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GARMIN LTD - Quarter Report: 2016 June (Form 10-Q)

 

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 25, 2016

 

or

 

¨

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)

 

Switzerland

(State or other jurisdiction

of incorporation or organization)

98-0229227

(I.R.S. Employer identification no.)

   

Mühlentalstrasse 2

8200 Schaffhausen

Switzerland

(Address of principal executive offices)

N/A

(Zip Code)

 

Company's telephone number, including area code: +41 52 630 1600

 

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 ¨

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). YES þ NO ¨

 

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 ¨ Non-accelerated Filer ¨ (Do not check if a smaller reporting company) Smaller reporting company ¨

 

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

 

Number of shares outstanding of the registrant’s common shares as of July 25, 2016

CHF 10.00 par value:  208,077,418 (including treasury shares)

 

 

 

 

Garmin Ltd.

Form 10-Q

Quarter Ended June 25, 2016

 

Table of Contents

 

  Page
Part I - Financial Information
     
Item 1. Condensed Consolidated Financial Statements 3
     
  Condensed Consolidated Balance Sheets at June 25, 2016 (Unaudited) and December 26, 2015 3
     
  Condensed Consolidated Statements of Income for the 13-weeks and 26-weeks ended June 25, 2016 and June 27, 2015 (Unaudited) 4
     
  Condensed Consolidated Statements of Comprehensive Income for  the 13-weeks and 26-weeks ended June 25, 2016 and June 27, 2015 (Unaudited) 5
     
  Condensed Consolidated Statements of Cash Flows for the  26-weeks ended June 25, 2016 and June 27, 2015 (Unaudited) 6
     
  Notes to Condensed Consolidated Financial Statements (Unaudited) 7
     
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 16
     
Item 3. Quantitative and Qualitative Disclosures About Market Risk 26
     
Item 4. Controls and Procedures 26
     
Part II - Other Information  
     
Item 1. Legal Proceedings 27
     
Item 1A.     Risk Factors 28
     
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 29
     
Item 3. Defaults Upon Senior Securities 29
     
Item 4. Mine Safety Disclosures 29
     
Item 5. Other Information 29
     
Item 6. Exhibits 30
     
Signature Page 31
     
Index to Exhibits 32

 

 2 

 

 

Part I - Financial Information

Item I - Condensed Consolidated Financial Statements

 

Garmin Ltd. And Subsidiaries

Condensed Consolidated Balance Sheets

(In thousands, except per share information)

 

   (Unaudited)     
   June 25,   December 26, 
   2016   2015 
Assets          
Current assets:          
Cash and cash equivalents  $801,464   $833,070 
Marketable securities   252,253    215,161 
Accounts receivable, net   510,309    531,481 
Inventories, net   508,161    500,554 
Deferred costs   46,552    49,176 
Prepaid expenses and other current assets   93,848    81,645 
Total current assets   2,212,587    2,211,087 
           
Property and equipment, net   450,654    446,089 
           
Marketable securities   1,306,159    1,343,387 
Restricted cash   257    259 
Noncurrent deferred income tax   118,320    116,518 
Noncurrent deferred costs   47,535    38,769 
Intangible assets, net   303,348    245,552 
Other assets   88,723    97,730 
Total assets  $4,527,583   $4,499,391 
           
Liabilities and Stockholders' Equity          
Current liabilities:          
Accounts payable  $151,904   $178,905 
Salaries and benefits payable   68,067    70,601 
Accrued warranty costs   34,670    30,449 
Accrued sales program costs   49,538    67,613 
Deferred revenue   150,587    164,982 
Accrued royalty costs   44,213    30,310 
Accrued advertising expense   24,534    33,547 
Other accrued expenses   77,442    74,926 
Income taxes payable   24,714    21,674 
Dividend payable   384,760    192,991 
Total current liabilities   1,010,429    865,998 
           
Deferred income taxes   54,633    56,210 
Non-current income taxes   111,664    101,689 
Non-current deferred revenue   130,342    128,731 
Other liabilities   1,680    1,637 
           
Stockholders' equity:          
Shares, CHF 10 par value, 208,077 shares authorized and issued; 188,877 shares outstanding at June 25, 2016 and 189,722 shares outstanding at December 26, 2015   1,797,435    1,797,435 
Additional paid-in capital   73,279    62,239 
Treasury stock   (445,268)   (414,637)
Retained earnings   1,794,792    1,930,517 
Accumulated other comprehensive income   (1,403)   (30,428)
Total stockholders' equity   3,218,835    3,345,126 
Total liabilities and stockholders' equity  $4,527,583   $4,499,391 

 

See accompanying notes.

 

 3 

 

 

Garmin Ltd. And Subsidiaries

Condensed Consolidated Statements of Income (Unaudited)

(In thousands, except per share information)

 

   13-Weeks Ended   26-Weeks Ended 
   June 25,   June 27,   June 25,   June 27, 
   2016   2015   2016   2015 
Net sales  $811,609   $773,830   $1,435,648   $1,359,224 
                     
Cost  of goods sold   348,651    354,580    632,840    595,852 
                     
Gross profit   462,958    419,250    802,808    763,372 
                     
Advertising expense   44,252    45,794    76,485    73,466 
Selling, general and administrative expense   103,677    97,552    199,287    196,302 
Research and development expense   114,355    109,240    222,559    215,242 
Total operating expense   262,284    252,586    498,331    485,010 
                     
Operating income   200,674    166,664    304,477    278,362 
                     
Other income (expense):                    
Interest income   8,455    7,420    15,883    15,444 
Foreign currency (losses)   (5,743)   (487)   (10,582)   (44,751)
Other income (loss)   415    (39)   1,570    698 
Total other income (expense)   3,127    6,894    6,871    (28,609)
                     
Income before income taxes   203,801    173,558    311,348    249,753 
                     
Income tax provision   42,737    35,805    62,193    45,208 
                     
Net income  $161,064   $137,753   $249,155   $204,545 
                     
Net income per share:                    
Basic  $0.85   $0.72   $1.32   $1.07 
Diluted  $0.85   $0.72   $1.31   $1.07 
                     
Weighted average common shares outstanding:                    
Basic   188,892    191,101    189,195    191,432 
Diluted   189,356    191,600    189,491    191,939 
                     
Dividends declared per share  $2.04   $2.04   $2.04   $2.04 

 

See accompanying notes.

 

 4 

 

 

Garmin Ltd. And Subsidiaries

Condensed Consolidated Statements of Comprehensive Income (Unaudited)

(In thousands)

 

   13-Weeks Ended   26-Weeks Ended 
   June 25,   June 27,   June 25,   June 27, 
   2016   2015   2016   2015 
Net income  $161,064   $137,753   $249,155   $204,545 
Foreign currency translation adjustment   5,896    17,716    12,162    20,471 
Change in fair value of available-for-sale marketable securities, net of deferred taxes   7,565    (10,216)   16,864    1,033 
Comprehensive income  $174,525   $145,253   $278,181   $226,049 

 

See accompanying notes.

 

 5 

 

 

Garmin Ltd. And Subsidiaries

Condensed Consolidated Statements of Cash Flows (Unaudited)

(In thousands)

 

   26-Weeks Ended 
   June 25,   June 27, 
   2016   2015 
Operating Activities:          
Net income  $249,155   $204,545 
Adjustments to reconcile net income to net cash provided by operating activities:          
Depreciation   26,657    24,915 
Amortization   14,852    13,215 
Loss on sale or disposal of property and equipment   64    420 
Provision for doubtful accounts   1,548    (1,499)
Deferred income taxes   (6,074)   (9,325)
Unrealized foreign currency loss   3,198    59,046 
Provision for obsolete and slow moving inventories   15,892    6,569 
Stock compensation expense   19,507    14,742 
Realized gain on marketable securities   (188)   (364)
Changes in operating assets and liabilities:          
Accounts receivable   24,415    60,016 
Inventories   (16,672)   (45,635)
Other current and non-current assets   (865)   (74,725)
Accounts payable   (32,291)   (7,084)
Other current and non-current liabilities   (10,806)   (53,808)
Deferred revenue   (13,066)   (38,836)
Deferred cost   (6,089)   6,892 
Income taxes payable   10,135    (174,788)
Net cash provided by (used in) operating activities   279,372    (15,704)
           
Investing activities:          
Purchases of property and equipment   (28,614)   (39,732)
Proceeds from sale of property and equipment   -    665 
Purchase of intangible assets   (2,831)   (1,939)
Purchase of marketable securities   (457,433)   (480,090)
Redemption of marketable securities   466,526    540,785 
Change in restricted cash   2    29 
Acquisitions, net of cash acquired   (62,137)   (12,632)
Net cash (used in) provided by investing activities   (84,487)   7,086 
           
Financing activities:          
Dividends paid   (193,111)   (183,925)
Purchase of treasury stock under share repurchase plan   (45,097)   (57,295)
Purchase of treasury stock related to equity awards   (173)   (240)
Proceeds from issuance of treasury stock related to equity awards   8,970    8,560 
Tax benefit from issuance of equity awards   2    1,239 
Net cash used in financing activities   (229,409)   (231,661)
           
Effect of exchange rate changes on cash and cash equivalents   2,918    (17,806)
           
Net decrease in cash and cash equivalents   (31,606)   (258,085)
Cash and cash equivalents at beginning of period   833,070    1,196,268 
Cash and cash equivalents at end of period  $801,464   $938,183 

 

See accompanying notes.

 

 6 

 

 

Garmin Ltd. and Subsidiaries

 

Notes to Condensed Consolidated Financial Statements (Unaudited)

 

June 25, 2016

(In thousands, except 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. 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. Operating results for the 13-week and 26-week periods ended June 25, 2016 are not necessarily indicative of the results that may be expected for the year ending December 31, 2016.

 

The condensed consolidated balance sheet at December 26, 2015 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 26, 2015.

 

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 53-week 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 13-week quarters. The quarters ended June 25, 2016 and June 27, 2015 both contain operating results for 13 weeks. The Company’s fiscal quarter and year ending December 31, 2016 will contain operating results for 14 weeks and 53 weeks, respectively.

 

At the Company’s Annual General Meeting on June 10, 2016, the Company’s shareholders approved the cancellation of 10,000 registered shares of the Company held by the Company (the “Formation Shares”) and the reduction in par value of each share of the Company from CHF 10 to CHF 0.10 and the amendment of the Company’s Articles of Association to effect a corresponding share capital reduction. The Company expects to complete the cancellation of the Formation Shares and the reduction in par value of each share and the corresponding reduction of the Company’s issued share capital by the end of the third quarter of 2016.

 

2.Inventories

 

The components of inventories consist of the following:

 

   June 25,   December 26, 
   2016   2015 
         
Raw materials  $167,889   $203,173 
Work-in-process   75,985    69,690 
Finished goods   309,898    273,762 
Inventory reserves   (45,611)   (46,071)
Inventory, net of reserves  $508,161   $500,554 

 

 7 

 

 

3.Earnings Per Share

 

The following table sets forth the computation of basic and diluted net income per share:

 

   13-Weeks Ended 
   June 25,   June 27, 
   2016   2015 
Numerator:          
Numerator for basic and diluted net income per share - net income  $161,064   $137,753 
           
Denominator:          
Denominator for basic net income per share –
weighted-average common shares
   188,892    191,101 
           
Effect of dilutive securities –          
stock options, stock appreciation rights and restricted stock units   464    499 
           
Denominator for diluted net income per share –
adjusted weighted-average common shares
   189,356    191,600 
           
Basic net income per share  $0.85   $0.72 
           
Diluted net income per share  $0.85   $0.72 

 

   26-Weeks Ended 
   June 25,   June 27, 
   2016   2015 
Numerator:          
Numerator for basic and diluted net income per share - net income  $249,155   $204,545 
           
Denominator:          
Denominator for basic net income per share –
weighted-average common shares
   189,195    191,432 
           
Effect of dilutive securities –
stock options, stock appreciation rights and restricted stock units
   296    507 
           
Denominator for diluted net income per share –
adjusted weighted-average common shares
   189,491    191,939 
           
Basic net income per share  $1.32   $1.07 
           
Diluted net income per share  $1.31   $1.07 

 

 8 

 

 

There were 3,873 and 3,558 anti-dilutive stock options, stock appreciation rights and restricted stock units (collectively “equity awards”) outstanding during the 13-week periods ended June 25, 2016 and June 27, 2015, respectively.

 

There were 4,231 and 3,598 anti-dilutive equity awards outstanding during the 26-week periods ended June 25, 2016 and June 27, 2015, respectively.

 

There were 11 and 91 shares issued as a result of exercises and releases of equity awards for the 13-week periods ended June 25, 2016 and June 27, 2015, respectively.

 

There were 13 and 128 shares issued as a result of exercises and releases of equity awards for the 26-week periods ended June 25, 2016 and June 27, 2015, respectively.

 

There were 285 employee stock purchase plan (ESPP) shares issued from outstanding Treasury stock during the 13-week and 26-week periods ended June 25, 2016.

 

There were 214 ESPP shares issued from outstanding Treasury stock during the 13-week and 26-week periods ended June 27, 2015.

 

4.Segment Information

 

The Company has identified five reportable segments – Auto, Aviation, Marine, Outdoor and Fitness. The Company’s Chief Operating Decision Maker (CODM) assesses segment performance and allocates resources to each segment individually.

 

Net sales, gross profit, and operating income for each of the Company’s reportable segments are presented below. In 2016 the Company moved action camera related revenue and expenses from the Outdoor segment to the Auto segment, allowing for alignment and synergies with other camera-based efforts occurring within the Auto segment. The overall impact of the move was immaterial. However, action camera related operating results for the 13-weeks and 26-weeks ended June 27, 2015 have been recast to conform to the current year presentation.

 

 

   Reportable Segments 
   Outdoor   Fitness   Marine   Auto   Aviation   Total 
                         
13-Weeks Ended June 25, 2016                          
                               
Net sales  $133,096   $212,855   $111,599   $245,728   $108,331   $811,609 
Gross profit  $85,224   $119,805   $64,515   $112,988   $80,426   $462,958 
Operating income  $48,565   $53,074   $28,548   $39,623   $30,864   $200,674 
                               
13-Weeks Ended June 27, 2015                          
                               
Net sales  $108,621   $158,649   $103,713   $300,581   $102,266   $773,830 
Gross profit  $66,019   $88,458   $58,577   $131,933   $74,263   $419,250 
Operating income  $37,201   $33,070   $23,901   $45,087   $27,405   $166,664 
                               
26-Weeks Ended June 25, 2016                          
                               
Net sales  $229,923   $355,273   $194,479   $441,326   $214,647   $1,435,648 
Gross profit  $144,155   $192,100   $108,664   $199,131   $158,758   $802,808 
Operating income  $76,450   $69,647   $38,840   $58,190   $61,350   $304,477 
                               
26-Weeks Ended June 27, 2015                          
                               
Net sales  $181,436   $289,644   $168,010   $519,807   $200,327   $1,359,224 
Gross profit  $115,084   $171,534   $94,090   $236,891   $145,773   $763,372 
Operating income  $60,730   $67,709   $28,468   $67,870   $53,585   $278,362 

 

 9 

 

 

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 property and equipment, net by geographic area are as follows as of and for the 26-week periods ended June 25, 2016 and June 27, 2015. Note that APAC includes Asia Pacific and EMEA includes Europe, the Middle East and Africa:

 

   Americas   APAC   EMEA   Total 
June 25, 2016                    
Net sales to external customers  $724,974   $175,226   $535,448   $1,435,648 
Property and equipment, net  $297,609   $113,295   $39,750   $450,654 
                     
June 27, 2015                    
Net sales to external customers  $722,317   $154,102   $482,805   $1,359,224 
Property and equipment, net  $287,171   $110,524   $47,977   $445,672 

 

5.Warranty Reserves

 

The Company’s products sold are generally covered by a warranty for periods ranging from one to two 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.

 

   13-Weeks Ended 
   June 25,   June 27, 
   2016   2015 
         
Balance - beginning of period  $31,407   $23,866 
Accrual for products sold during the period   17,860    10,348 
Expenditures   (14,597)   (8,113)
Balance - end of period  $34,670   $26,101 

 

   26-Weeks Ended 
   June 25,   June 27, 
   2016   2015 
         
Balance - beginning of period  $30,449   $27,609 
Accrual for products sold during the period   30,312    17,090 
Expenditures   (26,091)   (18,598)
Balance - end of period  $34,670   $26,101 

 

6.Commitments and Contingencies

 

The Company is party to certain commitments, which include purchases of raw materials, advertising expenditures, investments in certain low income housing tax credit projects, and other indirect purchases in connection with conducting our business. The aggregate amount of purchase orders and other commitments open as of June 25, 2016 was approximately $306,545. We cannot determine the aggregate amount of such purchase orders that represent contractual obligations because purchase orders may represent authorizations to purchase rather than binding agreements. Our purchase orders are based on our current needs and are typically fulfilled within short periods of time.

 

 10 

 

 

In the normal course of business, the Company and its subsidiaries are parties to various legal claims, investigations and complaints, including matters alleging patent infringement and other intellectual property claims. The Company evaluates, on a quarterly basis, developments in legal proceedings, investigations or claims that could affect the amount of any accrual or disclosure. The assessment regarding whether a loss is probable or a reasonable possibility, and whether the loss or a range of loss is estimable, often involves a series of complex judgments about future events.

 

Management of the Company currently does not believe there is at least a reasonable possibility the Company may have incurred a material loss, or a material loss in excess of recorded accruals, with respect to loss contingencies individually and in the aggregate, for the fiscal quarter ended June 25, 2016. The results of legal proceedings, investigations and claims, however, cannot be predicted with certainty. Although management considers the likelihood to be remote, an adverse resolution of one or more of such matters in excess of management’s expectations could have a material adverse effect on the Company’s results of operations in a particular quarter or fiscal year.

 

The Company settled or resolved certain matters during the fiscal quarter ended June 25, 2016 that did not individually or in the aggregate have a material impact on the Company’s financial condition or results of operations.

 

7. Income Taxes

 

The Company’s income tax expense increased from $35,805 to $42,737 for the 13-week period ended June 25, 2016, compared to the 13-week period ended June 27, 2015.  The effective tax rate of 21.0% in the second quarter of 2016 is comparable to the 20.6% in the second quarter of 2015. The increase in the effective tax rate is due to shifts in the projected income mix by jurisdiction for 2016 compared to the same projection at second quarter of 2015. The increase in the effective tax rate was offset by the permanent extension of the U.S. research and development tax credit legislation, which had not yet been extended in the second quarter of 2015.

 

The Company’s income tax expense increased from $45,208 to $62,192 for the first half of 2016, compared to the first half of 2015.  The effective tax rate increased to 20.0% for the first half of 2016, compared to 18.1% in the first half of 2015 primarily due to shifts in the projected income mix by jurisdiction for 2016 compared to the same projection at second quarter of 2015. Additionally, the favorable release of uncertain tax position reserves due to expiration of certain statutes or completion of tax audits was $2,009 lower compared to the first half of 2015. The increase in the effective tax rate was partially offset as a result of the permanent extension of the U.S. research and development tax credit legislation, which had not yet been extended in the second quarter of 2015.

 

8. Marketable Securities

 

The Financial Accounting Standards Board ("FASB") ASC topic entitled Fair Value Measurements and Disclosures 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). The accounting guidance classifies the inputs used to measure fair value into the following hierarchy:

 

Level 1 Unadjusted quoted prices in active markets for the identical asset or liability
   
Level 2 Observable inputs for the asset or liability, either directly or indirectly, such as quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, or inputs other than quoted prices that are observable for the asset or liability
   
Level 3 Unobservable inputs for the asset or liability

 

 11 

 

 

  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. Valuation is based on prices obtained from an independent pricing vendor using both market and income approaches. The primary inputs to the valuation include quoted prices for similar assets in active markets, quoted prices for identical or similar assets in markets that are not active, contractual cash flows, benchmark yields, and credit spreads.

 

The method described above may produce a fair value calculation that may not be indicative of net realizable value or reflective of future fair values. Furthermore, while the Company believes its valuation methods are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different fair value measurement at the reporting date.

 

  Available-for-sale securities measured at estimated fair value on a recurring basis are summarized below:

 

   Fair Value Measurements as
of June 25, 2016
 
   Total   Level 1   Level 2   Level 3 
U.S. Treasury securities  $28,368   $-   $28,368   $- 
Agency securities   127,748    -    127,748    - 
Mortgage-backed securities   293,723    -    293,723    - 
Corporate securities   832,515    -    832,515    - 
Municipal securities   197,944    -    197,944    - 
Other   78,114    -    78,114    - 
Total  $1,558,412   $-   $1,558,412   $- 

 

   Fair Value Measurements as
of December 26, 2015
 
   Total   Level 1   Level 2   Level 3 
U.S. Treasury securities  $27,731   $-   $27,731   $- 
Agency securities   208,631    -    208,631   $- 
Mortgage-backed securities   370,232    -    370,232   $- 
Corporate securities   648,590    -    648,590   $- 
Municipal securities   223,562    -    223,562   $- 
Other   79,802    -    79,802   $- 
Total  $1,558,548   $-   $1,558,548   $- 

 

Marketable securities classified as available-for-sale securities are summarized below:

 

   Available-For-Sale Securities as
of June 25, 2016
 
   Amortized Cost   Gross Unrealized
Gains
  

Gross Unrealized

Losses- OTTI(1)

   Gross Unrealized
Losses- Other(2)
   Estimated Fair Value
(Net Carrying
Amount)
 
U.S. Treasury securities  $28,074   $293   $-   $(0)  $28,367 
Agency securities   127,668    230    (146)   (4)   127,748 
Mortgage-backed securities   293,785    1,143    (372)   (833)   293,723 
Corporate securities   834,239    3,033    (640)   (4,116)   832,516 
Municipal securities   196,492    1,540    (0)   (88)   197,944 
Other   78,105    32    (8)   (15)   78,114 
Total  $1,558,363   $6,271   $(1,166)  $(5,056)  $1,558,412 

 

   Available-For-Sale Securities as
of December 26, 2015
 
   Amortized Cost   Gross Unrealized
Gains
   Gross Unrealized
Losses- OTTI(1)
   Gross Unrealized
Losses- Other(2)
   Estimated Fair Value
(Net Carrying
Amount)
 
U.S. Treasury securities  $27,772   $27   $-   $(68)  $27,731 
Agency securities   211,248    105    (2,409)   (313)   208,631 
Mortgage-backed securities   376,801    191    (1,210)   (5,550)   370,232 
Corporate securities   656,447    179    (1,635)   (6,401)   648,590 
Municipal securities   223,991    636    (9)   (1,056)   223,562 
Other   79,853    4    (14)   (41)   79,802 
Total  $1,576,112   $1,142   $(5,277)  $(13,429)  $1,558,548 

 

(1)Represents impairment not related to credit for those investment securities that have been determined to be other-than-temporarily impaired.
(2)Represents unrealized losses on investment securities that have not been determined to be other-than-temporarily impaired.

 

 12 

 

 

The Company’s investment policy requires investments to be rated A or better with the objective of minimizing the potential risk of principal loss. The fair value of the securities varies from period to period due to changes in interest rates, in the performance of the underlying collateral and in the credit performance of the underlying issuer, among other factors. The Company does not intend to sell the securities that have a material unrealized loss shown in the table above and it is not more likely than not that the Company will be required to sell the investment before recovery of their amortized costs bases, which may be maturity.

 

 The Company recognizes the credit component of other-than-temporary impairments of debt securities in "Other Income" and the noncredit component in "Other comprehensive income (loss)" for those securities that we do not intend to sell and for which it is not more likely than not that we will be required to sell before recovery. During 2015 and the 26-week period ending June 25, 2016, the Company did not record any material impairment charges on its outstanding securities.

 

 The amortized cost and estimated fair value of the securities at an unrealized loss position at June 25, 2016 were $633,601 and $627,379 respectively. Approximately 30.4% of securities in our portfolio were at an unrealized loss position at June 25, 2016. We have the ability to hold these securities until maturity or their value is recovered. We do not consider these unrealized losses to be other than temporary credit losses because there has been no material deterioration in credit quality and no change in the cash flows of the underlying securities. We do not intend to sell the securities and it is not more likely than not that we will be required to sell the securities; therefore, no material impairment has been recorded in the accompanying condensed consolidated statement of income.

 

The cost of securities sold is based on the specific identification method.

 

The following tables display additional information regarding gross unrealized losses and fair value by major security type for available-for-sale securities in an unrealized loss position as of June 25, 2016 and December 26, 2015:

 

   As of June 25, 2016 
   Less than 12 Consecutive Months   12 Consecutive Months or Longer 
   Gross Unrealized
Losses
   Fair Value   Gross Unrealized
Losses
   Fair Value 
U.S. Treasury securities  $(0)  $2,000   $-   $- 
Agency securities   (37)   25,333    (113)   14,886 
Mortgage-backed securities   (416)   61,305    (789)   81,949 
Corporate securities   (3,711)   332,191    (1,045)   67,796 
Municipal securities   (42)   13,996    (46)   9,836 
Other   (8)   6,164    (15)   11,923 
Total  $(4,214)  $440,989   $(2,008)  $186,390 

 

   As of December 26, 2015 
   Less than 12 Consecutive Months   12 Consecutive Months or Longer 
   Gross Unrealized
Losses
   Fair Value   Gross Unrealized
Losses
   Fair Value 
U.S. Treasury securities  $(68)  $22,184   $-   $- 
Agency securities   (691)   117,803    (2,031)   69,418 
Mortgage-backed securities   (4,571)   263,735    (2,189)   83,722 
Corporate securities   (6,719)   521,731    (1,317)   50,374 
Municipal securities   (1,035)   116,033    (30)   6,557 
Other   (29)   14,666    (26)   14,927 
Total  $(13,113)  $1,056,152   $(5,593)  $224,998 

 

 13 

 

 

The amortized cost and estimated fair value of marketable securities at June 25, 2016, by contractual maturity, are shown below. Expected maturities will differ from contractual maturities because the issuers of the securities may have the right to prepay obligations without prepayment penalties.

 

       Estimated 
   Cost   Fair Value 
         
Due in one year or less  $252,055   $252,253 
Due after one year through five years   1,099,787    1,101,047 
Due after five years through ten years   175,131    174,204 
Due after ten years   31,390    30,908 
   $1,558,363   $1,558,412 

 

9. Share Repurchase Plan

 

On February 13, 2015, the Board of Directors approved a share repurchase program authorizing the Company to repurchase up to $300,000 of the common shares of Garmin Ltd. 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 business and 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, 2016.  As of June 25, 2016, the Company had repurchased 4,292 shares using cash of $176,510.  There remains approximately $123,490 available to repurchase additional shares under this authorization.

 

10. Accumulated Other Comprehensive Income

 

The following provides required disclosure of changes in accumulated other comprehensive income (AOCI) balances by component for the 13-week and 26-week periods ended June 25, 2016:

 

   13-Weeks Ended June 25, 2016 
   Foreign Currency
Translation
Adjustment
   Gross unrealized
losses on available-
for-sale securities-
OTTI(3)
   Net unrealized gains
(losses) on available-
for-sale securities-
Other(4)
   Total 
Balance - beginning of period  $(7,841)  $(2,685)  $(4,338)  $(14,864)
Other comprehensive income before reclassification   5,896    1,519    6,231    13,646 
Amounts reclassified from accumulated other comprehensive income   -    -    (185)   (185)
Net current-period other comprehensive income   5,896    1,519    6,046    13,461 
Balance - end of period  $(1,945)  $(1,166)  $1,708   $(1,403)

 

 14 

 

 

   26-Weeks Ended June 25, 2016 
   Foreign Currency
Translation
Adjustment
   Gross unrealized
losses on available-
for-sale securities-
OTTI(3)
   Net unrealized gains
(losses) on available-
for-sale securities-
Other(4)
   Total 
Balance - beginning of period  $(14,107)  $(5,277)  $(11,044)  $(30,428)
Other comprehensive income before reclassification   12,162    4,111    13,248    29,521 
Amounts reclassified from accumulated other comprehensive income   -    -    (496)   (496)
Net current-period other comprehensive income   12,162    4,111    12,753    29,026 
Balance - end of period  $(1,945)  $(1,166)  $1,708   $(1,403)

 

(3) Represents the change in impairment, not related to credit, for those investment securities that have been determined to be other-than-temporarily impaired.

(4) Represents the change in unrealized gains (losses) on investment securities that have not been determined to be other-than-temporarily impaired.

 

The following provides required disclosure of reporting reclassifications out of AOCI for the 13-week and 26-week periods ended June 25, 2016:

 

 

13-Weeks Ended June 25, 2016
Details about
Accumulated Other
Comprehensive Income
Components
  Amount Reclassified
from Accumulated
Other Comprehensive
Income
   Affected Line Item
in the Statement
Where Net Income
is Presented
        
Unrealized gains (losses) on available-for-sale securities  $(264)  Other income (expense)
    449   Income tax (provision) benefit
   $185   Net of tax

 

26-Weeks Ended June 25, 2016
Details about
Accumulated Other
Comprehensive Income
Components
  Amount Reclassified
from Accumulated
Other Comprehensive
Income
   Affected Line Item
in the Statement
Where Net Income
is Presented
        
Unrealized gains (losses) on available-for-sale securities  $188   Other income (expense)
    308   Income tax (provision) benefit
   $496   Net of tax

 

11. Recently Issued Accounting Pronouncements

 

In May 2014, the FASB issued Accounting Standards Update (“ASU”) No. 2014-09, Revenue from Contracts with Customers (Topic 606) (“ASU 2014-09”), which supersedes previous revenue recognition guidance. ASU 2014-09 requires that a company will recognize revenue at an amount that reflects the consideration to which the company expects to be entitled in exchange for transferring goods or services to a customer. The new standard may be applied retrospectively to each prior period presented or in a modified retrospective approach in which the cumulative effect will be recognized as of the date of adoption. Additional updates to Topic 606 issued by the FASB in 2015 and 2016 include the following:

 

 15 

 

 

·ASU No. 2015-14, Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date (“ASU 2015-14”), which defers the effective date of the new guidance such that the new provisions will now be required for fiscal years, and interim periods within those years, beginning after December 15, 2017

 

·ASU No. 2016-08, Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations (“ASU 2016-08”), which clarifies the implementation guidance on principal versus agent considerations (reporting revenue gross versus net).

 

·ASU No. 2016-10, Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing (“ASU 2016-10”), which clarifies the implementation guidance on identifying performance obligations and classifying licensing arrangements

 

·ASU No. 2016-12, Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients (“ASU 2016-12”), which clarifies the implementation guidance in a number of other areas.

 

The Company is currently evaluating the impact of adopting the new revenue standards on its consolidated financial statements.

 

In January 2016, the FASB issued Accounting Standards Update No. 2016-01, Financial Instruments—Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities (“ASU 2016-01”). The standard addresses certain aspects of recognition, measurement, presentation, and disclosure of financial instruments. ASU 2016-01 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2017. The Company is currently evaluating the impact of adopting the new standard on its consolidated financial statements.

 

In February 2016, the FASB issued Accounting Standards Update No. 2016-02, Leases (Topic 842) (“ASU 2016-02”), which sets out the principles for the recognition, measurement, presentation and disclosure of leases for both lessees and lessors. ASU 2016-02 requires lessees to present a right-of-use asset and a corresponding lease liability on the balance sheet. Lessor accounting is substantially unchanged compared to the current accounting guidance. ASU 2016-02 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2018. Early adoption is permitted. The Company is currently evaluating the impact of adopting the new standard on its consolidated financial statements.

 

In March 2016, the FASB issued Accounting Standards Update No. 2016-09, Compensation—Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting (“ASU 2016-09”), which is intended to simplify the accounting for share-based payment awards. The standard includes provisions addressing income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. ASU 2016-09 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2016. Early adoption is permitted. The Company is currently evaluating the impact of adopting the new standard on its consolidated financial statements.

 

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 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 the Company’s assumptions prove incorrect or should unanticipated circumstances arise, 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 26, 2015. 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 website 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.

 

 16 

 

 

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 26, 2015.

 

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 five business segments, the outdoor, fitness, marine, auto and aviation markets. The Company’s segments offer products through its network of independent dealers and distributors. However, the nature of products and types of customers for the five segments may vary significantly. As such, the segments are managed separately.

 

Results of Operations

 

The following table sets forth the Company’s results of operations as a percentage of net sales during the periods shown (the table may not foot due to rounding):

 

   13-Weeks Ended 
   June 25, 2016   June 27, 2015 
         
Net sales   100%   100%
Cost of goods sold   43%   46%
Gross profit   57%   54%
Advertising   5%   6%
Selling, general and administrative   13%   13%
Research and development   14%   14%
Total operating expenses   32%   33%
Operating income   25%   22%
Other income (expense), net   0%   1%
Income before income taxes   25%   22%
Provision for income taxes   5%   5%
Net income   20%   18%

 

   26-Weeks Ended 
   June 25, 2016   June 27, 2015 
         
Net sales   100%   100%
Cost of goods sold   44%   44%
Gross profit   56%   56%
Advertising   5%   5%
Selling, general and administrative   14%   15%
Research and development   16%   16%
Total operating expenses   35%   36%
Operating income   21%   20%
Other income (expense), net   0%   -2%
Income before income taxes   22%   18%
Provision for income taxes   4%   3%
Net income   17%   15%

 

 17 

 

 

The Company manages its operations in five segments: outdoor, fitness, marine, auto, 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 segment table located in Note 4 sets forth the Company’s results of operations (in thousands) including net sales, gross profit, and operating income for each of the Company’s five segments during the periods shown. For each line item in the table, the total of the outdoor, fitness, marine, auto, and aviation segments' amounts equals the amount in the condensed consolidated statements of income included in Item 1.

 

In 2016 the Company moved action camera related revenue and expenses from the Outdoor segment to the Auto segment, allowing for alignment and synergies with other camera-based efforts occurring within the Auto segment. The overall impact of the move was immaterial. However, action camera related operating results for the 13-weeks and 26-weeks ended June 27, 2015 have been recast to conform to the current year presentation.

 

Comparison of 13-weeks ended June 25, 2016 and June 27, 2015

(Amounts included in the following discussion are stated in thousands unless otherwise indicated)

 

Net Sales

 

   13-weeks ended June 25, 2016   13-weeks ended June 27, 2015   Year over Year 
   Net Sales   % of Revenues   Net Sales   % of Revenues   $ Change   % Change 
Outdoor  $133,096    16%  $108,621    14%  $24,475    23%
Fitness   212,855    26%   158,649    21%   54,206    34%
Marine   111,599    14%   103,713    13%   7,886    8%
Auto   245,728    30%   300,581    39%   (54,854)   -18%
Aviation   108,331    13%   102,266    13%   6,066    6%
Total  $811,609    100%  $773,830    100%  $37,779    5%

 

Net sales increased 5% for the 13-week period ended June 25, 2016 when compared to the year-ago quarter. All segments, excluding Auto grew in the quarter. Auto revenue remains the largest portion of our revenue mix at 30% in the second quarter of 2016 compared to 39% in the second quarter of 2015.

 

Total unit sales increased to 4,209 in the second quarter of 2016 from 4,150 in the same period of 2015.

 

Auto segment revenue decreased 18% from the year-ago quarter, as both PND volumes and the contribution of amortization of previously deferred revenue declined when compared to second quarter 2015. Revenues in our fitness segment increased 34% from the year-ago quarter on the strength of activity trackers, running, and cycling products. Revenues in our outdoor segment increased 23% from the year-ago quarter primarily driven by growth in our wearable category and the newly acquired DeLorme product lines. Revenues in our marine segment increased 8% from the year-ago quarter due to increases within our inland fishing category. Aviation revenues increased 6% from the year-ago quarter primarily due to gains in OEM.

 

Cost of Goods Sold

 

   13-weeks ended June 25, 2016   13-weeks ended June 27, 2015   Year over Year 
   Cost of Goods   % of Revenues   Cost of Goods   % of Revenues   $ Change   % Change 
Outdoor  $47,872    36%  $42,602    39%  $5,271    12%
Fitness   93,050    44%   70,191    44%   22,859    33%
Marine   47,084    42%   45,136    44%   1,948    4%
Auto   132,740    54%   168,648    56%   (35,907)   -21%
Aviation   27,905    26%   28,003    27%   (98)   0%
Total  $348,651    43%  $354,580    46%  $(5,929)   -2%

 

Cost of goods sold decreased 300 basis points as a percentage of revenue from the year-ago quarter with decreases across all segments except fitness which was flat. In absolute dollars second quarter 2016 cost of goods sold was $5.9 million or 2% lower than the prior year quarter.

 

 18 

 

 

In the auto segment, the decrease of 21% in cost of goods sold reflects lower PND shipments.  In the fitness segment, the increase of 33% in cost of goods sold reflects strong volume growth.  In the outdoor and marine segments, the increases of 12% and 4% in cost of goods sold, respectively, reflects volume growth. The cost of goods sold for aviation was consistent year-over-year.

 

Gross Profit

 

   13-weeks ended June 25, 2016   13-weeks ended June 27, 2015   Year over Year 
   Gross Profit   % of Revenues   Gross Profit   % of Revenues   $ Change   % Change 
Outdoor  $85,224    64%  $66,019    61%  $19,205    29%
Fitness   119,805    56%   88,458    56%   31,347    35%
Marine   64,515    58%   58,577    56%   5,938    10%
Auto   112,988    46%   131,933    44%   (18,944)   -14%
Aviation   80,426    74%   74,263    73%   6,164    8%
Total  $462,958    57%  $419,250    54%  $43,709    10%

 

Gross profit dollars in the second quarter of 2016 increased 10% while gross profit margin increased 300 basis points compared to the second quarter of 2015. All segments had increases in gross margin rate except fitness which was flat.

 

Advertising Expense

 

   13-weeks ended June 25, 2016   13-weeks ended June 27, 2015     
   Advertising       Advertising       Year over Year 
   Expense   % of Revenues   Expense   % of Revenues   $ Change   % Change 
Outdoor  $6,702    5%  $6,010    6%  $692    12%
Fitness   22,377    11%   19,955    13%   2,422    12%
Marine   4,724    4%   6,037    6%   (1,313)   -22%
Auto   8,633    4%   11,999    4%   (3,365)   -28%
Aviation   1,816    2%   1,793    2%   23    1%
Total  $44,252    5%  $45,794    6%  $(1,542)   -3%

 

Advertising expense decreased 3% in absolute dollars and was relatively flat as a percent of revenues. The decrease in absolute dollars was primarily in auto and marine offset by increases in fitness and outdoor to support new product introductions with increased media spend and cooperative advertising.

 

Selling, General and Administrative Expense

 

   13-weeks ended June 25, 2016   13-weeks ended June 27, 2015     
   Selling, General &       Selling, General &       Year over Year 
   Admin. Expenses   % of Revenues   Admin. Expenses   % of Revenues   $ Change   % Change 
Outdoor  $18,277    14%  $13,413    12%  $4,864    36%
Fitness   28,758    14%   22,120    14%   6,637    30%
Marine   17,455    16%   15,299    15%   2,157    14%
Auto   33,000    13%   40,679    14%   (7,679)   -19%
Aviation   6,187    6%   6,041    6%   146    2%
Total  $103,677    13%  $97,552    13%  $6,125    6%

 

Selling, general and administrative expense increased 6% in absolute dollars and was relatively flat as a percent of revenues compared to the year-ago quarter. The absolute dollar increase is primarily due to the increased expenses associated with the recently acquired Delorme business and compensation related costs. Variances by segment are primarily due to the allocation of certain selling, general and administrative expenses based on percentage of total revenues.

 

 19 

 

 

Research and Development Expense

 

   13-weeks ended June 25, 2016   13-weeks ended June 27, 2015     
   Research &       Research &       Year over Year 
   Development   % of Revenues   Development   % of Revenues   $ Change   % Change 
Outdoor  $11,680    9%  $9,395    9%  $2,285    24%
Fitness   15,596    7%   13,313    8%   2,283    17%
Marine   13,788    12%   13,340    13%   447    3%
Auto   31,732    13%   34,168    11%   (2,438)   -7%
Aviation   41,559    38%   39,024    38%   2,535    6%
Total  $114,355    14%  $109,240    14%  $5,115    5%

 

Research and development expense increased 5% due to ongoing development activities for new products. In absolute dollars, research and development costs increased $5.1 million when compared with the year-ago quarter and were stable as a percent of revenue. Our research and development spending is focused on product development, improving existing software capabilities, and exploring new categories.

 

Operating Income

 

   13-weeks ended June 25, 2016   13-weeks ended June 27, 2015   Year over Year 
   Operating Income   % of Revenues   Operating Income   % of Revenues   $ Change   % Change 
Outdoor  $48,565    36%  $37,201    34%  $11,364    31%
Fitness   53,074    25%   33,070    21%   20,005    60%
Marine   28,548    26%   23,901    23%   4,648    19%
Auto   39,623    16%   45,087    15%   (5,463)   -12%
Aviation   30,864    28%   27,405    27%   3,458    13%
Total  $200,674    25%  $166,664    22%  $34,009    20%

 

Operating income increased 20% in absolute dollars and 320 basis points as a percent of revenue when compared to the second quarter of 2015. The increase in operating income is due to revenue growth and an improved gross margin percentage partially offset by an increase in operating expense.

 

Other Income (Expense)

 

   13-weeks ended   13-weeks ended 
   June 25, 2016   June 27, 2015 
Interest Income  $8,455   $7,420 
Foreign Currency gains (losses)   (5,743)   (487)
Other   415    (39)
Total  $3,127   $6,894 

 

The average return on cash and investments during the second quarter of 2016 was 1.4% compared to 1.2% during the same quarter of 2015. Higher interest income in the second quarter of 2016, as compared to the same period of 2015, is attributable to an increased rate of return on investments.

 

Foreign currency gains and losses for the Company are typically driven by movements in the Taiwan Dollar and the Euro in relation to the U.S. Dollar. The Taiwan Dollar is the functional currency of Garmin Corporation. The U.S. Dollar is the functional currency of Garmin (Europe) Ltd. The Euro is the functional currency of most other European subsidiaries. As these entities have grown, currency fluctuations can generate material gains and losses. Additionally, Euro-based inter-company transactions can also generate currency gains and losses. Due to the relative size of the entities using a functional currency other than the Taiwan Dollar and the Euro, currency fluctuations related to these entities are not expected to have a material impact on the Company’s financial statements.

 

The $5.7 million currency loss in the second quarter of 2016 was primarily due to the weakening of the U.S. Dollar against the Taiwan Dollar. During the second quarter of 2016, the U.S. Dollar weakened 0.6% against the Taiwan Dollar, resulting in a loss of $4.6 million, while the U.S. Dollar strengthened 0.5% against the Euro, resulting in an additional loss of $0.4 million. The remaining net currency loss of $0.7 million is related to other currencies and timing of transactions.

 

 20 

 

 

The $0.5 million currency loss in the second quarter 2015 was due to the U.S. Dollar weakening against both the Taiwan Dollar and the Euro. During the second quarter of 2015, the U.S. Dollar weakened 2.8% compared to the Euro resulting in a gain of $6.0 million while the U.S. Dollar weakened against the Taiwan Dollar 0.6% resulting in a loss of $6.4 million. The remaining net currency loss of $0.1 million is related to other currencies and timing of transactions.

 

Income Tax Provision

 

The Company’s income tax expense increased from $35.8 million to $42.7 million for the 13-week period ended June 25, 2016, compared to the 13-week period ended June 27, 2015. The effective tax rate of 21.0% in the second quarter of 2016 is comparable to the 20.6% in the second quarter of 2015. The increase in the effective tax rate is due to shifts in the projected income mix by jurisdiction for 2016 compared to the same projection at second quarter of 2015. The increase in the effective tax rate was offset by the permanent extension of the U.S. research and development tax credit legislation, which had not yet been extended in the second quarter of 2015.

 

Net Income

 

As a result of the above, net income for the 13-weeks ended June 25, 2016 was $161.1 million compared to $137.8 million for the 13-week period ended June 27, 2015, an increase of $23.3 million.

 

Comparison of 26-Weeks Ended June 25, 2016 and June 27, 2015

(Amounts included in the following discussion are stated in thousands unless otherwise indicated)

 

Net Sales

 

   26-weeks ended June 25, 2016   26-weeks ended June 27, 2015   Year over Year 
   Net Sales   % of Revenues   Net Sales   % of Revenues   $ Change   % Change 
Outdoor  $229,923    16%  $181,436    13%  $48,487    27%
Fitness   355,273    26%   289,644    21%   65,628    23%
Marine   194,479    14%   168,010    12%   26,469    16%
Auto   441,326    31%   519,807    38%   (78,481)   -15%
Aviation   214,647    15%   200,327    15%   14,320    7%
Total  $1,435,648    100%  $1,359,224    100%  $76,424    6%

 

Net sales increased 6% for the 26-week period ended June 25, 2016 when compared to the prior year period. All segments had an increase in revenue except for auto. Auto revenue remains the largest portion of our revenue mix at 31% in the first half of 2016 compared to 38% in the first half of 2015.

 

Total unit sales increased 4% to 7,516 in the first half of 2016 from 7,194 in the same period of 2015.

 

Auto segment revenue decreased 15% from the year-ago period, as both the volumes and the contribution of amortization of previously deferred revenue declined when compared to first half 2015. Outdoor revenue increased 27% primarily driven by growth in our wearables and the newly acquired DeLorme product lines. Fitness revenues increased 23% due to growth of our activity tracker, running, and cycling categories. Revenues in our marine segment increased 16% as the release of new marine products in multiple categories drove revenue growth against the first half of 2015. Aviation revenues increased 7% from the year-ago period primarily due to OEM growth.

 

 21 

 

 

Cost of Goods Sold

 

   26-weeks ended June 25, 2016   26-weeks ended June 27, 2015   Year over Year 
   Cost of Goods   % of Revenues   Cost of Goods   % of Revenues   $ Change   % Change 
Outdoor  $85,768    37%  $66,351    37%  $19,417    29%
Fitness   163,173    46%   118,111    41%   45,062    38%
Marine   85,816    44%   73,919    44%   11,896    16%
Auto   242,194    55%   282,916    54%   (40,721)   -14%
Aviation   55,889    26%   54,553    27%   1,336    2%
Total  $632,840    44%  $595,852    44%  $36,987    6%

 

Cost of goods sold increased 6% in absolute dollars for the first half of 2016 when compared to the year ago period.

 

In the auto segment, the cost of goods decline was largely consistent with the segment revenue decline. In the fitness segment, the cost of goods increase outpaced revenue growth due to product mix. In the outdoor and marine segments, the cost of goods increases were in line with the revenue growth.

 

Gross Profit

 

   26-weeks ended June 25, 2016   26-weeks ended June 27, 2015   Year over Year 
   Gross Profit   % of Revenues   Gross Profit   % of Revenues   $ Change   % Change 
Outdoor  $144,155    63%  $115,084    63%  $29,070    25%
Fitness   192,100    54%   171,534    59%   20,567    12%
Marine   108,664    56%   94,090    56%   14,573    15%
Auto   199,131    45%   236,891    46%   (37,759)   -16%
Aviation   158,758    74%   145,773    73%   12,985    9%
Total  $802,808    56%  $763,372    56%  $39,435    5%

 

Gross profit dollars in the first half of 2016 increased 5% while gross profit margin decreased 25 basis points compared to the first half of 2015. Fitness and auto margin declines were mostly offset by increased aviation margins and increased revenue while outdoor and marine held steady to the first half of 2015. All segment gross margin rates are relatively consistent between the first half of 2016 compared to the first half of 2015 except for the decrease in the fitness gross margin rate which is due to product mix.

 

Advertising Expense

 

   26-weeks ended June 25, 2016   26-weeks ended June 27, 2015     
   Advertising       Advertising       Year over Year 
   Expense   % of Revenues   Expense   % of Revenues   $ Change   % Change 
Outdoor  $11,860    5%  $10,355    6%  $1,505    15%
Fitness   37,229    10%   31,125    11%   6,105    20%
Marine   9,326    5%   9,800    6%   (475)   -5%
Auto   14,798    3%   19,031    4%   (4,233)   -22%
Aviation   3,272    2%   3,155    2%   117    4%
Total  $76,485    5%  $73,466    5%  $3,019    4%

 

Advertising expense increased 4% in absolute dollars and was relatively flat as a percent of revenue compared to the year-ago period. The increase in absolute dollars was primarily in fitness and outdoor to support new product introductions with increased media spend and cooperative advertising. This increase was partially offset by decreased spending in auto.

 

 22 

 

 

Selling, General and Administrative Expenses

 

   26-weeks ended June 25, 2016   26-weeks ended June 27, 2015     
   Selling, General &       Selling, General &       Year over Year 
   Admin. Expenses   % of Revenues   Admin. Expenses   % of Revenues   $ Change   % Change 
Outdoor  $34,247    15%  $25,778    14%  $8,470    33%
Fitness   54,810    15%   47,203    16%   7,605    16%
Marine   33,538    17%   29,277    17%   4,260    15%
Auto   63,789    14%   81,726    16%   (17,938)   -22%
Aviation   12,903    6%   12,319    6%   584    5%
Total  $199,287    14%  $196,302    14%  $2,985    2%

 

Selling, general and administrative expense increased 2% in absolute dollars and 50 basis points as a percent of revenues compared to the year-ago period. The absolute dollar increase can be attributed to increased expenses related to the recently acquired DeLorme business and compensation and IT related costs. Variances by segment are primarily due to the allocation of certain selling, general and administrative expenses based on percentage of total revenues.

 

Research and Development Expense

 

   26-weeks ended June 25, 2016   26-weeks ended June 27, 2015     
   Research &       Research &       Year over Year 
   Development   % of Revenues   Development   % of Revenues   $ Change   % Change 
Outdoor  $21,598    9%  $18,221    10%  $3,377    19%
Fitness   30,414    9%   25,497    9%   4,916    19%
Marine   26,959    14%   26,545    16%   414    2%
Auto   62,355    14%   68,264    13%   (5,909)   -9%
Aviation   81,233    38%   76,714    38%   4,520    6%
Total  $222,559    16%  $215,242    16%  $7,316    3%

 

Research and development expense increased 3% due to ongoing development activities for new products. In absolute dollars, research and development costs increased $7.3 million when compared with the year-ago period and decreased 30 basis point as a percent of revenues compared to the year-ago period. Our research and development spending is focused on product development, improving existing software capabilities, and exploring new categories.

 

Operating Income

 

   26-weeks ended June 25, 2016   26-weeks ended June 27, 2015   Year over Year 
   Operating Income   % of Revenues   Operating Income   % of Revenues   $ Change   % Change 
Outdoor  $76,450    33%  $60,730    33%  $15,719    26%
Fitness   69,647    20%   67,709    23%   1,939    3%
Marine   38,840    20%   28,468    17%   10,372    36%
Auto   58,190    13%   67,870    13%   (9,679)   -14%
Aviation   61,350    29%   53,585    27%   7,765    14%
Total  $304,477    21%  $278,362    20%  $26,115    9%

 

Operating income increased 9% in absolute dollars and 100 basis points as a percent of revenue when compared to the year-ago period. Revenue growth and a flat gross margin percentage contributed to the growth, slightly offset by increased operating expenses, as discussed above.

 

 23 

 

 

Other Income (Expense)

 

   26-weeks ended   26-weeks ended 
   June 25, 2016   June 27, 2015 
Interest Income   $15,883   $15,444 
Foreign Currency gains (losses)   (10,582)   (44,751)
Other    1,570    698 
Total   $6,871   $(28,609)

 

The average return on cash and investments during the first half of 2016 was 1.4% compared to 1.2% during the same period of 2015. The increase in interest income is attributable to an increased rate of return on investments.

 

The $10.6 million currency loss in the first half of 2016 was due primarily to the weakening of the U.S. Dollar against the Taiwan Dollar. During the first half of 2016, the U.S. Dollar weakened 1.6% against the Taiwan Dollar resulting in a loss of $11.2 million, while the U.S. Dollar weakened 1.3% against the Euro, resulting in a gain of $0.8 million. The remaining net currency loss of $0.2 million is related to other currencies and timing of transactions.

 

The majority of the $44.8 million currency loss in the first half of 2015 was due to the strengthening of the U.S. Dollar against the Euro in congruence with the U.S. Dollar weakening against the Taiwan Dollar. During the first half of 2015, the U.S. Dollar strengthened 8.3% compared to the Euro resulting in a loss of $25.0 million while weakening against the Taiwan Dollar by 2.5% resulting in a loss of $20.5 million. The remaining net currency gain of $0.7 million is related to other currencies and timing of transactions.

 

Income Tax Provision

 

The Company’s income tax expense increased from $45.2 million to $62.2 million for the first half of 2016, compared to the first half of 2015. The effective tax rate increased to 20.0% for the first half of 2016, compared to 18.1% in the first half of 2015 is primarily due to shifts in the projected income mix by jurisdiction for 2016 compared to the same projection at second quarter of 2015. Additionally, the favorable release of uncertain tax position reserves due to expiration of certain statutes or completion of tax audits was $2,009 lower compared to the first half of 2015. The increase in the effective tax rate was partially offset as a result of the permanent extension of the U.S. research and development tax credit legislation, which had not yet been extended in the second quarter of 2015.

 

Net Income

 

Net income for the 26-week period ended June 25, 2016 was $249.2 million compared to $204.5 million for the 26-week period ended June 27, 2015, an increase of $44.6 million.

 

Liquidity and Capital Resources

 

Operating Activities

 

   26-Weeks Ended 
   June 25,   June 27, 
(In thousands)  2016   2015 
Net cash provided by (used in) operating activities  $279,372   $(15,704)

 

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The $295.1 million increase in cash provided by operating activities in the first half 2016 compared to the first half 2015 was primarily due to the following:

 

·the impact of income taxes payable providing $184.9 million more cash due to the timing of 2015 income tax payments related to the inter-company restructuring that was announced in the third quarter 2014
·other current and noncurrent assets providing $73.9 million more cash primarily due to the timing of payments for royalties
·net income increasing $44.6 million as discussed in the Results of Operations section above
·other current and noncurrent liabilities providing $43.0 million more cash primarily due to timing of payments for royalties
·inventories providing $29.0 million more cash primarily due to reduced purchases of raw materials and
·deferred revenue providing $25.7 million more working capital benefit due to the net decrease in amortization of previously deferred revenue

 

Partially offset by:

 

·the $55.8 million impact of decreasing unrealized foreign currency losses due primarily to foreign currency rate fluctuations as discussed in the Results of Operations section above
·accounts receivable providing $35.6 million less working capital benefit primarily due to the net decrease in utilization of rebates receivable associated with royalties, partially offset by increased collections of trade receivables and
·accounts payable providing $25.2 million less cash primarily due to the timing of payments to suppliers

 

Investing Activities

 

   26-Weeks Ended 
   June 25,   June 27, 
(In thousands)  2016   2015 
Net cash (used in) provided by investing activities  $(84,487)  $7,086 

 

The $91.6 million decrease in cash provided by investing activities in the first half 2016 compared to first half 2015 was primarily due to the following:

 

·decreased net redemptions of marketable securities of $51.6 million and
·increased cash payments for acquisitions of $49.5 million

 

Partially offset by:

 

·decreased purchases of property and equipment of $11.1 million

 

It is management’s goal to invest the on-hand cash in accordance with the investment policy, which has been approved by the Board of Directors of each applicable Garmin entity holding the cash. The investment policy’s primary purpose is to preserve capital, maintain an acceptable degree of liquidity, and maximize yield within the constraint of low credit risk. Garmin’s average interest rate returns on cash and investments during first half 2016 and 2015 were approximately 1.4% and 1.2%, respectively.

 

Financing Activities

 

   26-Weeks Ended 
   June 25,   June 27, 
(In thousands)  2016   2015 
Net cash used in financing activities  $(229,409)  $(231,661)

 

 25 

 

 

The $2.3 million decrease in cash used in financing activities in the first half 2016 compared to first half 2015 was primarily due to the following:

 

·decreased purchases of treasury stock of $12.2 million under our share repurchase authorization

 

Partially offset by:

 

·increased dividend payments of $9.2 million due to the year-over-year increase of our dividend rate

 

We currently use cash flow from operations to fund our capital expenditures, to support our working capital requirements, to pay dividends, and to fund share repurchases. We expect that future cash requirements will principally be for capital expenditures, working capital, payment of dividends declared, share repurchases and the funding of strategic acquisitions. We believe that our existing cash balances and cash flow from operations will be sufficient to meet our long-term projected capital expenditures, working capital and other cash requirements.

 

Off-Balance Sheet Arrangements

 

We do not have any off-balance sheet arrangements.

 

Item 3.  Quantitative and Qualitative Disclosures About Market Risk

 

There are numerous market risks that can affect our future business, financial condition and results of operations. In addition to the other information set forth in this report, you should carefully consider the factors discussed in Part II, “Item 7A. Quantitative and Qualitative Disclosures About Market Risk” in our Annual Report on Form 10-K for the fiscal year ended December 26, 2015. There have been no material changes during the 13-week and 26-week periods ended June 25, 2016 in the risks described in our Annual Report on Form 10-K related to market sensitivity, inflation, foreign currency exchange rate risk and interest rate risk.

 

Item 4.  Controls and Procedures

 

(a) Evaluation of disclosure controls and procedures. The Company maintains a system of disclosure controls and procedures that are designed to provide reasonable assurance that information, which is required to be timely disclosed, is accumulated and communicated to management in a timely fashion.  A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. As of June 25, 2016, the Company carried out an evaluation, under the supervision and with the participation of the Company’s management, including the Company’s Chief Executive Officer and Chief Financial Officer, of the effectiveness of the Company’s disclosure controls and procedures.  Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded as of June 25, 2016 that our disclosure controls and procedures were effective such that the information relating to the Company, required to be disclosed in our Securities and Exchange Commission ("SEC") reports (i) is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms, and (ii) is accumulated and communicated to the Company's management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

 

(b) Changes in internal control over financial reporting. There has been no change in the Company’s internal controls over financial reporting that occurred during the Company’s fiscal quarter ended June 25, 2016 that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

 

 26 

 

 

Part II - Other Information

 

Item 1.  Legal Proceedings

 

The following information supplements and amends the discussion set forth under Part I, Item 3 "Legal Proceedings" in the Company’s Annual Report on Form 10-K for the fiscal year ended December 26, 2015 and the Company’s Quarterly Report on Form 10-Q for the fiscal quarter ended March 26, 2016.

 

ICON Health & Fitness, Inc. v. Garmin Ltd., Garmin International, Inc., and Garmin USA, Inc

 

The Court of Appeals for the Federal Circuit heard oral argument on ICON’s appeal on July 6, 2016. The parties await the Federal Circuit’s decision on the appeal.

 

In the Matter of Certain Marine Sonar Imaging Systems, Products Containing the Same and Components Thereof Johnson Outdoors Inc. and Johnson Outdoors Marine Electronics, Inc. v.  Garmin International, Inc., Garmin North America, Inc. and Garmin USA, Inc.

 

In May 2016, Johnson Outdoors, Inc. and Garmin International, Inc. entered into a confidential settlement agreement fully and finally settling all claims arising under the captioned ITC investigation and the captioned lawsuit. The terms of the settlement were not material to Garmin’s operating results, liquidity or financial position.

 

In the Matter of Certain Marine Sonar Imaging Devices, Including Downscan and Sidescan Devices, Products Containing the Same, and Components Thereof

 

On May 20, 2016 Navico filed a petition for modification of the limited exclusion order issued by the ITC. On June 1, 2016 Garmin filed its opposition to Navico’s petition for modification of the limited exclusion order. On June 9, 2016 Navico filed a reply to Garmin’s opposition. On June 10, 2016 Navico filed a motion for leave to file said reply. On June 20, 2016 Garmin filed an opposition to Navico’s motion for leave to file a reply.

 

On June 3, 2016 Navico withdrew, without prejudice, its request that the ITC initiate an enforcement proceeding.

 

On June 9, 2016, Navico filed its opening appellate brief with the Federal Circuit. On July 7, 2016, Garmin filed its opening appellate brief with the Federal Circuit.

 

Andrea Katz, on behalf of herself and all others similarly situated, v. Garmin Ltd. and Garmin International, Inc.

 

The parties have agreed to settle this lawsuit in consideration of a settlement under which Garmin would pay $385,000 to plaintiffs counsel for attorney’s fees and would repair or replace Forerunner 610 watchbands and watches at no cost provided that a request is made within twelve months of the date of the final approval of the settlement by the court. On May 31, 2016 the court granted preliminary approval for the settlement and scheduled a hearing on final approval of the settlement on November 3, 2016.

 

Navico Inc. And Navico Holding AS v. Garmin International, Inc. and Garmin USA, Inc. (U.S. District Court for the Eastern District of Texas)

 

On April 1, 2016 Garmin filed a motion to transfer this action to the United States District Court for the Northern District of Oklahoma. On April 19, 2016 Navico filed an opposition to the motion to transfer and on April 29, 2016 Garmin filed a reply to this opposition. On May 29, 2016 Navico filed a sur-reply in support of its opposition. The court has scheduled a claim construction hearing for February 3, 2017 and a trial date commencing on September 5, 2017

 

 27 

 

 

Pioneer Corporation v. Iiyonet Inc.

 

At a hearing on June 9, 2016 the Tokyo District Court disclosed its favorable impression that Garmin’s products do not infringe Pioneer’s asserted patent. The court is expected to issue its final ruling in September 2016.

 

Visteon Global Technologies, Inc. and Visteon Technologies LLC v. Garmin International, Inc.

 

On May 23, 2016 the court issued an order granting Garmin’s motion to exclude certain Garmin products from the lawsuit and granting in part Garmin’s motion to strike certain expert reports of certain of Visteon’s expert witnesses. On July 13, 2016, the court held a hearing on Garmin’s motion to exclude testimony of two of Visteon’s proposed expert witnesses. The court ordered the parties to submit additional briefing after the hearing with arguments based on the testimony provided at the hearing.

 

In the normal course of business, the Company and its subsidiaries are parties to various legal claims, actions, and complaints, including matters involving patent infringement, other intellectual property, product liability, customer claims and various other risks. It is not possible to predict with certainty whether or not the Company and its subsidiaries will ultimately be successful in any of these legal matters, or if not, what the impact might be. However, the Company’s management does not expect that the results in any of these legal proceedings will have a material adverse effect on the Company’s results of operations, financial position or cash flows.

 

Item 1A.  Risk Factors

 

There are many risks and uncertainties that can affect our future business, financial performance or share price. In addition to the other information set forth in this report, you should carefully consider the factors discussed in Part I, “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended December 26, 2015, as amended and supplemented by the risk factor set forth below. These risks, however, are not the only risks facing our Company. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition and/or operating results.

 

The following is an amended and restated version of a Risk Factor included in Item 1A. “Risk Factors” of our Annual Report on Form 10-K for the year ended December 26, 2015:

 

Economic, regulatory and political conditions and uncertainty could adversely affect our revenue and margins.

 

Our revenue and margins depend significantly on general economic conditions and the demand for products in the markets in which we compete. Economic weakness or constrained consumer and business spending has resulted in periods of decreased revenue and in the future, could result in decreased revenue and problems with our ability to manage inventory levels and collect customer receivables. In addition, financial difficulties experienced by our retailers and OEM customers have resulted, and could result in the future, in significant bad debt write-offs and additions to reserves in our receivables and could have an adverse effect on our results of operations.

 

The United Kingdom (UK) held a referendum on June 23, 2016 in which a majority of voters voted to exit the European Union (EU). Due to the unprecedented nature of the proposed withdrawal, significant uncertainty exists surrounding the timing and terms of the proposed exit. We have operations in the UK and several EU member states whose currencies, namely British Pound Sterling (GBP) and Euro, economies, taxation, and trade regulation, among other factors, could be adversely impacted by the negotiations and outcomes of the UK’s leaving the EU, which is likely to be a lengthy and complicated process. These events could have a material adverse effect on our business operations, results of operations and financial condition.

 

 28 

 

 

Item 2.Unregistered Sales of Equity Securities and Use of Proceeds

 

Items (a) and (b) are not applicable.

 

(c) Issuer Purchases of Equity Securities

 

The Board of Directors approved a share repurchase program on February 13, 2015, authorizing the Company to purchase up to $300 million of its common shares as market and business conditions warrant. The share repurchase authorization expires on December 31, 2016. The following table lists the Company’s share purchases during the second quarter of fiscal 2016:

 

Period  Total # of 
Shares Purchased
   Average Price
Paid Per Share
   Total Number of Shares
Purchased as Part of
Publicly Announced
Plans or Programs
   Maximum Number of Shares 
(or approx. Dollar Value of Shares in
thousands) That may yet be Purchased
Under the Plans or Program
 
March 27, 2016 - April 23, 2016   200,000   $40.56    200,000   $140,679 
April 24, 2016- May 21, 2016   190,037   $41.08    190,037   $132,873 
May 22, 2016 - June 25, 0216   222,500   $42.17    222,500   $123,490 
                     
Total   612,537   $41.31    612,537   $123,490 

 

Item 3.Defaults Upon Senior Securities

 

None

 

Item 4.Mine Safety Disclosures

 

Not applicable

 

Item 5.Other Information

 

Not applicable

 

 29 

 

 

Item 6.Exhibits

 

Exhibit 31.1   Certification of Chief Executive Officer pursuant to Exchange Act
    Rule 13a-14(a) or 15d-14(a).
     
Exhibit 31.2   Certification of Chief Financial Officer pursuant to Exchange Act
    Rule 13a-14(a) or 15d-14(a).
     
Exhibit 32.1   Certification of Chief Executive Officer pursuant to 18 U.S.C.  
    Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
     
Exhibit 32.2   Certification of Chief Financial Officer pursuant to 18 U.S.C.
    Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
     
Exhibit 101.INS   XBRL Instance Document
     
Exhibit 101.SCH   XBRL Taxonomy Extension Schema
     
Exhibit 101.CAL   XBRL Taxonomy Extension Calculation Linkbase
     
Exhibit 101.LAB   XBRL Taxonomy Extension Label Linkbase
     
Exhibit 101.PRE   XBRL Taxonomy Extension Presentation Linkbase
     
Exhibit 101.DEF   XBRL Taxonomy Extension Definition Linkbase

 

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SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the Company has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

  GARMIN LTD.
     
  By /s/ Douglas G. Boessen
    Douglas G. Boessen
    Chief Financial Officer
    (Principal Financial Officer and
    Principal Accounting Officer)

 

Dated:   July 27, 2016

 

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INDEX TO EXHIBITS

 

Exhibit No.   Description
     
Exhibit 31.1   Certification of Chief Executive Officer pursuant to Exchange Act
    Rule 13a-14(a) or 15d-14(a).
     
Exhibit 31.2   Certification of Chief Financial Officer pursuant to Exchange Act
    Rule 13a-14(a) or 15d-14(a).
     
Exhibit 32.1   Certification of Chief Executive Officer pursuant to 18 U.S.C.  
    Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
     
Exhibit 32.2   Certification of Chief Financial Officer pursuant to 18 U.S.C.
    Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
     
Exhibit 101.INS     XBRL Instance Document
     
Exhibit 101.SCH     XBRL Taxonomy Extension Schema
     
Exhibit 101.CAL     XBRL Taxonomy Extension Calculation Linkbase
     
Exhibit 101.LAB     XBRL Taxonomy Extension Label Linkbase
     
Exhibit 101.PRE     XBRL Taxonomy Extension Presentation Linkbase
     
Exhibit 101.DEF     XBRL Taxonomy Extension Definition Linkbase

 

 32