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, contain 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 Part II, Item 1A of this Quarterly Report on Form 10-Q and in the Company’s Annual Report on Form 10-K for the year ended December 26, 2020. This report has been filed with the Securities and Exchange Commission (the “SEC” or the “Commission”) in Washington, D.C. and can be obtained by contacting the SEC’s public reference operations or obtaining it through the SEC’s website at http://www.sec.gov. Readers are strongly encouraged to consider those factors when evaluating any forward-looking statement concerning the Company. The Company will not update any forward-looking statements in this Quarterly Report to reflect future events or developments.

The information contained in this Management’s Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with the Condensed Consolidated Financial Statements and Notes thereto included in this Form 10-Q and the audited financial statements and notes thereto in the Company’s Annual Report on Form 10-K for the year ended December 26, 2020.

Unless otherwise indicated, amounts set forth in the discussion below are in thousands.

Company Overview

The Company is a leading worldwide provider of wireless devices and applications that are designed for people who live an active lifestyle, many of which feature Global Positioning System (GPS) navigation. We are organized in the six operating segments of fitness, outdoor, aviation, marine, consumer auto, and auto OEM. The operating segments offer products through our network of subsidiary distributors and independent dealers and distributors, our own webshop, as well as through various auto, aviation, and marine original equipment manufacturers (OEMs). Each of the operating segments is managed separately.

Business Environment Update

The COVID-19 pandemic has created disruption and uncertainty in the global economy and has affected our business, suppliers, and customers. The pandemic had an unfavorable impact on net sales and profitability of our aviation and auto segments during 2020, however, both segments have trended positively during 2021. We believe net sales and profitability of our fitness, outdoor, and marine segments have benefited from a shift in consumer behavior and demand toward the products these segments offer, which has continued during 2021.

Our global supply chain is routinely subject to component shortages, increased lead times, cost fluctuations, and logistics constraints. These factors have been further amplified by the pandemic, and we expect these supply chain challenges to continue through at least the end of calendar year 2021.

The current business environment may evolve in ways that could impact our operations and financial results. Further, the nature and degree of the effects of the pandemic and supply chain challenges over time remains uncertain. Refer to Part II, Item 1A, “Risk Factors” of this Quarterly Report for further discussion of the risks and uncertainties facing our Company.

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								39-Weeks Ended
		September 25, 2021				September 26, 2020				September 25, 2021				September 26, 2020
Net sales			100	%			100	%			100	%			100	%
Cost of goods sold			42	%			40	%			41	%			40	%
Gross profit			58	%			60	%			59	%			60	%
Advertising			3	%			3	%			3	%			3	%
Selling, general and administrative			14	%			13	%			14	%			15	%
Research and development			18	%			16	%			17	%			18	%
Total operating expenses			35	%			32	%			34	%			36	%
Operating income			24	%			29	%			25	%			24	%
Other income (expense)			(1	)%			2	%			(0	)%			1	%
Income before income taxes			23	%			30	%			25	%			25	%
Income tax provision			1	%			2	%			3	%			2	%
Net income			22	%			28	%			22	%			23	%

The segment table located in Note 4 to the Condensed Consolidated Financial Statements sets forth the Company’s results of operations including net sales, gross profit, and operating income for each of the Company’s five reported segments during the periods shown, as well as supplemental information for the consumer auto and auto OEM operating segments that management believes is useful. For each line item in the table, the total of the fitness, outdoor, aviation, marine, and auto segments’ amounts equals the amount in the Condensed Consolidated Statements of Income included in Item 1.

Comparison of 13-Weeks ended September 25, 2021 and September 26, 2020

Net Sales

Net Sales		13-Weeks Ended September 25, 2021				Year-over-Year Change				13-Weeks Ended September 26, 2020
Fitness		$	342,316				4	%		$	328,446
Percentage of Total Net Sales			29	%							29	%
Outdoor			323,856				(3	%)			334,844
Percentage of Total Net Sales			27	%							30	%
Aviation			180,165				19	%			151,112
Percentage of Total Net Sales			15	%							14	%
Marine			207,534				25	%			165,437
Percentage of Total Net Sales			17	%							15	%
Auto			138,102				7	%			129,355
Percentage of Total Net Sales			12	%							12	%
Consumer Auto			82,914				—	%			82,659
Percentage of Total Net Sales			7	%							8	%
Auto OEM			55,188				18	%			46,696
Percentage of Total Net Sales			5	%							4	%
Total		$	1,191,973				7	%		$	1,109,194

Net sales increased 7% for the 13-week period ended September 25, 2021 when compared to the year-ago quarter. Total unit sales in the third quarter of 2021 decreased to 3,798 when compared to total unit sales of 4,041 in the third quarter of 2020, which differs from the increase in revenue primarily due to shifts in segment and product mix. Fitness was the largest portion of our revenue mix at 29% in the third quarter of 2021 compared to 29% in the third quarter of 2020.

The increase in fitness revenue was driven by sales growth in cycling and advanced wearables products. The increase in aviation revenue was driven by contributions from both OEM and aftermarket product categories. Marine revenue increased due to growth across multiple product categories, led by strong demand for our chartplotters. Auto revenue increased due to sales growth in auto OEM programs, while consumer auto revenue was relatively flat. Outdoor revenue decreased primarily due to the timing of product introductions in the prior year.

Gross Profit

Gross Profit		13-Weeks Ended September 25, 2021				Year-over-Year Change				13-Weeks Ended September 26, 2020
Fitness		$	183,028				3	%		$	177,794
Percentage of Segment Net Sales			53	%							54	%
Outdoor			210,522				(6	%)			223,704
Percentage of Segment Net Sales			65	%							67	%
Aviation			131,260				22	%			107,927
Percentage of Segment Net Sales			73	%							71	%
Marine			116,152				16	%			100,423
Percentage of Segment Net Sales			56	%							61	%
Auto			54,985				(5	%)			58,135
Percentage of Segment Net Sales			40	%							45	%
Consumer Auto			39,342				(9	%)			43,319
Percentage of Segment Net Sales			47	%							52	%
Auto OEM			15,643				6	%			14,816
Percentage of Segment Net Sales			28	%							32	%
Total		$	695,947				4	%		$	667,983
Percentage of Total Net Sales			58	%							60	%

Gross profit dollars in the third quarter of 2021 increased 4%, primarily due to the increase in net sales compared to the year-ago quarter, as described above. Consolidated gross margin decreased 180 basis points when compared to the year-ago quarter, primarily due to higher freight costs.

The fitness, outdoor, marine, and consumer auto gross margins were adversely impacted by higher freight costs, which were partially offset in the fitness and outdoor segments by a favorable product mix. The aviation gross margin increase was primarily attributable to product mix and lower per-unit manufacturing overhead costs. The auto OEM gross margin decrease was primarily attributable to product mix associated with growth in certain auto OEM programs. This auto OEM product mix and associated lower gross margin trend is generally expected to continue through 2021 and beyond.

Advertising Expense

Advertising		13-Weeks Ended September 25, 2021				Year-over-Year Change				13-Weeks Ended September 26, 2020
Fitness		$	15,109				12	%		$	13,444
Percentage of Segment Net Sales			4	%							4	%
Outdoor			11,543				(8	%)			12,607
Percentage of Segment Net Sales			4	%							4	%
Aviation			724				42	%			511
Percentage of Segment Net Sales			0	%							0	%
Marine			5,787				40	%			4,121
Percentage of Segment Net Sales			3	%							2	%
Auto			3,542				11	%			3,183
Percentage of Segment Net Sales			3	%							2	%
Consumer Auto			3,489				10	%			3,178
Percentage of Segment Net Sales			4	%							4	%
Auto OEM			53				960	%			5
Percentage of Segment Net Sales			0	%							0	%
Total		$	36,705				8	%		$	33,866
Percentage of Total Net Sales			3	%							3	%

Advertising expense as a percent of revenue was relatively flat when compared to the year-ago quarter and increased 8% in absolute dollars. The total absolute dollar increase was primarily attributable to increased media spend.

Selling, General and Administrative Expense

Selling, General & Admin. Expenses		13-Weeks Ended September 25, 2021				Year-over-Year Change				13-Weeks Ended September 26, 2020
Fitness		$	52,784				14	%		$	46,239
Percentage of Segment Net Sales			15	%							14	%
Outdoor			42,712				15	%			37,160
Percentage of Segment Net Sales			13	%							11	%
Aviation			18,887				-7	%			20,225
Percentage of Segment Net Sales			10	%							13	%
Marine			27,034				21	%			22,405
Percentage of Segment Net Sales			13	%							14	%
Auto			21,098				31	%			16,105
Percentage of Segment Net Sales			15	%							12	%
Consumer Auto			10,272				10	%			9,333
Percentage of Segment Net Sales			12	%							11	%
Auto OEM			10,826				60	%			6,772
Percentage of Segment Net Sales			20	%							15	%
Total		$	162,515				14	%		$	142,134
Percentage of Total Net Sales			14	%							13	%

Selling, general and administrative expense increased 14% in absolute dollars and was relatively flat as a percent of revenue compared to the year-ago quarter. The absolute dollar increase in the third quarter of 2021 was primarily attributable to increased personnel related expenses and information technology costs.

Research and Development Expense

Research & Development		13-Weeks Ended September 25, 2021				Year-over-Year Change				13-Weeks Ended September 26, 2020
Fitness		$	37,347				20	%		$	31,028
Percentage of Segment Net Sales			11	%							9	%
Outdoor			32,321				22	%			26,460
Percentage of Segment Net Sales			10	%							8	%
Aviation			60,353				3	%			58,594
Percentage of Segment Net Sales			33	%							39	%
Marine			29,605				26	%			23,415
Percentage of Segment Net Sales			14	%							14	%
Auto			54,431				54	%			35,385
Percentage of Segment Net Sales			39	%							27	%
Consumer Auto			14,276				13	%			12,630
Percentage of Segment Net Sales			17	%							15	%
Auto OEM			40,155				76	%			22,755
Percentage of Segment Net Sales			73	%							49	%
Total		$	214,057				22	%		$	174,882
Percentage of Total Net Sales			18	%							16	%

Research and development expense as a percent of revenue increased 220 basis points when compared to the year-ago quarter and increased 22% in absolute dollars. The fitness, outdoor, and marine increases in absolute dollars and as a percent of revenue were primarily due to higher engineering personnel costs. The auto increase in absolute dollars and as a percent of revenue was primarily attributable to higher engineering personnel costs related to investments in certain auto OEM programs and a lower proportion of such costs being contractually reimbursable. The aviation decrease as a percent of revenue was primarily due to the increase in sales, as described above, and greater leverage of expenses.

Operating Income

Operating Income (Loss)		13-Weeks Ended September 25, 2021				Year-over-Year Change				13-Weeks Ended September 26, 2020
Fitness		$	77,788				(11	%)		$	87,083
Percentage of Segment Net Sales			23	%							27	%
Outdoor			123,946				(16	%)			147,477
Percentage of Segment Net Sales			38	%							44	%
Aviation			51,296				79	%			28,597
Percentage of Segment Net Sales			28	%							19	%
Marine			53,726				6	%			50,482
Percentage of Segment Net Sales			26	%							31	%
Auto			(24,086	)			(796	%)			3,462
Percentage of Segment Net Sales			(17	%)							3	%
Consumer Auto			11,305				(38	%)			18,178
Percentage of Segment Net Sales			14	%							22	%
Auto OEM			(35,391	)			140	%			(14,716	)
Percentage of Segment Net Sales			(64	%)							(32	%)
Total		$	282,670				(11	%)		$	317,101
Percentage of Total Net Sales			24	%							29	%

Operating income decreased 11% in absolute dollars and decreased 490 basis points as a percent of revenue when compared to the year-ago quarter. This decrease was due to lower gross margin and higher operating expenses as a percent of revenue, as described above. Auto OEM experienced an operating loss in the current quarter, and we expect this trend to continue through 2021, primarily due to a lower gross margin and increased expense associated with certain programs, as described above.

Other Income (Expense)

Other Income (Expense)		13-Weeks Ended September 25, 2021				13-Weeks Ended September 26, 2020
Interest income		$	6,897			$	7,777
Foreign currency (losses) gains			(15,014	)			10,113
Other income			833				1,726
Total		$	(7,284	)		$	19,616

The average return on cash and investments, including interest and capital gain/loss returns during the third quarter of 2021 was 0.9% compared to 1.3% during the same quarter of 2020. Interest income decreased primarily due to lower yields on fixed-income securities.

Foreign currency gains and losses for the Company are driven by movements of a number of currencies in relation to the U.S. Dollar. The Taiwan Dollar is the functional currency of Garmin Corporation, the Euro is the functional currency of several subsidiaries, and the U.S. Dollar is the functional currency of Garmin (Europe) Ltd., although some transactions and balances are denominated in British Pounds. Other notable currency exposures include the Australian Dollar, Chinese Yuan, Japanese Yen, and Polish Zloty. 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.

The $15.0 million currency loss recognized in the third quarter of 2021 was primarily due to the U.S. Dollar strengthening against the Euro, Polish Zloty, Australian Dollar, and British Pound Sterling and weakening against the Taiwan Dollar within the 13-week period ended September 25, 2021. During this period, the U.S. Dollar strengthened 1.8% against the Euro, 3.6% against the Polish Zloty, 3.8% against the Australian Dollar, and 1.4% against the British Pound Sterling, resulting in losses of $4.1 million, $3.0 million, $1.4 million, and $0.9 million, respectively, while the U.S. Dollar weakened 0.6% against the Taiwan Dollar, resulting in a loss of $2.7 million. The remaining net currency loss of $2.9 million was related to the timing of transactions and impacts of other currencies, each of which was individually immaterial.

The $10.1 million currency gain recognized in the third quarter of 2020 was primarily due to the U.S. Dollar weakening against the Euro and British Pound Sterling, partially offset by the U.S. Dollar weakening against the Taiwan Dollar within the 13-week period ended September 26, 2020. During this period, the U.S. Dollar weakened 3.7% against the Euro and 3.3% against the British Pound Sterling, resulting in gains of $11.0 million and $1.8 million, respectively, while the U.S. Dollar weakened 0.8% against the Taiwan Dollar, resulting in a loss of $4.3 million. The remaining net currency gain of $1.6 million was related to the timing of transactions and impacts of other currencies, each of which was individually immaterial.

Income Tax Provision

The Company recorded income tax expense of $16.3 million in the 13-week period ended September 25, 2021, compared to income tax expense of $23.3 million in the 13-week period ended September 26, 2020. The effective tax rate was 5.9% in the third quarter of 2021, compared to 6.9% in the third quarter of 2020. The decrease was primarily due to the impact of return-to-provision adjustments associated with filing the U.S. tax return during the 13-week period ended September 25, 2021 compared to the year-ago quarter.

Net Income

As a result of the above, net income for the 13-week period ended September 25, 2021 was $259.0 million compared to $313.4 million for the 13-week period ended September 26, 2020, a decrease of $54.4 million.

Comparison of 39-Weeks ended September 25, 2021 and September 26, 2020

Net Sales

Net Sales		39-Weeks Ended September 25, 2021				Year-over-Year Change				39-Weeks Ended September 26, 2020
Fitness		$	1,063,642				26	%		$	846,688
Percentage of Total Net Sales			30	%							30	%
Outdoor			903,715				26	%			716,146
Percentage of Total Net Sales			25	%							25	%
Aviation			534,886				15	%			465,850
Percentage of Total Net Sales			15	%							17	%
Marine			678,698				40	%			486,269
Percentage of Total Net Sales			19	%							17	%
Auto			410,265				28	%			320,215
Percentage of Total Net Sales			11	%							11	%
Consumer Auto			231,587				18	%			196,942
Percentage of Total Net Sales			6	%							7	%
Auto OEM			178,678				45	%			123,273
Percentage of Total Net Sales			5	%							4	%
Total		$	3,591,206				27	%		$	2,835,168

Net sales increased 27% for the 39-week period ended September 25, 2021 when compared to the year-ago period. Net sales of most segments were adversely impacted by the COVID-19 pandemic for part of the prior year period, and therefore a portion of the year-over-year growth is attributable to the relatively low prior year comparable. We believe our fitness, outdoor, and marine segments have since benefited from a shift in consumer behavior and demand, which has continued during 2021, and our aviation and auto segments have trended positively during 2021.

The increase in fitness revenue was driven by sales growth in cycling and advanced wearables products. Outdoor revenue increased due to sales growth in multiple product categories, led by strong demand for our adventure watches. The increase in aviation revenue was driven by contributions from both OEM and aftermarket product categories. Marine revenue increased due to growth across all categories, led by strong demand for our chartplotters. Auto revenue increased due to sales growth in auto OEM programs and consumer auto specialty product categories.

Total unit sales in the first three quarters of 2021 increased to 11,564 when compared to total unit sales of 10,066 in the first three quarters of 2020, which was a smaller increase than that of revenue primarily due to shifts in segment and product mix. Fitness was the largest portion of our revenue mix at 30% in the first three quarters of 2021 compared to 30% in the first three quarters of 2020.

Gross Profit

Gross Profit		39-Weeks Ended September 25, 2021				Year-over-Year Change				39-Weeks Ended September 26, 2020
Fitness		$	581,765				30	%		$	446,936
Percentage of Segment Net Sales			55	%							53	%
Outdoor			590,355				26	%			469,150
Percentage of Segment Net Sales			65	%							66	%
Aviation			389,376				15	%			338,770
Percentage of Segment Net Sales			73	%							73	%
Marine			390,141				35	%			288,103
Percentage of Segment Net Sales			57	%							59	%
Auto			166,717				13	%			147,393
Percentage of Segment Net Sales			41	%							46	%
Consumer Auto			113,567				15	%			98,348
Percentage of Segment Net Sales			49	%							50	%
Auto OEM			53,150				8	%			49,045
Percentage of Segment Net Sales			30	%							40	%
Total		$	2,118,354				25	%		$	1,690,352
Percentage of Total Net Sales			59	%							60	%

Gross profit dollars in the first three quarters of 2021 increased 25%, primarily due to the increase in net sales compared to the year-ago period, as described above. Consolidated gross margin decreased 60 basis points when compared to the year-ago period, primarily due to higher freight costs.

The fitness gross margin increase was primarily attributable to product mix, partially offset by higher freight costs. The marine gross margin decrease was primarily due to higher freight costs. The auto OEM gross margin decrease was primarily attributable to product mix associated with growth in certain auto OEM programs. This auto OEM product mix and associated lower gross margin trend is generally expected to continue through 2021 and beyond.

Advertising Expense

Advertising		39-Weeks Ended September 25, 2021				Year-over-Year Change				39-Weeks Ended September 26, 2020
Fitness		$	47,808				30	%		$	36,802
Percentage of Segment Net Sales			4	%							4	%
Outdoor			32,684				17	%			28,006
Percentage of Segment Net Sales			4	%							4	%
Aviation			2,807				21	%			2,313
Percentage of Segment Net Sales			1	%							0	%
Marine			18,547				18	%			15,733
Percentage of Segment Net Sales			3	%							3	%
Auto			8,859				23	%			7,177
Percentage of Segment Net Sales			2	%							2	%
Consumer Auto			8,795				26	%			6,988
Percentage of Segment Net Sales			4	%							4	%
Auto OEM			64				(66	%)			189
Percentage of Segment Net Sales			0	%							0	%
Total		$	110,705				23	%		$	90,031
Percentage of Total Net Sales			3	%							3	%

Advertising expense as a percent of revenue was relatively flat when compared to the year-ago period and increased 23% in absolute dollars. The total absolute dollar increase was primarily attributable to increased media and cooperative spend.

Selling, General and Administrative Expense

Selling, General & Admin. Expenses		39-Weeks Ended September 25, 2021				Year-over-Year Change				39-Weeks Ended September 26, 2020
Fitness		$	159,947				22	%		$	131,540
Percentage of Segment Net Sales			15	%							16	%
Outdoor			125,378				23	%			102,232
Percentage of Segment Net Sales			14	%							14	%
Aviation			57,165				-1	%			57,871
Percentage of Segment Net Sales			11	%							12	%
Marine			83,036				18	%			70,437
Percentage of Segment Net Sales			12	%							14	%
Auto			60,370				23	%			49,255
Percentage of Segment Net Sales			15	%							15	%
Consumer Auto			29,231				(4	%)			30,334
Percentage of Segment Net Sales			13	%							15	%
Auto OEM			31,139				65	%			18,921
Percentage of Segment Net Sales			17	%							15	%
Total		$	485,896				18	%		$	411,335
Percentage of Total Net Sales			14	%							15	%

Selling, general and administrative expense increased 18% in absolute dollars and was 100 basis points lower as a percent of revenue compared to the year-ago period. The absolute dollar increase in the first three quarters of 2021 was primarily attributable to increased personnel related expenses and information technology costs, and the decrease as a percent of revenue was primarily due to greater leverage of operating costs.

Research and Development Expense

Research & Development		39-Weeks Ended September 25, 2021				Year-over-Year Change				39-Weeks Ended September 26, 2020
Fitness		$	105,521				19	%		$	88,519
Percentage of Segment Net Sales			10	%							10	%
Outdoor			93,262				21	%			76,855
Percentage of Segment Net Sales			10	%							11	%
Aviation			182,430				4	%			175,103
Percentage of Segment Net Sales			34	%							38	%
Marine			83,516				23	%			67,738
Percentage of Segment Net Sales			12	%							14	%
Auto			153,524				57	%			97,798
Percentage of Segment Net Sales			37	%							31	%
Consumer Auto			40,153				13	%			35,398
Percentage of Segment Net Sales			17	%							18	%
Auto OEM			113,371				82	%			62,400
Percentage of Segment Net Sales			63	%							51	%
Total		$	618,253				22	%		$	506,013
Percentage of Total Net Sales			17	%							18	%

Research and development expense as a percent of revenue was relatively flat when compared to the year-ago period and increased 22% in absolute dollars. The absolute dollar increase was primarily due to higher engineering personnel costs across all of our operating segments. The auto increase in absolute dollars and as a percent of revenue was primarily attributable to higher engineering personnel costs related to investments in auto OEM programs and a lower proportion of such costs being contractually reimbursable.

Operating Income

Operating Income		39-Weeks Ended September 25, 2021				Year-over-Year Change				39-Weeks Ended September 26, 2020
Fitness		$	268,489				41	%		$	190,075
Percentage of Segment Net Sales			25	%							22	%
Outdoor			339,031				29	%			262,057
Percentage of Segment Net Sales			38	%							37	%
Aviation			146,974				42	%			103,483
Percentage of Segment Net Sales			27	%							22	%
Marine			205,042				53	%			134,195
Percentage of Segment Net Sales			30	%							28	%
Auto			(56,036	)			720	%			(6,837	)
Percentage of Segment Net Sales			(14	%)							(2	%)
Consumer Auto			35,388				38	%			25,628
Percentage of Segment Net Sales			15	%							13	%
Auto OEM			(91,424	)			182	%			(32,465	)
Percentage of Segment Net Sales			(51	%)							(26	%)
Total		$	903,500				32	%		$	682,973
Percentage of Total Net Sales			25	%							24	%

Operating income increased 32% in absolute dollars and increased 110 basis points as a percent of revenue when compared to the year-ago period. This increase was due to revenue growth and lower operating expenses as a percent of revenue, as described above. Auto OEM experienced an operating loss in the current quarter, and we expect this trend to continue through 2021, primarily due to a lower gross margin and increased expense associated with certain programs, as described above.

Other Income (Expense)

Other Income (Expense)		39-Weeks Ended September 25, 2021				39-Weeks Ended September 26, 2020
Interest income		$	21,568			$	30,258
Foreign currency losses			(30,621	)			(9,802	)
Other Income			3,511				8,515
Total		$	(5,542	)		$	28,971

The average returns on cash and investments, including interest and capital gain/loss returns, during the 39-week periods ended September 25, 2021 and September 26, 2020 was 1.0% and 1.6%, respectively. Interest income decreased primarily due to lower yields on fixed-income securities.

Foreign currency gains and losses for the Company are driven by movements of a number of currencies in relation to the U.S. Dollar. The Taiwan Dollar is the functional currency of Garmin Corporation, the Euro is the functional currency of several subsidiaries, and the U.S. Dollar is the functional currency of Garmin (Europe) Ltd., although some transactions and balances are denominated in British Pounds. Other notable currency exposures include the Australian Dollar, Chinese Yuan, Japanese Yen, and Polish Zloty. 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.

The $30.6 million currency loss recognized in the 39-week period ended September 25, 2021 was primarily due to the U.S. Dollar strengthening against the Euro and Polish Zloty and weakening against the Taiwan Dollar within the 39-week period ended September 25, 2021. During this period, the U.S. Dollar strengthened 4.0% against the Euro and 5.9% against the Polish Zloty, resulting in losses of $13.9 million and $3.8 million, respectively, while the U.S. Dollar weakened 1.4% against the Taiwan Dollar, resulting in a loss of $7.4 million. The remaining net currency loss of $5.5 million was related to the timing of transactions and impacts of other currencies, each of which was individually immaterial.

The $9.8 million currency loss recognized in the 39-week period ended September 26, 2020 was primarily due to the U.S. Dollar weakening against the Taiwan Dollar, partially offset by the U.S. Dollar weakening against the Euro within the 39-week period ended September 26, 2020. During this period, the U.S. Dollar weakened 2.9% against the Taiwan Dollar, resulting in a loss of $13.0 million, while the U.S. Dollar weakened 4.1% against the Euro, resulting in a gain of $9.0 million. The remaining net currency loss of $5.8 million was related to the timing of transactions and impacts of other currencies, each of which was individually immaterial.

Income Tax Provision

The Company recorded income tax expense of $101.9 million in the first three quarters of 2021 compared to income tax expense of $53.2 million in the first three quarters of 2020. The effective tax rate was 11.3% in the first three quarters of 2021, compared to 7.5% in the first three quarters of 2020. The increase was primarily due to a decrease in uncertain tax position reserves released in the first three quarters of 2021 compared to the first three quarters of 2020.

Net Income

As a result of the above, net income for the 39-week period ended September 25, 2021 was $796.1 million compared to $658.8 million for the 39-week period ended September 26, 2020, an increase of $137.3 million.

Liquidity and Capital Resources

As of September 25, 2021, we had approximately $3.2 billion of cash, cash equivalents and marketable securities. We primarily use cash flow from operations, and expect that future cash requirements may be used, to fund our capital expenditures, support our working capital requirements, pay dividends, and fund strategic acquisitions. We believe that our existing cash balances and cash flow from operations will be sufficient to meet our short- and long-term projected working capital needs, capital expenditures, and other cash requirements.

It is management’s goal to invest the on-hand cash in accordance with the investment policy, which has been approved by the Company’s Board of Directors. The investment policy’s primary purpose is to preserve capital, maintain an acceptable degree of liquidity, and maximize yield within the constraint of low credit risk. Garmin’s average interest rate returns on cash and investments during the first three quarters of 2021 and 2020 were approximately 0.9% and 1.5%, respectively. 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. See Note 8 for additional information regarding marketable securities.

Operating Activities

		39-Weeks Ended				39-Weeks Ended
		September 25, 2021				September 26, 2020
Net cash provided by operating activities		$	843,465			$	699,449

The $144.0 million increase in cash provided by operating activities during the first three quarters of 2021 compared to the first three quarters of 2020 was due to an increase in net income of $137.3 million and an increase in other non-cash adjustments to net income of $55.6 million. These increases were partially offset by an increase in cash used in working capital of $48.9 million (which included an increase of $301.3 million in cash paid for inventory and an increase of $14.1 million in net cash used in other activities, partially offset by an increase of $137.6 million in net receipts of accounts receivable, a decrease of $69.5 million net cash used in accounts payable, and a decrease of $59.4 million in net cash used for income taxes).

Investing Activities

		39-Weeks Ended				39-Weeks Ended
		September 25, 2021				September 26, 2020
Net cash used in investing activities		$	(311,706	)		$	(179,331	)

The $132.4 million increase in cash used in investing activities during the first three quarters of 2021 compared to the first three quarters of 2020 was primarily due to an increase in net purchases of marketable securities of $212.5 million and an increase in net purchases of property and equipment of $52.8 million, partially offset by a decrease in cash payments for acquisitions of $132.8 million.

Financing Activities

		39-Weeks Ended				39-Weeks Ended
		September 25, 2021				September 26, 2020
Net cash used in financing activities		$	(344,505	)		$	(331,847	)

The $12.7 million increase in cash used in financing activities during the first three quarters of 2021 compared to the first three quarters of 2020 was due to an increase in dividend payments of $28.6 million and an increase in purchases of treasury stock related to equity awards of $4.6 million, partially offset by an increase in proceeds from the issuance of treasury stock of $20.5 million.

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 Condensed 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, revenue and expenses, and related disclosure of contingent assets and liabilities. On an on-going basis, Garmin evaluates its estimates, including those related to bad debts, inventories, investments, intangible assets, income taxes, warranty obligations, contingencies, customer sales programs and incentives, product returns, relative standalone selling prices, and progress toward completion of performance obligations in certain contracts with customers. 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 26, 2020. There were no significant changes to the Company’s critical accounting policies and estimates in the 13-week and 39-week periods ended September 25, 2021.