Item 8. Financial Statements and Supplementary Data

CONSOLIDATED BALANCE SHEETS

At the End of Year			2022						2021
(In millions, except par values)
ASSETS
Current assets*:*
Cash and cash equivalents			$	271.0					$	325.7
Accounts receivable, net			643.3						624.8
Inventories			402.5						363.3
Other current assets			201.4						136.8
Total current assets			1,518.2						1,450.6
Property and equipment, net			219.0						233.2
Operating lease right-of-use assets			121.2						141.0
Goodwill			4,137.9						3,981.5
Other purchased intangible assets, net			498.1						506.6
Deferred income tax assets			438.4						502.0
Other non-current assets			336.2						284.7
Total assets			$	7,269.0					$	7,099.6
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Short-term debt			$	300.0					$	—
Accounts payable			175.5						207.3
Accrued compensation and benefits			159.4						231.0
Deferred revenue			639.1						548.8
Other current liabilities			188.1						201.5
Total current liabilities			1,462.1						1,188.6
Long-term debt			1,220.0						1,293.2
Deferred revenue, non-current			98.5						83.0
Deferred income tax liabilities			157.8						263.1
Income taxes payable			40.9						54.5
Operating lease liabilities			105.1						121.4
Other non-current liabilities			134.4						151.1
Total liabilities			3,218.8						3,154.9
Commitments and contingencies (Note 9)
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; 246.9 and 250.9 shares issued and outstanding at the end of 2022 and 2021			0.2						0.3
Additional paid-in-capital			2,054.9						1,935.6
Retained earnings			2,230.0						2,170.5
Accumulated other comprehensive loss			(234.9)						(161.7)
Total stockholders' equity			4,050.2						3,944.7
Total liabilities and stockholders’ equity			$	7,269.0					$	7,099.6

See accompanying Notes to the Consolidated Financial Statements.

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CONSOLIDATED STATEMENTS OF INCOME

			2022						2021						2020
(In millions, except per share data)
Revenue:
Product			$	2,152.0					$	2,247.5					$	1,828.0
Service			641.3						649.4						644.8
Subscription			883.0						762.2						674.9
Total revenue			3,676.3						3,659.1						3,147.7
Cost of sales:
Product			1,046.1						1,090.1						855.0
Service			235.7						229.9						234.5
Subscription			203.9						216.7						211.0
Amortization of purchased intangible assets			85.0						87.7						92.3
Total cost of sales			1,570.7						1,624.4						1,392.8
Gross margin			2,105.6						2,034.7						1,754.9
Operating expense:
Research and development			542.1						536.6						475.9
Sales and marketing			553.6						506.8						467.0
General and administrative			422.2						369.1						300.9
Restructuring charges			30.2						10.3						25.8
Amortization of purchased intangible assets			46.6						50.9						65.5
Total operating expense			1,594.7						1,473.7						1,335.1
Operating income			510.9						561.0						419.8
Non-operating income (expense), net:
Divestitures gain, net			99.0						41.4						13.1
Interest expense, net			(71.1)						(65.4)						(77.6)
Income from equity method investments, net			31.1						37.7						39.4
Other income (expense), net			(0.8)						(0.1)						0.3
Total non-operating income (expense), net			58.2						13.6						(24.8)
Income before taxes			569.1						574.6						395.0
Income tax provision			119.4						81.8						4.4
Net income			449.7						492.8						390.6
Net income attributable to noncontrolling interests			—						0.1						0.7
Net income attributable to Trimble Inc.			$	449.7					$	492.7					$	389.9
Earnings per share attributable to Trimble Inc.:
Basic			$	1.81					$	1.96					$	1.56
Diluted			$	1.80					$	1.94					$	1.55
Shares used in calculating earnings per share:
Basic			248.6						251.4						250.5
Diluted			250.2						254.3						252.3

See accompanying Notes to the Consolidated Financial Statements.

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CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

			2022						2021						2020
(In millions)
Net income			$	449.7					$	492.8					$	390.6
Other comprehensive income (loss), net of tax
Foreign currency translation adjustments			(81.6)						(64.0)						77.1
Net change related to derivatives and other			8.4						0.8						1.2
Comprehensive income			376.5						429.6						468.9
Comprehensive income attributable to noncontrolling interests			—						0.1						0.7
Comprehensive income attributable to Trimble Inc.			$	376.5					$	429.5					$	468.2

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 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 income			—						—						—						—						(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
Net income																					449.7												449.7						—						449.7
Other comprehensive loss			—						—						—						—						(73.2)						(73.2)						—						(73.2)
Comprehensive income																																	376.5												376.5
Issuance of common stock under employee plans, net of tax withholdings			2.0						—						29.6						(43.2)						—						(13.6)						—						(13.6)
Stock repurchases			(6.0)						(0.1)						(47.6)						(347.0)						—						(394.7)						—						(394.7)
Stock-based compensation			—						—						137.3						—						—						137.3						—						137.3
Balance at the end of 2022			246.9						$	0.2					$	2,054.9					$	2,230.0					$	(234.9)					$	4,050.2					$	—					$	4,050.2

See accompanying Notes to the Consolidated Financial Statements.

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CONSOLIDATED STATEMENTS OF CASH FLOWS

			2022						2021						2020
(In millions)
Cash flows from operating activities
Net income			$	449.7					$	492.8					$	390.6
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation expense			40.2						41.3						39.7
Amortization expense			131.6						138.6						157.8
Deferred income taxes			(40.0)						(26.9)						(52.9)
Stock-based compensation			120.4						122.6						83.0
Divestitures gain, net			(99.0)						(43.9)						(12.2)
Other, net			41.7						19.2						42.4
(Increase) decrease in assets:
Accounts receivable, net			(55.4)						(9.0)						(14.0)
Inventories			(113.5)						(72.9)						(5.0)
Other current and non-current assets			(46.3)						(30.2)						2.5
Increase (decrease) in liabilities:
Accounts payable			(24.8)						60.3						(15.7)
Accrued compensation and benefits			(54.2)						54.1						34.9
Deferred revenue			108.6						27.4						65.7
Other current and non-current liabilities			(67.8)						(22.9)						(44.8)
Net cash provided by operating activities			391.2						750.5						672.0
Cash flow from investing activities:
Acquisitions of businesses, net of cash acquired			(373.5)						(236.1)						(201.9)
Purchases of property and equipment			(43.2)						(46.1)						(56.8)
Net proceeds from divestitures			215.4						67.3						27.5
Other, net			(25.0)						11.4						(0.6)
Net cash used in investing activities			(226.3)						(203.5)						(231.8)
Cash flows from financing activities:
Issuance of common stock, net of tax withholdings			(13.6)						(15.1)						10.0
Repurchases of common stock			(394.7)						(180.0)						(81.6)
Proceeds from debt and revolving credit lines			814.8						198.9						1,173.8
Payments on debt and revolving credit lines			(590.2)						(449.9)						(1,486.0)
Other, net			(15.3)						(1.6)						(16.5)
Net cash used in financing activities			(199.0)						(447.7)						(400.3)
Effect of exchange rate changes on cash and cash equivalents			(20.6)						(11.3)						8.6
Net (decrease) increase in cash and cash equivalents			(54.7)						88.0						48.5
Cash and cash equivalents - beginning of year			325.7						237.7						189.2
Cash and cash equivalents - end of year			$	271.0					$	325.7					$	237.7
Supplemental cash flow disclosure:
Cash paid for income taxes, net			$	197.3					$	98.3					$	59.0
Cash paid for interest			$	73.1					$	61.8					$	71.8

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 2022, 2021, and 2020 were all 52-week years ending on December 30, 2022, December 31, 2021, and January 1, 2021. 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 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.

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 $33.6 million and $39.5 million at the end of 2022 and 2021.

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 2022 and 2021, our allowance for credit losses was $5.9 million and $7.0 million. The provision for credit losses for the years ended 2022, 2021, and 2020 were $7.7 million, $2.6 million, and $7.1 million.

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.

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At the end of 2022 and 2021, deferred costs to obtain customer contracts were $74.7 million and $59.7 million. These costs are included in Other non-current assets in the Consolidated Balance Sheets.

Amortization expense related to deferred costs to obtain customer contracts was $32.0 million, $25.9 million, and $22.8 million, for 2022, 2021, and 2020. 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 lifecycle 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 allocate the fair value of purchase consideration to the assets acquired, liabilities assumed, and any noncontrolling interest based on their fair values at the acquisition date. When determining the fair values, 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. Any purchase consideration in excess of the fair values of the net assets acquired is recorded as goodwill.

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.

Acquisition costs are expensed as incurred.

Goodwill

We evaluate goodwill on an annual basis or more frequently if indicators of potential impairment exist. To determine whether goodwill is impaired, we first assess qualitative factors. Qualitative factors include but are not limited to macroeconomic conditions, industry and market considerations, cost factors, overall financial performance, or other relevant company-specific events. If it is determined more likely than not that the fair value of a goodwill reporting unit is less than its carrying amount, we perform a quantitative analysis. Alternatively, we may bypass the qualitative assessment and perform a quantitative impairment test.

When performing a 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. If the reporting unit's carrying amount exceeds its fair value, an impairment loss is recognized.

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Intangible Assets

Intangible assets acquired 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 $11.7 million and $17.1 million are included in Other current liabilities in the Consolidated Balance Sheets at the end of 2022 and 2021.

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.

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 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.

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.

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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 2022 and 2021.

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. We occasionally enter into foreign currency contracts to minimize the impact of foreign currency fluctuations on the purchase price of pending acquisitions, including the fourth quarter of 2022 foreign currency contract for the €1.88 billion or $2.0 billion pending acquisition of Transporeon. The above-mentioned foreign currency contracts are marked-to-market through earnings every reporting period and generally range in maturity from one to two months, or from four to six months for contracts related to acquisitions. We do not enter into foreign currency forward contracts for trading purposes.

In the fourth quarter of 2022, in conjunction with the pending acquisition of Transporeon, we entered into a contract to offset the changes in the price of U.S. Treasury Notes with an original maturity of 10 years (“Treasury Rate Lock”). The purpose of the Treasury Rate Lock is to minimize the impact of interest rate fluctuations on new fixed-rate debt expected to be issued in connection with this acquisition. This derivative contract is accounted for as a cash flow hedge and is marked-to-market each period with gains or losses recorded through other comprehensive income. Upon issuance of the debt, the derivative is settled, and the other comprehensive income is amortized as interest expense over the 10-year debt term by use of the effective interest rate method. At the end of 2021, there were no derivatives outstanding that were accounted for as hedges.

Recently issued Accounting Pronouncements not yet Adopted

There are no recently issued accounting pronouncements applicable or material to us not yet adopted.

Recent Adopted Accounting Pronouncements

There are no recently adopted accounting pronouncements.

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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:

			2022						2021						2020
(In millions, except per share data)
Numerator:
Net income attributable to Trimble Inc.			$	449.7					$	492.7					$	389.9
Denominator:
Weighted average number of common shares used in basic earnings per share			248.6						251.4						250.5
Effect of dilutive securities			1.6						2.9						1.8
Weighted average number of common shares and dilutive potential common shares used in diluted earnings per share			250.2						254.3						252.3
Basic earnings per share			$	1.81					$	1.96					$	1.56
Diluted earnings per share			$	1.80					$	1.94					$	1.55
Antidilutive weighted-average shares (1)			1.3						0.1						0.5

(1) Antidilutive stock-based awards are excluded from the calculation of diluted shares and diluted earnings per share because their impact would increase diluted earnings per share.

NOTE 3: ACQUISITIONS AND DIVESTITURES

Acquisitions

In December 2022, we entered into a definitive agreement to acquire Transporeon in an all-cash transaction valued at approximately €1.88 billion or $2.0 billion. Transporeon, a Germany-based company, is a leading cloud-based transportation management software platform that connects key stakeholders across the industry lifecycle to positively impact the optimization of global supply chains, in alignment with our Connect and Scale strategy. We believe the acquisition will advance our sustainability strategy by reducing under-utilized carrier capacity and “empty miles” and increase our international footprint and long-term Transportation opportunities. The acquisition will be funded through a combination of cash on hand and new debt. We expect this acquisition to close in the first half of 2023, subject to customary closing conditions including regulatory approvals in certain international countries. Following the closing, we intend to integrate Transporeon into our Transportation segment for financial reporting purposes.

In 2022, we acquired two businesses, with total purchase consideration of $379.5 million. The largest acquisition was Bid2Win Software, LLC, a leading provider of estimating and operations solutions for the heavy civil construction industry. In the aggregate, the businesses acquired contributed less than 1% of our total revenue during 2022. The Condensed Consolidated Statements of Income include the operating results of the acquired businesses from the date of acquisitions.

During 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 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. In the aggregate, the businesses acquired contributed less than 1% of our total revenue during 2020.

Acquisition costs of $20.4 million, $13.6 million, and $20.3 million in 2022, 2021, and 2020, 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:

			2022						2021						2020
(In millions)
Fair value of total purchase consideration			$	379.5					$	237.5					$	205.1
Less fair value of net assets acquired:
Net tangible assets acquired			(9.2)						(5.2)						(1.6)
Identified intangible assets			131.4						67.2						56.7
Deferred taxes			(0.8)						—						0.7
Goodwill			$	258.1					$	175.5					$	149.3

Divestitures

In 2022, we divested six businesses with total proceeds of $226.3 million. The largest divestiture was the sale of Time and Frequency, LOADRITE, Spectra Precision Tools, and SECO accessories businesses to Precisional LLC, an affiliate of The Jordan Company (“TJC”), for $205.1 million in cash, which included a working capital adjustment.

In 2021 and 2020, divestitures were not material to the financial statements.

NOTE 4: INTANGIBLE ASSETS AND GOODWILL

Intangible Assets

The following table presents a summary of our intangible assets:

						At the End of 2022																		At the End of 2021
(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			$	1,004.8					$	(722.7)					$	282.1					$	1,011.9					$	(748.2)					$	263.7
Customer relationships			8			654.1						(445.9)						208.2						667.8						(428.9)						238.9
Trade names and trademarks			6			39.5						(32.7)						6.8						48.0						(45.0)						3.0
Distribution rights and other intellectual properties			4			8.0						(7.0)						1.0						10.0						(9.0)						1.0
						$	1,706.4					$	(1,208.3)					$	498.1					$	1,737.7					$	(1,231.1)					$	506.6

As of the end of 2022 and 2021, $79.9 million and $160.1 million of fully amortized intangible assets were written off.

The estimated future amortization expense of intangible assets at the end of 2022 was as follows:

(In millions)
2023			$	133.5
2024			109.0
2025			73.5
2026			67.2
2027			53.5
Thereafter			61.4
Total			$	498.1

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Goodwill

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

			Buildings and Infrastructure						Geospatial						Resources and Utilities						Transportation						Total
(In millions)
Balance as of year end 2021			$	2,141.4					$	403.6					$	440.8					$	995.7					$	3,981.5
Additions due to acquisition			214.4						—						43.7						—						258.1
Decrease from divestitures			(23.9)						(6.9)						—						(6.9)						(37.7)
Foreign currency translation and other adjustments			(31.8)						(14.6)						(12.7)						(4.9)						(64.0)
Balance as of year end 2022			$	2,300.1					$	382.1					$	471.8					$	983.9					$	4,137.9

NOTE 5: CERTAIN BALANCE SHEET COMPONENTS

The components of inventory, net were as follows:

At the End of Year			2022						2021
(In millions)
Inventories:
Raw materials			$	154.9					$	129.6
Work-in-process			13.1						12.4
Finished goods			234.5						221.3
Total inventories			$	402.5					$	363.3

Finished goods includes $16.9 million and $13.7 million at the end of 2022 and 2021 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			2022						2021
(In millions)
Property and equipment, net:
Land, building, furniture, and leasehold improvements			$	244.4					$	238.8
Machinery and equipment			177.6						185.8
Software and licenses			146.4						150.9
Construction in progress			10.1						20.7
			578.5						596.2
Less: accumulated depreciation			(359.5)						(363.0)
Total property and equipment, net			$	219.0					$	233.2

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

At the End of Year			2022						2021
(In millions)
Accumulated foreign currency translation adjustments			$	(241.6)					$	(160.0)
Gain on cash flow hedge			5.4						—
Net unrealized actuarial gains (losses)			1.3						(1.7)
Total accumulated other comprehensive loss			$	(234.9)					$	(161.7)

NOTE 6: 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

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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.

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)
2022
Segment revenue			$	1,494.0					$	756.5					$	821.6					$	604.2					$	3,676.3
Segment operating income			406.3						221.4						278.3						58.8						964.8
2021
Segment revenue			$	1,422.7					$	828.9					$	771.3					$	636.5					$	3,659.4
Segment operating income			411.7						244.1						264.0						43.4						963.2
2020
Segment revenue			$	1,231.0					$	650.5					$	630.0					$	640.5					$	3,152.0
Segment operating income			338.1						184.4						221.0						50.1						793.6

			Reporting Segments
			Buildings and Infrastructure						Geospatial						Resources and Utilities						Transportation						Total
(In millions)
As of Year End 2022
Accounts receivable, net			$	305.1					$	137.2					$	79.2					$	121.8					$	643.3
Inventories			93.2						146.1						100.3						62.9						402.5
Goodwill			2,300.1						382.1						471.8						983.9						4,137.9
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

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

			2022						2021						2020
(In millions)
Consolidated segment operating income			$	964.8					$	963.2					$	793.6
Unallocated general corporate expenses			(123.3)						(106.2)						(74.0)
Purchase accounting adjustments			(131.6)						(134.5)						(156.6)
Acquisition / divestiture items			(32.8)						(21.8)						(21.4)
Stock-based compensation / deferred compensation			(112.0)						(128.6)						(90.4)
Restructuring and other costs			(54.2)						(11.1)						(31.4)
Consolidated operating income			510.9						561.0						419.8
Total non-operating income (expense), net			58.2						13.6						(24.8)
Consolidated income before taxes			$	569.1					$	574.6					$	395.0

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)
2022
North America			$	938.1					$	320.7					$	227.0					$	469.4					$	1,955.2
Europe			337.1						247.8						374.3						78.7						1,037.9
Asia Pacific			192.8						140.3						51.7						30.3						415.1
Rest of World			26.0						47.7						168.6						25.8						268.1
Total segment revenue			$	1,494.0					$	756.5					$	821.6					$	604.2					$	3,676.3
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

Total revenue in the United States as included in the Consolidated Statements of Income was $1,777.4 million, $1,687.4 million, and $1,502.3 million in 2022, 2021, and 2020. No single customer or country other than the United States accounted for 10% or more of our total revenue in 2022, 2021, and 2020. No single customer accounted for 10% or more of our accounts receivable at the end of 2022 and 2021.

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

At the End of Year			2022						2021
(In millions)
Property and equipment, net:
United States			$	157.7					$	171.3
Europe			40.3						44.8
Asia Pacific and Rest of World			21.0						17.1
Total property and equipment, net			$	219.0					$	233.2

NOTE 7: DEBT

Debt consisted of the following:

At the End of Year												Effective interest rate
(In millions, except percentages)						Date of Issuance						for 2022						2022						2021
Senior Notes:
Senior Notes, 4.15%, due June 2023						June 2018						4.36%						$	300.0					$	300.0
Senior Notes, 4.75%, due December 2024						November 2014						4.95%						400.0						400.0
Senior Notes, 4.90%, due June 2028						June 2018						5.04%						600.0						600.0
Credit Facilities:
2022 Revolving Credit Facility, due March 2027						September 2022						5.54%						225.0						—
Unamortized discount and issuance costs																		(5.0)						(6.8)
Total debt																		1,520.0						1,293.2
Less: Short-term debt																		300.0						—
Long-term debt																		$	1,220.0					$	1,293.2

Debt Maturities

At the end of 2022, our debt maturities based on outstanding principal were as follows:

(In million)
2023			$	300.0
2024			400.0
2025			—
2026			—
2027			225.0
Thereafter			600.0
Total			$	1,525.0

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.

Credit Facilities

Bridge Facility

On December 11, 2022, we entered into a bridge facility commitment letter (the “Bridge Facility”) in connection with the pending acquisition of Transporeon. Under the Bridge Facility, the lender committed to provide a 364-day senior unsecured term loan up to an aggregate amount of €1.88 billion that may be drawn only upon the acquisition of Transporeon. On

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December 27, 2022, the Bridge Facility was automatically reduced to €500 million upon entering into the 2022 Term Loan Agreement and the 2022 Credit Facility Amendment (as described below). If not terminated sooner, the commitment under the Bridge Facility expires on July 10, 2023.

Borrowings under the Bridge Facility will bear interest at the following rates, in each case, plus an applicable margin: (a) for Euro loans, EURIBOR and (b) for U.S dollar loans, the option of either (i) an adjusted Term SOFR or (ii) the alternate base rate (“ABR”). The applicable margin varies based on the Company’s credit ratings and ranges from 1.250% to 2.125% for EURIBOR and Term SOFR loans, and from 0.250% to 1.125% for ABR loans. The applicable margin will increase by 0.25% on each of the 90th, 180th, and 270th day after the closing date of the Bridge Facility. ABR is defined as the greater of the prime rate or the federal funds rate plus 0.50%. Term loans are prepayable without penalty.

In the fourth quarter of 2022, we incurred $7.3 million fees related to the Bridge Facility of which $5.9 million was recorded as Interest expense, net, and $1.4 million was deferred.

2022 Term Loan Credit Agreement

On December 27, 2022, we entered into a credit agreement (the “2022 Term Loan Credit Agreement”) providing for an unsecured delayed draw term loan facility in the aggregate principal amount of $1.0 billion, comprised of commitments for a 3-year tranche for $500.0 million and a 5-year tranche for $500.0 million.

The 2022 Term Loan Credit Agreement was entered into in connection with, and the proceeds of any loans must be used for, the pending acquisition of Transporeon. No amounts were drawn at the end of 2022.

The 3-year loan would be due and payable on the third anniversary of the funding date. The Company would be required to repay the 5-year loan in quarterly installments equal to:

• 0% of the principal amount for the first twelve calendar quarters following the funding date;

• 1.25% of the principal amount for each of the next four calendar quarters; and

• 2.5% of the principal amount for each calendar quarter thereafter, with the remaining principal amount due and payable on the fifth anniversary of the funding date.

Borrowings under the 2022 Term Loan Credit Agreement will bear interest, at the Company’s option, at either: (a) an adjusted Term SOFR or (b) the ABR, in each case, plus the applicable margin. The applicable margin varies based on the Company’s credit ratings and ranges as follows: (a) for the 3-year tranche, (i) from 1.125% to 2.000% for a Term SOFR loan, and (ii) from 0.125% to 1.000% for an ABR loan; and (b) for the 5-year tranche, (i) from 1.250% to 2.125% for a Term SOFR loan, and (ii) from 0.250% to 1.125% for an ABR loan. ABR is defined as the greatest of the prime rate, the federal funds rate plus 0.50%, or the adjusted Term SOFR plus 1.00%. Term loans are prepayable without penalty.

2022 Credit Facility and Amendment

On March 24, 2022, we entered into a credit agreement that provides for an unsecured revolving loan facility in the aggregate principal amount of $1.25 billion (the “2022 Credit Facility”). The proceeds of the revolving loans may be used by the Company for working capital and general corporate purposes, including the financing of acquisitions. Under the terms of the credit agreement, our interest rate and commitment fees are based on our current long-term, senior unsecured debt ratings, our leverage ratio, and certain specified sustainability targets. At the end of 2022, the interest rate charged on any outstanding borrowings was the prevailing Term SOFR for the applicable interest period plus 1.225%, and the commitment fee was 0.125% of the total undrawn commitment. At the end of 2022, $225.0 million was outstanding under the 2022 Credit Facility.

The commitment fee and interest rates are subject to upward or downward adjustments if we achieve, or fail to achieve, certain specified sustainability targets concerning greenhouse gas emission reductions and gender diversity. Such upward or downward adjustments may be up to 0.01% per annum for the commitment fee and up to 0.05% per annum for the interest rate.

On December 27, 2022, we entered into an amendment to the 2022 Credit Facility (the “2022 Credit Facility Amendment”) that made $600.0 million of the existing commitments under the Credit Facility available for the pending acquisition of Transporeon and increased our maximum permitted leverage ratio following the closing of the acquisition.

Uncommitted Facilities

At the end of 2022, we had two $75.0 million, one €100.0 million, and one £55.0 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.

Covenants

The 2022 Term Loan Credit Agreement and 2022 Credit Facility, as amended, contain customary covenants including, among other requirements, limitations that restrict the Company’s and its subsidiaries’ ability to create liens and enter into sale and

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leaseback transactions, and restrictions on the ability of the subsidiaries to incur indebtedness. Further, both debt agreements contain financial covenants that require the maintenance of maximum leverage and minimum interest coverage ratios. At the end of 2022, we were in compliance with the covenants for each of our debt agreements.

NOTE 8: 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 14 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			2022						2021
(In millions)
Operating lease expense			$	36.3					$	35.5
Short-term lease expense and other			14.8						17.8
Total lease expense			$	51.1					$	53.3

Supplemental cash flow information related to leases was as follows:

At the End of Year			2022						2021
(In millions)
Cash paid for liabilities included in the measurement of lease liabilities:
Operating cash flows from operating leases (1)			$	35.0					$	35.9
Right-of-use assets obtained in exchange for Operating lease liabilities:			$	26.3					$	49.5

(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			2022						2021
(In millions)
Operating lease right-of-use assets			$	121.2					$	141.0
Other current liabilities			$	35.0					$	35.0
Operating lease liabilities			105.1						121.4
Total operating lease liabilities			$	140.1					$	156.4
Weighted-average discount rate			3.30		%				3.31		%
Weighted-average remaining lease term			6 years						7 years

At the end of 2022, the maturities of lease liabilities were as follows:

(In millions)
2023			$	37.3
2024			30.3
2025			22.2
2026			16.9
2027			13.3
Thereafter			35.8
Total lease payments			$	155.8
Less: imputed interest			15.7
Total			$	140.1

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NOTE 9: COMMITMENTS AND CONTINGENCIES

At the end of 2022, we had unconditional purchase obligations of approximately $858.8 million as compared to $710.8 million at the end of 2021. These unconditional purchase obligations primarily represent open non-cancellable purchase orders for material purchases with our vendors and investments in our platform associated with our Connect and Scale strategy.

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 10: 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 2022																								Fair Values as of the end of 2021
			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)			$	31.5					$	—					$	—					$	31.5					$	44.7					$	—					$	—					$	44.7
Derivatives (2)			—						18.0						—						18.0						—						0.1						—						0.1
Contingent consideration (3)			—						—						3.1						3.1						—						—						—						—
Total assets measured at fair value			$	31.5					$	18.0					$	3.1					$	52.6					$	44.7					$	0.1					$	—					$	44.8
Liabilities
Deferred compensation plan (1)			$	31.5					$	—					$	—					$	31.5					$	44.7					$	—					$	—					$	44.7
Derivatives (2)			—						0.2						—						0.2						—						0.2						—						0.2
Contingent consideration (3)			—						—						—						—						—						—						12.8						12.8
Total liabilities measured at fair value			$	31.5					$	0.2					$	—					$	31.7					$	44.7					$	0.2					$	12.8					$	57.7

(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 and a Treasury Rate Lock contract that are included in Other current assets and Other current liabilities on our Consolidated Balance Sheets.

(3)Represents arrangements to receive payments from buyers of our divested companies or pay former owners of acquired companies that are included in Other current and non-current assets or Other current liabilities on our Consolidated Balance Sheets. The fair values are estimated using scenario-based methods based upon estimated future milestones.

Derivative assets include a Treasury Rate Lock contract and a foreign currency exchange contract, both related to the pending acquisition of Transporeon.

The Treasury Rate Lock contract is a cash flow hedge with gains or losses reported as a component of other comprehensive income and subsequently amortized to interest expense over the term of the associated debt. At the end of 2022, the notional amount of the interest rate-lock contract was $400.0 million, and the fair value of the contract was $7.2 million.

The foreign currency exchange contract is to economically hedge the euro-denominated purchase price of Transporeon. The gains or losses are recognized in other income (expense), net. The notional amount of the foreign currency exchange contract was $1,999.4 million, and the fair value of this contract was $10.4 million.

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 $1.5 billion and $1.4 billion at the end of 2022 and 2021.

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 11: DEFERRED REVENUE AND REMAINING PERFORMANCE OBLIGATIONS

Deferred Revenue

Changes in our deferred revenue during 2022 and 2021 were as follows:

			2022						2021
(In millions)
Beginning balance of the period			$	631.8					$	613.8
Revenue recognized from prior year-end			(511.5)						(533.8)
Billings net of revenue recognized from current year			617.3						551.8
Ending balance of the period			$	737.6					$	631.8

Remaining Performance Obligations

At the end of 2022, approximately $1.6 billion of revenue is expected to be recognized from remaining performance obligations for which goods or services have not been delivered, primarily subscription, software, and software maintenance, and to a lesser extent, hardware and professional services contracts. We expect to recognize $1.2 billion or 72% of our remaining performance obligations as revenue during the next 12 months and the remainder thereafter.

NOTE 12: INCOME TAXES

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

			2022						2021						2020
(In millions)
Income before taxes:
United States			$	117.7					$	144.0					$	24.7
Foreign			451.4						430.6						370.3
Total			$	569.1					$	574.6					$	395.0
Provision (benefit) for taxes:
U.S. Federal:
Current			$	98.4					$	27.1					$	(5.8)
Deferred			(97.7)						(22.9)						(16.3)
			0.7						4.2						(22.1)
U.S. State:
Current			12.6						5.6						0.8
Deferred			(5.0)						(2.5)						7.1
			7.6						3.1						7.9
Foreign:
Current			48.4						76.0						62.2
Deferred			62.7						(1.5)						(43.6)
			111.1						74.5						18.6
Income tax provision			$	119.4					$	81.8					$	4.4
Effective tax rate			21.0		%				14.2		%				1.1		%

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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:

			2022						2021						2020
Statutory federal income tax rate			21.0		%				21.0		%				21.0		%
Increase (reduction) in tax rate resulting from:
Foreign income taxed at different rates			4.4		%				0.5		%				1.7		%
Change in valuation allowance			—		%				—		%				2.0		%
U.S. State income taxes			1.0		%				1.1		%				0.5		%
Stock-based compensation			1.8		%				1.7		%				1.5		%
Excess tax benefit related to stock-based compensation			(0.6)		%				(2.5)		%				(1.5)		%
Other U.S. taxes on foreign operations			(3.5)		%				(1.6)		%				(1.0)		%
U.S. Federal research and development credits			(2.2)		%				(2.1)		%				(2.3)		%
Tax reserve releases			(1.8)		%				(2.1)		%				(4.8)		%
Intellectual property restructuring and tax law changes			—		%				(2.5)		%				(16.2)		%
Other			0.9		%				0.7		%				0.2		%
Effective tax rate			21.0		%				14.2		%				1.1		%

Our effective income tax rates for 2022 and 2021 were 21.0% and 14.2%. The effective income tax rate in 2022 increased compared to 2021 primarily due to a one-time tax benefit recorded in 2021 related to the revaluation of the Netherlands deferred tax assets mentioned below and lower stock-based compensation deductions during 2022.

In December 2021, due to a change in the Netherlands tax law, the statutory tax rate was 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.

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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			2022						2021
(In millions)
Deferred tax liabilities:
Global intangible low-taxed income			$	137.8					$	207.6
Purchased intangibles			121.1						115.8
Operating lease right-of-use assets			29.0						33.5
Other			16.1						12.7
Total deferred tax liabilities			304.0						369.6
Deferred tax assets:
Depreciation and amortization			400.0						474.9
Capitalized research and development			67.5						6.9
Operating lease liabilities			32.8						36.4
U.S. tax credit carryforwards			25.6						25.8
Expenses not currently deductible			30.9						43.7
Foreign net operating loss carryforwards			15.3						18.0
Stock-based compensation			13.8						13.9
U.S. net operating loss carryforwards			4.7						5.8
Other			36.6						28.8
Total deferred tax assets			627.2						654.2
Valuation allowance			(42.6)						(45.7)
Total deferred tax assets			584.6						608.5
Total net deferred tax assets			$	280.6					$	238.9
Reported as:
Non-current deferred income tax assets			$	438.4					$	502.0
Non-current deferred income tax liabilities			(157.8)						(263.1)
Net deferred tax assets			$	280.6					$	238.9

At the end of 2022, we have U.S. federal and foreign net operating loss carryforwards, or NOLs, of approximately $9.8 million and $82.4 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 $33.6 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 2022, we repatriated $350.3 million of our foreign earnings to the U.S.

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The total amount of unrecognized tax benefits at the end of 2022 was $76.5 million. A reconciliation of gross unrecognized tax benefits was as follows:

			2022						2021						2020
(In millions)
Beginning balance			$	64.2					$	64.1					$	71.6
Increase related to current year tax positions			23.0						9.6						8.0
(Decrease) increase related to prior years' tax positions			(0.7)						1.3						(0.4)
Settlement with taxing authorities			—						(1.3)						(0.5)
Lapse of statute of limitations			(10.0)						(9.5)						(14.6)
Ending balance			$	76.5					$	64.2					$	64.1

Total unrecognized tax benefits that, if recognized, would affect our effective tax rate were $51.6 million and $42.3 million at the end of 2022 and 2021.

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 from 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 2022 and 2021, we accrued $8.4 million and $9.2 million for interest and penalties.

On August 16, 2022, the U.S. federal government enacted the Inflation Reduction Act (“IRA”) of 2022. The IRA includes a 15% corporate alternative minimum tax effective in 2024 for certain large corporations, a 1% excise tax on net share repurchases after December 31, 2022, and several tax incentives to promote clean energy. We do not expect the provisions of the IRA to have a material impact on our financial results.

NOTE 13: 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 Restricted Stock Units (“RSUs”) for up to 92.6 million shares. At the end of 2022, the remaining number of shares available for grant under the 2002 stock plan was 17.6 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:

			2022						2021						2020
(In millions)
Restricted stock units			$	108.7					$	110.5					$	73.2
Stock options			1.1						1.3						1.5
ESPP			10.6						10.8						8.3
Total stock-based compensation expense			$	120.4					$	122.6					$	83.0

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Stock-based compensation expense was allocated as follows:

			2022						2021						2020
(In millions)
Cost of sales			$	12.6					$	9.5					$	6.7
Research and development			28.0						29.5						22.1
Sales and marketing			24.6						21.5						16.2
General and administrative			55.2						62.1						38.0
Total stock-based compensation expense			$	120.4					$	122.6					$	83.0

At the end of 2022, total unamortized stock-based compensation expense was $186.9 million, with a weighted-average recognition period of 1.9 years.

Restricted Stock Units

We grant RSUs containing only service conditions and RSUs containing a combination of service, performance, and 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 (a) the closing price of our common stock for awards containing only service or both service and performance conditions, or (b) 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 market conditions or performance conditions. 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.

			2022 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			4.3						$	56.96
Granted (2)			2.3						73.32
Shares vested, net (2)			(1.9)						52.21
Canceled and forfeited			(0.7)						63.02
Outstanding at the end of year			4.0						$	67.32

(1) Includes 0.3 million PSUs granted, 0.5 million PSUs vested, 0.3 million PSUs cancelled and forfeited, and 0.6 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 2022, 2021, and 2020 was $73.32, $78.44, and $42.50 per share. The fair value of all RSUs vested during 2022, 2021, and 2020 was $108.3 million, $81.4 million, and $78.0 million.

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 2022, 2021, and 2020, 0.6 million, 0.6 million, and 0.8 million shares were issued, representing $34.7 million, $33.4 million, and $26.9 million in cash received for the issuance of stock under the ESPP. At the end of 2022, the number of shares reserved for future purchases was 5.4 million.

NOTE 14: 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

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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 2022, 2021, and 2020, we repurchased approximately 6.0 million, 2.1 million, and 1.9 million shares of common stock in open market purchases under our 2017 and 2021 Stock Repurchase Programs, at an average price of $65.90, $85.75, and $43.40 per share, for a total of $394.7 million, $180.0 million, and $81.6 million. At the end of 2022, the 2021 Stock Repurchase Program had remaining authorized funds of $215.3 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 2022 repurchases, retained earnings was reduced by $347.0 million in 2022. Common stock repurchases under the program were recorded based upon the trade date for accounting purposes.

Because of the additional outstanding indebtedness we have and expect to incur in connection with the pending Transporeon acquisition, we have temporarily discontinued our share repurchases. See Note 3 “Acquisition and Divestitures” of this report for future information regarding our intended acquisition of Transporeon.

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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 30, 2022 and December 31, 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 30, 2022, 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 30, 2022 and December 31, 2021, and the results of its operations and its cash flows for each of the three years in the period ended December 30, 2022, 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 30, 2022, 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 17, 2023 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 17, 2023

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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 30, 2022, 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 30, 2022, 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 businesses acquired in 2022, which are included in the 2022 consolidated financial statements of the Company and constituted less than 1% of tangible assets and net assets as of December 30, 2022, 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 businesses acquired in 2022.

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 30, 2022 and December 31, 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 30, 2022, and the related notes and our report dated February 17, 2023 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 17, 2023

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