374  —  129,374 
Translation adjustment —  —  —  —  23,500  23,500 
Adjustment related to unrealized gains (losses) on available-for-sale securities net of income tax effects of $2,416 —  —  —  —  (15,034) (15,034)
Comprehensive income                137,840 
Dividends declared —  —  —  (170) —  (170)
Issuance of treasury stock related to equity awards —  (23,294) 25,220  —  —  1,926 
Stock compensation —  13,440  —  —  —  13,440 
Purchase of treasury stock related to equity awards —  —  (6,562) —  —  (6,562)
Reclassification under ASU 2016-06 —  —  —  (1,700) —  (1,700)
Reclassification under ASU 2018-02 —  —  —  452  (452) — 
Balance at March 31, 2018$17,979 $1,818,532 $(450,160)$2,546,400 $64,442 $3,997,193 

        Accumulated             Accumulated    
  Additional     Other       Additional       Other    
Common Paid-In Treasury Retained Comprehensive    Common Paid-In Treasury Retained Comprehensive    
Stock Capital Stock Earnings Income (Loss) Total  Stock  Capital  Stock  Earnings  Income (Loss)  Total 
Balance at December 29, 2018$17,979 $1,823,638 $(397,692)$2,710,619 $8,430 4,162,974 
Balance at June 30, 2018 $17,979  $1,828,515  $(433,959) $2,336,614  $9,732  $3,758,881 
Net income — — — 140,173 — 140,173   –   –   –   184,214   –   184,214 
Translation adjustment — — — — (9,235) (9,235)  –   –   –   –   (3,940)  (3,940)
Adjustment related to unrealized gains (losses) on available-for-sale securities net of income tax effects of $2,905 —  —  —  —  19,143  19,143 
Adjustment related to unrealized gains (losses) on available-for-sale securities net of income tax effects of $107  –   –   –   –   (1,168)  (1,168)
Comprehensive income            150,081                       179,106 
Dividends declared — — — (204) — (204)  –   –   –   –   –   – 
Issuance of treasury stock related to equity awards — (28,571) 28,571 — — —   –   (311)  693   –   –   382 
Stock compensation — 15,129 — — — 15,129   –   14,347   –   –   –   14,347 
Purchase of treasury stock related to equity awards —  —  (12,694) —  —  (12,694)  –   –   (8)  –   –   (8)
Balance at March 30, 2019$17,979 $1,810,196 $(381,815)$2,850,588 $18,338 $4,315,286 
Reclassification under ASU 2016-06                        
Reclassification under ASU 2018-02                        
Balance at September 29, 2018 $17,979  $1,842,551  $(433,274) $2,520,828  $4,624  $3,952,708 

              Accumulated    
     Additional        Other    
  Common  Paid-In  Treasury  Retained  Comprehensive    
  Stock  Capital  Stock  Earnings  Income (Loss)  Total 
Balance at June 29, 2019 $17,979  $1,825,135  $(368,200) $2,641,371  $34,681  $4,150,966 
Net income  –   –   –   227,866   –   227,866 
Translation adjustment  –   –   –   –   (18,885)  (18,885)
Adjustment related to unrealized gains (losses) on available-for-sale securities net of income tax effects of $657  –   –   –   –   4,794   4,794 
Comprehensive income                      213,775 
Dividends declared  –   –   –   (421)  –   (421)
Issuance of treasury stock related to equity awards  –   (30)  30   –   –   – 
Stock compensation  –   16,591   –   –   –   16,591 
Purchase of treasury stock related to equity awards  –   –   (17)  –   –   (17)
Balance at September 28, 2019 $17,979  $1,841,696  $(368,187) $2,868,816  $20,590  $4,380,894 

See accompanying notes.

 


4

Garmin Ltd. And Subsidiaries

Condensed Consolidated Statements of Stockholders’ Equity (Unaudited)

For the 39-Weeks Ended September 28, 2019 and September 29, 2018

(In thousands, except per share information)

              Accumulated    
     Additional        Other    
  Common  Paid-In  Treasury  Retained  Comprehensive    
  Stock  Capital  Stock  Earnings  Income (Loss)  Total 
Balance at December 30, 2017 $17,979  $1,828,386  $(468,818) $2,418,444  $56,428  $3,852,419 
Net income  –   –   –   503,930   –   503,930 
Translation adjustment  –   –   –   –   (30,308)  (30,308)
Adjustment related to unrealized gains (losses) on available-for-sale securities net of income tax effects of $3,014  –   –   –   –   (21,044)  (21,044)
Comprehensive income                      452,578 
Dividends declared ($2.12 per share)  –   –   –   (400,298)  –   (400,298)
Issuance of treasury stock related to equity awards  –   (27,929)  42,453   –   –   14,524 
Stock compensation  –   42,094   –   –   –   42,094 
Purchase of treasury stock related to equity awards  –   –   (6,909)  –   –   (6,909)
Reclassification under ASU 2016-06  –   –   –   (1,700)  –   (1,700)
Reclassification under ASU 2018-02  –   –   –   452   (452)  - 
Balance at September 29, 2018 $17,979  $1,842,551  $(433,274) $2,520,828  $4,624  $3,952,708 

              Accumulated    
     Additional        Other    
  Common  Paid-In  Treasury  Retained  Comprehensive    
  Stock  Capital  Stock  Earnings  Income (Loss)  Total 
Balance at December 29, 2018 $17,979  $1,823,638  $(397,692) $2,710,619  $8,430  $4,162,974 
Net income  –   –   –   591,695   –   591,695 
Translation adjustment  –   –   –   –   (27,805)  (27,805)
Adjustment related to unrealized gains (losses) on available-for-sale securities net of income tax effects of $5,968  –   –   –   –   39,965   39,965 
Comprehensive income                      603,855 
Dividends declared ($2.28 per share)  –   –   –   (433,498)  –   (433,498)
Issuance of treasury stock related to equity awards  –   (29,495)  42,477   –   –   12,982 
Stock compensation  –   47,553   –   –   –   47,553 
Purchase of treasury stock related to equity awards  –   –   (12,972)  –   –   (12,972)
Balance at September 28, 2019 $17,979  $1,841,696  $(368,187) $2,868,816  $20,590  $4,380,894 

See accompanying notes.

5

Garmin Ltd. And Subsidiaries

Condensed Consolidated Statements of Cash Flows (Unaudited)

(In thousands)

      
13-Weeks Ended  39-Weeks Ended 
March 30, March 31,  September 28, September 29, 
2019 2018  2019  2018 
Operating activities:          
Net income$140,173 $129,374  $591,695  $503,930 
Adjustments to reconcile net income to net cash provided by operating activities:             
Depreciation 16,832 16,014   52,503   47,902 
Amortization 7,179 7,132   25,112   23,574 
Loss (gain) on sale or disposal of property and equipment 227 (15)
Gain on sale or disposal of property and equipment  (5)  (491)
Provision for doubtful accounts 408 57   933   1,265 
Provision for obsolete and slow moving inventories 7,579 3,959   32,501   17,719 
Unrealized foreign currency loss (gain) 3,124 (517)
Unrealized foreign currency loss  14,653   4,158 
Deferred income taxes 9,105 416   18,012   20,177 
Stock compensation expense 15,129 13,440   47,553   42,094 
Realized losses on marketable securities 60 196 
Realized (gains) losses on marketable securities  (213)  481 
Changes in operating assets and liabilities, net of acquisitions:             
Accounts receivable 112,488 187,693   14,311   111,955 
Inventories (46,646) (26,455)  (210,622)  (69,139)
Other current and non-current assets 2,930 9,037   (86,538)  5,102 
Accounts payable (32,786) (36,708)  27,523   32,601 
Other current and non-current liabilities (76,030) (99,935)  (54,401)  (57,245)
Deferred revenue (6,744) (8,368)  (7,750)  (14,923)
Deferred costs 1,938 1,807   6,326   5,581 
Income taxes payable 9,616  17,063   (7,423)  27,041 
Net cash provided by operating activities 164,582 214,190   464,170   701,782 
             
Investing activities:             
Purchases of property and equipment (30,094) (26,336)  (91,469)  (122,846)
Proceeds from sale of property and equipment 47 121   370   1,296 
Purchase of intangible assets (413) (1,622)  (1,862)  (2,982)
Purchase of marketable securities (83,068) (140,623)  (333,320)  (314,179)
Redemption of marketable securities 80,907 65,253   333,783   229,066 
Acquisitions, net of cash acquired —  (9,417)  (275,310)  (29,170)
Net cash used in investing activities (32,621) (112,624)  (367,808)  (238,815)
             
Financing activities:             
Dividends (200,687) (96,146)  (308,905)  (296,149)
Proceeds from issuance of treasury stock related to equity awards — 1,926   12,982   14,524 
Purchase of treasury stock related to equity awards (12,694) (6,562)  (12,972)  (6,909)
Net cash used in financing activities$(213,381)$(100,782)  (308,895)  (288,534)
             
Effect of exchange rate changes on cash, cash equivalents, and restricted cash (4,286) 6,717   (11,834)  (9,650)
              
Net (decrease) increase in cash, cash equivalents, and restricted cash (85,706) 7,501   (224,367)  164,783 
Cash, cash equivalents, and restricted cash at beginning of period 1,201,805  891,759   1,201,805   891,759 
Cash, cash equivalents, and restricted cash at end of period$1,116,099 $899,260  $977,438  $1,056,542 

See accompanying notes.

6

 


Garmin Ltd. and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Unaudited)

September 28, 2019

March 30, 2019

(In thousands, except per share information)

 

1.

Accounting Policies

Basis of Presentation

The accompanying unaudited condensed consolidated financial statementsCondensed 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, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Additionally, the condensed consolidated financial statementsCondensed Consolidated Financial Statements should be read in conjunction with Item 2 of Management’s Discussion and Analysis of Financial Condition and Results of Operations, included in this Form 10-Q. Operating results for the 13-week periodand 39-week periods ended March 30,September 28, 2019 are not necessarily indicative of the results that may be expected for the year ending December 28, 2019.

The condensed consolidated balance sheetCondensed Consolidated Balance Sheet at December 29, 2018 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. For further information, refer to the consolidated financial statementsConsolidated Financial Statements and footnotes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 29, 2018.

The Company’s fiscal year is based on a 52-53 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 March 30,September 28, 2019 and March 31,September 29, 2018 both contain operating results for 13 weeks.

Recently Adopted Accounting Standards

Leases

In February 2016, the FASB issued Accounting Standards Update No. 2016-02, Leases (Topic 842) (“ASU 2016-02”), which sets out the principles for the recognition, measurement, presentation and disclosure of leases for both lessees and lessors. The FASB subsequently issued Accounting Standards Update No. 2018-10 and Accounting Standards Update No. 2018-11 in July 2018, which provide clarifications and improvements to ASU 2016-02 (collectively, the “new lease standard”). Accounting Standards Update No. 2018-11 also provides the optional transition method which allows companies to apply the new lease standard at the adoption date instead of at the earliest comparative period presented. The new lease standard requires lessees to present a right-of-use asset and a corresponding lease liability on the balance sheet.

The Company adopted the new lease standard as of the beginning of the 2019 fiscal year using the optional transition method. The Company did not have a cumulative effect adjustment to retained earnings as a result of adopting the new lease standard and does not expect the new lease standard to have a material impact on the Company's consolidated statementsCompany’s Consolidated Statements of incomeIncome or consolidated statementsConsolidated Statements of cash flowsCash Flows in future periods. The Company elected the package of transitional practical expedients upon adoption which, among other provisions, allowed the Company to carry forward historical lease classification. See Note 1211 – Leases for additional information regarding leases.

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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,Condensed Consolidated Financial Statements, refer to Note 2, “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 29, 2018. Other than the policy discussed below, there were no material changes to the Company’s significant accounting policies during the 13-week39-week period ended March 30,September 28, 2019.


Preproduction Costs Related to Long-Term Supply Arrangements

Preproduction design and development costs related to long-term supply arrangements are expensed as incurred, and classified as Research and development, unless the customer has provided a contractual guarantee for reimbursement of such costs. Contractually reimbursable costs are capitalized as incurred in the Condensed Consolidated Balance Sheets within Prepaid expenses and other current assets if reimbursement is expected to be received within one year, or within Other assets if expected to be received beyond one year. Such capitalized costs were approximately $5$22 million as of March 30,September 28, 2019, and there were no0 such capitalized costs as of December 29, 2018.

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2.Inventories

The components of inventories consist of the following:

Schedule of inventories     
March 30, December 29,  September 28, December 29, 
2019 2018  2019  2018 
         
Raw materials$213,380 $205,696  $267,718  $205,696 
Work-in-process 103,204 96,564   133,290   96,564 
Finished goods 281,803  259,580   348,817   259,580 
Inventories$598,387 $561,840  $749,825  $561,840 

 

3.

Earnings Per Share

The following table sets forth the computation of basic and diluted net income per share:

 

 13-Weeks Ended 
 March 30, March 31, 
 2019 2018 
Numerator:    
     
Numerator for basic and diluted net income per share - net income$140,173 $129,374 
       
Denominator:      
Denominator for basic net income per share – weighted-average common shares 189,601  188,322 
       
Effect of dilutive securities – stock options, stock appreciation rights and restricted stock units 998  970 
       
Denominator for diluted net income per share – adjusted weighted-average common shares 190,599  189,292 
       
Basic net income per share$0.74 $0.69 
       
Diluted net income per share$0.74 $0.68 

Schedule of computation of basic and diluted net income per share        
  13-Weeks Ended 
  September 28,  September 29, 
  2019  2018 
Numerator:      
Numerator for basic and diluted net income per share - net income $227,866  $184,214 
         
Denominator:        
Denominator for basic net income per share – weighted-average common shares  190,102   188,799 
         
Effect of dilutive securities – stock options, stock appreciation rights and restricted stock units  860   1,206 
         
Denominator for diluted net income per share – adjusted weighted-average common shares  190,962   190,005 
         
Basic net income per share $1.20  $0.98 
         
Diluted net income per share $1.19  $0.97 

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  39-Weeks Ended 
  September 28,  September 29, 
  2019  2018 
Numerator:      
Numerator for basic and diluted net income per share - net income $591,695  $503,930 
         
Denominator:        
Denominator for basic net income per share – weighted-average common shares  189,853   188,554 
         
Effect of dilutive securities – stock options, stock appreciation rights and restricted stock units  937   1,032 
         
Denominator for diluted net income per share – adjusted weighted-average common shares  190,790   189,586 
         
Basic net income per share $3.12  $2.67 
         
Diluted net income per share $3.10  $2.66 

There were no398 and 266 anti-dilutive stock options, stock appreciation rights and restricted stock units (collectively “equity awards”) outstanding during the 13-week and 39-week periods ended March 30,September 28, 2019, respectively, and March 31,0 anti-dilutive equity awards outstanding during the 13-week and 39-week periods ended September 29, 2018.

There were 386 and 332less than 1 net shares issued as a result of exercises and releases of equity awards for the 13-week period ended September 28, 2019, and there were 12 net shares issued as a result of exercises and releases of equity awards for the 13-week period ended September 29, 2018.

There were 396 and 390 net shares issued as a result of exercises and releases of equity awards for the 39-week periods ended March 30,September 28, 2019 and March 31,September 29, 2018, respectively.

There were 245 employee stock purchase plan (ESPP) shares issued from outstanding Treasury stock during the 39-week period ended September 28, 2019.

There were 230 ESPP shares issued from outstanding Treasury stock during the 39-week period ended September 29, 2018.

 

4.Segment Information

The Company has identified five5 reportable segments – auto, aviation, fitness, marine, and outdoor. The Company’s Chief Executive Officer, who has been identified as the Chief Operating Decision Maker (CODM), who uses operating income as the measure of profit or loss to assess segment performance and allocate resources. Operating income represents net sales less costs of goods sold and operating expenses. Net sales are directly attributed to each segment. Most costs of goods sold and the majority of operating expenses are also directly attributed to each segment, while certain other costs of goods sold and operating expenses are allocated to the segments in a manner appropriate to the specific facts and circumstances of the expenses being allocated.

In the first quarter of fiscal 2019, the methodology used to allocate certain selling, general, and administrative expenses to the segments was refined, endeavoring to provide the Company’s CODM with a more meaningful representation of segment profit or loss in light of the evolution of its segments. The Company’s composition of operating segments and reportable segments did not change. Prior year amounts are presented here as they were originally reported, as it is not practicable to accurately restate prior period activity in accordance with the refined allocation methodology. For comparative purposes, we estimate operating income for the 13-weeks ended March 31,September 29, 2018 would have been approximately $4$4 million less for the aviation segment, approximately $4$2 million more for the marine segment, approximately $2 million more for the outdoor segment, and not significantly different for the auto and fitness segments. We estimate operating income for the 39-weeks ended September 29, 2018 would have been approximately $13 million less for the aviation segment, approximately $10 million more for the marine segment, approximately $3 million more for the outdoor segment, and not significantly different for the auto and fitness and auto segments.

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Net sales (“revenue”), gross profit, and operating income for each of the Company’s reportable segments are presented below.

 

  Reportable Segments 
                   
  Outdoor  Fitness  Marine  Auto  Aviation  Total 
                   
13-Weeks Ended March 30, 2019                  
                   
Net sales$154,051 $180,256 $133,968 $126,999 $170,776 $766,050 
Gross profit 97,488  90,835  78,055  57,337  127,983  451,698 
Operating income 41,953  18,126  25,473  8,213  57,618  151,383 
                   
13-Weeks Ended March 31, 2018                  
                   
Net sales$144,258 $166,035 $113,554 $141,312 $145,713 $710,872 
Gross profit 93,285  96,601  66,683  61,012  108,954  426,535 
Operating income 43,822  33,374  13,131  3,468  48,407  142,202 


Net sales (“revenue”), gross profit, and operating income  Outdoor [Member]   Fitness [Member]   Marine [Member]   Auto [Member]    Aviation [Member]     
  Reportable Segments 
  Outdoor  Fitness  Marine  Auto  Aviation  Total 
                   
13-Weeks Ended September 28, 2019               
                   
Net sales $258,294  $243,099  $107,694  $137,722  $187,574  $934,383 
Gross profit  170,846   126,835   64,275   65,814   139,688   567,458 
Operating income  105,051   49,831   20,008   20,857   65,713   261,460 
                         
13-Weeks Ended  September 29, 2018                     
                         
Net sales $209,415  $190,185  $98,770  $165,214  $146,427  $810,011 
Gross profit  136,671   103,441   58,508   70,925   111,202   480,747 
Operating income  78,972   37,378   13,908   15,032   50,669   195,959 
                         
39-Weeks Ended  September 28, 2019                     
                         
Net sales $622,748  $675,007  $393,070  $422,132  $542,316  $2,655,273 
Gross profit  403,842   352,805   234,014   198,012   405,848   1,594,521 
Operating income  218,340   118,369   88,212   53,978   190,164   669,063 
                         
39 -Weeks Ended September 29, 2018                     
                         
Net sales $555,314  $581,315  $346,908  $486,653  $445,146  $2,415,336 
Gross profit  358,829   326,473   203,976   207,389   333,886   1,430,553 
Operating income  194,711   123,299   54,806   31,113   151,741   555,670 

 

Net sales to external customers by geographic region were as follows for the 13-week and 39-week periods ended March 30,September 28, 2019 and March 31,September 29, 2018. Note that APAC includes Asia Pacific and Australian Continent and EMEA includes Europe, the Middle East and Africa:

 

 13-Weeks Ended 
 March 30, March 31, 
 2019 2018 
Americas$379,456 $345,975 
EMEA 260,021  245,912 
APAC 126,573  118,985 
Net sales to external customers$766,050 $710,872 

Americas [Member]

EMEA [Member]

APAC [Member]

Schedule of net sales and property and equipment, net by geographic area 

    
  13-Weeks Ended  39-Weeks Ended 
  September 28,  September 29,  September 28,  September 29, 
  2019  2018  2019  2018 
Americas $439,113  $370,239  $1,289,409  $1,153,330 
EMEA  344,010   307,087   942,625   862,116 
APAC  151,260   132,685   423,239   399,890 
Net sales to external customers $934,383  $810,011  $2,655,273  $2,415,336 

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Net property and equipment by geographic region as of March 30,September 28, 2019 and March 31,September 29, 2018 are presented below.

 

Americas APAC EMEA Total             
March 30, 2019         
 Americas  APAC  EMEA  Total 
September 28, 2019         
Property and equipment, net$413,632 $212,933 $45,734 $672,299  $431,062  $217,184  $62,345  $710,591 
                         
March 31, 2018         
September 29, 2018                
Property and equipment, net$388,531 $176,245 $40,037 $604,813  $403,556  $202,790  $44,459  $650,805 

 

5.Warranty Reserves

 

Warranty Reserves Textual

The Company’s products sold are generally covered by a standard warranty for periods ranging from one to three years. years. The Company’s estimateestimates of costs to service its warranty obligations are based on historical experience and management’s expectations and judgments of future conditions, and are recorded as a liability on the balance sheet. The following reconciliation provides an illustration of changes in the aggregate warranty reserve.

 

Schedule of changes in the aggregate warranty reserve      
13-Weeks Ended  13-Weeks Ended 
March 30, March 31,  September 28, September 29, 
2019 2018  2019  2018 
         
Balance - beginning of period$38,276 $36,827  $39,330  $38,429 
Accrual for products sold during the period(1) 10,849 10,012   12,981   13,558 
Expenditures (14,083) (11,417)  (14,313)  (16,027)
Balance - end of period$35,042 $35,422  $37,998  $35,960 

         
  39-Weeks Ended 
  September 28,  September 29, 
  2019  2018 
       
Balance - beginning of period $38,276  $36,827 
Accrual for products sold during the period(1)  41,196   40,682 
Expenditures  (41,474)  (41,549)
Balance - end of period $37,998  $35,960 

 

(1)Changes in cost estimates related to pre-existing warranties are not material and aggregated with accruals for new warranty contracts in the ‘accrual for products sold during the period’ line.

 

6.Commitments and Contingencies

 

Commitments

 

The Company is party to certain commitments, which include purchases of raw materials, advertising expenditures, and other indirect purchases in connection with conducting our business. The aggregate amount of purchase orders and other commitments open as of March 30,September 28, 2019 was approximately $435,100.$467,300. We cannot determine the aggregate amount of such purchase orders that represent contractual obligations because purchase orders may represent authorizations to purchase rather than binding agreements. Our purchase orders are based on our current needs and are typically fulfilled within short periods of time.

 


Contingencies

 

In the normal course of business, the Company and its subsidiaries are parties to various legal claims, investigations and complaints, including matters alleging patent infringement and other intellectual property claims. The Company evaluates, on a quarterly and annual basis, developments in legal proceedings, investigations, claims, and other loss contingencies that could affect any required accrual or disclosure or estimate of reasonably possible loss or range of loss. An estimated loss from a loss contingency is accrued by a charge to income if it is probable that an asset has been impaired or a liability has been incurred and the amount of the loss can be reasonably estimated. If a range of loss is estimated, and some amount within that range appears to be a better estimate than any other amount within that range, then that amount is accrued. If no amount within the range can be identified as a better estimate than any other amount, the Company accrues the minimum amount in the range.

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If an outcome unfavorable to the Company is determined to be probable, but the amount of loss cannot be reasonably estimated or is determined to be reasonably possible, but not probable, we disclose the nature of the contingency and an estimate of the possible loss or range of loss or a statement that such an estimate cannot be made. The Company’s aggregate range of reasonably possible losses includes (1) matters where a liability has been accrued and there is a reasonably possible loss in excess of the amount accrued for that liability, and (2) matters where a loss is believed to be reasonably possible, but not probable, and a liability therefore has not been accrued. This aggregate range only represents the Company’s estimate of reasonably possible losses and does not represent the Company’s maximum loss exposure. The assessment regarding whether a loss is probable or reasonably possible, and whether the loss or a range of loss is estimable, often involves a series of complex judgments about future events. In assessing the probability of an outcome in a lawsuit, claim or assessment that could be unfavorable to the Company, we consider the following factors, among others: a) the nature of the litigation, claim, or assessment; b) the progress of the case; c) the opinions or views of legal counsel and other advisers; d) our experience in similar cases; e) the experience of other entities in similar cases; and f) how we intend to respond to the lawsuit, claim, or assessment. Costs incurred in defending lawsuits, claims or assessments are expensed as incurred.

 

Management of the Company currently does not believe it is reasonably possible that the Company may have incurred a material loss, or a material loss in excess of recorded accruals, with respect to loss contingencies in the aggregate, for the fiscal quarter ended March 30,September 28, 2019. The results of legal proceedings, investigations and claims, however, cannot be predicted with certainty. An adverse resolution of one or more of such matters in excess of management’s expectations could have a material adverse effect in the particular quarter or fiscal year in which a loss is recorded, but based on information currently known, the Company does not believe it is likely that losses from such matters would have a material adverse effect on the Company’s business or its consolidated financial position, results of operations or cash flows.

 

The Company settled or resolved certain matters during the 13-week periodand 39-week periods ended March 30,September 28, 2019 that did not individually or in the aggregate have a material impact on the Company’s business or its consolidated financial position, results of operations or cash flows.

 

7. Income Taxes

7.Income Taxes

The Company recorded income tax expense of $29,901 in the 13-week period ended September 28, 2019, compared to income tax expense of $17,113 in the 13-week period ended September 29, 2018. The effective tax rate was 11.6% in the third quarter of 2019, compared to 8.5% in the third quarter of 2018. The 310 basis points increase to the third quarter of 2019 effective tax rate compared to the prior year quarter is primarily due to a decrease in uncertain tax position reserves released due to expiring statutes of limitations in the third quarter of 2019 compared to the third quarter of 2018.

 

The Company recorded income tax expense of $26,092$108,115 in the 13-week period ended March 30,first three quarters of 2019, compared to income tax expense of $24,606$87,445 in the 13-week period ended March 31,first three quarters of 2018. The effective tax rate was 15.7%15.4% in the first quarterthree quarters of 2019, compared to 16.0%14.8% in the first quarterthree quarters of 2018.

 


8. Marketable Securities

8.Marketable Securities

 

The Financial Accounting Standards Board (“FASB”) ASC topic entitled Fair Value Measurements and Disclosures defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (exit price). The accounting guidance classifies the inputs used to measure fair value into the following hierarchy:

 

Level 1Unadjusted quoted prices in active markets for the identical asset or liability

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Level 2Observable inputs for the asset or liability, either directly or indirectly, such as quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, or inputs other than quoted prices that are observable for the asset or liability

 

Level 3Unobservable inputs for the asset or liability

 

The Company endeavors to utilize the best available information in measuring fair value. Financial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. Valuation is based on prices obtained from an independent pricing vendor using both market and income approaches. The primary inputs to the valuation include quoted prices for similar assets in active markets, quoted prices for identical or similar assets in markets that are not active, contractual cash flows, benchmark yields, and credit spreads.

 

The method described above may produce a fair value calculation that may not be indicative of net realizable value or reflective of future fair values. Furthermore, while the Company believes its valuation methods are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different fair value measurement at the reporting date.

 

Available-for-sale securities measured at fair value on a recurring basis are summarized below:

 

 Fair Value Measurements as
of March 30, 2019		 
 Total Level 1 Level 2 Level 3 
U.S. Treasury securities$22,229 $— $22,229 $— 
Agency securities 63,714  —  63,714  — 
Mortgage-backed securities 131,973  —  131,973  — 
Corporate securities 1,019,083  —  1,019,083  — 
Municipal securities 171,551  —  171,551  — 
Other 126,606  —  126,606  — 
Total$1,535,156 $— $1,535,156 $— 

U.S.Treasury Securities [Member]

Agency Securities [Member]

Mortgage-Backed Securities [Member]

Corporate Securities [Member]

Municipal Securities [Member]

Other [Member]

Recurring Basis [Member]

Schedule of available-for-sale securities   
  Fair Value Measurements as
of September 28, 2019		 
  Total  Level 1  Level 2  Level 3 
U.S. Treasury securities $16,557  $-  $16,557  $- 
Agency securities  67,926   -   67,926   - 
Mortgage-backed securities  129,564   -   129,564   - 
Corporate securities  1,066,438   -   1,066,438   - 
Municipal securities  158,530   -   158,530   - 
Other  113,746   -   113,746   - 
Total $1,552,761  $-  $1,552,761  $- 

 

Fair Value Measurements as
of December 29, 2018		  Fair Value Measurements as
of December 29, 2018
Total Level 1 Level 2 Level 3  Total Level 1 Level 2 Level 3 
U.S. Treasury securities$22,128 $— $22,128 $—  $22,128  $-  $22,128  $- 
Agency securities 59,116 — 59,116 —   59,116   -   59,116   - 
Mortgage-backed securities 135,865 — 135,865 —   135,865   -   135,865   - 
Corporate securities 980,524 — 980,524 —   980,524   -   980,524   - 
Municipal securities 173,137 — 173,137 —   173,137   -   173,137   - 
Other 142,342  —  142,342  —   142,342   -   142,342   - 
Total$1,513,112 $— $1,513,112 $—  $1,513,112  $-  $1,513,112  $- 

 


13

Marketable securities classified as available-for-sale securities are summarized below:

 

 Available-For-Sale Securities as
of March 30, 2019		 
   
 Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Fair Value 
U.S. Treasury securities$22,448 $— $(219)$22,229 
Agency securities 64,178  72  (535) 63,715 
Mortgage-backed securities 136,763  2  (4,793) 131,972 
Corporate securities 1,031,431  2,013  (14,361) 1,019,083 
Municipal securities 172,399  287  (1,135) 171,551 
Other 128,353  0  (1,747) 126,606 
Total$1,555,572 $2,374 $(22,790)$1,535,156 

Schedule of marketable securities classified as available-for-sale securities                
  Available-For-Sale Securities as
of September 28, 2019		 
  Amortized Cost  Gross Unrealized Gains  Gross Unrealized Losses  Fair Value 
U.S. Treasury securities $16,633  $3  $(79) $16,557 
Agency securities  67,875   130   (79)  67,926 
Mortgage-backed securities  131,507   174   (2,117)  129,564 
Corporate securities  1,061,714   8,965   (4,241)  1,066,438 
Municipal securities  157,456   1,173   (99)  158,530 
Other  114,106   129   (489)  113,746 
Total $1,549,291  $10,574  $(7,104) $1,552,761 

 

Available-For-Sale Securities as
of December 29, 2018		 
   Available-For-Sale Securities as
of December 29, 2018		 
Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Fair Value  Amortized Cost  Gross Unrealized Gains  Gross Unrealized Losses  Fair Value 
U.S. Treasury securities$22,485 $— $(357)$22,128  $22,485  $-  $(357) $22,128 
Agency securities 60,088 28 (1,000) 59,116   60,088   28   (1,000)  59,116 
Mortgage-backed securities 142,176 1 (6,312) 135,865   142,176   1   (6,312)  135,865 
Corporate securities 1,010,590 33 (30,099) 980,524   1,010,590   33   (30,099)  980,524 
Municipal securities 175,630 73 (2,566) 173,137   175,630   73   (2,566)  173,137 
Other 144,606  0  (2,264) 142,342   144,606   0   (2,264)  142,342 
Total$1,555,575 $135 $(42,598)$1,513,112  $1,555,575  $135  $(42,598) $1,513,112 

 

The Company’s investment policy targets low risk investments with the objective of minimizing the potential risk of principal loss. The fair value of our securities varies from period to period due to changes in interest rates, in the performance of the underlying collateral and in the credit performance of the underlying issuer, among other factors. The Company does not intend to sell the securities that have an unrealized loss shown in the table above, and it is not more likely than not that the Company will be required to sell a security before recovery of its amortized costs basis, which may be maturity.

 

The Company recognizes the credit component of other-than-temporary impairments of debt securities in “Other Income” and the noncredit component in “Other comprehensive income (loss)” for those securities that we do not intend to sell and for which it is not more likely than not that we will be required to sell before recovery. During 2018 and the 13-week39-week period ended March 30,September 28, 2019, the Company did not record any material impairment charges on its outstanding securities.

 

The amortized cost and fair value of the securities at an unrealized loss position as of March 30,September 28, 2019 were $1,223,105$626,766 and $1,200,315,$619,662, respectively. Approximately 73%44% of securities in our portfolio were at an unrealized loss position as of March 30,September 28, 2019. We have the ability to hold these securities until maturity or their value is recovered. We do not consider these unrealized losses to be other than temporary credit losses because there has been no material deterioration in credit quality and no change in the cash flows of the underlying securities. We do not intend to sell the securities and it is not more likely than not that we will be required to sell the securities; therefore, no material impairment has been recorded in the accompanying condensed consolidated statementCondensed Consolidated Statements of income.Income.

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The cost of securities sold is based on the specific identification method.

 


The following tables display additional information regarding gross unrealized losses and fair value by major security type for available-for-sale securities in an unrealized loss position as of March 30,September 28, 2019 and December 29, 2018.

 

 As of March 30, 2019 
 Less than 12 Consecutive Months 12 Consecutive Months or Longer 
 Gross Unrealized Losses Fair Value Gross Unrealized Losses Fair Value 
U.S. Treasury securities$(1)$3,988 $(218)$18,241 
Agency securities (1) 2,257  (534) 38,985 
Mortgage-backed securities (1) 301  (4,792) 131,521 
Corporate securities (172) 65,937  (14,189) 700,387 
Municipal securities (19) 11,415  (1,116) 120,394 
Other (1) 1,177  (1,746) 105,712 
Total$(195)$85,075 $(22,595)$1,115,240 

Schedule of gross unrealized losses and fair value by major security type               
  As of September 28, 2019 
  Less than 12 Consecutive Months  12 Consecutive Months or Longer 
  Gross Unrealized Losses  Fair Value  Gross Unrealized Losses  Fair Value 
U.S. Treasury securities $(0) $1,690  $(79) $14,464 
Agency securities  (10)  5,988   (69)  30,753 
Mortgage-backed securities  (149)  17,478   (1,968)  93,550 
Corporate securities  (672)  163,205   (3,569)  191,739 
Municipal securities  (59)  24,305   (40)  15,022 
Other  (141)  27,181   (348)  34,287 
Total $(1,031) $239,847  $(6,073) $379,815 

 

  As of December 29, 2018 
  Less than 12 Consecutive Months  12 Consecutive Months or Longer 
  Gross Unrealized Losses  Fair Value  Gross Unrealized Losses  Fair Value 
U.S. Treasury securities $(3) $3,975  $(354) $18,153 
Agency securities  (5)  4,656   (995)  40,508 
Mortgage-backed securities  (1)  361   (6,311)  135,323 
Corporate securities  (4,028)  323,633   (26,071)  640,439 
Municipal securities  (454)  38,371   (2,112)  118,362 
Other  (102)  8,015   (2,162)  114,120 
Total $(4,593) $379,011  $(38,005) $1,066,905 

 

The amortized cost and fair value of marketable securities at March 30,September 28, 2019, by maturity, are shown below.

 

Amortized Cost Fair Value 
Schedule of amortized cost and estimated fair value of marketable securities by contractual maturity      
     Amortized Cost  Fair Value 
Due in one year or less$198,020 $197,385  $300,566  $300,542 
Due after one year through five years 1,262,371 1,247,012   1,061,239   1,066,607 
Due after five years through ten years 95,181  90,759   174,371   172,546 
Due after ten years  13,115   13,066 
$1,555,572 $1,535,156 $1,549,291  $1,552,761 

9. Accumulated Other Comprehensive Income

15

9.Accumulated Other Comprehensive Income

 

The following provides required disclosure of changes in accumulated other comprehensive income (AOCI) balances by component for the 13-week periodand 39-week periods ended March 30,September 28, 2019:

 

Schedule of changes in accumulated other comprehensive income (AOCI)   
13-Weeks Ended March 30, 2019  13-Weeks Ended September 28, 2019 
Foreign Currency Translation Adjustment Net unrealized gains (losses) on available-for-sale securities Total  Foreign Currency Translation Adjustment  Net unrealized gains (losses) on available-for-sale securities  Total 
Beginning Balance$47,327 $(38,897)$8,430  $38,407  $(3,726) $34,681 
Other comprehensive income before reclassification, net of income tax benefit of $2,905 (9,234) 19,100 9,866 
Other comprehensive income before reclassification, net of income tax expense of $657  (18,885)  4,933   (13,952)
Amounts reclassified from accumulated other comprehensive income —  42  42   -   (139)  (139)
Net current-period other comprehensive income (9,234) 19,142  9,908   (18,885)  4,794   (14,091)
Ending Balance$38,093 $(19,755)$18,338  $19,522  $1,068  $20,590 

 


  39-Weeks Ended September 28, 2019 
  Foreign Currency Translation Adjustment  Net unrealized gains (losses) on available-for-sale securities  Total 
Beginning Balance $47,327  $(38,897) $8,430 
Other comprehensive income before reclassification, net of income tax expense of $5,968  (27,805)  40,180   12,375 
Amounts reclassified from accumulated other comprehensive income  -   (215)  (215)
Net current-period other comprehensive income  (27,805)  39,965   12,160 
Ending Balance $19,522  $1,068  $20,590 

The following provides required disclosure of reporting reclassifications out of AOCI for the 13-week periodand 39-week periods ended March 30,September 28, 2019:

 

Accumulated Net Investment Gain (Loss) Attributable to Parent Reclassification from Accumulated Other Comprehensive Income [Member]

13-Weeks Ended March 30, 2019
Details About Accumulated Other
Comprehensive Income
Components		 Amount Reclassified
from Accumulated
Other Comprehensive
Income		 Affected Line Item in the
Statement Where Net Income is
Presented
     
Unrealized gains (losses) on available-for-sale securities$(60)Other income (expense)
  18 Income tax benefit (provision)
 $(42)Net of tax

Schedule of of reporting reclassifications out of AOCI      
13-Weeks Ended September 28, 2019
Details About Accumulated Other Comprehensive Income Components Amount Reclassified from Accumulated Other Comprehensive Income  Affected Line Item in the Statement Where Net Income is Presented
Unrealized gains (losses) on available-for-sale securities $153  Other income (expense)
   (14) Income tax benefit (provision)
  $139  Net of tax

39-Weeks Ended September 28, 2019
Details About Accumulated Other Comprehensive Income Components Amount Reclassified from Accumulated Other Comprehensive Income  Affected Line Item in the Statement Where Net Income is Presented
Unrealized gains (losses) on available-for-sale securities $213  Other income (expense)
   2  Income tax benefit (provision)
  $215  Net of tax

16

 

10. Revenue

10.

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 (or “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 4 – Segment Information. The Company has identified six major product categories – auto PND, auto OEM, aviation, fitness, marine, and outdoor. Note 4 contains disaggregated revenue information of the aviation, fitness, marine, and outdoor major product categories. Auto segment revenue presented in Note 4 is comprised of the auto PND and auto OEM major product categories, as depicted below.

 

 Auto Revenue by Major Product Category 
 13-Weeks Ended 
 March 30, March 31, 
 2019 2018 
Auto PND 59%  63% 
Auto OEM 41%  37% 

Auto PND [Member]

Auto OEM [Member]

Schedule of disaggregated revenue by geographic region   
  Auto Revenue by Major Product Category 
  13-Weeks Ended  39-Weeks Ended 
  September 28,  September 29,  September 28,  September 29, 
  2019  2018  2019  2018 
Auto PND  69%  64%  66%  66%
Auto OEM  31%  36%  34%  34%

 

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 auto segment and relate to performance obligations that are satisfied over the 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 
 March 30, March 31, 
 2019 2018 
Point in time$724,177 $671,263 
Over time 41,873  39,609 
Net sales$766,050 $710,872 

Point in time [Member]

Over time [Member]

 Schedule of revenue disaggregated                
  13-Weeks Ended  39-Weeks Ended 
  September 28,  September 29,  September 28,  September 29, 
  2019  2018  2019  2018 
Point in time $886,954  $761,216  $2,522,229  $2,286,740 
Over time  47,429   48,795   133,044   128,596 
Net sales $934,383  $810,011  $2,655,273  $2,415,336 

 


17

 

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 consolidated balance sheets.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-week39-week period ending March 30,September 28, 2019 are presented below:

 

  13-Weeks Ended 
  March 30, 
  2019 
   Deferred Revenue(1)  Deferred Costs(2) 
        
Balance, beginning of period $172,938 $57,935 
Deferrals in period  35,119  6,923 
Recognition of deferrals in period  (41,873) (8,863)
Balance, end of period $166,184 $55,995 

Schedule of deferred revenue and costs  Deferred Revenue(1)   Deferred Costs(2) 
  39-Weeks Ended 
  September 28, 
  2019 
  Deferred Revenue(1)  Deferred Costs(2) 
Balance, beginning of period $172,938  $57,935 
Deferrals in period  125,278   20,284 
Recognition of deferrals in period  (133,044)  (26,613)
Balance, end of period $165,172  $51,606 

 

(1)Deferred revenue is comprised of both Deferred revenue and Noncurrent deferred revenue per the Condensed Consolidated Balance Sheets

(2)Deferred costs are comprised of both Deferred costs and Noncurrent deferred costs per the Condensed Consolidated Balance Sheets

 

Of the $41,873$133,044 of deferred revenue recognized in the 13-weeks39-weeks ended March 30,September 28, 2019, $31,161$78,092 was deferred as of the beginning of the period.

 

Approximately two-thirds of the $166,184$165,172 of deferred revenue at the end of the period March 30,, September 28, 2019, is recognized ratably over a period of three years or less.

 

11. Leases

11.Leases

Leases Textual

The Company leases certain real estate properties, vehicles, and equipment in various countries around the world. Leased properties are typically used for office space, distribution, and retail. The Company’s leases are classified as operating leases with remaining terms of 1 to 34 years, some of which include an option to extend or renew. If the exercise of an option to extend or renew is determined to be reasonably certain, the associated right-of-use asset and lease liability reflects the extended period and payments. For all real estate leases, any non-lease components, including common area maintenance, have been separated from lease components and excluded from the associated right-of-use asset and lease liability calculations. For all equipment and vehicle leases, an accounting policy election has been made to not separate lease and non-lease components.

 

Leases with an initial term of 12 months or less (“short-term leases”) are not recognized on the Company’s Condensed Consolidated Balance Sheets as a right-of-use asset or lease liability.

 

The following table represents lease costs recognized in the Company’s Condensed Consolidated Statements of Income for the 13-weeks and 39-weeks ended March 30,September 28, 2019. Lease costs are included in Selling, general and administrative expense and Research and development expense on the Company’s Condensed Consolidated Statements of Income.

  

 13-Weeks Ended 
 March 30, 
 2019 
Operating lease cost(1)$5,642 
Schedule of operating lease cost      
  13-Weeks Ended  39-Weeks Ended 
 
 		 
 		September 28, 
 		 
September 28, 
 
  2019  2019 
Operating lease cost(1) $6,023  $17,683 

 

(1)Operating lease cost includes short-term lease costs and variable lease costs, which were not material in the period.periods presented.

 


18

  

The following table represents the components of leases that are recognized on the Company’s Condensed Consolidated Balance Sheets as of March 30,September 28, 2019.

  

 March 30, 
 2019 
   
Operating lease right-of-use assets$54,978 
    
Other accrued expenses$13,095 
Noncurrent operating lease liabilities 43,277 
Total lease liabilities$56,372 
    
Weighted average remaining lease term  5.5 years 
Weighted average discount rate 4.0% 

Schedule of amounts recognized in balance sheet
September 28,
2019
Operating lease right-of-use assets$55,399
Other accrued expenses$13,438
Noncurrent operating lease liabilities42,855
Total lease liabilities$56,293
Weighted average remaining lease term5.6 years
Weighted average discount rate4.0%

 

The following table represents the maturity of lease liabilities.

 

Fiscal Year Lease payments 
2019, excluding the 13-weeks ended March 30, 2019 $12,260 
2020  13,727 
2021  10,360 
2022  7,058 
2023  6,742 
Thereafter  13,725 
Total $63,872 
Less: imputed interest  (7,500)
Presentvalue of lease liabilities $56,372 

Schedule of maturity of lease liabilities   
Fiscal Year Lease payments 
2019, excluding the 39-weeks ended September 28, 2019 $4,347 
2020  15,447 
2021  12,259 
2022  8,736 
2023  7,955 
Thereafter  15,389 
Total $64,133 
Less: imputed interest  (7,840)
Present value of lease liabilities $56,293 

 

The following table presents supplemental cash flow and noncash information related to leases.

 

Schedule of cash flow supplemental   
13-Weeks Ended  39-Weeks Ended 
March 30,  September 28, 
2019  2019 
Cash paid for amounts included in the measurement of operating lease liabilities(2)$4,412  $13,528 
Right-of-use assets obtained in exchange for new operating lease liabilities$2,859  $7,853 

 

(2)Included in Net cash provided by operating activities on the Company’s Condensed Consolidated Statements of Cash Flows.

 


12.Recently Issued Accounting Pronouncements Not Yet Adopted

12. Recently Issued Accounting Pronouncements Not Yet Adopted

Financial Instruments – Credit Losses

 

In June 2016, the FASB issued Accounting Standards Update No. 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”). ASU 2016-13 provides new guidance on assessment of expected credit losses of certain financial instruments. ASU 2016-13 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2019. Early adoption is permitted. The Company is currently evaluating the impact of adopting the new standard on its Consolidated Financial Statements.

Receivables – Nonrefundable Fees and Other Costs

In March 2017, the FASB issued Accounting Standards Update No. 2017-08, Receivables – Nonrefundable Fees and Other Costs (Topic 310-20): Premium Amortization on Purchased Callable Debt Securities (“ASU 2017-08”), which shortens the amortization period for certain callable debt securities held at a premium, requiring the premium to be amortized to the earliest call date. Callable debt securities held at a discount continue to be amortized to maturity. ASU 2017-08 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2019. Early adoption is permitted. The Company is currently evaluating the impact of adopting the new standard on its consolidated financial statements.Consolidated Financial Statements.

 

Financial Instruments – Credit Losses

13. Subsequent Events

 

In June 2016,Switzerland corporate tax reform was approved by public referendum in May 2019 and enacted in October 2019. Accordingly, the FASB issued Accounting Standards Update No. 2016-13, Financial Instruments – Credit Losses (Topic 326): MeasurementCompany expects to record an income tax benefit of Credit Losses on Financial Instruments (“ASU 2016-13”). ASU 2016-13 provides new guidance on assessmentapproximately $20 to $220 million in the fourth quarter of expected credit losses2019 due to an increase in certain Switzerland deferred tax assets resulting from enactment of certain financial instruments. ASU 2016-13 is effective for fiscal years,Switzerland Federal and interim periods within those years, beginning after December 15, 2019. Early adoption is permitted.Schaffhausen cantonal tax reform. The Company is currently evaluating transitional measures in Switzerland tax law that may affect the overall increase in deferred tax assets as well as the impact of adoptingtax reform to its ongoing effective tax rate, the new standard on its consolidated financial statements.materiality of which is not yet known.

 

13. Subsequent Events19

 

On April 1, 2019, the Company acquired the shares of Tacx Onroerend en Roerend Goed B.V., a privately-held Dutch company, that designs and manufacturers indoor bike trainers, tools and accessories, as well as indoor training software and applications. This acquisition was not material.

 

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

 

Overview

 

The discussion set forth below, as well as other portions of this Quarterly Report, contains statements concerning potential future events. Such forward-looking statements are based upon assumptions by management, as of the date of this Quarterly Report, including assumptions about risks and uncertainties faced by the Company. Readers can identify these forward-looking statements by their use of such verbs as expects, anticipates, believes or similar verbs or conjugations of such verbs. If any of the Company’s assumptions prove incorrect or should unanticipated circumstances arise, actual results could materially differ from those anticipated by such forward-looking statements. The differences could be caused by a number of factors or combination of factors including, but not limited to, those factors identified in the Company’s Annual Report on Form 10-K for the year ended December 29, 2018. This report has been filed with the Securities and Exchange Commission (the “SEC” or the “Commission”) in Washington, D.C. and can be obtained by contacting the SEC’s public reference operations or obtaining it through the SEC’s website at http://www.sec.gov. Readers are strongly encouraged to consider those factors when evaluating any forward-looking statement concerning the Company. The Company will not update any forward-looking statements in this Quarterly Report to reflect future events or developments.

 


The information contained in this Management’s Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with the Condensed Consolidated Financial Statements and Notes thereto included in this Form 10-Q and the audited financial statements and notes thereto in the Company’s Annual Report on Form 10-K for the year ended December 29, 2018.

 

The Company is a leading worldwide provider of navigation, communications and information devices, most of which are enabled by Global Positioning System, or GPS, technology. We operate in five reportable segments, which serve the outdoor, fitness, marine, auto and aviation markets. The Company’s segments offer consumer products through its network of subsidiary distributors and independent dealers and distributors and some also maintainsmaintain relationships with many original equipment manufacturers (OEMs). However, the nature of products and types of customers for the five segments may vary significantly. As such, the segments are managed separately.

 

20

Results of Operations

 

The following table sets forth the Company’s results of operations as a percent of net sales during the periods shown (the table may not foot due to rounding):

 

13-Weeks Ended 
March 30, 2019 March 31, 2018  13-Weeks Ended 
     September 28,
2019		  September 29,
2018		 
Net sales 100% 100%   100%  100%
Cost of goods sold 41%  40%   39%  41%
Gross profit 59% 60%   61%  59%
Advertising expense 4% 4%   3%  4%
Selling, general and administrative expense 17% 16%   13%  14%
Research and development expense 19%  20%   16%  17%
Total operating expense 39%  40%   33%  35%
Operating income 20% 20%   28%  24%
Other income 2%  2% 
Other income (expense)  (0)%  1%
Income before income taxes 22% 22%   28%  25%
Income tax provision 3%  3%   3%  2%
Net income 18%  18%   24%  23%

  39-Weeks Ended 
  September 28,
2019		  September 29,
2018		 
Net sales  100%  100%
Cost of goods sold  40%  41%
Gross profit  60%  59%
Advertising expense  4%  4%
Selling, general and administrative expense  14%  15%
Research and development expense  17%  17%
Total operating expense  35%  36%
Operating income  25%  23%
Other income (expense)  1%  1%
Income before income taxes  26%  24%
Income tax provision  4%  4%
Net income  22%  21%

 

The segment table located in Note 4 to the Condensed Consolidated Financial Statements sets forth the Company’s results of operations (in thousands) including net sales, gross profit, and operating income for each of the Company’s five segments during the periods shown. For each line item in the table, the total of the outdoor, fitness, marine, auto, and aviation segments’ amounts equals the amount in the condensed consolidated statementsCondensed Consolidated Statements of incomeIncome included in Item 1.

 

As indicated in Note 4 to the Condensed Consolidated Financial Statements, the methodology used to allocate certain selling, general, and administrative expenses was refined in the first quarter of 2019. The amounts presented below for the 13-weeks and 39-weeks ended March 31,September 29, 2018 are presented here as they were originally reported.

 


21

Comparison of 13-Weeks ended March 30,September 28, 2019 and March 31,September 29, 2018

(Amounts included in the following discussion are stated in thousands unless otherwise indicated)

 

Net Sales

  13-Weeks Ended March 30, 2019 13-Weeks Ended March 31, 2018 Year over Year 
  Net Sales % of Revenue Net Sales % of Revenue $ Change % Change 
Outdoor $154,051  20% $144,258  20% $9,793  7% 
Fitness  180,256  24%  166,035  23%  14,221  9% 
Marine  133,968  17%  113,554  16%  20,414  18% 
Auto  126,999  17%  141,312  20%  (14,313) (10%)
Aviation  170,776  22%  145,713  21%  25,063  17% 
Total $766,050  100% $710,872  100% $55,178  8% 

  13-Weeks Ended
September 28, 2019		  13-Weeks Ended
September 29, 2018		  Year over Year 
  Net Sales  % of Total  Net Sales  % of Total  $ Change  % Change 
Outdoor $258,294   28% $209,415   26% $48,879   23%
Fitness  243,099   26%  190,185   24%  52,914   28%
Marine  107,694   11%  98,770   12%  8,924   9%
Auto  137,722   15%  165,214   20%  (27,492)  (17)%
Aviation  187,574   20%  146,427   18%  41,147   28%
Total $934,383   100% $810,011   100% $124,372   15%

 

Net sales increased 8%15% for the 13-week period ended March 30,September 28, 2019 when compared to the year-ago quarter. The outdoor, fitness, marine, and aviation segments collectively increased by 12%24%, contributing 83%85% of total revenue. FitnessOutdoor was the largest portion of our revenue mix at 24%28% in the firstthird quarter of 2019 compared to 23%26% in the firstthird quarter of 2018.

 

Total unit sales in the firstthird quarter of 2019 increased to 3,1823,659 when compared to total unit sales of 2,9563,527 in the firstthird quarter of 2018.

 

Outdoor, fitness, marine, and aviation segment revenue increased 7%23%, 28%, 9%, 18%, and 17%28%, respectively, when compared to the year-ago quarter. The outdoor andsegment revenue increase was driven by sales growth in multiple product categories, led primarily by adventure watches. The fitness segment revenue increases wereincrease was primarily driven by strong sales in wearables.wearables and sales from Tacx, a newly acquired group of subsidiaries that designs and manufactures indoor bike trainers. The current quarter marine segment revenue increase was primarily driven by sales growth in chartplotters and sonar products.multiple product categories, led primarily by chartplotters. The aviation segment revenue increase was driven by sales growth across most product lines in both OEM and aftermarket categories. Auto segment revenue decreased 10%17% from the year-ago quarter, primarily due to lower OEM sales in the current quarter and the ongoing PND market contraction.

 

Gross Profit

 

  13-Weeks Ended March 30, 2019 13-Weeks Ended March 31, 2018 Year over Year 
  Gross Profit % of Revenue Gross Profit % of Revenue $ Change % Change 
Outdoor $97,488  63% $93,285  65% $4,203  5% 
Fitness  90,835  50%  96,601  58%  (5,766) (6%)
Marine  78,055  58%  66,683  59%  11,372  17% 
Auto  57,337  45%  61,012  43%  (3,675) (6%)
Aviation  127,983  75%  108,954  75%  19,029  17% 
Total $451,698  59% $426,535  60% $25,163  6% 

  13-Weeks Ended
September 28, 2019		  13-Weeks Ended
September 29, 2018		  Year over Year 
  Gross Profit  % of Revenue  Gross Profit  % of Revenue  $ Change  % Change 
Outdoor $170,846   66% $136,671   65% $34,175   25%
Fitness  126,835   52%  103,441   54%  23,394   23%
Marine  64,275   60%  58,508   59%  5,767   10%
Auto  65,814   48%  70,925   43%  (5,111)  (7)%
Aviation  139,688   74%  111,202   76%  28,486   26%
Total $567,458   61% $480,747   59% $86,711   18%

 

Gross profit dollars in the firstthird quarter of 2019 increased 6%18%, primarily due to growth in net sales whilealong with a gross margin decreased 100increase of 140 basis points compared to the year-ago quarter. Gross margin in the outdoor and fitness segments decreased compared to the year-ago quarter. Gross margin increased in the auto segment, and was relatively flat in the aviationoutdoor and marine segments, and decreased in the fitness and aviation segments when compared to the year-ago quarter.

 

The auto segment gross margin increase was primarily attributable to product mix. The fitness segment gross margin decreaseof 490 basis points was primarily attributable to lower average selling priceslicense expense. A portion of license expense favorability in the auto segment is expected to continue for the remainder of the year. Gross margin remained relatively flat within the outdoor and product mix.marine segments. The outdoorfitness and aviation segment gross margin decrease wasdecreases were primarily attributable to product mix.

 


22

Advertising Expense

 

  13-Weeks Ended March 30, 2019 13-Weeks Ended March 31, 2018   
  Advertising   Advertising   Year over Year 
  Expense % of Revenue Expense % of Revenue $ Change % Change 
Outdoor $7,171  5% $5,800  4% $1,371  24% 
Fitness  9,989  6%  9,685  6%  304  3% 
Marine  6,331  5%  5,285  5%  1,046  20% 
Auto  2,902  2%  3,230  2%  (328) (10%)
Aviation  1,222  1%  1,311  1%  (89) (7%)
Total $27,615  4% $25,311  4% $2,304  9% 

  13-Weeks Ended
September 28, 2019		  13-Weeks Ended
September 29, 2018		  Year over Year 
  Advertising  % of  Advertising  % of        
  Expense  Revenue  Expense  Revenue  $ Change  % Change 
Outdoor $11,327        4% $9,455        5% $1,872   20%
Fitness  13,403   6%  12,296   6%  1,107   9%
Marine  3,875   4%  3,594   4%  281   8%
Auto  2,874   2%  4,180   3%  (1,306)  (31)%
Aviation  1,189   1%  1,615   1%  (426)  (26)%
Total $32,668   3% $31,140   4% $1,528   5%

 

Advertising expense increased 9% in absolute dollars and was relatively flat as a percent of revenue was relatively flat when compared to the year-ago quarter.quarter and increased 5% in absolute dollars. The total absolute dollar increase was primarily attributable to increased mediacooperative advertising in the outdoor, segmentfitness, and increasedmarine segments, partially offset by decreased cooperative advertising in the fitnessauto and marineaviation segments.

Selling, General and Administrative Expense

 

  13-Weeks Ended March 30, 2019 13-Weeks Ended March 31, 2018   
   Selling, General &     Selling, General &    Year over Year 
   Admin. Expenses  % of Revenue  Admin. Expenses  % of Revenue  $ Change  % Change 
Outdoor $28,302  18% $26,056  18% $2,246  9% 
Fitness  37,573  21%  31,295  19%  6,278  20% 
Marine  25,983  19%  28,453  25%  (2,470) (9%) 
Auto  19,295  15%  22,059  16%  (2,764) (13%) 
Aviation  15,628  9%  9,202  6%  6,426  70% 
Total $126,781  17% $117,065  16% $9,716  8% 

  13-Weeks Ended
September 28, 2019		  13-Weeks Ended
September 29, 2018		  Year over Year 
  Selling, General &  % of  Selling, General &  % of        
  Admin. Expenses  Revenue  Admin. Expenses  Revenue  $ Change  % Change 
Outdoor $32,679        13% $31,240   15% $1,439   5%
Fitness  37,119   15%  31,370   16%  5,749   18%
Marine  20,232   19%  21,704   22%  (1,472)  (7)%
Auto  17,818   13%  21,418   13%  (3,600)  (17)%
Aviation  16,921   9%  8,937   6%  7,984   89%
Total $124,769   13% $114,669   14% $10,100   9%

 

Selling, general and administrative expense increased 8%9% in absolute dollars and was relatively flat as a percent of revenue compared to the year-ago quarter. The absolute dollar increase in the firstthird quarter of 2019 was primarily attributable to personnel costs and legal relatedexpenses from recent acquisitions. The fitness segment decrease as a percent of revenue was primarily due to greater leverage of operating costs.

 

As noted above and in Note 4 to the Condensed Consolidated Financial Statements, the Company refined its methodology to allocate certain selling, general and administrative expenses in the beginning of the 2019 fiscal year. The prior year amounts are presented here as originally reported. For comparative purposes, we estimate selling, general and administrative expenses for the firstthird quarter of 2018 would have been approximately $4 million more for the aviation segment, approximately $4$2 million less for the marine segment, approximately $2 million less for the outdoor segment, and not significantly different for the outdoor, fitness and auto segments. Selling, general and administrative expensesexpense as a percent of revenue also decreased in the outdoor and marine segments due to greater leverage of operating costs and increased in fitness primarily due to legal related costs.

 

Considering the refined allocation methodology noted above, we estimate selling, general and administrative expenses for the 52-weeks ended December 29, 2018 would have been approximately $18 million more for the aviation segment, approximately $11 million less for the marine segment, approximately $7 million less for the outdoor segment, and not significantly different for the fitness and auto segments.

 

Research and Development Expense

  13-Weeks Ended
September 28, 2019		  13-Weeks Ended
September 29, 2018		  Year over Year 
  Research &  % of  Research &  % of        
  Development  Revenue  Development  Revenue  $ Change  % Change 
Outdoor $21,789        8% $17,004   8% $4,785   28%
Fitness  26,482   11%  22,397   12%  4,085   18%
Marine  20,160   19%  19,302   20%  858   4%
Auto  24,265   18%  30,295   18%  (6,030)  (20)%
Aviation  55,865   30%  49,981   34%  5,884   12%
Total $148,561   16% $138,979   17% $9,582   7%

23

 

  13-Weeks Ended March 30, 2019 13-Weeks Ended March 31, 2018   
  Research &   Research &   Year over Year 
  Development % of Revenue Development % of Revenue $ Change % Change 
Outdoor $20,062  13% $17,607  12% $2,455  14% 
Fitness  25,147  14%  22,247  13%  2,900  13% 
Marine  20,268  15%  19,814  17%  454  2% 
Auto  26,927  21%  32,255  23%  (5,328) (17%)
Aviation  53,515  31%  50,034  34%  3,481  7% 
Total $145,919  19% $141,957  20% $3,962  3% 

Research and development expense increased 3% in absolute dollars and decreased 90 basis points as a percent of revenue decreased 130 basis points when compared to the year-ago quarter. This increasequarter and increased 7% in absolute dollarsdollars. The absolute dollar increase was primarily due to higher engineering personnel costs related to wearable and aviation product offerings.offerings and expenses resulting from recent acquisitions, partially offset by the capitalization of certain contractually reimbursable preproduction design and development personnel costs within the auto segment. Our research and development spending is focused on product development, improving existing software capabilities, and exploring new categories.

 


Operating Income

 

  13-Weeks Ended March 30, 2019 13-Weeks Ended March 31, 2018 Year over Year
  Operating Income % of Revenue Operating Income % of Revenue $ Change % Change
Outdoor  $41,953   27% $43,822   30% $(1,869)  (4%)
Fitness   18,126   10%  33,374   20%  (15,248)  (46%)
Marine   25,473   19%  13,131   12%  12,342   94%
Auto   8,213   6%  3,468   2%  4,745   137%
Aviation   57,618   34%  48,407   33%  9,211   19%
Total  $151,383   20% $142,202   20% $9,181   6%

  13-Weeks Ended
September 28, 2019		  13-Weeks Ended
September 29, 2018		  Year over Year 
  Operating Income  % of Revenue  Operating Income  % of Revenue  $ Change  % Change 
Outdoor $105,051   41% $78,972   38% $26,079   33%
Fitness  49,831   20%  37,378   20%  12,453   33%
Marine  20,008   19%  13,908   14%  6,100   44%
Auto  20,857   15%  15,032   9%  5,825   39%
Aviation  65,713   35%  50,669   35%  15,044   30%
Total $261,460   28% $195,959   24% $65,501   33%

   

Operating income increased 6%33% in absolute dollars and was relatively flat380 basis points as a percent of revenue when compared to the year-ago quarter. In the current quarter, the growth in operating income growth in absolute dollars and as a percent of revenue was primarily attributable to revenue growth, improved gross margin, and gross profit dollar growth, partially offset by increasedgreater leverage of operating expenses, as discussed above.

Other Income (Expense)

  13-Weeks Ended 13-Weeks Ended
  March 30, 2019 March 31, 2018
Interest income $13,704  $10,227 
Foreign currency gains  314   816 
Other  864   735 
Total $14,882  $11,778 

  13-Weeks Ended  13-Weeks Ended 
  September 28, 2019  September 29, 2018 
Interest income $12,309  $11,089 
Foreign currency losses  (16,296)  (6,868)
Other  294   1,147 
Total $(3,693) $5,368 

  

The average return on cash and investments, including interest and capital gains/losses, during the firstthird quarter of 2019 was 2.0% compared to 1.7%1.8% during the same quarter of 2018,2018. Interest income increased primarily due to slightly higher yields on fixed-income securities.

 

Foreign currency gains and losses for the Company are typically driven by movements in the Taiwan Dollar, Euro, and British Pound Sterling in relation to the U.S. Dollar. The Taiwan Dollar is the functional currency of Garmin Corporation, the U.S. Dollar is the functional currency of Garmin (Europe) Ltd., and the Euro is the functional currency of most of our other European subsidiaries, although some transactions and balances are denominated in British Pounds. The majority of the Company’s consolidated foreign currency gain or loss is typically driven by the significant cash and marketable securities, receivables and payables held in a currency other than the functional currency at a given legal entity. Due to the relative size of the entities using a functional currency other than the Taiwan Dollar, Euro, and British Pound Sterling, currency fluctuations related to these entities are not expected to have a material impact on the Company’s financial statements.

 

The $0.3$16.3 million currency gainloss recognized in the firstthird quarter of 2019 was primarily due to the strengthening of the U.S. Dollar against Taiwan Dollar and weakeningstrengthening against the Euro and British Pound Sterling, partially offset by the U.S. Dollar strengthening against the Euro,Taiwan Dollar, within the 13-weeks ended March 30,September 28, 2019. During this period, the U.S. Dollar strengthened 0.9%3.8% against the Taiwan DollarEuro and weakened 2.6%3.2% against the British Pound Sterling, resulting in gainslosses of $5.8$9.8 million and $1.2$1.5 million, respectively, while the U.S. Dollar strengthened 1.9%0.3% against the Euro,Taiwan Dollar, resulting in a lossgain of $7.8$1.2 million. The remaining net currency gainloss of $1.1$6.2 million was related to the timing of transactions and impacts of other currencies, each of which was individually immaterial.

 

The $0.8$6.9 million currency gainloss recognized in the firstthird quarter of 2018 was primarily due to the weakeningstrengthening of the U.S. Dollar against the Taiwan Dollar, Euro and British Pound Sterling within the 13-weeks ended March 31,September 29, 2018. During this period, the U.S. Dollar weakened 2.7%strengthened 0.7% against the Euro and 3.7%1.3% against the British Pound Sterling, resulting in gainslosses of $8.8$2.7 million and $2.0$0.6 million, respectively, while the U.S. Dollar weakened 2.0%remained relatively flat against the Taiwan Dollar, resulting in a loss of $12.7 million.Dollar. The remaining net currency gainloss of $2.7$3.6 million was related to the timing of transactions and impacts of other currencies, each of which was individually immaterial.

 


24

Income Tax Provision

 

The Company recorded income tax expense of $26.1$29.9 million in the 13-week period ended March 30,September 28, 2019, compared to income tax expense of $24.6$17.1 million in the 13-week period ended March 31,September 29, 2018. The effective tax rate was 15.7%11.6% in the firstthird quarter of 2019, compared to 16.0%8.5% in the firstthird quarter of 2018. The 310 basis points increase to the third quarter of 2019 effective tax rate compared to the prior year quarter is primarily due to a decrease in uncertain tax position reserves released due to expiring statutes of limitations in the third quarter of 2019 compared to the third quarter of 2018.

 

As discussed in Note 13 to the Condensed Consolidated Financial Statements, Switzerland corporate tax reform was approved by public referendum in May 2019 and enacted in October 2019. Accordingly, the Company expects to record an income tax benefit of approximately $20 to $220 million in the fourth quarter of 2019 due to an increase in certain Switzerland deferred tax assets resulting from enactment of Switzerland Federal and Schaffhausen cantonal tax reform. The Company is evaluating transitional measures in Switzerland tax law that may affect the overall increase in deferred tax assets as well as the impact of tax reform to its ongoing effective tax rate, the materiality of which is not yet known.

Net Income

 

As a result of the above, net income for the 13-weeks ended March 30,September 28, 2019 was $140.2$227.9 million compared to $129.4$184.2 million for the 13-week period ended March 31,September 28, 2018, an increase of $10.8$43.7 million.

 

Comparison of 39-Weeks Ended September 28, 2019 and 39-Weeks Ended September 29, 2018

Net Sales

  39-Weeks Ended
September 28, 2019		  39-Weeks Ended
September 29, 2018		  Year over Year 
  Net Sales  % of Total  Net Sales  % of Total  $ Change  % Change 
Outdoor $622,748   24% $555,314   23% $67,434   12%
Fitness  675,007   25%  581,315   24%  93,692   16%
Marine  393,070   15%  346,908   14%  46,162   13%
Auto  422,132   16%  486,653   20%  (64,521)  (13)%
Aviation  542,316   20%  445,146   19%  97,170   22%
Total $2,655,273   100% $2,415,336   100% $239,937   10%

Net sales increased 10% for the 39-week period ended September 28, 2019 when compared to the year-ago period. The outdoor, fitness, marine, and aviation segments collectively increased by 16%, contributing 84% of total revenue. Fitness was the largest portion of our revenue mix at 25% in the first three quarters of 2019 compared to 24% in the first three quarters of 2018.

Total unit sales in the first three quarters of 2019 increased to 10,678 when compared to the total unit sales of 10,266 in the first three quarters of 2018.

Outdoor, fitness, marine, and aviation segment revenues increased 12%, 16%, 13%, and 22%, respectively, when compared to the year-ago period. The outdoor segment revenue increase was primarily driven by strong sales in adventure watches, golf and inReach product lines. Fitness segment revenue increases were primarily driven by strong sales in wearables and sales from newly acquired Tacx. Marine segment revenue increases were driven by sales growth in multiple product categories, led primarily by chartplotters and sonar products. The aviation segment revenue increase was driven by sales growth in both OEM and aftermarket categories. Auto segment revenue decreased 13% from the year-ago period, primarily due to the ongoing PND market contraction.

25

Gross Profit

  39-Weeks Ended
September 28, 2019		  39-Weeks Ended
September 29, 2018		  Year over Year 
  Gross Profit  % of Revenue  Gross Profit  % of Revenue  $ Change  % Change 
Outdoor $403,842   65% $358,829   65% $45,013   13%
Fitness  352,805   52%  326,473   56%  26,332   8%
Marine  234,014   60%  203,976   59%  30,038   15%
Auto  198,012   47%  207,389   43%  (9,377)  (5)%
Aviation  405,848   75%  333,886   75%  71,962   22%
Total $1,594,521   60% $1,430,553   59% $163,968   11%

Gross profit dollars in the 39-week period ended September 28, 2019 increased 11% while gross margin remained relatively flat compared to the year-ago period. Gross margin increased 430 basis points in the auto segment when compared to the year-ago period, primarily attributable to lower license expense and product mix. A portion of license expense favorability in the auto segment is expected to continue for the remainder of the year. Gross margin remained relatively flat within the outdoor, marine, and aviation segments. Gross margin decreased in the fitness segment primarily due to lower average selling prices and product mix.

Advertising Expense

  39-Weeks Ended
September 28, 2019		  39-Weeks Ended
September 29, 2018		  Year over Year 
  Advertising  % of  Advertising  % of        
  Expense  Revenue  Expense  Revenue  $ Change  % Change 
Outdoor $30,464   5% $25,955   5% $4,509   17%
Fitness  41,319   6%  40,515   7%  804   2%
Marine  15,791   4%  14,022   4%  1,769   13%
Auto  10,180   2%  14,100   3%  (3,920)  (28)%
Aviation  4,054   1%  5,408   1%  (1,354)  (25)%
Total $101,808   4% $100,000   4% $1,808   2%

Advertising expense increased 2% in absolute dollars and was relatively flat as a percent of revenue when compared to the year-ago period. Increased cooperative advertising in the outdoor, fitness, and marine segments and increased media advertising in the outdoor segment was partially offset by decreased cooperative advertising in the auto and aviation segments.

Selling, General and Administrative Expense

  39-Weeks Ended
September 28, 2019		  39-Weeks Ended
September 29, 2018		  Year over Year 
  Selling, General & Admin.  % of  Selling, General & Admin.  % of        
  Expenses  Revenue  Expenses  Revenue  $ Change  % Change 
Outdoor $91,390   15% $85,887   15% $5,503   6%
Fitness  114,657   17%  95,462   16%  19,195   20%
Marine  69,524   18%  75,841   22%  (6,317)  (8)%
Auto  56,486   13%  68,465   14%  (11,979)  (17)%
Aviation  48,232   9%  26,579   6%  21,653   81%
Total $380,289   14% $352,234   15% $28,055   8%

Selling, general and administrative expense increased 8% in absolute dollars and was relatively flat as a percent of revenue when compared to the year-ago period. The absolute dollar increase was primarily attributable to personnel costs, legal related costs, and expenses from recent acquisitions. The fitness segment increase as a percent of revenue was primarily due to expenses from newly acquired Tacx.

As noted above and in Note 4 to the Condensed Consolidated Financial Statements, the Company refined its methodology to allocate certain selling, general and administrative expenses in the beginning of the 2019 fiscal year. The prior year amounts are presented here as originally reported. For comparative purposes, we estimate selling, general and administrative expenses for the first three quarters of 2018 would have been approximately $13 million more for the aviation segment, approximately $10 million less for the marine segment, approximately $3 million less for the outdoor segment, and not significantly different for the fitness and auto segments. Selling, general and administrative expense as a percent of revenue also decreased in marine due to greater leverage of operating costs.

26

Considering the refined allocation methodology noted above, we estimate selling, general and administrative expenses for the 52-weeks ended December 29, 2018 would have been approximately $18 million more for the aviation segment, approximately $11 million less for the marine segment, approximately $7 million less for the outdoor segment, and not significantly different for the fitness and auto segments.

Research and Development Expense

  39-Weeks Ended
September 28, 2019		  39-Weeks Ended
September 29, 2018		  Year over Year 
  Research &  % of  Research &  % of        
  Development  Revenue  Development  Revenue  $ Change  % Change 
Outdoor $63,648   10% $52,276   9% $11,372   22%
Fitness  78,460   12%  67,197   12%  11,263   17%
Marine  60,487   15%  59,307   17%  1,180   2%
Auto  77,368   18%  93,711   19%  (16,343)  (17)%
Aviation  163,398   30%  150,158   34%  13,240   9%
Total $443,361   17% $422,649   17% $20,712   5%

Research and development expense as a percent of revenue was relatively flat when compared to the year-ago period and increased 5% in absolute dollars. The absolute dollar increase in research and development expenses when compared with the year-ago period was primarily due to engineering personnel costs related to our wearable and aviation product offerings and expenses resulting from recent acquisitions, partially offset by the capitalization of certain contractually reimbursable preproduction design and development personnel costs within the auto segment. Our research and development spending is focused on product development, improving existing software capabilities, and exploring new categories.

Operating Income

  39-Weeks Ended
September 28, 2019		  39-Weeks Ended
September 29, 2018		  Year over Year 
  Operating  % of  Operating  % of        
 Income  Revenue  Income  Revenue  $ Change  % Change 
Outdoor $218,340   35% $194,711   35% $23,629   12%
Fitness  118,369   18%  123,299   21%  (4,930)  (4)%
Marine  88,212   22%  54,806   16%  33,406   61%
Auto  53,978   13%  31,113   6%  22,865   73%
Aviation  190,164   35%  151,741   34%  38,423   25%
Total $669,063   25% $555,670   23% $113,393   20%

Operating income increased 20% in absolute dollars and increased 220 basis points as a percent of revenue when compared to the year-ago period. The growth in operating income on an absolute dollar basis and as a percent of revenue was the result of revenue growth, improved gross margin, and greater leverage of operating expenses, as discussed above.

Other Income (Expense)

  39-Weeks Ended  39-Weeks Ended 
  September 28,
2019		  September 29,
2018		 
Interest income $39,748  $32,310 
Foreign currency losses  (12,568)  (3,405)
Other  3,567   6,800 
Total $30,747  $35,705 

The average returns on cash and investments, including interest and capital gains/losses, during the 39-weeks ended September 28, 2019 and the 39-weeks ended September 29, 2018 were 2.0% and 1.8%, respectively. Interest income increased primarily due to slightly higher yields on fixed-income securities.

27

The $12.6 million currency loss recognized in the first three quarters of 2019 was primarily due to the strengthening of the U.S. Dollar against most other currencies, partially offset by the U.S. Dollar strengthening against the Taiwan Dollar within the 39-weeks ended September 28, 2019. During this period, the U.S. Dollar strengthened 1.5% against the Taiwan Dollar, resulting in a gain of $8.6 million. This was more than offset by the U.S. Dollar strengthening 4.4% against the Euro and 3.3% against the British Pound Sterling, resulting in losses of $13.9 million and $0.9 million, respectively, and additional net currency losses of $6.4 million related to the timing of transactions and impacts of other currencies, each of which was individually immaterial.

The $3.4 million currency loss recognized in the first three quarters of 2018 was primarily due to the strengthening of the U.S. Dollar against most other currencies, partially offset by the U.S. Dollar strengthening against the Taiwan Dollar within the 39-weeks ended September 29, 2018. During this period, the U.S. Dollar strengthened 2.7% against the Taiwan Dollar, resulting in a gain of $13.6 million. This was more than offset by the U.S. Dollar strengthening 3.2% against the Euro and 3.6% against the British Pound Sterling, resulting in losses of $7.7 million and $0.6 million, respectively, and additional net currency losses of $8.7 million related to the timing of transactions and impacts of other currencies, each of which was individually immaterial.

Income Tax Provision

The Company recorded income tax expense of $108.1 million in the first three quarters of 2019, compared to income tax expense of $87.4 million in the first three quarters of 2018. The effective tax rate was 15.4% in the first three quarters of 2019, compared to 14.8% in the first three quarters of 2018.

As discussed in Note 13 to the Condensed Consolidated Financial Statements, Switzerland corporate tax reform was approved by public referendum in May 2019 and enacted in October 2019. Accordingly, the Company expects to record an income tax benefit of approximately $20 to $220 million in the fourth quarter of 2019 due to an increase in certain Switzerland deferred tax assets resulting from enactment of Switzerland Federal and Schaffhausen cantonal tax reform. The Company is evaluating transitional measures in Switzerland tax law that may affect the overall increase in deferred tax assets as well as the impact of tax reform to its ongoing effective tax rate, the materiality of which is not yet known.

Net Income

As a result of the above, net income for the 39-week period ended September 28, 2019 was $591.7 million compared to $503.9 million for the 39-week period ended September 29, 2018, an increase of $87.8 million.

Liquidity and Capital Resources

 

As of March 30,September 28, 2019, we had approximately $2.7$2.5 billion of cash and cash equivalents and marketable securities. We primarily use cash flow from operations, and expect that future cash requirements may be used, to fund our capital expenditures, support our working capital requirements, pay dividends, and fund strategic acquisitions. We believe that our existing cash balances and cash flow from operations will be sufficient to meet our long-term projected capital expenditures, working capital and other cash requirements.

 

It is management’s goal to invest the on-hand cash in accordance with the investment policy, which has been approved by the Company’s Board of Directors of each applicable Garmin entity holding the cash.Directors. The investment policy’s primary purpose is to preserve capital, maintain an acceptable degree of liquidity, and maximize yield within the constraint of low credit risk. Garmin’s average interest rate returns on cash and investments during the first quarterthree quarters of 2019 and 2018 were approximately 2.0% and 1.7%1.8%, respectively. The fair value of our securities varies from period to period due to changes in interest rates, in the performance of the underlying collateral and in the credit performance of the underlying issuer, among other factors. See Note 8 for additional information regarding marketable securities.

 

Operating Activities

 

  13-Weeks Ended
  March 30, March 31,
(In thousands) 2019 2018
Net cash provided by operating activities $164,582  $214,190 

  39-Weeks Ended 
  September 28,  September 29, 
(In thousands) 2019  2018 
Net cash provided by operating activities $464,170  $701,782 

 

The $49.6$237.6 million decrease in cash provided by operating activities induring the first quarterthree quarters of 2019 compared to the first quarterthree quarters of 2018 was primarily due to the decreaseincrease in cash provided byused in working capital of $67.9$310.6 million (which included a decrease of $74.9$98.0 million in net receipts of accounts receivable, ana net increase of $16.6$126.7 million in cash paid for inventory partially offsetassociated primarily with the Company’s effort to increase days of supply to support our increasingly diversified product lines, and a net increase of $85.9 million in cash used in other activities primarily driven by $23.6 million net cash provided by changes in accounts payable and other activities)payments associated with an amendment to a license agreement) and income taxes payable of $7.4$34.5 million. These decreases were partially offset by the year over year increase in net income of $10.8 million and other non-cash adjustments to net income of $14.9$107.5 million.

 

28

Investing Activities

  13-Weeks Ended
  March 30, March 31,
(In thousands) 2019 2018
Net cash used in investing activities $(32,621) $(112,624)

  39-Weeks Ended 
  September 28,  September 29, 
(In thousands) 2019  2018 
Net cash used in investing activities $(367,808) $(238,815)

 

The $80.0$129.0 million decreaseincrease in cash used in investing activities during the first quarterthree quarters of 2019 compared to the first quarterthree quarters of 2018 was primarily due to increased cash payments for acquisitions of $246.1 million, partially offset by decreased net purchases of marketable securities of $73.2$85.6 million and cash payments for acquisitionsnet purchases of $9.4 million, partially offset by $2.6 million net cash used in other activities.property and equipment of $30.4 million.

 


Financing Activities

  13-Weeks Ended
  March 30, March 31,
(In thousands) 2019 2018
Net cash used in financing activities $(213,381) $(100,782)

  39-Weeks Ended 
  September 28,  September 29, 
(In thousands) 2019  2018 
Net cash used in financing activities $(308,895) $(288,534)

 

The $112.6$20.4 million increase in cash used in financing activities during the first quarterthree quarters of 2019 compared to the first quarterthree quarters of 2018 was primarily due to an increase in dividend payments of $104.5$12.8 million associated with the timing of dividend payments that resultedand $7.6 million increase in two dividend payments in the first quarter of 2019 comparedtreasury stock net purchases related to one dividend payment in the first quarter of 2018.equity awards.

 

Off-Balance Sheet Arrangements

 

We do not have any off-balance sheet arrangements.

 

Critical Accounting Policies and Estimates

 

General

Garmin’s discussion and analysis of its financial condition and results of operations are based upon Garmin’s consolidated financial statements,Consolidated Financial Statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The presentation of these financial statements requires Garmin to make estimates and judgments that affect the reported amounts of assets, liabilities, revenue and expenses, and related disclosure of contingent assets and liabilities. On an on-going basis, Garmin evaluates its estimates, including those related to bad debts, inventories, investments, intangible assets, income taxes, warranty obligations, contingencies, customer sales programs and incentives, product returns, relative standalone selling prices, and progress toward completion of performance obligations in certain contracts with customers. Garmin bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

 

For a description of the significant accounting policies and methods used in the preparation of the Company’s condensed consolidated financial statements,Condensed Consolidated Financial Statements, refer to Note 2, “Summary of Significant Accounting Policies” in the Notes to the Consolidated Financial Statements in Part II, Item 8 and “Critical Accounting Policies and Estimates” in Part II, Item 7 of the Company’s Annual Report on Form 10-K for the fiscal year ended December 29, 2018. There were no material changes to the Company’s critical accounting policies and estimates in the 13-week periodand 39-week periods ended March 30,September 28, 2019, other than those discussed in Note 1, “Accounting Policies”.

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Item 3. Quantitative and Qualitative Disclosures About Market Risk

 

There are numerous market risks that can affect our future business, financial condition and results of operations. In addition to the other information set forth in this report, you should carefully consider the factors discussed in Part II, “Item 7A. Quantitative and Qualitative Disclosures About Market Risk” in our Annual Report on Form 10-K for the fiscal year ended December 29, 2018. There have been no material changes during the 13-week periodand 39-week periods ended March 30,September 28, 2019 in the risks described in our Annual Report on Form 10-K related to market sensitivity, inflation, foreign currency exchange rate risk and interest rate risk.


Item 4. Controls and Procedures

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(a) Evaluation of disclosure controls and procedures.The Company maintains a system of disclosure controls and procedures that are designed to provide reasonable assurance that information, which is required to be timely disclosed, is accumulated and communicated to management in a timely fashion.  A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. As of March 30,September 28, 2019, the Company carried out an evaluation, under the supervision and with the participation of the Company’s management, including the Company’s Chief Executive Officer and Chief Financial Officer, of the effectiveness of the Company’s disclosure controls and procedures.  Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded as of March 30,September 28, 2019 that our disclosure controls and procedures were effective such that the information relating to the Company, required to be disclosed in our Securities and Exchange Commission (“SEC”) reports (i) is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms, and (ii) is accumulated and communicated to the Company’s management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

 

(b)Changes in internal control over financial reporting. There has been no change in the Company’s internal controls over financial reporting that occurred during the Company’s fiscal quarter ended March 30,September 28, 2019 that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.


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Part II - Other Information

 

Item 1. Legal Proceedings

 

In the normal course of business, the Company and its subsidiaries are parties to various legal claims, actions, and complaints, including matters involving patent infringement, other intellectual property, product liability, customer claims and various other risks. It is not possible to predict with certainty whether or not the Company and its subsidiaries will ultimately be successful in any of these legal matters, or if not, what the impact might be. However, the Company’s management does not expect that the results in any of these legal proceedings will have a material adverse effect on the Company’s results of operations, financial position or cash flows. For additional information, see Note 6 – Commitments and Contingencies in the above Condensed Consolidated Financial Statements and Part I, “Item 3. Legal Proceedings” in the Company’s Annual Report on Form 10-K for the fiscal year ended December 29, 2018.

 

Item 1A. Risk Factors

 

There are many risks and uncertainties that can affect our future business, financial performance or share price. In addition to the other information set forth in this report, you should carefully consider the factors discussed in Part I, “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended December 29, 2018. There have been no material changes during the 13-week periodand 39-week periods ended March 30,September 28, 2019 in the risks described in our Annual Report on Form 10-K. These risks, however, are not the only risks facing our Company. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition and/or operating results.

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

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

 

Not applicable

Item 3.Defaults Upon Senior Securities

Item 3. Defaults Upon Senior Securities

 

None

Item 4.Mine Safety Disclosures

Item 4. Mine Safety Disclosures

 

Not applicable

Item 5.Other Information

Item 5. Other Information

 

Not applicable

 

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Item 6.Exhibits

 

Item 6. Exhibits

Exhibit 31.1Certification of Chief Executive Officer pursuant to Exchange Act  Rule 13a-14(a) or 15d-14(a).
   
Exhibit 31.2Certification of Chief Financial Officer pursuant to Exchange Act Rule 13a-14(a) or 15d-14(a).
   
Exhibit 32.1Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the  Sarbanes-Oxley Act of 2002
   
Exhibit 32.2Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002


Exhibit 101.INSXBRL Instance Document
  
Exhibit 101.SCH101.INSXBRL Taxonomy Extension SchemaInstance Document – the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
  
Exhibit 101.SCHInline XBRL Taxonomy Extension Schema
Exhibit 101.CALInline XBRL Taxonomy Extension Calculation Linkbase
  
Exhibit 101.DEFInline XBRL Taxonomy Extension Definition Linkbase
Exhibit 101.LABInline XBRL Taxonomy Extension Label Linkbase
  
Exhibit 101.PRE

Inline XBRL Taxonomy Extension Presentation Linkbase

Exhibit 101.DEF104Cover Page Interactive Data File (formatted as Inline XBRL Taxonomy Extension Definition Linkbaseand contained in Exhibit 101)


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SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the Company has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

 GARMIN LTD.
   
 By/s/ Douglas G. Boessen
  

Douglas G. Boessen

  Chief Financial Officer
  (Principal Financial Officer and
Principal Accounting Officer)

Dated: October 30, 2019

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INDEX TO EXHIBITS

Exhibit No.Description
   
Dated: May 1, 2019Exhibit 31.1 

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INDEX TO EXHIBITS

Exhibit No.Description
Exhibit 31.1Certification of Chief Executive Officer pursuant to Exchange Act  Rule 13a-14(a) or 15d-14(a).
   
Exhibit 31.2Certification of Chief Financial Officer pursuant to Exchange Act Rule 13a-14(a) or 15d-14(a).
   
Exhibit 32.1Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the  Sarbanes-Oxley Act of 2002
   
Exhibit 32.2Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

Exhibit 101.INSXBRL Instance Document
  
Exhibit 101.SCH101.INSXBRL Taxonomy Extension SchemaInstance Document – the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
  
Exhibit 101.SCHInline XBRL Taxonomy Extension Schema
Exhibit 101.CALInline XBRL Taxonomy Extension Calculation Linkbase
  
Exhibit 101.DEFInline XBRL Taxonomy Extension Definition Linkbase
Exhibit 101.LABInline XBRL Taxonomy Extension Label Linkbase
  
Exhibit 101.PRE

Inline XBRL Taxonomy Extension Presentation Linkbase

Exhibit 101.DEF104Cover Page Interactive Data File (formatted as Inline XBRL Taxonomy Extension Definition Linkbaseand contained in Exhibit 101)

34