Trimble Inc.
Feb 10, 2015

Trimble Reports Fourth Quarter and Full Year 2014 Results

- Fourth Quarter 2014 Revenue $563.8 Million, Down 6 Percent; GAAP Diluted Earnings Per Share $0.21: Non-GAAP Diluted Earnings per Share $0.29
- Fiscal 2014 Revenue $2.4 Billion, up 5 Percent; GAAP Diluted Earnings Per Share $0.81: Non-GAAP Diluted Earnings Per Share $1.46

SUNNYVALE, Calif., Feb. 10, 2015 /PRNewswire/ -- Trimble (NASDAQ: TRMB) today announced fourth quarter and fiscal year end results.

Fourth Quarter 2014

Fourth quarter 2014 revenue of $563.8 million was down 6 percent as compared to the fourth quarter of 2013. Engineering and Construction revenue was $328.5 million, down 1 percent. Field Solutions revenue was $80.7 million, down 27 percent. Mobile Solutions revenue was $124.1 million, down 1 percent. Advanced Devices revenue was $30.5 million, down 2 percent. Foreign currency translation unfavorably impacted company revenue by approximately 2 percent.

GAAP operating income was $76.9 million, up 14 percent as compared to the fourth quarter of 2013. GAAP operating margin was 13.6 percent of revenue as compared to 11.2 percent of revenue in the fourth quarter of 2013, and benefitted from the reversal of a $51.3 million reserve for legal matters related to a jury verdict that was overturned.   

GAAP net income was $55.8 million, down 7 percent as compared to the fourth quarter of 2013. Diluted GAAP earnings per share were $0.21 as compared to diluted GAAP earnings per share of $0.23 in the fourth quarter of 2013.

Non-GAAP operating income of $84.2 million was down 33 percent as compared to the fourth quarter of 2013. Non-GAAP operating margin was 14.9 percent of revenue as compared to 20.9 percent of revenue in the fourth quarter of 2013.

Non-GAAP net income of $76.1 million was down 33 percent as compared to the fourth quarter of 2013. Diluted non-GAAP earnings per share were $0.29 as compared to diluted non-GAAP earnings per share of $0.43 in the fourth quarter of 2013.

Operating cash flow in the quarter was $96.6 million, down 29 percent as compared to the fourth quarter of 2013.   

Fiscal 2014

Fiscal 2014 revenue of $2.4 billion was up 5 percent as compared to fiscal 2013. Engineering and Construction revenue was $1.3 billion, up 10 percent. Field Solutions revenue was $422.1 million, down 11 percent. Mobile Solutions revenue was $486.8 million, up 5 percent. Advanced Devices revenue was $138.5 million, up 9 percent.  

GAAP operating income was $260.8 million, up 4 percent as compared to fiscal 2013. GAAP operating margin was 10.9 percent of revenue as compared to 11.0 percent of revenue in fiscal 2013.

GAAP net income was $214.1 million, down 2 percent as compared to fiscal 2013. Diluted GAAP earnings per share were $0.81 as compared to diluted GAAP earnings per share of $0.84 in fiscal 2013.

Non-GAAP operating income of $479.8 million was up 1 percent as compared to fiscal 2013. Non-GAAP operating margin was 20.0 percent of revenue as compared to 20.7 percent of revenue in fiscal 2013.

Non-GAAP net income of $386.6 million was down 6 percent as compared to fiscal 2013. Diluted non-GAAP earnings per share were $1.46 as compared to diluted non-GAAP earnings per share of $1.58 in fiscal 2013.

Operating cash flow in fiscal 2014 was $407.1 million, down 2 percent as compared to fiscal 2013.  

"We were impacted in the fourth quarter by a stronger dollar, deferred revenue accounting effects associated with new acquisitions, and the short term reaction to the decline in oil prices. The combined effect of these factors pushed us lower in our anticipated revenue range for the quarter and will influence first half 2015 results. Agriculture revenue for the quarter was consistent with our expectation and represents a significant year-over-year decline," said Steven W. Berglund, Trimble's president and chief executive officer. "Total fiscal year 2014 results for the company showed revenue and non-GAAP operating income expansion, despite the significant declines in agriculture. Although the agriculture market remains volatile and difficult to forecast, we continue to invest in the coming agriculture technology transformation while also taking steps in the short term to maintain our historically strong financial model for the company. Despite continuing headwinds in the first half of 2015 we anticipate strengthening results as the year progresses."

Forward Looking Guidance

For the first quarter of 2015 Trimble expects revenue to be between $590 million and $620 million with GAAP earnings per share of $0.09 to $0.16 and non-GAAP earnings per share of $0.26 to $0.33. Non-GAAP guidance excludes the amortization of intangibles of $41 million related to previous acquisitions, anticipated acquisition costs of $4 million, and the anticipated impact of stock-based compensation expense of $13 million. GAAP guidance assumes a tax rate of 23 percent and non-GAAP guidance assumes a tax rate of 22 percent.  Both GAAP and non-GAAP earnings per share assume approximately 264 million shares outstanding.

Investor Conference Call / Webcast Details

Trimble will hold a conference call on February 10, 2015 at 2:00 p.m. PT to review its fourth quarter and fiscal year 2014 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). The pass code is 75288322. The replay will also be available on the Web at the address above.

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.

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, the ability to deliver revenue, earnings per share and other financial projections that Trimble has guided for the first quarter, 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, obtain new customers, or integrate new acquisitions. The Company's results would also be negatively impacted by weakening in the macro environment. 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, further worsening in the agricultural market, 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)










Fourth Quarter of


Fiscal Years










2014


2013


2014


2013









Revenues:








        Product

$ 386,510


$ 409,733


$1,713,564


$1,649,965

        Service

104,315


112,646


396,062


364,274

        Subscription

73,005


76,839


285,920


273,885

Total revenues

563,830


599,218


2,395,546


2,288,124









Cost of sales:








        Product

182,662


189,538


788,114


776,597

        Service

44,007


46,553


152,612


141,904

        Subscription

22,603


22,492


81,063


84,682

        Amortization of purchased intangible assets

21,950


21,181


82,913


81,119

Total cost of sales

271,222


279,764


1,104,702


1,084,302









Gross margin

292,608


319,454


1,290,844


1,203,822

Gross margin (%)

51.9%


53.3%


53.9%


52.6%









Operating expenses








    Research and development

80,855


77,636


317,992


299,421

    Sales and marketing

98,751


93,669


387,569


348,106

    General and administrative

16,924


58,498


247,120


216,876

    Restructuring

396


1,358


1,741


5,960

    Amortization of purchased intangible assets

18,793


20,947


75,599


81,722

       Total operating expenses

215,719


252,108


1,030,021


952,085

















Operating income 

76,889


67,346


260,823


251,737









Non-operating income (loss), net








    Interest expense, net

(8,859)


(4,134)


(18,681)


(17,582)

    Foreign currency transaction gain, (loss), net

(1,275)


172


(5,084)


(954)

    Income from equity method investments, net

840


4,772


12,368


20,680

    Other income (loss), net

4,022


(1,864)


16,589


(1,017)

       Total non-operating income (loss), net

(5,272)


(1,054)


5,192


1,127









Income before taxes

71,617


66,292


266,015


252,864









Income tax provision 

15,756


6,631


52,127


34,698

Net income

55,861


59,661


213,888


218,166

Less: Net gain (loss) attributable to noncontrolling interests 

33


(336)


(230)


(689)

Net income attributable to Trimble Navigation Ltd.

$  55,828


$   59,997


$   214,118


$   218,855









Earnings per share attributable to Trimble Navigation Ltd.








     Basic

$      0.22


$      0.23


$        0.82


$        0.85

     Diluted

$      0.21


$      0.23


$        0.81


$        0.84









Shares used in calculating earnings per share:








    Basic

259,217


258,187


260,103


256,648

    Diluted

262,665


262,832


264,456


261,206

 

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands)

(Unaudited)











Fiscal Year End


Fiscal Year End

As of


2014


2013

Assets










Current assets:





   Cash and cash equivalents


$         148,000


$         147,227

   Accounts receivable, net


362,049


337,932

   Other receivables


29,485


23,143

   Inventories, net


278,099


254,311

   Deferred income taxes


45,576


38,597

   Other current assets


39,407


35,807

      Total current assets


902,616


837,017






Property and equipment, net


157,355


142,975

Goodwill


2,101,169


1,989,470

Other purchased intangible assets, net


594,554


619,399

Other non-current assets


118,654


111,979






      Total assets


$      3,874,348


$      3,700,840






Liabilities 










Current liabilities:





   Current portion of long-term debt


$          64,431


$         106,402

   Accounts payable


103,851


112,522

   Accrued compensation and benefits


98,862


95,866

   Deferred revenue


211,589


159,295

   Accrued warranty expense


20,583


17,781

   Other accrued liabilities


88,983


85,124

      Total current liabilities


588,299


576,990






Non-current portion of long-term debt


674,015


652,056

Non-current deferred revenue


26,309


20,431

Deferred income taxes


121,071


136,399

Other non-current liabilities


95,802


80,982

      Total liabilities


1,505,496


1,466,858






Commitments and contingencies










Equity










Shareholders' equity:





   Common stock


1,207,365


1,106,017

   Retained earnings


1,210,977


1,081,695

   Accumulated other comprehensive income (loss)


(61,328)


33,194

Total Trimble Navigation Ltd. shareholders' equity


2,357,014


2,220,906

Noncontrolling interests 


11,838


13,076

      Total equity


2,368,852


2,233,982






      Total liabilities and equity


$      3,874,348


$      3,700,840

 

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS 

(In thousands)

(Unaudited)



Fiscal Years



2014


2013






Cash flow from operating activities:





    Net Income


$   213,888


$ 218,166






    Adjustments to reconcile net income to net cash provided by





       operating activities:





         Depreciation expense


33,129


26,736

         Amortization expense


158,512


162,841

         Provision for doubtful accounts


3,747


1,909

         Deferred income taxes


(1,650)


(14,963)

         Stock-based compensation


43,398


36,442

         Income from equity method investments


(12,368)


(20,680)

         Gain (loss) on an equity sale


(15,091)


-

         Acquisition / divestiture (gain)/loss


2,899


1,430

         Excess tax benefit for stock-based compensation


(14,098)


(13,540)

         Provision for excess and obsolete inventories


4,817


3,157

         Other non-cash items


4,653


(657)






    Add decrease (increase) in assets:





         Accounts receivables


(10,882)


(4,070)

         Other receivables


(2,321)


2,302

         Inventories


(31,778)


(11,351)

         Other current and non-current assets


(7,101)


(11,811)






    Add increase (decrease) in liabilities:





         Accounts payable


(7,185)


(15,834)

         Accrued compensation and benefits


527


4,047

         Deferred revenue


45,865


29,394

         Accrued warranty expense


3,045


675

         Other liabilities


(4,923)


20,442

 Net cash provided by operating activities 


407,083


414,635






 Cash flow from investing activities: 





      Acquisitions of businesses, net of cash acquired 


(307,945)


(258,797)

      Acquisitions of property and equipment 


(47,312)


(70,877)

      Acquisitions of intangible assets 


(7,633)


(242)

      (Purchases) sales of equity method investments 


(10,939)


2,430

      Dividends received from equity method investments 


32,231


7,672

      Other 


(2,448)


(4,950)

 Net cash used in investing activities 


(344,046)


(324,764)






 Cash flow from financing activities: 





      Issuance of common stock, net of tax withholdings 


56,095


47,707

      Repurchase and retirement of common stock 


(97,757)


-

      Excess tax benefit for stock-based compensation 


14,098


13,540

      Proceeds from debt and revolving credit lines 


816,166


407,678

      Payments on debt and revolving credit lines 


(840,126)


(567,344)

 Net cash used in financing activities 


(51,524)


(98,419)






 Effect of exchange rate changes on cash and cash equivalents 


(10,741)


(1,996)






 Net decrease in cash and cash equivalents 


773


(10,544)

 Cash and cash equivalents - beginning of period 


147,227


157,771






 Cash and cash equivalents - end of period 


$   148,000


$ 147,227

 

REPORTING SEGMENTS

(Dollars in thousands)

(Unaudited)
























Reporting Segments




Engineering










and


Field


Mobile


Advanced




Construction


Solutions


Solutions


Devices











FOURTH QUARTER OF FISCAL 2014 :









Revenues

$     328,509


$    80,678


$  124,140


$    30,503












Operating income before corporate allocations:

$      48,904


$    17,404


$    18,112


$     9,476



Operating margin (% of segment external net revenues)

14.9%


21.6%


14.6%


31.1%











FOURTH QUARTER OF FISCAL 2013 :









Revenues

$     331,112


$  111,080


$  125,880


$    31,146












Operating income before corporate allocations:

$      67,957


$    38,843


$    21,677


$     5,158



Operating margin (% of segment external net revenues)

20.5%


35.0%


17.2%


16.6%











FISCAL YEAR 2014 :









Revenue

$  1,348,129


$  422,090


$  486,819


$  138,508












Operating income before corporate allocations:

$     268,856


$  134,198


$    72,876


$    42,326



Operating margin (% of segment external net revenues)

19.9%


31.8%


15.0%


30.6%











FISCAL YEAR 2013 :









Revenue

$  1,222,040


$  473,891


$  465,138


$  127,055












Operating income before corporate allocations:

$     251,258


$  173,114


$    63,961


$    26,577



Operating margin (% of segment external net revenues)

20.6%


36.5%


13.8%


20.9%

 

GAAP TO NON-GAAP RECONCILIATION

(Dollars in thousands, except per share data)

(Unaudited)























Fourth Quarter of


Fiscal Years







2014


2013


2014


2013







Dollar

% of


Dollar

% of


Dollar

% of


Dollar

% of







Amount

Revenue


Amount

Revenue


Amount

Revenue


Amount

Revenue


GROSS MARGIN:
















GAAP gross margin:



$ 292,608

51.9%


$319,454

53.3%


$1,290,844

53.9%


$1,203,822

52.6%




Restructuring

( A )


38

0.0%


31

0.0%


363

0.0%


860

0.0%




Amortization of purchased intangible assets

( B )


21,950

3.9%


21,181

3.6%


82,913

3.5%


81,119

3.6%




Stock-based compensation

( C )


898

0.2%


757

0.1%


3,184

0.1%


2,573

0.1%




Amortization of acquisition-related inventory step-up

( D )


154

0.0%


-

0.0%


816

0.0%


1,505

0.1%



Non-GAAP gross margin: 



$ 315,648

56.0%


$ 341,423

57.0%


$1,378,120

57.5%


$1,289,879

56.4%



















OPERATING EXPENSES:
















GAAP operating expenses:



$ 215,719

38.3%


$252,108

42.1%


$1,030,021

43.0%


$952,085

41.6%




Restructuring

( A )


(396)

-0.1%


(1,358)

-0.2%


(1,741)

-0.1%


(5,960)

-0.3%




Amortization of purchased intangible assets

( B )


(18,793)

-3.3%


(20,947)

-3.5%


(75,599)

-3.1%


(81,722)

-3.5%




Stock-based compensation

( C )


(10,375)

-1.9%


(9,527)

-1.6%


(40,214)

-1.7%


(33,869)

-1.4%




Acquisition / divestiture items

( E )


(6,033)

-1.1%


(3,910)

-0.7%


(13,449)

-0.6%


(13,195)

-0.6%




Litigation

( H )


51,300

9.1%


-

0.0%


(711)

0.0%


(1,335)

-0.1%



Non-GAAP operating expenses:



$ 231,422

41.0%


$ 216,366

36.1%


$   898,307

37.5%


$816,004

35.7%



















OPERATING INCOME:
















GAAP operating income:



$   76,889

13.6%


$67,346

11.2%


$   260,823

10.9%


$251,737

11.0%




Restructuring

( A )


434

0.1%


1,389

0.2%


2,104

0.1%


6,820

0.3%




Amortization of purchased intangible assets

( B )


40,743

7.2%


42,128

7.0%


158,512

6.6%


162,841

7.1%




Stock-based compensation

( C )


11,273

2.0%


10,284

1.7%


43,398

1.8%


36,442

1.5%




Amortization of acquisition-related inventory step-up

( D )


154

0.0%


-

0.0%


816

0.0%


1,505

0.1%




Acquisition / divestiture items

( E )


6,033

1.1%


3,910

0.8%


13,449

0.6%


13,195

0.6%




Litigation

( H )


(51,300)

-9.1%


-

0.0%


711

0.0%


1,335

0.1%



Non-GAAP operating income: 



$   84,226

14.9%


$ 125,057

20.9%


$   479,813

20.0%


$473,875

20.7%



















NON-OPERATING INCOME (LOSS), NET:
















GAAP non-operating income (loss), net:



$    (5,272)



($1,054)



$       5,192



$1,127





Acquisition / divestiture items

( E )


(3,105)



2,276



2,899



1,430





Gain on an equity sale

( F )


-



-



(15,091)



-





Debt issuance cost write-off

( G )


4,205



-



4,205



-




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



$    (4,172)



$    1,222



$      (2,795)



$2,557


























GAAP and 



GAAP and 



GAAP and 



GAAP and 








Non-GAAP



Non-GAAP



Non-GAAP



Non-GAAP








Tax Rate %

( L )


Tax Rate %

( L )


Tax Rate %

( L )


Tax Rate %

( L )

INCOME TAX PROVISION:
















GAAP income tax provision:



$   15,756

22%


$6,631

10%


$     52,127

20%


$34,698

14%




Non-GAAP items tax effected

( I )


7,982



6,001



44,342



30,064





Tax on gain on an equity sale

( J )


-



-



(5,836)



-





Tax on RDS litigation

( K )


(19,840)



-



-



-




Non-GAAP income tax provision: 



$     3,898

5%


$  12,632

10%


$     90,633

19%


$     64,762

14%



















NET INCOME:  
















GAAP net income attributable to Trimble Navigation Ltd.



$   55,828



$  59,997



$   214,118



$   218,855





Restructuring

( A )


434



1,389



2,104



6,820





Amortization of purchased intangible assets

( B )


40,743



42,128



158,512



162,841





Stock-based compensation

( C )


11,273



10,284



43,398



36,442





Amortization of acquisition-related inventory step-up

( D )


154



-



816



1,505





Acquisition / divestiture items

( E )


2,928



6,186



16,348



14,625





Gain on an equity sale

( F )


-



-



(15,091)



-





Debt issuance cost write-off

( G )


4,205



-



4,205



-





Litigation

( H )


(51,300)



-



711



1,335





Non-GAAP tax adjustments

(I), (J), (K)


11,858



(6,001)



(38,506)



(30,064)




Non-GAAP net income attributable to Trimble Navigation Ltd.



$   76,123



$ 113,983



$   386,615



$   412,359




















DILUTED NET INCOME PER SHARE:
















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



$      0.21



$0.23



$        0.81



$0.84





Restructuring

( A )


-



-



0.01



0.03





Amortization of purchased intangible assets

( B )


0.16



0.16



0.60



0.62





Stock-based compensation

( C )


0.04



0.04



0.16



0.14





Amortization of acquisition-related inventory step-up

( D )


-



-



-



-





Acquisition / divestiture items

( E )


0.01



0.02



0.06



0.06





Gain on an equity sale

( F )


-



-



(0.06)



-





Debt issuance cost write-off

( G )


0.02



-



0.02



-





Litigation

( H )


(0.20)



-



-



0.01





Non-GAAP tax adjustments

(I), (J), (K)


0.05



(0.02)



(0.14)



(0.12)




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


$      0.29



$      0.43



$        1.46



$        1.58




















OPERATING LEVERAGE:
















Increase in non-GAAP operating income



$  (40,831)



$  39,997



$       5,938



$     76,538




Increase in revenue



$  (35,388)



$  83,695



$   107,422



$   248,011




Operating leverage (increase in non-GAAP operating 
















income as a % of increase in revenue)



N/A



47.8%



5.5%



30.9%



 

GAAP TO NON-GAAP RECONCILIATION (CONTINUED)

(Dollars in thousands, except per share data)

(Unaudited)


















































Fourth Quarter of


Fiscal Years





2014


2013


2014


2013

SEGMENT OPERATING INCOME:



% of
Segment

Revenue



% of
Segment

Revenue



% of
Segment

Revenue



% of
Segment

Revenue


Engineering and Construction















GAAP operating income before corporate allocations:


$ 48,904

14.9%


$ 67,957

20.5%


$ 268,856

19.9%


$ 251,258

20.6%



Stock-based compensation

( M )

4,214

1.3%


3,623

1.1%


15,244

1.2%


12,325

1.0%



Non-GAAP operating income before corporate allocations:


$ 53,118

16.2%


$ 71,580

21.6%


$ 284,100

21.1%


$ 263,583

21.6%

















Field Solutions















GAAP operating income before corporate allocations:


$ 17,404

21.6%


$ 38,843

35.0%


$ 134,198

31.8%


$ 173,114

36.5%



Stock-based compensation

( M )

969

1.2%


810

0.7%


3,554

0.8%


3,068

0.7%



Non-GAAP operating income before corporate allocations:


$ 18,373

22.8%


$ 39,653

35.7%


$ 137,752

32.6%


$ 176,182

37.2%

















Mobile Solutions















GAAP operating income before corporate allocations:


$ 18,112

14.6%


$ 21,677

17.2%


$   72,876

15.0%


$   63,961

13.8%



Stock-based compensation

( M )

1,350

1.1%


1,208

1.0%


5,123

1.0%


4,002

0.8%



Non-GAAP operating income before corporate allocations:


$ 19,462

15.7%


$ 22,885

18.2%


$   77,999

16.0%


$   67,963

14.6%

















Advanced Devices















GAAP operating income before corporate allocations:


$   9,476

31.1%


$   5,158

16.6%


$   42,326

30.6%


$   26,577

20.9%



Stock-based compensation

( M )

409

1.3%


645

2.0%


1,925

1.3%


3,295

2.6%



Non-GAAP operating income before corporate allocations:


$   9,885

32.4%


$   5,803

18.6%


$   44,251

31.9%


$   29,872

23.5%

 

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, acquisition/divestiture 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, and litigation 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, acquisition/divestiture costs associated with external and incremental costs resulting directly from merger and acquisition activities such as legal, due diligence, and integration costs and litigation expenses. 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 and divestiture gains/losses associated with unusual acquisition related items such as adjustments to the fair value of earn-out liabilities, intangible asset impairment charges and gains or losses related to the acquisition or sale of certain businesses and investments, and a gain on an equity sale. These gains/losses are specific to particular acquisitions and divestitures and vary significantly in amount and timing. Non-GAAP non-operating income, net also excludes the write-off of debt issuance costs associated with terminated and/or modified credit facilities and costs associated with the issuance of new credit facilities and Senior Notes that were not capitalized as debt issuance costs. 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 and divestiture costs, a gain on an equity sale, a write off of debt issuance costs, litigation expenses 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 and divestiture costs, a gain on an equity sale, a write off of debt issuance costs, litigation expenses 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 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. 

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 and divestiture costs, a gain on an equity sale, a write off of debt issuance costs, litigation, and non-GAAP tax adjustments.  For detailed explanations of the adjustments made to comparable GAAP measures, see items (A) - ( M ) 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.  We have incurred restructuring expense in each of the periods presented however the amount incurred can vary significantly based on whether a restructuring has occurred in the period and the timing of headcount reductions. 



( B )

Amortization of purchased intangible assets.  Included in our GAAP presentation of gross margin and operating expenses 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 provides an alternative way for investors to compare our operations pre-acquisition to those post-acquisitions and to those of our competitors that have pursued internal growth strategies. However, we note that companies that grow internally will incur costs to develop intangible assets that will be expensed in the period incurred, which may make a direct comparison more difficult.     



( 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 fourth quarter and fiscal 2014 and 2013, stock-based compensation was allocated as follows: 








Fourth Quarter of


Fiscal Years



(Dollars in thousands)


2014


2013


2014


2013



Cost of sales


$     898


$757


$  3,184


$2,573



Research and development


2,010


1,395


6,825


5,039



Sales and Marketing


1,591


1,988


7,613


7,329



General and administrative


6,774


6,144


25,776


21,501





$11,273


$10,284


$43,398


$36,442



( 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 / divestiture items.  Included in our GAAP presentation of operating expenses, acquisition costs consist of external and incremental costs resulting directly from merger and acquisition and strategic investment activities such as legal, due diligence, and integration costs.  Included in our GAAP presentation of non-operating income (loss) net, acquisition / divestiture items includes unusual acquisition, investment, or divestiture gains/losses such as adjustments to the fair value of earn-out liabilities, and gains/losses on acquisitions or divestitures of certain businesses and investments. 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 )

Gain on an equity sale.   Included in our GAAP presentation of non-operating income (loss), net this amount represents a gain on a partial equity sale of Virtual Site Solutions.  We excluded the gain from our non-GAAP measures. We believe that investors benefit from excluding this item from our non-GAAP measures because it facilitates an evaluation of our non-operating income trends.



( G )

Debt issuance cost write-off.   Included in our non-operating income (loss), net this amount represents a write-off of debt issuance costs for terminated and/or modified credit facilities and costs associated with the issuance of new credit facilities and Senior Notes that were not capitalized as debt issuance costs.  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.



( H )

Litigation.  The fiscal 2013 amount represents a settlement of litigation related to a pre-acquisition agreement with a contract manufacturer.  The fiscal 2014 amount represents $0.7M of costs based on an arbitration agreement, as well as $51.3M of estimated costs that were reserved during the third quarter based on a jury verdict in favor of the plaintiff, Recreational Data Services, Inc. and then reversed during the fourth quarter after the judge overturned the verdict. We have excluded these costs from our non-GAAP measures because they are non-recurring expenses that are not indicative of our ongoing operating results. We further believe that excluding these items from our non-GAAP results is useful to investors in that it allows for period-over-period comparability.              



( I )

Non-GAAP items tax effected.   This amount adjusts the provision for income taxes to reflect the effect of the non-GAAP items ( A ) - ( H ) 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. 



( J )

Tax on gain on an equity sale.  This amount represents the tax effect of a gain on a partial equity sale of Virtual Site Solutions.  We excluded this item as it represents the tax effect of a non-recurring gain.  We believe that investors benefit from excluding this item from our non-GAAP income tax provision because it facilitates a comparison of the non-GAAP tax rate in the current period to the non-GAAP tax rates in prior periods.



( K )

Tax on Recreational Data Services Inc. litigation.  This amount represents the tax effect of a reversal of a legal reserve recorded in the third quarter of 2014 that was reversed in the fourth quarter of 2014.  We excluded this item as it represents the tax effect of a non-recurring expense.  We believe that investors benefit from excluding this item from our non-GAAP income tax provision because it allows for period-over-period comparability.



( L )

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.



( M )

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 $4.3 million and $4.0 million for the fourth quarter of fiscal 2014 and 2013, respectively, and $17.6 million and $13.8 million for fiscal 2014 and 2013, respectively.

 

To view the original version on PR Newswire, visit:http://www.prnewswire.com/news-releases/trimble-reports-fourth-quarter-and-full-year-2014-results-300033980.html

SOURCE Trimble

News Provided by Acquire Media