Good afternoon. My name is Eric, and I will be your conference operator today. At this time, I would like to welcome everyone to the Trimble's Fourth Quarter 2014 Earnings Conference Call. [Operator Instructions] Mr. Jim Todd, you may begin your conference.

Good afternoon. I'm here today with Steve Berglund, our CEO; and Francois Delepine, our CFO. Before we begin, I'd like to remind you that the forward-looking statements made in today's call and the subsequent Q&A period are subject to risks and uncertainties. Trimble's actual results may differ materially from those currently anticipated due to a number of factors detailed in the Company's Form 10-Ks and 10-Qs or other documents filed with the Securities and Exchange Commission. During this call, we will refer to a press release which is available along with additional financial information, on our website at www.trimble.com. The non-GAAP measures discussed in the call are reconciled to GAAP measures in the tables to our press release. Now, let me turn the call over to Steve.

Good afternoon. There were four unanticipated elements in the fourth quarter which affected our performance against the guidance we provided at the beginning of the quarter. Exchange rates, the oil price decline, and acquisition revenue recognition effects had negative impacts on pre-tax results, while a catch-up adjustment to our annual tax rate had a favorable effect on the quarterly tax rate. Without these effects our reported revenue would have been in the middle of our guidance range. The major themes of this afternoon will be the fourth quarter is not a reliable predictor of performance. I will let Francois for explain the moving parts in the quarter. I will focus on total year 2014 results which provide a more useful contacts for 2015. The exchange rate, oil price and revenue recognition factors we encountered in the fourth quarter will have a negative impact on performance in the first half of 2015. Agriculture remains a negative factor but we believe our ability to forecast the market is improving. We have yet to prove it conclusively. The business outlooks were progressively improved during 2015 with relatively strong second half with double-digit revenue growth postponed until then. The major risk to this improving outlook is the economies outside U.S. which in some cases are less than robust and potentially disappointing As far as core result, 2014 was a stronger year than the reported results may indicate. Although total revenue growth was 5% the company excluding Field Solutions was up 9% for the year but most of that being organic. The other dynamic, agriculture induced bad news, good news effect is the rapidly decreasing reliance in agriculture margins. Over the last two years since 2012, total company non-GAAP operating income has increased by 21% despite the significant negative effects of a 25% decline in…

Thank you, Steve. Good afternoon, everyone. Before getting to the numbers, please note that unless otherwise indicated, the operating results I will discuss will be on a non-GAAP basis. The reconciliation from GAAP to non-GAAP numbers is in our earnings press release along with the financial data by segment. Unless otherwise indicated, growth rates are meant to be year-over-year growth rates. So now let's first, the fourth quarter results and then move on to the full-year 2014. Q4 total revenue was $564 million, down 6% year-over-year. Our fourth quarter revenue was challenging, which we expected. This was due to weakness in the agriculture business, the year-on-year comparison challenge due to the one-time effects in Q4 '13 in the engineering and construction segments and the impact of the 14th week in Q4 2013. Currency translation add an approximately 2% year-over-year unfavorable effect offset by acquisitions adding approximately 2% year-over-year. In the end, our results were towards the low end of our range due to the following: we were negatively impacted by the strengthening of the dollar during the quarter, recent acquisition at strong billings but less revenue recognized than the expected within the quarter, and lastly we saw short-term reaction in our oil and gas vertical to the decline in oil prices. Upside of agriculture, excluding the E&C one-time effects, and adjusting for currency impacts, organic revenue in Q4 was up approximately 5%. Now looking at revenue by segments: Engineering and construction segment revenue was down 1% this is essentially due to the one-time effects from Q4 ’13 excluding those the underlying organic growth for E&C is up in the high single digits driven by growth in heavy civil and building construction. Our Q4 guidance comments included that E&C revenue in Q4 ’13 benefited from the revenue recognition of the large…

[Operator Instructions] Your first question comes from the line of Paul Koster with JP Morgan, your line is open.

This is Mark Strauss, thanks for taking our questions. So, I guess starting with Field Solutions, I understand it's still early in the season for Ag but can you just talk about the demand you're seeing for some of the new products and thinking more specifically for the irrigation products and I guess this -- I know you don't guide by segment, but does the total guidance of 590 to 620 include a material impact from that? Or do you think, more meaningful to 2Q.

Again, as I said in the scripted portion, so far through the quarter we are on a profile that we have laid out -- well with the profile that we actually laid out back in last quarterly call. So I think it's too early to be at all categorical but the relative impact of irrigation -- part of it is action on our part. This is going to be a combination of direct and indirect distribution. We, in the last few months have shown significant progress in terms of putting direct salespeople in place so a growing portion of the geography is covered by direct salespeople which should have a beneficial impact. I think again it is a seasonal market and I think that March for latter stages of February and March are going to be the significant periods. So I think it's premature to talk specifically about irrigation. But again through five weeks of the quarter we are on the profile that we laid out, so there is some reassurance that we are getting -- and there are understanding of current market conditions is improving and that we are less subject to -- let's call it drastic unforeseen movement. So I think still guarded, but I think our level of controlling insight is improving. But beyond that I think we need to wait until we are little deeper in the quarter to kind of characterize where we are on this quarter.

Okay, thanks Steve. And Francois, are there any general guidelines you can give for FX, maybe just walk through your top one or two currency exposures, and just say is there anything like 5% decline, and the euro would be a x% decline in your annual revenues, kind of guidelines.

Yes, so let me just kind of give you some general trends, I mean clearly we have about a third of our revenue in non-US dollar and out of that the largest number by far is in Euro, so that should kind of help you little bit and just kind of the rates that we assumed for the Euro is 116 which is -- it's a little bit worse today, right. It's been a little bit -- but I think we are in the range, that's what we have assumed for the guidance.

Okay, thank you. That's it for us. Thank you very much.

Your next question comes from the line of Jonathan Ho with William Blair, your line is open.

Just wanted to start out with the guidance for 2015 and some of the comments you had on the second half of the year. I just wanted to know and I know you have outlined a few items but what gives you sort of confidence that the organic growth is going to get back to sort of your prior targets and overall revenue growth back to double-digits in that second half. And can you maybe rank order for us some of the items that you listed previously in terms of that importance?

Yes, so part of this is, I guess the fundamental question, which is more indicative the fourth quarter or the three quarters through September 2014. If you exclude Field Solutions, by my calculations so you want to double check this but by my calculation that year-over-year growth through the first nine months of the year for the company excluding Field Solutions was between 12% and 13%. So I think that going into the fourth quarter, we had baseline for the company excluding Field Solutions admittedly of 12% to 13% which was overwhelmingly organic. Now, the math that we laid out in the last quarterly call was for comparatively modest organic growth, actually less than -- I think we had shown earlier in 2014, plus the effect of the acquisitions. So I think the calculation related to 2015 and the of the exchange rates -- the combined effects of the exchange rates, oil and gas and these revenue accounting effects has put definite pressure on the first half of the year. But I think our calculation of the last quarter which was, let's call organic growth at levels that we had demonstrated or more than demonstrated in the past, plus the inorganic giving rise to the view that a double-digit number was possible, I think that certainly applies to the second half when the comps start to get easier. Plus, I think there is a view from an organic perspective that in terms of looking at the pipeline of activity that some of our businesses are reflecting, it's actually there are some quite positive trends, now these tends to be larger blocks of businesses, some of them will happen some of them won't happen, but we are likely to see some relatively significant pieces of business in the second half for…

Got it. Thank you, that's very helpful and this is a follow-up, I mean given what we saw happen with your OEM relationship in the fourth quarter, I know this is difficult to predict but have we seen sort of last time that that's going to happen, has there been some sort of change or correction in terms of inventory levels or production type trend that give you more confidence that you may be OEM partners still run their business more like auto companies or sort of whole production in the fourth quarter of ’15 any commentary there in terms of what may be gives you some more confidence that won’t recur?

Well, attempting to be balance here, one the on hand, I think what we saw in the third and fourth quarter was just the OEM standing on the breaks and given the complexity of their supply chain, they really have to hit the brakes really hard to get an effect. We have been something fairly close to just-in-time supplier when it came to supplying the factories. I think in a general senses, there is a whole lot of inventory left there to create an inventory effect. At the same time, I think that it’s fair to look in the direction of the OEMs because it's impossible to kind of predict behavior of complex organizations and I think it’s the appropriate question to ask but I think that I don't want to give any guarantees but I think that the bulk of the OEM questions behind us and then what we are really looking at now is okay what is the honest-to-goodness demand, the sell through demand of the marketplace is going to be, is going to be the clear driver from this point on, but again I don't want to give in, given that other people are involved, I don’t want to give an absolute sort of guarantee that it's done, but I think it is.

Thank you.

Your next question comes from the line of Brett Wong with Piper Jaffray and your line is open.

Thanks guys, thanks for taking my questions. I was wondering if you can frame up a little bit more of the impact in E&C with the little lower energy prices and obviously you since talked about the direct impact but more on that indirect impact.

So the direct impact I think we have seen it and we have traditionally sold between $20 million and $30 million into oil exploration and that’s a very quick reaction sort of market. So I think we saw the effect in the fourth quarter and it has been drastic and it has probably purged kind of zero in terms of that as being a marketplace for us for some here. If both turns out very quickly and then starts up very quickly. So if we have to rebound, what we are good with, what we would see presumably is a cliff function going in the other direction as far as the indirect effects, I think those will play out over time but it would be things like and may not even be detectable in the background clutter, it would be things like if at some point somebody were going to build a road into an oil exploration area that road may not be built but I don't think we wouldn't actually, may be in couple of cases we could but it will be demand we never knew was going to be there in the first place. So, I think there will be indirect effects, so I think it would be silly not to say that there are indirect effect, I don't think that they will be particularly easy to categorize or all that necessarily notable. I think that if it the indirect effects would okay, how would it effect national economies? And okay is there an effect that rolls through from us in terms of investment levels and such like that but I think by and large the parts of the industry that are going to be affected will be comparatively small for us, okay obviously, but most obviously be a construction related to oil and that has never been a particular point of focus for us. It has been for others in the industry's other competitors I think will be affected more directly by kind of the fall off and construction related to oil but that has never been a particular point of focus for us historically. So, there will be effects, I just don’t expect them to be particularly notable and it will tend to be kind of background effects and probably not even identifiable by us.

Thanks, Steve. Can you talk a little bit more just on expectations for longer-term highway bill, obviously that's going to be impactful here as we move into the second half. So, just any color you can provide there what you see now and obviously it makes sense that it would go through at this point with lower energy prices.

So, I think that -- I don't have any particular insight in terms what's happening in Washington. I think that if you were to look at the single, most positive discrete event that could occur for Trimble. I think it would be a highway bill with multiyear financing but probably would be the most significant discrete and was positive event that could happen to Trimble because it could reignite, I think a level of confidence, it would provide increased confidence that there would be multiple years of funding and that has resolved contractors which would rev up to make the investments necessary to be competitive and securing that funding. So, I think it would be highly notable if the highway bill, with multiple years twenty funding were to pass. Now, I think that it is reasonably encouraging, although I am not one to be able to judge particularly well. I think it is somewhat encouraging that there seems to be bipartisan discussion going on and that there seems to be a somewhat of a bipartisan view that okay gasoline taxes would be the way to fund it, I don't think that conversation was being held on a bipartisan basis as of and maybe even a year ago but certainly not two years ago. So I think that's encouraging. What the timetable is? I don't know but it is one of the few things that Congress might be able to pass in a spirit of bipartisanship. So a vague hopes on my part, it would be a significant for Trimble if that happens but I don't know what probabilities are and I don't know what time framework is.

Great. Thanks a lot.

Your next question comes in one Rob mason with Robert W. Baird. Your line is open.

Good afternoon, Steve, Francois. Thanks for taking the question. I want to dig in a second on the E&C margins, I think I understand the impact of the differed revenue accounting but is that all it’s going on there because it was pretty significant drop-off and I am not sure I can account for all of that margin degradation via that.

Yes, so there is one more element which the discreet revenue item that was recognized in Q4 ’13. So on a year-on-year basis, that's definitely has an impact. We also have dimensions which is probably $2 million to $3 million for just that E&C business alone, for the total company about $5 million. So those would be the two other things that I would point to decides the acquisition and as a matter of fact may have a bit more impact on the E&C it does on the total company in terms of operating margin.

Just, may be adding on here a little bit is, I think that if just the discrete, -- in effect if you play portfolio here a little bit and what we call our owner 's business focus on the owners of the project, which is where Manhattan software is, where the bulk of the stuff is occurring. We just took that out, the rest of E&C without the owner 's business. The operating margins for the fourth quarter 2014 would look pretty similar to what they look like in the fourth quarter 2013 without any exchange rates. So plain portfolio, relatively comfortable that okay we have got hard handle on E&C margins and what we have here is a bit of a portfolio issue to work through.

Yes, it would've flat and without the outliers and the acquisitions.

Okay. And Steve you reference this, I call it 30% or better stake in the ground and fueled solutions, would you expect that you could see that, return to that in the second half of ’15 based on your revenue expectations and does that give you the latitude to invest that you need to you fully see that's connected form solution come to market with the right channel.

Yes, I think so, I mean we were currently running in the 30s and so what I did today to provide comfort to the financial community that we weren’t simply going to watch Ag margins or for that matter Field Solutions margins have laid a way is okay, there is what I would call hard floor under margins for Ag and we will simply not let them fall below that. Now with what we see in terms of revenue profile, we do believe that okay even maintaining Ag margins in the 30s as oppose to maybe thinking about a number in the 40s for the time being. I think that leaves us with the discretion to continue to do what we need to do in terms of the connected farm, in terms of the data and information products and I think what you're saying part of the back and early part of 2015 is a product flow that's consistent with this. So I think that we are attempting to find the right balance short-term, long-term but what we attempt to do the day was provide some comfort that we believe we can actually do both.

Okay and did you give an update or maybe I missed it just within Ag, the growth within the aftermarket channel how that compared to be the OEM channel, was it still similar to the third-quarter levels, or did that...

I don’t think we have provided much in the way of quantification but directionally Francois talk to, it was it was not pretty anywhere but the fourth quarter was particularly difficult in the OEM channels. So I think that the relative performance of the aftermarket is still better than relative performance in OEM and I think we are getting maybe a better handle on long term interest being able to predict the aftermarket element of it.

Okay. Thanks for taking my questions.

Your next question comes from the line of Ian Ing with MKM Partners. Your line is opened.

Thanks for taking my questions. As far as we could tell, there was elevated equipment purchases at the end of the year due to section 179 and bonus depreciation loss, so did you see any benefit from that? And do you think customers just bought more in December or did they pull in some of their March purchases into December?

Well, answering the second question first. So far given that we are on a profile, on the profile we expect going into the year -- so far there is much evidence from kind of first five weeks of the quarter that there was much in the way of pull in. And again selling largely through a third-party channel, it's hard for me to actually talk to discrete effects. We're not involved with the farmer on each individual transactions going through distribution. So the answer is, there may have been affect, but I don't think it was, from our standpoint it was not particularly discernible. So I think that in terms of a relatively small investment like ours, I'm not sure how much would an effect kind of the tax sort of environment affects us. So if it was there, it wasn't particularly notable to us.

And obviously a difficult environment in many ways due to several factors, I mean could you highlight the trends that give you the most immunity to some of this, I mean is it the mix to more software and services, more of an annuity, or is it is just tipping point where you talked about contractors just really needing to be more efficient any sort of forces that help offset what's happening right now?

Are we talking agriculture, or are we talking in general?

Just in general, just what should we focus on if that gives you immunity to environments?

I mean again I think that immunity might be something that I could only hope for, but I think that again maybe focusing on construction, agriculture gets a lot of attention and the agriculture is what it is and okay we are exposed to kind of a very severe turndown there. So I think that – let me focus a little bit on construction. And I think there both at current status, I think there is also kind of strategic secular play there. But I think that when it comes to construction, Trimble is not selling capacity so whatever is happening in the marketplace in terms of kind of demand or whatever Trimble is selling productivity, it's selling ROI to the contractors. So it's not immunity but let's call it resistance to the downside and maybe putting in the form of if a contractor -- and I don't think we are certainly not, in the U.S. the situation is very robust and in many parts of the world it's still relatively workable economic environment. So I don't want to kind of focus on kind of a negative environment but, in construction let's say a contractor does park half of the fleet out back, the half of the machine fleet out back; Trimble still has the ability to walk through the front door and say okay, we are very sorry that half of your fleet is parked out back because you don't have work for it. But let us help you make the other 50%, the 50% you are using, 20% or 25% or 30% more productive, and we can sell in adverse environment. And I think there is a fundamental, very strong secular trend in construction at this point in time which is -- there are more and more contractors…

No thanks, I mean that laid out the long-term thesis being intact. Thanks.

Your next question comes from the line of Andrea James with Dougherty, your line is open.

Hi. Most of my questions are already asked so I will just ask two quick ones. What are your thoughts on the construction software solutions you have pulled together? I feel like it's really only recently that you really pulled it all together. So I guess, is there any inflection point coming soon and when you really start to get excited about it throwing off, I guess real fruit?

We did roll out at dimensions in November, we did roll out Trimble Connect, which is the fruit of some number of years and a significant amount of investment coined together in one platform that starts to unite all of our construction offerings. So I don't know if there is a magic moment this will be progressive. That's just the opening salvo. There will be new releases coming continuously on that, in every some number of months. But I think that we are seeing the benefit of let's call disintegrated approach on software but it's really in terms of the total Trimble franchise. Again our view, and I will point Ekholm as an example, simply because that has been in press release but the ability for Trimble to come in with a significant portion, if not all of the portion of the technology solution that, yes we will generate the 25% to 30% project savings potentially gives us a, what I will call, significant competitive advantage gives us a significant claim on the share of wallet that's being used for technology acquisition. And so I think that we're already seeing the benefit, maybe not all of it is public at this point in time, a lot of the participants do not want to be press released, but it gives a significant market position. That does result in software revenue sales, but it also pulls the hardware along with it because what we're selling is a bundled solution to a large extent and the software is optimized to work with Trimble hardware even though it would work with anybody's hardware as well. So I think we're already seeing the benefits. I'm not sure that I would want to describe it in terms of some magic moment that creates a real inflection point. I think this is simply every day taking a few more steps ahead sort of market.

Fair enough, and then one more, you talked about the highway bill. I guess, maybe a more minor piece of legislation would be the Railway Safety Act. Can you fill us in there? It's my understanding that every rail operator in North America is going to have to work with you or buy a Trimble survey machine in some way. Can you just bring us up to date and tell us if that is a needle mover at all in the upcoming year?

Well, I think I am going to need some more education from you as to exactly what Bill we are talking about. We do have a rail business. It is growing at a very strong double-digit from a small base. And we are talking to our railroads, but I wasn't aware that there was a legislation that was driving some of that. I guess you're going to have to educate me.

Well, maybe it's a safety thing. And then as far as the highway bill obviously you don't have -- all of the commentary that you're giving about the upcoming year, you're not assuming, that hasn’t factored into anything that you said so far, it would be sort of upside to what your communicating right now? Is that the way it was thing about?

I'm not going to -- either my personal reputation or the reputation of the company on Washington doing anything. So now it is not considered to be part of it. But I suspect if there were highway bill passed, again particularly in terms of the -- that was relatively clear that had multiple year funding and it was clear that it was going to be used for highway or bridge or infrastructure development, I suspect we would detect the changes in the marketplace within days or weeks. Just for me it would be highly rewarding to those contractors that actually play in the infrastructure market.

I appreciate it. Thank you.

And our next question is from the line of Richard Valera from Needham, your line is open.

This is Kristin for Rich Valera. Thanks for let me ask the question. Recently the Department of Transportation announced they expect to publish the final Class A - ELD mandate for the end of 2015. Can you just talk about the opportunities this provides for the Trimble and portion of your Mobile Solutions business?

Again, I think I'm going to dodge the question. I'm not necessarily well enough versed to talk about the, let's call it subtle interactions other than to make a probably non-helpful statement that in this realm when it comes to over the road regulation, it is definitely different. Here is a case where regulation creates business for Trimble and much of the regulatory push coming out of DoT, when it comes to over the road and well other forms of transportation as well, requires compliance and that requires technology. So again I'm not well educated enough to be particularly helpful at the moment but I suspect it's probably good news for us.

Okay, great. Thank you.

[Operator Instructions]. Our next question is from the line of Eli Lustgarten from Longbow Securities, your line is open.

Good afternoon, everybody. Can I get a couple of clarification to make sure you assumed the R&D credit will be here this year, how much is that lower your tax rate to 22%, because that mean obviously it didn't exist before the end of ’14. Is that a 1% to 2% of [indiscernible] or something like that?

Yes, it is built in, and it is a little bit shy, a 1.5% in fact.

And secondly, we always ignore it, but you had a hell of a year in Advanced Devices with a 31% drop; is there anything happening that would prevent that from duplicating itself in the years that we're looking for every nickel and dime, so as to make sure that we don't have a blindside there?

Yes, I'm going to disappoint you once again, Eli, by not getting enthusiastic. Yes, again I think that every once in a while Advanced Devices will have a -- and this one was driven from a couple of sources. So we have a small military business that actually did very well in 2014, given the kind of budgetary pressures in Pentagon, that's not likely to occur. And then we have a timing business that sells GPS-based timing solutions into the telecom infrastructure players such as Samsung. And that is exceptionally lumpy business, very hard to predict. And I wouldn't necessarily want to predict 2015 as being an up year for that. It could turn out to be that way but there are no indications that is something that we could reliably put in a forecast...

If then actually we don’t fit in itself?

Yes, so I think that the best thing is to assume a very low sort of growth rate for Advanced Devices and not assume that it will repeat again. Basically our internal calculations are not expecting much from it.

Now as far as -- can you give us what the carryover acquisitions in revenues and how the impact will be in 2015 versus 2014, with the change in deferred revenue? I mean how much revenue -- notably we see in E&C but how much should we account for acquisition growth in the year, that have already been made?

I would say approximately a 3% to 4% would be the rough magnitude, and most of the benefit we will start seeing in the second half as the accounting effects start.

And most of that’s in the E&C.

And most of that is in the E&C, yes.

And if that if we should we get the change to bring the E&C margin back up to the 20% range that we have seen all the year on a reported basis, and we've got a disappointing quarter under 15 or 16, kind of at which way you look at it. But you know we are going to stay there that while and we got to it at the second half and the acquisition impact the drivers back over 20?

Yes, I think, additionally from a runway trend standpoint at the time where we get to second half of the year, total year average, I can't really answer that precisely but, again the E&C margins in Q4, without the acquisition impact and without the applier which has caused, would have been flattish year-on-year. So I think it's what...

And again, but there is -- I know we didn’t duplicate the fourth quarter of '13, but you're not going to duplicate it in '15 either. You know I have to built that in, I'm just trying to get the scenario with the feel of first half of how the quarters play out and the margins begin to play out and the improvement that we're expecting to take place and E&C is probably most critical area. I am assuming that with the funding running out and the highway bill in the spring also, I assume it will get renewed, but we have all these short-term factors that the second half looks like it should be a much easier and better comparison in E&C than the first half. And I just want to make sure that the right profile to look at.

Yes, I think that's a general sense of, that's our general sense.

And in Mobile Solutions, also I mean you have -- two-part business, one strong, one is not. We had a steady state level of business activity that the modest revenues will be able to sustain the current levels of profitability that we saw for the year in 2014 and 2015?

For Mobile?

In Mobile, yes.

Yes, so I think that the real engine within Mobile is the transportational logistics businesses. At this point they are looking at another strong revenue growth year. I am personally expecting that the construction supply which is not a major part of the business but which is enough to kind of at the margins to require a bit of a story here. I think that is now looking at a meaningful growth year. And then I think the Field Services, the other relatively significant part of the segment, the pipeline for the second half of the year is looking pretty strong there. So I think that the general answer to your question is, yes, and I'm hoping for continued improvement and progression there.

Thank you very much.

At this time I am not showing no further questions. I'll now turn it back to the company.

Okay, thank you for attending. We'll talk to you next quarter. Thanks.