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Trimble Third Quarter 2010 Revenue $318.2 Million, Up 18 Percent; Non-GAAP EPS $0.39, Up 56 Percent
SUNNYVALE, Calif., Nov. 2, 2010 /PRNewswire via COMTEX News Network/ -- Trimble (Nasdaq: TRMB) today announced revenue of $318.2 million for its third quarter ended Oct. 1, 2010, up approximately 18 percent as compared to revenue of $269.7 million in the third quarter of 2009.
Operating income for the third quarter of 2010 was $31.7 million, up approximately 57 percent as compared to the third quarter of 2009. Operating margin in the third quarter of 2010 was 10.0 percent, as compared to an operating margin of 7.5 percent in the third quarter of 2009.
Amortization of intangibles was $14.4 million in the third quarter of 2010, as compared to $13.6 million in the third quarter of 2009. The impact of stock-based compensation expense was $5.5 million, as compared to $4.5 million in the third quarter of 2009. There was also $290 thousand of restructuring expense, a $69 thousand acquisition-related inventory step-up charge, and $2.5 million of non-recurring acquisition-related net gains in the third quarter of 2010. In the third quarter of 2009 there was a $1.1 million restructuring expense, no acquisition-related inventory step-up charge, and $577 thousand of non-recurring acquisition costs.
Excluding these items, third quarter 2010 non-GAAP operating income of $52.6 million was up 31 percent, as compared to the third quarter of 2009. Non-GAAP operating margin was 16.5 percent in the third quarter of 2010, as compared to 14.8 percent in the third quarter of 2009.
Third quarter 2010 net income was $32.8 million, up 111 percent, as compared to the third quarter of 2009. Diluted earnings per share for the third quarter of 2010 were $0.27, as compared to diluted earnings per share of $0.13 for the third quarter of 2009. The tax rate for the third quarter of 2010 was 14 percent as compared to 27 percent in the third quarter of 2009. The tax rate is lower primarily due to a previously announced settlement with the IRS and the geographical mix of pre-tax income.
Adjusting for the items noted above, non-GAAP net income of $48.2 million for the third quarter of 2010 was up 60 percent, as compared to the third quarter of 2009. Diluted non-GAAP earnings per share for the third quarter of 2010 were $0.39, as compared to diluted non-GAAP earnings per share of $0.25 in the third quarter of 2009.
"Trimble continues to see recovery in most of its markets, most particularly agriculture. We continue to work the issues in our Mobile Solutions segment and have established an improving trend which should continue into 2011," said Steven W. Berglund, Trimble's president and chief executive officer. "In spite of still uncertain economic conditions, we currently expect strengthening results for the total company in 2011."
Trimble Results by Business Segment
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, non-recurring acquisition costs, and the impact of stock-based compensation expense.
Engineering and Construction (E&C)
Third quarter 2010 E&C revenue was $189.6 million, up approximately 27 percent as compared to the third quarter of 2009, with strength across most product lines and geographies.
Operating income in E&C for the third quarter 2010 was $36.6 million, or 19.3 percent of revenue, as compared to $21.1 million, or 14.1 percent of revenue, in the third quarter of 2009. Non-GAAP operating income was $38.5 million, or 20.3 percent of revenue, as compared to $22.7 million, or 15.2 percent of revenue, in the third quarter of 2009. The improvement in non-GAAP operating margin was due to operating leverage from increased revenue.
Field Solutions
Third quarter 2010 Field Solutions revenue was $67.2 million, up 21 percent as compared to the third quarter of 2009. Sales of agricultural products were strong, driven by new product introductions and a better macro environment in agriculture. Geographic Information System (GIS) product sales were also up.
Operating income in Field Solutions for the third quarter 2010 was $21.0 million, or 31.3 percent of revenue, as compared to $16.3 million, or 29.3 percent of revenue, in the third quarter of 2009. Non-GAAP operating income was $21.5 million, or 32.0 percent of revenue, as compared to $16.6 million, or 29.8 percent of revenue, in the third quarter of 2009. The increase in operating margin was due to product mix and higher revenue.
Mobile Solutions
Third quarter 2010 Mobile Solutions revenue was $37.7 million, down 5 percent as compared to the third quarter of 2009 primarily due to the loss of a large customer in the second quarter partially offset by the acquisition of Punch Telematics.
Operating loss in Mobile Solutions for the third quarter 2010 was $83 thousand, or negative 0.2 percent of revenue, as compared to operating income of $3.4 million, or 8.5 percent of revenue, in the third quarter of 2009. Non-GAAP operating income was $744 thousand, or 2.0 percent of revenue, as compared to $4.3 million or 10.9 percent of revenue, in the third quarter of 2009. The decline in non-GAAP margins is due to lower revenue and product mix.
Advanced Devices
Third quarter 2010 Advanced Devices revenue was $23.7 million, down approximately 6 percent as compared to the third quarter of 2009 due to slower sales of embedded products.
Operating income in Advanced Devices for the third quarter 2010 was $4.1 million, or 17.2 percent of revenue, as compared to $4.5 million, or 17.9 percent of revenue, in the third quarter of 2009. Non-GAAP operating income in Advanced Devices was $4.5 million, or 19.1 percent of revenue, as compared to $4.9 million, or 19.5 percent of revenue, in the third quarter of 2009.
Stock Repurchase Program
Trimble repurchased $6.1 million in stock at an average price of $28.40 during the third quarter of 2010.
Use of Non-GAAP Financial Information
To help our readers understand our past financial performance and our future results, we supplement the financial results that we provide in accordance with generally accepted accounting principles, or GAAP, with non-GAAP financial measures. The specific non-GAAP measures which we use along with a reconciliation to the nearest comparable GAAP measures and the explanation for why management chose to exclude selected items and the additional purposes for which these non-GAAP measures are used 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. 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. Management generally compensates for the limitations in the use of non-GAAP financial measures by relying on comparable GAAP financial measures and providing investors with a reconciliation of the non-GAAP financial measure to the most directly comparable GAAP financial measure or measures. 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 2010 Trimble expects revenue between $313 million and $318 million, representing a year over year growth rate of 13 to 15 percent, with GAAP earnings per share of $0.18 to $0.20 and non-GAAP earnings per share of $0.33 to $0.35. Non-GAAP guidance for the fourth quarter of 2010 excludes the amortization of intangibles of $14.6 million related to previous acquisitions, the anticipated impact of stock-based compensation expense of $6.5 million, and expected acquisition costs of $1.6 million. Both GAAP and non-GAAP earnings per share assume an 18 to 20 percent tax rate and 124.2 million shares outstanding.
Investor Conference Call / Webcast Details
Trimble will hold a conference call on Nov. 2, 2010 at 1:30 p.m. PT to review its third quarter 2010 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 (800) 642-1687 (U.S.) or (706) 645-9291 (international) and the pass code is 20117040. 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 that Trimble has guided for the Fourth quarter and full year 2010 and 2011, the expected tax-rate, the anticipated impact of stock-based compensation expense, the amortization of intangibles related to previous acquisitions. The Company may suspend its stock repurchase plan at any time and for any reason without further notice. 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. If the current economic conditions worsen it may negatively impact our customers' purchasing decisions worldwide, including in emerging markets. In addition, 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. Any weakening of our accounts receivable or write-off of goodwill could also impair our financial results. 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, including the 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. 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 ------------------ Oct-1, Oct-2, 2010 2009 ---- ---- Revenue $318,210 $269,713 Cost of sales 158,462 137,255 ------- ------- Gross margin 159,748 132,458 ------- ------- Gross margin (%) 50.2% 49.1% Operating expenses Research and development 36,897 33,250 Sales and marketing 53,228 47,022 General and administrative 29,637 23,237 Restructuring 238 872 Amortization of purchased intangible assets 8,078 7,912 Total operating expenses 128,078 112,293 ------- ------- Operating income 31,670 20,165 Non-operating income, net Interest income 221 124 Interest expense (576) (450) Foreign currency transaction gain (loss), net 77 792 Income (loss) from equity method investments, net 3,404 (58) Other income, net 3,533 988 Total non-operating income, net 6,659 1,396 ----- ----- Income before taxes 38,329 21,561 Income tax provision 5,487 5,714 Net income 32,842 15,847 Less: Net income (loss) attributable to noncontrolling interests (3) 270 Net income attributable to Trimble Navigation Ltd. $32,845 $15,577 ======= ======= Earnings per share attributable to Trimble Navigation Ltd. Basic $0.27 $0.13 ----- ----- Diluted $0.27 $0.13 ----- ----- Shares used in calculating earnings per share: Basic 119,474 120,047 Diluted 122,869 122,854 ------- -------
Nine Months Ended ----------------- Oct-1, Oct-2, 2010 2009 ---- ---- Revenue $970,588 $848,730 Cost of sales 488,417 429,514 ------- ------- Gross margin 482,171 419,216 ------- ------- Gross margin (%) 49.7% 49.4% Operating expenses Research and development 109,339 100,844 Sales and marketing 153,518 141,120 General and administrative 85,474 75,901 Restructuring 1,244 5,797 Amortization of purchased intangible assets 24,250 22,411 Total operating expenses 373,825 346,073 ------- ------- Operating income 108,346 73,143 Non-operating income, net Interest income 864 546 Interest expense (1,385) (1,408) Foreign currency transaction gain (loss), net (1,046) 760 Income (loss) from equity method investments, net 9,025 421 Other income, net 3,022 1,476 Total non-operating income, net 10,480 1,795 ------ ----- Income before taxes 118,826 74,938 Income tax provision 51,061 20,244 Net income 67,765 54,694 Less: Net income (loss) attributable to noncontrolling interests 669 795 Net income attributable to Trimble Navigation Ltd. $67,096 $53,899 ======= ======= Earnings per share attributable to Trimble Navigation Ltd. Basic $0.56 $0.45 ----- ----- Diluted $0.54 $0.44 ----- ----- Shares used in calculating earnings per share: Basic 120,296 119,620 Diluted 123,599 121,893 ------- -------
CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands) (Unaudited)
Oct-1, Jan-1 2010 2010 ---- ---- Assets Current assets: Cash and cash equivalents $211,056 $273,848 Accounts receivables, net 229,746 202,293 Other receivables 18,172 11,856 Inventories, net 176,853 144,012 Deferred income taxes 29,600 39,686 Other current assets 20,673 18,383 ------ ------ Total current assets 686,100 690,078 Property and equipment, net 49,525 44,635 Goodwill 812,564 764,193 Other purchased intangible assets, net 203,230 202,782 Other non-current assets 64,661 51,589 ------ ------ Total assets $1,816,080 $1,753,277 ========== ========== Liabilities Current liabilities: Current portion of long-term debt $1,913 $445 Accounts payable 73,064 53,775 Accrued compensation and benefits 60,908 43,272 Deferred revenue 74,392 68,968 Accrued warranty expense 13,802 14,744 Other accrued liabilities 38,187 42,041 ------ ------ Total current liabilities 262,266 223,245 Non-current portion of long-term debt 151,180 151,038 Non-current deferred revenue 12,606 15,599 Deferred income taxes 29,388 38,857 Other non-current liabilities 41,313 59,983 Total liabilities 496,753 488,722 ------- ------- Commitments and contingencies Equity Shareholders' equity: Common stock 754,664 720,248 Retained earnings 500,407 491,367 Accumulated other comprehensive income 50,689 48,297 ------ ------ Total Trimble Navigation Ltd. shareholders' equity 1,305,760 1,259,912 Noncontrolling interests 13,567 4,643 Total equity 1,319,327 1,264,555 Total liabilities and equity $1,816,080 $1,753,277 ========== ==========
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) (Unaudited)
Nine Months Ended Oct-1, Oct-2, 2010 2009 ---- ---- Cash flow from operating activities: Net Income $67,765 $54,694 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation expense 13,310 13,941 Amortization expense 42,165 38,968 Provision for doubtful accounts 3,022 2,933 Amortization of debt issuance cost 169 169 Deferred income taxes (3,827) (9,268) Stock-based compensation 16,165 13,321 Income from equity method investments (9,025) (421) Excess tax benefit for stock-based compensation (1,971) (1,304) Provision for excess and obsolete inventories 3,573 2,943 Other non-cash items (3,799) (2,876) Add decrease (increase) in assets: Accounts receivables (17,030) 2,613 Other receivables 191 6,288 Inventories (32,549) 1,300 Other current and non-current assets 366 1,915 Add increase (decrease) in liabilities: Accounts payable 15,796 (1,068) Accrued compensation and benefits 15,780 2,273 Accrued liabilities (25,051) 1,947 Deferred revenue 1,982 10,753 Net cash provided by operating activities 87,032 139,121 ------ ------- Cash flow from investing activities: Acquisitions of businesses, net of cash acquired (90,757) (50,824) Acquisition of property and equipment (17,162) (9,541) Acquisitions of intangible assets (625) (26,839) Purchases of equity method investments (5,692) - Net purchases of short term investments - (2,000) Dividends received 5,000 2,896 Other 99 (379) --- Net cash used in investing activities (109,137) (86,687) -------- ------- Cash flow from financing activities: Issuance of common stock 31,901 13,673 Repurchase and retirement of common stock (73,853) - Excess tax benefit for stock-based compensation 1,971 1,304 Payments on long-term debt and revolving credit lines (467) (168) Tax withholding on restricted stock (16) - Net cash provided by (used in) financing activities (40,464) 14,809 ------- ------ Effect of exchange rate changes on cash and cash equivalents (223) 5,325 ---- ----- Net increase (decrease) in cash and cash equivalents (62,792) 72,568 Cash and cash equivalents -beginning of period 273,848 142,531 ------- ------- Cash and cash equivalents -end of period $211,056 $215,099 ======== ========
REPORTING SEGMENTS (Dollars in thousands) (Unaudited)
Reporting Segments ------------------ Engineering and Field Construction Solutions ------------ --------- THREE MONTHS ENDED OCTOBER 1, 2010: Revenue $189,598 $67,240 Operating income (loss) before corporate allocations: $36,589 $21,027 Operating margin (% of segment external net revenues) 19.3% 31.3% THREE MONTHS ENDED OCTOBER 2, 2009: Revenue $149,384 $55,654 Operating income before corporate allocations: $21,131 $16,286 Operating margin (% of segment external net revenues) 14.1% 29.3% NINE MONTHS ENDED OCTOBER 1, 2010: Revenue $535,657 $243,299 Operating income before corporate allocations: $89,317 $89,320 Operating margin (% of segment external net revenues) 16.7% 36.7% NINE MONTHS ENDED OCTOBER 2, 2009: Revenue $424,275 $234,598 Operating income before corporate allocations: $42,800 $88,637 Operating margin (% of segment external net revenues) 10.1% 37.8%
Reporting Segments ------------------ Mobile Advanced Solutions Devices --------- ------- THREE MONTHS ENDED OCTOBER 1, 2010: Revenue $37,692 $23,680 Operating income (loss) before corporate allocations: $(83) $4,073 Operating margin (% of segment external net revenues) (0.2%) 17.2% THREE MONTHS ENDED OCTOBER 2, 2009: Revenue $39,572 $25,103 Operating income before corporate allocations: $3,367 $4,488 Operating margin (% of segment external net revenues) 8.5% 17.9% NINE MONTHS ENDED OCTOBER 1, 2010: Revenue $113,839 $77,793 Operating income before corporate allocations: $2,140 $14,879 Operating margin (% of segment external net revenues) 1.9% 19.1% NINE MONTHS ENDED OCTOBER 2, 2009: Revenue $116,925 $72,932 Operating income before corporate allocations: $10,163 $13,633 Operating margin (% of segment external net revenues) 8.7% 18.7%
GAAP TO NON-GAAP RECONCILIATION (Dollars in thousands, except per share data) (Unaudited)
Three Months Ended ------------------ Oct-1, Oct-2, 2010 2009 ---- ---- Dollar % of Dollar % of Amount Revenue Amount Revenue ------ ------- ------ ------- GROSS MARGIN: GAAP gross margin: $159,748 50.2% $132,458 49.1% Restructuring ( A ) 52 0.0% 270 0.1% Amortization of purchased intangibles ( B ) 6,356 2.0% 5,661 2.1% Stock-based compensation ( C ) 485 0.2% 453 0.2% Amortization of acquisition- related inventory step-up ( D ) 69 0.0% - 0.0% --- --- --- --- Non-GAAP gross margin: $166,710 52.4% $138,842 51.5% -------- ---- -------- ---- OPERATING EXPENSES: GAAP operating expenses: $128,078 40.3% $112,293 41.6% Restructuring ( A ) (238) -0.1% (872) -0.3% Amortization of purchased intangibles ( B ) (8,078) -2.5% (7,912) -3.0% Stock-based compensation ( C ) (5,055) -1.6% (4,088) -1.5% Non-recurring acquisition costs ( E ) (569) -0.2% (577) -0.2% ---- ---- ---- ---- Non-GAAP operating expenses: $114,138 35.9% $98,844 36.6% -------- ---- ------- ---- OPERATING INCOME: GAAP operating income: $31,670 10.0% $20,165 7.5% Restructuring ( A ) 290 0.1% 1,142 0.4% Amortization of purchased intangibles ( B ) 14,434 4.5% 13,573 5.0% Stock-based compensation ( C ) 5,540 1.7% 4,541 1.7% Amortization of acquisition- related inventory step-up ( D ) 69 0.0% - 0.0% Non-recurring acquisition costs ( E ) 569 0.2% 577 0.2% --- --- --- --- Non-GAAP operating income: $52,572 16.5% $39,998 14.8% ------- ---- ------- ---- NON-OPERATING INCOME, NET: GAAP non-operating income, net: $6,659 $1,396 Non-recurring acquisition (gains) costs ( E ) (3,022) - ------ --- Non-GAAP non- operating income, net: $3,637 $1,396 ------ ------ NET INCOME: GAAP net income attributable to Trimble Navigation Ltd. $32,845 $15,577 Restructuring ( A ) 290 1,142 Amortization of purchased intangibles ( B ) 14,434 13,573 Stock-based compensation ( C ) 5,540 4,541 Amortization of acquisition- related inventory step-up ( D ) 69 - Non-recurring acquisition (gains) costs ( E ) (2,453) 577 Income tax effect on non-GAAP adjustments ( F ) (2,560) (5,256) ------ ------ Non-GAAP net income attributable to Trimble Navigation Ltd. $48,165 $30,154 ------- ------- DILUTED NET INCOME PER SHARE: GAAP diluted net income per share attributable to Trimble Navigation Ltd. $0.27 $0.13 Restructuring ( A ) - 0.01 Amortization of purchased intangibles ( B ) 0.12 0.11 Stock-based compensation ( C ) 0.04 0.04 Amortization of acquisition- related inventory step-up ( D ) - - Non-recurring acquisition (gains) costs ( E ) (0.02) - Income tax effect on non-GAAP adjustments ( F ) (0.02) (0.04) ----- ----- Non-GAAP diluted net income per share attributable to Trimble Navigation Ltd. $0.39 $0.25 ----- ----- OPERATING LEVERAGE: Increase in non- GAAP operating income $12,574 Increase in revenue $48,497 Operating leverage (increase in non- GAAP operating income as a % of increase in revenue) 25.9% % of % of Segment Segment SEGMENT OPERATING INCOME: Revenue Revenue ------- ------- Engineering and Construction GAAP operating income before corporate allocations: $36,589 19.3% $21,131 14.1% Stock-based compensation ( G ) 1,891 1.0% 1,563 1.1% Non-GAAP operating income before corporate allocations: $38,480 20.3% $22,694 15.2% ------- ---- ------- ---- Field Solutions GAAP operating income before corporate allocations: $21,027 31.3% $16,286 29.3% Stock-based compensation ( G ) 464 0.7% 293 0.5% Non-GAAP operating income before corporate allocations: $21,491 32.0% $16,579 29.8% ------- ---- ------- ---- Mobile Solutions GAAP operating income (loss) before corporate allocations: $(83) -0.2% $3,367 8.5% Stock-based compensation ( G ) 827 2.2% 958 2.4% Non-GAAP operating income before corporate allocations: $744 2.0% $4,325 10.9% ---- --- ------ ---- Advanced Devices GAAP operating income before corporate allocations: $4,073 17.2% $4,488 17.9% Stock-based compensation ( G ) 450 1.9% 397 1.6% Non-GAAP operating income before corporate allocations: $4,523 19.1% $4,885 19.5% ------ ---- ------ ----
Nine Months Ended ----------------- Oct-1, Oct-02, 2010 2009 ---- ---- Dollar % of Dollar % of Amount Revenue Amount Revenue ------ ------- ------ ------- GROSS MARGIN: GAAP gross margin: $482,171 49.7% $419,216 49.4% Restructuring ( A ) 150 0.0% 3,333 0.4% Amortization of purchased intangibles ( B ) 17,915 1.8% 16,421 1.9% Stock-based compensation ( C ) 1,472 0.2% 1,368 0.2% Amortization of acquisition- related inventory step-up ( D ) 140 0.0% 470 0.0% --- --- --- --- Non-GAAP gross margin: $501,848 51.7% $440,808 51.9% -------- ---- -------- ---- OPERATING EXPENSES: GAAP operating expenses: $373,825 38.5% $346,073 40.8% Restructuring ( A ) (1,244) -0.1% (5,797) -0.7% Amortization of purchased intangibles ( B ) (24,250) -2.5% (22,411) -2.7% Stock-based compensation ( C ) (14,693) -1.5% (11,953) -1.4% Non-recurring acquisition costs ( E ) (3,071) -0.3% (3,382) -0.4% ------ ---- ------ ---- Non-GAAP operating expenses: $330,567 34.1% $302,530 35.6% -------- ---- -------- ---- OPERATING INCOME: GAAP operating income: $108,346 11.2% $73,143 8.6% Restructuring ( A ) 1,394 0.1% 9,130 1.1% Amortization of purchased intangibles ( B ) 42,165 4.3% 38,832 4.6% Stock-based compensation ( C ) 16,165 1.7% 13,321 1.6% Amortization of acquisition- related inventory step-up ( D ) 140 0.0% 470 0.0% Non-recurring acquisition costs ( E ) 3,071 0.3% 3,382 0.4% ----- --- ----- --- Non-GAAP operating income: $171,281 17.6% $138,278 16.3% -------- ---- -------- ---- NON-OPERATING INCOME, NET: GAAP non-operating income, net: $10,480 $1,795 Non-recurring acquisition (gains) costs ( E ) (3,212) (386) ------ ---- Non-GAAP non- operating income, net: $7,268 $1,409 ------ ------ NET INCOME: GAAP net income attributable to Trimble Navigation Ltd. $67,096 $53,899 Restructuring ( A ) 1,394 9,130 Amortization of purchased intangibles ( B ) 42,165 38,832 Stock-based compensation ( C ) 16,165 13,321 Amortization of acquisition- related inventory step-up ( D ) 140 470 Non-recurring acquisition (gains) costs ( E ) (141) 2,996 Income tax effect on non-GAAP adjustments ( F ) 15,591 (17,411) ------ ------- Non-GAAP net income attributable to Trimble Navigation Ltd. $142,410 $101,237 -------- -------- DILUTED NET INCOME PER SHARE: GAAP diluted net income per share attributable to Trimble Navigation Ltd. $0.54 $0.44 Restructuring ( A ) 0.01 0.07 Amortization of purchased intangibles ( B ) 0.34 0.32 Stock-based compensation ( C ) 0.13 0.11 Amortization of acquisition- related inventory step-up ( D ) - - Non-recurring acquisition (gains) costs ( E ) - 0.03 Income tax effect on non-GAAP adjustments ( F ) 0.13 (0.14) ---- ----- Non-GAAP diluted net income per share attributable to Trimble Navigation Ltd. $1.15 $0.83 ----- ----- OPERATING LEVERAGE: Increase in non- GAAP operating income $33,003 Increase in revenue $121,858 Operating leverage (increase in non- GAAP operating income as a % of increase in revenue) 27.1% % of % of Segment Segment SEGMENT OPERATING INCOME: Revenue Revenue ------- ------- Engineering and Construction GAAP operating income before corporate allocations: $89,317 16.7% $42,800 10.1% Stock-based compensation ( G ) 5,494 1.0% 4,302 1.0% Non-GAAP operating income before corporate allocations: $94,811 17.7% $47,102 11.1% ------- ---- ------- ---- Field Solutions GAAP operating income before corporate allocations: $89,320 36.7% $88,637 37.8% Stock-based compensation ( G ) 1,397 0.6% 775 0.3% Non-GAAP operating income before corporate allocations: $90,717 37.3% $89,412 38.1% ------- ---- ------- ---- Mobile Solutions GAAP operating income (loss) before corporate allocations: $2,140 1.9% $10,163 8.7% Stock-based compensation ( G ) 2,246 2.0% 3,205 2.7% Non-GAAP operating income before corporate allocations: $4,386 3.9% $13,368 11.4% ------ --- ------- ---- Advanced Devices GAAP operating income before corporate allocations: $14,879 19.1% $13,633 18.7% Stock-based compensation ( G ) 1,350 1.8% 1,068 1.5% Non-GAAP operating income before corporate allocations: $16,229 20.9% $14,701 20.2% ------- ---- ------- ----
FOOTNOTES TO GAAP TO NON-GAAP RECONCILIATION (Unaudited) The non-GAAP financial measures included in the previous table are non-GAAP gross margin, non-GAAP operating expenses, non-GAAP operating income, non-GAAP non-operating income, net, non-GAAP net income, non-GAAP diluted net income per share and operating leverage, and non-GAAP segment operating income before corporate allocations. These non-GAAP measures can be used to evaluate the Company's historical and prospective financial performance, as well as its performance relative to competitors. The Company believes some of its investors track the Company's "core operating performance" as a means of evaluating the Company's performance in the ordinary, ongoing, and customary course of its operations. Management also believes that looking at its 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 intangibles, stock based compensation, amortization of acquisition-related inventory step-up, non-recurring acquisition costs, and a $27.5 million charge associated with the IRS settlement, which the Company believes are not indicative of its core operating performance ( A ) Restructuring. 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 from our non-GAAP measures because we believe it is not indicative of our core operating performance. ( B ) Amortization of purchased intangibles. Included in our GAAP presentation of cost of sales and operating expenses, amortization of purchased intangibles recorded arise from prior acquisitions and are non-cash in nature. We exclude these expenses from our non- GAAP measures because we believe they are not indicative of our core operating performance. ( 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 October 1, 2010 and October 2, 2009, stock-based compensation was allocated as follows:
Three Months Ended Nine Months Ended ------------------ ----------------- Oct-1, Oct-2, Oct-1, Oct-2, (Dollars in thousands) 2010 2009 2010 2009 ---- ---- ---- ---- Cost of sales $485 $453 $1,472 $1,368 Research and development 968 866 2,899 2,504 Sales and Marketing 1,283 1,134 4,013 3,200 General and administrative 2,804 2,088 7,781 6,249 $5,540 $4,541 $16,165 $13,321 ------ ------ ------- -------
( 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 we do not believe it is indicative of our core operating performance. ( E ) Non-recurring acquisition (gains) costs. Included in our GAAP presentation of operating expenses and non-operating income, net, non-recurring acquisition costs consist of external and incremental costs resulting directly from merger and acquisition activities such as legal, due diligence and integration costs. Also included are 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 earnout liabilities and payments made or received to settle earnout and holdback disputes. We exclude these items because they are non-recurring and unique to specific acquisitions and are not indicative of our core operating performance. ( F ) Income tax effect on non-GAAP adjustments. This amount adjusts the provision for income taxes to reflect the effect of the non-GAAP adjustments on non-GAAP net income. In addition, the nine months ended October 1, 2010 include the net impact of the $27.5 million associated with the IRS audit settlement. ( G ) 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. 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 $1.9 million and $1.3 million for the three months ended October 1, 2010 and October 2, 2009, respectively and $5.7 million and $4.0 million for the nine months ended October 1, 2010 and October 2, 2009, respectively.
SOURCE Trimble
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