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Trimble Third Quarter 2011 Revenue $417.4 Million, Up 31 Percent: GAAP Earnings per Share of $0.22 and Non-GAAP Earnings per Share of $0.52

Nov 01, 2011 (04:11 PM EDT)
URL: http://www.techweb.com/show-press-release/X873042/trimble-third-quarter-2011-revenue-417-4-million-up-31-percent-gaap-earnings-per-share-of-0-22-and-non-gaap-earnings-per-share-of-0-52.html

SUNNYVALE, Calif., Nov. 1, 2011 /PRNewswire/ -- Trimble (NASDAQ: TRMB) today announced third quarter 2011 revenue of $417.4 million, up approximately 31 percent as compared to the third quarter of 2010.  

GAAP operating income for the third quarter of 2011 was $32.4 million, up two percent as compared to the third quarter of 2010.  GAAP operating margin in the third quarter of 2011 was 7.8 percent as compared to 10.0 percent in the third quarter of 2010.

Third quarter 2011 GAAP net income was $28.0 million, down 15 percent as compared to the third quarter of 2010.  Diluted earnings per share in the third quarter of 2011 were $0.22 as compared to diluted earnings per share of $0.27 in the third quarter of 2010.  The GAAP operating margin and earnings per share were down primarily due to the impact of higher amortization of intangibles due to recent acquisitions.  

Third quarter 2011 non-GAAP operating income of $73.0 million was up 39 percent as compared to the third quarter of 2010.  Non-GAAP operating margin was 17.5 percent as compared to 16.5 percent in the third quarter of 2010.  

Non-GAAP net income of $65.7 million for the third quarter of 2011 was up 36 percent as compared to the third quarter of 2010.  Diluted non-GAAP earnings per share in the third quarter of 2011 were $0.52 as compared to diluted non-GAAP earnings per share of $0.39 in the third quarter of 2010. 

Third quarter 2011 non-GAAP results exclude:  

  • Restructuring expense of $694 thousand as compared to $290 thousand in the third quarter of 2010;
  • Amortization of intangibles of $24.1 million as compared to $14.4 million in the third quarter of 2010;
  • Stock-based compensation expense of $7.1 million as compared to $5.5 million in the third quarter of 2010;
  • Acquisition-related inventory step-up charge of $1.4 million as compared to $69 thousand in the third quarter of 2010;
  • Acquisition-related costs of $6.1 million as compared to a $2.5 million gain in the third quarter of 2010 and;
  • Loss on foreign exchange of $2.2 million from a hedge associated with the purchase of Tekla.  In the second quarter of 2011, there was a gain on foreign exchange related to this hedge of $5.6 million, which was also excluded from non-GAAP results.

"The third quarter results confirmed that Trimble can continue to grow under the current economic conditions.  In the quarter we saw year-over-year growth in all four segments for the first time since 2008," said Steven W. Berglund, Trimble's president and chief executive officer.  "The Mobile Solutions segment returned to profitability and we expect to see continued improvements each quarter.  The Engineering and Construction and Field Solutions segments both continue to show growth across most product lines and geographies.  While the economy remains uncertain, we are encouraged by the progress we are making in integrating our acquisitions, expanding geographies and extending our reach into new adjacencies," concluded Berglund.

Segment operating income is revenue less cost of goods sold and operating expenses, excluding general corporate expenses, restructuring expenses, amortization of intangibles, amortization of acquisition-related inventory step-up charges and acquisition costs.  Non-GAAP segment operating income also excludes the impact of stock-based compensation expense.

Engineering and Construction (E&C)

Third quarter 2011 E&C revenue was $241.1 million, up 27 percent as compared to the third quarter of 2010, driven by strength across most product lines, the positive effects of the SITECH dealer channel and the acquisition of Tekla. 

Operating income in E&C for the third quarter of 2011 was $42.6 million, or 17.7 percent of revenue, as compared to $36.6 million, or 19.3 percent of revenue in the third quarter of 2010.  Non-GAAP operating income was $45.2 million, or 18.8 percent of revenue, as compared to $38.5 million, or 20.3 percent of revenue, in the third quarter of 2010.  Non-GAAP operating margin was lower due primarily to a non-cash write down on a portion of Tekla's pre-acquisition deferred revenue.  Tekla was expected to be dilutive in the third and fourth quarters of 2011 and accretive beginning in the first quarter of 2012.

Field Solutions

Third quarter 2011 Field Solutions revenue was $91.1 million, up 35 percent as compared to the third quarter of 2010 due to growth in sales of both agriculture and geographic information system (GIS) products and the acquisition of Tekla.

Third quarter 2010 Field Solutions operating income was $31.0 million, or 34.1 percent of revenue, as compared to $21.0 million, or 31.3 percent of revenue, in the third quarter of 2010.  Non-GAAP operating income was $31.6 million, or 34.7 percent of revenue, as compared to $21.5 million, or 32.0 percent of revenue, in the third quarter of 2010.  The increase in non-GAAP operating margin was due to higher revenue.

Mobile Solutions

Third quarter 2011 Mobile Solutions revenue was $58.1 million, up 54 percent as compared to the third quarter of 2010 due primarily to acquisitions and growth within the base business also contributed.   

Third quarter 2011 Mobile Solutions operating income was $2.5 million, or 4.3 percent of revenue, as compared to an operating loss of $83 thousand, or negative 0.2 percent of revenue, in the third quarter of 2010.  Non-GAAP operating income was $3.2 million, or 5.5 percent of revenue, as compared to operating income of $744 thousand, or 2.0 percent of revenue, in the third quarter of 2010.  The improvement in non-GAAP operating margin was due primarily to acquisitions and some improvements in the base business driven by verticalization of the portfolio.

Advanced Devices

Third quarter 2011 Advanced Devices revenue was $27.1 million, up 15 percent as compared to the third quarter of 2010 due primarily to sales of Applanix products and acquisitions. 

The operating income in Advanced Devices for the third quarter 2011 was $4.0 million, or 14.6 percent of revenue, as compared to $4.1 million, or 17.2 percent of revenue, in the third quarter of 2010.  Non-GAAP operating income in Advanced Devices was $4.6 million, or 17.0 percent of revenue, as compared to $4.5 million, or 19.1 percent of revenue, in the third quarter of 2010.  The decline in non-GAAP operating margin was due to product mix and acquisitions.  

Stock Buy Back

Effective Oct. 28, 2011, Trimble's Board of Directors approved a $100 million stock repurchase program.  This program supersedes any existing repurchase programs.  The timing and actual number of shares repurchased will depend on a variety of factors including price, regulatory requirements, capital availability, and other market conditions. The program does not require the purchase of any minimum number of shares and may be suspended or discontinued at any time.

Use of Non-GAAP Financial Information

To help our investors understand our past financial performance and our future results, as well as our performance relative to competitors, we supplement the financial results that we provide in accordance with generally accepted accounting principles, or GAAP, with non-GAAP financial measures.  These non-GAAP measures can be used to evaluate our historical and prospective financial performance, as well as our performance relative to competitors. Our management regularly uses our supplemental non-GAAP financial measures internally to understand, manage and evaluate our business, and to make operating decisions. These non-GAAP measures are among the primary factors management uses in planning for and forecasting future periods. We believe that these non-GAAP financial measures reflect an additional way of viewing aspects of our operations that, when viewed with our GAAP results, provide a more complete understanding of factors and trends affecting our business. Further, we believe some of our investors track our "core operating performance" as a means of evaluating our performance in the ordinary, ongoing, and customary course of our operations.  Core operating performance excludes items that are non-cash, not expected to recur or not reflective of ongoing financial results. Management also believes that looking at our core operating performance provides a supplemental way to provide consistency in period to period comparisons.  

The specific non-GAAP measures which we use along with a reconciliation to the nearest comparable GAAP measures and the explanation for why these non-GAAP measures provide useful information to investors regarding our financial condition and results of operations and why management chose to exclude selected items can be found at the end of this release. The method we use to produce non-GAAP results is not computed according to GAAP and may differ from the methods used by other companies. Our non-GAAP results are not meant to be considered in isolation or as a substitute for comparable GAAP measures and should be read only in conjunction with our consolidated financial statements prepared in accordance with GAAP.  Investors are encouraged to review the reconciliation of our non-GAAP financial measures to the comparable GAAP results, which is attached to this earnings release.  Additional financial information about our use of non-GAAP results can be found on the investor relations page of our Web site at http://investor.trimble.com.

Forward Looking Guidance

For the fourth quarter of 2011 Trimble expects revenue between $415 million and $420 million with GAAP earnings per share of $0.20 to $0.22 and non-GAAP earnings per share of $0.47 to $0.49. Non-GAAP guidance for the fourth quarter of 2011 excludes the amortization of intangibles of $29.0 million related to previous acquisitions and the anticipated impact of stock-based compensation expense of $8.0 million. Both GAAP and non-GAAP earnings per share assume a 9 to 11 percent tax rate and 127.0 million shares outstanding and interest costs of $3.0 million.  

Investor Conference Call / Webcast Details

Trimble will hold a conference call on Nov. 1, 2011 at 1:30 p.m. PT to review its third quarter 2011 results. It will be broadcast live on the Web at http://investor.trimble.com.  Investors without Internet access may dial into the call at (800) 528-9198 (U.S.) or (702) 928-6633 (international).  A replay of the call will be available for seven days at (855) 859-2056 (U.S.) or (404) 537-3406 (international) and the pass code is 18784175.  The replay will also be available on the Web at the address above.

About Trimble

Trimble applies technology to make field and mobile workers in businesses and government significantly more productive. Solutions are focused on applications requiring position or location—including surveying, construction, agriculture, fleet and asset management, public safety and mapping. In addition to utilizing positioning technologies, such as GPS, lasers and optics, Trimble solutions may include software content specific to the needs of the user. Wireless technologies are utilized to deliver the solution to the user and to ensure a tight coupling of the field and the back office. Founded in 1978, Trimble is headquartered in Sunnyvale, Calif.

For more information visit: www.trimble.com.

Safe Harbor  

Certain statements made in this press release are forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, and are made pursuant to the safe harbor provisions of the Securities Litigation Reform Act of 1995.  These statements include expectations for future financial market and economic conditions, the ability to deliver revenue, earnings per share and other financial projections that Trimble has guided for the fourth quarter of 2011, the expected tax rate, the anticipated impact of stock-based compensation expense, the amortization of intangibles related to previous acquisitions, the impact of the Tekla acquisition and the expected performance of Trimble's Mobile Solutions segment.  These forward-looking statements are subject to change, and actual results may materially differ from those set forth in this press release due to certain risks and uncertainties.  The Company's results may be adversely affected if the Company is unable to market, manufacture and ship new products or obtain new customers for its Mobile Solutions segment or integrate new acquisitions.   Any failure to achieve predicted results could negatively impact the Company's revenues, cash flow from operations, and other financial results. The Company's financial results will also depend on a number of other factors and risks detailed from time to time in reports filed with the SEC, including its quarterly reports on Form 10-Q and its annual report on Form 10- K, such as changes in economic conditions, critical part supply chain shortages, possible write-offs of goodwill, and regulatory proceedings affecting GPS. Undue reliance should not be placed on any forward-looking statement contained herein, especially in light of greater uncertainty than normal in the economy in general. These statements reflect the Company's position as of the date of this release. The Company expressly disclaims any undertaking to release publicly any updates or revisions to any statements to reflect any change in the Company's expectations or any change of events, conditions, or circumstances on which any such statement is based.

FTRMB

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(In thousands, except per share data)

(Unaudited)












Three Months Ended


Nine Months Ended





Sep-30,


Oct-1,


Sep-30,


Oct-1,



2011


2010


2011


2010










Revenue


$ 417,433


$ 318,210


$ 1,208,895


$ 970,588

Cost of sales


205,874


158,462


597,072


488,417

Gross margin


211,559


159,748


611,823


482,171

Gross margin (%)


50.7%


50.2%


50.6%


49.7%










Operating expenses









   Research and development


49,928


36,897


139,452


109,339

   Sales and marketing


70,662


53,228


195,359


153,518

   General and administrative


44,088


29,637


114,717


85,474

   Restructuring


647


238


1,775


1,244

   Amortization of purchased intangible assets


13,786


8,078


32,830


24,250

      Total operating expenses


179,111


128,078


484,133


373,825



















Operating income


32,448


31,670


127,690


108,346










Non-operating income (expense), net









   Interest income


422


221


1,026


864

   Interest expense


(3,364)


(576)


(5,210)


(1,385)

   Foreign currency transaction gain, net


(4,022)


77


2,780


(1,046)

   Income from equity method investments, net


4,789


3,404


10,970


9,025

   Other expense, net


(388)


3,533


(892)


3,022

      Total non-operating income (expense), net


(2,563)


6,659


8,674


10,480










Income before taxes


29,885


38,329


136,364


118,826










Income tax provision


2,689


5,487


16,118


51,061

Net income


27,196


32,842


120,246


67,765

Less: Net income (loss) attributable to noncontrolling interests


(775)


(3)


(1,106)


669

Net income attributable to Trimble Navigation Ltd.


$   27,971


$   32,845


$    121,352


$   67,096










Earnings per share attributable to Trimble Navigation Ltd.









    Basic


$       0.23


$       0.27


$          0.99


$       0.56

    Diluted


$       0.22


$       0.27


$          0.96


$       0.54










Shares used in calculating earnings per share:









   Basic


122,969


119,474


122,485


120,296

   Diluted


125,894


122,869


125,980


123,599



CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands)

(Unaudited)






Sep-30,


Dec-31



2011


2010

Assets










Current assets:





  Cash and cash equivalents


$    138,255


$    220,788

  Accounts receivables, net


287,670


222,820

  Other receivables


25,655


21,069

  Inventories, net


215,681


192,852

  Deferred income taxes


47,165


36,924

  Other current assets


26,233


19,917

     Total current assets


740,659


714,370






Property and equipment, net


61,562


50,692

Goodwill


1,312,480


828,737

Other purchased intangible assets, net


516,176


204,948

Other non-current assets


82,521


68,145






     Total assets


$ 2,713,398


$ 1,866,892






Liabilities










Current liabilities:





  Current portion of long-term debt


$      66,873


$        1,993

  Accounts payable


105,766


72,349

  Accrued compensation and benefits


70,015


60,976

  Deferred revenue


95,884


73,888

  Accrued warranty expense


17,503


12,868

  Other accrued liabilities


38,737


29,741

     Total current liabilities


394,778


251,815






Non-current portion of long-term debt


570,380


151,160

Non-current deferred revenue


10,574


10,777

Deferred income taxes


125,992


24,598

Other non-current liabilities


47,217


42,843

     Total liabilities


1,148,941


481,193






Commitments and contingencies










Equity










Shareholders' equity:





  Common stock


861,305


781,779

  Retained earnings


657,000


536,350

  Accumulated other comprehensive income


25,804


48,027

Total Trimble Navigation Ltd. shareholders' equity


1,544,109


1,366,156

Noncontrolling interests


20,348


19,543

     Total equity


1,564,457


1,385,699






     Total liabilities and equity


$ 2,713,398


$ 1,866,892



CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)


Nine Months Ended



Sep-30,


Oct-1,



2011


2010






Cash flow from operating activities:





   Net Income


$ 120,246


$   67,765






   Adjustments to reconcile net income  to net cash provided by





      operating activities:





        Depreciation expense


14,683


13,310

        Amortization expense


56,747


42,165

        Provision for doubtful accounts


954


3,022

        Deferred income taxes


(10,175)


(3,827)

        Stock-based compensation


21,033


16,165

        (Income) loss from equity method investments


(11,001)


(9,025)

        Excess tax benefit for stock-based compensation


(11,698)


(1,971)

        Provision for excess and obsolete inventories


6,915


3,573

        Other non-cash items


2,738


(3,630)






   Add decrease (increase) in assets:





        Accounts receivables


(43,117)


(17,030)

        Other receivables


13,471


191

        Inventories


(11,344)


(32,549)

        Other current and non-current assets


7,005


366






   Add increase (decrease) in liabilities:





        Accounts payable


2,039


15,796

        Accrued compensation and benefits


(1,921)


15,780

        Deferred revenue


7,638


1,982

        Accrued warranty expense


402


(942)

        Accrued liabilities


(2,794)


(24,109)

Net cash provided by operating activities


161,821


87,032






Cash flow from investing activities:





     Acquisitions of businesses, net of cash acquired


(758,243)


(90,757)

     Acquisition of property and equipment


(16,002)


(17,162)

     Acquisitions of intangible assets


(1,666)


(625)

     Purchases of equity method investments


(3,267)


(5,692)

     Dividends received


7,500


5,000

     Other


(168)


99

Net cash used in investing activities


(771,846)


(109,137)






Cash flow from financing activities:





     Issuance of common stock, net


40,182


31,885

     Repurchase and retirement of common stock


-


(73,853)

     Excess tax benefit for stock-based compensation


11,698


1,971

     Proceeds from long-term debt, net of debt issuance costs


702,225


-

     Payments on short-term and long-term debt  


(225,942)


(467)

Net cash provided by (used in) financing activities


528,163


(40,464)






Effect of exchange rate changes on cash and cash equivalents


(671)


(223)






Net decrease in cash and cash equivalents


(82,533)


(62,792)

Cash and cash equivalents - beginning of period


220,788


273,848






Cash and cash equivalents - end of period


$ 138,255


$ 211,056



REPORTING SEGMENTS

(Dollars in thousands)

(Unaudited)







Reporting Segments





Engineering











and


Field


Mobile


Advanced





Construction


Solutions


Solutions


Devices












THREE MONTHS ENDED SEPTEMBER 30, 2011:










Revenue


$    241,106


$   91,106


$   58,101


$  27,120













Operating income before corporate allocations:


$      42,634


$   31,030


$     2,503


$    3,970



Operating margin (% of segment external net revenues)


17.7%


34.1%


4.3%


14.6%












THREE MONTHS ENDED OCTOBER 1, 2010:










Revenue


$    189,598


$   67,240


$   37,692


$  23,680













Operating income (loss) before corporate allocations:


$      36,589


$   21,027


$        (83)


$    4,073



Operating margin (% of segment external net revenues)


19.3%


31.3%


-0.2%


17.2%












NINE MONTHS ENDED SEPTEMBER 30, 2011:










Revenue


$    667,808


$ 318,188


$ 142,747


$  80,152













Operating income (loss) before corporate allocations:


$    112,400


$ 126,078


$   (1,515)


$  10,441



Operating margin (% of segment external net revenues)


16.8%


39.6%


(1.1%)


13.0%












NINE MONTHS ENDED OCTOBER 1, 2010:










Revenue


$    535,657


$ 243,299


$ 113,839


$  77,793













Operating income before corporate allocations:


$      89,317


$   89,320


$     2,140


$  14,879



Operating margin (% of segment external net revenues)


16.7%


36.7%


1.9%


19.1%



GAAP TO NON-GAAP RECONCILIATION

(Dollars in thousands, except per share data)

(Unaudited)







Three Months Ended


Nine Months Ended







Sep-30,


Oct-1,


Sep-30,


Oct-1,







2011


2010


2011


2010







Dollar

% of


Dollar

% of


Dollar

% of


Dollar

% of







Amount

Revenue


Amount

Revenue


Amount

Revenue


Amount

Revenue


GROSS MARGIN:
















GAAP gross margin:



$ 211,559

50.7%


$ 159,748

50.2%


$ 611,823

50.6%


$ 482,171

49.7%




Restructuring

( A )


47

0.0%


52

0.0%


335

0.0%


150

0.0%




Amortization of purchased intangibles

( B )


10,321

2.5%


6,356

2.0%


23,918

2.0%


17,915

1.8%




Stock-based compensation

( C )


491

0.1%


485

0.2%


1,461

0.1%


1,472

0.2%




Amortization of acquisition-related inventory step-up

( D )


1,354

0.3%


69

0.0%


3,063

0.3%


140

0.0%



Non-GAAP gross margin:



$ 223,772

53.6%


$ 166,710

52.4%


$ 640,600

53.0%


$ 501,848

51.7%



















OPERATING EXPENSES:
















GAAP operating expenses:



$ 179,111

42.9%


$ 128,078

40.2%


$ 484,133

40.0%


$ 373,825

38.5%




Restructuring

( A )


(647)

-0.2%


(238)

-0.1%


(1,775)

-0.1%


(1,244)

-0.1%




Amortization of purchased intangibles

( B )


(13,786)

-3.3%


(8,078)

-2.5%


(32,829)

-2.7%


(24,250)

-2.5%




Stock-based compensation

( C )


(6,614)

-1.6%


(5,055)

-1.6%


(19,572)

-1.6%


(14,693)

-1.5%




Acquisition costs

( E )


(7,281)

-1.7%


(569)

-0.2%


(12,775)

-1.1%


(3,071)

-0.3%



Non-GAAP operating expenses:



$ 150,783

36.1%


$ 114,138

35.8%


$ 417,182

34.5%


$ 330,567

34.1%



















OPERATING INCOME:
















GAAP operating income:



$   32,448

7.8%


$   31,670

10.0%


$ 127,690

10.6%


$ 108,346

11.2%




Restructuring

( A )


694

0.2%


290

0.1%


2,110

0.2%


1,394

0.1%




Amortization of purchased intangibles

( B )


24,107

5.8%


14,434

4.5%


56,747

4.7%


42,165

4.3%




Stock-based compensation

( C )


7,105

1.7%


5,540

1.7%


21,033

1.7%


16,165

1.7%




Amortization of acquisition-related inventory step-up

( D )


1,354

0.3%


69

0.0%


3,063

0.2%


140

0.0%




Acquisition costs

( E )


7,281

1.7%


569

0.2%


12,775

1.1%


3,071

0.3%



Non-GAAP operating income:



$   72,989

17.5%


$   52,572

16.5%


$ 223,418

18.5%


$ 171,281

17.6%



















NON-OPERATING INCOME (EXPENSE), NET:
















GAAP non-operating income (expense), net:



$   (2,563)



$     6,659



$     8,674



$   10,480





Acquisition gains

( E )


(1,220)



(3,022)



(71)



(3,212)





Debt issuance cost write-off

( F )


-



-



377



-





Foreign exchange loss (gain) associated with acquisition

( G )


2,191



-



(3,456)



-




Non-GAAP non-operating income (expense), net:



$   (1,592)



$     3,637



$     5,524



$     7,268


























GAAP and



GAAP and



GAAP and



GAAP and








Non-GAAP



Non-GAAP



Non-GAAP



Non-GAAP








Tax Rate %

( J )


Tax Rate %

( J )


Tax Rate %

( J )


Tax Rate %

( J )

INCOME TAX PROVISION:
















GAAP income tax provision:



$     2,689

9%


$     5,487

14%


$   16,118

12%


$   51,061

43%




Non-GAAP items tax effected:

( H )


3,738



2,560



10,478



11,949





IRS settlement

( I )


-



0



-



(27,540)




Non-GAAP income tax provision:



$     6,427

9%


$     8,047

14%


$   26,596

12%


$   35,470

20%



















NET INCOME:  
















GAAP net income attributable to Trimble Navigation Ltd.



$   27,971



$   32,845



$ 121,352



$   67,096





Restructuring

( A )


694



290



2,110



1,394





Amortization of purchased intangibles

( B )


24,107



14,434



56,747



42,165





Stock-based compensation

( C )


7,105



5,540



21,033



16,165





Amortization of acquisition-related inventory step-up

( D )


1,354



69



3,063



140





Acquisition gains

( E )


6,061



(2,453)



12,705



(141)





Debt issuance cost write-off

( F )


-



-



377



-





Foreign exchange loss (gain) associated with acquisition

( G )


2,191



-



(3,456)



-





Non-GAAP tax adjustments

( H ), ( I )


(3,738)



(2,560)



(10,478)



15,591




Non-GAAP net income attributable to Trimble Navigation Ltd.



$   65,745



$   48,165



$ 203,453



$ 142,410




















DILUTED NET INCOME PER SHARE:
















GAAP diluted net income per share attributable to Trimble Navigation Ltd.



$       0.22



$       0.27



$       0.96



$       0.54





Restructuring

( A )


0.01



-



0.02



0.01





Amortization of purchased intangibles

( B )


0.19



0.12



0.45



0.34





Stock-based compensation

( C )


0.06



0.04



0.17



0.13





Amortization of acquisition-related inventory step-up

( D )


0.01



-



0.02



-





Acquisition gains

( E )


0.05



(0.02)



0.10



-





Debt issuance cost write-off

( F )


-



-



-



-





Foreign exchange loss (gain) associated with acquisition

( G )


0.01



-



(0.03)



-





Non-GAAP tax adjustments

( H ), ( I )


(0.03)



(0.02)



(0.08)



0.13




Non-GAAP diluted net income per share attributable to Trimble Navigation Ltd.



$       0.52



$       0.39



$       1.61



$       1.15




















OPERATING LEVERAGE:
















Increase in non-GAAP operating income



$   20,416



$   12,575



$   52,137



$   33,003




Increase in revenue



$   99,223



$   48,497



$ 238,307



$ 121,858




Operating leverage (increase in non-GAAP operating
















income as a % of increase in revenue)



20.6%



25.9%



21.9%



27.1%








































GAAP TO NON-GAAP RECONCILIATION (CONTINUED)

(Dollars in thousands, except per share data)

(Unaudited)





Three Months Ended


Nine Months Ended


Sep-30,


Oct-1,


Sep-30,


Oct-1,


2011


2010


2011


2010







% of Segment



% of Segment



% of Segment



% of Segment

SEGMENT OPERATING INCOME:




Revenue



Revenue



Revenue



Revenue


Engineering and Construction
















GAAP operating income before corporate allocations:



$42,634

17.7%


$36,589

19.3%


$112,400

16.8%


$89,317

16.7%



Stock-based compensation

( K )


2,579

1.1%


1,891

1.0%


7,360

1.1%


5,494

1.0%



Non-GAAP operating income before corporate allocations:



$45,213

18.8%


$38,480

20.3%


$119,760

17.9%


$94,811

17.7%


















Field Solutions
















GAAP operating income before corporate allocations:



$31,030

34.1%


$21,027

31.3%


$126,078

39.6%


$89,320

36.7%



Stock-based compensation

( K )


559

0.6%


464

0.7%


1,619

0.5%


1,397

0.6%



Non-GAAP operating income before corporate allocations:



$31,589

34.7%


$21,491

32.0%


$127,697

40.1%


$90,717

37.3%


















Mobile Solutions
















GAAP operating income (loss) before corporate allocations:



$  2,503

4.3%


$     (83)

-0.2%


$   (1,515)

-1.1%


$  2,140

1.9%



Stock-based compensation

( K )


668

1.2%


827

2.2%


2,473

1.8%


2,246

2.0%



Non-GAAP operating income (loss) before corporate allocations:



$  3,171

5.5%


$     744

2.0%


$      958

0.7%


$  4,386

3.9%


















Advanced Devices
















GAAP operating income before corporate allocations:



$  3,970

14.6%


$  4,073

17.2%


$  10,441

13.0%


$14,879

19.1%



Stock-based compensation

( K )


636

2.4%


450

1.9%


1,955

2.5%


1,350

1.8%



Non-GAAP operating income before corporate allocations:



$  4,606

17.0%


$  4,523

19.1%


$  12,396

15.5%


$16,229

20.9%



FOOTNOTES TO GAAP TO NON-GAAP RECONCILIATION


(Unaudited)













Our non-GAAP measures are not meant to be considered in isolation or as a substitute for comparable GAAP measures. The non-GAAP financial measures included in the previous table as well as detailed explanations to the adjustments to comparable GAAP measures, are set forth below:

Non-GAAP gross margin

We believe our investors benefit by understanding our non-GAAP gross margin as a way of understanding how product mix, pricing decisions and manufacturing costs influence our business.  Non-GAAP gross margin excludes restructuring costs, amortization of purchased intangibles, stock-based compensation and amortization of acquisition-related inventory step-up from GAAP gross margin. We believe that these exclusions offer investors additional information that may be useful to view trends in our gross margin performance.

Non-GAAP operating expenses

We believe this measure is important to investors evaluating our non-GAAP spending in relation to revenue. Non-GAAP operating expenses exclude restructuring costs, amortization of purchased intangibles, stock-based compensation and acquisition costs associated with external and incremental costs resulting directly from merger and acquisition activities such as legal, due diligence and integration costs from GAAP operating expenses. We believe that these exclusions offer investors supplemental information to facilitate comparison of our operating expenses to our prior results.  

Non-GAAP operating income

We believe our investors benefit by understanding our non-GAAP operating income trends which are driven by revenue, gross margin, and spending. Non-GAAP operating income excludes restructuring costs, amortization of purchased intangibles, stock-based compensation, amortization of acquisition-related inventory step-up and acquisition costs associated with external and incremental costs resulting directly from merger and acquisition activities such as legal, due diligence and integration costs. We believe that these exclusions offer an alternative means for our investors to evaluate current operating performance compared to results of other periods.  

Non-GAAP non-operating income (expense), net

We believe this measure helps investors evaluate our non-operating income trends. Non-GAAP non-operating income (expense), net excludes acquisition costs associated with unusual acquisition related items such as a gain on bargain purchase (resulting from the fair value of identifiable net assets acquired exceeding the consideration transferred), adjustments to the fair value of earn-out liabilities and payments made or received to settle earn-out and holdback disputes. These costs are specific to particular acquisitions and vary significantly in amount and timing. Non-GAAP non-operating income (expense), net also excludes the write-off of debt issuance costs associated with a terminated credit facility as well as a foreign exchange gain specifically associated with one of our acquisitions. We believe that these exclusions provide investors with a supplemental view of our ongoing financial results.

Non-GAAP income tax provision

Investors benefit from the exclusion of an IRS settlement because it facilitates comparisons to our past income tax provision. Non-GAAP income tax provision excludes an IRS settlement from GAAP income tax provision and includes non-GAAP items tax effected. Non-GAAP items tax effected adjusts the provision for income taxes to reflect the effect of certain non-GAAP items on non-GAAP net income. We believe this information is useful to investors because it provides for consistent treatment of the excluded items in our non-GAAP presentation.

Non-GAAP net income

This measure provides a supplemental view of net income trends which are driven by non-GAAP income before taxes and our non-GAAP tax rate. Non-GAAP net income excludes restructuring costs, amortization of purchased intangibles, stock-based compensation, amortization of acquisition-related inventory step-up, acquisition costs, the write-off of debt issuance costs, a foreign exchange gain associated with an acquisition, the IRS settlement, and non-GAAP tax adjustments from GAAP net income. We believe our investors benefit from understanding these exclusions and from an alternative view of our net income performance as compared to our past net income performance.

Non-GAAP diluted net income per share

We believe our investors benefit by understanding our non-GAAP operating performance as reflected in a per share calculation as a way of measuring non-GAAP operating performance by ownership in the company. Non-GAAP diluted net income per share excludes restructuring costs, amortization of purchased intangibles, stock-based compensation, amortization of acquisition-related inventory step-up, acquisition costs, the write-off of debt issuance costs, a foreign exchange gain associated with an acquisition, the IRS settlement, and non-GAAP tax adjustments from GAAP diluted net income per share. We believe that these exclusions offer investors a useful view of our diluted net income per share as compared to our past diluted net income per share.  

Non-GAAP operating leverage

We believe this information is beneficial to investors as a measure of how much incremental revenue is contributed to our operating income. Non-GAAP operating leverage is the increase in non-GAAP operating income as a percentage of the increase in revenue. We believe that this information offers investors supplemental information to evaluate our current performance and to compare to our past non-GAAP operating leverage.  


Non-GAAP segment operating income

Non-GAAP segment operating income excludes stock-based compensation from GAAP segment operating income. We believe this information is useful to investors because some may exclude stock-based compensation as an alternative view when assessing trends in the operating income of our segments.  













( A )

Restructuring costs. Included in our GAAP presentation of cost of sales and operating expenses, restructuring costs recorded are primarily for employee compensation resulting from reductions in employee headcount in connection with our company restructurings.  We exclude restructuring costs from our non-GAAP measures because we believe they do not reflect expected future operating expenses, they are not indicative of our core operating performance, and they are not meaningful in comparisons to our past operating performance.  













( B )

Amortization of purchased intangibles. Included in our GAAP presentation of gross margin, operating expenses, operating income, and net income is amortization of purchased intangibles. US GAAP accounting requires that intangible assets are recorded at fair value and amortized over their useful lives. Consequently, the timing and size of our acquisitions will cause our operating results to vary from period to period making a comparison to past performance difficult for investors. This accounting treatment may cause differences when comparing our results to companies that grow internally because the fair value assigned to the intangible assets acquired through acquisition may significantly exceed the equivalent expenses that a company may incur for similar efforts when performed internally. Furthermore, the useful life that we expense our intangible assets over may be substantially different from the time period that an internal growth company incurs and recognizes such expenses. We believe that by excluding purchased intangibles which represents technology and/or customer relationships already developed, it enhances comparability by allowing investors to compare our operations pre-acquisition to those post-acquisitions and to those of our competitors that have pursued internal growth strategies.













( C )

Stock-based compensation. Included in our GAAP presentation of cost of sales and operating expenses, stock-based compensation consists of expenses for employee stock options and awards and purchase rights under our employee stock purchase plan. We exclude stock-based compensation expense from our non-GAAP measures because some investors may view it as not reflective of our core operating performance as it is a non-cash expense.   For the three months and nine months ended September 30, 2011 and October 1, 2010, stock-based compensation was allocated as follows:


















Three Months Ended


Nine Months Ended






Sep-30,


Oct-1,


Sep-30,


Oct-1,



(Dollars in thousands)



2011


2010


2011


2010



Cost of sales



$                 491


$                 485


$              1,461


$               1,472



Research and development



1,151


968


3,373


2,899



Sales and Marketing



1,672


1,283


4,966


4,013



General and administrative



3,791


2,804


11,233


7,781






$              7,105


$              5,540


$            21,033


$             16,165