CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(In thousands, except per share data)

(Unaudited)

Three Months Ended

Nine Months Ended

Sep-30,

Oct-1,

Sep-30,

Oct-1,

2011

2010

2011

2010

Revenue

$ 417,433

$ 318,210

$ 1,208,895

$ 970,588

Cost of sales

205,874

158,462

597,072

488,417

Gross margin

211,559

159,748

611,823

482,171

Gross margin (%)

50.7%

50.2%

50.6%

49.7%

Operating expenses

   Research and development

49,928

36,897

139,452

109,339

   Sales and marketing

70,662

53,228

195,359

153,518

   General and administrative

44,088

29,637

114,717

85,474

   Restructuring

647

238

1,775

1,244

   Amortization of purchased intangible assets

13,786

8,078

32,830

24,250

      Total operating expenses

179,111

128,078

484,133

373,825

Operating income

32,448

31,670

127,690

108,346

Non-operating income (expense), net

   Interest income

422

221

1,026

864

   Interest expense

(3,364)

(576)

(5,210)

(1,385)

   Foreign currency transaction gain, net

(4,022)

77

2,780

(1,046)

   Income from equity method investments, net

4,789

3,404

10,970

9,025

   Other expense, net

(388)

3,533

(892)

3,022

      Total non-operating income (expense), net

(2,563)

6,659

8,674

10,480

Income before taxes

29,885

38,329

136,364

118,826

Income tax provision

2,689

5,487

16,118

51,061

Net income

27,196

32,842

120,246

67,765

Less: Net income (loss) attributable to noncontrolling interests

(775)

(3)

(1,106)

669

Net income attributable to Trimble Navigation Ltd.

$   27,971

$   32,845

$    121,352

$   67,096

Earnings per share attributable to Trimble Navigation Ltd.

    Basic

$       0.23

$       0.27

$          0.99

$       0.56

    Diluted

$       0.22

$       0.27

$          0.96

$       0.54

Shares used in calculating earnings per share:

   Basic

122,969

119,474

122,485

120,296

   Diluted

125,894

122,869

125,980

123,599

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands)

(Unaudited)

Sep-30,

Dec-31

2011

2010

Assets

Current assets:

  Cash and cash equivalents

$    138,255

$    220,788

  Accounts receivables, net

287,670

222,820

  Other receivables

25,655

21,069

  Inventories, net

215,681

192,852

  Deferred income taxes

47,165

36,924

  Other current assets

26,233

19,917

     Total current assets

740,659

714,370

Property and equipment, net

61,562

50,692

Goodwill

1,312,480

828,737

Other purchased intangible assets, net

516,176

204,948

Other non-current assets

82,521

68,145

     Total assets

$ 2,713,398

$ 1,866,892

Liabilities

Current liabilities:

  Current portion of long-term debt

$      66,873

$        1,993

  Accounts payable

105,766

72,349

  Accrued compensation and benefits

70,015

60,976

  Deferred revenue

95,884

73,888

  Accrued warranty expense

17,503

12,868

  Other accrued liabilities

38,737

29,741

     Total current liabilities

394,778

251,815

Non-current portion of long-term debt

570,380

151,160

Non-current deferred revenue

10,574

10,777

Deferred income taxes

125,992

24,598

Other non-current liabilities

47,217

42,843

     Total liabilities

1,148,941

481,193

Commitments and contingencies

Equity

Shareholders' equity:

  Common stock

861,305

781,779

  Retained earnings

657,000

536,350

  Accumulated other comprehensive income

25,804

48,027

Total Trimble Navigation Ltd. shareholders' equity

1,544,109

1,366,156

Noncontrolling interests

20,348

19,543

     Total equity

1,564,457

1,385,699

     Total liabilities and equity

$ 2,713,398

$ 1,866,892

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

Nine Months Ended

Sep-30,

Oct-1,

2011

2010

Cash flow from operating activities:

   Net Income

$ 120,246

$   67,765

   Adjustments to reconcile net income  to net cash provided by

      operating activities:

        Depreciation expense

14,683

13,310

        Amortization expense

56,747

42,165

        Provision for doubtful accounts

954

3,022

        Deferred income taxes

(10,175)

(3,827)

        Stock-based compensation

21,033

16,165

        (Income) loss from equity method investments

(11,001)

(9,025)

        Excess tax benefit for stock-based compensation

(11,698)

(1,971)

        Provision for excess and obsolete inventories

6,915

3,573

        Other non-cash items

2,738

(3,630)

   Add decrease (increase) in assets:

        Accounts receivables

(43,117)

(17,030)

        Other receivables

13,471

191

        Inventories

(11,344)

(32,549)

        Other current and non-current assets

7,005

366

   Add increase (decrease) in liabilities:

        Accounts payable

2,039

15,796

        Accrued compensation and benefits

(1,921)

15,780

        Deferred revenue

7,638

1,982

        Accrued warranty expense

402

(942)

        Accrued liabilities

(2,794)

(24,109)

Net cash provided by operating activities

161,821

87,032

Cash flow from investing activities:

     Acquisitions of businesses, net of cash acquired

(758,243)

(90,757)

     Acquisition of property and equipment

(16,002)

(17,162)

     Acquisitions of intangible assets

(1,666)

(625)

     Purchases of equity method investments

(3,267)

(5,692)

     Dividends received

7,500

5,000

     Other

(168)

99

Net cash used in investing activities

(771,846)

(109,137)

Cash flow from financing activities:

     Issuance of common stock, net

40,182

31,885

     Repurchase and retirement of common stock

-

(73,853)

     Excess tax benefit for stock-based compensation

11,698

1,971

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

702,225

-

     Payments on short-term and long-term debt  

(225,942)

(467)

Net cash provided by (used in) financing activities

528,163

(40,464)

Effect of exchange rate changes on cash and cash equivalents

(671)

(223)

Net decrease in cash and cash equivalents

(82,533)

(62,792)

Cash and cash equivalents - beginning of period

220,788

273,848

Cash and cash equivalents - end of period

$ 138,255

$ 211,056

REPORTING SEGMENTS

(Dollars in thousands)

(Unaudited)

Reporting Segments

Engineering

and

Field

Mobile

Advanced

Construction

Solutions

Solutions

Devices

THREE MONTHS ENDED SEPTEMBER 30, 2011:

Revenue

$    241,106

$   91,106

$   58,101

$  27,120

Operating income before corporate allocations:

$      42,634

$   31,030

$     2,503

$    3,970

Operating margin (% of segment external net revenues)

17.7%

34.1%

4.3%

14.6%

THREE MONTHS ENDED OCTOBER 1, 2010:

Revenue

$    189,598

$   67,240

$   37,692

$  23,680

Operating income (loss) before corporate allocations:

$      36,589

$   21,027

$        (83)

$    4,073

Operating margin (% of segment external net revenues)

19.3%

31.3%

-0.2%

17.2%

NINE MONTHS ENDED SEPTEMBER 30, 2011:

Revenue

$    667,808

$ 318,188

$ 142,747

$  80,152

Operating income (loss) before corporate allocations:

$    112,400

$ 126,078

$   (1,515)

$  10,441

Operating margin (% of segment external net revenues)

16.8%

39.6%

(1.1%)

13.0%

NINE MONTHS ENDED OCTOBER 1, 2010:

Revenue

$    535,657

$ 243,299

$ 113,839

$  77,793

Operating income before corporate allocations:

$      89,317

$   89,320

$     2,140

$  14,879

Operating margin (% of segment external net revenues)

16.7%

36.7%

1.9%

19.1%

GAAP TO NON-GAAP RECONCILIATION

(Dollars in thousands, except per share data)

(Unaudited)

Three Months Ended

Nine Months Ended

Sep-30,

Oct-1,

Sep-30,

Oct-1,

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:

$ 211,559

50.7%

$ 159,748

50.2%

$ 611,823

50.6%

$ 482,171

49.7%

Restructuring

( A )

47

0.0%

52

0.0%

335

0.0%

150

0.0%

Amortization of purchased intangibles

( B )

10,321

2.5%

6,356

2.0%

23,918

2.0%

17,915

1.8%

Stock-based compensation

( C )

491

0.1%

485

0.2%

1,461

0.1%

1,472

0.2%

Amortization of acquisition-related inventory step-up

( D )

1,354

0.3%

69

0.0%

3,063

0.3%

140

0.0%

Non-GAAP gross margin:

$ 223,772

53.6%

$ 166,710

52.4%

$ 640,600

53.0%

$ 501,848

51.7%

OPERATING EXPENSES:

GAAP operating expenses:

$ 179,111

42.9%

$ 128,078

40.2%

$ 484,133

40.0%

$ 373,825

38.5%

Restructuring

( A )

(647)

-0.2%

(238)

-0.1%

(1,775)

-0.1%

(1,244)

-0.1%

Amortization of purchased intangibles

( B )

(13,786)

-3.3%

(8,078)

-2.5%

(32,829)

-2.7%

(24,250)

-2.5%

Stock-based compensation

( C )

(6,614)

-1.6%

(5,055)

-1.6%

(19,572)

-1.6%

(14,693)

-1.5%

Acquisition costs

( E )

(7,281)

-1.7%

(569)

-0.2%

(12,775)

-1.1%

(3,071)

-0.3%

Non-GAAP operating expenses:

$ 150,783

36.1%

$ 114,138

35.8%

$ 417,182

34.5%

$ 330,567

34.1%

OPERATING INCOME:

GAAP operating income:

$   32,448

7.8%

$   31,670

10.0%

$ 127,690

10.6%

$ 108,346

11.2%

Restructuring

( A )

694

0.2%

290

0.1%

2,110

0.2%

1,394

0.1%

Amortization of purchased intangibles

( B )

24,107

5.8%

14,434

4.5%

56,747

4.7%

42,165

4.3%

Stock-based compensation

( C )

7,105

1.7%

5,540

1.7%

21,033

1.7%

16,165

1.7%

Amortization of acquisition-related inventory step-up

( D )

1,354

0.3%

69

0.0%

3,063

0.2%

140

0.0%

Acquisition costs

( E )

7,281

1.7%

569

0.2%

12,775

1.1%

3,071

0.3%

Non-GAAP operating income:

$   72,989

17.5%

$   52,572

16.5%

$ 223,418

18.5%

$ 171,281

17.6%

NON-OPERATING INCOME (EXPENSE), NET:

GAAP non-operating income (expense), net:

$   (2,563)

$     6,659

$     8,674

$   10,480

Acquisition gains

( E )

(1,220)

(3,022)

(71)

(3,212)

Debt issuance cost write-off

( F )

-

-

377

-

Foreign exchange loss (gain) associated with acquisition

( G )

2,191

-

(3,456)

-

Non-GAAP non-operating income (expense), net:

$   (1,592)

$     3,637

$     5,524

$     7,268

GAAP and

GAAP and

GAAP and

GAAP and

Non-GAAP

Non-GAAP

Non-GAAP

Non-GAAP

Tax Rate %

( J )

Tax Rate %

( J )

Tax Rate %

( J )

Tax Rate %

( J )

INCOME TAX PROVISION:

GAAP income tax provision:

$     2,689

9%

$     5,487

14%

$   16,118

12%

$   51,061

43%

Non-GAAP items tax effected:

( H )

3,738

2,560

10,478

11,949

IRS settlement

( I )

-

0

-

(27,540)

Non-GAAP income tax provision:

$     6,427

9%

$     8,047

14%

$   26,596

12%

$   35,470

20%

NET INCOME:  

GAAP net income attributable to Trimble Navigation Ltd.

$   27,971

$   32,845

$ 121,352

$   67,096

Restructuring

( A )

694

290

2,110

1,394

Amortization of purchased intangibles

( B )

24,107

14,434

56,747

42,165

Stock-based compensation

( C )

7,105

5,540

21,033

16,165

Amortization of acquisition-related inventory step-up

( D )

1,354

69

3,063

140

Acquisition gains

( E )

6,061

(2,453)

12,705

(141)

Debt issuance cost write-off

( F )

-

-

377

-

Foreign exchange loss (gain) associated with acquisition

( G )

2,191

-

(3,456)

-

Non-GAAP tax adjustments

( H ), ( I )

(3,738)

(2,560)

(10,478)

15,591

Non-GAAP net income attributable to Trimble Navigation Ltd.

$   65,745

$   48,165

$ 203,453

$ 142,410

DILUTED NET INCOME PER SHARE:

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

$       0.22

$       0.27

$       0.96

$       0.54

Restructuring

( A )

0.01

-

0.02

0.01

Amortization of purchased intangibles

( B )

0.19

0.12

0.45

0.34

Stock-based compensation

( C )

0.06

0.04

0.17

0.13

Amortization of acquisition-related inventory step-up

( D )

0.01

-

0.02

-

Acquisition gains

( E )

0.05

(0.02)

0.10

-

Debt issuance cost write-off

( F )

-

-

-

-

Foreign exchange loss (gain) associated with acquisition

( G )

0.01

-

(0.03)

-

Non-GAAP tax adjustments

( H ), ( I )

(0.03)

(0.02)

(0.08)

0.13

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

$       0.52

$       0.39

$       1.61

$       1.15

OPERATING LEVERAGE:

Increase in non-GAAP operating income

$   20,416

$   12,575

$   52,137

$   33,003

Increase in revenue

$   99,223

$   48,497

$ 238,307

$ 121,858

Operating leverage (increase in non-GAAP operating

income as a % of increase in revenue)

20.6%

25.9%

21.9%

27.1%

GAAP TO NON-GAAP RECONCILIATION (CONTINUED)

(Dollars in thousands, except per share data)

(Unaudited)

Three Months Ended

Nine Months Ended

Sep-30,

Oct-1,

Sep-30,

Oct-1,

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:

$42,634

17.7%

$36,589

19.3%

$112,400

16.8%

$89,317

16.7%

Stock-based compensation

( K )

2,579

1.1%

1,891

1.0%

7,360

1.1%

5,494

1.0%

Non-GAAP operating income before corporate allocations:

$45,213

18.8%

$38,480

20.3%

$119,760

17.9%

$94,811

17.7%

Field Solutions

GAAP operating income before corporate allocations:

$31,030

34.1%

$21,027

31.3%

$126,078

39.6%

$89,320

36.7%

Stock-based compensation

( K )

559

0.6%

464

0.7%

1,619

0.5%

1,397

0.6%

Non-GAAP operating income before corporate allocations:

$31,589

34.7%

$21,491

32.0%

$127,697

40.1%

$90,717

37.3%

Mobile Solutions

GAAP operating income (loss) before corporate allocations:

$  2,503

4.3%

$     (83)

-0.2%

$   (1,515)

-1.1%

$  2,140

1.9%

Stock-based compensation

( K )

668

1.2%

827

2.2%

2,473

1.8%

2,246

2.0%

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

$  3,171

5.5%

$     744

2.0%

$      958

0.7%

$  4,386

3.9%

Advanced Devices

GAAP operating income before corporate allocations:

$  3,970

14.6%

$  4,073

17.2%

$  10,441

13.0%

$14,879

19.1%

Stock-based compensation

( K )

636

2.4%

450

1.9%

1,955

2.5%

1,350

1.8%

Non-GAAP operating income before corporate allocations:

$  4,606

17.0%

$  4,523

19.1%

$  12,396

15.5%

$16,229

20.9%

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 (expense), net

We believe this measure helps investors evaluate our non-operating income trends. Non-GAAP non-operating income (expense), 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 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, the IRS settlement, 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, the IRS settlement, 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.  

( 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.

( 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 nine months ended September 30, 2011 and October 1, 2010, stock-based compensation was allocated as follows:

Three Months Ended

Nine Months Ended

Sep-30,

Oct-1,

Sep-30,

Oct-1,

(Dollars in thousands)

2011

2010

2011

2010

Cost of sales