Business Combination

9 Months Ended

Sep. 30, 2011

Business Combination [Abstract]

Business Combination

NOTE 4. BUSINESS COMBINATION

Tekla Corporation

On May 8, 2011, the Company and Tekla Corporation ("Tekla") entered into an agreement, pursuant to which the Company would acquire all of the outstanding shares of Tekla. Tekla is headquartered in Finland and is a provider of building information modeling software and other model driven solutions for customers in the infrastructure and energy industries.

The acquisition closed on July 8, 2011, whereby the Company acquired 99.46% of the outstanding shares of Tekla for $454.9 million in cash. The Company intends to purchase the remaining shares of Tekla as soon as practical through compulsory redemption proceedings under the Finish Companies Act. The acquisition was funded through the use of approximately $54.9 million of the Company's existing cash, with the remainder funded through the Company's credit facilities. In connection with the acquisition, the Company incurred approximately $6.4 million in acquisition-related costs related primarily to investment banking, legal, accounting and other professional services. The acquisition costs were expensed as incurred and were included in General and administrative expenses in the Condensed Consolidated Financial Statements with $5.6 million and $6.4 million recognized in the three and nine month periods ended September 30, 2011, respectively.

Tekla is a leading provider of information model based software for the building and construction and infrastructure and energy industries. The Company expects that the integration of Tekla's BIM software solutions with Trimble's building construction estimating, project management and BIM-to-field solutions will enable a compelling set of productivity solutions for contractors around the world. Tekla's infrastructure and energy solutions will complement Trimble's growing portfolio of utilities and municipalities solutions. Additionally, Trimble's significant global customer base will immediately extend Tekla's customer reach while Tekla's global presence in the building and construction market will bolster Trimble's own customer reach.

Tekla's results of operations from July 8, 2011 through September 30, 2011 have been included in the Company's Condensed Consolidated Statements of Income for the three and nine months ended September 30, 2011. Tekla's building and construction activities are included within the Company's Engineering and Construction business segment and Tekla's infrastructure and energy activities are included within the Company's Field Solutions business segment.

The fair value of identifiable assets acquired and liabilities assumed were determined under the acquisition method of accounting for business combinations. The excess of purchase consideration over the fair value of net tangible and identifiable intangible assets acquired was recorded as goodwill. The fair values assigned to tangible and identifiable intangible assets acquired and liabilities assumed are based on estimates and assumptions provided by management. The estimated fair values of assets acquired and liabilities assumed are considered preliminary and are based on the information that was available as of the date of the acquisition. The Company believes that the information provides a reasonable basis for estimating the fair values of assets acquired and liabilities assumed, but it is waiting for additional information, primarily related to estimated values of certain net tangible and intangible assets, including certain income tax accruals. Thus the provisional measurements of fair value set forth below are subject to change. Such changes could be significant. The Company expects to finalize the valuation of the net tangible and intangible assets as soon as practicable, but not later than one-year from the acquisition date.

The following table summarizes the consideration transferred to acquire Tekla and the assets acquired and liabilities assumed and the estimated useful lives of the identifiable intangible assets acquired as of the date of the acquisition:

	Estimated Fair Value
(Dollars in thousands)
Total purchase consideration*		457,387
Net tangible assets acquired		12,007
				Estimated useful Life
Intangible assets acquired:
Developed product technology		107,260		7years
In-process research and development		7,591		Evaluated upon completion
Order backlog		1,246		6months
Customer relationships		83,929		8years
Trade name		7,648		8years
Subtotal		207,674
Deferred tax liability		(53,995	)
Less fair value of all assets/liabilities acquired		165,686
Goodwill	$	291,701

* Of the $457.4 million, $2.5 million is held in a cash account and represents the 0.54% of shares not yet acquired by the Company. The Company intends to purchase the remaining shares and has offered to purchase them at the same per share price as was provided for the 99.46% of shares obtained. Therefore, the non-controlling interest was valued based on that per-share price.

Details of the net assets acquired are as follows:

	As of July 8, 2011
(Dollars in thousands)
Cash and cash equivalents	$	12,871
Account receivable		12,862
Other receivables		1,712
Other current assets		2,265
Property and equipment, net		4,066
Other non-current assets		5,113
Accounts payable		(1,329	)
Accrued liabilities		(12,412	)
Deferred revenue liability		(10,048	)
Other non-current liabilities		(3,093	)
Total net assets acquired	$	12,007

The historical financial statements of Tekla were prepared in accordance with International Financial Reporting Standards ("IFRS"). Therefore, the Company adjusted the net tangible assets and liabilities in accordance with U.S. generally accepted accounting principles ("GAAP"). In addition, the Company recorded adjustments to align Tekla's accounting policies with that of the Company. The adjustments to measure the assets and liabilities assumed at fair value are described below:

Deferred revenue

The Company reduced Tekla's book value of deferred revenue by $8.1 million to adjust deferred revenue to the fair value of the direct cost to fulfill the obligations plus an operating margin which represents the expected required return of a market participant to provide the services. Tekla's deferred revenue balance is related to on-going maintenance agreements.

Intangible Assets

Developed product technology, which is comprised of products that have reached technological feasibility, includes products in Tekla's current product offerings. Tekla's technology includes BIM software technologies related to the Tekla Structures and Tekla Infrastructure and energy solutions products.

Order backlog relates to firm customer orders that generally are scheduled for delivery within the next year.

Customer relationships represent the value placed on Tekla's distribution channels and end users.

Trade names represent the value placed on the Tekla's brand and recognition in the building and construction, infrastructure and energy industries.

In-process research and development represents incomplete Tekla research and development projects that have not reached technological feasibility as of the consummation of the merger. Upon completion of the research and development projects, the assets will be amortized over the estimated future life of the product as indicated by its anticipated revenue streams evaluated upon completion.

Goodwill

Goodwill represents the excess of the fair value of consideration paid over the fair value of the underlying net tangible and intangible assets acquired. Goodwill consisted of Tekla's highly skilled and valuable assembled workforce, a proven ability to generate new products and services to drive future revenue, and a premium paid by the Company for synergies unique to its business. The Company recorded $291.7 million of goodwill from this acquisition with $246.6 million assigned to the Engineering and Construction segment and $45.1 million assigned to the Field Solutions segment. None of the goodwill recognized is expected to be deductible for income tax purposes.

Deferred tax liabilities

The Company recognized $54.0 million in net deferred tax liabilities for the tax effects of differences between fair values in the purchase price and the tax bases of assets acquired and liabilities assumed.

During the three and nine months ended September 30, 2011, Tekla contributed $15.2 million of revenue and recorded $1.1 million of operating loss within the business segments. The following table presents pro forma results of operations of the Company and Tekla, as if the companies had been combined as of the beginning of the earliest period presented. The unaudited pro forma results of operations are not necessarily indicative of results that would have occurred had the acquisition taken place on January 1, 2010, or of future results. Included in the pro forma results are fair value adjustments based on the fair values of assets acquired and liabilities assumed as of the acquisition date of July 8, 2011. Pro-forma results include amortization of intangible assets related to the acquisition, interest expense for debt used to purchase Tekla, and income tax effects, and for the three and nine months ended September 30, 2011 the pro forma results exclude foreign currency transaction gain/(loss) recognized on a hedge and acquisition related cost associated with the purchase of Tekla. The pro forma information for the three and nine months ended October 1, 2010 and for the three and nine months ended September 30, 2011 is as follows:

	Three Months Ended				Nine Months Ended
	September 30, 2011		October 1, 2010		September 30, 2011		October 1, 2010
(Dollars in thousands)
Total revenues	$	417,433	$	335,895	$	1,262,387	$	1,028,400
Net income		32,986		28,281		119,092		56,998
Net income attributable to Trimble Navigation Ltd		33,761		28,284		120,197		56,329
Basic earnings per share		0.27		0.24		0.98		0.47
Diluted earnings per share		0.27		0.23		0.95		0.46

Other Acquisitions

During the nine months ended September 30, 2011, the Company acquired several other businesses. The Condensed Consolidated Statements of Income include the operating results of each of these businesses from the date of acquisition, however the effects of each of these acquisitions were not material individually or in the aggregate to the Company's results. The Company determined the total consideration paid for each of the above acquisitions as well as the fair value of the assets acquired and liabilities assumed as of the date of acquisition. In certain cases, the fair value of the assets acquired and liabilities assumed are preliminary and may be adjusted as the Company obtains additional information.