GAAP Earnings Per Share $0.39 Non-GAAP Earnings Per Share $0.49
Operating income for the second quarter of 2008 was $62.9 million, up 12 percent from operating income of $56.0 million in the second quarter of 2007. Operating margins in the second quarter of 2008 were 16.7 percent, down slightly from operating margins of 17.1 percent in the second quarter of 2007. Amortization of intangibles increased from $10.4 million in the second quarter of 2007 to $10.9 million in the second quarter of 2008. The impact of stock-based compensation expense was flat year-over-year at $3.8 million. There was a $3.3 million restructuring expense in the second quarter of 2008 and a $333 thousand restructuring expense in the second quarter of 2007. Excluding these impacts, non-GAAP operating income of $81.0 million was up 15 percent compared to the second quarter of 2007. Non-GAAP operating margins were 21.4 percent in the second quarter of 2008, approximately flat compared to 21.5 percent in the second quarter of 2007.
Net income for the second quarter of 2008 was $48.6 million, up 39 percent compared to net income of $35.0 million in the second quarter of 2007. Diluted earnings per share for the second quarter of 2008 were $0.39, up 39 percent from diluted earnings per share of $0.28 in the second quarter of 2007.
The tax rate for the second quarter of 2008 was 28 percent, compared to 38 percent in the second quarter of 2007. The lower tax rate is due to the previously announced implementation of a global supply chain structure. Trimble now expects the full-year tax rate to be 31 percent versus previous guidance of 33 percent.
Adjusting for the amortization of intangibles and the impact of stock-based compensation and restructuring expenses, non-GAAP net income of $61.7 million for the second quarter of 2008 was up 40 percent compared to non-GAAP net income of $44.1 million in the second quarter of 2007. Non-GAAP earnings per share for the second quarter of 2008 were $0.49, up 40 percent from non-GAAP earnings per share of $0.35 in the second quarter of 2007.
"The Field Solutions segment continued its strong growth trend in the second quarter and we expect a robust agricultural environment for the remainder of the year. The environment for the Engineering and Construction segment remains uncertain in the U.S. and European markets, with continued strength outside those regions," said Steven W. Berglund, Trimble's chief executive officer.
"Although the Mobile Solutions segment has not yet reached our financial goals, potential large customers are showing significant, increased interest in our mobile products. This interest is driven by higher fuel prices, which are putting pressure on operating costs. We believe this improving sales pipeline has the potential to generate significant growth in revenue and profitability in 2009 in the segment. We continue to invest aggressively in anticipation of this growth," Berglund continued.
"While recognizing the potential impact of economic uncertainties we are reiterating the total company revenue guidance and increasing the earnings per share guidance for the year."
Trimble Results by Business Segment
Segment operating income is revenue less cost of goods sold and operating expenses, excluding general corporate expenses, restructuring expenses, amortization of intangibles, in-process research and development and the impact of stock-based compensation expense.
Engineering and Construction
Second quarter 2008 Engineering and Construction (E&C) revenue was $213.0 million, up approximately 7 percent when compared to revenue of $198.9 million in the second quarter of 2007. E&C growth was driven by strong international sales partially offset by slower conditions in the U.S.
Second quarter 2008 operating income in E&C was $45.2 million, or 21.2 percent of revenue, compared to $52.4 million, or 26.3 percent of revenue, in the second quarter of 2007.
Non-GAAP operating income in E&C was $46.2 million, or 21.7 percent of revenue, in the second quarter of 2008 compared to $53.2 million, or 26.7 percent of revenue, in the second quarter of 2007. As in the first quarter of 2008, the decline in operating margins resulted from the impact of foreign exchange rates, the impact of recent acquisitions which have not yet fully contributed to profitability, higher marketing and product development costs, and product mix.
Field Solutions
Second quarter 2008 Field Solutions revenue was $90.1 million, up approximately 63 percent compared to revenue of $55.3 million in the second quarter of 2007. Revenue growth was driven primarily by strong demand for agricultural products.
Second quarter 2008 operating income in Field Solutions was $34.8 million, or 38.6 percent of revenue compared to $18.4 million, or 33.3 percent of revenue, in the second quarter of 2007.
Non-GAAP operating income in Field Solutions was $35.0 million, or 38.9 percent of revenue, in the second quarter of 2008 compared to $18.6 million, or 33.6 percent of revenue, in the second quarter of 2007. Operating margin expansion resulted from operating leverage due to increased sales.
Mobile Solutions
Second quarter 2008 Mobile Solutions revenue was $42.3 million, up approximately 3 percent when compared to revenue of $40.9 million in the second quarter of 2007.
Second quarter 2008 operating income in Mobile Solutions was $1.9 million, or 4.6 percent of revenue compared to $2.9 million, or 7.1 percent of revenue, in the second quarter of 2007.
Non-GAAP operating income in Mobile Solutions was $3.1 million, or 7.4 percent of revenue, in the second quarter of 2008 compared to $4.4 million, or 10.8 percent of revenue, in the second quarter of 2007. Operating income was impacted primarily by losses from the field service and direct store delivery products, which are expected to show improvement as a new product platform is rolled out.
Advanced Devices
Second quarter 2008 Advanced Devices revenue was $32.4 million, approximately flat when compared to revenue of $32.7 million in the second quarter of 2007.
Second quarter 2008 operating income in Advanced Devices was $6.6 million, or 20.3 percent of revenue compared to $5.4 million, or 16.5 percent of revenue, in the second quarter of 2007.
Non-GAAP operating income in Advanced Devices was $6.9 million, or 21.3 percent of revenue, in the second quarter of 2008 compared to $5.7 million, or 17.4 percent of revenue, in the second quarter of 2007. Improvements in operating margins were due to product mix.
Stock Repurchase Program
In January, Trimble announced a stock repurchase program for up to $250 million. As part of this program, in the first quarter of 2008, Trimble repurchased approximately 968 thousand shares of Trimble stock at an average purchase price of $26.71. In the second quarter of 2008, Trimble repurchased approximately 287 thousand shares of Trimble stock at an average purchase price of $36.25. Subsequent to the end of the second quarter, as of July 24, 2008, Trimble repurchased 741 thousand shares of Trimble stock at an average purchase price of $33.18.
Use of Non-GAAP Financial Information
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 this earnings release. Additional financial information about our use of non-GAAP results can be found on the investor relations page of our Web site at
http://investor.trimble.com .
