Company Quick10K Filing
Quick10K
Trimble
Closing Price ($) Shares Out (MM) Market Cap ($MM)
$42.13 252 $10,600
10-Q 2019-03-29 Quarter: 2019-03-29
10-K 2018-12-28 Annual: 2018-12-28
10-Q 2018-09-28 Quarter: 2018-09-28
10-Q 2018-06-29 Quarter: 2018-06-29
10-Q 2018-03-30 Quarter: 2018-03-30
10-K 2017-12-29 Annual: 2017-12-29
10-Q 2017-09-29 Quarter: 2017-09-29
10-Q 2017-06-30 Quarter: 2017-06-30
10-Q 2017-03-31 Quarter: 2017-03-31
10-K 2016-12-30 Annual: 2016-12-30
10-Q 2016-09-30 Quarter: 2016-09-30
10-Q 2016-07-01 Quarter: 2016-07-01
10-Q 2016-04-01 Quarter: 2016-04-01
10-K 2016-01-01 Annual: 2016-01-01
10-Q 2015-10-02 Quarter: 2015-10-02
10-Q 2015-07-03 Quarter: 2015-07-03
10-Q 2015-04-03 Quarter: 2015-04-03
10-K 2015-01-02 Annual: 2015-01-02
10-Q 2014-10-03 Quarter: 2014-10-03
10-Q 2014-07-04 Quarter: 2014-07-04
10-Q 2014-04-04 Quarter: 2014-04-04
10-K 2014-01-03 Annual: 2014-01-03
8-K 2019-05-07 Shareholder Vote
8-K 2019-05-01 Earnings, Exhibits
8-K 2019-02-06 Earnings, Exhibits
8-K 2018-11-01 Earnings, Exhibits
8-K 2018-10-02 Officers
8-K 2018-08-01 Earnings, Exhibits
8-K 2018-07-02 M&A, Off-BS Arrangement, Regulation FD, Exhibits
8-K 2018-06-15 Enter Agreement, Leave Agreement, Off-BS Arrangement, Exhibits
8-K 2018-06-07 Enter Agreement, Other Events, Exhibits
8-K 2018-06-04 Other Events, Exhibits
8-K 2018-05-15 Enter Agreement, Exhibits
8-K 2018-05-07 Earnings, Exhibits
8-K 2018-05-01 Shareholder Vote
8-K 2018-04-30 Officers
8-K 2018-04-23 Enter Agreement, Earnings, Regulation FD, Other Events, Exhibits
8-K 2018-02-08 Earnings, Exhibits
8-K 2018-02-02 Enter Agreement, M&A, Off-BS Arrangement, Regulation FD, Exhibits
8-K 2018-02-01 Officers
8-K 2018-01-03 Other Events
AVAL Grupo Aval Acciones Y Valores 8,520
DCI Donaldson 6,650
SHOO Steven Madden 2,870
ENOB Enochian Biosciences 221
CELP Cypress Energy Partners 85
SGB Southwest Georgia Financial 52
DYNT Dynatronics 14
BMNY Borrowmoney.com 0
NSHI Northstar Healthcareome 0
COTE Coates 0
TRMB 2019-03-29
Part I - Financial Information
Item 1. Condensed Consolidated Financial Statements
Note 1. Overview and Basis of Presentation
Note 2. Updates To Significant Accounting Policies
Note 3. Stockholders' Equity
Note 4. Business Combinations
Note 5. Inventories
Note 6. Segment Information
Note 7. Debt
Note 8. Leases
Note 9. Fair Value Measurements
Note 10. Deferred Costs To Obtain Customer Contracts
Note 11. Product Warranties
Note 12. Deferred Revenue and Remaining Performance Obligations
Note 13. Earnings per Share
Note 14. Income Taxes
Note 15. Commitments and Contingencies
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosure About Market Risk
Item 4. Controls and Procedures
Part II. Other Information
Item 1. Legal Proceedings
Item 1A. Risk Factors
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Item 4. Mine Safety Disclosures
Item 6. Exhibits
EX-10.1 trimble2002stockplanasamen.htm
EX-10.2 trimbledcpplanamendedandre.htm
EX-31.1 trmb-1stquarter2019xex311.htm
EX-31.2 trmb-1stquarter2019xex312.htm
EX-32.1 trmb-1stquarter2019xex321.htm
EX-32.2 trmb-1stquarter2019xex322.htm

Trimble Earnings 2019-03-29

TRMB 10Q Quarterly Report

Balance SheetIncome StatementCash Flow

10-Q 1 trmb-1stquarter2019x10q.htm 10-Q Document

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
___________________________________ 
FORM 10-Q
___________________________________ 
(Mark One)
ý
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED March 29, 2019
OR
¨
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM             TO             
Commission file number: 001-14845
TRIMBLE INC.
(Exact name of registrant as specified in its charter)
___________________________________ 
Delaware
 
94-2802192
(State or other jurisdiction of
 
(I.R.S. Employer Identification Number)
incorporation or organization)
 
 
935 Stewart Drive, Sunnyvale, CA 94085
(Address of principal executive offices) (Zip Code)
Telephone Number (408) 481-8000
(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  ý    No  ¨
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes  ý    No  ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definition of “large accelerated filer”, “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):
 
 
Large Accelerated Filer
ý
Accelerated Filer
¨
 
 
 
 
 
Non-accelerated Filer
¨ 
Smaller Reporting Company
¨
 
 
 
 
 
 
 
 
Emerging Growth Company
¨

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨    No  ý



Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading Symbol(s)
Name of each exchange on which registered
Common Stock, $0.001 par value per share
TRMB
The Nasdaq Capital Market
As of May 3, 2019, there were 251,625,057 shares of Common Stock, par value $0.001 per share, outstanding.



TRIMBLE INC.
FORM 10-Q for the Quarter Ended March 29, 2019
TABLE OF CONTENTS
 
PART I.
Page
 
 
 
ITEM 1.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
ITEM 2.
 
 
 
ITEM 3.
 
 
 
ITEM 4.
 
 
 
PART II.
 
 
 
 
ITEM 1.
 
 
 
ITEM 1A.
 
 
 
ITEM 2.
 
 
 
ITEM 4.
 
 
 
ITEM 6.
 
 

3


PART I – FINANCIAL INFORMATION

ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
TRIMBLE INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED) 
 
First Quarter of
 
Fiscal Year End
As of
2019
 
2018
(In millions, except par value)
 
 
 
ASSETS
 
 
 
Current assets:
 
 
 
Cash and cash equivalents
$
216.7

 
$
172.5

Accounts receivable, net
525.2

 
512.6

Other receivables
23.8

 
33.2

Inventories
303.7

 
298.0

Other current assets
78.4

 
72.8

Total current assets
1,147.8

 
1,089.1

Property and equipment, net
212.8

 
212.9

Operating lease right-of-use assets
121.1

 

Goodwill
3,540.8

 
3,540.0

Other purchased intangible assets, net
697.5

 
744.3

Deferred costs, non-current
41.3

 
41.3

Other non-current assets
158.8

 
148.8

Total assets
$
5,920.1

 
$
5,776.4

LIABILITIES AND STOCKHOLDERS' EQUITY
 
 
 
Current liabilities:
 
 
 
Short-term debt
$
246.8

 
$
256.2

Accounts payable
147.6

 
147.6

Accrued compensation and benefits
112.1

 
169.2

Deferred revenue
422.9

 
348.4

Accrued warranty expense
14.1

 
15.3

Other current liabilities
146.5

 
118.5

Total current liabilities
1,090.0

 
1,055.2

Long-term debt
1,647.8

 
1,712.3

Deferred revenue, non-current
41.5

 
38.8

Deferred income tax liabilities
74.7

 
73.8

Income taxes payable
75.3

 
71.3

Operating lease liabilities

95.1

 

Other non-current liabilities
152.7

 
150.2

Total liabilities
3,177.1

 
3,101.6

Commitments and contingencies (Note 15)

 

Stockholders' equity:
 
 
 
Preferred stock, $0.001 par value; 3.0 shares authorized; none issued and outstanding

 

Common stock, $0.001 par value; 360.0 shares authorized; 251.5 and 250.9 shares issued and outstanding as of the end of the first quarter of fiscal 2019 and fiscal year end 2018, respectively
0.3

 
0.3

Additional paid-in-capital
1,634.5

 
1,591.9

Retained earnings
1,289.4

 
1,268.3

Accumulated other comprehensive loss
(182.5
)
 
(186.1
)
Total Trimble Inc. stockholders' equity
2,741.7

 
2,674.4

Noncontrolling interests
1.3

 
0.4

Total stockholders' equity
2,743.0

 
2,674.8

Total liabilities and stockholders' equity
$
5,920.1

 
$
5,776.4

See accompanying Notes to the Condensed Consolidated Financial Statements.

4


TRIMBLE INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
 
  
First Quarter of
(In millions, except per share amounts)
2019
 
2018
Revenue:
 
 
 
Product
$
488.4

 
$
497.8

Service
159.2

 
128.8

Subscription
154.0

 
115.6

Total revenue
801.6

 
742.2

Cost of sales:
 
 
 
Product
230.7

 
235.4

Service
64.0

 
59.6

Subscription
44.4

 
27.9

Amortization of purchased intangible assets
24.2

 
23.1

Total cost of sales
363.3

 
346.0

Gross margin
438.3

 
396.2

Operating expense:
 
 
 
Research and development
118.2

 
109.3

Sales and marketing
127.4

 
122.1

General and administrative
82.8

 
81.6

Restructuring charges
3.5

 
1.6

Amortization of purchased intangible assets
20.1

 
17.4

Total operating expense
352.0

 
332.0

Operating income
86.3

 
64.2

Non-operating income (expense), net:
 
 
 
Interest expense, net
(21.9
)
 
(9.5
)
Foreign currency transaction gain (loss), net
(0.9
)
 
3.7

Income from equity method investments, net
8.8

 
4.9

Other income, net
2.9

 
3.4

Total non-operating income (expense), net
(11.1
)
 
2.5

Income before taxes
75.2

 
66.7

Income tax provision
12.8

 
8.0

Net income
62.4

 
58.7

Net gain attributable to noncontrolling interests
0.1

 
0.2

Net income attributable to Trimble Inc.
$
62.3

 
$
58.5

Basic earnings per share
$
0.25

 
$
0.24

Shares used in calculating basic earnings per share
251.5

 
248.8

Diluted earnings per share
$
0.25

 
$
0.23

Shares used in calculating diluted earnings per share
254.0

 
253.2

See accompanying Notes to the Condensed Consolidated Financial Statements.

5


TRIMBLE INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(UNAUDITED)
 
 
First Quarter of
 
 
2019
 
2018
 
(In millions)
 
 
 
 
Net income
$
62.4

 
$
58.7

 
Foreign currency translation adjustments, net of tax
3.4

 
30.3

 
Net unrealized gain, net of tax
0.2

 

 
Comprehensive income
66.0

 
89.0

 
Comprehensive gain attributable to noncontrolling interests
0.1

 
0.2

 
Comprehensive income attributable to Trimble Inc.
$
65.9

 
$
88.8

 
See accompanying Notes to the Condensed Consolidated Financial Statements.

6


TRIMBLE INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(UNAUDITED)
 
Common stock
 
Retained
Earnings
 
Accumulated
Other
Comprehensive
Loss
 
Total
Stockholders’
Equity
 
Noncontrolling
Interest
 
Total
 
Shares
 
Amount
 
Additional Paid-In Capital
 
(In millions)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance at the end of fiscal 2018
250.9

 
$
0.3

 
$
1,591.9

 
$
1,268.3

 
$
(186.1
)
 
$
2,674.4

 
$
0.4

 
$
2,674.8

Net income

 

 

 
62.3

 

 
62.3

 
0.1

 
62.4

Other comprehensive income

 

 

 

 
3.6

 
3.6

 

 
3.6

Comprehensive income
 
 
 
 
 
 
 
 
 
 
65.9

 
 
 
66.0

Issuance of common stock under employee plans, net of tax withholdings
1.6

 

 
33.3

 
(7.7
)
 

 
25.6

 

 
25.6

Stock repurchases
(1.0
)
 

 
(6.5
)
 
(33.5
)
 

 
(40.0
)
 

 
(40.0
)
Stock-based compensation

 

 
16.6

 

 

 
16.6

 

 
16.6

Noncontrolling interest investments

 

 
(0.8
)
 

 

 
(0.8
)
 
0.8

 

Balance at the end of the first quarter of fiscal 2019
251.5

 
$
0.3

 
$
1,634.5

 
$
1,289.4

 
$
(182.5
)
 
$
2,741.7

 
$
1.3

 
$
2,743.0

 
Common stock
 
Retained
Earnings
 
Accumulated
Other
Comprehensive
Loss
 
Total
Stockholders’
Equity
 
Noncontrolling
Interest
 
Total
 
Shares
 
Amount
 
Additional Paid-In Capital
 
(In millions)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance at the end of fiscal 2017
248.9

 
$
0.2

 
$
1,461.1

 
$
1,084.6

 
$
(131.4
)
 
$
2,414.5

 
$

 
$
2,414.5

Net income

 

 

 
58.5

 

 
58.5

 
0.2

 
58.7

Other comprehensive income

 

 

 

 
30.3

 
30.3

 

 
30.3

Comprehensive income
 
 
 
 
 
 
 
 
 
 
88.8

 
 
 
89.0

Issuance of common stock under employee plans, net of tax withholdings
1.1

 

 
25.8

 
3.0

 

 
28.8

 

 
28.8

Stock repurchases
(1.3
)
 

 
(7.5
)
 
(42.5
)
 

 
(50.0
)
 

 
(50.0
)
Stock-based compensation

 

 
17.6

 

 

 
17.6

 

 
17.6

Balance at the end of the first quarter of fiscal 2018
248.7

 
$
0.2

 
$
1,497.0

 
$
1,103.6

 
$
(101.1
)
 
$
2,499.7

 
$
0.2

 
$
2,499.9

See accompanying Notes to the Condensed Consolidated Financial Statements.


7


TRIMBLE INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
 
First Quarter of
(In millions)
2019
 
2018
Cash flow from operating activities:
 
 
 
Net income
$
62.4

 
$
58.7

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
Depreciation expense
10.2

 
8.5

Amortization expense
44.3

 
40.5

Deferred income taxes
1.1

 
(10.8
)
Stock-based compensation
16.3

 
17.4

Income from equity method investments
(4.8
)
 
(0.1
)
Other non-cash items
1.8

 
(11.1
)
(Increase) decrease in assets:
 
 
 
Accounts receivable, net
(13.8
)
 
(29.4
)
Inventories
(6.8
)
 
(21.7
)
Other current and non-current assets
6.1

 
(1.1
)
Increase (decrease) in liabilities:
 
 
 
Accounts payable
3.4

 
11.1

Accrued compensation and benefits
(57.0
)
 
(41.6
)
Deferred revenue
77.1

 
69.6

Other current and non-current liabilities
7.3

 
(7.1
)
Net cash provided by operating activities
147.6

 
82.9

Cash flow from investing activities:
 
 
 
Acquisitions of businesses, net of cash acquired
4.9

 
(518.7
)
Acquisitions of property and equipment
(14.5
)
 
(18.2
)
Purchases of short-term investments

 
(24.0
)
Proceeds from maturities of short-term investments

 
6.2

Proceeds from sales of short-term investments

 
196.8

Other

 
4.4

Net cash used in investing activities
(9.6
)
 
(353.5
)
Cash flow from financing activities:
 
 
 
Issuance of common stock, net of tax withholdings
25.6

 
25.3

Repurchases of common stock
(40.0
)
 
(53.0
)
Proceeds from debt and revolving credit lines
266.9

 
591.0

Payments on debt and revolving credit lines
(339.7
)
 
(383.0
)
Other
(7.1
)
 

Net cash provided by (used in) financing activities
(94.3
)
 
180.3

Effect of exchange rate changes on cash and cash equivalents
0.5

 
6.3

Net increase (decrease) in cash and cash equivalents
44.2

 
(84.0
)
Cash and cash equivalents - beginning of period
172.5

 
358.5

Cash and cash equivalents - end of period
$
216.7

 
$
274.5


See accompanying Notes to the Condensed Consolidated Financial Statements.

8


NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – UNAUDITED
NOTE 1. OVERVIEW AND BASIS OF PRESENTATION
Company and Background
The Company began operations in 1978 and was originally incorporated in California as Trimble Navigation Limited in 1981. On October 1, 2016, Trimble Navigation Limited changed its name to Trimble Inc. ("Trimble" or the "Company") and changed its state of incorporation from the State of California to the State of Delaware. Other than the change in corporate domicile, the reincorporation did not result in any change in the business, physical location, management, assets, liabilities, or total stockholders' equity of the Company, nor did it result in any change in location of the Company's employees, including the Company's management.
Basis of Presentation
The Company has a 52-53 week fiscal year, ending on the Friday nearest to December 31, which for fiscal 2019 is January 3, 2020 and for fiscal 2018 was December 28, 2018. The first quarter of fiscal 2019 and 2018 ended on March 29, 2019 and March 30, 2018, respectively. Fiscal 2019 is 53-week year and 2018 is 52-week year. Unless otherwise stated, all dates refer to the Company’s fiscal year and fiscal periods.
The Condensed Consolidated Financial Statements include the results of the Company and its consolidated subsidiaries. Inter-company accounts and transactions have been eliminated. Noncontrolling interests represent the noncontrolling stockholders’ proportionate share of the net assets and results of operations of the Company’s consolidated subsidiaries.
The unaudited interim Condensed Consolidated Financial Statements and accompanying notes are prepared in accordance with U.S. generally accepted accounting principles ("GAAP"). In the opinion of management, the unaudited interim Condensed Consolidated Financial Statements reflect all adjustments of a normal recurring nature that are necessary for a fair presentation of the results for the interim periods presented. Interim results are not necessarily indicative of results for the full year. The information included in this Form 10-Q should be read in conjunction with information included in Trimble's Form 10-K filed with the U.S. Securities and Exchange Commission on February 21, 2019.
Use of Estimates
The preparation of financial statements in accordance with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in its Condensed Consolidated Financial Statements and accompanying notes. Estimates and assumptions are used for revenue recognition, including determining the nature and timing of satisfaction of performance obligations and determining standalone selling price of performance obligations, allowances for doubtful accounts, sales returns reserve, allowances for inventory valuation, warranty costs, investments, goodwill impairment, intangibles impairment, purchased intangibles, useful lives for tangible and intangible assets, stock-based compensation, and income taxes among others. Management bases its estimates on historical experience and various other assumptions believed to be reasonable. Actual results and outcomes may differ from management's estimates and assumptions.

9


NOTE 2. UPDATES TO SIGNIFICANT ACCOUNTING POLICIES
Summary of Significant Accounting Policies
There have been no material changes to the Company’s significant accounting polices during the first quarter of fiscal 2019 from those disclosed in the Company’s most recent Form 10-K, except for the following changes to our accounting policies as a result of adopting the new lease standard as discussed below:
Recently Adopted Accounting Pronouncements
Leases
In February 2016, the FASB issued a new lease standard that requires a lessee to recognize lease assets and lease liabilities on the balance sheet for most leases and provide enhanced disclosures. The Company adopted the new standard at the beginning of fiscal year 2019 by applying a modified retrospective method without restating comparative periods. Upon adoption, certain practical expedients were used to carry forward existing leases as previously defined and classified. Leases containing both lease and non-lease components are accounted for as part of the overall lease arrangement.
Operating leases with lease terms greater than one year are included in Operating lease right-of-use (“ROU”) assets, Other current liabilities, and Operating lease liabilities on the Company's Condensed Consolidated Balance Sheets. Those ROU assets and liabilities are recognized at the present value of lease payments over the lease terms by utilizing the Company’s incremental borrowing rate.
The standard had a material impact on the Company’s Condensed Consolidated Balance Sheets but did not have an impact on its Condensed Consolidated Income Statements or Statement of Cash Flows. The most significant impact was the recognition of $123.5 million ROU assets and $126.1 million lease liabilities for its operating leases at the adoption date.
Recently issued Accounting Pronouncements not yet adopted
Financial Instruments - Credit Losses
In June 2016, the FASB issued new guidance that requires credit losses on financial assets measured at amortized cost basis to be presented based on the net amount expected to be collected, not based on incurred losses. Further, credit losses on available-for-sale debt securities should be recorded through an allowance for credit losses limited to the amount by which fair value is below amortized cost. The new standard is effective for the Company beginning in fiscal 2020. Early adoption for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018 is permitted. The Company is currently evaluating the effect of the updated standard on its Condensed Consolidated Financial Statements.

Intangibles - Goodwill and Other
In January 2017, the FASB issued new guidance that simplifies the accounting for goodwill impairment by requiring impairment charges to be based on the first step in the current two-step impairment test. The impairment test is performed by comparing the fair value of a reporting unit with its carrying amount, and an impairment charge would be recognized for the amount by which the carrying amount exceeds the reporting unit’s fair value. The new standard is applied on a prospective basis and is effective for the Company beginning in fiscal 2020, and early adoption is permitted. The Company currently anticipates that the adoption will not have a material impact on its Condensed Consolidated Financial Statements.
Intangibles - Internal-Use Software
In August 2018, the FASB issued new guidance that clarifies the accounting for implementation costs incurred in a cloud computing arrangement that is a service contract. This guidance aligns the accounting for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the accounting for implementation costs incurred to develop or obtain internal-use software. The Company is required to adopt the guidance in the first quarter of fiscal year 2020. Early adoption is permitted. The Company is currently evaluating the effect of the new guidance on its Condensed Consolidated Financial Statements.

10


NOTE 3. STOCKHOLDERS’ EQUITY
Stock Repurchase Activities
In November 2017, the Company’s Board of Directors approved a stock repurchase program ("2017 Stock Repurchase Program"), authorizing the Company to repurchase up to $600.0 million of Trimble’s common stock.
Under the share repurchase program, the Company may repurchase shares from time to time in open market transactions, privately negotiated transactions, accelerated share buyback programs, tender offers, or by other means. The timing and amount of repurchase transactions will be determined by the Company’s management based on its evaluation of market conditions, share price, legal requirements, and other factors. The program may be suspended, modified, or discontinued at any time without prior notice.
During the first quarter of fiscal 2019, the Company repurchased approximately 1.0 million shares of common stock in open market purchases, at an average price of $39.59 per share, for a total of $40.0 million under the 2017 Stock Repurchase Program.
Stock repurchases are reflected as a decrease to common stock based on par value and additional-paid-in-capital based on the average book value per share for all outstanding shares, calculated at the time of each individual repurchase transaction. The excess of the purchase price over this average for each repurchase is charged to retained earnings. As a result of the repurchases, retained earnings was reduced by $33.5 million in the first quarter of fiscal 2019. Common stock repurchases under the program were recorded based upon the trade date for accounting purposes. At the end of the first quarter of fiscal 2019, the 2017 Stock Repurchase Program had remaining authorized funds of $312.2 million.
NOTE 4. BUSINESS COMBINATIONS

The Company determined the total consideration paid for each of its acquisitions as well as the fair value of the assets acquired
and liabilities assumed as of the date of acquisition. The excess of purchase consideration over the fair value of net tangible and identifiable intangible assets acquired was recorded as goodwill. The fair value of intangible assets acquired is generally determined based on a discounted cash flow analysis. The preliminary fair values of net tangible assets and intangible assets acquired were based on preliminary valuations and estimates and assumptions are subject to change within the measurement period (up to one year from the acquisition date). The primary areas that remain preliminary relate to the fair values of intangible assets acquired, certain tangible assets and liabilities acquired, income and non-income based taxes, and residual goodwill. The Company expects to continue to obtain information to assist in determining the fair values of the net assets acquired during the measurement period.
Intangible Assets
The following table presents details of the Company’s total intangible assets: 
As of
First Quarter of Fiscal 2019
 
Fiscal Year End 2018
 
Gross
 
 
 
 
 
Gross
 
 
 
 
 
Carrying
 
Accumulated
 
Net Carrying
 
Carrying
 
Accumulated
 
Net Carrying
(In millions)
Amount
 
Amortization
 
Amount
 
Amount
 
Amortization
 
Amount
Developed product technology
$
1,222.0

 
$
(850.7
)
 
$
371.3

 
$
1,220.3

 
$
(825.3
)
 
$
395.0

Trade names and trademarks
72.9

 
(54.7
)
 
18.2

 
72.9

 
(53.3
)
 
19.6

Customer relationships
715.6

 
(422.7
)
 
292.9

 
715.1

 
(406.5
)
 
308.6

Distribution rights and other intellectual property
78.4

 
(63.3
)
 
15.1

 
84.4

 
(63.3
)
 
21.1

 
$
2,088.9

 
$
(1,391.4
)
 
$
697.5

 
$
2,092.7

 
$
(1,348.4
)
 
$
744.3


The estimated future amortization expense of purchased intangible assets as of the end of the first quarter of fiscal 2019 was as follows:
(In millions)
 
2019 (Remaining)
$
121.0

2020
139.7

2021
118.3

2022
99.2

2023
85.6

Thereafter
133.7

Total
$
697.5

Goodwill
The changes in the carrying amount of goodwill by segment for the first quarter of fiscal 2019 were as follows: 
 
Buildings and Infrastructure
 
Geospatial
 
Resources and Utilities
 
Transportation
 
Total
(In millions)
 
 
 
 
 
 
 
 
 
Balance as of fiscal year end 2018
$
1,970.2

 
$
403.1

 
$
305.7

 
$
861.0

 
$
3,540.0

Purchase price adjustments- prior years' acquisitions
(0.3
)
 

 

 
(0.4
)
 
(0.7
)
Foreign currency translation adjustments
3.4

 
(1.6
)
 
(0.5
)
 
0.2

 
1.5

Balance as of the end of the first quarter of fiscal 2019
$
1,973.3

 
$
401.5

 
$
305.2

 
$
860.8

 
$
3,540.8

Viewpoint and e-Builder acquisitions
On July 2, 2018, the Company acquired all of the outstanding shares of Viewpoint in an all-cash transaction valued at $1,211.3 million. Viewpoint is a provider of construction management software, which integrates a contractor’s financial and resource management to their project operations in the field. The integration across the office, team, and field workflows enables contractors to employ Viewpoint to effectively manage and gain visibility over data and workflows that span the construction lifecycle from pre-production planning, to product operations and supply chain management, through project hand over, and asset operation and maintenance.
On February 2, 2018, the Company completed the acquisition of e-Builder in an all-cash transaction valued at $485.5 million. e-Builder is a SaaS-based construction program management solution for capital program owners and program management firms that provides an integrated project delivery solution for owners, program managers, and contractors across the design, construct, and operate lifecycle.
Viewpoint and e-Builder’s results of operations have been included in the Company’s Condensed Consolidated Statements of Income since their respective acquisition dates and for the first quarter of fiscal 2019. Both Viewpoint and e-Builder's performance are reported under the Buildings and Infrastructure segment.
The two acquisitions were funded through the use of approximately $211.2 million of the Company’s existing cash, with the remainder funded through the issuance of senior notes and the Company’s 2018 Credit Facilities (as defined in Note 7).
The following table summarizes the consideration transferred to acquire Viewpoint and e-Builder, the assets acquired, and liabilities assumed, and the estimated useful lives of the identifiable intangible assets as of the dates of the acquisitions:
 
 
 
 
 
 
 
 
 
(In millions)
Viewpoint
 
 
 
e-Builder
 
 
 
Total purchase consideration
$
1,211.3

 
 
 
$
485.5

 
 
 
Net tangible assets acquired
(0.4
)
 
 
 
2.0

 
 
 
Intangible assets acquired:
 
 
Estimated Useful Life
 
 
 
Estimated Useful Life
 
Developed product technology
225.4

 
6 years
 
60.5

 
7 years
 
In-Process Research & Development
12.9

 
n/a
 

 
 
 
Order backlog

 
 
 
1.7

 
6 months
 
Customer relationships
158.6

 
10 years
 
42.4

 
10 years
 
Trade name
8.9

 
5 years
 
4.8

 
7 years
 
Favorable Lease
4.3

 
4 - 9 years
 

 
 
 
Subtotal
410.1

 
 
 
109.4

 
 
 
Deferred tax liability
(61.2
)
 
 
 
(18.2
)
 
 
 
Less fair value of all assets/liabilities acquired
348.5

 
 
 
93.2

 
 
 
Goodwill
$
862.8

 
 
 
$
392.3

 
 
 
$52.6 million
Goodwill consisted of highly skilled and valuable assembled workforce, a proven ability to generate new products and services to drive future revenue, and a premium paid by the Company for synergies unique to its business. As of the first quarter of fiscal 2019, goodwill of $95.8 million for Viewpoint is expected to be deductible for tax purposes.
The following table presents supplemental pro forma results of operations of the Company, Viewpoint, and e-Builder, as if the companies had been combined as of the beginning of the earliest period presented. The unaudited pro forma results of operations are not necessarily indicative of results that would have occurred had the acquisitions taken place on the first day of fiscal 2018, or of future results. Included in the pro forma results are fair value adjustments based on the fair values of assets acquired and liabilities assumed as of the applicable acquisition dates. For the first quarter of fiscal 2018, the major impacts for the pro forma results include amortization of intangible assets related to the acquisitions, impacts from adoption of Revenue from Contracts with Customers, interest expense for debt used to purchase Viewpoint and e-Builder, income tax effects, and other adjustments to reflect fair value. The pro forma information for the first quarter of fiscal 2018 is as follows:
 
First Quarter of
Fiscal Period
2018
(in millions, except per share data)
 
Revenue
$
793.8

Net income attributable to Trimble Inc.
57.7

Basic earnings per share
0.23

Diluted earnings per share
0.23


11


NOTE 5. INVENTORIES
Inventories consisted of the following: 
 
First Quarter of
 
Fiscal Year End
As of
2019
 
2018
(In millions)
 
 
 
Raw materials
$
104.3

 
$
96.2

Work-in-process
12.6

 
12.6

Finished goods
186.8

 
189.2

Total inventories
$
303.7

 
$
298.0

NOTE 6. SEGMENT INFORMATION

The Company's operating segments were determined based on how the Company's chief operating decision maker views and evaluates operations. The Company’s reportable segments are described below:

Buildings and Infrastructure: This segment primarily serves customers working in architecture, engineering, construction, and operations and maintenance.
Geospatial: This segment primarily serves customers working in surveying, engineering, government, and land management.
Resources and Utilities: This segment primarily serves customers working in agriculture, forestry, and utilities.
Transportation: This segment primarily serves customers working in long haul trucking, field service management, rail, and military aviation.

The following Reporting Segment tables reflect the results of the Company’s reportable operating segments under its management reporting system. These results are not necessarily in conformity with U.S. GAAP. The Company presents segment revenue and income excluding the effects of certain acquired deferred revenue that was written down to fair value in purchase accounting. Segment income presented also excludes the effects of certain acquired capitalized commissions that were eliminated in purchase accounting, along with other adjustments that have historically been excluded in prior periods, as though the acquired companies operated independently in the periods presented. This is consistent with the way the chief operating decision maker evaluates each of the segment's performance and allocates resources. Comparative period financial information by reportable segment has been recast to conform with the current presentation.

 
Reporting Segments
 
Buildings and Infrastructure
 
Geospatial
 
Resources and Utilities
 
Transportation
 
Total
(In millions)
 
 
 
 
 
 
 
 
 
First Quarter of Fiscal 2019
 
 
 
 
 
 
 
 
 
Revenue
$
292.0

 
$
161.2

 
$
159.3

 
$
189.1

 
$
801.6

Acquired deferred revenue adjustment
2.7

 

 
0.2

 

 
2.9

Segment revenue
$
294.7

 
$
161.2

 
$
159.5

 
$
189.1

 
$
804.5

 
 
 
 
 
 
 
 
 
 
Operating income
$
61.4

 
$
29.4

 
$
51.0

 
$
31.2

 
$
173.0

Acquired deferred revenue adjustment
2.7

 

 
0.2

 

 
2.9

Amortization of acquired capitalized commissions
(1.6
)
 

 
(0.1
)
 

 
(1.7
)
Segment operating income
$
62.5

 
$
29.4

 
$
51.1

 
$
31.2

 
$
174.2

 
 
 
 
 
 
 
 
 
 
  Depreciation expense
$
2.1

 
$
1.6

 
$
1.1

 
$
1.1

 
$
5.9

 
 
 
 
 
 
 
 
 
 
First Quarter of Fiscal 2018
 
 
 
 
 
 
 
 
 
Revenue
$
224.7

 
$
174.5

 
$
159.2

 
$
183.8

 
$
742.2

Acquired deferred revenue adjustment
2.5

 

 
0.3

 
0.1

 
2.9

Segment revenue
$
227.2

 
$
174.5

 
$
159.5

 
$
183.9

 
$
745.1

 
 
 
 
 
 
 
 
 
 
Operating income
$
43.5

 
$
37.3

 
$
51.7

 
$
30.4

 
$
162.9

Acquired deferred revenue adjustment
2.5

 

 
0.3

 
0.1

 
2.9

Amortization of acquired capitalized commissions
(0.4
)
 

 
(0.1
)
 

 
(0.5
)
Segment operating income
$
45.6

 
$
37.3

 
$
51.9

 
$
30.5

 
$
165.3

 
 
 
 
 
 
 
 
 
 
     Depreciation expense
$
1.4

 
$
1.4

 
$
1.0

 
$
1.1

 
$
4.9

 
Reporting Segments
 
Buildings and Infrastructure
 
Geospatial
 
Resources and Utilities
 
Transportation
 
Total
(In millions)
 
 
 
 
 
 
 
 
 
As of the First Quarter of Fiscal 2019
 
 
 
 
 
 
 
 
 
Accounts receivable, net
$
186.2

 
$
111.3

 
$
101.7

 
$
126.0

 
$
525.2

Inventories
64.7

 
136.7

 
43.9

 
58.4

 
303.7

Goodwill
1,973.3

 
401.5

 
305.2

 
860.8

 
3,540.8

As of Fiscal Year End 2018
 
 
 
 
 
 
 
 
 
Accounts receivable, net
177.5

 
118.7

 
83.8

 
132.6

 
512.6

Inventories
70.3

 
133.5

 
46.2

 
48.0

 
298.0

Goodwill
$
1,970.2

 
$
403.1

 
$
305.7

 
$
861.0

 
$
3,540.0

A reconciliation of the Company’s consolidated segment operating income to consolidated income before income taxes is as follows: 
 
First Quarter of
 
2019
 
2018
(In millions)
 
 
 
Consolidated segment operating income
$
174.2

 
$
165.3

Unallocated corporate expense
(21.3
)
 
(23.4
)
Restructuring charges
(3.7
)
 
(1.4
)
Acquired deferred revenue adjustment
(2.9
)
 
(2.9
)
Amortization of purchased intangible assets
(44.3
)
 
(40.5
)
Stock-based compensation
(16.3
)
 
(17.4
)
Amortization of acquired capitalized commissions
1.7

 
0.5

Acquisition / divestiture items
(1.1
)
 
(16.0
)
Consolidated operating income
86.3

 
64.2

Non-operating income (expense), net:
(11.1
)
 
2.5

Consolidated income before taxes
$
75.2

 
$
66.7


On a total Company basis, the disaggregation of revenue by geography is summarized in the tables below. Revenue is defined as revenue from external customers attributed to countries based on the location of the customer and excludes the effects of certain acquired deferred revenue that was written down to fair value in purchase accounting, consistent with the Reporting Segment tables above.
 
Reporting Segments
 
Buildings and Infrastructure
 
Geospatial
 
Resources and Utilities
 
Transportation
 
Total
(In millions)
 
 
 
 
 
 
 
 
 
First Quarter of Fiscal 2019
 
 
 
 
 
 
 
 
 
North America
$
165.6

 
$
62.9

 
$
41.9

 
$
152.0

 
$
422.4

Europe
83.9

 
54.7

 
88.9

 
21.1

 
248.6

Asia Pacific
38.5

 
31.7

 
12.7

 
10.5

 
93.4

Rest of World
6.7

 
11.9

 
16.0

 
5.5

 
40.1

Total consolidated revenue
$
294.7

 
$
161.2

 
$
159.5

 
$
189.1

 
$
804.5

First Quarter of Fiscal 2018
 
 
 
 
 
 
 
 
 
North America
$
115.9

 
$
69.4

 
$
48.4

 
$
151.2

 
$
384.9

Europe
75.6

 
49.6

 
80.2

 
21.4

 
226.8

Asia Pacific
29.2

 
43.3

 
11.2

 
10.8

 
94.5

Rest of World
6.5

 
12.2

 
19.7

 
0.5

 
38.9

Total consolidated revenue
$
227.2

 
$
174.5

 
$
159.5

 
$
183.9

 
$
745.1


12


NOTE 7. DEBT
Debt consisted of the following:
 
As of
 
 
 
First Quarter of
 
Fiscal Year End
Instrument
 
Date of Issuance
 
2019
 
2018
(In millions)
 
 
 
Effective Interest Rate
Amount
 
Amount
Senior Notes:
 
 
 
 
 
 
 
   2023 Senior Notes, 4.15%, due June 2023
 
June 2018
 
4.36%
$
300.0

 
$
300.0

   2028 Senior Notes, 4.90%, due June 2028
 
June 2018
 
5.04%
600.0

 
600.0

   2024 Senior Notes, 4.75%, due December 2024
 
November 2014
 
4.95%
400.0

 
400.0

Credit Facilities:
 
 
 
 
 
 
 
    2018 Credit Facility, floating rate:
 
 
 
 
 
 
 
        Term Loan, due May 2021
 
May 2018
 
3.98%
350.0

 
425.0

        Revolving Credit Facility
 
 
 
4.19%
10.0

 

    Uncommitted facilities, floating rate
 
 
 
2.12%
246.7

 
255.9

Promissory notes and other debt
 
 
 
 
0.5

 
1.0

Unamortized discount and issuance costs
 
 
 
 
(12.6
)
 
(13.4
)
Total debt
 
 
 
 
1,894.6

 
1,968.5

Less: Short-term debt
 
 
 
 
246.8

 
256.2

Long-term debt
 
 
 
 
$
1,647.8

 
$
1,712.3


Each of the Company's debt agreements requires it to maintain compliance with certain debt covenants. The Company was in compliance with all its debt covenants at the end of the first quarter of fiscal 2019.
Debt Maturities
At the end of the first quarter of fiscal 2019, the Company's debt maturities based on outstanding principal were as follows (in millions):
Year Payable
 
2019 (Remaining)
$
246.8

2020
0.3

2021
350.0

2022

2023
310.0

Thereafter
1,000.0

Total
$
1,907.1

Senior Notes         
All series of Senior Notes in the above table bear interest that is payable semi-annually in June and December of each year. For the 2023 and 2028 Senior Notes, the interest rate is subject to adjustment from time to time if Moody’s or S&P (or, if applicable, a substitute rating agency) downgrades (or subsequently upgrades) its rating assigned to the notes.
Senior Notes are unsecured and rank equally in right of payment with all of the Company's other senior unsecured indebtedness. The Company may redeem the notes of each series of Senior Notes at its option in whole or in part at any time. Such indenture also contains covenants limiting the Company’s ability to create certain liens, enter into sale and lease-back transactions, and consolidate or merge with or into, or convey, transfer or lease all or substantially all of the Company’s properties and assets, each subject to certain exceptions.

13


2018 Credit facilities
The Credit Facility in the above table provides for unsecured credit facilities in the aggregate principal amount of $1.75 billion, which is comprised of $1.25 billion revolving credit facility maturing May 2023 and $500.0 million delayed draw term loan facility that matures on the third anniversary of the funding date. The Company may request an additional loan facility up to $500.0 million.
Uncommitted Facilities
The Company has two $75.0 million and one €100.0 million revolving credit facilities, which are uncommitted (the "Uncommitted Facilities") at the end of the first quarter of fiscal 2019.
For further information, refer to Note 7 of the Notes to the Consolidated Financial Statements included in the Company's Annual Report on Form 10-K for fiscal year 2018.
NOTE 8. LEASES
The Company has operating leases primarily for certain of its major facilities, including corporate offices, research and development facilities, and manufacturing facilities. The leases have remaining lease terms generally ranging from 1 to 8 years, some that include options to extend the lease for up to 10 years. The Company considers options to extend the lease in determining the lease term.
Operating lease expense for the first quarter of fiscal 2019 and 2018 was $14.4 million and $10.3 million, respectively. For the first quarter of fiscal 2019, $2.7 million of the lease expense was related to leases with terms of one year or less that are not recognized on the Company’s Condensed Consolidated Balance Sheets.
Supplemental cash flow information related to leases was as follows:
 
First Quarter of
As of
2019
(In millions)
 
Cash paid for liabilities included in the measurement of lease liabilities:
 
   Operating cash flows from operating leases
$
9.5

 
 
Right-of-use assets obtained in exchange for Operating lease liabilities:
$
7.2

Supplemental balance sheet information related to leases was as follows:
 
First Quarter of
As of
2019
(In millions)
 
 
 
Operating lease right-of-use assets
$
121.1

 
 
Other current liabilities
$
28.3

Operating lease liabilities
95.1

  Total operating lease liabilities
$
123.4

 
 
Weighted-average discount rate
4.3
%
Weighted-average remaining lease term
5 years


14


At the end of the first quarter of fiscal 2019, the Company's maturities of lease liabilities were as follows (in millions):
Year Payable
 
2019 (Remaining)
$
24.9

2020
30.3

2021
24.9

2022
20.1

2023
15.3

Thereafter
22.4

Total lease payments
$
137.9

Less imputed interest
$
14.5

Total
$
123.4

NOTE 9. FAIR VALUE MEASUREMENTS
The Company determines fair value based on the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants at the measurement date. Hierarchical levels are directly related to the amount of subjectivity associated with the inputs to fair valuation of these assets and liabilities and are as follows:
Level I—Observable inputs such as unadjusted, quoted prices in active markets for identical assets or liabilities.
Level II—Inputs (other than quoted prices included in Level I) are either directly or indirectly observable for the asset or liability. These include quoted prices for similar assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are not active.
Level III—Unobservable inputs that reflect management’s best estimate of what market participants would use in pricing the asset or liability at the measurement date. Consideration is given to the risk inherent in the valuation technique and the risk inherent in the inputs to the model.
Fair Value on a Recurring Basis
The fair value of assets and liabilities measured and recorded at fair value on a recurring basis at the end of period were as follows:
 
Fair Values as of the end of the First Quarter of Fiscal 2019
 
Fair Values as of Fiscal Year End 2018
(In millions)
Level I
 
Level II
 
Level III
 
Total
 
Level I
 
Level II
 
Level III
 
Total
Assets
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Deferred compensation plan assets (1)
$
33.9

 
$

 
$

 
$
33.9

 
$
28.5

 
$

 
$

 
$
28.5

Derivatives assets (2)

 
0.5

 

 
0.5

 

 
0.4

 

 
0.4

Total assets measured at fair value
$
33.9

 
$
0.5

 
$

 
$
34.4

 
$
28.5

 
$
0.4

 
$


$
28.9

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Liabilities
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Deferred compensation plan liabilities (1)
33.9

 

 

 
33.9

 
$
28.5

 
$

 
$

 
$
28.5

Derivatives liabilities (2)

 
0.4

 

 
0.4

 

 

 

 

Contingent consideration liabilities (3)

 

 
5.3

 
5.3

 

 

 
5.6

 
5.6

Total liabilities measured at fair value
$
33.9

 
$
0.4

 
$
5.3

 
$
39.6

 
$
28.5

 
$

 
$
5.6

 
$
34.1

(1)
The Company maintains a self-directed, non-qualified deferred compensation plan for certain executives and other highly compensated employees. The plan assets and liabilities are invested in actively traded mutual funds and individual stocks valued using observable quoted prices in active markets.
(2)
Derivative assets and liabilities primarily represent forward currency exchange contracts to minimize the short-term impact of foreign currency exchange rates on certain trade and inter-company receivables and payables.

15


(3)
Contingent consideration liabilities represent arrangements to pay the former owners of certain companies that Trimble acquired. The fair values are estimated using scenario-based methods or option pricing methods based upon estimated future revenues, gross margins or other milestones.
Additional Fair Value Information
The total estimated fair value of all outstanding financial instruments that are not recorded at fair value on a recurring basis (debt) was approximately $1.9 billion and $2.0 billion for the first quarter of 2019 and fiscal year end 2018, respectively, consistent with the carrying values.
The fair value of the Senior Notes was determined based on observable market prices in less active markets and is categorized accordingly as Level II in the fair value hierarchy. The fair value of the bank borrowings and promissory notes has been calculated using an estimate of the interest rate the Company would have had to pay on the issuance of notes with a similar maturity and by discounting the cash flows at that rate and is categorized as Level II in the fair value hierarchy. The fair values do not give an indication of the amount that the Company would currently have to pay to extinguish any of this debt.
NOTE 10. DEFERRED COSTS TO OBTAIN CUSTOMER CONTRACTS
The Company classifies all deferred costs to obtain customer contracts, which consists of deferred commissions, as a non-current asset included in Deferred Costs, non-current on the Company’s Condensed Consolidated Balance Sheets. At the end of the first quarter of fiscal 2019 and fiscal year end 2018, the Company had $41.3 million of deferred costs to obtain customer contracts.
Amortization expense related to deferred costs to obtain customer contracts for the first quarter of fiscal 2019 and 2018 was $5.6 million and $5.4 million, respectively. This expense was included in Sales and marketing expenses in the Company’s Condensed Consolidated Statements of Income. There was no impairment loss related to the deferred commissions for either period presented.
NOTE 11. PRODUCT WARRANTIES
The Company accrues for warranty costs as part of its cost of sales based on associated material product costs, technical support, labor costs, and costs incurred by third parties performing work on the Company’s behalf. The Company’s expected future costs are primarily estimated based upon historical trends in the volume of product returns within the warranty period and the costs to repair or replace the equipment. When products sold include warranty provisions, they are covered by a warranty for periods ranging generally from one year to two years.
While the Company engages in extensive product quality programs and processes, including actively monitoring and evaluating the quality of component suppliers, its warranty obligation is affected by product failure rates, material usage, and service delivery costs incurred in correcting a product failure. Should actual product failure rates, material usage or service delivery costs differ from the estimates, revisions to the estimated warranty accrual and related costs may be required.
Changes in the Company’s product warranty liability during the first quarter of fiscal 2019 are as follows: 
(In millions)
 
Balance as of fiscal year end 2018
$
15.3

Accruals for warranties issued
3.4

Changes in estimates
0.3

Warranty settlements (in cash or in kind)
(4.9
)
Balance as of the end of the first quarter of fiscal 2019
$
14.1


16


NOTE 12. DEFERRED REVENUE AND REMAINING PERFORMANCE OBLIGATIONS
Deferred Revenue
Changes in the Company’s deferred revenue during the first quarter of fiscal 2019 and 2018 were as follows: 
  
First Quarter of
(In millions)
2019
 
2018
Beginning balance of the period
$
387.3

 
$
276.6

Revenue recognized
(138.4
)
 
(98.0
)
Acquired deferred revenue

 
22.3

Net deferred revenue activity
215.5

 
159.5

Ending balance of the period
$
464.4

 
$
360.4

Remaining Performance Obligations
As of the end of the first quarter of fiscal 2019, approximately $1.1 billion of revenue is expected to be recognized from remaining performance obligations for which goods or services have not been delivered, primarily subscription and software maintenance, and to a lesser extent, hardware and professional services contracts. The Company expects to recognize revenue of approximately 72% and 17% on these remaining performance obligations over the next 12 and 24 months, respectively, with the remainder recognized thereafter.
NOTE 13. EARNINGS PER SHARE
Basic earnings per share is computed by dividing Net income attributable to Trimble Inc. by the weighted-average number of shares of common stock outstanding during the period. Diluted earnings per share is computed by dividing Net income attributable to Trimble Inc. by the weighted-average number of shares of common stock outstanding during the period increased to include the number of additional shares of common stock that would have been outstanding if the potentially dilutive securities had been issued. Potentially dilutive securities include outstanding stock options, shares to be purchased under the Company’s employee stock purchase plan, restricted stock units, and contingently issuable shares.
The following table shows the computation of basic and diluted earnings per share:
 
First Quarter of
 
2019
 
2018
(In millions, except per share amounts)
 
 
 
Numerator:
 
 
 
Net income attributable to Trimble Inc.
$
62.3

 
$
58.5

Denominator:
 
 
 
Weighted average number of common shares used in basic earnings per share
251.5

 
248.8

Effect of dilutive securities
2.5

 
4.4

Weighted average number of common shares and dilutive potential common shares used in diluted earnings per share
254.0

 
253.2

Basic earnings per share
$
0.25

 
$
0.24

Diluted earnings per share
$
0.25

 
$
0.23

For the first quarter of fiscal 2019 and 2018, the Company excluded insignificant shares of outstanding stock options from the calculation of diluted earnings per share because their effect would have been antidilutive.
NOTE 14. INCOME TAXES
For the first quarter of fiscal 2019, the Company’s effective income tax rate, after including discrete items, was 17%, as compared to 12% in the corresponding period in fiscal 2018, primarily due to a one-time tax benefit from foreign deferred tax adjustments in the first quarter of fiscal 2018.

17


The Company's effective tax rate is lower than the U.S. federal statutory rate of 21% primarily due to favorable tax rates associated with certain earnings from operations in lower-tax jurisdictions, a benefit from U.S. federal R&D credit, and stock-based compensation deductions.
The Company and its subsidiaries are subject to U.S. federal and state and foreign income tax. The Company is currently in different stages of multiple year examinations by the Internal Revenue Service (the "IRS") as well as various state and foreign taxing authorities. In addition, as discussed below, the Company has a pending matter in U.S. tax court regarding fiscal 2011. The Company believes its reserves are more likely than not to be adequate to cover final resolution of all open tax matters.
In the first quarter of fiscal 2018, the Company received a formal Notice of Deficiency from the IRS for fiscal year 2011, assessing tax and penalties totaling $51.2 million. The Company does not agree with the IRS position. Accordingly, on June 1, 2018, the Company filed a petition with the U.S. tax court relating to the Notice of Deficiency. On August 3, 2018, the IRS filed its response to the Company’s petition, with no changes to its position. In April 2019, the tax court issued an order for the case to begin on or after May 1, 2020.
Although timing of the resolution and/or closure of audits is not certain, the Company does not believe that its gross unrecognized tax benefits would materially change in the next twelve months.
Unrecognized tax benefits of $62.8 million and $60.5 million as of the end of the first quarter of fiscal 2019 and fiscal year end 2018, respectively, if recognized, would favorably affect the effective income tax rate in future periods. Unrecognized tax benefits are recorded in Other non-current liabilities and in the deferred tax accounts in the accompanying Condensed Consolidated Balance Sheets.
The Company's practice is to recognize interest and/or penalties related to income tax matters in income tax expense.  As of the end of the first quarter of fiscal 2019 and fiscal year end 2018, the Company had accrued $12.0 million and $11.0 million, respectively, for interest and penalties, which are recorded in Other non-current liabilities in the accompanying Condensed Consolidated Balance Sheets.
NOTE 15. COMMITMENTS AND CONTINGENCIES
Commitments
As of the end of the first quarter of fiscal 2019, the Company had unconditional purchase obligations of approximately $258.3 million. These unconditional purchase obligations primarily represent open non-cancelable purchase orders for material purchases with the Company’s vendors. Purchase obligations exclude agreements that are cancelable without penalty.
Litigation
From time to time, the Company is also involved in litigation arising out of the ordinary course of its business. There are no material legal proceedings, other than ordinary routine litigation incidental to the business, to which the Company or any of its subsidiaries is a party or of which any of the Company's or its subsidiaries' property is subject.


18


SPECIAL NOTE ON FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, which are subject to the “safe harbor” created by those sections. These statements include, among other things:
the portion of our revenue expected to come from sales to customers located in countries outside of the U.S.;
seasonal fluctuations in our construction equipment revenues, sales to U.S. governmental agencies, agricultural equipment business revenues, global macroeconomic conditions, and expectations that we may experience less seasonality in the future;
our plans to continue to invest in research and development to actively develop and introduce new products and to deliver targeted solutions to the markets we serve;
a continued shift in revenue towards a more significant mix of software, recurring revenue, and services;
our belief that increases in recurring revenue from our software and subscription solutions will provide us with enhanced business visibility over time;
our belief that our cash and cash equivalents, together with borrowings under the commitments for our credit facilities and senior notes, will be sufficient to meet our anticipated operating cash needs, debt service, and planned capital expenditures for at least the next twelve months;
any anticipated benefits to us from the acquisitions of e-Builder and Viewpoint and our ability to successfully integrate e-Builder and Viewpoint businesses;
fluctuations in interest rates and foreign currency exchange rates;
our belief that our gross unrecognized tax benefits will materially change in the next twelve months; and
our growth strategy, including our focus on historically underserved large markets, the relative importance of organic growth versus strategic acquisitions, and the reasons that we acquire businesses.

The forward-looking statements regarding future events and the future results of Trimble Inc. ("Trimble" or "the Company" or "we" or "our" or "us") are based on current expectations, estimates, forecasts, and projections about the industries in which Trimble operates and the beliefs and assumptions of the management of Trimble.  Discussions containing such forward-looking statements may be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” below. In some cases, forward-looking statements can be identified by terminology such as "may, " "will, " "should, " "could, " "predicts, " "potential, " "continue, " "expects, " "anticipates, " "future, " "intends, " "plans, " "believes, " "estimates, " and similar expressions. These forward-looking statements involve certain risks and uncertainties that could cause actual results, levels of activity, performance, achievements, and events to differ materially from those implied by such forward-looking statements, including but not limited to those discussed in "Risk Factors" below and elsewhere in this report, as well as in the Company’s Annual Report on Form 10-K for fiscal year 2018 and in other reports Trimble files with the Securities and Exchange Commission, each as it may be amended from time to time. These forward-looking statements are made as of the date of this Quarterly Report on Form 10-Q. We reserve the right to update these forward-looking statements for any reason, including the occurrence of material events, but assume no duty to update these statements to reflect subsequent events.
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
Management's Discussion and Analysis of Financial Condition and Results of Operations is based on our Condensed Consolidated Financial Statements. The preparation of financial statements and related disclosures in conformity with U.S. generally accepted accounting principles requires us to make judgments, assumptions, and estimates that affect the amounts reported in the Condensed Consolidated Financial Statements and accompanying Notes. Management bases its estimates on historical experience and various other assumptions believed to be reasonable. Although these estimates are based on management’s best knowledge of current events and actions that may impact the company in the future, actual results may be different from the estimates. Management believes that, except for the adoption of the new lease standard as discussed in Note 2 of the Notes to the Condensed Consolidated Financial Statements, there have been no significant changes during the first quarter of fiscal 2019 to the items that we disclosed as our critical accounting policies and estimates in the Management's Discussion and Analysis of Financial Condition and Results of Operations in our 2018 Annual Report on Form 10-K.
RECENT ACCOUNTING PRONOUNCEMENTS
For a summary of recent accounting pronouncements applicable to our Consolidated Financial Statements, see Note 2 of the Notes to our Condensed Consolidated Financial Statements in Item 1, which is incorporated herein by reference.

19


EXECUTIVE LEVEL OVERVIEW
Trimble began operations in 1978 and was originally incorporated in California as Trimble Navigation Limited in 1981. On October 1, 2016, Trimble Navigation Limited changed its name to Trimble Inc. and changed its state of incorporation from the State of California to the State of Delaware.
Trimble is a leading provider of technology solutions that optimize the work processes of office and mobile field professionals around the world. Our comprehensive work process solutions are used across a range of industries including agriculture, architecture, civil engineering, construction, government, natural resources, transportation, and utilities. Representative Trimble customers include engineering and construction firms, contractors, surveying companies, farmers and agricultural companies, long haul trucking companies, energy, utility companies, and state, federal, and municipal governments.
Trimble focuses on integrating its broad technological and application capabilities to create vertically-focused, system-level solutions that transform how work is done within the industries we serve. The integration of sensors, software, connectivity, and information in our portfolio gives us the unique ability to provide an information model specific to the customer’s workflow. For example, in construction, our strategy is centered on the concept of a “constructible model” that is at the center of our “Connected Construction” solutions, which provide real-time, connected, and cohesive information environments for the design, build, and operational phases of construction projects. In agriculture, we continue to develop “Connected Farm” solutions to optimize operations across the agriculture workflow. In long haul trucking, our “Connected Fleet” solutions provide transportation companies with tools to enhance fuel efficiency, safety, and transparency through connected vehicles and fleets across the enterprise.
Our growth strategy is centered on multiple elements:
Focus on attractive markets with significant growth and profitability potential - We focus on large markets historically underserved by technology that offer significant potential for long-term revenue growth, profitability, and market leadership. Our core industries such as construction, agriculture, and transportation markets are each multi-trillion dollar global industries that operate in increasingly demanding environments with technology adoption in the early phases relative to other industries. With the emergence of mobile computing capabilities, the increasing technological know-how of end users, and the compelling return on investment to our customers, we believe many of our markets are attractive for substituting Trimble’s technology and solutions in place of traditional operating methods.
Domain knowledge and technological innovation that benefit a diverse customer base - We have redefined our technological focus from hardware-driven point solutions to integrated work process solutions by developing domain expertise and heavily reinvesting in R&D and acquisitions. We have been spending approximately 15% of revenue over the past two years on R&D and currently have over 1,200 unique patents. We intend to continue to take advantage of our technology portfolio and deep domain knowledge to quickly and cost-effectively deliver specific, targeted solutions to each of the vertical markets we serve. We look for opportunities where the opportunity for technological change is high and that have a requirement for the integration of multiple technologies into complete vertical solutions.
Increasing focus on software and subscription offerings - Software and subscription services are increasingly important elements of our solutions and are core to our growth strategy. Trimble has an open application programming interface philosophy and open vendor environment, which leads to increased adoption of our software and subscription offerings. We believe that increased recurring revenue from these solutions will provide us with enhanced business visibility over time. Professional services constitute an additional growth channel that helps our customers integrate and optimize the use of our offerings in their environment.
Geographic expansion with localization strategy - We view international expansion as an important element of our strategy, and we continue to position ourselves in geographic markets that will serve as important sources of future growth. We currently have a physical presence in over 40 countries and distribution channels in over 100 countries.
Optimized go to market strategies to best access our markets - We utilize vertically-focused distribution channels that leverage domain expertise to best serve the needs of individual markets domestically and abroad. These channels include independent dealers, joint ventures, original equipment manufacturers ("OEM") sales and distribution alliances with key partners, such as CNH Global, Caterpillar, and Nikon, as well as direct sales to end-users, that provide us with broad market reach and localization capabilities to effectively serve our markets.
Strategic acquisitions - Organic growth continues to be our primary focus, while acquisitions serve to enhance our market position. We acquire businesses that bring domain expertise, technology, products, or distribution capabilities that augment our portfolio and allow us to penetrate existing markets more effectively, or to establish a market beachhead. Our success in targeting and effectively integrating acquisitions is an important aspect of our growth strategy.
Trimble’s focus on these growth drivers has led over time to growth in revenue and profitability as well as an increasingly diversified business model. Software and subscription growth is driving increased recurring revenue, leading to improved visibility in some of our businesses. As our solutions have expanded, our go to market model has also evolved, with a balanced mix between direct, distribution, and OEM customers, and an increasing number of enterprise level customer relationships.

20


For the first quarter of fiscal 2019, total revenue increased by $59.4 million compared to the first quarter of fiscal 2018. By geography, North America and Europe were up, and to a lesser extent, rest of world. Asia Pacific was slightly down year over year. We continue to experience a shift in revenue towards a more significant mix of software, recurring revenue and services, driven both by organic growth and acquisitions.
During fiscal 2018, we acquired six businesses, with total cash consideration of $1.8 billion. The largest acquisition was Viewpoint, which we acquired in the third quarter of 2018 with total cash consideration of $1.2 billion. Viewpoint is a provider of construction management software, which integrates a contractor’s financial and resource management to their project operations in the field. The acquisition is highly complementary to our construction technology portfolio and positions us to further our strategy to lead the industry's transformation. With Viewpoint, we offer customers a central workflow platform for delivering integrated end-to-end construction management, while further enabling connectivity across the complete construction lifecycle.
Our Condensed Consolidated Statements of Income includes the operating results of the businesses from the date of acquisition.
Seasonality of Business
Construction equipment revenue, within our Buildings and Infrastructure segment, historically has been higher in early spring. Our agricultural equipment revenue, within our Resources and Utilities segment, has historically been the highest in the first quarter, followed by the second quarter, reflecting buying in anticipation of the spring planting season in the Northern hemisphere. However, overall as a company, as a result of diversification of our business across segments and the increased impact of subscription revenues, we may experience less seasonality in the future. Changes in global macroeconomic conditions could also impact the level of seasonality we experience.
RESULTS OF OPERATIONS
Overview
The following table is a summary of revenue, gross margin, and operating income for the periods indicated and should be read in conjunction with the narrative descriptions below:
 
 
First Quarter of
 
2019
 
2018
(In millions)
 
 
 
Revenue:
 
 
 
Product
$
488.4

 
$
497.8

Service
159.2

 
128.8

Subscription
154.0

 
115.6

Total revenue
801.6

 
742.2

Gross margin
$
438.3

 
$
396.2

Gross margin %
54.7
%
 
53.4
%
Operating income
$
86.3

 
$
64.2

Operating income %
10.8
%

8.6
%
Diluted earnings per share
$
0.25

 
$
0.23

 
 
 
 
Total non-GAAP revenue *
$
804.5

 
$
745.1

Non-GAAP operating income *
$
152.9

 
$
141.9

Non-GAAP operating income % *
19.0
%
 
19.0
%
Non-GAAP diluted earnings per share *
$
0.45

 
$
0.45

 
* See SUPPLEMENTAL DISCLOSURE OF NON-GAAP FINANCIAL MEASURES for a reconciliation of our GAAP results to our non-GAAP measures.
Revenue
Total revenue increased $59.4 million or 8% for the first quarter of fiscal 2019, compared to the corresponding period in fiscal 2018. Excluding unfavorable foreign current impacts of approximately 2%, revenue increased due to the Viewpoint acquisition and, to a lesser extent, organic growth in Buildings and Infrastructure, Transportation, and Resources and Utilities. The increases

21


were partially offset by Geospatial, which was down. We consider organic growth to include revenue from acquisitions completed in, or before, the corresponding prior year period.
By revenue category, for the first quarter of fiscal 2019, product revenue decreased $9.4 million or 2%, service revenue increased $30.4 million or 24%, and subscription revenue increased $38.4 million or 33%, compared to the corresponding period in fiscal 2018. Product revenue decreased primarily due to weakness in our Geospatial OEM hardware sales in Asia Pacific and, to a lesser extent, prior year higher hardware demand in Transportation due to Electronic Logging Device (ELD) regulatory deadlines. Service and subscription revenue were significantly up due to Viewpoint software maintenance and subscription revenue and, to a lesser extent, organic growth, particularly in Buildings and Infrastructure and Transportation subscription revenue.
Gross Margin
Gross margin varies due to a combination of factors including product mix, pricing, distribution channel, and production volumes.
Gross margin increased by $42.1 million for the first quarter of fiscal 2019, compared to the corresponding period in fiscal 2018, primarily due to the Viewpoint acquisition and increased revenue growth in Buildings and Infrastructure and Transportation. Gross margin as a percentage of total revenue was 54.7% for the first quarter of fiscal 2019, compared to 53.4% for the corresponding period in fiscal 2018, primarily due to improved revenue mix across all segments, with the exception of Geospatial, which was down due to revenue declines.
Operating Income
Operating income increased by $22.1 million for the first quarter of fiscal 2019, compared to the corresponding period in fiscal 2018. Operating income as a percentage of total revenue was 10.8% for the first quarter of fiscal 2019, compared to 8.6% for the corresponding period in fiscal 2018.
For the first quarter of fiscal 2019, the increase in operating income was primarily attributable to organic revenue and gross margin expansion, and operating expense control in Buildings and Infrastructure, including the civil and building construction product families, the Viewpoint acquisition, and lower corporate expense, as the prior year included compensation expense related to the acceleration of acquisition stock options. The operating income increase was partially offset by Geospatial, which was down due to revenue declines.
Research and Development, Sales and Marketing and General and Administrative Expense
Research and development (R&D), sales and marketing (S&M) and general and administrative (G&A) expense are summarized in the following table:
 
First Quarter of
 
2019
 
2018
(In millions)
 
 
 
Research and development
$
118.2

 
$
109.3

Percentage of revenue
15
%
 
15
%
Sales and marketing
$
127.4

 
$
122.1

Percentage of revenue
16
%
 
16
%
General and administrative
$
82.8

 
$
81.6

Percentage of revenue
10
%
 
11
%
Total
$
328.4

 
$
313.0

Overall, R&D, S&M and G&A expense increased by approximately $15.4 million for the first quarter of fiscal 2019, compared to the corresponding period in fiscal 2018.
Research and development expense increased by $8.9 million or 8% for the first quarter of fiscal 2019, compared to the corresponding period in fiscal 2018. As compared to the prior year, the increase in the first quarter of fiscal 2019 was primarily due to the impact of Viewpoint expense not applicable in the prior corresponding period, and to a lesser extent, increased compensation expense associated with increased headcount, particularly in Transportation, partially offset by favorable foreign currency impacts.
Overall, research and development spending was 15% of revenue in the first quarter of fiscal 2019 and 2018. We believe that the development and introduction of new products are critical to our future success and we expect to continue active development of new products.


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Sales and marketing expense increased by $5.3 million or 4% in the first quarter of fiscal 2019, compared to the corresponding period in fiscal 2018. As compared to the prior year, the increase in the first quarter of fiscal 2018 was primarily due to the impact of Viewpoint expense not applicable in the prior corresponding period, partially offset by lower compensation expense and favorable foreign currency impacts.
Overall, spending for sales and marketing was 16% of revenue in the first quarter of fiscal 2019 and 2018.

General and administrative expense increased by $1.2 million, or 1% for the first quarter of fiscal 2019, compared to the corresponding period in fiscal 2018. As compared to the prior year, the increase in the first quarter of fiscal 2018 was primarily due to the impact of Viewpoint expense not applicable in the prior corresponding period, partially offset by lower compensation and stock based compensation expense, as well as lower consulting costs.
Overall, general and administrative spending was 10% of revenue in the first quarter of fiscal 2019, compared to 11% in the corresponding period in fiscal 2018.
Amortization of Purchased Intangible Assets
 
First Quarter of
 
2019
 
2018
(In millions)
 
 
 
Cost of sales
$
24.2

 
$
23.1

Operating expenses
20.1

 
17.4

Total amortization expense of purchased intangibles
$
44.3

 
$
40.5

Total amortization expense of purchased intangibles represented 6% of revenue in the first quarter of fiscal 2019 and 2018. The expense for the first quarter of fiscal 2019 was higher as compared to the corresponding period in fiscal 2018 due to new acquisitions amortization, primarily the Viewpoint acquisition, which was not applicable in the prior year, partially offset by the expiration of prior acquisitions' amortization.
Non-operating Income (Expense), Net
The components of Non-operating income (expense), net, were as follows:
 
 
First Quarter of
 
2019
 
2018
(In millions)
 
 
 
Interest expense, net
$
(21.9
)
 
$
(9.5
)
Foreign currency transaction gain (loss), net
(0.9
)
 
3.7

Income from equity method investments, net
8.8

 
4.9

Other income, net
2.9

 
3.4

Total non-operating income (expense), net
$
(11.1
)
 
$
2.5

Non-operating income (expense), net decreased by $13.6 million for the first quarter of fiscal 2019, compared to the corresponding period in fiscal 2018. The decrease for the first quarter was primarily due to higher interest costs associated with increased debt, and to a lesser extent, fluctuations in foreign currency transaction gain/(loss), partially offset by an increase in joint venture profitability.
Income Tax Provision
Our effective income tax rate, after including discrete items, for the first quarter of fiscal 2019 was 17%, compared to 12% in the corresponding period in fiscal 2018, primarily due to a one-time tax benefit from foreign deferred tax adjustments in the first quarter of fiscal 2018. Our effective tax rate is lower than the U.S. federal statutory rate of 21% primarily due to favorable tax rates associated with certain earnings from operations in lower-tax jurisdictions, a benefit from U.S. federal R&D credit and stock-based compensation deductions.

23


Results by Segment
Our Chief Executive Officer (chief operating decision maker) views and evaluates operations based on the results of our reportable operating segments under our management reporting system. For additional discussion of our segments, see Note 6 of the Notes to the Condensed Consolidated Financial Statements.
The following table is a summary of revenue and operating income by segment:
 
First Quarter of
 
2019
 
2018
(In millions)
 
 
 
Buildings and Infrastructure
 
 
 
Segment revenue
$
292.0

 
$
224.7

Segment revenue as a percent of total revenue
36
%
 
30
%
Segment operating income
$