UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(X)
T ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2004
28, 2007
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: 0-18645
TRIMBLE NAVIGATION LIMITED
(Exact
(Exact name of Registrant as specified in its charter)
California 94-2802192
---------- ----------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
749 North Mary Avenue, Sunnyvale, CA 94085
------------------------------------ -----
(Address of principal executive offices) (Zip Code)
Registrant's
| California | | 94-2802192 | |
| (State or other jurisdiction of incorporation or organization) | | (I.R.S. Employer Identification No.) | |
| 935 Stewart Drive, Sunnyvale, CA | | 94085 | |
| (Address of principal executive offices) | | (Zip Code) | |
Registrant’s telephone number, including area code: (408) 481-8000
Securities registered pursuant to Section 12(b) of the Act: NONE
| Title of each class | | Name of each exchange on which stock registered |
| Common Stock | | NASDAQ Global Select Market |
| Preferred Share Purchase Rights | | NASDAQ Global Select Market |
| (Title of Class) | | |
Securities registered pursuant to Section 12(g) of the Act: Common Stock
Preferred Share Purchase Rights
(TitleNONE
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of Class)
the Securities Act.
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.
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X
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'sregistrant’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. [X]
T
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer.
Large Accelerated Filer T | Accelerated Filer £ | Non-accelerated Filer £ |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes X No
The
As of June 29, 2007, the aggregate market value of the Common Stock held by non-affiliates of the registrant was approximately $3.9 billion based uponon the last saleclosing price of the Common Stockas reported on the NASDAQ National Market on July 2, 2004 was approximately $1.3 billion.
There were 52,581,679 sharesGlobal Select Market.
Indicate the number of share outstanding of each of the
registrant's Common Stock issued and
outstandingissuer’s classes of common stock, as of
March 9, 2005.
the latest practicable date. | Class | | | Outstanding at February 21, 2008 | |
| Common stock, no par value | | 121,161,625 shares | |
DOCUMENTS INCORPORATED BY REFERENCE
Certain parts of Trimble Navigation Limited's Proxy Statement relating to the annual meeting of stockholders to be held on May
19, 200522, 2008 (the "Proxy Statement") are incorporated by reference into Part III of this Annual Report on Form 10-K.
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. The forward-looking statements regarding future events and the future results of Trimble Navigation Limited
("Trimble"(“Trimble” or
"The Company"“The Company” or
"We"“We” or
"Our"“Our” or
"Us"“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
"Other“ Risk
Factors"Factors” and elsewhere, and in other reports Trimble files with the Securities and Exchange Commission
("SEC"(“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
"Management's Discussion and
Analysis of Financial Condition and Results of Operations-Risks"Risks and Uncertainties" contained herein, among other things, should be considered in evaluating our prospects and future financial performance. We have attempted to identify forward-looking statements in this report by placing an asterisk (*) before paragraphs containing such material.
TRIMBLE NAVIGATION LIMITED
2004
2007 FORM 10-K ANNUAL REPORT
| | PART I | | |
| Item 1 | | | | 5 |
| Item 1A | | | | 15 |
| Item 1B | | | | 21 |
| Item 2 | | | | 21 |
| Item 3 | | | | 21 |
| Item 4 | | | | 21 |
| | | | |
| | PART II | | |
| Item 5 | | | | 22 |
| Item 6 | | | | 23 |
| Item 7 | | | | 24 |
| Item 7A | | | | 40 |
| Item 8 | | | | 42 |
| Item 9 | | | | 82 |
| Item 9A | | | | 82 |
| Item 9B | | | | 82 |
| | | | |
| | PART III | | |
| Item 10 | | | | 83 |
| Item 11 | | | | 83 |
| Item 12 | | | | 83 |
| Item 13 | | | | 83 |
| Item 14 | | | | 83 |
| | | | |
| | PART IV | | |
| Item 15 | | | | 84 |
TRADEMARKS
Trimble, the globe and triangle logo, EZ-Guide, Telvisant, Lassen, SiteVision,EZ-Boom, Proliance, UtilityCenter, TrimWeb, TrimView, GEOManager, Taskforce, Juno, GeoExplorer, AgGPS, Thunderbolt, FirstGPS,AgGPS, Spectra Precision, Autopilot, Fieldport, Copernicus, TrimTrac, EZ-Steer, PocketCitation, Trimble Outdoors, and CrossCheck are
trademarks of Trimble Navigation Limited and its subsidiaries registered in the
United States Patent and Trademark Office and other countries. Force, Ranger,
Recon and TrimTracamong others are trademarks of Trimble Navigation Limited and its subsidiaries. All other trademarks are the property of their respective owners. PART I
Item 1 Business Overview
Trimble Navigation Limited, a California corporation ("Trimble"(“Trimble” or "the Company"“the Company” or "we"“we” or "our"“our” or "us"“us”), provides advanced positioning product solutions, most typically to commercial and government users. The principle applications servedprincipal application areas include surveying, agriculture, construction, agriculture, urbanasset management, mapping and naturalmobile resource
management, and fleet and asset management. Our products typically provide benefits that can include lower operational costs, higher productivity, and higher productivity.
Examples of productsimproved quality. Product examples include systems that guide agricultural and construction equipment, guidance systems, surveying instruments, systems that track fleets of vehicles, and data collection systems that enable the management of large amounts of geo-referenced information. In addition, we also manufacture components for in
vehiclein-vehicle navigation and telematics systems, and timing modules used in the synchronization of wireless networks.
Trimble
Our products often combine knowledge of location or position together with
applications software and a wireless link to provide a solution tofor a specific application. Position is provided through a number of alternative technologies including the Global Positioning System (GPS) and systems that use laser or optical technologies to establish position. Wireless communication techniques include both public networks, such as cellular, and private networks, such as business band radio. A significant amount of the differentiation inOur products are augmented by our products
is provided through software; this includes embedded firmware that enables the positioning solution and applicationsapplication software that allows the customer to make use of the positioning information.
We design and market our own products. Our manufacturing strategy includes a combination of in housein-house assembly as well as the use ofand third party subcontractors. Our global operations include major development, manufacturing or logistics operations in the United States, Sweden, Germany, New Zealand, France, Canada, the United Kingdom, the Netherlands, China, and the Netherlands.India. Products are sold through dealers, representatives, joint ventures, and other channels throughout the world. These channels are supported by our sales offices located in more than 2018 countries.
We began operations in 1978 and incorporated in California in 1981. Our common stock has been publicly traded on NASDAQ since 1990 under the symbol TRMB.
On January 17, 2007, Trimble’s board of directors approved a 2-for-1 split of all outstanding shares of the Company’s Common Stock, payable February 22, 2007 to stockholders of record on February 8, 2007. All shares and per share information presented have been adjusted to reflect the stock split on a retroactive basis for all periods presented.
Technology Overview
A majoritysignificant portion of our revenue is derived from applying GPSGlobal Navigation Satellite System (GNSS) technology to terrestrial applications. The GNSS includes the GPS is a systemnetwork of 24 orbiting U.S. based satellites and associated ground control that is funded and maintained by the U. S. Government and is available worldwide free of charge. GPScharge, and the Russian GLONASS satellite based system. Both Europe and China have announced plans to establish future operational satellite navigation based systems. GNSS positioning is based on a technique that precisely measures distances from four or more satellites. The satellites continuously transmit precisely timed radio signals using extremely accurate atomic clocks. A GPSGNSS receiver measures distances from the satellites in view by determining the travel time of a signal from the satellite to the receiver, and then uses those distances to compute its position. Under normal circumstances, a stand-alone GPSGNSS receiver is able to calculate its position at any point on earth, in the earth's atmosphere, or in lower earth orbit, to approximately 10 meters, 24 hours a day. Much better accuracies are possible through a technique called "differential
GPS."“differential GNSS.” In addition to providing position, GPSGNSS provides extremely accurate time measurement.
GPS
GNSS accuracy is dependent upon the locations of the receiver and the number of GPSGNSS satellites that are above the horizon at any given time. Reception of GPSGNSS signals requires line-of-sight visibility between the satellites and the receiver, which can be blocked by buildings, hills, and dense foliage. The receiver must have a line of sight to at least four satellites to determine its latitude, longitude, attitude (angular orientation), and time. The accuracy of GPSGNSS may also be limited by distortion of GPSGNSS signals from ionospheric and other atmospheric conditions.
Our
GPSGNSS products are based on proprietary receiver technology. Over time, the advances in positioning, wireless
communication,communications, and information technologies have enabled us to add more capability to our products and thereby deliver more value to our users. For example, the
recent developments in wireless technology and deployments of next generation wireless networks have enabled less expensive wireless communications. These developments
allow forprovide the efficient transfer of position data to locations away from the positioning field device, allowing the data to be accessed by more users,
and thereby increasing productivity. This
has
allowedallows us to
include a wireless link in manyintegrate visualization and design software into our systems, as well as offers positioning services, all of
which make our
products and connect remote
field operations to a central location.
customers more efficient at what they do.Our laser and optical products either measure distances and angles to provide a position in three dimensional space or they provide highly accurate laser references from which a position can be established. The key elementselement of these products areis typically a laser, which is generally a commercially available laser diode and a complex mechanical assembly. These elements are augmented by software algorithms.
Business Strategy
Our business strategy is developed around an analysis of several key elements:
o Attractive markets - We focus on markets that offer potential for
revenue growth, profitability, and market leadership.
o Innovative solutions that provide significant benefits to our
customers - We seek to apply our technology to applications for which
position data is important and where we can create unique value. We
look for opportunities in which the rate of technological change is
high and which have a requirement for the integration of multiple
technologies into a solution.
o Distribution channels to best access our markets - We select
distribution channels that best serve the needs of individual markets.
These channels can include independent dealers, direct sales, joint
ventures, OEM sales, and distribution alliances with key partners. We
view international expansion as an important element of our strategy
and seek to develop international channels.
| · | Attractive markets – We focus on underserved markets that offer potential for revenue growth, profitability, and market leadership. |
| · | Innovative solutions that provide significant benefits to our customers – We seek to apply our technology to applications in which position data is important and where we can create unique value by enabling enhanced productivity in the field or field to back office. We look for opportunities in which the rate of technological change is high and which have a requirement for the integration of multiple technologies into a solution. |
| · | Distribution channels to best access our markets – We select distribution channels that best serve the needs of individual markets. These channels can include independent dealers, direct sales, joint ventures, OEM sales, and distribution alliances with key partners. We view international expansion as an important element of our strategy and seek to develop international channels. |
Business Segments and Markets
We are organized into four main operatingreporting segments encompassing our various applications and product lines: Engineering and Construction, Field Solutions, Component Technologies,Mobile Solutions and Mobile Solutions. Our Portfolio Technologies segment
aggregates smaller businesses, primarily focused on defense and the integration
of GPS and inertial technologies.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. The presentation of prior period’s segment operating results has been conformed to our current segment presentation.
Engineering and Construction
Products in the Engineering and Construction segment improve productivity and accuracy throughout the entire construction process including the initial survey, planning, design, site preparation, and building phases. Our products are intended to both improve the productivity of each phase, as well as facilitate the entire process by improving information flow from one stepphase to the next.
The product solutions typically include multiple technologies. The elements of these solutions may incorporate GPS, optical, laser, radio, or cellular communications, and software.
communications.
An example of the customer benefits provided by our productproducts is our GPS and robotic optical surveying instruments which enable the surveyor to perform operations in the field faster, more reliably than conventional surveying instruments and with a smaller crew. Similarly, our construction machine guidance products allow the operator to achieve the desired landform bywhile eliminating stakeout and reducing rework. These steps in the construction process can be readily linked together with data collection modules and software to minimize the time and effort required to maintain data accuracy throughout the entire construction process.
We sell and distribute our products in this segment through a global network of independent dealers that are supported by Trimble personnel. This channel is supplemented by relationships that create additional channel breadth including our joint ventures with Caterpillar, Nikon, and private branding arrangements with other companies.
We also design and market handheld data collectors and data collection software for field use by surveyors, contractors, and other professionals. These products are sold directly through dealers and other survey manufacturers. Competitors
in this portion
Competitors in this segment are typically companies that provide optical, laser, or GPS positioning products. Our principal competitors are Topcon Corporation, and Leica
Geosystems.Geosystems which was purchased by Hexagon. Price points in this segment range from less than $1,000
for certain laser systems to approximately $125,000$100,000 for a high precision,high-precision, three-dimensional, machine control system.
Representative products sold in this segment include:
Trimble(R)
Trimble S6 Total Station - The Trimble S6 Total Stationtotal station is a technologically advanced optical surveying system. Its advanced servo motors make the Trimble S6 total station fast, silent, and precise, allowing surveyors to measure points and collect data in the field efficiently and productively. The Trimble S6 total station offers unique new Trimble technologies that enable cable-free operation, longer battery life, and accuracy assurance, among many other features. Its detachable Trimble CU controller runs powerful Trimble field software for collecting, displaying,is utilized to effectively collect, display, and managingmanage field data.
Trimble(R) R8 GPS System -
Trimble VX Spatial Station – Trimble VX™ Spatial Station is an advanced positioning system that combines optical, 3D scanning, and video capabilities—Trimble VISION™ technology—to measure objects in 3D to produce 2D and 3D data sets for spatial imaging projects. The Trimble R8 GPS System combines a GPS receiver,
radio, and battery in one compact unit to produce a lightweight and versatile,
cable-free GPS surveying solution. Surveyors can use the Trimble R8 system to
achieve centimeter-level accuracy in their measurements in real time. The
Trimble R8 system offers R-Track technology, which is a unique Trimble
technology developed to support new GPS signals for civilian use. These new
signals will be transmitted from modernized GPS satellites that the U.S.
Department of Defense has scheduled for launch in 2005.
Trimble(R) Recon(TM) Controller - The Trimble Recon Controller is a rugged
handheld controller used by surveyors and engineers in the field. Running the
Microsoft Pocket PC operating system, the Trimble Recon controllerVX Spatial Station enables users to runblend extremely accurate ground-based information with airborne data to provide comprehensive datasets for use in the Trimble software of their choice, plus other applications to support
their business needs.geospatial information industry.
SPS Site Positioning Solutions – The Trimble Recon controller features a touch screen for
quickSite Positioning Solutions family increases the productivity of construction professionals and easysupervisors during site preparation, layout and grade checking by simplifying workflows, eliminating unnecessary steps, and providing intelligent data entrymanagement between the field and a color graphic display. It tackles multiple
surveying applications, including topographic surveying, engineering,
construction, and mapping.
the office, creating time savings by providing data updates to all members of the team.
GCS familyFamily of Grade Control Systems - – Grade control systems meetsmeet construction contractors' needs with productivity-enhancing solutions for earthmoving, site prep, and roadwork. The Trimble(R)Trimble GCS family provides upgrade options that deliver earthmoving contractors with the flexibility to select a system that meets their daily needs today, and later add on to meet their changing needs. For example, a single control system such as the GCS300 can provide for low-cost point of entry into grade control, and over time can be upgraded to the GCS400 dual sensor system or to the full 3D GCS900 Grade Control System.
Spectra Precision(R)Precision Laser portable tools - Portable Tools – Our Spectra Precision® Laser portfolio includes a broad range of laser based tools for the interior, drywallsdrywall and ceilings, HVAC, and mechanical contractor. Designed to replace traditional methods of measurement and leveling for a wide range of interior construction applications, our laser tools are easy to learn and use. Our Spectra Precision Laser product portfolio includes rotating lasers for horizontal leveling and vertical alignment, as well as laser pointers and a laser based distance measuring device.devices. They are available through independent and national construction supply houses both in the USU.S. and in Europe.
Proliance Software - Proliance® Software allows infrastructure-intensive organizations to optimize the Plan-Build-Operate project lifecycle for complex capital projects, construction and real estate programs, and extensive facility portfolios. The Proliance Software was designed for large building owner/operators, real estate developers, and engineering-driven organizations managing $250 million or more annually in new project construction or facility renovations.
Field Solutions
Our Field Solutions segment addresses the agriculture and geographic information system (GIS) markets.
Our agriculture products consist of manual and automated navigation guidance for tractors and other farm equipment used in spraying, planting, cultivation, and harvesting applications. The benefits to the farmer include faster machine operation, higher yields, and lower consumption of chemicals.chemicals than conventional equipment. We also provide positioning solutions for leveling agricultural fields in irrigation applications and aligning drainage systems to better manage water flow in fields.
We use multiple distribution channels to access the agricultural market, including independent dealers and partners such as CNH Global. Competitors in this market are either vertically integrated implement companies such as John Deere, or agricultural instrumentation suppliers such as Raven, RHS, CSI
Wireless, BeelineHemisphere GPS and Novariant.
Our GIS product line is centered on handheld data collectors that gather information in the field to be incorporated into GIS databases. Typically this information includes features, attributes, and positions of fixed infrastructure and natural resource assets. An example would be
that of a utility company performing a survey of its transmission poles including the age and condition of each telephone pole. Our handheld unit enables this data to be collected and automatically stored while confirming the location of the asset. The data can then be downloaded into a GIS database. This stored data could later be used to
navigate back to any individual asset or item for maintenance or data update. Our mobile GIS initiative goes one step further by allowing this information to be communicated from the field worker to the back-office GIS database through the combination of wireless technologies, as well as giving the field worker the ability to download information from the database. This capability provides significant advantages to users including improved productivity, accuracy, and access to the information in the field.
Distribution for GIS products is primarily through a network of independent dealers and business partners, supported by Trimble personnel. Primary markets for our GIS products and solutions include both governmental and commercial users. Government usersUsers are most often municipal governments and natural resource agencies. Commercial users include utility companies. Competitors in this market are typically survey instrument companies utilizing GPS technology.
Two examples are Leica Geosystemstechnology such as Topcon and Thales.
Approximate product price points in this segment range from $3,000 for a GIS handheld unit to $35,000 for a fully automated, farm equipment control system.
Representative products sold within this segment include:
GeoExplorer(R) CE Series
AgGPS EZ-Guide 500 – A lightbar guidance system with a color LCD display, data logging functions and multiple accuracy options. Lightbar systems provide GPS-based guidance for vehicle operators to steer tractors, sprayers, fertilizer applicators, air seeders, and large tillage tools that require consistent pass-to-pass accuracy to help save fuel, increase efficiency, and reduce input costs for agricultural operations.
AgGPS EZ-Boom 2010 - Combines a The AgGPS® EZ-Boom® 2010 automated application control system is designed to help growers cut input costs and reduce operator fatigue by providing precise automatic control of field spraying applications. It works with the Trimble AgGPS receiver in a rugged handheld unit
running Microsoft's Windows CE operatingEZ-Guide® Plus lightbar guidance system, that makes it easy to collect
and maintain data about objects inAgGPS EZ-Steer® assisted steering system, or the field.
AgGPS(R) Autopilot(TM)AgGPS Autopilot™ automated steering system.
AgGPS Autopilot System - – A GPS-enabled, agricultural navigation system that connects to a tractor'stractor’s steering system and automatically steers the tractor along a precise path to within three centimeters or less. This enables both higher machine productivity and more precise application of seed and chemicals, thereby reducing costs to the farmer.
AgGPS(R) EZ-Guide(R)
AgGPS EZ-Steer System - – A GPS-enabled, manual guidancevalue added assisted steering system, that provideswhen combined with the tractor operator with steering visual corrections required to stay
on course toEZ-Guide Plus system, automatically steers agricultural vehicles along a path within 25 centimeters.20 centimeters or less. This system reduces the overlap or gapinstalls in less than thirty minutes and is designed to reduce gaps and overlaps in spraying, fertilizing, and other field applications, as well as reduce operator fatigue.
GeoExplorer 2005 Series – Combines a GPS receiver in a rugged handheld unit running industry standard Microsoft Windows Mobile version 5.0, making it easy to collect and maintain data about objects in the field. The GeoExplorer® series features three models ranging in accuracy from subfoot to 1-3 meters, thereby allowing the user to select the system most appropriate for their data collection and maintenance needs.
Fieldport Software – Focuses on automating field service processes, operational efficiency and profitability for water and wastewater utility customers. Sales and distribution of Fieldport® software solutions are direct to the customer. A Fieldport software installation involves a degree of integration and professional services.
Software – An enterprise suite of modules oriented towards the electric and gas utilities market. Modules include Outage Management (OMS), Mobile Asset Management, Data Collection, Staking, Network Tracing & Isolation and Field-based GIS Editing. Sales and distribution of UtilityCenter® software solutions are direct to the customer. UtilityCenter software installation involves a degree of integration and professional services.
Mobile Solutions
Our Mobile Solutions segment addresses gaps in technology for vehicles and mobile workers by providing both hardware and software applications for managing mobile work, mobile workers and mobile assets. The software is provided in both a client server model or web-based. Our software is provided through our hosted platform for a monthly subscription service fee or as a perpetual license with annual maintenance and support fees.
Our vehicle solutions typically include an onboard proprietary hardware device consisting of a GPS receiver, business logic, sensor interface, and a wireless modem. Our solution usually includes the communication service from/to the vehicle to our data center and access over the internet to the application software.
Our mobile worker solutions include a rugged handset device and software designed to automate service technician work in the field at the point of customer contact. The mobile worker handset solutions also synchronize to a client server at the back office for integration with other mission-critical business applications.
Our scheduling and dispatch solution is an enterprise software program to optimize scheduling and routing of field service technicians. For dynamic capacity management, our capacity planner, capacity controller, and intelligent appointer modules round out this innovative service delivery automation technology.
One element of our market strategy targets opportunities in specific vertical markets where we believe we can provide a unique value to the end-user by tailoring our solutions for a particular industry. Sample markets include Ready Mix Concrete, Direct Store Delivery and Public Safety. Our ready mix concrete solution combines a suite of sensors with our in-vehicle wireless platform providing fleets with updated vehicle status that requires no driver interaction – referred to as “auto-status.”
We also sell our vehicle solutions using a horizontal market strategy that focuses on providing turnkey solutions to a broad range of service fleets that span a large number of market segments. Here, we leverage our capabilities without the same level of customization. These solutions are sold to the general service fleets as well as transportation and distribution fleets both on a direct basis and through dealer channels.
Our enterprise strategy focuses on sales to large, enterprise accounts with more than 1,000 vehicles or routes. Here, in addition to a Trimble-hosted solution, we can also integrate our service directly into the customer’s IT infrastructure, giving them improved control of their information. In this market we sell directly to end-users. Sales cycles tend to be long due to field trials followed by an extensive decision-making process.
Approximate prices for hardware fall in the range of $400 to $3,000, while the monthly subscription service fees range from approximately $25 to approximately $55, depending on the customer service level.
We have also entered into new markets by acquisitions of @Road Inc. (@Road), Advanced Public Safety, Inc. (APS) and Visual Statement Inc. (VS). @Road is a global provider of solutions designed to automate the management of mobile resources and to optimize the service delivery process for customers across a variety of industries. APS provides mobile and handheld software products used by law enforcement, fire rescue and other public safety agencies. VS provides desktop software and enterprise solutions for collision and crime incident analysis, reporting and workflow management.
Representative products sold in this segment include:
Fleet Productivity - Our fleet productivity solution offerings are comprised of the TrimWeb™, GeoManager™, and TrimView™ mobile platforms. The TrimWeb and GeoManager systems provides different levels of service that run from snapshots of fleet activity to real-time fleet dispatch capability via access to the web-based platform through a secure internet connection. The TrimWeb and GeoManager systems include truck communication service and computer backbone support of the service. TrimView is sold to fleets where system integration into back office applications is required for more robust information flow.
Consumer Packaged Goods (CPG)- This software solution operates in the Microsoft CE/Pocket or WinMobile PC environment and addresses the pre-sales, delivery, route sales and full service vending functions performed by mobile workers. Customers within the CPG market purchase a combination of both license software and handheld PCs. The software handles all communications from/to the mobile computer as well as from/to the host and any other ERP or decision support systems.
Field Service - Our handset-based mobile solution enables technicians to maintain and repair residential and commercial appliances, office equipment, medical equipment, refrigeration equipment, fountain, and manufacturing equipment, and manage a variety of service functions including wireless dispatching of service calls, real-time messaging, spare parts management, and work order and workflow management. Trimble Field Service customers have benefited from increased service calls per day, an increase in first call resolution and reduction in administrative workload to name a few results.
Public Safety – We provide a suite of solutions for the public safety sector including our PocketCitation(TM) system which is an electronic ticketing system enables law enforcement officers to issue traffic citations utilizing a mobile handheld device. This system scans the traffic offender’s driver’s license and automatically populates the appropriate information into the citation. We provide a variation of this solution which enables law enforcement officers to complete electronic traffic citations within 30 seconds. Within this sector we also provide desktop software which enables accident investigators and other public safety professionals to reconstruct and simulate vehicle accidents.
Taskforce – The Taskforce® software solution provides scheduling and dispatch solutions for field service technicians by synchronizing the right human and physical resources required to optimize a field service resource network. The system manages significant numbers of dynamic scheduling resources in an unpredictable field service environment to increase productivity, field force utilization and control-to-field employee ratios.
Advanced Devices
In the first quarter of 2006, we began reporting a new segment called Advanced Devices that combines our previously reported Component Technologies Ourand Portfolio segments. This was done in recognition of the small size of each of the businesses comprising the new segment, relative to the total company. Advanced Devices includes the product lines from our Component Technologies, segment providesApplanix, Trimble Outdoors, and Military and Advanced Systems (MAS) businesses. It is helpful to recognize that with the exception of Trimble Outdoors and Applanix these businesses share several characteristics: they are hardware centric, generally rely on OEM distribution, and have products that can be utilized in a number of different end-user markets.
Within Component Technologies, we provide GPS-based components for applications that require embedded position or
time. Our largest markets are intime to market such as the telecommunications and automotive industries where we supply modules, boards, custom integrated circuits,
and software, or single application IP licenses to the customer according to the needs of the application. Sales are made directly to original equipment manufacturers (OEMs) and system integrators who incorporate our component into a sub-system or a complete system-level product.
In the telecommunications infrastructure market, we provide timing modules that
keep wireless networks synchronized and on frequency. For example, CDMA cellular
telephone networks require a high level of both short-term and long-term
frequency stability for proper operation (synchronization of information/voice
flow to avoid dropped calls). Our timing modules meet these needs at a much
lower cost than the atomic standards or other specially prepared components that
would otherwise be required. Customers include wireless infrastructure companies
such as Nortel, Samsung, and Andrew.
In the automotive and embedded market, we provide a GPS component that is
embedded into in-vehicle navigation (IVN), fleet management, vehicle security,
asset management and telematics applications. For the automotive market, in
addition to core GPS technology, we provide a location engine for IVN that
blends GPS with advanced dead reckoning (DR) technology to provide exceptional
position density in the most challenging navigation environments. The primary
selling attributes in this market are quality, technology, logistics and
customer support. Trimble supplies several Tier-1 IVN system manufacturers in
Europe and Asia.
* The requirements for smaller size and lower power of GPS components, coupled
with improving capabilities allow GPS to potentially be used in a new class of
wireless devices. Indicative of this trend, in 2004 we announced a new product
category, the TrimTrac, which combines a cellular phone in the same package as a
GPS receiver. We expect our strength in GPS technology will expand our
participation in this market.
* Component Technologies has developed GPS
software technologies which it is making available for license.
This softwareThese technologies can run on certain digital signal processors (DSP) or microprocessors, removing the need for dedicated GPS baseband
signal processor chips. Component Technologies hasWe have a partnershipcooperative licensing deal with u-Nav
MicroelectronicsNokia for Trimble's Global Navigation Satellite System (GNSS) patents related to license Trimbledesignated wireless products and services involving location technologies, such as GPS, software technology for u-Navassisted GPS chipsets.
* Component Technologies continuesor Galileo. The licensing agreement is exclusive to explore other positioning solutions in
addition to GPS. An example of such a solution is the television triangulation
technology developed by Rosum. With Rosum, we intend to develop a family of
devices which will greatly extend the ability to locate both people and assets
in environments that would be difficult or impossible for GPS only solutions.
The major competitor in the telecommunication infrastructure market is
Symmetricom. Competitors in the automotive and embedded markets are typically
component companies with GPS capability, including Japan Radio Corporation,
Motorola, and SiRF.
Representative products sold by this segment include:
Thunderbolt(R) GPS Disciplined Clock - The Thunderbolt clock is used as a time
sourceNokia for the synchronization of wireless networks. By combiningconsumer product and service domain and includes sublicensing rights. In return, Trimble receives a GPS receiver
with a high-quality quartz oscillator, the Thunderbolt achieves the performance
of an atomic standard with higher reliabilitynon-exclusive license to Nokia’s location-based patents for use in Trimble's commercial products and lower price.
FirstGPS(R) Technology - We license our FirstGPS technology, whichservices.
Our Applanix business is a
host-based, GPS system available as two integrated circuitsleading provider of advanced products and
associated
software. The software runs on a customer's existing microprocessor system
complementing the work done by the integrated circuitenabling solutions that maximize productivity through mobile mapping and positioning to
generate position,
velocity, and time. This low-power technology is particularly suitable for
small, mobile, battery-operated applications.
Lassen(R) iQ Module - The Lassen iQ module adds complete GPS functionality to a
mobile product in a postage stamp-sized footprint with ultra-low power
consumption, consuming less than 100mW at 3.3V. This module is designed for
portable handheld, battery-powered applications such as cell phones, pagers,
PDAs, digital cameras, and many others.
TrimTrac(TM) Locator - Our new TrimTrac product is a complete end user device
that combines GPS functionality with tri-band global system for mobile
communications (GSM) wireless communications. It is intended for high volume
personal vehicle and commercial asset management applications that demand a
low-cost locator device.
Mobile Solutions
Our Mobile Solutions segment addresses the market for fleet management services
by providing a Trimble-hosted platform solution that bundles both the hardware
and software needed to run the application. The software solution is typically
provided to the user through Internet-enabled access to our hosted platform for
a monthly service fee. This solution enables the fleet owner to dispatch, track,
and monitor the conditions of vehicles in the fleet on a real-time basis. A
vehicle-mounted unit consists of a single module including a GPS receiver,
sensor interface, and a cellular modem. Our solution includes the communication
service from the vehicle to our data center and access over the Internet to the
application software, relieving the user of the need to maintain extensive
computer operations.
We market our fleet management services in three primary areas, leveraging the
core platform. Our market strategy targets opportunities in specific verticalprofessional markets
where we believe we can provide a unique value to the end user by
customizing the hardware and software solution for a particular industry. For
example, the first vertical we are addressing is ready mix concrete. Here, we
combine a suite of sensors into a solution that can automatically determine the
status of a vehicle without driver intervention. Our agreement with McNeilus, a
major manufacturer of trucks for the ready mix concrete and waste management
industries, facilitates factory installations of our management solution to
ready mix concrete fleet operators. McNeilus', along with a Trimble sales force,
markets our solution as a retrofit for trucks already in the field, or as a
factory-installed option. We plan on leveraging our technology, partners and
customers into other verticals, such as other construction material delivery
vehicles and waste management trucks, where a customized solution can provide
similar benefits as in ready mix.
We also have a horizontal market strategy that focuses on providing turnkey
solutions to a broad range of service fleets and mobile workers that span a
large number of market segments. Here, we leverage the same general applications
that are used in our vertical markets without the same level of customization.
These products are distributed through individual dealers as well as
after-market automotive electronics suppliers.
Our enterprise strategy focuses on sales to large, enterprise accounts. Here, in
addition to a Trimble-hosted solution, we can also integrate our software
directly into the customer's IT infrastructure, giving them control of the
information. In this market we sell directly to end users and sales cycles tend
to be long due to field trials followed by an extensive decision-making process.
Approximate prices for the hardware fall in the range of $400 to $3,000, while
the monthly software service fees range from approximately $20 to approximately
$55, depending on the customer service level. Competition comes largely from
service-oriented businesses such as @Road.
Representative products sold by this segment include:
TrimWeb(TM) and TrimFleet(TM) Systems - Our fleet management service offerings
are comprised of the TrimWeb system and TrimFleet system. The TrimWeb system
provides different levels of service that run from snapshots of fleet activity
to real-time fleet dispatch capability via access to the TrimWeb platform
network through a secure internet connection. The TrimWeb system includes truck
communication service and computer backbone support of the software. The
TrimFleet system offers many of the same features, though the software resides
on the end users servers and is accessed by the customer through their own
internal networks, not via the internet. Variations of the TrimWeb system and
TrimFleet system are tailored for specific industry applications.
CrossCheck(R) Module - This hardware, mounted on the vehicle, provides location
and information through its built-in cellular interface. This module also
includes GPS positioning, sensor interfaces for vehicle conditions, and built-in
intelligence for distributed decision-making.
Portfolio Technologies
Our Portfolio Technologies segment includes various operations that aggregate to
less than 10 percent of our total revenue. The operations in this segment are
Applanix, Military and Advanced Systems (MAS), and Trimble Outdoors.worldwide. Applanix develops, manufactures, sells and supports high-value, precision products that combine GPS with inertial sensors for accurate measurement of the
position and attitude, of moving vehicles.flight management systems, and scalable mobile mapping solutions used in airborne, land and marine applications. Sales are made directly by our direct sales force to the end users, or to systems integrators.integrators, and OEMs, and through regional agents. Competitors include Leica, IGI in the
airborne survey market, and iXsea and VT TSS in the marine survey market.
Novatel.
Our MAS business supplies GPS receivers and embedded modules that use the military'smilitary’s GPS advanced capabilities. The modules are principally used in aircraft navigation and timing application.applications. Military products are sold directly to either the USU.S. Government or defense contractors. Sales are also made to authorized foreign end users. Competitors in this market include Rockwell Collins, L3, and Raytheon.
During fiscal 2004, we announced our newest business, Trimble Outdoors.
The Trimble Outdoors is a consumer business utilizing GPS enabledutilizes GPS-enabled cell phones to provide information for outdoor recreational activities. Some of the recreational activities include hiking, biking, backpacking, boating, and water sports. Consumers purchase the Trimble Outdoors product through our wireless operator partners which include Sprint-Nextel, SouthernLINC Wireless and Boost Mobile.
Representative products sold by this segment include:
Copernicus GPS Receiver–The Copernicus® Receiver is a full-function GPS receiver in a surface mount package the size of a postage stamp.
TrimTrac Locator - Our TrimTrac® product is a complete end user device that combines GPS functionality with global system for mobile communications (GSM) wireless communications. In 2006, we added to the TrimTrac locator full quad-band GSM and general packet radio service (GPRS) support along with several important application level features. The device is suitable for high volume personal vehicle and commercial asset management applications that demand a low-cost locator.
Applanix POS/AV(TM)AV System - An integrated GPS/inertial system for airborne surveying that measures aircraft position to an accuracy of a few centimeters and aircraft attitude (angular orientation) to an accuracy of 30 arc seconds or better. This system is typically interfaced to large format cameras and scanning lasers for producing geo-referenced topographic maps of the terrain.
Force(TM) 5 GS (GRAM-SAASM)
Applanix DSS Digital Sensor System - A digital airborne imaging solution that produces high-resolution orthophoto map products. Certified by the USGS, the system consists of a mapping grade digital camera that is tightly integrated with a GNSS/Inertial system, flight management system (FMS) and processing software for automatic geo-referencing of each pixel. The DSS can be used stand-alone or integrated with other airborne mapping sensors such as LiDAR. The DSS has been used by organizations worldwide in a variety of markets segments that include ortho mapping, utility and transportation corridor mapping and rapid response applications.
Force 524D Module - A dual frequency, embedded GPS module that is used in a variety of military airborne applications.
Trimble Outdoors Service - Trip planning and navigation software that works with GPS-enabled cell phones and conventional GPS receivers. This software enables consumers to research specific trips on-line as part of trip pre-planning. In addition, users are able to share outdoor and off-road experiences on-line with their friends and family.
Acquisitions and Joint Ventures
Our growth strategy is centered on developing and marketing innovative and complete value-added solutions to our existing customers, while also marketing them to new customers and geographic regions. In some cases, this has led to partnering with or acquiring companies that bring technologies, products or distribution capabilities that will allow us to
enter orestablish a market beach head, penetrate a market more
effectively, or develop solutions more quickly than if we had done so solely through internal development. Over the
past five years,Since 1999, this has led us to form twothree joint ventures and acquire multiple
companies.twenty seven companies through fiscal 2007. Most of these acquisitions have been small, both in dollar terms and in number of people added to the Trimble employee base. No assurance can be given that our previous or future acquisitions will be successful or will not materially adversely affect our financial condition or operating results. GeoNav
* We acquired the following companies or assets in the last twelve months:
HHK
On July 5, 2004December 19, 2007, we acquired GeoNavprivately-held HHK Datentechnik GmbH of Braunschweig, Germany, a small provider of customized office and field data collectionsoftware solutions for the cadastral survey market in Europe. We expect
the acquisition to augment our capability for localization of our products in
Europe. GeoNav'sGermany. HHK’s performance is reported under our Engineering and Construction business segment.
TracerNET Corporation
*
UtilityCenter
On March 5, 2004November 8, 2007, we acquired TracerNET Corporationthe UtilityCenter assets from privately-held UAI, Inc. of Virginia,Huntsville, Alabama. UAI is a leading provider of Geographic Information System (GIS)-based workflow automation and outage management solutions for electric and gas utilities. UtilityCenter’s performance is reported under our Field Solutions business segment.
Ingenieurbüro Breining GmbH
On September 19, 2007, we acquired Ingenieurbüro Breining GmbH of Kirchheim, Germany, a provider of wireless fleet management solutions. We expectcustomized field data collection and office software solutions for the TracerNET acquisition to
offer more diverse and complete fleet management solutions. TracerNET's
performance has been integrated into our Mobile Solutions segment.
MENSI S.A.
On December 9, 2003, we acquired MENSI S.A., a French developer of terrestrial
3D laser scanning technology. The MENSI acquisition enhanced our technology
portfolio and expanded our product offerings. MENSI'ssurvey market in Germany. Ingenieurbüro Breining’s performance is reported under our Engineering and Construction business segment.
Applanix Corporation
@Road, Inc.
On July 7, 2003,February 16, 2007, we acquired Applanix Corporation,publicly-held @Road, Inc. of Fremont, California. @Road, Inc. is a Canadian developerglobal provider of systems that integrate inertial navigation systemsolutions designed to automate the management of mobile resources and GPS technologies. The
Applanix acquisition extended our technology portfolio and offers increased
robustness and capabilities in our future positioning products. Applanix's
performanceto optimize the service delivery process for customers across a variety of industries. @Road is reported underwithin our Portfolio TechnologiesMobile Solutions business segment. Nikon-Trimble Co., Ltd.
On March 28, 2003, Trimble and Nikon Corporation agreed to form a joint venture
in Japan, Nikon-Trimble Co., Ltd., which assumed the operations of Nikon Geotecs
Co., Ltd., a Japanese subsidiary of Nikon Corporation and Trimble Japan KK,It significantly increases our Japanese subsidiary. Nikon-Trimble began operations in July of 2003.
Nikon-Trimble is 50% owned by us and 50% owned by Nikon, with equal voting
rights. It is focusing on the design and manufacture of surveying instruments
including mechanical total stations and related products. In Japan, this joint
venture distributes Nikon's survey products as well as our survey, agriculture,
construction and GIS products. Outside of Japan, we are the exclusive
distributor of Nikon survey and construction products.
* We expect the joint venture to enhance our market position in survey
instruments through geographic expansion and market penetration. The Nikon
products will broaden our survey and construction product portfolio and enable
us to better access emerging markets such as Russia, China, and India. It will
also provide us with the ability to sell our GPS and robotic technology to
existing Nikon customers. Additionally, Nikon-Trimble is expected to improve our
market position in Japan.
Caterpillar Trimble Control Technologies, LLC
On April 1, 2002, we established and began operations of a joint venture with
Caterpillar called Caterpillar Trimble Control Technologies, LLC, in which each
company has a 50% ownership stake and have equal voting rights. This joint
venture is developing new generations of machine control products for the
construction and mining markets for installationpresence in the factorymobile resource management, or asMRM, market which Trimble believes is a dealer
option.
* Today,large and fast growing market.
INPHO GmbH
On February 13, 2007, we
sell construction machine control products to contractors through
our dealer channel,acquired INPHO GmbH of Stuttgart, Germany. INPHO is a leader in photogrammetry and digital surface modeling for
installation on bulldozers, motorgraders,aerial surveying, mapping and
excavators
that are already in the field (the "after-market"). However, both companies
believe the adoption of the technology will spur future demand for machine
control products that can be integrated into the design of new Caterpillar
machines, while also available for "after-market" installation.
remote sensing applications. INPHO is reported within Trimble’s Engineering and Construction segment. Patents, Licenses and Intellectual Property
We hold approximately 600 US791 U.S. issued and enforceable patents and 108 non-USapproximately 119 non-U.S. patents, the majority of which cover GPS technology and other applications and over 93 of which coversuch as optical and laser technology and applications.
technology.
We prefer to own the intellectual property used in our products, either directly or thoughthrough subsidiaries. From time to time we license technology from third parties.
There are approximately 60233 trademarks registered to Trimble and its subsidiaries including "Trimble," the globe"AgGPS," “Spectra Precision,” and triangle logo, "AgGPS," "GeoExplorer," and
"Telvisant," among others that are registered to Trimble Navigation Limited in the United States and other countries. Additional trademarks are pending registration.
Sales and Marketing
We tailor the distribution channel to the needs of our products and regional markets through a number of forms of sales channel solutions around the world. We sell our products worldwide primarily through dealers, distributors, and authorized representatives, occasionally granting exclusive rights to market certain products within specific countries. This channel is supported and supplemented (where third party distribution is not available) by our regional sales offices in North America, Europe, Australia, China, Korea, New Zealand,
Singapore, and United Arab Emirates.throughout the world. We also utilize distribution alliances, OEM relationships, and joint ventures with other companies as a means to serve selected markets.
Sales
During fiscal 2007, sales to unaffiliated customers outsidein the United States comprised
approximatelyrepresented 50% in 2004, 51% in 2003, and 49% in 2002. During the 2004 fiscal
year, North and South America represented 57%, Europe the Middle East and
Africa represented 30%27%, Asia Pacific represented 12%, and Asiaother regions represented 13%11% of our total revenues. SupportDuring fiscal 2006, sales to customers in the United States represented 54%, Europe represented 25%, Asia Pacific represented 12%, and other regions represented 9% of our total revenues. During fiscal 2005, sales to customers in the United States represented 54%, Europe represented 25%, Asia Pacific represented 11%, and other regions represented 10% of our total revenues.
Warranty
The warranty periods for our products are generally between one90 days and three years. Selected military programs may require extended warranty periods up to 5.5 years certain TDS products have a 90-day warranty period, and certain Nikon products have a five-year warranty period. We support our GPS products through a circuit board replacement program from locations in the United Kingdom, Germany, Japan, and the United States. The repair and calibration of our non-GPS products are available from company-owned or authorized facilities. We reimburse dealers and distributors for all authorized warranty repairs they perform.
While we engage in extensive product quality programs and processes, including actively monitoring and evaluating the quality of component suppliers, our 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.
Seasonality of Business
* Our individual segment revenues aremay be affected by seasonal buying patterns in some of our
businesses. Over half of our total revenue comes from our Engineering and
Construction business, which has the biggest seasonal impact on our total
revenue. This business, and therefore our total revenue, is seasonally strongest
duringpatterns. Typically the second fiscal quarter due tohas been the start ofstrongest quarter for the Company driven by the construction buying season in
the northern hemisphere in spring. Typically, we expect the first and fourth
quarters to be the seasonal lows due to the lackseason.
Backlog
In most of our markets, the time between order placement and shipment is short.
Therefore,Orders are generally placed by customers on an as-needed basis. In general, customers may cancel or reschedule orders without penalty. For these reasons, we do not believe that orders are an accurate measure of backlog and, therefore, we believe that backlog is not a
reliablemeaningful indicator of
presentfuture revenues or
future business conditions.
material to understanding our business.
Manufacturing
Manufacturing of substantially allmany of our GPS products is subcontracted to Solectron Corporation. During fiscal 2004 we utilized Solectron's Suzhou
facilities in ChinaFlextronics International Limited. We utilize Flextronics for all of our Component Technologies products. During 2004
we expandedproducts, and for some of our use of Solectron in Mexico for ourConstruction and Survey, Field Solutions, products and handhelds.handheld products. We continue toalso utilize Solectron CaliforniaFlextronics for our high-end GPS products and new product introduction services. SolectronFlextronics is responsible for substantially all 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 SolectronFlextronics continues in effect until either party gives the other ninety days written notice.
We manufacture laser and optics-based products at our plants in Dayton, Ohio; Danderyd, Sweden; Jena and Kaiserslautern, Germany; Paris, France; and Toronto,
Canada.Shanghai, China. Some of these products or portions of these products are also subcontracted to third parties for assembly.
Our design and manufacturing sites in Dayton, Ohio; Sunnyvale, California; Danderyd, Sweden; Jena and Kaiserslautern, Germany are registered to ISO9001:2000, covering the design, production, distribution, and servicing of all our products. The Component
Technologies segment is registered to QS9000 for its automotive products. QS9000
is the automotive version of ISO9000 covering specific requirements for the
market.
Research and Development
We believe that our competitive position is maintained through the development and introduction of new products that incorporate improved features, 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.
Our research and development expenditures, net of reimbursed amounts were $77.6$131.5 million for fiscal 2004, $67.62007, $103.8 million for fiscal 2003,2006, and $61.2$84.3 million for fiscal 2002.
2005.
* We expect to continue investing in research and development with the goal of maintaining or improving our competitive position, as well as the goal of entering new markets.
Employees
As of December 31, 2004,28, 2007, we employed approximately 2,1603,606 employees, including 31% in sales and marketing, 27%36% in manufacturing, 28% in engineering, 24% in sales and 14%marketing, and 12% in general and administrative positions. Approximately 44%43% of employees are in locations outside the United States.
Our employees are not represented by unions except for those in Sweden and someSweden. Some employees in Germany.Germany 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'sCompany’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'sCompany’s web site through www.trimble.com/investors.html, as soon as reasonably practicable after such material is electronically filed with or furnished to the Securities and Exchange Commission. 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 Navigation Limited
749 North Mary Avenue,
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 March
1, 2005February 21, 2008 are as follows:
Name Age Position
- ---- --- --------
| Name | | Age | | Position |
| Steven W. Berglund | | 56 | | President and Chief Executive Officer |
| Rajat Bahri | | 43 | | Chief Financial Officer |
| Rick Beyer | | 50 | | Vice President |
| Bryn A. Fosburgh | | 45 | | Vice President |
| Mark A. Harrington | | 52 | | Vice President |
| Irwin L. Kwatek | | 68 | | Vice President and General Counsel |
| Julie Shepard | | 50 | | Vice President, Finance |
| Dennis L. Workman | | 63 | | Vice President and Chief Technical Officer |
Steven W. Berglund 53 President and Chief Executive Officer
Rajat Bahri 40 Chief Financial Officer
William C. Burgess 58 Vice President, Human Resources
Joseph F. Denniston, Jr. 44 Vice President, Operations
Bryn A. Fosburgh 42 Vice President and General Manager,
Engineering and Construction
Mark A. Harrington 49 Vice President, Strategy and Business
Development
John E. Huey 55 Treasurer
Irwin L. Kwatek 65 Vice President and General Counsel
Michael W. Lesyna 44 Vice President, Business Transformation
Bruce E. Peetz 53 Vice President, Advanced Technology and
Systems
Anup V. Singh 34 Vice President and Corporate Controller
Alan R. Townsend 56 Vice President and General Manager,
Field Solutions
Dennis L. Workman 60 Vice President and General Manager,
Component Technologies
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, and a pioneer in the development of laser systems. He spent 14 years at Spectra Physics in a variety of senior leadership positions. In the early 1980s, Mr. Berglund spent a number of years at Varian Associates in Palo Alto, where he held a variety of planning and manufacturing roles. Mr. Berglund began his career as a process engineer at Eastman Kodak in Rochester, New York. He attended the University of Oslo and the University of Minnesota where he received a B.S. in chemical engineering in 1974.engineering. He later received his M.B.A. from the University of Rochester in New York in 1977.
Rochester. In December 2007, Mr. Berglund was elected to the board of directors of Verigy Ltd. a semiconductor test equipment manufacturer.
Rajat Bahri - – Rajat Bahri joined Trimble as Chief Financial Officerchief financial officer in January 2005. Prior to joining Trimble, Mr. Bahri served for more than 15 years in various capacities within the financial organization of several subsidiaries of Kraft Foods, Inc. and General Foods Corporation. Most recently, he served as the chief financial officer for Kraft Canada, Inc. From June 2000 to June 2001 he served as chief financial officer of Kraft Pizza Company. From 1997 to 2000, Mr. Bahri was Operations Controller for Kraft Jacobs Suchard Europe. Mr. Bahri holds a Bachelor of Commerce from the University of Delhi in 1985 and an M.B.A. from Duke University in 1987. William C. Burgess - William BurgessIn 2005, he was elected to the board of STEC, Inc., a memory storage manufacturer.
Rick Beyer – Rick Beyer joined Trimble in AugustMarch 2004 as president of 2000 asTrimble Mobile Solutions and in May 2006, Mr. Beyer was appointed a vice president of Human Resources.Trimble. In October 2007 his role was expanded to include responsibility for a number of Trimble’s mobile solutions business divisions. Prior to joining Trimble, Mr. Burgess wasBeyer held senior executive positions within the wireless mobile solutions industry since 1987. Part of the original senior executive team that launched Qualcomm's OmniTRAC's mobile satellite communication solution, Mr. Beyer also held the positions of general manager at Rockwell Collins, on-board computing division, from 1994 to 1995; executive vice president of Human ResourcesNorcom Networks from 1995 to 1999; president of Husky Technologies, now part of Itronix, from 1999 to 2000; and Management Information Systems for Sonoma West
Holdings, Inc. From 1993CEO of TracerNet, which was acquired by Trimble, from 2002 to 1997, he2004. Mr. Beyer holds a B.A. from Olivet College and was Chairman of the Board at the college from 2000 to 2003. He was elected Trustee Emeritus in 2007. Rick also served as vice presidenta member of Human Resources
for Optical Coating Laboratory, from 1990 to 1993, he established and managed
the human resources function at Teknekron Communications Systems, and from 1985
to 1990 he was vice presidentCouncil of Human Resources for a $25 billion,
35,000-employee segment of Asea Brown Boveri (ABB), a global technology company.
Mr. Burgess received a B.S. from the University of Nebraska and an M.S. in
organizational development from Pepperdine University.
Joseph F. Denniston, Jr. - Joseph Denniston joined Trimble as vice president of
operations in April 2001, responsible for worldwide manufacturing, distribution
and logistics. Prior to Trimble, Mr. Denniston worked for 3Com Corporation.
During his 14-year tenure, he served as vice president of supply chain
managementBoard Chairs for the AmericasAssociation of Governing Boards for Colleges and held several positions in test engineering,
manufacturing engineering and operations. Previously at Sentry Schlumberger for
seven years, he held several positions including production engineering,
production management and test engineering over six years. Mr. Denniston
received a B.S. in electrical engineering technologyUniversities from the Missouri Institute
of Technology in 1981 and an M.S. in computer science engineering from Santa
Clara University in 1990.
2002 to 2005.
Bryn A. Fosburgh - – Bryn Fosburgh joined Trimble in 1994 as a technical service manager for surveying, mining, and construction. In 1997, Mr. Fosburgh was appointed director of development for the Company'sCompany’s land survey business unit where he oversaw the development of field and office software that enabled the interoperability of Trimble survey products. From October 1999 to July 2002, he served as division vice president of survey and infrastructure. From 2002 to 2005, Mr. Fosburgh served as vice president and general manager of Trimble's Geomatics and Engineering (G&E) business area, with responsibility for all the division-level activities associated with survey, construction, and infrastructure solutions. In January 2005, he was appointed vice president and general manager of the Engineering and Construction Division. In October 2007 his role was expanded to include a number of divisions, including construction and agriculture, as well as a responsibility for a number of corporate functions and geographical regions. Prior to Trimble, he was a civil engineer with the Wisconsin Department of Transportation responsible for coordinating the planning, data acquisition, and data analysis for statewide GPS surveying projects in support of transportation improvement projects. He has also held various engineering, research and operational 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. in civil engineering from Purdue University in 1989.
Mark A. Harrington - – Mark Harrington joined Trimble in January 2004 as a vice president, ofprimarily responsible for strategy and business development. In October 2007 his responsibilities were expanded to include a number of divisions, including survey and mapping and geographical information systems, as well as the responsibility for a number of corporate functions and geographical regions. Prior to joining Trimble, Mr. Harrington served as vice president of finance at Finisar Corporation and chief financial officer for both Cielo Communications, Inc., a photonics components manufacturer, from February 1998 to September 2002, and Vixel Corporation.Corporation, a photonics manufacturer, from April 2003 to December 2003. His experience also includes 11 years at Spectra-Physics where he served in a variety of roles including vice president of finance for Spectra-Physics Lasers, Inc. and vice president of finance for Spectra-Physics Analytical, Inc. Mr. Harrington began his career at Varian Associates, Inc. where he held a variety of management and individual positions in finance, operations and IT. Mr. Harrington received his B.S. in Business Administration from the University of Nebraska-Lincoln.
John E. Huey - John Huey joined Trimble in 1993 as director corporate credit and
collections, and was promoted to assistant treasurer in 1995 and treasurer in
1996. Past experience includes two years with ENTEX Information Services, five
years with National Refractories and Minerals Corporation (formerly Kaiser
Refractories), and thirteen years with Kaiser Aluminum and Chemical Sales, Inc.
He has held positions in credit management, market research, inventory control,
sales, and as an assistant controller. Mr. Huey received his B.A. degree in
Business Administration in 1971 from Thiel College in Greenville, Pennsylvania
and an MBA in 1972 from West Virginia University in Morgantown, West Virginia.
Irwin L. Kwatek - – Irwin Kwatek has served as vice president and general counsel of Trimble since November 2000. Prior to joining Trimble, Mr. Kwatek was vice president and general counsel of Tickets.com, a ticketing service provider, from May 1999 to November 2000. Prior to Tickets.com, he was engaged in the private practice of law for more than six years. During his career, he has served as vice president and general counsel to several publicly held high-tech companies including Emulex Corporation, Western Digital Corporation and General Automation, Inc. Mr. Kwatek received his B.B.A. from Adelphi College in Garden City, New York and an M.B.A. from the University of Michigan in Ann Arbor. He received his J.D. from Fordham University in New York City in 1968.
Michael W. Lesyna -Michael Lesyna
Julie Shepard – Julie Shepard joined Trimble in September 1999December of 2006 as vice president of strategic marketing. In September 2000, hefinance, and was appointed vice
presidentprincipal accounting officer in May 2007. Ms. Shepard brings with her over 20 years of experience in a broad range of finance roles. She is responsible for Trimble's worldwide finance operations including financial planning, accounting, and general manager of the Mobile Solutions Division. In July 2004,
Lesyna was appointed vice president of Business Transformation. In this
cross-divisional role he focuses on driving operational improvements based on
the marketing, sales and distribution channel strategies of Trimble's business
segments. The scope of his work includes tailored business prioritization as
well as lean manufacturing and lean overhead principles.external reporting. Prior to joining Trimble, Mr.
Lesyna spent six years at Booz Allen & Hamilton where he most recently served as
a principal in the operations management group. Prior to Booz Allen & Hamilton,
Mr. Lesyna held a variety of engineering positions at Allied Signal Aerospace.
Mr. Lesyna received his M.B.A., as well as an M.S. and B.S. in mechanical
engineering from Stanford University.
Bruce E. Peetz - Bruce Peetz hasMs. Shepard served as vice president of Advanced Technologyfinance and Systems since 1998corporate controller at Quantum Corporation, from 2005 to 2006, and has been with Trimble for 15 years. From 1996prior to 1998, Mr. Peetz servedthat, from 2004 to 2005, as general manager of the Survey Business. Prioran independent consultant to joining Trimble, Mr. PeetzQuantum Corporation. She was a research and development manager at
Hewlett-Packard for 10 years. Mr. Peetz received his B.S. in electrical
engineering from Massachusetts Institute of Technology in Cambridge,
Massachusetts in 1973.
Anup V. Singh - Anup Singh joined Trimble in December 2001 as corporate
controller. In August 2004 he was appointed vice president and corporate
controller. Priorof finance at Nishan Systems from 2000 to joining Trimble, Mr. Singh was with Excite@Home from July
1999 to December 2001. During his tenure2003. Ms. Shepard began her career at Excite@Home, he held the positions
of senior director of Corporate Financial PlanningPrice Waterhouse and Analysis, and
international controller. Before Excite@Home, Mr. Singh also worked for 3Com
Corporation from December 1997 to July 1999, and Ernst & Young LLP in San Jose,
California and London, England. Mr. Singh received his B.A. in 1991 and M.A. in
1995 in economics and management science from Cambridge University in England.
He is also a chartered accountant and was admitted as a member of the Institute
of Chartered Accountants in England and Wales in 1994.
Alan R. Townsend - Alan Townsend has served as vice president and general
manager of the Field Solutions business area since November 2001. From 1995 to
2001, Mr. Townsend was general manager of Mapping and GIS. Mr. Townsend joined
Trimble in 1991 as the manager of Trimble Navigation New Zealand Ltd. Prior to
Trimble, Mr. Townsend held a variety of technical and senior management roles
within the Datacom Group of companies in New Zealand including managing director
of Datacom Software Research Ltd. from 1986 to 1991. In addition, Mr. Townsend is a director of IT Capital Ltd., a venture capital company based in Auckland,
New Zealand. He is also a fellow of the New Zealand Institute of Management and
a past president of the New Zealand Software Exporters Association. Mr. TownsendCertified Public Accountant. She received a B.S.cB.S from California State University where she majored in economics from the University of Canterbury in 1970.
Accounting. Dennis L. Workman -– Dennis Workman has served as vice president of various business divisions, currently including advanced devices and general
manager of Trimble's Component Technologies segmentApplanix since September 1999. He was appointed Trimble’s chief technical officer in March 2006. From 1998 to 1999, Mr. Workman was senior director and chief technical officer of the newly formed Mobile and Timing Technologies (MTT) business group, also serving as general manager of Trimble's Automotive and Timing group. In 1997, he was director of engineering for Software & Component Technologies. Mr. Workman joined Trimble in 1995 as director of the newly created Timing vertical market. Prior to Trimble, Mr. Workman held various senior-level technical positions at Datum Inc. During his nine year tenure at Datum, he held the position of CTO. Mr. Workman received a B.S. in mathematics and physics from St. Mary'sMary’s College in 1967 and an M.S. in electrical engineering from the Massachusetts Institute of Technology in 1969.
Item 2 Properties
The following table sets forth the significant real property that we own or
lease:
Size in
Location Segment(s) served sq. feet Commitment
- -------- ----------------- -------- ----------
Sunnyvale, California All 150,000 Leased, expiring 2005
4 buildings
Huber Heights (Dayton), Ohio Engineering & Construction, 150,000 Owned, no encumbrances
Field Solutions
57,200 Leased, expiring in 2011
Distribution 35,600 Leased, month to month
Westminster, Colorado Engineering & Construction, 73,000 Leased, expiring 2006
Field Solutions 2 buildings
Corvallis, Oregon Engineering & Construction 20,000 Owned, no encumbrances
21,000 Leased, expiring 2006
Richmond Hill, Canada Portfolio Technologies 50,200 Leased, expiring 2007
Danderyd, Sweden Engineering & Construction 93,900 Leased, expiring 2005
Christchurch, New Zealand Engineering & Construction, 65,000 Leased, expiring 2010
Mobile Solutions, Field 2 buildings
Solutions
Jena, Germany Engineering & Construction 28,700 Leased, no expiration date
12 months notice
Kaiserslautern, Germany Engineering & Construction 26,000 Leased, expiring 2005
Raunheim, Germany Sales 28,700 Leased, expiring 2011
| Risk Factors. |
In addition, we lease a number of smaller offices around the world primarily for
sales functions. For financial information regarding obligations under leases,
see Note 10 of the Notes to the Consolidated Financial Statements.
* We believe that our facilities are adequate to support current and near-term
operations.
Item 3 Legal Proceedings
* We are from time to time a party to disputes or litigation incidental to our
business. We believe that our ultimate liability as a result of such disputes,
if any, would not be material to our overall financial position, results of
operations, or liquidity.
Item 4 Submission of Matters to a Vote of Security Holders
No matters were submitted to a vote of security holders during the fourth
quarter of 2004.
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters
On January 22, 2004, our Board of Directors approved a 3-for-2 split of all
outstanding shares of our common stock, payable March 4, 2004 to stockholders of
record on February 17, 2004. All shares and per share information presented has
been adjusted to reflect the stock split on a retroactive basis for all periods
presented.
Our common stock is traded on the NASDAQ National Market 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
National Market.
2004 2003
Sales Price Sales Price
Quarter Ended High Low High Low
------------- ---- --- ---- ---
First quarter $28.78 $20.15 $14.17 $8.68
Second quarter 29.50 22.43 18.50 12.43
Third quarter 32.16 21.55 19.57 14.97
Fourth quarter 34.45 24.56 25.60 13.49
As of December 31, 2004, there were approximately 1,075 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.
We are allowed to pay dividends and repurchase shares of our common stock up to
25% of net income in the previous fiscal year, under the existing terms of our
credit facilities.
Equity Compensation Plan Information
The following table sets forth, as of December 31, 2004, the total number of
securities outstanding under our stock option plans, the weighted average
exercise price of such options, and the number of options available for grant
under such plans. See Note 15 of the Notes to the Consolidated Financial
Statements for a summary of our plans.
Plan Category Number of securities to Weighted average exercise Number of securities remaining
be issued upon exercise price of outstanding available for future issuance
of outstanding options, options, warrants and under equity compensation plans
warrants and rights rights (excluding securities reflected
(a) (b) (c) in column (a))
Equity compensation plans
approved by security
holders:
Stock Option Plans .... 6,720,631 $16.10 2,275,485
Equity compensation plans
not approved by
security holders...
Total ..................... 6,720,631 $16.10 2,275,485
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.
December 31, January 2, January 3, December 28, December 29,
Fiscal Years Ended 2004 2004 2003 2001 2000
- ------------------ ---- ---- ---- ---- ----
(Dollar in thousands, except per share data)
Revenue $ 668,808 $ 540,903 $ 466,602 $ 475,292 $ 369,798
Gross margin $ 324,810 $ 268,030 $ 234,432 $ 237,235 $ 196,561
Gross margin percentage 49% 50% 50% 50% 53%
Income (loss) from continuing operations (1) $ 67,680 $ 38,485 $ 10,324 $ (23,492) $ 14,185
Gain on disposal of discontinued operations
(net of tax) $ - $ - $ - $ 613 $ -
Net income (loss) $ 67,680 $ 38,485 $ 10,324 $ (22,879) $ 14,185
Per common share:
Income (loss) from continuing operations
- Basic $ 1.32 $ 0.81 $ 0.24 $ (0.63) $ 0.40
- Diluted $ 1.23 $ 0.77 $ 0.24 $ (0.63) $ 0.37
Gain on disposal of discontinued operations
(net of tax)
- Basic $ - $ - $ - $ 0.01 $ -
- Diluted $ - $ - $ - $ 0.01 $ -
Net income (loss)
- Basic $ 1.32 $ 0.81 $ 0.24 $ (0.62) $ 0.40
- Diluted $ 1.23 $ 0.77 $ 0.24 $ (0.62) $ 0.37
Shares used in calculating basic earnings
per share 51,163 47,505 42,860 37,091 35,402
Shares used in calculating diluted earnings
per share 54,948 50,012 43,578 37,091 38,964
Cash dividends per share $ - $ - $ - $ - $ -
Total assets $ 653,978 $ 552,602 $ 447,704 $ 425,475 $ 498,506
Non-current portion of long term debt and
other liabilities $ 38,226 $ 85,880 $ 114,051 $ 131,759 $ 143,553
(1) We have significant intangible assets on our Consolidated Balance Sheets
that include goodwill and other purchased intangibles related to
acquisitions. At the beginning of fiscal 2002, we adopted Statement of
Financial Accounting Standards No. 141 ("SFAS 141"), Business Combinations,
and No. 142, Goodwill and Other Intangible Assets ("SFAS 142"). Application
of the non-amortization provisions of SFAS 142 significantly reduced
amortization expense of purchased intangibles and goodwill to approximately
$8.3 million for the fiscal year 2002 from $29.4 million in fiscal year
2001.
(2) We have reclassified deferred revenues previously included in accounts
receivable, net to the liabilities section in the Consolidated Balance
Sheets in fiscal year 2004. All prior periods have been changed to reflect
this reclassification.
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 and Uncertainties."
EXECUTIVE LEVEL OVERVIEW
Trimble's foundation remains positioning technology. We have augmented this
technology with wireless communication and software capabilities in order to
enable us to participate in a wider number of markets and to play a more central
role in those markets. Our efforts to market these technologies can generally be
characterized as falling into the categories of either end user markets or
component markets. The Engineering and Construction, Field Solutions, and Mobile
Solutions segments can be broadly described as end user markets and the
Component Technologies and Portfolio Technologies segments can be described as
components markets. In the end user markets we provide a value added solution to
the end user. Typically this requires a solution that includes a hardware
platform, significant applications software, and substantial levels of customer
support. In the components businesses, we typically sell to another company that
adds significant value and brings the solution to the end user.
The segments constituting the end user, solutions activities, make up over 80%
of our revenue. The critical success factors in these businesses center around
attaining a significant understanding of the end users' needs, applying that
knowledge to create highly innovative products, integrating those products into
an effective system, and establishing a proficient global, third-party
distribution.
The components businesses require different characteristics to be successful.
The customer is typically an OEM, system integrator, or other third party that
integrates our components into a system. To satisfy this customer group, our
focus is on price, product functionality, and quality. With recent product
introductions we have begun to add higher functionality into our products in
order to provide greater value and potentially capture higher average selling
prices for our offerings. For example, our TrimTrac product integrates GPS and
GSM cellular technologies into a fully functional location device. It
establishes a new asset tracking or security capability at an aggressive price
point and opens up a new class of customers and applications which were
previously not available to us.
During 2004 we continued to execute our strategy with a series of actions that
can be summarized in four categories.
Reinforcing our position in existing markets
Generally, we believe that our markets provide us with additional, substantial
potential for substituting our technology for traditional methods. In 2004 we
continued to develop new products and to strengthen our distribution channels to
realize these opportunities. The acquisitions of GeoNav and TracerNET provided
us with additional software capability and applications knowledge. A number of
new products, such as the Easy Guide Plus, strengthened our competitive position
and created new value for the user. The first full year of operation of our
joint venture with Nikon proved successful in extending our position in
surveying instruments.
Extend our position in existing markets through new product categories
We are utilizing the strength of the Trimble brand in our markets to expand our
revenues by bringing new products to existing users. A 2004 example was the
introduction of asset and fleet management services to the construction
industry.
Bring existing technology to new markets
We continue to reinforce our position in existing markets, and positioned
ourselves in newer markets that will serve as important sources of future
growth. Our efforts in China, India, Russia, Korea and Eastern Europe all
reflected improving financial results, with the promise of more in the future.
Pioneer completely new markets
In 2004 we introduced the TrimTrac product and Trimble Outdoors. Both products
embed new feature sets and are intended to address markets not traditionally
served by Trimble.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
Our accounting policies are more fully described in Note 2 of the Notes to the
Consolidated Financial Statements. The preparation of financial statements and
related disclosures in conformity with accounting principles generally accepted
in the United States requires us to make judgments, assumptions, and estimates
that affect the amounts reported in the Consolidated Financial Statements and
accompanying Notes to the Consolidated Financial Statements. We consider the
accounting polices described below to be our critical accounting polices. 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.
Revenue Recognition
We recognize product revenue 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. Revenue is reduced by a sales return reserve
as described under "Allowance for Doubtful Accounts and Sales Returns."
Revenue from purchased extended warranty and support agreements is deferred and
recognized ratably over the term of the warranty/support period. Substantially
all technology licenses and research revenue have consisted of initial license
fees and royalties, which were recognized when earned, provided we had no
remaining obligations.
Contracts and customer purchase orders are generally 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 analysis, as well as the customer's payment
history.
Our shipment terms for US orders, and international orders fulfilled from our
European distribution center are typically FCA (Free Carrier) shipping point,
except certain sales to US government agencies which are shipped FOB
destination. FCA shipping point means that we fulfill the obligation to deliver
when the goods are handed over, cleared for export, and into the charge of the
carrier named by the buyer at the named place or point. If no precise point is
indicated by the buyer, we may choose within the place or range stipulated where
the carrier will take the goods into carrier's charge.
Other international orders are shipped FOB destination, which means these
international orders are not recognized as revenue until the product is
delivered and title has transferred to the buyer or FCA shipping point. FOB
destination means that we bear all costs and risks of loss or damage to the
goods up to that point.
Revenue to distributors and resellers is recognized upon delivery, assuming all
other criteria for revenue recognition have been met. Distributors and resellers
do not have a right of return.
When a sale involves multiple elements, the entire fee from the arrangement is
allocated to each respective element based on its relative fair value and
recognized when revenue recognition criteria for each element are met. The
amount of product revenue allocated to an individual element is limited to the
lesser of its relative fair value or the amount not contingent on our delivery
of other elements under the arrangement, regardless of the probability of our
performance.
Our software arrangements generally consist of a license fee and post-contract
customer support (PCS). We 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, and revenue is primarily recognized when the software
has been delivered and there are no remaining obligations. Revenue from PCS is
recognized ratably over the term of the PCS agreement.
Allowance for Doubtful Accounts and Sales Returns
Our accounts receivable balance, net of allowance for doubtful accounts, was
$123.9 million as of December 31, 2004, compared with $104.6 million as of
January 2, 2004. The allowance for doubtful accounts as of December 31, 2004 was
$9.0 million, compared with $10.0 million as of January 2, 2004. We evaluate the
collectibility of our 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 we are aware of a specific customer's inability
to meet its financial obligations to us, a specific allowance for bad debts is
estimated and recorded which reduces the recognized receivable to the estimated
amount we believe will ultimately be collected. In addition to specific customer
identification of potential bad debts, bad debt charges are recorded based on
our recent past loss history and an overall assessment of past due trade
accounts receivable amounts outstanding.
A reserve for sales returns is established based on historical trends in product
return rates experienced in the ordinary course of business. The reserve for
sales returns as of December 31, 2004 and January 2, 2004 included $2.2 million
and $3.3 million, respectively, for estimated future returns that were recorded
as a reduction of our accounts receivable and revenue. If the actual future
returns were to deviate from the historical data on which the reserve had been
established, our revenue could be adversely affected.
Inventory Valuation
Our inventories, net balance was $87.7 million as of December 31, 2004, compared
with $70.8 million as of January 2, 2004. Our inventory allowances as of
December 31, 2004 were $26.2 million, compared with $25.9 million as of January
2, 2004. Our inventory is recorded at the lower of standard cost or market (net
realizable value). We generally use a standard cost accounting system to value
inventory and these standards are reviewed a minimum of once a year and multiple
times a year in our most active manufacturing plants. We adjust the inventory
value based on estimated excess and obsolete inventories determined primarily by
future demand forecasts. If actual future demand or market conditions are less
favorable than those projected by us, additional inventory write-downs may be
required.
Income Taxes
Income taxes are accounted for under the liability method whereby deferred tax
asset 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
that such assets will not be realized.
The valuation allowance decreased by $21.8 million in fiscal 2004 and $13.1
million in fiscal 2003. Approximately $8 million of the valuation allowance at
December 31, 2004 and $14.1 million at January 2, 2004 relates to the tax
benefit of stock option deductions, which will be credited to equity if and when
realized. In evaluating the need for a valuation allowance, we consider future
taxable income, resolution of tax uncertainties and prudent and feasible tax
planning strategies.
Goodwill Impairment
Goodwill as of December 31, 2004 was $259.5 million, compared with $241.4
million as of January 2, 2004. We performed goodwill impairment tests at the end
of the fiscal third quarter of 2004 and 2003 for each reporting unit and found
there was no impairment of our goodwill. We will continue to evaluate our
goodwill for impairment on an annual basis at the end of each fiscal third
quarter and whenever events and changes in circumstances suggest that the
carrying amount may not be recoverable.
For goodwill, the annual impairment evaluation includes a comparison of the
carrying value of the reporting unit (including goodwill) to that reporting
unit's fair value. If the reporting unit's estimated fair value exceeds the
reporting unit's carrying value, no impairment of goodwill exists. If the fair
value of the reporting unit does not exceed the unit's carrying value, then an
additional analysis is performed to allocate the fair value of the reporting
unit to all of the assets and liabilities of that unit as if that unit had been
acquired in a business combination and the fair value of the unit was the
purchase price. If the excess of the fair value of the reporting unit over the
fair value of the identifiable assets and liabilities is less than the carrying
value of the unit's goodwill, an impairment charge is recorded for the
difference.
We cannot predict the occurrence of certain future events that might adversely
affect the reported value of goodwill. Such events include, but are not limited
to, strategic decisions made in response to economic and competitive conditions,
the impact of the economic environment on our customer base, or a material
negative change in our relationships with significant customers.
Accounting for Long-Lived Assets Including Intangibles Subject to Amortization
Depreciation and amortization of our long-lived assets is provided using
straight-line methods over their estimated useful lives. Changes in
circumstances such as the passage of new laws or changes in regulations,
technological advances, changes to our business model, or changes in the capital
strategy could result in the actual useful lives differing from initial
estimates. In those cases where we determine that the useful life of a
long-lived asset should be revised, we will depreciate the net book value in
excess of the estimated residual value over its revised remaining useful life.
Factors such as changes in the planned use of equipment, customer attrition,
contractual amendments, or mandated regulatory requirements could result in
shortened useful lives.
Long-lived assets and asset groups 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 may differ
from actual cash flows. Long-lived 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 in the period in which the determination is made.
Warranty Costs
The liability for product warranties was $6.4 million as of December 31, 2004,
compared with $5.1 million as of January 2, 2004. (See Note 2 of the Notes to
the Consolidated Financial Statements for further information regarding our
warranty liability.) The warranty periods for our products are generally between
one and three years. Selected military programs may require extended warranty
periods up to 5.5 years, certain TDS products have a five year or 90-day
warranty period, and certain Nikon products have a five year warranty period. We
accrue for warranty costs as part of our cost of sales based on associated
material costs, technical support labor costs, and costs incurred by third
parties performing warranty work on our behalf. Our 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.
While we engage in extensive product quality programs and processes, including
actively monitoring and evaluating the quality of our component suppliers, our
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 our
estimates, revisions to the estimated warranty accrual and related costs may be
required.
Stock Compensation
We apply Accounting Principles Board Opinion No. 25, "Accounting for Stock
Issued to Employees" (APB 25) and related interpretations in accounting for our
stock option plans and stock purchase plan. Accordingly, we do not recognize
compensation cost for stock options granted at a price equal to fair market
value. Note 15 of the Notes to the Consolidated Financial Statements describes
the plans we operate, and Note 2 of the Notes to the Consolidated Financial
Statements contains a summary of the pro forma effects to reported net income
and earnings per share for fiscal 2004, 2003, and 2002 as if we had elected to
recognize compensation cost based on the fair value of the options granted at
grant date.
Investment in Joint Ventures
We have adopted the equity method of accounting for our investments in the
Caterpillar and Nikon joint ventures. This requires that we record our share of
the joint ventures' profits or losses in a given fiscal period. See Note 5 of
the Notes to the Consolidated Financial Statements for joint venture accounting.
Upon the formation of our Caterpillar joint venture in April 2002, we received a
cash distribution of $11.0 million. We have elected to treat the cash
distribution as a deferred gain, being amortized to the extent that losses are
attributable from the Caterpillar joint venture under the equity method
described above. When and if the joint venture is profitable on a sustainable
basis and future operating losses are not anticipated, then we will recognize as
a gain, the portion of the $11.0 million, which is unamortized. To the extent
that it is possible that we will have any future-funding obligation relating to
the Caterpillar joint venture, then the relevant amount of the $11.0 million
will be deferred until such time that the funding obligation no longer exists.
As of December 31, 2004, the balance of the unamortized deferred gain was $9.2
million.
RECENT BUSINESS DEVELOPMENTS
Trimble Outdoors
During the fourth quarter of fiscal 2004, we announced our newest business,
Trimble Outdoors. Trimble Outdoors is a consumer business utilizing GPS enabled
cell phones to provide information for outdoor recreational activities. Trimble
Outdoors performance is reported under our Portfolio segment.
GeoNav
* On July 5, 2004 we acquired GeoNav GmbH, a small provider of customized field
data collection solutions for the cadastral survey market in Europe. We expect
the acquisition to augment our capability for localization of our products in
Europe. GeoNav's performance is reported under our Engineering and Construction
segment.
TracerNET Corporation
* On March 5, 2004 we acquired TracerNET Corporation of Virginia, a provider of
wireless fleet management solutions. We expect the TracerNET acquisition to
offer more diverse and complete fleet management solutions. TracerNET's
performance is reported under our Mobile Solutions segment.
Pacific Crest Corporation
* On January 10, 2005 we acquired Pacific Crest Corporation of Santa Clara, a
supplier of wireless data communication systems for positioning and
environmental monitoring applications. We expect the Pacific Crest acquisition
to further enhance our wireless data communications capabilities in the
Engineering and Construction business segment.
RESULTS OF OPERATIONS
Overview
The following table is a breakdown of revenue and operating income for the
periods indicated and should be read in conjunction with the narrative
descriptions below.
December 31, January 2, January 3,
Fiscal Years Ended 2004 2004 2003
- ------------------ ---- ---- ----
(Dollars in thousands)
Total consolidated revenue $ 668,808 $ 540,903 $ 466,602
Gross Margin $ 324,810 $ 268,030 $ 234,432
Total consolidated operating income $ 117,405 $ 83,586 $ 62,320
Basis of Presentation
We have a 52-53 week fiscal year, ending on the Friday nearest to December 31,
which for fiscal 2004 was December 31, 2004. Fiscal 2004 and fiscal 2003 were
52-week years and fiscal 2002 a 53-week year. As a result of the extra week in
fiscal 2002, year-over-year results are not exactly comparable. Thus, due to the
inherent nature of adopting a 52-53 week fiscal year, the Company, analysts,
shareholders, investors, and others will have to make appropriate adjustments to
any analysis performed when comparing our activities and results in fiscal years
that contain 53 weeks to those that contain the standard 52 weeks.
Impact of Weaker US Dollar on Operating Results in Fiscal 2004
The depreciation of the US dollar versus major European currencies positively
impacted revenues by approximately $12.6 million in fiscal 2004 when compared
with rates used throughout fiscal 2003. As a result of our significant
manufacturing, distribution, research and development, and selling expenses
incurred outside of the US, the weaker US dollar negatively impacted our
operating income by approximately $3.0 million in fiscal 2004 when compared with
rates used throughout fiscal 2003.
Revenue
In fiscal 2004, total revenue increased by $127.9 million or 23.6% to $668.8
million from $540.9 million in fiscal 2003. The increase in fiscal 2004 was
primarily due to stronger performances in most of our operating segments driven
by the new product offerings and increased penetration in the markets we serve
(primarily Engineering and Construction and Field Solutions), expanded
distribution and selective acquisitions (primarily Mobile Solutions and
Portfolio Technologies), as well the positive impact of the weaker US dollar on
revenues generated in foreign currencies, primarily the Euro. Total revenue in
fiscal 2003 increased by $74.3 million or 15.9% to $540.9 million from $466.6
million in fiscal 2002. This increase was primarily due to the same factors
outlined above as all of our operating segments demonstrated stronger
performances versus prior periods.
* Total revenue outside the United States comprised approximately 50% in 2004,
51% in 2003, and 49% in 2002. During the 2004 fiscal year, North and South
America represented 57%, Europe, the Middle East and Africa represented 30%, and
Asia represented 13% of total revenues. In fiscal 2004, the United States
comprised approximately 50% of total revenues. 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 revenues in fiscal
2004, 2003, and 2002. It is possible, however, that in future periods the
failure of one or more large customers to purchase products in quantities
anticipated by us may adversely affect the results of operations.
Gross Margin
Our gross margin varies due to a number of factors including product mix,
pricing, distribution channel used, the effects of production volumes, new
product start-up costs, and foreign currency translations. Gross margin as a
percentage of total revenues was 48.6 % in fiscal 2004 and 49.6% in fiscal 2003.
The decrease in gross margin percentage for fiscal 2004, compared with fiscal
2003, was due to changes in the mix of products sold, principally related to
increased sales of lower margin Nikon-branded survey and construction products,
our agriculture products, pricing pressure in our Component Technologies
business (which typically demonstrates increased unit volumes coupled with
declining unit prices), the impact of the weaker US dollar on our non US
manufacturing, and distribution costs.
Gross margin as a percentage of total revenues was 49.6% in fiscal 2003 and
50.2% in fiscal 2002. The slight decrease in gross margin percentage for fiscal
2003, compared with fiscal 2002, was due primarily to the introduction of the
Nikon products in the third quarter, which was responsible for a margin decline
of approximately 0.8%. This was partially offset by stronger sales of handheld
survey products, GIS, wireless infrastructure, survey products as well as our
ongoing focus on product cost reductions.
* Because of potential product mix changes within and among the industry
markets, market pressures on unit selling prices, fluctuations in unit
manufacturing costs, including increases in component prices and other factors,
current level gross margins cannot be assured. In addition, should the global
economic conditions deteriorate, gross margin could be further adversely
impacted.
Operating Income
Operating income as a percentage of total revenue was 12.8% in fiscal 2004
compared to 10% in fiscal 2003 and 7.2% in fiscal 2002. The increase is driven
by disciplined management of operating expenses and greater leverage due to
revenue growth. The operating expenses represented 35.8% of total revenue in
fiscal 2004 as compared to 39.6% in fiscal 2003.
Results by Segment
To achieve distribution, marketing, production, and technology advantages in our
targeted markets, we manage our operations in the following five segments:
Engineering and Construction, Field Solutions, Component Technologies, Mobile
Solutions, and Portfolio Technologies. Operating income (loss) is net revenue
less operating expenses, excluding general corporate expenses, amortization of
purchased intangibles, restructuring charges, non-operating income (expense),
and income taxes.
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.
December 31, January 2, January 3,
Fiscal Years Ended 2004 2004 2003
- ------------------ ---- ---- ----
(Dollars in thousands)
Engineering and Construction
Revenue $ 440,478 $ 367,058 $ 319,615
Segment revenue as a percent of total revenue 66% 68% 68%
Operating income 79,505 60,664 53,453
Operating income as a percent of segment revenue 18% 17% 17%
Field Solutions
Revenue 105,591 79,879 67,259
Segment revenue as a percent of total revenue 16% 15% 14%
Operating income 25,151 14,500 9,676
Operating income as a percent of segment revenue 24% 18% 14%
Component Technologies
Revenue 65,522 64,193 59,755
Segment revenue as a percent of total revenue 9% 12% 13%
Operating income 13,880 16,560 10,673
Operating income as a percent of segment revenue 21% 26% 18%
Mobile Solutions
Revenue 23,531 12,981 8,486
Revenue as a percent of total consolidated revenue 4% 2% 2%
Operating loss (5,997) (6,452) (12,039)
Operating loss as a percent of segment revenue (25%) (50%) (142%)
Portfolio Technologies
Revenue 33,686 16,792 11,487
Segment revenue as a percent of total revenue 5% 3% 2%
Operating income (loss) 4,866 (1,686) 557
Operating income (loss) as a percent of segment revenue 14% (10%) 5%
A reconciliation of our consolidated segment operating income to consolidated
income before income taxes follows:
January 31, January 2, January 3,
Fiscal Years Ended 2004 2004 2003
- ------------------ ---- ---- ----
(In thousands)
Consolidated segment operating income $ 117,405 $ 83,586 $ 62,320
Unallocated corporate expense (22,901) (20,320) (19,098)
Amortization of purchased intangible assets (8,327) (7,312) (8,300)
Restructuring charges (552) (2,019) (1,099)
Non-operating expense, net (10,701) (18,350) (19,999)
------- ------- -------
Consolidated income before income taxes $ 74,924 $ 35,585 $ 13,824
========= ========== =========
Engineering and Construction
Engineering and Construction revenues increased by $73.4 million or 20% while
segment operating income increased by $18.8 million or 31.1% for fiscal 2004 as
compared to fiscal 2003. The relatively strong environment of fiscal 2003
continued into fiscal 2004, resulting in continued robust demand for survey,
machine control, and laser products. In addition, the full year effects for
Nikon-branded products contributed to the year over year increase. Targeted new
product introductions, such as the 5500 Servo Driven Station, provided improved
market penetration. The weaker US dollar also contributed to increased revenues
in this operating segment. Operating income increased at a higher rate than
revenue growth due to greater operating leverage on expenses.
Engineering and Construction revenues increased by $47.4 million or 14.8% during
fiscal 2003 as compared to fiscal 2002. Approximately half of the revenue
increase was driven by new product introductions and our increased marketing
efforts. The remaining increase was split evenly between geographic expansion,
especially in Asia and Russia, and the impact of the weaker US dollar. Segment
operating income increased due to higher revenues that were partially offset by
increased operating expenses outside the United States (largely driven by the
weaker US dollar), increased research and development spending on certain
programs as we continue to invest in developing next generation technology, and
lower margins earned on the sale of Nikon products. Overall, segment operating
income remained consistent at 17% of revenues.
Field Solutions
Field Solutions revenues increased by approximately $25.7 million or 32.2% while
segment operating income increased by $10.7 million or 73.5% for fiscal year
2004 as compared to fiscal 2003. Revenues increased primarily as a result of
higher demand for both automated and manual guidance products in the
agricultural market. In particular, revenues were enhanced by the introduction
of EZ-Guide(R) Plus. We saw increases in our GIS product lines due to increases
in our dealer and distributor business. Additionally, programs designed to
expand our distribution channel by supplementing adding value-added, solutions
focused business partners to our traditional dealer profile were successful. In
addition, we saw improved results in Europe and increased opportunities in
China. Increases in segment operating income were primarily due to higher
revenues.
Field Solutions revenues increased by approximately $12.6 million or 18.8% while
segment operating income increased by $4.8 million or 49.9% for fiscal year 2003
as compared to fiscal 2002. Revenues were up year over year due to continued
strong sales of the GeoExplorer(R) CE series handhelds released at the end of
fiscal 2002, and due to the expansion of our automatic guidance products onto
new agricultural vehicles.
Segment operating income increased in 2003 from the fiscal year 2002 primarily
due to higher revenues. This increase was partially offset by fractionally lower
gross margins and more investment in research and development and sales
functions. This enabled the segment operating income to increase from 14% to 18%
of revenues.
Component Technologies
Component Technologies revenues increased by $1.3 million or 2.1%, while segment
operating income decreased by $2.7 million or 16.2% for the fiscal year 2004 as
compared to fiscal 2003. Revenues increased primarily due to higher demand from
vehicle navigation and tracking customers, partially offset by the decline in
demand from wireless infrastructure customers. The segment operating income
decrease was primarily due to pricing pressures from the embedded and in-vehicle
navigation product lines, a less favorable product mix, and increased spending
for development of new categories of products.
Component Technologies revenues increased by $4.4 million or 7.4%, while segment
operating income increased by $5.9 million or 55.2% for the fiscal year 2003 as
compared to fiscal 2002. The increase in revenues was primarily due to increased
demand from our existing wireless infrastructure customers. Segment operating
income increased from 18% to 26% of revenues. The increase was primarily due to
a reduction in costs of goods sold due to the transfer of the manufacturing of
our products to China, reduced costs of raw materials, increased revenues and
higher margins aided by favorable product mix.
Mobile Solutions
Mobile Solutions revenues increased by $10.6 million or 81.3% in fiscal 2004
over fiscal 2003 due primarily to increases sales into the construction
materials market, higher dealer sales and a significant enterprise sale. During
the first quarter of fiscal 2004, we completed the acquisition of TracerNET to
strengthen our presence in this segment. The benefits of the integration were
not fully reflected until the fourth quarter of fiscal 2004 and the full year
impact of these activities will not be realized until fiscal 2005. Segment
operating loss decreased by $0.5 million or 7.1% in fiscal 2004 over fiscal 2003
due to increased revenues which was largely offset by increased expenses related
to the integration of the TracerNET acquisition.
Mobile Solutions revenues increased by $4.5 million or 53% in fiscal 2003 over
fiscal 2002 due primarily to an increase in our CrossCheck product sales and
higher fleet management services revenues as a result of an expanded customer
base. Segment operating loss decreased by $5.6 million or 46.4% in fiscal 2003
over fiscal 2002 due to increased revenues and lower operating expenses.
Operating expenses decreased by approximately $3.0 million primarily due to a
reduction in outside services and our personnel related to the completion of our
Telvisant system.
Portfolio Technologies
Portfolio Technologies revenues increased by $16.9 million or 100.6% while
segment operating income increased by $6.6 million or 388.6% for fiscal 2004 as
compared to fiscal 2003. The increases in revenues and operating income were
primarily due to the inclusion of full year results of Applanix, acquired in
July 2003, and higher sales of our military and advanced systems products.
Portfolio Technologies revenues increased by $5.3 million or 46.2% for the
fiscal year 2003 as compared to fiscal 2002. The increase in revenues was mostly
driven by the inclusion of revenue from Applanix acquired in 2003, while offset
by lower revenue of military-related products. Segment operating income
decreased by $2.2 million or 402.7% for fiscal 2003 as compared to fiscal 2002
due to weaker operating results from military products.
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 net revenues for the fiscal years ended 2004, 2003 and 2002
and should be read in conjunction with the narrative descriptions of those
operating expenses below.
December 31, January 2, January 3,
Fiscal Years Ended 2004 2004 2003
- ------------------ ---- ---- ----
(In thousands)
Research and development $ 77,558 11% $ 67,641 13% $ 61,232 13%
Sales and marketing 108,054 16% 97,870 18% 89,344 19%
General and administrative 44,694 7% 39,253 7% 40,634 9%
------ - ------ - ------ -
$ 230,306 34% $ 204,764 38% $ 191,210 41%
--------- -- --------- -- --------- --
Overall, R&D, sales and marketing, and G&A increased by approximately $25.5
million in fiscal 2004 compared to fiscal 2003. Incremental expenses arising
from acquisitions were approximately $13.7 million and the impact of the weaker
US dollar on non US operating expenses were approximately $7.6 million.
Research and development expenses increased by $9.9 million in fiscal 2004
compared to fiscal 2003 primarily due to sustaining engineering expenses and
costs incurred related to new product development, continued investment in next
generation technologies, and the effect of foreign currency fluctuations.
Research and development expenses increased by $6.4 million in fiscal 2003
compared to fiscal 2002 due to continued investment in next generation
technology primarily in the Engineering and Construction segment, the weakness
of the US dollar versus major European and New Zealand currencies, and also the
inclusion of the research and development expenses from Applanix after its
acquisition in July 2003.
* Overall spending remained relatively constant at approximately 13% of
revenues. We expect to continue to devote resources to the development of new
products and the enhancement of existing products. We believe that research and
development is critical to our strategic product development objectives and that
to leverage our leading technology and meet the changing requirements of our
customers, we will need to fund investments in several development projects in
parallel.
Sales and marketing expenses increased by $10.2 million in fiscal 2004 compared
to fiscal 2003, but decreased as a percent of total revenues. The majority of
the increase was due to the increase in revenue, promotional programs associated
with new products, and the foreign exchange impact on expenses in our non US
operations.
Sales and marketing expenses increased by $8.5 million in fiscal 2003 compared
to fiscal 2002 primarily due to higher revenue, increased sales efforts mostly
in emerging geographic areas such as China and Russia, the impact of the weaker
US dollar in Europe, and the inclusion of Applanix sales and marketing expenses
not applicable in the prior fiscal year.
* We intend to continue to focus and expand our sales and marketing efforts
across all the geographies and markets we serve in order to increase market
awareness of our products and to better support our existing customers
worldwide. Our future growth will depend in part on the timely development and
continued viability of the markets in which we currently compete as well as our
ability to continue to identify and exploit new markets for our products.
General and administrative expenses increased by $5.4 million in fiscal 2004
compared to fiscal 2003 primarily due to the inclusion of G&A expenses from
acquisitions, compliance with Sarbanes-Oxley, and bad debt expenses of $1.2
million. Spending overall remained relatively constant at approximately 7% of
revenues.
General and administrative expenses in fiscal 2003 decreased by $1.4 million and
represented 7.3% of revenues compared with 8.7% in fiscal 2002. In fiscal 2002,
we experienced higher bad debt expenses, primarily due to the bankruptcy of a
large Japanese distributor. In addition, in fiscal 2003 we incurred $3.0 million
less in information systems expenses. These reductions were offset in fiscal
2003 by lower sublease income received, expenses from Applanix after the
acquisition in July 2003, and higher compensation costs.
Other Operating Expenses
Restructuring Charges
Restructuring charges of $0.6 million, $2.0 million, and $1.1 million were
recorded in fiscal years 2004, 2003 and 2002, respectively. The charges in
fiscal 2004 were primarily related to severance costs due to the realignment of
Trimble Mobile Solutions, Inc., while charges in fiscal 2003 were primarily
related to our Japanese office relocation due to the Nikon-Trimble joint venture
formation As a result of these actions, the headcount of the affected operations
decreased by 36, 77 and 49 in fiscal 2004, 2003, and 2002, respectively. As of
December 31, 2004, the remaining accrual balance of $0.4 million is primarily
related to severance expected to be paid in fiscal 2005.
Amortization of Purchased and Other Intangible Assets
December 31, January 2, January 3,
Fiscal Years Ended 2004 2004 2003
- ------------------ ---- ---- ----
(in thousands)
Amortization of purchased intangibles $ 8,327 $ 7,312 $ 8,300
Amortization of other intangible assets 183 604 868
--- --- ---
Amortization of purchased and other intangible
assets $ 8,510 $ 7,916 $ 9,168
--------- --------- ---------
Amortization expense of purchased and other intangibles represented 1.3% of
revenue in fiscal 2004, having increased $0.6 million from fiscal 2003 when it
represented 1.5% of revenue.
Amortization expense of purchased and other intangibles represented 1.5% of
revenue in fiscal 2003, having decreased by approximately $1.3 million from
fiscal 2002 when it represented 2% of revenue. The decrease was due to certain
Spectra intangibles being fully amortized during fiscal 2003.
Non-operating Expense, Net
The following table shows non-operating expense, net for the periods indicated
and should be read in conjunction with the narrative descriptions of those
expenses below:
December 31, January 2, January 3,
Fiscal Years Ended 2004 2004 2003
- ------------------ ---- ---- ----
(in thousands)
Interest income $ 436 $ 465 $ 659
Interest expense (3,888) (11,938) (14,710)
Foreign exchange loss (859) (592) (823)
Expenses for affiliated operations, net (7,590) (6,403) (3,954)
Other income (expense) 1,200 118 (1,171)
----- --- ------
Total non-operating expense, net $ (10,701) $ (18,350) $ (19,999)
=========== ========== ==========
Non-operating expense, net decreased by $7.6 million or 42% during fiscal 2004
as compared with fiscal 2003 primarily due to lower interest expense after the
repayment of the principal balance of a subordinated note in June 2003, the
write off of $2.3 million of debt issuance costs as a result of our debt
refinancing in June 2003 and $1.3 million related to the write off of the
remaining unamortized portion of the warrants issued to Spectra Physics
Holdings, Inc. The increases in expense for affiliated operations were primarily
due to our higher construction machine control revenues which led to increased
impact from the pricing effects of transactions between us and the Caterpillar
joint venture. (See Note 5 of the Notes to the Consolidated Financial Statements
for financial information regarding joint ventures). This was partially offset
by $1.1 million related to our share of profits in the Nikon-Trimble joint
venture. The increase in other income (expense) was primarily due to a net gain
related to the sale of an investment.
Non-operating expense, net decreased by $1.6 million or 8% during fiscal 2003 as
compared with fiscal 2002 primarily due to a reduction in interest expense of
$2.8 million offset by an increase in expenses for affiliated operations. The
increase in expenses for affiliated operations is primarily due to the full year
impact of transfer pricing effects on transactions between us and our
Caterpillar joint venture, which commenced operations in April 2002. In
addition, we recorded approximately $0.3 million relating to our share of the
losses in our Nikon joint venture established in 2003.
In fiscal 2003, interest expense decreased by approximately $2.8 million due to
continued debt repayment during the year of approximately $51.8 million,
combined with the effect of lower interest rates. Offsetting the lower debt
interest, during the year, we recorded approximately $3.6 million of interest
expense due to the write off of $2.3 million of unamortized debt issuance costs
as a result of our debt refinancing in June 2003, as well as $1.3 million
related to the unamortized portion of warrants associated with the principal
balance of a subordinated note.
Income Tax Provision
Our effective income tax rates for fiscal years 2004, 2003 and 2002 were 10%,
(8%) and 25%, respectively. The fiscal 2002 income tax rate differs from the US
federal statutory rate of 35% due primarily to non-US taxes and the inability to
realize the benefit of net operating losses. The 2004 and 2003 income tax rates
are less than the US federal statutory rate, primarily due to the realization of
benefits from net operating losses and other previously reserved deferred tax
assets.
* We expect our effective income tax rate to go up in fiscal year 2005 because
of the significant realization of the valuation allowance for deferred taxes in
fiscal year 2004. The Company expects its effective income tax rate to
approximate 35%.
* In October 2004, The American Jobs Creation Act of 2004 was signed into law
providing changes in the tax law including an incentive to repatriate
undistributed earnings of foreign subsidiaries. We are currently evaluating the
potential impact of these provisions, including assessing the details of the
Act, analyzing the funds available for repatriation, the economic cost of doing
so and assessing the qualified uses of repatriated funds. However, given the
preliminary stage of our evaluation, it is not possible to determine the impact
to our fiscal year 2005 income tax provision. The Company expects to complete
its evaluation by September 30, 2005.
Litigation Matters
* From time to time, we are involved in litigation arising out of the ordinary
course of our business. There are no known claims or pending litigation that are
expected to have a material effect on our overall financial position, results of
operations, or liquidity.
OFF-BALANCE SHEET ARRANGEMENTS
Other than lease commitments incurred in the normal course of business, 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.
LIQUIDITY AND CAPITAL RESOURCES
December 31, January 2, January 3,
As of and for the Fiscal Year Ended 2004 2004 2003
- ----------------------------------- ---- ---- ----
(dollars in thousands)
Cash and cash equivalents $ 71,872 $ 45,416 $ 28,679
As a percentage of total assets 11.1% 8.3% 6.5%
Accounts receivable days sales outstanding (DSO) (1) 61 65 64
Inventory turns per year 4 4 5
Total debt $ 38,996 $ 90,486 $ 138,525
Cash provided by operating activities $ 73,115 $ 36,460 $ 32,316
Cash used in investing activities $ (25,133) $ (22,653) $ (5,766)
Cash provided (used) by financing activities $ (24,159) $ 54 $ (31,729)
Net increase/(decrease) in cash and cash equivalents $ 26,456 $ 16,737 $ (2,399)
(1) We have reclassified deferred revenues previously included in accounts
receivable, net to the liabilities section in the Consolidated Balance
Sheets in fiscal year 2004 and for all periods presented. As such, the DSO
calculation for all fiscal periods has been restated.
Cash and Cash Equivalents
In fiscal 2004, our cash and cash equivalents increased by $26.5 million from
fiscal 2003. The increase was primarily due to cash generated by operating
activities, partially offset by cash used in investing activities for
acquisitions and cash used in financing activities for debt repayment.
In fiscal 2004, cash provided by operating activities was $73.1 million, as
compared to $36.5 million in fiscal 2003. The increase of $36.7 million was
primarily driven by the $29.2 million increase in net income during fiscal 2004
compared to fiscal 2003 and better management of working capital. 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 accounts
receivable days for sales outstanding decreased from 65 days at the end of
fiscal 2003 to 61 days at the end of fiscal 2004. Our inventory turns was
unchanged at four at the end of fiscal 2004 and 2003.
Cash used in investing activities was $25.1 million in fiscal 2004 as compared
to $22.7 million in fiscal 2003. The increase was primarily due to cash
acquisitions and investment in capital equipment. During fiscal 2004, we spent
approximately $12.8 million on capital expenditures.
Cash used in financing activities was $24.2 million in fiscal 2004 as compared
to $54,000 in fiscal 2003. However, during fiscal 2004, we repaid approximately
$65.2 million of debt related to our previous Credit Facility. These debt
payments were funded by cash provided by operating activities, and the issuance
of common stock to employees pursuant to our stock option plan and employee
stock purchase plan of approximately $26.8 million.
* We believe that our cash and cash equivalents, together with our credit
facilities, will be sufficient to meet our anticipated operating cash needs for
at least the next twelve months. At December 31, 2004, we had $71.9 million of
cash and cash equivalents as well as access to $118 million of cash under the
terms of our revolver loans.
* We expect fiscal 2005 capital expenditures to be approximately $14 million to
$15 million, primarily for computer equipment, software, manufacturing tools and
test equipment, and leasehold improvements associated with business expansion.
Decisions related to how much cash is used for investing are influenced by the
expected amount of cash to be provided by operations.
Debt
At the end of fiscal 2004, our total debt was approximately $39 million as
compared with approximately $90.5 million at the end of fiscal 2003. This
balance primarily consists of $31.3 million outstanding under a term loan and $7
million outstanding under a senior secured revolving credit facility. On June
25, 2003, we obtained a new Credit Facility (comprising of a term loan and
revolver) in the amount of $109 million that enabled us to pay off our
indebtedness under our previous credit facility and a subordinated note used to
finance the Spectra Physics acquisition.
The new Credit Facility is secured by all material assets of our Company, except
for a portion of assets that are not pledged due to foreign tax considerations.
Financial covenants of the Credit Facility include leverage, fixed charge, and
minimum net worth tests. At December 31, 2004 and as of the date of this report,
we are in compliance with all debt covenants. The amortized principal, interest,
and commitment fees due under the Credit Facility are paid quarterly. Under the
four-year term loan portion of the Credit Facility, we are due to make payments
(excluding interest) of approximately $12.5 million in each of the next two
fiscal years (2005 and 2006), and $6.3 million in fiscal 2007.
Under the terms of the Credit Facility, we are allowed to pay dividends and
repurchase shares of our common stock up to 25% of net income in the previous
fiscal year. For additional discussion of our debt, see Note 9 of Notes to the
Consolidated Financial Statements.
CONTRACTUAL OBLIGATIONS
The following table summarizes our contractual obligations at December 31, 2004:
Payments Due By Period
----------------------
Less 1-3 3-5 More
than than
Total 1 year Years years 5
----- ------ ----- ----- -
years
(in thousands)
Total debt including interest $ 39,693 $ 20,483 $ 19,210 $ - $ -
Operating leases 23,957 11,412 6,591 4,018 1,936
Other purchase obligations and commitments 49,862 45,703 4,159 - -
------ ------ ----- ----- -----
Total (1) $ 113,512 $ 77,598 $ 29,960 $ 4,018 $ 1,936
========== ========== ========== ========= =========
(1) Total excludes contractual obligations already recorded on our balance sheet
as current liabilities, or certain obligations as discussed below.
* As of December 31, 2004, $22.6 million of our total debt was subject to
variable quarterly interest rates. Per our loan agreement, we pay a three-month
LIBOR rate plus a certain spread that depends on our leverage ratio. Our spread
is expected to be 1.5% over the remaining life of the debt. We have assumed a
three-month LIBOR rate of 2.56% for the first quarter of fiscal 2005 and have
forecasted an increase of 25 basis point quarter over quarter to a maximum of
4.81%. (See Note 9 of the Notes to the Consolidated Financial Statements for
further financial information regarding long-term debt)
Other purchase obligations and commitments represent open purchase orders for
material purchases with our customers and a forecasted commitment with a
supplier for outsourced services as described in Note 10 of the Notes to the
Consolidated Financial Statements. Our pension obligation which is not included
in the table above, and is included in "Other non-current liabilities" on our
Consolidated Balance Sheets, is disclosed at Note 16 of the Notes to the
Consolidated Financial Statements.
NEW ACCOUNTING STANDARDS
In December 2004, the FASB issued SFAS No. 123R, "Share-Based Payment." SFAS No.
123R requires employee stock options and rights to purchase shares under stock
participation plans to be accounted for under the fair value method, and
eliminates the ability to account for these instruments under the intrinsic
value method prescribed by APB Opinion No. 25, and allowed under the original
provisions of SFAS No. 123. SFAS No. 123R requires the use of an option pricing
model for estimating fair value, which is amortized to expense over the service
periods. The requirements of SFAS No. 123R are effective for fiscal periods
beginning after June 15, 2005. If we had applied the provisions of SFAS No. 123R
to the financial statements for the period ending December 31, 2004, assuming
that adoption would result in amounts similar to the current pro forma
disclosures under SFAS 123R, net income would have been reduced by approximately
$8.6 million. SFAS No. 123R allows for either prospective recognition of
compensation expense or retrospective recognition, which may be back to the
original issuance of SFAS No. 123 or only to interim periods in the year of
adoption. We are currently evaluating these transition methods.
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 Inability to Accurately Predict Orders and Shipments May AffectSubject Our Revenue,
Expenses and Earnings per Share.
Results of Operations to Significant Fluctuations From Quarter to Quarter
We have not been able in the past to consistently predict when our customers will place orders and request shipments so that we cannot always accurately plan our manufacturing requirements. As a result, if orders and shipments differ from
what we predict, we may incur additional expenses and build excess inventory, which may require additional reserves and allowances. AnyAccordingly, we have limited visibility into future changes in demand and our results of operations may be subject to significant change in
our customers' purchasing patterns could have a material adverse effect on our
operating results and reported earnings per share for a particularfluctuations from quarter to quarter.Our Operating Results in Each Quarter May Be Affected by Special Conditions, Such Assuch as Seasonality, Late Quarter Purchases, Weather, and Other Potential Issues.
Issues
Due in part to the buying patterns of our customers, a significant portion of our quarterly revenues occurs from orders received and immediately shipped to customers in the last few weeks and days of each quarter, although our operating expenses tend to remain fairly predictable. Engineering and construction purchases tend to occur in early spring, and governmental agencies tend to utilize funds available at the end of the government'sgovernment’s fiscal year for additional purchases at the end of our third fiscal quarter in September of each year. Concentrations of orders sometimes also occur at the end of our other two fiscal quarters. Additionally, 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. IfIt 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, our
operating results and reported earnings per share for that quarter could be
significantly impacted.
quarter.
We Are Dependent on a Specific Manufacturer and Assembler for Many of Our Products and on Specific Suppliers of Critical Parts for Our Products.
Products
We are substantially dependent upon Solectron Corporation in California, China
and MexicoFlextronics International Limited as our preferred manufacturing partner for many of our GPS products
previously manufactured out of our Sunnyvale facilities.products. Under the agreement, with Solectron, we provide to SolectronFlextronics a twelve-month product forecast and place purchase orders with SolectronFlextronics 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 SolectronFlextronics are cancelable, the terms of the agreement would require us to purchase from SolectronFlextronics all inventory not returnable or usable by other SolectronFlextronics customers. Accordingly, if we inaccurately forecast demand for our products, we may be unable to obtain adequate manufacturing capacity from SolectronFlextronics to meet customers'customers’ delivery requirements or we may accumulate excess inventories, if such inventories are not usable by other SolectronFlextronics customers. Our current contract with SolectronFlextronics continues in effect until either party gives the other ninety days written notice.
notice.
In addition, we rely on specific suppliers for a number of our critical components. We have experienced shortages of components in the past. Our current reliance on specific or a limited group of suppliers involves several risks, including a potential inability to obtain an adequate supply of required components and reduced control over pricing. Any inability to obtain adequate deliveries or any other circumstance that would require us to seek alternative sources of supply or to manufacture 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 and could have a material adverse effect onas well as our business.
operating results.
Our Annual and Quarterly Performance May Fluctuate.
Fluctuate Which Could Negatively Impact Our Operations and Our 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:
o changes in market demand,
o competitive market conditions,
o market acceptance of existing or new products,
o fluctuations in foreign currency exchange rates,
o the cost and availability of components,
o our ability to manufacture and ship products,
o the mix of our customer base and sales channels,
o the mix of products sold,
o our ability to expand our sales and marketing organization effectively,
o our ability to attract and retain key technical and managerial employees,
o the timing of shipments of products under contracts and
o general global economic conditions.
| · | changes in market demand, |
| · | competitive market conditions, |
| · | fluctuations in foreign currency exchange rates, |
| · | the cost and availability of components, |
| · | the mix of our customer base and sales channels, |
| · | the mix of products sold, |
| · | our ability to expand our sales and marketing organization effectively, |
| · | our ability to attract and retain key technical and managerial employees, and |
| · | general global economic conditions. |
In addition, demand for our products in any quarter or year may vary due to the seasonal buying patterns of our customers in the agricultural and engineering and construction industries. Due to the foregoing factors, our operating results
in one or more future periods are expected to be subject to significant
fluctuations. The price of our common stock could decline substantially in the event such fluctuations result in our financial performance being below the expectations of public market analysts and investors, which are based primarily on historical models that are not necessarily accurate representations of the future.
Our Gross Margin Is Subject to Fluctuation.
Fluctuation
Our gross margin is affected by a number of factors, including product mix, product pricing, cost of components, foreign currency exchange rates, and manufacturing costs. For example, sales of Nikon-branded products generally have lower gross marginsmargin as compared to our GPS survey products. Absent other factors, a shift in sales towards Nikon-branded products would lead to a reduction in our overall gross margins.margin. A decline in gross margin could potentially negatively impactharm our earnings per share.
Failure to maintain effective internal controls in compliance with Section 404results of the Sarbanes-Oxley Act could have an adverse effect on our businessoperations and stock
price.
Section 404 of the Sarbanes-Oxley Act requires us to include an internal control
report of management in our Annual Report on Form 10-K. For fiscal 2004 we
satisfied the requirements of Section 404, which requires annual management
assessments of the effectiveness of our internal controls over financial reporting and a report by our independent auditors addressing these assessments.
A system of controls, however well designed and operated, cannot provide
absolute assurance that the objectives of the system will be met. In addition,
the design of a control system is based in part upon certain assumptions about
the likelihood of future events. Because of the inherent limitations of control
systems, there is only reasonable assurance that our controls will succeed in
achieving their stated goals under all potential future conditions.
condition.
We Are Dependent on New Products.
Products and if we are Unable to Successfully Introduce Them Into The Market 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 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, enhance existing products, and achieve market acceptance of such products. We may incur problems in the future in innovating and introducing new products. Our development stage products may not be successfully completed or, if developed, may not achieve significant customer acceptance. If we were unable to successfully define, develop and introduce competitive new products, and enhance existing products, our future results of operations would be adversely affected. Development and manufacturing schedules for technology products are difficult to predict, and we might not achieve timely initial customer shipments of new products. The timely availability of these products in volume and their acceptance by customers are important to our future success.
A delay inIf we are unable to introduce new
product introductions could have a significant impact on our resultsproducts, if other companies develop similar technology products, or if we do not develop compelling new products, the number of
operations.
Our products may contain errors or defects, which could result in damage to our
reputation, lost revenues, diverted development resources and increased service
costs, warranty claims and litigation.
Our devices are complex and must meet stringent requirements. 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.
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. In general, our productscustomers may not
be free from errorsgrow as anticipated, or
defects after
commercial shipments have begun, which could result in damage to our reputation,
lost revenues, diverted development resources, increased customer service and
support costs and warranty claims and litigationmay decline, which could harm our
business,
results of operations and financial condition.
We May Not Be Able to Enter Into or Maintain Important Alliances.
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, McNeilus, and CNH Global. Our failure to form and maintain
such alliances, or the pre-emption of such alliances by actions of other
competitors or us, will adversely affect our ability to penetrate emerging
markets. No assurances can be given that we will not experience problems from
current or future alliances or that we will realize value from any such
strategic alliances.
We Are Dependent on the Availability of Allocated Bands Within the Radio
Frequency Spectrum.
Our GPS technology is dependent on the use of the Standard Positioning Service
("SPS") provided by the US Government's GPS. The GPS SPS operates in radio
frequency bands that are globally allocated for radio navigation satellite
services. 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.
Any ITU reallocation of radio frequency bands, including frequency band
segmentation or sharing of spectrum, may materially and adversely affect the
utility and reliability of our products, which would, in turn, cause a material
adverse effect on our operating results. Many of our products use other radio
frequency bands, together with the GPS signal, to provide enhanced GPS
capabilities, such as real-time kinematic precision. The continuing availability
of these non-GPS radio frequencies is essential to provide enhanced GPS products
to our precision survey and construction machine controls markets. Any
regulatory changes in spectrum allocation or in allowable operating conditions
may materially and adversely affect the utility and reliability of our products,
which would, in turn, cause a material adverse effect on our operating results.
In addition, unwanted emissions from mobile satellite services and other
equipment operating in adjacent frequency bands or in-band from licensed and
unlicensed devices may materially and adversely affect the utility and
reliability of our products, which could result in a material adverse effect on
our operating results. The FCC continually receives proposals for novel
technologies and services, such as ultra-wideband technologies, which may seek
to operate in, or across, the radio frequency bands currently used by the GPS
SPS and other public safety services. Adverse decisions by the FCC that result
in harmful interference to the delivery of the GPS SPS and other radio frequency
spectrum also used in our products may materially and adversely affect the
utility and reliability of our products, which could result in a material
adverse effect on our business and financial condition.
We Are Subject to the Adverse Impact of Radio Frequency Congestion.
We have certain products, such as GPS RTK systems, and surveying and mapping
systems that use integrated radio communication technology requiring access to
available radio frequencies allocated by the FCC (or the NTIA in the case of
federal government users of this equipment) for which the end user is required
to obtain a license in order to operate their equipment. In addition, access to
these frequencies by state agencies is under management by state radio
communications coordinators. Some bands are experiencing congestion that
excludes their availability for access by state agencies in some states. To
reduce congestion, the FCC announced that it will require migration of radio
technology from wideband to narrowband operations in these bands. In December
2003, the FCC stayed the effectiveness of its new rules until it acts on
petitions requesting a reconsideration of this new requirement. The stay is
indefinite at this point and the outcome of this proceeding is unknown at this
time. An inability to obtain access to these radio frequencies by end users, and
for new products to comply with FCC requirements, could have an adverse effect
on our operating results.
Many of Our Products Rely on the GPS Satellite System.
The GPS satellites and their ground support systems are complex electronic
systems subject to electronic and mechanical failures and possible sabotage. The
satellites 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 29 satellites in place, some have already been in
operation for 12 years. To repair 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
may impair the current utility of the GPS system and the growth of current and
additional market opportunities.
In addition, there can be no assurance that the US Government will remain
committed to the operation and maintenance of GPS satellites over a long period,
or that the policies of the US Government for the use of GPS without charge will
remain unchanged. However, a 1996 Presidential Decision Directive marks the
first time in the evolution of GPS that access for civilian use free of direct
user fees is specifically recognized and supported by Presidential policy
reaffirmed in 2004. In addition, Presidential policy has been complemented by
corresponding legislation, signed into law. Because of ever-increasing
commercial applications of GPS, other US Government agencies may become involved
in the administration or the regulation of the use of GPS signals. Any of the
foregoing factors could affect the willingness of buyers of our products to
select GPS-based systems instead of products based on competing technologies.
Many of our products also use signals from systems that augment GPS, such as the
Wide Area Augmentation System (WAAS) and National Differential GPS System
(NDGPS). Many of these augmentation systems are operated by the federal
government and rely on continued funding and maintenance of these systems. Any
curtailment of the operating capability of these systems could result in
decreased user capability thereby impacting our markets.
The European governments have begun development of an independent satellite
navigation system, known as Galileo. We believe we will have access to the
signal design to develop compatible receivers. However, if access to the signal
structure is delayed it may have a materially adverse effect on our business and
operating results.
Our Business is Subject to Disruptions and Uncertainties Caused by War or
Terrorism.
Acts of war or acts of terrorism 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 response to this threat, or any
future acts of terrorism, may cause further disruption to our economy and create
further uncertainties. To the extent that such disruptions or uncertainties
result in delays or cancellations of orders, or the manufacture or shipment of
our products, our business, operating results, and financial condition could be
materially and adversely affected.
Our Credit Agreement Contains Financial Covenants.
On June 25, 2003, we executed a Credit Agreement with Scotia Capital and certain
other banks which provides for financial commitments totaling up to $175
million. This credit facility contains financial covenants regarding minimum
fixed charge coverage and maximum leverage ratio which are extremely sensitive
to changes in earnings before interest, taxes, depreciation and amortization, or
EBITDA. In turn, EBITDA is highly correlated to revenues and costs. If we
default on one or more covenants, we will have to obtain either negotiated
waivers or amendments to the Credit Agreement. If we were unable to obtain such
waivers or amendments, the banks would have the right to accelerate the payment
of our outstanding obligations under the Credit Agreement which would have a
material adverse effect on our financial condition and viability as an operating
company. An event of default under any debt instrument, if not cured or waived,
could have a material adverse effect on us.
We Face Risks in Investing in and Integrating New Acquisitions.
Acquisitions of companies, divisions of companies, or products entail numerous
risks, including:
o potential inability to successfully integrate acquired operations and
products or to realize cost savings or other anticipated benefits from
integration;
o diversion of management's attention;
o loss of key employees of acquired operations;
o the difficulty of assimilating geographically dispersed operations and
personnel of the acquired companies;
o the potential disruption of our ongoing business;
o unanticipated expenses related to such integration;
o the correct assessment of the relative percentages of in-process research
and development expense that can be immediately written off as compared to
the amount which must be amortized over the appropriate life of the asset;
o the impairment of relationships with employees and customers of either an
acquired company or our own business;
o the potential unknown liabilities associated with acquired business; and
o inability to recover strategic investments in development stage entities.
As a result of such acquisitions, we have significant assets that include
goodwill and other purchased intangibles. The testing of these intangibles under
established accounting guidelines for impairment requires significant use of
judgment and assumptions. Changes in business conditions could require
adjustments to the valuation of these assets. In addition, losses incurred by a
company in which we have an investment may have a direct impact on our financial
statements or could result in our having to write-down the value of such
investment. Any such problems in integration or adjustments to the value of the
assets acquired could harm our growth strategy and have a material adverse
effect on our business, financial condition and compliance with debt covenants.
We Face Competition in Our Markets.
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 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 GPS, optical and laser suppliers and
competition may intensify from various larger US and non-US competitors and new
market entrants, some of which may be our current customers. The competition in
the future may, in some cases, result in price reductions, reduced margins or
loss of market share, any of which could materially and adversely affect our
business, 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 systems and 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 Proprietary Technology.
Technology, which Could Result in Litigation that Could Divert Significant Valuable Resources and Impair Our Liquidity
Our future success and competitive position is dependent upon our proprietary technology, and we rely on patent, trade secret, trademark, and copyright law to protect our intellectual property. The patents owned or licensed by us may be invalidated, circumvented, and 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.
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. We recognize that as new patents are issued or are brought to our attention by the holders of such patents, it may be necessary for us to withdraw products from the market, take a license from such patent holders, or redesign our products. We do not believe any of our products currently infringe patents or other proprietary rights of third parties, but we cannot be certain they do not do so. 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. Such eventsAny such litigation could require us to incur substantial costs and divert significant valuable resources, including the efforts of our technical and management personnel, which may impair our liquidity.
Investing in and Integrating New Acquisitions Could be Costly and May Place a Significant Strain on Our Management Systems and Resources
We have recently acquired a number of companies, including @Road, and intend to continue to acquire other companies. Acquisitions of companies 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 of acquired operations; |
| · | the difficulty of assimilating geographically dispersed operations and personnel of the acquired companies; |
| · | the potential disruption of our ongoing business; |
| · | unanticipated expenses related to acquisitions; |
| · | the correct assessment of the relative percentages of in-process research and development expense that can be immediately written off as compared to the amount which must be amortized over the appropriate life of the asset; |
| · | the impairment of relationships with employees and customers of either an acquired company or our own business; and |
| · | the potential unknown liabilities associated with acquired business. |
As a result of such acquisitions, we have significant assets that include goodwill and other purchased intangibles. The testing of these intangibles under established accounting guidelines for impairment requires significant use of judgment and assumptions. Changes in business conditions could require adjustments to the valuation of these assets. In addition, losses incurred by a company in which we have an investment may have a direct impact on our financial statements or could result in our having to write-down the value of such investment. Any such problems in integration or adjustments to the value of the assets acquired could harm our growth strategy, and could be costly and place a significant strain on our management systems and resources.
Our Products May Contain Errors or Defects, which Could Result in Damage to Our Reputation, Lost Revenues, Diverted Development Resources and Increased Service 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.
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. In general, our products may not be free from errors or defects after commercial shipments have begun, which could result in damage to our reputation, lost revenues, diverted development resources, increased customer service and support costs and warranty claims and litigation.
We Are Dependent on the Availability of Allocated Bands within the Radio Frequency Spectrum
Our GNSS technology is dependent on the use of satellite signals from space 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 on how each band is used.
Any ITU or local reallocation of radio frequency bands, including frequency band segmentation or sharing of spectrum, may materially and adversely affect the utility and reliability of our products. Many of our products use other radio frequency bands, together with the GNSS signal, to provide enhanced GNSS capabilities, such as real-time kinematic 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. Any regulatory changes in spectrum allocation or in allowable operating conditions could have a material adverse effect on our revenuesbusiness, results of operations, and financial condition.
We have certain products, such as GPS RTK systems, and surveying and mapping systems that use integrated radio communication technology requiring access to available radio frequencies allocated to local government. Some bands are experiencing congestion. In the US, the FCC announced that it will require migration of radio technology from wideband to narrowband operations in these bands. The rules require migration of users to narrowband channels by 2011. In the meantime, congestion could cause FCC coordinators to restrict or profitability.
We Must Carefully Managerefuse licenses. An inability to obtain access to these radio frequencies by end users could have a material adverse effect on our business, results of operations, and financial condition.
Many of Our Future Growth.
GrowthProducts Rely on GNSS technology, the GPS, and other Satellite Systems, Which May Become Inoperable and Result in our salesLost Revenue
GNSS technology, GPS satellites and their ground support systems are complex electronic systems subject to electronic and mechanical failures and possible sabotage. 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 30 satellites in place, some have already been in operation for more than 12 years. To repair damaged or continued expansionmalfunctioning 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 scopenumber of operating satellites may impair the current utility of the GPS system and the growth of current and additional market opportunities.
As the only complete GNSS currently in operation, we are dependent on continued operation of GPS. GPS is operated by the U. S. Government, which is committed to maintenance and improvement of GPS; however if the policy were to change, and GPS were no longer supported by the U. S. Government, 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
operations could
strainproducts also use signals from systems that augment GPS, such as the Wide Area Augmentation System (WAAS) and National Differential GPS System (NDGPS). Many of these augmentation systems are operated by the federal government and rely on continued funding and maintenance of these systems. In addition, some of our
current management, financial, manufacturing and other resources, and
may require us to implement and improve a varietyproducts also use satellite signals from the Russian Glonass System. Any curtailment of
the operating
financial and
other systems, procedures, and controls. Specifically we have experienced strain
in our financial and order management system. We are expanding our sales,
accounting, manufacturing, and other information systems to meet these
challenges. Problems associated with any improvement or expansioncapability of these systems procedures or controls may adversely affectcould result in decreased user capability thereby impacting our operations and these
systems, procedures or controls may not be designed, implemented or improved in
a cost-effective and timely manner. Any failuremarkets.
The European governments have begun development of an independent satellite navigation system, known as Galileo. We have access to implement, improve and expand
such systems, procedures, and controls inthe preliminary signal design, which is subject to change. Although an operational Galileo system is several years away, if we are unable to develop a timely and efficient mannercommercial product, it could result in lost revenue which could harm our growth strategyresults of operations and adversely affect our financial conditioncondition.
Our Business is Subject to Disruptions and ability to achieveUncertainties Caused by War or Terrorism
Acts of war or acts of terrorism, especially any directed at the GPS signals, could have a material adverse impact on our business, objectives.
We Are Dependent on Retainingoperating results, and Attracting Highly Skilled Developmentfinancial condition. The threat of terrorism and Managerial Personnel.
Our abilitywar and heightened security and military response to maintainthis threat, or any future acts of terrorism, may invoke a redeployment of the satellites used in GPS or interruptions of the system. To the extent that such interruptions result in delays or cancellations of orders, or the manufacture or shipment of our competitive technological position will depend, inproducts, it could have a large part,material adverse effect on our ability to attract, motivate,business, results of operations, and retain highly qualified
development and managerial personnel. Competition for qualified employees in our
industry and locations is intense, and there can be no assurance that we will be
able to attract, motivate, and retain enough qualified employees necessary for
the future continued development of our business and products.
We May Encounter Problems Associated With International Operations and Sales.
Our customers are located throughout the world. Sales to unaffiliated customers
in non-US locations represented approximately 50% of our revenues in our fiscal
year 2004, 51% of our revenues in our fiscal year 2003, and 49% in our fiscal
year 2002, respectively. In addition, we have significant international
operations, including a joint venture, manufacturing facilities, sales personnel
and customer support operations. We have sales offices outside the US. Our
non-US manufacturing facilities are in Sweden, Canada, France, and Germany, and
we have a regional fulfillment center in the Netherlands. Our non-US presence
exposes us to risks not faced by wholly US companies.
Specifically, we have experienced issues relating to integration of non-US
operations, greater difficulty in accounts receivable collection, longer payment
cycles, and currency fluctuations. Additionally, we face the following risks,
among others:
o unexpected changes in regulatory requirements;
o tariffs and other trade barriers;
o political, legal and economic instability in non-US markets, particularly
in those markets in which we maintain manufacturing and research
facilities;
o difficulties in staffing and management;
o language and cultural barriers;
o seasonal reductions in business activities in the summer months in Europe
and some other countries; o war and acts of terrorism; and
o potentially adverse tax consequences.
In certain non-US markets, there may be reluctance to purchase products based on
GPS technology, given the control of GPS by the US Government.
financial condition.
We Are Exposed to Fluctuations in Currency Exchange Rates.
Rates and Although We Hedge Against These Risks, Our Attempts to Hedge Could be Unsuccessful and Expose Us to Losses
A significant portion of our business is conducted outside the United States,U.S., and as such, we face exposure to movements in non-USnon-U.S. currency exchange rates. These exposures may change over time as business practices evolve and could have a material adverse impact on our financial results and cash flows. In fiscal
2004, the US dollar continued to weaken against several major currenciesFluctuation in which we do business, adversely impacting our financial results. The weaker US
dollar negativelycurrency impacts our operating income due to significant manufacturing,
distribution, research and development, and selling expenses incurred outside of
the US, while the weaker US dollar positively impacts our revenues generated in
foreign currencies, primarily the Euro.
results.
Currently, we 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 impact of currency fluctuations on certain non-functional currency assets and liabilities. Our attempts to hedge against these risks could be unsuccessful and expose us to losses.
Our Debt Could Adversely Affect Our Cash Flow and Prevent Us from Fulfilling Our Financial Obligations
On February 16, 2007, we amended and restated our existing $200 million unsecured revolving credit agreement to an aggregate availability of up to $300 million. Our debt 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, and other cash requirements; |
| · | increasing our vulnerability to adverse economic and industry conditions; |
| · | 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. |
Additionally, if we were to default under our amended credit agreement and were unable to obtain a waiver for such a default, interest on the obligations would accrue at an increased rate and the lenders could accelerate our obligations under the amended credit agreement, however that acceleration will be automatic in the case of bankruptcy and insolvency events of default. Additionally, our subsidiaries that have guaranteed the amended credit agreement could be required to pay the full amount of our obligations under the amended credit agreement. Any such action on the part of the lenders against us could harm our financial condition.
We May Not Be Able to Enter Into or Maintain Important Alliances
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, and CNH Global. Our failure to form and maintain such alliances, or the pre-emption of such alliances by actions of competitors or us, will adversely affect our ability to penetrate emerging markets. If we experience problems from current or future alliances it could harm our operating results and we may not be successful resultingable to realize value from any such strategic alliances.
We Face Competition in an adverse impactOur Markets Which Could Decrease Our Revenues 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 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 GPS, 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 and India. The competition in the future may, in some cases, result in price reductions, reduced margins or loss of market share, any of which could decrease our revenues 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
net income.
ability to execute our strategy to provide systems and 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 Subject to the Impact of Governmental and Other Similar Certifications.
Certifications and Failure to Obtain the Requisite Certifications Could Harm Our Operating Results
We market certain products that are subject to governmental and similar certifications before they can be sold. For example, CE certification for radiated emissions is required for most GPS receiver and data communications products sold in the European Union. An inability to obtain such certifications in a timely manner could have an adverse effect on our operating results. Also, 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 Federal Communications Commission (FCC)FCC for frequency-band usage. These are secondary licenses that are subject to certain restrictions. During the fourth quarter of 1998, the FCC temporarily
suspended the issuance of licenses for certain of our real-time kinematic
products because of interference with certain other users of similar radio
frequencies. 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 have a material
adverse effect ontherefore, our business.
operating results. Any failure to obtain the requisite certifications could also harm our operating results.
The Volatility of Our Stock Price Could Adversely Affect Your Investment in Our Common Stock.
Stock
The market price of our common stock has been, and may continue to be, highly volatile. During fiscal 2004,2007, our stock price ranged from $20.15$25.47 to $34.45.$57.41, on a post-split basis. We believe that a variety of factors could cause the price of our common stock to fluctuate, perhaps substantially, including:
o announcements and rumors of developments related to our business or the
industry in which we compete;
o quarterly fluctuations in our actual or anticipated operating results and
order levels;
o general conditions in the worldwide economy, including fluctuations in
interest rates;
o announcements of technological innovations;
o new products or product enhancements by us or our competitors;
o developments in patents or other intellectual property rights and
litigation;
o developments in our relationships with our customers and suppliers; and
o any significant acts of terrorism against the United States.
| · | announcements and rumors of developments related to our business or the industry in which we 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 by us or our competitors; and |
| · | developments in patents or other intellectual property rights and litigation; |
| · | developments in our relationships with our customers and suppliers; and |
| · | any significant acts of terrorism against the United States. |
In addition, in recent years the stock market in general and the markets for shares of "high-tech" companies in particular, have 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, and the market price of our common stock may decline.
We may be Materially Affected by New Regulatory Requirements.
We face increasing complexity in our product design and procurement operations
as we adjust to new and upcoming requirements relating to the materials
composition of many of our products. The European Union ("EU") has adopted two
directives to facilitate the recycling of electrical and electronic equipment
sold in the EU. The first of these is the Waste Electrical and Electronic
Equipment (WEEE) directive, which directs EU member states to enact laws,
regulations, and administrative provisions to ensure that producers of
electrical and electronic equipment are financially responsible for specified
collection, recycling, treatment and environmentally sound disposal of products
placed on the market after August 13, 2005 and from products in use prior to
that date that are being replaced. The EU has also adopted the Restriction on
the Use of Certain Hazardous Substances in Electrical and Electronic Equipment
("RoHS") directive. The RoHS directive restricts the use of lead, mercury and
certain other substances in electrical and electronic products placed on the
market in the European Union after July 1, 2006.
Similar laws and regulations have been or may be enacted in other regions,
including in the United States, China and Japan. Other environmental regulations
may require us to reengineer our products to utilize components which are more
environmentally compatible and such reengineering and component substitution may
result in additional costs to us. Although we do not anticipate any material
adverse effects based on the nature of our operations and the effect of such
laws, there is no assurance that such existing laws or future laws will not have
a material adverse effect on our business.
We are Subject to Environmental Laws and Potential Exposure to Environmental
Liabilities.
We are subject to various federal, state and local environmental laws and
regulations that govern our operations, including the handling and disposal of
non-hazardous and hazardous wastes, and emissions and discharges into the
environment. Failure to comply with such laws and regulations could result in
costs for corrective action, penalties, or the imposition of other liabilities.
We also are subject to laws and regulations that impose liability and clean-up
responsibility for releases of hazardous substances into the environment. Under
certain of these laws and regulations, a current or previous owner or operator
of property may be liable for the costs of remediating hazardous substances or
petroleum products on or from its property, without regard to whether the owner
or operator knew of, or caused, the contamination, as well as incur liability to
third parties impacted by such contamination. The presence of, or failure to
remediate properly, such substances could adversely affect the value and the
ability to transfer or encumber such property. Based on currently available
information, although there can be no assurance, we believe that such
liabilities will not have a material impact on our business.
Provisions in Our Charter Documents and Under California Law Could Prevent or Delay a Change of Control, which Could Reduce the Market Price of Our Common Stock.
Stock
Certain provisions of our articles of incorporation, as amended and restated, our bylaws, as amended and restated, and the California General Corporation Law may be deemed to have an anti-takeover effect and could discourage a third party from acquiring, or make it more difficult for a third party to acquire, control of us without approval of our board of directors. These provisions could also limit the price that certain investors might be willing to pay in the future for shares of our common stock. Certain provisions allow the board of directors to authorize the issuance of preferred stock with rights superior to those of the common stock.
We have adopted a Preferred Shares Rights Agreement, commonly known as a "poison pill." The provisions described above, our poison pill and provisions of the California General Corporation Law may discourage, delay or prevent a third party from acquiring us.
Item 7A. Quantitative
| Unresolved Staff Comments. |
None
The following table sets forth the significant real property that we own or lease as of February 21, 2008:
| Location | | Segment(s) served | | Size in Sq. Feet | | Commitment |
| Sunnyvale, California | | All | | 160,000 | | Leased, expiring in 2012 3 buildings |
| Huber Heights (Dayton), Ohio | | Engineering & Construction Field Solutions Distribution | | 150,000 57,200 42,600 | | Owned, no encumbrances Leased, expiring in 2011 Leased, expiring in 2008 |
| Westminster, Colorado | | Engineering & Construction, Field Solutions | | 76,000 | | Leased, expiring in 2013 |
| Corvallis, Oregon | | Engineering & Construction | | 20,000 38,000 | | Owned, no encumbrances Leased, expiring in 2008 |
| Richmond Hill, Canada | | Advanced Devices | | 50,200 | | Leased, expiring in 2010 |
| Danderyd, Sweden | | Engineering & Construction | | 93,900 | | Leased, expiring in 2010 |
| Christchurch, New Zealand | | Engineering & Construction, Mobile Solutions, Field Solutions | | 65,000 | | Leased, expiring in 2010 2 buildings |
| Fremont, California (@Road) | | Mobile Solutions | | 102,544 | | Leased, expiring in 2010 2 buildings |
Chennai, India (@Road) | | Mobile Solutions | | 37,910 | | Leased, expiring in 2009 |
In addition, we lease a number of smaller offices around the world primarily for sales and Qualitative Disclosuremanufacturing functions. For financial information regarding obligations under leases, see Note 10 of the Notes to the Consolidated Financial Statements.
* We believe that our facilities are adequate to support current and near-term operations.
From time to time, the Company is involved in litigation arising out of the ordinary course of its business. There are no known claims or pending litigation expected to have a material adverse effect on our business, results of operations, and financial condition.
| Submission of Matters to a Vote of Security Holders. |
No matters were submitted to a vote of security holders during the fourth quarter of 2007.
PART II
| Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities. |
On October 12, 2007, we issued 48,670 shares of our common stock to a warrantholder pursuant to the exercise of warrants held by such warrantholder. The holder of the warrants exercised the warrants on a cashless basis by surrendering their right to purchase a portion of the shares of the common stock based on a value of $40.06 per share, representing the average closing price of our common stock on the ten-day period prior to the exercise date of October 9, 2007. In connection with the cashless exercise of the warrants, the warrants were surrendered and no underwriting discounts or commissions were paid. We offered and sold the common stock issued in connection with these cashless exercise of warrants in reliance on the exemption from registration for exchanges of securities with existing security holders by virtue of Section 3(a)(9) of the Securities Act of 1933, as amended.
Our common stock is traded on the NASDAQ National Market 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 National Market.
| | | 2007 | | | 2006 | |
| | | Sales Price | | | Sales Price | |
| Quarter Ended | | High | | | Low | | | High | | | Low | |
| First quarter | | $ | 57.41 | | | $ | 25.47 | | | $ | 22.53 | | | $ | 17.51 | |
| Second quarter | | | 32.65 | | | | 26.83 | | | | 24.26 | | | | 19.68 | |
| Third quarter | | | 41.33 | | | | 32.24 | | | | 25.55 | | | | 21.29 | |
| Fourth quarter | | | 43.15 | | | | 30.40 | | | | 26.18 | | | | 22.10 | |
Stock Repurchase Program
On January 23, 2008, the Company announced that its board of directors has authorized a stock repurchase program for up to $250 million, effective February 1, 2008. The timing and actual number of shares repurchased will depend on a variety of factors including price, regulatory requirements, capital availability, and other market conditions. The program does not require the purchase of any minimum number of shares and may be suspended or discontinued at any time without public notice.
As of February 21, 2008, there were approximately 986 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.
Under the existing terms of our credit facility, we are allowed to pay dividends and repurchase shares of our common stock in any twelve (12) month period, in an aggregate amount equal to fifty percent (50%) of net income (plus to the extent deducted in determining net income for such period, non-cash expenses in respect of stock options) for the previous twelve month period. Also, we are allowed to spend an additional $50 million to pay dividends and repurchase shares if we are in compliance with our fixed charge coverage ratio.
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. In February 2007 we acquired @Road, Inc. which significantly impacted the trends shown below. Please refer to Note 4 to the Consolidated Financial Statements for more information.
| | | December 28, | | | December 29, | | | December 30, | | | December 31, | | | January 2, | |
| As of And For the Fiscal Years Ended | | 2007 | | | 2006 | | | 2005 | | | 2004 | | | 2004 | |
| (Dollar in thousands, except per share data) | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
| Revenue | | $ | 1,222,270 | | | $ | 940,150 | | | $ | 774,913 | | | $ | 668,808 | | | $ | 540,903 | |
| Gross margin | | $ | 612,905 | | | $ | 461,081 | | | $ | 389,805 | | | $ | 324,810 | | | $ | 268,030 | |
| Gross margin percentage | | | 50.1 | % | | | 49.0 | % | | | 50.3 | % | | | 48.6 | % | | | 49.6 | % |
| Income from continuing operations | | $ | 117,374 | | | $ | 103,658 | | | $ | 84,855 | | | $ | 67,680 | | | $ | 38,485 | |
| Net income | | $ | 117,374 | | | $ | 103,658 | | | $ | 84,855 | | | $ | 67,680 | | | $ | 38,485 | |
| Per common share (1): | | | | | | | | | | | | | | | | | | | | |
| Net income (1) | | | | | | | | | | | | | | | | | | | | |
| - Basic | | $ | 0.98 | | | $ | 0.94 | | | $ | 0.80 | | | $ | 0.66 | | | $ | 0.41 | |
| - Diluted | | $ | 0.94 | | | $ | 0.89 | | | $ | 0.75 | | | $ | 0.62 | | | $ | 0.38 | |
| Shares used in calculating basic earnings per share (1) | | | 119,280 | | | | 110,044 | | | | 106,432 | | | | 102,326 | | | | 95,010 | |
| Shares used in calculating diluted earnings per share (1) | | | 124,410 | | | | 116,072 | | | | 113,638 | | | | 109,896 | | | | 100,024 | |
| Cash dividends per share | | $ | - | | | $ | - | | | $ | - | | | $ | - | | | $ | - | |
| | | | | | | | | | | | | | | | | | | | | |
| Total assets | | $ | 1,539,359 | | | $ | 983,477 | | | $ | 749,265 | | | $ | 657,975 | | | $ | 553,083 | |
| Non-current portion of long term debt and other non-current liabilities | | $ | 116,692 | | | $ | 28,000 | | | $ | 19,474 | | | $ | 38,226 | | | $ | 85,880 | |
| (1) | 2-for-1 Stock Split - On January 17, 2007, Trimble’s board of directors approved a 2-for-1 split of all outstanding shares of the Company’s Common Stock, payable February 22, 2007 to stockholders of record on February 8, 2007. All shares and per share information presented has been adjusted to reflect the stock split on a retroactive basis for all periods presented. |
| 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’s focus is on combining positioning technology with wireless communication and application capabilities to create system-level solutions that enhance productivity and accuracy for our customers. The majority of our markets are end-user markets, including engineering and construction firms, governmental organizations, public safety workers, farmers and companies who must manage fleets of mobile workers and assets. In our Advanced Devices segment, we also provide components to original equipment manufacturers to incorporate into their products. In the end user markets, we provide a system that includes a hardware platform that may contain software and customer support. Some examples of our solutions include products that automate and simplify the process of surveying land, products that automate the utilization of equipment such as tractors and bulldozers, products that enable a company to manage its mobile workforce and assets, and products that allow municipalities to manage their fixed assets.
Solutions targeted at the end-user make up a significant majority of our revenue. To create compelling products, we must attain an understanding of the end users’ needs and work flow, and how location-based technology can enable that end user to work faster, more efficiently, and more accurately. We use this knowledge to create highly innovative products that change the way work is done by the end-user. With the exception of our Mobile Solutions and Advanced Devices segments, our products are generally sold through a dealer channel, and it is crucial that we maintain a proficient global, third-party distribution channel.
During 2007 we continued to execute our strategy with a series of actions that can be summarized in four categories.
Reinforcing our position in existing markets
* We believe that our markets provide us with additional, substantial potential for substituting our technology for traditional methods. In 2007, we continued to develop new products and to strengthen our distribution channels in order to expand our market opportunity. A number of new products such as the AgGPS EZ-Guide 500 system, Juno™ST handheld computer, Spectra Precision GL412 and 422 grade lasers, and Trimble CCS900 Compaction Control System, strengthened our competitive position and created new value for the user.
Extending our position in existing markets through new product categories
* We are utilizing the strength of the Trimble brand in our markets to expand our revenues by bringing new products to existing users. In fiscal 2007, we introduced the Trimble VX Spatial Station and a suite of interactive product training modules for the engineering and construction industry.
Bringing existing technology to new markets
* We continue to reinforce our position in existing markets and position ourselves in newer markets that will serve as important sources of future growth. Our efforts in Asia Pacific, including China, India and Russia, and Europe, including Eastern Europe, all reflected improving financial results, with the promise of more in the future.
Entering new market segments
* In 2007, we acquired @Road, a global provider of solutions designed to automate the management of mobile resources and to optimize the service delivery process for customers across a variety of industries, INPHO, a leader in photogrammetry and digital surface modeling for aerial surveying, mapping and remote sensing applications, Ingenieurbüro Breining, a provider of customized field data collection and office software solutions for the cadastral survey market in Germany. We also acquired UtilityCenter assets from UAI, Inc. which is a leading provider of Geographic Information System (GIS)-based workflow automation and outage management solutions for electric and gas utilities and HHK Datentechnik, a provider of customized office and field software solutions for the cadastral survey market in Germany.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
Our accounting policies are more fully described in Note 2 of the Notes to the Consolidated Financial Statements. The preparation of financial statements and related disclosures in conformity with accounting principles generally accepted in the United States requires us to make judgments, assumptions, and estimates that affect the amounts reported in the Consolidated Financial Statements and accompanying Notes to the Consolidated Financial Statements. We consider the accounting polices described below to be our critical accounting polices. 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.
Revenue Recognition
We recognize product revenue when persuasive evidence of an arrangement exists, shipment 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 analysis, 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, we may choose within the place or range stipulated where the carrier will take the goods into carrier’s charge. 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 the cost of goods sold.
Revenue to distributors and resellers is recognized upon shipment, assuming all other criteria for revenue recognition have been met. Distributors and resellers do not have a right of return.
Revenue from purchased extended warranty and support agreements is deferred and recognized ratably over the term of the warranty/support period.
We present revenue net of sales taxes and any similar assessments.
We apply Statement of Position (SOP) No. 97-2, “Software Revenue Recognition” to products where the embedded software is more than incidental to the functionality of the hardware. This determination requires significant judgment including a consideration of factors such as marketing, research and development efforts and any post-customer contract support (PCS) relating to the embedded software.
Our software arrangements generally consist of a perpetual license fee and PCS. We have established vendor-specific objective evidence (VSOE) of fair value for our PCS contracts based on renewal rates. 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 there are no remaining obligations. Revenue from PCS is recognized ratably over the term of the PCS agreement.
We apply EITF Issue 00-3, "Application of AICPA Statement of Position 97-2 to Arrangements That Include the Right to Use Software Stored on Another Entity's Hardware" for hosted arrangements which the customer 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. Subscription revenue related to our hosted arrangements is recognized ratably over the contract period. Upfront fees for our hosted solution primarily consist of amounts for the in-vehicle enabling hardware device and peripherals, if any. For upfront fees relating to propriety hardware where the firmware is more than incidental to the functionality of the hardware in accordance with SOP No. 97-2, “Software Revenue Recognition,” we defer the upfront fees at installation and recognize them ratably over the minimum service contract period, generally one to five years. Product costs are also deferred and amortized over such period.
In accordance with EITF Issue 00-21, “Accounting for Revenue Arrangements with Multiple Deliverables,” when a non-software sale involves multiple elements the entire fee from the arrangement is allocated to each respective element based on its relative fair value and recognized when revenue recognition criteria for each element is met.
Allowance for Doubtful Accounts and Sales Returns
Our accounts receivable balance, net of allowance for doubtful accounts and sales returns reserve, was $239.9 million as of December 28, 2007, as compared with $177.1 million as of December 29, 2006. The allowance for doubtful accounts was $5.2 million and $4.1 million as of December 28, 2007 and December 29, 2006, respectively. We evaluate the collectibility of our 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 we are aware of a specific customer’s inability to meet its financial obligations to us, a specific allowance for bad debts is estimated and recorded which reduces the recognized receivable to the estimated amount we believe will ultimately be collected. In addition to specific customer identification of potential bad debts, bad debt charges are recorded based on our recent past loss history and an overall assessment of past due trade accounts receivable amounts outstanding.
A reserve for sales returns is established based on historical trends in product return rates experienced in the ordinary course of business. The reserve for sales returns as of December 28, 2007 and December 29, 2006 were $1.7 million and $859,000, respectively, for estimated future returns that were recorded as a reduction of our accounts receivable and revenue. If the actual future returns were to deviate from the historical data on which the reserve had been established, our revenue could be adversely affected.
Inventory Valuation
Our inventories, net balance was $143.0 million as of December 28, 2007 compared with $112.6 million as of December 29, 2006. Our inventory allowances as of December 28, 2007 were $29.6 million, as compared with $28.6 million as of December 29, 2006. Our inventories are stated at the lower of standard cost (which approximates actual cost on a first-in, first-out basis) or market. Adjustments to reduce the cost of inventory to its net realizable value, if required, are made for estimated excess, obsolescence, or impaired balances. Factors influencing these adjustments include decline in demand, technological changes, product life cycle and development plans, component cost trends, product pricing, physical deterioration, and quality issues. If actual factors are less favorable than those projected by us, additional inventory write-downs may be required.
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.
Our valuation allowance is attributable to, primarily, acquisition related Net Operating Loss and Research and Development Credit carryforwards. Management believes that it is more likely than not that we will not realize these deferred tax assets, and, accordingly, a valuation allowance has been provided for such amounts. When the tax attributes are utilized and the valuation allowance is released, the benefit of the release of the valuation allowance will be accounted for as a credit to goodwill rather than as a reduction of the income tax provision.
Goodwill and Purchased Intangible Assets
Goodwill represents the excess of the purchase price over the fair value of the net tangible and identifiable intangible assets acquired in a business combination. Intangible assets resulting from the acquisitions of entities accounted for using the purchase method of accounting are estimated by management based on the fair value of assets received. Identifiable intangible assets are comprised of distribution channels, patents, licenses, technology, acquired backlog and trademarks. Identifiable intangible assets are being amortized over the period of estimated benefit using the straight-line method and estimated useful lives ranging from one to ten 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
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. Goodwill is reviewed for impairment utilizing a two-step process. First, impairment of goodwill is tested 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. Our evaluation resulted in no impairment of goodwill.
Depreciation and amortization of the 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 our business model, or changes in the capital strategy could result in the actual useful lives of intangible assets or other long-lived assets differing from initial estimates. In those 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 expensed and the residual value is 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 Market Risk
expected future operating performance and may differ from actual 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. No indicators of impairment have been identified.
Warranty Costs
The liability for product warranties was $10.8 million as of December 28, 2007, as compared with $8.6 million as of December 29, 2006. We accrue for warranty costs as part of cost of sales based on associated material product costs, technical support labor costs, and costs incurred by third parties performing work on our behalf. Our 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. The products sold are generally covered by a warranty for periods ranging from 90 days to three years, and in some instances up to 5.5 years.
While we engage in extensive product quality programs and processes, including actively monitoring and evaluating the quality of our component suppliers, our 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 our estimates, revisions to the estimated warranty accrual and related costs may be required.
Stock Compensation
Beginning in fiscal 2006, we adopted Statement of Financial Accounting Standards (SFAS) No. 123(R), “Share-Based Payment” (SFAS 123(R)), which requires the measurement and recognition of compensation expense for all share-based payment awards made to our employees and directors, including stock option and rights to purchase shares under stock participation plans, based on estimated fair values. We adopted SFAS 123(R) using the modified prospective application method, under which prior periods are not revised for comparative purposes. Prior to fiscal 2006, we applied Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees" (APB 25) and the disclosure provisions of SFAS No. 123, “Accounting for Stock-Based Compensation” (SFAS 123). As a result, the Company’s financial statements for fiscal 2006 include stock-based compensation expenses that are not comparable to financial statements prior to fiscal 2006.
Stock-based compensation expense recognized in the Company’s Consolidated Statements of Income for the period includes compensation expense for awards granted prior to, but not yet vested as of December 30, 2005 based on the grant date fair value estimated in accordance with the provisions of SFAS 123 and compensation expense for awards granted subsequent to December 30, 2005 based on the grant date fair value estimated in accordance with the provisions of SFAS 123(R). The fair value of rights to purchase shares under stock participation plans was estimated using the Black-Scholes option-pricing model. For stock options granted prior to October 1, 2005, the fair value was estimated at the date of grant using the Black-Scholes option-pricing model. For stock options granted on or after October 1, 2005, the fair value is estimated on the date of grant 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 expected dividends. In addition, the binomial model incorporates actual option-pricing behavior and changes in volatility over the option’s contractual term.
Beginning in fiscal 2006, our expected stock price volatility for stock purchase rights is based on implied volatilities of traded options on our stock and our expected stock price volatility for stock options is based on a combination of our historical stock price volatility for the period commensurate with the expected life of the stock option and the implied volatility of traded options. The use of implied volatilities was based upon the availability of actively traded options on our stock with terms similar to our awards and also upon our assessment that implied volatility is more representative of future stock price trends than historical volatility. However, because the expected life of our stock options is greater than the terms of our traded options, we used a combination of our historical stock price volatility commensurate with the expected life of our stock options and implied volatility of traded options. Prior to fiscal 2006, we used our historical stock price volatility in accordance with SFAS 123 for purposes of our pro-forma information.
We estimated the expected life of the awards based on an analysis of our historical experience of employee exercise and post-vesting termination behavior considered in relation to the contractual life of the options and purchase rights. The risk-free interest rate assumption is based upon observed interest rates appropriate for the expected term of the awards.
We do not currently pay cash dividends on our common stock and do not anticipate doing so in the foreseeable future. Accordingly, our expected dividend yield is zero.
Because stock-based compensation expense recognized in the Consolidated Statement of Operations for fiscal 2007 and 2006 is based on awards ultimately expected to vest, it has been reduced for estimated forfeitures. SFAS 123(R) requires forfeitures to be estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates. Forfeitures were estimated based on historical experience.
If factors change and we employ different assumptions in the application of SFAS 123(R) in future periods, the compensation expense that we record under SFAS 123(R) may differ significantly from what we have recorded in the current period. In addition, valuation models, including the Black-Scholes and binomial models, may not provide reliable measures of the fair values of our stock-based compensation. Consequently, there is a risk that our estimates of the fair values of our stock-based compensation awards on the grant dates may bear little resemblance to the actual values realized upon the exercise, expiration, early termination, or forfeiture of those stock-based payments in the future. Certain stock-based payments, such as employee stock options, may expire worthless or otherwise result in zero intrinsic value as compared to the fair values originally estimated on the grant date and reported in our financial statements. Alternatively, value may be realized from these instruments that are significantly higher than the fair values originally estimated on the grant date and reported in our financial statements.
See Note 2 and Note 14 to the Consolidated Financial Statements for additional information.
RECENT BUSINESS DEVELOPMENTS
During fiscal 2007, we acquired the following companies or assets, and results of their operations have been combined in the results of our operations from the date of the acquisition.
HHK
On December 19, 2007, we acquired privately-held HHK Datentechnik GmbH of Braunschweig, Germany, a provider of customized office and field software solutions for the cadastral survey market in Germany. HHK’s performance is reported under our Engineering and Construction business segment.
UtilityCenter
On November 8, 2007, we acquired the UtilityCenter assets from privately-held UAI, Inc. of Huntsville, Alabama. UAI is a leading provider of Geographic Information System (GIS)-based workflow automation and outage management solutions for electric and gas utilities. UtilityCenter’s performance is reported under our Field Solutions business segment.
Ingenieurbüro Breining GmbH
On September 19, 2007, we acquired Ingenieurbüro Breining GmbH of Kirchheim, Germany, a provider of customized field data collection and office software solutions for the survey market in Germany. Ingenieurbüro Breining’s performance is reported under our Engineering and Construction business segment.
@Road, Inc.
On February 16, 2007, we acquired publicly-held @Road, Inc. of Fremont, California. @Road, Inc. is a global provider of solutions designed to automate the management of mobile resources and to optimize the service delivery process for customers across a variety of industries. @Road is reported within our Mobile Solutions business segment. @Road significantly increases our presence in the mobile resource management, or MRM, market which Trimble believes is a large and fast growing market.
INPHO GmbH
On February 13, 2007, we acquired INPHO GmbH of Stuttgart, Germany. INPHO is a leader in photogrammetry and digital surface modeling for aerial surveying, mapping and remote sensing applications. INPHO is reported within Trimble’s Engineering and Construction segment.
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.
| | | December 28, | | | December 29, | | | December 30, | |
| Fiscal Years Ended | | 2007 | | | 2006 | | | 2005 | |
| (Dollars in thousands) | | | | | | | | | |
| | | | | | | | | | |
| Total consolidated revenue | | $ | 1,222,270 | | | $ | 940,150 | | | $ | 774,913 | |
| Gross Margin | | $ | 612,905 | | | $ | 461,081 | | | $ | 389,805 | |
| Gross Margin % | | | 50.1 | % | | | 49.0 | % | | | 50.3 | % |
| Total consolidated operating income | | $ | 178,267 | | | $ | 135,366 | | | $ | 124,944 | |
| Operating Income % | | | 14.6 | % | | | 14.4 | % | | | 16.1 | % |
Basis of Presentation
We have a 52-53 week fiscal year, ending on the Friday nearest to December 31, which for fiscal 2007 was December 28, 2007. Fiscal 2007, 2006 and 2005 were all 52-week years.
Revenue
In fiscal 2007, total revenue increased by $282.1 million, or 30%, to $1,222.3 million from $940.2 million in fiscal 2006. The increase in fiscal 2007 was due to stronger performances across all our operating segments. Engineering and Construction revenue increased $106.2 million, or 17%; Field Solutions increased $61.4 million, or 44%; Mobile Solutions increased $96.8 million, or 159%; and Advanced Devices increased $17.7 million, or 17%, as compared to the corresponding period in fiscal 2006. Revenue growth within these segments was primarily driven by new products, a robust agricultural environment, strong international growth, as well as the impact of acquisitions of $97.8 million, partially offset by regional pockets of softness in the U.S. markets.
In fiscal 2006, total revenue increased by $165.2 million, or 21%, to $940.2 million from $774.9 million in fiscal 2005. The increase in fiscal 2006 was primarily due to stronger performance across all our operating segments. The Engineering and Construction, Field Solutions, Mobile Solutions and Advanced Devices segments increased 21%, 9%, 93%, and 13% respectively, as compared to fiscal 2005. Revenue growth within these segments was driven by new product introductions, increased penetration of existing markets, and geographical expansion. Mobile Solutions growth in particular benefited from the prior year acquisitions. Overall, 2006 acquisitions impacted total company revenue growth by approximately 2%.
* During fiscal 2007, sales to customers in the United States represented 50%, Europe represented 27%, Asia Pacific represented 12%, and other regions represented 11% of our total revenues. During the 2006 fiscal year, sales to customers in the United States represented 54%, Europe represented 25%, Asia Pacific represented 12%, and other regions represented 9% of our total revenues. During fiscal 2005, sales to customers in the United States represented 54%, Europe represented 25%, Asia Pacific represented 11%, and other regions represented 10% of our total revenues. We anticipate that sales to international customers will continue to account for a major portion of our revenues.
* No single customer accounted for 10% or more of our total revenues in fiscal 2007, 2006, and 2005. It is possible, however, that in future periods the failure of one or more large customers to purchase products in quantities anticipated by us may adversely affect the results of operations.
Gross Margin
Our gross margin varies due to a number of factors including product mix, pricing, distribution channel used, effects of production volumes, new product start-up costs, and foreign currency translations.
In fiscal 2007, our gross margin increased by $151.8 million as compared to fiscal 2006 due to higher revenue, higher margin products, including software and subscription revenue, and improved manufacturing utilization, partially offset by an increase of $14.5 million in amortization of purchased intangibles primarily due to the acquisition of @Road. Gross margin as a percentage of total revenue was 50.1% in fiscal 2007 and 49.0% in fiscal 2006. The increase in the gross margin percentage was driven primarily by a 2 percentage point increase due to higher margin products including software and subscription revenue, offset by a decrease of 1 percentage point due to increased amortization of purchased intangibles.
In fiscal 2006, our gross margin increased by $71.3 million as compared to fiscal 2005 due to higher revenue and the success of higher margin products, including survey and machine control products and higher subscription revenues. The increase was partially offset by decreases due to the impact of the reclassification of the Caterpillar Trimble Control Technologies (CTCT) transactions of $18.1 million previously recorded in non-operating expenses, amortization of software-related purchased intangibles of $5.2 million, and stock-based compensation expense of $1.2 million that were not included in gross margin during the same period in fiscal 2005. Gross margin as a percentage of total revenues was 49.0% in fiscal 2006 and 50.3% in fiscal 2005. The decrease in the gross margin percentage was driven primarily by a decrease of 3 percentage points due to the CTCT impact, amortization of purchased intangibles and stock-based compensation, offset by an increase of 2 percentage points due to higher margin products and subscription revenues.
* Because of potential product mix changes within and among the industry markets, market pressures on unit selling prices, fluctuations in unit manufacturing costs, including increases in component prices and other factors, current level gross margin cannot be assured.
Operating Income
Operating income increased by $42.9 million for fiscal 2007 as compared to fiscal 2006. Operating income as a percentage of total revenue for fiscal 2007 was 14.6% as compared to 14.4% for fiscal 2006 due to higher revenue and associated gross margin, and software and subscription revenue, partially offset by additional amortization of purchased intangibles.
Operating income increased by $10.4 million for fiscal 2006 as compared to fiscal 2005 due to higher revenues and the success of higher margin products, offset by decreases due to the impact of the reclassification of the CTCT transactions previously recorded in non-operating expenses, and stock-based compensation expense that was not included in the operating income during fiscal 2005.
Operating income as a percentage of total revenue was 14.4% for fiscal 2006 compared to 16.1% in fiscal 2005. The decrease in operating income was due to a 4 percentage point CTCT transaction reclassification impact, amortization of purchased intangibles, increased acquisition expenses, and stock-based compensation impact, partially offset by 2 percentage point increase driven by gross margin expansion.
Results by Segment
To achieve distribution, marketing, production, and technology advantages in our targeted markets, we manage our operations in the following four segments: Engineering and Construction, Field Solutions, Mobile Solutions, and Advanced Devices. Operating income (loss) equals net revenue less cost of sales and operating expenses, excluding general corporate expenses, amortization of purchased intangibles, in-process research and development expenses, restructuring charges, non-operating income (expense), and income taxes.
In the first fiscal quarter of 2006, we combined the operating results of the former Component Technologies and Portfolio Technologies segments and included the combined operating results in the Advanced Devices segment. The change in presentation was made in recognition of the small size of each of the businesses relative to the total company. The presentation of prior periods’ segment operating results has been changed to conform to our current segment presentation.
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.
| | | December 28, | | | December 29, | | | December 30, | |
| Fiscal Years Ended | | 2007 | | | 2006 | | | 2005 | |
| (Dollars in thousands) | | | | | | | | | |
| | | | | | | | | | |
| Engineering and Construction | | | | | | | | | |
| Revenue | | $ | 743,291 | | | $ | 637,118 | | | $ | 524,461 | |
| Segment revenue as a percent of total revenue | | | 61 | % | | | 68 | % | | | 68 | % |
| Operating income | | $ | 174,177 | | | $ | 136,157 | | | $ | 117,993 | |
| Operating income as a percent of segment revenue | | | 23.4 | % | | | 21.4 | % | | | 22.5 | % |
| Field Solutions | | | | | | | | | | | | |
| Revenue | | $ | 200,614 | | | $ | 139,230 | | | $ | 127,843 | |
| Segment revenue as a percent of total revenue | | | 16 | % | | | 15 | % | | | 16 | % |
| Operating income | | $ | 60,933 | | | $ | 37,377 | | | $ | 32,527 | |
| Operating income as a percent of segment revenue | | | 30.4 | % | | | 26.8 | % | | | 25.4 | % |
| Mobile Solutions | | | | | | | | | | | | |
| Revenue | | $ | 157,673 | | | $ | 60,854 | | | $ | 31,481 | |
| Revenue as a percent of total consolidated revenue | | | 13 | % | | | 6 | % | | | 4 | % |
| Operating income (loss) | | $ | 12,517 | | | $ | 2,550 | | | $ | (3,072 | ) |
| Operating income (loss) as a percent of segment revenue | | | 7.9 | % | | | 4.2 | % | | | (9.8 | %) |
| Advanced Devices | | | | | | | | | | | | |
| Revenue | | $ | 120,692 | | | $ | 102,948 | | | $ | 91,128 | |
| Segment revenue as a percent of total revenue | | | 10 | % | | | 11 | % | | | 12 | % |
| Operating income | | $ | 17,276 | | | $ | 10,084 | | | $ | 13,212 | |
| Operating income as a percent of segment revenue | | | 14.3 | % | | | 9.8 | % | | | 14.5 | % |
A reconciliation of our consolidated segment operating income to consolidated income before income taxes follows:
| Fiscal Years Ended | | December 28, 2007 | | | December 29, 2006 | | | December 30, 2005 | |
| (In thousands) | | | | | | | | | |
| | | | | | | | | | |
| Consolidated segment operating income | | $ | 264,903 | | | $ | 186,168 | | | $ | 160,660 | |
| Unallocated corporate expense | | | (42,914 | ) | | | (35,798 | ) | | | (27,483 | ) |
| Restructuring charges | | | (3,025 | ) | | | -- | | | | (278 | ) |
| Amortization of purchased intangible assets | | | (38,585 | ) | | | (13,074 | ) | | | (6,855 | ) |
| In-process research and development | | | (2,112 | ) | | | (1,930 | ) | | | (1,100 | ) |
| Consolidated operating income | | | 178,267 | | | | 135,366 | | | | 124,944 | |
| Non-operating income (expense), net | | | 5,489 | | | | 12,726 | | | | (156 | ) |
| Consolidated income before income taxes | | $ | 183,756 | | | $ | 148,092 | | | $ | 124,788 | |
Engineering and Construction
Engineering and Construction revenues increased by $106.2 million, or 17%, while segment operating income increased by $38.0 million, or 28%, for fiscal 2007 as compared to fiscal 2006. The revenue growth was driven by all business units within the segment, strong international markets, acquisitions made during the last twelve months and foreign exchange gains. Segment operating income increased as a result of higher revenue and increased sales of higher margin products including software revenue and operating expense control.
Engineering and Construction revenues increased by $112.7 million, or 21%, while segment operating income increased by $18.2 million, or 15%, for fiscal 2006 as compared to fiscal 2005. The revenue growth was driven by the continued strength in survey products as well as increased sales of machine control products, aggressive marketing programs and geographic expansion. Segment operating income increased as a result of higher revenues and increased sales of higher margin products, partially offset by expenses related to CTCT transactions, and stock-based compensation expense that were not present in fiscal 2005.
Field Solutions revenues increased by approximately $61.4 million, or 44%, while segment operating income increased by $23.6 million, or 63%, for fiscal year 2007 as compared to fiscal 2006. Revenue was driven primarily by the introduction of new agricultural products and a robust agricultural market, both in the U.S. and internationally. Operating income increased primarily due to higher revenue and operating expense control.
Field Solutions revenues increased by approximately $11.4 million, or 9%, while segment operating income increased by $4.9 million, or 15%, for fiscal year 2006 as compared to fiscal 2005. Revenue increased primarily due to growth in our GIS business. In GIS, growth was due to new products and a continuing shift to a higher value, differentiated distribution channel. Operating income increased primarily due to increased revenue, partially offset by the inclusion of stock-based compensation that was not present in fiscal 2005.
Mobile Solutions revenues increased by $96.8 million, or 159%, while segment operating income increased by $10.0 million, or 391%, for fiscal 2007 as compared to fiscal 2006. Revenue grew due to increased subscription revenue due primarily to the @Road acquisition. Operating income increased primarily due to higher subscription revenue and associated gross margin.
Mobile Solutions revenues increased by $29.4 million, or 93%, while segment operating income increased by $5.6 million, or 183%, for fiscal 2006 as compared to fiscal 2005. Revenue increased due to increased subscriber growth, an increase in recurring subscription revenues, the benefit of acquisitions, and entry into new vertical markets. Operating income increased primarily due to higher subscription revenue and associated gross margin, partially offset by the inclusion of stock-based compensation that was not present in fiscal 2005.
Advanced Devices
Advanced Devices revenues increased by $17.7 million, or 17%, and segment operating income increased by $7.2 million, or 71%, for fiscal 2007 as compared to fiscal 2006. The increase in revenue was primarily driven by stronger performance in our Component Technologies timing and embedded product revenue. Operating income increased due to strong timing and embedded product revenue, licensing revenue associated with a Nokia intellectual property agreement signed in the third quarter of 2006, and strong operating expense control.
Advanced Devices revenues increased by $11.8 million, or 13%, while segment operating income decreased by $3.1 million, or 24%, for fiscal 2006 as compared to fiscal 2005. The increase in revenue was primarily due to stronger performance in our embedded and airborne products as well as licensing revenues associated with a Nokia intellectual property agreement signed in the third quarter of fiscal 2006. Operating income decreased for fiscal 2006 due to sales of lower gross margin products, a reduction in revenue in our Military and Advanced Systems product line, increased costs related to the TrimTrac product line and inclusion of stock-based compensation that were not present in the corresponding periods of fiscal 2005, partially offset by stronger embedded and airborne product revenue and intellectual property licensing revenue.
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 revenues for the fiscal years ended 2007, 2006, and 2005 and should be read in conjunction with the narrative descriptions of those operating expenses below.
| Fiscal Years Ended | | December 28, 2007 | | | December 29, 2006 | | | December 30, 2005 | |
| (In thousands) | | | | | | | | | | | | | | | | | | |
| Research and development | | $ | 131,468 | | | | 11 | % | | $ | 103,840 | | | | 11 | % | | $ | 84,276 | | | | 11 | % |
| Sales and marketing | | | 186,495 | | | | 15 | % | | | 143,623 | | | | 15 | % | | | 120,215 | | | | 15 | % |
| General and administrative | | | 92,572 | | | | 8 | % | | | 68,416 | | | | 7 | % | | | 52,137 | | | | 7 | % |
| | | | 410,535 | | | | 34 | % | | | 315,879 | | | | 34 | % | | $ | 256,628 | | | | 33 | % |
Overall, R&D, sales and marketing, and G&A expenses increased by approximately $94.7 million in fiscal 2007 compared to fiscal 2006.
Research and development expenses increased by $27.6 million in fiscal 2007 compared to fiscal 2006 primarily due to the inclusion of expenses of $16.8 million from acquisitions not applicable in the prior year, a $9.7 million increase in compensation related expenses, and a $3.2 million increase due to foreign currency exchange rates, partially offset by decreased consulting fees. Cost of software developed for external sale subsequent to reaching technical feasibility were not considered material and were expensed as incurred.
Research and development expenses increased by $19.6 million in fiscal 2006 as compared to fiscal 2005 primarily due to the inclusion of expenses of $4.6 million from acquisitions not applicable in the prior year, a $4.9 million increase in compensation related expenses, a $2.6 million in stock-based compensation expense not present in fiscal 2005, and a $2.3 million increase in R&D materials, primarily due to compliance with the European lead free initiative.
* Overall research and development spending remained relatively constant at approximately 11% of revenues. We expect to continue to devote resources to the development of new products and the enhancement of existing products. We believe that research and development is critical to our strategic product development objectives and that to leverage our leading technology and to meet the changing requirements of our customers, we will need to fund investments in several development projects in parallel.
Sales and marketing expenses increased by $42.9 million in fiscal 2007 as compared to fiscal 2006. The increase was primarily due to the inclusion of expenses of $20.7 million from acquisitions not applicable in the prior period, a $9.9 million increase in compensation-related expenses, a $4.3 million increase due to foreign currency exchange rates and a $3.4 million increase in marketing expenses. Spending overall remained relatively constant at approximately 15% of revenues.
Sales and marketing expenses increased by $23.4 million in fiscal 2006 as compared to fiscal 2005. The increase was primarily due to the inclusion of expenses of $7.5 million from acquisitions not applicable in the prior period, an $8.0 million increase in compensation-related expenses, a $2.8 million in stock-based compensation expense not present in fiscal 2005, and a $1.9 million increase in customer trade show expenses due to increased size and attendance at the shows.
* We intend to continue to focus and expand our sales and marketing efforts across all the geographies and markets we serve in order to increase market awareness of our products and to better support our existing customers worldwide. Our future growth will depend in part on the timely development and continued viability of the markets in which we currently compete as well as our ability to continue to identify and exploit new markets for our products.
General and administrative expenses increased by $24.2 million in fiscal 2007 compared to fiscal 2006 primarily due to the inclusion of expenses of $10.0 million from acquisitions not applicable in the prior year, a $4.8 million increase in compensation-related expenses, and a $5.4 million increase in tax and legal fees. Spending overall was at approximately 8% of revenues.
General and administrative expenses increased by $16.3 million in fiscal 2006 compared to fiscal 2005 primarily due to the inclusion of expenses of $4.3 million from acquisitions not applicable in the prior year, a $3.9 million increase in compensation-related expenses, and $6.0 million in stock-based compensation expense not present in fiscal 2005.
Other Operating Expenses
Restructuring Charges
Included in Other accrued liabilities on our Consolidated Balance Sheet is a restructuring accrual of $1.3 million as of December 28, 2007. In conjunction with the acquisition of @Road, we accrued $3.6 million for severance and benefits. These restructuring costs were recorded in accordance with EITF 95-3 as part of the purchase price with no impact on our Consolidated Statements of Income. During fiscal 2007 we paid $2.3 million against this restructuring accrual. The remaining restructuring accrual of $1.3 million is expected to be settled by the first half of fiscal 2008.
Included in our Consolidated Statements of Income for fiscal 2007 under “Restructuring charges” is a restructuring cost of $3.0 million for charges associated with the acceleration of vesting of employee stock options for certain terminated @Road employees. Of the total amount, $1.4 million was settled in cash and $1.6 million was recorded as Shareholder’s Equity.
There were no restructuring charges recorded in fiscal 2006. Restructuring charges of $0.3 million were recorded in fiscal 2005, primarily related to office closure costs due to integration efforts of the Mensi acquisition.
In-Process Research and Development
We recorded in-process research and development (IPR&D) expenses of $2.1 million, $1.9 million, and $1.1 million related to acquisitions made in fiscal 2007, 2006 and 2005 respectively. At the date of each acquisition, the projects associated with the IPR&D efforts had not yet reached technological feasibility and the research and development in process had no alternative future uses. The value of the IPR&D was determined using a discounted cash flow model similar to the income approach, focusing on the income producing capabilities of the in-process technologies. Accordingly, the value assigned to these IPR&D amounts were charged to expense on the respective acquisition date of each of the acquired companies.
Amortization of Purchased and Other Intangible Assets
| | | December 28, | | | December 29, | | | December 30, | |
| Fiscal Years Ended | | 2007 | | | 2006 | | | 2005 | |
| (in thousands) | | | | | | | | | |
| | | | | | | | | | |
| Cost of sales | | $ | 19,778 | | | $ | 5,353 | | | $ | 165 | |
| Operating expenses | | | 18,966 | | | | 7,906 | | | | 6,855 | |
| Total | | $ | 38,744 | | | $ | 13,259 | | | $ | 7,020 | |
Total amortization expense of purchased and other intangible assets was $38.7 million in fiscal 2007, of which $19.8 million was recorded in cost of sales and $19.0 million was recorded in operating expenses. Total amortization expense of purchased and other intangibles represented 3.2% of revenue in fiscal 2007, an increase of $25.5 million from fiscal 2006 when it represented 1.4% of revenue. The increase was primarily due to the acquisition of certain technology and patent intangibles as a result of acquisitions made in fiscal 2007, primarily @Road and to a lesser extent, fiscal 2006 acquisition intangibles that included a full year of amortization expense in fiscal 2007, but only partial year amortization expense in fiscal 2006 due to the timing of the acquisitions.
Total amortization expense of purchased and other intangibles represented 1.4% of revenue in fiscal 2006, an increase of $6.2 million from fiscal 2005 when it represented 0.9% of revenue. The increase was primarily due to the acquisition of certain technology and patent intangibles as a result of acquisitions made in fiscal 2006 as well as fiscal 2005 acquisition intangibles that included a full year of amortization expense in fiscal 2006, but only partial year amortization expense in fiscal 2005 due to the timing of the acquisitions.
Non-operating Income (Expense)
The following table shows non-operating income (expense) for the periods indicated and should be read in conjunction with the narrative descriptions of those expenses below:
| | | December 28, | | | December 29, | | | December 30, | |
| Fiscal Years Ended | | 2007 | | | 2006 | | | 2005 | |
| (in thousands) | | | | | | | | | |
| | | | | | | | | | |
| Interest income | | $ | 3,502 | | | $ | 3,799 | | | $ | 836 | |
| Interest expense | | | (6,602 | ) | | | (558 | ) | | | (2,331 | ) |
| Foreign exchange gain (loss) | | | (1,351 | ) | | | 1,719 | | | | 1,022 | |
| Income (expenses) for joint ventures, net | | | 8,377 | | | | 6,989 | | | | (291 | ) |
| Other income, net | | | 1,563 | | | | 777 | | | | 608 | |
| Total non-operating income (expense) | | $ | 5,489 | | | $ | 12,726 | | | $ | (156 | ) |
Total non-operating income (expense) decreased by $7.2 million during fiscal 2007 compared with fiscal 2006. Of this decrease, $6.0 million was due to higher interest expense due to an increase in debt associated with the @Road acquisition, $3.1 million was due to a change in foreign currency transactions due to fluctuations in the U.S. to Canadian and Euro currencies, and these decreases were partially offset by increased profits from our CTCT joint venture.
Total non-operating income (expense) increased by $12.9 million during fiscal 2006 compared with fiscal 2005. Of this increase, $4.7 million was due to higher interest income and lower interest expense as a result of interest income earned on higher cash balances and debt repaid in fiscal 2005 and also a $0.7 million increase in foreign currency transaction gains. In addition, expenses for joint ventures, net increased by $7.3 million due a $5.2 million increase in income from joint ventures and the absence of $11.6 million of net transfer pricing expense with CTCT that was included in fiscal 2005, but is now included in operating income, partially offset by the recognition of a one-time deferred gain on the CTCT joint venture of $9.3 million in fiscal 2005.
Income Tax Provision
Our effective income tax rate for fiscal years 2007, 2006 and 2005 was 36%, 30% and 32% respectively. The 2007 rate was greater than the U.S. federal statutory rate of 35% due to impacts resulting from SFAS No. 123(R), “Share-Based Payment.” The 2006 rate was less than the US federal statutory rate primarily due to operations in foreign jurisdictions subject to an effective tax rate lower than the U.S. and the Extraterritorial Income Exclusion (ETI) deduction. The 2005 income tax rate was less than the U.S. federal statutory rate, primarily due to the benefit from the repatriation of undistributed foreign subsidiary earnings provided by the American Jobs Creation Act of 2004.
Litigation Matters
* From time to time, we are involved in litigation arising out of the ordinary course of our business. There are no known claims or pending litigation that are expected to have a material effect on our overall financial position, results of operations, or liquidity.
OFF-BALANCE SHEET ARRANGEMENTS
Other than lease commitments incurred in the normal course of business (see Contractual Obligation 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 its products, we indemnify other parties, including customers, lessors, and parties to other transactions with the Company, 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. In addition, we have entered into indemnification agreements with its officers and directors, and the Company’s bylaws contain similar indemnification obligations to our agents.
It is not possible to determine the maximum potential amount 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 were not material and no liabilities have been recorded for these obligations on the Consolidated Balance Sheets as of December 28, 2007 and December 29, 2006.
LIQUIDITY AND CAPITAL RESOURCES
As of and for the Fiscal Year Ended | | December 28, 2007 | | | December 29, 2006 | | | December 30, 2005 | |
| (dollars in thousands) | | | | | | | | | |
| | | | | | | | | | |
| Cash and cash equivalents | | $ | 103,202 | | | $ | 129,621 | | | $ | 73,853 | |
| As a percentage of total assets | | | 6.7 | % | | | 13.2 | % | | | 9.9 | % |
| Total debt | | $ | 60,690 | | | $ | 481 | | | $ | 649 | |
| | | | | | | | | | | | | |
| Cash provided by operating activities | | $ | 186,985 | | | $ | 135,843 | | | $ | 92,365 | |
| Cash used in investing activities | | $ | (311,392 | ) | | $ | (114,188 | ) | | $ | (74,403 | ) |
| Cash provided by (used in) financing activities | | $ | 103,816 | | | $ | 34,162 | | | $ | (13,402 | ) |
| Effect of exchange rate changes on cash and cash equivalents | | $ | (5,828 | ) | | $ | (49 | ) | | $ | (2,579 | ) |
| Net increase (decrease) in cash and cash equivalents | | $ | (26,419 | ) | | $ | 55,768 | | | $ | 1,981 | |
Cash and Cash Equivalents
As of December 28, 2007, cash and cash equivalents totaled $103.2 million compared to $129.6 million at December 29, 2006. We had debt of $60.7 million at December 28, 2007 compared to $481,000 at December 29, 2006.
* 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.
* We believe that our cash and cash equivalents, together with our revolving credit facilities will be sufficient to meet our anticipated operating cash needs and stock purchases under the stock repurchase program for at least the next twelve months.
* We anticipate that planned capital expenditures primarily for computer equipment, software, manufacturing tools and test equipment, and leasehold improvements associated with business expansion, will constitute a partial use of our cash resources. Decisions related to how much cash is used for investing are influenced by the expected amount of cash to be provided by operations.
Operating Activities
Cash provided by operating activities was $187.0 million for fiscal 2007, as compared to $135.8 million for fiscal 2006. This increase of $51.1 million was primarily driven by an increase in net income before non-cash depreciation and amortization and increases in deferred revenue and income taxes payable. This was, partially offset by an increase in accounts receivable due to increased revenue.
Cash provided by operating activities was $135.8 million for fiscal 2006, as compared to $92.4 million for fiscal 2005. This increase of $43.4 million was primarily driven by an increase in net income before stock-based compensation expense and associated excess tax benefits, with the remainder due to working capital improvements in inventories and account receivables.
Investing Activities
Cash used in investing activities was $311.4 million for fiscal 2007, as compared to $114.2 million for fiscal 2006. The increase was primarily attributable to cash used for the @Road acquisition.
Cash used in investing activities was $114.2 million in fiscal 2006, as compared to $74.4 million in fiscal 2005. The $39.8 million increase in spending was due to an increase of $48.5 million in cash used for acquisitions, partially offset by a decrease of $6.9 million in capital equipment spending.
Financing Activities
Cash provided by financing activities was $103.8 million for fiscal 2007, as compared to $34.2 million for fiscal 2006, primarily related to outstanding debt that was incurred for the @Road acquisition.
Cash provided by financing activities was $34.2 million for fiscal 2006 compared to cash used of $13.4 million for fiscal 2005. The $47.6 million improvement was primarily due to a $38.3 million decrease in repayment of net debt and $8.8 million in excess tax benefits relating to stock-based compensation upon the exercise of stock options which were not present in fiscal 2005.
Accounts Receivable and Inventory Metrics
As of | | December 28,
2007 | | | December 29, 2006 | |
| | | | | | | |
| Accounts receivable days sales outstanding | | | 70 | | | | 69 | |
| Inventory turns per year | | | 4.3 | | | | 4.1 | |
Accounts receivable days of sales outstanding were relatively flat at 70 days as of December 28, 2007, as compared to 69 days as of December 30, 2006 with a slight increase due to a larger percentage of international business in the fourth quarter of fiscal 2007. Our accounts receivable days of sales outstanding are calculated based on ending accounts receivable, net, divided by revenue for the fourth fiscal quarter, times 91 days. Our inventory turns were at 4.3 for fiscal 2007 as compared to 4.1 for fiscal 2006 due to operational efficiencies. Our inventory turnover is based on the total cost of sales for the fiscal period over the average inventory for the corresponding fiscal period.
Debt
At the end of fiscal 2007, our total debt was comprised primarily of our term loan related to the acquisition of @Road in the amount of approximately $60.7 million as compared with approximately $481,000 at the end of fiscal 2006.
On July 28, 2005, we entered into a $200 million unsecured revolving credit agreement (the 2005 Credit Facility) with a syndicate of 10 banks with The Bank of Nova Scotia as the administrative agent. The funds available under the 2005 Credit Facility may be used for our general corporate purposes and up to $25 million of the 2005 Credit Facility may be used for letters of credit. We incurred a commitment fee when the 2005 Credit Facility was not used. The commitment fee is not material to our results during all periods presented.
On February 16, 2007, the Company amended and restated its existing $200 million unsecured revolving credit agreement with a syndicate of 11 banks with The Bank of Nova Scotia as the administrative agent (the 2007 Credit Facility). Under the 2007 Credit Facility, the Company exercised the option in the existing credit agreement to increase the availability under the revolving credit line by $100 million, for an aggregate availability of up to $300 million, and extended the maturity date of the revolving credit line by 18 months, from July 2010 to February 2012. Up to $25 million of the availability under the revolving credit line may be used to issue letters of credit, and up to $20 million may be used for swing line loans. In addition, during the first quarter of fiscal 2007 the Company incurred a five-year term loan under the 2007 Credit Facility in an aggregate principal amount of $100 million, which will mature concurrently with the revolving credit line. The term loan will be repaid in quarterly installments, with principal being amortized at the following annual rates: year 1 at 10%, year 2 at 15%, year 3 at 15%, year 4 at 20%, year 5 at 20%, and the last quarterly payment to be made at maturity, together with a final payment of 20%. The maximum leverage ratio under the 2007 Credit Facility is 3.00:1. The funds available under the new 2007 Credit Facility may be used by the Company for acquisitions, stock repurchases, and general corporate purposes. For additional discussion of our debt, see Note 9 of Notes to the Consolidated Financial Statements.
The Company may borrow funds under the 2007 Credit Facility in U.S. Dollars or in certain other currencies, and borrowings will bear interest, at the Company's option, at either: (i) a base rate, based on the administrative agent's prime rate, plus a margin of between 0% and 0.125%, depending on the Company's leverage ratio as of its most recently ended fiscal quarter, or (ii) a reserve-adjusted rate based on the London Interbank Offered Rate (LIBOR), Euro Interbank Offered Rate (EURIBOR), Stockholm Interbank Offered Rate (STIBOR), or other agreed-upon rate, depending on the currency borrowed, plus a margin of between 0.625% and 1.125%, depending on the Company's leverage ratio as of the most recently ended fiscal quarter. The Company's obligations under the 2007 Credit Facility are guaranteed by certain of the Company's domestic subsidiaries.
The 2007 Credit Facility contains customary affirmative, negative and financial covenants including, among other requirements, negative covenants that restrict the Company's ability to dispose of assets, create liens, incur indebtedness, repurchase stock, pay dividends, make acquisitions, make investments, enter into mergers and consolidations and make capital expenditures, within certain limitations, and financial covenants that require the maintenance of leverage and fixed charge coverage ratios. The 2007 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 the Company's obligations under the 2007 Credit Facility, however that acceleration will be automatic in the case of bankruptcy and insolvency events of default. As of December 28, 2007 we were in compliance with all financial debt covenants.
CONTRACTUAL OBLIGATIONS
The following table summarizes our contractual obligations at December 28, 2007:
| | | Payments Due By Period | |
| | | | | | Less than | | | 2-3 | | | 4-5 | | | More than | |
| | | Total | | | 1 year | | | Years | | | years | | | 5 years | |
| (in thousands) | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
| Total debt including interest (1) | | $ | 70,220 | | | $ | 3,203 | | | $ | 20,749 | | | $ | 46,268 | | | $ | - | |
| Operating leases | | | 53,991 | | | | 16,592 | | | | 23,314 | | | | 12,653 | | | | 1,432 | |
| Other purchase obligations and commitments | | | 60,570 | | | | 41,924 | | | | 14,494 | | | | 4,084 | | | | 68 | |
| Total | | $ | 184,781 | | | $ | 61,719 | | | $ | 58,557 | | | $ | 63,005 | | | $ | 1,500 | |
(1) We may borrow funds under the 2007 Credit Facility in U.S. Dollars or in certain other currencies, and will bear interest, at our option, at either: (i) a base rate, based on the administrative agent's prime rate, plus a margin of between 0% and 0.125%, depending on our leverage ratio as of its most recently ended fiscal quarter, or (ii) a reserve-adjusted rate based on the London Interbank Offered Rate (LIBOR), Euro Interbank Offered Rate (EURIBOR), Stockholm Interbank Offered Rate (STIBOR) or other agreed-upon rate, depending on the currency borrowed, plus a margin of between 0.625% and 1.125%, depending on our leverage ratio as of the most recently ended fiscal quarter. Our obligations under the 2007 Credit Facility are guaranteed by certain of our domestic subsidiaries. We estimate the interest to be 5.0% per annum.
Total debt consists of term loans of $60.0 million under our credit facilities and government loans of $0.7 million to foreign subsidiaries. (See Note 9 of the Notes to the Consolidated Financial Statements for further financial information regarding long-term debt)
Other purchase obligations and commitments represent open non-cancelable purchase orders for material purchases with our vendors. Purchase obligations exclude agreements that are cancelable without penalty. Our pension obligation, which is not included in the table above, is included in “Other current liabilities” and “Other non-current liabilities” on our Consolidated Balance Sheets. Additionally, as of December 28, 2007, we had acquisition earn-outs of $7.6 million and holdbacks of $10.3 million recorded in “Other current liabilities” and “Other non-current liabilities.” The maximum remaining payments, including the $7.6 million and $10.3 million recorded, will not exceed $71.5 million. The remaining earn-outs and holdbacks are payable through 2010.
We adopted FASB Interpretation No. 48, “Accounting for Uncertainty in Income Taxes,” (FIN 48), on December 30, 2006. A total of $28.4 million, including interests and penalties, represents the FIN 48 liability at December 28, 2007. At this time, we cannot make a reasonably reliable estimate of the period of cash settlement with tax authorities regarding this liability.
EFFECT OF NEW ACCOUNTING PRONOUNCEMENTS
The impact of recent accounting pronouncements is disclosed in Note 2 of the Notes to Consolidated Financial Statements.
| 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 or trading 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 money market funds and certificate of deposits for fiscal 2007 and 2006. The main objective of these instruments was safety of principal and liquidity while maximizing return, without significantly increasing risk.
* Due to the short-term nature of our cash equivalents and short-term investments, 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 senior secured Credit Facility.credit facilities. Our Credit Facility iscredit facilities are comprised of an unsecured revolving credit agreement with a three-year, US dollar-only revolver that expires on June 25, 2006,maturity date of February 2012, and a four-yearfive-year term loan that expires on June 25, 2007. Borrowingswhich will mature concurrently with the revolving credit line. We may borrow funds under the Credit
Facility haverevolving credit agreement in U.S. Dollars or in certain other currencies, and borrowings will bear interest, paymentsat our option, at either: (i) a base rate, based on a floatingthe administrative agent's prime rate, of LIBOR plus a numbermargin of basis points tied tobetween 0% and 0.125%, depending on our leverage ratio as of its most recently ended fiscal quarter, or (ii) a formulareserve-adjusted rate based on the London Interbank Offered Rate (“LIBOR”), Euro Interbank Offered Rate (“EURIBOR”), Stockholm Interbank Offered Rate (“STIBOR”), or other agreed-upon rate, depending on the currency borrowed, plus a margin of between 0.625% and 1.125%, depending on our Leverage Ratio. The revolver
maturesleverage ratio as of the most recently ended fiscal quarter.
As of December 28, 2007, we did not have an outstanding balance on June 25, 2006the revolving credit lines and has anthe worldwide outstanding principal balance of $7 million,
whileon the term loan matures on June 25, 2007 and has an outstanding principal
balance of $31.25 million, as of December 31, 2004 (all in US currency only).
The three-month LIBOR effective rate at December 31, 2004 was 2.56%.$60.0 million. A hypothetical 10% increase in the three-month LIBOR rates could result in approximately $98,000$0.3 million annual increase in interest expense on the existing principal balances. We have hedged the market risk with an interest rate swap on
50% of our term loan. The rate on that interest rate swap is 2.517%.
* 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 enter into foreign exchange forward contracts to minimize the short-term impact of foreign currency fluctuations on certain trade and inter-company receivables and payables, primarily denominated in Australian, Canadian, Japanese, New Zealand, South African and Swedish currencies, the Euro, and the 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 three months in original maturity. We do not enter into foreign exchange forward contractcontracts for trading purposes.
Foreign exchange forward contracts outstanding as of December
31, 200428, 2007 and
January 2, 2004December 29, 2006 are summarized as follows (in thousands):
December 31, 2004 January 2, 2004
----------------- ---------------
Nominal Amount Fair Value Nominal Amount Fair Value
-------------- ---------- -------------- ----------
Forward contracts:
Purchased $ (15,875) $ 431 $ 15,767 $ (1,666)
Sold $ 22,750 $ (970) $ 44,236 $ 2,994
| | December 28, 2007 | | December 29, 2006 | |
| | Nominal Amount | | Fair Value | | Nominal Amount | | Fair Value | |
| Forward contracts: | | | | | | | | | | | | |
| Purchased | | $ | (34,865 | ) | | $ | 325 | | | $ | (21,442 | ) | | $ | 201 | |
| Sold | | $ | 34,946 | | | $ | (782 | ) | | $ | 38,579 | | | $ | (358 | ) |
* We do not anticipate any material adverse effect on our consolidated financial position utilizing our current hedging strategy.
TRIMBLE NAVIGATION LIMITED
INDEX TO FINANCIAL STATEMENTS
Consolidated Balance Sheets at December 31, 2004 and January 2, 2004..........44
| Consolidated Balance Sheets at December 28, 2007 and December 29, 2006 | | 42 |
| | |
| Consolidated Statements of Income for the fiscal years ended December 28, 2007, December 29, 2006 and December 30, 2005 | | 43 |
| | |
| Consolidated Statements of Shareholders' Equity for the fiscal years ended December 28, 2007, December 29, 2006 and December 30, 2005 | | 44 |
| | |
| Consolidated Statements of Cash Flows for the fiscal years ended December 28, 2007, December 29, 2006 and December 30, 2005 | | 45 |
| | |
| Notes to Consolidated Financial Statements | | 46 |
| | |
| Reports of Ernst & Young LLP, Independent Registered Public Accounting Firm | | 80 |
| Financial Statements and Supplementary Data |
CONSOLIDATED BALANCE SHEETS
December 31, January 2,
As at 2004 2004
- ----- ---- ----
(in thousands)
ASSETS
Current assets:
Cash and cash equivalents $ 71,872 $ 45,416
Accounts receivable, less allowance for doubtful
accounts of $8,952 and $9,953, respectively 123,938 104,634
Other receivables 4,182 6,415
Inventories, net 87,745 70,826
Deferred income taxes 21,852 4,380
Other current assets 7,878 8,847
----- -----
Total current assets 317,467 240,518
Property and equipment, net 30,991 27,379
Goodwill 259,522 241,425
Other purchased intangible assets, net 13,835 19,741
Deferred income taxes 8,019 4,173
Other assets 24,144 19,366
------ ------
Total non-current assets 336,511 312,084
------- -------
Total assets $ 653,978 $ 552,602
============ ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt $ 12,500 $ 12,885
Accounts payable 43,551 26,019
Accrued compensation and benefits 31,202 25,950
Accrued liabilities 11,510 15,599
Deferred revenues 9,317 7,699
Accrued warranty expense 6,425 5,147
Deferred income taxes 2,521 1,136
Income taxes payable 11,951 9,969
------ -----
Total current liabilities 128,977 104,404
Non-current portion of long-term debt 26,496 77,601
Deferred gain on joint venture 9,179 9,845
Deferred income tax 5,435 4,229
Other non-current liabilities 11,730 8,279
------ -----
Total liabilities 181,817 204,358
------- -------
Commitments and contingencies
Shareholders' equity:
Preferred stock no par value; 3,000 shares authorized;
none outstanding -- --
Common stock, no par value; 90,000 shares authorized;
52,213 and 49,988 shares issued and outstanding at
December 31, 2004 and January 2, 2004, respectively 345,127 303,015
Retained earnings 82,670 14,990
Accumulated other comprehensive income 44,364 30,239
------ ------
Total shareholders' equity 472,161 348,244
------- -------
Total liabilities and shareholders' equity $ 653,978 $ 552,602
============ ===========
| | | December 28, | | | December 29, | |
| | | 2007 | | | 2006 | |
| (in thousands) | | | | | | |
| | | | | | | |
| ASSETS | | | | | | |
Current assets: | | | | | | |
| Cash and cash equivalents | | $ | 103,202 | | | $ | 129,621 | |
| Accounts receivable, less allowance for doubtful accounts of $5,221 and $4,063, and sales return reserve of $1,683 and $859 at December 28, 2007 and December 29, 2006, respectively | | | 239,884 | | | | 177,054 | |
| Other receivables | | | 10,201 | | | | 6,014 | |
| Inventories, net | | | 143,018 | | | | 112,552 | |
| Deferred income taxes | | | 44,333 | | | | 25,905 | |
| Other current assets | | | 15,661 | | | | 13,026 | |
| Total current assets | | | 556,299 | | | | 464,172 | |
| Property and equipment, net | | | 51,444 | | | | 47,998 | |
| Goodwill | | | 675,850 | | | | 374,510 | |
| Other purchased intangible assets, net | | | 197,777 | | | | 67,172 | |
| Other non-current assets | | | 57,989 | | | | 29,625 | |
| Total assets | | $ | 1,539,359 | | | $ | 983,477 | |
| | | | | | | | | |
| LIABILITIES AND SHAREHOLDERS' EQUITY | | | | | | | | |
| Current liabilities: | | | | | | | | |
| Current portion of long-term debt | | $ | 126 | | | $ | -- | |
| Accounts payable | | | 67,589 | | | | 49,194 | |
| Accrued compensation and benefits | | | 55,133 | | | | 47,006 | |
| Income taxes payable | | | 14,802 | | | | 23,814 | |
| Deferred revenue | | | 49,416 | | | | 28,060 | |
| Accrued warranty expense | | | 10,806 | | | | 8,607 | |
| Deferred income taxes | | | 4,129 | | | | 4,525 | |
| Other accrued liabilities | | | 47,851 | | | | 24,973 | |
| Total current liabilities | | | 249,852 | | | | 186,179 | |
| Non-current portion of long-term debt | | | 60,564 | | | | 481 | |
| Non-current deferred revenue | | | 15,872 | | | | -- | |
| Deferred income tax | | | 47,917 | | | | 21,633 | |
| Other non-current liabilities | | | 56,128 | | | | 27,519 | |
| Total liabilities | | | 430,333 | | | | 235,812 | |
| Commitments and contingencies | | | | | | | | |
| Shareholders' equity: | | | | | | | | |
| Preferred stock no par value; 3,000 shares authorized; none outstanding | | | -- | | | | -- | |
| Common stock, no par value; 180,000 shares authorized; 121,596 and 111,718 shares issued and outstanding at December 28, 2007 and December 29, 2006, respectively | | | 660,749 | | | | 435,371 | |
| Retained earnings | | | 388,557 | | | | 271,183 | |
| Accumulated other comprehensive income | | | 59,720 | | | | 41,111 | |
| Total shareholders' equity | | | 1,109,026 | | | | 747,665 | |
| Total liabilities and shareholders' equity | | $ | 1,539,359 | | | $ | 983,477 | |
See accompanying
NoteNotes to the Consolidated Financial Statements.
CONSOLIDATED STATEMENTS OF INCOME
December 31, January 2, January 3,
Fiscal Years Ended 2004 2004 2003
- ------------------ ---- ---- ----
(in thousands, except per share amounts)
Revenue (1) $ 668,808 $ 540,903 $ 466,602
Cost of sales (1) 343,998 272,873 232,170
------- ------- -------
Gross margin 324,810 268,030 234,432
Operating expenses
Research and development 77,558 67,641 61,232
Sales and marketing 108,054 97,870 89,344
General and administrative 44,694 39,253 40,634
Restructuring charges 552 2,019 1,099
Amortization of purchased intangible assets 8,327 7,312 8,300
----- ----- -----
Total operating expenses 239,185 214,095 200,609
------- ------- -------
Operating income 85,625 53,935 33,823
Non-operating income (expense), net
Interest income 436 465 659
Interest expense (3,888) (11,938) (14,710)
Foreign currency transaction loss, net (859) (592) (823)
Expenses for affiliated operations, net (7,590) (6,403) (3,954)
Other income (expense), net 1,200 118 (1,171)
----- --- ------
Total non-operating expense, net (10,701) (18,350) (19,999)
------- ------- -------
Income before taxes 74,924 35,585 13,824
Income tax provision (benefit) 7,244 (2,900) 3,500
----- ------ -----
Net income $ 67,680 $ 38,485 $ 10,324
============ =========== ===========
Basic earnings per share $ 1.32 $ 0.81 $ 0.24
Shares used in calculating basic earnings per share 51,163 47,505 42,860
Diluted earnings per share $ 1.23 $ 0.77 $ 0.24
Shares used in calculating diluted earnings per share 54,948 50,012 43,578
| | | December 28 | | | December 29, | | | December 30, | |
| Fiscal Years Ended | | 2007 | | | 2006 | | | 2005 | |
| (in thousands, except per share amounts) | | | | | | | | | |
| | | | | | | | | | |
Revenue (1) | | $ | 1,222,270 | | | $ | 940,150 | | | $ | 774,913 | |
Cost of sales (1) | | | 609,365 | | | | 479,069 | | | | 385,108 | |
| Gross margin | | | 612,905 | | | | 461,081 | | | | 389,805 | |
| | | | | | | | | | | | | |
| Operating expenses | | | | | | | | | | | | |
| Research and development | | | 131,468 | | | | 103,840 | | | | 84,276 | |
| Sales and marketing | | | 186,495 | | | | 143,623 | | | | 120,215 | |
| General and administrative | | | 92,572 | | | | 68,416 | | | | 52,137 | |
| Restructuring charges | | | 3,025 | | | | -- | | | | 278 | |
| Amortization of purchased intangible assets | | | 18,966 | | | | 7,906 | | | | 6,855 | |
| In-process research and development | | | 2,112 | | | | 1,930 | | | | 1,100 | |
| Total operating expenses | | | 434,638 | | | | 325,715 | | | | 264,861 | |
| Operating income | | | 178,267 | | | | 135,366 | | | | 124,944 | |
| Non-operating income (expense) | | | | | | | | | | | | |
| Interest income | | | 3,502 | | | | 3,799 | | | | 836 | |
| Interest expense | | | (6,602 | ) | | | (558 | ) | | | (2,331 | ) |
| Foreign currency transaction gain (loss), net | | | (1,351 | ) | | | 1,719 | | | | 1,022 | |
| Income (expenses) for joint ventures, net | | | 8,377 | | | | 6,989 | | | | (291 | ) |
| Other income | | | 1,563 | | | | 777 | | | | 608 | |
| Total non-operating income (expense) | | | 5,489 | | | | 12,726 | | | | (156 | ) |
| Income before taxes | | | 183,756 | | | | 148,092 | | | | 124,788 | |
| Income tax provision | | | 66,382 | | | | 44,434 | | | | 39,933 | |
| Net income | | $ | 117,374 | | | $ | 103,658 | | | $ | 84,855 | |
| | | | | | | | | | | | | |
| Basic earnings per share | | $ | 0.98 | | | $ | 0.94 | | | $ | 0.80 | |
| Shares used in calculating basic earnings per share | | | 119,280 | | | | 110,044 | | | | 106,432 | |
| | | | | | | | | | | | | |
| Diluted earnings per share | | $ | 0.94 | | | $ | 0.89 | | | $ | 0.75 | |
| Shares used in calculating diluted earnings per share | | | 124,410 | | | | 116,072 | | | | 113,638 | |
(1) Sales to related partiesCaterpillar Trimble Control Technologies Joint Venture (CTCT) and Nikon-Trimble Joint Venture (Nikon-Trimble) were $7.6$24.1 million, $4.0$22.3 million and $0$9.1 million in fiscal 2004, 20032007, 2006 and 2002,2005, respectively, whilewith associated cost of sales to those related parties
were $3.8of $17.0 million, $1.9$13.9 million and $0$4.0 million for fiscal 2007, 2006 and 2005, respectively. In addition, cost of sales associated with CTCT net inventory purchases was $25.1 million and $19.5 million in fiscal 2004, 20032007 and 2002,2006, respectively. Prior to fiscal 2006, the transactions with CTCT were included in Non-operating income (expense), net. See Note 5 to these Consolidated Financial Statements regarding joint ventures for a
discussion of related parties.
further discussion.
See accompanying Notes to the Consolidated Financial Statements.
CONSOLIDATED
STATEMENTSTATEMENTS OF
SHAREHOLDERS'SHAREHOLDERS’ EQUITY
Common stock Accumulative
Retained Other Total
Earnings Comprehensive Shareholders'
Shares Amount (Deficit) Income/(Loss) Equity
------ ------ --------- ------------- ------
(in thousands)
Balance at December 28, 2001 40,294 $191,224 $ (33,819) $ (18,916) $138,489
Components of comprehensive income:
Net income 10,324 10,234
Gain on interest rate swap 210 210
Unrealized loss on investments (17) (17)
Foreign currency translation adjustments 17,697 17,697
------ ------
Total comprehensive income 28,214
------
Issuance of common stock in connection 1,190 12,033 12,033
with acquisitions, net
Issuance of common stock under employee
plans and exercise of warrants 561 4,091 4,091
Issuance of warrants 1,528 1,528
Issuance of common stock in private
placement 1,920 16,996 16,996
----- ------ ------ ------ ------
Balance at January 3, 2003 43,965 225,872 (23,495) (1,026) 201,351
Components of comprehensive income:
Net income 38,485 38,485
Loss on interest rate swap (7) (7)
Unrealized gain on investments 74 74
Foreign currency translation adjustments 31,198 31,198
------ ------
Total comprehensive income 69,750
------
Issuance of common stock in connection 1,282 25,795 25,795
with acquisitions and joint venture,
net
Issuance of common stock under employee
plans and exercise of warrants 1,593 13,929 13,929
Issuance of warrants 836 836
Issuance of common stock in private
placement 3,148 36,583 36,583
----- ------ ------ ------ ------
Balance at January 2, 2004 49,988 303,015 14,990 30,239 348,244
Components of comprehensive income:
Net income 67,680 67,680
Gain on interest rate swap 106 106
Unrealized loss on investments (6) (6)
Foreign currency translation
adjustments, net of tax 14,025 14,025
------ ------
Total comprehensive income 81,805
------
Issuance of common stock in connection 294 899 899
with acquisitions, net
Issuance of common stock under employee
plans, exercise of warrants 1,930 26,805 26,805
Tax benefit from stock option exercises 14,408 14,408
------ -------- --------- --------- --------
Balance at December 31, 2004 52,213 $345,127 $ 82,670 $ 44,364 $472,161
------ -------- --------- --------- --------
| | | | | | | | | | | | Accumulative | | | | |
| | | | | | | | | | | | Other | | | Total | |
| | | Common stock | | | | | | Retained | | | Comprehensive | | | Shareholders' | |
| | | Shares | | | Amount | | | Earnings | | | Income/(Loss) | | | Equity | |
| (in thousands) | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
| Balance at December 31, 2004 | | | 104,426 | | | $ | 345,127 | | | $ | 82,670 | | | $ | 44,364 | | | $ | 472,161 | |
| Components of comprehensive income: | | | | | | | | | | | | | | | | | | | | |
| Net income | | | | | | | | | | | 84,855 | | | | | | | | 84,855 | |
| Loss on interest rate swap | | | | | | | | | | | | | | | (106 | ) | | | (106 | ) |
| Unrealized loss on investments | | | | | | | | | | | | | | | (34 | ) | | | (34 | ) |
| Foreign currency translation adjustments, net of tax | | | | | | | | | | | | | | | (24,690 | ) | | | (24,690 | ) |
| Total comprehensive income | | | | | | | | | | | | | | | | | | | 60,025 | |
| Issuance of common stock in connection with acquisitions and joint venture, net | | | 20 | | | | | | | | | | | | | | | | - | |
| Issuance of common stock under employee plans and exercise of warrants | | | 3,374 | | | | 24,582 | | | | | | | | | | | | 24,582 | |
| Tax benefit from stock option exercises | | | | | | | 14,487 | | | | | | | | | | | | 14,487 | |
| Balance at December 30, 2005 | | | 107,820 | | | $ | 384,196 | | | $ | 167,525 | | | $ | 19,534 | | | $ | 571,255 | |
| Components of comprehensive income: | | | | | | | | | | | | | | | | | | | | |
| Net income | | | | | | | | | | | 103,658 | | | | | | | | 103,658 | |
| Unrealized gain on investments | | | | | | | | | | | | | | | 4 | | | | 4 | |
| Foreign currency translation adjustments, net of tax | | | | | | | | | | | | | | | 21,709 | | | | 21,709 | |
| Total comprehensive income | | | | | | | | | | | | | | | | | | | 125,371 | |
| Adjustment to initially apply FASB Statement No. 158, net of tax | | | | | | | | | | | | | | | (136 | ) | | | (136 | ) |
| Issuance of common stock in connection with acquisitions, net | | | 52 | | | | | | | | | | | | | | | | - | |
| Issuance of common stock under employee plans and exercise of warrants | | | 3,846 | | | | 26,781 | | | | | | | | | | | | 26,781 | |
| Stock based compensation | | | | | | | 12,705 | | | | | | | | | | | | 12,705 | |
| Tax benefit from stock option exercises | | | | | | | 11,689 | | | | | | | | | | | | 11,689 | |
| Balance at December 29, 2006 | | | 111,718 | | | $ | 435,371 | | | $ | 271,183 | | | $ | 41,111 | | | $ | 747,665 | |
| Components of comprehensive income: | | | | | | | | | | | | | | | | | | | | |
| Net income | | | | | | | | | | | 117,374 | | | | | | | | 117,374 | |
| Unrealized loss on investments | | | | | | | | | | | | | | | (33 | ) | | | (33 | ) |
| Foreign currency translation adjustments, net of tax | | | | | | | | | | | | | | | 18,655 | | | | 18,655 | |
| Unrecognized actuarial loss | | | | | | | | | | | | | | | (13 | ) | | | (13 | ) |
| Total comprehensive income | | | | | | | | | | | | | | | | | | | 135,983 | |
| Issuance of common stock in connection with acquisitions, net | | | 5,876 | | | | 163,678 | | | | | | | | | | | | 163,678 | |
| Issuance of common stock under employee plans and exercise of warrants | | | 4,002 | | | | 31,913 | | | | | | | | | | | | 31,913 | |
| Stock based compensation | | | | | | | 15,099 | | | | | | | | | | | | 15,099 | |
| Tax benefit from stock option exercises | | | | | | | 14,637 | | | | | | | | | | | | 14,637 | |
| Minority interest | | | | | | | 51 | | | | | | | | | | | | 51 | |
| Balance at December 28, 2007 | | | 121,596 | | | $ | 660,749 | | | $ | 388,557 | | | $ | 59,720 | | | $ | 1,109,026 | |
See accompanying Notes to the Consolidated Financial Statements.
CONSOLIDATED STATEMENTS OF CASH FLOWS
December 31, January 2, January 3,
Fiscal Years Ended 2004 2004 2003
- ------------------ ---- ---- ----
(In thousands)
Cash flows from operating activities:
Net income $ 67,680 $ 38,485 $ 10,324
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 8,874 8,864 9,850
Amortization 8,510 7,916 9,168
Provision for doubtful accounts 1,210 (32) 5,443
Net loss on sale of fixed assets 202 - 423
Amortization of deferred gain - - (1,061)
Amortization of debt issuance cost 487 3,515 1,197
Deferred income taxes (1,482) (6,532) 1,464
Other (223) 2,533 193
Decrease (increase) in assets and liabilities:
Accounts receivable, net (17,245) (13,944) (11,043)
Deferred revenues 1,619 1,650 (32)
Other receivables 2,231 (4,389) 460
Inventories, net (15,529) (4,862) (7,649)
Other current and non-current assets (69) (792) (3,920)
Effect of foreign currency translation
adjustment (1,461) 6,895 438
Accounts payable 14,668 (6,387) 8,593
Accrued compensation and benefits 4,847 6,723 3,452
Deferred gain on joint venture (665) (947) 10,792
Accrued liabilities (1,757) (6,437) (4,823)
Income taxes payable 1,218 4,201 (953)
----- ----- ----
Net cash provided by operating activities 73,115 36,460 32,316
------ ------ ------
Cash flows from investing activities:
Acquisition of property and equipment (12,750) (10,901) (7,157)
Proceeds from sale of assets 546 334 1,407
Cost of acquisitions, net of cash acquired (11,388) (6,606) 1,718
Cost of joint venture and equity investments (1,500) (4,810) -
Costs of capitalized patents (41) (670) (1,734)
--- ---- ------
Net cash used in investing activities (25,133) (22,653) (5,766)
------- ------- ------
Cash flows from financing activities:
Issuance of common stock and warrants 26,805 50,514 21,393
(Payment) collection of notes receivable 271 1,326 (1,082)
Proceeds from long-term debt and revolving credit
lines 14,000 138,288 18,000
Payments on long-term debt and revolving credit lines (65,235) (190,074) (70,040)
------- -------- -------
Net cash provided by (used in) financing activities (24,159) 54 (31,729)
------- --------- -------
Effect of exchange rate changes on cash and cash equivalents 2,633 2,876 2,780
Net increase (decrease) in cash and cash equivalents 26,456 16,737 (2,399)
Cash and cash equivalents, beginning of period 45,416 28,679 31,078
------ ------ ------
Cash and cash equivalents, end of period $ 71,872 $ 45,416 $ 28,679
============ =========== ===========
| | | December 28, | | | December 29, | | | December 30, | |
| Fiscal Years Ended | | 2007 | | | 2006 | | | 2005 | |
| (In thousands) | | | | | | | | | |
| | | | | | | | | | |
| Cash flows from operating activities: | | | | | | | | | |
| Net income | | $ | 117,374 | | | $ | 103,658 | | | $ | 84,855 | |
Adjustments to reconcile net income to net cash provided by operating activities: | | | | | | | | | | | | |
| Depreciation | | | 17,212 | | | | 13,523 | | | | 10,671 | |
| Amortization | | | 38,744 | | | | 13,259 | | | | 7,020 | |
| Provision for doubtful accounts | | | 1,410 | | | | 163 | | | | (502 | ) |
| Amortization of debt issuance cost | | | 218 | | | | 180 | | | | 1,270 | |
| Deferred income taxes | | | 6,368 | | | | 10,368 | | | | 14,242 | |
| Non-cash restructuring expense | | | 1,725 | | | | -- | | | | -- | |
| Stock-based compensation | | | 15,016 | | | | 12,571 | | | | -- | |
| In-process research and development | | | 2,112 | | | | 1,930 | | | | 1,100 | |
| Equity (gain) loss from joint ventures | | | (8,377 | ) | | | (6,989 | ) | | | 291 | |
| Excess tax benefit for stock-based compensation | | | (12,409 | ) | | | (8,761 | ) | | | -- | |
| Provision for excess and obsolete inventories | | | 4,352 | | | | 7,376 | | | | 5,443 | |
| Other | | | 651 | | | | 720 | | | | (1,272 | ) |
| Add decrease (increase) in assets: | | | | | | | | | | | | |
| Accounts receivable | | | (35,696 | ) | | | (12,185 | ) | | | (19,018 | ) |
| Other receivables | | | 4,825 | | | | (51 | ) | | | (2,108 | ) |
| Inventories | | | (18,678 | ) | | | (7,588 | ) | | | (23,200 | ) |
| Other current and non-current assets | | | 7,650 | | | | (18,936 | ) | | | (2,294 | ) |
| Add increase (decrease) in liabilities: | | | | | | | | | | | | |
| Accounts payable | | | (3,521 | ) | | | (4,487 | ) | | | 1,078 | |
| Accrued compensation and benefits | | | 1,691 | | | | 7,807 | | | | 3,408 | |
| Accrued liabilities | | | (4,635 | ) | | | 9,790 | | | | 6,101 | |
| Deferred gain on joint venture | | | -- | | | | -- | | | | (9,180 | ) |
| Deferred revenues | | | 32,400 | | | | 3,263 | | | | 2,406 | |
| Income taxes payable | | | 18,553 | | | | 10,232 | | | | 12,054 | |
| Net cash provided by operating activities | | | 186,985 | | | | 135,843 | | | | 92,365 | |
| | | | | | | | | | | | | |
| Cash flows from investing activities: | | | | | | | | | | | | |
| Acquisition of property and equipment | | | (13,187 | ) | | | (16,529 | ) | | | (23,436 | ) |
| Acquisitions of businesses, net of cash acquired | | | (295,848 | ) | | | (99,887 | ) | | | (51,379 | ) |
| Purchase of debt and equity securities | | | (5,576 | ) | | | -- | | | | -- | |
| Proceeds from dividends | | | 2,888 | | | | 2,244 | | | | 515 | |
| Other | | | 331 | | | | (16 | ) | | | (103 | ) |
| Net cash used in investing activities | | | (311,392 | ) | | | (114,188 | ) | | | (74,403 | ) |
| | | | | | | | | | | | | |
| Cash flows from financing activities: | | | | | | | | | | | | |
| Issuance of common stock and warrants | | | 31,864 | | | | 26,566 | | | | 24,463 | |
| Excess tax benefit for stock-based compensation | | | 12,409 | | | | 8,761 | | | | -- | |
| Proceeds from long-term debt and revolving credit lines | | | 250,000 | | | | -- | | | | 6,000 | |
| Payments on long-term debt and revolving credit lines | | | (190,457 | ) | | | -- | | | | (44,250 | ) |
| Other | | | -- | | | | (1,165 | ) | | | 385 | |
| Net cash provided by (used in) financing activities | | | 103,816 | | | | 34,162 | | | | (13,402 | ) |
| | | | | | | | | | | | | |
| Effect of exchange rate changes on cash and cash equivalents | | | (5,828 | ) | | | (49 | ) | | | (2,579 | ) |
| | | | | | | | | | | | | |
| Net increase in cash and cash equivalents | | | (26,419 | ) | | | 55,768 | | | | 1,981 | |
| Cash and cash equivalents, beginning of fiscal year | | | 129,621 | | | | 73,853 | | | | 71,872 | |
| Cash and cash equivalents, end of fiscal year | | $ | 103,202 | | | $ | 129,621 | | | $ | 73,853 | |
See accompanying Notes to the Consolidated Financial Statements.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1: DESCRIPTION OF BUSINESS
Trimble Navigation Limited (Trimble or the Company) began operations in 1978 and incorporated in California in 1981. TrimbleThe Company provides advanced positioning product solutions, most typically to commercial and government users. The principal applications served include surveying, construction, agriculture, urban and natural resource management, defense,military, transportation and fleet and asset management.telecommunications. The Company'sCompany’s products typically provide its customers benefits that can include lower operational costs, higher productivity, and higher productivity.improved quality. Examples of products include systems that guide agricultural and construction equipment, surveying instruments, systems that track fleets of vehicles, and data collection systems that enable the management of large amounts of geo referencedgeo-referenced information. In addition, the Company also manufactures components for in vehiclein-vehicle navigation and telematics systems, and timing modules used in the synchronization of wireless networks.
NOTE 2: ACCOUNTING POLICIES
Use of Estimates
The preparation of financial statements in conformityaccordance with accounting principles generally accepted accounting principlesin the U.S. requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Estimates are used for revenue recognition, allowances for doubtful accounts, sales returns reserve, allowances for inventory valuation, warranty costs, investments, goodwill impairments, and income taxes among others. TheManagement 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 experienced by the Company may differ materially from management'smanagement’s estimates.
Basis of Presentation
Trimble
The Company has a 52-53 week fiscal year, that endsending on the Friday nearest to December 31. Fiscal 2004, a2007, fiscal 2006, and fiscal 2005 were all 52-week year,years, and ended on December 31, 200428, 2007, December 29, 2006 and fiscal 2003, also a 52-week
year, ended on January 2, 2004. Fiscal year 2002 was a 53-week year that ended
on January 2, 2003. The financial results of fiscal year 2002 have an extra
week, and therefore will not be exactly comparableDecember 30, 2005, respectively. Unless otherwise stated, all dates refer to the prior and subsequent
52-weekCompany’s fiscal years.
year.
These Consolidated Financial Statements include the results of Trimblethe Company and its majority-owned subsidiaries. Inter-company accounts and transactions have been eliminated. Certain amountssegment disclosures from prior years have been reclassified to conform to the current year presentation. The Company
On January 17, 2007, the Company’s board of directors approved a 2-for-1 split of all outstanding shares of the Company’s Common Stock, payable February 22, 2007 to stockholders of record on February 8, 2007. All shares and per share information presented has reclassified deferred revenues
previously included in accounts receivable, netbeen adjusted to reflect the liabilities section in
the Consolidated Balance Sheets in fiscal year 2004 andstock split on a retroactive basis for all periods presented.
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.income, net of tax in accumulated other comprehensive income within the shareholders’ equity section of the consolidated balance sheets. Income and expense accounts are translated at average exchange rates during the year. Where the U.S. dollar
is the functional currency, translation adjustments are recorded in foreign
currency transaction loss, net.
Cash and Cash Equivalents
Cash and cash equivalents include all cash and highly liquid investments with insignificant interest rate risk and maturities of three months or less at the date of purchase. The carrying amount of cash and cash equivalents approximates fair value because of the short maturity of those instruments.
Fair Value of Financial Instruments
The fair value of certain of the Company'sCompany’s financial instruments, including cash and cash equivalents, and other accrued liabilities approximate cost because of their short maturities. The fair value of investments is determined using quoted market prices for those securities or similar financial instruments.
Concentration of Risk
Cash and cash equivalents 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 of reputable credit and therefore bear minimal credit risk.
The Company is also exposed to credit risk in the Company'sCompany’s trade receivables, which are derived from sales to end user customers in diversified industries as well as various resellers. TrimbleThe Company performs ongoing credit evaluations of its customers'customers’ financial condition and limits the amount of credit extended when deemed necessary but generally does not require collateral.
With the selection of SolectronFlextronics Corporation in August 1999 as an exclusive manufacturing partner for many of its GPS products, Trimblethe Company became substantially dependent upon a sole supplier for the manufacture of many of its products. In addition, the Company relies on sole suppliers for a number of its critical components.
Allowance for Doubtful Accounts
Trimble
The Company maintains allowancesan allowance for doubtful accounts for estimated losses resulting from the inability of its customers to make required payments.
Trimble
The Company evaluates the 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'scustomer’s ability to pay. In circumstances where the Company is aware of a specific customer'scustomer’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 Trimblethat 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'sCompany’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 standard cost or market (net realizable
value). Standard costs approximate(which approximates actual costs, which are generallycost on a first-in, first out basis. The Company uses a standardfirst-out basis) or market. Adjustments to reduce the cost accounting systemof inventory to its net realizable value, inventoryif required, are made for estimated excess, obsolescence or impaired balances. Factors influencing these adjustments include declines in demand, technological changes, product life cycle and these standards are reviewed at a minimum of once a yeardevelopment plans, component cost trends, product pricing, physical deterioration and multiple times a year in the most active manufacturing plants. The Company
provides inventory allowances based on excess and obsolete inventories
determined primarily by future demand forecasts.quality issues. If actual future demand or
market conditionsfactors are less favorable than those projected by management,us, additional inventory write-downs may be required.
Internal-Use Software Development Costs
Software
The Company capitalizes material software development costs for internal use required to be capitalized pursuant to Statement of Position No. 98-1, "Accounting“Accounting for the Costs of Computer Software Developed or Obtained for Internal Use," have not been material to
date.
Use.”
Goodwill and Purchased Intangible Assets
Goodwill represents the excess of the purchase price over the fair value of the net tangible and
Long-Lived Assetsidentifiable intangible assets acquired in a business combination. Intangible assets
include goodwill, assembled workforce,resulting from the acquisitions of entities accounted for using the purchase method of accounting are estimated by management based on the fair value of assets received. Identifiable intangible assets are comprised of distribution channels, patents, licenses, technology, acquired backlog and
trademarks whichtrademarks. Identifiable intangible assets are
capitalized at cost. Intangible assets with definite lives arebeing amortized
onover the period of estimated benefit using the straight-line
basis. Usefulmethod and estimated useful lives
generally rangeranging from
fiveone to
seventen years with
a weighted average useful life of
5.76.2 years.
If facts and circumstances indicate that the goodwill, other intangible assets,
or property and equipment may be impaired, an evaluation of continuing value
would be performed. If an evaluationGoodwill is
required, the estimated future
undiscounted cash flows associated with these assets would be comparednot subject to their
carrying amountamortization, but is subject to determine if a write-down to fair market value or discounted
cash flow value is required. Trimble performedat least an annual assessment for impairment, testapplying a fair-value based test.
Impairment of Goodwill, Intangible Assets and Other Long-Lived Assets
The Company evaluates goodwill, at the end of the third fiscal quarter of 2004, 2003 and 2002,
respectively, and found there was no impairment of goodwill. Trimble will
continue to evaluate its goodwill for impairmenta minimum, on an annual basis at the end
of each fiscal third quarter 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. Goodwill is reviewed for impairment utilizing a two-step process. First, impairment of goodwill is tested 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.
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 those 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 may differ from actual 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.
Revenue Recognition
Trimble's revenues are recorded in accordance with the Securities and Exchange
Commission's (SEC) Staff Accounting Bulletin (SAB) No. 104, "Revenue
Recognition."
The Company recognizes product revenue when persuasive evidence of an arrangement exists, deliveryshipment 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.
Revenues from purchased extended warranty and support agreements are deferred
and recognized ratably over the term of the warranty/support period.
Substantially all technology licenses and research revenue have consisted of
initial license fees and royalties, which were recognized when earned, provided
we had no remaining obligations.
Contracts andand/or customer purchase orders are typically 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 analysis,analyses, as well as the customer'scustomer’s payment history.
Trimble's
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 USU.S. orders and international orders fulfilled from itsthe Company’s European distribution center are typically FCA (Free Carrier) shipping
point, except certain salesprovide that title passes to US government agencies which are shipped FOB
destination. FCA shipping point means that Trimble fulfills the obligation to
deliver whenbuyer upon delivery of the goods are handed over, cleared for export, and into the charge
ofto the carrier named by the buyer at the named place or point. If no precise point is indicated by the buyer, Trimblethe Company may choose within the place or range stipulated where the carrier will take the goods into carrier'scarrier’s charge. 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 the cost of goods sold.
Other international orders are shipped FOB destination, which means these
international orders are not recognized as revenue until the product is
delivered and title has transferred to the buyer or FCA shipping point. FOB
destination means that Trimble bears all costs and risks of loss or damage to
the goods up to that point.
Revenue to distributors and resellers is recognized upon delivery,shipment, assuming all other criteria for revenue recognition have been met. Distributors and resellers do not have a right of return.
When
Revenue from purchased extended warranty and support agreements is deferred and recognized ratably over the term of the warranty/support period.
The Company presents revenue net of sales taxes and any similar assessments.
The Company applies Statement of Position (SOP) No. 97-2, “Software Revenue Recognition,” to products where the embedded software is more than incidental to the functionality of the hardware. This determination requires significant judgment including a consideration of factors such as marketing, research and development efforts and any post contract support (PCS) relating to the embedded software.
The Company’s software arrangements generally consist of a perpetual license fee and PCS. The Company 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 there are no remaining obligations. Revenue from PCS is recognized ratably over the term of the PCS agreement.
The Company applies Emerging Issues Task Force (EITF) Issue 00-3, “Application of AICPA Statement of Position 97-2 to Arrangements That Include the Right to Use Software Stored on Another Entity’s Hardware” for hosted arrangements which the customer 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. Subscription revenue related to the Company’s hosted arrangements is recognized ratably over the contract period. Upfront fees for the Company’s hosted solution primarily consist of amounts for the in-vehicle enabling hardware device and peripherals, if any. For upfront fees relating to propriety hardware where the firmware is more than incidental to the functionality of the hardware in accordance with SOP No. 97-2, the Company defers the upfront fees at installation and recognizes them ratably over the minimum service contract period, generally one to five years. Product costs are also deferred and amortized over such period.
In accordance with EITF Issue 00-21, “Accounting for Revenue Arrangements with Multiple Deliverables,” when a non-software sale involves multiple elements the entire fee from the arrangement is allocated to each respective element based on its relative fair value and recognized when revenue recognition criteria for each element
areis met.
The
amount of product revenue allocated to an individual element is limited to the
lesser of its relative fair value or the amount not contingent on the Company's
delivery of other elements under the arrangement, regardless of the probability
of the Company's performance.
Trimble's software arrangements generally consist of a license fee and post
contract customer support (PCS). Trimble has established vendor-specific
objective evidence (VSOE) of fair value for its PCS contracts based on the
renewal rate. The remaining value of the software arrangement is allocated to
the license fee using the residual method, which revenue is primarily recognized
when the software has been delivered and there are no remaining obligations.
Revenue from PCS is recognized ratably over the term of the PCS agreement.
A reserve for sales returns is established based on historical trends in product
return rates experienced in the ordinary course of business. The reserve for
estimated future returns is recorded as a reduction of our accounts receivable
and revenue. If the actual returns were to deviate from the historical data on
which the sales reserve had been established, the Company's revenue could be
adversely affected.
Support and
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 Trimble'sthe 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. The products sold are generally covered by a warranty for periods ranging from 90 days to three years, and in some instances up to 5.5 years.
While the Company engages in extensive product quality programs and processes, including actively monitoring and evaluating the quality of component suppliers, its warranty obligation is affected by product failure rates, material usage, and service delivery costs incurred in correcting a product failure. Should actual product failure rates, material usage, or service delivery costs differ from the estimates, revisions to the estimated warranty accrual and related costs may be required.
Changes in the Company'sCompany’s product warranty liability during the 12 months ended December 31, 200428, 2007 and January 2, 2004,December 29, 2006, are as follows:
December 31, January 2,
Fiscal Years Ended 2004 2004
- ------------------ ---- ----
(In thousands)
Beginning balance $ 5,147 $ 6,394
Warranties accrued 7,333 4,417
Warranty claims (6,055) (5,664)
------- -------
Ending Balance $ 6,425 $ 5,147
============ ==========
| | | December 28, | | | December 29, | |
| Fiscal Years Ended | | 2007 | | | 2006 | |
| (In thousands) | | | | | | |
| | | | | | | |
| Beginning balance | | $ | 8,607 | | | $ | 7,466 | |
| Accruals for warranties issued | | | 15,950 | | | | 7,549 | |
| Changes in estimates | | | -- | | | | -- | |
| Warranty settlements (in cash or in kind) | | | (13,751 | ) | | | (6,408 | ) |
| Ending Balance | | $ | 10,806 | | | $ | 8,607 | |
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, with respect to certain matters. 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 against 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'sCompany’s bylaws contain similar indemnification obligations to the Company'sCompany’s agents.
It is not possible to determine the maximum potential amount 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 were not material and no liabilities have been recorded for these obligations on the Consolidated Balance Sheets as of December 31, 200428, 2007 and January 2, 2004.
December 29, 2006.
Advertising Costs
The Company expenses all advertising costs as incurred. Advertising expenses were approximately $9.5$21.2 million, $9.2$16.1 million, and $6.3$14.8 million, in fiscal 2004,
2003,2007, 2006, and 2002,2005, 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 considered material and were expensed as incurred. The Company received third party funding of approximately
$7.7$8.5 million,
$4.9$7.8 million, and
$5.3$9.0 million in fiscal
2004, 2003,2007, 2006, and
2002,2005, respectively. The Company offsets research and development expenses with any third party funding received. The Company retains the rights to any technology developed under such arrangements.
Stock
Stock-Based Compensation
In accordance withDecember 2004, the provisions of StatementFinancial Accounting Standards Board (“FASB”) issued Standard of Financial Accounting Standards (“SFAS”) No. 123 ("123(R), “Share-Based Payment” (“SFAS 123"123(R)”), "Accounting. SFAS 123(R) requires employee stock options and rights to purchase shares under stock participation plans to be accounted for Stock-Based Compensation"under the fair value method, and "Statement
of Financialeliminates the ability to account for these instruments under the intrinsic value method prescribed by Accounting Standards No. 148" ("SFAS 148"Principals Board (“APB”), "Accounting for
Stock-Based Compensation - Transition and Disclosure," Trimble applies
Accounting Principles Board Opinion No. 25, "Accountingand allowed under the original provisions of SFAS 123.
The Company has adopted SFAS 123(R) using the modified prospective method. As a result, the Company’s financial statements for Stock Issuedfiscal periods after December 30, 2005 include stock-based compensation expenses that are not comparable to Employees" ("APB 25") andfinancial statements of fiscal periods prior to December 30, 2005. SFAS 123(R) requires stock-based compensation to be estimated using the fair value on the date of grant using an option-pricing model. The value of the portion of the award that is expected to vest is recognized as expense over the related interpretationsemployees’ requisite service periods in accounting for its stock
option plans and stock purchase plan. Accordingly,the Company’s Consolidated Statements of Income. Prior to the adoption of SFAS 123(R), the Company does not
recognizeaccounted for stock-based compensation costto employees and directors using the intrinsic value method in accordance with APB Opinion No. 25 as allowed under SFAS No. 123, “Accounting for Stock-Based Compensation” (“SFAS 123”). Under the intrinsic value method, no stock-based compensation expense had been recognized in the Company’s Consolidated Statement of Income because the exercise price of the Company’s stock options granted atto employees and directors equaled the fair market value.value of the underlying stock at the date of grant. Note 1514 of the Consolidated Financial Statements describe the plans operated by Trimble.
For purposes of pro forma disclosures, the estimated fair value of the options
is amortized toCompany.
The following table summarizes stock-based compensation expense, over the options' vesting period, and the estimated fair
value of purchases under the employee stock purchase plan is expensed in the
year of purchase as well as the stock-based employee compensation cost, net of tax, related tax effects, that would have beento employee stock-based compensation included in the determinationConsolidated Statements of net
incomeIncome in accordance with SFAS 123(R) for the year ended December 28, 2007.
| Year Ended | | December 28, | | | December 29, | | | December 30, | |
| | | 2007 | | | 2006 | | | 2005 | |
| (in thousands) | | | | | | | | | |
| | | | | | | | | | |
| Cost of sales | | $ | 1,733 | | | $ | 1,173 | | | $ | - | |
| | | | | | | | | | | | | |
| Research & development | | | 3,573 | | | | 2,554 | | | | - | |
| Sales & marketing | | | 3,891 | | | | 2,815 | | | | - | |
| General & administrative | | | 5,819 | | | | 6,029 | | | | - | |
| Stock-based compensation expense included in operating expenses | | | 13,283 | | | | 11,398 | | | | - | |
| | | | | | | | | | | | | |
| Total stock-based compensation | | | 15,016 | | | | 12,571 | | | | - | |
Tax benefit (1) | | | (1,446 | ) | | | (1,185 | ) | | | - | |
| Total stock-based compensation, net of tax | | $ | 13,570 | | | $ | 11,386 | | | $ | - | |
| Effect of FAS 123(R) on basic earnings per share | | $ | 0.11 | | | $ | 0.10 | | | $ | - | |
| Effect of FAS 123(R) on diluted earnings per share | | $ | 0.11 | | | $ | 0.10 | | | $ | - | |
(1) Tax benefit related to U.S. non-qualified options and restricted stock units, applying a Federal statutory and State (Federal effected) tax rate for the year ended December 28, 2007 and December 29, 2006.
The table below provides pro-forma information for the year ended December 30, 2005 as if the fair value based method had been applied to all awards. The
effects on pro forma disclosure of applying SFAS No. 123 are not likely to be
representative of the effects on pro forma disclosure of future years.
Pro forma information regarding net income and earnings per share is required by
SFAS No. 123 and has been determined as if TrimbleCompany had accounted for its employee stock options and purchases under the employee stock purchase plan in accordance with SFAS 123.
| Fiscal Years Ended | | December 30, | |
| | | 2005 | |
| (in thousands, except per share amounts) | | | |
| | | | |
| Net income – as reported | | $ | 84,855 | |
Stock-based compensation expense, net of tax (1) | | | 11,149 | |
| Net income – pro-forma | | $ | 73,706 | |
| | | | | |
| Basic earnings per share – as reported | | $ | 0.80 | |
| Basic earnings per share – pro-forma | | $ | 0.69 | |
| | | | | |
| Diluted earnings per share – as reported | | $ | 0.75 | |
| Diluted earnings per share – pro-forma | | $ | 0.65 | |
(1) Includes compensation expense for employee stock purchase plan for the year ended December 30, 2005 and reduction of tax benefits for stock-based compensation other than non-qualified stock options which were not included in the pro-forma disclosure of the Company’s fiscal 2005 Form 10-K. Tax benefit relates to non-qualified options only as allowed by the applicable tax requirements using the statutory tax rate as of December 30, 2005.
Options
Stock option expense recognized during the period is based on the value of the portion of share-based payment awards that is expected to vest during the period. Stock option expense recognized in the Company’s Consolidated Statement of Income for the year ended December 28, 2007 included compensation expense for stock options granted prior to, but not yet vested as of December 29, 2006 based on the grant date fair value estimated in accordance with the provisions of SFAS 123 and compensation expense for the stock options granted subsequent to December 29, 2006 based on the grant date fair value estimated in accordance with the provisions of SFAS 123(R). In conjunction with the adoption of SFAS 123(R), the Company changed its method of attributing the value of stock option to expense from the accelerated multiple-option approach to the straight-line single option method. Compensation expense for all stock options granted on or prior to December 29, 2006 will continue to be recognized using the accelerated multiple-option approach while compensation expense for all stock options granted subsequent to December 29, 2006 will be recognized using the straight-line single-option method. SFAS 123(R) requires forfeitures to be estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates. In the Company’s pro-forma information required under SFAS 123 for the periods prior to fiscal 2006, the Company accounted for forfeitures as they occurred.
For options granted prior to October 1, 2005, the fair value methodfor these options was estimated at the date of SFAS No.123.
grant using the Black-Scholes option-pricing model. For stock options granted on or after October 1, 2005, the fair value of each award is estimated on the date of grant using a binomial valuation model. Similar to the Black-Scholes 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.
Under the
binomial and Black-Scholes
option pricing model,models, the
weighted-average estimated
valuesweighted average grant-date fair value of
employee stock options granted during fiscal years
2004, 2003,2007, 2006 and
20022005 were
$13.85, $10.03,$12.37, $8.04 and
$5.64,$7.27, respectively. The value of each option grant is estimated on the date of grant using the
binomial model for options granted during and after the fourth quarter of fiscal 2005, and the Black-Scholes option pricing model
for options granted during and prior to the third quarter of fiscal 2005, with the following
weighted-average assumptions:
December 31, January 2, January 3,
Fiscal Years Ended 2004 2004 2003
- ------------------ ---- ---- ----
Expected dividend yield - - -
Expected stock price volatility 45.98% 59.87% 52.70%
Risk free interest rate 3.66% 3.34% 3.13%
Expected life of options after vesting 1.74 years 1.56 years 1.18 years
An analysis of historical information
| | | December 28, 2007 | | | December 29, 2006 | | | December 30, 2005 | |
| Expected dividend yield | | | - | | | | - | | | | - | |
| Expected stock price volatility | | | 37 | % | | | 42 | % | | | 47 | % |
| Risk free interest rate | | | 4.2 | % | | | 4.8 | % | | | 4.3 | % |
| Expected life of options after vesting | | 1.3 years | | | 1.3 years | | | 1.7 years | |
Expected Dividend Yield – The dividend yield assumption is used to determine the Company's
assumptions, to the extent that historical information is relevant, based on the Company’s history and expectation of dividend payouts.
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. The Company used implied and historical volatility as the combination was more representative of future stock price trends than historical volatility alone.
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 option.
Expected Life Of Option – The Company’s expected term 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 to the contractual terms of the grants being issued in any given period.stock options, vesting schedules and expectations of future employee behavior.
Restricted Stock Units
Restricted stock units are converted into shares of Trimble common stock upon vesting on a one-for-one basis. Vesting of restricted stock units is subject to the employee’s continuing service to the Company. The expected life for
options granted reflects options grantedcompensation expense related to existing employees that generally
vest ratably over five years fromthese awards was determined using the fair value of Trimble’s common stock on the date of grant.
grant, and that expense is recognized on a straight-line basis over the vesting period. Restricted stock units typically vest at the end of three years.
Employee Stock Purchase Plan
Under the Employee Stock Purchase Plan, rights to purchase shares are
generally granted during the second and fourth quarter of each year.
The fair value of rights granted under the Employee Stock Purchase Plan was estimated at the date of grant using the Black-Scholes option-pricing model. The estimated weighted average value of rights granted under the Employee Stock Purchase Plan during fiscal years
2004, 2003,2007, 2006 and
20022005 were
$7.31, $3.57,$7.54, $5.16 and
$3.06$4.94, respectively. The fair value of rights granted during
2004, 20032007, 2006, and
20022005 was estimated at the date of grant using the following
weighted average assumptions:
December 31, January 2, January 3,
Fiscal years ended 2004 2004 2003
- ------------------ ---- ---- ----
Expected dividend yield - - -
Expected stock price volatility 45.98% 59.87% 52.70%
Risk free interest rate 3.66% 3.34% 3.13%
Expected life of options after vesting 0.5 years 0.5 years 0.5 years
Trimble's pro forma information
| Fiscal years ended | | December 28, 2007 | | | December 29, 2006 | | | December 30, 2005 | |
| Expected dividend yield | | | - | | | | - | | | | - | |
| Expected stock price volatility | | | 36.5 | % | | | 35.5 | % | | | 47 | % |
| Risk free interest rate | | | 4.9 | % | | | 4.8 | % | | | 3.5 | % |
| Expected life of purchase | | 0.5 years | | | 0.6years | | | 0.5 years | |
Expected Dividend Yield – The dividend yield assumption is as follows:
December 31, January 2, January 3,
(in thousands, except per share amounts) 2004 2004 2003
- ---------------------------------------- ---- ---- ----
Net income, as reported $ 67,680 $ 38,485 $ 10,324
Compensation expense, net of tax 8,617 9,817 9,895
----- ----- -----
Pro-forma net income $ 59,063 $ 28,668 $ 429
Reported basic earnings per share $ 1.32 $ 0.81 $ 0.24
------------ ----------- -----------
Pro-forma basic earnings per share $ 1.15 $ 0.60 $ 0.01
------------ ----------- -----------
Reported diluted earnings per share $ 1.23 $ 0.77 $ 0.24
------------ ----------- -----------
Pro-forma diluted earnings per share $ 1.07 $ 0.57 $ 0.01
------------ ----------- -----------
SFAS No. 123 requiresbased on the useCompany’s history and expectation of option pricing models that were not developeddividend payouts.
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 use in valuing employee stock options.the expected term of the purchase period.
Expected Life Of Purchase – The Black-Scholes option pricing
model was developed for use in estimating the fair value of short-lived
exchange-traded options that have no vesting restrictions and are fully
transferable. In addition, option pricing models require the input of highly
subjective assumptions, including the option'sCompany’s expected life and the price
volatility of the underlying stock. Becausepurchase is based on the Company's employee stock options
have characteristics significantly different from those of traded options, and
because changes in the subjective input assumptions can materially affect the
fair value estimate, in the opinion of management, the existing models do not
necessarily provide a reliable single measureterm of the fair valueoffering period of employee
stock options.
Depreciationthe purchase plan.
Property and AmortizationEquipment, Net
Property and equipment, net is stated at cost less accumulated depreciation. Depreciation of property and equipment owned is computed using the straight-line method over the shorter of the estimated useful lives or the lease terms. Useful lives include a range from two to six years for machinery and equipment, five years for furniture and fixtures, two to five years for computer equipment and software, and the life of the lease for leasehold improvements. 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 $17.2 million in fiscal 2007, $13.5 million in fiscal 2006 and $10.7 million in fiscal 2005.
Derivative Financial Instruments
The Company enters into foreign exchange forward contracts to minimize the short-term impact of foreign currency fluctuations on certain trade and inter-company receivables and payables, primarily denominated in Australian, Canadian, Japanese, New Zealand, South African and Swedish currencies, the Euro, and the 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 three months in original maturity. We do not enter into foreign exchange forward contracts for trading purposes.
Income Taxes
Income taxes are accounted for under the liability method whereby deferred tax assetassets 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 that such assets will not be realized. The Company adopted the provisions of FASB Interpretation No. 48, “Accounting for Uncertainty in Income Taxes” (FIN 48), on December 30, 2006. See Note 12 to the Consolidated Financial Statements for additional information.
Computation of Earnings Per Share
Number of shares used in calculation of basic earnings per share represents the weighted average common shares outstanding during the period and excludes any dilutive effects of options, non-vested restricted stock units and restricted stock awards, warrants, and convertible securities. The dilutive effects of options, non-vested restricted stock units and restricted stock awards, warrants, and convertible securities are included in diluted earnings per share.
New
Recent Accounting Standards
Pronouncements
In
January 2003, the Financial Accounting Standards Board issued Interpretation
No. 46, "Consolidation of Variable Interest Entities" (FIN 46), which was
amended by FIN 46R issued in December 2003. This interpretation of Accounting
Research Bulletin No. 51, "Consolidated Financial Statements," addresses
consolidation by business enterprises of variable interest entities (VIEs) that
either: (1) do not have sufficient equity investment at risk to permit the
entity to finance its activities without additional subordinated financial
support, or (2) for which the equity investors lack an essential characteristic
of a controlling financial interest. This Interpretation applies immediately to
VIEs created after January 31, 2003. It also applies in the first fiscal year or
interim period ending after March 15, 2004, to VIEs created before February 1,
2003 in which an enterprise holds a variable interest. FIN 46 requires
disclosure of VIEs in financial statements issued after January 31, 2003, if it
is reasonably possible that as of the transition date: (1) the company will be
the primary beneficiary of an existing VIE that will require consolidation or,
(2) the company will hold a significant variable interest in, or have
significant involvement with, an existing VIE. Trimble completed its review of
the requirements of FIN 46 and as a result of that review, no entities were
identified requiring disclosure or consolidation under FIN 46.
In December 2004,September 2006, the FASB issued SFAS No. 123R, "Share-Based Payment.158, "Employers' Accounting for Defined Benefit Pension and Other Postretirement Plans, an amendment of FASB Statements No. 87, 88, 106, and 132(R)." SFAS No.
123R158 requires employee stock optionscompanies to recognize the over-funded or under-funded status of a defined benefit post-retirement plan as an asset or liability in its balance sheet, recognize as a component of accumulated other comprehensive income, net of tax, amounts accumulated at the date of adoption due to delayed recognition of actuarial gains and rights to purchase shares under stock
participation plans to be accountedlosses, prior service costs and credits, and transition assets and obligations, and provide additional disclosures, effective for underfiscal years ending after December 15, 2006. On December 29, 2006, the fair value method,Company adopted the recognition and eliminates the ability to account for these instruments under the intrinsic
value method prescribed by APB Opinion No. 25, and allowed under the originaldisclosure provisions of SFAS No. 123. SFAS No. 123R requires the use158. The effect of an option pricing
model for estimating fair value, which is amortized to expense over the service
periods. The requirementsadopting these provisions of SFAS No. 123R are158 on the Company’s financial condition at December 29, 2006 and December 28, 2007 has been included in the accompanying consolidated financial statements. These provisions of SFAS 158 did not have an effect on the Company’s consolidated financial condition at December 30, 2005. See Note 15 to the Notes to Consolidated Financial Statements for additional information. SFAS 158 also requires companies to measure the funded status of the plan as of the date of its fiscal year-end, with limited exceptions, effective for fiscal periods
beginningyears ending after JuneDecember 15, 2005. If the Company had applied the provisions2008. This provision of SFAS No. 123R to the financial statements158 will be effective for the period ending December 31, 2004,
assuming that adoption would result in amounts similar to the current pro forma
disclosures under SFAS 123R, net income would have been reduced by approximately
$8.6 million. SFAS No. 123R allows for either prospective recognition of
compensation expense or retrospective recognition, which may be back to the
original issuance of SFAS No. 123 or only to interim periods in thefiscal year of
adoption.ended 2008. The Company is currently evaluating these transition methods.
this provision of SFAS 158 and its possible impacts on the Company’s financial statements.
In September 2006, the FASB issued SFAS 157, “Fair Value Measurements.” SFAS 157 establishes a framework for measuring the fair value of assets and liabilities. This framework is intended to provide increased consistency in how fair value determinations are made under various existing accounting standards which permit, or in some cases require, estimates of fair market value. SFAS 157 is effective for the Company beginning in its first quarter of fiscal 2008, although earlier adoption is encouraged. The Company does not expect the adoption of SFAS 157 to have a material impact on its financial position, results of operations or cash flows.
In February 2007, the FASB issued SFAS 159, “The Fair Value Option for Financial Assets and Financial Liabilities, including an amendment of FASB Statement No. 115.” SFAS 159 allows an entity the irrevocable option to elect fair value for the initial and subsequent measurement for certain financial assets and liabilities under an instrument-by-instrument election. Subsequent measurements for the financial assets and liabilities an entity elects to fair value will be recognized in earnings. SFAS 159 also establishes additional disclosure requirements. If the Company elected to adopt SFAS 159, it would be effective for the Company beginning in its first quarter of fiscal 2008, with early adoption permitted provided that the Company also adopted SFAS 157. The Company does not expect the adoption of SFAS 159 to have a material impact on its financial position, results of operations or cash flows.
In December 2007, the FASB issued SFAS No. 141(R), Business Combinations. SFAS No. 141(R) establishes principles and requirements for how an acquirer recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed, and any non-controlling interest in the acquiree and recognizes and measures the goodwill acquired in the business combination or a gain from a bargain purchase. SFAS No. 141(R) also sets forth the disclosures required to be made in the financial statements to evaluate the nature and financial effects of the business combination. SFAS No. 141(R) applies prospectively to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2008. Accordingly, the Company will adopt this standard in fiscal 2009. The Company is currently evaluating the potential impact of the adoption of SFAS 141(R) on its consolidated financial statements.
In December 2007, the FASB issued SFAS No. 160, Non-controlling Interests in Consolidated Financial Statements, an amendment of ARB No. 51. SFAS 160 will change the accounting and reporting for minority interests, which will be recharacterized as non-controlling interests (NCI) and classified as a component of equity. This new consolidation method will significantly change the accounting for transactions with minority interest holders. SFAS 160 requires retroactive adoption of the presentation and disclosure requirements for existing minority interests. All other requirements of SFAS 160 shall be applied prospectively. SFAS 160 is effective for fiscal years beginning after December 15, 2008 and, as such, the Company will adopt this standard in fiscal 2009. The Company is currently evaluating the potential impact of the adoption of SFAS 160 on its consolidated financial statements.
NOTE 3: EARNINGS PER SHARE
The following data show the amounts used in computing earnings per share and the effect on the weighted-average number of shares of potentially dilutive common stock.
December 31, January 2, January 3,
Fiscal Years Ended 2004 2004 2003
- ------------------ ---- ---- ----
(In thousands, except per share data)
Numerator:
Income available to common shareholders:
Used in basic and diluted earnings per
share $ 67,680 $ 38,485 $ 10,324
Denominator:
Weighted average number of common shares
used in basic earnings per share 51,278 47,505 42,860
Effect of dilutive securities (using
treasury stock method):
Common stock options 2,947 2,058 705
Common stock warrants 723 449 13
Weighted average number of common shares 54,948 50,012 43,578
and dilutive potential common
shares used in diluted earnings
per share
Basic earnings per share $ 1.32 $ 0.81 $ 0.24
Diluted earnings per share $ 1.23 $ 0.77 $ 0.24
| | | December 28, | | | December 29, | | | December 30, | |
| Fiscal Years Ended | | 2007 | | | 2006 | | | 2005 | |
| (In thousands, except per share data) | | | | | | | | | |
| | | | | | | | | | |
| Numerator: | | | | | | | | | |
| Income available to common shareholders: | | | | | | | | | |
| Used in basic and diluted earnings per share | | $ | 117,374 | | | $ | 103,658 | | | $ | 84,855 | |
| | | | | | | | | | | | | |
| Denominator: | | | | | | | | | | | | |
| Weighted average number of common shares used in basic earnings per share | | | 119,280 | | | | 110,044 | | | | 106,432 | |
| Effect of dilutive securities (using treasury stock method): | | | | | | | | | | | | |
| Common stock options and restricted stock units | | | 4,907 | | | | 5,134 | | | | 5,900 | |
| Common stock warrants | | | 223 | | | | 894 | | | | 1,306 | |
| Weighted average number of common shares and dilutive potential common shares used in diluted earnings per share | | | 124,410 | | | | 116,072 | | | | 113,638 | |
| | | | | | | | | | | | | |
| Basic earnings per share | | $ | 0.98 | | | $ | 0.94 | | | $ | 0.80 | |
| Diluted earnings per share | | $ | 0.94 | | | $ | 0.89 | | | $ | 0.75 | |
NOTE 4: BUSINESS COMBINATIONS
@Road, Inc.
On December 10, 2006, the Company and @Road, Inc. (@Road) entered into a definitive merger agreement. The acquisition became effective on February 16, 2007. @Road is a global provider of solutions designed to automate the management of mobile resources and to optimize the service delivery process for customers across a variety of industries. The acquisition of @Road expands the Company’s investment and reinforces the existing growth strategy for its Mobile Solutions segment. @Road’s results of operations since February 17, 2007 have been included in the Company’s consolidated statements of income within the Mobile Solutions business segment.
Purchase Price
Under the terms of the agreement, the Company acquired all of the outstanding shares of @Road common stock for $7.50 per share. The Company elected to issue $2.50 per share of the consideration in the form of the Company’s common stock (Common Stock) to be based upon the five-day average closing price of the Company’s shares six trading days prior to the closing of the transaction and the remaining $5.00 per share consideration was paid in cash. Further, each share of Series A-1 and Series A-2 Redeemable Preferred Stock, par value $0.001 per share, of @Road was converted into the right to receive an amount in cash equal to $100.00 plus all declared or accumulated but unpaid dividends with respect to such shares as of immediately prior to the effective time of the merger and each share of Series B-1 Redeemable Preferred Stock, par value $0.001 per share, of @Road and each share of Series B-2 Redeemable Preferred Stock, par value $0.001 per share, of @Road was converted into the right to receive an amount in cash equal to $831.39 plus all declared or accumulated but unpaid dividends with respect to such shares as of immediately prior to the effective time of the merger. In addition, all @Road vested stock options were terminated and the holders of each such option were entitled to receive the excess, if any, of the aggregate consideration over the exercise price. At the effective time of the merger, all unvested @Road stock options with an exercise price in excess of $7.50 were terminated and all unvested stock options that had exercise prices of $7.50 or less were assumed by the Company.
Concurrent with the merger, the Company amended and restated its existing $200 million unsecured revolving credit agreement with a syndicate of 11 banks with The Bank of Nova Scotia as the administrative agent (the 2007 Credit Facility) and incurred a five-year term loan under the 2007 Credit Facility. See Note 9 to the Consolidated Financial Statements for additional information.
The Company paid approximately $327.3 million in cash from debt and existing cash, and issued approximately 5.9 million shares of the Company’s common stock based on an exchange ratio of 0.0893 shares of the Company’s common stock for each outstanding share of @Road common stock as of February 16, 2007. The common stock issued had a fair value of $161.9 million and was valued using the average closing price of the Company’s common stock of $27.69 over a range of two trading days (February 14, 2007 through February 15, 2007) prior to, and including, the close date (February 16, 2007) of the transaction, which is also the date that the amount of the Company’s shares to be issued in accordance with the merger agreement was settled. The total purchase price is estimated as follows (in thousands):
| Cash consideration | | $ | 327,370 | |
| Common stock consideration | | | 161,947 | |
| Merger costs * | | | 5,712 | |
| Total Purchase price | | $ | 495,029 | |
* Merger costs consist of legal, advisory, accounting and administrative fees.
Preliminary Purchase Price Allocation
In accordance with SFAS 141, "Business Combinations,” the total purchase price was allocated to @Road net tangible assets, identifiable intangible assets and in-process research and development based upon their estimated fair values as of February 16, 2007. The excess purchase price over the net tangible, identifiable intangible assets and in-process research and development was recorded as goodwill. The fair values assigned to tangible and identifiable intangible assets acquired and liabilities assumed are based on estimates and assumptions provided by management. The allocation of the total estimated purchase price is preliminary and may differ from the actual purchase price allocation upon realization of any accrued costs and final fair value determination of certain tangible assets, intangible assets and liabilities assumed.
The total preliminary purchase price has been allocated as follows (in thousands):
| Value to be allocated to assets, based upon merger consideration | | $ | 495,029 | |
| Less: value of @Road’s assets acquired: | | | | |
| Net tangible assets acquired | | | 137,665 | |
| Amortizable intangibles assets: | | | | |
| Developed product technology | | | 66,600 | |
| Customer relationships | | | 75,300 | |
| Trademarks and trade names | | | 5,200 | |
| Subtotal | | | 147,100 | |
| In-process research and development | | | 2,100 | |
| Deferred tax liability | | | (56,854 | ) |
| | | | | |
| Goodwill | | $ | 265,018 | |
Net Tangible Assets
| | | As of | |
| | | February 16, | |
| (in thousands) | | 2007 | |
| Cash and cash equivalents | | $ | 74,729 | |
| Accounts receivable, net | | | 14,255 | |
| Other receivables | | | 8,774 | |
| Inventory | | | 15,272 | |
| Other current assets | | | 11,725 | |
| Property and equipment, net | | | 5,854 | |
| Deferred tax asset | | | 42,471 | |
| Other non-current assets | | | 7,935 | |
| | | | | |
| Total assets acquired | | $ | 181,015 | |
| | | | | |
| Accounts payable | | | 19,285 | |
| Deferred revenue | | | 7,365 | |
| Other accrued liabilities | | | 16,700 | |
| | | | | |
| Total liabilities assumed | | $ | 43,350 | |
| | | | | |
| Total net assets acquired | | $ | 137,665 | |
The Company reviewed and adjusted @Road's net tangible assets and liabilities to fair value, as necessary, as of February 16, 2007, including the following adjustments:
Fixed assets – the Company decreased @Road's historical value of fixed assets by $2.1 million to adjust fixed assets to an amount equivalent to fair value.
Deferred revenue and cost of sales – the Company reduced @Road's historical value of deferred revenue by $39.6 million to adjust deferred revenue to the fair value of the direct cost associated with servicing the underlying obligation plus a reasonable margin. @Road’s deferred revenue balance consists of upfront payments of its hosted product, licensed product, extended warranty and maintenance. The Company reduced @Road's historical value of deferred product cost by $47.1 million to adjust deferred product cost to the asset's underlying fair value. The deferred product costs adjustment to fair value related to deferral of cost of sales of hardware that have shipped, resulting in no fair value relating to the associated deferred product costs.
Other receivables and non-current assets – Other receivables and non-current assets were increased by $15.4 million to adjust for the fair value of future cash collections from customer contracts assumed for products delivered prior to the acquisition date. As the products were delivered prior to the acquisition date, revenue is not recognizable in the Company’s Consolidated Statements of Income.
Intangible Assets
Developed product technology, which is comprised of products that have reached technological feasibility, includes products in @Road's current product offerings. @Road's technology includes hardware, software and services that serve the mobile resource management market internationally. The Company expects to amortize the developed and core technology over a weighted average estimated life of seven years.
Customer relationships represent the value placed on @Road’s distribution channels and end users. The Company expects to amortize the fair value of these assets over a weighted average estimated life of seven years.
Trademarks and trade names represent the value placed on the @Road brand and recognition in the mobile resource management market. The Company expects to amortize the fair value of these assets over a weighted average estimated life of eight years.
In-process Research and Development
The Company recorded an expense of $2.1 million relating to in-process research and development projects in @Road’s license business. In-process research and development represents incomplete @Road research and development projects that had not reached technological feasibility and had no alternative future use as of the consummation of the merger.
Goodwill
The excess purchase price over the net tangible, identifiable intangible assets and in-process research and development was recorded as goodwill. The goodwill was attributed to the premium paid for the opportunity to expand and better serve the global mobile resource management market and achieve greater long-term growth opportunities than either company had operating alone. The Company believes these opportunities could include accelerating the rate at which products are brought to market and increasing the diversity and global reach of those products. In addition, the Company expects that the combined companies may be able to obtain greater operating leverage by reducing costs in areas of redundancy. Of the total $265.0 million assigned to goodwill, approximately $4.4 million is expected to be deductible for tax purposes.
Restructuring
Liabilities related to restructuring @Road's operations that meet the requirements of EITF 95-3, “Recognition of Liabilities in Connection with a Purchase Business Combination,” have been recorded as adjustments to the purchase price and an increase in goodwill. Liabilities related to restructuring the Company's operations have been recorded as expenses in the Company's Consolidated Statements of Income in the period that the costs are incurred.
The Company is in the process of finalizing the total restructuring liability related to the @Road acquisition. See Note 8 to the Consolidated Financial Statements for additional information.
Deferred Income Tax Assets/Liabilities
The Company recognized $56.9 million in net deferred tax liabilities for the tax effects of differences between assigned values in the purchase price and the tax bases of assets acquired and liabilities assumed.
@Road Stock Options Assumed
In accordance with the merger agreement, the Company assumed all @Road unvested stock options that had exercise prices of $7.50 or less. The Company issued approximately 795,000 stock options based on an exchange ratio of 0.268 shares of the Company’s common stock for each unvested stock option with exercise prices of $7.50 or less as of February 16, 2007. The fair value of these assumed options was determined to be $10.1 million which will be expensed over the remaining vesting terms of the assumed options which is approximately three to four years. The assumed options were valued using the binomial model similar to previously granted Trimble stock options.
Pro-Forma Results
The following table presents pro-forma results of operations of the Company and @Road, as if the companies had been combined as of December 31, 2005. The unaudited pro-forma results of operations are not necessarily indicative of results that would have occurred had the acquisition taken place on December 31, 2005 or of future results. Included in the pro-forma results are fair value adjustments based on the fair values of assets acquired and liabilities assumed as of the acquisition date of February 16, 2007 and adjustments for interest expense related to debt and stock options assumed as part of the merger consideration.
The Company excluded the effect of non-recurring items for both periods presented as the impact is short-term in nature. The pro-forma information is as follows:
| | | Fiscal Year Ended | |
| | | December 28, | | | December 29, | |
| | | 2007 (a) | | | 2006 (b) | |
| (in thousands, except per share data) | | | | | | |
| Pro-forma revenue | | $ | 1,239,319 | | | $ | 1,017,852 | |
| Pro-forma net income | | | 114,835 | | | | 69,959 | |
| Pro-forma basic net income per share | | $ | 0.96 | | | $ | 0.60 | |
| Pro-forma diluted net income per share | | $ | 0.92 | | | $ | 0.57 | |
| (a) | The pro-forma results of operations represent the Company’s results for fiscal 2007 together with @Road’s historical results through the acquisition date of February 16, 2007 as though they had been combined as of December 31, 2005. Pro-forma adjustments have been made based on the fair values of assets acquired and liabilities assumed as of February 16, 2007. Pro-forma revenue includes a $2.8 million increase due to the timing of recognizing deferred revenue write-downs and customer contracts where the product was delivered prior to the acquisition date. Pro-forma net income includes a $0.7 million increase due to the timing of recognizing revenue write-downs and related deferred cost of sales write-downs, amortization of intangible assets related to the acquisition of $2.2 million, and interest expense for debt used to purchase @Road of $1.4 million. The year to date amounts provided herein include adjustments to previously filed pro-forma numbers in the Company’s 10-Q’s. |
| (b) | The pro-forma results of operations represent the Company’s results for fiscal 2006 together with @Road’s historical results had they been combined as of December 31, 2005. Pro-forma adjustments have been made based on the fair values of assets acquired and liabilities assumed as of the acquisition date of February 16, 2007. Pro-forma revenue for fiscal 2006 includes a $22.0 million decrease due to deferred revenue write-downs and customer contracts for which the product was delivered prior to the acquisition date. Pro-forma net income for fiscal 2006 includes revenue write-downs and related deferred cost of sales write-downs of $3.1 million, amortization of intangible assets related to the acquisition of $18.3 million, and interest expense for debt used to purchase @Road of $11.2 million. |
Other Acquisitions
The following is a summary of other acquisitions made by Trimblethe Company during fiscal 2004,
20032007, 2006 and 20022005 all of which were accounted for as purchases:
| Acquisition | | Primary Service or Product | | Operating Segment | | Acquisition Date
- ----------- -------------------------- ----------------- ----------------
LeveLite Low-end construction instrument products |
| HHK Datentechnik GmbH | | Office and field software solutions for the cadastral survey market | | Engineering & Construction August 15, 2002
Applanix Inertial navigation systems | | December 19, 2007 |
| UtilityCenter | | Field service management software for utilities | | Field Solutions | | November 8, 2007 |
| Ingenieurbüro Breining GmbH | | Office and GPS Portfolio Technologies July 7, 2003
MENSI S.A. 3D laser scanning technology field software solutions for the cadastral survey market | | Engineering & Construction December 9, 2003
TracerNET Corp. Wireless fleet | | September 19, 2007 |
| Inpho GmbH | | Photogrammetry and digital surface modeling software for aerial surveying, mapping and remote sensing applications | | Engineering & Construction | | February 13, 2007 |
| Spacient Technologies, Inc. | | Enterprise field service management and mobile mapping solutions | | Field Solutions | | November 21, 2006 |
| Meridian Project Systems, Inc. | | Enterprise project management and lifecycle software | | Engineering & Construction | | November 7, 2006 |
| XYZ Solutions, Inc. | | Real-time, interactive 3D intelligence software | | Engineering & Construction | | October 27, 2006 |
| Visual Statement, Inc. | | Desktop software tools | | Mobile Solutions March 5, 2004
GeoNav GmbH Customized field data collection solutions | | October 11, 2006 |
| Intransix | | Mobile GPS applications | | Advanced Devices | | April 21, 2006 |
| BitWyse Solutions, Inc. | | Engineering and construction information management software | | Engineering & Construction July | | May 1, 2006 |
| Eleven Technology, Inc. | | Mobile application software | | Mobile Solutions | | April 28, 2006 |
| Quantm International, Inc. | | Transportation route optimization solution | | Engineering & Construction | | April 5, 2004
2006 |
XYZs of GPS, Inc. | | Real-time Global Navigation Satellite System | | Engineering & Construction | | February 26, 2006 |
| Advanced Public Safety, Inc. | | Mobile and handheld software for public safety | | Mobile Solutions | | December 30, 2005 |
| MobileTech Solutions, Inc. | | Field workforce automation solutions | | Mobile Solutions | | October 25, 2005 |
| Apache Technologies, Inc. | | Laser detection technology | | Engineering & Construction | | April 19, 2005 |
| Pacific Crest Corporation | | Wireless data communication systems | | Engineering & Construction | | January 10, 2005 |
The Consolidated Financial Statements include the operating results of each businessof these businesses from the date of acquisition. Pro formaPro-forma results of operations have not been presented because the effects of each of these acquisitions were not material to the Company'sCompany’s results.
The total purchase consideration for each of the above acquisitions was allocated to the assets acquired and liabilities assumed based on their estimated fair values as of the date of acquisition. The fair value of intangible assets acquired is generally determined based on a discounted cash flow analysis performed by third-party experts. Acquisition costs directly related to the acquisitions were capitalized.
At the date of each acquisition, the projects associated with in-process research and development (IPR&D) efforts had not yet reached technological feasibility and the research and development in process had no alternative future uses. Accordingly, the value assigned to these IPR&D amounts were charged to expense on the respective acquisition date of each of the acquired companies. The Company recorded IPR&D expense of $1.9 million and $1.1 million relating to acquisitions made in fiscal 2006 and 2005, respectively. The IPR&D of $2.1 million recorded during fiscal 2007 related entirely to the acquisition of @Road.
The following table summarizes the
Company'sCompany’s business combinations completed during fiscal years
2004, 20032007, 2006 and
20022005 other than @Road (in thousands):
December 31, January 2, January 3,
Fiscal Years Ended 2004 2004 2003
- ------------------ ---- ---- ----
Purchase price $ 12,246 $ 22,352 $ 8,880
Acquisition costs 279 810 144
Restructuring costs - - 555
---------- ---------- --------
Total purchase price $ 12,525 $ 23,162 $ 9,579
Purchase price allocation:
Fair value of tangible net assets
acquired $ 194 $ 5,176 $ 6,115
Deferred tax 2,455 (1,153) -
Identified intangible assets 2,117 3,440 -
Goodwill 7,759 15,699 3,464
----- ------ -----
Total $ 12,525 $ 23,162 $ 9,579
========== ========== ========
Purchase consideration for the acquisition in fiscal 2002 included 655,626
shares of common stock and additional earn-out payments not to exceed $3.9
million (in common stock and cash payment) based on future revenues derived from
existing product sales to a certain customer and a share | | | December 28, | | | December 29, | | | December 30, | |
| Fiscal Years Ended | | 2007 | | | 2006 | | | 2005 | |
| | | | | | | | | | |
| Purchase price | | $ | 49,311 | | | $ | 114,442 | | | $ | 63,830 | |
| Acquisition costs | | | 956 | | | | 2,650 | | | | 466 | |
| Total purchase price | | $ | 50,267 | | | $ | 117,092 | | | $ | 64,296 | |
| | | | | | | | | | | | | |
| Purchase price allocation: | | | | | | | | | | | | |
| Fair value of net assets acquired | | $ | 9,504 | | | $ | 7,960 | | | $ | 9,797 | |
| Identified intangible assets | | | 19,937 | | | | 51,613 | | | | 21,171 | |
| In-Process Research & Development | | | -- | | | | 1,930 | | | | 1,100 | |
| Deferred tax liability | | | (2,763 | ) | | | (14,723 | ) | | | (8,560 | ) |
| Goodwill | | | 23,589 | | | | 70,312 | | | | 40,788 | |
| Total | | $ | 50,267 | | | $ | 117,092 | | | $ | 64,296 | |
None of the payments
received from the settlement of potential litigation. As of December 31, 2004,
the total earn-out amount was approximately $3.2 million resulting in additionalamounts assigned to goodwill and a purchase price of approximately $8.9 million.
The purchase considerationabove are expected to be deductible for Applanix consisted of 1,154,240 shares of Trimble
common stock, of which 1,083,294 are issued. Former Applanix shareholders have
the right to receive the 17,214 shares of Trimble common stock upon the
surrender of exchangeable shares of a Trimble subsidiary and another 53,732
pursuant to meeting performance criteria under the terms of the agreement.
The MENSI S.A. acquisition agreement provides for Trimble to maketax purposes.
Certain acquisitions include additional earn-out cash payments not to exceed Euro 3 million (approximately US$3.7
million on December 9, 2003) based on future revenue derived from existing product sales. As of December 31, 2004, the totalproducts. These earn-out amount was
approximately $0.7 million resulting inpayments are considered additional goodwill and a purchase price consideration. Earn-out cash payments made for fiscal 2007, fiscal 2006 and fiscal 2005 were $11.8 million, $4.5 million and $1.6 million respectively. Earn-outs and changes in purchase price allocation estimates were recorded as purchase price adjustments and goodwill adjustments. Acquisitions made by the Company have additional potential earn-out cash payments in excess of that recorded on the Company’s Consolidated Balance Sheet not to exceed approximately $5.0$53.6 million.
Intangible Assets
The following tables present details of the
Company'sCompany’s total intangible assets:
December 31, January 2,
As of 2004 2004
- ----- ---- ----
(In thousands)
Intangible assets:
Intangible assets with definite life:
Existing technology $ 35,037 $ 32,389
Trade names, trademarks, patents, backlog and other intellectual
properties 22,111 20,911
------ ------
Total intangible assets with definite life 57,148 53,300
Less accumulated amortization (43,313) (33,559)
------- -------
Total net intangible assets $ 13,835 $ 19,741
=========== ==========
| | | December 28, 2007 | |
| | | | | | | | | | |
| | | Gross | | | | | | | |
| | | Carrying | | | Accumulated | | | Net Carrying | |
| (in thousands) | | Amount | | | Amortization | | | Amount | |
| Developed product technology | | $ | 157,394 | | | $ | (58,273 | ) | | $ | 99,121 | |
| Trade names and trademarks | | | 19,192 | | | | (12,490 | ) | | | 6,702 | |
| Customer relationships and other intellectual properties | | | 124,281 | | | | (32,327 | ) | | | 91,954 | |
| | | $ | 300,867 | | | $ | (103,090 | ) | | $ | 197,777 | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | | December 29, 2006 | |
| | | | | | | | | | | | | |
| | | Gross | | | | | | | | | |
| | | Carrying | | | Accumulated | | | Net Carrying | |
| (in thousands) | | Amount | | | Amortization | | | Amount | |
| Developed product technology | | $ | 92,430 | | | $ | (38,604 | ) | | $ | 53,826 | |
| Trade names and trademarks | | | 11,845 | | | | (10,687 | ) | | | 1,158 | |
| Customer relationships and other intellectual properties | | | 25,845 | | | | (13,657 | ) | | | 12,188 | |
| | | $ | 130,120 | | | $ | (62,948 | ) | | $ | 67,172 | |
Total intangible assets before accumulated amortization increased by $170.7 million primarily due to $167.0 million in intangible assets purchased in connection with @Road and other acquisitions in fiscal 2007 and $3.7 million in foreign exchange rate translation impact on non-US currency denominated intangible assets. Accumulated amortization increased by $40.1 million primarily due to amortization expenses of $38.7 million and $1.4 million in foreign exchange rate translation impact on non-US currency denominated intangible assets. The weighted-average amortization period is six years for developed product technology, eight years for trade names and trademarks, and seven years for customer relationships and other intellectual properties.
The following table presents details of the amortization expense of purchased and other intangible assets as reported in the Consolidated Statements of Income:
December 31, January 2, January 3,
Fiscal Years Ended 2004 2004 2003
- ------------------ ---- ---- ----
(In thousands)
Reported as:
Cost
| Fiscal Years Ended | | December 28, 2007 | | | December 29, 2006 | | | December 30, 2005 | |
| (In thousands) | | | | | | | | | |
| | | | | | | | | | |
| Reported as: | | | | | | | | | |
| Cost of sales | | $ | 19,778 | | | $ | 5,353 | | | $ | 165 | |
| Operating expenses | | | 18,966 | | | | 7,906 | | | | 6,855 | |
| Total | | $ | 38,744 | | | $ | 13,259 | | | $ | 7,020 | |
Total amortization expense of sales $ 183 $ 604 $ 868
Operating expenses 8,327 7,312 8,300
----- ----- -----
Total $ 8,510 $ 7,916 $ 9,168
intangible assets for fiscal 2007 increased by $25.5 million primarily due to an increase in intangible assets purchased in connection with acquisitions in fiscal 2007.
The estimated future amortization expense of intangible assets as of December 31, 2004,28, 2007, is as follows (in thousands):
Amortization
Expense
-------
2005 $ 6,581
2006 2,784
| | | Amortization Expense | |
| 2008 | | $ | 42,071 | |
| 2009 | | | 38,489 | |
| 2010 | | | 36,242 | |
| 2011 | | | 31,380 | |
| 2012 | | | 23,067 | |
| Thereafter | | | 26,528 | |
| Total | | $ | 197,777 | |
Goodwill
The changes in the carrying amount of goodwill for fiscal 2007 1,980
2008 1,080
2009 967
Thereafter 443
---------
Total $ 13,835
=========
Goodwill
Goodwill consistedare as follows (in thousands):
| | | Engineering and Construction | | | Field Solutions | | | Mobile Solutions | | | Advanced Devices | | | Total | |
| Balance as of December 29, 2006 | | $ | 296,597 | | | $ | 1,517 | | | $ | 63,430 | | | $ | 12,966 | | | $ | 374,510 | |
| Additions due to acquisitions | | | 19,921 | | | | 3,668 | | | | 265,018 | | | | -- | | | | 288,607 | |
| Purchase price adjustments | | | (5,630 | ) | | | 39 | | | | 7,784 | | | | -- | | | | 2,193 | |
| Foreign currency translation adjustments | | | 6,998 | | | | -- | | | | 1,429 | | | | 2,113 | | | | 10,540 | |
| Balance as of December 28, 2007 | | $ | 317,886 | | | $ | 5,224 | | | $ | 337,661 | | | $ | 15,079 | | | $ | 675,850 | |
The purchase price adjustments relate entirely to previous business acquisitions. Of the total purchase price adjustments of
the following:
December 31, January 2,
As of 2004 2004
- ----- ---- ----
(In thousands)
Goodwill, Spectra Precision acquisition $ 212,915 $ 205,562
Goodwill, other acquisitions 46,607 35,863
------ ------
Goodwill $ 259,522 $ 241,425
The increase in goodwill of approximately $18.1$2.2 million
recorded during fiscal
2004 was
primarily due to the acquisition2007, earn-out payments of
TracerNET and GeoNav of approximately $7.8$11.8 million and
the foreign exchange rate impactchanges in purchase price allocation estimates of
approximately $9.2$0.3 million
on
non-US currency denominated goodwill assets. See Note 7were offset by a decrease of
the Notes to the
Consolidated Financial Statements$9.9 million for
additional information regarding Trimble's
goodwill by operating segment.
tax adjustments. NOTE 5: JOINT VENTURE
VENTURES
Caterpillar Trimble Control Technologies Joint Venture
On April 1, 2002, Caterpillar Trimble Control Technologies LLC ("CTCT")(CTCT), a joint venture formed by Trimblethe Company and Caterpillar began operations. CTCT baseddevelops advanced electronic guidance and control products for earth moving machines in Dayton, Ohio,the construction and mining industries. The joint venture is 50% owned by Trimblethe Company and 50% owned by Caterpillar, with equal voting rights. It develops and markets next generation advanced electronic
guidance and control products for earthmoving machines in the construction,
mining, and waste industries. Under the terms of theThe joint venture agreement,
Caterpillar contributed $11.0 million cash plus selected technology,is accounted for a total
contributed value of $14.5 million, and Trimble contributed selected existing
machine control product technologies valued at $25.5 million. Additionally, both
companies have licensed patents and other intellectual property from their
portfolios to CTCT. During the first fiscal quarter of 2002, Trimble received a
special cash distribution of $11.0 million from CTCT.
Trimble has recorded the cash distribution of $11.0 million as a deferred gain,
being amortized to the extent that losses are attributable from CTCT under the equity method of accounting. When and if CTCT is profitable on a sustainable
basis and future operating losses are not anticipated, Trimble will recognizeUnder the un-amortized portion ofequity method, the $11.0 million as a gain. To the extent that it
is possible that the Company will have any future-funding obligation relating to
CTCT, then the relevant amount of the $11.0 million will be deferred until such
a time, as the funding obligation no longer exists. This un-amortized portion of
the deferred gain was approximately $9.2 million at December 31, 2004 and $9.8
million at January 2, 2004. Both Trimble'sCompany’s share of profits (losses) under the
equity method and the amortization of the $11.0 million deferred gainlosses are included in expense for affiliated operations,Income from joint ventures in the Non-operating income, net insection of the Consolidated Statements of Income. The expenses for affiliated operationsCompany recorded a profit of $7.8 million and $5.7 million and a loss of $0.2 million as its proportionate share of CTCT net income (loss) in fiscal 2007, 2006 and 2005, respectively. During fiscal 2007, 2006 and 2005, dividends received from CTCT, amounted to $2.3 million, $2.0 million and $0 million, and were recorded against Other non-current assets on the Consolidated Balance Sheets. The carrying amount of the investment in CTCT was $9.6 million at CTCT also includes incremental costsDecember 28, 2007 and $4.1 million at December 29, 2006, and is included in Other non-current assets on the Consolidated Balance Sheets.
The Company acts as a result of purchasing productscontract manufacturer for CTCT. Products are manufactured based on orders received from CTCT and are sold at direct cost plus a higher price than Trimble's
original manufacturingmark-up for the Company’s overhead costs partially offset by contract manufacturing fees
charged to CTCT. CTCT then resells products at cost plus a mark-up in consideration for CTCT’s research and development efforts to both Caterpillar and to the Company for sales through their respective distribution channels. Generally, the Company sells products through its after-market dealer channel, and Caterpillar sells products for factory and dealer installation. CTCT does not have net inventory on its balance sheet in that the resale of products to Caterpillar and the Company occur simultaneously when the products are purchased from the Company. In fiscal 2007 and 2006, the Company recorded $11.5 million and $8.4 million of revenue, respectively, and $10.3 million and $7.3 million of cost of sales, respectively, for the manufacturing of products sold by the Company to CTCT and then sold through the Caterpillar distribution channel. In addition, Trimblein fiscal 2007 and 2006, the Company recorded $25.1 million and $19.5 million in net cost of sales for the manufacturing of products sold by the Company to CTCT and then repurchased by the Company upon sale through the Company’s distribution channel. Prior to the first fiscal quarter of 2006, these transactions were included in income (expense) for joint ventures, net in the non-operating income (expense) section of the Consolidated Statements of Income. The change in presentation resulted from the Company’s assessment of CTCT’s advancement and ability to function as a stand-alone company. The amount recognized for the manufacturing of products sold to CTCT was $7.8 million is fiscal 2005 and the related cost was $6.8 million. As mentioned above, both amounts were included in income (expense) from joint ventures, net in non-operating income (expense). Also in fiscal 2005, $13.2 million was recorded as net cost of sales for the manufacturing of products sold by the Company to CTCT and then repurchased by the Company upon sale through the Company’s distribution channel.
In addition, the Company received reimbursement of employee-related costs from CTCT for
Trimblecompany employees
devoteddedicated to
CTCT. Reimbursed costs totaledCTCT or performance of work for CTCT totaling $13.7 million, $13.5 million and $9.7 million
$7.9 million,for fiscal 2007, 2006 and
$3.9 million in fiscal 2004, 2003, and 2002,2005, respectively. The reimbursements were offset against operating expenses.
December 31, January 2, January 3,
Fiscal Years Ended 2004 2004 2003
- ------------------ ---- ---- ----
(In millions)
CTCT incremental pricing effects, net $ 8.8 $ 5.9 $ 4.0
Trimble's 50% share of CTCT's reported (gain) loss 0.5 0.9 0.2
Amortization of deferred gain (0.7) (0.9) (0.2)
---- ---- -----
Total CTCT expense for affiliated operations, net $ 8.6 $ 5.9 $ 4.0
======= ======= ========
At December 28, 2007 and December 29, 2006, the Company had amounts due to and from CTCT. Receivables and payables to CTCT are settled individually with terms comparable to other non-related parties. The net outstanding balanceamounts due to and from CTCT was $0.7are presented on a gross basis in the Consolidated Balance Sheets. At December 28, 2007 and December 29, 2006, the receivables from CTCT were $5.6 million at December 31, 2004
and $0.8$4.7 million, at January 2, 2004respectively, and isare included in account receivables,within Accounts receivable, net, on the Consolidated Balance Sheets. As of the same dates, the payables due to CTCT were $5.2 million and $4.4 million, respectively, and are included within Accounts payable on the Consolidated Balance Sheets.
Nikon-Trimble Joint Venture
On March 28, 2003, Trimble and Nikon Corporation entered into an agreement to
formNikon-Trimble Co., Ltd (Nikon-Trimble), a joint venture in Japan, Nikon-Trimble Co., Ltd., which assumedwas formed by the operations ofCompany and Nikon Geotecs Co., Ltd., a Japanese subsidiary of Nikon
Corporation and Trimble Japan KK, a Japanese subsidiary of Trimble.
Nikon-TrimbleCorporation. The joint venture began operations in July 2003.2003 and is 50% owned by the Company and 50% owned by Nikon, with equal voting rights. It focuses on the design and manufacture of surveying instruments including mechanical total stations and related products. In Japan, this
The joint venture
distributes Nikon's survey
products as well as Trimble's products. Outside Japan, Trimble is
accounted for under the
exclusive
distributorequity method of
Nikon survey and construction products.accounting. Under the
termsequity method, the Company’s share of profits and losses are included in Income from joint ventures in the Non-operating income (expense) section of the
Consolidated Statements of Income. In fiscal 2007, 2006 and 2005, the Company recorded a profit of $0.6 million, a profit of $1.3 million and a loss of $36,000, respectively, as its proportionate share of Nikon-Trimble
agreement, Nikon contributed approximately
$10net income (loss). During fiscal 2007, 2006 and 2005, dividends received from Nikon-Trimble, amounted to $0.6 million,
in cash, while Trimble contributed approximately $4.1$0.3 million
in
cash and
349,251 common stock shares valued at approximately $5.9 million. The
Nikon-Trimble joint venture purchased certain tangible$0.5 million, and
intangiblewere recorded against Other non-current assets
from Nikon Geotecs Co., Ltd. and Trimble Japan KK.on the Consolidated Balance Sheets. The carrying amount of the investment
in Nikon-Trimble was approximately
$13.5$13.4 million at December
31, 200428, 2007 and
$10.7$14.0 million at
January 2, 2004.
Nikon-Trimble is 50% owned by Trimble and 50% owned by Nikon, with equal voting
rights. Trimble has adopted the equity method of accounting for its investment
in Nikon-Trimble, with its share of profit or loss from this joint venture
included in expenses for affiliated operations, net in the Consolidated
Statements of Income. During fiscal 2004, Trimble recorded a profit of
approximately $1.1 million as its proportionate share of the net income. During
fiscal 2003, and the first year of the joint venture's operations, Trimble's
proportionate share of the net loss was $0.3 million.
At December 31, 2004, the net payable by Trimble to Nikon-Trimble related to the
purchase and sale of products from and to Nikon-Trimble is $2.5 million29, 2006, and is included in accountsOther non-current assets on the Consolidated Balance Sheets. Nikon-Trimble is the distributor in Japan for Nikon and the Company’s products. The Company is the exclusive distributor outside of Japan for Nikon branded survey products. For products sold by the Company to Nikon-Trimble, revenue is recognized by the Company on a sell-through basis from Nikon-Trimble to the end customer. Profits from these inter-company sales are eliminated.
The terms and conditions of the sales of products from the Company to Nikon-Trimble are comparable with those of the standard distribution agreements which the Company maintains with its dealer channel and margins earned are similar to those from third party dealers. Similarly, the purchases of product by the Company from Nikon-Trimble are made on terms comparable with the arrangements which Nikon maintained with its international distribution channel prior to the formation of the joint venture with the Company. The Company recorded $12.6 million, $13.9 million and $9.1 million of revenue, and $6.7 million, $6.6 million and $4.0 million of cost of sales for the manufacturing of products sold by the Company to Nikon-Trimble.
At December 28, 2007 and December 29, 2006, the Company had amounts due to and from Nikon-Trimble. Receivables and payables to Nikon-Trimble are settled individually with terms comparable to other non-related parties. The amounts due to and from Nikon-Trimble are presented on a gross basis in the Consolidated Balance Sheets. At December 28, 2007 and December 29, 2006, the amounts due from Nikon-Trimble were $3.3 million and $1.5 million, respectively, and are included within Accounts receivable, net on the Consolidated Balance Sheets. As of the same dates, the amounts due to Nikon-Trimble were $5.7 million and $1.1 million, respectively, and are included within Accounts payable on the Consolidated Balance Sheets. At January 2,
2004, the outstanding balance from Nikon-Trimble due to Trimble was
approximately $1.4 million related to the transfer of certain tangible and
intangible assets from Trimble Japan KK, included in accounts and other
receivables, net and $2.0 million net payable by Trimble to Nikon-Trimble
related to the purchase and sale of products from and to Nikon-Trimble included
in accrued liabilities on the Consolidated Balance Sheets.
NOTE 6: CERTAIN BALANCE SHEET COMPONENTS
The following tables provide details of selected balance sheet items (in thousands):
| | | December 28, | | | December 29, | |
| As of | | 2007 | | | 2006 | |
| Inventories: | | | | | | |
| Raw materials | | $ | 63,465 | | | $ | 66,853 | |
| Work-in-process | | | 9,267 | | | | 6,181 | |
| Finished goods | | | 70,286 | | | | 39,518 | |
| Total | | $ | 143,018 | | | $ | 112,552 | |
Deferred costs of revenue are included within finished goods and were $11.0 million at December 31, January 2,
28, 2007 and $2.9 million at December 29, 2006, of which $8.3 million and none, respectively, are related to products that include services and will be recognized ratably over the term of the subscription period.
| Property and equipment, net: | | | | | | |
| Machinery and equipment | | $ | 79,956 | | | $ | 79,238 | |
| Furniture and fixtures | | | 10,974 | | | | 12,399 | |
| Leasehold improvements | | | 15,391 | | | | 13,124 | |
| Buildings | | | 6,527 | | | | 5,689 | |
| Land | | | 1,384 | | | | 1,231 | |
| | | | 114,232 | | | | 111,681 | |
| Less accumulated depreciation | | | (62,788 | ) | | | (63,683 | ) |
| Total | | $ | 51,444 | | | $ | 47,998 | |
During the year, accumulated depreciation decreased by $0.9 million primarily due to the write-off of fully depreciated assets and disposals in the amount of $20.8 million, offset by $17.2 million in depreciation expense and $2.7 million in foreign exchange translation rate impact.
| Other Non-Current Liabilities: | | | | | | |
| Deferred compensation | | $ | 8,646 | | | $ | 5,887 | |
| Pension | | | 6,646 | | | | 6,616 | |
| Deferred rent | | | 5,215 | | | | 5,327 | |
| Unrecognized tax benefits | | | 25,774 | | | | - | |
| Other non-current liabilities | | | 9,847 | | | | 9,689 | |
| Total | | $ | 56,128 | | | $ | 27,519 | |
As of 2004 2004
- ----- ---- ----
Inventories:
Raw materials $ 26,062 $ 20,927
Work-in-process 3,989 3,876
Finished goods 57,694 46,023
------ ------
Total $ 87,745 $ 70,826
=========== =========
PropertyDecember 28, 2007, the Company has $25.8 million of unrecognized tax benefits included in Other non-current liabilities that, if recognized, would favorably impact the effective income tax rate in future periods and equipment, net:
Machinery and equipment $ 71,882 $ 66,634
Furniture and fixtures 10,521 9,085
Leasehold improvements 5,861 4,502
Buildings 5,297 5,396
Land 1,231 1,231
----- -----
94,792 86,848
Less accumulated depreciation (63,801) (59,469)
------- -------
Total $ 30,991 $ 27,379
=========== =========interest and/or penalties related to income tax matters. As of December 29, 2006 these balances were included in Income taxes payable on the Consolidated Balance Sheets. As of December 28, 2007, this liability is classified in Other current assets:
Prepaid expenses $ 5,775 $ 5,122
Other 2,103 3,725
----- -----
Total $ 7,878 $ 8,847
=========== =========
non-current liabilities in the Consolidated Balance Sheets.
NOTE 7: OPERATINGREPORTING SEGMENT AND GEOGRAPHIC INFORMATION
Trimble is a designer and distributor of positioning products and applications enabled by GPS, optical, laser, and wireless communications technology. The Company provides products for diverse applications in its targeted markets.
To achieve distribution, marketing, production, and technology advantages,
in
Trimble's targeted markets, the Company manages its operations in the following
fivefour segments:
o Engineering and Construction -- Consists of products currently used by
survey and construction professionals in the field for positioning data
collection, field computing, data management, and automated machine
guidance and control. These products provide solutions for numerous
construction applications including surveying, general construction, site
preparation and excavation, road and runway construction, and underground
construction. During the third quarter of fiscal 2004 the Company acquired
GeoNav GmbH and its performance is reported in this business segment
o Field Solutions -- Consists of products that provide solutions in a variety
of agriculture and fixed asset applications, primarily in the areas of
precise land leveling, machine guidance, yield monitoring, variable-rate
applications of fertilizers and chemicals, and fixed asset data collection
for a variety of governmental and private entities. This segment is an
aggregation of the mapping and geographic information systems (GIS) and
agriculture businesses. Trimble has aggregated these business operations
under a single general manager in order to continue to leverage its
research and development activities due to the similarities of products
across the segment.
o Component Technologies -- Consists of products including proprietary
chipsets, printed circuit boards, modules, and licenses of intellectual
property. The applications into which end users currently incorporate the
component products include timing applications for synchronizing wireless
networks, in-vehicle navigation and telematics systems, fleet management,
security systems, data collection networks, and wireless handheld consumer
products.
o Mobile Solutions -- Consists of products that enable end users to monitor
and manage their mobile assets by communicating location and
activity-relevant information from the field to the office. Trimble offers
a range of products that address a number of sectors of this market
including truck fleets, security, telematics, and public safety vehicles.
During the first quarter of fiscal 2004 the Company acquired TracerNET and
its performance is reported in this business segment.
o Portfolio Technologies -- The various operations that comprise this segment
were aggregated on the basis that no single operation accounted for more
than 10% of Trimble's total revenue. During the first two fiscal quarters
of 2003, this segment was comprised solely of the Military and Advanced
Systems business. During the third quarter of fiscal 2003 the Company
completed the acquisition of Applanix and its performance is reported in
this business segment. During the fourth quarter of fiscal 2004 the Company
introduced Trimble Outdoors and its performance is reported in this
business segment.
| · | Engineering and Construction — Consists of products currently used by survey and construction professionals in the field for positioning, data collection, field computing, data management, and machine guidance and control. The applications served include surveying, road, runway, construction, site preparation and building construction. |
| · | Field Solutions — Consists of products that provide solutions in a variety of agriculture and geographic information systems (GIS) applications. In agriculture these include precise land leveling and machine guidance systems. In GIS they include handheld devices and software that enable the collection of data on assets for a variety of governmental and private entities. |
| · | Mobile Solutions — Consists of products that enable end users to monitor and manage their mobile assets by communicating location and activity-relevant information from the field to the office. Trimble offers a range of products that address a number of sectors of this market including truck fleets, security, and public safety vehicles. |
| · | Advanced Devices — The various operations that comprise this segment were aggregated on the basis that no single operation accounted for more than 10% of Trimble’s total revenue, operating income and assets. This segment is comprised of the Component Technologies, Military and Advanced Systems, Applanix and Trimble Outdoors businesses. |
Trimble evaluates each of its segment's performance and allocates resources based on profit and losssegment operating income from operations before income taxes, and some corporate allocations. Trimble and each of its segments employ the sameconsistent accounting policies.
In the first quarter of 2006, Trimble combined the operating results of the former Components Technologies and Portfolio Technologies segments and included the combined operating results in the Advanced Devices segment. The change in presentation was made in recognition of the small size of each of the businesses relative to the total company. The presentation of prior period’s segment operating results has been changed to conform to the Company’s current segment presentation.
The following table presents revenues, operating income (loss), and identifiable assets for the
fivefour segments. Operating income (loss) is net revenue less operating expenses, excluding general corporate expenses, amortization
in-process research and development expenses, restructuring charges, non-operating income (expense), and income taxes. The identifiable assets that Trimble's
chief operating decision makerChief Operating Decision Maker views by segment are accounts receivable and inventory.
December 31, January 2, January 3,
Fiscal Years Ended 2004 2004 2003
- ------------------ ---- ---- ----
(in thousands)
Engineering & Construction
Revenue $ 440,478 $ 367,058 $ 319,615
Operating income before corporate allocations 79,505 60,664 53,453
Accounts receivable 90,743 84,897 73,474
Inventories 65,116 56,008 46,332
Goodwill 238,801 229,287 205,933
Field Solutions
Revenue 105,591 79,879 67,259
Operating income before corporate allocations 25,151 14,500 9,676
Accounts receivable 19,141 16,589 11,598
Inventories 7,016 3,398 7,337
Component Technologies
Revenue 65,522 64,193 59,755
Operating income before corporate allocations 13,880 16,560 10,673
Accounts receivable 9,377 10,003 11,276
Inventories 5,271 2,021 2,853
Mobile Solutions
Revenue 23,531 12,981 8,486
Operating loss before corporate allocations (5,997) (6,452) (12,039)
Accounts receivable 9,073 4,103 1,960
Inventories 5,735 3,038 1,986
Goodwill 7,660 - -
Portfolio Technologies
Revenue 33,686 16,792 11,487
Operating income (loss) before corporate allocations 4,866 (1,686) 557
Accounts receivable 8,283 7,321 1,966
Inventories 4,607 6,361 2,636
Goodwill 13,061 12,138 -
Total
Revenue $ 668,808 $ 540,903 $ 466,602
Operating income before corporate allocations 117,405 83,586 62,320
Accounts receivable (1) 136,617 122,913 100,274
Inventories 87,745 70,826 61,144
Goodwill 259,522 241,425 205,933
| | | December 28, | | | December 29, | | | December 30, | |
| Fiscal Years Ended | | 2007 | | | 2006 | | | 2005 | |
| (in thousands) | | | | | | | | | |
| Engineering & Construction | | | | | | | | | |
| Revenue | | $ | 743,291 | | | $ | 637,118 | | | $ | 524,461 | |
| Operating income | | | 174,177 | | | | 136,157 | | | | 117,993 | |
| Accounts receivable | | | 165,183 | | | | 132,613 | | | | 112,157 | |
| Inventories | | | 89,780 | | | | 82,827 | | | | 80,590 | |
| Goodwill | | | 317,886 | | | | 296,597 | | | | 229,176 | |
| Field Solutions | | | | | | | | | | | | |
| Revenue | | $ | 200,614 | | | $ | 139,230 | | | $ | 127,843 | |
| Operating income | | | 60,933 | | | | 37,377 | | | | 32,527 | |
| Accounts receivable | | | 38,225 | | | | 21,016 | | | | 21,823 | |
| Inventories | | | 15,745 | | | | 10,946 | | | | 11,790 | |
| Goodwill | | | 5,224 | | | | 1,517 | | | | - | |
| Mobile Solutions | | | | | | | | | | | | |
| Revenue | | $ | 157,673 | | | $ | 60,854 | | | $ | 31,481 | |
| Operating income (loss) | | | 12,517 | | | | 2,550 | | | | (3,072 | ) |
| Accounts receivable | | | 27,978 | | | | 15,630 | | | | 10,789 | |
| Inventories | | | 18,781 | | | | 1,666 | | | | 1,983 | |
| Goodwill | | | 337,661 | | | | 63,430 | | | | 44,118 | |
| Advanced Devices | | | | | | | | | | | | |
| Revenue | | $ | 120,692 | | | $ | 102,948 | | | $ | 91,128 | |
| Operating income | | | 17,276 | | | | 10,084 | | | | 13,212 | |
| Accounts receivable | | | 19,190 | | | | 16,474 | | | | 14,033 | |
| Inventories | | | 18,712 | | | | 17,113 | | | | 13,488 | |
| Goodwill | | | 15,079 | | | | 12,966 | | | | 12,852 | |
| Total | | | | | | | | | | | | |
| Revenue | | $ | 1,222,270 | | | $ | 940,150 | | | $ | 774,913 | |
| Operating income | | | 264,903 | | | | 186,168 | | | | 160,660 | |
Accounts receivable (1) | | | 250,576 | | | | 185,733 | | | | 158,802 | |
| Inventories | | | 143,018 | | | | 112,552 | | | | 107,851 | |
| Goodwill | | | 675,850 | | | | 374,510 | | | | 286,146 | |
(1) As presented, accounts receivable represents trade receivables, gross, which are specified between segments.
The following are reconciliations corresponding to totals in the accompanying Consolidated Financial Statements:
December 31, January 2, January 3,
Fiscal Years Ended 2004 2004 2003
- ------------------ ---- ---- ----
(in thousands)
Operating income:
Total for reportable divisions $ 117,405 $ 83,586 $ 62,320
Unallocated corporate expenses (31,780) (29,651) (28,497)
------- ------- -------
Operating income $ 85,625 $ 53,935 $ 33,823
========== ========== =========
December 31, January 2,
As of 2004 2004
- ----- ---- ----
(in thousands)
Assets:
Accounts receivable total for reportable segments $ 136,617 $ 122,913
Unallocated (1) (12,679) (18,279)
------- -------
Accounts receivable, net $ 123,938 $ 104,634
========== ==========
Fiscal Years Ended | | December 28, 2007 | | | December 29, 2006 | | | December 30, 2005 | |
| (in thousands) | | | | | | | | | |
| Consolidated segment operating income | | $ | 264,903 | | | $ | 186,168 | | | $ | 160,660 | |
| Unallocated corporate expense | | | (42,914 | ) | | | (35,798 | ) | | | (27,483 | ) |
| Restructuring charges | | | (3,025 | ) | | | -- | | | | (278 | ) |
| Amortization of purchased intangible assets | | | (38,585 | ) | | | (13,074 | ) | | | (6,855 | ) |
| In-process research and development | | | (2,112 | ) | | | (1,930 | ) | | | (1,100 | ) |
| Consolidated operating income | | | 178,267 | | | | 135,366 | | | | 124,944 | |
| Non-operating expense, net | | | 5,489 | | | | 12,726 | | | | (156 | ) |
| Consolidated income before income taxes | | $ | 183,756 | | | $ | 148,092 | | | $ | 124,788 | |
| | | December 28, | | | December 29, | |
| As of | | 2007 | | | 2006 | |
| (in thousands) | | | | | | |
| Assets: | | | | | | |
| Accounts receivable total for reportable segments | | $ | 250,576 | | | $ | 185,733 | |
Unallocated (1) | | | (10,692 | ) | | | (8,679 | ) |
| Accounts receivable, net | | $ | 239,884 | | | $ | 177,054 | |
(1) Includes trade-related accruals, allowances, and cash received in advance that are not
allocatedadvance.
The distribution of the Company’s gross consolidated revenue by segment.
segment is summarized in the table below. Gross consolidated revenue includes external and internal sales. Total external consolidated revenue is reported net of eliminations of internal sales between segments.
| | | December 28, | | | December 29, | | | December 30, | |
| | | 2007 | | | 2006 | | | 2005 | |
| | | | | | | | | | |
| (In thousands) | | | | | | | | | |
| | | | | | | | | | |
| Engineering and Construction | | $ | 751,569 | | | $ | 641,352 | | | $ | 529,034 | |
| Field Solutions | | | 200,614 | | | | 139,230 | | | | 127,843 | |
| Mobile Solutions | | | 157,673 | | | | 60,854 | | | | 31,481 | |
| Advanced Devices | | | 120,431 | | | | 102,873 | | | | 91,182 | |
| Total Gross Consolidated Revenue | | | 1,230,287 | | | | 944,309 | | | | 779,540 | |
| Eliminations | | | (8,017 | ) | | | (4,159 | ) | | | (4,627 | ) |
| Total External Consolidated Revenue | | $ | 1,222,270 | | | $ | 940,150 | | | $ | 774,913 | |
The geographic distribution of
Trimble'sTrimble’s revenues and identifiable assets is summarized in the
tabletables below. Other foreign countries include Canada, and countries
withinin South and Central
America.America, the Middle East, and Africa. Revenue is defined as revenues from external customers. Identifiable assets indicated in the table below exclude inter-company receivables, investments in subsidiaries, goodwill, and intangibles assets.
Geographic Area
---------------
Europe Other
Middle East Non-US
Fiscal Years Ended US Africa Asia Countries Eliminations Total
- ------------------ -- ------ ---- --------- ------------ -----
(In thousands)
December 31, 2004
Sales to unaffiliated customers (1) $ 331,607 $ 196,737 $ 86,118 $ 54,346 $ - $ 668,808
Inter-geographic transfers 140,057 143,094 10,626 - (293,777) -
------- ------- ------ --------
Total revenue $ 471,664 $ 339,831 $ 96,744 $ 54,346 $ (293,777) $ 668,808
Identifiable assets $ 234,328 $ 117,319 $ 6,959 $ 12,697 $ - $ 371,303
January 2, 2004
Sales to unaffiliated customers (1) $ 265,846 $ 166,153 $ 70,257 $ 38,648 $ - $ 540,903
Inter-geographic transfers 112,623 116,185 - 3,755 (232,563) -
------- ------- ----- --------
Total revenue $ 378,469 $ 282,338 $ 70,257 $ 42,403 $ (232,563) $ 540,903
Identifiable assets $ 172,850 $ 91,008 $ 7,549 $ 12,330 - $ 283,737
January 3, 2003
Sales to unaffiliated customers (1) $ 235,716 $ 136,551 $ 60,878 $ 33,457 $ - $ 466,602
Inter-geographic transfers 62,843 73,625 - 4,121 (140,589) -
------ ------ ----- --------
Total revenue $ 298,559 $ 210,176 $ 60,878 $ 37,578 $ (140,589) $ 466,602
Identifiable assets $ 127,594 $ 70,057 $ 9,955 $ 5,743 $ (864) $ 212,485
| | | December 28, | | | December 29, | | | December 30, | |
| Fiscal Years Ended | | 2007 | | | 2006 | | | 2005 | |
| (in thousands) | | | | | | | | | |
| | | | | | | | | | |
| Revenue (1): | | | | | | | | | |
| United States | | $ | 608,137 | | | $ | 511,030 | | | $ | 415,443 | |
| Europe | | | 325,888 | | | | 231,428 | | | | 191,734 | |
| Asia Pacific | | | 146,545 | | | | 112,465 | | | | 88,315 | |
| Other Non-US Countries | | | 141,700 | | | | 85,227 | | | | 79,421 | |
| Total Consolidated Revenue | | $ | 1,222,270 | | | $ | 940,150 | | | $ | 774,913 | |
(1) SalesRevenue attributed to countries based on the location of the customer.
Transfers between USU.S. and non-USnon-U.S. geographic areas are made at prices based on total costs and contributions of the supplying geographic area. The Company's subsidiaries in Asia have derived revenue from commissions from USU.S. operations in each of the periods presented. These commission revenues and expenses are excluded from total revenue and operating income (loss) in the preceding table. In fiscal 2002, Germany comprised approximately 16% of sales to unaffiliated
customers. OtherNo single customer or country other than the United States no other country comprised more than
10% of sales to unaffiliated customers for any periods presented, except as
disclosed above.
Revenues by product groups are not practicable to obtain and therefore are not
presented.
No single customer accounted for 10% or more of Trimble's total revenues in fiscal years 2004, 2003,2007, 2006, and 2002.
2005.
| | | December 28, | | | December 29, | |
| As of | | 2007 | | | 2006 | |
| (in thousands) | | | | | | |
| | | | | | | |
| Identifiable assets: | | | | | | |
| United States | | $ | 381,755 | | | $ | 347,474 | |
| Europe | | | 217,422 | | | | 143,038 | |
| Asia Pacific and Other Non-US Countries | | | 36,167 | | | | 30,190 | |
| Total Identifiable Assets | | $ | 635,344 | | | $ | 520,702 | |
NOTE 8: RESTRUCTURING CHARGES
Included in Other accrued liabilities on the Company’s Consolidated Balance Sheet is a restructuring accrual of $1.3 million as of December 28, 2007. In conjunction with the Company’s acquisition of @Road, it accrued $3.6 million for severance and benefits. These restructuring costs were recorded in accordance with EITF 95-3 as part of the purchase price with no impact on the Company’s Consolidated Statement of Income. During fiscal 2007 the Company paid $2.3 million against this restructuring accrual. The remaining restructuring accrual of $1.3 million is expected to be settled by the first half of fiscal 2008.
Included in the Company’s Consolidated Statement of Income for fiscal 2007 under “Restructuring charges” is a restructuring cost of $3.0 million for charges associated with the acceleration of vesting of employee stock options for certain terminated @Road employees. Of the total amount, $1.4 million was settled in cash and $1.6 million was recorded as Shareholder’s Equity.
There were no restructuring charges recorded in fiscal 2006. Restructuring charges of $0.6 million, $2.0 million, and $1.1$0.3 million were recorded in fiscal years 2004, 2003 and 2002. The charges in fiscal 2004 were2005, primarily related to severanceoffice closure costs due to the realignment of Trimble Mobile
Solutions, Inc., while charges in fiscal 2003 were primarily related to
Trimble's Japanese office relocation due to the Nikon-Trimble joint venture
formation. As a result of these actions, the headcountintegration efforts of the affected
operations decreased by 36, 77 and 49 in fiscal 2004, 2003, and 2002,
respectively.
As of December 31, 2004, the remaining accrual balance of $0.4 million is
primarily related to severance expected to be paid in fiscal 2005. As of January
2, 2004, the restructuring accrual balance was approximately $0.4 million. The
liability for restructuring costs is recorded in other accrued liabilities in
the Consolidated Balance Sheets.
Mensi acquisition.
NOTE 9: LONG-TERM DEBT
Long-term debt consisted of the following:
December 31, January 2,
As of 2004 2004
- ----- ---- ----
(In thousands)
Credit Facilities:
Term loan $ 31,250 $ 43,750
Revolving credit facility 7,000 44,000
Promissory notes and other 746 2,736
--- -----
38,996 90,486
Less current portion of long-term debt 12,500 12,885
------ ------
Non-current portion $ 26,496 $ 77,601
============= ============
| | | December 28, | | | December 29, | |
| As of | | 2007 | | | 2006 | |
| (In thousands) | | | | | | |
| | | | | | | |
| Credit Facilities: | | | | | | |
| Term loan | | $ | 60,000 | | | $ | - | |
| Revolving credit facility | | | - | | | | - | |
| Promissory notes and other | | | 690 | | | | 481 | |
| | | | 60,690 | | | | 481 | |
| | | | | | | | | |
| Less current portion of long-term debt | | | 126 | | | | - | |
| Non-current portion | | $ | 60,564 | | | $ | 481 | |
The following summarizes the future cash payment obligations
(excluding(including interest) as of December
31, 2004:
2010 and
Total 2005 2006 2007 2008 2009 Beyond
----- ---- ---- ---- ---- ---- ------
(in thousands)
Credit Facilities:
Term loan $ 31,250 $ 12,500 $ 12,500 $ 6,250 $ - $ - $ -
Revolving credit facility 7,000 7,000 - - - - -
Promissory note and other 746 60 189 - 119 378 -
--- -- --- --- ---
Total contractual cash obligations $ 38,996 $ 19,560 $ 12,689 $ 6,250 $ 119 $ 378 $ -
========= ========== ========= ========= ========= ======== ==========
28, 2007:
| | | | | | | | | | | | | | | | | | | | | 2012 and | |
| | | Total | | | 2008 | | | 2009 | | | 2010 | | | 2011 | | | 2012 | | | Beyond | |
| (in thousands) | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | |
| Term Loan and other | | | 70,220 | | | | 3,203 | | | | 3,448 | | | | 17,301 | | | | 21,268 | | | | 25,000 | | | | - | |
| Total contractual cash obligations | | $ | 70,220 | | | $ | 3,203 | | | $ | 3,448 | | | $ | 17,301 | | | $ | 21,268 | | | $ | 25,000 | | | $ | - | |
Credit Facilities
On June 25, 2003, Trimble obtainedJuly 28, 2005, the Company entered into a $175$200 million securedunsecured revolving credit agreement (the 2005 Credit Facility ("2003
Credit Facility") fromFacility) with a syndicate of nine10 banks with The Bank of Nova Scotia as the administrative agent. The funds available under the 2005 Credit Facility may be used for our general corporate purposes and up to repay$25 million of the 2005 Credit Facility may be used for letters of credit. The Company incurred a Subordinated Notecommitment fee when the 2005 Credit Facility was not used. The commitment fee is not material to the Company’s results during all periods presented.
On February 16, 2007, the Company amended and refinancerestated its existing $200 million unsecured revolving credit agreement with a syndicate of senior, secured credit facilities obtained in July11 banks with The Bank of 2000. The 2003Nova Scotia as the administrative agent (the 2007 Credit Facility). Under the 2007 Credit Facility, is also used for ongoing working capital and
general corporate needs.
At December 31, 2004, Trimble had approximately $38.3 million of borrowingsthe Company exercised the option in the existing credit agreement to increase the availability under the 2003 Credit Facility, comprisedrevolving credit line by $100 million, for an aggregate availability of a $31.3up to $300 million, term loan and $7.0
million of a $125 million revolver. The Company has access to an additional $118
million of cash underextended the termsmaturity date of the revolving credit facility. The Company
has commitment fees online by 18 months, from July 2010 to February 2012. Up to $25 million of the unused portion of 0.5% if the Leverage Ratio (which
is defined as total indebtedness to Earnings before Interest, Taxes,
Depreciation and Amortization (EBITDA), as defined in the related agreement) is
2.0 or greater and 0.375% if the Leverage Ratio is less than 2.0.
Pricing of interest for borrowingsavailability under the 2003revolving credit line may be used to issue letters of credit, and up to $20 million may be used for swing line loans. In addition, during the first quarter of fiscal 2007 the Company incurred a five-year term loan under the 2007 Credit Facility asin an aggregate principal amount of December
31, 2004 is$100 million, which will mature concurrently with the revolving credit line. The term loan will be repaid in quarterly installments, with principal being amortized at LIBOR plusthe following annual rates: year 1 at 10%, year 2 at 15%, year 3 at 15%, year 4 at 20%, year 5 at 20%, and the last quarterly payment to be made at maturity, together with a spreadfinal payment of 1.50%20%. The spread is tied to a formula
based onmaximum leverage ratio under the Leverage Ratio.
The2007 Credit Facility is secured by all of3.00:1. The funds available under the Company's material assets, except
for assets that are subject to foreign tax considerations. Financial covenants
of the 2003new 2007 Credit Facility include leverage, fixed charge,may be used by the Company for acquisitions, stock repurchases, and minimum net
worth tests. Atgeneral corporate purposes.
As of December 31, 2004, Trimble28, 2007, the Company did not have an outstanding balance on the revolving credit line and had $60.0 million of outstanding term loan. The Company was in compliance with all financial debt covenants.
The amount dueCompany may borrow funds under the revolver loan is paid2007 Credit Facility in U.S. Dollars or in certain other currencies, and borrowings will bear interest, at the Company's option, at either: (i) a base rate, based on the administrative agent's prime rate, plus a margin of between 0% and 0.125%, depending on the Company's leverage ratio as of its most recently ended fiscal quarter, or (ii) a reserve-adjusted rate based on the loan
maturesLondon Interbank Offered Rate (LIBOR), Euro Interbank Offered Rate (EURIBOR), Stockholm Interbank Offered Rate (STIBOR), or other agreed-upon rate, depending on June 25, 2006,the currency borrowed, plus a margin of between 0.625% and 1.125%, depending on the Company's leverage ratio as of the most recently ended fiscal quarter. The Company's obligations under the 2007 Credit Facility are guaranteed by certain of the Company's domestic subsidiaries.
The 2007 Credit Facility contains customary affirmative, negative and financial covenants including, among other requirements, negative covenants that restrict the Company's ability to dispose of assets, create liens, incur indebtedness, repurchase stock, pay dividends, make acquisitions, make investments, enter into mergers and consolidations and make capital expenditures, within certain limitations, and financial covenants that require the maintenance of leverage and fixed charge coverage ratios. The 2007 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 loan commitment fees are paid on a quarterly
basis.
Underlenders may accelerate the terms ofCompany's obligations under the 20032007 Credit Facility, the Company is allowed to pay
dividends and repurchase shares of common stock up to 25% of net incomehowever that acceleration will be automatic in the previous fiscal year.
Due to the full repaymentcase of the subordinated note which financed the Spectra
Precision Group acquisitionbankruptcy and the refinancinginsolvency events of the 2000 Credit Facility, the
Company wrote off approximately $3.6 million of unamortized debt issuance costs
and warrants issued in connection with the subordinated note, as interest
expense in fiscal 2003.
Promissory Note and Others
default.
Notes Payable
As of December 31, 2004,28, 2007, the Company had other notes payable totaling approximately $0.8 million$690,000 consisting of government loans to foreign subsidiaries.
subsidiaries and loans assumed from acquisitions.
NOTE 10: COMMITMENTS AND CONTINGENCIES
Operating Leases
Trimble's
On February 16, 2007, the Company acquired @Road and assumed the lease for its primary facility in Fremont, California. The lease agreement has a five year term, commencing February 1, 2005 and ending May 16, 2010.
On January 13, 2006, the Company entered into a lease agreement for the lease of real property located in Westminster, Colorado. The lease agreement has a seven year term, commencing June 1, 2006 and ending May 31, 2013.
On May 13, 2005, the Company entered into a lease agreement for the lease of real property located in Sunnyvale, California. The lease agreement has a seven year term, commencing January 1, 2006 and ending December 31, 2012.
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 2011.2013. 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 Company has options to renew certain of these leases for an additional five years. Trimble also leases facilities under operating leases in the United
Kingdom, Sweden, and Germany that expire in 2005.
Future minimum payments required under non-cancelable operating leases are as follows:
Operating
Lease Payments
--------------
(In thousands)
2005 $ 11,412
2006 3,652
2007 2,939
2008 2,078
2009 1,940
Thereafter 1,936
-----
Total $ 23,957
--------
| | | Operating Lease Payments | |
| (In thousands) | | | |
| | | | |
| 2008 | | $ | 16,592 | |
| 2009 | | | 13,234 | |
| 2010 | | | 10,080 | |
| 2011 | | | 6,912 | |
| 2012 | | | 5,741 | |
| Thereafter | | | 1,432 | |
| Total | | $ | 53,991 | |
Net rent expense under operating leases was $10.9$14.2 million in fiscal 2004, $13.22007, $10.5 million in fiscal 2003,2006, and $5.9$12.6 million in fiscal 2002.2005. Sublease income was $38,000, $1.7$39,000, $44,000, and $39,000 for fiscal 2007, 2006, and 2005, respectively.
Additionally, as of December 28, 2007, the Company had acquisition earn-outs of $7.6 million and $4.7holdbacks of $10.3 million respectively.recorded in “Other current liabilities” and “Other non-current liabilities.” The maximum remaining payments, including the $7.6 million and $10.3 million recorded, will not exceed $71.5 million. The remaining earn-outs and holdbacks are payable through 2010.
At December 28, 2007, the company had unconditional purchase obligations of approximately $60.6 million. These unconditional purchase obligations primarily represent open non-cancelable purchase orders for material purchases withour vendors. Purchase Commitments with a Supplier
Trimble entered into a significant supply agreement in fiscal 2004obligations exclude agreements that sets
forth minimumare cancelable without penalty. These unconditional purchase commitments for outsourced services. The term of the
supply agreement is the earlier of four years from the initial product ship
date, or when Trimble has paid for a cumulative total of 200,000 billable hours
(approximately $10.4 million). Should Trimble not purchaseobligations are related primarily to inventory and pay for 200,000
hours, then Trimble will compensate the supplier for 20% of the shortfall.
Thereafter, the contract continues in effect until terminated by either party
with 30 days prior written notice to the other party. As of December 31, 2004,
based on current hours earned to date the future obligation is approximately
$7.7 million which is expected to be paid over the next two years. Trimble does
not expect a shortfall based on current hours earned to date.
items.
NOTE 11: FAIR VALUE OF FINANCIAL INSTRUMENTS
The estimated fair values of financial instruments outstanding are as follows:
Carrying Fair Carrying Fair
Amount Value Amount Values
------ ----- ------ ------
December 31, 2004 January 2, 2004
----------------- ---------------
As of
(In thousands)
Assets:
Cash and cash equivalents $ 71,872 $ 71,872 $ 45,416 $ 45,416
Forward foreign currency exchange contracts 639 539 1,412 1,328
Accounts and other receivable, net 123,938 123,938 104,634 104,634
Liabilities:
Credit facilities $ 38,250 $ 38,250 $ 87,750 $ 87,750
Promissory note and other 746 737 2,736 2,335
Accounts payable 43,551 43,551 26,019 26,019
| | | Carrying Amount | | | Fair Value | | | Carrying Amount | | | Fair Values | |
| | | December 28, 2007 | | | December 29, 2006 | �� |
| As of | | | | | | | | | | | | |
| (In thousands) | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| Assets: | | | | | | | | | | | | |
| Cash and cash equivalents | | $ | 103,202 | | | $ | 103,202 | | | $ | 129,621 | | | $ | 129,621 | |
| Forward foreign currency exchange contracts | | | - | | | | - | | | | - | | | | - | |
| Accounts receivable, net | | | 239,884 | | | | 239,884 | | | | 177,054 | | | | 177,054 | |
| | | | | | | | | | | | | | | | | |
| Liabilities: | | | | | | | | | | | | | | | | |
| Credit facility | | $ | 60,000 | | | $ | 49,000 | | | $ | - | | | $ | - | |
| Forward foreign currency exchange contracts | | | 178 | | | | 457 | | | | 70 | | | | 157 | |
| Promissory note and other | | | 690 | | | | 630 | | | | 481 | | | | 406 | |
| Accounts payable | | | 67,589 | | | | 67,589 | | | | 49,194 | | | | 49,194 | |
The fair value of the bank borrowings, and promissory notes have been estimated using an estimate of the interest rate Trimble would have had to pay on the issuance of notes with a similar maturity and discounting the cash flows at that rate. The fair values do not give an indication of the amount that Trimble would currently have to pay to extinguish any of this debt.
The fair value of forward foreign exchange contracts is estimated based on the difference between the market price and the carrying amount of comparable contracts. These contracts are adjusted to fair value at the end of every month.
NOTE 12: INCOME TAXES
The components of income before income taxes are as follows:
| | | December 28, | | | December 29, | | | December 30, | |
| Fiscal Years Ended | | 2007 | | | 2006 | | | 2005 | |
| (In thousands) | | | | | | | | | |
| | | | | | | | | | |
| United States | | $ | 126,768 | | | $ | 123,800 | | | $ | 99,500 | |
| Foreign | | | 57,362 | | | | 24,300 | | | | 25,300 | |
| Total | | $ | 184,130 | | | $ | 148,100 | | | $ | 124,800 | |
Trimble's income tax provision
(benefit) consisted of the following:
December 31, January 2, January 3,
Fiscal Years Ended 2004 2004 2003
- ------------------ ---- ---- ----
(In thousands)
US Federal:
Current $ 18,196 $ 513 $ -
Deferred (17,995) (7,000) -
------- ------
201 (6,487) -
--- ------
US State:
Current 2,895 250 142
Deferred (897) (600) -
---- ----
1,998 (350) 142
----- ---- ---
Non-US:
Current 3,137 1,594 2,052
Deferred 1,908 2,343 1,306
----- ----- -----
5,045 3,937 3,358
----- ----- -----
Income tax provision (benefit) $ 7,244 $ (2,900) $ 3,500
=========== =========== ==========
The pre-tax US income was approximately $70.0 million, $39.5 million and $3.3
million in fiscal years 2004, 2003 and 2002, respectively.
The fiscal year 2004 tax provision reflected above was reduced by $14.4 million
of tax benefits attributable to stock option deductions which were credited to
equity.
| | | December 28, | | | December 29, | | | December 30, | |
| Fiscal Years Ended | | 2007 | | | 2006 | | | 2005 | |
| (In thousands) | | | | | | | | | |
| | | | | | | | | | |
| US Federal: | | | | | | | | | |
| Current | | $ | 48,833 | | | $ | 47,795 | | | $ | 36,493 | |
| Deferred | | | (1,658 | ) | | | (2,972 | ) | | | (1,534 | ) |
| | | | 47,175 | | | | 44,823 | | | | 34,959 | |
| US State: | | | | | | | | | | | | |
| Current | | | 6,374 | | | | 2,967 | | | | 3,500 | |
| Deferred | | | (3,669 | ) | | | (2,168 | ) | | | (2,348 | ) |
| | | | 2,705 | | | | 799 | | | | 1,152 | |
| Foreign: | | | | | | | | | | | | |
| Current | | | 10,403 | | | | (1,493 | ) | | | 3,102 | |
| Deferred | | | 6,098 | | | | 305 | | | | 720 | |
| | | | 16,501 | | | | (1,188 | ) | | | 3,822 | |
| Income tax provision | | $ | 66,381 | | | $ | 44,434 | | | $ | 39,933 | |
The income tax provision
(benefit) differs from the amount computed by applying the statutory US federal income tax rate to income before taxes. The sources and tax effects of the differences are as follows:
December 31, January 2, January 3,
Fiscal Years Ended 2004 2004 2003
- ------------------ ---- ---- ----
(In thousands)
Expected tax from continuing operations at
35% in all years $ 26,223 $ 12,455 $ 4,839
Change in valuation allowance (24,004) (15,028) (1,156)
US State income taxes 1,299 - -
Export sales incentives (1,176) - -
Non-US tax rate differential and
unbenefitted losses 5,134 - (137)
US Federal research and development credit (508) - -
Other 276 (327) (46)
--- ---- ---
Income tax provision (benefit) $ 7,244 $ (2,900) $ 3,500
============ ========== =========
Effective tax rate 10% (8%) 25%
============ ========== =========
| | | December 28, | | | December 29, | | | December 30, | |
| Fiscal Years Ended | | 2007 | | | 2006 | | | 2005 | |
| (In thousands) | | | | | | | | | |
| | | | | | | | | | |
| Expected tax from continuing operations at 35% in all years | | $ | 64,446 | | | $ | 51,832 | | | $ | 43,677 | |
| | | | | | | | | | | | | |
| US State income taxes | | | 1,654 | | | | (110 | ) | | | 749 | |
| Export sales incentives | | | (365 | ) | | | (4,138 | ) | | | (2,316 | ) |
| Foreign related | | | (711 | ) | | | (7,682 | ) | | | 3,684 | |
| US Federal and California research and development credits | | | (2,206 | ) | | | (662 | ) | | | (895 | ) |
| In process research & development | | | 630 | | | | 1,046 | | | | -- | |
| Stock option compensation | | | 3,889 | | | | 3,626 | | | | -- | |
| Benefit from repatriation legislation | | | -- | | | | (1,050 | ) | | | (6,445 | ) |
| Other | | | (956 | ) | | | 1,572 | | | | 1,479 | |
| Income tax provision | | $ | 66,381 | | | $ | 44,434 | | | $ | 39,933 | |
| | | | | | | | | | | | | |
| Effective tax rate | | | 36 | % | | | 30 | % | | | 32 | % |
The components of deferred taxes consist of the following:
December 31, January 2,
As
Table of 2004 2004
- ----- ---- ----
(In thousands)
Deferred tax liabilities:
Purchased intangibles $ 3,247 $ 1,338
Depreciation and amortization 10,901 3,776
Other individually immaterial items 229 251
--- ---
Total deferred tax liabilities 14,377 5,365
------ -----
Deferred tax assets:
Inventory valuation differences 8,782 9,001
Expenses not currently deductible 8,034 5,528
US Federal credit carryforwards 5,619 9,150
Deferred revenue 3,857 4,280
US State credit carryforwards 6,722 6,999
Warranty 2,216 2,374
Depreciation and amortization 718 2,871
US Federal net operating loss carryforward 2,998 -
US residual tax on foreign earnings 2,682 -
Other individually immaterial items 7,655 3,106
----- -----
Total deferred tax assets 49,283 43,309
Valuation allowance (12,989) (34,756)
------- -------
Total deferred tax assets 36,294 8,553
Total net deferred tax assets (liabilities) $ 21,917 $ 3,188
============ ==========
Content
| | | December 28, | | | December 29, | |
| As of | | 2007 | | | 2006 | |
| (In thousands) | | | | | | |
| | | | | | | |
| Deferred tax liabilities: | | | | | | |
| Purchased intangibles | | $ | 68,561 | | | $ | 25,263 | |
| Depreciation and amortization | | | 26,720 | | | | 21,283 | |
| Other | | | 183 | | | | 175 | |
| Total deferred tax liabilities | | | 95,464 | | | | 46,721 | |
| | | | | | | | | |
| Deferred tax assets: | | | | | | | | |
| Inventory valuation differences | | | 7,359 | | | | 9,469 | |
| Expenses not currently deductible | | | 10,044 | | | | 8,546 | |
| US Federal credit carryforwards | | | 2,313 | | | | -0- | |
| Deferred revenue | | | 8,000 | | | | 1,298 | |
| US State credit carryforwards | | | 10,011 | | | | 8,869 | |
| Warranty | | | 2,177 | | | | 2,738 | |
| | | | | | | | | |
| US Federal net operating loss carryforward | | | 24,765 | | | | 2,055 | |
| Net foreign tax credits on undistributed foreign earnings | | | 12,857 | | | | 9,344 | |
| Accruals not currently deductible | | | 17,104 | | | | 8,803 | |
| Total deferred tax assets | | | 94,630 | | | | 51,121 | |
| Valuation allowance | | | (6,471 | ) | | | (4,254 | ) |
| Total deferred tax assets | | | 88,159 | | | | 46,867 | |
| | | | | | | | | |
| Total net deferred tax assets(Liabilities) | | $ | (7,305 | ) | | $ | 146 | |
The Company has $3.0$24.8 million of tax effected USU.S. federal net operating loss carryforwards (expiring in years 2020 through 2026) from a recent acquisition, which isacquisitions. Utilization of the Company’s net operating loss carryforwards are subject to certainannual limitations under IRC Section 382.due to ownership changes provided by the Internal Revenue Code of 1986, as amended. The total USCompany has federal research and development credit carryforwards of approximately $5.6$2.0 million expire beginning(expiring in 2005. The Company hasyears 2011 through 2024) and state research and development credit carryforwards of approximately $10.3$15.5 million which do not expire.
that can be carried over indefinitely.
The company’s valuation allowance decreased by $21.8 million in fiscal 2004is attributable to, primarily, acquisition related Net Operating Loss and $13.1
million in fiscal 2003. Approximately $8 millionResearch and Development Credit carryforwards. Management believes that it is more likely than not that the Company will not realize these deferred tax assets, and, accordingly, a valuation allowance has been established for such amounts. When the tax attributes are utilized and the valuation allowance is released, the benefit of the release of the valuation allowance at
December 31, 2004 and $14.1 million at January 2, 2004 relates to the tax
benefit of stock option deductions, which will be creditedaccounted for as a credit to equity if and when
realized.
In October 2004, The American Jobs Creation Actgoodwill rather than as a reduction of 2004 was signed into law
providing changes in the tax law including an incentive to repatriate
undistributed earnings of foreign subsidiaries. Trimble is currently evaluating
the potential impact of these provisions, including assessing the details of the
Act, analyzing the funds available for repatriation, the economic cost of doing
so and assessing the qualified uses of repatriated funds. However, given the
preliminary stage of the Company's evaluation, it is not possible to determine
the impact to its fiscal year 2005 income tax provision.
In July 2006, the FASB issued Interpretation No. 48, “Accounting for Uncertainty in Income Taxes” (FIN 48). FIN 48 applies to all tax positions related to income taxes subject to Statement of Financial Accounting Standard (SFAS) 109, “Accounting for Income Taxes.” Under FIN 48, a company would recognize the benefit from a tax position only if it is more-likely-than-not that the position would be sustained upon audit based solely on the technical merits of the tax position. FIN 48 clarifies how a company would measure the income tax benefits from the tax positions that are recognized, provides guidance as to the timing of the derecognition of previously recognized tax benefits and describes the methods for classifying and disclosing the liabilities within the financial statements for any unrecognized tax benefits (UTB). FIN 48 also addresses when a company should record interest and penalties related to tax positions and how the interest and penalties may be classified within the income statement and presented in the balance sheet.
The Company expectsadopted FIN 48 on December 30, 2006. As a result of the adoption of FIN 48, the Company recognized no change to completeliability for uncertain tax positions (compared to amounts under FAS 5, represented in the financial statements for the 2006 year). A total of $28.4 million (including interest and penalties of $3.1 million) represents the amount of unrecognized tax benefits as of December 28, 2007 that, if recognized, would favorably affect the effective income tax rate. There is $25.7 million of the unrecognized tax benefits recorded in Other non-current liabilities and $2.7 million is reflected within the deferred tax accounts in the accompanying Consolidated Balance Sheets.
A reconciliation of the change in the UTB balance from December 29, 2006 to December 28, 2007 is as follows:
| | | Federal, State and Foreign Tax | | | Accrued Interest and Penalties | | | Gross Unrecognized Income Tax Benefits | | | Deferred Federal and State Income Tax Benefits | | | Net Unrecognized Income Tax Benefits | |
| (Dollar in thousands) | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
| Balance at December 29, 2006 | | $ | 21,500 | | | $ | 2,200 | | | $ | 23,700 | | | $ | - | | | $ | 23,700 | |
| | | | | | | | | | | | | | | | | | | | | |
| Additions for tax positions related to the current year | | | 2,800 | | | | 1,000 | | | | 3,800 | | | | - | | | | 3,800 | |
| | | | | | | | | | | | | | | | | | | | | |
| Additions for tax positions related to prior years | | | 800 | | | | | | | | 800 | | | | - | | | | 800 | |
| | | | | | | | | | | | | | | | | | | | | |
| Other reductions for tax positions related to prior years | | | (400 | ) | | | (100 | ) | | | (500 | ) | | | - | | | | (500 | ) |
| | | | | | | | | | | | | | | | | | | | | |
| Foreign exchange | | | 600 | | | | | | | | 600 | | | | - | | | | 600 | |
| | | | | | | | | | | | | | | | | | | | | |
| Balance at December 28, 2007 | | $ | 25,300 | | | $ | 3,100 | | | $ | 28,400 | | | $ | - | | | $ | 28,400 | |
| | | | | | | | | | | | | | | | | | | | | |
| Total UTBs that, if recognized, would impact the effective tax rate as of December 28, 2007 | | $ | 25,300 | | | $ | 3,100 | | | $ | 28,400 | | | $ | - | | | $ | 28,400 | |
The Company and its evaluation by September 30, 2005.
subsidiaries are subject to U.S. federal, state, and foreign income taxes. The Company has substantially concluded all U.S. federal and state income tax matters for years through 1992. Foreign income tax matters have been concluded for years through 2000. The Company does not anticipate significant impact to the UTB balance with respect to current tax examinations. Furthermore, although timing of the resolution and/or closure on audits is highly uncertain, the company does not believe it is reasonably possible that the unrecognized tax benefits would materially change in the next 12 months.
The Company’s continuing practice is to recognize interest and/or penalties related to income tax matters in income tax expense. The Company’s liability includes interest and penalties at December 28, 2007 of $3.1 million, which is recorded in Other non- current liabilities in the accompanying Consolidated Balance Sheets. Current year interest and penalties reflected in income is $0.9 million.
NOTE 13:
SHAREHOLDER'S EQUITY
3-for-2 Stock Split
Trimble's Board of Directors approved a 3-for-2 split of all outstanding shares
of the Company's Common Stock, payable March 4, 2004 to stockholders of record
on February 17, 2004. Cash was paid in lieu of fractional shares. All share and
per share information has been adjusted to reflect the stock split on a
retroactive basis for all periods presented.
Common Stock
On April 14, 2003, Trimble sold 3,148,000 shares of its Common Stock, no par
value per share, to an investor at a price of $12.17 per share in an offering
pursuant to its shelf registration statement. The offering resulted in net
proceeds to Trimble of approximately $36.6 million, approximately $31 million of
which was used to pay down the principal balance and $5.6 million was used to
pay down the accrued interest due on the subordinated note.
On December 21, 2001, Trimble completed a private placement of 2,675,006 shares
of its Common Stock at a price of $10.00 per share to certain qualified
investors, resulting in gross proceeds of approximately $26.8 million to the
Company. On January 15, 2002, Trimble had a second closing of the private
placement issuing 1,920,006 shares of Common Stock at $10.00 per share resulting
in gross proceeds of an additional $19.2 million.
NOTE 14: COMPREHENSIVE INCOME
The components of comprehensive income and related tax effects
wereare as follows:
December 31, January 2, January 3,
Fiscal Years Ended 2004 2004 2003
- ------------------ ---- ---- ----
(in thousands)
Net income $ 67,680 $ 38,485 $ 10,324
Foreign currency translation adjustments, net of tax of
$(912) in 2004 14,025 31,198 17,697
Net gain (loss) on hedging transactions 106 (7) 210
Net unrealized gain (loss) on investments (6) 74 (17)
-- -- ---
Total comprehensive income $ 81,805 $ 69,750 $ 28,214
========== =========== ===========
Fiscal Years Ended | | December 28, 2007 | | | December 29, 2006 | | | December 30, 2005 | |
| (in thousands) | | | | | | | | | |
| Net income | | $ | 117,374 | | | $ | 103,658 | | | $ | 84,855 | |
| Foreign currency translation adjustments, net of tax of $(636) in 2007 and $(108) in 2006 | | | 18,655 | | | | 21,709 | | | | (24,690 | ) |
| Net gain (loss) on hedging transactions | | | - | | | | - | | | | (106 | ) |
| Net unrealized actuarial losses | | | (13 | ) | | | - | | | | - | |
| Net unrealized gain (loss) on investments | | | (33 | ) | | | 4 | | | | (34 | ) |
| Total comprehensive income | | $ | 135,983 | | | $ | 125,371 | | | $ | 60,025 | |
The components of accumulated other comprehensive
income, net of related tax were as follows:
December 31, January 2,
Fiscal Years Ended 2004 2004
- ------------------ ---- ----
(in thousands)
Accumulated foreign currency translation adjustments $ 44,191 $ 30,166
Accumulated net gain on hedging transactions 106 -
Accumulated net unrealized gain on foreign currency 67 73
-- --
Total accumulated other comprehensive income $ 44,364 $ 30,239
========== =========
| | | December 28, | | | December 29, | |
| Fiscal Years Ended | | 2007 | | | 2006 | |
| (in thousands) | | | | | | |
| Accumulated foreign currency translation adjustments | | $ | 59,869 | | | $ | 41,214 | |
| Net unrealized actuarial losses | | | (149 | ) | | | (136 | ) |
| Accumulated net unrealized gain on foreign currency | | | -- | | | | 33 | |
| Total accumulated other comprehensive income | | $ | 59,720 | | | $ | 41,111 | |
NOTE 15:14: EMPLOYEE STOCK BENEFIT PLANS
Employee Stock Purchase Plan
The Company has an Employee Stock Purchase Plan ("(“Purchase Plan"Plan”) under which an aggregate of 5,325,00011,550,000 shares of Common Stock have been reserved for sale to eligible employees as approved by the shareholders to date. The plan permits full-time 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 six-month offering period.period, which is generally six months. The Purchase Plan terminates on December 31,September 8, 2008. In fiscal 20042007 and 2003,2006, the shares issued under the Purchase Plan were 183,214430,068 and 328,044195,398 shares, respectively. Compensation expense recognized during fiscal 2007 and 2006 related to shares granted under the Employee Stock Purchase Plan was $2.6 million and $1.8 million, respectively. At December 31, 2004,28, 2007, the number of shares reserved for future purchases by eligible employees was 547,834.
1,010,206.
Restricted Stock Award
Trimble did not grant any restricted stock awards in fiscal 2007 or fiscal 2006. During the second quarter of fiscal 2005, the Company granted 40,000 shares of restricted common stock. The award vests 20% on June 30, 2005 and an additional 20% each June 30 thereafter. The Company recorded compensation expense in the Consolidated Statements of Income of $191,000, $191,000 and $120,000 for fiscal 2007, 2006 and 2005, respectively.
2002 Stock Plan
In 2002, Trimble's BoardTrimble’s board of Directorsdirectors adopted the 2002 Stock Plan ("(“2002 Plan"Plan”). The 2002 Plan approved by the shareholders provides for the granting of incentive and non-statutory stock options and stock awards for up to 4,500,00012,000,000 shares plus any shares currently reserved but un-issued to employees, consultants, and directors of Trimble. Incentive 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 granted under the 2002 Plan generally have 84-120 month terms, and vest at a rate of 20% at the first anniversary of grant and monthly thereafter at an annual rate of 20%, with full vesting occurring at the fifth anniversary of the grant. In certain instances, grants vest at a rate of 40% at the second anniversary of grant and monthly thereafter at an annual rate of 20% with full vesting occurring at the fifth anniversary of the grant. The Company issues new shares for option exercises. The restricted share units granted under this plan vest 100% after three years. As of December 28, 2007, options to purchase 7,498,123 shares were outstanding, 62,972 restricted stock units were unvested, and 3,833,397 were available for future grant under the 2002 Plan.
@Road Plan
In connection with the acquisition of @Road in February 2007, the Company assumed all of the outstanding stock options of @Road’s 2000 Stock Option Plan (“@Road Plan”) as well as the plan itself. The @Road Plan provides for the granting of incentive and non-statutory stock options. Incentive 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 granted under the @Road Plan generally have 120-month terms, and vest at a rate of 20% at the first anniversary of grant and monthly thereafter at an annual rate of 20%, with full vesting occurring at the fifth anniversary of the grant. The exercise price of non-statutory stock options
issued under the 2002 Plan must be at least 85% of the fair market value of
Common Stock on the date of grant.Company issues new shares for option exercises. As of December 31, 2004,28, 2007 options to purchase 3,074,987891,333 shares were outstanding and 2,271,021 wereunder the @Road Plan. Shares under this plan are no longer available for future grant underdue to the 2002 Plan.
Merger of @Road into Trimble.
1993 Stock Option Plan
In 1992, Trimble's
Boardboard of
Directorsdirectors adopted the 1993 Stock Option Plan
("(“1993
Plan"Plan”). The 1993 Plan, as amended to date and approved by shareholders, provided for the granting of incentive and non-statutory stock options for up to
9,562,50019,125,000 shares of Common Stock to employees, consultants, and directors of Trimble. Incentive 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 granted under the 1993 Plan have 120-month terms, and vest at a rate of 20% at the first anniversary of grant, and monthly thereafter at an annual rate of 20%, with full vesting occurring at the fifth anniversary of grant. The
exercise price of non-statutory stock options issued under the
1993 Plan must be at least 85% of the fair market value of Common Stock on the
date of grant.Company issues new shares for option exercises. As of December 31, 200428, 2007 options to purchase 3,223,1441,518,022 shares were outstanding and no shares were available for future grant.
1992 Management Discount Stock Option Plan
In 1992, Trimble's board of directors approved the 1992 Management Discount Stock Option Plan ("Discount Plan"). As of December 28, 2007, there were no options outstanding to purchase shares and 6,343 were available for future grant under the 1992 Management Discount Stock Option Plan.
1990 Director Stock Option Plan
In December 1990, Trimble adopted a Director Stock Option Plan under which an aggregate of 570,0001,140,000 shares of Common Stock have been reserved for issuance to non-employee directors as approved by the shareholders to date. At December 31,
2004,28, 2007, options to purchase 235,000215,000 shares were outstanding, and no shares were available for future grants under the Director Stock Option Plan.
1992 Management Discount Stock Option Plan
In 1992, Trimble's Board of Directors approved the 1992 Management Discount
Stock Option Plan ("Discount Plan"). Under the Discount Plan, 450,000
non-statutory stock options were reserved for grant to management employees at
exercise prices that may be significantly discounted from the fair market value
of Common Stock on the dates of grant.
Options are generally exercisable six
months from the date of grant. As of December 31, 2004, there were no shares
available for future grants. For accounting purposes, compensation cost on these
grants is measured by the excess over the discounted exercise prices of the fair
market value of Common Stock on the dates of option grants. There were no
discounted options granted in the plan in fiscal 2004, 2003,Outstanding and 2002. As of
December 31, 2004, options to purchase 187,500 shares were outstanding under the
1992 Management Discount Stock Option Plan.
SFAS 123 Disclosures
As stated in Note 2 of the Notes to the Consolidated Financial Statements,
Trimble has elected to follow APB 25 and related interpretations in accounting
for its employee stock options and stock purchase plans. The alternative fair
value accounting provided for under SFAS 123 requires use of option pricing
models that were not developed for use in valuing employee stock options. Under
APB 25, because the exercise price of Trimble's employee stock options equals
the market price of the underlying stock on date of grant, no compensation
expense is recognized.
Exercisable
Exercise prices for options outstanding as of December
31, 2004,28, 2007, ranged from
$5.33$2.67 to
$34.46. The weighted average remaining contractual life of those
options is 6.73 years.$40.59. In view of the wide range of exercise prices, Trimble considers it appropriate to provide the following additional information
inwith respect
ofto options outstanding at December
31, 2004:
Options Outstanding Options Exercisable
------------------- -------------------
Weighted- Weighted- Weighted-
Average Average Average
Number Exercise Price Remaining Number Exercise Price
Range Outstanding per Share Contractual Life Exercisable per Share
- ----- ----------- --------- ---------------- ----------- ---------
$ 5.33 - 7.13 789,503 $ 5.85 4.34 764,653 $ 5.82
7.67 - 8.53 474,717 8.12 5.11 394,988 8.04
8.79 - 10.23 734,867 10.12 7.39 302,543 10.07
10.25 - 11.65 1,109,575 11.15 5.81 750,693 11.06
11.67 - 16.04 637,137 13.16 4.90 529,281 12.99
17.00 961,017 17.00 8.54 249,430 17.00
17.55 - 25.33 369,501 21.77 8.65 75,893 21.17
27.42 729,709 27.42 5.65 621,939 27.42
27.56 4,500 27.56 9.06 0 0
29.06 - 34.46 910,105 29.72 9.66 31,820 34.46
------- ----- ---- ------ -----
Total 6,720,631 $ 16.10 6.73 3,721,240 $ 13.40
========= ======= ==== ========= ========
28, 2007:
| | | | Options Outstanding | | | Options Exercisable | |
| | | | | | | Weighted- | | | Weighted- | | | | | | Weighted- | |
| | | | | | | Average | | | Average | | | | | | Average | |
| | | | Number | | | Exercise Price | | | Remaining | | | Number | | | Exercise Price | |
| Range | | | Outstanding | | | per Share | | | Contractual Life (Years) | | | Exercisable | | | per Share | |
| (In thousands, except for per share data) | |
| $ | 2.67 – $5.11 | | | | 1,080 | | | $ | 4.58 | | | | 3.44 | | | | 1,080 | | | $ | 4.58 | |
| $ | 5.15 – $8.02 | | | | 1,030 | | | | 6.04 | | | | 3.00 | | | | 1,026 | | | | 6.04 | |
| $ | 8.50 | | | | 1,232 | | | | 8.50 | | | | 5.41 | | | | 1,008 | | | | 8.50 | |
| $ | 8.77 – $14.44 | | | | 870 | | | | 12.25 | | | | 4.79 | | | | 672 | | | | 12.42 | |
| $ | 14.53 | | | | 1,048 | | | | 14.53 | | | | 6.54 | | | | 571 | | | | 14.53 | |
| $ | 14.56 – $16.72 | | | | 689 | | | | 15.98 | | | | 7.31 | | | | 367 | | | | 15.96 | |
| $ | 17.00 | | | | 1,046 | | | | 17.00 | | | | 7.81 | | | | 362 | | | | 17.00 | |
| $ | 17.05 – $23.36 | | | | 659 | | | | 19.81 | | | | 7.57 | | | | 301 | | | | 19.68 | |
| $ | 23.44 | | | | 1,278 | | | | 23.44 | | | | 5.81 | | | | 153 | | | | 23.44 | |
| $ | 23.55 – $40.59 | | | | 1,191 | | | | 34.80 | | | | 6.74 | | | | 36 | | | | 27.02 | |
| Total | | | | 10,123 | | | $ | 15.88 | | | | 5.74 | | | | 5,576 | | | $ | 10.55 | |
| | | | | | | | | Weighted- | | | | |
| | | | | | Weighted- | | | Average | | | Aggregate | |
| | | Number | | | Average | | | Remaining | | | Intrinsic | |
| | | Of Shares | | | Exercise Price | | | Contractual Term | | | Value | |
| | | (in thousands) | | | per Share | | | (in years) | | | (in thousands) | |
| Options outstanding | | | 10,123 | | | $ | 15.88 | | | | 5.74 | | | $ | 156,330 | |
| Options outstanding and expected to vest | | | 9,507 | | | | 15.41 | | | | 5.68 | | | | 150,788 | |
| Options exercisable | | | 5,576 | | | | 10.55 | | | | 4.95 | | | | 112,283 | |
Options outstanding and expected to vest are adjusted for expected forfeitures. The aggregate intrinsic value is the total pretax intrinsic value based on the Company’s closing stock price of $30.69 as of December 28, 2007, which would have been received by the option holders had all option holders exercised their options as of that date.
As of December 28, 2007, the total unamortized stock option expense is $29.6 million with a weighted-average recognition period of 2.7 years.
Option Activity
Activity during fiscal
2004, 2003,2007, 2006, and
2002,2005, under the combined plans was as follows:
December 31, 2004 January 2, 2004 January 3, 2003
----------------- --------------- ---------------
Weighted Weighted Weighted
average average average
exercise exercise exercise
Fiscal Years Ended Options price Options price Options price
- ------------------ ------- ----- ------- ----- ------- -----
(In thousands, except for per
share data)
Outstanding at beginning of year 7,601 13.62 7,691 $ 12.35 6,932 $ 12.69
Granted 1,119 28.20 1,298 16.87 1,275 9.88
Exercised (1,710) 12.92 (1,263) 8.90 (199) 6.67
Cancelled (289) 16.55 (125) 15.51 (317) 13.46
Outstanding at end of year 6,721 16.10 7,601 $ 13.62 7,691 $ 12.35
Exercisable at end of year 3,721 13.40 4,136 $ 12.76 4,005 $ 11.69
Available for grant 2,275 1,605 2,790
Weighted-average fair value of
options granted during year $ 13.85 $ 10.03 $ 5.64
Non-statutory Options
On May 3, 1999, Trimble entered into an agreement
| | | December 28, 2007 | | | December 29, 2006 | | | December 30, 2005 | |
| Fiscal Years Ended | | Options | | | Weighted average exercise price | | | Options | | | Weighted average exercise price | | | Options | | | Weighted average exercise price | |
| (In thousands, except for per share data) | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
| Outstanding at beginning of year | | | 11,308 | | | $ | 12.04 | | | | 12,828 | | | $ | 9.35 | | | | 13,442 | | | $ | 8.05 | |
| Granted | | | 1,134 | | | | 27.37 | | | | 1,744 | | | | 22.94 | | | | 1,748 | | | | 17.05 | |
| Assumed from @Road | | | 795 | | | | 27.82 | | | | -- | | | | | | | | -- | | | | | |
| Exercised | | | (2,769 | ) | | | 8.05 | | | | (3,082 | ) | | | 6.95 | | | | (2,120 | ) | | | 7.37 | |
| Cancelled | | | (345 | ) | | | 18.08 | | | | (182 | ) | | | 12.99 | | | | (242 | ) | | | 10.20 | |
| Outstanding at end of year | | | 10,123 | | | | 15.88 | | | | 11,308 | | | | 12.04 | | | | 12,828 | | | | 9.35 | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Available for grant | | | 3,840 | | | | | | | | 4,460 | | | | | | | | 3,026 | | | | | |
The total intrinsic value of options exercised during fiscal 2007, 2006 and 2005 was $68.4 million, $48.8 million and $23.1 million, respectively. Compensation expense recognized during fiscal 2007 and 2006 related to grantstock options was $12.3 million and $10.7 million, respectively.
Restricted Stock Unit Activity
Activity during fiscal 2007 was as follows:
| | | Restricted Stock Units | | | Weighted Average Grant-Date Fair Value | |
| (In thousands, except for per share data) | | | | | | |
| | | | | | | |
| Nonvested at beginning of year | | | -- | | | | |
| Granted | | | 63 | | | $ | 40.55 | |
| Vested | | | (-- | ) | | | | |
| Cancelled | | | (-- | ) | | | | |
| Nonvested at end of year | | | 63 | | | $ | 40.55 | |
Compensation expense recognized during fiscal 2007 was $65,000. As of December 28, 2007, there was $2.0 million of total unamortized restricted stock unit compensation expense related to nonvested restricted stock units, with a non-statutory
option to purchase up to 45,000 sharesweighted-average recognition period of common stock at an exercise price of
$6.50 per share, with an expiration date of March 29, 2004. These non-statutory
options were exercised January 15, 2004.
2.8 years.
Warrants
On April 12, 2002, the Company issued to Spectra-Physics Holdings USA, Inc., a warrant to purchase up to 564,3501,128,700 shares of Trimble'sTrimble’s Common Stock over a fixed period of time. Initially, Spectra-Physics'Spectra-Physics’ warrant entitled it to purchase 300,000600,000 shares of Common Stock over a five-year period at an exercise price of $10.07$5.04 per share. On a quarterly basis beginning July 14, 2002, Spectra-Physics'Spectra-Physics’ warrant became exercisable for an additional 375750 shares of Common Stock for every $1 million of principal and interest outstanding to Spectra-Physics until the obligation was paid off in full. These shares are purchasable at a price equal to the average of Trimble'sTrimble’s closing price for the five days immediately proceeding the last trading day of each quarter. On July 14, 2002 an additional 26,04652,092 shares became exercisable at an exercise price of $9.64$4.82 per share. On October 14, 2002 an additional 26,73653,472 shares became exercisable at an exercise price of $6.12.$3.06. On January 14, 2003, an additional 27,42654,852 shares became exercisable at an exercise price of $9.03.$4.52. On April 14, 2003, an additional 14,31228,623 shares became exercisable at an exercise price of $13.37. The additional
shares are exercisable over a 5-year period. No additional shares will be
issuable under the warrant to Spectra-Physics as the underlying obligation has
been paid off in full.$6.69. The approximate fair value of the warrants of $2.4 million was determined using the Black-Scholes pricing model with the following assumptions: contractual life of 5-year period, risk-free interest rate of 4%; volatility of 65%; and no dividends during the contractual term. The valueadditional shares are exercisable over a 5-year period. No additional shares will be issuable under the warrant as the underlying obligation has been paid off in full. During fiscal 2007 there were 760,416 shares exercised related to the warrants. For fiscal 2006 and 2005, no shares were exercised. As of December 28, 2007, there are 28,623 shares outstanding and exercisable under the warrants was being
amortized to interest expense over the termwarrants.
On December 21, 2001 and January
15,14, 2002, in connection with the first and second closing of the private placement of the
Company'sCompany’s Common Stock,
Trimblethe Company granted five-year warrants to purchase an additional
919,0081,838,016 shares of Common Stock, subject to certain adjustments, at an exercise price of
$12.97$6.49 per share.
Common Stock Reserved for Future Issuances As of December
31, 2004, Trimble had reserved 10,940,975 common28, 2007, there are no shares
for
issuance upon exercise of options and warrants outstanding
and options available
for grantor exercisable under the
various employee stock benefit plans.
warrants.
NOTE 16:15: BENEFIT PLANS
401(k) Plan
Under the Company’s 401(k) Plan, Under Trimble's 401(k) Plan, USU.S. employee participants (including employees of certain subsidiaries) may direct the investment of contributions to their accounts among certain mutual funds and the Trimble Navigation Limited Common Stock Fund. The Trimble Fund sold net 89,80647,552 shares of Common Stock for an aggregate of $0.7$1.8 million in fiscal 2004. Trimble,2007. The Company, at its discretion, matches individual employee 401(k) Plan contributions at a rate of fifty cents of every dollar that the employee contributes to the 401(k) Plan up to 5% of the employee'semployee’s annual salary to an annual maximum of $2,500. Trimble'sThe Company’s matching contributions to the 401(k) Plan were $1.9$3.1 million in fiscal 2004, $1.82007, 2.5 million in fiscal 20032006, and $1.8$2.2 million in fiscal 2002.
Profit-Sharing Plan
In 1995, Trimble introduced an employee profit-sharing plan in which all
employees, excluding executives and certain levels of management, participate.
The plan distributes to employees approximately 5% of quarterly adjusted pre-tax
income. Payments under the plan during fiscal 2004, 2003 and 2002 were $4.4
million, $2.5 million, and $1.1 million, respectively.
2005.
Defined Contribution Pension Plans
Certain of the Company'sCompany’s European subsidiaries participate in state sponsored pension plans. Contributions are based on specified percentages of employee salaries. For these plans, Trimblethe Company contributed and charged to expense approximately $0.8 million for fiscal 2007, $0.7 million for fiscal 2006 and $0.6 million for fiscal 2004, $2.0 million for fiscal 2003, and
$1.4 million for fiscal 2002.
2005.
Defined Benefit Pension Plan
Trimble
The Company provides defined benefit pension plans in certain countries outsideSweden, Germany, and the United States, including Sweden and Germany.Netherlands. The largest of these plans is provided by the Swedish subsidiary which has an unfunded defined benefit pension plan that covered substantially all of its full-time employees through 1993. Benefits are based on a percentage of eligible earnings. The employee must have had a projected period of pensionable service of at least 30 years as of 1993. If the period was shorter, the pension benefits were reduced accordingly. Active employees do not accrue any future benefits; therefore, there is no service cost and the liability will only increase for interest cost.
Net
On December 29, 2006, the Company adopted the recognition and disclosure provisions of SFAS 158. SFAS 158 required the Company to recognize the funded status (i.e., the difference between the fair value of plan assets and the projected benefit obligations) of its pension plan in the Consolidated Balance Sheet, with a corresponding adjustment to accumulated other comprehensive income, net of tax. The adjustment to accumulated other comprehensive income at adoption represents the net unrecognized actuarial losses and unrecognized transition obligation remaining from the initial adoption of SFAS 87, all of which were previously netted against the plan’s funded status in the Company’s Consolidated Balance Sheets pursuant to the provisions of Statement 87. These amounts will be subsequently recognized as net periodic benefit costspension cost pursuant to the Company’s historical accounting policy for amortizing such amounts. Further, actuarial gains and losses that arise in fiscal 2004, 2003,subsequent periods and 2002 wereare not material.
recognized as net periodic pension cost in the same periods will be recognized a component of other comprehensive income. Those amounts will be subsequently recognized as a component of net periodic pension cost on the same basis as the amounts recognized in accumulated other comprehensive income at adoption of SFAS 158. The adoption of SFAS 158 had no effect on the Company’s consolidated statement of income for the year ended December 28, 2007, or for any prior period presented, and it will not effect the Company’s operating results in future periods.
The pension related balances on the Company’s Consolidated balance sheet at December 28, 2007 and December 29, 2006 are presented in the following table.
| | | December 28, 2007 | | | December 29, 2006 | |
| (in thousands) | | | | | | |
| | | | | | | |
| Intangible asset (pension) | | $ | - | | | $ | - | |
| | | | | | | | | |
| Current accrued pension liability | | | 276 | | | | 218 | |
| Non-current accrued pension liability | | | 6,646 | | | | 6,616 | |
| | | | | | | | | |
| Unrecognized actuarial loss | | | (149 | ) | | | (136 | ) |
The changes in the benefit obligations and plan assets of the significant
non-USnon-U.S. defined benefit pension plans for fiscal
20042007 and
20032006 were as follows:
Fiscal Years Ended December 31, 2004 January 2, 2004
- ------------------ ----------------- ---------------
(in thousands)
Change in benefit obligation:
Benefit obligation at beginning of year $ 6,204 $ 4,972
Service cost 74 -
Interest cost 388 328
Benefits paid (196) (256)
Foreign exchange impact 699 1,102
Actuarial (gains) losses 39 58
-- --
Benefit obligation at end of year 7,208 6,204
----- -----
Change in plan assets:
Fair value of plan assets at beginning of year 872 787
Actual return on plan assets 64 29
Employer contribution 238 150
Plan participants' contributions - -
Benefits paid (196) (256)
Foreign exchange impact 110 162
--- ---
Fair value of plan assets at end of year 1,088 872
----- ---
Benefit obligation in excess of plan assets 6,120 5,332
----- -----
Unrecognized prior service cost - -
Unrecognized net actuarial gain 127 35
--- --
Accrued pension costs (included in accrued liabilities) $ 5,993 $ 5,297
-------- -------
| Fiscal Years Ended | | December 28, 2007 | | | December 29, 2006 | |
| (in thousands) | | | | | | |
| | | | | | | |
| Change in benefit obligation: | | | | | | |
| Benefit obligation at beginning of year | | $ | 9,398 | | | $ | 6,929 | |
| Adjustment to include benefit obligation for the Netherlands subsidiary | | | 336 | | | | 1,412 | |
| Benefit obligation at beginning of year (restated) | | | 9,734 | | | | 8,341 | |
| Service cost | | | 411 | | | | 323 | |
| Interest cost | | | 460 | | | | 396 | |
| Benefits paid | | | (359 | ) | | | (311 | ) |
| Foreign exchange impact | | | 173 | | | | 1,253 | |
| Actuarial (gains) losses | | | (188 | ) | | | (268 | ) |
| Benefit obligation at end of year | | | 10,231 | | | | 9,734 | |
| Change in plan assets: | | | | | | | | |
| Fair value of plan assets at beginning of year | | | 2,913 | | | | 980 | |
| Adjustment to include fair value of plan assets for the Netherlands subsidiary | | | (13 | ) | | | 1,242 | |
| Fair value of plan assets at beginning of year (restated) | | | 2,900 | | | | 2,222 | |
| Actual return on plan assets | | | (92 | ) | | | 106 | |
| Employer contribution | | | 355 | | | | 455 | |
| Plan participants’ contributions | | | - | | | | - | |
| Benefits paid | | | (123 | ) | | | (311 | ) |
| Foreign exchange impact | | | 269 | | | | 428 | |
| Fair value of plan assets at end of year | | | 3,309 | | | | 2,900 | |
| | | | | | | | | |
| Benefit obligation in excess of plan assets at end of year | | $ | 6,922 | | | $ | 6,834 | |
| | | | | | | | | |
| Current portion (included in accrued compensation and benefits) | | | 276 | | | | 218 | |
| Non-current portion (included in other non-current liabilities) | | | 6,646 | | | | 6,616 | |
The under-funded status of the plan of $6.9 million at December 28, 2007 is recognized in the accompanying consolidated balance sheets as a short-term and a long-term accrued pension liability. No plan assets are expected to be returned to Trimble during the fiscal year-ended December 28, 2007.
Net periodic benefit cost in fiscal 2005 was not material.
Actuarial assumptions used to determine the net periodic pension costs for the year ended December 31, 200428, 2007 were as follows:
Swedish Subsidiary German Subsidiaries
------------------ -------------------
Discount rate 5.5% 5.25%
Rate
| | | | | | | | | | |
| | Swedish Subsidiary | | | German Subsidiaries | | | Netherlands Subsidiary | |
| Discount rate | | | 4.5 | % | | | 5.6 | % | | | 5.3 | % |
| Rate of compensation increase | | | 2.0 | % | | | 2.0 | % | | | 2.0 | % |
| Measurement Date | | 12/28/07 | | | 12/28/07 | | | 12/28/07 | |
The annual rent is subject to
adjustment based on the terms of the lease. The Consolidated Statements of
Income include expenses from this operating lease of $0.35Company’s accumulated benefits obligation was approximately $9.7 million and $7.5 million for fiscal years 2004, 2003,2007 and 2002.
Related-Party Notes Receivablefiscal 2006, respectively.
The Company’s plan assets are primarily located in our German subsidiaries and the Netherlands subsidiary. For German subsidiaries, for fiscal 2005, the asset allocation of our total plan assets was approximately as follows: 89% local government bonds, 7% real estate and 4% equity securities. Long-term asset allocation and expected return on assets assumptions are derived from detailed annual studies conducted by Trimble’s asset management group and actuaries. Trimble’s asset management group limits allocation to equity securities and real estate to a maximum of 10% and 25%, respectively, with the remaining assets to be allocated to local government bonds. For the Netherlands subsidiary, 100% of the assets are invested in an insurance contract. While the asset allocation give appropriate consideration to recent performance and historical returns, the strategy is focused primarily on conservative and sustainable long-term returns. Based on historical returns, Trimble has notes receivable from officers and employees ofexpects future return on assets to be approximately $0.4
million4%.
The Company expects to contribute approximately $576,000 to plan assets in fiscal year ended 2008.
The following benefit payments, which reflect estimated future employee service, as of December 31, 2004 and $0.8 million as of January 2, 2004. The
notes bear interest from 4.49%appropriate, are expected to 6.62% and have an average remaining life of
0.8 years as of December 31, 2004.
See Note 5 to the Notes to the Consolidated Financial Statements for additional
information regarding Trimble's related party transactions with joint venture
partners.
be paid:
| | | Expected Benefit Payments | |
| (In thousands) | | | |
| | | | |
| 2008 | | $612 | |
| 2009 | | $442 | |
| 2010 | | $542 | |
| 2011 | | $568 | |
| 2012 | | $576 | |
| Thereafter | | $5,609 | |
| Total | | $8,349 | |
NOTE
18:16: STATEMENT OF CASH FLOW DATA
December 31, January 2, January 3,
Fiscal Years Ended 2004 2004 2003
- ------------------ ---- ---- ----
(in thousands)
Supplemental disclosure of cash flow information:
Interest paid $ 3,142 $ 10,208 $ 12,215
Income taxes paid $ 6,694 $ 688 $ 2,635
Significant non-cash investing activities:
Issuance of shares related to invest in joint venture $ - $ 5,922 $ -
Issuance of shares related to acquisition related
earn-out payments $ 899 $ 1,349 $ 336
| | | December 28, | | | December 29, | | | December 30, | |
| Fiscal Years Ended | | 2007 | | | 2006 | | | 2005 | |
| (in thousands) | | | | | | | | | |
| | | | | | | | | | |
| Supplemental disclosure of cash flow information: | | | | | | | | | |
| Interest paid | | $ | 6,250 | | | $ | 8 | | | $ | 1,081 | |
| Income taxes paid | | $ | 35,170 | | | $ | 36,000 | | | $ | 8,938 | |
| | | | | | | | | | | | | |
| Significant non-cash investing activities: | | | | | | | | | | | | |
| Issuance of shares to acquire @Road | | $ | 161,947 | | | | - | | | $ | - | |
| Issuance of shares related to acquisition related earn-out payments | | $ | - | | | $ | - | | | $ | - | |
NOTE 19:17: LITIGATION
From time to time, the Company is involved in litigation arising out of the ordinary course of its business. There are no known claims or pending litigation expected to have a material effect on the
Company'sCompany’s overall financial position, results of operations, or liquidity.
NOTE
20:18: SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
First Second Third Fourth
Quarter Quarter Quarter Quarter
------- ------- ------- -------
(in thousands, except per share data)
Fiscal 2004
Revenue $ 156,510 $ 179,451 $ 170,164 $ 162,683
Gross margin 75,760 88,319 83,372 77,359
Net income 12,840 20,518 17,917 16,405
Basic net income per share 0.25 0.40 0.35 0.32
Diluted net income per share 0.24 0.38 0.33 0.29
Fiscal 2003
Revenue $ 127,325 $ 138,132 $ 139,569 $ 135,877
Gross margin 61,755 71,095 69,112 66,068
Net income 5,353 8,105 9,936 15,091
Basic net income per share 0.12 0.17 0.20 0.30
Diluted net income per share 0.12 0.16 0.19 0.28
Significant quarterly items for
| | | March 30, | | | June 29, | | | September 28, | | | December 28, | |
| Fiscal period ended | | 2007 | | | 2007 | | | 2007 | | | 2007 | |
| (in thousands, except per share data) | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| Revenue | | $ | 285,732 | | | $ | 327,732 | | | $ | 296,023 | | | $ | 312,783 | |
| Gross margin | | | 143,130 | | | | 167,169 | | | | 146,940 | | | | 155,666 | |
| Net income | | | 28,683 | | | | 35,026 | | | | 27,374 | | | | 26,291 | |
| | | | | | | | | | | | | | | | | |
| Basic net income per share | | | 0.25 | | | | 0.29 | | | | 0.23 | | | | 0.22 | |
| Diluted net income per share | | | 0.24 | | | | 0.28 | | | | 0.22 | | | | 0.21 | |
| | | | | | | | | | | | | | | | | |
| | | March 31, | | | June 30, | | | September 29, | | | December 29, | |
| Fiscal period ended | | 2006 | | | 2006 | | | 2006 | | | 2006 | |
| (in thousands, except per share data) | | | | | | | | | | | | | | | | |
| Revenue | | $ | 225,854 | | | $ | 245,326 | | | $ | 234,851 | | | $ | 234,119 | |
| Gross margin | | | 107,463 | | | | 121,656 | | | | 116,191 | | | | 115,771 | |
| Net income | | | 25,828 | | | | 28,503 | | | | 25,342 | | | | 23,985 | |
| | | | | | | | | | | | | | | | | |
| Basic net income per share | | | 0.24 | | | | 0.26 | | | | 0.23 | | | | 0.22 | |
| Diluted net income per share | | | 0.23 | | | | 0.25 | | | | 0.22 | | | | 0.20 | |
Trimble has a 52-53 week fiscal 2004 includeyear, ending on the following: (i) inFriday nearest to December 31. As a result of the second quarter of 2004 a $1.2 million income, or $0.03 per diluted share
relating to valuation of investment; (ii) in the third quarter of 2004 a $0.2
million income, or less than $0.01 per diluted share relating to revaluation of
investment; (iii) in the fourth quarter of 2004 a $0.4 million charge, or less
than $0.01 per diluted share relating to revaluation of investment.
Significant quarterly items for fiscal 2003 include the following: (i) in the
first quarter of 2003 a $0.4 million charge or $0.01 per diluted share relating
to workforce reduction; (ii) in the second quarter of 2003 a $0.7 million
charge, or $0.01 per diluted share relating to work force reduction and $3.6
million of interest expenses, or $0.07 per diluted share relatingextra week, year-over-year results are not exactly comparable. Thus, due to the Company's debt refinancing; (iii)inherent nature of adopting a 52-53 week fiscal year, the Company, analysts, shareholders, investors, and others will have to make appropriate adjustments to any analysis performed when comparing our activities and results. Fiscal 2007 and 2006 both were 52-week years.
NOTE 19: SUBSEQUENT EVENTS
On January 23, 2008, the Company announced that its board of directors has authorized a stock repurchase program for up to $250 million, effective February 1, 2008. The timing and actual number of shares repurchased will depend on a variety of factors including price, regulatory requirements, capital availability, and other market conditions. The program does not require the purchase of any minimum number of shares and may be suspended or discontinued at any time.
In February 2008, the Company announced it has appointed Merit E. Janow to serve on its board of directors effective March 1, 2008. Ms. Janow is a professor at Columbia University's School of International and Public Affairs (SIPA) and Columbia Law School and a leading expert in international economic law and policy with extensive experience in academia, government, business and the third quarterAsian-Pacific region.
Report of Independent Registered Public Accounting Firm
The Boardboard of Directorsdirectors and Shareholders of Trimble Navigation Limited
We have audited the accompanying consolidated balance sheets of Trimble Navigation Limited as of December 31, 200428, 2007 and January 2, 2004,December 29, 2006, and the related consolidated statements of income, shareholders'shareholders’ equity, and cash flows for each of the three years in the period ended December 31, 2004.28, 2007. Our audits also included the financial statement schedule listed in the index at Item 15(a)(2).15 (a) Schedule II. These financial statements and schedule are the responsibility of the Company'sCompany’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 Navigation Limited at December 31, 200428, 2007 and January 2, 2004,December 29, 2006, and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 31, 2004,28, 2007, in conformity with U.S.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.
As discussed in Note 2 to the consolidated financial statements, the Company changed its method of accounting for stock-based compensation as of December 31, 2005, and its method of accounting for uncertain tax positions as of December 30, 2006.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the effectiveness of Trimble Navigation Limited'sLimited’s internal control over financial reporting as of December 31, 2004,28, 2007, based on criteria established in Internal Control--IntegratedControl-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated March 11, 2005February 22, 2008, expressed an unqualified opinion thereon.
/s/
/s/ Ernst & Young LLP
Palo Alto,
San Jose, California
March 11, 2005
February 22, 2008
Report of Independent Registered Public Accounting Firm
The Boardboard of Directorsdirectors and Shareholders of Trimble Navigation Limited
We have audited management's assessment, included in Management's Report on
Internal Control Over Financial Reporting at Item 9a, that Trimble Navigation Limited maintained effectiveLimited's internal control over financial reporting as of December 31, 2004,28, 2007, based on criteria established in Internal Control--IntegratedControl—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (the COSO criteria). Trimble Navigation Limited'sLimited’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.reporting included in the accompanying Management's Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on management's
assessment and an opinion on the effectiveness of the company'scompany’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, evaluating management's assessment,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'scompany’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'scompany’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'scompany’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, management's assessment that Trimble Navigation Limited
maintained effective internal control over financial reporting as of December
31, 2004, is fairly stated, in all material respects, based on the COSO
criteria. Also, in our opinion, Trimble Navigation Limited maintained, in all material respects, effective internal control over financial reporting as of December 31, 2004,28, 2007, based on the COSO criteria.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of Trimble Navigation Limited as of December 31, 200428, 2007 and January 2, 2004,December 29, 2006, and the related consolidated statements of income, shareholders'shareholders’ equity, and cash flows for each of the three years in the period ended December 31, 2004 of Trimble
Navigation Limited28, 2007 and our report dated March 11, 2005February 22, 2008 expressed an unqualified opinion thereon.
/s/
/s/ Ernst & Young LLP
Palo Alto,
San Jose, California
March 11, 2005
Item 9 Changes in and Disagreements with Accountants on Accounting and Financial
Disclosure
February 22, 2008
| Changes in and Disagreements with Accountants on Accounting and Financial Disclosure. |
None
Item 9a. Controls and Procedures
(a) Evaluation of Disclosure Controls and Procedures
Trimble's
The management, with the participation of our Chief Executive Officer ("CEO") and Chief Financial Officer, ("CFO"),
after evaluatinghas evaluated the effectiveness of the company's "disclosureour disclosure controls and procedures"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 December 31, 2004,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 December 31, 2004, the company'send of such period, our disclosure controls and procedures were effective and designed to provide reasonable assurance that
material information relating to the company and its consolidated subsidiaries
required to be included in the company's periodic filings under the Exchange Act
would be made known to them by others within those entities.
are effective.
Inherent Limitations on Effectiveness of Controls
The company'scompany’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'ssystem’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'sManagement’s Report on Internal Control over Financial Reporting
The company'scompany’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'scompany’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. Based on the results of this evaluation, the company'scompany’s management concluded that its internal control over financial reporting was effective as of December 31, 2004.
Management's assessment of the28, 2007.
The effectiveness of our internal control over financial reporting as of December 31, 200428, 2007 has been audited by Ernst & Young LLP, an independent registered public accounting firm, as stated in their report which is included elsewhere herein.
(c)
Changes in Internal Control over Financial Reporting
During the quarter ended December 31, 2004,28, 2007, there were no changes in the company'scompany’s internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, the company'scompany’s internal control over financial reporting.
None.
PART III
Item 10 Directors and Executive Officers of the Registrant
| Directors, Executive Officers and Corporate Governance. |
The information required by this item, insofar as it relates to Trimble'sTrimble’s directors, will be contained under the captions "Election“Election of Directors"Directors” and "Section“Section 16(a) Beneficial Ownership Reporting Compliance"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“Executive Officers."
”
The information required by this item in so far as it relates to the nominating and audit committees will be contained in the Proxy Statement under the caption “Board Meetings and Committees.”
Code of Ethics
The
Company'sCompany’s Business Ethics and Conduct Policy
that applies to, among others, to the
Company'sCompany’s Chief Executive Officer, Chief Financial Officer, Corporate Controller, and other finance organization employees. The Business Ethics and Conduct Policy is available on the
Company'sCompany’s website at www.trimble.com under the heading
"Corporate“Corporate Governance and
Policies"Policies” on the Investor Information page of our website. A copy will be provided, without charge, to any shareholder who
requests one by written request addressed to General Counsel, Trimble Navigation Limited, 749 N. Mary Avenue,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 or Corporate Controller, the Company will disclose the nature of such amendment or waiver on the Company'sCompany’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 caption "Executive Compensation"“Executive Compensation” and is incorporated herein by reference.
Item 12 Security Ownership of Certain Beneficial Owners and Management and
Related Stockholder Matters
| 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“Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters"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“Certain Relationships and Related Transactions"Transactions, and Director Independence” and is incorporated herein by reference.
Item 14 Principal Accountant Fees and Services
| Principal Accounting Fees and Services. |
The information required by this item will be contained in the Proxy Statement under the caption "Principal Accountant“Principal Accounting Fees and Services"Services” and is incorporated herein by reference.
PART IV
Item 15. Exhibits, Financial Statement Schedules.
(a) (1) Financial Statements
| 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“Financial Statements and Supplementary Data.
"
Page in this
Annual Report
on Form 10-K
Consolidated Balance Sheets at January 31, 2004 and January 2, 2004........44
Consolidated Statements of Income for each of the three fiscal years
in the period ended January 31, 2004.......................................45
Consolidated Statement of Shareholders' Equity for each of the
three fiscal years in the period ended January 31, 2004....................46
Consolidated Statements of Cash Flows for each of the three
fiscal years in the period ended January 31, 2004..........................47
Notes to Consolidated Financial Statements ................................48
Reports of Independent Registered Public Accounting Firm...................72
(2) Financial Statement Schedules
”
| | Page in this Annual Report on Form 10-K |
| Consolidated Balance Sheets at December 28, 2007 and December 29, 2006 | | 42 |
| | |
Consolidated Statements of Income for the fiscal years ended December 28, 2007, December 29, 2006 and December 30, 2005 | | 43 |
| | |
Consolidated Statement of Shareholders’ Equity for the fiscal years ended December 28, 2007, December 29, 2006 and December 30, 2005 | | 44 |
| | |
Consolidated Statements of Cash Flows for the fiscal years ended December 28, 2007, December 29, 2006 and December 30, 2005 | | 45 |
| | |
| Notes to Consolidated Financial Statements | | 46 |
| | |
| Reports of Independent Registered Public Accounting Firm | | 80 |
| (2) | Financial Statement Schedules |
The following financial statement schedule is filed as part of this report:
Page in this
Annual Report
on Form 10-K
Schedule II - Valuation and Qualifying Accounts.......................S-1
| | Page in this Annual Report on Form 10-K |
| Schedule II – Valuation and Qualifying Accounts | | S-1 |
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.
(3)
(b) Exhibits
Exhibit
Number
3.1
| 2.1 | | Agreement and Plan of Merger, by and among Trimble Navigation Limited, Roadrunner Acquisition Corp. and @Road, Inc., dated as of December 10, 2006. (26) |
| 2.2 | | Form of Voting Agreement, by and among Trimble Navigation Limited and certain stockholders of @Road, Inc., dated as of December 10, 2006. (27) |
| 3.1 | | Restated Articles of Incorporation of the Company filed June 25, 1986. (5) |
| 3.2 | | Certificate of Amendment of Articles of Incorporation of the Company filed October 6, 1988. (6) |
| 3.3 | | Certificate of Amendment of Articles of Incorporation of the Company filed July 18, 1990. (7) |
| 3.4 | | Certificate of Determination of the Company filed February 19, 1999. (8) |
| 3.5 | | Certificate of Amendment of Articles of Incorporation of the Company filed May 29, 2003. (15) |
| 3.6 | | Certificate of Amendment of Articles of Incorporation of the Company filed March 4, 2004. (19) |
| 3.7 | | Certificate of Amendment of Articles of Incorporation of the Company filed February 21, 2007. (30) |
| 3.8 | | Bylaws of the Company (amended and restated through July 20, 2006). (18) |
| 4.1 | | Specimen copy of certificate for shares of Common Stock of the Company. (1) |
| 4.2 | | Preferred Shares Rights Agreement dated as of February 18, 1999. (4) |
| 4.3 | | Agreement of Substitution and Amendment of Preferred Shares Rights Agreement dated September 10, 2004. (20) |
| 4.4 | | Form of Warrant dated April 12, 2002. (13) |
| 10.1+ | | Form of Indemnification Agreement between the Company and its officers and directors. (25) |
| 10. 2+ | | 1990 Director Stock Option Plan, as amended, and form of Outside Director Non-statutory Stock Option Agreement. (3) |
| 10.3+ | | 1992 Management Discount Stock Option and form of Non-statutory Stock Option Agreement. (2) |
| 10.4+ | | 1993 Stock Option Plan, as amended October 24, 2003. (11) |
| 10.5+ | | Trimble Navigation 1988 Employee Stock Purchase Plan, as amended January 17, 2007. (33) |
| 10.6+ | | Employment Agreement between the Company and Steven W. Berglund dated March 17, 1999. (9) |
| 10.7+ | | Trimble Navigation Limited Deferred Compensation Plan effective December 30, 2004, as amended and restated October 19, 2007. (10) |
| 10.8+ | | Australian Addendum to the Trimble Navigation Limited 1988 Employee Stock Purchase Plan. (12) |
| 10.9+ | | Trimble Navigation Limited 2002 Stock Plan (as amended and restated October 19, 2007), including forms of option and restricted stock unit agreements. (32) |
| 10.10 | | Amended and Restated Credit Agreement dated February 16, 2007 (amending and restating the Credit Agreement dated as of July 28, 2005) among Trimble Navigation Limited, the Subsidiary Borrowers, The Bank of Nova Scotia (Administrative Agent, Issuing Bank and Swing Line Bank), Citibank N.A. and BMO Capital Markets (Co-Syndication Agents), Bank of America, N.A. and Wells Fargo Bank N.A. (Co-Documentation Agents), The Bank of Nova Scotia and BNY Capital Markets, Inc. (Joint Lead Arrangers), and The Bank of Nova Scotia (Sole Book Runner). (14) |
| 10.11+ | | Employment Agreement between the Company and Rajat Bahri dated December 6, 2004. (21) |
| 10.12+ | | Board of Directors Compensation Policy effective July 1, 2007. (34) |
| 10.13+ | | Form of Change in Control severance agreement between the Company and certain Company officers. (16) |
| 10.14+ | | Letter of Assignment between the Company and Alan Townsend dated November 12, 2003. (22) |
| 10.15+ | | Supplemental agreement to Letter of Assignment between the Company and Alan Townsend dated January 19, 2004. (23) |
| 10.16+ | | Trimble Navigation Limited 2006 Management Incentive Plan Description. (24) |
| 10.17 | | Lease dated May 11, 2005 between CarrAmerica Realty Operating Partnership, L.P. and the Company. (29) |
| 10.18+ | | Trimble Navigation Limited 2007 Management Incentive Plan Description. (28) |
| 10.19+ | | @Road, Inc. 2000 Stock Option Plan, as amended May 16, 2000. (31) |
| 21.1 | | Subsidiaries of the Company. (34) |
| 23.1 | | Consent of Ernst & Young LLP, independent registered public accounting firm. (34) |
| 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. (34) |
| 31.2 | | Certification of CFO pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. (34) |
| 32.1 | | Certification of CEO pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. (34) |
| 32.2 | | Certification of CFO pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. (34) |
| | |
| + | | Management contract or compensatory plan or arrangement. |
| (1) | | Incorporated by reference to exhibit number 4.1 to the Company’s Registration Statement on Form S-1, as amended (File No. 33-35333), which became effective July 19, 1990. |
| (2) | | Incorporated by reference exhibit number 10.46 to the Company’s Registration Statement on Form S-1 (File No. 33-45990), which was filed February 25, 1992. |
| (3) | | Incorporated by reference to exhibit number 10.32 to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 1993. |
| (4) | | Incorporated by reference to exhibit number 1 to the Company’s Registration Statement on Form 8-A, which was filed on February 18, 1999. |
| (5) | | Incorporated by reference to exhibit number 3.1 to the Company’s Annual Report on Form 10-K for the fiscal year ended January 1, 1999. |
| (6) | | Incorporated by reference to exhibit number 3.2 to the Company’s Annual Report on Form 10-K for the fiscal year ended January 1, 1999. |
| (7) | | Incorporated by reference to exhibit number 3.3 to the Company’s Annual Report on Form 10-K for the fiscal year ended January 1, 1999. |
| (8) | | Incorporated by reference to exhibit number 3.4 to the Company’s Annual Report on Form 10-K for the fiscal year ended January 1, 1999. |
| (9) | | 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) | | Incorporated by reference to exhibit number 10.2 to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 28, 2007. |
| (11) | | Incorporated by reference to exhibit number 10.3 to the Company’s Quarterly Report on Form 10-Q for the quarter ended October 3, 2003. |
| (12) | | Incorporated by reference to exhibit number 10.77 to the Company’s Annual Report on Form 10-K for the fiscal year ended December 29, 2000. |
| (13) | | Incorporated by reference to exhibit number 4.1 to the Company’s Registration Statement on Form S-3 filed on April 19, 2002. |
| (14) | | Incorporated by reference to exhibit number 10.1 to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2005. |
| (15) | | Incorporated by reference to exhibit number 3.5 to the Company’s Quarterly Report on Form 10-Q for the quarter ended July 4, 2003. |
| (16) | | Incorporated by reference to exhibit number 10.15 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2004. |
| (18) | | Incorporated by reference to exhibit number 3.7 to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 29, 2006. |
| (19) | | Incorporated by reference to exhibit number 3.6 to the Company’s Quarterly Report on Form 10-Q for the quarter ended April 2, 2004. |
| (20) | | Incorporated by reference to exhibit number 4.3 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2004. |
| (21) | | Incorporated by reference to exhibit number 10.13 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2004. |
| (22) | | Incorporated by reference to exhibit number 10.16 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2004. |
| (23) | | Incorporated by reference to exhibit number 10.17 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2004. |
| (24) | | Incorporated by reference to exhibit number 10.1 to the Company’s Current Report on Form 8-K filed on January 24, 2006. |
| (25) | | 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. |
| (26) | | Incorporated by reference to exhibit number 2.1 to the Company’s Current Report on Form 8-K filed on December 11, 2006. |
| (27) | | Incorporated by reference to exhibit number 2.2 to the Company’s Current Report on Form 8-K filed on December 11, 2006. |
| (28) | | Incorporated by reference to exhibit number 10.1 to the Company’s Current Report on Form 8-K filed on January 30, 2007. |
| (29) | | 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. |
| (30) | | Incorporated by reference to exhibit number 3.7 to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 30, 2007. |
| (31) | | 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. |
| (32) | | Incorporated by reference to exhibit number 10.1 to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 28, 2007. |
| (33) | | Incorporated by reference to exhibit 10.5 to the Company’s Annual Report on Form 10-K for the year ended December 29, 2006. |
| (34) | | Filed herewith. |
Table of Amendment of Articles of Incorporation of the Company filed
October 6, 1988. (6)
3.3 Certificate of Amendment of Articles of Incorporation of the Company filed
July 18, 1990. (7)
3.4 Certificate of Determination of the Company filed February 19, 1999. (8)
3.5 Certificate of Amendment of Articles of Incorporation of the Company filed
May 29, 2003. (20)
3.6 Certificate of Amendment of Articles of Incorporation of the Company filed
March 4, 2004. (24)
3.8 Amended and Restated Bylaws of the Company. (23)
4.1 Specimen copy of certificate for shares of Common Stock of the Company. (1)
4.2 Preferred Shares Rights Agreement dated as of February 18, 1999. (4)
4.3 Agreement of Substitution and Amendment of Preferred Shares Rights
Agreement dated September 10, 2004. (25)
4.4 First Amended and Restated Stock and Warrant Purchase Agreement between and
among the Company and the investors thereto dated January 14, 2002. (15)
4.5 Form of Warrant to Purchase Shares of Common Stock dated January 14, 2002.
(16)
4.6 Form of Warrant dated April 12, 2002. (17)
10.1+Form of Indemnification Agreement between the Company and its officers and
directors. (25)
10.2+1990 Director Stock Option Plan, as amended, and form of Outside
Director Non-statutory Stock Option Agreement. (3)
10.3+1992 Management Discount Stock Option and form of Non-statutory Stock
Option Agreement. (2)
10.4+ 1993 Stock Option Plan, as amended May 11, 2000. (12)
10.5+ 1988 Employee Stock Purchase Plan, as amended May 11, 2000. (13)
10.6+Employment Agreement between the Company and Steven W. Berglund dated
March 17, 1999. (9)
10.7+Nonqualified deferred Compensation Plan of the Company effective February
10, 1994. (10)
10.8***Supply Agreement dated August 10, 1999 by and among Trimble Navigation
Limited and Solectron Corporation and Solectron Federal Systems, Inc. (11)
10.9+Australian Addendum to the Trimble Navigation 1988 Employee Stock Purchase
Plan. (14)
10.10+ Amended and Restated 2002 Stock Plan (as of July 22, 2004), including
forms of option agreements. (22)
10.11 Credit Agreement dated June 25, 2003. (19)
10.12Letter dated May 8, 2002 exercising renewal option of the Supply Agreement
dated August 10, 1999 by and among Trimble Navigation Limited and Solectron
Corporation and Solectron Federal Systems, Inc. (18)
10.13+ Employment Agreement between the Company and Rajat Bahri dated December
7, 2004. (25)
10.14+ Board of Directors annual compensation policy effective January 1, 2004.
(25)
10.15+ Form of Change in Control agreement between the Company and certain
Company officers. (21)
10.16+ Letter of Assignment between the Company and Alan Townsend dated November
12, 2003. (25)
10.17+ Supplemental agreement to Letter of Assignment between the Company and
Alan Townsend dated January 19, 2004. (25)
21.1 Subsidiaries of the Company. (25)
23.1 Consent of Ernst & Young LLP, independent registered public accounting
firm. (25)
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. (25)
31.2 Certification of CFO pursuant to Section 302 of the Sarbanes-Oxley Act of
2002. (25)
32.1 Certification of CEO pursuant to Section 906 of the Sarbanes-Oxley Act of
2002. (25)
32.2 Certification of CFO pursuant to Section 906 of the Sarbanes-Oxley Act of
2002. (25)
*** Confidential treatment has been granted for certain portions of this
exhibit pursuant to an order dated effective October 5, 1999.
+ Management contract or compensatory plan or arrangement required to be
filed as an exhibit to this Annual Report on Form 10-K pursuant to Item
14(c) thereof.
(1) Incorporated by reference to exhibit number 4.1 to the registrant's
Registration Statement on Form S-1, as amended (File No. 33-35333), which
became effective July 19, 1990.
(2) Incorporated by reference exhibit number 10.46 to the registrant's
Registration Statement on Form S-1 (File No. 33-45990), which was filed
February 25, 1992.
(3) Incorporated by reference to exhibit number 10.32 to the registrant's
Annual Report on Form 10-K for the fiscal year ended December 31, 1993.
(4) Incorporated by reference to exhibit number 1 to the registrant's
Registration Statement on Form 8-A, which was filed on February 18, 1999.
(5) Incorporated by reference to exhibit number 3.1 to the registrant's Annual
Report on Form 10-K for the fiscal year ended January 1, 1999.
(6) Incorporated by reference to exhibit number 3.2 to the registrant's Annual
Report on Form 10-K for the fiscal year ended January 1, 1999.
(7) Incorporated by reference to exhibit number 3.3 to the registrant's Annual
Report on Form 10-K for the fiscal year ended January 1, 1999.
(8) Incorporated by reference to exhibit number 3.4 to the registrant's Annual
Report on Form 10-K for the fiscal year ended January 1, 1999.
(9) Incorporated by reference to exhibit number 10.67 to the registrant's
Annual Report on Form 10-K for the fiscal year ended January 1, 1999.
(10) Incorporated by reference to exhibit number 10.68 to the registrant's
Annual Report on Form 10-K for the fiscal year ended January 1, 1999.
(11) Incorporated by reference to exhibit number 10.69 to the registrant's
Report on Form 8-K, which was filed on August 25, 1999.
(12) Incorporated by reference to exhibit number 10.59 to the registrant's
registration statement on Form S-8 filed on June 1, 2000.
(13) Incorporated by reference to exhibit number 10.60 to the registrant's
registration statement on Form S-8 filed on June 1, 2000.
(14) Incorporated by reference to exhibit number 10.77 to the registrant's
Annual Report on Form 10-K for the fiscal year ended December 29, 2000.
(15) Incorporated by reference to exhibit number 4.1 to the registrant's Current
Report on Form 8-K filed on January 16, 2002.
(16) Incorporated by reference to exhibit number 4.2 to the registrant's Current
Report on Form 8-K filed on January 16, 2002.
(17) Incorporated by reference to exhibit number 4.1 to the registrant's
Registration Statement on Form S-3 filed on April 19, 2002.
(18) Incorporated by reference to exhibit number 10.83 to the registrant's
Annual Report on Form 10-K for the year ended January 3, 2003.
(19) Incorporated by reference to exhibit number 10.2 to the registrant's
Quarterly Report on Form 10-Q for the quarter ended July 4, 2003.
(20) Incorporated by reference to exhibit number 3.5 to the registrant's
Quarterly Report on Form 10-Q for the quarter ended July 4, 2003.
(21) Incorporated by reference to exhibit number 10.1 to the registrant's
Quarterly Report on Form 10-Q for the quarter ended October 1, 2004.
(22) Incorporated by reference to exhibit number 10.2 to the registrant's
Quarterly Report on Form 10-Q for the quarter ended October 1, 2004.
(23) Incorporated by reference to exhibit number 3.8 to the registrant's Annual
Report on Form 10-K for the year ended January 2, 2004.
(24) Incorporated by reference to exhibit number 3.6 to the registrant's
Quarterly Report on Form 10-Q for the quarter ended April 2, 2004.
(25) Filed herewith.
Content EXHIBIT LIST
Exhibit
Number
3.1
Exhibit Number | | |
| | |
| 2.1 | | Agreement and Plan of Merger, by and among Trimble Navigation Limited, Roadrunner Acquisition Corp. and @Road, Inc., dated as of December 10, 2006. (26) |
| 2.2 | | Form of Voting Agreement, by and among Trimble Navigation Limited and certain stockholders of @Road, Inc., dated as of December 10, 2006. (27) |
| 3.1 | | Restated Articles of Incorporation of the Company filed June 25, 1986. (5) |
| 3.2 | | Certificate of Amendment of Articles of Incorporation of the Company filed October 6, 1988. (6) |
| 3.3 | | Certificate of Amendment of Articles of Incorporation of the Company filed July 18, 1990. (7) |
| 3.4 | | Certificate of Determination of the Company filed February 19, 1999. (8) |
| 3.5 | | Certificate of Amendment of Articles of Incorporation of the Company filed May 29, 2003. (15) |
| 3.6 | | Certificate of Amendment of Articles of Incorporation of the Company filed March 4, 2004. (19) |
| 3.7 | | Certificate of Amendment of Articles of Incorporation of the Company filed February 21, 2007. (30) |
| 3.8 | | Bylaws of the Company (amended and restated through July 20, 2006). (18) |
| 4.1 | | Specimen copy of certificate for shares of Common Stock of the Company. (1) |
| 4.2 | | Preferred Shares Rights Agreement dated as of February 18, 1999. (4) |
| 4.3 | | Agreement of Substitution and Amendment of Preferred Shares Rights Agreement dated September 10, 2004. (20) |
| 4.4 | | Form of Warrant dated April 12, 2002. (13) |
| 10.1+ | | Form of Indemnification Agreement between the Company and its officers and directors. (25) |
| 10. 2+ | | 1990 Director Stock Option Plan, as amended, and form of Outside Director Non-statutory Stock Option Agreement. (3) |
| 10.3+ | | 1992 Management Discount Stock Option and form of Non-statutory Stock Option Agreement. (2) |
| 10.4+ | | 1993 Stock Option Plan, as amended October 24, 2003. (11) |
| 10.5+ | | Trimble Navigation 1988 Employee Stock Purchase Plan, as amended January 17, 2007. (33) |
| 10.6+ | | Employment Agreement between the Company and Steven W. Berglund dated March 17, 1999. (9) |
| 10.7+ | | Trimble Navigation Limited Deferred Compensation Plan effective December 30, 2004, as amended and restated October 19, 2007. (10) |
| 10.8+ | | Australian Addendum to the Trimble Navigation Limited 1988 Employee Stock Purchase Plan. (12) |
| | Trimble Navigation Limited 2002 Stock Plan (as amended and restated October 19, 2007), including forms of option and restricted stock unit agreements. (32) |
| 10.10 | | Amended and Restated Credit Agreement dated February 16, 2007 (amending and restating the Credit Agreement dated as of July 28, 2005) among Trimble Navigation Limited, the Subsidiary Borrowers, The Bank of Nova Scotia (Administrative Agent, Issuing Bank and Swing Line Bank), Citibank N.A. and BMO Capital Markets (Co-Syndication Agents), Bank of America, N.A. and Wells Fargo Bank N.A. (Co-Documentation Agents), The Bank of Nova Scotia and BNY Capital Markets, Inc. (Joint Lead Arrangers), and The Bank of Nova Scotia (Sole Book Runner). (14) |
| 10.11+ | | Employment Agreement between the Company and Rajat Bahri dated December 6, 2004. (21) |
| | Board of Directors Compensation Policy effective July 1, 2007. (34) |
| 10.13+ | | Form of Change in Control severance agreement between the Company and certain Company officers. (16) |
| 10.14+ | | Letter of Assignment between the Company and Alan Townsend dated November 12, 2003. (22) |
| 10.15+ | | Supplemental agreement to Letter of Assignment between the Company and Alan Townsend dated January 19, 2004. (23) |
| 10.16+ | | Trimble Navigation Limited 2006 Management Incentive Plan Description. (24) |
| 10.17 | | Lease dated May 11, 2005 between CarrAmerica Realty Operating Partnership, L.P. and the Company. (29) |
| 10.18+ | | Trimble Navigation Limited 2007 Management Incentive Plan Description. (28) |
| 10.19+ | | @Road, Inc. 2000 Stock Option Plan, as amended May 16, 2000. (31) |
| | Subsidiaries of the Company. (34) |
| | Consent of Ernst & Young LLP, independent registered public accounting firm. (34) |
| | Power of Attorney included on signature page herein. |
| | Certification of CEO pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. (34) |
| | Certification of CFO pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. (34) |
| | Certification of CEO pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. (34) |
| | Certification of CFO pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. (34) |
| + | | Management contract or compensatory plan or arrangement. |
| (1) | | Incorporated by reference to exhibit number 4.1 to the Company’s Registration Statement on Form S-1, as amended (File No. 33-35333), which became effective July 19, 1990. |
| (2) | | Incorporated by reference exhibit number 10.46 to the Company’s Registration Statement on Form S-1 (File No. 33-45990), which was filed February 25, 1992. |
| (3) | | Incorporated by reference to exhibit number 10.32 to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 1993. |
| (4) | | Incorporated by reference to exhibit number 1 to the Company’s Registration Statement on Form 8-A, which was filed on February 18, 1999. |
| (5) | | Incorporated by reference to exhibit number 3.1 to the Company’s Annual Report on Form 10-K for the fiscal year ended January 1, 1999. |
| (6) | | Incorporated by reference to exhibit number 3.2 to the Company’s Annual Report on Form 10-K for the fiscal year ended January 1, 1999. |
| (7) | | Incorporated by reference to exhibit number 3.3 to the Company’s Annual Report on Form 10-K for the fiscal year ended January 1, 1999. |
| (8) | | Incorporated by reference to exhibit number 3.4 to the Company’s Annual Report on Form 10-K for the fiscal year ended January 1, 1999. |
| (9) | | 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) | | Incorporated by reference to exhibit number 10.2 to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 28, 2007. |
| (11) | | Incorporated by reference to exhibit number 10.3 to the Company’s Quarterly Report on Form 10-Q for the quarter ended October 3, 2003. |
| (12) | | Incorporated by reference to exhibit number 10.77 to the Company’s Annual Report on Form 10-K for the fiscal year ended December 29, 2000. |
| (13) | | Incorporated by reference to exhibit number 4.1 to the Company’s Registration Statement on Form S-3 filed on April 19, 2002. |
| (14) | | Incorporated by reference to exhibit number 10.1 to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2005. |
| (15) | | Incorporated by reference to exhibit number 3.5 to the Company’s Quarterly Report on Form 10-Q for the quarter ended July 4, 2003. |
| (16) | | Incorporated by reference to exhibit number 10.15 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2004. |
| (18) | | Incorporated by reference to exhibit number 3.7 to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 29, 2006. |
| (19) | | Incorporated by reference to exhibit number 3.6 to the Company’s Quarterly Report on Form 10-Q for the quarter ended April 2, 2004. |
| (20) | | Incorporated by reference to exhibit number 4.3 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2004. |
| (21) | | Incorporated by reference to exhibit number 10.13 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2004. |
| (22) | | Incorporated by reference to exhibit number 10.16 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2004. |
| (23) | | Incorporated by reference to exhibit number 10.17 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2004. |
| (24) | | Incorporated by reference to exhibit number 10.1 to the Company’s Current Report on Form 8-K filed on January 24, 2006. |
| (25) | | 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. |
| (26) | | Incorporated by reference to exhibit number 2.1 to the Company’s Current Report on Form 8-K filed on December 11, 2006. |
| (27) | | Incorporated by reference to exhibit number 2.2 to the Company’s Current Report on Form 8-K filed on December 11, 2006. |
| (28) | | Incorporated by reference to exhibit number 10.1 to the Company’s Current Report on Form 8-K filed on January 30, 2007. |
| (29) | | 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. |
| (30) | | Incorporated by reference to exhibit number 3.7 to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 30, 2007. |
| (31) | | 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. |
| (32) | | Incorporated by reference to exhibit number 10.1 to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 28, 2007. |
| (33) | | Incorporated by reference to exhibit 10.5 to the Company’s Annual Report on Form 10-K for the year ended December 29, 2006. |
| (34) | | Filed herewith. |
Table of Amendment of Articles of Incorporation of the Company filed
October 6, 1988. (6)
3.3 Certificate of Amendment of Articles of Incorporation of the Company filed
July 18, 1990. (7)
3.4 Certificate of Determination of the Company filed February 19, 1999. (8)
3.5 Certificate of Amendment of Articles of Incorporation of the Company filed
May 29, 2003. (20)
3.6 Certificate of Amendment of Articles of Incorporation of the Company filed
March 4, 2004. (24)
3.8 Amended and Restated Bylaws of the Company. (23)
4.1 Specimen copy of certificate for shares of Common Stock of the Company. (1)
4.2 Preferred Shares Rights Agreement dated as of February 18, 1999. (4)
4.3 Agreement of Substitution and Amendment of Preferred Shares Rights
Agreement dated September 10, 2004. (25)
4.4 First Amended and Restated Stock and Warrant Purchase Agreement between and
among the Company and the investors thereto dated January 14, 2002. (15)
4.5 Form of Warrant to Purchase Shares of Common Stock dated January 14, 2002.
(16)
4.6 Form of Warrant dated April 12, 2002. (17)
10.1+Form of Indemnification Agreement between the Company and its officers and
directors. (25)
10.2+1990 Director Stock Option Plan, as amended, and form of Outside Director
Non-statutory Stock Option Agreement. (3)
10.3+1992 Management Discount Stock Option and form of Non-statutory Stock
Option Agreement. (2)
10.4+ 1993 Stock Option Plan, as amended May 11, 2000. (12)
10.5+ 1988 Employee Stock Purchase Plan, as amended May 11, 2000. (13)
10.6+Employment Agreement between the Company and Steven W. Berglund dated
March 17, 1999. (9)
10.7+Nonqualified deferred Compensation Plan of the Company effective February
10, 1994. (10)
10.8 ***Supply Agreement dated August 10, 1999 by and among Trimble Navigation
Limited and Solectron Corporation and Solectron Federal Systems, Inc. (11)
10.9+Australian Addendum to the Trimble Navigation 1988 Employee Stock Purchase
Plan. (14)
10.10+ Amended and Restated 2002 Stock Plan (as of July 22, 2004), including
forms of option agreements. (22)
10.11 Credit Agreement dated June 25, 2003. (19)
10.12Letter dated May 8, 2002 exercising renewal option of the Supply Agreement
dated August 10, 1999 by and among Trimble Navigation Limited and Solectron
Corporation and Solectron Federal Systems, Inc. (18)
10.13+ Employment Agreement between the Company and Rajat Bahri dated December
7, 2004. (25)
10.14+ Board of Directors annual compensation policy effective January 1, 2004.
(25)
10.15+ Form of Change in Control agreement between the Company and certain
Company officers. (21)
10.16+ Letter of Assignment between the Company and Alan Townsend dated November
12, 2003. (25)
10.17+ Supplemental agreement to Letter of Assignment between the Company and
Alan Townsend dated January 19, 2004. (25)
21.1 Subsidiaries of the Company. (25)
23.1 Consent of Ernst & Young LLP, independent registered public accounting
firm. (25)
24.2 Power of Attorney included on signature page herein.
31.1 Certification of CEO pursuant to Section 302 of the Sarbanes-Oxley Act of
2002. (25)
31.2 Certification of CFO pursuant to Section 302 of the Sarbanes-Oxley Act of
2002. (25)
32.1 Certification of CEO pursuant to Section 906 of the Sarbanes-Oxley Act of
2002. (25)
32.2 Certification of CFO pursuant to Section 906 of the Sarbanes-Oxley Act of
2002. (25)
*** Confidential treatment has been granted for certain portions of this
exhibit pursuant to an order dated effective October 5, 1999.
+ Management contract or compensatory plan or arrangement required to be
filed as an exhibit to this Annual Report on Form 10-K pursuant to Item
14(c) thereof.
(1) Incorporated by reference to exhibit number 4.1 to the registrant's
Registration Statement on Form S-1, as amended (File No. 33-35333), which
became effective July 19, 1990.
(2) Incorporated by reference exhibit number 10.46 to the registrant's
Registration Statement on Form S-1 (File No. 33-45990), which was filed
February 25, 1992.
(3) Incorporated by reference to exhibit number 10.32 to the registrant's
Annual Report on Form 10-K for the fiscal year ended December 31, 1993.
(4) Incorporated by reference to exhibit number 1 to the registrant's
Registration Statement on Form 8-A, which was filed on February 18, 1999.
(5) Incorporated by reference to exhibit number 3.1 to the registrant's Annual
Report on Form 10-K for the fiscal year ended January 1, 1999.
(6) Incorporated by reference to exhibit number 3.2 to the registrant's Annual
Report on Form 10-K for the fiscal year ended January 1, 1999.
(7) Incorporated by reference to exhibit number 3.3 to the registrant's Annual
Report on Form 10-K for the fiscal year ended January 1, 1999.
(8) Incorporated by reference to exhibit number 3.4 to the registrant's Annual
Report on Form 10-K for the fiscal year ended January 1, 1999.
(9) Incorporated by reference to exhibit number 10.67 to the registrant's
Annual Report on Form 10-K for the fiscal year ended January 1, 1999.
(10) Incorporated by reference to exhibit number 10.68 to the registrant's
Annual Report on Form 10-K for the fiscal year ended January 1, 1999.
(11) Incorporated by reference to exhibit number 10.69 to the registrant's
Report on Form 8-K, which was filed on August 25, 1999.
(12) Incorporated by reference to exhibit number 10.59 to the registrant's
registration statement on Form S-8 filed on June 1, 2000.
(13) Incorporated by reference to exhibit number 10.60 to the registrant's
registration statement on Form S-8 filed on June 1, 2000.
(14) Incorporated by reference to exhibit number 10.77 to the registrant's
Annual Report on Form 10-K for the fiscal year ended December 29, 2000.
(15) Incorporated by reference to exhibit number 4.1 to the registrant's Current
Report on Form 8-K filed on January 16, 2002.
(16) Incorporated by reference to exhibit number 4.2 to the registrant's Current
Report on Form 8-K filed on January 16, 2002.
(17) Incorporated by reference to exhibit number 4.1 to the registrant's
Registration Statement on Form S-3 filed on April 19, 2002.
(18) Incorporated by reference to exhibit number 10.83 to the registrant's
Annual Report on Form 10-K for the year ended January 3, 2003.
(19) Incorporated by reference to exhibit number 10.2 to the registrant's
Quarterly Report on Form 10-Q for the quarter ended July 4, 2003.
(20) Incorporated by reference to exhibit number 3.5 to the registrant's
Quarterly Report on Form 10-Q for the quarter ended July 4, 2003.
(21) Incorporated by reference to exhibit number 10.1 to the registrant's
Quarterly Report on Form 10-Q for the quarter ended October 1, 2004.
(22) Incorporated by reference to exhibit number 10.2 to the registrant's
Quarterly Report on Form 10-Q for the quarter ended October 1, 2004.
(23) Incorporated by reference to exhibit number 3.8 to the registrant's Annual
Report on Form 10-K for the year ended January 2, 2004.
(24) Incorporated by reference to exhibit number 3.6 to the registrant's
Quarterly Report on Form 10-Q for the quarter ended April 2, 2004.
(25) Filed herewith.
Content SIGNATURES
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.
TRIMBLE NAVIGATION LIMITED
By:
By: /s/ Steven W. Berglund
----------------------
Steven W. Berglund,
President and Chief Executive Officer
March 14, 2005
February 22, 2008
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 Date
/s/ Steven W. Berglund President, Chief Executive March 14, 2005
- ---------------------- Officer, Director
Steven W. Berglund
/s/ Rajat Bahri Chief Financial Officer and March 14, 2005
- --------------- Assistant Secretary
Rajat Bahri (Principal Financial Officer)
/s/ Anup Singh Corporate Controller March 14, 2005
- -------------- (Principal Accounting Officer)
Anup V. Singh
/s/ Robert S. Cooper Director March 10, 2005
- --------------------
Robert S. Cooper
_________________ Director March __, 2005
John B. Goodrich
/s/ William Hart Director March 14, 2005
- ----------------
William Hart
/s/ Ulf J. Johansson Director March 10, 2005
- --------------------
Ulf J. Johansson
/s/ Bradford W. Parkinson Director March 12, 2005
- -------------------------
Bradford W. Parkinson
/s/ Nickolas W. Vande Steeg Director March 11, 2005
- ---------------------------
Nickolas W. Vande Steeg
| Signature | | Capacity in which Signed | |
| | | |
| | | |
| /s/ Steven W. Berglund | | President, Chief Executive Officer, Director | February 25, 2008 |
| Steven W. Berglund | | | |
| | | |
| | | |
| /s/ Rajat Bahri | | Chief Financial Officer and Assistant | February 25, 2008 |
| Rajat Bahri | | Secretary (Principal Financial Officer) | |
| | | |
| | | |
| /s/ Julie Shepard | | Vice President of Finance and Principal | February 25, 2008 |
| Julie Shepard | | Accounting Officer | |
| | | |
| | | |
| /s/ John B. Goodrich | | Director | February 25, 2008 |
| John B. Goodrich | | | |
| | | |
| | | |
| /s/ William Hart | | Director | February 25, 2008 |
| William Hart | | | |
| | | |
| | | |
| /s/ Ulf J. Johansson | | Director | February 25, 2008 |
| Ulf J. Johansson | | | |
| | | |
| | | |
| /s/ Bradford W. Parkinson | | Director | February 25, 2008 |
| Bradford W. Parkinson | | | |
| | | |
| | | |
| /s/ Nickolas W. Vande Steeg | | Director | February 25, 2008 |
| Nickolas W. Vande Steeg | | | |
TRIMBLE NAVIGATION LIMITED
VALUATION AND QUALIFYING ACCOUNTS
(IN
(IN THOUSANDS OF DOLLARS)
December 31, January 2, January 3,
Allowance for doubtful accounts: 2004 2004 2003
- -------------------------------- ---- ---- ----
Balance at beginning of period $ 9,953 $ 9,900 $ 8,540
Acquired allowance 116 752 -
Bad debt expense 1,210 (32) 5,443
Write-offs, net of recoveries (2,327) (667) (4,083)
------ ---- ------
Balance at end of period $ 8,952 $ 9,953 $ 9,900
---------- --------- --------
Inventory allowance:
Balance at beginning of period $ 25,885 $ 25,150 $ 23,274
Acquired allowance 591 1,292 -
Additions to allowance 3,765 5,762 3,901
Write-offs, net of recoveries (4,024) (6,319) (2,025)
------ ------ ------
Balance at end of period $ 26,217 $ 25,885 $ 25,150
---------- --------- --------
Allowance for doubtful accounts: | | December 28, 2007 | | | December 29, 2006 | | | December 30, 2005 | |
| Balance at beginning of period | | $ | 4,063 | | | $ | 5,230 | | | $ | 8,952 | |
| Acquired allowance | | | 1,812 | | | | 494 | | | | 237 | |
| Bad debt expense | | | 1,303 | | | | 163 | | | | (502 | ) |
| Write-offs, net of recoveries | | | (1,957 | ) | | | (1,824 | ) | | | (3,457 | ) |
| Balance at end of period | | $ | 5,221 | | | $ | 4,063 | | | $ | 5,230 | |
| | | | | | | | | | | | | |
| Inventory allowance: | | | | | | | | | | | | |
| Balance at beginning of period | | $ | 28,582 | | | $ | 23,238 | | | $ | 26,217 | |
| Acquired allowance | | | 560 | | | | 1 | | | | 357 | |
| Additions to allowance | | | 4,524 | | | | 7,061 | | | | 5,612 | |
| Write-offs, net of recoveries | | | (4,040 | ) | | | (1,718 | ) | | | (8,948 | ) |
| Balance at end of period | | $ | 29,626 | | | $ | 28,582 | | | $ | 23,238 | |
| | | | | | | | | | | | | |
| Sales return reserve: | | | | | | | | | | | | |
| Balance at beginning of period | | $ | 859 | | | $ | 1,500 | | | $ | 2,210 | |
| Acquired allowance | | | 295 | | | | 55 | | | | 21 | |
| Additions (Reductions) to allowance | | | 465 | | | | (586 | ) | | | (383 | ) |
| Write-offs, net of recoveries | | | 64 | | | | (110 | ) | | | (348 | ) |
| Balance at end of period | | $ | 1,683 | | | $ | 859 | | | $ | 1,500 | |
| | | | | | | | | | | | | |