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

FORM 10-Q

x
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the quarterly period ended September 26, 2009
 
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
(State or other jurisdiction
of incorporation or organization)
98-0229227
(I.R.S. Employer identification no.)
P.O. Box 10670, Grand Cayman KY1-1006
Suite 3206B, 45 Market Street, Gardenia Court
Camana Bay, Cayman Islands
(Address of principal executive offices)
N/A
(Zip Code)

Company's telephone number, including area code:  (345) 640-9050

 (Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the Company (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Company was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES þ NO ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  YES þ NO ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer.  See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act.
Large Accelerated Filer  þ    Accelerated Filer ¨     Non-accelerated Filer ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). YES ¨ NO þ

Number of shares outstanding of the Company's common shares as of October 30, 2009
Common Shares, $.005 par value:  200,669,045
 

 
Garmin Ltd.
Form 10-Q
Quarter Ended September 26, 2009

Table of Contents
 
 
Page
Part I - Financial Information
 
     
Item 1.
Condensed Consolidated Financial Statements
  3
     
 
Introductory Comments
  3
     
 
Condensed Consolidated Balance Sheets at September 26, 2009 (Unaudited) and December 27, 2008
  4
     
 
Condensed Consolidated Statements of Income for the 13-weeks and 39-weeks ended September 26, 2009 and September 27, 2008 (Unaudited)
  5
     
 
Condensed Consolidated Statements of Cash Flows for 39-weeks ended September 26, 2009 and September 27, 2008 (Unaudited)
  6
     
 
Notes to Condensed Consolidated Financial Statements (Unaudited)
  7
     
Item 2.
Management's Discussion and Analysis of Financial Condition and Results of Operations
15
     
Item 3.
Quantitative and Qualitative Disclosures About Market Risk
24
     
Item 4.
Controls and Procedures
25
     
Part II - Other Information
 
     
Item 1.
Legal Proceedings
26
     
Item 1A.
Risk Factors
27
     
Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds
28
 
   
Item 3.
Defaults Upon Senior Securities
28
     
Item 4.
Submission of Matters to a Vote of Securities Holders
28
     
Item 5.
Other Information
28
     
Item 6.
Exhibits
29
     
Signature Page
 
30
     
Index to Exhibits
 
31

2


Garmin Ltd.
Form 10-Q
Quarter Ended September 26, 2009

Part I – Financial Information

Item 1.  Condensed Consolidated Financial Statements

Introductory Comments

The Condensed Consolidated Financial Statements of Garmin Ltd. ("Garmin" or the "Company") included herein have been prepared by the Company, without audit, pursuant to the rules and regulations of the United States Securities and Exchange Commission.  Certain information and note disclosures normally included in financial statements prepared in accordance with U.S. generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations, although the Company believes that the disclosures are adequate to enable a reasonable understanding of the information presented.  These Condensed Consolidated Financial Statements should be read in conjunction with the audited financial statements and the notes thereto for the year ended December 27, 2008.  Additionally, the Condensed Consolidated Financial Statements should be read in conjunction with Item 2 of Management's Discussion and Analysis of Financial Condition and Results of Operations, included in this Form 10-Q.

The results of operations for the 13-week and 39-week periods ended September 26, 2009 are not necessarily indicative of the results to be expected for the full year 2009.

3


Garmin Ltd. And Subsidiaries
Condensed Consolidated Balance Sheets
(In thousands, except share information)

   
(Unaudited)
       
   
September 26,
   
December 27,
 
   
2009
   
2008
 
Assets
           
Current assets:
           
Cash and cash equivalents
  $ 1,011,763     $ 696,335  
Marketable securities
    17,643       12,886  
Accounts receivable, net
    573,847       741,321  
Inventories, net
    373,290       425,312  
Deferred income taxes
    52,824       49,825  
Prepaid expenses and other current assets
    49,569       58,746  
                 
Total current assets
    2,078,936       1,984,425  
                 
Property and equipment, net
    444,172       445,252  
                 
Marketable securities
    770,444       262,009  
Restricted cash
    2,044       1,941  
Licensing agreements, net
    8,885       16,013  
Other intangible assets, net
    212,070       214,941  
                 
Total assets
  $ 3,516,551     $ 2,924,581  
                 
Liabilities and Stockholders' Equity
               
Current liabilities:
               
Accounts payable
  $ 185,668     $ 160,094  
Salaries and benefits payable
    32,787       34,241  
Accrued warranty costs
    83,081       87,408  
Accrued sales program costs
    56,318       90,337  
Deferred revenue
    48,621       680  
Other accrued expenses
    141,021       86,341  
Income taxes payable
    14,102       20,075  
Dividend payable
    150,447       -  
                 
Total current liabilities
    712,045       479,176  
                 
Deferred income taxes
    8,447       4,070  
Non-current income taxes
    239,419       214,366  
Other liabilities
    1,242       1,115  
                 
Stockholders' equity:
               
Common stock, $0.005 par value, 1,000,000,000 shares authorized:
               
Issued and outstanding shares - 200,596,000 as of
               
September 26, 2009 and 200,363,000 as of
               
December 27, 2008
    1,002       1,002  
Additional paid-in capital
    35,428       -  
Retained earnings
    2,537,598       2,262,503  
Accumulated other comprehensive loss
    (18,630 )     (37,651 )
                 
Total stockholders' equity
    2,555,398       2,225,854  
Total liabilities and stockholders' equity
  $ 3,516,551     $ 2,924,581  

See accompanying notes.
 
4

 
Garmin Ltd. And Subsidiaries
Condensed Consolidated Statements of Income (Unaudited)
(In thousands, except per share information)

   
13-Weeks Ended
   
39-Weeks Ended
 
   
September 26,
   
September 27,
   
September 26,
   
September 27,
 
   
2009
   
2008
   
2009
   
2008
 
                         
Net sales
  $ 781,254     $ 870,355     $ 1,887,057     $ 2,445,830  
                                 
Cost  of goods sold
    371,512       484,716       929,706       1,322,948  
                                 
Gross profit
    409,742       385,639       957,351       1,122,882  
                                 
Advertising expense
    45,853       50,742       103,101       147,199  
Selling, general and administrative expense
    71,499       67,785       193,461       194,181  
Research and development expense
    55,507       52,749       166,795       155,904  
Total operating expense
    172,859       171,276       463,357       497,284  
                                 
Operating income
    236,883       214,363       493,994       625,598  
                                 
Interest income
    6,360       8,435       16,646       26,563  
Foreign currency
    11,752       (12,744 )     4,478       4,818  
Gain on sale of equity securities
    -       -       -       50,949  
Other
    1,684       1,358       1,325       2,091  
Total other income  (expense)
    19,796       (2,951 )     22,449       84,421  
                                 
Income before income taxes
    256,679       211,412       516,443       710,019  
                                 
Income tax provision
    41,546       40,168       90,901       134,904  
                                 
Net income
  $ 215,133     $ 171,244     $ 425,542     $ 575,115  
                                 
Net income per share:
                               
Basic
  $ 1.07     $ 0.83     $ 2.12     $ 2.71  
Diluted
  $ 1.07     $ 0.82     $ 2.12     $ 2.68  
                                 
Weighted average common
                               
shares outstanding:
                               
Basic
    200,546       206,634       200,398       212,299  
Diluted
    201,599       208,107       201,038       214,252  
                                 
Cash dividends declared per common share
  $ 0.75     $ 0.75     $ 0.75     $ 0.75  
                                 
See accompanying notes.
                               

5


Garmin Ltd. And Subsidiaries
Condensed Consolidated Statements of Cash Flows (Unaudited)
(In thousands)

   
39-Weeks Ended
 
   
September 26,
   
September 27,
 
   
2009
   
2008
 
Operating Activities:
           
Net income
  $ 425,542     $ 575,115  
Adjustments to reconcile net income to net cash
               
provided by operating activities:
               
Depreciation
    39,945       33,797  
Amortization
    25,945       20,823  
Gain on sale of property and equipment
    (6 )     (243 )
Provision for doubtful accounts
    3,191       4,289  
Deferred income taxes
    (1,083 )     28,623  
Foreign currency transaction gains/losses
    (26,936 )     11,266  
Provision for obsolete and slow moving inventories
    17,309       29,439  
Stock compensation expense
    31,502       28,815  
Realized gains on marketable securities
    110       (50,884 )
Changes in operating assets and liabilities, net of acquisitions:
               
Accounts receivable
    178,281       302,012  
Inventories
    43,340       (196,471 )
Other current assets
    (22,827 )     (977 )
Accounts payable
    22,618       (175,715 )
Other current and non-current liabilities
    87,216       (95,588 )
Income taxes payable
    28,198       1,593  
Licensing agreements
    (3,790 )     (3,191 )
Net cash provided by operating activities
    848,555       512,703  
                 
Investing activities:
               
Purchases of property and equipment
    (35,441 )     (110,480 )
Proceeds from sale of property and equipment
    (7 )     8  
Purchase of intangible assets
    (7,461 )     (4,061 )
Purchase of marketable securities
    (626,155 )     (366,336 )
Redemption of marketable securities
    110,751       444,102  
Change in restricted cash
    (103 )     106  
Acquisitions, net of cash acquired
    -       (50,497 )
Net cash used in investing activities
    (558,416 )     (87,158 )
                 
Financing activities:
               
Proceeds from issuance of common stock from
               
exercise of stock options
    1,688       2,559  
Proceeds from issuance of common stock from
               
stock purchase plan
    3,712       5,144  
Stock repurchase
    (1,908 )     (624,688 )
Tax benefit related to stock option exercise
    455       2,309  
Net cash provided by(used in) financing activities
    3,947       (614,676 )
                 
Effect of exchange rate changes on cash and cash equivalents
    21,342       2,982  
                 
Net increase(decrease) in cash and cash equivalents
    315,428       (186,149 )
Cash and cash equivalents at beginning of period
    696,335       707,689  
Cash and cash equivalents at end of period
  $ 1,011,763     $ 521,540  

See accompanying notes.

6


Garmin Ltd. and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Unaudited)

September 26, 2009
(In thousands, except share and per share information)

1.
Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X.  Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements.  In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included.  Operating results for the 13-week and 39-week periods ended September 26, 2009 are not necessarily indicative of the results that may be expected for the year ending December 26, 2009.

The condensed consolidated balance sheet at December 27, 2008 has been derived from the audited financial statements at that date but does not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements.  For further information, refer to the consolidated financial statements and footnotes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 27, 2008.

The Company’s fiscal year is based on a 52-53 week period ending on the last Saturday of the calendar year.  Therefore the financial results of certain fiscal years, and the associated 14-week quarters, will not be exactly comparable to the prior and subsequent 52-week fiscal years and the associated quarters having only 13-weeks.  The quarters ended September 26, 2009 and September 27, 2008 both contain operating results for 13-weeks for both year-to-date periods.

2.
Inventories

The components of inventories consist of the following:

   
September 26, 2009
   
December 27, 2008
 
             
Raw Materials
  $ 107,121     $ 151,132  
Work-in-process
    39,517       28,759  
Finished goods
    245,353       268,625  
Inventory Reserves
    (18,701 )     (23,204 )
Inventory, net of reserves
  $ 373,290     $ 425,312  

3.
Share Repurchase Plan

The Board of Directors approved a share repurchase program on October 22, 2008, authorizing the Company to purchase up to $300,000 of its common shares as market and business conditions warrant.   The share repurchase authorization expires on December 31, 2009.   As of September 26, 2009, the Company had repurchased 117,600 shares using cash of $2,000 with all purchases made in the first quarter.  There remains approximately $256,000 available for repurchase under this authorization given the $42,000 of purchases in fiscal 2008.

7


4.
Earnings Per Share

The following table sets forth the computation of basic and diluted net income per share:
 
   
13-Weeks Ended
 
   
September 26,
   
September 27,
 
   
2009
   
2008
 
Numerator:
           
Numerator for basic and diluted net income
           
per share - net income
  $ 215,133     $ 171,244  
                 
Denominator:
               
Denominator for basic net income per share –
               
weighted-average common shares
    200,546       206,634  
                 
Effect of dilutive securities –
               
employee stock options
    1,053       1,473  
                 
Denominator for diluted net income per share –
               
adjusted weighted-average common shares
    201,599       208,107  
                 
Basic net income per share
  $ 1.07     $ 0.83  
                 
Diluted net income per share
  $ 1.07     $ 0.82  

   
39-Weeks Ended
 
   
September 26,
   
September 27,
 
   
2009
   
2008
 
Numerator:
           
Numerator for basic and diluted net income
           
per share - net income
  $ 425,542     $ 575,115  
                 
Denominator:
               
Denominator for basic net income per share –
               
weighted-average common shares
    200,398       212,299  
                 
Effect of dilutive securities –
               
employee stock options
    640       1,953  
                 
Denominator for diluted net income per share –
               
adjusted weighted-average common shares
    201,038       214,252  
                 
Basic net income per share
  $ 2.12     $ 2.71  
                 
Diluted net income per share
  $ 2.12     $ 2.68  

There were 7,097,790 and 6,497,596 anti-dilutive options for the 13-week periods ended on September 26, 2009 and September 27, 2008, respectively.

There were 7,853,062 and 5,655,282 anti-dilutive options for the 39-week periods ended on September 26, 2009 and September 27, 2008, respectively.
 
8

 
There were 91,501 and 116,221 shares issued as a result of exercises of stock appreciation rights and stock options for the 13-week and 39-week periods ended on September 26, 2009.

5.
Comprehensive Income

Comprehensive income is comprised of the following:

   
13-Weeks Ended
 
   
September 26,
   
September 27,
 
   
2009
   
2008
 
Net income
  $ 215,133     $ 171,244  
Translation adjustment
    12,135       (46,610 )
Change in fair value of available-for-sale
               
marketable securities, net of deferred taxes
    4,255       (4,144 )
Comprehensive income
  $ 231,523     $ 120,490  

   
39-Weeks Ended
 
   
September 26,
   
September 27,
 
   
2009
   
2008
 
Net income
  $ 425,542     $ 575,115  
Translation adjustment
    19,608       14,394  
Change in fair value of available-for-sale
               
marketable securities, net of deferred taxes
    (587 )     (61,409 )
Comprehensive income
  $ 444,563     $ 528,100  

6.
Segment Information

Net sales, operating income, and income before taxes for each of the Company’s reportable segments are presented below:

   
Reportable Segments
 
   
Outdoor/
         
Auto/
             
   
Fitness
   
Marine
   
Mobile
   
Aviation
   
Total
 
13-Weeks Ended September 26, 2009
                             
                               
Net sales
  $ 132,174     $ 45,426     $ 545,707     $ 57,947     $ 781,254  
Operating income
  $ 53,430     $ 11,783     $ 160,053     $ 11,617     $ 236,883  
Income before taxes
  $ 48,527     $ 13,206     $ 183,324     $ 11,622     $ 256,679  
                                         
13-Weeks Ended September 27, 2008
                                       
                                         
Net sales
  $ 118,614     $ 44,048     $ 626,506     $ 81,187     $ 870,355  
Operating income
  $ 52,136     $ 10,606     $ 124,359     $ 27,262     $ 214,363  
Income before taxes
  $ 50,365     $ 10,132     $ 124,608     $ 26,307     $ 211,412  
                                         
39-Weeks Ended September 26, 2009
                                       
                                         
Net sales
  $ 320,187     $ 143,641     $ 1,242,011     $ 181,218     $ 1,887,057  
Operating income
  $ 132,351     $ 43,696     $ 271,370     $ 46,577     $ 493,994  
Income before taxes
  $ 127,443     $ 44,649     $ 297,955     $ 46,396     $ 516,443  
                                         
39-Weeks Ended September 27, 2008
                                       
                                         
Net sales
  $ 308,255     $ 171,232     $ 1,710,248     $ 256,095     $ 2,445,830  
Operating income
  $ 116,892     $ 52,510     $ 361,190     $ 95,006     $ 625,598  
Income before taxes
  $ 126,115     $ 57,370     $ 428,767     $ 97,767     $ 710,019  

Allocation of certain research and development expenses, and selling, general, and administrative expenses are made to each segment on a percent of revenue basis.
 
9

 
Net sales and property and equipment, net by geographic area are as follows as of and for the 39-week periods ended September 26, 2009 and September 27, 2008:

   
 
Americas
   
Asia
   
Europe
   
Total
 
September 26, 2009  
                       
Net sales to external customers
  $ 1,204,755     $ 104,846     $ 577,456     $ 1,887,057  
Property and equipment, net
  $ 232,859     $ 157,487     $ 53,826     $ 444,172  
   
                               
September 27, 2008  
                               
Net sales to external customers
  $ 1,572,042     $ 108,962     $ 764,826     $ 2,445,830  
Property and equipment, net
  $ 220,246     $ 176,194     $ 56,979     $ 453,419  

7.
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 condensed consolidated balance sheets.   The following reconciliation provides an illustration of changes in the aggregate warranty reserve.

   
13-Weeks Ended
 
   
September 26,
   
September 27,
 
   
2009
   
2008
 
             
Balance - beginning of the period
  $ 79,968     $ 83,918  
Accrual for products sold
               
during the period
    49,981       21,659  
Expenditures
    (46,868 )     (24,286 )
Balance - end of the period
  $ 83,081     $ 81,291  

   
39-Weeks Ended
 
   
September 26,
   
September 27,
 
   
2009
   
2008
 
             
Balance - beginning of the period
  $ 87,408     $ 71,636  
Accrual for products sold
               
during the period
    104,671       94,646  
Expenditures
    (108,998 )     (84,991 )
Balance - end of the period
  $ 83,081     $ 81,291  

8.
Commitments

The Company is a party to certain commitments, which includes raw materials, advertising and other indirect purchases in connection with conducting out business.  Pursuant to these agreements, the Company is contractually committed to make purchases of approximately $72,800 over the next 5 years.

10


9.     Income Taxes

The Company’s earnings before taxes increased 21.4% during the third quarter of 2009 when compared to the same quarter in 2008, and income tax expense increased by 3.4%, to $41,546, for the 13-week period ended September 26, 2009, from $40,168 for the 13-week period ended September 27, 2008. The income tax expense increase is due to increased earnings before taxes offset by a decline in the Company’s tax rate.  The effective tax rate was 16.2% and 17.6% for the 13-weeks and 39-weeks ended September 26, 2009 compared to 19.0% for both the 13-weeks and 39-weeks ended September 27, 2008.   The decline in the tax rate for 2009 is related to the release of 2005 income tax reserves for which the statute of limitations has expired.

The Company experienced a relatively low effective corporate tax rate due to the proportion of our revenue generated by entities in tax jurisdictions with low statutory rates.   In particular,  the profit entitlement afforded the parent company based on its intellectual property rights ownership of consumer products along with substantial tax incentives offered by the Taiwanese government on certain high-technology capital investments have continued to generate a relatively low tax rate.

10.   Fair Value Measurements
 
The Accounting Standards Code (ASC) defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (exit price).  The ASC classifies the inputs used to measure fair value into the following hierarchy:
 
Level 1 
Unadjusted quoted prices in active markets for identical assets or liability
 
Level 2 
Unadjusted quoted prices in active markets for similar assets or liabilities, or
 
Unadjusted quoted prices for identical or similar assets
 
Level 3 
Unobservable inputs for the asset or liability
 
The Company endeavors to utilize the best available information in measuring fair value.  Financial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement.
 
For fair value measurements using significant unobservable inputs, an independent third party provided the valuation.  The inputs used in the valuations used the following methodology.  The collateral composition was used to estimate Weighted Average Life based on historical and projected payment information.  Cash flows were projected for the issuing trusts, taking into account underlying loan principal, bonds outstanding, and payout formulas.  Taking this information into account, assumptions were made as to the yields likely to be required, based upon then current market conditions for comparable or similar term Asset Based Securities as well as other fixed income securities.
 
Assets and liabilities measured at estimated fair value on a recurring basis are summarized below:
 
   
Fair Value Measurements as
 
   
of September 26, 2009
 
                         
Description
 
Total
   
Level 1
   
Level 2
   
Level 3
 
                         
Available for- sale securities
  $ 721,534     $ 721,534     $ -     $ -  
Failed Auction rate securities
  $ 66,553                     $ 66,553  
                                 
Total
  $ 788,087     $ 721,534     $ -     $ 66,553  
 
11

 
For assets and liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) during the period, the ASC requires a reconciliation of the beginning and ending balances, separately for each major category of assets.  The reconciliation is as follows:
 
   
Fair Value Measurements Using
 
   
Significant Unobservable Inputs (Level 3)
 
   
13-Weeks Ended
   
39-Weeks Ended
 
   
September 26, 2009
   
September 26, 2009
 
             
Beginning balance of auction rate securities
  $ 67,829     $ 71,303  
Total unrealized losses included in other
               
comprehensive income
    (1,276 )     (4,750 )
Purchases in and/or out of Level 3
    -       -  
Transfers in and/or out of Level 3
    -       -  
Ending balance of auction rate securities
  $ 66,553     $ 66,553  
 
The following is a summary of the company’s marketable securities classified as available-for-sale securities at September 26, 2009:
 
               
Gross
   
Other Than
   
Estimated Fair
 
         
Gross
   
Unrealized
   
Temporary
   
Value (Net Carrying
 
   
Amortized Cost
   
Unrealized Gains
   
Losses
   
Impairment
   
Amount)
 
Mortgage-backed securities
  $ 450,788     $ 3,543     $ (1,912 )  
-
    $ 452,419  
Auction Rate Securities
    92,100      
-
      (25,547 )    
-
      66,553  
Obligations of states and political subdivisions
    210,034       1,138       (114 )    
-
      211,058  
U.S. corporate bonds
    35,285       789       (962 )     (1,274 )     33,837  
Other
    23,126       1,259       (166 )    
-
      24,219  
Total
  $ 811,333     $ 6,729     $ (28,701 )   $ (1,274 )   $ 788,087  
 
The following is a summary of the company’s marketable securities classified as available-for-sale securities at December 27, 2008:

               
Gross
   
Other Than
   
Estimated Fair
 
         
Gross
   
Unrealized
   
Temporary
   
Value (Net Carrying
 
   
Amortized Cost
   
Unrealized Gains
   
Losses
   
Impairment
   
Amount)
 
Mortgage-backed securities
  $ 137,854     $ 1,184     $ (140 )   $ -     $ 138,898  
Auction Rate Securities
    92,850       -       (21,547 )     -       71,303  
Obligations of states and political subdivisions
    40,336       960       (12 )     -       41,284  
U.S. corporate bonds
    16,545       200       (2,707 )     -       14,038  
Other
    9,502       79       (209 )     -       9,372  
Total
  $ 297,087     $ 2,423     $ (24,615 )   $ -     $ 274,895  
 
The cost of securities sold is based on the specific identification method.
 
The unrealized losses on the Company’s investment in 2008 and year-to-date 2009 were caused primarily by changes in interest rates, specifically, widening credit spreads.  The Company’s investment policy requires investments to be rated A or better with the objective of minimizing the potential risk of principal loss.  Therefore, the Company considers the declines to be temporary in nature.  Fair values were determined for each individual security in the investment portfolio.  When evaluating the investments for other-than-temporary impairment, the Company review factors such as the length of time and extent to which fair value has been below cost basis, the financial condition of the issuer, and the Company’s ability and intent to hold the investment for a period of time, which may be sufficient for anticipated recovery in market value.  During 2008 and year-to-date 2009, the Company did not record any material impairment charges on its outstanding securities.
 
12

 
The amortized cost and estimated fair value of marketable securities at September 26, 2009, 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
  $ 28,459     $ 29,763  
Due after one year through five years
    280,383       256,171  
Due after five years through ten years
    297,331       297,497  
Due after ten years
    205,160       204,656  
    $ 811,333     $ 788,087  
 
For certain of the Company’s financial instruments, including accounts receivable, accounts payable and other accrued liabilities, the carrying amounts approximate fair value due to their short maturities.
 
11.  Recently Issued Accounting Pronouncements
 
In May 2008, the FASB issued EITF 07-1, Accounting for Collaborative Arrangements. EITF Issue 07-1 requires entities entering into collaborative arrangements in which two or more parties actively participate in a joint operating activity and are exposed to significant risks and rewards that depend on the commercial success of the joint operating activity to make specific disclosures regarding that arrangement. Garmin announced a strategic alliance with ASUSTeK Computer Inc. on February 4, 2009 that will leverage the companies’ navigation and mobile telephony expertise to design, manufacture and distribute co-branded location-centric mobile phones. The mobile phone product line will be known as the Garmin‐Asus nüvifone series. The Company has adopted EITF Issue 07-1 and the strategic alliance did not have a material impact on the Company’s financial condition or operating results in the third quarter of 2009.

In January 2009, the FASB released Proposed Staff Position SFAS 107-b and Accounting Principles Board (APB) Opinion No. 28-a, “Interim Disclosures about Fair Value of Financial Instruments” (SFAS 107-b and APB 28-a).  This proposal amends FASB Statement No. 107, “Disclosures about Fair Values of Financial Instruments,” to require disclosures about fair value of financial instruments in interim financial statements as well as in annual financial statements.  The proposal also amends APB Opinion No. 28, “Interim Financial Reporting,” to require those disclosures in all interim financial statements.  This proposal is effective for interim periods ending after June 15, 2009, but early adoption is permitted for interim periods ending after March 15, 2009.  The Company has adopted SFAS 107-b and APB 28-a and the guidance did not have a material impact on the Company’s financial condition or operating results in the third quarter of 2009.

In April 2009, the FASB issued FSP No. FAS 157-4 (“FSP FAS 157-4”), “Determining Fair Value When the Volume and Level of Activity for the Asset or Liability has Significantly Decreased and Identifying Transactions That Are Not Orderly” and FSP No. FAS 115-2 and FAS 124-2 (“FSP FAS 115-2”), “Recognition and Presentation of Other-Than-Temporary Impairments”.  These two FSPs were issued to provide additional guidance about (1) measuring the fair value of financial instruments when the markets become inactive and quoted prices may reflect distressed transactions, and (2) recording impairment charges on investments in debt instruments.  Additionally, the FASB issued FSP No. FAS 107-1 and APB 28-1 (“FSP FAS 107-1”), “Interim Disclosures about Fair Value of Financial Instruments,” to require disclosures of fair value of certain financial instruments in interim financial statements.  We do not anticipate the adoption of these FSPs will materially impact the Company.  These FSPs are effective for financial statements issued for interim and annual reporting periods ending after June 15, 2009.  The Company has adopted FSP FAS 157-4 and the guidance did not have a material impact on the Company’s financial condition or operating results in the third quarter of 2009.
 
In May 2009, the FASB issued SFAS No. 165, “Subsequent Events” (“SFAS 165”).  SFAS 165 establishes general standards of accounting for and disclosure of events that occur after the balance sheet date but before financial statements are issued or are available to be issued.  We do not anticipate the adoption of SFAS 165 will materially impact the Company.  SFAS 165 is effective for interim or annual financial periods ending after June 15, 2009.  The Company adopted the provisions of SFAS 165 for the quarter ended June 27, 2009.  The adoption of this provision did not have a material effect on our financial statements.
 
13

 
In June 2009, the FASB issued SFAS No. 168, “The FASB Accounting Standards CodificationTM and the Hierarchy of Generally Accepted Accounting Principles a replacement of FASB Statement No. 162” (“SFAS 168”).  SFAS 168 provides for the FASB Accounting Standards CodificationTM (the “ASC”) to become the single official source of authoritative, nongovernmental U.S. generally accepted accounting principles (GAAP).  The Codification did not change GAAP but reorganizes the literature.  SFAS 168 is effective for interim and annual periods ending after September 15, 2009.

In October 2009, the FASB issued Accounting Standard Update No. 2009-13, Revenue Recognition (Topic 605): Multiple-Deliverable Revenue Arrangements.  This guidance modifies the fair value requirements of ASC subtopic 605-25 Revenue Recognition-Multiple Element Arrangements by allowing the use of the “best estimate of selling price” in addition to Vendor Specific Objective Evidence (“VSOE”) and VOE (now referred to as third-party evidence “TPE”) for determining the selling price of a deliverable. A vendor is now required to use its best estimate of the selling price when VSOE or TPE of the selling price cannot be determined. In addition, the residual method of allocating arrangement consideration is no longer permitted. The amendments included in this update will be effective prospectively for revenue arrangements entered into or materially modified in fiscal years beginning on or after June 15, 2010.  Early adoption is permitted.  The Company is investigating the impact of adopting Accounting Standard Update No. 2009-13 on its consolidated financial statements.

In October 2009, the FASB issued Accounting Standard Update No. 2009-14, Software (Topic 985):  Certain Revenue Arrangements That Include Software Elements.    This guidance modifies the scope of ASC subtopic 965-605 Software-Revenue Recognition to exclude from its requirements (a) non-software components of tangible products and (b) software components of tangible products that are sold, licensed, or leased with tangible products when the software components and non-software components of the tangible product function together to deliver the tangible product’s essential functionality.   The amendments included in this update will be effective prospectively for revenue arrangements entered into or materially modified in fiscal years beginning on or after June 15, 2010.  Early adoption is permitted.  The Company is investigating the impact of adopting Accounting Standard Update No. 2009-14 on its consolidated financial statements.

12.  Subsequent Events

The Company evaluated subsequent events through the time of filing this Quarterly Report on Form 10-Q on November 4, 2009 and had none to report.

14


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

The discussion set forth below, as well as other portions of this Quarterly Report, contains statements concerning potential future events.  Such forward-looking statements are based upon assumptions by our management, as of the date of this Quarterly Report, including assumptions about risks and uncertainties faced by the Company.  Readers can identify these forward-looking statements by their use of such verbs as expects, anticipates, believes or similar verbs or conjugations of such verbs.  If any of our assumptions prove incorrect or should unanticipated circumstances arise, our actual results could materially differ from those anticipated by such forward-looking statements.  The differences could be caused by a number of factors or combination of factors including, but not limited to, those factors identified in the Company’s Annual Report on Form 10-K for the year ended December 27, 2008.  This report has been filed with the Securities and Exchange Commission (the "SEC" or the "Commission") in Washington, D.C. and can be obtained by contacting the SEC's public reference operations or obtaining it through the SEC's web site on the World Wide Web at http://www.sec.gov.  Readers are strongly encouraged to consider those factors when evaluating any forward-looking statement concerning the Company.  The Company will not update any forward-looking statements in this Quarterly Report to reflect future events or developments.

The information contained in this Management’s Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with the Condensed Consolidated Financial Statements and Notes thereto included in this Form 10-Q and the audited financial statements and notes thereto in the Company’s Annual Report on Form 10-K for the year ended December 27, 2008.

The Company is a leading worldwide provider of navigation, communications and information devices, most of which are enabled by Global Positioning System, or GPS, technology.  We operate in four business segments, the outdoor/fitness, marine, automotive/mobile and aviation markets.  Our segments offer products through our network of independent dealers and distributors.  However, the nature of products and types of customers for the four segments may vary significantly.  As such, the segments are managed separately.
 
15

 
Results of Operations

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

   
13-Weeks Ended
 
   
September 26, 2009
   
September 27, 2008
 
             
Net sales
    100.0 %     100.0 %
Cost of goods sold
    47.6 %     55.7 %
Gross profit
    52.4 %     44.3 %
Advertising
    5.9 %     5.8 %
Selling, general and administrative
    9.1 %     7.8 %
Research and development
    7.1 %     6.1 %
Total operating expenses
    22.1 %     19.7 %
Operating income
    30.3 %     24.6 %
Other income (expense), net
    2.5 %     -0.3 %
Income before income taxes
    32.8 %     24.3 %
Provision for income taxes
    5.3 %     4.6 %
Net income
    27.5 %     19.7 %

   
39-Weeks Ended
 
   
September 26, 2009
   
September 27, 2008
 
             
Net sales
    100.0 %     100.0 %
Cost of goods sold
    49.3 %     54.1 %
Gross profit
    50.7 %     45.9 %
Advertising
    5.5 %     6.0 %
Selling, general and administrative
    10.2 %     7.9 %
Research and development
    8.8 %     6.4 %
Total operating expenses
    24.5 %     20.3 %
Operating income
    26.2 %     25.6 %
Other income (expense), net
    1.2 %     3.6 %
Income before income taxes
    27.4 %     29.0 %
Provision for income taxes
    4.8 %     5.5 %
Net income
    22.6 %     23.5 %

The Company manages its operations in four segments: outdoor/fitness, marine, automotive/mobile, and aviation, and each of its segments employs the same accounting policies. Allocation of certain research and development expenses, and selling, general, and administrative expenses are made to each segment on a percent of revenue basis.   The following table sets forth our results of operations (in thousands) including revenue (net sales), operating income, and income before taxes for each of our four segments during the periods shown.  For each line item in the table, the total of the outdoor/fitness, marine, automotive/mobile, and aviation segments' amounts equals the amount in the condensed consolidated statements of income included in Item 1.

16


Comparison of 13-Weeks Ended September 26, 2009 and September 27, 2008
(Amounts included in the following discussion are stated in thousands unless otherwise indicated)

Net Sales

   
13-weeks ended September 26, 2009
   
13-weeks ended September 27, 2008
   
Quarter over Quarter
 
   
Net Sales
   
% of Revenues
   
Net Sales
   
% of Revenues
   
$ Change
   
% Change
 
Outdoor/Fitness
  $ 132,174       16.9 %   $ 118,614       13.6 %   $ 13,560       11.4 %
Marine
    45,426       5.8 %     44,048       5.1 %     1,378       3.1 %
Automotive/Mobile
    545,707       69.9 %     626,506       72.0 %     (80,799 )     -12.9 %
Aviation
    57,947       7.4 %     81,187       9.3 %     (23,240 )     -28.6 %
Total
  $ 781,254       100.0 %   $ 870,355       100.0 %   $ (89,101 )     -10.2 %

Net sales decreased 10.2% for the 13-week period ended September 26, 2009 when compared to the year-ago quarter.  The decline was driven by the automotive/mobile segment, as well as aviation, offset by increases in the marine and outdoor/fitness segments.  Automotive/mobile revenue remains the largest portion of our revenue mix, but declined from 72.0% in the third quarter of 2008 to 69.9% in the third quarter of 2009.

Total unit sales were flat at 3,866,000 in the third quarter of 2009 from 3,855,000 in the same period of 2008.   The slight increase in unit sales volume in the third quarter of fiscal 2009 was attributable to gains in the outdoor/fitness segment offset by a decline in aviation units.

Automotive/mobile segment revenue declined 13% from the year-ago quarter, as the average selling price declined 12% and volumes fell 1%.  This segment has slowed due to global macroeconomic conditions which have especially impacted North America and Europe, as well as increasing penetration rates in the industry.  The aviation segment declined 29% from the year-ago quarter as the industry continued to experience a significant slowdown associated with the macroeconomic conditions.  Revenues in our outdoor/fitness and marine segments increased 11% and 3%, respectively, from the year ago quarter as we delivered new products in the segment.

Gross Profit

   
13-weeks ended September 26, 2009
   
13-weeks ended September 27, 2008
   
Quarter over Quarter
 
   
Gross Profit
   
% of Revenues
   
Gross Profit
   
% of Revenues
   
$ Change
   
% Change
 
Outdoor/Fitness
  $ 82,886       62.7 %   $ 74,487       62.8 %   $ 8,399       11.3 %
Marine
    24,420       53.8 %     21,714       49.3 %     2,706       12.5 %
Automotive/Mobile
    263,653       48.3 %     236,339       37.7 %     27,314       11.6 %
Aviation
    38,783       66.9 %     53,099       65.4 %     (14,316 )     -27.0 %
Total
  $ 409,742       52.4 %   $ 385,639       44.3 %   $ 24,103       6.3 %

Gross profit dollars in the third quarter of 2009 grew 6.3% while gross profit margin increased 810 basis points compared to the third quarter of 2008.  Third quarter gross profit margins increased in all segments, excluding outdoor/fitness which fell 10 basis points, when compared to the same quarter in 2008.   Third quarter 2009 gross profit margin improvements were greatest in the automotive/mobile and marine segments at 1060 basis points and 450 basis points, respectively.

The automotive/mobile segment’s margin increase was driven by a decrease in per unit cost partially offset by average selling price reductions.  The per unit cost benefits were driven by foreign currency fluctuations, material cost reductions, and a mix shift toward newly released products, which typically have lower unit costs due to design efficiencies.  The Company also benefited from increased margins in the aviation and marine segments due to increased pricing and stable or decreasing per unit costs.  Aviation and marine gross margins increased 150 basis points and 450 basis points, respectively, from the year-ago quarter.

17

Advertising Expense
 
   
13-weeks ended September 26, 2009
   
13-weeks ended September 27, 2008
   
Quarter over Quarter
 
   
Advertising
   
% of Revenues
   
Advertising
   
% of Revenues
   
$ Change
   
% Change
 
Outdoor/Fitness
  $ 7,957       6.0 %   $ 7,164       6.0 %   $ 793       11.1 %
Marine
    2,810       6.2 %     2,523       5.7 %     287       11.4 %
Automotive/Mobile
    34,098       6.2 %     40,274       6.4 %     (6,176 )     -15.3 %
Aviation
    988       1.7 %     781       1.0 %     207       26.5 %
Total
  $ 45,853       5.9 %   $ 50,742       5.8 %   $ (4,889 )     -9.6 %
 
Advertising expense increased as a percentage of sales but decreased in absolute dollars when compared with the year-ago period.  As a percent of sales, advertising expenses increased to 5.9% in the third quarter of 2009 compared to 5.8% in third quarter of 2008.  The decrease of $4.9 million was a result of actions taken by the Company to reduce costs as the macroeconomic conditions impacted sales across our segments and around the world.
 
Selling, General and Administrative Expense

   
13-weeks ended September 26, 2009
   
13-weeks ended September 27, 2008
   
Quarter over Quarter
 
   
Selling, General &
         
Selling, General &
         
 
 
   
Admin. Expenses
   
% of Revenues
   
Admin. Expenses
   
% of Revenues
   
$ Change
   
% Change
 
Outdoor/Fitness
  $ 15,463       11.7 %   $ 8,704       7.3 %   $ 6,759       77.7 %
Marine
    4,276       9.4 %     3,652       8.3 %     624       17.1 %
Automotive/Mobile
    44,185       8.1 %     49,982       8.0 %     (5,797 )     -11.6 %
Aviation
    7,575       13.1 %     5,447       6.7 %     2,128       39.1 %
Total
  $ 71,499       9.1 %   $ 67,785       7.8 %   $ 3,714       5.5 %

Selling, general and administrative expense increased in absolute dollars and as a percentage of sales compared to the year-ago quarter.  The increased expense relates to a bad debt accrual due to cash collection risks associated with several of our customers.  The increased expense for the outdoor/fitness segment is driven by the allocation of costs based on revenues.  As outdoor/fitness revenues have increased as a percentage of revenues, additional selling, general and administrative expenses are shifted to the segment.  As a percent of sales, selling, general and administrative expenses increased from 7.8% of sales in the third quarter of 2008 to 9.1% of sales in the third quarter of 2009.

Research and Development Expense
 
   
13-weeks ended September 26,