The following table is a summary of revenue and operating income by segment:segment compared for the periods indicated:
| | | | | | | | | | | | | | | | | | | | | |
| First Quarter of | | |
| 2021 | | 2020 | | Change | | | | |
(In millions) | | | | | | | | | |
Buildings and Infrastructure | | | | | | | | | |
Segment revenue | $ | 343.1 | | | $ | 296.9 | | | 16% | | | | |
Segment revenue as a percent of total revenue | 39 | % | | 37 | % | | | | | | |
Segment operating income | $ | 96.4 | | | $ | 60.8 | | | 59% | | | | |
Segment operating income as a percent of segment revenue | 28.1 | % | | 20.5 | % | | | | | | |
Geospatial | | | | | | | | | |
Segment revenue | $ | 181.7 | | | $ | 146.2 | | | 24% | | | | |
Segment revenue as a percent of total revenue | 20 | % | | 18 | % | | | | | | |
Segment operating income | $ | 48.7 | | | $ | 30.5 | | | 60% | | | | |
Segment operating income as a percent of segment revenue | 26.8 | % | | 20.9 | % | | | | | | |
Resources and Utilities | | | | | | | | | |
Segment revenue | $ | 205.2 | | | $ | 180.3 | | | 14% | | | | |
Segment revenue as a percent of total revenue | 23 | % | | 23 | % | | | | | | |
Segment operating income | $ | 80.1 | | | $ | 66.9 | | | 20% | | | | |
Segment operating income as a percent of segment revenue | 39.0 | % | | 37.1 | % | | | | | | |
Transportation | | | | | | | | | |
Segment revenue | $ | 156.7 | | | $ | 170.6 | | | (8)% | | | | |
Segment revenue as a percent of total revenue | 18 | % | | 21 | % | | | | | | |
Segment operating income | $ | 8.4 | | | $ | 16.9 | | | (50)% | | | | |
Segment operating income as a percent of segment revenue | 5.4 | % | | 9.9 | % | | | | | | |
| | | | | | | | | |
|
| | | | | | | | | | | | | | | |
| Third Quarter of | | First Three Quarters of |
| 2017 | | 2016 | | 2017 | | 2016 |
(In millions) | | | | | | | |
Buildings and Infrastructure | | | | | | | |
Revenue | $ | 214.5 |
| | $ | 189.3 |
| | $ | 625.3 |
| | $ | 565.8 |
|
Segment revenue as a percent of total revenue | 32 | % | | 33 | % | | 32 | % | | 32 | % |
Operating income | $ | 52.2 |
| | $ | 40.9 |
| | $ | 135.3 |
| | $ | 102.2 |
|
Operating income as a percent of segment revenue | 24 | % | | 22 | % | | 22 | % | | 18 | % |
Geospatial | | | | | | | |
Revenue | $ | 169.7 |
| | $ | 159.9 |
| | $ | 484.8 |
| | $ | 476.0 |
|
Segment revenue as a percent of total revenue | 25 | % | | 27 | % | | 25 | % | | 27 | % |
Operating income | $ | 36.7 |
| | $ | 35.3 |
| | $ | 94.8 |
| | $ | 89.9 |
|
Operating income as a percent of segment revenue | 22 | % | | 22 | % | | 20 | % | | 19 | % |
Resources and Utilities | | | | | | | |
Revenue | $ | 114.4 |
| | $ | 87.5 |
| | $ | 345.3 |
| | $ | 300.3 |
|
Segment revenue as a percent of total revenue | 17 | % | | 15 | % | | 18 | % | | 17 | % |
Operating income | $ | 26.5 |
| | $ | 25.2 |
| | $ | 103.5 |
| | 90.0 |
|
Operating income as a percent of segment revenue | 23 | % | | 29 | % | | 30 | % | | 30 | % |
Transportation | | | | | | | |
Revenue | $ | 171.4 |
| | $ | 147.4 |
| | $ | 490.4 |
| | $ | 434.6 |
|
Segment revenue as a percent of total revenue | 26 | % | | 25 | % | | 25 | % | | 24 | % |
Operating income | $ | 31.2 |
| | $ | 26.5 |
| | $ | 82.2 |
| | $ | 70.7 |
|
Operating income as a percent of segment revenue | 18 | % | | 18 | % | | 17 | % | | 16 | % |
AThe following table is a reconciliation of our consolidated segment operating income to consolidated income before taxes follows:taxes:
|
| | | | | | | | | | | | | | | |
| Third Quarter of | | First Three Quarters of |
| 2017 | | 2016 | | 2017 | | 2016 |
(In millions) | | | | | | | |
Consolidated segment operating income | $ | 146.6 |
| | $ | 127.9 |
| | $ | 415.8 |
| | $ | 352.8 |
|
Unallocated corporate expense | (23.0 | ) | | (17.1 | ) | | (61.8 | ) | | (54.5 | ) |
Restructuring charges | (1.6 | ) | | (4.0 | ) | | (7.8 | ) | | (11.0 | ) |
Amortization of purchased intangible assets | (40.0 | ) | | (37.3 | ) | | (109.1 | ) | | (117.2 | ) |
Stock-based compensation | (16.1 | ) | | (13.3 | ) | | (45.0 | ) | | (40.0 | ) |
Amortization of acquisition-related inventory step-up | (2.2 | ) | | — |
| | (2.8 | ) | | — |
|
Acquisition and divestiture items | 0.3 |
| | (0.9 | ) | | (6.1 | ) | | (3.4 | ) |
Executive transition costs | — |
| | — |
| | — |
| | (1.0 | ) |
Consolidated operating income | 64.0 |
| | 55.3 |
| | 183.2 |
| | 125.7 |
|
Non-operating income (expense), net: | 5.6 |
| | (3.1 | ) | | 19.6 |
| | (5.8 | ) |
Consolidated income before taxes | $ | 69.6 |
| | $ | 52.2 |
| | $ | 202.8 |
| | $ | 119.9 |
|
| | | | | | | | | | | | | | | |
| First Quarter of | | |
| 2021 | | 2020 | | | | |
(In millions) | | | | | | | |
Consolidated segment operating income | $ | 233.6 | | | $ | 175.1 | | | | | |
Unallocated general corporate expenses | (24.4) | | | (13.9) | | | | | |
Acquired deferred revenue adjustment | (0.2) | | | (1.7) | | | | | |
Amortization of acquired capitalized commissions | 1.2 | | | 1.5 | | | | | |
Amortization of purchased intangible assets | (35.8) | | | (40.4) | | | | | |
Acquisition / divestiture items | (3.5) | | | (10.8) | | | | | |
Stock-based compensation / deferred compensation | (28.7) | | | (4.5) | | | | | |
Restructuring and other exit costs | (1.5) | | | (3.2) | | | | | |
COVID-19 expenses | 0.2 | | | (3.8) | | | | | |
Consolidated operating income | 140.9 | | | 98.3 | | | | | |
Total non-operating expense, net | (3.5) | | | (18.9) | | | | | |
Consolidated income before taxes | $ | 137.4 | | | $ | 79.4 | | | | | |
Buildings and Infrastructure
Buildings and Infrastructure revenue increased by $25.2$46.2 million or 13% and $59.5 million or 11% for the third quarter and the first three quarters of fiscal 2017, respectively, compared to the corresponding periods in fiscal 2016.16%. Segment operating income increased $11.3$35.6 million or 28%59%.
Revenue increased across many regions due in equal parts to hardware and $33.1 million or 32% for the third quarter and the first three quarters of fiscal 2017, respectively, compared to the corresponding periods in fiscal 2016.
The revenue increase for the third quarter and the first three quarters of fiscal 2017 was primarily due to organic growthrelated software sales in civil engineering and construction, products. Buildingresulting from strong residential construction includingspend and higher subscription revenue in our architecturesoftware businesses. The increase in subscription revenue resulted from the cumulative effect of conversions from perpetual licenses to subscription offerings for existing customers, as well as new sales to existing and design, structural engineering,new customers. Segment operating income and mechanical, electrical and plumbing products also contributed to growth. In the third quarter, Buildings and Infrastructure
experienced strong growth in markets suchoperating income as North America, Europe, and Asia Pacific, particularly in Japan and Australia. Operating incomea percentage of revenue increased for the third quarter and the first three quarters of fiscal 2017, primarily due to revenue and gross margin expansion, including a higher mix of software and subscription revenue, as well as operating expense control across the segment.control.
Geospatial
Geospatial revenue increased by $9.8$35.5 million or 6% and $8.8 million or 2% for the third quarter and the first three quarters of fiscal 2017, respectively, compared to the corresponding periods in fiscal 2016.24%. Segment operating income increased by $1.4$18.2 million or 4%60%.
Revenue increased primarily driven by geospatial survey new product introductions and $4.9 million or 5% for the third quarterstrong markets across major regions. Segment operating income and the first three quarterssegment operating income as a percentage of fiscal 2017, respectively, compared to the corresponding periods in fiscal 2016.
The revenue increase for the third quarter and first three quarters of fiscal 2017 wasincreased primarily due to geospatial organic growth for optical and Global Navigation Satellite Systems (GNSS) products, including the new SX 10, our scanning total station, and end market diversification. In the third quarter, Geospatial experienced growth in most regions including North America and Europe. Operating income increased for the third quarter and the first three quarters of fiscal 2017 primarily due tostrong revenue expansion partially offset by higherand operating expense including trade show costs.control.
Resources and Utilities
Resources and Utilities revenue increased by $26.9$24.9 million or 31% and $45.0 million or 15% for the third quarter and the first three quarters of fiscal 2017, respectively, compared to the corresponding periods in fiscal 2016. Segment operating income increased $1.3 million or 5% and $13.5 million or 15% for the third quarter and the first three quarters of fiscal 2017, respectively, compared to the corresponding periods in fiscals 2016.
Resources and Utilities revenue increased for the third quarter and the first three quarters of fiscal 2017 primarily due to acquisitions, including the impact of the Müller-Elektronik acquisition, and continued organic growth in agriculture and correction services. Although the Müller-Elektronik acquisition contributed significant growth to segment revenue, it was less impactful to consolidated revenue. In the third quarter, Agriculture continued to experience growth in North America in our aftermarket and OEM sales. Europe, Russia and Brazil were also up and continued to reflect penetration-related growth opportunities. Growth in Europe was also impacted positively by the Müller-Elektronik acquisition. Operating income increased for the third quarter and the first three quarters of fiscal 2017 primarily due to revenue expansion in agriculture and correction services and operating expense control across the segments, offset by impacts of new acquisitions, including the Müller-Elektronik acquisition.
Transportation
Transportation revenue increased by $24.0 million or 16% and $55.8 million or 13% for the third quarter and the first three quarters of fiscal 2017, respectively, compared to the corresponding periods in fiscal 2016.14%. Segment operating income increased by $4.7$13.2 million or 18%20%.
Revenue increased due to agriculture business strength in the reseller and $11.5 million or 16% for the third quarterOEM channels across major regions. Strong market fundamentals, including favorable commodity prices, government stimulus programs, and the first three quartersrobust new tractor sales, fueled growth. Segment operating income and segment operating income as a percentage of fiscal 2017, respectively, comparedrevenue increased primarily due to the corresponding periods in fiscal 2016.strong agriculture revenue and operating expense control.
Transportation
Transportation revenue increased for the third quarterdecreased $13.9 million or 8%. Segment operating income decreased $8.5 million or 50%.
Revenue decreased due in part to lower hardware and the first three quarterssubscription revenue in our mobility business resulting from competitive product performance challenges, which resulted in lower prices and a declining subscriber count. Additionally, a divestiture impacted year-over-year segment revenue trends. These declines were partially offset by subscription growth in our enterprise software business. Segment operating income and segment operating income as a percentage of fiscal 2017revenue decreased primarily due to continued organic growthrevenue and gross margin compression, partially offset by cost reductions.
LIQUIDITY AND CAPITAL RESOURCES
| | | | | | | | | | | | | | | | | |
| First Quarter of | | Fiscal Year End | | |
As of | 2021 | | 2020 | | Change |
(In millions, except percentages) | | | | | |
Cash and cash equivalents | $ | 264.6 | | | $ | 237.7 | | | $ | 26.9 | |
As a percentage of total assets | 3.9 | % | | 3.5 | % | | |
Principal balance of outstanding debt | $ | 1,397.6 | | | $ | 1,555.9 | | | $ | (158.3) | |
| | | | | |
| First Quarter of | | |
| 2021 | | 2020 | | Change |
(In millions) | | | | | |
Cash provided by operating activities | $ | 228.2 | | | $ | 155.7 | | | $ | 72.5 | |
Cash used in investing activities | (9.2) | | | (214.4) | | | $ | 205.2 | |
Cash (used in) provided by financing activities | (186.9) | | | 99.6 | | | $ | (286.5) | |
Effect of exchange rate changes on cash and cash equivalents | (5.2) | | | (13.3) | | | $ | 8.1 | |
Net increase in cash and cash equivalents | $ | 26.9 | | | $ | 27.6 | | | $ | (0.7) | |
Cash and Cash Equivalents
Our ability to continue to generate cash from operations will depend in large part on profitability, the rate of collections of accounts receivable, our inventory turns, and our ability to manage other areas of working capital. Our cash and cash equivalents are maintained with several financial institutions. Deposits held with banks may exceed the amount of insurance provided on such deposits. Generally, these deposits may be redeemed upon demand and are maintained with financial institutions considered to be of reputable credit and to present little credit risk.
We believe that our cash and cash equivalents and borrowings, as described below under the heading “Debt”, along with cash provided by operations will be sufficient to meet our anticipated operating cash needs, debt service, any stock repurchases under the stock repurchase program, and planned capital expenditures in the transportation and logistics business, particularly in North America due to the Electronic Logging Device (ELD) government mandate as well as complementary product sales such as video cameras. The continued technology deployment due to the ELD mandate. as well as routing and navigation management products, resulted in continued SaaS subscription revenue growth. next twelve months.
Operating income increased for the third quarter and the first three quarters of fiscal 2017 due to revenue expansion in the transportation and logistics business and operating expense control across the segments.Activities
Research and Development, Sales and Marketing and General and Administrative Expense
Research and development (R&D), sales and marketing (S&M) and general and administrative (G&A) expense are summarized in the following table:
|
| | | | | | | | | | | | | | | |
| Third Quarter of | | First Three Quarters of |
| 2017 | | 2016 | | 2017 | | 2016 |
(In millions) | | | | | | | |
Research and development | $ | 92.6 |
| | $ | 86.9 |
| | $ | 272.1 |
| | $ | 266.6 |
|
Percentage of revenue | 14 | % | | 15 | % | | 14 | % | | 15 | % |
Sales and marketing | $ | 100.6 |
| | $ | 88.6 |
| | $ | 295.8 |
| | $ | 282.7 |
|
Percentage of revenue | 15 | % | | 15 | % | | 15 | % | | 16 | % |
General and administrative | $ | 74.0 |
| | $ | 59.2 |
| | $ | 218.4 |
| | $ | 193.1 |
|
Percentage of revenue | 11 | % | | 10 | % | | 11 | % | | 11 | % |
Total | $ | 267.2 |
| | $ | 234.7 |
| | $ | 786.3 |
| | $ | 742.4 |
|
Percentage of revenue | 40 | % | | 40 | % | | 40 | % | | 42 | % |
Overall, R&D, S&M and G&A expense increased by approximately $32.5 million and $43.9 million for the third quarter and the first three quarters of fiscal 2017, respectively, compared to the corresponding periods in fiscal 2016.
Research and development expense increased by $5.7 million or 7% for the third quarter and 5.5 million or 2% for the first three quarters of fiscal 2017, respectively, compared to the corresponding periods in fiscal 2016.
As compared to the prior year, theThe increase in the third quartercash provided by operating activities of fiscal 2017$72.5 million was primarily driven by higher net income adjusted for non-cash items and positive working capital changes, including lower inventory, accounts payable, and accrued compensation and benefits requirements.
Investing Activities
The decrease of cash used in investing activities of $205.2 million was primarily due to $4.0 million in expense from acquisitions not applicablethe Kuebix acquisition included in the prior corresponding period, a $3.6 millionyear.
Financing Activities
The increase in compensation expense, andcash used in financing activities of $286.5 million was primarily driven by a $1.4 million increase due to unfavorable foreign exchange rates,decrease in debt proceeds, net of debt repayments, partially offset by a $1.9 million decrease in consulting expense, and a $1.4 million decrease in other expense.repurchases of common stock.
Compared to the prior year, the increase inDebt
During the first three quarters of fiscal 2017 was primarily due to an $8.5 million increase in compensation expense and $5.1 million in expense from acquisitions not applicable in the prior corresponding period, partially offset by a $4.9 million decrease in other expense, a $2.6 million decrease in consulting expense, and a $0.6 million decrease due to favorable foreign exchange rates.
Overall, research and development spending was 14% of revenue in both the third quarter and the first three quarters of fiscal 2017, compared to 15% in both the corresponding periods of fiscal 2016.
We believe that the development and introduction of new products are critical to our future success, and we expect to continue active development of new products.
Sales and marketing expense increased by $12.0 million or 14% and $13.1 million or 5% for the third quarter and the first three quarters of fiscal 2017, respectively, compared to the corresponding periods in fiscal 2016.
Compared to the prior year, the increase in the third quarter of fiscal 2017 was primarily due2021, we repaid $154.9 million of debt, net of debt proceeds. Each of our debt agreements requires us to a $6.5 million increasemaintain compliance with certain debt covenants, all of which we were in compensation expense, $3.3 million in expense from acquisitions not applicable incompliance with at the prior corresponding period, a $1.4 million increase due to unfavorable foreign exchange rates, and a $0.8 million increase in other expense.
Compared toend of the prior year, the increase in the first three quarters of fiscal 2017 was primarily due to a $7.9 million increase in compensation expense, $5.3 million in expense from acquisitions not applicable in the prior corresponding period, and a $1.3 million increase in travel/marketing cost primarily due to global dealer meetings and trade shows, partially offset by a $0.8 million decrease due to favorable foreign exchange rates, and a $0.6 million decrease in other expense.
Overall, spending for sales and marketing was 15% of revenue in both the third quarter and the first three quarters of fiscal 2017, compared to approximately 15% and 16% in the corresponding periods of fiscal 2016, respectively.
General and administrative expense increased by $14.8 million or 25% and $25.3 million or 13% for the third quarter and the first three quarters of fiscal 2017, respectively, compared to the corresponding periods in fiscal 2016.
Compared to the prior year, the increase in the third quarter of fiscal 2017 was primarily due2021. Refer to a $9.5 million increase in compensation expense, $4.0 million in expense from acquisitions not applicable in the prior corresponding period, a $0.8 million increase in other expense,Note 6 “Debt” of this Form 10-Q for more information regarding our debt.
Off Balance Sheet Financing and a $0.5 million increase due to unfavorable foreign exchange rates.Liabilities
Compared to the prior year, the increase in the first three quarters of fiscal 2017 was primarily due to a $20.2 million increase in compensation expense and $7.2 million in expense from acquisitions not applicable in the prior corresponding period, partially offset by a $1.5 million decrease in other expense and a $0.6 million decrease due to favorable foreign exchange rates.
Overall, general and administrative spending was 11% of revenue in both the third quarter and the first three quarters of fiscal 2017, compared to approximately 10% and 11% in the corresponding periods of 2016, respectively.
Restructuring charges
Restructuring charges primarily consist of severance and benefits, resulting from employee headcount reductions in connection with our restructuring programs related to decisions to streamline processes and reduce the cost structure. As of the end of the thirdfirst quarter of fiscal 2017, our restructuring liability was $1.1 million, which is expected to be substantially settled by the third quarter of fiscal 2018. Restructuring liabilities are reported within Other current liabilities on the Condensed Consolidated Balance Sheets.
Amortization of Purchased Intangible Assets
Amortization of purchased intangible assets was $40.0 million in the third quarter of fiscal 2017, compared to $37.3 million in the third quarter of fiscal 2016. Of the total $40.0 million in the third quarter of fiscal 2017, $17.0 million is presented as a separate line within Operating expense2021, other than inventory purchases and $23.0 million is presented as a separate line within Cost of sales in our Condensed Consolidated Statements of Income. Of the total $37.3 million in the third quarter of fiscal 2016, $15.5 million is presented as a separate line within Operating expense and $21.8 million is presented as a separate line within Cost of sales in our Condensed Consolidated Statements of Income. Amortization in the third quarter of fiscal 2017 reflects acquisitions not included in the corresponding period of fiscal 2016 offset by the fully amortized intangibles from prior acquisitions. As of the end of the third quarter of fiscal 2017 future amortization of intangible assets is expected to be $39.6 million during the remainder of fiscal 2017, $133.3 million during 2018, $91.9 million during 2019, $63.0 million during 2020, $40.9 million during 2021 and $37.1 million thereafter.
Non-operating Income (Expense), Net
The components of Non-operating income (expense), net, were as follows:
|
| | | | | | | | | | | | | | | |
| Third Quarter of | | First Three Quarters of |
| 2017 | | 2016 | | 2017 | | 2016 |
(In millions) | | | | | | | |
Interest expense, net | $ | (6.3 | ) | | $ | (6.6 | ) | | $ | (18.4 | ) | | $ | (19.8 | ) |
Foreign currency transaction gain (loss), net | 1.6 |
| | — |
| | 3.0 |
| | (1.6 | ) |
Income from equity method investments, net | 8.7 |
| | 5.2 |
| | 22.8 |
| | 13.9 |
|
Other income (expense), net | 1.6 |
| | (1.7 | ) | | 12.2 |
| | 1.7 |
|
Total non-operating income (expense), net | $ | 5.6 |
| | $ | (3.1 | ) | | $ | 19.6 |
| | $ | (5.8 | ) |
Non-operating income (expense), net increased $8.7 million and $25.4 million for the third quarter and the first three quarters of fiscal 2017, respectively, compared to the corresponding periods in fiscal 2016. The increase for the third quarter was primarily driven by an increase in joint venture profitability, an increase in Other income (expense), net due to the prior year's inclusion of divestiture losses, and to a lesser extent, the favorable impact from foreign currency exchange. The increase for the first three quarters was primarily due to an increase in Other income (expense), net due to divestiture gains, an increase in joint venture profitability and, to a lesser extent, the favorable impact from foreign currency exchange.
Income Tax Provision
Our effective income tax rate for the third quarter of fiscal 2017 was 20% as compared to 25% in the corresponding period in fiscal 2016, primarily due to a favorable change in the geographic mix of pre-tax income and stock-based compensation tax benefits. We expected the two favorable factors will impact on our fourth quarter effective tax rate. For the first three quarters of fiscal 2017, our effective income tax rate was 23% as compared to 21% in the corresponding period in fiscal 2016, primarily due
to a one time discrete tax benefit from the divestiture of the Advance Public Safety business in the second quarter of 2016, partially offset by a favorable change in the geographic mix of pre-tax income in fiscal 2017.
Historically, our effective tax rate has been lower than the U.S. federal statutory rate of 35% primarily due to the tax rates associated with certain earnings from operations in lower-tax jurisdictions. We have not provided for U.S. taxes on such earnings due to the indefinite reinvestment of such earnings outside the U.S.
OFF-BALANCE SHEET FINANCINGS AND LIABILITIES
Other than leaseother commitments incurred in the normal course of business, we dodid not have any off-balance sheet financing arrangements or liabilities, guarantee contracts, retained or contingent interests in transferred assets, or any obligation arising out of a material variable interest in an unconsolidated entity. We do not have any majority-owned subsidiaries that are not included in the Condensed Consolidated Financial Statements. Additionally, we do not have any interest in, or relationship with, any special purpose entities.liabilities.
In the normal course of business to facilitate sales of our products, we indemnify other parties, including customers, lessors and parties to other transactions with us, with respect to certain matters. We have agreedmay agree to hold the other party harmless against losses arising from a breach of representations or covenants, or out of intellectual property infringement or other claims made against certain parties. These agreements may limit the time within which an indemnification claim can be made and the amount of the
claim. From time to time, inIn connection with divesting some of our businesses or assets, we may also indemnify purchasers for certain matters in the normal course of business, such as breaches of representations, covenants, or excluded liabilities. In addition, we entered into indemnification agreements with our officers and directors, and our bylaws contain similar indemnification obligations to our agents.
It is not possible to determine the maximum potential amount under these indemnification agreements due to the limited history of prior indemnification claims and the unique facts and circumstances involved in each particular agreement. Historically, payments made by us under these agreements were not material, and no liabilities have been recorded for these obligations on the Condensed Consolidated Balance Sheets as of the end of the third quarter of fiscal 2017 and fiscal year end 2016.
LIQUIDITY AND CAPITAL RESOURCES
|
| | | | | | | |
| Third Quarter of | | Fiscal Year End |
As of | 2017 | | 2016 |
(In millions, except percentages) | | | |
Cash and cash equivalents and short-term investments | $ | 409.2 |
| | $ | 327.2 |
|
As a percentage of total assets | 9.8 | % | | 8.9 | % |
Principal balance of outstanding debt | 700.3 |
| | 624.8 |
|
| | | |
| First Three Quarters of |
| 2017 | | 2016 |
(In millions) | | | |
Cash provided by operating activities | $ | 310.0 |
| | $ | 287.0 |
|
Cash used in investing activities | (322.9 | ) | | (78.6 | ) |
Cash provided by (used in) financing activities | 34.2 |
| | (112.5 | ) |
Effect of exchange rate changes on cash and cash equivalents | 17.6 |
| | 1.6 |
|
Net increase in cash and cash equivalents | $ | 38.9 |
| | $ | 97.5 |
|
Cash and Cash Equivalents and Short-Term Investments
As of the end of the third quarter of fiscal 2017, cash, cash equivalents, and short-term investments totaled $409.2 million compared to $327.2 million as of fiscal year end 2016. We had a principal balance of outstanding debt of $700.3 million as of the end of the third quarter of fiscal 2017, compared to $624.8 million as of fiscal year end 2016.
Our ability to continue to generate cash from operations will depend in large part on profitability, the rate of collections of accounts receivable, our inventory turns and our ability to manage other areas of working capital.
Our cash, cash equivalents and short-term investments are maintained with several financial institutions. Deposits held with banks may exceed the amount of insurance provided on such deposits. Generally, these deposits may be redeemed upon demand and are maintained with financial institutions considered to be of reputable credit and to present little credit risk. Our investment policy requires the portfolio to include only securities with high credit quality and a weighted average maturity not to exceed 6 months, with the main objective of preserving capital and maintaining liquidity. We maintain an investment portfolio of various holdings, types, and maturities. We classify our investments as short-term investments based on their nature and their availability for use in current operations. We believe that our cash and cash equivalents, short-term investments, and borrowings under our 2014 Credit Facility as described below under the heading "Debt", will be sufficient to meet our anticipated operating cash needs, debt service, planned capital expenditures, and stock repurchases under the stock repurchase program for at least the next twelve months.
Operating Activities
Cash provided by operating activities was $310.0 million for the first three quarters of fiscal 2017, compared to $287.0 million for the first three quarters of fiscal 2016. The increase of $23.0 million was primarily driven by an increase in revenue, partially offset by an increase in working capital requirements, primarily inventory and accounts receivable.
Investing Activities
Cash used in investing activities was $322.9 million for the first three quarters of fiscal 2017, compared to $78.6 million for the first three quarters of fiscal 2016. The increase of $244.3 million was primarily due to increased spending for business acquisitions and purchases of available-for-sale investments, partially offset by proceeds from maturities and sales of short-term investments and proceeds from sales of businesses.
Financing Activities
Cash provided by financing activities was $34.2 million for the first three quarters of fiscal 2017, compared to cash used in financing activities of $112.5 million for the first three quarters of fiscal 2016. The increase of cash provided by financing activities of $146.7 million was primarily driven by an increase in debt proceeds, net of repayments and an increase in issuance of common stock.
Accounts Receivable and Inventory Metrics
|
| | | | | |
| Third Quarter of | | Fiscal Year End |
As of | 2017 | | 2016 |
Accounts receivable days sales outstanding | 55 |
| | 55 |
|
Inventory turns per year | 5.2 |
| | 4.8 |
|
Accounts receivable days sales outstanding were both 55 days as of the end of the third quarter of fiscal 2017 and as of the end of fiscal 2016. Our accounts receivable days sales outstanding are calculated based on ending accounts receivable, net, divided by revenue for the corresponding fiscal quarter, times a quarterly average of 91 days. Our inventory turns were 5.2 as of the end of the third quarter of fiscal 2017, compared to 4.8 as of the end of fiscal 2016. Our inventory turnover is calculated based on total cost of sales for the most recent twelve months divided by average ending inventory, net, for this same twelve month period. To the extent that customer demand continues to increase, inventory may be purchased in advance to reduce leads times. As a result, inventory turns may decrease.
Debt
Notes
In November 2014, we issued $400.0 million of Senior Notes (the "Notes") in a public offering registered with the Securities and Exchange Commission. The Notes mature on December 1, 2024 and accrue interest at a rate of 4.75% per annum, payable semiannually in arrears in cash on December 1 and June 1 of each year. In connection with the Notes offering, we entered into an Indenture with U.S. Bank National Association, as trustee. We may redeem the Notes at our option at any time, in accordance with the terms and conditions set forth in the Indenture. Further details regarding the terms of the Notes, including the redemption rights, and the Indenture, are provided in our fiscal 2016 Annual Report on Form 10-K.
2014 Credit Facility
In November 2014, we entered into a five-year credit agreement with a group of lenders, which provides for an unsecured revolving loan facility of $1.0 billion (the "2014 Credit Facility"). Under the 2014 Credit Facility, we may borrow, repay and reborrow funds under the revolving loan facility until its maturity on November 24, 2019, at which time the revolving facility will terminate, and all outstanding loans, together with all accrued and unpaid interest, must be repaid. The interest rate on the non-current debt outstanding
under the 2014 Credit Facility was 2.48% and 1.80%Sheets at the end of the thirdfirst quarter of fiscal 20172021 and fiscal year end 2016, respectively, and is payable on a quarterly basis. The outstanding balance of $164.0 million as of the end of the third quarter of fiscal 2017 and $94.0 million at the end of fiscal 2016 are classified as long-term debt. Amounts not borrowed under the revolving facility will be subject to a commitment fee. In February 2016, we entered into an amendment to the 2014 Credit Facility to facilitate our proposed reincorporation from California to Delaware and to effect other non-financial terms. In August 2016, we entered into a second amendment to revise a definition used in determining when a change of control of the Company may occur. We were in compliance with all covenants pertaining to the 2014 Credit Facility at the end of the third quarter of fiscal 2017.2020.
Uncommitted Facilities
We also have two $75 million revolving credit facilities which are uncommitted (the "Uncommitted Facilities"). The Uncommitted Facilities may be called by the lenders at any time, have no covenants and no specified expiration date. The $135.0 million outstanding at the end of the third quarter of fiscal 2017 and the $130.0 million outstanding at the end of fiscal 2016 under the Uncommitted Facilities are considered short-term debt. The weighted average interest rate on the Uncommitted Facilities was 2.11% at the end of the third quarter of fiscal 2017 and 1.65% at the end of fiscal 2016.
Promissory Notes and Other Debt
At the end of the third quarter of fiscal 2017 and the end of fiscal 2016, we had promissory notes and other notes payable totaling approximately $1.3 million and $0.8 million, respectively, of which $0.9 million and $0.5 million, respectively, was classified as long-term debt.
For additional discussion of our debt, see Note 7 of Notes to Condensed Consolidated Financial Statements.
Repatriation of Foreign Earnings and Income Taxes
As of the third quarter of fiscal 2017, $399.2 million of cash, cash equivalents and short-term investment was held by our foreign subsidiaries, of which $7.2 million was borrowed from the U.S. under intercompany financing arrangements. If these loaned funds are needed for our operations in the U.S., we would not be required to accrue and pay U.S. federal and state taxes to repatriate the loaned funds. To the extent of other repatriation of cash held by foreign entities, we generally would be required to pay U.S. federal and state taxes. While a significant portion of our foreign earnings continue to be permanently reinvested in our foreign subsidiaries, it is anticipated this reinvestment will not impede cash needs at the parent company level. However, if we were to make significant acquisitions or stock repurchases, we may be required to increase our outstanding indebtedness, which could result in increased borrowing costs. In our determination of which foreign earnings are permanently reinvested, we consider numerous factors, including the financial requirements of the U.S. parent company, the financial requirements of the foreign subsidiaries, and the tax consequences of remitting the foreign earnings back to the U.S. There are no other material impediments to our ability to access sources of liquidity and our resulting ability to meet short and long-term liquidity needs, other than in the event we are not in compliance with the covenants under our 2014 Credit Facility or the potential tax costs of remitting foreign earnings back to the U.S.
RECONCILIATIONSUPPLEMENTAL DISCLOSURE OF GAAP TOANNUALIZED RECURRING REVENUE AND NON-GAAP FINANCIAL MEASURES
To supplement our condensed consolidated financial information, we believe that the following information is helpful to gain an overall understanding of our past financial performance and prospects for the future. 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 following tables as well asand detailed explanations to the adjustments to comparable GAAP measures are set forth below:below.
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | First Quarter of | | | |
| | 2021 | | 2020 | | | | | |
| | Dollar | % of | | Dollar | % of | | | | | | | |
(In millions, except per share amounts) | | Amount | Revenue | | Amount | Revenue | | | | | | | |
REVENUE: | | | | | | | | | | | | | |
GAAP revenue: | | $ | 886.5 | | | | $ | 792.3 | | | | | | | | | |
Acquired deferred revenue adjustment | (A) | 0.2 | | | | 1.7 | | | | | | | | | |
Non-GAAP revenue: | | $ | 886.7 | | | | $ | 794.0 | | | | | | | | | |
GROSS MARGIN: | | | | | | | | | | | | | |
GAAP gross margin: | | $ | 493.3 | | 55.6 | % | | $ | 441.0 | | 55.7 | % | | | | | | | |
Acquired deferred revenue adjustment | (A) | 0.2 | | | | 1.7 | | | | | | | | | |
Amortization of purchased intangible assets | (C) | 22.1 | | | | 23.5 | | | | | | | | | |
Acquisition / divestiture items | (D) | — | | | | 1.7 | | | | | | | | | |
Stock-based compensation / deferred compensation | (E) | 2.0 | | | | 0.7 | | | | | | | | | |
Restructuring and other exit costs | (F) | — | | | | 0.3 | | | | | | | | | |
| | | | | | | | | | | | | |
Non-GAAP gross margin: | | $ | 517.6 | | 58.4 | % | | $ | 468.9 | | 59.1 | % | | | | | | | |
OPERATING EXPENSES: | | | | | | | | | | | | | |
GAAP operating expenses: | | $ | 352.4 | | 39.8 | % | | $ | 342.7 | | 43.3 | % | | | | | | | |
Amortization of acquired capitalized commissions | (B) | 1.2 | | | | 1.5 | | | | | | | | | |
Amortization of purchased intangible assets | (C) | (13.7) | | | | (16.9) | | | | | | | | | |
Acquisition / divestiture items | (D) | (3.5) | | | | (9.1) | | | | | | | | | |
Stock-based compensation / deferred compensation | (E) | (26.7) | | | | (3.8) | | | | | | | | | |
Restructuring and other exit costs | (F) | (1.5) | | | | (2.9) | | | | | | | | | |
COVID-19 expenses | (G) | 0.2 | | | | (3.8) | | | | | | | | | |
Non-GAAP operating expenses: | | $ | 308.4 | | 34.8 | % | | $ | 307.7 | | 38.8 | % | | | | | | | |
OPERATING INCOME: | | | | | | | | | | | | | |
GAAP operating income: | | $ | 140.9 | | 15.9 | % | | $ | 98.3 | | 12.4 | % | | | | | | | |
Acquired deferred revenue adjustment | (A) | 0.2 | | | | 1.7 | | | | | | | | | |
Amortization of acquired capitalized commissions | (B) | (1.2) | | | | (1.5) | | | | | | | | | |
Amortization of purchased intangible assets | (C) | 35.8 | | | | 40.4 | | | | | | | | | |
Acquisition / divestiture items | (D) | 3.5 | | | | 10.8 | | | | | | | | | |
Stock-based compensation / deferred compensation | (E) | 28.7 | | | | 4.5 | | | | | | | | | |
Restructuring and other exit costs | (F) | 1.5 | | | | 3.2 | | | | | | | | | |
COVID-19 expenses | (G) | (0.2) | | | | 3.8 | | | | | | | | | |
Non-GAAP operating income: | | $ | 209.2 | | 23.6 | % | | $ | 161.2 | | 20.3 | % | | | | | | | |
NON-OPERATING EXPENSE, NET: | | | | | | | | | | | | |
GAAP non-operating expense, net: | $ | (3.5) | | | | $ | (18.9) | | | | | | | | | |
Acquisition / divestiture items | (D) | (2.1) | | | | — | | | | | | | | | |
Deferred compensation | (E) | (1.5) | | | | 6.2 | | | | | | | | | |
| | | | | | | | | | | | | |
Non-GAAP non-operating expense, net: | $ | (7.1) | | | | $ | (12.7) | | | | | | | | | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | GAAP and Non-GAAP Tax Rate % | | | GAAP and Non-GAAP Tax Rate % | | | | | | | |
| | | (J) | | | (J) | | | | | | | |
INCOME TAX PROVISION: | | | | | | | | | | | | | |
GAAP income tax provision: | | $ | 22.8 | | 16.6 | % | | $ | 17.5 | | 22.0 | % | | | | | | | |
Non-GAAP items tax effected | (H) | 10.7 | | | | 15.2 | | | | | | | | | |
Difference in GAAP and Non-GAAP tax rate | (I) | 1.5 | | | | (6.7) | | | | | | | | | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
Non-GAAP income tax provision: | | $ | 35.0 | | 17.3 | % | | $ | 26.0 | | 17.5 | % | | | | | | | |
NET INCOME: | | | | | | | | | | | | | |
GAAP net income attributable to Trimble Inc.: | | $ | 114.5 | | | | $ | 61.9 | | | | | | | | | |
Acquired deferred revenue adjustment | (A) | 0.2 | | | | 1.7 | | | | | | | | | |
Amortization of acquired capitalized commissions | (B) | (1.2) | | | | (1.5) | | | | | | | | | |
Amortization of purchased intangible assets | (C) | 35.8 | | | | 40.4 | | | | | | | | | |
Acquisition / divestiture items | (D) | 1.4 | | | | 10.8 | | | | | | | | | |
Stock-based compensation / deferred compensation | (E) | 27.2 | | | | 10.7 | | | | | | | | | |
Restructuring and other exit costs | (F) | 1.5 | | | | 3.2 | | | | | | | | | |
COVID-19 expenses | (G) | (0.2) | | | | 3.8 | | | | | | | | | |
| | | | | | | | | | | | | |
Non-GAAP tax adjustments | (H) - (I) | (12.2) | | | | (8.5) | | | | | | | | | |
Non-GAAP net income attributable to Trimble Inc.: | | $ | 167.0 | | | | $ | 122.5 | | | | | | | | | |
| | | | | | | | | | | | | |
DILUTED NET INCOME PER SHARE: | | | | | | | | | | | | | |
GAAP diluted net income per share attributable to Trimble Inc.: | | $ | 0.45 | | | | $ | 0.25 | | | | | | | | | |
Acquired deferred revenue adjustment | (A) | — | | | | 0.01 | | | | | | | | | |
Amortization of acquired capitalized commissions | (B) | — | | | | (0.01) | | | | | | | | | |
Amortization of purchased intangible assets | (C) | 0.14 | | | | 0.16 | | | | | | | | | |
Acquisition / divestiture items | (D) | — | | | | 0.04 | | | | | | | | | |
Stock-based compensation / deferred compensation | (E) | 0.11 | | | | 0.04 | | | | | | | | | |
Restructuring and other exit costs | (F) | 0.01 | | | | 0.01 | | | | | | | | | |
COVID-19 expenses | (G) | — | | | | 0.02 | | | | | | | | | |
| | | | | | | | | | | | | |
Non-GAAP tax adjustments | (H) - (I) | (0.05) | | | | (0.03) | | | | | | | | | |
Non-GAAP diluted net income per share attributable to Trimble Inc.: | | $ | 0.66 | | | | $ | 0.49 | | | | | | | | | |
| | | | | | | | | | | | | |
ADJUSTED EBITDA: | | | | | | | | | | | | | |
GAAP net income attributable to Trimble Inc.: | | $ | 114.5 | | | | $ | 61.9 | | | | | | | | | |
Non-operating expense, net, income tax provision, and net gain attributable to noncontrolling interests | | 26.4 | | | | 36.4 | | | | | | | | | |
GAAP operating income: | | 140.9 | | | | 98.3 | | | | | | | | | |
Acquired deferred revenue adjustment | (A) | 0.2 | | | | 1.7 | | | | | | | | | |
Amortization of acquired capitalized commissions | (B) | (1.2) | | | | (1.5) | | | | | | | | | |
Amortization of purchased intangible assets | (C) | 35.8 | | | | 40.4 | | | | | | | | | |
Acquisition / divestiture items | (D) | 3.5 | | | | 10.8 | | | | | | | | | |
Stock-based compensation / deferred compensation | (E) | 28.7 | | | | 4.5 | | | | | | | | | |
Restructuring and other exit costs | (F) | 1.5 | | | | 3.2 | | | | | | | | | |
COVID-19 expenses | (G) | (0.2) | | | | 3.8 | | | | | | | | | |
Non-GAAP operating income: | | 209.2 | | | | 161.2 | | | | | | | | | |
Depreciation expense | | 10.3 | | | | 9.8 | | | | | | | | | |
Income from equity method investments, net | | 11.8 | | | | 9.4 | | | | | | | | | |
Adjusted EBITDA | | $ | 231.3 | | | | $ | 180.4 | | | | | | | | | |
Annualized Recurring Revenue Explanation
In addition to providing non-GAAP financial measures, we provide an annualized recurring revenue (“ARR”) performance measure in order to provide investors with a supplementary indicator of the value of the Company's current recurring revenue contracts. ARR represents the estimated annualized value of recurring revenue, including subscription, maintenance and software revenue, and term license contracts for the quarter. ARR is calculated by adding the portion of the contract value of all of our term licenses attributable to the current quarter to our non-GAAP recurring revenue for the current quarter and dividing that sum by the number of days in the quarter and then multiplying that quotient by 365. ARR should be viewed independently of revenue and deferred revenue as it is a performance measure and is not intended to be combined with or to replace either of those items.
Non-GAAP Explanations
Non-GAAP revenue
We believe this measure helps investors understand the performance of our business, as non-GAAP revenue excludes the effects of certain acquired deferred revenue that was written down to fair value in purchase accounting. Management believes that excluding fair value purchase accounting adjustments more closely correlates with the ordinary and ongoing course of the acquired company’s operations and facilitates analysis of revenue growth and trends.
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,the effects of certain acquired deferred revenue, amortization of purchased intangible assets, acquisition/divestiture items, stock-based compensation, deferred compensation, and amortization of acquisition-related inventory step-up from GAAP gross margin.restructuring and other exit costs. We believe that these exclusionsadjustments 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,the effects of certain acquired capitalized commissions that were eliminated in purchase accounting, 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,stock-based compensation, deferred compensation, restructuring and other required closingexit costs, and executive transition costs from GAAP operatingCOVID-19 expenses. We believe that these exclusionsadjustments offer investors supplemental information to facilitate comparison of our operating expenses to our prior results.results and trends.
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,the effects of purchase accounting adjustments to certain acquired deferred revenue and acquired capitalized commissions, amortization of purchased intangible assets, acquisition/divestiture items, stock-based compensation, amortization of acquisition-related inventory step-up, acquisition/divestiture costs associated with external and incremental costs resulting directly from merger and acquisition activities such as legal, due diligence, integration,deferred compensation, restructuring and other required closingexit costs, and executive transition costs.COVID-19 expenses. We believe that these exclusionsadjustments offer an alternativea supplemental means for our investors to evaluate current operating performance compared to prior results of other periods.
and trends.
Non-GAAP non-operating income (expense),expense, net
We believe this measure helps investors evaluate our non-operating income trends. Non-GAAP non-operating income (expense),expense, net, excludes acquisition/divestiture gains/losses associated with unusual acquisition related items, such as intangible asset impairment charges and gains or losses related to the acquisition or sale of certain businesses and investments.deferred compensation. We believe that these exclusions provide investors with a supplemental view of our ongoing financial results.
Non-GAAP income tax provision
We believe that providingthis measure helps 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.presentation and a difference in the GAAP and non-GAAP tax rates. The non-GAAP tax rate excludes charges and benefits such as net deferred tax impacts results from the non-U.S. intercompany transfer of intellectual property, tax law changes, and significant one-time reserve releases upon statute of limitations expirations.
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,the effects of purchase accounting adjustments to certain acquired deferred revenue and acquired capitalized commissions, amortization of purchased intangible assets, stock-based compensation, amortization of acquisition-related inventory step-up, acquisition/divestiture items, executive transitionstock-based compensation, restructuring and other exit costs, COVID-19 expenses, and non-GAAP tax adjustments from GAAP net income.adjustments. We believe our investors benefit from understanding these exclusionsadjustments and from an alternative view of our net income performance as compared to our past net income performance.prior periods and trends.
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,the effects of purchase accounting adjustments to certain acquired deferred revenue and acquired capitalized commissions, amortization of purchased intangible assets, stock-based compensation, amortization of acquisition-related inventory step-up, acquisition/divestiture items, executive transitionstock-based compensation, restructuring and other exit costs, COVID-19 expenses, and non-GAAP tax adjustments from GAAP diluted net income per share.adjustments. We believe that these exclusionsadjustments offer investors a useful view of our diluted net income per share as compared to our past dilutedprior periods and trends.
Adjusted EBITDA
Adjusted EBITDA is a performance measure that we believe offers a useful view of the overall operations of our business. We believe it is useful because it facilitates company-to-company operating performance comparisons by removing potential differences caused by variations unrelated to operating performance, such as capital structures (interest expense), income taxes, depreciation and amortization expenses. We define Adjusted EBITDA as non-GAAP operating income plus depreciation expense and income from equity method investments, net. Other companies define Adjusted EBITDA differently and so our measure may not be directly comparable to similarly titled measures. Our investors should consider the limitations of using Adjusted EBITDA, including the fact that this measure does not provide a complete measure of our operating performance. Adjusted EBITDA is not intended to purport to be an alternative to net income per share.or operating income as a measure of operating performance or to cash flow from operating activities as a measure of liquidity. In particular, Adjusted EBITDA is not intended to be a measure of cash flow available for our discretionary expenditures, as this measure does not consider certain cash requirements, such as restructuring and other exit costs, acquisition and divestiture items, interest payments, tax payments, and other debt service requirements.
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"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 relatingthe effects of purchase accounting adjustments to restructuring charges,certain acquired deferred revenue and acquired capitalized commissions, amortization of purchased intangible assets, stock-based compensation, amortization of acquisition-related inventory step-up, acquisition/divestiture items, executive transitionstock-based compensation, deferred compensation, restructuring and other exit costs, COVID-19 expenses, and non-GAAP tax adjustments. For detailed explanations
(A).Acquired deferred revenue adjustment. Purchase accounting generally requires us to write-down acquired deferred revenue to fair value. Our GAAP revenue includes the fair value impact from purchase accounting for post-contract support and subscriptions contracts assumed in connection with our acquisitions. The non-GAAP adjustment to our revenue is intended to reflect the full amount of such revenue. We believe this adjustment is useful to investors as a measure of the ongoing performance of our business and facilitates analysis of revenue growth and business trends.
(B).Amortization of acquired capitalized commissions. Purchase accounting generally requires us to eliminate capitalized sales commissions balances as of the acquisition date. Our GAAP sales and marketing expenses generally do not reflect the amortization of these capitalized sales commissions balances. The non-GAAP adjustment to increase our sales and marketing expenses is intended to reflect the full amount of amortization related to such balances as though the acquired companies operated independently in the periods presented. We believe this adjustment to sales and marketing expenses is useful to investors as a measure of the ongoing performance of our business.
(C).Amortization of purchased intangible assets. Included in our GAAP presentation of cost of sales and operating expenses is amortization of purchased intangible assets. We believe that by excluding the amortization of purchased intangible assets, which primarily represents technology and/or customer relationships already developed, this provides an alternative way for investors to compare our operations pre-acquisition to those post-acquisition 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.
(D).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 and adjustments made to comparablethe fair value of earn-out liabilities. Included in our GAAP presentation of non-operating 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 see items ( A ) - ( I ) below.are costs specific
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| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Third Quarter of | | First Three Quarters of | |
| | 2017 | | 2016 | | 2017 | | 2016 | |
| | Dollar | | % of | | Dollar | | % of | | Dollar | | % of | | Dollar | | % of | |
(In millions, except per share amounts) | | Amount | | Revenue | | Amount | | Revenue | | Amount | | Revenue | | Amount | | Revenue | |
GROSS MARGIN: | | | | | | | | | | | | | | | | | |
GAAP gross margin: | | $ | 349.5 |
| | 52.2 | % | | $ | 309.0 |
| | 52.9 | % | | $ | 1,022.6 |
| | 52.6 | % | | $ | 925.2 |
| | 52.1 | % | |
Restructuring charges | ( A ) | 0.3 |
| | — | % | | 0.5 |
| | 0.1 | % | | 1.3 |
| | 0.1 | % | | 1.2 |
| | 0.1 | % | |
Amortization of purchased intangible assets | ( B ) | 23.0 |
| | 3.4 | % | | 21.8 |
| | 3.7 | % | | 62.5 |
| | 3.2 | % | | 69.9 |
| | 3.9 | % | |
Stock-based compensation | ( C ) | 1.1 |
| | 0.2 | % | | 0.9 |
| | 0.2 | % | | 2.8 |
| | 0.1 | % | | 2.8 |
| | 0.1 | % | |
Amortization of acquisition-related inventory step-up | ( D ) | 2.2 |
| | 0.3 | % | | — |
| | — | % | | 2.8 |
| | 0.1 | % | | — |
| | — | % | |
Non-GAAP gross margin: | | $ | 376.1 |
|
| 56.1 | % | | $ | 332.2 |
| | 56.9 | % | | $ | 1,092.0 |
| | 56.1 | % | | $ | 999.1 |
| | 56.2 | % | |
to particular acquisitions. These are one-time costs that vary significantly in amount and timing and are not indicative of our core operating performance.
(E).Stock-based compensation / deferred compensation. Included in our GAAP presentation of cost of sales and operating expenses are stock-based compensation consists of expenses for employee stock options and awards and purchase rights under our employee stock purchase plan. Additionally, included in our GAAP presentation of cost of sales and operating expenses are income or expense associated with movement in our non-qualified deferred compensation plan liabilities. Changes in non-qualified deferred compensation plan assets, included in non-operating expense, net, offset the income or expense in the plan liabilities. We exclude them from our non-GAAP measures because some investors may view it as not reflective of our core operating performance as they are a non-cash item.
(F).Restructuring and other exit costs. Included in our GAAP presentation of cost of sales and operating expenses, restructuring and other exit costs are recorded for termination benefits related to reductions in employee headcount, including executive severance agreements, the closure or exit of facilities, and cancellation of certain contracts. We exclude restructuring and other exit costs 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 comparison to our past operating performance. Furthermore, these costs can vary significantly, thus exclusion from our non-GAAP results is useful to investors because it allows for period-over-period comparability. |
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OPERATING EXPENSES: | | | | | | | | | | | | | | | | | |
GAAP operating expenses: | | $ | 285.5 |
| | 42.6 | % | | $ | 253.7 |
| | 43.4 | % | | $ | 839.4 |
| | 43.2 | % | | $ | 799.5 |
| | 45.0 | % | |
Restructuring charges | ( A ) | (1.3 | ) | | (0.2 | )% | | (3.5 | ) | | (0.6 | )% | | (6.5 | ) | | (0.3 | )% | | (9.8 | ) | | (0.5 | )% | |
Amortization of purchased intangible assets | ( B ) | (17.0 | ) | | (2.5 | )% | | (15.5 | ) | | (2.7 | )% | | (46.6 | ) | | (2.5 | )% | | (47.3 | ) | | (2.7 | )% | |
Stock-based compensation | ( C ) | (15.0 | ) | | (2.2 | )% | | (12.4 | ) | | (2.1 | )% | | (42.2 | ) | | (2.2 | )% | | (37.2 | ) | | (2.1 | )% | |
Acquisition / divestiture items | ( E ) | 0.3 |
| | — | % | | (0.9 | ) | | (0.1 | )% | | (6.1 | ) | | (0.3 | )% | | (3.4 | ) | | (0.2 | )% | |
Executive transition costs | ( F ) | — |
| | — | % | | — |
| | — | % | | — |
| | — | % | | (1.0 | ) | | (0.1 | )% | |
Non-GAAP operating expenses: | | $ | 252.5 |
| | 37.7 | % | | $ | 221.4 |
| | 37.9 | % | | $ | 738.0 |
| | 37.9 | % | | $ | 700.8 |
| | 39.4 | % | |
OPERATING INCOME: | | | | | | | | | | | | | | | | | |
GAAP operating income: | | $ | 64.0 |
| | 9.6 | % | | $ | 55.3 |
| | 9.5 | % | | $ | 183.2 |
| | 9.4 | % | | $ | 125.7 |
| | 7.1 | % | |
Restructuring charges | ( A ) | 1.6 |
| | 0.2 | % | | 4.0 |
| | 0.7 | % | | 7.8 |
| | 0.4 | % | | 11.0 |
| | 0.6 | % | |
Amortization of purchased intangible assets | ( B ) | 40.0 |
| | 5.9 | % | | 37.3 |
| | 6.4 | % | | 109.1 |
| | 5.7 | % | | 117.2 |
| | 6.6 | % | |
Stock-based compensation | ( C ) | 16.1 |
| | 2.4 | % | | 13.3 |
| | 2.3 | % | | 45.0 |
| | 2.3 | % | | 40.0 |
| | 2.2 | % | |
Amortization of acquisition-related inventory step-up | ( D ) | 2.2 |
| | 0.3 | % | | — |
| | — | % | | 2.8 |
| | 0.1 | % | | — |
| | — | % | |
Acquisition / divestiture items | ( E ) | (0.3 | ) | | — | % | | 0.9 |
| | 0.1 | % | | 6.1 |
| | 0.3 | % | | 3.4 |
| | 0.2 | % | |
Executive transition costs | ( F ) | — |
| | — | % | | — |
| | — | % | | — |
| | — | % | | 1.0 |
| | 0.1 | % | |
Non-GAAP operating income: | | $ | 123.6 |
| | 18.4 | % | | $ | 110.8 |
| | 19.0 | % | | $ | 354.0 |
| | 18.2 | % | | $ | 298.3 |
| | 16.8 | % | |
NON-OPERATING INCOME (EXPENSE), NET: | | | | | | | | | | | | | | | | |
GAAP non-operating income (expense), net: | $ | 5.6 |
| | | | $ | (3.1 | ) | | | | $ | 19.6 |
| | | | $ | (5.8 | ) | | | |
Acquisition / divestiture items | ( E ) | — |
| | | | 2.8 |
| | | | (8.9 | ) | | | | 0.1 |
| | | |
Non-GAAP non-operating income (expense), net: | $ | 5.6 |
| | | | $ | (0.3 | ) | | | | $ | 10.7 |
| | | | $ | (5.7 | ) | | | |
| | | | | | | | | | | | | | | | | |
| | |
| | GAAP and Non-GAAP Tax Rate % | | ( I ) | | GAAP and Non-GAAP Tax Rate % | | ( I ) | | GAAP and Non-GAAP Tax Rate % | | ( I ) | | GAAP and Non-GAAP Tax Rate % | ( I ) |
INCOME TAX PROVISION: | | | | | | | | | | | | | | | | | |
GAAP income tax provision: | | $ | 13.9 |
| | 20 | % | | $ | 13.0 |
| | 25 | % | | $ | 46.7 |
| | 23 | % | | $ | 25.4 |
| | 21 | % | |
Non-GAAP items tax effected | ( G ) | 11.9 |
| | | | 14.6 |
| | | | 37.1 |
| | | | 36.3 |
| | | |
Difference in GAAP and Non-GAAP tax rate | ( H ) | 3.8 |
| | | | (1.1 | ) | | | | — |
| | | | 8.5 |
| | | |
Non-GAAP income tax provision: | | $ | 29.6 |
| | 23 | % | | $ | 26.5 |
| | 24 | % | | $ | 83.8 |
| | 23 | % | | $ | 70.2 |
| | 24 | % | |
NET INCOME: | | | | | | | | | | | | | | | | | |
GAAP net income attributable to Trimble Inc. | | $ | 55.7 |
| | | | $ | 39.2 |
| | | | $ | 156.1 |
| | | | $ | 94.7 |
| | | |
Restructuring charges | ( A ) | 1.6 |
| | | | 4.0 |
| | | | 7.8 |
| | | | 11.0 |
| | | |
Amortization of purchased intangible assets | ( B ) | 40.0 |
| | | | 37.3 |
| | | | 109.1 |
| | | | 117.2 |
| | | |
Stock-based compensation | ( C ) | 16.1 |
| | | | 13.3 |
| | | | 45.0 |
| | | | 40.0 |
| | | |
Amortization of acquisition-related inventory step-up | ( D ) | 2.2 |
| | | | — |
| | | | 2.8 |
| | | | — |
| | | |
Acquisition / divestiture items | ( E ) | (0.3 | ) | | | | 3.7 |
| | | | (2.8 | ) | | | | 3.5 |
| | | |
Executive transition costs | ( F ) | — |
| | | | — |
| | | | — |
| | | | 1.0 |
| | | |
Non-GAAP tax adjustments | ( G ) + ( H ) | (15.7 | ) | | | | (13.5 | ) | | | | (37.1 | ) | | | | (44.8 | ) | | | |
Non-GAAP net income attributable to Trimble Inc. | | $ | 99.6 |
| | | | $ | 84.0 |
| | | | $ | 280.9 |
| | | | $ | 222.6 |
| | | |
| | | | | | | | | | | | | | | | | |
DILUTED NET INCOME PER SHARE: | | | | | | | | | | | | | | | | | |
GAAP diluted net income per share attributable to Trimble Inc. | | $ | 0.22 |
| | | | $ | 0.15 |
| | | | $ | 0.61 |
| | | | $ | 0.37 |
| | | |
Restructuring charges | ( A ) | 0.01 |
| | | | 0.02 |
| | | | 0.03 |
| | | | 0.05 |
| | | |
Amortization of purchased intangible assets | ( B ) | 0.15 |
| | | | 0.15 |
| | | | 0.42 |
| | | | 0.46 |
| | | |
Stock-based compensation | ( C ) | 0.06 |
| | | | 0.05 |
| | | | 0.17 |
| | | | 0.16 |
| | | |
Amortization of acquisition-related inventory step-up | ( D ) | 0.01 |
| | | | — |
| | | | 0.01 |
| | | | — |
| | | |
(G).COVID-19 expenses. Included in our GAAP presentation of operating expenses, COVID-19 expenses consist of costs incurred as a direct impact from the COVID-19 virus pandemic, such as cancellation fees of trade shows due to public safety issues, additional costs for disinfecting facilities, and personal protective equipment. We exclude COVID-19 expenses from our non-GAAP measures because we believe they are one-time costs that vary significantly in amount and timing and are not indicative of our core operating performance.
(H).Non-GAAP items tax effected. This amount adjusts the provision for income taxes to reflect the effect of the non-GAAP items (A) - (G) 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.
(I).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 expense, net. The non-GAAP tax rate excludes charges and benefits such as net deferred tax impacts resulting from a non-U.S. intercompany transfer of intellectual property and significant one-time reserve releases upon statute of limitations expirations. 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. |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Acquisition / divestiture items | ( E ) | — |
| | | | 0.01 |
| | | | (0.01 | ) | | | | 0.02 |
| | | |
Executive transition costs | ( F ) | — |
| | | | — |
| | | | — |
| | | | — |
| | | |
Non-GAAP tax adjustments | ( G ) + ( H ) | (0.06 | ) | | | | (0.05 | ) | | | | (0.14 | ) | | | | (0.18 | ) | | | |
Non-GAAP diluted net income per share attributable to Trimble Inc. | | $ | 0.39 |
| | | | $ | 0.33 |
| | | | $ | 1.09 |
| | | | $ | 0.88 |
| | | |
| |
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-acquisition 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 third quarter and the first three quarters of fiscal years 2017 and 2016, stock-based compensation was allocated as follows:
|
|
| | | | | | | | | | | | | | | |
| Third Quarter of | | First Three Quarters of |
(Dollars in millions) | 2017 | | 2016 | | 2017 | | 2016 |
Cost of sales | $ | 1.1 |
| | $ | 0.9 |
| | $ | 2.8 |
| | $ | 2.8 |
|
Research and development | 2.7 |
| | 2.2 |
| | 7.7 |
| | 6.9 |
|
Sales and Marketing | 2.4 |
| | 2.1 |
| | 7.0 |
| | 6.3 |
|
General and administrative | 9.9 |
| | 8.1 |
| | 27.5 |
| | 24.0 |
|
| $ | 16.1 |
| | $ | 13.3 |
| | $ | 45.0 |
| | $ | 40.0 |
|
| |
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 of cost of sales, 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 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 required closing costs, 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. | Executive transition costs. Included in our GAAP presentation of operating expenses are amounts paid to the Company's former CFO upon his departure under the terms of his executive severance agreement. We excluded these payments from our non-GAAP measures because they represent non-recurring expenses and are not indicative of our ongoing operating expenses. We further believe that excluding the executive transition costs from our non-GAAP results is useful to investors in that it allows for period-over-period comparability.
|
| |
G. | Non-GAAP items tax effected. This amount adjusts the provision for income taxes to reflect the effect of the non-GAAP items ( A ) - ( F ) 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.
|
| |
H. | 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.
|
| |
I. | GAAP and non-GAAP tax rate %.(J).GAAP and non-GAAP tax rate percentages. 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.
|
Non-GAAP Operating Income
Non-GAAP operating income increased by $12.8 million or 12% and $55.7 million or 19% for the third quarter and the first three quarters of fiscal 2017, respectively, compared to the corresponding periods in fiscal 2016. Non-GAAP operating income as a percentage of total revenue was 18.4%GAAP income before taxes and 18.2% for the third quarter and the first three quartersnon-GAAP income tax provision as a percentage of fiscal 2017, respectively, comparednon-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 19.0% and 16.8% for the corresponding periodsnon-GAAP tax rates in fiscal 2016.prior periods.
Non-GAAP operating income and Non-GAAP operating income percentage for the third quarter and first three quarters of fiscal 2017 increased primarily attributable to revenue expansion across all segments and operating expense control.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
We are exposed to market risk related to changes in interest rates and foreign currency exchange rates. We use certain derivative financial instruments to manage these risks. We do not use derivative financial instruments for speculative purposes. All financial instruments are used in accordance with policies approved by our Board of Directors.
Market Interest Rate Risk
There have been no significant changes to our market interest rate risk assessment. Referassessment since January 1, 2021. For discussion of financial markets risks related to our 2016 Annual Report onchanges in interest rate, refer to “Quantitative and Qualitative Disclosure about Market Risk” section of the 2020 Form 10-K on page 49.10-K.
Foreign Currency Exchange Rate Risk
We operate in international markets, which expose us to market risk associated with foreign currency exchange rate fluctuations between the U.S. Dollar and various foreign currencies, the most significant of which is the Euro. In addition, volatile market conditions could result in changes in exchange rates.
Historically, the majority of our revenue contracts are denominated in U.S. Dollars, with the most significant exception being Europe, where we invoice primarily in Euro. Additionally, a portion of our expenses, primarily the cost to manufacture, cost of
personnel to deliver technical support on our products and professional services, sales and sales support, and research and development are denominated in foreign currencies, primarily the Euro.
Revenue resulting from selling in local currencies and costs incurred in local currencies are exposed to foreign currency exchange rate fluctuations, which can affect our operating income. As exchange rates vary, operating income may differ from expectations. In the thirdfirst quarter of fiscal 2017, 2021, revenue and operating income were positivelywas favorably impacted by foreign currency exchange rates by $6.6$20.6 million and $0.7 million, respectively. Currency translation added approximately 1% of revenue and 1% of operating income in the third quarter of fiscal 2017.was favorably impacted by $4.9 million.
We enter into foreign currency forward contracts to minimize the short-term impact of foreign currency exchange rate fluctuations on cash, anddebt, certain trade and inter-companyintercompany receivables and payables, primarily denominated in Euro, British pound andPound, New Zealand Dollars, Brazilian Real, Canadian Dollars, Norwegian Krone, and Canadian dollars.Euro. These contracts reduce the exposure to fluctuations in foreign currency exchange rate movements, as the gains and losses associated with foreign currency balances are generally offset with the gains and losses on the forward contracts. These instruments are marked to marketmarked-to-market through earnings every period and generally range from one to two months in maturity. We do not enter into foreign currency forward contracts for trading purposes. We occasionally enter into foreign currency forward contracts to hedge the purchase price of some of our larger business acquisitions. Foreign currency forward contracts outstanding as of the end of the thirdfirst quarter of fiscal 20172021 and fiscal year end 20162020 are summarized as follows (in millions):
| | | | | | | | | | | | | | | | | | | | | | | |
| First Quarter of Fiscal 2021 | | Fiscal Year End 2020 |
| Nominal Amount | | Fair Value | | Nominal Amount | | Fair Value |
Forward contracts: | | | | | | | |
Purchased | $ | (117.0) | | | $ | 0.2 | | | $ | (99.4) | | | $ | 0.9 | |
Sold | $ | 94.5 | | | $ | (0.3) | | | $ | 52.0 | | | $ | (0.5) | |
|
| | | | | | | | | | | | | | | |
| Third Quarter of Fiscal 2017 | | Fiscal Year End 2016 |
| Nominal Amount | | Fair Value | | Nominal Amount | | Fair Value |
Forward contracts: | | | | | | | |
Purchased | $ | (54.3 | ) | | $ | — |
| | $ | (99.2 | ) | | $ | — |
|
Sold | $ | 217.3 |
| | $ | (2.6 | ) | | $ | 86.1 |
| | $ | 0.1 |
|
ITEM 4. CONTROLS AND PROCEDURES
(a) Disclosure Controls and Procedures.
The management, with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of the end of the period covered by this report. Based on such evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that, as of the end of such period, our disclosure controls and procedures are effective.
(b) Internal Control Over Financial Reporting.
There have not been any changes in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the fiscal quarter to which this report relates that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
On September 2, 2011, Recreational Data Services, LLC filed a lawsuit in the Superior Court for the State of Alaska in Anchorage against Trimble Navigation Limited, Cabela’s Incorporated, AT&T Mobility and Alascom, Inc., alleging breach of contract, breach of fiduciary duty, interference with contract, promissory estoppel, fraud, and negligent misrepresentation. The case was tried in front of a jury in Alaska beginning on September 9, 2014. On September 26, 2014, the jury returned a verdict in favor of the plaintiff and awarded the plaintiff damages of $51.3 million. On January 29, 2015, the court granted our Motion for Judgment Notwithstanding the Verdict, and on March 18, 2015, the court awarded us a portion of its incurred attorneys’ fees and costs, and entered judgment in our favor in the amount of $0.6 million. The judgment also provides that the plaintiff take nothing on its claims. On April 17, 2015, the plaintiff filed a Notice of Appeal to the Alaska Supreme Court. On March 24, 2017, the Alaska Supreme Court affirmed, in part, and reversed, in part, the trial court's decision. The Alaska Supreme Court affirmed the trial court's determination that Plaintiff had not proven damages and was not entitled to recover any lost profits, but remanded the case to the trial court for an award of nominal damages to Plaintiff. On April 17, 2017, Plaintiff filed a Motion for Rehearing with the Alaska Supreme Court. The Alaska Supreme Court has denied rehearing on the finding that Plaintiff had failed to prove damages, returning the case to the trial court to award nominal damages.
From time to time, we are also involved in litigation arising out of the ordinary course of our business. There are no other material legal proceedings, other than ordinary routine litigation incidental to the business, to which we or any of our subsidiaries is a party or of which any of our or our subsidiaries' property is subject.
ITEM 1A. RISK FACTORS
A description of factors that could materially affect our business, financial condition, or operating results is included under "Risk and Uncertainties" in Item 1A of Part I of our 2016 Annual Report on Form 10-K and is incorporated herein by reference.
There have been no material changes to the Company’s risk factor disclosurefactors since our 2016 Annual Report onthe 2020 Form 10-K.10K. The risk factors described in ourthe 2020 Form 10-K are not the only risks facing our Company. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial conditions and/condition, or operating results.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
(a) NoneNone.
(b) NoneNone.
(c) The following table provides information relating to our purchases of equity securities for the thirdfirst quarter of fiscal 2017.2021:
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Total Number of Shares Purchased | | Average Price Paid per Share | | Total Number of Shares Purchased as Part of Publicly Announced Program | | Maximum Approximate Dollar Value of Shares that May Yet Be Purchased Under the Program | |
| | | | | | | | | |
January 2, 2021 – February 5, 2021 | | — | | | $ | — | | | — | | | $ | 90,728,167 | | |
February 6, 2021 – March 5, 2021 | | 442,554 | | | $ | 71.42 | | | 442,554 | | | $ | 59,119,610 | | |
March 6, 2021 – April 2, 2021 | | 118,890 | | | $ | 70.58 | | | 118,890 | | | $ | 50,728,199 | | |
Total | | 561,444 | | | | | 561,444 | | | | |
|
| | | | | | | | | |
| | Total Number of Shares Purchased | | Average Price Paid per Share | | Total Number of Shares Purchased as Part of Publicly Announced Program | | Maximum Dollar Value of Shares that May Yet Be Purchased Under the Program | |
| | | | | | | | | |
July 1, 2017 – August 4, 2017 | | 65,760 | | $35.76 | | 65,760 | | $100,652,793 | (1) |
August 5, 2017 – September 1, 2017 | | 1,895,194 | | 37.39 | | 1,895,194 | | $29,798,214 | |
September 2, 2017 – September 29, 2017 | | 281,958 | | $38.47 | | 281,958 | | $18,951,847 | |
Total | | 2,242,912 | |
| | 2,242,912 | | | |
(1) In August 2015,November 2017, our Board of Directors approved a stock repurchase program (2015(“2017 Stock Repurchase Program)Program”), authorizing us to repurchase up to $400.0$600.0 million of the Company'sour common stock. The 2017 Stock Repurchase Program does not have an expiration date. The timing and amount of repurchase transactions will beis determined by the Company’sour management based on itsthe evaluation of market conditions, share price, legal requirements, and other factors. The program may be suspended, modified, or discontinued at any time without public notice.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES None.
ITEM 4. MINE SAFETY DISCLOSURES
None.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS
We have filed, or incorporated into the Report by reference, the exhibits listed on the accompanying Index to Exhibits immediately followingpreceding the signature page of this Form 10-Q.
EXHIBIT INDEX
| | | | | |
3.1 | |
3.2 | |
4.1 | |
| |
10.1 | |
31.1 | |
31.2 | |
32.1 | |
32.2 | |
101 | The following financial statements from the Company’s Quarterly Report on Form 10-Q for the quarter ended April 2, 2021, formatted in Inline XBRL: (i) Condensed Consolidated Balance Sheets, (ii) Condensed Consolidated Statements of Income, (iii) Condensed Consolidated Statements of Comprehensive Income, (iv) Condensed Consolidated Statements of Stockholders' Equity, (v) Condensed Consolidated Statements of Cash Flows, and (vi) Notes to Condensed Consolidated Financial Statements, tagged as blocks of text and including detailed tags. |
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| |
| |
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104 | The cover page from the Company’s Quarterly Report on Form 10-Q for the quarter ended April 2, 2021, formatted in Inline XBRL. |
(1)Incorporated by reference to exhibit 3.1 to the Company’s Current Report on Form 8-K filed October 3, 2016.
(2)Incorporated by reference to exhibit 3.1 to the Company’s Current Report on Form 8-K filed September 30, 2020.
(3)Incorporated by reference to exhibit 4.1 to the Company’s Current Report on Form 8-K filed October 3, 2016.
(4)Incorporated by reference to exhibit 10.1 to the Company’s Current Report on Form 8-K filed February 25, 2021.
(5)Furnished or filed herewith.
(+) Indicates management contract or compensatory plan or arrangement.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
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| | | | | | | |
| | TRIMBLE INC. |
| | (Registrant) |
| |
By: | | /s/ Robert G. Painter |
| | Robert G. Painter |
| | Chief Financial Officer |
| | (Authorized Officer and Principal |
| | Financial Officer) |
DATE: November 7, 2017
EXHIBIT INDEX
|
| |
3.1By: | | /s/ David G. Barnes |
| | David G. Barnes |
3.2 | |
| |
4.1 | |
| |
31.1 | |
| |
31.2 | |
| | (Authorized Officer and Principal |
32.1 | |
| |
32.2 | |
| |
101.INS | XBRL Instance Document. |
| |
101.SCH | XBRL Taxonomy Extension Schema Document. |
| |
101.CAL | XBRL Taxonomy Extension Calculation Linkbase Document. |
| |
101.DEF | XBRL Taxonomy Extension Definition Document. |
| |
101.LAB | XBRL Taxonomy Extension Label Linkbase Document. |
| |
101.PRE | XBRL Taxonomy Extension Presentation Linkbase Document.Officer) |
| |
(1) | Incorporated by reference to exhibit number 3.1 to the registrant’s Current Report on Form 8-K filed October 3, 2016. |
| |
(2) | Incorporated by reference to exhibit number 3.2 to the registrant’s Current Report on Form 8-K filed October 3, 2016. |
| |
(3) | Incorporated by reference to exhibit number 4.1 to the Company’s Current Report on Form 8-K, filed October 3, 2016. |
| |
(4) | Furnished or filed herewith. |
DATE: May 7, 2021