Washington, D.C. 20549
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Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
Certain parts of Trimble Inc. Proxy Statement relating to the annual meeting of stockholders to be held on May 2, 201727, 2020 (the “Proxy Statement”) are incorporated by reference into Part III of this Annual Report on Form 10-K.
This Annual Report on Form 10-K contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, which are subject to the “safe harbor” created by those sections. These statements include, among other things:
The forward-looking statements regarding future events and the future results of Trimble Inc. (formerly Trimble Navigation Limited) (“Trimble” or “the Company” or “we” or “our” or “us”) are based on current expectations, estimates, forecasts, and projections about the industries in which Trimble operates, Trimble's current tax structure, including where Trimble's assets are deemed to reside for tax purposes, 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.”Operations” below. In some cases, forward-looking statements can be identified by terminology such as “may,” “will,” “should,” “could,” “predicts,” “potential,” “continue,” “expects,” “anticipates,” “future,” “intends,” “plans,” “believes,” “estimates,” and similar expressions. These forward-looking statements 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, including but are not limited to those discussed in this Report under the section entitled “Risk Factors” and elsewhere, and in other reports Trimble files with the Securities and Exchange Commission (“SEC”), specifically the most recent reports on Form 8-K and Form 10-Q, each as it may be amended from time to time. These forward-looking statements are made as of the date of this Annual Report on Form 10-K. We reserve the right to update these statements for any reason, including the occurrence of material events, but assume no duty to update these statements to reflect subsequent events. The risks and uncertainties under the caption “Risks and Uncertainties” contained herein, among other things, should be considered in evaluating our prospects and future financial performance.
TRIMBLE INC.
Trimble Inc., a Delaware corporation, is a leading provider of technology solutions that enable professionals and field mobile workers to improve or transform their work processes. Our comprehensive work process solutions are used across a range of industries including agriculture, architecture, civil engineering, survey, and land administration, construction, geospatial, environmental management, government, natural resources, transportation, and utilities. Representative Trimble customers include engineering and construction firms, contractors, owners, surveying companies, farmers and agricultural companies, enterprise firms with large-scale fleets,trucking companies, energy, mining and utility companies, and state, federal, and municipal governments.
Many of our products integrate real-time positioning or location technologies with wireless communications and software or information technologies. Information about location or position is transmitted via a wireless link to a domain-specific software application, which enhances the productivity of the worker, asset, or work process. Position is provided through a number of technologies including the Global Positioning System (GPS)("GPS"), other Global Navigation Satellite Systems (GNSS)("GNSS") and their augmentation systems, and systems that use laser, optical, inertial, or other technologies to establish real-time position. Integration of wireless communications in our solutions facilitates real-time data flow, communication, and situational awareness within sites and between work sites or vehicles and offices.
Software is a key element of most of our solutions and accounts for a steadily increasing portion of our business. Our software products and services range from embedded real-time firmware through field service and location oriented solutions on handheld and other small footprint devices, to application software that integrates field data with large scale enterprise back-office applications. Many of our software solutions are built on configurable and enterprise grade scalable platforms that can be tailored to the workflows that our customers follow to implement their customized business processes. Our software capabilities include extensive 3-D modeling, analysis and design solutions, civil engineering alignment selection solutions, design and data preparation software, BIM software, enterprise resource planning and project management solutions, cloud-based collaboration solutions, applications for advanced surveying and geospatial data collection and analysis, farm productivity solutions, fleet management solutions for transportation, as well as a large suite of domain-specific software applications used across a host of industries including agriculture, construction, utilities, and transportation. Our software is sold as a perpetual license or as a subscription and can be delivered for on-premise installation or in a hosted environment as Software as a Service (SaaS)("SaaS"). Our software products allow our customers to optimize their work processes for targeted outcomes, improve their productivity, and gain insight into their projects and operations to enhance their decision making and to gain maximum benefit from a broad range of other Trimble products and systems.
Our global operations include major development, manufacturing, or logistics operations in the United States, Sweden, Finland, Germany, New Zealand, Canada, the United Kingdom, the Netherlands, China, and India. Products are sold in more than 100 countries, through dealers, representatives, joint ventures, and other channels throughout the world, as well as direct sales to end users.end-users. Sales are supported by our own offices located in more than 35over 40 countries around the world.
We began operations in 1978 and were originally incorporated in California as Trimble Navigation Limited in 1981. On October 1, 2016, Trimble Navigation Limited changed its name to Trimble Inc. and changed its state of incorporation from the State of California to the State of Delaware. Our common stock has been publicly traded on NASDAQ since 1990 under the symbol TRMB.
Strategic acquisitions - Organic growth continues to be our primary focus, while acquisitions serve to enhance our market position. We acquire businesses that bring domain expertise, technology, products, or distribution capabilities that augment our portfolio and allow us to penetrate existing markets more effectively, or to establish a market beachhead. Our success in targeting and effectively integrating acquisitions is an important aspect of our growth strategy.
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• | Focus on attractive markets with significant growth and profitability potential - We focus on large markets historically underserved by technology that offer significant potential for long-term revenue growth, profitability, and market leadership. Our core industries such as construction, agriculture, and transportation are each multi-trillion dollar global industries that operate in demanding environments with technology adoption in the early phases relative to other industries. With the emergence of mobile computing capabilities, the increasing technological know-how of end users, and compelling return on investment, we believe many of our markets are attractive for substituting Trimble’s technology and solutions in place of traditional operating methods. |
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• | Domain knowledge and technological innovation that benefit a diverse customer base - We have over time redefined our technological focus from hardware-driven point solutions to integrated work process solutions by developing domain expertise and heavily reinvesting in R&D and acquisitions. We currently have over 1,200 unique patents. We intend to continue to take advantage of our technology portfolio and deep domain knowledge to quickly and cost-effectively deliver specific, targeted solutions to each of the vertical markets we serve. We look for opportunities where the opportunity for technological change is high and that have a requirement for the integration of multiple technologies into complete vertical solutions. |
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• | Increasing focus on software and services - Software and services targeted for the needs of vertical end markets are increasingly important elements of our solutions and are core to our growth strategy. Trimble generally has an open application programming interface philosophy and open vendor environment, which leads to increased adoption of our software and analytics offerings. These software and services solutions integrate and optimize additional workflows for our customers, thereby improving their work productivity, and in the case of subscription, maintenance, and support services, also provide us with enhanced business visibility over time. Professional services constitute an additional customer offering that helps our customers integrate and optimize the use of our offerings in their environment. |
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• | Geographic expansion with localization strategy - We view international expansion as an important element of our strategy and we continue to position ourselves in geographic markets that will serve as important sources of future growth. We currently have a physical presence in over 40 countries and distribution channels over 85 countries. |
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• | Optimized go-to-market strategies to best access our markets - We utilize vertically focused go-to-market strategies that leverage domain expertise to best serve the needs of individual markets both domestically and abroad. These go-to-market capabilities include independent dealers, joint ventures, original equipment manufacturers ("OEM"), and distribution alliances with key partners, such as CNH Global, Caterpillar, and Nikon, as well as direct sales to end-users, which provides us with broad market reach and localization capabilities to effectively serve our markets. |
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• | Strategic acquisitions - Organic growth continues to be our primary focus, while acquisitions serve to enhance our market position. We acquire businesses that bring domain expertise, technology, products, or distribution capabilities that augment our portfolio and allow us to penetrate existing markets more effectively, or to establish a market beachhead. Our success in targeting and effectively integrating acquisitions is an important aspect of our growth strategy. |
Business Segments and Markets
We are organized into four reporting segments encompassing our various applications and product lines: Engineering and Construction, Field Solutions, Mobile Solutions and Advanced Devices. Our segments are distinguished by the markets they serve. Each segment consists of businesses whichthat are responsible for product development, marketing, sales, strategy, and financial performance. We report our financial performance, including revenue and operating income, based on four reportable segments: Buildings and Infrastructure, Geospatial, Resources and Utilities, and Transportation. For further financial information about our segments, see Note 6 to the Consolidated Financial Statements.
EngineeringBuildings and ConstructionInfrastructure
The EngineeringBuildings and ConstructionInfrastructure segment primarily serves customers working in architecture, engineering, construction, surveying, natural resourcesarchitects, engineers, contractors, owners, and government.operators. Within this segment, our most substantial product portfolios are focused on building construction and civil engineering and construction,construction.
Building Construction. The Trimble building construction portfolio of solutions for the commercial and geospatial.industrial building industry spans the entire life cycle of a building and is used by owners, architects, designers, general contractors, sub-contractors, engineers, and facility owners or lessees. These solutions serve to improve productivity and to enhance data sharing and collaboration across different teams and stakeholders to help keep projects within cost, time, and quality targets. The suite of technologies and solutions we provide to the building industry includes program management solutions for owners, software for 3D conceptual design and modeling, BIM software that is used in design, engineering, and construction, enterprise resource planning and project management and project collaboration for general contractors, advanced integrated site layout and measurement systems, cost estimating, scheduling, and project controls solutions for contractors. The suite also includes applications for sub-contractors and construction trades such as steel, concrete and mechanical, electrical and plumbing, and an integrated workplace management services ("IWMS") software suite for real estate management, project coordination, and capital program planning and management. In addition,
Trimble’s Connect collaboration platform streamlines customer workflows and enables interoperability between Trimble’s and other providers' solutions. These solutions for the building industry serve to automate, streamline, and transform work processes across the building construction industry. Our solutions provide customer benefits such as reduced costs, reduced waste and re-work, increased worker safety and efficiencies, faster project completion times, improved information flow, better decision making, and enhanced quality control and sustainability. During 2019, we announced advances in several of our software packages and solutions.
Civil Engineering and Construction.Before dirt is ever moved in civil construction, feasibility, design, and scheduling are critical steps to site construction. Trimble provides the civil engineering and construction industry with a continuum of field solutions, software solutions, and services at every stage of the project - from planning and design, to construction, operation, and maintenance. Our civil construction solutions are used in civil infrastructure such as roads, railways, airports, land management, solar farms, marine construction, and landfills. Our solutions are used across the entire project life cycle to improve productivity, reduce waste and re-work, and enable more informed decision making through enhanced situational awareness, data flow, and project collaboration. At the same time, our solutions can improve worker safety and reduce environmental impact. Our suite of integrated solutions and technologies in this area includes field and office software for optimized route selection and design, systems to automatically guide and control construction equipment such as excavators, bulldozers, wheel loaders, motor graders, and paving equipment, systems to monitor, track, and manage assets, equipment, and workers, and software to facilitate the sharing and communication of data in real time. Together, these solutions are designed to transform how work is done within the heavy civil construction industry.
The Connected Site describes our civil construction market portfolio which integrates data and information across the entire construction process and across mixed fleets. This includes data from site positioning and machine control systems, construction asset management equipment and services, and various software applications. Utilizing wireless and internet-based site communications infrastructure, our Connected Site solutions include the ability to track and control equipment, perform remote
machine diagnostics, and reduce re-work. By leveraging the Connected SiteTrimble technology, contractors gain greater insight into their operations, helping them to lower costs and improve productivity, worker safety, and asset utilization.
To bolster the software solutions we provide to the Connected Site, we formed a joint venture with Caterpillar in October of 2008, called VirtualSite Solutions (VSS). VSS develops software for fleet management and connected worksite solutions, including subscription-based software as a service solutions. VSS solutions are part of the Connected Site portfolio, and are sold through a world-wide independent dealer channel under the name of SITECH. A separate joint venture with Caterpillar, Caterpillar-Trimble Control Technologies (CTCT)("CTCT"), was formed in 2002 to develop the next generation of advanced electronic guidance and control products for earthmoving machines. The joint venture develops machine control and guidance products that use site design information combined with accurate positioning technology to automatically control dozer blades and other machine tools. Caterpillar generally offers joint venture products as a factory-installed option, while Trimble focuses on the aftermarket with products for mixed fleets of earthmoving machines from Caterpillar and other equipment manufacturers to allow improved management of construction sites and projects. Effective in January 2014, Caterpillar and Trimble amended the joint ventures and related agreements between the parties to expand the range of productivity applications and services the companies will provide, and to support development of comprehensive unified fleet solutions for the construction industry.
During 2016,2019, we announced a number of developments, including the formationlaunch of factory fit, Trimble-Ready programs,an e-commerce platform for pre-owned Trimble products, and new collaborations with various original equipment manufacturers (OEM) within our Civil Engineering and Construction business. We also announced the introduction of office software, site positioning and machine control solutions designed for site and utility contractors and owner/operators. These solutions offer small to mid-sized contractors a reliable, flexible and affordable option to leverage construction technology.
Building Construction. The Trimble Buildings portfolio of solutions for the commercial and industrial building industry spans the entire lifecycle of a building and is used by architects, designers, general contractors, sub-contractors, engineers, and facility owners or lessees. These solutions servemultiple OEMs intended to improve productivity and to enhance data sharing and collaboration across different teams and stakeholders to help keep projects within cost, time and quality targets. The suitethe interoperability of technologies and solutions we providedata for civil engineering and construction projects.
We sell and distribute our products in the Building and Infrastructure segment through both a direct sales force and global networks of independent dealers with expertise and customer relationships in the respective markets, including the network of SITECH Technology Dealers, which serves the civil construction industry. BuildingPoint is an initiative to form a global network of specialized distribution partners to serve the building industry includes software for 3D conceptual design and modeling, BIM software which is used in design, construction and maintenance, advanced integrated site layout and measurement systems, cost estimating, scheduling, and project controls solutions for contractors, applications for sub-contractors and trades such as steel, concrete and mechanical, electrical and plumbing, and a bestneeds of breed integrated workplace management services (IWMS) software suite for real estate management, project coordination, capital program planning and management, and facility management for building owners and program managers. In addition, Trimble’s Connect collaboration platform streamlines customer workflows and enables interoperability between Trimble’s solutions. Our joint venture with Hilti, a leading global provider of solutions to the building trades, develops products which integrate Trimble’s positioning and asset management technologies with Hilti’s tools capabilities to create smarter tools and smarter construction sites. Together, these solutions for the building industry serve to automate, streamline and transform work processes across the building construction industry. Our solutions provide customer benefits such as reduced costs, reduced waste and re-work, increased worker safety and efficiencies, faster project completion times, improved information flow, better decision making and enhanced quality control.
Duringindustry by supporting customers in the year, we announced advances in severaladoption of the Trimble Buildings solutions. We sell many of our software packagessolutions through our own direct salesforce.
Competitors in this segment are typically companies that provide optical, laser, or GNSS positioning products as well as companies that produce software specific to the construction process. Our principal competitors are Topcon Corporation, Hexagon AB, and solutions. We launched Trimble ProjectSight, a new generation of our cloud-based project controls solution for construction managers and general contractors, which is a web and mobile solution that streamlinesAutodesk. As the creation, access and sharing of project information between the office and the jobsite for more efficient, accurate and predictable project delivery. Additionally, we collaborated with the Hilti Group to deliver new software integration and data exchange solutions, which are intended to facilitate the sharing of design information between software applications, provide easy access to data in the cloud, and provide more design content, specification information and pricing to our users. We also launched our SketchUp Viewer for Microsoft HoloLens, which is a new mixed-reality solution that allows users to virtually inhabit and experience their designs to improve quality, communication and efficiency in the design, construction and operation of buildings.
During 2016, we acquired Building Data, whose managed content and software solutions enable Mechanical, Electrical and Plumbing (MEP) contractors and engineers to produce intelligent, constructible models by including manufacturing-specific content from a proprietary database of over 6 million 3D data components. The combination of Building Data’s experience in Building Information Modeling (BIM) content, paired with Trimble’s leadership in providingCompany extends its software and hardwareservices offerings to cover the full set of construction life cycle management solutions for buildingused by owners, designers, and construction will enhancecompanies, we increasingly compete with large established companies that offer similar systems across all industries, such as Oracle. We compete principally on the basis of innovation, differentiated products, domain expertise, service, quality, and geographic reach.
Geospatial
The Geospatial segment primarily serves customers working in surveying, engineering, and government. Within this segment our offerings designed to provide contractorsmost substantial product portfolios are focused on surveying and engineers with increased efficiencies throughout the building lifecycle.geospatial, and geographic information systems ("GIS").
Geospatial. InSurveying and Geospatial.Through our surveying and geospatial business,product portfolio, professional surveyors and engineers providingprovide services to the construction, engineering, mining, oil and gas, energy and utilities, government, and land management sectors use oursectors. Our survey and geospatial solutions to replace less productive conventional methods of surveying, mapping, 2D or 3D modeling, measurement, reporting, and analysis. Our suite of solutions used in these activities include field basedincludes field-based data collection systems and field software, real time communications systems, and back-office software for data processing, modeling, reporting, and analysis. Our field basedfield-based
technologies are used in handheld, land mobile, and airborne applications and incorporate technologies such as mobile application software, high precision GNSS, robotic measurement systems, inertial positioning, 3D laser scanning, digital imaging, and optical or laser measurement and unmanned aerial vehicles.measurement. We maintain a joint venture with Nikon, which focuses on the design and manufacture in Japan of surveying instruments including mechanical total stations and related products. Our office basedoffice-based products include software for planning, data processing and editing, quality control, 3D modeling, intelligent data analysis and feature extraction, deformation monitoring, project reporting, and data export. Our customers in this area gain benefits from the use of our products including significantly improved productivity in both field and office activities, improved safety through non-contact measurement and detection of potentially dangerous ground or structure movement, and improved data flow whichthat enables better decision making.
In 2016, we launchedGeographic Information Systems. Our GIS product line collects authoritative field data and integrates that data into GIS databases. Our handheld data collection systems allow users to quickly log positions and descriptive information about their assets, ensure the integrity and accuracy of GIS information, and ultimately enable better decision-making. Through a next-generation survey instrument, the Trimble SX10 Scanning Total Station, which merges high-speed 3D scanning, enhanced Trimble VISION imaging technologycombination of wireless technologies and high-accuracy total station measurements into familiar field and office workflows for surveyors. We also launched Trimble® Catalyst, a software-defined Global Navigation Satellite System (GNSS) receiver that works with select Android mobile handhelds, smartphones and tablets, which, when combined with a small, lightweight, plug-and-play digital antenna and subscriptionsoftware solutions, fieldwork results are seamlessly delivered to the Catalyst service,back-office GIS, and mobile workers can also access GIS information remotely. This capability provides on-demandsignificant advantages to users, including improved productivity, accuracy, and access to information in the field.
During 2019, we announced the release of a new GNSS geo-location capabilities to transform consumer devices into high-accuracy mobile data collection systems.receiver, the launch of a new 3D laser scanning system, and the launch of a new high-performance field computer for our Mapping and Geographic Information Systems (GIS) portfolio.
We sell and distribute our products in the Engineering and ConstructionGeospatial segment primarily through multiple global networks of independent dealers with expertise and customer relationships in their respective segments, each supported by Trimble personnel. In 2016, the network of SITECH Technology Dealers, which serves the civil construction industry, expanded to 111 dealers worldwide across all regions, including the Americas, Europe, Middle East, Africa, Asia, China, and the South Pacific. We also made significant progress during the year with BuildingPoint, an initiative to form a global network of distribution partners to serve the needs of the building construction industry.
independent dealers and business partners. Competitors in this segment are typically survey instrument companies that provide optical, laser orutilizing GNSS positioning productstechnology such as well as companies that produce software specific to the construction process. Our principal competitors are Topcon Corporation and Hexagon AB and Autodesk.AB. We compete principally on the basis of innovative, differentiated products, service, qualityrobust performance, ease of use, price, interoperability, and geographic reach.interconnectedness.
Field SolutionsResources and Utilities
Our Field SolutionsThe Resources and Utilities segment primarily serves customers working in agriculture, forestry, and utilities. Within this segment, our most substantial product portfolio addresses the agriculture and geographic information systems (GIS) markets.market.
Agriculture.Our precision agriculture products and services consist of guidance and positioning systems, automated and variable-rate application and technology systems, and information management solutions that enable farmers and their partners to improve crop performance, profitability, and environmental quality. Trimble precision agriculture solutions can assist farmers throughout every step of their farming process, beginning with land preparation and continuing through the planting, nutrient, and pest management, and harvesting phases of a crop cycle. We provide manual and automated navigation guidance for tractors and other farm equipment used in spraying, planting, cultivating, and harvesting applications. The benefits to the farmer include faster machine operation, higher yields, and lower consumption of fuel and chemicals than conventional equipment. In addition, we provide solutions to automate application of pesticide and seeding. Our water solutions help farmers minimize their water costs and distribute water more efficiently and include applications for leveling agricultural fields for irrigation and aligning drainage systems to better manage water flow in fields, and controlling water application in linear and pivot irrigation systems.fields.
During 2016, we continued to develop our precision agriculture portfolio. We expanded our portfolio of Android-based display with the introduction of the MMX-070 tablet and continued to add more applications to our in-field mobile environment. We launched Vertical RTK, a grade control system for agriculture, which enables land improvement contractors to reduce downtime and costly delays by significantly enhancing vertical accuracy and stability of single baseline RTK systems. In the water management area, we released an industry-first technology for irrigation called Irrigate-IQ optimal flow. This technology enables farmers to utilize no-spray areas on center pivot irrigation systemsSoftware solutions that do not have a variable frequency drive pump, while keeping the pressure regulated across the pivot. Now, farmers who were unable to change the application across the pivot due to pumping equipment limitations can benefit from using no spray areas to focus water where it is needed, without the risk of damage due to significant pressure changes. In addition to Irrigate-IQ optimal flow, we also launched Irrigate-IQ uniform corner which enables farmers to apply a consistent application in areas covered by the corner arm. The solution utilizes individual nozzle control to minimize gaps and overlaps that are typically seen in traditional corner arm systems. As a result, farmers can extend the capabilities of their current corner arm by optimizing water use and preventing over- or under-watering.
Solutions which use data to enhance farm productivity are an increasing focus in our agriculture business. In 2016,2019, we consolidatedannounced the launch of Farmer Core, a numbernew entry-level software subscription that enables farmers to connect all aspects of their farm operation. Trimble Agriculture'sagricultural software brands and platforms into a single Trimble Ag Software solution. This integrated solution is designedused by farmers to not only help farmers seeking solutions to integrate all of the information on the farm, but whereand is also used by advisors, suppliers, and purchasers canto share information to help improve efficiencies. Trimble Ag Software enables a chain of custody where the farm can pass critical food safety and sustainability information to processors, distributors and ultimately to consumers who
seek transparency. Acquired in 2015, Agri-Trend’s Professional Agricultural Coaching services help farmers allocate scarce resources to produce a safe, reliable, and profitable food supply in an environmentally sustainable manner. The combination of ouragricultural software platform and the coaching advisory services enables farmers to make more informed decisions leading to higher yields, better quality crops, increased profitability, and reduced environmental impact.
For many of Trimble's end market applications and customer needs, the positional accuracy that can be derived from GNSS satellite signals alone is insufficient. In these applications, higher levels of positional accuracy are required. For these situations, Trimble Ag Softwareprovides an augmentation service that improves the positional accuracy that is available to the customer, thereby enabling higher levels of precision and Agri-Trend Coachingautomation in work processes that are conducted in the field. This service is provided by Trimble Positioning Services ("Positioning Services") and is available in a variety of formats and accuracy levels, depending on the relevant application's specific needs. Positioning Services serves customers in a variety of end markets, including agriculture, construction, geospatial, and other markets, with a majority of its customers being in agriculture.
During the third quarter of 2019, we completed the acquisition of 3LOG Systems, Inc., a supplier of timber management software solutions. The acquisition complements Trimble's forestry business software portfolio and further expands the Trimble Connected Forest™ solutions, which offer a complete end-to-end ecosystem for forest management, traceability, and timber processing.
During the fourth quarter of 2019, we completed the acquisition of privately-held Azteca Systems LLC (dba "Cityworks"), a provider of enterprise asset management (EAM) software for utilities and local government. Cityworks' solutions address the global challenges associated with maintaining and replacing aging utility, transportation, and public assets and infrastructure.
Additionally, during the fourth quarter of 2019, we announced the acquisitions of Cansel Survey Equipment's Can-Net and AllTerra New Zealand's iBase networks. The acquisitions significantly increase the global footprint of Trimble-owned Virtual Reference Station (VRS) networks by adding geographies in Canada and New Zealand. Subscription-based VRS correction services are available in many locations including within our Vantage distribution channel.now accessible to more customers around the world who rely on high-accuracy corrections to increase productivity and reduce operational costs.
In the course of 2016, we continued to add third-party applications to our Android-based TMX-2050 display platform, enabling customers to view more complete data from multiple industry software platforms and machines, in addition to the wide range of applications Trimble already offers.
We use multiple distribution approaches to access the agricultural market including independent dealers and direct selling to enterprise accounts. A significant portion of our sales are through CNH Global and affiliated dealer networks. During 2016 we expanded our Vantage global distribution channel. VantageTrimble distributors provide a premier level of technical expertise, customer service and support capabilities, and operate with a strategy that fosters technology interoperability in mixed fleets used on a farm. Vantage partnersTrimble distributors are committed to providing reliable, responsive, and dedicated infieldin-field service and support as well as creating a hassle freehassle-free experience for thegrower and their advisors when implementing advanced technology solutions. They also provide training soto help farmers and advisors havegain a better understanding of how to use the technology in a way that best meets their farming needs. We currently have Vantage partners in over 12 countries across 4 continents. Our forestry and utilities portfolios use a mix of direct sales and indirect distribution.
Competitors in thisthe agricultural market are vertically integrated farm equipment and implement companies, such as John Deere and AGCO, and agricultural instrumentation companies, such as Raven and Ag Junction. As we expand our business in agronomic services and data oriented applications, we expect to increasingly compete with major input suppliers such as Monsanto.Raven. We compete principally on the basis of robust performance, ease of use, domain expertise, customer support, price, interoperability, interconnectedness, and the completeness of our solutions.
Geographic Information Systems (GIS). Our GIS product line collects authoritativeTransportation
Trimble’s transportation solutions are multi-modal and provide capabilities for the long-haul trucking, field dataservice management, rail, and integrate that data into GIS databases. Our handheld data collection systems allow usersconstruction logistics industries to quickly log positionscreate a fully integrated supply chain and descriptive information about their assets, ensure the integrity and accuracyconnect all aspects of GIS information and ultimately, enable better decision-making. Through a combination of wireless technologies and software solutions, fieldwork results are seamlessly delivered to the back-office GIS, and mobile workers can also access GIS information remotely. This capability provides significant advantages to users including improved productivity, accuracy and access to information in the field.
Primary markets for our GIS products and solutions include both governmental and commercial users. Distribution for GIS products is primarily through a network of independent dealers and business partners, supported by Trimble personnel. Competitors in this market are typically survey instrument companies utilizing GNSS technology such as Topcon and Leica. We compete principally on the basis of robust performance, ease of use, price, interoperability and interconnectedness.
Mobile Solutions
Our Mobile Solutions segment primarily consists of two businesses, transportation and logistics trucks, drivers, back office, and field service management.freight. Trimble provides enterprise and mobility solutions focused on business intelligence and data analytics, safety and regulatory compliance, navigation and routing, freight brokerage, supply chain visibility and final mile, and transportation management and fleet maintenance. Within this segment, our most substantial product portfolio addresses the transportation market.
Transportation and Logistics.In the transportation and logistics market, we offer a suite of solutions marketed primarily under the Trimble PeopleNet, GEOTrac, TMW and ALK Technologies brands.brand. Together, this range of products provides a comprehensive fleet and transportation management, analytics, routing, mapping, reporting, and predictive modeling solution to enable the transportation and logistics industry to achieve greater overall operational efficiency, fleet performance, and profitability while ensuring regulatory compliance. Our fleet productivity and enterprise software offerings are comprised primarily of the PeopleNet, TMW, Vusion, PC*Miler, CoPilot and FleetWorks mobile platforms. Our enterprise strategy focuses on sales to large enterprise accounts with more than 1,000 vehicles.accounts. In addition to Trimble-hosted solutions, we also integrate our applications and services directly into the customer’s IT infrastructure.
The PeopleNet mobile communications system includestelematics solutions encompassingencompass route management, safety and compliance, end-to-end vehicle management, and supply chain communications. PeopleNet's products are used by more than 1,500 transportation fleets in the US and Canada. GEOTrac’s telematics systems provide end-to-end solutions for oil & gas road mapping, vehicle monitoring, geofencing, messaging and alerting, driver productivity, distress notification, lone worker monitoring, reporting and maintenance monitoring. The CarCube/FleetWorks solution is tailored for transportation and logistics companies in Europe and Australia. TMW's transportation software platform serves as a central hub from which the core operations of transportation organizations are managed, data is stored and analyzed, and mission critical business processes are automated. Our software platform automates business processes spanning the entire surface transportation lifecycle,life cycle, order-to-cash, delivering visibility, control, and decision support for the intricate relationships and complex processes involved in the movement of freight. TMW software technologies serve more than 2,300 customers, including many of the most sophisticated and complex transportation companies, as well as hundreds of smaller regional and local operations in North America. In our Mobile Solutions segment, customers manage nearly two million vehicles and mobile assets with $71 billion in annual freight spend, and direct more than 500,000 trucks in North America, Europe, Latin America and Australia-New Zealand. Furthermore, TMW acquired ALK
Technologies in 2013. ALK is a transportation technology company dedicated to innovative routing, mileage, mapping and mobile navigation solutions. We are known for providing trusted industry standard data to seamless integration. ALK solutions are developed for commercial and consumer end users.
Together the PC*Miler, CoPilot and ALK MapsTrimble products also provide a truck routing, mileage, and mapping solution andsolutions, as well as a voice guided turn-by-turn navigation solution. TMW's enterprise software also integrates with more than 215 partners, including PeopleNet's fleet productivity solutions.
Field Service Management. Trimble’s Field Service Management offerings provide owners and operators of fleets of vehicles, such as service vehicles, with visibility into field and fleet operations so they can increase efficiency and productivity. The Field Service Management suite includes applications for fleet management, work management and scheduling, worker safety and mobility that improve the effectiveness of work, workers and assets in the field. This cloud-based portfolio allows Trimble to offer customers industry-specific, enterprise-level solutions for enhanced performance and ease of use. Our market strategy targets opportunities in specific vertical markets where we believe we can provide unique value to the end-user by tailoring our solutions. Major markets include telecommunications, utilities, mobile workers, construction logistics, forestry, public safety and oil and gas.
The Mobile SolutionsTransportation segment generally sells directly to end-users.end-users and OEMs. Sales cycles tend to be long, due tooften involving field trials followed by an extensive decision-making process. Key competitors in this segment include Omnitracs Fleetmatics, Teletrac, and McLeod, among others. We compete principally on the basis of interoperability, domain expertise, customer support and service, price, innovative product offerings, quality, and provision of a complete solution.
Advanced Devices
Advanced Devices includes the product lines from our Embedded Technologies, Timing, Applanix, Military and Advanced Systems (MAS) businesses. These businesses share several common characteristics: they are hardware centric, generally market to OEMs, system integrators and service providers, and have products that can be utilized in a number of different end user markets and applications. The various operations that comprise this segment were aggregated on the basis that these operations do not exceed 10% of our total revenue, operating income or assets.
Within Embedded Technologies and Timing, we supply GNSS modules, licensing and complementary technologies, and GNSS-integrated sub-system solutions for applications requiring precise position, time or frequency. Embedded Technologies and Timing serve a broad range of vertical markets including telecommunications, automotive electronics, and commercial electronics. Sales are made directly to OEMs, system integrators, value-added resellers and service providers who incorporate our components into a complete system-level solution. Competitors in this market include Microsemi and u-blox. We compete principally on the basis of product performance, price and quality.
Our MAS business supplies GPS receivers and embedded modules that use the military’s advanced GPS capabilities. The modules are principally used in aircraft navigation and timing applications. Military products are sold directly to either the U.S. government or defense contractors. Sales are also made to authorized foreign end-users. Competitors in this market include Rockwell Collins, L3 and Raytheon.
Our Applanix business is a leading provider of advanced products and enabling solutions that maximize productivity through mobile mapping and positioning to professional markets worldwide. Applanix develops, manufactures, sells, and supports high-value, precision products that combine GNSS with inertial sensors for accurate measurement of position and attitude, flight management systems, and scalable mobile mapping solutions used in airborne, land, marine and autonomy-related applications.
Sales are made by our direct sales force to end-users, systems integrators, and OEMs, and through regional agents. Competitors include OxTS, IGI and Novatel. We compete principally on the basis of product features, performance and domain knowledge.
Patents, Licenses and Intellectual Property
We seek to establish and maintain our proprietary rights in our technology and products through the use of patents, copyrights, trademarks, and trade secret laws. We have a program to file applications for and obtain patents, copyrights, and trademarks in the United States and in selected foreign countries where we believe filing for such protection is appropriate. We hold over 1,200 unique issued and enforceable patents, the majority of which cover GNSS based technologies and other applications such as optical and laser technology. We are not dependent on any one patent. We also own numerous trademarks and service marks that contribute to the identity and recognition of Trimble and its products and services globally. We generally prefer to own the intellectual property used in our products, either directly or through subsidiaries. From time to time we license technology from third parties.
We are not dependent on any one patent and license. We also own numerous trademarks and service marks that contribute to the identity and recognition of Trimble and its global products and services.
Competition
Our markets are highly competitive, and we expect that both direct and indirect competition will increase in the future. Within our markets, we encounter direct competition from other GNSS, software, optical, and laser suppliers such as Hexagon and Topcon, and competition may intensify from various larger U.S. and non-U.S. competitors. Our hardware products are increasingly subject to competition from existing and new entrants from emerging markets such as China, which compete aggressively on price at the lower pricedlower-priced end of the market.market as well as on economic nationalism. Our integrated hardware and software products may also be subject to increasing competition from mass market devices such as smartphones and tablets combined with relatively inexpensive applications, which have not been heavily used for commercial applications in the past. Our software solutions are also increasingly subject to competition from existing and new entrants into the marketplace, including from some companies that may have access to significantly more resources than Trimble.
Many of our products and solutions are focused on specific industries. In each of these industries, we face competition from companies providing point solutions, or more traditional,traditionally, less technology intensive products and services, and theseservices. These companies often have greater financial resources and more established and recognized brands in those industries. Competing in vertical markets with more established industry participants requires that we successfully establish a market position, and that we market new and sometimes unfamiliar technology and automated solutions to customers that have not previously used such products. We also increasingly offer enterprise level solutions designed to meet the specific needs of our target industries. In doing so, we face competition from larger and more well establishedwell-established providers of enterprise software and services with whom we have not previously competed. See also "Risk Factors - We face substantial competition in our markets, which could decrease our revenue and growth rates or impair our operating results and financial condition."
Sales and Marketing
We tailor our distributiongo-to-market strategies to the needs of our products and regional markets around the world. ManyIn addition to direct sales, many of our products are sold worldwide primarily through indirect channels, including distributors, dealers, and authorized representatives. Occasionally we grant exclusive rights to market certain products or within specific countries. These channels are supported by our regional sales offices throughout the world. We also utilize distribution alliances, OEM relationships, and joint ventures with other companies as a means to serve selected markets as well as direct sales to end-users.
During fiscal 2016, sales to customers in the United States represented 49%, Europe represented 24%, Asia Pacific represented 15%, and other regions represented 12% of our total revenue.
Seasonality of Business
Construction purchases tend to occurequipment revenue, within our Buildings and Infrastructure segment, historically have been higher in early spring, and U.S. governmental agencies tend to utilize funds available at the end of the government’s fiscal year for additional purchases at the end of our third fiscal quarter in September of each year.spring. Our agricultural equipment business revenuesrevenue, within our Resources and Utilities segment, have historically been the highest in the first quarter, followed by the second quarter, reflecting buying in anticipation of the spring planting season in the Northern hemisphere. However, overall as a company, as a result of diversification of our business across segments and the increased impact of subscription revenues,revenue, we may experience less seasonality in the future. Changes in global macroeconomic conditions could also impact the level of seasonality we experience.
Backlog
In most of our markets, the time between order placement and shipment is short. Orders are generally placed by resellers and customers on an as-needed basis. In general, customers may cancel or reschedule orders without penalty. For these reasons, we do not believe that backlog is a meaningful indicator of future revenue or material to understanding our business.
Manufacturing
We outsource the manufacturing of many of our hardware products to our key contract manufacturing partners that include Flextronics International Limited,Flex Ltd., Benchmark Electronics Inc., and Jabil. Our contract manufacturing partners are responsible for significant material procurement, assembly, and testing. We continue to manage product design through pilot production for the subcontracted products, and we are directly involved in qualifying suppliers and key components used in all our products. Our current contract with FlextronicsFlex Ltd. continues in effect until either party gives the other ninety days written notice. We also utilize original design manufacturers for some of our products.
We manufacture our laser and optics-based products, as well as some of our GPS products, at our plants in Dayton, Ohio; Danderyd, SwedenSweden; and Shanghai, China. Some of these products or portions of these products are also subcontracted to third parties for assembly.
Our design, manufacturing, and distribution sites in Dayton, Ohio; Sunnyvale, California; Danderyd, Sweden; Eersel, Netherlands,Eindhoven, Netherlands; Auckland, New Zealand, and Shanghai, China are registered to ISO9001:2015 covering the design, production, distribution, and servicing of all our products.
Research and Development
We believe that our competitive position is maintained through the development and introduction of new products, including software and services, that incorporate improved features and functionality, better performance, smaller size and weight, lower cost, or some combination of these factors. We invest substantially in the development of new products. We also make significant investment in the positioning, communication, and information technologies that underlie our products and will likely provide competitive advantages.
We expect to continue investing in research and development at a rate consistent with our past, with the goal of maintaining or improving our competitive position and entering new markets.
Employees
At the end of fiscal 2016,2019, we employed 8,38811,484 employees with approximately 55%56% of employees in locations outside the United States.
Some employees in Sweden and Finland are represented by unions. Some employeesunions and in Germany and France are represented by works councils. We also employ temporary and contract personnel that are not included in the above headcount numbers. We have not experienced work stoppages or similar labor actions.
Available Information
The Company’s annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and all amendments to thosethese reports are available free of charge on the Company’s web site through investor.trimble.com, as soon as reasonably practicable after such material is electronically filed with or furnished to the Securities and Exchange Commission. Financial news and reports and related information about our Company as well as GAAP to non-GAAP to GAAP reconciliations canare also be found on this web site. Information contained on our web site is not part of this annual report on Form 10-K.
In addition, you may request a copy of these filings (excluding exhibits) at no cost by writing or telephoning us at our principal executive offices at the following address or telephone number:
Trimble Inc.
935 Stewart Drive, Sunnyvale, CA 94085
Attention: Investor Relations Telephone: 408-481-8000303-635-8551
Information about our Executive Officers
The names, ages and positions of the Company’s executive officers as of February 20, 201728, 2020 are as follows:
|
| | | | |
Name | | Age | | Position |
StevenSteve W. Berglund | | 6568 | | Executive Chairman |
Robert G. Painter | | 48 | | President and Chief Executive Officer |
RobertDavid G. PainterBarnes | | 4558 | | Chief Financial Officer |
Bryn A. FosburghMichael D. Bank | | 5458 | | Senior Vice President |
Christopher W. GibsonRonald J. Bisio | | 5551 | | Senior Vice President |
Bryn A. Fosburgh | | 57 | | Senior Vice President |
James A. Kirkland | | 5760 | | Senior Vice President, General Counsel and Secretary |
Jürgen D. KliemJames Langley | | 5945 | | Senior Vice President |
Darryl R. Matthews | | 49 | | Senior Vice President |
Sachin J. Sankpal | | 4952 | | Senior Vice President |
Julie A. Shepard | | 5962 | | Chief Accounting Officer |
James A. Veneziano | | 55 | | Senior Vice President |
Steven W. Berglund—Steven Berglund haswas appointed executive chairman of Trimble’s board in January 2020, and previously served as the president and chief executive officer of Trimble since March 1999. Prior to joining Trimble, Mr. Berglund was president of Spectra Precision, a group within Spectra Physics AB. Mr. Berglund’s business
experience includes a variety of senior leadership positions with Spectra Physics, and manufacturing and planning roles at Varian Associates. He began his career as a process engineer at Eastman Kodak. He attended the University of Oslo and the University of Minnesota where he received a B.S. in chemical engineering. Mr. Berglund received his M.B.A. from the University of Rochester. Mr. Berglund is a member of the board of directors of the Silicon Valley Leadership Group and the Association of the boardEquipment Manufacturers (AEM), as well as chairman of trustees of World Educational Services.AEM's construction sector board. He is also a member of the board as well as the construction sector board, of the Association of Equipment Manufacturers. In December 2013, Mr. Berglund was appointed to the board of directors and compensationaudit committee of Belden Inc., a global provider of end-to-end signal transmission solutions.
Robert G. Painter—Robert Painter was appointed Trimble’s president and chief executive officer in January 2020. From 2016 through 2019, he served as the Company's chief financial officer, of Trimble in February 2016. He iswhere he was responsible for Trimble’s worldwide finance operations. In 2015, Mr. Painter joinedwas appointed vice president of Trimble in 2006 and assumed leadership of Trimble’s business development activities, leading all acquisition and corporate strategy activities. From 2009 to 2010, he served as general managerbuildings businesses, a group focused on BIM-centric divisions that span the design-build-operate continuum of the Company’s Construction Services Division.building life cycle. From 20102011 to 2015,2014, he served as general manager of the Company’s joint venture with Hilti, which was created to foster collaborative development of product innovations for the building construction industry. In 2015,From 2009 to 2010, he served as general manager of the Company’s construction services division. Mr. Painter was appointed vice presidentjoined Trimble in 2006 and assumed leadership of Trimble Buildings, a Trimble group focused on BIM-centric businesses that span the Design-Build-Operate continuum of the Building lifecycle.Trimble’s business development, leading all acquisition and corporate strategy activities. Prior to joining the Company, Mr. Painter served in a variety of management and finance positions at Cenveo, Rapt Inc., Bain & Company, Whole Foods Markets,Market, and Kraft Foods. In 1993, he earned a Bachelor of Science degree in Finance from West Virginia University and received an MBA in Business from Harvard University in 1998.
Bryn A. FosburghDavid G. Barnes—Bryn Fosburgh isDavid G. Barnes joined Trimble as chief financial officer in January 2020 with more than 35 years of financial and strategic management experience, including treasury, tax, investor relations, and risk management. Prior to Trimble, Mr. Barnes served as chief financial officer at MWH Global Inc., a global provider of engineering and construction services, from January 2009 to May 2016. At MWH, he served on the board of directors and had responsibility for information technology and procurement in addition to his financial role. Following the sale of MWH to Stantec Inc., Mr. Barnes assumed operational responsibility for Stantec’s businesses outside North America from September 2017 to January 2019. He also served as a leader on the committee overseeing the integration of MHW into Stantec from May 2016 to July 2017. Prior to MWH, Mr. Barnes held financial leadership positions at Western Union, Coors, and YUM Brands. He began his career as a strategy consultant at Bain & Company. In 1983, he received a Bachelor of Science in Applied Mathematics from Yale University and his MBA in Finance and Marketing from the University of Chicago in 1987. Mr. Barnes also serves as a board member and chair of the Audit Committee of CSG Systems International.
Michael D. Bank—In February 2019, Michael Bank was appointed senior vice president of Trimble's civil engineering and construction business, where he had previously served as vice president since January 2016, as well as supervising Trimble’s precision tools, accessories, mining, aggregates, construction logistics, lifting solutions, and mobile computing solutions divisions. Prior to 2016, he served in general manager and business area manager roles in the precision tools, accessories, and mobile computing solutions divisions. He joined Trimble in 2006 through the acquisition of Apache Technologies, where he served as worldwide sales and marketing manager. Mr. Bank has over 35 years of experience in the construction technology industry. He has held positions in sales, marketing, engineering, product design, and technical support. He received his BS in Civil Engineering from the University of Cincinnati in 1984.
Ronald J. Bisio—In February 2019, Ronald Bisio was appointed senior vice president responsible for Trimble’s surveying and geospatial businesses, where he had previously served as vice president since April 2015. Prior to this role, he served as general manager for Trimble’s rail division from January 2011 until April 2015. He joined Trimble in 1996 and has held several marketing, sales, and general management positions since then at Trimble. He earned a Master of Business Administration degree from the University of Denver, a Master of Regional Planning degree from the University of Massachusetts, and a Bachelor of Science degree in Cartography from Salem State University in Salem, Massachusetts.
Bryn A. Fosburgh—Bryn Fosburgh currently serves as senior vice president responsible for Trimble’s construction businesses, which includes Trimble’s civil engineering and construction, buildings, Viewpoint and e-Builder divisions, as well as Trimble’s joint ventures with Caterpillar, Hilti, and Nikon Joint Ventures,Nikon. From 2016 to 2019, Mr. Fosburgh was the Company’s senior vice president responsible for Trimble’s joint ventures, as well as U.S. Federal government strategy and accounts, OEM construction machine businessdivision, and professional services groups. From 2014 to 2016, he served as senior vice president for Trimble's Geospatial, Civil Engineeringgeospatial, civil engineering and Construction (CEC),construction, and Building businesses,building divisions, and the Caterpillar and Hilti-related joint ventures. From 2010 to 2014, Mr. Fosburgh was responsible for our Buildingsbuildings and Heavy Civilheavy civil construction businessesdivisions along with our Caterpillar and Hilti joint ventures. From 2009 to 2010, Mr. Fosburgh served as vice president for Trimble's Construction Division, Transportationconstruction division, transportation and Logistics, Fields Service Management (FSM)logistics, field service management, and a number of corporate functions and geographical regions. From 2007 to 2009, Mr. Fosburgh was vice president for Trimble's Constructionconstruction and Agriculture Divisions,agriculture divisions, and from 2005 to 2007, Mr. Fosburgh served as vice president and general manager of Trimble's Engineeringengineering and Construction Division.construction division. Mr. Fosburgh joined Trimble in 1994 and has held numerous roles, including vice president and general manager for Trimble's geomatics and engineering division, and division vice president of survey and infrastructure. Prior to Trimble, Mr. Fosburgh was a civil engineer and also held various positions for the U.S. Army Corps of Engineers and Defense Mapping Agency. Mr. Fosburgh received a B.S. in geology from the University of Wisconsin in Green Bay in 1985 and an M.S. from the school of civil engineering at Purdue University in 1989.
Christopher W. Gibson—Christopher Gibson currently serves as senior vice president responsible for Trimble’s channel development and regional development in Latin & South America, Russia, India, China and Africa. Mr. Gibson also oversees emerging markets, key accounts and major project capabilities across the company, and is responsible for the company’s corporate marketing functions. From 2012 to 2015, Mr. Gibson served as vice president for Trimble's Survey, Geospatial, Geographic Information System (GIS), Infrastructure, Rail, Land Administration and Environmental Solutions businesses. Mr. Gibson joined Trimble in 1998 as European finance and operations director. In 2009, he was appointed to serve as vice president responsible for Trimble's Survey Division, and in December 2010, those responsibilities were expanded to include oversight of geographic regions and divisions, including Building Construction, Construction Tools, and the Hilti joint venture. From 2008 to 2009, Mr. Gibson served as the general manager for the Survey Division, and from 2005 to 2008, he was general manager for the Global Services Division. Prior to Trimble, Mr. Gibson's business experience includes a number of financial management roles with Tandem Computers, and financial analyst roles with Unilever subsidiaries. Mr. Gibson received a BA in Business Studies in 1985 from Thames Polytechnic, now the University of Greenwich, and was admitted as a Fellow to the Chartered Institute of Management Accountants in 1994.
James A. Kirkland—James Kirkland currently serves as senior vice president, General Counselgeneral counsel, and Secretary.secretary. He joined the company as vice president and general counsel in July 2008. Prior to joining Trimble, he served as general counsel and executive vice president, strategic development at Covad Communications. Mr. Kirkland also served as senior vice president of spectrum development and general counsel at Clearwire Technologies, Inc. Mr. Kirkland began his career in 1984 as an associate at Mintz Levin and in 1992 he was promoted to partner. Mr. Kirkland received his BA from Georgetown University in Washington, D.C. in 1981 and his J.D. from Harvard Law School in 1984.
Jürgen D. KliemJames Langley—Jürgen KliemJames Langley currently serves as a senior vice president overseeing Trimble's Distribution Holdings, activities in Germany and various corporate functions and initiatives. Between 2012 and 2016, he was vice president for several businesses within the Advanced Devices segment, and was also responsible for various corporate functions, including key accountsTrimble transportation businesses. He was appointed to this role in September 2019 and government funded projects.before that served as Trimble’s general manager of Trimble transportation enterprise since April 2019. Prior to that, Mr. Kliem previouslyLangley was with Dart Transit Company, a transportation and tractor fleet company based in Eagan, Minnesota, where he served as president from December 2017 until March 2019, and chief operating officer from January 2016 until March 2019. Before Dart, Mr Langley was with TMW Systems, one of Trimble’s transportation businesses, as vice president of strategy and business development from 2008 until 2012. From 2002 to 2008, Mr. Kliem served as general manager of Trimble's Survey Division,business intelligence and prior to that,optimization from May 2011 until December 2015. Mr. Kliem was responsible for Trimble's EngineeringLangley has extensive experience in the transportation industry, having also held positions at US Xpress, Transcard, and Construction Division in Europe. Mr. Kliem held various leadership roles at Spectra
Precision, which was acquired by Trimble, and at Geotronics, a company acquired by Spectra Precision. Before joining Geotronics, Mr. KliemJB Hunt, where he worked in a privately-held surveying firm addressing cadastral, construction, plantthe areas of operations, IT, engineering and engineering projects.analytics. Mr. Kliem receivedLangley holds a Diplom Ingenieur degree from the University of Essen, GermanyArkansas in 1982.transportation and logistics.
Darryl R. Matthews—Darryl Matthews currently serves as senior vice president and sector head responsible for Trimble’s Agriculture, Forestry, Positioning Servicesnatural resources businesses, which includes agriculture, forestry, and HarvestMark Divisions.global services divisions. From 2010 to 2015, Mr. Matthews served as president and general manager of the NAFTA Region for Nufarm Americas, Inc., a subsidiary of Nufarm Limited, a publicly-traded multinational agricultural chemical company. From 2008 to 2010, Mr. Matthews served as general manager of Nufarm Agriculture Inc., the Canadian subsidiary of Nufarm Limited. Mr. Matthews began his career at Dow AgroSciences in Canada where he held management roles in sales and marketing. From 2010 to 2015, he served on the Board of Directors for CropLife America. He received an Honors B.Sc. in Agriculture majoring in Horticultural Science and Business from the University of Guelph in Ontario, Canada in 1994.
Sachin J. SankpalJulie A. Shepard—Sachin SankpalJulie Shepard currently serves as senior vice president and sector head of Trimble’s Intelligent Transportation Systems. From 2012 to 2015, Mr. Sankpal held various general management positions within Honeywell, including president of Honeywell International’s Global Safety Products Division in Paris, France, vice president and general manager of Honeywell’s Safety Products Division for Europe, Middle East, Africa and India. From 2010 to 2012, he served as vice president of Global Strategic Marketing for Honeywell’s Life Safety Division. From 2003 to 2010, he held various business and operational roles at Avaya, Inc., including director of Strategy and Product Management, chief operating officer of Avaya-Japan, Ltd., operations leader in India, and director of Global Restructuring. From 2001 to 2003, he served as a director of Strategy and Finance for Trimble’s Engineering & Construction Division. From 1994 to 1999, Mr. Sankpal was a consultant for Navigant Consulting based in Boston, Mass. He began his career at Langan Engineering & Environmental Services as a staff engineer. He holds a BS in Civil Engineering from Rutgers University, an MS in Civil Engineering from the University of Maryland and an MBA from Dartmouth College.
Julie A. Shepard—Julie Shepardaccounting officer. She joined Trimble in December of 2006 as vice president of finance and was appointed chief accounting officer in May 2007.2017. Prior to joining Trimble, Ms. Shepard served as vice president of finance and corporate controller at Quantum Corporation. Ms. Shepard brings with her over 2530 years of experience in a broad range of finance roles, with diverse experience ranging from early stage private equity backed technology companies to large multinational corporations. Ms. Shepard began her career at Price Waterhouse and is a Certified Public Accountant. She received a B.S in Accounting from California State University. She is a member of the AICPA, Financial Executive Institute, and the California Society of CPAs.
James A. Veneziano—James Veneziano has served as a vice president of Trimble since 2009 and is currently senior vice president responsible for portions of Trimble's Mobile Solutions, Data Services and Hosting, Global Services and portions of the Advanced Devices segment. Mr. Veneziano joined Trimble in 1990 as a manufacturing engineer in the Company's Operations group. In 1993, he was appointed director of Operations. In 1998, Mr. Veneziano was appointed director of marketing for Agriculture and Mapping and GIS. From 2000 to 2005, Mr. Veneziano served as the general manager of Trimble's Agriculture business. From 2005 to 2009, he was the general manager of Trimble's Construction business. Prior to joining Trimble, Mr. Veneziano worked for Hewlett-Packard in a variety of manufacturing positions including development engineer and engineering supervisor as well as new product introduction manager. He received a B.S. in electrical engineering from Colorado State University in Fort Collins in 1984.
RISKS AND UNCERTAINTIES
You should carefully consider the following risk factors, in addition to the other information contained in this Form 10-K and in any other documents to which we refer you in this Form 10-K, before purchasing our securities. The risks and uncertainties described below are not the only ones we face.
Our annual and quarterly performance may fluctuate which could negatively impact our operations, financial results, and stock price
Our operating results have fluctuated and can be expected to continue to fluctuate in the future on a quarterly and annual basis as a result of a number of factors, many of which are beyond our control. Results in any period could be affected by:
changes in market demand,
competitive market conditions,
the timing of recognizing revenues,
fluctuations in foreign currency exchange rates,
the cost and availability of components,
the mix of our customer base and sales channels,
the mix of products sold,
pricing of products,
changes in U.S. or foreign policies on trade, taxes or spending,
global or regional economic and political developments, and
other risks, including those described below.
Seasonal variations in demand for our products may also affect our quarterly results. Construction purchases tend to occur in early spring, and U.S. governmental agencies tend to utilize funds available at the end of the government’s fiscal year for additional purchases at the end of our third fiscal quarter in September of each year. Our agricultural equipment business revenues have historically been the highest in the first quarter, followed by the second quarter, reflecting buying in anticipation of the spring planting season in the Northern hemisphere. If we do not accurately forecast seasonal demand we may be left with unsold inventory or have a shortage of inventory, which could negatively impact our financial results.
Due in part to the buying patterns of our customers, a significant portion of our quarterly revenue occurs from orders received and immediately shipped to customers in the last few weeks and days of each quarter, while our operating expense tends to remain fairly predictable. A majority of our sales force earns commissions on a quarterly basis which may cause concentrations of orders at the end of any fiscal quarter. It could harm our operating results if for any reason expected sales are deferred, orders are not received, or shipments are delayed a few days at the end of a quarter.
The price of our common stock could decline substantially in the event any of these risks result in our financial performance being below the expectations of public market analysts and investors, which are based on historical and predictive models that are not necessarily accurate representations of the future.
The volatility of our stock price could adversely affect an investment in our common stock
The market price of our common stock has been, and may continue to be, highly volatile. During fiscal 2016,2019, our stock price ranged from $18.36$30.93 to $30.84.$45.94. We believe that a variety of factors could cause the price of our common stock to fluctuate, perhaps substantially, including:
announcements and rumors of developments related to our business or
general conditions in the industry in which we compete, or related to the industries in which our customers compete,worldwide economy,
quarterly fluctuations in our actual or anticipated operating results and order levels,
general conditionsannouncements and reports of developments related to our business, our major customers and partners, and the industries in which we compete or the worldwide economy,industries in which our customers compete,
security breaches,
acquisition announcements,
new products or product enhancements announced or introduced by us or our competitors,
disputes with respect to developments in patents or other intellectual property rights,
security breaches,
developments in our relationships with our partners, customers, and suppliers,
the imposition of tariffs or other trade barriers,
political, economic or social uncertainty, and
acts of terrorism.
In addition, the stock market in general and the markets for shares of “high-tech” companies in particular have frequently experienced extreme price fluctuations, which have often been unrelated to the operating performance of affected companies. Any such fluctuations in the future could adversely affect the market price of our common stock.
We operate globally and are subject to significant risks in many jurisdictions
Global or regional conditions may harm our financial results. We have operations in many countries and regionala significant portion of our revenue is derived from countries outside of the United States. As a result, our operations and our financial results, including our ability to design, develop, or sell products, may be adversely affected by a number of factors outside of our control, including:
global and local economic conditions, and the cyclicality of some of our key markets may negatively impact our businesses and our operating results
Our earnings and financial position are and will continue to be influenced by various macroeconomic factors, including increases or decreases in gross domestic product, the level of consumer and business confidence and spending, changes in the interest rates on consumer and business credit, fluctuations in foreign currency exchange rates, changes in tax rates or policy, energy prices, changes in international trade policies and the demand for and the cost of commodities, such as corn and oil,
the strength of the agricultural, engineering, and construction markets,
inadequate infrastructure and other disruptions, such as supply chain interruptions and large-scale outages or unreliable provision of services from utilities, transportation, data hosting, or telecommunications providers,
government restrictions on our operations in any country, or restrictions on our ability to repatriate earnings from a particular country,
differing employment practices and labor issues,
formal or informal imposition of new or revised export and/or import and doing-business regulations, including trade sanctions, tariffs, and import or export licensing requirements, which existcould be changed without notice,
ineffective legal protection of our IP rights in certain countries,
uncertain economic and political conditions in countries where we do business,
local business and cultural factors that differ from our normal standards and practices, and
increased uncertainty regarding social, political, immigration, and trade policies in the various countriesU.S. and abroad, such as recent U.S. government action and policies, and the continuing uncertainty regarding the United Kingdom's impending withdrawal from the European Union ("Brexit").
There is inherent risk that political, diplomatic, or military events could result in whichtrade disruptions, including tariffs, trade embargoes, export restrictions, and other trade barriers. A significant trade disruption or the establishment or increase of any trade barrier in any area where we operate. During 2016, we experienced a strengthening U.S. Dollar which haddo business, including the impact of making someAsia Pacific region, could increase the cost of our products, and serviceswhich could adversely impact the margin that we earn on sales; make our products more expensive than manyfor customers or create uncertainty around demand for certain types of products, which could make our local competitors. Developments with respectproducts less competitive and reduce customer demand; or otherwise have a materially adverse impact on our future revenue and profits, our and our customers’ businesses, and our results of operations. In
response to trade policyU.S. tariffs, other countries may adopt tariffs and laws, treaties or international accords related to imports and exports, such as NAFTA, or tariffs or other trade barriers whichthat could be imposed by the U.S. or by other countries, could have a material adverse effect onlimit our or on our suppliers’ or customers’ business.
In the recent past, uncertainties in the financial and credit markets have caused our customersability to postpone purchases, and negative economic conditions may reduce future sales of, or demand for,competitively offer our products and services. Negative economic conditions or changes in tax policy may depressRecently, the tax revenues ofU.S. government entities, which are significant purchasers of our products. Many
of ourimposed tariffs on certain products are sold through dealer channels,imported into the U.S., and our dealers dependthe Chinese government imposed tariffs on the availability of credit both to finance purchases of ourcertain products for their inventory, and to finance purchases by their customers. Sources of credit could disappear or the financial situation of our channel partners and customers could become such that they are no longer eligible for such financing, or financing becomes more costly. Negative economic conditions may result in increased collection times or greater write-offs, affecting our cash flow and operating results. Our suppliersimported into China. Tariffs may be impacted by economic pressures, which may adversely affect their abilityincreased in the future. Given the current U.S. political climate and recent actions of the administration, there is significant uncertainty about the trade policies, treaties, government regulations, and tariffs that could apply to fulfill their obligations to us, or result in increased prices,trade between the U.S. and therefore cause a disruption in our supply chain or impact our operating results.
Financial conditions in several regions continue to place significant economic pressures on existing and potential customers, including our dealer channels. There is ongoing concern about economic conditions in Europe, which has experienced negative impacts from sovereign debt levels and government taxing and spending actions to address such issues,China, as well as the United Kingdom’s exit from the European Union. Other governments may continue to implement measures which may slow the economic growth rate in those countries (e.g., higher interest rates and reduced bank lending). Growth rates in key emerging markets, including China, have slowed, which could affect demand for our products, both with respect to the products we sell directly into emerging markets, and indirectly by reducing demand for our customers’ products. Falling commodity prices have also negatively affected markets such as the U.S., Canada, the Middle East and Australia.
We are subject to the cyclicality of the agricultural and engineering and construction industries, which can cause sudden (and sometimes material) declines in demand, with negative effects on sales, inventory levels and product pricing. In general, demandother nations, in the engineering and construction industries for our products is highly correlated to the economic cycle and can be subject to even greater levels of volatility. The agricultural spending cycle is influenced by general economic conditions as well as weather, crop loads, commodity pricing, the availability of credit and the strength of the U.S. Dollar. Since 2014, the agricultural sector has been experiencing a significant downturn and which has had and may have a negative effect on the company’s overall growth rate.future. In addition, new sources of supply and a decline in demand have resulted in a substantial decline in the price of oil and gas since 2014, and as a result, the oil and gas industry has been experiencing a significant downturn which has had and may continue to have a negative effect on our engineering and construction business.
Ifif there is significant deterioration in the global economy, the economies of the countries or regions where our customers are located or do business, or the industries that we or our customers serve, the demand for our products and services would likely decrease and our results of operations, financial position, and cash flows could be materially and adversely affected. In addition, government or customer efforts, attitudes, laws or policies may lead to non-U.S. customers favoring domestic suppliers that could compete with or replace our products, which would also have an adverse effect on our business. Changes in economic conditions and political uncertainty surrounding international trade also make it difficult to make financial forecasts, which could cause us to miss our financial guidance and adversely affect our stock price.
We face risks inherent in conducting business internationally, including compliance with international and U.S. laws and regulations that apply to our international operations. These laws and regulations include data privacy requirements, labor relations laws, tax laws, anti-competition regulations, import and trade restrictions, export control laws, and laws that prohibit corrupt payments to governmental officials or certain payments or remunerations to customers, including the U.S. Foreign Corrupt Practices Act ("FCPA"), the U.K. Bribery Act, or other anti-corruption laws that have recently been the subject of a substantial increase in global enforcement. Many of our products are subject to U.S. export law restrictions that limit the destinations and types of customers to which our products may be sold or that require an export license in connection with sales outside the United States. Given the high level of complexity of these laws, there is a risk that some provisions may be inadvertently or intentionally breached, for example through fraudulent or negligent behavior of individual employees, our failure to comply with certain formal documentation requirements or otherwise. Also, we may be held liable for actions taken by our local dealers and partners. Violations of these laws and regulations could result in fines, criminal sanctions against us, our officers or our employees, and prohibitions or conditions on the conduct of our business. Any such violations could include prohibitions or conditions on our ability to offer our products in one or more countries and could materially damage our reputation, our brand, our international expansion efforts, our ability to attract and retain employees, our business, and our operating results.
We operate in many parts of the world that have experienced significant governmental corruption to some degree and, in certain circumstances, strict compliance with anti-bribery laws may conflict with local customs and practices. We may be subject to competitive disadvantages to the extent that our competitors are able to secure business, licenses, or other preferential treatment by making payments to government officials and others in positions of influence or through other methods that relevant law and regulations prohibit us from using. Our success depends, in part, on our ability to anticipate these risks and manage these difficulties.
Existing privacy-related laws and regulations in the United States and other countries are evolving and are subject to potentially differing interpretations, and various U.S. federal and state or other international legislative and regulatory bodies may expand or enact laws regarding privacy and data security-related matters. For example, the European Union General Data Protection Regulation became effective in May 2018 and is wide-ranging in scope. In order to be compliant with the new EU requirements, we must continue to invest resources necessary to implement and manage policy changes across our business units and services relating to how we collect and use personal data relating to customers, employees, and vendors. Failure to comply may lead to sizable fines. In parallel, with the advent of the EU-U.S. Privacy Shield (the new framework agreement between the U.S. Department of Commerce and the European Commission for transferring personal data from the European Union to the United States) and other national requirements, we expect that the international transfer of personal data will present ongoing compliance challenges and complicate our business transactions. Countries outside the EU are considering or have passed legislation that requires local storage and processing of data, which could increase the cost and complexity of delivering our services.
We may be affected by fluctuations in currency exchange rates. We are potentially exposed to adverse as well as beneficial movements in currency exchange rates. Although most of our sales occur in U.S. dollars, expenses may be paid in local currencies. An increase in the value of the dollar could increase the real cost to our customers of our products in those markets outside the U.S. where we sell in dollars, and a weakened dollar could increase the cost of expenses such as payroll, utilities, tax, and marketing expenses, as well as overseas capital expenditures. We also conduct certain investing and financing activities in local currencies. Our hedging programs reduce, but do not eliminate, the impact of currency exchange rate movements; therefore, changes in exchange rates could harm our results of operations and financial condition.
Catastrophic events or geopolitical conditions could disrupt our operations. Acts of war, acts of terrorism or civil unrest, natural disasters and other catastrophic events, especially any events that impact our larger markets or GNSS signals or systems, could have a material adverse impact on our business, operating results, and financial condition. The threat of terrorism and war and heightened security and military activity in response to this threat, or any future acts of terrorism or hostilities, may involve a redeployment of the satellites used in GNSS or interruptions of the system. Civil unrest, local conflicts, or other political instability
may adversely impact regional economies, cause work stoppages, or result in limitations on business transactions with the affected foreign jurisdictions. To the extent that such interruptions result in delays or the cancellation of orders, disruption of the manufacturing or shipment of our products, or reduced demand for our products, these interruptions could have a material adverse effect on our business, results of operations, and financial condition.
Public health crises and epidemics, such as the novel coronavirus outbreak that is significantly affecting China, could impact our international operations and sales. Our results of operations could be adversely affected to the extent that the novel coronavirus or any other epidemic harms the Chinese economy or other significant markets where we do business. Contagious disease epidemics or global pandemics could significantly impact our international supply chain and result in component and product shortages and general disruptions to the economy. Such outbreaks could also result in mass quarantines, business closures, and significantly impact our suppliers, customers, and commercial partners in affected areas, which may materially and adversely affect our business, financial condition, and results of operations.
Engaging in international business inherently involves a number of other difficulties and risks.
These risks include:
longer payment cycles and difficulties in enforcing agreements and collecting receivables through certain foreign legal systems,
difficulties and costs of staffing and managing foreign operations,
differing local customer product preferences and requirements than our U.S. markets, and
difficulties protecting or procuring intellectual property rights.
These factors or any combination of these factors may adversely affect our revenue or our overall financial performance.
Investing in and integrating new acquisitions could be costly, place a significant strain on our management systems and resources, or may fail to deliver the expected return on investment, which could negatively impact our operating results
We typically acquire a number of businesses each year and intend to continue to acquire other businesses. Acquisitions entail numerous risks, including:
potential inability to successfully integrate acquired operations and products or to realize cost savings or other anticipated benefits from integration,
loss of key employees or customers of acquired operations,
difficulty of assimilating geographically dispersed operations and personnel of the acquired companies,
potential disruption of our business or the acquired business,
unanticipated expenses related to acquisitions,
unanticipated difficulties in conforming business practices, policies, procedures, internal controls, and financial records of acquisitions with our own business,
impairment of relationships with employees, customers, vendors, distributors or business partners of either an acquired company or our own business,
inability to accurately forecast the performance of recently acquired businesses, resulting in unforeseen adverse effects on our operating results,
potential liabilities, including liabilities resulting from known or unknown compliance or legal issues, associated with an acquired business, and
negative accounting impact to our results of operations because of purchase accounting treatment and the business or accounting practices of acquired companies.
Any such effects from acquisitions could be costly and place a significant strain on our management systems and resources.
As a result of acquisitions, we have significant assets that include goodwill and other purchased intangibles. The testing of goodwill and intangibles for impairment under established accounting guidelines requires significant use of judgment and assumptions. Changes in business conditions or in the prospects or results of operations of the acquired business could require negative adjustments to the valuation of these assets resulting in write-offs that would adversely affect our results. If we divest a business and the proceeds are less than the net book value at the time, we would be forced to write off the difference. In addition, changes in the operating results or the valuation of companies in which we have investments may have a direct impact on our financial statements or could result in our having to write down the value of such investment.
Even if successfully negotiated and closed, acquisitions may not yield expected synergies, may not advance our business strategy as expected, may fall short of expected return-on-investment targets, or may not prove successful or effective for our business. Companies that we acquire may operate with different cost and margin structures, which could further cause fluctuations in our operating results and adversely affect our operating margins.
Our internal and customer-facing systems, and systems of third parties we rely upon, may be subject to cybersecurity breaches, disruptions, or delays
A cybersecurity incident in our own systems or the systems of our third-party providers may compromise the confidentiality, integrity, or availability of our own internal data, the availability of our products and websites designed to support our customers, or our customer data. Computer hackers, foreign governments, or cyber terrorists may attempt to or succeed in penetrating our network security and our website. Unauthorized access to our proprietary business information or customer data may be obtained through break-ins, sabotage, breach of our secure network by an unauthorized party, computer viruses, computer denial-of-service attacks, employee theft or misuse, breach of the security of the networks of our third party providers, or other misconduct. Additionally, outside parties may attempt to fraudulently induce employees or users to disclose sensitive or confidential information in order to gain access to data. We have experienced security breaches in the past, and despite our efforts to maintain the security and integrity of our systems, it is impossible to eliminate this risk. For example, in late 2015 and early 2016, we were the subject of an attack by hackers operating in China. This incident resulted in the theft of proprietary and confidential data related to our GPS technology but has not had a meaningful impact on our business. Because the techniques used by computer hackers who may attempt to penetrate and sabotage our network security or our website change frequently, they may take advantage of weaknesses in third party technology or standards of which we are unaware or that we do not control, and may not be recognized until long after they have been launched against a target. We may be unable to anticipate or counter these techniques. It is also possible that unauthorized access to customer data or confidential information may be obtained through inadequate use of security controls by customers, vendors, or business partners. Efforts to prevent hackers from disrupting our service or otherwise accessing our systems are expensive to develop, implement, and maintain. Such efforts require ongoing monitoring and updating as technologies change and efforts to overcome security measures become more sophisticated and may limit the functionality of, or otherwise negatively impact our service offering and systems. A cybersecurity incident affecting our systems may also result in theft of our intellectual property, proprietary data or trade secrets, which would compromise our competitive position, reputation, and operating results. We also may be required to notify regulators about any actual or perceived personal data breach (including the EU Lead Data Protection Authority) as well as the individuals who are affected by the incident within strict time periods.
The systems we rely upon also remain vulnerable to damage or interruption from a number of other factors, including access to the Internet, the failure of our network or software systems, or significant variability in visitor traffic on our product websites, earthquakes, floods, fires, power loss, telecommunication failures, computer viruses, human error, and similar events or disruptions. Some of our systems are not fully redundant, and our disaster recovery planning is not sufficient for all eventualities. Our systems are also subject to intentional acts of vandalism. Despite any precautions we may take, the occurrence of a natural disaster, a decision by any of our third-party hosting providers to close a facility we use without adequate notice for financial or other reasons, or other unanticipated problems at our hosting facilities could cause system interruptions and delays, and result in loss of critical data and lengthy interruptions in our services.
We rely on our information systems and those of third parties for activities such as processing customer orders, delivery of products, hosting and providing services and support to our customers, billing and tracking our customers, hosting and managing our customer data, and otherwise running our business. Any disruptions or unexpected incompatibilities in our information systems and those of the third parties upon whom we rely could have a significant impact on our business.
An increasing portion of our revenue comes from SaaS solutions and other hosted services in which we store, retrieve, communicate, and manage data which is critical to our customers’ business systems. Disruption of our systems that support these services and solutions could cause disruptions in our customers’ systems and in the businesses that rely on these systems. Any such disruptions could harm our reputation, create liabilities to our customers, hurt demand for our services and solutions, and negatively impact our revenue and profitability.
We are subject to evolving privacy laws in the United States and other jurisdiction that are subject to potentially differing interpretations and which could adversely impact our business and require that we incur substantial costs and expenses
Existing privacy-related laws and regulations in the United States and other countries are evolving and are subject to potentially differing interpretations, and various U.S. federal and state or other international legislative and regulatory bodies may expand or enact laws regarding privacy and data security-related matters. For example, the European Union General Data Protection Regulation (“GDPR”) became effective in May 2018 and is wide-ranging in scope. In order to be compliant with the EU requirements, we must continue to invest resources necessary to implement and manage policy changes across our business units
and services relating to how we collect and use personal data relating to customers, employees, and vendors. Failure to comply may lead to sizable fines. Brexit could also lead to further legislative and regulatory changes with regard to personal data. The United Kingdom Data Protection Act that substantially implements the GDPR became law in May 2018. It remains unclear, however, how United Kingdom data protection laws or regulations will develop in the medium to longer term and how data transfers to and from the United Kingdom will be regulated at the time that Brexit is effectuated and implemented. In parallel, with the advent of the EU-U.S. Privacy Shield (the new framework agreement between the U.S. Department of Commerce and the European Commission for transferring personal data from the European Union to the United States) and other national requirements, we expect that the international transfer of personal data will present ongoing compliance challenges and complicate our business transactions. Countries outside the EU are considering or have passed legislation that requires local storage and processing of data, which could increase the cost and complexity of delivering our services. In addition, in June 2018, California enacted the California Consumer Privacy Act (the “CCPA”), which took effect in January 2020. The CCPA will, among other things, give California residents expanded rights to access and delete their personal information, opt out of certain personal information sharing, and receive detailed information about how their personal information is used. The CCPA was amended in September 2018, and further modifications may be made to this law before it takes effect. Additionally, in October 2019, the California Department of Justice published a notice of proposed rulemaking action with respect to draft regulations to implement the CCPA. We cannot yet predict the impact of the CCPA on our business or operations, but it may require us to modify our data processing practices and policies and to incur substantial costs and expenses in an effort to comply.
We may not be able to enter into or maintain important alliances and distribution relationships
We believe that in certain business opportunities our success will depend on our ability to form and maintain alliances with industry participants, such as Caterpillar, Nikon, Hilti, and CNH Global. Our failure to form and maintain such alliances, or the preemption or disruption of such alliances by actions of competitors, willcould adversely affect our ability to sell our products to customers. Our relationships with substantial industry participants such as Caterpillar and CNH are complex and multifaceted and are likely to evolve over time based upon the changing business needs and objectives of the parties. Since these strategic relationships contribute to significant ongoing business in certain of our important markets, changes in these relationships could adversely affect our sales and revenues.
Werevenue. In addition, we utilize dealer networks, including those affiliated with some of our strategic allies such as Caterpillar and CNH, Global, to market, sell, and service many of our products.
Changes in our product mix, including increasing provision of software and bundled solutions tailored to the needs of specific vertical markets, impose new demands on our distribution channels and may require significant changes in the skills and expertise required to successfully distribute our products and services, or the creation of new distribution channels. Recruiting and retaining qualified channel partners and training them in the use and the selling of our technology and product offerings requires significant time and resources. In order to develop and expand our distribution channels, we must continue to expand and improve our processes and procedures that support our distribution channels, including our investment in systems and training, and those processes and procedures may become increasingly complex and difficult to manage. The time and expense required for sales and marketing organizations of our channel partners to become familiar with our product offerings, including our new product developments, and newer types of offering such as software and services, may make it more difficult to introduce those products to end-users and delay end-user adoption, which could result in lower revenues.revenue.
Disruption of dealer coverage within specific geographic or end-user markets could cause difficulties in marketing, selling, or servicing our products and have an adverse effect on our business, operating results, or financial condition. Moreover, dealers who carry products that compete with our products may focus their inventory purchases and sales efforts on goods provided by competitors due to industry demand or profitability. Such sourcing decisions can adversely impact our sales, financial condition, and results of operations.
We are exposed to fluctuations in currency exchange rates which can adversely affect our operating results
Fluctuations in currencies impact our operating results, which are reported in U.S. Dollars. A significant portion of our business is conducted outside the U.S., and as such, we face exposure to movements in the currency exchange rates between the U.S. Dollar and other currencies. These exposures may change over time as economic conditions and business practices evolve and could have a material adverse impact on our financial results and cash flows. During 2016, our business was negatively impacted by the strong U.S. Dollar which increased the cost of some of our products and services relative to those of local competitors in some jurisdictions. If the U.S. Dollar remains strong or there is a continued increase in the exchange rate of the U.S. Dollar against other currencies, it could negatively impact foreign demand for our products or reduce the dollar value of local currency sales. A significant portion of our revenue is derived from countries outside of the United States. Possible import, export, tariff and other trade barriers, which could be imposed by the U.S. or other countries, might have a material adverse effect on the business.
Currently, we routinely hedge only those currency exposures associated with certain assets and liabilities denominated in non-functional currencies. The hedging activities undertaken by us are intended to offset the short term impact of currency fluctuations on certain non-functional currency assets and liabilities. Our attempts to hedge against these risks involve transaction costs, and could be unsuccessful and expose us to losses.
Investing in and integrating new acquisitions could be costly, place a significant strain on our management systems and resources, or may fail to deliver the expected return on investment, which could negatively impact our operating results
We typically acquire a number of businesses each year, and intend to continue to acquire other businesses. Acquisitions entail numerous risks, including:
potential inability to successfully integrate acquired operations and products or to realize cost savings or other anticipated benefits from integration;
loss of key employees or customers of acquired operations;
difficulty of assimilating geographically dispersed operations and personnel of the acquired companies;
potential disruption of our business or the acquired business;
unanticipated expenses related to acquisitions;
unanticipated difficulties in conforming business practices, policies, procedures, internal controls, and financial records of acquisitions with our own business;
impairment of relationships with employees, customers, vendors, distributors or business partners of either an acquired company or our own business;
inability to accurately forecast the performance of recently acquired businesses, resulting in unforeseen adverse effects on our operating results;
potential liabilities, including liabilities resulting from known or unknown compliance or legal issues, associated with an acquired business; and
negative accounting impact to our results of operations because of purchase accounting treatment and the business or accounting practices of acquired companies.
Any such effects from acquisitions could be costly and place a significant strain on our management systems and resources.
As a result of acquisitions, we have significant assets that include goodwill and other purchased intangibles. The testing of this goodwill and intangibles for impairment under established accounting guidelines requires significant use of judgment and assumptions. Changes in business conditions or in the prospects or results of operations of the acquired business could require negative adjustments to the valuation of these assets resulting in write-offs which adversely affect our results. If we divest a business and the proceeds are less than the net book value at the time, we would be forced to write off the difference. In addition, changes in the operating results or stock price of companies in which we have investments may have a direct impact on our financial statements or could result in our having to write-down the value of such investment.
Even if successfully negotiated and closed, acquisitions may not yield expected synergies, may not advance our business strategy as expected, may fall short of expected return-on-investment targets, or may not prove successful or effective for our business. Companies that we acquire may operate with different cost and margin structures, which could further cause fluctuations in our operating results and adversely affect our operating margins.
Our internal and customer-facing systems, and systems of third parties we rely upon, may be subject to disruption, delays or cybersecurity breaches that could adversely impact our customers and operations
A cybersecurity incident in our own systems or the systems of our third party providers may compromise the confidentiality, integrity, or availability of our own internal data, the availability of our products and websites designed to support our customers, or our customer data. Computer hackers, foreign governments or cyber terrorists may attempt to or succeed in penetrating our network security and our website. Unauthorized access to our proprietary business information or customer data may be obtained
through break-ins, sabotage, breach of our secure network by an unauthorized party, computer viruses, computer denial-of-service attacks, employee theft or misuse, breach of the security of the networks of our third party providers, or other misconduct. We have experienced security breaches in the past, and despite our efforts to maintain the security and integrity of our systems, it is virtually impossible to eliminate this risk. Because the techniques used by computer hackers who may attempt to penetrate and sabotage our network security or our website change frequently, may take advantage of weaknesses in third party technology or standards of which we are unaware or that we do not control, and may not be recognized until after they have been launched against a target, we may be unable to anticipate or counter these techniques. It is also possible that unauthorized access to customer data may be obtained through inadequate use of security controls by customers, vendors or business partners. A cybersecurity incident affecting our systems may also result in theft of our intellectual property, proprietary data or trade secrets, which would compromise our competitive position, reputation and operating results.
The systems we rely upon also remain vulnerable to damage or interruption from a number of other factors, including access to the internet, the failure of our network or software systems, or significant variability in visitor traffic on our product websites, earthquakes, floods, fires, power loss, telecommunication failures, computer viruses, human error, and similar events or disruptions. Some of our systems are not fully redundant, and our disaster recovery planning is not sufficient for all eventualities. Our systems are also subject to intentional acts of vandalism. Despite any precautions we may take, the occurrence of a natural disaster, a decision by any of our third-party hosting providers to close a facility we use without adequate notice for financial or other reasons, or other unanticipated problems at our hosting facilities could cause system interruptions and delays, and result in loss of critical data and lengthy interruptions in our services.
We rely on our information systems and those of third parties for activities such as processing customer orders, delivery of products, hosting and providing services and support to our customers, billing and tracking our customers, hosting and managing our customer data, and otherwise running our business. Any disruptions or unexpected incompatibilities in our information systems and those of the third parties upon whom we rely could have a significant impact on our business.
An increasing portion of our revenue comes from software as a service solutions and other hosted services in which we store, retrieve, communicate and manage data which is critical to our customers’ business systems. Disruption of our systems which support these services and solutions could cause disruptions in our customers’ systems and in the businesses that rely on these systems. Any such disruptions could harm our reputation, create liabilities to our customers, hurt demand for our services and solutions, and negatively impact our revenues and profitability.
Our products are highly technical and may contain undetected errors, product defects, security vulnerabilities, or software errors which could result in damage to our reputation, lost revenue, diverted development resources and increased service costs, warranty claims, and litigation
Our products, including our software products, are highly technical and complex and, when deployed, may contain errors, defects, or security vulnerabilities. We must develop our products quickly to keep pace with the rapidly changing market, and we have a history of frequently introducing new products. Products and services as sophisticated as ours could contain undetected errors or defects, especially when first introduced or when new models or versions are released. Such occurrences could result in damage to our reputation, lost revenue, diverted development resources, increased customer service and support costs, warranty claims, and litigation.
We warrant that our products will be free of defect for various periods of time, depending on the product. In addition, certain of our contracts include epidemic failure clauses. If invoked, these clauses may entitle the customer to return or obtain credits for products and inventory, or to cancel outstanding purchase orders even if the products themselves are not defective.
Errors, viruses or bugs may be present in software or hardware that we acquire or license from third parties and incorporate into our products or in third party software or hardware that our customers use in conjunction with our products. Our customers’ proprietary software and network firewall protections may corrupt data from our products and create difficulties in implementing our solutions. Changes to third party software or hardware that our customers use in conjunction with our software could also render our applications inoperable. Any errors, defects or security vulnerabilities in our products or any defects in, or compatibility issues with, any third party hardware or software or customers’ network environments discovered after commercial release could result in loss of revenuesrevenue or delay in revenue recognition, loss of customers, theft of trade secrets, data or intellectual property and increased service and warranty cost, any of which could adversely affect our business, financial condition, and results of operations.
Undiscovered vulnerabilities in our products alone or in combination with third party hardware or software could expose them to hackers or other unscrupulous third parties who develop and deploy viruses, and other malicious software programs that could attack our products. Actual or perceived security vulnerabilities in our products could harm our reputation and lead some customers to return products, to reduce or delay future purchases, or use competitive products.
If we are unable to effectively manage our increasingly diverse and complex businesses and operations, our ability to generate growth and revenue from new or existing customers may be adversely affected
Because our operations are geographically diverse and increasingly complex, our personnel resources and infrastructure could become strained, and our reputation in the market and our ability to successfully manage and grow our business may be adversely affected. The size, complexity, and diverse nature of our business and the expansion of our product lines and customer base have placed increased demands on our management and operations, and further growth, if any, may place additional strains on our resources in the future. Our ability to effectively compete and to manage our planned future growth will depend on, among other things, the following:
effectively managing executive leadership transitions, and maintaining continuity in our senior management and key personnel,
increasing the productivity of our existing employees,
attracting, retaining, training, and motivating our employees, particularly our technical and management personnel,
deploying our solutions using third-party information systems, which may require changes to our applications, documentation, and operational processes,
improving our operational, financial and management controls, and
improving our information reporting systems and procedures.
The companyCompany has increasingly diversified the nature of its businesses both organically and by acquisition. As a result, an increasing amount of our business involves business models which require managerial techniques and skill sets which are different from those required to manage our historical core businesses. We are increasingly selling products and solutions directly to large enterprise customers and other end users of our products. A direct sales model requires different skills and management processes and procedures from those we have generally used in our business in the past, and may create conflicts with our channel partners.
Over the last few years we have beenfocused more on SaaS subscription models. As a result, we expect to derive an increasing the portion of our business associatedrevenue in the future from subscriptions. This subscription model provides our customers the right to access certain of our software in a hosted environment or use downloaded software for a specified subscription period. Market acceptance of such offerings is affected by a variety of factors, including but not limited to: security, reliability, performance, current license terms, customer preference, social/community engagement, customer concerns with professional services in orderentrusting a third party to customize our solutions forstore and manage their data, public concerns regarding privacy and the needsenactment of individual customers.restrictive laws or regulations. If we are unable to successfully support and host our SaaS offerings in light of the foregoing risks and uncertainties, our results of operations could be negatively impacted.
Our annual and quarterly performance may fluctuate, which could negatively impact our operations, financial results, and stock price
Our operating results have fluctuated and can be expected to continue to fluctuate in the future on a quarterly and annual basis as a result of a number of factors, many of which are beyond our control. Results in any period could be affected by:
changes in market demand,
competitive market conditions,
the timing of recognizing revenue,
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,
pricing of products,
changes in U.S. or foreign policies on taxes, trade, or spending, including the 2017 Tax Cuts and Jobs Act (the "Tax Act"), and
other risks, including those described below.
Seasonal variations in demand for our products may also affect our quarterly results. Construction equipment revenue has historically been the highest in early spring. Our agricultural equipment revenue has historically been the highest in the first quarter, followed by the second quarter, reflecting buying in anticipation of the spring planting season in the Northern hemisphere. If we do not successfulaccurately forecast seasonal demand we may be left with unsold inventory or have a shortage of inventory, which could negatively impact our financial results.
Due in executing onpart to the buying patterns of our customers, a significant portion of our quarterly revenue occurs from orders received and immediately shipped to customers in the last few weeks and days of each quarter, while our operating expense tends to remain fairly predictable. These patterns could harm our operating results if for any reason expected sales are deferred, orders are not received, or shipments are delayed a few days at the end of a quarter.
The price of our common stock could decline substantially in the event any of these new models,risks result in our sales, revenue and financial performance may suffer.being below the expectations of public market analysts and investors, which are based on historical and predictive models that are not necessarily accurate representations of the future.
Changes in our software and subscription businesses may negatively affect our operatingoperations and financial results
An increasing portionof our revenue is generated through software maintenance and subscription revenue.revenue, which includes SaaS. Our customers have no obligation to renew their agreements for our software maintenance or subscription services after the expiration of their initial contract period, which typically ranges from one to five years. Our customer acquisition and renewal rates may decline or fluctuate as a result of a number of factors, including overall economic conditions, the health of their businesses, competitive offerings, and customer dissatisfaction with our services. If customers do not renew their contracts for our products, our maintenance and subscription revenue will decline, and our financial results will suffer. Any reduction in the number of licenses that we sell, even if our customer acquisition rates do not change, will have a negative impact on our future maintenance revenue growth. Since its introduction, our software as a service delivery model has also contributed to subscription revenue. If any of our assumptions about expenses, revenue or revenue recognition principles from these initiatives proves incorrect, or our attempts to improve efficiency are not successful, our actual results may vary materially from those anticipated, and our financial results will be negatively impacted.
We continually re-evaluate our software licensing programs and subscription renewal programs, including specific license models, delivery methods, and terms and conditions. Changes to our licensing programs and subscription renewal programs, including the timing of the release of enhancements, upgrades, maintenance releases, the term of the contract, discounts, promotions and other factors, could impact the timing of the recognition of revenue for our products, related enhancements and services and could adversely affect our operating results and financial condition. We may implement different licensing models which require the Company to recognize licensing fees over a longer period. Over the last few years, we have increasingly offered additional products inthrough a software as a service (SaaS)SaaS model. SaaS revenues arerevenue is currently recognized ratably over the subscription period. Any significant increase in the percentage of our business generated from such a subscription model could increase the amount of revenue to be recognized over time as opposed to upfront, which would delay revenue recognition and have a negative impact on our operating results in anya quarterly period. Revenue recognition is complex and will change as we adopt new accounting standard ASU No. 2014‑09. Due to these complexities, we may not be able to accurately forecast our non-deferred and deferred revenues,revenue, which could cause us to miss our earnings estimates or revenue projections and negatively impact our stock price.
We face substantial competition in our markets, which could decrease our revenue and growth rates or impair our operating results and financial condition
Our markets are highly competitive, and we expect that both direct and indirect competition will increase in the future. Our overall competitive position depends on a number of factors including the price, quality and performance of our products, the effectiveness of our distribution channel and direct sales force, the level of customer service, the development of new technology, and our ability to participate in emerging markets. Within each of our markets, we encounter direct competition from other GNSS, software, optical, and laser suppliers, and competition may intensify from various larger U.S. and non-U.S. competitors and new market entrants, particularly from emerging markets such as China. Our products, which commonly use GNSS for basic location information, may be subject to competition from alternative location technologies such as simultaneous location and mapping
technology. As we sell an increasing amount of software and subscription services, we face competition from a group of large well establishedwell-established companies with whom we have not previously competed. Our integrated hardware and software products may be subject to increasing competition from mass market devices such as smartphones and tablets used in conjunction with relatively inexpensive applications, which have not been heavily used for commercial applications in the past. These developments may require us to rapidly adapt to technological and customer preference changes that we have not previously been exposed to, including those related to cloud computing, mobile devices, and new computing platforms. Such competition has in the past resulted, and
in the future may result, in price reductions, reduced margins or loss of market share, any of which could decrease our revenue and growth rates or impair our operating results and financial condition. We believe that our ability to compete successfully in the future against existing and additional competitors will depend largely on our ability to execute our strategy to provide products with significantly differentiated features compared to currently available products. We may not be able to implement this strategy successfully, and our products may not be competitive with other technologies or products that may be developed by our competitors, many of whom have significantly greater financial, technical, manufacturing, marketing, sales, and other resources than we do.
We are dependent on new products and services, and if we are unable to successfully introduce them into the market or to effectively compete with new, disruptive product alternatives, our customer base may decline or fail to grow as anticipated
Our future revenue stream depends to a large degree on our ability to bring new products and services to market on a timely basis. We must continue to make significant investments in research and development in order to continue to develop new products and services, enhance existing products and achieve market acceptance of such products and services. We may encounter problems in the future in innovating and introducing new products and services. Our development stage products may not be successfully completed or, if developed, may not achieve significant customer acceptance. Development and manufacturing schedules for technology products are difficult to predict, and we might not achieve our goals as to the timing of introducing new technology products or could encounter increased costs. The timely availability and cost effectivecost-effective production of these products in volume and their acceptance by customers are important to our future success. If we are unable to introduce new products and services, if other companies develop competing technology products and services, or if we do not develop compelling new products and services, our number of customers may not grow as anticipated, or may decline, which could harm our operating results. Many of our offerings are increasingly focused on software and subscription services. The software industry is characterized by rapidly changing customer preferences which require us to address multiple delivery platforms, new mobile devices, and cloud computing. Life cycles of software products can be short, and this can exacerbate the risks associated with developing new products. The introduction of third-party solutions embodying new, disruptive technologies and the emergence of new industry standards could make our existing and future software solutions and other products obsolete or non-competitive. If we are not able to develop software and other solutions that address the increasingly sophisticated needs of our customers, or if we are unable to adapt to new platforms, technologies or new industry standards that impact our markets, our ability to retain or increase market share and operating results could be materially adversely affected.
Changes in our effective tax rate may reduce our net income in future periods
As a global company, we are subject to income and other taxes in the United States and numerous foreign jurisdictions. Significant judgment is required to determine and estimate worldwide tax liabilities. While we believe our tax positions are consistent with the tax laws in the jurisdictions in which we conduct our business, it is possible that these positions may be contested or overturned by jurisdictional tax authorities, which may have a significant impact on our global provision for income taxes. Our effective tax rate is largely based on the geographic mix of earnings, statutory rates, inter-company transfer pricing, and enacted tax laws. A number of factors may increase our future effective tax rates, including:
the jurisdictions in which profits are determined to be earned and taxed,
the resolution of issues arising from tax audits with U.S. and foreign tax authorities,
changes in our intercompany transfer pricing methodology,
changes in the valuation of our deferred tax assets and liabilities,
increases in expense not deductible for tax purposes, including transaction costs and impairments of goodwill in connection with acquisitions,
changes in the realizability of available tax credits,
changes in share-based compensation,
changes in tax laws or the interpretation of such tax laws, including the Tax Act and the Base Erosion and Profit Shifting (“BEPS”) project conducted by the Organization for Economic Co-operation and Development (“OECD”), and
changes in generally accepted accounting principles.
Tax laws are dynamic and subject to change as new laws are passed and new interpretations of the law are issued or applied, and governmental tax authorities are increasingly scrutinizing the tax positions of companies. On December 22, 2017, the U.S. government enacted the Tax Act, which made substantial changes to U.S. tax law. The ongoing implementation and interpretation of the Tax Act, any additional forthcoming legislative or administrative guidance and accounting standards related to the Tax Act could adversely affect our future effective tax rates. The implementation by us of new practices and processes designed to comply with, and benefit from, the Tax Act and its rules and regulations could require us to make substantial changes to our business practices, allocate additional resources, and increase our costs, which could negatively affect our business, results of operations, and financial condition. In light of recent changes in U.S. tax laws and to align with our international business operations, in the fourth quarter of 2019, we completed a non-U.S. intercompany transfer of our intellectual property to a subsidiary in the Netherlands.
This transfer and other changes we make to practices and processes based upon changes in U.S. and other tax laws are subject to challenge, and an adverse outcome in any such challenge could adversely affect our reported financial results.
Additionally, longstanding international tax norms that determine each country’s jurisdiction to tax cross-border international trade are evolving as a result of the BEPS reporting requirements recommended by the G8, G20, and the OECD. The foreign countries where we do business may change tax laws, regulations, and interpretations on a prospective or retroactive basis and these potential changes could adversely affect our effective tax rates. As these and other tax laws and related regulations change, our financial results could be materially impacted. Given the unpredictability of these possible changes and their potential interdependency, it is very difficult to assess whether the overall effect of such potential tax changes would be cumulatively positive or negative for our earnings and cash flow, but such changes could adversely impact our financial results.
On June 1, 2018, we filed a petition with the U.S. tax court relating to a Notice of Deficiency pertaining to our 2011 tax year. In the third quarter of fiscal 2019, we received a decision from the U.S. Tax Court resulting in no changes to our federal income tax liability for 2011. We are currently in various stages of multiple year examinations by state and foreign taxing authorities. If taxing authorities of any jurisdiction were to successfully challenge a material tax position, we could become subject to higher taxes and our earnings would be adversely affected.
Our debt could adversely affect our cash flow and prevent us from fulfilling our financial obligations
On November 24, 2014, we issued $400.0 million of 4.75% Senior Notes due December 1, 2024. On June 15, 2018, we issued $300.0 million of 4.15% Senior Notes due June 15, 2023 and $600.0 million of 4.90% Senior Notes due June 15, 2028. When our Senior Notes mature, we will have to expend significant resources to repay these Senior Notes or seek to refinance them. If we decide to refinance the Senior Notes, we may be required to do so on different or less favorable terms or we may be unable to refinance the Senior Notes at all, both of which may adversely affect our financial condition. Any downgrade by credit rating agencies could adversely affect our cost of borrowing, limit our access to the capital markets, or result in more restrictive covenants in future debt agreements.
In May 2018, we entered into a new credit agreement (the “2018 Credit Facility”), with JPMorgan Chase Bank, N.A. and certain other institutional lenders that provides for $1.75 billion of unsecured credit facilities comprised of a $1.25 billion loan facility maturing May 2023 (the “Revolving Credit Facility”) and a $500.0 million delayed draw term loan facility that matures on the third anniversary of the funding date (the “Term Loan”). Subject to the terms of the 2018 Credit Facility, we may request an additional loan facility up to $500.0 million. We also have two $75.0 million and one €100.0 million that are uncommitted (the “Uncommitted Facilities”) at the end of 2019 and may be called by the lenders with very little notice. At the end of fiscal 2019, our total debt was comprised primarily of Senior Notes of $1,300.0 million, a term loan balance of $225.0 million, a revolver credit facility of $110.0 million under the 2018 Credit Facility, and three revolving credit facilities of $218.7 million under the Uncommitted Facilities.
Our outstanding indebtedness could have other important consequences, such as:
requiring us to dedicate a portion of our cash flow from operations and other capital resources to debt service, thereby reducing our ability to fund working capital, capital expenditures, general corporate purposes, and other cash requirements, particularly if the ratings assigned to our debt securities by rating organizations were revised downward,
increasing our vulnerability to adverse economic and industry conditions,
reducing our ability to make investments and acquisitions which support the growth of the company, or to repurchase shares of our common stock,
placing us at a competitive disadvantage as compared to our competitors, to the extent that they are not as highly leveraged,
limiting our flexibility in planning for, or reacting to, changes and opportunities in, our industry, which may place us at a competitive disadvantage, and
limiting our ability to incur additional debt on acceptable terms, if at all.
There are various financial covenants and other restrictions in our debt instruments. If we fail to comply with any of these requirements, the related indebtedness (and other unrelated indebtedness) could become due and payable prior to its stated maturity, and we may not be able to repay the indebtedness that becomes due. A default under our debt instruments may also significantly affect our ability to obtain additional or alternative financing.
Our ability to make scheduled payments or to refinance our obligations with respect to indebtedness will depend on our operating and financial performance, which in turn, is subject to prevailing economic conditions and to financial, business and other factors beyond our control. A significant portion of our outstanding debt has interest rates which float based on prevailing interest rates and we may incur additional variable-rate debt in the future. Such rates tend to fluctuate based on general economic conditions,
general interest rates, Federal Reserve rates, and the supply of and demand for credit in the relevant interbanking market. In recent years, the Federal Reserve has incrementally raised the target range for the federal funds rate, with additional increases expected to come over the next year. If interest rates increase, our interest expense will also increase as would the costs of refinancing existing indebtedness or obtaining new debt.
Our ability to incur additional indebtedness over time may be limited due to applicable financial covenants and restrictions, and due to the risk that significantly increasing our level of indebtedness could impact the ratings assigned to our debt securities by rating organizations, which in turn would increase the interest rates and fees that we pay in connection with our indebtedness.
Some of our products rely on third party technologies including open source software, so if integrationwhich could result in product incompatibilities or incompatibility issues arise with these technologies or these technologies become unavailable,harm availability of our productproducts and services development may be delayed, our reputation could be harmed and our business could be adversely affected
We license software, technologies, and intellectual property underlying some of our software from third parties. The third party licenses we rely upon may not continue to be available to us on commercially reasonable terms, or at all, and the software and technologies may not be appropriately supported, maintained, or enhanced by the licensors, resulting in development delays. Some software licenses are subject to annual renewals at the discretion of the licensors. In some cases, if we were to breach a provision of these license agreements, the licensor could terminate the agreement immediately. The loss of licenses to, or inability to support, maintain, and enhance, any such third party software or technology could result in increased costs, or delays in software releases or updates, until such issues have been resolved. This could have a material adverse effect on our business, financial condition, results of operations, cash flows, and future prospects.
We also incorporate open source software into our products. Although we monitor our use of open source software, the terms of many open source licenses have not been interpreted by U.S. courts, and there is a risk that such licenses could be construed in a manner that could impose unanticipated conditions or restrictions on our ability to market or sell our products or to develop new products. In such event, we could be required to seek licenses from third-parties in order to continue offering our products, to disclose and offer royalty-free licenses in connection with our own source code, to re-engineer our products, or to discontinue the sale of our products in the event re-engineering cannot be accomplished on a timely basis, any of which could adversely affect our business.
We are dependent on proprietary technology, which could result in litigation that could divert significant valuable resources
Our future success and competitive position is dependent upon our proprietary technology, and we rely on patent, trade secret, trademark, and copyright laws to protect our intellectual property. The patents owned or licensed by us may be invalidated,
circumvented, infringed, or challenged. The rights granted under these patents may not provide competitive advantages to us. Any of our pending or future patent applications may not be issued within the scope of the claims sought by us, if at all.
Despite our efforts to protect our intellectual property rights, unauthorized parties may attempt to copy or otherwise obtain our software or develop software with the same functionality or to obtain and use information that we regard as proprietary. Others may develop technologies that are similar or superior to our technology, duplicate our technology or design around the patents owned by us. In addition, effective copyright, patent, and trade secret protection may be unavailable, limited, or not applied for in certain countries. The steps taken by us to protect our technology might not prevent the misappropriation of such technology.
The value of our products relies substantially on our technical innovation in fields in which there are many current patent filings. Third-partiesThird parties may claim that we or our customers (some of whom are indemnified by us) are infringing their intellectual property rights. For example, individuals and groups may purchase intellectual property assets for the purpose of asserting claims of infringement and attempting to extract settlements from us or our customers. The number of these claims has increased in recent years and may continue to increase in the future.years. As new patents are issued or are brought to our attention by the holders of such patents, it may be necessary for us to secure a license from such patent holders, redesign our products, or withdraw products from the market. In addition, the legal costs and engineering time required to safeguard intellectual property or to defend against litigation could become a significant expense of operations. Any such litigation could require us to incur substantial costs and divert significant valuable resources, including the efforts of our technical and management personnel, which could harm our results of operations and financial condition.
Our global operations expose us to risks and challenges associated with conducting business internationally, and our results of operations may be adversely affected by our efforts to comply with the laws of other countries, as well as U.S. laws which apply to international operations, such as the Foreign Corrupt Practices Act (FCPA) and U.S. export control laws
We operate on a global basis with offices or activities in Europe, Africa, Asia, South America, Australasia and North America. We face risks inherent in conducting business internationally, including compliance with international and U.S. laws and regulations that apply to our international operations. These laws and regulations include data privacy requirements, labor relations laws, tax laws, anti-competition regulations, import and trade restrictions, export control laws, and laws which prohibit corrupt payments to governmental officials or certain payments or remunerations to customers, including the U.S. Foreign Corrupt Practices Act (FCPA), the U.K. Bribery Act, or other anti-corruption laws that have recently been the subject of a substantial increase in global enforcement. Many of our products are subject to U.S. export law restrictions that limit the destinations and types of customers to which our products may be sold, or require an export license in connection with sales outside the United States. Given the high level of complexity of these laws, there is a risk that some provisions may be inadvertently or intentionally breached, for example through fraudulent or negligent behavior of individual employees, our failure to comply with certain formal documentation requirements or otherwise. Also, we may be held liable for actions taken by our local dealers and partners. Violations of these laws and regulations could result in fines, criminal sanctions against us, our officers or our employees, and prohibitions or conditions on the conduct of our business. Any such violations could include prohibitions or conditions on our ability to offer our products in one or more countries and could materially damage our reputation, our brand, our international expansion efforts, our ability to attract and retain employees, our business and our operating results.
In addition, we operate in many parts of the world that have experienced significant governmental corruption to some degree and, in certain circumstances, strict compliance with anti-bribery laws may conflict with local customs and practices. We may be subject to competitive disadvantages to the extent that our competitors are able to secure business, licenses or other preferential treatment by making payments to government officials and others in positions of influence or through other methods that relevant law and regulations prohibit us from using. Our success depends, in part, on our ability to anticipate these risks and manage these difficulties.
In addition to the foregoing, engaging in international business inherently involves a number of other difficulties and risks, including:
longer payment cycles and difficulties in enforcing agreements and collecting receivables through certain foreign legal systems,
political or economic instability,
potentially adverse tax consequences, tariffs, customs charges, bureaucratic requirements and other trade barriers,
difficulties and costs of staffing and managing foreign operations,
differing local customer product preferences and requirements than our U.S. markets,
difficulties protecting or procuring intellectual property rights, and
fluctuations in foreign currency exchange rates.
These factors or any combination of these factors may adversely affect our revenue or our overall financial performance.
Changes in our effective tax rate may reduce our net income in future periods
As a global company, we are subject to income and other taxes in the United States and numerous foreign jurisdictions. Significant judgment is required to determine and estimate worldwide tax liabilities. Our effective tax rate is largely based on the geographic mix of earnings, statutory rates, inter-company transfer pricing, and enacted tax laws. A number of factors may increase our future effective tax rates, including:
the jurisdictions in which profits are determined to be earned and taxed,
the resolution of issues arising from tax audits with U.S. and foreign tax authorities,
changes in our intercompany transfer pricing methodology,
changes in the valuation of our deferred tax assets and liabilities,
increases in expense not deductible for tax purposes, including transaction costs and impairments of goodwill in connection with acquisitions,
changes in the realizability of available tax credits,
changes in share-based compensation,
changes in tax laws or the interpretation of such tax laws, including the Base Erosion and Profit Shifting (“BEPS”) project being conducted by the Organization for Economic Co-operation and Development (“OECD”) and the potential tax reform of corporate tax system in the U.S.,
changes in generally accepted accounting principles, and
the repatriation of non-U.S. earnings for which we have not previously provided for U.S. taxes.
On October 5, 2015, the OECD released the final reports from its BEPS Action Plans. The BEPS recommendations covered a number of issues, including country-by-country reporting, permanent establishment rules, transfer pricing rules and tax treaties. These changes, which have been or are in the process of being adopted by numerous countries, could increase tax uncertainty and may adversely affect our provision for income taxes. If our effective tax rates were to increase, our operating results, cash flows or financial condition could be adversely affected.
In January 2016, the EC announced an Anti-Tax Avoidance Package containing measures to regulate certain elements of tax planning further and to boost tax transparency for consideration by the European Parliament and Council. Meanwhile, in the U.S., a number of proposals for broad reform of the corporate tax system are under evaluation by various legislative and administrative bodies. Future tax reform resulting from these developments may result in changes to long-standing tax principles, which could adversely affect our effective tax rate or result in higher cash tax liabilities. It is not possible to accurately determine the overall impact of such proposals on our effective tax rate at this time.
We are currently in various stages of multiple year examinations by federal, state, and foreign taxing authorities, including a review of our 2010 to 2012 tax years by the U.S. Internal Revenue Service, or IRS. If the IRS or the taxing authorities of any other jurisdiction were to successfully challenge a material tax position, we could become subject to higher taxes and our earnings would be adversely affected.
Our reported financial results may be adversely affected by changes in accounting principles applicable to us
Generally accepted accounting principles in the U.S. are subject to interpretation by the Financial Accounting Standards Board, or FASB, the SEC, and other bodies formed to promulgate and interpret appropriate accounting principles. For example, in May 2014, the FASB issued a comprehensive new revenue recognition standard that replaces the current revenue recognition guidance under U.S. GAAP. This standard establishes a principle for recognizing revenue upon the transfer of promised goods or services to customers, in an amount that reflects the expected consideration received in exchange for those goods or services. The standard also provides guidance on the recognition of costs related to obtaining and fulfilling customer contracts. We expect to adopt this accounting standard update in the first quarter of fiscal 2018. Entities have the option of using either a full retrospective or modified retrospective approach for the adoption of the standard. We are still evaluating which adoption method we will apply and are continuing to assess the impact that the updated standard will have on our consolidated financial statements and related disclosures. This new standard is both technical and complex, and we expect to incur significant ongoing costs to implement and maintain compliance with this new standard. In addition, there may be greater uncertainty with respect to projecting revenue results from future operations as we work through the new revenue recognition standard. The new standard may impact the timing and amounts of revenue recognized. Adoption of the new revenue recognition standard along with any other changes in accounting principles or interpretations could have a significant effect on our reported financial results and could affect the reporting of transactions completed before the announcement of a change. Any difficulties in the implementation of new or changed accounting standards could cause us to fail to meet our financial reporting obligations. If our estimates relating to our critical accounting policies are based on assumptions or judgments that change or prove to be incorrect, our operating results could fall below expectations of securities analysts and investors, resulting in a decline in our stock price.
We are dependent on a specific manufacturerlimited source manufacturers and assemblersuppliers for manycertain of our products and on other manufacturers,critical components, and specific suppliers of critical parts fora disruption in our products
supply chain could adversely affect our margins, revenue, and operating results
We are substantially dependent upon Flextronics International Limited as our preferred manufacturing partnera limited number of contract manufacturers for manythe manufacture, testing, and assembly of our GNSS products. Under our agreement with Flextronics, we provide a twelve-month product forecastcertain products and place purchase orders with Flextronics at least thirty calendar days in advance of the scheduled delivery of products to our customers, depending on production lead time. Although purchase orders placed with Flextronics are cancelable, the terms of the agreement would require us to purchase from Flextronics all inventory not returnable or usable by other Flextronics customers. Accordingly, if we inaccurately forecast demand for our products, we may be unable to obtain adequate manufacturing capacity from Flextronics to meet customers’ delivery requirements or we may accumulate excess inventories, if such inventories are not usable by other Flextronics customers. Our current contract with Flextronics continues in effect until either party gives the other ninety days written notice.
We rely on specific suppliers for a number of our critical components and on other contract manufacturers, including Benchmark Electronics and Jabil, for the manufacture, test and assembly of certain products and components. We have experienced shortages of components in the past. Our current reliance on specific or a limited group of suppliers and contract manufacturers involves risks, including a potential inability to obtain an adequate supply of required products or components to meet customers’ delivery requirements, a risk that we may accumulate excess inventories if we inaccurately forecast demand for our products, reduced control over pricing and delivery schedules, discontinuation of or increased prices for certain components, and economic conditions whichthat may adversely impact the viability of our suppliers and contract manufacturers. This situation may be exacerbated duringAny disruption in
our supply chain could reduce our revenue and adversely impact our financial results. Such a disruption could occur as a result of any periodnumber of economic recoveryevents, including, but not limited to, increases in wages that drive up prices or labor stoppages, the imposition of regulations, quotas or embargoes on components, a competitive environment.scarcity of, or significant increase in the price of, required electronic components for our products, trade restrictions, tariffs or duties, fluctuations in currency exchange rates, transportation failures affecting the supply chain and shipment of materials and finished goods, third party interference in the integrity of the products sourced through the supply chain, the unavailability of raw materials, severe weather conditions, natural disasters, civil unrest, military conflicts, geopolitical developments, war or terrorism, and disruptions in utility and other services. Any inability to obtain adequate deliveries or any other circumstance that would require us to seek alternative sources of supply or to manufacture, assemble and test such components internally could significantly delay our ability to ship our products, which could damage relationships with current and prospective customers and could harm our reputation and brand as well as our operating results.
We are dependent on the availability and unimpaired use of allocated bands within the radio frequency spectrum, and our products may be subject to harmful interference from new or modified spectrum uses
Our GNSS technology is dependent on the use of satellite signals and on terrestrial communication bands. International allocations of radio frequency are made by the International Telecommunications Union (ITU)("ITU"), a specialized technical agency of the United Nations. These allocations are further governed by radio regulations that have treaty status and which may be subject to modification every two to three years by the World Radio Communication Conference. Each country also has regulatory authority over how each band is used in the country. In the United States, the Federal Communications Commission (FCC)("FCC") and the National Telecommunications and Information Administration share responsibility for radio frequency allocations and spectrum usage regulations.
Any ITU or local reallocation of radio frequency bands, including frequency band segmentation and sharing of spectrum, or other modifications of the permitted uses of relevant frequency bands, may materially and adversely affect the utility and reliability of our products and have significant negative impacts on our customers, both of which could reduce demand for our products. For example, the FCC has been considering proposals to repurpose spectrum adjacent to the GPS bands for terrestrial broadband wireless operations throughout the United States. If the FCC were to permit implementation of such proposals, or similar proposals, terrestrial broadband wireless operations could create harmful interference to GPS receivers within range of such operations and impose costs to retrofit or replace affected receivers. Similarly, other countries have considered proposals for use of frequencies used by our products as well as adjacent bands that could cause harmful interference to our products.
Many of our products use other radio frequency bands, such as the public land mobile radio bands, together with the GNSS signal, to provide enhanced GNSS capabilities, such as real-time kinematics precision. The continuing availability of these non-GNSS radio frequencies is essential to provide enhanced GNSS products to our precision survey, agriculture, and construction machine controls markets. In addition, transmissions and emissions from other services and equipment operating in adjacent frequency bands or in-band may impair the utility and reliability of our products. Any regulatory changes in spectrum allocation or in allowable operating conditions could have a material adverse effect on our business, results of operations, and financial condition.
Many of our products rely on GNSS technology, GPS and other satellite systems, which may become degraded or inoperable and result in lost revenue
GNSS technology, GPS satellites, and their ground support systems are complex electronic systems subject to electronic and mechanical failures and possible intentional disruption. Many of the GPS satellites currently in orbit were originally designed to have lives of 7.5 years and are subject to damage by the hostile space environment in which they operate. However, of the current deployment of 31 operational satellites in orbit, sixseveral have been in operation for more than 15 years and over half have been in use for more than 7.5 years.or more. Repair of damaged or malfunctioning satellites is currently not economically feasible. If a significant number of satellites were to become inoperable, there could be a substantial delay before they are replaced with new satellites. A reduction in the number of operating satellites below the 24-satellite standard established for GPS may impair the utility of the GPS system and the growth of current and additional market opportunities. In addition, software updates to GPS satellites and ground control segments, can cause problems, and weinfrequent known events such as GPS week number rollover, may adversely affect our products and customers. We depend on public access to open technical specifications in advance of suchsystem updates to mitigate these problems.problems, which may not be available or complete.
We are dependent on continued operation of GPS, the principal GNSS currently in operation. The GPS constellation is operated by the U. S. Government, which is committed to maintenance and improvement of GPS. If supporting policies were to change, or if user fees were imposed, it could have a material adverse effect on our business, results of operations, and financial condition.
Many of our products also use signals from systems that augment GPS, such as the Wide Area Augmentation System and National Differential GPS System, and satellites transmitting signal corrections data on mobile satellite services frequencies utilized by our RTX corrections services. Some of these augmentation systems are operated by the U.S. government and rely on continued fundingand maintenance of these systems. Any curtailment of the operating capability of these systems or limitations on access to, or use
of the signals, or discontinuance of service could result in degradation of our services or product performance, with an adverse effect on our business.
Many of our products use satellite signals from the Russian GLONASS System. Other countries, including China and India, are in the process of creating their own GNSS systems, and we either have developed or will develop products which use GNSS signals from these systems. The European community is developing an independent radio navigation satellite system, known as Galileo. National or European authorities may provide preferential access to signals to companies associated with their markets, including our competitors, which could harm our competitive position. Use of non-USnon-U.S. GNSS signals may also be subject to FCC waiver requirements and to restrictions based upon international trade or geopolitical considerations. If we are unable to develop timely and competitive commercial products using these systems, or obtain timely and equal access to service signals, this could result in lost revenue. These authorities may also adopt protectionist measures favoring national companies who make use of their GNSS systems, to the detriment of Trimble products using the U.S. GPS system, which would harm our business.
We are subject to the impact of governmental and other similar certifications processes and regulations, which could adversely affect our products and our business
We market certainmany products that are subject to governmental regulations and similar certifications before they can be sold. For example,The European Union increasingly regulates the use of our products on agriculture, construction, and other types of machinery. CE certification is required for GNSS receivers and data communications products, conformingwhich must conform to the European harmonized GNSS receiver standard and the radio equipment directive, to be sold in the European community. Delays in publication of the European harmonized GNSS receiver standard could affect GNSS product access to European markets. In the future, U.S., European, or other governmental authorities may propose GPS receiver testing and certification for compliance with published GPS signal interface or other specifications. An inability to obtain any such certifications in a timely manner could have an adverse effect on our operating results. Governmental authorities may also propose other forms of GPS receiver performance standards, which may limit design alternatives, hamper product innovation, or impose additional costs. Some of our products that use integrated radio communication technology require product type certification and some products require an end-user to obtain licensing from the FCC for frequency-band usage. These are secondary licenses that are subject to certain restrictions. An inability or delay in obtaining such certifications or changes to thein applicable rules by the FCC could adversely affect our ability to bring our products to market which could harm our customer relationships, and therefore, our operating results. Any failureCompliance with evolving product regulations in our major markets could require that we redesign our products, cease selling products in certain markets, and increase our costs of product development. Failure to obtain the requisite certifications could also harmcomply may result in fines and limitations on sales of our operating results.products.
We have claims and lawsuits against us that may result in adverse outcomes
We are subject to a variety of claims and lawsuits. Adverse outcomes in some or all of these claims may result in significant monetary damages or injunctive relief that could adversely affect our ability to conduct our business. Litigation and other claims are subject to inherent uncertainties and the outcomes can be difficult to predict. Management may not adequately reserve for a contingent liability, or may suffer unforeseen liabilities, which could then impact the results of a financial period. A material adverse impact on our consolidated financial statements could occur for the period in which the effect of an unfavorable final outcome becomes probable and reasonably estimable which, if not expected, could harm our results of operations and financial condition.
Our debt could adversely affect our cash flow and prevent us from fulfilling our financial obligations
On November 24, 2014, we issued Senior Notes (Notes) due December 1, 2024 in an aggregate principal amount of $400.0 million. The Notes accrue interest at a rate of 4.75% per annum, payable semiannually in arrears on December 1 and June 1 of each year, beginning on June 1, 2015. When the Notes mature, we will have to expend significant resources to repay these Notes or seek to refinance them. If we decide to refinance the Notes, we may be required to do so on different or less favorable terms or we may be unable to refinance the Notes at all, both of which may adversely affect our financial condition.
On November 24, 2014, we entered into a new five-year credit agreement with a group of lenders (the 2014 Credit Facility). The 2014 Credit Facility provides for an unsecured revolving loan facility of $1.0 billion. Subject to the terms of the 2014 Credit Facility, the revolving loan facility may be increased and term loan facilities may be established in an amount of up to $500.0 million. We also have two $75 million revolving credit facilities which are uncommitted and may be called by the lenders with very little notice (the Uncommitted Facilities). At the end of fiscal 2016, our total debt was comprised primarily of Notes of
$400.0 million, a revolving loan balance of $94.0 million under the 2014 Credit Facility and a revolving credit line balance of $130.0 million under the Uncommitted Facilities.
Our outstanding indebtedness could have important consequences, such as:
requiring us to dedicate a portion of our cash flow from operations and other capital resources to debt service, thereby reducing our ability to fund working capital, capital expenditures, general corporate purposes, and other cash requirements, particularly if the ratings assigned to our debt securities by rating organizations were revised downward,
increasing our vulnerability to adverse economic and industry conditions,
reducing our ability to make investments and acquisitions which support the growth of the company, or to repurchase shares of our common stock,
limiting our flexibility in planning for, or reacting to, changes and opportunities in, our industry, which may place us at a competitive disadvantage, and
limiting our ability to incur additional debt on acceptable terms, if at all.
There are various financial covenants and other restrictions in our debt instruments. If we fail to comply with any of these requirements, the related indebtedness (and other unrelated indebtedness) could become due and payable prior to its stated maturity, and we may not be able to repay the indebtedness that becomes due. A default under our debt instruments may also significantly affect our ability to obtain additional or alternative financing.
Our ability to make scheduled payments or to refinance our obligations with respect to indebtedness will depend on our operating and financial performance, which in turn, is subject to prevailing economic conditions and to financial, business and other factors beyond our control. A significant portion of our outstanding debt has interest rates which float based on prevailing interest rates. If interest rates increase, our interest expense will also increase.
Our ability to incur additional indebtedness over time may be limited due to applicable financial covenants and restrictions, and due to the risk that significantly increasing our level of indebtedness could impact the ratings assigned to our debt securities by rating organizations, which in turn would increase the interest rates and fees that we pay in connection with our indebtedness.
Our business is subject to disruptions and uncertainties caused by war, terrorism, or civil unrest
Acts of war, acts of terrorism or civil unrest, especially any events that impact the GNSS signals or systems, could have a material adverse impact on our business, operating results, and financial condition. The threat of terrorism and war and heightened security and military activity in response to this threat, or any future acts of terrorism or hostilities, may involve a redeployment of the satellites used in GNSS or interruptions of the system. Civil unrest, local conflicts, or other political instability may adversely impact regional economies, cause work stoppages, or result in limitations on business transactions with the affected foreign jurisdictions. To the extent that such interruptions result in delays or the cancellation of orders, disruption of the manufacturing or shipment of our products, or reduced demand for our products it could have a material adverse effect on our business, results of operations, and financial condition.
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Item 1B. | Unresolved Staff Comments |
None
None.
The following table sets forth the significant real property that we own or lease as of December 30, 2016:
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| | |
Location | Segment(s) served | Size in Sq. Feet |
Sunnyvale, California | All | 167,000 |
Huber Heights (Dayton), Ohio | All | 310,000 |
Westminster, Colorado | All | 125,000 |
Chennai, India | All | 67,288 |
Danderyd, Sweden | Engineering & Construction | 113,000 |
Mayfield Heights, Ohio | Mobile Solutions | 74,000 |
Espoo, Finland | Engineering & Construction
Field Solutions | 65,678 |
Minnetonka, Minnesota | Mobile Solutions | 63,000 |
Christchurch, New Zealand | Engineering & Construction
Mobile Solutions
Field Solutions | 60,000 |
Richmond Hill, Canada | Advanced Devices | 50,200 |
Corvallis, Oregon | Engineering & Construction | 40,000 |
In addition,Our corporate headquarters is located in Sunnyvale, California where we lease a number of smaller offices around the world primarily for sales, manufacturingapproximately 139 thousand square feet. We also currently own approximately 316thousand square feet in Dayton, Ohio and other functions.250 thousand square feet in Westminster, Colorado. These facilities are used by all reporting segments. For financial information regarding obligations under leases, see Note 8 to the Consolidated Financial Statements.
We believe that our existing facilities are adequate to support current and near termnear-term operations.
On September 2, 2011, Recreational Data Services, LLC filed a lawsuit in the Superior Court for the State of Alaska in Anchorage against Trimble Navigation Limited, Cabela’s Incorporated, AT&T Mobility and Alascom, Inc., alleging breach of contract, breach of fiduciary duty, interference with contract, promissory estoppel, fraud, and negligent misrepresentation. The case was tried in front of a jury in Alaska beginning on September 9, 2014. On September 26, 2014, the jury returned a verdict in favor of the plaintiff and awarded the plaintiff damages of $51.3 million. On January 29, 2015, the court granted our Motion for Judgment notwithstanding the Verdict, and on March 18, 2015, the Court awarded us a portion of our incurred attorneys’ fees and costs, and entered judgment in our favor in the amount of $0.6 million. The judgment also provides that the plaintiff take nothing on its claims. On April 17, 2015, the plaintiff filed a Notice of Appeal to the Alaska Supreme Court. The parties have completed all appellate briefing, and oral arguments were heard before the Alaska Supreme Court on February 24, 2016. A decision by the Alaska Supreme Court has not been made. Although an unfavorable outcome on appeal could have an adverse effect on the Company, we believe the claims in the lawsuit are without merit.
From time to time, we are also involved in litigation arising out of the ordinary course of our business. There are no other material legal proceedings, other than ordinary routine litigation incidental to the business, to which we or any of our subsidiaries is a party or of which any of our or our subsidiaries' property is subject.
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Item 4. | Mine Safety Disclosures |
None.
PART II
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Item 5. | Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities |
Company Stock Performance
Our common stock is traded on the NASDAQ under the symbol “TRMB.” The table below sets forth, duringfollowing graph compares the periods indicated,cumulative five-year total return provided stockholders on Trimble Inc. common stock relative to the highcumulative total returns of the NASDAQ Composite Index and low per share sale prices forthe S&P 500 Information Technology Index. An investment of $100 (with reinvestment of all dividends) is assumed to have been made in our common stock as reportedand in each of the indexes on the NASDAQ.December 31, 2014, and its relative performance is tracked through December 31, 2019.
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| | | | | | | |
| 2016 | | 2015 |
| Sales Price | | Sales Price |
Quarter Ended | High | | Low | | High | | Low |
First quarter | $25.44 | | $18.36 | | $27.62 | | $23.68 |
Second quarter | $27.79 | | $22.68 | | $26.36 | | $22.28 |
Third quarter | $28.72 | | $23.69 | | $23.94 | | $15.90 |
Fourth quarter | $30.84 | | $25.30 | | $23.86 | | $16.40 |
Stock Repurchase Program
In August 2015,November 2017, our Board of Directors approved a stock repurchase program (2015("2017 Stock Repurchase Program)Program"), authorizing us to repurchase up to $400.0$600.0 million of Trimble’s common stock. The stock repurchase authorization does not have an expiration date and replaces the 2015 Stock Repurchase Program, which was completed. The timing and amount of repurchase transactions will beis determined by the Company’sour management based on its evaluation of market conditions, share price, legal requirements, and other factors. The program may be suspended, modified, or discontinued at any time without public notice.
During fiscal 2016,2019, we repurchased approximately 4.94.7 million shares of common stock in open market purchases under the 20152017 Stock Repurchase Programs, at an average price of $24.39$38.51 per share, for a total of $119.5$179.8 million. At the end of fiscal 2016,2019, the 20152017 Stock Repurchase Program had remaining authorized funds of $130.4$172.4 million.
The following table provides information relating to ourCompany did not repurchase any common stock repurchase activity during the fourth quarter of 2016:
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| | | | | | | | | | | | |
| Total Number of Shares Purchased | | Average Price Paid per Share | | Total Number of Shares Purchased as Part of Publicly Announced Program | | Dollar Value of Shares that May Yet Be Purchased Under the Program | |
October 1, 2016 - November 4, 2016 | 235,000 |
| | 25.95 | | 235,000 |
| | $ | 141,601,037 |
| |
November 5, 2016 - December 2, 2016 | 410,700 |
| | 27.21 | | 410,700 |
| | 130,425,285 |
| |
December 3, 2016 - December 30, 2016 | — |
| |
| | — |
| | $ | 130,425,285 |
| |
| 645,700 |
| |
| | 645,700 |
| | | |
| | | | | | | | |
2019.
As of February 22, 2017,26, 2020, there were approximately 667552 holders of record of our common stock.
Dividend Policy
We have not declared or paid any cash dividends on our common stock during any period for which financial information is provided in this Annual Report on Form 10-K. At this time, we intend to retain future earnings, if any, to fund the development and growth of our business and do not anticipate paying any cash dividends on our common stock in the foreseeable future.
Stock Split
On March 20, 2013 we effected a 2 for 1 split of all outstanding shares of our Common Stock to shareholders of record on March 6, 2013. All shares and per share information presented has been adjusted to reflect the stock split on a retroactive basis for all periods presented.
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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 statementsConsolidated 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,dates; comparisons of our results of operations and financial condition for periods prior to and subsequent to those acquisitions are not indicative of future results.
| | | | | | | | | | | | | | | | | | | | | |
Fiscal Years | 2016 | | 2015 | | 2014 | | 2013 | | 2012 | 2019 | | 2018 | | 2017 | | 2016 | | 2015 |
(Dollar in millions, except per share data) | | | | | | | | | | |
(In millions, except per share data) | | | | | | | | | | |
Revenue | $ | 2,362.2 |
| | $ | 2,290.4 |
| | $ | 2,395.5 |
| | $ | 2,288.1 |
| | $ | 2,040.1 |
| $ | 3,264.3 |
| | $ | 3,108.4 |
| | $ | 2,646.5 |
| | $ | 2,362.1 |
| | $ | 2,290.4 |
|
Gross margin | $ | 1,238.0 |
| | $ | 1,202.2 |
| | $ | 1,290.8 |
| | $ | 1,203.8 |
| | $ | 1,046.2 |
| $ | 1,780.9 |
| | $ | 1,681.0 |
| | $ | 1,377.6 |
| | $ | 1,234.5 |
| | $ | 1,202.2 |
|
Gross margin percentage | 52.4 | % | | 52.5 | % | | 53.9 | % | | 52.6 | % | | 51.3 | % | 54.6 | % | | 54.1 | % | | 52.1 | % | | 52.3 | % | | 52.5 | % |
Net income attributable to Trimble Inc. | $ | 132.4 |
| | $ | 121.1 |
| | $ | 214.1 |
| | $ | 218.9 |
| | $ | 191.1 |
| $ | 514.3 |
| | $ | 282.8 |
| | $ | 118.4 |
| | $ | 132.4 |
| | $ | 121.1 |
|
Net income | $ | 132.2 |
| | $ | 120.7 |
| | $ | 213.9 |
| | $ | 218.2 |
| | $ | 189.7 |
| $ | 514.5 |
| | $ | 283.3 |
| | $ | 118.5 |
| | $ | 132.2 |
| | $ | 120.7 |
|
Earnings per share | | | | | | | | | | | | | | | | | | |
—Basic | $ | 0.53 |
| | $ | 0.47 |
| | $ | 0.82 |
| | $ | 0.85 |
| | $ | 0.76 |
| $ | 2.05 |
| | $ | 1.13 |
| | $ | 0.47 |
| | $ | 0.53 |
| | $ | 0.47 |
|
—Diluted | $ | 0.52 |
| | $ | 0.47 |
| | $ | 0.81 |
| | $ | 0.84 |
| | $ | 0.74 |
| $ | 2.03 |
| | $ | 1.12 |
| | $ | 0.46 |
| | $ | 0.52 |
| | $ | 0.47 |
|
Shares used in calculating basic earnings per share | 250.5 |
| | 255.8 |
| | 260.1 |
| | 256.6 |
| | 251.1 |
| 250.8 |
| | 250.0 |
| | 252.1 |
| | 250.5 |
| | 255.8 |
|
Shares used in calculating diluted earnings per share | 253.9 |
| | 258.5 |
| | 264.5 |
| | 261.2 |
| | 256.8 |
| 252.9 |
| | 253.4 |
| | 256.7 |
| | 253.9 |
| | 258.5 |
|
| | | | | | | | | | | | | | | | | | |
At the End of Fiscal Year | 2016 | | 2015 | | 2014 | | 2013 | | 2012 | 2019 | | 2018 | | 2017 | | 2016 | | 2015 |
(Dollar in millions) | | | | | | | | | | |
(In millions) | | | | | | | | | | |
Total assets | $ | 3,673.8 |
| | $ | 3,680.7 |
| | $ | 3,855.9 |
| | $ | 3,693.5 |
| | $ | 3,475.8 |
| $ | 6,640.7 |
| | $ | 5,776.4 |
| | $ | 4,316.3 |
| | $ | 3,692.2 |
| | $ | 3,680.7 |
|
Long-term debt and other non-current liabilities | $ | 603.4 |
| | $ | 717.9 |
| | $ | 766.8 |
| | $ | 729.8 |
| | $ | 927.3 |
| $ | 1,777.1 |
| | $ | 1,862.5 |
| | $ | 947.5 |
| | $ | 603.4 |
| | $ | 717.9 |
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Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Trimble focuses on integrating its broad technological and application capabilities to create vertically-focused, system-level solutions that transform how work is done within the industries we serve. The integration of sensors, software, connectivity, and information in our portfolio gives us the unique ability to provide an information model specific to the customer’s workflow. For example, in construction, our strategy is centered on the concept of a “constructible model” whichthat is at the center of our “Connected Construction Site”Construction” solutions, which provideprovides real-time, connected, and cohesive information environments for the design, build, and operational phases of construction projects. In agriculture, we continue to develop “Connected Farm” solutions to optimize operations across the agriculture workflow. In transportation and logistics,long haul trucking, our “Connected Fleet” solutions provide transportation companies with tools to enhance fuel efficiency, safety, and transparency through connected vehicles and fleets across the enterprise.
We believe that the development and introduction of new products are critical to our future success, and we expect to continue active development of new products.