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

FORM 10-Q

x
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
 
For the quarterly period ended June 28, 2008

or

o
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
 
For the transition period from ________ to __________ 

Commission file number 0-31983
________________

GARMIN LTD.
(Exact name of Company as specified in its charter)

Cayman Islands
(State or other jurisdiction
of incorporation or organization)
98-0229227
(I.R.S. Employer identification no.)
P.O. Box 10670, Grand Cayman KY1-1006
Suite 3206B, 45 Market Street, Gardenia Court
Camana Bay, Cayman Islands
(Address of principal executive offices)
N/A
(Zip Code)

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

No Changes

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

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

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

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

Number of shares outstanding of the Company's common shares as of August 1, 2008
Common Shares, $.005 par value: 207,269,130 




Garmin Ltd.
Form 10-Q
Quarter Ended June 28, 2008

Table of Contents

 
Page
Part I - Financial Information
 
       
 
Item 1.
Condensed Consolidated Financial Statements (Unaudited)
3
       
   
Introductory Comments
3
       
   
Condensed Consolidated Balance Sheets at June 28, 2008 and December 29, 2007
4
       
   
Condensed Consolidated Statements of Income for the 13-weeks and 26-weeks ended June 28, 2008 and June 30, 2007
5
       
   
Condensed Consolidated Statements of Cash Flows for the 26-weeks ended June 28, 2008 and June 30, 2007
6
       
   
Notes to Condensed Consolidated Financial Statements
7
       
 
Item 2.
Management's Discussion and Analysis of Financial Condition and Results of Operations
14
       
 
Item 3.
Quantitative and Qualitative Disclosures About Market Risk
24
       
 
Item 4.
Controls and Procedures
25
       
Part II - Other Information
 
       
 
Item 1.
Legal Proceedings
26
       
   
Item 1A. Risk Factors
27
       
 
Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds
27
       
 
Item 3.
Defaults Upon Senior Securities
27
       
 
Item 4.
Submission of Matters to a Vote of Securities Holders
28
       
 
Item 5.
Other Information
28
       
 
Item 6.
Exhibits
29
       
Signature Page
30
   
Index to Exhibits
31

2


Garmin Ltd.
Form 10-Q
Quarter Ended June 28, 2008

Part I – Financial Information

Item 1. Condensed Consolidated Financial Statements (Unaudited)

Introductory Comments

The Condensed Consolidated Financial Statements of Garmin Ltd. ("Garmin" or the "Company") included herein have been prepared by the Company, without audit, pursuant to the rules and regulations of the United States Securities and Exchange Commission. Certain information and note disclosures normally included in financial statements prepared in accordance with U.S. generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations, although the Company believes that the disclosures are adequate to enable a reasonable understanding of the information presented. These Condensed Consolidated Financial Statements should be read in conjunction with the audited financial statements and the notes thereto for the year ended December 29, 2007. Additionally, the Condensed Consolidated Financial Statements should be read in conjunction with Item 2 of Management's Discussion and Analysis of Financial Condition and Results of Operations, included in this Form 10-Q.

The results of operations for the 13-week and 26-week periods ended June 28, 2008 are not necessarily indicative of the results to be expected for the full year 2008.

3


Garmin Ltd. And Subsidiaries
Condensed Consolidated Balance Sheets
(In thousands, except share information)
 
 
 
(Unaudited)  
 
 
 
 
 
June 28,  
 
December 29,
 
 
 
2008  
 
2007
 
Assets
         
Current assets:
         
Cash and cash equivalents
 
$
624,482
 
$
707,689
 
Marketable securities
   
36,335
   
37,551
 
Accounts receivable, net
   
679,789
   
952,513
 
Inventories, net
   
656,018
   
505,467
 
Deferred income taxes
   
93,235
   
107,376
 
Prepaid expenses and other current assets
   
27,712
   
22,179
 
 
         
Total current assets
   
2,117,571
   
2,332,775
 
 
         
Property and equipment, net
   
449,727
   
374,147
 
 
         
Marketable securities
   
348,997
   
386,954
 
Restricted cash
   
1,550
   
1,554
 
Licensing agreements, net
   
3,863
   
14,672
 
Other intangible assets, net
   
210,323
   
181,358
 
 
         
Total assets
 
$
3,132,031
 
$
3,291,460
 
 
         
Liabilities and Stockholders' Equity
         
Current liabilities:
         
Accounts payable
 
$
179,212
 
$
341,053
 
Salaries and benefits payable
   
35,081
   
31,696
 
Accrued warranty costs
   
83,918
   
71,636
 
Other accrued expenses
   
166,655
   
280,603
 
Income taxes payable
   
51,104
   
76,895
 
Dividend payable
   
157,498
   
-
 
 
         
Total current liabilities
   
673,468
   
801,883
 
 
         
Deferred income taxes
   
11,748
   
11,935
 
Non-current taxes
   
136,137
   
126,593
 
Other liabilities
   
1,025
   
435
 
 
         
Stockholders' equity:
         
Common stock, $0.005 par value, 1,000,000,000 shares authorized:
         
Issued and outstanding shares - 210,648,000 as of June 28, 2008 and 216,980,000 as of December 29, 2007
   
1,054
   
1,086
 
Additional paid-in capital
   
-
   
132,264
 
Retained earnings
   
2,258,730
   
2,171,134
 
Accumulated other comprehensive income
   
49,869
   
46,130
 
 
         
Total stockholders' equity
   
2,309,653
   
2,350,614
 
Total liabilities and stockholders' equity
 
$
3,132,031
 
$
3,291,460
 

See accompanying notes.

4


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

   
 
13-Weeks Ended
 
26-Weeks Ended
 
   
 
June 28,  
 
June 30,
 
June 28,  
 
June 30,
 
   
 
2008  
 
2007
 
2008  
 
2007
 
   
 
   
 
 
 
   
 
 
 
Net sales  
 
$
911,671
 
$
742,466
 
$
1,575,476
 
$
1,234,625
 
   
                 
Cost of goods sold  
   
494,543
   
367,799
   
838,233
   
622,206
 
   
                 
Gross profit  
   
417,128
   
374,667
   
737,243
   
612,419
 
   
                 
Selling, general and administrative expense  
   
125,028
   
95,373
   
222,853
   
161,297
 
Research and development expense  
   
53,597
   
37,727
   
103,154
   
71,230
 
   
   
178,625
   
133,100
   
326,007
   
232,527
 
   
                 
Operating income  
   
238,503
   
241,567
   
411,236
   
379,892
 
   
                 
Other income (expense):  
                 
Interest income  
   
9,656
   
10,841
   
18,060
   
20,199
 
Foreign currency  
   
21,561
   
(6,086
)
 
17,562
   
7,119
 
Gain on sale of equity securities  
   
45,686
   
-
   
50,949
   
-
 
Other  
   
757
   
315
   
799
   
334
 
   
   
77,660
   
5,070
   
87,370
   
27,652
 
   
                 
Income before income taxes  
   
316,163
   
246,637
   
498,606
   
407,544
 
   
                 
Income tax provision  
   
60,071
   
32,260
   
94,735
   
53,307
 
   
                 
Net income  
 
$
256,092
 
$
214,377
 
$
403,871
 
$
354,237
 
   
                 
Net income per share:  
                 
Basic  
 
$
1.20
 
$
0.99
 
$
1.88
 
$
1.64
 
Diluted  
 
$
1.19
 
$
0.98
 
$
1.86
 
$
1.62
 
   
                 
Weighted average common   shares outstanding:  
                 
Basic  
   
213,756
   
216,380
   
215,130
   
216,298
 
Diluted  
   
215,572
   
219,078
   
217,274
   
218,925
 

See accompanying notes.


5


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

     
 
26-Weeks Ended
 
     
 
June 28,  
 
June 30,
 
     
 
2008  
 
2007
 
Operating Activities:  
         
Net income  
 
$
403,871
 
$
354,237
 
Adjustments to reconcile net income to net cash   provided by operating activities:  
         
Depreciation  
   
18,690
   
13,479
 
  Amortization  
   
8,430
   
15,856
 
  Loss (gain) on sale of property and equipment  
   
(208
)
 
18
 
  Provision for doubtful accounts  
   
3,977
   
1,808
 
  Deferred income taxes  
   
17,342
   
(725
)
  Foreign currency transaction gains/losses  
   
25,428
   
(10,358
)
  Provision for obsolete and slow moving inventories  
   
28,326
   
17,309
 
  Stock compensation expense  
   
18,253
   
7,196
 
  Realized gains on marketable securities  
   
(72,445
)
 
-
 
Changes in operating assets and liabilities, net of acquisitions:  
         
  Accounts receivable  
   
307,580
   
(88,405
)
  Inventories  
   
(141,180
)
 
(33,406
)
  Other current assets  
   
8,110
   
9,059
 
  Accounts payable  
   
(213,507
)
 
63,472
 
  Other current and non-current liabilities  
   
(102,909
)
 
101,826
 
  Income taxes payable  
   
(25,341
)
 
(6,937
)
  Purchase of licenses  
   
(4,236
)
 
(22,290
)
Net cash provided by operating activities  
   
280,181
   
422,139
 
     
         
Investing activities:  
         
Purchases of property and equipment  
   
(79,917
)
 
(112,020
)
Proceeds from sale of property and equipment  
   
8
   
-
 
Purchase of intangible assets  
   
(997
)
 
(1,881
)
Purchase of marketable securities  
   
(344,119
)
 
(378,909
)
Redemption of marketable securities  
   
390,179
   
455,598
 
Change in restricted cash  
   
14
   
(33
)
Acquisitions, net of cash acquired    
   
(34,768
)
 
(68,902
)
Net cash used in investing activities  
   
(69,600
)
 
(106,147
)
     
         
Financing activities:  
         
Proceeds from issuance of common stock  
   
7,194
   
7,534
 
Stock repurchase  
   
(318,471
)
 
-
 
Payments on long term debt  
   
-
   
(248
)
Tax benefit related to stock option exercise  
   
1,965
   
7,360
 
Net cash (used in)/provided by financing activities  
   
(309,312
)
 
14,646
 
     
         
Effect of exchange rate changes on cash and cash equivalents  
   
15,524
   
(288
)
     
             
Net (decrease)/increase in cash and cash equivalents  
   
(83,207
)
 
330,350
 
Cash and cash equivalents at beginning of period  
   
707,689
   
337,321
 
Cash and cash equivalents at end of period  
 
$
624,482
 
$
667,671
 
     
         
See accompanying notes.  
         

6


Garmin Ltd. and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Unaudited)

June 28, 2008
(In thousands, except share and per share information)


1.
Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the 13-week and 26-week periods ended June 28, 2008 are not necessarily indicative of the results that may be expected for the year ending December 27, 2008.

The condensed consolidated balance sheet at December 29, 2007 has been derived from the audited financial statements at that date but does not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. For further information, refer to the consolidated financial statements and footnotes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 29, 2007.

The Company’s fiscal year is based on a 52-53 week period ending on the last Saturday of the calendar year. Therefore the financial results of certain fiscal years, and the associated 14-week quarters, will not be exactly comparable to the prior and subsequent 52-week fiscal years and the associated quarters having only 13-weeks. The quarters ended June 28, 2008 and June 30, 2007 both contain operating results for 13-weeks for both quarter-to-date periods.

2.
Inventories

The components of inventories consist of the following:

 
 
June 28, 2008  
 
December 29, 2007
 
   
 
   
 
 
 
Raw Materials  
 
$
173,205
 
$
130,056
 
Work-in-process  
   
56,628
   
57,622
 
Finished goods  
   
458,197
   
343,670
 
Inventory Reserves  
   
(32,012
)
 
(25,881
)
Inventory, net of reserves  
 
$
656,018
 
$
505,467
 
 
3. Stock Purchase Plan  

The Board of Directors approved a share repurchase program on February 4, 2008, authorizing the Company to purchase up to 5,000,000 shares of Garmin Ltd.’s common stock as market and business conditions warrant. The Company had repurchased 1,425,000 in first quarter 2008. As of June 28, 2008, the Company had repurchased the remaining 3,575,000 shares using cash of $158,317.

On June 6, 2008 the Board of Directors approved a share repurchase program authorizing the Company to repurchase up to 10,000,000 common shares of Garmin Ltd. and that it had adopted a Rule 10b5-1 plan covering 5,000,000 of such shares. The repurchases may be made from time to time as market and business conditions warrant on the open market or in negotiated transactions in compliance with the SEC’s Rule 10b-18. The timing and amounts of any repurchases will be determined by the company’s management depending on market conditions and other factors including price, regulatory requirements and capital availability. The program does not require the purchase of any minimum number of shares and may be suspended or discontinued at any time. The share repurchase authorization expires on December 31, 2009. As of June 28, 2008, the Company had repurchased 1,600,000 shares using cash of $70,098.

7



4.
Earnings Per Share

The following table sets forth the computation of basic and diluted net income per share (in thousands, except per share information):
 
 
 
13-Weeks Ended
 
 
 
June 28,  
 
June 30,
 
 
 
2008  
 
2007
 
Numerator:
         
Numerator for basic and diluted net income per share - net income
 
$
256,092
 
$
214,377
 
 
         
Denominator:
         
Denominator for basic net income per share – weighted-average common shares
   
213,756
   
216,380
 
 
         
Effect of dilutive securities – employee stock options and stock appreciation rights
   
1,816
   
2,698
 
 
         
Denominator for diluted net income per share – adjusted weighted-average common shares
   
215,572
   
219,078
 
 
         
Basic net income per share
 
$
1.20
 
$
0.99
 
 
         
Diluted net income per share
 
$
1.19
 
$
0.98
 

 
 
26-Weeks Ended
 
 
 
June 28,  
 
June 30,
 
 
 
2008  
 
2007
 
Numerator:
         
Numerator for basic and diluted net income per share - net income
 
$
403,871
 
$
354,237
 
 
         
Denominator:
         
Denominator for basic net income per share – weighted-average common shares
   
215,130
   
216,298
 
 
         
Effect of dilutive securities – employee stock options and stock appreciation rights
   
2,143
   
2,627
 
 
         
Denominator for diluted net income per share – adjusted weighted-average common shares
   
217,274
   
218,925
 
 
         
Basic net income per share
 
$
1.88
 
$
1.64
 
 
         
Diluted net income per share
 
$
1.86
 
$
1.62
 


8



There were 5,408,834 anti-dilutive options for the 13-week period ended June 28, 2008. There were 2,706,424 anti-dilutive options for the 13-week period ended June 30, 2007.

  There were 5,049,164 anti-dilutive options for the 26-week period ended June 28, 2008. There were 2,561,684 anti-dilutive options for the 26-week period ended June 30, 2007.

There were 36,877 shares issued as a result of exercises of stock appreciation rights and stock options for the 13-week period ended June 28, 2008.

There were 129,710 shares issued as a result of exercises of stock appreciation rights and stock options for the 26-week period ended June 28, 2008.

On June 6, 2008, the Company’s Board of Directors approved an annual cash dividend of $0.75 per share. The dividend is payable to shareholders of record on December 1, 2008 and will be paid on December 15, 2008.


5.
Comprehensive Income

Comprehensive income is comprised of the following (in thousands):

 
 
13-Weeks Ended
 
 
 
June 28,  
 
June 30,
 
 
 
2008  
 
2007
 
Net income
 
$
256,092
 
$
214,377
 
Translation adjustment
   
(18,790
)
 
2,345
 
Change in fair value of available-for-sale marketable securities, net of deferred taxes
   
(24,291
)
 
(538
)
Comprehensive income
 
$
213,011
 
$
216,184
 
 
 
 
26-Weeks Ended
 
 
 
June 28,  
 
June 30,
 
 
 
2008  
 
2007
 
Net income
 
$
403,871
 
$
354,237
 
Translation adjustment
   
61,004
   
(10,537
)
Change in fair value of available-for-sale marketable securities, net of deferred taxes
   
(57,265
)
 
1,280
 
Comprehensive income
 
$
407,610
 
$
344,980
 


6.
Segment Information

Net sales, operating income, and income before taxes for each of the Company’s reportable segments are presented below:
 
9

Garmin Ltd. And Subsidiaries
Revenue, Gross Profit, and Operating Income by Segment
                     

   
 
Reportable Segments
 
   
 
Outdoor/
 
 
 
Auto/
 
 
 
 
 
   
 
Fitness
 
Marine
 
Mobile
 
Aviation
 
Total
 
13-Weeks Ended June 28, 2008
                               
   
                     
Net sales
 
$
119,147
 
$
71,178
 
$
631,883
 
$
89,463
 
$
911,671
 
Operating income
 
$
45,445
 
$
24,068
 
$
129,190
 
$
39,800
 
$
238,503
 
Income before taxes
 
$
55,302
 
$
27,905
 
$
191,855
 
$
41,101
 
$
316,163
 
   
                     
13-Weeks Ended June 30, 2007
                     
   
                     
Net sales
 
$
77,163
 
$
79,771
 
$
507,895
 
$
77,637
 
$
742,466
 
Operating income
 
$
28,600
 
$
33,115
 
$
149,067
 
$
30,785
 
$
241,567
 
Income before taxes
 
$
28,812
 
$
34,065
 
$
153,109
 
$
30,651
 
$
246,637
 
   
                     
26-Weeks Ended June 28, 2008
                               
   
                     
Net sales
 
$
189,641
 
$
127,185
 
$
1,083,742
 
$
174,908
 
$
1,575,476
 
Operating income
 
$
64,756
 
$
41,904
 
$
236,831
 
$
67,745
 
$
411,236
 
Income before taxes
 
$
75,749
 
$
47,238
 
$
304,159
 
$
71,460
 
$
498,606
 
   
                     
26-Weeks Ended June 30, 2007
                     
   
                     
Net sales
 
$
137,690
 
$
122,775
 
$
824,520
 
$
149,640
 
$
1,234,625
 
Operating income
 
$
49,809
 
$
44,410
 
$
228,591
 
$
57,082
 
$
379,892
 
Income before taxes
 
$
53,595
 
$
47,150
 
$
248,253
 
$
58,546
 
$
407,544
 

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

Net Sales and long-lived assets (property and equipment) by geographic area are as follows as of and for the 26-week periods ended June 28, 2008 and June 30, 2007:

   
 
North
 
 
 
 
 
 
 
   
 
America
 
Asia
 
Europe
 
Total
 
June 28, 2008  
                 
Net sales to external customers
 
$
987,440
 
$
70,685
 
$
517,351
 
$
1,575,476
 
Long lived assets  
 
$
209,481
 
$
184,041
 
$
56,205
 
$
449,727
 
   
                 
June 30, 2007  
                 
Net sales to external customers
 
$
777,515
 
$
52,474
 
$
404,636
 
$
1,234,625
 
Long lived assets  
 
$
162,536
 
$
143,819
 
$
43,944
 
$
350,299
 


7.
Warranty Reserves
 
The Company’s products sold are generally covered by a warranty for periods ranging from one to three years. The Company’s estimate of costs to service its warranty obligations are based on historical experience and expectation of future conditions and are recorded as a liability on the balance sheet. The following reconciliation provides an illustration of changes in the aggregate warranty reserve.

10

 
 
13-Weeks Ended
 
 
 
June 28,
 
June 30,
 
 
 
2008
 
2007
 
 
 
 
 
 
 
Balance - beginning of the period
 
$
72,751
 
$
39,281
 
Accrual for products sold
         
during the period
   
37,666
   
22,565
 
Expenditures
   
(26,499
)
 
(12,121
)
Balance - end of the period
 
$
83,918
 
$
49,725
 
 
 
 
26-Weeks Ended
 
 
 
June 28,
 
June 30,
 
 
 
2008
 
2007
 
 
 
 
 
 
 
Balance - beginning of the period
 
$
71,636
 
$
37,639
 
Accrual for products sold
         
during the period
   
72,987
   
37,600
 
Expenditures
   
(60,705
)
 
(25,514
)
Balance - end of the period
 
$
83,918
 
$
49,725
 

8.
Commitments

Pursuant to certain supply agreements, the Company is contractually committed to make purchases of approximately $28.2 million over the next 3 years.

9.
Income Taxes

Our earnings before taxes increased 28.2% when compared to the same quarter in 2007, and our income tax expense increased by $27.8 million, to $60.1 million, for the 13-week period ended June 28, 2008, from $32.3 million for the 13-week period ended June 30, 2007, due to our earnings before taxes growth and a higher effective tax rate.  The effective tax rate was 19.0% for both the 13-weeks and 26-weeks ended June 28, 2008 compared to13.1% for both the 13-weeks and 26-weeks ended June 30, 2007.   The higher tax rate in 2008 when compared to 2007 was driven by a change in tax law related to the repatriation of earnings from our Taiwan subsidiary and the unfavorable mix of taxable income among Company entities.

10.
Recent Accounting Pronouncements
 
In September 2006, the FASB issued Statement of Financial Accounting Standards No. 157, Fair Value Measurements (“SFAS No. 157”). SFAS No. 157 establishes a framework for measuring fair value in GAAP, and expands disclosures about fair value measurements. SFAS No. 157 applies under other accounting pronouncements that require or permit fair value measurements. This statement is effective for fiscal years beginning after November 15, 2007, and interim periods within those fiscal years. The Company adopted SFAS No. 157 effective December 30, 2007.
 
SFAS No. 157 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (exit price). SFAS No. 157 classifies the inputs used to measure fair value into the following hierarchy:
 
Level 1    Unadjusted quoted prices in active markets for identical assets or liability
 
Level 2   Unadjusted quoted prices in active markets for similar assets or liabilities, or
 
 
 
11

 
                
Unadjusted quoted prices for identical or similar assets
 
Level 3   Unobservable inputs for the asset or liability
 
The Company endeavors to utilize the best available information in measuring fair value. Financial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement.
 
Assets and liabilities measured at estimated fair value on a recurring basis are summarized below:

   
Fair Value Measurements as
of June 28, 2008
 
 
 
Total
 
Level 1
 
Level 2
 
Level 3
 
Description
                         
                           
Available for-sale securites
 
$
299,863
 
$
299,863
   
-
   
-
 
Failed Auction rate securities
   
85,469
   
-
   
-
   
85,469
 
                                       
Total
 
$
385,332
 
$
299,863
 
$
-
 
$
85,469
 
 
For assets and liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) during the period, SFAS No. 157 requires a reconciliation of the beginning and ending balances, separately for each major category of assets. The reconciliation is as follows:

   
Fair Value Measurements Using
 
   
Significant Unobservable Inputs (Level 3)
 
   
13-Weeks Ended
 
26-Weeks Ended
 
   
June 28, 2008
 
June 28, 2008
 
Beginning balance of auction rate securities
 
$
88,208
 
$
0
 
Total unrealized losses included in other comprehensive income
   
(2,739
)
 
(7,381
)
Purchases in and/or out of Level 3
   
-
   
92,850
 
Transfers in and/or out of Level 3
   
-
   
-
 
Ending balance of auction rate securities
 
$
85,469
 
$
85,469
 

In December 2007, the FASB issued SFAS No. 160, Noncontrolling Interests in Consolidated Financial Statements (“SFAS 160”). SFAS 160 outlines the accounting and reporting for ownership interests in subsidiaries held by parties other than the parent, the amount of consolidated net income attributable to the parent and to the noncontrolling interest, changes in a parent’s ownership interest, and the valuation of retained noncontrolling equity investments when a subsidiary is deconsolidated. SFAS 160 also establishes disclosure requirements that clearly identify and distinguish between the interests of the parent and the interests of the noncontrolling owners. The statement is effective for fiscal years beginning on or after December 15, 2008. We do not expect the adoption of SFAS No. 160 to have a material impact on our financial reporting and disclosure.
 
In December 2007, the FASB issued SFAS No. 141 (revised 2007), Business Combinations (“SFAS 141R”). This standard establishes principles and requirements for how an acquirer recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed, any non-controlling interest in the acquiree and the goodwill acquired. SFAS 141R also establishes disclosure requirements that will enable users to evaluate the nature and financial effects of the business combination. The statement is effective for financial statements issued for fiscal years beginning on or after December 15, 2008 and interim periods within those fiscal years. The Company will determine the impact of adopting SFAS 141R on its consolidated financial statements should applicable transactions occur in the future.

12

In March 2008, the FASB issued Statement of Financial Accounting Standards No. 161, Disclosures about Derivative Instruments and Hedging Activities (“SFAS No. 161”). This statement will require holders of derivative instruments to provide qualitative disclosures about objectives and strategies for using derivatives, quantitative disclosures about fair value amounts of gains and losses from derivative instruments, and disclosures about credit-risk-related contingent features in derivative agreements. This statement is effective for interim and annual periods beginning after November 15, 2008. The company is not currently the holder of any derivative instruments; thus, currently adoption of this statement would not have any effect on the Company’s results of operations, financial condition, or cash flows.

11.
Acquisitions

In the second quarter of 2008, Garmin Ltd. acquired Formar Electronics N.V./S.A. (the distributor of Garmin’s consumer products in Belgium and Luxembourg). The company has been renamed Garmin Belux N.V./S.A. The acquisition is not considered to be material; therefore supplemental pro forma information is not presented.

On May 1, 2008, Garmin Ltd. announced its intent to acquire Satsignal Equipamentos de Comunicações e de Navegação S.A., the distributor of Garmin’s consumer products in Portugal. This acquisition is not expected to be material.

12.
Subsequent Events

On June 30, 2008, the acquisition of NavCor Oy, the distributor of Garmin’s consumer products in Finland, was completed and the distributor has been renamed Garmin Suomi Oy. This acquisition is not material; therefore supplemental pro forma information will not be presented.

On July 31, 2008, the acquisition of Puls Elektronik GmbH, the distributor of Garmin’s consumer products in Austria, was completed and the distributor is expected to be renamed Garmin Austria GmbH. This acquisition is not material; therefore supplemental pro forma information will not be presented.

Subsequent to June 28, 2008, the Company repurchased the remaining 3,400,000 shares pursuant to the Rule 10b5-1 plan adopted on June 6, 2008. This leaves an additional 5,000,000 shares to be repurchased as market and business conditions warrant.

13


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

The discussion set forth below, as well as other portions of this Quarterly Report, contains statements concerning potential future events. Such forward-looking statements are based upon assumptions by our management, as of the date of this Quarterly Report, including assumptions about risks and uncertainties faced by the Company. Readers can identify these forward-looking statements by their use of such verbs as expects, anticipates, believes or similar verbs or conjugations of such verbs. If any of our assumptions prove incorrect or should unanticipated circumstances arise, our actual results could materially differ from those anticipated by such forward-looking statements. The differences could be caused by a number of factors or combination of factors including, but not limited to, those factors identified in the Company’s Annual Report on Form 10-K for the year ended December 29, 2007. This report has been filed with the Securities and Exchange Commission (the "SEC" or the "Commission") in Washington, D.C. and can be obtained by contacting the SEC's public reference operations or obtaining it through the SEC's web site on the World Wide Web at http://www.sec.gov. Readers are strongly encouraged to consider those factors when evaluating any forward-looking statement concerning the Company. The Company will not update any forward-looking statements in this Quarterly Report to reflect future events or developments.

The information contained in this Management’s Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with the Condensed Consolidated Financial Statements and Notes thereto included in this Form 10-Q and the audited financial statements and notes thereto in the Company’s Annual Report on Form 10-K for the year ended December 29, 2007.

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

14



Results of Operations

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

 
 
13-Weeks Ended
 
 
 
June 28, 2008  
 
June 30, 2007
 
 
 
     
 
 
 
Net sales
   
100.0
%
 
100.0
%
Cost of goods sold
   
54.2
%
 
49.5
%
Gross profit
   
45.8
%
 
50.5
%
Research and development
   
5.9
%
 
5.1
%
Selling, general and administrative
   
13.7
%
 
12.8
%
Total operating expenses
   
19.6
%
 
17.9
%
Operating income
   
26.2
%
 
32.6
%
Other income (expense), net
   
8.5
%
 
0.6
%
Income before income taxes
   
34.7
%
 
33.2
%
Provision for income taxes
   
6.6
%
 
4.3
%
Net income
   
28.1
%
 
28.9
%
 
 
 
26-Weeks Ended
 
 
 
June 28, 2008  
 
June 30, 2007
 
 
 
     
 
 
 
Net sales
   
100.0
%
 
100.0
%
Cost of goods sold
   
53.2
%
 
50.4
%
Gross profit
   
46.8
%
 
49.6
%
Research and development
   
6.6
%
 
5.8
%
Selling, general and administrative
   
14.1
%
 
13.0
%
Total operating expenses
   
20.7
%
 
18.8
%
Operating income
   
26.1
%
 
30.8
%
Other income (expense), net
   
5.5
%
 
2.2
%
Income before income taxes
   
31.6
%
 
33.0
%
Provision for income taxes
   
6.0
%
 
4.3
%
Net income
   
25.6
%
 
28.7
%


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

15

     
 
Reporting Segments
 
     
 
Outdoor/
 
 
 
Auto/
 
 
 
 
 
     
 
Fitness
 
Marine
 
Mobile
 
Aviation
 
Total
 
     
 
 
 
 
 
 
 
 
 
 
 
13-Weeks Ended June 28, 2008
                     
     
                     
Net sales    
 
$
119,147
 
$
71,178
 
$
631,883
 
$
89,463
 
$
911,671
 
Gross profit  
 
$
67,908
 
$
40,120
 
$
243,720
 
$
65,380
 
$
417,128
 
Operating income  
 
$
45,445
 
$
24,068
 
$
129,190
 
$
39,800
 
$
238,503
 
     
                     
13-Weeks Ended June 30, 2007
                     
     
                     
Net sales    
 
$
77,163
 
$
79,771
 
$
507,895
 
$
77,637
 
$
742,466
 
Gross profit  
 
$
43,648
 
$
46,381
 
$
233,520
 
$
51,118
 
$
374,667
 
Operating income  
 
$
28,600
 
$
33,115
 
$
149,067
 
$
30,785
 
$
241,567
 
     
                     
26-Weeks Ended June 28, 2008
                     
     
                     
Net sales    
 
$
189,641
 
$
127,185
 
$
1,083,742
 
$
174,908
 
$
1,575,476
 
Gross profit  
 
$
105,347
 
$
72,583
 
$
439,614
 
$
119,699
 
$
737,243
 
Operating income  
 
$
64,756
 
$
41,904
 
$
236,831
 
$
67,745
 
$
411,236
 
     
                     
26-Weeks Ended June 30, 2007
                     
     
                     
Net sales    
 
$
137,690
 
$
122,775
 
$
824,520
 
$
149,640
 
$
1,234,625
 
Gross profit  
 
$
77,063
 
$
67,534
 
$
370,251
 
$
97,571
 
$
612,419
 
Operating income  
 
$
49,809
 
$
44,410
 
$
228,591
 
$
57,082
 
$
379,892
 

16

 
Comparison of 13-Weeks Ended June 28, 2008 and June 30, 2007

Net Sales

 
 
13-weeks ended June 28, 2008
   
13-weeks ended June 30, 2007
   
Quarter over Quarter
 
 
 
Net Sales
 
% of Revenues
   
Net Sales
 
% of Revenues
   
$ Change
 
% Change
 
Outdoor/Fitness
 
$
119,147
   
13.1
%
 
$
77,163
   
10.4
%
 
$
41,984
   
54.4
%
Marine
   
71,178
   
7.8
%
   
79,771
   
10.7
%
   
(8,593
)
 
-10.8
%
Automotive/Mobile
   
631,883
   
69.3
%
   
507,895
   
68.4
%
   
123,988
   
24.4
%
Aviation
   
89,463
   
9.8
%
   
77,637
   
10.5
%
   
11,826
   
15.2
%
Total
 
$
911,671
   
100.0
%
 
$
742,466
   
100.0
%
 
$
169,205
   
22.8
%
 
Increases in sales for the 13-week period ended June 28, 2008 were primarily due to a strong response to automotive and outdoor/fitness product offerings. Aviation revenues also grew but marine revenues declined on a year-over-year basis. Automotive/mobile revenue remains a significantly larger portion of our revenue mix, rising from 68.4% in the second quarter of 2007 to 69.3% in the second quarter of 2008.

Total unit sales increased 54% to 3,920,000 in the second quarter of 2008 from 2,544,000 in the second quarter of 2007. The higher unit sales volume in the second quarter of fiscal 2008 was primarily attributable to strong sales of automotive products during the seasonally higher second quarter, although unit growth was also strong in the outdoor/fitness segment due to new product offerings.

Automotive/mobile segment revenue grew 24.4% from the year-ago quarter, on the strength of nüvi and other personal navigation devices (PNDs). Revenues in our outdoor/fitness segment grew the fastest due to the introduction of the Colorado™ series, the Forerunner® 405 and Edge® 705. Our aviation segment also performed well with 15.2% growth from the year ago quarter. Growth in this segment is primarily driven by the demand for the G1000 in the OEM market and additional traction of our flight control products. The marine segment slowed during the quarter when compared with the strong second quarter of 2007 when many new products were introduced. The decline is primarily related to less consumer spending in the marine industry due to macroeconomic conditions and fuel prices.
 
Gross Profit

 
 
13-weeks ended June 28, 2008
   
13-weeks ended June 30, 2007
   
Quarter over Quarter
 
 
 
Gross Profit
 
% of Revenues
   
Gross Profit
 
% of Revenues
   
$ Change
 
% Change
 
Outdoor/Fitness
 
$
67,908
   
57.0
%
 
$
43,648
   
56.6
%
 
$
24,260
   
55.6
%
Marine
 
$
40,120
   
56.4
%
   
46,381
   
58.1
%
   
(6,261
)
 
-13.5
%
Automotive/Mobile
 
$
243,720
   
38.6
%
   
233,520
   
46.0
%
   
10,200
   
4.4
%
Aviation
 
$
65,380
   
73.1
%
   
51,118
   
65.8
%
   
14,262
   
27.9
%
Total
 
$
417,128
   
45.8
%
 
$
374,667
   
50.5
%
 
$
42,461
   
11.3
%
 
Gross profit dollars in the second quarter of 2008 grew 11.3% while gross profit margin percentage decreased 470 basis points over the second quarter of 2007. Second quarter gross profit margins increased to 57.0%, and 73.1% in the outdoor/fitness and aviation segments respectively, when compared to the second quarter of 2007. Second quarter 2008 gross profit margins decreased to 56.4% and 38.6% in the marine and automotive/mobile segment respectively, when compared with the second quarter of 2007.

Gross profit margin percentage for the Company overall decreased primarily as a result of the automotive/mobile segment remaining a significantly larger percentage of the Company’s product mix during a quarter when this segment’s margin fell by 740 basis points. The automotive/mobile segment is by nature a lower-margin business and the Company has begun to see the impacts expected on gross margin due to falling prices and a product mix shift toward lower end PNDs. Foreign currency fluctuations resulted in 100 basis points of gross margin favorability as the Company benefited from sales transacted in foreign currencies. Release of new products into the outdoor/fitness segment drove strong year-over-year improvement in outdoor/fitness margins. Declines in gross margin in the marine segment occurred as a result of more mature products. The aviation segment saw a 730 basis point increase in gross margin due to growth in OEM sales in the quarter. Aviation continued to be the Company’s highest gross margin segment.

17

 
Selling, General and Administrative Expenses

 
 
13-weeks ended June 28, 2008
   
13-weeks ended June 30, 2007
   
Quarter over Quarter
 
 
 
Selling, General &
 
 
   
Selling, General &
 
 
   
 
 
 
 
Admin. Expenses
 
% of Revenues
   
Admin. Expenses
 
% of Revenues
   
$ Change
 
% Change
 
Outdoor/Fitness
 
$
15,833
   
13.3
%
 
$
9,310
   
12.1
%
 
$
6,523
   
70.1
%
Marine
 
$
11,215
   
15.8
%
   
8,748
   
11.0
%
   
2,467
   
28.2
%
Automotive/Mobile
 
$
91,149
   
14.4
%
   
71,445
   
14.1
%
   
19,704
   
27.6
%
Aviation
 
$
6,831
   
7.6
%
   
5,870
   
7.6
%
   
961
   
16.4
%
Total
 
$
125,028
   
13.7
%
 
$
95,373
   
12.8
%
 
$
29,655
   
31.1
%
 
The increase in selling, general and administrative expense was driven primarily by costs associated with the European distributors acquired in 2007 and 2008, increased staffing throughout the organization to support our growth and increased advertising spending. Other selling, general and administrative expenses increased as a percent of sales from 5.2% of sales in the second quarter of 2007 to 7.3% of sales in the second quarter of 2008, as global staffing in marketing and administration were increased to support our rapid growth. In absolute dollars, other selling, general and administrative expenses increased $28.2 million when compared to the previous year quarter, with increases distributed across European distributors, information technology, call center, operations, finance, administration, and marketing administration areas to support the growth of our businesses. Advertising spending, while up $1.5 million in absolute dollars, declined as a percent of revenues, to 6.4% of revenues compared to 7.7% of revenues in the second quarter of 2007.

Research and Development Expense

 
 
13-weeks ended June 28, 2008
   
13-weeks ended June 30, 2007
   
Quarter over Quarter 
 
 
 
Research &
 
 
   
Research &
 
 
   
 
 
 
 
Development
 
% of Revenues
   
Development
 
% of Revenues
   
$ Change
 
% Change
 
Outdoor/Fitness
 
$
6,631
   
5.6
%
 
$
5,738
   
7.4
%
 
$
893
   
15.6
%
Marine
   
4,836
   
6.8
%
   
4,518
   
5.7
%
   
318
   
7.0
%
Automotive/Mobile
   
23,381
   
3.7
%
   
13,008
   
2.6
%
   
10,373
   
79.7
%
Aviation
   
18,749
   
21.0
%
   
14,463
   
18.6
%
   
4,286
   
29.6
%
Total
 
$
53,597
   
5.9
%
 
$
37,727
   
5.1
%
 
$
15,870
   
42.1
%

The 42.1% increase in research and development expense was due to ongoing development activities for new products, the addition of almost 300 new engineering personnel to our staff during the quarter, and an increase in engineering program costs during the second quarter of 2008 as a result of our continued emphasis on product innovation. Research and development costs increased $15.9 million when compared with the second quarter of 2007 representing an 80 basis point increase as a percent of revenue.
 
Operating Income

 
 
13-weeks ended June 28, 2008
   
13-weeks ended June 30, 2007
   
Quarter over Quarter 
 
 
 
Operating Income
 
% of Revenues
   
Operating Income
 
% of Revenues
   
$ Change
 
% Change
 
Outdoor/Fitness
 
$
45,445
   
38.1
%
 
$
28,600
   
37.1
%
 
$
16,845
   
58.9
%
Marine
   
24,068
   
33.8
%
   
33,115
   
41.5
%
   
(9,047
)
 
-27.3
%
Automotive/Mobile
   
129,190
   
20.4
%
   
149,067
   
29.3
%
   
(19,877
)
 
-13.3
%
Aviation
   
39,800
   
44.5
%
   
30,785
   
39.7
%
   
9,015
   
29.3
%
Total
 
$
238,503
   
26.2
%
 
$
241,567
   
32.5
%
 
$
($3,064
)
 
-1.3
%

Operating margin declined 630 basis points as a percent of revenue when compared to the second quarter of 2007 due to the decrease in gross margins, along with the costs associated with the European distributors, increases in staffing to support the growth of our businesses, and research and development expense associated with ongoing development activities. Operating margins decreased to 20.4% and 33.8% within our automotive/mobile and marine segments, respectively, when compared with the second quarter of 2007. Operating margins increased to 38.1% and 44.5% within our outdoor/fitness and aviation segments, respectively, when compared with the second quarter of 2007. Our operating income decreased as a function of the gross profit margin percentage decrease described above, as well as declining operating margins in both the marine and automotive/mobile segments.

18


Other Income (Expense)

 
 
13-weeks ended
 
13-weeks ended
 
 
 
June 28, 2008
 
June 30, 2007
 
Interest Income
 
$
9,656
 
$
10,841
 
Foreign Currency Exchange
   
21,561
   
(6,086
)
Gain on sale of equity securities
   
45,686
   
-
 
Other
   
757
   
315
 
Total
 
$
77,660
 
$
5,070
 


The average taxable equivalent interest rate of return on invested cash during the second quarter of 2008 was 3.6% compared to 4.4% during the same quarter of 2007. The decrease in interest income is attributable to slightly lower cash balances and decreasing interest rates.

Foreign currency gains and losses for the Company are primarily tied to movements by the Taiwan Dollar, the Euro, and the British Pound Sterling. The U.S. Dollar remains the functional currency of Garmin (Europe) Ltd. The Euro is the functional currency of Garmin France, Garmin Deutschland, Garmin Iberia, Garmin Italia, and Garmin Belux. As these entities grow, Euro currency moves will generate material gains and losses. Additionally, Euro-based inter-company transactions can also generate currency gains and losses. The Canadian dollar and Danish Krone are the functional currency of Dynastream Innovations, Inc. and Garmin Danmark, respectively; due to these entities’ relative size, currency moves do not have a material impact on the Company’s financial statements.

The majority of the $21.6 million currency gain in the second quarter of 2008 was related to the tender of our Tele Atlas N.V. shares. This transaction generated a realized gain of $20.4 million due to the strengthening of the Euro between the date of purchase of the shares in October 2007 to the date of tender in June 2008.

The majority of the $6.1 million currency loss in the second quarter of 2007 was due to the weakening of the U.S. Dollar compared to the Taiwan Dollar. During the second quarter of fiscal 2007 the exchange rate decreased 0.7% to $32.86 TD/USD at June 30, 2007 from $33.09 TD/USD at March 31, 2007, resulting in $5.8 million of the quarter’s loss. While the British Pound Sterling strengthened relative to the U.S. Dollar during the quarter, the timing of transactions during the period resulted in Garmin Europe recording a $0.6 million gain.

Other income of $46.3 million in the current quarter was primarily generated from the sale of our equity interest in Tele Atlas N.V.

Income Tax Provision
 
Our earnings before taxes increased 28.2% when compared to the second quarter of 2007, and our income tax expense increased by $27.8 million, to $60.1 million, for the 13-week period ended June 28, 2008, from $32.3 million for the 13-week period ended June 30, 2007, due to our earnings before taxes growth and a higher effective tax rate.  The effective tax rate was 19.0% in the second quarter of 2008 and 13.1% in the second quarter of 2007.    The higher tax rate in the second quarter of 2008 when compared to the same quarter in 2007 was driven by a change in tax law related to the repatriation of earnings from our Taiwan subsidiary and the unfavorable mix of taxable income among Company entities.

Net Income

As a result of the above, net income increased 19.5% for the 13-week period ended June 28, 2008 to $256.1 million compared to $214.4 million for the 13-week period ended June 30, 2007.

19


Comparison of 26-Weeks Ended June 28, 2008 and June 30, 2007

Net Sales

 
 
26-weeks ended June 28, 2008
   
26-weeks ended June 30, 2007
   
Quarter over Quarter 
 
 
 
Net Sales
 
% of Revenues
   
Net Sales
 
% of Revenues
   
$ Change
 
% Change
 
Outdoor/Fitness
 
$
189,641
   
12.0
%
 
$
137,690
   
11.2
%
 
$
51,951
   
37.7
%
Marine
   
127,185
   
8.1
%
   
122,775
   
9.9
%
   
4,410
   
3.6
%
Automotive/Mobile
   
1,083,742
   
68.8
%
   
824,520
   
66.8
%
   
259,222
   
31.4
%
Aviation
   
174,908
   
11.1
%
   
149,640
   
12.1
%
   
25,268
   
16.9
%
Total
 
$
1,575,476
   
100.0
%
 
$
1,234,625
   
100.0
%
 
$
340,851
   
27.6
%
 
Increases in sales for the 26-week period ended June 28, 2008 were due to a strong response to automotive, outdoor/fitness product offerings. Automotive/mobile revenue remains a significantly larger portion of our revenue mix, rising from 66.8% in the first half of 2007 to 68.8% in the first half of 2008.

Total unit sales increased 64% to 6,707,000 in the first half of 2008 from 4,095,000 in the same period of 2007. The higher unit sales volume in the first half of fiscal 2008 was primarily attributable to strong sales of automotive products, particularly in North America, and outdoor/fitness products.

Automotive/mobile segment revenue grew 31.4% from the year-ago period, on the strength of nuvi® and other personal navigation devices (PNDs). On a percentage basis, revenues in our outdoor/fitness segment grew faster than any other segment in the first half of 2008 due to the introduction of the Colorado™ series, the Forerunner® 405 and Edge® 705. Our aviation segment continued to perform well on the strength of our G1000 cockpit. Marine revenues were slightly higher in the first half of 2008 compared to the prior year due to strong growth in the first quarter of 2008 offset somewhat by a decline in the second quarter as previously discussed.

Gross Profit

 
 
26-weeks ended June 28, 2008
   
26-weeks ended June 30, 2007
   
Quarter over Quarter 
 
 
 
Gross Profit
 
% of Revenues
   
Gross Profit
 
% of Revenues
   
$ Change
 
% Change
 
Outdoor/Fitness
 
$
105,347
   
55.6
%
 
$
77,063
   
56.0
%
 
$
28,284
   
36.7
%
Marine
   
72,583
   
57.1
%
   
67,534
   
55.0
%
   
5,049
   
7.5
%
Automotive/Mobile
   
439,614
   
40.6
%
   
370,251
   
44.9
%
   
69,363
   
18.7
%
Aviation
   
119,699
   
68.4
%
   
97,571
   
65.2
%
   
22,128
   
22.7
%
Total
 
$
737,243
   
46.8
%
 
$
612,419
   
49.6
%
 
$
124,824
   
20.4
%
 
Gross profit dollars in the first half of 2008 grew 20.4% and gross profit margin percentage declined 280 basis points over the same period of the previous year. First half gross profit margins decreased to 55.6% and 40.6% in the outdoor/fitness and automotive/mobile segments respectively, when compared to the same period in 2007. First half 2008 gross profit margins increased to 57.1% and 68.4% within the marine and aviation segments, when compared with the first half of 2007.

Gross profit margin percentage for the Company overall decreased 280 basis points primarily as a result of the automotive/mobile segment decline of 430 basis points. The automotive/mobile segment is by nature a lower-margin business and the Company has begun to see the impacts expected on gross margin due to falling prices and a product mix shift toward lower end PNDs. Foreign currency fluctuations resulted in 200 basis points of gross margin favorability as the Company benefited from sales transacted in foreign currencies. Strong demand for the high margin G1000 in the aviation segment resulted in favorable product mix and margins for the aviation segment in the first half of the year. Marine gross margin increased compared to the first half of 2007 as the new products introduced in second quarter of 2007 continue to provide high gross margins. Outdoor/fitness gross margin was relatively stable and remained within historic ranges.

20


Selling, General and Administrative Expenses

 
 
26-weeks ended June 28, 2008
   
26-weeks ended June 30, 2007
   
Quarter over Quarter 
 
 
 
Selling, General &
 
 
   
Selling, General &
 
 
   
 
 
 
 
Admin. Expenses
 
% of Revenues
   
Admin. Expenses
 
% of Revenues
   
$ Change
 
% Change
 
Outdoor/Fitness
 
$
27,762
   
14.6
%
 
$
16,599
   
12.1
%
 
$
11,163
   
67.3
%
Marine
   
20,487
   
16.1
%
   
14,785
   
12.0
%
   
5,702
   
38.6
%
Automotive/Mobile
   
160,178
   
14.8
%
   
117,259
   
14.2
%
   
42,919
   
36.6
%