Garmin Ltd. (GRMN) November 11, 2015 - Tippie College of...

Importantdisclosuresappearonthelastpageofthisreport.

TheHenryFund

HenryB.TippieSchoolofManagementJonKerr[[email protected]] GarminLtd.(GRMN) November11,2015

ConsumerGoods–ElectronicEquipment StockRating NOACTIONInvestmentThesis TargetPrice $38-$43

GarmindesignsandmanufacturesnumerousGPSbasedproductsforawiderangeofindustries.Duetocreatingabroadrangeofproductsandsupplyingtoabroad rangeof industries, thecompanydoesnot focusononeareaofexpertise.Thereforethecompanyhasyettoremoveitsdependenceonthedeclining automotive personal navigation device (PND) market. Garmin istakingadvantageoftheflourishingwearableelectronicsmarketbymakingasignificant investment in research and development and advertising.However,theautomotive/mobiledecliningrevenuewilloffsetanygainsseenintheotherfouroperatingsegments.UntilGarmindevelopsanewproductlinetodrivesignificantgrowthandridthecompanyofitsdependencyontheautomotivePNDmarket,werecommenda“noaction”rating.

DriversofThesis• GarminisextremelydependentonthedecliningautomotivePNDmarket,

accountingfor43%ofrevenuein2014.• A decline in government defense spending will create increased

competition in thegeneralaviationmarket thatGarmincompetes in,ascompanies with significant ties to defense aviation will look to theconsumerandcommercialsectorforrevenues.

• Garmin’s products are spread-out across multiple industries, fromrunningwatches to airplane cockpit displays. The company’s resourcesarespreadoutacrossmanymarketsandthereforethecompanydoesnotspecializeinanyonearea.

RiskstoThesis• Garmin is a significant player in the booming wearable’s market.

Development of innovative features that set their products apart fromcompetitioncouldcreatesignificantrevenueforthecompany.

• Garmin has significant exposure to foreign currency. Without thestrengthening of the U.S. dollar, we predict Garmin would have anapproximately5%increaseinrevenuein2015.IftheU.S.dollarbeginstoweakenagainsttheothercurrencies,Garminwillseeearningsgrowthin2016.

HenryFundDCF $41.11HenryFundDDM $33.36RelativeP/EMultiple $41.19PriceData CurrentPrice $37.6352wkRange $34.90–$60.19Consensus1yrTarget $38.98KeyStatistics MarketCap(B) $7.11SharesOutstanding(M) 190.9InstitutionalOwnership 46.7%FiveYearBeta 0.96DividendYield 5.50%Est.5yrGrowth 4.34%Price/Earnings(TTM) 26.63Price/Sales(TTM) 2.46Debt/Equity 0.0%Profitability OperatingMargin 21.9%NetProfitMargin 12.7%ReturnonAssets(TTM) 7.8%ReturnonEquity(TTM) 10.3%

EarningsEstimatesYear 2012 2013 2014 2015E 2016E 2017EEPS $2.78 $3.13 $1.89 $2.60 $2.51 $2.70

Growth 3.73% 12.59% -39.62% 37.42% -3.32% 7.35%12MonthPerformance CompanyDescription

Garmin designs, develops, manufactures,markets, and distributes a wide variety ofhand-held, wrist-based, portable and fixed-mount Global Positioning System (GPS)enabled products as well as othernavigation, communication, and sensor-based products. The broad portfolio ofproducts are developed for consumers aswellastheautomotive,aviation,andmarineindustries. The products are distributedglobally.

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P/E ROE ProfitMargin

GRMN Industry Sector

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GRMN S&P500

Source:YahooFinance

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EXECUTIVESUMMARY

Garmin Ltd. is a provider of consumer and commercialelectronics. The company designs and manufacturesmultiple GPS based devices for numerous marketsincluding automotive, marine, aviation, and generalfitness.

Garmin is best known for their automotive personalnavigation devices (PND). In 2008, at the height ofpopularity of these devices, Garmin generated $2.54billion from the automotive segment, 73% of companyrevenue. The market for PNDs has steadily declinedbecause of the increased penetration of smart phones.Garmin is still very dependent on PND sales as it is thecompany’s largest segment and accounted for 43% ofrevenuein2014.

Thecompanyisattemptingtoremoveitsdependenceonthe automotive/mobile segment by increasing R&D andadvertisingexpensesinotherareasin2015.Asignificantportion of these funds will go towards the Fitnesssegment as Garmin attempts to take advantage of theboomingwearable’smarket.

Garmincompetesinthefitnessbandandactivitytrackersniche segment of the wearable’s market. This is agrowing market that is attracting a lot of competition.Fitbitisthemarketleaderwithanestimated67%marketsharein2014.(24)AccordingtoCEO,CliffPemble,Garminisadistantsecondat15%ofthatnichesegment. Whilewe expect the Garmin Fitness segment to have 13%revenuegrowthin2015,pricingpressuresfromincreasedcompetitionwillslowgrowthinthefuture.

WeexpectGarmintohaverevenuegrowthinfouroutofthe five company segments, however the increasedrevenue will be offset by the automotive segmentdecline. As well, we expect increased competition inboth theFitnessandAviationsegments,whichwill keepprofitsataminimum.Garminhasyettofindaproductorproduct line to replace the declining PND market,because of this we believe Garmin will struggle tomaintain profits for the foreseeable future andrecommendnoactiononGarmin’sstock.

COMPANYDESCRIPTION

Garmin was founded in 1989 in Olathe, Kansas. Thecompany’s first product was a panel-mounted GPSreceivertargetedforthemarinemarket,butGarminrosetoprominenceinthelate1990’swiththeintroductionof

theirautomotiveGPSnavigationunits.Thecompanyhassince moved into other industries and now has fivebusiness segments including Outdoor, Fitness, Marine,Automotive/Mobile,andAviation.

RevenueTypes

Source:Garmin201410-K(1)

Garmin’s largest revenue generating segment is theAutomotive/Mobilesegment. Thissegment includesthecompany’s line of personal navigation devices (PND) aswell as infotainment systems targeted at automotiveoriginal equipment manufacturers (OEM) and mobilenavigation applications for use on a broad range ofsmartphones and tablets. This segment has beendeclining in revenue since 2008 when it accounted for72.6%ofcompanyrevenue.Thedeclinehasbeenduetothe increased adoption of mobile phones with GPStechnology built into them as well as the increasingnumberof vehiclemanufacturers that are includingGPSnavigationinnewmodels.ThepercentageofnewcarsinEuropewithintegratedGPSnavigationincreasedfrom6%to11%from2009to2013. (25) In2014, thesegmenthassales of $1.24 billion and accounted for 43.2% of thecompany’srevenue,adecreaseof51.2%insixyears.Weexpect this trend to continue with revenues for theAutomotive/Mobile segment declining below $725millionin2019,adecreaseof10.2%peryear.

Thenext largest segment for thecompany is theFitnesssegment. The fitness segment includes the Forerunnerseriesofrunning/mulit-sportwatches,cyclingcomputers,cycling powermeters, swimmingwatches, and the Vivo

69.7% 62.0% 57.7% 55.0% 49.5% 43.2%

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RevenuebySegment'09to'14

Automomve/Mobile Fitness Outdoor Aviamon Marine

line of activity tracking devices. This segment has seentremendous growth the last few years, with revenuesincreasing60%from2013to2014. Since2009,revenueforthesegmenthasincreasedata27.4%CAGR.In2014,this segment generated $568.4 million in revenue andaccounted for 19.8% of total company revenue. Weexpect continued growth in this segment for thecompany with revenues growing at a 9.0% CAGR into2019,generatingnearly$875millioninrevenuein2019.

The outdoor product segment is the third largestsegment for Garmin, generating $427.6million in 2014,14.9% of revenue. The outdoor product line is a broadrangeofGPS-baseddevices foruse inoutdooractivities.The products in the segment include the handheldwaypoint navigation devices for hiking, hunting, andotheroutdooractivities,aswellastheApproachseriesofgolfGPSwatches and golfGPShandhelds, and theVIRBaction camera. This segment also includes the fēnixwatch series, which incorporates an altimeter,barometer, and compass for running, climbing, hiking,skiingandotheroutdooractivities.Theoutdoorproductsegment also includesGarmin’s lineof dog tracking andtrainingcollars.Weexpectrelativelyslowgrowthforthissegment with revenues increasing at a 3.0% CAGR into2019withrevenue’sstillmaintainingapproximately17%oftotalcompanyrevenue.

The aviation segment is the fourth largest for Garmingenerating $385.9million in 2014. TheGarmin aviationsegmenttargetspersonalandbusinessaircraftaswellashelicopters. The product line includes GPS-enablednavigation systems, communication and controlequipment, multi-function displays, and other cockpitrelated equipment. This segment has seen significantgrowthsince2009,growingata9.5%CAGR. Weexpectthisgrowthtoslowto4.0%CAGRinto2019.

The marine segment generates the least amount ofrevenueforthecompany,$248.4millionin2014,8.7%ofcompany revenue. The products in this segment aretargetedat the recreationalmarine industryand includechart plotters, fish finders, entertainment systems,autopilot systems, and other navigation andcommunicationequipment.Theoperatingmarginforthemarine segment has decreased from 34% in 2010 to10.6%in2014,thelowestamongthefivesegments.Weexpectrevenueforthesegmenttoincreaseata5.2%fiveyearCAGR,andweexpectoperatingmarginstocontinuetobearound10%in2019.

GeographicDiversification

Garmin sells its portfolio of products worldwide. TheAmericasconsistentlyaccountsforthelargestpercentageofsalesgenerating53.6%ofsalesin2014.


GarminisdiverseinthecountriesitoperatesinwiththeU.S. being the only country which accounts for greaterthan 10% of net sales. We expect the Americas tocontinuetomakeupthegreatestportionofrevenueforthecompany.However,theEMEAandAPACregionshavehad greater revenue growth than the Americas since2012. The America’s has had growth of less than 1%while EMEA and APAC have grown 5.6% and 4.0%,respectively.

With such a large percentage of foreign sales, currencyexchangerateshaveamajorimpactoncompanyprofits.In theQ2 2015 earnings call, Garmin CEO, Cliff Pemble,stated that Garmin had a loss of $59 million in thequarter due to foreign currency exchange ratefluctuation.(2)Duetothedollarcontinuingtostrengthen,weexpectexchangeratelossestocontinuetoincreaseasa greater percentage of sales come from overseas.Garminhasstatedtheyexpectforeignexchangeratestodecreaserevenuesby$160millionin2015.WithoutthestrengtheningoftheU.S.dollar,wepredictGarminwouldhaveayear-over-yeargrowthinearningofapproximately5%in2015.

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RECENTDEVELOPMENTS

ThirdQuarter2015Earnings

OnOctober28,2015,Garminannounced the results fortheir third quarter that ended September 26, 2015.Garmin announced EPS of $0.51with revenues of $680million for the quarter. These results were in linewithmanagement’s guidance but slightly missed analystconsensusestimatesof$0.50pershareand$688millioninrevenue.Thirdquarterrevenuesweredown3.8%yearover year. The decline is attributed to the negativeimpactofthestrongerdollar,whichnegatively impactedrevenues by $52 million. Fitness growth and marginsdeclined slightly due to market leader, Fitbit, gainingmomentum from their June 18th IPO. The Marinesegment had significant gains due to the recent Fusionacquisition and new product releases. The automotivesegment results are inlinewithmanagement’s guidancefrom the beginning of the year of a 15% decline inrevenuesfor2015.(2)

Overall,management’s guidance for FY15 is in linewiththeir guidance from the beginning of the year. Garminestimatestheywillendtheyearwithapproximately$2.9billion in revenue and EPS of $2.65. They expectoperatingmarginstodecreaseto20-21%in2015duetoan increase in advertising and competitive pricingpressures in the Fitness segment. We have modeledrevenuesof$2.80billionandanEPSof$2.60.

FusionAcquisition

On June 30, 2014, Garmin acquired Fusion Electronics.FusionElectronicsisbasedoutofAuckland,NewZealandand is a leader in integrated marine audio equipment.The Fusion acquisition gives Garmin access to theinfotainment segment of the marine market. Fusion’sproductsallowboaterstoconnectandcontroltheiraudiothrough select marine multifunction displays createmulti-zoneaudioconfigurationsspecifictotheirvessel.

In2014, revenues in themarinesegment increased11%inlargepartduetotheFusionElectronicsacquisition.Inthe 2Q15earnings call,Garmin’smanagement said theyexpect theMarine segment revenue to increase 15% in2015. This increase is due in large part to the Fusionacquisitionbroadening themarineproductportfolioandgenerating synergies for marine customers in both theOEM and after-market applications. We have modeledMarinesegmentrevenuesto increase11% in2015,withthe segment accounting for 10% of total company

revenue. WeexpectMarinerevenuestogrowata5.2%5-yearCAGR.

IncreasedAdvertisingInvestment

In Garmin’s FY2014 earnings call, managementannounced the company would have a significantincreaseinbothR&Dandadvertisinginvestmentin2015andinthefuture.In2014,Garminspentatotalof$146million in advertising, 5.1% of sales, which was anincrease of 30% from 2013. However, Garmin’sadvertisingbudgethasdecreasedsince2009whenitwas$155million,5.3%ofsales.(1)WehavemodeledGarmin’s2015 advertising budget to be $170.5 million, an 16%increasesfrom2014.WeexpectthebulkoftheincreasetogotowardstheFitnesssegment.

In2014,Garminspent$52.6millioninadvertisingfortheFitness segment. This includes costs for mediaadvertising, point of sale displays and sponsorships.Management stated they would increase theirinvestmentinTVadvertisingaswellasonlineanddigitaladvertising.In2014,Garminspent$18.7millioninmediaonlyadvertising,whilemarket leader,Fitbit, spent$21.6million. (3)According toGarminCEO,CliffPemble, in theFY2014earningscall,Garminholds15%of thewearablefitnesstrackermarketwhileFitbitholds67%.WebelieveGarminwillattempttostealmarketsharebysignificantlyincreasingtheirmedia-advertisingbudget.Therefore,wehavemodeled Garmin’s total advertising for the Fitnesssegment to increase 46% in 2015 to $76 million. As apercentof revenue, the Fitness segment advertisingwillincrease from 9.25% to 12% in 2015. We expect theFitnesssegmentadvertisingtoincreaseatan18.4%CAGRinto 2019, and companywide advertising to increase atan8.1%CAGRinto2019.

IncreasedDividendPayment

On June 5, 2015,Garmin announced the approval of anincreased quarterly dividend payment in the amount of$0.51pershare,an increaseof6.25%fromthepreviousquarter. At the timeof thedividendpayment,Garmin’sstock price was $43.93, a dividend yield of 4.64%. (4)Garmin has zero debt on their balance sheet, whichallows them the flexibility to pay large dividends andrepurchase stock. WebelieveGarmin canmaintain thislevelofdividendpayment. Inourmodel,we forecastedan 80% dividend payout ratio into 2019 with thecompanymaintainingpositivecashflows.

ReleasedEdgeExploreCyclingComputer

On August 25, 2015, Garmin announced its newestcycling computer, the Edge Explore 1000. The deviceincorporates incident detection capabilities, which canautomatically send a cyclist’s location to emergencycontacts if there is an accident. The new computerintegratesGarmin’snewlyacquiredVarialineofrearviewbikeradarthatwarnsthecyclistofapproachingcars.Thenew Edge Explore will begin shipping in Q3 of 2015.Dougherty and Company LLC calculate that cyclingaccounted for5%ofGarmin’scompanyrevenueand6%ofprofitsin2014.(5)Withthenewproductintroductions,cyclingisexpectedtobe6%ofrevenueand7%ofprofitin 2015. Cycling is included in the Fitness segment forGarmin,wehavemodeledFitnessrevenue’stogrow11%in2015andbecome22.5%ofcompanyrevenue.

INDUSTRYTRENDS

Wearable’sMarketGrowth

Wearable technology refers to any electronic device,which can beworn by a person to integrate computinginto daily activities. The wearable’s market space isexpected to grow at a CAGR of 35% over the next fiveyears. An estimated 33million units will be shipped in2015withthatnumber increasingto148millionunits in2019.(6)

Garmincompetesinthe“FitnessBandandOtherActivityTrackers”segmentofthemarket.Thefitnessbandscaterto a niche audience interested in health and exercise.Garmin does not viewmanufacturers of smartwatches,suchastheAppleWatchandSamsungGearS2,asdirectcompetitors. The fitnessbandsmarketwillnot increaseas fast as smart watches but will still see compoundannualgrowthof25.6%into2019.Unitshipmentsintheniche market are expected to be 11.9 million in 2015,increasingto29.6millionin2019.(6)

Source:BusinessInsider(6)

PNDMarketDeclineandConcentration

Personal Navigation Devices (PND) unit sales have beendecliningsince2011.Theintroductionofthesmartphonehasbeenthemainreasonforthisdecline.In2011,PNDspeaked with 47.9 million shipments. The number ofshipmentsisexpectedtodecreaseto22.7millionunitsin2015, a decrease of 17% per year. Garmin CEO, CliffPemble,hasgivenguidanceofa15%decline in revenueintheAutomotive/Mobilesegmentfor2015.Weexpectthisdecliningtrendtocontinue.Howeverweexpecttherateofdeclinetoslow.

Source:Statista(7)

GovernmentDefenseSpending

Governmentdefensespending isexpectedtodeclineforthe 4th straight year in 2015 and increasing slightly in2016from$583billionto$587billion,0.7%increase. (23)

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GlobalUnitShipmentsofPortableCarNavigadonDevices2010-2015

With the slow down in government defense spending,companies such as Rockwell Collins and Honeywell willputmoreemphasison the commercial segmentof theirbusiness. In Rockwell Collins’ 2014 Annual Report, theCEO stated they are continuing to adjust to changes indefense spending as they saw an increase of 6% incommercial systems and decline in 2% in governmentsystems.(22)

Source:Statista(23)

MARKETSANDCOMPETITION

Themarkets thatGarmin competes in are characterizedbyconstantinnovationandshortproductlifecycles.Duetothesecharacteristics,thecompany’sproductportfoliosquicklyfacematurityandobsolescence.

Automotive/MobileMarket

The PND Market is becoming highly concentrated withonly two companies dominating the market. In 2014,Garmin had 84% of the North American market whileTomTom had 15%. In Europe, Garmin had 35% of themarket with TomTom accounting for 51%. (8) MiTAC’sMagellan product line accounts for the bulk of theremaining14%marketshareinEurope.

In addition to PNDS, Garmin also competes to provideautomotiveinfotainmentsolutionstooriginalequipmentmanufacturers. Garmin’s product offerings range fromintegrated hardware within the vehicle to softwarenavigation solutions. Garmin has relationships withOEMs including Chrysler, Volkswagen, BMW, andMercedes Benz. Garmin competes with much largercompanies in this market segment. Their principal

competitors include Harman International, PanasonicCorporation,andtheMitsubishiGroup.

For the most part, the products offered by thesecompanies have common feature sets. The main waythey compete is through price and by manufacturinglocation. Automotive manufacturers want theirdistributors extremely close. For instance, the averagedistanceofsuppliersfromToyotaplantsisthirtymiles.(9)Garmin is at a disadvantage in the automotiveinfotainmentsegmentbecausetheirmainmanufacturingplant is in Taiwan, which is not a major automobilemanufacturing location. We do not believeGarminwillgeneratesignificantwinsintheautomotiveinfotainmentmarketandwebelieveGarminwillcontinuetostruggleinthe overall automotive segment as the PND marketcontinues to decline due to increased smartphonepenetration. WehavemodeledGarmin revenues in theAutomotive/Mobilesegmenttodecreaseata-10%CAGRinto2019.(7)

Wearable’sMarket

As statedearlier,Garmin competes in the “FitnessBandand Other Activity Trackers” segment of the wearable’smarket, which serves to a niche audience interested inhealth and exercise. Themarket is in its early stage ofdevelopment with many competing companies. Fitbit,who’sIPOwasJune18,2015, leadstheoverallwearablemarketwith24.4%marketsharein2Q15.ApplereleasedtheAppleWatchin2Q15andtook20.1%ofthemarket.Garminheldonto4.1%ofmarketshareinthequarter.(11)

Source:IDC(11)

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UnitedStatesDefenseOutlays

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WorldwideWearableDeviceTop5VendorsMarketShare

Other

Samsung

Garmin

Xiaomi

Apple

Fitbit

Thecompanies thatcompeteagainstoneanother in the“Fitness Band and Other Activity Trackers” segment areFitbit, Garmin, Xiaomi, Jawbone, and other smallerplayers. Fitbit dominates the market segment butaccording to Garmins 2Q15 earnings call, the companycaptured 15% of the Fitness Band and Other ActivityTrackers market in the quarter. We expect Garmin’sfitnesssegmentrevenuetoincreaseata9.0%CAGRinto2019 and become the companies largest contributor ofrevenueat 30.4%. Weexpectoperating income for thesegment to decrease from 33.5% in 2014 to 26.5% in2019 because of increased pricing pressures fromcompetitors and increased R&D and advertisingexpenses.

AviationMarket

The Avionics market is a very capital-intensive marketandisaverydifficultmarkettoenter.Ittakesalongtimeto develop a system and even more time to test andobtaintherequiredcertifications.ThetopmanufacturersinthisindustryincludeHoneywellInternational,RockwellCollins, United Technologies Corporation, and GEAviation. Garmin tends to compete in the low-endgeneral aviation segment against smaller, privatecompanies.

One common characteristic of the companies thatcompeteinthemarketishighR&Dcosts.In2014,intheaviation segment,Garmin spent $143million, or 37%ofsegment revenue on R&D. Rockwell Collins spent $934million,or19%ofrevenueonR&Din2014.

At thebeginningofFY2015,Garmin’smanagementgaveguidance of 15% year-over-year growth for the aviationsegment. However, during the 2Q15 earning call, theychanged their guidance to only 5% growth for thesegment due to macroeconomic challenges globally.According to the General Aviation ManufacturersAssociation (GAMA),globaldeliveriesofgeneralaviationaircraftwereapproximately4,100aircrafts in2007. Duetothepooreconomicenvironment,thatnumberdeclineduntil 2010. Since 2010, the number of general aviationaircraftdeliverieshasincreasedata4.9%5-yearCAGRto2454 aircrafts in 2014. (10) We expect this trend tocontinue and we have modeled aviation revenues togrow 4% in 2015.We expect revenues to grow at a 4%CAGR into 2019 as the general aviation aircraftproductionreturnstopre-recessionlevels.

MarineElectronicsMarket

Pricing in the marine electronics market is highlycompetitive which pressures profitability within themarket. Two of Garmin’s principal competitors in thismarketareHumminbirdbyJohnsonOutdoorsandFurunoElectronics, which had operating margins of 12.3% and2.09% respectively in 2014. Garmin had an operatingmargin in themarine segmentof10.6% in2014. (12) Therecreationalboatingmarketretailexpendituresgrewata3.8%CAGRfrom2010to2014.(13)Weexpectthistrendtocontinue and with Garmin’s acquisition of Fusion, wehave forecasted marine segment revenue to grow at a5.2% CAGR into 2019. Operating margin for Garmin’smarine segment has been declining since 2010 and weexpectittocontinuetodeclineto8.5%in2016butthenreturntoaround10%in2019.

PeerComparison

Garmin competes in many different markets offeringelectronicproductsfordifferentactivelifestyles.Becauseof the diverse markets, Garmin has numerouscompetitors. Garminhas adifferent leading competitorin every market they serve. Because of the diversecompetitors in a diverse set of industries, we choseprofitabilitymetricstocomparethepeercompanies.

EachcompanyGarmincompeteswithisadeveloperandmanufacturerofelectronicequipment.Akeycomponentofatechnologycompany’sfuturegrowthisresearchanddevelopment.

Source:MergentOnline(14)

0.0%5.0%10.0%15.0%20.0%25.0%30.0%35.0%40.0%45.0%

2014R&D%ofRevenue

TeleNav is an outlier in this comparison. The companycreates navigation platform services for the automobileindustry. They have a very large R&D expense as apercent of revenue. The company has had negativeincome the last two years and we believe they arespending large amounts of cash on R&D in order tostimulate organic growth. Rockwell Collins has a highR&D expense ratio because they operate in the designintensive aviation industry. Due toGarmin operating intheaviation industryamongother industries,wedonotbelieve their R&D expense ratio is significantly differentthantheircompetitors.

Source:MergentOnline(14)

Threecompaniesstandoutwhencomparingrevenueperemployee. The companies that standout are Apple,Fitbit, andGoPro, each generating over $1.4million peremployeewith Apple generating nearly $2.0million peremployee. Eachofthesethreecompanies isthemarketleaderintheindividualmarketstheycompetein.Garminis the market leader in the declining automotive PNDmarket. As such, Garmin’s revenue per employee is onpar with the rest of the competing companies shownhere,at$257thousandperemployee.AtthepeakoftheautomotivePNDmarket in2008,Garminwasgenerating$392thousandperemployee.Since2008,theirrevenueperemployeehasdeclined34.5%.

Sales

%NetProfitMargin

ROE%

Debt/Equity% P/E

AppleInc. 182,795 21.7 33.6 31.6 12.1

HoneywellInternational 32,398 10.5 24.1 49.2 16.6

HarmanInternational 6,155 5.6 16.5 45.7 24.6

RockwellCollins,Inc 4,980 12.4 35.3 117.9 16.5

GarminInternational 2,871 12.7 10.3 0.0 14.1

FLIRSystems 1,531 13.1 12.4 23.2 17.4

GoPro,Inc. 1,394 8.0 31.3 0.0 16.4

FitbitIncClassA 745 4.5 46.2 92.7 0.5

TeleNav,Inc 160 -14.4 -12.5 -70.8 -11.8Source:FactSet(12)

GarminisnotalargecompanywhencomparedtoAppleor Honeywell, but when compared to companies thatcompete innichemarkets,Garmin is relativelybig. FLIRSystems competes with Garmin in the niche hunting,fishing,andoutdooraccessorymarkets.GoProcompeteswith Garmin in the niche action camera market, whileFitbit competeswith Garmin in the Activity Tracker andFitness markets. Garmin’s outdoor segment, whichcontains hunting and outdoor products as well as theVIRB action camera, had $428 million in sales in 2014.Garmin’s segment sales were much less than FLIR andGoPro’ssales.Garmin’sfitnesssegment,whichcompeteswithFitbithadsalesof$568millionin2014,comparedtoFitbit’s$745million.

Garmin’s net profit margin is in the middle of pack at12.7%.However,ifyoudisregardTeleNav,Garmin’sROEis at the bottom with only 10.3% return on equity.Garmin does lead the group in debt/equity ratio asGarminhaszerodebtontheirbalancesheet.

ECONOMICOUTLOOK

While the aviation segment does business-to-businesstransactions,themajorityofGarmin’srevenuesarefromsalestoconsumers.Therefore,agoodindicationofsalesforGarmin in theUnitedStates is consumerconfidence.Consumer confidence is a strong indicator of consumerspendinganddisposableincome.

Since the recession in 2008, consumer confidence hasbeen steadily increasing. We believe consumerconfidencewillcontinueto increaseintheshorttermaswellasincreaseoverthenextfewyears.

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Many of the products that Garmin produces arediscretionarygoods,suchasfitnesswatches,fishfinders,and action cameras. When consumer spending is up,sales for these products will also be up. Personalconsumption expenditures have followed the consumerconfidence indicator as expenditures have been on therise since 2009 and have maintained approximately 3%growthperyear.

Source:FRED(16)

One factor that affects consumer spending is theunemployment rate. Unemployed people are trying tostretchtheirfinancialassetsforalongerdurationduetotheuncertaintyof theendof theirunemployment. Thisleads to a reduction in consumer spending due to

financial limitations. Weexpecttheunemploymentrateto maintain a level around 5.1% in the next 6 months,whichshouldkeepconsumerspendingfromdecreasing.

Source:FRED(17)

Exchange rates are a driver for companies competing inthetechnologyindustry.In2014,Garmingenerated46%ofitsrevenuefrominternationalsales.Assuch,currencymovements have a large effect on sales and profits forGarmin. In the following graph, theUS dollar has beengettingstronger in recentmonths. Weexpectexchangeratestomaintaintheircurrent levelsforthenextcoupleyears, which will have a negative effect on Garmin’srevenue.

Source:FRED(18)

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Sep-14

Dec-14

Mar-15

Jun-15

Sep-15

Percen

tCha

ngefrom

YearAgo

PersonalConsumpOonExpenditure-PercentChange

fromYearAgo

5.0

5.5

6.0

6.5

7.0

7.5

8.0

8.5

9.0

Percen

t

UnemploymentRate:AllPersonsAged15-64:U.S.

90

95

100

105

110

115

120

2010 2011 2012 2013 2014 2015

(Ind

exJa

n1997=100)

TradeWeightedUSDollarBroadIndex

CATALYSTSFORGROWTH

FitnessBandsandActivityTrackers

As the automotive segment continues to decline,Garmin’s vívo family of fitness bands and Forerunner®lineofrunningwatcheswillbethemaindriverforgrowthof the company going forward. Garmin continues tomake incremental improvements to each of theseproduct lines but in order to take advantage of theboomingwearable’s industryandgainsignificantmarketshare, Garmin needs to add differentiating features. Afewyearsagothatfeaturewaswristheartrate. Garminneeds to add other sensors to their products todifferentiate from competitors and create substantialgrowthintothefuture.

INVESTMENTPOSITIVES

• Garminsellsproducts intheboomingwearable’smarket,whichhave thepotential togenerate significantrevenue.

• Garmin is a financially stable company. Theyhaveasignificantamountofcashontheirbalancesheetandnodebt.In2014,theyhadacurrentratioof2.96.

• OfficersandDirectorsown37.8%ofoutstandingcommon shares. Owning such a large percentage ofsharescouldmakemanagementmoremotivatedtomakethecompanysucceed.

INVESTMENTNEGATIVES

• Garmin is extremely dependent on theautomotive PND market. The market continues todecline and Garmin’s revenue from this segment hasdeclinedata10%CAGRsince2009.

• Government spending declines will cause largercompanies such as Rockwell Collins and Honeywell tosearch for revenue within the general aviation marketthat Garmin competes in. Garmin could see increasedpricing pressure and a slow down in revenue ascompetitionincreasesinthemarket.

• Garmin operates in a lot of different industriesandsellsnumerousproducts ineachof these industries.The company’s resources are spread out across manymarkets and therefore the company does not specializeinanyonearea.

VALUATION

We used a Discounted Cash Flow (DCF), DividendDiscount Model (DDM), and Relative Price to Earnings(P/E) analysis to value Garmin Ltd. Through thevaluation, process we calculated a stock price range of$38to$43forthecompanysuggestinganoactionforthecompany.

SegmentGrowthRates(%)

2012 2013 2014 2015E 2016E 2017E 2018E 2019E

Outdoor 10.6 2.3 4.0 3.0 3.0 3.0 3.0 3.0

Fitness 7.9 10.7 59.5 11.0 11.0 9.0 7.0 7.0

Marine -6.1 7.1 11.4 11.0 6.0 3.0 3.0 3.0

Auto/Mobile -6.2 -12.7 -4.8 -15.0 -11.0 -9.0 -9.0 -7.0

Aviation 2.4 16.4 13.7 4.0 4.0 4.0 4.0 4.0

TotalRev. -1.6 -3.1 9.1 -2.4 0.0 0.6 0.6 1.6Source:Garmin201410-K(1)

Garmingeneratesrevenuethroughfivedifferentbusinesssegments.Weexpecttheoutdoorsegmenttohavesmallgrowthof3%peryear into2019. Wehave forecast themarinesegmentrevenuestoincreaseata5.2%five-yearCAGR due to expected increased retail expenditures inthe recreational boating market and due to the Fusionacquisition. For the aviation segment, we expectrevenues to grow at 4% per year as general aviationaircraft production increases towards pre-recessionlevels. The fitness segment is seeing significant growthdue to the booming wearable’s market and we expectthis trend to continue. We have modeled the fitnesssegment to increase at a 9.0% five-year CAGR andbecomeGarmin’s largestsegmentaccountingfor30%ofcompany revenue in 2019. Due to the increasedadoption of the smart phone and in-dash navigationsystemsbecoming standard features in automobiles,wehavemodeledtheautomobile/mobilesegmentrevenuesto decrease at a 10.2% CAGR into 2019. Due to thesignificantdecreaseinautomotivesegmentrevenues,wehavemodeled total company revenues to increase at a0.1%CAGRfrom2014to2019.

Grossprofitsfortheoutdoorsegmenthavedeclinedfrom67%in2010to62%in2014.Weexpectthegrossprofitmarginforthissegmenttodeclineto59%in2019duetopricingpressuresfromcompetitors. Similarly,weexpectgross margins to decrease in the fitness segment asnumerous competitors attempt to enter the growingwearable’smarket.Weexpectgrossmarginstodecreasefrom63%in2014to58%in2019.Themarinesegments

grossmarginhasdecreasedfrom62% in2010to52% in2014. We expect gross margins to maintain 52%, asGarminshouldbeabletokeepcurrentpricepointswithnew product introductions. The automotive segmentmargin has increased slightly since 2009 andwe expectthe segment tomaintain a 43%grossmargin into 2019.Theaviationsegmenthasconsistentlyhadgrossmarginsbetween69%and73%.Wehavemodeledgrossmarginsof 70% into 2019 for this segment. Overall, companygross margins were 55.9% in 2014. We have modeledtotalcompanygrossmarginstodecreaseslightlyin2015to54.9%,withmarginsincreasingto55.7%in2019.

Garmin management indicated they are going tosignificantly increase R&D and advertising expenses in2015andbeyond.WemodeledthemostgrowthinR&Dinvestment to go into the Fitness segment as Garminattempts to increase its product feature set in thewearable’smarket.WemodeledFitnessR&Dinvestmenttoincreaseata9.3%five-yearCAGR.WehavemodeledtheautomotivesegmenttodecreaseitsR&Dinvestmentata10.0%CAGRinto2019. WeexpectR&Dinvestmentin the other three segments to increase a 6% five-yearCAGR.

R&DExpenseas%ofSegmentRevenue 2012 2013 2014 2015E 2019E

Outdoor 5.13% 5.95% 6.96% 8.00% 7.00%

Fitness 7.32% 7.79% 6.91% 9.00% 7.00%

Marine 20.59% 20.90% 19.39% 21.00% 19.50%

Automotive/Mobile 8.62% 10.49% 10.87% 11.00% 11.00%

Aviation 37.76% 38.15% 37.11% 39.00% 37.00%Source:Garmin201410-K(1)

WehavemodeledSG&Aexpensestomaintainthesameratioasa%ofrevenueforeachsegmentinto2019.

SG&AExpenseas%ofSegmentRevenue 2012 2013 2014 2015E 2019E

Outdoor 13.57% 14.37% 13.35% 13.50% 13.50%

Fitness 13.66% 14.25% 13.33% 14.00% 14.50%

Marine 16.11% 17.31% 17.30% 17.50% 17.50%



WemodeledthemostgrowthinSG&AinvestmenttogointotheFitnesssegmentasGarminattemptstoincreaseitsmarketshareoftheFitnessBandandActivityTrackersegment of wearable’s market. We modeled Fitnessadvertising expenses to increase at an 18% five-yearCAGR. We havemodeled the automotive segment todecreaseitsadvertisingexpenseata9%CAGRinto2019.

The other three segments we expect advertisingexpenses to increase between a 5% and 7% five-yearCAGR.

AdvertisingExpenseas%ofSegmentRevenue 2012 2013 2014 2015E 2019E

Outdoor 5.18% 4.82% 6.70% 7.00% 8.00%

Fitness 7.87% 6.78% 9.25% 12.00% 14.00%

Marine 7.11% 5.13% 4.97% 5.00% 5.00%



Withthedeclineoftheautomotive/mobilesegmentandthese increased expenses, we have modeled totaloperating income to decline at a 2.9% five-year CAGR.We have modeled total operating margin to decline to20.4% in 2015 but maintain around a 20% operatingmargin into 2019. We believe the increase R&Dspending will only lead to sustained margins in thefuture.


We have estimated earnings per share to be $2.60 in2015 and $2.60 in 2016 before increasing to $2.78 in2019.The2015and2016EPSestimatesaretowardsthelow end of analyst estimates but within their range of$2.55-$2.67for2015and$2.46-$3.00for2016.(20)

Permanagement’sguidance in theFY2014earningscall,we modeled Garmin’s 2015 capital expenditures to be$85millioncomparedto$63millionin2014.Weexpecttheexpenditurestocontinuetoincreasebyaround3.4%per year into 2019. We have modeled capitalexpenditurestogrowto$97millionin2019.

WeusedaDCF,DDM,and relativeP/Eanalysis tovalueGarminLtd.usingtheaboveassumptions.TheDCFmodel

0.00%

5.00%

10.00%

15.00%

20.00%

25.00%

30.00%

GarminTotalOperadngMargin

computedapriceof$41.11,theDDMmodelcomputedastock price of $33.36, and the relative P/E analysiscomputedapriceof$41.19.

Garminhasconsistentlypaidyearlydividendssince2003,and starting in 2012, has consistently paid quarterlydividends.WedonotbelievetheDDMpriceof$33.36isrepresentative of the true value of the company.However, the DDM price is useful as indicating a pricefloorforthestock.

Webasedourprice rangeof $38 to$43on the relativeP/EandtheDCFmodel. Garmincompetesagainstmanydifferent competitors in many different industries. Weattempted to weight the relative valuationmodelmoreheavily on competitors in the automotive industry andwearable market space. While most of Garmin’scompetitorsareprivatecompanies,weselectedavarietyof companies from different industries to calculate therelativeP/Epriceof$41.19.

The DCF model calculated a price of $41.11. Weperformedmultiple sensitivity analyses varying differentinputs to themodel to come upwith the high range of$43forourstockpriceandalowrangeof$38.

OnOctober14,2015,Garminhadastockpriceof$36.82.However,afterpre-announcingQ3earningsandadjustingFY15 revenue guidance, the stock price dropped 14.5%beforereturningtothecurrentpriceof37.63.Therearecurrently 20 analysts covering Garmin and they have aprice range of $33 to $50 with a mean target price of$38.93. We believe Garmin’s revenues from theautomotive/mobile segment will decline faster thanconsensus analysts estimates and we are not confidentthat Garmin’s new advertising program will gainsignificant market share in the niche market of fitnessbandsandactivitytrackers. Therefore,wefeelourpricerangeof$38to$43isjustified.

KEYSTOMONITOR

AutoOEM

Theautomobile/mobilesegmentaccountsformorethan43% of the company’s revenue but sales have beendecliningsince2008.IfGarmincouldbegintolandsomelargeautomotiveinfotainmentcontractswithautomobilemanufacturers, it could spur growth in Garmin’s largestsegmentandcarrythecompanyforward.

ConsumerUAVs

GoPro recently announced they would be releasing anunmannedaerialvehicle(UAV),ordrone,in2016.Thereis still some regulatory uncertainty in this area, but themarketforcommercialandconsumerdronesisestimatedtobe $1.4 billion in 2015 and increase to $5.0billion in2017. (19) Garmin has the GPS, collision sensors, andaviation expertise in house to be a dominant player inthis market. Garmin R&D expenditures have increasedfrom around 10% of revenue in 2010 and 2011 to anestimated15%ofrevenuein2015.Whetherornotthesefunds are being applied to a consumer drone productshould be monitored. This market could producesignificantgrowthforGarmin.

AdvertisingInvestment

Garmin announced in the FY2014 earning call that thecompanywouldhaveasignificantincreaseinadvertisinginvestment in 2015. A significant portion of theadvertisingexpenseisgoingtowardsthefitnesssegmentproducts.Thisadvertisingprogramshouldbemonitoredto see if it begins to steal market share from industryleaderFitbit.

REFERENCES

1. Garmin201410-K2. Garmin20152ndQuarterEarningsCall

http://www8.garmin.com/aboutGarmin/invRelations/reports/Q22015_Earnings_Call_Transcript.pdf

3. “Health & Wellness; Reaching Your Consumers”,KantarMediahttp://kantarmedia.us/sites/default/files/files/KantarMedia_WellnessReport_615.pdf

4. “GarminReportsStrongFiscal2014RevenueandProFormaEPSGrowth”,February18,2015http://newsroom.garmin.com/press-release/earnings/garmin-reports-strong-fiscal-2014-revenue-and-pro-forma-eps-growth-proposes-d

5. “Mobile Computing FLASH NOTE – Garmin Ltd.”,August 25, 2015, Charles Anderson and JessicaMcHugh of Dougherty & Company LLC, EquityResearch

6. “TheWearableReport”,BIIntelligence,May21,2015http://www.businessinsider.com/the-wearable-computing-market-report-2014-10

7. “Worldwideunitshipmentsofportablecarnavigationdevicesfrom2010to2015”,Statista,2015

http://www.statista.com.proxy.lib.uiowa.edu/statistics/326896/worldwide-unit-shipments-portable-car-navigation/

8. “PND Market: Slowing Decline and MarketConcentration”,GPSBusinessNews,11/5/2014http://www.gpsbusinessnews.com/PND-Market-Slowing-Decline-and-Market-Concentration_a5159.html

9. “Proximity to plantsmakes supplier parks winners”,AutomotiveNewsEuropehttp://europe.autonews.com/article/20070319/ANE/70315010/proximity-to-plants-makes-supplier-parks-winners

10. “U.S. and Global Deliveries of General AviationAircraft”,Aerowebhttp://www.bga-aeroweb.com/General-Aviation.html

11. “Apple Debuts at the Number Two Spot as theWorldwide Wearables Market Grows 223.2% in2Q15,”27Aug2015,IDChttp://www.idc.com/getdoc.jsp?containerId=prUS25872215

12. FactSet13. “Retail volumeof the recreationalboatingmarket in

theUnitedStatesfrom2001to2014,”Statista2015http://www.statista.com.proxy.lib.uiowa.edu/statistics/209293/retail-volume-of-the-recreational-boating-market/

14. MergentOnline15. Federal Reserve Bank of St. Louis, 03/2015,

“ConsumerOpinionSurvey”https://research.stlouisfed.org/fred2/series/CSCICP03USM665S#

16. FederalReserveBankofSt.Louis,07/2015,“PersonalConsumptionExpenditures”https://research.stlouisfed.org/fred2/series/PCE#

17. Federal Reserve Bank of St. Louis, 09/2015, “TradeWeightedU.S.DollarIndex:Broad”https://research.stlouisfed.org/fred2/series/TWEXBMTH#

18. Federal Reserve Bank of St. Louis, 03/2015,“UnemploymentRate”https://research.stlouisfed.org/fred2/series/LRUN64TTUSM156N#

19. “Consumer and Commercial Drone Market $mm,”GoldmanSachsGlobalInvestmentResearchhttp://www.marketwatch.com/story/these-charts-show-why-gopro-has-a-shot-at-dominating-the-drone-market-2015-07-14

20. YahooFinance,GarminAnalystEstimates

http://finance.yahoo.com/q/ae?s=GRMN+Analyst+Estimates

21. GarminDividendHistoryhttp://www.nasdaq.com/symbol/grmn/dividend-history

22. RockwellCollins2014AnnualReporthttp://www3.rockwellcollins.com/annualreport/2014/ceo_message.html

23. “Defenseoutlaysand forecast in theUnitedStates”,USCongressionalBudgetOfficehttp://www.statista.com.proxy.lib.uiowa.edu/statistics/217577/outlays-for-defense-and-forecast-in-the-us/

24. “Fitbit dominance not threatened by Apple andJawbone,”JenniferBooton,July13,2015http://www.marketwatch.com/story/fitbit-dominance-not-threatened-by-apple-and-jawbone-threats-2015-07-13

25. “Share of cars or vans with satellite navigationtechnology in Europe between 2009 and 2013”,Statista2015http://www.statista.com/statistics/315395/distribution-of-vehicles-with-gps-in-england-united-kingdom/

IMPORTANTDISCLAIMER

HenryFundreportsarecreatedbystudentenrolledintheAppliedSecuritiesManagement(HenryFund)programatthe University of Iowa’s Tippie School of Management.These reports are intended to provide potentialemployersandotherinterestedpartiesanexampleoftheanalytical skills, investment knowledge, andcommunication abilities of Henry Fund students. HenryFund analysts are not registered investment advisors,brokers or officially licensed financial professionals. Theinvestment opinion contained in this report does notrepresentanofferorsolicitationtobuyorsellanyoftheaforementionedsecurities.Unlessotherwisenoted,factsand figures included in this report are from publiclyavailable sources. This report is not a completecompilation of data, and its accuracy is not guaranteed.From time to time, the University of Iowa, its faculty,staff, students, or the Henry Fund may hold a financialinterestinthecompaniesmentionedinthisreport.

GarminInternationalRevenueDecomposition

FiscalYearsEnding31-Dec 2012 2013 2014 2015E 2016E 2017E 2018E 2019E

Outdoor 401,747 410,989 427,555 440382 453593 467201 481217 495653Fitness 321,788 356,283 568,440 630968 700375 763409 816847 874027Marine 208,136 222,928 248,371 275692 292233 301000 310030 319331Automotive/Mobile 1,492,440 1,302,314 1,240,377 1054320 938345 853894 777044 722651Aviation 291,564 339,337 385,915 401352 417406 434102 451466 469525TotalRevenue 2,715,675 2,631,851 2,870,658 2,802,714 2,801,952 2,819,606 2,836,604 2,881,186

Outdoor 14.79% 15.62% 14.89% 15.71% 16.19% 16.57% 16.96% 17.20%Fitness 11.85% 13.54% 19.80% 22.51% 25.00% 27.08% 28.80% 30.34%Marine 7.66% 8.47% 8.65% 9.84% 10.43% 10.68% 10.93% 11.08%Automotive/Mobile 54.96% 49.48% 43.21% 37.62% 33.49% 30.28% 27.39% 25.08%Aviation 10.74% 12.89% 13.44% 14.32% 14.90% 15.40% 15.92% 16.30%%TotalRevenue 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00%

OutdoorGrowthRate 10.61% 2.30% 4.03% 3.00% 3.00% 3.00% 3.00% 3.00%FitnessGrowthRate 7.92% 10.72% 59.55% 11.00% 11.00% 9.00% 7.00% 7.00%MarineGrowthRate -6.13% 7.11% 11.41% 11.00% 6.00% 3.00% 3.00% 3.00%Automotive/MobileGrowthRate -6.17% -12.74% -4.76% -15.00% -11.00% -9.00% -9.00% -7.00%AviationGrowthRate 2.36% 16.39% 13.73% 4.00% 4.00% 4.00% 4.00% 4.00%TotalRevenueGrowthRate -1.55% -3.09% 9.07% -2.37% -0.03% 0.63% 0.60% 1.57%

GrossProfitOutdoor 260,564 262,529 266,550 268,633 267,620 275,649 283,918 292,436Fitness 204,615 222,925 358,287 391,200 427,229 458,045 481,940 506,935Marine 125,201 115,091 129,710 143,360 151,961 156,520 161,216 166,052Automotive/Mobile 642,913 565,083 569,452 453,358 403,488 367,174 334,129 310,740Aviation 205,187 241,672 280,413 280,946 292,184 303,871 316,026 328,667TotalGrossProfit 1,438,480 1,407,300 1,604,412 1,537,497 1,542,482 1,561,260 1,577,229 1,604,830

Outdoor 64.86% 63.88% 62.34% 61.00% 59.00% 59.00% 59.00% 59.00%Fitness 63.59% 62.57% 63.03% 62.00% 61.00% 60.00% 59.00% 58.00%Marine 60.15% 51.63% 52.22% 52.00% 52.00% 52.00% 52.00% 52.00%Automotive/Mobile 43.08% 43.39% 45.91% 43.00% 43.00% 43.00% 43.00% 43.00%Aviation 70.37% 71.22% 72.66% 70.00% 70.00% 70.00% 70.00% 70.00%TotalGrossProfitMargin 52.97% 53.47% 55.89% 54.86% 55.05% 55.37% 55.60% 55.70%

R&DExpenseOutdoor 20,606 24,469 29,747 35,231 36,287 32,704 33,685 34,696Fitness 23,543 27,757 39,252 56,787 63,034 53,439 57,179 61,182Marine 42,857 46,585 48,150 57,895 61,369 58,695 60,456 62,270Automotive/Mobile 128,661 136,639 134,774 115,975 103,218 93,928 85,475 79,492Aviation 110,106 129,473 143,198 156,527 162,788 160,618 167,042 173,724TotalR&DExpense 325,773 364,923 395,121 422,415 426,696 399,384 403,838 411,363

R&Dexpenseas%ofsegmentrevenueOutdoor 5.13% 5.95% 6.96% 8.00% 8.00% 7.00% 7.00% 7.00%Fitness 7.32% 7.79% 6.91% 9.00% 9.00% 7.00% 7.00% 7.00%Marine 20.59% 20.90% 19.39% 21.00% 21.00% 19.50% 19.50% 19.50%Automotive/Mobile 8.62% 10.49% 10.87% 11.00% 11.00% 11.00% 11.00% 11.00%Aviation 37.76% 38.15% 37.11% 39.00% 39.00% 37.00% 37.00% 37.00%

SG&AExpenseOutdoor 54,535 59,058 57,098 59,452 61,235 63,072 64,964 66,913Fitness 43,943 50,765 75,747 91,490 101,554 110,694 118,443 126,734Marine 33,540 38,578 42,975 48,246 51,141 52,675 54,255 55,883Automotive/Mobile 220,669 187,449 172,754 158,148 150,135 136,623 124,327 115,624Aviation 17,103 19,590 23,458 22,074 25,044 26,046 27,088 28,171TotalSG&AExpense 369,790 355,440 372,032 379,410 389,110 389,111 389,077 393,326

SG&AExpenseas%ofsegmentrevenueOutdoor 13.57% 14.37% 13.35% 13.50% 13.50% 13.50% 13.50% 13.50%Fitness 13.66% 14.25% 13.33% 14.50% 14.50% 14.50% 14.50% 14.50%Marine 16.11% 17.31% 17.30% 17.50% 17.50% 17.50% 17.50% 17.50%Automotive/Mobile 14.79% 14.39% 13.93% 15.00% 16.00% 16.00% 16.00% 16.00%Aviation 5.87% 5.77% 6.08% 5.50% 6.00% 6.00% 6.00% 6.00%

AdvertisingExpenseOutdoor 20,812 19,805 28,650 30,827 36,287 37,376 38,497 39,652Fitness 25,322 24,153 52,606 75,716 98,052 106,877 114,359 122,364Marine 14,804 11,435 12,353 13,785 14,612 15,050 15,502 15,967Automotive/Mobile 72,817 52,478 46,245 42,173 37,534 34,156 31,082 28,906Aviation 5,002 5,034 6,779 8,027 8,348 8,682 9,029 9,390TotalAdvertisingExpense 138,757 112,905 146,633 170,527 194,834 202,141 208,469 216,279

AdvertisingExpenseas%ofsegmentrevenueOutdoor 5.18% 4.82% 6.70% 7.00% 8.00% 8.00% 8.00% 8.00%Fitness 7.87% 6.78% 9.25% 12.00% 14.00% 14.00% 14.00% 14.00%Marine 7.11% 5.13% 4.97% 5.00% 5.00% 5.00% 5.00% 5.00%Automotive/Mobile 4.88% 4.03% 3.73% 4.00% 4.00% 4.00% 4.00% 4.00%Aviation 1.72% 1.48% 1.76% 2.00% 2.00% 2.00% 2.00% 2.00%

OperatingIncomeOutdoor 164,611 159,197 151,055 143,124 133,810 142,496 146,771 151,174Fitness 111,807 120,250 190,682 167,207 164,588 187,035 191,959 196,656Marine 34,000 18,493 26,232 23,434 24,840 30,100 31,003 31,933Automotive/Mobile 220,766 188,517 215,679 137,062 112,601 102,467 93,245 86,718Aviation 72,976 87,575 106,978 94,318 96,003 108,525 112,866 117,381TotalOperatingIncome 604,160 574,032 690,626 565,144 531,843 570,624 575,845 583,863

Outdoor 40.97% 38.74% 35.33% 32.50% 29.50% 30.50% 30.50% 30.50%Fitness 34.75% 33.75% 33.54% 26.50% 23.50% 24.50% 23.50% 22.50%Marine 16.34% 8.30% 10.56% 8.50% 8.50% 10.00% 10.00% 10.00%Automotive/Mobile 14.79% 14.48% 17.39% 13.00% 12.00% 12.00% 12.00% 12.00%Aviation 25.03% 25.81% 27.72% 23.50% 23.00% 25.00% 25.00% 25.00%TotalOperatingMargin 22.25% 21.81% 24.06% 20.16% 18.98% 20.24% 20.30% 20.26%

DomesticRevenue% 55.7% 54.4% 53.6% 57.9% 57.9% 57.9% 57.9% 57.9%InternationalRevenue% 44.3% 45.6% 46.4% 42.1% 42.1% 42.1% 42.1% 42.1%

GarminInternationalIncomeStatement

FiscalYearsEnding31-Dec 2012 2013 Q1 Q2 Q3 Q4 2014 Q1 Q2 Q3E Q4E 2015E Q1E Q2E Q3E Q4E 2016E 2017E 2018E 2019ENet sales 2,715,675 2,631,851 583,221 777,848 706,283 803,306 2,870,658 585,394 773,830 679,690 763,800 2,802,714 560,390 749,522 686,478 805,561 2,801,952 2,819,606 2,836,604 2,881,186Cost of goods sold 1,186,728 1,145,747 252,387 333,363 308,037 295,444 1,189,231 241,272 354,580 300,607 301,442 1,197,901 252,008 336,010 312,009 300,009 1,200,036 1,198,294 1,196,705 1,211,706Depreciation & Amortization 90,467 78,804 16,345 21,589 19,949 19,133 77,015 13,558 19,926 16,893 16,939 67,316 12,481 16,641 15,453 14,858 59,434 60,052 62,670 64,650Gross profit (loss) 1,438,480 1,407,300 330,834 444,485 398,246 507,862 1,604,412 330,564 399,324 362,190 445,418 1,537,497 295,902 396,871 359,016 490,694 1,542,482 1,561,260 1,577,229 1,604,830

Research & development expense 325,773 364,923 96,164 98,404 98,998 101,555 395,121 106,002 109,240 105,789 101,384 422,415 103,474 106,674 106,674 109,874 426,696 399,384 403,838 411,363Selling, general & administrative expenses 369,790 355,440 89,873 92,409 90,632 99,118 372,032 98,750 97,552 94,057 89,051 379,410 94,165 96,499 94,554 103,892 389,110 389,111 389,077 393,326Advertising expenses 138,757 112,905 24,428 34,918 33,112 54,175 146,633 27,672 45,794 36,887 60,174 170,527 32,148 46,760 44,812 71,114 194,834 202,141 208,469 216,279Total operating expenses 834,320 833,268 210,465 225,731 222,742 254,848 913,786 232,424 252,586 236,733 250,610 972,353 229,786 249,933 246,039 284,881 1,010,640 990,635 1,001,384 1,020,968

Operating income (loss) 604,160 574,032 120,369 218,754 175,504 253,014 690,626 98,140 146,738 125,457 194,808 565,144 66,116 146,937 112,977 205,813 531,843 570,624 575,845 583,863

Interest income 35,108 35,271 9,768 9,670 9,344 6,802 35,584 8,024 7,420 6,851 5,421 27,716 7,229 6,750 6,571 6,482 27,032 26,859 27,279 27,818Interest expense 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0Other income (expenses), net 5,282 8,717 -484 674 517 1,127 1,834 738 -39 2,010 483 3,192 75 457 292 577 1,401 1,410 1,418 1,441Foreign currency expense -20,022 35,538 12,814 -20,378 -12,703 15,968 -4,299 -44,264 -487 30,573 0 -14,178 0 0 0 0 0 0 0 0Total other income (expense), net 20,368 79,526 22,098 -10,034 -2,842 23,897 33,119 -35,502 6,894 39,434 5,904 16,730 7,304 7,208 6,863 7,059 28,433 28,269 28,697 29,258

Income (loss) before income taxes 624,528 653,558 142,467 208,720 172,662 276,911 723,745 62,638 153,632 164,891 200,712 581,874 73,420 154,145 119,839 212,872 560,275 598,893 604,542 613,121

Total income tax provision 82,125 41,146 23,649 26,737 319,496 -10,348 359,534 9,403 35,805 45,592 -6,032 84,768 10,696 22,456 17,458 31,011 81,621 87,247 88,070 89,320

Net income (loss) 542,403 612,412 118,818 181,983 -146,834 287,259 364,211 53,235 117,827 119,299 206,744 497,106 62,724 131,689 102,381 181,860 478,654 511,646 516,472 523,801

Weighted average shares outstanding - basic 194,909 195,411 195,090 193,771 192,239 -387,994 193,106 191,762 191,101 191,400 191,400 191,400 190,615 190,615 190,615 190,615 190,615 189,797 188,938 188,151Net income (loss) per share - basic 2.78 3.13 0.61 0.94 -0.76 1.1 1.89 0.28 0.62 0.63 1.08 2.60 0.33 0.69 0.54 0.95 2.51 2.70 2.73 2.78

Dividends per common share 1.75 1.8 0.45 0.48 0.48 0.48 1.89 0.48 0.51 0.51 0.51 2.01 0.51 0.51 0.51 0.51 2.04 2.13 2.16 2.25

GarminInternationalBalanceSheet

FiscalYearsEnding31-Dec 2,012 2,013 2,014 2015E 2016E 2017E 2018E 2019EASSETSCash & cash equivalents 1,231,180 1,179,149 1,196,268 1,112,094 1,078,944 1,080,689 1,093,408 1,108,552Marketable securities 153,083 149,862 167,989 169,669 171,366 175,650 180,041 184,542

Accounts receivable, gross 634,269 584,953 588,521 574,556 588,410 606,215 624,053 633,861Less: allowance for doubtful accounts 30,596 20,367 18,330 20,109 20,594 21,218 21,842 22,185Accounts receivable, net 603,673 564,586 570,191 554,447 567,816 584,998 602,211 611,676

Inventories 389,931 382,226 420,475 406,394 406,283 408,843 411,308 417,772

Loan receivable 0 137,379 0 0 0 0 0 0Prepaid expenses & other current assets 35,520 55,243 48,615 47,646 47,633 47,933 48,222 48,980

Total current assets 2,413,387 2,468,445 2,403,538 2,290,249 2,272,041 2,298,112 2,335,190 2,371,522

Marketable securities 1,488,312 1,502,106 1,407,344 1,421,417 1,435,632 1,471,522 1,508,310 1,546,018Restricted cash 836 249 308 308 308 308 308 308

Property & equipment, gross 759,738 796,280 859,596 944,596 1,004,598 1,064,513 1,124,348 1,184,933Less: accumulated depreciation 349,987 381,432 428,709 475,987 527,940 583,192 641,741 703,580Property & equipment, net 409,751 414,848 430,887 468,609 476,658 481,320 482,607 481,353

Goodwill 176,059 179,290 178,638 178,638 178,638 178,638 178,638 178,638Intangible assets 56,538 40,204 39,445 19,407 11,926 7,127 3,005 194License agreements & other Assets 15,229 17,789 21,853 22,422 22,416 22,557 22,693 23,049

Total Deferred Taxes (Assets - Liabilities) 159,906 155,400 66,644 161,059 155,081 165,770 167,333 169,708

Total assets 4,720,018 4,778,331 4,548,657 4,562,110 4,552,699 4,625,354 4,698,085 4,770,791

LIABILITIES AND STOCKHOLDERS' EQUITYLiabilities:Accounts payable 131,263 146,582 149,094 148,544 148,503 149,439 150,340 152,703

Accrued warranty costs 37,301 26,767 27,609 28,027 28,020 28,196 28,366 28,812Accrued sales program costs 57,080 50,903 58,934 56,054 56,039 56,392 56,732 57,624Income taxes payable 32,031 38,043 182,260 102,384 40,811 43,624 44,035 44,660Salaries & benefits payable 55,969 59,794 62,764 61,660 61,643 62,031 62,405 63,386Accrued royalty costs 71,745 64,538 51,889 47,646 44,831 42,294 42,549 43,218Accrued advertising expense 25,192 19,448 26,334 26,637 26,629 26,797 26,959 27,382Other accrued expenses 69,806 65,657 67,780 63,538 63,521 63,921 64,306 65,317Dividend payable 175,932 175,675 185,326 185,326 185,326 185,326 185,326 185,326

Total current liabilities 656,319 647,407 811,990 719,815 655,323 658,020 661,018 668,428

Total Deferred Revenue 349,115 329,395 251,252 336,326 336,234 338,353 340,392 345,742Non-current income taxes 181,754 140,933 80,611 21,192 20,405 21,812 22,018 22,330Other liabilities 1,034 890 1,437 1,267 1,267 1,275 1,282 1,303

Total Liabilities 1,188,222 1,118,625 1,145,290 1,078,600 1,013,229 1,019,460 1,024,711 1,037,803

Stockholders' Equity:Common stock and Additional Paid in Capital 1,869,897 1,876,698 1,870,956 1,877,873 1,884,789 1,884,789 1,884,789 1,884,789Treasury stock 81,280 120,620 330,132 370,132 410,132 450,132 490,132 530,132Retained earnings 1,604,625 1,865,587 1,859,972 1,973,198 2,062,242 2,168,667 2,276,146 2,375,761Accumulated other comprehensive gain (loss) 138,554 38,041 2,571 2,571 2,571 2,571 2,571 2,571

Total stockholders' equity 3,531,796 3,659,706 3,403,367 3,483,509 3,539,470 3,605,895 3,673,374 3,732,989

TotalLiabilitesandStockholders'Equity 4,720,018 4,778,331 4,548,657 4,562,110 4,552,699 4,625,354 4,698,085 4,770,791

GarminInternationalCashFlowStatement

FiscalYearsEnding31-Dec 2010 2011 2012 2013 2014Cash flows from operating activities:Net income (loss) 584,603 520,896 542,403 612,412 364,211Depreciation 53,487 54,610 52,632 48,476 48,433Amortization 41,164 39,925 37,835 30,328 28,582Loss (gain) on sale of property & equipment -306 -2,192 -367 -724 -306Provision for doubtful accounts -4,476 2,317 4,678 1,553 66Provision for obsolete & slow-moving inventories 5,753 16,047 11,003 20,891 25,903Unrealized foreign currency losses (gains) 62,770 18,583 40,042 -40,120 573Deferred income taxes -471 -42,475 -32,080 7,931 89,828Stock compensation 40,332 40,212 29,274 22,592 24,293Realized loss (gains) on marketable securities 2,382 -4,322 -2,980 -5,877 -505Account receivable 129,698 169,543 9,077 38,589 -27,398Inventories -77,122 -6,385 3,997 -17,593 -76,491Other current & non-current assets 0 0 39,717 -22,013 627Prepaid expenses & other current assets 9,886 -51,423 0 0 0License fees -3,329 -9,573 0 0 0Accounts payable -81,354 -26,329 -38,929 18,043 8,981Accrued expenses 0 0 0 0 0Other current & non-current liabilities -144,476 -61,103 -33,235 -31,775 16,467Deferred revenue 131,303 179,439 67,931 -16,150 -87,543Deferred costs -31,445 -36,120 -15,441 -2,204 11,029Income taxes payable 52,238 20,684 -30,812 -34,275 95,961Net cash flows from operating activities 770,637 822,334 684,745 630,084 522,711

Cash flows from investing activities:Purchases of property & equipment -32,232 -38,366 -38,445 -56,083 -73,339Proceeds from sale of property & equipment 139 4,127 757 885 748Purchase of intangible assets -3,883 -6,933 -6,783 -1,122 -4,720Purchase of marketable securities -694,038 -1,172,555 -1,429,593 -909,151 -1,006,482Sales of marketable securities 0 0 0 0 0Redemption of marketable securities 668,495 779,213 985,598 833,491 1,096,676Advances under loan receivable commitment 0 0 0 -137,369 137,379Acquisitions, net of cash acquired -12,120 -54,190 -7,697 -5,680 -18,871Change in restricted cash 770 506 -65 587 -59Net cash flows from investing activities -72,869 -488,198 -496,228 -274,442 131,332

Cash flows from financing activities:Dividends -298,853 -310,763 -253,386 -351,707 -360,075Tax benefit related to equity awards 4,495 3,313 -516 4,584 -84Proceeds from issue of common stock through stock purchase plan 0 0 0 0 0Issuance of treasury/common stock related to equity awards 9,465 22,337 22,798 22,770 20,753Purchase of treasury/common stock -225,928 -22,300 -18,745 -24,063 -18,638Purchase of treasury stock under share repurchase plan 0 0 0 -58,422 -241,578Net cash flows from financing activities -510,821 -307,413 -249,849 -406,838 -599,622

Effect of exchange rate changes on cash & cash equivalents -17,592 -499 5,352 -835 -37,302Net increase (decrease) in cash & cash equivalents 169,355 26,224 -55,980 -52,031 17,119

Cash & cash equivalents at beginning of year 1,091,581 1,260,936 1,287,160 1,231,180 1,179,149Cash & cash equivalents at end of year 1,260,936 1,287,160 1,231,180 1,179,149 1,196,268Cash paid during the year for income taxes 43,940 85,231 127,509 73,372 175,465Cash paid during the year for interest 1,246 0 0 3,584 5,260

GarminInternationalForecastedCashFlowStatement

FiscalYearsEnding31-Dec 2015E 2016E 2017E 2018E 2019E

Cashflowsfromoperatingactivities:Net income (loss) 497,106 478,654 511,646 516,472 523,801Add: Depreciation 47,278 51,953 55,253 58,548 61,839Add: Amortization 20,038 7,481 4,799 4,122 2,811Changes in:Accounts Receivable Net 15,744 -13,369 -17,182 -17,213 -9,465Inventories 14,081 110 -2,560 -2,465 -6,464Loan receivable 0 0 0 0 0Prepaid expenses & other current assets 969 13 -300 -289 -758License agreements & other Assets -569 6 -141 -136 -357Total Deferred Taxes (Assets - Liabilities) -94,415 5,978 -10,689 -1,563 -2,375Accounts payable -550 -40 936 901 2363Accrued warranty costs 418 -8 177 170 446Accrued sales program costs -2880 -15 353 340 892Income taxes payable -79876 -61573 2813 411 625Salaries & benefits payable -1104 -17 388 374 981Accrued royalty costs -4243 -2815 -2537 255 669Accrued advertising expense 303 -7 168 162 424Other accrued expenses -4242 -17 400 385 1011Dividend payable 0 0 0 0 0Total Deferred Revenue 85074 -91 2118 2040 5350Non-current income taxes -59419 -787 1406 206 312Other liabilities -170 0 8 8 20

Net cash flows from operating activities 433,543 465,456 547,056 562,727 582,124

Cash flows from investing activities:Short-term marketable securities -1,680 -1,697 -4,284 -4,391 -4,501Long-term marketable securities -14,073 -14,214 -35,891 -36,788 -37,708Restricted cash 0 0 0 0 0Property & equipment, gross -85,000 -60,002 -59,915 -59,835 -60,585Goodwill 0 0 0 0 0

Net cash flows from investing activities -100,753 -75,913 -100,090 -101,015 -102,794

Cash flows from financing activities:Payment of cash dividend -383,880 -389,610 -405,222 -408,993 -424,186Treasury Stock -40,000 -40,000 -40,000 -40,000 -40,000Common Stock and Additional paid-in capital 6,917 6,917 0 0 0Accumulated other comprehensive income 0 0 0 0 0

Net cash flows from financing activities -416,964 -422,693 -445,222 -448,993 -464,186

Cash flows from all activities:Net increase (decrease) in cash & cash equivalents -84,174 -33,150 1,745 12,720 15,144

Cash & cash equivalents, beginning of year 1,196,268 1,112,094 1,078,944 1,080,689 1,093,408Cash & cash equivalents, end of year 1,112,094 1,078,944 1,080,689 1,093,408 1,108,552

GarminInternationalCommonSizeIncomeStatement

FiscalYearsEnding31-Dec 2012 2013 Q1 Q2 Q3 Q4 2014 Q1 Q2 Q3E Q4E 2015E Q1E Q2E Q3E Q4E 2016E 2017E 2018E 2019E

Net sales 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%Cost of goods sold 43.7% 43.5% 43.3% 42.9% 43.6% 36.8% 41.4% 41.2% 45.8% 44.2% 39.5% 42.7% 45.0% 44.8% 45.5% 37.2% 42.8% 42.5% 42.2% 42.1%Depreciation & Amortization 3.3% 3.0% 2.8% 2.8% 2.8% 2.4% 2.7% 2.3% 2.6% 2.5% 2.2% 2.4% 2.2% 2.2% 2.3% 1.8% 2.1% 2.1% 2.2% 2.2%Gross profit (loss) 53.0% 53.5% 56.7% 57.1% 56.4% 63.2% 55.9% 56.5% 51.6% 53.3% 58.3% 54.9% 52.8% 52.9% 52.3% 60.9% 55.1% 55.4% 55.6% 55.7%

Research & development expense 12.0% 13.9% 16.5% 12.7% 14.0% 12.6% 13.8% 18.1% 14.1% 15.6% 13.3% 15.1% 18.5% 14.2% 15.5% 13.6% 15.2% 14.2% 14.2% 14.3%Selling, general & administrative expenses 13.6% 13.5% 15.4% 11.9% 12.8% 12.3% 13.0% 16.9% 12.6% 13.8% 11.7% 13.5% 16.8% 12.9% 13.8% 12.9% 13.9% 13.8% 13.7% 13.7%Advertising expenses 5.1% 4.3% 4.2% 4.5% 4.7% 6.7% 5.1% 4.7% 5.9% 5.4% 7.9% 6.1% 5.7% 6.2% 6.5% 8.8% 7.0% 7.2% 7.3% 7.5%Total operating expenses 30.7% 31.7% 36.1% 29.0% 31.5% 31.7% 31.8% 39.7% 32.6% 34.8% 32.8% 34.7% 41.0% 33.3% 35.8% 35.4% 36.1% 35.1% 35.3% 35.4%

Operating income (loss) 22.2% 21.8% 20.6% 28.1% 24.8% 31.5% 24.1% 16.8% 19.0% 18.5% 25.5% 20.2% 11.8% 19.6% 16.5% 25.5% 19.0% 20.2% 20.3% 20.3%

Interest income 1.3% 1.3% 1.7% 1.2% 1.3% 0.8% 1.2% 1.4% 1.0% 1.0% 0.7% 1.0% 1.3% 0.9% 1.0% 0.8% 1.0% 1.0% 1.0% 1.0%Interest expense 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%Other income (expenses), net 0.2% 0.3% -0.1% 0.1% 0.1% 0.1% 0.1% 0.1% 0.0% 0.3% 0.1% 0.1% 0.0% 0.1% 0.0% 0.1% 0.1% 0.1% 0.1% 0.1%Foreign currency expense -0.7% 1.4% 2.2% -2.6% -1.8% 2.0% -0.1% -7.6% -0.1% 4.5% 0.0% -0.5% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%Total other income (expense), net 0.8% 3.0% 3.8% -1.3% -0.4% 3.0% 1.2% -6.1% 0.9% 5.8% 0.8% 0.6% 1.3% 1.0% 1.0% 0.9% 1.0% 1.0% 1.0% 1.0%

Income (loss) before income taxes 23.0% 24.8% 24.4% 26.8% 24.4% 34.5% 25.2% 10.7% 19.9% 24.3% 26.3% 20.8% 13.1% 20.6% 17.5% 26.4% 20.0% 21.2% 21.3% 21.3%

Total income tax provision 3.0% 1.6% 4.1% 3.4% 45.2% -1.3% 12.5% 1.6% 4.6% 6.7% -0.8% 3.0% 1.9% 3.0% 2.5% 3.8% 2.9% 3.1% 3.1% 3.1%

Net income (loss) 20.0% 23.3% 20.4% 23.4% -20.8% 35.8% 12.7% 9.1% 15.2% 17.6% 27.1% 17.7% 11.2% 17.6% 14.9% 22.6% 17.1% 18.1% 18.2% 18.2%

GarminInternationalCommonSizeBalanceSheet

FiscalYearsEnding31-Dec 2012 2013 2014 2015E 2016E 2017E 2018E 2019EASSETSCash & cash equivalents 45.3% 44.8% 41.7% 39.7% 38.5% 38.3% 38.5% 38.5%Marketable securities 5.6% 5.7% 5.9% 6.1% 6.1% 6.2% 6.3% 6.4%

Accounts receivable, gross 23.4% 22.2% 20.5% 20.5% 21.0% 21.5% 22.0% 22.0%Less: allowance for doubtful accounts 1.1% 0.8% 0.6% 0.7% 0.7% 0.8% 0.8% 0.8%Accounts receivable, net 22.2% 21.5% 19.9% 19.8% 20.3% 20.7% 21.2% 21.2%

Inventories 14.4% 14.5% 14.6% 14.5% 14.5% 14.5% 14.5% 14.5%

Loan receivable 0.0% 5.2% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%Prepaid expenses & other current assets 1.3% 2.1% 1.7% 1.7% 1.7% 1.7% 1.7% 1.7%

Total current assets 88.9% 93.8% 83.7% 81.7% 81.1% 81.5% 82.3% 82.3%

Marketable securities 54.8% 57.1% 49.0% 50.7% 51.2% 52.2% 53.2% 53.7%Restricted cash 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%

Property & equipment, gross 28.0% 30.3% 29.9% 33.7% 35.9% 37.8% 39.6% 41.1%Less: accumulated depreciation 12.9% 14.5% 14.9% 17.0% 18.8% 20.7% 22.6% 24.4%Property & equipment, net 15.1% 15.8% 15.0% 16.7% 17.0% 17.1% 17.0% 16.7%

Goodwill 6.5% 6.8% 6.2% 6.4% 6.4% 6.3% 6.3% 6.2%Intangible assets 2.1% 1.5% 1.4% 0.7% 0.4% 0.3% 0.1% 0.0%License agreements & other Assets 0.6% 0.7% 0.8% 0.8% 0.8% 0.8% 0.8% 0.8%

Total Deferred Taxes (Assets - Liabilities) 5.9% 5.9% 2.3% 5.7% 5.5% 5.9% 5.9% 5.9%

Total assets 173.8% 181.6% 158.5% 162.8% 162.5% 164.0% 165.6% 165.6%

LIABILITIES AND STOCKHOLDERS' EQUITYLiabilities:Accounts payable 4.8% 5.6% 5.2% 5.3% 5.3% 5.3% 5.3% 5.3%

Accrued warranty costs 1.4% 1.0% 1.0% 1.0% 1.0% 1.0% 1.0% 1.0%Accrued sales program costs 2.1% 1.9% 2.1% 2.0% 2.0% 2.0% 2.0% 2.0%Income taxes payable 1.2% 1.4% 6.3% 3.7% 1.5% 1.5% 1.6% 1.6%Salaries & benefits payable 2.1% 2.3% 2.2% 2.2% 2.2% 2.2% 2.2% 2.2%Accrued royalty costs 2.6% 2.5% 1.8% 1.7% 1.6% 1.5% 1.5% 1.5%Accrued advertising expense 0.9% 0.7% 0.9% 1.0% 1.0% 1.0% 1.0% 1.0%Other accrued expenses 2.6% 2.5% 2.4% 2.3% 2.3% 2.3% 2.3% 2.3%Dividend payable 6.5% 6.7% 6.5% 6.6% 6.6% 6.6% 6.5% 6.4%

Total current liabilities 24.2% 24.6% 28.3% 25.7% 23.4% 23.3% 23.3% 23.2%

Total Deferred Revenue 12.9% 12.5% 8.8% 12.0% 12.0% 12.0% 12.0% 12.0%Non-current income taxes 6.7% 5.4% 2.8% 0.8% 0.7% 0.8% 0.8% 0.8%Other liabilities 0.0% 0.0% 0.1% 0.0% 0.0% 0.0% 0.0% 0.0%

Total Liabilities 43.8% 42.5% 39.9% 38.5% 36.2% 36.2% 36.1% 36.0%

Stockholders' Equity: 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%Common stock and Additional Paid in Capital 68.9% 71.3% 65.2% 67.0% 67.3% 66.8% 66.4% 65.4%Treasury stock 3.0% 4.6% 11.5% 13.2% 14.6% 16.0% 17.3% 18.4%Retained earnings 59.1% 70.9% 64.8% 70.4% 73.6% 76.9% 80.2% 82.5%Accumulated other comprehensive gain (loss) 5.1% 1.4% 0.1% 0.1% 0.1% 0.1% 0.1% 0.1%

Total stockholders' equity 130.1% 139.1% 118.6% 124.3% 126.3% 127.9% 129.5% 129.6%

TotalLiabilitesandStockholders'Equity 173.8% 181.6% 158.5% 162.8% 162.5% 164.0% 165.6% 165.6%

GarminInternationalValueDriverEstimation


MarginalTaxRateFederalstatutorytaxrate 35.00% 35.00% 35.00% 35.00% 35.00% 35.00% 35.00% 35.00%Stateincometaxes,netoffederalbenefit 0.33% 0.22% 0.89% 0.89% 0.89% 0.89% 0.89% 0.89%Foreignratedifferential -22.65% -18.56% -21.32% -21.32% -21.32% -21.32% -21.32% -21.32%MarginalTaxRate 12.68% 16.66% 14.57% 14.57% 14.57% 14.57% 14.57% 14.57%

EBITA:Net sales 2,715,675 2,631,851 2,870,658 2,802,714 2,801,952 2,819,606 2,836,604 2,881,186- Cost of sales -1,186,728 -1,145,747 -1,189,231 -1,197,901 -1,200,036 -1,198,294 -1,196,705 -1,211,706- Depreciation & Amortization -90,467 -78,804 -77,015 -67,316 -59,434 -60,052 -62,670 -64,650- Research & development expense -325,773 -364,923 -395,121 -422,415 -426,696 -399,384 -403,838 -411,363- Selling, general & administrative expense -369,790 -355,440 -372,032 -379,410 -389,110 -389,111 -389,077 -393,326- Advertising expense -138,757 -112,905 -146,633 -170,527 -194,834 -202,141 -208,469 -216,279+ImpliedInterestonOperatingLeases 3,799 3,380 4,513 4,607 5,010 5,096 5,146 5,160EBITA 607,959 577,412 695,139 569,751 536,853 575,721 580,991 589,023

Less:AdjustedTaxes:Income tax provision (benefit) 82,125 41,146 359,534 84,768 81,621 87,247 88,070 89,320- Tax Shield on Interest income -4,453 -5,876 -5,184 -4,038 -3,938 -3,913 -3,974 -4,052+ Tax Benefit on Interest expense 0 0 0 0 0 0 0 0+ Tax Shield Other income (expense), net -670 -1,452 -267 -465 -204 -205 -207 -210+ TaxShield Foreign Currency expense 2,539 -5,920 626 2,065 0 0 0 0+TaxShieldonImpliedLeaseInterest 482 563 657 671 730 742 750 752AdjustedTaxes 80,023 28,460 355,367 83,002 78,209 83,871 84,639 85,809

Plus:ChangeinDeferredTaxLiabilities:Deferred income tax provision (benefit) -32,080 7,931 89,828 -94,415 5,978 -10,689 -1,563 -2,375NetChangeinDTLiabilities -32,080 7,931 89,828 -94,415 5,978 -10,689 -1,563 -2,375

NOPLATNOPLAT:EBITA-AdjustedTaxes+ChangeinDT 495,856 556,882 429,600 392,334 464,622 481,160 494,789 500,839

OperatingCurrentAssets:Averageofcashofpeerssince2010 40% 40% 40% 40% 40% 40% 40% 40%xRevenue 2,715,675 2,631,851 2,870,658 2,802,714 2,801,952 2,819,606 2,836,604 2,881,186"Normal"Cash(RevenuexAvg%) 1,086,270 1,052,740 1,148,263 1,121,086 1,120,781 1,127,842 1,134,642 1,152,475Cashandcashequivalents 1,231,180 1,179,149 1,196,268 1,112,094 1,078,944 1,080,689 1,093,408 1,108,552

Lowerof"Normal"CashorActualCash 1,086,270 1,052,740 1,148,263 1,112,094 1,078,944 1,080,689 1,093,408 1,108,552Accounts receivable, net 603,673 564,586 570,191 554,447 567,816 584,998 602,211 611,676Inventories 389,931 382,226 420,475 406,394 406,283 408,843 411,308 417,772Prepaid expenses & other current assets 35,520 55,243 48,615 47,646 47,633 47,933 48,222 48,980OperatingCurrentAssets 2,115,394 2,054,795 2,187,544 2,120,580 2,100,676 2,122,462 2,155,149 2,186,980

OperatingCurrentLiabilities:Accounts payable 131,263 146,582 149,094 148,544 148,503 149,439 150,340 152,703Accrued warranty costs 37,301 26,767 27,609 28,027 28,020 28,196 28,366 28,812Accrued sales program costs 57,080 50,903 58,934 56,054 56,039 56,392 56,732 57,624Income taxes payable 32,031 38,043 182,260 102,384 40,811 43,624 44,035 44,660Salaries & benefits payable 55,969 59,794 62,764 61,660 61,643 62,031 62,405 63,386Accrued royalty costs 71,745 64,538 51,889 47,646 44,831 42,294 42,549 43,218Accrued advertising expense 25,192 19,448 26,334 26,637 26,629 26,797 26,959 27,382Other accrued expenses 69,806 65,657 67,780 63,538 63,521 63,921 64,306 65,317Dividend payable 175,932 175,675 185,326 185,326 185,326 185,326 185,326 185,326OperatingCurrentLiabilities 656,319 647,407 811,990 719,815 655,323 658,020 661,018 668,428

NetPPE:Property & equipment, net 409,751 414,848 430,887 468,609 476,658 481,320 482,607 481,353

PVofOperatingLeases:PVofOperatingLeases 40,283 53,788 54,911 59,718 60,744 61,338 61,502 61,342

OtherOperatingAssets:Intangible assets 56,538 40,204 39,445 19,407 11,926 7,127 3,005 194License agreements & other Assets 15,229 17,789 21,853 22,422 22,416 22,557 22,693 23,049TotalOtherLong-TermOperatingAssets 71,767 57,993 61,298 41,829 34,342 29,684 25,698 23,243

OtherOperatingLiabilities:Total Deferred Revenue 349,115 329,395 251,252 336,326 336,234 338,353 340,392 345,742Non-current income taxes 181,754 140,933 80,611 21,192 20,405 21,812 22,018 22,330Other liabilities 1,034 890 1,437 1,267 1,267 1,275 1,282 1,303TotalOtherLong-TermOperatingLiabilities 531,903 471,218 333,300 358,785 357,906 361,439 363,693 369,375

InvestedCapital:InvestedCapital 1,448,973 1,462,799 1,589,350 1,612,136 1,659,190 1,675,345 1,700,245 1,715,117

ValueDrivers:NOPLAT 495,856 556,882 429,600 392,334 464,622 481,160 494,789 500,839

/BeginningIC 1,590,316 1,448,973 1,462,799 1,589,350 1,612,136 1,659,190 1,675,345 1,700,245ROIC: 31.18% 38.43% 29.37% 24.69% 28.82% 29.00% 29.53% 29.46%

BeginningIC 1,590,316 1,448,973 1,462,799 1,589,350 1,612,136 1,659,190 1,675,345 1,700,245x(ROIC-WACC) 22.03% 29.28% 20.22% 15.54% 19.67% 19.85% 20.38% 20.31%

EP 350,363 424,321 295,774 246,930 317,133 329,366 341,517 345,289

NOPLAT 495,856 556,882 429,600 392,334 464,622 481,160 494,789 500,839-CapEx -141,343 13,826 126,551 22,786 47,054 16,154 24,900 14,872

FCF 637,198 543,057 303,049 369,548 417,568 465,006 469,888 485,967

GarminInternationalWeightedAverageCostofCapital(WACC)Estimation

WACC=Re*(E/V)+Rd*(1-t)*(D/V)+Rpfd*(PFD/V)

CostofEquityRe=Rf+B*(E[Rm]-Rf)

Rf 2.820%

E[Rm]-Rf 4.85%

Beta 1.308

Re 9.16%

CostofdebtRd 8.39%

CostofPreferredStockRpfd 0.00%

MarketValueofEquitySharesoutstanding 191815

SharesPrice 37.44

E $7,181,554

MarketValueofDebtLong-term debt 0

Operating Leases $54,911

D 54,911

MarketValueofPreferredSharesoutstanding 0

PFD 0

MarketValueofFirmV=E+D+PFD $7,236,465

weightofequity 99.24%

weightofdebt 0.76%

weightofpreferred 0.00%

MarginalTaxRate 14.57%

WACC 9.15%

GarminInternationalDiscountedCashFlow(DCF)andEconomicProfit(EP)ValuationModels

KeyInputs:

CVGrowth 1.50%

CVROIC 29.46%

WACC 9.15%

CostofEquity 9.16%


DCFModelPeriod 1 2 3 4

FCF 369,548 417,568 465,006 469,888 485,967

ContinuingValue 6,214,625

PV 338,573 350,502 357,605 331,071 4,378,661

V(operating) 5,756,412

Non-operatingAssets:

ExcessCash 48,005

Short-term marketable securities 167,989

Long-term marketable securities 1,407,344

Restricted cash 308

V(non-operating) 1,623,646

Non-operatingLiabilities:

EmployeeStockOptions 13,996

PVofOperatingLeases 54,911

V(other) 68,908

Debt:

Long-term debt 0

V(debt) 0

V(e) 7,311,150SharesOutstanding 191,815

IntrinsicValueofStock(FYEnd'14) 38.12

EPModelPeriod 1 2 3 4

EconomicProfit 246,930 317,133 329,366 341,517 345,289

ContinuingValue 4,514,379

PV 226,233 266,198 253,294 240,624 3,180,713

NPV 4,167,062

BeginningInvestedCapital(end2014) 1,589,350

V(operating) 5,756,412

Non-operatingAssets:

ExcessCash 48,005

Short-term marketable securities 167,989

Long-term marketable securities 1,407,344

Restricted cash 308

V(non-operating) 1,623,646

Non-operatingLiabilities:

EmployeeStockOptions 13,996

PVofOperatingLeases 54,911

V(other) 68,908

Debt:

Long-term debt 0

V(debt) 0

V(e) 7,311,150SharesOutstanding 191,815

IntrinsicValueofStock(FYEnd'14) 38.12

IntrinsicValueofStock(Today) $41.11

GarminInternationalDividendDiscountModel(DDM)orFundamentalP/EValuationModel


EPS 2.60$ 2.51$ 2.70$ 2.73$ 2.78$

KeyAssumptionsCVgrowth 2.50%CVROE 14.14%CostofEquity 9.16%

FutureCashFlowsP/EMultiple(CVYear) 12.35EPS(CVYear) 2.78$FutureStockPrice 34.39$DividendsPerShare 2.01 2.04 2.13 2.16 2.25FutureCashFlows 34.39

Period 1 2 3 4DiscountedCashFlows 1.84 1.71 1.64 1.52 24.22

IntrinsicValue(FYEnd'14) 30.93$

IntrinsicValueofStock(Today) $33.36

GarminInternationalRelativeValuationModelsPeerComparison

EPS EPSTicker Company Price 2015E 2016E P/E15 P/E16

HAR HarmanInternational $109.90 $6.51 $7.66 16.9 14.3MiTAC MiTACHoldinsCorp. $26.10 $2.10 $2.41 12.4 10.8TNAV TeleNav,Inc $7.40 ($0.68) ($0.28) (10.9) (26.4)FIT FitbitIncClassA $37.92 $0.96 $1.12 39.5 33.9GPRO GoPro,Inc. $25.13 $1.27 $1.40 19.8 18.0HON HoneywellInternationalInc. $104.00 $6.09 $6.55 17.1 15.9COL RockwellCollins,Inc $87.75 $5.28 $5.86 16.6 15.0AAPL AppleInc. $121.06 $9.79 $10.62 12.4 11.4

Average 15.9 14.2

GRMN GarminInternational $37.44 $2.60 $2.51 14.4 14.9

ImpliedValue:RelativeP/E(EPS15) $41.19RelativeP/E(EPS16) 35.73$

GarminInternationalKeyManagementRatios


LiquidityRatiosCurrentAssets 2,413,387 2,468,445 2,403,538 2,290,249 2,272,041 2,298,112 2,335,190 2,371,522/CurrentLiabilities 656,319 647,407 811,990 719,815 655,323 658,020 661,018 668,428=CurrentRatio 3.677 3.813 2.960 3.182 3.467 3.492 3.533 3.548

(CurrentAssets 2,413,387 2,468,445 2,403,538 2,290,249 2,272,041 2,298,112 2,335,190 2,371,522-Inventory) 389,931 382,226 420,475 406,394 406,283 408,843 411,308 417,772/CurrentLiabilities 656,319 647,407 811,990 719,815 655,323 658,020 661,018 668,428=QuickRatio 3.083 3.222 2.442 2.617 2.847 2.871 2.910 2.923

(Cash 1,231,180 1,179,149 1,196,268 1,112,094 1,078,944 1,080,689 1,093,408 1,108,552+(ST&LT)MarketableSecurities+RestrictedCash) 1,642,231 1,652,217 1,575,641 1,591,394 1,607,305 1,647,480 1,688,659 1,730,868/CurrentLiabilities 656,319 647,407 811,990 719,815 655,323 658,020 661,018 668,428=CashRatio 4.378 4.373 3.414 3.756 4.099 4.146 4.209 4.248

ActivityorAsset-ManagementRatiosAnnualSales 2,715,675 2,631,851 2,870,658 2,802,714 2,801,952 2,819,606 2,836,604 2,881,186/AverageAccountsReceivable 605,562 584,130 567,389 562,319 561,131 576,407 593,604 606,943ReceivablesTurnover 4.48 4.51 5.06 4.98 4.99 4.89 4.78 4.75

365 365 365 365 365 365 365 365 365/ReceivablesTurnover 4.48 4.51 5.06 4.98 4.99 4.89 4.78 4.75AverageCollectionPeriod 81.39 81.01 72.14 73.23 73.10 74.62 76.38 76.89

CostofGoodsSold 1,186,728 1,145,747 1,189,231 1,197,901 1,200,036 1,198,294 1,196,705 1,211,706/AverageInventory 393,836 386,079 401,351 413,434 406,338 407,563 410,075 414,540InventoryTurnover 3.013 2.968 2.963 2.897 2.953 2.940 2.918 2.923

365 365 365 365 365 365 365 365 365/InventoryTurnover 3.013 2.968 2.963 2.897 2.953 2.940 2.918 2.923InventoryPeriod 121.131 122.993 123.183 125.973 123.591 124.144 125.075 124.871

FinancialLeverageRatiosTotalDebt(includesoperatingleases) 40,283 53,788 54,911 59,718 60,744 61,338 61,502 61,342/TotalAssets 4,720,018 4,778,331 4,548,657 4,562,110 4,552,699 4,625,354 4,698,085 4,770,791DebtRatio 0.85% 1.13% 1.21% 1.31% 1.33% 1.33% 1.31% 1.29%

TotalDebt 40,283 53,788 54,911 59,718 60,744 61,338 61,502 61,342/TotalEquity 3,531,796 3,659,706 3,403,367 3,483,509 3,539,470 3,605,895 3,673,374 3,732,989Debt-to-EquityRatio 1.14% 1.47% 1.61% 1.71% 1.72% 1.70% 1.67% 1.64%

ProfitabilityRatios(Sales-COGS) 1,438,480 1,407,300 1,604,412 1,537,497 1,542,482 1,561,260 1,577,229 1,604,830/Sales 2,715,675 2,631,851 2,870,658 2,802,714 2,801,952 2,819,606 2,836,604 2,881,186GrossProfitMargin 52.97% 53.47% 55.89% 54.86% 55.05% 55.37% 55.60% 55.70%

NetIncome 542403 612412 364211 497106 478654 511646 516472 523801/Sales 2715675 2631851 2870658 2802714 2801952 2819606 2836604 2881186NetProfitMargin 19.97% 23.27% 12.69% 17.74% 17.08% 18.15% 18.21% 18.18%

NetIncome 542,403 612,412 364,211 497,106 478,654 511,646 516,472 523,801/AverageTotalAssets 4,549,884 4,749,175 4,663,494 4,555,383 4,557,405 4,589,027 4,661,720 4,734,438ReturnonAssets 11.92% 12.90% 7.81% 10.91% 10.50% 11.15% 11.08% 11.06%

NetIncome 542,403 612,412 364,211 497,106 478,654 511,646 516,472 523,801/AverageShareholderEquity 3,394,189 3,595,751 3,531,537 3,443,438 3,511,490 3,572,682 3,639,634 3,703,181ReturnonEquity 15.98% 17.03% 10.31% 14.44% 13.63% 14.32% 14.19% 14.14%

PayoutPolicyRatiosDividendsperShare $1.75 $1.80 $1.89 $2.01 $2.04 $2.13 $2.16 $2.25/EarningsperShare 2.78 3.13 1.89 2.60 2.51 2.70 2.73 2.78PayoutRatio 62.9% 57.5% 100.0% 77.4% 81.2% 79.0% 79.0% 80.8%

(TotalDividend 341,091 351,740 364,970 384,714 388,855 404,267 408,106 423,340+StockRepurchases) 18,745 82,485 260,216 40,000 40,000 40,000 40,000 40,000/NetIncome 542,403 612,412 364,211 497,106 478,654 511,646 516,472 523,801TotalPayoutRatio 66.34% 70.90% 171.65% 85.44% 89.60% 86.83% 86.76% 88.46%

PresentValueofOperatingLeaseObligations(2014) PresentValueofOperatingLeaseObligations(2013)

Operating OperatingFiscalYearsEnding42004 Leases FiscalYearsEnding42004 Leases2015 16422 2014 154602016 13781 2015 140412017 10469 2016 115472018 8693 2017 83002019 7098 2018 6310Thereafter 14840 Thereafter 14084TotalMinimumPayments 71303 TotalMinimumPayments 69742Less:Interest 16392 Less:Interest 15954PVofMinimumPayments 54911 PVofMinimumPayments 53788

CapitalizationofOperatingLeases CapitalizationofOperatingLeases

Pre-TaxCostofDebt 8.39% Pre-TaxCostofDebt 8.39%NumberYearsImpliedbyYear6Payment 2.1 NumberYearsImpliedbyYear6Payment 2.2

Lease PVLease Lease PVLeaseYear Commitment Payment Year Commitment Payment1 16422 15150.8 1 15460 14263.32 13781 11730.1 2 14041 11951.43 10469 8221.2 3 11547 9067.84 8693 6298.1 4 8300 6013.45 7098 4744.5 5 6310 4217.86&beyond 7098 8766.2 6&beyond 6310 8273.8PVofMinimumPayments 54911.1 PVofMinimumPayments 53787.5

PresentValueofOperatingLeaseObligations(2012) PresentValueofOperatingLeaseObligations(2011)

Operating OperatingFiscalYearsEnding42004 Leases FiscalYearsEnding42004 Leases2013 14340 2012 135492014 12090 2013 122512015 9029 2014 109022016 6659 2015 82112017 3337 2016 5833Thereafter 4292 Thereafter 6423TotalMinimumPayments 49747 TotalMinimumPayments 57169Less:Interest 9464 Less:Interest 11887PVofMinimumPayments 40283 PVofMinimumPayments 45282

CapitalizationofOperatingLeases CapitalizationofOperatingLeases

Pre-TaxCostofDebt 8.39% Pre-TaxCostofDebt 8.39%NumberYearsImpliedbyYear6Payment 1.3 NumberYearsImpliedbyYear6Payment 1.1

Lease PVLease Lease PVLeaseYear Commitment Payment Year Commitment Payment1 14340 13230.0 1 13549 12500.22 12090 10290.8 2 12251 10427.83 9029 7090.4 3 10902 8561.34 6659 4824.5 4 8211 5948.95 3337 2230.5 5 5833 3898.96&beyond 3337 2616.9 6&beyond 5833 3945.1PVofMinimumPayments 40283.2 PVofMinimumPayments 45282.3

EffectsofESOPExerciseandShareRepurchasesonCommonStockBalanceSheetAccountandNumberofSharesOutstanding

NumberofOptionsOutstanding(shares): 4,580AverageTimetoMaturity(years): 2.65ExpectedAnnualNumberofOptionsExercised: 1,726

CurrentAverageStrikePrice: 66.58$CostofEquity: 9.16%CurrentStockPrice: $37.44

1 2 3 4 52015E 2016E 2017E 2018E 2019E

IncreaseinSharesOutstanding: 238.5 238.5 0.0 0 0AverageStrikePrice: 29.00$ 29.00$ 90.01$ -$ -$IncreaseinCommonStockAccount: 6,917 6,917 - - -

ChangeinTreasuryStock -40,000 -40,000 -40,000 -40,000 -40,000ExpectedPriceofRepurchasedShares: 37.44$ 40.87$ 44.62$ 48.70$ 53.17$NumberofSharesRepurchased: (1,068) (979) (897) (821) (752)

SharesOutstanding(beginningoftheyear) 191,815 190,985 190,245 189,348 188,527Plus:SharesIssuedThroughESOP 238.5 238.5 0 0 0Less:SharesRepurchasedinTreasury 1,068 979 897 821 752SharesOutstanding(endoftheyear) 190,985 190,245 189,348 188,527 187,775

VALUATIONOFOPTIONSGRANTEDINESOP

TickerSymbol GRMNCurrentStockPrice $37.44RiskFreeRate 2.82%CurrentDividendYield 1.36%AnnualizedSt.Dev.ofStockReturns 29.17%

Average Average B-S ValueRangeof Number Exercise Remaining Option ofOptionsOutstandingOptions ofShares Price Life(yrs) Price GrantedRange1 477 29.00 1.48 10.28$ 4,901$Range2 1,033 70.01 2.44 1.00$ 1,034$Range3 2 130.01 2.75 0.06$ 0$Range4 1,982 50.01 2.90 3.96$ 7,840$Range5 1,083 110.01 2.92 0.20$ 219$Range6 3 90.01 2.95 0.53$ 2$

Total 4,580 66.58$ 2.65 1.67$ 13,996$

SensitivityAnalysisDCFPrice FitnessSegmentRevenueGrowth2015

$41.11 5.00% 6.50% 8.00% 9.50% 11.00% 12.50% 14.00% 15.50% 17.00%-7.00% $41.03 $41.47 $41.95 $42.44 $42.97 $43.52 $44.11 $44.72 $45.37-9.00% $40.50 $40.95 $41.42 $41.92 $42.45 $43.00 $43.58 $44.20 $44.84-11.00% $40.02 $40.47 $40.94 $41.44 $41.96 $42.52 $43.10 $43.71 $44.36-13.00% $39.57 $40.02 $40.49 $40.99 $41.52 $42.07 $42.65 $43.27 $43.91

AutomotiveSegment -15.00% $39.16 $39.61 $40.08 $40.58 $41.11 $41.66 $42.24 $42.86 $43.50RevenueGrowth2015 -17.00% $38.79 $39.24 $39.71 $40.21 $40.73 $41.28 $41.87 $42.48 $43.12

-19.00% $38.52 $38.95 $39.40 $39.88 $40.39 $40.94 $41.52 $42.13 $42.78-21.00% $38.30 $38.73 $39.18 $39.65 $40.15 $40.67 $41.23 $41.82 $42.47-23.00% $38.10 $38.53 $38.98 $39.45 $39.95 $40.47 $41.02 $41.60 $42.21

DCFPrice CVgrowthofNOPLAT$41.11 0.50% 0.75% 1.00% 1.25% 1.50% 1.75% 2.00% 2.25% 2.50%1.100 $42.79 $43.44 $44.14 $44.89 $45.69 $46.56 $47.50 $48.52 $49.631.150 $41.80 $42.40 $43.04 $43.73 $44.47 $45.26 $46.12 $47.04 $48.041.200 $40.87 $41.42 $42.02 $42.65 $43.33 $44.05 $44.83 $45.67 $46.581.250 $39.99 $40.51 $41.05 $41.64 $42.26 $42.92 $43.64 $44.41 $45.24

Beta 1.308 $39.04 $39.51 $40.01 $40.54 $41.11 $41.71 $42.36 $43.05 $43.801.350 $38.39 $38.83 $39.30 $39.80 $40.32 $40.89 $41.49 $42.14 $42.831.400 $37.65 $38.06 $38.50 $38.96 $39.45 $39.97 $40.52 $41.11 $41.751.450 $36.95 $37.33 $37.74 $38.17 $38.62 $39.10 $39.61 $40.16 $40.741.500 $36.29 $36.65 $37.02 $37.42 $37.84 $38.28 $38.76 $39.26 $39.80

DCFPrice CVgrowthofNOPLAT$41.11 0.50% 0.75% 1.00% 1.25% 1.50% 1.75% 2.00% 2.25% 2.50%7.00% $48.53 $49.52 $50.60 $51.76 $53.04 $54.43 $55.96 $57.66 $59.547.50% $45.79 $46.62 $47.50 $48.45 $49.49 $50.61 $51.84 $53.18 $54.668.00% $43.43 $44.11 $44.85 $45.64 $46.49 $47.41 $48.41 $49.49 $50.678.50% $41.36 $41.94 $42.56 $43.22 $43.93 $44.69 $45.51 $46.39 $47.35

WACC 9.11% $39.16 $39.64 $40.15 $40.68 $41.26 $41.87 $42.52 $43.23 $43.989.50% $37.93 $38.35 $38.79 $39.27 $39.77 $40.31 $40.88 $41.49 $42.1510.00% $36.49 $36.85 $37.23 $37.64 $38.07 $38.53 $39.01 $39.53 $40.0810.50% $35.19 $35.51 $35.84 $36.19 $36.56 $36.95 $37.36 $37.80 $38.2611.00% $34.03 $34.30 $34.59 $34.89 $35.21 $35.55 $35.90 $36.27 $36.67

DCFPrice FitnessR&DExpenseGrowth$41.11 5.00% 6.00% 7.00% 8.00% 9.00% 10.00% 11.00% 12.00% 13.00%5.00% $40.55 $40.17 $39.79 $39.44 $39.16 $38.89 $38.62 $38.34 $38.076.50% $41.08 $40.67 $40.27 $39.90 $39.61 $39.32 $39.02 $38.73 $38.448.00% $41.62 $41.19 $40.77 $40.40 $40.08 $39.77 $39.46 $39.14 $38.83

FitnessSegment 9.50% $42.20 $41.75 $41.30 $40.92 $40.58 $40.25 $39.91 $39.57 $39.24RevenueGrowth2015 11.00% $42.81 $42.33 $41.85 $41.47 $41.11 $40.75 $40.39 $40.03 $39.67

12.50% $43.45 $42.94 $42.44 $42.04 $41.66 $41.28 $40.89 $40.51 $40.1314.00% $44.12 $43.58 $43.06 $42.65 $42.24 $41.83 $41.43 $41.02 $40.6115.50% $44.82 $44.26 $43.73 $43.29 $42.86 $42.42 $41.99 $41.55 $41.1117.00% $45.56 $44.97 $44.43 $43.97 $43.50 $43.04 $42.57 $42.11 $41.65

Garmin Ltd. (GRMN) November 11, 2015 - Tippie College of...

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