CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(In thousands, except per share data)

(Unaudited)

Three Months Ended

Twelve Months Ended

Dec-30,

Dec-31,

Dec-30,

Dec-31,

2011

2010

2011

2010

Revenue

$ 435,170

$ 323,349

$ 1,644,065

$ 1,293,937

Cost of sales

217,412

160,019

814,484

648,436

Gross margin

217,758

163,330

829,581

645,501

Gross margin (%)

50.0%

50.5%

50.5%

49.9%

Operating expenses

   Research and development

57,555

40,750

197,007

150,089

   Sales and marketing

71,445

61,609

266,804

215,127

   General and administrative

43,658

32,878

158,375

118,352

   Restructuring

513

348

2,288

1,592

   Amortization of purchased intangible assets

15,875

8,489

48,705

32,739

      Total operating expenses

189,046

144,074

673,179

517,899

Operating income

28,712

19,256

156,402

127,602

Non-operating income, net

   Interest income

338

219

1,364

1,083

   Interest expense

(3,431)

(367)

(8,641)

(1,752)

   Foreign currency transaction gain (loss), net

(1,727)

210

1,053

(836)

   Income from equity method investments, net

4,379

2,770

15,349

11,795

   Other expense, net

2,819

173

1,927

3,195

      Total non-operating income, net

2,378

3,005

11,052

13,485

Income before taxes

31,090

22,261

167,454

141,087

Income tax provision (benefit)

2,427

(13,587)

18,545

37,474

Net income

28,663

35,848

148,909

103,613

Less: Net loss attributable to noncontrolling interests

(740)

(716)

(1,846)

(47)

Net income attributable to Trimble Navigation Ltd.

$   29,403

$   36,564

$    150,755

$    103,660

Earnings per share attributable to Trimble Navigation Ltd.

    Basic

$       0.24

$       0.30

$          1.23

$          0.86

    Diluted

$       0.23

$       0.29

$          1.20

$          0.84

Shares used in calculating earnings per share:

   Basic

123,446

120,522

122,725

120,352

   Diluted

126,592

124,395

126,133

123,798

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands)

(Unaudited)

Dec-30,

Dec-31,

2011

2010

Assets

Current assets:

  Cash and cash equivalents

$    154,621

$    220,788

  Accounts receivables, net

275,201

222,820

  Other receivables

7,103

21,069

  Inventories, net

232,063

192,852

  Deferred income taxes

44,632

36,924

  Other current assets

19,437

19,917

     Total current assets

733,057

714,370

Property and equipment, net

62,724

50,692

Goodwill

1,297,692

828,737

Other purchased intangible assets, net

476,791

204,948

Other non-current assets

82,211

68,145

     Total assets

$ 2,652,475

$ 1,866,892

Liabilities

Current liabilities:

  Current portion of long-term debt

$      65,918

$        1,993

  Accounts payable

97,956

72,349

  Accrued compensation and benefits

73,894

60,976

  Deferred revenue

105,066

73,888

  Accrued warranty expense

18,444

12,868

  Other accrued liabilities

50,045

29,741

     Total current liabilities

411,323

251,815

Non-current portion of long-term debt

498,518

151,160

Non-current deferred revenue

13,113

10,777

Deferred income taxes

95,594

24,598

Other non-current liabilities

45,025

42,843

     Total liabilities

1,063,573

481,193

Commitments and contingencies

Equity

Shareholders' equity:

  Common stock

878,514

781,779

  Retained earnings

685,639

536,350

  Accumulated other comprehensive income

5,140

48,027

Total Trimble Navigation Ltd. shareholders' equity

1,569,293

1,366,156

Noncontrolling interests

19,609

19,543

     Total equity

1,588,902

1,385,699

     Total liabilities and equity

$ 2,652,475

$ 1,866,892

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

Twelve Months Ended

Dec-30,

Dec-31,

2011

2010

Cash flow from operating activities:

   Net Income

$ 148,909

$ 103,613

   Adjustments to reconcile net income  to net cash provided by

      operating activities:

        Depreciation expense

20,509

18,198

        Amortization expense

85,160

57,639

        Provision for doubtful accounts

1,913

2,320

        Deferred income taxes

(26,305)

(14,918)

        Stock-based compensation

28,451

23,125

        Income from equity method investments

(15,349)

(11,795)

        Excess tax benefit for stock-based compensation

(14,762)

(9,639)

        Provision for excess and obsolete inventories

8,410

4,752

        Other non-cash items

2,885

(4,610)

   Add decrease (increase) in assets:

        Accounts receivables

(31,874)

(7,376)

        Other receivables

30,141

2,518

        Inventories

(30,139)

(45,549)

        Other current and non-current assets

10,519

2,257

   Add increase (decrease) in liabilities:

        Accounts payable

(4,310)

13,577

        Accrued compensation and benefits

2,469

15,928

        Deferred revenue

18,775

(1,177)

        Accrued warranty expense

644

(2,217)

        Other current and non-current liabilities

5,583

(22,616)

Net cash provided by operating activities

241,629

124,030

Cash flow from investing activities:

     Acquisitions of businesses, net of cash acquired

(759,737)

(136,419)

     Acquisition of property and equipment

(23,278)

(23,133)

     Acquisitions of intangible assets

(1,666)

(2,063)

     Purchases of equity method investments

(3,267)

(8,192)

     Proceeds received from noncontrolling interest holder

-

7,470

     Dividends received

12,398

5,858

     Other

1,985

105

Net cash used in investing activities

(773,565)

(156,374)

Cash flow from financing activities:

     Issuance of common stock, net

45,870

44,549

     Repurchase and retirement of common stock

-

(73,853)

     Excess tax benefit for stock-based compensation

14,762

9,639

     Proceeds from long-term debt and revolving credit lines

734,225

-

     Payments on short-term and long-term debt  

(330,690)

(499)

Net cash provided by (used in) financing activities

464,167

(20,164)

Effect of exchange rate changes on cash and cash equivalents

1,602

(552)

Net decrease in cash and cash equivalents

(66,167)

(53,060)

Cash and cash equivalents - beginning of period

220,788

273,848

Cash and cash equivalents - end of period

$ 154,621

$ 220,788

REPORTING SEGMENTS

(Dollars in thousands)

(Unaudited)

Reporting Segments

Engineering

and

Field

Mobile

Advanced

Construction

Solutions

Solutions

Devices

THREE MONTHS ENDED DECEMBER 30, 2011:

Revenue

$    238,689

$   95,533

$   75,794

$   25,154

Operating income before corporate allocations:

$      36,615

$   34,061

$     5,976

$     3,451

Operating margin (% of segment external net revenues)

15.3%

35.7%

7.9%

13.7%

THREE MONTHS ENDED DECEMBER 31, 2010:

Revenue

$    183,396

$   74,838

$   40,415

$   24,700

Operating income (loss) before corporate allocations:

$      21,648

$   27,053

$      (267)

$     3,446

Operating margin (% of segment external net revenues)

11.8%

36.1%

(0.7%)

14.0%

TWELVE MONTHS ENDED DECEMBER 30, 2011:

Revenue

$    906,497

$ 413,721

$ 218,540

$ 105,307

Operating income before corporate allocations:

$    149,015

$ 160,139

$     4,461

$   13,891

Operating margin (% of segment external net revenues)

16.4%

38.7%

2.0%

13.2%

TWELVE MONTHS ENDED DECEMBER 31, 2010:

Revenue

$    719,053

$ 318,137

$ 154,254

$ 102,493

Operating income before corporate allocations:

$    110,965

$ 116,373

$     1,873

$   18,325

Operating margin (% of segment external net revenues)

15.4%

36.6%

1.2%

17.9%

GAAP TO NON-GAAP RECONCILIATION

(Dollars in thousands, except per share data)

(Unaudited)

Three Months Ended

Twelve Months Ended

Dec-30,

Dec-31,

Dec-30,

Dec-31,

2011

2010

2011

2010

Dollar

% of

Dollar

% of

Dollar

% of

Dollar

% of

Amount

Revenue

Amount

Revenue

Amount

Revenue

Amount

Revenue

GROSS MARGIN:                                                                                                                    

GAAP gross margin:

$ 217,758

50.0%

$ 163,330

50.5%

$ 829,581

50.5%

$ 645,501

49.9%

Restructuring

( A )

131

0.0%

293

0.1%

466

0.0%

443

0.0%

Amortization of purchased intangibles

( B )

13,279

3.1%

6,985

2.2%

37,197

2.3%

24,900

1.9%

Stock-based compensation

( C )

494

0.1%

344

0.1%

1,955

0.1%

1,816

0.1%

Amortization of acquisition-related inventory step-up

( D )

739

0.2%

588

0.2%

3,802

0.2%

728

0.1%

Non-GAAP gross margin:

$ 232,401

53.4%

$ 171,540

53.1%

$ 873,001

53.1%

$ 673,388

52.0%

OPERATING EXPENSES:

GAAP operating expenses:

$ 189,046

43.4%

$ 144,074

44.6%

$ 673,179

40.9%

$ 517,899

40.0%

Restructuring

( A )

(513)

-0.1%

(348)

-0.1%

(2,288)

-0.1%

(1,592)

-0.1%

Amortization of purchased intangibles

( B )

(15,876)

-3.6%

(8,489)

-2.6%

(48,705)

-3.0%

(32,739)

-2.5%

Stock-based compensation

( C )

(6,924)

-1.6%

(6,616)

-2.1%

(26,496)

-1.6%

(21,309)

-1.7%

Acquisition costs

( E )

(2,117)

-0.5%

(3,466)

-1.1%

(14,892)

-0.9%

(6,537)

-0.5%

Non-GAAP operating expenses:

$ 163,616

37.6%

$ 125,155

38.7%

$ 580,798

35.3%

$ 455,722

35.2%

OPERATING INCOME:

GAAP operating income:

$  28,712

6.6%

$  19,256

6.0%

$ 156,402

9.5%

$ 127,602

9.9%

Restructuring

( A )

644

0.1%

641

0.2%

2,754

0.2%

2,035

0.2%

Amortization of purchased intangibles

( B )

29,155

6.7%

15,474

4.8%

85,902

5.2%

57,639

4.4%

Stock-based compensation

( C )

7,418

1.7%

6,960

2.1%

28,451

1.8%

23,125

1.8%

Amortization of acquisition-related inventory step-up

( D )

739

0.2%

588

0.2%

3,802

0.2%

728

0.0%

Acquisition costs

( E )

2,117

0.5%

3,466

1.0%

14,892

0.9%

6,537

0.5%

Non-GAAP operating income:

$  68,785

15.8%

$  46,385

14.3%

$ 292,203

17.8%

$ 217,666

16.8%

NON-OPERATING INCOME, NET:

GAAP non-operating income, net:

$    2,378

$    3,005

$   11,052

$   13,485

Acquisition (gain)/ loss

( E )

(194)

35

(264)

(3,177)

Debt issuance cost write-off

( F )

-

-

377

-

Foreign exchange loss (gain) associated with acquisition

( G )

1,688

-

(1,768)

-

Non-GAAP non-operating income, net:

$    3,872

$    3,040

$     9,397

$   10,308

GAAP and

GAAP and

GAAP and

GAAP and

Non-GAAP

Non-GAAP

Non-GAAP

Non-GAAP

Tax Rate %

( K )

Tax Rate %

( K )

Tax Rate %

( K )

Tax Rate %

( K )

INCOME TAX PROVISION (BENEFIT):

GAAP income tax provision (benefit):

$    2,427

8%

$ (13,587)

-61%

$   18,545

11%

$   37,474

27%

Non-GAAP items tax effected:

( H )

3,218

(1,014)

13,696

10,935

IRS settlement

( I )

-

-

-

(27,540)

Valuation allowance release

( J )

-

7,628

-

7,628

Non-GAAP income tax provision (benefit):

$    5,645

8%

$   (6,973)

-14%

$   32,241

11%

$   28,497

13%

NET INCOME:  

GAAP net income attributable to Trimble Navigation Ltd.

$  29,403

$  36,564

$ 150,755

$ 103,660

Restructuring

( A )

644

641

2,754

2,035

Amortization of purchased intangibles

( B )

29,155

15,474

85,902

57,639

Stock-based compensation

( C )

7,418

6,960

28,451

23,125

Amortization of acquisition-related inventory step-up

( D )

739

588

3,802

728

Acquisition costs

( E )

1,921

3,501

14,627

3,360

Debt issuance cost write-off

( F )

-

-

377

-

Foreign exchange loss (gain) associated with acquisition

( G )

1,688

-

(1,768)

-

Non-GAAP tax adjustments

      ( H ), ( I ), (J)

(3,218)

(6,605)

(13,696)

8,986

Non-GAAP net income attributable to Trimble Navigation Ltd.

$  67,750

$  57,123

$ 271,204

$ 199,533

DILUTED NET INCOME PER SHARE:

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

$      0.23

$      0.29

$     1.20

$      0.84

Restructuring

( A )

0.01

0.01

0.02

0.02

Amortization of purchased intangibles

( B )

0.23

0.12

0.67

0.46

Stock-based compensation

( C )

0.06

0.06

0.23

0.18

Amortization of acquisition-related inventory step-up

( D )

0.01

-

0.03

0.01

Acquisition costs

( E )

0.02

0.03

0.12

0.03

Debt issuance cost write-off

( F )

-

-

-

-

Foreign exchange loss (gain) associated with acquisition

( G )

0.01

-

(0.01)

-

Non-GAAP tax adjustments

      ( H ), ( I ), (J)

(0.03)

(0.05)

(0.11)

0.07

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

$      0.54

$      0.46

$      2.15

$      1.61

OPERATING LEVERAGE:

Increase in non-GAAP operating income

$  22,399

$   74,537

Increase in revenue

$ 111,821

$ 350,128

Operating leverage (increase in non-GAAP operating

income as a % of increase in revenue)

20.0%

21.3%

GAAP TO NON-GAAP RECONCILIATION (CONTINUED)

(Dollars in thousands, except per share data)

(Unaudited)

Three Months Ended

Twelve Months Ended

Dec-30,

Dec-31,

Dec-30,

Dec-31,

2011

2010

2011

2010

% of Segment

% of Segment

% of Segment

% of Segment

SEGMENT OPERATING INCOME:                                                        

Revenue

Revenue

Revenue

Revenue

Engineering and Construction

GAAP operating income before corporate allocations:

$          36,615

15.3%

$          21,648

11.8%

$         149,015

16.4%

$         110,965

15.4%

Stock-based compensation

( L )

2,780

1.2%

2,391

1.3%

10,140

1.2%

7,886

1.1%

Non-GAAP operating income before corporate allocations:

$         39,395

16.5%

$         24,039

13.1%

$          159,155

17.6%

$          118,851

16.5%

Field Solutions

GAAP operating income before corporate allocations:

$          34,061

35.7%

$          27,053

36.1%

$        160,139

38.7%

$         116,373

36.6%

Stock-based compensation

( L )

650

0.6%

582

0.8%

2,269

0.6%

1,978

0.6%

Non-GAAP operating income before corporate allocations:

$           34,711

36.3%

$          27,635

36.9%

$       162,408

39.3%

$          118,351

37.2%

Mobile Solutions

GAAP operating income (loss) before corporate allocations:

$            5,976

7.9%

$             (267)

-0.7%

$            4,461

2.0%

$             1,873

1.2%

Stock-based compensation

( L )

470

0.6%

1,198

3.0%

2,943

1.4%

3,444

2.2%

Non-GAAP operating income before corporate allocations:

$           6,446

8.5%

$                931

2.3%

$            7,404

3.4%

$             5,317

3.4%

Advanced Devices

GAAP operating income before corporate allocations:

$             3,451

13.7%

$           3,446

14.0%

$           13,891

13.2%

$          18,325

17.9%

Stock-based compensation

( L )

611

2.4%

584

2.3%

2,566

2.4%

1,934

1.9%

Non-GAAP operating income before corporate allocations:

$           4,062

16.1%

$           4,030

16.3%

$           16,457

15.6%

$         20,259

19.8%

FOOTNOTES TO GAAP TO NON-GAAP RECONCILIATION

(Unaudited)

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

Non-GAAP gross margin

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

Non-GAAP operating expenses

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

Non-GAAP operating income

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

Non-GAAP non-operating income, net

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

Non-GAAP income tax provision (benefit)

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

Non-GAAP net income

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

Non-GAAP diluted net income per share

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

Non-GAAP operating leverage

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

Non-GAAP segment operating income

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

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

( A )

Restructuring costs. Included in our GAAP presentation of cost of sales and operating expenses, restructuring costs recorded are primarily for employee compensation resulting from reductions in employee headcount in connection with our company restructurings.  We exclude restructuring costs from our non-GAAP measures because we believe they do not reflect expected future operating expenses, they are not indicative of our core operating performance, and they are not meaningful in comparisons to our past operating performance.  

( B )

Amortization of purchased intangibles. Included in our GAAP presentation of gross margin, operating expenses, operating income, and net income is amortization of purchased intangibles. US GAAP accounting requires that intangible assets are recorded at fair value and amortized over their useful lives. Consequently, the timing and size of our acquisitions will cause our operating results to vary from period to period making a comparison to past performance difficult for investors. This accounting treatment may cause differences when comparing our results to companies that grow internally because the fair value assigned to the intangible assets acquired through acquisition may significantly exceed the equivalent expenses that a company may incur for similar efforts when performed internally. Furthermore, the useful life that we expense our intangible assets over may be substantially different from the time period that an internal growth company incurs and recognizes such expenses. We believe that by excluding purchased intangibles which represents technology and/or customer relationships already developed, it enhances comparability by allowing investors to compare our operations pre-acquisition to those post-acquisitions and to those of our competitors that have pursued internal growth strategies.