Garmin Reports Solid Fiscal 2017 Revenue and Operating Income Growth; Proposes Dividend Increase

Garmin Ltd. (Nasdaq: GRMN) today announced results for the fourth
quarter and fiscal year ended December 30, 2017.

Highlights for the fourth quarter 2017 include:

• Total revenue of $888 million, growing 3% over the prior year quarter,
  with outdoor, fitness, marine and aviation collectively growing 9%
  over the prior year quarter and contributing 78% of total revenue
• Gross margin improved to 56.2% compared to 54.7% in the prior year
  quarter
• Operating margin improved to 20.2% compared to 18.6% in the prior year
  quarter
• Operating income of $179 million, representing growth of 12%
• GAAP EPS was $0.73 for the fourth quarter, representing growth of 2%
  and pro forma EPS⁽¹⁾ was $0.79 for fourth quarter 2017,
  representing growth of 9%
• Delivered our one-millionth certified aviation product demonstrating
  our long history of innovation and contribution to the aviation
  industry
• Began shipping our updated marine ECHOMAP™and STRIKER™
  products bringing connectivity to the water

Highlights for the fiscal year 2017 include:

• Total revenue of $3,087 million, growing 2% over the prior year, with
  outdoor, fitness, marine and aviation collectively growing 9% over the
  prior year and contributing 76% of total revenue
• Gross and operating margins of 57.8% and 21.7%, respectively, both
  improving from 2016 levels
• Operating income of $669 million, representing 7% growth
• GAAP EPS was $3.68 and pro forma EPS⁽¹⁾ was $2.94
• Shipped over 15 million units and over 188 million since inception
• Completed the acquisition of Navionics®S.p.A., a privately-held
  worldwide provider of electronic navigational charts and mobile
  applications for the marine industry
• Strong demand for the fēnix® line of wearables led to significant
  growth in our outdoor segment
• Connect IQ™ app store continued growth with over 3,500 apps and
  over 45 million downloads since inception
• Garmin ranked #41 on Forbes’ “The Just 100: America’s Best Corporate
  Citizens” and ranked as one of the Global 2000 World’s Best Employers

(in thousands,			13-Weeks Ended				14-Weeks Ended									52-weeks Ended				53-weeks Ended
except per share data)			December 30,				December 31,					Yr over Yr				December 30,				December 31,					Yr over Yr
			2017				2016					Change				2017				2016					Change
Net sales			$	888,496			$	860,767				3	%			$	3,087,004			$	3,018,665				2	%
Outdoor				203,278				175,397				16	%				698,867				546,326				28	%
Aviation				129,800				117,265				11	%				501,359				439,348				14	%
Marine				83,699				67,458				24	%				374,001				331,947				13	%
Fitness				276,195				274,052				1	%				762,194				818,486				-7	%
Auto				195,524				226,595				-14	%				750,583				882,558				-15	%
Gross margin %				56.2	%			54.7	%								57.8	%			55.6	%
Operating income %				20.2	%			18.6	%								21.7	%			20.7	%
GAAP diluted EPS			$	0.73			$	0.72				2	%			$	3.68			$	2.70				36	%
Pro forma diluted EPS (1)			$	0.79			$	0.73				9	%			$	2.94			$	2.83				4	%
(1) See attached table for reconciliation of non-GAAP measures including pro forma diluted EPS

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

“2017 was our second full year of sales and operating income growth
driven by strong sales in our outdoor, aviation and marine segments,”
said Cliff Pemble, president and chief executive officer of Garmin Ltd.
“Entering 2018, we see additional growth opportunities ahead and we
believe that we are well positioned to seize these opportunities with a
strong lineup of products.”

Outdoor:

The outdoor segment grew 16% in the quarter with significant
contributions from wearable devices combined with growth of inReach^®
subscription services. Gross and operating margins improved to 63% and
36%, respectively, resulting in 26% operating income growth. We expect
outdoor to continue to be a growth segment in 2018 as we leverage
opportunities in wearables and other product categories in the segment.

Aviation:

The aviation segment posted solid revenue growth of 11% in the quarter
with growth contributions from both aftermarket and OEM. Gross and
operating margins remained strong at 75% and 32%, respectively,
resulting in 27% operating income growth. During the quarter, we
delivered the 500^th G1000® integrated flight deck upgrade for
King Air aircraft, witnessed continued strength in our ADS-B offerings,
and Textron Aviation announced our selection as the avionics provider
for the Cessna Sky Courier 408. We continue to invest in upcoming
certifications with our numerous OEM partners, as well as ongoing
aftermarket opportunities for long-term market share gains.

Marine:

The marine segment posted strong fourth quarter revenue growth of 24%
driven by our updated lineup of chartplotters and fishfinders, as well
as contributions from our recently acquired Navionics product line.
Gross margin improved to 55%. During the fourth quarter, we recorded a
one-time accrual for a litigation settlement resulting in an operating
loss in the marine segment of 13%. During the fourth quarter, we began
shipping our new connected offerings in our popular ECHOMAP and STRIKER
product lines enabling connectivity through our new ActiveCaptain™
mobile app. We expect marine to be a growth segment in 2018 as we focus
on market share gains and new product innovations.

Fitness:

The fitness segment posted revenue growth of 1% in the quarter driven by
our GPS enabled products, partially offset by declines in our basic
activity trackers. Gross and operating margins increased to 53% and 21%,
resulting in a 24% growth in operating income. Our recently announced
Forerunner® 645 Music brings both music and Garmin Pay™ to a wearable
with advanced features such as running dynamics and connectivity. We
continue to see growth opportunities in our advanced wearables offset by
declines in our basic activity trackers.

Auto:

The auto segment recorded revenue decline of 14% in the quarter,
primarily due to the ongoing PND market contraction, partially offset by
solid growth in OEM and niche categories. Gross margin declined to 41%,
and operating margin was flat at 9%. At the recent Consumer Electronics
Show, we announced our new OEM scalable infotainment platform with
Amazon Alexa digital assistant integration. Looking forward, we are
focused on disciplined execution to bring desired innovation to the
market and to optimize profitability in this segment.

Additional Financial Information:

Total operating expenses in the quarter were $320 million, a 3% increase
from the prior year. Research and development investment increased 3%,
due to engineering personnel costs and the Navionics acquisition
partially offset by the additional week of expense in 2016. Selling,
general and administrative expenses increased 13%, due primarily to
litigation related costs and the Navionics acquisition. Advertising
decreased 13%, primarily due to lower media spend in the fitness segment.

The effective tax rate in the fourth quarter of 2017 was 23.1%. The pro
forma effective tax rate in the fourth quarter of 2017 was 20.9% (see
attached table for reconciliation of this non-GAAP measure), compared to
an effective tax rate of 19.0% in the prior year quarter. The increase
in the pro forma effective tax rate is primarily due to the Company’s
election to align certain Switzerland corporate tax positions with
evolving international tax initiatives and the impact of the release of
reserves partially offset by income mix by tax jurisdiction.

In the fourth quarter of 2017, we generated $144 million of free cash
flow (see attached table for reconciliation of this non-GAAP measure)
and returned cash to our shareholders with our quarterly dividend of $96
million. We ended the quarter with cash and marketable securities of
approximately $2.3 billion.

2018 Guidance:

We currently expect 2018 revenue of approximately $3.2 billion as growth
in marine, outdoor and aviation is partially offset by ongoing declines
in the PND market. We currently expect our full year pro forma EPS will
be approximately $3.05 based upon gross margin of approximately 58.5%,
operating margin of approximately 21% and a full year pro forma
effective tax rate of approximately 19%.

2018 Guidance (1)

Segment

Revenue Targets

Revenue

~$3.2 B

Auto (1)

-17

%

Gross Margin

~58.5%

Fitness

0

%

Operating Margin

~21%

Aviation

13

%

Tax Rate (Pro Forma)(2)

~19%

Outdoor

13

%

EPS (Pro Forma)(2)

~$3.05

Marine

18

%

				(1)		Consolidated and Auto segment guidance assumes the adoption of the new revenue recognition standard in 2018 and restatement of 2017 amounts.
				(2)		See attached table for reconciliation of non-GAAP measures including forward-looking pro forma tax rate and EPS

Effective in the first quarter 2018, the Company adopted Accounting
Standards Codification (ASC) Topic 606, the new revenue recognition
standard. The 2018 revenue and segment revenue growth percentages are
based upon the restated 2017 revenue amounts. We have included
additional appendices (Appendix A and B) with 2017 results reflecting
the new revenue recognition standard to help investors understand the
comparability of the 2018 guidance.

Dividend Recommendation:

The board of directors intends to recommend to the shareholders for
approval at the annual meeting to be held on June 8, 2018, a cash
dividend in the amount of $2.12 per share (subject to possible
adjustment based on the total amount of the dividend in Swiss Francs as
approved at the annual meeting), payable in four equal installments on
dates to be determined by the Board. The Board currently anticipates the
scheduling of the dividend in four installments as follows:

				Dividend Date			Record Date			$s per share
				June 29, 2018			June 18, 2018			$0.53
				September 28, 2018			September 14, 2018			$0.53
				December 31, 2018			December 14, 2018			$0.53
				March 29, 2019			March 15, 2019			$0.53

In addition, the board of directors has established March 30, 2018 as
the payment date and March 15, 2018 as the record date for the final
dividend installment of $0.51 per share, per the prior approval at the
2017 annual shareholders’ meeting. The first, second and third payments
of $0.51 per share were made on June 30, 2017, September 29, 2017, and
December 29, 2017, respectively.

Webcast Information/Forward-Looking Statements:

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

		When:			Wednesday, February 21, 2018 at 10:30 a.m. Eastern
		Where:			http://www.garmin.com/en-US/company/investors/events/
		How:			Simply log on to the web at the address above or call to listen in at 855-757-3897

An archive of the live webcast will be available until February 28, 2019
on the Garmin website at www.garmin.com.
To access the replay, click on the Investor Relations link and click
over to the Events Calendar page.

This release includes projections and other forward-looking
statements regarding Garmin Ltd. and its business that are commonly
identified by words such as “would,” “may,” “expects,” “estimates,”
“plans,” “intends,” “projects,” and other words or phrases with similar
meanings. Any statements regarding the Company’s GAAP and pro
forma estimated earnings, EPS, and effective tax rate, and the Company’s
expected segment revenue growth rates, consolidated revenue, gross
margins, operating margins, currency movements, expenses, pricing, new
products to be introduced in 2018, statements relating to possible
future dividends and the Company’s plans and objectives are
forward-looking statements. The forward-looking events and
circumstances discussed in this release may not occur and actual results
could differ materially as a result of risk factors and uncertainties
affecting Garmin, including, but not limited to, the risk factors that
are described in the Annual Report on Form 10-K for the year ended
December 30, 2017 filed by Garmin with the Securities and Exchange
Commission (Commission file number 0-31983). A copy of Garmin’s
2017 Form 10-K can be downloaded from

http://www.garmin.com/aboutGarmin/invRelations/finReports.html

.
Any forward-looking statements made in this release speak only as of the
date of this release.

Non-GAAP Financial Measures

This release and the attachments also contain non-GAAP financial
measures. A reconciliation to the nearest GAAP measure and a discussion
of the Company’s use of these measures are included in this release or
the attachments.

Garmin, the Garmin logo, the Garmin delta, fēnix, Forerunner, G1000,
inReach and Navionics are registered trademarks of Garmin Ltd. or its
subsidiaries and are registered in one or more countries, including the
U.S.; Active Captain, Connect IQ, ECHOMAP, Garmin Pay, Garmin Speak and
STRIKER are trademarks of Garmin Ltd. or one of its subsidiaries. All
other brands, product names, company names, trademarks and service marks
are the properties of their respective owners. All rights reserved.

Garmin Ltd. And Subsidiaries
Condensed Consolidated Statements of Income (Unaudited)
(In thousands, except per share information)
			13-Weeks Ended				14-Weeks Ended				52-Weeks Ended				53-Weeks Ended
			December 30,				December 31,				December 30,				December 31,
			2017				2016				2017				2016
Net sales			$	888,496			$	860,767			$	3,087,004			$	3,018,665
Cost of goods sold				388,978				389,985				1,303,840				1,339,095
Gross profit				499,518				470,782				1,783,164				1,679,570
Advertising expense				58,710				67,702				164,693				177,143
Selling, general and administrative expense				128,880				114,312				437,977				410,558
Research and development expense				132,552				128,952				511,634				467,960
Total operating expense				320,142				310,966				1,114,304				1,055,661
Operating income				179,376				159,816				668,860				623,909
Other income (expense):
Interest income				9,994				9,296				36,925				33,406
Foreign currency losses				(8,772	)			(1,648	)			(22,579	)			(31,651	)
Other				(107	)			1,093				(912	)			4,006
Total other income (expense)				1,115				8,741				13,434				5,761
Income before income taxes				180,491				168,557				682,294				629,670
Income tax provision (benefit)				41,711				31,952				(12,661	)			118,856
Net income			$	138,780			$	136,605			$	694,955			$	510,814
Net income per share:
Basic			$	0.74			$	0.73			$	3.70			$	2.71
Diluted			$	0.73			$	0.72			$	3.68			$	2.70
Weighted average common shares outstanding:
Basic				187,607				188,233				187,828				188,818
Diluted				188,915				189,171				188,732				189,343

Garmin Ltd. And Subsidiaries
Condensed Consolidated Balance Sheets
(In thousands, except per share information)
			(Unaudited)
			December 30,					December 31,
			2017					2016
Assets
Current assets:
Cash and cash equivalents			$	891,488				$	846,883
Marketable securities				161,687					266,952
Accounts receivable, net				590,882					527,062
Inventories, net				517,644					484,821
Deferred costs				48,312					47,395
Prepaid expenses and other current assets				153,912					89,903
Total current assets				2,363,925					2,263,016
Property and equipment, net				595,684					482,878
Marketable securities				1,260,033					1,213,285
Restricted cash				271					113
Deferred income taxes				199,343					110,293
Noncurrent deferred costs				73,851					56,151
Intangible assets, net				409,801					305,002
Other assets				107,352					94,395
Total assets			$	5,010,260				$	4,525,133
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable			$	169,640				$	172,404
Salaries and benefits payable				102,802					88,818
Accrued warranty costs				36,827					37,233
Accrued sales program costs				93,250					80,953
Deferred revenue				139,681					146,564
Accrued royalty costs				32,204					36,523
Accrued advertising expense				30,987					37,440
Other accrued expenses				93,652					70,469
Income taxes payable				33,638					16,163
Dividend payable				95,975					96,168
Total current liabilities				828,656					782,735
Deferred income taxes				75,215					61,220
Noncurrent income taxes				138,295					121,174
Noncurrent deferred revenue				163,840					140,407
Other liabilities				1,788					1,594
Stockholders’ equity:
Shares, CHF 0.10 par value, 198,077 shares authorized and issued; 188,189 shares outstanding at December 30, 2017 and 188,565 shares outstanding at December 31, 2016				17,979					17,979
Additional paid-in capital				1,828,386					1,836,047
Treasury stock				(468,818	)				(455,964	)
Retained earnings				2,368,874					2,056,702
Accumulated other comprehensive income (loss)				56,045					(36,761	)
Total stockholders’ equity				3,802,466					3,418,003
Total liabilities and stockholders’ equity			$	5,010,260				$	4,525,133

Garmin Ltd. And Subsidiaries
Condensed Consolidated Statements of Cash Flows (Unaudited)
(In thousands)
			52-Weeks Ended					53-Weeks Ended
			December 30,					December 31,
			2017					2016
Operating activities:
Net income			$	694,955				$	510,814
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation				59,895					55,796
Amortization				26,357					30,544
Gain on sale or disposal of property and equipment				(230	)				(503	)
Provision for doubtful accounts				1,021					4,136
Deferred income taxes				(90,725	)				1,699
Unrealized foreign currency loss				21,036					13,387
Provision for obsolete and slow moving inventories				31,071					26,458
Stock compensation				44,735					41,250
Realized losses (gains) on marketable securities				991					(822	)
Changes in operating assets and liabilities:
Accounts receivable				(40,088	)				9,000
Inventories				(38,575	)				(2,455	)
Other current and non-current assets				(21,608	)				2,234
Accounts payable				(17,240	)				(11,496	)
Other current and non-current liabilities				5,627					44,766
Deferred revenue				15,329					(6,363	)
Deferred costs				(18,266	)				(15,780	)
Income taxes payable				(13,443	)				3,017
Net cash provided by operating activities				660,842					705,682
Investing activities:
Purchases of property and equipment				(139,696	)				(90,960	)
Proceeds from sale of property and equipment				361					676
Purchase of intangible assets				(12,232	)				(5,715	)
Purchase of marketable securities				(587,656	)				(905,089	)
Redemption of marketable securities				635,311					957,350
Change in restricted cash				(153	)				146
Acquisitions, net of cash acquired				(90,471	)				(77,945	)
Net cash used in investing activities				(194,536	)				(121,537	)
Financing activities:
Dividends				(382,976	)				(481,452	)
Purchase of treasury stock under share repurchase plan				(74,523	)				(93,233	)
Purchase of treasury stock related to equity awards				(12,773	)				(7,331	)
Proceeds from issuance of treasury stock related to equity awards				21,860					18,648
Tax benefit from issuance of equity awards				–					1,692
Net cash used in financing activities				(448,412	)				(561,676	)
Effect of exchange rate changes on cash and cash equivalents				26,711					(8,656	)
Net increase in cash and cash equivalents				44,605					13,813
Cash and cash equivalents at beginning of period				846,883					833,070
Cash and cash equivalents at end of period			$	891,488				$	846,883

Garmin Ltd. And Subsidiaries
Net Sales, Gross Profit, and Operating Income by Segment (Unaudited)
			Reportable Segments
			Outdoor			Fitness			Marine				Auto			Aviation			Total
13-Weeks Ended December 30, 2017
Net sales			$	203,278		$	276,195		$	83,699			$	195,524		$	129,800		$	888,496
Gross profit				128,952			146,622			45,902				80,990			97,052			499,518
Operating income				73,322			57,315			(10,533	)			17,401			41,871			179,376
14-Weeks Ended December 31, 2016
Net sales			$	175,397		$	274,052		$	67,458			$	226,595		$	117,265		$	860,767
Gross profit				107,852			141,742			35,155				95,977			90,056			470,782
Operating income				58,314			46,175			2,995				19,363			32,969			159,816
52-Weeks Ended December 30, 2017
Net sales			$	698,867		$	762,194		$	374,001			$	750,583		$	501,359		$	3,087,004
Gross profit				448,410			422,636			212,592				327,921			371,605			1,783,164
Operating income				249,867			146,765			50,328				67,967			153,933			668,860
53-Weeks Ended December 31, 2016
Net sales			$	546,326		$	818,486		$	331,947			$	882,558		$	439,348		$	3,018,665
Gross profit				340,504			437,205			183,709				388,747			329,405			1,679,570
Operating income				184,035			160,596			52,167				102,347			124,764			623,909

Garmin Ltd. And Subsidiaries
Net Sales by Geography (Unaudited)
(In thousands)
			13-Weeks Ended			14-Weeks Ended						52-weeks Ended			53-weeks Ended
			December 30,			December 31,			Yr over Yr			December 30,			December 31,			Yr over Yr
			2017			2016			Change			2017			2016			Change
Net sales			$	888,496		$	860,767		3	%		$	3,087,004		$	3,018,665		2	%
Americas				426,374			445,324		-4	%			1,475,661			1,518,934		-3	%
EMEA				341,029			302,977		13	%			1,175,155			1,113,182		6	%
APAC				121,093			112,466		8	%			436,188			386,549		13	%
EMEA – Europe, Middle East and Africa; APAC – Asia Pacific and Australian Continent

Non-GAAP Financial Information

To supplement our financial results presented in accordance with GAAP,
this release includes the following measures defined by the Securities
and Exchange Commission as non-GAAP financial measures: pro forma net
income (earnings) per share, forward-looking pro forma earnings per
share, pro forma effective tax rate, forward-looking pro forma effective
tax rate and free cash flow. These non-GAAP measures are not based on
any comprehensive set of accounting rules or principles and should not
be considered a substitute for, or superior to, financial measures
calculated in accordance with GAAP, and may be different from non-GAAP
measures used by other companies, limiting the usefulness of the
measures for comparison with other companies. Management believes
providing investors with an operating view consistent with how it
manages the Company provides enhanced transparency into the operating
results of the Company, as described in more detail by category below.

The tables below provide reconciliations between the GAAP and non-GAAP
measures.

Pro forma effective tax rate

The Company’s income tax expense is periodically impacted by discrete
tax items that are not reflective of income tax expense incurred as a
result of current period earnings. Therefore, management believes
disclosure of the effective tax rate and income tax provision before the
effect of such discrete tax items are important measures to permit
investors’ consistent comparison between periods. In fiscal 2016, there
were no such discrete tax items identified.

Garmin Ltd. And Subsidiaries
Pro Forma Effective Tax Rate
(in thousands, except effective tax rate (ETR) information)
			13-Weeks Ended									52-weeks Ended
			December 30,									December 30,
			2017									2017
			$					ETR (1)				$					ETR (1)
U.S. GAAP income tax provision (benefit)			$	41,711				23.1	%			$	(12,661	)			(1.9	%)
Pro forma discrete tax items:
Switzerland corporate tax election(2)				11,279									180,034
Tax expense from share-based award expirations(3)				(15,345	)								(22,620	)
Total pro forma discrete tax items				(4,066	)								157,414
Income tax provision (Pro Forma)			$	37,645				20.9	%			$	144,753				21.2	%

(1)		Effective tax rate is calculated by taking the Income tax provision (benefit) divided by Income before taxes, as presented on the face of the Condensed Consolidated Statements of Income.
(2)		In first quarter 2017, a $169 million tax benefit was recognized resulting from the revaluation of certain Switzerland deferred tax assets. The revaluation is due to the Company’s election in February 2017 to align certain Switzerland corporate tax positions with international tax initiatives. In the fourth quarter 2017, an additional $11 million benefit was recognized as a result of this Switzerland election. These impacts during the transitional period following the election are not reflective of current income tax expense incurred and therefore affect period-to-period comparability.
(3)		Following adoption in fiscal 2017 of Accounting Standards Update No. 2016-09, Compensation – Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting (“ASU 2016-09”), the Company may periodically incur tax expense resulting from stock options and stock appreciation rights (SARs) expiring unexercised. New grants of stock options and SARs no longer comprise a significant component of the Company’s compensation arrangements. As the tax expense from expired awards is not related to current period earnings or compensation activities, and affects period-to-period comparability, it has been identified as a pro forma adjustment.

The net release of uncertain tax position reserves, amounting to
approximately $17.9 million and $11.9 million for the 52-weeks and
53-weeks ended December 30, 2017 and December 31, 2016, respectively,
have not been included as pro forma adjustments in the above
presentation of pro forma income tax provision as such items tend to be
more recurring in nature.

Pro forma net income (earnings) per share

Management believes that net income (earnings) per share before the
impact of foreign currency gains or losses and certain discrete income
tax items, as discussed above, is an important measure in order to
permit a consistent comparison of the Company’s performance between
periods.

Garmin Ltd. And Subsidiaries
Pro Forma Net Income (Earnings) Per Share
(in thousands, except per share information)
			13-Weeks Ended				14-Weeks Ended					52-weeks Ended				53-weeks Ended
			December 30,				December 31,					December 30,				December 31,
			2017				2016					2017				2016
Net income (GAAP)			$	138,780			$	136,605				$	694,955			$	510,814
Foreign currency losses(1)				8,772				1,648					22,579				31,651
Tax effect of foreign currency losses(2)				(1,829	)			(312	)				(4,791	)			(5,974	)
Discrete tax items(3)				4,066				–					(157,414	)			–
Net income (Pro Forma)			$	149,789			$	137,941				$	555,329			$	536,491
Net income per share (GAAP):
Basic			$	0.74			$	0.73				$	3.70			$	2.71
Diluted			$	0.73			$	0.72				$	3.68			$	2.70
Net income per share (Pro Forma):
Basic			$	0.80			$	0.73				$	2.96			$	2.84
Diluted			$	0.79			$	0.73				$	2.94			$	2.83
Weighted average common shares outstanding:
Basic				187,607				188,233					187,828				188,818
Diluted				188,915				189,171					188,732				189,343

(1)		The majority of the Company’s consolidated foreign currency losses are driven by movements in the Taiwan Dollar, Euro, and British Pound Sterling in relation to the U.S. Dollar and the related exchange rate impact on the significant cash, receivables, and payables held in a currency other than the functional currency at one of the Company’s subsidiaries. However, there is minimal cash impact from such foreign currency losses.
(2)		The tax effect of foreign currency losses was calculated using the pro forma effective tax rate of 20.9% for the quarter and 21.2% for the fiscal year ended December 30, 2017, respectively, and an effective tax rate of 19.0% for the quarter and 18.9% for the fiscal year ended December 31, 2016, respectively.
(3)		The discrete tax items are discussed in the pro forma effective tax rate section.

Free cash flow

Management believes that free cash flow is an important financial
measure because it represents the amount of cash provided by operations
that is available for investing and defines it as operating cash less
capital expenditures for property and equipment. Management believes
that excluding purchases of property and equipment provides a better
understanding of the underlying trends in the Company’s operating
performance and allows more accurate comparisons of the Company’s
operating results to historical performance. This metric may also be
useful to investors, but should not be considered in isolation as it is
not a measure of cash flow available for discretionary expenditures. The
most comparable GAAP measure is cash provided by operating activities.

Garmin Ltd. And Subsidiaries
Free Cash Flow
(in thousands)
			13-Weeks Ended				14-Weeks Ended					52-weeks Ended				53-weeks Ended
			December 30,				December 31,					December 30,				December 31,
			2017				2016					2017				2016
Net cash provided by operating activities			$	198,265			$	213,315				$	660,842			$	705,682
Less: purchases of property and equipment				(54,484	)			(48,803	)				(139,696	)			(90,960	)
Free Cash Flow			$	143,781			$	164,512				$	521,146			$	614,722

Forward-looking pro forma tax rate

Forward-looking pro forma tax rate and pro forma earnings per share are
calculated before the effect of certain discrete tax items. Management
believes certain discrete tax items may not be reflective of income tax
expense incurred as a result of current period earnings. Therefore, in
order to permit consistent comparison between periods, the tax rate and
earnings per share before the effect of such discrete tax items are
important measures. In the 52-weeks ended December 30, 2017, such
discrete tax items were recognized on a U.S. GAAP-basis that would have
affected comparability between periods and were therefore removed from
the pro forma tax rate. However, at this time management is unable to
determine whether or not significant discrete tax items will be
identified in fiscal 2018.

Forward-looking pro forma earnings per share (EPS)

Our 2018 pro forma EPS excludes foreign currency exchange gains and
losses. The estimated impact of such foreign currency gains and losses
cannot be reasonably estimated on a forward-looking basis due to the
high variability and low visibility with respect to non-operating
foreign currency exchange gains and losses and the related tax effects
of such gains and losses. The impact of such foreign currency gains and
losses, net of tax effects, was $0.04 and $0.09 per share for the
13-weeks and 52-weeks ended December 30, 2017, respectively.

Appendix A – Fiscal 2018 revenue recognition accounting change

The following appendices present 2017 results restated to reflect
Accounting Standards Codification (ASC) Topic 606, Revenue from
Contracts with Customers. These appendices provide comparable
information to help investors understand the 2018 guidance.

We adopted ASC Topic 606, Revenue from Contracts with Customers (“ASC
Topic 606”), the new revenue recognition standard, in the first quarter
of 2018, effective for Garmin’s fiscal year ending December 29, 2018.
ASC Topic 606 replaces existing revenue recognition rules with a
comprehensive revenue measurement and recognition standard.

Adoption approach

The Company has adopted the new revenue recognition standard utilizing
the full retrospective method. Under this method, the new recognition
standard is applied to each prior period reported in the forthcoming
2018 Form 10-Q and Form 10-K filings. This adoption approach enhances
comparability, as all periods presented in the forthcoming filings are
reported under the new standard. We have provided relevant information
below to highlight the financial impact of the new revenue recognition
standard, and have also provided relevant restated financial statements
under ASC Topic 606 in the following appendix.

ASC Topic 606 impacts

Based on our evaluation of the new revenue standard, Garmin’s
recognition will be consistent with our previous accounting policies
except for two impacts, both of which are within the Company’s auto
segment:

• A portion of the Company’s auto segment contracts have historically
  been accounted for under Accounting Standards Codification Topic
  985-605 Software-Revenue Recognition (Topic 985-605). Under Topic
  985-605, the Company deferred all elements of multiple-element
  software arrangements if vendor-specific objective evidence of fair
  value (VSOE) could not be established for an undelivered element (e.g.
  map updates). In applying the new revenue standard to certain
  contracts that include both software licenses and map updates, we
  recognize the portion of revenue related to the software license at
  the time of delivery rather than ratably over the map update period.
• For certain multiple-element arrangements within the Company’s auto
  segment, the Company’s previous policy was to allocate consideration
  to traffic services and recognize it ratably over the estimated life
  of the underlying product. Under the new revenue standard, we
  recognize revenue related to certain traffic services at the time of
  hardware and/or software delivery. Specifically, the new revenue
  standard emphasizes the timing of the Company’s performance, and upon
  delivery of the navigation device and/or software, the Company has
  performed its obligation with respect to the design and production of
  the product to receive and interpret the broadcast traffic signal for
  the benefit of the end user.

Both changes noted above accelerate the timing of revenue recognition.
See below for an overview of the financial impact to the Company’s
results of operations:

			FY 16										FY 17
(USD in millions)			Reported			Restated (1)			Impact (2)				Reported			Restated (1)			Impact (2)
Revenue – Consolidated			$3,019			$3,046			$27				$3,087			$3,122			$35
Revenue – Auto segment				883			910			27				751			785			35
Operating Income – Consolidated				624			633			9				669			684			15
Operating Income – Auto segment				102			111			9				68			83			15

(1)		Effective for the fiscal year ending December 29, 2018, we have adopted ASC Topic 606. The results above are restated under ASC Topic 606, and are included for comparability to 2018 earnings guidance.
(2)		This row may not cross-foot as figures are rounded to the nearest million.

The Company’s historical net cash flows provided by or used in
operating, investing, and financing activities are not impacted by
adoption of the new revenue standard.

Within Appendix A and Appendix B, the references to periods such as “FY
17,” “Q1 17,” or “2017,” refer to the corresponding periods or
period-end dates as reported in the applicable Form 10-K or Form 10-Q
filings. See additional restated financial information below within
Appendix B.

APPENDIX B – Restated financial information under ASC Topic 606

Garmin Ltd. And Subsidiaries
Condensed Consolidated Statements of Income (Unaudited)
(In thousands)
		Previously Reported
		FY 16		Q1 17			Q2 17		Q3 17		Q4 17		FY 17
Net sales		$3,018,665		$638,546			$816,885		$743,077		$888,496		$3,087,004
Cost of goods sold		1,339,095		266,423			339,027		309,412		388,978		1,303,840
Gross profit		1,679,570		372,123			477,858		433,665		499,518		1,783,164
Total operating expense		1,055,661		255,778			274,508		263,875		320,142		1,114,304
Operating income		623,909		116,345			203,350		169,790		179,376		668,860
Total other income (expense)		5,761		(28,653	)		24,705		16,266		1,115		13,434
Income before income taxes		629,670		87,692			228,055		186,056		180,491		682,294
Income tax provision (benefit)		118,856		(150,120	)		57,105		38,643		41,711		(12,661	)
Net income		$510,814		$237,812			$170,950		$147,413		$138,780		$694,955
		Restated (1)
		FY 16		Q1 17			Q2 17		Q3 17		Q4 17		FY 17
Net sales		$3,045,796		$641,510			$831,486		$751,245		$897,319		$3,121,560
Cost of goods sold		1,357,271		268,704			347,356		313,722		393,837		1,323,619
Gross profit		1,688,525		372,806			484,130		437,523		503,482		1,797,941
				.
Total operating expense		1,055,661		255,778			274,508		263,875		320,142		1,114,304
Operating income		632,864		117,028			209,622		173,648		183,340		683,637
Total other income (expense)		5,761		(28,653	)		24,705		16,266		1,115		13,434
Income before income taxes		638,625		88,375			234,327		189,914		184,455		697,071
Income tax provision (benefit)		122,890		(149,519	)		58,699		39,935		42,983		(7,902	)
Net income		$515,735		$237,894			$175,628		$149,979		$141,472		$704,973
		Impact
		FY 16		Q1 17			Q2 17		Q3 17		Q4 17		FY 17
Net sales		$27,131		$2,964			$14,601		$8,168		$8,823		$34,556
Cost of goods sold		18,176		2,281			8,329		4,310		4,859		19,779
Gross profit		8,955		683			6,272		3,858		3,964		14,777
Total operating expense		–		–			–		–		–		–
Operating income		8,955		683			6,272		3,858		3,964		14,777
Total other income (expense)		–		–			–		–		–		–
Income before income taxes		8,955		683			6,272		3,858		3,964		14,777
Income tax provision (benefit)		4,034		601			1,594		1,292		1,272		4,759
Net income		$4,921		$82			$4,678		$2,566		$2,692		$10,018

(1)		Effective for the fiscal year ending December 29, 2018, we have adopted ASC Topic 606. The results above are restated under ASC Topic 606.

Garmin Ltd. And Subsidiaries
Condensed Consolidated Balance Sheets (Unaudited)
(In thousands, except per share information)
			Previously Reported									Restated (1)									Impact
Assets			2016				2017					2016				2017					2016				2017
Current assets:
Cash and cash equivalents			$	846,883			$	891,488				$	846,883			$	891,488				$	–			$	–
Marketable securities				266,952				161,687					266,952				161,687					–				–
Accounts receivable, net				527,062				590,882					527,062				590,882					–				–
Inventories, net				484,821				517,644					484,821				517,644					–				–
Deferred costs				47,395				48,312					34,665				30,525					(12,730	)			(17,787	)
Prepaid expenses and other current assets				89,903				153,912					89,903				153,912					–				–
Total current assets				2,263,016				2,363,925					2,250,286				2,346,138					(12,730	)			(17,787	)
Property and equipment, net				482,878				595,684					482,878				595,684					–				–
Marketable securities				1,213,285				1,260,033					1,213,285				1,260,033					–				–
Restricted cash				113				271					113				271					–				–
Deferred income tax				110,293				199,343					105,668				189,959					(4,625	)			(9,384	)
Noncurrent deferred costs				56,151				73,851					30,934				33,029					(25,217	)			(40,822	)
Intangible assets, net				305,002				409,801					305,002				409,801					–				–
Other assets				94,395				107,352					94,395				107,352					–				–
Total assets			$	4,525,133			$	5,010,260				$	4,482,561			$	4,942,267				$	(42,572	)		$	(67,993	)
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable			$	172,404			$	169,640				$	172,404			$	169,640				$	–			$	–
Salaries and benefits payable				88,818				102,802					88,818				102,802					–				–
Accrued warranty costs				37,233				36,827					37,233				36,827					–				–
Accrued sales program costs				80,953				93,250					80,953				93,250					–				–
Deferred revenue				146,564				139,681					118,496				103,140					(28,068	)			(36,541	)
Accrued royalty costs				36,523				32,204					36,523				32,204					–				–
Accrued advertising expense				37,440				30,987					37,440				30,987					–				–
Other accrued expenses				70,469				93,652					70,469				93,652					–				–
Income taxes payable				16,163				33,638					16,163				33,638					–				–
Dividend payable				96,168				95,975					96,168				95,975					–				–
Total current liabilities				782,735				828,656					754,667				792,115					(28,068	)			(36,541	)
Deferred income taxes				61,220				75,215					62,617				76,612					1,397				1,397
Noncurrent income taxes				121,174				138,295					121,174				138,295					–				–
Noncurrent deferred revenue				140,407				163,840					91,238				87,061					(49,169	)			(76,779	)
Other liabilities				1,594				1,788					1,594				1,788					–				–
Stockholders’ equity:
Shares, CHF 0.10 par value				17,979				17,979					17,979				17,979					–				–
Additional paid-in capital				1,836,047				1,828,386					1,836,047				1,828,386					–				–
Treasury stock				(455,964	)			(468,818	)				(455,964	)			(468,818	)				–				–
Retained earnings				2,056,702				2,368,874					2,090,233				2,412,423					33,531				43,549
Accumulated other comprehensive income				(36,761	)			56,045					(37,024	)			56,428					(263	)			383
Total stockholders’ equity				3,418,003				3,802,466					3,451,271				3,846,397					33,268				43,931
Total liabilities and stockholders’ equity			$	4,525,133			$	5,010,260				$	4,482,561			$	4,942,267				$	(42,572	)		$	(67,993	)

(1)		Effective for the fiscal year ending December 29, 2018, we have adopted ASC Topic 606. The balances above are restated under ASC Topic 606.

Garmin Ltd. And Subsidiaries
Pro Forma Effective Tax Rate
(In thousands, except effective tax rate (ETR) information)
			Previously Reported
			FY 16				Q1 17				Q2 17				Q3 17				Q4 17				FY 17
Income before income taxes			$	629,670			$	87,692			$	228,055			$	186,056			$	180,491			$	682,294
U.S. GAAP income tax provision (benefit)				118,856				(150,120	)			57,105				38,643				41,711				(12,661	)
U.S. GAAP ETR(2)				18.9%				(171.2%)				25.0%				20.8%				23.1%				(1.9%)
Pro forma discrete tax items(3):
Switzerland corporate tax election				–				168,755				–				–				11,279				180,034
Impact of share-based award expirations				–				–				(7,275	)			–				(15,345	)			(22,620	)
Total pro forma discrete tax items				–				168,755				(7,275	)			–				(4,066	)			157,414
Pro Forma Income Tax Provision			$	118,856			$	18,635			$	49,830			$	38,643			$	37,644			$	144,753
Pro Forma ETR				18.9%				21.3%				21.9%				20.8%				20.9%				21.2%
			Restated (1)
			FY 16				Q1 17				Q2 17				Q3 17				Q4 17				FY 17
Income before income taxes			$	638,625			$	88,375			$	234,327			$	189,914			$	184,455			$	697,071
U.S. GAAP income tax provision (benefit)				122,890				(149,519	)			58,699				39,935				42,983				(7,902	)
U.S. GAAP ETR(2)				19.2%				(169.2%)				25.1%				21.0%				23.3%				(1.1%)
Pro forma discrete tax items(3):
Switzerland corporate tax election				–				168,755				–				–				11,279				180,034
Impact of share-based award expirations				–				–				(7,275	)			–				(15,345	)			(22,620	)
Total pro forma discrete tax items				–				168,755				(7,275	)			–				(4,066	)			157,414
Pro Forma Income Tax Provision			$	122,890			$	19,236			$	51,424			$	39,935			$	38,917			$	149,512
Pro Forma ETR				19.2%				21.8%				21.9%				21.0%				21.1%				21.4%

(1)		Effective for the fiscal year ending December 29, 2018, we have adopted ASC Topic 606. The results above are restated under ASC Topic 606.
(2)		Effective tax rate is calculated by taking the Income tax provision (benefit) divided by Income before taxes.
(3)		The discussion of the nature and purpose of discrete tax items identified for pro forma adjustments is located above in the “Non-GAAP Financial Information” section of this earnings release, under the heading “Pro forma effective tax rate.”

Garmin Ltd. And Subsidiaries
Pro Forma Net Income (Earnings) Per Share
(in thousands, except per share information)
			Previously Reported
			FY 16			Q1 17			Q2 17			Q3 17			Q4 17			FY 17
Net income (GAAP)			$510,814			$237,812			$170,950			$147,413			$138,780			$694,955
Foreign currency gains / losses(2)			31,651			37,497			(15,110	)		(8,579	)		8,772			22,579
Tax effect of foreign currency gains / losses(3)			(5,974	)		(7,969	)		3,302			1,782			(1,829	)		(4,791	)
Discrete tax items(4)			–			(168,755	)		7,275			–			4,066			(157,414	)
Net income (Pro Forma)			$536,491			$98,585			$166,417			$140,616			$149,789			$555,329
Diluted earnings per share (GAAP)			$2.70			$1.26			$0.91			$0.78			$0.73			$3.68
Diluted earnings per share (Pro Forma)			$2.83			$0.52			$0.88			$0.75			$0.79			$2.94
			Restated (1)
			FY 16			Q1 17			Q2 17			Q3 17			Q4 17			FY 17
Net income (GAAP)			$515,735			$237,894			$175,628			$149,979			$141,472			$704,973
Foreign currency gains / losses(2)			31,651			37,497			(15,110	)		(8,579	)		8,772			22,579
Tax effect of foreign currency gains / losses(3)			(5,974	)		(7,969	)		3,302			1,782			(1,829	)		(4,791	)
Discrete tax items(4)			–			(168,755	)		7,275			–			4,066			(157,414	)
Net income (Pro Forma)			$541,412			$98,667			$171,095			$143,182			$152,481			$565,347
Diluted earnings per share (GAAP)			$2.72			$1.26			$0.93			$0.80			$0.75			$3.74
Diluted earnings per share (Pro Forma)			$2.86			$0.52			$0.91			$0.76			$0.81			$3.00

(1)		Effective for the fiscal year ending December 29, 2018, we have adopted ASC Topic 606. The results above are restated under ASC Topic 606.
(2)		The majority of the Company’s consolidated foreign currency gains and losses are typically driven by movements in the Taiwan Dollar, Euro, and British Pound Sterling in relation to the U.S. Dollar and the related exchange rate impact on the significant cash, receivables, and payables held in a currency other than the functional currency at one of the Company’s subsidiaries. However, there is minimal cash impact from such foreign currency gains and losses.
(3)		The tax effect of foreign currency gains and losses is calculated using the pro forma ETR for the respective period, as presented above. The quarterly tax effects may not cross-foot to the annual tax effect due to quarterly variances in pro forma ETR.
(4)		The discrete tax items are discussed in the pro forma effective tax rate section.