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Business Combinations | 9 Months Ended
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Sep. 28, 2018
Business Combinations [Abstract] |
BUSINESS COMBINATIONS | BUSINESS COMBINATIONS During the first three quarters of fiscal 2018, the Company acquired five businesses, with total cash consideration of $1,753.9 million, including the acquisitions of Waterfall Holdings, Inc., the holding company of Viewpoint, Inc. (“Viewpoint”) and e-Builder, Inc. ("e-Builder") in all cash transactions valued at $1,211.2 million and $485.2 million, respectively. The Condensed Consolidated Statements of Income include the operating results of the businesses from the dates of acquisition. The businesses acquired during the first three quarters of fiscal 2018 contributed less than three percent to the Company's total revenue during the first three quarters of fiscal 2018. The Company determined the total consideration paid for each of its acquisitions as well as the fair value of the assets acquired and liabilities assumed as of the date of acquisition. The fair value of liabilities assumed includes deferred revenue which is written down to the cost, plus a reasonable profit margin, to fulfill customer contractual obligations. For certain acquisitions completed in the first three quarters of fiscal 2018, the fair value of the assets acquired and liabilities assumed are preliminary and may be adjusted as the Company obtains additional information, primarily related to adjustments for the true-up of acquired net working capital in accordance with certain purchase agreements, and estimated values of certain net tangible assets and liabilities including tax balances, pending the completion of final studies and analyses. If there are adjustments made for these items, the fair value of intangible assets and goodwill could be impacted. Thus, the provisional measurements of fair value are subject to change. Such changes could be significant. The Company expects to finalize the valuation of the net tangible and intangible assets as soon as practicable, but not later than one year from the acquisition date. The fair value, of identifiable assets acquired and liabilities assumed, was determined under the acquisition method of accounting for business combinations. The excess of purchase consideration over the fair value of net tangible and identifiable intangible assets acquired was recorded as goodwill. The fair value of intangible assets acquired is generally determined based on a discounted cash flow analysis. Acquisition costs directly related to all acquisitions, including the changes in the fair value of the contingent consideration liabilities, a net expense of $10.7 million and $34.8 million for the third quarter and the first three quarters of fiscal 2018, respectively, and a net benefit of $0.3 million and a net expense of $6.1 million for the third quarter and the first three quarters of fiscal 2017, respectively, were recorded as incurred. The following table summarizes the Company’s business combinations completed during the first three quarters of fiscal 2018 including Viewpoint and e-Builder (the acquisitions of which are described below):
| First Three Quarters of
| 2018
(In millions) |
Fair value of total purchase consideration | $ | 1,753.9 |
Less fair value of net assets acquired: |
Net tangible assets acquired | 5.1 |
Identifiable intangible assets | 551.5 |
Deferred income taxes | (83.2 | )
Goodwill | $ | 1,280.5 |
Intangible Assets The following table presents details of the Company’s total intangible assets:
As of | Third Quarter of Fiscal 2018 |  | Fiscal Year End 2017
| Gross |  |  |  |  |  | Gross |  |  |  |
| Carrying |  | Accumulated |  | Net Carrying |  | Carrying |  | Accumulated |  | Net Carrying
(In millions) | Amount |  | Amortization |  | Amount |  | Amount |  | Amortization |  | Amount
Developed product technology | $ | 1,218.8 |  |  | $ | (806.8 | ) |  | $ | 412.0 |  |  | $ | 915.3 |  |  | $ | (729.9 | ) |  | $ | 185.4 |
Trade names and trademarks | 73.0 |  |  | (52.2 | ) |  | 20.8 |  |  | 58.7 |  |  | (48.6 | ) |  | 10.1 |
Customer relationships | 717.2 |  |  | (393.1 | ) |  | 324.1 |  |  | 512.1 |  |  | (351.3 | ) |  | 160.8 |
Distribution rights and other intellectual property | 86.3 |  |  | (63.2 | ) |  | 23.1 |  |  | 69.2 |  |  | (60.7 | ) |  | 8.5 |
| $ | 2,095.3 |  |  | $ | (1,315.3 | ) |  | $ | 780.0 |  |  | $ | 1,555.3 |  |  | $ | (1,190.5 | ) |  | $ | 364.8 |
The estimated future amortization expense of purchased intangible assets as of the end of the third quarter of fiscal 2018 was as follows:
(In millions) |
2018 (Remaining) | $ | 46.0 |
2019 | 166.8 |
2020 | 138.2 |
2021 | 116.6 |
2022 | 98.4 |
Thereafter | 214.0 |
Total | $ | 780.0 |
Goodwill The changes in the carrying amount of goodwill by segment for the first three quarters of fiscal 2018 were as follows:
| Buildings and Infrastructure |  | Geospatial |  | Resources and Utilities |  | Transportation |  | Total
(In millions) |  |  |  |  |  |  |  |  |
Balance as of fiscal year end 2017 | $ | 706.8 |  |  | $ | 415.3 |  |  | $ | 314.5 |  |  | $ | 850.5 |  |  | $ | 2,287.1 |
Additions due to acquisitions | 1,280.5 |  |  | — |  |  | — |  |  | — |  |  | 1,280.5 |
Purchase price adjustments- prior years' acquisitions | — |  |  | — |  |  | (0.4 | ) |  | (0.7 | ) |  | (1.1 | )
Foreign currency translation adjustments | (4.2 | ) |  | (5.4 | ) |  | (4.1 | ) |  | (2.4 | ) |  | (16.1 | )
Divestiture (1) | — |  |  | (1.8 | ) |  | — |  |  | — |  |  | (1.8 | )
Balance as of the end of the third quarter of fiscal 2018 | $ | 1,983.1 |  |  | $ | 408.1 |  |  | $ | 310.0 |  |  | $ | 847.4 |  |  | $ | 3,548.6 |
(1) In the first quarter of 2018, the Company sold its Geoline business, which was part of the Geospatial segment. Viewpoint and e-Builder acquisitions On July 2, 2018, the Company acquired all of the outstanding shares of Viewpoint, Inc., in an all-cash transaction valued at $1,211.2 million (the “Viewpoint acquisition”). Viewpoint is a provider of construction management software, which integrates a contractor’s financial and resource management to their project operations in the field. The integration across the office, team and field workflows enables contractors to employ Viewpoint to effectively manage and gain visibility over data and workflows that span the construction lifecycle from pre-production planning, to product operations and supply chain management, through project hand over and asset operation and maintenance. The Company incurred approximately $17.5 million in acquisition-related costs, which were expensed as incurred in General and administrative expense. On February 2, 2018, the Company completed the acquisition of e-Builder. e-Builder is a SaaS-based construction program management solution for capital program owners and program management firms that provides an integrated project delivery solution for owners, program managers and contractors across the design, construct and operate lifecycle. Trimble acquired all of the issued and outstanding shares of common stock of e-Builder for a total purchase price of $485.2 million, subject to certain adjustments described in the purchase agreement. The Company incurred approximately $18.6 million in acquisition-related costs, primarily comprising compensation costs incurred post-closing associated with options which were accelerated in connection with the acquisition transaction, which were expensed as incurred and included in Cost of Sales - Service, Research and development, Sales and marketing and General and administrative expense. Viewpoint and e-Builder’s results of operations since their respective acquisition dates have been included in the Company’s Condensed Consolidated Statements of Income for the first three quarters of fiscal 2018. Both Viewpoint and e-Builder's performance are reported under the Buildings and Infrastructure segment. The two acquisitions were funded through the use of approximately $211.2 million of the Company’s existing cash, with the remainder funded through the issuance of senior notes and the Company’s 2018 Credit Facilities (as defined below). The following table summarizes the consideration transferred to acquire Viewpoint and e-Builder, the assets acquired and liabilities assumed and the estimated useful lives of the identifiable intangible assets as of the date of the acquisition:
(In millions) | Viewpoint |  |  |  | e-Builder |  |  |
Total purchase consideration | $ | 1,211.2 |  |  |  |  | $ | 485.2 |  |  |  |
Net tangible assets acquired | 3.5 |  |  |  |  | 1.3 |  |  |  |
Intangible assets acquired: |  |  | Estimated Useful Life |  |  |  | Estimated Useful Life |
Developed product technology | 222.0 |  |  | 6 years |  | 60.5 |  |  | 7 years |
In-Process Research & Development | 12.8 |  |  | n/a |  | — |  |  |  |
Order backlog | — |  |  |  |  | 1.7 |  |  | 6 months |
Customer relationships | 158.6 |  |  | 10 years |  | 42.4 |  |  | 10 years |
Trade name | 8.9 |  |  | 5 years |  | 4.8 |  |  | 7 years |
Favorable Lease | 4.3 |  |  | 4 - 9 years |  | — |  |  |  |
Subtotal | 406.6 |  |  |  |  | 109.4 |  |  |  |
Deferred tax liability | (58.2 | ) |  |  |  | (18.4 | ) |  |  |
Less fair value of all assets/liabilities acquired | 351.9 |  |  |  |  | 92.3 |  |  |  |
Goodwill | $ | 859.3 |  |  |  |  | $ | 392.9 |  |  |  |
Details of the net assets acquired are as follows:
| Viewpoint |  | e-Builder |
| As of July 2, 2018 |  | As of February 2, 2018 |
(In millions) |  |  |  |
Cash and cash equivalents | $ | 9.1 |  |  | $ | 2.5 |  |
Accounts receivable, net | 19.8 |  |  | 14.4 |  |
Other receivables | 1.7 |  |  | 43.3 |  |
Other current assets | 9.6 |  |  | 0.7 |  |
Property and equipment, net | 7.6 |  |  | — |  |
Other non-current assets | 3.2 |  |  | 0.2 |  |
Accounts payable | (1.3 | ) |  | (8.4 | ) |
Accrued compensation and benefits | (8.7 | ) |  | — |  |
Deferred revenue | (23.9 | ) |  | (11.8 | ) |
Other current liabilities | (11.4 | ) |  | (39.6 | ) |
Other non-current liabilities | (2.2 | ) |  | — |  |
Net tangible assets acquired | $ | 3.5 |  |  | $ | 1.3 |  |
Goodwill represents the excess of the fair value of consideration paid over the fair value of the underlying net tangible and intangible assets acquired. Goodwill consisted of highly skilled and valuable assembled workforce, a proven ability to generate new products and services to drive future revenue and a premium paid by the Company for synergies unique to its business. The Company recorded $859.3 million and $392.9 million of goodwill from Viewpoint and e-Builder acquisitions, respectively. Of the third quarter of fiscal 2018 goodwill balance, $95.8 million for Viewpoint is expected to be deductible for tax purposes. During the third quarter and the first three quarters of fiscal 2018, Viewpoint and e-Builder contributed $50.3 million and $65.9 million of revenue, respectively, and recorded $3.0 million and $1.5 million of operating income, respectively. The following table presents pro forma results of operations of the Company, Viewpoint and e-Builder, as if the companies had been combined as of the beginning of the earliest period presented. The unaudited pro forma results of operations are not necessarily indicative of results that would have occurred had the acquisitions taken place on the first day of fiscal 2017, or of future results. Included in the pro forma results are fair value adjustments based on the fair values of assets acquired and liabilities assumed as of the applicable acquisition dates. For the third quarter and first three quarters of fiscal 2018 and 2017, the major impacts for the pro-forma results include amortization of intangible assets related to the acquisitions, impacts from adoption of Revenue from Contracts with Customers, interest expense for debt used to purchase Viewpoint and e-Builder, income tax effects, and other adjustments to reflect fair value. The pro forma information for the third quarter and first three quarters of fiscal 2018 and 2017 is as follows:
| Third Quarter of |  | First Three Quarters of
Fiscal Period | 2018 |  | 2017 |  | 2018 |  | 2017
(in millions, except per share data) |  |  |  |  |  |  |
Revenue | $ | 795.2 |  |  | $ | 728.3 |  |  | $ | 2,420.0 |  |  | $ | 2,091.9 |
Net income attributable to Trimble Inc. | 81.9 |  |  | 42.2 |  |  | 189.5 |  |  | 108.6 |
Basic earnings per share | 0.33 |  |  | 0.17 |  |  | 0.76 |  |  | 0.43 |
Diluted earnings per share | 0.32 |  |  | 0.16 |  |  | 0.75 |  |  | 0.42 |

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- Definition The entire disclosure for a business combination (or series of individually immaterial business combinations) completed during the period, including background, timing, and recognized assets and liabilities. The disclosure may include leverage buyout transactions (as applicable). + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -URI http://asc.fasb.org/topic&trid=2303972 + Details
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