Trimble Reports Fourth Quarter and Fiscal 2010 Results; Fourth

Trimble Reports Fourth Quarter and Fiscal 2010 Results; Fourth Quarter 2010 Revenue Up 17 Percent, Non-GAAP EPS $0.46

FTRMB


CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share data)
(Unaudited)

	Three Months Ended		Twelve Months Ended

	Dec-31,	Jan-1,	Dec-31,	Jan-1,
	2010	2010	2010	2010

Revenue	$ 323,349	$ 277,529	$ 1,293,937	$ 1,126,259
Cost of sales	160,019	146,877	648,436	576,391
Gross margin	163,330	130,652	645,501	549,868
Gross margin (%)	50.5%	47.1%	49.9%	48.8%

Operating expenses
Research and development	40,750	35,795	150,089	136,639
Sales and marketing	61,609	48,739	215,127	189,859
General and administrative	32,878	24,929	118,352	100,830
Restructuring	348	588	1,592	6,385
Amortization of purchased intangible assets	8,489	7,924	32,739	30,335
Total operating expenses	144,074	117,975	517,899	464,048


Operating income	19,256	12,677	127,602	85,820

Non-operating income, net
Interest income	219	237	1,083	783
Interest expense	(367)	(404)	(1,752)	(1,812)
Foreign currency transaction gain (loss), net	210	(297)	(836)	463
Income from equity method investments, net	2,770	309	11,795	730
Other income, net	173	161	3,195	1,637
Total non-operating income, net	3,005	6	13,485	1,801

Income before taxes	22,261	12,683	141,087	87,621

Income tax provision (benefit)	(13,587)	3,414	37,474	23,658
Net income	35,848	9,269	103,613	63,963
Less: Net income (loss) attributable to noncontrolling interests	(716)	(278)	(47)	517
Net income attributable to Trimble Navigation Ltd.	$ 36,564	$ 9,547	$ 103,660	$ 63,446

Earnings per share attributable to Trimble Navigation Ltd.
Basic	$ 0.30	$ 0.08	$ 0.86	$ 0.53
Diluted	$ 0.29	$ 0.08	$ 0.84	$ 0.52

Shares used in calculating earnings per share:
Basic	120,522	120,395	120,352	119,814
Diluted	124,395	123,155	123,798	122,208


CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited)


	Dec-31,	Jan-1
	2010	2010
Assets

Current assets:
Cash and cash equivalents	$ 220,788	$ 273,848
Accounts receivables, net	222,820	202,293
Other receivables	21,069	11,856
Inventories, net	192,852	144,012
Deferred income taxes	36,924	39,686
Other current assets	19,917	18,383
Total current assets	714,370	690,078

Property and equipment, net	50,692	44,635
Goodwill	828,737	764,193
Other purchased intangible assets, net	204,948	202,782
Other non-current assets	68,145	51,589

Total assets	$ 1,866,892	$ 1,753,277

Liabilities

Current liabilities:
Current portion of long-term debt	$ 1,993	$ 445
Accounts payable	72,349	53,775
Accrued compensation and benefits	60,976	43,272
Deferred revenue	73,888	68,968
Accrued warranty expense	12,868	14,744
Other accrued liabilities	29,741	42,041
Total current liabilities	251,815	223,245

Non-current portion of long-term debt	151,160	151,038
Non-current deferred revenue	10,777	15,599
Deferred income taxes	24,598	38,857
Other non-current liabilities	42,843	59,983
Total liabilities	481,193	488,722

Commitments and contingencies

Equity

Shareholders' equity:
Common stock	781,779	720,248
Retained earnings	536,350	491,367
Accumulated other comprehensive income	48,027	48,297
Total Trimble Navigation Ltd. shareholders' equity	1,366,156	1,259,912
Noncontrolling interests	19,543	4,643
Total equity	1,385,699	1,264,555

Total liabilities and equity	$ 1,866,892	$ 1,753,277


CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
	Twelve Months Ended
		Dec-31,	Jan-1,
		2010	2010

Cash flow from operating activities:
Net Income		$ 103,613	$ 63,963

Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation expense		18,198	18,795
Amortization expense		57,639	52,672
Provision for doubtful accounts		2,320	4,139
Amortization of debt issuance cost		226	226
Deferred income taxes		(14,918)	(7,473)
Stock-based compensation		23,125	18,659
Income from equity method investments		(11,795)	(429)
Excess tax benefit for stock-based compensation		(9,639)	(1,453)
Provision for excess and obsolete inventories		4,752	3,530
Other non-cash items		(4,836)	(3,036)

Add decrease (increase) in assets:
Accounts receivables		(7,376)	(3,935)
Other receivables		2,518	3,516
Inventories		(45,549)	13,292
Other current and non-current assets		2,257	(620)

Add increase (decrease) in liabilities:
Accounts payable		13,577	2,631
Accrued compensation and benefits		15,928	245
Accrued liabilities		(24,833)	4,433
Deferred revenue		(1,177)	25,476
Net cash provided by operating activities		124,030	194,631

Cash flow from investing activities:
Acquisitions of businesses, net of cash acquired		(136,419)	(52,018)
Acquisition of property and equipment		(23,133)	(12,706)
Acquisitions of intangible assets		(2,063)	(26,839)
Purchases of equity method investments		(8,192)	-
Proceeds received from noncontrolling interest holder		7,470
Net purchases of short term investments		-	5,000
Dividends received		5,858	2,896
Other		105	(259)
Net cash used in investing activities		(156,374)	(83,926)

Cash flow from financing activities:
Issuance of common stock, net		44,549	14,855
Repurchase and retirement of common stock		(73,853)	-
Excess tax benefit for stock-based compensation		9,639	1,453
Payments on long-term debt and revolving credit lines		(499)	(183)
Net cash provided by (used in) financing activities		(20,164)	16,125

Effect of exchange rate changes on cash and cash equivalents		(552)	4,487

Net increase (decrease) in cash and cash equivalents		(53,060)	131,317
Cash and cash equivalents - beginning of period		273,848	142,531

Cash and cash equivalents - end of period		$ 220,788	$ 273,848


REPORTING SEGMENTS
(Dollars in thousands)
(Unaudited)


			Reporting Segments
			Engineering
			and	Field	Mobile	Advanced
			Construction	Solutions	Solutions	Devices

THREE MONTHS ENDED DECEMBER 31, 2010:
	Revenue		$ 183,396	$ 74,837	$ 40,415	$ 24,701

	Operating income (loss) before corporate allocations:		$ 21,648	$ 27,053	$ (267)	$ 3,446
		Operating margin (% of segment external net revenues)	11.8%	36.1%	(0.7%)	14.0%

THREE MONTHS ENDED JANUARY 1, 2010:
	Revenue		$ 154,304	$ 57,154	$ 37,956	$ 28,115

	Operating income before corporate allocations:		$ 15,482	$ 15,861	$ 4,178	$ 3,594
		Operating margin (% of segment external net revenues)	10.0%	27.8%	11.0%	12.8%

TWELVE MONTHS ENDED DECEMBER 31, 2010:
	Revenue		$ 719,053	$ 318,136	$ 154,254	$ 102,494

	Operating income before corporate allocations:		$ 110,965	$ 116,373	$ 1,873	$ 18,325
		Operating margin (% of segment external net revenues)	15.4%	36.6%	1.2%	17.9%

TWELVE MONTHS ENDED JANUARY 1, 2010:
	Revenue		$ 578,579	$ 291,752	$ 154,881	$ 101,047

	Operating income before corporate allocations:		$ 58,282	$ 104,498	$ 14,341	$ 17,227
		Operating margin (% of segment external net revenues)	10.1%	35.8%	9.3%	17.0%

GAAP TO NON-GAAP RECONCILIATION
(Dollars in thousands, except per share data)
(Unaudited)

				Three Months Ended						Twelve Months Ended
				Dec-31,			Jan-1,			Dec-31,			Jan-1,
				2010			2010			2010			2010
				Dollar	% of		Dollar	% of		Dollar	% of		Dollar	% of
				Amount	Revenue		Amount	Revenue		Amount	Revenue		Amount	Revenue
GROSS MARGIN:
	GAAP gross margin:			$ 163,330	50.5%		$ 130,652	47.1%		$ 645,501	49.9%		$ 549,868	48.8%
		Restructuring	( A )	293	0.1%		1,036	0.3%		443	0.0%		4,369	0.4%
		Amortization of purchased intangibles	( B )	6,985	2.2%		5,780	2.1%		24,900	1.9%		22,201	2.0%
		Stock-based compensation	( C )	344	0.1%		486	0.2%		1,816	0.1%		1,854	0.2%
		Amortization of acquisition-related inventory step-up	( D )	588	0.2%		-	0.0%		728	0.1%		470	0.0%
	Non-GAAP gross margin:			$ 171,540	53.1%		$ 137,954	49.7%		$ 673,388	52.0%		$ 578,762	51.4%

OPERATING EXPENSES:
	GAAP operating expenses:			$ 144,074	44.6%		$ 117,975	42.5%		$ 517,899	40.0%		$ 464,048	41.2%
		Restructuring	( A )	(348)	-0.1%		(588)	-0.2%		(1,592)	-0.1%		(6,385)	-0.6%
		Amortization of purchased intangibles	( B )	(8,489)	-2.6%		(7,924)	-2.9%		(32,739)	-2.5%		(30,335)	-2.7%
		Stock-based compensation	( C )	(6,616)	-2.1%		(4,852)	-1.7%		(21,309)	-1.7%		(16,805)	-1.5%
		Non-recurring acquisition costs	( E )	(3,466)	-1.1%		(440)	-0.2%		(6,537)	-0.5%		(3,822)	-0.3%
	Non-GAAP operating expenses:			$ 125,155	38.7%		$ 104,171	37.5%		$ 455,722	35.2%		$ 406,701	36.1%

OPERATING INCOME:
	GAAP operating income:			$ 19,256	6.0%		$ 12,677	4.6%		$ 127,602	9.9%		$ 85,820	7.6%
		Restructuring	( A )	641	0.2%		1,624	0.6%		2,035	0.2%		10,754	1.0%
		Amortization of purchased intangibles	( B )	15,474	4.8%		13,704	4.9%		57,639	4.4%		52,536	4.7%
		Stock-based compensation	( C )	6,960	2.1%		5,338	1.9%		23,125	1.8%		18,659	1.7%
		Amortization of acquisition-related inventory step-up	( D )	588	0.2%		-	0.0%		728	0.0%		470	0.0%
		Non-recurring acquisition costs	( E )	3,466	1.0%		440	0.2%		6,537	0.5%		3,822	0.3%
	Non-GAAP operating income:			$ 46,385	14.3%		$ 33,783	12.2%		$ 217,666	16.8%		$ 172,061	15.3%

NON-OPERATING INCOME, NET:
	GAAP non-operating income, net:			$ 3,005			$ 6			$ 13,485			$ 1,801
		Non-recurring acquisition (gains) costs	( E )	35			386			(3,177)			-
	Non-GAAP non-operating income, net:			$ 3,040			$ 392			$ 10,308			$ 1,801

					GAAP and			GAAP and			GAAP and			GAAP and
					Non-GAAP			Non-GAAP			Non-GAAP			Non-GAAP
					Tax Rate %	( F )		Tax Rate %	( F )		Tax Rate %	( F )		Tax Rate %	( F )
INCOME TAX PROVISION (BENEFIT):
	GAAP income tax provision (benefit):			$ (13,587)	-61%		$ 3,414	27%		$ 37,474	27%		$ 23,658	27%
		IRS settlement	( G )	-			-			(27,540)			-
		Valuation allowance release	( H )	7,628			-			7,628			-
		Non-GAAP items tax effected	( I )	(1,014)			5,785			10,935			23,196
	Non-GAAP income tax provision (benefit):			$ (6,973)	-14%		$ 9,199	27%		$ 28,497	13%		$ 46,854	27%

NET INCOME:
	GAAP net income attributable to Trimble Navigation Ltd.			$ 36,564			$ 9,547			$ 103,660			$ 63,446
		Restructuring	( A )	641			1,624			2,035			10,754
		Amortization of purchased intangibles	( B )	15,474			13,704			57,639			52,536
		Stock-based compensation	( C )	6,960			5,338			23,125			18,659
		Amortization of acquisition-related inventory step-up	( D )	588			-			728			470
		Non-recurring acquisition costs	( E )	3,501			826			3,360			3,822
		Non-GAAP tax adjustments	( G ), ( H ), ( I )	(6,614)			(5,785)			8,977			(23,196)
		Non-GAAP tax rate impact on noncontrolling interest	( J )	9			-			9			-
	Non-GAAP net income attributable to Trimble Navigation Ltd.			$ 57,123			$ 25,254			$ 199,533			$ 126,491

DILUTED NET INCOME PER SHARE:
	GAAP diluted net income per share attributable to Trimble Navigation Ltd.			$ 0.29			$ 0.08			$ 0.84			$ 0.52
		Restructuring	( A )	0.01			0.01			0.02			0.09
		Amortization of purchased intangibles	( B )	0.12			0.11			0.46			0.43
		Stock-based compensation	( C )	0.06			0.05			0.19			0.15
		Amortization of acquisition-related inventory step-up	( D )	-			-			-			0.01
		Non-recurring acquisition costs	( E )	0.03			0.01			0.03			0.03
		Non-GAAP tax adjustments	( G ), ( H ), ( I )	(0.05)			(0.05)			0.07			(0.19)
		Non-GAAP tax rate impact on noncontrolling interest	( J )	-			-			-			-
	Non-GAAP diluted net income per share attributable to Trimble Navigation Ltd.			$ 0.46			$ 0.21			$ 1.61			$ 1.04

OPERATING LEVERAGE:
	Increase in non-GAAP operating income			$ 12,602						$ 45,605
	Increase in revenue			$ 45,820						$ 167,678
	Operating leverage (increase in non-GAAP operating
	income as a % of increase in revenue)			27.5%						27.2%

GAAP TO NON-GAAP RECONCILIATION (CONTINUED)
(Dollars in thousands, except per share data)
(Unaudited)



				Three Months Ended				Twelve Months Ended
				Dec-31,		Jan-1,		Dec-31,		Jan-1,
				2010		2010		2010		2010
					% of Segment		% of Segment		% of Segment		% of Segment
SEGMENT OPERATING INCOME:					Revenue		Revenue		Revenue		Revenue
	Engineering and Construction
		GAAP operating income before corporate allocations:		$ 21,648	11.8%	$15,482	10.0%	$110,965	15.4%	$ 58,282	10.1%
		Stock-based compensation	( K)	2,391	1.3%	2,010	1.3%	7,886	1.1%	6,312	1.1%
		Non-GAAP operating income before corporate allocations:		$ 24,039	13.1%	$17,492	11.3%	$118,851	16.5%	$ 64,594	11.2%

	Field Solutions
		GAAP operating income before corporate allocations:		$ 27,053	36.1%	$15,861	27.8%	$116,373	36.6%	$ 104,498	35.8%
		Stock-based compensation	( K)	582	0.8%	311	0.5%	1,978	0.6%	1,086	0.4%
		Non-GAAP operating income before corporate allocations:		$ 27,635	36.9%	$16,172	28.3%	$118,351	37.2%	$ 105,584	36.2%

	Mobile Solutions
		GAAP operating income (loss) before corporate allocations:		$ (267)	-0.7%	$ 4,178	11.0%	$ 1,873	1.2%	$ 14,341	9.3%
		Stock-based compensation	( K)	1,198	3.0%	1,011	2.7%	3,444	2.2%	4,216	2.7%
		Non-GAAP operating income before corporate allocations:		$ 931	2.3%	$ 5,189	13.7%	$ 5,317	3.4%	$ 18,557	12.0%

	Advanced Devices
		GAAP operating income before corporate allocations:		$ 3,446	14.0%	$ 3,594	12.8%	$ 18,325	17.9%	$ 17,227	17.0%
		Stock-based compensation	( K)	584	2.3%	527	1.9%	1,934	1.9%	1,595	1.6%
		Non-GAAP operating income before corporate allocations:		$ 4,030	16.3%	$ 4,121	14.7%	$ 20,259	19.8%	$ 18,822	18.6%

FOOTNOTES TO GAAP TO NON-GAAP RECONCILIATION

(Unaudited)

The non-GAAP financial measures included in the previous table are non-GAAP gross margin, non-GAAP operating expenses, non-GAAP operating income, non-GAAP non-operating income, net, non-GAAP income tax provision (benefit), non-GAAP net income, non-GAAP diluted net income per share and operating leverage, and non-GAAP segment operating income before corporate allocations. These non-GAAP measures can be used to evaluate the Company's historical and prospective financial performance, as well as its performance relative to competitors. The Company believes some of its investors track the Company's "core operating performance" as a means of evaluating the Company's performance in the ordinary, ongoing, and customary course of its operations. Management also believes that looking at its core operating performance provides a supplemental way to provide consistency in period to period comparisons. Accordingly, management excludes from non-GAAP those items relating to restructuring, amortization of purchased intangibles, stock based compensation, amortization of acquisition-related inventory step-up, non-recurring acquisition costs, and non-recurring tax charges/benefits of which $27.6 million is associated with the IRS settlement and $7.6 million is associated with a valuation allowance release benefit. The Company does not believe that these these items are indicative of its core operating performance.

( A )	Restructuring. Included in our GAAP presentation of cost of sales and operating expenses, restructuring costs recorded are primarily for employee compensation resulting from reductions in employee headcount in connection with our company restructurings. We exclude restructuring from our non-GAAP measures because we believe it is not indicative of our core operating performance.

( B )	Amortization of purchased intangibles. Included in our GAAP presentation of cost of sales and operating expenses, amortization of purchased intangibles recorded arise from prior acquisitions and are non-cash in nature. We exclude these expenses from our non-GAAP measures because we believe they are not indicative of our core operating performance.

( C )	Stock-based compensation . Included in our GAAP presentation of cost of sales and operating expenses, stock-based compensation consists of expenses for employee stock options and awards and purchase rights under our employee stock purchase plan. We exclude stock-based compensation expense from our non-GAAP measures because some investors may view it as not reflective of our core operating performance as it is a non-cash expense. For the three months and twelve months ended December 31, 2010 and January 1, 2010, stock-based compensation was allocated as follows:

		Three Months Ended		Twelve Months Ended
		Dec-31,	Jan-1,	Dec-31,	Jan-1,
	(Dollars in thousands)	2010	2010	2010	2010
	Cost of sales	$ 344	$ 486	$ 1,816	$ 1,854
	Research and development	1,092	972	3,991	3,476
	Sales and Marketing	1,598	1,246	5,611	4,446
	General and administrative	3,926	2,634	11,707	8,883
		$ 6,960	$ 5,338	$ 23,125	$ 18,659

( D )	Amortization of acquisition-related inventory step-up. The purchase accounting entries associated with our business acquisitions require us to record inventory at its fair value, which is sometimes greater than the previous book value of the inventory. Included in our GAAP presentation of cost of sales, the increase in inventory value is amortized to cost of sales over the period that the related product is sold. We exclude inventory step-up amortization from our non-GAAP measures because we do not believe it is indicative of our core operating performance.

( E )	Non-recurring acquisition costs. Included in our GAAP presentation of operating expenses and non-operating income, net, non-recurring acquisition costs consist of external and incremental costs resulting directly from merger and acquisition activities such as legal, due diligence and integration costs. Also included are unusual acquisition related items such as a gain on bargain purchase (resulting from the fair value of identifiable net assets acquired exceeding the consideration transferred), adjustments to the fair value of earnout liabilities and payments made or received to settle earnout and holdback disputes. We exclude these items because they are non-recurring and unique to specific acquisitions and are not indicative of our core operating performance.

( F )	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.

( G )	IRS settlement. This amount represents a one time charge of $27.5 million in the second quarter of 2010 resulting from the IRS audit settlement. We excluded this because it is non-recurring and is not indicative of our core operating performance.

( H )	Valuation allowance release. This amount represents a one time benefit of $7.6 million in the fourth quarter of 2010 resulting from a valuation allowance release. We excluded this because it is non-recurring and is not indicative of our core operating performance.

( I )	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.

( J )	Non-GAAP tax rate impact on noncontrolling interests. This amount adjusts the provision for income taxes included in noncontrolling interest to reflect the non-GAAP tax rate.

( K )	Stock-based compensation . The amounts consist of expenses for employee stock options and awards and purchase rights under our employee stock purchase plan. As referred to above we exclude stock-based compensation here because investors may view it as not reflective of our core operating performance. However, management does include stock-based compensation for budgeting and incentive plans as well as for reviewing internal financial reporting. We discuss our operating results by segment with and without stock-based compensation expense, as we believe it is useful to investors. Stock-based compensation not allocated to the reportable segments was approximately $2.2 million and $1.5 million for the three months ended December 31, 2010 and January 1, 2010, respectively and $7.9 million and $5.5 million for the twelve months ended December 31, 2010 and January 1, 2010, respectively.

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