Operating income for the second quarter of 2006 was $38.7 million, flat when compared to the second quarter of 2005. For year-over-year comparisons, it should be noted that second quarter 2006 operating income reflects the impact of stock-based compensation expense resulting from the adoption of FAS 123(R) of $3.3 million. Additionally, the net impact of transactions with the Caterpillar Trimble Control Technologies (CTCT) joint venture reduced operating results by $5.1 million; these transactions were included in non-operating results in 2005. In addition, expenses related to acquisitions, namely amortization of purchased intangibles and purchased in-process research and development expense increased by $2.6 million versus second quarter of 2005. Adjusting for the above factors, operating income in the second quarter of 2006 was up 27 percent compared to the second quarter of 2005.
Net income for the second quarter of 2006 was $28.5 million, up 20 percent when compared to net income of $23.8 million in the second quarter of 2005. Earnings per share for the second quarter of 2006 were $0.49, up approximately 17 percent compared to earnings per share of $0.42 in the second quarter of 2005. Earnings per share in the second quarter of 2006 were negatively impacted by $0.04 due to the adoption of FAS 123(R) and by $0.06 due to acquisition-related expenses.
Adjusting for the impact of FAS 123(R) and acquisition related expenses, non-GAAP net income for the second quarter of 2006 was $34.1 million, up 37 percent compared to non-GAAP net income of $24.9 million in the second quarter of fiscal 2005. Non-GAAP earnings per share for the second quarter of 2006 were $0.59 up approximately 34 percent from $0.44 per share in the second quarter of 2005. GAAP and non-GAAP earnings per share for the second quarter of 2006 were calculated on a diluted basis using approximately 58.1 million shares.
"Trimble's growth reflects the strong performance of its core segments. We anticipate this momentum to carry us into the second half of the year," said Steven W. Berglund, Trimble's president and chief executive officer. "Our strategic initiatives in the construction and mobile work place are beginning to contribute to Trimble's revenue and provide the foundation for continued growth."
Trimble Results by Business Segment
The impact of the adoption of FAS123(R) should be considered in all year-over-year segment comparisons as second quarter 2005 results did not include stock-based compensation expense.
Engineering and Construction
Revenue for Engineering and Construction (E&C) was $168.0 million for the second quarter of 2006, up approximately 19 percent compared to revenue of $141.1 million in the second quarter of 2005.
On a reported basis, operating margins in E&C were 23 percent in the second quarter of 2006, compared to 26 percent in the second quarter of 2005. Excluding the impact of FAS 123(R) adoption and the CTCT joint venture transactions, discussed above, E&C operating margins were up one point year-over-year.
E&C growth continues to be enabled by a steady market, strong sales of new products and aggressive marketing programs.
Field Solutions
Revenue for Field Solutions (TFS) was $36.3 million in the second quarter of 2006, up 13 percent compared to $32.2 million in revenue in the second quarter of 2005. Both the agriculture and geographical information system businesses experienced double-digit growth in the quarter.
TFS operating margins for the second quarter of 2006 were 31 percent, compared to 25 percent in the second quarter of 2005 due to strong operating leverage.
Mobile Solutions
Second quarter 2006 revenue for Mobile Solutions (TMS), was $14.9 million, up 133 percent from revenue of $6.4 million in the second quarter of 2005. Revenue growth resulted from strong growth in subscriptions and the impact of acquisitions.
TMS operating margins were 3 percent for the second quarter of 2006, compared to a negative 29 percent in the second quarter of 2005. Profitability continues to improve in this segment due to higher subscription revenue.
Advanced Devices
Advanced Devices revenue was $26.1 million, up 7 percent from revenue of $24.5 million in the second quarter of 2005.
Advanced Devices operating margins were 9 percent, compared to 19 percent in the second quarter of 2005. This decline is primarily driven by expenses related to the introduction of the TrimTrac(R) GSM version and product mix.
Non-GAAP vs. GAAP Financials
The Company provides non-GAAP financial measures called "non-GAAP net 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, the amortization of acquisition-related inventory step-up 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 third quarter of 2006 the Company expects revenue to grow 17 to 19 percent compared to the third quarter of 2005, with revenue between $220 million and $225 million. At a 35 percent tax rate, with approximately 59 million shares outstanding, the Company expects third quarter 2006 GAAP earnings per share between $0.36 and $0.39.
The above GAAP guidance includes stock-based compensation due to the adoption of FAS 123(R). On a post-tax basis, the Company expects stock-based compensation for the third quarter of 2006 to be approximately $.04 per share.
Using a 35 percent tax rate -- excluding the amortization of intangibles of $4.2 million and the impact of stock-based compensation expense of $3.3 million -- the Company expects non-GAAP earnings per share between $0.44 and $0.47 for the third quarter of 2006.
Investor Conference Call / Webcast Details
The Company will hold a conference call on July 25, 2006 at 1:30 p.m. PDT to review its second 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 July 25, 2006. The replay number is (800) 642-1687 (U.S.), or (706) 645-9291 (international), and the pass code is 1480042.
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 third fiscal quarter of 2006 and the Company's outlook for the remainder of the year. 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 third 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 Six Months Ended
Jun-30, Jul-01, Jun-30, Jul-01,
2006 2005 2006 2005
Revenue $245,326 $204,225 $471,180 $399,608
Cost of sales 123,670 101,818 242,061 199,394
Gross margin 121,656 102,407 229,119 200,214
Gross margin (%) 49.6% 50.1% 48.6% 50.1%
Operating expenses
Research and development 27,607 20,865 52,053 42,693
Sales and marketing 35,747 28,704 68,453 59,075
General and administrative 16,205 11,924 31,966 24,756
Restructuring charges - - - 278
In-process research and
development 1,020 - 1,020 -
Amortization of purchased
intangible assets 2,408 2,177 3,893 4,475
Total operating expenses 82,987 63,670 157,385 131,277
Operating income 38,669 38,737 71,734 68,937
Non-operating income (expense), net
Interest income (expense), net 598 (419) 1,032 (1,030)
Foreign currency transaction
gain, net 334 163 927 6
Income (Expense) for
affiliated operations, net 1,575 (2,499) 3,191 (5,538)
Other income, net 18 138 182 168
Total non-operating income
(expense), net 2,525 (2,617) 5,332 (6,394)
Income before taxes 41,194 36,120 77,066 62,543
Income tax provision 12,691 12,333 22,735 21,317
Net income $28,503 $23,787 $54,331 $41,226
Earnings per share:
Basic $0.52 $0.45 $1.00 $0.78
Diluted $0.49 $0.42 $0.94 $0.73
Shares used in calculating
earnings per share:
Basic 54,847 52,959 54,544 52,729
Diluted 58,128 57,057 57,761 56,780
NON-GAAP RECONCILIATION
(Dollars in thousands, except per share data)
(Unaudited)
Three Months Ended Six Months Ended
Jun-30, Jul-01, Jun-30, Jul-01,
2006 2005 2006 2005
GAAP income before taxes $41,194 $36,120 $77,066 $62,543
Non-GAAP adjustments
Amortization of purchased
intangibles 3,742 *(a) 2,177 6,082 4,475
In-process research and
development 1,020 - 1,020 -
Amortization of acquisition-
related inventory step-up - - - 228
Restructuring charges - - - 278
Stock-based compensation 3,259 *(b) - 6,489 -
Total Non-GAAP adjustments 8,021 2,177 13,591 4,981
Non-GAAP income before taxes 49,215 38,297 90,657 67,524
Income tax provision 15,140 13,404 26,723 23,633
Non-GAAP net income $34,075 $24,893 $63,934 $43,891
Diluted Non-GAAP earnings per share $0.59 $0.44 $1.11 $0.77
Shares used in calculating diluted
non-GAAP earnings per share 58,128 57,057 57,761 56,780
*(a) Amortization of purchased intangibles, includes $2,408K recorded in
operating expense and $1,334K recorded in cost of sales.
*(b) Stock compensation expense by Segment and GAAP category (in $000's):
Three Months Ended June 30, 2006
('000s)
Advanced
E&C TFS TMS Devices Corporate Total
Cost of sales $110 25 17 16 141 $309
Research & development $293 79 52 196 48 $668
Sales & marketing $313 61 21 124 193 $712
General & administrative $346 85 75 147 917 $1,570
Total $1,062 $250 $165 $483 $1,299 $3,259
Six Months Ended June 30, 2006
('000s)
Advanced
E&C TFS TMS Devices Corporate Total
Cost of sales $207 49 26 33 281 $596
Research & development $553 154 106 397 95 $1,305
Sales & marketing $659 120 65 219 389 $1,452
General & administrative $676 170 142 320 1828 $3,136
Total $2,095 $493 $339 $969 $2,593 $6,489
EBITDA RECONCILIATION
(Dollars in thousands)
(Unaudited)
Three Months Ended Six Months Ended
Jun-30, Jul-01, Jun-30, Jul-01,
2006 2005 2006 2005
GAAP net income $28,503 $- $23,787 $- $54,331 $41,226
Add back :
Interest (income)
expense, net (598) 419 (1,032) 1,030
Income tax provision 12,691 12,333 22,735 21,317
Depreciation expense 3,386 2,378 6,489 4,890
Amortization of
intangibles 3,766 2,209 6,145 4,548
EBITDA $47,748 $41,126 $88,668 $73,011
CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited)
Jun-30, Dec-30,
2006 2005
Assets
Current assets:
Cash and cash equivalents 107,726 73,853
Accounts receivables, net 171,942 145,100
Other receivables 9,336 6,489
Inventories, net 113,925 107,851
Deferred income taxes 19,015 18,504
Other current assets 9,587 8,580
Total current assets 431,531 360,377
Property and equipment, net 47,278 42,664
Goodwill and other purchased
intangible assets, net 370,946 313,456
Deferred income taxes 6,483 3,580
Other assets 24,166 23,011
Total non-current assets 448,873 382,711
Total assets $880,404 $743,088
Liabilities and Shareholders' Equity
Current liabilities:
Current portion of long-term loan 431 216
Accounts payable 47,984 45,206
Accrued compensation and benefits 38,152 36,083
Accrued liabilities 22,686 16,189
Deferred revenue 24,502 12,588
Accrued warranty expenses 7,475 7,466
Deferred income taxes 3,996 4,087
Income taxes payable 28,497 24,922
Total current liabilities 173,723 146,757
Non-current portion of long-term loan 459 433
Deferred income taxes 14,373 5,602
Other non-current liabilities 27,110 19,041
Total liabilities 215,665 171,833
Shareholders' equity:
Common stock 413,619 384,196
Retained earnings 221,857 167,525
Accumulated other comprehensive
income 29,263 19,534
Total shareholders' equity 664,739 571,255
Total liabilities and
shareholders' equity $880,404 $743,088
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
Six Months Ended
Jun-30, Jul-01,
2006 2005
Cash flow from operating activities:
Net Income $54,331 $41,226
Adjustments to reconcile net
income to net cash provided by
operating activities:
Depreciation expense 6,489 4,890
Amortization expense 6,145 4,548
Provision for doubtful
accounts 95 (678)
Amortization of debt
issuance cost 90 244
Deferred income taxes 4,804 3,846
Stock-based compensation 6,489 -
In-process research and
development 1,020 -
Excess tax benefit for
stock-based compensation (4,770) -
Other 262 (48)
Add decrease (increase) in
assets:
Accounts receivables, net (19,417) (26,986)
Other receivables (2,649) 1,709
Inventories (2,860) (4,061)
Other current and non-
current assets (27,771) (1,452)
Add increase (decrease) in
liabilities:
Accounts payable 1,386 (1,997)
Accrued compensation and
benefits 1,185 158
Accrued liabilities 15,695 300
Deferred gain on joint
venture - 124
Deferred revenue 9,862 2,210
Income taxes payable 8,983 12,537
Net cash provided by operating
activities 59,369 36,570
Cash flows from investing
activities:
Acquisitions, net of cash
acquired (38,137) (20,233)
Acquisition of property and
equipment (10,943) (7,734)
Dividends received - 515
Cost of capitalized patents - (89)
Net cash used in investing
activities (49,080) (27,541)
Cash flow from financing activities:
Issuance of common stock 17,162 15,453
Excess tax benefit for stock-
based compensation 4,770 -
Proceeds from long-term debt
and revolving credit lines - 6,000
Payments on long-term debt and
revolving credit lines - (44,250)
Other (777) 307
Net cash provided (used) in
financing activities 21,155 (22,490)
Effect of exchange rate changes on
cash and cash equivalents 2,429 (1,551)
Net increase (decrease) in cash and
cash equivalents 33,873 (15,012)
Cash and cash equivalents -
beginning of period 73,853 71,872
Cash and cash equivalents - end of
period $107,726 $56,860
Q1'05 Q2'05 Q3'05 Q4'05
Actual Actual Actual Actual
Income Statement Metrics
Total Revenue $195,383 $204,225 $188,483 $186,821
Engineering & Construction 120,198 141,096 134,172 128,994
Trimble Field Solutions 45,425 32,187 24,882 25,349
Advanced Devices 22,359 24,505 22,215 22,049
Trimble Mobile Solutions 7,401 6,437 7,214 10,429
Gross Margin 50.1% 50.1% 51.6% 49.4%
Total Segment Income $39,663 $47,916 $40,492 $32,589
Engineering & Construction 21,490 37,173 34,360 24,970
Trimble Field Solutions 15,577 8,044 3,962 4,944
Advanced Devices 3,232 4,578 2,916 2,486
Trimble Mobile Solutions (636) (1,879) (746) 189
Corporate and Other Charges $(9,463) $(9,179) $(7,464) $(9,609)
Non-operating income (expense) $(12,761) $(14,951) $(12,792) $413
and income taxes
Net Income $17,439 $23,786 $20,236 $23,393
GAAP operating margin% 15.5% 19.0% 17.5% 12.3%
Non-GAAP operating margin% 16.9% 20.0% 18.5% 13.7%
GAAP EPS $0.31 $0.42 $0.35 $0.41
Fully-taxed (35%) Non-GAAP EPS $0.34 $0.44 $0.37 $0.29
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
Working Capital $197,372 $208,410 $232,985 $213,620
Capital Expenditures $3,164 $4,570 $6,666 $9,036
EBITDA $31,885 $41,126 $35,142 $35,822
Amortization of Intangibles 2,339 2,209 910 1,561
Depreciation 2,512 2,378 3,000 2,781
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 0.0 0.0 0.0
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 2.5 points and operating
income by 2.2 points in Q2'06.
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).
FY'05 Q1'06 Q2'06
Actual Actual Actual
Income Statement Metrics
Total Revenue $774,912 $225,854 $245,326
Engineering & Construction 524,460 146,734 168,041
Trimble Field Solutions 127,843 43,043 36,320
Advanced Devices 91,128 23,470 26,114
Trimble Mobile Solutions 31,481 12,607 14,851
Gross Margin 50.3% 47.6% 49.6% (a)
Total Segment Income $160,660 $42,833 $52,719
Engineering & Construction 117,993 26,378 38,803
Trimble Field Solutions 32,527 13,909 11,299
Advanced Devices 13,212 2,323 2,243
Trimble Mobile Solutions (3,072) 223 374
Corporate and Other Charges (35,715) $(9,768) $(14,049)
Non-operating income (expense) (40,091) $(7,237) $(10,167)
and income taxes
Net Income $84,854 $25,828 $28,503
GAAP operating margin% 16.1% 14.6% 15.8% (a)
Non-GAAP operating margin% 17.2% 17.1% 19.0%
GAAP EPS $1.49 $0.45 $0.49
Fully-taxed (35%) Non-GAAP EPS $1.43 $0.52 $0.59
Balance Sheet Metrics
Cash & Cash Equivalents $97,648 $107,726
Accounts Receivables, Net $171,392 $171,942
Inventories, Net $101,552 $113,925
Total Debt $603 $890
Short Term Debt 166 431
Long Term Debt 437 459
Equity $611,860 $664,739
Cashflow Metrics
Cash Flow from (used in) Operations $92,880 $18,298 $41,071
Working Capital $249,302 $257,808
Capital Expenditures $23,436 $4,972 $5,971
EBITDA $143,974 $40,882 $47,748
Amortization of Intangibles 7,019 2,380 3,766
Depreciation 10,671 3,104 3,386
Financial Ratios
Days Sales Outstanding 57 55
Inventory Turns (trailing 12 months) 4.0 4.0
Current ratio 2.6 2.5
Debt to Equity 0.0 0.0
Other
Headcount 2,543 2,627
(a) Impact of moving joint venture transactions from non-operating to
operating income - reduced gross margin by 2.5 points and operating
income by 2.2 points in Q2'06.
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).
Web site: http://www.trimble.com/