United States
Securities and Exchange Commission
Washington, D.C. 20549
FORM 10-Q
☒
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 28, 2024
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 001-41118
GARMIN LTD.
(Exact name of Company as specified in its charter)
Switzerland
98-0229227
(State or other jurisdiction
(I.R.S. Employer
of incorporation or organization)
identification no.)
Mühlentalstrasse 2
8200 Schaffhausen
N/A
(Address of principal executive offices)
(Zip Code)
Company’s telephone number, including area code: +41 52 630 1600
Securities registered pursuant to Section 12(b) of the Act:
Registered Shares, $0.10 Per Share Par Value
GRMN
New York Stock Exchange
(Title of each class)
(Trading Symbol)
(Name of each exchange on which registered)
Indicate by check mark whether the Company (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Company was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes ☑ NO ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large Accelerated Filer
☑
Accelerated Filer
Non-accelerated Filer
Smaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. YES ☐ NO ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
YES ☐ NO ☑
Number of shares outstanding of the registrant’s common shares as of October 25, 2024
Registered Shares, $0.10 par value: 192,024,969 (excluding treasury shares)
Garmin Ltd.
Form 10-Q
Quarter Ended September 28, 2024
Table of Contents
Page
Part I - Financial Information
1
Item 1.
Condensed Consolidated Financial Statements
Condensed Consolidated Statements of Income for the 13-Weeks and 39-Weeks ended September 28, 2024 and September 30, 2023 (Unaudited)
Condensed Consolidated Statements of Comprehensive Income for the 13-Weeks and 39-Weeks ended September 28, 2024 and September 30, 2023 (Unaudited)
2
Condensed Consolidated Balance Sheets at September 28, 2024 and December 30, 2023 (Unaudited)
3
Condensed Consolidated Statements of Cash Flows for the 39-Weeks ended September 28, 2024 and September 30, 2023 (Unaudited)
4
Condensed Consolidated Statements of Stockholders’ Equity for the 13-Weeks and 39-Weeks ended September 28, 2024 and September 30, 2023 (Unaudited)
5
Notes to Condensed Consolidated Financial Statements (Unaudited)
7
Item 2.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
16
Item 3.
Quantitative and Qualitative Disclosures About Market Risk
23
Item 4.
Controls and Procedures
Part II - Other Information
24
Legal Proceedings
Item 1A.
Risk Factors
Unregistered Sales of Equity Securities and Use of Proceeds
Defaults Upon Senior Securities
Mine Safety Disclosures
Item 5.
Other Information
25
Item 6.
Exhibits
26
Signature Page
27
i
Item I - Condensed Consolidated Financial Statements
Garmin Ltd. and Subsidiaries
Condensed Consolidated Statements of Income (Unaudited)
(In thousands, except per share information)
13-Weeks Ended
39-Weeks Ended
September 28, 2024
September 30, 2023
Net sales
$
1,586,022
1,277,531
4,474,342
3,745,751
Cost of goods sold
634,423
548,962
1,857,712
1,604,945
Gross profit
951,599
728,569
2,616,630
2,140,806
Research and development expense
249,162
221,572
734,848
667,451
Selling, general and administrative expenses
264,962
236,628
803,869
721,649
Total operating expense
514,124
458,200
1,538,717
1,389,100
Operating income
437,475
270,369
1,077,913
751,706
Other income (expense):
Interest income
28,830
19,803
83,143
54,461
Foreign currency gains (losses)
18,131
(11,539
)
15,584
6,946
Other income
1,814
938
2,623
4,206
Total other income (expense)
48,775
9,202
101,350
65,613
Income before income taxes
486,250
279,571
1,179,263
817,319
Income tax provision
87,139
22,328
203,560
69,810
Net income
399,111
257,243
975,703
747,509
Net income per share:
Basic
2.08
1.34
5.08
3.91
Diluted
2.07
5.06
3.90
Weighted average common shares outstanding:
192,201
191,435
192,055
191,409
193,171
191,868
192,940
191,772
See accompanying notes.
Condensed Consolidated Statements of Comprehensive Income (Unaudited)
(In thousands)
Foreign currency translation adjustment
62,176
(48,342
(17,199
(56,793
Change in fair value of available-for-sale marketable securities, net of deferred taxes
25,123
2,815
32,118
10,499
Comprehensive income
486,410
211,716
990,622
701,215
Condensed Consolidated Balance Sheets (Unaudited)
September 28,2024
December 30,2023
Assets
Current assets:
Cash and cash equivalents
2,009,361
1,693,452
Marketable securities
414,701
274,618
Accounts receivable, net
922,034
815,243
Inventories
1,505,536
1,345,955
Deferred costs
23,385
16,316
Prepaid expenses and other current assets
334,488
318,556
Total current assets
5,209,505
4,464,140
Property and equipment, net of accumulated depreciation of $1,120,096 and $1,030,588
1,220,113
1,224,097
Operating lease right-of-use assets
137,665
143,724
Noncurrent marketable securities
1,106,532
1,125,191
Deferred income tax assets
787,849
754,635
Noncurrent deferred costs
7,994
11,057
Goodwill
611,884
608,474
Other intangible assets, net
168,230
186,601
Other noncurrent assets
97,960
85,650
Total assets
9,347,732
8,603,569
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable
374,025
253,790
Salaries and benefits payable
218,941
190,014
Accrued warranty costs
57,983
55,738
Accrued sales program costs
75,802
98,610
Other accrued expenses
222,925
245,874
Deferred revenue
113,049
101,189
Income taxes payable
227,735
225,475
Dividend payable
288,204
139,997
Total current liabilities
1,578,664
1,310,687
Deferred income tax liabilities
104,996
114,682
Noncurrent income taxes payable
16,864
16,521
Noncurrent deferred revenue
30,227
36,148
Noncurrent operating lease liabilities
109,832
113,035
Other noncurrent liabilities
602
436
Stockholders’ equity:
Common shares (194,901 and 195,880 shares authorized and issued; 192,136 and 191,777 shares outstanding)
19,490
19,588
Additional paid-in capital
2,218,170
2,125,467
Treasury shares (2,765 and 4,103 shares)
(243,994
(330,909
Retained earnings
5,563,576
5,263,528
Accumulated other comprehensive income (loss)
(50,695
(65,614
Total stockholders’ equity
7,506,547
7,012,060
Total liabilities and stockholders’ equity
Condensed Consolidated Statements of Cash Flows (Unaudited)
September 30,2023
Operating Activities:
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation
102,343
98,483
Amortization
30,849
33,751
Gain on sale or disposal of property and equipment
(48
(50
Unrealized foreign currency (gains) losses
(25,486
9,927
Deferred income taxes
(53,966
(90,214
Stock compensation expense
101,039
66,214
Realized loss on marketable securities
29
56
Changes in operating assets and liabilities, net of acquisitions:
Accounts receivable, net of allowance for doubtful accounts
(103,567
(54,756
(163,865
111,459
Other current and noncurrent assets
(47,413
28,288
124,315
55,340
Other current and noncurrent liabilities
(6,987
430
5,885
7,063
(3,987
(1,152
Income taxes
13,737
(102,024
Net cash provided by operating activities
948,581
910,324
Investing activities:
Purchases of property and equipment
(108,869
(144,876
Purchase of marketable securities
(363,783
(116,039
Redemption of marketable securities
277,334
145,094
Net cash from (payments for) acquisitions
5,011
(150,853
Other investing activities, net
(458
(1,018
Net cash used in investing activities
(190,765
(267,692
Financing activities:
Dividends
(428,373
(419,166
Proceeds from issuance of treasury shares related to equity awards
24,530
21,946
Purchase of treasury shares related to equity awards
(16,313
(9,397
Purchase of treasury shares under share repurchase plan
(29,278
(79,533
Net cash used in financing activities
(449,434
(486,150
Effect of exchange rate changes on cash and cash equivalents
7,536
(12,854
Net increase in cash, cash equivalents, and restricted cash
315,918
143,628
Cash, cash equivalents, and restricted cash at beginning of period
1,694,156
1,279,912
Cash, cash equivalents, and restricted cash at end of period
2,010,074
1,423,540
Condensed Consolidated Statements of Stockholders’ Equity (Unaudited)
For the 13-Weeks Ended September 28, 2024 and September 30, 2023
CommonShares
AdditionalPaid-InCapital
TreasuryShares
RetainedEarnings
AccumulatedOtherComprehensiveIncome (Loss)
Total
Balance at July 1, 2023
2,077,540
(322,688
4,464,682
(115,300
6,123,822
—
Translation adjustment
Adjustment related to unrealized gains (losses) on available-for-sale securities net of income tax effects of $686
(370
Issuance of treasury shares related to equity awards
Stock compensation
22,817
Purchase of treasury shares under share repurchase plan, including any associated excise tax
(8,705
Cancellation of treasury shares
Share capital currency change
Balance at September 30, 2023
2,100,357
(331,393
4,721,555
(160,827
6,349,280
Balance at June 29, 2024
2,183,158
(223,899
5,164,227
(137,994
7,004,982
Adjustment related to unrealized gains (losses) on available-for-sale securities net of income tax effects of $8,613
238
(43
43
35,055
(49
(20,089
Balance at September 28, 2024
For the 39-Weeks Ended September 28, 2024 and September 30, 2023
Balance at December 31, 2022
17,979
2,042,472
(475,095
4,733,517
(114,533
6,204,340
Adjustment related to unrealized gains (losses) on available-for-sale securities net of income tax effects of $2,327
(558,882
(6,482
28,428
(76,156
(238
200,827
(200,589
1,847
(1,847
Balance at December 30, 2023
Adjustment related to unrealized gains (losses) on available-for-sale securities net of income tax effects of $10,810
(576,580
(8,336
32,866
(28,811
(98
99,173
(99,075
6
1.Accounting Policies
Basis of Presentation and Principles of Consolidation
The accompanying unaudited condensed consolidated financial statements include the accounts of Garmin Ltd. and its wholly-owned subsidiaries (collectively, we, our, us, the Company or Garmin). Intercompany balances and transactions have been eliminated.
The 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, the condensed consolidated financial statements reflect all adjustments, which are normal and recurring in nature, necessary for fair financial statement presentation. The condensed consolidated balance sheet at December 30, 2023 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. Additionally, the condensed consolidated financial statements should be read in conjunction with Part I, Item 2, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of this Form 10-Q, and the Company’s Annual Report on Form 10-K for the year ended December 30, 2023.
The Company's operating results are subject to fluctuations associated with seasonal demand for consumer products, the timing of new product introductions, and original equipment manufacturer (OEM) customer production schedules. Therefore, operating results for the 13-week and 39-week periods ended September 28, 2024 are not necessarily indicative of the results that may be expected for the year ending December 28, 2024.
The Company’s fiscal year is based on a 52- or 53-week period ending on the last Saturday of the calendar year. Therefore, the financial results of certain 53-week fiscal years, and the associated 14-week quarters, will not be exactly comparable to the prior and subsequent 52-week fiscal years and the associated 13-week quarters. The quarters ended September 28, 2024 and September 30, 2023 both contain operating results for 13 weeks.
Changes in Classification and Allocation
Certain prior period amounts have been reclassified or presented to conform to the current period presentation.
In the first quarter of fiscal 2024, the Company changed the presentation of operating expense to include advertising expense within selling, general and administrative expenses on the Company's condensed consolidated statements of income, which management believes to be a more meaningful presentation. As a result, the Company’s condensed consolidated statements of income have been recast for the 13-week and 39-week periods ended September 30, 2023 to conform with the current period presentation. This change had no effect on the Company’s consolidated operating or net income.
Significant Accounting Policies
For a description of the significant accounting policies and methods used in the preparation of the Company’s condensed consolidated financial statements, refer to Note 1, “Summary of Significant Accounting Policies” in the Notes to the Consolidated Financial Statements in Part II, Item 8 of the Company’s Annual Report on Form 10-K for the fiscal year ended December 30, 2023. There were no material changes to the Company’s significant accounting policies during the 39-week period ended September 28, 2024.
Recently Adopted Accounting Standards
There are no recently adopted accounting standards that have a material impact on the Company’s consolidated financial statements, accounting policies, processes, or systems.
Recently Issued Accounting Pronouncements Not Yet Adopted
Income Taxes
In December 2023, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures (“ASU 2023-09”) to enhance the transparency and decision usefulness of income tax disclosures, primarily related to the income tax rate reconciliation and income taxes paid. ASU 2023-09 will require the Company to disclose specified additional information in its income tax rate reconciliation, provide additional information for certain reconciling items, and disaggregate its disclosure of income taxes paid by federal, state and foreign taxes, with further disaggregation required for significant individual jurisdictions. ASU 2023-09 is effective for fiscal years beginning after December 15, 2024, with early adoption permitted. The amendments may be applied using either a prospective or retrospective approach.
Segment Reporting
In November 2023, the FASB issued Accounting Standards Update No. 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures (“ASU 2023-07”) to improve reportable segment disclosure requirements, primarily through enhanced disclosures. ASU 2023-07 will require the Company to disclose additional information about certain significant segment expenses, as well as how the Company’s chief operating decision maker (CODM) uses segment profit or loss information in assessing segment performance and deciding how to allocate resources. ASU 2023-07 is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. The Company will adopt ASU 2023-07 using a retrospective transition method.
2. Revenue
In order to further depict how the nature, amount, timing and uncertainty of the Company's revenue and cash flows are affected by economic factors, we disaggregate revenue (“net sales”) by geographic region, major product category, and pattern of recognition.
Disaggregated revenue by geographic region (Americas, APAC, and EMEA) is presented in Note 11 – Segment Information and Geographic Data. Note 11 also contains disaggregated revenue information of the five major product categories identified by the Company – fitness, outdoor, aviation, marine, and auto OEM.
A large majority of the Company’s sales are recognized on a point in time basis, usually once the product is shipped and title and risk of loss have transferred to the customer. Sales recognized over a period of time are primarily within the outdoor, aviation, and auto OEM segments and relate to performance obligations that are satisfied over the contractual service period or estimated life of the product. Revenue disaggregated by the timing of transfer of the goods or services is presented in the table below:
Point in time
1,496,940
1,200,676
4,231,561
3,532,960
Over time
89,082
76,855
242,781
212,791
Transaction price and costs associated with the Company’s unsatisfied performance obligations are reflected as deferred revenue and deferred costs, respectively, on the Company’s condensed consolidated balance sheets. Such amounts are recognized ratably over the applicable service period or estimated useful life. Changes in deferred revenue and costs during the 39-week period ended September 28, 2024 are presented below:
8
39-Weeks EndedSeptember 28, 2024
Deferred Revenue (1)
Deferred Costs (2)
Balance, beginning of period
137,337
27,373
Deferrals in period
248,720
47,371
Recognition of deferrals in period
(242,781
(43,365
Balance, end of period
143,276
31,379
(1)Deferred revenue is comprised of both deferred revenue and noncurrent deferred revenue per the condensed consolidated balance sheets.
(2)Deferred costs are comprised of both deferred costs and noncurrent deferred costs per the condensed consolidated balance sheets.
Of the $242,781 of deferred revenue recognized in the 39-week period ended September 28, 2024, approximately $84,371 was deferred as of the beginning of the period. Of the $143,276 of deferred revenue as of September 28, 2024, the Company expects to recognize approximately 90% ratably over a total period of three years or less.
3. Earnings Per Share
The following table sets forth the computation of basic and diluted net income per share. Stock options, stock appreciation rights, and restricted stock units are collectively referred to as “equity awards”.
Numerator:
Numerator for basic and diluted net income per share – net income
Denominator:
Denominator for basic net income per share – weighted-average common shares
Effect of dilutive equity awards
970
433
885
363
Denominator for diluted net income per share – adjusted weighted-average common shares
Basic net income per share
Diluted net income per share
Shares excluded from diluted net income per share calculation:
Anti-dilutive equity awards
215
4.Marketable Securities
Accounting Standards Codification Topic 820, Fair Value Measurements and Disclosures, defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (exit price). The accounting guidance classifies the inputs used to measure fair value into the following hierarchy:
Level 1
Unadjusted quoted prices in active markets for the identical asset or liability
Level 2
Observable inputs for the asset or liability, either directly or indirectly, such as quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, or inputs other than quoted prices that are observable for the asset or liability
Level 3
Unobservable inputs for the asset or liability
9
The Company endeavors to utilize the best available information in measuring fair value. Financial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. Valuation is based on prices obtained from an independent pricing vendor using both market and income approaches. The primary inputs to the valuation include quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, contractual cash flows, benchmark yields, and credit spreads.
The method described above may produce a fair value calculation that may not be indicative of net realizable value or reflective of future fair values. Furthermore, while the Company believes its valuation methods are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different fair value measurement at the reporting date.
Marketable securities classified as available-for-sale securities are summarized below:
Available-For-Sale Securitiesas of September 28, 2024
Fair Value Level
Amortized Cost
Gross Unrealized Gains
Gross Unrealized Losses
Fair Value
U.S. Treasury securities
4,869
20
4,889
Agency securities
25,955
145
(333
25,767
Mortgage-backed securities
34,910
(3,605
31,305
Corporate debt securities
1,203,805
9,573
(21,262
1,192,116
Municipal securities
274,323
508
(10,435
264,396
Other
2,874
(114
2,760
1,546,736
10,246
(35,749
1,521,233
Available-For-Sale Securitiesas of December 30, 2023
2,971
2,972
23,692
32
(585
23,139
38,743
(4,731
34,012
1,104,834
1,680
(46,073
1,060,441
294,240
98
(18,430
275,908
3,760
(423
3,337
1,468,240
1,811
(70,242
1,399,809
The primary objectives of the Company’s investment policy are to preserve capital, maintain an acceptable degree of liquidity, and maximize yield within the constraint of low credit risk. The fair value of securities varies from period to period due to changes in interest rates, the performance of the underlying collateral, and the credit performance of the underlying issuer, among other factors.
Accrued interest receivable, which totaled $13,386 as of September 28, 2024, is excluded from both the fair value and amortized cost basis of available-for-sale securities and is included within prepaid expenses and other current assets on the Company’s condensed consolidated balance sheets. The Company writes off impaired accrued interest on a timely basis, generally within 30 days of the due date, by reversing interest income. No accrued interest was written off during the 39-week period ended September 28, 2024.
The Company recognizes impairments relating to credit losses of available-for-sale securities through an allowance for credit losses and other income (expense) on the Company’s condensed consolidated statements of income. Impairment not relating to credit losses is recorded in accumulated other comprehensive income (loss) on the Company’s condensed consolidated balance sheets. The cost of securities sold is based on the specific identification method. Approximately 72% of securities in the Company’s portfolio were at an unrealized loss position as of September 28, 2024.
10
The following tables display additional information regarding gross unrealized losses and fair value by major security type for available-for-sale securities in an unrealized loss position as of September 28, 2024 and December 30, 2023.
As of September 28, 2024
Less than 12 Consecutive Months
12 Consecutive Months or Longer
1,000
6,667
7,667
(127
36,935
(21,135
688,156
725,091
235,171
37,935
(35,622
964,059
1,001,994
As of December 30, 2023
(31
10,923
(554
6,446
17,369
(702
64,637
(45,371
889,785
954,422
(32
2,654
(18,398
261,651
264,305
(765
78,214
(69,477
1,195,231
1,273,445
As of September 28, 2024 and December 30, 2023, the Company had not recognized an allowance for credit losses on any securities in an unrealized loss position.
The Company has not recorded an allowance for credit losses and charge to other income (expense) for the unrealized losses on agency, mortgage-backed, corporate debt, municipal, and other securities presented above because the Company does not consider the declines in fair value to have resulted from credit losses. The Company has not observed a significant deterioration in credit quality of these securities, which are highly rated with moderate to low credit risk. Declines in value are largely attributable to current global economic conditions. The securities continue to make timely principal and interest payments, and the fair values are expected to recover as they approach maturity. Management does not intend to sell the securities, and it is not more likely than not that the Company will be required to sell the securities, before the respective recoveries of their amortized cost bases, which may be maturity.
The amortized cost and fair value of marketable securities at September 28, 2024, by maturity, are shown below.
Due in one year or less
421,840
Due after one year through five years
1,108,518
1,092,026
Due after five years through ten years
7,588
7,001
Due after ten years
8,790
7,505
5.Income Taxes
The Company recorded income tax expense of $87,139 in the 13-week period ended September 28, 2024, compared to income tax expense of $22,328 in the 13-week period ended September 30, 2023. The effective tax rate was 17.9% in the third quarter of 2024, compared to 8.0% in the third quarter of 2023. The increase in effective tax rate between comparative periods was primarily due to the increase in the combined federal and cantonal Switzerland statutory tax rate in response to the implementation of global minimum tax requirements.
The Company recorded income tax expense of $203,560 in the 39-week period ended September 28, 2024, compared to income tax expense of $69,810 in the 39-week period ended September 30, 2023. The effective tax rate was 17.3% in the first three quarters of 2024, compared to 8.5% in the first three quarters of 2023. The increase in effective tax rate between comparative periods was primarily due to the increase in the combined federal and cantonal Switzerland statutory tax rate in response to the implementation of global minimum tax requirements.
11
6. Inventories
The components of inventories consist of the following:
December 30, 2023
Raw materials
565,253
493,493
Work-in-process
227,701
160,919
Finished goods
712,582
691,543
7. Warranty Reserves
The Company accrues for estimated future warranty costs at the time products are sold. The Company’s standard warranty obligation to retail partners generally provides for a right of return of any product for a full refund in the event that such product is not merchantable, is damaged, or is defective. The Company’s standard warranty obligation to its end-users provides for a period of one to two years from the date of shipment, while certain aviation, marine, and auto OEM products have a warranty period of two years or more from the date of installation. The Company’s estimates of costs to service its warranty obligations are based on historical experience and management’s expectations and judgments of future conditions, with most claims resolved within a year of the sale. The following reconciliation presents details of the changes in the Company's accrued warranty costs:
Balance - beginning of period
58,253
52,352
50,952
Accrual for products sold (1)
19,039
17,398
64,334
58,124
Expenditures
(19,309
(16,217
(62,089
(55,543
Balance - end of period
53,533
(1)Changes in cost estimates related to pre-existing warranties were not material and are aggregated with accruals for new warranty contracts in the ‘accrual for products sold’ line.
8.Commitments and Contingencies
Commitments
The Company is party to certain commitments that require the future purchase of goods or services (“unconditional purchase obligations”). The Company’s unconditional purchase obligations primarily consist of payments for inventory, capital expenditures, and other indirect purchases in connection with conducting its business. The aggregate amount of purchase orders and other commitments open as of September 28, 2024 that may represent noncancelable unconditional purchase obligations having a remaining term in excess of one year was approximately $339,000.
Certain cash balances are held as collateral in relation to bank guarantees. This restricted cash is reported within other assets on the condensed consolidated balance sheets and totaled $713 and $704 on September 28, 2024 and December 30, 2023, respectively. The total of the cash and cash equivalents balance and the restricted cash reported within other assets in the condensed consolidated balance sheets equals the total cash, cash equivalents, and restricted cash shown in the condensed consolidated statements of cash flows.
Contingencies
Management of the Company currently does not believe it is reasonably possible that the Company may have incurred a material loss, or a material loss in excess of recorded accruals, with respect to loss contingencies in the aggregate, for the fiscal quarter ended September 28, 2024. The results of legal proceedings, investigations and claims, however, cannot be predicted with certainty. An adverse resolution of one or more of such matters in excess of management’s expectations could have a material adverse effect in the particular quarter or fiscal year in which a loss is recorded, but based on information currently known, the Company does not believe it is likely that losses from such matters would have a material adverse effect on the Company’s business or its consolidated financial position, results of operations or cash flows.
12
The Company settled or resolved certain matters during the 13-week and 39-week periods ended September 28, 2024 that did not individually or in the aggregate have a material impact on the Company’s business or its consolidated financial position, results of operations or cash flows.
9. Stockholders' Equity
Under Swiss corporate law, dividends must be approved by shareholders at the annual general meeting of the Company’s shareholders. Approved dividends are payable in four equal installments on dates to be determined by the Board of Directors. A reduction of retained earnings and a corresponding liability are recorded at the time of shareholders' approval and are periodically adjusted based on the number of applicable shares outstanding.
The Company's shareholders approved the following dividends:
Approval Date
Dividend Payment Date
Record Date
Dividend Per Share
Fiscal 2024
June 7, 2024
June 28, 2024
June 17, 2024
0.75
September 27, 2024
September 13, 2024
December 27, 2024
December 13, 2024
March 28, 2025
March 14, 2025
3.00
Fiscal 2023
June 9, 2023
June 30, 2023
June 20, 2023
0.73
September 29, 2023
September 15, 2023
December 29, 2023
December 15, 2023
March 29, 2024
March 15, 2024
2.92
Fiscal 2022
June 10, 2022
June 30, 2022
June 20, 2022
September 30, 2022
September 15, 2022
December 30, 2022
December 15, 2022
March 31, 2023
March 15, 2023
Share Repurchase Programs
On April 22, 2022, the Board of Directors approved a share repurchase program (the “2022 Program”) authorizing the Company to repurchase up to $300,000 of the common shares of Garmin Ltd., exclusive of the cost of any associated excise tax. As of December 30, 2023, the Company had repurchased 3,176 shares for $300,000, leaving $0 available to repurchase additional shares under the 2022 Program when the share repurchase authorization expired on December 29, 2023.
On February 16, 2024, the Board of Directors approved a new share repurchase program (the “2024 Program”) authorizing the Company to repurchase up to $300,000 of the common shares of Garmin Ltd., exclusive of the cost of any associated excise tax. The timing and volume of share repurchases are subject to market conditions, business conditions and applicable laws, and are at management’s discretion. Share repurchases may be made from time to time in the open market or in privately negotiated transactions, including under plans complying with the provisions of Rule 10b5-1 and Rule 10b-18 of the Securities Exchange Act of 1934, as amended. The 2024 Program does not require the purchase of any minimum number of shares and may be suspended or discontinued at any time. The share repurchase authorization expires on December 26, 2026. As of September 28, 2024, the Company had repurchased 176 shares for $29,802, leaving $270,198 available to repurchase additional shares under the 2024 Program.
13
Treasury Shares
In March 2024, the Board of Directors authorized the cancellation of 979 shares previously purchased under our share repurchase program. The capital reduction by cancellation of these shares became effective in March 2024. Total stockholders’ equity reported for the Company was not affected.
10. Accumulated Other Comprehensive Income (Loss)
The following provides required disclosure of changes in accumulated other comprehensive income (loss) balances by component for the 13-week and 39-week periods ended September 28, 2024:
13-Weeks Ended September 28, 2024
Foreign currencytranslation adjustment
Net gains (losses) on available-for-sale securities
(90,883
(47,111
Other comprehensive income before reclassification, net of income tax expense of $8,613
87,299
Amounts reclassified from accumulated other comprehensive income to other income (expense), net of income tax of $0 included in income tax provision
Net current-period other comprehensive income (loss)
(28,707
(21,988
39-Weeks Ended September 28, 2024
(11,508
(54,106
Other comprehensive income (loss) before reclassification, net of income tax expense of $10,805
32,094
14,895
Amounts reclassified from accumulated other comprehensive income (loss) to other income (expense), net of income tax benefit of $5 included in income tax provision
14,919
11.Segment Information and Geographic Data
Garmin is organized in the five operating segments of fitness, outdoor, aviation, marine, and auto OEM. These operating segments represent the Company's reportable segments.
The Company’s Chief Executive Officer, who has been identified as the CODM, primarily uses operating income as the measure of profit or loss to assess segment performance and allocate resources. Operating income represents net sales less costs of goods sold and operating expenses. Net sales are directly attributed to each segment. Most costs of goods sold and the majority of operating expenses are also directly attributed to each segment, while certain other costs of goods sold and operating expenses are allocated to the segments in a reasonable manner considering the specific facts and circumstances of the expenses being allocated.
14
Net sales (“revenue”), gross profit, and operating income for each of the Company’s five reportable segments are presented below.
Fitness
Outdoor
Aviation
Marine
Auto OEM
463,887
526,551
204,631
222,244
168,709
283,325
358,693
154,138
122,433
33,010
Operating income (loss)
147,768
208,866
44,278
37,839
(1,276
13-Weeks Ended September 30, 2023
352,976
433,997
198,160
182,248
110,150
190,685
270,774
148,364
95,186
23,560
74,614
136,401
49,269
23,850
(13,765
1,235,182
1,332,617
639,739
821,933
444,871
723,375
885,646
478,131
449,472
80,006
323,511
451,408
146,899
185,422
(29,327
39-Weeks Ended September 30, 2023
932,561
1,210,773
629,195
677,026
296,196
484,759
755,800
463,774
365,162
71,311
139,651
351,399
169,730
142,135
(51,209
Net sales to external customers by geographic region for the 13-week and 39-week periods ended September 28, 2024 and September 30, 2023 are presented below. Note that APAC includes Asia Pacific and Australian Continent and EMEA includes Europe, the Middle East and Africa.
Americas
724,572
628,157
2,181,266
1,881,710
EMEA
612,658
439,123
1,618,058
1,252,526
APAC
248,792
210,251
675,018
611,515
Net sales to external customers
12.Subsequent Events
On September 30, 2024, the Company acquired Lumishore, a privately-held company that designs and manufactures high-performance above and underwater LED lighting systems for boats. This acquisition was not material.
15
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 on Form 10-Q, contain statements concerning potential future events. Such forward-looking statements are based upon assumptions by management, as of the date of this Quarterly Report on Form 10-Q, including assumptions about risks and uncertainties faced by the Company. Readers can identify these forward-looking statements by their use of such words as "future", "expects", "anticipates", "believes", “estimates”, “would”, “could”, “can”, “may,” or other similar words or other comparable terms. If any of the Company’s assumptions prove incorrect or should unanticipated circumstances arise, actual results could materially differ from those anticipated by such forward-looking statements. The differences could be caused by a number of factors or combination of factors including, but not limited to, those factors identified in Part II, Item 1A of this Quarterly Report on Form 10-Q and in the Company’s Annual Report on Form 10-K for the year ended December 30, 2023. Readers are strongly encouraged to consider those factors when evaluating any forward-looking statement concerning the Company. These forward-looking statements are made as of the date hereof, and the Company disclaims any obligation to update any forward-looking statements in this Quarterly Report on Form 10-Q to reflect future events or developments, except as required by law.
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 Quarterly Report on Form 10-Q and the audited financial statements and notes thereto in the Company’s Annual Report on Form 10-K for the year ended December 30, 2023. Unless the context otherwise requires, references in this document to "we", "us", "our", the "Company" and similar terms refer to Garmin Ltd. and its subsidiaries.
Unless otherwise indicated, amounts set forth in the discussion below are in thousands.
Company Overview
The Company is a leading worldwide provider of wireless devices, many of which feature Global Positioning System (GPS) navigation, and applications that are designed for people who live an active lifestyle. We are organized in the five operating segments of fitness, outdoor, aviation, marine, and auto OEM. Our products are sold through a variety of indirect distribution channels, including a large worldwide network of independent retailers, dealers, distributors, installation and repair shops, and original equipment manufacturers (OEMs). We also sell our products and services directly through our online webshop (garmin.com), subscriptions for connected services, and our own retail stores.
Results of Operations
As indicated in Note 1 to the Condensed Consolidated Financial Statements, in the first quarter of fiscal 2024, the Company changed the presentation of operating expense to include advertising expense within selling, general and administrative expenses on the Company's condensed consolidated statements of income, which management believes to be a more meaningful presentation.
This change in presentation had no effect on the Company's consolidated operating or net income. The amounts presented below for selling, general and administrative expenses for the 13-week and 39-week periods ended September 30, 2023 have been recast to conform with the current period presentation.
Comparison of 13-Weeks Ended September 28, 2024 and September 30, 2023
Net Sales
13-Weeks EndedSeptember 28, 2024
Year-over-Year Change
13-Weeks EndedSeptember 30, 2023
31
%
Percentage of Total Net Sales
21
33
34
22
53
Net sales increased 24% for the 13-week period ended September 28, 2024 when compared to the year-ago quarter. Total unit sales in the third quarter of 2024 increased to 4,620 when compared to total unit sales of 3,997 in the third quarter of 2023, which differs from the percent increase in revenue primarily due to shifts in segment and product mix. Outdoor was the largest portion of our revenue mix at 33% in the third quarter of 2024 compared to 34% in the third quarter of 2023.
The increase in fitness revenue was driven by sales growth across all categories, led by strong demand for wearables. Outdoor revenue increased primarily due to sales growth in adventure watches. The increase in aviation revenue was driven by sales growth in aftermarket product categories. The increase in marine revenue was primarily driven by contributions from the Company's acquisition of JL Audio. Auto OEM revenue increased primarily due to growth in domain controllers.
Gross Profit
49
Percentage of Segment Net Sales
61
54
68
62
75
55
52
40
60
57
Gross profit dollars in the third quarter of 2024 increased 31%, primarily due to the increase in net sales when compared to the year-ago quarter, as described above. Consolidated gross margin increased 300 basis points when compared to the year-ago quarter primarily due to lower costs of goods and favorable product mix within certain segments, partially offset by unfavorable segment mix.
The fitness, outdoor, and marine gross margin increases of 710 basis points, 570 basis points, and 290 basis points, respectively, were primarily attributable to lower costs of goods and favorable product mix. The aviation gross margin was relatively flat when compared to the year-ago quarter. The auto OEM gross margin decrease of 180 basis points was primarily attributable to unfavorable product mix.
Operating Expense
17
19
36
Total operating expense in the third quarter of 2024 increased 12% in absolute dollars and decreased 350 basis points as a percent of revenue when compared to the year-ago quarter.
Research and development expense increased 12% in absolute dollars and decreased 160 basis points as a percent of revenue when compared to the year-ago quarter. The absolute dollar expense increase was primarily due to higher engineering personnel costs.
Selling, general and administrative expenses increased 12% in absolute dollars and decreased 180 basis points when compared to the year-ago quarter. The absolute dollar expense increase was primarily attributable to increased personnel-related expenses.
Operating Income
Operating Income (Loss)
(10
%)
59
(91
(1
(12
28
Total operating income in the third quarter of 2024 increased 62% in absolute dollars and increased 640 basis points as a percent of revenue when compared to the year-ago quarter. The increase in operating income as a percent of revenue was driven by increased sales, increased gross margin as a percent of revenue, and lower operating expenses as a percent of revenue, as described above. The improved performance in fitness, outdoor, marine, and auto OEM was partially offset by a decrease in aviation.
Other Income (Expense)
The average interest rate return on cash and investments during the third quarter of 2024 was 3.3%, compared to 2.8% during the same quarter of 2023.
Foreign currency gains and losses for the Company are driven by movements of a number of currencies in relation to the U.S. Dollar. The Taiwan Dollar is the functional currency of Garmin Corporation, the Euro is the functional currency of several subsidiaries, and the U.S. Dollar is the functional currency of Garmin (Europe) Ltd., although some transactions and balances are denominated in British Pounds. Other notable currency exposures include the Australian Dollar, Chinese Yuan, Japanese Yen, and Polish Zloty. The majority of the Company’s consolidated foreign currency gain or loss is typically driven by the significant cash and marketable securities, receivables and payables held in a currency other than the functional currency at a given legal entity.
The $18.1 million currency gain recognized in the third quarter of 2024 was primarily due to the U.S. Dollar weakening against the British Pound Sterling, Euro, and Polish Zloty, partially offset by the U.S. Dollar weakening against the Taiwan Dollar, within the 13-week period ended September 28, 2024. During this period, the U.S. Dollar weakened 3.7% against the British Pound Sterling, 4.2% against the Euro, and 5.3% against the Polish Zloty, resulting in gains of $3.2 million, $8.9 million, and $9.3 million, respectively, while the U.S. Dollar weakened 2.9% against the Taiwan Dollar, resulting in a loss of $10.4 million. The remaining net currency gain of $7.1 million was related to the impacts of other currencies, each of which was individually immaterial.
The $11.5 million currency loss recognized in the third quarter of 2023 was primarily due to the U.S. Dollar strengthening against the Polish Zloty, Australian Dollar, and British Pound Sterling, partially offset by the U.S. Dollar strengthening against the Taiwan Dollar within the 13-week period ended September 30, 2023. During this period, the U.S. Dollar strengthened 6.8% against the Polish Zloty, 2.9% against the Australian Dollar, and 4.0% against the British Pound Sterling, resulting in losses of $18.4 million, $2.4 million, and $1.9 million, respectively, partially offset by the U.S. Dollar strengthening 3.4% against the Taiwan Dollar, resulting in a gain of $15.2 million. The remaining net currency loss of $4.0 million was related to the impacts of other currencies, each of which was individually immaterial.
18
Income Tax Provision
The Company recorded income tax expense of $87.1 million in the 13-week period ended September 28, 2024, compared to income tax expense of $22.3 million in the 13-week period ended September 30, 2023. The effective tax rate was 17.9% in the third quarter of 2024, compared to 8.0% in the third quarter of 2023. The increase in effective tax rate between comparative periods was primarily due to the increase in the combined federal and cantonal Switzerland statutory tax rate in response to the implementation of global minimum tax requirements.
Net Income
As a result of the above, net income for the 13-week period ended September 28, 2024 was $399.1 million compared to $257.2 million for the 13-week period ended September 30, 2023, an increase of $141.9 million.
Comparison of 39-Weeks Ended September 28, 2024 and September 30, 2023
39-Weeks EndedSeptember 30, 2023
30
50
Net sales increased 19% for the 39-week period ended September 28, 2024 when compared to the year-ago period. Total unit sales in the first three quarters of 2024 increased to 13,165 when compared to total unit sales of 11,369 in the first three quarters of 2023, which differs from the percent increase in revenue primarily due to shifts in segment and product mix. Outdoor was the largest portion of our revenue mix at 30% in the first three quarters of 2024 compared to 32% in the first three quarters of 2023.
The increase in fitness revenue was driven by sales growth across all categories, led by strong demand for wearables. Outdoor revenue increased primarily due to sales growth in adventure watches. Aviation revenue increased primarily due to growth in OEM product categories. Marine revenue increased primarily driven by contributions from the Company's acquisition of JL Audio. Auto OEM revenue increased primarily due to growth in domain controllers.
66
74
58
Gross profit dollars in the first three quarters of 2024 increased 22%, primarily due to the increase in net sales when compared to the year-ago period, as described above. Consolidated gross margin increased 130 basis points when compared to the year-ago period primarily due to favorable product mix within certain segments and lower costs of goods, partially offset by unfavorable segment mix.
The fitness and outdoor gross margin increases of 660 and 400 basis points, respectively, were primarily attributable to favorable product mix and lower costs of goods. The aviation gross margin increase of 100 basis points was primarily attributable to lower warranty costs. The marine gross margin was relatively flat when compared to the year-ago period. The auto OEM gross margin decrease of 610 basis points was primarily attributable to unfavorable product mix.
Selling, General and administrative expenses
37
Total operating expense in the first three quarters of 2024 increased 11% in absolute dollars and decreased 270 basis points as a percent of revenue when compared to the year-ago period.
Research and development expense increased 10% in absolute dollars and decreased 140 basis points as a percent of revenue when compared to the year-ago period. The absolute dollar expense increase was primarily due to higher engineering personnel costs.
Selling, general and administrative expense increased 11% in absolute dollars and decreased 130 basis points as a percent of revenue compared to the year-ago period. The absolute dollar expense increase was primarily attributable to increased personnel-related expenses, including the impact of the Company's acquisition of JL Audio.
132
(13
(7
(17
Total operating income in the first three quarters of 2024 increased 43% in absolute dollars and 400 basis points as a percent of revenue when compared to the year-ago period. The increase in operating income as a percent of revenue was due to increased sales, increased gross margin as a percent of revenue, and lower operating expenses as a percent of revenue, as described above. The improved performance in fitness, outdoor, marine, and auto OEM was partially offset by a decrease in aviation.
Foreign currency gains
The average interest rate returns on cash and investments during the 39-week periods ended September 28, 2024 and September 30, 2023 were 3.3% and 2.6%, respectively.
The $15.6 million currency gain recognized in the 39-week period ended September 28, 2024 was primarily due to the U.S. Dollar strengthening against the Taiwan Dollar within the 39-week period ended September 28, 2024. During this period, the U.S. Dollar strengthened 2.8% against the Taiwan Dollar, resulting in a gain of $19.6 million. The remaining net currency loss of $4.0 million was related to the impacts of other drivers, each of which was individually immaterial.
The $6.9 million currency gain recognized in the 39-week period ended September 30, 2023 was primarily due to the U.S. Dollar strengthening against the Taiwan Dollar, partially offset by the U.S. Dollar strengthening against the Australian Dollar, Chinese Yuan and Japanese Yen and U.S. Dollar volatility with the Polish Zloty within the 39-week period ended September 30, 2023. During this period, the U.S. Dollar strengthened 4.9% against the Taiwan Dollar, resulting in a gain of $21.1 million, partially offset by the U.S. Dollar strengthening 5.2% against the Australian Dollar, 4.6% against the Chinese Yuan, and 12.2% against the Japanese Yen, resulting in losses of $2.9 million, $2.9 million, and $2.8 million, respectively, while volatility with the Polish Zloty resulted in a net loss of $4.5 million as the loss in the third quarter more than offset gains in previous quarters. The remaining net currency loss of $1.1 million was related to the impacts of other currencies, each of which was individually immaterial.
The Company recorded income tax expense of $203.6 million in the first three quarters of 2024, compared to income tax expense of $69.8 million in the first three quarters of 2023. The effective tax rate was 17.3% in the first three quarters of 2024, compared to 8.5% in the first three quarters of 2023. The increase in effective tax rate between comparative periods was primarily due to the increase in the combined federal and cantonal Switzerland statutory tax rate in response to the implementation of global minimum tax requirements.
As a result of the above, net income for the 39-week period ended September 28, 2024 was $975.7 million compared to $747.5 million for the 39-week period ended September 30, 2023, an increase of $228.2 million.
Liquidity and Capital Resources
We primarily use cash flow from operations, and expect that future cash requirements may be used, to fund our capital expenditures, support our working capital requirements, pay dividends, fund share repurchases, and fund strategic acquisitions. We believe that our existing cash balances and cash flow from operations will be sufficient to meet our short- and long-term projected working capital needs, capital expenditures, and other cash requirements.
Cash, Cash Equivalents, and Marketable Securities
As of September 28, 2024, we had approximately $3.5 billion of cash, cash equivalents and marketable securities. Management invests idle or surplus cash in accordance with the Company's investment policy, which has been approved by the Company’s Board of Directors. The investment policy’s primary objectives are to preserve capital, maintain an acceptable degree of liquidity, and maximize yield within the constraint of low credit risk. Garmin’s average interest rate returns on cash and investments during the first three quarters of 2024 and 2023 were 3.3% and 2.6%, respectively. The fair value of our securities varies from period to period due to changes in interest rates, the performance of the underlying collateral, and the credit performance of the underlying issuer, among other factors. See Note 4 in the Notes to the Condensed Consolidated Financial Statements for additional information regarding marketable securities.
Cash Flows
Cash provided by operating activities totaled $948.6 million for the first three quarters of 2024, compared to $910.3 million for the first three quarters of 2023. The increase was primarily due to an increase in cash received from customers primarily driven by higher net sales as well as less cash paid for income taxes, partially offset by increases in cash paid for cost of goods sold and operating expenses in the first three quarters of 2024 compared to the first three quarters of 2023.
Cash used in investing activities totaled $190.8 million for the first three quarters of 2024, compared to $267.7 million for the first three quarters of 2023. The decrease was primarily due to a decrease in cash used for acquisitions and a decrease in purchases of property and equipment, partially offset by net purchases of marketable securities in the first three quarters of 2024, compared to net redemptions of marketable securities in the first three quarters of 2023.
Cash used in financing activities totaled $449.4 million for the first three quarters of 2024, compared to $486.2 million for the first three quarters of 2023. This decrease was primarily due to lower purchases of treasury shares under share repurchase plans and partially offset by higher cash dividend payments in the first three quarters of 2024 compared to the first three quarters of 2023.
Use of Cash
Operating Leases
The Company has lease arrangements for certain real estate properties, vehicles, and equipment. Leased properties are typically used for office space, distribution, and retail. As of September 28, 2024, the Company had fixed lease payment obligations of $161.8 million, with $33.4 million payable within 12 months.
Inventory Purchase Obligations
The Company obtains various raw materials and components for its products from a variety of third party suppliers. The Company’s inventory purchase obligations are primarily noncancelable. As of September 28, 2024, the Company had inventory purchase obligations of $847.2 million, with $673.2 million payable within 12 months.
Other Purchase Obligations
The Company’s other purchase obligations primarily consist of noncancelable commitments for capital expenditures and other indirect purchases in connection with conducting our business. As of September 28, 2024, the Company had other purchase obligations of $316.6 million, with $122.1 million payable within 12 months.
Critical Accounting Policies and Estimates
General
Our discussion and analysis of financial condition and results of operations are based upon the Company’s condensed 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 management to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. On an on-going basis, we evaluate our 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. We base our estimates on historical experience and various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.
For a description of the significant accounting policies and methods used in the preparation of the Company’s condensed consolidated financial statements, refer to Note 1, “Summary of Significant Accounting Policies” in the Notes to the Consolidated Financial Statements in Part II, Item 8 and “Critical Accounting Policies and Estimates” in Part II, Item 7 of the Company’s Annual Report on Form 10-K for the fiscal year ended December 30, 2023. There were no significant changes to the Company’s critical accounting policies and estimates in the 13-week and 39-week periods ended September 28, 2024.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
There are numerous market risks that can affect our future business, financial condition and results of operations. In addition to the other information set forth in this report, you should carefully consider the factors discussed in Part II, Item 7A, "Quantitative and Qualitative Disclosures About Market Risk” in our Annual Report on Form 10-K for the fiscal year ended December 30, 2023. There have been no material changes during the 13-week and 39-week periods ended September 28, 2024 in the risks described in our Annual Report on Form 10-K related to market sensitivity, inflation, foreign currency exchange rate risk and interest rate risk.
Item 4. Controls and Procedures
(a) Evaluation of disclosure controls and procedures. The Company maintains a system of disclosure controls and procedures that are designed to provide reasonable assurance that information, which is required to be timely disclosed, is accumulated and communicated to management in a timely fashion. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. As of September 28, 2024, the Company carried out an evaluation, under the supervision and with the participation of the Company’s management, including the Company’s Chief Executive Officer and Chief Financial Officer, of the effectiveness of the Company’s disclosure controls and procedures. Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded as of September 28, 2024 that our disclosure controls and procedures were effective such that the information relating to the Company, required to be disclosed in our Securities and Exchange Commission (SEC) reports (i) is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms, and (ii) is accumulated and communicated to the Company’s management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.
(b) Changes in internal control over financial reporting. There has been no change in the Company’s internal controls over financial reporting that occurred during the Company’s fiscal quarter ended September 28, 2024 that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.
Item 1. Legal Proceedings
In the normal course of business, the Company and its subsidiaries are parties to various legal claims, actions, and complaints, including matters involving patent infringement, other intellectual property, product liability, customer claims and various other risks. It is not possible to predict with certainty whether or not the Company and its subsidiaries will ultimately be successful in any of these legal matters, or if not, what the impact might be. However, the Company’s management does not expect that the results in any of these legal proceedings will have a material adverse effect on the Company’s business, results of operations, financial position or cash flows. For additional information, see Note 8, "Commitments and Contingencies" in the above Condensed Consolidated Financial Statements and Part I, Item 3, “Legal Proceedings” in the Company’s Annual Report on Form 10-K for the fiscal year ended December 30, 2023.
Item 1A. Risk Factors
There are many risks and uncertainties that can affect our future business, financial performance or share price. In addition to the other information set forth in this report, you should carefully consider the factors discussed in Part I, Item 1A, “Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended December 30, 2023. There have been no material changes during the 39-week period ended September 28, 2024 in the risks described in our Annual Report on Form 10-K. These risks, however, are not the only risks facing our Company. Additional risks and uncertainties, including those not currently known to us or that we currently deem to be immaterial, also may materially adversely affect our business, financial condition and/or operating results.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Issuer Purchases of Equity Securities
Share repurchase activity during the 13-week period ended September 28, 2024, summarized on a trade-date basis, was as follows (in thousands, except per share amounts):
Period
Total Number of Shares Purchased (1)
Average Price Paid Per Share (2)
Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs
Approximate Dollar Value of Shares That May Yet Be Purchased Under the Program
June 30, 2024 - July 27, 2024
38
168.18
283,896
July 28, 2024 - August 24, 2024
176.22
280,724
August 25, 2024 - September 28, 2024
176.32
270,198
116
(1) The Board of Directors approved a share repurchase program on February 16, 2024 (the "2024 Program"), which was announced on February 21, 2024. The 2024 Program authorizes the Company to purchase up to $300 million of its common shares, exclusive of the cost of any associated excise tax. Share repurchases may be made in the open market or in privately negotiated transactions, including under plans complying with the provisions of Rule 10b5-1 and Rule 10b-18 of the Securities Exchange Act of 1934, as amended. The timing and volume of share repurchases are subject to market conditions, business conditions and applicable laws, and are at management’s discretion. The 2024 Program does not require the purchase of any minimum number of shares and may be suspended or discontinued at any time. The 2024 Program expires on December 26, 2026. Refer to Note 9 in the Notes to the Condensed Consolidated Financial Statements for additional information related to share repurchases.
(2) Average price paid per share includes costs associated with the repurchases, except for the cost of any associated excise tax.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
Not applicable.
Item 5. Other Information
(c) Trading Plans
During the 13-week period ended September 28, 2024, no directors or officers (as defined in Rule 16a-1(f) of the Securities Exchange Act of 1934) of the Company adopted or terminated any “Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1 trading arrangement,” as each term is defined in Item 408(a) of Regulation S-K, except as follows:
Item 6. Exhibits
Exhibit 3.1
Articles of Association of Garmin Ltd., as amended and restated on June 7, 2024 (incorporated by reference to Exhibit 10.2 of the Registrant’s Current Report on Form 8-K filed on June 11, 2024).
Exhibit 3.2
Organizational Regulations of Garmin Ltd., as amended on October 25, 2019 (incorporated by reference to Exhibit 3.2 of the Registrant’s Amendment No.1 to Current Report on Form 8-K/A filed on November 21, 2019).
Exhibit 10.1*‡
Garmin Ltd. 2005 Equity Incentive Plan, as amended and restated on October 25, 2024.
Exhibit 10.2*‡
Form of Restricted Stock Unit Award Agreement pursuant to the Garmin Ltd. 2005 Equity Incentive Plan, for Swiss grantees.
Exhibit 10.3*‡
Form of Restricted Stock Unit Award Agreement pursuant to the Garmin Ltd. 2005 Equity Incentive Plan, for Canadian grantees.
Exhibit 10.4*‡
Form of Restricted Stock Unit Award Agreement pursuant to the Garmin Ltd. 2005 Equity Incentive Plan, for non-Swiss and non-Canadian grantees.
Exhibit 10.5*‡
Form of Restricted Stock Unit Award Agreement pursuant to the Garmin Ltd. 2005 Equity Incentive Plan, for awards of performance-based and time-based vesting restricted stock unit awards to non-Swiss and non-Canadian grantees who are executive officers.
Exhibit 10.6*‡
Form of Restricted Stock Unit Award Agreement pursuant to the Garmin Ltd. 2005 Equity Incentive Plan, for awards of performance-based and time-based vesting restricted stock unit awards to Swiss grantees who are not executive officers.
Exhibit 10.7*‡
Form of Restricted Stock Unit Award Agreement pursuant to the Garmin Ltd. 2005 Equity Incentive Plan, for awards of performance-based and time-based vesting restricted stock unit awards to Canadian grantees who are not executive officers.
Exhibit 10.8*‡
Form of Restricted Stock Unit Award Agreement pursuant to the Garmin Ltd. 2005 Equity Incentive Plan, for awards of performance-based and time-based vesting restricted stock unit awards to non-Swiss and non-Canadian grantees who are not executive officers.
Exhibit 31.1‡
Certification of Chief Executive Officer pursuant to Exchange Act Rule 13a-14(a) or 15d-14(a).
Exhibit 31.2‡
Certification of Chief Financial Officer pursuant to Exchange Act Rule 13a-14(a) or 15d-14(a).
Exhibit 32.1†
Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
Exhibit 32.2†
Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
Exhibit 101.INS‡
Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
Exhibit 101.SCH‡
Inline XBRL Taxonomy Extension Schema With Embedded Linkbase Documents
Exhibit 104‡
Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)
* Management contract or compensatory plan or arrangement pursuant to 601(b)(10)(iii)(A) of Regulation S-K.
‡ Filed herewith.
† Furnished herewith.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Company has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
By
/s/ Douglas G. Boessen
Douglas G. Boessen
Chief Financial Officer
(Principal Financial Officer and
Principal Accounting Officer)
Dated: October 30, 2024