Trimble announced results for its third quarter 2007, ended Sept. 28, 2007. Revenue for the third quarter of 2007 was $296.0 million, up approximately 26 percent from revenue of $234.9 million in the third quarter of 2006.
Operating income for the third quarter of 2007 was $43.8 million, up 21 percent from the third quarter of 2006. Operating margins in the third quarter of 2007 were 14.8 percent, compared to 15.5 percent in the third quarter of 2006. It should be noted in year-over-year comparisons that amortization of intangibles increased from $2.9 million in the third quarter of 2006 to $10.2 million in the third quarter of 2007. Additionally, the impact of stock-based compensation expense was $3.8 million in the third quarter of 2007, compared to $2.9 million in the third quarter of 2006. There was no in-process research and development expense in the third quarter of 2007; there was a $50 thousand in-process research and development expense in the third quarter of 2006. Excluding these impacts, non-GAAP operating income of $57.8 million grew by 37 percent compared to the third quarter of 2006. Non-GAAP operating income margins were 19.5 percent in the third quarter of 2007, up from 18.0 percent in the third quarter of 2006.
Net income for the third quarter of 2007 was up approximately 8 percent, to $27.4 million, compared to net income of $25.3 million in the third quarter of 2006. Diluted earnings per share for the third quarter of 2007 were $0.22, flat with diluted earnings per share of $0.22 in the third quarter of 2006. The tax rate for the third quarter of 2007 was 39 percent, compared to 35 percent in the third quarter of 2006. GAAP earnings per share in the third quarter of 2007 were negatively impacted by approximately $0.05 due to amortization of intangibles and by $0.02 due to stock-based compensation expense.
Adjusting for the amortization of intangibles, in-process research and development, and the impact of stock-based compensation expenses, non-GAAP net income for the third quarter of 2007 was up 23 percent, to $35.9 million, compared to non-GAAP net income of $29.2 million in the third quarter of fiscal 2006. Non-GAAP earnings per share for the third quarter of 2007 were $0.29, up approximately 16 percent from non-GAAP earnings per share of $0.25 in the third quarter of 2006.
"Trimble’s third quarter performance fit our standard operating template of revenue growth, tight control of costs, and expanding operating margins," said Steven W. Berglund, Trimble’s president and chief executive officer. "Although we once again saw some regional slowness in the U.S. within our E&C segment, we continue to believe in a robust 2008 based on a strong farm economy, continued international growth in E&C, and the need for productivity- based solutions in all of the markets we serve."
Trimble Results by Business Segment
Segment operating income is revenue less cost of goods sold and operating expenses, excluding general corporate expenses, amortization of intangibles, and in-process research and development. In addition, for each segment, non-GAAP operating income excludes the impact of stock-based compensation expense.
Engineering and Construction
Third quarter 2007 Engineering and Construction (E&C) revenue was $182.1 million, up approximately 12 percent when compared to revenue of $162.4 million in the third quarter of 2006. During the third quarter, E&C continued to experience some regional softness in U.S. sales and strong growth in international sales.
Operating income in E&C was $42.8 million, or 23.5 percent of revenue compared to $38.3 million, or 23.6 percent of revenue, in the third quarter of 2006.
Non-GAAP operating income in E&C was $43.7 million, or 24.0 percent of revenue, in the third quarter of 2007 compared to $39.2 million, or 24.2 percent of revenue, in the third quarter of 2006.
Field Solutions
Third quarter 2007 Field Solutions (TFS) revenue was $44.8 million, up 53 percent compared to $29.2 million in revenue in the third quarter of 2006. Sales of both agricultural and geographic information system products were strong, with particular strength driven by the continued robust farm economy.
Operating income in TFS was $11.9 million, or 26.7 percent of revenue, for the third quarter of 2007 compared to $5.6 million, or 19.3 percent of revenue, in the third quarter of 2006.
Non-GAAP operating income in TFS was $12.1 million, or 27.0 percent of revenue, for the third quarter of 2007 compared to $5.9 million, or 20.1 percent of revenue, in the third quarter of 2006.
Mobile Solutions
Third quarter 2007 Mobile Solutions revenue (TMS) was $39.2 million, up 139 percent from revenue of $16.4 million in the third quarter of 2006. Revenue growth was primarily driven by the impact of the @Road acquisition.
Operating income in TMS was $2.9 million, or 7.3 percent of revenue, for the third quarter of 2007 compared to $1.1 million, or 6.8 percent of revenue, in the third quarter of 2006.
Non-GAAP operating income in TMS was $4.3 million, or 10.9 percent of revenue, for the third quarter of 2007 compared to $1.3 million, or 7.9 percent of revenue, in the third quarter of 2006.
Advanced Devices
Third quarter 2007 Advanced Devices revenue was $29.9 million, up approximately 12 percent from revenue of $26.8 million in the third quarter of 2006 due to sales of timing products.
Operating income in Advanced Devices was $4.9 million, or 16.4 percent of revenue, for the third quarter of 2007 compared to $4.1 million, or 15.3 percent of revenue, in the third quarter of 2006.
Non-GAAP operating income in Advanced Devices was $5.2 million, or 17.5 percent of revenue, for the third quarter of 2007 compared to $4.6 million, or 17.0 percent of revenue, in the third quarter of 2006.
Use of Non-GAAP Financial Information
Our results of operations have undergone significant change primarily due to the impact of acquisitions and FAS 123(R). To help our readers understand our past financial performance and our future results, we supplement the financial results that we provide in accordance with generally accepted accounting principles, or GAAP, with non-GAAP financial measures. The specific non-GAAP measures which we use along with a reconciliation to the nearest comparable GAAP measures and the explanation for why management chose to exclude selected items and the additional purposes for which these non-GAAP measures are used can be found at the end of this release. The method we use to produce non-GAAP results is not computed according to GAAP and may differ from the methods used by other companies. Our non-GAAP results are not meant to be considered in isolation or as a substitute for comparable GAAP measures and should be read only in conjunction with our consolidated financial statements prepared in accordance with GAAP. 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. Management generally compensates for the limitations in the use of non-GAAP financial measures by relying on comparable GAAP financial measures and providing investors with a reconciliation of the non-GAAP financial measure to the most directly comparable GAAP financial measure or measures. Investors are encouraged to review the reconciliation of our non-GAAP financial measures to the comparable GAAP results, which is attached to our quarterly earnings release and which can be found, along with other financial information, on the investor relations page of our Web site at http://investor.trimble.com.
Forward Looking Guidance
In the fourth quarter of 2007, Trimble expects revenue to grow 26 to 28 percent compared to the fourth quarter of 2006, with revenue between $295 million and $300 million. Trimble expects fourth quarter 2007 GAAP earnings per share between $0.17 and $0.19 and non-GAAP earnings per share between $0.24 and $0.26. Non-GAAP guidance for the fourth quarter of 2007 excludes the amortization of intangibles of $10.0 million related to previous acquisitions, and the anticipated impact of stock-based compensation expense of $3.8 million. Both GAAP and non-GAAP guidance use a 39 percent tax rate, compared to an actual 25 percent tax rate in the fourth quarter of 2006, and assume 126 million shares outstanding.
Investor Conference Call / Webcast Details
Trimble will hold a conference call on October 23, 2007 at 1:30 p.m. PDT to review its third quarter 2007 results. It will be broadcast live on the Web at http://investor.trimble.com. Investors without Internet access may dial into the call at (800) 528-9198 (U.S.) or (706) 634-6089 (international). A replay of the call will be available for seven days at (800) 642-1687 (U.S.) or ((706) 645-9291 (international) and the passcode is 18774724. The replay will also be available on the Web at the address above.