Trimble Fourth Quarter 2011 Revenue $435.2 Million, Non-GAAP Earnings Per Share $0.54: Fiscal 2011 Revenue $1.64 Billion, Non-GAAP Earnings Per Share $2.15

FTRMB

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(In thousands, except per share data)

(Unaudited)












Three Months Ended


Twelve Months Ended





Dec-30,


Dec-31,


Dec-30,


Dec-31,



2011


2010


2011


2010










Revenue


$ 435,170


$ 323,349


$ 1,644,065


$ 1,293,937

Cost of sales


217,412


160,019


814,484


648,436

Gross margin


217,758


163,330


829,581


645,501

Gross margin (%)


50.0%


50.5%


50.5%


49.9%










Operating expenses









   Research and development


57,555


40,750


197,007


150,089

   Sales and marketing


71,445


61,609


266,804


215,127

   General and administrative


43,658


32,878


158,375


118,352

   Restructuring


513


348


2,288


1,592

   Amortization of purchased intangible assets


15,875


8,489


48,705


32,739

      Total operating expenses


189,046


144,074


673,179


517,899



















Operating income


28,712


19,256


156,402


127,602










Non-operating income, net









   Interest income


338


219


1,364


1,083

   Interest expense


(3,431)


(367)


(8,641)


(1,752)

   Foreign currency transaction gain (loss), net


(1,727)


210


1,053


(836)

   Income from equity method investments, net


4,379


2,770


15,349


11,795

   Other expense, net


2,819


173


1,927


3,195

      Total non-operating income, net


2,378


3,005


11,052


13,485










Income before taxes


31,090


22,261


167,454


141,087










Income tax provision (benefit)


2,427


(13,587)


18,545


37,474

Net income


28,663


35,848


148,909


103,613

Less: Net loss attributable to noncontrolling interests


(740)


(716)


(1,846)


(47)

Net income attributable to Trimble Navigation Ltd.


$   29,403


$   36,564


$    150,755


$    103,660










Earnings per share attributable to Trimble Navigation Ltd.









    Basic


$       0.24


$       0.30


$          1.23


$          0.86

    Diluted


$       0.23


$       0.29


$          1.20


$          0.84










Shares used in calculating earnings per share:









   Basic


123,446


120,522


122,725


120,352

   Diluted


126,592


124,395


126,133


123,798



CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands)

(Unaudited)






Dec-30,


Dec-31,



2011


2010

Assets










Current assets:





  Cash and cash equivalents


$    154,621


$    220,788

  Accounts receivables, net


275,201


222,820

  Other receivables


7,103


21,069

  Inventories, net


232,063


192,852

  Deferred income taxes


44,632


36,924

  Other current assets


19,437


19,917

     Total current assets


733,057


714,370






Property and equipment, net


62,724


50,692

Goodwill


1,297,692


828,737

Other purchased intangible assets, net


476,791


204,948

Other non-current assets


82,211


68,145






     Total assets


$ 2,652,475


$ 1,866,892






Liabilities










Current liabilities:





  Current portion of long-term debt


$      65,918


$        1,993

  Accounts payable


97,956


72,349

  Accrued compensation and benefits


73,894


60,976

  Deferred revenue


105,066


73,888

  Accrued warranty expense


18,444


12,868

  Other accrued liabilities


50,045


29,741

     Total current liabilities


411,323


251,815






Non-current portion of long-term debt


498,518


151,160

Non-current deferred revenue


13,113


10,777

Deferred income taxes


95,594


24,598

Other non-current liabilities


45,025


42,843

     Total liabilities


1,063,573


481,193






Commitments and contingencies










Equity










Shareholders' equity:





  Common stock


878,514


781,779

  Retained earnings


685,639


536,350

  Accumulated other comprehensive income


5,140


48,027

Total Trimble Navigation Ltd. shareholders' equity


1,569,293


1,366,156

Noncontrolling interests


19,609


19,543

     Total equity


1,588,902


1,385,699






     Total liabilities and equity


$ 2,652,475


$ 1,866,892



CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)


Twelve Months Ended



Dec-30,


Dec-31,



2011


2010






Cash flow from operating activities:





   Net Income


$ 148,909


$ 103,613






   Adjustments to reconcile net income  to net cash provided by





      operating activities:





        Depreciation expense


20,509


18,198

        Amortization expense


85,160


57,639

        Provision for doubtful accounts


1,913


2,320

        Deferred income taxes


(26,305)


(14,918)

        Stock-based compensation


28,451


23,125

        Income from equity method investments


(15,349)


(11,795)

        Excess tax benefit for stock-based compensation


(14,762)


(9,639)

        Provision for excess and obsolete inventories


8,410


4,752

        Other non-cash items


2,885


(4,610)






   Add decrease (increase) in assets:





        Accounts receivables


(31,874)


(7,376)

        Other receivables


30,141


2,518

        Inventories


(30,139)


(45,549)

        Other current and non-current assets


10,519


2,257






   Add increase (decrease) in liabilities:





        Accounts payable


(4,310)


13,577

        Accrued compensation and benefits


2,469


15,928

        Deferred revenue


18,775


(1,177)

        Accrued warranty expense


644


(2,217)

        Other current and non-current liabilities


5,583


(22,616)

Net cash provided by operating activities


241,629


124,030






Cash flow from investing activities:





     Acquisitions of businesses, net of cash acquired


(759,737)


(136,419)

     Acquisition of property and equipment


(23,278)


(23,133)

     Acquisitions of intangible assets


(1,666)


(2,063)

     Purchases of equity method investments


(3,267)


(8,192)

     Proceeds received from noncontrolling interest holder


-


7,470

     Dividends received


12,398


5,858

     Other


1,985


105

Net cash used in investing activities


(773,565)


(156,374)






Cash flow from financing activities:





     Issuance of common stock, net


45,870


44,549

     Repurchase and retirement of common stock


-


(73,853)

     Excess tax benefit for stock-based compensation


14,762


9,639

     Proceeds from long-term debt and revolving credit lines


734,225


-

     Payments on short-term and long-term debt  


(330,690)


(499)

Net cash provided by (used in) financing activities


464,167


(20,164)






Effect of exchange rate changes on cash and cash equivalents


1,602


(552)






Net decrease in cash and cash equivalents


(66,167)


(53,060)

Cash and cash equivalents - beginning of period


220,788


273,848






Cash and cash equivalents - end of period


$ 154,621


$ 220,788



REPORTING SEGMENTS

(Dollars in thousands)

(Unaudited)






Reporting Segments




Engineering










and


Field


Mobile


Advanced




Construction


Solutions


Solutions


Devices











THREE MONTHS ENDED DECEMBER 30, 2011:









Revenue

$    238,689


$   95,533


$   75,794


$   25,154












Operating income before corporate allocations:

$      36,615


$   34,061


$     5,976


$     3,451



Operating margin (% of segment external net revenues)

15.3%


35.7%


7.9%


13.7%











THREE MONTHS ENDED DECEMBER 31, 2010:









Revenue

$    183,396


$   74,838


$   40,415


$   24,700












Operating income (loss) before corporate allocations:

$      21,648


$   27,053


$      (267)


$     3,446



Operating margin (% of segment external net revenues)

11.8%


36.1%


(0.7%)


14.0%











TWELVE MONTHS ENDED DECEMBER 30, 2011:









Revenue

$    906,497


$ 413,721


$ 218,540


$ 105,307












Operating income before corporate allocations:

$    149,015


$ 160,139


$     4,461


$   13,891



Operating margin (% of segment external net revenues)

16.4%


38.7%


2.0%


13.2%











TWELVE MONTHS ENDED DECEMBER 31, 2010:









Revenue

$    719,053


$ 318,137


$ 154,254


$ 102,493












Operating income before corporate allocations:

$    110,965


$ 116,373


$     1,873


$   18,325



Operating margin (% of segment external net revenues)

15.4%


36.6%


1.2%


17.9%



GAAP TO NON-GAAP RECONCILIATION

(Dollars in thousands, except per share data)

(Unaudited)







Three Months Ended


Twelve Months Ended







Dec-30,


Dec-31,


Dec-30,


Dec-31,







2011


2010


2011


2010







Dollar

% of


Dollar

% of


Dollar

% of


Dollar

% of







Amount

Revenue


Amount

Revenue


Amount

Revenue


Amount

Revenue


GROSS MARGIN:                                                                                                                    
















GAAP gross margin:



$ 217,758

50.0%


$ 163,330

50.5%


$ 829,581

50.5%


$ 645,501

49.9%




Restructuring

( A )


131

0.0%


293

0.1%


466

0.0%


443

0.0%




Amortization of purchased intangibles

( B )


13,279

3.1%


6,985

2.2%


37,197

2.3%


24,900

1.9%




Stock-based compensation

( C )


494

0.1%


344

0.1%


1,955

0.1%


1,816

0.1%




Amortization of acquisition-related inventory step-up

( D )


739

0.2%


588

0.2%


3,802

0.2%


728

0.1%



Non-GAAP gross margin:



$ 232,401

53.4%


$ 171,540

53.1%


$ 873,001

53.1%


$ 673,388

52.0%



















OPERATING EXPENSES:
















GAAP operating expenses:



$ 189,046

43.4%


$ 144,074

44.6%


$ 673,179

40.9%


$ 517,899

40.0%




Restructuring

( A )


(513)

-0.1%


(348)

-0.1%


(2,288)

-0.1%


(1,592)

-0.1%




Amortization of purchased intangibles

( B )


(15,876)

-3.6%


(8,489)

-2.6%


(48,705)

-3.0%


(32,739)

-2.5%




Stock-based compensation

( C )


(6,924)

-1.6%


(6,616)

-2.1%


(26,496)

-1.6%


(21,309)

-1.7%




Acquisition costs

( E )


(2,117)

-0.5%


(3,466)

-1.1%


(14,892)

-0.9%


(6,537)

-0.5%



Non-GAAP operating expenses:



$ 163,616

37.6%


$ 125,155

38.7%


$ 580,798

35.3%


$ 455,722

35.2%



















OPERATING INCOME:
















GAAP operating income:



$  28,712

6.6%


$  19,256

6.0%


$ 156,402

9.5%


$ 127,602

9.9%




Restructuring

( A )


644

0.1%


641

0.2%


2,754

0.2%


2,035

0.2%




Amortization of purchased intangibles

( B )


29,155

6.7%


15,474

4.8%


85,902

5.2%


57,639

4.4%




Stock-based compensation

( C )


7,418

1.7%


6,960

2.1%


28,451

1.8%


23,125

1.8%




Amortization of acquisition-related inventory step-up

( D )


739

0.2%


588

0.2%


3,802

0.2%


728

0.0%




Acquisition costs

( E )


2,117

0.5%


3,466

1.0%


14,892

0.9%


6,537

0.5%



Non-GAAP operating income:



$  68,785

15.8%


$  46,385

14.3%


$ 292,203

17.8%


$ 217,666

16.8%



















NON-OPERATING INCOME, NET:
















GAAP non-operating income, net:



$    2,378



$    3,005



$   11,052



$   13,485





Acquisition (gain)/ loss

( E )


(194)



35



(264)



(3,177)





Debt issuance cost write-off

( F )


-



-



377



-





Foreign exchange loss (gain) associated with acquisition

( G )


1,688



-



(1,768)



-




Non-GAAP non-operating income, net:



$    3,872



$    3,040



$     9,397



$   10,308


























GAAP and



GAAP and



GAAP and



GAAP and








Non-GAAP



Non-GAAP



Non-GAAP



Non-GAAP








Tax Rate %

( K )


Tax Rate %

( K )


Tax Rate %

( K )


Tax Rate %

( K )

INCOME TAX PROVISION (BENEFIT):
















GAAP income tax provision (benefit):



$    2,427

8%


$ (13,587)

-61%


$   18,545

11%


$   37,474

27%




Non-GAAP items tax effected:

( H )


3,218



(1,014)



13,696



10,935





IRS settlement

( I )


-



-



-



(27,540)





Valuation allowance release

( J )


-



7,628



-



7,628




Non-GAAP income tax provision (benefit):



$    5,645

8%


$   (6,973)

-14%


$   32,241

11%


$   28,497

13%



















NET INCOME:  
















GAAP net income attributable to Trimble Navigation Ltd.



$  29,403



$  36,564



$ 150,755



$ 103,660





Restructuring

( A )


644



641



2,754



2,035





Amortization of purchased intangibles

( B )


29,155



15,474



85,902



57,639





Stock-based compensation

( C )


7,418



6,960



28,451



23,125





Amortization of acquisition-related inventory step-up

( D )


739



588



3,802



728





Acquisition costs

( E )


1,921



3,501



14,627



3,360





Debt issuance cost write-off

( F )


-



-



377



-





Foreign exchange loss (gain) associated with acquisition

( G )


1,688



-



(1,768)



-





Non-GAAP tax adjustments

      ( H ), ( I ), (J)


(3,218)



(6,605)



(13,696)



8,986




Non-GAAP net income attributable to Trimble Navigation Ltd.



$  67,750



$  57,123



$ 271,204



$ 199,533




















DILUTED NET INCOME PER SHARE:
















GAAP diluted net income per share attributable to Trimble Navigation Ltd.



$      0.23



$      0.29



$     1.20



$      0.84





Restructuring

( A )


0.01



0.01



0.02



0.02





Amortization of purchased intangibles

( B )


0.23



0.12



0.67



0.46





Stock-based compensation

( C )


0.06



0.06



0.23



0.18





Amortization of acquisition-related inventory step-up

( D )


0.01



-



0.03



0.01





Acquisition costs

( E )


0.02



0.03



0.12



0.03





Debt issuance cost write-off

( F )


-



-



-



-





Foreign exchange loss (gain) associated with acquisition

( G )


0.01



-



(0.01)



-





Non-GAAP tax adjustments

      ( H ), ( I ), (J)


(0.03)



(0.05)



(0.11)



0.07




Non-GAAP diluted net income per share attributable to Trimble Navigation Ltd.


$      0.54



$      0.46



$      2.15



$      1.61




















OPERATING LEVERAGE:
















Increase in non-GAAP operating income



$  22,399






$   74,537







Increase in revenue



$ 111,821






$ 350,128







Operating leverage (increase in non-GAAP operating
















income as a % of increase in revenue)



20.0%






21.3%








GAAP TO NON-GAAP RECONCILIATION (CONTINUED)

(Dollars in thousands, except per share data)

(Unaudited)

























































Three Months Ended


Twelve Months Ended







Dec-30,


Dec-31,


Dec-30,


Dec-31,







2011


2010


2011


2010








% of Segment



% of Segment



% of Segment



% of Segment


SEGMENT OPERATING INCOME:                                                        




Revenue



Revenue



Revenue



Revenue



Engineering and Construction

















GAAP operating income before corporate allocations:



$          36,615

15.3%


$          21,648

11.8%


$         149,015

16.4%


$         110,965

15.4%




Stock-based compensation

( L )


2,780

1.2%


2,391

1.3%


10,140

1.2%


7,886

1.1%




Non-GAAP operating income before corporate allocations:


$         39,395

16.5%


$         24,039

13.1%


$          159,155

17.6%


$          118,851

16.5%




















Field Solutions

















GAAP operating income before corporate allocations:



$          34,061

35.7%


$          27,053

36.1%


$        160,139

38.7%


$         116,373

36.6%




Stock-based compensation

( L )


650

0.6%


582

0.8%


2,269

0.6%


1,978

0.6%




Non-GAAP operating income before corporate allocations:


$           34,711

36.3%


$          27,635

36.9%


$       162,408

39.3%


$          118,351

37.2%




















Mobile Solutions

















GAAP operating income (loss) before corporate allocations:


$            5,976

7.9%


$             (267)

-0.7%


$            4,461

2.0%


$             1,873

1.2%




Stock-based compensation

( L )


470

0.6%


1,198

3.0%


2,943

1.4%


3,444

2.2%




Non-GAAP operating income before corporate allocations:


$           6,446

8.5%


$                931

2.3%


$            7,404

3.4%


$             5,317

3.4%




















Advanced Devices

















GAAP operating income before corporate allocations:



$             3,451

13.7%


$           3,446

14.0%


$           13,891

13.2%


$          18,325

17.9%




Stock-based compensation

( L )


611

2.4%


584

2.3%


2,566

2.4%


1,934

1.9%




Non-GAAP operating income before corporate allocations:


$           4,062

16.1%


$           4,030

16.3%


$           16,457

15.6%


$         20,259

19.8%





















FOOTNOTES TO GAAP TO NON-GAAP RECONCILIATION














(Unaudited)














Our non-GAAP measures are not meant to be considered in isolation or as a substitute for comparable GAAP measures. The non-GAAP financial measures included in the previous table as well as detailed explanations to the adjustments to comparable GAAP measures, are set forth below:


Non-GAAP gross margin


We believe our investors benefit by understanding our non-GAAP gross margin as a way of understanding how product mix, pricing decisions and manufacturing costs influence our business.  Non-GAAP gross margin excludes restructuring costs, amortization of purchased intangibles, stock-based compensation and amortization of acquisition-related inventory step-up from GAAP gross margin. We believe that these exclusions offer investors additional information that may be useful to view trends in our gross margin performance.


Non-GAAP operating expenses


We believe this measure is important to investors evaluating our non-GAAP spending in relation to revenue. Non-GAAP operating expenses exclude restructuring costs, amortization of purchased intangibles, stock-based compensation and acquisition costs associated with external and incremental costs resulting directly from merger and acquisition activities such as legal, due diligence and integration costs from GAAP operating expenses. We believe that these exclusions offer investors supplemental information to facilitate comparison of our operating expenses to our prior results.  



Non-GAAP operating income


We believe our investors benefit by understanding our non-GAAP operating income trends which are driven by revenue, gross margin, and spending. Non-GAAP operating income excludes restructuring costs, amortization of purchased intangibles, stock-based compensation, amortization of acquisition-related inventory step-up and acquisition costs associated with external and incremental costs resulting directly from merger and acquisition activities such as legal, due diligence and integration costs. We believe that these exclusions offer an alternative means for our investors to evaluate current operating performance compared to results of other periods.  


Non-GAAP non-operating income, net


We believe this measure helps investors evaluate our non-operating income trends. Non-GAAP non-operating income, net excludes acquisition costs associated with unusual acquisition related items such as a gain on bargain purchase (resulting from the fair value of identifiable net assets acquired exceeding the consideration transferred), adjustments to the fair value of earn-out liabilities and payments made or received to settle earn-out and holdback disputes. These costs are specific to particular acquisitions and vary significantly in amount and timing. Non-GAAP non-operating income (expense), net also excludes the write-off of debt issuance costs associated with a terminated credit facility as well as foreign exchange (gains)/losses specifically associated with hedges for our acquisitions. We believe that these exclusions provide investors with a supplemental view of our ongoing financial results.


Non-GAAP income tax provision (benefit)


Investors benefit from the exclusion of an IRS settlement and valuation allowance release because it facilitates comparisons to our past income tax provision. Non-GAAP income tax provision (benefit) excludes an IRS settlement and a valuation allowance release from GAAP income tax provision (benefit) and includes non-GAAP items tax effected. Non-GAAP items tax effected adjusts the provision for income taxes to reflect the effect of certain non-GAAP items on non-GAAP net income. We believe this information is useful to investors because it provides for consistent treatment of the excluded items in our non-GAAP presentation.


Non-GAAP net income


This measure provides a supplemental view of net income trends which are driven by non-GAAP income before taxes and our non-GAAP tax rate. Non-GAAP net income excludes restructuring costs, amortization of purchased intangibles, stock-based compensation, amortization of acquisition-related inventory step-up, acquisition costs, the write-off of debt issuance costs, foreign exchange (gains)/losses from hedges associated with acquisitions, and non-GAAP tax adjustments from GAAP net income. We believe our investors benefit from understanding these exclusions and from an alternative view of our net income performance as compared to our past net income performance.


Non-GAAP diluted net income per share


We believe our investors benefit by understanding our non-GAAP operating performance as reflected in a per share calculation as a way of measuring non-GAAP operating performance by ownership in the company. Non-GAAP diluted net income per share excludes restructuring costs, amortization of purchased intangibles, stock-based compensation, amortization of acquisition-related inventory step-up, acquisition costs, the write-off of debt issuance costs, foreign exchange (gains)/losses from hedges associated with acquisitions, and non-GAAP tax adjustments from GAAP diluted net income per share. We believe that these exclusions offer investors a useful view of our diluted net income per share as compared to our past diluted net income per share.  


Non-GAAP operating leverage


We believe this information is beneficial to investors as a measure of how much incremental revenue is contributed to our operating income. Non-GAAP operating leverage is the increase in non-GAAP operating income as a percentage of the increase in revenue. We believe that this information offers investors supplemental information to evaluate our current performance and to compare to our past non-GAAP operating leverage.  


Non-GAAP segment operating income


Non-GAAP segment operating income excludes stock-based compensation from GAAP segment operating income (loss). We believe this information is useful to investors because some may exclude stock-based compensation as an alternative view when assessing trends in the operating income of our segments.  


These non-GAAP measures can be used to evaluate our historical and prospective financial performance, as well as our performance relative to competitors. We believe some of our investors track our "core operating performance" as a means of evaluating our performance in the ordinary, ongoing, and customary course of our operations. Core operating performance excludes items that are non-cash, not expected to recur or not reflective of ongoing financial results.  Management also believes that looking at our core operating performance provides a supplemental way to provide consistency in period to period comparison.  Accordingly, management excludes from non-GAAP those items relating to restructuring, amortization of purchased intangibles, stock based compensation, amortization of acquisition-related inventory step-up, acquisition costs, the write-off of debt issuance costs associated with a terminated credit facility, foreign exchange gains/losses from hedges associated with acquisitions, and non-GAAP tax adjustments.  For detailed explanations of the adjustments made to comparable GAAP measures, see items (A) - (L) below,

















( A )

Restructuring costs. Included in our GAAP presentation of cost of sales and operating expenses, restructuring costs recorded are primarily for employee compensation resulting from reductions in employee headcount in connection with our company restructurings.  We exclude restructuring 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 comparisons to our past operating performance.  














( B )

Amortization of purchased intangibles. Included in our GAAP presentation of gross margin, operating expenses, operating income, and net income is amortization of purchased intangibles. US 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 expense 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 purchased intangibles which represents technology and/or customer relationships already developed, it enhances comparability by allowing investors to compare our operations pre-acquisition to those post-acquisitions and to those of our competitors that have pursued internal growth strategies.














( 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 three months and twelve months ended December 30, 2011 and December 31, 2010, stock-based compensation was allocated as follows:



















Three Months Ended


Twelve Months Ended







Dec-30,


Dec-31,


Dec-30,


Dec-31,




(Dollars in thousands)



2011


2010


2011


2010




Cost of sales



$                                  494


$                                  344


$                             1,955


$                               1,816




Research and development  



1,251


1,092


4,624


3,991




Sales and Marketing



1,706


1,598


6,672


5,611




General and administrative



3,967


3,926


15,200


11,707







$                             7,418


$                            6,960


$                         28,451


$                          23,125















( 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 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 costs.  Included in our GAAP presentation of operating expenses, acquisition costs consist of external and incremental costs resulting directly from merger and acquisition activities such as legal, due diligence and integration costs.  Included in our GAAP presentation of non-operating income, net, acquisition costs include unusual acquisition related items such as a gain on bargain purchase (resulting from the fair value of identifiable net assets acquired exceeding the consideration transferred), adjustments to the fair value of earn-out liabilities and payments made or received to settle earn-out and holdback disputes. 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 )

Debt issuance cost write-off.   Included in our non-operating income, net this amount represents a write-off of debt issuance cost for a terminated credit facility.  We excluded the debt issuance cost write-off from our non-GAAP measures. We believe that investors benefit from excluding this item from our non-operating income to facilitate a more meaningful evaluation of our non-operating income trends.














( G)

Foreign exchange (gain) loss associated with acquisition.     This amount represents gain and loss on foreign exchange hedges associated with two of our larger acquisitions.  We excluded the foreign exchange gain/loss from our non-GAAP measures because we believe that the exclusion of this item provides investors an enhanced view of the cost structure of our operations and facilitates comparisons with the results of other periods.                    














( 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 )


IRS settlement.   This amount represents a net charge of $27.5 million in the second quarter of 2010 resulting from the IRS audit settlement.  We excluded this because it is not indicative of our future operating results.  We believe that investors benefit from excluding this charge from our operating results to facilitate comparisons to past operating performance.














( J )

Valuation allowance release.  This amount represents a benefit of $7.6 million in the fourth quarter of 2010 resulting from a valuation allowance release. We excluded this from our non-GAAP results to enhance comparability of results across periods.



























( K )

GAAP and non-GAAP tax rate %.  These percentages are defined as GAAP income tax provision as a percentage of GAAP income before taxes and non-GAAP income tax provision as a percentage of non-GAAP income before taxes.   We believe that investors benefit from a presentation of non-GAAP tax rate percentage as a way of facilitating a comparison to non-GAAP tax rates in prior periods.














( L )

Stock-based compensation. The amounts consist of expenses for employee stock options and awards and purchase rights under our employee stock purchase plan. As referred to above we exclude stock-based compensation here because investors may view it as not reflective of our core operating performance as it is a non-cash expense. However, management does include stock-based compensation for budgeting and incentive plans as well as for reviewing internal financial reporting. We discuss our operating results by segment with and without stock-based compensation expense, as we believe it is useful to investors.   Stock-based compensation not allocated to the reportable segments was approximately $2.9 million and $2.2 million for the three months ended December 30, 2011 and December 31, 2010, respectively and $10.5 million and $7.9 million for the twelve months ended December 30, 2011 and December 31, 2010, respectively.




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