NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1: DESCRIPTION OF BUSINESS
The Company began operations in 1978 and was originally incorporated in California as Trimble Navigation Limited in 1981. On October 1, 2016, Trimble Navigation Limited changed its name to Trimble Inc. ("Trimble" or the "Company") and changed its state of incorporation from the State of California to the State of Delaware (the “Reincorporation”). Other than the change in corporate domicile, the reincorporation did not result in any change in the business, physical location, management, assets, liabilities or total stockholders' equity of the Company, nor did it result in any change in location of the Company's employees, including the Company's management. Additionally, the reincorporation did not alter any stockholders' percentage ownership interest or number of shares owned in the Company. The Reincorporation was previously approved by the Company’s stockholders at its 2016 annual meeting of stockholders.
Trimble is a leading provider of technology solutions that enable professionals and field mobile workers to improve or transform their work processes. Trimble's solutions are used across a range of industries including agriculture, architecture, civil engineering, survey and land administration, construction, geospatial, government, natural resources, transportation and utilities. Representative Trimble customers include engineering and construction firms, surveying companies, farmers and agricultural companies, enterprise firms with large-scale fleets, energy, mining and utility companies, and state, federal and municipal governments.
Trimble focuses on integrating broad technological and application capabilities to create system-level solutions that transform how work is done within the industries the Company serves. Products are sold based on return on investment and provide benefits such as lower operational costs, higher productivity, improved quality, enhanced safety and regulatory compliance, and reduced environmental impact. Representative products include equipment that automates large industrial equipment such as tractors and bulldozers; integrated systems that track fleets of vehicles and workers and provide real-time information and powerful analytics to the back-office; data collection systems that enable the management of large amounts of geo-referenced information; software solutions that connect all aspects of a construction site or a farm; and building information modeling (BIM) software that is used throughout the design, build, and operation of buildings.
NOTE 2: ACCOUNTING POLICIES
Use of Estimates
The preparation of financial statements in accordance with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Estimates are used for allowances for doubtful accounts, sales returns reserve, allowances for inventory valuation, warranty costs, investments, goodwill impairment, intangibles impairment, purchased intangibles, stock-based compensation, and income taxes among others. Management bases its estimates on historical experience and various other assumptions believed to be reasonable. Although these estimates are based on management’s best knowledge of current events and actions that may impact the company in the future, actual results may differ materially from management’s estimates.
Basis of Presentation
The Company has a 52-53 week fiscal year, ending on the Friday nearest to December 31. Fiscal
2016
,
2015
and
2014
were all 52-week years, and ended on
December 30, 2016
,
January 1, 2016
and
January 2, 2015
, respectively. Unless otherwise stated, all dates refer to the Company’s fiscal year.
These Consolidated Financial Statements include the results of the Company and its consolidated subsidiaries. Inter-company accounts and transactions have been eliminated. Noncontrolling interests represent the noncontrolling stockholders’ proportionate share of the net assets and results of operations of the Company’s consolidated subsidiaries.
The Company has presented revenue and cost of sales separately for products, service and subscriptions. Product revenue includes hardware, software licenses, parts and accessories; service revenue includes maintenance and support for hardware and software products, training and professional services; subscription revenue includes software as a service (SaaS).
Reclassification
As a result of the Reincorporation, the Company reports common stock at its par value and additional paid-in capital separately. The Company has elected to present this change in disclosure retrospectively, and accordingly, to conform to current year presentation, the Company reclassified
$1.24 billion
,
$1.21 billion
and
$1.11 billion
from common stock to additional paid-in capital at the end of fiscal 2015, 2014 and 2013, respectively, on the Company's Consolidated Balance Sheets and Consolidated Statements of Stockholders' Equity.
Foreign Currency Translation
Assets and liabilities of non-U.S. subsidiaries that operate in local currencies are translated to U.S. dollars at exchange rates in effect at the balance sheet date, with the resulting translation adjustments directly recorded to a separate component of accumulated other comprehensive income, net of tax in accumulated other comprehensive loss within the stockholders’ equity section of the Consolidated Balance Sheets. Income and expense accounts are translated at average monthly exchange rates during the year.
Derivative Financial Instruments
The Company enters into foreign exchange forward contracts to minimize the short-term impact of foreign currency fluctuations on cash, certain trade and inter-company receivables and payables, primarily denominated in Australian, Canadian, Singapore and New Zealand Dollars, Japanese Yen, Chinese Yuan, Indian Rupee, Brazilian Real, South African Rand, Swedish Krona, Swiss Franc, Euro and British pound. These contracts reduce the exposure to fluctuations in 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 market through earnings every period and generally range from
one
to
two
months in original maturity. The Company occasionally enters into foreign exchange forward contracts to hedge the purchase price of some of its larger business acquisitions. The Company does not enter into foreign exchange forward contracts for trading purposes. As of the fiscal years ended
2016
and
2015
, there were
no
derivative financial instruments outstanding that were accounted for as hedges.
Cash, Cash Equivalents and Short-Term Investments
The Company's cash equivalents and short-term investments consisted primarily of treasury bills, debt securities and commercial paper, interest and non-interest bearing bank deposits as well as bank time deposits. The Company classifies all investments that are considered readily convertible to known amounts of cash and have stated maturities of three months or less from the date of purchase as cash equivalents and those with stated maturities of greater than three months as short-term investments based on the nature of the investments and their availability for use in current operations. The Company has classified and accounted for such investments in cash equivalents and short-term investments as available-for-sale securities. The carrying amount of cash and cash equivalents approximates fair value because of the short maturity of those instruments.
The Company determines the appropriate classification of its short-term investments at the time of purchase and reevaluates such designation at each balance sheet date. These investments are carried at fair value, and any unrealized gains and losses, net of taxes, are reported in Accumulated other comprehensive loss, except for unrealized losses determined to be other-than-temporary, which would be recorded within Other income, net. The Company has not recorded any such impairment charge in the fiscal year 2016. Realized gains or losses on the sale of marketable securities are determined on a specific identification method, and such gains and losses are recorded as a component of Other income, net.
Concentrations of Risk
The Company is subject to concentrations of credit risk primarily from cash and cash equivalents, short-term investments and accounts receivable. The Company's cash equivalents and short-term investments consisted primarily of treasury bills, debt securities and commercial paper, interest and non-interest bearing bank deposits as well as bank time deposits. The main objective of these instruments is safety of principal and liquidity while maximizing return, without significantly increasing risk. 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 of reputable credit and therefore bear minimal credit risk.
The Company's 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. The Company maintains an investment portfolio of various holdings, types, and maturities.
The Company is also exposed to credit risk in the Company’s trade receivables, which are derived from sales to end-user customers in diversified industries as well as various resellers. The Company performs ongoing credit evaluations of its customers’ financial condition and limits the amount of credit extended when deemed necessary but generally does not require collateral.
With Flextronics Corporation International as an exclusive manufacturing partner for many of its products, the Company is dependent upon a sole supplier for the manufacture of these products. In addition, the Company relies on sole suppliers for a number of its critical components.
Allowance for Doubtful Accounts
The Company maintains an allowance for doubtful accounts for estimated losses resulting from the inability of its customers to make required payments. The allowance for doubtful accounts was
5.0 million
at the end of fiscal 2016 and 2015, respectively. The sales return reserve was
$3.6 million
and
$5.1 million
at the end of fiscal 2016 and 2015, respectively.
The Company evaluates the ongoing collectibility of its trade accounts receivable based on a number of factors such as age of the accounts receivable balances, credit quality, historical experience, and current economic conditions that may affect a customer’s ability to pay. In circumstances where the Company is aware of a specific customer’s inability to meet its financial obligations to the Company, a specific allowance for bad debts is estimated and recorded which reduces the recognized receivable to the estimated amount that the Company believes will ultimately be collected. In addition to specific customer identification of potential bad debts, bad debt charges are recorded based on the Company’s recent past loss history and an overall assessment of past due trade accounts receivable amounts outstanding.
Inventories
Inventories are stated at the lower of cost or market, which approximates net realizable value. Adjustments are also made to reduce the cost of inventory for estimated excess or obsolete balances. Factors influencing these adjustments include declines in demand which impact inventory purchasing forecasts, technological changes, product life cycle and development plans, component cost trends, product pricing, physical deterioration and quality issues. If the Company's estimates used to reserve for excess and obsolete inventory are different from what it expected, the Company may be required to recognize additional reserves, which would negatively impact its gross margin.
Property and Equipment, Net
Property and equipment, net is stated at cost less accumulated depreciation. Depreciation of property and equipment is computed using the straight-line method over the shorter of the estimated useful lives or the lease terms when applicable. Useful lives generally include a range from
four
to
six
years for machinery and equipment,
five
to
seven
years for furniture and fixtures,
two
to
five
years for computer equipment and software,
39
years for buildings, and
the life of the lease
for leasehold improvements. The Company capitalizes eligible costs to acquire or develop internal-use software that are incurred subsequent to the preliminary project stage. Capitalized costs related to internal-use software are amortized using the straight-line method over the estimated useful lives of the assets, which range generally from
two
to
five
years. The costs of repairs and maintenance are expensed when incurred, while expenditures for refurbishments and improvements that significantly add to the productive capacity or extend the useful life of an asset are capitalized. Depreciation expense was
$37.0 million
in fiscal
2016
,
$36.7 million
in fiscal
2015
and
$33.1 million
in fiscal
2014
.
Business Combinations
The Company allocates the fair value of purchase consideration to the assets acquired, liabilities assumed, and non-controlling interests in the acquiree based on their fair values at the acquisition date. The excess of the fair value of purchase consideration over the fair value of these assets acquired, liabilities assumed and non-controlling interests in the acquiree is recorded as goodwill.
When determining the fair values of assets acquired, liabilities assumed, and non-controlling interests in the acquiree, management makes significant estimates and assumptions, especially with respect to intangible assets. Critical estimates in valuing intangible assets include, but are not limited to, expected future cash flows, which includes consideration of future growth rates and margins, customer attrition rates, future changes in technology and brand awareness, loyalty and position, and discount rates. Fair value estimates are based on the assumptions management believes a market participant would use in pricing the asset or liability. Amounts recorded in a business combination may change during the measurement period, which is a period not to exceed one year from the date of acquisition, as additional information about conditions existing at the acquisition date becomes available.
Goodwill and Purchased Intangible Assets
Goodwill represents the excess of the purchase consideration over the fair value of the net tangible and identifiable intangible assets acquired in a business combination. Intangible assets acquired individually, with a group of other assets, or in a business combination are recorded at fair value. Identifiable intangible assets are comprised of distribution channels and distribution rights, patents, licenses, technology, acquired backlog, trademarks and in-process research and development. Identifiable intangible assets are being amortized over the period of estimated benefit using the straight-line method, reflecting the pattern of economic benefits associated with these assets, and have estimated useful lives ranging from
one
month to
twelve
years with a weighted average useful life of
6.2
years. Goodwill is not subject to amortization, but is subject to at least an annual assessment for impairment, applying a fair-value based test.
Impairment of Goodwill, Intangible Assets and Other Long-Lived Assets
The Company evaluates goodwill, at a minimum, on an annual basis and whenever events and changes in circumstances suggest that the carrying amount may not be recoverable. The Company performs its annual goodwill impairment testing in the fourth fiscal quarter of each year based on the values on the first day of that quarter. For the Company's annual goodwill impairment test in the fourth quarter of fiscal
2016
goodwill was reviewed for impairment utilizing a quantitative two-step process. In the first
step of this test, goodwill is tested for impairment at the reporting unit level by comparing the reporting unit’s carrying amount, including goodwill, to the fair value of the reporting unit. The fair values of the reporting units are estimated using a discounted cash flow approach. If the carrying amount of the reporting unit exceeds its fair value, a second step is performed to measure the amount of impairment loss, if any. In step two, the implied fair value of goodwill is calculated as the excess of the fair value of a reporting unit over the fair values assigned to its assets and liabilities. If the implied fair value of goodwill is less than the carrying value of the reporting unit’s goodwill, the difference is recognized as an impairment loss. When the Company performs a quantitative assessment of goodwill impairment, the determination of fair value of a reporting unit involves the use of significant estimates and assumptions. The discounted cash flows are based upon, among other things, assumptions about expected future operating performance using risk-adjusted discount rates. Actual future results may differ from those estimates. As of the first day of the fourth quarter of fiscal
2016
, the fair value for our reporting units ranged from
180%
to approximately
1,068%
of carrying amounts, therefore goodwill was not impaired and no further testing was required. For certain earlier stage reporting units, due to the smaller magnitude of the carrying value and fair value of each respective reporting unit, the margins by which the fair value exceeded the carrying value on an absolute dollar basis were relatively small.
Depreciation and amortization of the Company’s intangible assets and other long-lived assets is provided using the straight-line method over their estimated useful lives, reflecting the pattern of economic benefits associated with these assets. Changes in circumstances such as technological advances, changes to the Company’s business model, or changes in the capital strategy could result in the actual useful lives differing from initial estimates. In cases where the Company determines that the useful life of an asset should be revised, the Company will depreciate the net book value in excess of the estimated residual value over its revised remaining useful life. These assets are evaluated for impairment whenever events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable. The estimated future cash flows are based upon, among other things, assumptions about expected future operating performance and these estimates may differ from actual future cash flows. The assets evaluated for impairment are grouped with other assets to the lowest level for which identifiable cash flows are largely independent of the cash flows of other groups of assets and liabilities. If the sum of the projected undiscounted cash flows (excluding interest) is less than the carrying value of the assets, the assets will be written down to the estimated fair value.
Warranty
The Company accrues for warranty costs as part of its cost of sales based on associated material product costs, technical support labor costs, and costs incurred by third parties performing work on the Company’s behalf. The Company’s expected future cost is primarily estimated based upon historical trends in the volume of product returns within the warranty period and the cost to repair or replace the equipment. When products sold include warranty provisions, they are covered by a warranty for periods ranging generally from
1
year to
2
years.
While the Company engages in extensive product quality programs and processes, including actively monitoring and evaluating the quality of component suppliers, its warranty obligation is affected by product failure rates, material usage, and service delivery costs incurred in correcting a product failure. Should actual product failure rates, material usage, or service delivery costs differ from the estimates, revisions to the estimated warranty accrual and related costs may be required.
Changes in the Company’s product warranty liability during the fiscal years ended
2016
and
2015
are as follows:
|
|
|
|
|
|
|
|
|
At the End of Fiscal Year
|
2016
|
|
2015
|
(In millions)
|
|
|
|
Beginning balance
|
$
|
18.5
|
|
|
$
|
20.6
|
|
Acquired warranties
|
(0.2
|
)
|
|
0.1
|
|
Accruals for warranties issued
|
18.3
|
|
|
16.6
|
|
Changes in estimates
|
0.3
|
|
|
4.8
|
|
Warranty settlements (in cash or in kind)
|
(19.7
|
)
|
|
(23.6
|
)
|
Ending Balance
|
$
|
17.2
|
|
|
$
|
18.5
|
|
Guarantees, Including Indirect Guarantees of Indebtedness of Others
In the normal course of business to facilitate sales of its products, the Company indemnifies other parties, including customers, lessors, and parties to other transactions with the Company. For example, the Company has agreed 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 by certain parties. These agreements may limit the time within which an indemnification claim can be made and the amount of the claim. In addition, the Company has entered into indemnification agreements with its officers and directors, and the Company’s bylaws contain similar indemnification obligations to the Company’s agents.
It is not possible to determine the maximum potential exposure 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 the Company under these agreements have not been material and
no
liabilities have been recorded on the Consolidated Balance Sheets at the end of fiscal
2016
and
2015
.
Revenue Recognition
The Company recognizes revenue when it is realized or realizable and earned. The Company considers revenue realized or realizable and earned when persuasive evidence of an arrangement exists, delivery has occurred, the fee is fixed or determinable, and collectibility is reasonably assured. In instances where final acceptance of the product is specified by the customer or is uncertain, revenue is deferred until all acceptance criteria have been met.
Contracts and/or customer purchase orders are used to determine the existence of an arrangement. Shipping documents and customer acceptance, when applicable, are used to verify delivery. The Company assesses whether the fee is fixed or determinable based on the payment terms associated with the transaction and whether the sales price is subject to refund or adjustment. The Company assesses collectibility based primarily on the creditworthiness of the customer as determined by credit checks and analyses, as well as the customer’s payment history.
Revenue for orders is not recognized until the product is shipped and title has transferred to the buyer. The Company bears all costs and risks of loss or damage to the goods up to that point. The Company’s shipment terms for U.S. orders and international orders fulfilled from the Company’s European distribution center typically provide that title passes to the buyer upon delivery of the goods to the carrier named by the buyer at the named place or point. If no precise point is indicated by the buyer, delivery is deemed to occur when the carrier takes the goods into its charge from the place determined by the Company. Other shipment terms may provide that title passes to the buyer upon delivery of the goods to the buyer. Shipping and handling costs are included in Cost of sales.
Revenue from sales to distributors and dealers is recognized upon shipment, assuming all other criteria for revenue recognition have been met. Distributors and dealers do not have a right of return.
Revenue from purchased extended warranty and post contract support (PCS) agreements is deferred and recognized ratably over the term of the warranty or support period. Revenue from the Company's subscription services related to its hardware and software applications is recognized ratably over the term of the subscription service period beginning on the date that service is made available to the customer, assuming all revenue recognition criteria have been met.
The Company presents revenue net of sales taxes and any similar assessments.
The Company’s software arrangements generally consist of a perpetual license fee and PCS. The Company generally has established vendor-specific objective evidence (VSOE) of fair value for the Company’s PCS contracts based on the renewal rate. The remaining value of the software arrangement is allocated to the license fee using the residual method. License revenue is primarily recognized when the software has been delivered and fair value has been established for all remaining undelivered elements. In cases where VSOE of fair value for PCS is not established, revenue is recognized ratably over the PCS period after all software deliverables have been made and the only the undelivered element is PCS.
For services performed on a fixed-fee basis, revenue is recognized using the proportional performance method, with performance measured based on hours of work performed. For contracts that involve significant customization and implementation or consulting services that are essential to the functionality of the software, the license and services revenues are recognized using the percentage-of-completion method or, if we are unable to reliably estimate the costs to complete the services, we use the completed-contract method of accounting. A contract is considered complete when all significant costs have been incurred or when acceptance from the customer has been received.
Some of the Company’s subscription product offerings include hardware, subscription services and extended warranty. Under these hosted arrangements, the customer typically does not have the contractual right to take possession of the software at any time during the hosting period without incurring a significant penalty and it is not feasible for the customer to run the software either on its own hardware or on a third-party’s hardware.
The Company’s multiple deliverable product offerings include hardware with embedded firmware, extended warranty, software, PCS and subscription services, which are considered separate units of accounting. For certain of the Company’s products, software and non-software components function together to deliver the tangible product’s essential functionality.
In evaluating the revenue recognition for the Company's hardware or subscription agreements which contain multiple deliverables, the Company determined that in certain instances the Company was not able to establish VSOE for some or all deliverables in an
arrangement as the Company infrequently sold each element on a standalone basis, did not price products within a narrow range, or had a limited sales history. When VSOE cannot be established, the Company attempts to establish the selling price of each element based on relevant third-party evidence (TPE). TPE is determined based on competitor prices for similar deliverables when sold separately. The Company’s offerings may contain a significant level of proprietary technology, customization or differentiation such that the comparable pricing of products with similar functionality cannot be obtained. Furthermore, the Company is unable to reliably determine what similar competitor products’ selling prices are on a stand-alone basis. Therefore, the Company typically is not able to establish the selling price of an element based on TPE.
When the Company is unable to establish selling price using VSOE or TPE, the Company uses its best estimate of selling price (BESP) in the Company’s allocation of arrangement consideration. The objective of BESP is to determine the price at which the Company would transact a sale if the product or service were sold on a stand-alone basis. BESP is generally used for offerings that are not typically sold on a stand-alone basis or for new or highly customized offerings. The Company determines BESP for a product or service by considering multiple factors including, but not limited to, pricing practices, market conditions, competitive landscape, internal costs, geographies and gross margin. The determination of BESP is made through consultation with and formal approval by the Company’s management, taking into consideration the Company’s go-to-market strategy.
Advertising and Promotional Costs
The Company expenses all advertising and promotional costs as incurred. Advertising and promotional expense was approximately
$37.2 million
,
$32.3 million
, and
$39.0 million
, in fiscal
2016
,
2015
and
2014
, respectively.
Research and Development Costs
Research and development costs are charged to expense as incurred. Cost of software developed for external sale subsequent to reaching technical feasibility were not significant and were expensed as incurred. The Company received third party funding of approximately
$13.0 million
,
$12.5 million
, and
$13.5 million
in fiscal
2016
,
2015
and
2014
, respectively. The Company offsets research and development expense with any third party funding earned. The Company retains the rights to any technology developed under such arrangements.
Stock-Based Compensation
The Company has employee stock benefit plans, which are described more fully in “Note 13: Employee Stock Benefit Plans.” Stock compensation expense recognized in the Consolidated Statements of Income is based on the fair value of the portion of share-based payment awards that is expected to vest during the period and is net of estimated forfeitures. The Company attributes the value of stock options to expense using the straight-line single option method. The grant date fair value for options is estimated using the binomial valuation model. The fair value of rights to purchase shares under the Employee Stock Purchase Plan is estimated using the Black-Scholes option-pricing model. The fair value of restricted stock units (RSUs) and performance-based restricted stock units (PSUs) are valued as of the grant date using the fair value of Trimble’s common stock and the total expense associated with the performance-based awards is based upon the expected achievement of the underlying performance goals and may be adjusted in future periods based upon changes in expectations and actual achievement. The fair value for restricted stock units with market-based vesting conditions is valued as of the grant date using a Monte Carlo simulation. The Company estimates forfeitures at the time of grant and revises those estimates in subsequent periods if actual forfeitures differ from those estimates. The Company uses historical data to estimate pre-vesting option forfeitures and records stock-based compensation expense only for those awards that are expected to vest.
Income Taxes
Income taxes are accounted for under the liability method whereby deferred tax assets or liability account balances are calculated at the balance sheet date using current tax laws and rates in effect for the year in which the differences are expected to affect taxable income. A valuation allowance is recorded to reduce the carrying amounts of deferred tax assets if it is more likely than not such assets will not be realized. The Company’s valuation allowance is primarily attributable to foreign net operating losses and state research and development credit carryforwards. Management believes that it is more likely than not that the Company will not realize certain of these deferred tax assets, and, accordingly, a valuation allowance has been provided for such amounts. Valuation allowance adjustments associated with an acquisition after the measurement period are recorded through income tax expense.
Relative to uncertain tax positions, the Company only recognizes a tax benefit if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such positions are then measured based on the largest benefit that has a greater than 50 percent likelihood of being realized upon ultimate settlement. The Company considers many factors when evaluating and estimating our tax positions and tax benefits, which may require periodic adjustments and may not accurately forecast actual tax audit outcomes.
Determining whether an uncertain tax position is effectively settled requires judgment. Changes in recognition or measurement of the Company's uncertain tax positions would result in the recognition of a tax benefit or an additional charge to the tax provision. The Company’s practice is to recognize interest and/or penalties related to income tax matters in income tax expense.
The Company is subject to income taxes in the U.S. and numerous other countries, and is subject to routine corporate income tax audits in many of these jurisdictions. The Company generally believes that positions taken on its tax returns are more likely than not to be sustained upon audit, but tax authorities in some circumstance have, and may in the future, successfully challenge these positions. Accordingly, the Company’s income tax provision includes amounts intended to satisfy assessments that may result from these challenges. Determining the income tax provision for these potential assessments and recording the related effects requires management judgments and estimates. The amounts ultimately paid on resolution of an audit could be materially different from the amounts previously included in the Company’s income tax provision and, therefore, could have a material impact on its income tax provision, net income and cash flows. The Company’s accrual for uncertain tax positions includes uncertainties concerning the tax treatment of our international operations, including the allocation of income among different jurisdictions, intercompany transactions and related interest. See Note 11 to the Consolidated Financial Statements for additional information.
Computation of Earnings Per Share
The number of shares used in the calculation of basic earnings per share represents the weighted average common shares outstanding during the period and excludes any potentially dilutive securities. The dilutive effects of outstanding stock options, shares to be purchased under the Company’s employee stock purchase plan and restricted stock units are included in diluted earnings per share.
Recent Accounting Pronouncements
Fiscal 2016 Adoption
In February 2015, the FASB issued amendments to the consolidation guidance. The amendments under the new guidance modify the evaluation of whether limited partnerships and similar legal entities are variable interest entities (VIEs) or voting interest entities and eliminate the presumption that a general partner should consolidate a limited partnership. The Company adopted the amendments beginning in the first quarter of fiscal 2016. The adoption did not have a material impact on the Company's consolidated financial statements.
In September 2015, the FASB issued new guidance related to business combinations. The new guidance requires that any adjustments to provisional amounts in a business combination be recorded in the period such adjustments are determined, rather than retrospectively adjusting previously reported amounts. The Company adopted the amendments beginning in the first quarter of fiscal 2016. The adoption did not have a material impact on the Company's consolidated financial statements.
Fiscal 2017 Adoption
In July 2015, the FASB issued amendments to simplify the measurement of inventory. Under the amendments, inventory will be measured at the “lower of cost and net realizable value” and options that currently exist for “market value” will be eliminated. The guidance defines net realizable value as the “estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation”. The amendments are effective for the Company beginning in fiscal 2017 and will not have a material impact on the Company's consolidated financial statements.
In March 2016, the FASB issued amendments to its guidance on the accounting for derivatives and hedging. The new guidance clarifies the requirements for assessing whether contingent call or put options that can accelerate the payment of principal on debt instruments are clearly and closely related to their debt hosts. The amendments are effective for the Company beginning in fiscal 2017 and will not have a material impact on the Company's consolidated financial statements.
In March 2016, the FASB issued new guidance related to equity investments and joint ventures. This standard eliminates the requirement that when an existing cost method investment qualifies for use of the equity method, an investor must restate its historical financial statements, as if the equity method had been used during all previous periods. Under the new guidance, at the point an investment qualifies for the equity method, any unrealized gain or loss in accumulated other comprehensive income will be recognized through earnings. The amendments are effective for the Company beginning in fiscal 2017 and will not have a material impact on the Company's consolidated financial statements.
In March 2016, the FASB issued final guidance that changes certain aspects of the accounting for share-based payments awards, including the accounting for income taxes, forfeitures, and statutory tax withholding requirements, as well as classification in the statement of cash flows. The Company will adopt this guidance beginning in the first quarter of fiscal 2017. The adoption will not have a material impact on the Company's financial statements.
In October 2016, the FASB issued amendments to its guidance on the accounting for related parties, which amends the consolidation guidance issued in February 2015 regarding the treatment of indirect interests held through related parties that are under common control. The amendments are effective for the Company beginning in fiscal 2017 and will not have a material impact on the Company's consolidated financial statements.
Future Adoption
In May 2014, the FASB issued a comprehensive new revenue recognition standard that replaces the current revenue recognition guidance under U.S. GAAP. The new standard requires companies to recognize revenue in a way that depicts the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The Company expects to adopt this accounting standard update in the first quarter of fiscal 2018. Entities have the option of using either a full retrospective or modified retrospective approach for the adoption of the standard. The new standard may impact the timing and amounts of revenue recognized. The Company is still evaluating which adoption method it will apply and is continuing to assess the impact that the updated standard will have on its consolidated financial statements and related disclosures.
In January 2016, the FASB issued final guidance that will require entities to measure equity investments that do not result in consolidation and are not accounted for under the equity method at fair value and recognize any changes in fair value in net income unless the investments qualify for the new practicability exception. The amendments are effective for the Company beginning in fiscal 2018, although early adoption is permitted and should be applied by means of a cumulative-effect adjustment to the balance sheet as of the beginning of the fiscal year of adoption, with certain exceptions. The Company is currently evaluating the effect of the updated standard on its consolidated financial statements and related disclosures.
In February 2016, the FASB issued new guidance that requires a lessee to recognize assets and liabilities arising from leases on the balance sheet. Previous GAAP did not require lease assets and liabilities to be recognized for most leases. Additionally, companies are permitted to make an accounting policy election to not recognize lease assets and liabilities for leases with a term of
12 months
or less. For both finance leases and operating leases, the lease liability should be initially measured at the present value of the lease payments. This new guidance is effective for the Company beginning in fiscal 2019, although early adoption is permitted. The Company is currently evaluating the effect of this guidance on its consolidated financial statements and related disclosures.
In June 2016, the FASB issued new guidance that requires credit losses on financial assets measured at amortized cost basis to be presented based on the net amount expected to be collected, not based on incurred losses. Further, credit losses on available-for-sale debt securities should be recorded through an allowance for credit losses limited to the amount by which fair value is below amortized cost. The new standard is effective for the Company beginning in fiscal 2020. Early adoption for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018 is permitted. The Company is currently evaluating the effect of the updated standard on its consolidated financial statements and related disclosures.
In August 2016, the FASB issued new guidance related to statement of cash flows. This guidance amended the existing accounting standards for the statement of cash flows and provided guidance on certain classification issues related to the statement of cash flows. The new standard is effective for the Company beginning in fiscal 2019 and early adoption is permitted. The amendments should be applied retrospectively to all periods presented. For issues that are impracticable to apply retrospectively, the amendments may be applied prospectively as of the earliest date practicable. The Company is currently evaluating the timing and the impact of these amendments on its statement of cash flows, which will likely include a reclassification of payments for business combinations from cash flows from investing activities, to cash flows from operating and financing activities.
In October 2016, the FASB issued new guidance related to income taxes. This standard requires the recognition of the income tax consequences of an intra-entity transfer of an asset, other than inventory, when the transfer occurs. The guidance will be effective for the Company in its first quarter of fiscal 2018. The Company is currently evaluating the effect of the updated standard on its consolidated financial statements and related disclosures.
In January 2017, the FASB issued new guidance to that simplifies the accounting for goodwill impairment by requiring impairment charges to be based on the first step in today’s two-step impairment test. The impairment test is performed by comparing the fair value of a reporting unit with its carrying amount and an impairment charge would be recognized for the amount by which the carrying amount exceeds the reporting unit’s fair value. The new standard is to be applied on a prospective basis and is effective for the Company beginning in fiscal 2020 and early adoption is permitted. The Company is currently evaluating the effect of the updated standard on its consolidated financial statements and related disclosures.
In February 2017, the FASB issued new guidance clarifying the scope and application of existing guidance related to the sale or transfer of nonfinancial assets to noncustomers, including partial sales. The amendments are effective at the same time as the new revenue recognition guidance, which the Company expects to adopt in the first quarter of fiscal 2018. The Company is currently evaluating the effect of the updated standard on its consolidated financial statements and related disclosures.
NOTE 3: EARNINGS PER SHARE
Basic earnings per share is computed by dividing Net income by the weighted-average number of shares of common stock outstanding during the period. Diluted earnings per share is computed by dividing Net income by the weighted-average number of shares of common stock outstanding during the period increased to include the number of additional shares of common stock that would have been outstanding if the potentially dilutive securities had been issued. Potentially dilutive securities include outstanding stock options, shares to be purchased under the Company’s employee stock purchase plan and restricted stock units. The dilutive effect of potentially dilutive securities is reflected in diluted earnings per share by application of the treasury stock method. Under the treasury stock method, an increase in the fair market value of the Company’s common stock can result in a greater dilutive effect from potentially dilutive securities.
The following table shows the computation of basic and diluted earnings per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Years
|
2016
|
|
2015
|
|
2014
|
(in millions, except per share data)
|
|
|
|
|
|
Numerator:
|
|
|
|
|
|
Net income attributable to Trimble Inc.
|
$
|
132.4
|
|
|
$
|
121.1
|
|
|
$
|
214.1
|
|
Denominator:
|
|
|
|
|
|
Weighted average number of common shares used in basic earnings per share
|
250.5
|
|
|
255.8
|
|
|
260.1
|
|
Effect of dilutive securities
|
3.4
|
|
|
2.7
|
|
|
4.4
|
|
Weighted average number of common shares and dilutive potential common shares used in diluted earnings per share
|
253.9
|
|
|
258.5
|
|
|
264.5
|
|
Basic earnings per share
|
$
|
0.53
|
|
|
$
|
0.47
|
|
|
$
|
0.82
|
|
Diluted earnings per share
|
$
|
0.52
|
|
|
$
|
0.47
|
|
|
$
|
0.81
|
|
For fiscal
2016
,
2015
and
2014
the Company excluded
4.3 million
shares,
6.1 million
shares and
1.4 million
shares of outstanding stock options, respectively, from the calculation of diluted earnings per share because their effect would have been antidilutive.
NOTE 4: BUSINESS COMBINATIONS
During fiscal
2016
,
2015
and
2014
the Company acquired multiple businesses, all with cash consideration. The Consolidated Statements of Income include the operating results of the businesses from the dates of acquisition.
During fiscal 2016, the Company acquired
four
businesses, all with cash consideration, all in its Engineering and Construction segment. The purchase prices ranged from less than
$0.3 million
to
$14.0 million
. The acquisitions were not significant individually or in the aggregate. The largest acquisition was of a company that manages content and software solutions enable Mechanical, Electrical and Plumbing (MEP) contractors and engineers to produce intelligent and constructible models, based in Rocklin, California. In the aggregate, the businesses acquired during fiscal 2016 contributed less than
one
percent to the Company's total revenue during fiscal 2016.
During fiscal 2015, the Company acquired
thirteen
businesses, all with cash consideration, in its Engineering and Construction, Field Solutions and Mobile Solutions segments. The acquisitions were not significant individually or in the aggregate. The purchase prices ranged from less than
$2.0 million
to
$30.0 million
. The largest acquisition was a Norwegian company specializing in BIM software for infrastructure design software solutions across the European region. In the aggregate, the businesses acquired during fiscal 2015 collectively contributed less than
one
percent to the Company's total revenue during fiscal 2015.
During fiscal 2014, the Company acquired
thirteen
businesses across its Engineering and Construction, Field Solutions, and Mobile Solutions segments. The purchase prices ranged from less than
$0.6 million
to
$83.1 million
. The largest acquisition was of a company that provides software solutions to MEP industry and a software provider for real estate and facility management, based in London within the Engineering and Construction segment. In the aggregate, the businesses acquired during fiscal 2014 collectively contributed less than
one
percent to the Company's total revenue during fiscal 2014.
The Company determined the total consideration paid for each of its acquisitions as well as the fair value of the assets acquired and liabilities assumed as of the date of each acquisition. For certain acquisitions completed in fiscal 2016, the fair value of the assets acquired and liabilities assumed are preliminary and may be adjusted as the Company obtains additional information, primarily related to adjustments for the true up of acquired net working capital in accordance with certain purchase agreements, and estimated values of certain net tangible assets and liabilities including tax balances, pending the completion of final studies and analyses. If there are adjustments made for these items the fair value of intangible assets and goodwill could be impacted. Thus the provisional measurements of fair value set forth below are subject to change. Such changes could be significant. The Company expects to finalize the valuation of the net tangible and intangible assets as soon as practicable, but not later than
one
-year from the acquisition date.
The fair value of identifiable assets acquired and liabilities assumed were determined under the acquisition method of accounting for business combinations. The excess of purchase consideration over the fair value of net tangible and identifiable intangible assets acquired was recorded as goodwill. The fair value of intangible assets acquired is generally determined based on a discounted cash flow analysis. Acquisition costs of
$6.9 million
,
$12.0 million
and
$13.4 million
in fiscal
2016
,
2015
and
2014
, respectively, were expensed as incurred, along with the changes in fair value of the contingent consideration liabilities, and are included in General and administrative expenses in the Consolidated Statements of Income.
The following table summarizes the Company’s business combinations completed during fiscal
2016
,
2015
and
2014
:
|
|
|
|
|
|
|
|
|
|
|
|
|
(In millions)
|
Fiscal 2016
|
|
Fiscal 2015
|
|
Fiscal 2014
|
Fair value of total purchase consideration
|
$
|
27.6
|
|
|
$
|
176.2
|
|
|
$
|
331.8
|
|
Less fair value of net assets acquired:
|
|
|
|
|
|
Net tangible assets acquired
|
(1.9
|
)
|
|
8.0
|
|
|
41.2
|
|
Identified intangible assets
|
13.6
|
|
|
83.3
|
|
|
155.8
|
|
Deferred taxes
|
(1.3
|
)
|
|
(13.6
|
)
|
|
(46.8
|
)
|
Goodwill
|
$
|
17.2
|
|
|
$
|
98.5
|
|
|
$
|
181.6
|
|
Intangible Assets
The following table presents details of the Company’s total intangible assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At the End of Fiscal 2016
|
|
At the End of Fiscal 2015
|
(In millions)
|
Gross Carrying
Amount
|
|
Accumulated
Amortization
|
|
Net Carrying
Amount
|
|
Gross Carrying
Amount
|
|
Accumulated
Amortization
|
|
Net Carrying
Amount
|
Developed product technology
|
$
|
794.8
|
|
|
$
|
(620.6
|
)
|
|
$
|
174.2
|
|
|
$
|
802.1
|
|
|
$
|
(536.0
|
)
|
|
$
|
266.1
|
|
Trade names and trademarks
|
50.9
|
|
|
(42.9
|
)
|
|
8.0
|
|
|
52.8
|
|
|
(39.8
|
)
|
|
13.0
|
|
Customer relationships
|
438.7
|
|
|
(294.1
|
)
|
|
144.6
|
|
|
448.1
|
|
|
(258.0
|
)
|
|
190.1
|
|
Distribution rights and other intellectual properties
|
64.3
|
|
|
(57.8
|
)
|
|
6.5
|
|
|
78.6
|
|
|
(60.7
|
)
|
|
17.9
|
|
|
$
|
1,348.7
|
|
|
$
|
(1,015.4
|
)
|
|
$
|
333.3
|
|
|
$
|
1,381.6
|
|
|
$
|
(894.5
|
)
|
|
$
|
487.1
|
|
The weighted-average amortization period is
six
years for developed product technology,
five
years for trade names and trademarks,
seven
years for customer relationships, and
eight
years for distribution rights and other intellectual properties.
The estimated future amortization expense of intangible assets at the end of fiscal
2016
is as follows (in millions):
|
|
|
|
|
|
|
2017
|
$
|
126.1
|
|
2018
|
98.7
|
|
2019
|
59.4
|
|
2020
|
32.1
|
|
2021
|
11.5
|
|
Thereafter
|
5.5
|
|
Total
|
$
|
333.3
|
|
Goodwill
The changes in the carrying amount of goodwill for fiscal
2016
are as follows (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Engineering
and
Construction
|
|
Field
Solutions
|
|
Mobile
Solutions
|
|
Advanced
Devices
|
|
Total
|
At the end of fiscal 2015
|
$
|
1,140.1
|
|
|
$
|
125.7
|
|
|
$
|
822.9
|
|
|
$
|
17.7
|
|
|
$
|
2,106.4
|
|
Additions due to acquisitions and current year acquisitions' purchase price adjustments
|
18.6
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
18.6
|
|
Purchase price adjustments - prior years' acquisitions
|
—
|
|
|
0.2
|
|
|
0.1
|
|
|
—
|
|
|
0.3
|
|
Foreign currency translation adjustments
|
(35.1
|
)
|
|
(1.1
|
)
|
|
(3.9
|
)
|
|
0.2
|
|
|
(39.9
|
)
|
Divestitures
|
(1.2
|
)
|
|
—
|
|
|
(6.6
|
)
|
|
—
|
|
|
(7.8
|
)
|
At the end of fiscal 2016
|
$
|
1,122.4
|
|
|
$
|
124.8
|
|
|
$
|
812.5
|
|
|
$
|
17.9
|
|
|
$
|
2,077.6
|
|
The Company sold the Omega Group assets, Advanced Public Safety (APS) business, and Gatewing business in fiscal 2016. Both Omega Group and APS businesses provided software solutions for public safety agencies and were part of the Company’s Mobile Solutions segment. Gatewing provided lightweight unmanned aerial vehicles for photogrammetry and rapid terrain mapping applications and was part of the Company's Engineering and Construction segment.
NOTE 5: CERTAIN BALANCE SHEET COMPONENTS
The following tables provide details of selected balance sheet items:
|
|
|
|
|
|
|
|
|
At the End of Fiscal Year
|
2016
|
|
2015
|
(In millions)
|
|
|
|
Inventories:
|
|
|
|
Raw materials
|
$
|
77.9
|
|
|
$
|
107.5
|
|
Work-in-process
|
6.8
|
|
|
5.9
|
|
Finished goods
|
134.1
|
|
|
147.7
|
|
Total inventories
|
$
|
218.8
|
|
|
$
|
261.1
|
|
Finished goods includes
$14.4 million
at the end of fiscal year
2016
and
$14.6 million
at the end of fiscal year
2015
for costs of sales that have been deferred in connection with deferred revenue arrangements.
|
|
|
|
|
|
|
|
|
At the End of Fiscal Year
|
2016
|
|
2015
|
(In millions)
|
|
|
|
Property and equipment, net:
|
|
|
|
Machinery and equipment
|
$
|
113.3
|
|
|
$
|
115.8
|
|
Software and licenses
|
119.4
|
|
|
112.1
|
|
Furniture and fixtures
|
26.3
|
|
|
26.8
|
|
Leasehold improvements
|
32.1
|
|
|
30.4
|
|
Construction in progress
|
10.8
|
|
|
13.5
|
|
Buildings
|
47.9
|
|
|
48.1
|
|
Land
|
8.3
|
|
|
8.2
|
|
|
358.1
|
|
|
354.9
|
|
Less accumulated depreciation
|
(213.9
|
)
|
|
(195.7
|
)
|
Total
|
$
|
144.2
|
|
|
$
|
159.2
|
|
|
|
|
|
|
|
|
|
|
At the End of Fiscal Year
|
2016
|
|
2015
|
(In millions)
|
|
|
|
Other non-current liabilities:
|
|
|
|
Deferred compensation
|
$
|
22.6
|
|
|
$
|
21.1
|
|
Pension
|
13.1
|
|
|
13.5
|
|
Deferred rent
|
3.3
|
|
|
3.0
|
|
Unrecognized tax benefits
|
65.3
|
|
|
53.1
|
|
Other
|
9.5
|
|
|
15.8
|
|
Total
|
$
|
113.8
|
|
|
$
|
106.5
|
|
NOTE 6: REPORTING SEGMENT AND GEOGRAPHIC INFORMATION
To achieve distribution, marketing, production, and technology advantages, the Company manages its operations in the following four segments:
|
|
•
|
Engineering and Construction: This segment primarily serves customers working in architecture, engineering, construction, geospatial and government. Within this segment our most substantial product portfolios are focused on civil engineering and construction, building construction, and geospatial.
|
|
|
•
|
Field Solutions: This segment provides solutions for the farming, government and consumer markets, with its products focused on agriculture and geographic information systems (GIS).
|
|
|
•
|
Mobile Solutions: This segment provides solutions that enable end-users to monitor and manage their mobile work, mobile workers and mobile assets in the areas of transportation and logistics and field services management.
|
|
|
•
|
Advanced Devices - The various operations that comprise this segment are aggregated on the basis that these operations do not exceed
10%
of the Company's total revenue, operating income or assets. This segment is comprised of the Embedded Technologies, Timing, Applanix, Military and Advanced Systems and ThingMagic businesses.
|
The Company’s CODM, its Chief Executive Officer, evaluates each of its segment’s performance and allocates resources based on segment operating income before income taxes and some corporate allocations. The Company and each of its segments employ consistent accounting policies. In each of its segments the Company sells many individual products. For this reason it is impracticable to segregate and identify revenue for each of the individual products or group of products. Stock-based compensation is shown in the aggregate within unallocated corporate expense and is not reflected in the segment results, which is consistent with the way the CODM evaluates each of the segment's performance and allocates resources.
The following tables present revenue, operating income, depreciation expense and identifiable assets for the
four
segments. Operating income is revenue less cost of sales and operating expense, excluding general corporate expense, acquisition/divestiture costs, amortization of purchased intangible assets, amortization of acquisition-related inventory step-up, restructuring charges,
stock-based compensation, litigation reserves and executive transition costs. The identifiable assets that the CODM views by segment are accounts receivable, inventories and goodwill.
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Years
|
2016
|
|
2015
|
|
2014
|
(In millions)
|
|
|
|
|
|
Engineering and Construction
|
|
|
|
|
|
Revenue
|
$
|
1,313.6
|
|
|
$
|
1,283.3
|
|
|
$
|
1,348.1
|
|
Operating income
|
230.5
|
|
|
218.8
|
|
|
284.1
|
|
Depreciation expense
|
13.6
|
|
|
14.1
|
|
|
13.4
|
|
Field Solutions
|
|
|
|
|
|
Revenue
|
$
|
354.3
|
|
|
$
|
355.3
|
|
|
$
|
422.1
|
|
Operating income
|
105.2
|
|
|
108.6
|
|
|
137.8
|
|
Depreciation expense
|
1.3
|
|
|
1.2
|
|
|
0.9
|
|
Mobile Solutions
|
|
|
|
|
|
Revenue
|
$
|
559.7
|
|
|
$
|
520.3
|
|
|
$
|
486.8
|
|
Operating income
|
88.9
|
|
|
85.6
|
|
|
78.0
|
|
Depreciation expense
|
5.5
|
|
|
5.4
|
|
|
5.3
|
|
Advanced Devices
|
|
|
|
|
|
Revenue
|
$
|
134.6
|
|
|
$
|
131.5
|
|
|
$
|
138.5
|
|
Operating income
|
51.4
|
|
|
46.9
|
|
|
44.3
|
|
Depreciation expense
|
0.6
|
|
|
0.6
|
|
|
0.6
|
|
Total
|
|
|
|
|
|
Revenue
|
$
|
2,362.2
|
|
|
$
|
2,290.4
|
|
|
$
|
2,395.5
|
|
Operating income
|
476.0
|
|
|
459.9
|
|
|
544.2
|
|
Depreciation expense
|
21.0
|
|
|
21.3
|
|
|
20.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At the End of Fiscal Year
|
2016
|
|
2015
|
|
2014
|
(Dollars in millions)
|
|
|
|
|
|
Engineering and Construction
|
|
|
|
|
|
Accounts receivable
|
$
|
202.9
|
|
|
$
|
215.9
|
|
|
$
|
227.7
|
|
Inventories
|
140.8
|
|
|
178.0
|
|
|
185.2
|
|
Goodwill
|
1,122.4
|
|
|
1,140.1
|
|
|
1,170.6
|
|
Field Solutions
|
|
|
|
|
|
Accounts receivable
|
$
|
59.7
|
|
|
$
|
57.1
|
|
|
$
|
51.6
|
|
Inventories
|
32.7
|
|
|
36.0
|
|
|
51.0
|
|
Goodwill
|
124.8
|
|
|
125.7
|
|
|
96.0
|
|
Mobile Solutions
|
|
|
|
|
|
Accounts receivable
|
$
|
69.2
|
|
|
$
|
69.6
|
|
|
$
|
62.9
|
|
Inventories
|
31.6
|
|
|
30.4
|
|
|
26.1
|
|
Goodwill
|
812.5
|
|
|
822.9
|
|
|
796.0
|
|
Advanced Devices
|
|
|
|
|
|
Accounts receivable
|
$
|
23.0
|
|
|
$
|
19.3
|
|
|
$
|
19.8
|
|
Inventories
|
13.7
|
|
|
16.7
|
|
|
15.8
|
|
Goodwill
|
17.9
|
|
|
17.7
|
|
|
23.2
|
|
Total
|
|
|
|
|
|
Accounts receivable
|
$
|
354.8
|
|
|
$
|
361.9
|
|
|
$
|
362.0
|
|
Inventories
|
218.8
|
|
|
261.1
|
|
|
278.1
|
|
Goodwill
|
2,077.6
|
|
|
2,106.4
|
|
|
2,085.8
|
|
A reconciliation of the Company’s consolidated segment operating income to consolidated income before income taxes is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Years
|
2016
|
|
2015
|
|
2014
|
(In millions)
|
|
|
|
|
|
Consolidated segment operating income
|
$
|
476.0
|
|
|
$
|
459.9
|
|
|
$
|
544.2
|
|
Unallocated corporate expense (1)
|
(78.3
|
)
|
|
(80.2
|
)
|
|
(79.4
|
)
|
Restructuring charges (2)
|
(13.3
|
)
|
|
(12.8
|
)
|
|
(2.1
|
)
|
Stock-based compensation
|
(52.6
|
)
|
|
(50.1
|
)
|
|
(43.4
|
)
|
Amortization of purchased intangible assets
|
(150.8
|
)
|
|
(162.4
|
)
|
|
(158.5
|
)
|
Consolidated operating income
|
181.0
|
|
|
154.4
|
|
|
260.8
|
|
Non-operating income (expense), net
|
(4.3
|
)
|
|
(2.6
|
)
|
|
5.2
|
|
Consolidated income before taxes
|
$
|
176.7
|
|
|
$
|
151.8
|
|
|
$
|
266.0
|
|
(1) Unallocated corporate expense includes general corporate expense, amortization of acquisition-related inventory step-up, acquisition/divestiture costs, litigation expenses and executive transition costs.
(2) Restructuring charges primarily consist of severance and benefits, resulting from employee headcount reductions in connection with the Company's restructuring programs related to decisions to streamline processes and reduce the cost structure. As of the end of fiscal 2016, the Company's restructuring liability was
$2.5 million
, which is expected to be settled in fiscal 2017. Restructuring liabilities are reported within Other current liabilities on the Consolidated Balance Sheets.
The geographic distribution of Trimble’s revenue and long-lived assets is summarized in the tables below. Other non-US geographies include Canada, and countries in South and Central America, the Middle East, and Africa. Revenue is defined as revenue from external customers.
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Years
|
2016
|
|
2015
|
|
2014
|
(In millions)
|
|
|
|
|
|
Revenue (1):
|
|
|
|
|
|
United States
|
$
|
1,156.0
|
|
|
$
|
1,142.1
|
|
|
$
|
1,147.7
|
|
Europe
|
574.9
|
|
|
557.2
|
|
|
581.7
|
|
Asia Pacific
|
352.6
|
|
|
321.1
|
|
|
345.6
|
|
Other non-US countries
|
278.7
|
|
|
270.0
|
|
|
320.5
|
|
Total consolidated revenue
|
$
|
2,362.2
|
|
|
$
|
2,290.4
|
|
|
$
|
2,395.5
|
|
|
|
(1)
|
Revenue is attributed to countries based on the location of the customer.
|
No
single customer or country other than the United States accounted for
10%
or more of Trimble’s total revenue in fiscal years
2016
,
2015
and
2014
.
No
single customer accounted for
10%
or more of Trimble's accounts receivable as of fiscal years ended
2016
and
2015
.
Property and equipment, net by geographic area was as follows:
|
|
|
|
|
|
|
|
|
At the End of Fiscal Year
|
2016
|
|
2015
|
(In millions)
|
|
|
|
Property and equipment, net:
|
|
|
|
United States
|
$
|
120.4
|
|
|
$
|
130.4
|
|
Europe
|
15.3
|
|
|
18.9
|
|
Asia Pacific and other non-US countries
|
8.5
|
|
|
9.9
|
|
Total property and equipment, net
|
$
|
144.2
|
|
|
$
|
159.2
|
|
NOTE 7: DEBT
Debt consisted of the following:
|
|
|
|
|
|
|
|
|
At the End of Fiscal Year
|
2016
|
|
2015
|
(Dollars in millions)
|
|
|
|
Notes:
|
|
|
|
|
|
Principal amount
|
$
|
400.0
|
|
|
$
|
400.0
|
|
Unamortized discount on Notes
|
(2.5
|
)
|
|
(2.8
|
)
|
Debt issuance costs
|
(2.4
|
)
|
|
(2.7
|
)
|
Credit Facilities:
|
|
|
|
2014 Credit facility
|
94.0
|
|
|
216.0
|
|
Uncommitted facilities
|
130.0
|
|
|
118.0
|
|
Promissory notes and other debt
|
0.8
|
|
|
1.2
|
|
Total debt
|
619.9
|
|
|
729.7
|
|
Less: Short-term debt
|
130.3
|
|
|
118.3
|
|
Long-term debt
|
$
|
489.6
|
|
|
$
|
611.4
|
|
Notes
On
October 30, 2014
, the Company filed a shelf registration statement with the Securities and Exchange Commission (“SEC”) for the issuance of senior debt securities. On
November 24, 2014
, the Company issued
$400.0 million
of Senior Notes (“Notes”) under the shelf registration statement. Net proceeds from the offering were
$396.9 million
after deducting the
0.795%
discount on the public offering price. The Company recognized
$3.0 million
of debt issuance costs associated with the issuance of the Notes, including an underwriting discount of
$2.6 million
, which is classified as an offset to the Notes on the Consolidated Balance Sheets. The discount and debt issuance costs are being amortized to interest expense using the effective interest rate method over the term of the Notes. 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, beginning on June 1, 2015. The Notes are classified as long-term in the Consolidated Balance Sheet.
Prior to September 1, 2024, Trimble may redeem the Notes at its option at any time, in whole or in part, at a redemption price equal to the greater of (i)
100%
of the aggregate principal amount of the Notes to be redeemed and (ii) the sum of the present values of the remaining scheduled payments of interest and principal, calculated on a semiannual basis using a discount rate equal to the U.S. Treasury rate plus 40 basis points. After September 1, 2024, Trimble may redeem the Notes at its option at any time, in whole or in part, at a redemption price equal to
100%
of the aggregate principal amount of the Notes to be redeemed, plus accrued and unpaid interest thereon. In addition, in the event of a change of control, as defined in the prospectus filed with the SEC, each holder of the Notes will have the right to require Trimble to purchase for cash all or a portion of such holder’s Notes at a purchase price equal to
101%
of the principal amount of the Notes, plus any accrued and unpaid interest.
In connection with the closing of the Notes offering, Trimble entered into an Indenture with U.S. Bank National Association, as trustee. The Indenture contains covenants limiting Trimble’s ability to create certain liens, enter into sale and lease-back transactions, and consolidate or merge with or into, or convey, transfer or lease all or substantially all of Trimble’s properties and assets to, another person, each subject to certain exceptions. The Notes contain no financial covenants.
Credit Facilities
2014 Credit Facility
On
November 24, 2014
, the Company entered into a new
five
-year credit agreement with a group of lenders (the “2014 Credit Facility”). The 2014 Credit Facility provides for an unsecured revolving loan facility of
$1.0 billion
. Subject to the terms of the 2014 Credit Facility, the revolving loan facility may be increased and/or term loan facilities may be established in an amount up to
$500.0 million
. The outstanding balance of
$94.0 million
and
$216.0 million
is classified as long-term in the Consolidated Balance Sheet as of fiscal years ended
2016
and
2015
, respectively.
The 2014 Credit Facility replaced the Company's previous 2012 Credit Facility comprised of a
five
-year revolving loan facility of
$700.0 million
and a
five
-year
$700.0 million
term loan facility. Upon entering into the 2014 Credit Facility, the Company borrowed
$307.0 million
under the revolving loan facility. The Company used the proceeds from the revolving loan facility and the issuance of the Notes to pay off the then
$638.8 million
outstanding term loan balance under the 2012 Credit Facility. The Company also wrote off a portion of the unamortized debt issuance costs related to the 2012 Credit Facility totaling
$2.7 million
, which is classified as a non-operating expense in the Company’s fiscal 2014 Consolidated Statement of Income. In addition, the Company recognized
$1.6 million
of debt issuance costs associated with the 2014 Credit Facility. The remaining unamortized debt issuance costs associated with the 2012 Credit Facility and the new debt issuance costs associated with the 2014 Credit Facility
are classified as current and non-current assets on the Consolidated Balance Sheets and being amortized to interest expense using the effective interest rate method over the term of the 2014 Credit Facility.
The funds available under the 2014 Credit Facility may be used for working capital and general corporate purposes including stock repurchases and the financing of certain acquisitions. Under the 2014 Credit Facility, the Company 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. Amounts not borrowed under the revolving facility will be subject to a commitment fee, to be paid in arrears on the last day of each fiscal quarter, ranging from
0.10%
to
0.30%
per annum depending on either the Company's credit rating at such time or the Company's leverage ratio as of the most recently ended fiscal quarter, whichever results in more favorable pricing to the Company.
The Company may borrow funds under the 2014 Credit Facility in U.S. Dollars, Euros or in certain other agreed currencies, and borrowings will bear interest, at the Company’s option, at either: (i) a floating per annum base rate determined by reference to the highest of: (a) the administrative agent’s prime rate; (b)
0.50%
per annum above the federal funds effective rate; and (c) reserve-adjusted LIBOR for an interest period of
one month
plus
1.00%
, plus a margin of between
0.00%
and
0.75%
, or (ii) a reserve-adjusted fixed per annum rate based on LIBOR or EURIBOR, depending on the currency borrowed, plus a margin of between
1.00%
and
1.75%
. The applicable margin in each case is determined based on either Trimble’s credit rating at such time or Trimble’s leverage ratio as of its most recently ended fiscal quarter, whichever results in more favorable pricing to Trimble. Interest is payable on the last day of each fiscal quarter with respect to borrowings bearing interest at the base rate, or on the last day of an interest period, but at least every three months, with respect to borrowings bearing interest at LIBOR or EURIBOR rate.
The 2014 Credit Facility contains various customary representations and warranties by the Company, which include customary use of materiality, material adverse effect and knowledge qualifiers. The 2014 Credit Facility also contains customary affirmative and negative covenants including, among other requirements, negative covenants that restrict the Company's ability to create liens and enter into sale and leaseback transactions, and that restrict its subsidiaries’ ability to incur indebtedness. Further, the 2014 Credit Facility contains financial covenants that require the maintenance of minimum interest coverage and maximum leverage ratios. Specifically, the Company must maintain as of the end of each fiscal quarter a ratio of (a) EBITDA (as defined in the 2014 Credit Facility) to (b) interest expense for the most recently ended period of four fiscal quarters of not less than
3.50
to 1.00. The Company must also maintain, at the end of each fiscal quarter, a ratio of (x) total indebtedness (as defined in the 2014 Credit Facility) to (y) EBITDA (as defined in the 2014 Credit Facility) for the most recently ended period of four fiscal quarters of not greater than
3.00
to 1.00; provided, that on the completion of a material acquisition, the Company may increase the ratio by
0.50
for the fiscal quarter during which such acquisition occurred and each of the three subsequent fiscal quarters.
The Company was in compliance with these covenants at the end of fiscal 2016.
The 2014 Credit Facility contains events of default that include, among others, non-payment of principal, interest or fees, breach of covenants, inaccuracy of representations and warranties, cross defaults to certain other indebtedness, bankruptcy and insolvency events, material judgments and events constituting a change of control. Upon the occurrence and during the continuance of an event of default, interest on the obligations will accrue at an increased rate in the case of an event of default arising from the nonpayment of principal and the lenders may accelerate the Company's obligations under the 2014 Credit Facility, except that acceleration will be automatic in the case of bankruptcy and insolvency events of default.
In February 2016, the Company entered into an amendment to the 2014 Credit Facility to facilitate the Company's reincorporation from California to Delaware and to effect other non-financial terms. In August 2016, the Company entered into a second amendment to revise a definition used in determining when a change of control of the Company may occur.
The interest rate on the long-term debt outstanding under the 2014 Credit Facility was
1.80%
and
1.46%
at the end of fiscal
2016
and
2015
, respectively.
Uncommitted Facilities
The Company also has
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 interest rate on the Uncommitted Facilities is
1.00%
plus either LIBOR or the bank’s cost of funds or as otherwise agreed upon by the bank and the Company. The
$130.0 million
outstanding at the end of
2016
and the
$118.0 million
outstanding at the end of
2015
under the Uncommitted Facilities are classified as short-term in the Consolidated Balance Sheet. The weighted average interest rate on the Uncommitted Facilities was
1.65%
at the end of fiscal
2016
and
1.37%
at the end of fiscal
2015
.
Promissory Notes and Other Debt
At the end of fiscal
2016
and
2015
, the Company had promissory notes and other notes payable totaling approximately
$0.8 million
and
$1.2 million
, respectively, of which
$0.5 million
and
$0.9 million
, respectively, was classified as long-term in the Consolidated Balance Sheet.
Debt Maturities
At the end of fiscal
2016
, the Company's debt maturities based on outstanding principal were as follows (in millions):
|
|
|
|
|
Year Payable
|
|
2017
|
$
|
130.3
|
|
2018
|
0.2
|
|
2019
|
0.2
|
|
2020
|
94.1
|
|
2021
|
—
|
|
Thereafter
|
$
|
400.0
|
|
Total
|
$
|
624.8
|
|
NOTE 8: COMMITMENTS AND CONTINGENCIES
Operating Leases and Other Commitments
The Company’s principal facilities in the United States are leased under various cancelable and non-cancelable operating leases that expire at various dates through 2025. For tenant improvement allowances and rent holidays, Trimble records a deferred rent liability on the Consolidated Balance Sheets and amortizes the deferred rent over the terms of the leases as reductions to rent expense on the Consolidated Statements of Income.
The estimated future minimum payments required under the Company’s operating lease commitments at the end of fiscal
2016
were as follows (in millions):
|
|
|
|
|
2017
|
$
|
30.4
|
|
2018
|
23.6
|
|
2019
|
17.2
|
|
2020
|
12.6
|
|
2021
|
8.9
|
|
Thereafter
|
23.2
|
|
Total
|
$
|
115.9
|
|
Net rent expense under operating leases was
$34.4 million
in fiscal
2016
,
$34.0 million
in fiscal
2015
, and
$34.1 million
in fiscal
2014
.
At the end of fiscal
2016
, the Company had unconditional purchase obligations of approximately
$146.2 million
. These unconditional purchase obligations primarily represent open non-cancelable purchase orders for material purchases with the Company’s vendors. Purchase obligations exclude agreements that are cancelable without penalty.
Additionally, the Company has certain acquisitions include additional earn-out cash payments based on estimated future revenues, gross margins or other milestones. At the end of fiscal
2016
, the Company had
$4.5 million
included in Other current liabilities and Other non-current liabilities related to these earn-outs, representing the fair value of the contingent consideration.
Litigation
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 the Company a portion of its incurred attorneys’ fees and
costs, and entered Final Judgment in the Company’s favor in the amount of
$0.6 million
. The Final 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. The parties have completed all appellate briefing, and oral arguments were heard before the Alaska Supreme Court on February 24, 2016. A decision by the Alaska Supreme Court has not been made. Although an unfavorable outcome on appeal could have an adverse effect on the Company, the Company believes the claims in the lawsuit are without merit.
From time to time, the Company is 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 the Company or any of its subsidiaries is a party or of which any of the Company's or its subsidiaries' property is subject.
NOTE 9. CASH EQUIVALENTS AND SHORT-TERM INVESTMENTS
The Company did not have any investment in available-for-sale securities as of the end of fiscal 2015. The following table summarizes the Company’s available-for-sale securities as of the end of fiscal 2016:
|
|
|
|
|
|
At the end of Fiscal 2016
|
(Dollars in millions)
|
|
Available-for-sale securities:
|
|
U.S. Treasury securities
|
$
|
11.7
|
|
Municipal debt securities
|
10.0
|
|
Corporate debt securities
|
31.7
|
|
Time deposit
|
2.4
|
|
Commercial paper
|
77.5
|
|
Total available-for-sale securities
|
$
|
133.3
|
|
|
|
Reported as:
|
|
Cash and cash equivalents
|
$
|
22.2
|
|
Short-term investments
|
111.1
|
|
Total
|
$
|
133.3
|
|
The Company recognized
$0.3 million
realized gains on its available-for-sale securities during fiscal 2016, and the gross unrealized gains or losses as of the end of fiscal 2016 were de minimis.
The following table presents the contractual maturities of the Company's available-for-sale investments as of the end of fiscal 2016.
|
|
|
|
|
|
At the end of Fiscal 2016
|
(Dollars in millions)
|
|
Due in less than 1 year
|
$
|
106.9
|
|
Due in 1 to 5 years
|
16.4
|
|
Due in 5-10 years
|
2.0
|
|
Due after 10 years
|
8.0
|
|
Total
|
$
|
133.3
|
|
The Company’s available-for-sale securities are liquid and may be sold in the future to fund future operating needs. As a result, the Company recorded all of its available-for-sale securities, not classified as cash equivalents, in Short-term investments as of the end of fiscal 2016, regardless of the contractual maturity date of the securities.
NOTE 10: FAIR VALUE MEASUREMENTS
The Company determines fair value based on the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants at the measurement date. Where available, fair value is based on observable market prices or parameters. Where observable prices or inputs are not available, valuation models are applied. Hierarchical levels, defined by the guidance on fair value measurements are directly related to the amount of subjectivity associated with the inputs to fair valuation of these assets and liabilities, and are as follows:
Level I—Observable inputs such as unadjusted, quoted prices in active markets for identical assets or liabilities.
Level II—Inputs (other than quoted prices included in Level I) are either directly or indirectly observable for the asset or liability. These include quoted prices for similar assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are not active.
Level III—Unobservable inputs that reflect management’s best estimate of what market participants would use in pricing the asset or liability at the measurement date. Consideration is given to the risk inherent in the valuation technique and the risk inherent in the inputs to the model.
Fair Value on a Recurring Basis
Assets and liabilities measured at fair value on a recurring basis are categorized in the tables below based upon the lowest level of significant input to the valuations.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Values as of Fiscal Year End 2016
|
|
Fair Values as of Fiscal Year End 2015
|
(In millions)
|
Level I
|
|
Level II
|
|
Level III
|
|
Total
|
|
Level I
|
|
Level II
|
|
Level III
|
|
Total
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Available-for-sale securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Treasury securities (1)
|
$
|
—
|
|
|
$
|
11.7
|
|
|
$
|
—
|
|
|
$
|
11.7
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Municipal debt securities (1)
|
—
|
|
|
10.0
|
|
|
—
|
|
|
10.0
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Corporate debt securities (1)
|
—
|
|
|
31.7
|
|
|
—
|
|
|
31.7
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Time deposit (1)
|
|
|
2.4
|
|
|
|
|
2.4
|
|
|
|
|
|
|
|
|
|
Commercial paper (1)
|
—
|
|
|
77.5
|
|
|
—
|
|
|
77.5
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Total available-for-sale securities
|
—
|
|
|
133.3
|
|
|
—
|
|
|
133.3
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Deferred compensation plan assets (2)
|
22.6
|
|
|
—
|
|
|
—
|
|
|
22.6
|
|
|
21.1
|
|
|
—
|
|
|
—
|
|
|
21.1
|
|
Derivative assets (3)
|
—
|
|
|
0.2
|
|
|
—
|
|
|
0.2
|
|
|
—
|
|
|
2.9
|
|
|
—
|
|
|
2.9
|
|
Contingent consideration assets (4)
|
—
|
|
|
—
|
|
|
7.0
|
|
|
7.0
|
|
|
—
|
|
|
—
|
|
|
7.0
|
|
|
7.0
|
|
Total assets measured at fair value
|
$
|
22.6
|
|
|
$
|
133.5
|
|
|
$
|
7.0
|
|
|
$
|
163.1
|
|
|
$
|
21.1
|
|
|
$
|
2.9
|
|
|
$
|
7.0
|
|
|
$
|
31.0
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred compensation plan liabilities (2)
|
$
|
22.6
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
22.6
|
|
|
$
|
21.1
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
21.1
|
|
Derivative liabilities (3)
|
—
|
|
|
0.1
|
|
|
—
|
|
|
0.1
|
|
|
—
|
|
|
2.1
|
|
|
—
|
|
|
2.1
|
|
Contingent consideration liabilities (5)
|
—
|
|
|
—
|
|
|
4.5
|
|
|
4.5
|
|
|
—
|
|
|
—
|
|
|
6.6
|
|
|
6.6
|
|
Total liabilities measured at fair value
|
$
|
22.6
|
|
|
$
|
0.1
|
|
|
$
|
4.5
|
|
|
$
|
27.2
|
|
|
$
|
21.1
|
|
|
$
|
2.1
|
|
|
$
|
6.6
|
|
|
$
|
29.8
|
|
|
|
(1)
|
The Company’s available-for sale securities are valued using readily available pricing sources for comparable instruments, or model-driven valuations using significant inputs derived from or corroborated by observable market data, including yield curves and credit ratings.
|
|
|
(2)
|
The Company maintains a self-directed, non-qualified deferred compensation plan for certain executives and other highly compensated employees. The plan assets and liabilities are invested in actively traded mutual funds and individual stocks valued using observable quoted prices in active markets. Deferred compensation plan assets and liabilities are included in Other non-current assets and Other non-current liabilities, respectively, on the Company's Consolidated Balance Sheets.
|
|
|
(3)
|
Derivative assets and liabilities primarily represent forward currency exchange contracts. The Company typically enters into these contracts to minimize the short-term impact of foreign currency exchange rates on certain trade and inter-company receivables and payables. Derivative assets and liabilities are included in Other current assets and Other current liabilities on the Company's Consolidated Balance Sheets.
|
|
|
(4)
|
Contingent consideration assets represent arrangements for buyers to pay the Company for certain businesses that it has divested. The fair value is determined based on the Company's expectations of future receipts. The minimum amount to be received under these arrangements is
$3.5 million
. Contingent consideration assets are included in Other receivables and Other non-current assets on the Company's Consolidated Balance Sheets.
|
|
|
(5)
|
Contingent consideration liabilities represent arrangements to pay the former owners of certain companies that Trimble acquired. The undiscounted maximum payment under the arrangements is
$17.5 million
at the end of fiscal
2016
, based on estimated future revenues, gross margins or other milestones. Contingent consideration liabilities are included in Other current liabilities and Other non-current liabilities on the Company's Consolidated Balance Sheets.
|
Additional Fair Value Information
The following table provides additional fair value information relating to the Company’s financial instruments outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Carrying
Amount
|
|
Fair
Value
|
|
Carrying
Amount
|
|
Fair
Value
|
At the End of Fiscal Year
|
2016
|
|
2015
|
(In millions)
|
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
Notes
|
$
|
400.0
|
|
|
$
|
410.6
|
|
|
$
|
400.0
|
|
|
$
|
399.9
|
|
2014 Credit facility
|
94.0
|
|
|
94.0
|
|
|
216.0
|
|
|
216.0
|
|
Uncommitted facilities
|
130.0
|
|
|
$
|
130.0
|
|
|
118.0
|
|
|
118.0
|
|
Promissory notes and other debt
|
0.8
|
|
|
0.8
|
|
|
1.2
|
|
|
1.2
|
|
The fair value of the Notes was determined based on observable market prices in less active markets and is categorized accordingly as Level II in the fair value hierarchy. The fair value of the bank borrowings and promissory notes has been calculated using an estimate of the interest rate the Company would have had to pay on the issuance of notes with a similar maturity and discounting the cash flows at that rate, and is categorized as Level II in the fair value hierarchy. The fair values do not give an indication of the amount that the Company would currently have to pay to extinguish any of this debt.
NOTE 11: INCOME TAXES
Income before taxes and the provision for taxes consisted of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Years
|
2016
|
|
2015
|
|
2014
|
(In millions)
|
|
|
|
|
|
Income before taxes:
|
|
|
|
|
|
United States
|
$
|
68.4
|
|
|
$
|
55.6
|
|
|
$
|
99.3
|
|
Foreign
|
108.3
|
|
|
96.2
|
|
|
166.7
|
|
Total
|
$
|
176.7
|
|
|
$
|
151.8
|
|
|
$
|
266.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision for taxes:
|
|
|
|
|
|
US Federal:
|
|
|
|
|
|
Current
|
$
|
34.0
|
|
|
$
|
47.5
|
|
|
$
|
45.7
|
|
Deferred
|
(14.3
|
)
|
|
(23.0
|
)
|
|
(11.7
|
)
|
|
19.7
|
|
|
24.5
|
|
|
34.0
|
|
US State:
|
|
|
|
|
|
Current
|
3.5
|
|
|
5.7
|
|
|
7.7
|
|
Deferred
|
0.6
|
|
|
(2.8
|
)
|
|
(0.9
|
)
|
|
4.1
|
|
|
2.9
|
|
|
6.8
|
|
Foreign:
|
|
|
|
|
|
Current
|
28.8
|
|
|
25.4
|
|
|
25.3
|
|
Deferred
|
(8.1
|
)
|
|
(21.7
|
)
|
|
(14.0
|
)
|
|
20.7
|
|
|
3.7
|
|
|
11.3
|
|
Income tax provision
|
$
|
44.5
|
|
|
$
|
31.1
|
|
|
$
|
52.1
|
|
Effective tax rate
|
25
|
%
|
|
20
|
%
|
|
20
|
%
|
The difference between the tax provision at the statutory federal income tax rate and the tax provision as a percentage of income before taxes (effective tax rate) was as follows:
|
|
|
|
|
|
|
|
|
|
Fiscal Years
|
2016
|
|
2015
|
|
2014
|
Statutory federal income tax rate
|
35
|
%
|
|
35
|
%
|
|
35
|
%
|
Increase (reduction) in tax rate resulting from:
|
|
|
|
|
|
Foreign income taxed at lower rates
|
(10
|
)%
|
|
(11
|
)%
|
|
(18
|
)%
|
US State income taxes
|
2
|
%
|
|
1
|
%
|
|
2
|
%
|
US Federal research and development credits
|
(3
|
)%
|
|
(3
|
)%
|
|
(1
|
)%
|
Stock-based compensation
|
3
|
%
|
|
1
|
%
|
|
1
|
%
|
Foreign audit reserve release
|
—
|
%
|
|
(2
|
)%
|
|
—
|
%
|
Divestiture
|
(5
|
)%
|
|
—
|
%
|
|
—
|
%
|
Valuation allowance release - foreign
|
—
|
%
|
|
(3
|
)%
|
|
—
|
%
|
Other
|
3
|
%
|
|
2
|
%
|
|
1
|
%
|
Effective tax rate
|
25
|
%
|
|
20
|
%
|
|
20
|
%
|
The effective tax rate in fiscal 2016 increased compared to 2015 primarily due to the closing of a foreign audit and valuation allowance release in 2015, increase in nondeductible expense, and a change in the geographic mix of pretax income, partially offset by a tax benefit from a divestiture of a non-strategic business.
The effective tax rate in fiscal 2015 remained consistent with 2014. However, certain specific items affecting the effective tax rate did change. These included a change in geographic mix of pretax income, which was partially offset by tax benefits resulting from the closing of a foreign tax audit, valuation allowance releases and an increase in federal research and development credit.
Deferred income taxes reflect the net effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. The significant components of the Company’s deferred tax assets and liabilities are as follows:
|
|
|
|
|
|
|
|
|
At the End of Fiscal Year
|
2016
|
|
2015
|
(In millions)
|
|
|
|
Deferred tax liabilities:
|
|
|
|
Purchased intangibles
|
$
|
91.9
|
|
|
$
|
122.6
|
|
Depreciation and amortization
|
11.7
|
|
|
11.0
|
|
US residual tax on foreign earnings
|
11.3
|
|
|
12.2
|
|
Total deferred tax liabilities
|
114.9
|
|
|
145.8
|
|
|
|
|
|
Deferred tax assets:
|
|
|
|
Inventory valuation differences
|
12.9
|
|
|
11.5
|
|
Expenses not currently deductible
|
27.7
|
|
|
26.2
|
|
US federal tax credit carryforwards
|
0.3
|
|
|
0.6
|
|
Deferred revenue
|
6.9
|
|
|
6.6
|
|
US state tax credit carryforwards
|
15.1
|
|
|
16.4
|
|
Accrued warranty
|
3.1
|
|
|
3.4
|
|
US federal net operating loss carryforwards
|
3.8
|
|
|
5.5
|
|
Foreign net operating loss carryforwards
|
31.2
|
|
|
41.7
|
|
Stock-based compensation
|
31.9
|
|
|
29.6
|
|
Other
|
4.1
|
|
|
9.0
|
|
Total deferred tax assets
|
137.0
|
|
|
150.5
|
|
Valuation allowance
|
(30.6
|
)
|
|
(34.9
|
)
|
Total deferred tax assets
|
106.4
|
|
|
115.6
|
|
|
|
|
|
Total net deferred tax liabilities
|
$
|
(8.5
|
)
|
|
$
|
(30.2
|
)
|
|
|
|
|
Reported as:
|
|
|
|
Non-current deferred income tax assets
|
30.3
|
|
|
21.5
|
|
Non-current deferred income tax liabilities
|
(38.8
|
)
|
|
(51.7
|
)
|
Net deferred tax liabilities
|
$
|
(8.5
|
)
|
|
$
|
(30.2
|
)
|
In the fourth quarter of 2015, the Company adopted new accounting guidance for balance sheet classification of deferred taxes, which requires that all deferred income tax assets and liabilities be classified as non-current in the balance sheet. The guidance was adopted on a prospective basis and, therefore, prior periods were not retrospectively adjusted.
At the end of fiscal 2016, the Company has federal and foreign net operating loss carryforwards, or NOLs, of approximately
$13.6 million
and
$147.6 million
, respectively. The federal NOLs expire beginning year
2021
. There is, generally, no expiration for the foreign NOLs. Utilization of the Company’s federal and state NOLs is subject to annual limitations in accordance with the applicable tax code. The Company has determined that it is more likely than not that the Company will not realize a portion of the foreign NOLs and, accordingly, a valuation allowance has been established for such amount.
The Company has Federal and California research and development credit carryforwards of approximately
$0.3 million
and
$17.1 million
, respectively. The federal tax credit carryforwards will expire beginning
2030
. The California research tax credits have indefinite carryforward period. The Company believes that it is more likely than not that the Company will not realize a portion of the California research and development credit carryforwards and, accordingly, a valuation allowance has been established for such amount.
At the end of fiscal 2016, the Company’s foreign subsidiaries had approximately
$869.7 million
of accumulated undistributed earnings that are intended to be indefinitely reinvested outside the U.S. and, accordingly, no provision for U.S. federal and state income taxes have been provided thereon. If such earnings were to be distributed in the form of dividends or otherwise, the Company would have to recognize additional tax liability of approximately
$258.5 million
.
The total amount of the unrecognized tax benefits at the end of fiscal 2016 was
$72.9 million
. A reconciliation of gross unrecognized tax benefit is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
At the End of Fiscal Year
|
2016
|
|
2015
|
|
2014
|
(In millions)
|
|
|
|
|
|
Beginning gross balance
|
$
|
59.0
|
|
|
$
|
51.4
|
|
|
$
|
44.1
|
|
Increase related to prior years' tax positions
|
7.5
|
|
|
6.0
|
|
|
0.8
|
|
Increase related to current year tax positions
|
9.9
|
|
|
6.2
|
|
|
7.5
|
|
Lapse of statute of limitations
|
(1.4
|
)
|
|
(1.5
|
)
|
|
(1.0
|
)
|
Settlement with taxing authorities
|
(2.1
|
)
|
|
(3.1
|
)
|
|
—
|
|
Ending gross balance
|
$
|
72.9
|
|
|
$
|
59.0
|
|
|
$
|
51.4
|
|
The Company's total unrecognized tax benefits that, if recognized, would affect its effective tax rate were
$60.5 million
and
$52.7 million
at the end of fiscal
2016
and
2015
, respectively.
The Company and its subsidiaries are subject to U.S. federal, state, and foreign income taxes. The Company has substantially concluded all U.S. federal income tax audits for years through 2009. State income tax matters have been concluded for years through 2009 and non-U.S. income tax matters have been concluded for years through 2005. The Company is currently in various stages of multiple year examinations by federal, state, and foreign (multiple jurisdictions) taxing authorities. While the Company generally believes it is more likely than not that its tax positions will be sustained, it is reasonably possible that future obligations related to these matters could arise. The Company believes that its reserves are adequate to cover any potential assessments that may result from the examinations and negotiations.
In the first quarter of fiscal 2015, the Company received a Notice of Proposed Adjustment from the IRS for the fiscal years 2010 and 2011. The proposed adjustments primarily relate to the valuations of intercompany transfers of acquired intellectual property. The assessments of tax and penalties for the years in question total
$67.0 million
. The Company does not agree with the IRS position and has filed a protest with the IRS Appeals Office in April 2015. The IRS appeals process commenced in March 2016. Although the Company continues to believe in the merits of its positions, during the fourth quarter of fiscal 2016, the Company submitted a written proposal to the IRS to settle certain aspects of the assessments constituting
$15.8 million
of the total
$67.0 million
assessment. The Company intends to vigorously contest the IRS position on the remaining items, and believes that its reserves are adequate to cover any potential assessments.
Although timing of the resolution and/or closure of audits is not certain, the Company believes it is reasonably possible that its gross unrecognized tax benefits could decrease (whether by payment, release or a combination of both) in the next 12 months by up to
$6.2 million
primarily related to the IRS partial settlement discussed above.
The Company’s practice is to recognize interest and/or penalties related to income tax matters in income tax expense. The Company’s liability for unrecognized tax benefits including interest and penalties was recorded in Other non-current liabilities in the accompanying Consolidated Balance Sheets. At the end of fiscal
2016
and
2015
, the Company had accrued
$9.3 million
and
$6.7 million
, respectively, for payment of interest and penalties.
NOTE 12: ACCUMULATED OTHER COMPREHENSIVE LOSS
The components of accumulated other comprehensive loss, net of related tax were as follows:
|
|
|
|
|
|
|
|
|
At the End of Fiscal Year
|
2016
|
|
2015
|
(In millions)
|
|
|
|
Accumulated foreign currency translation adjustments
|
$
|
(216.8
|
)
|
|
$
|
(163.4
|
)
|
Net unrealized actuarial losses
|
(3.1
|
)
|
|
(3.4
|
)
|
Total accumulated other comprehensive loss
|
$
|
(219.9
|
)
|
|
$
|
(166.8
|
)
|
NOTE 13: EMPLOYEE STOCK BENEFIT PLANS
The Company’s stock benefit plans include the employee stock purchase plan and stock plans adopted in 2002, 1993, 1992, 1990, as well as
one
stock plan assumed through an acquisition in 2007. Other than the employee stock purchase plan and the 2002 and 1992 stock plans described below, the other plans have no shares available for future grant.
Plans
Employee Stock Purchase Plan
The Company has an Employee Stock Purchase Plan (“Purchase Plan”) under which an aggregate of
39.1 million
shares of Common Stock have been approved for issuance to eligible employees as approved by the stockholders to date. The plan permits eligible employees to purchase Common Stock through payroll deductions at
85%
of the lower of the fair market value of the Common Stock at the beginning or at the end of each offering period, which is generally
six
months. Rights to purchase shares are granted during the first and third quarter of each fiscal year. The Purchase Plan terminates on September 30, 2018. In fiscal
2016
,
2015
and
2014
,
1.1 million
,
1.0 million
, and
0.7 million
shares were issued, respectively, representing
$19.1 million
,
$18.1 million
and
$16.4 million
in cash received for the issuance of stock under the Purchase Plan. At the end of fiscal
2016
, the number of shares reserved for future purchases by eligible employees was
9.8 million
.
2002 Stock Plan
Trimble’s 2002 Stock Plan (“2002 Plan”), provides for the granting of incentive and non-statutory stock options and restricted stock units ("RSUs") for up to
62.6 million
shares plus any shares currently reserved but unissued to employees, consultants, and directors of Trimble. Both incentive and non-statutory stock options may be granted at exercise prices that are not less than
100%
of the fair market value of Common Stock on the date of grant. Employee stock options under the 2002 plan generally vest over
four
years with biennial, annual, or monthly vesting, and expire
seven
years from the date of grant. RSUs are converted into shares of Trimble common stock upon vesting on a one-for-one basis, except those with market-based or performance-based vesting conditions, in which the number of shares that may be greater. RSUs granted to employees generally vest over
four
years. RSUs granted to non-employee directors generally vest after
one
year. Grants of RSUs reduce the plan reserves by the number of shares to be issued multiplied by
1.69
and any forfeitures of these awards due to their not vesting would increase the plan reserve by the same measure.
1992 Employee Stock Bonus Plan
At the end of fiscal
2016
, there were
no
options outstanding to purchase shares under the 1992 Employee Stock Bonus Plan (“Bonus Plan”) and
1,606
shares were available for future grant under the Bonus Plan.
Stock Option and Restricted Stock Unit Activity
The following table summarizes the Company’s stock option and restricted stock unit activity during fiscal
2016
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock Options Outstanding
|
|
Restricted Stock Units Outstanding
|
|
Options
|
|
Weighted average
exercise price
|
|
Restricted
Stock Units
|
|
Weighted Average
Grant-Date Fair Value
|
(In millions, except for per share data)
|
|
|
|
|
|
|
|
Outstanding at the beginning of year
|
11.6
|
|
|
$
|
22.15
|
|
|
4.3
|
|
|
$
|
26.98
|
|
Granted
|
—
|
|
|
$
|
19.28
|
|
|
2.1
|
|
|
$
|
26.13
|
|
Option exercised
|
(3.7
|
)
|
|
$
|
16.47
|
|
|
—
|
|
|
$
|
—
|
|
Shares released, net
|
—
|
|
|
$
|
—
|
|
|
(1.2
|
)
|
|
$
|
27.86
|
|
Cancelled and Forfeited
|
(0.3
|
)
|
|
$
|
27.05
|
|
|
(0.5
|
)
|
|
$
|
26.43
|
|
Outstanding at the end of year
|
7.6
|
|
|
$
|
24.60
|
|
|
4.7
|
|
|
$
|
26.40
|
|
During fiscal year 2016, the Company granted
0.7 million
market-based and performance-based restricted stock units. As of fiscal year end 2016, the Company has
1.1 million
market-based and performance-based restricted stock units outstanding and
none
had vested as of fiscal 2016 year end.
As of the end of fiscal
2016
, the number of shares available for grant under the 2002 stock plan was
7.7 million
.
The following table summarizes information about stock options outstanding as of fiscal
2016
year end:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number
Of Shares
(in millions)
|
|
Weighted-
Average
Exercise Price
per Share
|
|
Weighted-
Average
Remaining
Contractual Term
(in years)
|
|
Aggregate
Intrinsic
Value
(in millions)
|
Vested and expected to vest
|
7.6
|
|
|
$
|
24.59
|
|
|
2.70
|
|
$
|
44.8
|
|
Options exercisable
|
6.6
|
|
|
$
|
24.15
|
|
|
2.47
|
|
$
|
41.3
|
|
The intrinsic value of options vested and expected to vest and exercisable is calculated based on the difference between the exercise price and the fair value of the Company’s common stock as of the end of fiscal
2016
. The total intrinsic value of options exercised during fiscal
2016
,
2015
and
2014
was
$36.0 million
,
$13.9 million
, and
$61.3 million
, respectively, and is calculated based on the difference between the exercise price and the fair value of the Company’s common stock as of the exercise date.
The following table summarizes information about restricted stock units outstanding as of fiscal
2016
:
|
|
|
|
|
|
|
|
|
|
|
Number
Of Shares Underlying Restricted Stock Units
(in millions)
|
|
Weighted-
Average
Remaining
Vesting Period
(in years)
|
|
Aggregate
Fair Value
(in millions)
|
Vested and expected to vest
|
5.5
|
|
|
1.64
|
|
$
|
164.7
|
|
The fair value of restricted stock units vested and expected to vest as of fiscal
2016
is calculated based on the fair value of the Company’s common stock as of the end of fiscal
2016
.
Stock-Based Compensation Expense
The following table summarizes stock-based compensation expense included in the Consolidated Statements of Income.
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Years
|
2016
|
|
2015
|
|
2014
|
(In millions)
|
|
|
|
|
|
Cost of sales
|
$
|
3.8
|
|
|
$
|
3.9
|
|
|
$
|
3.2
|
|
Research and development
|
9.1
|
|
|
8.7
|
|
|
6.8
|
|
Sales and marketing
|
8.3
|
|
|
9.1
|
|
|
7.6
|
|
General and administrative
|
31.4
|
|
|
28.4
|
|
|
25.8
|
|
Total operating expenses
|
48.8
|
|
|
46.2
|
|
|
40.2
|
|
Total stock-based compensation expense
|
$
|
52.6
|
|
|
$
|
50.1
|
|
|
$
|
43.4
|
|
Fair Value of Share Purchase Rights
The fair value of the share purchase rights granted under the Purchase Plan are valued using the Black-Scholes option pricing model with the following weighted-average assumptions:
|
|
|
|
|
|
|
|
|
|
Fiscal Years
|
2016
|
|
2015
|
|
2014
|
Expected life of purchase
|
0.5 years
|
|
|
0.5 years
|
|
|
0.5 years
|
|
Expected stock price volatility
|
36.9
|
%
|
|
31.3
|
%
|
|
30.5
|
%
|
Risk free interest rate
|
0.41
|
%
|
|
0.08
|
%
|
|
0.07
|
%
|
Expected dividend yield
|
—
|
|
|
—
|
|
|
—
|
|
Expected Life of Purchase—
The Company’s expected life of the purchase is based on the term of the offering period of the purchase plan.
Expected Stock Price Volatility
—The Company’s computation of expected volatility is based on implied volatilities from traded options on the Company’s stock. The Company used implied volatility because it is representative of future stock price trends during the purchase period.
Expected Risk Free Interest Rate
—The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of grant for the expected term of the purchase period.
Expected Dividend Yield
—The dividend yield assumption is based on the Company’s history and expectation of dividend payouts.
The weighted average grant-date fair value per share of stock purchase rights granted under the Employee Stock Purchase Plan during fiscal years
2016
,
2015
and
2014
was
$6.51
,
$5.24
and
$8.32
per share, respectively.
Fair value of Stock Options
The fair value of stock compensation is valued as of the grant date using a binomial valuation model. The binomial model takes into account variables such as volatility, dividend yield rate, and risk free interest rate. In addition, the binomial model incorporates actual option-pricing behavior and changes in volatility over the option’s contractual term. For options granted during fiscal
2016
,
2015
and
2014
, the following weighted-average assumptions were used:
|
|
|
|
|
|
|
|
|
|
Fiscal Years
|
2016
|
|
2015
|
|
2014
|
Expected life of options
|
4.0 years
|
|
|
3.9 years
|
|
|
4.0 years
|
|
Expected stock price volatility
|
38
|
%
|
|
36
|
%
|
|
35
|
%
|
Risk free interest rate
|
1.49
|
%
|
|
1.26
|
%
|
|
1.29
|
%
|
Expected dividend yield
|
—
|
|
|
—
|
|
|
—
|
|
Expected Life of Options
—The Company’s expected life represents the period that the Company’s stock options are expected to be outstanding and was determined based on historical experience of similar stock options with consideration for the contractual terms of the stock options, vesting schedules and expectations of future employee behavior.
Expected Stock Price Volatility
—The Company’s computation of expected volatility is based on a combination of implied volatilities from traded options on the Company’s stock and historical volatility, commensurate with the expected life of the stock options.
Expected Risk Free Interest Rate
—The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of grant for the expected life of the option.
Expected Dividend Yield
—The dividend yield assumption is based on the Company’s history and expectation of dividend payouts.
The weighted average grant-date fair value per share of stock options granted during fiscal years
2016
,
2015
and
2014
was
$6.03
,
$7.36
, and
$9.07
, respectively. The fair value of all stock options vested during fiscal years
2016
,
2015
and
2014
was
$14.6 million
,
$18.3 million
and
$20.5 million
, respectively.
Fair value of Restricted Stock Units and Performance-Based Restricted Stock Units
The fair value of RSUs and PSUs are valued as of the grant date using the fair value of Trimble’s common stock. RSUs are service-based awards and vest over time based on continued employment. PSUs vest upon the achievement of specified performance goals, as well as continued employment, and the expense recognized is based upon the expected achievement of such goals. The weighted average grant-date fair value per share of RSUs granted during fiscal years
2016
,
2015
and
2014
was
$26.13
,
$23.22
, and
$30.18
per share, respectively. The fair value of all restricted stock units vested during fiscal years
2016
,
2015
and
2014
was
$33.6 million
,
$16.3 million
and
$3.9 million
, respectively.
Fair Value of Market-Based Restricted Stock Units
Restricted stock units with market-based vesting conditions vest based on the achievement of the Company’s relative total stockholder return (TSR) of its common stock as compared to the TSR of the constituents of the S&P 500 at the start of the performance period. The fair value of restricted stock units with market-based vesting conditions is valued as of the grant date using a Monte Carlo simulation, using the following weighted-average assumptions:
|
|
|
|
|
|
Fiscal Years
|
2016
|
2015
|
Expected life of Market-Based Restricted Stock Units
|
3.1 years
|
|
2.6 years
|
|
Expected stock price volatility
|
33.8
|
%
|
30.9
|
%
|
Risk free interest rate
|
0.9
|
%
|
0.9
|
%
|
Expected dividend yield
|
—
|
|
—
|
|
The weighted average grant-date fair value of the restricted stock units with market-based vesting conditions granted during fiscal
2016
and 2015 was
$27.09
and
$31.60
per share, respectively.
Unrecognized Stock-Based Compensation
At the end of fiscal
2016
, total unamortized stock-based compensation expense was
$88.9 million
, with a weighted-average recognition period of
2.4
years.
NOTE 14: COMMON STOCK REPURCHASE
In August 2014, the Company's Board of Directors approved a stock repurchase program (2014 Stock Repurchase Program), authorizing the Company to repurchase up to
$300.0 million
of Trimble’s common stock, replacing a stock repurchase program which had been in place since 2011. In August 2015, the Company’s Board of Directors approved a stock repurchase program (2015 Stock Repurchase Program), authorizing the Company to repurchase up to
$400.0 million
of Trimble’s common stock, replacing the 2014 Stock Repurchase Program. In September 2015, the Company entered into an accelerated share repurchase agreement, or ASR, with an investment bank for
$75.0 million
.
Under the share repurchase program, the Company may repurchase shares from time to time in open market transactions, privately negotiated transactions, accelerated share buyback programs, tender offers, or by other means. The timing and amount of repurchase transactions will be determined by the Company’s management based on its evaluation of market conditions, share price, legal requirements and other factors. The program may be suspended, modified or discontinued at any time without prior notice. At the end of fiscal
2016
, the 2015 Stock Repurchase Program had remaining authorized funds of
$130.4 million
.
During fiscal
2016
, the Company repurchased approximately
4.9 million
shares of common stock in open market purchases under 2015 Stock Repurchase Programs, at an average price of
$24.39
per share, for a total of
$119.5 million
.
During fiscal
2015
, the Company repurchased approximately
7.5 million
shares of common stock in open market purchases, at an average price of
$21.29
per share, for a total of
$159.4 million
. This total includes
$75.1 million
and
$84.3 million
of open market purchases completed under the 2015 and 2014 Stock Repurchase Programs, respectively. The ASR was completed in December 2015 and resulted in the aggregate repurchase of approximately
3.7 million
shares of common stock with a volume weighted average price of
$20.11
per share.
During fiscal
2014
, under the provisions of both the 2014 and 2011 Stock Repurchase Programs, the Company repurchased approximately
3.2 million
shares of common stock in open market purchases at an average price of
$30.22
per share, for a total of
$97.8 million
.
Stock repurchases are reflected as a decrease to common stock based on par value and additional-paid-capital based on the average book value per share for all outstanding shares calculated at the time of each individual repurchase transaction. The excess of the purchase price over this average for each repurchase was charged to retained earnings. As a result of the
2016
repurchases, retained earnings was reduced by
$94.7 million
in fiscal
2016
. Common stock repurchases under the program were recorded based upon the trade date for accounting purposes.
NOTE 15: STATEMENT OF CASH FLOW DATA
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Years
|
2016
|
|
2015
|
|
2014
|
(In millions)
|
|
|
|
|
|
Supplemental disclosure of cash flow information:
|
|
|
|
|
|
Interest paid
|
$
|
27.3
|
|
|
$
|
26.5
|
|
|
$
|
15.6
|
|
Income taxes paid
|
$
|
57.4
|
|
|
$
|
54.0
|
|
|
$
|
66.1
|
|
NOTE 16: SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
Trimble has a 52-53 week fiscal year, ending on the Friday nearest to December 31. Both fiscal
2016
and
2015
were a 52-week year.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First
Quarter
|
|
Second
Quarter
|
|
Third
Quarter
|
|
Fourth
Quarter
|
Fiscal Period
|
2016
|
|
2016
|
|
2016
|
|
2016
|
(in millions, except per share data)
|
|
|
|
|
|
|
|
Revenue
|
$
|
583.0
|
|
|
$
|
609.6
|
|
|
$
|
584.1
|
|
|
$
|
585.5
|
|
Gross margin
|
300.6
|
|
|
315.6
|
|
|
309.0
|
|
|
312.8
|
|
Net income attributable to Trimble Inc.
|
19.8
|
|
|
35.7
|
|
|
39.2
|
|
|
37.7
|
|
Basic net income per share
|
0.08
|
|
|
0.14
|
|
|
0.16
|
|
|
0.15
|
|
Diluted net income per share
|
0.08
|
|
|
0.14
|
|
|
0.15
|
|
|
0.15
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First
Quarter
|
|
Second
Quarter
|
|
Third
Quarter
|
|
Fourth
Quarter
|
Fiscal Period
|
2015
|
|
2015
|
|
2015
|
|
2015
|
(in millions, except per share data)
|
|
|
|
|
|
|
|
Revenue
|
$
|
582.6
|
|
|
$
|
585.8
|
|
|
$
|
562.3
|
|
|
$
|
559.7
|
|
Gross margin
|
307.2
|
|
|
303.9
|
|
|
298.0
|
|
|
293.1
|
|
Net income attributable to Trimble Inc.
|
34.1
|
|
|
25.9
|
|
|
37.1
|
|
|
24.0
|
|
Basic net income per share
|
0.13
|
|
|
0.10
|
|
|
0.15
|
|
|
0.10
|
|
Diluted net income per share
|
0.13
|
|
|
0.10
|
|
|
0.14
|
|
|
0.09
|
|