TRIMBLE, INC. SUNNYVALE, Calif., Feb. 9, 2016 /PRNewswire/ -- Trimble (NASDAQ: TRMB) today announced fourth quarter and fiscal year end 2015 results.
Fourth Quarter 2015 Financial Summary
Fourth quarter 2015 revenue of $559.7 million was down 1 percent as compared to the fourth quarter of 2014. Engineering and Construction revenue was $319.1 million, down 3 percent. Field Solutions revenue was $79.4 million, down 2 percent. Mobile Solutions revenue was $132.2 million, up 7 percent. Advanced Devices revenue was $29.0 million, down 5 percent. Foreign currency translation unfavorably impacted company revenue by approximately 3 percent as compared to the fourth quarter of 2014.
GAAP operating income was $32.9 million, down 57 percent as compared to the fourth quarter of 2014. Fourth quarter 2014 GAAP operating and net income results were positively impacted by the reversal of a $51.3 million reserve for legal matters related to a jury verdict that was overturned. GAAP operating margin was 5.9 percent of revenue as compared to 13.6 percent of revenue in the fourth quarter of 2014.
GAAP net income was $24.0 million, down 57 percent as compared to the fourth quarter of 2014. Diluted GAAP earnings per share were $0.09 as compared to diluted GAAP earnings per share of $0.21 in the fourth quarter of 2014. The GAAP tax rate for the fourth quarter was 16 percent.
Non-GAAP operating income of $91.1 million was up 8 percent as compared to the fourth quarter of 2014. Non-GAAP operating margin was 16.3 percent of revenue as compared to 14.9 percent of revenue in the fourth quarter of 2014.
Non-GAAP net income of $67.3 million was down 12 percent as compared to the fourth quarter of 2014. Diluted non-GAAP earnings per share were $0.27 as compared to diluted non-GAAP earnings per share of $0.29 in the fourth quarter of 2014. The non-GAAP tax rate for the fourth quarter was 24 percent, compared to 5 percent in the fourth quarter of 2014.
"The quarter was more robust than we originally anticipated with relative strength across the company," said Steven W. Berglund, Trimble's president and chief executive officer. "The quarterly performance provides additional support for our 2016 expectations. Agriculture revenue was flat year to year, geospatial continues its recovery from the oil price shock, building construction's growth continues to be consistent, and transportation and logistics continues to build momentum."
Fiscal 2015 Financial Summary
Fiscal 2015 revenue of $2.3 billion was down 4 percent as compared to fiscal 2014. Engineering and Construction revenue was $1.3 billion, down 5 percent. Field Solutions revenue was $355.3 million, down 16 percent. Mobile Solutions revenue was $520.3 million, up 7 percent. Advanced Devices revenue was $131.5 million, down 5 percent. Foreign currency translation unfavorably impacted company revenue by approximately 4 percent as compared to fiscal 2014.
GAAP operating income was $154.4 million, down 41 percent as compared to fiscal 2014. GAAP operating margin was 6.7 percent of revenue as compared to 10.9 percent of revenue in fiscal 2014.
GAAP net income was $121.1 million, down 43 percent as compared to fiscal 2014. Diluted GAAP earnings per share were $0.47 as compared to diluted GAAP earnings per share of $0.81 in fiscal 2014. The GAAP tax rate for fiscal year 2015 was 20 percent.
Non-GAAP operating income of $389.9 million was down 19 percent as compared to fiscal 2014. Non-GAAP operating margin was 17.0 percent of revenue as compared to 20.0 percent of revenue in fiscal 2014.
Non-GAAP net income of $291.8 million was down 25 percent as compared to fiscal 2014. Diluted non-GAAP earnings per share were $1.13 as compared to diluted non-GAAP earnings per share of $1.46 in fiscal 2014. The non-GAAP tax rate for fiscal 2015 was 24 percent, compared to 19 percent in fiscal 2014.
Operating cash flow in fiscal 2015 was $354.9 million, down 13 percent as compared to fiscal 2014.
During fiscal 2015, Trimble repurchased $234.4 million of its common stock, through a combination of open market purchases and an accelerated share repurchase program. Approximately $250 million remains under the current share repurchase authorization.
Forward Looking Guidance
For the first quarter of 2016 Trimble expects revenue to be between $565 million and $595 million with GAAP earnings per share of $0.06 to $0.11 and non-GAAP earnings per share of $0.25 to $0.30. Non-GAAP guidance excludes the amortization of intangibles of $40 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 and non-GAAP guidance assume a tax rate of 24 percent and approximately 254 million shares outstanding.
Investor Conference Call / Webcast Details
Trimble will hold a conference call on February 9 at 1:30 p.m. PT to review its fourth quarter and full year 2015 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 30806350. The replay will also be available on the Web at the address above.
Use of Non-GAAP Financial Information
To help our investors understand our past financial performance and our future results, as well as our performance relative to competitors, we supplement the financial results that we provide in accordance with generally accepted accounting principles, or GAAP, with non-GAAP financial measures. These non-GAAP measures can be used to evaluate our historical and prospective financial performance, as well as our performance relative to competitors. Our management regularly uses our supplemental non-GAAP financial measures internally to understand, manage and evaluate our business, and to make operating decisions. These non-GAAP measures are among the primary factors management uses in planning for and forecasting future periods. We believe that these non-GAAP financial measures reflect an additional way of viewing aspects of our operations that, when viewed with our GAAP results, provide a more complete understanding of factors and trends affecting our business. Further, we believe some of our investors track our "core operating performance" as a means of evaluating our performance in the ordinary, ongoing, and customary course of our operations. Core operating performance excludes items that are non-cash, not expected to recur or not reflective of ongoing financial results. Management also believes that looking at our core operating performance provides a supplemental way to provide consistency in period to period comparisons.
The specific non-GAAP measures, which we use along with a reconciliation to the nearest comparable GAAP measures and the explanation for why these non-GAAP measures provide useful information to investors regarding our financial condition and results of operations and why management chose to exclude selected items can be found at the end of this release. The method we use to produce non-GAAP results is not computed according to GAAP and may differ from the methods used by other companies. Our non-GAAP results are not meant to be considered in isolation or as a substitute for comparable GAAP measures and should be read only in conjunction with our consolidated financial statements prepared in accordance with GAAP. Investors are encouraged to review the reconciliation of our non-GAAP financial measures to the comparable GAAP results, which is attached to this earnings release. Additional financial information about our use of non-GAAP results can be found on the investor relations page of our Web site at: http://investor.trimble.com.
About Trimble
Trimble applies technology to make field and mobile workers in businesses and government significantly more productive. Solutions are focused on applications requiring position or location--including surveying, construction, agriculture, fleet and asset management, public safety and mapping. In addition to utilizing positioning technologies, such as GPS, lasers and optics, Trimble solutions may include software content specific to the needs of the user. Wireless technologies are utilized to deliver the solution to the user and to ensure a tight coupling of the field and the back office. Founded in 1978, Trimble is headquartered in Sunnyvale, Calif.
For more information visit: www.trimble.com.
Safe Harbor
Certain statements made in this press release are forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, and are made pursuant to the safe harbor provisions of the Securities Litigation Reform Act of 1995. These statements include expectations for future financial market and economic conditions, the impact of acquisitions, the ability to deliver revenue, earnings per share and other financial projections that Trimble has guided for the first quarter, the expected tax rate, the anticipated impact of stock-based compensation expense, the amortization of intangibles related to previous acquisitions and the anticipated number of shares outstanding and interest costs. These forward-looking statements are subject to change, and actual results may materially differ from those set forth in this press release due to certain risks and uncertainties. The Company's results may be adversely affected if the Company is unable to market, manufacture and ship new products, obtain new customers, or integrate new acquisitions. The Company's results would also be negatively impacted by weakening in the macro environment including declining oil prices or foreign exchange fluctuations. Any failure to achieve predicted results could negatively impact the Company's revenues, cash flow from operations, and other financial results. The Company's financial results will also depend on a number of other factors and risks detailed from time to time in reports filed with the SEC, including its quarterly reports on Form 10-Q and its annual report on Form 10- K, such as changes in economic conditions, further worsening in the agricultural market, critical part supply chain shortages 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)
Fourth Quarter of Fiscal Years
----------------- ------------
2015 2014 2015 2014
---- ---- ---- ----
Revenues
Product $365.3 $386.5 $1,533.5 $1,713.6
Service 109.4 104.3 419.9 396.0
Subscription 85.0 73.0 337.0 285.9
Total revenues 559.7 563.8 2,290.4 2,395.5
----- ----- ------- -------
Cost of sales
Product 177.1 182.7 731.1 788.1
Service 41.2 44.0 164.2 152.6
Subscription 24.5 22.7 100.3 81.1
Amortization of purchased
intangible assets 23.8 21.9 92.6 82.9
Total cost of sales 266.6 271.3 1,088.2 1,104.7
----- ----- ------- -------
- -
Gross margin 293.1 292.5 1,202.2 1,290.8
----- ----- ------- -------
Gross margin (%) 52.4% 51.9% 52.5% 53.9%
Operating expenses
Research and development 85.4 80.8 336.7 318.0
Sales and marketing 92.8 98.8 374.6 387.6
General and administrative 63.2 16.9 255.3 247.1
Restructuring charges 2.4 0.4 11.4 1.7
Amortization of purchased
intangible assets 16.4 18.8 69.8 75.6
Total operating expenses 260.2 215.7 1,047.8 1,030.0
----- ----- ------- -------
Operating income 32.9 76.8 154.4 260.8
Non-operating income
(expense), net
Interest expense (6.5) (8.9) (25.6) (18.7)
Foreign currency transaction
gain (loss) (1.0) (1.3) 0.2 (5.1)
Income from equity method
investments 3.8 0.9 17.9 12.4
Other income (expense), net (0.9) 4.1 4.9 16.6
Total non-operating income
(expense), net (4.6) (5.2) (2.6) 5.2
---- ---- ---- ---
Income before taxes 28.3 71.6 151.8 266.0
Income tax provision 4.4 15.7 31.1 52.1
Net income 23.9 55.9 120.7 213.9
Less: Net gain (loss)
attributable to noncontrolling
interests (0.1) 0.1 (0.4) (0.2)
Net income attributable to
Trimble Navigation Ltd. $24.0 $55.8 $121.1 $214.1
===== ===== ====== ======
Earnings per share attributable
to Trimble Navigation Ltd.
Basic $0.10 $0.22 $0.47 $0.82
----- ----- ----- -----
Diluted $0.09 $0.21 $0.47 $0.81
----- ----- ----- -----
Shares used in calculating
earnings per share
Basic 250.5 259.2 255.8 260.1
Diluted 252.9 262.7 258.5 264.5
----- ----- ----- -----
CONDENSED CONSOLIDATED BALANCE SHEETS
(In millions)
(Unaudited)
Fiscal Year End Fiscal Year End
As of 2015 2014
----- ---- ----
Assets
Current assets:
Cash and cash
equivalents $116.0 $148.0
Accounts
receivable, net 361.9 362.0
Other receivables 14.9 29.5
Inventories, net 261.1 278.1
Other current
assets 44.5 39.1
---- ----
Total current
assets 798.4 856.7
Property and
equipment, net 159.2 157.4
Goodwill 2,106.4 2,085.8
Other purchased
intangible
assets, net 487.1 594.5
Other non-
current assets 129.6 161.5
----- -----
Total assets $3,680.7 $3,855.9
======== ========
Liabilities and
Shareholders'
Equity
Current
liabilities:
Current portion
of long-term
debt $118.3 $64.4
Accounts payable 99.8 103.8
Accrued
compensation and
benefits 98.9 98.9
Deferred revenue 234.6 211.6
Accrued warranty
expense 18.5 20.6
Other current
liabilities 90.8 88.0
Total current
liabilities 660.9 587.3
Non-current
portion of long-
term debt 611.4 671.0
Non-current
deferred revenue 29.6 26.3
Deferred income
tax liabilities 51.7 122.1
Other non-
current
liabilities 106.5 95.8
Total liabilities 1,460.1 1,502.5
------- -------
Shareholders'
equity:
Common stock 1,238.3 1,207.3
Retained earnings 1,148.2 1,211.0
Accumulated other
comprehensive
loss (166.8) (76.7)
------ -----
Total Trimble
Navigation Ltd.
shareholders'
equity 2,219.7 2,341.6
Noncontrolling
interests 0.9 11.8
Total
shareholders'
equity 2,220.6 2,353.4
------- -------
Total liabilities
and
shareholders'
equity $3,680.7 $3,855.9
======== ========
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In millions)
(Unaudited)
Fiscal Years
------------
2015 2014
---- ----
Cash flow from operating
activities:
Net Income $120.7 $213.9
Adjustments to reconcile net
income to net cash provided by
operating activities:
Depreciation expense 36.7 33.1
Amortization expense 162.4 158.5
Provision for doubtful accounts 1.9 3.8
Deferred income taxes 0.9 (1.7)
Stock-based compensation 50.1 43.4
Income from equity method
investments (17.9) (12.4)
Gain on an equity sale - (15.1)
Acquisition /divestiture (gain)
loss (3.9) 2.9
Excess tax benefit for stock-
based compensation (2.1) (14.1)
Provision for excess and obsolete
inventories 12.3 4.8
Other non-cash items 10.0 4.7
Add decrease (increase) in assets:
Accounts receivables 0.3 (10.9)
Other receivables 8.5 (2.3)
Inventories (2.9) (31.8)
Other current and non-current
assets (7.6) (7.1)
Add increase (decrease) in
liabilities:
Accounts payable (6.4) (7.2)
Accrued compensation and benefits (0.1) 0.5
Deferred revenue 28.1 45.9
Accrued warranty expense (2.0) 3.1
Other liabilities (34.1) (4.9)
Net cash provided by operating
activities 354.9 407.1
----- -----
Cash flow from investing
activities:
Acquisitions of businesses, net of
cash acquired (156.3) (307.9)
Acquisitions of property and
equipment (43.9) (47.3)
Purchases of equity investments (5.5) (10.9)
Acquisitions of intangible assets (0.1) (7.6)
Net proceeds from sale of business 12.1 -
Dividends received from equity
investments 20.0 32.2
Other 1.3 (2.5)
Net cash used in investing
activities (172.4) (344.0)
------ ------
Cash flow from financing
activities:
Issuance of common stock, net of
tax withholdings 29.7 56.1
Payments related to repurchases of
common stock (234.4) (97.8)
Excess tax benefit for stock-
based compensation 2.1 14.1
Proceeds from debt and revolving
credit lines 555.0 876.2
Payments on debt and revolving
credit lines (555.2) (900.1)
Net cash used in financing
activities (202.8) (51.5)
------ -----
Effect of exchange rate changes on
cash and cash equivalents (11.7) (10.8)
----- -----
Net increase (decrease) in cash
and cash equivalents (32.0) 0.8
Cash and cash equivalents -
beginning of period 148.0 147.2
----- -----
Cash and cash equivalents -end of
period $116.0 $148.0
====== ======
REPORTING SEGMENTS
(Dollars in millions)
(Unaudited)
Reporting Segments
------------------
Engineering
and Field Mobile Advanced
Construction Solutions Solutions Devices
------------ --------- --------- -------
FOURTH QUARTER OF FISCAL 2015 :
Revenue $319.1 $79.4 $132.2 $29.0
Operating
income before
corporate
allocations $52.5 $23.6 $23.1 $9.8
Operating
margin (%
of
segment
external
net
revenue) 16.5% 29.7% 17.5% 33.8%
FOURTH QUARTER OF FISCAL 2014 :
Revenue $328.5 $80.7 $124.1 $30.5
Operating
income before
corporate
allocations $53.1 ( A ) $18.4 ( A ) $19.5 ( A ) $9.9 ( A )
Operating
margin (%
of
segment
external
net
revenue) 16.2% 22.8% 15.7% 32.5%
FISCAL YEAR 2015 :
Revenue $1,283.3 $355.3 $520.3 $131.5
Operating
income before
corporate
allocations $218.8 $108.6 $85.6 $46.9
Operating
margin (%
of
segment
external
net
revenue) 17.0% 30.6% 16.5% 35.7%
FISCAL YEAR 2014 :
Revenue $1,348.1 $422.1 $486.8 $138.5
Operating
income before
corporate
allocations $284.1 ( A ) $137.8 ( A ) $78.0 ( A ) $44.3 ( A )
Operating
margin (%
of
segment
external
net
revenue) 21.1% 32.6% 16.0% 32.0%
( A ) Beginning with the first
quarter of fiscal 2015, the
Company changed its methodology
for allocating stock-based
compensation. Historically, the
Company allocated stock-based
compensation to each business
segment. Beginning in the first
quarter of fiscal 2015, stock-
based compensation is considered a
corporate expense and not
reflected in segment results. The
Company has adjusted the segment
operating income for all prior
periods to conform to the current
year methodology.
GAAP TO NON-GAAP RECONCILIATION
(Dollars in millions, except per share data)
(Unaudited)
Fourth Quarter of Fiscal Years
----------------- ------------
2015 2014 2015 2014
---- ---- ---- ----
Dollar % of Dollar % of Dollar % of Dollar % of
Amount Revenue Amount Revenue Amount Revenue Amount Revenue
------ ------- ------ ------- ------ ------- ------ -------
GROSS MARGIN:
GAAP gross
margin: $293.1 52.4% $292.5 51.9% $1,202.2 52.5% $1,290.8 53.9%
Restructuring charges ( A ) 0.6 0.1% 0.1 0.0% 1.4 0.1% 0.4 0.0%
Amortization of purchased
intangible assets ( B ) 23.8 4.2% 21.9 3.9% 92.6 4.0% 82.9 3.5%
Stock-based compensation ( C ) 1.0 0.2% 0.9 0.2% 3.9 0.2% 3.2 0.1%
Amortization of acquisition-
related inventory step-up ( D ) - 0.0% 0.2 0.0% - 0.0% 0.8 0.0%
Non-GAAP gross
margin: $318.5 56.9% $315.6 56.0% $1,300.1 56.8% $1,378.1 57.5%
------ ------ -------- --------
OPERATING EXPENSES:
GAAP operating
expenses: $260.2 46.5% $215.7 38.3% $1,047.8 45.7% $1,030.0 43.0%
Restructuring charges ( A ) (2.4) -0.4% (0.4) -0.1% (11.4) -0.5% (1.7) -0.1%
Amortization of purchased
intangible assets ( B ) (16.4) -2.9% (18.8) -3.3% (69.8) -3.1% (75.6) -3.2%
Stock-based compensation ( C ) (11.8) -2.1% (10.4) -1.9% (46.2) -2.0% (40.2) -1.7%
Acquisition / divestiture items ( E ) (1.9) -0.4% (6.0) -1.1% (9.9) -0.4% (13.5) -0.5%
Litigation ( F ) (0.3) -0.1% 51.3 9.1% (0.3) 0.0% (0.7) 0.0%
Non-GAAP
operating
expenses: $227.4 40.6% $231.4 41.0% $910.2 39.7% $898.3 37.5%
------ ------ ------ ------
OPERATING INCOME:
GAAP operating
income: $32.9 5.9% $76.8 13.6% $154.4 6.7% $260.8 10.9%
Restructuring charges ( A ) 3.0 0.5% 0.5 0.1% 12.8 0.6% 2.1 0.1%
Amortization of purchased
intangible assets ( B ) 40.2 7.2% 40.7 7.2% 162.4 7.1% 158.5 6.6%
Stock-based compensation ( C ) 12.8 2.3% 11.3 2.0% 50.1 2.2% 43.4 1.8%
Amortization of acquisition-
related inventory step-up ( D ) - 0.0% 0.2 0.0% - 0.0% 0.8 0.0%
Acquisition / divestiture items ( E ) 1.9 0.3% 6.0 1.1% 9.9 0.4% 13.5 0.6%
Litigation ( F ) 0.3 0.1% (51.3) -9.1% 0.3 0.0% 0.7 0.0%
Non-GAAP
operating
income: $91.1 16.3% $84.2 14.9% $389.9 17.0% $479.8 20.0%
----- ----- ------ ------
NON-OPERATING INCOME (EXPENSE), NET:
GAAP non-
operating income
(expense), net: $(4.6) $(5.2) $(2.6) $5.2
Acquisition / divestiture items ( E ) 1.9 (3.1) (3.9) 2.9
Gain on an equity sale ( G ) - - - (15.1)
Debt issuance cost write-off ( H ) - 4.2 - 4.2
Non-GAAP non-
operating
expense, net: $(2.7) $(4.1) $(6.5) $(2.8)
GAAP and GAAP and GAAP and GAAP and
Non-GAAP Non-GAAP Non-GAAP Non-GAAP
Tax Rate % ( M ) Tax Rate % ( M ) Tax Rate % ( M ) Tax Rate % ( M )
--------- --------- --------- ---------
INCOME TAX PROVISION:
GAAP income tax
provision: $4.4 16% $15.7 22% $31.1 20% $52.1 20%
Non-GAAP items tax effected ( I ) 9.3 8.0 47.1 44.3
Difference in GAAP and Non-GAAP
tax rate ( J ) 7.5 - 13.8 -
Tax on gain on an equity sale ( K ) - - - (5.8)
Tax on RDS litigation ( L ) - (19.8) - -
Non-GAAP income
tax provision: $21.2 24% $3.9 5% $92.0 24% $90.6 19%
----- ---- ----- -----
NET INCOME:
GAAP net income
attributable to
Trimble
Navigation Ltd. $24.0 $55.8 $121.1 $214.1
Restructuring charges ( A ) 3.0 0.5 12.8 2.1
Amortization of purchased
intangible assets ( B ) 40.2 40.7 162.4 158.5
Stock-based compensation ( C ) 12.8 11.3 50.1 43.4
Amortization of acquisition-
related inventory step-up ( D ) - 0.2 - 0.8
Acquisition / divestiture items ( E ) 3.8 2.9 6.0 16.4
Litigation ( F ) 0.3 (51.3) 0.3 0.7
Gain on an equity sale ( G ) - - - (15.1)
Debt issuance cost write-off ( H ) - 4.2 - 4.2
Non-GAAP tax adjustments ( I ) - ( L ) (16.8) 11.8 (60.9) (38.5)
Non-GAAP net
income
attributable to
Trimble
Navigation Ltd. $67.3 $76.1 $291.8 $386.6
DILUTED NET INCOME PER SHARE:
GAAP diluted net
income per share
attributable to
Trimble
Navigation Ltd. $0.09 $0.21 $0.47 $0.81
Restructuring charges ( A ) 0.01 - 0.05 0.01
Amortization of purchased
intangible assets ( B ) 0.16 0.16 0.63 0.60
Stock-based compensation ( C ) 0.05 0.04 0.19 0.16
Amortization of acquisition-
related inventory step-up ( D ) - - - -
Acquisition / divestiture items ( E ) 0.02 0.01 0.02 0.06
Litigation ( F ) - (0.20) - -
Gain on an equity sale ( G ) - - - (0.06)
Debt issuance cost write-off ( H ) - 0.02 - 0.02
Non-GAAP tax adjustments ( I ) - ( L ) (0.06) 0.05 (0.23) (0.14)
Non-GAAP diluted net income
per share attributable to
Trimble Navigation Ltd. $0.27 $0.29 $1.13 $1.46
OPERATING LEVERAGE:
Increase
(decrease) in
non-GAAP
operating income $6.9 $(40.8) $(89.9) $5.9
Increase
(decrease) in
revenue $(4.1) $(35.4) $(105.1) $107.4
Operating
leverage
(increase in
non-GAAP
operating
income as a % of
increase in
revenue) N/A N/A N/A 5.5%
FOOTNOTES TO GAAP TO NON-GAAP RECONCILIATION
(Unaudited)
Our non-GAAP measures are not meant to be considered in isolation or as a substitute for comparable GAAP measures. The non-GAAP financial
measures included in the previous table, as well as detailed explanations to the adjustments to comparable GAAP measures, are set forth
below:
Non-GAAP gross margin
We believe our investors benefit by understanding our non-GAAP gross margin as a way of understanding how product mix, pricing decisions and
manufacturing costs influence our business. Non-GAAP gross margin excludes restructuring costs, amortization of purchased intangible
assets, stock-based compensation and amortization of acquisition-related inventory step-up from GAAP gross margin. We believe that these
exclusions offer investors additional information that may be useful to view trends in our gross margin performance.
Non-GAAP operating expenses
We believe this measure is important to investors evaluating our non-GAAP spending in relation to revenue. Non-GAAP operating expenses
exclude restructuring costs, amortization of purchased intangible assets, stock-based compensation, acquisition/divestiture costs
associated with external and incremental costs resulting directly from merger and acquisition activities such as legal, due diligence, and
integration costs, and litigation expenses 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 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 (expense), net
We believe this measure helps investors evaluate our non-operating income trends. Non-GAAP non-operating income (expense), net excludes
acquisition and 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, and a gain on an equity sale. These gains/losses
are specific to particular acquisitions and divestitures and vary significantly in amount and timing. Non-GAAP non-operating income
(expense), net also excludes the write-off of debt issuance costs associated with terminated and/or modified credit facilities and costs
associated with the issuance of new credit facilities and Senior Notes that were not capitalized as debt issuance costs. We believe that
these exclusions provide investors with a supplemental view of our ongoing financial results.
Non-GAAP income tax provision
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. In fiscal 2015 we began calculating a non-GAAP tax rate separate from the GAAP tax rate, as
we expect this to add consistency in the quarterly non-GAAP trends. We have not retroactively gone back to prior periods to restate our
quarterly non-GAAP results with a similar separate rate. Therefore, comparability between periods may be affected.
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, litigation, a gain on an equity sale, write-off of debt issuance
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 costs,
amortization of purchased intangible assets, stock-based compensation, amortization of acquisition-related inventory step-up, acquisition
and divestiture costs, litigation, a gain on an equity sale, a write off of debt issuance 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.
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.
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 items, litigation, a gain on an equity sale, write- off of debt issuance costs and non-GAAP
tax adjustments. For detailed explanations of the adjustments made to comparable GAAP measures, see items (A) - ( M ) below:
( A ) Restructuring costs.Included in our GAAP presentation of
cost of sales and operating expenses, restructuring
costs recorded are primarily for employee compensation
resulting from reductions in employee headcount in
connection with our company restructurings. We exclude
restructuring costs from our non-GAAP measures because
we believe they do not reflect expected future
operating expenses, they are not indicative of our core
operating performance, and they are not meaningful in
comparisons to our past operating performance. We have
incurred restructuring expense in each of the periods
presented however the amount incurred can vary
significantly based on whether a restructuring has
occurred in the period and the timing of headcount
reductions.
( B ) Amortization of purchased intangible assets.Included in
our GAAP presentation of gross margin and operating
expenses is amortization of purchased intangible
assets. US GAAP accounting requires that intangible
assets are recorded at fair value and amortized over
their useful lives. Consequently, the timing and size
of our acquisitions will cause our operating results to
vary from period to period, making a comparison to past
performance difficult for investors. This accounting
treatment may cause differences when comparing our
results to companies that grow internally because the
fair value assigned to the intangible assets acquired
through acquisition may significantly exceed the
equivalent expenses that a company may incur for
similar efforts when performed internally. Furthermore,
the useful life that we expense our intangible assets
over may be substantially different from the time
period that an internal growth company incurs and
recognizes such expenses. We believe that by excluding
the amortization of purchased intangible assets, which
primarily represents technology and/or customer
relationships already developed, it provides an
alternative way for investors to compare our operations
pre-acquisition to those post-acquisitions and to
those of our competitors that have pursued internal
growth strategies. However, we note that companies that
grow internally will incur costs to develop intangible
assets that will be expensed in the period incurred,
which may make a direct comparison more difficult.
( C ) Stock-based compensation. Included in our GAAP
presentation of cost of sales and operating expenses,
stock-based compensation consists of expenses for
employee stock options and awards and purchase rights
under our employee stock purchase plan. We exclude
stock-based compensation expense from our non-GAAP
measures because some investors may view it as not
reflective of our core operating performance as it is a
non-cash expense. For the fourth quarter of and
fiscal years 2015 and 2014, stock-based compensation
was allocated as follows:
Fourth Quarter
of Fiscal Years
--------------- ------------
(Dollars in millions) 2015 2014 2015 2014
---- ---- ---- ----
Cost of sales $1.0 $0.9 $3.9 $3.2
Research and development 2.3 2.0 8.7 6.8
Sales and Marketing 2.4 1.6 9.1 7.6
General and administrative 7.1 6.8 28.4 25.8
$12.8 $11.3 $50.1 $43.4
----- ----- ----- -----
( 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, 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 ) Litigation. These amounts represent costs accrued to
settle litigation, generally as a result of an
arbitration agreement. The fiscal 2014 amount includes
$51.3M of estimated costs that were reserved during the
third quarter based on a jury verdict in favor of the
plaintiff, Recreational Data Services, Inc. and then
reversed during the fourth quarter after the judge
overturned the verdict. We have excluded these costs
from our non-GAAP measures because they are non-
recurring expenses that are not indicative of our
ongoing operating results. We further believe that
excluding these items from our non-GAAP results is
useful to investors in that it allows for period-over-
period comparability.
( G ) Gain on an equity sale. Included in our GAAP
presentation of non-operating income (expense), 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.
( H ) Debt issuance cost write-off. Included in our GAAP
non-operating income, net this amount represents a
write-off of debt issuance costs for terminated and/
or modified credit facilities and costs associated with
the issuance of new credit facilities and Senior Notes
in fiscal 2014 that were not capitalized as debt
issuance costs. We excluded the debt issuance cost
write-off from our non-GAAP measures. We believe that
investors benefit from excluding this item from our
non-operating income to facilitate a more meaningful
evaluation of our non-operating income trends.
( I ) Non-GAAP items tax effected. This amount adjusts the
provision for income taxes to reflect the effect of the
non-GAAP items ( A ) - ( H ) on non-GAAP net income.
We believe this information is useful to investors
because it provides for consistent treatment of the
excluded items in this non-GAAP presentation.
( J ) 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. In fiscal 2015 we began calculating a
non-GAAP tax rate separate from the GAAP rate as we
expect this to add consistency in the quarterly trends.
We have not retroactively gone back to prior periods
to restate them with a similar separate rate.
Therefore, comparability between periods may be
affected.
( K ) 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 2014 to the non-GAAP tax rates in the current and
prior periods.
( L ) Tax on Recreational Data Services Inc. litigation.
This amount represents the tax effect of a reversal
of a legal reserve recorded in the third quarter of
2014 that was reversed in the fourth quarter of 2014.
We excluded this item as it represents the tax
effect of a non-recurring expense. We believe that
investors benefit from excluding this item from our
non-GAAP income tax provision because it allows for
period-over-period comparability.
( M ) 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. However, this comparability may be
impacted since we began separately calculating a non-
GAAP tax rate in fiscal 2015.
To view the original version on PR Newswire, visit:http://www.prnewswire.com/news-releases/trimble-reports-fourth-quarter-and-full-year-2015-results-300217627.html
SOURCE Trimble
