UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 OR 15(d)
of The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): October 30, 2014
Trimble Navigation Limited
(Exact name of registrant as specified in its charter)
California | 001-14845 | 94-2802192 | ||
(State or other jurisdiction of incorporation) |
(Commission File Number) |
(IRS Employer I.D. No.) |
935 Stewart Drive, Sunnyvale, California, 94085
(Address of principal executive offices) (Zip Code)
Registrants telephone number, including area code: (408) 481-8000
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
¨ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
¨ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
¨ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
¨ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Item 2.02 | Results of Operations and Financial Condition. |
On October 30, 2014, Trimble Navigation Limited (the Company) issued a press release reporting its financial results for the quarter ended October 4, 2014. A copy of the press release is attached hereto as Exhibit 99.1 and is incorporated herein by this reference.
The information in this Current Report on Form 8-K, including the exhibit, is furnished pursuant to Item 2.02 and shall not be deemed to be filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (Exchange Act), or otherwise subject to the liabilities of that section. The information in this Current Report on Form 8-K shall not be incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Exchange Act, whether made before or after the date of this Current Report, regardless of any general incorporation language in such filing.
Item 9.01 | Financial Statements and Exhibits |
(d) Exhibits.
Exhibit No. |
Description | |
99.1 | Press Release dated October 30, 2014 relating to the Companys financial results for the quarter ended October 4, 2014. |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
TRIMBLE NAVIGATION LIMITED | ||||
a California corporation | ||||
Dated: October 30, 2014 | By: | /s/ François Delépine | ||
François Delépine | ||||
Chief Financial Officer |
EXHIBIT INDEX
Exhibit No. | Description | |
99.1 | Press Release dated October 30, 2014 relating to the Companys financial results for the quarter ended October 4, 2014. |
Exhibit 99.1
Trimble Reports Third Quarter 2014 Results
Third Quarter 2014 Revenue $584.8Million, Up 5 Percent
GAAP Operating Margin 1.9 Percent; Non-GAAP Operating Margin 20.3 Percent
GAAP Diluted Earnings Per Share $0.04; Non-GAAP Diluted Earnings Per Share $0.33
SUNNYVALE, Calif., Oct. 30, 2014 Trimble (NASDAQ: TRMB) today announced financial results for the third quarter of 2014.
Third Quarter 2014 Financial Highlights
| Third quarter 2014 revenue of $584.8 million was up 5 percent as compared to the third quarter of 2013. Engineering and Construction revenue was $342.3 million, up 10 percent, with growth across all major product categories. Field Solutions revenue was $88.8 million, down 11 percent due to weakness in sales of agriculture products, partially offset by an increase in Geographic Information System (GIS) sales. Mobile Solutions revenue was $121.2 million, up 7 percent due to double-digit growth in sales of transportation and logistics solutions. Advanced Devices revenue was $32.6 million, down 1 percent. Geographic results were mixed in the quarter. North America grew year-over-year in line with the second quarter, but Europe slowed overall, particularly in agriculture. Asia Pacific growth slowed in the quarter, with mixed performance across the region. Rest of World grew in the quarter, also with mixed performance across the geographies. |
| Both GAAP and non-GAAP profitability were negatively impacted by third quarter acquisitions, including the impact of non-cash write downs on pre-acquisition deferred revenue. The acquisitions are expected to be dilutive to fourth quarter 2014, and accretive to fiscal year 2015. In addition, GAAP results were negatively impacted by a $52 million reserve for legal matters primarily related to a jury verdict in the U.S. which the company plans to appeal. This legal reserve is excluded from non-GAAP results. |
| GAAP operating income was $11.1 million, down 82 percent as compared to the third quarter of 2013. GAAP operating margin was 1.9 percent of revenue as compared to 11.3 percent of revenue in the third quarter of 2013. Non-GAAP operating income of $118.4 million was up 0.2 percent as compared to the third quarter of 2013. Non-GAAP operating margin was 20.3 percent of revenue as compared to 21.2 percent of revenue in the third quarter of 2013. |
| GAAP net income was $11.8 million, down 78 percent as compared to the third quarter of 2013. Diluted GAAP earnings per share were $0.04 as compared to diluted GAAP earnings per share of $0.21 in the third quarter of 2013. Non-GAAP net income of $87.1 million was down 15 percent as compared to the third quarter of 2013. Diluted non-GAAP earnings per share were $0.33 as compared to diluted non-GAAP earnings per share of $0.39 in the third quarter of 2013. |
| The GAAP effective tax rate for the quarter was a benefit of (66 percent), as compared to a provision of 14 percent in the third quarter of 2013, primarily due to the tax effect of the $52 million reserve for legal matters. Excluding the tax impact of the legal reserve, the non-GAAP tax rate in the quarter was 25 percent, and was higher than expected due to differences in the geographic mix of pre-tax income. |
| Operating cash flow in the quarter was $95.9 million. Year-to-date operating cash flow was $310.5 million, an increase of 12 percent over fiscal 2013 year-to-date. |
While we recorded a year-over-year increase in revenue, the quarter was unimpressive. Our results in agriculture and Europe were both weaker than we originally anticipated, said Steven W. Berglund, Trimbles president and chief executive officer. Although we expect a challenging fourth quarter compared to last years performance, we believe we are improving our overall position in key markets.
Forward Looking Guidance
For the fourth quarter of 2014 Trimble expects revenue to be between $560 million and $590 million with GAAP earnings per share of $0.09 to $0.15 and non-GAAP earnings per share of $0.26 to $0.32. Non-GAAP guidance excludes the amortization of intangibles of $39 million related to previous acquisitions, anticipated acquisition costs of $4 million, and the anticipated impact of stock-based compensation expense of $12 million. Both GAAP and non-GAAP earnings per share assume a 21 to 23 percent tax rate and approximately 264 million shares outstanding.
Investor Conference Call / Webcast Details
Trimble will hold a conference call on October 30, 2014 at 1:30 p.m. PT to review its third quarter 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 22273266. 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 locationincluding 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 fourth 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 Companys 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 Companys results would also be negatively impacted by weakening in the macro environment. Any failure to achieve predicted results could negatively impact the Companys revenues, cash flow from operations, and other financial results. The Companys 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 Companys 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 Companys 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 | |||||||||||||||
2014 | 2013 | 2014 | 2013 | |||||||||||||
Revenues: |
||||||||||||||||
Product |
$ | 415,490 | $ | 401,565 | $ | 1,327,054 | $ | 1,240,232 | ||||||||
Service |
98,366 | 85,521 | 291,747 | 251,628 | ||||||||||||
Subscription |
70,940 | 69,416 | 212,915 | 197,046 | ||||||||||||
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Total revenues |
584,796 | 556,502 | 1,831,716 | 1,688,906 | ||||||||||||
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Cost of sales: |
||||||||||||||||
Product |
189,331 | 187,865 | 605,452 | 587,059 | ||||||||||||
Service |
36,759 | 31,959 | 108,605 | 95,351 | ||||||||||||
Subscription |
21,876 | 21,223 | 58,460 | 62,190 | ||||||||||||
Amortization of purchased intangible assets |
20,057 | 20,402 | 60,963 | 59,938 | ||||||||||||
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Total cost of sales |
268,023 | 261,449 | 833,480 | 804,538 | ||||||||||||
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Gross margin |
316,773 | 295,053 | 998,236 | 884,368 | ||||||||||||
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Gross margin (%) |
54.2 | % | 53.0 | % | 54.5 | % | 52.4 | % | ||||||||
Operating expenses |
||||||||||||||||
Research and development |
78,954 | 71,622 | 237,137 | 221,785 | ||||||||||||
Sales and marketing |
95,843 | 85,507 | 288,818 | 254,437 | ||||||||||||
General and administrative |
111,399 | 53,648 | 230,196 | 158,378 | ||||||||||||
Restructuring |
219 | 31 | 1,345 | 4,602 | ||||||||||||
Amortization of purchased intangible assets |
19,269 | 21,216 | 56,806 | 60,775 | ||||||||||||
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Total operating expenses |
305,684 | 232,024 | 814,302 | 699,977 | ||||||||||||
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Operating income |
11,089 | 63,029 | 183,934 | 184,391 | ||||||||||||
Non-operating income (loss), net |
||||||||||||||||
Interest expense, net |
(2,975 | ) | (4,122 | ) | (9,822 | ) | (13,448 | ) | ||||||||
Foreign currency transaction loss |
(3,200 | ) | (157 | ) | (3,809 | ) | (1,126 | ) | ||||||||
Income from equity method investments, net |
2,840 | 4,494 | 11,528 | 15,908 | ||||||||||||
Other income (loss), net |
(599 | ) | 268 | 12,567 | 847 | |||||||||||
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Total non-operating income (loss), net |
(3,934 | ) | 483 | 10,464 | 2,181 | |||||||||||
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|
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Income before taxes |
7,155 | 63,512 | 194,398 | 186,572 | ||||||||||||
Income tax provision (benefit) |
(4,720 | ) | 8,892 | 36,371 | 28,067 | |||||||||||
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|
|||||||||
Net income |
11,875 | 54,620 | 158,027 | 158,505 | ||||||||||||
Less: Net gain (loss) attributable to noncontrolling interests |
43 | 151 | (263 | ) | (353 | ) | ||||||||||
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Net income attributable to Trimble Navigation Ltd. |
$ | 11,832 | $ | 54,469 | $ | 158,290 | $ | 158,858 | ||||||||
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Earnings per share attributable to Trimble Navigation Ltd. |
||||||||||||||||
Basic |
$ | 0.05 | $ | 0.21 | $ | 0.61 | $ | 0.62 | ||||||||
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Diluted |
$ | 0.04 | $ | 0.21 | $ | 0.60 | $ | 0.61 | ||||||||
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Shares used in calculating earnings per share: |
||||||||||||||||
Basic |
260,329 | 257,037 | 260,398 | 256,135 | ||||||||||||
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Diluted |
264,419 | 261,137 | 265,053 | 260,664 | ||||||||||||
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CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited)
Third Quarter of | Fiscal Year End | |||||||
As of |
2014 | 2013 | ||||||
Assets |
||||||||
Current assets: |
||||||||
Cash and cash equivalents |
$ | 139,477 | $ | 147,227 | ||||
Accounts receivables, net |
358,504 | 337,932 | ||||||
Other receivables |
29,791 | 23,143 | ||||||
Inventories, net |
278,028 | 254,311 | ||||||
Deferred income taxes |
44,743 | 38,597 | ||||||
Other current assets |
45,659 | 35,807 | ||||||
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Total current assets |
896,202 | 837,017 | ||||||
Property and equipment, net |
153,823 | 142,975 | ||||||
Goodwill |
2,051,560 | 1,989,470 | ||||||
Other purchased intangible assets, net |
571,923 | 619,399 | ||||||
Other non-current assets |
126,027 | 111,979 | ||||||
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Total assets |
$ | 3,799,535 | $ | 3,700,840 | ||||
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Liabilities |
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Current liabilities: |
||||||||
Current portion of long-term debt |
$ | 69,020 | $ | 106,402 | ||||
Accounts payable |
104,758 | 112,522 | ||||||
Accrued compensation and benefits |
87,980 | 95,866 | ||||||
Deferred revenue |
205,714 | 159,295 | ||||||
Accrued warranty expense |
20,422 | 17,781 | ||||||
Other accrued liabilities |
85,074 | 85,124 | ||||||
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Total current liabilities |
572,968 | 576,990 | ||||||
Non-current portion of long-term debt |
577,720 | 652,056 | ||||||
Non-current deferred revenue |
25,274 | 20,431 | ||||||
Deferred income taxes |
114,337 | 136,399 | ||||||
Other non-current liabilities |
145,567 | 80,982 | ||||||
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Total liabilities |
1,435,866 | 1,466,858 | ||||||
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Commitments and contingencies |
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Equity |
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Shareholders equity: |
||||||||
Common stock |
1,197,146 | 1,106,017 | ||||||
Retained earnings |
1,184,228 | 1,081,695 | ||||||
Accumulated other comprehensive income (loss) |
(29,509 | ) | 33,194 | |||||
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Total Trimble Navigation Ltd. shareholders equity |
2,351,865 | 2,220,906 | ||||||
Noncontrolling interests |
11,804 | 13,076 | ||||||
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Total equity |
2,363,669 | 2,233,982 | ||||||
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Total liabilities and equity |
$ | 3,799,535 | $ | 3,700,840 | ||||
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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
First Three Quarters of | ||||||||
2014 | 2013 | |||||||
Cash flow from operating activities: |
||||||||
Net Income |
$ | 158,027 | $ | 158,505 | ||||
Adjustments to reconcile net income to net cash provided by operating activities: |
||||||||
Depreciation expense |
24,068 | 19,630 | ||||||
Amortization expense |
117,769 | 120,713 | ||||||
Provision for doubtful accounts |
2,887 | 1,204 | ||||||
Deferred income taxes |
(1,193 | ) | (13,520 | ) | ||||
Stock-based compensation |
32,125 | 26,158 | ||||||
Income from equity method investments |
(11,528 | ) | (15,908 | ) | ||||
Gain on an equity sale |
(15,091 | ) | | |||||
Excess tax benefit for stock-based compensation |
(14,094 | ) | (8,803 | ) | ||||
Provision for excess and obsolete inventories |
3,553 | 1,551 | ||||||
Other non-cash items |
5,422 | 738 | ||||||
Add decrease (increase) in assets: |
||||||||
Accounts receivables |
(12,742 | ) | (28,466 | ) | ||||
Other receivables |
(4,709 | ) | 4,047 | |||||
Inventories |
(27,234 | ) | 2,645 | |||||
Other current and non-current assets |
(12,929 | ) | (22,765 | ) | ||||
Add increase (decrease) in liabilities: |
||||||||
Accounts payable |
(6,745 | ) | (22,467 | ) | ||||
Accrued compensation and benefits |
(9,321 | ) | (2,738 | ) | ||||
Deferred revenue |
41,861 | 46,891 | ||||||
Accrued warranty expense |
2,735 | 347 | ||||||
Other liabilities |
37,603 | 10,646 | ||||||
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Net cash provided by operating activities |
310,464 | 278,408 | ||||||
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Cash flow from investing activities: |
||||||||
Acquisitions of businesses, net of cash acquired |
(170,863 | ) | (200,401 | ) | ||||
Acquisitions of property and equipment |
(34,952 | ) | (57,646 | ) | ||||
Acquisitions of intangible assets |
(7,007 | ) | (105 | ) | ||||
(Purchases) sales of equity method investments |
(10,939 | ) | 2,429 | |||||
Dividends received from equity method investments |
25,850 | 7,672 | ||||||
Increase in restricted cash |
| (6,696 | ) | |||||
Other |
(4,532 | ) | (1,661 | ) | ||||
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Net cash used in investing activities |
(202,443 | ) | (256,408 | ) | ||||
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Cash flow from financing activities: |
||||||||
Issuance of common stock, net of tax withholdings |
53,601 | 37,667 | ||||||
Repurchase and retirement of common stock |
(64,978 | ) | | |||||
Excess tax benefit for stock-based compensation |
14,094 | 8,803 | ||||||
Proceeds from debt and revolving credit lines |
32,027 | 332,021 | ||||||
Payments on debt and revolving credit lines |
(143,274 | ) | (440,886 | ) | ||||
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|||||
Net cash used in financing activities |
(108,530 | ) | (62,395 | ) | ||||
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|||||
Effect of exchange rate changes on cash and cash equivalents |
(7,241 | ) | (2,119 | ) | ||||
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Net decrease in cash and cash equivalents |
(7,750 | ) | (42,514 | ) | ||||
Cash and cash equivalents - beginning of period |
147,227 | 157,771 | ||||||
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Cash and cash equivalents - end of period |
$ | 139,477 | $ | 115,257 | ||||
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REPORTING SEGMENTS
(Dollars in thousands)
(Unaudited)
Reporting Segments | ||||||||||||||||
Engineering | ||||||||||||||||
and | Field | Mobile | Advanced | |||||||||||||
Construction | Solutions | Solutions | Devices | |||||||||||||
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THIRD QUARTER OF FISCAL 2014 : |
||||||||||||||||
Revenues |
$ | 342,272 | $ | 88,791 | $ | 121,171 | $ | 32,562 | ||||||||
Operating income before corporate allocations: |
$ | 70,553 | $ | 25,185 | $ | 18,209 | $ | 9,091 | ||||||||
Operating margin (% of segment external net revenues) |
20.6 | % | 28.4 | % | 15.0 | % | 27.9 | % | ||||||||
THIRD QUARTER OF FISCAL 2013 : |
||||||||||||||||
Revenues |
$ | 310,611 | $ | 99,466 | $ | 113,570 | $ | 32,855 | ||||||||
Operating income before corporate allocations: |
$ | 73,488 | $ | 31,373 | $ | 15,276 | $ | 8,420 | ||||||||
Operating margin (% of segment external net revenues) |
23.7 | % | 31.5 | % | 13.5 | % | 25.6 | % | ||||||||
FIRST THREE QUARTERS OF FISCAL 2014 : |
||||||||||||||||
Revenue |
$ | 1,019,620 | $ | 341,412 | $ | 362,679 | $ | 108,005 | ||||||||
Operating income before corporate allocations: |
$ | 219,952 | $ | 116,794 | $ | 54,764 | $ | 32,850 | ||||||||
Operating margin (% of segment external net revenues) |
21.6 | % | 34.2 | % | 15.1 | % | 30.4 | % | ||||||||
FIRST THREE QUARTERS OF FISCAL 2013 : |
||||||||||||||||
Revenue |
$ | 890,928 | $ | 362,811 | $ | 339,258 | $ | 95,909 | ||||||||
Operating income before corporate allocations: |
$ | 183,301 | $ | 134,271 | $ | 42,284 | $ | 21,419 | ||||||||
Operating margin (% of segment external net revenues) |
20.6 | % | 37.0 | % | 12.5 | % | 22.3 | % |
GAAP TO NON-GAAP RECONCILIATION
(Dollars in thousands, except per share data)
(Unaudited)
Third Quarter of | First Three Quarters of | |||||||||||||||||||||||||||||||||||||||||
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: |
$ | 316,773 | 54.2 | % | $ | 295,053 | 53.0 | % | $ | 998,236 | 54.5 | % | $ | 884,368 | 52.4 | % | ||||||||||||||||||||||||||
Restructuring |
( A ) | 108 | 0.0 | % | 8 | 0.0 | % | 325 | 0.0 | % | 829 | 0.0 | % | |||||||||||||||||||||||||||||
Amortization of purchased intangible assets |
( B ) | 20,057 | 3.4 | % | 20,402 | 3.7 | % | 60,963 | 3.3 | % | 59,938 | 3.6 | % | |||||||||||||||||||||||||||||
Stock-based compensation |
( C ) | 776 | 0.1 | % | 609 | 0.1 | % | 2,286 | 0.1 | % | 1,816 | 0.1 | % | |||||||||||||||||||||||||||||
Amortization of acquisition-related inventory step-up |
( D ) | 586 | 0.1 | % | 378 | 0.1 | % | 662 | 0.1 | % | 1,505 | 0.1 | % | |||||||||||||||||||||||||||||
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Non-GAAP gross margin: |
$ | 338,300 | 57.8 | % | $ | 316,450 | 56.9 | % | $ | 1,062,472 | 58.0 | % | $ | 948,456 | 56.2 | % | ||||||||||||||||||||||||||
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OPERATING EXPENSES: |
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GAAP operating expenses: |
$ | 305,684 | 52.3 | % | $ | 232,024 | 41.7 | % | $ | 814,302 | 44.5 | % | $ | 699,977 | 41.4 | % | ||||||||||||||||||||||||||
Restructuring |
( A ) | (219 | ) | 0.0 | % | (31 | ) | 0.0 | % | (1,345 | ) | -0.1 | % | (4,602 | ) | -0.3 | % | |||||||||||||||||||||||||
Amortization of purchased intangible assets |
( B ) | (19,269 | ) | -3.3 | % | (21,216 | ) | -3.9 | % | (56,806 | ) | -3.1 | % | (60,775 | ) | -3.6 | % | |||||||||||||||||||||||||
Stock-based compensation |
( C ) | (10,262 | ) | -1.8 | % | (8,296 | ) | -1.5 | % | (29,839 | ) | -1.6 | % | (24,342 | ) | -1.4 | % | |||||||||||||||||||||||||
Acquisition / divestiture items |
( E ) | (4,056 | ) | -0.7 | % | (2,891 | ) | -0.5 | % | (7,416 | ) | -0.4 | % | (9,285 | ) | -0.5 | % | |||||||||||||||||||||||||
Litigation |
( G ) | (52,011 | ) | -8.9 | % | (1,335 | ) | -0.2 | % | (52,011 | ) | -2.9 | % | (1,335 | ) | -0.1 | % | |||||||||||||||||||||||||
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Non-GAAP operating expenses: |
$ | 219,867 | 37.6 | % | $ | 198,255 | 35.6 | % | $ | 666,885 | 36.4 | % | $ | 599,638 | 35.5 | % | ||||||||||||||||||||||||||
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OPERATING INCOME: |
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GAAP operating income: |
$ | 11,089 | 1.9 | % | $ | 63,029 | 11.3 | % | $ | 183,934 | 10.0 | % | $ | 184,391 | 10.9 | % | ||||||||||||||||||||||||||
Restructuring |
( A ) | 327 | 0.1 | % | 39 | 0.0 | % | 1,670 | 0.1 | % | 5,431 | 0.3 | % | |||||||||||||||||||||||||||||
Amortization of purchased intangible assets |
( B ) | 39,326 | 6.7 | % | 41,618 | 7.5 | % | 117,769 | 6.4 | % | 120,713 | 7.2 | % | |||||||||||||||||||||||||||||
Stock-based compensation |
( C ) | 11,038 | 1.9 | % | 8,905 | 1.6 | % | 32,125 | 1.8 | % | 26,158 | 1.5 | % | |||||||||||||||||||||||||||||
Amortization of acquisition-related inventory step-up |
( D ) | 586 | 0.1 | % | 378 | 0.1 | % | 662 | 0.0 | % | 1,505 | 0.1 | % | |||||||||||||||||||||||||||||
Acquisition / divestiture items |
( E ) | 4,056 | 0.7 | % | 2,891 | 0.5 | % | 7,416 | 0.4 | % | 9,285 | 0.6 | % | |||||||||||||||||||||||||||||
Litigation |
( G ) | 52,011 | 8.9 | % | 1,335 | 0.2 | % | 52,011 | 2.9 | % | 1,335 | 0.1 | % | |||||||||||||||||||||||||||||
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Non-GAAP operating income: |
$ | 118,433 | 20.3 | % | $ | 118,195 | 21.2 | % | $ | 395,587 | 21.6 | % | $ | 348,818 | 20.7 | % | ||||||||||||||||||||||||||
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NON-OPERATING INCOME (LOSS), NET: |
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GAAP non-operating income (loss), net: |
$ | (3,934 | ) | $ | 483 | $ | 10,464 | $ | 2,181 | |||||||||||||||||||||||||||||||||
Acquisition / divestiture items |
( E ) | 1,699 | 14 | 6,004 | (846 | ) | ||||||||||||||||||||||||||||||||||||
Gain on an equity sale |
( F ) | | | (15,091 | ) | | ||||||||||||||||||||||||||||||||||||
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Non-GAAP non-operating income, net: |
$ | (2,235 | ) | $ | 497 | $ | 1,377 | $ | 1,335 | |||||||||||||||||||||||||||||||||
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GAAP and | GAAP and | GAAP and | GAAP and | |||||||||||||||||||||||||||||||||||||||
Non-GAAP | Non-GAAP | Non-GAAP | Non-GAAP | |||||||||||||||||||||||||||||||||||||||
Tax Rate % | (K) | Tax Rate % | (K) | Tax Rate % | (K) | Tax Rate % | (K) | |||||||||||||||||||||||||||||||||||
INCOME TAX PROVISION (BENEFIT): |
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GAAP income tax provision (benefit): |
$ | (4,720 | ) | -66 | % | $ | 8,892 | 14 | % | $ | 36,371 | 19 | % | $ | 28,067 | 15 | % | |||||||||||||||||||||||||
Non-GAAP items tax effected |
( H ) | 13,930 | 7,725 | 36,360 | 24,062 | |||||||||||||||||||||||||||||||||||||
Tax on gain on an equity sale |
( I ) | | | (5,836 | ) | | ||||||||||||||||||||||||||||||||||||
Tax on RDS litigation |
( J ) | 19,840 | | 19,840 | | |||||||||||||||||||||||||||||||||||||
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Non-GAAP income tax provision: |
$ | 29,049 | 25 | % | $ | 16,617 | 14 | % | $ | 86,735 | 22 | % | $ | 52,129 | 15 | % | ||||||||||||||||||||||||||
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NET INCOME: |
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GAAP net income attributable to Trimble Navigation Ltd. |
$ | 11,832 | $ | 54,469 | $ | 158,290 | $ | 158,858 | ||||||||||||||||||||||||||||||||||
Restructuring |
( A ) | 327 | 39 | 1,670 | 5,431 | |||||||||||||||||||||||||||||||||||||
Amortization of purchased intangible assets |
( B ) | 39,326 | 41,618 | 117,769 | 120,713 | |||||||||||||||||||||||||||||||||||||
Stock-based compensation |
( C ) | 11,038 | 8,905 | 32,125 | 26,158 | |||||||||||||||||||||||||||||||||||||
Amortization of acquisition-related inventory step-up |
( D ) | 586 | 378 | 662 | 1,505 | |||||||||||||||||||||||||||||||||||||
Acquisition / divestiture items |
( E ) | 5,755 | 2,905 | 13,420 | 8,439 | |||||||||||||||||||||||||||||||||||||
Gain on an equity sale |
( F ) | | | (15,091 | ) | | ||||||||||||||||||||||||||||||||||||
Litigation |
( G ) | 52,011 | 1,335 | 52,011 | 1,335 | |||||||||||||||||||||||||||||||||||||
Non-GAAP tax adjustments |
( H ),( I ),( J ) | (33,770 | ) | (7,725 | ) | (50,364 | ) | (24,062 | ) | |||||||||||||||||||||||||||||||||
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Non-GAAP net income attributable to Trimble Navigation Ltd. |
$ | 87,105 | $ | 101,924 | $ | 310,492 | $ | 298,377 | ||||||||||||||||||||||||||||||||||
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DILUTED NET INCOME PER SHARE: |
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GAAP diluted net income per share attributable to Trimble Navigation Ltd. |
$ | 0.04 | $ | 0.21 | $ | 0.60 | $ | 0.61 | ||||||||||||||||||||||||||||||||||
Restructuring |
( A ) | | | 0.01 | 0.02 | |||||||||||||||||||||||||||||||||||||
Amortization of purchased intangible assets |
( B ) | 0.15 | 0.16 | 0.44 | 0.45 | |||||||||||||||||||||||||||||||||||||
Stock-based compensation |
( C ) | 0.04 | 0.03 | 0.12 | 0.10 | |||||||||||||||||||||||||||||||||||||
Amortization of acquisition-related inventory step-up |
( D ) | | | | 0.01 | |||||||||||||||||||||||||||||||||||||
Acquisition / divestiture items |
( E ) | 0.02 | 0.01 | 0.05 | 0.03 | |||||||||||||||||||||||||||||||||||||
Gain on an equity sale |
( F ) | | | (0.06 | ) | | ||||||||||||||||||||||||||||||||||||
Litigation |
( G ) | 0.20 | 0.01 | 0.20 | 0.01 | |||||||||||||||||||||||||||||||||||||
Non-GAAP tax adjustments |
( H ),( I ),( J ) | (0.12 | ) | (0.03 | ) | (0.19 | ) | (0.09 | ) | |||||||||||||||||||||||||||||||||
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Non-GAAP diluted net income per share attributable to Trimble Navigation Ltd. |
$ | 0.33 | $ | 0.39 | $ | 1.17 | $ | 1.14 | ||||||||||||||||||||||||||||||||||
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OPERATING LEVERAGE: |
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Increase in non-GAAP operating income |
$ | 238 | $ | 12,889 | $ | 46,769 | $ | 36,541 | ||||||||||||||||||||||||||||||||||
Increase in revenue |
$ | 28,294 | $ | 51,739 | $ | 142,810 | $ | 164,316 | ||||||||||||||||||||||||||||||||||
Operating leverage (increase in non-GAAP operating income as a % of increase in revenue) |
0.8 | % | 24.9 | % | 32.7 | % | 22.2 | % |
GAAP TO NON-GAAP RECONCILIATION (CONTINUED)
(Dollars in thousands, except per share data)
(Unaudited)
Third Quarter of | First Three Quarters of | |||||||||||||||||||||||||||||||||
2014 | 2013 | 2014 | 2013 | |||||||||||||||||||||||||||||||
% of Segment | % of Segment | % of Segment | % of Segment | |||||||||||||||||||||||||||||||
Revenue | Revenue | Revenue | Revenue | |||||||||||||||||||||||||||||||
SEGMENT OPERATING INCOME: |
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Engineering and Construction |
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GAAP operating income before corporate allocations: |
$ | 70,553 | 20.6 | % | $ | 73,488 | 23.7 | % | $ | 219,952 | 21.6 | % | $ | 183,301 | 20.6 | % | ||||||||||||||||||
Stock-based compensation |
(L) | 3,599 | 1.1 | % | 2,950 | 0.9 | % | 11,030 | 1.1 | % | 8,702 | 1.0 | % | |||||||||||||||||||||
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Non-GAAP operating income before corporate allocations: |
$ | 74,152 | 21.7 | % | $ | 76,438 | 24.6 | % | $ | 230,982 | 22.7 | % | $ | 192,003 | 21.6 | % | ||||||||||||||||||
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Field Solutions |
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GAAP operating income before corporate allocations: |
$ | 25,185 | 28.4 | % | $ | 31,373 | 31.5 | % | $ | 116,794 | 34.2 | % | $ | 134,271 | 37.0 | % | ||||||||||||||||||
Stock-based compensation |
(L) | 909 | 1.0 | % | 714 | 0.8 | % | 2,585 | 0.8 | % | 2,258 | 0.6 | % | |||||||||||||||||||||
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Non-GAAP operating income before corporate allocations: |
$ | 26,094 | 29.4 | % | $ | 32,087 | 32.3 | % | $ | 119,379 | 35.0 | % | $ | 136,529 | 37.6 | % | ||||||||||||||||||
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Mobile Solutions |
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GAAP operating income before corporate allocations: |
$ | 18,209 | 15.0 | % | $ | 15,276 | 13.5 | % | $ | 54,764 | 15.1 | % | $ | 42,284 | 12.5 | % | ||||||||||||||||||
Stock-based compensation |
(L) | 1,313 | 1.1 | % | 934 | 0.8 | % | 3,773 | 1.0 | % | 2,794 | 0.8 | % | |||||||||||||||||||||
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Non-GAAP operating income before corporate allocations: |
$ | 19,522 | 16.1 | % | $ | 16,210 | 14.3 | % | $ | 58,537 | 16.1 | % | $ | 45,078 | 13.3 | % | ||||||||||||||||||
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Advanced Devices |
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GAAP operating income before corporate allocations: |
$ | 9,091 | 27.9 | % | $ | 8,420 | 25.6 | % | $ | 32,850 | 30.4 | % | $ | 21,419 | 22.3 | % | ||||||||||||||||||
Stock-based compensation |
(L) | 514 | 1.6 | % | 900 | 2.8 | % | 1,516 | 1.4 | % | 2,650 | 2.8 | % | |||||||||||||||||||||
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Non-GAAP operating income before corporate allocations: |
$ | 9,605 | 29.5 | % | $ | 9,320 | 28.4 | % | $ | 34,366 | 31.8 | % | $ | 24,069 | 25.1 | % | ||||||||||||||||||
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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. We believe that these exclusions provide investors with a supplemental view of our ongoing financial results.
Non-GAAP income tax provision (benefit)
Investors benefit from the exclusion of the tax impact on an equity sale and on the $51.3 million accrued for the RDS litigation because it facilitates comparisons to our past 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, 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, 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, and non-GAAP tax adjustments. For detailed explanations of the adjustments made to comparable GAAP measures, see items (A) - ( L ) 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 third quarter and the first three quarters of fiscal 2014 and 2013, stock-based compensation was allocated as follows: |
Third Quarter of | First Three Quarters of | |||||||||||||||
(Dollars in thousands) | 2014 | 2013 | 2014 | 2013 | ||||||||||||
Cost of sales |
$ | 776 | $ | 609 | $ | 2,286 | $ | 1,816 | ||||||||
Research and development |
1,600 | 1,265 | 4,815 | 3,644 | ||||||||||||
Sales and Marketing |
2,062 | 1,816 | 6,022 | 5,341 | ||||||||||||
General and administrative |
6,600 | 5,215 | 19,002 | 15,357 | ||||||||||||
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$ | 11,038 | $ | 8,905 | $ | 32,125 | $ | 26,158 | |||||||||
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(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, 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) | Litigation. In the third quarter of 2013 this amount represents a settlement of litigation related to a pre-acquisition agreement with a contract manufacturer. In the third quarter of 2014 this amount includes $51.3M of estimated costs based on a jury verdict in favor of the plaintiff, Recreational Data Services, Inc. against the Company as well as $0.7M of costs based on an arbitration agreement. 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. |
(H) | Non-GAAP items tax effected. This amount adjusts the provision for income taxes to reflect the effect of the non-GAAP items ( A ) - ( E ) 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) | 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. |
(J) | Tax on Recreational Data Services, Inc. litigation. This amount represents the tax effect of a loss recorded as a result of a jury verdict in favor of Recreational Data Services, Inc. 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. |
(K) | 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. |
(L) | 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 $4.7 million and $3.4 million for the third quarter of fiscal 2014 and 2013, respectively, and $13.2 million and $9.8 million for the first three quarters of fiscal 2014 and 2013, respectively. |