GAAP operating income for the third quarter of 2011 was $32.4 million, up two percent as compared to the third quarter of 2010. GAAP operating margin in the third quarter of 2011 was 7.8 percent as compared to 10.0 percent in the third quarter of 2010.
Third quarter 2011 GAAP net income was $28.0 million, down 15 percent as compared to the third quarter of 2010. Diluted earnings per share in the third quarter of 2011 were $0.22 as compared to diluted earnings per share of $0.27 in the third quarter of 2010. The GAAP operating margin and earnings per share were down primarily due to the impact of higher amortization of intangibles due to recent acquisitions.
Third quarter 2011 non-GAAP operating income of $73.0 million was up 39 percent as compared to the third quarter of 2010. Non-GAAP operating margin was 17.5 percent as compared to 16.5 percent in the third quarter of 2010.
Non-GAAP net income of $65.7 million for the third quarter of 2011 was up 36 percent as compared to the third quarter of 2010. Diluted non-GAAP earnings per share in the third quarter of 2011 were $0.52 as compared to diluted non-GAAP earnings per share of $0.39 in the third quarter of 2010.
Third quarter 2011 non-GAAP results exclude:
- Restructuring expense of $694 thousand as compared to $290 thousand in the third quarter of 2010;
- Amortization of intangibles of $24.1 million as compared to $14.4 million in the third quarter of 2010;
- Stock-based compensation expense of $7.1 million as compared to $5.5 million in the third quarter of 2010;
- Acquisition-related inventory step-up charge of $1.4 million as compared to $69 thousand in the third quarter of 2010;
- Acquisition-related costs of $6.1 million as compared to a $2.5 million gain in the third quarter of 2010 and;
- Loss on foreign exchange of $2.2 million from a hedge associated with the purchase of Tekla. In the second quarter of 2011, there was a gain on foreign exchange related to this hedge of $5.6 million, which was also excluded from non-GAAP results.
"The third quarter results confirmed that Trimble can continue to grow under the current economic conditions. In the quarter we saw year-over-year growth in all four segments for the first time since 2008," said Steven W. Berglund, Trimble's president and chief executive officer. "The Mobile Solutions segment returned to profitability and we expect to see continued improvements each quarter. The Engineering and Construction and Field Solutions segments both continue to show growth across most product lines and geographies. While the economy remains uncertain, we are encouraged by the progress we are making in integrating our acquisitions, expanding geographies and extending our reach into new adjacencies," concluded Berglund.
Segment operating income is revenue less cost of goods sold and operating expenses, excluding general corporate expenses, restructuring expenses, amortization of intangibles, amortization of acquisition-related inventory step-up charges and acquisition costs. Non-GAAP segment operating income also excludes the impact of stock-based compensation expense.
Engineering and Construction (E&C)
Third quarter 2011 E&C revenue was $241.1 million, up 27 percent as compared to the third quarter of 2010, driven by strength across most product lines, the positive effects of the SITECH dealer channel and the acquisition of Tekla.
Operating income in E&C for the third quarter of 2011 was $42.6 million, or 17.7 percent of revenue, as compared to $36.6 million, or 19.3 percent of revenue in the third quarter of 2010. Non-GAAP operating income was $45.2 million, or 18.8 percent of revenue, as compared to $38.5 million, or 20.3 percent of revenue, in the third quarter of 2010. Non-GAAP operating margin was lower due primarily to a non-cash write down on a portion of Tekla's pre-acquisition deferred revenue. Tekla was expected to be dilutive in the third and fourth quarters of 2011 and accretive beginning in the first quarter of 2012.
Field Solutions
Third quarter 2011 Field Solutions revenue was $91.1 million, up 35 percent as compared to the third quarter of 2010 due to growth in sales of both agriculture and geographic information system (GIS) products and the acquisition of Tekla.
Third quarter 2010 Field Solutions operating income was $31.0 million, or 34.1 percent of revenue, as compared to $21.0 million, or 31.3 percent of revenue, in the third quarter of 2010. Non-GAAP operating income was $31.6 million, or 34.7 percent of revenue, as compared to $21.5 million, or 32.0 percent of revenue, in the third quarter of 2010. The increase in non-GAAP operating margin was due to higher revenue.
Mobile Solutions
Third quarter 2011 Mobile Solutions revenue was $58.1 million, up 54 percent as compared to the third quarter of 2010 due primarily to acquisitions and growth within the base business also contributed.
Third quarter 2011 Mobile Solutions operating income was $2.5 million, or 4.3 percent of revenue, as compared to an operating loss of $83 thousand, or negative 0.2 percent of revenue, in the third quarter of 2010. Non-GAAP operating income was $3.2 million, or 5.5 percent of revenue, as compared to operating income of $744 thousand, or 2.0 percent of revenue, in the third quarter of 2010. The improvement in non-GAAP operating margin was due primarily to acquisitions and some improvements in the base business driven by verticalization of the portfolio.
Advanced Devices
Third quarter 2011 Advanced Devices revenue was $27.1 million, up 15 percent as compared to the third quarter of 2010 due primarily to sales of Applanix products and acquisitions.
The operating income in Advanced Devices for the third quarter 2011 was $4.0 million, or 14.6 percent of revenue, as compared to $4.1 million, or 17.2 percent of revenue, in the third quarter of 2010. Non-GAAP operating income in Advanced Devices was $4.6 million, or 17.0 percent of revenue, as compared to $4.5 million, or 19.1 percent of revenue, in the third quarter of 2010. The decline in non-GAAP operating margin was due to product mix and acquisitions.
Stock Buy Back
Effective Oct. 28, 2011, Trimble's Board of Directors approved a $100 million stock repurchase program. This program supersedes any existing repurchase programs. The timing and actual number of shares repurchased will depend on a variety of factors including price, regulatory requirements, capital availability, and other market conditions. The program does not require the purchase of any minimum number of shares and may be suspended or discontinued at any time.
Use of Non-GAAP Financial Information
To help our investors understand our past financial performance and our future results, as well as our performance relative to competitors, we supplement the financial results that we provide in accordance with generally accepted accounting principles, or GAAP, with non-GAAP financial measures. These non-GAAP measures can be used to evaluate our historical and prospective financial performance, as well as our performance relative to competitors. Our management regularly uses our supplemental non-GAAP financial measures internally to understand, manage and evaluate our business, and to make operating decisions. These non-GAAP measures are among the primary factors management uses in planning for and forecasting future periods. We believe that these non-GAAP financial measures reflect an additional way of viewing aspects of our operations that, when viewed with our GAAP results, provide a more complete understanding of factors and trends affecting our business. Further, we believe some of our investors track our "core operating performance" as a means of evaluating our performance in the ordinary, ongoing, and customary course of our operations. Core operating performance excludes items that are non-cash, not expected to recur or not reflective of ongoing financial results. Management also believes that looking at our core operating performance provides a supplemental way to provide consistency in period to period comparisons.
