Garmin Earnings - Sales up 53%, Net Earnings up 60%

Garmin released strong earnings numbers today ahead of the market open, but then got its stock hammered as sales were below Wall Street's expectations. So, while they missed some sales expectations, things are still pretty darn good, as revenue was up 53% over year ago, with automotive pulling in the dough, with sales up 110% over year ago.

Looking at the Business highlights, they indicate that they are well positioned after launching the new Nuvi 200 line, have new production capacity to produce up to 8 million units annually, are selling the Nuvi 600/650 widescreens, as well as the MSN Direct models, the SP 580 and the Nuvi 680.

Garmin also reported the sale of 1.5 million units in the first quarter, and for those keeping track, that is a few more than TomTom reported (1.3 million units), although they are only making automotive (motorcycle) units.

New Models
Like we gleaned from the last earnings announcement, we expect new fitness models. "We look forward to new product introductions scheduled for later in the year, and will provide updated progress for the segment as the year progresses and we have better visibility." Hummm, can't wait. Sunlight is a wastin' let's get those new models out while the warmer weather is here.

From the press release...

First Quarter 2007 Financial highlights:

-- Total revenue of $492 million, up 53% from $322 million in first
quarter 2006

-- Automotive/Mobile segment revenue increased 110% to $317 million in
first quarter 2007

-- Aviation segment revenue increased 26% to $72 million in first quarter
2007

-- Outdoor/Fitness segment revenue decreased 5% to $60 million in first
quarter 2007

-- Marine segment revenue decreased 15% to $43 million in first quarter
2007

-- All geographic areas experienced significant growth:

-- North America revenue was $323 million compared to $202 million, up
60%

-- Europe revenue was $148 million compared to $102 million, up 45%

-- Asia revenue was $21 million compared to $18 million, up 17%

-- Mix of revenue by region remained stable relative to the year-ago
quarter. Revenue from our automotive/mobile segment continued to
become a larger portion of total company revenues when compared with
the same quarter in 2006, at 64% of total revenues.

-- Earnings per share increased 60% to $0.64 from $0.40 in first quarter
2006; excluding foreign exchange, EPS increased 37% to $0.59 from $0.43
in the same quarter in 2006.

Business highlights:

-- Strong sales in both our automotive/mobile and aviation segments put
them on track to meet or exceed full year guidance for these segments.

-- 1.55 million units sold in the first quarter of 2007, up 67% from the
same quarter in 2006.

-- Delivered many new products in the quarter, with new products
specifically geared to enhance our positions in the automotive and
marine markets and to broaden and deepen our product offerings as we
move into the spring selling season.

-- Our second Taiwan manufacturing facility has seven production lines
fully operational, bringing our total production lines in Taiwan to 21
and our production capacity to approximately 8 million units annually.
Because of the significant increase in demand for PNDs, additional
manufacturing lines will be added at this facility during second
quarter to create a full capacity configuration.

-- Targeted advertising and promotional programs secured during the first
quarter for the spring season should drive solid second quarter sales.
We continue to work to increase our retail penetration and broaden our
distribution.

Executive overview from Dr. Min Kao, Chairman and Chief Executive Officer:

"The first quarter was an exciting quarter for Garmin. We are pleased to have delivered numerous new automotive and marine products, which have been received with enthusiasm by the market and we are ramping up production to meet the upcoming spring season. We continued to experience strong sales of automotive/mobile products in this seasonally slower quarter, and look forward to a healthy second quarter, spurred by consumer interest in our revolutionary new marine product line, and our new and existing automotive/mobile products group, which are both very popular segments this time of year.

We continued to experience triple digit growth in our automotive/mobile segment, which demonstrates that our products continue to be well-positioned to take advantage of the growing demand for portable navigation devices in both of these important markets. Recent deliveries include:

-- the economical yet elegant nuvi(TM) 200 series,

-- the nuvi(TM) 600 and 650 products for cost-conscious consumers who
prefer a wide-screen display,

-- StreetPilot c580 and nuvi(TM) 680 with dynamic content provided by MSN
Direct, and

-- our nuvi(TM) 270, 370, and 670 with pre-loaded North American and
European mapping for international travelers.

These product releases demonstrate our commitment to the creation of innovative and feature-rich products, which will allow us broader and deeper penetration of the automotive/mobile market. Our popular nuvi(TM) and c-series product offerings allow extensive market segmentation, attracting customers with compelling, competitive features and useful content integrated into easy-to-use products which should drive strong results in the spring buying season and beyond.

Our aviation segment grew faster than expected during the quarter, as positive response to our WAAS and GMX200 products offerings and growth in the sale of new aircraft carrying the G1000 cockpit continued. We are pleased with our initial delivery of the G900 cockpit to the experimental aircraft market as well, and we remain optimistic about opportunities in our aviation business through the remainder of the year. Finally, we are delighted to have our G1000 cockpit selected for new Piper Saratoga II TC and Piper 6X aircraft, expanding our long-standing partnership with Piper Aircraft, Inc.

Response to our revolutionary new marine products and cartography has been very positive, with strong initial orders and backlogs for radar, 400- and 500-series products delivered in March 2007. Our soon-to-be-delivered 4000- and 5000-series products have generated much enthusiasm, and we anticipate strong orders for these products as well. We believe the marine segment is positioned to meet our 2007 guidance for this segment, however this will happen through strong sales in both second and third quarters due to the timing of new product introductions. We are also very pleased with our recent acquisition of the assets of Nautamatic Marine Systems, Inc. whose innovative, patented marine autopilot technology will allow us to further expand our suite of marine networking products.

Revenue in our outdoor/fitness segment this quarter decreased when compared to the year ago quarter. Our outdoor/fitness segment had a very strong first quarter in 2006, when pipeline fill of many new fitness products and a special promotional deal in Europe drove strong sales of outdoor and fitness products. We look forward to new product introductions scheduled for later in the year, and will provide updated progress for the segment as the year progresses and we have better visibility."

Financial overview from Kevin Rauckman, Chief Financial Officer:

"Overall we are pleased with our financial results for the first quarter, and look forward to a strong selling season during the second quarter," said Kevin Rauckman, chief financial officer of Garmin Ltd. "Our revenue and earnings per share during the quarter grew 53% and 60% respectively, exceeding our expectations. Excluding the impact of foreign exchange, EPS for the quarter grew 37%, from $0.43 to $0.59. Automotive/mobile segment's first quarter revenues increased 110% compared to the prior year and aviation revenue grew 26% on strong sales in both our retrofit and OEM businesses. Timing of new marine product introductions resulted in lower first quarter revenues for this segment, and pushed traditional "marine season" revenues into the second and third quarters this year. Gross margin for the overall business remained relatively strong in the first quarter. The auto/mobile segment margin improved 130 basis points from first quarter of 2006, as higher-margin, more fully-featured product continued to sell very well and positively impact product mix in the segment. Aviation gross margin also improved 270 basis points as new retrofit products became a larger portion of the segment's product mix. Both our outdoor/fitness and marine segments experienced gross margin declines when compared with the year-ago quarter, as product mix reflected the discounting of older products, particularly in the marine segment.

Operating margin improved 100 basis points in our auto/mobile segment in the first quarter of 2007 when compared with the year-ago quarter. Aviation segment operating margins also improved 120 basis points. Operating margins declined in our marine and outdoor/fitness segments when compared with the year-ago quarter. Total operating margin of 28.1% for the first quarter of 2007 fell 300 basis points when compared with the year-ago quarter. These results were as we expected, and reflect increased advertising, product support, marketing, and administrative resource commitments to support our rapid growth.

We also generated $156 million of free cash flow in the first quarter of 2007, resulting in a cash and marketable securities balance of $912 million at the end of the quarter."

Fiscal 2007 Outlook

We remain optimistic about the future success of our business and our ability to serve customers and distributors around the world. We anticipate overall revenue to exceed $2.5 billion in 2007, and earnings per share to exceed $2.70 assuming an effective tax rate of approximately 13 percent. We anticipate automotive/mobile revenues to grow faster in 2007 than we earlier anticipated, and continue to expect declining operating margins due to product mix and a continued transition toward mass market levels. We intend to provide a formal update to our fiscal 2007 financial expectations during the Q2 2007 earnings conference call.

In addition to the full build-out of our second Taiwan manufacturing facility in the second quarter, we are also exploring the possible purchase of a third manufacturing facility to meet the greater than anticipated PND demand and the need for additional office space. Having completed the European headquarters facilities renovation and move in April, we are now planning to expand our warehouse distribution facility at our Kansas headquarters to support our continued growth.

May 2, 2007

Garmin Earnings - Sales up 53%, Net Earnings up 60%