2014

Trimble Third Quarter Revenue of $504.8 Million Up 21 Percent and Non-GAAP Earnings Per Share of $0.68 Up 31 Percent Versus Prior Year

SUNNYVALE, Calif., Nov. 1, 2012 /PRNewswire/ -- Trimble (NASDAQ:  TRMB) today announced third quarter revenue of $504.8 million, up 21 percent as compared to the third quarter of 2011. 

GAAP operating income for the third quarter of 2012 was $63.5 million, up 96 percent as compared to the third quarter of 2011.  GAAP operating margin in the third quarter of 2012 was 12.6 percent of revenue as compared to 7.8 percent of revenue in the third quarter of 2011.

GAAP net income for the third quarter of 2012 was $53.4 million, up 91 percent as compared to the third quarter of 2011.  Diluted earnings per share in the third quarter of 2012 were $0.42 as compared to diluted earnings per share of $0.22 in the third quarter of 2011.  The tax rate for both GAAP and non-GAAP results was 19 percent for the third quarter of 2012 as compared to 9 percent in the third quarter of 2011, primarily due to the geographical mix of pre-tax income and the absence of research and development tax credits.

Third quarter 2012 non-GAAP operating income of $105.3 million was up 44 percent as compared to the third quarter of 2011.  Non-GAAP operating margin was 20.9 percent of revenue as compared to 17.5 percent of revenue in the third quarter of 2011. 

Non-GAAP net income of $86.8 million for the third quarter of 2012 was up 32 percent as compared to the third quarter of 2011.  Diluted non-GAAP earnings per share in the third quarter of 2012 were $0.68 as compared to diluted non-GAAP earnings per share of $0.52 in the third quarter of 2011.

Third quarter 2012 non-GAAP results are adjusted for the following:

  • Restructuring expense of $361 thousand as compared to $694 thousand in the third quarter of 2011;
  • Amortization of intangibles of $31.4 million as compared to $24.1 million in the third quarter of 2011;
  • Stock-based compensation expense of $7.7 million as compared to $7.1 million in the third quarter of 2011;
  • Acquisition-related inventory step-up charge of $547 thousand as compared to $1.4 million in the third quarter of 2011;
  • Acquisition-related costs of $1.5 million as compared to $6.1 million in the third quarter of 2011;
  • In the third quarter of 2012 there was no gain or loss on foreign currency exchange from a hedge associated with an acquisition as compared to a loss of $2.2 million in the third quarter of 2011.

"Third quarter results demonstrated both significant year-to-year organic revenue growth as well as non-GAAP operating margin expansion.   It is particularly encouraging that all reporting segments participated in this progression," said Steven W. Berglund, Trimble's president and chief executive officer.  "While current macro-economic uncertainties require us to remain cautious about near-term prospects, the quarter's results reinforce our expectation of sustainable market and financial success."

Segment operating income is revenue less cost of sales 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 2012 E&C revenue was $287.2 million, up 19 percent as compared to the third quarter of 2011.  Growth in E&C came primarily from the sales of heavy and highway and vertical construction products, and acquisitions, partially offset by the impact of foreign exchange.  Geographically, there was growth across all major regions.

Third quarter operating income in E&C was $68.5 million, or 23.8 percent of revenue as compared to $42.6 million, or 1 7.7 percent of revenue in the third quarter of 2011.  Non-GAAP operating income was $71.1 million, or 24.8 percent of revenue, as compared to $45.2 million, or 18.8 percent of revenue, in the third quarter of 2011.  The improvement in operating income was due to higher gross margins as a result of product mix and improved operating expense leverage.

Field Solutions

Third quarter 2012 Field Solutions revenue was $103.0 million, up 13 percent as compared to the third quarter of 2011 due primarily to increased sales of agricultural products.

Third quarter 2012 Field Solutions operating income was $36.0 million, or 35.0 percent of revenue, as compared to $31.0 million, or 34.1 percent of revenue, in the third quarter of 2011.  Non-GAAP operating income was $36.6 million, or 35.6 percent of revenue, as compared to $31.6 million, or 34.7 percent of revenue, in the third quarter of 2011 due primarily to improvements in agricultural product margins. 

Mobile Solutions

Third quarter 2012 Mobile Solutions revenue was $83.8 million, up 44 percent as compared to the third quarter of 2011 due to higher subscription revenue and the impact of acquisitions.

Third quarter 2012 Mobile Solutions operating income was $8.2 million, or 9.8 percent of revenue, as compared to $2.5 million, or 4.3 percent of revenue, in the third quarter of 2011.  Non-GAAP operating income was $8.9 million, or 10.6 percent of revenue, as compared to $3.2 million, or 5.5 percent of revenue, in the third quarter of 2011.  The improvement in non-GAAP operating margin was due primarily to growth in subscription revenue and the impact of acquisitions.

Advanced Devices

Third quarter 2012 Advanced Devices revenue was $30.7 million, up 13 percent as compared to the third quarter of 2011, primarily due to strong sales of timing devices.

Operating income in Advanced Devices for the third quarter of 2012 was $5.7 million, or 18.5 percent of revenue, as compared to $4.0 million, or 14.6 percent of revenue, in the third quarter of 2011.  Non-GAAP operating income in Advanced Devices was $6.2 million, or 20.3 percent of revenue, as compared to $4.6 million, or 17.0 percent of revenue, in the third quarter of 2011.  The improvement in non-GAAP operating margin was due to product mix. 

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 2012 Trimble expects revenue between $503 million and $508 million with GAAP earnings per share of $0.24 to $0.26 and non-GAAP earnings per share of $0.54 to $0.56.  Non-GAAP guidance excludes the amortization of intangibles of $31.6 million related to previous acquisitions; anticipated acquisition costs of $8.0 million; and the anticipated impact of stock-based compensation expense of $8.1 million. Both GAAP and non-GAAP earnings per share assume a 15 to 17 percent tax rate and 129.8 million shares outstanding.  The above guidance includes the impact of the TMW System acquisition which closed Oct. 2, 2012.  TMW System is expected to be slightly dilutive to Trimble's fourth quarter non-GAAP earnings per share by $0.01 to $0.03 per share, due to the impact of a one-time, non-cash write-down on a portion of TMW System's deferred revenue. Trimble expects the acquisition to be accretive to its 2013 non-GAAP earnings per share by $0.12 to $0.14 per share.  

Investor Conference Call / Webcast Details

Trimble will hold a conference call on Nov. 1, 2012 at 1:30 p.m. PT to review its third quarter 2012 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 (706) 902-3611 (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 37450164.  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 impact of acquisitions and the ability to deliver revenue, earnings per share and other financial projections that Trimble has guided for the fourth quarter and full year 2012, the impact of the TMW Systems acquisition in 2013, the expected tax rate, the anticipated impact of stock-based compensation expense, the amortization of intangibles related to previous acquisitions and the anticipated number of shares outstanding and interest costs.  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.   The Company's results would also be negatively impacted by further weakening in the macro environment in Europe and China or a softening of the market in North or South America.  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)












Third Quarter of


First Three Quarters of












2012


2011


2012


2011










Revenues:









        Product


$ 386,902


$ 333,262


$1,187,638


$1,004,378

        Service


64,237


44,517


185,262


112,288

        Subscription


53,624


39,654


151,690


92,229

Total revenues


504,763


417,433


1,524,590


1,208,895










Cost of sales:









        Product


185,102


163,774


577,281


494,899

        Service


23,615


19,823


67,591


50,525

        Subscription


17,451


11,956


47,860


27,730

        Amortization of purchased intangible assets


15,728


10,321


42,145


23,918

Total cost of sales


241,896


205,874


734,877


597,072










Gross margin


262,867


211,559


789,713


611,823

Gross margin (%)


52.1%


50.7%


51.8%


50.6%










Operating expenses









    Research and development


61,181


49,928


185,721


139,452

    Sales and marketing


76,481


70,662


230,094


195,359

    General and administrative


45,722


44,088


142,595


114,717

    Restructuring


301


647


1,894


1,775

    Amortization of purchased intangible assets


15,712


13,786


47,170


32,830

       Total operating expenses


199,397


179,111


607,474


484,133



















Operating income 


63,470


32,448


182,239


127,690










Non-operating income, net









    Interest expense, net


(3,925)


(2,942)


(11,561)


(4,184)

    Foreign currency transaction gain (loss), net


174


(4,022)


(1,843)


2,780

    Income from equity method investments, net


6,453


4,789


19,708


10,970

    Other income (expense), net


650


(388)


1,897


(892)

       Total non-operating income, net


3,352


(2,563)


8,201


8,674










Income before taxes


66,822


29,885


190,440


136,364










Income tax provision


13,022


2,689


33,403


16,118

Net income


53,800


27,196


157,037


120,246

Less: Net gain (loss) attributable to noncontrolling interests 


436


(775)


(837)


(1,106)

Net income attributable to Trimble Navigation Ltd.


$   53,364


$   27,971


$   157,874


$   121,352










Earnings per share attributable to Trimble Navigation Ltd.









     Basic


$      0.42


$      0.23


$        1.26


$        0.99

     Diluted


$      0.42


$      0.22


$        1.23


$        0.96










Shares used in calculating earnings per share:









    Basic


125,871


122,969


125,202


122,485

    Diluted


128,379


125,894


128,144


125,980

 

 

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands)

(Unaudited)











Third Quarter


Fiscal Year End

As of 


2012


2011

Assets










Current assets:





   Cash and cash equivalents


$     141,840


$         154,621

   Accounts receivables, net


320,904


275,201

   Other receivables


13,374


7,103

   Inventories, net


234,301


232,063

   Deferred income taxes


43,037


44,632

   Other current assets


24,569


19,437

      Total current assets


778,025


733,057






Property and equipment, net


81,653


62,724

Goodwill


1,551,886


1,297,692

Other purchased intangible assets, net


510,987


476,791

Other non-current assets


98,942


82,211






      Total assets


$  3,021,493


$      2,652,475






Liabilities 










Current liabilities:





   Current portion of long-term debt


$       89,909


$          65,918

   Accounts payable


107,719


97,956

   Accrued compensation and benefits


82,328


73,894

   Deferred revenue


127,602


105,066

   Accrued warranty expense


16,083


18,444

   Other accrued liabilities


61,425


50,045

      Total current liabilities


485,066


411,323






Non-current portion of long-term debt


553,198


498,518

Non-current deferred revenue


6,346


13,113

Deferred income taxes


99,412


95,594

Other non-current liabilities


52,418


45,025

      Total liabilities


1,196,440


1,063,573






Commitments and contingencies










Equity










Shareholders' equity:





   Common stock


965,035


878,514

   Retained earnings


836,903


685,639

   Accumulated other comprehensive income


6,692


5,140

Total Trimble Navigation Ltd. shareholders' equity


1,808,630


1,569,293

Noncontrolling interests 


16,423


19,609

      Total equity


1,825,053


1,588,902






      Total liabilities and equity


$  3,021,493


$      2,652,475

 

 

 

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS 

(In thousands)

(Unaudited)



First Three Quarters of



2012


2011






Cash flow from operating activities:





    Net Income


$     157,037


$  120,246






    Adjustments to reconcile net income to net cash provided by





       operating activities:





         Depreciation expense


16,910


14,683

         Amortization expense


89,315


56,747

         Provision for doubtful accounts


1,428


954

         Deferred income taxes


646


(10,175)

         Stock-based compensation


23,628


21,033

         Income from equity method investments


(19,708)


(11,001)

         Excess tax benefit for stock-based compensation


(16,673)


(11,698)

         Provision for excess and obsolete inventories


6,372


6,915

         Other non-cash items


(3,019)


2,738






    Add decrease (increase) in assets:





         Accounts receivables


(39,496)


(43,117)

         Other receivables


(7,996)


13,471

         Inventories


(4,650)


(11,344)

         Other current and non-current assets


(2,844)


7,005






    Add increase (decrease) in liabilities:





         Accounts payable


7,828


2,039

         Accrued compensation and benefits


6,375


(1,921)

         Deferred revenue


12,390


7,638

         Accrued warranty expense


(2,491)


402

         Other current and non-current liabilities


18,842


(2,794)

 Net cash provided by operating activities 


243,894


161,821






 Cash flow from investing activities: 





      Acquisitions of businesses, net of cash acquired 


(355,484)


(758,243)

      Acquisition of property and equipment 


(34,126)


(16,002)

      Acquisitions of intangible assets 


(795)


(1,666)

      Purchases of equity method investments 




(3,267)

      Dividends received 


2,140


7,500

      Other 


303


(168)

 Net cash used in investing activities 


(387,962)


(771,846)






 Cash flow from financing activities: 





      Issuance of common stock, net 


37,142


40,182

      Excess tax benefit for stock-based compensation 


16,673


11,698

      Proceeds from long-term debt and revolving credit lines 


478,556


702,225

      Payments on short-term and long-term debt  


(401,062)


(225,942)

 Net cash provided by financing activities 


131,309


528,163






 Effect of exchange rate changes on cash and cash equivalents 


(22)


(671)






 Net decrease in cash and cash equivalents 


(12,781)


(82,533)

 Cash and cash equivalents - beginning of period 


154,621


220,788






 Cash and cash equivalents - end of period 


$     141,840


$  138,255

 

 

REPORTING SEGMENTS

(Dollars in thousands)

(Unaudited)





Reporting Segments



Engineering









and


Field


Mobile


Advanced



Construction


Solutions


Solutions


Devices













THIRD QUARTER OF FISCAL 2012 :










Revenues


$     287,244


$ 102,993


$  83,830


$  30,696












Operating income before corporate allocations:


$       68,451


$   36,021


$    8,218


$    5,684


Operating margin (% of segment external net revenues)


23.8%


35.0%


9.8%


18.5%











THIRD QUARTER OF FISCAL 2011 :










Revenues


$     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%











FIRST THREE QUARTERS OF FISCAL 2012 :










Revenue


$     820,304


$ 373,863


$ 243,615


$  86,808












Operating income before corporate allocations:


$     168,001


$ 145,005


$  21,200


$  12,936



Operating margin (% of segment external net revenues)


20.5%


38.8%


8.7%


14.9%











FIRST THREE QUARTERS OF FISCAL 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%

 

 

 

GAAP TO NON-GAAP RECONCILIATION

(Dollars in thousands, except per share data)

(Unaudited)























Third Quarter of


First Three Quarters of







2012


2011


2012


2011







Dollar

% of


Dollar

% of


Dollar

% of


Dollar

% of







Amount

Revenue


Amount

Revenue


Amount

Revenue


Amount

Revenue


GROSS MARGIN:
















GAAP gross margin:



$   262,867

52.1%


$   211,559

50.7%


$   789,713

51.8%


$   611,823

50.6%




Restructuring

( A )


60

0.0%


47

0.0%


139

0.0%


335

0.0%




Amortization of purchased intangible assets

( B )


15,728

3.1%


10,321

2.5%


42,145

2.8%


23,918

2.0%




Stock-based compensation

( C )


502

0.1%


491

0.1%


1,480

0.1%


1,461

0.1%




Amortization of acquisition-related inventory step-up

( D )


547

0.1%


1,354

0.3%


677

0.0%


3,063

0.3%



Non-GAAP gross margin: 



$   279,704

55.4%


$   223,772

53.6%


$   834,154

54.7%


$   640,600

53.0%



















OPERATING EXPENSES:
















GAAP operating expenses:



$   199,397

39.5%


$   179,111

42.9%


$   607,474

39.8%


$   484,133

40.0%




Restructuring

( A )


(301)

-0.1%


(647)

-0.2%


(1,894)

-0.1%


(1,775)

-0.1%




Amortization of purchased intangible assets

( B )


(15,712)

-3.1%


(13,785)

-3.3%


(47,170)

-3.1%


(32,829)

-2.7%




Stock-based compensation

( C )


(7,182)

-1.3%


(6,615)

-1.6%


(22,148)

-1.5%


(19,572)

-1.6%




Acquisition costs

( E )


(1,804)

-0.4%


(7,281)

-1.7%


(14,385)

-0.9%


(12,775)

-1.1%



Non-GAAP operating expenses:



$   174,398

34.6%


$   150,783

36.1%


$   521,877

34.2%


$   417,182

34.5%



















OPERATING INCOME:
















GAAP operating income:



$     63,470

12.6%


$    32,448

7.8%


$   182,239

12.0%


$   127,690

10.6%




Restructuring

( A )


361

0.1%


694

0.2%


2,033

0.1%


2,110

0.2%




Amortization of purchased intangible assets

( B )


31,440

6.2%


24,106

5.8%


89,315

5.9%


56,747

4.7%




Stock-based compensation

( C )


7,684

1.5%


7,106

1.7%


23,628

1.6%


21,033

1.6%




Amortization of acquisition-related inventory step-up

( D )


547

0.1%


1,354

0.3%


677

0.0%


3,063

0.3%




Acquisition costs

( E )


1,804

0.4%


7,281

1.7%


14,385

0.9%


12,775

1.1%



Non-GAAP operating income: 



$   105,306

20.9%


$    72,989

17.5%


$   312,277

20.5%


$   223,418

18.5%



















NON-OPERATING INCOME, NET:
















GAAP non-operating income, net:



$      3,352



$     (2,563)



$      8,201



$       8,674





Acquisition gain

( E )


(334)



(1,220)



(447)



(71)





Debt issuance cost write-off

( F )


-



-



-



377





Foreign exchange (gain) loss associated with acquisitions

( G )


-



2,190



1,578



(3,456)




Non-GAAP non-operating income, net: 



$      3,018



$     (1,593)



$      9,332



$       5,524


























GAAP and 



GAAP and 



GAAP and 



GAAP and 








Non-GAAP



Non-GAAP



Non-GAAP



Non-GAAP








Tax Rate %

( I )


Tax Rate %

( I )


Tax Rate %

( I )


Tax Rate %

( I )

INCOME TAX PROVISION:
















GAAP income tax provision:



$     13,022

19%


$      2,689

9%


$    33,403

18%


$     16,118

12%




Non-GAAP items tax effected:

( H )


8,088



3,737



22,873



10,478




Non-GAAP income tax provision: 



$     21,110

19%


$      6,426

9%


$    56,276

18%


$     26,596

12%



















NET INCOME:  
















GAAP net income attributable to Trimble Navigation Ltd.



$     53,364



$    27,971



$   157,874



$   121,352





Restructuring

( A )


361



694



2,033



2,110





Amortization of purchased intangible assets

( B )


31,440



24,106



89,315



56,747





Stock-based compensation

( C )


7,684



7,106



23,628



21,033





Amortization of acquisition-related inventory step-up

( D )


547



1,354



677



3,063





Acquisition costs

( E )


1,470



6,061



13,938



12,705





Debt issuance cost write-off

( F )


-



-



-



377





Foreign exchange (gain) loss associated with acquisitions

( G )


-



2,190



1,578



(3,456)





Non-GAAP tax adjustments

( H )


(8,088)



(3,737)



(22,873)



(10,478)




Non-GAAP net income attributable to Trimble Navigation Ltd.



$     86,778



$    65,745



$   266,170



$   203,453




















DILUTED NET INCOME PER SHARE:
















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



$        0.42



$        0.22



$        1.23



$         0.96





Restructuring

( A )


-



0.01



0.02



0.02





Amortization of purchased intangible assets

( B )


0.24



0.19



0.70



0.45





Stock-based compensation

( C )


0.06



0.06



0.18



0.17





Amortization of acquisition-related inventory step-up

( D )


-



0.01



0.01



0.02





Acquisition costs

( E )


0.01



0.05



0.11



0.10





Debt issuance cost write-off

( F )


-



-



-



-





Foreign exchange (gain) loss associated with acquisitions

( G )


-



0.01



0.01



(0.03)





Non-GAAP tax adjustments

( H )


(0.05)



(0.03)



(0.18)



(0.08)




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


$        0.68



$        0.52



$        2.08



$         1.61




















OPERATING LEVERAGE:
















Increase in non-GAAP operating income



$     32,317



$    20,417



$    88,859



$     52,137




Increase in revenue



$     87,330



$    99,223



$   315,695



$   238,307




Operating leverage (increase in non-GAAP operating 
















income as a % of increase in revenue)



37.0%



20.6%



28.1%



21.9%



 

 

 

GAAP TO NON-GAAP RECONCILIATION (CONTINUED)

(Dollars in thousands, except per share data)

(Unaudited)






















































Third Quarter of


First Three Quarters of






2012


2011


2012


2011







% of Segment



% of Segment



% of Segment



% of Segment

SEGMENT OPERATING INCOME:




Revenue



Revenue



Revenue



Revenue


Engineering and Construction
















GAAP operating income before corporate allocations:



$ 68,451

23.8%


$ 42,634

17.7%


$ 168,001

20.5%


$ 112,400

16.8%



Stock-based compensation

( J )


2,675

1.0%


2,579

1.1%


8,730

1.0%


7,360

1.1%



Non-GAAP operating income before corporate allocations:



$ 71,126

24.8%


$ 45,213

18.8%


$ 176,731

21.5%


$ 119,760

17.9%


















Field Solutions
















GAAP operating income before corporate allocations:



$ 36,021

35.0%


$ 31,030

34.1%


$ 145,005

38.8%


$ 126,078

39.6%



Stock-based compensation

( J )


628

0.6%


559

0.6%


1,952

0.5%


1,619

0.5%



Non-GAAP operating income before corporate allocations:



$ 36,649

35.6%


$ 31,589

34.7%


$ 146,957

39.3%


$ 127,697

40.1%


















Mobile Solutions
















GAAP operating income (loss) before corporate allocations:



$   8,218

9.8%


$   2,503

4.3%


$  21,200

8.7%


$   (1,515)

(1.1%)



Stock-based compensation

( J )


682

0.8%


668

1.2%


1,710

0.7%


2,473

1.8%



Non-GAAP operating income before corporate allocations:



$   8,900

10.6%


$   3,171

5.5%


$  22,910

9.4%


$       958

0.7%


















Advanced Devices
















GAAP operating income before corporate allocations:



$   5,684

18.5%


$   3,970

14.6%


$  12,936

14.9%


$  10,441

13.0%



Stock-based compensation

( J )


544

1.8%


636

2.4%


1,716

2.0%


1,955

2.5%



Non-GAAP operating income before corporate allocations:



$   6,228

20.3%


$   4,606

17.0%


$  14,652

16.9%


$  12,396

15.5%

 

 

 

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 intangible assets, 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 intangible assets, stock-based compensation and acquisition costs associated with external and incremental costs resulting directly from merger and acquisition activities such as legal, due diligence, integration costs and acquisition bonus payments 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 intangible assets, 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, integration costs and acquisition bonus payments. 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, net

We believe this measure helps investors evaluate our non-operating income trends. Non-GAAP non-operating income, net excludes acquisition gains associated with unusual acquisition related items such as an adjustment to 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. These costs are specific to particular acquisitions and vary significantly in amount and timing. Non-GAAP non-operating income, net also excludes the write-off of debt issuance costs associated with a terminated credit facility as well as foreign exchange (gains) losses specifically associated with hedges for two of our acquisitions. We believe that these exclusions provide investors with a supplemental view of our ongoing financial results.

 

Non-GAAP income tax provision

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 intangible assets, stock-based compensation, amortization of acquisition-related inventory step-up, acquisition costs, a write-off of debt issuance costs associated with a terminated credit facility, foreign exchange (gains) losses from hedges associated with two acquisitions, 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 intangible assets, stock-based compensation, amortization of acquisition-related inventory step-up, acquisition costs, a write-off of debt issuance costs associated with a terminated credit facility, foreign exchange (gains) losses from hedges associated with two acquisitions, 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 (loss). 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. 

These non-GAAP measures can be used to evaluate our historical and prospective financial performance, as well as our performance relative to competitors. 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.  Accordingly, management excludes from non-GAAP those items relating to restructuring, amortization of purchased intangible assets, stock based compensation, amortization of acquisition-related inventory step-up, acquisition costs, a write-off of debt issuance costs associated with a terminated credit facility, foreign exchange (gains) losses from hedges associated with two acquisitions, and non-GAAP tax adjustments.  For detailed explanations of the adjustments made to comparable GAAP measures, see items (A) - ( J ) below,















( 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 intangible assets. Included in our GAAP presentation of gross margin, operating expenses, operating income, and net income is amortization of purchased intangible assets. 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 the amortization of purchased intangible assets, which primarily 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 third quarter and the first three quarters of fiscal 2012 and 2011, stock-based compensation was allocated as follows: 



















Third Quarter of


First Three Quarters of




(Dollars in thousands)



2012


2011


2012


2011




Cost of sales



$                 502


$                 491


$              1,480


$               1,461




Research and development



1,163


1,151


3,869


3,373




Sales and Marketing



1,616


1,672


5,244


4,966




General and administrative



4,403


3,791


13,035


11,233







$              7,684


$              7,105


$            23,628


$             21,033















( D )

Amortization of acquisition-related inventory step-up.  The purchase accounting entries associated with our business acquisitions require us to record inventory at its fair value, which is sometimes greater than the previous book value of the inventory.  Included in our GAAP presentation of cost of sales, the increase in inventory value is amortized to cost of sales over the period that the related product is sold.  We exclude inventory step-up amortization from our non-GAAP measures because it is a non-cash expense that we do not believe is indicative of our ongoing operating results.  We further believe that excluding this item from our non-GAAP results is useful to investors in that it allows for period-over-period comparability.














( E )

Acquisition costs.  Included in our GAAP presentation of operating expenses, acquisition costs consist of external and incremental costs resulting directly from merger and acquisition activities such as legal, due diligence, integration costs and acquisition bonus payments.  Included in our GAAP presentation of non-operating income, net, acquisition costs include unusual acquisition related items such as an adjustment to a gain on bargain purchase (resulting from the fair value of identifiable net assets acquired exceeding the consideration transferred), and adjustments to the fair value of earn-out liabilities. Although we do numerous acquisitions, the costs that have been excluded from the non-GAAP measures are costs specific to particular acquisitions. These are one-time costs that vary significantly in amount and timing and are not indicative of our core operating performance.














( F )

Debt issuance cost write-off.   Included in our non-operating income, net this amount represents a write-off of debt issuance cost for a terminated credit facility.  We excluded the debt issuance cost write-off from our non-GAAP measures. We believe that investors benefit from excluding this item from our non-operating income to facilitate a more meaningful evaluation of our non-operating income trends.














( G )

Foreign exchange (gain) loss associated with acquisitions.    This amount represents the (gain) loss on foreign exchange hedges associated with two of our acquisitions.  We excluded the foreign exchange (gain) loss from our non-GAAP measures because we believe that the exclusion of this item provides investors an enhanced view of the cost structure of our operations and facilitates comparisons with the results of other periods.                     














( H )

Non-GAAP items tax effected.   This amount adjusts the provision for income taxes to reflect the effect of the non-GAAP items (A) - (G) on non-GAAP net income.   We believe this information is useful to investors because it provides for consistent treatment of the excluded items in this non-GAAP presentation. 














( I )

GAAP and non-GAAP tax rate %.  These percentages are defined as GAAP income tax provision as a percentage of GAAP income before taxes and non-GAAP income tax provision as a percentage of non-GAAP income before taxes.   We believe that investors benefit from a presentation of non-GAAP tax rate percentage as a way of facilitating a comparison to non-GAAP tax rates in prior periods.














( J )

Stock-based compensation. The amounts consist of expenses for employee stock options and awards and purchase rights under our employee stock purchase plan. As referred to above we exclude stock-based compensation here because investors may view it as not reflective of our core operating performance as it is a non-cash expense. However, management does include stock-based compensation for budgeting and incentive plans as well as for reviewing internal financial reporting. We discuss our operating results by segment with and without stock-based compensation expense, as we believe it is useful to investors. Stock-based compensation not allocated to the reportable segments was approximately $3.2 million and $2.7 million for the third quarter of fiscal 2012 and 2011, respectively, and $9.5 million and $7.6 million for the first three quarters of fiscal 2012 and 2011, respectively.

 

SOURCE Trimble



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