Edgar Filing: GARMIN LTD

United States

Securities and Exchange Commission

Washington, D.C. 20549

FORM 10-Q

x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 25, 2016

¨	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _____ to _____

Commission file number 0-31983

________________

GARMIN LTD.

(Exact name of Company as specified in its charter)

Switzerland

(State or other jurisdiction

of incorporation or organization)

98-0229227

(I.R.S. Employer identification no.)

Mühlentalstrasse 2

8200 Schaffhausen

Switzerland

(Address of principal executive offices)

N/A

(Zip Code)

Company's telephone number, including area code: +41 52 630 1600

Indicate by check mark whether the Company (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Company was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES þ NO ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). YES þ NO ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act.

Large Accelerated Filer þ Accelerated Filer ¨ Non-accelerated Filer ¨ (Do not check if a smaller reporting company) Smaller reporting company ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). YES ¨ NO þ

Number of shares outstanding of the registrant’s common shares as of July 25, 2016

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

Garmin Ltd.

Form 10-Q

Quarter Ended June 25, 2016

Table of Contents

		Page
Part I - Financial Information

Item 1.	Condensed Consolidated Financial Statements	3

	Condensed Consolidated Balance Sheets at June 25, 2016 (Unaudited) and December 26, 2015	3

	Condensed Consolidated Statements of Income for the 13-weeks and 26-weeks ended June 25, 2016 and June 27, 2015 (Unaudited)	4

	Condensed Consolidated Statements of Comprehensive Income for the 13-weeks and 26-weeks ended June 25, 2016 and June 27, 2015 (Unaudited)	5

	Condensed Consolidated Statements of Cash Flows for the 26-weeks ended June 25, 2016 and June 27, 2015 (Unaudited)	6

	Notes to Condensed Consolidated Financial Statements (Unaudited)	7

Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	16

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	26

Item 4.	Controls and Procedures	26

Part II - Other Information

Item 1.	Legal Proceedings	27

Item 1A.	Risk Factors	28

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	29

Item 3.	Defaults Upon Senior Securities	29

Item 4.	Mine Safety Disclosures	29

Item 5.	Other Information	29

Item 6.	Exhibits	30

Signature Page		31

Index to Exhibits		32

Part I - Financial Information

Item I - Condensed Consolidated Financial Statements

Garmin Ltd. And Subsidiaries

Condensed Consolidated Balance Sheets

(In thousands, except per share information)

	(Unaudited)
	June 25,			December 26,
	2016			2015
Assets
Current assets:
Cash and cash equivalents	$	801,464		$	833,070
Marketable securities		252,253			215,161
Accounts receivable, net		510,309			531,481
Inventories, net		508,161			500,554
Deferred costs		46,552			49,176
Prepaid expenses and other current assets		93,848			81,645
Total current assets		2,212,587			2,211,087

Property and equipment, net		450,654			446,089

Marketable securities		1,306,159			1,343,387
Restricted cash		257			259
Noncurrent deferred income tax		118,320			116,518
Noncurrent deferred costs		47,535			38,769
Intangible assets, net		303,348			245,552
Other assets		88,723			97,730
Total assets	$	4,527,583		$	4,499,391

Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable	$	151,904		$	178,905
Salaries and benefits payable		68,067			70,601
Accrued warranty costs		34,670			30,449
Accrued sales program costs		49,538			67,613
Deferred revenue		150,587			164,982
Accrued royalty costs		44,213			30,310
Accrued advertising expense		24,534			33,547
Other accrued expenses		77,442			74,926
Income taxes payable		24,714			21,674
Dividend payable		384,760			192,991
Total current liabilities		1,010,429			865,998

Deferred income taxes		54,633			56,210
Non-current income taxes		111,664			101,689
Non-current deferred revenue		130,342			128,731
Other liabilities		1,680			1,637

Stockholders' equity:
Shares, CHF 10 par value, 208,077 shares authorized and issued; 188,877 shares outstanding at June 25, 2016 and 189,722 shares outstanding at December 26, 2015		1,797,435			1,797,435
Additional paid-in capital		73,279			62,239
Treasury stock		(445,268	)		(414,637	)
Retained earnings		1,794,792			1,930,517
Accumulated other comprehensive income		(1,403	)		(30,428	)
Total stockholders' equity		3,218,835			3,345,126
Total liabilities and stockholders' equity	$	4,527,583		$	4,499,391

See accompanying notes.

Garmin Ltd. And Subsidiaries

Condensed Consolidated Statements of Income (Unaudited)

(In thousands, except per share information)

	13-Weeks Ended						26-Weeks Ended
	June 25,			June 27,			June 25,			June 27,
	2016			2015			2016			2015
Net sales	$	811,609		$	773,830		$	1,435,648		$	1,359,224

Cost of goods sold		348,651			354,580			632,840			595,852

Gross profit		462,958			419,250			802,808			763,372

Advertising expense		44,252			45,794			76,485			73,466
Selling, general and administrative expense		103,677			97,552			199,287			196,302
Research and development expense		114,355			109,240			222,559			215,242
Total operating expense		262,284			252,586			498,331			485,010

Operating income		200,674			166,664			304,477			278,362

Other income (expense):
Interest income		8,455			7,420			15,883			15,444
Foreign currency (losses)		(5,743	)		(487	)		(10,582	)		(44,751	)
Other income (loss)		415			(39	)		1,570			698
Total other income (expense)		3,127			6,894			6,871			(28,609	)

Income before income taxes		203,801			173,558			311,348			249,753

Income tax provision		42,737			35,805			62,193			45,208

Net income	$	161,064		$	137,753		$	249,155		$	204,545

Net income per share:
Basic	$	0.85		$	0.72		$	1.32		$	1.07
Diluted	$	0.85		$	0.72		$	1.31		$	1.07

Weighted average common shares outstanding:
Basic		188,892			191,101			189,195			191,432
Diluted		189,356			191,600			189,491			191,939

Dividends declared per share	$	2.04		$	2.04		$	2.04		$	2.04

See accompanying notes.

Garmin Ltd. And Subsidiaries

Condensed Consolidated Statements of Comprehensive Income (Unaudited)

(In thousands)

	13-Weeks Ended					26-Weeks Ended
	June 25,		June 27,			June 25,		June 27,
	2016		2015			2016		2015
Net income	$	161,064	$	137,753		$	249,155	$	204,545
Foreign currency translation adjustment		5,896		17,716			12,162		20,471
Change in fair value of available-for-sale marketable securities, net of deferred taxes		7,565		(10,216	)		16,864		1,033
Comprehensive income	$	174,525	$	145,253		$	278,181	$	226,049

See accompanying notes.

Garmin Ltd. And Subsidiaries

Condensed Consolidated Statements of Cash Flows (Unaudited)

(In thousands)

	26-Weeks Ended
	June 25,			June 27,
	2016			2015
Operating Activities:
Net income	$	249,155		$	204,545
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation		26,657			24,915
Amortization		14,852			13,215
Loss on sale or disposal of property and equipment		64			420
Provision for doubtful accounts		1,548			(1,499	)
Deferred income taxes		(6,074	)		(9,325	)
Unrealized foreign currency loss		3,198			59,046
Provision for obsolete and slow moving inventories		15,892			6,569
Stock compensation expense		19,507			14,742
Realized gain on marketable securities		(188	)		(364	)
Changes in operating assets and liabilities:
Accounts receivable		24,415			60,016
Inventories		(16,672	)		(45,635	)
Other current and non-current assets		(865	)		(74,725	)
Accounts payable		(32,291	)		(7,084	)
Other current and non-current liabilities		(10,806	)		(53,808	)
Deferred revenue		(13,066	)		(38,836	)
Deferred cost		(6,089	)		6,892
Income taxes payable		10,135			(174,788	)
Net cash provided by (used in) operating activities		279,372			(15,704	)

Investing activities:
Purchases of property and equipment		(28,614	)		(39,732	)
Proceeds from sale of property and equipment		-			665
Purchase of intangible assets		(2,831	)		(1,939	)
Purchase of marketable securities		(457,433	)		(480,090	)
Redemption of marketable securities		466,526			540,785
Change in restricted cash		2			29
Acquisitions, net of cash acquired		(62,137	)		(12,632	)
Net cash (used in) provided by investing activities		(84,487	)		7,086

Financing activities:
Dividends paid		(193,111	)		(183,925	)
Purchase of treasury stock under share repurchase plan		(45,097	)		(57,295	)
Purchase of treasury stock related to equity awards		(173	)		(240	)
Proceeds from issuance of treasury stock related to equity awards		8,970			8,560
Tax benefit from issuance of equity awards		2			1,239
Net cash used in financing activities		(229,409	)		(231,661	)

Effect of exchange rate changes on cash and cash equivalents		2,918			(17,806	)

Net decrease in cash and cash equivalents		(31,606	)		(258,085	)
Cash and cash equivalents at beginning of period		833,070			1,196,268
Cash and cash equivalents at end of period	$	801,464		$	938,183

See accompanying notes.

Garmin Ltd. and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Unaudited)

June 25, 2016

(In thousands, except per share information)

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Additionally, the condensed consolidated financial statements should be read in conjunction with Item 2 of Management's Discussion and Analysis of Financial Condition and Results of Operations, included in this Form 10-Q. Operating results for the 13-week and 26-week periods ended June 25, 2016 are not necessarily indicative of the results that may be expected for the year ending December 31, 2016.

The condensed consolidated balance sheet at December 26, 2015 has been derived from the audited financial statements at that date but does not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. For further information, refer to the consolidated financial statements and footnotes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 26, 2015.

The Company’s fiscal year is based on a 52-53 week period ending on the last Saturday of the calendar year. Therefore the financial results of certain 53-week fiscal years, and the associated 14-week quarters, will not be exactly comparable to the prior and subsequent 52-week fiscal years and the associated 13-week quarters. The quarters ended June 25, 2016 and June 27, 2015 both contain operating results for 13 weeks. The Company’s fiscal quarter and year ending December 31, 2016 will contain operating results for 14 weeks and 53 weeks, respectively.

At the Company’s Annual General Meeting on June 10, 2016, the Company’s shareholders approved the cancellation of 10,000 registered shares of the Company held by the Company (the “Formation Shares”) and the reduction in par value of each share of the Company from CHF 10 to CHF 0.10 and the amendment of the Company’s Articles of Association to effect a corresponding share capital reduction. The Company expects to complete the cancellation of the Formation Shares and the reduction in par value of each share and the corresponding reduction of the Company’s issued share capital by the end of the third quarter of 2016.

Inventories

The components of inventories consist of the following:

	June 25,			December 26,
	2016			2015

Raw materials	$	167,889		$	203,173
Work-in-process		75,985			69,690
Finished goods		309,898			273,762
Inventory reserves		(45,611	)		(46,071	)
Inventory, net of reserves	$	508,161		$	500,554

Earnings Per Share

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

	13-Weeks Ended
	June 25,		June 27,
	2016		2015
Numerator:
Numerator for basic and diluted net income per share - net income	$	161,064	$	137,753

Denominator:
Denominator for basic net income per share – weighted-average common shares		188,892		191,101

Effect of dilutive securities –
stock options, stock appreciation rights and restricted stock units		464		499

Denominator for diluted net income per share – adjusted weighted-average common shares		189,356		191,600

Basic net income per share	$	0.85	$	0.72

Diluted net income per share	$	0.85	$	0.72

	26-Weeks Ended
	June 25,		June 27,
	2016		2015
Numerator:
Numerator for basic and diluted net income per share - net income	$	249,155	$	204,545

Denominator:
Denominator for basic net income per share – weighted-average common shares		189,195		191,432

Effect of dilutive securities – stock options, stock appreciation rights and restricted stock units		296		507

Denominator for diluted net income per share – adjusted weighted-average common shares		189,491		191,939

Basic net income per share	$	1.32	$	1.07

Diluted net income per share	$	1.31	$	1.07

There were 3,873 and 3,558 anti-dilutive stock options, stock appreciation rights and restricted stock units (collectively “equity awards”) outstanding during the 13-week periods ended June 25, 2016 and June 27, 2015, respectively.

There were 4,231 and 3,598 anti-dilutive equity awards outstanding during the 26-week periods ended June 25, 2016 and June 27, 2015, respectively.

There were 11 and 91 shares issued as a result of exercises and releases of equity awards for the 13-week periods ended June 25, 2016 and June 27, 2015, respectively.

There were 13 and 128 shares issued as a result of exercises and releases of equity awards for the 26-week periods ended June 25, 2016 and June 27, 2015, respectively.

There were 285 employee stock purchase plan (ESPP) shares issued from outstanding Treasury stock during the 13-week and 26-week periods ended June 25, 2016.

There were 214 ESPP shares issued from outstanding Treasury stock during the 13-week and 26-week periods ended June 27, 2015.

Segment Information

The Company has identified five reportable segments – Auto, Aviation, Marine, Outdoor and Fitness. The Company’s Chief Operating Decision Maker (CODM) assesses segment performance and allocates resources to each segment individually.

Net sales, gross profit, and operating income for each of the Company’s reportable segments are presented below. In 2016 the Company moved action camera related revenue and expenses from the Outdoor segment to the Auto segment, allowing for alignment and synergies with other camera-based efforts occurring within the Auto segment. The overall impact of the move was immaterial. However, action camera related operating results for the 13-weeks and 26-weeks ended June 27, 2015 have been recast to conform to the current year presentation.

	Reportable Segments
	Outdoor		Fitness		Marine		Auto		Aviation		Total

13-Weeks Ended June 25, 2016

Net sales	$	133,096	$	212,855	$	111,599	$	245,728	$	108,331	$	811,609
Gross profit	$	85,224	$	119,805	$	64,515	$	112,988	$	80,426	$	462,958
Operating income	$	48,565	$	53,074	$	28,548	$	39,623	$	30,864	$	200,674

13-Weeks Ended June 27, 2015

Net sales	$	108,621	$	158,649	$	103,713	$	300,581	$	102,266	$	773,830
Gross profit	$	66,019	$	88,458	$	58,577	$	131,933	$	74,263	$	419,250
Operating income	$	37,201	$	33,070	$	23,901	$	45,087	$	27,405	$	166,664

26-Weeks Ended June 25, 2016

Net sales	$	229,923	$	355,273	$	194,479	$	441,326	$	214,647	$	1,435,648
Gross profit	$	144,155	$	192,100	$	108,664	$	199,131	$	158,758	$	802,808
Operating income	$	76,450	$	69,647	$	38,840	$	58,190	$	61,350	$	304,477

26-Weeks Ended June 27, 2015

Net sales	$	181,436	$	289,644	$	168,010	$	519,807	$	200,327	$	1,359,224
Gross profit	$	115,084	$	171,534	$	94,090	$	236,891	$	145,773	$	763,372
Operating income	$	60,730	$	67,709	$	28,468	$	67,870	$	53,585	$	278,362

Allocation of certain research and development expenses, and selling, general, and administrative expenses are made to each segment on a percent of revenue basis.

Net sales and property and equipment, net by geographic area are as follows as of and for the 26-week periods ended June 25, 2016 and June 27, 2015. Note that APAC includes Asia Pacific and EMEA includes Europe, the Middle East and Africa:

	Americas		APAC		EMEA		Total
June 25, 2016
Net sales to external customers	$	724,974	$	175,226	$	535,448	$	1,435,648
Property and equipment, net	$	297,609	$	113,295	$	39,750	$	450,654

June 27, 2015
Net sales to external customers	$	722,317	$	154,102	$	482,805	$	1,359,224
Property and equipment, net	$	287,171	$	110,524	$	47,977	$	445,672

Warranty Reserves

The Company’s products sold are generally covered by a warranty for periods ranging from one to two years. The Company’s estimate of costs to service its warranty obligations are based on historical experience and expectation of future conditions and are recorded as a liability on the balance sheet. The following reconciliation provides an illustration of changes in the aggregate warranty reserve.

	13-Weeks Ended
	June 25,			June 27,
	2016			2015

Balance - beginning of period	$	31,407		$	23,866
Accrual for products sold during the period		17,860			10,348
Expenditures		(14,597	)		(8,113	)
Balance - end of period	$	34,670		$	26,101

	26-Weeks Ended
	June 25,			June 27,
	2016			2015

Balance - beginning of period	$	30,449		$	27,609
Accrual for products sold during the period		30,312			17,090
Expenditures		(26,091	)		(18,598	)
Balance - end of period	$	34,670		$	26,101

Commitments and Contingencies

The Company is party to certain commitments, which include purchases of raw materials, advertising expenditures, investments in certain low income housing tax credit projects, and other indirect purchases in connection with conducting our business. The aggregate amount of purchase orders and other commitments open as of June 25, 2016 was approximately $306,545. We cannot determine the aggregate amount of such purchase orders that represent contractual obligations because purchase orders may represent authorizations to purchase rather than binding agreements. Our purchase orders are based on our current needs and are typically fulfilled within short periods of time.

In the normal course of business, the Company and its subsidiaries are parties to various legal claims, investigations and complaints, including matters alleging patent infringement and other intellectual property claims. The Company evaluates, on a quarterly basis, developments in legal proceedings, investigations or claims that could affect the amount of any accrual or disclosure. The assessment regarding whether a loss is probable or a reasonable possibility, and whether the loss or a range of loss is estimable, often involves a series of complex judgments about future events.

Management of the Company currently does not believe there is at least a reasonable possibility the Company may have incurred a material loss, or a material loss in excess of recorded accruals, with respect to loss contingencies individually and in the aggregate, for the fiscal quarter ended June 25, 2016. The results of legal proceedings, investigations and claims, however, cannot be predicted with certainty. Although management considers the likelihood to be remote, an adverse resolution of one or more of such matters in excess of management’s expectations could have a material adverse effect on the Company’s results of operations in a particular quarter or fiscal year.

The Company settled or resolved certain matters during the fiscal quarter ended June 25, 2016 that did not individually or in the aggregate have a material impact on the Company’s financial condition or results of operations.

7. Income Taxes

The Company’s income tax expense increased from $35,805 to $42,737 for the 13-week period ended June 25, 2016, compared to the 13-week period ended June 27, 2015. The effective tax rate of 21.0% in the second quarter of 2016 is comparable to the 20.6% in the second quarter of 2015. The increase in the effective tax rate is due to shifts in the projected income mix by jurisdiction for 2016 compared to the same projection at second quarter of 2015. The increase in the effective tax rate was offset by the permanent extension of the U.S. research and development tax credit legislation, which had not yet been extended in the second quarter of 2015.

The Company’s income tax expense increased from $45,208 to $62,192 for the first half of 2016, compared to the first half of 2015. The effective tax rate increased to 20.0% for the first half of 2016, compared to 18.1% in the first half of 2015 primarily due to shifts in the projected income mix by jurisdiction for 2016 compared to the same projection at second quarter of 2015. Additionally, the favorable release of uncertain tax position reserves due to expiration of certain statutes or completion of tax audits was $2,009 lower compared to the first half of 2015. The increase in the effective tax rate was partially offset as a result of the permanent extension of the U.S. research and development tax credit legislation, which had not yet been extended in the second quarter of 2015.

8. Marketable Securities

The Financial Accounting Standards Board ("FASB") ASC topic entitled Fair Value Measurements and Disclosures defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (exit price). The accounting guidance classifies the inputs used to measure fair value into the following hierarchy:

Level 1	Unadjusted quoted prices in active markets for the identical asset or liability

Level 2	Observable inputs for the asset or liability, either directly or indirectly, such as quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, or inputs other than quoted prices that are observable for the asset or liability

Level 3	Unobservable inputs for the asset or liability

The Company endeavors to utilize the best available information in measuring fair value. Financial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. Valuation is based on prices obtained from an independent pricing vendor using both market and income approaches. The primary inputs to the valuation include quoted prices for similar assets in active markets, quoted prices for identical or similar assets in markets that are not active, contractual cash flows, benchmark yields, and credit spreads.

The method described above may produce a fair value calculation that may not be indicative of net realizable value or reflective of future fair values. Furthermore, while the Company believes its valuation methods are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different fair value measurement at the reporting date.

Available-for-sale securities measured at estimated fair value on a recurring basis are summarized below:

	Fair Value Measurements as of June 25, 2016
	Total		Level 1		Level 2		Level 3
U.S. Treasury securities	$	28,368	$	-	$	28,368	$	-
Agency securities		127,748		-		127,748		-
Mortgage-backed securities		293,723		-		293,723		-
Corporate securities		832,515		-		832,515		-
Municipal securities		197,944		-		197,944		-
Other		78,114		-		78,114		-
Total	$	1,558,412	$	-	$	1,558,412	$	-

	Fair Value Measurements as of December 26, 2015
	Total		Level 1		Level 2		Level 3
U.S. Treasury securities	$	27,731	$	-	$	27,731	$	-
Agency securities		208,631		-		208,631	$	-
Mortgage-backed securities		370,232		-		370,232	$	-
Corporate securities		648,590		-		648,590	$	-
Municipal securities		223,562		-		223,562	$	-
Other		79,802		-		79,802	$	-
Total	$	1,558,548	$	-	$	1,558,548	$	-

Marketable securities classified as available-for-sale securities are summarized below:

	Available-For-Sale Securities as of June 25, 2016
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses- OTTI⁽¹⁾			Gross Unrealized Losses- Other⁽²⁾			Estimated Fair Value (Net Carrying Amount)
U.S. Treasury securities	$	28,074	$	293	$	-		$	(0	)	$	28,367
Agency securities		127,668		230		(146	)		(4	)		127,748
Mortgage-backed securities		293,785		1,143		(372	)		(833	)		293,723
Corporate securities		834,239		3,033		(640	)		(4,116	)		832,516
Municipal securities		196,492		1,540		(0	)		(88	)		197,944
Other		78,105		32		(8	)		(15	)		78,114
Total	$	1,558,363	$	6,271	$	(1,166	)	$	(5,056	)	$	1,558,412

	Available-For-Sale Securities as of December 26, 2015
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses- OTTI⁽¹⁾			Gross Unrealized Losses- Other⁽²⁾			Estimated Fair Value (Net Carrying Amount)
U.S. Treasury securities	$	27,772	$	27	$	-		$	(68	)	$	27,731
Agency securities		211,248		105		(2,409	)		(313	)		208,631
Mortgage-backed securities		376,801		191		(1,210	)		(5,550	)		370,232
Corporate securities		656,447		179		(1,635	)		(6,401	)		648,590
Municipal securities		223,991		636		(9	)		(1,056	)		223,562
Other		79,853		4		(14	)		(41	)		79,802
Total	$	1,576,112	$	1,142	$	(5,277	)	$	(13,429	)	$	1,558,548

(1)

Represents impairment not related to credit for those investment securities that have been determined to be other-than-temporarily impaired.

(2)

Represents unrealized losses on investment securities that have not been determined to be other-than-temporarily impaired.

The Company’s investment policy requires investments to be rated A or better with the objective of minimizing the potential risk of principal loss. The fair value of the securities varies from period to period due to changes in interest rates, in the performance of the underlying collateral and in the credit performance of the underlying issuer, among other factors. The Company does not intend to sell the securities that have a material unrealized loss shown in the table above and it is not more likely than not that the Company will be required to sell the investment before recovery of their amortized costs bases, which may be maturity.

The Company recognizes the credit component of other-than-temporary impairments of debt securities in "Other Income" and the noncredit component in "Other comprehensive income (loss)" for those securities that we do not intend to sell and for which it is not more likely than not that we will be required to sell before recovery. During 2015 and the 26-week period ending June 25, 2016, the Company did not record any material impairment charges on its outstanding securities.

The amortized cost and estimated fair value of the securities at an unrealized loss position at June 25, 2016 were $633,601 and $627,379 respectively. Approximately 30.4% of securities in our portfolio were at an unrealized loss position at June 25, 2016. We have the ability to hold these securities until maturity or their value is recovered. We do not consider these unrealized losses to be other than temporary credit losses because there has been no material deterioration in credit quality and no change in the cash flows of the underlying securities. We do not intend to sell the securities and it is not more likely than not that we will be required to sell the securities; therefore, no material impairment has been recorded in the accompanying condensed consolidated statement of income.

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

The following tables display additional information regarding gross unrealized losses and fair value by major security type for available-for-sale securities in an unrealized loss position as of June 25, 2016 and December 26, 2015:

	As of June 25, 2016
	Less than 12 Consecutive Months					12 Consecutive Months or Longer
	Gross Unrealized Losses			Fair Value		Gross Unrealized Losses			Fair Value
U.S. Treasury securities	$	(0	)	$	2,000	$	-		$	-
Agency securities		(37	)		25,333		(113	)		14,886
Mortgage-backed securities		(416	)		61,305		(789	)		81,949
Corporate securities		(3,711	)		332,191		(1,045	)		67,796
Municipal securities		(42	)		13,996		(46	)		9,836
Other		(8	)		6,164		(15	)		11,923
Total	$	(4,214	)	$	440,989	$	(2,008	)	$	186,390

	As of December 26, 2015
	Less than 12 Consecutive Months					12 Consecutive Months or Longer
	Gross Unrealized Losses			Fair Value		Gross Unrealized Losses			Fair Value
U.S. Treasury securities	$	(68	)	$	22,184	$	-		$	-
Agency securities		(691	)		117,803		(2,031	)		69,418
Mortgage-backed securities		(4,571	)		263,735		(2,189	)		83,722
Corporate securities		(6,719	)		521,731		(1,317	)		50,374
Municipal securities		(1,035	)		116,033		(30	)		6,557
Other		(29	)		14,666		(26	)		14,927
Total	$	(13,113	)	$	1,056,152	$	(5,593	)	$	224,998

The amortized cost and estimated fair value of marketable securities at June 25, 2016, 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	$	252,055	$	252,253
Due after one year through five years		1,099,787		1,101,047
Due after five years through ten years		175,131		174,204
Due after ten years		31,390		30,908
	$	1,558,363	$	1,558,412

9. Share Repurchase Plan

On February 13, 2015, the Board of Directors approved a share repurchase program authorizing the Company to repurchase up to $300,000 of the common shares of Garmin Ltd. The repurchases may be made from time to time as market and business conditions warrant on the open market or in negotiated transactions in compliance with the SEC’s Rule 10b-18. The timing and amounts of any repurchases will be determined by the Company’s management depending on business and market conditions and other factors including price, regulatory requirements and capital availability. The program does not require the purchase of any minimum number of shares and may be suspended or discontinued at any time. The share repurchase authorization expires on December 31, 2016. As of June 25, 2016, the Company had repurchased 4,292 shares using cash of $176,510. There remains approximately $123,490 available to repurchase additional shares under this authorization.

10. Accumulated Other Comprehensive Income

The following provides required disclosure of changes in accumulated other comprehensive income (AOCI) balances by component for the 13-week and 26-week periods ended June 25, 2016:

	13-Weeks Ended June 25, 2016
	Foreign Currency Translation Adjustment			Gross unrealized losses on available- for-sale securities- OTTI⁽³⁾			Net unrealized gains (losses) on available- for-sale securities- Other⁽⁴⁾			Total
Balance - beginning of period	$	(7,841	)	$	(2,685	)	$	(4,338	)	$	(14,864	)
Other comprehensive income before reclassification		5,896			1,519			6,231			13,646
Amounts reclassified from accumulated other comprehensive income		-			-			(185	)		(185	)
Net current-period other comprehensive income		5,896			1,519			6,046			13,461
Balance - end of period	$	(1,945	)	$	(1,166	)	$	1,708		$	(1,403	)

	26-Weeks Ended June 25, 2016
	Foreign Currency Translation Adjustment			Gross unrealized losses on available- for-sale securities- OTTI⁽³⁾			Net unrealized gains (losses) on available- for-sale securities- Other⁽⁴⁾			Total
Balance - beginning of period	$	(14,107	)	$	(5,277	)	$	(11,044	)	$	(30,428	)
Other comprehensive income before reclassification		12,162			4,111			13,248			29,521
Amounts reclassified from accumulated other comprehensive income		-			-			(496	)		(496	)
Net current-period other comprehensive income		12,162			4,111			12,753			29,026
Balance - end of period	$	(1,945	)	$	(1,166	)	$	1,708		$	(1,403	)

(3) Represents the change in impairment, not related to credit, for those investment securities that have been determined to be other-than-temporarily impaired.

(4) Represents the change in unrealized gains (losses) on investment securities that have not been determined to be other-than-temporarily impaired.

The following provides required disclosure of reporting reclassifications out of AOCI for the 13-week and 26-week periods ended June 25, 2016:

13-Weeks Ended June 25, 2016
Details about Accumulated Other Comprehensive Income Components	Amount Reclassified from Accumulated Other Comprehensive Income			Affected Line Item in the Statement Where Net Income is Presented

Unrealized gains (losses) on available-for-sale securities	$	(264	)	Other income (expense)
		449		Income tax (provision) benefit
	$	185		Net of tax

26-Weeks Ended June 25, 2016
Details about Accumulated Other Comprehensive Income Components	Amount Reclassified from Accumulated Other Comprehensive Income		Affected Line Item in the Statement Where Net Income is Presented

Unrealized gains (losses) on available-for-sale securities	$	188	Other income (expense)
		308	Income tax (provision) benefit
	$	496	Net of tax

11. Recently Issued Accounting Pronouncements

In May 2014, the FASB issued Accounting Standards Update (“ASU”) No. 2014-09, Revenue from Contracts with Customers (Topic 606) (“ASU 2014-09”), which supersedes previous revenue recognition guidance. ASU 2014-09 requires that a company will recognize revenue at an amount that reflects the consideration to which the company expects to be entitled in exchange for transferring goods or services to a customer. The new standard may be applied retrospectively to each prior period presented or in a modified retrospective approach in which the cumulative effect will be recognized as of the date of adoption. Additional updates to Topic 606 issued by the FASB in 2015 and 2016 include the following:

ASU No. 2015-14, Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date (“ASU 2015-14”), which defers the effective date of the new guidance such that the new provisions will now be required for fiscal years, and interim periods within those years, beginning after December 15, 2017

ASU No. 2016-08, Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations (“ASU 2016-08”), which clarifies the implementation guidance on principal versus agent considerations (reporting revenue gross versus net).

ASU No. 2016-10, Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing (“ASU 2016-10”), which clarifies the implementation guidance on identifying performance obligations and classifying licensing arrangements

ASU No. 2016-12, Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients (“ASU 2016-12”), which clarifies the implementation guidance in a number of other areas.

The Company is currently evaluating the impact of adopting the new revenue standards on its consolidated financial statements.

In January 2016, the FASB issued Accounting Standards Update No. 2016-01, Financial Instruments—Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities (“ASU 2016-01”). The standard addresses certain aspects of recognition, measurement, presentation, and disclosure of financial instruments. ASU 2016-01 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2017. The Company is currently evaluating the impact of adopting the new standard on its consolidated financial statements.

In February 2016, the FASB issued Accounting Standards Update No. 2016-02, Leases (Topic 842) (“ASU 2016-02”), which sets out the principles for the recognition, measurement, presentation and disclosure of leases for both lessees and lessors. ASU 2016-02 requires lessees to present a right-of-use asset and a corresponding lease liability on the balance sheet. Lessor accounting is substantially unchanged compared to the current accounting guidance. ASU 2016-02 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2018. Early adoption is permitted. The Company is currently evaluating the impact of adopting the new standard on its consolidated financial statements.

In March 2016, the FASB issued Accounting Standards Update No. 2016-09, Compensation—Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting (“ASU 2016-09”), which is intended to simplify the accounting for share-based payment awards. The standard includes provisions addressing income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. ASU 2016-09 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2016. Early adoption is permitted. The Company is currently evaluating the impact of adopting the new standard on its consolidated financial statements.

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

The discussion set forth below, as well as other portions of this Quarterly Report, contains statements concerning potential future events. Such forward-looking statements are based upon assumptions by management, as of the date of this Quarterly Report, including assumptions about risks and uncertainties faced by the Company. Readers can identify these forward-looking statements by their use of such verbs as expects, anticipates, believes or similar verbs or conjugations of such verbs. If any of the Company’s assumptions prove incorrect or should unanticipated circumstances arise, actual results could materially differ from those anticipated by such forward-looking statements. The differences could be caused by a number of factors or combination of factors including, but not limited to, those factors identified in the Company’s Annual Report on Form 10-K for the year ended December 26, 2015. This report has been filed with the Securities and Exchange Commission (the "SEC" or the "Commission") in Washington, D.C. and can be obtained by contacting the SEC's public reference operations or obtaining it through the SEC's website at http://www.sec.gov. Readers are strongly encouraged to consider those factors when evaluating any forward-looking statement concerning the Company. The Company will not update any forward-looking statements in this Quarterly Report to reflect future events or developments.

The information contained in this Management’s Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with the Condensed Consolidated Financial Statements and Notes thereto included in this Form 10-Q and the audited financial statements and notes thereto in the Company’s Annual Report on Form 10-K for the year ended December 26, 2015.

The Company is a leading worldwide provider of navigation, communications and information devices, most of which are enabled by Global Positioning System, or GPS, technology. We operate in five business segments, the outdoor, fitness, marine, auto and aviation markets. The Company’s segments offer products through its network of independent dealers and distributors. However, the nature of products and types of customers for the five segments may vary significantly. As such, the segments are managed separately.

Results of Operations

The following table sets forth the Company’s results of operations as a percentage of net sales during the periods shown (the table may not foot due to rounding):

	13-Weeks Ended
	June 25, 2016			June 27, 2015

Net sales		100	%		100	%
Cost of goods sold		43	%		46	%
Gross profit		57	%		54	%
Advertising		5	%		6	%
Selling, general and administrative		13	%		13	%
Research and development		14	%		14	%
Total operating expenses		32	%		33	%
Operating income		25	%		22	%
Other income (expense), net		0	%		1	%
Income before income taxes		25	%		22	%
Provision for income taxes		5	%		5	%
Net income		20	%		18	%

	26-Weeks Ended
	June 25, 2016			June 27, 2015

Net sales		100	%		100	%
Cost of goods sold		44	%		44	%
Gross profit		56	%		56	%
Advertising		5	%		5	%
Selling, general and administrative		14	%		15	%
Research and development		16	%		16	%
Total operating expenses		35	%		36	%
Operating income		21	%		20	%
Other income (expense), net		0	%		-2	%
Income before income taxes		22	%		18	%
Provision for income taxes		4	%		3	%
Net income		17	%		15	%

The Company manages its operations in five segments: outdoor, fitness, marine, auto, and aviation, and each of its segments employs the same accounting policies. Allocation of certain research and development expenses, and selling, general, and administrative expenses are made to each segment on a percent of revenue basis. The segment table located in Note 4 sets forth the Company’s results of operations (in thousands) including net sales, gross profit, and operating income for each of the Company’s five segments during the periods shown. For each line item in the table, the total of the outdoor, fitness, marine, auto, and aviation segments' amounts equals the amount in the condensed consolidated statements of income included in Item 1.

In 2016 the Company moved action camera related revenue and expenses from the Outdoor segment to the Auto segment, allowing for alignment and synergies with other camera-based efforts occurring within the Auto segment. The overall impact of the move was immaterial. However, action camera related operating results for the 13-weeks and 26-weeks ended June 27, 2015 have been recast to conform to the current year presentation.

Comparison of 13-weeks ended June 25, 2016 and June 27, 2015

(Amounts included in the following discussion are stated in thousands unless otherwise indicated)

Net Sales

	13-weeks ended June 25, 2016					13-weeks ended June 27, 2015					Year over Year
	Net Sales		% of Revenues			Net Sales		% of Revenues			$ Change			% Change
Outdoor	$	133,096		16	%	$	108,621		14	%	$	24,475			23	%
Fitness		212,855		26	%		158,649		21	%		54,206			34	%
Marine		111,599		14	%		103,713		13	%		7,886			8	%
Auto		245,728		30	%		300,581		39	%		(54,854	)		-18	%
Aviation		108,331		13	%		102,266		13	%		6,066			6	%
Total	$	811,609		100	%	$	773,830		100	%	$	37,779			5	%

Net sales increased 5% for the 13-week period ended June 25, 2016 when compared to the year-ago quarter. All segments, excluding Auto grew in the quarter. Auto revenue remains the largest portion of our revenue mix at 30% in the second quarter of 2016 compared to 39% in the second quarter of 2015.

Total unit sales increased to 4,209 in the second quarter of 2016 from 4,150 in the same period of 2015.

Auto segment revenue decreased 18% from the year-ago quarter, as both PND volumes and the contribution of amortization of previously deferred revenue declined when compared to second quarter 2015. Revenues in our fitness segment increased 34% from the year-ago quarter on the strength of activity trackers, running, and cycling products. Revenues in our outdoor segment increased 23% from the year-ago quarter primarily driven by growth in our wearable category and the newly acquired DeLorme product lines. Revenues in our marine segment increased 8% from the year-ago quarter due to increases within our inland fishing category. Aviation revenues increased 6% from the year-ago quarter primarily due to gains in OEM.

Cost of Goods Sold

	13-weeks ended June 25, 2016					13-weeks ended June 27, 2015					Year over Year
	Cost of Goods		% of Revenues			Cost of Goods		% of Revenues			$ Change			% Change
Outdoor	$	47,872		36	%	$	42,602		39	%	$	5,271			12	%
Fitness		93,050		44	%		70,191		44	%		22,859			33	%
Marine		47,084		42	%		45,136		44	%		1,948			4	%
Auto		132,740		54	%		168,648		56	%		(35,907	)		-21	%
Aviation		27,905		26	%		28,003		27	%		(98	)		0	%
Total	$	348,651		43	%	$	354,580		46	%	$	(5,929	)		-2	%

Cost of goods sold decreased 300 basis points as a percentage of revenue from the year-ago quarter with decreases across all segments except fitness which was flat. In absolute dollars second quarter 2016 cost of goods sold was $5.9 million or 2% lower than the prior year quarter.

In the auto segment, the decrease of 21% in cost of goods sold reflects lower PND shipments. In the fitness segment, the increase of 33% in cost of goods sold reflects strong volume growth. In the outdoor and marine segments, the increases of 12% and 4% in cost of goods sold, respectively, reflects volume growth. The cost of goods sold for aviation was consistent year-over-year.

Gross Profit

	13-weeks ended June 25, 2016					13-weeks ended June 27, 2015					Year over Year
	Gross Profit		% of Revenues			Gross Profit		% of Revenues			$ Change			% Change
Outdoor	$	85,224		64	%	$	66,019		61	%	$	19,205			29	%
Fitness		119,805		56	%		88,458		56	%		31,347			35	%
Marine		64,515		58	%		58,577		56	%		5,938			10	%
Auto		112,988		46	%		131,933		44	%		(18,944	)		-14	%
Aviation		80,426		74	%		74,263		73	%		6,164			8	%
Total	$	462,958		57	%	$	419,250		54	%	$	43,709			10	%

Gross profit dollars in the second quarter of 2016 increased 10% while gross profit margin increased 300 basis points compared to the second quarter of 2015. All segments had increases in gross margin rate except fitness which was flat.

Advertising Expense

	13-weeks ended June 25, 2016					13-weeks ended June 27, 2015
	Advertising					Advertising					Year over Year
	Expense		% of Revenues			Expense		% of Revenues			$ Change			% Change
Outdoor	$	6,702		5	%	$	6,010		6	%	$	692			12	%
Fitness		22,377		11	%		19,955		13	%		2,422			12	%
Marine		4,724		4	%		6,037		6	%		(1,313	)		-22	%
Auto		8,633		4	%		11,999		4	%		(3,365	)		-28	%
Aviation		1,816		2	%		1,793		2	%		23			1	%
Total	$	44,252		5	%	$	45,794		6	%	$	(1,542	)		-3	%

Advertising expense decreased 3% in absolute dollars and was relatively flat as a percent of revenues. The decrease in absolute dollars was primarily in auto and marine offset by increases in fitness and outdoor to support new product introductions with increased media spend and cooperative advertising.

Selling, General and Administrative Expense

	13-weeks ended June 25, 2016					13-weeks ended June 27, 2015
	Selling, General &					Selling, General &					Year over Year
	Admin. Expenses		% of Revenues			Admin. Expenses		% of Revenues			$ Change			% Change
Outdoor	$	18,277		14	%	$	13,413		12	%	$	4,864			36	%
Fitness		28,758		14	%		22,120		14	%		6,637			30	%
Marine		17,455		16	%		15,299		15	%		2,157			14	%
Auto		33,000		13	%		40,679		14	%		(7,679	)		-19	%
Aviation		6,187		6	%		6,041		6	%		146			2	%
Total	$	103,677		13	%	$	97,552		13	%	$	6,125			6	%

Selling, general and administrative expense increased 6% in absolute dollars and was relatively flat as a percent of revenues compared to the year-ago quarter. The absolute dollar increase is primarily due to the increased expenses associated with the recently acquired Delorme business and compensation related costs. Variances by segment are primarily due to the allocation of certain selling, general and administrative expenses based on percentage of total revenues.

Research and Development Expense

	13-weeks ended June 25, 2016					13-weeks ended June 27, 2015
	Research &					Research &					Year over Year
	Development		% of Revenues			Development		% of Revenues			$ Change			% Change
Outdoor	$	11,680		9	%	$	9,395		9	%	$	2,285			24	%
Fitness		15,596		7	%		13,313		8	%		2,283			17	%
Marine		13,788		12	%		13,340		13	%		447			3	%
Auto		31,732		13	%		34,168		11	%		(2,438	)		-7	%
Aviation		41,559		38	%		39,024		38	%		2,535			6	%
Total	$	114,355		14	%	$	109,240		14	%	$	5,115			5	%

Research and development expense increased 5% due to ongoing development activities for new products. In absolute dollars, research and development costs increased $5.1 million when compared with the year-ago quarter and were stable as a percent of revenue. Our research and development spending is focused on product development, improving existing software capabilities, and exploring new categories.

Operating Income

	13-weeks ended June 25, 2016					13-weeks ended June 27, 2015					Year over Year
	Operating Income		% of Revenues			Operating Income		% of Revenues			$ Change			% Change
Outdoor	$	48,565		36	%	$	37,201		34	%	$	11,364			31	%
Fitness		53,074		25	%		33,070		21	%		20,005			60	%
Marine		28,548		26	%		23,901		23	%		4,648			19	%
Auto		39,623		16	%		45,087		15	%		(5,463	)		-12	%
Aviation		30,864		28	%		27,405		27	%		3,458			13	%
Total	$	200,674		25	%	$	166,664		22	%	$	34,009			20	%

Operating income increased 20% in absolute dollars and 320 basis points as a percent of revenue when compared to the second quarter of 2015. The increase in operating income is due to revenue growth and an improved gross margin percentage partially offset by an increase in operating expense.

Other Income (Expense)

	13-weeks ended			13-weeks ended
	June 25, 2016			June 27, 2015
Interest Income	$	8,455		$	7,420
Foreign Currency gains (losses)		(5,743	)		(487	)
Other		415			(39	)
Total	$	3,127		$	6,894

The average return on cash and investments during the second quarter of 2016 was 1.4% compared to 1.2% during the same quarter of 2015. Higher interest income in the second quarter of 2016, as compared to the same period of 2015, is attributable to an increased rate of return on investments.

Foreign currency gains and losses for the Company are typically driven by movements in the Taiwan Dollar and the Euro in relation to the U.S. Dollar. The Taiwan Dollar is the functional currency of Garmin Corporation. The U.S. Dollar is the functional currency of Garmin (Europe) Ltd. The Euro is the functional currency of most other European subsidiaries. As these entities have grown, currency fluctuations can generate material gains and losses. Additionally, Euro-based inter-company transactions can also generate currency gains and losses. Due to the relative size of the entities using a functional currency other than the Taiwan Dollar and the Euro, currency fluctuations related to these entities are not expected to have a material impact on the Company’s financial statements.

The $5.7 million currency loss in the second quarter of 2016 was primarily due to the weakening of the U.S. Dollar against the Taiwan Dollar. During the second quarter of 2016, the U.S. Dollar weakened 0.6% against the Taiwan Dollar, resulting in a loss of $4.6 million, while the U.S. Dollar strengthened 0.5% against the Euro, resulting in an additional loss of $0.4 million. The remaining net currency loss of $0.7 million is related to other currencies and timing of transactions.

The $0.5 million currency loss in the second quarter 2015 was due to the U.S. Dollar weakening against both the Taiwan Dollar and the Euro. During the second quarter of 2015, the U.S. Dollar weakened 2.8% compared to the Euro resulting in a gain of $6.0 million while the U.S. Dollar weakened against the Taiwan Dollar 0.6% resulting in a loss of $6.4 million. The remaining net currency loss of $0.1 million is related to other currencies and timing of transactions.

Income Tax Provision

The Company’s income tax expense increased from $35.8 million to $42.7 million for the 13-week period ended June 25, 2016, compared to the 13-week period ended June 27, 2015. The effective tax rate of 21.0% in the second quarter of 2016 is comparable to the 20.6% in the second quarter of 2015. The increase in the effective tax rate is due to shifts in the projected income mix by jurisdiction for 2016 compared to the same projection at second quarter of 2015. The increase in the effective tax rate was offset by the permanent extension of the U.S. research and development tax credit legislation, which had not yet been extended in the second quarter of 2015.

Net Income

As a result of the above, net income for the 13-weeks ended June 25, 2016 was $161.1 million compared to $137.8 million for the 13-week period ended June 27, 2015, an increase of $23.3 million.

Comparison of 26-Weeks Ended June 25, 2016 and June 27, 2015

(Amounts included in the following discussion are stated in thousands unless otherwise indicated)

Net Sales

	26-weeks ended June 25, 2016					26-weeks ended June 27, 2015					Year over Year
	Net Sales		% of Revenues			Net Sales		% of Revenues			$ Change			% Change
Outdoor	$	229,923		16	%	$	181,436		13	%	$	48,487			27	%
Fitness		355,273		26	%		289,644		21	%		65,628			23	%
Marine		194,479		14	%		168,010		12	%		26,469			16	%
Auto		441,326		31	%		519,807		38	%		(78,481	)		-15	%
Aviation		214,647		15	%		200,327		15	%		14,320			7	%
Total	$	1,435,648		100	%	$	1,359,224		100	%	$	76,424			6	%

Net sales increased 6% for the 26-week period ended June 25, 2016 when compared to the prior year period. All segments had an increase in revenue except for auto. Auto revenue remains the largest portion of our revenue mix at 31% in the first half of 2016 compared to 38% in the first half of 2015.

Total unit sales increased 4% to 7,516 in the first half of 2016 from 7,194 in the same period of 2015.

Auto segment revenue decreased 15% from the year-ago period, as both the volumes and the contribution of amortization of previously deferred revenue declined when compared to first half 2015. Outdoor revenue increased 27% primarily driven by growth in our wearables and the newly acquired DeLorme product lines. Fitness revenues increased 23% due to growth of our activity tracker, running, and cycling categories. Revenues in our marine segment increased 16% as the release of new marine products in multiple categories drove revenue growth against the first half of 2015. Aviation revenues increased 7% from the year-ago period primarily due to OEM growth.

Cost of Goods Sold

	26-weeks ended June 25, 2016					26-weeks ended June 27, 2015					Year over Year
	Cost of Goods		% of Revenues			Cost of Goods		% of Revenues			$ Change			% Change
Outdoor	$	85,768		37	%	$	66,351		37	%	$	19,417			29	%
Fitness		163,173		46	%		118,111		41	%		45,062			38	%
Marine		85,816		44	%		73,919		44	%		11,896			16	%
Auto		242,194		55	%		282,916		54	%		(40,721	)		-14	%
Aviation		55,889		26	%		54,553		27	%		1,336			2	%
Total	$	632,840		44	%	$	595,852		44	%	$	36,987			6	%

Cost of goods sold increased 6% in absolute dollars for the first half of 2016 when compared to the year ago period.

In the auto segment, the cost of goods decline was largely consistent with the segment revenue decline. In the fitness segment, the cost of goods increase outpaced revenue growth due to product mix. In the outdoor and marine segments, the cost of goods increases were in line with the revenue growth.

Gross Profit

	26-weeks ended June 25, 2016					26-weeks ended June 27, 2015					Year over Year
	Gross Profit		% of Revenues			Gross Profit		% of Revenues			$ Change			% Change
Outdoor	$	144,155		63	%	$	115,084		63	%	$	29,070			25	%
Fitness		192,100		54	%		171,534		59	%		20,567			12	%
Marine		108,664		56	%		94,090		56	%		14,573			15	%
Auto		199,131		45	%		236,891		46	%		(37,759	)		-16	%
Aviation		158,758		74	%		145,773		73	%		12,985			9	%
Total	$	802,808		56	%	$	763,372		56	%	$	39,435			5	%

Gross profit dollars in the first half of 2016 increased 5% while gross profit margin decreased 25 basis points compared to the first half of 2015. Fitness and auto margin declines were mostly offset by increased aviation margins and increased revenue while outdoor and marine held steady to the first half of 2015. All segment gross margin rates are relatively consistent between the first half of 2016 compared to the first half of 2015 except for the decrease in the fitness gross margin rate which is due to product mix.

Advertising Expense

	26-weeks ended June 25, 2016					26-weeks ended June 27, 2015
	Advertising					Advertising					Year over Year
	Expense		% of Revenues			Expense		% of Revenues			$ Change			% Change
Outdoor	$	11,860		5	%	$	10,355		6	%	$	1,505			15	%
Fitness		37,229		10	%		31,125		11	%		6,105			20	%
Marine		9,326		5	%		9,800		6	%		(475	)		-5	%
Auto		14,798		3	%		19,031		4	%		(4,233	)		-22	%
Aviation		3,272		2	%		3,155		2	%		117			4	%
Total	$	76,485		5	%	$	73,466		5	%	$	3,019			4	%

Advertising expense increased 4% in absolute dollars and was relatively flat as a percent of revenue compared to the year-ago period. The increase in absolute dollars was primarily in fitness and outdoor to support new product introductions with increased media spend and cooperative advertising. This increase was partially offset by decreased spending in auto.

Selling, General and Administrative Expenses

	26-weeks ended June 25, 2016					26-weeks ended June 27, 2015
	Selling, General &					Selling, General &					Year over Year
	Admin. Expenses		% of Revenues			Admin. Expenses		% of Revenues			$ Change			% Change
Outdoor	$	34,247		15	%	$	25,778		14	%	$	8,470			33	%
Fitness		54,810		15	%		47,203		16	%		7,605			16	%
Marine		33,538		17	%		29,277		17	%		4,260			15	%
Auto		63,789		14	%		81,726		16	%		(17,938	)		-22	%
Aviation		12,903		6	%		12,319		6	%		584			5	%
Total	$	199,287		14	%	$	196,302		14	%	$	2,985			2	%

Selling, general and administrative expense increased 2% in absolute dollars and 50 basis points as a percent of revenues compared to the year-ago period. The absolute dollar increase can be attributed to increased expenses related to the recently acquired DeLorme business and compensation and IT related costs. Variances by segment are primarily due to the allocation of certain selling, general and administrative expenses based on percentage of total revenues.

Research and Development Expense

	26-weeks ended June 25, 2016					26-weeks ended June 27, 2015
	Research &					Research &					Year over Year
	Development		% of Revenues			Development		% of Revenues			$ Change			% Change
Outdoor	$	21,598		9	%	$	18,221		10	%	$	3,377			19	%
Fitness		30,414		9	%		25,497		9	%		4,916			19	%
Marine		26,959		14	%		26,545		16	%		414			2	%
Auto		62,355		14	%		68,264		13	%		(5,909	)		-9	%
Aviation		81,233		38	%		76,714		38	%		4,520			6	%
Total	$	222,559		16	%	$	215,242		16	%	$	7,316			3	%

Research and development expense increased 3% due to ongoing development activities for new products. In absolute dollars, research and development costs increased $7.3 million when compared with the year-ago period and decreased 30 basis point as a percent of revenues compared to the year-ago period. Our research and development spending is focused on product development, improving existing software capabilities, and exploring new categories.

Operating Income

	26-weeks ended June 25, 2016					26-weeks ended June 27, 2015					Year over Year
	Operating Income		% of Revenues			Operating Income		% of Revenues			$ Change			% Change
Outdoor	$	76,450		33	%	$	60,730		33	%	$	15,719			26	%
Fitness		69,647		20	%		67,709		23	%		1,939			3	%
Marine		38,840		20	%		28,468		17	%		10,372			36	%
Auto		58,190		13	%		67,870		13	%		(9,679	)		-14	%
Aviation		61,350		29	%		53,585		27	%		7,765			14	%
Total	$	304,477		21	%	$	278,362		20	%	$	26,115			9	%

Operating income increased 9% in absolute dollars and 100 basis points as a percent of revenue when compared to the year-ago period. Revenue growth and a flat gross margin percentage contributed to the growth, slightly offset by increased operating expenses, as discussed above.

Other Income (Expense)

	26-weeks ended			26-weeks ended
	June 25, 2016			June 27, 2015
Interest Income	$	15,883		$	15,444
Foreign Currency gains (losses)		(10,582	)		(44,751	)
Other		1,570			698
Total	$	6,871		$	(28,609	)

The average return on cash and investments during the first half of 2016 was 1.4% compared to 1.2% during the same period of 2015. The increase in interest income is attributable to an increased rate of return on investments.

The $10.6 million currency loss in the first half of 2016 was due primarily to the weakening of the U.S. Dollar against the Taiwan Dollar. During the first half of 2016, the U.S. Dollar weakened 1.6% against the Taiwan Dollar resulting in a loss of $11.2 million, while the U.S. Dollar weakened 1.3% against the Euro, resulting in a gain of $0.8 million. The remaining net currency loss of $0.2 million is related to other currencies and timing of transactions.

The majority of the $44.8 million currency loss in the first half of 2015 was due to the strengthening of the U.S. Dollar against the Euro in congruence with the U.S. Dollar weakening against the Taiwan Dollar. During the first half of 2015, the U.S. Dollar strengthened 8.3% compared to the Euro resulting in a loss of $25.0 million while weakening against the Taiwan Dollar by 2.5% resulting in a loss of $20.5 million. The remaining net currency gain of $0.7 million is related to other currencies and timing of transactions.

Income Tax Provision

The Company’s income tax expense increased from $45.2 million to $62.2 million for the first half of 2016, compared to the first half of 2015. The effective tax rate increased to 20.0% for the first half of 2016, compared to 18.1% in the first half of 2015 is primarily due to shifts in the projected income mix by jurisdiction for 2016 compared to the same projection at second quarter of 2015. Additionally, the favorable release of uncertain tax position reserves due to expiration of certain statutes or completion of tax audits was $2,009 lower compared to the first half of 2015. The increase in the effective tax rate was partially offset as a result of the permanent extension of the U.S. research and development tax credit legislation, which had not yet been extended in the second quarter of 2015.

Net Income

Net income for the 26-week period ended June 25, 2016 was $249.2 million compared to $204.5 million for the 26-week period ended June 27, 2015, an increase of $44.6 million.

Liquidity and Capital Resources

Operating Activities

	26-Weeks Ended
	June 25,		June 27,
(In thousands)	2016		2015
Net cash provided by (used in) operating activities	$	279,372	$	(15,704	)

The $295.1 million increase in cash provided by operating activities in the first half 2016 compared to the first half 2015 was primarily due to the following:

the impact of income taxes payable providing $184.9 million more cash due to the timing of 2015 income tax payments related to the inter-company restructuring that was announced in the third quarter 2014

other current and noncurrent assets providing $73.9 million more cash primarily due to the timing of payments for royalties

net income increasing $44.6 million as discussed in the Results of Operations section above

other current and noncurrent liabilities providing $43.0 million more cash primarily due to timing of payments for royalties

inventories providing $29.0 million more cash primarily due to reduced purchases of raw materials and

deferred revenue providing $25.7 million more working capital benefit due to the net decrease in amortization of previously deferred revenue

Partially offset by:

the $55.8 million impact of decreasing unrealized foreign currency losses due primarily to foreign currency rate fluctuations as discussed in the Results of Operations section above

accounts receivable providing $35.6 million less working capital benefit primarily due to the net decrease in utilization of rebates receivable associated with royalties, partially offset by increased collections of trade receivables and

accounts payable providing $25.2 million less cash primarily due to the timing of payments to suppliers

Investing Activities

	26-Weeks Ended
	June 25,			June 27,
(In thousands)	2016			2015
Net cash (used in) provided by investing activities	$	(84,487	)	$	7,086

The $91.6 million decrease in cash provided by investing activities in the first half 2016 compared to first half 2015 was primarily due to the following:

decreased net redemptions of marketable securities of $51.6 million and

increased cash payments for acquisitions of $49.5 million

Partially offset by:

decreased purchases of property and equipment of $11.1 million

It is management’s goal to invest the on-hand cash in accordance with the investment policy, which has been approved by the Board of Directors of each applicable Garmin entity holding the cash. The investment policy’s primary purpose is to preserve capital, maintain an acceptable degree of liquidity, and maximize yield within the constraint of low credit risk. Garmin’s average interest rate returns on cash and investments during first half 2016 and 2015 were approximately 1.4% and 1.2%, respectively.

Financing Activities

	26-Weeks Ended
	June 25,			June 27,
(In thousands)	2016			2015
Net cash used in financing activities	$	(229,409	)	$	(231,661	)

The $2.3 million decrease in cash used in financing activities in the first half 2016 compared to first half 2015 was primarily due to the following:

decreased purchases of treasury stock of $12.2 million under our share repurchase authorization

Partially offset by:

increased dividend payments of $9.2 million due to the year-over-year increase of our dividend rate

We currently use cash flow from operations to fund our capital expenditures, to support our working capital requirements, to pay dividends, and to fund share repurchases. We expect that future cash requirements will principally be for capital expenditures, working capital, payment of dividends declared, share repurchases and the funding of strategic acquisitions. We believe that our existing cash balances and cash flow from operations will be sufficient to meet our long-term projected capital expenditures, working capital and other cash requirements.

Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

There are numerous market risks that can affect our future business, financial condition and results of operations. In addition to the other information set forth in this report, you should carefully consider the factors discussed in Part II, “Item 7A. Quantitative and Qualitative Disclosures About Market Risk” in our Annual Report on Form 10-K for the fiscal year ended December 26, 2015. There have been no material changes during the 13-week and 26-week periods ended June 25, 2016 in the risks described in our Annual Report on Form 10-K related to market sensitivity, inflation, foreign currency exchange rate risk and interest rate risk.

Item 4. Controls and Procedures

(a) Evaluation of disclosure controls and procedures. The Company maintains a system of disclosure controls and procedures that are designed to provide reasonable assurance that information, which is required to be timely disclosed, is accumulated and communicated to management in a timely fashion. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. As of June 25, 2016, the Company carried out an evaluation, under the supervision and with the participation of the Company’s management, including the Company’s Chief Executive Officer and Chief Financial Officer, of the effectiveness of the Company’s disclosure controls and procedures. Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded as of June 25, 2016 that our disclosure controls and procedures were effective such that the information relating to the Company, required to be disclosed in our Securities and Exchange Commission ("SEC") reports (i) is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms, and (ii) is accumulated and communicated to the Company's management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

(b) Changes in internal control over financial reporting. There has been no change in the Company’s internal controls over financial reporting that occurred during the Company’s fiscal quarter ended June 25, 2016 that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

Part II - Other Information

Item 1. Legal Proceedings

The following information supplements and amends the discussion set forth under Part I, Item 3 "Legal Proceedings" in the Company’s Annual Report on Form 10-K for the fiscal year ended December 26, 2015 and the Company’s Quarterly Report on Form 10-Q for the fiscal quarter ended March 26, 2016.

ICON Health & Fitness, Inc. v. Garmin Ltd., Garmin International, Inc., and Garmin USA, Inc

The Court of Appeals for the Federal Circuit heard oral argument on ICON’s appeal on July 6, 2016. The parties await the Federal Circuit’s decision on the appeal.

In the Matter of Certain Marine Sonar Imaging Systems, Products Containing the Same and Components Thereof Johnson Outdoors Inc. and Johnson Outdoors Marine Electronics, Inc. v. Garmin International, Inc., Garmin North America, Inc. and Garmin USA, Inc.

In May 2016, Johnson Outdoors, Inc. and Garmin International, Inc. entered into a confidential settlement agreement fully and finally settling all claims arising under the captioned ITC investigation and the captioned lawsuit. The terms of the settlement were not material to Garmin’s operating results, liquidity or financial position.

In the Matter of Certain Marine Sonar Imaging Devices, Including Downscan and Sidescan Devices, Products Containing the Same, and Components Thereof

On May 20, 2016 Navico filed a petition for modification of the limited exclusion order issued by the ITC. On June 1, 2016 Garmin filed its opposition to Navico’s petition for modification of the limited exclusion order. On June 9, 2016 Navico filed a reply to Garmin’s opposition. On June 10, 2016 Navico filed a motion for leave to file said reply. On June 20, 2016 Garmin filed an opposition to Navico’s motion for leave to file a reply.

On June 3, 2016 Navico withdrew, without prejudice, its request that the ITC initiate an enforcement proceeding.

On June 9, 2016, Navico filed its opening appellate brief with the Federal Circuit. On July 7, 2016, Garmin filed its opening appellate brief with the Federal Circuit.

Andrea Katz, on behalf of herself and all others similarly situated, v. Garmin Ltd. and Garmin International, Inc.

The parties have agreed to settle this lawsuit in consideration of a settlement under which Garmin would pay $385,000 to plaintiffs counsel for attorney’s fees and would repair or replace Forerunner 610 watchbands and watches at no cost provided that a request is made within twelve months of the date of the final approval of the settlement by the court. On May 31, 2016 the court granted preliminary approval for the settlement and scheduled a hearing on final approval of the settlement on November 3, 2016.

Navico Inc. And Navico Holding AS v. Garmin International, Inc. and Garmin USA, Inc. (U.S. District Court for the Eastern District of Texas)

On April 1, 2016 Garmin filed a motion to transfer this action to the United States District Court for the Northern District of Oklahoma. On April 19, 2016 Navico filed an opposition to the motion to transfer and on April 29, 2016 Garmin filed a reply to this opposition. On May 29, 2016 Navico filed a sur-reply in support of its opposition. The court has scheduled a claim construction hearing for February 3, 2017 and a trial date commencing on September 5, 2017

Pioneer Corporation v. Iiyonet Inc.

At a hearing on June 9, 2016 the Tokyo District Court disclosed its favorable impression that Garmin’s products do not infringe Pioneer’s asserted patent. The court is expected to issue its final ruling in September 2016.

Visteon Global Technologies, Inc. and Visteon Technologies LLC v. Garmin International, Inc.

On May 23, 2016 the court issued an order granting Garmin’s motion to exclude certain Garmin products from the lawsuit and granting in part Garmin’s motion to strike certain expert reports of certain of Visteon’s expert witnesses. On July 13, 2016, the court held a hearing on Garmin’s motion to exclude testimony of two of Visteon’s proposed expert witnesses. The court ordered the parties to submit additional briefing after the hearing with arguments based on the testimony provided at the hearing.

In the normal course of business, the Company and its subsidiaries are parties to various legal claims, actions, and complaints, including matters involving patent infringement, other intellectual property, product liability, customer claims and various other risks. It is not possible to predict with certainty whether or not the Company and its subsidiaries will ultimately be successful in any of these legal matters, or if not, what the impact might be. However, the Company’s management does not expect that the results in any of these legal proceedings will have a material adverse effect on the Company’s results of operations, financial position or cash flows.

Item 1A. Risk Factors

There are many risks and uncertainties that can affect our future business, financial performance or share price. In addition to the other information set forth in this report, you should carefully consider the factors discussed in Part I, “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended December 26, 2015, as amended and supplemented by the risk factor set forth below. These risks, however, are not the only risks facing our Company. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition and/or operating results.

The following is an amended and restated version of a Risk Factor included in Item 1A. “Risk Factors” of our Annual Report on Form 10-K for the year ended December 26, 2015:

Economic, regulatory and political conditions and uncertainty could adversely affect our revenue and margins.

Our revenue and margins depend significantly on general economic conditions and the demand for products in the markets in which we compete. Economic weakness or constrained consumer and business spending has resulted in periods of decreased revenue and in the future, could result in decreased revenue and problems with our ability to manage inventory levels and collect customer receivables. In addition, financial difficulties experienced by our retailers and OEM customers have resulted, and could result in the future, in significant bad debt write-offs and additions to reserves in our receivables and could have an adverse effect on our results of operations.

The United Kingdom (UK) held a referendum on June 23, 2016 in which a majority of voters voted to exit the European Union (EU). Due to the unprecedented nature of the proposed withdrawal, significant uncertainty exists surrounding the timing and terms of the proposed exit. We have operations in the UK and several EU member states whose currencies, namely British Pound Sterling (GBP) and Euro, economies, taxation, and trade regulation, among other factors, could be adversely impacted by the negotiations and outcomes of the UK’s leaving the EU, which is likely to be a lengthy and complicated process. These events could have a material adverse effect on our business operations, results of operations and financial condition.

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

Items (a) and (b) are not applicable.

The Board of Directors approved a share repurchase program on February 13, 2015, authorizing the Company to purchase up to $300 million of its common shares as market and business conditions warrant. The share repurchase authorization expires on December 31, 2016. The following table lists the Company’s share purchases during the second quarter of fiscal 2016:

Period	Total # of Shares Purchased		Average Price Paid Per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs		Maximum Number of Shares (or approx. Dollar Value of Shares in thousands) That may yet be Purchased Under the Plans or Program
March 27, 2016 - April 23, 2016		200,000	$	40.56		200,000	$	140,679
April 24, 2016- May 21, 2016		190,037	$	41.08		190,037	$	132,873
May 22, 2016 - June 25, 0216		222,500	$	42.17		222,500	$	123,490

Total		612,537	$	41.31		612,537	$	123,490

Item 3.

Defaults Upon Senior Securities

None

Item 4.

Mine Safety Disclosures

Not applicable

Item 5.

Other Information

Not applicable

Item 6.

Exhibits

Exhibit 31.1		Certification of Chief Executive Officer pursuant to Exchange Act
		Rule 13a-14(a) or 15d-14(a).

Exhibit 31.2		Certification of Chief Financial Officer pursuant to Exchange Act
		Rule 13a-14(a) or 15d-14(a).

Exhibit 32.1		Certification of Chief Executive Officer pursuant to 18 U.S.C.
		Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

Exhibit 32.2		Certification of Chief Financial Officer pursuant to 18 U.S.C.
		Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

Exhibit 101.INS		XBRL Instance Document

Exhibit 101.SCH		XBRL Taxonomy Extension Schema

Exhibit 101.CAL		XBRL Taxonomy Extension Calculation Linkbase

Exhibit 101.LAB		XBRL Taxonomy Extension Label Linkbase

Exhibit 101.PRE		XBRL Taxonomy Extension Presentation Linkbase

Exhibit 101.DEF		XBRL Taxonomy Extension Definition Linkbase

SIGNATURES

Pursuant to the requirements 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/ Douglas G. Boessen
		Douglas G. Boessen
		Chief Financial Officer
		(Principal Financial Officer and
		Principal Accounting Officer)

Dated: July 27, 2016

INDEX TO EXHIBITS

Exhibit No.		Description

Exhibit 31.1		Certification of Chief Executive Officer pursuant to Exchange Act
		Rule 13a-14(a) or 15d-14(a).

Exhibit 31.2		Certification of Chief Financial Officer pursuant to Exchange Act
		Rule 13a-14(a) or 15d-14(a).

Exhibit 32.1		Certification of Chief Executive Officer pursuant to 18 U.S.C.
		Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

Exhibit 32.2		Certification of Chief Financial Officer pursuant to 18 U.S.C.
		Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

Exhibit 101.INS		XBRL Instance Document

Exhibit 101.SCH		XBRL Taxonomy Extension Schema

Exhibit 101.CAL		XBRL Taxonomy Extension Calculation Linkbase

Exhibit 101.LAB		XBRL Taxonomy Extension Label Linkbase

Exhibit 101.PRE		XBRL Taxonomy Extension Presentation Linkbase

Exhibit 101.DEF		XBRL Taxonomy Extension Definition Linkbase