Revenue of $188.5 Million and GAAP Earnings of $0.35 Per Share
Net income was up 13 percent while operating income was up 33 percent due to a year-over-year increase in effective tax rates. In the third quarter of 2005, the effective tax rate was 34 percent, compared to an effective tax rate of 17 percent in the third quarter of 2004. The 2004 effective tax rate benefited from a research and development tax credit and net operating loss carry-forwards which should be factored into year-over-year comparisons.
"During the third quarter, the Engineering and Construction segment continued to show strong growth, both within the survey and the machine control product lines. We are also pleased with the continuing progress of the Trimble Mobile Solutions segment," said Steven W. Berglund, Trimble's president and chief executive officer. "Our outlook for the fourth quarter is cautious given the uncertainties of the agricultural market, as farmers react to the impact of higher petroleum and natural gas products."
"Looking ahead to 2006, we remain bullish on the Engineering and Construction market, which we expect will show continued growth. Trimble Mobile Solutions is moving toward profitability and should show strong double-digit growth in 2006. While we are guarded about the agricultural market, we believe Trimble Field Solutions will show year-over-year growth in 2006. We also expect Component Technologies to rebound and demonstrate full-year growth over 2005," concluded Berglund.
Trimble Results by Business Segment
Following are Trimble's results by segment:
Revenue for Engineering and Construction (E&C) was $134.2 million for the third quarter of 2005, up approximately 19 percent compared to revenue of $113 million in the third quarter of fiscal 2004. This revenue growth was driven by the continued success of the Trimble S6 servo, auto lock and robotic total stations, as well as machine control products. E&C's operating margins were 25.6 percent, compared to 21.2 percent in the third quarter of 2004.
Revenue for Trimble Field Solutions (TFS) was $24.9 million in the third quarter of 2005, down 5.4 percent compared to $26.3 million in revenue in the third quarter of 2004. Operating margins were 15.9 percent, compared to 22.2 percent in the third quarter of 2004. TFS was impacted by slower sales of precision agriculture products, which we believe resulted from farmers' reaction to higher operating costs. This increase was triggered by higher petroleum and natural gas prices, which impacted the costs of equipment operations and fertilizer.
Revenue for Component Technologies (CT) was $12.6 million, down from $14.9 million in the same period of 2004. The decline in revenue is due to lower shipments of in-vehicle navigation products, in line with Company guidance on its last quarterly conference call. CT operating margins were 13.0 percent in the third quarter of 2005, compared to 18.7 percent in the third quarter of 2004.
Revenue for Trimble Mobile Solutions (TMS) was $7.2 million, up 14 percent from revenue of $6.4 million in the third quarter of 2004. Operating losses were $700 thousand, compared to losses of $2.1 million in the third quarter of fiscal 2004. The number of TMS subscribers grew by over 100 percent when compared to the third quarter of 2004.
Portfolio Technologies revenue was $9.6 million, approximately flat with revenue of $9.7 million in the third quarter of fiscal 2004. Operating margins were 13.2 percent compared to 22.8 percent in the third quarter of 2004, due to a one time royalty payment in the third quarter of 2004.
Non-GAAP Net Income and Earnings Per Share
Non-GAAP net income for the third quarter of fiscal 2005 was $21.0 million, up approximately 38 percent compared to non-GAAP net income of $15.2 million in the third quarter of fiscal 2004. Non-GAAP earnings per share for the third quarter of fiscal 2005 were $0.37 up approximately 32 percent from $0.28 per share in the third quarter of fiscal 2004.
GAAP and non-GAAP earnings per share for the third quarter of 2005 were calculated on a diluted basis using approximately 57.5 million shares.
Forward Looking Guidance
For the fourth quarter of fiscal 2005, the company is guiding revenue growth of 8 to 10 percent over the prior year. This represents revenue of $176 to $179 million, with operating margins between 12.5 and 12.9 percent of revenue. Our short-term outlook is tempered by uncertainty about growth in the agriculture market, where Trimble Field Solutions products are sold. Non- operating expenses are expected to be approximately $2.0 million. The Company expects to use a 20 to 22 percent effective tax rate for the GAAP income tax provision in the fourth quarter. This is due to various factors, including consideration of the one-time benefit from the repatriation of undistributed earnings of foreign subsidiaries incentive provided by the American Jobs Creation Act of 2004. Trimble expects GAAP earnings per share between $0.26 and $0.28 per share, using approximately 57.9 million shares outstanding. Included in the assumptions regarding our GAAP earnings per share projections are approximately $1.0 million for amortization of purchased intangibles.
Non-GAAP vs. GAAP Financials
The Company provides non-GAAP financial measures called "non-GAAP net income" and "non-GAAP EPS" 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 excluded amortization of purchased intangibles, restructuring charges, the amortization of acquisition related inventory step-up charges, and revaluation of minority investments because the chief executive officer excludes these items when budgeting and evaluating the business. The Company uses a fully-taxed rate of 35 percent for non-GAAP net income and earnings per share because it is used by outside analysts and investors, as well as for internal analysis, to provide comparable information for use in evaluating Trimble's performance versus prior periods and other companies. However, 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.
Investor Conference Call / Web cast Details
The Company will hold a conference call on Thursday, Oct. 20 at 1:30 p.m. PDT to review its third quarter 2005 results. It will be broadcast live on the Web at www.trimble.com/investors.shtml. A replay of the call will be available for seven days beginning at 8:00 p.m., PDT. The replay number is 800-642-1687 (U.S.), or 706-645-9291 (international), and the pass code is 1048662.
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, automobile navigation, machine guidance, asset tracking, wireless platforms, and telecommunications infrastructure. Founded in 1978 and headquartered in Sunnyvale, California, Trimble has more than 2,000 employees in more than 20 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, non-operating expenses, operating margins, effective tax rate, amortization of purchased intangibles and earnings per share estimates for the fourth fiscal quarter of 2005. These forward-looking statements are subject to change, and actual results may materially differ from those set forth in this press release and the 2006 versus 2005 projected growth by segment due to certain risks and uncertainties. For example, recent 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. The Company's expenses could also increase as a result of the recent revaluation of the Chinese Yuan. Fuel and other operating costs could remain high or increase, which could further weaken sales into the agricultural market. In addition, the Company's results may be adversely affected if its joint ventures and recent acquisitions do not achieve anticipated results or if the Company is unable to market, manufacture and ship new product. 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 2005 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.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)
Three Months Ended Nine Months Ended
Sep-30, Oct-01, Sep-30, Oct-01,
2005 2004 2005 2004
Revenue $188,484 $170,164 $588,092 $506,125
Cost of sales 91,192 86,792 290,586 258,674
Gross margin 97,292 83,372 297,506 247,451
Gross margin (%) 51.6% 49.0% 50.6% 48.9%
Operating expenses
Research and development 20,639 19,177 63,332 57,962
Sales and marketing 29,313 26,576 88,388 80,238
General and administrative 13,448 10,800 38,204 33,138
Restructuring charges -- -- 278 327
Amortization of purchased
intangible assets 865 2,019 5,340 6,078
Total operating expenses 64,265 58,572 195,542 177,743
Operating income 33,027 24,800 101,964 69,708
Non-operating income (expense),
net
Interest expense, net (650) (843) (1,680) (2,699)
Foreign currency transaction
loss, net 61 (317) 67 (446)
Expenses for affiliated
operations, net (1,976) (2,284) (7,514) (6,336)
Other income, net 119 231 287 1,551
Total non-operating
expense, net (2,446) (3,213) (8,840) (7,930)
Income before taxes 30,581 21,587 93,124 61,778
Income tax provision 10,345 3,670 31,662 10,503
Net income $20,236 $17,917 $61,462 $51,275
Earnings per share :
Basic $0.38 $0.35 $1.16 $1.01
Diluted $0.35 $0.33 $1.08 $0.94
Shares used in calculating
earnings per share :
Basic 53,592 51,412 53,017 50,882
Diluted 57,492 55,056 56,997 54,641
FULLY TAXED NON-GAAP RECONCILIATION
(Dollars in thousands, except per share data)
(Unaudited)
Three Months Ended Nine Months Ended
Sep-30, Oct-01, Sep-30, Oct-01,
2005 2004 2005 2004
GAAP income before taxes $30,581 $21,587 $93,124 $61,778
Non-GAAP adjustments
Amortization of purchased
intangibles 865 2,019 5,340 6,078
Amortization of acquisition-
related inventory step-up -- -- 228 475
Restructuring charges -- -- 278 327
Write off of Debt Issuance Costs 918 -- 918 --
Investments revaluation, net - (201) -- (1,444)
Total Non-GAAP adjustments 1,783 1,818 6,764 5,436
Non-GAAP income before taxes 32,364 23,405 99,888 67,214
Income tax provision-35% 11,328 8,192 34,960 23,525
Non-GAAP net income $21,036 $15,213 $64,928 $43,689
Diluted Non-GAAP earnings per share $0.37 $0.28 $1.14 $0.80
Shares used in calculating diluted
non-GAAP earnings per share 57,492 55,056 56,997 54,641
EBITDA RECONCILIATION
(Dollars in thousands)
(Unaudited)
Three Months Ended Nine Months Ended
Sep-30, Oct-01, Sep-30, Oct-01,
2005 2004 2005 2004
GAAP net income $20,236 $17,917 $61,462 $51,275
Add back :
Interest expenses, net 650 843 1,680 2,699
Income tax 10,345 3,670 31,662 10,503
Depreciation expense 3,000 2,077 7,890 6,249
Amortization of
purchased intangibles 911 2,066 5,459 6,216
EBITDA $35,142 $26,573 $108,153 $76,942
CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited)
Sep-30, Dec-31,
2005 2004
Assets
Current assets:
Cash and cash equivalents 87,293 71,872
Accounts receivables, net 146,792 123,938
Other receivables 2,521 4,182
Inventories, net 93,940 87,745
Deferred income taxes 20,491 21,852
Other current assets 9,964 7,878
Total current assets 361,001 317,467
Property and equipment, net 35,823 30,991
Goodwill and other purchased
intangible assets, net 271,524 273,357
Deferred income taxes 7,882 8,019
Other assets 23,660 24,144
Total non-current assets 338,889 336,511
Total assets $699,890 $653,978
Liabilities and Shareholders' Equity
Current liabilities:
Current portion of long-term debt $-- $12,500
Accounts payable 39,533 43,551
Accrued compensation and benefits 31,777 31,202
Accrued liabilities 19,117 17,935
Deferred revenues 10,883 9,317
Deferred income taxes 2,442 2,521
Income taxes payable 24,973 11,951
Total current liabilities 128,725 128,977
Non-current portion of long-term debt 659 26,496
Deferred gain on joint venture 9,304 9,179
Deferred income taxes 5,739 5,435
Other non-current liabilities 12,069 11,730
Total liabilities 156,496 181,817
Shareholders' equity:
Common stock 376,555 345,127
Retained earnings 144,132 82,670
Accumulated other comprehensive
income 22,707 44,364
Total shareholders' equity 543,394 472,161
Total liabilities and
shareholders' equity $699,890 $653,978
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
Three Months Ended Nine Months Ended
Sep-30, Oct-01, Sep-30, Oct-01,
2005 2004 2005 2004
Cash flow from operating activities:
Net Income $20,236 $17,917 $61,462 $51,275
Adjustments to reconcile net
income to net cash provided by
operating activities:
Depreciation expense 3,000 2,077 7,890 6,249
Amortization expense 911 2,066 5,459 6,216
Provision for doubtful
accounts 15 (643) (663) 909
Amortization of debt issuance
cost 981 123 1,225 366
Deferred income taxes 4,564 1,503 8,410 1,629
Other (622) 319 (670) (141)
Add decrease (increase) in assets:
Accounts receivables, net 4,313 9,481 (22,673) (28,934)
Other receivables 198 (226) 1,907 2,986
Inventories (865) (10,995) (4,926) (10,080)
Other current and non-current
assets (2,998) (1,068) (4,450) (3,656)
Effect of foreign currency
translation adjustment (254) (473) 1,597 747
Add increase (decrease) in
liabilities:
Accounts payable (2,377) (66) (4,374) 15,398
Accrued compensation and
benefits 667 2,275 825 3,463
Accrued liabilities 5,223 1,919 5,523 558
Deferred revenue (533) 101 1,677 3,790
Deferred gain on joint
venture -- (205) 124 (356)
Income taxes payable 312 (151) 12,850 3,564
Net cash provided by operating
activities 32,772 23,954 71,193 53,983
Cash flows from investing activities:
Acquisitions, net of cash
acquired (1,356) (1,327) (21,589) (12,165)
Acquisition of property and
equipment (6,666) (2,841) (14,400) (8,909)
Proceeds from disposal of
property and equipment -- 21 -- 562
Dividend received -- -- 515 --
Cost of capitalized patents (5) (14) (94) (40)
Net cash used in investing activities (8,027) (4,161) (35,568) (20,552)
Cash flow from financing activities:
Issuance of common stock 5,428 8,891 20,881 18,389
Collections of notes receivable 83 153 390 218
Proceeds from long-term debt and
revolving credit lines -- -- 6,000 14,000
Payments on long-term debt and
revolving credit lines -- (25,125)(44,250) (52,110)
Net cash (used) / provided by
financing activities 5,511 (16,081) (16,979) (19,503)
Effect of exchange rate changes on
cash and cash equivalents 177 750 (3,225) (225)
Net increase in cash and cash
equivalents 30,433 4,462 15,421 13,703
Cash and cash equivalents - beginning
of period 56,860 54,657 71,872 45,416
Cash and cash equivalents - end of
period $87,293 $59,119 $87,293 $59,119
Supplemental disclosures of cash flow
information:
Cash paid during the period for:
Income taxes, net of refunds $249 $2,314 $4,151 $4,332
Q3'04 Q4'04 Q1'05 Q2'05 Q3'05
Actual Actual Actual Actual Actual
Income Statement Metrics
Total Revenue $170,164 $162,684 $195,383 $204,225 $188,484
Engineering &
Construction 112,994 107,767 120,198 141,096 134,173
Trimble Field
Solutions 26,293 23,754 45,425 32,187 24,882
Component Technologies 14,872 15,619 14,197 14,830 12,630
Trimble Mobile
Solutions 6,353 6,691 7,401 6,437 7,214
Portfolio Technologies 9,652 8,853 8,162 9,675 9,585
Gross Margin 49.0% 47.6% 50.1% 50.1% 51.6%
Total Segment Income $32,775 $23,998 $39,663 $47,916 $40,492
Engineering &
Construction 24,002 16,169 21,490 37,173 34,360
Trimble Field
Solutions 5,850 4,221 15,577 8,044 3,962
Component Technologies 2,782 3,121 2,600 2,821 1,648
Trimble Mobile
Solutions (2,058) (542) (636) (1,879) (746)
Portfolio Technologies 2,199 1,029 632 1,757 1,268
Corporate and Other
Charges $(7,975) $(8,080) $(9,463) $(9,179) $(7,465)
Non-operating expense
and income taxes $(6,883) $488 $(12,761) $(14,950) $(12,791)
Net Income $17,917 $16,406 $17,439 $23,787 $20,236
GAAP operating margin% 14.6% 9.8% 15.5% 19.0% 17.5%
Non-GAAP operating
margin% 15.8% 11.3% 16.9% 20.0% 18.5%
GAAP EPS $0.33 $0.29 $0.31 $0.42 $0.35
Fully-taxed (35%) Non-
GAAP EPS $0.28 $0.19 $0.34 $0.44 $0.37
Balance Sheet Metrics
Cash & Cash Equivalents $59,119 $71,872 $50,193 $56,860 $87,293
Accounts Receivables,
Net $132,194 $123,938 $154,540 $150,592 $146,792
Inventories, Net $81,751 $87,745 $91,309 $89,853 $93,940
Total Debt $52,271 $38,996 $28,836 $661 $659
Short Term Debt 12,661 12,500 12,500 -- --
Long Term Debt 39,610 26,496 16,336 661 659
Equity $418,331 $472,161 $490,188 $513,817 $543,394
Cashflow Metrics
Cash Flow from (used
in) Operations $23,954 $19,130 $(1,192) $39,613 $32,772
Working Capital $158,950 $188,490 $197,372 $208,410 $232,276
Capital Expenditures $2,841 $3,841 $3,164 $4,570 $6,666
Interest, net $815 $724 $562 $497 $--
EBITDA $26,573 $18,820 $31,886 $41,126 $35,142
Amortization of
Intangibles 2,065 2,295 2,339 2,209 911
Depreciation 2,077 2,625 2,512 2,378 3,000
Financial Ratios
Days Sales Outstanding 64 63 62 60 60
Inventory Turns
(trailing 12 months) 4.5 4.5 4.3 4.1 4.0
Current ratio 2.2 2.5 2.5 2.7 2.8
Debt to Equity 0.1 0.1 0.1 0.0 0.0
Other
Headcount 2,159 2,160 2,231 2,308 2,347
CONTACT: LeaAnn McNabb of Trimble, +1-408-481-7808
Web site: http://www.trimble.com/