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Trimble Navigation Limited
935 Stewart Drive
Post Office Box 3642
Sunnyvale, CA 94085
1.408.481.8000 phone
1.408.481.7781 fax

  NEWS RELEASE

 

 

 Trimble First Quarter 2008 Revenue Up 24 Percent to $355.3 million

GAAP Earnings Per Share $0.32; Non-GAAP Earnings Per Share $0.40

 

SUNNYVALE, Calif., April 24, 2008 — Trimble (Nasdaq: TRMB) today announced results for its first quarter of 2008 ended Mar. 28, 2008. In the first quarter of 2008 revenue was $355.3 million, up approximately 24 percent from revenue of $285.7 million in the first quarter of 2007.

 

Operating income for the first quarter of 2008 was $58.0 million, up 48 percent from the first quarter of 2007. Operating margins in the first quarter of 2008 were 16.3 percent, compared to 13.7 percent in the first quarter of 2007. Amortization of intangibles increased from $7.9 million in the first quarter of 2007 to $10.8 million in the first quarter of 2008. The impact of stock-based compensation expense was $4.0 million in the first quarter of 2008, compared to $3.4 million in the first quarter of 2007. There were no in-process research and development or restructuring expenses in the first quarter of 2008, while there was a $2.1 million in-process research and development expense and a $2.7 million restructuring expense in the first quarter of 2007. In addition, amortization of acquisition-related inventory step-up was $0.2 million in the first quarter of 2008, compared to no amortization of acquisition-related inventory step-up in the first quarter of 2007. Excluding these impacts, non-GAAP operating income of $73.0 million grew by 32 percent compared to the first quarter of 2007. Non-GAAP operating margins were 20.5 percent in the first quarter of 2008, up from 19.4 percent in the first quarter of 2007.

 

Net income for the first quarter of 2008 was $40.1 million, up 40 percent compared to net income of $28.7 million in the first quarter of 2007. Diluted earnings per share for the first quarter of 2008 were $0.32, up 35 percent from diluted earnings per share of $0.24 in the first quarter of 2007.

 

The tax rate for the first quarter of 2008 was 33 percent, compared to 32 percent in the first quarter of 2007. Trimble�s tax rate was lower than forecasted due to the implementation of a global supply chain structure which is expected to result in a structural tax rate of 33 percent for fiscal 2008 and beyond.

 

Adjusting for the amortization of intangibles, in-process research and development, the impact of stock-based compensation expenses, restructuring, and the amortization of acquisition-related inventory step-up, non-GAAP net income of $50.1 million for the first quarter of  2008 was up 26 percent compared to non-GAAP net income of $39.6 million in the first quarter of 2007. Non-GAAP earnings per share for the first quarter of 2008 were $0.40, up 22 percent from non-GAAP earnings per share of $0.33 in the first quarter of 2007.  

 

"The first quarter of 2008 emphasized the growing diversity of the Trimble business portfolio. Although E&C continued to be impacted by slow U.S. economic conditions, we saw strong growth across all other geographies.  In addition, we experienced almost 75 percent growth in our TFS segment, driven by strong agriculture product sales," said Steven W. Berglund, Trimble's chief executive officer. 

 

While monitoring the continuing uncertain economy, our view for revenues for the entire year remains generally unchanged with an expectation for higher earnings per share than previous guidance.�

 

Trimble Results by Business Segment

Segment operating income is revenue less cost of goods sold and operating expenses, excluding general corporate expenses, amortization of intangibles, amortization of acquisition-related inventory step-up, and in-process research and development. In addition, for each segment, non- GAAP operating income excludes the impact of stock-based compensation expense.

 

Engineering and Construction

First quarter 2008 Engineering and Construction (E&C) revenue was $194.2 million, up approximately 11 percent when compared to revenue of $175.6 million in the first quarter of 2007, with strong international sales.

 

First quarter 2008 operating income in E&C was $37.0 million, or 19.0 percent of revenue compared to $42.2 million, or 24.0 percent of revenue, in the first quarter of 2007.

 

Non-GAAP operating income in E&C was $37.9 million, or 19.5 percent of revenue, in the first quarter of 2008 compared to $43.0 million, or 24.5 percent of revenue, in the first quarter of 2007. The decline in operating margins resulted primarily from unfavorable foreign currency exchange rates, the impact of recent acquisitions and product mix.

 

Field Solutions

First quarter 2008 Field Solutions (TFS) revenue was $88.0 million, up approximately 73 percent when compared to revenue of $51.0 million in the first quarter of 2007. Sales were strong across all geographic regions and product lines, with the majority of the increase coming from the agriculture business.

 

First quarter 2008 operating income in TFS was $35.1 million, or 39.9 percent of revenue compared to $16.6 million, or 32.6 percent of revenue, in the first quarter of 2007. 

 

Non-GAAP operating income in TFS was $35.3 million, or 40.1 percent of revenue, in the first quarter of 2008 compared to $16.8 million, or 33.0 percent of revenue, in the first quarter of 2007. Operating margin expansion was due primarily to higher revenue.

 

Mobile Solutions

First quarter 2008 Mobile Solutions (TMS) revenue was $44.0 million, up approximately 47 percent when compared to revenue of $29.9 million in the first quarter of 2007.

 

First quarter 2008 operating income in TMS was $2.5 million, or 5.6 percent of revenue compared to $1.0 million, or 3.4 percent of revenue, in the first quarter of 2007.     

 

Non-GAAP operating income in TMS was $3.9 million, or 8.8 percent of revenue, in the first quarter of 2008 compared to $1.8 million, or 5.9 percent of revenue, in the first quarter of 2007. Operating margin expansion was driven by higher subscription revenue and operating synergies which were partially offset by higher new product development costs.

 

Advanced Devices

First quarter 2008 Advanced Devices revenue was $29.1 million, approximately flat when compared to revenue of $29.3 million in the first quarter of 2007.

 

First quarter 2008 operating income in Advanced Devices was $4.7 million, or 16.1 percent of revenue compared to $3.3 million, or 11.4 percent of revenue, in the first quarter of 2007.

 

Non-GAAP operating income in Advanced Devices was $5.0 million, or 17.3 percent of revenue, in the first quarter of 2008 compared to $3.7 million, or 12.6 percent of revenue, in the first quarter of 2007. Operating margins improved due to product mix.

 

Stock Repurchase Program

In January, Trimble announced a stock repurchase program for up to $250 million.  As part of this program, in the first quarter of 2008, Trimble repurchased approximately 968 thousand shares of Trimble stock at an average purchase price of $26.71.

 

Use of Non-GAAP Financial Information

To help our readers understand our past financial performance and our future results, we supplement the financial results that we provide in accordance with generally accepted accounting principles, or GAAP, with non-GAAP financial measures. The specific non-GAAP measures which we use along with a reconciliation to the nearest comparable GAAP measures and the explanation for why management chose to exclude selected items and the additional purposes for which these non-GAAP measures are used 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. 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. Management generally compensates for the limitations in the use of non-GAAP financial measures by relying on comparable GAAP financial measures and providing investors with a reconciliation of the non-GAAP financial measure to the most directly comparable GAAP financial measure or measures. Investors are encouraged to review the reconciliation of our non-GAAP financial measures to the comparable GAAP results which is attached to our quarterly earnings release and which can be found, along with other financial information, on the investor relations page of our Web site at www.investor.trimble.com.

 

Forward Looking Guidance

In the second quarter of 2008, Trimble expects revenue to grow 14 to 16 percent compared to the second quarter of 2007, with revenue between $374 million and $379 million. Trimble expects second quarter 2008 GAAP earnings per share between $0.36 and $0.38 and non-GAAP earnings per share between $0.44 and $0.46. Non-GAAP guidance for the second quarter of 2008 excludes the amortization of intangibles of $10.9 million related to previous acquisitions, and the anticipated impact of stock-based compensation expense of $3.9 million. Both GAAP and non-GAAP guidance use a 33 percent tax rate and assume 125.9 million shares outstanding. 

 

Trimble has modified full-year 2008 guidance incorporating its current outlook for the year as well as its lower tax rate.  Revenue is expected to grow 15 to 17 percent versus previous guidance of 14 to 17 percent revenue growth. Full-year non-GAAP earnings per share are expected to be $1.50 to $1.55, versus previous guidance of $1.39 to $1.44.

 

Investor Conference Call / Webcast Details

Trimble will hold a conference call on Apr. 24, 2008 at 1:30 p.m. PDT to review its first quarter 2008 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 (706) 634-6089 (international). A replay of the call will be available for seven days at (800) 642-1687 (U.S.) or ((706) 645-9291 (international) and the pass code is 43045401. The replay will also be available on the Web at the address above.

 

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 and headquartered in Sunnyvale, Calif., Trimble has a worldwide presence with more than 3,600 employees in over 18 countries.

 

For more information visit Trimble's Web site at 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 the revenue, effective tax rate, stock-based compensation, the impact from in-process research and development expense, amortization of purchased intangible gross margin, and earnings per share estimates for the second quarter, full-year 2008 and, in the case of tax rates the next three years. 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. For example, strong demand for the Company's products may not continue because of a decline in the overall health of the economy and international markets, which may result in reduced capital spending. In addition, the Company's results may be adversely affected if the growth rates and profitability expectations for each of its four segments are not achieved, or its joint ventures and recent acquisitions do not achieve anticipated results, or if the Company is unable to market, manufacture and ship new products. Any failure to achieve predicted results could negatively impact the Company's revenues, gross margin and other financial results. Whether the Company achieves its guidance for the second quarter and full year 2008 will also depend on a number of other factors, including the 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. Undue reliance should not be placed on any forward-looking statement contained herein. 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 thousands, except per share data)
                                   (Unaudited)

                                                      Three Months Ended
                                                     Mar-28,        Mar-30,
                                                      2008           2007

    Revenue                                         $355,296       $285,732
    Cost of sales                                    180,920        142,602
    Gross margin                                     174,376        143,130
    Gross margin (%)                                   49.1%          50.1%

    Operating expenses
      Research and development                        37,345         31,163
      Sales and marketing                             51,158         42,147
      General and administrative                      22,690         21,642
      Restructuring                                        -          2,692
      Amortization of purchased intangible assets      5,143          4,106
      In-process research and development                  -          2,112
        Total operating expenses                     116,336        103,862


    Operating income                                  58,040         39,268

    Non-operating income, net
      Interest income                                    457          1,243
      Interest expense                                  (762)        (1,400)
      Foreign currency transaction gain, net             968            357
      Income from joint ventures, net                  2,015          2,422
      Other income (expense), net                       (907)           235
        Total non-operating income, net                1,771          2,857

    Income before taxes                               59,811         42,125

    Income tax provision                              19,744         13,442
    Net income                                       $40,067        $28,683


    Earnings per share:
      Basic                                            $0.33          $0.25
      Diluted                                          $0.32          $0.24

    Shares used in calculating earnings per share:
      Basic                                          121,467        115,449
      Diluted                                        125,159        120,896



                      CONDENSED CONSOLIDATED BALANCE SHEETS
                                  (In thousands)
                                    Unaudited


                                                     Mar-28,        Dec-28,
                                                      2008           2007
    Assets

    Current assets:
      Cash and cash equivalents                      $71,379       $103,202
      Accounts receivables, net                      280,651        239,884
      Other receivables                                9,980         10,201
      Inventories, net                               148,503        143,018
      Deferred income taxes                           41,760         44,333
      Other current assets                            18,329         15,661
        Total current assets                         570,602        556,299

    Property and equipment, net                       52,326         51,444
    Goodwill                                         709,149        675,850
    Other purchased intangible assets, net           197,976        197,777
    Other non-current assets                          57,823         57,989

        Total assets                              $1,587,876     $1,539,359

    Liabilities and Shareholders' Equity

    Current liabilities:
      Current portion of long-term debt                 $138           $126
      Accounts payable                                72,798         67,589
      Accrued compensation and benefits               46,127         55,133
      Deferred revenue                                56,982         49,416
      Deferred income taxes                              109          4,129
      Accrued warranty expense                        11,201         10,806
      Income taxes payable                            19,890         14,802
      Other accrued liabilities                       28,439         47,851
        Total current liabilities                    235,684        249,852

    Non-current portion of long-term debt             60,440         60,564
    Non-current deferred revenue                      11,544         15,872
    Deferred income taxes                             61,291         47,917
    Other non-current liabilities                     60,162         56,128

        Total liabilities                            429,121        430,333

    Commitments and contingencies

    Shareholders' equity:
      Common stock                                   670,324        660,749
      Retained earnings                              408,030        388,557
      Accumulated other comprehensive income          80,401         59,720
        Total shareholders' equity                 1,158,755      1,109,026

        Total liabilities and
         shareholders' equity                     $1,587,876     $1,539,359



                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                  (In thousands)
                                    Unaudited

                                                        Three Months Ended
                                                      Mar-28,        Mar-30,
                                                       2008           2007

    Cash flow from operating activities:
      Net Income                                     $40,067        $28,683

      Adjustments to reconcile net income to
       net cash provided by operating activities:
        Depreciation expense                           4,571          4,121
        Amortization expense                          10,848          7,894
        Provision for doubtful accounts                   38            288
        Amortization of debt issuance cost                56             49
        Deferred income taxes                           (885)        (6,402)
        Non-cash restructuring expense                     -          1,391
        Stock-based compensation                       3,982          3,353
        In-process research and development                -          2,112
        Equity gain from joint ventures               (2,015)        (2,422)
        Excess tax benefit for stock-based
         compensation                                 (1,992)        (2,193)
        Provision for excess and obsolete inventories  2,103          1,055
        Other non-cash items                             202            103

      Add decrease (increase) in assets:
        Accounts receivables                         (39,280)       (28,262)
        Other receivables                                516          1,867
        Inventories                                   (3,437)        (1,025)
        Other current and non-current assets            (191)        11,167

      Add increase (decrease) in liabilities:
        Accounts payable                               3,760          3,265
        Accrued compensation and benefits            (10,557)       (11,618)
        Accrued liabilities                           (1,648)         2,063
        Deferred revenue                               2,034          3,296
        Income taxes payable                          12,547         12,962
      Net cash provided by operating activities       20,719         31,747

      Cash flows from investing activities:
        Acquisitions of businesses, net of
         cash acquired                               (39,593)      (272,050)
        Acquisition of property and equipment         (3,711)        (3,873)
        Other                                            (43)            12
      Net cash used in investing activities          (43,347)      (275,911)

      Cash flow from financing activities:
        Issuance of common stock                       8,483         10,474
        Excess tax benefit for stock-based
         compensation                                  1,992          2,193
        Repurchase and retirement of common stock    (25,870)             -
        Proceeds from long-term debt and revolving
         credit lines                                      -        250,000
        Payments on long-term debt and revolving
         credit lines                                   (312)       (80,000)
        Other                                              -              -
      Net cash provided by (used in) financing
       activities                                    (15,707)       182,667

      Effect of exchange rate changes on cash and
       cash equivalents                                6,512         (4,553)

      Net decrease in cash and cash equivalents      (31,823)       (66,050)
      Cash and cash equivalents - beginning
       of period                                     103,202        129,621

      Cash and cash equivalents - end of period      $71,379        $63,571



                             NON-GAAP RECONCILIATION
                   CONDENSED CONSOLIDATED STATEMENTS OF INCOME
                  (Dollars in thousands, except per share data)
                                   (Unaudited)


                                                      Three Months Ended
                                                     Mar-28,        Mar-30,
                                                      2008           2007

    REVENUE:                                        $355,296       $285,732

    GROSS MARGIN:
      GAAP gross margin:                            $174,376       $143,130
        Amortization of purchased intangibles   (B)    5,661          3,789
        Stock-based compensation                (D)      493            342
        Amortization of acquisition-related
         inventory step-up                      (E)      183              -
      Non-GAAP gross margin:                        $180,713       $147,261
      Non-GAAP gross margin (% of revenue)             50.9%          51.5%

    OPERATING EXPENSES:
      GAAP operating expenses:                      $116,336       $103,862
        Restructuring                           (A)        -         (2,692)
        Amortization of purchased intangibles   (B)   (5,143)        (4,106)
        In-process research and development     (C)        -         (2,112)
        Stock-based compensation                (D)   (3,489)        (3,011)
      Non-GAAP operating expenses:                  $107,704        $91,941

    OPERATING INCOME:
      GAAP operating income:                         $58,040        $39,268
        Restructuring                           (A)        -          2,692
        Amortization of purchased intangibles   (B)   10,804          7,895
        In-process research and development     (C)        -          2,112
        Stock-based compensation                (D)    3,982          3,353
        Amortization of acquisition-related
         inventory step-up                      (E)      183              -
      Non-GAAP operating income:                     $73,009        $55,320
      Non-GAAP operating margin (% of revenue)         20.5%          19.4%

    NET INCOME:
      GAAP net income:                               $40,067        $28,683
        Restructuring                           (A)        -          2,692
        Amortization of purchased intangibles   (B)   10,804          7,895
        In-process research and development     (C)        -          2,112
        Stock-based compensation                (D)    3,982          3,353
        Amortization of acquisition-related
         inventory step-up                      (E)      183              -
        Income tax effect on non-GAAP
         adjustments                            (F)   (4,941)        (5,121)
      Non-GAAP net income:                           $50,095        $39,614

    DILUTED NET INCOME PER SHARE:
      GAAP diluted net income per share:               $0.32          $0.24
      Non-GAAP diluted net income per share:           $0.40          $0.33

    SHARES USED TO COMPUTE DILUTED NET
     INCOME PER SHARE:
      GAAP and Non-GAAP shares used to compute
       net income per share:                         125,159        120,896

    OPERATING LEVERAGE:
      Increase in non-GAAP operating income          $17,689
      Increase in revenue                            $69,564
      Operating leverage (increase in
       non-GAAP operating income as a %
       of increase in revenue)                         25.4%



    The non-GAAP financial measures included in the table above are non-GAAP
    gross margin, non-GAAP operating expenses, non-GAAP operating income,
    non-GAAP net income and non-GAAP diluted net income per share, which
    adjust for the following items: expenses related to acquisitions,
    stock-based compensation expense and restructuring charges. Management
    uses these non-GAAP measures to assess trends in its business and for
    budgeting purposes, as many of these excluded items are non-cash. In
    addition, we believe that the presentation of these non-GAAP financial
    measures is useful to investors for the reasons associated with each of
    the adjusting items as described below.

    (A) Restructuring. The amounts recorded are for employee compensation
        resulting from reductions in employee headcount in connection with our
        company restructurings and we believe they are not directly related to
        the operation of our business.

    (B) Amortization of purchased intangibles. The amounts recorded as
        amortization of purchased intangibles arise from prior acquisitions
        and are non-cash in nature. We exclude these expenses because we
        believe they are not reflective of ongoing operating results in the
        period incurred and are not directly related to the operation of our
        business. Approximately $5,661K and $3,789K of the amortization of
        purchased intangibles was included in cost of sales for the three
        months ended March 28, 2008 and March 30, 2007, and approximately
        $5,143K and $4,106K was reported as a separate line within operating
        expenses for the three months ended March 28, 2008 and March 30, 2007,
        respectively.

    (C) In-process research and development. The amounts recorded as
        in-process research and development arise from prior acquisitions and
        are non-cash in nature. We exclude these expenses because we believe
        they are not reflective of ongoing operating results in the period
        incurred and not directly related to the operation of our business.

    (D) Stock-based Compensation. The amounts consist of expenses for employee
        stock options and purchase rights under our employee stock purchase
        plan determined in accordance with SFAS 123(R), which became effective
        for us on January 1, 2006. We exclude these stock-based compensation
        expenses because they are non-cash expenses that we believe are not
        reflective of ongoing operation results. For the three months ended
        March 28, 2008 and March 30, 2007, stock-based compensation was
        allocated as follows:

                                                        Three Months Ended
                                                       Mar-28,        Mar-30,
                                                        2008           2007

    Cost of sales                                       $493           $342
    Research and development                             917            729
    Sales and Marketing                                1,030            767
    General and administrative                         1,542          1,515
                                                      $3,982         $3,353


    (E) 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. 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 reflective
        of our ongoing operating results, and it is not used by management to
        assess the core profitability of our business operations.

    (F) Income tax effect on non-GAAP adjustments. This amounts adjusts the
        provision for income taxes to reflect the effect of the non-GAAP
        adjustments on non-GAAP operating income.



                             NON-GAAP RECONCILIATION
                                REPORTING SEGMENTS
                              (Dollars in thousands)
                                   (Unaudited)


                                               Reporting Segments

                                    Engineering
                                        and        Field     Mobile   Advanced
                                   Construction  Solutions  Solutions  Devices

    THREE MONTHS ENDED
     MARCH 28, 2008:
      Revenue                         $194,180    $88,037    $44,011   $29,068

      GAAP operating income before
       corporate allocations:          $36,954    $35,095     $2,453   $4,692
        Stock-based compensation (G)       971        198      1,408      327
      Non-GAAP operating income
       before corporate allocations:   $37,925    $35,293     $3,861   $5,019
      Non-GAAP operating margin
       (% of segment external
       net revenues)                     19.5%      40.1%       8.8%    17.3%


    THREE MONTHS ENDED
     MARCH 30, 2007:
       Revenue                        $175,604    $50,962    $29,857   $29,309

      GAAP operating income before
       corporate allocations:          $42,164    $16,628     $1,017   $3,343
        Stock-based compensation (G)       872        190        742      364
      Non-GAAP operating income
       before corporate allocations:   $43,036    $16,818     $1,759   $3,707
      Non-GAAP operating margin
       (% of segment external
       net revenues)                     24.5%      33.0%       5.9%    12.6%


    (G) Stock-based Compensation. The amounts consist of expenses for
        employee stock options and purchase rights under our employee stock
        purchase plan determined in accordance with SFAS 123(R), which became
        effective for us on January 1, 2006. We discuss our operating results
        by segment with and with-out stock-based compensation expense, as we
        believe it is useful to investors to understand the impact of the
        application of SFAS 123(R) to our results of operations. Stock-based
        compensation not allocated to the reportable segments was
        approximately $1,078K and $1,185K for the three months ended March
        28, 2008 and March 30, 2007, respectively.




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