Business Wire | Oct 27, 2021 07:00AM EDT

Garmin announces third quarter results

Oct. 27, 2021

SCHAFFHAUSEN, Switzerland--(BUSINESS WIRE)--Oct. 27, 2021--Garmin(r) Ltd. (NASDAQ: GRMN), today announced results for the third quarter ended September 25, 2021.

Highlights for third quarter 2021 include:

* Total revenue of $1.19 billion, a 7% increase over the prior year quarter * Gross and operating margin were 58.4% and 23.7%, respectively * Operating income of $283 million, an 11% decrease compared to the prior year quarter * GAAP EPS was $1.34 and pro forma EPS(1) was $1.41 * Named Manufacturer of the Year by the National Marine Electronics Association for the seventh consecutive year * Ranked #1 in avionics support for the 18th consecutive year by Aviation International News * Received production qualification from BMW for our Olathe, Kansas manufacturing facility * Launched the Approach(r) R10, our first portable golf launch monitor * Recently hosted fifth annual Garmin Developer Conference where we announced strategic Connect IQ partnerships

(Inthousands,except per 13-Weeks Ended 39-Weeks Ended shareinformation)

September 25, September 26, YoY September 25, September 26, YoY

2021 2020 Change 2021 2020 Change

Net sales $ 1,191,973 $ 1,109,194 7% $ 3,591,206 $ 2,835,168 27%

Fitness 342,316 328,446 4% 1,063,642 846,688 26%

Outdoor 323,856 334,844 (3)% 903,715 716,146 26%

Aviation 180,165 151,112 19% 534,886 465,850 15%

Marine 207,534 165,437 25% 678,698 486,269 40%

Auto 138,102 129,355 7% 410,265 320,215 28%



Gross margin 58.4% 60.2% 59.0% 59.6% %



Operating 23.7% 28.6% 25.2% 24.1% income %



GAAP diluted $ 1.34 $ 1.63 (18)% $ 4.13 $ 3.44 20% EPS

Pro formadiluted EPS^ $ 1.41 $ 1.58 (11)% $ 4.27 $ 3.41 25% (1)



(1) See attached Non-GAAP Financial Information for discussion andreconciliation of non-GAAP financial measures, including pro forma diluted EPS

Executive Overview from Cliff Pemble, President and Chief Executive Officer:

"I am very pleased with our performance in the quarter as we are now comparing against the robust pandemic-driven growth from the prior year," said Cliff Pemble, President and CEO of Garmin. "Strong demand for active lifestyle products continued, and our marine and aviation segments recorded impressive double-digit growth resulting in record consolidated revenue in the third quarter. We are very pleased with the results we have delivered thus far, giving us confidence to raise our full year 2021 revenue and EPS guidance."

Fitness:

Revenue from the fitness segment grew 4% in the third quarter driven by solid demand for our cycling and advanced wearable products. Gross margin and operating margins were 53% and 23%, respectively, resulting in $78 million of operating income. We recently hosted our fifth annual Garmin Developer Conference where we announced a collaboration with Dexcom to provide people with Type 1 and Type 2 diabetes with a way to quickly see their glucose levels and trends on their compatible Garmin smartwatch or cycling computer.

Outdoor:

Revenue from the outdoor segment decreased 3% in the third quarter primarily due to the timing of product introductions in the prior year. Gross margin and operating margins were 65% and 38%, respectively, resulting in $124 million of operating income. During the quarter, we launched the Approach R10, our first portable golf launch monitor, designed to help golfers improve their game with more than a dozen key metrics shown in real time.

Aviation:

Revenue from the aviation segment grew 19% in the third quarter with contributions from both OEM and aftermarket product categories. Gross margin and operating margins were 73% and 28%, respectively, resulting in $51 million of operating income. During the quarter, we introduced Smart Glide, a revolutionary safety tool that helps pilots in loss of engine power emergencies by automating tasks to reduce pilot workload. Also during the quarter, we announced the certification of our GFC 600H flight control system for Bell 505 helicopters. The GFC 600H reduces a pilot's workload and brings a number of helicopter-specific safety features to the market.

Marine:

Revenue from the marine segment grew 25% in the third quarter with growth across multiple categories, led by strong demand for our chartplotters. Gross margin and operating margins were 56% and 26%, respectively, resulting in $54 million of operating income. During the quarter, we launched Surround View, the marine industry's first intelligent camera system to offer captains a 360-degree bird's-eye view around the boat. Also, during the quarter, Garmin marine electronics were selected by Malibu Boats to exclusively outfit their full line of Axis wakesurf and wakeboarding boats.

Auto:

Revenue from the auto segment grew 7% during the third quarter primarily driven by growth in auto OEM programs. Gross margin was 40%, and we recorded an operating loss of $24 million in the quarter driven by investments in auto OEM programs. During the quarter, we began production shipments of the BMW computing module from our United States manufacturing facility and began prototype shipments of next-generation BMW computing modules from our Poland manufacturing facility. Also, we recently introduced a new lineup of Drive navigators for the consumer market, bringing larger displays and more connected features to our customers.

Additional Financial Information:

Total operating expenses in the third quarter were $413 million, an 18% increase over the prior year. Research and development increased by 22%, primarily due to engineering personnel costs. Selling, general and administrative expenses increased 14%, driven primarily by personnel related expenses and information technology costs. Advertising increased 8% driven primarily by higher media spend in the quarter.

The effective tax rate in the third quarter of 2021 was 5.9% compared to 6.9% in the prior year quarter.

In the third quarter of 2021, we generated approximately $204 million of free cash flow(1) and paid a quarterly dividend of approximately $129 million. We ended the quarter with cash and marketable securities of approximately $3.2 billion.

* See attached Non-GAAP Financial Information for discussion and reconciliation of non-GAAP financial measures, including pro forma effective tax rate and free cash flow. 2021 Guidance(2):

Based on our strong performance in the first three quarters of 2021, we are updating our full year guidance. We now anticipate revenue of approximately $4.95 billion with projected growth in all segments. We anticipate our full year pro forma EPS will be approximately $5.60 based on a gross margin of approximately 58.2%, operating margin of approximately 24.0% and a full year pro forma effective tax rate of approximately 11.5%.

2021 Guidance Segment Revenue Growth Estimates

Updated Prior Updated Prior

Revenue $4.95B $4.90B Fitness 17% 17%

Gross Margin 58.2% 58.5% Outdoor 17% 17%

Operating Margin 24.0% 23.8% Aviation 12% 10%

Tax Rate 11.5% 11.5% Marine 30% 27%

EPS $5.60 $5.50 Auto 17% 15%



(2) All amounts and %s in the above 2021 Guidance tables are approximate. Also,see attached discussion on Forward-looking Financial Measures

Webcast Information/Forward-Looking Statements:

The information for Garmin Ltd.'s earnings call is as follows:

When: Wednesday, October 27, 2021 at 10:30 a.m. Eastern Where: https://www.garmin.com/en-US/investors/events/ How: Simply log on to the web at the address above or call to listen in at 855-757-3897

An archive of the live webcast will be available until October 26, 2022 on the Garmin website at www.garmin.com. To access the replay, click on the Investors link and click over to the Events Calendar page.

This release includes projections and other forward-looking statements regarding Garmin Ltd. and its business that are commonly identified by words such as "anticipates," "would," "may," "expects," "estimates," "plans," "intends," "projects," and other words or phrases with similar meanings. Any statements regarding the Company's expected fiscal 2021 GAAP and pro forma estimated earnings, EPS, and effective tax rate, and the Company's expected segment revenue growth rates, consolidated revenue, gross margins, operating margins, potential future acquisitions, currency movements, expenses, pricing, new products launches, market reach, statements relating to possible future dividends, statements related to the ongoing impact of the COVID-19 pandemic, and the Company's plans and objectives are forward-looking statements. The forward-looking events and circumstances discussed in this release may not occur and actual results could differ materially as a result of risk factors and uncertainties affecting Garmin, including, but not limited to, the risk factors that are described in both the Annual Report on Form 10-K for the year ended December 26, 2020 and the Quarterly Report on Form 10-Q for the quarter ended September 25, 2021 filed by Garmin with the Securities and Exchange Commission (Commission file number 0-31983). A copy of Garmin's 2020 Form 10-K and the Q3 2021 Form 10-Q can be downloaded from https://www.garmin.com/en-US/investors/sec/. All information provided in this release and in the attachments is as of September 25, 2021. Undue reliance should not be placed on the forward-looking statements in this press release, which are based on information available to us on the date hereof. We undertake no duty to update this information unless required by law.

This release and the attachments contain non-GAAP financial measures. A reconciliation to the nearest GAAP measure and a discussion of the Company's use of these measures are included in the attachments.

Garmin, the Garmin logo, the Garmin delta, and Approach are trademarks of Garmin Ltd. or its subsidiaries and are registered in one or more countries, including the U.S. Drive is a trademark of Garmin Ltd. or its subsidiaries. All other brands, product names, company names, trademarks and service marks are the properties of their respective owners. All rights reserved.

Garmin Ltd. and Subsidiaries Condensed Consolidated Statements of Income (Unaudited)

(In thousands, except per share information)



13-Weeks Ended 39-Weeks Ended

September September September September 25, 26, 25, 26,

2021 2020 2021 2020

Net sales $ 1,191,973 $ 1,109,194 $ 3,591,206 $ 2,835,168

Cost of goods sold 496,026 441,211 1,472,852 1,144,816

Gross profit 695,947 667,983 2,118,354 1,690,352



Advertising expense 36,705 33,866 110,705 90,031

Selling, general and 162,515 142,134 485,896 411,335 administrative expense

Research and 214,057 174,882 618,253 506,013 development expense

Total operating expense 413,277 350,882 1,214,854 1,007,379



Operating income 282,670 317,101 903,500 682,973

Other income (expense):

Interest income 6,897 7,777 21,568 30,258

Foreign currency (15,014 ) 10,113 (30,621 ) (9,802 )(losses) gains

Other income 833 1,726 3,511 8,515

Total other income (7,284 ) 19,616 (5,542 ) 28,971 (expense)



Income before income 275,386 336,717 897,958 711,944 taxes

Income tax provision 16,347 23,300 101,894 53,168

Net income $ 259,039 $ 313,417 $ 796,064 $ 658,776



Net income per share:

Basic $ 1.35 $ 1.64 $ 4.14 $ 3.45

Diluted $ 1.34 $ 1.63 $ 4.13 $ 3.44



Weighted average common shares outstanding:

Basic 192,322 191,234 192,123 191,021

Diluted 193,185 191,998 192,955 191,760

Garmin Ltd. and SubsidiariesCondensed Consolidated Balance Sheets (Unaudited) (In thousands, except per share information)

September 25, 2021

December 26, 2020

Assets

Current assets:

Cash and cash equivalents

$

1,639,056

$

1,458,442

Marketable securities

345,214

387,642

Accounts receivable, net

639,345

849,469

Inventories

1,113,503

762,084

Deferred costs

16,046

20,145

Prepaid expenses and other current assets

255,802

191,569

Total current assets

4,008,966

3,669,351

Property and equipment, net

974,981

855,539

Operating lease right-of-use assets

89,934

94,626

Marketable securities

1,253,589

1,131,175

Deferred income taxes

251,983

245,455

Noncurrent deferred costs

13,035

16,510

Intangible assets, net

809,163

828,566

Other assets

169,838

190,151

Total assets

$

7,571,489

$

7,031,373

Liabilities and Stockholders' Equity

Current liabilities:

Accounts payable

$

318,604

$

258,885

Salaries and benefits payable

173,566

181,937

Accrued warranty costs

42,849

42,643

Accrued sales program costs

78,251

109,891

Deferred revenue

87,770

86,865

Accrued advertising expense

30,044

31,950

Other accrued expenses

146,426

149,817

Income taxes payable

109,862

68,585

Dividend payable

386,567

233,644

Total current liabilities

1,373,939

1,164,217

Deferred income taxes

127,733

116,844

Noncurrent income taxes

78,176

92,810

Noncurrent deferred revenue

42,022

49,934

Noncurrent operating lease liabilities

71,527

75,958

Other liabilities

23,354

15,494

Stockholders' equity:

Shares, CHF 0.10 par value, 198,077 shares authorized and issued; 192,322

shares outstanding at September 25, 2021 and 191,571 shares outstanding

at December 26, 2020

17,979

17,979

Additional paid-in capital

1,950,464

1,880,354

Treasury stock

(303,373

)

(320,016

)

Retained earnings

4,034,912

3,754,372

Accumulated other comprehensive income

154,756

183,427

Total stockholders' equity

5,854,738

5,516,116

Total liabilities and stockholders' equity

$

7,571,489

$

7,031,373

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



September December 25, 26, 2021 2020

Assets

Current assets:

Cash and cash equivalents $ 1,639,056 $ 1,458,442

Marketable securities 345,214 387,642

Accounts receivable, net 639,345 849,469

Inventories 1,113,503 762,084

Deferred costs 16,046 20,145

Prepaid expenses and other current assets 255,802 191,569

Total current assets 4,008,966 3,669,351



Property and equipment, net 974,981 855,539

Operating lease right-of-use assets 89,934 94,626

Marketable securities 1,253,589 1,131,175

Deferred income taxes 251,983 245,455

Noncurrent deferred costs 13,035 16,510

Intangible assets, net 809,163 828,566

Other assets 169,838 190,151

Total assets $ 7,571,489 $ 7,031,373



Liabilities and Stockholders' Equity

Current liabilities:

Accounts payable $ 318,604 $ 258,885

Salaries and benefits payable 173,566 181,937

Accrued warranty costs 42,849 42,643

Accrued sales program costs 78,251 109,891

Deferred revenue 87,770 86,865

Accrued advertising expense 30,044 31,950

Other accrued expenses 146,426 149,817

Income taxes payable 109,862 68,585

Dividend payable 386,567 233,644

Total current liabilities 1,373,939 1,164,217



Deferred income taxes 127,733 116,844

Noncurrent income taxes 78,176 92,810

Noncurrent deferred revenue 42,022 49,934

Noncurrent operating lease liabilities 71,527 75,958

Other liabilities 23,354 15,494



Stockholders' equity:

Shares, CHF 0.10 par value, 198,077 sharesauthorized and issued; 192,322

shares outstanding at September 25, 2021 and 17,979 17,979 191,571 shares outstanding

at December 26, 2020

Additional paid-in capital 1,950,464 1,880,354

Treasury stock (303,373 ) (320,016 )

Retained earnings 4,034,912 3,754,372

Accumulated other comprehensive income 154,756 183,427

Total stockholders' equity 5,854,738 5,516,116

Total liabilities and stockholders' equity $ 7,571,489 $ 7,031,373

Garmin Ltd. and SubsidiariesCondensed Consolidated Statements of Cash Flows (Unaudited)(In thousands)

39-Weeks Ended

September 25, 2021

September 26, 2020

Operating Activities:

Net income

$

796,064

$

658,776

Adjustments to reconcile net income to net cash provided by

operating activities:

Depreciation

75,272

57,141

Amortization

38,485

32,969

Loss (gain) on sale or disposal of property and equipment

246

(1,815

)

Unrealized foreign currency losses

24,390

4,384

Deferred income taxes

8,358

14,353

Stock compensation expense

68,656

53,515

Realized gain on marketable securities

(513

)

(1,316

)

Changes in operating assets and liabilities, net of acquisitions:

Accounts receivable, net of allowance for doubtful accounts

197,024

59,474

Inventories

(357,387

)

(56,063

)

Other current and non-current assets

(31,398

)

(27,019

)

Accounts payable

57,602

(11,939

)

Other current and non-current liabilities

(39,941

)

(18,299

)

Deferred revenue

(6,914

)

(21,148

)

Deferred costs

7,547

9,855

Income taxes payable

5,974

(53,419

)

Net cash provided by operating activities

843,465

699,449

Investing activities:

Purchases of property and equipment

(187,960

)

(137,072

)

Proceeds from sale of property and equipment

26

1,965

Purchase of intangible assets

(1,408

)

(1,643

)

Purchase of marketable securities

(1,081,789

)

(702,487

)

Redemption of marketable securities

975,318

808,554

Acquisitions, net of cash acquired

(15,893

)

(148,648

)

Net cash used in investing activities

(311,706

)

(179,331

)

Financing activities:

Dividends

(362,602

)

(333,975

)

Proceeds from issuance of treasury stock related to equity awards

35,733

15,202

Purchase of treasury stock related to equity awards

(17,636

)

(13,074

)

Net cash used in financing activities

(344,505

)

(331,847

)

Effect of exchange rate changes on cash and cash equivalents

(6,172

)

7,900

Net increase in cash, cash equivalents, and restricted cash

181,082

196,171

Cash, cash equivalents, and restricted cash at beginning of period

1,458,748

1,027,638

Cash, cash equivalents, and restricted cash at end of period

$

1,639,830

$

1,223,809

The following table includes supplemental financial information for the consumer auto and auto OEM operating segments that management believes is useful.

Garmin Ltd. and SubsidiariesCondensed Consolidated Statements of Cash Flows (Unaudited) (In thousands)



39-Weeks Ended

September September 25, 26, 2021 2020

Operating Activities:

Net income $ 796,064 $ 658,776

Adjustments to reconcile net income to net cashprovided by

operating activities:

Depreciation 75,272 57,141

Amortization 38,485 32,969

Loss (gain) on sale or disposal of property and 246 (1,815 )equipment

Unrealized foreign currency losses 24,390 4,384

Deferred income taxes 8,358 14,353

Stock compensation expense 68,656 53,515

Realized gain on marketable securities (513 ) (1,316 )

Changes in operating assets and liabilities, net of acquisitions:

Accounts receivable, net of allowance for 197,024 59,474 doubtful accounts

Inventories (357,387 ) (56,063 )

Other current and non-current assets (31,398 ) (27,019 )

Accounts payable 57,602 (11,939 )

Other current and non-current liabilities (39,941 ) (18,299 )

Deferred revenue (6,914 ) (21,148 )

Deferred costs 7,547 9,855

Income taxes payable 5,974 (53,419 )

Net cash provided by operating activities 843,465 699,449



Investing activities:

Purchases of property and equipment (187,960 ) (137,072 )

Proceeds from sale of property and equipment 26 1,965

Purchase of intangible assets (1,408 ) (1,643 )

Purchase of marketable securities (1,081,789 ) (702,487 )

Redemption of marketable securities 975,318 808,554

Acquisitions, net of cash acquired (15,893 ) (148,648 )

Net cash used in investing activities (311,706 ) (179,331 )



Financing activities:

Dividends (362,602 ) (333,975 )

Proceeds from issuance of treasury stock 35,733 15,202 related to equity awards

Purchase of treasury stock related to equity (17,636 ) (13,074 )awards

Net cash used in financing activities (344,505 ) (331,847 )



Effect of exchange rate changes on cash and (6,172 ) 7,900 cash equivalents



Net increase in cash, cash equivalents, and 181,082 196,171 restricted cash

Cash, cash equivalents, and restricted cash at 1,458,748 1,027,638 beginning of period

Cash, cash equivalents, and restricted cash at $ 1,639,830 $ 1,223,809 end of period

The following table includes supplemental financial information for the consumer auto and auto OEM operating segments that management believes is useful.

Garmin Ltd. and SubsidiariesNet Sales, Gross Profit and Operating Income by Segment (In thousands)

Auto

Total Consumer Auto Fitness Outdoor Aviation Marine Total Auto Auto OEM

13-Weeks Ended September 25, 2021



Net sales $ 342,316 $ 323,856 $ 180,165 $ 207,534 $ 138,102 $ 82,914 $ 55,188 $ 1,191,973

Gross profit 183,028 210,522 131,260 116,152 54,985 39,342 15,643 695,947

Operating income 77,788 123,946 51,296 53,726 (24,086 ) 11,305 (35,391 ) 282,670 (loss)



13-Weeks Ended September 26, 2020



Net sales $ 328,446 $ 334,844 $ 151,112 $ 165,437 $ 129,355 $ 82,659 $ 46,696 $ 1,109,194

Gross profit 177,794 223,704 107,927 100,423 58,135 43,319 14,816 667,983

Operating income 87,083 147,477 28,597 50,482 3,462 18,178 (14,716 ) 317,101 (loss)



39-Weeks Ended September 25, 2021



Net sales $ 1,063,642 $ 903,715 $ 534,886 $ 678,698 $ 410,265 $ 231,587 $ 178,678 $ 3,591,206

Gross profit 581,765 590,355 389,376 390,141 166,717 113,567 53,150 2,118,354

Operating income 268,489 339,031 146,974 205,042 (56,036 ) 35,388 (91,424 ) 903,500 (loss)



39-Weeks Ended September 26, 2020



Net sales $ 846,688 $ 716,146 $ 465,850 $ 486,269 $ 320,215 $ 196,942 $ 123,273 $ 2,835,168

Gross profit 446,936 469,150 338,770 288,103 147,393 98,348 49,045 1,690,352

Operating income 190,075 262,057 103,483 134,195 (6,837 ) 25,628 (32,465 ) 682,973 (loss)

Garmin Ltd. and SubsidiariesNet Sales by Geography(In thousands)

13-Weeks Ended

39-Weeks Ended

September 25,2021

September 26,2020

YoYChange

September 25,2021

September 26,2020

YoYChange

Net sales

$

1,191,973

$

1,109,194

7%

$

3,591,206

$

2,835,168

27%

Americas

573,331

521,869

10%

1,723,415

1,372,360

26%

EMEA

442,622

407,859

9%

1,330,855

1,042,928

28%

APAC

176,020

179,466

(2)%

536,936

419,880

28%

EMEA - Europe, Middle East and Africa; APAC - Asia Pacific and Australian Continent

Non-GAAP Financial Information

To supplement our financial results presented in accordance with GAAP, this release includes the following measures defined by the Securities and Exchange Commission as non-GAAP financial measures: pro forma effective tax rate, pro forma net income (earnings) per share and free cash flow. These non-GAAP measures are not based on any comprehensive set of accounting rules or principles and should not be considered a substitute for, or superior to, financial measures calculated in accordance with GAAP, and may be different from non-GAAP measures used by other companies, limiting the usefulness of the measures for comparison with other companies. Management believes providing investors with an operating view consistent with how it manages the Company provides enhanced transparency into the operating results of the Company, as described in more detail by category below.

The tables below provide reconciliations between the GAAP and non-GAAP measures.

Pro forma effective tax rate

The Company's income tax expense is periodically impacted by discrete tax items that are not reflective of income tax expense incurred as a result of current period earnings. Therefore, management believes disclosure of the effective tax rate and income tax provision before the effect of certain discrete tax items are important measures to permit investors' consistent comparison between periods. In the 39-weeks ended September 25, 2021, there were no such discrete tax items identified.

Garmin Ltd. and SubsidiariesNet Sales by Geography (In thousands)

13-Weeks Ended 39-Weeks Ended

September September YoY September September YoY 25, 26, Change 25, 26, Change 2021 2020 2021 2020

Net $ 1,191,973 $ 1,109,194 7% $ 3,591,206 $ 2,835,168 27% sales

Americas 573,331 521,869 10% 1,723,415 1,372,360 26%

EMEA 442,622 407,859 9% 1,330,855 1,042,928 28%

APAC 176,020 179,466 (2)% 536,936 419,880 28%



EMEA - Europe, Middle East and Africa; APAC - Asia Pacific and AustralianContinent

Non-GAAP Financial Information

To supplement our financial results presented in accordance with GAAP, this release includes the following measures defined by the Securities and Exchange Commission as non-GAAP financial measures: pro forma effective tax rate, pro forma net income (earnings) per share and free cash flow. These non-GAAP measures are not based on any comprehensive set of accounting rules or principles and should not be considered a substitute for, or superior to, financial measures calculated in accordance with GAAP, and may be different from non-GAAP measures used by other companies, limiting the usefulness of the measures for comparison with other companies. Management believes providing investors with an operating view consistent with how it manages the Company provides enhanced transparency into the operating results of the Company, as described in more detail by category below.

The tables below provide reconciliations between the GAAP and non-GAAP measures.

Pro forma effective tax rate

The Company's income tax expense is periodically impacted by discrete tax items that are not reflective of income tax expense incurred as a result of current period earnings. Therefore, management believes disclosure of the effective tax rate and income tax provision before the effect of certain discrete tax items are important measures to permit investors' consistent comparison between periods. In the 39-weeks ended September 25, 2021, there were no such discrete tax items identified.

(In thousands) 13-Weeks Ended 39-Weeks Ended

September 25, September 26, September 25, September 26,

2021 2020 2021 2020

$ ETR^ $ ETR^ $ ETR^ $ ETR^ (1) (1) (1) (1)

GAAP income tax $16,347 5.9% $23,300 6.9% $101,894 11.3% $53,168 7.5%provision

Pro forma discrete tax item:

Uncertain tax reserve - - - 14,308 release^(2)

Pro forma income tax $16,347 5.9% $23,300 6.9% $101,894 11.3% $67,476 9.5%provision



(1) Effective tax rate is calculated by taking the income tax provision dividedby income before taxes, as presented on the face of the Condensed ConsolidatedStatements of Income.



(2) In second quarter 2020, the Company recognized a $14.3 million income taxbenefit due to the release of uncertain tax position reserves associated withthe 2014 intercompany restructuring, which was a pro forma adjustment in 2014.The second quarter 2020 impact of the reserve release is not reflective ofincome tax expense incurred as a result of current period earnings andtherefore affects period-to-period comparability.

Pro forma net income (earnings) per share

Management believes that net income (earnings) per share before the impact of foreign currency gains or losses and certain discrete income tax items, as discussed above, is an important measure in order to permit a consistent comparison of the Company's performance between periods.

(In thousands, except per share 13-Weeks Ended 39-Weeks Ended information)

September September September September 25, 26, 25, 26,

2021 2020 2021 2020

GAAP net income $ 259,039 $ 313,417 $ 796,064 $ 658,776

Foreign currency gains / losses 15,014 (10,113 ) 30,621 9,802 ^(1)

Tax effect of foreign currency (891 ) 700 (3,475 ) (929 )gains / losses^(2)

Pro forma discrete tax item^(3) - - - (14,308 )

Pro forma net income $ 273,162 $ 304,004 $ 823,210 $ 653,341



GAAP net income per share:

Basic $ 1.35 $ 1.64 $ 4.14 $ 3.45

Diluted $ 1.34 $ 1.63 $ 4.13 $ 3.44



Pro forma net income per share:

Basic $ 1.42 $ 1.59 $ 4.28 $ 3.42

Diluted $ 1.41 $ 1.58 $ 4.27 $ 3.41



Weighted average common shares outstanding:

Basic 192,322 191,234 192,123 191,021

Diluted 193,185 191,998 192,955 191,760



(1) Foreign currency gains and losses for the Company are driven by movementsof a number of currencies in relation to the U.S. Dollar and the relatedexchange rate impact on the significant cash, receivables, and payables held ina currency other than the functional currency at a given legal entity. However,there is minimal cash impact from such foreign currency gains and losses.



(2) The tax effect of foreign currency gains and losses was calculated usingthe effective tax rate of 5.9% and 11.3% for the 13-weeks and 39-weeks endedSeptember 25, 2021, respectively, and a pro forma effective tax rate of 6.9%and 9.5% for the 13-weeks and 39-weeks ended September 26, 2020, respectively.



(3) The discrete tax item is discussed in the pro forma effective tax ratesection above.

Free cash flow

Management believes that free cash flow is an important liquidity measure because it represents the amount of cash provided by operations that is available for investing and defines it as operating cash flows less capital expenditures for property and equipment. Management believes that excluding purchases of property and equipment provides a better understanding of the underlying trends in the Company's operations and allows more accurate comparisons of the Company's results between periods. This metric may also be useful to investors, but should not be considered in isolation as it is not a measure of cash flow available for discretionary expenditures. The most comparable GAAP measure is net cash provided by operating activities.

(In thousands) 13-Weeks Ended 39-Weeks Ended

September September September September 25, 26, 25, 26,

2021 2020 2021 2020

Net cash provided by $ 245,423 $ 274,339 $ 843,465 $ 699,449 operating activities

Less: purchases of (41,418 ) (38,802 ) (187,960 ) (137,072 )property and equipment

Free Cash Flow $ 204,005 $ 235,537 $ 655,505 $ 562,377

Forward-looking Financial Measures

The forward-looking financial measures in our 2021 guidance provided above do not consider the potential future net effect of foreign currency exchange gains and losses, certain discrete tax items and any other impacts that may be identified as pro forma adjustments in calculating the non-GAAP measures described above.

The estimated impact of foreign currency gains and losses cannot be reasonably estimated on a forward-looking basis due to the high variability and low visibility with respect to non-operating foreign currency exchange gains and losses and the related tax effects of such gains and losses. The impact on diluted net income per share of foreign currency gains and losses, net of tax effects, was $0.14 per share for the 39-weeks ended September 25, 2021.

At this time, management is unable to determine whether or not significant discrete tax items will occur in fiscal 2021 or anticipate the impact of any other events that may be considered in the calculation of non-GAAP financial measures.

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CONTACT: Investor Relations Contact: Teri Seck 913/397-8200 investor.relations@garmin.com

CONTACT: Media Relations Contact: Krista Klaus 913/397-8200 media.relations@garmin.com