TRIMBLE, INC. SUNNYVALE, Calif., Aug. 2, 2017 /PRNewswire/ -- Trimble Inc. (NASDAQ: TRMB) today announced financial results for the second quarter of 2017.
Second Quarter of 2017 Financial Summary
Second quarter 2017 revenue of $661.9 million was up 9 percent as compared to the second quarter of 2016. Buildings and Infrastructure revenue was $222.7 million, up 10 percent. Geospatial revenue was $165.3 million, up 1 percent. Resources and Utilities revenue was $111.0 million, up 12 percent. Transportation revenue was $162.9 million, up 13 percent.
GAAP operating income was $62.6 million, up 55 percent as compared to the second quarter of 2016. GAAP operating margin was 9.5 percent of revenue as compared to 6.7 percent of revenue in the second quarter of 2016.
GAAP net income was $49.9 million, up 40 percent as compared to the second quarter of 2016. Diluted GAAP earnings per share were $0.19 as compared to diluted GAAP earnings per share of $0.14 in the second quarter of 2016.
Non-GAAP operating income of $121.2 million was up 22 percent as compared to the second quarter of 2016. Non-GAAP operating margin was 18.3 percent of revenue as compared to 16.2 percent of revenue in the second quarter of 2016.
Non-GAAP net income of $96.5 million was up 30 percent as compared to the second quarter of 2016. Diluted non-GAAP earnings per share were $0.38 as compared to diluted non-GAAP earnings per share of $0.29 in the second quarter of 2016.
The GAAP tax rate for the quarter was 26 percent as compared to 7 percent in the second quarter of 2016, and the non-GAAP tax rate was 23 percent as compared to 24 percent in the second quarter of 2016.
Operating cash flow for the first two quarters of 2017 was $248.7 million, up 27 percent as compared to the first two quarters of 2016. Deferred revenue for the second quarter of 2017 was $341.0 million, up 8 percent as compared to the second quarter of 2016.
During the second quarter, Trimble acquired BOS Forestry, NM Group, and Innovative Software Engineering (ISE). During the second quarter, Trimble also announced that it agreed to acquire Müller-Elektronik, which closed early in the third quarter of 2017.
"The second quarter revenue and income exceeded our expectations with improved performance across the company," said Steven W. Berglund, Trimble's president and chief executive officer. "The performance validates our expectations of a further step-up in revenue growth during the second half of the year, driven by both organic growth and a contribution from new acquisitions."
Forward Looking Guidance
For the third quarter of 2017 Trimble expects revenue to be between $645 million and $675 million with GAAP earnings per share of $0.16 to $0.20 and non-GAAP earnings per share of $0.34 to $0.38. Non-GAAP guidance excludes the amortization of intangibles of $37 million related to previous acquisitions, anticipated acquisition costs of $3 million, the anticipated impact of stock-based compensation expense of $15 million, and $3 million in anticipated restructuring charges. GAAP guidance assumes a tax rate of 23 percent and non-GAAP guidance assumes a tax rate of 23 percent. Both GAAP and non-GAAP earnings per share assume approximately 258 million shares outstanding.
Investor Conference Call / Webcast Details
Trimble will hold a conference call on August 2 at 2:00 p.m. PT to review its second quarter 2017 results. An accompanying slide presentation will be made available on the "Investors" section of the Trimble website, www.trimble.com, under the subheading "Events & Presentations". The call 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 passcode is 56839605. The replay will also be available on the web at the address above.
Use of Non-GAAP Financial Information
To help investors understand Trimble's past financial performance and future results, as well as its performance relative to competitors, Trimble supplements the financial results that the company provides in accordance with generally accepted accounting principles, or GAAP, with non-GAAP financial measures. These non-GAAP measures can be used to evaluate Trimble's historical and prospective financial performance, as well as its performance relative to competitors. The company's management regularly uses supplemental non-GAAP financial measures internally to understand, manage and evaluate the business, and to make operating decisions. These non-GAAP measures are among the primary factors management uses in planning for and forecasting future periods. Trimble believes that these non-GAAP financial measures reflect an additional way of viewing aspects of the company's operations that, when viewed with the GAAP results, provide a more complete understanding of factors and trends affecting the business. Further, Trimble believes some of company's investors track "core operating performance" as a means of evaluating performance in the ordinary, ongoing, and customary course of the company's 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 Trimble's core operating performance provides a supplemental way to provide consistency in period to period comparisons.
The specific non-GAAP measures, which Trimble uses 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 the 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 the company uses to produce non-GAAP results is not computed according to GAAP and may differ from the methods used by other companies. Trimble's 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 Trimble's consolidated financial statements prepared in accordance with GAAP. Investors are encouraged to review the reconciliation of non-GAAP financial measures to the comparable GAAP results, which is attached to this earnings release. Additional financial information about Trimble's use of non-GAAP results can be found on the Investor Relations page of the Trimble website at: http://investor.trimble.com.
About Trimble
Trimble is transforming the way the world works by delivering products and services that connect the physical and digital worlds. Core technologies in positioning, modeling, connectivity and data analytics enable customers to improve productivity, quality, safety and sustainability. From purpose built products to enterprise lifecycle solutions, Trimble software, hardware and services are transforming a broad range of industries such as agriculture, construction, geospatial and transportation and logistics. For more information about Trimble (NASDAQ:TRMB), 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 potential for revenue growth in 2017, the impact of acquisitions, the ability to deliver revenue, earnings per share and other financial projections that Trimble has guided for the third quarter of 2017, including the expected tax rate, anticipated impact of stock-based compensation expense, amortization of intangibles related to previous acquisitions, anticipated acquisition costs, restructuring charges, and the anticipated number of diluted shares outstanding. 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 adverse geopolitical developments, weakening in the macro environment or foreign exchange fluctuations, or the imposition of barriers to international trade. 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, critical part supply chain shortages, and possible write-offs of goodwill. 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 millions, except per share data)
(Unaudited)
Second Quarter of First Two Quarters of
----------------- ---------------------
2017 2016 2017 2016
---- ---- ---- ----
Revenue:
Product $445.6 $407.0 $851.0 $800.6
Service 110.0 109.7 216.8 211.3
Subscription 106.3 92.9 208.0 180.7
Total revenue 661.9 609.6 1,275.8 1,192.6
----- ----- ------- -------
Cost of sales:
Product 219.8 199.4 414.2 389.4
Service 47.7 44.0 94.8 85.6
Subscription 27.4 26.6 54.2 53.3
Amortization of purchased intangible assets 20.5 24.0 39.5 48.1
Total cost of sales 315.4 294.0 602.7 576.4
----- ----- ----- -----
Gross margin 346.5 315.6 673.1 616.2
----- ----- ----- -----
Gross margin (%) 52.3 % 51.8 % 52.8 % 51.7 %
Operating expense:
Research and development 90.8 92.0 179.5 179.7
Sales and marketing 100.4 97.4 195.2 194.1
General and administrative 75.1 65.6 144.4 133.9
Restructuring charges 2.3 4.5 5.2 6.3
Amortization of purchased
intangible assets 15.3 15.6 29.6 31.8
Total operating expense 283.9 275.1 553.9 545.8
----- ----- ----- -----
Operating income 62.6 40.5 119.2 70.4
Non-operating income (expense), net:
Interest expense, net (6.0) (6.6) (12.1) (13.2)
Foreign currency transaction
gain (loss), net - (1.5) 1.4 (1.6)
Income from equity method
investments, net 9.9 5.8 14.1 8.7
Other income, net 1.1 0.1 10.6 3.4
Total non-operating income (expense), net 5.0 (2.2) 14.0 (2.7)
--- ---- ---- ----
Income before taxes 67.6 38.3 133.2 67.7
Income tax provision 17.7 2.7 32.8 12.4
Net income 49.9 35.6 100.4 55.3
Less: Net loss attributable
to noncontrolling interests - (0.1) - (0.2)
Net income attributable to Trimble Inc. $49.9 $35.7 $100.4 $55.5
===== ===== ====== =====
Earnings per share attributable to Trimble Inc.:
Basic $0.20 $0.14 $0.40 $0.22
-----
Diluted $0.19 $0.14 $0.39 $0.22
-------
Shares used in calculating earnings per share:
Basic 253.0 250.5 252.5 250.8
-----
Diluted 257.1 253.7 256.5 253.9
-------
CONDENSED CONSOLIDATED BALANCE SHEETS
(In millions)
(Unaudited)
Second Quarter of Fiscal Year End
As of 2017 2016
----- ---- ----
Assets
Current assets:
Cash and cash
equivalents $384.9 $216.1
Short-term
investments 101.2 111.1
Accounts
receivable, net 395.3 354.8
Other
receivables 26.5 35.4
Inventories 223.3 218.8
Other current
assets 51.9 42.5
Total current assets 1,183.1 978.7
Property and equipment, net 145.6 144.2
Goodwill 2,183.7 2,077.6
Other purchased intangible assets, net 363.5 333.3
Other non-current assets 162.4 140.0
----- -----
Total assets $4,038.3 $3,673.8
======== ========
Liabilities and Stockholders' Equity
Current liabilities:
Short-term debt $147.3 $130.3
Accounts payable 136.9 109.8
Accrued
compensation
and benefits 117.0 97.5
Deferred revenue 301.7 246.5
Accrued warranty
expense 17.5 17.2
Other current
liabilities 106.4 86.9
Total current liabilities 826.8 688.2
Long-term debt 465.0 489.6
Non-current deferred revenue 39.3 37.7
Deferred income tax liabilities 41.7 38.8
Other non-current liabilities 147.8 113.8
Total liabilities 1,520.6 1,368.1
------- -------
Stockholders' equity:
Common stock 0.3 0.3
Additional paid-
in-capital 1,425.7 1,348.3
Retained
earnings 1,251.8 1,177.1
Accumulated
other
comprehensive
loss (160.0) (219.9)
Total Trimble Inc. stockholders' equity 2,517.8 2,305.8
Noncontrolling interests (0.1) (0.1)
----
Total stockholders' equity 2,517.7 2,305.7
------- -------
Total liabilities and
stockholders' equity $4,038.3 $3,673.8
======== ========
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In millions)
(Unaudited)
First Two Quarters of
---------------------
2017 2016
---- ----
Cash flow from operating activities:
Net Income $100.4 $55.3
Adjustments to
reconcile net
income to net cash
provided by
operating
activities:
Depreciation expense 17.7 18.8
Amortization expense 69.1 79.9
Provision for doubtful accounts 0.9 2.4
Deferred income taxes (0.2) 0.5
Stock-based compensation 28.9 26.7
Income from equity method
investments (14.1) (8.7)
Divestiture gain, net (8.0) (2.7)
Provision for excess and obsolete
inventories 1.6 8.8
Other non-cash items (1.6) 3.0
Decrease (increase)
in assets:
Accounts receivable (31.0) (18.2)
Other receivables 2.8 (1.5)
Inventories (1.8) 11.2
Other current and non-current
assets (14.0) (7.8)
Increase (decrease)
in liabilities:
Accounts payable 22.0 6.4
Accrued compensation and benefits 14.1 2.2
Deferred revenue 49.4 53.8
Accrued warranty 0.1 (0.7)
Other liabilities 12.4 (33.8)
Net cash provided by operating activities 248.7 195.6
----- -----
Cash flow from investing activities:
Acquisitions of
businesses, net of
cash acquired (129.8) (20.0)
Acquisitions of
property and
equipment (15.6) (12.2)
Purchases of equity
method investments - (1.5)
Purchases of short-
term investments (137.6) -
Net proceeds from
sales of businesses 20.1 10.7
Proceeds from
maturities of
short-term
investments 56.8 -
Proceeds from sales
of short-term
investments 90.6 -
Dividends received
from equity method
investments 5.0 10.7
Other 0.2 (0.3)
Net cash used in investing activities (110.3) (12.6)
------ -----
Cash flow from financing activities:
Issuance of common
stock, net of tax
withholdings 49.8 25.0
Repurchases and
retirement of
common stock (20.4) (88.3)
Proceeds from debt
and revolving
credit lines 340.0 202.0
Payments on debt and
revolving credit
lines (350.1) (207.0)
Net cash provided by (used in) financing activities 19.3 (68.3)
---- -----
Effect of exchange rate changes on cash and cash
equivalents 11.1 1.2
---- ---
Net increase in cash and cash equivalents 168.8 115.9
Cash and cash equivalents - beginning of period 216.1 116.0
----- -----
Cash and cash equivalents - end of period $384.9 $231.9
====== ======
REPORTING SEGMENTS
(Dollars in millions)
(Unaudited)
Reporting Segments
------------------
Buildings Resources
and and
Infrastructure Geospatial Utilities Transportation
-------------- ---------- --------- --------------
SECOND QUARTER OF FISCAL 2017 :
Revenue $222.7 $165.3 $111.0 $162.9
Operating
income before
corporate
allocations $50.4 $30.2 $34.8 $26.2
Operating margin (% of
segment external net
revenue) 22.6 % 18.3 % 31.4 % 16.1 %
SECOND QUARTER OF FISCAL 2016 :
Revenue $202.8 $163.9 $99.0 $143.9
Operating
income before
corporate
allocations $38.9 $28.5 $29.9 $20.4
Operating margin (% of
segment external net
revenue) 19.2 % 17.4 % 30.2 % 14.2 %
FIRST TWO QUARTERS OF 2017 :
Revenue $410.8 $315.1 $230.9 $319.0
Operating
income before
corporate
allocations $83.1 $58.1 $77.0 $51.0
Operating margin (% of
segment external net
revenue) 20.2 % 18.4 % 33.3 % 16.0 %
FIRST TWO QUARTERS OF 2016 :
Revenue $376.5 $316.1 $212.8 $287.2
Operating
income before
corporate
allocations $61.3 $54.6 $64.8 $44.2
Operating margin (% of
segment external net
revenue) 16.3 % 17.3 % 30.5 % 15.4 %
GAAP TO NON-GAAP RECONCILIATION
(Dollars in millions, except per share data)
(Unaudited)
Second Quarter of First Two Quarters of
----------------- ---------------------
2017 2016 2017 2016
---- ----
Dollar % of Dollar % of Dollar % of Dollar % of
Amount Revenue Amount Revenue Amount Revenue Amount Revenue
------ ------- ------ ------- ------ ------- ------ -------
GROSS MARGIN:
GAAP gross
margin: $346.5 52.3 % $315.6 51.8 % $673.1 52.8 % $616.2 51.7 %
Restructuring charges ( A ) 0.5 0.1 % 0.4 0.1 % 1.0 0.1 % 0.7 0.1 %
Amortization of purchased
intangible assets ( B ) 20.5 3.1 % 24.0 3.9 % 39.5 3.1 % 48.1 4.0 %
Stock-based compensation ( C ) 0.9 0.1 % 0.9 0.1 % 1.7 0.1 % 1.9 0.1 %
Amortization of acquisition-
related inventory step-up ( D ) 0.5 0.1 % - -% 0.6 -% - -%
--- ---- --- --- --- ---
Non-GAAP gross
margin: $368.9 55.7 % $340.9 55.9 % $715.9 56.1 % $666.9 55.9 %
------ ------ ------ ------
OPERATING EXPENSES:
GAAP operating
expenses: $283.9 42.8 % $275.1 45.1 % $553.9 43.5 % $545.8 45.8 %
Restructuring charges ( A ) (2.3) (0.3)% (4.5) (0.7)% (5.2) (0.4)% (6.3) (0.5)%
Amortization of purchased
intangible assets ( B ) (15.3) (2.3)% (15.6) (2.6)% (29.6) (2.3)% (31.8) (2.7)%
Stock-based compensation ( C ) (14.3) (2.2)% (12.1) (2.0)% (27.2) (2.2)% (24.8) (2.1)%
Acquisition / divestiture items ( E ) (4.3) (0.6)% (0.9) (0.1)% (6.4) (0.6)% (2.5) (0.2)%
Executive transition costs ( F ) - -% (0.1) -% - -% (1.0) (0.1)%
Non-GAAP
operating
expenses: $247.7 37.4 % $241.9 39.7 % $485.5 38.0 % $479.4 40.2 %
------ ------ ------ ------
OPERATING INCOME:
GAAP operating
income: $62.6 9.5 % $40.5 6.7 % $119.2 9.3 % $70.4 5.9 %
Restructuring charges ( A ) 2.8 0.4 % 4.9 0.8 % 6.2 0.5 % 7.0 0.6 %
Amortization of purchased
intangible assets ( B ) 35.8 5.4 % 39.6 6.5 % 69.1 5.4 % 79.9 6.7 %
Stock-based compensation ( C ) 15.2 2.3 % 13.0 2.1 % 28.9 2.3 % 26.7 2.2 %
Amortization of acquisition-
related inventory step-up ( D ) 0.5 0.1 % - -% 0.6 -% - -%
Acquisition / divestiture items ( E ) 4.3 0.6 % 0.9 0.1 % 6.4 0.6 % 2.5 0.2 %
Executive transition costs ( F ) - -% 0.1 -% - -% 1.0 0.1 %
Non-GAAP
operating
income: $121.2 18.3 % $99.0 16.2 % $230.4 18.1 % $187.5 15.7 %
------ ----- ------ ------
NON-OPERATING INCOME (EXPENSE), NET:
GAAP non-
operating income
(expense), net: $5.0 $(2.2) $14.0 $(2.7)
Acquisition / divestiture items ( E ) (0.8) 0.4 (8.9) (2.7)
---- ----
Non-GAAP non-
operating income
(expense), net: $4.2 $(1.8) $5.1 $(5.4)
GAAP and GAAP and GAAP and GAAP and
Non-GAAP Non-GAAP Non-GAAP Non-GAAP
Tax Rate % ( I ) Tax Rate % ( I ) Tax Rate % ( I ) Tax Rate % ( I )
--------- --------- --------- ---------
INCOME TAX PROVISION:
GAAP income tax
provision: $17.7 26 % $2.7 7 % $32.8 25 % $12.4 18 %
Non-GAAP items tax effected ( G ) 15.0 4.1 25.2 21.0
Difference in GAAP and Non-GAAP
tax rate ( H ) (3.8) 16.4 (3.8) 10.3
Non-GAAP income
tax provision: $28.9 23 % $23.2 24 % $54.2 23 % $43.7 24 %
----- ----- ----- -----
NET INCOME:
GAAP net income
attributable to
Trimble Inc. $49.9 $35.7 $100.4 $55.5
Restructuring charges ( A ) 2.8 4.9 6.2 7.0
Amortization of purchased
intangible assets ( B ) 35.8 39.6 69.1 79.9
Stock-based compensation ( C ) 15.2 13.0 28.9 26.7
Amortization of acquisition-
related inventory step-up ( D ) 0.5 - 0.6 -
Acquisition / divestiture items ( E ) 3.5 1.3 (2.5) (0.2)
Executive transition costs ( F ) - 0.1 - 1.0
Non-GAAP tax adjustments ( G ) + ( H ) (11.2) (20.5) (21.4) (31.3)
Non-GAAP net
income
attributable to
Trimble Inc. $96.5 $74.1 $181.3 $138.6
DILUTED NET INCOME PER SHARE:
GAAP diluted net
income per share
attributable to
Trimble Inc. $0.19 $0.14 $0.39 $0.22
Restructuring charges ( A ) 0.01 0.02 0.03 0.03
Amortization of purchased
intangible assets ( B ) 0.14 0.15 0.27 0.31
Stock-based compensation ( C ) 0.06 0.05 0.11 0.11
Amortization of acquisition-
related inventory step-up ( D ) - - - -
Acquisition / divestiture items ( E ) 0.01 0.01 (0.01) -
Executive transition costs ( F ) - - - -
Non-GAAP tax adjustments ( G ) + ( H ) (0.03) (0.08) (0.08) (0.12)
Non-GAAP diluted
net income per
share
attributable to
Trimble Inc. $0.38 $0.29 $0.71 $0.55
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 charges, 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 charges, 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, and executive transition costs from
GAAP operating 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 charges, 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 executive transition costs. 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 (expense), net
We believe this measure helps investors evaluate our non-
operating income trends. Non-GAAP non-operating income
(expense), net excludes acquisition/divestiture gains/
losses associated with unusual acquisition related items
such as intangible asset impairment charges and gains or
losses related to the acquisition or sale of certain
businesses and investments. We believe that these
exclusions provide investors with a supplemental view of
our ongoing financial results.
Non-GAAP income tax provision
We believe that providing investors with the non-GAAP
income tax provision is beneficial 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 charges, amortization of
purchased intangible assets, stock-based compensation,
amortization of acquisition-related inventory step-up,
acquisition/divestiture costs, executive transition
costs, 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
charges, amortization of purchased intangible assets,
stock-based compensation, amortization of acquisition-
related inventory step-up, acquisition/divestiture
costs, executive transition costs, 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.
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 charges, amortization of
purchased intangible assets, stock-based compensation,
amortization of acquisition-related inventory step-up,
acquisition/divestiture costs, executive transition
costs, and non-GAAP tax adjustments. For detailed
explanations of the adjustments made to comparable GAAP
measures, see items (A) - ( I ) below.
( A ) Restructuring
charges.Included
in our GAAP
presentation of
cost of sales
and operating
expenses,
restructuring
charges
recorded are
primarily for
employee
compensation
resulting from
reductions in
employee
headcount in
connection with
our company
restructurings.
We exclude
restructuring
charges 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. U.S.
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 use to
amortize 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 second
quarter and the
first two
quarters of
fiscal years
2017 and 2016,
stock-based
compensation
was allocated
as follows:
Second Quarter First Two
of Quarters of
-------------- -----------
(Dollars in millions) 2017 2016 2017 2016
---- ---- ---- ----
Cost of sales $0.9 $0.9 $1.7 $1.9
Research and development 2.6 2.4 5.0 4.7
Sales and marketing 2.4 2.2 4.6 4.2
General and administrative 9.3 7.5 17.6 15.9
--- ----
$15.2 $13.0 $28.9 $26.7
----- ----- ----- -----
( 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, as well
as adjustments to the fair
value of earn-out
liabilities. Included in
our GAAP presentation of
non-operating income
(expense), net, acquisition
/ divestiture items
includes unusual
acquisition, investment,
and/or divestiture gains/
losses. 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 ) Executive transition costs.
Included in our GAAP
presentation of operating
expenses are amounts paid to
the Company's former CFO
upon his departure under the
terms of his executive
severance agreement. We
excluded these payments from
our non-GAAP measures
because they represent non-
recurring expenses and are
not indicative of our
ongoing operating expenses.
We further believe that
excluding the executive
transition costs from our
non-GAAP results is useful
to investors in that it
allows for period-over-
period comparability.
( G ) Non-GAAP items tax effected.
This amount adjusts the
provision for income taxes
to reflect the effect of the
non-GAAP items ( A ) - ( F
) 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.
( H ) Difference in GAAP and Non-
GAAP tax rate. This amount
represents the difference
between the GAAP and Non-
GAAP tax rates applied to
the Non-GAAP operating
income plus the Non-GAAP
non-operating income
(expense), net.
( I ) 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.
View original content:http://www.prnewswire.com/news-releases/trimble-reports-second-quarter-of-2017-results-300498639.html
SOURCE Trimble
