Trimble Reports Third Quarter 2008 Non-GAAP Earnings Per Share of $0.40
| | | · GAAP Earnings Per Share of $0.31 |
| | | |
SUNNYVALE, Calif., Oct. 23, 2008 - Trimble (NASDAQ: TRMB) today announced revenue of $328.1 million for its third quarter ended Sept. 26, 2008. Revenue was up approximately 11 percent from revenue of $296.0 million in the third quarter of 2007.
Operating income for the third quarter of 2008 was $54.1 million, up 24 percent from operating income of $43.8 million in the third quarter of 2007. Operating margins in the third quarter of 2008 were 16.5 percent, compared to operating margins of 14.8 percent in the third quarter of 2007. Amortization of intangibles increased from $10.2 million in the third quarter of 2007 to $11.1million in the third quarter of 2008. The impact of stock-based compensation expense was flat year-over-year at $3.8 million. There was a $451 thousand restructuring expense and a $418 thousand amortization of inventory step-up charge in the third quarter of 2008 compared to no restructuring expense or amortization of inventory step-up charge in the third quarter of 2007. Excluding these impacts, non-GAAP operating income of $69.9 million was up 21 percent compared to the third quarter of 2007. Non-GAAP operating margins were 21.3 percent in the third quarter of 2008, up from 19.5 percent in the third quarter of 2007.
Net income for the third quarter of 2008 was $39.1 million, up 43 percent compared to net income of $27.4 million in the third quarter of 2007. Diluted earnings per share for the third quarter of 2008 were $0.31, up 41 percent from diluted earnings per share of $0.22 in the third quarter of 2007.
The tax rate for the third quarter of 2008 was 30 percent, compared to 39 percent in the third quarter of 2007. The lower tax rate is due to the previously announced implementation of a global supply chain structure.
Adjusting for the amortization of intangibles and the impact of stock-based compensation, restructuring expenses and amortization of inventory step-up, non-GAAP net income of $50.2 million for the third quarter of 2008 was up 40 percent compared to non-GAAP net income of $35.9 million in the third quarter of 2007. Non-GAAP earnings per share for the third quarter of 2008 were $0.40, up 38 percent from non-GAAP earnings per share of $0.29 in the third quarter of 2007.
“As we discussed in early October, our customer’s buying decisions in the third quarter were impacted by a number of factors but most significantly by the uncertain credit markets,” said Steven W. Berglund, Trimble’s president and chief executive officer. “This uncertainty led to postponement of purchase decisions which negatively impacted our revenue. Our proactive steps taken earlier this year to control costs, in addition to tax-rate reductions, enabled us to deliver earnings per share growth of almost 40 percent year-over-year,” Berglund continued.
“The conditions that impacted the third quarter remain present in the fourth quarter making it difficult to forecast in the short-term. Our fourth quarter guidance is what we believe to be a sober assessment, reflecting the short-term uncertainty,” Berglund said. “Fiscal year 2009 will undoubtedly be difficult. However, we believe once the short-term credit market uncertainties are resolved, there are a number of factors that will help Trimble offset recessionary conditions. These include continued strong international sales, continued growth in agriculture, a strong pipeline for mobile solutions products, momentum from the newly formed VirtualSite joint venture with Caterpillar and new product categories.”
Trimble Results by Business Segment
Segment operating income is revenue less cost of goods sold and operating expenses, excluding general corporate expenses, restructuring expenses, amortization of intangibles, in-process research and development and the impact of stock-based compensation expense.
Engineering and Construction
Third quarter 2008 Engineering and Construction (E&C) revenue was $191.9 million, up approximately 5 percent when compared to revenue of $182.1 million in the third quarter of 2007. E&C growth was due to international sales, offset by slower sales in the U.S. and Europe.
Third quarter 2008 operating income in E&C was $41.6 million, or 21.7 percent of revenue, compared to $42.8 million, or 23.5 percent of revenue, in the third quarter of 2007.
Non-GAAP operating income in E&C was $42.7 million, or 22.3 percent of revenue, in the third quarter of 2008 compared to $43.7 million, or 24.0 percent of revenue, in the third quarter of 2007. The decline in operating margins was due to the impact of recent acquisitions which have not yet fully contributed to profitability, partially offset by the realization of expense reductions taken at the end of the second quarter of 2008.
Field Solutions
Third quarter 2008 Field Solutions revenue was $64.4 million, up approximately 44 percent compared to revenue of $44.8 million in the third quarter of 2007. Revenue growth was once again driven primarily by strong demand for agricultural products.
Third quarter 2008 operating income in Field Solutions was $22.1 million, or 34.3 percent of revenue compared to $11.9 million, or 26.7 percent of revenue, in the third quarter of 2007.
Non-GAAP operating income in Field Solutions was $22.3 million, or 34.6 percent of revenue, in the third quarter of 2008 compared to $12.1 million, or 27 percent of revenue, in the third quarter of 2007. Expansion in operating margin was due primarily to strong revenue growth.
Mobile Solutions
Third quarter 2008 Mobile Solutions revenue was $40.8 million, up approximately 4 percent when compared to revenue of $39.2 million in the third quarter of 2007.
Third quarter 2008 operating income in Mobile Solutions was $3.6 million, or 8.8 percent of revenue compared to $2.9 million, or 7.3 percent of revenue, in the third quarter of 2007.
Non-GAAP operating income in Mobile Solutions was $4.6 million, or 11.2 percent of revenue, in the third quarter of 2008 slightly up compared to $4.3 million, or 10.9 percent of revenue, in the third quarter of 2007.
Advanced Devices
Third quarter 2008 Advanced Devices revenue was $31.1 million, up approximately 4 percent when compared to revenue of $29.9 million in the third quarter of 2007.
Third quarter 2008 operating income in Advanced Devices was $6.8 million, or 20.3 percent of revenue compared to $4.9 million, or 16.4 percent of revenue, in the third quarter of 2007.
Non-GAAP operating income in Advanced Devices was $7.2 million, or 23.1 percent of revenue, in the third quarter of 2008 compared to $5.2 million, or 17.5 percent of revenue, in the third quarter of 2007. Improvements in operating margins were due to product mix and increased licensing revenue.
Stock Repurchase Program
As part of Trimble’s stock repurchase program, in the third quarter Trimble purchased 2.45 million shares of Trimble stock at an average purchase price of $32.43 for a total of $79.5 million. This is in addition to the purchase of approximately 968 thousand shares of Trimble stock at an average purchase price of $26.71 in the first quarter of 2008 and approximately 287 thousand shares of Trimble stock at an average purchase price of $36.25 in the second quarter of 2008.
Use of Non-GAAP Financial Information
To help our readers understand our past financial performance and our future results, we supplement the financial results that we provide in accordance with generally accepted accounting principles, or GAAP, with non-GAAP financial measures. The specific non-GAAP measures which we use along with a reconciliation to the nearest comparable GAAP measures and the explanation for why management chose to exclude selected items and the additional purposes for which these non-GAAP measures are used can be found at the end of this release. The method we use to produce non-GAAP results is not computed according to GAAP and may differ from the methods used by other companies. Our non-GAAP results are not meant to be considered in isolation or as a substitute for comparable GAAP measures and should be read only in conjunction with our consolidated financial statements prepared in accordance with GAAP. Our management regularly uses our supplemental non-GAAP financial measures internally to understand, manage and evaluate our business and to make operating decisions. These non-GAAP measures are among the primary factors management uses in planning for and forecasting future periods. We believe that these non-GAAP financial measures reflect an additional way of viewing aspects of our operations that, when viewed with our GAAP results, provide a more complete understanding of factors and trends affecting our business. Management generally compensates for the limitations in the use of non-GAAP financial measures by relying on comparable GAAP financial measures and providing investors with a reconciliation of the non-GAAP financial measure to the most directly comparable GAAP financial measure or measures. Investors are encouraged to review the reconciliation of our non-GAAP financial measures to the comparable GAAP results which is attached to this earnings release. Additional financial information about our use of non-GAAP results can be found on the investor relations page of our Web site at www.investor.trimble.com.
Forward Looking Guidance
In the fourth quarter of 2008, Trimble is forecasting revenue between $315 million and $323 million. Trimble expects fourth quarter 2008 GAAP earnings per share between $0.22 and $0.25 and non-GAAP earnings per share between $0.32 and $0.35. Non-GAAP guidance for the fourth quarter of 2008 excludes the amortization of intangibles expected to be $11.5 million related to previous acquisitions, and the anticipated impact of stock-based compensation expense of $3.8 million. Both GAAP and non-GAAP guidance use a 23 percent tax rate and assume 125 million shares outstanding. Management notes that current uncertainty in global economic conditions makes it particularly difficult to predict product demand and other related matters and makes it more likely that Trimble's results could differ materially from these expectations.
Investor Conference Call / Webcast Details
Trimble will hold a conference call on Oct. 23, 2008 at 1:30 p.m. PT to review its third quarter 2008 results. It will be broadcast live on the Web at http://investor.trimble.com. Investors without Internet access may dial into the call at (800) 528-9198 (U.S.) or (706) 634-6089 (international). A replay of the call will be available for seven days at (800) 642-1687 (U.S.) or ((706) 645-9291 (international) and the pass code is 66498751. The replay will also be available on the Web at the address above.
About Trimble
Trimble applies technology to make field and mobile workers in businesses and government significantly more productive. Solutions are focused on applications requiring position or location—including surveying, construction, agriculture, fleet and asset management, public safety and mapping. In addition to utilizing positioning technologies such as GPS, lasers and optics, Trimble solutions may include software content specific to the needs of the user. Wireless technologies are utilized to deliver the solution to the user and to ensure a tight coupling of the field and the back office. Founded in 1978 and headquartered in Sunnyvale, Calif., Trimble has a worldwide presence with more than 3,800 employees in over 18 countries.
For more information visit Trimble's Web site at www.trimble.com.
Safe Harbor
Certain statements made in this press release are forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, and are made pursuant to the safe harbor provisions of the Securities Litigation Reform Act of 1995. These statements include projections for revenue, effective tax rate, stock-based compensation, amortization of purchased intangibles, and earnings per share estimates for the fourth quarter of 2008. These statements also include possible factors that may offset recessionary conditions for the Company in 2009. 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, the current global credit crisis and recessionary conditions in the United States and Europe may be protracted, negatively impacting our customer's purchasing decisions worldwide including in emerging markets. In addition, the Company's results may be adversely affected if the growth rates, customer wins and profitability expectations for each of its four segments are not achieved, or if its joint ventures, including the newly formed VirtualSite joint venture, and recent acquisitions do not achieve anticipated results, or if the Company is unable to market, manufacture and ship new products. The mix of our U.S. versus international sales can impact our effective tax rate. Any failure to achieve predicted results could negatively impact the Company's revenues, operating margins and other financial results. Whether the Company achieves its guidance for the fourth quarter of 2008 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
CONDENSED CONSOLIDATED STATEMENTS OF INCOME |
| (In thousands, except per share data) |
| (Unaudited) |
| | | Three Months Ended | | Nine Months Ended | |
| | | | | | | | | | |
| | | Sep-26, | | Sep-28, | | Sep-26, | | Sep-28, | |
| | | 2008 | | 2007 | | 2008 | | 2007 | |
| | | | | | | | | | |
| Revenue | | $ | 328,087 | | $ | 296,023 | | $ | 1,061,150 | | $ | 909,487 | |
| Cost of sales | | | 162,464 | | | 149,083 | | | 534,052 | | | 452,248 | |
| Gross margin | | | 165,623 | | | 146,940 | | | 527,098 | | | 457,239 | |
| Gross margin (%) | | | 50.5 | % | | 49.6 | % | | 49.7 | % | | 50.3 | % |
| | | | | | | | | | | | | | |
| Operating expenses | | | | | | | | | | | | | |
| Research and development | | | 35,348 | | | 31,707 | | | 112,097 | | | 96,737 | |
| Sales and marketing | | | 48,664 | | | 45,274 | | | 151,727 | | | 134,967 | |
| General and administrative | | | 22,072 | | | 21,262 | | | 70,051 | | | 67,182 | |
| Restructuring | | | 21 | | | - | | | 2,435 | | | 3,025 | |
| Amortization of purchased intangible assets | | | 5,462 | | | 4,911 | | | 15,768 | | | 14,212 | |
| In-process research and development | | | - | | | - | | | - | | | 2,112 | |
| Total operating expenses | | | 111,567 | | | 103,154 | | | 352,078 | | | 318,235 | |
| | | | | | | | | | | | | | |
| | | | | | | | | | | | | | |
| Operating income | | | 54,056 | | | 43,786 | | | 175,020 | | | 139,004 | |
| | | | | | | | | | | | | | |
| Non-operating income, net | | | | | | | | | | | | | |
| Interest income | | | 404 | | | 770 | | | 1,369 | | | 2,607 | |
| Interest expense | | | (214 | ) | | (1,616 | ) | | (1,389 | ) | | (5,476 | ) |
| Foreign currency transaction gain (loss), net | | | 117 | | | (459 | ) | | 2,338 | | | (532 | ) |
| Income from joint ventures, net | | | 2,163 | | | 1,943 | | | 6,796 | | | 6,445 | |
| Other income (expense), net | | | (907 | ) | | 451 | | | (1,661 | ) | | 1,173 | |
| Total non-operating income, net | | | 1,563 | | | 1,089 | | | 7,453 | | | 4,217 | |
| | | | | | | | | | | | | | |
| Income before taxes | | | 55,619 | | | 44,875 | | | 182,473 | | | 143,221 | |
| | | | | | | | | | | | | | |
| Income tax provision | | | 16,552 | | | 17,501 | | | 54,740 | | | 52,138 | |
| Net income | | $ | 39,067 | | $ | 27,374 | | $ | 127,733 | | $ | 91,083 | |
| | | | | | | | | | | | | | |
| | | | | | | | | | | | | | |
| Earnings per share : | | | | | | | | | | | | | |
| Basic | | $ | 0.32 | | $ | 0.23 | | $ | 1.05 | | $ | 0.77 | |
| Diluted | | $ | 0.31 | | $ | 0.22 | | $ | 1.02 | | $ | 0.74 | |
| | | | | | | | | | | | | | |
| Shares used in calculating earnings per share : | | | | | | | | | | | | | |
| Basic | | | 120,603 | | | 120,591 | | | 121,171 | | | 118,553 | |
| Diluted | | | 124,423 | | | 125,687 | | | 125,071 | | | 123,691 | |
CONDENSED CONSOLIDATED BALANCE SHEETS |
| (In thousands) |
| Unaudited |
| | | Sep-26, | | Dec-28, | |
| | | 2008 | | 2007 | |
Assets | | | | | |
| | | | | | |
| Current assets: | | | | | |
| Cash and cash equivalents | | $ | 70,479 | | $ | 103,202 | |
| Accounts receivables, net | | | 257,548 | | | 239,884 | |
| Other receivables | | | 8,724 | | | 10,201 | |
| Inventories, net | | | 162,033 | | | 143,018 | |
| Deferred income taxes | | | 49,637 | | | 44,333 | |
| Other current assets | | | 16,738 | | | 15,661 | |
| Total current assets | | | 565,159 | | | 556,299 | |
| | | | | | | | |
| Property and equipment, net | | | 50,819 | | | 51,444 | |
| Goodwill | | | 716,191 | | | 675,850 | |
| Other purchased intangible assets, net | | | 181,196 | | | 197,777 | |
| Other non-current assets | | | 60,332 | | | 57,989 | |
| | | | | | | | |
| Total assets | | $ | 1,573,697 | | $ | 1,539,359 | |
| | | | | | | | |
Liabilities and Shareholders' Equity | | | | | | | |
| | | | | | | | |
| Current liabilities: | | | | | | | |
| Current portion of long-term debt | | $ | 129 | | $ | 126 | |
| Accounts payable | | | 68,446 | | | 67,589 | |
| Accrued compensation and benefits | | | 47,994 | | | 55,133 | |
| Deferred revenue | | | 56,559 | | | 49,416 | |
| Accrued warranty expense | | | 12,077 | | | 10,806 | |
| Income taxes payable | | | 17,201 | | | 14,802 | |
| Other accrued liabilities | | | 35,808 | | | 51,980 | |
| Total current liabilities | | | 238,214 | | | 249,852 | |
| | | | | | | | |
| Non-current portion of long-term debt | | | 51,487 | | | 60,564 | |
| Non-current deferred revenue | | | 12,921 | | | 15,872 | |
| Deferred income taxes | | | 56,373 | | | 47,917 | |
| Other non-current liabilities | | | 54,672 | | | 56,128 | |
| | | | | | | | |
| Total liabilities | | | 413,667 | | | 430,333 | |
| | | | | | | | |
| Commitments and contingencies | | | | | | | |
| | | | | | | | |
| Shareholders' equity: | | | | | | | |
| Common stock | | | 681,019 | | | 660,749 | |
| Retained earnings | | | 421,155 | | | 388,557 | |
| Accumulated other comprehensive income | | | 57,856 | | | 59,720 | |
| Total shareholders' equity | | | 1,160,030 | | | 1,109,026 | |
| | | | | | | | |
| Total liabilities and shareholders' equity | | $ | 1,573,697 | | $ | 1,539,359 | |
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS |
| (In thousands) |
| Unaudited |
| | | Nine Months Ended | |
| | | Sep-26, | | Sep-28, | |
| | | 2008 | | 2007 | |
| | | | | | |
| Cash flow from operating activities: | | | | | |
| Net Income | | $ | 127,733 | | $ | 91,083 | |
| | | | | | | | |
| Adjustments to reconcile net income to net cash provided by | | | | | | | |
| operating activities: | | | | | | | |
| Depreciation expense | | | 14,287 | | | 12,733 | |
| Amortization expense | | | 32,999 | | | 28,615 | |
| Provision for doubtful accounts | | | 597 | | | 684 | |
| Amortization of debt issuance cost | | | 169 | | | 162 | |
| Deferred income taxes | | | (14,235 | ) | | (6,547 | ) |
| Non-cash restructuring expense | | | - | | | 1,725 | |
| Stock-based compensation | | | 11,603 | | | 10,949 | |
| In-process research and development | | | - | | | 2,112 | |
| Equity gain from joint ventures | | | (6,796 | ) | | (6,445 | ) |
| Excess tax benefit for stock-based compensation | | | (5,847 | ) | | (13,283 | ) |
| Provision for excess and obsolete inventories | | | 2,672 | | | 3,513 | |
| Other non-cash items | | | 179 | | | 144 | |
| | | | | | | | |
| Add decrease (increase) in assets: | | | | | | | |
| Accounts receivables | | | (16,230 | ) | | (42,971 | ) |
| Other receivables | | | 1,598 | | | 4,619 | |
| Inventories | | | (16,165 | ) | | (15,512 | ) |
| Other current and non-current assets | | | (201 | ) | | 6,353 | |
| | | | | | | | |
| Add increase (decrease) in liabilities: | | | | | | | |
| Accounts payable | | | (1,859 | ) | | (7,518 | ) |
| Accrued compensation and benefits | | | (7,426 | ) | | (6,182 | ) |
| Accrued liabilities | | | 725 | | | 5,350 | |
| Deferred revenue | | | 2,862 | | | 25,989 | |
| Income taxes payable | | | 15,280 | | | 33,511 | |
| Net cash provided by operating activities | | | 141,945 | | | 129,084 | |
| | | | | | | | |
| Cash flows from investing activities: | | | | | | | |
| Acquisitions of businesses, net of cash acquired | | | (69,310 | ) | | (285,523 | ) |
| Acquisition of property and equipment | | | (11,293 | ) | | (9,208 | ) |
| Dividends received | | | 3,148 | | | 2,888 | |
| Other | | | (154 | ) | | 361 | |
| Net cash used in investing activities | | | (77,609 | ) | | (291,482 | ) |
| | | | | | | | |
| Cash flow from financing activities: | | | | | | | |
| Issuance of common stock | | | 22,119 | | | 27,830 | |
| Excess tax benefit for stock-based compensation | | | 5,847 | | | 13,283 | |
| Repurchase and retirement of common stock | | | (115,851 | ) | | - | |
| Proceeds from long-term debt and revolving credit lines | | | 51,000 | | | 250,000 | |
| Payments on long-term debt and revolving credit lines | | | (60,316 | ) | | (170,037 | ) |
| Other | | | - | | | - | |
| Net cash provided by (used in) financing activities | | | (97,201 | ) | | 121,076 | |
| | | | | | | | |
| Effect of exchange rate changes on cash and cash equivalents | | | 142 | | | (4,227 | ) |
| | | | | | | | |
| Net decrease in cash and cash equivalents | | | (32,723 | ) | | (45,549 | ) |
| Cash and cash equivalents - beginning of period | | | 103,202 | | | 129,621 | |
| | | | | | | | |
| Cash and cash equivalents - end of period | | $ | 70,479 | | $ | 84,072 | |
NON-GAAP RECONCILIATION |
CONDENSED CONSOLIDATED STATEMENTS OF INCOME |
| ( Dollars in thousands, except per share data) |
| (Unaudited) |
| | | | | Three Months Ended | | Nine Months Ended | |
| | | | | Sep-26, | | Sep-28, | | Sep-26, | | Sep-28, | |
| | | | | 2008 | | 2007 | | 2008 | | 2007 | |
| | | | | | | | | | | | |
REVENUE: | | | | | $ | 328,087 | | $ | 296,023 | | $ | 1,061,150 | | $ | 909,487 | |
| | | | | | | | | | | | | | | | | |
GROSS MARGIN: | | | | | | | | | | | | | | | | |
| GAAP gross margin: | | | | | $ | 165,623 | | $ | 146,940 | | $ | 527,098 | | $ | 457,239 | |
| Restructuring | | | ( A | ) | | 430 | | | - | | | 1,360 | | | - | |
| Amortization of purchased intangibles | | | ( B | ) | | 5,681 | | | 5,263 | | | 17,097 | | | 14,289 | |
| Stock-based compensation | | | ( D | ) | | 453 | | | 469 | | | 1,433 | | | 1,240 | |
| Amortization of acquisition-related inventory step-up | | | ( E | ) | | 418 | | | - | | | 601 | | | - | |
| Non-GAAP gross margin: | | | | | $ | 172,605 | | $ | 152,672 | | $ | 547,589 | | $ | 472,768 | |
| Non-GAAP gross margin (% of revenue) | | | | | | 52.6 | % | | 51.6 | % | | 51.6 | % | | 52.0 | % |
| | | | | | | | | | | | | | | | | |
OPERATING EXPENSES: | | | | | | | | | | | | | | | | |
| GAAP operating expenses: | | | | | $ | 111,567 | | $ | 103,154 | | $ | 352,078 | | $ | 318,235 | |
| Restructuring | | | ( A | ) | | (21 | ) | | - | | | (2,435 | ) | | (3,025 | ) |
| Amortization of purchased intangibles | | | ( B | ) | | (5,462 | ) | | (4,911 | ) | | (15,768 | ) | | (14,212 | ) |
| In-process research and development | | | ( C | ) | | - | | | - | | | - | | | (2,112 | ) |
| Stock-based compensation | | | ( D | ) | | (3,373 | ) | | (3,335 | ) | | (10,170 | ) | | (9,709 | ) |
| Non-GAAP operating expenses: | | | | | $ | 102,711 | | $ | 94,908 | | $ | 323,705 | | $ | 289,177 | |
| | | | | | | | | | | | | | | | | |
OPERATING INCOME: | | | | | | | | | | | | | | | | |
| GAAP operating income: | | | | | $ | 54,056 | | $ | 43,786 | | $ | 175,020 | | $ | 139,004 | |
| Restructuring | | | ( A | ) | | 451 | | | - | | | 3,795 | | | 3,025 | |
| Amortization of purchased intangibles | | | ( B | ) | | 11,143 | | | 10,174 | | | 32,865 | | | 28,501 | |
| In-process research and development | | | ( C | ) | | - | | | - | | | - | | | 2,112 | |
| Stock-based compensation | | | ( D | ) | | 3,826 | | | 3,804 | | | 11,603 | | | 10,949 | |
| Amortization of acquisition-related inventory step-up | | | ( E | ) | | 418 | | | - | | | 601 | | | - | |
| Non-GAAP operating income: | | | | | $ | 69,894 | | $ | 57,764 | | $ | 223,884 | | $ | 183,591 | |
| Non-GAAP operating margin (% of revenue) | | | | | | 21.3 | % | | 19.5 | % | | 21.1 | % | | 20.2 | % |
| | | | | | | | | | | | | | | | | |
NET INCOME: | | | | | | | | | | | | | | | | |
| GAAP net income: | | | | | $ | 39,067 | | $ | 27,374 | | $ | 127,733 | | $ | 91,083 | |
| Restructuring | | | ( A | ) | | 451 | | | - | | | 3,795 | | | 3,025 | |
| Amortization of purchased intangibles | | | ( B | ) | | 11,143 | | | 10,174 | | | 32,865 | | | 28,501 | |
| In-process research and development | | | ( C | ) | | - | | | - | | | - | | | 2,112 | |
| Stock-based compensation | | | ( D | ) | | 3,826 | | | 3,804 | | | 11,603 | | | 10,949 | |
| Amortization of acquisition-related inventory step-up | | | ( E | ) | | 418 | | | - | | | 601 | | | - | |
| Income tax effect on non-GAAP adjustments | | | ( F | ) | | (4,713 | ) | | (5,452 | ) | | (14,620 | ) | | (16,062 | ) |
| Non-GAAP net income: | | | | | $ | 50,192 | | $ | 35,900 | | $ | 161,977 | | $ | 119,608 | |
| | | | | | | | | | | | | | | | | |
DILUTED NET INCOME PER SHARE: | | | | | | | | | | | | | | | | |
| GAAP diluted net income per share: | | | | | $ | 0.31 | | $ | 0.22 | | $ | 1.02 | | $ | 0.74 | |
| Non-GAAP diluted net income per share: | | | | | $ | 0.40 | | $ | 0.29 | | $ | 1.30 | | $ | 0.97 | |
| | | | | | | | | | | | | | | | | |
SHARES USED TO COMPUTE DILUTED NET | | | | | | | | | | | | | | | | |
INCOME PER SHARE: | | | | | | | | | | | | | | | | |
| GAAP and Non-GAAP shares used to compute | | | | | | | | | | | | | | | | |
| net income per share: | | | | | | 124,423 | | | 125,687 | | | 125,071 | | | 123,691 | |
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OPERATING LEVERAGE: | | | | | | | | | | | | | | | | |
| Increase in non-GAAP operating income | | | | | $ | 12,130 | | | | | $ | 40,293 | | | | |
| Increase in revenue | | | | | $ | 32,064 | | | | | $ | 151,663 | | | | |
| Operating leverage (increase in non-GAAP operating | | | | | | | | | | | | | | | | |
| income as a % of increase in revenue) | | | | | | 37.8 | % | | | | | 26.6 | % | | | |
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| The non-GAAP financial measures included in the table above are non-GAAP gross margin, non-GAAP operating expenses, non-GAAP operating income, non-GAAP net income and non-GAAP diluted net income per share, which adjust for the following items: expenses related to acquisitions, stock-based compensation expense and restructuring charges. Management uses these non-GAAP measures to assess trends in its business and for budgeting purposes, as many of these excluded items are non-cash. In addition, we believe that the presentation of these non-GAAP financial measures is useful to investors for the reasons associated with each of the adjusting items as described below. |
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| ( A ) | | Restructuring. The amounts recorded are for employee compensation resulting from reductions in employee headcount in connection with our company restructurings and we believe they are not directly related to the operation of our business. |
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| ( B ) | | Amortization of purchased intangibles. The amounts recorded as amortization of purchased intangibles arise from prior acquisitions and are non-cash in nature. We exclude these expenses because we believe they are not reflective of ongoing operating results in the period incurred and are not directly related to the operation of our business. Approximately $5,681K and $5,263K of the amortization of purchased intangibles was included in cost of sales for the three months ended September 26, 2008 and September 28, 2007, and approximately $5,462K and $4,911K was reported as a separate line within operating expenses for the three months ended September 26, 2008 and September 28, 2007, respectively. Approximately $17,097K and $14,289K of the amortization of purchased intangibles was included in cost of sales for the nine months ended September 26, 2008 and September 28, 2007, and approximately $15,768K and $14,212K was reported as a separate line within operating expenses for the nine months ended September 26, 20 |
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| ( C ) | | In-process research and development. The amounts recorded as in-process research and development arise from prior acquisitions and are non-cash in nature. We exclude these expenses because we believe they are not reflective of ongoing operating results in the period incurred and not directly related to the operation of our business. |
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| ( D ) | | Stock-based Compensation. The amounts consist of expenses for employee stock options and purchase rights under our employee stock purchase plan determined in accordance with SFAS 123(R), which became effective for us on January 1, 2006. We exclude these stock-based compensation expenses because they are non-cash expenses that we believe are not reflective of ongoing operation results. For the three and nine months ended September 26, 2008 and September 28, 2007, stock-based compensation was allocated as follows: |
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| | | | | Three Months Ended | | Nine Months Ended | |
| | | | | Sep-26, | | Sep-28, | | Sep-26, | | Sep-28, | |
| | | | | 2008 | | 2007 | | 2008 | | 2007 | |
| Cost of sales | | | | $ 453 | | $ 469 | | $ 1,433 | | $ 1,240 | |
| Research and development | | | | | | 796 | | | 868 | | | 2,629 | | | 2,619 | |
| Sales and Marketing | | | | | | 937 | | | 1,059 | | | 2,898 | | | 2,800 | |
| General and administrative | | | | | | 1,640 | | | 1,408 | | | 4,643 | | | 4,290 | |
| | | | | | $ | 3,826 | | $ | 3,804 | | $ | 11,603 | | $ | 10,949 | |
| ( E ) | | 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. 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 we do not believe it is reflective of our ongoing operating results, and it is not used by management to assess the core profitability of our business operations. |
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| ( F ) | | Income tax effect on non-GAAP adjustments. This amounts adjusts the provision for income taxes to reflect the effect of the non-GAAP adjustments on non-GAAP operating income. |
NON-GAAP RECONCILIATION |
REPORTING SEGMENTS |
| ( Dollars in thousands) |
| (Unaudited) |
| | | | | Reporting Segments | |
| | | | | Engineering | | | | | | | |
| | | | | and | | Field | | Mobile | | Advanced | |
| | | | | Construction | | Solutions | | Solutions | | Devices | |
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THREE MONTHS ENDED SEPTEMBER 26, 2008: | | | | | | | | | | | |
| Revenue | | | | | $ | 191,858 | | $ | 64,354 | | $ | 40,822 | | $ | 31,053 | |
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| GAAP operating income before corporate allocations: | | | | | $ | 41,560 | | $ | 22,058 | | $ | 3,602 | | $ | 6,835 | |
| Stock-based compensation | | | ( G | ) | | 1,146 | | | 203 | | | 987 | | | 337 | |
| Non-GAAP operating income before corporate allocations: | | | | | $ | 42,706 | | $ | 22,261 | | $ | 4,589 | | $ | 7,172 | |
| Non-GAAP operating margin (% of segment external net revenues) | | | | | | 22.3 | % | | 34.6 | % | | 11.2 | % | | 23.1 | % |
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THREE MONTHS ENDED SEPTEMBER 28, 2007: | | | | | | | | | | | | | | | | |
| Revenue | | | | | $ | 182,135 | | $ | 44,763 | | $ | 39,204 | | $ | 29,921 | |
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| GAAP operating income before corporate allocations: | | | | | $ | 42,824 | | $ | 11,931 | | $ | 2,855 | | $ | 4,893 | |
| Stock-based compensation | | | ( G | ) | | 863 | | | 177 | | | 1,401 | | | 334 | |
| Non-GAAP operating income before corporate allocations: | | | | | $ | 43,687 | | $ | 12,108 | | $ | 4,256 | | $ | 5,227 | |
| Non-GAAP operating margin (% of segment external net revenues) | | | | | | 24.0 | % | | 27.0 | % | | 10.9 | % | | 17.5 | % |
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NINE MONTHS ENDED SEPTEMBER 26, 2008: | | | | | | | | | | | | | | | | |
| Revenue | | | | | $ | 599,057 | | $ | 242,461 | | $ | 127,118 | | $ | 92,514 | |
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| GAAP operating income before corporate allocations: | | | | | $ | 123,675 | | $ | 91,961 | | $ | 7,997 | | $ | 18,105 | |
| Stock-based compensation | | | ( G | ) | | 3,193 | | | 600 | | | 3,582 | | | 979 | |
| Non-GAAP operating income before corporate allocations: | | | | | $ | 126,868 | | $ | 92,561 | | $ | 11,579 | | $ | 19,084 | |
| Non-GAAP operating margin (% of segment external net revenues) | | | | | | 21.2 | % | | 38.2 | % | | 9.1 | % | | 20.6 | % |
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NINE MONTHS ENDED SEPTEMBER 28, 2007: | | | | | | | | | | | | | | | | |
| Revenue | | | | | $ | 556,592 | | $ | 150,998 | | $ | 109,988 | | $ | 91,909 | |
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| GAAP operating income before corporate allocations: | | | | | $ | 137,359 | | $ | 46,957 | | $ | 6,778 | | $ | 13,620 | |
| Stock-based compensation | | | ( G | ) | | 2,541 | | | 531 | | | 3,670 | | | 1,001 | |
| Non-GAAP operating income before corporate allocations: | | | | | $ | 139,900 | | $ | 47,488 | | $ | 10,448 | | $ | 14,621 | |
| Non-GAAP operating margin (% of segment external net revenues) | | | | | | 25.1 | % | | 31.4 | % | | 9.5 | % | | 15.9 | % |
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| ( G ) | | Stock-based Compensation. The amounts consist of expenses for employee stock options and purchase rights under our employee stock purchase plan determined in accordance with SFAS 123(R), which became effective for us on January 1, 2006. We discuss our operating results by segment with and with-out stock-based compensation expense, as we believe it is useful to investors to understand the impact of the application of SFAS 123(R) to our results of operations. Stock-based compensation not allocated to the reportable segments was approximately $1,153K and $1,029K for the three months ended September 26, 2008 and September 28, 2007, respectively and $3,249K and $3,206K for the nine months ended September 26, 2008 and September 28, 2007, respectively. |
