Item 8. Financial Statements and Supplementary Data

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Item 8. Financial Statements and Supplementary Data

CONSOLIDATED BALANCE SHEETS


At the End of Year	2021		2020
(In millions, except par values)
ASSETS
Current assets:
Cash and cash equivalents	$	325.7	$	237.7

Accounts receivable, net	624.8		620.5

Inventories	363.3		301.7

Other current assets	136.8		121.5
Total current assets	1,450.6		1,281.4
Property and equipment, net	233.2		251.8
Operating lease right-of-use assets	141.0		128.9
Goodwill	3,981.5		3,876.5
Other purchased intangible assets, net	506.6		580.1
Deferred income tax assets	502.0		510.2
Other non-current assets	284.7		248.0
Total assets	$	7,099.6	$	6,876.9
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Short-term debt	$	—	$	255.8
Accounts payable	207.3		143.2
Accrued compensation and benefits	231.0		166.8
Deferred revenue	548.8		560.5

Other current liabilities	201.5		185.0
Total current liabilities	1,188.6		1,311.3
Long-term debt	1,293.2		1,291.4
Deferred revenue, non-current	83.0		53.3
Deferred income tax liabilities	263.1		300.3
Income taxes payable	54.5		62.2
Operating lease liabilities	121.4		109.2
Other non-current liabilities	151.1		150.6
Total liabilities	3,154.9		3,278.3
Commitments and contingencies (Note 8)
Stockholders’ equity:
Preferred stock, $0.001 par value; 3.0 shares authorized; none issued and outstanding	—		—
Common stock, $0.001 par value; 360.0 shares authorized; 250.9 and 250.8 shares issued and outstanding at the end of 2021 and 2020	0.3		0.3
Additional paid-in-capital	1,935.6		1,801.7
Retained earnings	2,170.5		1,893.4
Accumulated other comprehensive loss	(161.7)		(98.5)
Total Trimble Inc. stockholders’ equity	3,944.7		3,596.9
Noncontrolling interests	—		1.7
Total stockholders' equity	3,944.7		3,598.6
Total liabilities and stockholders’ equity	$	7,099.6	$	6,876.9

See accompanying Notes to the Consolidated Financial Statements.

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CONSOLIDATED STATEMENTS OF INCOME


	2021		2020		2019
(In millions, except per share data)
Revenue:
Product	$	2,247.5	$	1,828.0	$	1,934.8
Service	649.4		644.8		686.2
Subscription	762.2		674.9		643.3
Total revenue	3,659.1		3,147.7		3,264.3
Cost of sales:
Product	1,090.1		855.0		939.4
Service	229.9		234.5		253.9
Subscription	216.7		211.0		196.0
Amortization of purchased intangible assets	87.7		92.3		94.1
Total cost of sales	1,624.4		1,392.8		1,483.4
Gross margin	2,034.7		1,754.9		1,780.9
Operating expense:
Research and development	536.6		475.9		469.7
Sales and marketing	506.8		467.0		504.2
General and administrative	369.1		300.9		330.6
Restructuring charges	10.3		25.8		26.8
Amortization of purchased intangible assets	50.9		65.5		73.7
Total operating expense	1,473.7		1,335.1		1,405.0
Operating income	561.0		419.8		375.9
Non-operating expense, net:
Interest expense, net	(65.4)		(77.6)		(82.4)

Income from equity method investments, net	37.7		39.4		35.8
Other income, net	41.3		13.4		15.5
Total non-operating income (expense), net	13.6		(24.8)		(31.1)
Income before taxes	574.6		395.0		344.8
Income tax provision (benefit)	81.8		4.4		(169.7)
Net income	492.8		390.6		514.5
Net gain attributable to noncontrolling interests	0.1		0.7		0.2
Net income attributable to Trimble Inc.	$	492.7	$	389.9	$	514.3
Earnings per share attributable to Trimble Inc.:
Basic	$	1.96	$	1.56	$	2.05
Diluted	$	1.94	$	1.55	$	2.03
Shares used in calculating earnings per share:
Basic	251.4		250.5		250.8
Diluted	254.3		252.3		252.9

See accompanying Notes to the Consolidated Financial Statements.

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CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME


	2021		2020		2019

(In millions)
Net income	$	492.8	$	390.6	$	514.5
Foreign currency translation adjustments, net of tax $1.0 in 2021, $0.5 in 2020, and $0.1 in 2019	(64.0)		77.1		10.3

Net unrealized gain (loss), net of tax	0.8		1.2		(1.0)
Comprehensive income	429.6		468.9		523.8
Comprehensive income attributable to noncontrolling interests	0.1		0.7		0.2
Comprehensive income attributable to Trimble Inc.	$	429.5	$	468.2	$	523.6

See accompanying Notes to the Consolidated Financial Statements.

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CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY


	Common stock					Retained Earnings		Accumulated Other Comprehensive Loss		Total Stockholders’ Equity		Noncontrolling Interest		Total
	Shares	Amount		Additional Paid-In Capital
(In millions)
Balance at the end of 2018	250.9	$	0.3	$	1,591.9	$	1,268.3	$	(186.1)	$	2,674.4	$	0.4	$	2,674.8
Net income	—	—		—		514.3		—		514.3		0.2		514.5
Other comprehensive income	—	—		—		—		9.3		9.3		—		9.3
Comprehensive income										523.6				523.8
Issuance of common stock under employee plans, net of tax withholdings	3.7	—		59.8		(30.7)		—		29.1		—		29.1
Stock repurchases	(4.7)	(0.1)		(30.6)		(149.1)		—		(179.8)		—		(179.8)
Stock-based compensation	—	—		72.5		—		—		72.5		—		72.5
Noncontrolling interest investments	—	—		(0.8)		—		—		(0.8)		0.8		—
Balance at the end of 2019	249.9	$	0.2	$	1,692.8	$	1,602.8	$	(176.8)	$	3,119.0	$	1.4	$	3,120.4
Net income	—	—		—		389.9		—		389.9		0.7		390.6
Other comprehensive income	—	—		—		—		78.3		78.3		—		78.3
Comprehensive income										468.2				468.9
Issuance of common stock under employee plans, net of tax withholdings	2.8	0.1		40.6		(30.7)		—		10.0		—		10.0
Stock repurchases	(1.9)	—		(13.0)		(68.6)		—		(81.6)		—		(81.6)
Stock-based compensation	—	—		81.3		—		—		81.3		—		81.3
Noncontrolling interest investments	—	—		—		—		—		—		(0.4)		(0.4)
Balance at the end of 2020	250.8	$	0.3	$	1,801.7	$	1,893.4	$	(98.5)	$	3,596.9	$	1.7	$	3,598.6
Net income						492.7				492.7		0.1		492.8
Other comprehensive loss	—	—		—		—		(63.2)		(63.2)		—		(63.2)
Comprehensive income										429.5				429.6
Issuance of common stock under employee plans, net of tax withholdings	2.2	—		36.2		(51.3)		—		(15.1)		—		(15.1)
Stock repurchases	(2.1)	—		(15.7)		(164.3)		—		(180.0)		—		(180.0)
Stock-based compensation	—	—		112.8		—		—		112.8		—		112.8
Noncontrolling interest investments	—	—		0.6		—		—		0.6		(1.8)		(1.2)
Balance at the end of 2021	250.9	$	0.3	$	1,935.6	$	2,170.5	$	(161.7)	$	3,944.7	$	—	$	3,944.7

See accompanying Notes to the Consolidated Financial Statements.

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CONSOLIDATED STATEMENTS OF CASH FLOWS


	2021		2020		2019

(In millions)
Cash flows from operating activities
Net income	$	492.8	$	390.6	$	514.5
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation expense	41.3		39.7		39.4
Amortization expense	138.6		157.8		167.8
Deferred income taxes	(26.9)		(52.9)		(220.2)
Stock-based compensation	122.6		83.0		75.0
Divestitures (gain) loss, net	(43.9)		(12.2)		(12.4)
Other, net	19.2		42.4		10.1
(Increase) decrease in assets:
Accounts receivable, net	(9.0)		(14.0)		(96.0)
Inventories	(72.9)		(5.0)		(21.3)
Other current and non-current assets	(30.2)		2.5		11.0
Increase (decrease) in liabilities:
Accounts payable	60.3		(15.7)		14.5
Accrued compensation and benefits	54.1		34.9		(46.4)
Deferred revenue	27.4		65.7		148.2
Other current and non-current liabilities	(22.9)		(44.8)		0.8
Net cash provided by operating activities	750.5		672.0		585.0
Cash flow from investing activities:
Acquisitions of businesses, net of cash acquired	(236.1)		(201.9)		(220.8)
Purchases of property and equipment	(46.1)		(56.8)		(69.0)
Net proceeds from sale of businesses	67.3		27.5		0.5
Net proceeds from sale of property and equipment	20.8		0.4		0.4
Other, net	(9.4)		(1.0)		13.6
Net cash used in investing activities	(203.5)		(231.8)		(275.3)
Cash flows from financing activities:
Issuance of common stock, net of tax withholdings	(15.1)		10.0		29.1
Repurchase of common stock	(180.0)		(81.6)		(179.8)
Proceeds from debt and revolving credit lines	198.9		1,173.8		1,195.4
Payments on debt and revolving credit lines	(449.9)		(1,486.0)		(1,322.9)
Other, net	(1.6)		(16.5)		(14.4)
Net cash used in financing activities	(447.7)		(400.3)		(292.6)
Effect of exchange rate changes on cash and cash equivalents	(11.3)		8.6		(0.4)
Net increase in cash and cash equivalents	88.0		48.5		16.7
Cash and cash equivalents - beginning of year	237.7		189.2		172.5
Cash and cash equivalents - end of year	$	325.7	$	237.7	$	189.2

Supplemental cash flow disclosure:
Cash paid for income taxes, net	$	98.3	$	59.0	$	63.1
Cash paid for interest	$	61.8	$	71.8	$	79.2

See accompanying Notes to the Consolidated Financial Statements.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1: DESCRIPTION OF BUSINESS AND ACCOUNTING POLICIES

Trimble Inc., (“we” or “our” or “us”) is incorporated in the State of Delaware since October 2016.

We are a leading provider of technology solutions that enable professionals and field mobile workers to improve or transform their work processes. We focus on transforming the way the world works by delivering products and services that connect the physical and digital worlds. We generate revenue primarily through the sale of our hardware, software, maintenance and support, professional services, and subscriptions.

Basis of Presentation

These Consolidated Financial Statements include our results of our consolidated subsidiaries. Intercompany accounts and transactions have been eliminated. Noncontrolling interests represent the noncontrolling stockholders’ proportionate share of the net assets and results of operations of our consolidated subsidiaries.

We use a 52–53 week fiscal year ending on the Friday nearest to December 31. Fiscal 2021 and 2020 were both 52-week years ending on December 31, 2021 and January 1, 2021, respectively. Fiscal 2019 was a 53-week year ended on January 3, 2020. Unless otherwise stated, all dates refer to our fiscal year and fiscal periods.

Use of Estimates

The preparation of financial statements in accordance with U.S. generally accepted accounting principles (“GAAP”) requires us to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Estimates and assumptions are used for revenue recognition, including determining the nature and timing of satisfaction of performance obligations and determining standalone selling price (“SSP”) of performance obligations, provision for credit losses, sales returns reserve, inventory valuation, warranty costs, investments, acquired intangibles, goodwill and intangible asset impairment analysis, other long-lived asset impairment analysis, stock-based compensation, and income taxes. We base our estimates on historical experience and various other assumptions we believe to be reasonable. Actual results that we experience may differ materially from our estimates.

Reportable Segments

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

Our Chief Executive Officer and 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.

Revenue Recognition

Significant Judgments

Revenue is recognized upon transfer of control of promised products or services to customers in an amount that reflects the consideration we expect to receive in exchange for those products or services. Revenue is recognized net of allowance for returns and any taxes collected from customers. We enter into contracts that may 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 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.

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Nature of Goods and Services

We generate revenue primarily from products, services, and subscriptions; each of which is a distinct performance obligation. Descriptions are as follows:

Product

Product revenue includes hardware and software licenses.

Hardware is recognized when the control of the product transfers to the customer, which is generally when the product is shipped. We recognize shipping fees reimbursed by customers as revenue and the cost for shipping as an expense in Cost of sales when control over products has transferred to the customer.

Software including perpetual and term licenses is recognized upon delivery and commencement of license term. In general, our contracts do not provide for customer specific acceptances.

Service

Service revenue includes hardware and software maintenance and support and professional services.

Hardware maintenance and support, commonly called extended warranty, entitles the customer to receive replacement parts and repair services. Extended warranty is separately priced and is recognized on a straight-line basis over the extended service period, which begins after the standard warranty period, ranging from one to two years depending on the product line.

Software maintenance and support entitles the customer to receive software product upgrades and enhancements on a when and if available basis and technical support. Software maintenance is recognized on a straight-line basis commencing upon product delivery over the post-contract support term, which ranges from one to three years, with one year being most common.

Professional services include installation, training, configuration, project management, system integrations, customization, data migration/conversion, and other implementation services. The majority of professional services are not complex, can be provided by other vendors, and are readily available and billed on a time-and-material basis. Revenue for distinct professional services is recognized over time, based on work performed.

In some contracts, products and professional services may be combined into a single performance obligation. This generally arises when products or subscriptions are sold with significant customization, modification, or integration services. Revenue for the combined performance is recognized over time as the work progresses because of the continuous transfer of control to the customer.

Subscription

Subscription revenue includes software as a service (“SaaS”), data, and hosting services.

SaaS may be sold with devices used to collect, generate, and transmit data. SaaS is distinct from the related devices. In addition, we may host the software that the customer has separately licensed. Hosting services are distinct from the underlying software.

Subscription terms generally range from month-to-month to one to three years. Subscription revenue is recognized monthly over the subscription term, commencing from activation.

Accounts Receivable, Net

Accounts receivable, net, includes billed and unbilled amounts due from customers. Unbilled receivables include revenue recognized that exceeds the amount billed to the customer, provided the billing is not contingent upon future performance, and we have the unconditional right to future payment with only the passage of time required. Both billed and unbilled amounts due are stated at their net estimated realizable value. The unbilled receivables were $39.5 million and $138.7 million at the end of 2021 and 2020.

We maintain an allowance for credit losses to provide for the estimated amount of receivables that will not be collected. Each reporting period, we evaluate the collectability of our trade accounts receivable based on a number of factors such as age of the accounts receivable balances, credit quality, historical experience, and current and future economic conditions that may affect a customer’s ability to pay. At the end of 2021 and 2020, our allowance for credit losses was $7.0 million. The provision for credit losses for the years ended 2021, 2020 and 2019 were $2.6 million, $7.1 million, and $6.5 million.

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Deferred Costs to Obtain Customer Contracts

Sales commissions incurred in obtaining contracts that include maintenance or subscription revenue are deferred if the contractual term is greater than a year or if renewals are expected, and the renewal commission is not commensurate with the initial commission. These commission costs are deferred and amortized over the estimated benefit period, which is either the contract term or the shorter of customer life or product life that ranges from three to seven years. Contracts with an amortization period of a year or less from this deferral requirement are expensed as incurred.

At the end of 2021 and 2020, deferred costs to obtain customer contracts were $59.7 million and $51.3 million. These costs are included in Other non-current assets in the Consolidated Balance Sheets. There was no impairment loss in relation to the costs capitalized for the periods presented.

Amortization expense related to deferred costs to obtain customer contracts was $25.9 million, $22.8 million, and $22.3 million, for 2021, 2020, and 2019. This expense is included in Sales and marketing expense in our Consolidated Statements of Income.

Inventories

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 that impact inventory purchasing forecasts, technological changes, product life cycle and development plans, component cost trends, product pricing, physical deterioration, and quality issues. If our estimate used to reserve for excess and obsolete inventory differs from what is expected, we may be required to recognize additional reserves, which would negatively impact our gross margin.

Property and Equipment, Net

Property and equipment are depreciated using the straight-line method over the shorter of the estimated useful lives or the lease terms when applicable. Useful lives generally range from four to six years for machinery and equipment, five to ten years for furniture and fixtures, two to five years for computer equipment and software, thirty-nine years for buildings, and the life of the lease for leasehold improvements. We capitalize eligible costs to acquire or develop certain internal-use software and amortize those assets using the straight-line method over the estimated useful lives of the assets, which range from two to five years.

Leases

We determine if an arrangement is a lease at inception. Operating leases with lease terms greater than one year are included in Operating lease right-of-use (“ROU”) assets, in both Other current liabilities, and Operating lease liabilities in our Consolidated Balance Sheets.

ROU assets represent our right to use an underlying asset for the lease term, and lease liabilities represent our obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. Present value is determined by using our incremental borrowing rate based on the estimated rate of interest for collateralized borrowings over a similar term of the lease payments at commencement date. The operating lease ROU asset includes adjustments made for uneven rents, lease incentives, and lease impairments. Lease expense for lease payments is recognized on a straight-line basis over the lease term.

Lease agreements that include both lease and non-lease components are accounted for as part of the overall lease arrangement.

Business Combinations

We account for business combinations using the acquisition method of accounting whereby certain identifiable assets and liabilities of the acquired business and any noncontrolling interest in the acquiree are recorded at their estimated fair values as of the acquisition date. Any purchase consideration in excess of the estimated fair values of the net assets acquired is recorded as goodwill. Acquisition-related expenses and related restructuring costs are expensed as incurred.

When determining the fair values of certain assets acquired, liabilities assumed, and noncontrolling interests in the acquiree, we make significant estimates and assumptions, especially concerning intangible assets. Critical estimates when valuing intangible assets include expected future cash flows based on consideration of future growth rates and margins, customer attrition rates, future changes in technology and brand awareness, loyalty and position, and discount rates.

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Goodwill

We evaluate goodwill on an annual basis or more frequently if indicators of potential impairment exist. We utilize either a qualitative or quantitative approach to assess the likelihood of impairment as of the first day of the fourth quarter. When performing the qualitative approach, we consider macroeconomic conditions, industry and market considerations, overall financial performance, and other relevant events and factors that may impact the reporting units. When performing the quantitative approach, we compare the reporting unit’s carrying amount, including goodwill, to the reporting unit's fair value. The estimation of a reporting unit's fair value involves using estimates and assumptions including expected future operating performance using risk-adjusted discount rates. Actual future results may differ from those estimates. If the carrying amount of the reporting unit exceeds its fair value, an impairment loss is recognized.

Intangible Assets

Intangible assets acquired individually, with a group of other assets, or in a business combination are recorded at fair value. Our intangible assets are amortized over the period of estimated benefit using the straight-line method over their estimated useful lives, which range from three years to ten years and have a weighted-average useful life of approximately seven years. We write off fully amortized intangible assets when those assets are no longer used.

We review intangible assets for impairment whenever events or changes in circumstances indicate that the carrying amount of those 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.

Warranty

We accrue for warranty costs as part of our cost of sales based on associated material product costs, technical support labor costs, and costs incurred by third parties performing work on our behalf. Our expected future cost is primarily estimated based upon historical trends in the volume of product returns within the warranty period and the cost to repair or replace the equipment. When products sold include warranty provisions, they are covered by a warranty for periods ranging from one year to two years.

Accrued warranty expenses of $17.1 million and $13.8 million are included in Other current liabilities in the Consolidated Balance Sheets at the end of 2021 and 2020.

Foreign Currency Translation

Assets and liabilities recorded in foreign currency are translated to U.S. dollars at the exchange rates on the balance sheet date. Revenue and expense are translated at average monthly exchange rates during the year. Translation adjustments resulting from this process are recorded to other comprehensive income.

Stock-Based Compensation

Stock-based compensation expense is based on the measurement date fair value of the awards, net of expected forfeitures. Expense is generally recognized on a straight-line basis over the requisite service period of the stock awards. The estimate of the forfeiture rate is based on historical experience.

Advertising and Promotional Costs

Advertising and promotional costs are expensed as incurred. Advertising and promotional expense was approximately $31.6 million, $28.6 million, and $42.7 million, in 2021, 2020, and 2019.

Research and Development Costs

Research and development costs are expensed as incurred. Development costs for software to be sold subsequent to reaching technical feasibility were not significant and were expensed as incurred. We received third party funding of approximately $12.6 million, $16.3 million, and $16.5 million in 2021, 2020, and 2019. We offset research and development expense with any unconditional third party funding earned and retain the rights to any technology developed under such arrangements.

Income Taxes

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 it is more likely than not such assets will not be realized. Our valuation allowance is primarily attributable to foreign net operating losses and state research and development credit carryforwards.

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Relative to uncertain tax positions, we only recognize a tax benefit if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. 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. 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. Our practice is to recognize interest and/or penalties related to income tax matters in income tax expense.

We are subject to income taxes in the U.S. and numerous other countries and are subject to routine corporate income tax audits in many of these jurisdictions. We generally believe that positions taken on our tax returns are more likely than not to be sustained upon audit, but tax authorities in some circumstance have, and may in the future, successfully challenge these positions. Accordingly, our income tax provision includes amounts intended to satisfy assessments that may result from these challenges. The amounts ultimately paid on resolution of an audit could be materially different from the amounts previously included in our income tax provision and, therefore, could have a material impact on our income tax provision, net income, and cash flows.

Concentrations of Risk

Cash and cash equivalents 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 of reputable credit and therefore bear minimal credit risk.

We are also exposed to credit risk in our trade receivables, which are derived from sales to end-user customers in diversified industries as well as various resellers. We perform ongoing credit evaluations of our customers’ financial conditions and limit the amount of credit extended, when deemed necessary, but generally do not require collateral.

In addition, we rely on a limited number of suppliers for a number of our critical components.

Guarantees, Including Indirect Guarantees of Indebtedness of Others

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 may agree 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. 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 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 amount 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 under these agreements were not material, and no liabilities have been recorded for these obligations in the Consolidated Balance Sheets at the end of 2021 and 2020.

Derivative Financial Instruments

We enter into foreign exchange forward contracts to minimize the short-term impact of foreign currency fluctuations on cash and certain trade and intercompany receivables and payables, primarily denominated in New Zealand Dollars, Brazil Real, Canadian Dollars, Norwegian Krone, and Euro. These contracts reduce the exposure to fluctuations in foreign currency exchange rate movements, as the gains and losses associated with foreign currency balances are generally offset with the gains and losses on the forward contracts. These instruments are marked-to-market through earnings every reporting period and generally range from one to two months in original maturity. We occasionally enter into foreign currency forward contracts to hedge the purchase price of some of our larger business acquisitions. We do not enter into foreign currency forward contracts for trading purposes. As of the years ended 2021 and 2020, there were no derivative financial instruments outstanding that were accounted for as hedges.

Recent Accounting Pronouncements

Income Taxes—Simplifying the Accounting for Income Taxes

In December 2019, the FASB issued amendments to the accounting for Income Taxes to reduce complexity by removing certain exceptions and implementing targeted simplifications. We adopted the new standard on a prospective basis at the beginning of 2021. The adoption did not have a material impact on our Consolidated Financial Statements.

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Business Combinations—Accounting for Contract Assets and Contract Liabilities from Contracts with Customers

In October 2021, the FASB issued amendments to improve, simplify, and provide consistency for recognition and measurement of acquired contract assets and contract liabilities from revenue contracts in a business combination. The amendments require that an acquirer recognize and measure contract assets and contract liabilities under Topic 606, Revenue from Contracts with Customers, as if it had originated the contracts. The amendments also allow for election of certain practical expedients, which are applied on an acquisition-by-acquisition basis. The new accounting amendments are effective for the Company beginning in 2023 with prospective application. Early adoption is permitted, including in any interim period, and if elected, the amendments are applied retrospectively for any acquisitions that occurred in the year of interim adoption.

We early adopted the guidance in the fourth quarter of 2021 retrospectively to all business combinations completed since the beginning of 2021. The adoption did not have a material impact on our Consolidated Financial Statements.

NOTE 2: EARNINGS PER SHARE

Basic earnings per share is computed based on the weighted-average number of shares of common stock outstanding during the period. Diluted earnings per share is computed based on the weighted-average number of shares of common stock outstanding during the period plus additional shares of common stock that would have been outstanding if potentially dilutive securities had been issued. Potentially dilutive common shares include outstanding stock options, RSUs, contingently issuable shares, and shares to be purchased under our ESPP.

The following table shows the computation of basic and diluted earnings per share:


	2021		2020		2019
(In millions, except per share data)
Numerator:
Net income attributable to Trimble Inc.	$	492.7	$	389.9	$	514.3
Denominator:
Weighted average number of common shares used in basic earnings per share	251.4		250.5		250.8
Effect of dilutive securities	2.9		1.8		2.1
Weighted average number of common shares and dilutive potential common shares used in diluted earnings per share	254.3		252.3		252.9
Basic earnings per share	$	1.96	$	1.56	$	2.05
Diluted earnings per share	$	1.94	$	1.55	$	2.03

Anti-dilutive stock-based awards excluded from the calculations of diluted EPS were immaterial during the periods presented.

NOTE 3: BUSINESS COMBINATION, INTANGIBLE ASSETS, AND GOODWILL

On December 13, 2021, we acquired AgileAssets, with total purchase consideration of $237.5 million. AgileAssets is a provider of SaaS solutions for transportation asset lifecycle management. The financial results have been included in our consolidated financial statements since the date of the acquisition. The acquisition contributed less than 1% of our total revenue during 2021.

During 2020, we acquired three businesses, with total purchase consideration of $205.1 million. The acquisitions were not significant individually or in the aggregate. The largest acquisition was Kuebix, a transportation management system provider. In the aggregate, the businesses acquired contributed less than 1% of our total revenue during 2020.

During 2019, we acquired four businesses, with total purchase consideration of $247.0 million. The acquisitions were not significant individually or in the aggregate. The largest acquisition was Cityworks, a company that provides enterprise asset management (EAM) software for utilities and local government. In the aggregate, the businesses acquired contributed less than 1% of our total revenue during 2019.

For the AgileAssets acquisition in 2021, the preliminary allocation of purchase price was based upon preliminary fair value estimates and analyses, including preliminary work performed by third-party valuation specialists, which could change within the measurement period as valuations are finalized. The primary areas that remain preliminary relate to the fair values of intangible assets acquired and certain tangible assets and liabilities acquired. We expect to finalize the valuation as soon as practicable, but no later than one year from the acquisition date.

Acquisition costs of $13.6 million, $20.3 million, and $20.2 million in 2021, 2020, and 2019, were expensed as incurred and are included in Cost of sales and General and administrative expenses in our Consolidated Statements of Income.

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The following table summarizes the business combinations completed during the periods indicated:


	2021		2020		2019
(In millions)
Fair value of total purchase consideration	$	237.5	$	205.1	$	247.0
Less fair value of net assets acquired:
Net tangible assets acquired	(5.2)		(1.6)		6.7
Identified intangible assets	67.2		56.7		104.6
Deferred taxes	—		0.7		(3.4)

Goodwill	$	175.5	$	149.3	$	139.1

Intangible Assets

The following table presents a summary of our intangible assets:


		At the End of 2021						At the End of 2020
(In millions)	Weighted-Average Useful Lives (in years)	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount
Developed product technology	6	$	1,011.9	$	(748.2)	$	263.7	$	1,118.2	$	(811.1)	$	307.1
Customer relationships	9	667.8		(428.9)		238.9		681.1		(419.3)		261.8
Trade names and trademarks	6	48.0		(45.0)		3.0		58.3		(51.9)		6.4
Distribution rights and other intellectual properties	4	10.0		(9.0)		1.0		45.8		(41.0)		4.8
		$	1,737.7	$	(1,231.1)	$	506.6	$	1,903.4	$	(1,323.3)	$	580.1

As of the end of 2021 and 2020, $160.1 million and $338.3 million of fully amortized intangible assets were written off.

The estimated future amortization expense of intangible assets at the end of 2021 was as follows:


(In million)
2022	$	127.2
2023	115.6
2024	90.1
2025	55.9
2026	49.5
Thereafter	68.3
Total	$	506.6

Goodwill

The changes in the carrying amount of goodwill by segment were as follows:


(In millions)	Buildings and Infrastructure		Geospatial		Resources and Utilities		Transportation		Total
Balance as of year end 2020	$	1,997.4	$	415.7	$	453.8	$	1,009.6	$	3,876.5

Additions due to acquisition	175.5		—		—		—		175.5
Decrease from the sale of businesses	(14.7)		—		(3.3)		—		(18.0)
Foreign currency translation and other adjustments	(16.8)		(12.1)		(9.7)		(13.9)		(52.5)

Balance as of year end 2021	$	2,141.4	$	403.6	$	440.8	$	995.7	$	3,981.5

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NOTE 4: CERTAIN BALANCE SHEET COMPONENTS

The components of inventory, net were as follows:


At the End of Year	2021		2020
(In millions)
Inventories:
Raw materials	$	129.6	$	95.6
Work-in-process	12.4		16.0
Finished goods	221.3		190.1
Total inventories	$	363.3	$	301.7

Finished goods includes $13.7 million and $11.7 million at the end of 2021 and 2020 for costs of sales that have been deferred in connection with deferred revenue arrangements.

The components of property and equipment, net were as follows:


At the End of Year	2021		2020
(In millions)
Property and equipment, net:
Land, building, furniture, and leasehold improvements	$	238.8	$	253.3
Machinery and equipment	185.8		178.7
Software and licenses	150.9		148.9
Construction in progress	20.7		17.2
	596.2		598.1
Less: accumulated depreciation	(363.0)		(346.3)
Total property and equipment, net	$	233.2	$	251.8

The components of accumulated other comprehensive loss, net of related tax were as follows:


At the End of Year	2021		2020
(In millions)
Accumulated foreign currency translation adjustments	$	(160.0)	$	(96.0)

Net unrealized actuarial losses	(1.7)		(2.5)
Total accumulated other comprehensive loss	$	(161.7)	$	(98.5)

NOTE 5: REPORTING SEGMENT AND GEOGRAPHIC INFORMATION

We determined our operating segments based on how our Chief Operating Decision Maker (“CODM”) views and evaluates operations. Various factors, including market separation and customer-specific applications, go-to-market channels, and products and services, were considered in determining these operating segments. Our CODM regularly reviews our segment operating results to make decisions about resources to be allocated to each segment and assess performance. In each of our segments, we sell many individual products. For this reason, it is impracticable to segregate and identify revenue for each of the individual products or group of products we sell.

Our reportable segments are described below:

Buildings and Infrastructure.** This segment primarily serves customers working in architecture, engineering, construction, and operations and maintenance.
Geospatial.** This segment primarily serves customers working in surveying, engineering, and government.
Resources and Utilities.** This segment primarily serves customers working in agriculture, forestry, and utilities.
Transportation.** This segment primarily serves customers working in long haul trucking and freight shipper markets.

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The following Reporting Segment tables reflect the results of our reportable operating segments under our management reporting system. These results are not necessarily in conformity with U.S. GAAP. This is consistent with the way the CODM evaluates each of the segment's performance and allocates resources.


	Reporting Segments
	Buildings and Infrastructure		Geospatial		Resources and Utilities		Transportation		Total
(In millions)
2021
Revenue	$	1,422.5	$	828.9	$	771.3	$	636.4	$	3,659.1
Purchase accounting adjustments(1)	0.2		—		—		0.1		0.3
Segment revenue	$	1,422.7	$	828.9	$	771.3	$	636.5	$	3,659.4

Operating income	$	415.6	$	244.1	$	264.0	$	43.6	$	967.3
Purchase accounting adjustments(2)	(3.9)		—		—		(0.2)		(4.1)


Segment operating income	$	411.7	$	244.1	$	264.0	$	43.4	$	963.2

Depreciation expense	$	7.0	$	7.0	$	5.9	$	4.1	$	24.0

2020
Revenue	$	1,230.7	$	650.5	$	627.3	$	639.2	$	3,147.7
Purchase accounting adjustments(1)	0.3		—		2.7		1.3		4.3
Segment revenue	$	1,231.0	$	650.5	$	630.0	$	640.5	$	3,152.0

Operating income	$	343.0	$	184.4	$	218.4	$	49.0	$	794.8
Purchase accounting adjustments(2)	(4.9)		—		2.6		1.1		(1.2)


Segment operating income	$	338.1	$	184.4	$	221.0	$	50.1	$	793.6

Depreciation expense	$	8.1	$	6.2	$	5.6	$	4.1	$	24.0

2019
Revenue	$	1,254.2	$	649.4	$	568.4	$	792.3	$	3,264.3
Purchase accounting adjustments(1)	4.0		—		3.0		—		7.0
Segment revenue	$	1,258.2	$	649.4	$	571.4	$	792.3	$	3,271.3

Operating income	$	322.1	$	132.2	$	166.2	$	125.9	$	746.4
Purchase accounting adjustments(2)	(2.2)		—		2.9		—		0.7


Segment operating income	$	319.9	$	132.2	$	169.1	$	125.9	$	747.1

Depreciation expense	$	8.1	$	6.3	$	4.4	$	4.4	$	23.2

(1) Includes acquired deferred revenue adjustments of certain acquired deferred revenue that was written down to fair value in purchase accounting.
(2) Includes acquired deferred revenue adjustments and amortization of acquired capitalized commissions.

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	Reporting Segments
	Buildings and Infrastructure		Geospatial		Resources and Utilities		Transportation		Total
(In millions)
As of Year End 2021
Accounts receivable, net	$	246.8	$	134.0	$	112.9	$	131.1	$	624.8
Inventories	79.3		136.4		67.4		80.2		363.3
Goodwill	2,141.4		403.6		440.8		995.7		3,981.5

As of Year End 2020
Accounts receivable, net	$	260.1	$	117.5	$	91.2	$	151.7	$	620.5
Inventories	59.1		120.1		49.0		73.5		301.7
Goodwill	1,997.4		415.7		453.8		1,009.6		3,876.5

As of Year End 2019
Accounts receivable, net	$	232.0	$	115.5	$	93.3	$	167.4	$	608.2
Inventories	67.1		125.0		45.5		74.5		312.1
Goodwill	1,973.0		401.5		445.4		860.7		3,680.6

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


	2021		2020		2019

(In millions)
Consolidated segment operating income	$	963.2	$	793.6	$	747.1
Unallocated general corporate expenses	(106.2)		(74.0)		(73.1)
Purchase accounting adjustments (1)	(134.5)		(156.6)		(168.5)



Acquisition / divestiture items	(21.8)		(21.4)		(20.5)
Stock-based compensation / deferred compensation	(128.6)		(90.4)		(81.2)
Restructuring and other costs	(11.1)		(31.4)		(27.9)
Consolidated operating income	561.0		419.8		375.9
Total non-operating income (expense), net	13.6		(24.8)		(31.1)
Consolidated income before taxes	$	574.6	$	395.0	$	344.8

(1) Purchase accounting adjustments include acquired deferred revenue adjustments, amortization of acquired capitalized commissions, and amortization of purchased intangible assets.

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The disaggregation of revenue by geography is summarized in the tables below. Revenue is defined as revenue from external customers attributed to countries based on the location of the customer and excludes the effects of certain acquired deferred revenue that was written down to fair value in purchase accounting, consistent with the Reporting Segment tables above.


	Reporting Segments
	Buildings and Infrastructure		Geospatial		Resources and Utilities		Transportation		Total
(In millions)
2021
North America	$	823.5	$	337.3	$	212.2	$	493.1	$	1,866.1
Europe	386.6		282.3		368.4		87.3		1,124.6
Asia Pacific	188.4		161.4		67.3		30.2		447.3
Rest of World	24.2		47.9		123.4		25.9		221.4
Total segment revenue	$	1,422.7	$	828.9	$	771.3	$	636.5	$	3,659.4

2020
North America	$	703.4	$	249.9	$	191.4	$	502.5	$	1,647.2
Europe	337.1		222.3		284.3		78.4		922.1
Asia Pacific	165.7		138.2		64.5		34.9		403.3
Rest of World	24.8		40.1		89.8		24.7		179.4
Total segment revenue	$	1,231.0	$	650.5	$	630.0	$	640.5	$	3,152.0

2019
North America	$	722.7	$	263.0	$	173.3	$	636.3	$	1,795.3
Europe	338.7		217.5		273.6		90.4		920.2
Asia Pacific	165.3		122.7		47.4		39.7		375.1
Rest of World	31.5		46.2		77.1		25.9		180.7
Total segment revenue	$	1,258.2	$	649.4	$	571.4	$	792.3	$	3,271.3

Total revenue in the United States as included in the Consolidated Statements of Income was $1,687.4 million, $1,502.3 million, and $1,641.0 million in 2021, 2020, and 2019. No single customer or country other than the United States accounted for 10% or more of our total revenue in 2021, 2020, and 2019. No single customer accounted for 10% or more of our accounts receivable at the end of 2021 and 2020.

Property and equipment, net by geographic area were as follows:


At the End of Year	2021		2020
(In millions)
Property and equipment, net:
United States	$	171.3	$	200.3
Europe	44.8		41.0
Asia Pacific and Rest of World	17.1		10.5
Total property and equipment, net	$	233.2	$	251.8

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NOTE 6: DEBT

Debt consisted of the following:


At the End of Year		Effective interest rate
(In millions, except percentages)	Date of Issuance	for 2021	2021		2020
Senior Notes:
2023 Senior Notes, 4.15%, due June 2023	June 2018	4.36%	$	300.0	$	300.0
2028 Senior Notes, 4.90%, due June 2028	June 2018	5.04%	600.0		600.0
2024 Senior Notes, 4.75%, due December 2024	November 2014	4.95%	400.0		400.0
Credit Facilities:




Uncommitted facilities, floating rate			—		255.8
Promissory notes and other debt			—		0.1
Unamortized discount and issuance costs			(6.8)		(8.7)
Total debt			1,293.2		1,547.2
Less: Short-term debt			—		255.8
Long-term debt			$	1,293.2	$	1,291.4

Each of our debt agreements requires us to maintain compliance with certain debt covenants, all of which we complied with at the end of 2021.

Debt Maturities

At the end of 2021, our debt maturities based on outstanding principal were as follows:


(In million)
2022	$	—
2023	300.0
2024	400.0
2025	—
2026	—
Thereafter	600.0
Total	$	1,300.0

Senior Notes

All series of senior notes in the above table bear interest that is payable semi-annually in June and December of each year. For the 2023 and 2028 senior notes, the interest rate is subject to adjustment from time to time if Moody’s or S&P (or, if applicable, a substitute rating agency) downgrades (or subsequently upgrades) its rating assigned to the notes.

Senior Notes are unsecured and rank equally in right of payment with all of our other senior unsecured indebtedness. We may redeem the notes of each series of senior notes at our option in whole or in part at any time. 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.

2018 Credit Facility

At the end of 2021, we had access to a $1.25 billion unsecured revolving credit facility maturing in May 2023, which may be used for working capital and general corporate purposes, including permitted acquisitions. As part of the credit facility, we may request an additional term loan facility up to $500.0 million prior to the maturity of the credit facility and subject to approval.

Uncommitted Facilities

At the end of 2021, we had one £55.0 million, two $75.0 million, and one €100.0 million revolving credit facilities, which are uncommitted (the “Uncommitted Facilities”). Generally, these uncommitted facilities may be redeemed upon demand. Borrowings under uncommitted facilities are classified as short-term debt in our Consolidated Balance Sheet.

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NOTE 7: LEASES

We have operating leases primarily for certain of our major facilities, including corporate offices, research and development facilities, and manufacturing facilities. Lease terms range from 1 to 13 years, and certain leases include options to extend the lease for up to 9 years. We consider options to extend the lease in determining the lease term.

Operating lease expense consisted of:


At the End of Year	2021		2020
(In millions)
Operating lease expense	$	35.5	$	38.1
Short-term lease expense and other	17.8		15.7
Total lease expense	$	53.3	$	53.8

Supplemental cash flow information related to leases was as follows:


At the End of Year	2021		2020
(In millions)
Cash paid for liabilities included in the measurement of lease liabilities:
Operating cash flows from operating leases (1)	$	35.9	$	37.0

Right-of-use assets obtained in exchange for Operating lease liabilities:	$	49.5	$	29.4

(1)Excludes cash payments for short-term leases, which are not capitalized.

Supplemental balance sheet information related to leases was as follows:


At the End of Year	2021			2020
(In millions)
Operating lease right-of-use assets	$	141.0		$	128.9

Other current liabilities	$	35.0		$	33.8
Operating lease liabilities	121.4			109.2
Total operating lease liabilities	$	156.4		$	143.0

Weighted-average discount rate	3.31		%	3.86		%
Weighted-average remaining lease term	7 years			6 years

At the end of 2021, the maturities of lease liabilities were as follows:


(In million)
2022	$	37.4
2023	30.3
2024	23.6
2025	18.3
2026	14.7
Thereafter	49.3
Total lease payments	$	173.6
Less: imputed interest	17.2
Total	$	156.4

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NOTE 8: COMMITMENTS AND CONTINGENCIES

At the end of 2021, we had unconditional purchase obligations of approximately $710.8 million as compared to $241.1 million at the end of 2020. The increase was primarily related to investments in our platform associated with our Connect and Scale strategy and non-cancellable inventory commitments that increased due to extension of lead times and the growth of our hardware business.

Litigation

From time to time, we are involved in litigation arising in 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.

NOTE 9: FAIR VALUE MEASUREMENTS

The following table summarizes the fair values of financial instruments at fair value on a recurring basis for the periods indicated and determined using the following inputs:


	Fair Values as of the end of 2021								Fair Values as of the end of 2020

	Quoted prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs				Quoted prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs
(In millions)	(Level I)		(Level II)		(Level III)		Total		(Level I)		(Level II)		(Level III)		Total
Assets





Deferred compensation plan (1)	$	44.7	$	—	$	—	$	44.7	$	41.9	$	—	$	—	$	41.9
Derivatives (2)	—		0.1		—		0.1		—		0.9		—		0.9
Total assets measured at fair value	$	44.7	$	0.1	$	—	$	44.8	$	41.9	$	0.9	$	—	$	42.8
Liabilities
Deferred compensation plan (1)	$	44.7	$	—	$	—	$	44.7	$	41.9	$	—	$	—	$	41.9
Derivatives (2)	—		0.2		—		0.2		—		0.5		—		0.5
Contingent consideration (3)	—		—		12.8		12.8		—		—		12.3		12.3
Total liabilities measured at fair value	$	44.7	$	0.2	$	12.8	$	57.7	$	41.9	$	0.5	$	12.3	$	54.7

(1)Represents a self-directed, non-qualified deferred compensation plan for certain executives and other highly compensated employees included in Other non-current assets and Other non-current liabilities on our Consolidated Balance Sheets. The plan is invested in actively traded mutual funds and individual stocks valued using observable quoted prices in active markets.

(2)Represents forward currency exchange contracts that are included in Other current assets and Other current liabilities on our Consolidated Balance Sheets.

(3)Represents arrangements to pay the former owners of certain companies that we acquired that are included in Other current liabilities on our Condensed Consolidated Balance Sheets. The fair values are estimated using scenario-based methods or option pricing methods based upon estimated future revenues, gross margins, or other milestones. The undiscounted maximum payment under the arrangements is $14.8 million at the end of 2021.

Additional Fair Value Information

The total estimated fair value of all outstanding financial instruments that are not recorded at fair value on a recurring basis (debt) was approximately $1.4 billion and $1.8 billion at the end of 2021 and 2020.

The fair value of the senior notes was determined based on observable market prices in less active markets and is categorized accordingly as Level II. The fair values do not indicate the amount we would currently have to pay to extinguish any of this debt.

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NOTE 10: DEFERRED REVENUE AND REMAINING PERFORMANCE OBLIGATIONS

Deferred Revenue

Changes in our deferred revenue during 2021 and 2020 were as follows:



	2021		2020
(In millions)
Beginning balance of the period	$	613.8	$	541.9
Revenue recognized	(533.8)		(476.9)

Billing and other net activities	551.8		548.8
Ending balance of the period	$	631.8	$	613.8

Remaining Performance Obligations

At the end of 2021, approximately $1.8 billion of revenue is expected to be recognized from remaining performance obligations for which goods or services have not been delivered, primarily subscription, post-contract services and hardware, and to a lesser extent, professional services. We expect to recognize $1.4 billion or 76% of our remaining performance obligations as revenue during the next 12 months and the remainder thereafter.

NOTE 11: INCOME TAXES

Income before taxes and the provision (benefit) for taxes consisted of the following:


	2021			2020			2019
(In millions)
Income before taxes:
United States	$	144.0		$	24.7		$	43.0
Foreign	430.6			370.3			301.8
Total	$	574.6		$	395.0		$	344.8

Provision (benefit) for taxes:
U.S. Federal:
Current	$	27.1		$	(5.8)		$	(3.8)
Deferred	(22.9)			(16.3)			252.3
	4.2			(22.1)			248.5
U.S. State:
Current	5.6			0.8			5.1
Deferred	(2.5)			7.1			(0.7)
	3.1			7.9			4.4
Foreign:
Current	76.0			62.2			49.2
Deferred	(1.5)			(43.6)			(471.8)
	74.5			18.6			(422.6)
Income tax provision (benefit)	$	81.8		$	4.4		$	(169.7)
Effective tax rate	14.2		%	1.1		%	(49.2)		%

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The difference between the tax provision (benefit) at the statutory federal income tax rate and the tax provision (benefit) as a percentage of income before taxes (“effective tax rate”) was as follows:


	2021		2020		2019
Statutory federal income tax rate	21.0	%	21.0	%	21.0	%
Increase (reduction) in tax rate resulting from:
Foreign income taxed at different rates	0.5	%	1.7	%	(7.3)	%
Change in valuation allowance	—	%	2.0	%	—	%
U.S. State income taxes	1.1	%	0.5	%	1.5	%
Stock-based compensation	1.7	%	1.5	%	1.2	%
Excess tax benefit related to stock-based compensation	(2.5)	%	(1.5)	%	(2.4)	%

Other U.S. taxes on foreign operations	(1.6)	%	(1.0)	%	1.3	%
U.S. Federal research and development credits	(2.1)	%	(2.3)	%	(2.8)	%
Tax reserve releases	(2.1)	%	(4.8)	%	(4.9)	%
Intellectual property restructuring and tax law changes	(2.5)	%	(16.2)	%	(59.8)	%
Other	0.7	%	0.2	%	3.0	%
Effective tax rate	14.2	%	1.1	%	(49.2)	%

In December 2021, due to a change in the Netherlands tax law, the statutory tax rate was further increased from 25.0% to 25.8% effective January 1, 2022. As a result, we recorded a one-time tax benefit of $14.4 million in 2021 due to the revaluation of the Netherlands deferred tax assets.

Previously in December 2020, also as a result of a Netherlands tax law change that increased Netherlands statutory tax rate from 21.7% to 25.0%, effective January 1, 2021, we recorded a one-time tax benefit of $64.0 million in 2020 due to the revaluation of the Netherlands deferred tax assets.

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Deferred income taxes reflect the net effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. The significant components of deferred tax assets and liabilities were as follows:


At the End of Year	2021		2020
(In millions)
Deferred tax liabilities:
Global intangible low-taxed income	$	207.6	$	219.7
Purchased intangibles	115.8		138.1

Operating lease right-of-use assets	33.5		32.3
Other	12.7		11.3
Total deferred tax liabilities	369.6		401.4

Deferred tax assets:
Depreciation and amortization	474.9		497.1
Operating lease liabilities	36.4		35.0
U.S. tax credit carryforwards	25.8		32.8
Expenses not currently deductible	43.7		32.3
Foreign net operating loss carryforwards	18.0		16.8
Stock-based compensation	13.9		10.6
U.S. net operating loss carryforwards	5.8		7.4
Other	35.7		20.6
Total deferred tax assets	654.2		652.6
Valuation allowance	(45.7)		(41.3)
Total deferred tax assets	608.5		611.3
Total net deferred tax assets	$	238.9	$	209.9

Reported as:
Non-current deferred income tax assets	$	502.0	$	510.2
Non-current deferred income tax liabilities	(263.1)		(300.3)
Net deferred tax assets	$	238.9	$	209.9

At the end of 2021, we have U.S. federal and foreign net operating loss carryforwards, or NOLs, of approximately $12.9 million and $90.2 million, respectively. The U.S. federal NOLs will begin to expire in 2026. There is generally no expiration for the foreign NOLs. Utilization of our U.S. federal NOLs is subject to annual limitations in accordance with the applicable tax code. We have determined that it is more likely than not that we will not realize a portion of the foreign NOLs and, accordingly, a valuation allowance has been established for such amount.

We have California research and development credit carryforwards of approximately $33.0 million, which have an indefinite carryforward period. We believe that it is more likely than not that we will not realize a significant portion of the California research and development credit carryforwards and, accordingly, a valuation allowance has been established for such amount.

As a result of the Tax Act, we can repatriate foreign earnings back to the U.S. when needed with minimal U.S. income tax consequences. We reinvested a large portion of our undistributed foreign earnings in acquisitions and other investments and intend to bring back a portion of foreign cash that was subject to the transition tax and the global intangible low-taxed income tax. During 2021, we repatriated $290.1 million of our foreign earnings to the U.S.

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The total amount of the unrecognized tax benefits at the end of 2021 was $64.2 million. A reconciliation of gross unrecognized tax benefit was as follows:


	2021		2020		2019
(In millions)
Beginning balance	$	64.1	$	71.6	$	69.1
Increase related to current year tax positions	9.6		8.0		12.6
(Decrease) increase related to prior years' tax positions	1.3		(0.4)		3.8
Settlement with taxing authorities	(1.3)		(0.5)		(5.7)
Lapse of statute of limitations	(9.5)		(14.6)		(8.2)
Ending balance	$	64.2	$	64.1	$	71.6

Total unrecognized tax benefits that, if recognized, would affect our effective tax rate were $42.3 million and $47.8 million at the end of 2021 and 2020.

We and our subsidiaries are subject to U.S. federal, state, and foreign income taxes. Our tax years are substantially closed for all U.S. federal and state income taxes for audit purposes through 2015. Non-U.S. income tax matters have been concluded for years through 2008. We are currently in various stages of multiple year examinations state, and foreign (multiple jurisdictions) taxing authorities. While we generally believe it is more likely than not that our tax positions will be sustained, it is reasonably possible that future obligations related to these matters could arise. We believe that our reserves are adequate to cover any potential assessments that may result from the examinations and negotiations.

Although timing of the resolution and/or closure of audits is not certain, we do not believe that our gross unrecognized tax benefits would materially change in the next twelve months.

Our practice is to recognize interest and/or penalties related to income tax matters in income tax expense. Our liability for unrecognized tax benefits including interest and penalties was recorded in Other non-current liabilities on our Consolidated Balance Sheets. At the end of 2021 and 2020, we accrued $9.2 million and $9.6 million for interest and penalties.

NOTE 12: EMPLOYEE STOCK BENEFIT PLANS

Amended and Restated 2002 Stock Plan

In May 2020, our stockholders approved an amendment to the 2002 Stock Plan to increase the number of shares of common stock available for issuance by 18.0 million shares. As such, our Amended and Restated 2002 Stock Plan provides for the granting of incentive and non-statutory stock options and RSUs for up to 92.6 million shares. At the end of 2021, the remaining number of shares available for grant under the 2002 stock plan was 20.2 million.

Stock-Based Compensation Expense

The following table summarizes the components of stock-based compensation expense recognized in our Consolidated Statements of Income for the periods indicated:


	2021		2020		2019
(In millions)
Restricted stock units	$	110.5	$	73.2	$	67.3
Stock options	1.3		1.5		0.6
ESPP	10.8		8.3		7.1
Total stock-based compensation expense	$	122.6	$	83.0	$	75.0

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Stock-based compensation expense was allocated as follows:


	2021		2020		2019
(In millions)
Cost of sales	$	9.5	$	6.7	$	5.6
Research and development	29.5		22.1		16.7
Sales and marketing	21.5		16.2		13.0
General and administrative	62.1		38.0		39.7
Total stock-based compensation expense	$	122.6	$	83.0	$	75.0

At the end of 2021, total unamortized stock-based compensation expense was $151.1 million, with a weighted-average recognition period of 2.0 years.

Restricted Stock Units

We grant RSUs containing only service conditions and RSUs containing a combination of service, performance, and/or market conditions (“PSUs”). RSUs containing only service conditions typically vest ratably over a three to four year service period. PSUs are granted to executive officers and other senior employees and vest after a two to three year service period.

The fair value at the grant date is determined by (1) the closing price of our common stock for awards containing only service or both service and performance conditions, or (2) the Monte Carlo valuation model for awards containing both service and market conditions.

For PSUs, the number of shares received at vesting will range from 0% to 200% of the target grant amount based on either (1) market conditions, (2) performance conditions, or (3) both. Market conditions consider our relative total stockholder return (“TSR”) of our common stock as compared to the TSR of the constituents of the S&P 500 over the vesting period. Performance conditions consider the achievement of our financial results over the vesting period.


	2021 Restricted Stock Units Outstanding
	Number of Units (1)	Weighted Average Grant-Date Fair Value per Share
(In millions, except for per share data)
Outstanding at the beginning of year	5.4	$	44.25
Granted (2)	1.2	78.44
Shares vested, net (2)	(1.9)	39.62
Canceled and forfeited	(0.4)	51.15
Outstanding at the end of year	4.3	$	56.96

(1) Includes 0.2 million PSUs granted, 0.4 million PSUs vested, and 1.1 million PSUs outstanding at the end of the year.

(2) Excludes approximately 0.1 million PSUs related to achievement above target levels at the vesting date.

The weighted-average grant date fair value of all RSUs granted during 2021, 2020, and 2019 was $78.44, $42.50, and $41.38 per share. The fair value of all RSUs vested during 2021, 2020, and 2019 was $81.4 million, $78.0 million, and $75.7 million per share.

Employee Stock Purchase Plan

We have an ESPP under which our stockholders have approved an aggregate of 39.0 million shares of common stock for issuance to eligible employees. The fair value at the grant date is based on the Black-Scholes valuation model. The plan permits eligible employees to purchase common stock through payroll deductions at 85% of the lower of the fair market value of the common stock at the beginning or at the end of each offering period, which is six months. Rights to purchase shares are granted during the first and third quarter of each year. The ESPP terminates on March 15, 2027. In 2021, 2020, and 2019, 0.6 million, 0.8 million, and 0.8 million shares were issued, representing $33.4 million, $26.9 million, and $25.7 million in cash received for the issuance of stock under the ESPP. At the end of 2021, the number of shares reserved for future purchases was 6.0 million.

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NOTE 13: COMMON STOCK REPURCHASE

In August 2021, our Board of Directors approved a new share repurchase program (“2021 Stock Repurchase Program”) authorizing up to $750.0 million in repurchases of our common stock. Under the 2021 Stock Repurchase Program, the share repurchase authorization does not have an expiration date and supersedes and replaces the $600.0 million share repurchase authorization approved by our Board of Directors in November 2017 (“2017 Stock Repurchase Program”), of which $50.7 million was remaining and has been cancelled.

Under the 2021 Stock Repurchase Program, we may repurchase shares from time to time, subject to business and market conditions and other investment opportunities, through open market transactions, privately-negotiated transactions, accelerated stock repurchase plans, or by other means. The timing and actual number of any shares repurchased will depend on a variety of factors, including market conditions, our share price, other available uses of capital, applicable legal requirements, and other factors. The 2021 Stock Repurchase Program may be suspended, modified, or discontinued at any time at the Company’s discretion without notice.

During 2021, 2020, and 2019, we repurchased approximately 2.1 million, 1.9 million, and 4.7 million shares of common stock in open market purchases under our 2017 and 2021 Stock Repurchase Programs, at an average price of $85.75, $43.40, and $38.51 per share, for a total of $180.0 million, $81.6 million, and $179.8 million. At the end of 2021, the 2021 Stock Repurchase Program had remaining authorized funds of $610.0 million.

Stock repurchases are reflected as a decrease to common stock based on par value and additional-paid-in-capital, based on the average book value per share for all outstanding shares calculated at the time of each individual repurchase transaction. The excess of the purchase price over this average for each repurchase was charged to retained earnings. As a result of the 2021 repurchases, retained earnings was reduced by $164.3 million in 2021. Common stock repurchases under the program were recorded based upon the trade date for accounting purposes.

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Report of Independent Registered Public Accounting Firm

To the Stockholders and the Board of Directors of Trimble Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Trimble Inc. (the Company) as of December 31, 2021 and January 1, 2021, the related consolidated statements of income, comprehensive income, stockholders’ equity and cash flows for each of the three years in the period ended December 31, 2021, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2021 and January 1, 2021, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2021, in conformity with U.S. generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control–Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) and our report dated February 22, 2022 expressed an unqualified opinion thereon.

Basis for Opinion

These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

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			Revenue Recognition - Identification of Performance Obligations
Description of the Matter			As described in Note 1 to the consolidated financial statements, the Company enters into contracts that can include various combinations of products and services. Determining whether products or services are considered distinct performance obligations that should be recognized separately or combined into a single performance obligation may sometimes require significant judgment. Auditing the Company's determination of distinct performance obligations was complex due to the effort involved in assessing whether the various product and service offerings promised within each contract are separate performance obligations or should be combined into a single performance obligation.
How We Addressed the Matter in Our Audit			We obtained an understanding, evaluated the design, and tested the operating effectiveness of the Company's internal controls over the evaluation of the relevant terms of its contracts, and the appropriate identification of distinct performance obligations. This included testing relevant controls over the information systems that are important to the initiation, recording, and billing of revenue transactions. Our audit procedures included evaluating management’s revenue recognition policy which included the application of management’s judgment in the identification of performance obligations. Among other procedures to evaluate management’s identification and determination of the distinct performance obligations, we read executed contracts for a sample of sales transactions to understand the terms in the customer agreement and evaluated the appropriateness of management’s application of the Company’s accounting policy. We evaluated the accuracy of the Company’s contract summary documentation, specifically related to the identification and determination of distinct performance obligations, and the related revenue recognition. Finally, we assessed the appropriateness of the related disclosures in the consolidated financial statements.

/s/ Ernst & Young LLP

We have served as the Company’s auditor since 1986.

San Jose, California

February 22, 2022

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Report of Independent Registered Public Accounting Firm

To the Stockholders and the Board of Directors of Trimble Inc.

Opinion on Internal Control over Financial Reporting

We have audited Trimble Inc.’s internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control–Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria). In our opinion, Trimble Inc. (the Company) maintained, in all material respects, effective internal control over financial reporting as of December 31, 2021, based on the COSO criteria.

As indicated in the accompanying Management's Report on Internal Control over Financial Reporting, management's assessment of and conclusion on the effectiveness of internal control over financial reporting did not include the internal controls of the current year acquisition, which is included in the 2021 consolidated financial statements of the Company and constituted less than 1% of tangible assets and net assets as of December 31, 2021, and less than 1% of revenues and net income for the year then ended. Our audit of internal control over financial reporting of the Company also did not include an evaluation of the internal control over financial reporting of the current year acquisition.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of December 31, 2021 and January 1, 2021, the related consolidated statements of income, comprehensive income, stockholders’ equity and cash flows for each of the three years in the period ended December 31, 2021, and the related notes and our report dated February 22, 2022 expressed an unqualified opinion thereon.

Basis for Opinion

The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management's Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects.

Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

Definition and Limitations of Internal Control over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ Ernst & Young LLP

San Jose, California February 22, 2022

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