Garmin Ltd – ‘10-K405’ for 12/29/01

On:  Wednesday, 3/27/02   ·   For:  12/29/01   ·   Accession #:  1121788-2-3   ·   File #:  0-31983

in

this entire Filing. an “Entity” Search.

Show

Documents searched

and

each “hit”. the 1st “hit”.

↓↑Hints

Annual Report — [x] Reg. S-K Item 405   —   Form 10-K
Filing Table of Contents

Document/Exhibit                   Description                      Pages   Size 

 1: 10-K405     Annual Report -- [x] Reg. S-K Item 405                73    337K 

Document Table of Contents

10-K405
1st Page of 73
TOC
↑Top
Previous
Next
↓Bottom
Just 1st
 
 United States
Securities and Exchange Commission
Washington, D.C. 20549

 FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
 SECURITIES EXCHANGE ACT OF 1934
For the year ended December 29, 2001
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)

  Cayman Islands                                  98-0229227
      (State or other jurisdiction        (I.R.S. Employer identification no.)
of incorporation or organization)                                 
5th Floor, Harbour Place, P.O. Box 30464 SMB,                 N/A           
 103 South Church Street                          (Zip Code)
George Town, Grand Cayman, Cayman Islands                               
(Address of principal executive offices)                                

      Company's telephone number, including area code: (345)-946-5203*

Securities registered pursuant to Section 12(b) of the Act:  None               
Securities registered pursuant to Section 12(g) of the Act:                     

Common Shares, $0.01 Per Share Par Value
(Title of Class)

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 [X] NO [ ]                               

Indicate by check mark if disclosure of delinquent  filers  pursuant to Item 405
of  Regulation S-K is not contained  herein,  and will not be contained,  to the
best of Company's  knowledge,  in a definitive  proxy or information  statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]                                                                  

     Aggregate  market  value  of the  voting  and  non-voting  shares  held  by
non-affiliates  of the Company as of March 22, 2002,  based on the closing price
of the  Registrant's  common  shares on the  Nasdaq  Stock  Market for that date

Common Shares, $.01 par value - $1,166,074,202
     Number of shares outstanding of the Company's common shares as of March 22,
2002:                                                                           
 Common Shares, $.01 par value - 107,779,568
Documents incorporated by reference:                                            
Portions of the following  documents are  incorporated  herein by reference into
Part of the Form 10-K as indicated:                                             

                                      Part of Form 10-K into
Document                                           which Incorporated           
                                          Part III
Company's Definitive Proxy Statement for the 2002 Annual Meeting of Shareholders
which will be filed no later than 120 days after December 29, 2001              

*The executive offices of the Registrant's principal United States subsidiary   
are located at 1200 East 151st Street, Olathe, Kansas  66062.                 
The telephone number there is (913) 397-8200.                                   

10-K405
2nd Page of 73
TOC
1st
Previous
Next
↓Bottom
Just 2nd
 Garmin Ltd.

2001 Form 10-K Annual Report

 Table of Contents

    Cautionary Statement With Respect To Forward-Looking Comments............1

Part I

Item 1.      Business.........................................................1 
Item 2.      Properties......................................................10 
Item 3.      Legal Proceedings...............................................11 
Item 4.      Submission of Matters to a Vote of Security Holders.............11 
            Executive Officers and Significant Employees of the Company.....11

 Part II

Item 5.      Market for the Company's Common Stock and Related                  
                 Stockholder Matters........................................12
Item 6.      Selected Consolidated Financial Data............................13 
Item 7.      Management's Discussion and Analysis of Financial Condition        
                 and Results of Operations..................................15
Item 7A.     Quantitative and Qualitative Disclosures About Market Risk......36 

Item 8.      Financial Statements and Supplementary Data.....................37 
Item 9.      Changes in and Disagreements with Accountants on Accounting        
                 and Financial Disclosure...................................62

Part III

Item 10.     Directors and Executive Officers of the Company.................62 
Item 11.     Executive Compensation..........................................62 
Item 12.     Security Ownership of Certain Beneficial Owners and Management..62 
Item 13.     Certain Relationships and Related Transactions..................62 

 Part IV

Item 14.     Exhibits, Financial Statement Schedules, and Reports on            
                 Form 8-K...................................................63
            Signatures......................................................66

GARMIN,  the GARMIN logo, the GARMIN globe design,  the GARMIN 'swoosh' design, 
STREETPILOT,  ETREX, ETREX SUMMIT, EMAP, TRACBACK, DCG, GPSMAP, GPS II, GPS III,
GPSCOM, PHASETRAC 12, TRACPAK, G CHART, PERSONAL NAVIGATOR,  GUIDANCE BY GARMIN,
AUTOLOCATE, NAVTALK and SEE-THRU are included among the registered trademarks of
Garmin, and ETREX CAMO, ETREX LEGEND, ETREX MARINER, ETREX VENTURE, ETREX VISTA,
METROGUIDE,  MAPSOURCE, CLICK STICK, BLUECHART, GPS V and RINO are trademarks of
Garmin Ltd. or its  subsidiaries.  All other trademarks and trade names referred
to in this Form 10-K are the property of their respective owners.               

10-K405
3rd Page of 73
TOC
1st
Previous
Next
↓Bottom
Just 3rd
 CAUTIONARY STATEMENT WITH RESPECT TO FORWARD-LOOKING COMMENTS

The discussions set forth in this Annual Report on Form 10-K contain  statements
concerning  potential future events. Such  forward-looking  statements are based
upon  assumptions  by the  Company's  management,  as of the date of this Annual
Report,  including  assumptions  about  risks  and  uncertainties  faced  by the
Company. In addition,  management may make forward-looking  statements orally or
in other  writings,  including,  but not limited to, in press  releases,  in the
annual  report to  shareholders  and in the  Company's  other  filings  with the
Securities and Exchange Commission.  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.  Readers are cautioned not to place
undue reliance on these forward-looking statements, which speak only as of their
date. If any of management's assumptions prove incorrect or should unanticipated
circumstances  arise, the Company's 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 Item 7,  'Management's  Discussion  and
Analysis of Financial  Condition and Results of  Operations',  of this Form 10-K
under the  heading  'Company-Specific  Trends and Risks'.  Readers are  strongly
encouraged  to  consider  those  factors  when  evaluating  any  forward-looking
statements   concerning   the   Company.   The  Company   will  not  update  any
forward-looking  statements  in this Annual  Report to reflect  future events or
developments.                                                                   

Part I

Item 1.  Business                                                               

    This discussion of the business of Garmin Ltd. ('Garmin' or the 'Company')
should  be  read  in  conjunction  with,  and  is  qualified  by  reference  to,
'Management's  Discussion and Analysis of the Company's  Financial Condition and
Results of  Operations'  ('MD&A')  under Item 7 herein and the  information  set
forth in response to Item 101 of Regulation  S-K in such Item 7 is  incorporated
herein by reference in partial response to this Item 1. In addition, pursuant to
Rule 12b-23 under the Securities  Exchange Act of 1934, as amended,  the segment
and  geographic  information  included  in Item  8,  'Financial  Statements  and
Supplementary  Data',  Note 11 is  incorporated  herein by  reference in partial
response to this Item 1.                                                        

     The Company was  incorporated  in the Cayman  Islands on July 24, 2000 as a
holding  company  for  Garmin  Corporation,  a Taiwan  corporation,  in order to
facilitate a public offering of Garmin shares in the United States.             

     The Company owns, directly or indirectly, all of the operating companies in
the Garmin group, except for one share of Garmin Corporation held of record, but
not  beneficially,  by each of six  shareholders  as  nominees  to  satisfy  the
requirement  under  Taiwan  law in  effect at the time of the  formation  of the
Company  that Garmin  Corporation  have at least seven  shareholders,  and 4,000
shares  of  Garmin  Corporation  held by two  related  shareholders  who did not
convert their Garmin  Corporation  shares to shares of the Company.  These 4,006
shares  represent  approximately  0.004%  of the  outstanding  shares  of Garmin
Corporation.                                                                    

Recent Developments in the Company's Business                                   

Sequoia Instruments, Inc.                                             

     On November 29, 2001,  Garmin announced that it had acquired  substantially
all the  assets  of  Sequoia  Instruments,  Inc.  ('Sequoia'),  a  research  and
development   company  which  has  developed   technology   relating  to  Global
Positioning  System  ('GPS')  aided Air Data and Attitude  Heading and Reference
Systems  ('ADHRS') for aircraft.  Garmin paid Sequoia  $3,625,000 for the assets
and the purchase agreement provides for additional  payments to Sequoia totaling
$1,000,000  upon the  certification  and  shipment  of  products  based upon the
technology acquired from Sequoia.                                               

10-K405
4th Page of 73
TOC
1st
Previous
Next
↓Bottom
Just 4th
Shareholder Rights Plan                                               

     On October 24,  2001,  Garmin's  Board of Directors  adopted a  shareholder
rights plan (the 'Rights Plan'). Pursuant to the Rights Plan, the Board declared
a dividend of one preferred  share  purchase  right on each  outstanding  common
share of Garmin to  shareholders  of record as of November  1, 2001.  The rights
trade  together with Garmin's  common shares.  The rights  generally will become
exercisable  if a person or group  acquires or announces an intention to acquire
15 percent or more of Garmin's outstanding common shares. Each right (other than
those  held by the new 15  percent  shareholder)  will  then be  exercisable  to
purchase preferred shares of Garmin (or in certain instances other securities of
Garmin)  having at that time a market  value equal to two times the then current
exercise   price.   Under  certain   circumstances,   the  rights  will  entitle
shareholders  to  purchase  shares  in  an  acquiring  company  at a 50  percent
discount.  The rights will expire on October 31, 2011 unless  earlier  redeemed.
Garmin's Board of Directors may redeem the rights at a price of $0.002 per right
generally at any time before the rights become exercisable.                     

Share Repurchase Program                                              

     On  September  24,  2001,  Garmin  announced  that its  Board of  Directors
approved a share repurchase  program  authorizing  Garmin to purchase up to five
million common shares of Garmin Ltd. as market and business  conditions warrant.
The  purchases may be made from time to time on the open market or in negotiated
transactions  in compliance  with Rule 10b-18  promulgated by the Securities and
Exchange Commission.  The timing and amounts of any purchases will be determined
by Garmin's  management  depending on market conditions and other factors deemed
relevant. The share repurchase authorization expires on December 31, 2002. As of
March 22, 2002,  Garmin had purchased a total of 595,200 shares pursuant to this
share  repurchase  authorization  at a  total  cost of $9.8  million.  All  such
purchased  shares have been  cancelled and now form part of the  authorized  but
unissued  capital of Garmin,  since Cayman Islands law does not permit a company
to hold its own shares.                                                         

Management of Garmin International, Inc.                              

     On March 27,  2002,  Dr. Min H. Kao was  appointed as President of Garmin's
principal U.S. subsidiary,  Garmin International,  Inc. ('Garmin International')
and Gary L.  Burrell was  appointed  Chairman of Garmin  International.  Dr. Kao
previously served as Vice President of Garmin International since April 1991 and
Mr. Burrell previously served as President of Garmin  International since August
1990.  Both Dr. Kao and Mr.  Burrell  continue to serve as  directors  of Garmin
International and of Garmin and as Co-Chairmen and Co-CEOs of Garmin.           

Company Overview                                                                

     Garmin is a leading,  worldwide provider of navigation,  communications and
information  devices,  most of  which  are  enabled  by GPS  technology.  Garmin
designs,  develops,  manufactures  and markets  under the GARMIN brand a diverse
family of  hand-held,  portable and fixed mount  GPS-enabled  products and other
navigation, communications and information products for the general aviation and
consumer  markets.  Each of  Garmin's  GPS  products  utilizes  its  proprietary
integrated  circuit  and  receiver  designs to  collect,  calculate  and display
location, direction, speed and other information in forms optimized for specific
uses.                                                                           

Overview of the Global Positioning System                                       

    The Global Positioning  System first made available by the U.S. government
for commercial use in 1983, is a worldwide  navigation  system which enables the
precise   determination  of  geographic  location  using  established  satellite
technology.  The system consists of a constellation of orbiting satellites.  The
satellites and their ground  control and monitoring  stations are maintained and
operated by the United States Department of Defense,  which maintains an ongoing
satellite  replenishment  program to ensure  continuous  global system coverage.
Access to the system is provided free of charge by the U.S. government.         

     Reception  of  GPS  signals  from  the  satellites  requires  line-of-sight
visibility between the satellites and the receiver.  GPS receivers  generally do
not work  indoors  and when a receiver is  outside,  buildings,  hills and dense
foliage can block  reception.  GPS receivers can be very compact,  and it is not
necessary to have a large dish antenna to receive GPS signals.                  

10-K405
5th Page of 73
TOC
1st
Previous
Next
↓Bottom
Just 5th
     Prior to May 2000, the U.S.  Department of Defense  intentionally  degraded
the  accuracy  of  civilian  GPS  signals  in  a  process   known  as  Selective
Availability  ('SA') for national security purposes.  SA variably degraded GPS  
position accuracy to a radius of 100 meters. On May 2, 2000, the U.S. Department
of Defense  discontinued  SA. With SA removed,  a GPS receiver can calculate its
position  to an  accuracy  of 10 meters  or less,  significantly  enhancing  the
utility of GPS for most applications.                                           

     The  accuracy  and  utility of GPS can be  enhanced  even  further  through
augmentation  techniques  which compute any  remaining  errors in the signal and
broadcast these corrections to a GPS device. The Federal Aviation Administration
('FAA') is  developing a Wide Area  Augmentation  System  ('WAAS')  comprising  
ground  reference  stations  and  additional  satellites  which will improve the
accuracy  of GPS  positioning  available  in the United  States and  portions of
Canada and Mexico to approximately 3 meters. WAAS is intended to support the use
of GPS as the primary  means of enroute,  terminal and approach  navigation  for
aviation  in the  United  States.  The  increased  accuracy  offered  by WAAS is
expected also to enhance the utility of WAAS-enabled  GPS receivers for consumer
applications. The FAA has stated that it expects the WAAS system to have initial
operating capability by December 2003.                                          

Products                                                                        

     Garmin has  achieved a leading  market  position  and a record of growth in
revenues and profits by offering ergonomically  designed, user friendly products
with innovative  features and designs covering a broad range of applications and
price points.                                                                   

     Garmin's target markets currently  consist of the consumer  segment,  which
primarily  includes  marine,  recreational  and  automotive  products,  and  the
aviation segment, which consists of panel mount and portable products for use in
general aviation aircraft.                                                      

     While the marine, recreational,  automotive and aviation product lines will
continue to be the core of Garmin's business in the near-term,  GPS capabilities
are  becoming  increasingly  commercially  viable  in a wide  range of  consumer
products  and  services,  including  wireless  consumer  and mobile  information
devices (such as Family Radio Service and General  Mobile Radio Service  two-way
radios,  cellular phones and personal digital  assistants).  Garmin's goal is to
take  advantage  of its brand name and its  product  development  experience  to
expand its product line in these potentially high-growth GPS markets.           

Consumer                                                                        

    Garmin currently offers a wide range of consumer products, including hand-
held GPS receivers, our StreetPilot(R) portable automotive navigation device and
fixed-mount  GPS/Sounder  products,  targeted toward the marine and recreational
market segments.  Garmin believes that its consumer products are known for their
value  leadership,  high  performance,   innovation  and  ergonomics.   Garmin's
StreetPilot  III  won the  2001  Consumer  Electronics  Association  Design  and
Engineering Showcase award for mobile electronics.  The StreetPilot III also won
an Editors Choice award from Cnet.com in 2001.                                  

    Garmin  also  offers  a broad  set of  accessories for its  products.  For
instance,  Garmin's  MapSource(TM)CDs,  which can be loaded  into  selected GPS 
products through a personal computer, provide detailed mapping  information for 
the  United States and Canada and a number of  European  countries.  With this  
information, Garmin's StreetPilot, GPS V, eTrex(R) Venture, eTrex Legend, eTrex 
Vista, and eMap(TM) products can provide the customer with detailed information 
concerning  business  listings and  points  of  interest.  A user can  choose a 
business  listing  (e.g., restaurants, hotels, and  shops)  and the unit will   
display the location of the destination on a map along with the user's location 
and the distance from the user's location. Garmin's BlueChart(TM) CD's and data 
cards,  which  are  compatible  with  selected  GPS  chartplotter and  handheld 
products, provide detailed nautical chart data for boaters.                     

10-K405
6th Page of 73
TOC
1st
Previous
Next
↓Bottom
Just 6th
     The table  below  includes a sampling of some of the  products  that Garmin
currently offers to consumers.                                                  

Handheld and portable consumer products:                                        

eMap             Pocket-size  GPS with  built-in basic map showing  highways    
         and major streets for personal use and business travel.
             MapSource compatibility allows street level mapping, points
 of interest and address location functionality.

eTrex                                                                           
(6 models)       Ultra compact full feature handheld GPS design for outdoor     
                 enthusiasts. All models are waterproof and have rugged designs.
              The eTrex Summit and eTrex Vista have electronic compass and
                barometric altimeter functions.  eTrex Venture has a worldwide
                 database of cities.  eTrex Legend and eTrex Vista have internal
              basemaps of either North and South America or Europe.  eTrex
              Camo features a camouflaged design and a hunting and fishing
                 almanac.  The eTrex class of products represented approximately
              20 percent of total consolidated revenues during fiscal year
             2001.  The eTrex class of products represented less than 10
                 percent of total consolidated revenues during fiscal years 2000
and 1999.                                     

StreetPilot                                                                     
(3 models)       Portable automotive navigation systems with basemap and        
               MapSource compatibility allowing street level mapping, points
               of interest and address location functionality.  The ColorMap
           model features a color display.  StreetPilot III features
             "turn by turn" automatic route guidance and voice prompting
and a high resolution color display.          

GPS 12                                                                          
(3 models)       Rugged handhelds for serious outdoor enthusiasts. Capabilities 
             and features  available in different GPS 12  models include
                basic navigation, color graphics, built-in database of cities,
basemaps and MapSource compatibility.         

GPSMAP 76                                                                       
(2 models)       Handheld GPS with large display and a waterproof case which    
         floats in water. Preloaded with U.S. tidal data and has
               MapSource and BlueChart compatibility. GPSMAP 76S(expected to
                be available in April 2002)features a barometric altimeter and
an electronic compass.                        

GPS V            Portable GPS with 'turn by turn' automatic route guidance,     
             MapSource compatibility for street level mapping and unique
selectable vertical or horizontal displays.   

Marine fixed-mount units:                                                       

GPS126,128 and 152                                                              
              Low cost  fixed-mount GPS's for boating with either a built-in
              antenna or an external antenna for exposed installations.  GPS
               152 has internal database of U.S.cities and navigation aids and
               has the compatibility of uploading points of interest data from
a personal computer with MapSource CD-ROM's.    

GPSMAP                                                                          
(11 models)     Marine GPS/plotter  combinations for boating and fishing        
               enthusiasts of different levels.Features available on different
              models include a variety of display sizes(ranging in size from
             3.8" to 10"), high-contrast LCD graphics, monochrome 16-color
             or 256-color displays and the capability of uploading mapping
               and nautical chart data from a personal computer with MapSource
and BlueChart CD-ROM's.                         

10-K405
7th Page of 73
TOC
1st
Previous
Next
↓Bottom
Just 7th
Sounder products:                                                               

FishFinders                                                                     
(6 models)      Fishfinders feature DCG(R)and See-Thru(R)technology, which aid  
             fishermen in defining the ocean/lake bottom and spotting fish
              in hidden or obscured areas.  Fishfinder Blue series  products
               have dual frequency transducers for optimal performance in deep
water.                                          

GPSMAP/Sounder                                                                  
(3 models)      'All-in-one' product lines  with  GPS,  chartplotter and sonar  
               functionality.  These  units  come with different display sizes
          (ranging in size from 4.2" to 7.25") and the capability of
          uploading mapping and nautical chart data.  Certain models
    feature dual frequency transducers for optimal sonar
performance in deep water.                      

Consumer communications products:                                               

NavTalk GSM      A handheld unit that combines a 900 MHz/1800 MHz GSM digital   
           cellular telephone and a full-featured  GPS receiver with
              mapping display, 'turn by turn' automatic route guidance and
             voice prompting.  Features the ability to transmit location
             from one unit to another unit and to location-based service
companies.                                    

VHF 720 & 725    Waterproof, portable handheld marine radios with either 3-watt 
         or 5-watt power output  provide clear VHF communication
capabilities for all types of boaters.        

Aviation                                                                        

    Garmin's panel mounted product line includes GPS-enabled  navigation,  VHF
communications  transmitters/receivers,  traditional VHF navigation  receivers, 
instrument landing  receivers,  digital  transponders (which transmit either an 
aircraft's altitude or its flight identification number in response to requests 
transmitted by ground-based  air traffic  control radar systems or air traffic  
avoidance devices on other aircraft), marker beacon receivers and audio panels. 

   Garmin's aviation  products have won  prestigious awards  throughout  the
industry for their  innovative  features  and ease of use. Garmin was the first 
company to offer a GPS receiver, the GPS 155/165, which met the Federal Aviation
Administration's requirements for certain kinds of instrument approaches and did
so a full year ahead of its  competitors.  The GPS 155/165  with its  instrument
approach  capability won Flying  Magazine's  outstanding  achievement  award for
1994. The GNS 430/530 offers multiple features and capabilities  integrated into
a single product.  This high level of integration  minimizes the use of precious
space in the cockpit,  enhances the quality and safety of flight through the use
of modern  designs and  components and reduces the cost of equipping an aircraft
with modern  electronics.  The GNS 430 was also recognized by Flying Magazine as
the  Editor's  Choice  Product of the Year for 1998.  In 1994 and again in 2000,
Garmin  earned  recognition  from  the  Aircraft  Electronics   Association  for
outstanding  contribution  to the general  aviation  electronics  industry.  The
GPSMAP  295 won  Aviation  Consumer  Magazine's Gear of the Year award for best 
aviation portable product in 2000 and again in 2001.                            

    Garmin's panel mounted  aviation  products are sold in the retrofit market
where older aircraft are fitted with the latest  electronics from Garmin's broad
product  line.  Garmin  believes  this  market  continues  to have  good growth 
potential as aircraft owners elect to upgrade their existing  aircraft at a cost
that is lower than purchasing a new aircraft.                                   

10-K405
8th Page of 73
TOC
1st
Previous
Next
↓Bottom
Just 8th
   Garmin has also gained market share as an original equipment manufacturer
supplier  to  leading  airframe  manufacturers  such as the New Piper  Aircraft 
Company,  Raytheon Aircraft Company, Mooney Aircraft Corporation, Cirrus Design 
Corporation and Eurocopter.  Garmin  anticipates  further growth in its sales to
the original equipment  manufacturers  market as its product offerings expand to
include weather  information and primary flight  instruments that use the latest
display technologies.                                                           

     The table  below  includes  a  sampling  of some of the  aviation  products
currently offered by Garmin:                                                    

Handheld and portable aviation products:                                        

GPS 92          Value-priced unit for recreational pilots with built-in         
               Jeppesen(R) database.  The Jeppesen database includes airports,
            navigation beacons,controlled airspace,runway data and final
approach waypoints.                             

GPS III Pilot   Aviation style GPS III, with built-in maps and Jeppesen         
database.                                       

GPSMAP 195      Portable GPS receiver with 4.1" moving map display and built-in 
aviation database.                              

GPSMAP 295      A high-end portable GPS receiver designed specifically for the  
         serious aviator.  Features include a 16-color display and
            built-in aviation database; it can download MapSource CD-ROM
            information through a personal computer for street level map
details.                                        

Panel-mount aviation products:                                                  

GNC 300XL TSO   Instrument Flight Rules ('IFR') certified  product  that        
              combines a GPS receiver with VHF radio and features moving map
graphics.                                       

400 Series                                                                      
(3 models)      The GNS 430 is the world's first 'all-in-one' IFR certified     
   GPS navigation  receiver/traditional VHF navigation
         receiver/instrument  landing  systems  receiver  and  VHF
          communication transmitter/receiver.  Features available in
              different 400 series models include 4 color map graphics, GPS,
communication and navigation capabilities.      

500 Series                                                                      
(2 models)      These units combine the features of the 400 series along with a 
larger 5" color display.                        

GI-102A &                                                                       
106A          Course deviation indicators (CDIs).  The GI-106A features an  
     instrument landing system receiver to aid in landing.

GMA 340         A feature-rich  audio panel with six-place stereo intercom and  
       independent pilot/co-pilot communications capabilities.

GTX 320A &                                                                      
  327          FAA-certified  transponders  which  transmit altitude or flight
         information to air traffic control radar systems or other
                aircraft's air traffic avoidance devices and feature solid-state
          construction for longer life. The GTX 327 offers a digital
display with unique timing functions.           

10-K405
9th Page of 73
TOC
1st
Previous
Next
↓Bottom
Just 9th
Aviation communications products:                                               

NavTalk Pilot   GPS-enabled cellular telephone, with built-in aviation database,
              offers AirCell(R) airborne service so that pilots can make and
receive cellular telephone calls while airborne.

Sales and Marketing                                                             

     Garmin's  consumer  products  are  sold  through  a  worldwide  network  of
approximately 2,500 independent  dealers and distributors in approximately 100  
countries who meet our sales and customer service qualifications. Garmin intends
to  selectively  grow its dealer  network  geographically  and by product lines.
Marketing  support is provided  geographically  from Garmin's offices in Olathe,
Kansas (North, South and Central America), Romsey, U.K. (Europe, Middle East and
Africa) and Shijr, Taiwan (Asia and Australasia). Garmin's distribution strategy
is  intended  to  increase  Garmin's  global   penetration  and  presence  while
maintaining high quality standards to ensure end-user satisfaction.             

    In 2001, Garmin established a new subsidiary in Kansas,  Garmin USA, Inc.,
to handle  consumer and aviation  product  sales  activities in the USA. Also in
2001, Garmin's subsidiary, Garmin Foreign Sales Corporation,  was dissolved in  
view of the changes to U.S.  tax laws enacted in the Foreign  Sales  Corporation
Repeal and Extraterritorial Income Exclusion Act of 2000.                       

     Garmin's U.S. consumer segment marketing is handled through its dealers who
are  serviced  by  a  staff  of  regional  sales  managers  and  in-house  sales
associates. Some of Garmin's largest consumer products dealers include:         

        - Bass Pro Shops - a freshwater sports specialist with a sophisticated
catalog sales effort and 'super store' locations;         

        - Boat America/Boat U.S. - A major marine dealer featuring memberships
for special buying privileges;                            

     - Boaters World - a leading off-shore marine retailer with multiple
locations;                                                

      - Cabela's - a major catalog retailer for the outdoor marine market;

- Wal-Mart - one of the world's largest mass retailers;       

       - West Marine - one of the largest U.S. marine retailers specializing
in offshore boating equipment; and                        

- Best Buy - one of the largest U.S. electronics retailers    

     Garmin's European consumer segment marketing is handled through  in-country
distributors who resell to dealers. Working closely with Garmin's in-house sales
and marketing  staff in Romsey,  U.K.,  these  distributors  are responsible for
inventory  levels  and staff  training  requirements  at each  retail  location.
Garmin's Taiwan-based marketing team handles its Asia marketing effort.         

     Aviation  marketing is handled through  dealers around the world.  Garmin's
largest  aviation  dealers include  Sportsmen's  Market,  Tropic Aero and JA Air
Center.  All have the training,  equipment and certified  staff required for the
at-airport  installation of Garmin's most sophisticated IFR avionics  equipment.
Visual Flight Rules ('VFR')  equipment  including  handheld GPS receivers,  is  
sold through dealers, usually at airport locations or through catalogs.         

     In addition to the  traditional  distribution  channels  mentioned,  Garmin
enjoys significant market penetration with original equipment manufacturers.  In
the  consumer  market,   Garmin's  products  are  standard  equipment  on  boats
manufactured  by Ranger Boats and Lund Boat  Company.  In the  aviation  market,
Garmin's  avionics  are standard  equipment on airplanes  built by The New Piper
Aircraft Company,  Raytheon Aircraft  Company,  Mooney Aircraft  Corporation and
Cirrus Design Corporation.  Other aircraft and boat manufacturers offer Garmin's
products as optional equipment.                                                 

10-K405
10th Page of 73
TOC
1st
Previous
Next
↓Bottom
Just 10th
Competition                                                                     

     The market for  navigation,  communications  and  information  products  is
highly competitive.  Garmin believes the principal competitive factors impacting
the market for its products are features,  quality,  design,  customer  service,
brand, price, time-to-market and availability. Garmin believes that it generally
competes favorably in these areas.                                              

     Garmin  believes that its principal  competitors  for consumer  GPS-enabled
product lines are Thales Navigation, Inc. ('Thales'),  Lowrance Electronics Inc.
('Lowrance'),   Cobra  Electronics   Corporation  ('Cobra'),   Raymarine  Ltd.  
('Raymarine'), Furuno Electronic Company, the Standard Horizon Division of Yaesu
Co. Ltd.  ('Standard'),  Navman Ltd.  and Simrad AS  ('Simrad').  For Garmin's  
fishfinder/depth  sounder  product  lines,  Garmin  believes  that its principal
competitors are Lowrance, Furuno, Raymarine,  Simrad and the Humminbird division
of  Techsonic  Industries,  Inc.  ('Humminbird').  Garmin  believes  that  its  
principal  competitors  for marine VHF  transceiver  product lines are Standard,
Shakespeare Corporation,  Humminbird,  Raymarine, Uniden Corporation, Simrad and
Icom, Inc. For Garmin's  general  aviation  product lines,  Garmin considers its
principal competitors to be Lowrance and Thales, for portable GPS units, and UPS
Aviation  Technologies,  a subsidiary of United Parcel Service, Inc., Honeywell,
Inc.,  Northstar  Technologies,  Goodrich  Corporation,  Meggitt PLC and Avidyne
Corporation  for  panel-mount  GPS and display units.  For Garmin's Family Radio
Service and General Mobile Radio Service product line,  Garmin believes that its
principal  competitors  are  Motorola,  Inc.  ('Motorola'),  Cobra and  Audiovox
Corporation.  For Garmin's  cellular  product  line,  Garmin  believes  that its
principal  competitors are Nokia Oy, Telefon AB LM Ericsson,  Motorola,  Benefon
Oy,  Siemens AG  ('Siemens'),  Sony  Corporation  and Samsung.  For Garmin's GPS
sensor board  product  lines,  Garmin  believes its  principal  competitors  are
Trimble  Navigation,  Ltd.,  Conexant,  Inc.,  Thales,  Motorola,  Philips  N.V.
('Philips') and SiRF Technology,  Inc. For Garmin's  automotive product lines,  
Garmin considers its principal  competitors to be Thales,  Alpine  Electronics, 
Inc., Denso KK, Visteon,  the On-Star  Division of General Motors  Corporation, 
Xanavi Informatics  Corporation,  Robert Bosch GmbH,  Siemens and Philips.  For 
Garmin's personal digital assistant product line, Garmin considers its principal
competitors to be Palm, Inc. and Handspring, Inc.                               

Research and Development                                                        

     Garmin's product  innovations are driven by its strong emphasis on research
and  development and the close  partnership  between  Garmin's  engineering and 
manufacturing teams. Garmin's products are created by its engineering and design
staff of  approximately  275  people  worldwide.  Garmin's  manufacturing  staff
includes  manufacturing  process engineers who work closely with Garmin's design
engineers to ensure  manufacturability  and  manufacturing  cost control for its
products.  Garmin's  design  staff  includes  industrial  designers,  as well as
software  engineers,  electrical  engineers  and  mechanical  engineers.  Garmin
believes the  industrial  design of its products has played an important role in
Garmin's  success.  Once a  development  project is initiated  and  approved,  a
multi-disciplinary  team is created to design the product and transition it into
manufacturing.                                                                  

     Below is a table of Garmin's  expenditures on research and development over
the last three fiscal years.                                                    

                            Fiscal Years Ended
         ---------------------------------------------------------------------
                       December 29,        December 30,           December 25,
                             2001                2000                   1999
         ---------------------------------------------------------------------
(In thousands)                                                                  
Research and development    $28,164             $21,764                $17,339  

10-K405
11th Page of 73
TOC
1st
Previous
Next
↓Bottom
Just 11th
Manufacturing and Operations                                                    

     Garmin  believes  that one of its core  competencies  is its  manufacturing
capability at both its Shijr,  Taiwan facility and its Olathe,  Kansas facility.
Garmin's   vertically   integrated   approach  has  provided  it  the  following
competitive advantages:                                                         

     Reduced   time-to-market.   Utilizing  concurrent  engineering  techniques,
Garmin's products are introduced to production at an early development stage and
the feedback  provided by manufacturing  is incorporated  into the design before
mass production begins. In this manner, Garmin can significantly reduce the time
required to move a product from its design phase to mass production  deliveries,
with improved quality and yields.  Reducing time to market has enabled Garmin to
offer several industry firsts,  such as the NavTalk  GPS-enabled  wireless phone
and  the  GNS  430,  which  integrates   traditional   aviation  navigation  and
communications systems with GPS in a single package.                            

     Design and process optimization.  Using its manufacturing resources, Garmin
can rapidly  prototype  design  concepts,  products  and  processes  in order to
achieve higher efficiency,  lower cost and best value for the customer. Garmin's
ability to fully explore product design and  manufacturing  process concepts has
enabled it to optimize  its designs to minimize  size and weight in a GPS device
that is fully functional, waterproof, and rugged.                               

     Logistical agility. Operating its own manufacturing facilities helps Garmin
minimize  problems  common  to  the  electronics  industry,  such  as  component
shortages and long component lead times.  Many products can be  re-engineered to
bypass  component  shortages or reduce cost and the new designs can quickly fill
the distribution pipeline.  Garmin can react rapidly to changes in market demand
by  maintaining  a  safety  stock of  long-lead  components  or by  rescheduling
components from one product line to another.                                    

     Garmin's design and manufacturing processes are certified to ISO 9001/2 for
superior quality.  Garmin's Taiwan manufacturing  facility also achieved QS 9000
quality  certification  in 2001.  QS 9000 is a quality  standard for  automotive
suppliers.  In addition  Garmin's  aviation  panel-mount  products  are designed
according to processes which are approved and monitored by the FAA.             

Intellectual Property                                                           

     Garmin's  success  and  ability  to  compete  is  dependent  in part on its
proprietary  technology.  Garmin relies on a combination  of patent,  copyright,
trademark  and trade  secret laws,  as well as  confidentiality  agreements,  to
establish and protect our proprietary  rights. As of March 22, 2002, Garmin held
63 U.S.  patents that expire at various  dates no earlier than 2006. As of March
22, 2002, Garmin had 99 U.S. patent applications pending.  Garmin's U.S. patents
do not create any patent rights in foreign countries. In addition,  Garmin often
relies  on  licenses  of  intellectual  property  for use in its  business.  For
example,  Garmin obtains licenses for digital cartography  technology for use in
our products from various sources.  Garmin's registered U.S. trademarks include:
GARMIN;  the GARMIN logo; the GARMIN globe design; the GARMIN 'swoosh' design;  
STREETPILOT;  ETREX;  ETREX SUMMIT;  EMAP;  TRACBACK;  DCG; PERSONAL  NAVIGATOR;
GPSMAP;  GPS II; GPS III; GUIDANCE BY GARMIN;  GPSCOM;  PHASETRAC 12; TRACPAK; G
CHART;  AUTOLOCATE;  NAVTALK and  SEE-THRU.  Our mark  GARMIN and certain  other
trademarks have also been  registered in selected  foreign  countries.  Garmin's
trademarks include ETREX CAMO; ETREX LEGEND; ETREX MARINER; ETREX VENTURE; ETREX
VISTA;  METROGUIDE;  MAPSOURCE;  CLICK STICK, BLUECHART, GPS V and RINO. Some of
Garmin's  patents and its  registered  trademarks  and  trademarks  are owned by
Garmin's subsidiary, Garmin Corporation.                                        

     Garmin  believes  that its continued  success  depends in large part on the
intellectual  skills of its employees and their ability to continue to innovate.
Garmin will continue to file and prosecute patent  applications when appropriate
to attempt to protect Garmin's rights in its proprietary technologies.          

     It is possible that Garmin's current patents, or patents which it may later
acquire,  may be successfully  challenged or invalidated in whole or in part. It
is also  possible that Garmin may not obtain  issued  patents for  inventions it
seeks to protect.  It is also possible  that Garmin may not develop  proprietary
products or technologies  in the future that are patentable,  or that any patent
issued to Garmin may not provide it with any competitive advantages, or that the
patents  of others  will harm or  altogether  preclude  Garmin's  ability  to do
business.   Legal  protections  afford  only  limited  protection  for  Garmin's

10-K405
12th Page of 73
TOC
1st
Previous
Next
↓Bottom
Just 12th
technology.   Despite  Garmin's  efforts  to  protect  its  proprietary  rights,
unauthorized  parties  may attempt to copy  aspects of  Garmin's  products or to
obtain and use information that Garmin regards as proprietary. Litigation may be
necessary in the future to enforce Garmin's  intellectual  property  rights,  to
protect  its  trade  secrets,  to  determine  the  validity  and  scope  of  the
proprietary  rights of others or to defend  against  claims of  infringement  or
invalidity.  Any  resulting  litigation  could result in  substantial  costs and
diversion of Garmin's  resources.  Garmin's means of protecting its  proprietary
rights may not be adequate and Garmin's  competitors may  independently  develop
similar technology.                                                             

Regulations                                                                     

     Garmin's  aviation  products  that are  intended for  installation  in type
certificated  aircraft  are  required to be  certified  by the FAA, its European
counterpart,  the Joint Aviation Authorities, and other comparable organizations
before  they can be used in an  aircraft.  The  telecommunications  industry  is
highly  regulated,  and the regulatory  environment in which Garmin  operates is
subject to change. In accordance with Federal  Communication  Commission ("FCC")
rules and  regulations,  wireless  transceiver and cellular handset products are
required  to be  certified  by the FCC and  comparable  authorities  in  foreign
countries where they are sold.  Garmin's products sold in Europe are required to
comply with relevant directives of the European Commission. A delay in receiving
required certifications for new products or enhancements to Garmin's products or
losing  certification  for Garmin's existing products could adversely affect its
business.                                                                       

     Because Garmin Corporation, one of the Company's principal subsidiaries, is
located in Taiwan,  foreign exchange control laws and regulations of Taiwan with
respect to  remittances  into and out of Taiwan  may have an impact on  Garmin's
operations.  The  Taiwan  Foreign  Exchange  Control  Statute,  and  regulations
thereunder,  provide that all foreign exchange  transactions must be executed by
banks  designated  to handle such  business by the Ministry of Finance of Taiwan
and by the  Central  Bank  of  China,  also  referred  to as  the  CBC.  Current
regulations favor  trade-related  foreign exchange  transactions.  Consequently,
foreign  currency  earned from  exports of  merchandise  and services may now be
retained and used freely by exporters, while all foreign currency needed for the
import of merchandise  and services may be purchased  freely from the designated
foreign exchange banks. Aside from trade-related foreign exchange  transactions,
Taiwan  companies and residents may, without foreign  exchange  approval,  remit
outside and into Taiwan  foreign  currencies of up to $50 million and $5 million
respectively,  or their  equivalent,  each calendar year.  Currency  conversions
within the limits are  processed by the  designated  banks and do not have to be
reviewed  and  approved  by the CBC.  The  above  limits  apply  to  remittances
involving  a  conversion  between NT Dollars and U.S.  Dollars or other  foreign
currencies.  The CBC typically approves foreign exchange in excess of the limits
if a party  applies  with the CBC for review and  presents  legitimate  business
reasons justifying the currency conversion. A requirement is also imposed on all
enterprises to register all medium and long-term foreign debt with the CBC.     

Employees                                                                       

     As of December 29, 2001, Garmin had 1,329 full-time employees worldwide, of
whom 629 were in the United States, 664 were in Taiwan and 36 were in the United
Kingdom.  None of Garmin's employees are represented by a labor union or covered
by a collective bargaining agreement. Garmin considers its employee relations to
be good.                                                                        

Item 2.  Properties                                                             

     Garmin's U.S. subsidiaries, Garmin International, Inc. and Garmin USA, Inc.
occupy a 240,000 square foot facility on 41 acres in Olathe,  Kansas,  where all
aviation  panel-mount   products  are  manufactured  and  Garmin  products  are 
warehoused, distributed,  and  supported  for  North  and  South  America.  The 
expansion of the  Olathe  facility  from  103,000 to  240,000  square  feet was 
substantially completed in March, 2001. Garmin's subsidiary, Garmin Realty, LLC 

10-K405
13th Page of 73
TOC
1st
Previous
Next
↓Bottom
Just 13th
also  purchased an  additional  46 acres of land on the Olathe site in February,
2000 for  future  expansion.  In  connection  with the bond  financings  for the
facility in Olathe and the expansion of that facility,  the City of Olathe holds
the legal title to this property which is leased to Garmin's subsidiaries by the
City. Upon the payment in full of the outstanding  bonds,  the City of Olathe is
obligated to transfer  title to Garmin's subsidiaries for the aggregate sum of  
$200. In December 2001, Garmin  International,  Inc. entered into a ground lease
for 148,320 square feet of land at New Century Airport in Gardner,  Kansas. This
ground  lease  expires in 2026.  In January  2002,  Garmin  International,  Inc.
completed  construction of a 25,034 square foot aircraft hangar, flight test and
certification  facility on this land for use in development and certification of
aviation products.                                                              

     Garmin's  subsidiary,  Garmin  Corporation,  owns  a  249,326  square  foot
facility in Shijr,  Taipei County,  Taiwan where it manufactures all of Garmin's
consumer and portable  aviation  products and  warehouses,  markets and supports
products for the Pacific Rim  countries.  Garmin  Corporation  occupies  208,375
square feet at this  facility  and leases the  remaining  41,082  square feet to
third parties.                                                                  

     Garmin's  subsidiary,  Garmin (Europe) Ltd.,  leases an aggregate of 28,358
square feet under two leases in Romsey,  England for warehousing,  marketing and
supporting  Garmin  products  in  Europe,  Africa and the  Middle  East.  Garmin
(Europe) Ltd.  also repairs  products at this  facility.  These leases expire in
2010 and 2015 respectively.  Garmin International, Inc. also leases an aggregate
of 3,233 square feet of office space in Tempe, Arizona for software development,
and  Wichita,  Kansas for  support  for  Garmin's  aviation  original  equipment
manufacturer operations.                                                        

Item 3.  Legal Proceedings                                                      

     From time to time, Garmin may be involved in litigation  relating to claims
arising out of our operations.  As of March 22, 2002,  Garmin was not a party to
any material legal proceedings.                                                 

Item 4.  Submission of Matters to a Vote of Security Holders                    

Not applicable.                                                       

Executive Officers and Significant Employees of the Company                     

     Pursuant  to General  Instruction  G(3) of Form 10-K and  instruction  3 to
paragraph (b) of Item 401 of Regulation  S-K, the following  list is included as
an unnumbered Item in Part I of this Annual Report on Form 10-K in lieu of being
included in the Company's  Definitive  Proxy  Statement in  connection  with its
annual meeting of shareholders scheduled for June 7, 2002.                      

     Gary L. Burrell,  age 64, has served as Co-Chairman and Co-Chief  Executive
Officer of Garmin  Ltd.  since  August  2000.  He has been a director  of Garmin
Corporation  since January  1990.  He served as President of Garmin  Corporation
from January 1990 to December 1998. Mr. Burrell has also been Chairman of Garmin
International,  Inc. since March 2002, a director of Garmin International,  Inc.
since August 1990 and he served as President of Garmin International,  Inc. from
August 1990 to March 2002.  Mr.  Burrell has been  Chairman of Garmin USA,  Inc.
since March 2002 and a director of Garmin USA,  Inc.  since  December  2001.  He
served as President of Garmin USA, Inc.  from  December 2001 to March 2002.  Mr.
Burrell has been a director and Chairman of Garmin (Europe) Ltd. since 1992. Mr.
Burrell  was a director of Garmin  Foreign  Sales  Corporation  from May 1998 to
December 2001 and President from July 1998 to December 2001. Mr. Burrell holds a
BS degree in  Electrical  Engineering  from Wichita  State  University  and a MS
degree in Electrical Engineering from Rensselaer Polytechnic Institute.         

     Dr. Min H. Kao, age 53, has served as  Co-Chairman  and Co-Chief  Executive
Officer of Garmin  Ltd.  since  August  2000.  He has been  President  of Garmin
Corporation  since  January  1999.  He has also been  Chairman and a director of
Garmin  Corporation  since  January 1990.  Dr. Kao has been  President of Garmin
International,  Inc.  since March 2002 and a director  of Garmin  International,
Inc.  since August 1990.  He served as Vice  President of Garmin  International,
Inc.  from April 1991 to March 2002.  Dr. Kao has been  President of Garmin USA,
Inc. since March 2002 and a director of Garmin USA, Inc. since December 2001. He
served as Vice  President of Garmin USA,  Inc. from December 2001 to March 2002.
He has been a  director  of Garmin  (Europe)  Ltd.  since  1992.  Dr.  Kao was a
director of Garmin Foreign Sales  Corporation from May 1998 to December 2001 and
Vice  President  from July 1998 to December  2001.  Dr. Kao holds  Ph.D.  and MS
degrees in  Electrical  Engineering  from the  University  of Tennessee and a BS
degree in Electrical Engineering from National Taiwan University.               

     Kevin S.  Rauckman,  age 39,  has  served as Chief  Financial  Officer  and
Treasurer of Garmin Ltd.  since August 2000. He has been Director of Finance and
Treasurer of Garmin  International,  Inc.  since  January 1999 and a director of
Garmin  International,  Inc.  since  April  2001.  He has been  Treasurer  and a
director of Garmin USA, Inc. since  December  2001. Mr.  Rauckman was a director
and Treasurer of Garmin Foreign Sales  Corporation from January 1999 to December
2001.  Previously,  Mr.  Rauckman  served as  Director  of Finance  and in other
finance   capacities  for  one  of  Allied  Signal's  (now  known  as  Honeywell
International, Inc.) Aerospace units from May 1996 to January 1999 and served as
Finance Manager with Unisys  Corporation,  a technology  hardware and consulting
services  company,  from June 1993 to April 1996. Mr.  Rauckman holds BS and MBA
degrees in Business from the University of Kansas.                              

     Andrew R. Etkind,  age 46, has served as General  Counsel and  Secretary of
Garmin  Ltd.  since  August  2000.  He  has  been  General   Counsel  of  Garmin
International, Inc. since February 1998 and Secretary since October 1998. He has
been General  Counsel and Secretary of Garmin USA,  Inc.  since  December  2001.
Previously, Mr. Etkind served as Senior Attorney for Alumax Inc., a manufacturer
of aluminum and aluminum products,  from March 1996 to January 1998 and was Vice
President,  General Counsel and Secretary of Information  Management  Resources,
Inc., a  software  systems  development  and consulting company, from July 1993 
to February 1996. Mr. Etkind holds BA, MA and LLM  degrees  from  Cambridge     
University,  England  and a JD  degree  from  the University of Michigan Law    
School.                                                                         

     Gary  V.  Kelley,  age  55,  has  been  Director  of  Marketing  of  Garmin
International,  Inc. since 1992 and has been a director of Garmin  (Europe) Ltd.
since 1993. Mr. Kelley holds a BBA degree from Baker University. He also holds a
commercial pilot license with instrument and flight instructor ratings.         

     All  executive  officers are elected by and serve at the  discretion of the
Company's  Board of Directors.  None of the executive  officers have  employment
agreements with the Company. There are no arrangements or understandings between
the executive  officers and any other person  pursuant to which he or she was or
is to be selected as an officer.  None of the executive  officers are related to
one  another.  Dr. Min H. Kao is the  brother of  Ruey-Jeng  Kao, a Director  of
Garmin Ltd. and a supervisor of Garmin Corporation.  Elected by the shareholders
of Garmin Corporation,  a supervisor serves as an ex-officio member of its Board
of Directors to protect the interests of all shareholders.                      

 PART II

Item 5.  Market for the Company's Common Stock and Related Stockholder Matters  

     The Company's common shares have traded on the Nasdaq National Market under
the symbol 'GRMN' since its initial  public  offering on December 8, 2000. As of
March 22, 2002 there were approximately 129 shareholders of record.             

     No cash dividends  have been paid since the initial public  offering of the
Company's  common shares on December 8, 2000. The Company  intends to retain its
earnings for use in its business and therefore  does not  anticipate  paying any
cash dividends in the foreseeable future.                                       

10-K405
14th Page of 73
TOC
1st
Previous
Next
↓Bottom
Just 14th
     The date of the Company's initial public offering was December 8, 2000. The
range of high and low closing  sales prices of the  Company's common  shares as 
reported on the Nasdaq Stock Market for each fiscal quarter of fiscal years 2000
and 2001 was as follows:                                                        

              Year Ended                  Year Ended
   ---------------------------------------------------------------------------
                     December 29, 2001           December 30, 2000
   ---------------------------------------------------------------------------
                    High           Low          High           Low
   ---------------------------------------------------------------------------
First Quarter        $25.13        $17.00          N/A           N/A  
   ---------------------------------------------------------------------------
Second Quarter       $24.68        $18.00          N/A           N/A  
   ---------------------------------------------------------------------------
Third Quarter        $23.36        $14.40          N/A           N/A  
   ---------------------------------------------------------------------------
Fourth Quarter       $21.32        $15.50        $21.19         $18.19
   ---------------------------------------------------------------------------

     During the fourth  fiscal  quarter of fiscal year 2001,  Garmin  expended a
total of $13.4  million of the $104.4  million net proceeds from its December 8,
2000 initial  public  offering (the 'IPO') as follows:  $3.6 million was used to
acquire  substantially  all the assets of  Sequoia  Instruments,  Inc.  and $9.8
million was used to purchase a total of 595,200  shares of Garmin  pursuant to a
share repurchase  program  approved by Garmin's Board of Directors.  See 'Recent
Developments in the Company's Business' under Item 1 herein.                    

     Garmin plans to use the  remaining  $91.0 million net proceeds from the IPO
for working capital and other general  corporate  purposes,  including  possible
share repurchases,  acquisitions or strategic partnerships. Garmin currently has
no specific plan for allocating  those proceeds among working  capital and other
general  corporate  purposes.  Garmin  currently has no  commitments to make any
material  investments or  acquisitions  and will retain broad  discretion in the
allocation of net proceeds from the IPO.                                        

Item 6.  Selected Financial Data                                                

     The following table sets forth selected consolidated  financial data of the
Company.  The selected  consolidated  balance sheet data as of December 29, 2001
and December 30, 2000 and the selected consolidated statement of income data for
the years ended December 29, 2001,  December 30, 2000 and December 25, 1999 were
derived from the Company's  audited  consolidated  financial  statements and the
related notes thereto which are included in Item 8 of this annual report on Form
10-K.  The  selected  consolidated  balance  sheet data as of December 25, 1999,
December 26, 1998 and December 31, 1997 and the selected consolidated  statement
of income data for the years ended  December 25, 1998 and December 31, 1997 were
derived  from the  Company's  audited  consolidated  financial  statements,  not
included herein.                                                                

     The  information  set  forth  below is not  necessarily  indicative  of the
results of future  operations  and should be read  together  with  'Management's
Discussion and Analysis of Financial  Condition and Results of  Operations'  and
the consolidated  financial statements and notes to those statements included in
Items 7 and 8 and Part II of this Form 10-K.                                    

10-K405
15th Page of 73
TOC
1st
Previous
Next
↓Bottom
Just 15th
                                                        [Enlarge/Download Table]


                                                    Years Ended (1)                     

                                   Dec. 29,    Dec. 30,   Dec. 25,   Dec. 26,   Dec. 31,
                                    2001        2000       1999       1998       1997   
                                           (in thousands, except per share data)        
                                                                                        
Consolidated Statements of                                                              
Income Data:                                                                            
    Net sales                      $369,119    $345,741   $232,586   $169,030   160,280 
    Cost of goods sold              170,960     162,015    105,654     82,787    93,620 
                                   --------    --------   --------   --------   ------- 

        Gross profit                198,159     183,726    126,932     86,243    66,660 
    Operating expenses;                                                                 
        Selling, general and                                                            
             administrative          38,709      32,669     27,063     24,680    17,102 
        Research and                                                                    
             development             28,164      21,764     17,339     14,876    12,657 
                                    -------     -------    -------     ------    ------ 
    Total operating expenses         66,873      54,433     44,402     39,556    29,759 
                                    -------     -------    -------     ------    ------ 
    Operating income                131,286     129,293     82,530     46,687    36,901 
    Other income, net (2), (3)       20,749      11,629      1,602        833    11,971 
                                    -------     -------     ------     ------    ------ 
    Income before income                                                                
             taxes                  152,035     140,922     84,132     47,520    48,872 
    Income tax provision             38,587      35,259     19,965     12,354    12,780 
                                    -------     -------     ------     ------    ------ 
                   Net income      $113,448    $105,663    $64,167    $35,166   $36,092 
                                   ========    ========    =======    =======   ======= 

    Net income per share:                                                               
                   Basic              $1.05       $1.05       $0.64     $0.35     $0.37 
                   Diluted            $1.05       $1.05       $0.64     $0.35     $0.37 
    Weighted average common                                                             
        shares outstanding:                                                             
                   Basic            108,097     100,489     100,000    99,624    98,876 
                   Diluted          108,447     100,506     100,000    99,624    98,876 

    Cash dividends per share (4)      $0.00       $0.29       $0.13     $0.12     $0.09 

Balance Sheet Data (at end of                                                           
Period):                                                                                
    Cash and cash equivalents      $192,842    $251,731    $104,079   $80,360   $64,243 
    Marketable securities          $131,584          $0          $0        $0        $0 
    Total assets                   $532,155    $463,347    $250,090  $174,532  $143,482 
    Total debt (5)                  $32,188     $46,946     $27,720    $9,708   $15,823 
    Total stockholders' equity     $453,969    $365,239    $194,599  $135,940  $104,204 

(1)  Our fiscal year-end is the last Saturday of the calendar year and does not         
     always fall on December 31. Prior to 1998, our fiscal years ended on               
     December 31.                                                                       
(2)  Other income, net mainly consists of interest income, interest expense and         
     foreign currency gain(loss).                                                       
(3)  Includes $11.6 million, $7.0 million, and $10.0 million of foreign currency        
     gains during 2001, 2000, and 1997, respectively.                                   
(4)  Represents cash dividends per share based on the actual number of shares           
     outstanding at the time of the dividend, as adjusted for the 1.12379256            
     for 1 stock split of our common shares, effected through a stock dividend          
     on November 6, 2000.  There were no cash dividends issued during 2001.             
(5)  Total debt consists of notes payable and long-term debt.                           


10-K405
16th Page of 73
TOC
1st
Previous
Next
↓Bottom
Just 16th
Item 7.  Management's Discussion and Analysis of Financial Condition and        
Results of Operations                                         

     The  following  discussion  and  analysis of our  financial  condition  and
results of  operations  focuses on and is intended to clarify the results of our
operations,  certain  changes  in our  financial  position,  liquidity,  capital
structure and business  developments for the periods covered by the consolidated
financial  statements included in this Form 10-K. This discussion should be read
in  conjunction  with,  and is  qualified  by  reference  to, the other  related
information  including,  but not limited to, the audited consolidated  financial
statements  (including the notes thereto and the  independent  auditor's  report
thereon),  the description of our business,  all as set forth in this Form 10-K,
as well as the risk factors  discussed below (the 'Company-Specific  Trends and 
Risks').                                                                        

     As  previously  noted,  the  discussion  set forth below,  as well as other
portions of this Form 10-K,  contains  statements  concerning  potential  future
events.  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  on which the statements are based 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, the  Company-Specific  Trends and Risks. Readers
are strongly  encouraged  to consider  those  factors when  evaluating  any such
forward-looking  statement. We will not update any forward-looking statements in
this Form 10-K.                                                                 

     Prior to 1998,  the Company's  fiscal year was based on a calendar year. In
1998,  the  Company  elected to change its  fiscal  year to a 52-53 week  period
ending on the last Saturday of the calendar year.  Fiscal year 2000 contained 53
weeks  compared  to 52 weeks  for  fiscal  years  2001,  1999 and  1998.  Unless
otherwise  stated,  all years and dates refer to the  Company's  fiscal year and
fiscal  periods.  Unless the  context  otherwise  requires,  references  in this
document to 'we', 'us', 'our' and  similar  terms refer to Garmin Ltd. and its  
subsidiaries.                                                                   

Overview                                                                        

     We are 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 two business segments, the consumer and aviation
markets.  Both of our segments offer products through our network of independent
dealers and distributors. However, the nature of products and types of customers
for the two  segments  vary  significantly.  As such,  the  segments are managed
separately. Our consumer segment includes portable GPS receivers and accessories
for marine,  recreation,  land and  automotive  applications  sold  primarily to
retail outlets.  Our aviation products are portable and panel-mount avionics for
Visual  Flight  Rules  and  Instrument  Flight  Rules  navigation  and are  sold
primarily to retail outlets and certain aircraft manufacturers.                 

     Since our first products were delivered in 1991, we have generated positive
income from  operations each year and have funded our growth from these profits.
Our sales have  increased at a compounded  annual  growth rate of 23% since 1997
and our net income has increased at a compounded annual growth rate of 33% since
1997. All of this growth has been organic;  none has occurred as a result of any
acquisition or merger.                                                          

     Since our  principal  locations  are in the United  States,  Taiwan and the
U.K., we experience some foreign currency fluctuations in our operating results.
The functional currency of our European operations is the U.S. dollar (effective
in 2001) and the  functional  currency  of our Asian  operations  is the  Taiwan
Dollar.  Minimal  transactions of our European operations are now denominated in
British Pound Sterling.  We experienced $11.6 million,  $7.0 million,  and $10.0
million in foreign  currency  gains during  fiscal years 2001,  2000,  and 1997,
respectively. To date, we have not entered into hedging transactions with either
the British Pound Sterling or the Taiwan Dollar, although we may utilize hedging
transactions in the future.                                                     

10-K405
17th Page of 73
TOC
1st
Previous
Next
↓Bottom
Just 17th
Critical Accounting Policies and Estimates                                      

General                                                                         

The Company's  discussion and analysis of its financial condition and results of
operations are based upon the Company's consolidated financial statements, which
have been prepared in accordance with accounting  principles  generally accepted
in the United States.  The presentation of these financial  statements  requires
the Company to make estimates and judgements that affect the reported amounts of
assets, liabilities, revenues and expenses, and related disclosure of contingent
assets  and  liabilities.  On an  on-going  basis,  the  Company  evaluates  its
estimates,  including  those related to customer sales programs and  incentives,
product returns, bad debts, inventories,  investments, intangible assets, income
taxes, warranty obligations, and contingencies and litigation. The Company bases
its estimates on historical experience and on various other assumptions that are
believed to be reasonable under the circumstances, the results of which form the
basis for making  judgements  about the carrying value of assets and liabilities
that are not readily apparent from other sources. Actual results may differ from
these estimates under different assumptions or conditions.                      
Revenue Recognition                                                             

The Company records estimated  reductions to revenue for customer sales programs
and incentive  offerings  including  rebates,  price protection,  promotions and
other volume-based incentives. If market conditions were to decline, the Company
may take actions to increase customer incentive  offerings possibly resulting in
an incremental reduction of revenue at the time the incentive is offered.       

Bad Debt                                                                        

The Company  maintains  allowances  for doubtful  accounts for estimated  losses
resulting from the inability of its customers to make required payments.  If the
financial condition of the Company's customers were to deteriorate, resulting in
an impairment of their ability to make  payments,  additional  allowances may be
required.                                                                       

Warranties                                                                      

The  Company's  products  sold are  generally  covered by a warranty for periods
ranging  from one to two  years.  The  Company  accrues a warranty  reserve  for
estimated costs to provide warranty services. The Company's estimate of costs to
service  its  warranty  obligations  is  based  on  historical   experience  and
expectation  of  future  conditions.  To  the  extent  the  Company  experiences
increased  warranty claim activity or increased costs  associated with servicing
those claims,  its warranty  accrual will increase  resulting in decreased gross
profit.                                                                         

Inventory                                                                       

The Company writes down its inventory for estimated obsolescence or unmarketable
inventory  equal  to the  difference  between  the  cost  of  inventory  and the
estimated  market value based upon  assumptions  about future  demand and market
conditions.  If actual market conditions are less favorable than those projected
by management, additional inventory write-downs may be required.                

10-K405
18th Page of 73
TOC
1st
Previous
Next
↓Bottom
Just 18th
Income Taxes                                                                    

It is the  Company's  policy  to record a  valuation  allowance  to  reduce  its
deferred  tax assets to an amount that it believes is more likely than not to be
realized.  While the Company has  considered  future  taxable income and ongoing
prudent and  feasible  tax planning  strategies  in  assessing  the need for the
valuation  allowance,  in the event the Company were to determine  that it would
not be able to realize all or part of its net deferred tax assets in the future,
an  adjustment  to the  deferred  tax  assets  would be charged to income in the
period such determination was made. Likewise,  should the Company determine that
it would be able to realize its  deferred  tax assets in the future in excess of
its net recorded amount, an adjustment to the deferred tax assets would increase
income in the period such determination was made.                               

Net Sales                                                                       

     Our net  sales  are  generated  through  sales  to our  global  dealer  and
distributor network and to original equipment manufacturers.  We recognize sales
when products are shipped. Our sales are largely of a consumer nature; therefore
backlog levels are not  necessarily  indicative of our future sales results.  We
aim to achieve a quick  turnaround on orders we receive,  and we typically  ship
most orders within 72 hours.                                                    

     Net sales are subject to some seasonal fluctuation. Typically, sales of our
consumer  products are highest in the second  quarter,  due to increased  demand
during the spring and summer marine season,  and in the fourth  quarter,  due to
increased demand during the holiday buying season.  Our aviation products do not
experience much seasonal variation, but are more influenced by the timing of the
release of new products when the initial demand is typically the strongest.     

Gross Profit                                                                    

     The most significant components of our cost of goods sold are raw material,
labor and depreciation.  Raw material costs, which are our most significant cost
item,  generally have not  fluctuated  materially as a percentage of sales since
early 1998, when we negotiated  lower raw material costs with our key suppliers.
As a result,  gross profit  increased  substantially as a percentage of sales in
1998 from that realized in prior years.                                         

     In 2000, we  experienced  upward pricing  pressures on our high  technology
components,  but  had  offset  those  with  efficiencies  in  our  manufacturing
processes.  We did not experience  significant  pricing pressure in fiscal 2001.
Our existing practice of performing in-house,  the design and manufacture of our
products  has  enabled us to utilize  alternative  lower  cost  components  from
different suppliers and, where necessary,  to redesign our products to permit us
to use these lower cost  components.  We believe that because of our practice of
performing in-house, the design, manufacture and marketing of our products, both
the Taipei,  Taiwan and Olathe,  Kansas  manufacturing  plants have  experienced
relatively low costs of manufacturing,  compared to our competition. In general,
products  manufactured  in Taiwan have been our  highest  volume  products.  Our
manufacturing labor costs historically have been lower in Taiwan than in Olathe.

     Sales  price  variability  has had and can be expected to have an effect on
our gross profit.  In the past, prices of some of our handheld devices sold into
the consumer  market have declined due to market  pressures and  introduction of
new  products  sold at lower price  points.  The average  selling  prices of our
aviation  products have increased due to the  introduction  of more advanced and
innovative  products.  In  conjunction  with the  effects of lower  labor  costs
experienced  on Taiwan  production,  the effect of the sales  price  variability
inherent  within the mix of  GPS-enabled  products sold could have a significant
impact on our gross profit.                                                     

10-K405
19th Page of 73
TOC
1st
Previous
Next
↓Bottom
Just 19th
Selling, General and Administrative Expenses                                    

    - Our selling, general and administrative expenses consist primarily of:

- salaries for sales and marketing personnel;                       

     - salaries and related costs for executives and administrative personnel;

- advertising, marketing, and other brand building costs;           

- accounting and legal costs;                                       

- information systems and infrastructure costs;                     

- travel and related costs; and                                     

- occupancy and other overhead costs.                               

     Since we plan to  increase  market  penetration  in the  future,  we expect
selling, general and  administrative expenses to continue to increase  for the  
foreseeable future. We intend to increase  advertising and marketing expenses in
order to build increased brand awareness in the consumer marketplace, especially
as we enter into new  markets,  such as wireless  and PDA. We do not  anticipate
that these increased expenses will significantly impact our financial results in
2002 and subsequent periods.                                                    

Research and Development                                                        

     The majority of our research and development  costs represent  salaries for
our  engineers,  costs  for  high  technology  components  used in  product  and
prototype  development,  and  costs  of test  equipment  needed  during  product
development.                                                                    

     We have continued to grow our research and development  capabilities  since
our inception. Substantially all of the research and development of our products
is performed in the United States.                                              

     We  are  committed  to  increasing  the  level  of  innovative  design  and
development  of new  products  as we strive  for  expanded  ability to serve our
existing  consumer and aviation  markets as well as new markets for  GPS-enabled
devices.  We continue to grow our  research and  development  budget on absolute
terms.  Research  and  development  expenses may also grow at a faster rate when
compared to our projected revenue growth for fiscal year 2002.                  

Customers                                                                       

     No customer  accounted  for greater than 10% of our sales in the year ended
December 29, 2001. Our top ten customers  accounted for approximately 26% of net
sales.  We  have  experienced  average  sales  days  in  our  customer  accounts
receivable between 35 and 45 days since 1998.                                   

Income Taxes                                                                    

     We have  experienced  a relatively  low effective tax rate in Taiwan due to
lower marginal tax rates and substantial tax incentives offered by the Taiwanese
government on certain  high-technology capital investments.  Therefore,  profits
earned in Taiwan have been taxed at a lower rate than those in the United States
and Europe. As a result,  our consolidated  effective tax rate was approximately
25% during 2001. We have taken advantage of this tax benefit in Taiwan since our
inception and we expect to continue to benefit from lower effective tax rates at
least through 2004. The current  Taiwan tax incentives  that Garmin has received
approval for will end in 2004.  We have applied for  additional  incentives  for
years beyond 2004.  However,  there can be no assurance that such tax incentives
will be granted after 2004.                                                     

10-K405
20th Page of 73
TOC
1st
Previous
Next
↓Bottom
Just 20th
Results of Operations                                                           

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

                              Fiscal Years Ended
                           ---------------------------------------------------
                                   Dec. 29,        Dec. 30,         Dec. 25,
                                       2001            2000             1999

Net sales                              100.0%          100.0%           100.0%  
Cost of goods sold                      46.3%           46.9%            45.4%  
Gross profit                            53.7%           53.1%            54.6%  
Operating expenses:                                                             
Selling, general and                                                            
  administrative                      10.5%            9.4%            11.6%
Research and development                 7.6%            6.3%             7.5%  
Total operating expenses                18.1%           15.7%            19.1%  
Operating income                        35.6%           37.4%            35.5%  
Other income, net                        5.6%            3.4%             0.7%  
Income before income taxes              41.2%           40.8%            36.2%  
Provision for income taxes              10.5%           10.2%             8.6%  
Net income                              30.7%           30.6%            27.6%  
------------------------------------------------------------------------------- 

     The following  table sets forth our results of  operations  for each of our
two segments  through income before income taxes during the periods  shown.  For
each line item in the table,  the total of the consumer  and aviation  segments'
amounts equals the amount in the  consolidated  statements of income included in
Item 8.                                                                         

                                                        [Enlarge/Download Table]


                                                            Fiscal Years Ended                                      
                                ------------------------------------------------------------------------------------
                                      Dec. 29, 2001               Dec. 30, 2000                Dec. 25, 1999        
                                    Consumer      Aviation      Consumer      Aviation       Consumer      Aviation 
                                                                  (in thousands)                                    

                                                                                                                    
Net sales                           $263,358      $105,761      $230,183      $115,558       $169,164       $63,422 
Cost of goods sold                   130,836        40,124       114,656        47,359         78,088        27,566 

Gross profit                         132,522        65,637       115,527        68,199         91,076        35,856 
Operating expenses:                                                                                                 
Selling, general and                  29,018         9,691        23,756         8,913         20,486         6,577 
      administrative                                                                                                
Research and development              18,197         9,967        14,210         7,554         11,431         5,908 

Total operating expenses              47,215        19,658        37,966        16,467         31,917        12,485 

Operating income                      85,307        45,979        77,561        51,732         59,159        23,371 
Other income, net                     17,204         3,545        10,542         1,087          1,290           312 

Income before income taxes          $102,511       $49,524       $88,103       $52,819        $60,449       $23,683 

------------------------------- ------------- ------------- ------------- ------------- -------------- -------------

10-K405
21st Page of 73
TOC
1st
Previous
Next
↓Bottom
Just 21st
Comparison of Fiscal Years Ended December 29, 2001 and December 30, 2000        

Net Sales                                                                       

     Net sales  increased  $23.4 million,  or 6.8%, to $369.1 million for fiscal
year ended December 29, 2001, from $345.7 million for fiscal year ended December
30, 2000. The increase during fiscal 2001 was primarily due to the  introduction
of 25 new products and overall demand for our consumer products.  Sales from our
consumer  products  accounted for 71.3% of net revenues for fiscal 2001 compared
to 66.6% during  fiscal 2000.  Sales from our aviation  products  accounted  for
28.7% of net  revenues  for fiscal 2001  compared to 33.4%  during  fiscal 2000.
Total  consumer  and  aviation  units  increased  8.8% to 1,331,000 in 2001 from
1,223,000 in 2000. In general,  management  believes that continuous  innovation
and the introduction of new products are essential for future revenue growth.   

     Net sales for the consumer  segment  increased $33.2 million,  or 14.4%, to
$263.4 million for fiscal 2001 from $230.2 million for fiscal 2000. The increase
was primarily due to the  introduction  of 22 new consumer  products and overall
demand for our consumer products as total units were up 9.7%. It is management's
opinion that the continued demand for the Company's  consumer products is due to
the  emergence  of the GPS market in  general, and overall  increased  consumer 
awareness of the capabilities and applications of GPS.                          

     Net sales for the aviation  segment  decreased  $9.8  million,  or 8.5%, to
$105.8 million for fiscal 2001 from $115.6 million for fiscal 2000. The decrease
for fiscal 2001 was primarily due to declining economic  conditions and the shut
down of U.S.  airspace as a result of the  terrorist  attacks  that  occurred on
September 11, 2001. In addition to the shut down of U.S.  airspace,  the general
aviation   industry  was  further   impacted  by  the  additional   restrictions
implemented by the Federal Aviation  Administration  (FAA) on those flights that
fly utilizing Visual Flight Rules (VFR). The FAA restricted VFR flight inside 30
enhanced Class B (a 20-25 mile radius around the 30 largest  metropolitan  areas
in the  country)  airspace  areas.  The Aircraft  Owners and Pilots  Association
(AOPA) estimated that these restrictions  affected  approximately 41,800 general
aviation  aircraft based at 282 airports inside the 30 enhanced Class B airspace
areas. The AOPA estimates that approximately 90% of all general aviation flights
are conducted VFR, and that only 15% of general  aviation  pilots are current to
fly utilizing  Instrument Flight Rules (IFR).  These  restrictions  impacted our
revenues since many general  aviation  aircraft were grounded and were unable to
fly to  aviation  dealers  to buy  our  products.  As a  result  of the  factors
indicated above, total aviation units sold during fiscal 2001 declined 9.3% when
compared to fiscal 2000.                                                        

     As of February 20, 2002, there continue to be temporary flight restrictions
on  several  general  aviation  airports  across  the  nation as a result of the
September 11 terrorist attacks.  As stated above, the Company's aviation segment
represents approximately one-third of total revenues. Should the FAA continue to
impose  more  restrictions,  or elect to shutdown  U.S. airspace in the future, 
these factors could have a material adverse effect on our business.             

Gross Profit                                                                    

     Gross profit increased $14.5 million, or 7.9%, to $198.2 million for fiscal
year 2001 from $183.7  million in fiscal year 2000.  The  increase is  primarily
attributed  to the  introduction  of 25 new products and overall  demand for our
consumer  products.  Gross  profit as a percentage  of net revenues  improved to
53.7% in 2001 from 53.1% in 2000. The  improvement in gross margin was primarily
due to the  introduction of new higher margin products,  improved  manufacturing
efficiencies on many of the new products  introduced  throughout the year, and a
reduction of material costs.                                                    

     Gross profit for the consumer segment increased $17.0 million, or 14.7%, to
$132.5  million for fiscal 2001 from $115.5 million in fiscal 2000. The increase
is primarily  attributed  to the  introduction  of 22 new consumer  products and
overall  demand for our consumer  products.  Gross profit as a percentage of net
revenues  remained  relatively flat at 50.3% for 2001 when compared to 50.2% for
2000.                                                                           

10-K405
22nd Page of 73
TOC
1st
Previous
Next
↓Bottom
Just 22nd
     Gross profit for the aviation segment  decreased $2.6 million,  or 3.8%, to
$65.6 million for fiscal 2001 from $68.2 million for fiscal 2000. The decline in
gross  profit is  primarily  due to the  decrease  in revenues  associated  with
declining economic  conditions and the shut down of U.S. airspace as a result of
the terrorist  attacks that  occurred on September  11, 2001.  Gross profit as a
percentage  of net revenues  improved to 62.1% in 2001 from 59.0% in 2000.  This
improvement  as a percentage of net revenues is primarily  attributed to product
mix as we  experienced a 13.9%  increase in higher margin panel mount unit sales
during 2001 when compared to 2000.                                              

Selling, General and Administrative Expenses                                    

     Selling,  general and administrative  expenses  increased $6.0 million,  or
18.5%,  to $38.7  million  (10.5% of net  revenues)  for fiscal  2001 from $32.7
million  (9.4%  of  net  revenues)  for  fiscal  2000.   Selling,   general  and
administrative  expenses  increased  $5.3  million,  or 22.2%,  in the  consumer
segment  and  increased  $0.8  million,  or 8.7% in the  aviation  segment.  The
increase  in expense was  primarily  attributable  to  increases  in  employment
generally  across the  organization  (net increase of 32  employees),  increased
advertising  costs (up 27.6%)  associated with new product  releases,  increased
costs  associated  with  being a public  company,  and  increases  in  insurance
premiums.  Overall,  selling, general and administrative expenses increased at a
higher  rate than  revenues  due to the need to ramp-up  for the  release of new
products. Management expects its selling, general and administrative expenses to
increase approximately 15% to 20% during fiscal 2002 on an absolute dollar basis
due to the anticipated introduction of new products for 2002.                   

Research and Development Expenses                                               

     Research and  development  expenses  increased $6.4 million,  or 29.4%,  to
$28.2  million  (7.6% of net  revenues)  for fiscal year 2001 from $21.8 million
(6.3% of net revenues) for fiscal year 2000.  Research and development  expenses
increased  $4.0 million,  or 28.1%,  in the consumer  segment and increased $2.4
million,  or 31.9%,  in the  aviation  segment.  The  increase  in  expense  was
primarily  attributable to the development and  introduction of 25 new products,
and the addition of 50 new engineers to our staff during fiscal 2001. Management
believes that one of the key strategic initiatives for future growth and success
of the Company is continuous  innovation,  development,  and introduction of new
products.  Management  expects that its research and  development  expenses will
increase approximately 25% to 30% during fiscal 2002 on an absolute dollar basis
due to the anticipated  introduction of new products for fiscal 2002. Management
expects to continue to invest in the  research and  development  of new products
and technology in order to maintain the Company's  competitive  advantage in the
markets in which it competes.                                                   

Other Income (Expense)                                                          

     Other income (expense)  principally  consists of interest income,  interest
expense and foreign currency exchange gains and losses.  Other income for fiscal
year 2001  amounted to $20.7  million  compared to other income of $11.6 million
for fiscal year 2000.  Interest income for fiscal 2001 amounted to $11.2 million
compared to $6.9 million for fiscal 2000, the increase being attributable to the
growth of the Company's cash and cash  equivalents  from  profitable  operations
during the period on which interest income is earned. Interest expense decreased
to $2.2 million for fiscal 2001 from $2.3 million for fiscal 2000, due primarily
to the  reduction of debt and a lower  interest rate  environment  during fiscal
2001.                                                                           

     We recognized a foreign currency  exchange gain of $11.6 million for fiscal
2001 compared to a gain of $7.0 million for fiscal 2000.  The $11.6 million gain
was due to the significantly  increased  strength of the U.S. Dollar compared to
the Taiwan Dollar during 2001,  when the exchange rate increased to 35.17 TD/USD
at December 29, 2001 from 33.01  TD/USD at December  30, 2000.  The $7.0 million
gain during  2000 was due to the  significantly  increased  strength of the U.S.
Dollar  compared  to the Taiwan  Dollar  during  2000,  when the  exchange  rate
increased to 33.01 TD/USD at December 30, 2000 from 31.30 TD/USD at December 25,
1999.                                                                           

10-K405
23rd Page of 73
TOC
1st
Previous
Next
↓Bottom
Just 23rd
Income Tax Provision                                                            

     Income tax expense increased by $3.3 million, to $38.6 million,  for fiscal
year 2001 from  $35.3  million  for fiscal  year 2000 due to our higher  taxable
income. The effective tax rate was 25.4% for fiscal 2001 versus 25.0% for fiscal
2000. The increase is  attributable to the source of taxable income between each
of our subsidiaries  changing slightly during 2001. Management believes that the
effective tax rate for fiscal 2002 will be comparable to fiscal 2001.           

Net Income                                                                      

     As a result of the above,  net income  increased 7.4% to $113.4 million for
fiscal year 2001 compared to $105.7 million for fiscal year 2000.               

Comparison of Fiscal Years Ended December 30, 2000 and December 25, 1999        

Net Sales                                                                       

     Our net sales were $345.7  million in fiscal 2000, a 49% increase  over net
sales of $232.6 million in fiscal 1999. The increase in sales during this period
was driven by increased  demand across  nearly all product lines which  reflects
the overall growth of the GPS market. Sales from our consumer products accounted
for 66.6% of net sales in fiscal  2000  compared to 72.7% of net sales in fiscal
1999.  Sales  from our  aviation  products  accounted  for 33.4% of net sales in
fiscal 2000 compared to 27.3% of net sales in fiscal 1999.  Net sales  increased
$61.0 million, or 36%, in the consumer segment and $52.1 million, or 82%, in the
aviation segment.  In May 2000,  President Clinton withdrew the prior government
degradation placed on GPS accuracy.  Although difficult to quantify,  management
believes that the  withdrawal  of this  degradation  has helped drive  increased
demand for and sales of consumer GPS devices in 2000.  The aviation sales growth
was driven by new products  introduced in early 2000 and continued strong demand
of our panel mount aviation products that were introduced in early 1999.        
Gross Profit                                                                    

     Gross profit was $183.7  million in fiscal 2000, a 45% increase  over gross
profit of $126.9 million in fiscal 1999.  Gross profit as a percent of net sales
decreased  to 53.1% in fiscal  2000 from 54.6% in fiscal 1999 due  primarily  to
inventory  charges that were  recorded  during 2000 to reserve for excess stocks
and  technological  obsolescence  related  to the  transition  to  new  products
expected  during  fiscal 2001,  offset by the effects of increased  efficiencies
from higher sales volume across all products and the 6.1 percentage  point shift
in the mix to  higher  margin  aviation  sales.  Gross  profit  increased  $24.5
million,  or 27%,  in the  consumer  segment and $32.3  million,  or 90%, in the
aviation segment.  The percentage  increase in gross profits for each segment is
generally comparable to the percentage increase in that segment's net sales with
the  consumer  segment  gross  profit  affected  more by the  inventory  charges
mentioned above.                                                                

Selling, General and Administrative Expenses                                    

     Despite a 49% increase in net sales,  selling,  general and  administrative
expenses only increased 21%, to $32.7 million (9.4% of net sales) in fiscal 2000
from $27.1  million  (11.6% of net sales) in fiscal 1999.  Selling,  general and
administrative  expenses increased $3.3 million, or 16%, in the consumer segment
and $2.3  million,  or 36%, in the  aviation  segment.  The  increase in expense
reflects  increased  employment  generally  across  the  organization  but  also
specifically in the areas of customer  service and marketing,  in support of our
increased  sales in both  segments.  The  percentage  increase was higher in the
aviation segment than in the consumer segment due to the significant increase in
aviation net sales as compared to consumer sales growth.  We also experienced an
increase in our cooperative  advertising costs, which is an ongoing program with
our key dealers and distributors in both segments.                              

Research and Development Expense                                                

     Research  and  development  expense  increased  approximately  26% to $21.8
million  (6.3% of net  sales) in fiscal  2000 from  $17.3  million  (7.5% of net
sales) in fiscal 1999.  Research and development expense increased $2.8 million,
or 24%, in the  consumer  segment  and $1.6  million,  or 28%,  in the  aviation
segment.  The  increase  in expense  was due  primarily  to  additional  product
development  costs in both consumer and aviation  segments as well as additional
software  development  in the  consumer  segment.  The  percentage  increase was
slightly higher in the aviation  segment due to the development of Garmin's next
generation aviation products.                                                   

10-K405
24th Page of 73
TOC
1st
Previous
Next
↓Bottom
Just 24th
Other Income (Expense)                                                          

     Other income (expense)  principally  consists of interest income,  interest
expense and foreign currency  exchange gains and losses.  Other income (expense)
for fiscal 2000  amounted to $11.6  million  compared to $1.6  million in fiscal
1999.  Interest  income during fiscal 2000 amounted to $6.9 million  compared to
$4.3 million in fiscal 1999,  the increase being  attributable  to the growth of
Garmin's cash and cash  equivalents  during the year on which interest income is
earned.  Interest  expense  increased  to $2.3  million in fiscal 2000 from $0.6
million in fiscal 1999, due primarily to the additional  long-term debt required
to finance the 1999 purchase of our new Taiwan  facility and further  expand our
Olathe,  Kansas facility in 2000. We recognized a foreign currency exchange gain
of $7.0  million  during  fiscal 2000  compared to a $1.5 million loss in fiscal
1999 due to the  significant  strengthening  of the U.S.  Dollar compared to the
Taiwan  Dollar during fiscal year 2000,  when the exchange rate  increased  from
31.30 TD/USD at December 25, 1999 to 33.01 TD/USD at December 30, 2000.         

Income Tax Provision                                                            

     Income tax expense increased by $15.3 million,  to $35.3 million, in fiscal
2000 from $20.0 million in fiscal 1999,  due to our higher taxable  income.  The
effective  tax rate was 25.0% in fiscal 2000 versus  23.7% in fiscal  1999.  The
increase is partly attributable to a surtax on undistributed  earnings in Taiwan
that Garmin will pay in 2001. The tax cost of distributing  earnings from Garmin
Corporation,  Garmin's Taiwan subsidiary,  to the Company  significantly exceeds
the  amount  of the  surtax.  Prior to  Garmin's  reorganization,  completed  in
September  2000 in  contemplation  of its  IPO,  distributions  made  to  Garmin
Corporation shareholders resulted in minimal tax cost to Garmin.                

Net Income                                                                      

     As a result of the  above,  net income in fiscal  2000 was  $105.7  million
compared to $64.2 million in fiscal 1999.                                       

Liquidity and Capital Resources                                                 

     Net cash generated by operations  was $130.0  million,  $83.5 million,  and
$48.5  million for fiscal years 2001,  2000 and 1999,  respectively.  We operate
with a strong customer driven approach and therefore carry sufficient  inventory
to meet customer  demand.  Because we desire to respond quickly to our customers
and minimize order  fulfillment  time,  our inventory  levels are generally high
enough to meet most demand. We also attempt to carry sufficient inventory levels
on key components so that potential supplier shortages have as minimal an impact
as  possible  on  our  ability  to  deliver  our  finished  products.  We do not
anticipate that our inventory management  techniques will have a negative impact
on our financial  results in the future. We were able to reduce inventory levels
during  fiscal year 2001 by $28.7 million when compared to fiscal year end 2000,
without impairing our ability to meet customer demand,  by effectively  managing
the introduction of 25 new products during the year.                            

     During fiscal 2001, our capital expenditures  totaled $14.9 million,  which
was $9.9  million less than during  2000.  In fiscal 2000 and 1999,  our capital
expenditures   totaled   approximately   $24.8   million   and  $32.2   million,
respectively.  The  expenditures in fiscal 2001 were incurred  primarily for the
completed  expansion  of  our  Olathe,  Kansas  facility  ($3.2  million),   the
construction  of our new flight test and  certification  facility ($1.6 million)
located at the New Century Airport in Olathe,  Kansas, and for general corporate
purposes.  The  expenditures in fiscal 2000 and 1999 were incurred  primarily to
increase our manufacturing  capacity both in the United States and in Taiwan. We
financed  these capital  expenditures  through net operating  cash flow and debt
from outside financial institutions.                                            

10-K405
25th Page of 73
TOC
1st
Previous
Next
↓Bottom
Just 25th
     The fiscal 2000 capital expenditures were primarily for our Olathe,  Kansas
building and land expansion  project that was  approximately  80% complete as of
December 30, 2000. The 1999 capital expenditures were primarily for the purchase
of building and land for our Taiwan factory.  We expect our needs for capital in
2002 to be less than those incurred during 2001 since the recent  expansions are
complete.  We expect our future  capital  requirements  to consist  primarily of
purchases of production  machinery and equipment to expand  capacity.  A portion
will  also be used for  conversion  of  available  space in our  Olathe,  Kansas
building  for assembly use and  expansion  of our testing  operations  using our
facility in Shijr,  Taiwan.  We may use a portion of the net  proceeds  from our
December 2000 IPO to acquire targeted strategic businesses.                     

     In addition to capital expenditures, cash flow used in investing activities
principally  relates to the purchase of fixed income securities  associated with
the  investment  of our on-hand cash  balances and  approximately  $15.7 million
related to the purchase of licenses and our acquisition of Sequoia  Instruments,
Inc. It is  management's  goal to invest the on-hand  cash  consistent  with the
Company's  investment policy, which has been approved by the Board of Directors.
The investment  policy's  primary  purpose is to preserve  capital,  maintain an
acceptable  degree of  liquidity,  and maximize  yield within the  constraint of
maximum safety.  The Company's  average return on its investments  during fiscal
year 2001 was approximately 4.0%.                                               

     Cash flow used in financing activities during 2001 relates primarily to the
reduction of our Taiwan debt and stock repurchase  program.  The Company retired
approximately   $14.2  million  of  its  long-term   debt  during  fiscal  2001.
Additionally,  the Company  repurchased 595,200 shares of its common stock under
its stock  repurchase  program  that was  approved by the Board of  Directors on
September 24, 2001. The cash flow source from financing  activities  during 2000
was due  primarily  to the  issuance  of debt  and IPO  proceeds  less  dividend
distributions.                                                                  

     We  currently   use  cash  flow  from   operations   to  fund  our  capital
expenditures,  to repay debt and to support our working capital requirements. We
expect  that  future  cash   requirements   will   principally  be  for  capital
expenditures, repayment of indebtedness and working capital requirements.       

     Cash  dividends paid to  stockholders  were $0.0,  $29.0 million,  and $7.5
million during fiscal years 2001, 2000 and 1999, respectively.  Included in cash
dividends for fiscal 2000 was a special one-time  dividend of $17.4 million that
was paid in order to provide funds to shareholders to pay withholding  taxes and
stock transfer taxes related to the reorganization of Garmin Corporation.  We do
not anticipate paying additional dividends in the foreseeable future.           

     We believe that our existing  cash  balances and cash flow from  operations
will be sufficient to meet our projected capital  expenditures,  working capital
and other cash requirements at least through the end of fiscal 2002.            

Contractual Obligations and Commercial Commitments                              

     On March 23, 2000,  Garmin  International,  Inc.  completed a $20.0 million
20-year  Taxable  Industrial  Revenue  Bond  issuance  for the  expansion of its
Olathe, Kansas facility.  At December 29, 2001,  outstanding principal under the
2000 Bonds totaled $20.0 million.  Interest on the 2000 Bonds is payable monthly
at a variable  interest  rate (2.10% at December  29,  2001),  which is adjusted
weekly to the current market rate as determined by the remarketing  agent of the
2000 Bonds with principal due upon maturity on April 15, 2020.                  

     The 2000 Bonds are  secured  by an  irrevocable  letter of credit  totaling
$20.3  million with  facility  fees of 0.75%.  This  renewable  letter of credit
initially expires on September 20, 2004. The bank has required a sinking fund be
established with semiannual payments of $0.7 million beginning April 2002.      

     On January 1, 1995,  Garmin  International,  Inc.  completed a $9.5 million
30-year Tax-Exempt  Industrial Revenue Bond issuance for the construction of its
new corporate  headquarters  located in Olathe,  Kansas.  Upon completion of the
project in 1996, Garmin  International  retired bonds totaling $0.2 million.  At

10-K405
26th Page of 73
TOC
1st
Previous
Next
↓Bottom
Just 26th
December 29, 2001 and December 30, 2000,  outstanding  principal under the Bonds
totaled  $9.3  million.  Interest on the Bonds is payable  monthly at a variable
interest  rate (1.75% and 5.15% at  December  29, 2001 and  December  30,  2000,
respectively), which is adjusted weekly to the current market rate as determined
by the  remarketing  agent for the Bonds with  principal  due upon  maturity  on
January 1, 2025.                                                                

     The Bonds are  secured by an  irrevocable  letter of credit  totaling  $9.7
million,  with  facility  fees of 0.75%  annually,  through  September 30, 2004,
renewable  on an annual basis  thereafter.  The bank has the option of requiring
Garmin International,  Inc. to establish a sinking fund related to the principal
balance  outstanding on the Bonds,  which it had not exercised  through December
29, 2001.  The letter of credit is secured by a mortgage on all assets  financed
with the proceeds of the Bonds and is guaranteed by Garmin Corporation.         

     Our reimbursement agreements contain restrictive covenants,  which include,
among other things,  financial  covenants  requiring minimum cash flow leverage,
maximum  capitalization,  minimum tangible net worth, and other  affirmative and
negative covenants. We do not expect these limitations to have a material effect
on our  business  or  results  of  operations.  We are in  compliance  with  all
covenants contained in the reimbursement agreements.                            

     During  1999,  Garmin  Corporation  borrowed  $18.0  million to finance the
purchase  of  land  and a new  manufacturing  facility  in  Shijr,  Taiwan.  The
outstanding  balance of $2.8 million at December  29, 2001,  was paid in full in
January 2002.                                                                   

     We utilize  interest rate swap agreements to manage interest rate exposure.
The principal  objective of such financial  derivative  contracts is to moderate
the effect of fluctuations in interest rates. We, as a matter of policy,  do not
speculate in financial  markets and  therefore do not hold these  contracts  for
trading  purposes.  We utilize what are considered simple  instruments,  such as
non-leveraged interest rate swaps, to accomplish our objectives.                

     The  company has the option at any time during the year to retire a portion
or all of its long-term debt.                                                   

Off-Balance Sheet Arrangements                                                  

We do not have any off-balance sheet arrangements.                    

10-K405
27th Page of 73
TOC
1st
Previous
Next
↓Bottom
Just 27th
Recent Accounting Pronouncements                                                

     In October 2001,  the Financial  Accounting  Standards  Board (FASB) issued
Statement  No. 144,  'Accounting  for the  Impairment  or Disposal of Long-Lived
Assets,' which is effective for fiscal years  beginning after December 15, 2001.
This new  standard,  when in effect,  will  supersede  SFAS  Statement  No. 121,
'Accounting  for the  Impairment  of  Long-Lived  Assets and for the  Long-Lived
Assets to Be Disposed  Of,'  providing  one  accounting  model for the review of
asset  impairment.  Statement  No.  144  retains  much  of the  recognition  and
measurement  provisions  of  Statement  No. 121, but removes  goodwill  from its
scope. It also requires  long-lived  assets to be disposed of other than by sale
to be considered as held and used until disposed of,  requiring the  depreciable
life to be adjusted as an  accounting  change.  Criteria to classify  long-lived
assets to be disposed of by sale has changed  from SFAS  Statement  No. 121, but
these costs will continue to be reported at the lower of their  carrying  amount
or fair value less cost to sell, and will cease to be depreciated.              

     Statement 144 will also supercede the section of the Accounting  Principles
Board (APB)  Opinion No. 30,  which  prescribes  reporting  for the effects of a
disposal  of  a  segment  of  a  business.  This  statement  retains  the  basic
presentation  provisions  of the opinion,  but requires  losses on a disposal or
discontinued  operation  to be  recognized  as  incurred.  It also  broadens the
definition of a discontinued operation to include a component of an entity. This
statement is not expected to have a material impact on our financial statements.

     In July 2001,  the FASB issued  Statement  No. 143,  'Accounting  for Asset
Retirement Obligations.'  The  objective  of  this  statement  is  to  provide  
accounting  guidance for legal  obligations  associated  with the  retirement of
long-lived  assets by  requiring  the fair  value of a  liability  for the asset
retirement  obligation  to be  recognized in the period in which it is incurred.
When the liability is initially  recognized,  the asset  retirement costs should
also be capitalized by increasing the carrying amount of the related  long-lived
asset.  The  liability is then accreted to its present value each period and the
capitalized  costs are depreciated over the useful life of the associated asset.
This statement is effective for fiscal years  beginning after June 15, 2002, and
is not expected to have a material impact on our financial statements.          

     In June 2001, the (FASB) issued Statement No. 141, 'Business Combinations,'
and Statement No. 142, 'Goodwill and Other Intangible Assets.' Statement No. 141
supercedes APB Opinion No. 16, 'Business  Combinations,'  and FASB Statement No.
28,  'Accounting for  Pre-acquisition  Contingencies of Purchased  Enterprises.'
This  statement  requires  accounting  for all business  combinations  using the
purchase  method,  and changes the criteria for  recognizing  intangible  assets
apart from goodwill.  This statement is effective for all business  combinations
initiated after June 30, 2001.  Statement No. 142 supercedes APB Opinion No. 17,
'Intangible Assets' and addresses how purchased  intangibles should be accounted
for upon  acquisition.  The  statement  also  addresses  how  goodwill and other
intangible  assets  should  be  accounted  for after  they  have been  initially
recognized  in the  financial  statements.  All  intangibles  will be subject to
periodic  impairment  testing and will be adjusted to fair value. This statement
is effective  for fiscal years  beginning  after  December 15, 2001,  and is not
expected to have a material impact on our business.                             

     In June 1998 and June 1999, the Financial  Accounting  Standards  Board, or
FASB,  issued  Statement of Financial  Accounting  Standards,  or SFAS, No. 133,
Accounting for Derivative  Instruments and Hedging  Activities and SFAS No. 137,
Accounting for Derivative  Instruments and Hedging  Activities--Deferral  of the
Effective Date of FASB Statement No. 133. These statements  require companies to
record  derivatives on the balance sheet as assets or  liabilities,  measured at
fair  value.  Gains or losses  resulting  from  changes  in the  values of those
derivatives  would be accounted for depending on the use of the  derivative  and
whether it qualifies  for hedge  accounting.  SFAS No. 133 was effective for our
fiscal year ending December 29, 2001. The adoption of SFAS No. 133 has not had a
material impact on our financial condition or results of operations.            

10-K405
28th Page of 73
TOC
1st
Previous
Next
↓Bottom
Just 28th
Company-Specific Trends and Risks                                               

You should carefully  consider the risks described below regarding an investment
in our common shares. The risks described below are not the only ones facing our
company. Additional risks and uncertainties not presently known to us or that we
currently believe to be immaterial may also impair our business  operations.  If
any of the following risks occur, our business, financial condition or operating
results could be materially adversely affected.                                 

Risks Related to the Company                                                    

Our Global Positioning System products depend upon satellites  maintained by the
United States Department of Defense. If a significant number of these satellites
become  inoperable,  unavailable  or are not  replaced or if the policies of the
United States  government for the use of the Global  Positioning  System without
charge are changed or if there is interference  with Global  Positioning  System
signals, our business will suffer.                                              

     The  Global  Positioning   System  is  a  satellite-based   navigation  and
positioning  system  consisting of a constellation of orbiting  satellites.  The
satellites and their ground  control and monitoring  stations are maintained and
operated by the United States  Department of Defense.  The Department of Defense
does not  currently  charge  users for access to the  satellite  signals.  These
satellites  and their  ground  support  systems are complex  electronic  systems
subject to  electronic  and  mechanical  failures  and  possible  sabotage.  The
satellites were  originally  designed to have lives of 7.5 years and are subject
to damage by the hostile space  environment in which they operate.  However,  of
the current  deployment of  satellites in place,  the average age is 6 years and
some have been operating for more than 11 years.                                

     If  a  significant   number  of  satellites  were  to  become   inoperable,
unavailable  or are not  replaced,  it would  impair the current  utility of our
Global  Positioning  System  products  and the growth of current and  additional
market  opportunities.  In  addition,  there can be no  assurance  that the U.S.
government  will remain  committed to the  operation and  maintenance  of Global
Positioning  System  satellites over a long period,  or that the policies of the
U.S.  government  that  provide  for the use of the  Global  Positioning  System
without charge and without accuracy  degradation will remain unchanged.  Because
of the increasing  commercial  applications  of the Global  Positioning  System,
other U.S.  government agencies may become involved in the administration or the
regulation of the use of Global Positioning System signals.                     

     European  governments  have  expressed  interest in building an independent
satellite  navigation  system  known  as  Galileo.   Depending  on  the  as  yet
undetermined  design and operation of this system,  it is possible that it could
cause interference with Global Positioning System signals.                      

     Any of the foregoing  factors could affect the willingness of buyers of our
products to select Global Positioning  System-based products instead of products
based on competing technologies.                                                

A shut down of U.S. airspace would harm our business.                           

     On September  11,  2001,  terrorists  hijacked  and crashed four  passenger
aircraft  operated by commercial  air carriers,  resulting in major loss of life
and   property.   Following   the  terorist   attacks,   the  Federal   Aviation
Administration ('FAA') ordered all aircraft operating in the U.S. to be grounded
for several  days. In addition to this shut down of U.S.  airspace,  the general
aviation   industry  was  further   impacted  by  the  additional   restrictions
implemented  by the FAA on those flights that fly utilizing  Visual Flight Rules
(VFR).  The FAA  restricted  VFR flight inside 30 enhanced Class B (a 20-25 mile
radius around the 30 largest  metropolitan areas in the USA) airspace areas. The
Aircraft Owners and Pilots  Association (AOPA) estimated that these restrictions
affected  approximately  41,800 general aviation  aircraft based at 282 airports

10-K405
29th Page of 73
TOC
1st
Previous
Next
↓Bottom
Just 29th
inside  the 30  enhanced  Class  B  airspace  areas.  The  AOPA  estimates  that
approximately  90% of all general  aviation  flights are conducted VFR, and that
only 15% of general  aviation  pilots are  current to fly  utilizing  Instrument
Flight Rules  (IFR).  These  restrictions  impacted our revenues in the aviation
segment  since many  general  aviation  aircraft  were  grounded and this caused
potential customers to forgo or defer purchasing our aviation products.         

     The shut down of U.S. airspace following the September 11, 2001 also caused
delays in the shipment of our products  manufactured in our Taiwan manufacturing
facility to our  distribution  facility  in Olathe,  Kansas,  thereby  adversely
affecting  our  ability to supply new and  existing  products to our dealers and
distributors.                                                                   

     Any future shut down of U.S.  airspace or  imposition  of  restrictions  on
general  aviation  could  have a material  adverse  effect on our  business  and
financial results.                                                              

Any reallocation of radio frequency  spectrum could cause interference with     
the reception of Global Positioning System signals. This interference could     
harm our business.                                                              

     Our Global  Positioning  System technology is dependent on the use of radio
frequency spectrum. The assignment of spectrum is controlled by an international
organization known as the International  Telecommunications Union ('ITU'). The  
Federal Communications Commission ('FCC') is responsible for the assignment of  
spectrum for  non-government  use in the United  States in  accordance  with ITU
regulations.  Any ITU or FCC reallocation of radio frequency spectrum, including
frequency band  segmentation  or sharing of spectrum,  could cause  interference
with the reception of Global  Positioning  System signals and may materially and
adversely  affect the utility and  reliability of our products,  which would, in
turn,  cause a material  adverse effect on our operating  results.  In addition,
emissions  from  mobile  satellite  service  and other  equipment  operating  in
adjacent  frequency  bands or inband may  materially  and  adversely  affect the
utility  and  reliability  of our  products,  which  could  result in a material
adverse effect on our operating results.                                        

Ultra-Wideband radio devices could cause interference with the reception of     
Global Positioning System signals if the FCC were to change its rules. This     
interference could harm our business.                                           

     On February 14, 2002, the FCC adopted a First Report and Order that permits
certain Ultra-Wideband ('UWB') radio devices to operate on an unlicensed basis  
in  frequency  bands  above or  below  the  frequency  band  used by the  Global
Positioning  System.  The FCC has  stated  that it plans to review  the rules of
operation  for UWB devices  again within a six to twelve month period  following
the date of adoption of its First  Report and Order.  If the FCC were to issue a
further rule authorizing  operation of UWB devices in the frequency band used by
the Global  Positioning  System,  such devices might cause interference with the
reception of Global Positioning  System signals.  Such interference could reduce
demand for Global  Positioning  System  products  in the future.  Any  resulting
change in market  demand for Global  Positioning  System  products  could have a
material adverse effect on our financial results.                               

If we are not successful in the continued development, introduction or timely   
manufacture of new products, demand for our products could decrease.            

     We expect that a significant portion of our future revenue will continue to
be derived from sales of newly introduced products.  The market for our products
is characterized by rapidly changing technology, evolving industry standards and
changes in  customer  needs.  If we fail to modify or improve  our  products  in
response to changes in technology,  industry  standards or customer  needs,  our
products could rapidly become less competitive or obsolete.  We must continue to
make significant investments in research and development in order to continue to
develop new products,  enhance existing  products and achieve market  acceptance
for such products.  However,  there can be no assurance that  development  stage
products  will  be  successfully  completed  or,  if  developed,   will  achieve
significant customer acceptance.                                                

     If we are unable to  successfully  develop and  introduce  competitive  new
products,  and enhance our existing  products,  our future results of operations
would be adversely  affected.  Our pursuit of necessary  technology  may require
substantial time and expense. We may need to license new technologies to respond
to technological change. These licenses may not be available to us on terms that
we can accept.  We may not succeed in adapting our products to new  technologies
as they emerge.  Development and manufacturing schedules for technology products
are  difficult to predict,  and there can be no  assurance  that we will achieve
timely initial customer  shipments of new products.  The timely  availability of
these products in volume and their  acceptance by customers are important to our
future success. We have previously experienced delays in shipping certain of our
products and any future delays,  whether due to  manufacturing  delays,  lack of
market acceptance,  delays in regulatory  approval,  or otherwise,  could have a
material adverse effect on our results of operations.                           

10-K405
30th Page of 73
TOC
1st
Previous
Next
↓Bottom
Just 30th
If we do not correctly anticipate demand for our products, we may not be able to
secure sufficient quantities or cost-effective production of our products or we 
could have costly excess production or inventories.                             

     Historically,  we have  experienced  steady  increases  in  demand  for our
products  (although  we did  experience  a decline  in demand  for our  aviation
products in 2001 due to declining economic  conditions and the shut down of U.S.
airspace as a result of the  terrorist  attacks that  occurred on September  11,
2001)  and we have  generally  been  able to  increase  production  to meet that
demand. However, the demand for our products depends on many factors and will be
difficult to forecast.  We expect that it will become more difficult to forecast
demand as we introduce and support  multiple  products and as competition in the
market for our products intensifies.  Significant unanticipated  fluctuations in
demand could cause the following problems in our operations:                    

         - If demand increases beyond what we forecast, we would have to rapidly
  increase production. We would depend on suppliers to provide
       additional volumes of components and those suppliers might not be
           able to increase production rapidly enough to meet unexpected demand.

       - Rapid increases in  production  levels to meet unanticipated demand
  could result in higher costs for manufacturing and supply of
          components  and other  expenses.  These higher costs could lower our
     profit  margins.  Further,  if production is increased rapidly,
   manufacturing quality could decline, which may also lower our
margins.                                                  

    - If  forecasted  demand does not  develop,  we could have  excess
         production resulting in higher inventories of finished products and
           components, which would use cash and could lead to write-offs of some
          or all of the excess inventories. Lower than forecasted demand could
       also result in excess  manufacturing  capacity at our facilities,
which could result in lower margins.                      

We may become subject to significant product liability costs.                   

     If our aviation products malfunction or contain errors or defects, airplane
collisions or crashes could occur resulting in property damage,  personal injury
or death.  Malfunctions or errors or defects in our marine navigational products
could cause boats to run aground or cause  other  wreckage,  personal  injury or
death.  If any of  these  events  occurs,  we could be  subject  to  significant
liability for personal injury and property damage. We maintain insurance against
accident-related  risks  involving  our  products.  However,  there  can  be  no
assurance that such  insurance  would be sufficient to cover the cost of damages
to others or that such insurance  will continue to be available at  commercially
reasonable  rates.  If we are unable to maintain  sufficient  insurance to cover
product liability costs, our business could be harmed.                          

We depend on our suppliers, some of which are the sole source for specific      
components, and our production would be seriously harmed if these suppliers are 
not able to meet our demand and alternative sources are not available, or if    
the costs of components rise.                                                   

     We are dependent on third party  suppliers for various  components  used in
our current  products.  Some of the components  that we procure from third party
suppliers include semiconductors and  electroluminescent  panels, liquid crystal
displays,  memory chips and microprocessors.  The cost, quality and availability
of  components  are  essential  to the  successful  production  and  sale of our
products.  Some  components come from our sole source  suppliers.  International
Business Machines Corporation, RF Micro Devices, Inc. NEC Electronics,  Inc. and

10-K405
31st Page of 73
TOC
1st
Previous
Next
↓Bottom
Just 31st
Texas Instruments Taiwan Ltd. are each the sole source supplier to us of certain
application-specific  integrated circuits  incorporating our proprietary designs
which they manufacture for us. Intel  Corporation is the sole source supplier of
certain  microprocessors used in some of our products.  Analog Devices,  Inc. is
the sole source  supplier of a  microprocessor  used in our NavTalk GSM product.
Alternative  sources  may not be  currently  available  for  these  sole  source
components.                                                                     

     In  the  past,  we  have  experienced  shortages,   particularly  involving
components  that are also used in cellular  phones.  In  addition,  if there are
shortages in supply of  components,  the costs of such  components  may rise. If
suppliers are unable to meet our demand for  components on a timely basis and if
we are unable to obtain an alternative source or if the price of the alternative
source is  prohibitive,  or if the costs of  components  rise,  our  ability  to
maintain timely and cost-effective production of our products would be seriously
harmed.                                                                         

     We license mapping data for use in our products from various sources. There
are only a limited  number of suppliers  of mapping  data for each  geographical
region. If we are unable to continue  licensing such mapping data and are unable
to obtain an alternative  source,  or if the price of the alternative  source is
prohibitive, our ability to supply mapping data for use in our products would be
seriously harmed.                                                               

We rely on independent dealers and distributors to sell our products, and       
disruption to these channels would harm our business.                           

     Because we sell a majority  of our  products  to  independent  dealers  and
distributors,  we are subject to many risks,  including  risks  related to their
inventory  levels and support for our products.  In particular,  our dealers and
distributors  maintain  significant levels of our products in their inventories.
If dealers and  distributors  attempt to reduce  their levels of inventory or if
they do not maintain  sufficient levels to meet customer demand, our sales could
be negatively impacted.                                                         

     Our dealers and distributors also sell products offered by our competitors.
If our  competitors  offer our dealers and  distributors  more favorable  terms,
those  dealers  and  distributors  may  de-emphasize  or  decline  to carry  our
products.  In the future,  we may not be able to retain or attract a  sufficient
number of  qualified  dealers  and  distributors.  If we are unable to  maintain
successful  relationships  with  dealers  and  distributors  or  to  expand  our
distribution channels, our business will suffer.                                

If we fail to manage our growth and expansion effectively, we may not be able   
to successfully manage our business.                                            

     Our ability to  successfully  offer our products and implement our business
plan in a rapidly evolving market requires an effective  planning and management
process.  We continue to increase the scope of our operations  domestically  and
internationally and have grown our shipments and headcount  substantially.  This
growth has placed, and our anticipated growth in future operations will continue
to place, a significant strain on our management systems and resources.         

10-K405
32nd Page of 73
TOC
1st
Previous
Next
↓Bottom
Just 32nd
Our business may suffer if we are not able to hire and retain sufficient        
qualified personnel or if we lose our key personnel.                            

     Our future success depends partly on the continued  contribution of our key
executive,  engineering,  sales,  marketing,  manufacturing  and  administrative
personnel.  We currently do not have  employment  agreements with any of our key
executive  officers.  We do not have key man  life  insurance  on any of our key
executive  officers and do not currently  intend to obtain such  insurance.  The
loss of the  services  of any of our  senior  level  management,  or  other  key
employees,  could  harm our  business.  Recruiting  and  retaining  the  skilled
personnel  we require to maintain  our market  position  may be  difficult.  For
example,  in recent  years there has been a  nationwide  shortage  of  qualified
electrical  engineers and software  engineers who are necessary for us to design
and develop new products and therefore,  it has been challenging to recruit such
personnel. If we fail to hire and retain qualified employees, we may not be able
to maintain and expand our business.                                            

Our sales and gross margins for our products may fluctuate or erode.            

     Our sales and gross margins for our products may  fluctuate  from period to
period due to a number of factors,  including product mix,  competition and unit
volumes. In particular, the average selling prices of a specific product tend to
decrease over that product's life. To offset such  decreases,  we intend to rely
primarily on obtaining yield  improvements and corresponding  cost reductions in
the  manufacture  of existing  products and on  introducing  new  products  that
incorporate  advanced  features  and  therefore  can be sold at  higher  average
selling  prices.  However,  there  can be no  assurance  that we will be able to
obtain any such yield  improvements or cost reductions or introduce any such new
products in the future.  To the extent that such cost reductions and new product
introductions do not occur in a timely manner or our customers' products do not 
achieve  market  acceptance,  our business,  financial  condition and results of
operations could be materially  adversely affected.  As we introduce new product
lines that serve cellular  handset,  personal  digital  assistant,  Family Radio
Service  and  original  equipment  manufacturer   automotive  and  sensor  board
applications,  we may  experience  a decline in our overall  gross  margins from
sales of these potentially high volume but low margin product lines.            

Our quarterly operating results are subject to fluctuations and seasonality.    

     Our  operating  results  are  difficult  to predict.  Our future  quarterly
operating results may fluctuate significantly.  If this occurs, the price of our
stock would likely decline. As we expand our operations, our operating expenses,
particularly  our sales,  marketing  and research  and  development  costs,  may
increase.  If revenues decrease and we are unable to reduce those costs rapidly,
our operating results would be negatively affected.                             

     Historically,  our revenues have usually been weaker in the first and third
quarters of each fiscal  year and have,  from time to time,  been lower than the
preceding quarter. Our devices are highly consumer-oriented, and consumer buying
is  traditionally  lower in these  quarters.  Sales of certain  of our  consumer
products  tend to be  higher  in our  second  fiscal  quarter  due to  increased
consumer  spending for such products during the recreational  marine and fishing
season.  Sales of certain of our consumer products also tend to be higher in our
fourth fiscal quarter due to increased  consumer spending patterns on electronic
devices  during the  holiday  season.  In  addition,  we attempt to time our new
product  releases to coincide with relatively  higher  consumer  spending in the
second  and  fourth  fiscal  quarters,   which  contributes  to  these  seasonal
variations.                                                                     

Because our reporting currency is in U.S. Dollars and the functional currency of
one of our primary operating subsidiaries is in Taiwan Dollars, exchange rate   
fluctuations impact the financial statements of this operating subsidiary and   
our consolidated financial statements.                                          

     Foreign  exchange  effects  on our  financial  statements  can be  material
because our reporting currency is in U.S. Dollars while the functional  currency
of Garmin Corporation, one of our operating subsidiaries,  is in Taiwan Dollars.
We are exposed to foreign  exchange risks related to recurring  foreign currency
payments,  principally in U.S.  Dollars.  In addition,  fluctuations in exchange
rates between the U.S. Dollar and the Taiwan Dollar,  may have an adverse impact
on the financial statements of Garmin Corporation,  and, as a consequence,  upon
consolidation  have an indirect  adverse  effect on our  consolidated  financial
statements.                                                                     

10-K405
33rd Page of 73
TOC
1st
Previous
Next
↓Bottom
Just 33rd
If we are unable to compete effectively with existing or new competitors, our   
resulting loss of competitive position could result in price reductions, fewer  
customer orders, reduced margins and loss of market share.                      

     The  markets  for  our  products  are  highly  competitive  and  we  expect
competition  to increase in the future.  We plan to enter the  cellular  handset
market and will be competing against Telefon AB LM Ericsson,  Motorola, Inc. and
Nokia  Oy  with  certain  products.  These  competitors,  as well as some of our
existing competitors or potential competitors,  such as Honeywell International,
Inc.  and UPS  Aviation  Technologies,  have  significantly  greater  financial,
technical and marketing  resources than we do. These  competitors may be able to
respond  more  rapidly to new or  emerging  technologies  or changes in customer
requirements.  They  may  also  be  able  to  devote  greater  resources  to the
development,  promotion and sale of their products.  Increased competition could
result in price reductions,  fewer customer orders,  reduced margins and loss of
market  share.  Our failure to compete  successfully  against  current or future
competitors could seriously harm our business,  financial  condition and results
of operations.                                                                  

Our intellectual property rights are important to our operations, and we could  
suffer loss if they infringe upon other's rights or are infringed upon by       
others.                                                                         

     We rely on a  combination  of  patents,  copyrights,  trademarks  and trade
secrets,  confidentiality provisions and licensing arrangements to establish and
protect  our  proprietary  rights.  To this end,  we hold  rights to a number of
patents and registered  trademarks and regularly file applications to attempt to
protect  our  rights in new  technology  and  trademarks.  However,  there is no
guarantee that our patent  applications will become issued patents,  or that our
trademark  applications will become  registered  trademarks.  Moreover,  even if
approved, our patents or trademarks may thereafter be successfully challenged by
others or otherwise  become  invalidated for a variety of reasons.  In addition,
the only  patents  we have  obtained  are U.S.  patents.  Thus,  any  patents or
trademarks  we  currently  have  or may  later  acquire  may  not  provide  us a
significant competitive advantage.                                              

     Third parties may claim that we are infringing their intellectual  property
rights.  Such claims  could have a serious  adverse  effect on our  business and
financial  condition.   Litigation  concerning  patents  or  other  intellectual
property  can be  costly  and time  consuming.  We may seek  licenses  from such
parties,  but they  could  refuse to grant us a license  or demand  commercially
unreasonable  terms.  We might  not  have  sufficient  resources  to pay for the
licenses.  Such  infringement  claims  could also cause us to incur  substantial
liabilities and to suspend or permanently cease the use of critical technologies
or processes or the production or sale of major products.                       

Failure to obtain required certifications of our products on a timely basis     
could harm our business.                                                        

     We have certain  products,  especially  in our aviation  segment,  that are
subject to governmental and similar  certifications before they can be sold. For
example, Federal Aviation Administration ('FAA') certification is required for  
all of our  aviation  products  that  are  intended  for  installation  in  type
certificated  aircraft.  To the extent that it is required,  certification is an
expensive  and time  consuming  process  that  requires  significant  focus  and
resources.  An  inability  to obtain,  or  excessive  delay in  obtaining,  such
certifications  could have an adverse  effect on our  ability to  introduce  new
products and, therefore,  our operating results.  In addition,  we cannot assure
you  that  our   certified   products   will  not  be   decertified.   Any  such
decertification could have an adverse effect on our operating results.          

10-K405
34th Page of 73
TOC
1st
Previous
Next
↓Bottom
Just 34th
Our business is subject to economic, political and other risks associated with  
international sales and operations.                                             

     Our  business  is  subject  to  risks   associated   with  doing   business
internationally.  We estimate that  approximately  25.3% of our net sales in the
fiscal  year  ended   December  29,  2001   represented   products   shipped  to
international destinations. Accordingly, our future results could be harmed by a
variety of international factors, including:                                    

- changes in foreign currency exchange rates;                 

     - changes in a specific country's or region's political or economic
conditions, particularly in emerging markets;             

- trade protection measures and import or export licensing    
requirements;                                             

- potentially negative consequences from changes in tax laws; 

         - difficulty in managing widespread sales and manufacturing operations;
and                                                       

- less effective protection of intellectual property.         

We may experience unique economic and political risks associated with companies 
that operate in Taiwan.                                                         

     Relations  between Taiwan and the People's Republic of China, also referred
to as the PRC, and other factors affecting the political or economic  conditions
of Taiwan in the future  could  affect our business and the market price and the
liquidity  of our  shares.  Our  principal  manufacturing  facilities  where  we
manufacture all of our products, except our panel-mounted aviation products, are
located in Taiwan.                                                              

     Taiwan  has a  unique  international  political  status.  The  PRC  asserts
sovereignty over all of China,  including Taiwan,  certain other islands and all
of mainland  China.  The PRC government does not recognize the legitimacy of the
Taiwan  government.  Although  significant  economic and cultural relations have
been  established  during  recent  years  between  Taiwan  and the PRC,  the PRC
government  has  indicated  that it may use military  force to gain control over
Taiwan in certain  circumstances,  such as the  declaration of  independence  by
Taiwan. Relations between Taiwan and the PRC have on occasion adversely affected
the  market  value of  Taiwanese  companies  and  could  negatively  affect  our
operations in Taiwan in the future.                                             

There is uncertainty as to our shareholders' ability to enforce certain foreign 
civil liabilities in the Cayman Islands and Taiwan.                             

     We are a Cayman Islands company and a substantial portion of our assets are
located outside the United States,  particularly in Taiwan.  As a result, it may
be difficult for you to effect  service of process within the United States upon
us. In  addition,  there is  uncertainty  as to whether the courts of the Cayman
Islands and Taiwan would recognize or enforce  judgments of United States courts
obtained  against  us  predicated  upon the civil  liability  provisions  of the
securities  laws of the United States or any state  thereof,  or be competent to
hear  original  actions  brought  in the  Cayman  Islands  or Taiwan  against us
predicated upon the securities laws of the United States or any state thereof.  

Our shareholders may face difficulties in protecting their interests because    
we are incorporated under Cayman Islands law.                                   

     Our  corporate  affairs are  governed  by our  Memorandum  and  Articles of
Association  and by the Companies Law (2001 Second  Revision) and the common law
of the  Cayman  Islands.  The  rights  of our  shareholders  and  the  fiduciary
responsibilities  of our directors  under Cayman  Islands law are not as clearly
established   as  under   statutes  or  judicial   precedent   in  existence  in
jurisdictions in the United States.  Therefore, our public shareholders may have
more  difficulty  in  protecting  their  interests in the face of actions by the
management, directors or our controlling shareholders than would shareholders of
a corporation  incorporated in a jurisdiction  in the United States,  due to the
comparatively less developed nature of Cayman Islands law in this area.         

10-K405
35th Page of 73
TOC
1st
Previous
Next
↓Bottom
Just 35th
We may pursue strategic acquisitions, investments, strategic partnerships or    
other ventures, and our business could be materially harmed if we fail to       
successfully identify, complete and integrate such transactions.                

     We intend to evaluate  acquisition  opportunities and opportunities to make
investments in complementary businesses,  technologies, services or products, or
to enter into any strategic  partnerships with parties who can provide access to
those assets,  additional product or services  offerings or additional  industry
expertise.  We currently have no commitments to make any material investments or
acquisitions,  or to enter  into  strategic  partnerships.  We may not  identify
suitable acquisition,  investment or strategic partnership candidates,  or if we
do identify  suitable  candidates,  we may not complete  those  transactions  on
commercially favorable terms, or at all.                                        

     Any future acquisition could result in difficulties  assimilating  acquired
operations and products,  diversion of capital and  management's  attention away
from other  business  issues and  opportunities  and  amortization  of  acquired
intangible  assets.  Integration  of acquired  companies  may result in problems
related to integration  of technology and  inexperienced  management  teams.  In
addition,  the key personnel of the acquired  company may decide not to work for
us. Our management has not had experience in assimilating acquired organizations
and  products  into  our  operations.  We may  not  successfully  integrate  any
operations,  personnel or products that we may acquire in the future. If we fail
to successfully  integrate such  transactions,  our business could be materially
harmed.                                                                         

We have benefited in the past from Taiwan government tax incentives offered on  
certain high technology capital investments that may not always be available.   

     Our  effective  tax rate is lower  than the U.S.  Federal  statutory  rate,
because we have  benefited  from lower tax rates  since our  inception  and from
incentives  offered in Taiwan  related  to our high  technology  investments  in
Taiwan.  The loss of these tax benefits  could have a significant  effect on our
financial results in the future.                                                

Changes in our United States federal income tax classification or in applicable 
tax law could result in adverse tax consequences to our shareholders.           

     We do not believe that we (or any of our  non-United  States  subsidiaries)
are  currently a 'foreign  personal  holding  company'  or  'passive foreign    
investment company' for United States  federal  income tax purposes.  We would  
constitute a foreign personal holding company in any taxable year if (1) 60% (or
50% in any year  following the year in which we first became a foreign  personal
holding  company) or more of our gross  income  were  foreign  personal  holding
company income (which is generally income of a passive nature such as dividends,
interest  and  royalties)  (the 'income  test')  and (2) more than 50% of the   
voting power or value of our equity were owned, directly or indirectly,  by five
or fewer U.S. holders that are individuals (the 'shareholder test'). If we (or  
any of our non-United States  subsidiaries) are classified as a foreign personal
holding  company in any taxable  year,  then each  shareholder  that is a United
States  person  would  be  required  to pay tax on its  pro  rata  share  of the
undistributed  foreign  personal holding income of such foreign personal holding
company.  We currently  satisfy the shareholder test for qualifying as a foreign
personal  holding  company  but intend to manage our affairs so as to attempt to
avoid  satisfaction  of the income  test for  qualifying  as a foreign  personal
holding  company,  or minimize the impact to our  shareholders if we satisfy the
income test,  to the extent this  management  of our affairs would be consistent
with our business goals, although we cannot assure you in this regard.          

     We do not expect to become a passive foreign investment  company.  However,
because the passive foreign investment company determination is made annually on
the basis of facts and circumstances  that may be beyond our control and because
the principles for applying the passive foreign investment company tests are not
entirely  clear,  we cannot assure you that we will not become a passive foreign
investment  company. If we are a passive foreign investment company in any year,
then any of our  shareholders  that is a United States person could be liable to
pay  tax at  ordinary  income  tax  rates  plus an  interest  charge  upon  some
distributions by us or when that shareholder  sells our common shares at a gain.

10-K405
36th Page of 73
TOC
1st
Previous
Next
↓Bottom
Just 36th
Further,  if we are classified as a passive  foreign  investment  company in any
year in which a  United  States  person  is a  shareholder,  we  generally  will
continue to be treated as a passive foreign  investment  company with respect to
such shareholder in all succeeding  years,  regardless of whether we continue to
satisfy the income or asset tests described above. Additional tax considerations
would  apply  if we or  any  of  our  subsidiaries  were  a  controlled  foreign
corporation or a personal holding company.                                      

Risks Relating to Our Shares                                                    

We do not plan to pay dividends in the foreseeable future.                      

     We do not currently  anticipate  paying cash dividends for the  foreseeable
future.  In addition,  if in the future we  determined  to pay  dividends on our
shares, as a holding company,  we expect to be principally  dependent on receipt
of funds from our operating subsidiaries.  Our principal operating subsidiary is
a Taiwan company and dividends  payable to us from that company would be subject
to Taiwan withholding tax, which is currently applicable at the rate of 20%.    

The markets for high technology stocks have experienced extreme volatility and  
our share price may be subject to significant fluctuations and volatility.      

     The markets for high technology stocks have experienced  extreme volatility
that has often been  unrelated to the operating  performance  of the  particular
companies.  These broad market  fluctuations  may  adversely  affect the trading
price of our common shares.                                                     

Our officers and directors exert substantial influence over us.                 

     Members of our Board of Directors and our executive officers, together with
members of their  families  and  entities  that may be deemed  affiliates  of or
related to such persons or entities, beneficially own approximately 51.8% of our
outstanding common shares. Accordingly,  these shareholders may be able to elect
all members of our Board of  Directors  and  determine  the outcome of corporate
actions requiring shareholder approval,  such as mergers and acquisitions.  This
level of  ownership  may have a  significant  effect in  delaying,  deferring or
preventing a change in control of Garmin and may adversely affect the voting and
other rights of other holders of our common shares.                             

Prior to 2006, without the approval of a majority of certain of our             
shareholders, we may not dispose of our shares of Garmin Corporation or its     
assets, even if it would benefit all of our shareholders.                       

     In connection  with the  reorganization  whereby  Garmin became the holding
company for Garmin Corporation,  shareholders of Garmin Corporation entered into
a shareholders' agreement whereby each shareholder party to the agreement agreed
to take all reasonable  actions required to prevent the disposition by Garmin of
any shares of Garmin Corporation or of substantially all of the assets of Garmin
Corporation  until after December 31, 2005 except upon approval of a majority in
interest of such shareholders who are U.S. citizens or residents. Certain of our
officers and directors own a substantial portion of these shares.               

Provisions in our charter documents might deter, delay or prevent a third party 
from acquiring us, which could decrease the value of our shares.                

     Our Board of Directors has the authority to issue up to 1,000,000 preferred
shares  and  to  determine  the  price,  rights,  preferences,   privileges  and
restrictions,  including voting rights, of those shares without any further vote
or action by the  shareholders.  This could have an adverse impact on the market
price of our  common  shares.  We have no present  plans to issue any  preferred
shares,  but we may do so.  The rights of the  holders  of common  shares may be
subject  to,  and  adversely  affected  by,  the  rights of the  holders  of any

10-K405
37th Page of 73
TOC
1st
Previous
Next
↓Bottom
Just 37th
preferred shares that may be issued in the future. In addition,  we have adopted
a  classified  board of  directors.  Our  shareholders  are unable to remove any
director or the entire  board of directors  without a super  majority  vote.  In
addition,  a super  majority  vote is  required  to  approve  transactions  with
interested  shareholders.   Shareholders  do  not  have  the  right  to  call  a
shareholders  meeting.  We have adopted a shareholders' rights plan which under 
certain circumstances would significantly impair the ability of third parties to
acquire  control of us without prior  approval of our Board of  Directors.  This
shareholders' rights plan and the provisions in our charter documents could make
it more  difficult  for a third  party  to  acquire  us,  even if doing so would
benefit our shareholders.                                                       

Item 7A.  Quantitative and Qualitative Disclosures About Market Risk            

Market Sensitivity                                            

     We have  market  risk  primarily  in  connection  with the  pricing  of our
products and services and the purchase of raw materials. Product pricing and raw
materials  costs  are both  significantly  influenced  by  semiconductor  market
conditions.  Historically, during cyclical industry downturns, we have been able
to offset  pricing  declines for our products  through a combination of improved
product mix and success in obtaining price reductions in raw material costs.    

Inflation                                                     

     We do not believe that inflation has had a material effect on our business,
financial  condition  or  results  of  operations.  If our costs  were to become
subject  to  significant  inflationary  pressures,  we may not be able to  fully
offset such higher costs through price increases. Our inability or failure to do
so could  adversely  affect our  business,  financial  condition  and results of
operations.                                                                     

Foreign Currency Exchange Rate Risk                           

     The  operation  of the  Company's  subsidiaries  in  international  markets
results in exposure to movements in currency  exchange  rates. We generally have
not been significantly  affected by foreign exchange fluctuations because, until
recently, the Taiwan Dollar has proven to be relatively stable.  However, within
the last two years we have experienced significant foreign currency gains due to
the strengthening of the U.S. dollar. The potential of volatile foreign exchange
rate  fluctuations in the future could have a significant  effect on our results
of operations.                                                                  

     The principal currency involved is the Taiwan Dollar.  Garmin  Corporation,
located in Shijr, Taiwan uses the local currency as the functional currency. The
Company  translates all assets and  liabilities  at year-end  exchange rates and
income and  expense  accounts  at  average  rates  during the year.  In order to
minimize the effect of the currency exchange fluctuations on our operations,  we
have  elected  to  retain  most of our  cash at our  Taiwan  subsidiary  in U.S.
dollars.  As discussed  above,  the exchange rate increased 6.5% during 2001 and
resulted in a foreign  currency  gain of $11.6  million.  If the  exchange  rate
decreased by a similar  percentage,  a comparable foreign currency loss would be
recognized.                                                                     

Interest Rate Risk                                            

     As of December 29, 2001, we have interest rate risk in connection  with our
industrial  revenue  bonds  that  bear  interest  at  a  floating  rate.  Garmin
International,  Inc. entered into two interest rate swap agreements, one on July
1, 2000 ($10.0 million) and another on February 6, 2001 ($5.0 million), totaling
$15.0 million to modify the  characteristics  of its outstanding  long-term debt
from a floating rate to a fixed rate basis. These agreements involve the receipt
of floating rate amounts in exchange for fixed rate  interest  payments over the
life of the agreements  without an exchange of the underlying  principal amount.
The estimated fair value of the interest swap  agreements of $1.5 million is the
amount we would be required to pay to terminate the swap  agreements at December
29,  2001.  A 10%  positive  or  negative  change in the  floating  counterparty
interest rates  associated  with the swaps would change the estimated fair value
of the interest rate swap  agreements  to $1.4 million  (positive 10% change) or
$1.6 million (negative 10% change), respectively.                               

10-K405
38th Page of 73
TOC
1st
Previous
Next
↓Bottom
Just 38th
     The  Company's  average  outstanding  debt  during  fiscal  year  2001  was
approximately  $39.3  million.  The average  interest rate on debt during fiscal
2001 was 5.5%. A 10% positive or negative  change in the average  interest  rate
during  fiscal  2001 would have  resulted in  interest  expense of $2.4  million
(positive 10% change) or $1.9 million (negative 10% change), respectively.  This
compares to the actual interest expense of $2.2 million during fiscal 2001.     

Item 8.  Financial Statements and Supplementary Data                            

Garmin Ltd. and Subsidiaries

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Contents

Report of Independent Auditors...............................................37 

Consolidated Balance Sheets at December 29, 2001 and December 30, 2000.......38 
Consolidated Statements of Income for the Years Ended December 29, 2001,        
  December 30, 2000, and December 25, 1999..................................39
Consolidated Statements of Stockholders' Equity for the Years Ended             
  December 29, 2001, December 30, 2000, and December 25, 1999...............40
Consolidated Statements of Cash Flows for the Years Ended December 29, 2001,    
  December 30, 2000, and December 25, 1999..................................41
Notes to Consolidated Financial Statements...................................43 

10-K405
39th Page of 73
TOC
1st
Previous
Next
↓Bottom
Just 39th
Report of Independent Auditors

The Board of Directors and Stockholders                                         
Garmin Ltd.                                                                     

     We have audited the accompanying consolidated balance sheets of Garmin Ltd.
and  subsidiaries  (the  Company) as of December 29, 2001 and December 30, 2000,
and the related  consolidated  statements of income,  stockholders'  equity, and
cash flows for each of the three years in the period  ended  December  29, 2001.
Our audits also included the financial statement schedule listed in the index at
Item 14(a)(2). These financial statements and schedule are the responsibility of
the Company's  management.  Our responsibility is to express an opinion on these
financial statements and schedule based on our audits.                          

     We conducted our audits in accordance  with  auditing  standards  generally
accepted in the United States.  Those standards require that we plan and perform
the audit to obtain reasonable  assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.  An
audit also includes  assessing the accounting  principles  used and  significant
estimates  made by  management,  as well as  evaluating  the  overall  financial
statement  presentation.  We believe that our audits provide a reasonable  basis
for our opinion.                                                                

     In our opinion,  the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Garmin Ltd. and
subsidiaries  at December 29, 2001 and December 30, 2000, and the  consolidated 
results of their  operations and their cash flows for each of the three years in
the period ended  December 29, 2001, in conformity  with  accounting  principles
generally  accepted in the United  States.  Also,  in our  opinion,  the related
financial statement schedule, when considered in relation to the basic financial
statements taken as a whole,  presents  fairly,  in all material  respects,  the
information set forth therein.                                                  

Kansas City, Missouri                                                           
February 1, 2002                                                                

10-K405
40th Page of 73
TOC
1st
Previous
Next
↓Bottom
Just 40th
                                                        [Enlarge/Download Table]


                          Garmin Ltd. and Subsidiaries                                                 

                           Consolidated Balance Sheets                                                 
                    (In Thousands, Except Share Information)                                           

                                                                     December 29,      December 30,    
                                                                         2001              2000        
                                                                   ------------------------------------
                                                                                                       
Assets                                                                                                 
Current assets:                                                                                        
   Cash and cash equivalents                                             $192,842         $251,731     
   Marketable securities (Note 3)                                          40,835                -     
   Accounts receivable, less allowance for doubtful accounts of                                        
     $2,627 in 2001 and $1,866 in 2000                                     47,998           32,719     
   Inventories                                                             61,132           89,855     
   Deferred income taxes (Note 8)                                           7,007           12,293     
   Prepaid expenses and other current assets                                2,921            1,423     
                                                                   ------------------------------------
Total current assets                                                      352,735          388,021     

Property and equipment (Note 5):                                                                       
   Land and improvements                                                   20,414           21,135     
   Building and improvements                                               32,864           29,493     
   Office furniture and equipment                                          11,365            9,151     
   Manufacturing equipment                                                 17,282           16,543     
   Engineering equipment                                                   11,671            8,237     
   Vehicles                                                                 1,671              245     
                                                                   ------------------------------------
                                                                           95,267           84,804     
   Accumulated depreciation                                                25,181           20,100     
                                                                   ------------------------------------
                                                                           70,086           64,704     

Restricted cash (Note 5)                                                    1,600            5,848     
Marketable securities (Note 3)                                             90,749                -     
Intangible assets                                                          16,985            4,774     
                                                                   ------------------------------------
Total assets                                                             $532,155         $463,347     
                                                                   ====================================

Liabilities and stockholders' equity                                                                   
Current liabilities:                                                                                   
   Accounts payable                                                     $  18,837        $  22,496     
   Salaries and benefits payable                                            3,308            3,441     
   Accrued warranty costs                                                   4,777            5,228     
   Accrued sales program costs                                              2,518            3,403     
   Other accrued expenses (Note 9)                                          2,967            1,091     
   Income taxes payable                                                    12,444           13,725     
   Current portion of long-term debt (Note 5)                               4,177              587     
                                                                   ------------------------------------
Total current liabilities                                                  49,028           49,971     

Long-term debt (Note 5)                                                    28,011           46,359     
Deferred income taxes (Note 8)                                              1,147            1,686     
Other liabilities                                                               -               92     

Stockholders' equity:                                                                                  
   Preferred stock, $1.00 par value, 1,000,000 shares authorized,                                      
     none issued                                                                -                -     
   Common stock, $0.01 par value 500,000,000 shares authorized                                         
     (Notes 12 and 13):                                                                                
       Shares issued and outstanding - 107,774,918 in 2001 and                                         
         108,242,111 in 2000                                                1,078            1,082     
   Additional paid-in capital                                             127,131          133,925     
   Retained earnings (Notes 5 and 6)                                      365,087          253,140     
   Accumulated other comprehensive loss                                   (39,327)         (22,908)    
                                                                   ------------------------------------
Total stockholders' equity                                                453,969          365,239     
                                                                   ------------------------------------
Total liabilities and stockholders' equity                               $532,155         $463,347     
                                                                   ====================================
See accompanying notes.                                                                                

10-K405
41st Page of 73
TOC
1st
Previous
Next
↓Bottom
Just 41st
                                                        [Enlarge/Download Table]


                                                     Garmin Ltd. and Subsidiaries                          

                                                   Consolidated Statements of Income                       
                                        (In Thousands, Except Share and Per Share Information)             

                                                                           Year Ended                      
                                                      -----------------------------------------------------
                                                      December 29,     December 30,      December 25,      
                                                             2001             2000               1999      
                                                      -----------------------------------------------------

                                                                                                           
Net sales                                                   $369,119        $345,741          $232,586     
Cost of goods sold                                           170,960         162,015           105,654     
                                                      -----------------------------------------------------
Gross profit                                                 198,159         183,726           126,932     

Selling, general, and administrative expenses                 38,709          32,669            27,063     
Research and development expense                              28,164          21,764            17,339     
                                                      -----------------------------------------------------
                                                              66,873          54,433            44,402     
                                                      -----------------------------------------------------
Operating income                                             131,286         129,293            82,530     

Other income (expense):                                                                                    
   Interest income                                            11,164           6,925             4,327     
   Interest expense                                           (2,174)         (2,287)             (577)    
   Foreign currency                                           11,573           6,962            (1,469)    
   Other                                                         186              29              (679)    
                                                      -----------------------------------------------------
                                                              20,749          11,629             1,602     
                                                      -----------------------------------------------------
Income before income taxes                                   152,035         140,922            84,132     

Income tax provision (benefit):                                                                            
   Current                                                    33,781          39,723            19,130     
   Deferred                                                    4,806          (4,464)              835     
                                                      -----------------------------------------------------
                                                              38,587          35,259            19,965     
                                                      -----------------------------------------------------
Net income                                                  $113,448        $105,663         $  64,167     
                                                      =====================================================

Basic and diluted net income per share (Note 14)         $     1.05      $     1.05         $    0.64      
                                                      =====================================================

See accompanying notes.                                                                                    

10-K405
42nd Page of 73
TOC
1st
Previous
Next
↓Bottom
Just 42nd
                                                        [Enlarge/Download Table]


                                            Consolidated Statements of Stockholders' Equity                
                                             (In Thousands, Except Per Share Information)                  

                                                                                Accumulated                
                                                       Additional                  Other                   
                                     Common Stock       Paid-In     Retained   Comprehensive               
                                   Shares    Dollars    Capital     Earnings        Loss         Total     
                                 ------------------------------------------------------------------------  

                                                                                                           
Balance at December 26, 1998        55,555   $   555    $  17,585    $132,247      $(14,447)     $135,940  
   Net income                            -         -            -      64,167             -        64,167  
   Translation adjustment                -         -            -           -         2,022         2,022  
                                                                                                 --------  
     Comprehensive income                                                                          66,189  
   Cash dividend ($0.13 per                                                                                
     share)                              -         -            -      (7,530)            -        (7,530) 
   80% stock dividend               44,445       445       12,008     (12,453)            -             -  
                                 ------------------------------------------------------------------------- 
Balance at December 25, 1999       100,000     1,000       29,593     176,431       (12,425)      194,599  
   Net income                            -         -            -     105,663             -       105,663  
   Translation adjustment                -         -            -           -       (10,483)      (10,483) 
                                                                                                 --------  
     Comprehensive income                                                                          95,180  
   Cash dividend ($0.29 per                                                                                
     share)                              -         -            -     (28,954)            -       (28,954) 
   Issuance of common stock in                                                                             
     initial public offering,                                                                              
     net of offering costs           8,242        82      104,332           -             -       104,414  
                                 ------------------------------------------------------------------------  
Balance at December 30, 2000       108,242     1,082      133,925     253,140       (22,908)      365,239  
   Net income                            -         -            -     113,448             -       113,448  
   Translation adjustment                -         -            -           -       (15,519)      (15,519) 
   Adjustment related to                                                                                   
     effective portion of cash                                                                             
     flow hedges, net of                                                                                   
     deferred taxes of $579              -         -            -           -          (900)         (900) 
                                                                                                 --------  
      Comprehensive income                                                                           97,029
   Issuance of common stock                                                                                
     from exercise of stock                                                                                
     options                             5         1           70           -             -            71  
   Issuance of common stock                                                                                
     through stock purchase plan       123         1        1,463           -             -         1,464  
   Purchase and retirement of                                                                              
     common stock                     (595)       (6)      (8,327)     (1,501)            -        (9,834) 
                                 ------------------------------------------------------------------------- 
Balance at December 29, 2001        107,775    $1,078     $127,131    $365,087     $(39,327)      $453,969 
                                 ========================================================================= 

See accompanying notes.                                                                                    

10-K405
43rd Page of 73
TOC
1st
Previous
Next
↓Bottom
Just 43rd
                                                        [Enlarge/Download Table]


                                          Garmin Ltd. and Subsidiaries                                     

                                      Consolidated Statements of Cash Flows                                
                                                 (In Thousands)                                            

                                                                           Year Ended                      
                                                      -----------------------------------------------------
                                                         December 29,     December 30,     December 25,    
                                                                 2001             2000             1999    
                                                      -----------------------------------------------------
                                                                                                           
Operating activities                                                                                       
Net income                                                   $113,448         $105,663         $64,167     
Adjustments to reconcile net income to net cash                                                            
   provided by operating activities:                                                                       
     Depreciation                                               7,341            7,104           5,554     
     Amortization                                               3,527              465              18     
     Loss on disposal of property and equipment                    23            1,605             136     
     Provision for doubtful accounts                            1,137              911             825     
     Provision for obsolete and slow-moving                                                                
       inventories                                              4,000            5,915           1,202     
     Foreign currency translation                              (5,593)          (4,831)          4,128     
     Deferred income taxes                                      4,806           (4,464)            835     
     Net sale of trading securities                                -                 -           2,173     
     Changes in operating assets and liabilities:                                                          
       Accounts receivable                                    (17,894)          (3,250)        (14,657)    
       Inventories                                             22,958          (48,024)        (14,119)    
       Prepaid expenses and other current assets                 (447)            (373)           (508)    
       Accounts payable                                        (2,657)           7,961           5,888     
       Accrued expenses                                        (1,016)             999           1,278     
       Income taxes payable                                       358           13,812          (8,450)    
                                                      -----------------------------------------------------
Net cash provided by operating activities                     129,991           83,493          48,470     

Purchases of property and equipment                           (14,883)         (24,821)        (32,195)    
Proceeds from sale of property and equipment                      239            5,919              69     
Purchases of marketable securities                         (1,684,985)               -               -     
Sales of marketable securities                              1,553,401                -               -     
Purchase of assets of Sequoia Instruments, Inc.                (3,625)               -               -     
Purchases of licenses                                         (12,028)          (4,251)              -     
Change in restricted cash                                       4,239           (5,856)              -     
Other                                                            (748)              95            (176)    
                                                      -----------------------------------------------------
Net cash used in investing activities                        (158,390)         (28,914)        (32,302)    

Financing activities                                                                                       
Dividends                                                           -          (28,954)          (7,530)   
Proceeds from issuance of common stock, net of                                                             
   offering costs                                                   -          104,414                -    
Proceeds from issuance of common stock through stock                                                       
   purchase plan                                                1,464                -                -    
Proceeds from issuance of common stock from exercise                                                       
   of stock options                                                71                -                -    
Proceeds from issuance of notes payable and long-term                                                      
   debt                                                             -                -           18,040    
Proceeds from issuance of Industrial Revenue Bonds                  -           20,000                -    
Principal payments on long-term debt                          (14,189)               -                -    
Principal payments on notes payable                                 -               (5)            (357)   
Purchases of common stock                                      (9,834)               -                -    
                                                      -----------------------------------------------------
Net cash (used in) provided by financing activities           (22,488)          95,455           10,153    

Effect of exchange rate changes on cash                        (8,002)          (2,382)          (2,602)   
                                                      -----------------------------------------------------
Net (decrease) increase in cash and cash equivalents          (58,889)         147,652           23,719    
Cash and cash equivalents at beginning of year                251,731          104,079           80,360    
                                                      -----------------------------------------------------
Cash and cash equivalents at end of year                     $192,842         $251,731         $104,079    
                                                      =====================================================

10-K405
44th Page of 73
TOC
1st
Previous
Next
↓Bottom
Just 44th
                                 GARMIN LTD.SUBSIDIARIES
                               Consolidated Statements of Cash Flows (continued)
                                (In Thousands)

                                                        [Enlarge/Download Table]

                                                                           Year Ended                      
                                                      -----------------------------------------------------
                                                         December 29,     December 30,     December 25,    
                                                                 2001             2000             1999    
                                                      -----------------------------------------------------
                                                                                                           
Supplemental disclosures of cash flow information                                                          

Cash paid during the year for income taxes               $     38,844        $  28,788       $   28,733    
                                                      =====================================================

Cash received during the year from income tax refunds    $           -       $      12       $    1,517    
                                                      =====================================================

Cash paid during the year for interest, net of $405                                                        
   of capitalized interest in 2000                       $       2,011       $   2,223       $     558     
                                                      =====================================================

Supplemental disclosures of noncash investing and                                                          
   financing activities                                                                                    
Liability recognized in accrued expenses related to                                                        
   cash flow hedges and charge to accumulated other                                                        
   comprehensive loss                                    $      1,479        $       -       $             
                                                      =====================================================

Issuance of stock dividends                              $              -    $       -       $    12,453   
                                                      =====================================================

See accompanying notes.                                                                                    

10-K405
45th Page of 73
TOC
1st
Previous
Next
↓Bottom
Just 45th
GARMIN LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 1. Organization                                                            

On July 24, 2000, the stockholders of Garmin Corporation  (GARMIN)  incorporated
Garmin Ltd. (the Company)  under the laws of the Cayman  Islands.  Subsequently,
the  stockholders  of GARMIN  executed a  Shareholders  Agreement to transfer to
Garmin Ltd. their  investments  in 88,988,394  common shares of stock of GARMIN.
These shares, which represented approximately 100% of the issued and outstanding
common stock of GARMIN as of July 24, 2000, were used by the stockholders to pay
for their  subscriptions  to  100,000,000  common shares of Garmin Ltd. at a par
value of $0.01 or an aggregate value of $1,000.  As such, the exchange of shares
in this  reorganization  between  GARMIN and the newly formed  holding  company,
Garmin  Ltd.,  completed  on  September  22,  2000,  has been  accounted  for at
historical cost similar to that in pooling-of-interests  accounting. In addition
to the  shares of GARMIN  owned by Garmin  Ltd.,  one share of GARMIN is held by
each of six  shareholders  pursuant  to the  requirement  of  Taiwan  law that a
company have at least seven  shareholders  and 4,000 shares owned by two related
stockholders  who did not convert GARMIN shares to shares of the Company.  These
4,006 shares are not reported as or considered to be held by minority  interests
in the accompanying consolidated financial statements due to immateriality. As a
result,  GARMIN is considered  herein to be a wholly owned  subsidiary of Garmin
Ltd. As discussed in Note 12, Garmin Ltd.  completed an initial public  offering
of its common stock in December 2000.                                           

Note 2. Summary of Significant Accounting Policies                              

Basis of Presentation and Principles of Consolidation                           

The  accompanying  consolidated  financial  statements  have  been  prepared  in
accordance with accounting  principles  generally accepted in the United States.
Accordingly, the accompanying consolidated financial statements                 

10-K405
46th Page of 73
TOC
1st
Previous
Next
↓Bottom
Just 46th
GARMIN LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Note 2.  Summary of Significant Accounting Policies (continued)                 

reflect the accounts of Garmin Ltd. and its wholly owned  subsidiaries as if the
reorganization  described in Note 1 was effective for all periods presented. All
significant inter-company balances and transactions have been eliminated.       

Nature of Business                                                              

Garmin Ltd. and subsidiaries  (together,  the Company) manufacture,  market, and
distribute  Global  Positioning   System-enabled   products  and  other  related
products.  GARMIN was  incorporated in Taiwan,  Republic of China on January 16,
1990.  GARMIN is primarily  responsible for the  manufacturing  of the Company's
consumer and portable  aviation  products and, to a lesser  extent,  new product
development  and sales and marketing of the  Company's  products in Asia and the
Far East.  Effective April 2001, the Company now acts as distributor for GARMIN.
In April 1990, a 100%-owned  subsidiary,  Garmin International,  Inc. (GII), was
incorporated  in the United States.  GII is primarily  responsible for sales and
marketing of the  Company's  products in many  international  markets and in the
United  States  as well  as  research  and new  product  development.  GII  also
manufactures  certain products for the Company's  aviation segment.  During June
1992, GII formed Garmin (Europe) Limited (GEL), a wholly owned subsidiary in the
United Kingdom,  to sell its products  principally  within the European  market.
During 2000, GII sold its interest in GEL to Garmin Ltd. As a result, GEL is now
a direct  subsidiary  of Garmin Ltd.  Also during  2000,  Garmin  Realty LLC was
formed by GII to hold certain real estate.  In December  2001, GII formed Garmin
USA as a sales organization.                                                    

Fiscal Year                                                                     

The Company has adopted a 52-53-week  period  ending on the last Saturday of the
calendar year. Due to the fact that there are not exactly 52 weeks in a calendar
year and there is slightly more than one  additional day per year (not including
the effects of leap year) in each calendar year as compared to a 52-week  fiscal
year, the Company will have a fiscal year  comprising 53 weeks in certain fiscal
years,  as determined by when the last Saturday of the calendar year occurs.  In
those  resulting  fiscal  years that have 53 weeks,  the Company  will record an
extra week of sales,  costs,  and related  financial  activity.  Therefore,  the
financial  results of those fiscal years,  and the associated  14-week  quarter,
will not be exactly  comparable to the prior and subsequent 52-week fiscal years
and the associated  quarters having only 13 weeks.  Fiscal 2001 and 1999 include
52 weeks while fiscal 2000 was comprised of 53 weeks.                           

Foreign Currency Translation                                                    

GARMIN utilizes the New Taiwan Dollar as its functional currency. Prior to 2001,
GEL utilized the British pound sterling as its functional currency.  However, as
a result of an increase in United States  dollar-denominated  transactions,  GEL
changed its functional  currency to the United States dollar effective  December
31,  2000.  The  impact of this  change was not  material.  In  accordance  with
Statement of Financial  Accounting  Standards  (SFAS) No. 52,  Foreign  Currency
Translation,  the financial  statements of GARMIN for all periods  presented and
GEL for fiscal 2000 and 1999 have been  translated  into United States  dollars,
the  functional  currency of Garmin Ltd.  and GII,  and the  reporting  currency
herein,  for purposes of consolidation  at rates prevailing  during the year for
sales,  costs,  and  expenses  and at  end-of-year  rates  for  all  assets  and
liabilities.  The effect of this translation is recorded in a separate component
of stockholders' equity.                                                        

10-K405
47th Page of 73
TOC
1st
Previous
Next
↓Bottom
Just 47th
GARMIN LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Note 2.  Summary of Significant Accounting Policies (continued)                 

     Transactions in foreign  currencies are recorded at the approximate rate of
     exchange at the transaction  date.  Assets and  liabilities  resulting from
     these  transactions are translated at the rate of exchange in effect at the
     balance sheet date. All  differences  are recorded in results of operations
     and amounted to exchange gains (losses) of approximately  $11,573,  $6,962,
     and $(1,469) for the years ended December 29, 2001,  December 30, 2000, and
     December 25, 1999, respectively. These gains (losses) are included in other
     income (expense) in the accompanying consolidated statements of income. The
     gain in fiscal 2001 is the result of the strengthening of the United States
     dollar  compared to the New Taiwan Dollar in the second and fourth quarters
     of fiscal 2001 while the gain in fiscal 2000 is principally attributable to
     the  strengthening  of the United States dollar  compared to the New Taiwan
Dollar in the fourth quarter of fiscal 2000.                          

     Cumulative  translation  adjustments  of $38,427 and $22,908 as of December
     29,  2001 and  December  30,  2000,  respectively,  have been  included  in
     accumulated  other  comprehensive  loss  in the  accompanying  consolidated
balance sheets.                                                       

Earnings Per Share                                                              

     Basic earnings per share amounts are computed based on the weighted-average
     number of common shares  outstanding.  For purposes of diluted earnings per
     share,  the number of shares  that  would be issued  from the  exercise  of
     dilutive stock options has been reduced by the number of shares which could
     have been purchased from the proceeds of the exercise at the average market
     price  of  the   Company's   stock  during  the  period  the  options  were
outstanding. See Note 14.                                             

Common Stock                                                                    

     The amount of retained  earnings  capitalized in connection  with the stock
     dividends  previously issued by the Company has been based on the par value
     of the underlying  GARMIN common stock,  which was the United States dollar
equivalent of ten New Taiwan Dollars.                                 

Cash and Cash Equivalents                                                       

     For purposes of reporting  cash flows,  cash and cash  equivalents  include
     cash on hand,  operating accounts,  money market funds, and securities with
     maturities of three months or less when  purchased.  The carrying amount of
     cash and cash equivalents approximates fair value, given the short maturity
of those instruments.                                                 

Inventories                                                                     

     Inventories  are stated at the lower of cost or market.  Cost is determined
     using  the  weighted-average   method  (which  approximates  the  first-in,
     first-out  (FIFO)  method)  by GARMIN  and the FIFO  method by GII and GEL.
Inventories consisted of the following:                               

10-K405
48th Page of 73
TOC
1st
Previous
Next
↓Bottom
Just 48th
GARMIN LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Note 2.  Summary of Significant Accounting Policies (continued)                 

                                              December 29,        December 30,
                                                 2001                 2000
                                     -----------------------------------------
Raw materials                                 $26,381              $46,418
Work-in-process                                 9,582                8,116
Finished goods                                 34,723               41,825
Inventory reserv                              (9,554)              (6,504)
                                     -----------------------------------------
                                              $61,132              $89,855
                                     =========================================

Property and Equipment                                                          

     Property  and  equipment  are  recorded at cost and  depreciated  using the
straight-line method over the following estimated useful lives:       

    Buildings and improvements                                      8-55 years
    Office furniture and equipment                                   3-8 years
    Manufacturing and engineering equipment                          3-8 years
    Vehicles                                                           3 years

Long-Lived Assets                                                               

     In  accordance  with  SFAS  No.  121,  Accounting  for  the  Impairment  of
     Long-Lived  Assets and  Long-Lived  Assets to be  Disposed  Of, the Company
     reviews  long-lived  assets for  impairment  whenever  events or changes in
     circumstances  indicate  the  carrying  amount of an asset may not be fully
     recoverable.  SFAS  No.  121  has  not  had  an  impact  on  the  Company's
consolidated financial statements.                                    

Intangible Assets                                                               

     Intangible  assets  principally  consist  of costs  incurred  with  certain
     licensing agreements totaling  approximately $11,400 and $4,700 at December
     29, 2001 and December 30, 2000, respectively.  Licenses are being amortized
     over the lives of the related license agreements, which are generally three
     years.  Accumulated  amortization  is  approximately  $5,100  and $2,300 at
December 29, 2001 and December 30, 2000, respectively.                

     Other  intangible  assets  consist of patents as well as goodwill and other
     intangible   assets   acquired  in  the   Company's   purchase  of  Sequoia
     Instruments,  Inc. in November 2001. The total purchase price of $3,625 was
     allocated to goodwill,  developed  technology,  and other intangibles.  The
     purchase  includes  additional  consideration  of $1,000  contingent on the
    completion of certain activities expected to occur in 2002 and thereafter.

     Patents and other  intangible  assets are being  amortized  over the useful
     lives  of the  related  assets,  which  is  generally  five  to ten  years.
     Accumulated amortization is $391 and $204 at December 29, 2001 and December
30, 2000, respectively.                                               

Investments in Debt Securities                                                  

     Management   determines  the  appropriate   classification   of  marketable
     securities at the time of purchase and reevaluates  such  designation as of
each balance sheet date.                                              

10-K405
49th Page of 73
TOC
1st
Previous
Next
↓Bottom
Just 49th
GARMIN LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Note 2.  Summary of Significant Accounting Policies (continued)                 

     Debt securities not classified as  held-to-maturity  and marketable  equity
     securities not classified as trading are classified as  available-for-sale.
     All   of   the   Company's    marketable    securities    are    considered
     available-for-sale  at December  29, 2001.  See Note 3.  Available-for-sale
     securities are stated at fair value,  with the unrealized gains and losses,
     net of tax, reported in other comprehensive income. During 2001, there were
     no significant  unrealized gains or losses reported in other  comprehensive
income.                                                               

     The amortized cost of debt securities  classified as  available-for-sale is
     adjusted  for  amortization  of premiums  and  accretion  of  discounts  to
     maturity, or in the case of mortgage-backed  securities, over the estimated
     life of the security. Such amortization is included in interest income from
     investments.  Realized gains and losses, and declines in value judged to be
     other-than-temporary  are included in net securities  gains  (losses).  The
     cost of  securities  sold is based on the specific  identification  method.
     Realized  gains  and  losses  on  available-for-sale  securities  were  not
material.                                                             

Financial Instruments                                                           

     GII has entered into interest  rate swap  agreements to modify the interest
     characteristics  of  portions  of its  outstanding  long-term  debt  from a
     floating rate to a fixed rate basis.  These agreements  involve the receipt
     of floating rate amounts in exchange for fixed rate interest  payments over
     the life of the agreements without an exchange of the underlying  principal
     amount.  The  differential  to be paid or  received  is accrued as interest
     rates change and recognized as an adjustment to interest expense related to
     the debt. The related amount payable to or receivable from the counterparty
is included in other liabilities or assets. See Note 9.               

Income Taxes                                                                    

     The  Company  accounts  for  income  taxes  using the  liability  method in
     accordance  with SFAS No. 109,  Accounting for Income Taxes.  The liability
     method provides that deferred tax assets and liabilities are recorded based
     on the difference between the tax bases of assets and liabilities and their
     carrying amount for financial reporting purposes as measured by the enacted
     tax rates and laws that will be in effect when the differences are expected
     to reverse.  Income taxes have not been accrued at the GARMIN level for the
     unremitted  earnings  of GII  or GEL  totaling  approximately  $96,948  and
     $77,544 at December 29, 2001 and December 30, 2000,  respectively,  because
     such  earnings  are  intended  to  be  reinvested  in  these   subsidiaries
indefinitely.                                                         

Use of Estimates                                                                

     The  preparation of  consolidated  financial  statements in conformity with
     accounting  principles  generally  accepted in the United  States  requires
     management  to make  estimates  and  assumptions  that  affect the  amounts
     reported in the consolidated  financial  statements and accompanying notes.
Actual results could differ from those estimates.                     

Concentration of Credit Risk                                                    

     The  Company  grants  credit to certain  customers  who meet the  Company's
     pre-established  credit  requirements.  Generally,  the  Company  does  not
     require  security when trade credit is granted to customers.  Credit losses
     are provided for in the Company's  consolidated  financial  statements  and
consistently have been within management's expectations.              

Revenue Recognition                                                             

     The  Company  recognizes  revenue  from  product  sales when the product is
     shipped to the customer and title has  transferred.  The Company assumes no
     remaining  significant  obligations  associated with the product sale other
than that related to its warranty programs discussed below.           

10-K405
50th Page of 73
TOC
1st
Previous
Next
↓Bottom
Just 50th
GARMIN LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Note 2.  Summary of Significant Accounting Policies (continued)                 

  Shipping  and  handling  costs  are  included in cost of  sales  in  the
accompanying consolidated financial statements.                       

Product Warranty                                                                

     The Company provides for estimated  warranty costs at the time of sale. The
     warranty  period is generally  for one year from date of shipment  with the
     exception of certain aviation products for which the warranty period is two
years from the date of installation.                                  

Sales Programs                                                                  

     The Company  provides  certain  monthly and  quarterly  incentives  for its
     dealers based on various factors  including  dealer  purchasing  volume and
     growth. Additionally,  the Company provides rebates to end users on certain
     products.  Estimated  rebates and incentives  payable to  distributors  are
     regularly  reviewed  and recorded as accrued  expenses on a monthly  basis.
     These rebates and incentives are recorded as reductions to net sales in the
accompanying consolidated statements of income.                       

Advertising Costs                                                               

     The Company expenses  advertising  costs as incurred.  Advertising  expense
     charged to  operations  amounted to  approximately  $14,714,  $11,529,  and
     $8,574 for the years ended  December  29,  2001,  December  30,  2000,  and
December 25, 1999, respectively.                                      

Research and Development                                                        

     Substantially  all  research  and  development  is  performed by GII in the
     United  States.  Research  and  development  costs,  which are  expensed as
     incurred,  amounted to approximately $28,164,  $21,764, and $17,339 for the
     years ended  December 29, 2001,  December 30, 2000,  and December 25, 1999,
respectively.                                                         

Accounting for Stock-Based Compensation                                         

     In accordance  with  Accounting  Principles  Board (APB) Opinion No. 25 and
     related interpretations,  the Company uses the intrinsic value-based method
     for measuring  stock-based  compensation  cost which measures  compensation
     cost as the excess,  if any, of the quoted  market price of Company  common
     stock at the  grant  date over the  amount  the  employee  must pay for the
     stock.  Required pro forma disclosures of compensation  expense  determined
     under the fair value  method of SFAS No. 123,  Accounting  for  Stock-Based
Compensation, are presented in Note 13.                               

Derivative Investments and Hedging Activities                                   

     In June 1998, the Financial  Accounting  Standards Board (FASB) issued SFAS
     No. 133,  Accounting for  Derivative  Instruments  and Hedging  Activities,
     which is required to be adopted in years beginning after June 15, 2000. The
     Company  adopted  the  new  statement  effective  December  31,  2000,  the
     beginning of fiscal 2001. This statement  requires the Company to recognize
     all  derivatives  on the  balance  sheet  at fair  value.  Derivatives  not
     considered  hedges  must be  adjusted to fair value  through  income.  If a
     derivative is a hedge, depending on the nature of the hedge, changes in the
     fair value of the  derivative  will either be offset  against the change in
     fair  value of the  hedged  asset,  liability  or firm  commitment  through
     earnings or recognized in other comprehensive  income until the hedged item
     is recognized in earnings. The ineffective portion of a derivative's change
in fair value will be immediately recognized in earnings. See Note 9. 

10-K405
51st Page of 73
TOC
1st
Previous
Next
↓Bottom
Just 51st
GARMIN LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Note 2.  Summary of Significant Accounting Policies (continued)                 

Recent Pronouncements                                                           

     In August 2001, the FASB issued SFAS No. 144, Accounting for the Impairment
or Disposal of Long-Lived  Assets,  which  addresses  financial  accounting  and
reporting for the  impairment or disposal of  long-lived  assets and  supersedes
SFAS No.  121,  Accounting  for the  Impairment  of  Long-Lived  Assets  and for
Long-Lived Assets to be Disposed Of, and the accounting and reporting provisions
of APB Opinion No. 30, Reporting the Results of Operations,  for a disposal of a
segment of a business.  SFAS No. 144 is  effective  for fiscal  years  beginning
after  December  15,  2001,  with earlier  application  encouraged.  The Company
expects to adopt SFAS No. 144 as of December  30,  2001,  and it does not expect
that the  adoption  of the  statement  will  have a  significant  impact  on the
Company's financial position and results of operations.                         

     In June 2001, the FASB issued SFAS No. 141, Business Combinations, and SFAS
No. 142,  Goodwill and Other  Intangible  Assets.  SFAS No. 141  supercedes  APB
Opinion No. 16, Business Combinations, and FASB Statement No. 28, Accounting for
Preacquisition  Contingencies of Purchased Enterprises.  This statement requires
accounting for all business  combination using the purchase method,  and changes
the  criteria  for  recognizing  intangible  assets  apart from  goodwill.  This
statement is effective for all business  combinations  initiated  after June 30,
2001.  SFAS No. 142  supercedes  APB  Opinion  No. 17,  Intangible  Assets,  and
addresses how purchased  intangibles  should be accounted for upon  acquisition.
The statement also addresses how goodwill and other intangible  assets should be
accounted  for after  they  have  been  initially  recognized  in the  financial
statements.  All intangibles will be subject to periodic  impairment testing and
will be adjusted to fair value.                                                 

     The Company will adopt SFAS No. 142 beginning in the first quarter of 2002.
Application of the nonamortization and impairment provisions of the statement is
not expected to be significant.                                                 

Reclassifications                                                               

     Certain  amounts  in  the  fiscal  1999  and  2000  consolidated  financial
statements have been reclassified to conform with the fiscal 2001 presentation. 

Note 3. Investments                                                             

          The  following  is a summary of the  Company's  marketable  securities
classified as available-for-sale-securities at December 29, 2001:     

10-K405
52nd Page of 73
TOC
1st
Previous
Next
↓Bottom
Just 52nd
GARMIN LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Note 3.  Investments (continued)                                                

                                                        [Enlarge/Download Table]


                                                                               Estimated Fair   
                                                         Gross Unrealized         Value (Net    
                                       Amortized Cost      Gains/Losses         Carrying Amount)
                                     -----------------------------------------------------------
                                                                                                
Mortgage-backed securities                $  31,320            $  -              $  31,320      
Obligations of states and political                                                             
  subdivisions                               55,116               -                 55,116      
U.S. corporate bonds                         39,575               -                 39,575      
Other                                         5,573               -                  5,573      
                                     -----------------------------------------------------------
Total                                      $131,584            $  -               $131,584      
                                     ===========================================================

     The amortized cost and estimated fair value of debt  securities at December
     29, 2001, 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                        $ 40,835             $ 40,835
  Due after one year through five years            11,948               11,948
  Due after five years through ten years            3,126                3,126
  Due after ten years                              75,675               75,675
                                      ----------------------------------------
                                                 $131,584             $131,584
                                      ========================================

Note 4. Line of Credit                                                          

     During December 2000, the Company renewed a line of credit agreement with a
     bank  providing for maximum  borrowings of $5,000 less indirect  borrowings
     under certain standby letters of credit which totaled  approximately $4,000
     at  December  30,  2000.  There  were  no  direct  or  indirect  borrowings
     outstanding  under the line of credit as of December 30, 2000.  The line of
     credit, which bears interest at the bank's prime rate less 1% or LIBOR plus
1.5%, expired June 28, 2001 and was unsecured.                        

Note 5. Long-Term Debt                                                          

     During 1995, GII entered into an agreement with the City of Olathe,  Kansas
     for the  construction of a new corporate  headquarters  (the project) which
     was financed through issuance of Series 1995 Industrial  Revenue Bonds (the
     Bonds) totaling $9,500. Upon completion of the project in 1996, GII retired
     bonds   totaling  $155.  At  December  29,  2001  and  December  30,  2000,
     outstanding principal under the Bonds totaled $9,345. Interest on the Bonds
     is payable monthly at a variable interest rate (1.75% and 5.15% at December
     29, 2001 and December 30, 2000, respectively),  which is adjusted weekly to
     the current  market rate as  determined  by the  remarketing  agent for the
Bonds with principal due upon maturity on January 1, 2025. See Note 9.

     The Bonds are secured by an irrevocable  letter of credit totaling  $9,650,
     with facility fees of 0.75% annually, through September 30, 2004, renewable
     on an annual basis thereafter.  The bank has the option of requiring GII to
     establish a sinking fund related to the principal  balance  outstanding  on
     the Bonds, which it had not exercised through December 29, 2001. The letter
     of credit is secured by a mortgage on all assets financed with the proceeds
of the Bonds and is guaranteed by GARMIN.                             

     In  connection  with the letter of credit  agreement  entered into with the
     bank, GII is required to comply with various  covenants,  including minimum
     tangible  net  worth  requirements  of both  GARMIN  and  GII  and  various
financial performance ratios.                                         

10-K405
53rd Page of 73
TOC
1st
Previous
Next
↓Bottom
Just 53rd
GARMIN LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Note 5.  Long-Term Debt (continued)                                             

     During 1999,  GARMIN borrowed $18,040 to finance the purchase of land and a
     new  manufacturing  facility  in Taiwan.  The  balance  was due in 60 equal
     payments of principal  plus interest  beginning in November  2001.  Through
     November 2001,  interest was payable at a fixed rate of 6.155%.  Subsequent
     to November 2001,  interest in adjustable  based on the Republic of China's
     government preferential rate on term deposits plus 0.18%. The Company opted
     to prepay a significant  portion of the outstanding  principal during 2001.
     The outstanding  balance of $2,843 at December 29, 2001 was paid in full in
January 2002.                                                         

     During 2000,  GII entered into another  agreement  with the City of Olathe,
     Kansas to finance the Company's  expansion of its manufacturing  facilities
     through  the  issuance of Series 2000  Industrial  Revenue  Bonds (the 2000
     Bonds) totaling  $20,000.  The proceeds from the issuance of the 2000 Bonds
     were placed in an interest-bearing  restricted cash account controlled by a
     trustee  appointed  by the  issuer.  Disbursements  from  the  account  are
     restricted  to  purchases  of  equipment  and  construction  related to the
     project and amounted to $5,694 and $14,304  during the years ended December
     29, 2001 and December 30, 2000,  respectively.  Unexpended bond proceeds in
this restricted cash account amounted to $2 at December 29, 2001.     

     At December 29, 2001,  outstanding  principal  under the 2000 Bonds totaled
     $20,000.  Interest  on the 2000  Bonds is  payable  monthly  at a  variable
     interest rate (2.1% at December 29, 2001),  which is adjusted weekly to the
     current  market rate as  determined  by the  remarketing  agent of the 2000
Bonds with principal due upon maturity at April 15, 2020. See Note 9. 

     The 2000 Bonds are  secured  by an  irrevocable  letter of credit  totaling
     $20,288  with  facility  fees of  0.75%.  This  renewable  letter of credit
     initially  expires on September  20, 2004.  The bank has required a sinking
    fund be established with semiannual payments of $667 beginning April 2002.

Principal payments on long-term debt through 2006 and thereafter are:           

Year                 Amount               
---------------------------               

2002                 $4,177               
2003                  1,334               
2004                  1,334               
2005                  1,334               
2006                  1,334               
Thereafter           22,675               
------------- 
     $32,188
============= 

Note 6. Leases and Other Commitments                                            

     Rental  expense  related to office and warehouse  space for GEL amounted to
     $232,  $139 and $140 for the years ended  December 29,  2001,  December 30,
     2000, and December 25, 1999, respectively. Future minimum lease payments on
     the related lease are $236 per year through 2006. In the years 2007 through
   lease expiration in 2015, total future minimum lease payments are $2,122.

10-K405
54th Page of 73
TOC
1st
Previous
Next
↓Bottom
Just 54th
GARMIN LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Note 6. Leases and Other Commitments (continued)                                

     At December  29, 2001 and  December  30,  2000,  standby  letters of credit
     amounting to $871 and $869, respectively, were issued by banks on behalf of
the Company.                                                          

     Approximately  $39,000  and  $35,000  of  Garmin's  retained  earnings  are
     indefinitely  restricted from distribution to stockholders  pursuant to the
 law of Taiwan at December 29, 2001 and December 30, 2000, respectively.

     Substantially  all of the  assets of GEL are held as  collateral  by a bank
securing payment of the United Kingdom value-added tax requirements.  

Note 7. Employee Benefit Plans                                                  

     GII has an employee  savings plan under which its employees may  contribute
     up to 15% of their  annual  compensation  subject to Internal  Revenue Code
     maximum  limitations.  Additionally,  GEL has a defined  contribution  plan
     under  which  its  employees  may  contribute  up  to 5%  of  their  annual
     compensation.  Both GII and GEL contribute an amount determined annually at
     the  discretion of the Board of Directors.  During the years ended December
     29,  2001,  December 30, 2000,  and December 25, 1999,  expense  related to
     these  plans of $1,172,  $1,144,  and $930,  respectively,  was  charged to
operations.                                                           

     Additionally,  GII has a defined  contribution money purchase plan (the MPP
     Plan) which covers substantially all employees. GII contributes a specified
     percentage of each participant's  annual  compensation up to certain limits
     as  defined in the MPP Plan.  During the years  ended  December  29,  2001,
     December 30, 2000, and December 25, 1999, GII recorded  expense  related to
the Plan of $1,184, $849, and $721, respectively.                     

Note 8. Income Taxes                                                            

The Company's income tax provision consists of the following:                   

                                Year Ended
                        ------------------------------------------------------
                      December 29,   December 30,   December 25,
                              2001           2000           1999
                        ------------------------------------------------------
Federal:                                                                  
Current                    $10,208           $14,638         $  8,883 
Deferred                     (338)             (450)            (710) 
                        ------------------------------------------------------
                            9,870            14,188            8,173
State:                                                                    
Current                      2,237             3,479            1,332 
Deferred                      (74)           (2,051)             (85) 
                        ------------------------------------------------------
                            2,163             1,428            1,247
Foreign:                                                                  
Current                     21,336            21,606            8,915 
Deferred                     5,218           (1,963)            1,630 
                        ------------------------------------------------------
                           26,554            19,643           10,545
                        ------------------------------------------------------
Total                        $38,587           $35,259          $19,965   
                        ======================================================

10-K405
55th Page of 73
TOC
1st
Previous
Next
↓Bottom
Just 55th
GARMIN LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Note 8. Income Taxes (continued)                                                

     The income tax provision  differs from the amount  computed by applying the
     statutory  federal income tax rate to income before taxes.  The sources and
tax effects of the differences are as follows:                        

                                                        [Enlarge/Download Table]

                                                              Year Ended                        
                                          ------------------------------------------------------
                                             December 29,   December 30,   December 25,         
                                                     2001           2000           1999         
                                          ------------------------------------------------------
                                                                                                
Federal income tax expense at                                                                   
  U.S. statutory rate                            $53,212          $49,323          $29,446      
State income tax expense, net of federal                                                        
  tax effect                                       1,406              928              810      
Foreign tax rate differential                   (13,640)          (9,623)          (5,604)      
Taiwan tax incentives and credits                (3,260)          (5,181)          (3,817)      
Other, net                                           869            (188)            (870)      
                                          ------------------------------------------------------
Income tax expense                               $38,587          $35,259          $19,965      
                                          ======================================================

     The Company's income before income taxes attributable to foreign operations
     was $120,550,  $99,171,  and $58,467 for the years ended December 29, 2001,
     December 30, 2000, and December 25, 1999, respectively.  The tax incentives
     and credits received from Taiwan included in the table above reflect $0.03,
     $0.05,  and $0.04 per  weighted-average  common share  outstanding  for the
     years ended  December 29, 2001,  December 30, 2000,  and December 25, 1999,
     respectively.  The Company currently expects to benefit from the incentives
     and credits being  offered by Taiwan  through 2004, at which time these tax
benefits expire.                                                      

     Deferred income taxes reflect the net tax effects of temporary  differences
     between  the  carrying  amounts of assets  and  liabilities  for  financial
     reporting   purposes  and  the  amounts  used  for  income  tax   purposes.
     Significant components of the Company's deferred tax assets and liabilities
are as follows:                                                       

                                                     December 29, December 30,
                                                     2001         2000
                                               -------------------------------
Deferred tax assets:                                                      
    Product warranty accruals                         $1,833            $1,808
    Allowance for doubtful accounts                      888               705
    Inventory carrying value                           2,241             7,678
    Sales program allowances                           1,696             1,668
    Vacation accrual                                     438               324
    Interest-rate swaps                                  579                 -
    Other                                                 46               452
                                              --------------------------------
                                                       7,721            12,635
Deferred tax liabilities:                                                 
    Unrealized foreign currency gains                    844             1,098
    Depreciation                                       1,017               930
                                              --------------------------------
                                                       1,861             2,028
                                              --------------------------------
  Net deferred tax assets                             $5,860           $10,607
                                              ================================

10-K405
56th Page of 73
TOC
1st
Previous
Next
↓Bottom
Just 56th
GARMIN LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Note 9. Interest Rate Risk Management                                           

     During  1996,   GII  entered  into  an  interest  rate  swap  agreement  to
     effectively   convert  a  portion  of  its  floating  rate  long-term  debt
     associated with the Bonds to a fixed rate basis, thus,  reducing the impact
     of interest  rate changes on future  income.  The  agreement was renewed in
     2001. Pursuant to this 'pay-fixed' swap agreement,  GII agreed to exchange,
     at specified  intervals,  the difference between the fixed and the floating
     interest  amounts  calculated on the notional  amount of the swap agreement
     totaling  $5,000 at December 29, 2001 and  December  30, 2000.  GII's fixed
     interest rate under the swap agreement is 5.1%. The counterparty's floating
     rate is based on the  nontaxable  PSA Municipal  Swap Index and amounted to
     1.75% and 5.15% at December 29, 2001 and  December 30, 2000,  respectively.
     Notional  amounts do not quantify risk or represent  assets and liabilities
     of the Company, but are used in the determination of cash settlements under
     the  agreement.  The Company is exposed to credit losses from  counterparty
     nonperformance but does not anticipate any losses from its agreement, which
    is with a major financial institution. The agreement expires June 6, 2004.

     During 2000,  GII entered into an additional  swap agreement to effectively
     convert a portion of additional  floating rate  long-term  debt  associated
     with the 2000 Bonds to a fixed rate basis.  Pursuant to this pay-fixed swap
     agreement,  GII agreed to exchange, at specified intervals,  the difference
     between  the fixed and the  floating  interest  amounts  calculated  on the
     notional amount of the swap agreement totaling $10,000 at December 29, 2001
     and December 30, 2000.  GII's fixed  interest rate under the swap agreement
     is 7.26% compared to the  counterparty's  floating rate of 2.1% and 6.7% at
     December 29, 2001 and December 30, 2000,  respectively.  The counterparty's
     floating  rate is  based  on the  bank's  Taxable  Low  Floater  Rate.  The
agreement expires June 1, 2004.                                       

     The fair value of the  interest  rate swap  agreements  is a  liability  of
     $1,479 at  December  29,  2001.  The fair  value of the  agreement  was not
     significant  at December 30, 2000. The liability has been included in other
     accrued expenses in the consolidated  balance sheets. None of the Company's
cash flow hedges were deemed ineffective.                             

     At December 29, 2001, the Company expects to reclassify $621 of loss on the
     interest rate swaps from accumulated other  comprehensive  loss to earnings
     during the next 12 months  related to the payment of  variable  interest on
     floating rate debt,  assuming market interest rates remain  consistent with
rates at that date.                                                   

10-K405
57th Page of 73
TOC
1st
Previous
Next
↓Bottom
Just 57th
GARMIN LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Note 10. Fair Value of Financial Instruments                                    

     In accordance with SFAS No. 107,  Disclosures about Fair Value of Financial
     Instruments,  the following  summarizes required information about the fair
     value  of  certain   financial   instruments  for  which  it  is  currently
     practicable to estimate such value.  None of the financial  instruments are
     held or issued for trading  purposes.  The carrying amounts and fair values
of the Company's financial instruments are as follows:                

                                                        [Enlarge/Download Table]

                                       December 29, 2001                  December 30, 2000     
                               -----------------------------------------------------------------
                                  Carrying            Fair           Carrying            Fair   
                                   Amount            Value            Amount            Value   
                               -----------------------------------------------------------------
                                                                                                
Cash and cash equivalents           $192,842         $192,842          $251,731         $251,731
Restricted cash                        1,600            1,600             5,848            5,848
Marketable securities                131,584          131,584                 -                -
Interest rate swap agreements                                                                   
  (liability)                          1,479            1,479                 -                -
Long-term debt:                                                                                 
  Term loan                            2,843            2,843            17,601           17,481
  Series 1995 Bonds                    9,345            9,345             9,345            9,345
  Series 2000 Bonds                   20,000           20,000            20,000           20,000

     The  carrying  value  of  cash  and  cash  equivalents,   restricted  cash,
     marketable securities, and interest rate swap agreements approximates their
     fair value. The fair values of the Company's  long-term  floating-rate debt
     have  been  estimated  using  discounted  cash flow  analyses,  based on an
     estimate of the interest rate the Company would have to pay on the issuance
     of debt with a similar  maturity  and terms.  The fair values of  long-term
     debt  as  reported  are not  necessarily  the  amounts  the  Company  would
currently have to pay to extinguish any of this debt.                 

Note 11. Segment Information                                                    

     The Company  operates  within its targeted  markets  through two reportable
     segments,  those  being  related to  products  sold into the  consumer  and
     aviation markets.  Both of the Company's reportable segments offer products
     through the  Company's  network of  independent  dealers and  distributors.
     However, the nature of products and types of customers for the two segments
     vary  significantly.  As such,  the  segments are managed  separately.  The
     Company's  consumer segment  includes  portable global  positioning  system
     (GPS)  receivers  and  accessories  for  marine,   recreation,   land,  and
     automotive use sold  primarily to retail  outlets.  The Company's  aviation
     products are portable and panel mount  avionics for Visual Flight Rules and
     Instrument Flight Rules navigation and are sold primarily to retail outlets
and certain aircraft manufacturers.                                   

     The Company's Co-Chief Executive Officers have been identified as the Chief
     Operating  Decision  Makers  (CODM).  The CODM  evaluates  performance  and
     allocates  resources  based on income  before income taxes of each segment.
     Income before income taxes  represents  net sales less  operating  expenses
     including  certain  allocated general and  administrative  costs,  interest
     income and expense,  foreign currency  adjustments,  and other nonoperating
     corporate expenses.  The accounting policies of the reportable segments are
     the  same as those  described  in the  summary  of  significant  accounting
policies. There are no intersegment sales or transfers.               

10-K405
58th Page of 73
TOC
1st
Previous
Next
↓Bottom
Just 58th
GARMIN LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Note 11. Segment Information (continued)                                        

     The identifiable assets associated with each reportable segment reviewed by
     CODM include  accounts  receivable  and  inventories.  The Company does not
     report property and equipment,  depreciation and  amortization,  or capital
expenditures by segment to the CODM.                                  

     Revenues, interest income and interest expense, income before income taxes,
     and identifiable  assets for each of the Company's  reportable segments are
presented below:                                                      

                                      Year Ended December 29, 2001
                                      ----------------------------------------
                                        Consumer      Aviation           Total
                                      ----------------------------------------

  Sales to external customers          $263,358       $105,761        $369,119
  Allocated interest income               7,960          3,204          11,164
  Allocated interest expense              1,550            624           2,174
  Income before income taxes            102,511         49,524         152,035
Assets:                                                                   
    Accounts receivable                  34,222         13,776          47,998
    Inventory                            43,587         17,545          61,132

                                      Year Ended December 30, 2000
                                     -----------------------------------------
                                        Consumer      Aviation           Total
                                     -----------------------------------------

  Sales to external customers          $230,183       $115,558        $345,741
  Allocated interest income               4,610          2,315           6,925
  Allocated interest expense              1,522            765           2,287
  Income before income taxes             88,103         52,819         140,922
Assets:                                                                   
    Accounts receivable                  21,791         10,928          32,719
    Inventory                            59,843         30,012          89,855

                                        Year Ended December 25, 1999
                                     -----------------------------------------
                                        Consumer      Aviation           Total
                                     -----------------------------------------

  Sales to external customers          $169,164        $63,422        $232,586
  Allocated interest income               3,147          1,180           4,327
  Allocated interest expense                420            157             577
  Income before income taxes             60,449         23,683          84,132
Assets:                                                                   
    Accounts receivable                  22,804          8,549          31,353
    Inventory                            31,093         20,155          51,248

10-K405
59th Page of 73
TOC
1st
Previous
Next
↓Bottom
Just 59th
GARMIN LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Note 11. Segment Information (continued)                                        

     Net sales and long-lived assets (property and equipment) by geographic area
     are as follows as of and for the years ended  December 29,  2001,  December
30, 2000, and December 25, 1999:                                      

                                                        [Enlarge/Download Table]


                               North America         Asia            Europe            Total     
                             --------------------------------------------------------------------
                                                                                                 
December 29, 2001                                                                                
Sales to external customers        $275,630          $15,039           $78,450         $369,119  
Long-lived assets                    40,183           29,321               582           70,086  

December 30, 2000                                                                                
Sales to external customers        $256,782          $16,569           $72,390         $345,741  
Long-lived assets                    32,737           31,453               514           64,704  

December 25, 1999                                                                                
Sales to external customers        $172,742          $11,146           $48,698         $232,586  
Long-lived assets                    17,433           38,228               190           55,851  


     No single customer accounted for 10% or more of the Company's  consolidated
net sales in any period.                                              

Note 12. Initial Public Offering                                                

     On December 8, 2000, the Company  completed an underwritten  initial public
     offering of 12,075,000 (including shares sold pursuant to the underwriters'
     over-allotment  option)  shares of its common  stock,  8,242,111  shares of
     which were  offered by the Company (the  Offering) at an offering  price of
     $14.00 per share.  Prior to but in connection with the offering,  the Board
     of  Directors  approved a  1.12379256-for-1  stock  split of the  Company's
     common shares,  effected  through a stock dividend on November 6, 2000. All
     share and per share information  included in the accompanying  consolidated
     financial  statements has been adjusted to give  retroactive  effect to the
common stock split.                                                   

Note 13. Stock Compensation Plans                                               

     During 2000, the Company  adopted  several stock  compensation  plans.  The
     Company  accounts  for  all of  these  plans  under  APB  Opinion  No.  25,
     Accounting  for Stock  Issued to  Employees,  and related  interpretations.
     Accordingly, as all awards are granted at the fair market value on the date
of grant, no compensation expense is recognized.                      

The various plans are summarized below:                                         

10-K405
60th Page of 73
TOC
1st
Previous
Next
↓Bottom
Just 60th
GARMIN LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Note 13.  Stock Compensation Plans (continued)                                  

2000 Equity Incentive Plan                                                      

     In October 2000,  the  stockholders  adopted an equity  incentive plan (the
     Plan) providing for grants of incentive and nonqualified  stock options and
    'other' stock  compensation  awards to  employees  of the  Company and its
     subsidiaries,  pursuant to which up to 3,500,000 shares of common stock are
     available for issuance.  The stock options  generally vest over a period of
     five years or as  otherwise  determined  by the Board of  Directors  or the
     Compensation  Committee  and  generally  expire  ten years from the date of
     grant,  if not  exercised.  Option  activity under the Plan during 2000 and
    2001 is summarized  below.  There have been no 'other' stock  compensation
awards granted under the Plan.                                        

2000 Nonemployee Directors' Option Plan                                         

     Also in October  2000,  the  stockholders  adopted a stock  option plan for
     nonemployee  directors (the Directors Plan) providing for grants of options
     for up to 50,000  common shares of the  Company's  stock.  The term of each
     award is ten years. All awards vest evenly over a three-year period. During
     2001,  options to purchase  5,325 shares were granted  under this plan.  No
     options  associated with the Directors Plan had been granted as of December
30, 2000.                                                             

     A summary of the Company's  stock option  activity and related  information
     under the Equity  Incentive Plan and 2000  Nonemployee  Directors' Plan for
    the years ended December 29, 2001 and December 30, 2000 is provided below:

                     Weighted-
                     Average
                                           Exercise Price   Number of Shares
                                        ------------------------------------
                                                              (In Thousands)

Outstanding at December 25, 1999                $  -                   -  
Granted                                         14.00            1,201
Exercised                                        -                   -
Canceled                                         -                   -
                                                               ---------------
Outstanding at December 30, 2000                  14.00            1,201  
Granted                                         19.96              369
 Exercised                                       14.00               (5)
Canceled                                         -                   -
                                                               ---------------
Outstanding at December 29, 2001                  15.59            1,565  
                                                               ===============
                                                December 29,      December 30,
                                                2001              2000
                                         -------------------------------------
Weighted-average fair value of                                            
options granted during the year                  $12.28            $8.53  

10-K405
61st Page of 73
TOC
1st
Previous
Next
↓Bottom
Just 61st
GARMIN LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Note 13.  Stock Compensation Plans (continued)                                  

     The  weighted-average  remaining  contract life for options  outstanding at
     December  29, 2001 is  approximately  nine years.  Options  outstanding  at
     December 29, 2001 have exercise  prices  ranging from $14.00 to $22.54.  At
     December 29, 2001,  options to purchase 234,150 shares are exercisable.  No
options were exercisable at December 30, 2000.                        

     Pro forma  information  regarding  net  income  and  earnings  per share is
     required by SFAS No. 123.  SFAS No. 123 requires the pro forma  information
     be  determined  as if the  Company has  accounted  for its  employee  stock
     options under the fair value method of that statement.  As described below,
     the fair value  accounting  provided under SFAS No. 123 requires the use of
     option valuation models that were not developed for use in valuing employee
     stock  options.  The fair value for these options was estimated at the date
     of grant using a  Black-Scholes  option  pricing  model with the  following
     weighted-average  assumptions  for 2001 and 2000 (no options  were  granted
     prior to 2000):  risk-free interest rate of 5.11% and 5.75%,  respectively;
     no dividend  yield;  volatility  factor of the expected market price of the
     Company's   common   stock  of  0.591  and  0.530,   respectively;   and  a
weighted-average expected life of the option of seven years.          

     The  Black-Scholes   option  valuation  model  was  developed  for  use  in
     estimating  the  fair  value  of  traded  options  which  have  no  vesting
     restrictions  and are fully  transferable.  In addition,  option  valuation
     models require the input of highly  subjective  assumptions,  including the
     expected  stock price  volatility.  Because the  Company's  employee  stock
     options have characteristics  significantly  different from those of traded
     options,  and  because  changes in the  subjective  input  assumptions  can
     materially  affect the fair value estimate,  in management's  opinion,  the
     existing models do not necessarily provide a reliable single measure of the
fair value of its employee stock options.                             

     For  purposes of pro forma  disclosures,  the  estimated  fair value of the
     options is  amortized  to expense over the  option's  vesting  period.  The
     Company's pro forma  information  for the years ended December 29, 2001 and
December 30, 2000 is as follows:                                      

                                               December 29,       December 30,
                                               2001               2000
                                        --------------------------------------
                                        --------------------------------------

  Pro forma net income                               $112,150         $105,580
Pro forma net income per share:                                           
    Basic                                            $   1.04         $   1.05
    Diluted                                          $   1.03         $   1.05

Employee Stock Purchase Plan                                                    

     The stockholders also adopted an employee stock purchase plan (ESPP). Up to
     1,000,000  shares of common stock have been  reserved for the ESPP.  Shares
     will be offered to  employees  at a price equal to the lesser of 85% of the
     fair  market  value of the stock on the date of purchase or 85% of the fair
     market value on the enrollment  date. The ESPP is intended to qualify as an
    'employee stock purchase  plan' under Section 423 of the Internal  Revenue
     Code. During 2001, 123,007 shares were purchased under the plan for a total
purchase price of $1,464. No shares were purchased during 2000.       

10-K405
62nd Page of 73
TOC
1st
Previous
Next
↓Bottom
Just 62nd
GARMIN LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Note 14. Earnings Per Share                                                     

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

                                                        [Enlarge/Download Table]


                                                                      Year Ended                    
                                                  --------------------------------------------------
                                                     December 29,     December 30,      December 25,
                                                        2001             2000              1999     
                                                  --------------------------------------------------
                                                                                                    
Numerator:                                                                                          
  Numerator for basic and diluted net income per                                                    
    share - net income                                 $113,448          $105,663        $  64,167  
                                                  ==================================================
Denominator (in thousands):                                                                         
  Denominator for basic net income per share -                                                      
    weighted-average common shares                      108,097           100,489          100,000  
  Effect of dilutive securities - employee stock                                                    
    options (Note 13)                                       350                17                -  
                                                  --------------------------------------------------
  Denominator for diluted net income per share -        108,447           100,506          100,000  
    adjusted weighted-average common shares                                                         
                                                  ==================================================
Basic net income per share                             $   1.05          $   1.05        $    0.64  
                                                  ==================================================
Diluted net income per share                           $   1.05          $   1.05        $    0.64  
                                                  ==================================================


     Options to purchase  361,875  shares of common stock at prices ranging from
     $20.25  to $22.54  per  share  were  outstanding  during  2001 but were not
     included  in the  computation  of diluted  earnings  per share  because the
    options' exercise  price was greater than the average  market price of the
common shares and, therefore, the effect would be antidilutive.       

Note 15. Share Repurchase Program                                               

     On September  24, 2001,  the Board of Directors  authorized  the Company to
     repurchase  up to 5,000,000  shares of the  Company's  common stock through
     December 31, 2002. At December 29, 2001, the Company had purchased  595,200
shares at $9,834.                                                     

Note 16. Shareholder Rights Plan                                                

     On October 24,  2001,  Garmin's  Board of Directors  adopted a  shareholder
    rights plan (the 'Rights Plan').  Pursuant to the Rights  Plan,  the Board
     declared  a  dividend  of  one  preferred  share  purchase  right  on  each
     outstanding common share of Garmin to shareholders of record as of November
     1, 2001. The rights trade together with Garmin's common shares.  The rights
     generally  will  become  exercisable  if a  person  or  group  acquires  or
     announces   an  intention  to  acquire  15  percent  or  more  of  Garmin's
     outstanding common shares.  Each right (other than those held by the new 15
     percent  shareholder) will then be exercisable to purchase preferred shares
     of Garmin (or in certain  instances  other  securities of Garmin) having at
     that  time a market  value  equal to two times  the then  current  exercise
     price.  Garmin's  Board of  Directors  may  redeem the rights at $0.002 per
     right at any time before the rights become  exercisable.  The rights expire
October 31, 2011.                                                     

10-K405
63rd Page of 73
TOC
1st
Previous
Next
↓Bottom
Just 63rd
GARMIN LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Note 17. Selected Quarterly Information (Unaudited)                             

                                                        [Enlarge/Download Table]


                                           Year Ended December 29, 2001                    
                      ---------------------------------------------------------------------
                                                  Quarter Ended                            
                      ---------------------------------------------------------------------
                           March 31          June 30        September 29      December 29  
                      ---------------------------------------------------------------------
                                                                                           
Net sales                    $85,534          $103,634          $86,930           $93,021  
Gross profit                  45,918            55,050           47,729            49,462  
Net income                    23,799            36,603           25,001            28,045  
Net income per share         $  0.22          $   0.34          $  0.23           $  0.26  

                                           Year Ended December 30, 2000                    
                      ---------------------------------------------------------------------
                                                  Quarter Ended                            
                      ---------------------------------------------------------------------
                           March 25          June 24        September 23      December 30  
                      ---------------------------------------------------------------------
Net sales                    $76,576         $  93,964          $89,539           $85,662  
Gross profit                  41,913            50,025           49,031            42,757  
Net income                    20,599            29,161           28,292            27,611  
Net income per share         $  0.21         $    0.29          $  0.28           $  0.27  


     The above  quarterly  financial  data is  unaudited,  but in the opinion of
     management,  all  adjustments  necessary  for a  fair  presentation  of the
selected data for these interim periods presented have been included. 

10-K405
64th Page of 73
TOC
1st
Previous
Next
↓Bottom
Just 64th
Item 9.  Changes in and Disagreements with Accountants on Accounting and        
Financial Disclosure                                          

None.                                                         

PART III

Item 10.  Directors and Executive Officers of the Company                       

     The Company has incorporated by reference  certain  information in response
     or partial  response to the Items under this Part III of this Annual Report
     on Form 10-K  pursuant  to General  Instruction  G(3) of this Form 10-K and
     Rule  12b-23  under  the  Exchange  Act.  The  Company's  definitive  proxy
     statement in connection with its annual meeting of  stockholders  scheduled
     for June 7, 2002 (the 'Proxy Statement'), will be filed with the Securities
 and Exchange Commission no later than 120 days after December 29, 2001.

(a)      Directors of the Company                                     

     The  information  set forth in response to Item 401 of Regulation S-K under
     the  headings  'Proposal-Election  of Two  Directors'  and  'The  Board  of
     Directors' in the Company's Proxy Statement is hereby  incorporated  herein
by reference in partial response to this Item 10.                     

(b)      Executive Officers of the Company                              

     The  information  set forth in response to Item 401 of Regulation S-K under
     the heading 'Executive  Officers and Significant  Employees of the Company'
     in Part I of this Form 10-K is incorporated  herein by reference in partial
response to this Item 10.                                             

(c)      Compliance with Section 16(a) of the Exchange Act              

     The  information  set forth in response to Item 405 of Regulation S-K under
     the heading 'Other  Matters-Section  16(a) Beneficial  Ownership  Reporting
     Compliance' in the Company's Proxy Statement is hereby  incorporated herein
by reference in partial response to this Item 10.                     

Item 11.  Executive Compensation                                                

     The  information  set forth in response to Item 402 of Regulation S-K under
    'The Board of Directors - Compensation  of Directors' and under 'Executive
Compensation' in  the  Company's Proxy Statement (other  than  the    
    'Compensation  Committee Report on Executive Compensation'  and the 'Stock
    Performance Graph') is hereby incorporated herein by reference in response
to this Item 11.                                                      

Item 12.  Security Ownership of Certain Beneficial Owners and Management        

     The  information  set forth in response to Item 403 of Regulation S-K under
  the  heading 'Security  Ownership  of  Certain   Beneficial  Owners  and
     Management' in the Company's Proxy Statement is hereby  incorporated herein
by reference in response to this Item 12.                             

     The Company has no knowledge of any arrangement, the operation of which may
at a subsequent date result in a change in control of the Company.    

Item 13.  Certain Relationships and Related Transactions                        

     The  information  set forth in response to Item 404 of Regulation S-K under
    the heading 'Compensation Committee Interlocks and Insider  Participation'
     and 'Certain Relationships and Related Transactions' in the Company's Proxy
    Statement is incorporated herein by reference in response to this Item 13.

10-K405
65th Page of 73
TOC
1st
Previous
Next
↓Bottom
Just 65th
 PART IV

Item 14.  Exhibits, Financial Statement Schedules and Reports on Form 8-K       

(a)      List of Documents filed as part of this Report                         

(1)      Consolidated Financial Statements                      

       The consolidated  financial statements and related notes, together with
   the report  of  Ernst  &  Young  LLP,  appear  in Part  II,  Item 8
'Financial Statements and Supplementary Data' of this Form 10-K.

(2)      Schedule II Valuation and Qualifying Accounts          

      All other schedules have been omitted because they are not applicable,
are insignificant or the required information is shown in  the  
consolidated financial statements or notes thereto.             

 (3)     Exhibits--The following exhibits are filed as part of, or
                incorporated by reference into, this Annual Report on Form 10-K:

EXHIBIT           DESCRIPTION                                 
NUMBER                                                        
________          _____________                               

3.1*             Memorandum of Association                  

3.2*             Articles of Association                    

4.1*             Specimen share certificate                 

4.2**            Shareholder Rights Agreement               

10.1*             Garmin Ltd. 2000 Equity Incentive Plan      

        10.2*             Garmin Ltd. 2000 Non-Employee Directors' Option Plan

10.3*             Garmin Ltd. Employee Stock Purchase Plan    

         10.4              First Amendment to Garmin Ltd.Employee Stock Purchase
Plan                      

21.1              List of subsidiaries                        

23.1              Consent of Ernst & Young LLP                

  24.1              Power of Attorney (included in signature page)

------------------------------------------------------------------------------- 
*    Incorporated by reference from the Registrant's Registration Statement on  
    Form S-1 filed December 6, 2000 and declared effective on December 8, 2000
(Commission File No. 333-45514).                                      

**   Incorporated by reference from the Registrant's Current Report on Form 8-K 
filed on October 26, 2001.                                            

(b)  Reports on Form 8-K                                                        

 On October 26, 2001 the Company filed a Form 8-K dated October 25, 2001
reporting the adoption by the Company of a shareholder rights plan.   

10-K405
66th Page of 73
TOC
1st
Previous
Next
↓Bottom
Just 66th
GARMIN LTD. AND SUBSIDIARIES
 INDEX TO FINANCIAL STATEMENT SCHEDULE

Garmin Ltd. Financial Statement Schedule for the years ended December 29, 2001, 
December 30, 2000, and December 25, 1999.                                       

  Schedule II - Valuation and qualifying accounts...........................65

10-K405
67th Page of 73
TOC
1st
Previous
Next
↓Bottom
Just 67th
 SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
Garmin Ltd. and Subsidiaries

                                                        [Enlarge/Download Table]


                                                                            Additions                                       
                                                                   -----------------------------                            
                    Description                       Balance at     Charged to    Charged to     Deductions      Balance at
                                                     Beginning of    Costs and        Other                         End of  
                                                        Period        Expenses      Accounts                        Period  
----------------------------------------------------------------------------------------------------------------------------

                                                                                                                            
Year Ended December 25, 1999:                                                                                               
  Deducted from asset accounts:                                                                                             
    Allowance for doubtful accounts                       $    618       $    825       $     -    $  (327)(1)    $  1,116  
    Inventory reserve                                                                                                       
                                                             1,861          1,202             -     (1,336)(2)       1,727  
                                                     -----------------------------------------------------------------------
Total                                                     $  2,479       $  2,027       $     -    $(1,663)       $  2,843  
                                                     =======================================================================

Year Ended December 30, 2000:                                                                                               
  Deducted from asset accounts:                                                                                             
    Allowance for doubtful accounts                       $  1,116       $    911       $     -    $  (161)(1)    $  1,866  
    Inventory reserve                                                                                                       
                                                             1,727          5,915             -     (1,138)(2)       6,504  
                                                    ----------------------------------------------------------------------- 
Total                                                     $  2,843      $   6,826       $     -    $(1,299)       $  8,370  
                                                    ======================================================================= 

Year Ended December 29, 2001:                                                                                               
  Deducted from asset accounts:                                                                                             
    Allowance for doubtful accounts                       $  1,866      $   1,137       $     -    $  (376)(1)    $  2,627  
    Inventory reserve                                                                                                       
                                                             6,504          4,000             -       (950)(2)       9,554  
                                                    ----------------------------------------------------------------------- 
Total                                                     $  8,370      $   5,137       $     -    $(1,326)       $ 12,181  
                                                    ======================================================================= 


(1)    Uncollectible accounts written off, net of recoveries.                   

(2)    Obsolete inventory dispositions and shrinkage.                           

10-K405
68th Page of 73
TOC
1st
Previous
Next
↓Bottom
Just 68th
SIGNATURES

     Pursuant  to the  requirements  of  Section  13 or 15(d) 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/ Min H. Kao
                                                    Min H. Kao
                                                    Co-Chief Executive Officer

Dated:  March 27, 2002                                                

 POWER OF ATTORNEY

          Know all persons by these  presents,  that each person whose signature
     appears below  constitutes  and appoints Gary L. Burrell and Min H. Kao and
     Andrew R. Etkind,  and each of them, as his or her  attorney-in-fact,  with
     the power of  substitution,  for him or her in any and all  capacities,  to
     sign any  amendments  to this Annual  Report on Form 10-K,  and to file the
     same, with exhibits  thereto and other  documents in connection  therewith,
     with  the  Securities  and  Exchange   Commission,   hereby  ratifying  and
     confirming   all  that  said   attorney-in-fact,   or  his   substitute  or
substitutes, may do or cause to be done by virtue hereof.             

          Pursuant to the  requirements of the Securities  Exchange Act of 1934,
     this  Annual  Report on Form 10-K has been  signed  below by the  following
     persons on behalf of the  Registrant  and in the  capacities  indicated  on
March 27, 2002:                                                       

/s/ Gary L. Burrell                                  /s/ Min H. Kao           
Gary L. Burrell                                      Min H. Kao       
    Co-Chairman, Co-Chief                                Co-Chairman, Co-Chief
Executive Officer and Director                  Executive Officer and Director
(Co-Principal Executive Officer)               (Co-Principal Executive Officer) 

/s/ Kevin Rauckman                              /s/ Ruey-Jeng Kao       
Kevin Rauckman                                  Ruey-Jeng Kao   
(Principal Financial Officer and                             Director           
Principal Accounting Officer)                                                 
Chief Financial Officer and Treasurer                                           

/s/ Thomas A. McDonnell                         /s/ Donald H. Eller       
Thomas A. McDonnell                             Donald H. Eller   
  Director                                          Director

/s/ Gene M. Betts                                                             
Gene M. Betts                                                         
Director                                                    

10-K405
69th Page of 73
TOC
1st
Previous
Next
↓Bottom
Just 69th
 Garmin Ltd.
2001 Form 10-K Annual Report
 Exhibit Index

          The following exhibits are attached hereto. See Part IV of this Annual
Report on Form 10-K for a complete list of exhibits.                  

Exhibit                                                                         
Number            Document                                                      

10.4              First Amendment to Garmin Ltd. Employee Stock Purchase Plan   

21.1              List of Subsidiaries                                          

23.1              Consent of Ernst & Young LLP                                  

10-K405
70th Page of 73
TOC
1st
Previous
Next
↓Bottom
Just 70th
                                                                  EXHIBIT 10.4

FIRST AMENDMENT TO THE
GARMIN LTD. EMPLOYEE STOCK PURCHASE PLAN

          The Garmin Ltd.  Employee  Stock  Purchase Plan is amended,  effective
December 1, 2001, as follows:                                         

I.

Section 2.11 is amended to read as follows:                   

             2.11  'Eligible Employee' means an Employee, including an
                 employee on Qualified Military Leave, eligible to participate
in the Plan in accordance with Article V.   

II. 

Section 2.12 is amended to read as follows:                   

              2.12  'Employee' means an individual who performs services
                for the Company or a Participating Subsidiary pursuant to an
             employment relationship described in Treasury Regulations
             Section 31.3401(c)-1 or any successor provision, or an in
                 individual who would be performing such services but for such
individual's Qualified Military Leave.      

III.

          Sections  2.22 through 2.26 are  renumbered  as Sections  2.23 through
 2.27, respectively, and a new Section 2.22 is added to read as follows:

           2.22 'Qualified Military Leave' means an absence due to
              service in the uniformed services of the United States (as
                defined in Chapter 43 of Title 38 of the United States Code)
               by an individual employee of the Company or a Participating
                Subsidiary, provided the individual's rights to reemployment
            under the Uniformed Services Employment and Reemployment
      Rights Act of 1994 have not expired or terminated.

IV. 

Sub-sections 5.2(b) and (c) are amended to read as follows:   

               (b) Employees (other than individuals on Qualified Military
           Leave) who are customarily employed by the Company or a
                 Participating Subsidiary for not more than 20 hours per week;
or                                          

               (c) Employees (other than individuals on Qualified Military
           Leave) who are customarily employed by the Company or a
              Participating Subsidiary for not more than five (5) months
in any calendar year.                       

10-K405
71st Page of 73
TOC
1st
Previous
Next
↓Bottom
Just 71st
V.

Section 10.3 is amended to read as follows:                   

              10.3  Leave of Absence.  If a Participant takes a leave of
           absence (other than a Qualified Military Leave) without
              terminating employment, such Participant will be deemed to
                  have discontinued contributions to the Plan in accordance with
                  Section 8.3, but will remain a Participant in the Plan through
              the balance of the Accumulation Period in which his or her
                  leave of absence begins, so long as such leave of absence does
                  not exceed 90 days.  If a Participant takes a leave of absence
               (other than a Qualified Military Leave) without terminating
                 employment, such Participant will be deemed to have withdrawn
    from the Plan in accordance with Section 10.1 on
the 91st day of such leave of absence.      

VI. 

   Except as amended herein, the Plan shall remain in full force and
effect.                                                       

Executed this 8th day of January, 2002.                                         

..........................GARMIN LTD.       

   ..........................By:    /s/ Min H. Kao

..........................Name:  Min H. Kao 

           ..........................Title: Co-Chairman and Co-CEO

10-K405
72nd Page of 73
TOC
1st
Previous
Next
↓Bottom
Just 72nd
                                                                EXHIBIT 21.1

 GARMIN LTD.

List of Subsidiaries of Registrant

Name of Subsidiary                               Jurisdiction of Incorporation  

Garmin Corporation                                            Taiwan            
Garmin International, Inc.                                    Kansas            
Garmin USA, Inc.                                              Kansas            
Garmin Realty, LLC                                            Kansas            
Garmin (Europe) Ltd.                                         England            

10-K405
Last Page of 73
TOC
1st
Previous
Next
↓Bottom
Just 73rd
                                                                EXHIBIT 23.1

 Consent of Independent Auditors

     We consent to the incorporation by reference in the Registration Statements
     (Form S-8 Nos.  333-51470  and  333-52766)  pertaining  to the Garmin  Ltd.
     Employee  Stock  Purchase  Plan,  Garmin Ltd. 2000 Equity  Incentive  Plan,
     Garmin   Ltd.   Non-Employee   Director   Option   Plan,   and  the  Garmin
     International,  Inc.  Savings and Profit  Sharing  Plan of our report dated
     February 1, 2002, with respect to the consolidated financial statements and
     schedule of Garmin Ltd.  included in the Annual  Report (Form 10-K) for the
year ended December 29, 2001.                                         

                                                      /s/  Ernst & Young LLP
                                                           Ernst & Young LLP

Kansas City, Missouri                                                           
March  25, 2002                                                                 

Dates Referenced Herein   and   Documents Incorporated by Reference

				Referenced-On Page
This ‘10-K405’ Filing		Date		First		Last			Other Filings
		1/1/25		26		52
		4/15/20		25		53
		10/31/11		4		62
		12/31/05		36					10-K,  11-K
		9/30/04		26		52
		9/20/04		25		53
		6/6/04		56
		6/1/04		56
		12/31/02		4		62			11-K
		6/15/02		27
		6/7/02		13		64
Filed on:		3/27/02		4		68
		3/25/02		73
		3/22/02		1		13
		2/20/02		21
		2/14/02		29
		2/1/02		39		73
		12/30/01		51
For Period End:		12/29/01		1		73			10-K/A,  DEF 14A
		12/15/01		27		51
		12/1/01		70
		11/29/01		3
		11/1/01		4		62
		10/26/01		65					8-K
		10/25/01		65
		10/24/01		4		62			8-K
		9/24/01		4		62
		9/11/01		21		30
		6/30/01		27		51			10-Q
		6/28/01		52					11-K
		2/6/01		37
		12/31/00		46		50			11-K
		12/30/00		14		67			10-K405
		12/8/00		13		65			S-8
		12/6/00		65					S-1/A
		11/6/00		15		59
		9/22/00		45
		7/24/00		3		45
		7/1/00		37
		6/15/00		50
		5/2/00		5
		3/23/00		25
		12/25/99		14		67
		12/26/98		14
		12/25/98		14
		12/31/97		14
		1/1/95		25
									List all Filings