Edgar Filing: TRIMBLE INC.

Document

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

___________________________________________________

FORM 10-K



ý	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 28, 2018



¨	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 incorporation or organization)		(I.R.S. Employer Identification No.)

935 Stewart Drive, Sunnyvale, CA		94085
(Address of principal executive offices)		(Zip Code)

Registrant’s telephone number, including area code: (408) 481-8000

Securities registered pursuant to Section 12(b) of the Act:



Title of each class		Name of each exchange on which stock registered
Common Stock, $0.001 par value		NASDAQ Global Select Market

Preferred Share Purchase Rights		NASDAQ Global Select Market
(Title of Class)

Securities registered pursuant to Section 12(g) of the Act: NONE

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ý No ¨

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act. Yes ¨ No ý

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 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 if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer.



Large Accelerated Filer	ý	Accelerated Filer	¨
Non-accelerated Filer	o	Smaller Reporting Company	¨
Emerging Growth Company	o

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

As of June 29, 2018, the aggregate market value of the common stock held by non-affiliates of the registrant was approximately $8.2 billion based on the closing price as reported on the NASDAQ Global Select Market. Shares of common stock held by each officer and director of the registrant have been excluded in that such person may be deemed to be an affiliate. This determination of affiliate status is not necessarily a conclusive determination for any other purpose.

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.



Class		Outstanding at February 19, 2019
Common stock, $0.001 par value		251,514,221 shares

DOCUMENTS INCORPORATED BY REFERENCE

Certain parts of Trimble Inc. Proxy Statement relating to the annual meeting of stockholders to be held on May 7, 2019 (the “Proxy Statement”) are incorporated by reference into Part III of this Annual Report on Form 10-K.

SPECIAL NOTE ON FORWARD-LOOKING STATEMENTS

This Annual Report on Form 10-K 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 coming from sales to customers located in countries outside of the U.S.;


•	seasonal fluctuations in our construction equipment revenues, agricultural equipment 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 solutions will provide us with enhanced business visibility over time;


•	our belief that our cash and cash equivalents and short-term investments, 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, planned capital expenditures and stock repurchases under the stock repurchase program 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; 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.” 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 this Report under the section entitled “Risk Factors” and elsewhere, and in other reports Trimble files with the Securities and Exchange Commission (“SEC”), specifically the most recent reports on Form 8-K and Form 10-Q, each as it may be amended from time to time. These forward-looking statements are made as of the date of this Annual Report on Form 10-K. We reserve the right to update these statements for any reason, including the occurrence of material events. The risks and uncertainties under the caption “Risks and Uncertainties” contained herein, among other things, should be considered in evaluating our prospects and future financial performance.

TRIMBLE INC.

2018 FORM 10-K ANNUAL REPORT

TABLE OF CONTENTS




	PART I
Item 1	Business	6
Item 1A	Risk Factors	15
Item 1B	Unresolved Staff Comments	26
Item 2	Properties	26
Item 3	Legal Proceedings	26
Item 4	Mine Safety Disclosures	26

	PART II
Item 5	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	27
Item 6	Selected Financial Data	28
Item 7	Management’s Discussion and Analysis of Financial Condition and Results of Operations	29
Item 7A	Quantitative and Qualitative Disclosures about Market Risk	49
Item 8	Financial Statements and Supplementary Data	52
Item 9	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	92
Item 9A	Controls and Procedures	92
Item 9B	Other Information	92

	PART III
Item 10	Directors, Executive Officers, and Corporate Governance	93
Item 11	Executive Compensation	93
Item 12	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	93
Item 13	Certain Relationships, Related Transactions, and Director Independence	93
Item 14	Principal Accountant Fees and Services	93

	PART IV
Item 15	Exhibits and Financial Statement Schedules	94
Item 16	Form 10-K Summary	94
	Signatures	94

PART I


Item 1.	Business

Trimble Inc., a Delaware corporation, is a leading provider of technology solutions that enable professionals and field mobile workers to improve or transform their work processes. Our comprehensive work process solutions are used across a range of industries including agriculture, architecture, civil engineering, survey and land administration, construction, geospatial, government, natural resources, transportation, and utilities. Representative Trimble customers include engineering and construction firms, contractors, owners, surveying companies, farmers and agricultural companies, long haul trucking companies, energy, utility companies, and state, federal and municipal governments.

We transform the way the world works by delivering products and services that connect the physical and digital worlds. Core technologies used in positioning, modeling, connectivity, and data analytics enable customers to improve productivity, quality, safety, and sustainability. Our products are sold based on return on investment and provide benefits such as lower operational costs, higher productivity, improved quality, enhanced safety and regulatory compliance, and reduced environmental impact. Representative products include equipment that automates and enables increased precision within large industrial equipment such as tractors and bulldozers; integrated systems that track fleets of vehicles and workers and provide real-time information and analytics to the back-office; data collection systems that enable the management of large amounts of geo-referenced information; software solutions that connect all aspects of a construction site or a farm; and building information modeling ("BIM") software that is used throughout the design, build, and operation of buildings.

Many of our products integrate real-time positioning or location technologies with wireless communications and software or information technologies. Information about location or position is transmitted via a wireless link to a domain-specific software application which enhances the productivity of the worker, asset, or work process. Position is provided through a number of technologies including the Global Positioning System ("GPS"), other Global Navigation Satellite Systems ("GNSS") and their augmentation systems, and systems that use laser, optical, inertial or other technologies to establish real-time position. Integration of wireless communications in our solutions facilitates real-time data flow, communication and situational awareness within sites and between work sites or vehicles and offices.

Software is a key element of most of our solutions and accounts for a steadily increasing portion of our business. Our software products and services range from embedded real-time firmware to application software that integrates field data with large scale enterprise back-office applications. Many of our software solutions are built on configurable and enterprise grade scalable platforms that can be tailored to the workflows that our customers follow to implement their customized business processes. Our software capabilities include extensive 3-D modeling, analysis and design solutions, design and data preparation software, BIM software, enterprise resource planning and project management solutions, cloud-based collaboration solutions, applications for advanced surveying and geospatial data collection and analysis, farm productivity solutions, fleet management solutions for transportation and logistics, as well as a large suite of domain-specific software applications used across a host of industries including agriculture, construction, utilities, and transportation. Our software is sold as a perpetual license or as a subscription, and can be delivered for on-premise installation or in a hosted environment as Software as a Service ("SaaS"). Our software products allow our customers to optimize their work processes for targeted outcomes, improve their productivity, gain insight into their projects and operations, to enhance their decision making and to gain maximum benefit from a broad range of other Trimble products and systems.

Our global operations include major development, manufacturing, or logistics operations in the United States, Sweden, Finland, Germany, New Zealand, Canada, the United Kingdom, the Netherlands, China, and India. Products are sold in more than 100 countries, through dealers, representatives, joint ventures, and other channels throughout the world, as well as direct sales to end-users. Sales are supported by our own offices located in over 40 countries around the world.

We began operations in 1978 and were 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. Our common stock has been publicly traded on NASDAQ since 1990 under the symbol TRMB.

Business Strategy

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 are each multi-trillion dollar global industries which operate in 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 compelling return on investment, 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 over time 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 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 which have a requirement for the integration of multiple technologies into complete vertical solutions.

•

Increasing focus on software and services - Software and services targeted for the needs of vertical end markets are increasingly important elements of our solutions and are core to our growth strategy. Trimble generally has an open application programming interface philosophy and open vendor environment which leads to increased adoption of our software and analytics offerings. These software and services solutions integrate and optimize additional workflows for our customers, thereby improving their work productivity, and in the case of subscription, maintenance and support services, also provide us with enhanced business visibility over time. Professional services constitute an additional customer offering 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 go-to-market strategies that leverage domain expertise to best serve the needs of individual markets domestically and abroad. These go-to-market capabilities include independent dealers, joint ventures, original equipment manufacturers ("OEM"), 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.

Business Segments and Markets

Our segments are distinguished by the markets they serve. Each segment consists of businesses which are responsible for product development, marketing, sales, strategy, and financial performance. We report our financial performance, including revenues and operating income, based on four reportable segments: Buildings and Infrastructure, Geospatial, Resources and Utilities, and Transportation. For further financial information about our segments, see Note 6 to the Consolidated Financial Statements.

Buildings and Infrastructure

The Buildings and Infrastructure segment primarily serves architects, engineers, contractors, owners, and operators. Within this segment, our most substantial product portfolios are focused on civil engineering and construction and building construction.

Civil Engineering and Construction. Before dirt is ever moved in civil construction, feasibility, design, and scheduling are critical steps to site construction. Trimble provides the civil engineering and construction industry with a continuum of field solutions, software solutions, and services at every stage of the project - from planning and design, to construction, operation, and maintenance. Our civil construction solutions are used in civil infrastructure such as roads, railways, airports, land management, solar farms, marinas, and landfills. Our solutions are used across the entire project life cycle to improve productivity, reduce waste and re-work, and enable more informed decision making through enhanced situational awareness, data flow, and project collaboration. At the same time, our solutions can improve worker safety and reduce environmental impact. Our suite of integrated solutions and technologies in this area includes field and office software for optimized route selection and design, systems to automatically guide and control construction equipment such as excavators, bulldozers, wheel loaders, motor graders, and paving equipment, systems to monitor, track, and manage assets, equipment and workers, and software to facilitate the sharing and communication of data in real time. Together, these solutions are designed to transform how work is done within the heavy civil construction industry.

The Connected Site describes our civil construction market portfolio, which integrates data and information across the entire construction process and across mixed fleets. This includes data from site positioning and machine control systems, construction asset management equipment and services, and various software applications. Utilizing wireless and internet-based site communications infrastructure, our Connected Site solutions include the ability to track and control equipment, perform remote machine diagnostics, and reduce re-work. By leveraging the Connected Site technology, contractors gain greater insight into their operations, helping them to lower costs and improve productivity, worker safety, and asset utilization.

A joint venture with Caterpillar, Caterpillar-Trimble Control Technologies ("CTCT") was formed in 2002 to develop the next generation of advanced electronic guidance and control products for earthmoving machines. The joint venture develops machine control and guidance products that use site design information combined with accurate positioning technology to automatically control dozer blades and other machine tools. Caterpillar generally offers joint venture products as a factory-installed option, while Trimble focuses on the aftermarket with products for mixed fleets of earthmoving machines from Caterpillar and other equipment manufacturers to allow improved management of construction sites and projects.

During 2018, we announced a number of developments, including new collaborations with multiple OEMs intended to improve the interoperability of technologies and data for civil engineering and construction projects. In addition, we announced an update to the Trimble Earthworks platform to include support for additional equipment types.

Building Construction. The Trimble building construction portfolio of solutions for the commercial and industrial building industry spans the entire lifecycle of a building and is used by owners, architects, designers, general contractors, sub-contractors, engineers, and facility owners or lessees. These solutions serve to improve productivity and to enhance data sharing and collaboration across different teams and stakeholders to help keep projects within cost, time, and quality targets. The suite of technologies and solutions we provide to the building industry includes program management solutions for owners, software for 3D conceptual design and modeling, BIM software which is used in design, construction, and maintenance, enterprise resource planning and project management and project collaboration for general contractors, advanced integrated site layout and measurement systems, cost estimating, scheduling, and project controls solutions for contractors. The suite also includes applications for sub-contractors and trades such as steel, concrete and mechanical, electrical and plumbing, and an integrated workplace management services ("IWMS") software suite for real estate management, project coordination, capital program planning and management, and facility management for building owners and program managers. In addition, Trimble’s Connect collaboration platform streamlines customer workflows and enables interoperability between Trimble’s and other providers' solutions. These solutions for the building industry serve to automate, streamline, and transform work processes across the building construction industry. Our solutions provide customer benefits such as reduced costs, reduced waste and re-work, increased worker safety and efficiencies, faster project completion times, improved information flow, better decision making, and enhanced quality control.

During 2018, we announced advances in several of our software packages and solutions, launched new construction management solutions, and completed the acquisitions of FabSuite, Stabiplan, e-Builder, and Viewpoint.

In the first quarter of 2018, we acquired privately-held Stabiplan, a 3D Computer Aided Design and Engineering software and BIM content provider for the Mechanical, Electrical and Plumbing ("MEP") industries in Europe. The acquisition of Stabiplan broadened Trimble's existing construction solutions for MEP contractors and engineers that enable automated estimating, project management, modeling, detailing, layout, and construction.

Also during the first quarter of 2018, we acquired privately-held e-Builder, a leading SaaS-based construction program management solution for capital program owners and program management firms. The addition of e-Builder extended Trimble's ability to accelerate industry transformation by providing an integrated project delivery solution for owners, program managers, and contractors across the design, construct, and operate lifecycle.

During the second quarter of 2018, we acquired the assets of privately-held FabSuite, a supplier of Management Information System solutions for steel fabrication. With the acquisition of FabSuite software, Trimble's portfolio was expanded to include the complete structural steel workflow for planning, managing, designing, modeling, and automating the fabrication processes to maximize constructability.

In the third quarter of 2018, we acquired privately-held Viewpoint, a leading provider of scalable construction management software, which integrates a contractor's financial and resource management with their project operations on their jobsites and in the field. The acquisition of Viewpoint extended Trimble's ability to provide more complete and integrated project, jobsite, and business workflows across the construction lifecycle.

We sell and distribute our products in the Building and Infrastructure segment through both a direct sales force and global networks of independent dealers with expertise and customer relationships in the respective markets, including the network of SITECH Technology Dealers, which serves the civil construction industry. BuildingPoint is an initiative to form a global network of specialized distribution partners to serve the needs of the building construction industry by supporting customers in the adoption of the Trimble Buildings solutions. We sell many of our software solutions through our own direct salesforce.

Competitors in this segment are typically companies that provide optical, laser or GNSS positioning products as well as companies that produce software specific to the construction process. Our principal competitors are Topcon Corporation, Hexagon AB, and Autodesk. As the Company extends its software and services offerings to cover the full set of construction lifecycle management solutions used by owners, designers, and construction companies, we increasingly compete with large established companies that

offer similar systems across all industries, such as Oracle. We compete principally on the basis of innovation, differentiated products, service, quality, and geographic reach.

Geospatial

The Geospatial segment primarily serves customers working in surveying, engineering, and government. Within this segment our most substantial product portfolios are focused on surveying and geospatial, and geographic information systems ("GIS").

Surveying and Geospatial. Through our Surveying and Geospatial product portfolio, professional surveyors and engineers provide services to the construction, engineering, mining, oil and gas, energy and utilities, government, and land management sectors. Our survey and geospatial solutions replace less productive conventional methods of surveying, mapping, 2D or 3D modeling, measurement, reporting, and analysis. Our suite of solutions include field based data collection systems and field software, real time communications systems, and back-office software for data processing, modeling, reporting, and analysis. Our field based technologies are used in handheld, land mobile, and airborne applications and incorporate technologies such as mobile application software, high precision GNSS, robotic measurement systems, inertial positioning, 3D laser scanning, digital imaging, optical or laser measurement, and unmanned aerial vehicles. We maintain a joint venture with Nikon, which focuses on the design and manufacture in Japan of surveying instruments including mechanical total stations and related products. Our office based products include software for planning, data processing and editing, quality control, 3D modeling, intelligent data analysis and feature extraction, deformation monitoring, project reporting, and data export. Our customers in this area gain benefits from the use of our products including significantly improved productivity in both field and office activities, improved safety through non-contact measurement and detection of potentially dangerous ground or structure movement, and improved data flow that enables better decision making.

Geographic Information Systems. Our GIS product line collects authoritative field data and integrates that data into GIS databases. Our handheld data collection systems allow users to quickly log positions and descriptive information about their assets, ensure the integrity and accuracy of GIS information, and ultimately enable better decision-making. Through a combination of wireless technologies and software solutions, fieldwork results are seamlessly delivered to the back-office GIS, and mobile workers can also access GIS information remotely. This capability provides significant advantages to users, including improved productivity, accuracy, and access to information in the field.

During 2018, we announced the release of a new handheld computer for field data collection, the launch of a new version of our Inpho office software suite for photogrammetry, the launch of new GNSS receiver systems for land surveyors, and a new field controller solution for land and civil construction surveyors.

We sell and distribute our products in the Geospatial segment primarily through a global network of independent dealers and business partners supported by Trimble personnel. Competitors in this segment are typically survey instrument companies utilizing GNSS technology such as Topcon Corporation and Hexagon AB. We compete principally on the basis of robust performance, ease of use, price, interoperability, and interconnectedness.

Resources and Utilities

The Resources and Utilities segment primarily serves customers working in agriculture, forestry, and utilities. Within this segment, our most substantial product portfolio addresses the agriculture market.

Our precision agriculture products and services consist of guidance and positioning systems, automated and variable-rate application and technology systems, and information management solutions that enable farmers and their partners to improve crop performance, profitability, and environmental quality. Trimble precision agriculture solutions can assist farmers throughout every step of their farming process, beginning with land preparation and continuing through the planting, nutrient and pest management, and harvesting phases of a crop cycle. We provide manual and automated navigation guidance for tractors and other farm equipment used in spraying, planting, cultivating, and harvesting applications. The benefits to the farmer include faster machine operation, higher yields, and lower consumption of fuel and chemicals than conventional equipment. In addition, we provide solutions to automate application of pesticide and seeding. Our water solutions help farmers minimize their water costs and distribute water more efficiently and include applications for leveling agricultural fields for irrigation, aligning drainage systems to better manage water flow in fields, and controlling water application in linear and pivot irrigation systems.

Solutions that use data to enhance farm productivity are an increasing focus in our agriculture business. In 2018, we continued the development and integration of a number of Trimble Agriculture's software programs and platforms, including the release of the Trimble Farmer Fit solution. Trimble Farmer Fit equips farms of all sizes with a field record-keeping and mapping system available 24/7 on desktop, online, or mobile platforms. Trimble agricultural software is used by farmers to help integrate all of the information on the farm, and is also used by advisors, suppliers, and purchasers to share information to help improve efficiencies.

Trimble’s solutions enable a chain of custody where the farm can pass critical food safety and sustainability information to processors, distributors, and ultimately to consumers who seek transparency. Trimble agricultural software enables farmers to make more informed decisions leading to higher yields, better quality crops, increased profitability, and reduced environmental impact.

For many of Trimble's end market applications and customer needs, the positional accuracy that can be derived from GNSS satellite signals alone is insufficient. In these applications, higher levels of positional accuracy are required. For these situations, Trimble provides an augmentation service that improves the positional accuracy that is available to the customer, thereby enabling higher levels of precision and automation in work processes that are conducted in the field. This service is provided by Trimble Positioning Services ("Positioning Services") and is available in a variety of formats and accuracy levels, depending on the relevant application's specific needs. Positioning Services serves customers in a variety of end markets, including agriculture, construction, geospatial, and other markets, with a majority of its customers being in agriculture.

We use multiple distribution approaches to access the agricultural market, including independent dealers and direct selling to enterprise accounts. A significant portion of our sales are through CNH Global and affiliated dealer networks. Our own Vantage distributors provide a premier level of technical expertise, customer service and support capabilities, and operate with a strategy that fosters technology interoperability in mixed fleets used on a farm. Vantage partners are committed to providing reliable, responsive, and dedicated in-field service and support as well as creating a hassle free experience for the grower and their advisors when implementing advanced technology solutions. They also provide training, so farmers and advisors have a better understanding of how to use the technology in a way that best meets their needs. We currently have Vantage partners in over 14 countries across 5 continents. Our forestry and utilities portfolios use a mix of direct sales and indirect distribution.

Competitors in the agricultural market are vertically integrated farm equipment and implement companies, such as John Deere and agricultural instrumentation companies, such as Raven and AGCO. As we expand our business in agronomic services and data oriented applications, we expect to increasingly compete with major input suppliers, such as Monsanto. We compete principally on the basis of robust performance, ease of use, customer support, price, interoperability, interconnectedness, and the completeness of our solutions.

Transportation

Trimble’s transportation solutions are multi-modal and provide capabilities for the long-haul trucking, field service management, rail and construction logistics industries to create a fully integrated supply chain and connect all aspects of transportation and logistics-trucks, drivers, back office, freight and assets. In trucking, Trimble provides enterprise and mobility solutions focused on business intelligence and data analytics, safety and regulatory compliance, navigation and routing, freight brokerage, supply chain visibility and final mile, and transportation management and fleet maintenance. Within this segment, our most substantial product portfolio addresses the transportation and logistics market.

In 2018, we announced that the PeopleNet, TMW, and 10-4 Systems businesses had been unified under the single Trimble brand. By doing so, we further articulated our approach in providing a comprehensive fleet mobility, management, and logistics platform enabling customers to connect all aspects of their business, including trucks, drivers, freight, and assets, to make more informed decisions and reach greater levels of productivity, efficiency, and safety.

In the transportation and logistics market, we offer a suite of solutions marketed primarily under the Trimble brand and secondarily marketed under the PeopleNet, GEOTrac, TMW, ISE, Punch, Veltec, and Trimble MAPS brands. Together, this range of products provides a comprehensive fleet and transportation management, analytics, routing, mapping, reporting, and predictive modeling solution to enable the transportation and logistics industry to achieve greater overall operational efficiency, fleet performance, and profitability while ensuring regulatory compliance. Our fleet productivity and enterprise software offerings are comprised primarily of the PeopleNet, TMW, Vusion, PC*Miler, CoPilot, and FleetWorks mobile platforms. Our enterprise strategy focuses on sales to large enterprise accounts. In addition to Trimble-hosted solutions, we also integrate our applications and services directly into the customer’s IT infrastructure.

The PeopleNet telematics solutions encompass route management, safety and compliance, end-to-end vehicle management, and supply chain communications. GEOTrac’s telematics solution provides end-to-end capabilities for oil and gas road mapping, vehicle monitoring, geofencing, messaging and alerting, driver productivity, distress notification, lone worker monitoring, reporting, and maintenance monitoring. The CarCube/FleetWorks solution is tailored for transportation and logistics companies in Europe and Australia. TMW's transportation software platform serves as a central hub from which the core operations of transportation organizations are managed, data is stored and analyzed, and mission critical business processes are automated. Our software platform automates business processes spanning the entire surface transportation lifecycle, order-to-cash, delivering visibility, control, and decision support for the intricate relationships and complex processes involved in the movement of freight.

Trimble MAPS' products provide truck routing, mileage, and mapping solutions, as well as a voice guided turn-by-turn navigation solution.

In 2018, we acquired privately-held Veltec, a Brazil based fleet management provider that delivers solutions to transportation companies to improve safety and reduce operational costs. The acquisition of Veltec further expanded Trimble's global footprint and extended Trimble's fleet safety and efficiency solutions to new markets.

The Transportation segment generally sells directly to end-users and OEMs. Sales cycles tend to be long, often involving field trials followed by an extensive decision-making process. Key competitors in this segment include Omnitracs and McLeod, among others. We compete principally on the basis of interoperability, customer support and service, price, innovative product offerings, quality, and provision of a complete solution.

Patents, Licenses and Intellectual Property

We seek to establish and maintain our proprietary rights in our technology and products through the use of patents, copyrights, trademarks, and trade secret laws. We have a program to file applications for and obtain patents, copyrights, and trademarks in the United States and in selected foreign countries where we believe filing for such protection is appropriate. We hold over 1,200 unique issued and enforceable patents, the majority of which cover GNSS based technologies and other applications such as optical and laser technology. We generally prefer to own the intellectual property used in our products, either directly or through subsidiaries. From time to time we license technology from third parties. We are not dependent on any one patent and license. We also own numerous trademarks and service marks that contribute to the identity and recognition of Trimble and its global products and services.

Competition

Our markets are highly competitive, and we expect that both direct and indirect competition will increase in the future. Within our markets, we encounter direct competition from other GNSS, software, optical, and laser suppliers such as Hexagon and Topcon, and competition may intensify from various larger U.S. and non-U.S. competitors. Our hardware products are increasingly subject to competition from existing and new entrants from emerging markets such as China, which compete aggressively on price at the lower-priced end of the market. Our integrated hardware and software products may also be subject to increasing competition from mass market devices such as smartphones and tablets combined with relatively inexpensive applications, which have not been heavily used for commercial applications in the past. Our software solutions are also increasingly subject to competition from existing and new entrants into the marketplace, including from some companies that may have access to significantly more resources than Trimble.

Many of our products and solutions are focused on specific industries. In each of these industries, we face competition from companies providing point solutions, or more traditionally, less technology intensive products and services. These companies often have greater financial resources and more established and recognized brands in those industries. Competing in vertical markets with more established industry participants requires that we successfully establish a market position and market new and sometimes unfamiliar technology and automated solutions to customers that have not previously used such products. We also increasingly offer enterprise level solutions designed to meet the specific needs of our target industries. In doing so, we face competition from larger and more well established providers of enterprise software and services with whom we have not previously competed. See also "Risk Factors - We face substantial competition in our markets which could decrease our revenue and growth rates or impair our operating results and financial condition."

Sales and Marketing

We tailor our go-to-market strategies to the needs of our products and regional markets around the world. In addition to direct sales, many of our products are sold worldwide primarily through indirect channels, including distributors, dealers, and authorized representatives. Occasionally we grant exclusive rights to market certain products or within specific countries. These channels are supported by our regional sales offices throughout the world. We also utilize distribution alliances, OEM relationships, and joint ventures with other companies as a means to serve selected markets as well as direct sales to end-users.

Seasonality of Business

Construction equipment revenues, within our Buildings and Infrastructure segment, historically have been higher in early spring. Our agricultural equipment revenues, within our Resources and Utilities segment, have 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.

Manufacturing

We outsource the manufacturing of many of our hardware products to our key contract manufacturing partners that include Flex Ltd., Benchmark Electronics Inc., and Jabil. Our contract manufacturing partners are responsible for significant material procurement, assembly, and testing. We continue to manage product design through pilot production for the subcontracted products, and we are directly involved in qualifying suppliers and key components used in all our products. Our current contract with Flex Ltd. continues in effect until either party gives the other ninety days written notice. We also utilize original design manufacturers for some of our products.

We manufacture our laser and optics-based products, as well as some of our GPS products, at our plants in Dayton, Ohio; Danderyd, Sweden; and Shanghai, China. Some of these products or portions of these products are also subcontracted to third parties for assembly.

Our design, manufacturing, and distribution sites in Dayton, Ohio; Sunnyvale, California; Danderyd, Sweden; Eindhoven, Netherlands; Auckland, New Zealand; and Shanghai, China are registered to ISO9001:2015 covering the design, production, distribution, and servicing of all our products.

Research and Development

We believe that our competitive position is maintained through the development and introduction of new products, including software and services, that incorporate improved features and functionality, better performance, smaller size and weight, lower cost, or some combination of these factors. We invest substantially in the development of new products. We also make significant investment in the positioning, communication, and information technologies that underlie our products and will likely provide competitive advantages.

We expect to continue investing in research and development at a rate consistent with our past, with the goal of maintaining or improving our competitive position, and entering new markets.

Employees

At the end of fiscal 2018, we employed 11,287 employees with approximately 55% of employees in locations outside the United States.

Some employees in Sweden and Finland are represented by unions. Some employees in Germany and France are represented by works councils. We also employ temporary and contract personnel that are not included in the above headcount numbers. We have not experienced work stoppages or similar labor actions.

Available Information

The Company’s annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and all amendments to these reports are available free of charge on the Company’s web site through investor.trimble.com, as soon as reasonably practicable after such material is electronically filed with or furnished to the Securities and Exchange Commission. Financial news and reports and related information about our Company as well as GAAP to non-GAAP reconciliations can also be found on this web site. Information contained on our web site is not part of this annual report on Form 10-K.

In addition, you may request a copy of these filings (excluding exhibits) at no cost by writing or telephoning us at our principal executive offices at the following address or telephone number:

Trimble Inc.

935 Stewart Drive, Sunnyvale, CA 94085

Attention: Investor Relations Telephone: 408-481-8000

Executive Officers

The names, ages and positions of the Company’s executive officers as of February 21, 2019 are as follows:



Name	Age	Position
Steven W. Berglund	67	President and Chief Executive Officer
Robert G. Painter	47	Chief Financial Officer
Michael D. Bank	57	Senior Vice President
Ronald J. Bisio	50	Senior Vice President
Rosalind D. Buick	54	Senior Vice President
Thomas S. Fansler	62	Senior Vice President
Bryn A. Fosburgh	56	Senior Vice President
James A. Kirkland	59	Senior Vice President, General Counsel and Secretary
Darryl R. Matthews	51	Senior Vice President
Sachin J. Sankpal	51	Senior Vice President
Julie A. Shepard	61	Chief Accounting Officer

Steven W. Berglund—Steven Berglund has served as president and chief executive officer of Trimble since March 1999. Prior to joining Trimble, Mr. Berglund was president of Spectra Precision, a group within Spectra Physics AB. Mr. Berglund’s business experience includes a variety of senior leadership positions with Spectra Physics, and manufacturing and planning roles at Varian Associates. He began his career as a process engineer at Eastman Kodak. He attended the University of Oslo and the University of Minnesota where he received a B.S. in chemical engineering. Mr. Berglund received his M.B.A. from the University of Rochester. Mr. Berglund is a member of the board of directors of the Silicon Valley Leadership Group and the Association of Equipment Manufacturers (AEM), as well as chairman of AEM's construction sector board. He is also a member of the board of directors and audit committee of Belden Inc., a global provider of end-to-end signal transmission solutions.

Robert G. Painter—Robert Painter was appointed chief financial officer of Trimble in February 2016. He is responsible for Trimble’s worldwide finance operations. In 2015, Mr. Painter was appointed vice president of Trimble Buildings, a Trimble group focused on BIM-centric businesses that span the Design-Build-Operate continuum of the Building lifecycle. From 2010 to 2015, he served as general manager of the Company’s joint venture with Hilti, which was created to foster collaborative development of product innovations for the building construction industry. From 2009 to 2010, he served as general manager of the Company’s Construction Services Division. Mr. Painter joined Trimble in 2006 and assumed leadership of Trimble’s business development activities, leading all acquisition and corporate strategy activities. Prior to joining the Company, Mr. Painter served in a variety of management and finance positions at Cenveo, Rapt Inc., Bain & Company, Whole Foods Markets, and Kraft Foods. In 1993, he earned a Bachelor of Science degree in Finance from West Virginia University, and received an MBA in Business from Harvard University in 1998.

Michael D. Bank—In February 2019, Michael Bank was appointed senior vice president of Trimble's Engineering & Construction business, where he had previously served as vice president since January 2016, as well as supervising Trimble’s Precision Tools, Accessories, Mining, Aggregates, Construction Logistics, Lifting Solutions, and Mobile Computing Solutions businesses. Prior to 2016, he served in general manager and business area manager roles in the Precision Tools, Accessories, and Mobile Computing Solutions businesses. He joined Trimble in 2006 through the acquisition of Apache Technologies, where he served as worldwide sales and marketing manager. Mr. Bank has over 35 years of experience in the construction technology industry. He has held positions in sales, marketing, engineering, product design and technical support. He received his BS in Civil Engineering from the University of Cincinnati in 1984.

Ronald J. Bisio—In February 2019, Ronald Bisio was appointed senior vice president responsible for Trimble’s Surveying and Geospatial businesses, where he had previously served as vice president since April 2015. Prior to this role, he served as general manager for Trimble’s Rail business from January 2011 until April 2015. He joined Trimble in 1996 and has held several marketing, sales, and general management positions since then at Trimble. He earned a Master of Business Administration degree from the University of Denver, a Master of Regional Planning degree from the University of Massachusetts, and a Bachelor of Science degree in Cartography from Salem State University in Salem, Massachusetts.

Rosalind D. Buick—In February 2019, Rosalind Buick was appointed senior vice president responsible for Trimble's Buildings business, including Buildings, Architecture, General Construction, Mechanical Electrical & Plumbing, Real Estate & Workplace Solutions and Trimble Connect divisions, which business she had previously served as vice president since 2016. Previously, Dr. Buick served as general manager and vice president of the Civil Engineering & Construction, Aggregates and Mining divisions

from 2009 to 2016. Dr. Buick joined the company in 1996 and worked in several capacities in Trimble Agriculture for 12 years. Dr. Buick began her career as a research scientist and university teacher at Virginia Tech and later at Lincoln University, New Zealand, in computer decision support software research applying simulation models, GIS, operations research and artificial intelligence to agricultural and environmental applications. She completed her Ph.D in plant physiology and simulation models in 1989, a degree in Agricultural Science in 1986 from Lincoln University, New Zealand, and an executive MBA from Duke University in 2016.

Thomas S. Fansler—In February 2019, Thomas Fansler was appointed senior vice president responsible for Trimble’s Transportation sector, in which sector he had been a vice president since December 2018. From November 2015 to December 2018, he held various roles within the sector, most recently serving as president of Trimble’s Transportation Mobility division (formerly PeopleNet). He joined the company in 2009 as the founder of Vusion, a compliance and analytics provider acquired by Trimble. Previously, he was co-founder and managing partner at Inter-Tax, Inc., the largest North American fuel tax provider at the time. Mr. Fansler is active in several industry organizations, currently serving on the American Transportation Research Institute (ATRI) Research Advisory Committee and served on the Board of Directors for the Truckload Carriers Association (TCA) and is a Past Membership Chair. He received his BA from Connecticut College and an MBA from the University of St. Thomas in Minnesota.

Bryn A. Fosburgh—Bryn Fosburgh currently serves as senior vice president responsible for the Caterpillar, Hilti, and Nikon Joint Ventures, U.S. Federal government strategy and accounts, OEM construction machine business, and professional services groups. From 2014 to 2016, he served as senior vice president for Trimble's Geospatial, Civil Engineering and Construction, and Building businesses, and the Caterpillar and Hilti-related joint ventures. From 2010 to 2014, Mr. Fosburgh was responsible for our Buildings and Heavy Civil construction businesses along with our Caterpillar and Hilti joint ventures. From 2009 to 2010, Mr. Fosburgh served as vice president for Trimble's Construction Division, Transportation and Logistics, Fields Service Management and a number of corporate functions and geographical regions. From 2007 to 2009, Mr. Fosburgh was vice president for Trimble's Construction and Agriculture Divisions, and from 2005 to 2007, Mr. Fosburgh served as vice president and general manager of Trimble's Engineering and Construction Division. Mr. Fosburgh joined Trimble in 1994 and has held numerous roles, including vice president and general manager for Trimble's geomatics and engineering division, and division vice president of survey and infrastructure. Prior to Trimble, Mr. Fosburgh was a civil engineer and also held various positions for the U.S. Army Corps of Engineers and Defense Mapping Agency. Mr. Fosburgh received a B.S. in geology from the University of Wisconsin in Green Bay in 1985 and an M.S. from the school of civil engineering at Purdue University in 1989.

James A. Kirkland—James Kirkland currently serves as senior vice president, general counsel and secretary. He joined the company as vice president and general counsel in July 2008. Prior to joining Trimble, he served as general counsel and executive vice president, strategic development at Covad Communications. Mr. Kirkland also served as senior vice president of spectrum development and general counsel at Clearwire Technologies, Inc. Mr. Kirkland began his career in 1984 as an associate at Mintz Levin and in 1992 he was promoted to partner. Mr. Kirkland received his BA from Georgetown University in Washington, D.C. in 1981 and his J.D. from Harvard Law School in 1984.

Darryl R. Matthews—Darryl Matthews currently serves as senior vice president and sector head responsible for Trimble’s Agriculture, Forestry, Positioning Services, Global Services, and HarvestMark Divisions. From 2010 to 2015, Mr. Matthews served as president and general manager of the NAFTA Region for Nufarm Americas, Inc., a subsidiary of Nufarm Limited, a publicly-traded multinational agricultural chemical company. From 2008 to 2010, Mr. Matthews served as general manager of Nufarm Agriculture Inc., the Canadian subsidiary of Nufarm Limited. Mr. Matthews began his career at Dow AgroSciences in Canada where he held management roles in sales and marketing. From 2010 to 2015, he served on the Board of Directors for CropLife America. He received an Honors B.Sc. in Agriculture majoring in Horticultural Science and Business from the University of Guelph in Ontario, Canada in 1994.

Sachin J. Sankpal—Sachin Sankpal currently serves as senior vice president responsible for Rail, Utilities, Field Services Management, Applanix, and Embedded Devices businesses. From 2012 to 2015, Mr. Sankpal held various general management positions within Honeywell, including president of Honeywell International’s Global Safety Products Division in Paris, France, vice president and general manager of Honeywell’s Safety Products Division for Europe, Middle East, Africa and India. From 2010 to 2012, he served as vice president of Global Strategic Marketing for Honeywell’s Life Safety Division. From 2003 to 2010, he held various business and operational roles at Avaya, Inc., including director of Strategy and Product Management, chief operating officer of Avaya-Japan, Ltd., operations leader in India, and director of Global Restructuring. From 2001 to 2003, he served as a director of Strategy and Finance for Trimble’s Engineering & Construction Division. From 1994 to 1999, Mr. Sankpal was a consultant for Navigant Consulting based in Boston, Mass. He began his career at Langan Engineering & Environmental Services as a staff engineer. He holds a BS in Civil Engineering from Rutgers University, an MS in Civil Engineering from the University of Maryland and an MBA from Dartmouth College.

Julie A. Shepard—Julie Shepard joined Trimble in December of 2006 as vice president of finance and was appointed chief accounting officer in May 2007. Prior to joining Trimble, Ms. Shepard served as vice president of finance and corporate controller at Quantum Corporation. Ms. Shepard brings with her over 25 years of experience in a broad range of finance roles, with diverse experience ranging from early stage private equity backed technology companies to large multinational corporations. Ms. Shepard began her career at Price Waterhouse and is a Certified Public Accountant. She received a B.S in Accounting from California State University. She is a member of the AICPA, Financial Executive Institute, and the California Society of CPAs.


Item 1A.	Risk Factors

RISKS AND UNCERTAINTIES

You should carefully consider the following risk factors, in addition to the other information contained in this Form 10-K and in any other documents to which we refer you in this Form 10-K, before purchasing our securities. The risks and uncertainties described below are not the only ones we face.

The volatility of our stock price could adversely affect an investment in our common stock

The market price of our common stock has been, and may continue to be, highly volatile. During fiscal 2018, our stock price ranged from $29.75 to $45.70. We believe that a variety of factors could cause the price of our common stock to fluctuate, perhaps substantially, including:


•	general conditions in the worldwide economy,


•	quarterly fluctuations in our actual or anticipated operating results and order levels,

announcements and reports of developments related to our business, our major customers and partners, and the industries in which we compete or the industries in which our customers compete,


•	security breaches,


•	acquisition announcements,


•	new products or product enhancements announced or introduced by us or our competitors,


•	disputes with respect to developments in patents or other intellectual property rights,


•	developments in our relationships with our partners, customers and suppliers,


•	the imposition of tariffs or other trade barriers,


•	political, economic or social uncertainty, and


•	acts of terrorism.

In addition, the stock market in general and the markets for shares of “high-tech” companies in particular have frequently experienced extreme price fluctuations, which have often been unrelated to the operating performance of affected companies. Any such fluctuations in the future could adversely affect the market price of our common stock.

We operate globally and are subject to significant risks in many jurisdictions

Global or regional conditions may harm our financial results. We have operations in many countries and a significant portion of our revenue is derived from countries outside of the United States. As a result, our operations and our financial results, including our ability to design, develop, or sell products, may be adversely affected by a number of factors outside of our control, including:


•	global and local economic conditions,


•	the demand and cost of commodities, such as corn and oil,


•	the strength of the agricultural, engineering, and construction markets,


•	inadequate infrastructure and other disruptions, such as supply chain interruptions and large-scale outages or unreliable provision of services from utilities, transportation, data hosting, or telecommunications providers,


•	government restrictions on our operations in any country, or restrictions on our ability to repatriate earnings from a particular country,


•	differing employment practices and labor issues,


•	formal or informal imposition of new or revised export and/or import and doing-business regulations, including trade sanctions, tariffs, and import or export licensing requirements, which could be changed without notice,


•	ineffective legal protection of our IP rights in certain countries,


•	local business and cultural factors that differ from our normal standards and practices, and


•	increased uncertainty regarding social, political, immigration, and trade policies in the U.S. and abroad, such as recent U.S. government action and policies, and the continuing uncertainty regarding the United Kingdom's impending withdrawal from the European Union ("Brexit").

A significant trade disruption or the establishment or increase of any trade barrier in any area where we do business, including the Asia Pacific region, could increase the cost of our products, which could adversely impact the margin that we earn on sales; make our products more expensive for customers or create uncertainty around demand for certain types of products, which could make our products less competitive and reduce customer demand; or otherwise have a materially adverse impact on our future revenue and profits, our and our customers’ businesses, and our results of operations. In response to U.S. tariffs, other countries may adopt tariffs and other trade barriers that could limit our ability to competitively offer our products and services. Recently, the U.S. government imposed tariffs on certain products imported into the U.S. and the Chinese government imposed tariffs on certain products imported into China. Tariffs may be increased in the future. Given the current U.S. political climate and recent actions of the administration, there is significant uncertainty about the trade policies, treaties, government regulations and tariffs that could apply to trade between the U.S. and China, as well as other nations, in the future. In addition, if there is significant deterioration in the global economy, the economies of the countries or regions where our customers are located or do business, or the industries that we or our customers serve, the demand for our products and services would likely decrease and our results of operations, financial position and cash flows could be materially and adversely affected. Changes in economic conditions and political uncertainty surrounding international trade also make it difficult to make financial forecasts, which could cause us to miss our financial guidance and adversely affect our stock price.

We face risks inherent in conducting business internationally, including compliance with international and U.S. laws and regulations that apply to our international operations. These laws and regulations include data privacy requirements, labor relations laws, tax laws, anti-competition regulations, import and trade restrictions, export control laws, and laws that prohibit corrupt payments to governmental officials or certain payments or remunerations to customers, including the U.S. Foreign Corrupt Practices Act ("FCPA"), the U.K. Bribery Act, or other anti-corruption laws that have recently been the subject of a substantial increase in global enforcement. Many of our products are subject to U.S. export law restrictions that limit the destinations and types of customers to which our products may be sold, or require an export license in connection with sales outside the United States. Given the high level of complexity of these laws, there is a risk that some provisions may be inadvertently or intentionally breached, for example through fraudulent or negligent behavior of individual employees, our failure to comply with certain formal documentation requirements or otherwise. Also, we may be held liable for actions taken by our local dealers and partners. Violations of these laws and regulations could result in fines, criminal sanctions against us, our officers or our employees, and prohibitions or conditions on the conduct of our business. Any such violations could include prohibitions or conditions on our ability to offer our products in one or more countries and could materially damage our reputation, our brand, our international expansion efforts, our ability to attract and retain employees, our business, and our operating results.

We operate in many parts of the world that have experienced significant governmental corruption to some degree and, in certain circumstances, strict compliance with anti-bribery laws may conflict with local customs and practices. We may be subject to competitive disadvantages to the extent that our competitors are able to secure business, licenses, or other preferential treatment by making payments to government officials and others in positions of influence or through other methods that relevant law and regulations prohibit us from using. Our success depends, in part, on our ability to anticipate these risks and manage these difficulties.

Existing privacy-related laws and regulations in the United States and other countries are evolving and are subject to potentially differing interpretations, and various U.S. federal and state or other international legislative and regulatory bodies may expand or enact laws regarding privacy and data security-related matters. For example, the European Union General Data Protection Regulation became effective in May 2018 and is wide-ranging in scope. In order to be compliant with the new EU requirements, we must continue to invest resources necessary to implement and manage policy changes across our business units and services relating to how we collect and use personal data relating to customers, employees, and vendors. Failure to comply may lead to sizable fines. In parallel, with the advent of the EU-U.S. Privacy Shield (the new framework agreement between the U.S. Department of Commerce and the European Commission for transferring personal data from the European Union to the United States) and other national requirements, we expect that the international transfer of personal data will present ongoing compliance challenges and complicate our business transactions. Countries outside the EU are considering or have passed legislation that requires local storage and processing of data, which could increase the cost and complexity of delivering our services.

We may be affected by fluctuations in currency exchange rates. We are potentially exposed to adverse as well as beneficial movements in currency exchange rates. Although most of our sales occur in U.S. dollars, expenses may be paid in local currencies. An increase in the value of the dollar could increase the real cost to our customers of our products in those markets outside the U.S. where we sell in dollars, and a weakened dollar could increase the cost of expenses such as payroll, utilities, tax, and marketing expenses, as well as overseas capital expenditures. We also conduct certain investing and financing activities in local currencies. Our hedging programs reduce, but do not eliminate, the impact of currency exchange rate movements; therefore, changes in exchange rates could harm our results of operations and financial condition.

Catastrophic events or geopolitical conditions could disrupt our operations. Acts of war, acts of terrorism or civil unrest, natural disasters and other catastrophic events, especially any events that impact our larger markets or GNSS signals or systems, could

have a material adverse impact on our business, operating results, and financial condition. The threat of terrorism and war and heightened security and military activity in response to this threat, or any future acts of terrorism or hostilities, may involve a redeployment of the satellites used in GNSS or interruptions of the system. Civil unrest, local conflicts, or other political instability may adversely impact regional economies, cause work stoppages, or result in limitations on business transactions with the affected foreign jurisdictions. To the extent that such interruptions result in delays or the cancellation of orders, disruption of the manufacturing or shipment of our products, or reduced demand for our products, these interruptions could have a material adverse effect on our business, results of operations, and financial condition.

Engaging in international business inherently involves a number of other difficulties and risks.

These risks include:


•	longer payment cycles and difficulties in enforcing agreements and collecting receivables through certain foreign legal systems,


•	difficulties and costs of staffing and managing foreign operations,


•	differing local customer product preferences and requirements than our U.S. markets, and


•	difficulties protecting or procuring intellectual property rights.

These factors or any combination of these factors may adversely affect our revenue or our overall financial performance.

Investing in and integrating new acquisitions could be costly, place a significant strain on our management systems and resources, or may fail to deliver the expected return on investment, which could negatively impact our operating results

We typically acquire a number of businesses each year, and intend to continue to acquire other businesses. In the past year, two of our acquisitions, Viewpoint and e-Builder, were acquired for $1,211.3 million and $485.2 million respectively. Acquisitions entail numerous risks, including:


•	potential inability to successfully integrate acquired operations and products or to realize cost savings or other anticipated benefits from integration,


•	loss of key employees or customers of acquired operations,


•	difficulty of assimilating geographically dispersed operations and personnel of the acquired companies,


•	potential disruption of our business or the acquired business,


•	unanticipated expenses related to acquisitions,


•	unanticipated difficulties in conforming business practices, policies, procedures, internal controls, and financial records of acquisitions with our own business,


•	impairment of relationships with employees, customers, vendors, distributors or business partners of either an acquired company or our own business,


•	inability to accurately forecast the performance of recently acquired businesses, resulting in unforeseen adverse effects on our operating results,


•	potential liabilities, including liabilities resulting from known or unknown compliance or legal issues, associated with an acquired business, and


•	negative accounting impact to our results of operations because of purchase accounting treatment and the business or accounting practices of acquired companies.

Any such effects from acquisitions could be costly and place a significant strain on our management systems and resources.

As a result of acquisitions, we have significant assets that include goodwill and other purchased intangibles. The testing of goodwill and intangibles for impairment under established accounting guidelines requires significant use of judgment and assumptions. Changes in business conditions or in the prospects or results of operations of the acquired business could require negative adjustments to the valuation of these assets resulting in write-offs which adversely affect our results. If we divest a business and the proceeds are less than the net book value at the time, we would be forced to write off the difference. In addition, changes in the operating results or the valuation of companies in which we have investments may have a direct impact on our financial statements or could result in our having to write-down the value of such investment.

Even if successfully negotiated and closed, acquisitions may not yield expected synergies, may not advance our business strategy as expected, may fall short of expected return-on-investment targets, or may not prove successful or effective for our business. Companies that we acquire may operate with different cost and margin structures, which could further cause fluctuations in our operating results and adversely affect our operating margins.

Our internal and customer-facing systems, and systems of third parties we rely upon, may be subject to cybersecurity breaches, disruptions or delays

A cybersecurity incident in our own systems or the systems of our third party providers may compromise the confidentiality, integrity, or availability of our own internal data, the availability of our products and websites designed to support our customers, or our customer data. Computer hackers, foreign governments or cyber terrorists may attempt to or succeed in penetrating our network security and our website. Unauthorized access to our proprietary business information or customer data may be obtained through break-ins, sabotage, breach of our secure network by an unauthorized party, computer viruses, computer denial-of-service attacks, employee theft or misuse, breach of the security of the networks of our third party providers, or other misconduct. Additionally, outside parties may attempt to fraudulently induce employees or users to disclose sensitive or confidential information in order to gain access to data. We have experienced security breaches in the past, and despite our efforts to maintain the security and integrity of our systems, it is impossible to eliminate this risk. For example, in late 2015 and early 2016, we were the subject of an attack by hackers operating in China. This incident resulted in the theft of proprietary and confidential data related to our GPS technology but has not had a meaningful impact on our business. Because the techniques used by computer hackers who may attempt to penetrate and sabotage our network security or our website change frequently, they may take advantage of weaknesses in third party technology or standards of which we are unaware or that we do not control, and may not be recognized until long after they have been launched against a target. We may be unable to anticipate or counter these techniques. It is also possible that unauthorized access to customer data or confidential information may be obtained through inadequate use of security controls by customers, vendors, or business partners. Efforts to prevent hackers from disrupting our service or otherwise accessing our systems are expensive to develop, implement, and maintain. Such efforts require ongoing monitoring and updating as technologies change and efforts to overcome security measures become more sophisticated and may limit the functionality of, or otherwise negatively impact our service offering and systems. A cybersecurity incident affecting our systems may also result in theft of our intellectual property, proprietary data or trade secrets, which would compromise our competitive position, reputation, and operating results. We also may be required to notify regulators about any actual or perceived personal data breach (including the EU Lead Data Protection Authority) as well as the individuals who are affected by the incident within strict time periods.

The systems we rely upon also remain vulnerable to damage or interruption from a number of other factors, including access to the internet, the failure of our network or software systems, or significant variability in visitor traffic on our product websites, earthquakes, floods, fires, power loss, telecommunication failures, computer viruses, human error, and similar events or disruptions. Some of our systems are not fully redundant, and our disaster recovery planning is not sufficient for all eventualities. Our systems are also subject to intentional acts of vandalism. Despite any precautions we may take, the occurrence of a natural disaster, a decision by any of our third-party hosting providers to close a facility we use without adequate notice for financial or other reasons, or other unanticipated problems at our hosting facilities could cause system interruptions and delays, and result in loss of critical data and lengthy interruptions in our services.

We rely on our information systems and those of third parties for activities such as processing customer orders, delivery of products, hosting and providing services and support to our customers, billing and tracking our customers, hosting and managing our customer data, and otherwise running our business. Any disruptions or unexpected incompatibilities in our information systems and those of the third parties upon whom we rely could have a significant impact on our business.

An increasing portion of our revenue comes from software as a service ("SaaS") solutions and other hosted services in which we store, retrieve, communicate, and manage data which is critical to our customers’ business systems. Disruption of our systems that support these services and solutions could cause disruptions in our customers’ systems and in the businesses that rely on these systems. Any such disruptions could harm our reputation, create liabilities to our customers, hurt demand for our services and solutions, and negatively impact our revenues and profitability.

We may not be able to enter into or maintain important alliances and distribution relationships

We believe that in certain business opportunities our success will depend on our ability to form and maintain alliances with industry participants, such as Caterpillar, Nikon, Hilti, and CNH Global. Our failure to form and maintain such alliances, or the preemption or disruption of such alliances by actions of competitors, will adversely affect our ability to sell our products to customers. Our relationships with substantial industry participants such as Caterpillar and CNH are complex and multifaceted, and are likely to evolve over time based upon the changing business needs and objectives of the parties. Since these strategic relationships contribute to significant ongoing business in certain of our important markets, changes in these relationships could adversely affect our sales and revenues. In addition, we utilize dealer networks, including those affiliated with some of our strategic allies such as Caterpillar and CNH, to market, sell, and service many of our products.

Changes in our product mix, including increasing provision of software and bundled solutions tailored to the needs of specific vertical markets, impose new demands on our distribution channels and may require significant changes in the skills and expertise required to successfully distribute our products and services, or the creation of new distribution channels. Recruiting and retaining

qualified channel partners and training them in the use and the selling of our technology and product offerings requires significant time and resources. In order to develop and expand our distribution channels, we must continue to expand and improve our processes and procedures that support our distribution channels, including our investment in systems and training, and those processes and procedures may become increasingly complex and difficult to manage. The time and expense required for sales and marketing organizations of our channel partners to become familiar with our product offerings, including our new product developments, and newer types of offering such as software and services, may make it more difficult to introduce those products to end-users and delay end-user adoption, which could result in lower revenues.

Disruption of dealer coverage within specific geographic or end-user markets could cause difficulties in marketing, selling, or servicing our products and have an adverse effect on our business, operating results, or financial condition. Moreover, dealers who carry products that compete with our products may focus their inventory purchases and sales efforts on goods provided by competitors due to industry demand or profitability. Such sourcing decisions can adversely impact our sales, financial condition, and results of operations.

Our products are highly technical and may contain undetected errors, product defects, security vulnerabilities or software errors

Our products, including our software products, are highly technical and complex and, when deployed, may contain errors, defects or security vulnerabilities. We must develop our products quickly to keep pace with the rapidly changing market, and we have a history of frequently introducing new products. Products and services as sophisticated as ours could contain undetected errors or defects, especially when first introduced or when new models or versions are released. Such occurrences could result in damage to our reputation, lost revenue, diverted development resources, increased customer service and support costs, warranty claims, and litigation.

We warrant that our products will be free of defect for various periods of time, depending on the product. In addition, certain of our contracts include epidemic failure clauses. If invoked, these clauses may entitle the customer to return or obtain credits for products and inventory, or to cancel outstanding purchase orders even if the products themselves are not defective.

Errors, viruses or bugs may be present in software or hardware that we acquire or license from third parties and incorporate into our products or in third party software or hardware that our customers use in conjunction with our products. Our customers’ proprietary software and network firewall protections may corrupt data from our products and create difficulties in implementing our solutions. Changes to third party software or hardware that our customers use in conjunction with our software could also render our applications inoperable. Any errors, defects or security vulnerabilities in our products or any defects in, or compatibility issues with, any third party hardware or software or customers’ network environments discovered after commercial release could result in loss of revenues or delay in revenue recognition, loss of customers, theft of trade secrets, data or intellectual property and increased service and warranty cost, any of which could adversely affect our business, financial condition, and results of operations.

Undiscovered vulnerabilities in our products alone or in combination with third party hardware or software could expose them to hackers or other unscrupulous third parties who develop and deploy viruses, and other malicious software programs that could attack our products. Actual or perceived security vulnerabilities in our products could harm our reputation and lead some customers to return products, to reduce or delay future purchases, or use competitive products.

If we are unable to effectively manage our increasingly diverse and complex businesses and operations, our ability to generate growth and revenue from new or existing customers may be adversely affected

Because our operations are geographically diverse and increasingly complex, our personnel resources and infrastructure could become strained and our reputation in the market and our ability to successfully manage and grow our business may be adversely affected. The size, complexity, and diverse nature of our business and the expansion of our product lines and customer base have placed increased demands on our management and operations, and further growth, if any, may place additional strains on our resources in the future. Our ability to effectively compete and to manage our planned future growth will depend on, among other things, the following:


•	maintaining continuity in our senior management and key personnel,


•	increasing the productivity of our existing employees,


•	attracting, retaining, training, and motivating our employees, particularly our technical and management personnel,


•	deploying our solutions using third-party information systems, which may require changes to our applications, documentation, and operational processes,


•	improving our operational, financial and management controls, and


•	improving our information reporting systems and procedures.

The company has increasingly diversified the nature of its businesses both organically and by acquisition. As a result, an increasing amount of our business involves business models which require managerial techniques and skill sets which are different from those required to manage our historical core businesses.

Over the last few years we have focused more on SaaS subscription models. As a result, we expect to derive an increasing portion of our revenues in the future from subscriptions. This subscription model provides our customers the right to access certain of our software in a hosted environment or use downloaded software for a specified subscription period. Market acceptance of such offerings is affected by a variety of factors, including but not limited to: security, reliability, performance, current license terms, customer preference, social/community engagement, customer concerns with entrusting a third party to store and manage their data, public concerns regarding privacy and the enactment of restrictive laws or regulations. If we are unable to successfully account for, support and host our SaaS offerings in light of the foregoing risks and uncertainties, our results of operations could be negatively impacted.

Our annual and quarterly performance may fluctuate which could negatively impact our operations, financial results, and stock price

Our operating results have fluctuated and can be expected to continue to fluctuate in the future on a quarterly and annual basis as a result of a number of factors, many of which are beyond our control. Results in any period could be affected by:


•	changes in market demand,


•	competitive market conditions,


•	the timing of recognizing revenues,


•	fluctuations in foreign currency exchange rates,


•	the cost and availability of components,


•	the mix of our customer base and sales channels,


•	the mix of products sold,


•	pricing of products,


•	changes in U.S. or foreign policies on taxes, trade, or spending, including the 2017 Tax Cuts and Jobs Act (the "Tax Act"), and


•	other risks, including those described below.

Seasonal variations in demand for our products may also affect our quarterly results. Construction equipment revenues have historically been the highest in early spring. Our agricultural equipment revenues have 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. If we do not accurately forecast seasonal demand we may be left with unsold inventory or have a shortage of inventory, which could negatively impact our financial results.

Due in part to the buying patterns of our customers, a significant portion of our quarterly revenue occurs from orders received and immediately shipped to customers in the last few weeks and days of each quarter, while our operating expense tends to remain fairly predictable. These patterns could harm our operating results if for any reason expected sales are deferred, orders are not received, or shipments are delayed a few days at the end of a quarter.

The price of our common stock could decline substantially in the event any of these risks result in our financial performance being below the expectations of public market analysts and investors, which are based on historical and predictive models that are not necessarily accurate representations of the future.

Changes in our software and subscription businesses may negatively affect our operations and financial results

An increasing portionof our revenue is generated through software maintenance and subscription revenue, which includes SaaS. Our customers have no obligation to renew their agreements for our software maintenance or subscription services after the expiration of their initial contract period, which typically ranges from one to five years. Our customer acquisition and renewal rates may decline or fluctuate as a result of a number of factors, including overall economic conditions, the health of their businesses, competitive offerings, and customer dissatisfaction with our services. If customers do not renew their contracts for our products, our maintenance and subscription revenue will decline and our financial results will suffer. Any reduction in the number of licenses that we sell, even if our customer acquisition rates do not change, will have a negative impact on our future maintenance revenue growth. If any of our assumptions about expenses, revenue or revenue recognition principles from these initiatives proves incorrect, or our attempts to improve efficiency are not successful, our actual results may vary materially from those anticipated, and our financial results will be negatively impacted.

We continually re-evaluate our software licensing programs and subscription renewal programs, including specific license models, delivery methods, and terms and conditions. Changes to our licensing programs and subscription renewal programs, including the

timing of the release of enhancements, upgrades, maintenance releases, the term of the contract, discounts, promotions and other factors, could impact the timing of the recognition of revenue for our products, related enhancements and services and could adversely affect our operating results and financial condition. We may implement different licensing models which require the Company to recognize licensing fees over a longer period. Over the last few years, we have increasingly offered additional products through a SaaS model. SaaS revenues are currently recognized ratably over the subscription period. Any significant increase in the percentage of our business generated from such a subscription model could increase the amount of revenue to be recognized over time as opposed to upfront, which would delay revenue recognition and have a negative impact on our operating results in a quarterly period. Due to these complexities, we may not be able to accurately forecast our revenue, which could cause us to miss our earnings estimates or revenue projections and negatively impact our stock price.

We face substantial competition in our markets which could decrease our revenue and growth rates or impair our operating results and financial condition

Our markets are highly competitive and we expect that both direct and indirect competition will increase in the future. Our overall competitive position depends on a number of factors including the price, quality and performance of our products, the effectiveness of our distribution channel and direct sales force, the level of customer service, the development of new technology and our ability to participate in emerging markets. Within each of our markets, we encounter direct competition from other GNSS, software, optical and laser suppliers, and competition may intensify from various larger U.S. and non-U.S. competitors and new market entrants, particularly from emerging markets such as China. Our products, which commonly use GNSS for basic location information, may be subject to competition from alternative location technologies such as simultaneous location and mapping technology. As we sell an increasing amount of software and subscription services, we face competition from a group of large well-established companies with whom we have not previously competed. Our integrated hardware and software products may be subject to increasing competition from mass market devices such as smartphones and tablets used in conjunction with relatively inexpensive applications, which have not been heavily used for commercial applications in the past. These developments may require us to rapidly adapt to technological and customer preference changes that we have not previously been exposed to, including those related to cloud computing, mobile devices and new computing platforms. Such competition has in the past resulted, and in the future may result, in price reductions, reduced margins or loss of market share, any of which could decrease our revenue and growth rates or impair our operating results and financial condition. We believe that our ability to compete successfully in the future against existing and additional competitors will depend largely on our ability to execute our strategy to provide products with significantly differentiated features compared to currently available products. We may not be able to implement this strategy successfully, and our products may not be competitive with other technologies or products that may be developed by our competitors, many of whom have significantly greater financial, technical, manufacturing, marketing, sales, and other resources than we do.

We are dependent on new products and services and if we are unable to successfully introduce them into the market, or to effectively compete with new, disruptive product alternatives, our customer base may decline or fail to grow as anticipated

Our future revenue stream depends to a large degree on our ability to bring new products and services to market on a timely basis. We must continue to make significant investments in research and development in order to continue to develop new products and services, enhance existing products and achieve market acceptance of such products and services. We may encounter problems in the future in innovating and introducing new products and services. Our development stage products may not be successfully completed or, if developed, may not achieve significant customer acceptance. Development and manufacturing schedules for technology products are difficult to predict, and we might not achieve our goals as to the timing of introducing new technology products, or could encounter increased costs. The timely availability and cost effective production of these products in volume and their acceptance by customers are important to our future success. If we are unable to introduce new products and services, if other companies develop competing technology products and services, or if we do not develop compelling new products and services, our number of customers may not grow as anticipated, or may decline, which could harm our operating results. Many of our offerings are increasingly focused on software and subscription services. The software industry is characterized by rapidly changing customer preferences which require us to address multiple delivery platforms, new mobile devices and cloud computing. Life cycles of software products can be short and this can exacerbate the risks associated with developing new products. The introduction of third-party solutions embodying new, disruptive technologies and the emergence of new industry standards could make our existing and future software solutions and other products obsolete or non-competitive. If we are not able to develop software and other solutions that address the increasingly sophisticated needs of our customers, or if we are unable to adapt to new platforms, technologies or new industry standards that impact our markets, our ability to retain or increase market share and operating results could be materially adversely affected.

Changes in our effective tax rate may reduce our net income in future periods

As a global company, we are subject to income and other taxes in the United States and numerous foreign jurisdictions. Significant judgment is required to determine and estimate worldwide tax liabilities. Our effective tax rate is largely based on the geographic

mix of earnings, statutory rates, inter-company transfer pricing, and enacted tax laws. A number of factors may increase our future effective tax rates, including:


•	the jurisdictions in which profits are determined to be earned and taxed,


•	the resolution of issues arising from tax audits with U.S. and foreign tax authorities,


•	changes in our intercompany transfer pricing methodology,


•	changes in the valuation of our deferred tax assets and liabilities,


•	increases in expense not deductible for tax purposes, including transaction costs and impairments of goodwill in connection with acquisitions,


•	changes in the realizability of available tax credits,


•	changes in share-based compensation,


•	changes in tax laws or the interpretation of such tax laws, including the Tax Act and the Base Erosion and Profit Shifting (“BEPS”) project conducted by the Organization for Economic Co-operation and Development (“OECD”), and


•	changes in generally accepted accounting principles.

We are subject to taxation in the U.S. and numerous foreign jurisdictions. On December 22, 2017, the U.S. government enacted the Tax Act which had a significant impact on our effective tax rate for the fourth quarter of 2017. Although we completed the accounting for the tax effects of the Tax Act as of the fourth quarter of 2018, any additional forthcoming legislative guidance and accounting standards related to the Tax Act could adversely affect our future effective tax rates. The implementation by us of new practices and processes designed to comply with, and benefit from, the Tax Act and its rules and regulations could require us to make substantial changes to our business practices, allocate additional resources, and increase our costs, which could negatively affect our business, results of operations, and financial condition.

Additionally, longstanding international tax norms that determine each country’s jurisdiction to tax cross-border international trade are evolving as a result of the BEPS reporting requirements recommended by the G8, G20 and the OECD. On October 5, 2015, the OECD issued a series of reports recommending changes to numerous long-standing tax principles. Many of these recommendations are being adopted by various countries in which we do business and may increase our taxes in these countries. The foreign countries where we do business may change tax laws, regulations, and interpretations on a prospective or retroactive basis and these potential changes could adversely affect our effective tax rates. As these and other tax laws and related regulations change, our financial results could be materially impacted. Given the unpredictability of these possible changes and their potential interdependency, it is very difficult to assess whether the overall effect of such potential tax changes would be cumulatively positive or negative for our earnings and cash flow, but such changes could adversely impact our financial results.

On June 1, 2018, we filed a petition with the U.S. tax court relating to a Notice of Deficiency pertaining to our 2011 tax year. We are also currently in various stages of multiple year examinations by federal, state, and foreign taxing authorities, including a review of our 2012 tax year by the U.S. Internal Revenue Service, or IRS. If the Tax Court, IRS or the taxing authorities of any other jurisdiction were to successfully challenge a material tax position, we could become subject to higher taxes and our earnings would be adversely affected.

Our debt could adversely affect our cash flow and prevent us from fulfilling our financial obligations

On November 24, 2014, we issued $400.0 million of 4.75% Senior Notes due December 1, 2024. On June 15, 2018, we issued $300.0 million of 4.15% Senior Notes due June 15, 2023 and $600.0 million of 4.90% Senior Notes due June 15, 2028. When our Senior Notes mature, we will have to expend significant resources to repay these Senior Notes or seek to refinance them. If we decide to refinance the Senior Notes, we may be required to do so on different or less favorable terms or we may be unable to refinance the Senior Notes at all, both of which may adversely affect our financial condition.

In May 2018, we entered into a new credit agreement (the “2018 Credit Facility”), with JPMorgan Chase Bank, N.A. and certain other institutional lenders that provides for $1.75 billion of unsecured credit facilities comprised of a $1.25 billion loan facility maturing May 2023 (the “Revolving Credit Facility”) and a $500.0 million delayed draw term loan facility that matures on the third anniversary of the funding date (the “Term Loan”). Subject to the terms of the 2018 Credit Facility, we may request an additional loan facility up to $500.0 million. We also have two $75.0 million and one €100.0 million Uncommitted Facilities, which are uncommitted and may be called by the lenders with very little notice. At the end of fiscal 2018, our total debt was comprised primarily of Senior Notes of $1,300.0 million, a term loan balance of $425.0 million under the 2018 Credit Facility and three revolving credit facilities of $255.9 million under the Uncommitted Facilities.

In April 2018, as a result of the announcement of the Viewpoint acquisition and our plans to incur additional indebtedness, Moody’s Investor Service, Inc. downgraded our ratings from Baa2 to Baa3 and, while our Standard & Poor’s ratings were stable, we received

a negative outlook. Any downgrade by credit rating agencies could adversely affect our cost of borrowing, limit our access to the capital markets, or result in more restrictive covenants in future debt agreements.

Our outstanding indebtedness could have other important consequences, such as:


•	requiring us to dedicate a portion of our cash flow from operations and other capital resources to debt service, thereby reducing our ability to fund working capital, capital expenditures, general corporate purposes, and other cash requirements, particularly if the ratings assigned to our debt securities by rating organizations were revised downward,


•	increasing our vulnerability to adverse economic and industry conditions,


•	reducing our ability to make investments and acquisitions which support the growth of the company, or to repurchase shares of our common stock,


•	placing us at a competitive disadvantage as compared to our competitors, to the extent that they are not as highly leveraged,


•	limiting our flexibility in planning for, or reacting to, changes and opportunities in, our industry, which may place us at a competitive disadvantage, and


•	limiting our ability to incur additional debt on acceptable terms, if at all.

There are various financial covenants and other restrictions in our debt instruments. If we fail to comply with any of these requirements, the related indebtedness (and other unrelated indebtedness) could become due and payable prior to its stated maturity, and we may not be able to repay the indebtedness that becomes due. A default under our debt instruments may also significantly affect our ability to obtain additional or alternative financing.

Our ability to make scheduled payments or to refinance our obligations with respect to indebtedness will depend on our operating and financial performance, which in turn, is subject to prevailing economic conditions and to financial, business and other factors beyond our control. A significant portion of our outstanding debt has interest rates which float based on prevailing interest rates and we may incur additional variable-rate debt in the future. Such rates tend to fluctuate based on general economic conditions, general interest rates, Federal Reserve rates, and the supply of and demand for credit in the relevant interbanking market. In recent years, the Federal Reserve has incrementally raised the target range for the federal funds rate, with additional increases expected to come over the next year. If interest rates increase, our interest expense will also increase as would the costs of refinancing existing indebtedness or obtaining new debt.

Our ability to incur additional indebtedness over time may be limited due to applicable financial covenants and restrictions, and due to the risk that significantly increasing our level of indebtedness could impact the ratings assigned to our debt securities by rating organizations, which in turn would increase the interest rates and fees that we pay in connection with our indebtedness.

Some of our products rely on third party technologies including open source software, which could result in product incompatibilities or harm availability of our products and services

We license software, technologies, and intellectual property underlying some of our software from third parties. The third party licenses we rely upon may not continue to be available to us on commercially reasonable terms, or at all, and the software and technologies may not be appropriately supported, maintained, or enhanced by the licensors, resulting in development delays. Some software licenses are subject to annual renewals at the discretion of the licensors. In some cases, if we were to breach a provision of these license agreements, the licensor could terminate the agreement immediately. The loss of licenses to, or inability to support, maintain and enhance, any such third party software or technology could result in increased costs, or delays in software releases or updates, until such issues have been resolved. This could have a material adverse effect on our business, financial condition, results of operations, cash flows, and future prospects.

We also incorporate open source software into our products. Although we monitor our use of open source software, the terms of many open source licenses have not been interpreted by U.S. courts, and there is a risk that such licenses could be construed in a manner that could impose unanticipated conditions or restrictions on our ability to market or sell our products or to develop new products. In such event, we could be required to seek licenses from third-parties in order to continue offering our products, to disclose and offer royalty-free licenses in connection with our own source code, to re-engineer our products, or to discontinue the sale of our products in the event re-engineering cannot be accomplished on a timely basis, any of which could adversely affect our business.

We are dependent on proprietary technology, which could result in litigation that could divert significant valuable resources

Our future success and competitive position is dependent upon our proprietary technology, and we rely on patent, trade secret, trademark, and copyright laws to protect our intellectual property. The patents owned or licensed by us may be invalidated, circumvented, infringed, or challenged. The rights granted under these patents may not provide competitive advantages to us. Any of our pending or future patent applications may not be issued within the scope of the claims sought by us, if at all.

Despite our efforts to protect our intellectual property rights, unauthorized parties may attempt to copy or otherwise obtain our software or develop software with the same functionality or to obtain and use information that we regard as proprietary. Others may develop technologies that are similar or superior to our technology, duplicate our technology or design around the patents owned by us. In addition, effective copyright, patent, and trade secret protection may be unavailable, limited, or not applied for in certain countries. The steps taken by us to protect our technology might not prevent the misappropriation of such technology.

The value of our products relies substantially on our technical innovation in fields in which there are many current patent filings. Third-parties may claim that we or our customers (some of whom are indemnified by us) are infringing their intellectual property rights. For example, individuals and groups may purchase intellectual property assets for the purpose of asserting claims of infringement and attempting to extract settlements from us or our customers. The number of these claims has increased in recent years. As new patents are issued or are brought to our attention by the holders of such patents, it may be necessary for us to secure a license from such patent holders, redesign our products, or withdraw products from the market. In addition, the legal costs and engineering time required to safeguard intellectual property or to defend against litigation could become a significant expense of operations. Any such litigation could require us to incur substantial costs and divert significant valuable resources, including the efforts of our technical and management personnel, which could harm our results of operations and financial condition.

We are dependent on sole source and limited source manufacturers and suppliers for certain of our products and critical components and a disruption in our supply chain could adversely affect our margins, revenues, and operating results

We are dependent upon a limited number of contract manufacturers for the manufacture, testing, and assembly of certain products, including Flex Ltd. as our preferred manufacturing partner for many of our GNSS products, and specific suppliers for a number of our critical components. Our current reliance on specific or a limited group of suppliers and contract manufacturers involves risks, including a potential inability to obtain an adequate supply of required products or components to meet customers’ delivery requirements, a risk that we may accumulate excess inventories if we inaccurately forecast demand for our products, reduced control over pricing and delivery schedules, discontinuation of or increased prices for certain components, and economic conditions which may adversely impact the viability of our suppliers and contract manufacturers. Any disruption in our supply chain could reduce our revenue and adversely impact our financial results. Such a disruption could occur as a result of any number of events, including, but not limited to, increases in wages that drive up prices or labor stoppages, the imposition of regulations, quotas or embargoes on components, a scarcity of, or significant increase in the price of, required electronic components for our products, trade restrictions, tariffs or duties, fluctuations in currency exchange rates, transportation failures affecting the supply chain and shipment of materials and finished goods, third party interference in the integrity of the products sourced through the supply chain, the unavailability of raw materials, severe weather conditions, natural disasters, civil unrest, military conflicts, geopolitical developments, war or terrorism and disruptions in utility and other services. Any inability to obtain adequate deliveries or any other circumstance that would require us to seek alternative sources of supply or to manufacture, assemble and test such components internally could significantly delay our ability to ship our products, which could damage relationships with current and prospective customers and could harm our reputation and brand as well as our operating results.

We are dependent on the availability and unimpaired use of allocated bands within the radio frequency spectrum and our products may be subject to harmful interference from new or modified spectrum uses

Our GNSS technology is dependent on the use of satellite signals and on terrestrial communication bands. International allocations of radio frequency are made by the International Telecommunications Union ("ITU"), a specialized technical agency of the United Nations. These allocations are further governed by radio regulations that have treaty status and which may be subject to modification every two to three years by the World Radio Communication Conference. Each country also has regulatory authority over how each band is used in the country. In the United States, the Federal Communications Commission ("FCC") and the National Telecommunications and Information Administration share responsibility for radio frequency allocations and spectrum usage regulations.

Any ITU or local reallocation of radio frequency bands, including frequency band segmentation and sharing of spectrum, or other modifications of the permitted uses of relevant frequency bands, may materially and adversely affect the utility and reliability of our products and have significant negative impacts on our customers, both of which could reduce demand for our products. For example, the FCC has been considering proposals to repurpose spectrum adjacent to the GPS bands for terrestrial broadband wireless operations throughout the United States. If the FCC were to permit implementation of such proposals, or similar proposals, terrestrial broadband wireless operations could create harmful interference to GPS receivers within range of such operations and impose costs to retrofit or replace affected receivers. Similarly, other countries have considered proposals for use of frequencies used by our products as well as adjacent bands that could cause harmful interference to our products.

Many of our products use other radio frequency bands, such as the public land mobile radio bands, together with the GNSS signal, to provide enhanced GNSS capabilities, such as real-time kinematics precision. The continuing availability of these non-GNSS radio frequencies is essential to provide enhanced GNSS products to our precision survey, agriculture, and construction machine

controls markets. In addition, transmissions and emissions from other services and equipment operating in adjacent frequency bands or in-band may impair the utility and reliability of our products. Any regulatory changes in spectrum allocation or in allowable operating conditions could have a material adverse effect on our business, results of operations, and financial condition.

Many of our products rely on GNSS technology, GPS and other satellite systems, which may become degraded or inoperable and result in lost revenue

GNSS technology, GPS satellites and their ground support systems are complex electronic systems subject to electronic and mechanical failures and possible intentional disruption. Many of the GPS satellites currently in orbit were originally designed to have lives of 7.5 years and are subject to damage by the hostile space environment in which they operate. However, of the current deployment of 31 operational satellites in orbit, nine have been in operation for more than 15 years, and over half have been in use for more than 7.5 years. Repair of damaged or malfunctioning satellites is currently not economically feasible. If a significant number of satellites were to become inoperable, there could be a substantial delay before they are replaced with new satellites. A reduction in the number of operating satellites below the 24-satellite standard established for GPS may impair the utility of the GPS system and the growth of current and additional market opportunities. In addition, software updates to GPS satellites and ground control segments, and infrequent known events such as GPS week number rollover, may adversely affect our products and customers. We depend on public access to open technical specifications in advance of system updates to mitigate these problems, which may not be available or complete.

We are dependent on continued operation of GPS, the principal GNSS currently in operation. The GPS constellation is operated by the U. S. Government, which is committed to maintenance and improvement of GPS. If supporting policies were to change, or if user fees were imposed, it could have a material adverse effect on our business, results of operations, and financial condition.

Many of our products also use signals from systems that augment GPS, such as the Wide Area Augmentation System and National Differential GPS System, and satellites transmitting signal corrections data on mobile satellite services frequencies utilized by our RTX corrections services. Some of these augmentation systems are operated by the U.S. government and rely on continued fundingand maintenance of these systems. Any curtailment of the operating capability of these systems or limitations on access to, or use of the signals, or discontinuance of service could result in degradation of our services or product performance, with an adverse effect on our business.

Many of our products use satellite signals from the Russian GLONASS System. Other countries, including China and India, are in the process of creating their own GNSS systems, and we either have developed or will develop products which use GNSS signals from these systems. The European community is developing an independent radio navigation satellite system, known as Galileo. National or European authorities may provide preferential access to signals to companies associated with their markets, including our competitors, which could harm our competitive position. Use of non-US GNSS signals may also be subject to FCC waiver requirements and to restrictions based upon international trade or geopolitical considerations. If we are unable to develop timely and competitive commercial products using these systems, or obtain timely and equal access to service signals, this could result in lost revenue. These authorities may also adopt protectionist measures favoring national companies who make use of their GNSS systems, to the detriment of Trimble products using the U.S. GPS system, which would harm our business.

We are subject to the impact of governmental and other certifications processes and regulations which could adversely affect our products and our business

We market many products that are subject to governmental regulations and certifications before they can be sold. The European Union increasingly regulates the use of our products on agriculture, construction, and other types of machinery. CE certification is required for GNSS receivers and data communications products, which must conform to the European harmonized GNSS receiver standard and the radio equipment directive, to be sold in the European community. Delays in publication of the European harmonized GNSS receiver standard could affect GNSS product access to European markets. In the future, U.S., European, or other governmental authorities may propose GPS receiver testing and certification for compliance with published GPS signal interface or other specifications. An inability to obtain any such certifications in a timely manner could have an adverse effect on our operating results. Governmental authorities may also propose other forms of GPS receiver performance standards, which may limit design alternatives, hamper product innovation, or impose additional costs. Some of our products that use integrated radio communication technology require product type certification and some products require an end-user to obtain licensing from the FCC for frequency-band usage. An inability or delay in obtaining such certifications or changes in applicable rules could adversely affect our ability to bring our products to market which could harm our customer relationships and therefore, our operating results. Compliance with evolving product regulations in our major markets could require that we redesign our products, cease selling products in certain markets, and increase our costs of product development. Failure to comply may result in fines and limitations on sales of our products.

We have claims and lawsuits against us that may result in adverse outcomes

We are subject to a variety of claims and lawsuits. Adverse outcomes in some or all of these claims may result in significant monetary damages or injunctive relief that could adversely affect our ability to conduct our business. Litigation and other claims are subject to inherent uncertainties and the outcomes can be difficult to predict. Management may not adequately reserve for a contingent liability, or may suffer unforeseen liabilities, which could then impact the results of a financial period. A material adverse impact on our consolidated financial statements could occur for the period in which the effect of an unfavorable final outcome becomes probable and reasonably estimable which, if not expected, could harm our results of operations and financial condition.


Item 1B.	Unresolved Staff Comments

None


Item 2.	Properties

Our corporate headquarters is located in Sunnyvale, California where we lease approximately 139 thousand square feet. We also currently own approximately 308 thousand square feet in Dayton, Ohio and 250 thousand square feet in Westminster, Colorado. These facilities are used by all operating segments. In addition, we own and lease a number of offices throughout the United States and various international locations primarily for sales, manufacturing and other functions; the largest properties include space in the following locations: Portland, Oregon in the United States and, internationally, Sweden, Finland, India, New Zealand, Germany, and Canada. For financial information regarding obligations under leases, see Note 8 to the Consolidated Financial Statements.

We believe that our existing facilities are adequate to support current and near term operations.


Item 3.	Legal Proceedings

From time to time, we are involved in litigation arising out of the ordinary course of our business. There are no material legal proceedings, other than ordinary routine litigation incidental to the business, to which we or any of our subsidiaries is a party or of which any of our or our subsidiaries' property is subject.


Item 4.	Mine Safety Disclosures

None.

PART II


Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

Company Stock Performance

Our common stock is traded on the NASDAQ under the symbol “TRMB.” The following graph compares the cumulative five-year total return provided shareholders on Trimble Inc. common stock relative to the cumulative total returns of the NASDAQ Composite Index and the S&P 500 Information Technology Index. An investment of $100 (with reinvestment of all dividends) is assumed to have been made in our common stock and in each of the indexes on December 31, 2013, and its relative performance is tracked through December 31, 2018.

Stock Repurchase Program

In November 2018, our Board of Directors approved a stock repurchase program ("2017 Stock Repurchase Program"), authorizing us to repurchase up to $600.0 million of Trimble’s common stock. The share repurchase authorization does not have an expiration date and replaces the 2015 Stock Repurchase Program, which was completed. The timing and amount of repurchase transactions will be determined by our 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 public notice.

During fiscal 2018, we repurchased approximately 2.4 million shares of common stock in open market purchases under the 2017 Stock Repurchase Programs, at an average price of $37.23 per share, for a total of $90.0 million. At the end of fiscal 2018, the 2017 Stock Repurchase Program had remaining authorized funds of $352.2 million.

The following table provides information relating to our common stock repurchase activity during the fourth quarter of 2018:



	Total Number of Shares Purchased	Average Price Paid per Share	Total Number of Shares Purchased as Part of Publicly Announced Program	Dollar Value of Shares that May Yet Be Purchased Under the Program
September 29, 2018 - November 2, 2018	—		—	$	—
November 3, 2018 - November 30, 2018	—		—	—
December 1, 2018 - December 28, 2018	1,149,276	$34.80	1,149,276	$	352,157,589
	1,149,276		1,149,276

As of February 19, 2019, there were approximately 571 holders of record of our common stock.

Dividend Policy

We have not declared or paid any cash dividends on our common stock during any period for which financial information is provided in this Annual Report on Form 10-K. At this time, we intend to retain future earnings, if any, to fund the development and growth of our business and do not anticipate paying any cash dividends on our common stock in the foreseeable future.


Item 6.	Selected Financial Data

The following selected consolidated financial data should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements and related notes appearing elsewhere in this annual report. Historical results are not necessarily indicative of future results. In particular, because the results of operations and financial condition related to our acquisitions are included in our Consolidated Statements of Income and Consolidated Balance Sheets data commencing on those respective acquisition dates, comparisons of our results of operations and financial condition for periods prior to and subsequent to those acquisitions are not indicative of future results.



Fiscal Years	2018			2017			2016			2015			2014
				*As Adjusted			*As Adjusted
(In millions, except per share data)
Revenue	$	3,108.4		$	2,646.5		$	2,362.1		$	2,290.4		$	2,395.5
Gross margin	$	1,681.0		$	1,377.6		$	1,234.5		$	1,202.2		$	1,290.8
Gross margin percentage	54.1		%	52.1		%	52.3		%	52.5		%	53.9		%
Net income attributable to Trimble Inc.	$	282.8		$	118.4		$	132.4		$	121.1		$	214.1
Net income	$	283.3		$	118.5		$	132.2		$	120.7		$	213.9
Earnings per share
—Basic	$	1.13		$	0.47		$	0.53		$	0.47		$	0.82
—Diluted	$	1.12		$	0.46		$	0.52		$	0.47		$	0.81
Shares used in calculating basic earnings per share	250.0			252.1			250.5			255.8			260.1
Shares used in calculating diluted earnings per share	253.4			256.7			253.9			258.5			264.5

At the End of Fiscal Year	2018			2017			2016			2015			2014
				*As Adjusted			*As Adjusted
(In millions)
Total assets	$	5,776.4		$	4,316.3		$	3,692.2		$	3,680.7		$	3,855.9
Long-term debt and other non-current liabilities	$	1,862.5		$	947.5		$	603.4		$	717.9		$	766.8

* See Note 2 of the Notes to the Consolidated Financial Statements.

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion should be read in conjunction with the consolidated financial statements and the related notes. The following discussion contains forward-looking statements that reflect our plans, estimates and beliefs. Our actual results could differ materially from those discussed in the forward-looking statements. Factors that could cause or contribute to these differences include, but are not limited to, those discussed below and those listed under “Risks Factors.”

EXECUTIVE LEVEL OVERVIEW

Trimble Inc. 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” which is at the center of our “Connected Site” 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 which 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.

•

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. In 2018, over 50% of our sales were to customers located in countries outside of the U.S.

•

During 2018, we acquired e-Builder and Viewpoint to expand our capabilities in construction software solutions. These acquisitions expanded and reinforced our value proposition in the construction software market, bringing enhanced capabilities and offerings in project and program management, extensive relationships with project owners, and an information backbone that enables real-time access to all the information needed to operate a construction enterprise. These additional capabilities are enabling us to strengthen our reach to contractors and owners, as we link detailed construction plans to the delivery and execution of construction projects. e-Builder and Viewpoint’s results of operations post-acquisition are reflected in our Buildings and Infrastructure segment.

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 services 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.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

The preparation of financial statements and related disclosures in conformity with U.S. generally accepted accounting principles (GAAP) requires us to make judgments, assumptions, and estimates that affect the reported amounts of assets, liabilities, revenue, costs of sales, operating expenses, and related disclosures. We consider the accounting polices described below to be our critical accounting policies. These critical accounting policies are impacted significantly by judgments, assumptions, and estimates used in the preparation of the consolidated financial statements, and actual results could differ materially from the amounts reported based on these policies. Our accounting policies are more fully described in Note 2 of our accompanying Notes to Consolidated Financial Statements included in Part II, Item 8, "Financial Statements and Supplementary Data" of this Annual Report on Form 10-K.

Revenue Recognition

We adopted the requirements of the new revenue recognition standard starting in the first quarter of fiscal 2018, utilizing the full retrospective method of transition. Revenue is recognized upon transfer of control of promised products or services to customers in an amount that reflects the consideration that we expect to receive in exchange for those products or services. Revenue is generally recognized net of allowance for returns and any taxes collected from customers. We enter into contracts that can include various combinations of products and services, which are generally capable of being distinct and accounted for as separate performance obligations; however, determining whether products or services are considered distinct performance obligations that should be accounted for separately versus together may sometimes require significant judgment.

Judgment is required to determine stand alone selling price ("SSP") for each distinct performance obligation. We use a range of amounts to estimate SSP when products and services are sold separately and determine whether there is a discount to be allocated based on the relative SSP of the various products and services. In instances where SSP is not directly observable, we determine SSP using information that may include market conditions and other observable inputs.

Income Taxes

We are a U.S. based multinational company operating in multiple U.S. and foreign jurisdictions. Significant judgment is required in evaluating our uncertain tax positions and determining our provision for income taxes. We consider many factors when evaluating and estimating our tax positions and tax benefits, which may require periodic adjustments and may not accurately forecast actual tax audit outcomes. Determining whether an uncertain tax position is effectively settled requires judgment. Changes in recognition or measurement of our uncertain tax positions would result in the recognition of a tax benefit or an additional charge to the tax provision.

Income taxes are accounted for under the liability method, whereby deferred tax assets or liability account balances are calculated at the balance sheet date using current tax laws and rates in effect for the year in which the differences are expected to affect taxable income. A valuation allowance is recorded to reduce the carrying amounts of deferred tax assets if we believe it is more likely than not such assets will not be realized.

We are subject to the periodic examination of our domestic and foreign tax returns by the IRS, state, local, and foreign tax authorities who may challenge our tax positions. We regularly assess the likelihood of adverse outcomes from these examinations in determining the adequacy of our provision for income taxes.

Business Combinations and Valuation of Goodwill and Purchased Intangible Assets

We allocate the fair value of purchase consideration to the assets acquired, liabilities assumed, and non-controlling interests in the acquiree based on their fair values as of the acquisition date. The excess of the fair value of purchase consideration over the fair value of these assets acquired, liabilities assumed, and non-controlling interests in the acquiree is recorded as goodwill.

When determining the fair values of assets acquired, liabilities assumed, and non-controlling interests in the acquiree, management makes significant estimates and assumptions, especially with respect to intangible assets. Critical estimates in valuing intangible assets include, but are not limited to, expected future cash flows, which includes consideration of future growth rates and margins, customer attrition rates, future changes in technology and brand awareness, loyalty and position, and discount rates. Fair value estimates are based on the assumptions management believes a market participant would use in pricing the asset or liability. Identifiable intangible assets are comprised of distribution channels and distribution rights, patents, licenses, technology, acquired backlog, trademarks, and in-process research and development. Amounts recorded in a business combination may change during the measurement period, which is a period not to exceed one year from the date of acquisition, as additional information about conditions existing at the acquisition date becomes available.

We evaluate goodwill on an annual basis and whenever events and changes in circumstances indicate that the carrying amount may not be recoverable. The annual goodwill impairment test is performed at the reporting unit level on the first day of the fourth fiscal quarter of each year. We utilize either a qualitative assessment or a quantitative test to determine if it is more likely than not that the fair value of each reporting unit is less than its carrying amount. In performing the qualitative assessment, we consider events and circumstances, including but not limited to, macroeconomic conditions, industry and market considerations, cost factors, and overall financial performance. When we perform a quantitative test, the estimation of the fair value of a reporting unit involves the use of certain estimates and assumptions including expected future operating performance using risk-adjusted discount rates.

Identifiable intangible assets are being amortized over the period of estimated benefit using the straight-line method. Changes in circumstances such as technological advances, changes to its business model, or changes in the capital strategy could result in the actual useful lives of intangible assets differing from initial estimates. If we determine that the useful life of an asset should be revised, the net book value in excess of the estimated residual value is depreciated over its revised remaining useful life. These assets are evaluated for impairment whenever events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable based on their future cash flows. The estimated future cash flows are primarily based upon assumptions about expected future operating performance. The assets evaluated for impairment are grouped with other assets to the lowest level for which identifiable cash flows are largely independent of the cash flows of other groups of assets and liabilities. If the sum of the estimated undiscounted cash flows is less than the carrying value of the assets, the assets are written down to the estimated fair value.

Inventory Valuation

Our inventories are stated at the lower of cost or net realizable value. Adjustments are also made to reduce the cost of inventory for estimated excess or obsolete balances. Factors influencing these adjustments include declines in demand which impact inventory purchasing forecasts, technological changes, product life cycle and development plans, component cost trends, product pricing, physical deterioration and quality issues. If our estimates used to reserve for excess and obsolete inventory are different from what we expected, we may be required to recognize additional reserves, which would negatively impact our gross margin.

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.



Fiscal Years	2018			2017			2016
				*As Adjusted			*As Adjusted
(In millions)
Revenues:
Product	$	1,999.9		$	1,763.8		$	1,570.6
Service	588.7			475.4			436.7
Subscription	519.8			407.3			354.8
Total revenue	$	3,108.4		$	2,646.5		$	2,362.1
Gross margin	1,681.0			1,377.6			1,234.5
Gross margin %	54.1		%	52.1		%	52.3		%
Total consolidated operating income	320.7			235.7			180.4
Operating income as a % of revenue	10.3		%	8.9		%	7.6		%

* See Note 2 of the Notes to the Consolidated Financial Statements.

Basis of Presentation

We have a 52-53 week fiscal year, ending on the Friday nearest to December 31, which for fiscal 2018 was December 28, 2018. Fiscal 2018, 2017 and 2016 were all 52-week years.

Revenue

In fiscal 2018, total revenue increased by $461.9 million, or 17%, to $3.11 billion from $2.65 billion in fiscal 2017. Overall revenue increased due to organic growth across all segments and most major regions. Acquisitions, including e-Builder and Viewpoint, contributed to growth, particularly in service and subscription revenue. We consider acquisition growth to include acquisition revenue that was not applicable in the prior corresponding periods.

On a segment basis, the increase in fiscal 2018 was primarily due to solid growth across segments, including Buildings and Infrastructure, and to a lesser extent, Resources and Utilities, Transportation and Geospatial. Buildings and Infrastructure revenue increased $257.2 million, or 31%, Resources and Utilities revenue increased $86.1 million, or 18%, Transportation increased $74.8 million, or 11%, and Geospatial revenue increased $64.6 million, or 10%, as compared to fiscal 2017. Buildings and Infrastructure revenue increased due to the e-Builder and Viewpoint acquisitions, which were acquired in the first and third quarters, respectively, and organic growth. Resources and Utilities revenue increased primarily due to continued organic growth in agriculture markets, as well as the impact of the Müller-Elektronik ("Müller") acquisition, Geospatial revenue increased mainly due to surveying organic growth, and Transportation revenue increased due to increased organic subscription growth from new and existing transportation and logistics customers and to a lesser extent, product sales.

By revenue category, overall product revenue increased $236.1 million, or 13%, service revenue increased $113.3 million, or 24%, and subscription revenue increased $112.5 million, or 28%. Product revenue increased primarily due to organic growth in Buildings and Infrastructure due to building construction and civil engineering and construction product sales, in Geospatial due to surveying product sales, and in Resources and Utilities due to agriculture product sales. Transportation contributed to a lesser extent. Service and subscription revenue increases were primarily due to growth in Buildings and Infrastructure, including the impact of the Viewpoint and e-Builder acquisitions, and to a lesser extent, Transportation, and Resources and Utilities.

In fiscal 2017, total revenue increased by $284.4 million, or 12%, to $2.65 billion from $2.36 billion in fiscal 2016. Overall revenue increased primarily due to organic growth across all segments and major regions. To a lesser extent, acquisitions contributed to growth, particularly in product and service revenue.

On a segment basis, the increase in fiscal 2017 was primarily due to Transportation, Buildings and Infrastructure, Resources and Utilities, and to a lesser extent, Geospatial. Transportation increased $90.3 million or 15%, Buildings and Infrastructure revenue increased $87.7 million, or 12%, Resources and Utilities revenue increased $83.8 million, or 21%, and Geospatial revenue increased $22.8 million, or 4%, as compared to fiscal 2017. Transportation revenue increased due to continued organic growth in the transportation and logistics business. Buildings and Infrastructure revenue increased primarily due to strong organic growth in

civil engineering and construction and building construction. Resources and Utilities revenue increased primarily due to acquisitions, in particular the impact of Müller acquisition, and continued organic growth in agriculture, correction services, and forestry. Geospatial revenue increased mainly due to strong geospatial and surveying organic growth.

By revenue category, overall product revenue increased $193.2 million, or 12%, service revenue increased $38.7 million, or 9%, and subscription revenue increased $52.5 million, or 15%. Product, service and subscription revenue increased primarily due to organic growth across all segments. To a lesser extent, acquisitions contributed to growth, particularly in product and service revenue.

During fiscal 2018, sales to customers in North America represented 53%, Europe represented 28%, Asia Pacific represented 13%, and the rest of world represented 6% of our total revenue. During fiscal 2017, sales to customers in North America represented 53%, Europe represented 26%, Asia Pacific represented 14%, and the rest of world represented 7% of our total revenue. During fiscal 2016, sales to customers in North America represented 54%, Europe represented 24%, Asia Pacific represented 15%, and the rest of world represented 7% of our total revenue. We anticipate that sales to international customers will continue to account for a significant portion of our revenue.

No single customer accounted for 10% or more of our total revenue in fiscal 2018, 2017 or 2016. No single customer accounted for 10% or more of our accounts receivable as of fiscal years ended 2018 and 2017.

Gross Margin

Our gross margin varies due to a number of factors including product mix, pricing, distribution channel, production volumes, new product start-up costs, and foreign currency translations.

In fiscal 2018, our gross margin increased by $303.4 million as compared to fiscal 2017, primarily due to increased revenue across all segments - Buildings and Infrastructure, Resources and Utilities, Transportation, and Geospatial. Gross margin as a percentage of total revenue was 54.1% in fiscal 2018 and 52.1% in fiscal 2017. The increase in gross margin percentage was primarily due to improved product mix across all segments, partially offset by increased intangibles amortization and the effects of acquired deferred revenue from the e-Builder and Viewpoint acquisitions that was written down to fair value in purchase accounting.

In fiscal 2017, our gross margin increased by $143.1 million as compared to fiscal 2016, primarily due to increased revenue across all segments - Buildings and Infrastructure, Resources and Utilities, Transportation and to a lesser extent, Geospatial. Gross margin as a percentage of total revenue was 52.1% in fiscal 2017 and 52.3% in fiscal 2016. The slight decrease in the gross margin percentage was primarily due to the impact of acquisitions, particularly Müller.

Operating Income

Operating income increased by $85.0 million for fiscal 2018 as compared to fiscal 2017. Operating income as a percentage of total revenue for fiscal 2018 was 10.3% as compared to 8.9% for fiscal 2017. The increase in operating income was attributable to segment revenue and gross margin expansion and operating expense control, partially offset by higher amortization of purchased intangible assets, acquisition costs associated with the Viewpoint and e-Builder acquisitions and expense related to the acceleration of e-Builder employee stock options in the first quarter.

Operating income increased by $55.3 million for fiscal 2017 as compared to fiscal 2016. Operating income as a percentage of total revenue for fiscal 2017 was 8.9% as compared to 7.6% for fiscal 2016. The increases in operating income and operating income percentage were attributable to revenue expansion and strong operating control in Buildings and Infrastructure, and to a lesser extent Transportation, Resources and Utilities, and Geospatial. Operating income was partially offset by higher corporate expense.

Research and Development, Sales and Marketing, and General and Administrative Expenses

The following table shows research and development (“R&D”), sales and marketing, and general and administrative (“G&A”) expenses in absolute dollars and as a percentage of total revenue for fiscal years 2018, 2017, and 2016 and should be read in conjunction with the narrative descriptions of those operating expenses below.



Fiscal Years	2018			2017			2016
				*As Adjusted			*As Adjusted
(In millions)
Research and development	$	446.1		$	370.2		$	349.6
Percentage of revenue	14		%	14		%	15		%
Sales and marketing	479.8			400.1			374.7
Percentage of revenue	15		%	15		%	16		%
General and administrative	349.8			301.7			256.0
Percentage of revenue	11		%	11		%	11		%
Total	$	1,275.7		$	1,072.0		$	980.3

* See Note 2 of the Notes to the Consolidated Financial Statements.

Overall, R&D, sales and marketing, and G&A expenses increased by approximately $203.7 million in fiscal 2018 compared to fiscal 2017.

Research and development expense increased by $75.9 million, or 21%, in fiscal 2018, as compared to fiscal 2017. Overall, research and development spending was 14% of revenue in both fiscal 2018 and 2017. As compared to the prior year, the increase in fiscal 2018 was primarily due to the impact of acquisitions, primarily Viewpoint and e-Builder, not applicable in the prior corresponding periods, and to a lesser extent, an increase in compensation expense associated with increased headcount, particularly in Transportation.

Research and development expense increased by $20.6 million, or 6%, in fiscal 2017, as compared to fiscal 2016. Overall, research and development spending was 14% of revenue in fiscal 2017 compared to 15% in fiscal 2016. As compared to the prior year, the increase in fiscal 2017 research and development expense was primarily due to an increase in compensation expense associated with increased headcount, particularly in Resources and Utilities, and to a lesser extent, expense increase from fiscal 2017 business acquisitions, primarily Müller expenses not applicable in the prior corresponding periods.

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.

Sales and marketing expense increased by $79.7 million, or 20%, in fiscal 2018, as compared to fiscal 2017. Overall, spending for sales and marketing was 15% of revenue in both fiscal 2018 and 2017. As compared to the prior year, the increase in fiscal 2018 was primarily due to the impact of acquisitions, primarily Viewpoint and e-Builder, not applicable in the prior corresponding periods, and to a lesser extent, increased sales compensation expense.

Sales and marketing expense increased by $25.4 million, or 7%, in fiscal 2017, as compared to fiscal 2016. Overall, spending for sales and marketing was 15% of revenue in fiscal 2017 compared to 16% in fiscal 2016. As compared to the prior year, the increase in fiscal 2017 was primarily due to an increase in compensation expense, and to a lesser extent, expense from fiscal 2017 business acquisitions, not applicable in the prior corresponding periods.

General and administrative expense increased by $48.1 million, or 16%, in fiscal 2018, as compared to fiscal 2017. Overall, general and administrative spending was 11% of revenue in both fiscal 2018 and 2017. As compared to the prior year, the increase in fiscal 2018 was primarily due to the impact of acquisitions, primarily Viewpoint and e-Builder, not applicable in the prior corresponding periods and increased stock-based compensation expense.

General and administrative expense increased by $45.7 million, or 18%, as compared to fiscal 2016. Overall, general and administrative spending was 11% of revenue in both fiscal 2017 and 2016. As compared to the prior year, the increase in fiscal 2017 was primarily due to an increase in compensation expense which included an increase in stock compensation expense, expense from fiscal 2017 business acquisitions, and to a lesser extent, and increase due to higher consulting costs mainly related to the ASC 606 implementation.

Amortization of Purchased Intangible Assets



Fiscal Years	2018		2017		2016
(In millions)
Cost of sales	$	103.2	$	85.8	$	88.6
Operating expenses	76.4		63.0		62.2
Total	$	179.6	$	148.8	$	150.8

Total amortization expense of purchased intangibles increased $30.8 million as compared to fiscal 2017. The increase was primarily due to amortization of new purchased intangibles related to Viewpoint, e-Builder and Stabiplan acquisitions, which were not applicable in the prior year. Total amortization expense of purchased intangibles decreased $2.0 million as compared to fiscal 2016. The decrease was primarily due to the expiration of amortization for prior acquisitions, partially offset by acquisitions not included in fiscal 2016. Overall, total amortization expenses of purchased intangibles represented 6% of revenue in fiscal 2018, 2017, and 2016.

Non-operating Income (Expense), Net

The following table shows non-operating income (expense), net for the periods indicated and should be read in conjunction with the narrative descriptions below:



Fiscal Years	2018			2017			2016
				*As Adjusted			*As Adjusted
(In millions)
Interest expense, net	$	(73.2	)	$	(25.2	)	$	(25.9	)
Foreign currency transaction gain (loss), net	0.5			3.3			(1.9		)
Income from equity method investments, net	28.7			29.5			17.6
Other income, net	1.3			4.9			5.9
Total non-operating income (expense), net	$	(42.7	)	$	12.5		$	(4.3	)

* See Note 2 of the Notes to the Consolidated Financial Statements.

Total non-operating income (expense), net decreased by $55.2 million during fiscal 2018 compared with fiscal 2017. The decrease was primarily due to higher interest costs associated with increased debt and related costs in connection with fiscal 2018 acquisitions.

Total non-operating income (expense), net increased by $16.8 million during fiscal 2017 compared with fiscal 2016. The increase was primarily due to an increase in joint venture profitability and, to a lesser extent, the favorable impact from foreign currency exchange.

Income Tax Provision

The Tax Act, which reduced U.S. federal tax rate from 35% to 21%, imposed a one-time transition tax on accumulated foreign earnings and created new taxes on certain foreign-sourced earnings (referred to as “GILTI”). We recorded reasonable estimates as provisional amounts arising from the Tax Act during the previous quarters including a provisional net income tax expense of $80.2 million recorded in the fourth quarter of 2017. In the fourth quarter of 2018, we completed the accounting for the tax effects of the Tax Act and made immaterial adjustments to the provisional amounts recorded previously. Additionally, in the fourth quarter of fiscal 2018, we finalized our accounting policy election to recognize deferred taxes in relation to GILTI.

Our effective income tax rates for fiscal 2018, 2017 and 2016 were -2%, 52% and 25%, respectively. The fiscal 2018 rate was lower than the U.S. federal statutory rate of 21%, primarily due to benefits from reserve release due to expiration of the U.S. federal statute of limitations for certain tax years, a one-time benefit from deferred taxes in relation to GILTI, and benefits from stock based compensation. The fiscal 2017 rate was higher than the U.S. federal statutory rate of 35% primarily due to the impact of the Tax Act, partially offset by the geographic mix of pretax income, the U.S. federal R&D credit, and stock-based compensation tax benefits. The fiscal 2016 rate was less than the U.S. federal statutory rate of 35% primarily due to the geographic mix of pre-tax income, a divestiture of a non-strategic business, and the U.S. federal R&D credit.

Results by Segment

We report our financial performance, including revenues and operating income, based on four reportable segments: Buildings and Infrastructure, Geospatial, Resources and Utilities, and Transportation.

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. These results are not necessarily in conformance with U.S. GAAP. Beginning with the third quarter of fiscal 2018, we presented segment revenue and income excluding the effects of certain acquired deferred revenue that was written down to fair value in purchase accounting. Segment income 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 presentation is consistent with the way the chief operating decision maker evaluates each segment's performance and allocates resources. Comparative period financial information by reportable segment has been recast to conform with the current presentation.

For additional discussion of our segments, see Note 6 of the Notes to the Consolidated Financial Statements.

The following table is a breakdown of revenue and operating income by segment for the periods indicated and should be read in conjunction with the narrative descriptions below:



Fiscal Years	2018			2017			2016
				*As Adjusted			*As Adjusted
(In millions)
Buildings and Infrastructure
Segment revenue	$	1,087.7		$	830.5		$	742.8
Segment revenue as a percent of total segment revenue	35		%	31		%	31		%
Segment operating income	$	256.7		$	176.2		$	132.7
Segment operating income as a percent of segment revenue	24		%	21		%	18		%
Geospatial
Segment revenue	$	723.1		$	658.5		$	635.7
Segment revenue as a percent of total segment revenue	23		%	25		%	27		%
Segment operating income	$	166.4		$	129.4		$	120.6
Segment operating income as a percent of segment revenue	23		%	20		%	19		%
Resources and Utilities
Segment revenue	$	568.1		$	482.0		$	398.2
Segment revenue as a percent of total segment revenue	18		%	18		%	17		%
Segment operating income	$	168.2		$	137.9		$	119.3
Segment operating income as a percent of segment revenue	30		%	29		%	30		%
Transportation
Segment revenue	$	753.1		$	678.3		$	588.0
Segment revenue as a percent of total segment revenue	24		%	26		%	25		%
Segment operating income	$	143.3		$	114.8		$	103.8
Segment operating income as a percent of segment revenue	19		%	17		%	18		%

* See Note 2 of the Notes to the Consolidated Financial Statements.

A reconciliation of our consolidated segment operating income to consolidated income before income taxes follows:



Fiscal Years	2018			2017			2016
				*As Adjusted			*As Adjusted
(In millions)
Consolidated segment operating income	$	734.6		$	558.3		$	476.4
Unallocated corporate expense	(90.7		)	(86.8		)	(70.5		)
Acquired deferred revenue adjustment	(23.6		)	(2.8		)	(2.6		)
Restructuring charges	(8.7		)	(10.5		)	(13.3		)
Amortization of purchased intangible assets	(179.6		)	(148.8		)	(150.8		)
Stock-based compensation	(76.9		)	(64.8		)	(52.6		)
Amortization of acquisition-related inventory step-up	(0.2		)	(2.8		)	—
Acquisition and divestiture items	(38.9		)	(7.4		)	(6.8		)
Executive transition costs	—			—			(1.0		)
Amortization of acquired capitalized commissions	4.7			1.3			1.6
Consolidated operating income	320.7			235.7			180.4
Non-operating income (expense), net	(42.7		)	12.5			(4.3		)
Consolidated income before taxes	$	278.0		$	248.2		$	176.1

* See Note 2 of the Notes to the Consolidated Financial Statements.

Buildings and Infrastructure

Buildings and Infrastructure revenue increased by $257.2 million, or 31%, while segment operating income increased by $80.5 million, or 46%, for fiscal 2018 as compared to fiscal 2017. Building construction experienced strong organic growth throughout the year across most markets and regions. Civil engineering and construction, which introduced new products such as Earthworks and SiteWorks, contributed to growth. In the fourth quarter this product family was impacted by lower government demand. In addition to organic growth, the e-Builder and Viewpoint acquisitions, which were acquired in the first and third quarters, respectively, contributed to growth, particularly in service and subscription revenue. Segment operating income increased due to increased revenue and gross margin expansion due to product mix.

Buildings and Infrastructure revenue increased by $87.7 million, or 12%, while segment operating income increased by $43.5 million, or 33%, for fiscal 2017 as compared to fiscal 2016. The revenue increase was primarily due to organic growth in building construction and civil engineering and construction due to continued strength in construction markets throughout the year. Buildings and Infrastructure experienced strong growth in markets such as North America, Europe, and Asia Pacific, particularly in Japan and Australia. Segment operating income increased primarily due to revenue expansion and operating expense control across the segment.

Geospatial

Geospatial revenue increased by $64.6 million, or 10%, while segment operating income increased by $37.0 million, or 29%, for fiscal year 2018 as compared to fiscal 2017. The revenue increase was primarily due to organic growth for optical and GNSS survey products, across most major regions, with North America and Europe particularly strong. New products, end market diversification, and stronger regional economies, and to a lesser extent, autonomy products, contributed to the growth. Segment operating income increased primarily due to increased revenue and gross margin expansion due to the sale of higher margin products and operating expense control.

Geospatial revenue increased by $22.8 million, or 4%, while segment operating income increased by $8.8 million, or 7%, for fiscal year 2017 as compared to fiscal 2016. The revenue increase was primarily due to geospatial organic growth for optical and Global Navigation Satellite Systems products, including the new SX 10, our scanning total station, and end market diversification. Geospatial experienced growth, with Europe particularly strong. Segment operating income increased primarily due to revenue and gross margin expansion, partially offset by higher operating expense.

Resources and Utilities

Resources and Utilities revenue increased by $86.1 million, or 18%, while segment operating income increased by $30.3 million, or 22%, for fiscal year 2018 as compared to fiscal 2017. The revenue increase was primarily due to continued growth in agriculture, including the impact of the Müller acquisition, which was acquired in the third quarter of fiscal 2017. Growth in Europe was up due to the Müller acquisition and to a lesser extent, agriculture organic growth. Growth in North America was up due to organic growth. Demand in Asia Pacific was weaker for agricultural products due to droughts in Australia. Resources and Utilities revenue

declined slightly, for the fourth quarter of 2018 as compared to the fourth quarter of 2017 as a result of uncertainty surrounding demand for agricultural products arising from the U.S.-Chinese trade dispute, which may also impact the first half of fiscal 2019. Segment operating income increased due to increased revenue, gross margin expansion due to product mix and operating expense control.

Resources and Utilities revenue increased by $83.8 million, or 21%, while segment operating income increased by $18.6 million, or 16%, for fiscal year 2017 as compared to fiscal 2016. The revenue increase was due to acquisitions, including the impact of the Müller acquisition, and continued organic growth in agriculture and correction services. Agriculture continued to experience growth in North America in our aftermarket and OEM sales. Europe and Brazil were also up and continued to reflect penetration-related growth opportunities. Growth in Europe was also impacted positively by the Müller acquisition. Segment operating income increased due to increased revenue, partially impacted by lower operating margin acquisitions, including Müller.

Transportation

Transportation revenue increased by $74.8 million, or 11%, and segment operating income increased by $28.5 million, or 25%, for fiscal 2018 as compared to fiscal 2017. Revenue increased primarily due to continued organic subscription growth from new and existing transportation and logistics customers and to a lesser extent, product sales, including enterprise software licenses and hardware. Segment operating income and operating income percentage increased primarily due to revenue and gross margin expansion, due to higher margin subscription revenue, partially offset by selected research and development investments.

Transportation revenue increased by $90.3 million, or 15%, and segment operating income increased by $11.0 million, or 11%, for fiscal 2017 as compared to fiscal 2016. Revenue increased primarily due to continued organic growth in the transportation and logistics business, particularly in North America due to the Electronic Logging Device ("ELD") government mandate. The continued technology deployment due to the ELD mandate as well as routing and navigation management products resulted in continued SaaS subscription revenue growth. Segment operating income increased due to revenue expansion in the transportation and logistics business, partially offset by selected growth related investments.

OFF-BALANCE SHEET ARRANGEMENTS

Other than operating leases, inventory purchases, and other commitments incurred in the normal course of business (see Contractual Obligations table below), we do not have any off-balance sheet financing arrangements or liabilities, guarantee contracts, retained or contingent interests in transferred assets, or any obligation arising out of a material variable interest in an unconsolidated entity. We do not have any majority-owned subsidiaries that are not included in the consolidated financial statements. Additionally, we do not have any interest in, or relationship with, any special purpose entities.

In the normal course of business to facilitate sales of our products, we indemnify other parties, including customers, lessors and parties to other transactions with us, with respect to certain matters. We have agreed to hold the other party harmless against losses arising from a breach of representations or covenants, or out of intellectual property infringement or other claims made against certain parties. These agreements may limit the time within which an indemnification claim can be made and the amount of the claim. From time to time, in connection with divesting some of our businesses or assets, we may also indemnify purchasers for certain matters in the normal course of business, such as breaches of representations, covenants or excluded liabilities. In addition, we have entered into indemnification agreements with our officers and directors, and our bylaws contain similar indemnification obligations to our agents.

It is not possible to determine the maximum potential exposure under these indemnification agreements due to the limited history of prior indemnification claims and the unique facts and circumstances involved in each particular agreement. Historically, payments made by us under these agreements have not been material and no liabilities have been recorded for these obligations on the Consolidated Balance Sheets at the end of fiscal 2018 and 2017.

LIQUIDITY AND CAPITAL RESOURCES



At the End of Fiscal Year	2018			2017			2016
				*As Adjusted			*As Adjusted
(In millions)
Cash and cash equivalents and short-term investments	$	172.5		$	537.4		$	327.2
As a percentage of total assets	3.0		%	12.5		%	8.9		%
Principal balance of outstanding debt	$	1,981.9		$	918.2		$	624.8
Fiscal Years	2018			2017			2016
				*As Adjusted			*As Adjusted
(In millions)
Cash provided by operating activities	$	486.7		$	429.7		$	431.1
Cash used in investing activities	(1,649.6		)	(371.2		)	(146.9		)
Cash provided by (used in) financing activities	989.4			66.5			(177.3		)
Effect of exchange rate changes on cash and cash equivalents	(12.5		)	17.4			(6.8		)
Net increase (decrease) in cash and cash equivalents	$	(186.0	)	$	142.4		$	100.1

* See Note 2 of the Notes to the Consolidated Financial Statements.

Cash and Cash Equivalents and Short-Term Investments

At the end of fiscal 2018, cash and cash equivalents and short-term investments totaled $172.5 million compared to $537.4 million at the end of fiscal 2017. We had a principal balance of outstanding debt of $1,981.9 million at the end of fiscal 2018 compared to $918.2 million at the end of fiscal 2017. As a result of the Tax Act, we can repatriate our foreign earnings back to the U.S. when needed with minimal U.S. income tax consequences other than the transition tax and GILTI. We have reinvested a large portion of our undistributed foreign earnings in acquisitions and other investments and we intend to bring back a portion of foreign cash which was subject to the transition tax and GILTI. During fiscal 2018, we repatriated $609.3 million of our foreign earnings to the U.S as a result of the Tax Act. For further information on income taxes, refer to Note 13 to the Consolidated Financial Statements.

Our ability to continue to generate cash from operations will depend in large part on profitability, the rate of collections of accounts receivable, our inventory turns, and our ability to manage other areas of working capital. Our cash, cash equivalents, and short-term investments are maintained with several financial institutions. Deposits held with banks may exceed the amount of insurance provided on such deposits. Generally, these deposits may be redeemed upon demand and are maintained with financial institutions considered to be of reputable credit and to present little credit risk. Our investment policy requires the portfolio to include only securities with high credit quality and a weighted average maturity not to exceed six months, with the main objective of preserving capital and maintaining liquidity. We maintain an investment portfolio of various holdings, types, and maturities. We classify our investments as short-term investments based on their nature and their availability for use in current operations. We believe that our cash and cash equivalents, short-term investments and borrowings, as described below under the heading "Debt", will be sufficient to meet our anticipated operating cash needs, debt service, stock repurchases under the stock repurchase program, and planned capital expenditures.

Operating Activities

Cash provided by operating activities was $486.7 million for fiscal 2018, as compared to $429.7 million for fiscal 2017. The increase of $57.0 million was primarily driven by an increase in net income, net of non-cash items, and an increase in deferred revenue associated with revenue growth, partially offset by a decrease in other liabilities for income taxes paid.

Cash provided by operating activities was $429.7 million for fiscal 2017, as compared to $431.1 million for fiscal 2016. The decrease of $1.4 million was primarily driven by an increase in inventory requirements and accounts receivable, associated with revenue growth, largely offset by an increase in other liabilities for income taxes accrued due to the impact of the Tax Act.

Investing Activities

Cash used in investing activities was $1,649.6 million for fiscal 2018, as compared to $371.2 million for fiscal 2017. The increase of $1,278.4 million used in investing activities of was primarily due to increased spending for business acquisitions, including the $1,211.3 million purchase of Viewpoint and $485.2 million purchase of e-Builder, partially offset by proceeds from the sale of short-term investments.

Cash used in investing activities was $371.2 million for fiscal 2017, as compared to $146.9 million for fiscal 2016. The increase of $224.3 million used in investing activities was primarily due to increased spending for business acquisitions and purchases of short-term investments, partially offset by proceeds from maturities and sales of short-term investments and proceeds from sales of businesses.

Financing Activities

Cash provided by financing activities was $989.4 million for fiscal 2018, as compared to $66.5 million during fiscal 2017. The increase of cash provided by financing activities of $922.9 million was primarily driven by the net proceeds from our debt facilities and our senior notes offering.

Cash provided by financing activities was $66.5 million for fiscal 2017, as compared to cash used of $177.3 million during fiscal 2016. The increase of cash provided by financing activities of $243.8 million was primarily driven by an increase in debt proceeds, net of repayments, partially offset by stock repurchases.

Accounts Receivable and Inventory Metrics



At the End of Fiscal Year	2018	2017
		*As Adjusted
Accounts receivable days sales outstanding	59	56
Inventory turns per year	4.9	5.4

* See Note 2 of the Notes to the Consolidated Financial Statements.

Accounts receivable days sales outstanding were at 59 days at the end of fiscal 2018, as compared to 56 days at the end of fiscal 2017. Our accounts receivable days sales outstanding are calculated based on ending accounts receivable, net, divided by revenue for the fourth fiscal quarter, times a quarterly average of 91 days. Our inventory turns were 4.9 at the end of fiscal 2018, as compared to 5.4 at the end of fiscal 2017. Our inventory turnover is calculated based on total cost of sales for the most recent twelve months divided by average ending inventory, net, for this same twelve month period.

Debt

Each of our debt agreements requires us to maintain compliance with certain debt covenants, all of which we were in compliance with at the end of fiscal 2018.

Senior Notes:

2023 Senior Notes

In June 2018, we issued an aggregate principal amount of $300.0 million in senior notes (the "2023 Senior Notes") that will mature in June 2023 and bear interest at a fixed rate of 4.15 percent per annum. The interest is payable semi-annually in June and December of each year, commencing in December 2018. 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 2023 Senior Notes, as set of forth in the applicable indenture. The 2023 Senior Notes were sold at 99.964 percent of the aggregate principal amount. We incurred issuance costs of $0.9 million in connection with the 2023 Senior Notes that, along with the debt discount upon issuance, are being amortized to interest expense over the term of the 2023 Senior Notes. The 2023 Senior Notes are unsecured and rank equally in right of payment with all of our other senior unsecured indebtedness.

2028 Senior Notes

In June 2018, we issued an aggregate principal amount of $600.0 million in senior notes (the "2028 Senior Notes") that will mature in June 2028 and bear interest at a fixed rate of 4.90 percent per annum. The interest is payable semi-annually in June and December of each year, commencing in December 2018. 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 2028 Senior Notes, as set of forth in the applicable indenture. The 2028 Senior Notes were sold at 99.867 percent of the aggregate principal amount. We incurred issuance costs of $1.8 million in connection with the 2028 Senior Notes that, along with the debt discount upon issuance, are being amortized to interest expense over the term of the 2028 Senior Notes. The 2028 Senior Notes are unsecured and rank equally in right of payment with all of our other senior unsecured indebtedness.

2024 Senior Notes

In November 2014, we issued an aggregate principal amount of $400.0 million in senior notes (the "2024 Senior Notes") that will mature in December 2024 and bear interest at a fixed rate of 4.75 percent per annum. The interest is payable semi-annually in December and June of each year. We incurred issuance costs of $3.0 million in connection with the 2024 Senior Notes that, along with the debt discount upon issuance, are being amortized to interest expense over the term of the senior notes. The 2024 Senior Notes are unsecured and rank equally in right of payment with all of our other senior unsecured indebtedness.

The 2023 Senior Notes, the 2028 Senior Notes and the 2024 Senior Notes are collectively referred to herein as the “Senior Notes.” We may redeem the notes of each series of Senior Notes at its option in whole or in part at any time, in accordance with the terms and conditions set forth in the indenture governing such series. Such indenture also contains covenants limiting our 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 our properties and assets, each subject to certain exceptions.

The Senior Notes are classified as long-term debt in the Consolidated Balance Sheets.

Credit facilities:

Bridge Facility

In April 2018, we entered into a bridge loan commitment letter with a group of lenders (the “Bridge Facility”) that was subsequently terminated in June 2018 upon the issuance of the 2023 Senior Notes, the 2028 Senior Notes and after entering into the 2018 Credit Facility (as defined below). We incurred costs in connection with the Bridge Facility of $5.8 million that were recorded to Interest expense, net.

2018 Credit Facility

In May 2018, we entered into a new credit agreement (the “2018 Credit Facility”), with JPMorgan Chase Bank, N.A. and certain other institutional lenders that provides for $1.75 billion of unsecured credit facilities comprised of a $1.25 billion revolving loan facility maturing May 2023 (the “Revolving Credit Facility”) and a $500.0 million delayed draw term loan facility that matures on the third anniversary of the funding date (the “Term Loan”). Subject to the terms of the 2018 Credit Facility, we may request an additional loan facility up to $500.0 million. At the end of fiscal 2018, $425.0 million was outstanding under the Term Loan and no amounts were outstanding under the Revolving Credit Facility. Borrowings under the Revolving Credit Facility are available for working capital and general corporate purposes, including permitted acquisitions.

The 2018 Credit Facility also contains customary affirmative and negative covenants including, among other requirements, negative covenants that restrict us and our subsidiaries’ ability to create liens and enter into sale and leaseback transactions and that restrict its subsidiaries’ ability to incur indebtedness. Further, the 2018 Credit Facility contains financial covenants that require us to maintain a minimum interest coverage of not less than 3.50 to 1.00 and a maximum leverage ratio of not greater than 3.50:1.00 (or 4.25:1.00 for the four fiscal quarters beginning in the third quarter of fiscal 2018 and 3.75:1.00 for the subsequent two fiscal quarter or for four fiscal quarters in connection with certain material acquisitions).

Uncommitted Facilities

We also have two $75.0 million and one €100.0 million revolving credit facilities which are uncommitted (the "Uncommitted Facilities") at the end of fiscal 2018. The $255.9 million outstanding under the Uncommitted Facilities at the end of fiscal 2018 and $128.0 million outstanding at the end of fiscal 2017 are classified as short-term debt in the Consolidated Balance Sheet. The weighted average interest rate was 2.16% and 2.24% at the end of fiscal 2018 and 2017, respectively.

Promissory Notes and Other Debt

At the end of fiscal 2018 and 2017, we had promissory notes and other notes payable totaling approximately $1.0 million and $1.2 million, respectively, of which $0.7 million and $0.8 million, respectively, was classified as long-term in the Consolidated Balance Sheet.

For additional discussion of our debt, see Note 7 of the Notes to Consolidated Financial Statements.

CONTRACTUAL OBLIGATIONS

The following table summarizes our contractual obligations at the end of fiscal 2018:



	Payments Due By Period
	Total		Less than 1 year		1-3 years		3-5 years		More than 5 years
(In millions)
Principal payments on debt (1)	$	1,981.9	$	256.2	$	425.7	$	300.0	$	1,000.0
Interest payments on debt (2)	494.0		82.1		146.7		115.5		149.7
Operating leases obligations	167.1		42.7		58.4		39.1		26.9
Other purchase obligations and commitments (3)	274.6		243.2		29.0		1.6		0.8
Income taxes payable (4)	86.9		7.6		15.1		21.7		42.5
Total	$	3,004.5	$	631.8	$	674.9	$	477.9	$	1,219.9


(1)	Amount represents principal payments over the life of the debt obligations. (See Note 7 to the Consolidated Financial Statements for further financial information regarding debt.)

(2)

Amount represents the expected interest payments relating to our debt. On November 24, 2014, we issued $400.0 million of 4.75% Senior Notes due December 1, 2024. On June 15, 2018, we issued $300.0 million of 4.15% Senior Notes due June 15, 2023 and $600.0 million of 4.90% Senior Notes due June 15, 2028. The interest on our Senior Notes are payable semi-annually. Interest on our Term Loan and Uncommitted Facilities was estimated to be 3.89% and 2.16% per annum, respectively, based upon recent trends and is payable at least quarterly.


(3)	Other purchase obligations and commitments primarily represent open non-cancelable purchase orders for material purchases with our vendors, and also include estimated payments due for acquisition related earn-outs. Purchase obligations exclude agreements that are cancelable without penalty.


(4)	Income taxes payable represents a one-time transition tax liability related to known amounts of cash taxes payable in future years as a result of the Tax Act. For further information, see Note 13 to the Consolidated Financial Statements.

Excluded from the table above are unrecognized tax benefits of $65.8 million included in Other non-current liabilities, including interest and penalties. At this time, we cannot make a reasonably reliable estimate of the period of cash settlement with tax authorities regarding this liability, and therefore, such amounts are not included in the contractual obligations table above.

EFFECT OF NEW ACCOUNTING PRONOUNCEMENTS

The impact of recent accounting pronouncements is disclosed in Note 2 of our accompanying Notes to the Consolidated Financial Statements included in Part II, Item 8, "Financial Statements and Supplementary Data" of this Annual Report on Form 10-K.

RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES

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 following tables as well as detailed explanations to the adjustments to comparable GAAP measures, are set forth below:

Non-GAAP revenue

We believe this measure helps investors understand the performance of our business as non-GAAP revenue excludes the effects of certain acquired deferred revenue that was written down to fair value in purchase accounting. Management believes that excluding fair value purchase accounting adjustments more closely correlates with the ordinary and ongoing course of the acquired company’s operations and facilitates analysis of revenue growth and business trends.

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 the effects of certain acquired deferred revenue that was written down to fair value in purchase accounting, restructuring charges, amortization of purchased intangible assets, stock-based compensation, amortization of acquisition-related inventory step-up and acquisition/divestiture items from GAAP gross margin. We believe that these adjustments 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 charges, amortization of purchased intangible assets, stock-based compensation, acquisition/divestiture items associated with external and incremental costs resulting directly from merger and acquisition activities such as legal, due diligence, integration and other costs including the acceleration of acquisition stock options, as well as adjustment to the fair value of earn-out liabilities, executive transition costs, and the effects of certain acquired capitalized commissions that were eliminated in purchase accounting from GAAP operating expenses. We believe that these adjustments 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 the effects of purchase accounting adjustments to certain acquired deferred revenue and acquired capitalized commissions, restructuring charges, amortization of purchased intangible assets, stock-based compensation, amortization of acquisition-related inventory step-up, acquisition/divestiture items, and executive transition costs from GAAP operating income. We believe that these adjustments 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/divestiture gains/losses associated with unusual acquisition related items such as intangible asset impairment charges and gains or losses related to the acquisition or sale of certain businesses and investments and debt issuance costs. We believe that these exclusions provide investors with a supplemental view of our ongoing financial results.

Non-GAAP income tax provision

We believe that providing investors with the non-GAAP income tax provision is beneficial 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 the effects of purchase accounting adjustments to certain acquired deferred revenue and acquired capitalized commissions, restructuring charges, amortization of purchased intangible assets, stock-based compensation, amortization of acquisition-related inventory step-up, acquisition/divestiture items, executive transition costs, debt issuance costs and non-GAAP tax adjustments from GAAP net income. We believe our investors benefit from understanding these adjustments and from an alternative view of our net income performance 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 the effects of purchase accounting adjustments to certain acquired deferred revenue and acquired capitalized commissions, restructuring charges, amortization of purchased intangible assets, stock-based compensation, amortization of acquisition-related inventory step-up, acquisition/divestiture items, executive transition costs, debt issuance costs and non-GAAP tax adjustments from GAAP diluted net income per share. We believe that these adjustments offer investors a useful view of our diluted net income per share compared to our past diluted net income per share.

Adjusted EBITDA

We believe that adjusted EBITDA assists investors in comparing our performance over various reporting periods on a consistent basis. Adjusted EBITDA refers to non-GAAP operating income plus depreciation and income from equity method investments. We also believe the measure provides useful information to investors in understanding and evaluating our operating results in the same manner as our management and board of directors.

These non-GAAP measures can be used to evaluate our historical and prospective financial performance, as well as our performance relative to competitors. We believe some of our investors track our ""core operating performance"" as a means of evaluating our performance in the ordinary, ongoing and customary course of our operations. Core operating performance excludes items that are non-cash, not expected to recur or not reflective of ongoing financial results. Management also believes that looking at our core operating performance provides a supplemental way to provide consistency in period to period comparisons. Accordingly, management excludes from non-GAAP those items relating to the effects of purchase accounting adjustments to certain acquired deferred revenue and acquired capitalized commissions, restructuring charges, amortization of purchased intangible assets, stock-based compensation, amortization of acquisition-related inventory step-up, acquisition/divestiture items, executive transition costs, debt issuance costs and non-GAAP tax adjustments. For detailed explanations of the adjustments made to comparable GAAP measures, see items ( A ) - ( N ) below.



		Fiscal Years
		2018				2017				2016
						* As Adjusted				* As Adjusted
(In millions, except per share data)		Dollar Amount		% of Revenue		Dollar Amount		% of Revenue		Dollar Amount		% of Revenue
REVENUE:
GAAP revenue:		$	3,108.4			$	2,646.5			$	2,362.1
Acquired deferred revenue adjustment	( A )	23.6				2.8				2.6
Non-GAAP Revenue:		$	3,132.0			$	2,649.3			$	2,364.7
GROSS MARGIN:
GAAP gross margin:		$	1,681.0	54.1	%	$	1,377.6	52.1	%	$	1,234.5	52.3	%
Acquired deferred revenue adjustment	( A )	23.6				2.8				2.6
Restructuring charges	( B )	0.5				3.6				1.7
Amortization of purchased intangible assets	( C )	103.2				85.8				88.6
Stock-based compensation	( D )	4.5				3.9				3.8
Amortization of acquisition-related inventory step-up	( E )	0.2				2.8				—
Acquisition / divestiture items	( F )	2.0				—				—
Non-GAAP gross margin:		$	1,815.0	58.0	%	$	1,476.5	55.7	%	$	1,331.2	56.3	%
OPERATING EXPENSES:
GAAP operating expenses:		$	1,360.3	43.8	%	$	1,141.9	43.1	%	$	1,054.1	44.6	%



Restructuring charges	( B )	(8.2		)			(6.9		)			(11.6		)
Amortization of purchased intangible assets	( C )	(76.4		)			(63.0		)			(62.2		)
Stock-based compensation	( D )	(72.4		)			(60.9		)			(48.8		)
Acquisition / divestiture items	( F )	(36.9		)			(7.4		)			(6.8		)
Executive transition costs	( G )	—					—					(1.0		)
Amortization of acquired capitalized commissions	( H )	4.7					1.3					1.6
Non-GAAP operating expenses:		$	1,171.1		37.4	%	$	1,005.0		37.9	%	$	925.3		39.1	%
OPERATING INCOME:
GAAP operating income:		$	320.7		10.3	%	$	235.7		8.9	%	$	180.4		7.6	%
Acquired deferred revenue adjustment	( A )	23.6					2.8					2.6
Restructuring charges	( B )	8.7					10.5					13.3
Amortization of purchased intangible assets	( C )	179.6					148.8					150.8
Stock-based compensation	( D )	76.9					64.8					52.6
Amortization of acquisition-related inventory step-up	( E )	0.2					2.8					—
Acquisition / divestiture items	( F )	38.9					7.4					6.8
Executive transition costs	( G )	—					—					1.0
Amortization of acquired capitalized commissions	( H )	(4.7		)			(1.3		)			(1.6		)
Non-GAAP operating income:		$	643.9		20.6	%	$	471.5		17.8	%	$	405.9		17.2	%
NON-OPERATING INCOME (EXPENSE), NET:
GAAP non-operating income (expense), net:		$	(42.7	)			$	12.5				$	(4.3	)
Acquisition / divestiture items	( F )	(0.3		)			(0.3		)			(3.5		)
Debt issuance costs	( I )	6.7					—					—
Non-GAAP non-operating income (expense), net:		$	(36.3	)			$	12.2				$	(7.8	)

					GAAP and Non-GAAP Tax Rate % (N)					GAAP and Non-GAAP Tax Rate % (N)					GAAP and Non-GAAP Tax Rate % (N)
INCOME TAX PROVISION (BENEFIT):
GAAP income tax provision (benefit):		$	(5.3	)	(2	)%	$	129.7		52	%	$	43.9		25	%
Non-GAAP items tax effected:	( J )	47.8					46.9					55.5
Difference in GAAP and Non-GAAP tax	( K )	27.3					14.8					(3.8		)
Tax reform impacts	( L )	21.3					(80.2		)			—
Reserve release upon statute of limitations expiration	( M )	$	24.3				—					$	—
Non-GAAP income tax provision:		$	115.4		19	%	$	111.2		23	%	$	95.6		24	%
NET INCOME:
GAAP net income attributable to Trimble Inc.		$	282.8				$	118.4				$	132.4
Acquired deferred revenue adjustment	( A )	23.6					2.8					2.6
Restructuring charges	( B )	8.7					10.5					13.3
Amortization of purchased intangible assets	( C )	179.6					148.8					150.8
Stock-based compensation	( D )	76.9					64.8					52.6
Amortization of acquisition-related inventory step-up	( E )	0.2					2.8					—
Acquisition / divestiture items	( F )	38.6					7.1					3.3
Executive transition costs	( G )	—					—					1.0
Amortization of acquired capitalized commissions	( H )	(4.7		)			(1.3		)			(1.6		)
Debt issuance costs	( I )	6.7					—					—



Non-GAAP tax adjustments	( J ) - ( M )	(120.7		)	18.5		(51.7		)
Non-GAAP net income attributable to Trimble Inc.		$	491.7		$	372.4	$	302.7
DILUTED NET INCOME PER SHARE:
GAAP diluted net income per share attributable to Trimble Inc.		$	1.12		$	0.46	$	0.52
Acquired deferred revenue adjustment	( A )	0.09			0.01		0.01
Restructuring charges	( B )	0.04			0.04		0.06
Amortization of purchased intangible assets	( C )	0.71			0.58		0.59
Stock-based compensation	( D )	0.30			0.25		0.20
Amortization of acquisition-related inventory step-up	( E )	—			0.01		—
Acquisition / divestiture items	( F )	0.15			0.03		0.01
Executive transition costs	( G )	—			—		—
Amortization of acquired capitalized commissions	( H )	(0.02		)	—		(0.01		)
Debt issuance costs	( I )	0.03			—		—
Non-GAAP tax adjustments	( J ) - ( M )	(0.48		)	0.07		(0.19		)
Non-GAAP diluted net income per share attributable to Trimble Inc.		$	1.94		$	1.45	$	1.19
ADJUSTED EBITDA:
Non-GAAP operating income:		$	643.9		$	471.5	$	405.9
Depreciation expense		35.6			34.6		37.0
Income from equity method investments, net		28.7			29.5		17.6
Adjusted EBITDA		$	708.2		$	535.6	$	460.5

* See Note 2 of the Notes to the Consolidated Financial Statements for a summary of adjustments

(A)

Acquired deferred revenue adjustment. Purchase accounting generally requires us to write-down acquired deferred revenue to fair value. Our GAAP revenue includes the fair value impact from purchase accounting for post contract support and subscriptions contracts assumed in connection with our acquisitions. The non-GAAP adjustment to our revenue is intended to reflect the full amount of such revenue. We believe this adjustment is useful to investors as a measure of the ongoing performance of our business and facilitates analysis of revenue growth and business trends.

(B)

Restructuring charges. Included in our GAAP presentation of cost of sales and operating expenses, restructuring charges recorded are primarily for employee compensation resulting from reductions in employee headcount in connection with our company restructurings. We exclude restructuring charges 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. We have incurred restructuring expense in each of the periods presented. However the amount incurred can vary significantly based on whether a restructuring has occurred in the period and the timing of headcount reductions.

(C)

Amortization of purchased intangible assets. Included in our GAAP presentation of gross margin and operating expenses is amortization of purchased intangible assets. U.S. 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 use to amortize 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 the amortization of purchased intangible assets, which primarily represents technology and/or customer relationships already developed, it provides an alternative way for investors to compare our operations pre-acquisition to those post-acquisition and to those of our competitors that have pursued internal

growth strategies. However, we note that companies that grow internally will incur costs to develop intangible assets that will be expensed in the period incurred, which may make a direct comparison more difficult.

(D)

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 fiscal years 2018, 2017 and 2016, stock-based compensation was allocated as follows:



	Fiscal Years
(In millions)	2018		2017		2016
Cost of sales	$	4.5	$	3.9	$	3.8
Research and development	15.0		10.4		9.1
Sales and Marketing	10.0		9.3		8.3
General and administrative	47.4		41.2		31.4
Total stock-based compensation expense	$	76.9	$	64.8	$	52.6

(E)

Amortization of acquisition-related inventory step-up. The purchase accounting entries associated with our business acquisitions require us to record inventory at its fair value, which is sometimes greater than the previous book value of the inventory. Included in our GAAP presentation, the increase in inventory value is amortized to cost of sales over the period that the related product is sold. We exclude inventory step-up amortization from our non-GAAP measures because it is a non-cash expense that we do not believe is indicative of our ongoing operating results. We further believe that excluding this item from our non-GAAP results is useful to investors in that it allows for period-over-period comparability.

(F)

Acquisition / divestiture items. Included in our GAAP presentation of cost of sales and operating expenses, acquisition costs consist of external and incremental costs resulting directly from merger and acquisition and strategic investment activities such as legal, due diligence, integration and other closing costs, including the acceleration of acquisition stock options, as well as adjustments to the fair value of earn-out liabilities. Included in our GAAP presentation of non-operating income (expense), net, acquisition/divestiture items includes unusual acquisition, investment and/or divestiture gains/losses. Although we do numerous acquisitions, the costs that have been excluded from the non-GAAP measures are costs specific to particular acquisitions. These are one-time costs that vary significantly in amount and timing and are not indicative of our core operating performance.

(G)

Executive transition costs. Included in our GAAP presentation of operating expenses are amounts paid to the Company's former CFO upon his departure under the terms of his executive severance agreement. We excluded these payments from our non-GAAP measures because they represent non-recurring expenses and are not indicative of our ongoing operating expenses. We further believe that excluding the executive transition costs from our non-GAAP results is useful to investors in that it allows for period-over-period comparability.

(H)

Amortization of acquired capitalized commissions. Purchase accounting generally requires us to eliminate capitalized sales commissions balances as of the acquisition date. Our GAAP sales and marketing expenses generally do not reflect the amortization of these capitalized sales commissions balances. The non-GAAP adjustment to increase our sales and marketing expenses is intended to reflect the full amount of amortization related to such balances as though the acquired companies operated independently in the periods presented. We believe this adjustment to sales and marketing expenses is useful to investors as a measure of the ongoing performance of our business.

(I)

Debt issuance costs. Included in our non-operating income (loss), net this amount represents incurred costs in connection with the Bridge Facility, costs associated with the issuance of new credit facilities and Senior Notes that were not capitalized as debt issuance costs and a write-off of debt issuance costs for terminated and/or modified credit facilities. We excluded the debt issuance cost write-off from our non-GAAP measures. We believe that investors benefit from excluding this item from our non-operating income to facilitate an evaluation of our non-operating income trends.


(J)	Non-GAAP items tax effected. This amount adjusts the provision for income taxes to reflect the effect of the non-GAAP items ( A ) - ( I ) on non-GAAP net income. We believe this information is useful to investors because it provides for consistent treatment of the excluded items in this non-GAAP presentation.