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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 Reports Third Quarter 2007 Revenue Growth of 26 Percent 
Revenue $296.0 Million - GAAP Earnings Per Share $0.22; Non-GAAP Earnings Per Share $0.29

SUNNYVALE, Calif., Oct 23, 2007 /PRNewswire-FirstCall via COMTEX News Network/ -- Trimble (Nasdaq: TRMB) today announced results for its third quarter 2007, ended Sept. 28, 2007. Revenue for the third quarter of 2007 was $296.0 million, up approximately 26 percent from revenue of $234.9 million in the third quarter of 2006.

Operating income for the third quarter of 2007 was $43.8 million, up 21 percent from the third quarter of 2006. Operating margins in the third quarter of 2007 were 14.8 percent, compared to 15.5 percent in the third quarter of 2006. It should be noted in year-over-year comparisons that amortization of intangibles increased from $2.9 million in the third quarter of 2006 to $10.2 million in the third quarter of 2007. Additionally, the impact of stock-based compensation expense was $3.8 million in the third quarter of 2007, compared to $2.9 million in the third quarter of 2006. There was no in-process research and development expense in the third quarter of 2007; there was a $50 thousand in-process research and development expense in the third quarter of 2006. Excluding these impacts, non-GAAP operating income of $57.8 million grew by 37 percent compared to the third quarter of 2006. Non-GAAP operating income margins were 19.5 percent in the third quarter of 2007, up from 18.0 percent in the third quarter of 2006.

Net income for the third quarter of 2007 was up approximately 8 percent, to $27.4 million, compared to net income of $25.3 million in the third quarter of 2006. Diluted earnings per share for the third quarter of 2007 were $0.22, flat with diluted earnings per share of $0.22 in the third quarter of 2006. The tax rate for the third quarter of 2007 was 39 percent, compared to 35 percent in the third quarter of 2006. GAAP earnings per share in the third quarter of 2007 were negatively impacted by approximately $0.05 due to amortization of intangibles and by $0.02 due to stock-based compensation expense.

Adjusting for the amortization of intangibles, in-process research and development, and the impact of stock-based compensation expenses, non-GAAP net income for the third quarter of 2007 was up 23 percent, to $35.9 million, compared to non-GAAP net income of $29.2 million in the third quarter of fiscal 2006. Non-GAAP earnings per share for the third quarter of 2007 were $0.29, up approximately 16 percent from non-GAAP earnings per share of $0.25 in the third quarter of 2006.

"Trimble's third quarter performance fit our standard operating template of revenue growth, tight control of costs, and expanding operating margins," said Steven W. Berglund, Trimble's president and chief executive officer. "Although we once again saw some regional slowness in the U.S. within our E&C segment, we continue to believe in a robust 2008 based on a strong farm economy, continued international growth in E&C, and the need for productivity- based solutions in all of the markets we serve."

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, 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

Third quarter 2007 Engineering and Construction (E&C) revenue was $182.1 million, up approximately 12 percent when compared to revenue of $162.4 million in the third quarter of 2006. During the third quarter, E&C continued to experience some regional softness in U.S. sales and strong growth in international sales.

Operating income in E&C was $42.8 million, or 23.5 percent of revenue compared to $38.3 million, or 23.6 percent of revenue, in the third quarter of 2006.

Non-GAAP operating income in E&C was $43.7 million, or 24.0 percent of revenue, in the third quarter of 2007 compared to $39.2 million, or 24.2 percent of revenue, in the third quarter of 2006.

Field Solutions

Third quarter 2007 Field Solutions (TFS) revenue was $44.8 million, up 53 percent compared to $29.2 million in revenue in the third quarter of 2006. Sales of both agricultural and geographic information system products were strong, with particular strength driven by the continued robust farm economy.

Operating income in TFS was $11.9 million, or 26.7 percent of revenue, for the third quarter of 2007 compared to $5.6 million, or 19.3 percent of revenue, in the third quarter of 2006.

Non-GAAP operating income in TFS was $12.1 million, or 27.0 percent of revenue, for the third quarter of 2007 compared to $5.9 million, or 20.1 percent of revenue, in the third quarter of 2006.

Mobile Solutions

Third quarter 2007 Mobile Solutions revenue (TMS) was $39.2 million, up 139 percent from revenue of $16.4 million in the third quarter of 2006. Revenue growth was primarily driven by the impact of the @Road acquisition.

Operating income in TMS was $2.9 million, or 7.3 percent of revenue, for the third quarter of 2007 compared to $1.1 million, or 6.8 percent of revenue, in the third quarter of 2006.

Non-GAAP operating income in TMS was $4.3 million, or 10.9 percent of revenue, for the third quarter of 2007 compared to $1.3 million, or 7.9 percent of revenue, in the third quarter of 2006.

Advanced Devices

Third quarter 2007 Advanced Devices revenue was $29.9 million, up approximately 12 percent from revenue of $26.8 million in the third quarter of 2006 due to sales of timing products.

Operating income in Advanced Devices was $4.9 million, or 16.4 percent of revenue, for the third quarter of 2007 compared to $4.1 million, or 15.3 percent of revenue, in the third quarter of 2006.

Non-GAAP operating income in Advanced Devices was $5.2 million, or 17.5 percent of revenue, for the third quarter of 2007 compared to $4.6 million, or 17.0 percent of revenue, in the third quarter of 2006.

Use of Non-GAAP Financial Information

Our results of operations have undergone significant change primarily due to the impact of acquisitions and FAS 123(R). 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 http://investor.trimble.com.

Forward Looking Guidance

In the fourth quarter of 2007, Trimble expects revenue to grow 26 to 28 percent compared to the fourth quarter of 2006, with revenue between $295 million and $300 million. Trimble expects fourth quarter 2007 GAAP earnings per share between $0.17 and $0.19 and non-GAAP earnings per share between $0.24 and $0.26. Non-GAAP guidance for the fourth quarter of 2007 excludes the amortization of intangibles of $10.0 million related to previous acquisitions, and the anticipated impact of stock-based compensation expense of $3.8 million. Both GAAP and non-GAAP guidance use a 39 percent tax rate, compared to an actual 25 percent tax rate in the fourth quarter of 2006, and assume 126 million shares outstanding.

Investor Conference Call / Webcast Details

Trimble will hold a conference call on October 23, 2007 at 1:30 p.m. PDT to review its third quarter 2007 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 passcode is 18774724. 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 3,400 employees in over 18 countries.

For more information visit Trimble's Web site at http://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 intangibles, and earnings per share estimates for the fourth quarter 2007. 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. The Company's results would also be negatively impacted by unforeseen costs associated with the integration of @Road or delays in integrating the two companies. 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 fourth quarter of 2007 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   Nine Months Ended

                                       Sep-28,   Sep-29,   Sep-28,   Sep-29,
                                        2007      2006      2007      2006

    Revenue                           $296,023  $234,851  $909,487  $706,031
    Cost of sales                      149,083   118,660   452,248   360,721
    Gross margin                       146,940   116,191   457,239   345,310
    Gross margin (%)                     49.6%     49.5%     50.3%     48.9%

    Operating expenses
        Research and development        31,707    25,180    96,737    77,233
        Sales and marketing             45,274    34,902   134,967   103,355
        General and administrative      21,262    17,981    67,182    49,947
        Restructuring                        -         -     3,025         -
        Amortization of purchased
         intangible assets               4,911     1,747    14,212     5,640
        In-process research and
         development                         -        50     2,112     1,070
           Total operating expenses    103,154    79,860   318,235   237,245


    Operating income                    43,786    36,331   139,004   108,065

    Non-operating income, net
        Interest income                    770     1,402     2,607     2,677
        Interest expense                (1,616)      (87)   (5,476)     (330)
        Income from joint ventures       1,943     1,047     6,445     4,238
        Other income (expense), net         (8)      295       641     1,404
           Total non-operating
            income, net                  1,089     2,657     4,217     7,989

    Income before taxes                 44,875    38,988   143,221   116,054

    Income tax provision                17,501    13,646    52,138    36,381
    Net income                         $27,374   $25,342   $91,083   $79,673


    Earnings per share:
        Basic                            $0.23     $0.23     $0.77     $0.73
        Diluted                          $0.22     $0.22     $0.74     $0.69

    Shares used in calculating
     earnings per share:
        Basic                          120,591   110,678   118,553   109,618
        Diluted                        125,687   116,986   123,691   115,854



                    CONDENSED CONSOLIDATED BALANCE SHEETS
                                (In thousands)
                                  Unaudited

                                                    Sep-28,           Dec-29,
                                                     2007              2006
    Assets

    Current assets:
       Cash and cash equivalents                    $84,072         $129,621
       Accounts receivables, net                    242,589          177,054
       Other receivables                             10,677            6,014
       Inventories, net                             142,158          112,552
       Other current assets                          57,211           38,931
          Total current assets                      536,707          464,172

    Property and equipment, net                      51,667           47,998
    Goodwill                                        669,608          374,510
    Other purchased intangible assets,
     net                                            195,459           67,172
    Other non-current assets                         51,092           29,625

          Total assets                           $1,504,533         $983,477

    Liabilities and Shareholders' Equity

    Current liabilities:
       Current portion of long-term debt               $167             $-
       Accounts payable                              63,358           49,194
       Deferred revenue                              53,598           28,060
       Deferred income taxes                          5,234            4,525
       Income taxes payable                          33,178           23,814
       Other accrued liabilities                     88,113           80,586
          Total current liabilities                 243,648          186,179

    Non-current portion of long-term debt            80,923              481
    Non-current deferred revenue                     11,988              -
    Deferred income taxes                            39,907           21,633
    Other non-current liabilities                    55,475           27,519

          Total liabilities                         431,941          235,812

    Commitments and contingencies

    Shareholders' equity:
       Common stock                                 650,454          435,371
       Retained earnings                            362,266          271,183
       Accumulated other comprehensive
        income                                       59,872           41,111
          Total shareholders' equity              1,072,592          747,665

          Total liabilities and
           shareholders' equity                  $1,504,533         $983,477



               CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                (In thousands)
                                  Unaudited
                                                      Nine Months Ended
                                                    Sep-28,           Sep-29,
                                                     2007              2006

    Cash flow from operating activities:
        Net Income                                 $91,083           $79,673

        Adjustments to reconcile net income to
         net cash provided by operating
         activities:
             Depreciation expense                   12,733             9,939
             Amortization expense                   28,615             9,082
             Provision for doubtful accounts           684               181
             Amortization of debt issuance cost        162               135
             Deferred income taxes                  (6,547)             (355)
             Non-Cash Restructuring expense          1,725               -
             Stock-based compensation               10,949             9,437
             In-process research and development     2,112             1,070
             Equity gain from joint ventures        (6,445)           (4,238)
             Excess tax benefit for stock-based
              compensation                         (13,283)           (8,088)
             Provision for excess and obsolete
              inventories                            3,513             5,830
             Other noncash items                       144                61

        Add decrease (increase) in assets:
             Accounts receivables                  (42,971)          (19,829)
             Other receivables                       4,619             3,615
             Inventories                           (15,512)           (9,110)
             Other current and non-current
              assets                                 6,353            (7,127)

        Add increase (decrease) in liabilities:
             Accounts payable                       (7,518)           (6,250)
             Accrued liabilities                      (832)            4,760
             Deferred revenue                       25,989             9,499
             Income taxes payable                   33,511             7,482
     Net cash provided by operating activities     129,084            85,767

     Cash flows from investing activities:
          Acquisitions, net of cash acquired      (285,523)          (43,167)
          Acquisition of property and
           equipment                                (9,208)          (13,966)
          Proceeds from dividends                    2,888               -
          Other                                        361               (16)
     Net cash used in investing activities        (291,482)          (57,149)

     Cash flow from financing activities:
          Issuance of common stock                  27,830            24,134
          Excess tax benefit for stock-based
           compensation                             13,283             8,088
          Proceeds from long-term debt and
           revolving credit lines                  250,000               -
          Payments on long-term debt and
           revolving credit lines                 (170,037)              -
          Other                                        -                (911)
     Net cash provided by financing activities     121,076            31,311

     Effect of exchange rate changes on cash
      and cash equivalents                          (4,227)            2,620

     Net increase (decrease) in cash and
      cash equivalents                             (45,549)           62,549
     Cash and cash equivalents - beginning of
      period                                       129,621            73,853

     Cash and cash equivalents - end of period     $84,072          $136,402



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

                                       Three Months Ended  Nine Months Ended
                                       Sep-28,   Sep-29,   Sep-28,   Sep-29,
                                         2007      2006      2007      2006

    REVENUE:                           $296,023  $234,851  $909,487  $706,031

    GROSS MARGIN:
      GAAP gross margin:               $146,940  $116,191  $457,239  $345,310
        Amortization of purchased
         intangibles               (B)    5,263     1,128    14,289     3,317
        Stock-based compensation   (D)      469       285     1,240       881
      Non-GAAP gross margin:           $152,672  $117,604  $472,768  $349,508
      Non-GAAP gross margin (% of
       revenue)                           51.6%     50.1%     52.0%     49.5%

    OPERATING EXPENSES:
      GAAP operating expenses:         $103,154   $79,860  $318,235  $237,245
        Restructuring              (A)      -         -      (3,025)      -
        Amortization of purchased
         intangibles               (B)   (4,911)   (1,747)  (14,212)   (5,640)
        In-process research and
         development               (C)      -         (50)   (2,112)   (1,070)
        Stock-based compensation   (D)   (3,335)   (2,663)   (9,709)   (8,556)
      Non-GAAP operating expenses:      $94,908   $75,400  $289,177  $221,979

    OPERATING INCOME:
      GAAP operating income:            $43,786   $36,331  $139,004  $108,065
        Restructuring              (A)      -         -       3,025       -
        Amortization of purchased
         intangibles               (B)   10,174     2,875    28,501     8,957
        In-process research and
         development               (C)        -        50     2,112     1,070
        Stock-based compensation   (D)    3,804     2,948    10,949     9,437
      Non-GAAP operating income:        $57,764   $42,204  $183,591  $127,529
      Non-GAAP operating margin
       (% of revenue)                     19.5%     18.0%     20.2%     18.1%

    NET INCOME:
      GAAP net income:                  $27,374   $25,342   $91,083   $79,673
        Restructuring              (A)      -         -       3,025       -
        Amortization of purchased
         intangibles               (B)   10,174     2,875    28,501     8,957
        In-process research and
         development               (C)        -        50     2,112     1,070
        Stock-based compensation   (D)    3,804     2,948    10,949     9,437
        Income tax effect on non-
         GAAP adjustments          (E)   (5,452)   (2,055)  (16,062)   (6,064)
      Non-GAAP net income:              $35,900   $29,160  $119,608   $93,073

    DILUTED NET INCOME PER SHARE:
      GAAP diluted net income per
       share:                             $0.22     $0.22     $0.74     $0.69
      Non-GAAP diluted net income
       per share:                         $0.29     $0.25     $0.97     $0.80

    SHARES USED TO COMPUTE DILUTED NET
    INCOME PER SHARE:
      GAAP and Non-GAAP shares used to
       compute net income per share:    125,687   116,986   123,691   115,854

    OPERATING LEVERAGE:
      Increase in non-GAAP operating
       income                           $15,560             $56,062
      Increase in revenue               $61,172            $203,456
      Operating leverage (increase in
       non-GAAP operating income as a
       % of increase in revenue)          25.4%               27.6%


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 $5,263K and $1,128K of the amortization of
         purchased intangibles was included in cost of sales for the three
         months ended September 28, 2007 and September 29, 2006, respectively,
         and approximately $4,911K and $1,747K was reported as a separate line
         within operating expenses for the three months ended September 28,
         2007 and September 29, 2006, respectively. Approximately $14,289K and
         $3,317K of the amortization of purchased intangibles was included in
         cost of sales for the nine months ended September 28, 2007 and
         September 29, 2006, respectively, and approximately $14,212K and
         $5,640K was reported as a separate line within operating expenses for
         the nine months ended September 28, 2007 and September 29, 2006,
         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.  Further, we
         believe it is useful to investors to understand the impact of the
         application of SFAS 123(R) to our results of operations.  For the
         three and nine months ended September 28, 2007 and September 29,
         2006, stock-based compensation was allocated as follows:

                                      Three Months Ended   Nine Months Ended
                                       Sep-28,   Sep-29,    Sep-28,   Sep-29,
                                        2007      2006       2007      2006
        Cost of sales                   $469      $285     $1,240      $881
        Research and development         868       620      2,619     1,926
        Sales and Marketing            1,059       663      2,800     2,115
        General and administrative     1,408     1,380      4,290     4,515
                                      $3,804    $2,948    $10,949    $9,437


    (E)  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
     SEPTEMBER 28, 2007:
      Revenue                           $182,135   $44,763   $39,204  $29,921

      GAAP operating income before
       corporate allocations:            $42,824   $11,931    $2,855   $4,893
        Stock-based compensation    (F)      863       177     1,401      334
      Non-GAAP operating income
       before corporate allocations:     $43,687   $12,108    $4,256   $5,227
      Non-GAAP operating margin
       (% of segment external net
       revenues)                           24.0%     27.0%     10.9%    17.5%

    THREE MONTHS ENDED SEPTEMBER 29,
     2006:
      Revenue                           $162,370   $29,236   $16,426  $26,819

      GAAP operating income before
       corporate allocations:            $38,337    $5,634    $1,125   $4,113
        Stock-based compensation    (F)      906       233       171      458
      Non-GAAP operating income
       before corporate allocations:     $39,243    $5,867    $1,296   $4,571
      Non-GAAP operating margin
       (% of segment external net
       revenues)                           24.2%     20.1%      7.9%    17.0%

    NINE MONTHS ENDED
     SEPTEMBER 28, 2007:
      Revenue                           $556,592  $150,998  $109,988  $91,909

      GAAP operating income before
       corporate allocations:           $137,359   $46,957    $6,771  $13,620
        Stock-based compensation    (F)    2,541       531     3,670    1,001
      Non-GAAP operating income
       before corporate allocations:    $139,900   $47,488   $10,441  $14,621
      Non-GAAP operating margin
       (% of segment external net
       revenues)                           25.1%     31.4%      9.5%    15.9%

    NINE MONTHS ENDED SEPTEMBER 29,
     2006:
      Revenue                           $477,144  $108,598   $43,884  $76,405

      GAAP operating income before
       corporate allocations:           $103,517   $30,841    $1,722   $8,679
        Stock-based compensation    (F)    3,002       727       511    1,426
      Non-GAAP operating income
       before corporate allocations:    $106,519   $31,568    $2,233  $10,105
      Non-GAAP operating margin
       (% of segment external net
       revenues)                           22.3%     29.1%      5.1%    13.2%


    (F)  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
         because it facilitates trends in the business prior to the adoption
         of SFAS 123(R).  Stock-based compensation not allocated to the
         reportable segments was approximately $1,029K and $1,180K for the
         three months ended September 28, 2007 and September 29, 2006,
         respectively and $3,206K and $3,771K for the nine months ended
         September 28, 2007 and September 29, 2006, respectively.




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