Overall Business Down 1% Largely On Automotive Segment Losses

We don't normally get this far down in the weeds on company's quarterly earnings, but Garmin's first quarter trends could be a sign of a recovering economy, and least in some sectors of the aviation industry.

The company posted revenue increases in its aviation segment of 12% or $66 million, according to a report released Wednesday. It also recorded year-over-year growth in both aviation and marine as these markets have begun to show signs of stabilization.

"The first quarter of 2010 provided mixed results but we view the overall trends in the business as positive indicators for the remainder of the year," said Dr. Min Kao, chairman and chief executive officer of Garmin Ltd. "While excess channel inventory led to a decline in the sell-in of PNDs, sell-through trends of our major United States retail partners continued to show year-over-year growth. In addition, we generated strong revenue and margins in our outdoor/fitness, aviation and marine segments which allowed us to post pro forma earnings per share growth of 52% in the quarter.

The aviation segment growth was based in large part on the retrofit market, which improved on a year-over-year basis. While Garmin says they are pleased with this result, recovery in the aviation market will generally lag that of the overall economy. The company continues to invest to achieve its strategic initiatives of expanding presence and long-term growth opportunities in the business jet, helicopter and experimental aircraft markets.

"While top line results for the first quarter reflect some excess inventory challenges at retailers in the PND category, we still expect to achieve our full-year forecast previously provided for both revenues and EPS," said Kevin Rauckman, chief financial officer of Garmin Ltd. "This is a result of a number of trends that we experienced in first quarter 2010. Sell-through of PNDs in the North American market grew and ASPs increased during the first quarter. Outdoor/fitness, aviation and marine delivered solid results with strong first quarter revenues and margins."

FMI: www.garmin.com