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 September 30, 2017

¨	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 ¨ Emerging growth company ¨

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. YES ¨ NO ¨

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 October 30, 2017

CHF 0.10 par value: 198,077,418 (including treasury shares)

Garmin Ltd.

Form 10-Q

Quarter Ended September 30, 2017

Table of Contents

		Page

Part I - Financial Information

Item 1.	Condensed Consolidated Financial Statements	3

	Condensed Consolidated Balance Sheets at September 30, 2017 (Unaudited) and December 31, 2016	3

	Condensed Consolidated Statements of Income for the 13-weeks and 39-weeks ended September 30, 2017 and September 24, 2016 (Unaudited)	4

	Condensed Consolidated Statements of Comprehensive Income for the 13-weeks and 39-weeks ended September 30, 2017 and September 24, 2016 (Unaudited)	5

	Condensed Consolidated Statements of Cash Flows for the 39-weeks ended September 30, 2017 and September 24, 2016 (Unaudited)	6

	Notes to Condensed Consolidated Financial Statements (Unaudited)	7

Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	21

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	32

Item 4.	Controls and Procedures	32

Part II - Other Information

Item 1.	Legal Proceedings	34

Item 1A.	Risk Factors	34

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	35

Item 3.	Defaults Upon Senior Securities	35

Item 4.	Mine Safety Disclosures	35

Item 5.	Other Information	35

Item 6.	Exhibits	35

Signature Page		37

Index to Exhibits		38

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)
	September 30,			December 31,
	2017			2016
Assets
Current assets:
Cash and cash equivalents	$	891,279		$	846,883
Marketable securities		253,699			266,952
Accounts receivable, net		457,391			527,062
Inventories, net		575,335			484,821
Deferred costs		47,483			47,395
Prepaid expenses and other current assets		107,287			89,903
Total current assets		2,332,474			2,263,016

Property and equipment, net		554,441			482,878

Marketable securities		1,210,323			1,213,285
Restricted cash		117			113
Deferred income taxes		262,473			110,293
Noncurrent deferred costs		69,286			56,151
Intangible assets, net		313,269			305,002
Other assets		93,008			94,395
Total assets	$	4,835,391		$	4,525,133

Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable	$	158,591		$	172,404
Salaries and benefits payable		89,124			88,818
Accrued warranty costs		35,669			37,233
Accrued sales program costs		53,826			80,953
Deferred revenue		138,570			146,564
Accrued royalty costs		37,895			36,523
Accrued advertising expense		20,099			37,440
Other accrued expenses		105,783			70,469
Income taxes payable		15,250			16,163
Dividend payable		191,238			96,168
Total current liabilities		846,045			782,735

Deferred income taxes		68,204			61,220
Noncurrent income taxes		123,905			121,174
Noncurrent deferred revenue		155,814			140,407
Other liabilities		1,738			1,594

Stockholders' equity:
Shares, CHF 0.10 par value, 198,077 shares authorized and issued; 187,500 shares outstanding at September 30, 2017 and 188,565 shares outstanding at December 31, 2016		17,979			17,979
Additional paid-in capital		1,851,529			1,836,047
Treasury stock		(506,799	)		(455,964	)
Retained earnings		2,230,489			2,056,702
Accumulated other comprehensive income (loss)		46,487			(36,761	)
Total stockholders' equity		3,639,685			3,418,003
Total liabilities and stockholders' equity	$	4,835,391		$	4,525,133

See accompanying notes.

Garmin Ltd. And Subsidiaries

Condensed Consolidated Statements of Income (Unaudited)

(In thousands, except per share information)

	13-Weeks Ended						39-Weeks Ended
	September 30,			September 24,			September 30,			September 24,
	2017			2016			2017			2016
Net sales	$	743,077		$	722,250		$	2,198,508		$	2,157,898

Cost of goods sold		309,412			316,270			914,862			949,110

Gross profit		433,665			405,980			1,283,646			1,208,788

Advertising expense		32,449			32,956			105,983			109,441
Selling, general and administrative expense		101,794			96,959			309,095			296,246
Research and development expense		129,632			116,449			379,083			339,008
Total operating expense		263,875			246,364			794,161			744,695

Operating income		169,790			159,616			489,485			464,093

Other income (expense):
Interest income		9,207			8,226			26,931			24,109
Foreign currency gains (losses)		8,579			(19,421	)		(13,808	)		(30,003	)
Other (expense) income		(1,520	)		1,344			(805	)		2,914
Total other income (expense)		16,266			(9,851	)		12,318			(2,980	)

Income before income taxes		186,056			149,765			501,803			461,113

Income tax provision (benefit)		38,643			24,711			(54,372	)		86,904

Net income	$	147,413		$	125,054		$	556,175		$	374,209

Net income per share:
Basic	$	0.79		$	0.66		$	2.96		$	1.98
Diluted	$	0.78		$	0.66		$	2.95		$	1.98

Weighted average common shares outstanding:
Basic		187,616			188,692			187,902			189,027
Diluted		188,490			189,238			188,671			189,376

Dividends declared per share		-			-		$	2.04		$	2.04

See accompanying notes.

Garmin Ltd. And Subsidiaries

Condensed Consolidated Statements of Comprehensive Income (Unaudited)

(In thousands)

	13-Weeks Ended					39-Weeks Ended
	September 30,		September 24,			September 30,		September 24,
	2017		2016			2017		2016
Net income	$	147,413	$	125,054		$	556,175	$	374,209
Foreign currency translation adjustment		5,804		29,598			71,310		41,760
Change in fair value of available-for-sale marketable securities, net of deferred taxes		536		(2,429	)		11,938		14,434
Comprehensive income	$	153,753	$	152,223		$	639,423	$	430,403

See accompanying notes.

Garmin Ltd. And Subsidiaries

Condensed Consolidated Statements of Cash Flows (Unaudited)

(In thousands)

	39-Weeks Ended
	September 30,			September 24,
	2017			2016
Operating activities:
Net income	$	556,175		$	374,209
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation		44,011			40,327
Amortization		19,688			22,215
(Gain) loss on sale or disposal of property and equipment		(184	)		155
Provision for doubtful accounts		551			2,559
Deferred income taxes		(143,846	)		(6,821	)
Unrealized foreign currency loss		17,504			19,536
Provision for obsolete and slow moving inventories		16,504			20,943
Stock compensation expense		32,441			29,211
Realized loss (gain) on marketable securities		594			(1,068	)
Changes in operating assets and liabilities:
Accounts receivable		84,982			76,372
Inventories		(86,631	)		(41,002	)
Other current and non-current assets		(9,635	)		3,400
Accounts payable		(24,526	)		(40,694	)
Other current and non-current liabilities		(37,403	)		1,942
Deferred revenue		5,726			(13,660	)
Deferred costs		(12,650	)		(9,906	)
Income taxes payable		(724	)		14,648
Net cash provided by operating activities		462,577			492,366

Investing activities:
Purchases of property and equipment		(85,211	)		(42,157	)
Proceeds from sale of property and equipment		264			15
Purchase of intangible assets		(9,069	)		(4,706	)
Purchase of marketable securities		(438,046	)		(739,676	)
Redemption of marketable securities		455,376			772,733
Change in restricted cash		-			(6	)
Acquisitions, net of cash acquired		(12,400	)		(62,137	)
Net cash used in investing activities		(89,086	)		(75,934	)

Financing activities:
Dividends paid		(287,318	)		(289,331	)
Purchase of treasury stock under share repurchase plan		(74,523	)		(65,221	)
Purchase of treasury stock related to equity awards		(3,587	)		(184	)
Proceeds from issuance of treasury stock related to equity awards		10,316			10,210
Tax benefit from issuance of equity awards		-			365
Net cash used in financing activities		(355,112	)		(344,161	)

Effect of exchange rate changes on cash and cash equivalents		26,017			7,218

Net increase in cash and cash equivalents		44,396			79,489
Cash and cash equivalents at beginning of period		846,883			833,070
Cash and cash equivalents at end of period	$	891,279		$	912,559

See accompanying notes.

Garmin Ltd. and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Unaudited)

September 30, 2017

(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 39-week periods ended September 30, 2017 are not necessarily indicative of the results that may be expected for the year ending December 30, 2017.

The condensed consolidated balance sheet at December 31, 2016 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 31, 2016.

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 September 30, 2017 and September 24, 2016 both contain operating results for 13 weeks.

In March 2016, the Financial Accounting Standards Board (“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 Company adopted ASU 2016-09 on a prospective basis during the quarter ended April 1, 2017. ASU 2016-09 requires excess tax benefits or deficiencies from stock-based compensation to be recognized in the income tax provision. We previously recorded these amounts to additional paid-in capital. Additionally, under ASU 2016-09, excess tax benefits and deficiencies are not estimated in the effective tax rate, rather, are recorded as discrete tax items in the period they occur. Excess income tax benefits from stock-based compensation arrangements are classified as a cash flow from operations under ASU 2016-09, rather than as a cash flow from financing activities. The most significant impact of ASU 2016-09 during the 39-week period ended September 30, 2017 is the recognition of income tax expense of $7,275 resulting from stock options and stock appreciation rights expiring unexercised. There were no material expirations during the 13-week period ended September 30, 2017. The impact of the tax expense associated with the expiration of stock option and stock appreciation rights on diluted earnings per share was $0.04 for the 39-week period ended September 30, 2017. The Company believes ASU 2016-09 may have a material effect on forthcoming periods. However, the Company is unable to reasonably estimate the impact due to the dependency of these items on the underlying share price of the Company.

Inventories

The components of inventories consist of the following:

	September 30,			December 31,
	2017			2016

Raw materials	$	189,367		$	162,882
Work-in-process		84,249			68,602
Finished goods		334,557			293,789
Inventory reserves		(32,838	)		(40,452	)
Inventory, net of reserves	$	575,335		$	484,821

Earnings Per Share

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

	13-Weeks Ended
	September 30,		September 24,
	2017		2016
Numerator:
Numerator for basic and diluted net income per share - net income	$	147,413	$	125,054

Denominator:
Denominator for basic net income per share – weighted-average common shares		187,616		188,692

Effect of dilutive securities – stock options, stock appreciation rights and restricted stock units		874		546

Denominator for diluted net income per share – adjusted weighted-average common shares		188,490		189,238

Basic net income per share	$	0.79	$	0.66

Diluted net income per share	$	0.78	$	0.66

	39-Weeks Ended
	September 30,		September 24,
	2017		2016
Numerator:
Numerator for basic and diluted net income per share - net income	$	556,175	$	374,209

Denominator:
Denominator for basic net income per share – weighted-average common shares		187,902		189,027

Effect of dilutive securities – stock options, stock appreciation rights and restricted stock units		769		349

Denominator for diluted net income per share – adjusted weighted-average common shares		188,671		189,376

Basic net income per share	$	2.96	$	1.98

Diluted net income per share	$	2.95	$	1.98

There were 1,051 and 3,170 anti-dilutive stock options, stock appreciation rights and restricted stock units (collectively “equity awards”) outstanding during the 13-week periods ended September 30, 2017 and September 24, 2016, respectively.

There were 1,567 and 3,696 anti-dilutive equity awards outstanding during the 39-week periods ended September 30, 2017 and September 24, 2016, respectively.

There were 2 and 26 net shares issued as a result of exercises and releases of equity awards for the 13-week periods ended September 30, 2017 and September 24, 2016, respectively.

There were 161 and 39 shares issued as a result of exercises and releases of equity awards for the 39-week periods ended September 30, 2017 and September 24, 2016, respectively.

There were 248 employee stock purchase plan (ESPP) shares issued from outstanding Treasury stock during the 39-week period ended September 30, 2017.

There were 285 ESPP shares issued from outstanding Treasury stock during the 39-week period ended September 24, 2016.

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 (“revenue”), gross profit, and operating income for each of the Company’s reportable segments are presented below.

	Reportable Segments
	Outdoor		Fitness		Marine		Auto		Aviation		Total

13-Weeks Ended September 30, 2017

Net sales	$	184,937	$	167,147	$	77,312	$	189,053	$	124,628	$	743,077
Gross profit	$	118,175	$	96,135	$	44,574	$	83,961	$	90,820	$	433,665
Operating income	$	67,810	$	33,492	$	18,420	$	15,971	$	34,097	$	169,790

13-Weeks Ended September 24, 2016

Net sales	$	141,006	$	189,161	$	70,010	$	214,637	$	107,436	$	722,250
Gross profit	$	88,497	$	103,363	$	39,891	$	93,638	$	80,591	$	405,980
Operating income	$	49,271	$	44,774	$	10,332	$	24,795	$	30,444	$	159,616

39-Weeks Ended September 30, 2017

Net sales	$	495,589	$	485,999	$	290,302	$	555,059	$	371,559	$	2,198,508
Gross profit	$	319,457	$	276,014	$	166,690	$	246,931	$	274,554	$	1,283,646
Operating income	$	176,544	$	89,452	$	60,860	$	50,566	$	112,063	$	489,485

39-Weeks Ended September 24, 2016

Net sales	$	370,929	$	544,434	$	264,489	$	655,963	$	322,083	$	2,157,898
Gross profit	$	232,652	$	295,463	$	148,554	$	292,770	$	239,349	$	1,208,788
Operating income	$	125,721	$	114,422	$	49,172	$	82,984	$	91,794	$	464,093

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 39-week periods ended September 30, 2017 and September 24, 2016. Note that APAC includes Asia Pacific and Australian Continent and EMEA includes Europe, the Middle East and Africa:

	Americas		APAC		EMEA		Total
September 30, 2017
Net sales to external customers	$	1,049,287	$	315,096	$	834,125	$	2,198,508
Property and equipment, net	$	356,351	$	160,360	$	37,730	$	554,441

September 24, 2016
Net sales to external customers	$	1,073,610	$	274,083	$	810,205	$	2,157,898
Property and equipment, net	$	297,747	$	117,301	$	39,198	$	454,246

Warranty Reserves

The Company’s products sold are generally covered by a standard warranty for periods ranging from one to three 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
	September 30,			September 24,
	2017			2016

Balance - beginning of period	$	37,012		$	34,670
Accrual for products sold during the period		16,903			15,859
Expenditures		(18,246	)		(11,657	)
Balance - end of period	$	35,669		$	38,872

	39-Weeks Ended
	September 30,			September 24,
	2017			2016

Balance - beginning of period	$	37,233		$	30,449
Accrual for products sold during the period		40,850			46,170
Expenditures		(42,414	)		(37,747	)
Balance - end of period	$	35,669		$	38,872

Commitments and Contingencies

Commitments

The Company is party to certain commitments, which include purchases of raw materials, advertising expenditures, and other indirect purchases in connection with conducting our business. The aggregate amount of purchase orders and other commitments open as of September 30, 2017 was approximately $363,000. 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.

Contingencies

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 and annual basis, developments in legal proceedings, investigations, claims, and other loss contingencies that could affect any required accrual or disclosure or estimate of reasonably possible loss or range of loss. An estimated loss from a loss contingency is accrued by a charge to income if it is probable that an asset has been impaired or a liability has been incurred and the amount of the loss can be reasonably estimated. If a range of loss is estimated, and some amount within that range appears to be a better estimate than any other amount within that range, then that amount is accrued. If no amount within the range can be identified as a better estimate than any other amount, the Company accrues the minimum amount in the range.

If an outcome unfavorable to the Company is determined to be probable, but the amount of loss cannot be reasonably estimated or is determined to be reasonably possible, but not probable, we disclose the nature of the contingency and an estimate of the possible loss or range of loss or a statement that such an estimate cannot be made. The Company’s aggregate range of reasonably possible losses includes (1) matters where a liability has been accrued and there is a reasonably possible loss in excess of the amount accrued for that liability, and (2) matters where a loss is believed to be reasonably possible, but not probable, and a liability therefore has not been accrued. This aggregate range only represents the Company’s estimate of reasonably possible losses and does not represent the Company’s maximum loss exposure. The assessment regarding whether a loss is probable or reasonably possible, and whether the loss or a range of loss is estimable, often involves a series of complex judgments about future events. In assessing the probability of an outcome in a lawsuit, claim or assessment that could be unfavorable to the Company, we consider the following factors, among others: a) the nature of the litigation, claim, or assessment; b) the progress of the case; c) the opinions or views of legal counsel and other advisers; d) our experience in similar cases; e) the experience of other entities in similar cases; and f) how we intend to respond to the lawsuit, claim, or assessment. Costs incurred in defending lawsuits, claims or assessments are expensed as incurred.

Other than the matter discussed below, management of the Company currently does not believe it is reasonably possible that the Company may have incurred a material loss, or a material loss in excess of recorded accruals, with respect to loss contingencies in the aggregate, for the fiscal quarter ended September 30, 2017. The results of legal proceedings, investigations and claims, however, cannot be predicted with certainty. An adverse resolution of one or more of such matters in excess of management’s expectations could have a material adverse effect in the particular quarter or fiscal year in which a loss is recorded, but based on information currently known, the Company does not believe it is likely that losses from such matters would have a material adverse effect on the Company’s business or its consolidated financial position, results of operations or cash flows.

The Company settled or resolved certain matters during the 13-week and 39-week periods ended September 30, 2017 that did not individually or in the aggregate have a material impact on the Company’s business or its consolidated financial position, results of operations or cash flows.

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

On June 9, 2014, Navico Inc. and Navico Holding AS (collectively “Navico”) filed a complaint with the United States International Trade Commission (“ITC”) alleging the Company infringed upon three specific Navico patents relating to downscan sonar. On December 1, 2015, the ITC issued a Final Determination concluding that there was infringement by Garmin. On August 30, 2016, Navico filed a request that the ITC initiate an enforcement proceeding for alleged violations by Garmin of the previous cease and desist orders issued by the ITC. On May 26, 2017, the Administrative Law Judge issued his initial enforcement determination concluding that Garmin’s sale of certain DownVü sonar products violated the ITC’s December 2015 orders and recommended a civil penalty of $37 million. On June 13, 2017, the US Court of Appeals for the Federal Circuit (“Federal Circuit”) reversed the ITC’s December 2015 Final Determination. Specifically, the Federal Circuit ruled that two of the three patents in suit are invalid and that Garmin does not infringe upon the third patent. The ITC stayed the issuance of a Final Determination in this enforcement proceeding pending the issuance by the Federal Circuit of its mandate, which occurred on October 31, 2017. The Company believes the claims in this complaint are without merit, believes it has valid defenses, believes there is a remote likelihood that the Company may have incurred a material loss with respect to this matter, and no loss accrual has therefore been recorded.

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

On June 4, 2014, Navico filed suit in the United States District Court for the Northern District of Oklahoma alleging the Company infringed upon the same three specific Navico patents relating to downscan sonar that are the subject of their complaint filed with ITC discussed above. On January 15, 2016, the court issued an order staying this lawsuit pending the final determination of any appeal filed with the Federal Circuit concerning that ITC complaint. The Federal Circuit issued its mandate in this appeal on October 31, 2017, reversing the ITC’s December 2015 infringement ruling. The Company believes the claims in this lawsuit are without merit, believes it has valid defenses, believes there is a remote likelihood that the Company may have incurred a material loss with respect to this matter, and no loss accrual has therefore been recorded.

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 March 4, 2016, Navico filed suit in the United States District Court for the Eastern District of Texas, Marshall Division alleging the Company infringed upon two specific Navico patents relating to downscan sonar. On September 8, 2017, a jury returned a verdict finding that Garmin had willfully infringed upon those two patents and awarded damages of $38 million. The judge in this matter must now issue a final judgment which could result in damages of up to three times the original jury verdict (or up to $114 million). The final judgment could also include pre-judgment interest, post-judgment interest, and attorneys’ fees.

If the final judgment orders the Company to pay any amount of damages, the Company will appeal that decision to the Federal Circuit, based on grounds which the same court found in favor of the Company that similar Navico patents were not valid or were not infringed. The Company believes the claims in this lawsuit are without merit, is challenging the verdict, believes it has valid defenses, and will vigorously defend this matter. We believe the Federal Circuit will not uphold the validity of the asserted claims of these Navico patents, which are closely related to the claims of the patents that the Federal Circuit has already concluded are obvious and invalid in view of the prior art, and will therefore reverse the jury verdict. As the Company believes a loss in this lawsuit is not probable after any and all challenges and appeals, no loss accrual has been recorded.

In assessing the probability of a loss, we considered, among other factors, our experience and the experience of other entities in similar cases, how we intend to respond to the lawsuit, and the opinions of internal and external legal counsel that a loss is not probable, but is reasonably possible. In view of these factors, the existence of the jury verdict, the possibility of needing to appeal the final judgment and other uncertainties, the Company believes that it is reasonably possible that a loss could occur in a range from zero to up to $114 million, exclusive of pre-judgment interest, post-judgment interest, and attorneys’ fees.

Income Taxes

The Company recorded income tax expense of $38,643 in the 13-week period ended September 30, 2017, compared to income tax expense of $24,711 in the 13-week period ended September 24, 2016. The effective tax rate was 20.8% in the third quarter of 2017, compared to 16.5% in the third quarter of 2016. The 430 basis points increase to the third quarter of 2017 effective tax rate compared to the prior year quarter is primarily due to the Company’s election in February 2017 to align certain Switzerland corporate tax positions with evolving international tax initiatives, and shifts in projected income mix by jurisdiction, partially offset by the release of reserves related to uncertain tax positions due to the expiration of certain statutes of limitations during the third quarter of 2017.

The Company recorded an income tax benefit of $54,372 for the first three quarters of 2017, compared to income tax expense of $86,904 for the first three quarters of 2016. The effective tax rate was (10.8%) in the first three quarters of 2017, compared to 18.8% in the first three quarters of 2016. Excluding an income tax benefit of $168,755 due to revaluation of deferred tax assets, and the $7,275 expense due to the expiration of share-based awards (see Note 1 regarding the impacts of ASU 2016-09), the effective tax rate for the first three quarters of 2017 increased 250 basis points compared to the effective tax rate for the first three quarters of 2016. This remaining 250 basis point increase in effective tax rate was primarily due to the Company’s election in February 2017 to align certain Switzerland corporate tax positions with evolving international tax initiatives.

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 fair value on a recurring basis are summarized below:

	Fair Value Measurements as of September 30, 2017
	Total		Level 1		Level 2		Level 3
U.S. Treasury securities	$	19,859	$	-	$	19,859	$	-
Agency securities		50,975		-		50,975		-
Mortgage-backed securities		192,966		-		192,966		-
Corporate securities		866,665		-		866,665		-
Municipal securities		160,398		-		160,398		-
Other		173,159		-		173,159		-
Total	$	1,464,022	$	-	$	1,464,022	$	-

	Fair Value Measurements as of December 31, 2016
	Total		Level 1		Level 2		Level 3
U.S. Treasury securities	$	29,034	$	-	$	29,034	$	-
Agency securities		59,541		-		59,541		-
Mortgage-backed securities		230,823		-		230,823		-
Corporate securities		893,725		-		893,725		-
Municipal securities		176,168		-		176,168		-
Other		90,946		-		90,946		-
Total	$	1,480,237	$	-	$	1,480,237	$	-

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

	Available-For-Sale Securities as of September 30, 2017

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
U.S. Treasury securities	$	19,986	$	10	$	(137	)	$	19,859
Agency securities		51,594		5		(624	)		50,975
Mortgage-backed securities		197,525		23		(4,582	)		192,966
Corporate securities		876,508		721		(10,564	)		866,665
Municipal securities		161,165		329		(1,096	)		160,398
Other		174,754		10		(1,605	)		173,159
Total	$	1,481,532	$	1,098	$	(18,608	)	$	1,464,022

	Available-For-Sale Securities as of December 31, 2016

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
U.S. Treasury securities	$	29,291	$	31	$	(288	)	$	29,034
Agency securities		60,513		19		(991	)		59,541
Mortgage-backed securities		236,354		41		(5,572	)		230,823
Corporate securities		914,028		252		(20,555	)		893,725
Municipal securities		178,804		224		(2,859	)		176,169
Other		90,934		20		(9	)		90,945
Total	$	1,509,924	$	587	$	(30,274	)	$	1,480,237

The Company’s investment policy targets low risk investments with the objective of minimizing the potential risk of principal loss. The fair value of our 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 an unrealized loss shown in the table above, and it is not more likely than not that the Company will be required to sell a security before recovery of its amortized cost basis, 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 2016 and the 39-week period ending September 30, 2017, the Company did not record any material impairment charges on its outstanding securities.

The amortized cost and fair value of the securities at an unrealized loss position at September 30, 2017 were $1,140,662 and $1,122,054 respectively. Approximately 59% of securities in our portfolio were at an unrealized loss position at September 30, 2017. 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 September 30, 2017 and December 31, 2016.

	As of September 30, 2017
	Less than 12 Consecutive Months					12 Consecutive Months or Longer
	Gross Unrealized Losses			Fair Value		Gross Unrealized Losses			Fair Value
U.S. Treasury securities	$	(49	)	$	10,535	$	(88	)	$	4,835
Agency securities		(416	)		29,139		(208	)		16,441
Mortgage-backed securities		(1,486	)		73,508		(3,096	)		117,656
Corporate securities		(4,034	)		432,176		(6,530	)		238,952
Municipal securities		(298	)		54,675		(798	)		31,085
Other		(1,602	)		111,332		(3	)		1,720
Total	$	(7,885	)	$	711,365	$	(10,723	)	$	410,689

	As of December 31, 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	$	(288	)	$	24,260	$	-		$	-
Agency securities		(991	)		49,255		-			-
Mortgage-backed securities		(3,702	)		159,665		(1,870	)		64,645
Corporate securities		(18,856	)		765,712		(1,699	)		40,910
Municipal securities		(2,762	)		130,994		(97	)		6,326
Other		(3	)		4,058		(6	)		6,919
Total	$	(26,602	)	$	1,133,944	$	(3,672	)	$	118,800

The amortized cost and fair value of marketable securities at September 30, 2017, 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.

	Amortized Cost		Fair Value

Due in one year or less	$	253,879	$	253,699
Due after one year through five years		1,012,722		1,002,997
Due after five years through ten years		186,767		179,714
Due after ten years		28,164		27,612
	$	1,481,532	$	1,464,022

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 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. In December 2016, the Board of Directors authorized an extension through December 31, 2017 to purchase remaining common shares. As of September 30, 2017, the Company had repurchased 6,776 shares using cash of $299,169. There remains approximately $831 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 39-week periods ended September 30, 2017:

	13-Weeks Ended September 30, 2017
	Foreign Currency Translation Adjustment		Net unrealized gains (losses) on available- for-sale securities			Total
Balance - beginning of period	$	56,095	$	(15,948	)	$	40,147
Other comprehensive income before reclassification		5,804		519			6,323
Amounts reclassified from accumulated other comprehensive income		-		17			17
Net current-period other comprehensive income		5,804		536			6,340
Balance - end of period	$	61,899	$	(15,412	)	$	46,487

	39-Weeks Ended September 30, 2017
	Foreign Currency Translation Adjustment			Net unrealized gains (losses) on available- for-sale securities			Total
Balance - beginning of period	$	(9,411	)	$	(27,350	)	$	(36,761	)
Other comprehensive income before reclassification		71,310			11,378			82,688
Amounts reclassified from accumulated other comprehensive income		-			560			560
Net current-period other comprehensive income		71,310			11,938			83,248
Balance - end of period	$	61,899		$	(15,412	)	$	46,487

The following provides required disclosure of reporting reclassifications out of AOCI for the 13-week and 39-week periods ended September 30, 2017:

13-Weeks Ended September 30, 2017
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	$	(10	)	Other income (expense)
		(7	)	Income tax benefit (provision)
	$	(17	)	Net of tax

39-Weeks Ended September 30, 2017
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	$	(594	)	Other income (expense)
		34		Income tax benefit (provision)
	$	(560	)	Net of tax

11.

Recently Issued Accounting Pronouncements

Revenue from Contracts with Customers

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. The FASB has issued several standards amending or relating to ASU 2014-09 (collectively, the “new revenue standards”). The effective date of ASU 2014-09 is for fiscal years, and interim periods within those years, beginning on or after December 15, 2017. The Company does not intend to early adopt, and therefore will adopt in the Company’s fiscal year ending December 29, 2018. The Company plans to adopt the new revenue standards using the full retrospective method to restate each prior reporting period presented.

Our evaluation of the new revenue standards, as it relates to possible differences in the timing of revenue recognition for our contracts, is substantially complete. Based on our evaluation of the new revenue standards, our recognition will be consistent with our current accounting policies except for certain arrangements within the Company’s auto segment.

A portion of the Company’s auto segment contracts are currently accounted for under Accounting Standards Codification Topic 985-605 Software-Revenue Recognition (Topic 985-605). Under Topic 985-605, the Company defers all elements of multiple-element software arrangements if vendor-specific objective evidence of fair value (VSOE) cannot be established for an undelivered element (e.g. map updates). In applying the new revenue standards to certain contracts that include both software licenses and map updates, we will recognize the portion of revenue related to the software license at the time of delivery rather than ratably over the map update period.

Additionally, for certain multiple-element arrangements within the Company’s auto segment, the Company’s current policy is to allocate consideration to traffic services and recognize it ratably over the estimated life of the underlying product. Under the new revenue standards, we will recognize revenue related to certain traffic services at the time of hardware and/or software delivery. Specifically, the new revenue standards emphasize the timing of the Company’s performance, and upon delivery of the navigation device and/or software, the Company has performed its obligation with respect to the design and production of the product to receive and interpret the broadcast traffic signal for the benefit of the end user.

The changes in accounting policy described above will collectively result in reductions to deferred costs (asset) and deferred revenue (liability) balances and will accelerate the recognition of revenues and deferred costs in the auto segment going forward. The Company is currently finalizing its assessment of these impacts of the new revenue standards to the Consolidated Financial Statements. The new revenue standards require enhanced disclosures regarding contract assets and liabilities, and increased disaggregation of revenues, among other enhanced disclosure requirements. We are in the process of implementing changes to processes and internal controls for the new revenue standards.

Financial Instruments – Recognition, Measurement, Presentation, and Disclosure

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.

Leases

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.

Statement of Cash Flows

In August 2016, the FASB issued Accounting Standards Update No. 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments (“ASU 2016-15”), which adds or clarifies guidance on the classification of certain cash receipts and payments in the statement of cash flows. The standard addresses eight specific cash flow issues with the objective of reducing diversity in practice. ASU 2016-15 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2017. Early adoption is permitted. The Company is currently evaluating the impact of adopting the new standard on its consolidated financial statements.

Income Taxes

In October 2016, the FASB issued Accounting Standards Update No. 2016-16, Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other than Inventory (“ASU 2016-16”), which requires recognition of the income tax consequences of an intra-entity transfer of an asset other than inventory when the transfer occurs. ASU 2016-16 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2017. Early adoption is permitted. The Company is currently evaluating the impact of adopting the new standard on its consolidated financial statements.

Receivables – Nonrefundable Fees and Other Costs

In March 2017, the FASB issued Accounting Standards Update No. 2017-08, Receivables – Nonrefundable Fees and Other Costs (Topic 310-20): Premium Amortization on Purchased Callable Debt Securities (“ASU 2017-08”), which shortens the amortization period for certain callable debt securities held at a premium, requiring the premium to be amortized to the earliest call date. Callable debt securities held at a discount continue to be amortized to maturity. ASU 2017-08 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2019. Early adoption is permitted. The Company is currently evaluating the impact of adopting the new standard on its consolidated financial statements.

12.

Subsequent Events

On October 26, 2017, the Company acquired the shares of Navionics S.p.A., a privately held worldwide provider of electronic navigational charts and mobile applications for the marine industry. This acquisition was not material.

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 31, 2016. 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 31, 2016.

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 percent of net sales during the periods shown (the table may not foot due to rounding):

	13-Weeks Ended
	September 30, 2017			September 24, 2016

Net sales		100	%		100	%
Cost of goods sold		42	%		44	%
Gross profit		58	%		56	%
Advertising expense		4	%		5	%
Selling, general and administrative expense		14	%		13	%
Research and development expense		17	%		16	%
Total operating expense		36	%		34	%
Operating income		23	%		22	%
Other income (expense)		2	%		(1	)%
Income before income taxes		25	%		21	%
Income tax (benefit) provision		5	%		3	%
Net income		20	%		17	%

	39-Weeks Ended
	September 30, 2017			September 24, 2016

Net sales		100	%		100	%
Cost of goods sold		42	%		44	%
Gross profit		58	%		56	%
Advertising expense		5	%		5	%
Selling, general and administrative expense		14	%		14	%
Research and development expense		17	%		16	%
Total operating expense		36	%		35	%
Operating income		22	%		22	%
Other income (expense)		1	%		0	%
Income before income taxes		23	%		21	%
Income tax (benefit) provision		(2	)%		4	%
Net income		25	%		17	%

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 to the Condensed Consolidated Financial Statements 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.

Comparison of 13-weeks ended September 30, 2017 and September 24, 2016

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

Net Sales

	13-weeks ended September 30, 2017					13-weeks ended September 24, 2016					Year over Year
	Net Sales		% of Revenues			Net Sales		% of Revenues			$ Change			% Change
Outdoor	$	184,937		25	%	$	141,006		19	%	$	43,931			31	%
Fitness		167,147		23	%		189,161		26	%		(22,014	)		-12	%
Marine		77,312		10	%		70,010		10	%		7,302			10	%
Auto		189,053		25	%		214,637		30	%		(25,584	)		-12	%
Aviation		124,628		17	%		107,436		15	%		17,192			16	%
Total	$	743,077		100	%	$	722,250		100	%	$	20,827			3	%

Net sales increased 3% for the 13-week period ended September 30, 2017 when compared to the year-ago quarter. The outdoor, aviation, marine, and fitness segments collectively increased by 9%, contributing 75% of total revenue. Auto was the largest portion of our revenue mix at 25% in the third quarter of 2017 compared to 30% in the third quarter of 2016.

Total unit sales decreased to 3,492 in the third quarter of 2017 from 3,848 in the same period of 2016.

Auto segment revenue decreased 12% from the year-ago quarter, primarily due to the ongoing PND market contraction. Revenues in the fitness segment decreased 12% from the year-ago quarter driven by the general decline of the basic activity tracker market and the timing of product introductions. The marine increase of 10% is primarily due to strong chartplotter and fishfinder sales in the current quarter. Revenues in the outdoor segment increased 31% from the year-ago quarter primarily driven by significant growth in the wearable category. Aviation revenues increased 16% when compared to the year-ago quarter, driven by both strong aftermarket and OEM sales.

Cost of Goods Sold

	13-weeks ended September 30, 2017					13-weeks ended September 24, 2016					Year over Year
	Cost of Goods		% of Revenues			Cost of Goods		% of Revenues			$ Change			% Change
Outdoor	$	66,762		36	%	$	52,509		37	%	$	14,253			27	%
Fitness		71,012		42	%		85,798		45	%		(14,786	)		-17	%
Marine		32,738		42	%		30,119		43	%		2,619			9	%
Auto		105,092		56	%		120,999		56	%		(15,907	)		-13	%
Aviation		33,808		27	%		26,845		25	%		6,963			26	%
Total	$	309,412		42	%	$	316,270		44	%	$	(6,858	)		-2	%

Third quarter 2017 cost of goods sold was $6.9 million or 2% lower than the prior year quarter. This decrease in cost of goods sold dollars, combined with the increase in revenues discussed above, resulted in a 220 basis point decrease in cost of goods sold as a percent of revenues compared to the year-ago quarter.

In the auto segment, the decline in cost of goods sold was largely consistent with the segment revenue declines. In the marine segment, the increase in cost of goods sold was largely consistent with the segment revenue increases. In the outdoor and fitness segments, the decreases in cost of goods sold as a percent of revenue resulted from a shift in product mix toward higher margin products. In the aviation segment, the increase in cost of goods as a percentage of revenue resulted primarily from slightly increased warranty costs compared to the year-ago quarter.

Gross Profit

	13-weeks ended September 30, 2017					13-weeks ended September 24, 2016					Year over Year
	Gross Profit		% of Revenues			Gross Profit		% of Revenues			$ Change			% Change
Outdoor	$	118,175		64	%	$	88,497		63	%	$	29,678			34	%
Fitness		96,135		58	%		103,363		55	%		(7,228	)		-7	%
Marine		44,574		58	%		39,891		57	%		4,683			12	%
Auto		83,961		44	%		93,638		44	%		(9,677	)		-10	%
Aviation		90,820		73	%		80,591		75	%		10,229			13	%
Total	$	433,665		58	%	$	405,980		56	%	$	27,685			7	%

Gross profit dollars in the third quarter of 2017 increased 7% while gross margin increased 220 basis points compared to the third quarter of 2016. Gross margin remained relatively flat across all segments, except for fitness and aviation, which increased and decreased, respectively, as discussed above.

Advertising Expense

	13-weeks ended September 30, 2017					13-weeks ended September 24, 2016
	Advertising					Advertising					Year over Year
	Expense		% of Revenues			Expense		% of Revenues			$ Change			% Change
Outdoor	$	8,092		4	%	$	6,459		5	%	$	1,633			25	%
Fitness		14,089		8	%		14,616		8	%		(527	)		-4	%
Marine		2,618		3	%		2,941		4	%		(323	)		-11	%
Auto		6,340		3	%		6,992		3	%		(652	)		-9	%
Aviation		1,310		1	%		1,948		2	%		(638	)		-33	%
Total	$	32,449		4	%	$	32,956		5	%	$	(507	)		-2	%

Advertising expense decreased 2% in absolute dollars and was relatively flat as a percent of revenues compared to the year-ago quarter. The overall decrease in absolute dollars was driven primarily by decreases cooperative advertising, partially offset by an increase in outdoor media.

Selling, General and Administrative Expense

	13-weeks ended September 30, 2017					13-weeks ended September 24, 2016
	Selling, General &					Selling, General &					Year over Year
	Admin. Expenses		% of Revenues			Admin. Expenses		% of Revenues			$ Change			% Change
Outdoor	$	27,574		15	%	$	20,074		14	%	$	7,500			37	%
Fitness		27,858		17	%		27,294		14	%		564			2	%
Marine		8,681		11	%		13,041		19	%		(4,360	)		-33	%
Auto		30,231		16	%		30,875		14	%		(644	)		-2	%
Aviation		7,450		6	%		5,675		5	%		1,775			31	%
Total	$	101,794		14	%	$	96,959		13	%	$	4,835			5	%

Selling, general and administrative expense increased 5% in absolute dollars and was relatively flat as a percent of revenues compared to the year-ago quarter. The outdoor and aviation segment increases were relatively flat as a percent of revenues. The increase as a percent of revenues in the fitness segment was primarily attributable to information technology and selling-related costs. The auto segment increase as a percent of revenues, and the marine segment decrease as a percent of revenues are primarily due to legal related costs.

Research and Development Expense

	13-weeks ended September 30, 2017					13-weeks ended September 24, 2016
	Research &					Research &					Year over Year
	Development		% of Revenues			Development		% of Revenues			$ Change		% Change
Outdoor	$	14,699		8	%	$	12,693		9	%	$	2,006		16	%
Fitness		20,696		12	%		16,679		9	%		4,017		24	%
Marine		14,855		19	%		13,577		19	%		1,278		9	%
Auto		31,419		17	%		30,976		14	%		443		1	%
Aviation		47,963		38	%		42,524		40	%		5,439		13	%
Total	$	129,632		17	%	$	116,449		16	%	$	13,183		11	%

Research and development expense increased 11% primarily due to engineering personnel costs related to our wearable product offerings and aviation. In absolute dollars, research and development costs increased $13.2 million when compared with the year-ago quarter and increased 130 basis points 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 September 30, 2017					13-weeks ended September 24, 2016					Year over Year
	Operating Income		% of Revenues			Operating Income		% of Revenues			$ Change			% Change
Outdoor	$	67,810		37	%	$	49,271		35	%	$	18,539			38	%
Fitness		33,492		20	%		44,774		24	%		(11,282	)		-25	%
Marine		18,420		24	%		10,332		15	%		8,088			78	%
Auto		15,971		8	%		24,795		12	%		(8,824	)		-36	%
Aviation		34,097		27	%		30,444		28	%		3,653			12	%
Total	$	169,790		23	%	$	159,616		22	%	$	10,174			6	%

Operating income increased 6% in absolute dollars and increased 70 basis points as a percent of revenue when compared to the third quarter of 2016. The growth in operating income on an absolute dollar and percent of revenue basis resulted from revenue growth and an increase in gross margin percent, partially offset by increased operating expenses as a percent of revenue, as discussed above.

Other Income (Expense)

	13-weeks ended			13-weeks ended
	September 30, 2017			September 24, 2016
Interest income	$	9,207		$	8,226
Foreign currency gains (losses)		8,579			(19,421	)
Other		(1,520	)		1,344
Total	$	16,266		$	(9,851	)

The average return on cash and investments during the third quarter of 2017 was 1.6% compared to 1.5% during the same quarter of 2016. Interest income increased primarily due to slightly higher yields on fixed-income securities.

Foreign currency gains and losses for the Company are typically driven by movements in the Taiwan Dollar, Euro, and British Pound Sterling 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., and the Euro is the functional currency of most of our other European subsidiaries, although some transactions and balances are denominated in British Pounds. The majority of the Company’s consolidated foreign currency gain or loss is typically driven by the significant cash and marketable securities, receivables and payables held in a currency other than the functional currency at a given legal entity. Due to the relative size of the entities using a functional currency other than the Taiwan Dollar, Euro, and British Pound Sterling, currency fluctuations related to these entities are not expected to have a material impact on the Company’s financial statements.

The $8.6 million currency gain recognized in the third quarter of 2017 was primarily due to the weakening of the U.S. Dollar against the Euro and the British Pound Sterling, partially offset by the U.S. Dollar weakening against the Taiwan Dollar within the 13-weeks ended September 30, 2017. During this period, the U.S. Dollar weakened 3.4% against the Euro and 2.8% against the British Pound Sterling, resulting in gains of $8.0 million and $0.7 million, respectively, while the U.S. Dollar weakened 0.3% against the Taiwan Dollar, resulting in a loss of $1.6 million. The remaining net currency gain of $1.5 million was related to other currencies and timing of transactions.

The $19.4 million currency loss recognized in the third quarter of 2016 was primarily due to the weakening of the U.S. Dollar against the Taiwan Dollar within the 13-weeks ended September 24, 2016. During this period, the U.S. Dollar weakened 3.5% against the Taiwan Dollar, resulting in a loss of $20.9 million, while the U.S. Dollar weakened 1.0% against the Euro, resulting in a gain of $2.6 million. The remaining net currency loss of $1.1 million was related to other currencies and timing of transactions.

Income Tax (Benefit) Provision

The Company recorded income tax expense of $38.6 million in the 13-week period ended September 30, 2017, compared to income tax expense of $24.7 million in the 13-week period ended September 24, 2016. The effective tax rate was 20.8% in the third quarter of 2017, compared to 16.5% in the third quarter of 2016. The 430 basis points increase to the third quarter of 2017 effective tax rate compared to the prior year quarter is primarily due to the Company’s election in February 2017 to align certain Switzerland corporate tax positions with evolving international tax initiatives, and shifts in projected income mix by jurisdiction, partially offset by the release of reserves related to uncertain tax positions due to the expiration of certain statutes of limitations during the third quarter of 2017.

Net Income

As a result of the above, net income for the 13-weeks ended September 30, 2017 was $147.4 million compared to $125.1 million for the 13-week period ended September 24, 2016, an increase of $22.4 million.

Comparison of 39-Weeks Ended September 30, 2017 and 39-Weeks Ended September 24, 2016

Net Sales

	39-weeks ended September 30, 2017					39-weeks ended September 24, 2016					Year over Year
	Net Sales		% of Revenues			Net Sales		% of Revenues			$ Change			% Change
Outdoor	$	495,589		23	%	$	370,929		17	%	$	124,660			34	%
Fitness		485,999		22	%		544,434		26	%		(58,435	)		-11	%
Marine		290,302		13	%		264,489		12	%		25,813			10	%
Auto		555,059		25	%		655,963		30	%		(100,904	)		-15	%
Aviation		371,559		17	%		322,083		15	%		49,476			15	%
Total	$	2,198,508		100	%	$	2,157,898		100	%	$	40,610			2	%

Net sales increased 2% for the 39-week period ended September 30, 2017 when compared to the year-ago period. All segments had an increase in revenue except for auto and fitness. Auto was the largest portion of our revenue mix at 25% in the first three quarters of 2017 compared to 30% in the same period of 2016.

Total unit sales decreased to 10,495 in the first three quarters of 2017 from 11,374 in the same period of 2016.

Auto segment revenue decreased 15% from the year-ago period, primarily due to the ongoing PND market contraction. Revenues in the fitness segment decreased 11% from the year-ago period driven by the general decline of the basic activity tracker market and the timing of product introductions. Outdoor, marine, and aviation revenues increased 34%, 10%, and 15%, respectively, when compared to the year-ago period. Growth in outdoor was driven by the significant growth in the wearable category. Our marine segment growth was distributed broadly across most product categories. Aviation revenues increased primarily due to growth in aftermarket sales.

Cost of Goods Sold

	39-weeks ended September 30, 2017					39-weeks ended September 24, 2016					Year over Year
	Cost of Goods		% of Revenues			Cost of Goods		% of Revenues			$ Change			% Change
Outdoor	$	176,132		36	%	$	138,277		37	%	$	37,855			27	%
Fitness		209,985		43	%		248,971		46	%		(38,986	)		-16	%
Marine		123,612		43	%		115,935		44	%		7,677			7	%
Auto		308,128		56	%		363,193		55	%		(55,065	)		-15	%
Aviation		97,005		26	%		82,734		26	%		14,271			17	%
Total	$	914,862		42	%	$	949,110		44	%	$	(34,248	)		-4	%

Cost of goods sold decreased 4% in absolute dollars for the 39-weeks ended September 30, 2017 when compared to the year-ago period. This decrease in cost of goods sold dollars, combined with the increase in revenues discussed above, resulted in a 240 basis point decrease in cost of goods sold as a percent of revenues compared to the year-ago quarter.

In the auto segment, the cost of goods decline was largely consistent with the segment revenue decline. In the outdoor and fitness segments, the decreases in cost of goods sold as a percent of revenues resulted from a shift in product mix toward higher margin products. The marine and aviation segment increases in cost of goods sold were largely consistent with the segment revenue increases.

Gross Profit

	39-weeks ended September 30, 2017					39-weeks ended September 24, 2016					Year over Year
	Gross Profit		% of Revenues			Gross Profit		% of Revenues			$ Change			% Change
Outdoor	$	319,457		64	%	$	232,652		63	%	$	86,805			37	%
Fitness		276,014		57	%		295,463		54	%		(19,449	)		-7	%
Marine		166,690		57	%		148,554		56	%		18,136			12	%
Auto		246,931		44	%		292,770		45	%		(45,839	)		-16	%
Aviation		274,554		74	%		239,349		74	%		35,205			15	%
Total	$	1,283,646		58	%	$	1,208,788		56	%	$	74,858			6	%

Gross profit dollars in the 39-weeks ended September 30, 2017 increased 6% while gross profit margin increased 240 basis points compared to the year-ago period. Growth in sales of higher margin segments contributed to the increase in gross profit dollars and gross margin percentage. Fitness gross margin increased to 57%, primarily due to product mix. All other segment gross margin rates are relatively consistent between fiscal periods.

Advertising Expenses

	39-weeks ended September 30, 2017					39-weeks ended September 24, 2016
	Advertising					Advertising					Year over Year
	Expense		% of Revenues			Expense		% of Revenues			$ Change			% Change
Outdoor	$	26,671		5	%	$	18,319		5	%	$	8,352			46	%
Fitness		45,235		9	%		51,844		10	%		(6,609	)		-13	%
Marine		12,620		4	%		12,267		5	%		353			3	%
Auto		17,236		3	%		21,790		3	%		(4,554	)		-21	%
Aviation		4,221		1	%		5,221		2	%		(1,000	)		-19	%
Total	$	105,983		5	%	$	109,441		5	%	$	(3,458	)		-3	%

Advertising expense decreased 3% in absolute dollars and was relatively flat as a percent of revenues compared to the year-ago period. The decrease in absolute dollars was primarily in fitness and auto, driven primarily by decreases in cooperative advertising and media spending. This was partially offset by an increase in outdoor media.

Selling, General and Administrative Expenses

	39-weeks ended September 30, 2017					39-weeks ended September 24, 2016
	Selling, General &					Selling, General &					Year over Year
	Admin. Expenses		% of Revenues			Admin. Expenses		% of Revenues			$ Change			% Change
Outdoor	$	74,182		15	%	$	54,321		15	%	$	19,861			37	%
Fitness		81,537		17	%		82,104		15	%		(567	)		-1	%
Marine		48,798		17	%		46,579		18	%		2,219			5	%
Auto		83,620		15	%		94,665		14	%		(11,045	)		-12	%
Aviation		20,958		6	%		18,577		6	%		2,381			13	%
Total	$	309,095		14	%	$	296,246		14	%	$	12,849			4	%

Selling, general and administrative expense increased 4% in absolute dollars and was relatively flat as a percent of revenues compared to the year-ago period. The absolute dollar increase was primarily attributable to legal costs and information technology costs. Fitness increased as a percent of revenues primarily due to increased information technology and selling-related costs. Variances by segment are primarily due to the allocation of certain selling, general and administrative expenses based on percent of total revenues.

Research and Development Expense

	39-weeks ended September 30, 2017					39-weeks ended September 24, 2016
	Research &					Research &					Year over Year
	Development		% of Revenues			Development		% of Revenues			$ Change		% Change
Outdoor	$	42,060		8	%	$	34,291		9	%	$	7,769		23	%
Fitness		59,790		12	%		47,093		9	%		12,697		27	%
Marine		44,412		15	%		40,536		15	%		3,876		10	%
Auto		95,509		17	%		93,331		14	%		2,178		2	%
Aviation		137,312		37	%		123,757		38	%		13,555		11	%
Total	$	379,083		17	%	$	339,008		16	%	$	40,075		12	%

Research and development expense increased 12% primarily due to engineering personnel costs related to our wearable product offerings and aviation. In absolute dollars, research and development costs increased $40.1 million when compared with the year-ago period, and increased 150 basis points 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

	39-weeks ended September 30, 2017					39-weeks ended September 24, 2016					Year over Year
	Operating Income		% of Revenues			Operating Income		% of Revenues			$ Change			% Change
Outdoor	$	176,544		36	%	$	125,721		34	%	$	50,823			40	%
Fitness		89,452		18	%		114,422		21	%		(24,970	)		-22	%
Marine		60,860		21	%		49,172		19	%		11,688			24	%
Auto		50,566		9	%		82,984		13	%		(32,418	)		-39	%
Aviation		112,063		30	%		91,794		29	%		20,269			22	%
Total	$	489,485		22	%	$	464,093		22	%	$	25,392			5	%

Operating income increased 5% in absolute dollars and increased 80 basis points as a percent of revenue when compared to the year-ago period. The growth in operating income on an absolute dollar and percent of revenue basis resulted from revenue growth and an increase in gross margin percent, partially offset by increased operating expenses as a percent of revenue, as discussed above.

Other Income (Expense)

	39-weeks ended			39-weeks ended
	September 30, 2017			September 24, 2016
Interest income	$	26,931		$	24,109
Foreign currency gains (losses)		(13,808	)		(30,003	)
Other		(805	)		2,914
Total	$	12,318		$	(2,980	)

The average returns on cash and investments during the 39-weeks ended September 30, 2017 and the 39-weeks ended September 24, 2016 were 1.5% and 1.4%, respectively. Interest income increased primarily due to slightly higher yields on fixed-income securities.

The $13.8 million currency loss recognized in the first three quarters of 2017 was primarily due to the weakening of the U.S. Dollar against the Taiwan Dollar, partially offset by the U.S. Dollar weakening against the Euro, and the British Pound Sterling within the 39-weeks ended September 30, 2017. During this period, the U.S. Dollar weakened 7.1% against the Taiwan Dollar, resulting in a loss of $43.1 million, while the U.S. Dollar weakened 12.3% against the Euro and 8.6% against the British Pound Sterling, resulting in gains of $22.2 million and $4.2 million, respectively. The remaining net currency gain of $2.9 million was related to other currencies and timing of transactions.

The $30.0 million currency loss recognized in the first three quarters of 2016 was primarily due to the weakening of the U.S. Dollar against the Taiwan Dollar within the 39-weeks ended September 24, 2016. During this period, the U.S. Dollar weakened 5.0% against the Taiwan Dollar, resulting in a loss of $32.1 million, while the U.S. Dollar weakened 2.3% against the Euro, resulting in a gain of $3.3 million. The remaining net currency loss of $1.2 million was related to other currencies and timing of transactions.

Income Tax Provision

The Company recorded an income tax benefit of $54.4 million in the first three quarters of 2017, compared to income tax expense of $86.9 million in the first three quarters of 2016. The effective tax rate was (10.8%) for the first three quarters of 2017, compared to 18.8% for the first three quarters of 2016. In the first three quarters of 2017, a $168.8 million income tax benefit was recognized due to revaluation of deferred tax assets. The Company also recognized income tax expense of $7.3 million associated with the expiration of share-based awards in the first three quarters of 2017. Prior to the adoption of ASU 2016-09 in fiscal 2017, the tax effect of such expirations would have been recorded to additional paid-in capital, rather than as a discrete tax item. Excluding the effect of these discrete tax items, the effective tax rate for the first three quarters of 2017 increased 250 basis points compared to the effective tax rate in the first three quarters of 2016. This remaining 250 basis point increase in effective tax rate was primarily due to the Company’s election in February 2017 to align certain Switzerland corporate tax positions with evolving international tax initiatives.

Net Income

As a result of the various factors noted above, net income increased 49% to $556.2 million for the 39-weeks ended September 30, 2017 compared to $374.2 million for the 39-weeks ended September 24, 2016.

Liquidity and Capital Resources

Operating Activities

	39-Weeks Ended
	September 30,		September 24,
(In thousands)	2017		2016
Net cash provided by operating activities	$	462,577	$	492,366

The $29.8 million decrease in cash provided by operating activities in the first three quarters of 2017 compared to the first three quarters of 2016 was primarily due to the following:

the impact of deferred income taxes providing $137.0 million less cash, primarily related to the revaluation of certain Switzerland deferred tax assets as discussed in the Results of Operations section above, partially offset by the utilization of certain deferred tax assets

inventories and related provisions for obsolete and slow moving inventories providing $50.1 million less cash primarily due to higher raw materials and work-in-process balances in anticipation of longer lead times for certain raw material components, new product introductions, and continued strong demand for certain key product categories

other current and noncurrent liabilities providing $39.3 million less cash primarily due to timing of payments for salaries and benefits payable, accrued sales program costs, and accrued advertising expenses

the impact of income taxes payable providing $15.4 million less cash due to the timing of disbursements and

other current and noncurrent assets providing $13.0 million less cash primarily related to the timing of prepayments for indirect taxes and equipment

Partially offset by:

net income increasing $182.0 million as discussed in the Results of Operations section above

deferred revenue providing a $19.4 million larger working capital benefit

accounts payable providing $16.2 million more cash primarily due to the timing of disbursements and

accounts receivable providing $8.6 million more cash primarily due to the timing of collections

Investing Activities

	39-Weeks Ended
	September 30,			September 24,
(In thousands)	2017			2016
Net cash used in investing activities	$	(89,086	)	$	(75,934	)

The $13.2 million increase in cash used in investing activities in the first three quarters of 2017 compared to the first three quarters of 2016 was primarily due to the following:

increased purchases of property and equipment of $43.1 million and

decreased net redemptions of marketable securities of $15.7 million

Partially offset by:

decreased cash payments for acquisitions of $49.7 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 returns on cash and investments during the first three quarters of 2017 and 2016 were approximately 1.5% and 1.4%, respectively.

Financing Activities

	39-Weeks Ended
	September 30,			September 24,
(In thousands)	2017			2016
Net cash used in financing activities	$	(355,112	)	$	(344,161	)

The $11.0 million increase in cash used in financing activities in the first three quarters of 2017 compared to the first three quarters of 2016 was primarily due to the following:

increased purchases of treasury stock of $9.3 million under our share repurchase authorization and

increased purchases of treasury stock of $3.4 million related to equity awards

Our declared dividend has increased from $0.45 per share for the eight calendar quarters beginning in June 2012 to $0.48 per share for the four calendar quarters beginning in June 2014 to $0.51 per share for the twelve quarters beginning in June 2015.

We primarily 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.

Critical Accounting Policies and Estimates

General

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

For a description of the significant accounting policies and methods used in the preparation of the Company’s condensed consolidated financial statements, refer to Note 2, “Summary of Significant Accounting Policies” in the Notes to the Consolidated Financial Statements in Part II, Item 8 and “Critical Accounting Policies and Estimates” in Part II, Item 7 of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2016. There were no material changes to the Company’s critical accounting policies and estimates, other than the following accounting policy which became a critical accounting policy, during the 13-week and 39-week periods ended September 30, 2017.

Legal and Other Contingencies

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. We evaluate, on a quarterly and annual basis, developments in legal proceedings, investigations, claims, and other loss contingencies that could affect any required accrual or disclosure or estimate of reasonably possible loss or range of loss. An estimated loss from a loss contingency is accrued by a charge to income if it is probable that an asset has been impaired or a liability has been incurred and the amount of the loss can be reasonably estimated. If a range of loss is estimated, and some amount within that range appears to be a better estimate than any other amount within that range, then that amount is accrued. If no amount within the range can be identified as a better estimate than any other amount, the Company accrues the minimum amount in the range.

If an outcome unfavorable to the Company is determined to be probable, but the amount of loss cannot be reasonably estimated or is determined to be reasonably possible, but not probable, we disclose the nature of the contingency and an estimate of the possible loss or range of loss or a statement that such an estimate cannot be made. The Company’s aggregate range of reasonably possible losses includes (1) matters where a liability has been accrued and there is a reasonably possible loss in excess of the amount accrued for that liability, and (2) matters where a loss is believed to be reasonably possible, but not probable, and a liability therefore has not been accrued. This aggregate range only represents the Company’s estimate of reasonably possible losses and does not represent the Company’s maximum loss exposure. In assessing the probability of an outcome in a lawsuit, claim or assessment that could be unfavorable to the Company, we consider the following factors, among others: a) the nature of the litigation, claim, or assessment; b) the progress of the case; c) the opinions or views of legal counsel and other advisers; d) our experience in similar cases; e) the experience of other entities in similar cases; and f) how we intend to respond to the lawsuit, claim, or assessment. Costs incurred in defending lawsuits, claims or assessments are expensed as incurred.

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 31, 2016. There have been no material changes during the 13-week and 39-week periods ended September 30, 2017 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 September 30, 2017, 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 September 30, 2017 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 September 30, 2017 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 31, 2016 and the Company’s Quarterly Report on Form 10-Q for the fiscal quarter ended July 1, 2017.

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

On October 24, 2017, the U.S. Court of Appeals for the Federal Circuit (the “Federal Circuit”) denied Navico’s combined petition for panel rehearing and rehearing en banc. On October 31, 2017, the Federal Circuit issued its mandate confirming their June 2017 decisions holding that all asserted claims of the ‘840 patent and the ‘550 patent are invalid in view of the prior art and confirming that Garmin does not infringe the ‘499 patent. Although there can be no assurance that an unfavorable outcome of this litigation would not have a material adverse effect on our operating results, liquidity or financial position, Garmin believes that the claims in this lawsuit are without merit and intends to vigorously defend this action.

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

A jury trial took place on September 5-8, 2017. On September 7, 2017, during the trial, the court granted Garmin’s motion for judgment as a matter of law dismissing Navico’s claim for false advertising. On September 8, 2017, the jury returned a verdict finding that Navico had proven infringement of the ‘022 and ‘168 patents, Garmin’s infringement was willful, and Navico should be awarded damages of $38 million. On October 10, 2017, Navico filed post-trial motions. On October 20, 2017, Garmin filed a motion for judgment as a matter of law and/or a motion for a new trial On October 23, 2017, Garmin filed its responses to Navico’s post-trial motions. All post-trial motions are scheduled for oral argument on November 28, 2017. Although there can be no assurance that an unfavorable outcome of this litigation would not have a material adverse effect on our operating results, liquidity or financial position, Garmin believes that the claims in this lawsuit are without merit and intends to vigorously defend this lawsuit.

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

On October 27, 2017 the parties entered into a settlement agreement pursuant to which this lawsuit will be dismissed.

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 31, 2016. There have been no material changes during the 13-week and 39-week periods ended September 30, 2017 in the risks described in our Annual Report on Form 10-K. 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.

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. In December 2016, the Board of Directors authorized an extension through December 31, 2017 to purchase remaining common shares. The following table lists the Company’s share purchases during the third quarter of 2017:

Period	Total # of Shares Purchased		Average Price Paid Per Share		Maximum Number of Shares (or Approx. Dollar Value of Shares in thousands) That May Yet be Purchased Under the Plan
July 2, 2017 - July 29, 2017		0	$	0.00	$	11,397
July 30, 2017 - August 26, 2017		125,201	$	51.65	$	4,930
August 27, 2017 - September 30, 2017		79,270	$	51.71	$	831
Total		204,471	$	51.68	$	831

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: November 1, 2017

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