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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 2006 Revenue Growth of 25 Percent

 

SUNNYVALE, Calif., Oct 24, 2006 /PRNewswire-FirstCall via COMTEX News Network/ -- Trimble (Nasdaq: TRMB) today announced results for its third quarter 2006, ended September 29, 2006. Revenue for the third quarter of 2006 was $234.9 million, up 25 percent from revenue of $188.5 million in the third quarter of 2005.

Operating income for the third quarter of 2006 was $36.3 million, up 10 percent from the third quarter of 2005. For year-over-year comparisons it should be noted that third quarter 2006 operating income reflects a $3.0 million impact from stock-based compensation expense resulting from the adoption of FAS 123R. Additionally, the net impact of transactions with the Caterpillar Trimble Control Technologies (CTCT) joint venture, which were included in non-operating results in 2005, reduced operating results by $4.7 million in the quarter. In addition, amortization of purchased intangibles and purchased in-process research and development expense increased by $2.1 million versus the third quarter of 2005 due to acquisitions. Adjusting for the above factors, operating income in the third quarter of 2006 was up 38 percent compared to the third quarter of 2005.

Net income for the third quarter of 2006 was $25.3 million, up 25 percent when compared to net income of $20.2 million in the third quarter of 2005. Earnings per share for the third quarter of 2006 were $0.43, up approximately 23 percent compared to earnings per share of $0.35 in the third quarter of 2005. Earnings per share in the third quarter of 2006 were negatively impacted by approximately $0.03 due to the adoption of FAS 123R and by approximately $0.03 due to higher amortization of intangibles.

Adjusting for the impact of FAS 123R and acquisition related expenses, non-GAAP net income for the third quarter of 2006 was $29.2 million, up 39 percent compared to non-GAAP net income of $21.0 million in the third quarter of fiscal 2005. Non-GAAP earnings per share for the third quarter of 2006 were $0.50, up approximately 36 percent from non-GAAP earnings per share of $0.37 in the third quarter of 2005. GAAP and non-GAAP earnings per share for the third quarter of 2006 were calculated on a diluted basis using approximately 58.5 million shares.

"Our continued success reflects the combination of a robust strategy combined with effective execution. All segments within Trimble contributed to the third quarter. In particular, the Mobile Solutions segment continues to demonstrate rapid development with accompanying improvements in financial performance," said Steven W. Berglund, Trimble's president and chief executive officer. "We believe Trimble should continue to exhibit solid performance in the fourth quarter of 2006 and into 2007."

Trimble Results by Business Segment

For year-over-year comparisons it should be noted that third quarter 2005 results did not include stock-based compensation expense because FAS 123R was not adopted until the first quarter of 2006.

Engineering and Construction

Revenue for Engineering and Construction (E&C) was $162.4 million for the third quarter of 2006, up approximately 21 percent compared to revenue of $134.2 million in the third quarter of 2005.

Operating margins in E&C were 24 percent in the third quarter of 2006, compared to 26 percent in the third quarter of 2005. Excluding the impact of FAS 123R adoption and the CTCT joint venture transactions discussed above, E&C operating margins were 27 percent.

Growth in E&C was driven by continued strength in end markets and strong sales across the E&C product line.

Field Solutions

Field Solutions (TFS) revenue was $29.2 million in the third quarter of 2006, up 18 percent compared to $24.9 million in revenue in the third quarter of 2005. Growth was driven both by increased agricultural product sales and GIS product sales.

TFS operating margins for the third quarter of 2006 were 19 percent, compared to 16 percent in the third quarter of 2005 due to strong operating leverage.

Mobile Solutions

Third quarter 2006 revenue for Mobile Solutions (TMS), was $16.4 million, up 128 percent from revenue of $7.2 million in the third quarter of 2005. Organic revenue growth was strong, while revenue from acquisitions began to contribute meaningfully to results.

TMS operating margins were 7 percent for the third quarter of 2006, compared to a 10 percent loss in the third quarter of 2005. Margin expansion came from increased operating leverage driven principally by higher subscription revenue.

Advanced Devices

Advanced Devices revenue was $26.8 million, up 21 percent from revenue of $22.2 million in the third quarter of 2005, due primarily to increased sales of embedded devices and Applanix products, and licensing revenue from Nokia.

Advanced Devices operating margins were 15 percent, compared to 13 percent in the third quarter of 2005.

Non-GAAP vs. GAAP Financials

The Company provides non-GAAP financial measures including "non-GAAP net income," "non-GAAP operating income," and "non-GAAP earnings per share" to supplement its consolidated financial statements presented in accordance with GAAP. These non-GAAP financial measures are intended to supplement the user's overall understanding of the Company's current financial performance and its prospects for the future. In many cases, non-GAAP financial measures are used by analysts and investors to evaluate the Company.

The Company excludes the amortization of purchased intangibles, in-process research and development, restructuring charges, and the impact of stock-based compensation in computing non-GAAP measures because the chief executive officer excludes these items when budgeting and evaluating the business. These non-GAAP financial measures are not intended to supersede or replace the Company's GAAP results. Please see the supplemental financial statements, attached to this press release, for a reconciliation of GAAP to non-GAAP results.

Forward Looking Guidance

In the fourth quarter of 2006 the Company expects revenue to grow 18 to 20 percent compared to the fourth quarter of 2005, with revenue between $220 million and $225 million. At a 36 percent tax rate, with approximately 59.0 million shares outstanding, the Company expects fourth quarter 2006 GAAP earnings per share between $0.31 and $0.34.

The above GAAP guidance includes stock-based compensation due to the adoption of FAS 123R. On a post-tax basis, the Company expects stock-based compensation for the fourth quarter of 2006 to be approximately $0.03 per share.

The Company expects non-GAAP earnings per share between $0.40 and $0.43, compared to actual non-GAAP earnings per share of $0.29 in the fourth quarter of 2005. Non-GAAP guidance for the fourth quarter of 2006 uses a 36 percent tax-rate and excludes the amortization of intangibles of $5.6 million in the quarter, as well as the anticipated impact of stock-based compensation expense of $2.7 million.

Investor Conference Call / Webcast Details

The Company will hold a conference call on Oct. 24, 2006 at 1:30 p.m. PDT to review its third quarter 2006 results. It will be broadcast live on the Web at www.trimble.com/investors.shtml. A replay of the call will be available for thirty days beginning at 8:00 p.m. PDT on Oct. 24, 2006. The replay number is (800) 642-1687 (U.S.), or (706) 645-9291 (international), and the pass code is 7257038.

About Trimble

Trimble is a leading innovator of Global Positioning System (GPS) technology. In addition to providing advanced GPS components, Trimble augments GPS with other positioning technologies as well as wireless communications and software to create complete customer solutions. Trimble's worldwide presence and unique capabilities position the Company for growth in emerging applications including surveying, agriculture, machine guidance, asset and fleet management, wireless platforms, and telecommunications infrastructure. Founded in 1978 and headquartered in Sunnyvale, California, Trimble has more than 2,400 employees in more than 18 countries worldwide.

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, amortization of purchased intangibles and earnings per share estimates for the fourth fiscal quarter of 2006 and the Company's belief that it will continue to exhibit solid performance in the fourth quarter and through 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. Fuel and other operating costs could remain high or increase, which could weaken sales into the agricultural market. 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 fourth fiscal quarter of 2006 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


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

                                   Three Months Ended  Nine Months Ended
                                    Sep-29,   Sep-30,   Sep-29,   Sep-30,
                                     2006      2005      2006      2005

Revenue                            $234,851  $188,484  $706,030  $588,092
Cost of sales                       118,660    91,192   360,721   290,586
Gross margin                        116,191    97,292   345,309   297,506
Gross margin (%)                      49.5%     51.6%     48.9%     50.6%

Operating expenses
    Research and development         25,180    20,639    77,234    63,332
    Sales and marketing              34,902    29,313   103,356    88,388
    General and administrative       17,981    13,448    50,016    38,204
    Restructuring charges                 -         -         -       278
    In-process research and
     development                         50         -     1,000         -
    Amortization of purchased
     intangible assets                1,747       865     5,639     5,340
       Total operating expenses      79,860    64,265   237,245   195,542


Operating income                     36,331    33,027   108,064   101,964

Non-operating income (expense),
 net
    Interest income (expense), net    1,315      (650)    2,347    (1,680)
    Foreign currency transaction
     gain, net                           67        61       995        67
    Income (Expense) for
     affiliated operations, net       1,047    (1,976)    4,238    (7,514)
    Other income, net                   228       119       409       287
       Total non-operating income
        (expense), net                2,657    (2,446)    7,989    (8,840)

Income before taxes                  38,988    30,581   116,053    93,124

Income tax provision                 13,646    10,345    36,380    31,662
Net income                          $25,342   $20,236   $79,673   $61,462


Earnings per share:
     Basic                            $0.46     $0.38     $1.45     $1.16
     Diluted                          $0.43     $0.35     $1.38     $1.08

Shares used in calculating
 earnings per share:
    Basic                            55,339    53,592    54,809    53,017
    Diluted                          58,493    57,492    57,927    56,997



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


                                   Three Months Ended   Nine Months Ended
                                   Sep-29,     Sep-30,  Sep-29,   Sep-30,
                                    2006        2005      2006     2005

GAAP income before taxes           $38,988     $30,581  $116,053  $93,124

Non-GAAP adjustments
    Amortization of purchased
     intangibles                     2,875 *(a)    865     8,955    5,340
    In-process research and
     development                        50           -     1,000        -
    Amortization of acquisition-
     related inventory step-up           -           -         -      228
    Restructuring charges                -           -         -      278
    Write off of Debt Issuance
     Costs                               -         918         -      918
    Stock-based compensation         2,948 *(b)      -     9,437        -
       Total Non-GAAP adjustments    5,873       1,783    19,392    6,764

Non-GAAP income before taxes        44,861      32,364   135,445   99,888

Income tax provision                15,701      11,328    47,406   34,961

Non-GAAP net income                $29,160     $21,036   $88,039  $64,927

Diluted Non-GAAP earnings per
 share                               $0.50       $0.37     $1.52    $1.14

Shares used in calculating diluted
 non-GAAP earnings per share        58,493      57,492    57,927   56,997


*(a) Amortization of purchased intangibles, includes $1,747K recorded in
operating expense and $1,128K recorded in cost of sales for the three
months ended September 29, 2006 and $3,316K recorded in operating expense
and $5,639K recorded in cost of sales for the nine months ended September
29, 2006.
*(b) Stock compensation expense by Segment and GAAP category (in $000's):

Three Months Ended September 29, 2006
('000s)

                    E&C        TFS     TMS  Advanced  Corporate  Total
                                             Devices

Cost of sales        $79        24      17       37       129    $285
Research &
 development        $278        71      55      172        43    $620
Sales & marketing   $277        59      11      132       183    $663
General &
 administrative     $271        79      88      117       825  $1,380

  Total             $906      $233    $171     $458    $1,180  $2,948

Nine Months Ended September 29, 2006
('000s)

                     E&C        TFS     TMS    Advanced Corporate Total
                                             Devices
Cost of sales       $285        73      43       69       410    $881
Research &
 development        $832       225     161      570       138  $1,926
Sales &
 marketing          $936       179      76      351       572  $2,115
General &
 administrative     $947       249     230      438     2,651  $4,515

  Total           $3,001      $727    $510   $1,428    $3,771  $9,437




                        EBITDA RECONCILIATION
                        (Dollars in thousands)
                             (Unaudited)


                               Three Months Ended      Nine Months Ended
                               Sep-29,     Sep-30,     Sep-29,   Sep-30,
                                2006        2005         2006      2005

GAAP net income                $25,342     $20,236      $79,673   $61,462

   Add back :
          Interest (income)
           expense, net         (1,315)        650       (2,347)    1,680
          Income tax provision  13,646      10,345       36,380    31,662
         Depreciation expense    3,450       3,000        9,939     7,890
         Amortization of
          intangibles            2,937         911        9,082     5,459

 EBITDA                        $44,060     $35,142     $132,727  $108,153



                     CONSOLIDATED BALANCE SHEETS
                            (In thousands)
                             (Unaudited)
                                               Sep-29,           Dec-30,
                                                2006              2005
Assets

Current assets:
   Cash and cash equivalents                   136,402            73,853
   Accounts receivables, net                   173,318           145,100
   Other receivables                             7,423             6,489
   Inventories, net                            114,875           107,851
   Deferred income taxes                        21,834            18,504
   Other current assets                         10,275             8,580
      Total current assets                     464,127           360,377

Property and equipment, net                     47,389            42,664
Goodwill and other purchased
 intangible assets, net                        373,155           313,456
Deferred income taxes                            3,809             3,580
Other assets                                    24,556            23,011
      Total non-current assets                 448,909           382,711

      Total assets                            $913,036          $743,088

Liabilities and Shareholders' Equity

Current liabilities:
   Current portion of long-term loan               290               216
   Accounts payable                             40,529            45,206
   Accrued compensation and benefits            39,387            36,083
   Accrued liabilities                          22,398            16,189
   Deferred revenue                             24,302            12,588
   Accrued warranty expenses                     7,737             7,466
   Deferred income taxes                         5,462             4,087
   Income taxes payable                         21,977            24,922
      Total current liabilities                162,082           146,757

Non-current portion of long-term loan              467               433
Deferred income taxes                           14,031             5,602
Other non-current liabilities                   27,532            19,041
      Total liabilities                        204,112           171,833

Shareholders' equity:
   Common stock                                428,730           384,196
   Retained earnings                           247,199           167,525
   Accumulated other comprehensive
    income                                      32,995            19,534
      Total shareholders' equity               708,924           571,255

      Total liabilities and
       shareholders' equity                   $913,036          $743,088



                  CONSOLIDATED STATEMENTS OF CASH FLOWS
                             (In thousands)
                               (Unaudited)
                                                    Nine Months Ended
                                                Sep-29,           Sep-30,
                                                 2006              2005

Cash flow from operating activities:
    Net Income                                  $79,673           $61,462

    Adjustments to reconcile net
     income  to net cash provided by
       operating activities:
         Depreciation expense                     9,939             7,890
         Amortization expense                     9,082             5,459
         Provision for doubtful
          accounts                                  181              (663)
         Amortization of debt
          issuance cost                             135             1,225
         Deferred income taxes                     (355)            8,410
         Stock-based compensation                 9,437                 -
         In-process research and
          development                             1,000                 -
         Excess tax benefit for
          stock-based compensation               (8,088)                -
         Other                                      131              (670)

    Add decrease (increase) in
     assets:
         Accounts receivables, net              (19,829)          (22,673)
         Other receivables                         (623)            1,907
         Inventories                             (3,442)           (4,926)
         Other current and non-
          current assets                         (7,127)           (4,450)

    Add increase (decrease) in
     liabilities:
         Accounts payable                        (6,250)           (4,374)
         Accrued compensation and
          benefits                                2,188               825
         Accrued liabilities                      2,734             5,523
         Deferred gain on joint
          venture                                     -               124
         Deferred revenue                         9,499             1,677
         Income taxes payable                     7,482            12,850
 Net cash provided by operating
  activities                                     85,767            69,596

 Cash flows from investing
  activities:
      Acquisitions, net of cash
       acquired                                 (43,167)          (21,589)
      Acquisition of property and
       equipment                                (13,966)          (14,400)
      Dividends received                              -               515
      Cost of capitalized patents                   (16)              (94)
 Net cash used in investing
  activities                                    (57,149)          (35,568)

 Cash flow from financing activities:
      Issuance of common stock                   24,134            20,881
      Excess tax benefit for stock-
       based compensation                         8,088                 -
      Proceeds from long-term debt
       and revolving credit lines                     -             6,000
      Payments on long-term debt and
       revolving credit lines                         -           (44,250)
      Other                                        (911)              390
 Net cash provided (used) in
  financing activities                           31,311           (16,979)

 Effect of exchange rate changes on
  cash and cash equivalents                       2,620            (1,628)

 Net increase (decrease)  in cash and
  cash equivalents                               62,549            15,421
 Cash and cash equivalents -
  beginning of period                            73,853            71,872

 Cash and cash equivalents - end of
  period                                       $136,402           $87,293



                           Q1'05     Q2'05     Q3'05     Q4'05    FY'05
                           Actual    Actual    Actual    Actual   Actual

Income Statement Metrics
 Total Revenue           $195,383  $204,225  $188,484  $186,821  $774,913
  Engineering &
   Construction           120,198   141,096   134,173   128,994   524,461
  Trimble Field
   Solutions               45,425    32,187    24,882    25,349   127,843
  Advanced Devices         22,359    24,505    22,215    22,049    91,128
  Trimble Mobile
   Solutions                7,401     6,437     7,214    10,429    31,481

 Gross Margin               50.1%     50.1%     51.6%     49.4%     50.3%

 Total Segment Income     $39,663   $47,916   $40,492   $32,589  $160,660
  Engineering &
   Construction            21,490    37,173    34,360    24,970   117,993
  Trimble Field
   Solutions               15,577     8,044     3,962     4,944    32,527
  Advanced Devices          3,232     4,578     2,916     2,486    13,212
  Trimble Mobile
   Solutions                 (636)   (1,879)     (746)      189    (3,072)

 Corporate and Other
  Charges                 $(9,463)  $(9,179)  $(7,465)  $(9,609)  (35,716)

 Non-operating income
  (expense)              $(12,761) $(14,950) $(12,791)     $413   (40,089)
 and income taxes
 Net Income               $17,439   $23,787   $20,236   $23,393   $84,855

 GAAP operating margin%     15.5%     19.0%     17.5%     12.3%     16.1%
 Non-GAAP operating
  margin%                   16.9%     20.0%     18.5%     13.7%     17.2%

 GAAP EPS                   $0.31     $0.42     $0.35     $0.41     $1.49
 Non-GAAP EPS               $0.34     $0.44     $0.37     $0.29     $1.44

Balance Sheet Metrics
 Cash & Cash Equivalents  $50,193   $56,860   $87,293   $73,853

 Accounts Receivables,
  Net                    $154,540  $150,590  $146,792  $145,100

 Inventories, Net         $91,309   $89,853   $93,940  $107,851

 Total Debt               $28,836      $661      $659      $649
  Short Term Debt          12,500         -         -         -
  Long Term Debt           16,336       661       659       649

 Equity                  $490,188  $513,817  $543,394  $571,255

Cashflow Metrics

 Cash Flow from (used
  in) Operations          $(1,192)  $37,762   $33,541   $22,769   $92,880

 Working Capital         $197,372  $208,410  $232,985  $213,620

 Capital Expenditures      $3,164    $4,570    $6,666    $9,036   $23,436

 EBITDA                   $31,885   $41,126   $35,142   $35,822  $143,975
  Amortization of
   Intangibles              2,339     2,209       911     1,561    $7,020
  Depreciation              2,512     2,378     3,000     2,781   $10,671

Financial Ratios
 Days Sales Outstanding        62        60        60        66
 Inventory Turns
  (trailing 12 months)        4.3       4.1       4.0       3.9
 Current ratio                2.5       2.7       2.8       2.5
 Debt to Equity               0.1         -         -         -

Other
 Headcount                  2,231     2,308     2,347     2,462


  (a) Impact of moving joint venture transactions from non-operating to
  operating income - reduced gross margin by 2.4 points and operating
  income by 2.0 points in Q3'06. In addition, operating margins were
  impacted by 1.3 points due to stock-based compensation expense.
  (For details, please refer to the Non-GAAP Reconciliation).
  (b) Impact of moving joint venture transactions from non-operating to
  operating income - reduced operating income by 2.0 points in Q3'06.



                                      Q1'06     Q2'06     Q3'06
                                      Actual    Actual    Actual

Income Statement Metrics
 Total Revenue                       $225,854  $245,326  $234,851
  Engineering & Construction          146,734   168,041   162,370
  Trimble Field Solutions              43,043    36,320    29,236
  Advanced Devices                     23,470    26,114    26,819
  Trimble Mobile Solutions             12,607    14,851    16,426

 Gross Margin                           47.6%     49.6%     49.5% (a)

 Total Segment Income                 $42,833   $52,719   $49,209
  Engineering & Construction           26,378    38,803    38,337
  Trimble Field Solutions              13,909    11,299     5,634
  Advanced Devices                      2,323     2,243     4,113
  Trimble Mobile Solutions                223       374     1,125

 Corporate and Other Charges          $(9,768) $(14,049) $(12,878)

 Non-operating income (expense)       $(7,237) $(10,167) $(10,989)
 and income taxes
 Net Income                           $25,828   $28,503   $25,342

 GAAP operating margin%                 14.6%     15.8%     15.5% (a)
 Non-GAAP operating margin%             17.1%     19.0%     18.0% (b)

 GAAP EPS                               $0.45     $0.49     $0.43
 Non-GAAP EPS                           $0.52     $0.59     $0.50

Balance Sheet Metrics
 Cash & Cash Equivalents              $97,648  $107,726  $136,402

 Accounts Receivables, Net           $171,392  $171,942  $173,318

 Inventories, Net                    $101,552  $113,925  $114,875

 Total Debt                              $603      $890      $757
  Short Term Debt                         166       431       290
  Long Term Debt                          437       459       467

 Equity                              $611,860  $664,739  $708,924

Cashflow Metrics

 Cash Flow from (used in) Operations  $18,298   $41,071   $26,398

 Working Capital                     $249,302  $257,808  $302,045

 Capital Expenditures                  $4,972    $5,971    $3,023

 EBITDA                               $40,882   $47,748   $44,060
  Amortization of Intangibles           2,380     3,766     2,937
  Depreciation                          3,104     3,386     3,450

Financial Ratios
 Days Sales Outstanding                    57        55        59
 Inventory Turns (trailing 12
  months)                                 4.0       4.0       4.0
 Current ratio                            2.6       2.5       2.9
 Debt to Equity                             -         -         -

Other
 Headcount                              2,543     2,627     2,665


  (a) Impact of moving joint venture transactions from non-operating to
  operating income -- reduced gross margin by 2.4 points and operating
  income by 2.0 points in Q3'06. In addition, operating margins were
  impacted by 1.3 points due to stock-based compensation expense.
  (For details, please refer to the Non-GAAP Reconciliation).
  (b) Impact of moving joint venture transactions from non-operating to
  operating income -- reduced operating income by 2.0 points in Q3'06.




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