UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2001
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from_____ to______
Commission file number 0-31983
----------------
GARMIN LTD.
(Exact name of Company as specified in its charter)
CAYMAN ISLANDS 98-0229227
-------------- ----------
(State or other jurisdiction (I.R.S. Employer identification no.)
of incorporation or organization)
Queensgate House, P.O. Box 30464SMB, N/A
113 South Church Street (Zip Code)
George Town, Grand Cayman, Cayman Islands
(Address of principal executive offices)
(345) 946-5203*
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(Company's telephone number, including area code)
No Changes
----------------------------------------------------
(Former name, former address and former fiscal year)
if changed since last report
COMMON SHARES, $0.01 PER SHARE PAR VALUE
----------------------------------------
(Title of Class)
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 [X] NO [ ]
Number of shares outstanding of the Company's common shares as of May 11, 2001:
Common Shares, $.01 par value - 108,242,111
*The executive offices of the Registrant's principal United States subsidiary
are located at 1200 East 151st Street, Olathe, Kansas 66062.
The telephone number there is (913) 397-8200.
GARMIN LTD.
FORM 10-Q
QUARTER ENDED MARCH 31, 2001
TABLE OF CONTENTS
Part I - Financial Information Page
Item 1. Condensed Consolidated Financial Statements (unaudited)
Introductory Comments 3
Condensed Consolidated Balance Sheets at March 31, 2001
and December 30, 2000. 4
Condensed Consolidated Statements of Income for the three-
months ended March 31, 2001 and March 25, 2000. 5
Condensed Consolidated Statements of Cash Flows for the
three-months ended March 31, 2001 and March 25, 2000. 6
Notes to Condensed Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 9
Item 3. Quantitative and Qualitative Disclosures About
Market Risk 13
Part II - Other Information
Item 1. Legal Proceedings 15
Item 2. Changes in Securities 15
Item 3. Defaults Upon Senior Securities 15
Item 4. Submission of Matters to a Vote of Security Holders 15
Item 5. Other Information 15
Item 6. Exhibits and Reports on Form 8-K 15
Signature Page 16
GARMIN LTD.
FORM 10-Q
QUARTER ENDED MARCH 31, 2001
PART I - FINANCIAL INFORMATION
ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
INTRODUCTORY COMMENTS
The Condensed Consolidated Financial Statements of Garmin Ltd. ("Garmin" or
the "Company") included herein have been prepared by the Company, without audit,
pursuant to the rules and regulations of the United States Securities and
Exchange Commission. Certain information and note disclosures normally included
in financial statements prepared in accordance with accounting principles
generally accepted in the United States of America have been condensed or
omitted pursuant to such rules and regulations, although the Company believes
that the disclosures are adequate to enable a reasonable understanding of the
information presented. These Condensed Consolidated Financial Statements should
be read in conjunction with the audited financial statements and the notes
thereto for the year ended December 31, 2000. Additionally, the Condensed
Consolidated Financial Statements should be read in conjunction with Item 2.
Management's Discussion and Analysis of Financial Condition and Results of
Operations included in this Form 10-Q.
The results of operations for the three-months ended March 31, 2001, are not
necessarily indicative of the results to be expected for the full year 2001.
GARMIN LTD. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
----------------------------
(Unaudited)
March 31, December 30,
2001 2000
----------------------------
Assets
Current Assets:
Cash and cash equivalents $253,019 $251,731
Accounts receivable, net 48,575 32,719
Inventories 85,756 89,855
Deferred income taxes 11,988 12,293
Prepaid expenses and other current assets 3,508 1,423
---------- ----------
Total current assets 402,846 388,021
Property and equipment, net 68,083 64,704
Other assets, net 7,956 10,622
---------- ----------
Total assets $478,885 $463,347
========== ==========
Liabilities and Stockholder's Equity
Current liabilities:
Accounts payable $15,209 $22,496
Other accrued expenses 12,507 13,163
Income taxes payable 8,571 5,795
Current portion of long-term debt - 587
---------- ----------
Total current liabilities 36,287 42,041
Long-term debt, less current portion 43,983 46,359
Deferred income taxes 8,637 9,616
Other liabilities - 92
Stockholders' equity:
Preferred stock, $1.00 par value,
1,000,000 authorized, none issued - -
Common stock, $0.01 par value,
500,000,000, share authorized:
Issued and outstanding shares - 108,242,111 1,082 1,082
Additional paid-in capital 133,925 133,925
Retained earnings 276,939 253,140
Accumulated other comprehensive loss (21,968) (22,908)
---------- ----------
Total stockholders' equity 389,978 365,239
---------- ----------
Total liabilities and stockholders' equity $478,885 $463,347
========== ==========
GARMIN LTD. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE INFORMATION)
THREE MONTHS ENDED
---------------------------------
MARCH 31, MARCH 25,
2001 2000
----------------------------------
Net sales $85,534 $76,576
Cost of goods sold 39,616 34,663
-------- --------
Gross profit 45,918 41,913
Selling, general and
administrative expenses 9,259 7,091
Research and development
expense 6,296 4,706
-------- --------
15,555 11,797
-------- --------
Operating income 30,363 30,116
Other income (expense):
Interest income 3,286 935
Interest expense (768) (483)
Foreign currency (1,103) (3,698)
Other 123 94
-------- --------
1,538 (3,152)
-------- --------
Income before income taxes 31,901 26,964
Income tax provision 8,102 6,365
--------- --------
Net income $23,799 $20,599
========= ========
Net income per share
Basic $0.22 $0.21
Diluted $0.22 $0.21
Weighted average common
shares outstanding:
Basic 108,242 100,000
Diluted 108,608 100,000
GARMIN LTD. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(IN THOUSANDS)
------------------------------
March 31, March 25,
2001 2000
------------------------------
OPERATING ACTIVITIES:
Net income $23,799 $20,599
Depreciation & amortization 2,384 1,434
Provision for doubtful accounts 74 66
Deferred income taxes 339 (167)
Accounts receivable (15,753) (3,629)
Inventories 4,280 (15,613)
Other current assets (1,342) 438
Accounts payable (7,428) 4,259
Other current liabilities (1,786) 600
Income taxes 2,780 (80)
--------- ---------
Net cash provided by operating activities 7,347 7,907
INVESTING ACTIVITIES:
Purchases of property and equipment (4,709) (8,322)
Decrease in restricted cash 3,204 -
Other (1,307) -
--------- ---------
Net cash used in investing activities (2,812) (8,322)
FINANCING ACTIVITIES:
Payments on long term debt (2,484) -
--------- ---------
Net cash provided by (used in) financing activities (2,484) -
--------- ---------
Effect of exchange rate changes on cash (764) 5,700
Net increase in cash 1,287 5,285
Cash at beginning of period 251,732 104,237
--------- ---------
Cash at end of period $253,019 $109,522
========= =========
GARMIN LTD.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2001
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE INFORMATION)
1. BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary for a fair presentation have
been included. Operating results for the three-month period ended March 31, 2001
are not necessarily indicative of the results that may be expected for the year
ended December 29, 2001.
The condensed consolidated balance sheet at December 30, 2000 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 completed financial statements. For further information, refer to
the condensed consolidated financial statements and footnotes thereto included
in the Company's Annual Report on Form 10-K for the year ended December 30,
2000.
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 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 quarters having
only 13 weeks. The quarters ended March 31, 2001 and March 25, 2000 both contain
operating results for 13 weeks.
2. INVENTORIES
The components of inventory consist of the following:
MARCH 31, 2001 DECEMBER 30, 2000
------------------------------------------
Raw materials $37,717 $39,914
Work-in-process 12,143 8,116
Finished goods 35,896 41,825
------ ------
Inventory, net of reserves $85,756 $89,855
======= =======
------------------------------------------
3. INITIAL PUBLIC OFFERING
On December 8, 2000, the Company completed an underwritten initial public
offering of 12,075,000 shares (including shares sold pursuant to the
underwriters' over-allotment option) of its common stock, of which 8,242,111
shares were offered by the Company and 3,832,889 were offered by selling
shareholders (the Offering) at an offering price of $14.00 per share. Prior to,
but in connection with the Offering, the Board of Directors approved a
1.12379256-for-1 stock split of the Company's common shares, effected through a
stock dividend on November 6, 2000. All share and per share information included
in the accompanying condensed consolidated financial statements has been
adjusted to give retroactive effect to the common stock split.
4. EARNINGS PER SHARE
The following table sets forth the computation of basic and diluted net income
per share:
Three-month period Ended
----------------------------
March 31, March 25,
2001 2000
----------------------------
Numerator:
Numerator for basic and diluted net income
per share - net income $23,799 $20,599
============================
Denominator (in thousands):
Denominator for basic net income per share -
weighted-average common shares 108,242 100,000
Effect of dilutive securities - employee
stock options 366 -
----------------------------
Denominator for diluted net income per
share - adjusted weighted-average common
shares 108,608 100,000
============================
Basic net income per share $0.22 $0.21
============================
Diluted net income per share $0.22 $0.21
============================
5. COMPREHENSIVE INCOME
Comprehensive income is comprised of the following:
THREE-MONTH PERIOD ENDED
-----------------------------------------------
MARCH 31, 2001 MARCH 25, 2000
-----------------------------------------------
Net income $23,799 $20,599
Translation adjustment (940) (4,513)
------ -------
Comprehensive income $22,859 $16,086
======= =======
-----------------------------------------------
6. SEGMENT INFORMATION
Revenues and income before income taxes for each of the Company's reportable
segments are presented below:
THREE-MONTH PERIOD ENDED
---------------------------------------------------------
MARCH 31, 2001 MARCH 25, 2000
---------------------------------------------------------
CONSUMER AVIATION CONSUMER AVIATION
(IN THOUSANDS)
Sales to external
customers $58,524 $27,010 $50,152 $26,424
Income before
income taxes $20,006 $11,895 $16,392 $10,572
---------------------------------------------------------
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
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 our 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 our assumptions prove
incorrect or should unanticipated circumstances arise, our 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 30, 2000. 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 web site on the
World Wide Web 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 30, 2000.
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 two business segments, the consumer and
aviation markets. Both of our segments offer products through our network of
independent dealers and distributors. However, the nature of products and types
of customers for the two segments vary significantly. As such, the segments are
managed separately. Our consumer segment includes portable GPS receivers and
accessories for marine, recreation, land and automotive use sold primarily to
retail outlets. Our aviation products are portable and panel-mount avionics for
Visual Flight Rules and Instrument Flight Rules navigation and are sold
primarily to retail outlets and certain aircraft manufacturers.
RESULTS OF OPERATIONS
The following table sets forth our results of operations as a percentage of
net sales during the periods shown:
THREE-MONTH PERIOD ENDED
----------------------------------
MARCH 31, 2001 MARCH 25, 2000
----------------------------------
Net sales 100.0% 100.0%
Cost of goods sold 46.3% 45.3%
----- -----
Gross profit 53.7% 54.7%
Selling, general and
administrative 10.8% 9.3%
Research and development 7.4% 6.1%
---- ----
Total operating expenses 18.2% 15.4%
----- -----
Operating income 35.5% 39.3%
Other income, net 1.8% (4.1)%
---- ------
Income before income taxes 37.3% 35.2%
Provision for income taxes 9.5% 8.3%
---- ----
Net income 27.8% 26.9%
===== =====
----------------------------------
The following table sets forth our results of operations for each of our
two segments through income before income taxes during the periods shown. For
each line item in the table, the total of the consumer and aviation segments'
amounts equals the amount in the consolidated statements of income included in
Item 1.
THREE-MONTH PERIOD ENDED
-------------------------------------------------
MARCH 31, 2001 MARCH 25, 2000
-------------------------------------------------
CONSUMER AVIATION CONSUMER AVIATION
-------- -------- -------- --------
(IN THOUSANDS)
Net sales $58,524 $27,010 $50,152 $26,424
Cost of goods sold 28,552 11,064 23,629 11,034
------ ------ ------ ------
Gross profit 29,972 15,946 26,523 15,390
Operating expenses:
Selling, general and
administrative 6,657 2,602 5,128 1,963
Research and development 4,235 2,061 2,776 1,930
----- ----- ----- -----
Total operating expenses 10,892 4,663 7,904 3,893
------ ----- ----- -----
Operating income 19,080 11,283 18,619 11,497
Other income (expense), net 926 612 (2,227) (925)
------ ------ ------- -----
Income before
income taxes $20,006 $11,895 $16,392 $10,572
======= ======= ======= =======
--------------------------------------------------
COMPARISON OF THREE MONTHS ENDED MARCH 31, 2001 AND MARCH 25, 2000
NET SALES
Net sales increased $8.9 million, or 11.7%, to $85.5 million for the
three-month period ended March 31, 2001, from $76.6 million for the three-month
period ended March 25, 2000. The increase for the three-month period ended March
31, 2001 was primarily due to the introduction of several new products and the
increase in overall demand for our GPS products. Sales from our consumer
products accounted for 68.4% of net sales for the first quarter of 2001 compared
to 65.5% during the first quarter of 2000. Sales from our aviation products
accounted for 31.6% for the first quarter of 2001 compared to 34.5% during the
first quarter of 2000. Our consumer segment primarily drove sales growth as
total units were up 22% to 320,000 in 2001 from 263,000 in 2000.
Net sales for the consumer segment increased $8.3 million, or 16.7%, to
$58.5 million for the three-month period ended March 31, 2001, from $50.2
million for the three-month period ended March 25, 2000. The increase for the
three-month period ended March 31, 2001 was primarily due to the new product
introductions in our eTrex(R) product line and overall demand for our marine and
recreation products.
Net sales for the aviation segment increased $0.6 million, or 2.2%, to
$27.0 million for the three-month period ended March 31, 2001, from $26.4
million for the three-month period ended March 25, 2000. The increase for the
three-month period ended March 31, 2001 was primarily due to strong sales of our
panel-mount aviation products partially offset by lower demand of our handheld
aviation products. We experienced strong sales of our GPSMAP(R) 295 during the
three-month period ended March 25, 2000 when the product was introduced.
GROSS PROFIT
Gross profit increased $4.0 million, or 9.6%, to $45.9 million for the
three-month period ended March 31, 2001, from $41.9 million for the three-month
period ended March 25, 2000. This increase was primarily attributable to revenue
growth associated with increased unit volumes. Gross profit as a percentage of
net sales decreased to 53.7% for the three-month period ended March 31, 2001
from 54.7% for the three-month period ended March 25, 2000. This decrease as a
percentage of net sales was primarily attributed to a shift in product mix
within the consumer segment and the fact that we did not fully benefit from the
incremental sales generated from our new product introductions that occurred
late in the quarter.
Gross profit for the consumer segment increased $3.5 million, or 13.0%, to
$30.0 million for the three-month period ended March 31, 2001, from $26.5
million for the three-month period ended March 25, 2000. Gross profit as a
percentage of net sales decreased to 51.2% for the three-month period ended
March 31, 2001 from 52.9% for the three-month period ended March 25, 2000 due to
a shift in product mix as we sold more lower priced eTrex units. Additionally,
we did not fully benefit from the incremental sales generated from our new
product introductions that occurred late in the quarter.
Gross profit for the aviation segment increased $0.5 million, or 3.6%, to
$15.9 million for the three-month period ended March 31, 2001, from $15.4
million for the three-month period ended March 25, 2000. Gross profit as a
percentage of net sales increased to 59.0% for the three-month period ended
March 31, 2001 from 58.2% for the three-month period ended March 25, 2000. This
increase as a percentage of net sales was primarily attributed to continued
sales of our higher margin panel-mount aviation product line.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses increased $2.2 million, or
30.6%, to $9.3 million (10.8% of net sales) for the three-month period ended
March 31, 2001, from $7.1 million (9.3% of net sales) for the three-month period
ended March 25, 2000. Selling, general and administrative expenses increased
$1.6 million, or 29.9%, in the consumer segment and $0.6 million, or 32.6%, in
the aviation segment. The increase in expense was primarily attributable to
additional costs associated with our being a public company, increases in
employment generally across the organization and increased advertising costs
associated with new product releases.
RESEARCH AND DEVELOPMENT EXPENSE
Research and development expenses increased $1.6 million, or 33.8%, to $6.3
million (7.4% of net sales) for the three-month period ended March 31, 2001,
from $4.7 million (6.1% of net sales) for the three-month period ended March 25,
2000. Research and development expenses increased $1.4 million, or 52.5%, in the
consumer segment and $0.2 million, or 6.8%, in the aviation segment. The
increase in expense was primarily due to the release of seven new products
within our consumer segment and an increase in our engineering staff as a result
of our continued emphasis on innovation.
OPERATING INCOME
Operating income for the three-month period ended March 31, 2001 increased
to $30.4 million, or 0.8% from $30.1 million for the three-month period ended
March 25, 2000. Operating income as a percentage of net sales decreased to 35.5%
for the three-month period ended March 31, 2001, from 39.3% for the three-month
period ended March 25, 2000 as a result of the factors discussed above.
OTHER INCOME (EXPENSE)
Other income (expense) principally consists of interest income, interest
expense and foreign currency exchange gains and losses. Other income for the
three-month period ended March 31, 2001 amounted to $1.5 million compared to
other expense of $3.2 million for the three-month period ended March 25, 2000.
Interest income for the three-month period ended March 31, 2001 amounted to $3.3
million compared to $0.9 million for the three-month period ended March 25,
2000, the increase being attributable to the growth of Garmin's cash and cash
equivalents during the period on which interest income is earned. Interest
expense increased to $0.8 million for the three-month period ended March 31,
2001 from $0.5 million for the three-month period ended March 25, 2000, due
primarily to the additional long-term debt required to finance the further
expansion of our Olathe, Kansas facility in 2000.
We recognized a foreign currency exchange loss of $1.1 million for the
three-month period ended March 31, 2001 compared to a loss of $3.7 million for
the three-month period ended March 25, 2000. The $1.1 million loss was due to
the weakness of the U.S. Dollar compared to the New Taiwan Dollar during the
first quarter of fiscal 2001, when the exchange rate decreased to 32.85 NTD/USD
at March 31, 2001 from 33.01 NTD/USD at December 30, 2000. The $3.7 million loss
was due to the weakness of the U.S. Dollar compared to the New Taiwan Dollar
during the first quarter of fiscal 2000, when the exchange rate decreased to
30.66 NTD/USD at March 25, 2000 from 31.65 NTD/USD at December 25, 1999.
INCOME TAX PROVISION
Income tax expense increased by $1.7 million, to $8.1 million, for the
three-month period ended March 31, 2001 from $6.4 million for the three-month
period ended March 25, 2000 due to our higher taxable income. The effective tax
rate was 25.4% for the three-month period ended March 31, 2001 versus 23.6% for
the three-month period ended March 25, 2000. The increase is attributable to a
surtax on undistributed earnings in Taiwan that Garmin will pay in 2002. The tax
cost of distributing earnings from Garmin Corporation, Garmin's Taiwan
subsidiary, to the Company significantly exceeds the amount of the surtax.
NET INCOME
As a result of the above, net income for the three-month period ended March
31, 2001 was $23.8 million compared to $20.6 million for the three-month period
ended March 25, 2000.
LIQUIDITY AND CAPITAL RESOURCES
Net cash generated by operating activities was $7.3 million for the
three-month period ended March 31, 2001 compared to $7.9 million for the
three-month period ended March 25, 2000. We operate with a strong customer
driven approach and therefore carry sufficient inventory to meet customer
demand. Because we desire to respond quickly to our customers and minimize order
fulfillment time, our inventory levels are generally high enough to meet most
demand. We also attempt to carry sufficient inventory levels on key components
so that potential supplier shortages have as minimal an impact as possible on
our ability to deliver our finished products. We did experience a $4.1 million
reduction in inventory for the three-month period ended March 31, 2001 as we
began shipments of seven new products. Due to the timing of these new product
introductions during the quarter, our accounts receivable balance increased
$15.9 million to $48.6 million at March 31, 2001 from $32.7 million at March 25,
2000. We do not anticipate that the timing of new product introductions will
have a negative impact on our financial results in the future.
During the three-month period ended March 31, 2001, our capital
expenditures totaled $4.7 million compared to $8.3 million for the three-month
period ended March 25, 2000. The capital expenditures were incurred primarily
for the expansion of our Olathe, Kansas facility.
We believe that our existing cash balances and cash flow from operations
will continue to be sufficient to meet our expected capital and liquidity needs
for the foreseeable future.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
MARKET SENSITIVITY
We have market risk primarily in connection with the pricing of our
products and services and the purchase of raw materials. Product pricing and raw
materials costs are both significantly influenced by semiconductor market
conditions. Historically, during cyclical industry downturns, we have been able
to offset pricing declines for our products through a combination of improved
product mix and success in obtaining price reductions in raw material costs.
FOREIGN CURRENCY EXCHANGE RATE RISK
The operation of the Company's subsidiaries in international markets
results in exposure to movements in currency exchange rates. The principal
currencies involved are the New Taiwan Dollar and the British Pound Sterling.
Although some fluctuations have occurred, particularly in 1997 and the fourth
quarter of 2000, we generally have not been significantly affected by foreign
exchange fluctuations because, until recently, the New Taiwan Dollar has proven
to be relatively stable. However, more volatile foreign exchange rate
fluctuations in the future could have a significant effect on our results of
operations. The Company's international subsidiaries use the local currency as
the functional currency. The Company translates all assets and liabilities at
year-end exchange rates and income and expense accounts at average rates during
the year.
The operation of the Company's subsidiaries in international markets
results in exposure to movements in currency exchange rates. The principal
currencies involved are the New Taiwan Dollar and the British Pound Sterling.
The Company's international subsidiaries use the local currency as the
functional currency. The Company translates all assets and liabilities at
year-end exchange rates and income and expense accounts at average rates during
the year. All of the Company's sales are in U.S. dollars. In order to minimize
the effect of the currency exchange fluctuations on our operations, we have
elected to retain most of our cash at our Taiwan subsidiary in U.S. dollars. As
such, even when a significant gain or loss occurs as a result of more volatile
foreign exchange rate fluctuations, the actual impact on our operations is of a
lesser extent.
INTEREST RATE RISK
As of March 31, 2001, we have interest rate risk in connection with our
industrial revenue bonds that bear interest at a floating rate. Garmin
International, Inc. entered into an interest rate swap agreement to modify the
characteristics of $15 million of its outstanding long-term debt from a floating
rate to a fixed rate basis. This agreement involves the receipt of floating rate
amounts in exchange for fixed rate interest payments over the life of the
agreement without an exchange of the underlying principal amount. The gain or
loss on interest rate swap agreements is immaterial.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
- -----------------------------------------
From time to time the Company may be involved in litigation arising in
the course of its operations. As of May 11, 2001, the Company was not a
party to any material legal proceedings.
Item 2. Changes in Securities and Use of Proceeds
- -----------------------------------------
None
Item 3. Defaults Upon Senior Securities
- -----------------------------------------
None
Item 4. Submission of Matters to a Vote of Security Holders
- -----------------------------------------
None
Item 5. Other Information
- -----------------------------------------
Not applicable
Item 6. Exhibits and Reports on Form 8-K
- -----------------------------------------
Not applicable
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/ Kevin Rauckman
-------------------------------
Kevin Rauckman
Chief Financial Officer
(Principal Financial Officer and
Principal Accounting Officer)
Dated: May 14, 2001