Edgar Filing: GARMIN LTD

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 September 28, 2013

¨	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 October 28, 2013

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

Garmin Ltd.

Form 10-Q

Quarter Ended September 28, 2013

Table of Contents

Part I - Financial Information		Page

Item 1.	Condensed Consolidated Financial Statements	3

	Introductory Comments	3

	Condensed Consolidated Balance Sheets at September 28, 2013 (Unaudited) and December 29, 2012	4

	Condensed Consolidated Statements of Income for the 13-weeks and 39-weeks ended September 28, 2013 and September 29, 2012 (Unaudited)	5

	Condensed Consolidated Statements of Comprehensive Income for the 13-weeks and 39-weeks ended September 28, 2013 and September 29, 2012 (Unaudited)	6

	Condensed Consolidated Statements of Cash Flows for the 39-weeks ended September 28, 2013 and September 29, 2012 (Unaudited)	7

	Notes to Condensed Consolidated Financial Statements (Unaudited)	8

Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	17

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	29

Item 4.	Controls and Procedures	30

Part II - Other Information

Item 1.	Legal Proceedings	31

Item 1A.	Risk Factors	35

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	35

Item 3.	Defaults Upon Senior Securities	35

Item 4.	Mine Safety Disclosures	35

Item 5.	Other Information	35

Item 6.	Exhibits	36

Signature Page		37

Index to Exhibits		38

	2

Garmin Ltd.

Form 10-Q

Quarter Ended September 28, 2013

Part I – Financial Information

Item 1. Condensed Consolidated Financial Statements

Introductory Comments

The Condensed Consolidated Financial Statements of Garmin Ltd. ("Garmin" or the "Company") included herein have been prepared by the Company, without audit, pursuant to the rules and regulations of the United States Securities and Exchange Commission. Certain information and note disclosures normally included in financial statements prepared in accordance with U.S. generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations, although the Company believes that the disclosures are adequate to enable a reasonable understanding of the information presented. These Condensed Consolidated Financial Statements should be read in conjunction with the audited financial statements and the notes thereto for the year ended December 29, 2012. Additionally, the Condensed Consolidated Financial Statements should be read in conjunction with Item 2 of Management's Discussion and Analysis of Financial Condition and Results of Operations, included in this Form 10-Q.

The results of operations for the 13-week and 39-week periods ended September 28, 2013 are not necessarily indicative of the results to be expected for the full year 2013.

	3

Garmin Ltd. And Subsidiaries

Condensed Consolidated Balance Sheets

(In thousands, except share information)

	(Unaudited)
	Sept 28,		December 29,
	2013		2012
Assets
Current assets:
Cash and cash equivalents	$	1,068,700	$	1,231,180
Marketable securities		134,253		153,083
Accounts receivable, net		475,707		603,673
Inventories, net		416,725		389,931
Deferred income taxes		67,437		68,785
Deferred costs		56,749		53,948
Prepaid expenses and other current assets		225,067		35,520
Total current assets		2,444,638		2,536,120

Property and equipment, net		413,675		409,751

Marketable securities		1,594,144		1,488,312
Restricted cash		252		836
Noncurrent deferred income tax		94,734		93,920
Noncurrent deferred costs		39,625		42,359
Other intangible assets, net		221,979		232,597
Other assets		14,179		15,229
Total assets	$	4,823,226	$	4,819,124

Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable	$	151,798	$	131,263
Salaries and benefits payable		63,064		55,969
Accrued warranty costs		34,639		37,301
Accrued sales program costs		36,487		57,080
Deferred revenue		255,830		252,375
Accrued royalty costs		34,285		71,745
Accrued advertising expense		16,862		25,192
Other accrued expenses		73,241		69,806
Deferred income taxes		63		332
Income taxes payable		44,060		32,031
Dividend payable		263,704		175,932
Total current liabilities		974,033		909,026

Deferred income taxes		3,516		2,467
Non-current income taxes		121,091		181,754
Non-current deferred revenue		166,165		193,047
Other liabilities		917		1,034

Stockholders' equity:
Shares, CHF 10 par value, 208,077,418 shares authorized and issued; 195,221,791 shares outstanding at September 28, 2013 and 195,591,854 shares outstanding at December 29, 2012		1,797,435		1,797,435
Additional paid-in capital		87,377		72,462
Treasury stock		(100,912)		(81,280)
Retained earnings		1,701,823		1,604,625
Accumulated other comprehensive income		71,781		138,554
Total stockholders' equity		3,557,504		3,531,796
Total liabilities and stockholders' equity	$	4,823,226	$	4,819,124

See accompanying notes.

	4

Garmin Ltd. And Subsidiaries

Condensed Consolidated Statements of Income (Unaudited)

(In thousands, except per share information)

	13-Weeks Ended				39-Weeks Ended
	Sept 28,		Sept 29,		Sept 28,		Sept 29,
	2013		2012		2013		2012
Net sales	$	643,637	$	672,376	$	1,872,156	$	1,947,127

Cost of goods sold		290,748		313,321		859,494		882,501

Gross profit		352,889		359,055		1,012,662		1,064,626

Advertising expense		26,251		30,102		77,983		91,952
Selling, general and administrative expense		86,462		86,402		260,769		275,763
Research and development expense		88,427		82,489		272,349		242,510
Total operating expense		201,140		198,993		611,101		610,225

Operating income		151,749		160,062		401,561		454,401

Other income (expense):
Interest income		8,435		7,987		25,512		26,278
Foreign currency gains (losses)		(822)		(6,364)		18,280		(16,124)
Other		1,438		942		3,666		5,064
Total other income (expense)		9,051		2,565		47,458		15,218

Income before income taxes		160,800		162,627		449,019		469,619

Income tax (benefit) provision		(26,869)		22,279		192		56,510

Net income	$	187,669	$	140,348	$	448,827	$	413,109

Net income per share:
Basic	$	0.96	$	0.72	$	2.30	$	2.12
Diluted	$	0.96	$	0.72	$	2.29	$	2.11

Weighted average common shares outstanding:
Basic		195,325		194,912		195,488		194,834
Diluted		196,300		196,161		196,312		196,171

Dividends declared per share					$	1.80	$	1.80

See accompanying notes.

	5

Garmin Ltd. And Subsidiaries

Condensed Consolidated Statements of Comprehensive Income (Unaudited)

(In thousands)

	13-Weeks Ended				39-Weeks Ended
	Sept 28,		Sept 29,		Sept 28,		Sept 29,
		2013	2012		2013		2012
Net income	$	187,669	$	140,348	$	448,827	$	413,109
Translation adjustment		13,379		22,591		(24,177)		31,881
Change in fair value of available-for-sale marketable securities, net of deferred taxes		(6,441)		3,844		(42,596)		2,543
Comprehensive income	$	194,607	$	166,783	$	382,054	$	447,533

See accompanying notes.

	6

Garmin Ltd. And Subsidiaries

Condensed Consolidated Statements of Cash Flows (Unaudited)

(In thousands)

	39-Weeks Ended
	Sept 28,		Sept 29,
	2013		2012
Operating Activities:
Net income	$	448,827	$	413,109
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation		36,840		40,025
Amortization		23,629		21,192
(Gain)/Loss on sale of property and equipment		41		(17)
Provision for doubtful accounts		1,023		2,786
Deferred income taxes		2,851		(7,384)
Unrealized foreign currency losses/(gains)		(17,273)		24,974
Provision for obsolete and slow moving inventories		15,965		3,795
Stock compensation expense		15,608		26,364
Realized gains on marketable securities		(2,963)		(1,647)
Changes in operating assets and liabilities, net of acquisitions:
Accounts receivable		128,098		103,039
Inventories		(44,337)		(44,761)
Other current and non-current assets		(18,329)		14,051
Accounts payable		21,936		(20,271)
Other current and non-current liabilities		(60,719)		(63,839)
Deferred revenue		(22,613)		35,277
Deferred cost		(57)		(8,561)
Income taxes payable		(48,256)		(28,098)
Net cash provided by operating activities		480,271		510,034

Investing activities:
Purchases of property and equipment		(41,325)		(26,881)
Proceeds from sale of property and equipment		65		25
Purchase of intangible assets		(1,574)		(5,174)
Purchase of marketable securities		(716,226)		(1,004,021)
Redemption of marketable securities		578,464		735,521
Advances under loan receivable commitment		(173,708)		-
Change in restricted cash		584		(59)
Acquisitions, net of cash acquired		(5,686)		(4,010)
Net cash used in investing activities		(359,406)		(304,599)

Financing activities:
Dividends paid		(263,857)		(253,386)
Purchase of treasury stock under share repurchase plan		(26,926)		-
Purchase of treasury stock related to equity awards		(7,430)		(6,542)
Proceeds from issuance of treasury stock related to equity awards		13,620		10,971
Tax benefit from issuance of equity awards		411		1,810
Net cash used in financing activities		(284,182)		(247,147)

Effect of exchange rate changes on cash and cash equivalents		837		1,625

Net increase/(decrease) in cash and cash equivalents		(162,480)		(40,087)
Cash and cash equivalents at beginning of period		1,231,180		1,287,160
Cash and cash equivalents at end of period	$	1,068,700	$	1,247,073

See accompanying notes.

	7

Garmin Ltd. and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Unaudited)

September 28, 2013

(In thousands, except share and per share information)

1. Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the 13-week and 39-week periods ended September 28, 2013 are not necessarily indicative of the results that may be expected for the year ending December 28, 2013.

The condensed consolidated balance sheet at December 29, 2012 has been derived from the audited financial statements at that date but does not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. For further information, refer to the consolidated financial statements and footnotes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 29, 2012.

The Company’s fiscal year is based on a 52-53 week period ending on the last Saturday of the calendar year. Therefore the financial results of certain fiscal years, and the associated 14-week quarters, will not be exactly comparable to the prior and subsequent 52-week fiscal years and the associated quarters having only 13 weeks. The quarters ended September 28, 2013 and September 29, 2012 both contain operating results for 13 weeks.

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2. Inventories

The components of inventories consist of the following:

	September 28, 2013		December 29, 2012
Raw materials	$	136,923	$	119,142
Work-in-process		52,894		53,656
Finished goods		256,996		243,238
Inventory reserves		(30,088)		(26,105)
Inventory, net of reserves	$	416,725	$	389,931

3. Earnings Per Share

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

	13-Weeks Ended
	Sept 28,		Sept 29,
	2013		2012
Numerator:
Numerator for basic and diluted net income per share - net income	$	187,669	$	140,348

Denominator:
Denominator for basic net income per share – weighted-average common shares		195,325		194,912

Effect of dilutive securities – stock options, stock appreciation rights and restricted stock units		975		1,249

Denominator for diluted net income per share – adjusted weighted-average common shares		196,300		196,161

Basic net income per share	$	0.96	$	0.72

Diluted net income per share	$	0.96	$	0.72

	39-Weeks Ended
	Sept 28,		Sept 29,
	2013		2012
Numerator:
Numerator for basic and diluted net income per share - net income	$	448,827	$	413,109

Denominator:
Denominator for basic net income per share – weighted-average common shares		195,488		194,834

Effect of dilutive securities – stock options, stock appreciation rights and restricted stock units		824		1,337

Denominator for diluted net income per share – adjusted weighted-average common shares		196,312		196,171

Basic net income per share	$	2.30	$	2.12

Diluted net income per share	$	2.29	$	2.11

There were 5,443,047 and 5,599,936 anti-dilutive stock options, stock appreciation rights and restricted stock units (collectively “equity awards”) for the 13-week periods ended September 28, 2013 and September 29, 2012, respectively.

There were 5,507,363 and 5,667,000 anti-dilutive equity awards for the 39-week periods ended September 28, 2013 and September 29, 2012, respectively.

	9

There were 233,703 and 94,668 shares issued as a result of exercises of equity awards for the 13-week periods ended September 28, 2013 and September 29, 2012, respectively.

There were 344,254 and 307,386 shares issued as a result of exercises of equity awards for the 39-week periods ended September 28, 2013 and September 29, 2012, respectively.

4. Segment Information

The Company has identified five operating segments – Auto/Mobile, Aviation, Marine, Outdoor and Fitness. Each operating segment is individually reviewed and evaluated by our Chief Operating Decision Maker, who allocates resources and assesses performance of each segment individually.

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

	Reportable Segments
							Auto/
	Outdoor		Fitness		Marine		Mobile		Aviation		Total
13-Weeks Ended September 28, 2013

Net sales	$	101,350	$	81,007	$	55,301	$	322,520	$	83,459	$	643,637
Operating income	$	44,107	$	26,493	$	4,118	$	53,848	$	23,183	$	151,749
Income before taxes	$	45,556	$	27,938	$	4,347	$	58,144	$	24,815	$	160,800

13-Weeks Ended September 29, 2012

Net sales	$	105,572	$	64,788	$	44,766	$	384,393	$	72,857	$	672,376
Operating income	$	48,384	$	21,219	$	8,378	$	65,165	$	16,916	$	160,062
Income before taxes	$	48,953	$	21,853	$	8,705	$	65,399	$	17,717	$	162,627

39-Weeks Ended September 28, 2013

Net sales	$	284,372	$	237,660	$	178,344	$	919,810	$	251,970	$	1,872,156
Operating income	$	110,538	$	76,026	$	16,089	$	134,324	$	64,584	$	401,561
Income before taxes	$	117,996	$	81,186	$	20,828	$	160,803	$	68,206	$	449,019

39-Weeks Ended September 29, 2012

Net sales	$	283,230	$	217,815	$	168,620	$	1,055,786	$	221,676	$	1,947,127
Operating income	$	118,032	$	76,016	$	35,584	$	170,208	$	54,561	$	454,401
Income before taxes	$	119,971	$	77,916	$	36,596	$	178,978	$	56,158	$	469,619

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 39-week periods ended September 28, 2013 and September 29, 2012. Note that APAC includes Asia Pacific and EMEA includes Europe, the Middle East and Africa:

	10

	Americas		APAC		EMEA		Total
September 28, 2013
Net sales to external customers	$	1,002,796	$	176,524	$	692,836	$	1,872,156
Property and equipment, net	$	235,520	$	123,763	$	54,392	$	413,675

September 29, 2012
Net sales to external customers	$	1,068,289	$	186,165	$	692,673	$	1,947,127
Property and equipment, net	$	221,085	$	135,227	$	51,541	$	407,853

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
	Sept 28,		Sept 29,
	2013		2012
Balance - beginning of the period	$	34,288	$	40,797
Accrual for products sold		10,884		9,009
Expenditures		(10,533)		(10,659)
Balance - end of the period	$	34,639	$	39,147

	39-Weeks Ended
	Sept 28,		Sept 29,
	2013		2012
Balance - beginning of the period	$	37,301	$	46,773
Accrual for products sold		29,076		24,863
Expenditures		(31,738)		(32,489)
Balance - end of the period	$	34,639	$	39,147

6. Commitments and Contingencies

We are party to certain commitments, which includes raw materials, advertising and other indirect purchases in connection with conducting our business. Pursuant to these agreements, the Company is contractually committed to make purchases of approximately $213,173 over the next five years.

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.

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On March 14, 2013, the Company entered into a Memorandum of Agreement (the “Agreement”) with Bombardier, Inc. (“Bombardier”). The Company is the supplier of the avionics system for the Lear 70 and Lear 75 aircraft currently in development for Learjet, Inc., which is a subsidiary of Bombardier (the “Program”). In order to assist Bombardier in connection with delayed cash flows from the Program partially related to the certification of avionics for the Program exceeding the planned delivery date, the Company agreed to provide Bombardier a short term, interest free, loan of $173,708 in cash in seven installments beginning on March 22, 2013 and ending on September 20, 2013 pursuant to the terms and conditions of the Agreement. Bombardier will repay the loan in five installments beginning in November 2013 and ending in March 2014 pursuant to the terms and conditions of the Agreement. As of September 28, 2013, the Company had advanced $173,708 to Bombardier, which is included in prepaid and other current assets in the accompanying condensed consolidated balance sheet.

7. Income Taxes

Our earnings before taxes decreased 1.1% when compared to the same quarter in 2012, while our income tax expense decreased by $49,148, to ($26,869) for the 13-week period ended September 28, 2013, from $22,279 for the 13-week period ended September 29, 2012. The significant decline was due primarily to the impact of a $52,180 benefit in the third quarter which includes the release of uncertain tax position reserves from 2009 offset by Taiwan surtax expense due to this reserve release. Excluding this item, we would have reported an effective tax rate of 15.7% in the third quarter of 2013 compared to 13.7% in the third quarter of 2012. This increase was primarily driven by an unfavorable income mix across tax jurisdictions, as well as the release of other uncertain tax position reserves, amounting to approximately ($401) in third quarter 2013 and $1,737 in the third quarter 2012 that are considered immaterial, tend to be more recurring in nature and are comparable between periods.

Our earnings before taxes decreased 4.4% when compared to the same period in 2012, while our income tax expense decreased by $56,318 to $192, for the 39-week period ended September 28, 2013, from $56,510 for the 39-week period ended September 29, 2012. The significant decline was due to the impact of a $52,180 benefit in the third quarter, which includes the release of uncertain tax position reserves from 2009 offset by Taiwan surtax expense due to this reserve release and a $16,536 benefit in the first quarter of 2013, also related to reserve releases. Excluding these items, we would have reported an effective tax rate of 15.3% for the first three quarters of 2013 compared to 12.0% for the first three quarters of 2012. This increase was primarily driven by an unfavorable income mix across tax jurisdictions, as well as the release of other uncertain tax position reserves amounting to approximately $9,556 for the 39-weeks ended September 28, 2013 and $11,945 for the 39-weeks ended September 29, 2012 that are considered immaterial, tend to be more recurring in nature and are comparable between periods, partially offset by the impact of $6,301 of research and development tax credits related to 2012 which were recognized when the related legislation was enacted in January 2013.

8. Marketable Securities

The 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 identical assets 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

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. The valuation methods used by the Company for each significant class of investments are summarized below.

Mortgage-backed securities, corporate bonds and obligations of states and political subdivisions – Valued 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.

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Common stocks – Valued at the closing price reported on the active market on which the individual securities are traded.

The methods 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 September 28, 2013
Description	Total		Level 1		Level 2		Level 3

Mortgage-backed securities	$	518,840	$	-	$	518,840	$	-
Obligations of states and political subdivisions		690,615		-		690,615		-
Corporate bonds		420,345		-		420,345		-
Common stocks		27,435		27,435		-		-
Other		71,162		-		71,162		-
Total	$	1,728,397	$	27,435	$	1,700,962	$	-

	Fair Value Measurements as
	of December 29, 2012
Description	Total		Level 1		Level 2		Level 3

Mortgage-backed securities	$	650,895	$	-	$	650,895	$	-
Obligations of states and political subdivisions		499,857		-		499,857		-
Corporate bonds		399,941		-		399,941		-
Common stocks		22,982		22,982		-		-
Other		67,720		-		67,720		-
Total	$	1,641,395	$	22,982	$	1,618,413	$	-

The following is a summary of the Company’s marketable securities classified as available-for-sale securities at September 28, 2013:

									Estimated Fair
					Gross		Other Than		Value (Net
			Gross Unrealized		Unrealized		Temporary		Carrying
	Amortized Cost		Gains		Losses		Impairment		Amount)
Mortgage-backed securities	$	534,722	$	4,386	$	(20,268)	$	-	$	518,840
Obligations of states and political subdivisions		711,989		1,649		(23,023)		-		690,615
U.S. corporate bonds		424,439		1,658		(4,478)		(1,274)		420,345
Common stocks		23,795		3,975		(335)		-		27,435
Other		67,914		3,335		(87)		-		71,162
Total	$	1,762,859	$	15,003	$	(48,191)	$	(1,274)	$	1,728,397

	13

In the first three quarters of 2013, Garmin experienced unrealized, non-cash losses on its investment portfolio resulting in a balance of $48,191 of gross unrealized losses on marketable securities at September 28, 2013. The amortized cost and estimated fair value of the securities at an unrealized loss position at September 28, 2013 were $1,165,053 and $1,116,862, respectively. This decrease in estimated fair value is primarily due to market valuations on mortgage-backed securities and obligations of states and political subdivisions declining. The decline was due to increases in the 10 Year Treasury Bond Yield during the second and third quarters, which caused market valuations of certain securities in our investment portfolios to decline. Approximately 47% of the securities in our portfolio were at an unrealized loss position at September 28, 2013. 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 and no impairment has been recorded in the accompanying condensed consolidated statement of income.

The following is a summary of the Company’s marketable securities classified as available-for-sale securities at December 29, 2012:

									Estimated Fair
					Gross		Other Than		Value (Net
			Gross Unrealized		Unrealized		Temporary		Carrying
	Amortized Cost		Gains		Losses		Impairment		Amount)
Mortgage-backed securities	$	644,388	$	8,894	$	(2,387)	$	-	$	650,895
Obligations of states and political subdivisions		499,241		2,345		(1,729)		-		499,857
U.S. corporate bonds		400,310		3,138		(2,233)		(1,274)		399,941
Common stocks		21,113		2,392		(523)		-		22,982
Other		67,181		551		(12)		-		67,720
Total	$	1,632,233	$	17,320	$	(6,884)	$	(1,274)	$	1,641,395

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

The amortized cost and estimated fair value of marketable securities at September 28, 2013, 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.

	Cost		Estimated Fair Value
Due in one year or less	$	136,835	$	134,253
Due after one year through five years		688,846		686,299
Due after five years through ten years		257,244		249,112
Due after ten years		621,050		592,932
Other (No contractual maturity dates)		58,884		65,801
	$	1,762,859	$	1,728,397

9. Share Repurchase Plan

On February 15, 2013, the Board of Directors approved a share repurchase program authorizing the Company to purchase up to $300,000 of its common shares. A Rule 10b5-1 plan was adopted and allows the repurchase of its shares at times when it otherwise might be prevented from doing so under insider trading laws or because of self-imposed trading blackout periods. The share repurchase authorization expires on December 31, 2014. As of September 28, 2013, the Company had repurchased 713,092 shares using cash of $26,926. There remains approximately $273,074 available for repurchase 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 39-week periods ended September 28, 2013:

	14

	13-Weeks Ended Sept 28, 2013
	Foreign Currency Translation Adjustment		Unrealized Gains (Losses) on Available for Sale Securities		Total
Balance - beginning of period	$	91,416	$	(26,573)	$	64,843
Other comprehensive income before reclassification		13,379		(6,336)		7,043
Amounts reclassified from accumulated other comprehensive income		-		(105)		(105)
Net current-period other comprehensive income		13,379		(6,441)		6,938
Balance - end of period	$	104,795	$	(33,014)	$	71,781

	39-Weeks Ended Sept 28, 2013
	Foreign Currency Translation Adjustment		Unrealized Gains (Losses) on Available for Sale Securities		Total
Balance - beginning of period	$	128,972	$	9,582	$	138,554
Other comprehensive income before reclassification		(24,177)		(39,810)		(63,987)
Amounts reclassified from accumulated other comprehensive income		-		(2,786)		(2,786)
Net current-period other comprehensive income		(24,177)		(42,596)		(66,773)
Balance - end of period	$	104,795	$	(33,014)	$	71,781

The following provides required disclosure of reporting reclassifications out of AOCI for the 13-week and 39-week periods ended September 28, 2013:

13-Weeks Ended Sept 28, 2013
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	$	137	Other income (expense)
		(32)	Income tax provision
	$	105	Net of tax

	15

39-Weeks Ended Sept 28, 2013
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	$	2,963	Other income (expense)
		(177)	Income tax provision
	$	2,786	Net of tax

11. License Fees

During the second quarter of 2012, the Company determined certain license fee payments to one of its suppliers had exceeded contractual requirements since the third quarter of 2010. The periodic royalty audit by the supplier, which was already underway, was completed in June 2012, resulting in a net overpayment of such license fees of $20.8 million. This credit is reflected in cost of goods sold for the 39-week period ended September 29, 2012.

12. Recently Issued Accounting Pronouncements

In July 2012, the FASB issued Accounting Standards Update No. 2012-02 “Testing Indefinite-Lived Intangible Assets for Impairment” (ASU 2012-02), which is included in ASC Topic 350 (Intangibles—Goodwill and Other). ASU 2012-02 provides an option for companies to use a qualitative approach to test indefinite-lived intangible assets for impairment if certain conditions are met. The amendments are effective for annual and interim impairment tests performed for fiscal years beginning after September 15, 2012. The implementation of the amended accounting guidance did not have a material impact on the Company’s financial statements.

In February 2013, the FASB issued Accounting Standards Update No. 2013-02 “Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income” (ASU 2013-02), which is included in ASC Topic 220 (Comprehensive Income). The objective of ASU 2013-02 is to improve the reporting of reclassifications out of accumulated other comprehensive income. The amendments are effective prospectively for reporting periods beginning after December 15, 2012. The Company has implemented this amendment and has included the required disclosure in the Notes to Condensed Consolidated Financial Statements.

In July 2013, the FASB issued Accounting Standards Update No. 2013-11 “Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists” (ASU 2013-11), which is included in ASC Topic 740 (Income Taxes). ASU 2013-11 requires an entity to net its liability for unrecognized tax positions against a net operating loss carryforward, a similar tax loss or a tax credit carryforward when settlement in this manner is available under the tax law. The provisions of this new guidance are effective for reporting periods beginning after December 15, 2013. We are currently evaluating the impact of the new guidance on our financial statements.

	16

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

The discussion set forth below, as well as other portions of this Quarterly Report, contains statements concerning potential future events. Such forward-looking statements are based upon assumptions by our management, as of the date of this Quarterly Report, including assumptions about risks and uncertainties faced by the Company. Readers can identify these forward-looking statements by their use of such verbs as expects, anticipates, believes or similar verbs or conjugations of such verbs. If any of our assumptions prove incorrect or should unanticipated circumstances arise, our actual results could materially differ from those anticipated by such forward-looking statements. The differences could be caused by a number of factors or combination of factors including, but not limited to, those factors identified in the Company’s Annual Report on Form 10-K for the year ended December 29, 2012. This report has been filed with the Securities and Exchange Commission (the "SEC" or the "Commission") in Washington, D.C. and can be obtained by contacting the SEC's public reference operations or obtaining it through the SEC's web site on the World Wide Web at http://www.sec.gov. Readers are strongly encouraged to consider those factors when evaluating any forward-looking statement concerning the Company. The Company will not update any forward-looking statements in this Quarterly Report to reflect future events or developments.

The information contained in this Management’s Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with the Condensed Consolidated Financial Statements and Notes thereto included in this Form 10-Q and the audited financial statements and notes thereto in the Company’s Annual Report on Form 10-K for the year ended December 29, 2012.

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, automotive/mobile and aviation markets. Our segments offer products through our network of independent dealers and distributors. However, the nature of products and types of customers for the five segments may vary significantly. As such, the segments are managed separately.

	17

Results of Operations

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

	13-Weeks Ended
	September 28, 2013		September 29, 2012

Net sales	100	%	100	%
Cost of goods sold	45	%	47	%
Gross profit	55	%	53	%
Advertising	4	%	4	%
Selling, general and administrative	13	%	13	%
Research and development	14	%	12	%
Total operating expenses	31	%	29	%
Operating income	24	%	24	%
Other income (expense), net	1	%	0	%
Income before income taxes	25	%	24	%
Provision/(benefit) for income taxes	-4	%	3	%
Net income	29	%	21	%

	39-Weeks Ended
	September 28, 2013		September 29, 2012

Net sales	100	%	100	%
Cost of goods sold	46	%	45	%
Gross profit	54	%	55	%
Advertising	4	%	5	%
Selling, general and administrative	14	%	14	%
Research and development	15	%	13	%
Total operating expenses	33	%	32	%
Operating income	21	%	23	%
Other income (expense), net	3	%	1	%
Income before income taxes	24	%	24	%
Provision for income taxes	0	%	3	%
Net income	24	%	21	%

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

	18

Garmin Ltd. And Subsidiaries

Net Sales, Operating Income and Income before Taxes by Segment (Unaudited)

	Reportable Segments
							Auto/
	Outdoor		Fitness		Marine		Mobile		Aviation		Total

13-Weeks Ended September 28, 2013

Net sales	$	101,350	$	81,007	$	55,301	$	322,520	$	83,459	$	643,637
Operating income	$	44,107	$	26,493	$	4,118	$	53,848	$	23,183	$	151,749
Income before taxes	$	45,556	$	27,938	$	4,347	$	58,144	$	24,815	$	160,800

13-Weeks Ended September 29, 2012

Net sales	$	105,572	$	64,788