Trimble Reports First Quarter 2018 Results
Trimble Reports First Quarter 2018 Results
- First Quarter 2018 Revenue $742.2 million
- GAAP Diluted Earnings Per Share $0.23; Non-GAAP Diluted Earnings Per Share $0.44
SUNNYVALE, Calif., May 7, 2018 /PRNewswire/ -- Trimble Inc. (NASDAQ: TRMB) today announced financial results for the first quarter of 2018.
First Quarter 2018 Financial Summary
First quarter 2018 revenue of $742.2 million was up 22 percent as compared to the first quarter of 2017. Buildings and Infrastructure revenue was $224.7 million, up 20 percent. Geospatial revenue was $174.5 million, up 17 percent. Resources and Utilities revenue was $159.2 million, up 32 percent. Transportation revenue was $183.8 million, up 19 percent.
GAAP operating income was $64.2 million, up 17 percent as compared to the first quarter of 2017. GAAP operating margin was 8.6 percent of revenue as compared to 9.0 percent of revenue in the first quarter of 2017.
GAAP net income was $58.5 million, up 17 percent as compared to the first quarter of 2017. Diluted GAAP earnings per share were $0.23 as compared to diluted GAAP earnings per share of $0.19 in the first quarter of 2017.
Non-GAAP operating income of $139.5 million was up 30 percent as compared to the first quarter of 2017. Non-GAAP operating margin was 18.8 percent of revenue as compared to 17.6 percent of revenue in the first quarter of 2017.
Non-GAAP net income of $112.5 million was up 35 percent as compared to the first quarter of 2017. Diluted non-GAAP earnings per share were $0.44 as compared to diluted non-GAAP earnings per share of $0.33 in the first quarter of 2017.
The GAAP tax rate for the quarter was 12 percent as compared to 22 percent in the first quarter of 2017, and the non-GAAP tax rate was 19 percent as compared to 23 percent in the first quarter of 2017.
Operating cash flow for the first quarter of 2018 was $82.9 million, down 20 percent as compared to the first quarter of 2017. Deferred revenue for the first quarter of 2018 was $360.4 million, up 19 percent as compared to the first quarter of 2017.
During the first quarter, Trimble repurchased approximately 1.3 million shares of its common stock for $50.0 million. Approximately $392 million remains under the current share repurchase authorization as of the end of the first quarter. As previously announced, Trimble has temporarily suspended its stock buyback program.
"The strength of the first quarter reflects our improving competitive position and strong execution in every segment," said Steven W. Berglund, Trimble's president and chief executive officer. "Our strategic evolution, which is expected to accelerate with the recently announced Viewpoint and e-Builder acquisitions, will lead to higher value added solutions and higher revenue growth. These acquisitions are expected to be accretive to operating margins and cash flow in 2019."
Forward Looking Guidance
For the second quarter of 2018, Trimble expects revenue to be between $755 million and $785 million with GAAP earnings per share of $0.21 to $0.26 and non-GAAP earnings per share of $0.42 to $0.46. Non-GAAP guidance excludes the amortization of intangibles of $42 million related to previous acquisitions, anticipated acquisition costs of $8 million, the anticipated impact of stock-based compensation expense of $15 million, and $2 million in anticipated restructuring charges. GAAP guidance assumes a tax rate of 15 percent and non-GAAP guidance assumes a tax rate of 19 percent. Both GAAP and non-GAAP earnings per share assume approximately 253 million shares outstanding.
New Accounting Standard
Trimble adopted a new accounting standard, ASC 606, starting with the first quarter of fiscal 2018, which primarily affects recognition of revenue and related costs of sales for software term licenses, custom professional services contracts, and contracts with non-standard terms and conditions. Trimble is utilizing the full retrospective method of transition, and prior periods presented here have been restated to reflect adoption of this new standard.
Investor Conference Call / Webcast Details
Trimble will hold a conference call on May 7 at 2:00 p.m. PT to review its first quarter 2018 results. An accompanying slide presentation will be made available on the "Investors" section of the Trimble Website, www.trimble.com, under the subheading "Events & Presentations". The call will be broadcast live on the Web at http://investor.trimble.com. Investors without Internet access may dial into the call at (800) 528-9198 (U.S.) or (702) 928-6633 (international). The passcode is 6279819. The replay will also be available on the Web at the address above.
Use of Non-GAAP Financial Information
To help investors understand Trimble's past financial performance and future results, as well as its performance relative to competitors, Trimble supplements the financial results that the company provides in accordance with generally accepted accounting principles, or GAAP, with non-GAAP financial measures. These non-GAAP measures can be used to evaluate Trimble's historical and prospective financial performance, as well as its performance relative to competitors. The company's management regularly uses supplemental non-GAAP financial measures internally to understand, manage and evaluate the business, and to make operating decisions. These non-GAAP measures are among the primary factors management uses in planning for and forecasting future periods. Trimble believes that these non-GAAP financial measures reflect an additional way of viewing aspects of the company's operations that, when viewed with GAAP results, provide a more complete understanding of factors and trends affecting the business. Further, Trimble believes some of the company's investors track "core operating performance" as a means of evaluating performance in the ordinary, ongoing, and customary course of the company's operations. Core operating performance excludes items that are non-cash, not expected to recur or not reflective of ongoing financial results. Management also believes that looking at Trimble's core operating performance provides a supplemental way to provide consistency in period to period comparisons.
The specific non-GAAP measures, which Trimble uses along with a reconciliation to the nearest comparable GAAP measures and the explanation for why these non-GAAP measures provide useful information to investors regarding the financial condition and results of operations and why management chose to exclude selected items can be found at the end of this release. The method the company uses to produce non-GAAP results is not computed according to GAAP and may differ from the methods used by other companies. Trimble's non-GAAP results are not meant to be considered in isolation or as a substitute for comparable GAAP measures and should be read only in conjunction with Trimble's consolidated financial statements prepared in accordance with GAAP. Investors are encouraged to review the reconciliation of non-GAAP financial measures to the comparable GAAP results, which is attached to this earnings release. Additional financial information about Trimble's use of non-GAAP results can be found on the investor relations page of our website at: http://investor.trimble.com.
About Trimble
Trimble is transforming the way the world works by delivering products and services that connect the physical and digital worlds. Core technologies in positioning, modeling, connectivity and data analytics enable customers to improve productivity, quality, safety and sustainability. From purpose built products to enterprise lifecycle solutions, Trimble software, hardware and services are transforming a broad range of industries such as agriculture, construction, geospatial and transportation and logistics. For more information about Trimble (NASDAQ:TRMB), visit: www.trimble.com.
Safe Harbor
Certain statements made in this press release are forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, and are made pursuant to the safe harbor provisions of the Securities Litigation Reform Act of 1995. These statements include expectations for future financial market and economic conditions, the potential for growth and margin expansion in 2018, the ability to deliver revenue, earnings per share and other financial projections that Trimble has guided for the second quarter of 2018, including the expected tax rate, anticipated impact of stock-based compensation expense, amortization of intangibles related to previous acquisitions, anticipated acquisition costs, restructuring charges, the anticipated number of diluted shares outstanding, the planned Viewpoint acquisition and financing thereof, and the impact of the Viewpoint and e-Builder acquisitions on Trimble's financial results. 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. These factors include, for example, Trimble's expected tax rate and current expected income, which are based on current tax law, including current interpretations of the Tax Cuts and Jobs Act of 2017 ("TCJA"), and may be affected by evolving interpretations of TCJA; the jurisdictions in which profits are determined to be earned and taxed; changes in the estimates of credits, benefits and deductions; the resolution of issues arising from tax audits with various tax authorities, including payment of interest and penalties; and the ability to realize deferred tax assets; the ability to complete the Viewpoint acquisition on the anticipated schedule, or at all; the ability to obtain long-term financing for the Viewpoint acquisition on favorable terms, or at all; and synergies between Viewpoint and Trimble, and acquisition accounting for Viewpoint, including the impact of the reduction of deferred revenue, are estimated and may be materially different from actual results. The Company's results may be adversely affected if the Company is unable to market, manufacture and ship new products, obtain new customers, or integrate new acquisitions. The Company's results would also be negatively adverse geopolitical developments, weakening in the macro environment, foreign exchange fluctuations, or the imposition of barriers to international trade. Any failure to achieve predicted results could negatively impact the Company's revenues, cash flow from operations, and other financial results. The Company's financial results will also depend on a number of other factors and risks detailed from time to time in reports filed with the SEC, including its quarterly reports on Form 10-Q and its annual report on Form 10- K, such as changes in economic conditions, critical part supply chain shortages, and possible write-offs of goodwill. Undue reliance should not be placed on any forward-looking statement contained herein, especially in light of greater uncertainty than normal in the economy in general. These statements reflect the Company's position as of the date of this release. The Company expressly disclaims any undertaking to release publicly any updates or revisions to any statements to reflect any change in the Company's expectations or any change of events, conditions, or circumstances on which any such statement is based.
FTRMB
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In millions, except per share data)
(Unaudited)
First Quarter of
----------------
2018 2017
----
* As Adjusted
-------------
Revenue:
Product $497.8 $409.6
Service 128.8 106.6
Subscription 115.6 94.4
Total revenue 742.2 610.6
----- -----
Cost of sales:
Product 235.4 193.4
Service 59.6 47.0
Subscription 27.9 26.9
Amortization of purchased
intangible assets 23.1 19.0
Total cost of sales 346.0 286.3
----- -----
Gross margin 396.2 324.3
----- -----
Gross margin (%) 53.4 % 53.1 %
Operating expense:
Research and
development 109.3 88.7
Sales and
marketing 122.1 94.4
General and
administrative 81.6 69.3
Restructuring
charges 1.6 2.9
Amortization of
purchased
intangible
assets 17.4 14.3
Total operating expense 332.0 269.6
----- -----
Operating income 64.2 54.7
Non-operating income, net:
Interest
expense, net (9.5) (6.1)
Foreign currency
transaction
gain, net 3.7 1.4
Income from
equity method
investments,
net 4.9 4.2
Other income,
net 3.4 9.5
Total non-operating income, net 2.5 9.0
--- ---
Income before taxes 66.7 63.7
Income tax provision 8.0 13.9
Net income 58.7 49.8
Net gain
attributable to
noncontrolling
interests 0.2 -
Net income attributable to Trimble
Inc. $58.5 $49.8
===== =====
Earnings per share attributable to Trimble Inc.:
Basic $0.24 $0.20
-----
Diluted $0.23 $0.19
-------
Shares used in calculating earnings per share:
Basic 248.8 252.0
Diluted 253.2 255.9
-------
* Prior-period information has
been restated for the adoption of
ASC 606, Revenue from Contracts
with Customers.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In millions)
(Unaudited)
First Quarter of Fiscal Year End
2018 2017
----
As of * As Adjusted
----- -------------
Assets
Current assets:
Cash and cash
equivalents $274.5 $358.5
Short-term
investments - 178.9
Accounts
receivable, net 475.7 427.7
Other
receivables 33.4 42.8
Inventories 289.1 264.6
Other current
assets 51.9 39.2
Total current assets 1,124.6 1,311.7
Property and equipment, net 184.3 174.0
Goodwill 2,726.4 2,287.1
Other purchased intangible assets, net 466.2 364.8
Deferred costs, non-current 35.6 35.0
Other non-current assets 136.6 143.7
----- -----
Total assets $4,673.7 $4,316.3
======== ========
Liabilities and Shareholders' Equity
Current liabilities:
Short-term debt $430.5 $128.4
Accounts payable 157.4 146.0
Accrued
compensation
and benefits 105.8 143.9
Deferred revenue 324.2 237.6
Accrued warranty
expense 18.9 18.3
Other current
liabilities 110.0 99.2
Total current liabilities 1,146.8 773.4
Long-term debt 691.8 785.5
Non-current deferred revenue 36.2 39.0
Deferred income tax liabilities 49.8 47.8
Income taxes payable 80.4 94.1
Other non-current liabilities 168.8 162.0
Total liabilities 2,173.8 1,901.8
------- -------
Stockholders' equity:
Common stock 0.2 0.2
Additional paid-
in-capital 1,497.0 1,461.1
Retained
earnings 1,103.6 1,084.6
Accumulated
other
comprehensive
loss (101.1) (131.4)
Total Trimble Inc. stockholders' equity 2,499.7 2,414.5
Noncontrolling interests 0.2 -
---
Total stockholders' equity 2,499.9 2,414.5
------- -------
Total liabilities and
stockholders' equity $4,673.7 $4,316.3
======== ========
* Prior-period information has
been restated for the adoption of
ASC 606, Revenue from Contracts
with Customers.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In millions)
(Unaudited)
First Quarter of
----------------
2018 2017
----
* As Adjusted
-------------
Cash flow from operating activities:
Net income $58.7 $49.8
Adjustments to
reconcile net
income to net cash
provided by
operating
activities:
Depreciation expense 8.5 8.9
Amortization expense 40.5 33.3
Stock-based compensation 17.4 13.7
Income from equity method
investments (0.1) (2.7)
Other non-cash items (7.4) (9.7)
Decrease (increase)
in assets:
Accounts receivable (29.4) (34.0)
Inventories (21.7) (2.4)
Other current and non-current
assets (10.6) (4.7)
Increase (decrease)
in liabilities:
Accounts payable 11.1 3.5
Accrued compensation and benefits (41.6) (14.8)
Deferred revenue 69.6 53.3
Other liabilities (12.1) 9.8
----- ---
Net cash provided by operating activities 82.9 104.0
---- -----
Cash flow from investing activities:
Acquisitions of
businesses, net of
cash acquired (518.7) (78.5)
Acquisitions of
property and
equipment (18.2) (5.7)
Purchases of short-
term investments (24.0) (59.0)
Proceeds from
maturities of
short-term
investments 6.2 24.4
Proceeds from sales
of short-term
investments 196.8 3.9
Other 4.4 19.6
Net cash used in investing activities (353.5) (95.3)
------ -----
Cash flow from financing activities:
Issuance of common
stock, net of tax
withholdings 25.3 39.6
Repurchases of
common stock (53.0) (14.2)
Proceeds from debt
and revolving
credit lines 591.0 252.0
Payments on debt and
revolving credit
lines (383.0) (226.1)
Other - (0.3)
Net cash provided by financing activities 180.3 51.0
----- ----
Effect of exchange rate changes on cash and cash
equivalents 6.3 5.0
--- ---
Net increase (decrease) in cash and cash equivalents (84.0) 64.7
Cash and cash equivalents - beginning of period 358.5 216.1
----- -----
Cash and cash equivalents - end of period $274.5 $280.8
====== ======
* Prior period information has
been restated for the adoption
of ASC 606, Revenue from
Contracts with Customers, and
ASU No. 2016-15, Statement of
Cash Flows: Classification of
Certain Cash Receipts and Cash
Payments.
REPORTING SEGMENTS
(Dollars in millions)
(Unaudited)
Reporting Segments
------------------
Buildings Resources
and and
Infrastructure Geospatial Utilities Transportation
-------------- ---------- --------- --------------
FIRST QUARTER OF FISCAL 2018 :
Revenue $224.7 $174.5 $159.2 $183.8
Operating
income before
corporate
allocations $43.5 $37.3 $51.7 $30.4
Operating
margin (%
of
segment
external
net
revenue) 19.4 % 21.4 % 32.5 % 16.5 %
FIRST QUARTER OF FISCAL 2017 as adjusted :
Revenue $186.5 $149.6 $120.2 $154.3
Operating
income before
corporate
allocations $31.7 $27.9 $42.6 $23.5
Operating
margin (%
of
segment
external
net
revenue) 17.0 % 18.6 % 35.4 % 15.2 %
Note: First quarter of fiscal 2017
information has been restated for
the adoption of ASC 606, Revenue
from Contracts with Customers.
GAAP TO NON-GAAP RECONCILIATION
(Dollars in millions, except per share data)
(Unaudited)
First Quarter of
----------------
2018 2017
* As Adjusted
-------------
Dollar % of Dollar % of
Amount Revenue Amount Revenue
------ ------- ------ -------
GROSS MARGIN:
GAAP gross margin: $396.2 53.4 % $324.3 53.1 %
Restructuring charges ( A ) (0.2) -% 0.5 0.1 %
Amortization of purchased
intangible assets ( B ) 23.1 3.1 % 19.0 3.1 %
Stock-based compensation ( C ) 1.1 0.1 % 0.8 0.2 %
Amortization of acquisition-
related inventory step-up ( D ) - -% 0.1 -%
Acquisition / divestiture items ( E ) 2.0 0.3 % - -%
---
Non-GAAP gross
margin: $422.2 56.9 % $344.7 56.5 %
------ ------
OPERATING EXPENSES:
GAAP operating
expenses: $332.0 44.8 % $269.6 44.1 %
Restructuring charges ( A ) (1.6) (0.2)% (2.9) (0.5)%
Amortization of purchased
intangible assets ( B ) (17.4) (2.3)% (14.3) (2.3)%
Stock-based compensation ( C ) (16.3) (2.3)% (12.9) (2.1)%
Acquisition / divestiture items ( E ) (14.0) (1.9)% (2.1) (0.3)%
Non-GAAP
operating
expenses: $282.7 38.1 % $237.4 38.9 %
------ ------
OPERATING INCOME:
GAAP operating
income: $64.2 8.6 % $54.7 9.0 %
Restructuring charges ( A ) 1.4 0.2 % 3.4 0.6 %
Amortization of purchased
intangible assets ( B ) 40.5 5.4 % 33.3 5.4 %
Stock-based compensation ( C ) 17.4 2.4 % 13.7 2.3 %
Amortization of acquisition-
related inventory step-up ( D ) - -% 0.1 -%
Acquisition / divestiture items ( E ) 16.0 2.2 % 2.1 0.3 %
Non-GAAP
operating income: $139.5 18.8 % $107.3 17.6 %
------ ------
NON-OPERATING INCOME (EXPENSE), NET:
GAAP non-
operating income,
net: $2.5 $9.0
Acquisition / divestiture items ( E ) (2.8) (8.1)
---- ----
Non-GAAP non-
operating income
(expense), net: $(0.3) $0.9
GAAP and GAAP and
Non-GAAP Non-GAAP
Tax Rate % ( H ) Tax Rate % ( H )
--------- ---------
INCOME TAX PROVISION:
GAAP income tax
provision: $8.0 12 % $13.9 22 %
Non-GAAP items tax effected ( F ) 8.7 9.8
Difference in GAAP and Non-GAAP
tax rate ( G ) 9.8 1.2
---
Non-GAAP income
tax provision: $26.5 19 % $24.9 23 %
----- -----
NET INCOME:
GAAP net income
attributable to
Trimble Inc.: $58.5 $49.8
Restructuring charges ( A ) 1.4 3.4
Amortization of purchased
intangible assets ( B ) 40.5 33.3
Stock-based compensation ( C ) 17.4 13.7
Amortization of acquisition-
related inventory step-up ( D ) - 0.1
Acquisition / divestiture items ( E ) 13.2 (6.0)
Non-GAAP tax adjustments ( F ) + ( G ) (18.5) (11.0)
Non-GAAP net
income
attributable to
Trimble Inc.: $112.5 $83.3
DILUTED NET INCOME PER SHARE:
GAAP diluted net
income per share
attributable to
Trimble Inc.: $0.23 $0.19
Restructuring charges ( A ) - 0.01
Amortization of purchased
intangible assets ( B ) 0.16 0.13
Stock-based compensation ( C ) 0.07 0.05
Amortization of acquisition-
related inventory step-up ( D ) - -
Acquisition / divestiture items ( E ) 0.05 (0.02)
Non-GAAP tax adjustments ( F ) + ( G ) (0.07) (0.03)
Non-GAAP diluted
net income per
share
attributable to
Trimble Inc.: $0.44 $0.33
* Prior-
period
information
has been
restated for
the adoption
of ASC 606,
Revenue from
Contracts
with
Customers.
FOOTNOTES TO GAAP TO NON-GAAP RECONCILIATION
(Unaudited)
Our non-GAAP measures are not meant to be considered in isolation or as a substitute for comparable GAAP measures. The non-GAAP financial measures included in the previous table as well
as detailed explanations to the adjustments to comparable GAAP measures, are set forth below:
Non-GAAP gross margin
We believe our investors benefit by understanding our non-GAAP gross margin as a way of understanding how product mix, pricing decisions and manufacturing costs influence our business.
Non-GAAP gross margin excludes restructuring charges, amortization of purchased intangible assets, stock-based compensation, amortization of acquisition-related inventory step-up, and
acquisition/divestiture items associated with the acceleration of acquisition stock options from GAAP gross margin. We believe that these exclusions offer investors additional information
that may be useful to view trends in our gross margin performance.
Non-GAAP operating expenses
We believe this measure is important to investors evaluating our non-GAAP spending in relation to revenue. Non-GAAP operating expenses exclude restructuring charges, amortization of
purchased intangible assets, stock-based compensation, acquisition/divestiture items associated with external and incremental costs resulting directly from merger and acquisition
activities such as legal, due diligence, integration, and other required closing costs including the acceleration of acquisition stock options from GAAP operating expenses. We believe that
these exclusions offer investors supplemental information to facilitate comparison of our operating expenses to our prior results.
Non-GAAP operating income
We believe our investors benefit by understanding our non-GAAP operating income trends which are driven by revenue, gross margin, and spending. Non-GAAP operating income excludes
restructuring charges, amortization of purchased intangible assets, stock-based compensation, amortization of acquisition-related inventory step-up, acquisition/divestiture items
associated with external and incremental costs resulting directly from merger and acquisition activities such as legal, due diligence, integration, and other required closing costs
including the acceleration of acquisition stock options. We believe that these exclusions offer an alternative means for our investors to evaluate current operating performance compared to
results of other periods.
Non-GAAP non-operating income (expense), net
We believe this measure helps investors evaluate our non-operating income trends. Non-GAAP non-operating income (expense), net excludes acquisition/divestiture gains/losses associated
with unusual acquisition related items such as intangible asset impairment charges, gains or losses related to the acquisitions, or sale of certain businesses and investments. We believe
that these exclusions provide investors with a supplemental view of our ongoing financial results.
Non-GAAP income tax provision
We believe that providing investors with the non-GAAP income tax provision is beneficial because it provides for consistent treatment of the excluded items in our non-GAAP presentation.
Non-GAAP net income
This measure provides a supplemental view of net income trends which are driven by non-GAAP income before taxes and our non-GAAP tax rate. Non-GAAP net income excludes restructuring
charges, amortization of purchased intangible assets, stock-based compensation, amortization of acquisition-related inventory step-up, acquisition/divestiture items, and non-GAAP tax
adjustments from GAAP net income. We believe our investors benefit from understanding these exclusions and from an alternative view of our net income performance as compared to our past
net income performance.
Non-GAAP diluted net income per share
We believe our investors benefit by understanding our non-GAAP operating performance as reflected in a per share calculation as a way of measuring non-GAAP operating performance by
ownership in the company. Non-GAAP diluted net income per share excludes restructuring charges, amortization of purchased intangible assets, stock-based compensation, amortization of
acquisition-related inventory step-up, acquisition/divestiture items, and non-GAAP tax adjustments from GAAP diluted net income per share. We believe that these exclusions offer
investors a useful view of our diluted net income per share as compared to our past diluted net income per share.
These non-GAAP measures can be used to evaluate our historical and prospective financial performance, as well as our performance relative to competitors. We believe some of our investors
track our "core operating performance" as a means of evaluating our performance in the ordinary, ongoing, and customary course of our operations. Core operating performance excludes items
that are non-cash, not expected to recur or not reflective of ongoing financial results. Management also believes that looking at our core operating performance provides a supplemental
way to provide consistency in period to period comparisons. Accordingly, management excludes from non-GAAP those items relating to restructuring charges, amortization of purchased
intangible assets, stock-based compensation, amortization of acquisition-related inventory step-up, acquisition/divestiture items, and non-GAAP tax adjustments. For detailed
explanations of the adjustments made to comparable GAAP measures, see items (A) - ( H ) below.
( A ) Restructuring charges.Included in our GAAP presentation of cost of sales
and operating expenses, restructuring charges recorded are primarily for
employee compensation resulting from reductions in employee headcount in
connection with our company restructurings. We exclude restructuring
charges from our non-GAAP measures because we believe they do not reflect
expected future operating expenses, they are not indicative of our core
operating performance, and they are not meaningful in comparisons to our
past operating performance. We have incurred restructuring expense in
each of the periods presented. However the amount incurred can vary
significantly based on whether a restructuring has occurred in the period
and the timing of headcount reductions.
( B ) Amortization of purchased intangible assets.Included in our GAAP
presentation of gross margin and operating expenses is amortization of
purchased intangible assets. U.S. GAAP accounting requires that intangible
assets are recorded at fair value and amortized over their useful lives.
Consequently, the timing and size of our acquisitions will cause our
operating results to vary from period to period, making a comparison to
past performance difficult for investors. This accounting treatment may
cause differences when comparing our results to companies that grow
internally because the fair value assigned to the intangible assets
acquired through acquisition may significantly exceed the equivalent
expenses that a company may incur for similar efforts when performed
internally. Furthermore, the useful life that we use to amortize our
intangible assets over may be substantially different from the time period
that an internal growth company incurs and recognizes such expenses. We
believe that by excluding the amortization of purchased intangible assets,
which primarily represents technology and/or customer relationships
already developed, it provides an alternative way for investors to compare
our operations pre-acquisition to those post-acquisitions and to those
of our competitors that have pursued internal growth strategies. However,
we note that companies that grow internally will incur costs to develop
intangible assets that will be expensed in the period incurred, which may
make a direct comparison more difficult.
( C ) Stock-based compensation. Included in our GAAP presentation of cost of
sales and operating expenses, stock-based compensation consists of
expenses for employee stock options and awards and purchase rights under
our employee stock purchase plan. We exclude stock-based compensation
expense from our non-GAAP measures because some investors may view it as
not reflective of our core operating performance as it is a non-cash
expense. For the first quarter of fiscal years 2018 and 2017, stock-
based compensation was allocated as follows:
First Quarter of
----------------
(Dollars in millions) 2018 2017
---- ----
Cost of sales $1.1 $0.8
Research and development 3.1 2.4
Sales and marketing 2.3 2.2
General and administrative 10.9 8.3
----
Total stock-based compensation $17.4 $13.7
----- -----
( D ) Amortization of acquisition-related inventory step-up. The purchase
accounting entries associated with our business acquisitions require us to
record inventory at its fair value, which is sometimes greater than the
previous book value of the inventory. Included in our GAAP presentation,
the increase in inventory value is amortized to cost of sales over the
period that the related product is sold. We exclude inventory step-up
amortization from our non-GAAP measures because it is a non-cash expense
that we do not believe is indicative of our ongoing operating results. We
further believe that excluding this item from our non-GAAP results is
useful to investors in that it allows for period-over-period
comparability.
( E ) Acquisition / divestiture items. Included in our GAAP presentation of
cost of sales and operating expenses, acquisition costs consist of
external and incremental costs resulting directly from merger and
acquisition and strategic investment activities such as legal, due
diligence, integration, and other closing costs, including the
acceleration of acquisition stock options, as well as adjustments to the
fair value of earn-out liabilities. Included in our GAAP presentation of
non-operating income (expense), net, acquisition/divestiture items
includes unusual acquisition, investment, and/or divestiture gains/
losses. Although we do numerous acquisitions, the costs that have been
excluded from the non-GAAP measures are costs specific to particular
acquisitions. These are one-time costs that vary significantly in amount
and timing and are not indicative of our core operating performance.
( F ) Non-GAAP items tax effected. This amount adjusts the provision for
income taxes to reflect the effect of the non-GAAP items ( A ) - ( E )
on non-GAAP net income. We believe this information is useful to
investors because it provides for consistent treatment of the excluded
items in this non-GAAP presentation.
( G ) Difference in GAAP and Non-GAAP tax rate. This amount represents the
difference between the GAAP and Non-GAAP tax rates applied to the Non-
GAAP operating income plus the Non-GAAP non-operating income (expense),
net. We believe that investors benefit from excluding this amount from our
non-GAAP income tax provision because it facilitates a comparison of the
non-GAAP tax provision in the current and prior periods.
( H ) GAAP and non-GAAP tax rate %. These percentages are defined as GAAP
income tax provision as a percentage of GAAP income before taxes and non-
GAAP income tax provision as a percentage of non-GAAP income before
taxes. We believe that investors benefit from a presentation of non-
GAAP tax rate percentage as a way of facilitating a comparison to non-
GAAP tax rates in prior periods.
NEW ACCOUNTING STANDARDS ADOPTION IMPACT
CONDENSED CONSOLIDATED BALANCE SHEETS
(In millions)
(Unaudited)
As Reported ASC 606 Adjustments As Adjusted
----------- ------------------- -----------
Fiscal Year End Fiscal Year End Fiscal Year End Fiscal Year End Fiscal Year End Fiscal Year End
As of 2017 2016 2017 2016 2017 2016
----- ---- ---- ---- ---- ---- ----
Assets
Current assets:
Cash and cash
equivalents $358.5 $216.1 $ - $ - $358.5 $216.1
Short term
investments 178.9 111.1 - - 178.9 111.1
Accounts
receivable, net 414.8 354.8 12.9 11.4 427.7 366.2
Other
receivables 42.8 35.4 - - 42.8 35.4
Inventories 271.8 218.8 (7.2) (5.5) 264.6 213.3
Other current
assets 50.3 42.5 (11.1) (2.7) 39.2 39.8
Total current assets 1,317.1 978.7 (5.4) 3.2 1,311.7 981.9
Property and equipment, net 174.0 144.2 - - 174.0 144.2
Goodwill 2,287.1 2,077.6 - - 2,287.1 2,077.6
Other purchased intangible assets, net 364.8 333.3 - - 364.8 333.3
Deferred costs, non-current - - 35.0 30.3 35.0 30.3
Other non-current assets 155.2 140.0 (11.5) (15.1) 143.7 124.9
----- ----- ----- ----- ----- -----
Total assets $4,298.2 $3,673.8 $18.1 $18.4 $4,316.3 $3,692.2
======== ======== ===== ===== ======== ========
Liabilities and Stockholders' Equity
Current liabilities:
Short-term debt $128.4 $130.3 $ - $ - $128.4 $130.3
Accounts payable 146.1 109.8 (0.1) 0.1 146.0 109.9
Accrued
compensation
and benefits 143.0 97.5 0.9 0.6 143.9 98.1
Deferred revenue 272.4 246.5 (34.8) (34.7) 237.6 211.8
Accrued warranty
expense 18.3 17.2 - - 18.3 17.2
Other current
liabilities 101.0 86.9 (1.8) (4.0) 99.2 82.9
Total current liabilities 809.2 688.2 (35.8) (38.0) 773.4 650.2
Long-term debt 785.5 489.6 - - 785.5 489.6
Non-current deferred revenue 41.0 37.7 (2.0) (3.1) 39.0 34.6
Deferred income tax liabilities 40.4 38.8 7.4 10.0 47.8 48.8
Income taxes payable 94.1 - - - 94.1 -
Other non-current liabilities 162.0 113.8 - - 162.0 113.8
----- ----- --- --- ----- -----
Total liabilities 1,932.2 1,368.1 (30.4) (31.1) 1,901.8 1,337.0
------- ------- ----- ----- ------- -------
Stockholders' equity:
Common stock 0.2 0.3 - - 0.2 0.3
Additional paid-
in capital 1,461.1 1,348.3 - - 1,461.1 1,348.3
Retained
earnings 1,035.9 1,177.1 48.7 51.4 1,084.6 1,228.5
Accumulated
other
comprehensive
loss (131.2) (219.9) (0.2) (1.9) (131.4) (221.8)
Total Trimble Inc. stockholders' equity 2,366.0 2,305.8 48.5 49.5 2,414.5 2,355.3
Noncontrolling interests - (0.1) - - - (0.1)
--- ---- --- --- --- ----
Total stockholders' equity 2,366.0 2,305.7 48.5 49.5 2,414.5 2,355.2
------- ------- ---- ---- ------- -------
Total liabilities and
stockholders' equity $4,298.2 $3,673.8 $18.1 $18.4 $4,316.3 $3,692.2
======== ======== ===== ===== ======== ========
NEW ACCOUNTING STANDARDS ADOPTION IMPACT
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In millions, except per share data)
(Unaudited)
As Reported ASC 606 & ASU 2017-07
Adjustments As Adjusted
----------- ---------------------- -----------
Fiscal Year Fiscal Year Fiscal Year Fiscal Year Fiscal Year Fiscal Year
2017 2016 2017 2016 2017 2016
---- ---- ---- ---- ---- ----
Revenue:
Product $1,763.8 $1,562.0 $ - $8.6 $1,763.8 $1,570.6
Service 461.6 430.2 13.8 6.5 475.4 436.7
Subscription 428.8 370.0 (21.5) (15.2) 407.3 354.8
----- ----- ----- ----- ----- -----
Total revenue 2,654.2 2,362.2 (7.7) (0.1) 2,646.5 2,362.1
------- ------- ---- ---- ------- -------
Cost of sales:
Product 866.5 760.8 9.1 3.2 875.6 764.0
Service 196.3 169.9 (1.9) 0.2 194.4 170.1
Subscription 113.0 104.9 0.1 - 113.1 104.9
Amortization of purchased
intangible assets 85.8 88.6 - - 85.8 88.6
---- ---- --- --- ---- ----
Total cost of sales 1,261.6 1,124.2 7.3 3.4 1,268.9 1,127.6
------- ------- --- --- ------- -------
Gross margin 1,392.6 1,238.0 (15.0) (3.5) 1,377.6 1,234.5
------- ------- ----- ---- ------- -------
Gross margin (%) 52.5% 52.4% 52.1% 52.3%
Operating expense:
Research and
development 370.2 349.6 - - 370.2 349.6
Sales and
marketing 404.2 377.6 (4.1) (2.9) 400.1 374.7
General and
administrative 302.3 256.0 (0.6) - 301.7 256.0
Restructuring
charges 6.9 11.6 - - 6.9 11.6
Amortization of
purchased
intangible
assets 63.0 62.2 - - 63.0 62.2
--------------
Total operating expense 1,146.6 1,057.0 (4.7) (2.9) 1,141.9 1,054.1
------- ------- ---- ---- ------- -------
Operating income 246.0 181.0 (10.3) (0.6) 235.7 180.4
Non-operating income (expense), net:
Interest
expense, net (25.0) (25.9) (0.2) - (25.2) (25.9)
Foreign currency
transaction
gain (loss),
net 3.3 (1.9) - - 3.3 (1.9)
Income from
equity method
investments,
net 29.5 17.6 - - 29.5 17.6
Other income,
net 5.3 5.9 (0.4) - 4.9 5.9
--------------
Total non-operating income
(expense), net 13.1 (4.3) (0.6) - 12.5 (4.3)
---- ---- ---- --- ---- ----
Income before taxes 259.1 176.7 (10.9) (0.6) 248.2 176.1
Income tax provision 137.9 44.5 (8.2) (0.6) 129.7 43.9
----- ---- ---- ---- ----- ----
Net income 121.2 132.2 (2.7) - 118.5 132.2
Net gain (loss)
attributable to
noncontrolling
interests 0.1 (0.2) - - 0.1 (0.2)
--------------
Net income attributable to Trimble
Inc. $121.1 $132.4 $(2.7) $ - $118.4 $132.4
====== ====== ===== =============== ====== ======
Net income per share attributable to Trimble Inc.
Basic $0.48 $0.53 $(0.01) $ - $0.47 $0.53
-----
Diluted $0.47 $0.52 $(0.01) $ - $0.46 $0.52
-------
Shares used in calculating net income per share:
Basic 252.1 250.5 - - 252.1 250.5
-----
Diluted 256.7 253.9 - - 256.7 253.9
-------
NEW ACCOUNTING STANDARDS ADOPTION IMPACT
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (LOSS)
(In millions, except per share data)
(Unaudited)
Q1'17
-----
As Reported ASC 606 Adjustments As Adjusted
Revenue:
Product $405.4 $4.2 $409.6
Service 106.8 (0.2) 106.6
Subscription 101.7 (7.3) 94.4
----- ---- ----
Total revenue 613.9 (3.3) 610.6
----- ---- -----
Cost of sales:
Product 194.4 (1.0) 193.4
Service 47.1 (0.1) 47.0
Subscription 26.8 0.1 26.9
Amortization of purchased
intangible assets 19.0 - 19.0
---- --- ----
Total cost of sales 287.3 (1.0) 286.3
----- ---- -----
Gross margin 326.6 (2.3) 324.3
----- ---- -----
Gross margin (%) 53.2 % 53.1%
Operating expense:
Research and
development 88.7 - 88.7
Sales and
marketing 94.8 (0.4) 94.4
General and
administrative 69.3 - 69.3
Restructuring
charges 2.9 - 2.9
Amortization of
purchased
intangible
assets 14.3 - 14.3
--------------- ---- ---
Total operating expense 270.0 (0.4) 269.6
----- ---- -----
Operating income 56.6 (1.9) 54.7
Non-operating income (expense), net:
Interest
expense, net (6.1) - (6.1)
Foreign currency
transaction
gain, net 1.4 - 1.4
Income from
equity method
investments,
net 4.2 - 4.2
Other income
(loss), net 9.5 - 9.5
------------- --- ---
Total non-operating income
(expense), net 9.0 - 9.0
--- --- ---
Income before taxes 65.6 (1.9) 63.7
Income tax provision 15.1 (1.2) 13.9
---- ---- ----
Net income (loss) 50.5 (0.7) 49.8
Net gain
attributable to
noncontrolling
interests - - -
---------------- --- ---
Net income (loss) attributable to
Trimble Inc. $50.5 $(0.7) $49.8
===== ===== =====
Net income (loss) per share attributable to Trimble Inc.
Basic $0.20 $ - $0.20
----- ----- -----------------------------
Diluted $0.20 $(0.01) $0.19
------- ----- ------
Shares used in calculating net income (loss) per share:
Basic 252.0 - 252.0
----- ----- ---
Diluted 255.9 - 255.9
------- ----- ---
NEW ACCOUNTING STANDARDS ADOPTION IMPACT
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In millions)
(Unaudited)
As Reported ASC 606 Adjustments As Adjusted
*ASU 2016-15
Adjustments
Fiscal Years Fiscal Years Fiscal Years
------------ ------------ ------------
2017 2016 2017 2016 2017 2016
---- ---- ---- ---- ---- ----
Cash flow from operating activities:
Net income $121.2 $132.2 $(2.7) $ - $118.5 $132.2
Adjustments to
reconcile net
income to net cash
provided by
operating
activities:
Depreciation expense 34.6 37.0 - - 34.6 37.0
Amortization expense 148.8 150.8 - - 148.8 150.8
Stock-based compensation 64.8 52.6 - - 64.8 52.6
Income from equity method
investments (29.5) (17.6) 18.1 * 17.6 * (11.4) -
Other non-cash items 6.9 19.0 (8.2) (0.6) (1.3) 18.4
Decrease (increase)
in assets:
Accounts receivable (41.6) 1.2 (1.1) 2.6 (42.7) 3.8
Inventories (38.7) 24.0 1.4 2.2 (37.3) 26.2
Other current and non-current
assets (15.5) 0.2 5.5 2.0 (10.0) 2.2
Increase (decrease)
in liabilities:
Accounts payable 25.9 10.9 (0.2) (0.1) 25.7 10.8
Accrued compensation and benefits 33.7 0.6 0.3 (0.3) 34.0 0.3
Deferred revenue 16.4 26.1 2.9 (6.6) 19.3 19.5
Income taxes payable 88.2 (16.1) - - 88.2 (16.1)
Accrued liabilities (3.3) (7.3) 1.8 * 0.7 * (1.5) (6.6)
---- --- ----
Net cash provided by operating activities 411.9 413.6 17.8 17.5 429.7 431.1
----- ----- ---- ---- ----- -----
Cash flow from investing activities:
Acquisitions of
businesses, net of
cash acquired (293.1) (38.8) 12.9 * 15.1 * (280.2) (23.7)
Acquisitions of
property and
equipment (43.7) (26.0) - - (43.7) (26.0)
Purchases of short-
term investments (288.0) (113.3) - - (288.0) (113.3)
Proceeds from
maturities of
short-term
investments 122.1 2.4 - - 122.1 2.4
Proceeds from sales
of short-term
investments 97.7 - - - 97.7 -
Dividends received
from equity method
investments 18.1 17.6 (18.1) * (17.6) * - -
Other 20.9 13.7 - - 20.9 13.7
Net cash used in investing activities (366.0) (144.4) (5.2) (2.5) (371.2) (146.9)
------ ------ ---- ---- ------ ------
Cash flow from financing activities:
Issuance of common
stock, net of tax
withholdings 73.8 67.5 - - 73.8 67.5
Repurchases and
retirement of
common stock (285.3) (119.5) - - (285.3) (119.5)
Proceeds from debt
and revolving
credit lines 786.0 355.0 - - 786.0 355.0
Payments on debt and
revolving credit
lines (495.4) (465.3) - - (495.4) (465.3)
Other - - (12.6) * (15.0) * (12.6) (15.0)
Net cash provided by (used in) financing activities 79.1 (162.3) (12.6) (15.0) 66.5 (177.3)
---- ------ ----- ----- ---- ------
Effect of exchange rate changes on cash and cash
equivalents 17.4 (6.8) - - 17.4 (6.8)
---- ---- --- --- ---- ----
Net increase in cash and cash equivalents 142.4 100.1 0.0 0.0 142.4 100.1
Cash and cash equivalents - beginning of period 216.1 116.0 - - 216.1 116.0
----- ----- --- --- ----- -----
Cash and cash equivalents - end of period $358.5 $216.1 $0.0 $0.0 $358.5 $216.1
====== ====== ==== ==== ====== ======
ASU No.
2016-15,
Statement of
Cash Flows
adoption
reclassification
adjustments
were included
in specified
lines in
fiscal 2017
* and 2016.
NEW ACCOUNTING STANDARDS ADOPTION IMPACT
REPORTING SEGMENTS
(Dollars in millions)
As Reported Topic 606 Adjustments As Adjusted
-----------
Fiscal Fiscal Fiscal Fiscal Fiscal Fiscal
Year Year Year Year Year Year
2017 2016 2017 2016 2017 2016
---- ---- ---- ---- ---- ----
BUILDINGS AND INFRASTRUCTURE
----------------------------
Revenue $834.9 $743.5 $(5.5) $(1.7) $829.4 $741.8
Operating
income $179.9 $133.9 $(3.9) $(1.2) $176.0 $132.7
Operating
margin (%
of
segment
external
net
revenues) 21.5 % 18.0 % 21.2 % 17.9 %
GEOSPATIAL
----------
Revenue $661.2 $634.7 $(2.7) $1.0 $658.5 $635.7
Operating
income $130.9 $120.8 $(1.5) $(0.2) $129.4 $120.6
Operating
margin (%
of
segment
external
net
revenues) 19.8 % 19.0 % 19.7 % 19.0 %
RESOURCES AND UTILITIES
-----------------------
Revenue $476.9 $395.7 $4.1 $1.7 $481.0 $397.4
Operating
income $136.3 $118.4 $0.7 $0.4 $137.0 $118.8
Operating
margin (%
of
segment
external
net
revenues) 28.6 % 29.9 % 28.5 % 29.9 %
TRANSPORTATION
--------------
Revenue $681.2 $588.3 $(3.6) $(1.1) $677.6 $587.2
Operating
income $120.6 $102.9 $(6.2) $0.4 $114.4 $103.3
Operating
margin (%
of
segment
external
net
revenues) 17.7 % 17.5 % 16.9 % 17.6 %
CONTACT: Michael Leyba, Investor Relations, 415-309-3127, michael_leyba@trimble.com; Lea Ann McNabb, Media, 408-481-7808, leaann_mcnabb@trimble.com
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SOURCE Trimble Inc.
