Trimble - 10-Q quarterly report FY

(Mark One)

x           QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED APRIL 3, 2009

OR

o           TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM __________ TO __________

Commission file number: 001-14845

TRIMBLE NAVIGATION LIMITED

(Exact name of registrant as specified in its charter)

935 Stewart Drive, Sunnyvale, CA 94085

(Address of principal executive offices) (Zip Code)

(Registrant's telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes           x    No           o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes           o    No           o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definition of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes           o    No           x

 

TRIMBLE NAVIGATION LIMITED

FORM 10-Q for the Quarter Ended April 3, 2009

TABLE OF CONTENTS

 

 

PART I – FINANCIAL INFORMATION

ITEM 1.   CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

TRIMBLE NAVIGATION LIMITED

CONDENSED CONSOLIDATED BALANCE SHEETS

(UNAUDITED)

See accompanying Notes to the Condensed Consolidated Financial Statements.

TRIMBLE NAVIGATION LIMITED

 CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(UNAUDITED)

See accompanying Notes to the Condensed Consolidated Financial Statements.

TRIMBLE NAVIGATION LIMITED

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

See accompanying Notes to the Condensed Consolidated Financial Statements.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – UNAUDITED

Trimble Navigation Limited (the Company), incorporated in California in 1981, provides positioning solutions to commercial and government users in a large number of markets.  These markets include surveying, agriculture, construction, asset management, mapping, and mobile resource management.

The Company has a 52-53 week fiscal year, ending on the Friday nearest to December 31, which for fiscal 2008 was January 2, 2009. The first quarter of fiscal 2009 and fiscal 2008 ended on April 3, 2009 and March 28, 2008, respectively.  Fiscal 2009 is a 52-week year and fiscal 2008 was a 53-week year.  Unless otherwise stated, all dates refer to the Company’s fiscal year and fiscal periods.

The Condensed Consolidated Financial Statements include the results of the Company and its majority-owned subsidiaries.  Inter-company accounts and transactions have been eliminated.  Noncontrolling interests represent the minority shareholders’ proportionate share of the net assets and results of operations of the Company’s majority-owned subsidiaries.  The Condensed Consolidated Balance Sheet as of January 2, 2009 is derived from the audited Consolidated Financial Statements included in the Annual Report on Form 10-K of Trimble Navigation Limited for fiscal year 2008. Certain amounts from prior periods have been reclassified to conform to the current period presentation.

The accompanying financial data as of April 3, 2009 and for the three months ended April 3, 2009 and March 28, 2008 has been prepared by the Company, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the U.S. have been condensed or omitted pursuant to such rules and regulations.  The following discussion should be read in conjunction with the Company’s 2008 Annual Report on Form 10-K.

In the opinion of management, all adjustments (which include only normal recurring adjustments) necessary to present a fair statement of financial position as of April 3, 2009, results of operations for the three months ended April 3, 2009 and March 28, 2008 and cash flows for the three months ended April 3, 2009 and March 28, 2008, as applicable, have been made.  The results of operations for the three months ended April 3, 2009 are not necessarily indicative of the operating results for the full fiscal year or any future periods.  Individual segment revenue may be affected by seasonal buying patterns and general economic conditions.

The preparation of financial statements in accordance with accounting principles generally accepted in the U.S. requires management to make estimates and assumptions that affect the amounts reported in its Condensed Consolidated Financial Statements and accompanying notes.  Management bases its estimates on historical experience and various other assumptions believed to be reasonable. Although these estimates are based on management’s best knowledge of current events and actions that may impact the company in the future, actual results may be different from the estimates.

NOTE 2. UPDATES TO SIGNIFICANT ACCOUNTING POLICIES

There have been no changes to the Company’s significant accounting polices during the three months ended April 3, 2009 from those disclosed in the Company’s 2008 Form 10-K.

Recent Accounting Pronouncements

Updates to recent accounting standards as disclosed in the Company’s Annual Report on Form 10-K for the fiscal year ended January 2, 2009 are as follows:

In December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in Consolidated Financial Statements, an amendment of ARB No. 51”. SFAS 160 changed the accounting and reporting for minority interests, which were recharacterized as noncontrolling interests and classified as a component of equity. This new consolidation method significantly changed the accounting for transactions with minority interest holders. SFAS 160 required retroactive adoption of the presentation and disclosure requirements for previously existing minority interests. All other requirements of SFAS 160 are applied prospectively. SFAS 160 is effective for fiscal years beginning after December 15, 2008 and, as such, the Company adopted this standard in the first quarter of fiscal 2009. The adoption of SFAS 160 did not have a material impact on the Company’s financial position, results of operations, or cash flows.

NOTE 3. SHAREHOLDERS’ EQUITY

Stock Repurchase Activities

In January 2008, the Company’s Board of Directors authorized a stock repurchase program (“2008 Stock Repurchase Program”), authorizing the Company to repurchase up to $250 million of Trimble’s common stock under this program. During the three months ended March 28,2008, the Company repurchased approximately 968,000 shares of common stock in open market purchases at an average price of $26.71 per share, for a total of $25.9 million. To date, the Company has repurchased approximately 4,243,000 shares of common stock in open market purchases at an average price of $29.67 per share, for a total of $125.9 million. The purchase price was reflected as a decrease to common stock based on the average stated value per share with the remainder to retained earnings. No shares of common stock were repurchased during the three months ended April 3, 2009.  Common stock repurchases under the program were recorded based upon the trade date for accounting purposes.  All common shares repurchased under this program have been retired. As of April 3, 2009, the 2008 Stock Repurchase Program had remaining authorized funds of $124.1 million.  The timing and actual number of future shares repurchased will depend on a variety of factors including price, regulatory requirements, capital availability, and other market conditions.  The program does not require the purchase of any minimum number of shares and may be suspended or discontinued at any time without public notice.

Stock-Based Compensation

The Company accounts for its employee stock options and rights to purchase shares under its stock participation plans at fair value, in accordance with SFAS 123(R), “Share-Based Payment.” SFAS 123(R) requires stock-based compensation to be estimated using the fair value on the date of grant using an option-pricing model. The value of the portion of the award that is expected to vest is recognized as expense over the related employees’ requisite service periods in the Company’s Condensed Consolidated Statements of Income.

The following table summarizes stock-based compensation expense, net of tax, related to employee stock-based compensation included in the Condensed Consolidated Statements of Income in accordance with SFAS 123(R) for the three months ended April 3, 2009 and March 28, 2008.

(1) Tax benefit related to U.S. non-qualified options and restricted stock units, applying a Federal statutory and State (Federal effected) tax rate for the respective periods.

Options

Stock option expense recognized during the period is based on the value of the portion of the stock option that is expected to vest during the period. The fair value of each stock option is estimated on the date of grant using a binomial valuation model. The Black-Scholes model was used to value those options granted prior to the fourth quarter of fiscal 2005. Similar to the Black-Scholes model, the binomial model takes into account variables such as volatility, dividend yield rate, and risk free interest rate. For options granted during the three months ended April 3, 2009 and March 28, 2008, the following weighted average assumptions were used:

 

 

NOTE 4. JOINT VENTURES

Caterpillar Trimble Control Technologies Joint Venture

 

In addition, the Company received reimbursement of employee-related costs from CTCT for company employees dedicated to CTCT or performance of work for CTCT totaling $2.7 million and $4.0 million for the three months ended April 3, 2009 and March 28, 2008, respectively. The reimbursements were offset against operating expense.

At April 3, 2009 and January 2, 2009, the Company had amounts due to and from CTCT.  Receivables and payables to CTCT are settled individually with terms comparable to other non-related parties.  The amounts due to and from CTCT are presented on a gross basis in the Condensed Consolidated Balance Sheets.  At April 3, 2009 and January 2, 2009, the receivables from CTCT were $4.6 million and $4.1 million, respectively, and are included within Accounts receivable, net, on the Condensed Consolidated Balance Sheets.  As of the same dates, the payables due to CTCT were $4.7 million and $3.1 million, respectively, and are included within Accounts payable on the Condensed Consolidated Balance Sheets.

Nikon-Trimble Joint Venture

On March 28, 2003, Nikon-Trimble Co., Ltd (Nikon-Trimble), a joint venture, was formed by the Company and Nikon Corporation.  The joint venture began operations in July 2003 and is 50% owned by the Company and 50% owned by Nikon, with equal voting rights. It focuses on the design and manufacture of surveying instruments including mechanical total stations and related products.

The joint venture is accounted for under the equity method of accounting.  Under the equity method, the Company’s share of profits and losses are included in Income from joint ventures in the Non-operating income (expense), net section of the Condensed Consolidated Statements of Income.  During the three months ended April 3, 2009 and March 28, 2008, the Company recorded a loss of $0.5 million and a profit of $0.2 million, respectively, as its proportionate share of Nikon-Trimble net income.  During the three months ended April 3, 2009 and March 28, 2008, there were no dividends received from Nikon-Trimble.  The carrying amount of the investment in Nikon-Trimble was $13.5 million at April 3, 2009 and $13.9 million at January 2, 2009, and is included in Other non-current assets on the Condensed Consolidated Balance Sheets.

Nikon-Trimble is the distributor in Japan for Nikon and the Company’s products.  The Company is the exclusive distributor outside of Japan for Nikon branded survey products. For products sold by the Company to Nikon-Trimble, revenue is recognized by the Company on a sell-through basis from Nikon-Trimble to the end customer.

The terms and conditions of the sales of products from the Company to Nikon-Trimble are comparable with those of the standard distribution agreements which the Company maintains with its dealer channel and margins earned are similar to those from third party dealers. Similarly, the purchases of product by the Company from Nikon-Trimble are made on terms comparable with the arrangements which Nikon maintained with its international distribution channel prior to the formation of the joint venture with the Company.  During the three months ended April 3, 2009, the Company recorded $3.5 million of revenue and $2.1 million of cost of sales for the manufacturing of products sold by the Company to Nikon-Trimble. During the three months ended March 28, 2008, the Company recorded $3.9 million of revenue and $2.4 million of cost of sales for the manufacturing of products sold by the Company to Nikon-Trimble.  The Company also purchases product from Nikon-Trimble for future sales to third party customers. Purchases of inventory from Nikon-Trimble were $1.6 million and $2.9 million during the three months ended April 3, 2009 and March 28, 2008, respectively.

At April 3, 2009 and January 2, 2009, the Company had amounts due to and from Nikon-Trimble.  Receivables and payables to Nikon-Trimble are settled individually with terms comparable to other non-related parties.  The amounts due to and from Nikon-Trimble are presented on a gross basis in the Condensed Consolidated Balance Sheets. At April 3, 2009 and January 2, 2009, the amounts due from Nikon-Trimble were $1.8 million and $2.0 million, respectively, and are included within Accounts receivable, net on the Condensed Consolidated Balance Sheets.  As of the same dates, the amounts due to Nikon-Trimble were $1.5 million and $2.3 million, respectively, and are included within Accounts payable on the Condensed Consolidated Balance Sheets.

NOTE 5. GOODWILL AND INTANGIBLE ASSETS

Intangible Assets

Intangible Assets consisted of the following:

The estimated future amortization expense of intangible assets as of April 3, 2009, is as follows (Dollars in thousands):

Goodwill

The changes in the carrying amount of goodwill by operating segment for the three months ended April 3, 2009, are as follows:

NOTE 6. CERTAIN BALANCE SHEET COMPONENTS

Inventories, net consisted of the following:

Deferred costs of revenue are included within finished goods and were $17.4 million at April 3, 2009 and $15.4 million at January 2, 2009.

Other non-current liabilities consisted of the following:

As of April 3, 2009 and January 2, 2009, the Company has $35.2 million and $34.3 million, respectively, of unrecognized tax benefits included in Other non-current liabilities that, if recognized, would favorably affect the effective income tax rate in future periods and interest and/or penalties related to income tax matters.

NOTE 7. SEGMENT INFORMATION

The Company is a designer and distributor of positioning solutions enabled by GPS, optical, laser, and wireless communications technology. The Company provides products for diverse applications in its targeted markets.

To achieve distribution, marketing, production, and technology advantages, the Company manages its operations in the following four segments:

 

 

 

The following table presents revenue, operating income, and identifiable assets for the four segments. Operating income is revenue less cost of sales and operating expense, excluding general corporate expense, amortization of purchased intangibles, amortization of inventory step-up charges, in-process research and development expense, merger and acquisition charges, restructuring charges, non-operating income (expense) net, and income tax provision. The identifiable assets that the Company's Chief Operating Decision Maker, its Chief Executive Officer, views by segment are accounts receivable and inventories.

Unallocated corporate expense includes general corporate expense, amortization of inventory step-up charges, in-process research and development expense, and merger and acquisition charges.  A reconciliation of the Company’s consolidated segment operating income to consolidated income before income taxes is as follows:

NOTE 8. LONG-TERM DEBT, COMMITMENTS AND CONTINGENCIES

Long-term debt consisted of the following:

Leases and other commitments

The estimated future minimum operating lease commitments as of April 3, 2009, are as follows (Dollars in thousands):

NOTE 9.  FAIR VALUE OF FINANCIAL INSTRUMENTS

 

NOTE 10. PRODUCT WARRANTIES

 

The Company accrues for warranty costs as part of its cost of sales based on associated material product costs, technical support labor costs, and costs incurred by third parties performing work on the Company's behalf.  The Company’s expected future costs are primarily estimated based upon historical trends in the volume of product returns within the warranty period and the costs to repair or replace the equipment. The products sold are generally covered by a warranty for periods ranging from 90 days to three years, and in some instances up to 5.5 years.

While the Company engages in extensive product quality programs and processes, including actively monitoring and evaluating the quality of component suppliers, its warranty obligation is affected by product failure rates, material usage, and service delivery costs incurred in correcting a product failure. Should actual product failure rates, material usage, or service delivery costs differ from the estimates, revisions to the estimated warranty accrual and related costs may be required.

Changes in the Company’s product warranty liability during the three months ended April 3, 2009 are as follows (Dollars in thousands):

NOTE 11. EARNINGS PER SHARE

The following data was used in computing earnings per share and the effect on the weighted-average number of shares of potentially dilutive common stock.

NOTE 12: RESTRUCTURING CHARGES:

Restructuring expense for the three months ended April 3, 2009 and March 28, 2008 was as follows:

Restructuring liability:

The following table summarizes the restructuring activity for the three months ended April 3, 2009 (Dollars in thousands):

The $3.9 million restructuring accrual consists of severance and benefitsand is included in Other current liabilities. It is expected to be paid through the fourth quarter of fiscal 2009.

NOTE 13: INCOME TAXES

The Company’s effective income tax rate for the three months ended April 3, 2009 was 25.0%, as compared to 33.0% for the three months ended March 28, 2008.

The Company and its U.S. subsidiaries are subject to U.S. federal and state income tax.  The Company has substantially concluded all U.S. federal and state income tax matters for years through 1992.  Non-U.S. income tax matters have been concluded for years through 2000. The Company is currently in various stages of multiple year examinations by Federal, State, and foreign taxing authorities. The Company does not anticipate a significant impact to the unrecognized tax benefits balance under FIN 48 with respect to current tax examinations.  Although the timing of the resolution and/or the closure on audits is highly uncertain, the Company does not believe that the unrecognized tax benefits would materially change in the next twelve months.

The amount of liabilities for unrecognized tax benefits under FIN 48 (net of the federal benefit on state issues) that, if recognized, would favorably affect the effective income tax rate in any future period are $38.2 million and $37.3 million at April 3, 2009 and January 2, 2009, respectively.  The unrecognized tax benefits are recorded in Other non-current liabilities and within the deferred tax accounts in the accompanying Condensed Consolidated Balance Sheets.

The Company’s continuing practice is to recognize interest and/or penalties related to income tax matters in income tax expense. The Company’s unrecognized tax benefit liabilities include interest and penalties at April 3, 2009 and January 2, 2009, of $4.6 million and $4.4 million, respectively, which were recorded in Other non-current liabilities in the accompanying Condensed Consolidated Balance Sheets.

 

 

The Emergency Economic Stabilization Act of 2008, Energy Improvement and Extension Act of 2008, and Tax Extenders and Alternative Minimum Tax Relief Act of 2008 (HR1424) were signed into law on October 3, 2008.  This legislation includes a provision that retroactively extends the research tax credit from January 1, 2008 to December 31, 2009.  The impact in 2008 was a tax benefit of $1.9 million and an expected tax benefit of $1.6 million in 2009.

As of February 20, 2009, California enacted elective legislation under CR & TC 25128.5 to use the single sales factor apportionment formula.  The impact of this legislation resulted in a tax benefit of $0.8 million in the quarter ended April 3, 2009.

NOTE 14: COMPREHENSIVE INCOME:

The components of comprehensive income, net of related tax, and noncontrolling interests are as follows:

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, which are subject to the “safe harbor” created by those sections. Actual results could differ materially from those indicated in the forward-looking statements due to a number of factors including, but not limited to, the risk factors discussed in “Risk Factors” below and elsewhere in this report as well as in the Company's Annual Report on Form 10-K for fiscal year 2008 and other reports and documents that the Company files from time to time with the Securities and Exchange Commission.The Company has attempted to identify forward-looking statements in this report by placing an asterisk (*) before paragraphs. Discussions containing such forward-looking statements may be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” below. In some cases, forward-looking statements can be identified by terminology such as “may,” ”will,” “should,” “could,” “predicts,” “potential,” “continue,” “expects,” “anticipates,” “future,” “intends,” “plans,” “believes,” “estimates,” and similar expressions. These forward-looking statements are made as of the date of this Quarterly Report on Form 10-Q, and the Company disclaims any obligation to update these statements or to explain the reasons why actual results may differ.

ITEM 2.  MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The discussion and analysis of our financial condition and results of operations are based upon our condensed consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the U. S. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenue and expense, and related disclosure of contingent assets and liabilities. On an on-going basis, we evaluate our estimates, including those related to product returns, doubtful accounts, inventories, investments, intangible assets, income taxes, warranty obligations, restructuring costs, and contingencies and litigation. We base our estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the amount and timing of revenue and expense and the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

 

There have been no changes to our significant accounting polices during the three months ended April 3, 2009 from those disclosed in our 2008 Form 10-K.

Recent Accounting Pronouncements

Updates to recent accounting standards as disclosed in our Annual Report on Form 10-K for the fiscal year ended January 2, 2009 are as follows:

 

In December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in Consolidated Financial Statements, an amendment of ARB No. 51”. SFAS 160 changed the accounting andreporting for minority interests, which were recharacterized as noncontrolling interests (NCI) and classified as a component of equity. This new consolidation method significantly changed the accounting for transactions with minority interest holders. SFAS 160 required retroactive adoption of the presentation and disclosure requirements for previously existing minority interests. All other requirements of SFAS 160 are applied prospectively. SFAS 160 is effective for fiscal years beginning after December 15, 2008 and, as such, we adopted this standard in the first quarter of fiscal 2009. The adoption of SFAS 160 did not have a material impact on our financial position, results of operations, or cash flows.

EXECUTIVE LEVEL OVERVIEW

* We believe these markets provide us with additional, substantial potential for substituting our technology for traditional methods. We are continuing to develop new products and to strengthen our distribution channels in order to expand our market opportunity. In our Field Solutions Segment,we introduced a Variable Rate Application Option for our EZ Guidance 500 Systems, new AgGPS Autopilot platform kits for tractors, combines and sprayers, as well as the new Ag 162/262 Receivers that feature the Trimble proprietary Transcend Positioning Technology.  We also enhanced our Utility Center Software and the Trident-3D data capture and analyst software for mobile mapping applications.  In our Engineering and Construction segment, we introduced a new portfolio of Robotic Total Stations (RTS555, RTS655, and RTS633) for construction layout applications, the new Nomad 800X series of rugged handhelds, the HV301G Green Beam Laser, as well as the Spectra Precision Laser LL1100 and LR20.  Further enhancements to the Trimble® GCS900 Grade Control System, the Construction Manager software, and the Real Time Kinematic (RTK) engine GPS firmware were also made available. In our Mobile Solutions segment, we announced that Windstream Corporation and DirectSat USA are rolling out the Trimble GeoManager solution.  All of these products strengthened our competitive position and created new value for the user.

 

 

RECENT BUSINESS DEVELOPMENTS

The following companies and joint ventures were acquired or formed during twelve months ended April 3, 2009 and are combined in our results of operations since the date of acquisition or formation:

RESULTS OF OPERATIONS

Overview

The following table is a summary of revenue, gross margin, and operating income for the periods indicated and should be read in conjunction with the narrative descriptions below.

Revenue

In the three months ended April 3, 2009, total revenue decreased by $66.3 million or 19%, as compared to the same corresponding period in fiscal 2008. The decrease was primarily due to slower sales in the Engineering and Construction segment.  Engineering and Construction revenue decreased $66.5 million, Field Solutions increased $11.1 million, Mobile Solutions decreased $5.7 million, and Advanced Devices decreased $5.2 million, as compared to the same corresponding period in fiscal 2008.  The revenue decrease was primarily due to recessionary conditions in the U.S. and European markets in Engineering and Construction, unfavorable foreign currency exchange rates, partially offset by new product sales, increased agricultural sales, as well as the impact of acquisitions.

Gross Margin

Gross margin varies due to a number of factors including product mix, pricing, distribution channel, production volumes, and foreign currency translations.

 

Operating Income

Operating income decreased by $33.8 million for the three months ended April 3, 2009, as compared to the corresponding period in the prior year.  Operating income as a percentage of total revenue was 8.4% for the three months ended April 3, 2009, as compared to 16.3% for the three months ended March 28, 2008.  The decrease in operating income percentage for the three month period was primarily due to lower revenue inEngineering and Construction and restructuring charges, partially offset by lower expense and higher gross margin, as compared to the corresponding period in the prior year.

Results by Segment

To achieve distribution, marketing, production, and technology advantages in our targeted markets, we manage our operations in the following four segments: Engineering and Construction, Field Solutions, Mobile Solutions, and Advanced Devices.  Operating income equals net revenue less cost of sales and operating expense, excluding general corporate expense, amortization of purchased intangibles, amortization of inventory step-up charges, in-process research and development expense, merger and acquisition charges, restructuring charges, non-operating income (expense) net, and income tax provision.

The following table is a breakdown of revenue and operating income by segment:

Unallocated corporate expense includes general corporate expense, amortization of inventory step-up charges, in-process research and development expense, and merger and acquisition charges.  A reconciliation of our consolidated segment operating income to consolidated income before income taxes follows:

Engineering and Construction

Engineering and Construction revenue decreased by $66.5 million or 34% for the three months ended April 3, 2009, as compared to the same corresponding period in fiscal 2008.  Segment operating income decreased $34.4 million or 93% for the three months ended April 3, 2009, as compared to the same corresponding period in fiscal 2008.

The revenue decline for the three months ended April 3, 2009 was primarily driven by recessionary conditions in the U.S. and European markets. Segment operating income decreasedprimarily due to the revenue shortfall and unfavorable foreign currency exchange rates.

Field Solutions revenue increased by $11.1million or 13% for the three months ended April 3, 2009, as compared to the same corresponding period in fiscal 2008.  Segment operating income increased by $7.1 million or 20% for the three months ended April 3, 2009, as compared to the same corresponding period in fiscal 2008.

The revenue increase for the three month periods ended April 3, 2009 was driven by the introduction of new agricultural products, increased sales worldwide, and the impact of acquisitions. Operating income increased primarily due to higher revenue, gross margin improvement, and operating expense control.

Research and Development, Sales and Marketing, and General and Administrative Expenses

Research and development (R&D), sales and marketing (S&M), and general and administrative (G&A) expense are summarized in the following table:

Overall, R&D, S&M, and G&A expense decreased by approximately $2.1 million for the three months ended April 3, 2009, as compared to the corresponding period in fiscal 2008.

Research and development expense decreased by $3.2 million in the first quarter of fiscal 2009, as compared to the first quarter of fiscal 2008, primarily due to foreign currency exchange rates and decreased compensation related expense, partially offset by the inclusion of expense from acquisitions not included in the prior year. All of our R&D costs have been expensed as incurred. Costs of software developed for external sale subsequent to reaching technical feasibility were not considered material and were expensed as incurred. Spending overall was at approximately12% of revenue in the first quarter of fiscal 2009, as compared to 11% in the corresponding period of fiscal 2008.

* We believe that the development and introduction of new products are critical to our future success and we expect to continue active development of new products.

Sales and marketing expense decreased by $2.2 million in the first quarter of fiscal 2009, as compared to the corresponding period of fiscal 2008. The decrease was primarily due to foreign currency exchange rates, partially offset by the inclusion of expense from acquisitions not applicable in the prior year, and trade show expense. Spending overall was at approximately17% of revenue in the first quarter of fiscal 2009, as compared to 14% in the corresponding period of fiscal 2008.

 

General and administrative expense increased by $3.4 million in the first quarter of fiscal 2009, as compared to the corresponding period in fiscal 2008 primarily due to the inclusion of expense from acquisitions not applicable in the prior year and bad debt expense, partially offset by foreign currency exchange rates. Spending overall was at approximately9% of revenue in the first quarter of fiscal 2009, as compared to 6% in the corresponding period of fiscal 2008.

Amortization of Purchased Intangible Assets

 

Restructuring Charges

Restructuring expense for the three months ended April 3, 2009 and March 28, 2008 was as follows:

 

 

Restructuring liability:

The following table summarizes the restructuring activity for the three months ended April 3, 2009 (Dollars in thousands):

The $3.9 million restructuring accrual consists of severance and benefits and is included in Other current liabilities. It is expected to be paid through the fourth quarter of fiscal 2009.

Non-operating Income (Expense), Net

The components of non-operating income (expense), net, are as follows:

The non-operating income (expense), net decreased $2.4 million for the first quarter of fiscal 2009, as compared to the corresponding period in fiscal 2008. The decrease was primarily due to lower income from joint ventures anda decrease in foreign exchange gains.

Income Tax Provision

Our effective income tax rate for the three months ended April 3, 2009 was 25.0%, as compared to 33.0% for the three months ended March 28, 2008.  The 2009 and 2008 first quarter fiscal rate is lower than the statutory federal income tax rate of 35% primarily due to the geographical mix of our pre-tax income.

OFF-BALANCE SHEET FINANCINGS AND LIABILITIES

LIQUIDITY AND CAPITAL RESOURCES