Trimble
Annual Report 2016

Plain-text annual report

Connecting the Physical and Digital Worlds 2016 ANNUAL REPORT To Our Shareholders 2016 was a year of progress for Trimble. Although many of our end markets remained challenged and geopolitical environments presented new uncertainties, we re-established the Trimble financial model, as demonstrated by our financial results in the second half of the year. Second-half results represented the best financial results of any six-month period since the first half of 2014, with all of our reporting segments generating year-over-year organic revenue growth and margin expansion. Overall, Trimble’s revenue increased 3 percent for the year, up 2 percent in the first half and 4 percent in the second half of 2016. We continue to strengthen our leadership position in our end markets and are poised to benefit from improvements in macro conditions. Strong performance in our transportation business, civil engineering and construction business outside North America, and second-half organic growth in agriculture was partially offset by challenges in our geospatial business and relative weakness in North American construction. Field Solutions; and transportation and logistics in Mobile Solutions. Beyond these relatively large core markets, we are also developing a number of smaller emerging markets such as forestry, electrical and water utilities, rail, and field service. In each of these markets, our formula remains consistent: we combine an extensive knowledge of the workflow and user needs with innovative development to create significant customer value and competitive differentiation. To help ensure this strategic and organizational focus, we divested five businesses in 2016. On a regional basis, North American results reflected continued weakness in our agriculture and geospatial markets, offset by strong growth in our transportation business. European results were impacted by declines in the UK after Our market and customer position remains strong and is growing. For example, Trimble serves more than 70 percent of the top geospatial firms, 80 percent of the top 25 building the Brexit vote. Excluding the UK, the European market posted contractors and 100 percent of the top 10 civil contractors solid growth. In the rest of the world, markets including Japan, in North America. In agriculture, Trimble solutions are used Australia, Russia, India and South America grew at double- on more than 125 million acres of farmland worldwide. digit rates. China remained volatile and Africa and the Middle In transportation, greater than 85 percent of the top 200 East remained weak. trucking companies in North America use our technology, and our software solutions enable fleets to manage more Non-GAAP operating margins were 17.2 percent in 2016. than 2 million vehicles. The margin picture improved significantly in the second half of 2016, with second-half operating leverage well above our Innovation was the driving theme for geospatial in 2016, with historical averages. Margins are expected to show continued the fourth quarter launches of a new total station, a new 3D progression during 2017. laser scanner and software-enabled GNSS technologies. In civil engineering and construction, we continued to Trimble solutions transform work processes in some of the expand our set of OEM relationships and grew our software world’s largest industries by delivering hardware, software and services that connect the physical and digital worlds. offering encompassing all phases of the construction continuum. In building construction, we released new Our strategic emphasis is focused on five core components: software for architecture and design and structural design; geospatial, civil engineering and construction, and building construction in Engineering & Construction; agriculture in we also acquired Building Data in the mechanical, electrical and plumbing (MEP) space, which will further strengthen 2 0 1 6 H I G H L I G H T S +3% +8% +15% Revenue Recurring Revenue Operating Cash Flow our building information modeling (BIM) solutions. At our Dimensions User Conference, Trimble attracted over 4,400 registered attendees and held over 625 educational sessions. In agriculture, we continued to develop our precision agriculture portfolio. We consolidated a number of software brands and platforms into a single agriculture software solution, expanded our OEM relationships and demonstrated solid growth outside of the North American market. In transportation, we continued to expand the breadth of our mobile and enterprise portfolio for the trucking industry, including new product offerings such as video intelligence and SaaS-based enterprise solutions. We initiated our first integrated PeopleNet and TMW in.sight User Conference, which attracted over 2,400 attendees and held over 350 educational sessions. Trimble continues to maintain a strong financial position. We are leveraging strong operating cash flows as well as using our balance sheet to invest internally and externally through strategic acquisitions to add value to our overall portfolio. Operating cash flow of $407 million was up 15 percent. Deferred revenue and recurring revenue both increased 8 percent to record levels in 2016, reflecting ongoing changes in the mix of our revenue toward software and subscription offerings, a trend which we expect to continue. We reduced debt by $110 million and repurchased $119 million of our stock. During the year, we completed our reincorporation in Delaware and changed our corporate name from Trimble Navigation Limited to Trimble Inc. While we do not place undue importance on the name change, it does recognize the fundamental change the company has undergone since its With a strong financial and strategic foundation entering 2017, we expect to demonstrate organic growth and operating margin expansion throughout the year. While acquisition activity was light in 2016, we expect acquisitions to increase and to accelerate the execution of our strategy. Acquisitions in 2017 will be focused on the core franchises of construction, agriculture and transportation as well as building the emerging businesses of rail, water, forestry and utilities. Our fundamental goals remain unchanged: (cid:88) Breakout market leadership—achieved by leading transformations in our markets. (cid:88) Top-tier financial performance—focused on revenue growth, incremental margin performance and return on equity. (cid:88) A new standard of excellence that transcends best current practices—focused on following a unique path emphasizing “always better.” Our success starts with the competency, commitment and loyalty of our employees. They deliver the domain knowledge and innovation that has been the cornerstone of our historic success. Once again I thank them for their contributions. Steven W. Berglund origination and signifies a non-constrained view of the future. President and Chief Executive Officer Financial Information Revenue (in U.S. $ Millions) Non-GAAP Operating Income (in U.S. $ Millions) Cash Flow from Operations (in U.S. $ Millions) 6 9 3 , 2 $ 8 8 2 , 2 $ 0 9 2 , 2 $ 2 6 3 , 2 $ 0 4 0 2 $ , 4 7 4 $ 0 8 4 $ 7 9 3 $ 0 9 3 $ 6 0 4 $ 5 1 4 $ 7 0 4 $ 7 0 4 $ 5 5 3 $ 1 4 3 $ 2012 2013 2014 2015 2016 2012 2013 2014 2015 2016 2012 2013 2014 2015 2016 Diverse Business Mix Revenue by Segment Global Opportunity Revenue by Region Growing Software Mix Revenue by Offering 6% 15% 24% 55% 12% 15% 24% 49% ≈47% ≈53% (cid:122) Engineering & Construction (cid:122) Field Solutions (cid:122) United States (cid:122) Asia (cid:122) Hardware (cid:122) Mobile Solutions (cid:122) Advanced Devices (cid:122) Europe (cid:122) Rest of World (cid:122) Software/Services/Recurring Comparison of Cumulative Five-Year Total Return* Among Trimble Inc., the NASDAQ Composite Index®, and the S&P® Information Technology Index. 250 200 150 100 50 2011 2012 2013 2014 2015 2016 (cid:122) Trimble (cid:122) NASDAQ Composite Index® (cid:122) S&P® Information Technology Index The graph compares the cumulative five-year total return provided shareholders on Trimble Inc. common stock relative to the cumulative total returns of the NASDAQ Composite Index and the S&P Information Technology Index. An investment of $100 (with reinvestment of all dividends) is assumed to have been made in our common stock and in each of the indexes on 12/31/2011, and its relative performance is tracked through 12/31/2016. The company has never paid dividends on its common stock and has no present plans to do so. *The company adopted a 52-53-week fiscal year effective upon the end of fiscal year 1997, and the actual date of the company’s 2016 fiscal year end was December 30, 2016. Any variations due to any differences between the actual date of a particular fiscal year end and the calendar year end for such year are not expected to be material. UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ___________________________________________________ FORM 10-K ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 30, 2016 OR 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 INC. (Exact name of Registrant as specified in its charter) Delaware (State or other jurisdiction of incorporation or organization) 935 Stewart Drive, Sunnyvale, CA (Address of principal executive offices) 94-2802192 (I.R.S. Employer Identification No.) 94085 (Zip Code) Registrant’s telephone number, including area code: (408) 481-8000 Securities registered pursuant to Section 12(b) of the Act: Title of each class Common Stock, $0.001 par value Preferred Share Purchase Rights (Title of Class) Name of each exchange on which stock registered NASDAQ Global Select Market NASDAQ Global Select Market Securities registered pursuant to Section 12(g) of the Act: NONE TRIMBLE NAVIGATION LIMITED (Former name or former address, if changed since last report.) No No Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act. Yes 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 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 during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. No No Large Accelerated Filer Non-accelerated Filer (Do not check if a smaller reporting company) Accelerated Filer Smaller Reporting Company 1 Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes As of July 1, 2016, the aggregate market value of the common stock held by non-affiliates of the registrant was approximately $6.1 billion based on the closing price as reported on the NASDAQ Global Select Market. Shares of common stock held by each officer and director of the registrant have been excluded in that such person may be deemed to be an affiliate. This determination of affiliate status is not necessarily a conclusive determination for any other purpose. Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date. No Class Common stock, $0.001 par value Outstanding at February 22, 2017 252,283,685 shares 2 DOCUMENTS INCORPORATED BY REFERENCE Certain parts of Trimble Inc. Proxy Statement relating to the annual meeting of stockholders to be held on May 2, 2017 (the “Proxy Statement”) are incorporated by reference into Part III of this Annual Report on Form 10-K. 3 SPECIAL NOTE ON FORWARD-LOOKING STATEMENTS This Annual Report on Form 10-K contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, which are subject to the “safe harbor” created by those sections. These statements include, among other things: • • • • • • • • the portion of our revenue coming from sales to international customers; seasonal fluctuations in our construction and agricultural equipment business revenues, macroeconomic conditions, and business conditions in the markets we serve; our plans to continue to invest in research and development at a rate consistent with our past, to develop and introduce new products, to improve our competitive position, and to enter new markets; our belief that increases in recurring revenue from our software and solutions will provide us with enhanced business visibility over time; our potential exposure in connection with pending proceedings; our belief that our cash and cash equivalents and short-term investments, together with borrowings under our 2014 Credit Facility, will be sufficient to meet our anticipated operating cash needs, debt service, planned capital expenditures, and stock purchases under the stock repurchase program for at least the next twelve months; fluctuations in interest rates; and the imposition of barriers to international trade. The forward-looking statements regarding future events and the future results of Trimble Inc. (formerly Trimble Navigation Limited) (“Trimble” or “the Company” or “we” or “our” or “us”) are based on current expectations, estimates, forecasts, and projections about the industries in which Trimble operates and the beliefs and assumptions of the management of Trimble. Discussions containing such forward-looking statements may be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” 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 involve certain risks and uncertainties that could cause actual results, levels of activity, performance, achievements, and events to differ materially from those implied by such forward-looking statements, but are not limited to those discussed in this Report under the section entitled “Risk Factors” and elsewhere, and in other reports Trimble files with the Securities and Exchange Commission (“SEC”), specifically the most recent reports on Form 8-K and Form 10-Q, each as it may be amended from time to time. These forward-looking statements are made as of the date of this Annual Report on Form 10-K. We reserve the right to update these statements for any reason, including the occurrence of material events. The risks and uncertainties under the caption “Risks and Uncertainties” contained herein, among other things, should be considered in evaluating our prospects and future financial performance. 4 TRIMBLE INC. 2016 FORM 10-K ANNUAL REPORT TABLE OF CONTENTS PART I Business Item 1 Item 1A Risk Factors Item 1B Unresolved Staff Comments Item 2 Properties Legal Proceedings Item 3 Item 4 Mine Safety Disclosures PART II Item 5 Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Selected Financial Data Item 6 Item 7 Management’s Discussion and Analysis of Financial Condition and Results of Operations Item 7A Quantitative and Qualitative Disclosures about Market Risk Item 8 Financial Statements and Supplementary Data Changes in and Disagreements with Accountants on Accounting and Financial Disclosure Item 9 Item 9A Controls and Procedures Item 9B Other Information PART III Item 10 Directors, Executive Officers, and Corporate Governance Item 11 Executive Compensation Item 12 Item 13 Certain Relationships, Related Transactions, and Director Independence Item 14 Principal Accountant Fees and Services Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters PART IV Item 15 Exhibits and Financial Statement Schedules Item 16 Form 10-K Summary 5 6 15 26 27 27 27 28 29 30 49 52 87 87 87 88 88 88 88 88 89 89 Item 1. Business PART I Trimble Inc., a Delaware corporation, is a leading provider of technology solutions that enable professionals and field mobile workers to improve or transform their work processes. Our solutions are used across a range of industries including agriculture, architecture, civil engineering, survey and land administration, construction, geospatial, environmental management, government, natural resources, transportation and utilities. Representative Trimble customers include engineering and construction firms, surveying companies, farmers and agricultural companies, enterprise firms with large-scale fleets, energy, mining and utility companies, and state, federal and municipal governments. Our focus is on integrating our broad technological and application capabilities to create solutions that transform how work is done within the industries we serve. Our products are sold based on return on investment and provide benefits such as lower operational costs, higher productivity, improved quality, enhanced safety and regulatory compliance, and reduced environmental impact. Representative products include equipment that automates and enables increased precision within large industrial equipment such as tractors and bulldozers; integrated systems that track fleets of vehicles and workers and provide real-time information and analytics to the back-office; data collection systems that enable the management of large amounts of geo-referenced information; software solutions that connect all aspects of a construction site or a farm; and building information modeling (BIM) software that is used throughout the design, build, and operation of buildings. Our customers increasingly demand integration of individual point solutions, whether hardware sensors or software applications, in order to improve their complete work processes. Our solutions provide the connections between hardware and applications, rather than requiring customers to integrate point solutions on their own. We also increasingly provide additional services (training, consulting, technical support and integration services) to link our solutions with existing customer solutions, such as ERP systems. Many of our products integrate real-time positioning or location technologies with wireless communications and software or information technologies. Information about location or position is transmitted via a wireless link to a domain-specific software application which enhances the productivity of the worker, asset or work process. Position is provided through a number of technologies including the Global Positioning System (GPS), other Global Navigation Satellite Systems (GNSS) and their augmentation systems, and systems that use laser, optical, inertial or other technologies to establish real-time position. Integration of wireless communications in our solutions facilitates real-time data flow, communication and situational awareness within sites and between work sites or vehicles and offices. Software is a key element of most of our solutions and accounts for a steadily increasing portion of our business. Our software products and services range from embedded real-time firmware, through field service and location oriented solutions on handheld and other small footprint devices, to application software that integrates field data with large scale enterprise back-office applications. Many of our software solutions are built on configurable and enterprise grade scalable platforms that can be tailored to the workflows that our customers follow to implement their customized business processes. Our software capabilities include extensive 3-D modeling, analysis and design solutions, civil engineering alignment selection solutions, design and data preparation software, BIM software, cloud-based collaboration solutions, applications for advanced surveying and geospatial data collection and analysis, as well as a large suite of domain-specific software applications used across a host of industries including agriculture, construction, utilities, and transportation. Our software is sold as a perpetual license or as a subscription, and can be delivered for on-premise installation or in a hosted environment as Software as a Service (SaaS). Our software products allow our customers to optimize their work processes for targeted outcomes, improve their productivity, gain insight into their projects and operations, to enhance their decision making and to gain maximum benefit from a broad range of other Trimble products and systems. Our global operations include major development, manufacturing, or logistics operations in the United States, Sweden, Finland, Germany, New Zealand, Canada, the United Kingdom, the Netherlands, China, and India. Products are sold in more than 100 countries, through dealers, representatives, joint ventures and other channels throughout the world, as well as direct sales to end users. Sales are supported by our own offices located in more than 35 countries around the world. We began operations in 1978 and were originally incorporated in California as Trimble Navigation Limited in 1981. On October 1, 2016, Trimble Navigation Limited changed its name to Trimble Inc. and changed its state of incorporation from the State of California to the State of Delaware. Our common stock has been publicly traded on NASDAQ since 1990 under the symbol TRMB. Business Strategy Our growth strategy is centered on multiple elements: • Focus on attractive markets with significant growth and profitability potential - We focus on large markets historically underserved by technology that offer significant potential for long-term revenue growth, profitability and market leadership. Our core industries such as construction, agriculture, and transportation are each multi-trillion dollar global 6 industries which operate in demanding environments with technology adoption in the early phases relative to other industries. With the emergence of mobile computing capabilities, the increasing technological know-how of end users and compelling return on investment, we believe many of our markets are ripe for substituting Trimble’s technology and solutions in place of traditional operating methods. • • Domain knowledge and technological innovation that benefit a diverse customer base - We have over time redefined our technological focus from hardware-driven point solutions to integrated work process solutions by developing domain expertise and heavily reinvesting in R&D and acquisitions. We have been spending an average of 14% of revenue over the past several years on R&D and currently have over 1,200 unique patents. We intend to continue to take advantage of our technology portfolio and deep domain knowledge to quickly and cost-effectively deliver specific, targeted solutions to each of the vertical markets we serve. We look for opportunities where the opportunity for technological change is high and which have a requirement for the integration of multiple technologies into complete vertical solutions. Increasing focus on software and services - Software and services are increasingly important elements of our solutions and are core to our growth strategy. Trimble generally has an open application programming interface (API) philosophy and open vendor environment which leads to increased adoption of our software offerings. The increased recurring revenue from these solutions is expected to provide us with enhanced business visibility over time. Professional services constitute an additional growth channel that helps our customers integrate and optimize the use of our offerings in their environment. • Geographic expansion with localization strategy - We view international expansion as an important element of our strategy and we continue to position ourselves in geographic markets that will serve as important sources of future growth. We currently have a physical presence in over 35 countries and distribution channels in over 100 countries. In 2016, over 50% of our sales were to customers located in countries outside of the U.S. • Optimized go to market strategies to best access our markets - We utilize vertically-focused distribution channels that leverage domain expertise to best serve the needs of individual markets domestically and abroad. These channels include independent dealers, joint ventures, original equipment manufacturers (OEM) sales, and distribution alliances with key partners, such as CNH Global, Caterpillar and Nikon, as well as direct sales to end-users, that provide us with broad market reach and localization capabilities to effectively serve our markets. Strategic acquisitions - Organic growth continues to be our primary focus, while acquisitions serve to enhance our market position. We acquire businesses that bring domain expertise, technology, products, or distribution capabilities that augment our portfolio and allow us to penetrate existing markets more effectively, or to establish a market beachhead. Our success in targeting and effectively integrating acquisitions is an important aspect of our growth strategy. • Business Segments and Markets We are organized into four reporting segments encompassing our various applications and product lines: Engineering and Construction, Field Solutions, Mobile Solutions and Advanced Devices. Our segments are distinguished by the markets they serve. Each segment consists of businesses which are responsible for product development, marketing, sales, strategy and financial performance. For further financial information about our segments, see Note 6 to the Consolidated Financial Statements. Engineering and Construction The Engineering and Construction segment primarily serves customers working in architecture, engineering, construction, surveying, natural resources and government. Within this segment our most substantial product portfolios are focused on civil engineering and construction, building construction, and geospatial. Civil Engineering and Construction. Before dirt is ever moved in civil construction, feasibility, design and scheduling are critical steps to site construction. Trimble provides the industry with a continuum of field solutions, software solutions and services at every stage of the project - from planning and design, to construction, operation and maintenance. Our civil construction solutions are used in civil infrastructure such as roads, railways, airports, land management, solar farms, marine and landfills. Our solutions are used across the entire project life cycle to improve productivity, reduce waste and re-work, and enable more informed decision making through enhanced situational awareness, data flow and project collaboration. At the same time, our solutions can improve worker safety and reduce environmental impact. Our suite of integrated solutions and technologies in this area includes field and office software for optimized route selection and design, systems to automatically guide and control construction equipment such as excavators, bulldozers, wheel loaders, motor graders and paving equipment, systems to monitor, track and manage assets, equipment and workers, and software to facilitate the sharing and communication of data in real time. Together, these solutions are designed to transform how work is done within the heavy civil construction industry. The Connected Site describes our civil construction market portfolio, which integrates data and information across the entire construction process and across mixed fleets. This includes data from site positioning and machine control systems, construction asset management equipment and services, and various software applications. Utilizing wireless and internet-based site communications infrastructure, our Connected Site solutions include the ability to track and control equipment, perform remote 7 machine diagnostics and reduce re-work. By leveraging the Connected Site technology, contractors gain greater insight into their operations, helping them to lower costs and improve productivity, worker safety, and asset utilization. To bolster the software solutions we provide to the Connected Site, we formed a joint venture with Caterpillar in October of 2008, called VirtualSite Solutions (VSS). VSS develops software for fleet management and connected worksite solutions, including subscription-based software as a service solutions. VSS solutions are part of the Connected Site portfolio, and are sold through a world-wide independent dealer channel under the name of SITECH. A separate joint venture with Caterpillar, Caterpillar-Trimble Control Technologies (CTCT) was formed in 2002 to develop the next generation of advanced electronic guidance and control products for earthmoving machines. The joint venture develops machine control and guidance products that use site design information combined with accurate positioning technology to automatically control dozer blades and other machine tools. Caterpillar generally offers joint venture products as a factory-installed option, while Trimble focuses on the aftermarket with products for mixed fleets of earthmoving machines from Caterpillar and other equipment manufacturers to allow improved management of construction sites and projects. Effective in January 2014, Caterpillar and Trimble amended the joint ventures and related agreements between the parties to expand the range of productivity applications and services the companies will provide, and to support development of comprehensive unified fleet solutions for the construction industry. During 2016, we announced a number of developments, including the formation of factory fit, Trimble-Ready programs, with various original equipment manufacturers (OEM) within our Civil Engineering and Construction business. We also announced the introduction of office software, site positioning and machine control solutions designed for site and utility contractors and owner/operators. These solutions offer small to mid-sized contractors a reliable, flexible and affordable option to leverage construction technology. Building Construction. The Trimble Buildings portfolio of solutions for the commercial and industrial building industry spans the entire lifecycle of a building and is used by architects, designers, general contractors, sub-contractors, engineers, and facility owners or lessees. These solutions serve to improve productivity and to enhance data sharing and collaboration across different teams and stakeholders to help keep projects within cost, time and quality targets. The suite of technologies and solutions we provide to the building industry includes software for 3D conceptual design and modeling, BIM software which is used in design, construction and maintenance, advanced integrated site layout and measurement systems, cost estimating, scheduling, and project controls solutions for contractors, applications for sub-contractors and trades such as steel, concrete and mechanical, electrical and plumbing, and a best of breed integrated workplace management services (IWMS) software suite for real estate management, project coordination, capital program planning and management, and facility management for building owners and program managers. In addition, Trimble’s Connect collaboration platform streamlines customer workflows and enables interoperability between Trimble’s solutions. Our joint venture with Hilti, a leading global provider of solutions to the building trades, develops products which integrate Trimble’s positioning and asset management technologies with Hilti’s tools capabilities to create smarter tools and smarter construction sites. Together, these solutions for the building industry serve to automate, streamline and transform work processes across the building construction industry. Our solutions provide customer benefits such as reduced costs, reduced waste and re-work, increased worker safety and efficiencies, faster project completion times, improved information flow, better decision making and enhanced quality control. During the year, we announced advances in several of our software packages and solutions. We launched Trimble ProjectSight, a new generation of our cloud-based project controls solution for construction managers and general contractors, which is a web and mobile solution that streamlines the creation, access and sharing of project information between the office and the jobsite for more efficient, accurate and predictable project delivery. Additionally, we collaborated with the Hilti Group to deliver new software integration and data exchange solutions, which are intended to facilitate the sharing of design information between software applications, provide easy access to data in the cloud, and provide more design content, specification information and pricing to our users. We also launched our SketchUp Viewer for Microsoft HoloLens, which is a new mixed-reality solution that allows users to virtually inhabit and experience their designs to improve quality, communication and efficiency in the design, construction and operation of buildings. During 2016, we acquired Building Data, whose managed content and software solutions enable Mechanical, Electrical and Plumbing (MEP) contractors and engineers to produce intelligent, constructible models by including manufacturing-specific content from a proprietary database of over 6 million 3D data components. The combination of Building Data’s experience in Building Information Modeling (BIM) content, paired with Trimble’s leadership in providing software and hardware solutions for building construction, will enhance our offerings designed to provide contractors and engineers with increased efficiencies throughout the building lifecycle. Geospatial. In our geospatial business, professional surveyors and engineers providing services to the construction, engineering, mining, oil and gas, energy and utilities, government and land management sectors use our survey and geospatial solutions to replace less productive conventional methods of surveying, mapping, 2D or 3D modeling, measurement, reporting and analysis. Our suite of solutions used in these activities include field based data collection systems and field software, real time communications systems and back-office software for data processing, modeling, reporting and analysis. Our field based 8 technologies are used in handheld, land mobile and airborne applications and incorporate technologies such as mobile application software, high precision GNSS, robotic measurement systems, inertial positioning, 3D laser scanning, digital imaging, optical or laser measurement and unmanned aerial vehicles. We maintain a joint venture with Nikon which focuses on the design and manufacture in Japan of surveying instruments including mechanical total stations and related products. Our office based products include software for planning, data processing and editing, quality control, 3D modeling, intelligent data analysis and feature extraction, deformation monitoring, project reporting and data export. Our customers in this area gain benefits from the use of our products including significantly improved productivity in both field and office activities, improved safety through non-contact measurement and detection of potentially dangerous ground or structure movement and improved data flow which enables better decision making. In 2016, we launched a next-generation survey instrument, the Trimble SX10 Scanning Total Station, which merges high-speed 3D scanning, enhanced Trimble VISION imaging technology and high-accuracy total station measurements into familiar field and office workflows for surveyors. We also launched Trimble® Catalyst, a software-defined Global Navigation Satellite System (GNSS) receiver that works with select Android mobile handhelds, smartphones and tablets, which, when combined with a small, lightweight, plug-and-play digital antenna and subscription to the Catalyst service, provides on-demand GNSS, geo-location capabilities to transform consumer devices into high-accuracy mobile data collection systems. We sell and distribute our products in the Engineering and Construction segment through multiple global networks of independent dealers with expertise and customer relationships in their respective segments, each supported by Trimble personnel. In 2016, the network of SITECH Technology Dealers, which serves the civil construction industry, expanded to 111 dealers worldwide across all regions, including the Americas, Europe, Middle East, Africa, Asia, China, and the South Pacific. We also made significant progress during the year with BuildingPoint, an initiative to form a global network of distribution partners to serve the needs of the building construction industry. Competitors in this segment are typically companies that provide optical, laser or GNSS positioning products as well as companies that produce software specific to the construction process. Our principal competitors are Topcon Corporation, Hexagon AB and Autodesk. We compete principally on the basis of innovative, differentiated products, service, quality and geographic reach. Field Solutions Our Field Solutions segment primarily addresses the agriculture and geographic information systems (GIS) markets. Agriculture. Our precision agriculture products consist of guidance and positioning systems, automated application systems and information management solutions that enable farmers and their partners to improve crop performance, profitability and environmental quality. Trimble precision agriculture solutions can assist farmers throughout every step of their farming process, beginning with land preparation and continuing through the planting, nutrient and pest management, and harvesting phases of a crop cycle. We provide manual and automated navigation guidance for tractors and other farm equipment used in spraying, planting, cultivating, and harvesting applications. The benefits to the farmer include faster machine operation, higher yields, and lower consumption of fuel and chemicals than conventional equipment. In addition, we provide solutions to automate application of pesticide and seeding. Our water solutions help farmers minimize their water costs and distribute water more efficiently, and include applications for leveling agricultural fields for irrigation, aligning drainage systems to better manage water flow in fields, and controlling water application in linear and pivot irrigation systems. During 2016, we continued to develop our precision agriculture portfolio. We expanded our portfolio of Android-based display with the introduction of the MMX-070 tablet and continued to add more applications to our in-field mobile environment. We launched Vertical RTK, a grade control system for agriculture, which enables land improvement contractors to reduce downtime and costly delays by significantly enhancing vertical accuracy and stability of single baseline RTK systems. In the water management area, we released an industry-first technology for irrigation called Irrigate-IQ optimal flow. This technology enables farmers to utilize no-spray areas on center pivot irrigation systems that do not have a variable frequency drive pump, while keeping the pressure regulated across the pivot. Now, farmers who were unable to change the application across the pivot due to pumping equipment limitations can benefit from using no spray areas to focus water where it is needed, without the risk of damage due to significant pressure changes. In addition to Irrigate-IQ optimal flow, we also launched Irrigate-IQ uniform corner which enables farmers to apply a consistent application in areas covered by the corner arm. The solution utilizes individual nozzle control to minimize gaps and overlaps that are typically seen in traditional corner arm systems. As a result, farmers can extend the capabilities of their current corner arm by optimizing water use and preventing over- or under-watering. Solutions which use data to enhance farm productivity are an increasing focus in our agriculture business. In 2016, we consolidated a number of Trimble Agriculture's software brands and platforms into a single Trimble Ag Software solution. This integrated solution is designed to not only help farmers seeking solutions to integrate all of the information on the farm, but where advisors, suppliers, and purchasers can share information to improve efficiencies. Trimble Ag Software enables a chain of custody where the farm can pass critical food safety and sustainability information to processors, distributors and ultimately to consumers who 9 seek transparency. Acquired in 2015, Agri-Trend’s Professional Agricultural Coaching services help farmers allocate scarce resources to produce a safe, reliable, and profitable food supply in an environmentally sustainable manner. The combination of our software platform and the coaching advisory services enables farmers to make more informed decisions leading to higher yields, better quality crops, increased profitability, and reduced environmental impact. Trimble Ag Software and Agri-Trend Coaching services are available in many locations including within our Vantage distribution channel. In the course of 2016, we continued to add third-party applications to our Android-based TMX-2050 display platform, enabling customers to view more complete data from multiple industry software platforms and machines, in addition to the wide range of applications Trimble already offers. We use multiple distribution approaches to access the agricultural market, including independent dealers and direct selling to enterprise accounts. A significant portion of our sales are through CNH Global and affiliated dealer networks. During 2016 we expanded our Vantage global distribution channel. Vantage distributors provide a premier level of technical expertise, customer service and support capabilities and operate with a strategy that fosters technology interoperability in mixed fleets used on a farm. Vantage partners are committed to providing reliable, responsive and dedicated infield service and support as well as creating a hassle free experience for the grower and their advisors when implementing advanced technology solutions. They also provide training so farmers and advisors have a better understanding of how to use the technology in a way that best meets their farming needs. We currently have Vantage partners in over 12 countries across 4 continents. Competitors in this market are vertically integrated farm equipment and implement companies such as John Deere and agricultural instrumentation companies such as Raven and Ag Junction. As we expand our business in agronomic services and data oriented applications, we expect to increasingly compete with major input suppliers such as Monsanto. We compete principally on the basis of robust performance, ease of use, price, interoperability, interconnectedness and the completeness of our solutions. Geographic Information Systems (GIS). Our GIS product line collects authoritative field data and integrate that data into GIS databases. Our handheld data collection systems allow users to quickly log positions and descriptive information about their assets, ensure the integrity and accuracy of GIS information and ultimately, enable better decision-making. Through a combination of wireless technologies and software solutions, fieldwork results are seamlessly delivered to the back-office GIS, and mobile workers can also access GIS information remotely. This capability provides significant advantages to users including improved productivity, accuracy and access to information in the field. Primary markets for our GIS products and solutions include both governmental and commercial users. Distribution for GIS products is primarily through a network of independent dealers and business partners, supported by Trimble personnel. Competitors in this market are typically survey instrument companies utilizing GNSS technology such as Topcon and Leica. We compete principally on the basis of robust performance, ease of use, price, interoperability and interconnectedness. Mobile Solutions Our Mobile Solutions segment primarily consists of two businesses, transportation and logistics and field service management. Transportation and Logistics. In the transportation and logistics market, we offer a suite of solutions marketed under the Trimble, PeopleNet, GEOTrac, TMW and ALK Technologies brands. Together, this range of products provides a comprehensive fleet and transportation management, analytics, routing, mapping, reporting and predictive modeling solution to enable the transportation and logistics industry to achieve greater overall operational efficiency, fleet performance, and profitability while ensuring regulatory compliance. Our fleet productivity and enterprise software offerings are comprised primarily of the PeopleNet, TMW, Vusion, PC*Miler, CoPilot and FleetWorks mobile platforms. Our enterprise strategy focuses on sales to large enterprise accounts with more than 1,000 vehicles. In addition to Trimble-hosted solutions, we also integrate our applications and services directly into the customer’s IT infrastructure. The PeopleNet mobile communications system includes solutions encompassing route management, safety and compliance, end- to-end vehicle management, and supply chain communications. PeopleNet's products are used by more than 1,500 transportation fleets in the US and Canada. GEOTrac’s telematics systems provide end-to-end solutions for oil & gas road mapping, vehicle monitoring, geofencing, messaging and alerting, driver productivity, distress notification, lone worker monitoring, reporting and maintenance monitoring. The CarCube/FleetWorks solution is tailored for transportation and logistics companies in Europe and Australia. 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. Our software platform automates business processes spanning the entire surface transportation lifecycle, order-to-cash, delivering visibility, control, and decision support for the intricate relationships and complex processes involved in the movement of freight. TMW software technologies serve more than 2,300 customers, including many of the most sophisticated and complex transportation companies, as well as hundreds of smaller regional and local operations in North America. In our Mobile Solutions segment, customers manage nearly two million vehicles and mobile assets with $71 billion in annual freight spend, and direct more than 500,000 trucks in North America, Europe, Latin America and Australia-New Zealand. Furthermore, TMW acquired ALK 10 Technologies in 2013. ALK is a transportation technology company dedicated to innovative routing, mileage, mapping and mobile navigation solutions. We are known for providing trusted industry standard data to seamless integration. ALK solutions are developed for commercial and consumer end users. Together the PC*Miler, CoPilot and ALK Maps products provide a truck routing, mileage and mapping solution and a voice guided turn-by-turn navigation solution. TMW's enterprise software also integrates with more than 215 partners, including PeopleNet's fleet productivity solutions. Field Service Management. Trimble’s Field Service Management offerings provide owners and operators of fleets of vehicles, such as service vehicles, with visibility into field and fleet operations so they can increase efficiency and productivity. The Field Service Management suite includes applications for fleet management, work management and scheduling, worker safety and mobility that improve the effectiveness of work, workers and assets in the field. This cloud-based portfolio allows Trimble to offer customers industry-specific, enterprise-level solutions for enhanced performance and ease of use. Our market strategy targets opportunities in specific vertical markets where we believe we can provide unique value to the end-user by tailoring our solutions. Major markets include telecommunications, utilities, mobile workers, construction logistics, forestry, public safety and oil and gas. The Mobile Solutions segment generally sells directly to end-users. Sales cycles tend to be long due to field trials followed by an extensive decision-making process. Key competitors in this segment include Omnitracs, Fleetmatics, Teletrac, and McLeod, among others. We compete principally on the basis of interoperability, customer support and service, price, innovative product offerings, quality, and provision of a complete solution. Advanced Devices Advanced Devices includes the product lines from our Embedded Technologies, Timing, Applanix, Military and Advanced Systems (MAS) businesses. These businesses share several common characteristics: they are hardware centric, generally market to OEMs, system integrators and service providers, and have products that can be utilized in a number of different end user markets and applications. The various operations that comprise this segment were aggregated on the basis that these operations do not exceed 10% of our total revenue, operating income or assets. Within Embedded Technologies and Timing, we supply GNSS modules, licensing and complementary technologies, and GNSS- integrated sub-system solutions for applications requiring precise position, time or frequency. Embedded Technologies and Timing serve a broad range of vertical markets including telecommunications, automotive electronics, and commercial electronics. Sales are made directly to OEMs, system integrators, value-added resellers and service providers who incorporate our components into a complete system-level solution. Competitors in this market include Microsemi and u-blox. We compete principally on the basis of product performance, price and quality. Our MAS business supplies GPS receivers and embedded modules that use the military’s advanced GPS capabilities. The modules are principally used in aircraft navigation and timing applications. Military products are sold directly to either the U.S. government or defense contractors. Sales are also made to authorized foreign end-users. Competitors in this market include Rockwell Collins, L3 and Raytheon. Our Applanix business is a leading provider of advanced products and enabling solutions that maximize productivity through mobile mapping and positioning to professional markets worldwide. Applanix develops, manufactures, sells, and supports high- value, precision products that combine GNSS with inertial sensors for accurate measurement of position and attitude, flight management systems, and scalable mobile mapping solutions used in airborne, land, marine and autonomy-related applications. Sales are made by our direct sales force to end-users, systems integrators, and OEMs, and through regional agents. Competitors include OxTS, IGI and Novatel. We compete principally on the basis of product features, performance and domain knowledge. Patents, Licenses and Intellectual Property We seek to establish and maintain our proprietary rights in our technology and products through the use of patents, copyrights, trademarks, and trade secret laws. We have a program to file applications for and obtain patents, copyrights, and trademarks in the United States and in selected foreign countries where we believe filing for such protection is appropriate. We hold over 1,200 unique issued and enforceable patents, the majority of which cover GNSS based technologies and other applications such as optical and laser technology. We are not dependent on any one patent. We also own numerous trademarks and service marks that contribute to the identity and recognition of Trimble and its products and services globally. We generally prefer to own the intellectual property used in our products, either directly or through subsidiaries. From time to time we license technology from third parties. 11 Competition Our markets are highly competitive and we expect that both direct and indirect competition will increase in the future. Within our markets, we encounter direct competition from other GNSS, software, optical and laser suppliers such as Hexagon and Topcon, and competition may intensify from various larger U.S. and non-U.S. competitors. Our hardware products are increasingly subject to competition from existing and new entrants from emerging markets such as China, which compete aggressively on price at the lower priced end of the market. Our integrated hardware and software products may also be subject to increasing competition from mass market devices such as smartphones and tablets combined with relatively inexpensive applications, which have not been heavily used for commercial applications in the past. Many of our products and solutions are focused on specific industries. In each of these industries we face competition from companies providing point solutions or more traditional, less technology intensive products and services, and these companies often have greater financial resources and more established and recognized brands in those industries. Competing in vertical markets with more established industry participants requires that we successfully establish a market position and market new and sometimes unfamiliar technology and automated solutions to customers that have not previously used such products. We also increasingly offer enterprise level solutions designed to meet the specific needs of our target industries. In doing so, we face competition from larger and more well established providers of enterprise software and services with whom we have not previously competed. See also "Risk Factors - We face substantial competition in our markets which could decrease our revenue and growth rates or impair our operating results and financial condition." Sales and Marketing We tailor our distribution to the needs of our products and regional markets around the world. Many of our products are sold worldwide primarily through indirect channels, including distributors, dealers and authorized representatives. Occasionally we grant exclusive rights to market certain products, or within specific countries. These channels are supported by our regional sales offices throughout the world. We also utilize distribution alliances, OEM relationships, and joint ventures with other companies as a means to serve selected markets, as well as direct sales to end-users. During fiscal 2016, sales to customers in the United States represented 49%, Europe represented 24%, Asia Pacific represented 15%, and other regions represented 12% of our total revenue. Seasonality of Business Construction purchases tend to occur in early spring, and U.S. governmental agencies tend to utilize funds available at the end of the government’s fiscal year for additional purchases at the end of our third fiscal quarter in September of each year. Our agricultural equipment business revenues have historically been the highest in the first quarter, followed by the second quarter, reflecting buying in anticipation of the spring planting season in the Northern hemisphere. However, overall as a company, as a result of diversification of our business across segments and the increased impact of subscription revenues, we may experience less seasonality in the future. Changes in global macroeconomic conditions could also impact the level of seasonality we experience. Backlog In most of our markets, the time between order placement and shipment is short. Orders are generally placed by resellers and customers on an as-needed basis. In general, customers may cancel or reschedule orders without penalty. For these reasons, we do not believe that backlog is a meaningful indicator of future revenue or material to understanding our business. Manufacturing We outsource the manufacturing of many of our hardware products to our key contract manufacturing partners that include Flextronics International Limited, Benchmark Electronics Inc. and Jabil. Our contract manufacturing partners are responsible for significant material procurement, assembly and testing. We continue to manage product design through pilot production for the subcontracted products, and we are directly involved in qualifying suppliers and key components used in all our products. Our current contract with Flextronics continues in effect until either party gives the other ninety days written notice. We also utilize original design manufacturers for some of our products. We manufacture our laser and optics-based products, as well as some of our GPS products, at our plants in Dayton, Ohio; Danderyd, Sweden and Shanghai, China. Some of these products or portions of these products are also subcontracted to third parties for assembly. 12 Our design manufacturing and distribution sites in Dayton, Ohio; Sunnyvale, California; Danderyd, Sweden; Eersel, Netherlands, Auckland, New Zealand and Shanghai, China are registered to ISO9001:2015, covering the design, production, distribution, and servicing of all our products. Research and Development We believe that our competitive position is maintained through the development and introduction of new products, including software and services, that incorporate improved features and functionality, better performance, smaller size and weight, lower cost, or some combination of these factors. We invest substantially in the development of new products. We also make significant investment in the positioning, communication and information technologies that underlie our products and will likely provide competitive advantages. We expect to continue investing in research and development at a rate consistent with our past, with the goal of maintaining or improving our competitive position, and entering new markets. Employees At the end of fiscal 2016, we employed 8,388 employees, with approximately 55% of employees in locations outside the United States. Some employees in Sweden and Finland are represented by unions. Some employees in Germany and France are represented by works councils. We also employ temporary and contract personnel that are not included in the above headcount numbers. We have not experienced work stoppages or similar labor actions. Available Information The Company’s annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and all amendments to those reports are available free of charge on the Company’s web site through investor.trimble.com, as soon as reasonably practicable after such material is electronically filed with or furnished to the Securities and Exchange Commission. Financial news and reports and related information about our Company as well as non-GAAP to GAAP reconciliations can also be found on this web site. Information contained on our web site is not part of this annual report on Form 10-K. In addition, you may request a copy of these filings (excluding exhibits) at no cost by writing or telephoning us at our principal executive offices at the following address or telephone number: Trimble Inc. 935 Stewart Drive, Sunnyvale, CA 94085 Attention: Investor Relations Telephone: 408-481-8000 Executive Officers The names, ages and positions of the Company’s executive officers as of February 20, 2017 are as follows: Name Steven W. Berglund Robert G. Painter Bryn A. Fosburgh Christopher W. Gibson James A. Kirkland Jürgen D. Kliem Darryl R. Matthews Sachin J. Sankpal Julie A. Shepard James A. Veneziano Age 65 45 54 55 57 59 49 49 59 55 Position President and Chief Executive Officer Chief Financial Officer Senior Vice President Senior Vice President Senior Vice President, General Counsel and Secretary Senior Vice President Senior Vice President Senior Vice President Chief Accounting Officer Senior Vice President Steven W. Berglund—Steven Berglund has served as president and chief executive officer of Trimble since March 1999. Prior to joining Trimble, Mr. Berglund was president of Spectra Precision, a group within Spectra Physics AB. Mr. Berglund’s business 13 experience includes a variety of senior leadership positions with Spectra Physics, and manufacturing and planning roles at Varian Associates. He began his career as a process engineer at Eastman Kodak. He attended the University of Oslo and the University of Minnesota where he received a B.S. in chemical engineering. Mr. Berglund received his M.B.A. from the University of Rochester. Mr. Berglund is a member of the board of directors of the Silicon Valley Leadership Group and of the board of trustees of World Educational Services. He is also a member of the board, as well as the construction sector board, of the Association of Equipment Manufacturers. In December 2013, Mr. Berglund was appointed to the board of directors and compensation committee of Belden Inc., a global provider of end-to-end signal transmission solutions. Robert G. Painter—Robert Painter was appointed chief financial officer of Trimble in February 2016. He is responsible for Trimble’s worldwide finance operations. Mr. Painter joined Trimble in 2006 and assumed leadership of Trimble’s business development activities, leading all acquisition and corporate strategy activities. From 2009 to 2010, he served as general manager of the Company’s Construction Services Division. From 2010 to 2015, he served as general manager of the Company’s joint venture with Hilti, which was created to foster collaborative development of product innovations for the building construction industry. In 2015, Mr. Painter was appointed vice president of Trimble Buildings, a Trimble group focused on BIM-centric businesses that span the Design-Build-Operate continuum of the Building lifecycle. Prior to joining the Company, Mr. Painter served in a variety of management and finance positions at Cenveo, Rapt Inc., Bain & Company, Whole Foods Markets, and Kraft Foods. In 1993, he earned a Bachelor of Science degree in Finance from West Virginia University, and received an MBA in Business from Harvard University in 1998. Bryn A. Fosburgh—Bryn Fosburgh is senior vice president responsible for the Caterpillar, Hilti, and Nikon Joint Ventures, U.S. Federal government strategy and accounts, OEM construction machine business and professional services groups. From 2014 to 2016, he served as senior vice president for Trimble's Geospatial, Civil Engineering and Construction (CEC), and Building businesses, and the Caterpillar and Hilti-related joint ventures. From 2010 to 2014, Mr. Fosburgh was responsible for our Buildings and Heavy Civil construction businesses along with our Caterpillar and Hilti joint ventures. From 2009 to 2010, Mr. Fosburgh served as vice president for Trimble's Construction Division, Transportation and Logistics, Fields Service Management (FSM) and a number of corporate functions and geographical regions. From 2007 to 2009, Mr. Fosburgh was vice president for Trimble's Construction and Agriculture Divisions, and from 2005 to 2007, Mr. Fosburgh served as vice president and general manager of Trimble's Engineering and Construction Division. Mr. Fosburgh joined Trimble in 1994 and has held numerous roles, including vice president and general manager for Trimble's geomatics and engineering division, and division vice president of survey and infrastructure. Prior to Trimble, Mr. Fosburgh was a civil engineer and also held various positions for the U.S. Army Corps of Engineers and Defense Mapping Agency. Mr. Fosburgh received a B.S. in geology from the University of Wisconsin in Green Bay in 1985 and an M.S. from the school of civil engineering at Purdue University in 1989. Christopher W. Gibson—Christopher Gibson currently serves as senior vice president responsible for Trimble’s channel development and regional development in Latin & South America, Russia, India, China and Africa. Mr. Gibson also oversees emerging markets, key accounts and major project capabilities across the company, and is responsible for the company’s corporate marketing functions. From 2012 to 2015, Mr. Gibson served as vice president for Trimble's Survey, Geospatial, Geographic Information System (GIS), Infrastructure, Rail, Land Administration and Environmental Solutions businesses. Mr. Gibson joined Trimble in 1998 as European finance and operations director. In 2009, he was appointed to serve as vice president responsible for Trimble's Survey Division, and in December 2010, those responsibilities were expanded to include oversight of geographic regions and divisions, including Building Construction, Construction Tools, and the Hilti joint venture. From 2008 to 2009, Mr. Gibson served as the general manager for the Survey Division, and from 2005 to 2008, he was general manager for the Global Services Division. Prior to Trimble, Mr. Gibson's business experience includes a number of financial management roles with Tandem Computers, and financial analyst roles with Unilever subsidiaries. Mr. Gibson received a BA in Business Studies in 1985 from Thames Polytechnic, now the University of Greenwich, and was admitted as a Fellow to the Chartered Institute of Management Accountants in 1994. James A. Kirkland—James Kirkland currently serves as senior vice president, General Counsel and Secretary. He joined the company as vice president and general counsel in July 2008. Prior to joining Trimble, he served as general counsel and executive vice president, strategic development at Covad Communications. Mr. Kirkland also served as senior vice president of spectrum development and general counsel at Clearwire Technologies, Inc. Mr. Kirkland began his career in 1984 as an associate at Mintz Levin and in 1992 he was promoted to partner. Mr. Kirkland received his BA from Georgetown University in Washington, D.C. in 1981 and his J.D. from Harvard Law School in 1984. Jürgen D. Kliem—Jürgen Kliem currently serves as senior vice president overseeing Trimble's Distribution Holdings, activities in Germany and various corporate functions and initiatives. Between 2012 and 2016, he was vice president for several businesses within the Advanced Devices segment, and was also responsible for various corporate functions, including key accounts and government funded projects. Mr. Kliem previously served as vice president of strategy and business development from 2008 until 2012. From 2002 to 2008, Mr. Kliem served as general manager of Trimble's Survey Division, and prior to that, Mr. Kliem was responsible for Trimble's Engineering and Construction Division in Europe. Mr. Kliem held various leadership roles at Spectra 14 Precision, which was acquired by Trimble, and at Geotronics, a company acquired by Spectra Precision. Before joining Geotronics, Mr. Kliem worked in a privately-held surveying firm addressing cadastral, construction, plant and engineering projects. Mr. Kliem received a Diplom Ingenieur degree from the University of Essen, Germany in 1982. Darryl R. Matthews—Darryl Matthews currently serves as senior vice president and sector head responsible for Trimble’s Agriculture, Forestry, Positioning Services and HarvestMark Divisions. From 2010 to 2015, Mr. Matthews served as president and general manager of the NAFTA Region for Nufarm Americas, Inc., a subsidiary of Nufarm Limited, a publicly-traded multinational agricultural chemical company. From 2008 to 2010, Mr. Matthews served as general manager of Nufarm Agriculture Inc., the Canadian subsidiary of Nufarm Limited. Mr. Matthews began his career at Dow AgroSciences in Canada where he held management roles in sales and marketing. From 2010 to 2015, he served on the Board of Directors for CropLife America. He received an Honors B.Sc. in Agriculture majoring in Horticultural Science and Business from the University of Guelph in Ontario, Canada in 1994. Sachin J. Sankpal—Sachin Sankpal currently serves as senior vice president and sector head of Trimble’s Intelligent Transportation Systems. From 2012 to 2015, Mr. Sankpal held various general management positions within Honeywell, including president of Honeywell International’s Global Safety Products Division in Paris, France, vice president and general manager of Honeywell’s Safety Products Division for Europe, Middle East, Africa and India. From 2010 to 2012, he served as vice president of Global Strategic Marketing for Honeywell’s Life Safety Division. From 2003 to 2010, he held various business and operational roles at Avaya, Inc., including director of Strategy and Product Management, chief operating officer of Avaya-Japan, Ltd., operations leader in India, and director of Global Restructuring. From 2001 to 2003, he served as a director of Strategy and Finance for Trimble’s Engineering & Construction Division. From 1994 to 1999, Mr. Sankpal was a consultant for Navigant Consulting based in Boston, Mass. He began his career at Langan Engineering & Environmental Services as a staff engineer. He holds a BS in Civil Engineering from Rutgers University, an MS in Civil Engineering from the University of Maryland and an MBA from Dartmouth College. Julie A. Shepard—Julie Shepard joined Trimble in December of 2006 as vice president of finance, and was appointed chief accounting officer in May 2007. Prior to joining Trimble, Ms. Shepard served as vice president of finance and corporate controller at Quantum Corporation. Ms. Shepard brings with her over 25 years of experience in a broad range of finance roles, with diverse experience ranging from early stage private equity backed technology companies to large multinational corporations. Ms. Shepard began her career at Price Waterhouse and is a Certified Public Accountant. She received a B.S in Accounting from California State University. She is a member of the AICPA, Financial Executive Institute and the California Society of CPAs. James A. Veneziano—James Veneziano has served as a vice president of Trimble since 2009 and is currently senior vice president responsible for portions of Trimble's Mobile Solutions, Data Services and Hosting, Global Services and portions of the Advanced Devices segment. Mr. Veneziano joined Trimble in 1990 as a manufacturing engineer in the Company's Operations group. In 1993, he was appointed director of Operations. In 1998, Mr. Veneziano was appointed director of marketing for Agriculture and Mapping and GIS. From 2000 to 2005, Mr. Veneziano served as the general manager of Trimble's Agriculture business. From 2005 to 2009, he was the general manager of Trimble's Construction business. Prior to joining Trimble, Mr. Veneziano worked for Hewlett- Packard in a variety of manufacturing positions including development engineer and engineering supervisor as well as new product introduction manager. He received a B.S. in electrical engineering from Colorado State University in Fort Collins in 1984. Item 1A. Risk Factors RISKS AND UNCERTAINTIES You should carefully consider the following risk factors, in addition to the other information contained in this Form 10-K and in any other documents to which we refer you in this Form 10-K, before purchasing our securities. The risks and uncertainties described below are not the only ones we face. Our annual and quarterly performance may fluctuate which could negatively impact our operations, financial results, and stock price Our operating results have fluctuated and can be expected to continue to fluctuate in the future on a quarterly and annual basis as a result of a number of factors, many of which are beyond our control. Results in any period could be affected by: • • • • • changes in market demand, competitive market conditions, the timing of recognizing revenues, fluctuations in foreign currency exchange rates, the cost and availability of components, 15 • • • • • • the mix of our customer base and sales channels, the mix of products sold, pricing of products, changes in U.S. or foreign policies on trade, taxes or spending, global or regional economic and political developments, and other risks, including those described below. Seasonal variations in demand for our products may also affect our quarterly results. Construction purchases tend to occur in early spring, and U.S. governmental agencies tend to utilize funds available at the end of the government’s fiscal year for additional purchases at the end of our third fiscal quarter in September of each year. Our agricultural equipment business revenues have historically been the highest in the first quarter, followed by the second quarter, reflecting buying in anticipation of the spring planting season in the Northern hemisphere. If we do not accurately forecast seasonal demand we may be left with unsold inventory or have a shortage of inventory, which could negatively impact our financial results. Due in part to the buying patterns of our customers, a significant portion of our quarterly revenue occurs from orders received and immediately shipped to customers in the last few weeks and days of each quarter, while our operating expense tends to remain fairly predictable. A majority of our sales force earns commissions on a quarterly basis which may cause concentrations of orders at the end of any fiscal quarter. It could harm our operating results if for any reason expected sales are deferred, orders are not received, or shipments are delayed a few days at the end of a quarter. The price of our common stock could decline substantially in the event any of these risks result in our financial performance being below the expectations of public market analysts and investors, which are based on historical and predictive models that are not necessarily accurate representations of the future. The volatility of our stock price could adversely affect an investment in our common stock The market price of our common stock has been, and may continue to be, highly volatile. During fiscal 2016, our stock price ranged from $18.36 to $30.84. We believe that a variety of factors could cause the price of our common stock to fluctuate, perhaps substantially, including: • • • • • • • • • • announcements and rumors of developments related to our business or the industry in which we compete, or related to the industries in which our customers compete, quarterly fluctuations in our actual or anticipated operating results and order levels, general conditions in the worldwide economy, acquisition announcements, new products or product enhancements announced or introduced by us or our competitors, disputes with respect to developments in patents or other intellectual property rights, security breaches, developments in our relationships with our partners, customers and suppliers, political, economic or social uncertainty, and acts of terrorism. In addition, the stock market in general and the markets for shares of “high-tech” companies in particular, have frequently experienced extreme price fluctuations which have often been unrelated to the operating performance of affected companies. Any such fluctuations in the future could adversely affect the market price of our common stock. Global and regional economic conditions and the cyclicality of some of our key markets may negatively impact our businesses and our operating results Our earnings and financial position are and will continue to be influenced by various macroeconomic factors, including increases or decreases in gross domestic product, the level of consumer and business confidence and spending, changes in the interest rates on consumer and business credit, fluctuations in foreign currency exchange rates, changes in tax rates or policy, energy prices, changes in international trade policies and the demand for and the cost of commodities such as corn, which exist in the various countries in which we operate. During 2016, we experienced a strengthening U.S. Dollar which had the impact of making some of our products and services more expensive than many of our local competitors. Developments with respect to trade policy and laws, treaties or international accords related to imports and exports, such as NAFTA, or tariffs or other trade barriers which could be imposed by the U.S. or by other countries, could have a material adverse effect on our or on our suppliers’ or customers’ business. In the recent past, uncertainties in the financial and credit markets have caused our customers to postpone purchases, and negative economic conditions may reduce future sales of, or demand for, our products and services. Negative economic conditions or changes in tax policy may depress the tax revenues of government entities, which are significant purchasers of our products. Many 16 of our products are sold through dealer channels, and our dealers depend on the availability of credit both to finance purchases of our products for their inventory, and to finance purchases by their customers. Sources of credit could disappear or the financial situation of our channel partners and customers could become such that they are no longer eligible for such financing, or financing becomes more costly. Negative economic conditions may result in increased collection times or greater write-offs, affecting our cash flow and operating results. Our suppliers may be impacted by economic pressures, which may adversely affect their ability to fulfill their obligations to us, or result in increased prices, and therefore cause a disruption in our supply chain or impact our operating results. Financial conditions in several regions continue to place significant economic pressures on existing and potential customers, including our dealer channels. There is ongoing concern about economic conditions in Europe, which has experienced negative impacts from sovereign debt levels and government taxing and spending actions to address such issues, as well as the United Kingdom’s exit from the European Union. Other governments may continue to implement measures which may slow the economic growth rate in those countries (e.g., higher interest rates and reduced bank lending). Growth rates in key emerging markets, including China, have slowed, which could affect demand for our products, both with respect to the products we sell directly into emerging markets, and indirectly by reducing demand for our customers’ products. Falling commodity prices have also negatively affected markets such as the U.S., Canada, the Middle East and Australia. We are subject to the cyclicality of the agricultural and engineering and construction industries, which can cause sudden (and sometimes material) declines in demand, with negative effects on sales, inventory levels and product pricing. In general, demand in the engineering and construction industries for our products is highly correlated to the economic cycle and can be subject to even greater levels of volatility. The agricultural spending cycle is influenced by general economic conditions as well as weather, crop loads, commodity pricing, the availability of credit and the strength of the U.S. Dollar. Since 2014, the agricultural sector has been experiencing a significant downturn and which has had and may have a negative effect on the company’s overall growth rate. In addition, new sources of supply and a decline in demand have resulted in a substantial decline in the price of oil and gas since 2014, and as a result, the oil and gas industry has been experiencing a significant downturn which has had and may continue to have a negative effect on our engineering and construction business. If there is significant deterioration in the global economy, the economies of the countries or regions where our customers are located or do business, or the industries that we or our customers serve, the demand for our products and services would likely decrease and our results of operations, financial position and cash flows could be materially and adversely affected. Changes in economic conditions also make it difficult to make financial forecasts, which could cause us to miss our financial guidance and adversely affect our stock price. We may not be able to enter into or maintain important alliances and distribution relationships We believe that in certain business opportunities our success will depend on our ability to form and maintain alliances with industry participants, such as Caterpillar, Nikon, Hilti, and CNH Global. Our failure to form and maintain such alliances, or the preemption or disruption of such alliances by actions of competitors, will adversely affect our ability to sell our products to customers. Our relationships with substantial industry participants such as Caterpillar and CNH are complex and multifaceted, and are likely to evolve over time based upon the changing business needs and objectives of the parties. Since these strategic relationships contribute to significant ongoing business in certain of our important markets, changes in these relationships could adversely affect our sales and revenues. We utilize dealer networks, including those affiliated with some of our strategic allies such as Caterpillar and CNH Global, to market, sell and service many of our products. Changes in our product mix, including increasing provision of software and bundled solutions tailored to the needs of specific vertical markets, impose new demands on our distribution channels and may require significant changes in the skills and expertise required to successfully distribute our products and services, or the creation of new distribution channels. Recruiting and retaining qualified channel partners and training them in the use and the selling of our technology and product offerings requires significant time and resources. In order to develop and expand our distribution channels, we must continue to expand and improve our processes and procedures that support our distribution channels, including our investment in systems and training, and those processes and procedures may become increasingly complex and difficult to manage. The time and expense required for sales and marketing organizations of our channel partners to become familiar with our product offerings, including our new product developments, and newer types of offering such as software and services, may make it more difficult to introduce those products to end-users and delay end-user adoption, which could result in lower revenues. Disruption of dealer coverage within specific geographic or end-user markets could cause difficulties in marketing, selling or servicing our products and have an adverse effect on our business, operating results or financial condition. Moreover, dealers who carry products that compete with our products may focus their inventory purchases and sales efforts on goods provided by competitors due to industry demand or profitability. Such sourcing decisions can adversely impact our sales, financial condition and results of operations. 17 We are exposed to fluctuations in currency exchange rates which can adversely affect our operating results Fluctuations in currencies impact our operating results, which are reported in U.S. Dollars. A significant portion of our business is conducted outside the U.S., and as such, we face exposure to movements in the currency exchange rates between the U.S. Dollar and other currencies. These exposures may change over time as economic conditions and business practices evolve and could have a material adverse impact on our financial results and cash flows. During 2016, our business was negatively impacted by the strong U.S. Dollar which increased the cost of some of our products and services relative to those of local competitors in some jurisdictions. If the U.S. Dollar remains strong or there is a continued increase in the exchange rate of the U.S. Dollar against other currencies, it could negatively impact foreign demand for our products or reduce the dollar value of local currency sales. A significant portion of our revenue is derived from countries outside of the United States. Possible import, export, tariff and other trade barriers, which could be imposed by the U.S. or other countries, might have a material adverse effect on the business. Currently, we routinely hedge only those currency exposures associated with certain assets and liabilities denominated in non- functional currencies. The hedging activities undertaken by us are intended to offset the short term impact of currency fluctuations on certain non-functional currency assets and liabilities. Our attempts to hedge against these risks involve transaction costs, and could be unsuccessful and expose us to losses. Investing in and integrating new acquisitions could be costly, place a significant strain on our management systems and resources, or may fail to deliver the expected return on investment, which could negatively impact our operating results We typically acquire a number of businesses each year, and intend to continue to acquire other businesses. Acquisitions entail numerous risks, including: • • • • • • • • • • potential inability to successfully integrate acquired operations and products or to realize cost savings or other anticipated benefits from integration; loss of key employees or customers of acquired operations; difficulty of assimilating geographically dispersed operations and personnel of the acquired companies; potential disruption of our business or the acquired business; unanticipated expenses related to acquisitions; unanticipated difficulties in conforming business practices, policies, procedures, internal controls, and financial records of acquisitions with our own business; impairment of relationships with employees, customers, vendors, distributors or business partners of either an acquired company or our own business; inability to accurately forecast the performance of recently acquired businesses, resulting in unforeseen adverse effects on our operating results; potential liabilities, including liabilities resulting from known or unknown compliance or legal issues, associated with an acquired business; and negative accounting impact to our results of operations because of purchase accounting treatment and the business or accounting practices of acquired companies. Any such effects from acquisitions could be costly and place a significant strain on our management systems and resources. As a result of acquisitions, we have significant assets that include goodwill and other purchased intangibles. The testing of this goodwill and intangibles for impairment under established accounting guidelines requires significant use of judgment and assumptions. Changes in business conditions or in the prospects or results of operations of the acquired business could require negative adjustments to the valuation of these assets resulting in write-offs which adversely affect our results. If we divest a business and the proceeds are less than the net book value at the time, we would be forced to write off the difference. In addition, changes in the operating results or stock price of companies in which we have investments may have a direct impact on our financial statements or could result in our having to write-down the value of such investment. Even if successfully negotiated and closed, acquisitions may not yield expected synergies, may not advance our business strategy as expected, may fall short of expected return-on-investment targets, or may not prove successful or effective for our business. Companies that we acquire may operate with different cost and margin structures, which could further cause fluctuations in our operating results and adversely affect our operating margins. Our internal and customer-facing systems, and systems of third parties we rely upon, may be subject to disruption, delays or cybersecurity breaches that could adversely impact our customers and operations A cybersecurity incident in our own systems or the systems of our third party providers may compromise the confidentiality, integrity, or availability of our own internal data, the availability of our products and websites designed to support our customers, or our customer data. Computer hackers, foreign governments or cyber terrorists may attempt to or succeed in penetrating our network security and our website. Unauthorized access to our proprietary business information or customer data may be obtained 18 through break-ins, sabotage, breach of our secure network by an unauthorized party, computer viruses, computer denial-of-service attacks, employee theft or misuse, breach of the security of the networks of our third party providers, or other misconduct. We have experienced security breaches in the past, and despite our efforts to maintain the security and integrity of our systems, it is virtually impossible to eliminate this risk. Because the techniques used by computer hackers who may attempt to penetrate and sabotage our network security or our website change frequently, may take advantage of weaknesses in third party technology or standards of which we are unaware or that we do not control, and may not be recognized until after they have been launched against a target, we may be unable to anticipate or counter these techniques. It is also possible that unauthorized access to customer data may be obtained through inadequate use of security controls by customers, vendors or business partners. A cybersecurity incident affecting our systems may also result in theft of our intellectual property, proprietary data or trade secrets, which would compromise our competitive position, reputation and operating results. The systems we rely upon also remain vulnerable to damage or interruption from a number of other factors, including access to the internet, the failure of our network or software systems, or significant variability in visitor traffic on our product websites, earthquakes, floods, fires, power loss, telecommunication failures, computer viruses, human error, and similar events or disruptions. Some of our systems are not fully redundant, and our disaster recovery planning is not sufficient for all eventualities. Our systems are also subject to intentional acts of vandalism. Despite any precautions we may take, the occurrence of a natural disaster, a decision by any of our third-party hosting providers to close a facility we use without adequate notice for financial or other reasons, or other unanticipated problems at our hosting facilities could cause system interruptions and delays, and result in loss of critical data and lengthy interruptions in our services. We rely on our information systems and those of third parties for activities such as processing customer orders, delivery of products, hosting and providing services and support to our customers, billing and tracking our customers, hosting and managing our customer data, and otherwise running our business. Any disruptions or unexpected incompatibilities in our information systems and those of the third parties upon whom we rely could have a significant impact on our business. An increasing portion of our revenue comes from software as a service solutions and other hosted services in which we store, retrieve, communicate and manage data which is critical to our customers’ business systems. Disruption of our systems which support these services and solutions could cause disruptions in our customers’ systems and in the businesses that rely on these systems. Any such disruptions could harm our reputation, create liabilities to our customers, hurt demand for our services and solutions, and negatively impact our revenues and profitability. Our products are highly technical and may contain undetected errors, product defects, security vulnerabilities or software errors, which could result in damage to our reputation, lost revenue, diverted development resources and increased service costs, warranty claims, and litigation Our products, including our software products, are highly technical and complex and, when deployed, may contain errors, defects or security vulnerabilities. We must develop our products quickly to keep pace with the rapidly changing market, and we have a history of frequently introducing new products. Products and services as sophisticated as ours could contain undetected errors or defects, especially when first introduced or when new models or versions are released. Such occurrences could result in damage to our reputation, lost revenue, diverted development resources, increased customer service and support costs, warranty claims, and litigation. We warrant that our products will be free of defect for various periods of time, depending on the product. In addition, certain of our contracts include epidemic failure clauses. If invoked, these clauses may entitle the customer to return or obtain credits for products and inventory, or to cancel outstanding purchase orders even if the products themselves are not defective. Errors, viruses or bugs may be present in software or hardware that we acquire or license from third parties and incorporate into our products or in third party software or hardware that our customers use in conjunction with our products. Our customers’ proprietary software and network firewall protections may corrupt data from our products and create difficulties in implementing our solutions. Changes to third party software or hardware that our customers use in conjunction with our software could also render our applications inoperable. Any errors, defects or security vulnerabilities in our products or any defects in, or compatibility issues with, any third party hardware or software or customers’ network environments discovered after commercial release could result in loss of revenues or delay in revenue recognition, loss of customers, theft of trade secrets, data or intellectual property and increased service and warranty cost, any of which could adversely affect our business, financial condition and results of operations. Undiscovered vulnerabilities in our products alone or in combination with third party hardware or software could expose them to hackers or other unscrupulous third parties who develop and deploy viruses, and other malicious software programs that could attack our products. Actual or perceived security vulnerabilities in our products could harm our reputation and lead some customers to return products, to reduce or delay future purchases or use competitive products. If we are unable to effectively manage our increasingly diverse and complex businesses and operations, our ability to generate growth and revenue from new or existing customers may be adversely affected 19 Because our operations are geographically diverse and increasingly complex, our personnel resources and infrastructure could become strained and our reputation in the market and our ability to successfully manage and grow our business may be adversely affected. The size, complexity and diverse nature of our business and the expansion of our product lines and customer base have placed increased demands on our management and operations, and further growth, if any, may place additional strains on our resources in the future. Our ability to effectively compete and to manage our planned future growth will depend on, among other things, the following: • maintaining continuity in our senior management and key personnel, • • • increasing the productivity of our existing employees, attracting, retaining, training and motivating our employees, particularly our technical and management personnel, deploying our solutions using third-party information systems, which may require changes to our applications, documentation and operational processes, improving our operational, financial and management controls, and improving our information reporting systems and procedures. • • The company has increasingly diversified the nature of its businesses both organically and by acquisition. As a result, an increasing amount of our business involves business models which require managerial techniques and skill sets which are different from those required to manage our historical core businesses. We are increasingly selling products and solutions directly to large enterprise customers and other end users of our products. A direct sales model requires different skills and management processes and procedures from those we have generally used in our business in the past, and may create conflicts with our channel partners. Over the last few years we have been increasing the portion of our business associated with professional services in order to customize our solutions for the needs of individual customers. If we are not successful in executing on these new models, our sales, revenue and financial performance may suffer. Changes in our software and subscription businesses may negatively affect our operating results An increasing portion of our revenue is generated through software maintenance and subscription revenue. Our customers have no obligation to renew their agreements for our software maintenance or subscription services after the expiration of their initial contract period, which typically ranges from one to five years. Our customer acquisition and renewal rates may decline or fluctuate as a result of a number of factors, including overall economic conditions, the health of their businesses, competitive offerings and customer dissatisfaction with our services. If customers do not renew their contracts for our products, our maintenance and subscription revenue will decline and our financial results will suffer. Any reduction in the number of licenses that we sell, even if our customer acquisition rates do not change, will have a negative impact on our future maintenance revenue growth. Since its introduction, our software as a service delivery model has also contributed to subscription revenue. If any of our assumptions about expenses, revenue or revenue recognition principles from these initiatives proves incorrect, or our attempts to improve efficiency are not successful, our actual results may vary materially from those anticipated, and our financial results will be negatively impacted. We continually re-evaluate our software licensing programs and subscription renewal programs, including specific license models, delivery methods, and terms and conditions. Changes to our licensing programs and subscription renewal programs, including the timing of the release of enhancements, upgrades, maintenance releases, the term of the contract, discounts, promotions and other factors, could impact the timing of the recognition of revenue for our products, related enhancements and services and could adversely affect our operating results and financial condition. We may implement different licensing models which require the Company to recognize licensing fees over a longer period. Over the last few years, we have increasingly offered additional products in a software as a service (SaaS) model. SaaS revenues are currently recognized ratably over the subscription period. Any significant increase in the percentage of our business generated from such a subscription model, could increase the amount of revenue to be recognized over time as opposed to upfront, which would delay revenue recognition and have a negative impact on our operating results in any quarterly period. Revenue recognition is complex and will change as we adopt new accounting standard ASU No. Due to these complexities, we may not be able to accurately forecast our non-deferred and deferred revenues, which could cause us to miss our earnings estimates or revenue projections and negatively impact our stock price. We face substantial competition in our markets which could decrease our revenue and growth rates or impair our operating results and financial condition Our markets are highly competitive and we expect that both direct and indirect competition will increase in the future. Our overall competitive position depends on a number of factors including the price, quality and performance of our products, the effectiveness of our distribution channel and direct sales force, the level of customer service, the development of new technology and our ability to participate in emerging markets. Within each of our markets, we encounter direct competition from other GNSS, software, optical and laser suppliers and competition may intensify from various larger U.S. and non-U.S. competitors and new market entrants, particularly from emerging markets such as China. Our products, which commonly use GNSS for basic location information, may be subject to competition from alternative location technologies such as simultaneous location and mapping 20 technology. As we sell an increasing amount of software and subscription services, we face competition from a group of large well established companies with whom we have not previously competed. Our integrated hardware and software products may be subject to increasing competition from mass market devices such as smartphones and tablets used in conjunction with relatively inexpensive applications, which have not been heavily used for commercial applications in the past. These developments may require us to rapidly adapt to technological and customer preference changes that we have not previously been exposed to, including those related to cloud computing, mobile devices and new computing platforms. Such competition has in the past resulted and in the future may result in price reductions, reduced margins or loss of market share, any of which could decrease our revenue and growth rates or impair our operating results and financial condition. We believe that our ability to compete successfully in the future against existing and additional competitors will depend largely on our ability to execute our strategy to provide products with significantly differentiated features compared to currently available products. We may not be able to implement this strategy successfully, and our products may not be competitive with other technologies or products that may be developed by our competitors, many of whom have significantly greater financial, technical, manufacturing, marketing, sales, and other resources than we do. We are dependent on new products and services and if we are unable to successfully introduce them into the market, or to effectively compete with new, disruptive product alternatives, our customer base may decline or fail to grow as anticipated Our future revenue stream depends to a large degree on our ability to bring new products and services to market on a timely basis. We must continue to make significant investments in research and development in order to continue to develop new products and services, enhance existing products and achieve market acceptance of such products and services. We may encounter problems in the future in innovating and introducing new products and services. Our development stage products may not be successfully completed or, if developed, may not achieve significant customer acceptance. Development and manufacturing schedules for technology products are difficult to predict, and we might not achieve our goals as to the timing of introducing new technology products, or could encounter increased costs. The timely availability and cost effective production of these products in volume and their acceptance by customers are important to our future success. If we are unable to introduce new products and services, if other companies develop competing technology products and services, or if we do not develop compelling new products and services, our number of customers may not grow as anticipated, or may decline, which could harm our operating results. Many of our offerings are increasingly focused on software and subscription services. The software industry is characterized by rapidly changing customer preferences which require us to address multiple delivery platforms, new mobile devices and cloud computing. Life cycles of software products can be short and this can exacerbate the risks associated with developing new products. The introduction of third-party solutions embodying new, disruptive technologies and the emergence of new industry standards could make our existing and future software solutions and other products obsolete or non-competitive. If we are not able to develop software and other solutions that address the increasingly sophisticated needs of our customers, or if we are unable to adapt to new technologies or new industry standards that impact our markets, our ability to retain or increase market share and operating results could be materially adversely affected. Some of our products rely on third party technologies including open source software, so if integration or incompatibility issues arise with these technologies or these technologies become unavailable, our product and services development may be delayed, our reputation could be harmed and our business could be adversely affected We license software, technologies and intellectual property underlying some of our software from third parties. The third party licenses we rely upon may not continue to be available to us on commercially reasonable terms, or at all, and the software and technologies may not be appropriately supported, maintained or enhanced by the licensors, resulting in development delays. Some software licenses are subject to annual renewals at the discretion of the licensors. In some cases, if we were to breach a provision of these license agreements, the licensor could terminate the agreement immediately. The loss of licenses to, or inability to support, maintain and enhance, any such third party software or technology could result in increased costs, or delays in software releases or updates, until such issues have been resolved. This could have a material adverse effect on our business, financial condition, results of operations, cash flows and future prospects. We also incorporate open source software into our products. Although we monitor our use of open source software, the terms of many open source licenses have not been interpreted by U.S. courts, and there is a risk that such licenses could be construed in a manner that could impose unanticipated conditions or restrictions on our ability to market or sell our products or to develop new products. In such event, we could be required to seek licenses from third-parties in order to continue offering our products, to disclose and offer royalty-free licenses in connection with our own source code, to re-engineer our products or to discontinue the sale of our products in the event re-engineering cannot be accomplished on a timely basis, any of which could adversely affect our business. We are dependent on proprietary technology, which could result in litigation that could divert significant valuable resources Our future success and competitive position is dependent upon our proprietary technology, and we rely on patent, trade secret, trademark, and copyright laws to protect our intellectual property. The patents owned or licensed by us may be invalidated, 21 circumvented, infringed or challenged. The rights granted under these patents may not provide competitive advantages to us. Any of our pending or future patent applications may not be issued within the scope of the claims sought by us, if at all. Despite our efforts to protect our intellectual property rights, unauthorized parties may attempt to copy or otherwise obtain our software or develop software with the same functionality or to obtain and use information that we regard as proprietary. Others may develop technologies that are similar or superior to our technology, duplicate our technology or design around the patents owned by us. In addition, effective copyright, patent and trade secret protection may be unavailable, limited or not applied for in certain countries. The steps taken by us to protect our technology might not prevent the misappropriation of such technology. The value of our products relies substantially on our technical innovation in fields in which there are many current patent filings. Third-parties may claim that we or our customers (some of whom are indemnified by us) are infringing their intellectual property rights. For example, individuals and groups may purchase intellectual property assets for the purpose of asserting claims of infringement and attempting to extract settlements from us or our customers. The number of these claims has increased in recent years and may continue to increase in the future. As new patents are issued or are brought to our attention by the holders of such patents, it may be necessary for us to secure a license from such patent holders, redesign our products, or withdraw products from the market. In addition, the legal costs and engineering time required to safeguard intellectual property or to defend against litigation could become a significant expense of operations. Any such litigation could require us to incur substantial costs and divert significant valuable resources, including the efforts of our technical and management personnel, which could harm our results of operations and financial condition. Our global operations expose us to risks and challenges associated with conducting business internationally, and our results of operations may be adversely affected by our efforts to comply with the laws of other countries, as well as U.S. laws which apply to international operations, such as the Foreign Corrupt Practices Act (FCPA) and U.S. export control laws We operate on a global basis with offices or activities in Europe, Africa, Asia, South America, Australasia and North America. We face risks inherent in conducting business internationally, including compliance with international and U.S. laws and regulations that apply to our international operations. These laws and regulations include data privacy requirements, labor relations laws, tax laws, anti-competition regulations, import and trade restrictions, export control laws, and laws which prohibit corrupt payments to governmental officials or certain payments or remunerations to customers, including the U.S. Foreign Corrupt Practices Act (FCPA), the U.K. Bribery Act, or other anti-corruption laws that have recently been the subject of a substantial increase in global enforcement. Many of our products are subject to U.S. export law restrictions that limit the destinations and types of customers to which our products may be sold, or require an export license in connection with sales outside the United States. Given the high level of complexity of these laws, there is a risk that some provisions may be inadvertently or intentionally breached, for example through fraudulent or negligent behavior of individual employees, our failure to comply with certain formal documentation requirements or otherwise. Also, we may be held liable for actions taken by our local dealers and partners. Violations of these laws and regulations could result in fines, criminal sanctions against us, our officers or our employees, and prohibitions or conditions on the conduct of our business. Any such violations could include prohibitions or conditions on our ability to offer our products in one or more countries and could materially damage our reputation, our brand, our international expansion efforts, our ability to attract and retain employees, our business and our operating results. In addition, we operate in many parts of the world that have experienced significant governmental corruption to some degree and, in certain circumstances, strict compliance with anti-bribery laws may conflict with local customs and practices. We may be subject to competitive disadvantages to the extent that our competitors are able to secure business, licenses or other preferential treatment by making payments to government officials and others in positions of influence or through other methods that relevant law and regulations prohibit us from using. Our success depends, in part, on our ability to anticipate these risks and manage these difficulties. In addition to the foregoing, engaging in international business inherently involves a number of other difficulties and risks, including: • longer payment cycles and difficulties in enforcing agreements and collecting receivables through certain foreign legal systems, political or economic instability, potentially adverse tax consequences, tariffs, customs charges, bureaucratic requirements and other trade barriers, difficulties and costs of staffing and managing foreign operations, differing local customer product preferences and requirements than our U.S. markets, difficulties protecting or procuring intellectual property rights, and fluctuations in foreign currency exchange rates. • • • • • • These factors or any combination of these factors may adversely affect our revenue or our overall financial performance. 22 Changes in our effective tax rate may reduce our net income in future periods As a global company, we are subject to income and other taxes in the United States and numerous foreign jurisdictions. Significant judgment is required to determine and estimate worldwide tax liabilities. Our effective tax rate is largely based on the geographic mix of earnings, statutory rates, inter-company transfer pricing, and enacted tax laws. A number of factors may increase our future effective tax rates, including: • • • • • • • • • • the jurisdictions in which profits are determined to be earned and taxed, the resolution of issues arising from tax audits with U.S. and foreign tax authorities, changes in our intercompany transfer pricing methodology, changes in the valuation of our deferred tax assets and liabilities, increases in expense not deductible for tax purposes, including transaction costs and impairments of goodwill in connection with acquisitions, changes in the realizability of available tax credits, changes in share-based compensation, changes in tax laws or the interpretation of such tax laws, including the Base Erosion and Profit Shifting (“BEPS”) project being conducted by the Organization for Economic Co-operation and Development (“OECD”) and the potential tax reform of corporate tax system in the U.S., changes in generally accepted accounting principles, and the repatriation of non-U.S. earnings for which we have not previously provided for U.S. taxes. On October 5, 2015, the OECD released the final reports from its BEPS Action Plans. The BEPS recommendations covered a number of issues, including country-by-country reporting, permanent establishment rules, transfer pricing rules and tax treaties. These changes, which have been or are in the process of being adopted by numerous countries, could increase tax uncertainty and may adversely affect our provision for income taxes. If our effective tax rates were to increase, our operating results, cash flows or financial condition could be adversely affected. In January 2016, the EC announced an Anti-Tax Avoidance Package containing measures to regulate certain elements of tax planning further and to boost tax transparency for consideration by the European Parliament and Council. Meanwhile, in the U.S., a number of proposals for broad reform of the corporate tax system are under evaluation by various legislative and administrative bodies. Future tax reform resulting from these developments may result in changes to long-standing tax principles, which could adversely affect our effective tax rate or result in higher cash tax liabilities. It is not possible to accurately determine the overall impact of such proposals on our effective tax rate at this time. We are currently in various stages of multiple year examinations by federal, state, and foreign taxing authorities, including a review of our 2010 to 2012 tax years by the U.S. Internal Revenue Service, or IRS. If the IRS or the taxing authorities of any other jurisdiction were to successfully challenge a material tax position, we could become subject to higher taxes and our earnings would be adversely affected. Our reported financial results may be adversely affected by changes in accounting principles applicable to us Generally accepted accounting principles in the U.S. are subject to interpretation by the Financial Accounting Standards Board, or FASB, the SEC, and other bodies formed to promulgate and interpret appropriate accounting principles. For example, in May 2014, the FASB issued a comprehensive new revenue recognition standard that replaces the current revenue recognition guidance under U.S. GAAP. This standard establishes a principle for recognizing revenue upon the transfer of promised goods or services to customers, in an amount that reflects the expected consideration received in exchange for those goods or services. The standard also provides guidance on the recognition of costs related to obtaining and fulfilling customer contracts. We expect to adopt this accounting standard update in the first quarter of fiscal 2018. Entities have the option of using either a full retrospective or modified retrospective approach for the adoption of the standard. We are still evaluating which adoption method we will apply and are continuing to assess the impact that the updated standard will have on our consolidated financial statements and related disclosures. This new standard is both technical and complex, and we expect to incur significant ongoing costs to implement and maintain compliance with this new standard. In addition, there may be greater uncertainty with respect to projecting revenue results from future operations as we work through the new revenue recognition standard. The new standard may impact the timing and amounts of revenue recognized. Adoption of the new revenue recognition standard along with any other changes in accounting principles or interpretations could have a significant effect on our reported financial results and could affect the reporting of transactions completed before the announcement of a change. Any difficulties in the implementation of new or changed accounting standards could cause us to fail to meet our financial reporting obligations. If our estimates relating to our critical accounting policies are based on assumptions or judgments that change or prove to be incorrect, our operating results could fall below expectations of securities analysts and investors, resulting in a decline in our stock price. We are dependent on a specific manufacturer and assembler for many of our products and on other manufacturers, and specific suppliers of critical parts for our products 23 We are substantially dependent upon Flextronics International Limited as our preferred manufacturing partner for many of our GNSS products. Under our agreement with Flextronics, we provide a twelve-month product forecast and place purchase orders with Flextronics at least thirty calendar days in advance of the scheduled delivery of products to our customers, depending on production lead time. Although purchase orders placed with Flextronics are cancelable, the terms of the agreement would require us to purchase from Flextronics all inventory not returnable or usable by other Flextronics customers. Accordingly, if we inaccurately forecast demand for our products, we may be unable to obtain adequate manufacturing capacity from Flextronics to meet customers’ delivery requirements or we may accumulate excess inventories, if such inventories are not usable by other Flextronics customers. Our current contract with Flextronics continues in effect until either party gives the other ninety days written notice. We rely on specific suppliers for a number of our critical components and on other contract manufacturers, including Benchmark Electronics and Jabil, for the manufacture, test and assembly of certain products and components. We have experienced shortages of components in the past. Our current reliance on specific or a limited group of suppliers and contract manufacturers involves risks, including a potential inability to obtain an adequate supply of required components, reduced control over pricing and delivery schedules, discontinuation of or increased prices for certain components, and economic conditions which may adversely impact the viability of our suppliers and contract manufacturers. This situation may be exacerbated during any period of economic recovery or a competitive environment. Any inability to obtain adequate deliveries or any other circumstance that would require us to seek alternative sources of supply or to manufacture, assemble and test such components internally could significantly delay our ability to ship our products, which could damage relationships with current and prospective customers and could harm our reputation and brand as well as our operating results. We are dependent on the availability and unimpaired use of allocated bands within the radio frequency spectrum and our products may be subject to harmful interference from new or modified spectrum uses Our GNSS technology is dependent on the use of satellite signals and on terrestrial communication bands. International allocations of radio frequency are made by the International Telecommunications Union (ITU), a specialized technical agency of the United Nations. These allocations are further governed by radio regulations that have treaty status and which may be subject to modification every two to three years by the World Radio Communication Conference. Each country also has regulatory authority over how each band is used in the country. In the United States, the Federal Communications Commission (FCC) and the National Telecommunications and Information Administration share responsibility for radio frequency allocations and spectrum usage regulations. Any ITU or local reallocation of radio frequency bands, including frequency band segmentation and sharing of spectrum, or other modifications of the permitted uses of relevant frequency bands, may materially and adversely affect the utility and reliability of our products and have significant negative impacts on our customers, both of which could reduce demand for our products. For example, the FCC has been considering proposals to repurpose spectrum adjacent to the GPS bands for terrestrial broadband wireless operations throughout the United States. If the FCC were to permit implementation of such proposals, or similar proposals, terrestrial broadband wireless operations could create harmful interference to GPS receivers within range of such operations and impose costs to retrofit or replace affected receivers. Similarly, other countries have considered proposals for use of frequencies used by our products as well as adjacent bands that could cause harmful interference to our products. Many of our products use other radio frequency bands, such as the public land mobile radio bands, together with the GNSS signal, to provide enhanced GNSS capabilities, such as real-time kinematics precision. The continuing availability of these non-GNSS radio frequencies is essential to provide enhanced GNSS products to our precision survey, agriculture, and construction machine controls markets. In addition, transmissions and emissions from other services and equipment operating in adjacent frequency bands or in-band may impair the utility and reliability of our products. Any regulatory changes in spectrum allocation or in allowable operating conditions could have a material adverse effect on our business, results of operations, and financial condition. Many of our products rely on GNSS technology, GPS and other satellite systems, which may become degraded or inoperable and result in lost revenue GNSS technology, GPS satellites and their ground support systems are complex electronic systems subject to electronic and mechanical failures and possible intentional disruption. Many of the GPS satellites currently in orbit were originally designed to have lives of 7.5 years and are subject to damage by the hostile space environment in which they operate. However, of the current deployment of 31 operational satellites in orbit, six have been in operation for more than 15 years, and over half have been in use for more than 7.5 years. Repair of damaged or malfunctioning satellites is currently not economically feasible. If a significant number of satellites were to become inoperable, there could be a substantial delay before they are replaced with new satellites. A reduction in the number of operating satellites below the 24-satellite standard established for GPS may impair the utility of the GPS system and the growth of current and additional market opportunities. In addition, software updates to GPS satellites and ground control segments can cause problems, and we depend on public access to open technical specifications in advance of such updates to mitigate these problems. 24 We are dependent on continued operation of GPS, the principal GNSS currently in operation. The GPS constellation is operated by the U. S. Government, which is committed to maintenance and improvement of GPS. If supporting policies were to change, or if user fees were imposed, it could have a material adverse effect on our business, results of operations, and financial condition. Many of our products also use signals from systems that augment GPS, such as the Wide Area Augmentation System and National Differential GPS System, and satellites transmitting signal corrections data on mobile satellite services frequencies utilized by our RTX corrections services. Some of these augmentation systems are operated by the U.S. government and rely on continued funding and maintenance of these systems. Any curtailment of the operating capability of these systems or limitations on access to, or use of the signals, or discontinuance of service could result in degradation of our services or product performance, with an adverse effect on our business. Many of our products use satellite signals from the Russian GLONASS System. Other countries, including China and India, are in the process of creating their own GNSS systems, and we either have developed or will develop products which use GNSS signals from these systems. The European community is developing an independent radio navigation satellite system, known as Galileo. National or European authorities may provide preferential access to signals to companies associated with their markets, including our competitors, which could harm our competitive position. Use of non-US GNSS signals may also be subject to FCC waiver requirements and to restrictions based upon international trade or geopolitical considerations. If we are unable to develop timely and competitive commercial products using these systems, or obtain timely and equal access to service signals, this could result in lost revenue. These authorities may also adopt protectionist measures favoring national companies who make use of their GNSS systems, to the detriment of Trimble products using the U.S. GPS system, which would harm our business. We are subject to the impact of governmental and other similar certifications processes and regulations which could adversely affect our products and our business We market certain products that are subject to governmental and similar certifications before they can be sold. For example, CE certification is required for GNSS receivers and data communications products, conforming to the European harmonized GNSS receiver standard and the radio equipment directive, to be sold in the European community. Delays in publication of the European harmonized GNSS receiver standard could affect GNSS product access to European markets. In the future, U.S. governmental authorities may propose GPS receiver testing and certification for compliance with published GPS signal interface or other specifications. An inability to obtain any such certifications in a timely manner could have an adverse effect on our operating results. Governmental authorities may also propose other forms of GPS receiver performance standards, which may limit design alternatives, hamper product innovation or impose additional costs. Some of our products that use integrated radio communication technology require product type certification and some products require an end-user to obtain licensing from the FCC for frequency- band usage. These are secondary licenses that are subject to certain restrictions. An inability or delay in obtaining such certifications or changes to the rules by the FCC could adversely affect our ability to bring our products to market which could harm our customer relationships and therefore, our operating results. Any failure to obtain the requisite certifications could also harm our operating results. We have claims and lawsuits against us that may result in adverse outcomes We are subject to a variety of claims and lawsuits. Adverse outcomes in some or all of these claims may result in significant monetary damages or injunctive relief that could adversely affect our ability to conduct our business. Litigation and other claims are subject to inherent uncertainties and the outcomes can be difficult to predict. Management may not adequately reserve for a contingent liability, or may suffer unforeseen liabilities, which could then impact the results of a financial period. A material adverse impact on our consolidated financial statements could occur for the period in which the effect of an unfavorable final outcome becomes probable and reasonably estimable which, if not expected, could harm our results of operations and financial condition. Our debt could adversely affect our cash flow and prevent us from fulfilling our financial obligations On November 24, 2014, we issued Senior Notes (Notes) due December 1, 2024 in an aggregate principal amount of $400.0 million. The Notes accrue interest at a rate of 4.75% per annum, payable semiannually in arrears on December 1 and June 1 of each year, beginning on June 1, 2015. When the Notes mature, we will have to expend significant resources to repay these Notes or seek to refinance them. If we decide to refinance the Notes, we may be required to do so on different or less favorable terms or we may be unable to refinance the Notes at all, both of which may adversely affect our financial condition. On November 24, 2014, we entered into a new five-year credit agreement with a group of lenders (the 2014 Credit Facility). The 2014 Credit Facility provides for an unsecured revolving loan facility of $1.0 billion. Subject to the terms of the 2014 Credit Facility, the revolving loan facility may be increased and term loan facilities may be established in an amount of up to $500.0 million. We also have two $75 million revolving credit facilities which are uncommitted and may be called by the lenders with very little notice (the Uncommitted Facilities). At the end of fiscal 2016, our total debt was comprised primarily of Notes of 25 $400.0 million, a revolving loan balance of $94.0 million under the 2014 Credit Facility and a revolving credit line balance of $130.0 million under the Uncommitted Facilities. Our outstanding indebtedness could have important consequences, such as: • • • • • requiring us to dedicate a portion of our cash flow from operations and other capital resources to debt service, thereby reducing our ability to fund working capital, capital expenditures, general corporate purposes, and other cash requirements, particularly if the ratings assigned to our debt securities by rating organizations were revised downward, increasing our vulnerability to adverse economic and industry conditions, reducing our ability to make investments and acquisitions which support the growth of the company, or to repurchase shares of our common stock, limiting our flexibility in planning for, or reacting to, changes and opportunities in, our industry, which may place us at a competitive disadvantage, and limiting our ability to incur additional debt on acceptable terms, if at all. There are various financial covenants and other restrictions in our debt instruments. If we fail to comply with any of these requirements, the related indebtedness (and other unrelated indebtedness) could become due and payable prior to its stated maturity, and we may not be able to repay the indebtedness that becomes due. A default under our debt instruments may also significantly affect our ability to obtain additional or alternative financing. Our ability to make scheduled payments or to refinance our obligations with respect to indebtedness will depend on our operating and financial performance, which in turn, is subject to prevailing economic conditions and to financial, business and other factors beyond our control. A significant portion of our outstanding debt has interest rates which float based on prevailing interest rates. If interest rates increase, our interest expense will also increase. Our ability to incur additional indebtedness over time may be limited due to applicable financial covenants and restrictions, and due to the risk that significantly increasing our level of indebtedness could impact the ratings assigned to our debt securities by rating organizations, which in turn would increase the interest rates and fees that we pay in connection with our indebtedness. Our business is subject to disruptions and uncertainties caused by war, terrorism, or civil unrest Acts of war, acts of terrorism or civil unrest, especially any events that impact the GNSS signals or systems, could have a material adverse impact on our business, operating results, and financial condition. The threat of terrorism and war and heightened security and military activity in response to this threat, or any future acts of terrorism or hostilities, may involve a redeployment of the satellites used in GNSS or interruptions of the system. Civil unrest, local conflicts, or other political instability may adversely impact regional economies, cause work stoppages, or result in limitations on business transactions with the affected foreign jurisdictions. To the extent that such interruptions result in delays or the cancellation of orders, disruption of the manufacturing or shipment of our products, or reduced demand for our products it could have a material adverse effect on our business, results of operations, and financial condition. Item 1B. Unresolved Staff Comments None 26 Item 2. Properties The following table sets forth the significant real property that we own or lease as of December 30, 2016: Segment(s) served Size in Sq. Feet Location Sunnyvale, California Huber Heights (Dayton), Ohio Westminster, Colorado Chennai, India Danderyd, Sweden All All All All Engineering & Construction Mayfield Heights, Ohio Mobile Solutions Espoo, Finland Engineering & Construction Field Solutions Minnetonka, Minnesota Mobile Solutions Christchurch, New Zealand Richmond Hill, Canada Corvallis, Oregon Engineering & Construction Mobile Solutions Field Solutions Advanced Devices Engineering & Construction 167,000 310,000 125,000 67,288 113,000 74,000 65,678 63,000 60,000 50,200 40,000 In addition, we lease a number of smaller offices around the world primarily for sales, manufacturing and other functions. For financial information regarding obligations under leases, see Note 8 to the Consolidated Financial Statements. We believe that our facilities are adequate to support current and near term operations. Item 3. Legal Proceedings On September 2, 2011, Recreational Data Services, LLC filed a lawsuit in the Superior Court for the State of Alaska in Anchorage against Trimble Navigation Limited, Cabela’s Incorporated, AT&T Mobility and Alascom, Inc., alleging breach of contract, breach of fiduciary duty, interference with contract, promissory estoppel, fraud, and negligent misrepresentation. The case was tried in front of a jury in Alaska beginning on September 9, 2014. On September 26, 2014, the jury returned a verdict in favor of the plaintiff and awarded the plaintiff damages of $51.3 million. On January 29, 2015, the court granted our Motion for Judgment notwithstanding the Verdict, and on March 18, 2015, the Court awarded us a portion of our incurred attorneys’ fees and costs, and entered judgment in our favor in the amount of $0.6 million. The judgment also provides that the plaintiff take nothing on its claims. On April 17, 2015, the plaintiff filed a Notice of Appeal to the Alaska Supreme Court. The parties have completed all appellate briefing, and oral arguments were heard before the Alaska Supreme Court on February 24, 2016. A decision by the Alaska Supreme Court has not been made. Although an unfavorable outcome on appeal could have an adverse effect on the Company, we believe the claims in the lawsuit are without merit. From time to time, we are also involved in litigation arising out of the ordinary course of our business. There are no other 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. Item 4. Mine Safety Disclosures None. 27 PART II Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Our common stock is traded on the NASDAQ under the symbol “TRMB.” The table below sets forth, during the periods indicated, the high and low per share sale prices for our common stock as reported on the NASDAQ. Quarter Ended First quarter Second quarter Third quarter Fourth quarter Stock Repurchase Program 2016 Sales Price 2015 Sales Price High $25.44 $27.79 $28.72 $30.84 Low $18.36 $22.68 $23.69 $25.30 High $27.62 $26.36 $23.94 $23.86 Low $23.68 $22.28 $15.90 $16.40 In August 2015, our Board of Directors approved a stock repurchase program (2015 Stock Repurchase Program), authorizing us to repurchase up to $400.0 million of Trimble’s common stock. The timing and amount of repurchase transactions will be determined by the Company’s management based on its evaluation of market conditions, share price, legal requirements and other factors. The program may be suspended, modified or discontinued at any time without public notice. During fiscal 2016, we repurchased approximately 4.9 million shares of common stock in open market purchases under the 2015 Stock Repurchase Programs, at an average price of $24.39 per share, for a total of $119.5 million. At the end of fiscal 2016, the 2015 Stock Repurchase Program had remaining authorized funds of $130.4 million. The following table provides information relating to our common stock repurchase activity during the fourth quarter of 2016: October 1, 2016 - November 4, 2016 November 5, 2016 - December 2, 2016 December 3, 2016 - December 30, 2016 Average Price Paid per Share 25.95 27.21 Total Number of Shares Purchased 235,000 410,700 — 645,700 Total Number of Shares Purchased as Part of Publicly Announced Program Dollar Value of Shares that May Yet Be Purchased Under the Program 235,000 410,700 $ — $ 645,700 141,601,037 130,425,285 130,425,285 As of February 22, 2017, there were approximately 667 holders of record of our common stock. Dividend Policy We have not declared or paid any cash dividends on our common stock during any period for which financial information is provided in this Annual Report on Form 10-K. At this time, we intend to retain future earnings, if any, to fund the development and growth of our business and do not anticipate paying any cash dividends on our common stock in the foreseeable future. Stock Split On March 20, 2013 we effected a 2 for 1 split of all outstanding shares of our Common Stock to shareholders of record on March 6, 2013. All shares and per share information presented has been adjusted to reflect the stock split on a retroactive basis for all periods presented. 28 Item 6. Selected Financial Data The following selected consolidated financial data should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements and related notes appearing elsewhere in this annual report. Historical results are not necessarily indicative of future results. In particular, because the results of operations and financial condition related to our acquisitions are included in our Consolidated Statements of Income and Consolidated Balance Sheets data commencing on those respective acquisition dates, comparisons of our results of operations and financial condition for periods prior to and subsequent to those acquisitions are not indicative of future results. Fiscal Years 2016 2015 2014 2013 2012 (Dollar in millions, except per share data) Revenue Gross margin Gross margin percentage Net income attributable to Trimble Inc. Net income Earnings per share —Basic —Diluted Shares used in calculating basic earnings per share Shares used in calculating diluted earnings per share At the End of Fiscal Year (Dollar in millions) Total assets Long-term debt and other non-current liabilities $ $ $ $ $ $ $ $ $ $ $ $ $ $ 2,362.2 1,238.0 52.4% 132.4 132.2 0.53 0.52 250.5 253.9 $ $ $ $ $ $ 2,290.4 1,202.2 52.5% 121.1 120.7 0.47 0.47 255.8 258.5 $ $ $ $ $ $ 2,395.5 1,290.8 53.9% 214.1 213.9 0.82 0.81 260.1 264.5 $ $ $ $ $ $ 2,288.1 1,203.8 52.6% 218.9 218.2 0.85 0.84 256.6 261.2 2,040.1 1,046.2 51.3% 191.1 189.7 0.76 0.74 251.1 256.8 2016 2015 2014 2013 2012 3,673.8 603.4 $ $ 3,680.7 717.9 $ $ 3,855.9 766.8 $ $ 3,693.5 729.8 $ $ 3,475.8 927.3 29 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations The following discussion should be read in conjunction with the consolidated financial statements and the related notes. The following discussion contains forward-looking statements that reflect our plans, estimates and beliefs. Our actual results could differ materially from those discussed in the forward-looking statements. Factors that could cause or contribute to these differences include, but are not limited to, those discussed below and those listed under “Risks Factors.” EXECUTIVE LEVEL OVERVIEW Trimble Inc. is a leading provider of technology solutions that optimize the work processes of office and mobile field professionals around the world. Our comprehensive work process solutions are used across a range of industries including agriculture, architecture, civil engineering, construction, government, natural resources, transportation and utilities. Representative Trimble customers include engineering and construction firms, contractors, surveying companies, farmers and agricultural companies, transportation and logistics companies, energy, mining and utility companies, and state, federal and municipal governments. Trimble focuses on integrating its broad technological and application capabilities to create vertically-focused, system-level solutions that transform how work is done within the industries we serve. The integration of sensors, software, connectivity, and information in our portfolio gives us the unique ability to provide an information model specific to the customer’s workflow. For example, in construction, our strategy is centered on the concept of a “constructible model” which is at the center of our “Connected Construction Site” solutions which provide real-time, connected, and cohesive information environments for the design, build, and operational phases of projects. In agriculture, we continue to develop “Connected Farm” solutions to optimize operations across the agriculture workflow. In transportation and logistics, our “Connected Fleet” solutions provide transportation companies with tools to enhance fuel efficiency, safety, and transparency through connected vehicles and fleets across the enterprise. Our growth strategy is centered on multiple elements: • Focus on attractive markets with significant growth and profitability potential - We focus on large markets historically underserved by technology that offer significant potential for long-term revenue growth, profitability and market leadership. Our core industries such as construction, agriculture, and transportation markets are each multi-trillion dollar global industries which operate in increasingly demanding environments with technology adoption in the early phases relative to other industries. With the emergence of mobile computing capabilities, the increasing technological know- how of end users and the compelling return on investment to our customers, we believe many of our markets are ripe for substituting Trimble’s technology and solutions in place of traditional operating methods. • Domain knowledge and technological innovation that benefit a diverse customer base - We have over time redefined our technological focus from hardware-driven point solutions to integrated work process solutions by developing domain expertise and heavily reinvesting in R&D and acquisitions. We have been spending approximately 14% of revenue over the past several years on R&D and currently have over 1,200 unique patents. We intend to continue to take advantage of our technology portfolio and deep domain knowledge to quickly and cost-effectively deliver specific, targeted solutions to each of the vertical markets we serve. We look for opportunities where the opportunity for technological change is high and which have a requirement for the integration of multiple technologies into complete vertical solutions. Increasing focus on software and services - Software and services are increasingly important elements of our solutions and are core to our growth strategy. Trimble has an open application programming interface (API) philosophy and open vendor environment which leads to increased adoption of our software offerings. The increased recurring revenue from these solutions will provide us with enhanced business visibility over time. Professional services constitute an additional growth channel that helps our customers integrate and optimize the use of our offerings in their environment. • • Geographic expansion with localization strategy - We view international expansion as an important element of our strategy and we continue to position ourselves in geographic markets that will serve as important sources of future growth. We currently have a physical presence in over 35 countries and distribution channels in over 100 countries. In 2016, over 50% of our sales were to customers located in countries outside of the U.S. • Optimized go to market strategies to best access our markets - We utilize vertically-focused distribution channels that leverage domain expertise to best serve the needs of individual markets domestically and abroad. These channels include independent dealers, joint ventures, original equipment manufacturers (OEM) sales, and distribution alliances with key partners, such as CNH Global, Caterpillar, and Nikon, as well as direct sales to end-users, that provide us with broad market reach and localization capabilities to effectively serve our markets. Strategic acquisitions - Organic growth continues to be our primary focus, while acquisitions serve to enhance our market position. We acquire businesses that bring domain expertise, technology, products, or distribution capabilities that augment our portfolio and allow us to penetrate existing markets more effectively, or to establish a market beachhead. Our success in targeting and effectively integrating acquisitions is an important aspect of our growth strategy. • 30 Trimble’s focus on these growth drivers has led over time to growth in revenue and profitability as well as an increasingly diversified business model. Software and services growth is driving increased recurring revenue, leading to improved visibility in some of our businesses. As our solutions have expanded, our go to market model has also evolved, with a balanced mix between direct, distribution and OEM customers, and an increasing number of enterprise level customer relationships. CRITICAL ACCOUNTING POLICIES AND ESTIMATES The preparation of financial statements and related disclosures in conformity with U.S. generally accepted accounting principles requires us to make judgments, assumptions, and estimates that affect the reported amounts of assets, liabilities, revenue, costs of sales, operating expenses, and related disclosures. We consider the accounting polices described below to be our critical accounting policies. These critical accounting policies are impacted significantly by judgments, assumptions, and estimates used in the preparation of the Consolidated Financial Statements, and actual results could differ materially from the amounts reported based on these policies. Our accounting policies are more fully described in Note 2 of our accompanying Notes to Consolidated Financial Statements included in Part II, Item 8, "Financial Statements and Supplementary Data" of this Annual Report on Form 10-K. Revenue Recognition We recognize revenue when it is realized or realizable and earned. We consider revenue realized or realizable and earned when persuasive evidence of an arrangement exists, delivery has occurred, the fee is fixed or determinable, and collectibility is reasonably assured. In instances where final acceptance of the product is specified by the customer or is uncertain, revenue is deferred until all acceptance criteria have been met. Contracts and/or customer purchase orders are used to determine the existence of an arrangement. Shipping documents and customer acceptance, when applicable, are used to verify delivery. We assess whether the fee is fixed or determinable based on the payment terms associated with the transaction and whether the sales price is subject to refund or adjustment. We assess collectibility based primarily on the creditworthiness of the customer as determined by credit checks and analyses, as well as the customer’s payment history. Revenue for orders is not recognized until the product is shipped and title has transferred to the buyer. We bear all costs and risks of loss or damage to the goods up to that point. Our shipment terms for U.S. orders and international orders fulfilled from our European distribution center typically provide that title passes to the buyer upon delivery of the goods to the carrier named by the buyer at the named place or point. If no precise point is indicated by the buyer, delivery is deemed to occur when the carrier takes the goods into its charge from the place determined by us. Other shipment terms may provide that title passes to the buyer upon delivery of the goods to the buyer. Shipping and handling costs are included in Cost of sales. Revenue from sales to distributors and dealers is recognized upon shipment, assuming all other criteria for revenue recognition have been met. Distributors and dealers do not have a right of return. Revenue from purchased extended warranty and post contract support (PCS) agreements is deferred and recognized ratably over the term of the warranty or support period. Revenue from our subscription services related to our hardware and applications is recognized ratably over the term of the subscription service period beginning on the date that service is made available to the customer, assuming all revenue recognition criteria have been met. We present revenue net of sales taxes and any similar assessments. Our software arrangements generally consist of a perpetual license fee and PCS. We generally have established vendor-specific objective evidence (VSOE) of fair value for our PCS contracts based on the renewal rate. The remaining value of the software arrangement is allocated to the license fee using the residual method. License revenue is primarily recognized when the software has been delivered and fair value has been established for all remaining undelivered elements. In cases where VSOE of fair value for PCS is not established, revenue is recognized ratably over the PCS period after all software deliverables have been made and the only the undelivered element is PCS. For services performed on a fixed-fee basis, revenue is recognized using the proportional performance method, with performance measured based on hours of work performed. For contracts that involve significant customization and implementation or consulting services that are essential to the functionality of the software, the license and services revenues are recognized using the percentage- of-completion method or, if we are unable to reliably estimate the costs to complete the services, we use the completed-contract method of accounting. A contract is considered complete when all significant costs have been incurred or when acceptance from the customer has been received. Some of our subscription product offerings include hardware, subscription services and extended warranty. Under these hosted arrangements, the customer typically does not have the contractual right to take possession of the software at any time during the 31 hosting period without incurring a significant penalty and it is not feasible for the customer to run the software either on its own hardware or on a third-party’s hardware. Our multiple deliverable product offerings include hardware with embedded firmware, extended warranty, software, PCS services and subscription services, which are considered separate units of accounting. For certain of our products, software and non-software components function together to deliver the tangible product’s essential functionality. In evaluating the revenue recognition for our hardware or subscription agreements which contain multiple deliverables, we determined that in certain instances we were not able to establish VSOE for some or all deliverables in an arrangement as we infrequently sold each element on a standalone basis, did not price products within a narrow range, or had a limited sales history. When VSOE cannot be established, we attempt to establish the selling price of each element based on relevant third-party evidence (TPE). TPE is determined based on competitor prices for similar deliverables when sold separately. Our offerings may contain a significant level of proprietary technology, customization or differentiation such that the comparable pricing of products with similar functionality cannot be obtained. Furthermore, we are unable to reliably determine what similar competitor products’ selling prices are on a stand-alone basis. Therefore, we typically are not able to establish the selling price of an element based on TPE. When we are unable to establish selling price using VSOE or TPE, we use our best estimate of selling price (BESP) in our allocation of arrangement consideration. The objective of BESP is to determine the price at which we would transact a sale if the product or service were sold on a stand-alone basis. BESP is generally used for offerings that are not typically sold on a stand-alone basis or for new or highly customized offerings. We determine BESP for a product or service by considering multiple factors including, but not limited to, pricing practices, market conditions, competitive landscape, internal costs, geographies and gross margin. The determination of BESP is made through consultation with and formal approval by our management, taking into consideration our go-to-market strategy. Income Taxes We are a United States-based multinational company operating in multiple U.S. and foreign jurisdictions. Significant judgment is required in evaluating our uncertain tax positions and determining our provision for income taxes. 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. Determining whether an uncertain tax position is effectively settled requires judgment. 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. We are subject to the periodic examination of our domestic and foreign tax returns by the IRS, state, local and foreign tax authorities who may challenge our tax positions. We regularly assess the likelihood of adverse outcomes from these examinations in determining the adequacy of our provision for income taxes. Our income tax expense has differed from the tax computed at the U.S. federal statutory income tax rate primarily due to the changes in nondeductible expenses, changes in the geographic mix of pretax income, and changes related to acquisitions and divestitures. Unanticipated changes in our tax rates could affect our future results of operations. Our future effective tax rates could be unfavorably affected by changes in the tax rates in jurisdictions where our income is earned, by unanticipated decreases in the amount of earnings in countries with low statutory tax rates, or by changes in the valuation of our deferred tax assets and liabilities. The United States and foreign countries where we do business may change tax laws, regulations, and interpretations and these potential changes could adversely affect our effective tax rates. Business Combinations and Valuation of Goodwill and Purchased Intangible Assets We allocate the fair value of purchase consideration to the assets acquired, liabilities assumed, and non-controlling interests in the acquiree based on their fair values at the acquisition date. The excess of the fair value of purchase consideration over the fair value of these assets acquired, liabilities assumed and non-controlling interests in the acquiree is recorded as goodwill. When determining the fair values of assets acquired, liabilities assumed, and non-controlling interests in the acquiree, management makes significant estimates and assumptions, especially with respect to intangible assets. Critical estimates in valuing intangible assets include, but are not limited to, expected future cash flows, which includes consideration of future growth rates and margins, customer attrition rates, future changes in technology and brand awareness, loyalty and position, and discount rates. Fair value estimates are based on the assumptions management believes a market participant would use in pricing the asset or liability. Identifiable intangible assets are comprised of distribution channels and distribution rights, patents, licenses, technology, acquired backlog, trademarks, and in-process research and development. 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. 32 We evaluate goodwill, at a minimum, on an annual basis and whenever events and changes in circumstances suggest that the carrying amount may not be recoverable. The annual goodwill impairment testing is performed in the fourth fiscal quarter of each year based on the values on the first day of that quarter. Goodwill was reviewed for impairment utilizing a quantitative two-step process. When we perform a quantitative assessment of goodwill impairment, the determination of fair value of a reporting unit involves the use of significant estimates and assumptions. The discounted cash flows are based upon, among other things, assumptions about expected future operating performance using risk-adjusted discount rates. Actual future results may differ from those estimates. Identifiable intangible assets are being amortized over the period of estimated benefit using the straight-line method, approximates the pattern of economic benefits associated with these assets. Changes in circumstances such as technological advances, changes to our business model, or changes in the capital strategy could result in the actual useful lives of intangible assets differing from initial estimates. In cases where we determine that the useful life of an asset should be revised, the net book value in excess of the estimated residual value will be depreciated over its revised remaining useful life. These assets are evaluated for impairment whenever events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable based on their future cash flows. The estimated future cash flows are based upon, among other things, assumptions about expected future operating performance and these estimates may differ from actual future cash flows. The assets evaluated for impairment are grouped with other assets to the lowest level for which identifiable cash flows are largely independent of the cash flows of other groups of assets and liabilities. If the sum of the projected undiscounted cash flows (excluding interest) is less than the carrying value of the assets, the assets will be written down to the estimated fair value. Stock-Based Compensation We recognize compensation expense for all share-based payment awards made to our employees and directors, based on estimated fair values, net of estimated forfeitures. The awards include restricted stock units with service-based, market-based and performance-based vesting conditions, rights to purchase shares under our employee stock purchase plan and stock options. The fair value of our service-based and performance-based restricted stock units is determined using the closing price of our common stock on the date of grant and the total expense associated with the performance-based awards is based upon the expected achievement of the underlying performance goals and may be adjusted in future periods based upon changes in expectations and actual achievement. The fair value of restricted stock units with market-based vesting conditions is valued as of the grant date using a Monte Carlo simulation. The fair value of rights to purchase shares under our employee stock purchase plan is estimated using the Black-Scholes option-pricing model and the fair value of our options is estimated using a binomial valuation model. The determination of fair value of share-based payment awards on the date of grant using an option-pricing model is affected by our stock price as well as assumptions regarding a number of highly complex and subjective variables. These variables include our expected stock price volatility over the term of the awards, actual and projected employee stock option exercise behaviors, risk-free interest rates, and any expected dividends. In addition, the binomial model incorporates actual option-pricing behavior and changes in volatility over the option’s contractual term. The Monte Carlo simulation takes into account the same input assumptions as the binomial option pricing model as outlined above; however, it also incorporates into the fair-value determination the possibility that the market-based vesting conditions may not be satisfied and the impact of the possible differing stock price paths for Trimble and each of the constituents of the S&P 500. If factors change and we employ different assumptions to determine the fair value of our share-based payment awards granted in future periods, the compensation expense that we record under it may differ significantly from what we have recorded in the current period. Stock-based compensation expense recognized in the Consolidated Statements of Income is based on awards ultimately expected to vest, including the achievement of performance-based goals and estimated forfeitures. If the performance goals achieved are different from what had been estimated or actual forfeitures differ materially from our estimates, stock-based compensation recognized may not be reflective of what was earned in that period. Inventory Valuation Our inventories are stated at the lower of cost or market, which approximates 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 which impact inventory purchasing forecasts, technological changes, product life cycle and development plans, component cost trends, product pricing, physical deterioration and quality issues. If our estimates used to reserve for excess and obsolete inventory are different from what we expected, we may be required to recognize additional reserves, which would negatively impact our gross margin. 33 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. Fiscal Years (Dollars in millions) Revenues: Product Service Subscription Total revenue Gross margin Gross margin % Total consolidated operating income Operating income as a % of revenue Basis of Presentation 2016 2015 2014 $ $ $ $ 1,562.0 430.2 370.0 2,362.2 1,238.0 52.4% 181.0 7.7% $ $ 1,533.5 419.9 337.0 2,290.4 1,202.2 52.5% 154.4 6.7% 1,713.6 396.0 285.9 2,395.5 1,290.8 53.9% 260.8 10.9% We have a 52-53 week fiscal year, ending on the Friday nearest to December 31, which for fiscal 2016 was December 30, 2016. Fiscal 2016, 2015 and 2014 were all 52-week years. Revenue In fiscal 2016, total revenue increased by $71.8 million, or 3%, to $2.36 billion from $2.29 billion in fiscal 2015. Overall revenue was primarily impacted by organic growth in building construction, civil engineering and construction, and transportation and logistics, partially offset by declines in geospatial and GIS. We consider organic growth to include all revenue except for revenue associated with acquisitions made within the last four quarters. On a segment basis, the increase in fiscal 2016 was primarily due to Engineering and Construction and Mobile Solutions, to a lesser extent Advanced Devices, partially offset by slight declines in Field Solutions. Engineering and Construction revenue increased $30.3 million, or 2%, Mobile Solutions revenue increased $39.4 million, or 8%, Advanced Devices increased $3.1 million, or 2%, partially offset by a slight decrease in Field Solutions revenue of $1.0 million, or less than 1%, as compared to fiscal 2015. Engineering and Construction revenue increased driven by building construction and civil engineering and construction, partially offset by declines in geospatial. Field Solutions revenue was down due to softness in GIS markets. Mobile Solutions revenue increased due to continued growth in the transportation and logistics market. Advanced Devices revenue increased primarily due to strong OEM and end user sales. By revenue category, overall product revenue increased $28.5 million, or 2%, service revenue increased $10.3 million, or 2%, and subscription revenue increased $33.0 million, or 10%. The product revenue increase was primarily within Engineering and Construction and Mobile Solutions, to a lesser extent Advanced Devices, partially offset by declines in Field Solutions. Service and subscription increases were primarily due to organic growth within Engineering and Construction and Mobile Solutions as we continue to expand software and services, including implementation, maintenance and subscription services, as a portion of our revenue. Although to a lesser extent, acquisition growth within Field Solutions also contributed. In fiscal 2015, total revenue decreased by $105.1 million, or 4%, to $2.29 billion from $2.40 billion in fiscal 2014. Overall revenue was primarily impacted by negative foreign currency effects, and to a lesser extent declines due to oil and gas and agricultural market conditions, partially offset by acquisitions and improved growth in building construction and transportation and logistics. On a segment basis, the decrease in fiscal 2015 was primarily due to Engineering and Construction and Field Solutions, partially offset by the increase in Mobile Solutions. Engineering and Construction revenue decreased $64.8 million, or 5%, Field Solutions revenue decreased $66.8 million, or 16%, and Advanced Devices decreased $7.0 million, or 5%, partially offset by an increase in Mobile Solutions of $33.5 million, or 7%, as compared to fiscal 2014. The decline in Engineering and Construction was primarily driven by the impact of foreign currency effects due to the weaker Euro and to a lesser extent, oil price declines on regional economies, primarily in geospatial. The decline was partially offset by building construction which was up due to organic growth and to a lesser extent, acquisitions not applicable in the prior year. The decline in Field Solutions revenue was primarily due to softness in agricultural markets and to a lesser extent, GIS and foreign currency effects. Mobile Solutions revenue increased due 34 to continued growth in the transportation and logistics market. Advanced Devices revenue decreased primarily due to weaker sales of timing component products. By revenue category, overall product revenue decreased $180.1 million, or 11%, service revenue increased $23.9 million, or 6%, and subscription revenue increased $51.1 million, or 18%. The product revenue decrease was primarily within Engineering and Construction and Field Solutions, slightly offset by a product revenue increase in Mobile Solutions. Service and subscription increases were primarily due to organic growth within Engineering and Construction and Mobile Solutions, as we continue to expand software and services, including implementation and maintenance, and subscription services as a portion of our revenue. Although to a lesser extent, acquisitions growth within Engineering and Construction also contributed. During fiscal 2016, sales to customers in the United States represented 49%, Europe represented 24%, Asia Pacific represented 15%, and other regions represented 12% of our total revenue. During fiscal 2015, sales to customers in the United States represented 50%, Europe represented 24%, Asia Pacific represented 14%, and other regions represented 12% of our total revenue. During fiscal 2014, sales to customers in the United States represented 48%, Europe represented 24%, Asia Pacific represented 14%, and other regions represented 14% of our total revenue. We anticipate that sales to international customers will continue to account for a significant portion of our revenue. No single customer accounted for 10% or more of our total revenue in fiscal 2016, 2015 or 2014. No single customer accounted for 10% or more of our accounts receivable as of fiscal years ended 2016 and 2015. Gross Margin Our gross margin varies due to a number of factors including product mix, pricing, distribution channel, production volumes, new product start-up costs, and foreign currency translations. In fiscal 2016, our gross margin increased by $35.8 million as compared to fiscal 2015, primarily due to increased revenue in Engineering and Construction and Mobile Solutions. Gross margin as a percentage of total revenue was 52.4% in fiscal 2016 and 52.5% in fiscal 2015. The slight decrease in the gross margin percentage was primarily in Engineering and Construction and Mobile Solutions due to product mix, partially offset by lower intangible asset amortization. In fiscal 2015, our gross margin decreased by $88.6 million as compared to fiscal 2014 primarily due to decreased revenue in Engineering and Construction and Field Solutions. Gross margin as a percentage of total revenue was 52.5% in fiscal 2015 and 53.9% in fiscal 2014. The decrease in the gross margin percentage was primarily in Engineering and Construction due to product mix and foreign currency effects due to the weaker Euro, and to a lesser extent, due to an increase in intangible asset amortization. Operating Income Operating income increased by $26.6 million for fiscal 2016 as compared to fiscal 2015. Operating income as a percentage of total revenue for fiscal 2016 was 7.7% as compared to 6.7% for fiscal 2015. The increase in operating income and operating income percentage was primarily due to revenue expansion in Engineering and Construction and Mobile Solutions, the effects of strong operating expense control across the company and lower intangible asset amortization. Operating income decreased by $106.4 million for fiscal 2015 as compared to fiscal 2014. Operating income as a percentage of total revenue for fiscal 2015 was 6.7% as compared to 10.9% for fiscal 2014. The decrease in operating income and operating income percentage was primarily due to revenue declines in Engineering and Construction and Field Solutions and increased restructuring, partially offset by the effects of operating expense control. Also, higher revenue in Mobile Solutions partially offset the declines. 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. Segment operating income equals net revenue less cost of sales and operating expense, excluding general corporate expense, amortization of purchased intangible assets, stock-based compensation, amortization of acquisition-related inventory step-up, acquisition costs and restructuring charges. 35 The following table is a breakdown of revenue and operating income by segment for the periods indicated and should be read in conjunction with the narrative descriptions below. Fiscal Years (Dollars in millions) Engineering and Construction Revenue Segment revenue as a percent of total revenue Operating income Operating income as a percent of segment revenue Field Solutions Revenue Segment revenue as a percent of total revenue Operating income Operating income as a percent of segment revenue Mobile Solutions Revenue Segment revenue as a percent of total revenue Operating income Operating income as a percent of segment revenue Advanced Devices Revenue Segment revenue as a percent of total revenue Operating income Operating income as a percent of segment revenue 2016 2015 2014 $ $ $ $ $ $ $ $ 1,313.6 55% 230.5 18% 354.3 15% 105.2 30% 559.7 24% 88.9 16% 134.6 6% 51.4 38% $ $ $ $ $ $ $ $ 1,283.3 56% 218.8 17% 355.3 15% 108.6 31% 520.3 23% 85.6 16% 131.5 6% 46.9 36% $ $ $ $ $ $ $ $ 1,348.1 56% 284.1 21% 422.1 18% 137.8 33% 486.8 20% 78.0 16% 138.5 6% 44.3 32% A reconciliation of our consolidated segment operating income to consolidated income before income taxes follows: Fiscal Years 2016 2015 2014 (in millions) Consolidated segment operating income Unallocated corporate expense Restructuring charges Stock-based compensation Amortization of purchased intangible assets Consolidated operating income Non-operating income (expense), net Consolidated income before taxes $ $ 476.0 (78.3) (13.3) (52.6) (150.8) 181.0 (4.3) 176.7 $ $ 459.9 (80.2) (12.8) (50.1) (162.4) 154.4 (2.6) 151.8 $ $ 544.2 (79.4) (2.1) (43.4) (158.5) 260.8 5.2 266.0 Unallocated corporate expense includes general corporate expense, amortization of acquisition-related inventory step-up, acquisition/divestiture costs, litigation expenses and executive transition costs. Engineering and Construction Engineering and Construction revenue increased by $30.3 million, or 2%, while segment operating income increased by $11.7 million, or 5%, for fiscal 2016 as compared to fiscal 2015. The revenue increase for fiscal 2016 was primarily due to organic growth in building construction and civil engineering and construction. The increase was partially offset by a decline in geospatial sales, primarily due to continued challenges in North American markets due to the impact of oil and gas market softness, which continued to reduce product demand. Segment operating income increased primarily due to stronger results in building construction, civil engineering and construction and operating expense control across all businesses, partially offset by weaker geospatial results and growth related investments in the segment. Engineering and Construction revenue decreased by $64.8 million, or 5%, while segment operating income decreased by $65.3 million, or 23%, for fiscal 2015 as compared to fiscal 2014. The revenue decrease for fiscal 2015 was primarily driven by the 36 negative foreign currency effects due to the weaker Euro and to a lesser extent, the impact of oil and gas markets on regional economies which impacted sales, primarily in geospatial. The decline was partially offset by building construction which was up due to organic growth and acquisitions not applicable in the prior year. Segment operating income decreased primarily due to decreased revenue and lower gross margin resulting from product mix and foreign currency effects due to the weaker Euro, slightly offset by the effects of operating expense control. Although acquisitions contributed to revenue, they also presented a short term negative impact on revenue and operating income, partly because of deferred revenue accounting effects. Field Solutions Field Solutions revenue decreased by $1.0 million, or less than 1%, while segment operating income decreased by $3.4 million, or 3%, for fiscal year 2016 as compared to fiscal 2015. The revenue decrease was primarily due to continued weakness in GIS markets, partially offset by agriculture which was up in the second half of the year due to organic growth in Europe, Australia, and emerging markets as well as the impact of acquisitions. Segment operating income decreased due to GIS and the impact of acquisitions. Field Solutions revenue decreased by $66.8 million, or 16%, while segment operating income decreased by $29.2 million, or 21%, for fiscal year 2015 as compared to fiscal 2014. The revenue decrease was primarily due to continued softness in agriculture markets, particularly in the OEM channels, and to a lesser extent, GIS and negative foreign currency effects due to the weaker Euro. Segment operating income decreased due to the revenue decrease described above, partially offset by the effects of operating expense control. Mobile Solutions Mobile Solutions revenue increased by $39.4 million, or 8%, while segment operating income increased by $3.3 million, or 4%, for fiscal year 2016 as compared to fiscal 2015. The revenue increase was primarily due to continued organic growth in the transportation and logistics business, with strength throughout the year as PeopleNet mobility and enterprise solutions continued to benefit from U.S. regulatory mandates. Segment operating income increased due to increased revenue, partially offset by lower margin product mix and growth related investments in the segment. Mobile Solutions revenue increased by $33.5 million, or 7%, while segment operating income increased by $7.6 million, or 10%, for fiscal year 2015 as compared to fiscal 2014. The revenue increase was primarily due to continued organic growth in the transportation and logistics market, which focuses on enterprise solutions. This was partially offset by a decline in field services and negative foreign currency effects due to the weaker Euro. Segment operating income increased due to increased revenue and product mix. Advanced Devices Advanced Devices revenue increased by $3.1 million, or 2%, and segment operating income increased by $4.5 million, or 10%, for fiscal 2016 as compared to fiscal 2015. Revenue and operating income increased primarily due to strong OEM and end user sales. Operating income increased due to increased revenue and product mix as well as operating expense control. Advanced Devices revenue decreased by $7.0 million, or 5%, and segment operating income increased by $2.6 million, or 6%, for fiscal 2015 as compared to fiscal 2014. The decrease in revenue was primarily driven by decreased sales of timing component products, while the increase in operating income was due to higher margin product mix and operating expense control. 37 Research and Development, Sales and Marketing, and General and Administrative Expenses The following table shows research and development (“R&D”), sales and marketing, and general and administrative (“G&A”) expenses in absolute dollars and as a percentage of total revenue for fiscal years 2016, 2015 and 2014 and should be read in conjunction with the narrative descriptions of those operating expenses below. Fiscal Years (Dollars in millions) Research and development Percentage of revenue Sales and marketing Percentage of revenue General and administrative Percentage of revenue Total Percentage of revenue 2016 2015 2014 $ 349.6 $ 336.7 $ 318.0 15% 377.6 16% 256.0 11% 15% 374.6 16% 255.3 11% 13% 387.6 16% 247.1 10% $ 983.2 $ 966.6 $ 952.7 42% 42% 39% Overall, R&D, sales and marketing, and G&A expenses increased by approximately 16.6 million in fiscal 2016 compared to fiscal 2015. All of our R&D costs have been expensed as incurred. Research and development expense increased by $12.9 million, or 4%, in fiscal 2016, as compared to fiscal 2015. Overall, research and development spending was 15% of revenue in both fiscal 2016 and 2015. As compared to the prior year, fiscal 2016 research and development expense increased 3% due to expense from fiscal 2016 business acquisitions, 2% due to higher compensation expense, and 2% due to increased consulting costs, partially offset by a 2% decrease in other expenses and a 1% decrease due to favorable foreign exchange rates. Research and development expense increased by $18.7 million, or 6%, in fiscal 2015, as compared to fiscal 2014. Overall, research and development spending was 15% of revenue in fiscal 2015 versus 13% in fiscal 2014. As compared to the prior year, fiscal 2015 research and development expense increased 7% due to higher compensation and other expenses and 5% due to fiscal 2015 business acquisitions, partially offset by a 6% decrease due to favorable foreign exchange rates. 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 increased by $3.0 million, or 1%, in fiscal 2016, as compared to fiscal 2015. Overall, spending for sales and marketing was 16% of revenue in both fiscal 2016 and 2015. As compared to the prior year, fiscal 2016 sales and marketing expense increased 2% due to expense from fiscal 2016 business acquisitions and 1% due to trade show expenses, partially offset by a 1% decrease due to favorable foreign exchange rates and 1% due to lower travel expenses. Sales and marketing expense decreased by $13.0 million, or 3%, in fiscal 2015, as compared to fiscal 2014. Overall, spending for sales and marketing was 16% of revenue in both fiscal 2015 and 2014. As compared to the prior year, fiscal 2015 sales and marketing expense decreased 6% due to favorable foreign exchange rates and 1% due to lower compensation and other expenses, partially offset by a 4% increase due to fiscal 2015 business acquisitions. General and administrative expense was flat in fiscal 2016, as compared to fiscal 2015. Overall, general and administrative spending was 11% of revenue in both fiscal 2016 and 2015. As compared to the prior year, fiscal 2016 general and administrative expense increased slightly 3% due to expense from fiscal 2016 business acquisitions and 1% due to higher compensation expense, partially offset by a 3% decrease due to lower tax and legal costs and a 1% decrease due to favorable foreign exchange rates. General and administrative expense increased by $8.2 million, or 3%, in fiscal 2015, as compared to fiscal 2014. Overall, general and administrative spending was 11% of revenue in fiscal 2015 versus 10% in fiscal 2014. As compared to the prior year, fiscal 2015 general and administrative expense increased 8% due to fiscal 2015 business acquisitions, partially offset by a 4% decrease due to favorable foreign exchange rates and 1% decrease due to lower compensation and other expenses. 38 Amortization of Purchased Intangible Assets Fiscal Years (in millions) Cost of sales Operating expenses Total 2016 2015 2014 $ $ 88.6 62.2 150.8 $ $ 92.6 69.8 162.4 $ $ 82.9 75.6 158.5 Total amortization expense of purchased intangibles represented 6.4% of revenue in fiscal 2016, a decrease of $11.6 million from fiscal 2015 when it represented 7.1% of revenue. The decrease was primarily due to the expiration of amortization for prior acquisitions, partially offset by acquisitions not included in fiscal 2015. Total amortization expense of purchased intangibles represented 7.1% of revenue in fiscal 2015, an increase of $3.9 million from fiscal 2014 when it represented 6.6% of revenue. The increase was primarily due to acquisitions not included in fiscal 2014, partially offset by the expiration of amortization for prior acquisitions. Non-operating Income (Expense), Net The following table shows non-operating income, net for the periods indicated and should be read in conjunction with the narrative descriptions below: Fiscal Years (in millions) Interest expense, net Foreign currency transaction gain (loss), net Income from equity method investments, net Other income, net Total non-operating income (expense), net 2016 2015 2014 $ $ (25.9) $ (1.9) 17.6 5.9 (4.3) $ (25.6) $ 0.2 17.9 4.9 (2.6) $ (18.7) (5.1) 12.4 16.6 5.2 Total non-operating income (expense), net decreased by $1.7 million during fiscal 2016 compared with fiscal 2015. The decrease was primarily due to the impact of foreign currency transaction fluctuations, partially offset by deferred compensation gains included in Other income, net. Total non-operating income (expense), net decreased by $7.8 million during fiscal 2015 compared with fiscal 2014. The decrease was primarily due to higher interest expense and a gain on a partial equity sale of Virtual Site Solutions (VSS) included in the first quarter of fiscal 2014, partially offset by the impact of foreign currency transaction fluctuations and increased income from equity method investments due to joint venture profitability. Income Tax Provision Our effective income tax rates for fiscal 2016, 2015 and 2014 were 25%, 20% and 20%, respectively. The fiscal 2016 rate was less than the U.S. federal statutory rate of 35% primarily due to the geographic mix of pre-tax income, a divestiture of a non- strategic business, and the U.S. federal R&D credit. The fiscal 2015 rate was less than the U.S. federal statutory rate of 35% primarily due to the geographical mix of our pre-tax income and, to a lesser extent, the inclusion of the current year U.S. federal R&D credit. The fiscal 2014 rate was less than the U.S. federal statutory rate of 35% primarily due to the geographical mix of our pre-tax income and, to a lesser extent, the inclusion of the current year U.S. federal R&D credit, partially offset by the effect of a gain on a partial equity sale of VSS. 39 OFF-BALANCE SHEET ARRANGEMENTS Other than operating leases, inventory purchases and other commitments incurred in the normal course of business (see Contractual Obligations table below), we do not have any off-balance sheet financing arrangements or liabilities, guarantee contracts, retained or contingent interests in transferred assets, or any obligation arising out of a material variable interest in an unconsolidated entity. We do not have any majority-owned subsidiaries that are not included in the consolidated financial statements. Additionally, we do not have any interest in, or relationship with, any special purpose entities. 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 have agreed 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. From time to time, 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 have 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 exposure 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 by us under these agreements have not been material and no liabilities have been recorded for these obligations on the Consolidated Balance Sheets at the end of fiscal 2016 and 2015. LIQUIDITY AND CAPITAL RESOURCES At the End of Fiscal Year 2016 2015 2014 (Dollars in millions) Cash and cash equivalents and short-term investments As a percentage of total assets Principal balance of outstanding debt Fiscal Years (Dollars in millions) Cash provided by operating activities Cash used in investing activities Cash used in financing activities Effect of exchange rate changes on cash and cash equivalents Net increase (decrease) in cash and cash equivalents Cash and Cash Equivalents and Short-Term Investments $ $ $ $ $ $ $ 327.2 8.9% 624.8 2016 407.1 (144.4) (155.8) (6.8) 100.1 $ $ $ $ $ $ $ 116.0 3.2% 735.2 2015 354.9 (172.4) (202.8) (11.7) (32.0) $ $ $ $ $ $ $ 148.0 3.8% 741.6 2014 407.1 (344.0) (51.5) (10.8) 0.8 At the end of fiscal 2016, cash and cash equivalents and short-term investments totaled $327.2 million compared to $116.0 million at the end of fiscal 2015. We had a principal balance of outstanding debt of $624.8 million at the end of fiscal 2016 compared to $735.2 million at the end of fiscal 2015. Our ability to continue to generate cash from operations will depend in large part on profitability, the rate of collections of accounts receivable, our inventory turns and our ability to manage other areas of working capital. Our cash, cash equivalents and short-term investments 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 considered to be of reputable credit and to present little credit risk. Our investment policy requires the portfolio to include only securities with high credit quality and a weighted average maturity not to exceed 6 months, with the main objective of preserving capital and maintaining liquidity. We maintain an investment portfolio of various holdings, types, and maturities. We classify our investments as short-term investments based on their nature and their availability for use in current operations. We believe that our cash and cash equivalents, short-term investments, and borrowings under our 2014 Credit Facility as described below under the heading “Debt”, will be sufficient to meet our anticipated operating cash needs, debt service, planned capital expenditures, acquisitions and stock repurchases under the stock repurchase program for at least the next twelve months. 40 Operating Activities Cash provided by operating activities was $407.1 million for fiscal 2016, as compared to $354.9 million for fiscal 2015. The increase of $52.2 million was due to an increase in net income before non-cash depreciation and amortization primarily due to increased operating income in Engineering and Construction and Mobile Solutions, to a lesser extent Advanced Devices, also due to a decrease in working capital requirements due to inventory improvements. Cash provided by operating activities was $354.9 million for fiscal 2015, as compared to $407.1 million for fiscal 2014. The decrease of $52.2 million was due to a decrease in net income before non-cash depreciation and amortization primarily due to decreased operating income in Engineering and Construction and to a lesser extent, Field Solutions. This was partially offset by a decrease in working capital requirements due to inventory improvements. Investing Activities Cash used in investing activities was $144.4 million for fiscal 2016, as compared to $172.4 million for fiscal 2015. The decrease of cash used in investing activities is primarily due to less cash used for business and intangible asset acquisitions, partially offset by the purchase of short-term investments. Fiscal 2016 acquisitions included Building Data and Sefaira and other acquisitions. Fiscal 2015 acquisitions included PocketMobile and Vianova Systems and other acquisitions. Cash used in investing activities was $172.4 million for fiscal 2015, as compared to $344.0 million for fiscal 2014. The decrease is primarily due to cash used for business and intangible asset acquisitions. Fiscal 2015 acquisitions included PocketMobile and Vianova Systems and other acquisitions. Fiscal 2014 acquisitions included Manhattan Software, Amtech and other acquisitions. Financing Activities Cash used by financing activities was $155.8 million for fiscal 2016, as compared to cash used of $202.8 million during fiscal 2015. The decrease of cash used by financing activities of $47.0 million was primarily due to a decrease in cash used for stock repurchases, partially offset by payments on revolving credit facilities. Cash used by financing activities was $202.8 million for fiscal 2015, as compared to cash used of $51.5 million during fiscal 2014. The increase of $151.3 million was primarily due to an increase in cash used for stock repurchases. Accounts Receivable and Inventory Metrics At the End of Fiscal Year Accounts receivable days sales outstanding Inventory turns per year 2016 2015 55 4.8 59 4.0 Accounts receivable days sales outstanding were down at 55 days at the end of fiscal 2016, as compared to 59 days at the end of fiscal 2015 due to improved collections. Our accounts receivable days sales outstanding are calculated based on ending accounts receivable, net, divided by revenue for the fourth fiscal quarter, times a quarterly average of 91 days. Our inventory turns were 4.8 at the end of fiscal 2016, as compared to 4.0 at the end of fiscal 2015 due to improved inventory management. Our inventory turnover is based on the total cost of sales for the fiscal period over the average inventory for the corresponding fiscal period. Although favorable over the prior year, accounts receivable days sales outstanding and inventory turns are subject to a variety of business factors and these favorable trends may not continue in the future. Debt Notes On October 30, 2014, we filed a shelf registration statement with the Securities and Exchange Commission (“SEC”) for the issuance of senior debt securities. On November 24, 2014, we issued $400.0 million of Senior Notes (“Notes”) under the shelf registration statement. The Notes mature on December 1, 2024 and accrue interest at a rate of 4.75% per annum, payable semiannually in arrears on December 1 and June 1 of each year, beginning on June 1, 2015. The Notes are classified as long-term in the Consolidated Balance Sheet. Prior to September 1, 2024, we may redeem the Notes at our option at any time, in whole or in part, at a redemption price equal to the greater of (i) 100% of the aggregate principal amount of the Notes to be redeemed and (ii) the sum of the present values of the remaining scheduled payments of interest and principal, calculated on a semiannual basis using a discount rate equal to the U.S. Treasury rate plus 40 basis points. After September 1, 2024, we may redeem the Notes at our option at any time, in whole or in part, at a redemption price equal to 100% of the aggregate principal amount of the Notes to be redeemed, plus accrued and unpaid interest thereon. In addition, in the event of a change of control, as defined in the prospectus filed with the SEC, each 41 holder of the Notes will have the right to require us to purchase for cash all or a portion of such holder’s Notes at a purchase price equal to 101% of the principal amount of the Notes, plus any accrued and unpaid interest. In connection with the closing of the Notes offering, we entered into an Indenture with U.S. Bank National Association, as trustee. The Indenture 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 to, another person, each subject to certain exceptions. We were in compliance with these covenants at the end of fiscal 2016. The Notes contain no financial covenants. 2014 Credit Facility On November 24, 2014, we entered into a new five-year credit agreement with a group of lenders (the “2014 Credit Facility”), which replaced our previous 2012 Credit Facility. The 2014 Credit Facility provides for an unsecured revolving loan facility of $1.0 billion. Subject to the terms of the 2014 Credit Facility, the revolving loan facility may be increased and/or term loan facilities may be established in an amount up to $500.0 million. The outstanding balance of $94.0 million is classified as long-term in the Consolidated Balance Sheet. The funds available under the 2014 Credit Facility may be used for working capital and general corporate purposes, stock repurchases and the financing of certain acquisitions. Under the 2014 Credit Facility, we may borrow, repay and reborrow funds under the revolving loan facility until its maturity on November 24, 2019, at which time the revolving facility will terminate, and all outstanding loans, together with all accrued and unpaid interest, must be repaid. Amounts not borrowed under the $1.0 billion revolving facility will be subject to a commitment fee, to be paid in arrears on the last day of each fiscal quarter, ranging from 0.10% to 0.30% per annum depending on either our credit rating at such time or our leverage ratio as of the most recently ended fiscal quarter, whichever results in more favorable pricing to us. We may borrow funds under the 2014 Credit Facility in U.S. Dollars, Euros or in certain other agreed currencies, and borrowings will bear interest, at our option, at either: (i) a floating per annum base rate determined by reference to the highest of: (a) the administrative agent’s prime rate; (b) 0.50% per annum above the federal funds effective rate; and (c) reserve-adjusted LIBOR for an interest period of one month plus 1.00%, plus a margin of between 0.00% and 0.75%, or (ii) a reserve-adjusted fixed per annum rate based on LIBOR or EURIBOR, depending on the currency borrowed, plus a margin of between 1.00% and 1.75%. The applicable margin in each case is determined based on either Trimble’s credit rating at such time or Trimble’s leverage ratio as of its most recently ended fiscal quarter, whichever results in more favorable pricing to us. Interest is payable on the last day of each fiscal quarter with respect to borrowings bearing interest at the base rate, or on the last day of an interest period, but at least every three months, with respect to borrowings bearing interest at LIBOR or EURIBOR rate. The 2014 Credit Facility contains various customary representations and warranties by us, which include customary use of materiality, material adverse effect and knowledge qualifiers. The 2014 Credit Facility also contains customary affirmative and negative covenants including, among other requirements, negative covenants that restrict our ability to create liens and enter into sale and leaseback transactions, and that restrict our subsidiaries’ ability to incur indebtedness. Further, the 2014 Credit Facility contains financial covenants that require the maintenance of minimum interest coverage and maximum leverage ratios. Specifically, we must maintain as of the end of each fiscal quarter a ratio of (a) EBITDA (as defined in the 2014 Credit Facility) to (b) interest expense for the most recently ended period of four fiscal quarters of not less than 3.50 to 1.00. We must also maintain, at the end of each fiscal quarter, a ratio of (x) total indebtedness (as defined in the 2014 Credit Facility) to (y) EBITDA (as defined in the 2014 Credit Facility) for the most recently ended period of four fiscal quarters of not greater than 3.00 to 1.00; provided, that on the completion of a material acquisition, we may increase the ratio by 0.50 for the fiscal quarter during which such acquisition occurred and each of the three subsequent fiscal quarters. We were in compliance with these covenants at the end of fiscal 2016. The 2014 Credit Facility contains events of default that include, among others, non-payment of principal, interest or fees, breach of covenants, inaccuracy of representations and warranties, cross defaults to certain other indebtedness, bankruptcy and insolvency events, material judgments and events constituting a change of control. Upon the occurrence and during the continuance of an event of default, interest on the obligations will accrue at an increased rate and the lenders may accelerate our obligations under the 2014 Credit Facility, except that acceleration will be automatic in the case of bankruptcy and insolvency events of default. In February 2016, we entered into an amendment to the 2014 Credit Facility to facilitate the Reincorporation from California to Delaware and to effect other non-financial terms. In August 2016, we entered into a second amendment to revise a definition used in determining when a change of control of the Company may occur. The interest rate on the long-term debt outstanding under the credit facilities was 1.80% and 1.46% at the end of fiscal 2016 and 2015, respectively. 42 Uncommitted Facilities We also have two $75 million revolving credit facilities which are uncommitted (the “Uncommitted Facilities”). The Uncommitted Facilities may be called by the lenders at any time, have no covenants and no specified expiration date. The interest rate on the Uncommitted Facilities is 1.00% plus either LIBOR or the bank’s cost of funds or as otherwise agreed upon by the bank and us. The $130.0 million outstanding at the end of 2016 and the $118.0 million outstanding at the end of 2015 under the Uncommitted Facilities are classified as short-term in our Consolidated Balance Sheet. The weighted average interest rate on the Uncommitted Facilities was 1.65% at the end of fiscal 2016 and 1.37% at the end of fiscal 2015. For additional discussion of our debt, see Note 7 to the Consolidated Financial Statements. Repatriation of Foreign Earnings and Income Taxes At the end of fiscal 2016, $310.1 million of cash, cash equivalents and short-term investment was held by our foreign subsidiaries, of which $5.9 million was borrowed from the U.S. under intercompany financing arrangements. If these loaned funds are needed for our operations in the U.S., we would not be required to accrue and pay U.S. federal and state taxes to repatriate the loaned funds. To the extent of other repatriation of cash held by foreign subsidiaries, we generally would be required to pay U.S. federal and state taxes. While a significant portion of our foreign earnings continue to be permanently reinvested in our foreign subsidiaries, it is anticipated this reinvestment will not impede cash needs at the parent company level. However, if we were to make significant acquisitions or stock repurchases, we may be required to increase our outstanding indebtedness, which could result in increased borrowing costs. In our determination of which foreign earnings are permanently reinvested, we consider numerous factors, including the financial requirements of the U.S. parent company, the financial requirements of the foreign subsidiaries, and the tax consequences of remitting the foreign earnings back to the U.S. There are no other material impediments to our ability to access sources of liquidity and our resulting ability to meet short and long-term liquidity needs, other than in the event we are not in compliance with the covenants under our 2014 Credit Facility or the potential tax costs of remitting foreign earnings back to the U.S. CONTRACTUAL OBLIGATIONS The following table summarizes our contractual obligations at the end of fiscal 2016: Payments Due By Period Total Less than 1 year 1-3 years 3-5 years More than 5 years (in millions) Principal payments on debt (1) Interest payments on debt (2) Operating leases Other purchase obligations and commitments (3) Total $ $ 624.8 160.0 115.9 150.7 1,051.4 $ $ 130.2 22.6 30.4 136.9 320.1 $ $ 0.4 60.6 40.8 13.1 114.9 $ $ 94.2 38.4 21.5 0.7 154.8 $ $ 400.0 38.4 23.2 — 461.6 (1) (2) (3) Amount represents principal payments over the life of the debt obligations. (See Note 7 to the Consolidated Financial Statements for further financial information regarding debt.) Amount represents the expected interest payments relating to our debt. Our $400.0 million Notes accrue interest at 4.75% per annum and are payable semi-annually in arrears on December 1 and June 1 each year. Interest on our Credit Facilities and Uncommitted Facilities was estimated to be 1.80% and 1.65% per annum, respectively, based upon recent trends and is payable at least quarterly. Other purchase obligations and commitments primarily represent open non-cancelable purchase orders for material purchases with our vendors, and also include estimated payments due for acquisition related earn-outs. Purchase obligations exclude agreements that are cancelable without penalty. At the end of fiscal 2016, we had unrecognized tax benefits (included in other non-current liabilities) of $65.3 million, including interest and penalties. At this time, we cannot make a reasonably reliable estimate of the period of cash settlement with tax authorities regarding this liability, and therefore, such amounts are not included in the contractual obligations table above. 43 EFFECT OF NEW ACCOUNTING PRONOUNCEMENTS The impact of recent accounting pronouncements is disclosed in Note 2 of our accompanying Notes to Consolidated Financial Statements included in Part II, Item 8, "Financial Statements and Supplementary Data" of this Annual Report on Form 10-K. RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES 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 following tables 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 charges, 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 charges, 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, integration costs, executive transition costs and litigation expense from GAAP operating 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 charges, 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, integration costs, executive transition 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 (expense), net We believe this measure helps investors evaluate our non-operating income trends. Non-GAAP non-operating income (expense), net excludes acquisition and divestiture gains/losses associated with unusual acquisition related items such as intangible asset impairment charges and gains or losses related to the acquisition or sale of certain businesses and investments, and an equity sale gain. These gains/losses are specific to particular acquisitions and divestitures and vary significantly in amount and timing. Non- GAAP non-operating income (expense), 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 We believe that providing investors with the non-GAAP income tax provision is beneficial because it provides for consistent treatment of the excluded items in our non-GAAP presentation. In fiscal 2015 we began calculating a non-GAAP tax rate separate from the GAAP rate as we expect this to add consistency in the non-GAAP trends. The non-GAAP income tax provision excludes material non-recurring items such as build and release of valuation allowances, reserve releases related to closure of tax audits, and other non-recurring items. We have not retroactively restated prior periods’ non-GAAP results with a similar separate rate. Therefore, comparability between periods may be affected. 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 charges, amortization of purchased intangible assets, stock- 44 based compensation, amortization of acquisition-related inventory step-up, acquisition/divestiture costs, executive transition costs, litigation expenses, an equity sale gain, debt issuance cost write-offs 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 charges, amortization of purchased intangible assets, stock-based compensation, amortization of acquisition- related inventory step-up, acquisition/divestiture costs, executive transition costs, litigation expenses, an equity sale gain, debt issuance cost write-offs 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. 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 charges, amortization of purchased intangible assets, stock-based compensation, amortization of acquisition-related inventory step-up, acquisition/divestiture items, executive transition costs, litigation expenses, a gain on an equity sale, write-off of debt issuance costs and non-GAAP tax adjustments. For detailed explanations of the adjustments made to comparable GAAP measures, see items (A) - ( L) below, (Dollars in millions, except per share data) GROSS MARGIN: GAAP gross margin: Restructuring charges Amortization of purchased intangible assets Stock-based compensation Amortization of acquisition-related inventory step-up Non-GAAP gross margin: OPERATING EXPENSES: GAAP operating expenses: Restructuring charges Amortization of purchased intangible assets Stock-based compensation Acquisition / divestiture items Executive transition costs Litigation Non-GAAP operating expenses: OPERATING INCOME: GAAP operating income: Restructuring charges Amortization of purchased intangible assets Stock-based compensation Amortization of acquisition-related inventory step-up Acquisition / divestiture items Executive transition costs 2016 Fiscal Years 2015 2014 Dollar Amount % of Revenue Dollar Amount % of Revenue Dollar Amount % of Revenue $ 1,238.0 52.4 % $ 1,202.2 52.5 % $ 1,290.8 $ $ $ $ ( A ) ( B ) ( C ) ( D ) ( A ) ( B ) ( C ) ( E ) ( F ) ( G ) ( A ) ( B ) ( C ) ( D ) ( E ) ( F ) 1.7 88.6 3.8 — 0.1 % 3.8 % 0.1 % — % 1.4 92.6 3.9 — 0.1 % 4.0 % 0.2 % — % 0.4 82.9 3.2 0.8 1,332.1 56.4 % $ 1,300.1 56.8 % $ 1,378.1 1,057.0 (11.6) 44.7 % $ 1,047.8 45.7 % $ 1,030.0 (0.5)% (11.4) (0.5)% (1.7) (2.6)% (2.1)% (0.3)% — % — % (69.8) (46.2) (9.9) — (0.3) (3.1)% (2.0)% (0.4)% — % — % (75.6) (40.2) (13.5) — (0.7) 39.2 % $ 910.2 39.7 % $ 898.3 7.7 % $ 0.6 % 6.4 % 2.2 % — % 0.3 % — % 154.4 12.8 162.4 50.1 — 9.9 — 6.7 % $ 260.8 0.6 % 7.1 % 2.2 % — % 0.4 % — % 2.1 158.5 43.4 0.8 13.5 — (62.2) (48.8) (6.8) (1.0) — 926.6 181.0 13.3 150.8 52.6 — 6.8 1.0 45 53.9 % — % 3.5 % 0.1 % — % 57.5 % 43.0 % (0.1)% (3.2)% (1.7)% (0.5)% — % — % 37.5 % 10.9 % 0.1 % 6.6 % 1.8 % — % 0.6 % — % Litigation Non-GAAP operating income: NON-OPERATING INCOME (EXPENSE), NET: GAAP non-operating income (expense), net: Acquisition / divestiture items Gain on an equity sale Debt issuance cost write-off Non-GAAP non-operating income (expense), net: $ $ ( G ) ( E ) ( H ) ( I ) — 405.5 — % 0.3 — % 0.7 17.2 % $ 389.9 17.0 % $ 479.8 — % 20.0 % (4.3) (3.5) — — $ (2.6) (3.9) — — $ 5.2 2.9 (15.1) 4.2 $ (7.8) $ (6.5) $ (2.8) GAAP and Non-GAAP Tax Rate % (L) GAAP and Non-GAAP Tax Rate % (L) GAAP and Non-GAAP Tax Rate % (L) $ $ $ $ $ INCOME TAX PROVISION: GAAP income tax provision: Non-GAAP items tax effected: Difference in GAAP and Non-GAAP tax ( J ) ( K ) Non-GAAP income tax provision: NET INCOME: GAAP net income attributable to Trimble Inc. Restructuring charges Amortization of purchased intangible assets Stock-based compensation Amortization of acquisition-related inventory step-up Acquisition / divestiture items Executive transition costs Litigation Gain on an equity sale Debt issuance cost write-off Non-GAAP tax adjustments Non-GAAP net income attributable to Trimble Inc. DILUTED NET INCOME PER SHARE: GAAP diluted net income per share attributable to Trimble Inc. Restructuring charges Amortization of purchased intangible assets Stock-based compensation Amortization of acquisition-related inventory step-up Acquisition / divestiture items Executive transition costs Litigation Gain on an equity sale Debt issuance cost write-off Non-GAAP tax adjustments ( A ) ( B ) ( C ) ( D ) ( E ) ( F ) ( G ) ( H ) ( I ) ( J ) - ( K ) ( A ) ( B ) ( C ) ( D ) ( E ) ( F ) ( G ) ( H ) ( I ) ( J ) - ( K ) 44.5 55.3 (4.3) 95.5 132.4 13.3 150.8 52.6 — 3.3 1.0 — — — (51.0) 302.4 0.52 0.06 0.59 0.20 — 0.01 — — — — 25 % $ 24 % $ $ $ $ 31.1 47.1 13.8 92.0 121.1 12.8 162.4 50.1 — 6.0 — 0.3 — — (60.9) 291.8 0.47 0.05 0.63 0.19 — 0.02 — — — — (0.19) (0.23) 20 % $ 24 % $ 52.1 44.3 (5.8) 90.6 $ 214.1 20 % 19 % 2.1 158.5 43.4 0.8 16.4 0.7 (15.1) 4.2 (38.5) 386.6 0.81 0.01 0.60 0.16 — 0.06 — — (0.06) 0.02 (0.14) $ $ Non-GAAP diluted net income per share attributable to Trimble Inc. $ 1.19 $ 1.13 $ 1.46 46 A. B. C. Restructuring charges. Included in our GAAP presentation of cost of sales and operating expenses, restructuring charges recorded are primarily for employee compensation resulting from reductions in employee headcount in connection with our company restructurings. We exclude restructuring charges 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 last three years. However the amount incurred can vary significantly based on whether a restructuring has occurred in the period and the timing of headcount reductions. 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 use to amortize 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. 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 fiscal years 2016, 2015 and 2014, stock-based compensation was allocated as follows: (In millions) Cost of sales Research and development Sales and Marketing General and administrative Total stock-based compensation expense 2016 Fiscal Years 2015 2014 3.8 9.1 8.3 31.4 52.6 $ $ 3.9 8.7 9.1 28.4 50.1 $ $ 3.2 6.8 7.6 25.8 43.4 $ $ D. E. F. G. 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. 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, as well as adjustments to the fair value of our earn-out liabilities. Included in our GAAP presentation of non-operating income (expense), net, acquisition / divestiture items includes unusual acquisition, investment, or divestiture gains/losses. 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. Executive transition costs. Included in our GAAP presentation of operating expenses are amounts paid to the Company's former CFO upon his departure under the terms of his executive severance agreement. We excluded these payments from our non-GAAP measures because they represent non-recurring expenses and are not indicative of our ongoing operating expenses. We further believe that excluding the executive transition costs from our non-GAAP results is useful to investors in that it allows for period-over-period comparability. Litigation. These amounts represent costs accrued to settle litigation, generally as a result of an arbitration agreement. The fiscal 2014 amount includes $51.3 million 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 47 H. I. J. K. L. 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. Gain on an equity sale. Included in our GAAP presentation of non-operating income (expense), 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. Debt issuance cost write-off. Included in our GAAP non-operating income, 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 in fiscal 2014 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. Non-GAAP items tax effected. This amount adjusts the provision for income taxes to reflect the effect of the non-GAAP items ( A ) - ( I ) 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. Difference in GAAP and Non-GAAP tax . The non-GAAP income tax provision excludes material non-recurring items such as build and release of valuation allowances, reserve releases related to closure of tax audits, and other non-recurring items. 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 provision in the current and prior periods. For fiscal 2014, the Non-GAAP tax adjustment 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. In fiscal 2015 we began calculating a non-GAAP tax rate separate from the GAAP rate as we expect this to add consistency in the quarterly trends. For fiscal 2015 and 2016, this amount represents the difference between the GAAP and Non-GAAP tax rates applied to the Non-GAAP operating income plus the Non-GAAP non-operating income (expense), net. 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. However, this comparability may be impacted since we began separately calculating a non-GAAP tax rate in fiscal 2015. Non-GAAP Operating Income Non-GAAP operating income increased by $15.6 million for fiscal 2016 as compared to fiscal 2015, and decreased by $89.9 million for fiscal 2015 as compared to fiscal 2014. Non-GAAP operating income as a percentage of total revenue was 17.2%, 17.0%, and 20.0% for fiscal years 2016, 2015, and 2014, respectively. The Non-GAAP operating income and Non-GAAP operating income percentage for fiscal 2016 increased primarily due to revenue expansion in Engineering and Construction and Mobile Solutions and strong operating expense control across the company. The Non-GAAP operating income and Non-GAAP operating income percentage for fiscal 2015 decreased primarily due to revenue declines in Engineering and Construction and Field Solutions, partially offset by a revenue increase in Mobile Solutions. 48 Item 7A. Quantitative and Qualitative Disclosure about Market Risk We are exposed to market risk related to changes in interest rates and foreign currency exchange rates. We use certain derivative financial instruments to manage these risks. We do not use derivative financial instruments for speculative purposes. All financial instruments are used in accordance with policies approved by our board of directors. Market Interest Rate Risk Our cash equivalents and short-term investments consisted primarily of treasury bills, debt securities and commercial paper, interest and non-interest bearing bank deposits as well as bank time deposits. The main objective of these instruments is safety of principal and liquidity while maximizing return, without significantly increasing risk. Due to the nature of our cash equivalents and short-term investments where they are readily convertible to cash, we do not anticipate any material effect on our portfolio due to fluctuations in interest rates. We are exposed to market risk due to the possibility of changing interest rates under our credit facilities. Our 2014 Credit Facility is comprised of a revolving credit agreement and a letter of credit sub-facility with maturity dates of November 24, 2019 and also two unsecured uncommitted revolving credit agreements that are callable by the bank at any time. We may borrow funds under these facilities in U.S. Dollars or in certain other currencies and borrowings will bear interest as described under Note 7 of Notes to the Consolidated Financial Statements. At the end of fiscal 2016, we had outstanding a revolving loan of $94.0 million under the 2014 Credit Facility and a revolving credit line of $130.0 million under the Uncommitted Facilities. A hypothetical 10% increase in our borrowing rates at the end of fiscal 2016 could result in approximately $0.2 million annual increase in interest expense on these existing principal balances. The hypothetical changes and assumptions made above will be different from what actually occurs in the future. Furthermore, the computations do not anticipate actions that may be taken by our management should the hypothetical market changes actually occur over time. As a result, actual earnings effects in the future will differ from those quantified above. Foreign Currency Exchange Rate Risk We operate in international markets, which expose us to market risk associated with foreign currency exchange rate fluctuations between the U.S. Dollar and various foreign currencies, the most significant of which is the Euro. Historically, the majority of our revenue contracts are denominated in U.S. Dollars, with the most significant exception being Europe, where we invoice primarily in Euros. Additionally, a portion of our expenses, primarily the cost to manufacture, cost of personnel to deliver technical support on our products and professional services, sales and sales support and research and development, are denominated in foreign currencies, primarily the Euro. Revenue resulting from selling in local currencies and costs incurred in local currencies are exposed to foreign currency exchange rate fluctuations which can affect our operating income. As exchange rates vary, operating income may differ from expectations. In fiscal 2016, revenue was negatively impacted by foreign currency exchange rates by $12.1 million and operating income was favorably impacted by $3.2 million, respectively. Currency translation subtracted approximately 1% of revenue and added 2% of operating income in fiscal 2016. 49 We enter into foreign currency forward contracts to minimize the short-term impact of foreign currency exchange rate fluctuations on cash and certain trade and inter-company receivables and payables, primarily denominated in Swiss Franc, Euro, British pound and New Zealand and Canadian dollars. 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. These instruments are marked to market through earnings every period and generally range from one to two months in maturity. We do not enter into foreign currency forward contracts for trading purposes. We occasionally enter into foreign currency forward contracts to hedge the purchase price of some of our larger business acquisitions. Foreign currency forward contracts outstanding at the end of fiscal 2016 and 2015 are summarized as follows (in millions): (In millions) Forward contracts: Purchased Sold At the End of Fiscal 2016 At the End of Fiscal 2015 Nominal Amount Fair Value Nominal Amount Fair Value $ $ (99.2) $ $ 86.1 — $ $ 0.1 (86.5) $ $ 88.1 1.3 (0.5) 50 TRIMBLE INC. INDEX TO FINANCIAL STATEMENTS Consolidated Balance Sheets Consolidated Statements of Income Consolidated Statements of Comprehensive Income Consolidated Statements of Stockholders’ Equity Consolidated Statements of Cash Flows Notes to Consolidated Financial Statements Reports of Independent Registered Public Accounting Firm 52 53 54 55 56 57 85 51 Item 8. Financial Statements and Supplementary Data CONSOLIDATED BALANCE SHEETS At the End of Fiscal Year (In millions, except par values) ASSETS Current assets: Cash and cash equivalents Short-term investments Accounts receivable, net Other receivables Inventories Other current assets Total current assets Property and equipment, net Goodwill Other purchased intangible assets, net Other non-current assets Total assets LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Short-term debt Accounts payable Accrued compensation and benefits Deferred revenue Accrued warranty expense Other current liabilities Total current liabilities Long-term debt Non-current deferred revenue Deferred income tax liabilities Other non-current liabilities Total liabilities Commitments and contingencies (Note 8) 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; 251.3 and 250.7 shares issued and outstanding at the end of fiscal 2016 and 2015, respectively Additional paid-in-capital Retained earnings Accumulated other comprehensive loss Total Trimble Inc. stockholders’ equity Noncontrolling interests Total stockholders' equity Total liabilities and stockholders’ equity See accompanying Notes to the Consolidated Financial Statements. 52 2016 2015 $ $ $ $ 216.1 111.1 354.8 35.4 218.8 42.5 978.7 144.2 2,077.6 333.3 140.0 3,673.8 130.3 109.8 97.5 246.5 17.2 86.9 688.2 489.6 37.7 38.8 113.8 1,368.1 — 0.3 1,348.3 1,177.1 (219.9) 2,305.8 (0.1) 2,305.7 3,673.8 $ $ $ $ 116.0 — 361.9 14.9 261.1 44.5 798.4 159.2 2,106.4 487.1 129.6 3,680.7 118.3 99.8 98.9 234.6 18.5 90.8 660.9 611.4 29.6 51.7 106.5 1,460.1 — 0.3 1,238.0 1,148.2 (166.8) 2,219.7 0.9 2,220.6 3,680.7 CONSOLIDATED STATEMENTS OF INCOME Fiscal Years (In millions, except per share data) Revenue: Product Service Subscription Total revenues Cost of sales: Product Service Subscription Amortization of purchased intangible assets Total cost of sales Gross margin Operating expense Research and development Sales and marketing General and administrative Restructuring charges Amortization of purchased intangible assets Total operating expense Operating income Non-operating income (expense), net Interest expense, net Foreign currency transaction gain (loss), net Income from equity method investments, net Other income, net Total non-operating income (expense), net Income before taxes Income tax provision Net income Less: Net loss attributable to noncontrolling interests Net income attributable to Trimble Inc. Basic earnings per share Shares used in calculating basic earnings per share Diluted earnings per share Shares used in calculating diluted earnings per share See accompanying Notes to the Consolidated Financial Statements. 2016 2015 2014 $ $ $ $ 1,562.0 430.2 370.0 2,362.2 760.8 169.9 104.9 88.6 1,124.2 1,238.0 349.6 377.6 256.0 11.6 62.2 1,057.0 181.0 (25.9) (1.9) 17.6 5.9 (4.3) 176.7 44.5 132.2 (0.2) 132.4 0.53 250.5 0.52 253.9 $ $ $ $ 1,533.5 419.9 337.0 2,290.4 731.1 164.2 100.3 92.6 1,088.2 1,202.2 336.7 374.6 255.3 11.4 69.8 1,047.8 154.4 (25.6) 0.2 17.9 4.9 (2.6) 151.8 31.1 120.7 (0.4) 121.1 0.47 255.8 0.47 258.5 1,713.6 396.0 285.9 2,395.5 788.1 152.6 81.1 82.9 1,104.7 1,290.8 318.0 387.6 247.1 1.7 75.6 1,030.0 260.8 (18.7) (5.1) 12.4 16.6 5.2 266.0 52.1 213.9 (0.2) 214.1 0.82 260.1 0.81 264.5 $ $ $ $ 53 CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME Fiscal Years (In millions) Net income 2016 2015 2014 $ 132.2 $ 120.7 $ 213.9 Foreign currency translation adjustments, net of tax $(0.2) in 2016, $(4.3) in 2015, and $(6.4) in 2014 Net unrealized actuarial gain (loss), net of tax Comprehensive income Less: Comprehensive loss attributable to noncontrolling interests Comprehensive income attributable to Trimble Inc. $ (53.4) 0.3 79.1 (0.2) 79.3 $ (90.2) (104.0) 0.1 30.6 (0.4) 31.0 $ (1.7) 108.2 (0.2) 108.4 See accompanying Notes to the Consolidated Financial Statements. 54  CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY Common stock Shares Amount Additional Paid-In Capital Retained Earnings Accumulated Other Comprehensive Income/(Loss) Total Stockholders’ Equity Noncontrolling Interest Total 258.7 $ 0.3 $ 1,105.7 $ 1,081.7 $ 29.0 $ 2,216.7 $ 13.1 $ 2,229.8 (105.7) 214.1 (1.8) (83.0) 214.1 (105.7) 108.4 56.1 (97.8) 44.1 — 14.1 (0.2) 213.9 (105.7) 108.2 56.1 (97.8) 44.1 (1.1) (1.1) 14.1 3.7 (3.2) — — 57.9 (14.8) 44.1 — 14.1 (In millions, except par values) Balance at the end of fiscal 2013 Net income Other comprehensive loss Comprehensive income Issuance of common stock under employee plans, net of tax withholdings Stock repurchases Stock-based compensation Noncontrolling interest investments Tax benefit from stock option exercises Balance at the end of fiscal 2014 259.2 $ 0.3 $ 1,207.0 $ 1,211.0 $ (76.7) $ 2,341.6 $ 11.8 $ 2,353.4 Net income Other comprehensive loss Comprehensive income Issuance of common stock under employee plans, net of tax withholdings Stock repurchases Stock-based compensation Noncontrolling interest investments Tax benefit from stock option exercises 2.7 (11.2) — — 121.1 (3.6) (180.3) 33.3 (54.1) 50.9 — 0.9 (90.1) 121.1 (90.1) 31.0 29.7 (234.4) 50.9 — 0.9 Balance at the end of fiscal 2015 250.7 $ 0.3 $ 1,238.0 $ 1,148.2 $ (166.8) $ 2,219.7 $ Net income Other comprehensive loss Comprehensive income Issuance of common stock under employee plans, net of tax withholdings Stock repurchases Stock-based compensation Noncontrolling interest investments Tax benefit from stock option exercises (53.1) 132.4 (8.8) (94.7) 132.4 (53.1) 79.3 67.9 (119.5) 53.2 0.8 4.4 5.5 (4.9) — — 76.7 (24.8) 53.2 0.8 4.4 (0.4) 120.7 (90.1) 30.6 29.7 (234.4) 50.9 (10.5) (10.5) 0.9 0.9 $ 2,220.6 (0.2) 132.2 (53.1) 79.1 67.9 (119.5) 53.2 — 4.4 (0.8) Balance at the end of fiscal 2016 251.3 $ 0.3 $ 1,348.3 $ 1,177.1 $ (219.9) $ 2,305.8 $ (0.1) $ 2,305.7 See accompanying Notes to the Consolidated Financial Statements. 55 CONSOLIDATED STATEMENTS OF CASH FLOWS Fiscal Years (In millions) Cash flows from operating activities: Net income Adjustments to reconcile net income to net cash provided by operating activities: Depreciation expense Amortization expense Provision for doubtful accounts Deferred income taxes Stock-based compensation Income from equity method investments Gain on an equity sale Divestiture (gain) loss, net Excess tax benefit for stock-based compensation Provision for excess and obsolete inventories Other non-cash items Add decrease (increase) in assets: Accounts receivable Other receivables Inventories Other current and non-current assets Add increase (decrease) in liabilities: Accounts payable Accrued compensation and benefits Deferred revenue Accrued warranty expense Accrued liabilities Net cash provided by operating activities Cash flows from investing activities: Acquisitions of businesses, net of cash acquired Acquisitions of property and equipment Acquisitions of intangible assets Purchases of equity method investments Purchases of short-term investments Proceeds from maturities of short-term investments Net proceeds from sales of businesses Dividends received from equity method investments Other Net cash used in investing activities Cash flows from financing activities: Issuance of common stock, net of tax withholdings Repurchase and retirement of common stock Excess tax benefit for stock-based compensation Proceeds from debt and revolving credit lines Payments on debt and revolving credit lines Net cash used in financing activities Effect of exchange rate changes on cash and cash equivalents Net increase (decrease) in cash and cash equivalents Cash and cash equivalents, beginning of fiscal year Cash and cash equivalents, end of fiscal year $ See accompanying Notes to the Consolidated Financial Statements. 56 2016 2015 2014 $ 132.2 $ 120.7 $ 213.9 37.0 150.8 3.0 0.4 52.6 (17.6) — (3.5) (6.5) 15.8 3.3 1.2 1.4 24.0 (1.2) 10.9 0.6 26.1 (1.1) (22.3) 407.1 (38.8) (26.0) (0.3) (1.5) (113.3) 2.4 14.4 17.6 1.1 (144.4) 67.5 (119.5) 6.5 355.0 (465.3) (155.8) (6.8) 100.1 116.0 216.1 $ 36.7 162.4 1.9 0.9 50.1 (17.9) — (3.9) (2.1) 12.3 10.0 0.3 8.5 (2.9) (7.6) (6.4) (0.1) 28.1 (2.0) (34.1) 354.9 (156.3) (43.9) (0.1) (5.5) — — 12.1 20.0 1.3 (172.4) 29.7 (234.4) 2.1 555.0 (555.2) (202.8) (11.7) (32.0) 148.0 116.0 $ 33.1 158.5 3.8 (1.7) 43.4 (12.4) (15.1) 2.9 (14.1) 4.8 4.7 (10.9) (2.3) (31.8) (7.1) (7.2) 0.5 45.9 3.1 (4.9) 407.1 (307.9) (47.3) (7.6) (10.9) — — — 32.2 (2.5) (344.0) 56.1 (97.8) 14.1 876.2 (900.1) (51.5) (10.8) 0.8 147.2 148.0 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 1: DESCRIPTION OF BUSINESS The Company began operations in 1978 and was originally incorporated in California as Trimble Navigation Limited in 1981. On October 1, 2016, Trimble Navigation Limited changed its name to Trimble Inc. ("Trimble" or the "Company") and changed its state of incorporation from the State of California to the State of Delaware (the “Reincorporation”). Other than the change in corporate domicile, the reincorporation did not result in any change in the business, physical location, management, assets, liabilities or total stockholders' equity of the Company, nor did it result in any change in location of the Company's employees, including the Company's management. Additionally, the reincorporation did not alter any stockholders' percentage ownership interest or number of shares owned in the Company. The Reincorporation was previously approved by the Company’s stockholders at its 2016 annual meeting of stockholders. Trimble is a leading provider of technology solutions that enable professionals and field mobile workers to improve or transform their work processes. Trimble's solutions are used across a range of industries including agriculture, architecture, civil engineering, survey and land administration, construction, geospatial, government, natural resources, transportation and utilities. Representative Trimble customers include engineering and construction firms, surveying companies, farmers and agricultural companies, enterprise firms with large-scale fleets, energy, mining and utility companies, and state, federal and municipal governments. Trimble focuses on integrating broad technological and application capabilities to create system-level solutions that transform how work is done within the industries the Company serves. Products are sold based on return on investment and provide benefits such as lower operational costs, higher productivity, improved quality, enhanced safety and regulatory compliance, and reduced environmental impact. Representative products include equipment that automates large industrial equipment such as tractors and bulldozers; integrated systems that track fleets of vehicles and workers and provide real-time information and powerful analytics to the back-office; data collection systems that enable the management of large amounts of geo-referenced information; software solutions that connect all aspects of a construction site or a farm; and building information modeling (BIM) software that is used throughout the design, build, and operation of buildings. NOTE 2: ACCOUNTING POLICIES Use of Estimates The preparation of financial statements in accordance with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Estimates are used for allowances for doubtful accounts, sales returns reserve, allowances for inventory valuation, warranty costs, investments, goodwill impairment, intangibles impairment, purchased intangibles, stock-based compensation, and income taxes among others. 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 differ materially from management’s estimates. Basis of Presentation The Company has a 52-53 week fiscal year, ending on the Friday nearest to December 31. Fiscal 2016, 2015 and 2014 were all 52-week years, and ended on December 30, 2016, January 1, 2016 and January 2, 2015, respectively. Unless otherwise stated, all dates refer to the Company’s fiscal year. These Consolidated Financial Statements include the results of the Company and its consolidated subsidiaries. Inter-company accounts and transactions have been eliminated. Noncontrolling interests represent the noncontrolling stockholders’ proportionate share of the net assets and results of operations of the Company’s consolidated subsidiaries. The Company has presented revenue and cost of sales separately for products, service and subscriptions. Product revenue includes hardware, software licenses, parts and accessories; service revenue includes maintenance and support for hardware and software products, training and professional services; subscription revenue includes software as a service (SaaS). Reclassification As a result of the Reincorporation, the Company reports common stock at its par value and additional paid-in capital separately. The Company has elected to present this change in disclosure retrospectively, and accordingly, to conform to current year presentation, the Company reclassified $1.24 billion, $1.21 billion and $1.11 billion from common stock to additional paid-in capital at the end of fiscal 2015, 2014 and 2013, respectively, on the Company's Consolidated Balance Sheets and Consolidated Statements of Stockholders' Equity. 57 Foreign Currency Translation Assets and liabilities of non-U.S. subsidiaries that operate in local currencies are translated to U.S. dollars at exchange rates in effect at the balance sheet date, with the resulting translation adjustments directly recorded to a separate component of accumulated other comprehensive income, net of tax in accumulated other comprehensive loss within the stockholders’ equity section of the Consolidated Balance Sheets. Income and expense accounts are translated at average monthly exchange rates during the year. Derivative Financial Instruments The Company enters into foreign exchange forward contracts to minimize the short-term impact of foreign currency fluctuations on cash, certain trade and inter-company receivables and payables, primarily denominated in Australian, Canadian, Singapore and New Zealand Dollars, Japanese Yen, Chinese Yuan, Indian Rupee, Brazilian Real, South African Rand, Swedish Krona, Swiss Franc, Euro and British pound. These contracts reduce the exposure to fluctuations in 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. These instruments are marked to market through earnings every period and generally range from one to two months in original maturity. The Company occasionally enters into foreign exchange forward contracts to hedge the purchase price of some of its larger business acquisitions. The Company does not enter into foreign exchange forward contracts for trading purposes. As of the fiscal years ended 2016 and 2015, there were no derivative financial instruments outstanding that were accounted for as hedges. Cash, Cash Equivalents and Short-Term Investments The Company's cash equivalents and short-term investments consisted primarily of treasury bills, debt securities and commercial paper, interest and non-interest bearing bank deposits as well as bank time deposits. The Company classifies all investments that are considered readily convertible to known amounts of cash and have stated maturities of three months or less from the date of purchase as cash equivalents and those with stated maturities of greater than three months as short-term investments based on the nature of the investments and their availability for use in current operations. The Company has classified and accounted for such investments in cash equivalents and short-term investments as available-for-sale securities. The carrying amount of cash and cash equivalents approximates fair value because of the short maturity of those instruments. The Company determines the appropriate classification of its short-term investments at the time of purchase and reevaluates such designation at each balance sheet date. These investments are carried at fair value, and any unrealized gains and losses, net of taxes, are reported in Accumulated other comprehensive loss, except for unrealized losses determined to be other-than-temporary, which would be recorded within Other income, net. The Company has not recorded any such impairment charge in the fiscal year 2016. Realized gains or losses on the sale of marketable securities are determined on a specific identification method, and such gains and losses are recorded as a component of Other income, net. Concentrations of Risk The Company is subject to concentrations of credit risk primarily from cash and cash equivalents, short-term investments and accounts receivable. The Company's cash equivalents and short-term investments consisted primarily of treasury bills, debt securities and commercial paper, interest and non-interest bearing bank deposits as well as bank time deposits. The main objective of these instruments is safety of principal and liquidity while maximizing return, without significantly increasing risk. 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. The Company's investment policy requires the portfolio to include only securities with high credit quality and a weighted average maturity not to exceed 6 months, with the main objective of preserving capital and maintaining liquidity. The Company maintains an investment portfolio of various holdings, types, and maturities. The Company is also exposed to credit risk in the Company’s trade receivables, which are derived from sales to end-user customers in diversified industries as well as various resellers. The Company performs ongoing credit evaluations of its customers’ financial condition and limits the amount of credit extended when deemed necessary but generally does not require collateral. With Flextronics Corporation International as an exclusive manufacturing partner for many of its products, the Company is dependent upon a sole supplier for the manufacture of these products. In addition, the Company relies on sole suppliers for a number of its critical components. Allowance for Doubtful Accounts The Company maintains an allowance for doubtful accounts for estimated losses resulting from the inability of its customers to make required payments. The allowance for doubtful accounts was 5.0 million at the end of fiscal 2016 and 2015, respectively. The sales return reserve was $3.6 million and $5.1 million at the end of fiscal 2016 and 2015, respectively. 58 The Company evaluates the ongoing collectibility of its trade accounts receivable based on a number of factors such as age of the accounts receivable balances, credit quality, historical experience, and current economic conditions that may affect a customer’s ability to pay. In circumstances where the Company is aware of a specific customer’s inability to meet its financial obligations to the Company, a specific allowance for bad debts is estimated and recorded which reduces the recognized receivable to the estimated amount that the Company believes will ultimately be collected. In addition to specific customer identification of potential bad debts, bad debt charges are recorded based on the Company’s recent past loss history and an overall assessment of past due trade accounts receivable amounts outstanding. Inventories Inventories are stated at the lower of cost or market, which approximates 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 which impact inventory purchasing forecasts, technological changes, product life cycle and development plans, component cost trends, product pricing, physical deterioration and quality issues. If the Company's estimates used to reserve for excess and obsolete inventory are different from what it expected, the Company may be required to recognize additional reserves, which would negatively impact its gross margin. Property and Equipment, Net Property and equipment, net is stated at cost less accumulated depreciation. Depreciation of property and equipment is computed using the straight-line method over the shorter of the estimated useful lives or the lease terms when applicable. Useful lives generally include a range from four to six years for machinery and equipment, five to seven years for furniture and fixtures, two to five years for computer equipment and software, 39 years for buildings, and the life of the lease for leasehold improvements. The Company capitalizes eligible costs to acquire or develop internal-use software that are incurred subsequent to the preliminary project stage. Capitalized costs related to internal-use software are amortized using the straight-line method over the estimated useful lives of the assets, which range generally from two to five years. The costs of repairs and maintenance are expensed when incurred, while expenditures for refurbishments and improvements that significantly add to the productive capacity or extend the useful life of an asset are capitalized. Depreciation expense was $37.0 million in fiscal 2016, $36.7 million in fiscal 2015 and $33.1 million in fiscal 2014. Business Combinations The Company allocates the fair value of purchase consideration to the assets acquired, liabilities assumed, and non-controlling interests in the acquiree based on their fair values at the acquisition date. The excess of the fair value of purchase consideration over the fair value of these assets acquired, liabilities assumed and non-controlling interests in the acquiree is recorded as goodwill. When determining the fair values of assets acquired, liabilities assumed, and non-controlling interests in the acquiree, management makes significant estimates and assumptions, especially with respect to intangible assets. Critical estimates in valuing intangible assets include, but are not limited to, expected future cash flows, which includes consideration of future growth rates and margins, customer attrition rates, future changes in technology and brand awareness, loyalty and position, and discount rates. Fair value estimates are based on the assumptions management believes a market participant would use in pricing the asset or liability. 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. Goodwill and Purchased Intangible Assets Goodwill represents the excess of the purchase consideration over the fair value of the net tangible and identifiable intangible assets acquired in a business combination. Intangible assets acquired individually, with a group of other assets, or in a business combination are recorded at fair value. Identifiable intangible assets are comprised of distribution channels and distribution rights, patents, licenses, technology, acquired backlog, trademarks and in-process research and development. Identifiable intangible assets are being amortized over the period of estimated benefit using the straight-line method, reflecting the pattern of economic benefits associated with these assets, and have estimated useful lives ranging from one month to twelve years with a weighted average useful life of 6.2 years. Goodwill is not subject to amortization, but is subject to at least an annual assessment for impairment, applying a fair-value based test. Impairment of Goodwill, Intangible Assets and Other Long-Lived Assets The Company evaluates goodwill, at a minimum, on an annual basis and whenever events and changes in circumstances suggest that the carrying amount may not be recoverable. The Company performs its annual goodwill impairment testing in the fourth fiscal quarter of each year based on the values on the first day of that quarter. For the Company's annual goodwill impairment test in the fourth quarter of fiscal 2016 goodwill was reviewed for impairment utilizing a quantitative two-step process. In the first 59 step of this test, goodwill is tested for impairment at the reporting unit level by comparing the reporting unit’s carrying amount, including goodwill, to the fair value of the reporting unit. The fair values of the reporting units are estimated using a discounted cash flow approach. If the carrying amount of the reporting unit exceeds its fair value, a second step is performed to measure the amount of impairment loss, if any. In step two, the implied fair value of goodwill is calculated as the excess of the fair value of a reporting unit over the fair values assigned to its assets and liabilities. If the implied fair value of goodwill is less than the carrying value of the reporting unit’s goodwill, the difference is recognized as an impairment loss. When the Company performs a quantitative assessment of goodwill impairment, the determination of fair value of a reporting unit involves the use of significant estimates and assumptions. The discounted cash flows are based upon, among other things, assumptions about expected future operating performance using risk-adjusted discount rates. Actual future results may differ from those estimates. As of the first day of the fourth quarter of fiscal 2016, the fair value for our reporting units ranged from 180% to approximately 1,068% of carrying amounts, therefore goodwill was not impaired and no further testing was required. For certain earlier stage reporting units, due to the smaller magnitude of the carrying value and fair value of each respective reporting unit, the margins by which the fair value exceeded the carrying value on an absolute dollar basis were relatively small. Depreciation and amortization of the Company’s intangible assets and other long-lived assets is provided using the straight-line method over their estimated useful lives, reflecting the pattern of economic benefits associated with these assets. Changes in circumstances such as technological advances, changes to the Company’s business model, or changes in the capital strategy could result in the actual useful lives differing from initial estimates. In cases where the Company determines that the useful life of an asset should be revised, the Company will depreciate the net book value in excess of the estimated residual value over its revised remaining useful life. These assets are evaluated for impairment whenever events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable. The estimated future cash flows are based upon, among other things, assumptions about expected future operating performance and these estimates may differ from actual future cash flows. The assets evaluated for impairment are grouped with other assets to the lowest level for which identifiable cash flows are largely independent of the cash flows of other groups of assets and liabilities. If the sum of the projected undiscounted cash flows (excluding interest) is less than the carrying value of the assets, the assets will be written down to the estimated fair value. Warranty 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 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 generally from 1 year to 2 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 fiscal years ended 2016 and 2015 are as follows: At the End of Fiscal Year (In millions) Beginning balance Acquired warranties Accruals for warranties issued Changes in estimates Warranty settlements (in cash or in kind) Ending Balance 2016 2015 $ $ 18.5 (0.2) 18.3 0.3 (19.7) 17.2 $ $ 20.6 0.1 16.6 4.8 (23.6) 18.5 Guarantees, Including Indirect Guarantees of Indebtedness of Others In the normal course of business to facilitate sales of its products, the Company indemnifies other parties, including customers, lessors, and parties to other transactions with the Company. For example, the Company has agreed 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 by certain parties. These agreements may limit the time within which an indemnification claim can be made and the amount of the claim. In addition, the Company has entered into indemnification agreements with its officers and directors, and the Company’s bylaws contain similar indemnification obligations to the Company’s agents. 60 It is not possible to determine the maximum potential exposure 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 by the Company under these agreements have not been material and no liabilities have been recorded on the Consolidated Balance Sheets at the end of fiscal 2016 and 2015. Revenue Recognition The Company recognizes revenue when it is realized or realizable and earned. The Company considers revenue realized or realizable and earned when persuasive evidence of an arrangement exists, delivery has occurred, the fee is fixed or determinable, and collectibility is reasonably assured. In instances where final acceptance of the product is specified by the customer or is uncertain, revenue is deferred until all acceptance criteria have been met. Contracts and/or customer purchase orders are used to determine the existence of an arrangement. Shipping documents and customer acceptance, when applicable, are used to verify delivery. The Company assesses whether the fee is fixed or determinable based on the payment terms associated with the transaction and whether the sales price is subject to refund or adjustment. The Company assesses collectibility based primarily on the creditworthiness of the customer as determined by credit checks and analyses, as well as the customer’s payment history. Revenue for orders is not recognized until the product is shipped and title has transferred to the buyer. The Company bears all costs and risks of loss or damage to the goods up to that point. The Company’s shipment terms for U.S. orders and international orders fulfilled from the Company’s European distribution center typically provide that title passes to the buyer upon delivery of the goods to the carrier named by the buyer at the named place or point. If no precise point is indicated by the buyer, delivery is deemed to occur when the carrier takes the goods into its charge from the place determined by the Company. Other shipment terms may provide that title passes to the buyer upon delivery of the goods to the buyer. Shipping and handling costs are included in Cost of sales. Revenue from sales to distributors and dealers is recognized upon shipment, assuming all other criteria for revenue recognition have been met. Distributors and dealers do not have a right of return. Revenue from purchased extended warranty and post contract support (PCS) agreements is deferred and recognized ratably over the term of the warranty or support period. Revenue from the Company's subscription services related to its hardware and software applications is recognized ratably over the term of the subscription service period beginning on the date that service is made available to the customer, assuming all revenue recognition criteria have been met. The Company presents revenue net of sales taxes and any similar assessments. The Company’s software arrangements generally consist of a perpetual license fee and PCS. The Company generally has established vendor-specific objective evidence (VSOE) of fair value for the Company’s PCS contracts based on the renewal rate. The remaining value of the software arrangement is allocated to the license fee using the residual method. License revenue is primarily recognized when the software has been delivered and fair value has been established for all remaining undelivered elements. In cases where VSOE of fair value for PCS is not established, revenue is recognized ratably over the PCS period after all software deliverables have been made and the only the undelivered element is PCS. For services performed on a fixed-fee basis, revenue is recognized using the proportional performance method, with performance measured based on hours of work performed. For contracts that involve significant customization and implementation or consulting services that are essential to the functionality of the software, the license and services revenues are recognized using the percentage- of-completion method or, if we are unable to reliably estimate the costs to complete the services, we use the completed-contract method of accounting. A contract is considered complete when all significant costs have been incurred or when acceptance from the customer has been received. Some of the Company’s subscription product offerings include hardware, subscription services and extended warranty. Under these hosted arrangements, the customer typically does not have the contractual right to take possession of the software at any time during the hosting period without incurring a significant penalty and it is not feasible for the customer to run the software either on its own hardware or on a third-party’s hardware. The Company’s multiple deliverable product offerings include hardware with embedded firmware, extended warranty, software, PCS and subscription services, which are considered separate units of accounting. For certain of the Company’s products, software and non-software components function together to deliver the tangible product’s essential functionality. In evaluating the revenue recognition for the Company's hardware or subscription agreements which contain multiple deliverables, the Company determined that in certain instances the Company was not able to establish VSOE for some or all deliverables in an 61 arrangement as the Company infrequently sold each element on a standalone basis, did not price products within a narrow range, or had a limited sales history. When VSOE cannot be established, the Company attempts to establish the selling price of each element based on relevant third-party evidence (TPE). TPE is determined based on competitor prices for similar deliverables when sold separately. The Company’s offerings may contain a significant level of proprietary technology, customization or differentiation such that the comparable pricing of products with similar functionality cannot be obtained. Furthermore, the Company is unable to reliably determine what similar competitor products’ selling prices are on a stand-alone basis. Therefore, the Company typically is not able to establish the selling price of an element based on TPE. When the Company is unable to establish selling price using VSOE or TPE, the Company uses its best estimate of selling price (BESP) in the Company’s allocation of arrangement consideration. The objective of BESP is to determine the price at which the Company would transact a sale if the product or service were sold on a stand-alone basis. BESP is generally used for offerings that are not typically sold on a stand-alone basis or for new or highly customized offerings. The Company determines BESP for a product or service by considering multiple factors including, but not limited to, pricing practices, market conditions, competitive landscape, internal costs, geographies and gross margin. The determination of BESP is made through consultation with and formal approval by the Company’s management, taking into consideration the Company’s go-to-market strategy. Advertising and Promotional Costs The Company expenses all advertising and promotional costs as incurred. Advertising and promotional expense was approximately $37.2 million, $32.3 million, and $39.0 million, in fiscal 2016, 2015 and 2014, respectively. Research and Development Costs Research and development costs are charged to expense as incurred. Cost of software developed for external sale subsequent to reaching technical feasibility were not significant and were expensed as incurred. The Company received third party funding of approximately $13.0 million, $12.5 million, and $13.5 million in fiscal 2016, 2015 and 2014, respectively. The Company offsets research and development expense with any third party funding earned. The Company retains the rights to any technology developed under such arrangements. Stock-Based Compensation The Company has employee stock benefit plans, which are described more fully in “Note 13: Employee Stock Benefit Plans.” Stock compensation expense recognized in the Consolidated Statements of Income is based on the fair value of the portion of share-based payment awards that is expected to vest during the period and is net of estimated forfeitures. The Company attributes the value of stock options to expense using the straight-line single option method. The grant date fair value for options is estimated using the binomial valuation model. The fair value of rights to purchase shares under the Employee Stock Purchase Plan is estimated using the Black-Scholes option-pricing model. The fair value of restricted stock units (RSUs) and performance-based restricted stock units (PSUs) are valued as of the grant date using the fair value of Trimble’s common stock and the total expense associated with the performance-based awards is based upon the expected achievement of the underlying performance goals and may be adjusted in future periods based upon changes in expectations and actual achievement. The fair value for restricted stock units with market-based vesting conditions is valued as of the grant date using a Monte Carlo simulation. The Company estimates forfeitures at the time of grant and revises those estimates in subsequent periods if actual forfeitures differ from those estimates. The Company uses historical data to estimate pre-vesting option forfeitures and records stock-based compensation expense only for those awards that are expected to vest. 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. The Company’s valuation allowance is primarily attributable to foreign net operating losses and state research and development credit carryforwards. Management believes that it is more likely than not that the Company will not realize certain of these deferred tax assets, and, accordingly, a valuation allowance has been provided for such amounts. Valuation allowance adjustments associated with an acquisition after the measurement period are recorded through income tax expense. Relative to uncertain tax positions, the Company only recognizes 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. The tax benefits recognized in the financial statements from such positions are then measured based on the largest benefit that has a greater than 50 percent likelihood of being realized upon ultimate settlement. The Company considers 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. 62 Determining whether an uncertain tax position is effectively settled requires judgment. Changes in recognition or measurement of the Company's uncertain tax positions would result in the recognition of a tax benefit or an additional charge to the tax provision. The Company’s practice is to recognize interest and/or penalties related to income tax matters in income tax expense. The Company is subject to income taxes in the U.S. and numerous other countries, and is subject to routine corporate income tax audits in many of these jurisdictions. The Company generally believes that positions taken on its 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, the Company’s income tax provision includes amounts intended to satisfy assessments that may result from these challenges. Determining the income tax provision for these potential assessments and recording the related effects requires management judgments and estimates. The amounts ultimately paid on resolution of an audit could be materially different from the amounts previously included in the Company’s income tax provision and, therefore, could have a material impact on its income tax provision, net income and cash flows. The Company’s accrual for uncertain tax positions includes uncertainties concerning the tax treatment of our international operations, including the allocation of income among different jurisdictions, intercompany transactions and related interest. See Note 11 to the Consolidated Financial Statements for additional information. Computation of Earnings Per Share The number of shares used in the calculation of basic earnings per share represents the weighted average common shares outstanding during the period and excludes any potentially dilutive securities. The dilutive effects of outstanding stock options, shares to be purchased under the Company’s employee stock purchase plan and restricted stock units are included in diluted earnings per share. Recent Accounting Pronouncements Fiscal 2016 Adoption In February 2015, the FASB issued amendments to the consolidation guidance. The amendments under the new guidance modify the evaluation of whether limited partnerships and similar legal entities are variable interest entities (VIEs) or voting interest entities and eliminate the presumption that a general partner should consolidate a limited partnership. The Company adopted the amendments beginning in the first quarter of fiscal 2016. The adoption did not have a material impact on the Company's consolidated financial statements. In September 2015, the FASB issued new guidance related to business combinations. The new guidance requires that any adjustments to provisional amounts in a business combination be recorded in the period such adjustments are determined, rather than retrospectively adjusting previously reported amounts. The Company adopted the amendments beginning in the first quarter of fiscal 2016. The adoption did not have a material impact on the Company's consolidated financial statements. Fiscal 2017 Adoption In July 2015, the FASB issued amendments to simplify the measurement of inventory. Under the amendments, inventory will be measured at the “lower of cost and net realizable value” and options that currently exist for “market value” will be eliminated. The guidance defines net realizable value as the “estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation”. The amendments are effective for the Company beginning in fiscal 2017 and will not have a material impact on the Company's consolidated financial statements. In March 2016, the FASB issued amendments to its guidance on the accounting for derivatives and hedging. The new guidance clarifies the requirements for assessing whether contingent call or put options that can accelerate the payment of principal on debt instruments are clearly and closely related to their debt hosts. The amendments are effective for the Company beginning in fiscal 2017 and will not have a material impact on the Company's consolidated financial statements. In March 2016, the FASB issued new guidance related to equity investments and joint ventures. This standard eliminates the requirement that when an existing cost method investment qualifies for use of the equity method, an investor must restate its historical financial statements, as if the equity method had been used during all previous periods. Under the new guidance, at the point an investment qualifies for the equity method, any unrealized gain or loss in accumulated other comprehensive income will be recognized through earnings. The amendments are effective for the Company beginning in fiscal 2017 and will not have a material impact on the Company's consolidated financial statements. In March 2016, the FASB issued final guidance that changes certain aspects of the accounting for share-based payments awards, including the accounting for income taxes, forfeitures, and statutory tax withholding requirements, as well as classification in the statement of cash flows. The Company will adopt this guidance beginning in the first quarter of fiscal 2017. The adoption will not have a material impact on the Company's financial statements. 63 In October 2016, the FASB issued amendments to its guidance on the accounting for related parties, which amends the consolidation guidance issued in February 2015 regarding the treatment of indirect interests held through related parties that are under common control. The amendments are effective for the Company beginning in fiscal 2017 and will not have a material impact on the Company's consolidated financial statements. Future Adoption In May 2014, the FASB issued a comprehensive new revenue recognition standard that replaces the current revenue recognition guidance under U.S. GAAP. The new standard requires companies to recognize revenue in a way that depicts the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The Company expects to adopt this accounting standard update in the first quarter of fiscal 2018. Entities have the option of using either a full retrospective or modified retrospective approach for the adoption of the standard. The new standard may impact the timing and amounts of revenue recognized. The Company is still evaluating which adoption method it will apply and is continuing to assess the impact that the updated standard will have on its consolidated financial statements and related disclosures. In January 2016, the FASB issued final guidance that will require entities to measure equity investments that do not result in consolidation and are not accounted for under the equity method at fair value and recognize any changes in fair value in net income unless the investments qualify for the new practicability exception. The amendments are effective for the Company beginning in fiscal 2018, although early adoption is permitted and should be applied by means of a cumulative-effect adjustment to the balance sheet as of the beginning of the fiscal year of adoption, with certain exceptions. The Company is currently evaluating the effect of the updated standard on its consolidated financial statements and related disclosures. In February 2016, the FASB issued new guidance that requires a lessee to recognize assets and liabilities arising from leases on the balance sheet. Previous GAAP did not require lease assets and liabilities to be recognized for most leases. Additionally, companies are permitted to make an accounting policy election to not recognize lease assets and liabilities for leases with a term of 12 months or less. For both finance leases and operating leases, the lease liability should be initially measured at the present value of the lease payments. This new guidance is effective for the Company beginning in fiscal 2019, although early adoption is permitted. The Company is currently evaluating the effect of this guidance on its consolidated financial statements and related disclosures. In June 2016, the FASB issued new guidance that requires credit losses on financial assets measured at amortized cost basis to be presented based on the net amount expected to be collected, not based on incurred losses. Further, credit losses on available-for- sale debt securities should be recorded through an allowance for credit losses limited to the amount by which fair value is below amortized cost. The new standard is effective for the Company beginning in fiscal 2020. Early adoption for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018 is permitted. The Company is currently evaluating the effect of the updated standard on its consolidated financial statements and related disclosures. In August 2016, the FASB issued new guidance related to statement of cash flows. This guidance amended the existing accounting standards for the statement of cash flows and provided guidance on certain classification issues related to the statement of cash flows. The new standard is effective for the Company beginning in fiscal 2019 and early adoption is permitted. The amendments should be applied retrospectively to all periods presented. For issues that are impracticable to apply retrospectively, the amendments may be applied prospectively as of the earliest date practicable. The Company is currently evaluating the timing and the impact of these amendments on its statement of cash flows, which will likely include a reclassification of payments for business combinations from cash flows from investing activities, to cash flows from operating and financing activities. In October 2016, the FASB issued new guidance related to income taxes. This standard requires the recognition of the income tax consequences of an intra-entity transfer of an asset, other than inventory, when the transfer occurs. The guidance will be effective for the Company in its first quarter of fiscal 2018. The Company is currently evaluating the effect of the updated standard on its consolidated financial statements and related disclosures. In January 2017, the FASB issued new guidance to that simplifies the accounting for goodwill impairment by requiring impairment charges to be based on the first step in today’s two-step impairment test. The impairment test is performed by comparing the fair value of a reporting unit with its carrying amount and an impairment charge would be recognized for the amount by which the carrying amount exceeds the reporting unit’s fair value. The new standard is to be applied on a prospective basis and is effective for the Company beginning in fiscal 2020 and early adoption is permitted. The Company is currently evaluating the effect of the updated standard on its consolidated financial statements and related disclosures. 64 In February 2017, the FASB issued new guidance clarifying the scope and application of existing guidance related to the sale or transfer of nonfinancial assets to noncustomers, including partial sales. The amendments are effective at the same time as the new revenue recognition guidance, which the Company expects to adopt in the first quarter of fiscal 2018. The Company is currently evaluating the effect of the updated standard on its consolidated financial statements and related disclosures. NOTE 3: EARNINGS PER SHARE Basic earnings per share is computed by dividing Net income by the weighted-average number of shares of common stock outstanding during the period. Diluted earnings per share is computed by dividing Net income by the weighted-average number of shares of common stock outstanding during the period increased to include the number of additional shares of common stock that would have been outstanding if the potentially dilutive securities had been issued. Potentially dilutive securities include outstanding stock options, shares to be purchased under the Company’s employee stock purchase plan and restricted stock units. The dilutive effect of potentially dilutive securities is reflected in diluted earnings per share by application of the treasury stock method. Under the treasury stock method, an increase in the fair market value of the Company’s common stock can result in a greater dilutive effect from potentially dilutive securities. The following table shows the computation of basic and diluted earnings per share: Fiscal Years 2016 2015 2014 (in millions, except per share data) Numerator: Net income attributable to Trimble Inc. Denominator: Weighted average number of common shares used in basic earnings per share Effect of dilutive securities Weighted average number of common shares and dilutive potential common shares used in diluted earnings per share Basic earnings per share Diluted earnings per share $ $ $ 132.4 $ 121.1 $ 214.1 250.5 3.4 253.9 0.53 0.52 $ $ 255.8 2.7 258.5 0.47 0.47 $ $ 260.1 4.4 264.5 0.82 0.81 For fiscal 2016, 2015 and 2014 the Company excluded 4.3 million shares, 6.1 million shares and 1.4 million shares of outstanding stock options, respectively, from the calculation of diluted earnings per share because their effect would have been antidilutive. NOTE 4: BUSINESS COMBINATIONS During fiscal 2016, 2015 and 2014 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 2016, the Company acquired four businesses, all with cash consideration, all in its Engineering and Construction segment. The purchase prices ranged from less than $0.3 million to $14.0 million. The acquisitions were not significant individually or in the aggregate. The largest acquisition was of a company that manages content and software solutions enable Mechanical, Electrical and Plumbing (MEP) contractors and engineers to produce intelligent and constructible models, based in Rocklin, California. In the aggregate, the businesses acquired during fiscal 2016 contributed less than one percent to the Company's total revenue during fiscal 2016. During fiscal 2015, the Company acquired thirteen businesses, all with cash consideration, in its Engineering and Construction, Field Solutions and Mobile Solutions segments. The acquisitions were not significant individually or in the aggregate. The purchase prices ranged from less than $2.0 million to $30.0 million. The largest acquisition was a Norwegian company specializing in BIM software for infrastructure design software solutions across the European region. In the aggregate, the businesses acquired during fiscal 2015 collectively contributed less than one percent to the Company's total revenue during fiscal 2015. During fiscal 2014, the Company acquired thirteen businesses across its Engineering and Construction, Field Solutions, and Mobile Solutions segments. The purchase prices ranged from less than $0.6 million to $83.1 million. The largest acquisition was of a company that provides software solutions to MEP industry and a software provider for real estate and facility management, based in London within the Engineering and Construction segment. In the aggregate, the businesses acquired during fiscal 2014 collectively contributed less than one percent to the Company's total revenue during fiscal 2014. 65 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 2016, 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 of $6.9 million, $12.0 million and $13.4 million in fiscal 2016, 2015 and 2014, respectively, were expensed as incurred, along with the changes in fair value of the contingent consideration liabilities, and are included in General and administrative expenses in the Consolidated Statements of Income. The following table summarizes the Company’s business combinations completed during fiscal 2016, 2015 and 2014: (In millions) Fair value of total purchase consideration Less fair value of net assets acquired: Net tangible assets acquired Identified intangible assets Deferred taxes Goodwill Intangible Assets Fiscal 2016 Fiscal 2015 Fiscal 2014 27.6 $ 176.2 $ 331.8 (1.9) 13.6 (1.3) 17.2 $ 8.0 83.3 (13.6) 98.5 $ 41.2 155.8 (46.8) 181.6 $ $ The following table presents details of the Company’s total intangible assets: (In millions) Gross Carrying Amount Accumulated Amortization Net Carrying Amount Gross Carrying Amount Accumulated Amortization Net Carrying Amount At the End of Fiscal 2016 At the End of Fiscal 2015 Developed product technology $ 794.8 $ (620.6) $ 174.2 $ 802.1 $ (536.0) $ Trade names and trademarks Customer relationships Distribution rights and other intellectual properties 50.9 438.7 64.3 (42.9) (294.1) (57.8) 8.0 144.6 6.5 52.8 448.1 78.6 (39.8) (258.0) (60.7) $ 1,348.7 $ (1,015.4) $ 333.3 $ 1,381.6 $ (894.5) $ 266.1 13.0 190.1 17.9 487.1 The weighted-average amortization period is six years for developed product technology, five years for trade names and trademarks, seven years for customer relationships, and eight years for distribution rights and other intellectual properties. The estimated future amortization expense of intangible assets at the end of fiscal 2016 is as follows (in millions): 2017 2018 2019 2020 2021 Thereafter Total $ $ 126.1 98.7 59.4 32.1 11.5 5.5 333.3 66 Goodwill The changes in the carrying amount of goodwill for fiscal 2016 are as follows (in millions): At the end of fiscal 2015 Additions due to acquisitions and current year acquisitions' purchase price adjustments Purchase price adjustments - prior years' acquisitions Foreign currency translation adjustments Divestitures At the end of fiscal 2016 Engineering and Construction 1,140.1 $ Field Solutions 125.7 $ Mobile Solutions Advanced Devices $ 822.9 $ 17.7 $ 18.6 — (35.1) (1.2) 1,122.4 $ — 0.2 (1.1) — 124.8 $ — 0.1 (3.9) (6.6) 812.5 $ — — 0.2 — 17.9 $ $ Total 2,106.4 18.6 0.3 (39.9) (7.8) 2,077.6 The Company sold the Omega Group assets, Advanced Public Safety (APS) business, and Gatewing business in fiscal 2016. Both Omega Group and APS businesses provided software solutions for public safety agencies and were part of the Company’s Mobile Solutions segment. Gatewing provided lightweight unmanned aerial vehicles for photogrammetry and rapid terrain mapping applications and was part of the Company's Engineering and Construction segment. NOTE 5: CERTAIN BALANCE SHEET COMPONENTS The following tables provide details of selected balance sheet items: At the End of Fiscal Year (In millions) Inventories: Raw materials Work-in-process Finished goods Total inventories 2016 2015 $ $ 77.9 6.8 134.1 218.8 $ $ 107.5 5.9 147.7 261.1 Finished goods includes $14.4 million at the end of fiscal year 2016 and $14.6 million at the end of fiscal year 2015 for costs of sales that have been deferred in connection with deferred revenue arrangements. At the End of Fiscal Year (In millions) Property and equipment, net: Machinery and equipment Software and licenses Furniture and fixtures Leasehold improvements Construction in progress Buildings Land Less accumulated depreciation Total 2016 2015 $ $ 113.3 119.4 26.3 32.1 10.8 47.9 8.3 358.1 (213.9) 144.2 $ $ 115.8 112.1 26.8 30.4 13.5 48.1 8.2 354.9 (195.7) 159.2 67 At the End of Fiscal Year (In millions) Other non-current liabilities: Deferred compensation Pension Deferred rent Unrecognized tax benefits Other Total 2016 2015 $ $ 22.6 13.1 3.3 65.3 9.5 113.8 $ $ 21.1 13.5 3.0 53.1 15.8 106.5 NOTE 6: REPORTING SEGMENT AND GEOGRAPHIC INFORMATION To achieve distribution, marketing, production, and technology advantages, the Company manages its operations in the following four segments: • Engineering and Construction: This segment primarily serves customers working in architecture, engineering, construction, geospatial and government. Within this segment our most substantial product portfolios are focused on civil engineering and construction, building construction, and geospatial. • Field Solutions: This segment provides solutions for the farming, government and consumer markets, with its products focused on agriculture and geographic information systems (GIS). • Mobile Solutions: This segment provides solutions that enable end-users to monitor and manage their mobile work, mobile workers and mobile assets in the areas of transportation and logistics and field services management. • Advanced Devices - The various operations that comprise this segment are aggregated on the basis that these operations do not exceed 10% of the Company's total revenue, operating income or assets. This segment is comprised of the Embedded Technologies, Timing, Applanix, Military and Advanced Systems and ThingMagic businesses. The Company’s CODM, its Chief Executive Officer, evaluates each of its segment’s performance and allocates resources based on segment operating income before income taxes and some corporate allocations. The Company and each of its segments employ consistent accounting policies. In each of its segments the Company sells many individual products. For this reason it is impracticable to segregate and identify revenue for each of the individual products or group of products. Stock-based compensation is shown in the aggregate within unallocated corporate expense and is not reflected in the segment results, which is consistent with the way the CODM evaluates each of the segment's performance and allocates resources. The following tables present revenue, operating income, depreciation expense and identifiable assets for the four segments. Operating income is revenue less cost of sales and operating expense, excluding general corporate expense, acquisition/divestiture costs, amortization of purchased intangible assets, amortization of acquisition-related inventory step-up, restructuring charges, stock-based compensation, litigation reserves and executive transition costs. The identifiable assets that the CODM views by segment are accounts receivable, inventories and goodwill. 68 Fiscal Years (In millions) Engineering and Construction Revenue Operating income Depreciation expense Field Solutions Revenue Operating income Depreciation expense Mobile Solutions Revenue Operating income Depreciation expense Advanced Devices Revenue Operating income Depreciation expense Total Revenue Operating income Depreciation expense At the End of Fiscal Year (Dollars in millions) Engineering and Construction Accounts receivable Inventories Goodwill Field Solutions Accounts receivable Inventories Goodwill Mobile Solutions Accounts receivable Inventories Goodwill Advanced Devices Accounts receivable Inventories Goodwill Total Accounts receivable Inventories Goodwill 2016 2015 2014 $ $ $ $ $ 1,313.6 230.5 13.6 354.3 105.2 1.3 559.7 88.9 5.5 134.6 51.4 0.6 2,362.2 476.0 21.0 $ $ $ $ $ 1,283.3 218.8 14.1 355.3 108.6 1.2 520.3 85.6 5.4 131.5 46.9 0.6 2,290.4 459.9 21.3 1,348.1 284.1 13.4 422.1 137.8 0.9 486.8 78.0 5.3 138.5 44.3 0.6 2,395.5 544.2 20.2 2016 2015 2014 $ $ $ $ $ 202.9 140.8 1,122.4 59.7 32.7 124.8 69.2 31.6 812.5 23.0 13.7 17.9 354.8 218.8 2,077.6 $ $ $ $ $ 215.9 178.0 1,140.1 57.1 36.0 125.7 69.6 30.4 822.9 19.3 16.7 17.7 361.9 261.1 2,106.4 227.7 185.2 1,170.6 51.6 51.0 96.0 62.9 26.1 796.0 19.8 15.8 23.2 362.0 278.1 2,085.8 $ $ $ $ $ $ $ $ $ $ A reconciliation of the Company’s consolidated segment operating income to consolidated income before income taxes is as follows: 69 Fiscal Years (In millions) Consolidated segment operating income Unallocated corporate expense (1) Restructuring charges (2) Stock-based compensation Amortization of purchased intangible assets Consolidated operating income Non-operating income (expense), net Consolidated income before taxes 2016 2015 2014 $ $ 476.0 (78.3) (13.3) (52.6) (150.8) 181.0 (4.3) 176.7 $ $ 459.9 (80.2) (12.8) (50.1) (162.4) 154.4 (2.6) 151.8 $ $ 544.2 (79.4) (2.1) (43.4) (158.5) 260.8 5.2 266.0 (1) Unallocated corporate expense includes general corporate expense, amortization of acquisition-related inventory step-up, acquisition/divestiture costs, litigation expenses and executive transition costs. (2) Restructuring charges primarily consist of severance and benefits, resulting from employee headcount reductions in connection with the Company's restructuring programs related to decisions to streamline processes and reduce the cost structure. As of the end of fiscal 2016, the Company's restructuring liability was $2.5 million, which is expected to be settled in fiscal 2017. Restructuring liabilities are reported within Other current liabilities on the Consolidated Balance Sheets. The geographic distribution of Trimble’s revenue and long-lived assets is summarized in the tables below. Other non-US geographies include Canada, and countries in South and Central America, the Middle East, and Africa. Revenue is defined as revenue from external customers. Fiscal Years (In millions) Revenue (1): United States Europe Asia Pacific Other non-US countries Total consolidated revenue 2016 2015 2014 $ $ 1,156.0 574.9 352.6 278.7 2,362.2 $ $ 1,142.1 557.2 321.1 270.0 2,290.4 $ $ 1,147.7 581.7 345.6 320.5 2,395.5 (1) Revenue is attributed to countries based on the location of the customer. No single customer or country other than the United States accounted for 10% or more of Trimble’s total revenue in fiscal years 2016, 2015 and 2014. No single customer accounted for 10% or more of Trimble's accounts receivable as of fiscal years ended 2016 and 2015. Property and equipment, net by geographic area was as follows: 2016 2015 $ $ 120.4 15.3 8.5 144.2 $ $ 130.4 18.9 9.9 159.2 At the End of Fiscal Year (In millions) Property and equipment, net: United States Europe Asia Pacific and other non-US countries Total property and equipment, net NOTE 7: DEBT Debt consisted of the following: 70 At the End of Fiscal Year (Dollars in millions) Notes: Principal amount Unamortized discount on Notes Debt issuance costs Credit Facilities: 2014 Credit facility Uncommitted facilities Promissory notes and other debt Total debt Less: Short-term debt Long-term debt Notes 2016 2015 $ $ $ 400.0 (2.5) (2.4) 94.0 130.0 0.8 619.9 130.3 489.6 $ 400.0 (2.8) (2.7) 216.0 118.0 1.2 729.7 118.3 611.4 On October 30, 2014, the Company filed a shelf registration statement with the Securities and Exchange Commission (“SEC”) for the issuance of senior debt securities. On November 24, 2014, the Company issued $400.0 million of Senior Notes (“Notes”) under the shelf registration statement. Net proceeds from the offering were $396.9 million after deducting the 0.795% discount on the public offering price. The Company recognized $3.0 million of debt issuance costs associated with the issuance of the Notes, including an underwriting discount of $2.6 million, which is classified as an offset to the Notes on the Consolidated Balance Sheets. The discount and debt issuance costs are being amortized to interest expense using the effective interest rate method over the term of the Notes. The Notes mature on December 1, 2024 and accrue interest at a rate of 4.75% per annum, payable semiannually in arrears in cash on December 1 and June 1 of each year, beginning on June 1, 2015. The Notes are classified as long-term in the Consolidated Balance Sheet. Prior to September 1, 2024, Trimble may redeem the Notes at its option at any time, in whole or in part, at a redemption price equal to the greater of (i) 100% of the aggregate principal amount of the Notes to be redeemed and (ii) the sum of the present values of the remaining scheduled payments of interest and principal, calculated on a semiannual basis using a discount rate equal to the U.S. Treasury rate plus 40 basis points. After September 1, 2024, Trimble may redeem the Notes at its option at any time, in whole or in part, at a redemption price equal to 100% of the aggregate principal amount of the Notes to be redeemed, plus accrued and unpaid interest thereon. In addition, in the event of a change of control, as defined in the prospectus filed with the SEC, each holder of the Notes will have the right to require Trimble to purchase for cash all or a portion of such holder’s Notes at a purchase price equal to 101% of the principal amount of the Notes, plus any accrued and unpaid interest. In connection with the closing of the Notes offering, Trimble entered into an Indenture with U.S. Bank National Association, as trustee. The Indenture contains covenants limiting Trimble’s 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 Trimble’s properties and assets to, another person, each subject to certain exceptions. The Notes contain no financial covenants. Credit Facilities 2014 Credit Facility On November 24, 2014, the Company entered into a new five-year credit agreement with a group of lenders (the “2014 Credit Facility”). The 2014 Credit Facility provides for an unsecured revolving loan facility of $1.0 billion. Subject to the terms of the 2014 Credit Facility, the revolving loan facility may be increased and/or term loan facilities may be established in an amount up to $500.0 million. The outstanding balance of $94.0 million and $216.0 million is classified as long-term in the Consolidated Balance Sheet as of fiscal years ended 2016 and 2015, respectively. The 2014 Credit Facility replaced the Company's previous 2012 Credit Facility comprised of a five-year revolving loan facility of $700.0 million and a five-year $700.0 million term loan facility. Upon entering into the 2014 Credit Facility, the Company borrowed $307.0 million under the revolving loan facility. The Company used the proceeds from the revolving loan facility and the issuance of the Notes to pay off the then $638.8 million outstanding term loan balance under the 2012 Credit Facility. The Company also wrote off a portion of the unamortized debt issuance costs related to the 2012 Credit Facility totaling $2.7 million, which is classified as a non-operating expense in the Company’s fiscal 2014 Consolidated Statement of Income. In addition, the Company recognized $1.6 million of debt issuance costs associated with the 2014 Credit Facility. The remaining unamortized debt issuance costs associated with the 2012 Credit Facility and the new debt issuance costs associated with the 2014 Credit Facility 71 are classified as current and non-current assets on the Consolidated Balance Sheets and being amortized to interest expense using the effective interest rate method over the term of the 2014 Credit Facility. The funds available under the 2014 Credit Facility may be used for working capital and general corporate purposes including stock repurchases and the financing of certain acquisitions. Under the 2014 Credit Facility, the Company may borrow, repay and reborrow funds under the revolving loan facility until its maturity on November 24, 2019, at which time the revolving facility will terminate, and all outstanding loans, together with all accrued and unpaid interest, must be repaid. Amounts not borrowed under the revolving facility will be subject to a commitment fee, to be paid in arrears on the last day of each fiscal quarter, ranging from 0.10% to 0.30% per annum depending on either the Company's credit rating at such time or the Company's leverage ratio as of the most recently ended fiscal quarter, whichever results in more favorable pricing to the Company. The Company may borrow funds under the 2014 Credit Facility in U.S. Dollars, Euros or in certain other agreed currencies, and borrowings will bear interest, at the Company’s option, at either: (i) a floating per annum base rate determined by reference to the highest of: (a) the administrative agent’s prime rate; (b) 0.50% per annum above the federal funds effective rate; and (c) reserve- adjusted LIBOR for an interest period of one month plus 1.00%, plus a margin of between 0.00% and 0.75%, or (ii) a reserve- adjusted fixed per annum rate based on LIBOR or EURIBOR, depending on the currency borrowed, plus a margin of between 1.00% and 1.75%. The applicable margin in each case is determined based on either Trimble’s credit rating at such time or Trimble’s leverage ratio as of its most recently ended fiscal quarter, whichever results in more favorable pricing to Trimble. Interest is payable on the last day of each fiscal quarter with respect to borrowings bearing interest at the base rate, or on the last day of an interest period, but at least every three months, with respect to borrowings bearing interest at LIBOR or EURIBOR rate. The 2014 Credit Facility contains various customary representations and warranties by the Company, which include customary use of materiality, material adverse effect and knowledge qualifiers. The 2014 Credit Facility also contains customary affirmative and negative covenants including, among other requirements, negative covenants that restrict the Company's ability to create liens and enter into sale and leaseback transactions, and that restrict its subsidiaries’ ability to incur indebtedness. Further, the 2014 Credit Facility contains financial covenants that require the maintenance of minimum interest coverage and maximum leverage ratios. Specifically, the Company must maintain as of the end of each fiscal quarter a ratio of (a) EBITDA (as defined in the 2014 Credit Facility) to (b) interest expense for the most recently ended period of four fiscal quarters of not less than 3.50 to 1.00. The Company must also maintain, at the end of each fiscal quarter, a ratio of (x) total indebtedness (as defined in the 2014 Credit Facility) to (y) EBITDA (as defined in the 2014 Credit Facility) for the most recently ended period of four fiscal quarters of not greater than 3.00 to 1.00; provided, that on the completion of a material acquisition, the Company may increase the ratio by 0.50 for the fiscal quarter during which such acquisition occurred and each of the three subsequent fiscal quarters. The Company was in compliance with these covenants at the end of fiscal 2016. The 2014 Credit Facility contains events of default that include, among others, non-payment of principal, interest or fees, breach of covenants, inaccuracy of representations and warranties, cross defaults to certain other indebtedness, bankruptcy and insolvency events, material judgments and events constituting a change of control. Upon the occurrence and during the continuance of an event of default, interest on the obligations will accrue at an increased rate in the case of an event of default arising from the nonpayment of principal and the lenders may accelerate the Company's obligations under the 2014 Credit Facility, except that acceleration will be automatic in the case of bankruptcy and insolvency events of default. In February 2016, the Company entered into an amendment to the 2014 Credit Facility to facilitate the Company's reincorporation from California to Delaware and to effect other non-financial terms. In August 2016, the Company entered into a second amendment to revise a definition used in determining when a change of control of the Company may occur. The interest rate on the long-term debt outstanding under the 2014 Credit Facility was 1.80% and 1.46% at the end of fiscal 2016 and 2015, respectively. Uncommitted Facilities The Company also has two $75 million revolving credit facilities which are uncommitted (the "Uncommitted Facilities"). The Uncommitted Facilities may be called by the lenders at any time, have no covenants and no specified expiration date. The interest rate on the Uncommitted Facilities is 1.00% plus either LIBOR or the bank’s cost of funds or as otherwise agreed upon by the bank and the Company. The $130.0 million outstanding at the end of 2016 and the $118.0 million outstanding at the end of 2015 under the Uncommitted Facilities are classified as short-term in the Consolidated Balance Sheet. The weighted average interest rate on the Uncommitted Facilities was 1.65% at the end of fiscal 2016 and 1.37% at the end of fiscal 2015. Promissory Notes and Other Debt 72 At the end of fiscal 2016 and 2015, the Company had promissory notes and other notes payable totaling approximately $0.8 million and $1.2 million, respectively, of which $0.5 million and $0.9 million, respectively, was classified as long-term in the Consolidated Balance Sheet. Debt Maturities At the end of fiscal 2016, the Company's debt maturities based on outstanding principal were as follows (in millions): Year Payable 2017 2018 2019 2020 2021 Thereafter Total $ $ $ 130.3 0.2 0.2 94.1 — 400.0 624.8 NOTE 8: COMMITMENTS AND CONTINGENCIES Operating Leases and Other Commitments The Company’s principal facilities in the United States are leased under various cancelable and non-cancelable operating leases that expire at various dates through 2025. For tenant improvement allowances and rent holidays, Trimble records a deferred rent liability on the Consolidated Balance Sheets and amortizes the deferred rent over the terms of the leases as reductions to rent expense on the Consolidated Statements of Income. The estimated future minimum payments required under the Company’s operating lease commitments at the end of fiscal 2016 were as follows (in millions): 2017 2018 2019 2020 2021 Thereafter Total $ $ 30.4 23.6 17.2 12.6 8.9 23.2 115.9 Net rent expense under operating leases was $34.4 million in fiscal 2016, $34.0 million in fiscal 2015, and $34.1 million in fiscal 2014. At the end of fiscal 2016, the Company had unconditional purchase obligations of approximately $146.2 million. These unconditional purchase obligations primarily represent open non-cancelable purchase orders for material purchases with the Company’s vendors. Purchase obligations exclude agreements that are cancelable without penalty. Additionally, the Company has certain acquisitions include additional earn-out cash payments based on estimated future revenues, gross margins or other milestones. At the end of fiscal 2016, the Company had $4.5 million included in Other current liabilities and Other non-current liabilities related to these earn-outs, representing the fair value of the contingent consideration. Litigation On September 2, 2011, Recreational Data Services, LLC filed a lawsuit in the Superior Court for the State of Alaska in Anchorage against Trimble Navigation Limited, Cabela’s Incorporated, AT&T Mobility and Alascom, Inc., alleging breach of contract, breach of fiduciary duty, interference with contract, promissory estoppel, fraud, and negligent misrepresentation. The case was tried in front of a jury in Alaska beginning on September 9, 2014. On September 26, 2014, the jury returned a verdict in favor of the plaintiff and awarded the plaintiff damages of $51.3 million. On January 29, 2015, the court granted our Motion for Judgment notwithstanding the Verdict, and on March 18, 2015, the Court awarded the Company a portion of its incurred attorneys’ fees and 73 costs, and entered Final Judgment in the Company’s favor in the amount of $0.6 million. The Final Judgment also provides that the plaintiff take nothing on its claims. On April 17, 2015, the plaintiff filed a Notice of Appeal to the Alaska Supreme Court. The parties have completed all appellate briefing, and oral arguments were heard before the Alaska Supreme Court on February 24, 2016. A decision by the Alaska Supreme Court has not been made. Although an unfavorable outcome on appeal could have an adverse effect on the Company, the Company believes the claims in the lawsuit are without merit. From time to time, the Company is also involved in litigation arising out of the ordinary course of our business. There are no other material legal proceedings, other than ordinary routine litigation incidental to the business, to which the Company or any of its subsidiaries is a party or of which any of the Company's or its subsidiaries' property is subject. NOTE 9. CASH EQUIVALENTS AND SHORT-TERM INVESTMENTS The Company did not have any investment in available-for-sale securities as of the end of fiscal 2015. The following table summarizes the Company’s available-for-sale securities as of the end of fiscal 2016: At the end of Fiscal 2016 (Dollars in millions) Available-for-sale securities: U.S. Treasury securities Municipal debt securities Corporate debt securities Time deposit Commercial paper $ Total available-for-sale securities $ Reported as: Cash and cash equivalents Short-term investments Total $ $ 11.7 10.0 31.7 2.4 77.5 133.3 22.2 111.1 133.3 The Company recognized $0.3 million realized gains on its available-for-sale securities during fiscal 2016, and the gross unrealized gains or losses as of the end of fiscal 2016 were de minimis. The following table presents the contractual maturities of the Company's available-for-sale investments as of the end of fiscal 2016. At the end of Fiscal 2016 (Dollars in millions) Due in less than 1 year $ Due in 1 to 5 years Due in 5-10 years Due after 10 years Total $ 106.9 16.4 2.0 8.0 133.3 The Company’s available-for-sale securities are liquid and may be sold in the future to fund future operating needs. As a result, the Company recorded all of its available-for-sale securities, not classified as cash equivalents, in Short-term investments as of the end of fiscal 2016, regardless of the contractual maturity date of the securities. 74 NOTE 10: FAIR VALUE MEASUREMENTS The Company determines fair value based on the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants at the measurement date. Where available, fair value is based on observable market prices or parameters. Where observable prices or inputs are not available, valuation models are applied. Hierarchical levels, defined by the guidance on fair value measurements are directly related to the amount of subjectivity associated with the inputs to fair valuation of these assets and liabilities, and are as follows: Level I—Observable inputs such as unadjusted, quoted prices in active markets for identical assets or liabilities. Level II—Inputs (other than quoted prices included in Level I) are either directly or indirectly observable for the asset or liability. These include quoted prices for similar assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are not active. Level III—Unobservable inputs that reflect management’s best estimate of what market participants would use in pricing the asset or liability at the measurement date. Consideration is given to the risk inherent in the valuation technique and the risk inherent in the inputs to the model. Fair Value on a Recurring Basis Assets and liabilities measured at fair value on a recurring basis are categorized in the tables below based upon the lowest level of significant input to the valuations. Fair Values as of Fiscal Year End 2016 Fair Values as of Fiscal Year End 2015 Level I Level II Level III Total Level I Level II Level III Total $ — $ $ — $ (In millions) Assets Available-for-sale securities: U.S. Treasury securities (1) Municipal debt securities (1) Corporate debt securities (1) Time deposit (1) Commercial paper (1) Total available-for-sale securities Deferred compensation plan assets (2) Derivative assets (3) Contingent consideration assets (4) Total assets measured at fair value Liabilities Deferred compensation plan liabilities (2) Derivative liabilities (3) Contingent consideration liabilities (5) $ $ 11.7 10.0 31.7 2.4 77.5 133.3 — 0.2 — — — — — 22.6 — — — — Total liabilities measured at fair value $ 22.6 $ — — — — — — 7.0 7.0 11.7 10.0 31.7 2.4 77.5 133.3 22.6 0.2 7.0 $ — $ — $ — $ — — — — — 21.1 — — — — — — — 2.9 — 21.1 $ 2.9 $ — — — — — — 7.0 7.0 — — — — 21.1 2.9 7.0 $ 31.0 21.1 $ — $ — $ 21.1 $ $ 0.1 — 0.1 $ — 4.5 4.5 0.1 4.5 — — 2.1 — $ 27.2 $ 21.1 $ 2.1 $ — 6.6 6.6 2.1 6.6 $ 29.8 22.6 $ 133.5 $ $ 163.1 22.6 $ — $ — $ 22.6 (1) The Company’s available-for sale securities are valued using readily available pricing sources for comparable instruments, or model-driven valuations using significant inputs derived from or corroborated by observable market data, including yield curves and credit ratings. (2) The Company maintains a self-directed, non-qualified deferred compensation plan for certain executives and other highly compensated employees. The plan assets and liabilities are invested in actively traded mutual funds and individual stocks valued using observable quoted prices in active markets. Deferred compensation plan assets and liabilities are included in Other non-current assets and Other non-current liabilities, respectively, on the Company's Consolidated Balance Sheets. (3) Derivative assets and liabilities primarily represent forward currency exchange contracts. The Company typically enters into these contracts to minimize the short-term impact of foreign currency exchange rates on certain trade and inter- company receivables and payables. Derivative assets and liabilities are included in Other current assets and Other current liabilities on the Company's Consolidated Balance Sheets. 75 (4) Contingent consideration assets represent arrangements for buyers to pay the Company for certain businesses that it has divested. The fair value is determined based on the Company's expectations of future receipts. The minimum amount to be received under these arrangements is $3.5 million. Contingent consideration assets are included in Other receivables and Other non-current assets on the Company's Consolidated Balance Sheets. (5) Contingent consideration liabilities represent arrangements to pay the former owners of certain companies that Trimble acquired. The undiscounted maximum payment under the arrangements is $17.5 million at the end of fiscal 2016, based on estimated future revenues, gross margins or other milestones. Contingent consideration liabilities are included in Other current liabilities and Other non-current liabilities on the Company's Consolidated Balance Sheets. Additional Fair Value Information The following table provides additional fair value information relating to the Company’s financial instruments outstanding: At the End of Fiscal Year (In millions) Liabilities: Notes 2014 Credit facility Uncommitted facilities Promissory notes and other debt Carrying Amount Fair Value Carrying Amount Fair Value 2016 2015 $ $ $ 400.0 94.0 130.0 0.8 $ 410.6 94.0 130.0 0.8 $ 400.0 216.0 118.0 1.2 399.9 216.0 118.0 1.2 The fair value of the Notes was determined based on observable market prices in less active markets and is categorized accordingly as Level II in the fair value hierarchy. The fair value of the bank borrowings and promissory notes has been calculated using an estimate of the interest rate the Company would have had to pay on the issuance of notes with a similar maturity and discounting the cash flows at that rate, and is categorized as Level II in the fair value hierarchy. The fair values do not give an indication of the amount that the Company would currently have to pay to extinguish any of this debt. 76 NOTE 11: INCOME TAXES Income before taxes and the provision for taxes consisted of the following: Fiscal Years (In millions) Income before taxes: United States Foreign Total Provision for taxes: US Federal: Current Deferred US State: Current Deferred Foreign: Current Deferred Income tax provision Effective tax rate 2016 2015 2014 $ $ $ $ 68.4 108.3 176.7 34.0 (14.3) 19.7 3.5 0.6 4.1 28.8 (8.1) 20.7 44.5 25% $ $ $ $ $ $ 55.6 96.2 151.8 47.5 (23.0) 24.5 5.7 (2.8) 2.9 25.4 (21.7) 3.7 $ 31.1 $ 99.3 166.7 266.0 45.7 (11.7) 34.0 7.7 (0.9) 6.8 25.3 (14.0) 11.3 52.1 20% 20% The difference between the tax provision at the statutory federal income tax rate and the tax provision as a percentage of income before taxes (effective tax rate) was as follows: Fiscal Years Statutory federal income tax rate Increase (reduction) in tax rate resulting from: Foreign income taxed at lower rates US State income taxes US Federal research and development credits Stock-based compensation Foreign audit reserve release Divestiture Valuation allowance release - foreign Other Effective tax rate 2016 2015 2014 35 % (10)% 2 % (3)% 3 % — % (5)% — % 3 % 25 % 35 % (11)% 1 % (3)% 1 % (2)% — % (3)% 2 % 20 % 35 % (18)% 2 % (1)% 1 % — % — % — % 1 % 20 % The effective tax rate in fiscal 2016 increased compared to 2015 primarily due to the closing of a foreign audit and valuation allowance release in 2015, increase in nondeductible expense, and a change in the geographic mix of pretax income, partially offset by a tax benefit from a divestiture of a non-strategic business. The effective tax rate in fiscal 2015 remained consistent with 2014. However, certain specific items affecting the effective tax rate did change. These included a change in geographic mix of pretax income, which was partially offset by tax benefits resulting from the closing of a foreign tax audit, valuation allowance releases and an increase in federal research and development credit. 77 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 the Company’s deferred tax assets and liabilities are as follows: At the End of Fiscal Year (In millions) Deferred tax liabilities: Purchased intangibles Depreciation and amortization US residual tax on foreign earnings Total deferred tax liabilities Deferred tax assets: Inventory valuation differences Expenses not currently deductible US federal tax credit carryforwards Deferred revenue US state tax credit carryforwards Accrued warranty US federal net operating loss carryforwards Foreign net operating loss carryforwards Stock-based compensation Other Total deferred tax assets Valuation allowance Total deferred tax assets Total net deferred tax liabilities Reported as: Non-current deferred income tax assets Non-current deferred income tax liabilities Net deferred tax liabilities 2016 2015 $ $ $ $ 91.9 11.7 11.3 114.9 12.9 27.7 0.3 6.9 15.1 3.1 3.8 31.2 31.9 4.1 137.0 (30.6) 106.4 (8.5) $ 30.3 (38.8) (8.5) $ 122.6 11.0 12.2 145.8 11.5 26.2 0.6 6.6 16.4 3.4 5.5 41.7 29.6 9.0 150.5 (34.9) 115.6 (30.2) 21.5 (51.7) (30.2) In the fourth quarter of 2015, the Company adopted new accounting guidance for balance sheet classification of deferred taxes, which requires that all deferred income tax assets and liabilities be classified as non-current in the balance sheet. The guidance was adopted on a prospective basis and, therefore, prior periods were not retrospectively adjusted. At the end of fiscal 2016, the Company has federal and foreign net operating loss carryforwards, or NOLs, of approximately $13.6 million and $147.6 million, respectively. The federal NOLs expire beginning year 2021. There is, generally, no expiration for the foreign NOLs. Utilization of the Company’s federal and state NOLs is subject to annual limitations in accordance with the applicable tax code. The Company has determined that it is more likely than not that the Company will not realize a portion of the foreign NOLs and, accordingly, a valuation allowance has been established for such amount. The Company has Federal and California research and development credit carryforwards of approximately $0.3 million and $17.1 million, respectively. The federal tax credit carryforwards will expire beginning 2030. The California research tax credits have indefinite carryforward period. The Company believes that it is more likely than not that the Company will not realize a portion of the California research and development credit carryforwards and, accordingly, a valuation allowance has been established for such amount. At the end of fiscal 2016, the Company’s foreign subsidiaries had approximately $869.7 million of accumulated undistributed earnings that are intended to be indefinitely reinvested outside the U.S. and, accordingly, no provision for U.S. federal and state income taxes have been provided thereon. If such earnings were to be distributed in the form of dividends or otherwise, the Company would have to recognize additional tax liability of approximately $258.5 million. 78 The total amount of the unrecognized tax benefits at the end of fiscal 2016 was $72.9 million. A reconciliation of gross unrecognized tax benefit is as follows: At the End of Fiscal Year (In millions) Beginning gross balance Increase related to prior years' tax positions Increase related to current year tax positions Lapse of statute of limitations Settlement with taxing authorities Ending gross balance 2016 2015 2014 $ $ 59.0 $ 51.4 $ 7.5 9.9 (1.4) (2.1) 72.9 $ 6.0 6.2 (1.5) (3.1) 59.0 $ 44.1 0.8 7.5 (1.0) — 51.4 The Company's total unrecognized tax benefits that, if recognized, would affect its effective tax rate were $60.5 million and $52.7 million at the end of fiscal 2016 and 2015, respectively. The Company and its subsidiaries are subject to U.S. federal, state, and foreign income taxes. The Company has substantially concluded all U.S. federal income tax audits for years through 2009. State income tax matters have been concluded for years through 2009 and non-U.S. income tax matters have been concluded for years through 2005. The Company is currently in various stages of multiple year examinations by federal, state, and foreign (multiple jurisdictions) taxing authorities. While the Company generally believes it is more likely than not that its tax positions will be sustained, it is reasonably possible that future obligations related to these matters could arise. The Company believes that its reserves are adequate to cover any potential assessments that may result from the examinations and negotiations. In the first quarter of fiscal 2015, the Company received a Notice of Proposed Adjustment from the IRS for the fiscal years 2010 and 2011. The proposed adjustments primarily relate to the valuations of intercompany transfers of acquired intellectual property. The assessments of tax and penalties for the years in question total $67.0 million. The Company does not agree with the IRS position and has filed a protest with the IRS Appeals Office in April 2015. The IRS appeals process commenced in March 2016. Although the Company continues to believe in the merits of its positions, during the fourth quarter of fiscal 2016, the Company submitted a written proposal to the IRS to settle certain aspects of the assessments constituting $15.8 million of the total $67.0 million assessment. The Company intends to vigorously contest the IRS position on the remaining items, and believes that its reserves are adequate to cover any potential assessments. Although timing of the resolution and/or closure of audits is not certain, the Company believes it is reasonably possible that its gross unrecognized tax benefits could decrease (whether by payment, release or a combination of both) in the next 12 months by up to $6.2 million primarily related to the IRS partial settlement discussed above. The Company’s practice is to recognize interest and/or penalties related to income tax matters in income tax expense. The Company’s liability for unrecognized tax benefits including interest and penalties was recorded in Other non-current liabilities in the accompanying Consolidated Balance Sheets. At the end of fiscal 2016 and 2015, the Company had accrued $9.3 million and $6.7 million, respectively, for payment of interest and penalties. NOTE 12: ACCUMULATED OTHER COMPREHENSIVE LOSS The components of accumulated other comprehensive loss, net of related tax were as follows: At the End of Fiscal Year (In millions) Accumulated foreign currency translation adjustments Net unrealized actuarial losses Total accumulated other comprehensive loss 2016 2015 $ $ (216.8) $ (3.1) (219.9) $ (163.4) (3.4) (166.8) 79 NOTE 13: EMPLOYEE STOCK BENEFIT PLANS The Company’s stock benefit plans include the employee stock purchase plan and stock plans adopted in 2002, 1993, 1992, 1990, as well as one stock plan assumed through an acquisition in 2007. Other than the employee stock purchase plan and the 2002 and 1992 stock plans described below, the other plans have no shares available for future grant. Plans Employee Stock Purchase Plan The Company has an Employee Stock Purchase Plan (“Purchase Plan”) under which an aggregate of 39.1 million shares of Common Stock have been approved for issuance to eligible employees as approved by the stockholders to date. 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 generally six months. Rights to purchase shares are granted during the first and third quarter of each fiscal year. The Purchase Plan terminates on September 30, 2018. In fiscal 2016, 2015 and 2014, 1.1 million, 1.0 million, and 0.7 million shares were issued, respectively, representing $19.1 million, $18.1 million and $16.4 million in cash received for the issuance of stock under the Purchase Plan. At the end of fiscal 2016, the number of shares reserved for future purchases by eligible employees was 9.8 million. 2002 Stock Plan Trimble’s 2002 Stock Plan (“2002 Plan”), provides for the granting of incentive and non-statutory stock options and restricted stock units ("RSUs") for up to 62.6 million shares plus any shares currently reserved but unissued to employees, consultants, and directors of Trimble. Both incentive and non-statutory stock options may be granted at exercise prices that are not less than 100% of the fair market value of Common Stock on the date of grant. Employee stock options under the 2002 plan generally vest over four years with biennial, annual, or monthly vesting, and expire seven years from the date of grant. RSUs are converted into shares of Trimble common stock upon vesting on a one-for-one basis, except those with market-based or performance-based vesting conditions, in which the number of shares that may be greater. RSUs granted to employees generally vest over four years. RSUs granted to non-employee directors generally vest after one year. Grants of RSUs reduce the plan reserves by the number of shares to be issued multiplied by 1.69 and any forfeitures of these awards due to their not vesting would increase the plan reserve by the same measure. 1992 Employee Stock Bonus Plan At the end of fiscal 2016, there were no options outstanding to purchase shares under the 1992 Employee Stock Bonus Plan (“Bonus Plan”) and 1,606 shares were available for future grant under the Bonus Plan. Stock Option and Restricted Stock Unit Activity The following table summarizes the Company’s stock option and restricted stock unit activity during fiscal 2016: (In millions, except for per share data) Outstanding at the beginning of year Granted Option exercised Shares released, net Cancelled and Forfeited Outstanding at the end of year Stock Options Outstanding Restricted Stock Units Outstanding Options Weighted average exercise price Restricted Stock Units Weighted Average Grant-Date Fair Value 11.6 $ — $ (3.7) $ — $ (0.3) $ 7.6 $ 22.15 19.28 16.47 — 27.05 24.60 4.3 2.1 $ $ — $ (1.2) $ (0.5) $ 4.7 $ 26.98 26.13 — 27.86 26.43 26.40 During fiscal year 2016, the Company granted 0.7 million market-based and performance-based restricted stock units. As of fiscal year end 2016, the Company has 1.1 million market-based and performance-based restricted stock units outstanding and none had vested as of fiscal 2016 year end. As of the end of fiscal 2016, the number of shares available for grant under the 2002 stock plan was 7.7 million. 80 The following table summarizes information about stock options outstanding as of fiscal 2016 year end: Vested and expected to vest Options exercisable Number Of Shares (in millions) Weighted- Average Exercise Price per Share Weighted- Average Remaining Contractual Term (in years) Aggregate Intrinsic Value (in millions) 7.6 6.6 $ $ 24.59 24.15 2.70 2.47 $ $ 44.8 41.3 The intrinsic value of options vested and expected to vest and exercisable is calculated based on the difference between the exercise price and the fair value of the Company’s common stock as of the end of fiscal 2016. The total intrinsic value of options exercised during fiscal 2016, 2015 and 2014 was $36.0 million, $13.9 million, and $61.3 million, respectively, and is calculated based on the difference between the exercise price and the fair value of the Company’s common stock as of the exercise date. The following table summarizes information about restricted stock units outstanding as of fiscal 2016: Number Of Shares Underlying Restricted Stock Units (in millions) Weighted- Average Remaining Vesting Period (in years) Aggregate Fair Value (in millions) Vested and expected to vest 5.5 1.64 $ 164.7 The fair value of restricted stock units vested and expected to vest as of fiscal 2016 is calculated based on the fair value of the Company’s common stock as of the end of fiscal 2016. Stock-Based Compensation Expense The following table summarizes stock-based compensation expense included in the Consolidated Statements of Income. Fiscal Years (In millions) Cost of sales Research and development Sales and marketing General and administrative Total operating expenses Total stock-based compensation expense Fair Value of Share Purchase Rights 2016 2015 2014 $ $ 3.8 9.1 8.3 31.4 48.8 52.6 $ $ 3.9 8.7 9.1 28.4 46.2 50.1 $ $ 3.2 6.8 7.6 25.8 40.2 43.4 The fair value of the share purchase rights granted under the Purchase Plan are valued using the Black-Scholes option pricing model with the following weighted-average assumptions: Fiscal Years Expected life of purchase Expected stock price volatility Risk free interest rate Expected dividend yield 2016 0.5 years 36.9% 0.41% — 2015 0.5 years 31.3% 0.08% — 2014 0.5 years 30.5% 0.07% — Expected Life of Purchase—The Company’s expected life of the purchase is based on the term of the offering period of the purchase plan. Expected Stock Price Volatility—The Company’s computation of expected volatility is based on implied volatilities from traded options on the Company’s stock. The Company used implied volatility because it is representative of future stock price trends during the purchase period. Expected Risk Free Interest Rate—The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of grant for the expected term of the purchase period. 81 Expected Dividend Yield—The dividend yield assumption is based on the Company’s history and expectation of dividend payouts. The weighted average grant-date fair value per share of stock purchase rights granted under the Employee Stock Purchase Plan during fiscal years 2016, 2015 and 2014 was $6.51, $5.24 and $8.32 per share, respectively. Fair value of Stock Options The fair value of stock compensation is valued as of the grant date using a binomial valuation model. The binomial model takes into account variables such as volatility, dividend yield rate, and risk free interest rate. In addition, the binomial model incorporates actual option-pricing behavior and changes in volatility over the option’s contractual term. For options granted during fiscal 2016, 2015 and 2014, the following weighted-average assumptions were used: Fiscal Years Expected life of options Expected stock price volatility Risk free interest rate Expected dividend yield 2016 4.0 years 38% 1.49% — 2015 3.9 years 36% 1.26% — 2014 4.0 years 35% 1.29% — Expected Life of Options—The Company’s expected life represents the period that the Company’s stock options are expected to be outstanding and was determined based on historical experience of similar stock options with consideration for the contractual terms of the stock options, vesting schedules and expectations of future employee behavior. Expected Stock Price Volatility—The Company’s computation of expected volatility is based on a combination of implied volatilities from traded options on the Company’s stock and historical volatility, commensurate with the expected life of the stock options. Expected Risk Free Interest Rate—The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of grant for the expected life of the option. Expected Dividend Yield—The dividend yield assumption is based on the Company’s history and expectation of dividend payouts. The weighted average grant-date fair value per share of stock options granted during fiscal years 2016, 2015 and 2014 was $6.03, $7.36, and $9.07, respectively. The fair value of all stock options vested during fiscal years 2016, 2015 and 2014 was $14.6 million, $18.3 million and $20.5 million, respectively. Fair value of Restricted Stock Units and Performance-Based Restricted Stock Units The fair value of RSUs and PSUs are valued as of the grant date using the fair value of Trimble’s common stock. RSUs are service- based awards and vest over time based on continued employment. PSUs vest upon the achievement of specified performance goals, as well as continued employment, and the expense recognized is based upon the expected achievement of such goals. The weighted average grant-date fair value per share of RSUs granted during fiscal years 2016, 2015 and 2014 was $26.13, $23.22, and $30.18 per share, respectively. The fair value of all restricted stock units vested during fiscal years 2016, 2015 and 2014 was $33.6 million, $16.3 million and $3.9 million, respectively. Fair Value of Market-Based Restricted Stock Units Restricted stock units with market-based vesting conditions vest based on the achievement of the Company’s relative total stockholder return (TSR) of its common stock as compared to the TSR of the constituents of the S&P 500 at the start of the performance period. The fair value of restricted stock units with market-based vesting conditions is valued as of the grant date using a Monte Carlo simulation, using the following weighted-average assumptions: Fiscal Years Expected life of Market-Based Restricted Stock Units Expected stock price volatility Risk free interest rate Expected dividend yield 2016 3.1 years 33.8% 0.9% — 2015 2.6 years 30.9% 0.9% — The weighted average grant-date fair value of the restricted stock units with market-based vesting conditions granted during fiscal 2016 and 2015 was $27.09 and $31.60 per share, respectively. 82 Unrecognized Stock-Based Compensation At the end of fiscal 2016, total unamortized stock-based compensation expense was $88.9 million, with a weighted-average recognition period of 2.4 years. NOTE 14: COMMON STOCK REPURCHASE In August 2014, the Company's Board of Directors approved a stock repurchase program (2014 Stock Repurchase Program), authorizing the Company to repurchase up to $300.0 million of Trimble’s common stock, replacing a stock repurchase program which had been in place since 2011. In August 2015, the Company’s Board of Directors approved a stock repurchase program (2015 Stock Repurchase Program), authorizing the Company to repurchase up to $400.0 million of Trimble’s common stock, replacing the 2014 Stock Repurchase Program. In September 2015, the Company entered into an accelerated share repurchase agreement, or ASR, with an investment bank for $75.0 million. Under the share repurchase program, the Company may repurchase shares from time to time in open market transactions, privately negotiated transactions, accelerated share buyback programs, tender offers, or by other means. The timing and amount of repurchase transactions will be determined by the Company’s management based on its evaluation of market conditions, share price, legal requirements and other factors. The program may be suspended, modified or discontinued at any time without prior notice. At the end of fiscal 2016, the 2015 Stock Repurchase Program had remaining authorized funds of $130.4 million. During fiscal 2016, the Company repurchased approximately 4.9 million shares of common stock in open market purchases under 2015 Stock Repurchase Programs, at an average price of $24.39 per share, for a total of $119.5 million. During fiscal 2015, the Company repurchased approximately 7.5 million shares of common stock in open market purchases, at an average price of $21.29 per share, for a total of $159.4 million. This total includes $75.1 million and $84.3 million of open market purchases completed under the 2015 and 2014 Stock Repurchase Programs, respectively. The ASR was completed in December 2015 and resulted in the aggregate repurchase of approximately 3.7 million shares of common stock with a volume weighted average price of $20.11 per share. During fiscal 2014, under the provisions of both the 2014 and 2011 Stock Repurchase Programs, the Company repurchased approximately 3.2 million shares of common stock in open market purchases at an average price of $30.22 per share, for a total of $97.8 million. Stock repurchases are reflected as a decrease to common stock based on par value and additional-paid-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 2016 repurchases, retained earnings was reduced by $94.7 million in fiscal 2016. Common stock repurchases under the program were recorded based upon the trade date for accounting purposes. NOTE 15: STATEMENT OF CASH FLOW DATA Fiscal Years (In millions) Supplemental disclosure of cash flow information: Interest paid Income taxes paid 2016 2015 2014 $ $ 27.3 57.4 $ $ 26.5 54.0 $ $ 15.6 66.1 NOTE 16: SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED) Trimble has a 52-53 week fiscal year, ending on the Friday nearest to December 31. Both fiscal 2016 and 2015 were a 52-week year. 83 Fiscal Period (in millions, except per share data) Revenue Gross margin Net income attributable to Trimble Inc. Basic net income per share Diluted net income per share Fiscal Period (in millions, except per share data) Revenue Gross margin Net income attributable to Trimble Inc. Basic net income per share Diluted net income per share First Quarter 2016 Second Quarter 2016 Third Quarter 2016 Fourth Quarter 2016 $ $ $ $ 583.0 300.6 19.8 0.08 0.08 First Quarter 2015 582.6 307.2 34.1 0.13 0.13 609.6 315.6 35.7 0.14 0.14 Second Quarter 2015 585.8 303.9 25.9 0.10 0.10 $ $ $ $ 584.1 309.0 39.2 0.16 0.15 Third Quarter 2015 562.3 298.0 37.1 0.15 0.14 585.5 312.8 37.7 0.15 0.15 Fourth Quarter 2015 559.7 293.1 24.0 0.10 0.09 84 The Board of Directors and Stockholders of Trimble Inc. Report of Independent Registered Public Accounting Firm We have audited the accompanying consolidated balance sheets of Trimble Inc. as of December 30, 2016 and January 1, 2016, and 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, 2016. Our audits also included the financial statement schedule listed in the Index at Item 15(a). These financial statements and schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and schedule based on our audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Trimble Inc. at December 30, 2016 and January 1, 2016, and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 30, 2016, in conformity with U.S. generally accepted accounting principles. Also, in our opinion, the related financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly in all material respects the information set forth therein. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), Trimble Inc.’s internal control over financial reporting as of December 30, 2016, 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 24, 2017, expressed an unqualified opinion thereon. San Jose, California February 24, 2017 /s/ Ernst & Young LLP 85 Report of Independent Registered Public Accounting Firm The Board of Directors and Stockholders of Trimble Inc. We have audited Trimble Inc.'s internal control over financial reporting as of December 30, 2016, 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). Trimble Inc.'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 conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). 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. 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. In our opinion, Trimble Inc. maintained, in all material respects, effective internal control over financial reporting as of December 30, 2016, 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 all current year acquisitions, which are included in the 2016 consolidated financial statements of Trimble Inc. and constituted less than 1% of total assets and net assets as of December 30, 2016, and less than 1% of revenues and net income for the year then ended. Our audit of internal control over financial reporting of Trimble Inc. also did not include an evaluation of the internal control over financial reporting of all current year acquisitions. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of Trimble Inc. as of December 30, 2016 and January 1, 2016, and 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, 2016 of Trimble Inc. and our report dated February 24, 2017 expressed an unqualified opinion thereon. San Jose, California February 24, 2017 /s/ Ernst & Young LLP 86 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure None Item 9A. Controls and Procedures (a) Evaluation of Disclosure Controls and Procedures The Company's management, with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of the end of the period covered by this report. Based on such evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that, as of the end of such period, our disclosure controls and procedures are effective. Inherent Limitations on Effectiveness of Controls The Company’s management, including the CEO and CFO, does not expect that our internal control over financial reporting will prevent or detect all error and all fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system’s objectives will be met. The design of any system of controls is based in part on certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. (b) Management’s Report on Internal Control over Financial Reporting The Company’s management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rule 13a-15(f). Our internal control over financial reporting is 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. The Company’s management, including the CEO and CFO, conducted an evaluation of the effectiveness of its internal control over financial reporting based on the Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework). The Company has excluded from its evaluation the internal control over financial reporting of all current year acquisitions, which are included in the December 30, 2016 consolidated financial statements and constituted less than 1% of total assets and net assets as of December 30, 2016, and less than 1% of consolidated revenue and net income for the year then ended. Based on the results of this evaluation, the Company’s management concluded that its internal control over financial reporting was effective at the end of fiscal 2016. The effectiveness of our internal control over financial reporting at the end of fiscal 2016 has been audited by Ernst & Young LLP, an independent registered public accounting firm, as stated in their report which is included elsewhere herein. Changes in Internal Control over Financial Reporting During the fourth quarter of fiscal 2016, there were no changes in the Company’s internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting. Item 9B. Other Information None. 87 Item 10. Directors, Executive Officers and Corporate Governance PART III The information required by this item, insofar as it relates to Trimble’s directors, will be contained under the captions “Election of Directors” and “Section 16(a) Beneficial Ownership Reporting Compliance” in the Proxy Statement and is incorporated herein by reference. The information required by this item relating to executive officers is set forth above in Item 1 Business Overview under the caption “Executive Officers.” The information required by this item insofar as it relates to the nominating and audit committees will be contained in the Proxy Statement under the caption “Board Meetings and Committees; Director Independence.” Code of Ethics The Company’s Business Ethics and Conduct Policy applies to, among others, the Company’s Chief Executive Officer, Chief Financial Officer, Principal Accounting Officer and other finance organization employees. The Business Ethics and Conduct Policy is available on the Company’s website at www.trimble.com under the heading “Corporate Governance - Governance Documents” on the Investor Relations page of our website. A copy will be provided, without charge, to any stockholder who requests one by written request addressed to General Counsel, Trimble Inc., 935 Stewart Drive, Sunnyvale, CA 94085. If any substantive amendments to the Business Ethics and Conduct Policy are made or any waivers are granted, including any implicit waiver, from a provision of the Business Ethics and Conduct Policy, to its Chief Executive Officer, Chief Financial Officer, Vice President of Finance, or Corporate Controller, the Company will disclose the nature of such amendment or waiver on the Company’s website at www.trimble.com or in a report on Form 8-K. Item 11. Executive Compensation The information required by this item will be contained in the Proxy Statement under the captions “Executive Compensation” and “Non-Employee Director Compensation” and is incorporated herein by reference. Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters The information required by this item will be contained in the Proxy Statement under the caption “Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters” and is incorporated herein by reference. Item 13. Certain Relationships and Related Transactions, and Director Independence The information required by this item will be contained in the Proxy Statement under the caption “Certain Relationships and Related Person Transactions” and is incorporated herein by reference. Item 14. Principal Accounting Fees and Services The information required by this item will be contained in the Proxy Statement under the caption “Principal Accounting Fees and Services” and is incorporated herein by reference. PART IV 88 Item 15. Exhibits and Financial Statement Schedules. (a) (1) Financial Statements The following consolidated financial statements required by this item are included in Part II Item 8 hereof under the caption “Financial Statements and Supplementary Data.” Consolidated Balance Sheets Consolidated Statements of Income Consolidated Statements of Comprehensive Income Consolidated Statements of Stockholders’ Equity Consolidated Statements of Cash Flows Notes to Consolidated Financial Statements Reports of Independent Registered Public Accounting Firm (1) Financial Statement Schedules The following financial statement schedule is filed as part of this report: Schedule II—Valuation and Qualifying Accounts Page in this Annual Report on Form 10-K 52 53 54 55 56 57 85 Page in this Annual Report on Form 10-K 95 All other schedules have been omitted as they are either not required or not applicable, or the required information is included in the consolidated financial statements or the notes thereto. (b) Exhibits We have filed, or incorporated into the Report by reference, the exhibits listed on the accompanying Index to Exhibits immediately following the signature page of this Form 10-K. Item 16. Form 10-K Summary. None. Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this Report on Form 10-K to be signed on its behalf by the undersigned, thereunto duly authorized. SIGNATURES By: February 24, 2017 TRIMBLE INC. /S/ STEVEN W. BERGLUND Steven W. Berglund, President and Chief Executive Officer 89 POWER OF ATTORNEY Know all persons by these presents, that each person whose signature appears below constitutes and appoints Steven W. Berglund as his attorney-in-fact, with the power of substitution, for him in any and all capacities, to sign any amendments to this Report on Form 10-K, and to file the same, with exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, hereby ratifying and confirming all that said attorney-in-fact, or his substitute or substitutes, may do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Exchange Act of 1934, this Annual Report on Form 10-K has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated: Signature Capacity in which Signed /s/ STEVEN W. BERGLUND Steven W. Berglund President, Chief Executive Officer, Director February 24, 2017 /s/ ROBERT G. PAINTER Robert G. Painter /s/ JULIE A. SHEPARD Julie A. Shepard /s/ MERIT E. JANOW Merit E. Janow /s/ MEAGHAN LLOYD Meaghan Lloyd /s/ ULF J. JOHANSSON Ulf J. Johansson /s/ RON S. NERSESIAN Ron S. Nersesian /s/ MARK S. PEEK Mark S. Peek /s/ NICKOLAS W. VANDE STEEG Nickolas W. Vande Steeg /s/ BÖRJE EKHOLM Börje Ekholm /s/ KAIGHAM (KEN) GABRIEL Kaigham (Ken) Gabriel Chief Financial Officer (Principal Financial Officer) February 24, 2017 Chief Accounting Officer (Principal Accounting Officer) February 24, 2017 February 24, 2017 February 24, 2017 February 24, 2017 February 24, 2017 February 24, 2017 February 24, 2017 February 24, 2017 February 24, 2017 Director Director Director Director Director Director Director Director 90  INDEX TO EXHIBITS Exhibit Number 2.1 3.1 3.2 4.1 4.2 4.3 4.4 Agreement and Plan of Merger, dated September 30, 2016, between Trimble Inc. and Trimble Navigation Limited (Incorporated by reference to exhibit number 2.1 to the Company's Current Report on Form 8-K, filed on October 3, 2016) Certificate of Incorporation of Trimble Inc. (Incorporated by reference to exhibit number 3.1 to the Company’s Current Report on Form 8-K, filed on October 3, 2016) By-Laws of Trimble Inc. (Incorporated by reference to exhibit number 3.2 to the Company’s Current Report on Form 8- K, filed on October 3, 2016) Form of Common Stock Certificate of Trimble Inc. (Incorporated by reference to exhibit number 4.1 to the Company’s Current Report on Form 8-K, filed on October 3March 25, 2016) Indenture, dated as of October 30, 2014, between the Company and U.S. Bank National Association (Incorporated by reference to exhibit number 4.2 to the Company’s Registration Statement on Form S-3, filed October 30, 2014) First Supplemental Indenture, dated November 24, 2014, between the Company and U.S. Bank National Association (which includes Form of 4.750% Senior Note due 2024) (Incorporated by reference to exhibit number 4.1 to the Company’s Current Report on Form 8-K, filed November 24, 2014) Second Supplemental Indenture, dated October 1, 2016, between Trimble Inc., Trimble Navigation Limited and U.S. Bank National Association (Incorporated by reference to exhibit number 4.2 to the Company’s Current Report on Form 8-K, filed October 3, 2016) 10.1+ Employment Agreement between the Company and Steven W. Berglund dated March 17, 1999 (Incorporated by reference to exhibit number 10.67 to the Company’s Annual Report on Form 10-K for the fiscal year ended January 1, 1999) 10.2+ Amendment to Employment Agreement between the Company and Steven W. Berglund dated December 19, 2008 (Incorporated by reference to exhibit number 10.14 to the Company’s Annual Report on Form 10-K for the year ended January 2, 2009) 10.3+ Form of Indemnification Agreement between the Company and its officers and directors (Incorporated by reference to exhibit number 10.1 to the Company’s Annual Report on Form 10-K for the year ended December 30, 2005) 10.4+ Amended and Restated form of Change in Control severance agreement between the Company and certain Company officers (Incorporated by reference to exhibit number 10.13 to the Company's Annual Report on Form 10-K for the year ended January 2, 2009) 10.5+ Trimble Navigation Limited Annual Management Incentive Plan Description (Incorporated by reference to exhibit number 10.1 to the Company’s Current Report on Form 8-K, filed on May 3, 2010) 10.6 10.7 Letter of assignment between the Company and Christopher Gibson dated June 11, 2008 (Incorporated by reference to exhibit number 10.24 to the Company's Annual Report on Form 10-K for the year ended December 31, 2010) Amendment to the letter of assignment between the Company and Christopher Gibson dated December 20, 2009 (Incorporated by reference to exhibit number 10.25 to the Company's Annual Report on Form 10-K for the year ended December 31, 2010) 10.8+ Offer letter between the Company and François Delépine dated November 1, 2013 (Incorporated by reference to exhibit number 10.9 to the Company’s Annual Report on Form 10-K for the fiscal year ended January 3, 2014) 10.9+ Board of Directors Compensation Policy (effective as of May 7, 2015) (Incorporated by reference to exhibit number 10.1 to the Company’s Current Report on Form 8-K filed on May 11, 2015) 91 10.10+ Trimble Navigation Limited Deferred Compensation Plan effective December 30, 2004, as amended and restated (Incorporated by reference to exhibit number 10.7 to the Company's Quarterly Report on Form 10-Q for the quarter ended October 2, 2015) 10.11 Lease dated May 11, 2005 between Carr America Realty Operating Partnership, L.P. and the Company (Incorporated by reference to exhibit number 10.17 to the Company’s Annual Report on Form 10-K for the year ended December 30, 2005) 10.12 First Amendment to Lease between Carr NP Properties, LLC and the Company (Incorporated by reference to exhibit number 10.23 to the Company's Annual Report on Form 10-K for the year ended December 31, 2010) 10.13** Master Manufacturing Services Agreement by and between the Company and Flextronics Corporation (formerly Solectron Corporation) dated March 12, 2004, as amended January 19, 2005, October 25, 2005 and June 20, 2007 (Incorporated by reference to exhibit number 10.6 to the Company’s Quarterly Report on Form 10-Q for the quarter ended July 3, 2009) 10.14** Consigned Excess Inventory Addendum to the Master Manufacturing Services Agreement by and between the Company and Flextronics Corporation (formerly Solectron Corporation) dated July 6, 2009 (Incorporated by reference to exhibit number 10.1 to the Company’s Quarterly Report on Form 10-Q for the quarter ended October 2, 2009) 10.15 Five-Year Credit Agreement, dated as of November 24, 2014, among the Company, the subsidiary borrowers from time to time party thereto, the lenders from time to time party thereto and JPMorgan Chase Bank, N.A., as Administrative Agent (Incorporated by reference to exhibit number 10.1 to the Company’s Current Report on Form 8-K, filed November 24, 2014) 10.16 First Amendment dated February 26, 2016 to the Five-Year Credit Agreement dated November 24, 2014 among the Company, the subsidiary borrowers from time to time party thereto, the lenders from time to time party thereto and JPMorgan Chase Bank, N.A., as Administrative Agent (Incorporated by reference to exhibit number 10.1 to the Company’s Quarterly Report on Form 10-Q for the quarter ended April 1, 2016) 10.17 Second Amendment dated as of August 9, 2016 to the Five-Year Credit Agreement dated November 24, 2014 among the Company, the subsidiary borrowers from time to time party thereto, the lenders from time to time party thereto and JPMorgan Chase Bank, N.A., as Administrative Agent (Incorporated by reference to exhibit number 10.1 to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2016) 10.18+ @Road, Inc. 2000 Stock Option Plan, as amended May 16, 2000 (Incorporated by reference to exhibit number 10.19 to the Company’s Annual Report on Form 10-K for the year ended December 29, 2006) 10.19+ Trimble Navigation Limited Australian Addendum to the Amended and Restated Employee Stock Purchase Plan (Incorporated by reference to exhibit number 10.5 to the Company’s Quarterly Report on Form 10-Q for the quarter ended July 3, 2009) 10.20+ Australian Addendum to the Trimble Navigation Limited Amended and Restated 2002 Stock Plan (Incorporated by reference to exhibit number 10.7 to the Company’s Quarterly Report on Form 10-Q for the quarter ended July 3, 2009) 10.21+ Trimble Navigation Limited Amended and Restated 2002 Stock Plan (Incorporated by reference to exhibit number 10.1 to the Company's Quarterly Report on Form 10-Q for the quarter ended July 4, 2014) 10.22+ Trimble Navigation Limited Amended and Restated Employee Stock Purchase Plan (Incorporated by reference to exhibit number 10.8 to the Company's Quarterly Report on Form 10-Q for the quarter ended October 2, 2015) 10.23 Form of officer stock option agreement under the Company’s Amended and Restated 2002 Stock Plan (Incorporated by reference to exhibit number 10.1 to the Company’s Quarterly Report on Form 10-Q for the quarter ended October 3, 2014) 10.24 Form of U.S. director stock option agreement under the Company’s Amended and Restated 2002 Stock Plan (Incorporated by reference to exhibit number 10.2 to the Company’s Quarterly Report on Form 10-Q for the quarter ended October 3, 2014) 92 10.25 Form of non-U.S. director stock option agreement under the Company’s Amended and Restated 2002 Stock Plan (Incorporated by reference to exhibit number 10.3 to the Company’s Quarterly Report on Form 10-Q for the quarter ended October 3, 2014) 10.26 Form of global stock option agreement (officers) under the Company’s Amended and Restated 2002 Stock Plan. (Incorporated by reference to exhibit number 10.1 to the Company’s Quarterly Report on Form 10-Q for the quarter ended October 2, 2015) 10.27 Form of global restricted stock unit award agreement under the Company’s Amended and Restated 2002 Stock Plan (Incorporated by reference to exhibit number 10.2 to the Company’s Quarterly Report on Form 10-Q for the quarter ended October 2, 2015) 10.28 Form of U.S. director restricted stock unit award agreement under the Company’s Amended and Restated 2002 Stock Plan (Incorporated by reference to exhibit number 10.3 to the Company’s Quarterly Report on Form 10-Q for the quarter ended October 2, 2015) 10.29 Form of non-U.S. director restricted stock unit award agreement under the Company’s Amended and Restated 2002 Stock Plan (Incorporated by reference to exhibit number 10.4 to the Company’s Quarterly Report on Form 10-Q for the quarter ended October 2, 2015) 10.30 Form of global subscription agreement under the Company’s Amended and Restated Employee Stock Purchase Plan (Incorporated by reference to exhibit number 10.5 to the Company’s Quarterly Report on Form 10-Q for the quarter ended October 2, 2015) 10.31 Form of global performance restricted stock unit award agreement under the Company’s Amended and Restated 2002 Stock Plan (Incorporated by reference to exhibit number 10.6 to the Company’s Quarterly Report on Form 10-Q for the quarter ended October 2, 2015 ) 10.32 Form of global restricted stock unit award agreement (officers) under the Company’s Amended and Restated 2002 Stock Plan (Incorporated by reference to exhibit number 10.30 to the Company's Annual Report on Form 10-K for the year ended January 1, 2016) 10.33+ Offer letter between the Company and Robert G. Painter dated January 29, 2016 (Incorporated by reference to exhibit number 10.1 to the Company’s Current Report on Form 8-K, filed February 1, 2016) 10.34+ Settlement Agreement and Release by and between Francois Delepine and the Company dated as of March 14, 2016 (Incorporated by reference to exhibit number 10.2 to the Company’s Quarterly Report on Form 10-Q for the quarter ended April 1, 2016) 10.35+ Letter agreement for consulting services by and between Francois Delepine and the Company dated as of March 14, 2016 (Incorporated by reference to exhibit number 10.3 to the Company’s Quarterly Report on Form 10-Q for the quarter ended April 1, 2016) 10.36 Form of Global Performance Stock Unit Award Agreement (Total Shareholder Return) under the Company's Amended and Restated 2002 Stock Plan (Incorporated by reference to exhibit number 10.1 to the Company’s Quarterly Report on Form 10-Q for the quarter ended July 1, 2016) 10.37 Form of Global Performance Stock Unit Award Agreement (Operating Income/Revenue) under the Company's Amended and Restated 2002 Stock Plan (Incorporated by reference to exhibit number 10.2 to the Company’s Quarterly Report on Form 10-Q for the quarter ended July 1, 2016) 21.1 Subsidiaries of the Company (filed herewith) 23.1 Consent of Independent Registered Public Accounting Firm (filed herewith) 24.1 Power of Attorney (included on signature page herein) 31.1 Certification of CEO pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith) 93 31.2 Certification of CFO pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith) 32.1 Certification of CEO pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (filed herewith) 32.2 Certification of CFO pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (filed herewith) 101.INS ++ XBRL Instance Document 101.SCH ++ XBRL Taxonomy Extension Schema Document 101.CAL ++ XBRL Taxonomy Extension Calculation Linkbase Document 101.DEF ++ XBRL Taxonomy Extension Definition Linkbase Document 101.LAB ++ XBRL Taxonomy Extension Label Linkbase Document 101.PRE ++ XBRL Taxonomy Extension Presentation Linkbase Document Users of this data are advised that, pursuant to Rule 406T, these interactive data files are deemed not filed and otherwise are not subject to liability. + ++ Indicates management contract or compensatory plan or arrangement required to be filed as an exhibit to this Annual Report on Form 10-K. Pursuant to applicable securities laws and regulations, the Company is deemed to have complied with the reporting obligation relating to the submission of interactive data files in such exhibits and is not subject to liability under any anti-fraud provisions of the federal securities laws as long as the Company has made a good faith attempt to comply with the submission requirements and promptly amends the interactive data files after becoming aware that the interactive data files fails to comply with the submission requirements. ** Portions of this document have been omitted and filed separately with the Securities and Exchange Commission pursuant to a request for confidential treatment under Rule 24b-2. 94 SCHEDULE II TRIMBLE INC. VALUATION AND QUALIFYING ACCOUNTS (in millions) Fiscal Years Allowance for doubtful accounts: Balance at beginning of period Acquired allowance Bad debt expense Write-offs, net of recoveries Balance at end of period 2016 2015 2014 $ $ 5.0 0.3 3.0 (3.3) 5.0 $ $ 7.8 0.6 1.9 (5.3) 5.0 $ $ 6.3 2.6 3.8 (4.9) 7.8 95 SUBSIDIARIES OF THE COMPANY EXHIBIT 21.1 Name of Subsidiary or Affiliate Jurisdiction of Incorporation Trimble Planning Solutions Pty Ltd Manhattan Asia Pacific Pty Ltd Information Alignment Pty Limited Trimble Navigation Australia Pty Ltd Civil & Structural Computing Pty Ltd Trimble Australia Solutions Pty Ltd LSI Robway PTY Limited Spatial Dimension Australia Pty Ltd Sefaira Pty Ltd Beena Vision Asia – Pacific Pty Ltd. Plancal GmbH Austria AllTerra Österreich GmbH Trimble NV ICS Benelux N.V. Acunia International N.V. Trimble Leuven NV Wevada N.V. Trimble Brasil Solucoes Ltda Gehry Technologies Consultoria E Software Ltda Spatial Dimension Sistemas do Brasil Ltda 0807381 B.C. Ltd. Load Systems International Inc. Applanix Corporation Cengea Solutions Corporation Geo- 3D Inc. Trimble Canada Development Ltd PeopleNet Communications Canada Corp Trimble Canada Corporation Trimble Exchangeco Limited Trimble Holdings Company VS Visual Statements Inc. GeoTrac Systems Inc. Maddocks Systems Inc. Spatial Dimension Canada ULC Trimble Chile Comercial Limitada Trimble Navigation Chile Limitada Trimble Loadrite Chile SPA Trimble Electronics Products (Shanghai) Co. Ltd Trimble Communication and Navigation Technology (Xi’An) Co., Ltd. Tianpan Information Science & Technology Co. Ltd. Tianpan Century Co. Ltd. Trimble Leading Electronic Technology (Shanghai) Co. Ltd Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Austria Austria Belgium Belgium Belgium Belgium Belgium Brazil Brazil Brazil Canada Canada Canada Canada Canada Canada Canada Canada Canada Canada Canada Canada Canada Canada Chile Chile Chile China China China China China Name of Subsidiary or Affiliate Jurisdiction of Incorporation Zhongtie Trimble Digital Engineering and Construction Limited Company GT (Beijing) Co., Ltd Eleven Technology (SIP) Co., Ltd Trimble DBO Information Technology (Shanghai) Co. Ltd. Trimble Solutions Aarhus A/S PocketMobile Denmark ASP Trimble Middle East WLL Fifth Element Oy Trimble Finland Oy Trimble Solutions Oy Trimble Solutions France Sarl Mensi S.A Punch Telematix France S.A.S Trimble France S.A.S Trimble Nantes S.A.S Trimble Lyon SARL ALK Technologies SARL Magnav France Holdco S.A.S Manhattan Software France SARL GT France S.A.S. Solid S.A.S Axio-Net GmbH Trimble Germany GmbH Trimble Kaiserslautern GmbH Trimble Jena GmbH Trimble TerraSat GmbH HHK Datebtechnik GmbH Sigma Handels GmbH Trimble Solutions Germany GmbH Trimble Railway GmbH AllTerra Deutschland GmbH Punch Telematix Deutschland GmbH Linear Project GmbH Sigma GmbH GT Asia Limited Trimble Hungary Kft Trimble EM3 Teleservices PVT. Ltd Trimble Navigation India Pvt Limited Trimble Mobility Solutions India Limited Building Data Private Limited Trimble Information Technologies India Pvt. Ltd. Trimble Solutions India Pvt Ltd Spime India Technologies Pvt. Ltd. CSC World (India) Private Limited China China China China Denmark Denmark Egypt Finland Finland Finland France France France France France France France France France France France Germany Germany Germany Germany Germany Germany Germany Germany Germany Germany Germany Germany Germany Hong Kong Hungary India India India India India India India India Name of Subsidiary or Affiliate Jurisdiction of Incorporation Lakefield e Technologies Ltd Lakefield e Technologies Group Ltd Lime Daross Limited Trimble Railway Ltd Spektra S.r.L. Spektra Agri Srl Trimble Italia SRL Trimble Japan KK Trimble Solutions Japan KK Trimble Solutions Korea Co., Ltd Trimble Solutions Malaysia Sdn. Bhd. Geo de SECO S de RL de CV Gehry Technologies Americas Services S de RL de CV Gehry Technologies Americas S de RL de CV KWW Beheer B.V. Trimble B.V. Logic Way B.V. Punch Telematix Nederland B.V TNL Technology Holdings CV Trimble Europe B.V Trimble Loadrite Europe B.V. Trimble International BV Gehry Technologies Netherlands BV Inc. Trimble Loadrite Holdings Limited Trimble Navigation New Zealand Ltd Loadrite North America Ltd Loadrite Limited Trimble Loadrite Auckland Limited Manhattan Asia Pacific NZ Limited Trimble New Zealand Solutions Trimble Norway AS Trimble Solutions Sandvika AS PocketMobile Norge AS Trimble Poland Sp. z.o.o. Trimble RUS LLC Rusnavgeoset LLC Load Systems UK Limited Trimble Navigation Singapore PTE Limited Trimble Solutions SEA Pte. Ltd. Trimble Navigation Technology South Africa (Pty) Ltd Trimble South Africa Distribution Holdings Pty Ltd. Sitech Southern Africa (Pty) Ltd Spatial Dimension (Pty) Ltd Spatial Dimension South Africa Pty Ltd Geotronics Southern Europe S.L Punch Telematix Iberica S.L Trimble International Holdings S.L Trimble Navigation Iberica S.L Ireland Ireland Ireland Ireland Italy Italy Italy Japan Japan Korea Malaysia Mexico Mexico Mexico Netherlands Netherlands Netherlands Netherlands Netherlands Netherlands Netherlands Netherlands Netherlands New Zealand New Zealand New Zealand New Zealand New Zealand New Zealand New Zealand Norway Norway Norway Poland Russia Russia Scotland Singapore Singapore South Africa South Africa South Africa South Africa South Africa Spain Spain Spain Spain Name of Subsidiary or Affiliate Jurisdiction of Incorporation ViaNova Systems Spain S.L. Trimble Solutions Sweden AB Trimble A.B Trimble Sweden A.B ViaNova Geosuite AB Trimble Solutions Gothenburg AB PocketMobile Communications AB Plancal Holding AG Trimble Lizenz Switzerland GmbH Trimble Switzerland GmbH Trimble Holding GmbH Trimble Thailand Co Ltd Load Systems International FZE GT Middle East Limited Gehry Technologies Middle East LLC Amtech Power Software Ltd Lake e Technologies Limited (UK) Trimble Solutions UK Ltd Trimble MRM Ltd Trimble UK Limited StruCAD 2011 ALK Technology Limited Cobco 867 Limited CSC (World) Limited CSC (Holdings) Ltd. Computer Services Consultants (UK) Ltd. Civil & Structural Computing (International) Ltd. Civil & Structural Computing (Middle East) Ltd. Manhattan Datacraft Ltd Manhattan Software Group Ltd Atrium Software Ltd MSG Public Service Limited De Facto 1731 Limited De Facto 1732 Limited Amtech Group Limited TSI Stamford Limited Trade Service Information Limited TSI Powerdata Limited Amtech Trustees Limited Estimation Limited Bdata Limited Quickpen Limited Wix McLelland Limited ViaNova Systems Company Limited Sefaira Limited Sefaira UK Limited Loadrite Western Inc. Trimble IP Limited Corporation Spain Sweden Sweden Sweden Sweden Sweden Sweden Switzerland Switzerland Switzerland Switzerland Thailand UAE UAE UAE UK UK UK UK UK UK UK UK UK UK UK UK UK UK UK UK UK UK UK UK UK UK UK UK UK UK UK UK UK UK UK USA-AZ USA-CA Name of Subsidiary or Affiliate Jurisdiction of Incorporation Trimble IP General Corporation SECO Manufacturing Company Inc Trimble Export Limited Trimble Military and Advanced Systems Inc. Spime Inc. Trade Service Company LLC Office Products Update Services LLC Fidelity Comtech, Inc. Trimble Navigation Foundation PeopleNet Holdings Corporation PNET Holding Corp. Trimble Solutions USA Inc. VirtualSite Solutions LLC Lake e Technologies Inc. Trade Service Holdings Inc. Iron Solutions, Inc. Gehry Technologies, Inc. Mining Information Systems, Inc. Sefaira Inc. Trucker Tech Inc. ALK Technologies, Inc. Beena Vision Systems, Inc. Beena Vision Technologies, Inc. Beena Vision Services, Inc. TMW Systems Inc. Loadrite Inc. Telog Instruments, Inc. Technical Sales International, Inc. Building Data, LLC Process Automation Company, LLC PeopleNet Communications Corporation Beartooth Mapping Inc Applanix LLC Ashtech LLC Dynamic Survey Solutions, Inc. Geoline Inc USA-CA USA-CA USA-CA USA-CA USA-CA USA-CA USA-CA USA-CO USA-DE USA-DE USA-DE USA -DE USA-DE USA-DE USA -DE USA-DE USA-DE USA-DE USA-DE USA-DE USA-FL USA-GA USA-GA USA-GA USA-OH USA-NC USA-NY USA-NV USA-NV USA-NV USA-MN USA-MT USA-TX USA-TX USA-VT USA-WA EXHIBIT 23.1 Consent of Independent Registered Public Accounting Firm We consent to the incorporation by reference in the following Registration Statements: (1) Registration Statement (Form S-8 Nos. 33-78502 and 333-04670) of Trimble Inc., pertaining to the 1990 Director Stock Option Plan, (2) Registration Statement (Form S-8 No. 33-45604) pertaining to the "Position Us for Progress" 1992 Employee Stock Bonus Plan of Trimble Inc., (3) Registration Statement (Form S-8 Nos. 33-39647, 33-57522, 33-78502, 33-91858, 333-04670, 333-53703, 333-84949, 333-38264, 333-65758, and 333-28429) pertaining to the 1993 Stock Option Plan of Trimble Inc., (4) Registration Statement (Form S-8 Nos. 333-97979, 333-118212, 333-138551, 333-161295, and 333-183229) pertaining to the Amended and Restated 2002 Stock Plan of Trimble Inc., (5) Registration Statement (Form S-8 Nos. 333-53703, 333-84949, 333-38264, 333-97979, 333-118212, 333-161295, 333-138551, 333-183229, 33-37384, and 33-62078) pertaining to the Amended and Restated, Employee Stock Purchase Plan of Trimble Inc., (6) Registration Statement (Form S-8 Nos. 33-45167, 33-46719, 33-50944, 33-84362 and 333-208275) pertaining to the Savings and Retirement Plan of Trimble Inc., and (7) Registration Statement (Form S-3 No. 333-199716) of Trimble Inc.; of our reports dated February 24, 2017, with respect to the consolidated financial statements and schedules and the effectiveness of internal control over financial reporting of Trimble Inc. included in its Annual Report (Form 10-K) for the year ended December 30, 2016, filed with the Securities and Exchange Commission. /s/ Ernst & Young LLP San Jose, California February 24, 2017 CERTIFICATION OF CHIEF EXECUTIVE OFFICER EXHIBIT 31.1 I, Steven W. Berglund, certify that: 1. 2. 3. 4. I have reviewed this annual report on Form 10-K of Trimble Inc.; Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: a) b) c) d) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, 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; Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and 5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): a) b) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. Date: February 24, 2017 /s/ Steven W. Berglund Steven W. Berglund Chief Executive Officer CERTIFICATION OF CHIEF FINANCIAL OFFICER EXHIBIT 31.2 I, Robert G. Painter, certify that: 1. 2. 3. 4. I have reviewed this annual report on Form 10-K of Trimble Inc.; Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: a) b) c) d) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, 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; Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and 5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): a) b) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. Date: February 24, 2017 /s/ Robert G. Painter Robert G. Painter Chief Financial Officer EXHIBIT 32.1 CERTIFICATION OF CEO PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Annual Report on Form 10-K of Trimble Inc. (the “Company”) for the period ended December 30, 2016 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), Steven W. Berglund, as Chief Executive Officer of the Company, hereby certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes- Oxley Act of 2002, to the best of his knowledge, that: • • the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, and the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. /s/ Steven W. Berglund Steven W. Berglund Chief Executive Officer February 24, 2017 EXHIBIT 32.2 CERTIFICATION OF CFO PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Annual Report on Form 10-K of Trimble Inc. (the “Company”) for the period ended December 30, 2016 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), Robert G. Painter, as Chief Financial Officer of the Company, hereby certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes- Oxley Act of 2002, to the best of his knowledge, that: • • the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, and the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. /s/ Robert G. Painter Robert G. Painter Chief Financial Officer February 24, 2017 Management Information Executive Management Board of Directors Steven W. Berglund President and Chief Executive Officer Robert G. Painter Senior Vice President Chief Financial Officer Business Operations Bryn A. Fosburgh Senior Vice President Christopher W. Gibson Senior Vice President Jürgen Kleim Senior Vice President Darryl R. Matthews Senior Vice President Sachin J. Sankpal Senior Vice President James M. Veneziano Senior Vice President Staff Operations Douglas R. Brent Senior Vice President Technology Innovation James A. Kirkland Senior Vice President General Counsel Leah K. Lambertson Senior Vice President Operations and Chief Information Officer Michael Lesyna Senior Vice President Strategy and Corporate Development Mike Bank Vice President Ron Bisio Vice President Roz D. Buick, PhD Vice President Brian McLaughlin Vice President David Wangler Vice President E. Michael Scarpa Senior Vice President Chief Human Resources Officer Prakash Iyer Vice President Software Architecture and Strategy Julie A. Shepard Vice President Finance and Chief Accounting Officer Ulf J. Johansson, Ph.D Chairman Business Consultant and Director, Telefon AB LM Ericsson Nickolas W. Vande Steeg Vice Chairman Chairman, Bedrock Creek Director, Azusa Pacific University - University College Director, Gardner Denver Inc. Director, Wabtec Corporation Director, Pacific Design Technologies Steven W. Berglund President and Chief Executive Officer Ronald S. Nersesian President and Chief Executive Officer, Keysight Technologies Merit E. Janow Dean, School of International and Public Affairs, and Professor of Practice Columbia University Mark S. Peek Co-President, Workday Dr. Kaigham J. Gabriel President and Chief Executive Officer, Draper Börje Ekholm President and Chief Executive Officer, Ericsson Meaghan Lloyd Partner, Gehry Partners, LLP Corporate Headquarters Trimble Investor Information Trimble Inc. 935 Stewart Drive Sunnyvale, California 94085 +1 (408) 481-8000 www.trimble.com Traded: The NASDAQ Stock Exchange Symbol: TRMB Locations Shareholder Information Australia India Russia Austria Belgium Brazil Canada Chile China Denmark Finland France Indonesia Saudi Arabia Ireland Italy Japan Korea Lithuania Malaysia Mexico Singapore South Africa Spain Sweden Switzerland Thailand United Arab Emirates Netherlands United Kingdom Independent Auditor Ernst & Young LLP San Jose, California Transfer Agent & Registrar American Stock Transfer & Trust Company 6201 15th Avenue Brooklyn, New York 11219 +1 (800) 937-5449 www.amstock.com info@amstock.com Investor Relations Contact +1 (408) 481-7838 Germany New Zealand United States of America investor_relations@trimble.com Ghana Hong Kong Hungary Norway Poland Qatar The company’s annual report on Form 10-K, as filed with the Securities Exchange Commission, accompanies this annual report to shareholders and is also available on the Investor Relations section of the Company’s website at www.trimble.com. © 2017, Trimble Inc. All rights reserved. Trimble, the Globe and Triangle Logo, are trademarks of Trimble Inc. and/or its affiliates, registered in the United States Patent and Trademark Office and/or in other countries. All other trademarks are the property of their respective owners. 

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