Garmin
Annual Report 2014

Plain-text annual report

20 14 A N N U A L R E P O R T Garmin Ltd. Mühlentalstrasse 2 8200 Schaffhausen Switzerland Garmin.com © 2015 Garmin Ltd. All rights reserved. M00-60329-00 0415 has been a worldwide leader F or the last 25 years, Garmin the bar for personal navigation in satellite navigation, setting We leveraged our experience Customer testimonials and Based on the accomplishments developing dedicated watches professional recommendations and milestones we achieved in for fitness, outdoor and aviation from last year demonstrate the 2014, we’re looking forward to the enthusiasts to launch an exciting relationship our customers have future. We continue to invest in Innovation from experience devices (PND) by creating superior new line of activity trackers, which with our products and their research and development (R&D) products that are essential to our customers’ lives. However, appeal to all levels of fitness. We correlation to success in their and continue to pursue business added connectivity across all our chosen fields. For instance, opportunities in our core market we recognize that innovation and markets by integrating social and fishing legend and broadcast segments, as well as to explore diversification are the key s to winning and retaining customers and maint aining lon g -t erm sustained growth. To that end, in 2014 we continued to offer and improve on the strong portfolio of products in all our markets— aviation, automotive/mob ile, fitness, outdoor and marine— while also venturing into new smart technology in select products personality Bill Dance partnered emerging categories. By celebrating to provide a profound, data-rich with Garmin, and is thrilled to use 25 years in the industry last year, experience to our customers, and recommend Garmin marine we have established our legacy as allowing them to gain a deeper electronics. Recognized as one an innovative products company, understanding of themselves and of the world’s top professional and we expect not just to endure their goals. In addition, we widened the displays and angles for some triathletes, Timothy O’Donnell helped launch the Forerunner® of our products to provide users 920XT, our highly anticipated more detailed information at a multisport device that’s qualified glance, decreasing distraction and to guide the training of elite and but also to succeed for many years to come. territory with additional products enhancing safety. amateur athletes alike. and categories. Dear Shareholders, 2014 was a year of change for Garmin. Notably, we entered new markets and we launched new product categories that produced growth in both revenue and profits. In 2014, revenue grew 9% for the full year and our pro-forma EPS grew 18%, ahead of revenue, due to strong margin performance and operating expenses that grew consistent with sales. This successful outcome was made possible by the dedication and hard work of Garmin associates around the globe. I am proud of what our team has accomplished and I am thankful for the strong contributions made by our associates. One of Garmin’s greatest strengths is the As we look at 2015 and beyond, we will diversity of our target markets and product continue to employ a strategy of multi- portfolio. While we are excited about the market diversification. We will focus on new markets we have entered and the new building share in recently entered markets product categories that we have launched, and product categories, while investing for we also recognize that we could not have the future by creating more new markets achieved these results without the strong and categories where we can play an contributions from existing markets and essential role in the lives of our customers. product categories. In 2014, we further We will continue to invest in our core diversified our business, generating 57% markets creating compelling, innovative, of our revenue and 69% of our operating and differentiated products that our income from Aviation, Fitness, Marine, customers seek. and Outdoor. While the PND market size continues to decline, we have offset some of the declines with market share gains, and we have invested in new markets and product categories that have further softened the impact. We believe we are in a stronger position thanks to the intentional investments we have been making to diversify our business. I want to thank our shareholders for your ongoing support of our business and strategy. We will continue to focus on the long term, building a sustainable enduring company that plays an ever increasing role in the lives of our customers. CLIFF PEMBLE | PRESIDENT AND CEO 2014 will be remembered as the year the target audience for wearable technology began the transition from early The most recent additions to the lineup combine practical function with personalized feedback. We launched Connect IQ™, our first- adopters to mainstream consumers. ever open platform for third-party This shift was led by the advanced developers to create apps for our engineering that enabled the watches. The software development development of devices able to be kit (SDK ) allows developers to worn easily and every day, driving translate rich sensor data into the evolution of the technology new relevant metrics using fully from pure novelty product to one customizable data screens. Users that provides value. can then tailor these apps to meet Over the last decade, we began their individual needs. developing watches for dedicated This expansion to our collection enthusiasts. They have helped of watches, which now includes our customers win races, sail the both those intended for exclusive seas, break par, summit mountains pursuits as well as lifestyle bands and land safely, providing robust targeted to all levels of fitness, and accurate metrics for specific provided strong growth driven by activities. Nevertheless, we realize the combination of breakthrough not all our customers are elite design and market demand, and athletes or backcountry explorers. is perfectly timed to coincide with Therefore, we leveraged our consumers’ newfound comfort expertise and pushed further into with the use of wearable technology. the emerging wearable technology market. Ahead of the trend INSPIRING a Movement implementing a pilot program for To help our customers stay on our own associates. Designed to track, Garmin Connect™ and improve employee wellness and Garmin Connect™ Mobile received inspire individuals to keep a a complete design update, with healthy balance between work improved navigation, customizable and life, the corporate wellness dashboard, enhanced reports to program uses Garmin devices and track performance over time and technology to provide motivation easier social network sharing. A and accountability for participants. partnership signed in 2014 with For added inspiration, our devices made their broadcast debut when we partnered with the most recent season of NBC’s “The Biggest Loser®,” the competition reality show, for a branded version of our basic activity tracker. the popular app MyFitnessPal® now lets users view calories consumed and then burned, and also see their net count for the remainder of the day based on their set calorie goal, providing a more complete view of their health habits. More than 10 years ago, then, the company has retained Garmin launched its first fitness watch. Since when it’s time to start moving again. In addition, our devices are capable of learning a user’s activity level and using it to set a personalized, its position as a pioneer in the attainable daily goal. We also market. In 2014, Garmin drew on were among the first to add smart this long-standing reputation in the notifications and offer a version fitness market to begin offering a that, with a year-long battery life, complete array of wellness devices doesn’t need to be charged. and programs. To coincide with the release of True to our vision to be the global these activity trackers, Garmin leader in every market we serve, also began offering a corporate we “raised the bar” for features in wellness program to engage the activity trackers. Our distinctive red workplace population of other Move Bar gently reminds users companies — but not before Everything is Connected A s the world increasingly people are seeking ways to simplify intensifies its demands on time and attention, their lives through the use of smart, integrated technology. More users are choosing to control their own data, capturing and translating it through personal, mobile devices— especially the ever-present smart- phone —and customizing the metrics to better understand and streamline the way they live, reach their destinations and achieve their goals. The same smart devices our technology enhanced our products’ integrate scanning sonar capabilities, customers use in their everyday features and improved both interactive features that make it lives can now be used as a wireless performance and safety. easier for pilots to navigate and gateway in numerous ways. These technology-enabled devices In 2014 we added connectivity can now share weather, traffic, GPS and wireless capabilities to information and even flight plans, communicate with or control receive satellite radio signals, our avionics, marine networks gauge tire pressure, allow drivers and transportation electronics to keep their eyes on the road to provide added flexibility and and capture in-flight footage information in the cockpit, at or incidents on the road. We the helm and behind the wheel. introduced smartphone-based Smart and Bluetooth®-enabled fleet navigators, chartplotters that read charts throughout their flight and expanded an entire portfolio of products to feature wireless connectivity between select avionics and a tablet or phone. Windows to the Future major milestones in 2014. Garmin celebrated several We observed the 25th anniversary of the company’s For 25 years Garmin has been offered in sonar and non-sonar committed to providing superior versions, is a premier line that products that are known for their streamlines high performance, innovation, reliability and intuitive usability and superior boating founding. We also recognized the design. But we’re resolved not features with a renowned interface 20th anniversary of the industry’s to rest on our accomplishments. that makes any time on the water first FAA approval of an instrument The same commitment to more productive and enjoyable. approach approved GPS receiver, innovation that drove our The series includes a vibrant and the tenth anniversary of cutting-edge technology when widescreen display available in a delivering the revolutionary G1000® we began still resides in the DNA variety of sizes. Garmin DownVü™ Integrated Flight Deck (IFD) to of our latest products. and Garmin SideVü™ scanning customers. In 2014 we released a large We have a lot to be proud of at touchscreen glass flight-display Garmin. The introduction of GPS system for installation in navigation revolutionized the experimental amateur-built aviation industry, setting in motion and light sport aircraft (LSA) and the phase-out of ground-based an intuitive, safety-enhancing, navigational aids (NAVAIDs) and and easy-to-install angle of attack ushering in the next generation (AOA) system available for simple (NextGen) of technology. GPS installation in general aviation sonar provide an almost picture- quality representation of objects, structure and fish that are found both underneath the boat and also to the sides. These true-to- life images give an angler a better idea of the most ideal spots and underwater structure for fishing, and provide a clear sonar picture. navigation proved to be more aircraft. We also announced The displays on our products are precise and provided instrument new capabilities and enhanced the windows through which many approach capability, particularly important for remote airports operational benefits for the G1000® King Air C90 aircraft. of our customers view the world. They rely on the data they provide that did not have funding, or accessibility to NAVAIDs. In our marine market, we launched new products, boasting glass- bonded, monochrome displays that show more than 50 marine and vessel parameters, including depth, speed, wind and navigational data. The GPSMAP® 7400/7600 series of multifunction displays (MFD), to enhance their experiences and improve performance and safety. These true -to-life images give pilots, mariners and drivers clear pictures and advanced information to make accurate decisions not just to get from Point A to Point B, but to get there efficiently, safely and enjoyably. What Our Users Say L ast year fishing legend Bill Dance partnere d with Garmin to use and recommend our marine electronics, including our new line of sonar and GPS devices designed specifically for freshwater anglers. A professional angler for nearly 50 years, Bill has introduced thousands to the sport of fishing through his television show “Bill Dance Outdoors,” which has been on the air since 1968 — totaling more than two thousand episodes. The full stories behind these testimonials can be found on sites.garmin.com/en-US/annualreport/. “ I’m thrilled to have the opportunity to fish with Garmin’s completely redesigned fishfinder and GPS units. Not only do they have the clearest sonar and the most detailed lake maps on the market today, but Garmin units are designed to be easy to use.” GARMIN-SPONSORED ANGLER, BILL DANCE “ My Astro®320/DC™ 50 bundle saved my dog’s life tonight!“ TOM M. “ I just want to say that your Approach® golf watches are great products. Keep up the great work, Garmin! You have a customer for life.” BRIAN T. “ While on a fishing trip I had the good fortune to use a friend’s brand new echoMAP™DownVü/SideVü, and all I can say is WOW!” BEN S. “ The fēnix® 2 saved my life.” WENDY R. “ Twenty-four pounds lost in less than 5 months all because of the vívofit.” CHRIS T. “ It eased my mind knowing I would have my GPS with me.” MARY M. “ My Garmin Forerunner ® 10 is my secret weapon and my constant companion.” LESLIE M. Recognized as one of the world’s elite and amateur athletes alike. top professional triathletes, Timothy won the 2013 IRONMAN® Timothy O’Donnell helped launch long-distance triathlon in Brazil in a the Forerunner® 920XT, our highly record-setting 8:01:32, and in the anticipated multisport device that’s same year was the top American in qualified to guide the training of the IRONMAN® World Championship. “ In a sport where records and seconds count, Garmin is an essential tool for training and racing. They continually and methodically raise the bar for their products, just as I strive to do with each race.” GARMIN-SPONSORED TRIATHLETE, TIMOTHY O’DONNELL Our Markets Marine Revenue IN MILLIONS Operating Income IN MILLIONS Outdoor Revenue IN MILLIONS Operating Income IN MILLIONS Fitness Revenue IN MILLIONS Operating Income IN MILLIONS 12 208 21+22+ 25 3+2+ 3 40+41+ 43 16+16+ 15 32+36+ 57 11+12+ 19 322 569 248 428 223 356 402 120 191 112 151 164 411 159 26 34 18 13 12 12 13 14 14 14 13 Aviation Revenue IN MILLIONS Automotive/Mobile Total Company Operating Income IN MILLIONS Revenue IN MILLIONS Operating Income IN MILLIONS Revenue IN MILLIONS Operating Income IN MILLIONS 12 292 29+34+ 39 7+9+ 11 50+43+ 41 22+19+ 22 43+45+ 50 22+20+ 25 2,632 2,871 2,716 1,240 1,302 1,492 386 339 691 574 604 221 107 189 216 73 88 12 13 13 12 13 14 14 14 Financial Review The selected financial data below and elsewhere in this annual report should be read in conjunction with the consolidated financial statements and notes thereto included in our Annual Report on Form 10-K, a copy of which is included with this annual report or is available at Garmin.com/10K. Revenue by Segment % OF TOTAL Operating Income by Segment % OF TOTAL 7 8 11 13 12 2012 55+ 55 49+ 49 43+ 43 36+ 3633+ 2014 2012 2013 2013 2014 31+ 20 22 31 28 33 27 28 21 19 15 12 15 14 15 16 15 13 6 3 4 9 AUTOMOTIVE/MOBILE OUTDOOR FITNESS AVIATION MARINE Revenue and Net Income $ IN MILLIONS Diluted EPS $ PER SHARE R&D Expenditures $ IN MILLIONS Book Value Per Share $ PER SHARE 11 10 585 521 90 19 92 17 91 18 88 20 96 12 612 542 364 12 13 14 2,690 2,759 2,716 2,632 2,871 11 10 10 2.67 2.95 30+27+28+31 55+60+65+73 +19 +79 3.12 2.76 1.88 299 277 395 326 365 13 14 11 12 14 13 12 Comparison of 5-Year Cumulative Total Return AMONG GARMIN LTD., THE NASDAQ COMPOSITE INDEX, AND THE NASDAQ 100 INDEX GARMIN LTD. NASDAQ COMPOSITE NASDAQ 100 179.27 196.83 199.67 212.25 223.74 234.29 141.48 118.70 121.87 151.01 139.00 143.60 100.00 100.00 100.00 105.11 117.61 114.80 +35+47+50+60+71 +38+41+48+67+78 +39+40+46+66+75 10 11 12 13 09 14 11 10 16.71 15.40 31+33+36+37 +35 18.64 17.53 18.00 13 12 14 The graph below matches Garmin Ltd.’s cumulative 5-year total shareholder return on common stock with the cumulative total returns of the NASDAQ Composite index and the NASDAQ 100 index. The graph tracks the performance of a $100 investment in our common stock and in each index (with the reinvestment of all dividends) from 12/31/2009 to 12/31/2014. *$100 invested on 12/31/08 in stock or index, including reinvestment of dividends. Fiscal year ending December 31. The stock price performance included in this graph is not necessarily indicative of future stock price performance. Investor Relations investor.relations@garmin.com Security analysts, investment professionals and shareholders can find investor relations information on the company’s website at Garmin.com/10K Transfer Agent Computershare Trust Company, N.A. 250 Royall Street Canton, Massachusetts, 02021 United States of America Independent Accountants Ernst & Young LLP Market Information The shares of Garmin Ltd. are traded on the NASDAQ Global Select Market under the symbol GRMN. Garmin Ltd. is a component of the S&P 500 Index. Offices Garmin Ltd. Mühlentalstrasse 2 8200 Schaffhausen Switzerland Garmin International, Inc. 1200 East 151st Street Olathe, Kansas, 66062 United States of America Garmin (Europe) Ltd. Liberty House Hounsdown Business Park Southampton SO40 9LR United Kingdom Garmin Corporation No. 68, Zhangshu 2nd Road Xizhi Dist., New Taipei City 221 Taiwan, R.O.C. Board of Directors Dr. Donald H. Eller 2 | 3 INDEPENDENT TECHNICAL EXPERT Joseph J. Hartnett 1 | 2 | 3 FORMER PRESIDENT AND CHIEF EXECUTIVE OFFICER INGENIENT TECHNOLOGIES Dr. Min H. Kao EXECUTIVE CHAIRMAN GARMIN LTD. Charles W. Peffer 1 | 2 | 3 RETIRED PARTNER KPMG LLP Clifton A. Pemble PRESIDENT AND CHIEF EXECUTIVE OFFICER GARMIN LTD. Thomas P. Poberenzy 1 | 2 | 3 CHAIRMAN EMERITUS EXPERIMENTAL AIRCRAFT ASSOCIATION (EAA) 1 | Audit Committee 2 | Nominating and Corporate Governance Committee 3 | Compensation Committee Executive Officers Dr. Min H. Kao EXECUTIVE CHAIRMAN Clifton A. Pemble PRESIDENT AND CHIEF EXECUTIVE OFFICER Douglas G. Boessen CHIEF FINANCIAL OFFICER AND TREASURER Andrew R. Etkind VICE PRESIDENT, GENERAL COUNSEL AND SECRETARY Danny J. Bartel VICE PRESIDENT, WORLDWIDE SALES GARMIN INTERNATIONAL, INC. Patrick G. Desbois VICE PRESIDENT, OPERATIONS GARMIN INTERNATIONAL, INC. Philip I. Straub VICE PRESIDENT AND MANAGING DIRECTOR, AVIATION GARMIN INTERNATIONAL, INC. Sean M. Biddlecombe MANAGING DIRECTOR, EMEA GARMIN (EUROPE) LTD. P.C. Huang GENERAL MANAGER GARMIN CORPORATION Garmin, the Garmin logo, Forerunner, G1000, GPSMAP, Approach, fēnix, Astro and vívofit are trademarks of Garmin Ltd. or its subsidiaries and are registered in one or more countries, including the U.S. Connect IQ, Garmin DownVü, Garmin SideVü , Garmin Connect, Garmin Connect Mobile, GNX, echoMAP and DC and are trademarks of Garmin Ltd. or its subsidiaries. The Biggest Loser® is a registered trademark of Universal City Studios Productions, LLLP. MyFitnessPal is a registered trademark of MyFitnessPal, Inc. The Bluetooth® word mark is owned by the Bluetooth SIG, Inc. IRONMAN® is a registered trademark of World Triathlon Corporation (WTC). 22 + 28 + 15 + 4 + z 15 + 12 + 11 + 7 + z 16 + 14 + 13 + 8 + z 15 + 20 + 13 + 9 + z 27 + 19 + 12 + 6 + z 28 + 21 + 15 + 3 + z + + + + + + + + 33 30 32 20 14 A N N U A L R E P O R T Garmin Ltd. Mühlentalstrasse 2 8200 Schaffhausen Switzerland Garmin.com © 2015 Garmin Ltd. All rights reserved. M00-60329-00 0415 

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