CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(In thousands, except per share data)

(Unaudited)

Fourth Quarter of

Fiscal Years

2014

2013

2014

2013

Revenues:

        Product

$ 386,510

$ 409,733

$1,713,564

$1,649,965

        Service

104,315

112,646

396,062

364,274

        Subscription

73,005

76,839

285,920

273,885

Total revenues

563,830

599,218

2,395,546

2,288,124

Cost of sales:

        Product

182,662

189,538

788,114

776,597

        Service

44,007

46,553

152,612

141,904

        Subscription

22,603

22,492

81,063

84,682

        Amortization of purchased intangible assets

21,950

21,181

82,913

81,119

Total cost of sales

271,222

279,764

1,104,702

1,084,302

Gross margin

292,608

319,454

1,290,844

1,203,822

Gross margin (%)

51.9%

53.3%

53.9%

52.6%

Operating expenses

    Research and development

80,855

77,636

317,992

299,421

    Sales and marketing

98,751

93,669

387,569

348,106

    General and administrative

16,924

58,498

247,120

216,876

    Restructuring

396

1,358

1,741

5,960

    Amortization of purchased intangible assets

18,793

20,947

75,599

81,722

       Total operating expenses

215,719

252,108

1,030,021

952,085

Operating income 

76,889

67,346

260,823

251,737

Non-operating income (loss), net

    Interest expense, net

(8,859)

(4,134)

(18,681)

(17,582)

    Foreign currency transaction gain, (loss), net

(1,275)

172

(5,084)

(954)

    Income from equity method investments, net

840

4,772

12,368

20,680

    Other income (loss), net

4,022

(1,864)

16,589

(1,017)

       Total non-operating income (loss), net

(5,272)

(1,054)

5,192

1,127

Income before taxes

71,617

66,292

266,015

252,864

Income tax provision 

15,756

6,631

52,127

34,698

Net income

55,861

59,661

213,888

218,166

Less: Net gain (loss) attributable to noncontrolling interests 

33

(336)

(230)

(689)

Net income attributable to Trimble Navigation Ltd.

$  55,828

$   59,997

$   214,118

$   218,855

Earnings per share attributable to Trimble Navigation Ltd.

     Basic

$      0.22

$      0.23

$        0.82

$        0.85

     Diluted

$      0.21

$      0.23

$        0.81

$        0.84

Shares used in calculating earnings per share:

    Basic

259,217

258,187

260,103

256,648

    Diluted

262,665

262,832

264,456

261,206

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands)

(Unaudited)

Fiscal Year End

Fiscal Year End

2014

2013

Assets

Current assets:

   Cash and cash equivalents

$         148,000

$         147,227

   Accounts receivable, net

362,049

337,932

   Other receivables

29,485

23,143

   Inventories, net

278,099

254,311

   Deferred income taxes

45,576

38,597

   Other current assets

39,407

35,807

      Total current assets

902,616

837,017

Property and equipment, net

157,355

142,975

Goodwill

2,101,169

1,989,470

Other purchased intangible assets, net

594,554

619,399

Other non-current assets

118,654

111,979

      Total assets

$      3,874,348

$      3,700,840

Liabilities 

Current liabilities:

   Current portion of long-term debt

$          64,431

$         106,402

   Accounts payable

103,851

112,522

   Accrued compensation and benefits

98,862

95,866

   Deferred revenue

211,589

159,295

   Accrued warranty expense

20,583

17,781

   Other accrued liabilities

88,983

85,124

      Total current liabilities

588,299

576,990

Non-current portion of long-term debt

674,015

652,056

Non-current deferred revenue

26,309

20,431

Deferred income taxes

121,071

136,399

Other non-current liabilities

95,802

80,982

      Total liabilities

1,505,496

1,466,858

Commitments and contingencies

Equity

Shareholders' equity:

   Common stock

1,207,365

1,106,017

   Retained earnings

1,210,977

1,081,695

   Accumulated other comprehensive income (loss)

(61,328)

33,194

Total Trimble Navigation Ltd. shareholders' equity

2,357,014

2,220,906

Noncontrolling interests 

11,838

13,076

      Total equity

2,368,852

2,233,982

      Total liabilities and equity

$      3,874,348

$      3,700,840

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS 

(In thousands)

(Unaudited)

Fiscal Years

2014

2013

Cash flow from operating activities:

    Net Income

$   213,888

$ 218,166

    Adjustments to reconcile net income to net cash provided by

       operating activities:

         Depreciation expense

33,129

26,736

         Amortization expense

158,512

162,841

         Provision for doubtful accounts

3,747

1,909

         Deferred income taxes

(1,650)

(14,963)

         Stock-based compensation

43,398

36,442

         Income from equity method investments

(12,368)

(20,680)

         Gain (loss) on an equity sale

(15,091)

-

         Acquisition / divestiture (gain)/loss

2,899

1,430

         Excess tax benefit for stock-based compensation

(14,098)

(13,540)

         Provision for excess and obsolete inventories

4,817

3,157

         Other non-cash items

4,653

(657)

    Add decrease (increase) in assets:

         Accounts receivables

(10,882)

(4,070)

         Other receivables

(2,321)

2,302

         Inventories

(31,778)

(11,351)

         Other current and non-current assets

(7,101)

(11,811)

    Add increase (decrease) in liabilities:

         Accounts payable

(7,185)

(15,834)

         Accrued compensation and benefits

527

4,047

         Deferred revenue

45,865

29,394

         Accrued warranty expense

3,045

675

         Other liabilities

(4,923)

20,442

 Net cash provided by operating activities 

407,083

414,635

 Cash flow from investing activities: 

      Acquisitions of businesses, net of cash acquired 

(307,945)

(258,797)

      Acquisitions of property and equipment 

(47,312)

(70,877)

      Acquisitions of intangible assets 

(7,633)

(242)

      (Purchases) sales of equity method investments 

(10,939)

2,430

      Dividends received from equity method investments 

32,231

7,672

      Other 

(2,448)

(4,950)

 Net cash used in investing activities 

(344,046)

(324,764)

 Cash flow from financing activities: 

      Issuance of common stock, net of tax withholdings 

56,095

47,707

      Repurchase and retirement of common stock 

(97,757)

-

      Excess tax benefit for stock-based compensation 

14,098

13,540

      Proceeds from debt and revolving credit lines 

816,166

407,678

      Payments on debt and revolving credit lines 

(840,126)

(567,344)

 Net cash used in financing activities 

(51,524)

(98,419)

 Effect of exchange rate changes on cash and cash equivalents 

(10,741)

(1,996)

 Net decrease in cash and cash equivalents 

773

(10,544)

 Cash and cash equivalents - beginning of period 

147,227

157,771

 Cash and cash equivalents - end of period 

$   148,000

$ 147,227

REPORTING SEGMENTS

(Dollars in thousands)

(Unaudited)

Reporting Segments

and

Field

Mobile

Advanced

Construction

Solutions

Solutions

Devices

FOURTH QUARTER OF FISCAL 2014 :

Revenues

$     328,509

$    80,678

$  124,140

$    30,503

Operating income before corporate allocations:

$      48,904

$    17,404

$    18,112

$     9,476

Operating margin (% of segment external net revenues)

14.9%

21.6%

14.6%

31.1%

FOURTH QUARTER OF FISCAL 2013 :

Revenues

$     331,112

$  111,080

$  125,880

$    31,146

Operating income before corporate allocations:

$      67,957

$    38,843

$    21,677

$     5,158

Operating margin (% of segment external net revenues)

20.5%

35.0%

17.2%

16.6%

FISCAL YEAR 2014 :

Revenue

$  1,348,129

$  422,090

$  486,819

$  138,508

Operating income before corporate allocations:

$     268,856

$  134,198

$    72,876

$    42,326

Operating margin (% of segment external net revenues)

19.9%

31.8%

15.0%

30.6%

FISCAL YEAR 2013 :

Revenue

$  1,222,040

$  473,891

$  465,138

$  127,055

Operating income before corporate allocations:

$     251,258

$  173,114

$    63,961

$    26,577

Operating margin (% of segment external net revenues)

20.6%

36.5%

13.8%

20.9%

GAAP TO NON-GAAP RECONCILIATION

(Dollars in thousands, except per share data)

(Unaudited)

Fourth Quarter of

Fiscal Years

2014

2013

2014

2013

Dollar

% of

Dollar

% of

Dollar

% of

Dollar

% of

Amount

Revenue

Amount

Revenue

Amount

Revenue

Amount

Revenue

GROSS MARGIN:

GAAP gross margin:

$ 292,608

51.9%

$319,454

53.3%

$1,290,844

53.9%

$1,203,822

52.6%

Restructuring

( A )

38

0.0%

31

0.0%

363

0.0%

860

0.0%

Amortization of purchased intangible assets

( B )

21,950

3.9%

21,181

3.6%

82,913

3.5%

81,119

3.6%

Stock-based compensation

( C )

898

0.2%

757

0.1%

3,184

0.1%

2,573

0.1%

Amortization of acquisition-related inventory step-up

( D )

154

0.0%

-

0.0%

816

0.0%

1,505

0.1%

Non-GAAP gross margin: 

$ 315,648

56.0%

$ 341,423

57.0%

$1,378,120

57.5%

$1,289,879

56.4%

OPERATING EXPENSES:

GAAP operating expenses:

$ 215,719

38.3%

$252,108

42.1%

$1,030,021

43.0%

$952,085

41.6%

Restructuring

( A )

(396)

-0.1%

(1,358)

-0.2%

(1,741)

-0.1%

(5,960)

-0.3%

Amortization of purchased intangible assets

( B )

(18,793)

-3.3%

(20,947)

-3.5%

(75,599)

-3.1%

(81,722)

-3.5%

Stock-based compensation

( C )

(10,375)

-1.9%

(9,527)

-1.6%

(40,214)

-1.7%

(33,869)

-1.4%

Acquisition / divestiture items

( E )

(6,033)

-1.1%

(3,910)

-0.7%

(13,449)

-0.6%

(13,195)

-0.6%

Litigation

( H )

51,300

9.1%

-

0.0%

(711)

0.0%

(1,335)

-0.1%

Non-GAAP operating expenses:

$ 231,422

41.0%

$ 216,366

36.1%

$   898,307

37.5%

$816,004

35.7%

OPERATING INCOME:

GAAP operating income:

$   76,889

13.6%

$67,346

11.2%

$   260,823

10.9%

$251,737

11.0%

Restructuring

( A )

434

0.1%

1,389

0.2%

2,104

0.1%

6,820

0.3%

Amortization of purchased intangible assets

( B )

40,743

7.2%

42,128

7.0%

158,512

6.6%

162,841

7.1%

Stock-based compensation

( C )

11,273

2.0%

10,284

1.7%

43,398

1.8%

36,442

1.5%

Amortization of acquisition-related inventory step-up

( D )

154

0.0%

-

0.0%

816

0.0%

1,505

0.1%

Acquisition / divestiture items

( E )

6,033

1.1%

3,910

0.8%

13,449

0.6%

13,195

0.6%

Litigation

( H )

(51,300)

-9.1%

-

0.0%

711

0.0%

1,335

0.1%

Non-GAAP operating income: 

$   84,226

14.9%

$ 125,057

20.9%

$   479,813

20.0%

$473,875

20.7%

NON-OPERATING INCOME (LOSS), NET:

GAAP non-operating income (loss), net:

$    (5,272)

($1,054)

$       5,192

$1,127

Acquisition / divestiture items

( E )

(3,105)

2,276

2,899

1,430

Gain on an equity sale

( F )

-

-

(15,091)

-

Debt issuance cost write-off

( G )

4,205

-

4,205

-

Non-GAAP non-operating income (loss), net: 

$    (4,172)

$    1,222

$      (2,795)

$2,557

GAAP and 

GAAP and 

GAAP and 

GAAP and 

Non-GAAP

Non-GAAP

Non-GAAP

Non-GAAP

Tax Rate %

( L )

Tax Rate %

( L )

Tax Rate %

( L )

Tax Rate %

( L )

INCOME TAX PROVISION:

GAAP income tax provision:

$   15,756

22%

$6,631

10%

$     52,127

20%

$34,698

14%

Non-GAAP items tax effected

( I )

7,982

6,001

44,342

30,064

Tax on gain on an equity sale

( J )

-

-

(5,836)

-

Tax on RDS litigation

( K )

(19,840)

-

-

-

Non-GAAP income tax provision: 

$     3,898

5%

$  12,632

10%

$     90,633

19%

$     64,762

14%

NET INCOME:  

GAAP net income attributable to Trimble Navigation Ltd.

$   55,828

$  59,997

$   214,118

$   218,855

Restructuring

( A )

434

1,389

2,104

6,820

Amortization of purchased intangible assets

( B )

40,743

42,128

158,512

162,841

Stock-based compensation

( C )

11,273

10,284

43,398

36,442

Amortization of acquisition-related inventory step-up

( D )

154

-

816

1,505

Acquisition / divestiture items

( E )

2,928

6,186

16,348

14,625

Gain on an equity sale

( F )

-

-

(15,091)

-

Debt issuance cost write-off

( G )

4,205

-

4,205

-

Litigation

( H )

(51,300)

-

711

1,335

Non-GAAP tax adjustments

(I), (J), (K)

11,858

(6,001)

(38,506)

(30,064)

Non-GAAP net income attributable to Trimble Navigation Ltd.

$   76,123

$ 113,983

$   386,615

$   412,359

DILUTED NET INCOME PER SHARE:

GAAP diluted net income per share attributable to Trimble Navigation Ltd.

$      0.21

$0.23

$        0.81

$0.84

Restructuring

( A )

-

-

0.01

0.03

Amortization of purchased intangible assets

( B )

0.16

0.16

0.60

0.62

Stock-based compensation

( C )

0.04

0.04

0.16

0.14

Amortization of acquisition-related inventory step-up

( D )

-

-

-

-

Acquisition / divestiture items

( E )

0.01

0.02

0.06

0.06

Gain on an equity sale

( F )

-

-

(0.06)

-

Debt issuance cost write-off

( G )

0.02

-

0.02

-

Litigation

( H )

(0.20)

-

-

0.01

Non-GAAP tax adjustments

(I), (J), (K)

0.05

(0.02)

(0.14)

(0.12)

Non-GAAP diluted net income per share attributable to Trimble Navigation Ltd.

$      0.29

$      0.43

$        1.46

$        1.58

OPERATING LEVERAGE:

Increase in non-GAAP operating income

$  (40,831)

$  39,997

$       5,938

$     76,538

Increase in revenue

$  (35,388)

$  83,695

$   107,422

$   248,011

Operating leverage (increase in non-GAAP operating 

income as a % of increase in revenue)

N/A

47.8%

5.5%

30.9%

GAAP TO NON-GAAP RECONCILIATION (CONTINUED)

(Dollars in thousands, except per share data)

(Unaudited)

Fourth Quarter of

Fiscal Years

2014

2013

2014

2013

SEGMENT OPERATING INCOME:

% of
Segment

Revenue

% of
Segment

Revenue

% of
Segment

Revenue

% of
Segment

Revenue

Engineering and Construction

GAAP operating income before corporate allocations:

$ 48,904

14.9%

$ 67,957

20.5%

$ 268,856

19.9%

$ 251,258

20.6%

Stock-based compensation

( M )

4,214

1.3%

3,623

1.1%

15,244

1.2%

12,325

1.0%

Non-GAAP operating income before corporate allocations:

$ 53,118

16.2%

$ 71,580

21.6%

$ 284,100

21.1%

$ 263,583

21.6%

Field Solutions

GAAP operating income before corporate allocations:

$ 17,404

21.6%

$ 38,843

35.0%

$ 134,198

31.8%

$ 173,114

36.5%

Stock-based compensation

( M )

969

1.2%

810

0.7%

3,554

0.8%

3,068

0.7%

Non-GAAP operating income before corporate allocations:

$ 18,373

22.8%

$ 39,653

35.7%

$ 137,752

32.6%

$ 176,182

37.2%

Mobile Solutions

GAAP operating income before corporate allocations:

$ 18,112

14.6%

$ 21,677

17.2%

$   72,876

15.0%

$   63,961

13.8%

Stock-based compensation

( M )

1,350

1.1%

1,208

1.0%

5,123

1.0%

4,002

0.8%

Non-GAAP operating income before corporate allocations:

$ 19,462

15.7%

$ 22,885

18.2%

$   77,999

16.0%

$   67,963

14.6%

Advanced Devices

GAAP operating income before corporate allocations:

$   9,476

31.1%

$   5,158

16.6%

$   42,326

30.6%

$   26,577

20.9%

Stock-based compensation

( M )

409

1.3%

645

2.0%

1,925

1.3%

3,295

2.6%

Non-GAAP operating income before corporate allocations:

$   9,885

32.4%

$   5,803

18.6%

$   44,251

31.9%

$   29,872

23.5%

FOOTNOTES TO GAAP TO NON-GAAP RECONCILIATION

(Unaudited)

Our non-GAAP measures are not meant to be considered in isolation or as a substitute for comparable GAAP measures. The non-GAAP financial measures included in the previous table as well as detailed explanations to the adjustments to comparable GAAP measures, are set forth below:

Non-GAAP gross margin

We believe our investors benefit by understanding our non-GAAP gross margin as a way of understanding how product mix, pricing decisions and manufacturing costs influence our business.  Non-GAAP gross margin excludes restructuring costs, amortization of purchased intangible assets, stock-based compensation and amortization of acquisition-related inventory step-up from GAAP gross margin. We believe that these exclusions offer investors additional information that may be useful to view trends in our gross margin performance.

Non-GAAP operating expenses

We believe this measure is important to investors evaluating our non-GAAP spending in relation to revenue. Non-GAAP operating expenses exclude restructuring costs, amortization of purchased intangible assets, stock-based compensation, acquisition/divestiture costs associated with external and incremental costs resulting directly from merger and acquisition activities such as legal, due diligence, and integration costs from GAAP operating expenses, and litigation expenses. We believe that these exclusions offer investors supplemental information to facilitate comparison of our operating expenses to our prior results. 

Non-GAAP operating income

We believe our investors benefit by understanding our non-GAAP operating income trends which are driven by revenue, gross margin, and spending. Non-GAAP operating income excludes restructuring costs, amortization of purchased intangible assets, stock-based compensation, amortization of acquisition-related inventory step-up, acquisition/divestiture costs associated with external and incremental costs resulting directly from merger and acquisition activities such as legal, due diligence, and integration costs and litigation expenses. We believe that these exclusions offer an alternative means for our investors to evaluate current operating performance compared to results of other periods. 

Non-GAAP non-operating income, net

We believe this measure helps investors evaluate our non-operating income trends. Non-GAAP non-operating income, net excludes acquisition and divestiture gains/losses associated with unusual acquisition related items such as adjustments to the fair value of earn-out liabilities, intangible asset impairment charges and gains or losses related to the acquisition or sale of certain businesses and investments, and a gain on an equity sale. These gains/losses are specific to particular acquisitions and divestitures and vary significantly in amount and timing. Non-GAAP non-operating income, net also excludes the write-off of debt issuance costs associated with terminated and/or modified credit facilities and costs associated with the issuance of new credit facilities and Senior Notes that were not capitalized as debt issuance costs. We believe that these exclusions provide investors with a supplemental view of our ongoing financial results.

Non-GAAP income tax provision

Non-GAAP items tax effected adjusts the provision for income taxes to reflect the effect of certain non-GAAP items on non-GAAP net income. We believe this information is useful to investors because it provides for consistent treatment of the excluded items in our non-GAAP presentation.

Non-GAAP net income

This measure provides a supplemental view of net income trends which are driven by non-GAAP income before taxes and our non-GAAP tax rate. Non-GAAP net income excludes restructuring costs, amortization of purchased intangible assets, stock-based compensation, amortization of acquisition-related inventory step-up, acquisition and divestiture costs, a gain on an equity sale, a write off of debt issuance costs, litigation expenses and non-GAAP tax adjustments from GAAP net income. We believe our investors benefit from understanding these exclusions and from an alternative view of our net income performance as compared to our past net income performance.

Non-GAAP diluted net income per share

We believe our investors benefit by understanding our non-GAAP operating performance as reflected in a per share calculation as a way of measuring non-GAAP operating performance by ownership in the company. Non-GAAP diluted net income per share excludes restructuring costs, amortization of purchased intangible assets, stock-based compensation, amortization of acquisition-related inventory step-up, acquisition and divestiture costs, a gain on an equity sale, a write off of debt issuance costs, litigation expenses and non-GAAP tax adjustments from GAAP diluted net income per share. We believe that these exclusions offer investors a useful view of our diluted net income per share as compared to our past diluted net income per share. 

Non-GAAP operating leverage

We believe this information is beneficial to investors as a measure of how much incremental revenue contributed to our operating income. Non-GAAP operating leverage is the increase in non-GAAP operating income as a percentage of the increase in revenue. We believe that this information offers investors supplemental information to evaluate our current performance and to compare to our past non-GAAP operating leverage. 

Non-GAAP segment operating income

Non-GAAP segment operating income excludes stock-based compensation from GAAP segment operating income. We believe this information is useful to investors because some may exclude stock-based compensation as an alternative view when assessing trends in the operating income of our segments. 

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

( A )

Restructuring costs.  Included in our GAAP presentation of cost of sales and operating expenses, restructuring costs recorded are primarily for employee compensation resulting from reductions in employee headcount in connection with our company restructurings.  We exclude restructuring costs from our non-GAAP measures because we believe they do not reflect expected future operating expenses, they are not indicative of our core operating performance, and they are not meaningful in comparisons to our past operating performance.  We have incurred restructuring expense in each of the periods presented however the amount incurred can vary significantly based on whether a restructuring has occurred in the period and the timing of headcount reductions. 

( B )

Amortization of purchased intangible assets.  Included in our GAAP presentation of gross margin and operating expenses is amortization of purchased intangible assets. US GAAP accounting requires that intangible assets are recorded at fair value and amortized over their useful lives. Consequently, the timing and size of our acquisitions will cause our operating results to vary from period to period, making a comparison to past performance difficult for investors. This accounting treatment may cause differences when comparing our results to companies that grow internally because the fair value assigned to the intangible assets acquired through acquisition may significantly exceed the equivalent expenses that a company may incur for similar efforts when performed internally. Furthermore, the useful life that we expense our intangible assets over may be substantially different from the time period that an internal growth company incurs and recognizes such expenses. We believe that by excluding the amortization of purchased intangible assets, which primarily represents technology and/or customer relationships already developed, it provides an alternative way for investors to compare our operations pre-acquisition to those post-acquisitions and to those of our competitors that have pursued internal growth strategies. However, we note that companies that grow internally will incur costs to develop intangible assets that will be expensed in the period incurred, which may make a direct comparison more difficult.     

( C )

Stock-based compensation.  Included in our GAAP presentation of cost of sales and operating expenses, stock-based compensation consists of expenses for employee stock options and awards and purchase rights under our employee stock purchase plan. We exclude stock-based compensation expense from our non-GAAP measures because some investors may view it as not reflective of our core operating performance as it is a non-cash expense.   For the fourth quarter and fiscal 2014 and 2013, stock-based compensation was allocated as follows: 

Fourth Quarter of

Fiscal Years

(Dollars in thousands)

2014

2013

2014

2013

Cost of sales

$     898

$757

$  3,184

$2,573

Research and development

2,010

1,395

6,825

5,039

Sales and Marketing

1,591

1,988

7,613

7,329

General and administrative

6,774

6,144

25,776

21,501

$11,273

$10,284

$43,398

$36,442

( D )

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

( E )

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

( F )

Gain on an equity sale.   Included in our GAAP presentation of non-operating income (loss), net this amount represents a gain on a partial equity sale of Virtual Site Solutions.  We excluded the gain from our non-GAAP measures. We believe that investors benefit from excluding this item from our non-GAAP measures because it facilitates an evaluation of our non-operating income trends.

( G )

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

( H )

Litigation.  The fiscal 2013 amount represents a settlement of litigation related to a pre-acquisition agreement with a contract manufacturer.  The fiscal 2014 amount represents $0.7M of costs based on an arbitration agreement, as well as $51.3M of estimated costs that were reserved during the third quarter based on a jury verdict in favor of the plaintiff, Recreational Data Services, Inc. and then reversed during the fourth quarter after the judge overturned the verdict. We have excluded these costs from our non-GAAP measures because they are non-recurring expenses that are not indicative of our ongoing operating results. We further believe that excluding these items from our non-GAAP results is useful to investors in that it allows for period-over-period comparability.              

( I )

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

( J )

Tax on gain on an equity sale.  This amount represents the tax effect of a gain on a partial equity sale of Virtual Site Solutions.  We excluded this item as it represents the tax effect of a non-recurring gain.  We believe that investors benefit from excluding this item from our non-GAAP income tax provision because it facilitates a comparison of the non-GAAP tax rate in the current period to the non-GAAP tax rates in prior periods.

( K )

Tax on Recreational Data Services Inc. litigation.  This amount represents the tax effect of a reversal of a legal reserve recorded in the third quarter of 2014 that was reversed in the fourth quarter of 2014.  We excluded this item as it represents the tax effect of a non-recurring expense.  We believe that investors benefit from excluding this item from our non-GAAP income tax provision because it allows for period-over-period comparability.

( L )

GAAP and non-GAAP tax rate %.  These percentages are defined as GAAP income tax provision as a percentage of GAAP income before taxes and non-GAAP income tax provision as a percentage of non-GAAP income before taxes.   We believe that investors benefit from a presentation of non-GAAP tax rate percentage as a way of facilitating a comparison to non-GAAP tax rates in prior periods.

( M )

Stock-based compensation.  The amounts consist of expenses for employee stock options and awards and purchase rights under our employee stock purchase plan. As referred to above we exclude stock-based compensation here because investors may view it as not reflective of our core operating performance as it is a non-cash expense. However, management does include stock-based compensation for budgeting and incentive plans as well as for reviewing internal financial reporting. We discuss our operating results by segment with and without stock-based compensation expense, as we believe it is useful to investors. Stock-based compensation not allocated to the reportable segments was approximately $4.3 million and $4.0 million for the fourth quarter of fiscal 2014 and 2013, respectively, and $17.6 million and $13.8 million for fiscal 2014 and 2013, respectively.