NOTE 4: BUSINESS COMBINATIONS

During fiscal 2013, 2012 and 2011 the Company acquired multiple businesses, all with cash consideration. The Consolidated Statements of Income include the operating results of the businesses from the dates of acquisition.

During fiscal 2013, the Company acquired sixteen businesses across its Engineering and Construction, Field Solutions, and Mobile Solutions segments. None of the acquisitions were significant individually or in the aggregate. The purchase prices ranged from less than $0.5 million to $80.0 million. The largest acquisitions were of a company that provides product and pricing information to the MEP industry within the Engineering and Construction segment, and a software for logistics provider within the Mobile Solutions segment. In the aggregate, the business acquired during fiscal 2013 collectively contributed less than three percent to the Company's total revenue during fiscal 2013.

During fiscal 2012 none of the acquisitions completed were significant individually, but in the aggregate they were significant. TMW, representing 45% of the total cash consideration, was the largest of the 2012 acquisitions, and related information is presented below. During fiscal 2011, each of the acquisitions was not material individually except for the acquisition of Tekla Corporation (“Tekla”) in July 2011, which related information is presented below.

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 each acquisition. For certain acquisitions completed in fiscal 2013, 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 set forth below 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 were 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 the acquisitions of $13.5 million, $20.5 million and $14.9 million in fiscal 2013, 2012, and 2011, respectively were expensed as incurred and were included in General and administrative expenses in the Consolidated Statements of Income.

The following table summarizes the Company’s business combinations completed during fiscal 2013, 2012 and 2011 including TMW and Tekla:



(in thousands)	Fiscal 2013			Fiscal 2012			Fiscal 2011
Fair value of total purchase consideration	$	284,710		$	747,822		$	797,801
Fair value of net assets acquired	20,919			28,846			23,121
Identified intangible assets	130,063			284,861			374,928
Deferred taxes	(26,326		)	(69,774		)	(96,330		)
Noncontrolling interest	(1,968		)	(387		)	—
Goodwill	$	162,022		$	504,276		$	496,082

Intangible Assets

The following table presents details of the Company’s total intangible assets:



	At the End of Fiscal 2013							At the End of Fiscal 2012
(in thousands)	Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount
Developed product technology	$	699,479	$	(363,389	)	$	336,090	$	610,643	$	(267,952	)	$	342,691
Trade names and trademarks	46,195		(28,699		)	17,496		42,512		(23,241		)	19,271
Customer relationships	424,630		(189,338		)	235,292		385,269		(135,571		)	249,698
Distribution rights and other intellectual properties	79,844		(49,323		)	30,521		72,510		(39,751		)	32,759
	$	1,250,148	$	(630,749	)	$	619,399	$	1,110,934	$	(466,515	)	$	644,419

The weighted-average amortization period is six years for developed product technology, five years for trade names and trademarks, eight years for customer relationships, and seven years for distribution rights and other intellectual properties.

The following table presents details of the amortization expense of purchased and other intangible assets as reported in the Consolidated Statements of Income:



Fiscal Years	2013		2012		2011
(in thousands)
Reported as:
Cost of sales	$	81,119	$	60,277	$	37,197
Operating expenses	81,722		65,430		48,705
Total	$	162,841	$	125,707	$	85,902

The estimated future amortization expense of intangible assets at the end of fiscal 2013, is as follows (in thousands):




2014	$	151,661
2015	138,975
2016	119,502
2017	97,629
2018	68,103
Thereafter	43,529
Total	$	619,399

Goodwill

The changes in the carrying amount of goodwill for fiscal 2013 are as follows (in thousands):



	Engineering and Construction		Field Solutions		Mobile Solutions			Advanced Devices			Total
At the end of fiscal 2012	$	958,103	$	68,684	$	763,386		$	25,526		$	1,815,699
Additions due to acquisitions	109,119		18,513		34,390			—			162,022
Purchase price adjustments	26		—		441			35			502
Foreign currency translation adjustments	12,992		1,454		(2,123		)	(1,076		)	11,247
At the end of fiscal 2013	$	1,080,240	$	88,651	$	796,094		$	24,485		$	1,989,470

TMW and Tekla Acquisitions

On October 2, 2012, the Company acquired all the outstanding shares of common stock of privately-held TMW Systems, Inc. (TMW) of Beachwood, Ohio, a provider of enterprise software to transportation and logistics (T&L) companies. TMW's transportation software platform serves as a central hub from which the core operations of transportation organizations are managed, data is stored and analyzed, and mission critical business processes are automated. TMW's enterprise software currently integrates with Trimble's T&L solutions (primarily PeopleNet), and one of the objectives of the acquisition was to leverage complementary technology to deliver to customers a more comprehensive and integrated end to end solution for transportation management. Additionally, Trimble's global presence was expected to extend TMW's reach and scope beyond its leading position in North America.

TMW’s results of operations since October 2, 2012 have been included in the Company’s Consolidated Statements of Income. TMW’s performance is reported under the Mobile Solutions business segment.

On July 8, 2011, the Company acquired 99.46% of the outstanding shares of Tekla. The Company purchased the remaining shares of Tekla in February 2012 after completing compulsory redemption proceedings under the Finish Companies Act. Tekla is a provider of information model based software for the building and construction and infrastructure and energy industries. The objective of the acquisition was to integrate Tekla's Building Information Modeling (BIM) software solutions with Trimble's building construction estimating, project management and BIM-to-field solutions and enable productivity solutions for contractors around the world. Tekla's infrastructure and energy solutions complement Trimble's portfolio of utility and municipality solutions. Additionally, Trimble's global customer base was expected to extend Tekla's customer reach while Tekla's global presence in the building and construction market was expected to benefit Trimble's own customer reach.

Tekla’s results of operations have been included in the Company's Consolidated Statements of Income beginning July 8, 2011. Tekla’s building and construction activities are included within the Company’s Engineering and Construction business segment and Tekla’s infrastructure and energy activities are included within the Company’s Field Solutions business segment.

The following table summarizes the consideration transferred to acquire TMW and Tekla, the assets acquired and liabilities assumed, and the estimated useful lives of the identifiable intangible assets acquired as of the date of each acquisition:



	2012				2011
	TMW				Tekla
(Dollars in thousands)
Total purchase consideration	$	333,414			$	457,387		*
Net tangible assets acquired	3,068				13,279
Intangible assets acquired:				Estimated Useful Life					Estimated Useful Life
Developed product technology	71,250			6 years	107,260				7 years
In-process research and development	—				7,591				Evaluated upon completion
Order backlog	2,630			1 year	1,246				6 months
Customer relationships	70,900			8 years	83,929				8 years
Trade name	4,200			5 years	7,648				8 years
Subtotal	148,980				207,674
Deferred tax liability	(52,495		)		(53,996		)
Less fair value of all assets/liabilities acquired	99,553				166,957
Goodwill	$	233,861			$	290,430

* Of the $457.4 million, $2.5 million was held in a cash account at the end of fiscal 2011 and represents the 0.54% of shares that were not yet acquired by the Company. In February, 2012 the Company purchased the remaining shares at the same per share price as was provided for the original 99.46% of shares obtained. Therefore, the non-controlling interest was valued based on that per-share price.

Details of the net tangible assets acquired are as follows:



	2012			2011
	TMW			Tekla
(Dollars in thousands)
Cash and cash equivalents	$	1,478		$	12,871
Accounts receivable	17,719			12,862
Other receivables	549			1,712
Deferred income taxes	1,162			—
Other current assets	1,967			2,181
Property and equipment, net	1,773			4,066
Other non-current assets	278			5,113
Accounts payable	(409		)	(1,329		)
Accrued liabilities	(8,642		)	(12,842		)
Deferred revenue liability	(7,677		)	(10,048		)
Deferred income tax liabilities	(4,841		)	—
Other non-current liabilities	(289		)	(1,307		)
Net tangible assets acquired	$	3,068		$	13,279

Goodwill recorded for TMW and Tekla consisted of a 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. Of the $290.4 million of goodwill recorded for the Tekla acquisition, $245.6 million was assigned to the Engineering and Construction segment and $44.8 million was assigned to the Field Solutions segment. The $233.9 million recorded for TMW was assigned to the Mobile Solutions segment. None of the amounts assigned to goodwill are expected to be deductible for tax purposes.

The following table presents pro forma results of operations of the Company, TMW and Tekla, 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 acquisition taken place at the beginning of the earliest period presented, or of future results. Included in the pro forma results are fair value adjustments based on the fair value of assets acquired and liabilities assumed as of the acquisition date. During fiscal 2012, TMW contributed $16.5 million of revenue and recorded $1.7 million of operating income. During fiscal 2011, Tekla contributed $35.9 million of revenue and recorded $0.1 million of operating income. Pro-forma results include amortization of intangible assets related to the acquisitions, interest expense for debt used to purchase TMW and Tekla, acquisition related costs associated with the purchases, income tax effects, and for fiscal 2011 the pro forma results exclude a foreign currency transaction gain recognized on a hedge. The pro forma information for fiscal 2012 and 2011 is as follows:



Fiscal Years	2012		2011
(Dollars in thousands)
Total revenues	$	2,132,918	$	1,784,822
Net income	193,837		143,850
Net income attributable to Trimble Navigation Ltd.	195,181		145,695
Basic earnings per share	$	1.55	$	1.19
Diluted earnings per share	$	1.52	$	1.16