CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(In thousands, except per share data)

(Unaudited)

Three Months Ended

Six Months Ended

Jul-1,

Jul-2,

Jul-1,

Jul-2,

2011

2010

2011

2010

Revenue

$                   407,169

$                    333,363

$                  791,462

$                  652,378

Cost of sales

198,435

169,937

391,198

329,955

Gross margin

208,734

163,426

400,264

322,423

Gross margin (%)

51.3%

49.0%

50.6%

49.4%

Operating expenses

   Research and development

46,292

36,552

89,524

72,442

   Sales and marketing

63,490

50,522

124,697

100,290

   General and administrative

37,157

27,290

70,628

55,837

   Restructuring

361

375

1,128

1,006

   Amortization of purchased intangible assets

9,867

8,126

19,044

16,172

      Total operating expenses

157,167

122,865

305,021

245,747

Operating income

51,567

40,561

95,243

76,676

Non-operating income, net

   Interest income

319

244

604

643

   Interest expense

(1,350)

(411)

(1,846)

(809)

   Foreign currency transaction gain, net

6,496

(1,869)

6,802

(1,123)

   Income from equity method investments, net

3,418

3,147

6,181

5,621

   Other expense, net

(252)

(825)

(504)

(511)

      Total non-operating income, net

8,631

286

11,237

3,821

Income before taxes

60,198

40,847

106,480

80,497

Income tax provision

6,020

34,076

13,429

45,574

Net income

54,178

6,771

93,050

34,923

Less: Net income (loss) attributable to noncontrolling interests

500

418

(331)

672

Net income attributable to Trimble Navigation Ltd.

53,679

$                        6,353

93,382

$                    34,251

Earnings per share attributable to Trimble Navigation Ltd.

    Basic

$                         0.44

$                          0.05

$                        0.76

$                        0.28

    Diluted

$                         0.43

$                          0.05

$                        0.74

$                        0.28

Shares used in calculating earnings per share:

   Basic

122,667

120,654

122,243

120,707

   Diluted

126,192

124,099

126,024

123,964

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands)

(Unaudited)

Jul-1,

Dec-31

2011

2010

Assets

Current assets:

  Cash and cash equivalents

$    249,811

$    220,788

  Accounts receivables, net

257,176

222,820

  Other receivables

27,635

21,069

  Inventories, net

216,080

192,852

  Deferred income taxes

35,791

36,924

  Other current assets

26,245

19,917

     Total current assets

812,738

714,370

Property and equipment, net

53,391

50,692

Goodwill

894,514

828,737

Other purchased intangible assets, net

230,921

204,948

Other non-current assets

78,241

68,145

     Total assets

$ 2,069,805

$ 1,866,892

Liabilities

Current liabilities:

  Current portion of long-term debt

$        1,969

$        1,993

  Accounts payable

87,608

72,349

  Accrued compensation and benefits

59,640

60,976

  Deferred revenue

91,033

73,888

  Accrued warranty expense

13,163

12,868

  Other accrued liabilities

39,171

29,741

     Total current liabilities

292,584

251,815

Non-current portion of long-term debt

125,287

151,160

Non-current deferred revenue

8,612

10,777

Deferred income taxes

37,575

24,598

Other non-current liabilities

45,745

42,843

     Total liabilities

509,803

481,193

Commitments and contingencies

Equity

Shareholders' equity:

  Common stock

839,716

781,779

  Retained earnings

629,576

536,350

  Accumulated other comprehensive income

72,057

48,027

Total Trimble Navigation Ltd. shareholders' equity

1,541,349

1,366,156

Noncontrolling interests

18,653

19,543

     Total equity

1,560,002

1,385,699

     Total liabilities and equity

$ 2,069,805

$ 1,866,892

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

Six Months Ended

Jul-1,

Jul-2,

2011

2010

Cash flow from operating activities:

   Net Income

$   93,050

$   34,923

   Adjustments to reconcile net income  to net cash provided by

      operating activities:

        Depreciation expense

9,175

8,736

        Amortization expense

32,641

27,733

        Provision for doubtful accounts

640

2,596

        Amortization of debt issuance cost

678

-

        Deferred income taxes

(4,139)

(4,461)

        Stock-based compensation

13,927

10,625

        (Income) loss from equity method investments

(6,181)

(5,621)

        Excess tax benefit for stock-based compensation

(10,950)

(1,412)

        Provision for excess and obsolete inventories

4,731

3,173

        Other non-cash items

1,353

(3,334)

   Add decrease (increase) in assets:

        Accounts receivables

(30,650)

(15,398)

        Other receivables

5,988

7,647

        Inventories

(16,100)

(19,747)

        Other current and non-current assets

1,478

1,003

   Add increase (decrease) in liabilities:

        Accounts payable

8,776

17,315

        Accrued compensation and benefits

(5,453)

8,142

        Accrued liabilities

3,164

(21,680)

        Deferred revenue

8,588

676

        Income taxes payable

-

44,393

Net cash provided by operating activities

110,716

95,309

Cash flow from investing activities:

     Acquisitions of businesses, net of cash acquired

(91,449)

(33,605)

     Acquisition of property and equipment

(9,322)

(11,030)

     Acquisitions of intangible assets

(566)

(297)

     Purchases of equity method investments

(267)

(3,692)

     Increase in restricted cash for business acquisition

-

(17,151)

     Dividends received

7,500

5,000

     Other

(357)

67

Net cash used in investing activities

(94,461)

(60,708)

Cash flow from financing activities:

     Issuance of common stock, net

30,663

17,867

     Repurchase and retirement of common stock

-

(60,510)

     Excess tax benefit for stock-based compensation

10,950

1,412

     Proceeds from long-term debt, net of debt issuance costs

144,225

-

     Payments on short-term and long-term debt  

(177,831)

(94)

Net cash provided by (used in) financing activities

8,007

(41,325)

Effect of exchange rate changes on cash and cash equivalents

4,761

(5,464)

Net increase (decrease) in cash and cash equivalents

29,023

(12,188)

Cash and cash equivalents - beginning of period

220,788

273,848

Cash and cash equivalents - end of period

$ 249,811

$ 261,660

REPORTING SEGMENTS

(Dollars in thousands)

(Unaudited)

Reporting Segments

Engineering

and

Field

Mobile

Advanced

Construction

Solutions

Solutions

Devices

THREE MONTHS ENDED JULY 1, 2011:

Revenue

$    236,668

$ 104,029

$ 40,224

$  26,248

Operating income (loss) before corporate allocations:

$      46,987

$   42,543

$ (2,684)

$    2,607

Operating margin (% of segment external net revenues)

19.9%

40.9%

(6.7%)

9.9%

THREE MONTHS ENDED JULY 2, 2010:

Revenue

$    188,441

$   80,158

$ 38,188

$  26,576

Operating income before corporate allocations:

$      33,921

$   28,980

$      324

$    5,181

Operating margin (% of segment external net revenues)

18.0%

36.2%

0.8%

19.5%

SIX MONTHS ENDED JULY 1, 2011:

Revenue

$    426,702

$ 227,082

$ 84,645

$  53,033

Operating income (loss) before corporate allocations:

$      69,766

$   95,048

$ (4,018)

$    6,470

Operating margin (% of segment external net revenues)

16.4%

41.9%

(4.7%)

12.2%

SIX MONTHS ENDED JULY 2, 2010:

Revenue

$    346,059

$ 176,059

$ 76,147

$  54,113

Operating income before corporate allocations:

$      52,728

$   68,293

$   2,223

$  10,806

Operating margin (% of segment external net revenues)

15.2%

38.8%

2.9%

20.0%

GAAP TO NON-GAAP RECONCILIATION

(Dollars in thousands, except per share data)

(Unaudited)

Three Months Ended

Six Months Ended

Jul-1,

Jul-2,

Jul-1,

Jul-2,

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:

$ 208,734

51.3%

$ 163,426

49.0%

$ 400,264

50.6%

$ 322,423

49.4%

Restructuring

( A )

189

0.0%

55

0.0%

288

0.0%

98

0.0%

Amortization of purchased intangibles

( B )

6,709

1.7%

5,790

1.7%

13,597

1.8%

11,559

1.8%

Stock-based compensation

( C )

502

0.1%

486

0.2%

970

0.1%

987

0.2%

Amortization of acquisition-related inventory step-up

( D )

1,201

0.3%

-

0.0%

1,709

0.2%

71

0.0%

Non-GAAP gross margin:

$ 217,335

53.4%

$ 169,757

50.9%

$ 416,828

52.7%

$ 335,138

51.4%

OPERATING EXPENSES:

GAAP operating expenses:

$ 157,167

38.5%

$ 122,865

36.9%

$ 305,021

38.5%

$ 245,747

37.7%

Restructuring

( A )

(361)

-0.1%

(375)

-0.1%

(1,128)

-0.1%

(1,006)

-0.2%

Amortization of purchased intangibles

( B )

(9,867)

-2.4%

(8,126)

-2.5%

(19,044)

-2.4%

(16,172)

-2.4%

Stock-based compensation

( C )

(6,627)

-1.6%

(4,498)

-1.4%

(12,957)

-1.6%

(9,638)

-1.5%

Acquisition costs

( E )

(3,304)

-0.8%

(1,764)

-0.5%

(5,494)

-0.7%

(2,502)

-0.4%

Non-GAAP operating expenses:

$ 137,008

33.6%

$ 108,102

32.4%

$ 266,398

33.7%

$ 216,429

33.2%

OPERATING INCOME:

GAAP operating income:

$   51,567

12.7%

$   40,561

12.2%

$   95,243

12.0%

$   76,676

11.7%

Restructuring

( A )

550

0.1%

430

0.1%

1,416

0.2%

1,104

0.2%

Amortization of purchased intangibles

( B )

16,576

4.0%

13,916

4.2%

32,641

4.1%

27,731

4.3%

Stock-based compensation

( C )

7,129

1.8%

4,984

1.5%

13,927

1.8%

10,625

1.6%

Amortization of acquisition-related inventory step-up

( D )

1,201

0.3%

-

0.0%

1,709

0.2%

71

0.0%

Acquisition costs

( E )

3,304

0.8%

1,764

0.5%

5,494

0.7%

2,502

0.4%

Non-GAAP operating income:

$   80,327

19.7%

$   61,655

18.5%

$ 150,430

19.0%

$ 118,709

18.2%

NON-OPERATING INCOME, NET:

GAAP non-operating income, net:

$     8,631

$        286

$   11,237

$     3,821

Acquisition costs

( E )

385

10

1,149

(190)

Debt issuance cost write-off

( I )

377

-

377

-

Foreign exchange gains associated with acquisition

( J )

(5,646)

-

(5,646)

-

Non-GAAP non-operating income, net:

$     3,747

$        296

$     7,117

$     3,631

GAAP and

GAAP and

GAAP and

GAAP and

Non-GAAP

Non-GAAP

Non-GAAP

Non-GAAP

Tax Rate %

( F )

Tax Rate %

( F )

Tax Rate %

( F )

Tax Rate %

( F )

INCOME TAX PROVISION:

GAAP income tax provision:

6,020

10%

$   34,076

83%

$   13,429

13%

$   45,574

57%

IRS settlement

( G )

-

(27,540)

-

(27,540)

Non-GAAP items tax effected:

( H )

2,388

3,375

6,741

9,389

Non-GAAP income tax provision:

$     8,408

10%

$     9,911

16%

$   20,170

13%

$   27,423

22%

NET INCOME:  

GAAP net income attributable to Trimble Navigation Ltd.

$   53,679

$     6,353

$   93,382

$   34,251

Restructuring

( A )

550

430

1,416

1,104

Amortization of purchased intangibles

( B )

16,576

13,916

32,641

27,731

Stock-based compensation

( C )

7,129

4,984

13,927

10,625

Amortization of acquisition-related inventory step-up

( D )

1,201

-

1,709

71

Acquisition costs

( E )

3,689

1,774

6,644

2,312

Debt issuance cost write-off

( I )

377

-

377

-

Foreign exchange gains associated with acquisition

( J )

(5,646)

-

(5,646)

-

Non-GAAP tax adjustments

(G), ( H )

(2,388)

24,165

(6,741)

18,151

Non-GAAP net income attributable to Trimble Navigation Ltd.

$   75,167

$   51,622

$ 137,709

$   94,245

DILUTED NET INCOME PER SHARE:

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

$       0.43

$       0.05

$       0.74

$       0.28

Restructuring

( A )

-

-

0.01

0.01

Amortization of purchased intangibles

( B )

0.13

0.11

0.26

0.22

Stock-based compensation

( C )

0.06

0.04

0.11

0.09

Amortization of acquisition-related inventory step-up

( D )

0.01

-

0.01

-

Acquisition costs

( E )

0.03

0.02

0.05

0.02

Debt issuance cost write-off

( I )

-

-

-

-

Foreign exchange gains associated with acquisition

( J )

(0.04)

-

(0.04)

-

Non-GAAP tax adjustments

(G), ( H )

(0.02)

0.20

(0.05)

0.15

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

$       0.60

$       0.42

$       1.09

$       0.76

OPERATING LEVERAGE:

Increase in non-GAAP operating income

$   18,672

$     9,283

$   31,721

$   20,429

Increase in revenue

$   73,806

$   43,300

$ 139,084

$   73,361

Operating leverage (increase in non-GAAP operating

income as a % of increase in revenue)

25.3%

21.4%

22.8%

27.8%

GAAP TO NON-GAAP RECONCILIATION (CONTINUED)

(Dollars in thousands, except per share data)

(Unaudited)

Three Months Ended

Six Months Ended

Jul-1,

Jul-2,

Jul-1,

Jul-2,

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:

$ 46,987

19.9%

$ 33,921

18.0%

$ 69,766

16.4%

$ 52,728

15.2%

Stock-based compensation

( K )

2,443

1.0%

1,878

1.0%

4,781

1.1%

3,603

1.0%

Non-GAAP operating income before corporate allocations:

$ 49,430

20.9%

$ 35,799

19.0%

$ 74,547

17.5%

$ 56,331

16.3%

Field Solutions

GAAP operating income before corporate allocations:

$ 42,543

40.9%

$ 28,980

36.2%

$ 95,048

41.9%

$ 68,293

38.8%

Stock-based compensation

( K )

548

0.5%

477

0.6%

1,060

0.5%

932

0.5%

Non-GAAP operating income before corporate allocations:

$ 43,091

41.4%

$ 29,457

36.7%

$ 96,108

42.3%

$ 69,225

39.3%

Mobile Solutions

GAAP operating income (loss) before corporate allocations:

$ (2,684)

-6.7%

$      324

0.8%

$ (4,018)

-4.7%

$   2,223

2.9%

Stock-based compensation

( K )

809

2.0%

217

0.6%

1,805

2.1%

1,419

1.9%

Non-GAAP operating income (loss) before corporate allocations:

$ (1,875)

-4.7%

$      541

1.4%

$ (2,213)

-2.6%

$   3,642

4.8%

Advanced Devices

GAAP operating income before corporate allocations:

$   2,607

9.9%

$   5,181

19.5%

$   6,470

12.2%

$ 10,806

20.0%

Stock-based compensation

( K )

668

2.6%

457

1.7%

1,319

2.5%

900

1.6%

Non-GAAP operating income before corporate allocations:

$   3,275

12.5%

$   5,638

21.2%

$   7,789

14.7%

$ 11,706

21.6%

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 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 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, net also excludes the write-off of debt issuance costs associated with a terminated credit facility as well as a foreign exchange gain specifically associated with one of our acquisitions. We believe that these exclusions provide investors with a supplemental view of our ongoing financial results.

Non-GAAP income tax provision

Investors benefit from the exclusion of an IRS settlement because it facilitates comparisons to our past income tax provision. Non-GAAP income tax provision excludes an IRS settlement from GAAP income tax provision 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, a foreign exchange gain associated with an acquisition, 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, a foreign exchange gain associated with an acquisition, 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. 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 comparisons.  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, a foreign exchange gain associated with an acquisition, and certain tax charges/benefits of which $27.5 million is associated with the IRS settlement. For detailed explanations of the adjustments made to comparable GAAP measures, see items (A) – (K) below.

( A )

Restructuring. Included in our GAA P 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 cost of sales and operating expenses, amortization of purchased intangibles recorded arises from prior acquisitions and are non-cash in nature.  Amortization charges for intangibles are inconsistent in size and timing.  We exclude these expenses from our non-GAAP measures because we believe they are not indicative of our core operating performance and to facilitate an evaluation of our current operating performance and comparison to Trimble’s past operating performance.

( C )

Stock-based compensation. Included in our GAAP presentation of cost of sales and operating expenses, stock-based compensation consists of expenses for employee stock options and awards and purchase rights under our employee stock purchase plan. We exclude stock-based compensation expense from our non-GAAP measures because some investors may view it as not reflective of our core operating performance as it is a non-cash expense.   For the three months and six months ended July 1, 2011 and July 2, 2010, stock-based compensation was allocated as follows:

Three Months Ended

Six Months Ended

Jul-1,