Back to GetFilings.com



United States
Securities and Exchange Commission
Washington, D.C. 20549

FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 27, 2003
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)
5th Floor, Harbour Place, P.O. Box 30464 SMB, N/A
103 South Church Street (Zip Code)
George Town, Grand Cayman, Cayman Islands
(Address of principal executive offices)

Company's telephone number, including area code: (345) 946-5203

Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:

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 [ ]

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Company's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]

Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act). YES [X] NO [ ]

Aggregate market value of the voting and non-voting common shares held by
non-affiliates of the Company as of June 27, 2003, the last business day of the
Company's most recently completed second fiscal quarter, based on the closing
price of the Company's common shares on the Nasdaq Stock Market for that date

Common Shares, $.01 par value - $2,532,348,456
Number of shares outstanding of the Company's common shares as of March 1, 2004:
Common Shares, $.01 par value - 108,201,576

Documents incorporated by reference:
Portions of the following document are incorporated herein by reference into
Part III of the Form 10-K as indicated:

Part of Form 10-K into
Document which Incorporated
- -------- ----------------------
Company's Definitive Proxy Statement for the 2004 Part III
Annual Meeting of Shareholders which will be
filed no later than 120 days after December 27, 2003







Garmin Ltd.

2003 Form 10-K Annual Report

Table of Contents

Cautionary Statement With Respect To Forward-Looking Comments........1

Part I

Item 1. Business.............................................................1
Item 2. Properties..........................................................11
Item 3. Legal Proceedings...................................................12
Item 4. Submission of Matters to a Vote of Security Holders........... .....12
Executive Officers and Significant Employees of the Company.........12

Part II

Item 5. Market for the Company's Common Shares and Related
Shareholder Matters............................................14
Item 6. Selected Financial Data.............................................14
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations......................................16
Item 7A. Quantitative and Qualitative Disclosures About Market Risk..........37

Item 8. Financial Statements and Supplementary Data.........................39
Item 9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure.......................................64
Item 9A. Controls and Procedures.............................................64

Part III

Item 10. Directors and Executive Officers of the Company; Audit Committee
Financial Expert; Code of Ethics.................................64
Item 11. Executive Compensation..............................................65
Item 12. Security Ownership of Certain Beneficial Owners and Management
and Rekated Shareholder Matters..................................65
Item 13. Certain Relationships and Related Transactions......................66
Item 14. Principal Accountant Fees and Services..............................66

Part IV

Item 15. Exhibits, Financial Statement Schedules, and Reports on Form 8-K....66
Signatures..........................................................70


GARMIN, the GARMIN logo, the GARMIN globe design, the GARMIN "swoosh" design,
APOLLO, BLUECHART, CITY SELECT, DCG, ETREX, ETREX CAMO, ETREX LEGEND, ETREX
SUMMIT, ETREX VENTURE, ETREX VISTA, GNC, GPS II, GPS III, GPS V, GPSMAP,
GUIDANCE BY GARMIN, IQUE, MAPSOURCE, METROGUIDE, NAVTALK, PERSONAL NAVIGATOR,
RINO, SEE-THRU, STREETPILOT, and TRACBACK are included among the registered
trademarks of Garmin, and FORERUNNER, FORETREX, G1000, GEKO, ION, QUE, and WAAS
ENABLED are included among the trademarks of Garmin Ltd. or its subsidiaries.
All other trademarks and trade names referred to in this Form 10-K are the
property of their respective owners.





CAUTIONARY STATEMENT WITH RESPECT TO FORWARD-LOOKING COMMENTS

The discussions set forth in this Annual Report on Form 10-K contain
statements concerning potential future events. Such forward-looking statements
are based upon assumptions by the Company's management, as of the date of this
Annual Report, including assumptions about risks and uncertainties faced by the
Company. In addition, management may make forward-looking statements orally or
in other writings, including, but not limited to, in press releases, in the
annual report to shareholders and in the Company's other filings with the
Securities and Exchange Commission. 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. Readers are cautioned not to place
undue reliance on these forward-looking statements, which speak only as of their
date. If any of management's assumptions prove incorrect or should unanticipated
circumstances arise, the Company's 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 Item 7, "Management's Discussion and
Analysis of Financial Condition and Results of Operations", of this Form 10-K
under the heading "Company-Specific Trends and Risks". Readers are strongly
encouraged to consider those factors when evaluating any forward-looking
statements concerning the Company. The Company does not undertake to update any
forward-looking statements in this Annual Report to reflect future events or
developments.

Part I

Item 1. Business

This discussion of the business of Garmin Ltd. ("Garmin" or the "Company")
should be read in conjunction with, and is qualified by reference to,
"Management's Discussion and Analysis of the Company's Financial Condition and
Results of Operations" ("MD&A") under Item 7 herein and the information set
forth in response to Item 101 of Regulation S-K in such Item 7 is incorporated
herein by reference in partial response to this Item 1. Garmin has two business
segments - Consumer and Aviation. Pursuant to Rule 12b-23 under the Securities
Exchange Act of 1934, as amended, the segment and geographic information
included in Item 8, "Financial Statements and Supplementary Data", Note 10 is
incorporated herein by reference in partial response to this Item 1.

Garmin was incorporated in the Cayman Islands on July 24, 2000 as a holding
company for Garmin Corporation, a Taiwan corporation, in order to facilitate a
public offering of Garmin shares in the United States. Garmin owns, directly or
indirectly, all of the operating companies in the Garmin group.

Garmin's annual report on Form 10-K, quarterly reports on Form 10-Q,
current reports on Form 8-K, proxy statement and Forms 3, 4 and 5 filed on
behalf of directors and executive officers and all amendments to those reports
will be made available free of charge through the Investor Relations section of
Garmin's Internet website (http://www.garmin.com) as soon as reasonably
practicable after such material is electronically filed with, or furnished to,
the Securities and Exchange Commission.

The reference to Garmin's website address does not constitute incorporation
by reference of the information contained on this website and such information
should not be considered part of this report on Form 10-K.


Recent Developments in the Company's Business

Acquisition of UPS Aviation Technologies, Inc.

On August 22, 2003, Garmin's subsidiary, Garmin International, Inc.
completed the acquisition of all the outstanding stock of UPS Aviation
Technologies, Inc., a subsidiary of United Parcel Services, Inc., for $38
million in cash. The name of the acquired company has since been changed to
Garmin AT, Inc.

Garmin AT, Inc. is located in Salem, Oregon and had 145 employees as of
December 31, 2003. The acquisition is expected to provide Garmin with additional
resources for developing and manufacturing products for the aviation market. The
acquisition also provided Garmin with a range of additional aviation products,
including the CNX80 Global Positioning System ("GPS") navigation receiver, which
is the first fully-integrated panel-mounted GPS receiver certified by the
Federal Aviation Administration ("FAA") for primary means navigation using the
FAA's Wide Area Augmentation System ("WAAS").

1


New Consumer Product Introductions

Garmin began shipping the iQue(R) 3600 in July 2003. The iQue 3600 is the
Company's first personal digital assistant (PDA) product. The iQue 3600 is a
Palm(R) operating system based PDA with fully-integrated GPS navigation
technology, including color maps, automatic route calculation and turn-by-turn
navigation with voice prompts.

In August 2003, Garmin began shipping the StreetPilot(R) 2610 and in
September 2003 Garmin began shipping the StreetPilot 2650, two new models for
portable automotive applications. Both models feature a high resolution color
display with touchscreen, fast map drawing and route calculation and a remote
control.

In November 2003, Garmin began shipping the Forerunner(tm) 201, an
integrated personal training product for running and other athletic applications
which uses a GPS sensor to provide data on speed, training time, distance, lap
time and other information.

New Aviation Product Introductions

In 2003, Garmin announced that Cessna Aircraft Company selected Garmin's
G-1000(tm) integrated avionics system as standard equipment for Cessna's new
Citation Mustang business jet and as optional equipment for certain Cessna
single-engine piston aircraft. Cessna expects the Citation Mustang to be in
production in 2006. Also in 2003, Garmin announced that Diamond Aircraft
selected the G-1000 system as standard equipment for its DA42 TwinStar
twin-engine piston aircraft and as optional equipment for its DA40 Diamond Star
single-engine piston aircraft. The G-1000 system is expected to be available in
the second quarter of 2004.

NASDAQ-100 Index

In December 2003, Garmin was added to the NASDAQ-100 Index(R). The
NASDAQ-100 Index is composed of the 100 largest non-financial stocks on the
NASDAQ Stock Market based on market capitalization.

Debt Retirement

On June 2, 2003, Garmin's subsidiary, Garmin International, Inc. purchased
all $20 million of its outstanding industrial revenue bonds issued in 2000 (City
of Olathe, Kansas Taxable Industrial Revenue Bonds, Garmin International, Inc.
Project, Series 2000). This action retired all of the long-term debt of Garmin
Ltd. and its subsidiaries.


Company Overview

Garmin is a leading, worldwide provider of navigation, communications and
information devices, most of which are enabled by GPS technology. Garmin
designs, develops, manufactures and markets under the GARMIN brand a diverse
family of hand-held, portable and fixed mount GPS-enabled products and other
navigation, communications and information products for the general aviation and
consumer markets. Each of Garmin's GPS products utilizes its proprietary
integrated circuit and receiver designs to collect, calculate and display
location, direction, speed and other information in forms optimized for specific
uses.



Overview of the Global Positioning System

The Global Positioning System is a worldwide navigation system which
enables the precise determination of geographic location using established
satellite technology. The system consists of a constellation of orbiting
satellites. The satellites and their ground control and monitoring stations are
maintained and operated by the United States Department of Defense, which
maintains an ongoing satellite replenishment program to ensure continuous global
system coverage. Access to the system is provided free of charge by the U.S.
government.

2


Reception of GPS signals from the satellites requires line-of-sight
visibility between the satellites and the receiver. GPS receivers generally do
not work indoors and when a receiver is outside, buildings, hills and dense
foliage can attenuate or block reception. GPS receivers can be very compact, and
it is not necessary to have a large dish antenna to receive GPS signals.

Prior to May 2000, the U.S. Department of Defense intentionally degraded
the accuracy of civilian GPS signals in a process known as Selective
Availability ("SA") for national security purposes. SA variably degraded GPS
position accuracy to a radius of 100 meters. On May 2, 2000, the U.S. Department
of Defense discontinued SA. With SA removed, a GPS receiver can calculate its
position to an accuracy of approximately 10 meters or less, enhancing the
utility of GPS for most applications.

The accuracy and utility of GPS can be enhanced even further through
augmentation techniques which compute any remaining errors in the signal and
broadcast these corrections to a GPS device. The Federal Aviation Administration
("FAA") is developing a Wide Area Augmentation System ("WAAS") comprising ground
reference stations and additional satellites which will improve the accuracy of
GPS positioning available in the United States and portions of Canada and Mexico
to approximately 3 meters. WAAS is intended to support the use of GPS as the
primary means of enroute, terminal and approach navigation for aviation in the
United States. The increased accuracy offered by WAAS is expected also to
enhance the utility of WAAS-enabled GPS receivers for consumer applications. The
FAA announced on July 11, 2003 that the WAAS system had achieved initial
operating capability and that the system was available for instrument flight use
with appropriately certified avionics equipment.

Products

Garmin has achieved a leading market position and a record of growth in
revenues and profits by offering ergonomically designed, user friendly products
with innovative features and designs covering a broad range of applications and
price points.

Garmin's target markets currently consist of the consumer segment, which
primarily includes marine, recreational and automotive products, and the
aviation segment, which consists of panel mount and portable products for use in
general aviation aircraft.

While the marine, recreational, automotive and aviation product lines will
continue to be the core of Garmin's business in the near-term, GPS capabilities
are becoming increasingly commercially viable in a wide range of consumer
products and services, including wireless consumer and mobile information
devices (such as Family Radio Service and General Mobile Radio Service two-way
radios and personal digital assistants). Garmin's goal is to take advantage of
its brand name and its product development experience to expand its product line
in these markets.


Consumer

Garmin currently offers a wide range of consumer products, including
handheld GPS receivers, two-way radios with integrated GPS receivers,
GPS-enabled portable digital assistants, portable automotive navigation devices
and fixed-mount GPS/Sounder products. Garmin believes that its consumer products
are known for their value leadership, high performance, innovation and
ergonomics. Garmin's iQue 3600 portable digital assistant with integrated GPS
won the 2003 Consumer Electronics Association Best of Innovations award in the
mobile office category.

Garmin also offers a broad set of accessories for its products. For
instance, Garmin's MapSource(R) CDs, which can be loaded into selected GPS
products through a personal computer, provide detailed mapping information for
the United States and Canada, Australia, South Africa and a number of European
and Asian countries. With this information, many of Garmin's products can
provide the customer with detailed information concerning business listings and

3



points of interest. A user can choose a business listing (e.g., restaurants,
hotels, and shops) and the unit will display the location of the destination on
a map along with the user's location and the distance from the user's location.
Some of Garmin's products offer automatic route calculation and turn-by-turn
route guidance. Garmin's BlueChart(R) CD's and data cards, which are compatible
with selected GPS chartplotter and handheld products, provide detailed nautical
chart data for boaters.

The table below includes a sampling of some of the products that Garmin
currently offers to consumers.

Handheld and portable consumer products:

Geko
(3 models) Miniature size low-cost GPS receivers with colorful
design and easy operation.

Forerunner 201 Affordable, compact lightweight training assistant
for athletes with an easy-to-read display, ergonomic
wristband, and integrated GPS sensor that provides
precise speed, distance, and pace data.

eTrex
(6 models) Ultra compact full feature handheld GPS design for
outdoor enthusiasts. All models are waterproof and
have rugged designs. The eTrex Summit and eTrex
Vista have electronic compass and barometric
altimeter functions. eTrex Venture has a worldwide
database of cities. eTrex Legend and eTrex Vista
have internal basemaps of either North and South
America or Europe. eTrex Camo features a camouflaged
design and a hunting and fishing almanac. In fiscal
years 2003, 2002 and 2001, the eTrex class of
products represented approximately 19%, 20% and 20%,
respectively, of Garmin's total consolidated
revenues.

StreetPilot
(3 models) Portable automotive navigation systems with basemap
and MapSource compatibility allowing street level
mapping, points of interest and address location
functionality. Features of the StreetPilot 2610
and 2650 include "turn by turn" automatic route
guidance and voice prompting, high resolution color
display, remote control, touch screen and
PC/USB connection capabilities. The StreetPilot
2650 additionally features "dead reckoning"
capabilities allowing for continued navigation even
in the event of lost GPS reception.

GPS60C
(commenced shipping
in January 2004) Lightweight, rugged and waterproof handheld with 256-
color transreflective TFT color displays. Contain
56MB of internal memory for uploading mapping data
from MapSource CD-ROMs and automatic route
calculation with turn-by-turn directions.

GPS 72 Rugged handheld for land or marine navigation.
Features include 1 MB internal memory for loading
MapSource points of interest and high contrast
4-level gray scale display.

GPS 76
(3 models) Handheld GPS with large display and a waterproof case
which floats in water. Preloaded with U.S. tidal
data. GPSMAP 76 has internal basemap and MapSource
compatibility for street level mapping and detailed
marine charts. GPSMAP 76S additionally features a
barometric altimeter and an electronic compass.

GPS V Portable GPS with "turn by turn" automatic route
guidance, MapSource compatibility for street level
mapping and selectable vertical or horizontal
displays.

iQue 3600 Portable Digital Assistant (PDA) with integrated
GPS and mapping. Features include Palm OS 5
platform with all standard Palm applications,
voice recorder, flip-up integrated GPS antenna,
3.8" diagonal 320x480 pixel color display,
automatic route calculation, turn-by-turn voice
route guidance and patent-pending contact-locator
feature that connects the address book and
calendar to the GPS mapping features. Includes
internal basemap, 32MB of internal memory, SD
card expansion slot. Compatible with MapSource and
BlueChart products for street-level mapping and
detailed marine charts.

4



Marine fixed-mount units:

GPS126, 128 and 152 Low cost fixed-mount GPS units for boating with
either a built-in antenna or an external antenna
for exposed installations. GPS 152 has internal
database of U.S. cities and navigation aids and has
the compatibility of uploading points of interest
data from a personal computer with MapSource
CD-ROMs.

GPSMAP
(10 models) Marine GPS/plotter combinations for boating and
fishing enthusiasts of different levels. Features
available on different models include a variety
of display sizes (ranging in size from 3.8" to 10"),
high-contrast LCD graphics, monochrome 16-color or
256-color displays and the capability of uploading
mapping and nautical chart data from a personal
computer with MapSource and BlueChart CD-ROMs.

Sounder products:

FishFinders
(7 models) Fishfinders feature DCG(R)and See-Thru(R)technology,
which aid fishermen in defining the ocean/lake bottom
and spotting fish in hidden or obscured areas.
Features available on different models include color
displays and dual frequency transducers for optimal
performance in deep water.

GPSMAP/Sounder
(4 models) "All-in-one" product lines with GPS, chartplotter
and sonar functionality. These
units come with different display sizes (ranging in
size from 4.2" to 7.25") and the capability of
uploading mapping and nautical chart data. Certain
models feature dual frequency transducers for
optimal sonar performance in deep water. GPSMAP
188C features a color display.

Consumer communications products:

Rino
(3 models) Handheld two-way Family Radio Service (FRS) and
General Mobile Radio Service (GMRS) radios that
integrate two-way voice communications with GPS
navigation. Features include patented "peer-to-peer
position reporting" so you can transmit your location
to another Rino radio. The Rino 120 has an
internal basemap and MapSource compatibility for
street-level mapping. The Rino 130 (which commenced
shipping in the first quarter of 2004) has 24 MB of
internal memory, built-in electronic compass,
barometric sensor, and NOAA weather radio receiver.

NavTalk GSM A handheld unit that combines a 900 MHz/1800 MHz
GSM digital cellular telephone and a full-featured
GPS receiver with mapping display, "turn by turn"
automatic route guidance and voice prompting.
Features the ability to transmit location from one
unit to another unit and to location-based service
companies.

VHF 720 & 725 Waterproof, portable handheld marine two-way radios
with either 3-watt or 5-watt power output provide
clear Very High Frequency (VHF) communication
capabilities for all types of boaters.

5


Aviation

Garmin's panel mounted product line includes GPS-enabled navigation, VHF
communications transmitters/receivers, multi-function displays, traditional VHF
navigation receivers, instrument landing system (ILS) receivers, digital
transponders (which transmit either an aircraft's altitude or its flight
identification number in response to requests transmitted by ground-based air
traffic control radar systems or air traffic avoidance devices on other
aircraft), marker beacon receivers and audio panels.

Garmin's aviation products have won prestigious awards throughout the
industry for their innovative features and ease of use. Garmin was the first
company to offer a GPS receiver, the GPS 155/165, which met the Federal Aviation
Administration's requirements for certain kinds of instrument approaches and did
so a full year ahead of its competitors. The GPS 155/165 with its instrument
approach capability won Flying Magazine's outstanding achievement award for
1994. The GNS 430/530 offers multiple features and capabilities integrated into
a single product. This high level of integration minimizes the use of precious
space in the cockpit, enhances the quality and safety of flight through the use
of modern designs and components and reduces the cost of equipping an aircraft
with modern electronics. The GNS 430 was also recognized by Flying Magazine as
the Editor's Choice Product of the Year for 1998. In 1994 and again in 2000,
Garmin earned recognition from the Aircraft Electronics Association for
outstanding contribution to the general aviation electronics industry. The
GPSMAP 295 won Aviation Consumer Magazine's Gear of the Year award for best
aviation portable product in 2000 and again in 2001. Garmin won first place for
avionics product support in Professional Pilot magazine's survey of its readers
published in its January 2003 issue. Also, Garmin was ranked No. 1 among
avionics manufacturers for operation, presentation, technical advancement,
information, construction and satisfaction in a survey of readers of
Professional Pilot magazine published in its January 2004 issue.

Garmin's panel mounted aviation products are sold in the retrofit market
where older aircraft are fitted with the latest electronics from Garmin's broad
product line. Garmin believes this market continues to have good growth
potential as aircraft owners elect to upgrade their existing aircraft at a cost
that is lower than purchasing a new aircraft.

Garmin has also expanded its range of aviation electronics (avionics)
offerings to leading General Aviation aircraft manufacturers such as the Cessna
Aircraft Company, Cirrus Design Corporation, Diamond Aircraft Industries, EADS
Socata, Eurocopter, Mooney Aircraft Corporation, New Piper Aircraft Company,
Raytheon Aircraft Company, Pilatus Business Aircraft, and Robinson Helicopter.
Garmin anticipates further growth in its sales to the original equipment
manufacturers market as its product offerings expand to include flight control
systems and primary flight and multi-function display instrumentation that uses
the latest display technologies.

The table below includes a sampling of some of the aviation products
currently offered by Garmin:

Handheld and portable aviation products:

GPS III Pilot Aviation style portable GPS receiver, with built-in
maps and Jeppesen database.


GPSMAP 196 Portable GPS receiver with 3.8" diagonal moving map
and Horizontal Situation Indicator (HSI) display
with internal basemap and automatic logbook
functions. Also features automatic turn-by-turn
automotive routing and MapSource compatibility for
street level mapping.

GPSMAP 295 A high-end portable GPS receiver designed
specifically for the serious aviator. Features
include a 16-color display and built-in aviation
database; it can download MapSource CD-ROM
information through a personal computer for street
level map details.

Panel-mount aviation products:

GNC 300XL TSO Instrument Flight Rules ("IFR") certified
product that combines a GPS receiver with VHF radio
and features moving map graphics.

6


400 Series
(3 models) The GNS 430 was the world's first "all-in-one"
IFR certified GPS navigation receiver/traditional
VHF navigation receiver/instrument landing systems
receiver and VHF communication transmitter/receiver.
Features available in different 400 series models
include 4-color map graphics, GPS, communication and
navigation capabilities.

500 Series
(2 models) These units combine the features of the 400 series
along with a larger 5" color display.

GI-102A & 106A Course deviation indicators (CDIs). The
GI-106A features an instrument landing system
receiver to aid in landing.

GMA 340 A feature-rich audio panel with six-place
stereo intercom and independent
pilot/co-pilot communications capabilities.

GTX 320A & 327 FAA-certified transponders which transmit altitude or
flight identification to air traffic control radar
systems or other aircraft's air traffic avoidance
devices and feature solid-state construction for
longer life. The GTX 327 offers a digital
display with timing functions.

GTX 330 & 330D FAA-certified Mode S transponders with data link
capability, including local air traffic information
at FAA radar sites equipped with Traffic Information
Service (TIS).

Apollo CNX 80 Integrated avionics unit with GPS navigation receiver
certified for primary means Wide Area Augmentation
System (WAAS)/GPS navigation and VHF navigation
receiver/instrument landing systems receiver and VHF
communication transmitter/receiver.

Apollo MX 20 Multi-function display unit featuring high resolution
6-inch active-matrix color LCD display and
customizable map function.

Apollo SL 30 and SL 40 Compact UHF navigation and communications units
that combine a 760-channel VHF communications
radio with 200-channel glideslope and localizer
receivers. The SL30 features 8 watts carrier
transmit power and the SL40 features 10 watts
carrier transmit power.

G1000
(expected to be
available in second
quarter of 2004) Integrated avionics suite that presents navigation,
communication, attitude, weather, terrain, traffic,
surveillance and engine information on large high-
resolution color displays.

Sales and Marketing

Garmin's consumer products are sold through a worldwide network of
approximately 3,000 independent dealers and distributors in approximately 100
countries who meet our sales and customer service qualifications. No single
customer represented 10% or more of Garmin's consolidated revenues in the year
ended December 27, 2003. Garmin intends to selectively grow its dealer network
geographically and by product lines. Marketing support is provided
geographically from Garmin's offices in Olathe, Kansas (North, South and Central
America), Romsey, U.K. (Europe, Middle East and Africa) and Shijr, Taiwan (Asia
and Australia). Garmin's distribution strategy is intended to increase Garmin's
global penetration and presence while maintaining high quality standards to
ensure end-user satisfaction.

Garmin's U.S. consumer segment marketing is handled through its dealers who
are serviced by a staff of regional sales managers and in-house sales
associates. Some of Garmin's largest consumer products dealers include:

7


o Bass Pro Shops--a freshwater sports specialist with a sophisticated
catalog sales effort and "super store" locations;

o Best Buy--one of the largest U.S. electronics retailers;

o Boaters World--a leading off-shore marine retailer with multiple
locations;

o Cabela's--a major hunting and fishing catalog retailer for the
outdoor marine market with super store and destination store
locations;

o Circuit City--a leading U.S. electronics retailer;

o Target--a leading mass merchandise chain of retail stores;

o Wal-Mart--one of the world's largest mass retailers; and

o West Marine--the largest U.S. marine retailer specializing in
offshore boating equipment.

Garmin's Europe, Middle East and Africa consumer segment marketing is
handled through in-country distributors who resell to dealers. Working closely
with Garmin's in-house sales and marketing staff in Romsey, U.K., these
distributors are responsible for inventory levels and staff training
requirements at each retail location. Garmin's Taiwan-based marketing team
handles its Asia marketing effort.

Instrument Flight Rules ("IFR") products are sold through distributors
around the world. Garmin's largest aviation distributors include Sportsman's
Market, Tropic Aero and JA Air Center. These distributors have the training,
equipment and certified staff required for at-airport installation of Garmin's
most sophisticated IFR avionics equipment. Visual Flight Rules ("VFR")
equipment, including handheld GPS receivers, are also sold through distributors
and through catalogs.

In addition to the traditional distribution channels mentioned, Garmin
enjoys significant market penetration with original equipment manufacturers. In
the consumer market, Garmin's products are standard equipment on boats
manufactured by Allison Boats, Cigarette Racing Team, Inc., Cobalt Boats, Pro
Sports Boats and Ranger Boats. In the aviation market, Garmin's avionics are
standard equipment on aircraft built by Cessna Aircraft Company, Cirrus Design
Corporation, Diamond Aircraft Industries, EADS SOCATA, Eurocopter, The Lancair
Company, Pilatus Business Aircraft, Mooney Aircraft Corporation, Raytheon
Aircraft Company, Robinson Helicopter, Tiger Aircraft, LLC and The New Piper
Aircraft Company. Other aircraft and boat manufacturers offer Garmin's products
as optional equipment.

Competition

The market for navigation, communications and information products is
highly competitive. Garmin believes the principal competitive factors impacting
the market for its products are design, functionality, quality and reliability,
customer service, brand, price, time-to-market and availability. Garmin believes
that it generally competes favorably in these areas.

Garmin believes that its principal competitors for consumer GPS-enabled
product lines are Thales Navigation, Inc. ("Thales"), Lowrance Electronics Inc.
("Lowrance"), Cobra Electronics Corporation ("Cobra"), Raymarine Ltd.
("Raymarine"), Furuno Electronic Company, the Standard Vertex Division of Yaesu
Co. Ltd. ("Standard"), the Northstar Technologies unit of Brunswick Corporation,
Navman NZ Ltd. ("Navman"), a subsidiary of Brunswick Corporation, and Simrad AS
("Simrad"). For Garmin's fishfinder/depth sounder product lines, Garmin believes
that its principal competitors are Lowrance, Furuno, Raymarine, Simrad, Navman,
and the Humminbird division of Techsonic Industries, Inc.. ("Humminbird").
Garmin believes that its principal competitors for marine VHF transceiver
product lines are Standard, Shakespeare Corporation, Humminbird, Raymarine,
Uniden Corporation, Simrad and Icom, Inc. For Garmin's general aviation product
lines, Garmin considers its principal competitors to be Lowrance, for portable
GPS units, and Honeywell, Inc., Avidyne Corporation, L-3 Avionics Systems,
Meggitt PLC, Rockwell Collins, Inc., Universal Avionics Systems Corporation,
Chelton Flight Systems and Free Flight Systems for panel-mount GPS and display
units. For Garmin's Family Radio Service and General Mobile Radio Service
product line, Garmin believes that its principal competitors are Motorola, Inc.
("Motorola"), Cobra and Audiovox Corporation. For Garmin's cellular product
line, Garmin believes that its principal competitors are Nokia Oy, Telefon AB LM

8


Ericsson, Motorola, Benefon Oy, Siemens AG ("Siemens"), Sony Corporation
("Sony") and Samsung. For Garmin's GPS sensor board product lines, Garmin
believes its principal competitors are Furuno, Koden, Trimble Navigation, Ltd.,
Thales, Motorola, Philips N.V. ("Philips") and SiRF Technology, Inc. For
Garmin's automotive product lines, Garmin considers its principal competitors to
be Thales, Alpine Electronics, Inc., Cobra, Denso KK, Visteon, the On-Star
Division of General Motors Corporation, Navman, Xanavi Informatics Corporation,
Robert Bosch GmbH, and Siemens. For Garmin's personal digital assistant product
line, Garmin considers its principal competitors to be PalmOne, Inc., Sony,
Hewlett-Packard Company, Dell Computer Corporation and Toshiba Corporation.

Research and Development

Garmin's product innovations are driven by its strong emphasis on research
and development and the close partnership between Garmin's engineering and
manufacturing teams. Garmin's products are created by its engineering and design
staff, which numbered approximately 515 people worldwide as of December 31,
2003. Garmin's manufacturing staff includes manufacturing process engineers who
work closely with Garmin's design engineers to ensure manufacturability and
manufacturing cost control for its products. Garmin's design staff includes
industrial designers, as well as software engineers, electrical engineers and
mechanical engineers. Garmin believes the industrial design of its products has
played an important role in Garmin's success. Once a development project is
initiated and approved, a multi-disciplinary team is created to design the
product and transition it into manufacturing.

Below is a table of Garmin's expenditures on research and development over
the last three fiscal years.





Fiscal Years Ended
-------------------------------------------------------------------------------
December 27, December 28, December 29,
2003 2002 2001
------------------------- ------------------------- -------------------------

(In thousands)
Research and development $43,706 $32,163 $28,164



Manufacturing and Operations

Garmin believes that one of its core competencies is its manufacturing
capability at both its Shijr, Taiwan facility and its Olathe, Kansas facility.
Garmin believes that its vertically integrated approach has provided it the
following benefits:

Reduced time-to-market. Utilizing concurrent engineering techniques,
Garmin's products are introduced to production at an early development stage and
the feedback provided by manufacturing is incorporated into the design before
mass production begins. In this manner, Garmin attempts to reduce the time
required to move a product from its design phase to mass production deliveries,
with improved quality and yields. Reducing time to market has enabled Garmin to
offer several industry firsts, such as the Rino GPS-enabled Family Radio
Service/General Mobile Radio Service two-way radio, the iQue 3600 portable
digital assistant with integrated GPS and mapping and the GNS 430, which
integrates traditional aviation navigation and communications systems with GPS
in a single package.

Design and process optimization. Garmin uses its manufacturing resources to
rapidly prototype design concepts, products and processes in order to achieve
higher efficiency, lower cost and better value for customers. Garmin's ability
to fully explore product design and manufacturing process concepts has enabled
it to optimize its designs to minimize size and weight in GPS devices that are
functional, waterproof, and rugged.

Logistical agility. Operating its own manufacturing facilities helps Garmin
minimize problems, such as component shortages and long component lead times
which are common in the electronics industry. Many products can be re-engineered
to bypass component shortages or reduce cost and the new designs can quickly
fill the distribution pipeline. Garmin reacts rapidly to changes in market
demand by maintaining a safety stock of long-lead components and by rescheduling
components from one product line to another.

Garmin's design and manufacturing processes are certified to ISO 9001-2000,
international quality standards developed by the International Organization for
Standardization. Garmin's Taiwan manufacturing facility has also achieved QS
9000 quality certification, a quality standard for automotive suppliers. In
addition Garmin's aviation panel-mount products are designed and manufactured
according to processes which are approved and monitored by the FAA.

9


Materials

Garmin purchases components for its products from a number of suppliers
around the world. For certain components, Garmin relies on sole source
suppliers. The failure of our suppliers to deliver components in sufficient
quantities and in a timely manner could adversely affect our business.

Seasonality

Our sales are subject to some seasonal fluctuation. Typically, sales of our
consumer products are highest in the second quarter, due to increased demand
during the spring and summer marine season, and in the fourth quarter, due to
increased demand during the holiday buying season. Sales of consumer products
are also influenced by the timing of the release of new products. Our aviation
products do not experience much seasonal variation, but are more influenced by
the timing of the release of new products when the initial demand is typically
the strongest.

Backlog

Our sales are generally of a consumer nature and there is a relatively
short cycle between order and shipment. Therefore, we believe that backlog
information is not material to the understanding of our business. We typically
ship most orders within 72 hours of receipt.


Intellectual Property

Garmin's success and ability to compete is dependent in part on its
proprietary technology. Garmin relies on a combination of patent, copyright,
trademark and trade secret laws, as well as confidentiality agreements, to
establish and protect our proprietary rights. As of March 1, 2004, Garmin held
141 U.S. patents that expire at various dates no earlier than 2006. As of March
1, 2004, Garmin had 153 U.S. patent applications pending. Our U.S. patents do
not create any patent rights in foreign countries and we do not hold any foreign
patents. In addition, Garmin often relies on licenses of intellectual property
for use in its business. For example, Garmin obtains licenses for digital
cartography technology for use in our products from various sources. Garmin's
registered U.S. trademarks include: GARMIN; the GARMIN logo; the GARMIN globe
design; the GARMIN "swoosh" design; APOLLO; BLUECHART; CITY SELECT; DCG; ETREX;
ETREX CAMO; ETREX LEGEND; ETREX SUMMIT; ETREX VISTA; ETREX VENTURE; GNC; GPS II;
GPS III; GPS V; GPSMAP; GUIDANCE BY GARMIN; IQUE; MAPSOURCE; METROGUIDE;
NAVTALK; PERSONAL NAVIGATOR; RINO; SEE-THRU; STREETPILOT and TRACBACK. Our mark
GARMIN and certain other trademarks have also been registered in selected
foreign countries. Garmin's trademarks include FORERUNNER; FORETREX; G1000;
GEKO; ION; QUE and WAAS ENABLED. Some of Garmin's patents and its registered
trademarks and trademarks are owned by Garmin's subsidiaries, Garmin
Corporation, Garmin International, Inc. and Garmin AT, Inc.

Garmin believes that its continued success depends on the intellectual
skills of its employees and their ability to continue to innovate. Garmin will
continue to file and prosecute patent applications when appropriate to attempt
to protect Garmin's rights in its proprietary technologies.

It is possible that Garmin's current patents, or patents which it may later
acquire, may be successfully challenged or invalidated in whole or in part. It
is also possible that Garmin may not obtain issued patents for inventions it
seeks to protect. It is also possible that Garmin may not develop proprietary
products or technologies in the future that are patentable, or that any patent
issued to Garmin may not provide it with any competitive advantages, or that the
patents of others will preclude Garmin from manufacturing and marketing certain
products. Legal protections afford only limited protection for Garmin's
technology. Despite Garmin's efforts to protect its proprietary rights,
unauthorized parties may attempt to copy aspects of Garmin's products or to
obtain and use information that Garmin regards as proprietary. Litigation may be

10


necessary in the future to enforce Garmin's intellectual property rights, to
protect its trade secrets, to determine the validity and scope of the
proprietary rights of others or to defend against claims of infringement or
invalidity. Any resulting litigation could result in substantial costs and
diversion of Garmin's resources. Garmin's means of protecting its proprietary
rights may not be adequate and Garmin's competitors may independently develop
similar technology.


Regulations

Garmin's aviation products that are intended for installation in type
certificated aircraft are required to be certified by the FAA, its European
counterpart, the Joint Aviation Authorities, and other comparable organizations
before they can be used in an aircraft. The telecommunications industry is
highly regulated, and the regulatory environment in which Garmin operates is
subject to change. In accordance with Federal Communication Commission ("FCC")
rules and regulations, wireless transceiver and cellular handset products are
required to be certified by the FCC and comparable authorities in foreign
countries where they are sold. Garmin's products sold in Europe are required to
comply with relevant directives of the European Commission. A delay in receiving
required certifications for new products or enhancements to Garmin's products or
losing certification for Garmin's existing products could adversely affect its
business.

Because Garmin Corporation, one of the Company's principal subsidiaries, is
located in Taiwan, foreign exchange control laws and regulations of Taiwan with
respect to remittances into and out of Taiwan may have an impact on Garmin's
operations. The Taiwan Foreign Exchange Control Statute, and regulations
thereunder, provide that all foreign exchange transactions must be executed by
banks designated to handle such business by the Ministry of Finance of Taiwan
and by the Central Bank of China, also referred to as the CBC. Current
regulations favor trade-related foreign exchange transactions. Consequently,
foreign currency earned from exports of merchandise and services may now be
retained and used freely by exporters, while all foreign currency needed for the
import of merchandise and services may be purchased freely from the designated
foreign exchange banks. Aside from trade-related foreign exchange transactions,
Taiwan companies and residents may, without foreign exchange approval, remit
outside and into Taiwan foreign currencies of up to $50 million and $5 million
respectively, or their equivalent, each calendar year. Currency conversions
within the limits are processed by the designated banks and do not have to be
reviewed and approved by the CBC. The above limits apply to remittances
involving a conversion between New Taiwan Dollars and U.S. Dollars or other
foreign currencies. The CBC typically approves foreign exchange in excess of the
limits if a party applies with the CBC for review and presents legitimate
business reasons justifying the currency conversion. A requirement is also
imposed on all enterprises to register all medium and long-term foreign debt
with the CBC.


Environmental Matters

Capital expenditures, earnings and the competitive position of Garmin have
not been materially affected by compliance with federal, state and local
environmental laws and regulations.


Employees

As of December 31, 2003, Garmin had 2,021 full-time employees worldwide, of
whom 997 were in the United States, 975 were in Taiwan and 49 were in the United
Kingdom. None of Garmin's employees are represented by a labor union or covered
by a collective bargaining agreement. Garmin considers its employee relations to
be good.


Item 2. Properties

Garmin International, Inc. and Garmin USA, Inc., occupy a 240,000 square
foot facility on 41 acres in Olathe, Kansas, where all aviation panel-mount
products are manufactured and Garmin products are warehoused, distributed, and
supported for North, Central and South America. Garmin's subsidiary, Garmin
Realty, LLC also owns an additional 46 acres of land on the Olathe site for

11


future expansion. In connection with the bond financings for the facility in
Olathe and the expansion of that facility, the City of Olathe holds the legal
title to this property which is leased to Garmin's subsidiaries by the City.
Upon the payment in full of the outstanding bonds, the City of Olathe is
obligated to transfer title to Garmin's subsidiaries for the aggregate sum of
$200. Garmin International, Inc. has purchased all the outstanding bonds and
continues to hold the bonds until maturity in order to benefit from property tax
abatement.

Garmin AT, Inc. leases approximately 15 acres of land in Salem, Oregon with
a ground lease. This ground lease expires in 2030 but Garmin AT has the option
to extend the ground lease until 2050. Garmin AT, Inc. owns and occupies a
52,000 square foot facility and a 6,000 square foot aircraft hangar on this
land. Garmin AT, Inc. plans to construct a 15,000 square foot expansion to its
aircraft hangar in 2004.

Garmin International, Inc. is constructing a 575,000 square foot expansion
to its Olathe, Kansas facility. This building expansion is expected to be
completed in 2004.

Garmin International, Inc. leases 148,320 square feet of land at New
Century Airport in Gardner, Kansas under a ground lease which expires in 2026.
Garmin International, Inc. owns and occupies a 25,034 square foot aircraft
hangar, flight test and certification facility on this land for use in
development and certification of aviation products.

Garmin's subsidiary, Garmin Corporation, owns a 249,326 square foot
facility in Shijr, Taipei County, Taiwan where it manufactures all of Garmin's
consumer and portable aviation products and warehouses, markets and supports
products for the Pacific Rim countries. Garmin Corporation occupies 218,662
square feet at this facility and leases the remaining 30,664 square feet to
third parties.

Garmin's subsidiary, Garmin (Europe) Ltd., leases an aggregate of 28,358
square feet under three leases in Romsey, England for warehousing, marketing and
supporting Garmin products in Europe, Africa and the Middle East. Garmin
(Europe) Ltd. also repairs products at this facility. One of these leases
expires in 2010 and two of these leases expire in 2015. Garmin International,
Inc. also leases an aggregate of 3,233 square feet of office space in Tempe,
Arizona for software development, and Wichita, Kansas for support for Garmin's
aviation original equipment manufacturer operations.


Item 3. Legal Proceedings

From time to time, Garmin may be involved in litigation relating to claims
arising out of our operations. As of March 1, 2004, Garmin was not a party to
any material legal proceedings.


Item 4. Submission of Matters to a Vote of Security Holders

No matters were submitted to a vote of shareholders of Garmin during the
fourth fiscal quarter of 2003.

Executive Officers and Significant Employees of the Company

Pursuant to General Instruction G(3) of Form 10-K and instruction 3 to
paragraph (b) of Item 401 of Regulation S-K, the following list is included as
an unnumbered Item in Part I of this Annual Report on Form 10-K in lieu of being
included in the Company's Definitive Proxy Statement in connection with its
annual meeting of shareholders scheduled for June 4, 2004.

Gary L. Burrell, age 66, has served as Co-Chairman of Garmin Ltd. since
August 2000. He also served as Co-Chief Executive Officer of Garmin Ltd. from
August 2000 to August 2002. He has been a director of Garmin Corporation since
January 1990. He served as President of Garmin Corporation from January 1990 to
December 1998. Mr. Burrell has also been Chairman of Garmin International, Inc.
since March 2002, a director of Garmin International, Inc. since August 1990 and
he served as President of Garmin International, Inc. from August 1990 to March
2002. Mr. Burrell has been Chairman of Garmin USA, Inc. since March 2002 and a
director of Garmin USA, Inc. since December 2001. He served as President of
Garmin USA, Inc. from December 2001 to March 2002. Mr. Burrell has been a
director and Chairman of Garmin (Europe) Ltd. since 1992. Mr. Burrell was a
director of Garmin Foreign Sales Corporation from May 1998 to December 2001 and

12


President from July 1998 to December 2001. Mr. Burrell holds a BS degree in
Electrical Engineering from Wichita State University and a MS degree in
Electrical Engineering from Rensselaer Polytechnic Institute.

Dr. Min H. Kao, age 55, has served as Co-Chairman of Garmin Ltd. since
August 2000. He has served as Chief Executive Officer of Garmin Ltd. since
August 2002 and previously served as Co-Chief Executive Officer from August 2000
to August 2002. He has been President of Garmin Corporation since January 1999.
He has also been Chairman and a director of Garmin Corporation since January
1990. Dr. Kao has been President of Garmin International, Inc. since March 2002
and a director of Garmin International, Inc. since August 1990. He served as
Vice President of Garmin International, Inc. from April 1991 to March 2002. Dr.
Kao has been President of Garmin USA, Inc. since March 2002 and a director of
Garmin USA, Inc. since December 2001. Dr. Kao has been President of Garmin AT,
Inc. and a director of Garmin AT, Inc. since August 2003. He served as Vice
President of Garmin USA, Inc. from December 2001 to March 2002. He has been a
director of Garmin (Europe) Ltd. since 1992. Dr. Kao was a director of Garmin
Foreign Sales Corporation from May 1998 to December 2001 and Vice President from
July 1998 to December 2001. Dr. Kao holds Ph.D. and MS degrees in Electrical
Engineering from the University of Tennessee and a BS degree in Electrical
Engineering from National Taiwan University.

Kevin S. Rauckman, age 41, has served as Chief Financial Officer and
Treasurer of Garmin Ltd. since August 2000. He has been Director of Finance and
Treasurer of Garmin International, Inc. since January 1999 and a director of
Garmin International, Inc. since April 2001. He has been Treasurer and a
director of Garmin USA, Inc. since December 2001. Mr. Rauckman has been Chief
Financial Officer and Treasurer and a director of Garmin AT, Inc. since August
2003. Mr. Rauckman was a director and Treasurer of Garmin Foreign Sales
Corporation from January 1999 to December 2001. Previously, Mr. Rauckman served
as Director of Finance and in other finance capacities for one of Allied
Signal's (now known as Honeywell International, Inc.) Aerospace units from May
1996 to January 1999 and served as Finance Manager with Unisys Corporation, a
technology hardware and consulting services company, from June 1993 to April
1996. Mr. Rauckman holds BS and MBA degrees in Business from the University of
Kansas.

Andrew R. Etkind, age 48, has served as General Counsel and Secretary of
Garmin Ltd. since August 2000. He has been General Counsel of Garmin
International, Inc. since February 1998 and Secretary since October 1998. He has
been General Counsel and Secretary of Garmin USA, Inc. since December 2001. Mr.
Etkind has been General Counsel and Secretary of Garmin AT, Inc. since August
2003. He has been Secretary of Garmin (Europe) Ltd. since March 2001.
Previously, Mr. Etkind served as Senior Attorney for Alumax Inc., a manufacturer
of aluminum and aluminum products, from March 1996 to January 1998 and was Vice
President, General Counsel and Secretary of Information Management Resources,
Inc., a software systems development and consulting company, from July 1993 to
February 1996. Mr. Etkind holds BA, MA and LLM degrees from Cambridge
University, England and a JD degree from the University of Michigan Law School.

Clifton A. Pemble, age 38, has been Director of Engineering of Garmin
International, Inc. since 2002. Previously, he was Software Engineering Manager
of Garmin International, Inc. from 1995 to 2002 and a Software Engineer with
Garmin International, Inc. from 1989 to 1995. Mr. Pemble has been a director of
Garmin AT, Inc. since August 2003. Prior to joining Garmin, Mr. Pemble was a
Software Engineer at Allied Signal (now known as Honeywell International, Inc.).
Mr. Pemble holds BA degrees in Mathematics and Computer Science from MidAmerica
Nazarene University.

Gary V. Kelley, age 57, has been Director of Marketing of Garmin
International, Inc. since 1992 and has been a director of Garmin (Europe) Ltd.
since 1993. He has also been Director of Marketing of Garmin USA, Inc. since
January 2002. Mr. Kelley holds a BBA degree from Baker University. He also holds
a commercial pilot license with instrument and flight instructor ratings.

All executive officers are elected by and serve at the discretion of the
Company's Board of Directors. None of the executive officers has an employment
agreement with the Company. There are no arrangements or understandings between
the executive officers and any other person pursuant to which he or she was or
is to be selected as an officer. There is no family relationship among any of
the executive officers. Dr. Min H. Kao is the brother of Ruey-Jeng Kao, who is a
supervisor of Garmin Corporation, Garmin's Taiwan subsidiary. A supervisor
serves as an ex-officio member of Garmin Corporation's Board of Directors.


13


PART II


Item 5. Market for the Company's Common Shares and Related Shareholder Matters

The Company's common shares have traded on the Nasdaq National Market under
the symbol "GRMN" since its initial public offering on December 8, 2000 (the
"IPO"). As of March 1, 2004 there were 174 shareholders of record.

The range of high and low closing sales prices of the Company's common
shares as reported on the Nasdaq Stock Market for each fiscal quarter of fiscal
years 2003 and 2002 was as follows:


Year Ended
December 27, 2003 December 28, 2002
-----------------------------------------------
High Low High Low
-----------------------------------------------
First Quarter $36.89 $28.08 $22.92 $18.76
Second Quarter $50.26 $35.05 $24.19 $21.80
Third Quarter $46.61 $36.25 $21.90 $18.10
Fourth Quarter $56.01 $41.68 $30.33 $18.00


One dividend has been paid since the IPO. The Board of Directors declared a
cash dividend of $0.50 per common share to shareholders of record on December 1,
2003 which was paid on December 15, 2003. The Board of Directors currently
anticipates declaring and paying annual cash dividends in similar amounts in the
future subject to continuation of favorable tax treatment for dividends,
evaluation of the Company's level of earnings, balance sheet position and
availability of cash.



Item 6. Selected Financial Data

The following table sets forth selected consolidated financial data of the
Company. The selected consolidated balance sheet data as of December 27, 2003
and December 28, 2002 and the selected consolidated statement of income data for
the years ended December 27, 2003, December 28, 2002 and December 29, 2001 were
derived from the Company's audited consolidated financial statements and the
related notes thereto which are included in Item 8 of this annual report on Form
10-K. The selected consolidated balance sheet data as of December 29, 2001,
December 30, 2000, and December 25, 1999 and the selected consolidated statement
of income data for the years ended December 30, 2000 and December 25, 1999 were
derived from the Company's audited consolidated financial statements, not
included herein.

14


The information set forth below is not necessarily indicative of the
results of future operations and should be read together with "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
the consolidated financial statements and notes to those statements included in
Items 7 and 8 in Part II of this Form 10-K.



Years ended (1)
----------------------------------------------------------------------------------
Dec. 27, 2003 Dec. 28, 2002 Dec. 29, 2001 Dec. 30, 2000 Dec. 25, 1999
----------------------------------------------------------------------------------
(in thousands, except per share data)

Consolidated Statements of
Income Data:
Net sales $572,989 $465,144 $369,119 $345,741 $232,586
Cost of goods sold 242,448 210,088 170,960 162,015 105,654
----------- ------------ ------------ ----------- -----------
Gross profit 330,541 255,056 198,159 183,726 126,932

Operating expenses:
Selling, general and
administrative 59,835 45,453 38,709 32,669 27,063
Research and development 43,706 32,163 28,164 21,764 17,339
----------- ------------ ------------ ----------- -----------
Total operating expenses 103,541 77,616 66,873 54,433 44,402
----------- ------------ ------------ ----------- -----------

Operating income 227,000 177,440 131,286 129,293 82,530
Other income, net (2), (3) (1,057) 5,294 20,749 11,629 1,602
----------- ------------ ------------ ----------- -----------
Income before income taxes 225,943 182,734 152,035 140,922 84,132

Income tax provision 47,309 39,937 38,587 35,259 19,965
----------- ------------ ------------ ----------- -----------
Net income $178,634 $142,797 $113,448 $105,663 $64,167
=========== ============ ============ =========== ===========

Net income per share: (6)
Basic $1.65 $1.32 $1.05 $1.05 $0.64
Diluted $1.64 $1.32 $1.05 $1.05 $0.64
Weighted average common
shares outstanding:
Basic 108,011 107,774 108,097 100,489 100,000
Diluted 108,902 108,201 108,447 100,506 100,000

Cash dividends per share (4) $0.50 $0.00 $0.00 $0.29 $0.13

Balance Sheet Data (at end of
Period):
Cash and cash equivalents $274,329 $216,768 $192,842 $251,731 $104,079
Marketable securities 221,447 245,708 131,584 0 0
Total assets 856,945 705,888 538,984 463,347 250,090
Total debt (5) 0 20,000 32,188 46,946 27,720
Total stockholders' equity 749,690 602,499 453,969 365,239 194,599

- -------------------------------------------------------------------------------------------------------------------------



(1) Our fiscal year-end is the last Saturday of the calendar year and does not
always fall on December 31.
(2) Other income, net mainly consists of interest income, interest expense and
foreign currency gain (loss).
(3) Includes $6.7 million of foreign currency losses in 2003, $0.0 million,
$11.6 million, and $7.0 million of foreign currency gains in 2002, 2001,
and 2000 respectively, and $1.5 million of foreign currency losses in 1999.
(4) A cash dividend of $0.50 per share was paid on December 15, 2003 to share-
holders of record on December 1, 2003. There were no cash dividends issued
during 2002 or 2001. Dividends paid in 2000 and 1999 are adjusted for
the 1.12379256 for 1 stock split of our common shares, effected through a
stock dividend on November 6, 2000.
(5) Total debt consists of notes payable and long-term debt.
(6) Net income per share in 2000 and 1999 are adjusted for the 1.12379256 for 1
stock split of our common shares, effected through a stock dividend on
November 6, 2000.



15


Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations

The following discussion and analysis of our financial condition and
results of operations focuses on and is intended to clarify the results of our
operations, certain changes in our financial position, liquidity, capital
structure and business developments for the periods covered by the consolidated
financial statements included in this Form 10-K. This discussion should be read
in conjunction with, and is qualified by reference to, the other related
information including, but not limited to, the audited consolidated financial
statements (including the notes thereto and the independent auditor's report
thereon), the description of our business, all as set forth in this Form 10-K,
as well as the risk factors discussed below (the "Company-Specific Trends and
Risks").

As previously noted, the discussion set forth below, as well as other
portions of this Form 10-K, contains statements concerning potential future
events. 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 on which the statements are based 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, the Company-Specific Trends and Risks. Readers
are strongly encouraged to consider those factors when evaluating any such
forward-looking statement. We do not undertake to update any forward-looking
statements in this Form 10-K.

The Company's fiscal year is a 52-53 week period ending on the last
Saturday of the calendar year. Fiscal year 2000 contained 53 weeks compared to
52 weeks for fiscal years 2003, 2002 and 2001. Unless otherwise stated, all
years and dates refer to the Company's fiscal year and fiscal periods. Unless
the context otherwise requires, references in this document to "we," "us," "our"
and similar terms refer to Garmin Ltd. and its subsidiaries.

Unless otherwise indicated, dollars are in thousands.


Overview

We are 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 applications 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.

Since our first products were delivered in 1991, we have generated positive
income from operations each year and have funded our growth from these profits.
Our sales have increased at a compounded annual growth rate of 23% since 1996
and our net income has increased at a compounded annual growth rate of 34% since
1996. The vast majority of this growth has been organic; only a very small
amount of new revenue occurred as a result of the acquisition of UPS Aviation
Technologies in 2003, and this acquisition had no significant impact on net
income for that year.

Since our principal locations are in the United States, Taiwan and the
U.K., we experience some foreign currency fluctuations in our operating results.
The functional currency of our European operations is the U.S. dollar (effective
in 2001) and the functional currency of our Asian operations is the New Taiwan
Dollar. Minimal transactions of our European operations are now denominated in
British Pounds Sterling or the Euro. We experienced $(6.7) million, $0.0
million, $11.6 million, $7.0 million, and $(1.5) million in foreign currency
gains (losses) during fiscal years 2003, 2002, 2001, 2000, and 1999,
respectively. To date, we have not entered into hedging transactions with the
European Dollar, the British Pound Sterling or the New Taiwan Dollar, although
we may utilize hedging transactions in the future.

16


Critical Accounting Policies and Estimates


General

The Company's discussion and analysis of its financial condition and
results of operations are based upon the Company's 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 the Company to make estimates and judgements that affect the
reported amounts of assets, liabilities, revenues and expenses, and related
disclosure of contingent assets and liabilities. On an on-going basis, the
Company evaluates its estimates, including those related to customer sales
programs and incentives, product returns, bad debts, inventories, investments,
intangible assets, income taxes, warranty obligations, and contingencies and
litigation. The Company 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 judgements 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.


Revenue Recognition

The Company records estimated reductions to revenue for customer sales
programs returns and incentive offerings including rebates, price protection,
promotions and other volume-based incentives. The reductions to revenue are
based on estimates and judgements using historical experience and expectation of
future conditions. Changes in these estimates could negatively affect the
Company's operating results. These incentives are accrued for on a percentage of
sales basis and reviewed periodically. If market conditions were to decline, the
Company may take actions to increase customer incentive offerings possibly
resulting in an incremental reduction of revenue at the time the incentive is
offered.


Warranties

The Company's products sold are generally covered by a warranty for periods
ranging from one to two years. The Company accrues a warranty reserve for
estimated costs to provide warranty services. The Company's estimate of costs to
service its warranty obligations is based on historical experience and
expectation of future conditions. To the extent the Company experiences
increased warranty claim activity or increased costs associated with servicing
those claims, its warranty accrual will increase resulting in decreased gross
profit.


Inventory

The Company writes down its inventory for estimated obsolescence or
unmarketable inventory equal to the difference between the cost of inventory and
the estimated market value based upon assumptions about future demand and market
conditions. If actual market conditions are less favorable than those projected
by management, additional inventory write-downs may be required.

Investments

Investments are classified as available for sale and recorded at fair
value, and unrealized investment gains and losses are reflected in stockholders'
equity. Investment income is recorded when earned, and capital gains and losses
are recognized when investments are sold. Investments are reviewed periodically
to determine if they have suffered an impairment of value that is considered
other than temporary. If investments are determined to be impaired, a capital
loss is recognized at the date of determination.

Testing for impairment of investments also requires significant management
judgement. The identification of potentially impaired investments, the
determination of their fair value and the assessment of whether any decline in
value is other than temporary are the key judgement elements. The discovery of
new information and the passage of time can significantly change these
judgements. Revisions of impairment judgements are made when new information

17


becomes known, and any resulting impairment adjustments are made at that time.
The current economic environment and recent volatility of securities markets
increase the difficulty of determining fair value and assessing investment
impairment.


Income Taxes

While no valuation allowance has been recorded, it is the Company's policy
to record a valuation allowance to reduce its deferred tax assets to an amount
that it believes is more likely than not to be realized. While the Company has
considered future taxable income and ongoing prudent and feasible tax planning
strategies in assessing the need for the valuation allowance, in the event the
Company were to determine that it would not be able to realize all or part of
its net deferred tax assets in the future, an adjustment to the deferred tax
assets would be charged to income in the period such determination was made.
Likewise, should the Company determine that it would be able to realize its
deferred tax assets in the future in excess of its net recorded amount, an
adjustment to the deferred tax assets would increase income in the period such
determination was made.

In addition, the calculation of our tax liabilities involves dealing with
uncertainties in the application of complex tax regulations. We recognize
liabilities for tax audit issues in the U.S. and other tax jurisdictions based
on our estimate of whether, and the extent to which, additional taxes will be
due. If payment of these amounts ultimately proves to be unnecessary, the
reversal of the liabilities would result in tax benefits being recognized in the
period when we determine the liabilities are no longer necessary. If our
estimate of tax liabilities proves to be less than the ultimate assessment, a
further charge to expense would result.

Stock Based Compensation

The Company distributes a small number of stock options each year as part
of the Company's compensation package for employees. Employees with certain
levels of responsibility within the Company are eligible for stock option
grants, but the granting of options is at the discretion of the Compensation
Committee of the Board of Directors and is not a contractual obligation. Stock
compensation plans are discussed in detail in Note 11 of the Notes to
Consolidated Financial Statements.


Accounting Terms and Characteristics


Net Sales

Our net sales are primarily generated through sales to our global dealer
and distributor network and to original equipment manufacturers. We recognize
sales when products are shipped. Our sales are largely of a consumer nature;
therefore backlog levels are not necessarily indicative of our future sales
results. We aim to achieve a quick turnaround on orders we receive, and we
typically ship most orders within 72 hours.

Net sales are subject to some seasonal fluctuation. Typically, sales of our
consumer products are highest in the second quarter, due to increased demand
during the spring and summer marine season, and in the fourth quarter, due to
increased demand during the holiday buying season. Our aviation products do not
experience much seasonal variation, but are more influenced by the timing of the
release of new products when the initial demand is typically the strongest.


Gross Profit

The most significant components of our cost of goods sold are raw
materials, labor and depreciation. Raw material costs, which are our most
significant cost item, have come down slightly as a percentage of sales in
recent years, as we have negotiated lower raw material costs with our key
suppliers. As a result, gross profit has improved somewhat as a percentage of
sales when compared with prior years.


18


In 2000, we experienced upward pricing pressures on our high technology
components, but had offset those with efficiencies in our manufacturing
processes. We did not experience significant pricing pressure on high technology
components in fiscal 2001 and fiscal 2002. We experienced upward pricing
pressures on our high technology components in late 2003, but offset much of
those with efficiencies in our manufacturing processes. Our existing practice of
performing the design and manufacture of our products in-house has enabled us to
utilize alternative lower cost components from different suppliers and, where
possible, to redesign our products to permit us to use these lower cost
components. We believe that because of our practice of performing the design,
manufacture and marketing of our products in-house, both our Shijr, Taiwan and
Olathe, Kansas manufacturing plants have experienced relatively low costs of
manufacturing, compared to our competition. In general, products manufactured in
Taiwan have been our highest volume products. Our manufacturing labor costs
historically have been lower in Taiwan than in Olathe.

Sales price variability has had and can be expected to have an effect on
our gross profit. In the past, prices of some of our handheld devices sold into
the consumer market have declined due to market pressures and introduction of
new products sold at lower price points. The average selling prices of our
aviation products have decreased due to product mix and market pressures
partially offset by the introduction of more advanced products sold at higher
prices. In conjunction with the effects of lower labor costs experienced on
Taiwan production, the effect of the sales price variability inherent within the
mix of GPS-enabled products sold could have a significant impact on our gross
profit.


Selling, General and Administrative Expenses

Our selling, general and administrative expenses consist primarily of:

o salaries for sales and marketing personnel;

o salaries and related costs for executives and administrative
personnel;

o advertising, marketing, and other brand building costs;

o accounting and legal costs;

o information systems and infrastructure costs;

o travel and related costs; and

o occupancy and other overhead costs.

Since we plan to increase market penetration in the future, we expect
selling, general and administrative expenses to continue to increase for the
foreseeable future. We intend to increase advertising and marketing expenses in
order to build increased brand awareness in the consumer marketplace, especially
as we continue to develop new markets, such as automotive and personal digital
assistants (PDA). We also intend to increase our customer call center support as
our consumer segment continues to grow. Another cause of increased selling,
general, and administrative costs is the continued implementation of an ORACLE
Enterprise Resource Planning (ERP) system during fiscal 2004 and associated
information system staffing needed to support ORACLE. We anticipate that these
increased expenses could impact our financial results in fiscal 2004 and
subsequent periods, although it is unclear at this point what the extent of this
impact may be.

Research and Development

The majority of our research and development costs represent salaries for
our engineers, costs for high technology components used in product and
prototype development, and costs of test equipment needed during product
development.

We have continued to grow our research and development capabilities since
our inception. Substantially all of the research and development of our products
is performed in the United States.

19


We are committed to increasing the level of innovative design and
development of new products as we strive for expanded ability to serve our
existing consumer and aviation markets as well as new markets for GPS-enabled
devices. We continue to grow our research and development budget on absolute
terms. Research and development expenses may also grow at a faster rate when
compared to our projected revenue growth for fiscal year 2003.


Customers

No customer accounted for greater than 10% of our sales in the year ended
December 27, 2003. Our top ten customers accounted for approximately 25% of net
sales. We have experienced average sales days in our customer accounts
receivable between 35 and 51 days since 1999. The average sales days in our
customer accounts receivable was 51 days as of December 27, 2004.


Income Taxes

We have experienced a relatively low effective tax rate in Taiwan due to
lower marginal tax rates and substantial tax incentives offered by the Taiwanese
government on certain high-technology capital investments. Therefore, profits
earned in Taiwan have been taxed at a lower rate than those in the United States
and Europe. As a result, our consolidated effective tax rate was approximately
21% during 2003. We have taken advantage of this tax benefit in Taiwan since our
inception and we expect to continue to benefit from lower effective tax rates at
least through 2008. The current Taiwan tax incentives for which Garmin has
received approval will end in 2008. We plan on applying for additional
incentives for years beyond 2008 based on capital investments we expect to make
in the future. However, there can be no assurance that such tax incentives will
be available indefinitely.


Results of Operations

The following table sets forth our results of operations as a percentage of
net sales during the periods shown:


Fiscal Years Ended
-------------------------------------
Dec. 27, Dec. 28, Dec. 29,
2003 2002 2001
-------------------------------------

Net sales 100.0% 100.0% 100.0%
Cost of goods sold 42.3% 45.2% 46.3%
Gross profit 57.7% 54.8% 53.7%
Operating expenses:
Selling, general and administrative 10.4% 9.8% 10.5%
Research and development 7.6% 6.9% 7.6%
Total operating expenses 18.0% 16.7% 18.1%
Operating income 39.7% 38.1% 35.6%
Other income / (loss) , net (0.2%) 1.2% 5.6%
Income before income taxes 39.5% 39.3% 41.2%
Provision for income taxes 8.3% 8.6% 10.5%
Net income 31.2% 30.7% 30.7%

- --------------------------------------------------------------------------------



20


The following table sets forth our results of operations for each of our
two segments through income before taxes during the period 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 data included in Item
6.




Fiscal Years Ended
--------------------------------------------------------------------------
December 27, 2003 December 28, 2002 December 29, 2001
Consumer Aviation Consumer Aviation Consumer Aviation


Net sales $452,437 $120,552 $350,674 $114,470 $263,358 $105,761
Cost of goods sold 199,284 43,164 166,130 43,958 130,836 40,124
--------------------------------------------------------------------------

Gross profit 253,153 77,388 184,544 70,512 132,522 65,637
Operating expenses:
Selling, general and administrative 47,113 12,722 35,114 10,339 29,018 9,691
Research and development 22,195 21,511 18,863 13,300 18,197 9,967
--------------------------------------------------------------------------

Total operating expenses 69,308 34,233 53,977 23,639 47,215 19,658
--------------------------------------------------------------------------

Operating income 183,845 43,155 130,567 46,873 85,307 45,979
Other income / (loss), net (1,144) 87 4,292 1,002 17,204 3,545
--------------------------------------------------------------------------

Income before income taxes $182,701 $43,242 $134,859 $47,875 $102,511 $49,524

- ---------------------------------------------------------------------------------------------------------------------





Comparison of Fiscal Years Ended December 27, 2003 and December 28, 2002

Net Sales



------------------------------------------------------------------------------------------------------
2003 2002 Year over Year
------------------------------------------------------------------------------------------------------
% of % of
Net Sales Net Sales Net Sales Net Sales $ change % change
-------------------------------------------------------------------------------------------------------


Consumer $452,437 79.0% $350,674 75.4% $101,763 29.0%
- -----------------------------------------------------------------------------------------------------------------------------
Aviation 120,552 21.0% 114,470 24.6% 6,082 5.3%
- -----------------------------------------------------------------------------------------------------------------------------
Total $572,989 100.0% $465,144 100.0% $107,845 23.2%
- -----------------------------------------------------------------------------------------------------------------------------



The increase in total net sales during fiscal 2003 was primarily due to the
introduction of 16 new products and overall demand for our consumer products.
Total consumer and aviation units sold increased 33.0% to 2,066,000 in 2003 from
1,557,000 in 2002. In general, management believes that continuous innovation
and the introduction of new products are essential for future revenue growth.

The Company's revenues are seasonal, with the fiscal second and fourth
quarter revenues meaningfully higher than the first and third fiscal quarters.
The revenue increase in second quarter is primarily attributable to the onset of
the marine selling season and secondarily Father's Day purchases, and the
revenue increase in the fourth quarter is primarily attributable to the
traditional holiday selling season. Revenues can also be impacted in any given
quarter by the timing of new product introductions.

The increase in net sales to consumers was primarily due to the
introduction of 16 new consumer products and overall demand for our consumer
products as total units sold were up 33%. It is management's belief that the
continued demand for the Company's consumer products is due to the emergence of
the GPS market in general, and overall increased consumer awareness of the
capabilities and applications of GPS.

The increase in aviation sales for fiscal 2003 was primarily due to
increased sales from panel mount products sold into the retrofit market and
sales from UPS Aviation Technologies (now Garmin AT, Inc.), which was acquired
during the third quarter of 2003. While Temporary Flight Restrictions (TFR's)
continue to impact general aviation, the flying community is adapting to these
changes and returning to the skies in greater numbers. Should the Federal
Aviation Administration (FAA) impose more restrictions, or elect to shutdown
U.S. airspace in the future, these factors could have a material adverse effect
on our business.

21


Gross Profit



------------------------------------------------------------------------------------------------------
2003 2002 Year over Year
-------------------------------------------------------------------------------------------------------
Gross % of Gross % of
Profit Net Sales Profit Net Sales $ change % change
- -----------------------------------------------------------------------------------------------------------------------------


Consumer $253,153 56.0% $184,544 52.6% $68,609 37.2%
- -----------------------------------------------------------------------------------------------------------------------------
Aviation 77,388 64.2% 70,512 61.6% 6,876 9.8%
- -----------------------------------------------------------------------------------------------------------------------------
Total $330,541 57.7% $255,056 54.8% $75,485 29.6%
- -----------------------------------------------------------------------------------------------------------------------------



The increase in gross profit is primarily attributed to the introduction of
16 new products and overall demand for our consumer products. The improvement in
gross margin was primarily due to the introduction of new higher margin
products, improved manufacturing efficiencies on many of the new products
introduced throughout the year, and reductions of certain material costs early
in the fiscal year. The Company experienced upward pricing pressure on certain
raw materials components in the latter part of 2003. It is unclear at this point
if this pricing pressure will abate or continue in 2004.

The increase in consumer gross margin is primarily attributed to the
introduction of 16 new consumer products and overall demand for our consumer
products.

The increase in aviation gross profit is primarily due to improved product
mix within our OEM and retrofit products partially offset by certain lower gross
profit margin products as a result of the acquisition of UPS Aviation
Technologies.


Selling, General and Administrative Expenses




------------------------------------------------------------------------------------------------------
2003 2002 Year over Year
------------------------------------------------------------------------------------------------------
Selling, % of Selling, % of
Gen. & Admin. Net Sales Gen. & Admin. Net Sales $ change % change
- -----------------------------------------------------------------------------------------------------------------------------


Consumer $47,113 10.4% $35,114 10.0% $11,999 34.2%
- -----------------------------------------------------------------------------------------------------------------------------
Aviation 12,722 10.6% 10,339 9.0% 2,383 23.0%
- -----------------------------------------------------------------------------------------------------------------------------
Total $59,835 10.4% $45,453 9.8% $14,382 31.6%
- -----------------------------------------------------------------------------------------------------------------------------


The increase in expense was primarily attributable to increases in
employment generally across the organization (net increase of approximately 300
non-engineering employees), significantly increased advertising costs (up 32%)
associated primarily with consumer products, ORACLE software implementation
costs, and additional staffing in our customer call center. In the past,
selling, general and administrative expenses increased at a lower rate than
revenues due to strong demand for newly introduced and existing consumer
products. Management expects that in spite of strong demand for our products,
selling, general and administrative expenses will remain flat or increase
slightly as a percentage of sales during fiscal 2004.


Research and Development Expenses



-----------------------------------------------------------------------------------------------------
2003 2002 Year over Year
-----------------------------------------------------------------------------------------------------
Research % of Research % of
& Development Net Sales & Development Net Sales $ change % change
- -----------------------------------------------------------------------------------------------------------------------------


Consumer $22,195 4.9% $18,863 5.4% $3,332 17.7%
- -----------------------------------------------------------------------------------------------------------------------------
Aviation 21,511 17.8% 13,300 11.6% 8,211 61.7%
- -----------------------------------------------------------------------------------------------------------------------------
Total $43,706 7.6% $32,163 6.9% $11,543 35.9%
- -----------------------------------------------------------------------------------------------------------------------------


The increase in research and development expense was primarily attributable
to the addition of 50 UPS Aviation Technologies engineering associates to our
aviation research and development team and the addition of 100 new engineers to
our research and development teams during fiscal 2003. Management believes that
one of the key strategic initiatives for future growth and success of the
Company is continuous innovation, development, and introduction of new products.

22


Management expects that its research and development expenses will increase
approximately 20% to 25% during fiscal 2004 on an absolute dollar basis due to
the anticipated introduction of approximately 45 new products for fiscal 2004.
Management expects to continue to invest in the research and development of new
products and technology in order to maintain the Company's competitive advantage
in the markets in which it competes.


Other Income (Expense)

------------------------------------
2003 2002
- ----------------------------------------------------------------------------
Interest Income $7,473 $6,466
- ----------------------------------------------------------------------------
Interest Expense (534) (1,329)
- ----------------------------------------------------------------------------
Foreign Currency Exhange (6,699) 11
- ----------------------------------------------------------------------------
Other (1,297) 146
- ----------------------------------------------------------------------------
Total ($1,057) $5,294
- ----------------------------------------------------------------------------


Other income (expense) principally consists of interest income, interest
expense and foreign currency exchange gains and losses. Other income was
significantly lower in fiscal 2003, relative to fiscal year 2002, with the
majority of this difference caused by foreign currency losses in 2003. Interest
income for fiscal 2003 increased due to larger cash and marketable securities
balances during the year, increasing the returns on the Company's cash and cash
equivalents. Interest expense decreased 60% for fiscal 2003 relative to fiscal
2002, due primarily to the retirement of $20 million of outstanding long-term
debt during fiscal 2003.

During fiscal 2003 the Company experienced foreign currency exchange losses
of $6.7 million, as the U.S. Dollar weakened versus the New Taiwan Dollar (34.05
NTD/USD) relative to the end of fiscal 2002 (34.90 NTD/USD). During fiscal 2002
the Company's position was neutral with regard to foreign currency exchange
gains and losses, and the U.S. Dollar was at approximately the same level at the
beginning of 2002 relative to the New Taiwan Dollar ($35.17 NTD/USD) as it was
at the end of fiscal 2002 ($34.90 NTD/USD).


Income Tax Provision

Income tax expense increased by $7.4 million, to $47.3 million, for fiscal
year 2003 from $39.9 million for fiscal year 2002 due to our higher taxable
income. The effective tax rate was 20.9% for fiscal 2003 versus 21.9% for fiscal
2002. The decrease in tax rate is due primarily to additional tax benefits
received from Taiwan as a result of our continued capital investment in our
manufacturing facilities there. Management believes that the effective tax rate
for fiscal 2004 will be comparable to fiscal 2003. The actual effective tax rate
will be dependent upon the production volume and additional capital investments
made during fiscal 2004.


Net Income

As a result of the various factors noted above, net income increased 25.1%
to $178.6 million for fiscal year 2003 compared to $142.8 million for fiscal
year 2002.

23


Comparison of Fiscal Years Ended December 28, 2002 and December 29, 2001

Net Sales



-------------------------------------------------------------------------------------------------------
2002 2001 Year over Year
-------------------------------------------------------------------------------------------------------
% of % of
Net Sales Net Sales Net Sales Net Sales $ change % change
-------------------------------------------------------------------------------------------------------


Consumer $350,674 75.4% $263,358 71.3% $87,316 33.2%
- -----------------------------------------------------------------------------------------------------------------------------
Aviation 114,470 24.6% 105,761 28.7% 8,709 8.2%
- -----------------------------------------------------------------------------------------------------------------------------
Total $465,144 100.0% $369,119 100.0% $96,025 26.0%
- -----------------------------------------------------------------------------------------------------------------------------



The increase in net sales during fiscal 2002 was primarily due to the
introduction of 22 new products and overall demand for our consumer products.
Total consumer and aviation units sold increased 17.0% to 1,557,000 in 2002 from
1,331,000 in 2001. In general, management believes that continuous innovation
and the introduction of new products are essential for future revenue growth.

The increase in consumer net sales was primarily due to the introduction of
18 new consumer products and overall demand for our consumer products as total
units sold were up 17.1%. It is management's belief that the continued demand
for the Company's consumer products is due to the emergence of the GPS market in
general, and overall increased consumer awareness of the capabilities and
applications of GPS.

The increase in aviation net sales for fiscal 2002 was primarily due to the
introduction of four new products, increased penetration into the OEM market,
and significant reductions of the restrictions placed on general aviation
following the events of September 11, 2001. While Temporary Flight Restrictions
(TFR's) continue to impact general aviation, the flying community is adapting to
these changes and returning to the skies in greater numbers. Should the Federal
Aviation Administration (FAA) impose more restrictions, or elect to shutdown
U.S. airspace in the future, these factors could have a material adverse effect
on our business.


Gross Profit



-------------------------------------------------------------------------------------------------------
2002 2001 Year over Year
-------------------------------------------------------------------------------------------------------
Gross % of Gross % of
Profit Net Sales Profit Net Sales $ change % change
- -----------------------------------------------------------------------------------------------------------------------------

Consumer $184,544 52.6% $132,522 50.3% $52,022 39.3%
- -----------------------------------------------------------------------------------------------------------------------------
Aviation 70,512 61.6% 65,637 62.1% 4,875 7.4%
- -----------------------------------------------------------------------------------------------------------------------------
Total $255,056 54.8% $198,159 53.7% $56,897 28.7%
- -----------------------------------------------------------------------------------------------------------------------------


The increase in gross profit is primarily attributed to the introduction of
22 new products and overall demand for our consumer products. The improvement in
gross margin was primarily due to the introduction of new higher margin
products, improved manufacturing efficiencies on many of the new products
introduced throughout the year, and a reduction of material costs.

The increase in the consumer segment gross profit is primarily attributed
to the introduction of 18 new consumer products and overall demand for our
consumer products.

The increase in the aviation segment gross profit is primarily due to the
increase in revenues associated with the introduction of four new aviation
products, increased penetration into the OEM market, and a return to less
restricted airspace for general aviation aircraft. The decrease in gross margin
as a percentage of net revenues for the aviation segment is primarily attributed
to product mix as we experienced a 19.4% increase in lower margin panel mount
unit sales during 2002 when compared to 2001.

24


Selling, General and Administrative Expenses




-------------------------------------------------------------------------------------------------------
2002 2001 Year over Year
-------------------------------------------------------------------------------------------------------
Selling, % of Selling, % of
Gen. & Admin. Net Sales Gen. & Admin. Net Sales $ change % change
- -----------------------------------------------------------------------------------------------------------------------------

Consumer $35,114 10.0% $29,018 11.0% $6,096 21.0%
- -----------------------------------------------------------------------------------------------------------------------------
Aviation 10,339 9.0% 9,691 9.2% 648 6.7%
- -----------------------------------------------------------------------------------------------------------------------------
Total $45,453 9.8% $38,709 10.5% $6,744 17.4%
- -----------------------------------------------------------------------------------------------------------------------------




The increase in selling, general, and administrative expense was primarily
attributable to increases in employment generally across the organization (net
increase of 146 employees), increased advertising costs (up 13.3%) associated
primarily with new product releases, additional staffing in the customer call
center, and increases in insurance premiums. Overall, selling, general and
administrative expenses increased at a lower rate than revenues due to strong
demand for newly introduced and existing consumer products.


Research and Development Expenses




--------------------------------------------------------------------------------------------------------
2002 2001 Year over Year
--------------------------------------------------------------------------------------------------------
Research % of Research % of
& Development Net Sales & Development Net Sales $ change % change
- -----------------------------------------------------------------------------------------------------------------------------

Consumer $18,863 5.4% $18,197 6.9% $666 3.7%
- -----------------------------------------------------------------------------------------------------------------------------
Aviation 13,300 11.6% 9,967 9.4% 3,333 33.4%
- -----------------------------------------------------------------------------------------------------------------------------
Total $32,163 6.9% $28,164 7.6% $3,999 14.2%
- -----------------------------------------------------------------------------------------------------------------------------


The increase in research and development expense during fiscal 2002 was
primarily attributable to the development and introduction of 22 new products,
and the addition of 67 new engineers to our staff. Management believes that one
of the key strategic initiatives for future growth and success of the Company is
continuous innovation, development, and introduction of new products.


Other Income (Expense)

------------------------------------
2002 2001
- ----------------------------------------------------------------------------
Interest Income $6,466 $11,164
- ----------------------------------------------------------------------------
Interest Expense (1,329) (2,174)
- ----------------------------------------------------------------------------
Foreign Currency Exhange 11 11,573
- ----------------------------------------------------------------------------
Other 146 186
- ----------------------------------------------------------------------------
Total $5,294 $20,749
- ----------------------------------------------------------------------------

The majority of the difference between 2001 and 2002 was caused by foreign
currency gains in 2001. Interest income for fiscal 2002 decreased relative to
fiscal 2001 due to the fall in interest rates, reducing the returns on the
Company's cash and cash equivalents. Interest expense decreased from fiscal 2001
to fiscal 2002 due primarily to the reduction of debt and a lower interest rate
environment during fiscal 2002.

During fiscal 2002 the Company's position was neutral with regard to
foreign currency exchange gains and losses, as the U.S. Dollar was at
approximately the same level at the beginning of 2002 relative to the New Taiwan
Dollar (35.17 NTD/USD) as it was at the end of fiscal 2002 (34.90 NTD/USD). In
fiscal 2001 there was an $11.6 million gain due to the significantly increased
strength of the U.S. Dollar compared to the New Taiwan Dollar during 2001, when
the exchange rate increased to 35.17 NTD/USD at December 29, 2001 from 33.01
NTD/USD at December 30, 2000.


25


Income Tax Provision

Income tax expense increased by $1.3 million, to $39.9 million, for fiscal
year 2002 from $38.6 million for fiscal year 2001 due to our higher taxable
income. The effective tax rate was 21.9% for fiscal 2002 versus 25.4% for fiscal
2001. The decrease in tax rate is due primarily to additional tax benefits
received from Taiwan as a result of our continued capital investment in our
manufacturing facilities there.


Net Income

As a result of the above, net income increased 25.9% to $142.8 million for
fiscal year 2002 compared to $113.4 million for fiscal year 2001.


Liquidity and Capital Resources

Net cash generated by operations was $175.2 million, $175.4 million, and
$130.0 for fiscal years 2003, 2002, and 2001, respectively. We operate with a
customer oriented approach and seek to maintain 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 substantial
enough to meet most demand. We also attempt to carry sufficient inventory levels
of key components so that potential supplier shortages have as minimal an impact
as possible on our ability to deliver our finished products. We significantly
increased our raw material inventories in late 2003 in anticipation of new
product releases in the first half of 2004 and also as a response to the
significant increase in the lead-time of high dollar components such as LCD's
and flash memory. In addition, we prefer to have sufficient finished goods on
hand to meet anticipated demand for our products. Finished goods inventory
levels also continued to grow gradually as a function of our growing sales. We
were able to reduce inventory levels during fiscal year 2002 by $3.6 million
when compared to fiscal year end 2001, without impairing our ability to meet
customer demand, by effectively managing the introduction of 22 new products
during the year. We expect that inventory levels may decrease during the latter
half of fiscal 2004 as raw materials inventories are consumed during the
manufacture and delivery of new products in the first half of 2004.

Capital expenditures in 2003 totaled $32.8 million, an increase of $20.4
million over fiscal 2002. This increase in 2003 was primarily attributable to
the initiation of expansion of our Olathe, Kansas facility ($17 million) and
maintenance capital expenditures ($3.4 million). During fiscal 2002, our capital
expenditures totaled $12.4 million. The expenditures in fiscal 2002 were
primarily related to general corporate purposes ($9.8 million) and the addition
of surface-mount production equipment in both the Olathe, Kansas and Shijr,
Taiwan facilities ($2.6 million).

We have budgeted approximately $60 million of capital expenditures during
fiscal 2004 to include construction costs related to the completion of our
facilities expansion in Olathe, Kansas and purchases of production machinery and
equipment to expand capacity in the Shijr, Taiwan facility.

In addition to capital expenditures, in 2003 cash flow used in investing
relates to the $38.2 million acquisition of UPS Aviation Technologies (renamed
Garmin AT), the purchase of fixed income securities associated with the
investment of our on-hand cash balances and approximately $2.3 million of
intangible assets. The Company's average return on its investments during fiscal
2003 was approximately 1.5%. In 2002, cash flow used in investing principally
related to the purchase of fixed income securities associated with the
investment of our on-hand cash balances and approximately $13.5 million related
to the purchase of licenses, of which $11.5 million consists of prepaid
royalties under our license agreement with PalmSource, Inc. for the Palm
Operating System. It is management's goal to invest the on-hand cash consistent
with the Company's investment policy, which has been approved by the Board of
Directors. The investment policy's primary purpose is to preserve capital,
maintain an acceptable degree of liquidity, and maximize yield within the
constraint of maximum safety. The Company's average return on its investments
during fiscal year 2002 was approximately 1.6%.

Cash flow used in financing activities during 2003 relates primarily to the
payment of a dividend ($54.0 million), and reduction of our debt ($20.0
million). The Company retired approximately $20.0 million of long-term debt
during fiscal 2003, which represented the remainder of an outstanding issue of


26


industrial revenue bonds. The employee stock option exercises and employee stock
purchase plan purchases generated a $4.3 million source of cash in 2003. Cash
flow used in financing activities during 2002 relates primarily to the reduction
of our debt. The Company retired approximately $12.2 million of its long-term
debt during fiscal 2002, consisting in good part of an outstanding issue of
industrial revenue bonds. The employee stock purchase plan and stock option
exercises were a $2.1 million source of cash in 2002. During 2001, the Company
repurchased 595,200 shares of its common shares under its stock repurchase
program that was approved by the Board of Directors on September 24, 2001 and
expired on December 31, 2002.

We currently use cash flow from operations to fund our capital expenditures
and to support our working capital requirements. We expect that future cash
requirements will principally be for capital expenditures and working capital
requirements.

Cash dividends paid to shareholders were $54.0 million, $0.0 million, $0.0
million, and $29.0 million during fiscal years 2003, 2002, 2001 and 2000,
respectively. Included in cash dividends for fiscal 2000 was a special one-time
dividend of $17.4 million that was paid in order to provide funds to
shareholders to pay withholding taxes and stock transfer taxes related to the
reorganization of Garmin Corporation.

We believe that our existing cash balances and cash flow from operations
will be sufficient to meet our projected capital expenditures, working capital
and other cash requirements at least through the end of fiscal 2004.


Contractual Obligations and Commercial Commitments

On March 23, 2000, Garmin International, Inc. completed a $20.0 million
20-year Taxable Industrial Revenue Bond issuance (the "2000 Bonds") for the
expansion of its Olathe, Kansas facility. During May of fiscal 2003, these
outstanding bonds were retired by Garmin International, Inc. for a total of
$20.0 million.

On January 1, 1995, Garmin International, Inc. completed a $9.5 million
30-year Tax-Exempt Industrial Revenue Bond issuance for the construction of its
new corporate headquarters located in Olathe, Kansas. Upon completion of the
project in 1996, Garmin International retired bonds totaling $0.1 million.
During May of fiscal 2002, the remainder of the outstanding bonds were retired
by Garmin International, Inc. for a total of $9.4 million.

We utilize interest rate swap agreements from time to time to manage
interest rate exposure. The principal objective of such financial derivative
contracts is to moderate the effect of fluctuations in interest rates. We, as a
matter of policy, do not speculate in financial markets and therefore do not
hold these contracts for trading purposes.

Future payments due from the Company, as of December 27, 2003, aggregated
by type of contractual obligation, are:




Payments due by period
-----------------------------------------------------------
Less than More than
Contractual Obligations Total 1 year 1-3 years 3-5 years 5 years
- --------------------------------------------------------------------------------------------

Long-Term Debt - - - - -
Capital Lease Obligations - - - - -
Operating Leases $15,189 $107 $602 $602 $13,878
Purchase Obligations $60,013 $60,013 $0 $0 $0
Other Long-Term Liabilities - - - - -
-----------------------------------------------------------
Total $75,202 $60,120 $602 $602 $13,878




Operating Leases describes a lease obligation associated with the Garmin
Europe facility in the United Kingdom and a lease obligation associated with
Garmin AT. Purchase obligations are the aggregate of those purchase orders that
were outstanding on December 27, 2003; these obligations are created and then
paid off within 3 months during the normal course of our manufacturing business.


27


Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements.


Recent Accounting Pronouncements

In December 2002, the FASB issued SFAS No. 148, "Accounting for Stock-Based
Compensation -- Transition and Disclosure." This statement requires all entities
with stock-based employee compensation arrangements to provide additional
disclosures in their summary of significant accounting policies note. Since the
Company uses the intrinsic value method of Accounting Principles Board ("APB")
Opinion No. 25, "Accounting for Stock Issued to Employees", the accounting
policies note includes a tabular presentation of pro forma net income and
earnings per share using the fair value method prescribed by SFAS No. 123,
"Accounting for Stock-Based Compensation". Also, SFAS No. 148 permits entities
changing to the fair value method of accounting for employee stock compensation
to choose from one of three transition methods -- the prospective method, the
modified prospective method, or the retroactive restatement method. Finally,
SFAS No. 148 requires the Company to make interim-period pro forma disclosures
if stock-based compensation is accounted for under the intrinsic value method in
any period presented. The expanded annual disclosure requirements and the
transition provisions were effective for the Company's fiscal year 2002. The new
interim period disclosures were required in the Company's financial statements
for interim periods beginning in the first quarter of fiscal 2003. This
statement did not have a material impact on the Company's results of operations
or financial condition.

In July 2001, the FASB issued SFAS No. 143, "Accounting for Asset
Retirement Obligations." The objective of this statement is to provide
accounting guidance for legal obligations associated with the retirement of
long-lived assets by requiring the fair value of a liability for the asset
retirement obligation to be recognized in the period in which it is incurred.
When the liability is initially recognized, the asset retirement costs should
also be capitalized by increasing the carrying amount of the related long-lived
asset. The liability is then accreted to its present value each period and the
capitalized costs are depreciated over the useful life of the associated asset.
This statement is effective for fiscal years beginning after June 15, 2002, and
did not have a material impact on our financial statements.

At its November 2002 meeting, the EITF reached a consensus on Issue 00-21
"Accounting for Revenue Arrangements with Multiple Deliverable", which provides
a model to be used, in the context of a multiple-deliverable revenue
arrangement, in determining (a) how the arrangement consideration should be
measured, (b) whether the arrangement should be divided into separate units of
accounting, and, if so, (c) how the arrangement consideration should be
allocated to the separate units of accounting. Issue 00-21 is effective for
revenue arrangements entered into in fiscal periods (annual or interim)
beginning after June 15, 2003, with earlier adoption permitted. Companies also
are permitted to adopt Issue 00-21 by reporting the change in accounting as a
cumulative effect adjustment in accordance with APB Opinion No. 20, "Accounting
Changes", and FASB Statement No. 3, "Reporting Accounting Changes in Interim
Financial Statements". The adoption of this standard did not have a material
impact on the Company's results of operations or financial condition.

In January 2003, the Financial Accounting Standards Board (FASB) issued
Interpretation No. 46, "Consolidation of Variable Interest Entities."
Interpretation No. 46 requires that the assets, liabilities and results of the
activity of variable interest entities be consolidated into the financial
statements of the Company that has the controlling financial interest.
Interpretation No. 46 also provides the framework for determining whether a
variable interest entity should be consolidated based on voting interests or
significant financial support provided to it. Interpretation No. 46 will become
effective for the Company on March 31, 2004 for variable interest entities
created prior to December 31, 2003. We do not expect the adoption of
Interpretation No. 46 to have a material impact on our results of operations or
financial condition.


Company-Specific Trends and Risks

You should carefully consider the risks described below regarding an
investment in our common shares. The risks described below are not the only ones

28


facing our company. Additional risks and uncertainties not presently known to us
or that we currently believe to be immaterial may also impair our business
operations. If any of the following risks occur, our business, financial
condition or operating results could be materially adversely affected.


Risks Related to the Company

Our Global Positioning System products depend upon satellites maintained by the
United States Department of Defense. If a significant number of these satellites
become inoperable, unavailable or are not replaced or if the policies of the
United States government for the use of the Global Positioning System without
charge are changed or if there is interference with Global Positioning System
signals, our business will suffer.

The Global Positioning System is a satellite-based navigation and
positioning system consisting of a constellation of orbiting satellites. The
satellites and their ground control and monitoring stations are maintained and
operated by the United States Department of Defense. The Department of Defense
does not currently charge users for access to the satellite signals. These
satellites and their ground support systems are complex electronic systems
subject to electronic and mechanical failures and possible sabotage. The
satellites were originally designed to have lives of 7.5 years and are subject
to damage by the hostile space environment in which they operate. However, of
the current deployment of satellites in place, some have been operating for more
than 13 years.

If a significant number of satellites were to become inoperable,
unavailable or are not replaced, it would impair the current utility of our
Global Positioning System products and the growth of current and additional
market opportunities. In addition, there can be no assurance that the U.S.
government will remain committed to the operation and maintenance of Global
Positioning System satellites over a long period, or that the policies of the
U.S. government that provide for the use of the Global Positioning System
without charge and without accuracy degradation will remain unchanged. Because
of the increasing commercial applications of the Global Positioning System,
other U.S. government agencies may become involved in the administration or the
regulation of the use of Global Positioning System signals.

European governments have expressed interest in building an independent
satellite navigation system known as Galileo. Depending on the as yet
undetermined design and operation of this system, it is possible that it could
cause interference with Global Positioning System signals.

Any of the foregoing factors could affect the willingness of buyers of our
products to select Global Positioning System-based products instead of products
based on competing technologies.


A shut down of U.S. airspace would harm our business.

On September 11, 2001, terrorists hijacked and crashed four passenger
aircraft operated by commercial air carriers, resulting in major loss of life
and property. Following the terrorist attacks, the Federal Aviation
Administration ("FAA") ordered all aircraft operating in the U.S. to be grounded
for several days. In addition to this shut down of U.S. airspace, the general
aviation industry was further impacted by the additional restrictions
implemented by the FAA on those flights that fly utilizing Visual Flight Rules
(VFR). The FAA restricted VFR flight inside 30 enhanced Class B (a 20-25 mile
radius around the 30 largest metropolitan areas in the USA) airspace areas. The
Aircraft Owners and Pilots Association (AOPA) estimated that these restrictions
affected approximately 41,800 general aviation aircraft based at 282 airports
inside the 30 enhanced Class B airspace areas. The AOPA estimates that
approximately 90% of all general aviation flights are conducted VFR, and that
only 15% of general aviation pilots are current to fly utilizing Instrument
Flight Rules (IFR).

The shut down of U.S. airspace following September 11, 2001 caused reduced
sales of our general aviation products and delays in the shipment of our
products manufactured in our Taiwan manufacturing facility to our distribution
facility in Olathe, Kansas, thereby adversely affecting our ability to supply
new and existing products to our dealers and distributors.

Any future shut down of U.S. airspace or imposition of restrictions on
general aviation could have a material adverse effect on our business and
financial results.

29



Any reallocation of radio frequency spectrum could cause interference with the
reception of Global Positioning System signals. This interference could harm our
business.

Our Global Positioning System technology is dependent on the use of the
Standard Positioning Service (SPS) provided by the U.S. Government's Global
Positioning System satellites. The Global Positioning System operates in radio
frequency bands that are globally allocated for radio navigation satellite
services. The assignment of spectrum is controlled by an international
organization known as the International Telecommunications Union ("ITU"). The
Federal Communications Commission ("FCC") is responsible for the assignment of
spectrum for non-government use in the United States in accordance with ITU
regulations. Any ITU or FCC reallocation of radio frequency spectrum, including
frequency band segmentation or sharing of spectrum, could cause interference
with the reception of Global Positioning System signals and may materially and
adversely affect the utility and reliability of our products, which would, in
turn, have a material adverse effect on our operating results. In addition,
emissions from mobile satellite service and other equipment operating in
adjacent frequency bands or inband may materially and adversely affect the
utility and reliability of our products, which could result in a material
adverse effect on our operating results.


Ultra-Wideband radio devices could cause interference with the reception of
Global Positioning System signals if the FCC were to change its rules. This
interference could harm our business.

On February 13, 2003, the FCC adopted a Memorandum Opinion and Order (the
"Order") that allows a limited number of Ultra-Wideband ("UWB") devices to
operate on a licensed basis in the frequency band used by the Global Positioning
System. The Order limits these devices to use by qualified emergency officials
at emission limits that protect the Global Positioning System. The FCC has
stated that it plans to review the rules of operation for UWB devices again
within a twelve to eighteen month period following the date of adoption of the
Order. If the FCC were to issue a further rule authorizing operation of UWB
devices in the frequency band used by the Global Positioning System at higher
power levels than those set out in the Order or otherwise change the
definitional or operational characteristics of permitted UWB devices, such
devices might cause interference with the reception of Global Positioning System
signals. Such interference could reduce demand for Global Positioning System
products in the future. Any resulting change in market demand for Global
Positioning System products could have a material adverse effect on our
financial results.


If we are not successful in the continued development, introduction or timely
manufacture of new products, demand for our products could decrease.

We expect that a significant portion of our future revenue will continue to
be derived from sales of newly introduced products. The market for our products
is characterized by rapidly changing technology, evolving industry standards and
changes in customer needs. If we fail to modify or improve our products in
response to changes in technology, industry standards or customer needs, our
products could rapidly become less competitive or obsolete. We must continue to
make significant investments in research and development in order to continue to
develop new products, enhance existing products and achieve market acceptance
for such products. However, there can be no assurance that development stage
products will be successfully completed or, if developed, will achieve
significant customer acceptance.

If we are unable to successfully develop and introduce competitive new
products, and enhance our existing products, our future results of operations
would be adversely affected. Our pursuit of necessary technology may require
substantial time and expense. We may need to license new technologies to respond
to technological change. These licenses may not be available to us on terms that
we can accept or may materially change the gross profits that we are able to
obtain on our products. We may not succeed in adapting our products to new
technologies as they emerge. Development and manufacturing schedules for
technology products are difficult to predict, and there can be no assurance that
we will achieve timely initial customer shipments of new products. The timely
availability of these products in volume and their acceptance by customers are
important to our future success. We have previously experienced delays in
shipping certain of our products and any future delays, whether due to product

30


development delays, manufacturing delays, lack of market acceptance, delays in
regulatory approval, or otherwise, could have a material adverse effect on our
results of operations.


If we do not correctly anticipate demand for our products, we may not be able to
secure sufficient quantities or cost-effective production of our products or we
could have costly excess production or inventories.

Historically, we have experienced steady increases in demand for our
products (although we did experience a decline in demand for our aviation
products in 2001 due to declining economic conditions and the shut down of U.S.
airspace as a result of the terrorist attacks that occurred on September 11,
2001) and we have generally been able to increase production to meet that
demand. However, the demand for our products depends on many factors and will be
difficult to forecast. We expect that it will become more difficult to forecast
demand as we introduce and support multiple products and as competition in the
market for our products intensifies. Significant unanticipated fluctuations in
demand could cause the following problems in our operations:

o If demand increases beyond what we forecast, we would have to rapidly
increase production. We would depend on suppliers to provide
additional volumes of components and those suppliers might not be
able to increase production rapidly enough to meet unexpected demand.

o Rapid increases in production levels to meet unanticipated demand
could result in higher costs for manufacturing and supply of
components and other expenses. These higher costs could lower our
profit margins. Further, if production is increased rapidly,
manufacturing quality could decline, which may also lower our
margins.

o If forecasted demand does not develop, we could have excess
production resulting in higher inventories of finished products and
components, which would use cash and could lead to write-offs of some
or all of the excess inventories. Lower than forecasted demand could
also result in excess manufacturing capacity at our facilities, which
could result in lower margins.


We may become subject to significant product liability costs.

If our aviation products malfunction or contain errors or defects, airplane
collisions or crashes could occur resulting in property damage, personal injury
or death. Malfunctions or errors or defects in our marine navigational products
could cause boats to run aground or cause other wreckage, personal injury or
death. If any of these events occurs, we could be subject to significant
liability for personal injury and property damage. We maintain insurance against
accident-related risks involving our products. However, there can be no
assurance that such insurance would be sufficient to cover the cost of damages
to others or that such insurance will continue to be available at commercially
reasonable rates. If we are unable to maintain sufficient insurance to cover
product liability costs, our business could be harmed.


We depend on our suppliers, some of which are the sole source for specific
components, and our production would be seriously harmed if these suppliers are
not able to meet our demand and alternative sources are not available, or if the
costs of components rise.

We are dependent on third party suppliers for various components used in
our current products. Some of the components that we procure from third party
suppliers include semiconductors and electroluminescent panels, liquid crystal
displays, memory chips and microprocessors. The cost, quality and availability
of components are essential to the successful production and sale of our
products. Some components we use are from sole source suppliers. Certain
application-specific integrated circuits incorporating our proprietary designs
are manufactured for us by sole source suppliers. Alternative sources may not be
currently available for these sole source components.

In the past, we have experienced shortages, particularly involving
components that are also used in cellular phones. In addition, if there are
shortages in supply of components, the costs of such components may rise. If
suppliers are unable to meet our demand for components on a timely basis and if

31


we are unable to obtain an alternative source or if the price of the alternative
source is prohibitive, or if the costs of components rise, our ability to
maintain timely and cost-effective production of our products would be seriously
harmed.

We license mapping data for use in our products from various sources. There
are only a limited number of suppliers of mapping data for each geographical
region. If we are unable to continue licensing such mapping data and are unable
to obtain an alternative source, or if the price of the alternative source is
prohibitive, our ability to supply mapping data for use in our products would be
seriously harmed.


We rely on independent dealers and distributors to sell our products, and
disruption to these channels would harm our business.

Because we sell a majority of our products to independent dealers and
distributors, we are subject to many risks, including risks related to their
inventory levels and support for our products. In particular, our dealers and
distributors maintain significant levels of our products in their inventories.
If dealers and distributors attempt to reduce their levels of inventory or if
they do not maintain sufficient levels to meet customer demand, our sales could
be negatively impacted.

Our dealers and distributors also sell products offered by our competitors.
If our competitors offer our dealers and distributors more favorable terms,
those dealers and distributors may de-emphasize or decline to carry our
products. In the future, we may not be able to retain or attract a sufficient
number of qualified dealers and distributors. If we are unable to maintain
successful relationships with dealers and distributors or to expand our
distribution channels, our business will suffer.


Failure to manage our growth and expansion effectively could adversely impact
our business.

Our ability to successfully offer our products and implement our business
plan in a rapidly evolving market requires an effective planning and management
process. We continue to increase the scope of our operations domestically and
internationally and have grown our shipments and headcount substantially. This
growth has placed, and our anticipated growth in future operations will continue
to place, a significant strain on our management systems and resources.


Our business may suffer if we are not able to hire and retain sufficient
qualified personnel or if we lose our key personnel.

Our future success depends partly on the continued contribution of our key
executive, engineering, sales, marketing, manufacturing and administrative
personnel. We currently do not have employment agreements with any of our key
executive officers. We do not have key man life insurance on any of our key
executive officers and do not currently intend to obtain such insurance. The
loss of the services of any of our senior level management, or other key
employees, could harm our business. Recruiting and retaining the skilled
personnel we require to maintain our market position may be difficult. For
example, in some recent years there has been a nationwide shortage of qualified
electrical engineers and software engineers who are necessary for us to design
and develop new products and therefore, it has sometimes been challenging to
recruit such personnel. If we fail to hire and retain qualified employees, we
may not be able to maintain and expand our business.


Our sales and gross margins for our products may fluctuate or erode.

Our sales and gross margins for our products may fluctuate from period to
period due to a number of factors, including product mix, competition and unit
volumes. In particular, the average selling prices of a specific product tend to
decrease over that product's life. To offset such decreases, we intend to rely
primarily on obtaining yield improvements and corresponding cost reductions in
the manufacture of existing products and on introducing new products that
incorporate advanced features and therefore can be sold at higher average
selling prices. However, there can be no assurance that we will be able to
obtain any such yield improvements or cost reductions or introduce any such new
products in the future. To the extent that such cost reductions and new product

32


introductions do not occur in a timely manner or our customers' products do not
achieve market acceptance, our business, financial condition and results of
operations could be materially adversely affected. As we introduce new product
lines that serve personal digital assistant ("PDA"), and original equipment
manufacturer automotive and sensor board applications, we may experience a
decline in our overall gross margins from sales of these potentially high volume
but low margin product lines.


Our quarterly operating results are subject to fluctuations and seasonality.

Our operating results are difficult to predict. Our future quarterly
operating results may fluctuate significantly. If this occurs, the price of our
stock would likely decline. As we expand our operations, our operating expenses,
particularly our sales, marketing and research and development costs, may
increase as a percentage of our sales. If revenues decrease and we are unable to
reduce those costs rapidly, our operating results would be negatively affected.

Historically, our revenues have usually been weaker in the first and third
quarters of each fiscal year and have, from time to time, been lower than the
preceding quarter. Our devices are highly consumer-oriented, and consumer buying
is traditionally lower in these quarters. Sales of certain of our consumer
products tend to be higher in our second fiscal quarter due to increased
consumer spending for such products during the recreational marine and fishing
season. Sales of certain of our consumer products also tend to be higher in our
fourth fiscal quarter due to increased consumer spending patterns on electronic
devices during the holiday season. In addition, we attempt to time our new
product releases to coincide with relatively higher consumer spending in the
second and fourth fiscal quarters, which contributes to these seasonal
variations.


Our quarterly financial statements will reflect fluctuations in foreign currency
translation.

Our Taiwan subsidiary holds, and is expected to continue to hold,
significant cash, cash equivalents, and marketable securities. Because the U.S.
Dollar is the primary currency for our business and in order to substantially
reduce the economic consequence of any variation in the exchange rate for the
U.S. Dollar and the New Taiwan Dollar on these assets, management expects that
the Taiwan subsidiary will continue to hold the majority of these assets in U.S.
Dollar or U.S. Dollar denominated instruments. Nonetheless, U.S. GAAP requires
the Company at the end of each accounting period to translate into New Taiwan
dollars all such U.S. dollar denominated assets held by our Taiwan subsidiary.
This translation is required because the New Taiwan Dollar is the functional
currency of the subsidiary. This U.S. GAAP-mandated translation will cause us to
recognize gain or loss on our financial statements as the New Taiwan dollar/U.S.
dollar exchange rate varies. Such gain or loss will create variations in our
earnings per share. Because there is minimal cash impact caused by such exchange
rate variations, management will continue to focus on the Company's operating
performance before the impact of the foreign currency translation.


If we are unable to compete effectively with existing or new competitors, our
resulting loss of competitive position could result in price reductions, fewer
customer orders, reduced margins and loss of market share.

The markets for our products are highly competitive and we expect
competition to increase in the future. Many of our competitors have
significantly greater financial, technical and marketing resources than we do.
These competitors may be able to respond more rapidly to new or emerging
technologies or changes in customer requirements. They may also be able to
devote greater resources to the development, promotion and sale of their
products. Increased competition could result in price reductions, fewer customer
orders, reduced margins and loss of market share. Our failure to compete
successfully against current or future competitors could seriously harm our
business, financial condition and results of operations.


Our intellectual property rights are important to our operations, and we could
suffer loss if they infringe upon other's rights or are infringed upon by
others.

We rely on a combination of patents, copyrights, trademarks and trade
secrets, confidentiality provisions and licensing arrangements to establish and
protect our proprietary rights. To this end, we hold rights to a number of

33


patents and registered trademarks and regularly file applications to attempt to
protect our rights in new technology and trademarks. However, there is no
guarantee that our patent applications will become issued patents, or that our
trademark applications will become registered trademarks. Moreover, even if
approved, our patents or trademarks may thereafter be successfully challenged by
others or otherwise become invalidated for a variety of reasons. In addition,
the only patents we have obtained are U.S. patents. Thus, any patents or
trademarks we currently have or may later acquire may not provide us a
significant competitive advantage.

Third parties may claim that we are infringing their intellectual property
rights. Such claims could have a serious adverse effect on our business and
financial condition. From time to time we receive letters alleging infringement
of patents. Litigation concerning patents or other intellectual property is
costly and time consuming. We may seek licenses from such parties, but they
could refuse to grant us a license or demand commercially unreasonable terms. We
might not have sufficient resources to pay for the licenses. Such infringement
claims could also cause us to incur substantial liabilities and to suspend or
permanently cease the use of critical technologies or processes or the
production or sale of major products.


Failure to obtain required certifications of our products on a timely basis
could harm our business.

We have certain products, especially in our aviation segment, that are
subject to governmental and similar certifications before they can be sold. For
example, Federal Aviation Administration ("FAA") certification is required for
all of our aviation products that are intended for installation in type
certificated aircraft. To the extent required, certification is an expensive and
time consuming process that requires significant focus and resources. An
inability to obtain, or excessive delay in obtaining, such certifications could
have an adverse effect on our ability to introduce new products and, therefore,
our operating results. In addition, we cannot assure you that our certified
products will not be decertified. Any such decertification could have an adverse
effect on our operating results.


Our business is subject to economic, political and other risks associated with
international sales and operations.

Our business is subject to risks associated with doing business
internationally. We estimate that approximately 29% of our net sales in the
fiscal year ended December 27, 2003 represented products shipped to
international destinations. Accordingly, our future results could be harmed by a
variety of international factors, including:

o changes in foreign currency exchange rates;


o changes in a specific country's or region's political or economic
conditions, particularly in emerging markets;

o trade protection measures and import or export licensing requirements;

o potentially negative consequences from changes in tax laws;

o difficulty in managing widespread sales and manufacturing operations;
and

o less effective protection of intellectual property.


We may experience unique economic and political risks associated with companies
that operate in Taiwan.

Relations between Taiwan and the People's Republic of China, also referred
to as the PRC, and other factors affecting the political or economic conditions
of Taiwan in the future could affect our business and the market price and the
liquidity of our shares. Our principal manufacturing facilities where we
manufacture all of our products, except our panel-mounted aviation products, are
located in Taiwan.

34


Taiwan has a unique international political status. The PRC asserts
sovereignty over all of China, including Taiwan, certain other islands and all
of mainland China. The PRC government does not recognize the legitimacy of the
Taiwan government. Although significant economic and cultural relations have
been established during recent years between Taiwan and the PRC, the PRC
government has indicated that it may use military force to gain control over
Taiwan in certain circumstances, such as the declaration of independence by
Taiwan. Relations between Taiwan and the PRC have on occasion adversely affected
the market value of Taiwanese companies and could negatively affect our
operations in Taiwan in the future.


There is uncertainty as to our shareholders' ability to enforce certain foreign
civil liabilities in the Cayman Islands and Taiwan.

We are a Cayman Islands company and a substantial portion of our assets are
located outside the United States, particularly in Taiwan. As a result, it may
be difficult for you to effect service of process within the United States upon
us. In addition, there is uncertainty as to whether the courts of the Cayman
Islands or Taiwan would recognize or enforce judgments of United States courts
obtained against us predicated upon the civil liability provisions of the
securities laws of the United States or any state thereof, or be competent to
hear original actions brought in the Cayman Islands or Taiwan against us
predicated upon the securities laws of the United States or any state thereof.


Our shareholders may face difficulties in protecting their interests because we
are incorporated under Cayman Islands law.

Our corporate affairs are governed by our Memorandum and Articles of
Association and by the Companies Law (2003 Revision) and the common law of the
Cayman Islands. The rights of our shareholders and the fiduciary
responsibilities of our directors under Cayman Islands law are not as clearly
established as under statutes or judicial precedent in existence in
jurisdictions in the United States. Therefore, our public shareholders may have
more difficulty in protecting their interests in the face of actions by the
management, directors or our controlling shareholders than would shareholders of
a corporation incorporated in a jurisdiction in the United States, due to the
comparatively less developed nature of Cayman Islands law in this area.


We may pursue strategic acquisitions, investments, strategic partnerships or
other ventures, and our business could be materially harmed if we fail to
successfully identify, complete and integrate such transactions.

We intend to evaluate acquisition opportunities and opportunities to make
investments in complementary businesses, technologies, services or products, or
to enter into any strategic partnerships with parties who can provide access to
those assets, additional product or services offerings or additional industry
expertise. In August 2003, we acquired UPS Aviation Technologies, Inc. We
currently have no commitments to make any material investments or acquisitions,
or to enter into strategic partnerships. We may not be able to identify suitable
acquisition, investment or strategic partnership candidates, or if we do
identify suitable candidates in the future, we may not be able to complete those
transactions on commercially favorable terms, or at all.

Any future acquisition could result in difficulties assimilating acquired
operations and products and diversion of capital and management's attention away
from other business issues and opportunities. Integration of acquired companies
may result in problems related to integration of technology and inexperienced
management teams. In addition, the key personnel of the acquired company may
decide not to work for us. Our management has had limited experience in
assimilating acquired organizations and products into our operations. We may not
successfully integrate any operations, personnel or products that we may acquire
in the future. If we fail to successfully integrate such transactions, our
business could be materially harmed.


35


We have benefited in the past from Taiwan government tax incentives offered on
certain high technology capital investments that may not always be available.

Our effective tax rate is lower than the U.S. Federal statutory rate,
because we have benefited from lower tax rates since our inception and from
incentives offered in Taiwan related to our high technology investments in
Taiwan. The loss of these tax benefits could have a significant effect on our
financial results in the future.


Changes in our United States federal income tax classification or in applicable
tax law could result in adverse tax consequences to our shareholders.

We do not believe that we (or any of our non-United States subsidiaries)
are currently a "foreign personal holding company" or "passive foreign
investment company" for United States federal income tax purposes. We would
constitute a foreign personal holding company in any taxable year if (1) 60% (or
50% in any year following the year in which we first became a foreign personal
holding company) or more of our gross income were foreign personal holding
company income (which is generally income of a passive nature such as dividends,
interest and royalties) (the "income test") and (2) more than 50% of the voting
power or value of our equity were owned, directly or indirectly, by five or
fewer U.S. holders that are individuals (the "shareholder test"). If we (or any
of our non-United States subsidiaries) are classified as a foreign personal
holding company in any taxable year, then each shareholder that is a United
States person would be required to pay tax on its pro rata share of the
undistributed foreign personal holding income of such foreign personal holding
company. We currently satisfy the shareholder test for qualifying as a foreign
personal holding company but intend to manage our affairs so as to attempt to
avoid satisfaction of the income test for qualifying as a foreign personal
holding company, or minimize the impact to our shareholders if we satisfy the
income test, to the extent this management of our affairs would be consistent
with our business goals, although we cannot assure you in this regard.

We do not expect to become a passive foreign investment company. However,
because the passive foreign investment company determination is made annually on
the basis of facts and circumstances that may be beyond our control and because
the principles for applying the passive foreign investment company tests are not
entirely clear, we cannot assure you that we will not become a passive foreign
investment company. If we are a passive foreign investment company in any year,
then any of our shareholders that is a United States person could be liable to
pay tax at ordinary income tax rates plus an interest charge upon some
distributions by us or when that shareholder sells our common shares at a gain.
Further, if we are classified as a passive foreign investment company in any
year in which a United States person is a shareholder, we generally will
continue to be treated as a passive foreign investment company with respect to
such shareholder in all succeeding years, regardless of whether we continue to
satisfy the income or asset tests described above. Additional tax considerations
would apply if we or any of our subsidiaries were a controlled foreign
corporation or a personal holding company.


Risks Relating to Our Shares

The markets for high technology stocks have experienced extreme volatility and
our share price may be subject to significant fluctuations and volatility.

The markets for high technology stocks have experienced extreme volatility
that has often been unrelated to the operating performance of the particular
companies. These broad market fluctuations may adversely affect the trading
price of our common shares.

36


Our officers and directors exert substantial influence over us.

As of March 1, 2004 members of our Board of Directors and our executive
officers, together with members of their families and entities that may be
deemed affiliates of or related to such persons or entities, beneficially own
approximately 45% of our outstanding common shares. Accordingly, these
shareholders may be able to determine the outcome of corporate actions requiring
shareholder approval, such as mergers and acquisitions. This level of ownership
may have a significant effect in delaying, deferring or preventing a change in
control of Garmin and may adversely affect the voting and other rights of other
holders of our common shares.


Prior to 2006, without the approval of a majority of certain of our
shareholders, we may not dispose of our shares of Garmin Corporation or its
assets, even if it would benefit all of our shareholders.

In connection with the reorganization whereby Garmin became the holding
company for Garmin Corporation, shareholders of Garmin Corporation entered into
a shareholders' agreement whereby each shareholder party to the agreement agreed
to take all reasonable actions required to prevent the disposition by Garmin of
any shares of Garmin Corporation or of substantially all of the assets of Garmin
Corporation until after December 31, 2005 except upon approval of a majority in
interest of such shareholders who are U.S. citizens or residents. Certain of our
officers and directors own a substantial portion of these shares.


Provisions in our charter documents might deter, delay or prevent a third party
from acquiring us, which could decrease the value of our shares.

Our Board of Directors has the authority to issue up to 1,000,000 preferred
shares and to determine the price, rights, preferences, privileges and
restrictions, including voting rights, of those shares without any further vote
or action by the shareholders. This could have an adverse impact on the market
price of our common shares. We have no present plans to issue any preferred
shares, but we may do so. The rights of the holders of common shares may be
subject to, and adversely affected by, the rights of the holders of any
preferred shares that may be issued in the future. In addition, we have adopted
a classified board of directors. Our shareholders are unable to remove any
director or the entire board of directors without a super majority vote. In
addition, a super majority vote is required to approve transactions with
interested shareholders. Shareholders do not have the right to call a
shareholders meeting. We have adopted a shareholders' rights plan which under
certain circumstances would significantly impair the ability of third parties to
acquire control of us without prior approval of our Board of Directors. This
shareholders' rights plan and the provisions in our charter documents could make
it more difficult for a third party to acquire us, even if doing so would
benefit our shareholders.


Item 7A. 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 materials costs.

Inflation

We do not believe that inflation has had a material effect on our business,
financial condition or results of operations. If our costs were to become
subject to significant inflationary pressures, we may not be able to fully
offset such higher costs through price increases. Our inability or failure to do
so could adversely affect our business, financial condition and results of
operations.

37


Foreign Currency Exchange Rate Risk

The operation of the Company's subsidiaries in international markets
results in exposure to movements in currency exchange rates. We generally have
not been significantly affected by foreign exchange fluctuations because, until
recently, the Taiwan Dollar has proven to be relatively stable. However,
periodically we have experienced significant foreign currency gains and losses
due to the strengthening and weakening of the U.S. dollar. The potential of
volatile foreign exchange rate fluctuations in the future could have a
significant effect on our results of operations.

The principal currency involved is the New Taiwan Dollar. Garmin
Corporation, located in Shijr, Taiwan uses 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. In order
to minimize the effect of the currency exchange fluctuations on our net assets,
we have elected to retain most of our Taiwan subsidiary's cash in U.S. dollars.
As discussed above, the Taiwan dollar/U.S. dollar exchange rate can be volatile.
The exchange rate decreased 3.0% during 2003 and resulted in a foreign currency
loss of $6.7 million. While the net effect of foreign currency moves in fiscal
2002 was neutral, there were significant shifts in the exchange rate throughout
2002. The exchange rate increased 6.5% during 2001 and resulted in a foreign
currency gain of $11.6 million. If the exchange rate decreased by a similar
percentage, a comparable foreign currency loss would be recognized. A 10%
positive or negative change in the US dollar exchange rate versus the New Taiwan
Dollar would have resulted in a foreign currency gain of $22.1 million (positive
10% change) or a foreign currency loss of $22.1 million (negative 10% change)
during 2003.


Interest Rate Risk

As of December 27, 2003, we have no outstanding long-term debt, and
therefore no debt-related interest rate risk. Upon retiring the industrial
revenue bond issue during 2003 as described above, Garmin International, Inc.
also terminated two interest rate swap agreements, one with a $10.0 million
notional amount and another with a $5.0 million notional amount at a cost of
$0.6 million. The Company's average outstanding debt during fiscal 2003 was
approximately $10 million. The average interest rate on debt during fiscal 2003
was 3.5%.

At December 27, 2003, the Company is exposed to interest rate risk in
connection with its investments in marketable securities. As interest rates
change, the unrealized gains and losses associated with those securities will
fluctuate accordingly. A hypothetical change of 10% in interest rates would not
have a material effect on such unrealized gains or losses. At December 27, 2003,
unrealized gains on those securities were $2.8 million.


38




Item 8. Financial Statements and Supplementary Data



CONSOLIDATED FINANCIAL STATEMENTS

Garmin Ltd. and Subsidiaries
Years Ended December 27, 2003, December 28, 2002, and December 29, 2001




Contents

Report of Independent Auditors................................................40

Consolidated Balance Sheets at December 27, 2003 and December 28, 2002........41
Consolidated Statements of Income for the Years Ended December 27, 2003,
December 28, 2002, and December 29, 2001...................................42
Consolidated Statements of Stockholders' Equity for the Years Ended
December 27, 2003, December 28, 2002, and December 29, 2001................43
Consolidated Statements of Cash Flows for the Years Ended December 27, 2003,
December 28, 2002, and December 29, 2001...................................44
Notes to Consolidated Financial Statements....................................46




39




Report of Independent Auditors



The Board of Directors and Stockholders
Garmin Ltd.


We have audited the accompanying consolidated balance sheets of Garmin Ltd.
and subsidiaries (the Company) as of December 27, 2003 and December 28, 2002,
and the related consolidated statements of income, stockholders' equity, and
cash flows for each of the three years in the period ended December 27, 2003.
Our audits also included the financial statement schedule listed in the index at
Item 15(a)(2). These financial statements and schedule are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements and schedule based on our audits.

We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.

In our opinion, the financial statements referred to above present
fairly, in all material respects, the consolidated financial position of Garmin
Ltd. and subsidiaries at December 27, 2003 and December 28, 2002, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended December 27, 2003, in conformity with accounting
principles generally accepted in the United States. Also, in our opinion, the
related financial statement schedule, when considered in relation to the basic
financial statements taken as a whole, presents fairly in all material respects
the information set forth therein.



/s/ Ernst & Young LLP


Kansas City, Missouri
January 30, 2004


40



Garmin Ltd. And Subsidiaries

Consolidated Balance Sheets
(In thousands, except share information)






December 27, December 28,
2003 2002
-------------------------------------

Assets
Current assets:
Cash and cash equivalents $274,329 $216,768
Marketable securities (Note 3) 53,127 113,336
Accounts receivable, less allowance for doubtful accounts of
$3,576 in 2003 and $3,153 in 2002 82,718 58,278
Inventories, net 96,794 57,507
Deferred income taxes (Note 7) 26,812 22,620
Prepaid expenses and other current assets 6,148 4,490
--------------- ---------------
Total current assets 539,928 472,999

Property and equipment (Note 5)
Land and improvements 21,168 20,517
Building and improvements 59,044 33,952
Office furniture and equipment 22,437 15,086
Manufacturing equipment 21,146 18,920
Engineering equipment 19,880 15,730
Vehicles 2,424 2,286
--------------- ---------------
146,099 106,491
Accumulated depreciation 41,315 32,051
--------------- ---------------
104,784 74,440

Restricted cash (Note 5) 1,602 1,598
Marketable securities (Note 3) 168,320 132,372
License agreements, net 14,966 19,370
Other intangible assets 27,345 5,109
--------------- ---------------
Total assets $856,945 $705,888
=============== ===============

Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $40,671 $32,446
Salaries and benefits payable 4,792 4,178
Accrued warranty costs 8,399 5,949
Accrued sales program costs 4,461 4,752
Other accrued expenses (Note 8) 7,165 8,000
Income taxes payable 38,946 25,853
--------------- ---------------
Total current liabilities 104,434 81,178

Long-term debt (Note 4) - 20,000
Deferred income taxes (Note 7) 2,821 2,211

Stockholders' equity:
Preferred stock, $1.00 par value, 1,000,000 shares authorized,
none issued
Common stock, $0.01 par value, 500,000,000 shares authorized
(Notes 12 and 13):
Issued and outstanding shares - 108,166,000 in 2003, and
107,919,766 in 2002 1,082 1,080
Additional paid-in capital 104,022 129,431
Retained earnings (Note 2) 663,604 507,884
Accumulated other comprehensive loss (19,018) (35,896)
--------------- ---------------
Total stockholders' equity 749,690 602,499
--------------- ---------------
Total liabilities and stockholders' equity $856,945 $705,888
=============== ===============



See accompanying notes.


41



Garmin Ltd. And Subsidiaries

Consolidated Statements of Income
(In Thousands, Except Per Share Information)





Fiscal Year Ended
------------------------------------------------------------------
December 27, December 28, December 29,
2003 2002 2001
------------------------------------------------------------------


Net sales $572,989 $465,144 $369,119
Cost of goods sold 242,448 210,088 170,960
--------------- ---------------- ---------------
Gross profit 330,541 255,056 198,159

Selling, general and administrative expenses 59,835 45,453 38,709
Research and development expense 43,706 32,163 28,164
--------------- ---------------- ---------------
103,541 77,616 66,873
--------------- ---------------- ---------------
Operating income 227,000 177,440 131,286

Other income (expense):
Interest income 7,473 6,466 11,164
Interest expense (534) (1,329) (2,174)
Foreign currency (6,699) 11 11,573
Other (1,297) 146 186
--------------- ----------------
(1,057) 5,294 20,749
--------------- ---------------- ---------------
Income before income taxes 225,943 182,734 152,035

Income tax provision (benefit):
Current 51,514 40,510 40,610
Deferred (4,205) (573) (2,023)
--------------- ---------------- ---------------
47,309 39,937 38,587
--------------- ---------------- ---------------
Net income $178,634 $142,797 $113,448
=============== ================ ===============

Basic net income per share (Note 12) $1.65 $1.32 $1.05
=============== ================ ===============
Diluted net income per share (Note 12) $1.64 $1.32 $1.05
=============== ================ ===============





See accompanying notes.


42



Garmin Ltd. And Subsidiaries

Consolidated Statements of Stockholders' Equity
(In Thousands, Except Per Share Information)




Accumulated
Additional Other
Common Stock Paid-In Retained Comprehensive
-----------------------
Shares Dollars Capital Earnings Loss Total
-----------------------------------------------------------------------


Balance at December 30, 2000 108,242 $1,082 $133,925 $253,140 ($22,908) $365,239
Net income - - - 113,448 - 113,448
Translation adjustment - - - - (15,519) (15,519)
Adjustment related to effective
portion of cash flow hedges,
net of income tax effects of
$579 - - - - (900) (900)
-----------
Comprehensive income 97,029
Issuance of common stock
from exercise of stock options 5 1 70 - - 71
Issuance of common stock
through stock purchase plan 123 1 1,463 - - 1,464
Purchase and retirement of
common stock (595) (6) (8,327) (1,501) - (9,834)
-----------------------------------------------------------------------
Balance at December 29, 2001 107,775 1,078 127,131 365,087 (39,327) 453,969
Net income - - - 142,797 - 142,797
Translation adjustment - - - - 2,456 2,456
Adjustment related to effective
portion of cash flow hedges,
net of income tax effects of
$170 - - - - 263 263
Adjustment related to
unrealized gains on
available-for-sale securities,
net of income tax effects of
$455 - - - - 712 712
-----------
Comprehensive income 146,228
Issuance of common stock from
exercise of stock options 74 1 1,252 - - 1,253
Issuance of common stock through
stock purchase plan 70 1 1,048 - - 1,049
-----------------------------------------------------------------------
Balance at December 28, 2002 107,919 1,080 129,431 507,884 (35,896) 602,499
Net income - - - 178,634 - 178,634
Translation adjustment - - - - 15,006 15,006
Adjustment related to effective
portion of cash flow hedges
less reclassification
adjustment, net of income tax
effects of $408 - - - - 638 638
Adjustment related to unrealized
gains (losses) on available-
for-sale securities, net of
income tax effects of $357 - - - - 1,234 1,234
-----------
Comprehensive income 195,512
Dividends paid ($0.50 per share) - - (31,126) (22,914) - (54,040)
Tax benefit from exercise of employee
stock options - - 1,458 - - 1,458
Issuance of common stock from
exercise of stock options 176 2 2,454 - - 2,456
Issuance of common stock through
stock purchase plan 71 - 1,805 - - 1,805
-----------------------------------------------------------------------
Balance at December 27, 2003 108,166 $1,082 $104,022 $663,604 ($19,018) $749,690
=======================================================================


See accompanying notes.


43



Garmin Ltd. and Subsidiaries
Consolidated Statements of Cash Flows
(In Thousands)




Fiscal Year Ended
--------------------------------------------------------
December 27, December 28, December 29,
2003 2002 2001
--------------------------------------------------------

Operating Activities:
Net income $178,634 $142,797 $113,448
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation 10,216 8,279 7,341
Amortization 9,888 7,852 3,527
(Gain) Loss on sale of property and equipment 61 (7) 23
Provision for doubtful accounts 600 941 1,137
Provision for obsolete and slow-moving inventories 6,574 688 4,000
Foreign currency translation gains/losses 10,015 600 (5,593)
Deferred income taxes (4,205) (573) (2,023)
Changes in operating assets and liabilities, net of acquisition:
Accounts receivable (21,982) (10,854) (17,894)
Inventories (36,102) 3,173 22,958
Prepaid expenses and other current assets (1,590) (1,568) (447)
Accounts payable 6,324 13,604 (2,657)
Accrued expenses 735 9,716 (1,016)
Income taxes payable 15,912 760 7,187
Other assets 100 - -
--------------- --------------- ---------------
Net cash provided by operating activities 175,180 175,408 129,991

Investing activities:
Purchases of property and equipment (32,770) (12,424) (14,883)
Proceeds from sale of property and equipment 14 18 239
Purchase of marketable securities 22,870 (869,112) (1,684,985)
Sales of marketable securities - 753,998 1,553,401
Purchase of Sequoia Instruments, Inc. - - (3,625)
Purchase of UPS Aviation Technologies, Inc. (38,177) - -
Purchase of licenses (1,724) (13,525) (12,028)
Change in restricted cash 4 2 4,239
Other (649) (29) (748)
--------------- --------------- ---------------
Net cash used in investing activities (50,432) (141,072) (158,390)

Financing activities:
Dividends (54,040) - -
Proceeds from issuance of common stock through
stock purchase plan 1,805 1,049 1,464
Proceeds from issuance of common stock from
exercise of stock options 2,456 1,026 71
Principal payments on long-term debt (20,000) (12,236) (14,189)
Purchase of common stock - - (9,834)
--------------- --------------- ---------------
Net cash used in financing activities (69,779) (10,161) (22,488)

Effect of exchange rate changes on cash and cash equivalents 2,592 (249) (8,002)
--------------- --------------- ---------------

Net increase / (decrease) in cash and cash equivalents 57,561 23,926 (58,889)
Cash and cash equivalents at beginning of year 216,768 192,842 251,731
--------------- --------------- ---------------
Cash and cash equivalents at end of year $274,329 $216,768 $192,842
=============== =============== ===============




44




Garmin Ltd. And Subsidiaries

Consolidated Statements of Cash Flows (continued)
(In Thousands)





Fiscal Year Ended
--------------------------------------------------------
December 27, December 28, December 29,
2003 2002 2001
--------------------------------------------------------

Supplemental disclosures of cash flow information

Cash paid during the year for income taxes $38,266 $39,992 $38,844
========================================================

Cash received during the year from income tax refunds $512 - -
========================================================

Cash paid during the year for interest $534 $1,325 $2,011
========================================================

Supplemental disclosure of non-cash investing and
financing activities
Change in liability recognized in accrued expenses
related to cash flow hedges and charge to
accumulated other comprehensive loss ($1,046) ($433) $1,479
========================================================

Change in marketable securities related to unrealized
appreciation $1,591 $1,167 -
========================================================

Fair value of assets acquired (UPS Aviation Technologies) $41,558 - -
Liabilities assumed (3,320) - -
Less: cash acquired (61) - -
--------------------------------------------------------
Net cash paid $38,177 - -
========================================================



See accompanying notes.



45


GARMIN LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In Thousands, Except Share and Per Share Information)
December 27, 2003 and December 28, 2002


1. Organization


On July 24, 2000, the stockholders of Garmin Corporation (GARMIN)
incorporated Garmin Ltd. (the Company) under the laws of the Cayman Islands.
Subsequently, the stockholders of GARMIN executed a Shareholders Agreement to
transfer to Garmin Ltd. their investments in 88,988,394 common shares of stock
of GARMIN. These shares, which represented approximately 100% of the issued and
outstanding common stock of GARMIN as of July 24, 2000, were used by the
stockholders to pay for their subscriptions to 100,000,000 common shares of
Garmin Ltd. at a par value of $0.01 or an aggregate value of $1,000. As such,
the exchange of shares in this reorganization between GARMIN and the newly
formed holding company, Garmin Ltd., completed on September 22, 2000, has been
accounted for at historical cost similar to that in pooling-of-interests
accounting. Until April 15, 2002, one share of GARMIN stock was held by each of
six shareholders as nominees under nominee trusts in order to comply with
Article 2 of the Company Law of Taiwan which required that, as a "company
limited by stock", GARMIN have at least seven shareholders, and 4,000 shares of
GARMIN were held by two shareholders who did not convert their GARMIN shares to
common shares of the Company. These 4,006 shares represented approximately
0.004% of the outstanding shares of GARMIN. Taiwan company law was subsequently
changed to remove the requirement that a Taiwan company have a minimum of seven
shareholders and to permit single shareholder companies. As of April 15, 2002,
the Company acquired the 4,000 shares of GARMIN that were held by the two
shareholders and the six nominee shareholders each transferred their own share
of GARMIN stock to the Company. As a result, the Company now owns all of the
outstanding shares of GARMIN. Garmin Ltd. completed an initial public offering
of its common stock in December 2000.


2. Summary of Significant Accounting Policies


Basis of Presentation and Principles of Consolidation

The accompanying consolidated financial statements have been prepared in
accordance with accounting principles generally accepted in the United States.
The accompanying consolidated financial statements reflect the accounts of
Garmin Ltd. and its wholly owned subsidiaries. All significant inter-company
balances and transactions have been eliminated.

Nature of Business

Garmin Ltd. and subsidiaries (together, the Company) manufacture, market,
and distribute Global Positioning System-enabled products and other related
products. GARMIN was incorporated in Taiwan, Republic of China on January 16,
1990. GARMIN is primarily responsible for the manufacturing and distribution of
the Company's products to Garmin International, Inc. (GII) and Garmin (Europe)
Limited (GEL) and, to a lesser extent, new product development and sales and
marketing of the Company's products in Asia and the Far East. In April 1990, a
100%-owned subsidiary, Garmin International, Inc., was incorporated in the
United States. GII is primarily responsible for sales and marketing of the
Company's products in many international markets and in the United States as
well as research and new product development. GII also manufactures certain
products for the Company's aviation segment. During June 1992, GII formed Garmin
(Europe) Limited, a wholly owned subsidiary in the United Kingdom, to sell its
products principally within the European market. During 2000, GII sold its
interest in GEL to Garmin Ltd. As a result, GEL is now a direct subsidiary of
Garmin Ltd. Also during 2000, Garmin Realty LLC was formed by GII to hold
certain real estate. In December 2001, GII formed Garmin USA as a sales
organization. During August 2003, GII acquired all the outstanding capital stock
of UPS Aviation Technologies, Inc. for $38 million in cash and renamed the
company Garmin AT, Inc (GAT). See Note 16.


46


GARMIN LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(In Thousands, Except Share and Per Share Information)


Fiscal Year

The Company has adopted a 52-53-week period ending on the last Saturday of
the calendar year. Due to the fact that there are not exactly 52 weeks in a
calendar year and there is slightly more than one additional day per year (not
including the effects of leap year) in each calendar year as compared to a
52-week fiscal year, the Company will have a fiscal year comprising 53 weeks in
certain fiscal years, as determined by when the last Saturday of the calendar
year occurs.

In those resulting fiscal years that have 53 weeks, the Company will record
an extra week of sales, costs, and related financial activity. Therefore, the
financial results of those fiscal years, and the associated 14-week quarter,
will not be exactly comparable to the prior and subsequent 52-week fiscal years
and the associated quarters having only 13 weeks. Fiscal 2003, 2002 and 2001
included 52 weeks.

Foreign Currency Translation

GARMIN utilizes the New Taiwan Dollar as its functional currency. In
accordance with Statement of Financial Accounting Standards (SFAS) No. 52,
Foreign Currency Translation, the financial statements of GARMIN for all periods
presented have been translated into United States dollars, the functional
currency of Garmin Ltd. and GII, and the reporting currency herein, for purposes
of consolidation at rates prevailing during the year for sales, costs, and
expenses and at end-of-year rates for all assets and liabilities. The effect of
this translation is recorded in a separate component of stockholders' equity.
Cumulative translation adjustments of $20,965 and $35,971 as of December 27,
2003 and December 28, 2002, respectively, have been included in accumulated
other comprehensive loss in the accompanying consolidated balance sheets.

Transactions in foreign currencies are recorded at the approximate rate of
exchange at the transaction date. Assets and liabilities resulting from these
transactions are translated at the rate of exchange in effect at the balance
sheet date. All differences are recorded in results of operations and amounted
to an exchange loss of approximately $6,699, and exchange gains of $11 and
$11,573 for the years ended December 27, 2003, December 28, 2002, and December
29, 2001, respectively. The loss in fiscal 2003 is due to weakening of the
United States dollar compared to the New Taiwan Dollar throughout the year. The
gain in fiscal 2001 is the result of the strengthening of the United States
dollar compared to the New Taiwan Dollar in the second and fourth quarters of
fiscal 2001. This loss and these gains are included in other income in the
accompanying consolidated statements of income.

Earnings Per Share

Basic earnings per share amounts are computed based on the weighted-average
number of common shares outstanding. For purposes of diluted earnings per share,
the number of shares that would be issued from the exercise of dilutive stock
options has been reduced by the number of shares which could have been purchased
from the proceeds of the exercise at the average market price of the Company's
stock during the period the options were outstanding. See Note 12.


Cash and Cash Equivalents

For purposes of reporting cash flows, cash and cash equivalents include
cash on hand, operating accounts, money market funds, and securities with
maturities of three months or less when purchased. The carrying amount of cash
and cash equivalents approximates fair value, given the short maturity of those
instruments.

47


Inventories

Inventories are stated at the lower of cost or market. Cost is determined
using the weighted-average method (which approximates the first-in, first-out
(FIFO) method) by GARMIN and the FIFO method by GII, GAT and GEL. Inventories
consisted of the following:



December 27, December 28,
2003 2002
---------------------------------

Raw Materials $45,388 $24,177
Work-in-process 12,551 10,936
Finished goods 50,340 31,818
Inventory reserves (11,485) (9,424)
---------------------------------
$96,794 $57,507
=================================



Property and Equipment

Property and equipment are recorded at cost and depreciated using the
straight-line method over the following estimated useful lives:


Buildings and improvements 8-55 years
Office furniture and equipment 3-8 years
Manufacturing and engineering equipment 3-8 years
Vehicles 3-8 years


Long-Lived Assets

In accordance with SFAS No. 144, Accounting for the Impairment or Disposal
of Long-Lived Assets, the Company reviews long-lived assets for impairment
whenever events or changes in circumstances indicate the carrying amount of an
asset may not be fully recoverable. The carrying amount of a long-lived asset is
not recoverable if it exceeds the sum of the undiscounted cash flows expected to
result from the use and eventual disposition of the asset. That assessment shall
be based on the carrying amount of the asset at the date it is tested for
recoverability. An impairment loss shall be measured as the amount by which the
carrying amount of a long-lived asset exceeds its fair value.


Dividends

On July 23, 2003 the Board of Directors declared a dividend of $0.50 per
share to be paid on December 15, 2003 to shareholders of record on December 1,
2003. The Company paid out a dividend in the amount of $54,040. The dividend has
been reported as a reduction of retained earnings to the extent of the
stand-alone retained earnings of Garmin Ltd. The excess has been reported as a
reduction of additional paid-in-capital.

Approximately $67,882 and $50,669 of GARMIN's retained earnings are
indefinitely restricted from distribution to stockholders pursuant to the law of
Taiwan at December 27, 2003 and December 28, 2002, respectively.


Intangible Assets

On December 30, 2001, the Company adopted SFAS No. 142, Goodwill and Other
Intangible Assets. The statement addresses how goodwill and other intangible
assets should be accounted for and tested for impairment. The standard requires
intangibles to be identified as either finite-lived or indefinite lived.
Indefinite-lived intangible assets are no longer subject to amortization, yet
are to be tested for impairment annually and on an interim basis if events or

48


changes in circumstances between annual tests indicate that the asset might be
impaired. The impairment test requires the determination of the value of the
intangible asset. If the value of the intangible asset is less than its carrying
value, an impairment loss should be recognized in an amount equal to the
difference. The asset will then be carried at its new value. Finite lived
intangible assets are still subject to amortization and are reviewed for
impairment in accordance with SFAS No. 144. The adoption of this statement did
not have a material impact on the Company.

At December 27, 2003 and December 28, 2002, the Company had patents,
license agreements, customer related intangibles and other identifiable finite
lived intangible assets recorded at a cost of $48,703 and $35,403, respectively.
The Company's excess purchase cost over fair value of net assets acquired
(goodwill) was $11,418 and zero at December 27, 2003 and December 28, 2002,
respectively.

Identifiable, finite lived intangible assets are amortized over their
estimated useful lives on a straight-line basis over three to ten years.
Accumulated amortization was $17,810 and $10,924 at December 27, 2003 and
December 28, 2002, respectively. Amortization expense was $6,886, $5,277 and
$2,800 for the years ended December 27, 2003, December 28, 2002, and December
29, 2001, respectively. In the next five years, the amortization expense is
estimated to be $12,945, $7,145, $2,363, $1,889, and $1,535, respectively.

Marketable Securities

Management determines the appropriate classification of marketable
securities at the time of purchase and reevaluates such designation as of each
balance sheet date.

All of the Company's marketable securities are considered
available-for-sale at December 27, 2003. See Note 3. Available-for-sale
securities are stated at fair value, with the unrealized gains and losses, net
of tax, reported in other comprehensive loss. During 2003, unrealized gains of
$1,234 were reported in other comprehensive loss, net of related taxes.

The amortized cost of debt securities classified as available-for-sale is
adjusted for amortization of premiums and accretion of discounts to maturity, or
in the case of mortgage-backed securities, over the estimated life of the
security. Such amortization is included in interest income from investments.
Realized gains and losses, and declines in value judged to be
other-than-temporary are included in net securities gains (losses). The cost of
securities sold is based on the specific identification method. Realized gains
and losses on available-for-sale securities were not material.

Income Taxes

The Company accounts for income taxes using the liability method in
accordance with SFAS No. 109, Accounting for Income Taxes. The liability method
provides that deferred tax assets and liabilities are recorded based on the
difference between the tax bases of assets and liabilities and their carrying
amount for financial reporting purposes as measured by the enacted tax rates and
laws that will be in effect when the differences are expected to reverse. Income
taxes have not been accrued by Garmin Corporation for the unremitted earnings of
GII totaling approximately $112,567 and $122,315 at December 27, 2003 and
December 28, 2002, respectively, because such earnings are intended to be
reinvested in this subsidiary indefinitely. Income taxes have also not been
accrued by the Company for the unremitted earnings of Garmin Corporation or GEL
because such earnings are also intended to be reinvested in these subsidiaries
indefinitely.

Use of Estimates

The preparation of consolidated financial statements in conformity with
accounting principles generally accepted in the United States requires
management to make estimates and assumptions that affect the amounts reported in
the consolidated financial statements and accompanying notes. Actual results
could differ from those estimates.


49


Concentration of Credit Risk

The Company grants credit to certain customers who meet the Company's
pre-established credit requirements. Generally, the Company does not require
security when trade credit is granted to customers. Credit losses are provided
for in the Company's consolidated financial statements and consistently have
been within management's expectations.

Revenue Recognition

The Company recognizes revenue from product sales when the product is
shipped to the customer and title has transferred. The Company assumes no
remaining significant obligations associated with the product sale other than
that related to its warranty programs discussed below.

Shipping and Handling Costs

Shipping and handling costs are included in cost of goods sold in the
accompanying consolidated financial statements.

Product Warranty

The Company provides for estimated warranty costs at the time of sale. The
warranty period is generally for one year from date of shipment with the
exception of certain aviation products for which the warranty period is two
years from the date of installation.

Sales Programs

The Company provides certain monthly and quarterly incentives for its
dealers based on various factors including dealer purchasing volume and growth.
Additionally, from time to time, the Company provides rebates to end users on
certain products. Estimated rebates and incentives payable to distributors are
regularly reviewed and recorded as accrued expenses on a monthly basis. These
rebates and incentives are recorded as reductions to net sales in the
accompanying consolidated statements of income.

Advertising Costs

The Company expenses advertising costs as incurred. Advertising expense
charged to operations amounted to approximately $22,071, $16,670, and $14,714
for the years ended December 27, 2003, December 28, 2002, and December 29, 2001,
respectively.

Research and Development

Substantially all research and development is performed by GII in the
United States. Research and development costs, which are expensed as incurred,
amounted to approximately $43,706, $32,163, and $28,164 for the years ended
December 27, 2003, December 28, 2002, and December 29, 2001, respectively.

Accounting for Stock-Based Compensation

At December 27, 2003, the Company has two stock-based employee compensation
plans, which are described more fully in Note 11. The Company accounts for those
plans under the recognition and measurement principles of APB Opinion No. 25,
Accounting for Stock Issued to Employees, and related Interpretations. No
stock-based employee compensation cost is reflected in net income, as all
options granted under those plans had an exercise price equal to the market
value of the underlying common stock on the date of grant. The following table
illustrates the effect on net income and earnings per share if the Company had
applied the fair value recognition provisions of SFAS No. 123, Accounting for
Stock-Based Compensation, to stock-based employee compensation.


50





December 27, December 28, December 29,
2003 2002 2001
------------------------------------------------------

Net income as reported $178,634 $142,797 $113,448
Deduct: Total stock-based employee compensation
expense determined under fair-value based
method for all awards, net of tax effects (3,046) (1,949) (1,298)
------------------------------------------------------
Pro forma net income $175,588 $140,848 $112,150
======================================================
Pro forma net income per share:
Basic $1.63 $1.31 $1.04
Diluted $1.61 $1.30 $1.03




Derivative Investments and Hedging Activities

The Company applies SFAS No. 133, Accounting for Derivative Instruments and
Hedging Activities, to its derivative instruments and hedging activities. This
statement requires the Company to recognize all derivatives on the balance sheet
at fair value. Derivatives not considered hedges must be adjusted to fair value
through income.

If a derivative is a hedge, depending on the nature of the hedge, changes
in the fair value of the derivative will either be offset against the change in
fair value of the hedged asset, liability or firm commitment through earnings or
recognized in other comprehensive income until the hedged item is recognized in
earnings. The ineffective portion of a derivative's change in fair value will be
immediately recognized in earnings.

GII has historically entered into interest rate swap agreements to modify
the interest characteristics of portions of its outstanding long-term debt from
a floating rate to a fixed rate basis. These agreements involved the receipt of
floating rate amounts in exchange for fixed rate interest payments over the life
of the agreements without an exchange of the underlying principal amount. The
differential to be paid or received is accrued as interest rates change and
recognized as an adjustment to interest expense related to the debt. The related
amount payable to or receivable from the counterparty is included in other
liabilities or assets. The Company's agreements have previously qualified for
hedge accounting as permitted in SFAS No. 133, resulting in the agreement's
being marked to market at each balance sheet date through other comprehensive
income. Management assessed the effectiveness of the hedge relationship on a
periodic basis during the year. See Note 8.

Recent Accounting Pronouncements

At its November 2002 meeting, the EITF reached a consensus on Issue 00-21
"Accounting for Revenue Arrangements with Multiple Deliverable", which provides
a model to be used, in the context of a multiple-deliverable revenue
arrangement, in determining (a) how the arrangement consideration should be
measured, (b) whether the arrangement should be divided into separate units of
accounting, and, if so, (c) how the arrangement consideration should be
allocated to the separate units of accounting. Issue 00-21 is effective for
revenue arrangements entered into in fiscal periods (annual or interim)
beginning after June 15, 2003, with earlier adoption permitted. Companies also
are permitted to adopt Issue 00-21 by reporting the change in accounting as a
cumulative effect adjustment in accordance with APB Opinion No. 20, Accounting
Changes, and SFAS No. 3, Reporting Accounting Changes in Interim Financial
Statements. The adoption of this standard did not have a material impact on the
Company's results of operations or financial condition.

In January 2003, the Financial Accounting Standards Board (FASB) issued
Interpretation No. 46, "Consolidation of Variable Interest Entities."
Interpretation No. 46 requires that the assets, liabilities and results of the
activity of variable interest entities be consolidated into the financial
statements of the Company that has the controlling financial interest.
Interpretation No. 46 also provides the framework for determining whether a
variable interest entity should be consolidated based on voting interests or
significant financial support provided to it. Interpretation No. 46 will become
effective on March 31, 2004 for variable interest entities created prior to
December 31, 2003. We do not expect the adoption of Interpretation No. 46 to
have a material impact on our results and operations or financial condition.


51


Reclassification

Certain amounts in the fiscal 2002 consolidated financial statements have
been reclassified to conform to fiscal 2003 presentation.


3. Marketable Securities

The following is a summary of the Company's marketable securities
classified as available-for-sale securities at December 27, 2003:




Estimated Fair
Gross Unrealized Value (Net
Amortized Cost Gains/Losses Carrying Amount)
------------------------------------------------------------------

Mortgage-backed securities $61,354 $1,097 $62,451
Obligations of states and political
subdivisions 95,544 1,313 96,857
U.S. corporate bonds 34,591 349 34,940
Other 27,200 (1) 27,199
------------------------------------------------------------------
Total $218,689 $2,758 $221,447
------------------------------------------------------------------




The following is a summary of the Company's marketable securities
classified as available-for-sale securities at December 28, 2002:




Estimated Fair
Gross Unrealized Value (Net
Amortized Cost Gains/Losses Carrying Amount)
------------------------------------------------------------------

Mortgage-backed securities $58,038 $386 $58,424
Obligations of states and political
subdivisions 86,006 595 86,601
U.S. corporate bonds 79,572 185 79,757
Other 20,925 1 20,926
------------------------------------------------------------------
Total $244,541 $1,167 $245,708
------------------------------------------------------------------



The amortized cost and estimated fair value of marketable securities at
December 27, 2003, by contractual maturity, are shown below. Expected maturities
will differ from contractual maturities because the issuers of the securities
may have the right to prepay obligations without prepayment penalties.





Estimated
Cost Fair Value
-------------------------------------------


Due in one year or less (2004) $52,836 $53,127
Due after one year through five years (2005-2009) 102,844 104,866
Due after five years through ten years (2010-2014) 38,105 38,493
Due after ten years (2015 and thereafter) 24,904 24,961
-------------------------------------------
$218,689 $221,447
-------------------------------------------



The Company invests in auction rate securities which effectively mature
every 28 days. Upon maturity, the proceeds are reinvested in the same security.


52


4. Long-Term Debt


During 1995, GII entered into an agreement with the City of Olathe, Kansas
for the construction of a new corporate headquarters (the project) which was
financed through issuance of Series 1995 Industrial Revenue Bonds (the Bonds)
totaling $9,500. Upon completion of the project in 1996, GII retired bonds
totaling $155. During 2002, GII retired the remaining Bonds totaling $9,345.

During 1999, GARMIN borrowed $18,040 to finance the purchase of land and a
new manufacturing facility in Taiwan. The balance was due in 60 equal payments
of principal plus interest beginning in November 2001. Through November 2001,
interest was payable at a fixed rate of 6.155%. Subsequent to November 2001,
interest was adjustable based on the Republic of China's government preferential
rate on term deposits plus 0.18%. The Company opted to prepay a significant
portion of the outstanding principal during 2001. The outstanding balance of
$2,891 at December 29, 2001 was paid in full in January 2002.

During 2000, GII entered into another agreement with the City of Olathe,
Kansas to finance the Company's expansion of its manufacturing facilities
through the issuance of Series 2000 Industrial Revenue Bonds (the 2000 Bonds)
totaling $20,000. The proceeds from the issuance of the 2000 Bonds were placed
in an interest-bearing restricted cash account controlled by a trustee appointed
by the issuer. Disbursements from the account were restricted to purchases of
equipment and construction related to the project and amounted to $0 and $5,696
for years ended December 28, 2002 and December 29, 2001, respectively. There
were no unexpended bond proceeds in this restricted cash account at December 28,
2002. During the second quarter of 2003, GII instructed the trustee of the 2000
Bonds to call them at par, leaving an outstanding principal of $0 at December
27, 2003.

At December 28, 2002, outstanding principal under the 2000 Bonds totaled
$20,000. Interest on the 2000 Bonds was payable monthly at a variable interest
rate (1.51% at December 28, 2002), which was adjusted weekly to the current
market rate as determined by the remarketing agent of the 2000 Bonds.



5. Commitments and Contingencies


Rental expense related to office, warehouse space and real estate amounted
to $324, $281, and $232 for the years ended December 27, 2003, December 28,
2002, and December 29, 2001, respectively.

Future minimum lease payments are as follows:

Year Amount
----------------------------

2004 $107
2005 301
2006 301
2007 301
2008 301
Thereafter 13,276




At December 27, 2003 and December 28, 2002, standby letters of credit
amounting to $0 and $509, respectively, were issued by banks on behalf of the
Company. At December 27, 2003, the Company expects future costs of approximately
$45,000 for the completion of its facility expansion in Olathe, Kansas.

Certain cash balances of GEL are held as collateral by a bank securing
payment of the United Kingdom value-added tax requirements. These amounted to
$1,602 and $1,598 at December 27, 2003 and December 28, 2002, respectively, and
are reported as restricted cash.

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 and other intellectual property claims and various

53


other risks. It is not possible to predict with certainly 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.


6. Employee Benefit Plans


GII sponsors an employee retirement plan under which its employees may
contribute up to 50% of their annual compensation subject to Internal Revenue
Code maximum limitations and to which GII contributes a specified percentage of
each participants annual compensation up to certain limits as defined in the
plan. Additionally, GEL has a defined contribution plan under which its
employees may contribute up to 5% of their annual compensation. Both GII and GEL
contribute an amount determined annually at the discretion of the Board of
Directors. During the years ended December 27, 2003, December 28, 2002, and
December 29, 2001, expense related to these plans of $4,197, $2,728, and $2,356,
respectively, was charged to operations.

Certain of the Company's foreign subsidiaries participate in local defined
benefit pension plans. Contributions are calculated by formulas that consider
final pensionable salaries. Neither obligations nor contributions for the years
ended December 27, 2003, December 28, 2002, and December 29, 2001 were
significant.




7. Income Taxes

The Company's income tax provision (benefit) consists of the following:





Fiscal Year Ended
-------------------------------------------------------------
December 27, December 28, December 29,
2003 2002 2001
-------------------------------------------------------------

Federal:
Current $17,066 $18,576 $10,208
Deferred (2,486) (1,639) (338)
-------------------------------------------------------------
14,580 16,937 9,870
State:
Current 849 (1,035) 2,237
Deferred (1,379) (328) (74)
-------------------------------------------------------------
(530) (1,363) 2,163
Foreign:
Current 33,599 22,969 28,165
Deferred (340) 1,394 (1,611)
-------------------------------------------------------------
33,259 24,363 26,554
-------------------------------------------------------------
Total $47,309 $39,937 $38,587
=============================================================





54


The income tax provision differs from the amount computed by applying the
statutory federal income tax rate to income before taxes. The sources and tax
effects of the differences are as follows:




Fiscal Year Ended
-------------------------------------------------------------
December 27, December 28, December 29,
2003 2002 2001
-------------------------------------------------------------

Federal income tax expense at
U.S. statutory rate $79,080 $63,957 $53,212
State income tax expense, net of
federal tax effect 626 886 1,406
Foreign tax rate differential (21,038) (16,759) (13,640)
Taiwan surtax, tax incentives
and credits (21,161) (10,757) (3,260)
Other, net 9,802 2,610 869
-------------------------------------------------------------
Income tax expense $47,309 $39,937 $38,587
=============================================================




The Company's income before income taxes attributable to non-U.S.
operations was $202,390, $146,804, and $120,550, for the years ended December
27, 2003, December 28, 2002, and December 29, 2001, respectively. The tax
incentives and credits received from Taiwan included in the table above reflect
$0.38, $0.10, and $0.03 per weighted-average common share outstanding for the
years ended December 27, 2003, December 28, 2002, and December 29, 2001,
respectively. The Company currently expects to benefit from the incentives and
credits being offered by Taiwan through 2008, at which time these tax benefits
expire.

Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Significant components of
the Company's deferred tax assets and liabilities are as follows:




December 27, December 28,
2003 2002
---------------------------------------

Deferred tax assets:
Product warranty accruals $2,529 $1,707
Allowance for doubtful accounts 1,214 1,088
Inventory carrying value 2,045 2,777
Sales program allowances 2,183 3,249
Vacation accrual 740 507
Interest rate swaps - 408
Unrealized intercompany profit in inventory 15,498 12,767
Other 2,603 117
---------------------------------------
26,812 22,620
Deferred tax liabilities:
Unrealized investment gain 812 455
Unrealized foreign currency gains 86 623
Depreciation 1,923 1,133
---------------------------------------
2,821 2,211
Net deferred tax assets $23,991 $20,409
=======================================






55


8. Interest Rate Risk Management

During 1996, GII entered into an interest rate swap agreement to
effectively convert a portion of its floating rate long-term debt associated
with the Bonds to a fixed rate basis, thus, reducing the impact of interest rate
changes on future income. The agreement was renewed in 2001. Pursuant to this
"pay-fixed" swap agreement, GII agreed to exchange, at specified intervals, the
difference between the fixed and the floating interest amounts calculated on the
notional amount of the swap agreement totaling $5,000 at December 28, 2002.
GII's fixed interest rate under the swap agreement was 5.1%. The counterparty's
floating rate was based on the nontaxable PSA Municipal Swap Index and amounted
to 1.18% at December 28, 2002.

During 2000, GII entered into an additional swap agreement to effectively
convert a portion of additional floating rate long-term debt associated with the
2000 Bonds to a fixed rate basis. Pursuant to this pay-fixed swap agreement, GII
agreed to exchange, at specified intervals, the difference between the fixed and
the floating interest amounts calculated on the notional amount of the swap
agreement totaling $10,000 at December 28, 2002. GII's fixed interest rate under
the swap agreement was 7.26% compared to the counterparty's floating rate of
1.51% at December 28, 2002. The counterparty's floating rate was based on the
bank's Taxable Low Floater Rate.

The fair value of the interest rate swap agreements was recorded as a
component of other accrued expenses and amounted to $1,046 at December 28, 2002.
During the second quarter of 2003, GII liquidated its interest rate swap
positions and realized the loss previously recorded as a component of other
comprehensive loss. None of the Company's cash flow hedges were deemed
ineffective.



9. Fair Value of Financial Instruments


In accordance with SFAS No. 107, Disclosures about Fair Value of Financial
Instruments, the following summarizes required information about the fair value
of certain financial instruments for which it is currently practicable to
estimate such value. None of the financial instruments are held or issued for
trading purposes. The carrying amounts and fair values of the Company's
financial instruments are as follows:





December 27, 2003 December 28, 2002
---------------------------------------------------------------
Carrying Fair Carrying Fair
Amount Value Amount Value
---------------------------------------------------------------


Cash and cash equivalents $274,329 $274,329 $216,768 $216,768
Restricted cash 1,602 1,602 1,598 1,598
Marketable securities 221,447 221,447 245,708 245,708
Interest rate swap agreements
(liability) - - 1,046 1,046
Long-term debt:
Series 2000 Bonds - - 20,000 20,000




The carrying value of cash and cash equivalents, restricted cash,
marketable securities, and interest rate swap agreements approximates their fair
value. The fair value of the Company's floating-rate long-term debt was
estimated to be the par value of the debt due to the variable interest rate
nature of the instruments.


56


10. Segment Information

The Company operates within its targeted markets through two reportable
segments, those being related to products sold into the consumer and aviation
markets. Both of the Company's reportable segments offer products through the
Company's 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. The Company's consumer segment
includes portable global positioning system (GPS) receivers and accessories for
marine, recreation, land, and automotive use sold primarily to retail outlets.
These products are produced primarily by the Company's subsidiary in Taiwan. The
Company's aviation products are portable and panel mount avionics for Visual
Flight Rules and Instrument Flight Rules navigation and are sold primarily to
aviation dealers and certain aircraft manufacturers.

The Company's Chief Executive Officer has been identified as the Chief
Operating Decision Maker (CODM). The CODM evaluates performance and allocates
resources based on income before income taxes of each segment. Income before
income taxes represents net sales less operating expenses including certain
allocated general and administrative costs, interest income and expense, foreign
currency adjustments, and other non-operating corporate expenses. The accounting
policies of the reportable segments are the same as those described in the
summary of significant accounting policies. There are no inter-segment sales or
transfers.

The identifiable assets associated with each reportable segment reviewed by
the CODM include accounts receivable and inventories. The Company does not
report property and equipment, intangible assets, depreciation and amortization,
or capital expenditures by segment to the CODM.



57


Revenues, interest income and interest expense, income before income taxes,
and identifiable assets for each of the Company's reportable segments are
presented below:





Fiscal Year Ended December 27, 2003
-----------------------------------------------------
Consumer Aviation Total
-----------------------------------------------------


Net sales to external customers $452,437 $120,552 $572,989
Allocated interest income 5,901 1,572 7,473
Allocated interest expense 422 112 534
Income before income taxes 182,701 43,242 225,943
Assets:
Accounts receivable 65,315 17,403 82,718
Inventories 76,429 20,365 96,794








Fiscal Year Ended December 28, 2002
-----------------------------------------------------
Consumer Aviation Total
-----------------------------------------------------


Net sales to external customers $350,674 $114,470 $465,144
Allocated interest income 4,875 1,591 6,466
Allocated interest expense 1,002 327 1,329
Income before income taxes 134,859 47,875 182,734
Assets:
Accounts receivable 43,942 14,336 58,278
Inventories 43,360 14,147 57,507







Fiscal Year Ended December 29, 2001
-----------------------------------------------------
Consumer Aviation Total
-----------------------------------------------------


Net sales to external customers $263,358 $105,761 $369,119
Allocated interest income 7,960 3,204 11,164
Allocated interest expense 1,550 624 2,174
Income before income taxes 102,511 49,524 152,035
Assets:
Accounts receivable 34,222 13,776 47,998
Inventories 43,587 17,545 61,132





58


Net sales, long-lived assets (property and equipment), and net assets by
geographic area are as follows as of and for the years ended December 27, 2003,
December 28, 2002, and December 29, 2001:




North
America Asia Europe Total
-------------------------------------------------------------------------

December 27, 2003
Net sales to external customers $414,580 $25,183 $133,226 $572,989
Long-lived assets 71,817 32,475 492 104,784
Net assets 284,902 437,152 27,636 749,690

December 28, 2002
Net sales to external customers $339,415 $22,673 $103,056 $465,144
Long-lived assets 43,599 30,374 467 74,440
Net assets 232,430 348,255 21,814 602,499

December 29, 2001
Net sales to external customers $275,630 $15,039 $78,450 $369,119
Long-lived assets 40,183 29,321 582 70,086
Net assets 209,499 228,270 16,200 453,969





No single customer accounted for 10% or more of the Company's consolidated
net sales in any period. Accounts receivable from one customer were
approximately $7,891 as of December 27, 2003 representing 9.5% of total accounts
receivable.



11. Stock Compensation Plans

The various Company stock compensation plans are summarized below:

2000 Equity Incentive Plan

In October 2000, the stockholders adopted an equity incentive plan (the
Plan) providing for grants of incentive and nonqualified stock options and
"other" stock compensation awards to employees of the Company and its
subsidiaries, pursuant to which up to 3,500,000 shares of common stock are
available for issuance. The stock options generally vest over a period of five
years or as otherwise determined by the Board of Directors or the Compensation
Committee and generally expire ten years from the date of grant, if not
exercised. Option activity under the Plan during 2003, 2002 and 2001 is
summarized below. There have been no "other" stock compensation awards granted
under the Plan.

2000 Non-employee Directors' Option Plan

Also in October 2000, the stockholders adopted a stock option plan for
non-employee directors (the Directors Plan) providing for grants of options for
up to 50,000 common shares of the Company's stock. The term of each award is ten
years. All awards vest evenly over a three-year period. During 2003, 2002 and
2001, options to purchase 3,648, 5,058 and 5,325 shares were granted under this
plan.




59


A summary of the Company's stock option activity and related information
under the 2000 Equity Incentive Plan and the 2000 Non-employee Directors' Option
Plan for the years ended December 27, 2003, December 28, 2002 and December 29,
2001 is provided below:




Weighted-Average
Exercise Price Number of Shares
-------------------------------------------
(In Thousands)


Outstanding at December 30, 2000 $14.00 1,176
Granted 19.96 374
Exercised 14.00 (5)
Canceled 14.00 (10)
--------------------
Outstanding at December 29, 2001 15.45 1,535
Granted 29.61 453
Exercised 14.15 (74)
Canceled 16.58 (40)
--------------------
Outstanding at December 28, 2002 18.90 1,874
Granted 54.30 581
Exercised 14.91 (176)
Canceled 18.19 (22)
--------------------
Outstanding at December 27, 2003 28.42 2,257
====================






December 27, December 28, December 29,
2003 2002 2001
----------------------------------------------------------------

Weighted-average fair value of options
granted during the year $22.01 $11.42 $12.28




Stock Options as of December 27, 2003
- ---------------------------------------------------------------------------
Exercise Options Remaining Options
Price Outstanding Life (Years) Exercisable
- ---------------------------------------------------------------------------
(In Thousands) (In Thousands)

$14-$24 1,241 7.23 568
$25-$34 436 9.00 87
$35-$44 6 9.45 -
$45-$55 574 9.98 -
-------------------------------------------------------------
2,257 8.28 655



The weighted-average remaining contract life for options outstanding at
December 27, 2003 is 8.28 years.

Pro forma information regarding net income and earnings per share is
required by SFAS No. 123. SFAS No. 123 requires the pro forma information be
determined as if the Company has accounted for its employee stock options under
the fair value method of that statement. As described below, the fair value
accounting provided under SFAS No. 123 requires the use of option valuation
models that were not developed for use in valuing employee stock options. The
fair value for these options was estimated at the date of grant using a
Black-Scholes option pricing model with the following weighted-average
assumptions for 2003, 2002, and 2001: risk-free interest rate of 4.25%, 1.67%,
and 5.11%, respectively; dividend yield of 1.0% for 2003 and no dividend yield
for 2002 and 2001; volatility factor of the expected market price of the
Company's common stock of 0.3927, 0.3395, and 0.591, respectively; and a
weighted-average expected life of the option of six years in 2003 and seven
years in 2002 and 2001.

The Black-Scholes option valuation model was developed for use in
estimating the fair value of traded options which have no vesting restrictions
and are fully transferable. In addition, option valuation models require the


60


input of highly subjective assumptions, including the expected stock price
volatility. Because the Company's employee stock options have characteristics
significantly different from those of traded options, and because changes in the
subjective input assumptions can materially affect the fair value estimate, in
management's opinion, the existing models do not necessarily provide a reliable
single measure of the fair value of its employee stock options.

Employee Stock Purchase Plan

The stockholders also adopted an employee stock purchase plan (ESPP). Up to
1,000,000 shares of common stock have been reserved for the ESPP. Shares will be
offered to employees at a price equal to the lesser of 85% of the fair market
value of the stock on the date of purchase or 85% of the fair market value on
the enrollment date. The ESPP is intended to qualify as an "employee stock
purchase plan" under Section 423 of the Internal Revenue Code. During 2003, 2002
and 2001, 70,857, 70,035 and 123,007 shares were purchased under the plan for a
total purchase price of $1,805, $1,265 and $1,464, respectively. At December 27,
2003, approximately 736,000 shares are available for future issuance.



12. Earnings Per Share


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






Fiscal Year Ended
---------------------------------------------------------
December 27, December 28, December 29,
2003 2002 2001
---------------------------------------------------------

Numerator (in thousands):
Numerator for basic and diluted
net income per share - net income $178,634 $142,797 $113,448
=========================================================

Denominator (in thousands):
Denominator for basic net income per share -
weighted-average common shares 108,011 107,774 108,097
Efect of dilutive securities -
employee stock options (note 11) 891 427 350
---------------------------------------------------------
Denominator for diluted net income per share -
adjusted weighted-average common shares 108,902 108,201 108,447
=========================================================

Basic net income per share $1.65 $1.32 $1.05
=========================================================

Diluted net income per share $1.64 $1.32 $1.05
=========================================================





Options to purchase 48 shares of common stock at $54.54 per share were
outstanding during 2003 and 472 shares of common stock at prices ranging from
$21.67 to $29.79 per share were outstanding during 2002 but were not included in
the computation of diluted earnings per share because the options' exercise
price was greater than the average market price of the common shares and,
therefore, the effect would be antidilutive.



13. Share Repurchase Program


On September 24, 2001, the Board of Directors authorized the Company to
repurchase up to 5,000,000 shares of the Company's common stock through December
31, 2002. Through December 28, 2002, the Company had purchased 595,200 shares at
$9,834. The share repurchase authorization expired on December 31, 2002.


61


14. Shareholder Rights Plan


On October 24, 2001, Garmin's Board of Directors adopted a shareholder
rights plan (the "Rights Plan"). Pursuant to the Rights Plan, the Board declared
a dividend of one preferred share purchase right on each outstanding common
share of Garmin to shareholders of record as of November 1, 2001. The rights
trade together with Garmin's common shares. The rights generally will become
exercisable if a person or group acquires or announces an intention to acquire
15% or more of Garmin's outstanding common shares. Each right (other than those
held by the new 15% shareholder) will then be exercisable to purchase preferred
shares of Garmin (or in certain instances other securities of Garmin) having at
that time a market value equal to two times the then current exercise price.
Garmin's Board of Directors may redeem the rights at $0.002 per right at any
time before the rights become exercisable. The rights expire on October 31,
2011.



15. Selected Quarterly Information (Unaudited)





Fiscal Year Ended December 27, 2003
------------------------------------------------------------------------
Quarter Ending
------------------------------------------------------------------------
March 29 June 28 September 27 December 27
------------------------------------------------------------------------


Net sales $123,788 $143,495 $135,562 $170,144
Gross profit 74,655 83,657 76,709 95,520
Net income 41,494 47,246 35,308 54,586
Basic net income per share 0.38 0.43 0.33 0.51





Fiscal Year Ended December 28, 2002
------------------------------------------------------------------------
Quarter Ending
------------------------------------------------------------------------
March 30 June 29 September 28 December 28
------------------------------------------------------------------------


Net sales $100,856 $122,838 $107,756 $133,694
Gross profit 54,492 67,662 59,051 73,851
Net income 26,761 32,146 38,428 45,462
Basic net income per share 0.25 0.30 0.36 0.41



The above quarterly financial data is unaudited, but in the opinion of
management, all adjustments necessary for a fair presentation of the selected
data for these interim periods presented have been included. These results are
not necessarily indicative of future quarterly results.



16. Garmin AT Acquisition


On August 22, 2003, GII acquired all of the outstanding capital stock of
UPS Aviation Technologies, Inc. for $38 million in cash. UPS Aviation
Technologies, headquartered in Salem, Oregon, designs and manufactures multiple
lines of communications, navigation and surveillance products for general
aviation and air transport customers.

The purchase price of the UPS Aviation Technologies acquisition was
allocated to the estimated fair values of assets acquired and liabilities
assumed based on management's estimates and third-party appraisals. The excess
purchase price over the fair value of the net assets acquired was allocated to
deductible goodwill in the amount of $11.4 million. UPS Aviation Technologies,
Inc. was subsequently renamed Garmin AT, Inc. by the Company. The results of
Garmin AT, Inc. are included in the financial statements for the period from
August 22, 2003 to December 27, 2003.


62


The following table summarizes the purchase price allocation and the useful
life of intangibles for the aforementioned acquisition:

Intangibles
Amount Useful Life (years)
----------------------------------------
Working capital $8,562
Fixed assets 7,092
Intangibles:
Technology / Patents 4,151 8
Tradenames 824 3
Non-Competition Agreements 2,122 4
Customer Contracts 292 3
Customer Relationships 3,344 10
Order Backlogs 372 3
Goodwill 11,418
- -------------------------------------------------------------------------------
Purchase price paid, net of cash acquired $38,177
- -------------------------------------------------------------------------------


The following table is prepared on a pro forma basis for the 13-week and
52-week periods ended December 27, 2003 and December 28, 2002 as though the
business had been acquired as of the beginning of the period presented, after
including the estimated impact of certain adjustments such as amortization of
intangibles (unaudited):




13-Weeks Ended 52-Weeks Ended
-------------------------------- -------------------------------
December 27, December 28, December 27, December 28,
2003 2002 2003 2002
-------------------------------- -------------------------------

Net sales $170,144 $138,790 $591,050 $486,029
Net income after income taxes $54,586 $44,768 $178,524 $139,265
Basic net income per share $0.51 $0.42 $1.65 $1.29
Diluted net income per share $0.50 $0.41 $1.64 $1.29
-------------------------------- -------------------------------





The pro forma results are not necessarily indicative of what would have
occurred if the acquisition had been in effect for the periods presented. In
addition, they are not intended to be a projection of future results and do not
reflect any synergies that might be achieved from combining the operations.


17. Warranty Reserves

The Company's products sold are generally covered by a warranty for periods
ranging from one to two years. The Company's estimate of costs to service its
warranty obligations are based on historical experience and expectation 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:





Fiscal Year Ended
--------------------------------------
December 27, December 28,
2003 2002
--------------------------------------


Balance - beginning of period $5,949 $4,777
Accrual for products sold during the period 4,429 8,520
Expenditures (1,979) (7,348)
--------------------------------------
Balance - end of period $8,399 $5,949
======================================






63



Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure

None.


Item 9A. Controls and Procedures

Under the supervision and with the participation of our management,
including the Chief Executive Officer and Chief Financial Officer, we have
evaluated the effectiveness of the design and operation of our disclosure
controls and procedures pursuant to Exchange Act Rule 13a-14(c) as of the end of
the period covered by this report. Based on the evaluation, the Chief Executive
Officer and Chief Financial Officer have concluded that these disclosure
controls and procedures are effective. There were no changes in our internal
control over financial reporting during the quarter ended December 27, 2003 that
have materially affected, or are reasonably likely to materially affect, our
internal controls over financial reporting.



PART III


Item 10. Directors and Executive Officers of the Company

Garmin has incorporated by reference certain information in response or
partial response to the Items under this Part III of this Annual Report on Form
10-K pursuant to General Instruction G(3) of this Form 10-K and Rule 12b-23
under the Exchange Act. Garmin's definitive proxy statement in connection with
its annual meeting of stockholders scheduled for June4, 2004 (the "Proxy
Statement") will be filed with the Securities and Exchange Commission no later
than 120 days after December 27, 2003.

(a) Directors of the Company

The information set forth in response to Item 401 of Regulation S-K under
the headings "Election of Two Directors" and "The Board of Directors" in
Garmin's Proxy Statement is hereby incorporated herein by reference in partial
response to this Item 10.

(b) Executive Officers of the Company

The information set forth in response to Item 401 of Regulation S-K under
the heading "Executive Officers and Significant Employees of the Company" in
Part I of this Form 10-K is incorporated herein by reference in partial response
to this Item 10.

(c) Compliance with Section 16(a) of the Exchange Act

The information set forth in response to Item 405 of Regulation S-K under
the heading "Section 16(a) Beneficial Ownership Reporting Compliance" in
Garmin's Proxy Statement is hereby incorporated herein by reference in partial
response to this Item 10.

(d) Audit Committee Financial Expert

Garmin's Board of Directors has determined that both Gene M. Betts and
Thomas A. McDonnell, members of Garmin's Audit Committee, are "audit committee
financial experts" as defined by the SEC regulations implementing Section 407 of
the Sarbanes-Oxley Act of 2002. Mr. Betts and Mr. McDonnell each are
"independent" as defined by current listing standards of the Nasdaq Stock
Market.


64


(e) Code of Ethics

Garmin's Board of Directors has adopted the Code of Business Conduct and
Ethics for Directors, Officers and Employees of Garmin Ltd. and Subsidiaries
(the "Code"). The Code is applicable to all Garmin employees including the Chief
Executive Officer, the Chief Financial Officer, the Controller and other
officers. A copy of the Code is filed as Exhibit 14 to this Annual Report on
Form 10-K. If any amendments to the Code are made, or any waivers with respect
to the Code are granted to the Chief Executive Officer, Chief Financial Officer
or Controller, such amendment or waiver will be disclosed in a Form 8-K filed
with the Securities and Exchange Commission.


Item 11. Executive Compensation

The information set forth in response to Item 402 of Regulation S-K under
"The Board of Directors - Compensation of Directors" and under "Executive
Compensation Matters" in Garmin's Proxy Statement (other than the "Compensation
Committee Report on Executive Compensation" and the "Stock Performance Graph")
is hereby incorporated herein by reference in response to this Item 11.


Item 12. Security Ownership of Certain Beneficial Owners and Management and
Related Shareholder Matters

The information set forth in response to Item 403 of Regulation S-K under
the heading "Stock Ownership of Certain Beneficial Owners and Management" in the
Company's Proxy Statement is hereby incorporated herein by reference in response
to this Item 12.

Equity Compensation Plan Information

The following table gives information as of December 27, 2003 about the
Garmin Common Shares that may be issued under all of the Company's existing
equity compensation plans.




- ------------------------------ ------------------------------ ------------------------- ----------------------------
A B C
- ------------------------------ ------------------------------ ------------------------- ----------------------------
Number of securities
remaining available for
Plan Category Number of securities to be Weighted-average future issuance under
issued upon exercise of exercise price of equity compensation plans
outstanding options, outstanding options, (excluding securities
warrants and rights warrants and rights reflected in column A)
- ------------------------------ ------------------------------ ------------------------- ----------------------------

Equity compensation plans
approved by shareholders(1) 2,257,537 $28.42 1,618,398
- ------------------------------ ------------------------------ ------------------------- ----------------------------
Equity compensation plans
not approved by shareholders -- -- --
- ------------------------------ ------------------------------ ------------------------- ----------------------------
Total 2,257,537 $28.42 1,618,398

- ------------------------------ ------------------------------ ------------------------- ----------------------------




(1) Consists of the Garmin Ltd. 2000 Equity Incentive Plan, the Garmin Ltd.
2000 Non-Employee Directors' Option Plan and the Garmin Ltd. Employee
Stock Purchase Plan.


The Company has no knowledge of any arrangement, the operation of which may
at a subsequent date result in a change in control of the Company.


65


Item 13. Certain Relationships and Related Transactions

The information set forth in response to Item 404 of Regulation S-K under
the heading "The Board of Directors - Compensation Committee Interlocks and
Insider Participation" and "Certain Relationships and Related Transactions" in
the Company's Proxy Statement is incorporated herein by reference in response to
this Item 13.

Item 14. Principal Accounting Fees and Services

The information set forth under the headings "Principal Accounting Firm
Fees" and "Pre-Approval of Services Provided by the Independent Accountant" in
the Proxy Statement is hereby incorporated by reference in response to this Item
14.




PART IV


Item 15. Exhibits, Financial Statement Schedules and Reports on Form 8-K

(a) List of Documents filed as part of this Report

(1) Consolidated Financial Statements

The consolidated financial statements and related notes, together with the
report of Ernst & Young LLP, appear in Part II, Item 8 "Financial
Statements and Supplementary Data" of this Form 10-K.

(2) Schedule II Valuation and Qualifying Accounts

All other schedules have been omitted because they are not applicable, are
insignificant or the required information is shown in the consolidated
financial statements or notes thereto.

(3) Exhibits -- The following exhibits are filed as part of, or
incorporated by reference into, this Annual Report on Form 10-K:


EXHIBIT DESCRIPTION
NUMBER
-------- -------------

3.1* Memorandum and Articles of Association of Garmin Ltd.
(as amended)

4.1** Specimen share certificate

4.2*** Shareholder Rights Agreement

10.1** Garmin Ltd. 2000 Equity Incentive Plan

10.2** Garmin Ltd. 2000 Non-Employee Directors' Option Plan

10.3** Garmin Ltd. Employee Stock Purchase Plan

10.4**** First Amendment to Garmin Ltd. Employee Stock
Purchase Plan

10.5* Second Amendment to Garmin Ltd. Employee Stock
Purchase Plan

14.1 Code of Business Conduct and Ethics for Directors,
Officers and Employees of Garmin Ltd. and
Subsidiaries

66



21.1 List of subsidiaries

23.1 Consent of Ernst & Young LLP

24.1 Power of Attorney (included in signature page)

31.1 Chief Executive Officer's Certification pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002.

31.2 Chief Financial Officer's Certification pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002.

32.1 Chief Executive Officer's Certification pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002.

32.2 Chief Financial Officer's Certification pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002.



- -------------------------------------------------------------------------------

* Incorporated by reference from the Registrant's Quarterly Report on Form
10-Q filed on August 13, 2003.

** Incorporated by reference from the Registrant's Registration Statement
on Form S-1 filed December 6, 2000 (Commission File No. 333-45514).

*** Incorporated by reference from the Registrant's Current Report on Form 8-K
filed on October 26, 2001.

**** Incorporated by reference from the Registrant's Annual Report on Form 10-K
filed on March 27, 2002.


(b) Reports on Form 8-K

The Company furnished under Item 12 of Form 8-K the Company's Form 8-K
dated October 29, 2003 reporting the announcement of financial results for the
fiscal quarter ended September 27, 2003.


67




GARMIN LTD. AND SUBSIDIARIES
INDEX TO FINANCIAL STATEMENT SCHEDULE

Garmin Ltd. Financial Statement Schedule for the years ended December 27, 2003,
December 28, 2002 and December 29, 2001.

Schedule II - Valuation and qualifying accounts........................... 69



68




SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
Garmin Ltd. and Subsidiaries
(In thousands)






Additions
------------------------------------
Balance at Charged to Charged to Balance at
Beginning of Costs and Other End of
Description Period Expenses Accounts Deductions Period
- ------------------------------------------------------------------------------------------------------------------------------------

Year Ended December 29, 2001:
Deducted from asset accounts
Allowance for doubtful accounts $ 1,866 $ 1,137 $ - $ (376) $ 2,627
Inventory reserve 6,504 4,000 - (950) 9,554
-----------------------------------------------------------------------------------------
Total $ 8,370 $ 5,137 $ - $ (1,326) $ 12,181
-----------------------------------------------------------------------------------------

Year Ended December 28, 2002:
Deducted from asset accounts
Allowance for doubtful accounts $ 2,627 $ 941 $ - $ (415) $ 3,153
Inventory reserve 9,554 688 - (818) 9,424
-----------------------------------------------------------------------------------------
Total $ 12,181 $ 1,629 $ - $ (1,233) $ 12,577
-----------------------------------------------------------------------------------------

Year Ended December 27, 2003:
Deducted from asset accounts
Allowance for doubtful accounts $ 3,153 $ 600 $ - $ (177) $ 3,576
Inventory reserve 9,424 6,574 - (4,513) 11,485
-----------------------------------------------------------------------------------------
Total $ 12,577 $ 7,174 $ - $ (4,690) $ 15,061
-----------------------------------------------------------------------------------------






69


SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) 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/ Min H. Kao
Min H. Kao
Chief Executive Officer

Dated: March 10, 2004


POWER OF ATTORNEY

Know all persons by these presents, that each person whose signature
appears below constitutes and appoints Gary L. Burrell, Min H. Kao and Andrew R.
Etkind, and each of them, as his attorney-in-fact, with the power of
substitution, for him in any and all capacities, to sign any amendments to this
Annual Report on Form 10-K, and to file the same, with exhibits thereto and
other documents in connection therewith, with the Securities and Exchange
Commission, hereby ratifying and confirming all that said attorney-in-fact, or
his substitute or substitutes, may do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Exchange Act of 1934, this
Annual Report on Form 10-K has been signed below by the following persons on
behalf of the registrant and in the capacities indicated on March 10, 2004:

/s/ Min H. Kao /s/ Gene M. Betts
Min H. Kao Gene M. Betts
Co-Chairman, Chief Director
Executive Officer and Director
(Principal Executive Officer)


/s/ Kevin Rauckman /s/ Donald H. Eller
Kevin Rauckman Donald H. Eller
Chief Financial Officer and Treasurer Director
(Principal Financial Officer and
Principal Accounting Officer)

/s/ Gary L. Burrell /s/ Thomas A. McDonnell
Gary L. Burrell Thomas A. McDonnell
Co-Chairman and Director Director



70




Garmin Ltd.
2003 Form 10-K Annual Report
Exhibit Index




The following exhibits are attached hereto. See Part IV of this Annual
Report on Form 10-K for a complete list of exhibits.



Exhibit
Number Document
- ------ --------

14.1 Code of Business Conduct and Ethics for Directors, Officers and
Employees of Garmin Ltd.

21.1 List of subsidiaries

23.1 Consent of Ernst & Young LLP

31.1 Chief Executive Officer's Certification pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002

31.2 Chief Financial Officer's Certification pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002

32.1 Chief Executive Officer's Certification pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002

32.2 Chief Financial Officer's Certification pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002


71