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 Garmin Reports Solid Fiscal 2016 Revenue and Operating Income Growth
   Wednesday, February 22, 2017 7:00:02 AM ET

Garmin Ltd. (GRMN ) today announced results for the fiscal-year ended December 31, 2016.

Highlights for the fourth quarter 2016 include:

-- Total revenue of $861 million, growing 10% over the prior year, with outdoor, fitness, marine and aviation collectively growing 25% over the prior year quarter and contributing 74% of total revenue

-- Gross margin improved to 54.7% compared to 52.9% in the prior year quarter

-- Operating margin of 18.6% compared to 18.7% in the prior year quarter

-- Operating income growth of 10%

-- GAAP EPS was $0.72 and pro forma EPS(1) of $0.73 for fourth quarter 2016

-- Introduced the fA"nix(R) 5 with three watch designs that are expected to appeal to a broader range of wrist sizes and style preferences

Highlights for the fiscal year 2016 include:

-- Total revenue of $3,019 million growing 7% over the prior year, with outdoor, fitness, marine and aviation collectively growing 21% over the prior year and contributing 71% of total revenue

-- Gross and operating margins of 55.6% and 20.7%, respectively, both improving from 2015 levels

-- GAAP EPS was $2.70, a 13% improvement over the prior year, and pro forma EPS(1) was $2.83, a 14% improvement over the prior year

-- Shipped approximately 16.8 million units, up 4% from the prior year and over 173 million since inception

-- Connect IQ app store establishes itself with over 2,500 apps and over 24 million downloads since inception

                                                                                                                                  
(in thousands,                                                      14-Weeks Ended     13-Weeks Ended                                                 53-Weeks Ended     52-Weeks Ended      
                                                                    ----------------------------------- -------------------- ----------------------------------- -------------------- ---------------------                                          ----------------------------------- -------------------- ----------------------------------- -------------------- ---------------------
except per share data)                                                  Dec 31,                                                  Dec 26,                                                   Yr over Yr                                                    Dec 31,                                                  Dec 26,                                                   Yr over Yr
                                                                         2016                                                   2015 (2)               Change                                                       2016                                                   2015 (2)               Change
                                                                    -------------                                            -------------  -------------------- -------------------- -------------------                                            -------------                                            -------------  -------------------- -------------------- -------------------
Net sales                                                           $860,767                                                 $781,358                                                         10 %                                                   $3,018,665                                               $2,820,270                                                        7 %
    Outdoor                                                          175,397                                                  119,884                                                         46 %                                                      546,326                                                  411,184                                                       33 %
    Fitness                                                          274,052                                                  228,740                                                         20 %                                                      818,486                                                  661,599                                                       24 %
    Marine                                                            67,458                                                   56,454                                                         19 %                                                      331,947                                                  286,778                                                       16 %
    Aviation                                                         117,265                                                  104,059                                                         13 %                                                      439,348                                                  398,618                                                       10 %
    Auto                                                             226,595                                                  272,221                                                        -17 %                                                      882,558                                                1,062,091                                                      -17 %
                                                                                                                                                                                                                                                                                                                                                                        
Gross profit %                                                          54.7 %                                                   52.9 %                                                                                                                    55.6 %                                                   54.6 %
                                                                                                                                                                                                                                                                                                                                                                        
Operating profit %                                                      18.6 %                                                   18.7 %                                                                                                                    20.7 %                                                   19.5 %
                                                                                                                                                                                                                                                                                                                                                                        
GAAP diluted EPS                                                       $0.72                                                    $0.70                                                          3 %                                                        $2.70                                                    $2.39                                                       13 %
Pro forma diluted EPS (1)                                              $0.73                                                    $0.74                                                         -1 %                                                        $2.83                                                    $2.49                                                       14 %
(1)       See attached table for reconciliation of non-GAAP measures
                             including pro forma diluted EPS
(2)                          Action camera related net sales for the 13-weeks and 52-weeks
                             ended Dec 26, 2015 have been recast from the Outdoor segment to
                             the Auto segment to conform to the current year presentation.
  

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

"2016 was a remarkable year of growth driven by strong sales in our outdoor, fitness, marine, and aviation segments," said Cliff Pemble, president and Chief Executive Officer of Garmin Ltd. "Entering 2017, we see additional growth opportunities ahead and we are well positioned to seize these opportunities with a strong lineup of great products."

Outdoor:

The outdoor segment grew 46% in the quarter with significant contributions from wearable devices combined with growth in all other product categories and the contribution of DeLorme products. Gross margin remained strong at 61% while operating margin was relatively flat at 33%, resulting in 42% operating income growth. We recently announced our fA"nix(R) 5 series with three different designs all featuring Garmin Elevate(TM) wrist heart rate technology and our QuickFit(TM) band replacement system: the fA"nix 5S is perfect for smaller wrists without sacrificing multisport functionality, the fA"nix 5X includes preloaded wrist-based mapping, and the compact fA"nix 5 is feature-packed with an all-new industrial design. We expect outdoor to continue to be a growth segment in 2017 as we leverage opportunities in wearables and other product categories in the segment.

Fitness:

The fitness segment posted strong revenue growth of 20% in the quarter driven by wearables with Garmin Elevate(TM) wrist heart rate technology. Gross margin increased year-over-year to 52% with operating margin of 17%, resulting in a 15% growth in operating income. The recently launched vivofit jr. was well received by retailers and customers during the holiday quarter and we see additional growth potential for wearables designed specifically for children. We believe fitness will be our largest revenue contributor in 2017, and enter the year confident in our product lineup.

Marine:

The marine segment posted strong fourth quarter revenue growth of 19% driven by our solid lineup of chart plotters and fish finders. Gross margin decreased year-over-year to 52% due to product mix, while operating margin improved to 4%. In the quarter, we introduced new touchscreen and keyed chartplotter combo offerings in our popular GPSMAP(R) product line, many with built-in sonar, and new radar and entertainment offerings. We expect marine to continue to be a growth segment in 2017 as we focus on market share gains and new product innovations.

Aviation:

The aviation segment posted solid revenue growth of 13% in the quarter with growth contributions from both OEM and aftermarket. Gross and operating margins were 77% and 28%, respectively. During the quarter, we received FAA installation approval for our helicopter ADS-B offerings, supported Cirrus in the certification and initial deliveries of the SF 50 light jet, and Textron Airland announced our selection as the avionics provider for the Scorpion light attack aircraft. We continue to invest in upcoming certifications with our numerous OEM partners, as well as ongoing opportunities for long-term market share gains.

Auto:

The auto segment recorded revenue decline of 17% in the quarter, primarily due to the ongoing PND market contraction. Gross margin remained constant at 42%, while operating margin declined year-over-year to 9%. At the recent CES show we announced our next generation Drive series PNDs, which offer expanded safety and driver awareness features and WIFI capability that enhances the process of updating maps and other content stored on the device. During the quarter, we were chosen as a Tier 1 infotainment hardware supplier for BMW affirming recent investments in our OEM program.

Additional Financial Information:

Total operating expenses in the quarter were $311 million, a 16% increase from the prior year. Advertising increased 19%, driven by year-over-year increases in the fitness and outdoor segments to support wearables. Research and development and selling, general and administrative expenses increased 22% and 9%, respectively, due primarily to recent acquisitions and an additional week in our fourth quarter 2016.

The effective tax rate in the fourth quarter of 2016 was 19.0%, an increase from 13.2% in the prior year quarter. The year-over-year increase in the fourth quarter 2016 tax rate is primarily due to the recording of a full year of the U.S. research and development tax credit in the fourth quarter of 2015 versus being spread over four quarters in 2016.

In the fourth quarter of 2016, we generated $165 million of free cash flow (see attached table for reconciliation of this non-GAAP measure). We continued to return cash to shareholders through dividends and share repurchases. As a result of the additional week in the fourth quarter 2016, two quarterly dividends were recorded totaling approximately $192 million and we repurchased approximately $28 million of Company stock. We have approximately $75 million remaining in the share repurchase program which was extended through December 31, 2017, and expect to repurchase Company stock as business and market conditions warrant. We ended the quarter with cash and marketable securities of approximately $2.3 billion.

2017 Guidance:

                                         2017 Guidance
                                                                                                                                                                                             --------------------
                                                                                           Revenue                                                                                                   $3.02B
                                                                                        Gross Margin                                                                                                  56%
                                                                                      Operating Margin                                                                                                20%
                                                                                    Tax Rate (Pro Forma)                                                                                              22%
                                                                                       EPS (Pro Forma)                                                                                               $2.65
                                                                                                                                                                                              

We expect 2017 revenue of approximately $3.02 billion as growth in outdoor, fitness, marine and aviation is offset by ongoing declines in the PND market. We expect gross margins to be approximately 56%, relatively flat to the prior year. Operating margin is expected to be approximately 20%. With a pro forma expected tax rate of approximately 22%, we currently forecast 2017 pro forma EPS of approximately $2.65. The expected year-over-year increase in the 2017 pro forma tax rate is primarily due to the Company’s election to adjust certain Switzerland tax positions to address potential tax risk from evolving global tax initiatives.

Dividend Recommendation:

The board of directors intends to recommend to the shareholders for approval at the annual meeting to be held on June 9, 2017, a cash dividend in the amount of $2.04 per share (subject to possible adjustment based on the total amount of the dividend in Swiss Francs as approved at the annual meeting), payable in four equal installments on dates to be determined by the Board. The Board currently anticipates the scheduling of the dividend in four installments as follows:

        Dividend Date          Record Date                $s per share
                                                                                    ------------------                                           ------------------                                           --------------------
                                                                                    June 30, 2017                                                June 19, 2017                                                               $0.51
                                                                                    September 29, 2017                                           September 15, 2017                                                          $0.51
                                                                                    December 29, 2017                                            December 15, 2017                                                           $0.51
                                                                                    March 30, 2018                                               March 15, 2018                                                              $0.51
                                                                                                                                                                                                               

In addition, the board of directors has established March 31, 2017 as the payment date and March 15, 2017 as the record date for the final dividend installment of $0.51 per share, per the prior approval at the 2016 annual shareholders’ meeting. The first, second and third payments of $0.51 per share were made on June 30, 2016, September 30, 2016, and December 30, 2016, respectively.

Webcast Information/Forward-Looking Statements:

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

        When:      Wednesday, February 22, 2017 at 10:30 a.m. Eastern
                                                                                    Where:                                           http://www.garmin.com/en-US/company/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 April 27, 2017 on the Garmin website at www.garmin.com. To access the replay, click on the Investor Relations 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 "would," "may," "expects," "estimates," "plans," "intends," "projects," and other words or phrases with similar meanings. Any statements regarding the Company’s GAAP and pro forma estimated earnings, EPS, tax rate and revenue for fiscal 2017, the Company’s expected segment revenue growth rates, margins, currency movements, expenses, pricing, new products to be introduced in 2017 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 the Annual Report on Form 10-K for the year ended December 31, 2016 filed by Garmin with the Securities and Exchange Commission (Commission file number 0-31983). A copy of Garmin’s 2016 Form 10-K can be downloaded from http://www.garmin.com/aboutGarmin/invRelations/finReports.html .

Garmin, the Garmin logo, the Garmin delta, DeLorme, fA"nix, GPSMAP and vivofit, are trademarks of Garmin Ltd. or its subsidiaries and are registered in one or more countries, including the U.S.; Garmin Elevate and QuickFit are trademarks 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)
 
                                                                                                                                                       
                                                                                              14-Weeks Ended                    13-Weeks Ended                                                           53-Weeks Ended                      52-Weeks Ended
                                                                                      -------------------------------------------------- -------------------- ------------------------------                                          ---------------------------------------------------- -------------------- --------------------------------
                                                                                               December 31,                                                            December 26,                                                             December 31,                                                              December 26,
                                                                                                   2016                              2015                                                                     2016                                2015
                                                                                      -------------------------------------------------- -------------------- ------------------------------                                          ---------------------------------------------------- -------------------- --------------------------------
Net sales                                                                             $860,767                                                                $781,358                                                                $3,018,665                                                                $2,820,270
                                                                                                                                                                                                                                                                                                                 
Cost of goods sold                                                                     389,985                                              368,215                                              1,339,095                                              1,281,566  
                                                                                      -------- --------------------                                           -------- --------------------                                           ---------- --------------------                                           ---------- --------------------
                                                                                                                                                                                                                                                                                                                 
Gross profit                                                                           470,782                                                                 413,143                                                                 1,679,570                                                                 1,538,704
                                                                                                                                                                                                                                                                                                                 
Advertising expense                                                                     67,702                                                                  56,814                                                                   177,143                                                                   167,166
Selling, general and administrative expense                                            114,312                                                                 104,556                                                                   410,558                                                                   394,914
Research and development expense                                                       128,952                                              106,011                                                467,960                                                427,043  
                                                                                      -------- --------------------                                           -------- --------------------                                           ---------- --------------------                                           ---------- --------------------
Total operating expense                                                                310,966                                              267,381                                              1,055,661                                                989,123  
                                                                                      -------- --------------------                                           -------- --------------------                                           ---------- --------------------                                           ---------- --------------------
                                                                                                                                                                                                                                                                                                                 
Operating income                                                                       159,816                                                                 145,762                                                                   623,909                                                                   549,581
                                                                                                                                                                                                                                                                                                                 
Other income (expense):
    Interest income                                                                      9,296                                                                   7,358                                                                    33,406                                                                    29,653
    Foreign currency losses                                                             (1,648 )                                                                (9,288 )                                                                 (31,651 )                                                                 (23,465 )
    Other income                                                                         1,093                                                8,711                                                  4,006                                                 11,418  
                                                                                      -------- --------------------                                           -------- --------------------                                           ---------- --------------------                                           ---------- --------------------
Total other income (expense)                                                             8,741                                                6,781                                                  5,761                                                 17,606  
                                                                                      -------- --------------------                                           -------- --------------------                                           ---------- --------------------                                           ---------- --------------------
                                                                                                                                                                                                                                                                                                                 
Income before income taxes                                                             168,557                                                                 152,543                                                                   629,670                                                                   567,187
                                                                                                                                                                                                                                                                                                                 
Income tax provision                                                                    31,952                                               20,160                                                118,856                                                110,960  
                                                                                      -------- --------------------                                           -------- --------------------                                           ---------- --------------------                                           ---------- --------------------
                                                                                                                                                                                                                                                                                                                 
Net income                                                                            $136,605                                             $132,383                                               $510,814                                               $456,227  
                                                                                      ======== ====================                                           ======== ====================                                           ========== ====================                                           ========== ====================
                                                                                                                                                                                                                                                                                                                 
Net income per share:
    Basic                                                                                $0.73                                                                   $0.70                                                                     $2.71                                                                     $2.39
    Diluted                                                                              $0.72                                                                   $0.70                                                                     $2.70                                                                     $2.39
 
Weighted average common shares outstanding:
    Basic                                                                              188,233                                                                 189,317                                                                   188,818                                                                   190,631
    Diluted                                                                            189,171                                                                 189,847                                                                   189,343                                                                   191,107
                                                                                                                                                                                                                                                                                                                            
                                                                                                                                                                                                                                                                                                                            
                                                                                               Garmin Ltd. And Subsidiaries
                                                                                           Condensed Consolidated Balance Sheets
                                                                                       (In thousands, except per share information)
                                                                            
                                                                                                                 ----------------------------------------------------------------------------------------------------------
                                                                                                                            (Unaudited)             
                                                                                                                           December 31,                                                              December 26,
                                                                                                                               2016                                2015
                                                                                                                 ---------------------------------------------------- -------------------- --------------------------------
Assets
Current assets:
    Cash and cash equivalents                                                                                      $846,883                                                                  $833,070
    Marketable securities                                                                                           266,952                                                                   215,161
    Accounts receivable, net                                                                                        527,062                                                                   531,481
    Inventories, net                                                                                                484,821                                                                   500,554
    Deferred costs                                                                                                   47,395                                                                    49,176
    Prepaid expenses and other current assets                                                                        89,903                                                 81,645  
                                                                                                                 ---------- --------------------                                           ---------- --------------------
Total current assets                                                                                              2,263,016                                                                 2,211,087
                                                                                                                                                                                            
Property and equipment, net                                                                                         482,878                                                                   446,089
                                                                                                                                                                                            
Marketable securities                                                                                             1,213,285                                                                 1,343,387
Restricted cash                                                                                                         113                                                                       259
Noncurrent deferred income tax                                                                                      110,293                                                                   116,518
Noncurrent deferred costs                                                                                            56,151                                                                    38,769
Intangible assets, net                                                                                              305,002                                                                   245,552
Other assets                                                                                                         94,395                                                 97,730  
                                                                                                                 ---------- --------------------                                           ---------- --------------------
Total assets                                                                                                     $4,525,133                                             $4,499,391  
                                                                                                                 ========== ====================                                           ========== ====================
                                                                                                                                                                                            
Liabilities and Stockholders’ Equity
Current liabilities:
    Accounts payable                                                                                               $172,404                                                                  $178,905
    Salaries and benefits payable                                                                                    88,818                                                                    70,601
    Accrued warranty costs                                                                                           37,233                                                                    30,449
    Accrued sales program costs                                                                                      80,953                                                                    67,613
    Deferred revenue                                                                                                146,564                                                                   164,982
    Accrued royalty costs                                                                                            36,523                                                                    30,310
    Accrued advertising expense                                                                                      37,440                                                                    33,547
    Other accrued expenses                                                                                           70,469                                                                    74,926
    Income taxes payable                                                                                             16,163                                                                    21,674
    Dividend payable                                                                                                 96,168                                                192,991  
                                                                                                                 ---------- --------------------                                           ---------- --------------------
Total current liabilities                                                                                           782,735                                                                   865,998
                                                                                                                                                                                            
Deferred income taxes                                                                                                61,220                                                                    56,210
Non-current income taxes                                                                                            121,174                                                                   101,689
Non-current deferred revenue                                                                                        140,407                                                                   128,731
Other liabilities                                                                                                     1,594                                                                     1,637
                                                                                                                                                                                            
Stockholders’ equity:
    Shares, CHF 0.10 par value, 198,077 shares authorized and issued;
    and 188,565 shares outstanding at December 31, 2016
                                                                                                                     17,979                                                                 1,797,435
    Shares, CHF 10.00 par value, 208,077 shares authorized and issued;
    and 189,722 shares outstanding at December 26, 2015
    Additional paid-in capital                                                                                    1,836,047                                                                    62,239
    Treasury stock                                                                                                 (455,964 )                                                                (414,637 )
    Retained earnings                                                                                             2,056,702                                                                 1,930,517
    Accumulated other comprehensive income                                                                          (36,761 )                                                                 (30,428 )
                                                                                                                 ---------- --------------------                                           ---------- --------------------
Total stockholders’ equity                                                                                        3,418,003                                              3,345,126  
                                                                                                                 ---------- --------------------                                           ---------- --------------------
Total liabilities and stockholders’ equity                                                                       $4,525,133                                             $4,499,391  
                                                                                                                 ========== ====================                                           ========== ====================
                                                                                                                                                                                                       
                                                                                                                                                                                                       
                                                                                                                  Garmin Ltd. And Subsidiaries
                                                                                                   Condensed Consolidated Statements of Cash Flows (Unaudited)
                                                                                                                         (In thousands)
                                                                                   53-Weeks Ended                      52-Weeks Ended
                                                                                                                                                      ---------------------------------------------------- -------------------- --------------------------------
                                                                                                                                                                   Dec 31,                             Dec 26,
                                                                                                                                                                    2016                                                                      2015
                                                                                                                                                      --------------------------------                                          --------------------------------
Operating activities:
Net income                                                                                                                                              $510,814                                                                  $456,227
Adjustments to reconcile net income to net cash provided by
operating activities:
    Depreciation                                                                                                                                          55,796                                                                    51,311
    Amortization                                                                                                                                          30,544                                                                    27,049
    Loss (gain) on sale or disposal of property and equipment                                                                                               (503 )                                                                    (198 )
    Provision for doubtful accounts                                                                                                                        4,136                                                                    (2,521 )
    Deferred income taxes                                                                                                                                  1,699                                                                     5,897
    Unrealized foreign currency loss                                                                                                                      13,387                                                                    37,931
    Provision for obsolete and slow moving inventories                                                                                                    26,458                                                                    23,257
    Stock compensation expense                                                                                                                            41,250                                                                    26,290
    Realized gain on marketable securities                                                                                                                  (822 )                                                                     (55 )
Changes in operating assets and liabilities:
    Accounts receivable                                                                                                                                    9,000                                                                    22,473
    Inventories                                                                                                                                           (2,455 )                                                                (121,718 )
    Other current and non-current assets                                                                                                                   2,234                                                                  (107,360 )
    Accounts payable                                                                                                                                     (11,496 )                                                                  36,079
    Other current and non-current liabilities                                                                                                             44,766                                                                    20,742
    Deferred revenue                                                                                                                                      (6,363 )                                                                 (43,338 )
    Deferred cost                                                                                                                                        (15,780 )                                                                    (585 )
    Income taxes payable                                                                                                                                   3,017                                               (151,014 )
                                                                                                                                                      ---------- --------------------                                           ---------- --------------------
Net cash provided by operating activities                                                                                                                705,682                                                                   280,467
                                                                                                                                                                                                                                 
Investing activities:
Purchases of property and equipment                                                                                                                      (90,960 )                                                                 (80,592 )
Proceeds from sale of property and equipment                                                                                                                 676                                                                     7,921
Purchase of intangible assets                                                                                                                             (5,715 )                                                                  (3,889 )
Purchase of marketable securities                                                                                                                       (905,089 )                                                                (915,921 )
Redemption of marketable securities                                                                                                                      957,350                                                                   919,141
Proceeds from repayment on loan receivable                                                                                                                     -                                                                         -
Change in restricted cash                                                                                                                                    146                                                                        48
Acquisitions, net of cash acquired                                                                                                                       (77,945 )                                                                 (38,687 )
                                                                                                                                                      ---------- --------------------                                           ---------- --------------------
Net cash (used in) provided by investing activities                                                                                                     (121,537 )                                                                (111,979 )
                                                                                                                                                                                                                                 
Financing activities:
Dividends paid                                                                                                                                          (481,452 )                                                                (378,117 )
Purchase of treasury stock under share repurchase plan                                                                                                   (93,233 )                                                                (131,413 )
Purchase of treasury stock related to equity awards                                                                                                       (7,331 )                                                                  (5,586 )
Proceeds from issuance of treasury stock related to equity awards                                                                                         18,648                                                                    17,073
Tax benefit from issuance of equity awards                                                                                                                 1,692                                                 (2,049 )
                                                                                                                                                      ---------- --------------------                                           ---------- --------------------
Net cash used in financing activities                                                                                                                   (561,676 )                                                                (500,092 )
                                                                                                                                                                                                                                 
Effect of exchange rate changes on cash and cash equivalents                                                                                              (8,656 )                                                                 (31,594 )
                                                                                                                                                                                                              
                                                                                                                                                      --------------------------------                                          --------------------------------
Net increase (decrease) in cash and cash equivalents                                                                                                      13,813                                                                  (363,198 )
Cash and cash equivalents at beginning of period                                                                                                         833,070                                              1,196,268  
                                                                                                                                                      ---------- --------------------                                           ---------- --------------------
Cash and cash equivalents at end of period                                                                                                              $846,883                                               $833,070  
                                                                                                                                                      ========== ====================                                           ========== ====================
                                                                                                                                                                                                                                            
                                                                                                                                                                                                                                            
                                                                                                                                                                                                 Garmin Ltd. And Subsidiaries
                                                                                                                                                                                   Net Sales, Gross Profit, and Operating Income by Segment
                                                                                                                                                                                                          (Unaudited)
                                                                                                                                                                                                        (In thousands)
                                                                                                                                                                                                        Reporting Segments
                                                                               ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                      Outdoor                  Fitness                  Marine                    Auto                   Aviation                   Total
                                                                               --------------------                                           --------------------                                           -------------------                                            --------------------                                           --------------------                                           --------------------
                                                                                                                                                                                                                                                                                                                                                                                                           
14-Weeks Ended December 31, 2016
                                                                                                                                                                                                                                                                                                                                                                                                           
Net sales                                                                                  $175,397                                                       $274,052                                              $67,458                                                                 $226,595                                                       $117,265                                                       $860,767
Gross profit                                                                               $107,852                                                       $141,742                                              $35,155                                                                  $95,977                                                        $90,056                                                       $470,782
Operating income                                                                            $58,314                                                        $46,175                                               $2,995                                                                  $19,363                                                        $32,969                                                       $159,816
                                                                                                                                                                                                                                                                                                                                                                                                           
13-Weeks Ended December 26, 2015 (3)
                                                                                                                                                                                                                                                                                                                                                                                                           
Net sales                                                                                  $119,884                                                       $228,740                                              $56,454                                                                 $272,221                                                       $104,059                                                       $781,358
Gross profit                                                                                $73,353                                                       $117,344                                              $30,289                                                                 $113,257                                                        $78,900                                                       $413,143
Operating income                                                                            $40,935                                                        $40,288                                              ($5,593 )                                                                $36,182                                                        $33,950                                                       $145,762
                                                                                                                                                                                                                                                                                                                                                                                                           
                                                                                                                                                                                                                                                                                                                                                                                                           
53-Weeks Ended December 31, 2016
                                                                                                                                                                                                                                                                                                                                                                                                           
Net sales                                                                                  $546,326                                                       $818,486                                             $331,947                                                                 $882,558                                                       $439,348                                                     $3,018,665
Gross profit                                                                               $340,504                                                       $437,205                                             $183,709                                                                 $388,747                                                       $329,405                                                     $1,679,570
Operating income                                                                           $184,035                                                       $160,596                                              $52,167                                                                 $102,347                                                       $124,764                                                       $623,909
                                                                                                                                                                                                                                                                                                            
52-Weeks Ended December 26, 2015 (3)
                                                                                                                                                                                                                                                                                                                                                                                                           
Net sales                                                                                  $411,184                                                       $661,599                                             $286,778                                                               $1,062,091                                                       $398,618                                                     $2,820,270
Gross profit                                                                               $254,878                                                       $366,139                                             $158,493                                                                 $464,480                                                       $294,714                                                     $1,538,704
Operating income                                                                           $139,070                                                       $134,574                                              $28,611                                                                 $136,069                                                       $111,257                                                       $549,581
(3)   Action camera related operating results for the 13-weeks and
                         52-weeks ended December 26, 2015 have been recast from the Outdoor
                         segment to the Auto segment to conform to the current year
                         presentation.
                           
                                                                                                                                                                         Garmin Ltd. And Subsidiaries
                                                                                                                                                                      Net Sales by Geography (Unaudited)
                                                                                                                                                                                (In thousands)
                 14-Weeks Ended     13-Weeks Ended           53-Weeks Ended     52-Weeks Ended      
                                                       -------------- -------------------- -------------------- -------------- -------------------- -------------------- ---------------------                                          -------------- -------------------- -------------------- -------------- -------------------- -------------------- ---------------------
                                                           Dec 31,            Dec 26,             Yr over Yr                                                    Dec 31,            Dec 26,             Yr over Yr
                                                            2016                                                     2015                 Change                                                       2016                                                     2015                 Change
                                                       --------------                                           -------------- -------------------- -------------------- ---------------------                                          --------------                                           -------------- -------------------- -------------------- ---------------------
Net sales                                                    $860,767                                                 $781,358                                                   10 %                                                       $3,018,665                                               $2,820,270                                                    7 %
    Americas                                                  447,537                                                  412,581                                                    8 %                                                        1,521,147                                                1,469,243                                                    4 %
    EMEA                                                      300,764                                                  268,787                                                   12 %                                                        1,110,969                                                1,013,139                                                   10 %
    APAC                                                      112,466                                                   99,990                                                   12 %                                                          386,549                                                  337,888                                                   14 %

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 net income (earnings) per share, forward-looking pro forma earnings per share, forward-looking pro forma tax rate 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. 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.

Pro forma net income (earnings) per share

Management believes that net income (earnings) per share before the impact of foreign currency gain or loss and certain discrete income tax items, as discussed below, is an important measure. The majority of the Company’s consolidated foreign currency gain or loss is typically driven by movements in the Taiwan Dollar, Euro, and British Pound Sterling in relation to the U.S. Dollar and the related exchange rate impact on the significant cash, receivables, and payables held in a currency other than the functional currency at one of the Company’s subsidiaries. However, there is minimal cash impact from such foreign currency gain or loss. The Company’s income tax expense is periodically impacted by discrete tax items that are not reflective of the income tax expense that is incurred related to the current period earnings. Accordingly, earnings per share before the impact of foreign currency translation gain or loss and certain discrete income tax items permits a consistent comparison of the Company’s operating performance between periods.

The tax effect of foreign currency gains (losses) was calculated using effective tax rates of 19.0% and 13.2% for the fourth quarters of 2016 and 2015, respectively and 18.9% and 19.6% for the fiscal years of 2016 and 2015. The effective tax rate is calculated by taking the Income tax provision divided by Income before taxes, as presented on the face of the Condensed Consolidated Statements of Income both on a quarterly and fiscal year basis

There were no discrete tax items identified by management in the 53-weeks and 52-weeks ended December 31, 2016 and December 26, 2015, respectively, that were excluded from pro forma earnings per share. The net release of other uncertain tax position reserves, amounting to approximately $11.9 million and $7.3 million for the 53-weeks and 52-weeks ended December 31, 2016 and December 26, 2015, respectively, have not been included as pro forma adjustments in the above presentation of pro forma earnings per share as such amounts tend to be more recurring in nature, and do not affect comparability between periods.

                                                                                                                                                         Garmin Ltd. And Subsidiaries
                                                                                                                                                       Net income per share (Pro Forma)
                                                                                                                                                 (in thousands, except per share information)
                                                                                                                                                     
                                                                                              14-Weeks Ended                    13-Weeks Ended                                                          53-Weeks Ended                     52-Weeks Ended
                                                                                      -------------------------------------------------- -------------------- ------------------------------                                          -------------------------------------------------- -------------------- --------------------------------
                                                                                                  Dec 31,                                                                 Dec 26,                                                                 Dec 31,                                                                  Dec 26,
                                                                                                   2016                              2015                                                                    2016                               2015
                                                                                      -------------------------------------------------- -------------------- ------------------------------                                          -------------------------------------------------- -------------------- --------------------------------
                                                                                                                                                                                                                                                                                                               
Net Income (GAAP)                                                                     $136,605                                                                $132,383                                                                $510,814                                                                  $456,227
Foreign currency losses                                                                  1,648                                                                   9,288                                                                  31,651                                                                    23,465
Tax effect of foreign currency losses                                                     (312 )                          (1,227 )                                                                (5,974 )                            (4,590 )
                                                                                      -------- -------------------- -------------------- -------------------- -------- --------------------                                           -------- -------------------- -------------------- -------------------- ---------- --------------------
Net income (Pro Forma)                                                                $137,941       $140,444                                             $536,491         $475,102  
                                                                                      -------- -------------------- -------------------- -------------------- -------- --------------------                                           -------- -------------------- -------------------- -------------------- ---------- --------------------
                                                                                                                                                                                                                                                                                                               
Net income per share (GAAP):
    Basic                                                                                $0.73                                                                   $0.70                                                                   $2.71                                                                     $2.39
    Diluted                                                                              $0.72                                                                   $0.70                                                                   $2.70                                                                     $2.39
                                                                                                                                                                                                                                                                                                               
Net income per share (Pro Forma):
    Basic                                                                                $0.73                                                                   $0.74                                                                   $2.84                                                                     $2.49
    Diluted                                                                              $0.73                                                                   $0.74                                                                   $2.83                                                                     $2.49
                                                                                                                                                                                                                                                                                                               
Weighted average common shares outstanding:
    Basic                                                                              188,233                                                                 189,317                                                                 188,818                                                                   190,631
    Diluted (GAAP)                                                                     189,171                                                                 189,847                                                                 189,343                                                                   191,107
                                                                                                                                                                                                                                                                                                                          
                                                                                                                                                                                                                                                                                                                          

Free cash flow

Management believes that free cash flow is an important financial measure because it represents the amount of cash provided by operations that is available for investing and defines it as operating cash flow plus one-time cash payments associated with our inter-company restructuring less capital expenditures for property and equipment.

                                                                                                                                                                                                      Garmin Ltd. And Subsidiaries
                                                                                                                                                                                                             Free Cash Flow
                                                                                                                                                                                                             (in thousands)
 
                                                                              14-Weeks Ended                                        13-Weeks Ended                                        53-Weeks Ended                                        52-Weeks Ended
                                                                                                  ---------------------------------------------------------------------- -------------------- --------------------------------------------------                                          ---------------------------------------------------------------------- -------------------- --------------------------------------------------
                                                                                                                        Dec 31,                                               Dec 26,                                                                                     Dec 31,                                               Dec 26,
                                                                                                                         2016                                                  2015                                                                                        2016                                                  2015
                                                                                                  ---------------------------------------------------------------------- -------------------- --------------------------------------------------                                          ---------------------------------------------------------------------- -------------------- --------------------------------------------------
                                                                                                                                                                                                                                                                                                                                                                                       
Net cash provided by operating activities                                                                            $ 213,315                                                                                   $ 158,336                                                                                   $ 705,682                                                                                   $ 280,467
Less: purchases of property and equipment                                                                              (48,803 )                                                                                   (27,295 )                                                                                   (90,960 )                                                                                   (80,592 )
Plus: taxes paid related to inter-company restructuring                                                   -               -                                                     -         182,800  
                                                                                                  -------------------- ------- -------------------- -------------------- -------------------- -------------------- ------- --------------------                                           -------------------- ------- -------------------- -------------------- -------------------- -------------------- ------- --------------------
Free Cash Flow                                                                                                       $ 164,512                          $ 131,041                                                                $ 614,722                          $ 382,675  
                                                                                                  ==================== ======= ==================== ==================== ==================== ==================== ======= ====================                                           ==================== ======= ==================== ==================== ==================== ==================== ======= ====================
                                                                                                                                                                                                                                                                                                                                                                                                                    

Forward-looking pro forma tax rate

Forward-looking pro forma tax rate and pro forma earnings per share are calculated before the effect of certain discrete tax items. Management believes certain discrete tax items may not be reflective of income tax expense incurred as a result of current period earnings. Therefore, in order to permit consistent comparison between periods, the tax rate and earnings per share before the effect of such discrete tax items are important measures. In the 53-weeks ended December 31, 2016, there were no such discrete tax items identified. However, in fiscal 2017, management believes certain discrete tax items will be recognized on a U.S. GAAP-basis, that will have an effect on comparability between periods:

-- The Company expects its fiscal 2017 pro forma tax rate to increase to 22% due to the Company’s election in February 2017 to adjust certain Switzerland corporate tax positions to address potential tax risk from evolving global tax initiatives. The 2017 pro forma tax rate of 22% excludes the effect of the expected revaluation of certain Switzerland deferred tax assets, for which the Company anticipates recording approximately $150 million of income tax benefit in the first quarter of 2017.

-- The fiscal 2017 pro forma tax rate of 22% also excludes the tax effects from share-based compensation as a result of the adoption of Accounting Standards Update No. 2016-09, Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Accounting ("ASU 2016-09"), which may have a material effect on the U.S. GAAP-basis tax rate. However, the Company is unable to project these amounts due to the dependency of this item on the underlying share price of the Company.

While management expects the above to have a significant impact on comparability, management is unable to determine whether or not additional significant discrete tax items will be identified in fiscal 2017.

Forward-looking pro forma earnings per share (EPS)

In addition to the discrete tax items discussed in the forward-looking pro forma tax rate section above, our 2017 pro forma EPS excludes foreign currency exchange gains and losses. The estimated impact of such 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 of such foreign currency gains and losses, net of tax effects, was $0.01 and $0.13 per share for the 14-weeks and 53-weeks ended December 31, 2016, respectively.

http://cts.businesswire.com/ct/CT?id=bwnews&sty=20170222005464r1&sid=cmtx6&distro=nx&lang=en

View source version on businesswire.com: http://www.businesswire.com/news/home/20170222005464/en/

SOURCE: Garmin Ltd.

Garmin Ltd. 
Investor Relations Contact: 
Teri Seck, 913-397-8200 
investor.relations@garmin.com 
or 
Media Relations Contact: 
Ted Gartner, 913-397-8200 
media.relations@garmin.com


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