UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K/A10-K
(X) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 28, 2001
-----------------January 2, 2004
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from _____________ to ______________________to______________
Commission File Number: 0-18645
TRIMBLE NAVIGATION LIMITED
(Exact name of Registrant as specified in its charter)
California 94-2802192
-------------------------------------- ------------------------------------
(State or other jurisdiction of incorporation or organization)
(I.R.S. Employer Identification No.)
incorporation or organization)
645749 North Mary Avenue, Sunnyvale, CA 94088
--------------------------------------- -----------------------------------94085
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (408) 481-8000
Securities registered pursuant to Section 12(b) of the Act: NONE
Securities registered pursuant to Section 12(g) of the Act:
Common Stock
Preferred Share Purchase Rights
(Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X[X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Act). Yes [X] No [ ]
The aggregate market value of the registrant's Common Stock held by non-affiliates of the
registrant, was approximately $446,702,176 as of March 22,
2002, based onupon the closinglast sale price of the common stockCommon Stock reported on the
NASDAQ StockNasdaq National Market for that date.on July 3, 2003 was approximately $795 million.
There were 28,181,73650,537,119 shares of the registrant's Common Stock issued and
outstanding as of March 22, 2002.
111, 2004.
DOCUMENTS INCORPORATED BY REFERENCE
Certain parts of Trimble Navigation Limited's Proxy Statement relating to the
annual meeting of stockholders to be held on May 19, 2004 (the "Proxy
Statement") are incorporated by reference into Part III of this Annual Report on
Form 10-K.
SPECIAL NOTE ON FORWARD-LOOKING STATEMENTS
This reportAnnual 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. Actual1934, which are subject to the "safe harbor" created
by those sections. The forward-looking statements regarding future events and
the future results of Trimble Navigation Limited ("Trimble" or " The Company" or
"We" or "Our" or "Us") are based on current expectations, estimates, forecasts,
and projections about the industries in which Trimble operates and the beliefs
and assumptions of the management of Trimble. Discussions containing such
forward-looking statements may be found in "Management's Discussion and Analysis
of Financial Condition and Results of Operations." In some cases,
forward-looking statements can be identified by terminology such as "may,"
"will," "should," "could," "predicts," "potential," "continue," "expects,"
"anticipates," "future," "intends," "plans," "believes," "estimates," and
similar expressions. These forward-looking statements involve certain risks and
uncertainties that could cause actual results, levels of activity, performance,
achievements and events to differ materially from those indicated in theimplied by such
forward-looking statements, as a result ofbut are not limited to those discussed in this
Report under the risk factors set
forthsection entitled "Other Risk Factors" and elsewhere, and in or incorporated by reference into, this report and
other reports and
documents that the CompanyTrimble files with the Securities and Exchange Commission.Commission ("SEC"),
specifically the most recent reports on Form 8-K and Form 10-Q, each as it may
be amended from time to time. These forward-looking statements are made as of
the date of this Annual Report on Form 10-K. We reserve the right to update
these statements for any reason, including the occurrence of material events.
The Company hasrisks and uncertainties under the caption "Management's Discussion and
Analysis of Financial Condition and Results of Operations--Risks and
Uncertainties" contained herein, among other things, should be considered in
evaluating our prospects and future financial performance. We have attempted to
identify forward-looking statements in this report by placing an asterisk (*)
before paragraphs containing such material.
TRIMBLE NAVIGATION LIMITED
2003 FORM 10-K ANNUAL REPORT
TABLE OF CONTENTS
PART I
Item 1.1 Business...........................................................5
Item 2 Properties........................................................17
Item 3 Legal Proceedings.................................................17
Item 4 Submission of Matters to a Vote of Security Holders...............17
PART II
Item 5 Market for the Registrant's Common Equity and Related
Stockholder Matters...............................................18
Item 6 Selected Financial Data...........................................19
Item 7 Management's Discussion and Analysis of Financial Condition and
Results of Operations.............................................20
Item 7A Quantitative and Qualitative Disclosures about Market Risk........42
Item 8 Financial Statements and Supplementary Data.......................45
Item 9 Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure..............................................76
Item 9A Controls and Procedures...........................................76
PART III
Item 10 Directors and Executive Officers of the Registrant................76
Item 11 Executive Compensation............................................76
Item 12 Security Ownership of Certain Beneficial Owners and
Management and Related Stockholder Matters........................77
Item 13 Certain Relationships and Related Transactions....................77
Item 14 Principal Accountant Fees and Services............................77
PART IV
Item 15 Exhibits, Financial Statement Schedules and Reports on
Form 8-K.......................................................77-89
TRADEMARKS
Trimble, the globe and triangle logo, EZ-Guide, Telvisant, Lassen, SiteVision,
GeoExplorer, AgGPS, Thunderbolt, FirstGPS, and CrossCheck are trademarks of
Trimble Navigation Limited registered in the United States Patent and Trademark
Office and other countries. Force, Galaxy, Placer, TrimTrac and Trimble Toolbox
are trademarks of Trimble Navigation Limited. All other trademarks are the
property of their respective owners.
PART I
Item 1 Business GeneralOverview
Trimble Navigation Limited, a California corporation ("Trimble" or "the Company"
or "we" or "our" or "us"), develops, manufactures,provides advanced positioning product solutions to
commercial and distributesgovernment users in a large number of markets. These markets
include surveying, construction, agriculture, urban and resource management,
military, transportation, and telecommunications. Our products enabled by Global
Positioning System ("GPS"), optical, laser, and wireless communications
technology. Wetypically provide
end-users, value added resellers ("VAR's") and originalbenefits that can include cost savings, improved quality, or higher
productivity. Examples of our products include earthmoving equipment manufacturers ("OEM's") with positioning solutions principally
targetedguidance
systems, surveying instruments, fleet management systems, components for the agriculture, engineering and construction, fleet and asset
management, timing, automobilein
vehicle navigation and military markets.
Background
Trimble providestelematics systems, farm equipment guidance systems,
field data collection handhelds, and timing modules used in the synchronization
of wireless networks.
Our products typically integrate positioning, solutions for many applications requiring
precise determination of location using GPS, optical, laser, communicationscommunication, and information
technologies. Positioning solutionstechnologies used include the Global Positioning
System (GPS), laser, optical, and inertial, while communication techniques
include both public networks, such as cellular, and private networks such as
business band radio. A significant amount of the differentiation in the products
is provided through software; both firmware that enables the positioning
solution and applications software that allows the customer to make use of the
positioning information.
We design and market our own products. Our manufacturing strategy includes a
combination of in house assembly and fabrication as well as subcontracting those
functions to third parties. We conduct our business globally with major
development, manufacturing or logistics operations in the United States, Sweden,
Germany, New Zealand, and the Netherlands. Products are usedsold through dealers,
representatives, joint ventures, and other channels throughout the world. These
channels are supported by our sales offices located in many industries
including construction, engineering, agriculture, trucking, maritime,
automotive, aviation, fleetmore than 20 countries.
We began operations in 1978 and asset management, consumer, mobile appliances,
military, in-vehicle navigation, timing, and recreation.
Theincorporated in California in 1981. Our common
stock has been publicly traded on Nasdaq since 1990 under the symbol TRMB.
Technology Overview
A majority of Trimble product sales useour revenues is derived from applying GPS as the positioning
technology. GPS offers major advantages over earlier technologies in ease of
use, precision, and accuracy. It provides worldwide coverage in three dimensions
and can also provide data to enable time and velocity measurementsterrestrial
applications. GPS is a system of 2824 orbiting Navstar satellites established and associated ground
control that is funded and maintained by the U.S. government, which has been fully operational since March 1995.U. S. Government and is available
worldwide free of charge. GPS positioning is based on a trilateration technique that precisely
measures distances from threefour or more Navstar satellites. The satellites continuously
transmit precisely timed radio signals using extremely accurate atomic clocks. A
GPS receiver calculatesmeasures distances from the satellites in view by determining the
travel time of a signal from the satellite to the receiver. The receiver, and then trilateratesuses those
distances to compute its position using its known distance from various satellites, and
calculates latitude, longitude and altitude.position. Under normal circumstances, a stand-alone GPS
receiver is able to calculate its position at any point on earth, in the earth's
atmosphere, or in lower earth orbit, to approximately 10 meters, 24 hours a day.
GreaterMuch better accuracies are possible through a technique called "differential
GPS." In addition, GPS provides highlyextremely accurate time measurement.
* The usefulness of GPS accuracy is dependent upon the locations of the receiver and the number of
GPS satellites that are above the horizon at any given time. Reception of GPS
signals requires line-of-sight visibility between the Navstar satellites and the
receiver, which can be blocked by buildings, hills, cloud cover and dense foliage. The
receiver must have a line of sight to at least three satellites in
order to determine its location in two dimensions--latitude and longitude--and
at least four satellites to determine its
location in three dimensions -
latitude, longitude, attitude (angular orientation), and altitude.time. The accuracy of
GPS may also be limited by distortion of GPS signals from ionospheric and other
atmospheric conditions, and
intentional or inadvertent signal interference or Selective Availability ("SA").
SA, which was the largest component of GPS distortion, is controlled by the U.S.
Department of Defense and on May 1, 2000, was deactivated.
2
Different applications require different accuracies - for example
navigation typically requires one to three meters and survey and machine
guidance typically require less than ten centimeters. By using a technique
called "differential GPS" using two or more GPS receivers, position accuracy can
be improved over unaided GPS. This technique compensates for a number of
measurement distortions, including ionospheric and other atmospheric distortions
as well as SA. Differential GPS involves placing one GPS receiver at a known
location and continuously comparing its calculated location to its actual
location to measure signal distortions and errors in the satellite data.
Measurement corrections can be transmitted in real-time over a radio or
telephone link or integrated later with accumulated data. Most distortions and
errors are reasonably constant over large areas, so that multiple GPS receivers
can use these measurements to correct their own position calculations.
* Trimble'sconditions.
Our GPS products are based on proprietary receiver technology.
Trimble's GPS receivers track all satellites in view and automatically select
the optimum combination of satellites to provide the most accurate set of
measurements. The convergence
of positioning, wireless, and information technologies enables significant new
value to be added to positioning systems, thereby creating a more robust
solution for the user. In addition, recent developments in wireless technology
and deployments of next generation wireless networks have enabled less expensive
wireless communications. These developments allow for the efficient transfer of
position data to locations away from the positioning field device, allowing the
data to be accessed by more users and thereby increasing productivity.
* Navstar satellites and their ground support systems are complex
electronic systems subject to electronic and mechanical failures and possible
sabotage. The satellites were originally designed to have lives of 7.5 years and
are subject to damage by the hostile space environment in which they operate.
The U.S. Department of Defense is committed to maintaining a 24 satellite
constellation. The total number of GPS satellites that are currently operational
is 28, some of which have been in place for 12 years. Repairing damaged or
malfunctioning satellites is currently not 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 significant reduction in the number of
operating satellites would impair the current utility of the GPS system and the
growth of current and additional market opportunities. In addition, there can be
no assurance that the U.S. government will remain committed to the operation and
maintenance of GPS satellites over a long period, or that the policies of the
U.S. Government for the use of GPS without charge will remain unchanged.
However, a 1996 Presidential Decision Directive marks the first time that access
to GPS for civilian use has a solid foundation in law. Because of increasing
commercial GPS applications, other U.S. Government agencies may become involved
in the administration or the regulation of the use of GPS signals. Any of these
factors could affect the willingness of buyers of the Trimble products to select
GPS-based systems instead of products based on competing technologies. Any
resulting change in market demand for GPS products could have a material adverse
effect on Trimble's financial results. In 1995, certain European government
organizations expressed concern regarding the susceptibility of GPS equipment to
intentional or inadvertent signal interference. Such concern could translate
into reduced demand for GPS products in certain geographic regions in the
future.
LaserOur laser and optical products measure distances veryand angles accurately by means of a
light beam. Trimbleusing
light. We generally usesuse commercially available laser diodes to create laser light
beams for its applications. Trimble'sdistance measurement. In addition, our proprietary precision mechanics
and software algorithms in these products combine to give robust, accurate
distance and angle measurements for a variety of agricultural, surveying, and
construction applications.
Business Strategy
Our business strategy leverages our expertise in GPS and other positioning
technologies to provide
product solutions tofor our customers. Our primary
objectives are:
* Focuscustomers, built around several key elements:
o Attractive markets - We focus on growth markets. We target markets whichthat offer potential for revenue
growth, profitability, and market leadership.
Our current focus is on four
primary market segments: Engineering and Construction, Agriculture, Fleet and
Asset Management and Component Technologies. In addition, we serve other smaller
markets and include these in the Portfolio Technologies segment. In general, theo Innovative solutions that provide significant benefits to our customers needs within these market segments can be characterized by a need for
improved productivity, lower cost, higher convenience or better information.- We
intendseek to continuously evaluate new market segments as well as specific vertical
markets within these segments as we develop newapply our technology to applications for our technology.
3
* Provide innovative, differentiated product solutions.which position data has a high
value. We strive to
provide innovative solutionsanticipate that deliver significant value to our end-users by
developing products with hardware capabilities and software features designed
for specific applications. Trimble continues to focus on hardware advances that
lead to smaller size, lower power requirements, improved sensitivity and greater
accuracy. Our products typically bundle hardware and software together. In some
cases, we license the results of our developments to third parties.
* Develop products that integrate positioning communications and
information technologies. We intend to leverage thefurther advances in positioning, wireless, and
information technologies by integrating them inwill enable new classes of productssolutions to emerge that
provide the user with higher functionality and greaterwill create new opportunities.
o Distribution channels to best access to
information.
* Developour markets - We utilize a range of
distribution channels to improve market penetration. We have
developed extensivebest serve the needs of individual markets. These
channels can include independent dealers, direct sales, OEM sales, and
distribution channels within our targeted market segments
and have established strong customer relationships based on Trimble's strong
product position and commitment to support. The acquisition of the Spectra
Precision Group added significant new distribution capability internationally. A
major focus will be to further develop our channels, both by increasing the
capabilities in regions currently served as well as through international
expansion.
* Pursue key customer alliances. Key customer alliances have been a
significant element of our success. We have established such alliances with companies including Caterpillar Inc.; CNH Global N.V.; Siemens VDO Automotive
AG; Infineon Technologies; Nortel Networks Limited; Blaupunkt-Werke GmbH, a
wholly owned subsidiary of Robert Bosch GmbH (Bosch); McNeilus Companies, Inc.,
a subsidiary of Oshkosh Truck Corporation; and Seiko Epson. These relationships
have enhanced our abilitykey partners. In addition, we will continue to enter new markets, develop new products and
strengthen our distribution network. These relationships are generally
terminable at will by either party. As our markets develop and new markets
emerge, we expect that alliances will be a significant factor in our success. We
may also form other types of alliances or take advantage of acquisition
opportunities that complement our product portfolio,
extend our technology,
enable us to enter new markets, or solidifyinternational distribution.
Business Segments and Markets
We are organized into four main operating segments encompassing our current market position.
INDUSTRY SEGMENTS
We operate in four primary industry segments that use a variety of
positioning-based solutions, including: (i)various
applications and product lines: Engineering and Construction, (ii)
Agriculture, (iii) Fleet and Asset Management, (iv)Field Solutions,
Component Technologies, and other smaller segments included in Portfolio Technologies.
We design, market, and distribute products that determine precise
geographic location or position, sometimes combined with data communications and
applications software. We sell our products through a network of direct
salespeople, OEMs, VARs, independent dealers, distributors and authorized sales
representatives supported by sales offices throughout the world.
We conduct research and development activities at our facilities in
Sunnyvale, California; Dayton, Ohio; Corvallis, Oregon; Chandler, Arizona;
Westminster, Colorado; Danderyd, Sweden; Christchurch, New Zealand and in Jena,
Munich and Kaiserslautern in Germany. Solectron Corporation and Solectron
Federal Systems, Inc. (collectively, "Solectron") currently manufacture most of
Trimble's GPS products.Mobile Solutions. We also have production facilitiesoperate in Danderyd, Sweden,
Jenasmaller
business areas, primarily focused on military and Kaiserslautern in Germany and Dayton, Ohio forinertial integration
technologies, which aggregate into the manufacturePortfolio Technologies segment. Our
segments are distinguished by the markets they serve. Each segment consists of
our
optical and laser products.
To achieve distribution, marketing, production, and technology advantages
for our targeted markets, we manage our industry segments within corresponding
divisions. Each division isbusinesses which are responsible for strategy,product development, marketing, sales,
and marketing,
product developmentstrategy, and financial performance, and is headed by a general manager.
Engineering and Construction
To pursueSegment Realignment
In the opportunitiesfirst fiscal quarter of 2003, we realigned two of our reportable
segments. The Tripod Data Systems (TDS) business is now included in the
Engineering and Construction industrysegment. Previously it was included in the
Portfolio Technologies segment. All comparable information for earlier periods
has been restated to conform to the new basis.
Engineering and Construction
Products in the Engineering and Construction segment we employimprove productivity and
accuracy throughout the entire construction process including the initial
survey, planning, design, earthmoving, and building phases. The product emphasis
is aimed at making each individual task more efficient, as well as speeding up
the entire process by improving information flow from one step to the next.
We typically combine a number of technologies into product solutions. The
elements of these solutions may incorporate GPS, optical, laser, radio or
cellular communications, and information
technology. We offersoftware.
An example of the customer benefits provided by our product is our GPS and
robotic optical surveying instruments which enable the surveyor to perform
operations in the field faster, more reliably and with a range of hardwaresmaller crew.
Similarly, our construction machine guidance products allow the operator to
achieve the desired landform by eliminating stakeout and reducing rework. In
turn, these steps in the construction process can be readily linked together
with data collection modules and software to minimize the time and effort
required to maintain data accuracy throughout the entire construction process.
We sell and distribute our products from this segment through a global network
of independent dealers that are supported by our sales force. This channel is
supplemented by relationships that create additional channel breadth including
our joint ventures with Caterpillar, Nikon, and private branding arrangements
with other companies.
We also design and market handheld data collectors and data collection software
for field use by surveyors, contractors, and other professionals. These products
are sold directly, through dealers, and other survey manufacturers. Competitors
in this portion of the business are small and geographically diverse.
Competitors in this segment are typically companies that provide optical, laser,
or GPS positioning products. Our principal competitors are Topcon Corporation
and Leica Geosystems. Price points in this segment range from less than $1,000
for certain laser systems to approximately $125,000 for a high precision,
three-dimensional, machine control system.
Representative products sold in this segment include:
5800 RTK Rover - This is an integrated unit that allows the surveyor to make
centimeter-level measurements or do construction stakeout with only one person.
Wireless technology eliminates cables that could otherwise snag on foliage and
structures. The rover weighs 3.5kg for an entire system on a pole including
batteries.
5600 Total Station - This optical total station series provides a choice of
increasing levels of automation that allow the surveyor to choose a system that
will best suit his work. Depending on the job, these configurations enable
one-person stakeout and survey. The included Attachable Control Unit (ACU) also
works with the 5800 RTK Rover providing complete measurement compatibility
regardless of the technology used.
SiteVision(R) GPS System - SiteVision GPS is a machine-mounted, positioning
system that guides the operator by comparing the actual position of the blade
with the digitized design that resides in a computer on the machine. The use of
this system enables faster machine speed, eliminates the need for placing
stakes, and lowers the number of passes needed to get the desired grade.
Applications include road construction and site preparation.
Spectra Precision(R) Laser GL 700 Series - This laser product provides grade
control capability for heavy equipment on a construction site. The level surface
of the laser light can be precisely controlled, and machines with a laser
receiver can be controlled to establish a precise and uniform grade over the
desired area. Applications include trenching, pipe laying, machine control
grading, and road construction applications.
TDS Ranger(TM) Series - The TDS Ranger device is a handheld data collector
supporting Microsoft's Windows CE operating system. Running TDS survey software,
this unit can control and collect data from all major brands of optical and GPS
surveying instruments. The operator can also run his or her own application
programs for the Microsoft Windows CE operating system on the platform.
Field Solutions
Our Field Solutions segment addresses the agriculture and geographic information
system (GIS) markets.
Our agriculture products consist of manual and automated navigation guidance for
tractors and other farm equipment used by
surveyin spraying, planting, cultivation, and
construction professionalsharvesting applications. The benefits to the farmer include faster machine
operation, higher yields, and lower consumption of chemicals. We also provide
positioning solutions for leveling agricultural fields in irrigation
applications and aligning drainage systems to better manage water flow in
fields.
Our distribution to the agricultural market is through multiple channels.
Revenue is generated through independent dealers and through partners such as
CNH Global. Competitors in this market are either vertically integrated
implement companies such as John Deere, or agricultural instrumentation
suppliers such as Raven, RHS, CSI Wireless, Beeline and Integrinautics.
Our GIS product line is centered on handheld data collectors that gather
information in the field to perform precise position
determination,be incorporated into GIS databases. Typically this
information includes features, attributes, and positions of fixed infrastructure
and natural resource assets. An example would be that of a utility company
performing a survey of its transmission poles including the age and condition of
each telephone pole. Our handheld unit enables this data collection,to be collected and
automatically stored while confirming the location of the asset. The data can
then be downloaded into a GIS database. This stored data could later be used to
navigate back to any individual asset or item for maintenance or data update.
Our mobile GIS initiative goes one step further by allowing this information to
be communicated from the field computing, data management,worker to the back-office GIS database through
the combination of wireless technologies (Bluetooth and automated
machine guidancecellular), as well as
giving the field worker the ability to download information from the database
using these same wireless technologies. This capability provides significant
advantages to users including improved productivity, accuracy and control. The applications served include surveying, general
construction, site preparation, excavation, road and runway construction,
interior construction and underground construction.
4
Our products reduceaccess to the need for manual calculations and operations,
thereby improving productivity and providing potential cost savings. These
improvements can also lead to improved project completion times and reduced
errors that lead to rework. Our goal is to provide comprehensive
"field-to-office" solutions that enable users to integrate field construction
operations with their office information systems. These solutions streamline the
use of
information in the engineering and construction process, from project
concept to completion. For example, if the field and the office are tightly
integrated, data collected and created in the project feasibility phase can be
used and modified in the design phase. Data resulting from the design phase can
be used to automate processes in the construction phase. Finally, data collected
from the construction site can be usedfield.
Distribution for both monitoring progress and quality,
and as an input to required design changes.
In 2001, Trimble generated approximately 64% of its revenue from this
segment.
Products
The followingGIS products is a table of some of the key Engineering and Construction
products.
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Product Description
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GPS Total Station(R)5700 A GPS measurement system that provides three dimensional position
within 10 millimeters. Provides surveyors and civil engineers with
features that improve speed and accuracy. Combined with Trimble
Survey Controller(TM)field software and Trimble Geomatics Office
Software(TM), survey and design tasks are unified in one system.
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5600DR 200+ Total Station A reflectorless total station surveying instrument that does not
require a reflecting prism. Surveyors can survey objects that cannot
be physically reached from over 200 meters away. The instrument
can, in its robotic version, be operated remotely which enables one
operator to execute all applications without assistance.
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SiteVision(R) GPS 3D Machine Control System A grade control system for the
construction market that combines a ruggedized on-board computer, a
high precision dual frequency receiver, two duel frequency GPS
antennas, three light bars and a radio. The System enables a
bulldozer operator to grade to the design that is displayed in the cab
and eliminate the need to follow stakes.
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Spectra Precision Laser GL700 series An innovative series of laser
transmitters designed for a variety of machine control, general
construction and agricultural applications. Simple to setup and
use they offer higher stability and more consistent accuracy over wide
areas. The transmitters improve productivity and reduce rework for
a range of site prep and general construction grading applications.
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Agriculture
In today's competitive agriculture market, where low cost producers have a
significant advantage, efficient field operation and data management can be
critical to success. We provide water management, machine guidance and field
management solutions to enhance the productivity of equipment assets, to improve
yields and shorten key processes. Our products serve a number of agriculture
applications including precise land leveling, machine guidance, yield monitoring
and variable-rate applications of fertilizers and chemicals. For example, our
GPS-based machinery guidance systems and field monitoring systems enable
machinery operators to achieve improved accuracy when planting row crops and
applying fertilizers and chemicals.
5
* We believe that there is a considerable growth opportunity in replacing
traditional positioning technologies in the agriculture market with GPS and
laser positioning technology. Given the recent introduction of the technology,
the Company believes that the market remains relatively unpenetrated. Machine
guidance systems have primarily been sold and installed in the aftermarket.
Original equipment manufacturers are increasingly integrating these capabilities
into new machines. We believe that we are positioned to address the
opportunities in the new equipment market as the result of our relationship with
CNH Global (formerly Case Corporation), a global manufacturer and distributor of
agricultural equipment. Since 1997, CNH Global has utilized our GPS receivers
for advanced farming systems. Our customers in the agriculture market segment
include family farmers, commercial growers, crop consultants, equipment
manufacturers, farm centers and service providers.
In 2001 this segment represented approximately 5% of Trimble's revenue.
Products
The following is a table of some of the key Agriculture products.
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Product Description
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AgGPS(R)132 Farmers use the AgGPS 132 to tag soil type, insect infestation, or
crop yield information with precise, sub-meter location data.
Mapping this data highlights problem areas and helps farmers
target their use of agricultural products, saving money and
increasing productivity.
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AgGPS(R)Autopilot A system that automatically steers tractors to within centimeters for
row-crop applications. The driver, with hands-free operation, can now
concentrate on working the implements for listing, bed preparation,
planting and cultivating. This technology translates into increased
productivity for the farmer through more efficient utilization of
tractors and extended working hours.
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Laser-based Water Management Systems Laser-based water management allows
the agricultural industry to make topographical maps of their fields,
design solutions for drainage or irrigation, and control the
machines that grade the land using a rotating plane of laser light.
Growers generally have either too much water or too little water to
grow a crop. Landleveling and farm tile drainage is a high
productivity long-term investment for a grower to enhance crop yields.
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AgGPS(R)EZ-GuideTM 110 The AgGPS EZ-Guide 110 is a low-cost, easy-to-use parallel swathing
system that uses GPS technology to help the operator guide farm
machinery in precise rows. The system allows farmers to increase
productivity and profitability through more efficient utilization of
agriculture vehicles, extending working hours available in a day and
reducing costs. The EZ-Guide system is fully upgradable with
Trimble's EZ-Map and Field Manager products for field mapping or
variable rate management.
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Fleet and Asset Management
Our Fleet and Asset Management segment includes the mapping and Geographic
Information Systems (GIS) market and the mobile positioning and communications
market.
We integrate wireless, GPS and information technologies to provide
solutions for a variety of applications in fleet management and asset tracking.
Our products enable end-users to monitor and manage their mobile and fixed
assets by communicating location-relevant information from the field to the
office. The keys to these applications is the ability to accurately locate
assets and to rapidly collect and transfer a wide range of asset-related
6
data from the field to the office for monitoring and verification and for use in
decisions. We currently offer a rangeof products that address a number of
sectors of this market including truck fleets, security, telematics, public
safety vehicles, and fixed asset data collection for a variety of governmental
and private entities.
Our mobile asset management products offer a range of asset management
solutions, including an internet delivered, cellular based solution for vehicle
fleet management that provides all the functionality necessary to actively
manage vehicles in the field. End-users can track the movement of their
vehicles, employees, and goods and services. This allows them to improve their
decisions regarding asset utilization. For example, end-users can route vehicles
in their fleet more efficiently, reducing vehicle downtime, and potentially
increasing the number of deliveries or trips per vehicle. Other benefits may
include more efficient vehicle maintenance, reduced misuse of vehicles and
providing their customers with more detailed information on the location of
products and services.
In fixed asset tracking, the increased use of the Internet and wireless
communication is providing asset-rich organizations such as utilities, natural
resource agencies and local governments with better access to data on their
field assets. A key to this market is the creation and maintenance of GIS
databases. Our range of GPS based GIS data collection and maintenance products
enable these organizations to capture and maintain the features and attributes
of their field assets.
As with our other targeted market segments, we believe that there is
considerable growth opportunity in this market, which is in the early stages of
adopting positioning-based solutions. Currently, mobile resources are often
tracked using inefficient and incomplete systems such as wireless telephones and
pagers. We believe that penetration of GPS-based positioning systems in this
market segment will accelerate as the cost of such systems decreases and
functionality increases.
In 2001, this segment represented approximately 12% of Trimble's revenue.
Products
The following is a table of some of the key Fleet and Asset Management products.
-------------------------------------------------------------------------------------------------------------------
Product Description
-------------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------------
Pathfinder Pro Family The GPS Pathfinder(R)Pro XR and Pro XRS Systems are GIS data
collection and maintenance systems that provide real-time submeter
accuracy. These systems are used in a range of applications
including utility asset management, environmental monitoring,
scientific research, hazardous waste clean up, municipal asset
management, and natural resource management.
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CrossCheck(R) Product Family A cellular mobile unit that combines GPS, cellular,
and computing technologies onto a single module - provides a
cost-effective asset and route management tool for fleet management.
-------------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------------
GeoExplorer(R)3 A data collection and maintenance system that provides a rugged
handheld GPS solution for creating and maintaining GIS databases for
management of utility, urban, and natural resources.
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Component Technologies
We market our component products through a network of OEM relationships.
Theindependent
dealers and business partners, supported by our sales force. Primary markets for
our GIS products and solutions include proprietary chipsets, printed circuitgovernment, defense and homeland
security, utility and communications and natural resources management.
Competitors in this market are typically either survey instrument companies
having GPS technology and/or consumer GPS companies. Two examples are Leica
Geosystems and Thales Navigation.
Approximate price points in this segment range from $3,000 for a GIS handheld
unit to $35,000 for a fully automated, farm equipment control system.
Representative products sold within this segment include:
GeoExplorer(R) CE Series - Combines a GPS receiver in a rugged handheld unit
running Microsoft's Windows CE operating system that makes it easy to collect
and maintain data about objects in the field.
AgGPS(R) Autopilot System - A GPS-enabled, agricultural navigation system that
connects to a tractor's steering system and automatically steers the tractor
along a precise path to within three centimeters or less. This enables both
higher machine productivity and more precise application of seed and chemicals,
thereby reducing costs to the farmer.
AgGPS(R) EZ-Guide(R) System - A GPS-enabled, manual guidance system that
provides the tractor operator with steering visual corrections required to stay
on course to within 25 centimeters. This system reduces the overlap or gap in
spraying, fertilizing, and other field applications.
Component Technologies
Our Component Technologies segment provides GPS-based components for
applications that require embedded position or time. Our largest markets are in
the telecommunications and automotive industries where we supply modules,
boards, custom integrated circuits and software, or single application IP
licenses to the customer according to the needs of the application. Sales are
made directly to original equipment manufacturers (OEMs) and system integrators
who incorporate our component into a sub-system or a complete system-level
product.
In the telecommunications infrastructure market, we provide timing modules that
keep wireless networks synchronized and intellectual property licenses. The products are incorporatedon frequency. For example, CDMA cellular
telephone networks require a high level of both short-term and long-term
frequency stability for proper operation (synchronization of information/voice
flow to avoid dropped calls). Our timing modules meet these needs at a much
lower cost than the atomic standards or other specially prepared components that
would otherwise be required. Customers include wireless infrastructure companies
such as Nortel, Samsung, Nokia, UTStarcom, and Andrew.
In the automotive and embedded market, we provide a GPS component that is
embedded into timing
sources for synchronizing wireless and computer systems; in-vehicle navigation (IVN) systems. Our focus on high
reliability, continuous improvement, and telematics systems; fleet management; security systems; data collection
systems;low cost has earned us supplier awards
and wireless handheld consumer products.
* We believe that technological advancescontinuing business in GPS components will result in
reduced size, lower cost, lower power consumptionthis market. Customers include IVN system
manufacturers and improved capability. These
improvements will allow GPS to be potentially useful for a number of new, high
volume applications, many of them in consumer markets. The applications may
include
7
wireless handheld products (smart phones, pagers, child and personal locators);
automobile products (navigation systems, security systems, auto emergency
response systems, and telematics systems); PC-based products (in-car computers,
portable PCs, and PDAs); and general consumer products (wristwatches, portable
navigation systems, and pet locators).
* Our in-vehicle navigation and telematics technologies are sold to OEMs
that sell directly to automobile manufacturers, including Pioneer, Bosch
Blaupunkt-Werke GmbH,integrators such as Siemens VDO Automotive AG, Hyundai
Automotive Company, Robert Bosch GmbH, and Ixfin Magneti Marelli. Automobile
manufacturers that currently purchase products incorporating our GPS technology
include: Alfa Romeo, BMW, Fiat, Honda, Mercedes, Opel, Porsche, Renault,Marelli Sistemi
Electronici S.P.A .
* The declining size and VW/Audi.
* A significant consumer marketpower requirements for GPS components, coupled with
improving capabilities allow GPS to potentially be used in a new class of
applications such as position-aware cellular telephones or other wireless
handheld devices. We expect our strength in GPS technology will expand our
participation in this market.
* Component Technologies continues to explore other positioning solutions in
addition to GPS. An example of such a solution is expectedthe television triangulation
technology developed by Rosum. With Rosum, we intend to develop a family of
devices which will greatly extend the ability to locate both people and assets
in environments that would be difficult or impossible for GPS only solutions.
The major competitor in the telecommunication infrastructure market is
Symmetricom. Competitors in the automotive and embedded markets are typically
component companies with GPS capability, including Japan Radio Corporation,
Motorola, and SiRF.
Representative products sold by this segment include:
Thunderbolt(R) GPS Disciplined Clock - The Thunderbolt clock is used as a time
source for the synchronization of wireless networks. By combining a GPS receiver
with a high-quality quartz oscillator, the Thunderbolt achieves the performance
of an atomic standard with higher reliability and lower price.
FirstGPS(R) Technology - We license our FirstGPS technology, which is a
host-based, GPS system available as two integrated circuits and associated
software. The software runs on a customer's existing microprocessor system
complementing the work done by the integrated circuit to generate position,
velocity, and time. This low-power technology is particularly suitable for
small, mobile, battery-operated applications.
Lassen(R) SQ Module - The Lassen SQ module adds complete GPS functionality to a
mobile product in a postage stamp-sized footprint with ultra-low power
consumption, consuming less than 100mW at 3.3V. This module is designed for
portable handheld, battery-powered applications such as cell phones, pagers,
PDAs, digital cameras, and many others.
TrimTrac(TM) Locator - Our new TrimTrac product is a complete end user device
that combines GPS functionality with tri-band global system for mobile
communications (GSM) wireless communications. It is intended for high volume
personal vehicle and commercial asset management applications that demand a
low-cost locator device.
Mobile Solutions
Our Mobile Solutions segment addresses the market for fleet management services
by providing a Trimble-hosted platform solution that bundles both the hardware
and software needed to run the application. The software solution is typically
provided to the user through Internet-enabled access to our hosted platform for
a monthly service fee. This bundled solution enables the fleet owner to
dispatch, track, and monitor the conditions of vehicles in the fleet on a
real-time basis. A vehicle-mounted unit consists of a single module including a
GPS receiver, sensor interface, and a cellular modem. Our solution includes the
communication service from the vehicle to our data center and access over the
Internet to the application software, relieving the user of the need to maintain
extensive computer operations.
We market our fleet management services in three primary areas, leveraging the
core platform. Our vertical market strategy targets opportunities in specific
vertical markets where we believe we can provide a unique value to the end user
by customizing the hardware and software solution for a particular industry. For
example, the first vertical we are addressing is ready mix concrete. Here, we
combine a suite of sensors into a solution that can automatically determine the
status of a vehicle without driver intervention. Our agreement with McNeilus, a
major manufacturer of trucks for the ready mix concrete and waste management
industries, facilitates the delivery of a complete management solution to ready
mix concrete fleet operators and refuse haulers. McNeilus' sales force markets
our solution as a retrofit for trucks already in the field, or as a
factory-installed option. We plan on leveraging our technology, partners and
customers into other verticals, such as other construction material delivery
vehicles and waste management trucks, where a customized solution can provide
similar benefits as in ready mix.
We also have a horizontal market strategy that focuses on providing turnkey
solutions to a broad range of service fleets and mobile workers that span over
90 distinct markets. Here, we leverage the same general applications that are
used in our vertical markets, however, the same level of customization, such as
additional sensors, is typically not required. These products are distributed
through individual dealers and dealer service providers, as well as after-market
automotive electronics suppliers.
Our enterprise strategy focuses on sales to large, enterprise accounts. Here, in
addition to a Trimble-hosted solution, we can also integrate our software
directly into the customer's IT infrastructure, giving them control of the
information. In this market we sell directly to end users and sales cycles tend
to be the
wireless handset market. The FCC has mandated that wireless carriers must be
ablelong due to provide location data for all 911 emergency calls made from cellular
phones. This Enhanced 911 (E911) mandate now requires all carriers and all
markets to deploy the location capabilityfield trials followed by 2006. The mandate is creating the
needan extensive decision-making process.
Approximate prices for the wireless carriershardware fall in the range of $300 to $3,000, while
the monthly software service fees range from approximately $20 to approximately
$55, depending on the customer service level. Competition comes largely from
service-oriented businesses such as @Road and handset manufacturerssoftware companies such as Command
Alkon.
Representative products sold by this division include:
Telvisant(R) System - Our fleet management service offering, Telvisant provides
different levels of service that run from snapshots of fleet activity to
find ways to meet
the mandate's accuracy requirements of 50 meters, 67 percentreal-time fleet dispatch capability. Telvisant includes truck communication
service and computer backbone support of the timesoftware. Variations of Telvisant
are tailored for specific industry applications.
CrossCheck(R) Module - This hardware, mounted on the vehicle, provides location
and within 150 meters, 95 percent of the timeinformation through its built-in cellular interface. This module also
includes GPS positioning, sensor interfaces for handsets. GPS technology provides
a potential solution to meet or exceed the requirements of the E911 mandate.
This market will require very small, low-cost GPS components that consume very
little power. Trimble's current productsvehicle conditions, and technical development plans are
aligned with the needs of the high volume market and we expect to be an active
participant in the market. The mandate also allowsbuilt-in
intelligence for network based solutions
that can provide accuracy of 100 meters 67 percent of the time and within 300
meters 95 percent of the time. We also offer precision GPS timing products
designed for the network based E911 solutions.
This segment represented approximately 12% of Trimble's 2001 revenue.
Products
The following is a table of some of the key Component Technologies products.
-------------------------------------------------------------------------------------------------------------------
Product Description
-------------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------------
FirstGPS(TM) Specifically developed for power-sensitive mobile information
devices such as laptops, PDAs, digital cameras, smart phones,
pagers and automobile navigation systems. The architecture allows
high-volume manufacturers of consumer products to add GPS
location with minimal impact on the device's size or battery life.
-------------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------------
Thunderbolt(TM) GPS-disciplined Clock A GPS clock designed specifically for precision
timing and synchronization of wireless networks. Wireless systems
need precise timing to optimize use of their assigned radio spectrums
across wide geographic areas.
-------------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------------
Custom CDMA Clock A GPS clock supplied to major supplies of CDMA equipment.
-------------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------------
Lassen(TM) LP GPS A miniature, low-power GPS receiver module for battery-powered
applications. It is suited to embedding GPS in portable devices
such as PDAs, personal communication systems, data
terminals, recorders and instrumentation units.
-------------------------------------------------------------------------------------------------------------------
distributed decision-making.
Portfolio Technologies
ThisOur Portfolio Technologies segment is an aggregation ofincludes various operations that each equalaggregate to
less than ten10 percent of the Company'sour total operating revenue. The products in this segment are
navigation modules and embedded sensors that are used in avionics, flight, and
military applications. Also, includedThe two operations in this segment are Applanix, and
Military and Advanced Systems (MAS).
Applanix develops, manufactures, sells and supports high-value, precision
products that combine GPS with inertial sensors for accurate measurement of the
position and attitude of moving vehicles. Sales are made directly by our sales
force to the end users or to systems integrators. Competitors include IGI in the
airborne survey market, and iXsea and VT TSS in the marine survey market.
Our MAS business supplies GPS modules that use the military's GPS advanced
capabilities. The modules are used for guiding aircraft. Military products are
sold directly by our sales force to either the US Government or a contractor.
Sales are also made to non-US governments, with the sales of the encrypted
components taking place through the US Government. Competitors in this market
include Rockwell, L3, Raytheon, and Thales.
Representative products sold by this segment include:
Applanix POS/AV - An integrated GPS/inertial system for airborne surveying that
measures aircraft position to an accuracy of a few centimeters and aircraft
attitude (angular orientation) to an accuracy of 30 arc seconds or better. This
system is typically interfaced to large format cameras and scanning lasers for
producing geo-referenced topographic maps of the terrain.
Force 5(TM) Module - A dual frequency, embedded GPS module that is used in a
variety of military airborne applications.
Acquisitions and Joint Ventures
Our growth strategy is centered around developing and marketing innovative and
complete value-added solutions to our existing customers, while also marketing
them to new customers and geographic regions. To do this, we believe it is
essential to continually enhance our market position, which has led to
partnering with or acquiring companies that bring technologies, products or
distribution capabilities that will allow us to enter or penetrate a market
quicker than if we had done so solely through internal development. Over the
past five years, this has led us to form two joint ventures and acquire six
companies. No assurance can be given that our previous or future acquisitions
will be successful or will not materially adversely affect our financial
condition or operating results.
Applanix Corporation
* On July 7, 2003, we acquired privately held Applanix Corporation, a Canadian
developer of systems that integrate inertial navigation system and GPS
technologies. We expect the Applanix acquisition to extend our technology
portfolio and enable increased robustness and capabilities in our future
positioning products. Applanix's performance is reported under our Portfolio
Technologies segment.
MENSI S.A.
* On December 9, 2003, we acquired privately held MENSI S.A., a French developer
of terrestrial 3D laser scanning technology. We expect the MENSI acquisition to
enhance our technology portfolio and expand our product offerings. MENSI's
performance is reported under our Engineering and Construction segment.
TracerNET Corporation
* On March 5, 2004, we acquired privately held TracerNET Corporation of
Virginia, a provider of wireless fleet management solutions. We expect the
TracerNET acquisition to offer more diverse and complete fleet management
solutions. TracerNET's performance will be reported under our Mobile Solutions
segment.
Nikon-Trimble Co., Ltd.
On March 28, 2003, Trimble and Nikon Corporation entered into an agreement to
form a joint venture in Japan, Nikon-Trimble Co., Ltd., which would assume the
operations of Nikon Geotecs Co., Ltd., a Japanese subsidiary of Nikon
Corporation and Trimble Japan KK, our Tripod Data Systems subsidiary,Japanese subsidiary. Nikon-Trimble began
operations in July of 2003.
Nikon-Trimble is 50% owned by us and 50% owned by Nikon, with equal voting
rights. It is focusing on the design and manufacture of surveying instruments
including mechanical total stations and related products. In Japan, this joint
venture distributes Nikon's survey products as well as our survey, agriculture,
construction and GIS products. Outside of Japan, we are the exclusive
distributor of Nikon survey and construction products.
* We expect the joint venture to enhance our market position in survey
instruments through geographic expansion and market penetration. The Nikon
instruments will broaden our survey and construction product portfolio and
enable us to better access emerging markets such as Russian, Chinese, and Indian
markets. It will also provide us with the ability to sell our GPS and robotic
technology to existing Nikon customers. Additionally, Nikon-Trimble is expected
to improve our market position in Japan.
Caterpillar Trimble Control Technologies, LLC
On April 1, 2002, we established and began operations of a joint venture with
Caterpillar called Caterpillar Trimble Control Technologies, LLC, in which was acquiredeach
company has a 50% ownership stake and have equal voting rights. This joint
venture is developing new generations of machine control products for the
construction and mining markets for installation in the factory or as a dealer
option.
* Today, we sell construction machine control products to contractors through
our dealer channel, for installation on November
14, 2000.
8
On March 6, 2001,bulldozers, motorgraders, and excavators
that are already in the Company sold its Air Transport Systems (ATS) business
to Honeywell. The ATS business was a part of our Portfolio Technologies segment
and involvedfield (the "after-market"). However, both companies
believe the Trimble 8100, the HT 9100 and two other product lines.
Products
The following is a table of someadoption of the key Portfolio Technologies products.
- ----------------------------------------------- ----------------------------------------------------------------------
TA-12(TM) An all-in-view, PPS GPS receiver for military aircraft operating
within the US National Airspace System. The TA-12 receiver is
FAA TSO-C129A certified and designed for integration with
Flight Management Systems that require Instrument Flight Rules
certified operations.
- ----------------------------------------------- ----------------------------------------------------------------------
- ----------------------------------------------- ----------------------------------------------------------------------
Force 5 GRAM-S(TM) An all-in-view, dual frequency PPS embedded GPS receiver card
designed for integration with military inertial navigation systems
for use on high performance aircraft and missiles.
- ----------------------------------------------- ----------------------------------------------------------------------
technology will spur future demand for machine
control products that can be integrated into the design of new Caterpillar
machines, while also available for "after-market" installation.
Patents, Licenses and Intellectual Property
We hold approximately 600 US patents and 108 non-US patents, the majority of
which cover GPS technology and applications, and over 94 of which cover optical
and laser technology and applications.
We prefer to own the intellectual property used in our products, either directly
or though subsidiaries. From time to time we license technology from third
parties.
There are approximately 60 trademarks registered to Trimble including "Trimble,"
the globe and triangle logo, "AgGPS," "GeoExplorer," and "Telvisant," among
others that are registered to Trimble Navigation Limited in the United States
and other countries. Additional trademarks are pending registration.
Sales and Marketing
TrimbleWe currently hashave regional sales offices throughout North America and Europe.
Offices serving the rest of the world include Australia, Canada, China, Dubai, Japan, Manila,Korea, New
Zealand, Singapore, and Singapore.United Arab Emirates. We tailor the distribution channel
to the needs of the productour products and regional market.markets. Therefore, we have a number
of forms of sales channel solutions around the world.
North America. Trimble sells itsAmerica
We sell our products in the United States and Canada primarily through dealers,
distributors, and authorized representatives. This channel is supplemented and
supported by our employees who provide additional sales support. In some cases,
where third party distribution is not available, we utilize a direct sales
force. We also utilize distribution alliances and OEM relationships with other
companies as a means to serve selected markets.
International. Trimble marketsInternational
We market to end-usersend users through aan extensive world wide network of dealers and
distributors in more than 85 countries.distributors. Distributors carry one or more product lines and are generally
limited to selling either in one country or inassigned a portion of a country. Trimbleterritory. We occasionally grantsgrant exclusive rights to market certain
products within specified countries. See Note 3 of the Notes to the Consolidated
Financial Statements for financial information regarding joint ventures
Sales to unaffiliated customers in locations outside the U.S.United States comprised
approximately 51% in 2003, 49% in 2002, and 50% of total revenues in 2001. During the 2003 fiscal
2001, 52% in fiscal 2000 and 52%
in fiscal 1999.year, North and South America represented 58% of our revenue,56%, Europe, 30%the Middle East and
Africa represented 31%, and Asia 12% in fiscal 2001.
Support.represented 13% of our total revenues.
Support and Warranty
The warranty periods for Trimble'sour products are generally between one and three years
from date of shipment. Selected military programs may require extended warranty
periods up to 5.5 years, certain TDS products have a 90-day warranty period, and
certain Nikon products sold by our Tripod Data
Systems subsidiary have a 90 dayfive-year warranty period. We support our GPS
products through an on-boarda circuit board replacement program from locations in the
United Kingdom, Germany, Japan, and Sunnyvale, California.the United States. The repair and
calibration of our non-GPS products isare available from company ownedcompany-owned or
fundedauthorized facilities.
Additionally over 200 service providers globally perform warranty servicing of
our products. We reimburse dealers and distributors for all authorized
warranty repairs they perform.
Trimble does not deriveWhile we engage in extensive product quality programs and processes, including
actively monitoring and evaluating the quality of component suppliers, our
warranty obligation is affected by product failure rates, material usage, and
service delivery costs incurred in correcting a significant portion of its
revenues from supportproduct failure. Should actual
product failure rates, material usage, or service activities.
Competition
Indelivery costs differ from the
estimates, revisions to the estimated warranty accrual and related costs may be
required.
Seasonality of Business
* Our revenues are affected by seasonal buying patterns in some of our
businesses. Over half of our total revenue comes from our Engineering and
Construction segment,business, which has the biggest seasonal impact on our total
revenue. This business, and therefore our total revenue, is seasonally strongest
during the second quarter due to the start of the construction buying season in
the northern hemisphere in spring. Typically, we face competition primarilyexpect the first and fourth
quarters to be the seasonal lows due to the lack of construction during the
winter months. If other factors such as economic conditions or underlying growth
in the business are removed, the historical variability in our total quarterly
revenue from other GPS and optical vendors, including Leica AG, Topcon Corporation
Thales Group, NovAtel Inc., Sokkia Company, Ltd., and Nikon Geosystems.seasonality has generally been less than 10 percent.
Backlog
In the Agriculture segment we face competition from John Deere, CSI
Wireless, Starlink, AgSystems, Integrinautics, and Topcon Corporation.
9
In the Component Technologies segment for GPS components the primary
competitors are Japan Radio Corporation (JRC), Motorola, SirF, uBlox, and
Leadtech. In the timingmost of our markets, the primary competitortime between order placement and shipment is Symmetricom.
In the Fleet and Asset management segmentshort.
Therefore, we face competition from CSI
Wireless, @Road, MinorPlanet, @Track, AirIQ, Leica AG, Garmin Corporation, and
Corvallis Micro Technologies.
In the Portfolio Technologies segment, we face competition from Rockwell
Collins Inc., L3 Communications, Raytheon Company, and Thales Group.
* The principal competitive factors vary widely from segment to segment,
but typically include ease of use, size, weight, power consumption, features,
performance, reliability and price. In the commercial solution applications,
ease of use and user functionality become the differentiating factors. We believe that our products currently compare favorably with respect to these
factors. We intend to expand our market presence through:
o systems, products and services that have significantly differentiated
features with improved benefits to end-users.
obacklog is not a strong commitment to new product development. Trimble currently
offers more than 100 products and continues to improve and expand the
line.
o our technology leadership with approximately 531 patents issued.
o extensive worldwide distribution.
* We believe that our ability to compete successfully in thereliable indicator of present or
future against
existing and additional competitors will depend largely on our ability to
provide more complete solutions, as well as products and services that have
significantly differentiated features with improved cost/benefit ratios to our
end-users. There can be no assurances that we will be able to implement this
strategy successfully, or that our competitors, many of whom have substantially
greater resources, will not apply those resources to compete successfully
against us.
Research and Development
We expect growth in our targeted market segments to be achieved, in a large
part, by our strong commitment to research and development. We invest in
developing positioning technologies, information technologies, and wireless
communications, realized in the design of proprietary software, optics, laser
systems, control systems, integrated circuits, network radios, GPS receivers,
and real time kinematic (RTK) technology. We devote a portionbusiness conditions.
Manufacturing
Manufacturing of our research
and development expendituresGPS products is subcontracted to advancing core positioning technologies and
integrating them with synergistic technologies such as communications, sensors,
and information technologies.
The majoritySolectron Corporation. We
completed the move of our research and development staff develops products for a
variety of applications that utilize these technologies. Recent examples
include:
o 3-D passive positioning through the use of rotating lasers for the
construction market
o 5600DR 200+ reflectorless robotic total station for the surveying and
construction market
o Crosscheck GSM, integrating cellular and GPS technology for fleet
management
o Autosteer tractor controls utilizing GPS and sensor technologies for
the agricultural market.
o The GPS Total Station 5700 incorporating Trimble's latest RTK
technology for surveying and stake out, and
o The FirstGPS technology, offering small, low-power GPS for automotive
and other embedded applications.
10
Below is a table of Trimble's expenditures on research and development over
the last three fiscal years.
December 28, December 29, December 31,
Fiscal Years Ended 2001 2000 1999
- ------------------------- ----------------- ------------------ -----------------
(In thousands)
Research and development $62,881 $46,520 $36,493
* Trimble expects that a significant portion of future revenues will be
derived from sales of newly introduced products. Consequently, our future
success depends in part on our ability to continue to develop and manufacture
new competitive products with timely market introductions. Advances in product
technology will require continued investment in research and development in
order to maintain and enhance our market position.
Manufacturing
In August of 1999, we began outsourcing the manufacture of our GPS-basedall Component Technologies products to Solectron Corporation (Solectron).in China
in the first quarter of 2003. During 2003 we started utilizing Solectron continuesin
Mexico for some of our handheld products. We continue to manufactureutilize Solectron
California for our high-end GPS products and new product introduction services.
Solectron is responsible for substantially all material procurement, assembly,
and testing. Trimble continuesWe continue to manage product design up through pilot production. While Solectron is responsibleproduction
for most facets of the physical manufacturing process,subcontracted products, and we are directly involved in qualifying
suppliers and the key components used in all our products. Our current contract with
Solectron continues in effect until either party gives the other ninety days
written notice.
We manufacture our opticallaser and laser-basedoptics-based products at four manufacturing
facilities locatedour plants in Dayton, Ohio;
Danderyd, Sweden; and KaiserslauternJena and Jena,Kaiserslautern, Germany. Some of these products
and subassembliesor portions of these products are also assembled on a
contract basis.
In addition, as of August 2001, Trimble completed the transfer of its
manufacturing activities in Austin, Texas,subcontracted to Sunnyvale, California. We are
currently in the process of transferring our FAA certifications to our Sunnyvale
manufacturing facility.
While most of the components used in our products are standard and can be
obtained from multiple qualified manufactures, somethird parties for
assembly.
All of our key componentsmanufacturing sites are proprietary or sole sourcedregistered to ISO9001:2000, covering the
design, production, distribution, and require extended lead times. If we were required
to find new vendors for these sole or limited sourced components, we would have
to qualify replacement components and possibly reconfigureservicing of all our products. This
qualification or reconfiguration process could result in product shipment
delays. Our supply management team works closely with strategically important
suppliers who provide sole or limited sourced products.
Backlog
Trimble believes that due to the volume of products delivered from shelf
inventories and the shortening of product delivery schedules, backlogThe
Component Technologies segment is not a
meaningful indicator of future business prospects. Therefore, we believe that
backlog information is not material to an understanding of our business.
Patents, Trademarks, and Licenses
Our success depends to a significant extent on technical innovation. We
pursue an active program of filing patent applications to protect
technologically sensitive features of our products. We currently hold
approximately 370 U.S. GPS related patents and approximately 20 foreign GPS
related patents that expire at various dates no earlier than 2005, and we hold
approximately 40 other technology patents. We also have approximately 100 laser
or optical related patents worldwide. We currently license certain peripheral
aspects of our technology from Spectrum Information Technologies and
GeoResearch. Trimble may enter into additional licensing arrangements in the
future relating to its technologies.
At present there are 92 trademarks registered to TrimbleQS9000 for its automotive
products. QS9000 is the automotive version of ISO9000 covering specific
requirements for the market.
Research and its
subsidiaries. Specifically, "Trimble" with the sextant logo, "Trimble
Navigation," "GeoExplorer," and "GPS Total Station," are trademarks of Trimble
11
Navigation Limited, registered in the United States and other countries.
"Trimble" with the globe and triangle logo and additional trademarks are pending
registration.
Although weDevelopment
We believe that our patentscompetitive position is maintained through the development
and trademarks have value, thereintroduction of new products that incorporate improved features, better
performance, smaller size and weight, lower cost, or some combination of these
factors. We invest substantially in the development of new products. We also
make significant investment in the positioning, communication, and information
technologies that underlie our products and will likely provide competitive
advantages.
Our research and development expenditures, net of reimbursed amounts were $67.6
million for fiscal 2003, $61.2 million for fiscal 2002, and $62.9 million for
fiscal 2001.
* We expect to continue investing in research and development with the goal of
maintaining or improving our competitive position, as well as the goal of
entering new markets and satisfying new needs for positioning related solutions.
There can be no assurance that those patents and trademarks, or any additional patents and
trademarks that may be obtainedwe will succeed in the future, will provide meaningful
protection from competition. We actively develop and protect our intellectual
property through a program of patenting, enforcement, and licensing.
We do not believe that any of our products infringe patent or other
proprietary rights of third parties, but we cannot be certain that they do not
dodoing so. (See Note 21 to Consolidated Financial Statements.) If infringement is
alleged, legal defense costs could be material, and there can be no assurance
that the necessary licenses could be obtained on terms or conditions that would
not have a material adverse effect on our profitability.
Employees
As of December 28, 2001, TrimbleJanuary 2, 2004, we employed 2,099 people: 555 in research and
development, 715approximately 2,150 employees, including 30%
in sales and marketing, 58329% in manufacturing, 28% in engineering, and 24613% in
general administration. Of these, 598 were locatedand administrative positions. Approximately 45% of employees are in
Europe (of which 246 were
in Germany and 245 were in Sweden), 196 in New Zealand, 39 in the Asia Pacific
region and 1,266 inlocations outside the United States, CanadaStates.
Our employees are not represented by unions except for those in Sweden and Mexico.some
in Germany. We also employ temporary and contract personnel that are not
included in the above headcount numbers. Trimble's success depends in part on the continued contribution and
long-term effectiveness of our employees. Competition in recruiting personnel
can be significant in some labor markets and our continued ability to attract
and retain highly skilled employees is essential to our future growth and
success. Our employees are not represented by labor unions, except in certain
European countries where union membership is almost universal. We have not experienced work stoppages.
12stoppages
or similar labor actions.
Available Information
The Company's annual reports on Form 10-K, quarterly reports on Form 10-Q,
current reports on Form 8-K, and all amendments to those reports are available
free of charge on the Company's website through www.trimble.com/investors.html,
as soon as reasonably practicable after such material is electronically filed
with or furnished to the Securities and Exchange Commission. Information
contained on our website is not part of this annual report on Form 10-K.
In addition, you may request a copy of these filings (excluding exhibits) at no
cost by writing or telephoning us at our principal executive offices at the
following address or telephone number:
Trimble Navigation Limited
749 North Mary Avenue, Sunnyvale, CA 94085
Attention: Investor Relations
Telephone: 408-481-8000
Executive Officers of the Company
The names, ages, and positions of the Company's executive officers as of March
5, 20021, 2004 are as follows:
Name Age Position
- -----------------------------------------------------------------------------------------------------------------------------
Steven W. Berglund.................. 50 President, Chief Executive Officer
Mary Ellen P. Genovese.............. 42 Chief Financial Officer
William C. Burgess.................. 55 Vice President, Human Resources
Joe F. Denniston, Jr................ 41 Vice President of Operations
John E. Huey........................ 52 Treasurer
Irwin L. Kwatek..................... 63 Vice President and General Counsel
Michael W. Lesyna................... 41 Vice President and General Manager, Mobile Solutions Division
Bruce E. Peetz...................... 50 Vice President, Advance Technology and Systems
Karl G. Ramstrom.................... 58 Senior Vice President and General Manager,
Engineering and Construction Division
Anup V. Singh....................... 31 Corporate Controller
Alan R. Townsend.................... 53 Vice President and General Manager, Trimble Field Solutions Division
Dennis L. Workman................... 56 Vice President and General Manager, Component Technologies Division
All officers serve at the discretion of the Board of Directors. There are
no family relationships between any of the directors or executive officers of
the Company.Name Age Position
- ---------------------------------------------------------------------------
Steven W. Berglund joined the Company as52 President and Chief Executive Officer
Mary Ellen P. Genovese 44 Chief Financial Officer
William C. Burgess 57 Vice President, Human Resources
Joseph F. Denniston, Jr. 43 Vice President, Operations
Bryn A. Fosburgh 41 Vice President and General Manager,
Geomatics and Engineering
Mark A. Harrington 48 Vice President of Strategy
and Business Development
John E. Huey 54 Treasurer
Irwin L. Kwatek 64 Vice President and General Counsel
Michael W. Lesyna 43 Vice President and General Manager,
Mobile Solutions
Bruce E. Peetz 52 Vice President, Advanced Technology and Systems
Christopher J. Shephard 41 Vice President and General Manager,
Construction Instruments
Anup V. Singh 33 Corporate Controller
Alan R. Townsend 55 Vice President and General Manager,
Field Solutions
Dennis L. Workman 58 Vice President and General Manager,
Component Technologies
Steven W. Berglund - Steven Berglund joined Trimble as president and chief
executive officer in March 1999. Mr. Berglund was elected to the Company's Board of
Directors at the Annual Meeting of Shareholders held in June of 1999. Mr.
Berglund has experience in engineering, manufacturing, finance, and global
operations. Prior to joining the Company,Trimble, Mr. Berglund was
president of Spectra Precision, Inc., a subsidiary of Spectra-Physics.group within Spectra Precision had global
revenue of approximately $200 millionPhysics AB, and developed and manufactured surveying
instruments, laser based construction instruments, and machine control systems.
During his fourteen years with Spectra-Physics, which was a pioneer
in the development of lasers, Mr. Berglund heldlaser systems. He spent 14 years at Spectra Physics in a
variety of positions that included
four years based in Europe. Prior to Spectra-Physics,senior leadership positions. In the early 1980s, Mr. Berglund spent a
number of years at Varian Associates in Palo Alto, California where he held a numbervariety of
planning and manufacturing roles. Mr. Berglund began his career as a process
engineer at Eastman Kodak in Rochester, New York. Mr. BerglundHe attended the University of
Oslo and the University of Minnesota where he received a B.S. degree in Chemical Engineeringchemical
engineering in 1974 and1974. He later received his M.B.A. from the University of
Rochester in New York in 1977.
Mary Ellen P. Genovese joined- Mary Ellen Genovese, chief financial officer, has been
responsible for the overall financial activities of Trimble as Controllersince September
2000. Ms. Genovese was vice president of Manufacturing
Operations in December 1992.finance and corporate controller from
1997 to September 2000. From 1994 to 1997, sheMs. Genovese served as Business Unit
Controllerbusiness unit
controller for Software and Component Technologies, and for the trackingTracking and
communications
business units.Communications. She was appointed Corporate Controllerjoined Trimble as controller of manufacturing operations in
October 1997 and Vice
President of Finance and Corporate Controller in February 1998. In September
2000 she was appointed Chief Financial Officer.December 1992. Prior to joining Trimble, Mrs.Ms. Genovese was Chief Financial Officer and Presidentchief financial
officer for Minton Co., a distributing company to the commercial building
market, from 1991 to 1992. In
her position as Chief Financial Officer she was responsible for the accounting,
management reporting and bank and investor financing for the company. In March
of 1992, the board of directors asked her to assume the role of President to
reorganize the company, including the divestiture of the manufacturing
operations. Prior to 1991, she worked for 10 years with General
Signal Corporation. She was appointed European Financial ControllerCorp. in July 1990, where
she was responsible for the company's three European operations, Germany, France
and the United Kingdom. From 1988 to 1990 she served as Unit Financial Officer,
for General Signal's Semiconductor Systems Division. She held several other
management positions including Materials Manager, Controller of Manufacturing
Operation and International Projects Controller for General Signal's Ultratech
Stepper Division from 1984 to 1988. Mrs.positions. Ms. Genovese is a Certified Public
Accountantcertified public
accountant and received her B.S. in accounting from Fairfield University in
Connecticut in 1981.
13
William C. Burgess - William Burgess joined Trimble in August of 2000 as Vice Presidentvice
president of Human Resources. From August 1998Prior to July 2000,joining Trimble, Mr. Burgess was Vice Presidentvice
president of Human Resources and Management Information Systems for Sonoma West
Holdings, Inc. Mr. Burgess alsoFrom 1993 to 1997, he served as Vice Presidentvice president of Human Resources from May 1995
through July 1998
for Optical Coating Laboratory, a large high-tech manufacturer
of fiber optic products. Mr. Burgess' experience also includes Telenekronfrom 1990 to 1993, he established and managed
the human resources function at Teknekron Communications Systems, and from 1985
to 1990 he was vice president of Human Resources for a developer$25 billion,
35,000-employee segment of telecommunications software; and Asea Brown Boveri (ABB), a global technology company.
Mr. Burgess received hisa B.S. from the University of Nebraska in 1973 and aan M.S. in
organizational development from Pepperdine University in 1978.
JoeUniversity.
Joseph F. Denniston, Jr. - Joseph Denniston joined Trimble in April 2001 as vice president of
operations. In his role, he isoperations in April 2001, responsible for worldwide manufacturing, distribution
and logistics strategy.logistics. Prior to Trimble, Mr. Denniston worked for 3Com Corporation.
During his 14-year tenure, he held several positions in test
engineering, manufacturing engineering and operations. Most recently he served as vice president of supply chain
management for the Americas. Prior to joining
3Com, he served over five yearsAmericas and held several positions in test engineering,
manufacturing engineering and operations. Previously at Sentry Schlumberger in various roles. Hefor
seven years, he held several positions including production engineering,
production management and test engineering over six years. Mr. Denniston
received a B.S. in electrical engineering technology from the Missouri Institute
of Technology in 1981 and aan M.S. in computer science engineering from Santa
Clara University in 1990.
Bryn A. Fosburgh - Bryn Fosburgh was appointed vice president and general
manager of the Geomatics and Engineering business in July 2002, with
responsibility for all the division-level activities associated with survey,
construction, and infrastructure solutions. From October 1999 to July 2002, Mr.
Fosburgh served as division vice president of survey and infrastructure. In
1997, Mr. Fosburgh was appointed director of development for the Company's land
survey business unit where he oversaw the development of field and office
software that enabled the interoperability of Trimble survey products. Mr.
Fosburgh joined Trimble in 1994 as technical service manager for surveying,
mining, and construction. Prior to Trimble, Mr. Fosburgh was a civil engineer
with the Wisconsin Department of Transportation where he was responsible for
coordinating the planning, data acquisition, and data analysis for statewide GPS
surveying projects in support of transportation improvement projects. He has
also held various engineering, research and operational positions for the US
Army Corps of Engineers and Defense Mapping Agency. Mr. Fosburgh received a B.S.
in geology from the University of Wisconsin in Green Bay in 1985 and an M.S. in
civil engineering from Purdue University in 1989.
Mark A. Harrington - Mark Harrington joined Trimble in January 2004 as vice
president of strategy and business development. Prior to joining Trimble, Mr.
Harrington served as vice president of finance at Finisar Corporation and chief
financial officer for both Cielo Communications, Inc. and Vixel Corporation. His
experience also includes 11 years at Spectra-Physics where he served in a
variety of roles including vice president of finance for Spectra-Physics Lasers,
Inc. and vice president of finance for Spectra-Physics Analytical, Inc. Mr.
Harrington began his career at Varian Associates, Inc. where he held a variety
of management and individual positions in finance, operations and IT. Mr.
Harrington received his B.S. in Business Administration from the University of
Nebraska-Lincoln.
John E. Huey - John Huey joined Trimble in 1993 as Director Corporate Creditdirector corporate credit and
Collections,collections, and was promoted to Assistant Treasurerassistant treasurer in 1995 and Treasurertreasurer in
1996. Past experience includes two years with ENTEX Information Services, five
years with National Refractories and Minerals Corporation (formerly Kaiser
Refractories), and thirteen years with Kaiser Aluminum and Chemical Sales, Inc.
He has held positions in Credit Management, Market Research, Inventory Control,
Salescredit management, market research, inventory control,
sales, and as an Assistant Controller.assistant controller. Mr. Huey received his B.A. degree in
Business Administration in 1971 from Thiel College in Greenville, Pennsylvania
and an MBA in 1972 from West Virginia University in Morgantown, West Virginia.
Irwin L. Kwatek joined- Irwin Kwatek has served as vice president and general counsel
of Trimble as Vice President and General Counsel insince November 2000. Prior to joining Trimble, Mr. Kwatek was Vice Presidentvice
president and General Counselgeneral counsel of Tickets.com, Inc., a ticketing servicesservice provider, from
May 1999 to November 2000. Prior to thatTickets.com, he was engaged in the private
practice of law for more than six years. InDuring his career, Mr. Kwatekhe has served as
Vice Presidentvice president and General Counselgeneral counsel to several publicly-heldpublicly held high-tech companies
including Emulex Corporation, Western Digital Corporation and General
Automation, Inc. Mr. Kwatek received his B.B.A. from Adelphi College in Garden
City, New York and aan M.B.A. from the University of Michigan in Ann Arbor. He
received his J.D. from Fordham University in New York City in 1968.
Michael W. Lesyna joined Trimble as Vice President of Strategic Marketing
in September 1999. In September 2000, he was appointed Vice President- Michael Lesyna has been vice president and General Managergeneral manager
of the Mobile Positioning and Communications Division (recently
renamed Mobile Solutions Division). Mr. Lesyna brings broad experience in
developing business and marketing strategies for high tech companies.segment since September 2000. Prior to Trimble, Mr.
Lesyna worked forspent six years at Booz Allen and& Hamilton where he spent six
years, most recently servingserved as
a principal in the operations management group. While at Booz Allen and Hamilton, he was responsible for advising companies on a
wide range of strategic issues. Prior to Booz Allen and& Hamilton,
Mr. Lesyna held a variety of engineering positions at Allied Signal Aerospace.
He served as
a Project Engineer for Allied Signal's European consortium in Germany, was a
Development and Test Engineer for the altitude chamber, and was a Design
Engineer for the company's first jet fighter engine afterburner. Mr. Lesyna received an MBA from Stanford University in 1994. He also receivedhis M.B.A., as well as an M.S. in
mechanical engineering in 1983 and a B.S. in mechanical
engineering in 1982,
both from Stanford University.
Bruce E. Peetz joined Trimble in June 1988 as Program Manager for GPS
Systems. From January 1990 to January 1993 he- Bruce Peetz has served as Development Manager for
commercial dual-frequency products, and from January 1993 to December 1995 he
served as Engineering Manager for Surveying and Core Engineering. In January1996
he was appointed General Manager of the Land Surveying unit, and from February
1998 started the Advanced Systems division as General Manager. In October 1998
he was named Vice Presidentvice president of Advanced Technology
and Systems consolidating
Systemssince 1998 and has been with Trimble Laboratories.for 15 years. From 1996 to
1998, Mr. Peetz served as general manager of the Survey Business. Prior to
joining Trimble, Mr. Peetz served inwas a variety of engineeringresearch and management positions during eleven yearsdevelopment manager at
Hewlett
Packard.Hewlett-Packard for 10 years. Mr. Peetz received his BSEEB.S. in electrical
engineering from the Massachusetts Institute of Technology in 1973, and did graduate work at UCLA.
Karl G. Ramstrom joined TrimbleCambridge,
Massachusetts in August 2000 as Senior Vice President and
General Manager of the Engineering and Construction Division. Prior to joining
Trimble, Mr. Ramstrom served as President of the Spectra
14
Precision Group, which was acquired by Trimble in July 2000. During his 31-year
tenure at Spectra Precision and its predecessor companies, he held a variety of
positions, including marketing, sales management, general management, and
finally executive responsibilities. Before his appointment as President, Mr.
Ramstrom headed Spectra Precision's Survey business unit headquartered in
Danderyd, Sweden. After completing his education in his native Sweden, Mr.
Ramstrom began his career as a surveyor with the Swedish Road Administration
before joining Spectra Precision in 1969.1973.
Anup V. Singh joined- Anup Singh has served as corporate controller since joining
Trimble in December 2001 as corporate controller.2001. Prior to joining Trimble, Mr. Singh worked forwas with
Excite@Home from July 1999 to December 2001. During his tenure there,at Excite@Home,
he held the positionpositions of senior director of Corporate Financial Planning and
Analysis, where he was responsible for
worldwide budgeting, forecasting, management reporting and long-term strategic
financial planning. He also held the position of international controller,
responsible for all Finance and Administrative functions of the International
Business Unit. In this role he developed and managed the execution of business
plans for several joint ventures and overseas subsidiaries.controller. Before Excite@Home, Mr. Singh also
worked for 3Com Corporation from December 1997 to July 1999, and Ernst and& Young
LLP in both San Jose, California and London, England. HeMr. Singh received his B.A. in
1991 and M.A. in 1995 in economics and management science from Cambridge
University in England. He is also a chartered accountant and was admitted as a
member of the Institute of Chartered Accountants in England and Wales in 1994.
Christopher J. Shephard - Chris Shephard was appointed vice president and
general manager of the Construction Instruments business area in July 2002 after
serving as division vice president of operations for Engineering and
Construction since Trimble's acquisition of Spectra Precision Group in July
2000. Prior to Trimble, Mr. Shephard served from 1998 to 2000 as Spectra
Precision's chief financial officer. Mr. Shephard also worked for more than
eight years at Booz Allen & Hamilton. Prior to Booz Allen & Hamilton, Mr.
Shephard spent three years at Copeland Corporation, a division of Emerson, in
their management-training program. Mr. Shephard received a B.A. in business
studies from Manchester Polytechnic in England in 1985 and an M.M. from the J.L.
Kellogg Graduate School of Management at Northwestern University, Evanston,
Illinois in 1990.
Alan R. Townsend - Alan Townsend has served as vice president and general
manager of the Field Solutions business area since November 2001. He also serves
as the managing director of Trimble Navigation New Zealand Ltd. for which he has
overall site responsibility. From 1995 to 2001, Mr. Townsend was general manager
of Mapping and GIS. Mr. Townsend joined Trimble in 1991 as the Manager of Trimble
Navigation New Zealand Ltd., a product development subsidiary of Trimble
Navigation Ltd. In 1995, he was appointed General Manager of the Mapping and GIS
systems group. In January 2001, he was promoted to Vice President and General
Manager of the Mapping and GIS Division and in November 2001 he assumed
responsibility for the Agriculture business. He is also serving as the Managing
Directormanager of
Trimble Navigation New Zealand Ltd. Prior to Trimble, Mr. Townsend served inheld a
variety of technical and senior management roles within the Datacom groupGroup of
companies in New Zealand including Managing Directormanaging director of Datacom Software
Research Ltd. from 1986 to 1991. Trimble acquired Datacom Software Research Ltd. in 1991. In addition, Mr. Townsend is a Directordirector of IT
Capital Ltd., a venture capital company based in Auckland, New Zealand; and a Director of Pulse Data Ltd., an electronics
company that produces aids for the visually impaired in Christchurch, New Zealand. He is
also a fellow of the New Zealand Institute of Management and a past president of
the New Zealand Software Exporters Association. Mr. Townsend received a B.Sc.B.S.c in
economics from the University of Canterbury in 1970.
Dennis L. Workman joined Trimble in 1995- Dennis Workman has served as Directorvice president and general
manager of Timing, where he
led the development of GPS-based precision timing products for the wireless
telecom market. In 1997, he was promotedTrimble's Component Technologies segment since September 1999. From
1998 to Director of Engineering for Software
and Component Technologies. In 1998,1999, Mr. Workman was appointed Senior Directorsenior director and Chief Technical Officerchief technical officer of the
newly formed Mobile and Timing Technologies (MTT) business group. Mr. Workmangroup, also servedserving
as General Managergeneral manager of Trimble's Automotive and Timing group, as well as Chief Technology Officer for MTT.group. In September 1999,1997, he was
appointed to servedirector of engineering for Software & Component Technologies. Mr. Workman
joined Trimble in 1995 as Vice President and General Managerdirector of the Component Technologies Division.newly created Timing vertical market.
Prior to Trimble, Mr. Workman held various senior-level technical positions at
Datum Inc. During his 9-yearnine year tenure at Datum, he spearheaded technology development for GPS products. Mr. Workman
also ledheld the developmentposition of board-level products unrelated to GPS for Datum's
Bancomm division. In 1978, Mr. Workman co-founded Bancomm, which manufactures
board-level and instrumentation products for precision timing and data logging
applications. In 1984, he was appointed President of Bancomm. Prior to Bancomm,
Mr. Workman co-founded Compression Labs in 1977 and served as Chief Technical
Officer. Mr. Workman began his career at Chicago Aerial Industries as lead
engineer. He then joined Goodyear Aerospace, now Loral, as program manager.CTO.
Mr. Workman received a B.S. in mathematics and physics from St. Mary's College
in 1967 and aan M.S. in electrical engineering from the Massachusetts Institute
of Technology in 1969.
Item 2.2 Properties
Trimble currentlyThe following table sets forth the significant real property that we own or
lease:
Location Segment(s) served Size in sq.feet Commitment
Sunnyvale, California All 150,000 Leased, expiring 2005
4 buildings
Huber Heights (Dayton), Ohio Engineering & Construction, 150,000 Owned, no encumbrances
Field Solutions 57,200 Leased, expiring in 2011
Distribution 32,800 Leased, month to month
Westminster, Colorado Engineering & Construction, 73,000 Leased, expiring 2006
Field Solutions 2 buildings
Corvallis, Oregon Engineering & Construction 20,000 Owned, encumbered by $1.7M mortgage
21,000 Leased, expiring 2006
Chandler, Arizona Mobile Solutions 11,500 Leased, expiring 2004
Toronto, Canada Portfolio Technologies 50,500 Leased, expiring 2004
Danderyd, Sweden Engineering & Construction 93,900 Leased, expiring 2005
Christchurch, New Zealand Engineering & Construction, 65,000 Leased, expiring 2011
Mobile Solutions, Field 2 buildings
Solutions
Jena, Germany Engineering & Construction 28,700 Leased, no expiration date
12 months notice
Kaiserslautern, Germany Engineering & Construction 26,000 Leased, expiring 2005
Raunheim, Germany Sales 28,700 Leased, expiring 2011
In addition, we lease a number of smaller offices around the world primarily for
sales functions. For financial information regarding obligations under leases,
an aggregate of 309,480 square feet in fourteen
buildings in Sunnyvale, California. Trimble uses approximately 165,000 square
feet, with approximately 30,000 square feet used for final assembly and shipping
of GPS-based products and the balance is subleased to others. The leases and
subleases on these buildings expire at various dates through 2005. We are
leasing two buildings in Westminster, Colorado totaling 73,000 square feet of
which Trimble uses the 28,000 square foot facility. It is expected that Trimble
will use approximately 10,000 square feetsee Note 10 of the 45,000 square foot building
withNotes to the balance subleased. The leases expire in 2006. We lease a
15
building in Chandler, Arizona totaling 26,039 square feet and the lease expires
in November 2002. Trimble leases 65,000 square feet in two buildings in
Christchurch, New Zealand, for software development. The leases expire in 2005
and 2010. We also lease a 57,200 square foot building in Huber Heights, Ohio
(our Dayton, Ohio facility) where 22,300 square feet are used in the
manufacturing of optical and laser based products, and the balance is used for
sales, marketing, research and development and administration. The lease expires
July 16, 2011. The Company owns an additional 150,000 square feet in Huber
Heights, Ohio of which approximately 96,500 square feet is used for
manufacturing and warehousing and the remainder are used for administration
activities. We also lease a 21,600 square foot building in Atlanta, Georgia
where approximately 2,100 square feet is used in manufacturing/warehouse space
and 19,500 square feet is used for sales, marketing, research and development
and administration and this lease expires in September 2002. Trimble leases a
93,900 square foot building in Danderyd, Sweden and a 26,000 square foot
building in Kaiserslautern, Germany and a 28,700 square foot building in Jena,
Germany. These buildings are primarily used for manufacturing. Trimble's largest
international sales office is leased in Raunheim, Germany (28,700 square feet).
In addition, our sales offices in Austria, Australia, Belgium, China, France,
Germany, Italy, Japan, Mexico, Netherlands, Philippines, Spain, Singapore,
Russia, United Kingdom, United Arab Emirates, and in various cities throughout
the United States are leased. Trimble's international office leases expire at
various dates through 2010. Certain of the leases have renewal options. Trimble
owns a two story, 20,000 square foot building in Corvallis, Oregon, used by our
Tripod Data Systems subsidiary, that is encumbered by a $1.9 million dollar
loan.Consolidated Financial Statements.
* We believe that our facilities are adequate to support our current and anticipated near-term future
operations.
Item 3.3 Legal Proceedings
The information with respect* We are from time to legal proceedings required by this item is
included in Part II,time a party to disputes or litigation incidental to our
business. We believe that our ultimate liability as a result of such disputes,
if any, would not be material to our overall financial position, results of
operations, or liquidity.
Item 8, Note 21 to the Consolidated Financial Statements,
hereof.
Item 4.4 Submission of Matters to a Vote of Security Holders
Not applicable.
16No matters were submitted to a vote of security holders during the fourth
quarter of 2003.
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters
Trimble's Common StockOn January 22, 2004, our Board of Directors approved a 3-for-2 split of all
outstanding shares of our common stock, payable March 4, 2004 to stockholders of
record on February 17, 2004. All shares and per share information presented has
been adjusted to reflect the stock split on a retroactive basis for all periods
presented.
Our common stock is quotedtraded on the Nasdaq National Market under the symbol
TRMB."TRMB." The following table below sets forth, forduring the quartersperiods indicated, the
range of high and
low closing salesper share bid prices for Trimble's Common Stock on the
Nasdaq National Market:
High Low
----- ----
2001:
Fourth $18.41 $12.89
Third 19.80 13.06
Second 21.25 12.75
First 28.50 16.50
2000:
Fourth $28.19 $18.00
Third 62.81 20.44
Second 50.75 18.44
First 30.25 19.00
As of March 22, 2002 there were 1,112 registered shareholders of record,
and the closing price of Trimble'sour common stock on that day was $15.95 per share as reported on the Nasdaq National
Market.
Trimble has never paid2003 2002
Sales Price Sales Price
Quarter Ended High Low High Low
------------- ---- --- ---- ---
First quarter $14.17 $8.68 $11.43 $7.84
Second quarter 18.50 12.43 12.33 9.98
Third quarter 19.57 14.97 10.00 6.85
Fourth quarter 25.60 13.49 9.65 5.35
As of January 2, 2004, there were approximately 1,055 holders of record of our
common stock.
We made the following sales of unregistered securities during the year ended
January 2, 2004.
Our merger agreement with LeveLite provides for us to make earn-out payments not
to exceed an aggregate $3.9 million (in common stock and cash dividendspayment) based on
itscertain future revenues and payments received. Upon a hearing before the
California Department of Corporations in which the terms and conditions of the
offer to the LeveLite shareholders were approved, the shares of Common Stock. We presently
intendStock to
retain earnings to finance our business, and do not intend to declare
any cash dividendsbe issued in the foreseeable future. Under the provisionstransaction were exempt from registration by reason of
qualification under Section 3(a)(10) of the Credit
Facilities,Securities Act of 1933, as amended.
We made the Company is allowed to pay dividends and repurchase shares of itsfollowing earn-outs in common stock up to 25%during fiscal 2003:
Date of net income for the prior fiscal year. See Note 11 to
the Consolidated Financial Statements contained in Item 8 below.
Recent SalesNumber of
Unregistered Securitiesissuance shares issued Price
-------- ------------- -----
January 22, 2003 35,994 $ 9.35
April 23, 2003 26,549 13.86
July 29, 2003 20,679 16.52
October 27, 2003 19,842 15.25
On May 31, 2001, affiliates of John Hancock Life Insurance Company
exercised warrants to acquire 400,000June 30, 2003, we issued 349,251 shares of common stock to Nikon-Trimble Co.
Ltd. We issued these shares as a contribution to capital in the formation of
Nikon-Trimble Co. Ltd. as a joint venture with Nikon Corporation. The shares
were valued at a purchase price
of $10.95 for aggregate cash proceeds of approximately $4.4 million. The
warrants were issued in a privately negotiated transaction in 1994. These
securities$16.95 per share and were exempt from registration under Section
4(2) of the Securities Act of 1933, as amended.
On December 21, 2001, we completed the first closing of a private placement
equity offering of 1,783,337 shares of our common stock at a price of $15.00 per
share to certain qualified investors for aggregate cash proceeds of
approximately $26.8 million. Additionally, we granted these investors five-year
warrants to purchase an additional 356,670 shares of stock, subject to certain
adjustments, at an exercise price of $19.475 per share.
On January 15, 2002, we completed the second closing of the private
placement equity offering, through which, we issued 1,280,004 additional shares
of our common stock at a price of $15.00 per share to certain qualified
investors for aggregate cash proceeds of approximately $19.2 million.
Additionally, we granted these investors five-year warrants to purchase an
additional 256,002 shares of common stock, subject to certain adjustments, at an
exercise price of $19.475 per share.
On March 20 2002, in connection with the amendment to the subordinated
note, the Company agreed to issue to Thermo Electron a five-year warrant to
purchase 200,000 shares of Trimble's common stock at an exercise price of
$15.11. Under the terms of the agreement, beginning on July 14, 2002, Trimble
will also issue five-year warrants to purchase 250 shares of common stock on a
quarterly basis for every $1 million of principal and interest outstanding until
the note is paid off. These warrants will be exercisable at a price equal to
Trimble's closing price on the last trading day of each quarter. Under the
five-year warrant, the total number of warrants issued will not exceed 376,233
shares.
17
These sales of securities in the private placement were deemed exempt from
the registration in reliance on Section 4(2) of the Securities Act, as amended,
or Regulation D promulgated thereunder, based on the nature of the
purchaserspurchaser and the nature of the arms-length negotiated transaction,transaction.
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 filingforeseeable future.
We are allowed to pay dividends and repurchase shares of a
Form D.our common stock up to
25% of net income in the previous fiscal year, under the existing terms of our
credit facilities.
Equity Compensation Plan Information
The following table sets forth, as of January 2, 2004, the total number of
shares subject tosecurities outstanding under our stock option plans, the warrants and theweighted average
exercise price of the
warrants are subject to adjustment as provided in the documents governing the
issuance of the warrants. The warrant exercise price and/orsuch options, and the number and kind
of shares purchasable upon the exercise of each warrant are subject to certain
adjustmentsoptions available for subdivisions or combinations of stock, dividends or
distributions in common stock, other stock or property, reorganizations,
consolidations or mergers, certain sales or issuances of securities below the
adjusted fair market value of a share of common stock (deemed to be $15.58
initially in the warrants), or liquidated damages in the event that the selling
shareholders are prohibited from selling their shares or shares purchasable upon
the exercise of their warrants for greater than a defined number of days.
We used the net proceeds of the sales for working capital purposes and to
pay down a portion of our outstanding debt.grant
under such plans.
Plan Category Number of securities to Weighted average exercise Number of securities remaining
be issued upon exercise price of outstanding available for future issuance
of outstanding options, options, warrants and under equity compensation plans
warrants and rights rights (excluding securities reflected
in column (a))
(a) (b) (c)
--- --- ---
Equity compensation plans approved by security holders:
Stock Option Plans.... 7,600,787 $13.61 1,643,555
Equity compensation plans
not approved by
security holders... - - -
Total..................... 7,600,787 $13.61 1,643,555
Item 6. Selected Financial Data
HISTORICAL FINANCIAL REVIEW
The following selected consolidated financial data should be read in conjunction
with " Management's"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and our consolidated financial statements and related notes
appearing elsewhere in this annual report. Historical results are not
necessarily indicative of future results. In particular, because the results of
operations and financial condition related to the Spectra Precision Group which
was acquired on July 14, 2000, Tripod Data Systems which was acquired on
November 14, 2000, and the acquired assets of Grid Data, Inc. on April 2, 2001,our acquisitions are included in
our consolidated statementConsolidated Statement of operationsOperations and balance sheetConsolidated Balance Sheets data
commencing on those respective acquisition dates, comparisons of our results of
operations and financial condition for periods prior to and subsequent to those
acquisitions are not indicative of future results.
SummaryWe have significant intangible assets on our Consolidated StatementsBalance Sheets that
include goodwill and other purchased intangibles related to acquisitions. At the
beginning of Operations Datafiscal 2002, we adopted Statement of Financial Accounting Standards
No. 141 ("SFAS 141"), Business Combinations, and No. 142, Goodwill and Other
Intangible Assets ("SFAS 142"). Application of the non-amortization provisions
of SFAS 142 significantly reduced amortization expense of purchased intangibles
and goodwill to approximately $8.3 million for the fiscal year 2002 from $29.4
million in fiscal year 2001.
January 2, January 3, December 28, December 29, December 31,
January 1, January 2,
Fiscal Years Ended 2004 2003 2001 2000 1999
1999 1998
- ------------------------------------------- ---------------- ---------------- ---------------- ---------------- ----------------
(In------------------ ---- ---- ---- ---- ----
(Dollar in thousands, of dollars, except per share data)
Revenue $ 540,903 $ 466,602 $ 475,292 $ 369,798 $ 271,364
Gross margin $ 268,323268,030 $ 266,442
Cost of sales 238,057 173,237 127,117 141,075 124,411
---------------- ---------------- ---------------- ---------------- ----------------
Gross Margin234,432 $ 237,235 $ 196,561 $ 144,247
$ 127,248 $ 142,031
Operating expenses
Research and development 62,881 46,520 36,493 45,763 38,242
Sales and marketing 103,778 79,901 53,543 61,874 57,661
General and administrative 37,407 30,514 33,750 33,245 27,424
Restructuring charges 3,599 -- -- 10,280 --
Amortization of goodwill and other
purchased intangibles 29,389 13,407 -- -- --
---------------- ---------------- ---------------- ---------------- ----------------
Total operating expenses 237,054 170,342 123,786 151,162 123,327
---------------- ---------------- ---------------- ---------------- ----------------
Operating incomeGross margin percentage 50% 50% 50% 53% 53%
Income (loss) from continuing operations 181 26,219 20,461 (23,914) 18,704
Nonoperating income (expense), net (10,459) 274 (2,041) 1,172
(21,773)
---------------- ---------------- ---------------- ---------------- ----------------
Income (loss) before income taxes
from continuing operations (21,592) (25,955)
15,760 20,735 19,876
Income tax provision 1,900 1,575 2,073 1,400 2,496
---------------- ---------------- ---------------- ---------------- ----------------
Net income (loss) from continuing
operations$ 38,485 $ 10,324 $ (23,492) $ 14,185 $ 18,662
$ (27,355) $ 17,380
---------------- ---------------- ---------------- ---------------- ----------------
Loss from discontinued operations
18
(net of tax) -- -- -- (5,760) (8,101)
Gain (loss) on disposal of discontinued operations
(net of tax) $ - $ - $ 613 --$ - $ 2,931 (20,279) --
---------------- ---------------- ---------------- ---------------- ----------------
Net income (loss) $ 38,485 $ 10,324 $ (22,879) $ 14,185 $ 21,593
$ (53,394) $ 9,279
================ ================ ================ ================ ================
Basic net incomePer common share: (1)
Income (loss) per share from continuing operations
- Basic $ (0.95)0.81 $ 0.600.24 $ 0.83(0.63) $ (1.22)0.40 $ 0.780.55
- Diluted $ 0.77 $ 0.24 $ (0.63) $ 0.37 $ 0.54
Gain on disposal of discontinued operations
(net of tax)
- Basic net$ - $ - $ 0.01 $ - $ 0.09
- Diluted $ - $ - $ 0.01 $ - $ 0.09
Net income (loss)
per share from
discontinued operations 0.02 -- 0.13 (1.16) (0.36)
---------------- ---------------- ---------------- ---------------- ----------------- Basic net income (loss) per share $ (0.93)0.81 $ 0.600.24 $ 0.96(0.62) $ (2.38)0.40 $ 0.42
================ ================ ================ ================ ================0.64
- Diluted $ 0.77 $ 0.24 $ (0.62) $ 0.37 $ 0.63
Shares used in calculating basic earnings
per share 24,727 23,601 22,424 22,470 22,293
================ ================ ================ ================ ================
Diluted net income (loss) per share
from continuing operations $ (0.95) $ 0.55 $ 0.82 $ (1.22) $ 0.75
Diluted net income (loss) per share
from discontinued operations 0.02 -- 0.13 (1.16) (0.35)
---------------- ---------------- ---------------- ---------------- ----------------
Diluted net income (loss) per share $ (0.93) $ 0.55 $ 0.95 $ (2.38) $ 0.40
================ ================ ================ ================ ================(1) 47,505 42,860 37,091 35,402 33,636
Shares used in calculating diluted earnings
per share 24,727 25,976 22,852 22,470 22,947
================ ================ ================ ================ ================(1) 50,012 43,578 37,091 38,964 34,278
Cash dividends per share $ --- $ --- $ --- $ --- $ --
================ ================ ================ ================ ================
Other Operating Data:
December 28, December 29, December 31, January 1, January 2,
Fiscal Years ended 2001 2000 1999 1999 1998
- ------------------------------------------- ---------------- ---------------- ---------------- ---------------- ----------------
(In thousand of dollars, except where
shown as a percentage of revenue)
Gross margin percentage 50% 53% 53% 47% 53%
Operating income (loss) percentage 0% 7% 8% (9%) 7%
EBITDA (1) 41,038 49,196 29,345 (13,637) 31,130
EBITDA percentage (1) 9% 13% 11% (5%) 12%
Depreciation and amortization 41,524 23,476 9,073 12,510 12,207
Cash provided (used) by operating
activities 25,093 19,835 23,625 6,968 (2,051)
Cash provided (used) by investing
activities (11,441) (167,180) (17,882) 22,484 (7,106)
Cash provided (used) by financing
activities (23,450) 138,957 2,656 (8,538) 6,437
Selected Consolidated Balance Sheet:
December 28, December 29, December 31, January 1, January 2,
As of 2001 2000 1999 1999 1998
- ------------------------------------------- ---------------- ---------------- ---------------- ---------------- ----------------
(In thousands)
Working capital (deficit) $ 19,304 $ (10,439) $ 111,808 $ 81,956 $ 133,434
Total assets $ 544,903 $ 441,656 $ 419,395 $ 488,628 $ 181,751
156,279 207,663
NoncurrentNon-current portion of long-termlong term debt 131,759 143,553 33,821 31,640 30,697
Shareholders' equity 138,489 134,943 100,796 74,691 139,483
- --------------------------------------------------------------------------------
(1) EBITDA consists of earnings from continuing operations before interest
income, interest expense, income taxes, depreciation and amortization. Our
EBITDA is presented because it is a widely accepted financial indicator.
EBITDA is not a measure of financial performance in accordance with
generally accepted accounting principles and should not be considered in
isolation or as an alternative to net income (loss) as an indicator of a
Company's performance or to cash flows from operating activities as a
measure of liquidity. Trimble's EBITDA may not be comparable to similarly
titled measures as defined by other companies.
19
The following table sets forth, for the periods indicated, certain
financial data as a percentage of total revenue:
December 28, December 29, December 31, January 1, January 2,
Fiscal Years ended 2001 2000 1999 1999 1998
Revenue 100% 100% 100% 100% 100%
Cost of sales 50% 47% 47% 53% 47%
------ ------ ------ ------ ------
Gross margin 50% 53% 53% 47% 53%
Operating expenses:
Research and development 13% 13% 13% 17% 14%
Sales and marketing 22% 22% 21% 23% 22%
General and administrative 8% 8% 12% 12% 10%
Restructuring charges 1% 0% 0% 4% 0%
Amortization of goodwill and
other purchased intangibles 6% 4% 0% 0% 0%
------ ------ ------ ------ ------
Total operating expense 50% 46% 46% 56% 46%
------ ------ ------ ------ ------
Operating income (loss) from
continuing operations 0% 7% 8% (9%) 7%
Nonoperating income (expense), net (5%) (3%) 0% (1%) 0%
------ ------ ------ ------ ------
Income (loss) before income taxes
from continuing operations (5%) 4% 8% (10%) 7%
Income tax provision 0% 0% 1% 1% 1%
------ ------ ------ ------ ------
Net income (loss) from
continuing operations (5%) 4% 7% (10%) 7%
------ ------ ------ ------ ------
Loss from discontinued
operations, (net of tax) 0% 0% 0% (2%) (3%)
Gain (loss) on disposal of
discontinued operations (net of tax) 0% 0% 1% (8%) 0%
------ ------ ------ ------ ------
Net income (loss) (5%) 4% 8% (20%) 3%
====== ====== ====== ====== ======liabilities $ 85,880 $ 114,051 $ 131,759 $ 143,553 $ 33,821
(1) Earnings per share and shares used in calculating earnings per share have
been restated to reflect a three-for-two stock split in February 2004.
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations
For a more complete understanding of our financial condition and results of
operations, and some of the risks that could affect future results, see "Risk
Factors" beginning on page 34. This sectionThe following discussion should also be read in conjunction with the Consolidated Financial Statementsconsolidated
financial statements and Supplementary Data,the related notes. The following discussion contains
forward-looking statements that reflect our plans, estimates and beliefs. Our
actual results could differ materially from those discussed in the
forward-looking statements. Factors that could cause or contribute to these
differences include, but are not limited to, those discussed below and those
listed under "Risks and Uncertainties."
EXECUTIVE LEVEL OVERVIEW
We are a global provider of complete, integrated solutions that provide a
seamless flow of position information both in the field and between the field
and back office. To do this, we utilize advanced positioning technologies
(including GPS, optical, inertial and laser technologies) combined with wireless
communications and applications software, to get data points with accuracies
down to several millimeters. This can increase productivity through time and
cost savings, as the need for labor is reduced, rework from mistakes is less
frequent, and the time to complete a job is shortened.
Our solutions businesses, Engineering and Construction, Field Solutions, and
Mobile Solutions make up over 80% of our revenue. We believe our strength in
these businesses stems from our ability to bring innovative products or
solutions to the market, as well as effectively train and manage a global,
third-party distribution channel that is proficient in selling technology
solutions into markets that have historically utilized manual and low-tech
processes.
In 2003 we extended our market and product capabilities through internal
development, acquisitions, and alliances. In July, we established a joint
venture with Nikon Corporation, which immediately followwill extend our presence in the global
construction positioning market. Our acquisitions of Applanix in July and MENSI
in December added important new technologies which will enable us to develop new
applications or broaden current application solutions. We also announced an
alliance with CNH Global, which will significantly extend our distribution reach
for our Autopilot agricultural product line.
Our other strategic business, Component Technologies, is different from the
"solution businesses", as it seeks to either provide GPS technology directly to
third parties, such as OEM's and system integrators, or to integrate GPS into
other technologies, such as wireless. These products allow for higher
functionality and therefore, a higher average selling price for our offerings.
Through greater integration we see potential future growth opportunities. For
example, our recently announced TrimTrac product integrates GPS and GSM cellular
technologies into a fully functional location device. It establishes a new asset
tracking or security capability at an aggressive price point and opens up a new
class of customers and applications which were previously not available to us.
In 2003 we positioned ourselves in newer markets that will serve as important
sources of future growth. Our efforts in China, India, Russia, Korea and Eastern
Europe all reflected improving financial results, with the promise of more in
the future.
With our improving profitability, we now have the opportunity to re-emphasize
revenue growth. We expect this section.growth to come from the continuation of several
trends that we saw in 2003. These trends include further penetrating existing
markets with current and new products, continued geographic expansion into
emerging markets such as Russia, China, India, Korea and Eastern Europe, taking
advantage of market consolidation, improving competitive position due to
offering complete solutions with a proficient dealer channel, and entering new
markets with new products such as our TrimTrac (tm) locator and Recon products,
fleet management services, and our inertial/GPS positioning and orientation
systems acquired as part of Applanix.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
Trimble's discussion and analysisOur accounting policies are more fully described in Note 1 of its financial condition and resultsthe Notes to the
Consolidated Financial Statements. The preparation of
operations are based upon our consolidated financial statements which have been
preparedand
related disclosures in accordanceconformity with accounting principles generally accepted
in the United States. The preparation of these financial statementsStates requires us to make estimatesjudgments, assumptions, and judgmentsestimates
that affect the amounts reported amounts of assets, liabilities,
revenuesin the Consolidated Financial Statements and
expenses, and related disclosure of contingent assets and
liabilities. On an on-going basis, we evaluate our estimates, including those
relatedaccompanying Notes to product returns, doubtful accounts, inventories, investments,
intangible assets, income taxes, warranty obligations,
20
restructuring costs, and contingencies and litigation.the Consolidated Financial Statements. We base our estimates on
historical experience and on various other assumptions that are believedconsider the
accounting polices described below to be reasonable under the circumstances, the results of which form the basis for
making judgments about the amount and timing of revenue and expenses and the
carrying values of assets and liabilities that are not readily apparent from
other sources. Actual results may differ from these estimates under different
assumptions or conditions.
We believe the followingour critical accounting polices. These
critical accounting policies affect our more
significantare impacted significantly by judgments,
assumptions, and estimates used in the preparation of our consolidated
financial statements.the Consolidated Financial
Statements, and actual results could differ materially from the amounts reported
based on these policies.
Revenue Recognition
Trimble's revenues are recorded in accordance withWe recognize product revenue when persuasive evidence of an arrangement exists,
delivery has occurred, the Securitiesfee is fixed or determinable, and Exchange Commission's (SEC) Staff Accounting Bulletin (SAB) No. 101, " Revenue
Recognition". We require the following: (i) execution of a written customer
order, (ii) deliverycollectibility is
reasonably assured. In instances where final acceptance of the product (iii) fee is
fixed and determinable, and
(iv) collectibility of the proceeds is probable. We recognize revenue from
product sales when the products are shipped tospecified by the customer title has
transferred,or is uncertain, revenue is deferred until all
acceptance criteria have been met. Our total deferred revenue was $7.7 million
and no significant obligations remain. The Company defers revenue
if there$6.0 million as of January 2, 2004 and January 3, 2003, respectively.
Revenue is uncertainty about customer acceptance. The Company reduces product
revenuereduced by a sales return reserve as described under "Allowance for
estimated customer returnsDoubtful Accounts and for any discounts that may occur
under programs the Company has with its customers and partners.
Our shipment terms for domestic orders are typically FOB shipping point.
Our international orders are typically shipped FOB destination, and accordingly,
international orders are not recognized as revenue until the product is
delivered and title has transferred.
RevenuesSales Returns."
Revenue from purchased extended warranty and support agreements areis deferred and
recognized ratably over the term of the warranty/support period. Substantially
all technology licenses and research revenue have consisted of initial license
fees and royalties, which were recognized when earned, provided Trimblewe had no
remaining obligations.
Sales
Contracts and customer purchase orders are generally used to determine the
existence of an arrangement. Shipping documents and customer acceptance, when
applicable, are used to verify delivery. We assess whether the fee is fixed or
determinable based on the payment terms associated with the transaction and
whether the sales price is subject to refund or adjustment. We assess
collectibility based primarily on the creditworthiness of the customer as
determined by credit checks and analysis, as well as the customer's payment
history.
Our shipment terms for US orders, and international orders fulfilled from our
European distribution center are typically FCA (Free Carrier) shipping point,
except certain sales to US government agencies which are shipped FOB
destination. FCA shipping point means that we fulfill the obligation to deliver
when the goods are handed over, cleared for export, and into the charge of the
carrier named by the buyer at the named place or point. If no precise point is
indicated by the buyer, we may choose within the place or range stipulated where
the carrier will take the goods into carrier's charge.
Other international orders are shipped FOB destination, which means these
international orders are not recognized as revenue until the product is
delivered and title has transferred to the buyer or FCA shipping point. FOB
destination means that we bear all costs and risks of loss or damage to the
goods up to that point. .
Revenue to distributors and resellers areis recognized upon shipment providing
that there is evidence of such an arrangement through a distribution agreement
or purchase order, title has transferred, no remaining performance obligations
exist, the price and terms of the sale are fixed and collection is probable.delivery, assuming all
other criteria for revenue recognition have been met. Distributors and resellers
do not have a right of return.
When a sale involves multiple elements, the entire fee from the arrangement is
allocated to each respective element based on its relative fair value and
recognized when revenue recognition criteria for each element are met. The
Company'samount of product revenue allocated to an individual element is limited to the
lesser of its relative fair value or the amount not contingent on our delivery
of other elements under the arrangement, regardless of the probability of our
performance.
Our software arrangements generally consist of a license fee and post
contractpost-contract
customer support (PCS). The Company hasWe have established vendor specificvendor-specific objective evidence
(VSOE) of fair value for itsour PCS contracts based on the price
of the renewal rate. The
remaining value of the software arrangement is allocated to the license fee
using the residual method, whichand revenue is primarily recognized when the software
has been delivered and there are no remaining obligations. Revenue from PCS is
recognized ratably over the periodterm of the PCS agreement.
Allowance for Doubtful Accounts Trimble maintains allowancesand Sales Returns
Our accounts receivable balance, net of allowance for doubtful accounts, was
$96.2 million as of January 2, 2004, compared with $77.6 million as of January
3, 2003. The allowance for doubtful accounts as of January 2, 2004 was $10.0
million, compared with $9.9 million as of January 3, 2003. We evaluate the
collectibility of our trade accounts receivable based on a number of factors. In
circumstances where we are aware of a specific customer's inability to meet its
financial obligations to us, a specific allowance for bad debts is estimated and
recorded which reduces the recognized receivable to the estimated amount we
believe will ultimately be collected. In addition to specific customer
identification of potential bad debts, bad debt charges are recorded based on
our recent past loss history and an overall assessment of past due trade
accounts receivable amounts outstanding.
A reserve for sales returns is established based on historical trends in product
return rates experienced in the ordinary course of business. The reserve for
sales returns as of January 2, 2004 and January 3, 2003 included $3.3 million
and $2.7 million, respectively, for estimated losses
resultingfuture returns that were recorded
as a reduction of our accounts receivable and revenue. If the actual future
returns were to deviate from the inability of its customers to make required payments. Ifhistorical data on which the financial condition ofreserve had been
established, our customers were to deteriorate, resulting in an
impairment of their ability to make payments, additional allowances mayrevenue could be required.adversely affected.
Inventory Valuation
InventoryOur inventory balance was $70.8 million as of January 2, 2004, compared with
$61.1 million as of January 3, 2003. Our inventory allowances as of January 2,
2004 were $25.9 million, compared with $25.2 million as of January 3, 2003. Our
inventory is recorded at the lower of cost or market. We use a standard cost
accounting system to value inventory and these standards are reviewed a minimum
of once a year and multiple times a year in our most active manufacturing
plants. We adjust the inventory value for estimated excess and obsolete
inventory based on management'sour assessment of future demand and market conditions. If
actual future demand or market conditions are less favorable than those
projected by management,us, additional inventory write-downs may be required.
21
GoodwillIncome Taxes
Deferred taxes are provided on a liability method whereby deferred tax assets
are recognized for deductible temporary differences and Other Purchased Intangible Assets
Trimble has significant tangibledeferred liabilities are
recognized for taxable temporary differences. Temporary differences are the
differences between the reported amounts of assets and intangibleliabilities and their tax
bases. Deferred tax assets on its balance sheetare reduced by a valuation allowance when it is
determined to be more likely than not that include goodwillsome portion or all of the deferred
tax assets will not be realized. In evaluating the need for a valuation
allowance, we consider future taxable income, resolution of tax uncertainties
and prudent and feasible tax planning strategies. In fiscal year 2003, we have
recorded a deferred tax asset of $7.6 million that is more likely than not to be
realized. We need to generate $20.0 million of future US income to realize the
deferred tax asset.
If we determine that we would not be able to realize all or part of our deferred
tax assets in the future, an adjustment to the carrying value of the deferred
tax assets would be charged to income in the period in which such determination
is made.
Our effective income tax rates from continuing operations for fiscal years 2003,
2002 and 2001 were (8%), 25% and (9%), respectively. The 2002 and 2001 income
tax rates differ from the US federal statutory rate of 35%, due primarily to
non-US taxes and the inability to realize the benefit of net operating losses.
The 2003 income tax rate is less than the US federal statutory rate, due
primarily to the realization of benefits from net operating losses and other
purchased intangibles relatedpreviously reserved deferred tax assets.
Goodwill Impairment
Goodwill as of January 2, 2004 was $241.4 million, compared with $205.9 million
as of January 3, 2003. We perform goodwill impairment tests on an annual basis
for each reporting unit. Based on impairment tests performed, there was no
impairment of our goodwill in fiscal 2003 and 2002.
For goodwill, the annual impairment evaluation includes a comparison of the
carrying value of the reporting unit (including goodwill) to acquisitions.
The valuation and classificationthat reporting
unit's fair value. If the reporting unit's estimated fair value exceeds the
reporting unit's carrying value, no impairment of thesegoodwill exists. If the fair
value of the reporting unit does not exceed the unit's carrying value, then an
additional analysis is performed to allocate the fair value of the reporting
unit to all of the assets and the assignmentliabilities of useful
amortization lives involve significant judgmentsthat unit as if that unit had been
acquired in a business combination and the fair value of the unit was the
purchase price. If the excess of the fair value of the reporting unit over the
fair value of the identifiable assets and liabilities is less than the carrying
value of the unit's goodwill, an impairment charge is recorded for the
difference.
We cannot predict the occurrence of certain future events that might adversely
affect the reported value of goodwill. Such events include, but are not limited
to, strategic decisions made in response to economic and competitive conditions,
the impact of the economic environment on our customer base, or a material
negative change in our relationships with significant customers.
Accounting for the Long-Lived Assets Including Intangibles Subject to
Amortization
Depreciation and amortization of our long-lived assets is provided using
straight-line methods over their estimated useful lives. Changes in
circumstances such as the passage of new laws or changes in regulations,
technological advances, changes to our business model, or changes in the capital
strategy could result in the actual useful lives differing from initial
estimates. In those cases where we determine that the useful life of a
long-lived asset should be revised, we will depreciate the net book value in
excess of the estimated residual value over its revised remaining useful life.
Factors such as changes in the planned use of estimates. The
testing of these intangibles under established accounting guidelinesequipment, customer attrition,
contractual amendments, or mandated regulatory requirements could result in
shortened useful lives.
Long-lived assets and asset groups are evaluated for impairment also requires significant use of judgment and assumptions. Trimble's
assets are tested and reviewed for impairment on an ongoing basis under the
established accounting guidelines. Changeswhenever events
or changes in business conditions could
potentially require future adjustments to asset valuations.
If facts and circumstances indicate that the goodwill,carrying amount of such assets may
not be recoverable. The estimated future cash flows are based upon, among other
intangible
things, assumptions about expected future operating performance and may differ
from actual cash flows. Long-lived assets or propertyevaluated for impairment are grouped
with other assets to the lowest level for which identifiable cash flows are
largely independent of the cash flows of other groups of assets and equipment may be impaired, an evaluationliabilities.
If the sum of continuing
value would be performed. If an evaluation is required, the estimated futureprojected undiscounted cash flows associated with these(excluding interest) is less
than the carrying value of the assets, wouldthe assets will be compared to their
carrying amount to determine if a writewritten down to fair market value or discounted
cash flow value is required.
Warranties
We provide for the
estimated fair value in the period in which the determination is made.
Warranty Costs
The liability for product warranties was $5.1 million as of January 2, 2004,
compared with $6.4 million as of January 3, 2003. (See Note 1 of the Notes to
the Consolidated Financial Statements for further information regarding our
warranty liability.) The warranty periods for our products are generally between
one and three years from date of shipment. Selected military programs may
require extended warranty periods up to 5.5 years, certain TDS products have a
five year or 90-day warranty period, and certain Nikon products have a five year
warranty period. We accrue for warranty costs as part of our cost of sales based
on associated material costs and technical support labor costs. Material cost is
primarily estimated based upon historical trends in the volume of product
warranties atreturns within the time revenue
is recognized.warranty period and the cost to repair or replace the
equipment.
While we engage in extensive product quality programs and processes, including
actively monitoring and evaluating the quality of our component suppliers, our
warranty obligation is affected by product failure rates, material usage, and
service delivery costs incurred in correcting a product failure. Should actual
product failure rates, material usage, or service delivery costs differ from our
estimates, revisions to the estimated warranty accrual and related costs may be
required.
Stock Compensation
We apply Accounting Principles Board Opinion No. 25, "Accounting for Stock
Issued to Employees" (APB 25) and related interpretations in accounting for our
stock option plans and stock purchase plan. Accordingly, we do not recognize
compensation cost for stock options granted at a price equal to fair market
value. Note 13 of the Notes to the Consolidated Financial Statements describes
the plans we operate, and Note 1 of the Notes to the Consolidated Financial
Statements contains a summary of the pro forma effects to reported net income
(loss) and earnings (loss) per share for fiscal 2003, 2002, and 2001 as if we
had elected to recognize compensation cost based on the fair value of the
options granted at grant date.
Investment in Joint Ventures
We have adopted the equity method of accounting for our investments in the
Caterpillar and Nikon joint ventures. This requires that we record our share of
the joint ventures' profits or losses in a given fiscal period. See Note 3 of
the Notes to the Consolidated Financial Statements for joint venture accounting.
Upon the formation of our Caterpillar joint venture in April 2002, we received a
cash distribution of $11.0 million. We have elected to treat the cash
distribution as a deferred gain, being amortized to the extent that losses are
attributable from the Caterpillar joint venture under the equity method
described above. When and if the joint venture is profitable on a sustainable
basis and future operating losses are not anticipated, then we will recognize as
a gain, the portion of the $11.0 million, which is unamortized. To the extent
that it is possible that we will have any future-funding obligation relating to
the Caterpillar joint venture, then the relevant amount of the $11.0 million
will be deferred until such time that the funding obligation no longer exists.
As of January 2, 2004, the balance of the unamortized deferred gain was $9.8
million.
RECENT BUSINESS DEVELOPMENTS
*Nikon-Trimble Joint Venture
On March 15, 2002,28, 2003, Trimble and Caterpillar Inc. announced that they have
reached a definitiveNikon Corporation entered into an agreement to
form Caterpillar Trimble Control Technologies
LLC. Thea joint venture 50 percent owned byin Japan, Nikon-Trimble Co., Ltd. ("Nikon-Trimble"), which
would assume the operations of Nikon Geotecs Co., Ltd., a Japanese subsidiary of
Nikon Corporation and Trimble and 50 percent owned by
Caterpillar, will develop the next generationJapan KK, our Japanese subsidiary. Nikon-Trimble
began operations in July of advanced electronic guidance
and control products for earthmoving machines in the construction, mining and
waste industries. Caterpillar Trimble Control Technologies LLC will be based in
Dayton, Ohio and is expected to begin operations on April 1, 2002.2003.
Under the terms of the Nikon-Trimble agreement, CaterpillarNikon contributed $14.5(Y)1.2 billion
(approximately US$10 million on June 30, 2003) in cash, and selected
technology, and Trimblewhile we contributed
select existing machine control product
technologies valued at $25.5 million. Additionally, both companies have licensed
patents and other intellectual property from their portfolios to the joint
venture. Also, Trimble has received a special cash distribution of $11(Y)500 million from the joint venture.
The joint venture's intention is to develop machine control products that
integrate site design information with accurate positioning technology to
automatically control blades and other machine functions This machine control
technology will combine historical Trimble positioning technology with
capability gained through the acquisition of Spectra Precision.
Effective(approximately US$4.1 million as of April 2, 2001, Trimble completed the acquisition of certain
assets of Grid Data, Inc. ("Grid Data"), an Arizona corporation, for
approximately $3.5 millionJune 30, 2003) in cash and
the assumption(Y)700 million of certain liabilities. In
addition, Trimble may make certain earn-out payments based upon the completion
of certain business milestones. If the first milestone is achieved by April 2,
2002, 218,352 shares of Trimbleour common stock will be paid out to the
shareholders of Grid Data. If the first milestoneor 349,251 shares valued at approximately
US$5.9 million on June 30, 2003. Nikon-Trimble purchased certain tangible and
intangible assets from Nikon Geotecs Co., Ltd., and Trimble Japan KK.
Nikon-Trimble is achieved50% owned by us and a second
milestone is completed50% owned by October 2, 2003, an additional 141,928 shares of
Trimble common stock will be paid out. However, if at the time the second
milestone is achieved Trimble's common stock is at a price less than the price
per share as defined in the agreement, then Trimble may, at its option, pay
$3.25 million in cash or $3.25 million in Trimble common stock, valuedNikon, with equal voting
rights for both. Nikon-Trimble focuses on the date that the second milestone is achieved. The additional consideration, if
earned,design and manufacture of
surveying instruments including mechanical total stations and related products.
In Japan, this joint venture will be recordeddistribute Nikon's survey products as additional goodwill. As of the date of this report,
it was uncertain whether the additional consideration was earned.
On March 6, 2001, Trimble sold certain product lines of its Air Transport
Systems business, to Honeywell International Inc. for approximately $4.5 million
in cash. The Air Transport System business was not material to the
22
Company's financial resultswell as
our GPS survey products and was not considered strategic to Trimble's future
operations. Under the asset purchase agreement, Honeywell purchased the Air
Transport Systems' product lines that included the HT 1000, HT 9000, HT 9100 and
Trimble's TNL 8100. As part of an alliance that began in 1995, Trimble and
Honeywell jointly developed, manufactured, marketed, and sold the HT product
line. These products are installed in many commercial aircraft and major
airlines around the world for GPS based navigation. During the third quarter of
fiscal 2001 Trimble also sold off other related product lines and discontinued
its manufacturing operations in Austin, Texas. These actions resulted in a loss
on disposal of approximately $113,000, which is included in nonoperating income
(expense) for fiscal 2001. The Company also incurred severance costs of
approximately $1,724,000 which is included in restructuring charges related to
the termination of employees associated with the product lines disposed of in
fiscal 2001.
Trimble acquired the Spectra Precision Group on July 14, 2000, which
resulted in Trimble's emergence as a leader in the Engineering and Construction market. An integration team was immediately created to manageproducts,
including robotic total stations. Outside Japan, we will be the transition,
reduce risks, and achieve approximately $20 millionexclusive
distributor of annualized cost
synergies. Management believes the integration efforts have proceeded in
accordance with the plans. The sales force has been integrated, the global
distribution channel has been extended, theNikon survey and machine guidance product
lines have been rationalized, redundant development has been eliminated and
redundant sales and service facilities have been consolidated. Overall, these
actions have resulted in approximately $19 million of annualized cost synergies
implemented by the end of fiscal 2001.construction products.
* We expect these cost synergiesthe joint venture to primarily benefitenhance our salesmarket position in survey
instruments through geographic expansion and marketing expenses, but operational efficienciesmarket penetration. Nikon's line of
instruments will also reducebroaden our administrative expenses,survey and costs of goods sold with the
elimination of duplicateconstruction product lines,portfolio and consolidation of purchasing and
manufacturing operations. We have realized to date approximately $13 million of
these cost reductions, primarily in sales and marketing expenses, and expect to
realize the balance in fiscal 2002. The remaining savings are expected to
benefit our sales and marketing expenses, as well as favorably impact our gross
margins through increased manufacturing efficiencies. Additional cost reduction
activities are planned for fiscal 2002 such as further consolidation of sales
and service facilities primarily in Europe, which are expected to
enable us to meetbetter access emerging markets. It will also provide us with the
original $20 million estimateability to sell our GPS and robotic technology to existing Nikon customers.
Additionally, we expect to improve our market position in cost synergies.
RESULTS FROM CONTINUING OPERATIONS EXCLUDING INFREQUENT, AND ACQUISITION RELATED
ADJUSTMENTS
Income (loss) from continuing operations include certain infrequentJapan because of the
Nikon-Trimble distribution network.
Acquisitions
Applanix Corporation
* On July 7, 2003, we acquired privately held Applanix Corporation, a Canadian
developer of systems that integrate inertial navigation system and GPS
technologies. We expect the Applanix acquisition related charges thatto extend our technology
portfolio and enable increased robustness and capabilities in our future
positioning products. Applanix's performance is reported under our Portfolio
Technologies segment.
MENSI S.A.
* On December 9, 2003, we acquired privately held MENSI S.A., a French developer
of terrestrial 3D laser scanning technology. We expect the MENSI acquisition to
enhance our technology portfolio and expand our product offerings. MENSI's
performance is reported under our Engineering and Construction segment.
The combined purchase price of Applanix and MENSI was approximately $25 million.
TracerNET Corporation
* On March 5, 2004, we acquired privately held TracerNET Corporation of
Virginia, a provider of wireless fleet management believes are not reflective of
on-going operations. The following table, which does not purportsolutions. We expect the
TracerNET acquisition to present the
results of continuing operations in accordance with generally accepted
accounting principles, reflects results of operations to exclude the effects of
such items as follows (in thousands):
23
December 28, December 29, December 31,
Fiscal Years Ended 2001 2000 1999
- ------------------------------------------------------------------------------------------------------------
Income (loss) before income taxes from continuing
Operations $(21,592) $15,760 $20,735
Infrequent and acquisition-related charges:
Loss on sale of business (Other income and
expense) 113 -- --
Amortization of goodwill and other purchased
intangibles 29,389 13,407 --
Restructuring charges 3,599 -- --
Gain on sale of minority investment (Other income
and expense) (270) (1,274) --
Inventory purchase accounting adjustment (Cost of
sales) -- 4,600 --
Debt extinguishment costs (Interest income and
expense) -- 1,185 --
Write down of investment
(Other income and expense) 136 -- --
Facility relocation costs - Boulder, Colorado
(General and administrative) -- 917 --
--------------- --------------- -------------
Total infrequent and acquisition-related charges 32,967 18,835 20,735
--------------- --------------- -------------
Adjusted income before income taxes from continuing
operations 11,375 34,595 20,735
Income tax provision 1,900 3,460 2,073
-------------- --------------- -------------
Adjusted net income $ 9,475 $31,135 $18,662
============== =============== =============
offer more diverse and complete fleet management
solutions. TracerNET's performance will be reported under our Mobile Solutions
segment.
RESULTS OF CONTINUING OPERATIONS
In fiscal 2001, the Company's annual revenues from continuing operations
increased to $475.3 million from $369.8 million in fiscal 2000 and $271.4
million in fiscal 1999. In fiscal 2001, the Company had net loss from continuing
operations of $23.5 million, or $0.95 diluted loss per share, compared to a net
income from continuing operations of $14.2 million, or $0.55 diluted earnings
per share, in fiscal 2000 and $18.7 million or $0.82 diluted earnings per share
in fiscal 1999. The total net loss for fiscal 2001, including discontinued
operations, was $22.9 million, or $0.93 diluted loss per share, compared to a
total net income for fiscal 2000, including discontinued operations, of $14.2
million, or $0.55 diluted earnings per share and $21.6 million, or $0.95 diluted
earning per share for fiscal 1999. Summary of financial data by business segment
is as follows:
The following table shows revenue and operating income by segment for the
periods indicated and should be read in conjunction with the narrative
descriptions below. Operating income by segment excludes unallocated corporate
expenses which are comprised primarily of general and administrative costs,
amortization of goodwill and other purchased intangibles as well as other items not controlled by
the business segment. 24Segment operating income for fiscal 2002 and fiscal 2001
have been restated to reflect the allocations of certain corporate expenses so
as to be comparable with the allocation methodology in fiscal 2003.
At the beginning of fiscal 2003, we realigned two of our reportable segments.
The following table shows restated revenue and operating income by segment to
reflect this realignment. The Tripod Data Systems business is now included in
the Engineering and Construction segment and was previously included in the
Portfolio Technologies segment.
% of % of % ofJanuary 2, January 3, December 28, Total December 29, Total December 31, Total
Fiscal Years Ended 2004 2003 2001
Revenue 2000 Revenue 1999 Revenue
- ----------------------------------- --------------- ----------- ---------------- ----------- --------------- ----------------------------- ---- ---- ----
(Dollars in thousands)
Total consolidated revenue $540,903 $466,602 $475,292
Total consolidated operating income $83,586 $62,320 $62,306
Engineering and Construction
Revenue $ 303,944 64% $ 195,150 53% $ 108,536 40%$367,058 $319,615 $317,849
Segment revenue as a percent of total revenue 68% 68% 67%
Operating income from continuing operations 51,625 43,937 37,223
Segment60,664 53,453 49,849
Operating income as a percentagepercent of segment revenue 17% 23% 34%
Agriculture17% 16%
Field Solutions
Revenue 24,632 5% 26,024 7% 12,837 5%79,879 67,259 68,519
Segment revenue as a percent of total revenue 15% 14% 14%
Operating income 14,500 9,676 11,349
Operating income as a percent of segment revenue 18% 14% 17%
Mobile Solutions
Revenue 12,981 8,486 13,791
Revenue as a percent of total consolidated revenue 2% 2% 3%
Operating loss (6,452) (12,039) (9,990)
Operating loss as a percent of segment revenue (50%) (142%) (72%)
Component Technologies
Revenue 64,193 59,755 58,083
Segment revenue as a percent of total revenue 12% 13% 12%
Operating income 16,560 10,673 10,359
Operating income as a percent of segment revenue 26% 18% 18%
Portfolio Technologies
Revenue 16,792 11,487 17,050
Segment revenue as a percent of total revenue 3% 2% 4%
Operating income (loss) from continuing (617) 4,254 2,407
operations
Segment(1,686) 557 738
Operating income (loss) as a percentagepercent of segment
revenue (3%(10%) 16% 19%
Fleet and Asset Management
Revenue 57,678 12% 65,099 18% 67,271 25%
Segment Operating income
from continuing operations 4,810 15,211 14,677
Segment Operating income
as a percentage of segment
revenue 8% 23% 22%
Component Technologies
Revenue 58,083 12% 60,230 16% 58,660 22%
Segment Operating income
from continuing operations 10,882 14,850 15,055
Segment Operating income
as a percentage of segment
revenue 19% 25% 26%
Portfolio Technologies
Revenue 30,955 7% 23,295 6% 24,060 9%
Segment Operating income
from continuing operations 803 (1,540) (2,598)
Segment Operating income
as a percentage of segment
revenue 3% (7%) (11%)
Total Revenue $475,292 $369,798 $271,364
Total Segment Operating
income from continuing
operations $67,503 $76,712 $66,7645% 4%
25
A reconciliation of Trimble'sour consolidated segment operating income from
continuing operations(loss) to
consolidated income (loss) before income taxes from
continuing operations follows:
January 2, January 3, December 28, December 29, December 31,
Fiscal Years Ended 2004 2003 2001
2000 1999
- ------------------------------------------------------- ---------------- ----------------- ---------------------------------- ---- ---- ----
(In thousands)
Consolidated segment operating income from
continuing operations $ 67,50383,586 $ 76,71262,320 $ 66,76462,306
Unallocated corporate expense (34,334) (37,086) (46,303)(20,320) (19,098) (29,137)
Amortization of goodwill and other purchased intangiblesintangible assets (7,312) (8,300) (29,389) (13,407) -
Restructuring charges (3.599) - -(2,019) (1,099) (3,599)
Non-operating expense, net (18,350) (19,999) (21,773)
-------- -------- --------
Consolidated income (expense), net (21,773) (10,459) 274
---------------- ----------------- ----------------
Income (loss) from continuing operations before income taxes $ 35,585 $ 13,824 $ (21,592)
$ 15,760 $ 20,735
================ ================= ======================== ========= ==========
Revenue.
Basis of Presentation
We have a 52-53 week fiscal year, ending on the Friday nearest to December 31,
which for fiscal 2003 was January 2, 2004. Fiscal 2003 was a 52-week year and
fiscal 2002 a 53-week year. As a result of the extra week in fiscal 2002,
year-over-year results are not exactly comparable. Thus, due to the inherent
nature of adopting a 52-53 week fiscal year, the Company, analysts,
shareholders, investors, and others will have to make appropriate adjustments to
any analysis performed when comparing our activities and results in fiscal years
that contain 53 weeks to those that contain the standard 52 weeks. Fiscal year
2001 comprised 52 weeks.
Impact of Weaker US Dollar on Operating Income in Fiscal 2003
The depreciation of the US dollar versus major European currencies positively
impacted revenues by approximately $15.3 million in fiscal 2003 compared with
fiscal 2002. As a result of our significant manufacturing, distribution,
research and development, and selling expenses incurred outside of the US, the
weaker US dollar negatively impacted our operating income by approximately $5.9
million in fiscal 2003.
Revenue
In fiscal 2001,2003, total revenue increased by $105.5$74.3 million or 28.5%15.9% to $475.3$540.9
million from $369.8$466.6 million in fiscal 2000.2002. The increase in fiscal 2003 was
primarily due to stronger performances in all of our operating segments driven
by the new product offerings, increased acceptance of our products in the
markets we serve, expanded distribution and selective acquisitions, as well the
positive impact of the weaker US dollar on revenues generated in foreign
currencies, primarily the Euro. Total revenue increased in fiscal 20002002 decreased by $98.4$8.7
million or 36.3%1.8% to $466.6 million from $271.4$475.3 million in fiscal 1999.
Engineering and Construction
Revenue
Products within the Engineering and Construction segment include surveying,
general construction, site preparation, excavation, road and runway
construction, interior construction and underground construction systems.
Engineering and Construction revenues increased by $108.8 million or 56% in
fiscal 2001, over fiscal 2000. The increase in 2001 revenue compared to 2000 was
due to the following factors:
o In fiscal 2001 Trimble experienced a full year of revenues generated from
the purchase of the Spectra Precision Group compared to approximately
half-year results in fiscal 2000, which accounted for approximately $85.0
million.
o Strong demand for land survey product line primarily
due to the introductionreduction of the "Trimble ToolboxTM" in first fiscal quarter of 2001.
The new Trimble Toolbox is a set of integrated surveying tools that
provides significantly higher functionality to surveyors and other
construction professionals.
o Higher demand for GPS machine guidance equipment.
Engineering and Construction revenues increased by $86.6 million or 80% in
fiscal 2000 over fiscal 1999. The increase in 2000 revenue compared to 1999 was
due to the following factors:
o Higher revenues in 2000 resulting from the partial year effect of the
purchase of the Spectra Precision Group in July 2000.This accounted for
approximately $87 million of additional revenues for the period July 14,
2000 through December 29, 2000.
o Higher demand for GPS machine guidance equipment.
o These increases were partially offset due to delivery problems related to
critical part shortages from suppliers.
Operating Income
Engineering and Construction operating income increased by $7.7 million or
17% in fiscal 2001 over fiscal 2000. The increase in fiscal 2001 operating
income compared to fiscal 2000 was due to the following:
o Fiscal 2001 included a full year of the Spectra Precision acquisition and
the benefits of the consolidation of product lines in the Engineering and
Construction business areas. In addition, results were favorably impacted
by the introduction of the Trimble Toolbox survey products in the first
quarter of 2001.
26
o The worldwide cost reduction program, implemented as part of the Trimble
and Spectra Precision integration, also favorably impacted operating
income.
Engineering and Construction operating income increased by $6.7 million or
18% in fiscal 2000 over fiscal 1999. The increase in 2000 operating income
compared to 1999 was primarily due to the partial year effect in fiscal year
2000 of consolidating Spectra Precision for the period July 14, 2000 through
December 29, 2000. This added approximately $5.6 million of operating income.
Agriculture
Revenue
Products within the Agriculture segment include GPS-based machine guidance
systems, field management systems and laser-based water management systems.
Agriculture revenues decreased by $1.4 million or 5% in fiscal 2001 over fiscal
2000. The 2001 decrease in revenue compared to 2000 was due to the following
factors:
o Increased revenues generated from the water management product line
acquired with the purchase of Spectra Precision Group in July 2000
accounted for an increase of approximately $2.7 million through the
reporting of a full year's revenue in 2001.
o This was more than offset by lower demand for our GPS machine control
products due to the slowdown in the U.S. agricultural economy.
Agriculture revenues increased by $13.2 million or 103% in fiscal 2000 over
fiscal 1999. The 2000 increase in revenue compared to 1999 was due to the
following factors:
o Increased revenues generated from the partial year effect of including
Spectra Precision revenues for the period July 14, 2000 through December
29, 2000. This added approximately $6.9 million.
o Introduction of new products, including the AgGPS 170 Field Computer, the
AgGPS 114,Mobile Solutions and the PSO Plus Parallel Swathing Option with Data Logging.
o Higher general demand for GPS agriculture products.
o These increases were partially offset due to delivery problems related to
critical part shortages from suppliers.
Operating Income
Agriculture operating income decreased by $4.9 million or 115% in fiscal
2001 over fiscal 2000. The decrease in 2001 operating income compared to 2000
was due to the following factors:
o A product mix shift towards lower priced products and a general reduction
in prices.
o Startup development, selling and support costs associated with the ramp up
of the Autopilot product line.
Agriculture operating income increased by $1.8 million or 77% in fiscal
2000 over fiscal 1999. The increase in 2000 operating income compared to 1999
was due to sharply higher sales volumes.
Fleet and Asset Management
Revenue
Products within the Fleet and Asset Management segment use GPS and
information technologies to provide solutions for a variety of applications in
fleet management and asset tracking. Fleet and Asset Management revenues
decreased by $7.4 million or 11% in fiscal 2001 over fiscal 2000. The 2001
decrease in revenue compared to 2000 was due to the following factors:
o A reduction of approximately $4.0 million in our Satcom GalaxyTM Inmarsat-C
line due to the announcement of our intention to discontinue certain of
these product lines in early 2001, Mexico's satellite communications
systems capacity limitations, and as a result of the general economic
slowdown.
o Sales of the CrossCheck(R)and Placer product lines were down by
approximately $3.0 million as a result of the economic slow down.
27
Fleet and Asset Management revenues decreased by $2.2 million or 3% in
fiscal 2000 over fiscal 1999. The 2000 revenue change compared to 1999 was due
to the following factors:
o Asset management and tracking product revenues were down due to delivery
problems related to critical part shortages from suppliers.
o These decreases were partially offset by increased demand in our Mapping
products, especially our new GeoExplorer 3 used for GIS data collection and
data maintenance. In addition, unit sales for our Crosscheck family of
products increased by 30% over the prior year.
Operating Income
Fleet and Asset Management operating income decreased by $10.4 million or
68% in fiscal 2001 over fiscal 2000. The decrease in 2001 operating income
compared to 2000 was due to the following factors:
o Decrease in margins due to the sell-off of existing Satcom inventory at
reduced prices.
o Competitive price pressures on wireless hardware
o Significant costs incurred in the development of a service platform to
enable a range of asset management solutions including an internet
delivered cellular based solution for vehicle fleet management.
Fleet and Asset Management operating income increased by $0.5 million or 4%
in fiscal 2000 over fiscal 1999. The increase in 2000 operating income compared
to 1999 was due to an increase in revenue of Geographic Information Systems
product lines with higher margins, partially offset by decreasing Satcom
revenue.
Component Technologies
Revenues
Products within the Component Technologies segment consist principally of
proprietary GPS chipsets and modules marketed to original equipment
manufacturers. Component Technologies revenues decreased by $2.1 million or 4%
in fiscal 2001 over fiscal 2000. The 2001 revenue change compared to 2000 was
due to the following:
o Embedded product lines were down approximately $2.7 million or 16% year
over year due to the economic slowdown.
o Timing product lines were down due to reduced spending in the
telecommunications market.
o In-vehicle navigation unit sales increased by approximately $0.9 million.
Volume grew by 29%, which was offset by a decrease of 19% in an average
selling price of these products during the year. We expect this trend to
continue as technology advances in component technology will enable among
other things, reduced cost.
Component Technologies revenues increased by $1.6 million or 3% in fiscal
2000 over fiscal 1999. The 2000 revenue change compared to 1999 was due to the
following:
o Strong demand for GPS embedded applications such as vehicle tracking and
safety and security.
o The sales increase was partially offset by delivery problems related to
critical part shortages from our suppliers.
Operating Income
Component Technologies operating income decreased by $4.0 million or 27% in
fiscal 2001 over fiscal 2000. The decrease in 2001 operating income compared to
2000 was due to the following:
o Lower revenue and product mix changes.
o Higher expenditures primarily in research and development and sales and
marketing areas due to new product and channel development.
Component Technologies operating income decreased by $0.2 million or 1% in
fiscal 2000 over fiscal 1999. The decrease in 2000 operating income compared to
1999 was due primarily to product mix changes.
28
Portfolio Technologies
segments.
International Revenues
This segment is an aggregation of various operations that each equal less
than ten percent of the Company's total operating revenue. The products in this
segment are navigation modules and embedded sensors that are used in avionics,
flight, and military applications. Also, included in this segment are the
operations of our Tripod Data Systems subsidiary which was acquired on November
14, 2000. Portfolio Technologies revenues increased by $7.7 million or 33% in
fiscal 2001 over fiscal 2000. The 2001* Total revenue increase compared to 2000 was due
to the following factors:
o In fiscal 2001, Trimble experienced a full year of revenues generated from
the purchase of Tripod Data Systems as compared to one and one-half months
in fiscal 2000, which accounted for an increase of approximately $12.2
million.
o The above increase was partially offset by a $4.1 million or 48% reduction
in our commercial aviation product line during fiscal 2001. The sale of the
air transport product line to Honeywell was completed in March 2001. See
Note 8 to the Consolidated Financial Statements.
Portfolio Technologies revenues decreased by $0.8 million or 3% in fiscal
2000 over fiscal 1999. The 2000 revenue decrease compared to 1999 was due to the
following:
o Decreases in revenues for military and air transport products.
o Trimble's decision to exit the commercial marine business in the fourth
quarter of 1998 and the sale of the last of such products in the second
quarter of 1999.
Operating Income
Portfolio Technologies operating income increased by $2.3 million or 152%
in fiscal 2001 over fiscal 2000. The increase in fiscal 2001 operating income
compared to fiscal 2000 was primarily due to an incremental $2.5 million
resulting from a full years operating results of Tripod Data Systems acquired on
November 14, 2000.
Portfolio Technologies operating income increased by $1.1 million or 41% in
fiscal 2000 over fiscal 1999. The increase in fiscal 2000 operating income
compared to fiscal 1999 was due to the following:
o In fiscal 2000, we had a decrease in research and development expenses of
approximately $0.5 million.
o We had an increase of approximately $0.2 million in cost reimbursement
funds received for research and development projects.
International Revenues.
* Sales to our unaffiliated customers in locations outside the U.S.United States comprised approximately 51% in 2003,
49% in 2002, and 50% of total revenues in 2001. During the 2003 fiscal 2001, 52% in fiscal 2000
and 52% in fiscal 1999.year, North and South
America represented 58% of total
revenue,56%, Europe, 30%the Middle East and Africa represented 31%, and
Asia 12% inrepresented 13% of total revenues. In fiscal 2001.2003, the United States
comprised approximately 49% of total revenues. We anticipate that sales to
international customers will continue to account for a significant portion of
our revenue. For this reason, we are subject to the risks inherent in these
foreign sales, including unexpected changes in regulatory requirements, exchange
rates, governmental approval, and tariffs, or other barriers. Even though the U.S.US
Government announced on March 29, 1996, that it would supportsupports and maintainmaintains the GPS
system, and on May 1, 2000, stated that it has no intent to ever again
userestore Selective
Availability, (SA), a method of degrading GPS accuracy, there may be reluctance in
certain foreignnon-US markets to purchase such products given the control of GPS by the
U.S.US Government. Trimble'sOur results of operations could be adversely affected if we were
unable to continue to generate significant sales in locations outside the U.S.US.
* No single customer including the U.S. Government and its agencies, accounted for 10% or more of the Company'sour total revenues in fiscal
2001, 2000
or 1999.2003, 2002, and 2001. It is possible;possible, however, that in future periods the
failure of one or more large customers to purchase products in quantities
anticipated by the
Companyus may adversely affect the results of operations.
29
Gross Margin.
* GrossMargin
Our gross margin varies due to a number of factors including product mix,
international sales mix, customer type, the effects of production volumes and
fixed manufacturing costs on unit product costs, and new product start-up costs.costs, and
foreign currency translations. Gross margin as a percentage of total revenues
was 50%49.6 % in fiscal 20012003 and 53%50.2% in fiscal 2000. Not including a $4.6 million charge for inventory purchase
accounting adjustment for the acquisition of the Spectra Precision group, gross
margin was 54% in fiscal 2000 and 53% in fiscal 1999.2002. The slight decrease in gross
margin percentage for fiscal 2001,2003, compared with fiscal 2000, is2002, was due largelyprimarily
to the introduction of the Nikon products in the third quarter which generated a
lower consolidated gross margin of approximately 0.8%. This was partially offset
by stronger sales of TDS, GIS, wireless infrastructure, survey products as well
as our ongoing focus on product cost reductions. Shipping and handling costs are
included in cost of goods sold.
Gross margin as a percentage of total revenues was 50.2% in fiscal 2002 and
49.9% in fiscal 2001. The slight increase in gross margin percentage for fiscal
2002, compared with fiscal 2001, was due in part to approximately $6.0$3.3 million
of additional charges associated with the write-downwrite down of excess
and obsolete inventory partiallyin
fiscal 2001 related to the consolidationrationalization and simplification of product lines
and partially due to componentsinventories in excess of our demand
forecast horizon of twelve months, which impacted gross margin by approximately
1.3%. We expect that these excess and obsolete products will be disposed of
during fiscal 2002. These disposals may result from selling at deeply discounted
prices, use in research and development, or scrap. Also during fiscal 2001, we
exited a number of our direct sales offices, in an ongoing effort to change our
sales model from direct to dealer discount, which impacted gross margin by
approximately 0.8%. The remaining decrease in gross margin percentage is
attributable to product mix changes and a full year sale of Spectra Precision
Group's products (as compared to half a year in fiscal 2000), which typically
are sold at lower gross margins than Trimble's traditional products. In
addition, there were unabsorbed fixed manufacturing overheads due to lower than
expected revenues in fiscal 2001, resulting from the economic slowdown.
In fiscal 2000, adjusted gross margin increased by one percentage point
over fiscal year 1999 due to the favorable product mix of Engineering and
Construction and Agriculture products, which yielded higher margins through the
integration of software and wireless communications. In addition, it was
favorably impacted by the cost benefits of outsourcing our manufacturing to
Solectron. These increases were partially offset by higher costs to acquire
components due to worldwide component shortages.forecasted 12-month demand.
* Because of potential product mix changes within and among the industry
markets, market pressures on unit selling prices, fluctuations in unit
manufacturing costs, including increases in component prices and other factors,
current level gross margins cannot be assured. In addition, should the global
economic conditions deteriorate, further, gross margin could be further adversely
impacted.
Engineering and Construction
Engineering and Construction revenues increased by $47.4 million or 14.8% while
segment operating income increased by $7.2 million or 13.5% for fiscal 2003 as
compared to fiscal 2002. Approximately half of the revenue increase was driven
by new product introductions and our increased marketing efforts. The remaining
increase was split evenly between geographic expansion, especially in Asia and
Russia, and the impact of the weaker US dollar. Segment operating income
increased due to higher revenues that were partially offset by increased
operating expenses outside the United States (largely driven by the weaker US
dollar), increased research and development spending on certain programs as we
continue to invest in developing next generation technology and lower margins
earned on the sale of Nikon products. Overall, segment operating income remained
consistent at 17% of revenues.
Engineering and Construction revenues increased by $1.8 million or 0.6% during
fiscal 2002 as compared to fiscal 2001 primarily due to the LeveLite acquisition
which added $3.6 million of revenues, and strong performance by our machine
control product offering as we continue to penetrate the after-market for
machine guidance on earthmoving equipment. Increased revenues were partially
offset by a reduction in revenues in several product areas due to continued
difficult global economic conditions. Segment operating income increased by $3.6
million or 7.2% in fiscal 2002 over fiscal 2001 primarily due to a reduction of
$4.2 million of operating expenses due to the transfer of employee-related
expenses to Caterpillar Trimble Control Technologies. Higher revenues and lower
operating expenses were partially offset by a reduction in gross margin as a
result of product sales mix during fiscal 2002.
Field Solutions
Field Solutions revenues increased by approximately $12.6 million or 18.8% while
segment operating income increased by $4.8 million or 49.9% for fiscal year 2003
as compared to fiscal 2002. Revenues were up year over year due to continued
strong sales of the GeoExplorer(R) CE series handhelds released at the end of
fiscal 2002, and due to the expansion of our automatic guidance products onto
new agricultural vehicles.
Segment operating income increased in 2003 from the fiscal year 2002 primarily
due to higher revenues. This increase was partially offset by fractionally lower
gross margins and more investment in research and development and sales
functions. This enabled the segment operating income to increase from 14% to 18%
of revenues.
Field Solutions experienced a revenue decline in fiscal 2002 of $1.3 million or
1.8% compared with fiscal 2001 primarily due to the decline in the United States
federal, state, and local government spending and a delay in the release of the
new GeoExplorer(R) CE Series due to component supply issues. This decrease was
partially offset by the increased demand for both the manual and auto guidance
product lines. Segment operating income decreased by $1.7 million or 14.7% in
fiscal 2002 over fiscal 2001 primarily due to the decrease in government
spending described above and lower gross margin due to product sales mix, which
was more weighted toward the relatively lower margin agricultural business area.
Mobile Solutions
Mobile Solutions revenues increased by $4.5 million or 53% in fiscal 2003 over
fiscal 2002 due primarily to an increase in our CrossCheck product sales and
higher fleet management services revenues as a result of an expanded customer
base. Segment operating loss decreased by $5.6 million or 46.4% in fiscal 2003
over fiscal 2002 due to increased revenues and lower operating expenses.
Operating Expenses.expenses decreased by approximately $3.0 million primarily due to a
reduction in outside services and our personnel related to the completion of our
Telvisant system.
Mobile Solutions revenues decreased by $5.3 million or 38.5% in fiscal 2002 over
fiscal 2001 primarily due to the reduction of approximately $3.0 million in our
satellite communications business as a result of our decision to discontinue the
Galaxy(TM) Inmarsat-C product line in early 2001, a slow down in system
integration projects due to reduced spending at municipalities, and reduced
sales of wireless products of $0.9 million due to a transition from a sensor
provider to a fully integrated service provider. Sales of some product lines
were down as a result of the economic slow down and the shift of technology from
analog to digital.
Segment operating loss increased by $2.0 million or 20.5% in fiscal 2002 over
fiscal 2001 primarily due to the lower revenues as described above, and
increased costs incurred in the development and marketing of a service platform
to enable a range of asset management solutions.
Component Technologies
Component Technologies revenues increased by $4.4 million or 7.4%, while segment
operating income increased by $5.9 million or 55.2% for the fiscal year 2003 as
compared to fiscal 2002. The increase in revenues was primarily due to increased
demand from our existing wireless infrastructure customers. Segment operating
income increased from 18% to 26% of revenues. The increase was primarily due to
a reduction in costs of goods sold due to the transfer of the manufacturing of
our products to China, reduced costs of raw materials, increased revenues and
higher margins aided by favorable product mix.
Component Technologies revenues increased by $1.7 million or 2.9% in fiscal 2002
over fiscal 2001 due primarily to a timing products increase of $4.6 million in
fiscal 2002 over fiscal 2001 due to significant demand during the second half of
fiscal 2002 from new and existing wireless infrastructure customers. IVN revenue
decreased $1.0 million in fiscal 2002 over fiscal 2001 as average selling prices
declined by more than 9%, and license revenue decreased $1.7 million in fiscal
2002 over fiscal 2001 due to an expired license contract. Component Technologies
operating income increased by $0.3 million or 3% in fiscal 2002 over fiscal 2001
as a result of higher gross margins resulting from higher revenues and favorable
product mix, partially offset by higher operating expenses, primarily in
research and development and marketing.
Portfolio Technologies
Portfolio Technologies revenues increased by $5.3 million or 46.2% for the
fiscal year 2003 as compared to fiscal 2002. The increase in revenues was mostly
driven by the inclusion of revenue from Applanix acquired in 2003, while offset
by lower revenue of military-related products. Segment operating income
decreased by $2.2 million or 402.7% for fiscal 2003 as compared to fiscal 2002
due to weaker operating results from military products.
Portfolio Technologies revenues decreased by $5.6 million or 32.6% in fiscal
2002 over fiscal 2001 primarily due to lost revenues of $4.4 million as a result
of the sale of our air transport product line to Honeywell in fiscal 2001.
Portfolio Technologies operating income decreased by $0.2 million or 24.5% in
fiscal 2002 over fiscal 2001 due to the lower revenues which was offset by cost
reduction initiatives.
Operating Expenses
The following table shows operating expenses for the periods indicated and
should be read in conjunction with the narrative descriptions of those operating
expenses below:
January 2, January 3, December 28, December 29, December 31,
Fiscal Years Ended 2004 2003 2001
2000 1999
- ---------------------------------------------------------------- ----------------- ------------------ --------------------- ---- ----
(In thousands)
Research and development $ 62,88167,641 $ 46,52061,232 $ 36,49362,881
Sales and marketing 97,870 89,344 103,778 79,901 53,543
General and administrative 39,253 40,634 37,407 30,514 33,750
Restructuring charges 2,019 1,099 3,599 -- --
Amortization of goodwill and other purchased
intangiblesintangible assets 7,312 8,300 29,389
13,407 --
--------------- --------------- ----------------------- ----- ------
Total operating expenses $ 214,095 $ 200,609 $ 237,054
$ 170,342 $ 123,786
=============== =============== =========================== ========= =========
Research and Development.Development
Research and development expenses increased by $6.4 million to $67.6 million in
fiscal 2003 over fiscal 2002 due to continued investment in next generation
technology primarily in the Engineering and Construction segment, the weakness
of the US dollar versus major European and New Zealand currencies, and also the
inclusion of the research and development expenses from Applanix after the
acquisition in July 2003. Overall spending remained relatively constant at
approximately 13% of revenues. All of our research and development costs have
been expensed as incurred.
Research and development spending increaseddecreased by $16.4$1.6 million during fiscal 2002
as compared to fiscal 2001 and represented 13% of revenue, consistent with 13%
in fiscal 2000. The
dollar2001, primarily due to the transfer of employee-related expenses to
our Caterpillar joint venture of approximately $2.8 million, partially offset by
an increase in 2001 was due primarily toengineering expenses associated with the following factors:
o In fiscal 2001 Trimble experienced a full yearintroduction of operations of the Spectra
Precision Group compared with half a year in fiscal 2000, which accounted
for approximately $11.7 million of the increase.
30
o The increase was also due to approximately $5.0 million related to a full
year of operations of Tripod Data Systems in fiscal 2001 compared with one
and one-half months for fiscal 2000, as well as the inclusion of Grid Data
for approximately nine months in fiscal 2001.
Research and development spending increased by $10.0 million during fiscal
2000, representing 13% of revenue, consistent with 13% in 1999. The dollar
change in 2000 was due primarily to the following factors:
o The acquisition of Spectra Precision in July 2000, which accounted for
approximately $10.0 million of the increase.
o Lower cost reimbursement for development projects of approximately $2.0
million.
o Net reductions in spending of approximately $2.0 million related to
personnel, temporary help, facilities and consulting.new
products.
* The Company believesWe believe that the development and introduction of new products isare critical
to itsthe our future success and expectswe expect to continue its active development of futurenew
products.
Sales and Marketing.
Sales and marketing expense increased by $23.9 million in fiscal 2001 and
represents 22% of revenue, consistent with 22% in fiscal 2000. The dollar change
in 2001 was due primarily to the inclusion of a full year of operations of the
Spectra Precision Group as compared with half a year in fiscal 2000, which
accounted for approximately $23.1 million of the increase.Marketing
Sales and marketing expenses increased by $26.4$8.5 million duringto $97.9 million in
fiscal 2000
and represents 22% of revenues, compared with 21% in 1999. The primary reason
for the increase in expenses from 1999 to 2000 was2003 over fiscal 2002 primarily due to higher revenue, increased sales
efforts mostly in emerging geographic areas such as China and Russia, the purchaseimpact
of the Spectra Precision Groupweaker US dollar in July 2000, which had approximately $26.6 million inEurope, and the inclusion of Applanix sales and
marketing expenses recordednot applicable in July 14, 2000 through December 29,
2000.the prior fiscal year. As a percentage of
revenue, sales and marketing expenses decreased from 19% to 18%.
Sales and marketing expenses decreased by $14.4 million in fiscal 2002 and
represented 19% of revenue, compared with 22% in fiscal 2001. During fiscal
2001, we sold off many of our direct sales offices which decreased sales and
marketing expenses by approximately $7.0 million for fiscal 2002, and we
decreased overall compensation, travel, advertising, promotional, and trade show
expenses by approximately $7.4 million for fiscal 2002 compared to the
corresponding period in fiscal 2001.
* Trimble'sOur future growth will depend in part on the timely development and continued
viability of the markets in which we currently compete and onas well as our ability to
continue to identify and exploit new markets for our products.
General and Administrative.Administrative
General and administrative expenseexpenses in fiscal 2003 decreased by $1.4 million to
$39.3 million and represented 7.3% of revenues compared with 8.7% in fiscal
2002. In fiscal 2002, we experienced higher bad debt expenses, primarily due to
the bankruptcy of a large Japanese distributor. In addition, in fiscal 2003 we
incurred $3.0 million less in information systems expenses. These reductions
were offset in fiscal 2003 by lower sublease income received, expenses from
Applanix after the acquisition in July 2003, and higher compensation costs.
General and administrative expenses increased by $6.9$3.2 million in fiscal 2001,2002
representing 8%9% of revenue, consistentcompared with 8% in fiscal 2000. The dollar2001 primarily due to an
increase in 2001 was due primarilybad debt provisions related to customers in an uncertain economic
environment and bad debt expenses for accounts written off during the following:
o In fiscal 2001, Trimble experienced a full year of operations of the
Spectra Precision Group as compared with half a year in fiscal 2000, which
accounted for approximately $5.6 million of the increase.
o The increase was also due
to approximately $0.9 million related to a full
year of operations of Tripod Data Systems in fiscal 2001 as compared with
one and one-half months for fiscal 2000.
General and administrative expenses decreased by $3.2 million during fiscal
2000, representing 8% of revenues, compared with 12% in fiscal 1999. The
decrease in fiscal 2000 as compared to fiscal 1999 was due to the following:
o An allowance for doubtful accounts charge of approximately $1.4 million in
fiscal 1999, of which approximately $1.0 million related to collectibility
issues for certain customers in Brazil who were impacted by a significant
devaluation of the Brazilian real against the United States dollar during
that year.
o Trimble also had decreases of approximately $6.1 million in expenses
related to personnel, legal, facilities, equipment and other office
supplies.
o These decreases were partially offset by approximately $3.0 million of the
Spectra Precision Group's expenses included since its purchase in July
2000.customer defaults.
Restructuring Charges
Restructuring charges of $3.6$2.0 million were recorded in fiscal 2003, $1.1 million
in fiscal 2002, and $3.6 million in fiscal 2001, all of which related to
severance costs, incurred asexcept for $0.3 in 2003 which related to lease costs of our
Japanese office closure due to the Nikon joint venture. As a result of the
Company being impactedrestructuring activities, our headcount decreased by 77, 49, and 207 in fiscal
2003, 2002, and 2001, respectively. As of January 2, 2004, the global economic slow down, as well as severance costs
31
related to employees terminated due torestructuring
accrual balance was approximately $0.4 million which will be paid over the
dispositionremaining term of certain product lines.
As a resultthe lease through 2006.
Amortization of these actions, Trimble's headcountGoodwill, Purchased and Other Intangible Assets
January 2, January 3, December 28,
Fiscal Years Ended 2004 2003 2001
- ------------------ ---- ---- ----
(in thousands)
Amortization of goodwill and purchased
intangibles(1) $ 7,312 $ 8,300 $ 29,389
Amortization of other intangible assets 604 868 917
--- --- ---
Total amortization of goodwill, purchased,
and other intangible assets $ 7,916 $ 9,168 $ 30,306
========= ======== ========
(1) Amortization of goodwill in 2001 only.
Amortization expense of purchased and other intangibles decreased in fiscal 20012003
by 232 individuals. This headcount reduction will reduce our on-going operating
expenses and enable us to be better positioned to achieve our strategic goals.
Asapproximately $1.3 million representing 1.5% of December 28, 2001, all of the restructuring charges except for
approximately $80,000 have been paid. The remaining amounts are expected to be
paidrevenue, compared with 2% in
fiscal 2002. The decrease was due to certain Spectra Precision Group Restructuring Activities
At the time we acquired the Spectra Precision Group, we formulated a
restructuring plan and provided approximately $9.0 million for costs to close
certain duplicative office facilities, combine operations including redundant
domestic and foreign legal entities, reduce workforce in overlapping areas, and
relocate certain employees. These costs were accrued for as part of the
allocation of the purchase price. Included in the total cost was approximately
$2.7 million related to the discontinuance of overlapping product lines which
was included in our reserve for excess and obsolete inventory. The facility
consolidation and employee relocations resulted primarily from combining certain
office facilities and duplicative functions, including management functions, of
the Spectra Precision Group. Through the end of fiscal 2001, we had charged
against the reserve approximately $3.3 million which consisted of $0.9 million
for legal and tax consulting expenses relating to consolidation of legal
entities, $1.3 million for severance expenses, $0.7 million for facilities and
direct sales offices closures, $0.3 million for an underfunded pension plan, and
other costs of $0.1 million.
We revised our final estimates of the costs to complete the remaining
planned activities and accordingly reduced the restructuring reserve by
approximately $1.1 million, with a corresponding adjustment to goodwill in the
fourth quarter of fiscal 2001. The reserve balance was approximately $1.9
million at December 28, 2001 and we anticipate completing the majority of our
restructuring activitiesintangibles being fully
amortized during fiscal 2002.
The elements of the reserve at December 28, 2001 on the balance sheet
(included in accrued liabilities) are as follows:
Employee Severance and Facility Closure, Legal
Relocation and Tax Expense Total
(In thousands)
Total reserve $ 1,945 $ 4,370 $ 6,315
Amounts paid/written off (1,685) (1,610) (3,295)
Revision to estimates (260) (812) (1,072)
------------------------------------------------------------------------
Balance as of December 28, 2001 $ - $ 1,948 $ 1,948
========================================================================
Amortization of Goodwill and Other Purchased Intangibles.
December 28, December 29, December 31,
Fiscal Years Ended 2001 2000 1999
- ------------------------------------------------------------- -------------------- -------------------- --------------------
- ------------------------------------------------------------- -------------------- -------------------- --------------------
(In thousands)
Amortization of goodwill $ 7,647 $ 3,116 $ -
Amortization of other purchased intangibles 21,742 10,291 -
Amortization of other intangibles 917 930 961
-------------------- -------------------- --------------------
Total amortization of goodwill, other purchased, and other
intangibles $ 30,306 $ 14,337 $ 961
==================== ==================== ====================
2003.
Amortization expense of goodwill, purchased, and other purchased intangibles increaseddecreased in
fiscal 20012002 by approximately $16.0$21.1 million representing 6%2% of revenue, compared
with 4%6% in fiscal 2000.2001. The increasedecrease was primarily due to the acquisitionadoption of the Spectra Precision Group in July 2000, which resulted in a
year over year increase of approximately $15.0 million in goodwill and
intangibles amortization.
32
Amortization of goodwill and other purchased intangibles increased by $13.4
million during fiscal 2000, representing 4% of revenues, compared with 0%FAS
142 in fiscal 1999. The increase in fiscal 2000, as compared to fiscal 1999, is due to2002 that does not require the purchase of the Spectra Precision Group in July 2000, which had
approximately $13.4 million in amortization of goodwill and
other purchased
intangibles recorded in July 14, 2000 through December 29, 2000.
Nonoperating Income (Expense), Net.intangible assets with indefinite lives.
Non-operating Expense, Net
The following table shows nonoperating income (expenses),non-operating expense, net for the periods indicated
and should be read in conjunction with the narrative descriptions of those
expenses below:
January 2, January 3, December 28, December 29, December 31,
Fiscal Years Ended 2004 2003 2001
2000 1999
- ---------------------------------------------- --------------- ----------------
- ---------------------------------------------- --------------- ----------------
(In------------------ ---- ---- ----
(in thousands)
Interest income $ 1,118465 $ 4,478659 $ 3,8571,118
Interest expense (11,938) (14,710) (22,224) (14,438) (3,394)
Foreign exchange gain (loss)loss (592) (823) (237)
(376) 28Expenses for affiliated operations, net (6,403) (3,954) -
Other income (expense) 118 (1,171) (430)
(123) (217)
--------------- ---------------- ------------------- ------ ----
Total non-operating expense, net $ (18,350) $(19,999) $ (21,773)
$ (10,459) $ 274
=============== ================ ================
Nonoperating========= ======== =========
Non-operating expense, net increaseddecreased by $11.3$1.6 million or 8% during fiscal 20012003 as
compared with fiscal 2000. The primary reasons for the increase were as follows:
o Increase2002 primarily due to a reduction in interest expense of
$2.8 million offset by an increase in expenses for affiliated operations. The
increase in expenses for affiliated operations is primarily due to the full year
impact of transfer pricing effects on transactions between us and our
Caterpillar joint venture, which commenced operations in April 2002. (See Note 3
of the Notes to the Consolidated Financial Statements for financial information
regarding joint ventures). In addition, we recorded approximately $0.3 million
relating to our share of the losses in our Nikon joint venture established in
2003.
In fiscal 2003, interest expense decreased by approximately $2.8 million due to
continued debt repayment during the year of approximately $51.8 million,
combined with the effect of lower interest rates. Offsetting the lower debt
interest, during the year, we recorded approximately $3.6 million of interest
expense due to the write off of $2.3 million of unamortized debt issuance costs
as a result of our debt refinancing in June 2003, as well as $1.3 million
related to loans and Credit Facilities
incurred primarily to finance the acquisitionunamortized portion of warrants associated with the principal
balance of our Subordinated Note. (See Note 9 of the Spectra Precision
Group accountedNotes to the Consolidated
Financial Statements for approximately $7.8 million.
o Decreased interest income resulting from the sale and maturities of
short-term investments used to finance the acquisition of Spectra Precision
Group accounted for approximately $3.4 million.
Nonoperating income (expense),financial information regarding our Subordinated Note.)
Non-operating expense, net increaseddecreased by $10.7$1.8 million during fiscal 20002002 as
compared with fiscal 1999. The primary reason2001, as a result of a decrease in net interest expense of
$7.1 million due to significant repayment of debt balances during the year of
approximately $52 million, combined with the effect of lower interest rates.
This was partially offset by expenses recorded for the increase wasaffiliated operations of $4.0
million as a result of transfer pricing effects on transactions between us and
our Caterpillar joint venture, an increase in interest expenses related to loansforeign exchange loss of $0.6
million, and credit facilities resulting
from the acquisitiona write-down of the Spectra Precision Groupminority investment of approximately $10.7
million$1.5 million.
Income Tax Provision. Trimble'sProvision
Our effective income tax rates from continuing operations for fiscal years 2003,
2002, and 2001 2000 and 1999 were (9%(8%), 10%25% and 10%(9%), respectively. The fiscal 2002 and 2001
income tax rate differsrates differ from the US federal statutory rate of 35%, due primarily
to foreignnon-US taxes and the inability to realize the benefit of net operating
losses. The 2000 and 19992003 income tax rates arerate is less than the US federal statutory rate,
primarily due primarily to the realization of the benefits from
prior net operating losses and other
previously reserved deferred tax assets.
Inflation. The effects of inflation on Trimble's financial results have not
been significantLitigation Matters
* From time to date.
LITIGATION
* Trimble istime, we are involved in litigation arising out of the ordinary
course of our business. There are no known claims or pending litigation that are
expected to have a numbermaterial effect on our overall financial position, results of
legal matters as discussedoperations, or liquidity.
Off-balance Sheet Financings and Liabilities
Other than lease commitments incurred in Note 21
to the Consolidated Financial Statements. While Trimble doesnormal course of business, we do
not expect to
suffer significant adverse effects from these litigation mattershave any off-balance sheet financing arrangements or from
unasserted claims,liabilities, guarantee
contracts, retained or contingent interests in transferred assets, or any
obligation arising out of a material variable interest in an unconsolidated
entity. We do not have any majority-owned subsidiaries that are not included in
the nature of litigation is unpredictable and there can be no
assurance that it willconsolidated financial statements. Additionally, we do not do so.
33
have any interest
in, or relationship with, any special purpose entities.
LIQUIDITY AND CAPITAL RESOURCES
January 2, January 3, December 28,
December 29, 2000 December 31,
As of and for the Fiscal Year Ended 2004 2003 2001
1999
- --------------------------------------------------------- ----------------- -------------------- -------------------
(Dollars----------------------------------- ---- ---- ----
(dollars in thousands)
Cash and cash equivalents $ 31,07845,416 $ 40,87628,679 $ 49,26431,078
As a percentage of total assets 8.3% 6.5% 7.4% 8.4% 27.1%
Accounts receivable days sales outstanding (DSO) 55 57 4660 58 53
Inventory turns per year 4.1 4.2 6.64 5 4
Total debt $ 90,486 $ 138,525 $ 190,565
Cash provided by operating activities $ 25,09336,460 $ 19,83532,316 $ 23,625
25,09326,370
Cash used by investing activities $(22,653) $ (5,766) $(11,441) $(167,180) $(17,882)
Cash provided (used) by financing activities $ 54 $(31,729) $(23,450)
$ 138,957 $ 2,656
Net increase increase/(decrease) in cash and cash equivalents $ (9,798)16,737 $ (8,388)(2,399) $ 8,399(9,798)
Cash and Cash Equivalents
In fiscal 2001, Trimble's2003, our cash and cash equivalents decreasedincreased by $9.8$16.7 million from
fiscal 2000.2002. The Company repaid $60.7 million of its debt
outstanding under its senior secured credit facilities. Thisincrease was financed by the
issuance of common stock of approximately $36.4 million, andprimarily due to cash generated from
operating activities of approximately $25.1 million. The Company also used
approximately $3.5 million for the purchase of certain assets of Grid Data, and
approximately $7.3 million for net capital expenditures.
At December 28, 2001, Trimble's debt mainly consisted of $101.3 million
outstanding under senior secured credit facilities, and an $84 million
subordinated promissory note related to the acquisition of the Spectra Precision
Group. Trimble has relied primarily on cash provided by operating
activities, to
fund capital expenditures, and otherpartially offset by cash used in investing activities.
During December 2001
and January 2002, the Company raised $26.8 million and $19.2 million,
respectively, in a private placement of equity.
On March 20, 2002, the Company used $21.2 million of net proceeds from its
private placement to retire accrued interest and principal under its
subordinated note with Spectra Physics Holdings, Inc., a subsidiary of Thermo
Electron, reducing the outstanding principal amount to $68.7 million. In
addition, the Company renegotiated the terms of the subordinated note. Under the
revised agreement, the maturity of the note was extended until July 14, 2004, at
the current interest rate of approximately 10.4% per year. In connection with
the amendment, on March 20, 2002, the Company agreed to issue to Thermo Electron
a five-year warrant to purchase 200,000 shares of Trimble's common stock at an
exercise price of $15.11. Under the terms of the agreement, beginning on July
14, 2002, Trimble will also issue five-year warrants to purchase 250 shares of
common stock on a quarterly basis for every $1 million of principal and interest
outstanding until the note is paid off. These warrants will be exercisable at a
price equal to Trimble's closing price on the last trading day of each quarter.
Under the five-year warrant, the total number of warrants issued will not exceed
376,233 shares.
* In fiscal 2001,2003, cash provided by operating activities was $25.1$36.5 million, as
compared to $19.8$32.3 million in fiscal 2000. Trimble's2002. The increase of $4.1 million was
primarily driven by the $28.2 million increase in net income during fiscal 2003
compared to fiscal 2002 offset by an increase in accounts receivable and
inventory and a decrease in accounts payable. Also, fiscal 2002 was positively
impacted by a special one-time distribution of $11.0 million to us from our
Caterpillar joint venture. Our ability to continue to generate cash from
operations will depend in large part on revenues,profitability, the rate of collections
of accounts receivable, and continued focus on reducing operating
costs and the move towards profitability. Both theour inventory turns, and our ability to manage other
areas of working capital. Our accounts receivable days for sales outstanding
metrics were similarincreased from 58 days at the end of fiscal 20012002 to 60 days at the end of fiscal
2000 level. The decrease in2003. Our inventory turns decreased from five at the end of fiscal 19992002 to four
at the end of fiscal 2000 was primarily due to the acquisition of the Spectra Precision Group
in July 14, 2000. We moved from an outsource model in 1999 to significant in
house manufacturing in fiscal 2000 as a result of the factories acquired in the
USA, Sweden and Germany. Also, the increase in accounts receivable days sales
outstanding from fiscal 1999 to fiscal 2000 was due to the Spectra Precision
Group conducting a significant portion of its business with international
customers, who are traditionally slower payers.
34
2003.
Cash flows used in investing activities were $11.4$22.7 million in fiscal 20012003 as compared
to $167.2$5.8 million in fiscal 2000. Cash used in investing activities
in fiscal 20002002. The increase was primarily due to approximately
$4.8 million invested in our Nikon joint venture upon its formation, $2.2
million and $4.3 million cash outlays related to the purchaseour acquisitions of the Spectra Precision
Group, offset by net salesApplanix
and MENSI, respectively, certain earn-out payments made as a result of short term investments.our
previous LeveLite acquisition, and increased expenditure on capital equipment.
During fiscal 2003, we spent approximately $10.9 million on capital
expenditures.
Cash used by financing activities was $23.5 million in fiscal 2001 as
compared with cash provided by financing activities, of $139.0 millionnet, was neutral in fiscal 2000. During2003, as
compared to $31.7 million cash used in fiscal 2001, the Company made $60.72002. However during fiscal 2003,
we repaid approximately $69 million of payments against its
senior secured credit facilities.debt-related to our previous Subordinated
Note and Credit Facility. These debt payments were offsetfunded primarily by proceeds
from the issuance of common stock to employees pursuant to Trimble'sour stock option plan
and employee stock purchase plan of $6.9approximately $13.9 million, as well as
issuance of common stock under a private equity placement of $26.8$38.3 million. AlsoOn
April 14, 2003, we sold 3,148,000 shares of our common stock, no par value per
share, to an investor at a price of $12.17 per share in fiscal
2001, John Hancock Life Insurance Company exercised warrantsan offering pursuant to
our shelf registration statement. The offering resulted in net proceeds to us of
$4.4 million.
In July 2000, Trimble obtained $200approximately $36.6 million, approximately $31 million of senior, secured credit
facilities (the "Credit Facilities") from a syndicate of bankswhich was used to supportpay
down the acquisition of the Spectra Precision Group and the Company's ongoing working
capital requirements and to refinance certain existing debt (see Note 11 to the
Consolidated Financial Statements). At December 28, 2001, Trimble had
approximately $101 million outstanding under the Credit Facilities, comprised of
$61 million under a five-year $100 million term loan, $30 million under a $50
million three-year U.S. dollar only revolving Credit Facility ("revolver"), and
$10 million under a $50 million three-year multi-currency revolver.
The Credit Facilities are secured by all material assets of the Company,
subject to foreign tax considerations. If Trimble is able to achieve and
maintain a leverage ratio (Debt/EBITDA) of 2.0x or less for four consecutive
quarters, the security for the Credit Facilities will be released. Financial
covenants of the Credit Facilities include leverage, fixed charge, and minimum
net worth tests. During December 2001, the Company received a waiver with
respect to compliance with the fixed charge ratio for the quarter ended December
28, 2001, and modified the fixed charge ratio for the quarter ended March 29,
2002. At December 28, 2001, the Company is in compliance with debt covenants.
The amounts due under the three year revolver loans are paid as the loans
mature, and the loan commitment fees are paid on a quarterly basis. Under the
five-year term loan, the Company is due to make payments (excluding interest) of
approximately $20 million in fiscal 2002, $24 million in fiscal 2003 and the
remaining $17 million in fiscal 2004. In order to reduce variable interest rate
exposure on borrowings under its existing credit facility, Trimble had an
interest rate swap agreement on a portion of the variable rate debt, which fixes
the rateprincipal balance on the notional amount of $25.0Subordinated Note and $5.6 million at 5.195%. This agreement
expired in February 2002 and was not renewed.
Management believesused to
pay down the accrued interest on that itsNote.
* We believe that our cash and cash equivalents, together with itsour credit
facilities, will be sufficient to meet itsour anticipated operating cash needs beyondfor
at least the next twelve months. At December 28, 2001, the CompanyJanuary 2, 2004, we had $31.1$45.4 million of
cash and cash equivalents as well as access to $60$81 million of cash under the
terms of its three-yearour revolver loans.
On January 15, 2002, we
completed the second closing of the private placement equity offering, through
which, we received aggregate cash proceeds of approximately $19.2 million. These
proceeds were used to repay debt.
Trimble is currently restricted from paying dividends and is limited as to
the amount of its common stock that it can repurchase under the terms of the
Credit Facilities. The Company is allowed to pay dividends and repurchase shares
of its common stock up to 25% of net income in the previous* We expect fiscal year. The
Company has obligations under noncancelable operating leases for its office
facilities (see Note 12 to the Consolidated Financial Statements). In fiscal
2002, the payments under these noncancelable operating leases are expected to be
approximately $12.7 million.
* The Company expects fiscal 20022004 capital expenditures to be approximately $7.0$12 million to
$9.0$14 million, primarily for computer equipment, software, manufacturing tools and
test equipment, and leasehold improvements associated with business expansion.
Decisions related to how much cash is used for investing are influenced by the
expected amount of cash to be provided by operations.
* Trimble has evaluatedDebt
At the issuesend of fiscal 2003, our total debt was approximately $90.5 million as
compared with approximately $138.5 million at the end of fiscal 2002. This
balance primarily consists of $43.8 million outstanding under a term loan and
does$44.0 million outstanding under a senior secured revolving credit facility. On
June 25, 2003, we obtained a new Credit Facility (comprising of a term loan and
revolver) in the amount of $109 million that enabled us to pay off our
indebtedness under our previous credit facility and the Subordinated Note.
The new Credit Facility is secured by all material assets of our Company, except
for a portion of assets that are not currently believe that the
introductionpledged due to foreign tax considerations.
Financial covenants of the EuroCredit Facility include leverage, fixed charge, and
minimum net worth tests. At January 2, 2004 and as of the date of this report,
we are in compliance with all debt covenants. The amortized principal, interest,
and commitment fees due under the Credit Facility are paid quarterly. Under the
four-year term loan portion of the Credit Facility, we are due to make payments
(excluding interest) of approximately $12.5 million in each of the next three
fiscal years (2004, 2005, and 2006), and $6.3 million in fiscal 2007.
Under the terms of the Credit Facility, we are allowed to pay dividends and
repurchase shares of our common stock up to 25% of net income in the previous
fiscal year. For additional discussion of our debt, see Note 9 of Notes to the
Consolidated Financial Statements.
CONTRACTUAL OBLIGATIONS
The following table summarizes our future payment obligations:
Less than 1-3 3-5 More than
Contractual Obligations Total 1 year Years years 5 years
- ----------------------- ----- ------ ----- ----- -------
(in thousands)
Total debt including $ 99,941 $ 17,310 $ 73,570 $ 7,851 $ 1,210
interest
Operating leases 28,141 10,129 11,723 3,132 3,157
Purchase obligations 33,062 31,485 1,577 - -
------ ------ -----
Total $ 161,144 $ 58,924 $ 86,870 $ 10,983 $ 4,367
========== ========== ========== ========= =========
* As of January 2, 2004, $65.9 million of our total debt was subject to variable
quarterly interest rates. Per our loan agreement, we pay a three-month LIBOR
rate plus a certain spread that depends on our leverage ratio. Our spread is
expected to be 1.5% over the remaining life of our obligation of the debt. We
have assumed a three-month LIBOR rate of 1.20% for widespread businesseach quarter in fiscal 2004
and have forecasted an increase of 25 basis points quarter over quarter to a
maximum of 3.25%. (See Note 9 of the Notes to the Consolidated Financial
Statements for further financial information regarding long-term debt)
Purchase obligations represent open purchase orders for material purchases with
our customers. Our pension obligation which is not included in the table above,
and is included in "Other non-current liabilities" on our Consolidated Balance
Sheets, is disclosed at Note 14 of the Notes to the Consolidated Financial
Statements.
New Accounting Standards
In November of 2002, the Emerging Issues Task Force (EITF) reached a consensus
on Issue No. 00-21, "Revenue Arrangements with Multiple Deliverables." EITF
Issue No. 00-21 provides guidance on how to account for arrangements that
involve the delivery or performance of multiple products, services, and/or
rights to use assets. The provisions of EITF Issue No. 00-21 apply to revenue
arrangements entered into in January 2002 willfiscal periods beginning after June 15, 2003.
Adoption of EITF Issue No. 00-21 did not have a material effect on our results.
Financial Accounting Standards Board (FASB) Interpretation No. 46 (FIN 46),
"Consolidation of Variable Interest Entities," was issued in January 2003, and a
revised interpretation of FIN 46 (FIN 46-R) was issued in December 2003. FIN 46
requires certain variable interest entities to be consolidated by the primary
beneficiary of the entity if the equity investors in the entity do not have the
characteristics of a controlling financial interest or do not have sufficient
equity at risk for the entity to finance its foreign exchange and hedging activities. Trimble has also
assessedactivities without additional
subordinated financial support from other parties. The provisions of FIN 46 are
effective immediately for all arrangements entered into after January 31, 2003.
Since January 31, 2003, we have not obtained any variable interests in any
entities we believe are variable interest entities. For arrangements entered
into prior to February 1, 2003, we are required to adopt the potential impact thatprovisions of FIN
46-R in the Euro conversionfirst quarter of fiscal 2004. We are in the process of determining
the effect, if any, the adoption of FIN 46-R will have on our financial
statements.
In April 2003, the FASB issued Statement of Financial Accounting Standard (SFAS)
No. 149, "Amendment of Statement 133 on Derivative Instruments and Hedging
Activities." SFAS No. 149 amends and clarifies financial accounting and
reporting for derivative instruments, including certain derivative instruments
embedded in regardother contracts (collectively referred to its internal systems accommodating Euro-denominated transactionsas derivatives) and doesfor
hedging activities under SFAS No. 133, "Accounting for Derivative Instruments
and Hedging Activities." SFAS No. 149 is effective for contracts entered into or
modified after June 30, 2003, and for hedging relationships designated after
June 30, 2003. The adoption of this Statement did not currently anticipate any adverse impacthave an effect on our
financial statements.
In May 2003, the FASB issued SFAS No. 150, "Accounting for Certain Financial
Instruments with Characteristics of Both Liabilities and Equity." SFAS No. 150
establishes standards for how an issuer classifies and measures certain
financial instruments with characteristics of both liabilities and equity. Many
of these instruments were previously classified as equity. SFAS No. 150 is
effective for financial instruments entered into or modified after May 31, 2003
and otherwise was effective at the beginning of the first interim period
beginning after June 15, 2003. The adoption of this Statement did not have an
effect on our financial statements.
RISKS AND UNCERTAINTIES
You should carefully consider the following risk factors, in addition to the
Company.
35other information contained in this Form 10-K and in any other documents to
which we refer you in this Form 10-K, before purchasing our securities. The
risks and uncertainties described below are not the only ones we face.
Our Inability to Accurately Predict Orders and Shipments May Affect Our Revenue,
Expenses and Earnings per Share.
We have not been able in the past to consistently predict when our customers
will place orders and request shipments so that we cannot always accurately plan
our manufacturing requirements. As a result, if orders and shipments differ from
what we predict, we may incur additional expenses and build excess inventory,
which may require additional reserves and allowances. Any significant change in
our customers' purchasing patterns could have a material adverse effect on our
operating results and reported earnings per share for a particular quarter.
Our Operating Results in Each Quarter May Be Affected by Special Conditions,
Such As Seasonality, Late Quarter Purchases, and Other Potential Issues.
Due in part to the buying patterns of our customers, a significant portion of
our quarterly revenues occurs from orders received and immediately shipped to
customers in the last few weeks and days of each quarter, although our operating
expenses tend to remain fairly predictable. Engineering and construction
purchases tend to occur in early spring, and governmental agencies tend to
utilize funds available at the end of the government's fiscal year for
additional purchases at the end of our third fiscal quarter in September of each
year. Concentrations of orders sometimes also occur at the end of our other two
fiscal quarters. Additionally, a majority of our sales force earns commissions
on a quarterly basis which may cause concentrations of orders at the end of any
fiscal quarter. If for any reason expected sales are deferred, orders are not
received, or shipments are delayed a few days at the end of a quarter, our
operating results and reported earnings per share for that quarter could be
significantly impacted.
We Are Dependent on a Sole Manufacturer and Assembler for Many of Our Products
and on Sole Suppliers of Critical Parts for Our Products.
We are substantially dependent upon Solectron Corporation in California, China
and Mexico as the exclusive manufacturing partner for many of our GPS products
previously manufactured out of our Sunnyvale facilities. Under the agreement
with Solectron, we provide to Solectron a twelve-month product forecast and
place purchase orders with Solectron 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 Solectron are cancelable, the terms
of the agreement would require us to purchase from Solectron all inventory not
returnable or usable by other Solectron customers. Accordingly, if we
inaccurately forecast demand for our products, we may be unable to obtain
adequate manufacturing capacity from Solectron to meet customers' delivery
requirements or we may accumulate excess inventories, if such inventories are
not usable by other Solectron customers.
Our current contract with Solectron continues in effect until either party gives
the other ninety days written notice.
* TrimbleSolectron is assembling all of our Component Technologies products in China.
Although this initiative in China has entered into forward foreign currency exchange contractsbrought cost savings over assembling in
California, we may experience quality control issues, shipping delays, or other
problems associated with manufacturing in China.
In addition, we rely on sole suppliers for a number of our critical components.
We have experienced shortages of components in the past. Our current reliance on
sole or a limited group of suppliers involves several risks, including a
potential inability to offset the effectsobtain an adequate supply of changes in exchange ratesrequired components and
reduced control over pricing. Any inability to obtain adequate deliveries or any
other circumstance that would require us to seek alternative sources of supply
or to manufacture such components internally could significantly delay our
ability to ship our products, which could damage relationships with current and
prospective customers and could harm our reputation and brand, and could have a
material adverse effect on foreign-denominated
intercompany receivables. At December 28, 2001, we had forward foreign currency
exchange contracts to sell approximately 181.0 million Japanese yen,
approximately 3.0 million Euros, and to buy approximately 0.3 million British
pounds sterling at contracted rates that mature over the next six months.
CERTAIN OTHER RISK FACTORSour business.
Our Annual and Quarterly Performance May Fluctuate.
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 byby:
o changes in market demand,
o competitive market conditions,
o market acceptance of existing or new or existing products,
o fluctuations in foreign currency exchange rates,
o the cost and availability of components,
o our ability to manufacture and ship products,
o the mix of our customer base and sales channels,
o the mix of products sold,
o our ability to expand our sales and marketing organization
effectively,
o our ability to attract and retain key technical and managerial
employees,
o the timing of shipments of products under contracts and sale of
licensing rights, and
o general global economic conditions.
In addition, demand for our products in any quarter or year may vary due to the
seasonal buying patterns of our customers in the agricultural and engineering
and construction industries. Due to the foregoing factors, our operating results
in one or more future periods are expected to be subject to significant
fluctuations. The price of our common stock could decline substantially in the
event such fluctuations result in our financial performance being below the
expectations of public market analysts and investors, which are based primarily
on historical models that are not necessarily accurate representations of the
future.
Our Operating Results in Each Quarter May Not Accurately Reflect Business
Activity in Each Quarter.
Due, in part, to the buying patterns of our customers, a significant
portion of our quarterly revenues occurs from orders received and immediately
shipped to customers in the last few weeks and days of each quarter, although
our operating expenses tend to remain constant. Engineering and construction
purchases tend to occur in early spring, and 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. Concentrations of orders sometimes also occur at the end of our other two
fiscal quarters. Additionally, a majority of our sales force earn commissions on
a quarterly basis, which may cause concentrations of orders at the end of any
fiscal quarter. If for any reason expected sales are deferred, orders are not
received, or shipments were to be delayed a few days at the end of a quarter,
our operating results and reported earnings per share for that quarter could be
significantly impacted.
Our Inability to Accurately Predict Orders and Shipments May Affect Our Revenue,
Expenses and Earnings per Share.
Because we have been unable in the past to predict exactly when our
customers will place orders and request shipments, we cannot accurately plan our
manufacturing requirements. As a result, if the orders and shipments differ from
what we predict, we may incur additional expenses and build unneeded inventory,
which may require additional reserves. Any significant change in our customers'
purchasing patterns could have a material adverse effect on our operating
results and reported earnings per share for a particular quarter.
Our Gross Margin Is Subject to Fluctuation.
Our gross margin is affected by a number of factors, including product mix,
product pricing, cost of components, foreign currency exchange rates and
manufacturing costs. For example, since our Engineering and Construction and
Geographic Information Systems (GIS)sales of Nikon products generally have higherlower
gross margins thanas compared to our Component Technologies products, absentGPS survey products. Absent other factors, a
shift in sales toward Engineering and Construction and GIS productstowards Nikon would lead to a gross margin improvement. On the other hand, if market conditions in the highly
competitive Engineering and Construction and GIS market segments forced us to
lower unit prices, we would suffer a decline in gross margin unless we were able
to timely offset the price reduction by a reduction in production costs or by
sales of
36
other products with higherour overall gross
margins.margins A decline in gross margin could have a
material effect onnegatively impact our operating results.
We Are Dependent on a Sole Manufacturer forearnings per
share.
Our ProductsBusiness is Subject to Disruptions and on Sole SuppliersUncertainties Caused by War or
Terrorism.
Acts of Critical Parts for Our Products.
With the selectionwar or acts of Solectron Corporation in August 1999 as an exclusive
manufacturing partner for many of our GPS products previously manufactured out
of our Sunnyvale facilities, we are substantially dependent upon a sole supplier
for the manufacture of our products. Under the agreement with Solectron, we
provide to Solectron a twelve-month product forecast and place purchase orders
with Solectron sixty calendar days in advance of the scheduled delivery of
products to our customers. Although purchase orders placed with Solectron are
cancelable, the terms of the agreement would require us to purchase from
Solectron all material inventory not returnable or usable by other Solectron
customers. Accordingly, if we inaccurately forecast demand for our products, we
may be unable to obtain adequate manufacturing capacity from Solectron to meet
customers' delivery requirements or we may accumulate excess inventories, if
such inventories are not usable by other Solectron customers.
In addition, we rely on sole suppliers for a number of our critical ASICS.
We have experienced shortages of supplies, including ASICS, in the past. As an
example, we were affected by industry-wide shortages of memory devices and
electronic components that reached their most severe impact in the third
calendar quarter of 2000. Our current reliance on sole or a limited group of
suppliers involves several risks, including a potential inability to obtain an
adequate supply of required components and reduced control over pricing. Any
inability to obtain adequate deliveries or any other circumstance that would
require us to seek alternative sources of supply or to manufacture such
components internally could significantly delay our ability to ship our
products, which could damage relationships with current and prospective
customers and could harm our reputation and brand, whichterrorism could have a material adverse effectimpact on our
business.
Our Credit Agreement Contains Stringent Financial Covenants.
Twobusiness, operating results, and financial condition. The threat of terrorism
and war and heightened security and military response to this threat, or any
future acts of terrorism, may cause further disruption to our economy and create
further uncertainties. To the financial covenantsextent that such disruptions or uncertainties
result in our Credit Agreement with ABN AMRO Bank,
N.V. and certain other banks, dated asdelays or cancellations of July 14, 2000 as amended (the "Credit
Agreement"), minimum fixed charge coverage and maximum leverage ratio, are
extremely sensitive to changes in earnings before interest, taxes, depreciation
and amortization ("EBITDA"). In turn, EBITDA is highly correlated to revenues
and cost cutting. Due to uncertainties associated withorders, or the downturn in the
worldwide economy, our future revenues by quarter are becoming increasingly more
difficult to forecast and we have recently put in place various cost cutting
measures, including the consolidation of service functions and centers, closure
of redundant offices, consolidation of redundant product lines and reductions in
staff. If revenues should decline at a faster pace than the rate of these cost
cutting measures, on a quarter to quarter basis we may not be in compliance with
the two above mentioned financial covenants. If we default on onemanufacture or more
covenants, we will have to obtain either negotiated waivers or amendments to the
Credit Agreement. If we are unable to obtain such waivers or amendments, the
banks would have the right to accelerate the paymentshipment of
our outstanding
obligations under the Credit Agreement, which would have a material adverse
effect onproducts, our business, operating results, and financial condition could be
materially and viability as an operating company. In
addition, a default under one of our debt instruments may also trigger
cross-defaults under our other debt instruments. An event of default under any
debt instrument, if not cured or waived, could have a material adverse effect on
us.adversely affected.
Our Substantial Indebtedness Could Materially Restrict Our Operations and
Adversely Affect Our Financial Condition.
We now have, and for the foreseeable future willexpect to have, a significant level
of indebtedness. Our substantial indebtedness could:
o increase our vulnerability to general adverse economic and industry
conditions;
o limit our ability to fund future working capital, capital
expenditures, research and development and other general corporate
requirements, or to make certain investments that could benefit us;
o require us to dedicate a substantial portion of our cash flow to
service interest and principal payments on our debt;
o limit our flexibility to react to changes in our business and the
industry in which we operate; and
37
o limit our ability to borrow additional funds.
Our Credit Agreement Contains Financial Covenants.
On June 25, 2003, we executed a Credit Agreement with Scotia Capital and certain
other banks which provides for financial commitments totaling up to $175
million. This credit facility contains financial covenants regarding minimum
fixed charge coverage and maximum leverage ratio which are extremely sensitive
to changes in earnings before interest, taxes, depreciation and amortization, or
EBITDA. In turn, EBITDA is highly correlated to revenues and costs. If we
default on one or more covenants, we will have to obtain either negotiated
waivers or amendments to the Credit Agreement. If we were unable to obtain such
waivers or amendments, the banks would have the right to accelerate the payment
of our outstanding obligations under the Credit Agreement which would have a
material adverse effect on our financial condition and viability as an operating
company. In addition, a default under one of our debt instruments may also
trigger cross defaults under our other debt instruments. An event of default
under any debt instrument, if not cured or waived, could have a material adverse
effect on us.
We Rely on Key Customers.
We generate a portion of our revenue from large original equipment manufacturers
such as Siemens VDO Automotive AG and Nortel. A reduction or loss of business
with these customers could have a material adverse effect on our financial
condition and results of operations. There can be no assurance that we will be
able to continue to realize value from these relationships in the future.
We Are Dependent on New Products.
Our future revenue stream depends to a large degree on our ability to bring new
products to market on a timely basis. We must continue to make significant
investments in research and development in order to continue to develop new
products, enhance existing products and achieve market acceptance of such
products. We may incur problems in the future in innovating and introducing new
products. Our development stage products may not be successfully completed or,
if developed, may not achieve significant customer acceptance. If we were unable
to successfully define, develop and introduce competitive new products, and
enhance existing products, our future results of operations would be adversely
affected. Development and manufacturing schedules for technology products are
difficult to predict, and we might not achieve timely initial customer shipments
of new products. The timely availability of these products in volume and their
acceptance by customers are important to our future success. A delay in new
product introductions could have a significant impact on our results of
operations.
We May Not Be Able to Enter Into or Maintain Important Alliances.
We believe that in certain business opportunities our success will depend on our
ability to form and maintain alliances with industry participants, such as
Caterpillar, Nikon, McNeilus, and CNH Global. Our failure to form and maintain
such alliances, or the pre-emption of such alliances by actions of other
competitors or us, will adversely affect our ability to penetrate emerging
markets. No assurances can be given that we will not experience problems from
current or future alliances or that we will realize value from any such
strategic alliances.
We Are Dependent on the Availability of Allocated Bands Within the Radio
Frequency Spectrum.
Our GPS technology is dependent on the use of the Standard Positioning Service
("SPS") provided by the US Government's GPS. The GPS SPS operates in radio
frequency bands that are globally allocated for radio navigation satellite
services. International allocations of radio frequency are made by the
International Telecommunications Union ("ITU"), a specialized technical agency
of the United Nations. These allocations are further governed by radio
regulations that have treaty status and which may be subject to modification
every two to three years by the World Radio Communication Conference.
Any ITU reallocation of radio frequency bands, including frequency band
segmentation or sharing of spectrum, may materially and adversely affect the
utility and reliability of our products, which would, in turn, cause a material
adverse effect on our operating results. Many of our products use other radio
frequency bands, together with the GPS signal, to provide enhanced GPS
capabilities, such as real-time kinematics precision. The continuing
availability of these non-GPS radio frequencies is essential to provide enhanced
GPS products to our precision survey markets. Any regulatory changes in spectrum
allocation or in allowable operating conditions may materially and adversely
affect the utility and reliability of our products, which would, in turn, cause
a material adverse effect on our operating results.
In addition, unwanted emissions from mobile satellite services and other
equipment operating in adjacent frequency bands or in-band from licensed and
unlicensed devices may materially and adversely affect the utility and
reliability of our products, which could result in a material adverse effect on
our operating results. The FCC continually receives proposals for novel
technologies and services, such as ultra-wideband technologies, which may seek
to operate in, or across, the radio frequency bands currently used by the GPS
SPS and other public safety services. Adverse decisions by the FCC that result
in harmful interference to the delivery of the GPS SPS and other radio frequency
spectrum also used in our products may materially and adversely affect the
utility and reliability of our products, which could result in a material
adverse effect on our business and financial condition.
We Are Subject to the Adverse Impact of Radio Frequency Congestion.
We have certain products, such as GPS RTK systems, surveying and mapping
systems, and Robotic Total Stations, that use integrated radio communication
technology requiring access to available radio frequencies allocated by the FCC
(or the NTIA in the case of federal government users of this equipment) for
which the end user is required to obtain a license in order to operate their
equipment. In addition, access to these frequencies by state agencies is under
management by state radio communications coordinators. Some bands are
experiencing congestion that excludes their availability for access by state
agencies in some states, including the State of California. To reduce
congestion, the FCC announced that it will require migration of radio technology
from wideband to narrowband operations in these bands. In December 2003, the FCC
stayed the effectiveness of its new rules until it acts on petitions requesting
a reconsideration of this new requirement. The stay is indefinite at this point
and the outcome of this proceeding is unknown at this time. An inability to
obtain access to these radio frequencies by end users, and for new products to
comply with FCC requirements, could have an adverse effect on our operating
results.
Many of Our Products Rely on the GPS Satellite System.
The GPS satellites and their ground support systems are complex electronic
systems subject to electronic and mechanical failures and possible sabotage. The
satellites were originally designed to have lives of 7.5 years and are subject
to damage by the hostile space environment in which they operate. However, of
the current deployment of 28 satellites in place, some have already been in
operation for 13 years. To repair damaged or malfunctioning satellites is
currently not economically feasible. If a significant number of satellites were
to become inoperable, there could be a substantial delay before they are
replaced with new satellites. A reduction in the number of operating satellites
may impair the current utility of the GPS system and the growth of current and
additional market opportunities.
In addition, there can be no assurance that the US Government will remain
committed to the operation and maintenance of GPS satellites over a long period,
or that the policies of the US Government for the use of GPS without charge will
remain unchanged. However, a 1996 Presidential Decision Directive marks the
first time in the evolution of GPS that access for civilian use free of direct
user fees is specifically recognized and supported by Presidential policy. In
addition, Presidential policy has been complemented by corresponding
legislation, signed into law. Because of ever-increasing commercial applications
of GPS, other US Government agencies may become involved in the administration
or the regulation of the use of GPS signals. Any of the foregoing factors could
affect the willingness of buyers of our products to select GPS-based systems
instead of products based on competing technologies.
Many of our products also use signals from systems that augment GPS, such as the
Wide Area Augmentation System (WAAS) and national Differential GPS System
(NDGPS). Many of these augmentation systems are operated by the federal
government and rely on continued funding and maintenance of these systems. Any
curtailment of the operating capability of these systems could result in
decreased user capability thereby impacting our markets.
Any resulting change in market demand for GPS products could have a material
adverse effect on our financial results. For example, European governments have
expressed interest in building an independent satellite navigation system, known
as Galileo. Depending on the as yet undetermined design and operation of this
system, there may be interference to the delivery of the GPS SPS and may
materially and adversely affect the utility and reliability of our products
which could result in a material adverse effect on our business and operating
results.
We Face Risks in Investing in and Integrating New Acquisitions.
Acquisitions of companies, divisions of companies, or products entail numerous
risks, including:
o potential inability to successfully integrate acquired operations and
products or to realize cost savings or other anticipated benefits from
integration;
o diversion of management's attention;
o loss of key employees of acquired operations;
o the difficulty of assimilating geographically dispersed operations and
personnel of the acquired companies;
o the potential disruption of our ongoing business;
o unanticipated expenses related to such integration;
o the correct assessment of the relative percentages of in-process
research and development expense that can be immediately written off
as compared to the amount which must be amortized over the appropriate
life of the asset;
o the impairment of relationships with employees and customers of either
an acquired company or our own business;
o the potential unknown liabilities associated with acquired business;
and
o inability to recover strategic investments in development stage
entities.
As a result of such acquisitions, we have significant assets that include
goodwill and other purchased intangibles. The testing of these intangibles under
established accounting guidelines for impairment requires significant use of
judgment and assumptions. Changes in business conditions could require
adjustments to the valuation of these assets. In addition, losses incurred by a
company in which we have an investment may have a direct impact on our financial
statements or could result in our having to write-down the value of such
investment. Any such problems in integration or adjustments to the value of the
assets acquired could harm our growth strategy and have a material adverse
effect on our business, financial condition and compliance with debt covenants.
We Face Competition in Our Markets.
Our markets are highly competitive and we expect that both direct and indirect
competition will increase in the future. Our overall competitive position
depends on a number of factors including the price, quality and performance of
our products, the level of customer service, the development of new technology
and our ability to participate in emerging markets. Within each of our markets,
we encounter direct competition from other GPS, optical and laser suppliers and
competition may intensify from various larger domesticUS and internationalnon-US competitors and new
market entrants, some of which may be our current customers. The competition in
the future, may, in some cases, result in price reductions, reduced margins or
loss of market share, any of which could materially and adversely affect our
business, operating results and financial condition. We believe that our ability
to compete successfully in the future against existing and additional
competitors will depend largely on our ability to execute our strategy to
provide systems and products with significantly differentiated features compared
to currently available products. There can be
no assurance that we willWe may not be able to implement this strategy
successfully, or
that any suchand our products willmay 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. There can be no assurance that we will be able to compete
successfully against current or future competitors or that competitive pressures
cause us to lose market share or force us to engage in price reductions that
could have a material adverse effect on our business.
We May Encounter Problems Associated With International Operations and Sales.
Our customers are located throughout the world. Sales to unaffiliated
customers in foreign locations represented approximately 50% of our revenues in
our fiscal year 2001 and 52% in each of our fiscal years 2000 and 1999. In
addition, we have significant international operations, including manufacturing
facilities, sales personnel and customer support operations. Our international
sales operations include offices in Australia, Canada, China, France, Germany,
Great Britain, Japan, Mexico, New Zealand, Sweden, Russia, Singapore and others.
Our international manufacturing facilities are in Sweden and Germany. Our
international presence exposes us to risks not faced by wholly-domestic
companies. Specifically, we have experienced issues relating to integration of
foreign operations, greater difficulty in accounts receivable collection, longer
payment cycles and currency fluctuations. Additionally, we face the following
risks, among others: unexpected changes in regulatory requirements; tariffs and
other trade barriers; political, legal and economic instability in foreign
markets, particularly in those markets in which we maintain manufacturing and
research facilities; difficulties in staffing and management; language and
cultural barriers; seasonal reductions in business activities in the summer
months in Europe and some other countries; and potentially adverse tax
consequences. Although we implemented a program to attempt to manage foreign
exchange risks through hedging and other strategies, there can be no assurance
that this program will be successful and that currency exchange rate
fluctuations will not have a material adverse effect on our results of
operations. In addition, in certain foreign markets, there may be reluctance to
purchase products based on GPS technology, given the control of GPS by the U.S.
Government.
We Are Dependent on Proprietary Technology.
Our future success and competitive position is dependent upon our proprietary
technology, and we rely on patent, trade secret, trademark and copyright law to
protect our intellectual property. There can be no assurance
that theThe patents owned or licensed by us will notmay be
invalidated, circumvented, challenged, or that theand challenged. The rights granted thereunder willunder these
patents may not provide competitive advantages to us or that anyus. Any of our pending or
future patent applications willmay not be issued within the scope of the claims
sought by us, if at all.
We are
currently defending two separate lawsuits for alleged patent infringement, one
alleging infringement of a patent by some of our grade control systems, which
products accounted for approximately two percent (2%) of our revenues in our
fiscal year 2001, and another alleging infringement by our surveying products,
which products accounted for approximately eleven percent (11%) of our revenues
in our fiscal year 2001. In the event that in either or both of these suits our
products are held to be infringing a valid patent, we could be prevented from
continuing to sell these products and could be required to pay substantial
damages, or, alternatively, enter into a royalty-bearing license agreement.
38
There can be no assurance that others will notOthers 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 foreign countries. There can be no assurance that theThe steps taken by us to
protect our technology willmight not prevent the misappropriation of such
technology.
The value of our products relies substantially on our technical innovation in
fields in which there are many current patent filings. We recognize that as new
patents are issued or are brought to our attention by the holders of such
patents, it may be necessary for us to withdraw products from the market, take a
license from such patent holders, or redesign our products. We do not believe
any of our products currently infringe patents or other proprietary rights of
third parties, but we cannot be certain they do not do so. In addition, the
legal costs and engineering time required to safeguard intellectual property or
to defend against litigation could become a significant expense of operations.
Such events could have a material adverse effect on our revenues or
profitability.
We Are Dependent on New Products.Must Carefully Manage Our future revenue stream dependsFuture Growth.
Growth in our sales or continued expansion in the scope of our operations could
strain our current management, financial, manufacturing and other resources, and
may require us to implement and improve a large degree onvariety of operating, financial and
other systems, procedures, and controls. Specifically we have experienced strain
in our abilityfinancial and order management system. We are expanding our sales,
accounting, manufacturing, and other information systems to bring
new productsmeet these
challenges. These systems, procedures, or controls may not be adequate to
market onsupport our operations and may not be designed, implemented, or improved in a
cost-effective and timely manner. Any failure to implement, improve and expand
such systems, procedures, and controls in a timely basis. We must continue to make significant
investments in research and development in order to continue to develop new
products, enhance existing products and achieve market acceptance of such
products. However, there can be no assurance that development stage products
will be successfully completed or, if developed, will achieve significant
customer acceptance. If we were unable to successfully define, develop and
introduce competitive new products, and enhance existing products, our future
results of operations would be adversely affected. Development and manufacturing
schedules for technology products are difficult to predict, and there can be no
assurance that we will achieve timely initial customer shipments of new
products. The timely availability of these products in volume and their
acceptance by customers are important to our future success. A delay in new
product introductions could have a significant impact on our results of
operations. No assurance can be given that we will not incur problems in the
future in innovating and introducing new products.
Our Stock Price May Be Volatile.
Our common stock has experienced and can be expected to experience
substantial price volatility in response to actual or anticipated quarterly
variations in results of operations, announcements of technological innovations
or new products by us or our competitors, developments related to patents or
other intellectual property rights, developments in our relationship with
customers, suppliers, or strategic partners and other events or factors. In
addition, any shortfall or changes in revenue, gross margins, earnings, or other
financial results from analysts' expectations could cause the price of our
common stock to fluctuate significantly. Additionally, certain macro-economic
factors such as changes in interest rates as well as market climate for the
high-technology sector could also have an impact on the trading price of our
stock.
We Face Risks of Entering Into and Maintaining Alliances.
We believe that in certain emerging markets our success will depend on our
ability to form and maintain alliances with established system providers and
industry leaders. Our failure to form and maintain such alliances, or the
preemption of such alliances by actions of other competitors or us will
adversely affect our ability to penetrate emerging markets. No assurances can be
given that we will not experience problems from current or future alliances or
that we will realize value from any such strategic alliances.
We Face Risks in Investing in and Integrating New Acquisitions.
We are continuously evaluating external investments in technologies related
to our business, and have made relatively small strategic equity investments in
a number of GPS related technology companies. Acquisitions of companies,
divisions of companies, or products entail numerous risks, including (i) the
potential inability to successfully integrate acquired operations and products
or to realize cost savings or other anticipated benefits from integration; (ii)
diversion of management's attention; (iii) loss of key employees of acquired
operations; and (iv) inability to recover strategic investments in development
stage entities. As a result of such acquisitions, we have significant assets
that include goodwill and other purchased intangibles. The testing of these
intangibles under established accounting guidelines for impairment requires
significant use of judgment and assumptions. Changes in
39
business conditions could require adjustments to the valuation of these assets.
Any such problems in integration or adjustments to the value of the assets
acquiredefficient manner could
harm our growth strategy and have a material adverse effect on
our business, financial condition and compliance with debt covenants.
We Are Dependent on Key Customers.
We currently enjoy strong relationships with key customers. An increasing
amount of our revenue is generated from large original equipment manufacturers
such as Siemens VDO Automotive, Nortel, Caterpillar, CNH Global, Bosch, and
others. A reduction or loss of business with these customers could have a
material adverse effect onadversely affect our financial condition and
results of operations.
There can be no assurance that we will be ableability to continue to realize value from
these relationships in the future.achieve our business objectives.
We Are Dependent on Retaining and Attracting Highly Skilled Development and
Managerial Personnel.
Our ability to maintain our competitive technological position will depend, in a
large part, on our ability to attract, motivate, and retain highly qualified
development and managerial personnel. Competition for qualified employees in our
industry and location is intense, and there can be no assurance that we will be
able to attract, motivate, and retain enough qualified employees necessary for
the future continued development of our business and products.
We May Encounter Problems Associated With International Operations and Sales.
Our customers are located throughout the world. Sales to unaffiliated customers
in non-US locations represented approximately 51% of our revenues in our fiscal
year 2003, 49% in our fiscal year 2002 and 50% in our fiscal year 2001. In
addition, we have significant international operations, including manufacturing
facilities, sales personnel and customer support operations. We have sales
offices outside the US. Our non-US manufacturing facilities are in Sweden and
Germany, and we have a regional fulfillment center in the Netherlands. Our
non-US presence exposes us to risks not faced by wholly US companies.
Specifically, we have experienced issues relating to integration of non-US
operations, greater difficulty in accounts receivable collection, longer payment
cycles, and currency fluctuations. Additionally, we face the following risks,
among others:
o unexpected changes in regulatory requirements;
o tariffs and other trade barriers;
o political, legal and economic instability in non-US markets,
particularly in those markets in which we maintain manufacturing and
research facilities;
o difficulties in staffing and management;
o language and cultural barriers;
o seasonal reductions in business activities in the summer months in
Europe and some other countries;
o war and acts of terrorism; and
o potentially adverse tax consequences.
In certain non-US markets, there may be reluctance to purchase products based on
GPS technology, given the control of GPS by the US Government.
We Are Exposed to Fluctuations in Currency Exchange Rates.
A significant portion of our business is conducted outside the United States,
and as such, we face exposure to adverse movements in non-US currency exchange
rates. These exposures may change over time as business practices evolve and
could have a material adverse impact on our financial results and cash flows. In
fiscal 2003, the US dollar weakened against several major currencies in which we
do business, adversely impacting our financial results.
Currently, we hedge only those currency exposures associated with certain assets
and liabilities denominated in non-functional currencies and periodically will
hedge anticipated foreign currency cash flows. The hedging activities undertaken
by us are intended to offset the impact of currency fluctuations on certain
non-functional currency assets and liabilities. Our attempts to hedge against
these risks may not be successful resulting in an adverse impact on our net
income.
We Are Subject to the Impact of Governmental and Other Similar Certifications.
We market certain products that are subject to governmental and similar
certifications before they can be sold. For example, CE certification for
radiated emissions is required for most GPS receiver and data communications
products sold in the European Union. An inability to obtain such certifications
in a timely manner could have an adverse effect on our operating results. Also,
our products that use integrated radio communication technology require an end-userend
user to obtain licensing from the Federal Communications Commission ("FCC")(FCC) for
frequency-band usage. These are secondary licenses that are subject to certain
restrictions. During the fourth quarter of 1998, the FCC temporarily suspended
the issuance of licenses for certain of our real-time kinematickinematics products
because of interference with certain other users of similar radio frequencies.
An inability or delay in obtaining such certifications or delays ofchanges to the rules
by the FCC could adversely affect our ability to bring our products to market
which could harm our customer relationships and have a material adverse effect
on our business.
The Volatility of Our Stock Price Could Adversely Affect Your Investment in Our
Common Stock.
The market price of our common stock has been, and may continue to be, highly
volatile. During fiscal 2003, our stock price ranged from $8.68 to $25.60. We
Are Dependent onbelieve that a variety of factors could cause the Availabilityprice of Allocated Bands Withinour common stock to
fluctuate, perhaps substantially, including:
o announcements and rumors of developments related to our business or
the Radio
Frequency Spectrum.
Our GPS technology is dependent onindustry in which we compete;
o quarterly fluctuations in our actual or anticipated operating results
and order levels;
o general conditions in the useworldwide economy, including fluctuations in
interest rates;
o announcements of the Standard Positioning
Service ("SPS") providedtechnological innovations;
o new products or product enhancements by the U.S. Government's Global Positioning System
("GPS"). The GPS SPS operatesus or our competitors;
o developments in radio frequency bands that are globally
allocated for radio navigation satellite services. International allocationspatents or other intellectual property rights and
litigation;
o developments in our relationships with our customers and suppliers;
and
o any significant acts of radio frequency are made by the International Telecommunications Union ("ITU"),
a specialized technical agency ofterrorism against the United Nations. These allocations are
further governed by radio regulations thatStates.
In addition, in recent years the stock market in general and the markets for
shares of "high-tech" companies in particular, have treaty status andexperienced extreme price
fluctuations which may be
subjecthave often been unrelated to modification every two-three years by the World Radiocommunication
Conference.operating performance of
affected companies. Any ITU reallocation of radio frequency bands, including frequency
band segmentation or sharing of spectrum, may materially andsuch fluctuations in the future could adversely affect
the utility and reliabilitymarket price of our products, which would, in turn, cause a
material adverse effect on our operating results. Manycommon stock, and the market price of our products usecommon stock
may decline.
We are Subject to Environmental Laws and Potential Exposure to Environmental
Liabilities.
We are subject to various federal, state and local environmental laws and
regulations that govern our operations, including the handling and disposal of
non-hazardous and hazardous wastes, and emissions and discharges into the
environment. Failure to comply with such laws and regulations could result in
costs for corrective action, penalties, or the imposition of other radio frequency bands, together withliabilities.
We also are subject to laws and regulations that impose liability and clean-up
responsibility for releases of hazardous substances into the GPS signal, to provide enhanced GPS
capabilities, such as real-time kinematic precision. The continuing availabilityenvironment. Under
certain of these non-GPS radio frequencies is essentiallaws and regulations, a current or previous owner or operator
of property may be liable for the costs of remediating hazardous substances or
petroleum products on or from its property, without regard to provide enhanced GPS productswhether the owner
or operator knew of, or caused, the contamination, as well as incur liability to
our precision survey markets. Any regulatory changes in spectrum allocationthird parties impacted by such contamination. The presence of, or in allowable operating conditions may materially andfailure to
remediate properly, such substances could adversely affect the utility and reliability of our products, which would, in turn, cause a material
adverse effect on our operating results. In addition, unwanted emissions from
mobile satellite services and other equipment operating in adjacent frequency
bands or inband from licensed and unlicensed devices may materially and
adversely affect the utility and reliability of our products, which could result
in a material adverse effect on our operating results. The FCC continually
receives proposals for novel technologies and services, such as ultra-wideband
technologies, which may seek to operate in, or across, the radio frequency bands
currently used by the GPS SPS and other public safety services. Adverse
decisions by the FCC that result in harmful interference to the delivery of the
GPS SPS and other radio frequency spectrum also used in our products may
materially and adversely affect the utility and reliability of our products,
which could result in a material adverse effect on our business and financial
condition.
40
We Are Subject to the Adverse Impact of Radio Frequency Congestion.
We have certain real-time kinematic products, such as our Land Survey 5700,
that use integrated radio communication technology that requires access to
available radio frequencies allocated by the FCC. In addition, access to these
frequencies by state agencies is under management by state radio communications
coordinators. Some bands are experiencing congestion that excludes their
availability for access by state agencies in some states, including the state of
California. An inability to obtain access to these radio frequencies could have
an adverse effect on our operating results.
We Are Reliant on the GPS Satellite Network.
The GPS satellites and their ground support systems are complex electronic
systems subject to electronic and mechanical failures and possible sabotage. The
satellites were originally designed to have lives of 7.5 years and are subject
to damage by the hostile space environment in which they operate. However, of
the current deployment of 28 satellites in place, some have already been in
place for 12 years. To repair damaged or malfunctioning satellites is currently
not economically feasible. If a significant number of satellites were to become
inoperable, there could be a substantial delay before they are replaced with new
satellites. A reduction in the number of operating satellites would impair the
current utility of the GPS systemvalue and the
growth of current and additional
market opportunities. In addition,ability to transfer or encumber such property. Based on currently available
information, although there can be no assurance, we believe that the U.S.
Governmentsuch
liabilities will remain committed to the operation and maintenance of GPS
satellites over a long period, or that the policies of the U.S. Government for
the use of GPS without charge will remain unchanged. However, a 1996
Presidential Decision Directive marks the first time in the evolution of GPS
that access for civilian use free of direct user fees is specifically recognized
and supported by Presidential policy. In addition, Presidential policy has been
complemented by corresponding legislation, signed into law. Because of
ever-increasing commercial applications of GPS, other U.S. Government agencies
may become involved in the administration or the regulation of the use of GPS
signals. Any of the foregoing factors could affect the willingness of buyers of
our products to select GPS-based systems instead of products based on competing
technologies. Any resulting change in market demand for GPS products couldnot have a material adverse effectimpact on our financial results. For example, European
governments have expressed interest in building an independent satellite
navigation system, known as Galileo. Depending on the as yet undetermined design
and operation of this system, there may be interference to the delivery of the
GPS SPS and may materially and adversely affect the utility and reliability of
our products, which could result in a material adverse effect on our business
and operating results.
We Are Reliant on a Continuous Power Supply.
California recently experienced an energy crisis that threatened to disrupt
our operations and resulted in increased expenses for our California facilities.
In the event of an acute power shortage, that is, when power reserves for the
State of California fall below certain critical levels, California has on some
occasions implemented, and may in the future continue to implement, rolling
blackouts throughout the state. We currently do not have adequate backup
generators or alternate sources of power in the event of a blackout, and our
current insurance does not provide coverage for any damages we or our customers
may suffer as a result of any interruption in our power supply. If blackouts
interrupt our power supply or Solectron's power supply, we would be temporarily
unable to continue operations at our California facilities. Any such
interruption in our ability to continue operations at our facilities or
Solectron's ability to manufacture product at its facilities could damage our
reputation, harm our ability to retain existing customers and to obtain new
customers, and could result in lost revenue, any of which could substantially
harm our business and results of operations.
We Must Carefully Manage Our Future Growth.
Any continued growth in our sales or any continued expansion in the scope
of our operations could strain our current management, financial, manufacturing
and other resources and may require us to implement and improve a variety of
operating, financial and other systems, procedures and controls. Specifically we
have experienced strain in our financial and order management system, as a
result of our acquisitions. While we plan to expand our sales, accounting,
manufacturing, and other information systems to meet these challenges, there can
be no assurance that these efforts will succeed, or that any existing or new
systems over time, procedures or controls will be adequate to support our
operations or that our systems, procedures and controls will be designed,
implemented or improved in a
41
cost effective and timely manner. Any failure to implement, improve and expand
such systems, procedures and controls in a timely and efficient manner could
harm our growth strategy and adversely affect our financial condition and
ability to achieve our business objectives.business.
Provisions in Our Preferred Share Rights Agreement May Have Anti-Takeover
Effects.Charter Documents and Under California Law Could Prevent or
Delay a Change of Control, which Could Reduce the Market Price of Our preferred share rights agreement gives our board of directors and
shareholders the ability to dilute the ownership of any person acquiring fifteen
percent (15%) or moreCommon
Stock.
Certain provisions of our common stock, thereby potentially making any such
acquisition impracticalarticles of incorporation, as amended and restated,
our bylaws, as amended and restated, and the California General Corporation Law
may be deemed to have an anti-takeover effect and could discourage a third party
from acquiring, or make it more difficult for an acquirer. The existence of this preferred share
rights agreement could delay, defer or prevent a change ofthird party to acquire, control
of us in a
transaction not approved bywithout approval of our board of directors. New Accounting Standards
In August 2001,These provisions could also
limit the Financial Accounting Standards Board issued FAS No.
144, "Accountingprice that certain investors might be willing to pay in the future for
shares of our common stock. Certain provisions allow the Impairment or Disposalboard of Long-lived Assets". FAS No.
144 supercedes FAS No. 121, "Accounting fordirectors to
authorize the Impairmentissuance of Long-lived Assetspreferred stock with rights superior to those of the
common stock.
We have adopted a Preferred Shares Rights Agreement, commonly known as a "poison
pill." The provisions described above, our poison pill and Assets to be Disposed of" and the accounting and reporting provisions of Accounting Principles Board Opinion No. 30, "Reporting the
Results of Operations
- -Reporting the Effects of Disposal ofCalifornia General Corporation Law may discourage, delay or prevent a Segment of a Business, and
Extraordinary, Unusual and Infrequently Occurring Events and Transactions." FAS
No. 144 also amends Accounting Research Bulletin No. 51, "Consolidated Financial
Statements," to eliminate the exception to consolidation for a subsidiary for
which control is likely to be temporary. The provisions of FAS No. 144 will be
effective for fiscal years beginning after December 15, 2001. The effect of
adopting FAS No. 144 has been evaluated by the Company, and does not have a
material adverse effect on Trimble's financial position or results of
operations.
In June 2001, the Financial Accounting Standards Board issued Statements of
Financial Accounting Standards No. 141, Business Combinations, and No. 142,
Goodwill and Other Intangible Assets. Statement 141 requires that the purchase
method of accounting be used for all business combinations initiated after June
30, 2001. Statement 141 also includes guidance on the initial recognition and
measurement of goodwill and other intangible assets arisingthird
party from business
combinations completed after June 30, 2001. Statement 142 prohibits the
amortization of goodwill and intangible assets with indefinite useful lives.
Statement 142 requires that these assets be reviewed for impairment at least
annually. Intangible assets with finite lives will continue to be amortized over
their estimated useful lives. Additionally, Statement 142 requires that goodwill
included in the carrying value of equity method investments no longer be
amortized.
The Company will apply Statement 142 beginning in the first quarter of
2002. Application of the nonamortization provisions of Statement 142 will
significantly reduce amortization expense which was approximately $26.8 million
in fiscal 2001. The Company will reclassify identifiable intangible assets with
indefinite lives, as defined by Statement 142, to goodwill at the date of
adoption. The Company will test goodwill for impairment using the two-step
process prescribed in Statement 142. The first step is a screen for potential
impairment, while the second step measures the amount of the impairment, if any.
The Company expects to perform the first of the required impairment tests of
goodwill and indefinite lived intangible assets as of January 1, 2002 in the
first quarter of 2002. Any impairment charge resulting from these transitional
impairment tests will be reflected as the cumulative effect of a change in
accounting principle in the first quarter of 2002. Based on the preliminary
unaudited analysis completed to date, we do not believe that the application of
these statements will have an adverse material impact on the earnings and
financial position of the Company.acquiring us.
Item 7A. Quantitative and Qualitative Disclosure about Market Risk
We are exposed to market risk related to changes in interest rates and foreign
currency exchange rates. Trimble usesWe use certain derivative financial instruments to
manage these risks. Trimble doesWe do not use derivative financial instruments for
speculative or trading purposes. All financial instruments are used in
accordance with policespolicies approved by Trimble'sour board of directors.
42
Market Interest Rate Risk
The Company isWe are exposed to market risk due to the possibility of changing interest rates
under its seniorour secured credit facilities. The Company's credit
facilities areCredit Facility. Our Credit Facility is comprised of a
three-year, US dollar-only revolver a three-year
Multi-Currency revolver,that expires on June 25, 2006, and a
five-yearfour-year term loan.loan that expires on June 25, 2007. Borrowings under the credit
facilityCredit
Facility have interest payments based on a floating rate of LIBOR plus a number
of basis points tied to a formula based on the Company's leverage ratio. As of
December 28, 2001, our senior debt to EBITDA (senior leverage ratio) was
approximately 2.25. At this leverage ratio our pricing will be LIBOR plus 225
basis points.Leverage Ratio. The U.S. dollar and the Multi-Currency revolvers run through July
2003 and have outstanding principal balances at December 28, 2001 of $30.0
million and $10.0 million, respectively. As of December 28, 2001 the Company has
borrowed from the Multi-Currency revolver
in U.S. currency only. The term loan
runs through July 2005matures on June 25, 2006 and has an outstanding principal balance of $61.3$44
million, at December 28, 2001.while the term loan matures on June 25, 2007 and has an outstanding
principal balance of $43.8 million, as of January 2, 2004 (all in US currency
only). The three-month LIBOR effective rate at December 28, 2001January 2, 2004 was 1.9%1.155%. A
hypothetical ten percent10% increase in three-month LIBOR rates could result in
approximately $193,000$101,790 annual increase in interest expense on the existing
principal balances. In order to reduce variable interest rate exposure on borrowings under its
existing credit facility, Trimble hadWe have hedged the market risk with an interest rate swap agreement on
a
portion50% of the variable rate debt, which fixes theour term loan. The rate on the notional amount
of $25.0 million at 5.195%. This agreement expired in February 2002 and was not
renewed.
The Company also has $3.3 million of Euro-denominated debt, classified as a
current liability at the end of fiscal 2001. Thethat interest rate on this
instrumentswap is fixed at six percent. A hypothetical ten percent decrease in
interest rates would not have a material impact on the results of operations of
the Company as related to this debt.
In addition, the Company has a $1.9 million promissory note, of which
$87,000 was classified as a current liability at the end of fiscal 2001. The
note is payable in monthly installments, bearing a variable interest rate of
7.14% as of December 28, 2001. A hypothetical ten percent increase in interest
rates would not have a material impact on the results of operations of the
Company.2.517%.
* The hypothetical changes and assumptions made above will be different from
what actually occurs in the future. Furthermore, the computations do not
anticipate actions that may be taken by Trimble'sour management should the hypothetical
market changes actually occur over time. As a result, actual earnings effects in
the future will differ from those quantified above.
Foreign Currency Exchange Rate Risk
Trimble hedges identified risks associated withWe enter into foreign currency
transactions in orderexchange forward contracts to minimize the short-term
impact of changes in foreign currency exchange ratesfluctuations on earnings. Trimble utilizes forward contracts to hedge certain trade and intercompanyinter-company
receivables and payables.payables, primarily denominated in Australian, Canadian, New
Zealand, and Swedish currencies, the Euro, and the British pound. These
contracts reduce the exposure to fluctuations in exchange rate movements as the
gains and losses associated with foreign currency balances are generally offset
with the gains and losses on the hedgeforward contracts. All hedgeThese instruments are marked
to market through earnings every period. Certain intercompany transactions such as the
sale of products between our Spectra Precision Group entities areperiod and generally range from one to three
months in original maturity. We do not specifically hedged utilizingenter into foreign exchange forward
contract for trading purposes.
Foreign exchange forward contracts because the Company believes
that it has a natural hedge through its worldwide operating structure. The
Company's practice is to settle these intercompany transactions on a timely
basis which reduces our exposure to fluctuations in exchange rate movements.outstanding as of January 2, 2004 and January
3, 2003 are summarized as follows (in thousands):
January 2, 2004 January 3, 2003
--------------- ---------------
Nominal Amount Fair Value Nominal Amount Fair Value
-------------- ---------- -------------- ----------
Forward contracts:
Purchased $ 15,767 $ (1,666) $ 24,414 $ (658)
Sold $ 44,236 2,994 24,539 955
* Trimble doesWe do not anticipate any material adverse effect on itsour consolidated financial
position utilizing our current hedging strategy.
From time to time, we may also utilize forward foreign exchange contracts
designated as cash flow hedges of operational exposures represented by firm
backlog orders to specific accounts over a specific period of time. We record
changes in the fair value of cash flow hedges in accumulated, other
comprehensive income (loss), until the firm backlog transaction ships. Upon
recognition of revenue, we reclassify the gain or loss on the cash flow hedge to
the statement of operations. The critical terms of the cash flow hedging
instruments are the same as the underlying forecasted transactions. The changes
in fair value of the derivatives are intended to offset changes in the expected
cash flow from the forecasted transactions. All forward contracts have
a maturitymaturities of less than six months,12 months. For the fiscal year ended January 3, 2003, we
recorded a gain of $57,000 reflecting the net change and we doending balance in
relation to a firm backlog hedge. We did not defer any gainshedge against backlog orders during
fiscal 2003.
TRIMBLE NAVIGATION LIMITED
INDEX TO FINANCIAL STATEMENTS
Consolidated Balance Sheets at January 2, 2004 and losses with respectJanuary 3, 2003...........45
Consolidated Statements of Operations for each of the three fiscal years
in the period ended January 2, 2004.......................................46
Consolidated Statement of Shareholders' Equity for each of the three
fiscal years in the period ended January 2, 2004..........................47
Consolidated Statements of Cash Flows for each of the three fiscal years
in the period ended January 2, 2004.......................................48
Notes to such contracts, as they are all
accounted for through earnings in each period.
43
The following table provides information about Trimble's foreign exchange
forward contracts outstanding asConsolidated Financial Statements...................................49
Report of December 28, 2001:
Foreign Currency Contract Value Fair Value in
Amount USD USD
Currency Buy/Sell (in thousands) (in thousands) (in thousands)
- ----------------------- --------------------- -------------------- --------------------- --------------------
EURO Sell 3,769 $ 3,365 $ 3,332
EURO Buy 800 $ 716 $ 712
STERLING Buy 298 $ 423 $ 433
YEN Sell 225,000 $ 1,903 $ 1,714
YEN Buy 44,000 $ 363 $ 335
The following table provides information about the Company's foreign
exchange forward contracts outstanding as of December 29, 2000:
Foreign Currency Contract Value Fair Value in
Amount USD USD
Currency Buy/Sell (in thousands) (in thousands) (in thousands)
- ----------------------- --------------------- -------------------- --------------------- --------------------
YEN Sell 125,600 $ 1,136 $ 1,106
NZD Buy 4,619 $ 1,934 $ 2,045
NZD Sell 200 $ 80 $ 89
EURO Sell 4,109 $ 3,569 $ 3,863
STERLING Buy 1.665 $ 2,416 $ 2,489
44Ernst & Young LLP, Independent Auditors............................74
Item 8. Financial Statements and Supplementary Data
CONSOLIDATED BALANCE SHEETS
December 28, December 29,
2001 2000January 2, January 3,
As at 2004 2003
- --------------------------------------------------------------------- ---------------- ------------------
(In----- ---- ----
(in thousands)
ASSETS
ASSETS
Current assets:
Cash and cash equivalents $ 31,07845,416 $ 40,87628,679
Accounts receivable, less allowance for doubtful accounts of $8,540$9,953
and $6,538,$9,900, respectively 71,680 83,600103,350 79,645
Inventories, 51,810 58,970net 70,826 61,144
Deferred income taxes 4,380 76
Other current assets 6,536 8,017
---------------- ------------------5,659 8,401
----- -----
Total current assets 161,104 191,463229,631 177,945
Property and equipment, at cost less accumulated depreciation 27,542 34,05927,379 22,037
Goodwill and other241,425 205,933
Other purchased intangible assets, less accumulated amortization 220,304 249,83219,741 23,238
Deferred income taxes 383 5314,173 417
Other assets 10,062 12,743
---------------- ------------------22,554 12,086
------ ------
Total long-termnon-current assets 258,291 297,165
---------------- ------------------315,272 263,711
------- -------
Total assets $ 419,395544,903 $ 488,628
================ ==================441,656
=========== =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Bank and other short-term borrowings $ 40,025- $ 62,0006,556
Current portion of long-term debt 23,443 51,72112,885 24,104
Accounts payable 21,494 26,44826,019 30,669
Accrued compensation and benefits 13,786 16,77125,950 17,728
Accrued liabilities 24,138 26,660
Accrued interest expense 3,616 3,95715,599 21,000
Accrued warranty expense 6,827 7,7495,147 6,394
Deferred income taxes 1,136 -
Income taxes payable 7,403 5,005
Deferred gain on sale of assets 1,068 1,591
---------------- ------------------9,969 6,450
----- -----
Total current liabilities 141,800 201,902
Noncurrent96,705 112,901
Non-current portion of long-term debt and other liabilities 127,097 137,34177,601 107,865
Deferred gain on joint venture 9,845 10,792
Deferred income tax 7,347 8,2304,229 2,561
Other noncurrentnon-current liabilities 4,662 6,212
---------------- ------------------8,279 6,186
----- -----
Total liabilities 280,906 353,685
---------------- ------------------196,659 240,305
------- -------
Commitments and Contingencies
Shareholders' equity:
Preferred stock no par value; 3,000 shares authorized; none outstanding -- --- -
Common stock, no par value; 40,00090,000 shares authorized; 26,862,49,988, and 24,16243,965
shares outstanding, respectively 191,224 154,846
Accumulated deficit (33,819) (10,940)303,015 225,872
Retained earnings (accumulated deficit) 14,990 (23,495)
Accumulated other comprehensive loss (18,916) (8,963)
---------------- ------------------income (loss) 30,239 (1,026)
------ ------
Total shareholders' equity 138,489 134,943
---------------- ------------------348,244 201,351
------- -------
Total liabilities and shareholders' equity $ 419,395544,903 $ 488,628
================ ==================441,656
=========== =========
See accompanying notesNotes to consolidated financial statements.
45the Consolidated Financial Statements.
CONSOLIDATED STATEMENTS OF OPERATIONS
January 2, January 3, December 28, December 29, December 31,
Fiscal Years Ended 2004 2003 2001
2000 1999
- ---------------------------------------------------- ---------------- ---------------- ------------------ (In---- ---- ----
(in thousands, except per share data)
Revenue (1) $ 540,903 $ 466,602 $ 475,292
$ 369,798 $ 271,364
Cost of salesrevenue 272,873 232,170 238,057
173,237 127,117
---------------- ---------------- ------------------------- ------- -------
Gross Marginmargin 268,030 234,432 237,235 196,561 144,247
Operating expenses
Research and development 67,641 61,232 62,881 46,520 36,493
Sales and marketing 97,870 89,344 103,778 79,901 53,543
General and administrative 39,253 40,634 37,407 30,514 33,750
Restructuring charges 2,019 1,099 3,599 -- --
Amortization of purchased intangible assets and goodwill and other
purchased intangibles7,312 8,300 29,389
13,407 --
---------------- ---------------- ----------------------- ----- ------
Total operating expenses 214,095 200,609 237,054
170,342 123,786
---------------- ---------------- ------------------------- ------- -------
Operating income from continuing operations 53,935 33,823 181
26,219 20,461
NonoperatingNon-operating income (expense), net
Interest income 465 659 1,118 4,478 3,857
Interest expense (11,938) (14,710) (22,224)
(14,438) (3,394)
Foreign exchange gain (loss)currency transaction loss, net (592) (823) (237)
(376) 28Expenses for affiliated operations, net (6,403) (3,954) -
Other income (expense) (430) (123) (217)
---------------- ---------------- ------------------
Total nonoperating income (expense), net 118 (1,171) (430)
--- ------ ----
Total non-operating expense, net (18,350) (19,999) (21,773)
(10,459) 274
---------------- ---------------- ------------------------- ------- -------
Income (loss) before income taxes from continuing operations 35,585 13,824 (21,592) 15,760 20,735
Income tax provision (benefit) (2,900) 3,500 1,900
1,575 2,073
---------------- ---------------- ------------------
Net income------- ----- -----
Income (loss) from continuing operations 38,485 10,324 (23,492) 14,185 18,662
---------------- ---------------- ------------------
Gain on disposal of discontinued operations (net of tax) - - 613
-- 2,931
---------------- ---------------- ---------------------
Net income (loss) $ 38,485 $ 10,324 $ (22,879)
$ 14,185 $ 21,593
================ ================ ============================ ========== ==========
Basic net incomeearnings (loss) per share from continuing operations $ (0.95)0.81 $ 0.600.24 $ 0.83(0.63)
Basic net incomeearnings per share from discontinued operations 0.02 -- 0.13
---------------- ---------------- ------------------- 0.01
====
Basic net incomeearnings (loss) per share $ (0.93)0.81 $ 0.600.24 $ 0.96
================ ================ ==================(0.62)
========== ========== ==========
Shares used in calculating basic earnings per share 24,727 23,601 22,424
================ ================ ==================47,505 42,860 37,091
Diluted net incomeearnings (loss) per share from continuing operations $ (0.95)0.77 $ 0.550.24 $ 0.82(0.63)
Diluted net incomeearnings per share from discontinued operations 0.02 -- 0.13
---------------- ---------------- ------------------- - 0.01
====
Diluted net incomeearnings (loss) per share $ (0.93)0.77 $ 0.550.24 $ 0.95
================ ================ ==================(0.62)
========== ========== ==========
Shares used in calculating diluted earnings per share 24,727 25,976 22,852
================ ================ ==================50,012 43,578 37,091
(1) Includes sales to related parties of $4.0 million for fiscal 2003. None in
fiscal 2001 and 2002.
See accompanying notesNotes to consolidated financial statements.
46the Consolidated Financial Statements.
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
Common stock and warrants ----------------------------
Accumulative
Retained otherOther Total
earnings comprehensive shareholders'Earnings Comprehensive Shareholders'
Shares Amount (deficit) income/(loss)(Deficit) Income/(Loss) Equity
- -------------------------------------------------- ------------------ ------ --------- ------------- ---------------- ---------------- -----------------
(In------
(in thousands)
Balance at January 1, 1999 22,247 $ 122,201 $ (46,718) $ (792) $ 74,691
Components of comprehensive income (loss):
Net income 21,593 21,593
Unrealized loss on short-term investments (142) (142)
Currency translation adjustments (107) (107)
-----------------
Comprehensive income (loss) 21,344
-----------------
Subtotal 96,035
-----------------
Issuance of stock under employee plans 495 4,468 4,468
Issuance of warrants -- 293 293
------------ ------------- ---------------- ---------------- -----------------
Balance at December 31, 1999 22,742 126,962 (25,125) (1,041) 100,796
Components of comprehensive income (loss):
Net income 14,185 14,185
Unrealized gain on short-term investments 123 123
Currency translation adjustments (8,045) (8,045)
-----------------
Comprehensive income (loss) 6,263
-----------------
Subtotal 107,059
-----------------
Issuance of stock under employee plans and
exercise of warrants 843 12,043 12,043
Issuance of stock for acquisition 577 14,995 14,995
Issuance of warrants -- 846 846
------------ ------------- ---------------- ---------------- -----------------
Balance at December 29, 2000 24,162 154,846 (10,940) (8,963) 134,94336,243 $154,846 $(10,940) $(8,963) $134,943
Components of comprehensive income (loss):
Net loss (22,879) (22,879)
Loss on interest rate swap (203) (203)
Unrealized gain on investments 16 16
CurrencyForeign currency translation adjustments (9,766) (9,766)
----------------------- ------
Comprehensive income (loss)loss (32,832)
------------------------
Subtotal 102,111
-----------------
Issuance of stock under employee plans
and exercise of warrants 9171,376 11,344 11,344
Issuance of stock forin private placement 1,7832,675 25,034 25,034
------------ ------------- ---------------- ---------------- ---------------------- ------ ------
Balance at December 28, 2001 26,86240,294 191,224 (33,819) (18,916) 138,489
Components of comprehensive income (loss):
Net income 10,324 10,234
Gain on interest rate swap 210 210
Unrealized loss on investments (17) (17)
Foreign currency translation adjustments 17,697 17,697
------ ------
Comprehensive income 28,214
------
Subtotal 166,703
Issuance of stock for
acquisition 1,190 12,033 12,033
Issuance of stock under employee plans
exercise of warrants 561 4,091 4,091
Issuance of warrants 1,528 1,528
Issuance of stock in private placement 1,920 16,996 16,996
----- ------ ------
Balance at January 3, 2003 43,965 225,872 (23,495) (1,026) 201,351
Components of comprehensive income (loss):
Net income 38,485 38,485
Gain on interest rate swap (7) (7)
Unrealized gain on investments 74 74
Foreign currency translation adjustments 31,198 31,198
------ ------
Comprehensive income 69,750
------
Subtotal 271,101
Issuance of stock for
acquisition 825 18,524 18,524
Issuance of stock for Joint Venture with
Nikon 350 5,922 5,922
Issuance of stock under employee plans
and exercise of warrants 1,593 13,929 13,929
Issuance of stock for Levelite 107 1,349 1,349
Issuance of warrants 836 836
Issuance of stock in private placement 3,148 36,583 36,583
----- ------ ------
Balance at January 2, 2004 49,988 $303,015 $ 191,24414,990 $ (33,819) $ (18,916) $ 138,489
============ ============= ================ ================ =================30,239 $348,244
====== ======== ========= ======== ========
See accompanying notesNotes to consolidated financial statements.
47the Consolidated Financial Statements.
CONSOLIDATED STATEMENTS OF CASH FLOWS
January 2, January 3, December 28, December 29, December 31,
Fiscal Years Ended 2004 2003 2001
2000 1999
- --------------------------------------------------------- ----------------- ----------------- ----------------------------------- ---- ---- ----
(In thousands)
Cash flow from operating activities:
Net income (loss) $ (22,879)38,485 $ 14,185 $ 18,66210,324 $(22,879)
Adjustments to reconcile net income (loss) to cash
flows provided by operating activities:
Depreciation expense 8,864 9,850 11,218 9,139 8,112
Amortization expense 7,916 9,168 30,306
14,337 961
GainProvision for doubtful accounts (32) 5,443 5,077
(Gain) loss on sale of fixed assets - 423 (135) -- --
Amortization of deferred gain - (1,061) (1,584) (2,555) (651)
Amortization of debt issuance cost 3,515 1,197 960 440 --
Deferred income taxes (6,532) 1,464 (887)
(908) 18
Other 2,533 193 (508) (2,505) 56
Decrease (increase) in assets:
Accounts receivable net 11,919 (6,091) (2,574)(16,683) (10,615) 6,842
Inventories (4,862) (7,649) 7,442 (5,994) 6,653
Other current and noncurrentnon-current assets (792) (3,920) 2,393 (3,743) (354)
Effect of foreign currency translation adjustment (4,538) (1,116) (107)6,895 438 (3,261)
Increase (decrease) in liabilities:
Accounts payable (6,387) 8,593 (4,954) 7,554 (1,290)
Accrued compensation and benefits 6,723 3,452 (3,112)
(6,362) 2,315
Customer advances -- -- (808)Deferred gain on joint venture (947) 10,792 -
Accrued liabilities (6,437) (4,823) (2,946) 5,595 (8,193)
Income taxes payable 4,201 (953) 2,398
(2,141) 825
----------------- ----------------- ---------------------- ---- -----
Net cash provided by operating activities 25,093 19,835 23,625
----------------- ----------------- -----------------36,460 32,316 26,370
------ ------ ------
Effect of exchange rate changes on cash and cash 2,876 2,780 (1,277)
equivalents
Cash flow from investing activities:
Equity investments -- 35 (748)
Acquisition of property and equipment (10,901) (7,157) (7,254) (7,555) (6,411)
Proceeds from sale of assets 334 1,407 1,177 -- 26,863
Acquisitions, net of cash acquired (6,606) 1,718 (4,430)
(211,488) --Investment in Nikon-Trimble Joint Venture (4,810) - -
Costs of capitalized patents (670) (1,734) (934)
(900) (1,127)
Purchase of short-term investments -- (6,458) (54,809)
Maturities/sales of short-term investments -- 59,186 18,350
----------------- ----------------- ---------------------- ------- -----
Net cash used by investing activities (22,653) (5,766) (11,441)
(167,180) (17,882)
----------------- ----------------- ------------------------- ------- --------
Cash flow from financing activities:
Issuance of common stock and warrants 50,514 21,393 36,378 12,043 4,468
(Payment)/collection of notes receivable 1,326 (1,082) 872 196 (540)
Proceeds from long-term debt and revolving credit lines 138,288 18,000 30,062 162,000 --
Payments on long-term debt and revolving credit lines (190,074) (70,040) (90,762)
(35,282) (1,272)
----------------- ----------------- -------------------------- -------- --------
Net cash provided (used) by financing activities 54 (31,729) (23,450)
138,957 2,656
----------------- ----------------- -----------------
Increase-- -------- --------
Net increase (decrease) in cash and cash equivalents 16,737 (2,399) (9,798) (8,388) 8,399
Cash and cash equivalents, beginning of period 28,679 31,078 40,876
49,264 40,865
----------------- ----------------- ----------------------- ------ ------
Cash and cash equivalents, end of period $ 45,416 $ 28,679 $ 31,078
$ 40,876 $ 49,264
================= ================= ========================= ======== =========
See accompanying notesNotes to consolidated financial statements.
48the Consolidated Financial Statements.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1 - Summary of Significant Accounting Policies:
Use of Estimates.Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the amounts reported in the financial statements and accompanying notes.
Due to the inherent nature of those estimates, actual results could differ from
expectations.
Basis of Presentation.Presentation
Trimble Navigation Limited ("Trimble" or "the Company") has a 52-53 week fiscal year, ending on the Friday nearest to December
31, which for fiscal 20012003 was December 28, 2001.January 2, 2004. Fiscal 2002 was a 53-week year.
The Company'sfinancial results of fiscal year normally consists of 52 weeks
divided into four equal quarters of 13 weeks each. However, due to the fact that
there are not exactly 52 weeks in a calendar year and that there is slightly
more than one additional day per calendar year, as compared to a 52-week fiscal
year, the Company will2002 have a fiscal year composed of 53 weeks in certain fiscal
years.
In those resulting fiscal years that have 53 weeks, Trimble will record an extra week, of revenues, costs and related financial activity. Therefore, the
financial results of those fiscal years and the associated quarter, having the
extra week,therefore will
not be exactly comparable to the prior and subsequent 52-week fiscal years and the associated quarters having only 13 weeks. Thus, due to the
inherent nature of adopting a 52-53 week fiscalyears.
Fiscal year Trimble, analysts,
shareholders, investors and others will have to make appropriate adjustments to
any analysis performed when comparing the Company's activities and results in
fiscal years that contain 53 weeks, to those that contain the standard2001 comprised 52 weeks.
Fiscal years 2001, 2000 and 1999 were all comprised of 52 weeks. The next
53-week year will be fiscal year 2002.
The consolidated financial statements include the results of Trimble and its
subsidiaries. IntercompanyInter-company accounts and transactions have been eliminated.
Certain amounts from prior years have been reclassified to conform to the
current year presentation.
Foreign Currency
Translation.
Assets and liabilities of Trimble's foreignthe Company's non-US subsidiaries are translated into
U.S.US dollars at year-end exchange rates, and revenues and expenses are translated
at average rates prevailing during the year. Local currencies are considered to
be the functional currencies for the Company's non-U.S.non-US subsidiaries. Translation
adjustments are included in shareholders' equity in the consolidated balance
sheet caption "Accumulated other comprehensive income (loss)." Foreign currency
transaction gains and losses are included in results of operations as incurred
and have not been significant to the Company's operating results in any fiscal
year.year presented. The effect of foreign currency rate changes on cash and cash
equivalents is not material. Cumulative translation adjustment increased by
approximately $31.2 million due to weakening US dollar against other currencies
affecting the translation of our assets dominated in non-US currencies.
Cash and Cash Equivalents.Equivalents
Cash and cash equivalents include all cash and highly liquid investments with
insignificant interest rate risk and original maturities of three months or less.less at the
date of purchase. The carrying amount of cash and cash equivalents approximates
fair value because of the short maturity of those instruments.
Concentration of Risk.Risk
In entering into forward foreign exchange contracts, Trimble has assumed the
risk that might arise from the possible inability of counterpartiescounter-parties to meet the
terms of their contracts. The counterpartiescounter-parties to these contracts are major
multinational investment and commercial banks, and Trimblethe Company does not expect
any losses as a result of counterpartycounter-party defaults (see Note 6)6 of the Notes to the
Consolidated Financial Statements). TrimbleThe Company is also exposed to credit risk
in itsthe Company's trade receivables, which are derived from sales to end user
49
customers in diversified industries as well as various resellers. The CompanyTrimble
performs ongoing credit evaluations of its customers' financial condition and
limits the amount of credit extended when deemed necessary but generally does
not require collateral.
With the selection of Solectron Corporation in August 1999 as an exclusive
manufacturing partner for many of the Company'sits GPS products, the Company isTrimble became substantially
dependent upon a sole supplier for the manufacture of many of its products. In
addition, Thethe Company relies on sole suppliers for a number of its critical
components.
The majority
Many of Trimble product salesTrimble's products use GPS as the positioning technology. GPS is a
system of 2824 orbiting Navstar satellites established and funded by the U.S. government,US Government,
which has been fully operational since March 1995. A significant reduction in
the number of operating satellites would impair the current utility of the GPS
system and the growth of current and additional market opportunities. In
addition, there can be no assurance that the U.S.
government willUS Government may not remain committed to the operation and
maintenance of GPS satellites over a long period, or thatand the policiespolicy of the U.S.US
Government for the use of GPS without charge will remain unchanged.may change.
Allowance for Doubtful Accounts.Accounts
Trimble maintains allowances for doubtful accounts for estimated losses
resulting from the inability of its customers to make required payments.
IfTrimble evaluates the collectibility of its trade accounts receivable based on a
number of factors. In circumstances where the Company is aware of a specific
customer's inability to meet its financial conditionobligations to the Company, a
specific allowance for bad debts is estimated and recorded which reduces the
recognized receivable to the estimated amount Trimble believes will ultimately
be collected. In addition to specific customer identification of potential bad
debts, bad debt charges are recorded based on the Company's customers were to deteriorate, resultingrecent past loss
history and an overall assessment of past due trade accounts receivable amounts
outstanding. The amount was not significant in an impairment of their ability to make payments, additional allowances may be
required. Thefiscal 2003 and the expenses
recorded for doubtful accounts were approximately$5.4 million in fiscal 2002 and $5.1 million
in fiscal 2001, $1.2 million in fiscal 2000, and $1.9 million in fiscal
1999.
Inventories.2001.
Inventories
Inventories are stated at the lower of standard cost or market (net realizable
value). Standard costs approximate average actual costs. The Company uses a
standard cost accounting system to value inventory and these standards are
reviewed at a minimum of once a year and multiple times a year in the most
active manufacturing plants. The Company writes downprovides for the inventory value for
estimated excess and obsolete inventory, based on management's assessment of
future demand and market conditions. If actual future demand or market
conditions are less favorable than those projected by management, additional
inventory write-downs may be required.
Intangible and Long-lived Assets.Non-Current Assets
Intangible assets include goodwill, assembled workforce, distribution channels,
patents, licenses, technology, and trademarks which are capitalized at cost andcost.
Intangible assets with definite lives are amortized on the straight-line basis over their estimated useful lives.basis.
Useful lives generally range from 2five to 10seven years, with weighted average
useful life of 5.7 years. Goodwill isPrior to December 29, 2001, goodwill was amortized
over 20 years, except for goodwill from the Grid Data purchase, which iswas
amortized over 5five years.
If facts and circumstances indicate that the goodwill, other intangible assets,
or property and equipment may be impaired, an evaluation of continuing value
would be performed. If an evaluation is required, the estimated future
undiscounted cash flows associated with these assets would be compared to their
carrying amount to determine if a write downwrite-down to fair market value or discounted
cash flow value is required. Starting inTrimble performed an impairment test of goodwill
upon transition to FAS No. 142 on December 29, 2001, and an annual impairment
test at the end of the third fiscal quarter of 2002 and 2003, respectively, and
found no impairment. Trimble will adopt FAScontinue to evaluate its goodwill for
impairment on an annual basis at the end of each fiscal third quarter and
whenever events and changes in circumstances suggest that the carrying amount
may not be recoverable.
Trimble adopted SFAS No. 142 (see "New accounting
standards" section below). Intangible assets relating to assembled workforce and
distribution channels will be reclassified ason December 29, 2001. As a result, goodwill and goodwill willis no
longer be amortized.amortized and intangible assets with indefinite lives were reclassified
to goodwill.
Revenue Recognition.
The Company designs, markets, and distributes products that determine
precise geographic location or position, sometimes combined with data
communications and applications software. Trimble sells its products through a
network of direct salespeople, OEMs, VARs, independent dealers, distributors and
authorized sales representatives supported by sales offices throughout the
world.
50
Recognition
Trimble's revenues are recorded in accordance with the Securities and Exchange
Commission's (SEC) Staff Accounting Bulletin (SAB) No. 101,104, "Revenue
Recognition." Trimble requiresThe Company recognizes product revenue when persuasive evidence of
an arrangement exists, delivery has occurred, the following: (i) execution of a written
customer order, (ii) deliveryfee is fixed or determinable,
and collectibility is reasonably assured. In instances where final acceptance of
the product (iii) fee is fixed and
determinable, and (iv) collectibility of the proceeds is probable. The Company
recognizes revenue from product sales when the products are shipped tospecified by the customer title has transferred, and no significant obligations remain. The
Company defers revenue if thereor is uncertainty about customer acceptance.
Deferreduncertain, revenue is included in accrued liabilities on the consolidated balance
sheet. The Company reduces product revenue for estimated customer returns, and
any discount which may occur under programs the Company has with its customers
and partners.
The Company's shipment terms for domestic orders are typically FOB shipping
point. International orders are typically shipped FOB destination, and
accordingly international orders are not recognized as revenuedeferred
until the product
is delivered and title has transferred.all acceptance criteria have been met.
Revenues from purchased extended warranty and support agreements are deferred
and recognized ratably over the term of the warranty/support period.
Substantially all technology licenses and research revenue have consisted of
initial license fees and royalties, which were recognized when earned, provided
Trimble haswe had no remaining obligations.
SalesContracts and customer purchase orders are generally used to determine the
existence of an arrangement. Shipping documents and customer acceptance, when
applicable, are used to verify delivery. The Company assesses whether the fee is
fixed or determinable based on the payment terms associated with the transaction
and whether the sales price is subject to refund or adjustment. The Company
assesses collectibility based primarily on the creditworthiness of the customer
as determined by credit checks and analysis, as well as the customer's payment
history.
Trimble's shipment terms for US orders, and international orders fulfilled from
its European distribution center are typically FCA (Free Carrier) shipping
point, except certain sales to US government agencies which are shipped FOB
destination. FCA shipping point means that Trimble fulfills the obligation to
deliver when the goods are handed over, cleared for export, and into the charge
of the carrier named by the buyer at the named place or point. If no precise
point is indicated by the buyer, Trimble may choose within the place or range
stipulated where the carrier will take the goods into carrier's charge. Shipping
and handling costs are included in the cost of goods sold.
Other international orders are shipped FOB destination, which means these
international orders are not recognized as revenue until the product is
delivered and title has transferred to the buyer or FCA shipping point. FOB
destination means that Trimble bears all costs and risks of loss or damage to
the goods up to that point.
Revenue to distributors and resellers areis recognized upon shipment providing
that there is evidence of the arrangement through a distribution agreement or
purchase order, title has transferred, no remaining performance obligations
exist, the price and terms of the sale are fixed and collection is probable.delivery, assuming all
other criteria for revenue recognition have been met. Distributors and resellers
do not have a right of return.
When a sale involves multiple elements the entire fee from the arrangement is
allocated to each respective element based on its relative fair value and
recognized when revenue recognition criteria for each element are met. The
amount of product revenue allocated to an individual element is limited to the
lesser of its relative fair value or the amount not contingent on the Company's
delivery of other elements under the arrangement, regardless of the probability
of the Company's performance.
Trimble's software arrangements generally consist of a license fee and post
contract customer support (PCS). The CompanyTrimble has established vendor specificvendor-specific
objective evidence (VSOE) of fair value for its PCS contracts based on the
price
of the renewal rate. The remaining value of the software arrangement is allocated to
the license fee using the residual method, which revenue is primarily recognized
when the software has been delivered and there are no remaining obligations.
Revenue from PCS is recognized ratably over the periodterm of the PCS agreement.
Product Warranty.
Trimble providesSupport and Warranty
The warranty periods for the estimated cost of product warranties at the time
revenue is recognized. The warranty period isCompany's products are generally between one toand
three years from date of shipment. In addition, selectSelected military programs may require
extended warranty periods up to 5.5 years, certain TDS products have a five year
or 90-day warranty period, and certain Nikon products sold by Tripod Data Systems have a 90 dayfive year warranty
period. Trimble supports its GPS products through a circuit board replacement
program from locations in the United Kingdom, Germany, Japan, and the United
States. The repair and calibration of Trimble's non-GPS products are available
from company- owned or authorized facilities. The Company reimburses dealers and
distributors for all authorized warranty repairs they perform.
While the Company engages in extensive product quality programs and processes,
including actively monitoring and evaluating the quality of component suppliers,
the Company'sits warranty obligation is affected by product failure rates, material usage,
and service delivery costs incurred in correcting a product failure. Should
actual product failure rates, material usage, or service delivery costs differ
from the estimates, revisions to the estimated warranty accrual and related
costs may be required.
Changes in the Company's product warranty liability during the 12 months, ended
January 2, 2004 and January 3, 2003, are as follows:
January 2, January 3,
Fiscal Years Ended 2004 2003
- ------------------ ---- ----
(In thousands)
Beginning balance $ 6,394 $ 6,827
Warranties accrued 4,417 2,821
Warranty claims (5,664) (3,254)
------ ------
Ending Balance $ 5,147 $ 6,394
========== ==========
Guarantees, Including Indirect Guarantees of Indebtedness of Others
In addition to product warranties, the Company, from time to time, in the normal
course of business, indemnifies other parties with whom it enters into
contractual relationships, including customers, lessors, and parties to other
transactions with the Company, with respect to certain matters. The Company has
agreed to hold the other party harmless against specified losses, such as those
arising from a breach of representations or covenants, third party claims that
the Trimble's products when used for their intended purpose(s) infringe the
intellectual property rights of such third party or other claims made against
certain parties. It is not possible to determine the maximum potential amount of
liability under these indemnification obligations due to the limited history of
prior indemnification claims and the unique facts and circumstances that are
likely to be involved in each particular claim. Historically, payments made by
the Company under these obligations were not material and no liabilities have
been recorded for these obligations on the balance sheets as of January 2, 2004
and January 3, 2003.
Advertising Costs.Costs
Trimble expenses advertising costs as incurred. Advertising expenses were
approximately $6.8$9.2 million, $7.9$6.3 million, and $4.2$6.8 million in fiscal 2001, 20002003, 2002,
and 1999,2001, respectively.
Research and Development Costs.Costs
Research and development costs are charged to expense whenas incurred. Trimble has
received third party funding of approximately $4.1$4.9 million, $4.8$5.3 million, and
$7.1$4.1 million in fiscal 2001, 2000,2003, 2002, and 1999,2001, respectively. The Company offsets
research and development expenses with any third party funding received.
TrimbleThe Company retains the rights to any technology developed.
51
Stock Compensation.Compensation
In accordance with the provisions of Statement of Financial Accounting Standards
(SFAS) No. 123 ("SFAS 123"), "Accounting for Stock-Based Compensation" and "Statement
of Financial Accounting Standards No. 148" ("SFAS 148"), "Accounting for
Stock-Based Compensation - Transition and Disclosure," Trimble applies
Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to
Employees" (APB 25)("APB 25") and related interpretations in accounting for its stock
option plans and stock purchase plan. Accordingly, itthe Company does not
recognize compensation cost for stock options granted at or above market.fair market value. Note
16 to13 of the Consolidated Financial Statements describesdescribe the plans operated by
Trimble, and
contains a summaryTrimble.
For purposes of pro forma disclosures, the estimated fair value of the options
is amortized to expense over the options' vesting period, and the estimated fair
value of purchases under the employee stock purchase plan is expensed in the
year of purchase as well as the stock-based employee compensation cost, net of
related tax effects, that would have been included in the determination of net
income if the fair value based method had been applied to all awards. The
effects on pro forma disclosure of applying SFAS No. 123 are not likely to be
representative of the effects to reportedon pro forma disclosure of future years.
Pro forma information regarding net income (loss) and earnings (loss) per share
for fiscal 2001, 2000is required by SFAS No. 123 and 1999has been determined as if Trimble had elected to recognize compensation cost based onaccounted
for its employee stock options and purchases under the employee stock purchase
plan using the fair value method of SFAS No.123. The fair value for these
options was estimated at the date of grant using a Black-Scholes option-pricing
model with the following weighted-average assumptions for fiscal 2003, 2002, and
2001:
January 2, January 3, December 28,
2004 2003 2001
---- ---- ----
Expected dividend yield - - -
Expected stock price volatility 59.87% 52.70% 69.59%
Risk free interest rate 3.34% 3.13% 4.15%
Expected life of options after vesting 1.56 1.18 1.20
The Black-Scholes option valuation model was developed for use in estimating the
fair value of traded options that have no vesting restrictions and are fully
transferable. In addition, option valuation models require the input of highly
subjective assumptions including the expected stock price volatility. Because
Trimble's employee stock options granted at grant date,have characteristics significantly different
from those of traded options, and because changes in the subjective input
assumptions can materially affect the fair value estimate, in management's
opinion, the existing models do not necessarily provide a reliable single
measure of its employee stock options.
Trimble's pro forma information is as prescribed by SFAS No. 123.
Depreciation.follows:
January 2, January 3, December 28,
Fiscal Years Ended 2004 2003 2001
- ------------------ ---- ---- ----
(dollars in thousands)
Net income (loss) - as reported $ 38,485 $ 10,324 $(22,879)
Stock-based employee compensation expense
determined under fair value method based for all
awards, net of related tax effects 11,549 11,641 12,718
------ ------ ------
Net earnings (loss) - pro forma $ 26,936 $ (1,317) $(35,597)
Basic earnings (loss) per share - as reported 0.81 0.24 (0.62)
Basic earnings (loss) per share - pro forma 0.57 (0.03) (0.96)
Diluted earnings (loss) per share - as reported 0.77 0.24 (0.62)
Diluted earnings (loss) per share - pro forma 0.54 (0.03) (0.96)
Depreciation
Depreciation of property and equipment owned or under capitalized leases is
computed using the straight-line method over the shorter of the estimated useful
lives or the lease terms. Useful lives include a range from two to foursix years for
machinery and equipment, four to five years for furniture and fixtures, and
fourtwo to five
years for computer equipment and software, and the life of the lease for
leasehold improvements.
Income Taxes.Taxes
Income taxes are accounted for under the liability method whereby deferred tax
asset or liability account balances are calculated at the balance sheet date
using current tax laws and rates in effect for the year in which the differences
are expected to affect taxable income. A valuation allowance is recorded to
reduce the carrying amounts of deferred tax assets if it is more likely than
not, that such assets will not be realized.
Earnings (Loss) Per Share.Share
Number of shares used in calculation of basic earnings per share represents the
weighted average common shares outstanding during the period and excludes any
dilutive effects of options, warrants, and convertible securities. The dilutive
effects of options, warrants, and convertible securities are included in diluted
earnings per share. (See Note 21 to the Consolidated Financial Statements
regarding a 3 for 2 stock split subsequent to year end.)
New Accounting Standards.Standards
In August 2001,November of 2002, the EITF reached a consensus on Issue No. 00-21, "Revenue
Arrangements with Multiple Deliverables." EITF Issue No. 00-21 provides guidance
on how to account for arrangements that involve the delivery or performance of
multiple products, services and/or rights to use assets. The provisions of EITF
Issue No. 00-21 apply to revenue arrangements entered into after June, 2003. The
effect of adoption of EITF Issue No. 00-21 on Trimble's results of operations
and financial condition was immaterial.
Financial Accounting Standards Board (FASB) Interpretation No. 46 (FIN 46),
"Consolidation of Variable Interest Entities," was issued FAS No.
144, "Accountingin January 2003, and a
revised interpretation of FIN 46 (FIN 46-R) was issued in December 2003. FIN 46
requires certain variable interest entities to be consolidated by the primary
beneficiary of the entity if the equity investors in the entity do not have the
characteristics of a controlling financial interest or do not have sufficient
equity at risk for the Impairment or Disposal of Long-lived Assets." FAS No.
144 supercedes FAS No. 121, "Accounting for the Impairment of Long-lived Assets
and Assetsentity to be Disposed of" and the accounting and reporting provisions of
Accounting Principles Board Opinion No. 30, "Reporting the Results of Operations
Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary,
Unusual and Infrequently Occurring Events and Transactions." FAS No. 144 also
amends Accounting Research Bulletin No. 51, "Consolidated Financial Statements,"
to eliminate the exception to consolidation for a subsidiary for which control
is likely to be temporary.finance its activities without additional
subordinated financial support from other parties. The provisions of FAS No. 144 will beFIN 46 are
effective for
fiscal years beginning after December 15, 2001. The effect of adopting FAS No.
144 has been evaluated by the Company, and does not have a material adverse
effect on Trimble's financial position or results of operations.
In June 2001, the Financial Accounting Standards Board issued Statements of
Financial Accounting Standards No. 141, Business Combinations, and No. 142,
Goodwill and Other Intangible Assets. Statement 141 requires that the purchase
method of accounting be usedimmediately for all business combinations initiatedarrangements entered into after June
30, 2001. Statement 141 also includes guidance onJanuary 31, 2003.
Since January 31, 2003, Trimble has not obtained any variable interests in any
entities it believes are variable interest entities. For arrangements entered
into prior to February 1, 2003, Trimble would be required to adopt the
initial recognition and
measurementprovisions of goodwill and other intangible assets arising from business
combinations completed after June 30, 2001. Statement 142 prohibits the
amortization of goodwill and intangible assets with indefinite useful lives.
Statement 142 requires that these assets be reviewed for impairment at least
annually. Intangible assets with finite lives will continue to be amortized over
their estimated useful lives. Additionally, Statement 142 requires that goodwill
included in the carrying value of equity method investments no longer be
amortized.
52
The Company will apply Statement 142 beginningFIN 46-R in the first quarter of 2002. Applicationfiscal 2004. Trimble is in the
process of determining the nonamortization provisionseffect, if any, the adoption of FIN 46-R will have on
its financial statements.
In April 2003, the FASB issued SFAS No. 149, "Amendment of Statement 142 will
significantly reduce amortization expense which was approximately $26.8 million133 on
Derivative Instruments and Hedging Activities." SFAS No. 149 amends and
clarifies financial accounting and reporting for derivative instruments,
including certain derivative instruments embedded in fiscal 2001. The Company will reclassify identifiable intangible assets with
indefinite lives,other contracts
(collectively referred to as defined by Statement 142, to goodwill at the date of
adoption. The Company will test goodwillderivatives) and for impairment using the two-step
process prescribed in Statement 142. The first step is a screen for potential
impairment, while the second step measures the amount of the impairment, if any.
The Company expects to perform the first of the required impairment tests of
goodwill and indefinite lived intangible assets as of January 1, 2002 in the
first quarter of 2002. Any impairment charge resulting from these transitional
impairment tests will be reflected as the cumulative effect of a change in
accounting principle in the first quarter of 2002. Based on the preliminary
unaudited analysis completed to date, the Company does not believe that the
application of these statements will have an adverse material impact on the
earnings and financial position of the Company.
Trimble adopted Statement of Financial Accounting Standardshedging activities under SFAS
No. 133, (SFAS
133) "Accounting for Derivative Instruments and Hedging Activities,Activities." SFAS
No. 149 is effective for contracts entered into or modified after June 30, 2003,
and for hedging relationships designated after June 30, 2003. The adoption of
this Statement did not have an effect on Trimble's financial statements.
In May 2003, the FASB issued SFAS No. 150, "Accounting for Certain Financial
Instruments with Characteristics of Both Liabilities and Equity." SFAS No. 150
establishes standards for how an issuer classifies and measures certain
financial instruments with characteristics of both liabilities and equity. Many
of these instruments were previously classified as equity. SFAS No. 150 is
effective for financial instruments entered into or modified after May 31, 2003
and otherwise was effective at the beginning of fiscal 2001.the first interim period
beginning after June 15, 2003, which for Trimble, was the fourth quarter of
2003. The effectadoption of adopting SFAS 133this Statement did not have a
material impactan effect on the Company'sTrimble's
financial position or results of operations.statements.
Note 2 - Acquisitions:
The following is a summary of acquisitions made by the CompanyTrimble during fiscal 20012003,
2002, and fiscal 2000,2001, all of which were accounted for as purchases:
Acquisition Primary Service or Product Acquisition Date
- ------------------------------------- -------------------------------------------- --------------------------
Spectra Precision Group Optical and laser products July 14, 2000
Tripod Data Systems Software for data collection applications November 14, 2000
Grid Data Wireless Application Service ProviderAcquisition Primary Service or Product Acquisition Date
- ----------- -------------------------- ----------------
Grid Data Wireless application service provider April 2, 2001
LeveLite Low-end construction instrument products August 15, 2002
Applanix Inertial navigation systems and GPS July 7, 2003
MENSI 3D laser scanning technology December 9, 2003
The Company's consolidated financial statements include the results of operations of
acquired companies commencing on the date of acquisition. Pro forma information
is not presented, as these acquisitions did not have a material effect on the
Company's results of operations.
Allocation of Purchase Consideration
The total purchase consideration for each of the above acquisitions was
allocated to the assets acquired and liabilities assumed based on their
estimated fair values as of the date of acquisition. The Grid Data transaction was an asset purchase.
Goodwill represents the excess of purchase consideration over the fair
value of the assets, including identifiable intangible assets, net of the fair
value of liabilities assumed. Goodwill and intangible assets related to the
acquisitions are amortized to expense on a straight-line basis over their
estimated useful lives. Useful lives range generally from 3 to 10 years.
Goodwill is amortized over 20 years, except for goodwill on Grid Data which is
amortized over 5 years
53
Allocation of Purchase Consideration
The following is a summary
of purchase price, acquisition costs and purchase price allocation of the Spectra Precision Group, TripodGrid
Data, Systems,
and Grid DataLeveLite, Applanix, and MENSI acquisitions:
Spectra Precision Group Tripod Data Systems Grid Data --------------------------- ---------------------- -----------------------LeveLite Applanix MENSI
--------- -------- -------- -----
(In thousands)
Purchase price $293,800 $14,995 $3,504$ 8,248 $ 7,506 $ 17,401 $ 4,273
Acquisition costs 7,719 391 50 144 438 372
Restructuring costs 7,851- 555 - -
----------- --------- ------------
Total purchase price $309,370 $15,386 $3,554
=========== ========= =========$ 8,298 $ 8,205 $ 17,839 $ 4,645
======== ======== ======== ========
Purchase Price Allocation:price allocation:
Fair value of tangible net assets
acquired 65,913 4,261 204(141) 6,115 3,742 1,434
Deferred tax (9,138) - - (1,153) -
Identified intangible assets:
Distribution Channel 78,600Existing technology - - Existing Technology 25,200 - -
Assembled Workforce 18,300 - -
Trade names, trade marks, patents, and
other intellectual properties 10,800 -3,440 -
Goodwill 119,695 11,125 3,350
----------- --------- ----------8,439 2,090 11,810 3,211
----- ----- ------ -----
Total $309,370 $15,386 $3,554
=========== ========= ==========$ 8,298 $ 8,205 $ 17,839 $ 4,645
======== ======== ======== ========
Spectra Precision Group
Spectra Precision, a group of wholly-owned businesses, formerly owned by
Thermo Electron Corporation, collectively known as the "Spectra Precision
Group," was acquired on July 14, 2000. The acquisition was completed for an
aggregate purchase price, excluding acquisition and restructuring costs, of
approximately $293.8 million. Subsequently, in March 2002, the purchase price
was adjusted by $1.1 million as a result of the completion of final negotiations
with Thermo Electron relating to certain assets and liabilities acquired. This
adjustment subsequently decreased the purchase price to approximately $292.7
million and goodwill to approximately $118.6 million. The acquisition included
100% of the stock of Spectra Precision Inc., a Delaware corporation, Spectra
Precision SRL, an Italian corporation, Spectra Physics Holdings GmbH, a German
corporation, and Spectra Precision BV, a Netherlands corporation. The
acquisition also included certain assets and liabilities of Spectra Precision
AB, a Swedish corporation, including 100% of the shares of Spectra Precision SA,
a French corporation, Spectra Precision Scandinavia AB, a Swedish corporation,
Spectra Precision of Canada Ltd., a Canadian corporation, and Spectra Precision
Handelsges mbH, an Austrian corporation.
The acquisition was financed with $80 million in seller subordinated debt,
$140 million of cash provided through a syndicate of banks, and approximately
$74 million of Trimble's then available cash on hand.
Tripod Data Systems
Tripod Data Systems, Inc., an Oregon corporation was purchased on November
14, 2000 for an aggregate final purchase price of approximately $14.995 million.
The purchase price consisted of 576,726 shares of Trimble's common stock valued
at the average closing price for the five trading days proceeding the closing
date.
Grid Data, Inc.
On April 2, 2001, Trimble acquired certain assets of Grid Data, an Arizona
corporation, for approximately $3.5 million in cash and the assumption of
certain liabilities. In addition, the purchase agreement provided for Trimble mayto
make certain earn-out
54
payments based upon the completion of certain business milestones.
IfIn June 2002, Trimble issued 402,528 shares of common stock in settlement of all
earn-out payments, which resulted in additional goodwill of $4.8 million, with a
final purchase price of approximately $8.3 million.
LeveLite Technology, Inc.
On August 15, 2002, Trimble acquired LeveLite Technology, Inc., a California
corporation, for approximately $5.7 million. This strategic acquisition
complements Trimble's entry-level construction instrument product line. The
purchase price consisted of 655,626 shares of common stock. The merger agreement
provides for Trimble to make additional earn-out payments not to exceed $3.9
million (in common stock and cash payment) based on future revenues derived from
existing product sales to a certain customer and a share of the first
milestone is achieved by Aprilpayments
received from the settlement of potential litigation. As of January 2, 2002, 218,3522004, the
total earn-out amount was approximately $1.8 million resulting in additional
goodwill and a final purchase price of approximately $7.5 million.
Applanix Corporation
* On July 7, 2003, Trimble acquired privately held Applanix Corporation of
Ontario, Canada for approximately $17.8 million. Applanix develops systems that
integrate inertial navigation system (INS) and GPS technologies. The purchase
price consisted of 1,154,240 shares of Trimble common stock, will be paid out. Ifof which 720,404
were issued. Former Applanix shareholders have the first milestone is achieved and a second milestone is
completed by October 2, 2003, an additional 141,928right to receive the
remaining 433,836 shares of Trimble common stock upon the surrender of
exchangeable shares of a Trimble subsidiary. Trimble expects the Applanix
acquisition to extend its technology portfolio and enable increased robustness
and capabilities in its future positioning products. Applanix's performance is
reported under the Company's Portfolio Technologies segment. Trimble's allocated
a portion of the purchase price to existing technology, which is being amortized
over seven years.
MENSI S.A.
On December 9, 2003, we acquired privately held MENSI S.A., a French developer
of terrestrial 3D laser scanning technology. This strategic acquisition will
be paid out. However, if at the time the second milestone is achieved
Trimble's common stock is at aenhance our technology portfolio and expand our product offerings. The purchase
price less thanconsisted of an undisclosed price per share,
theninitial cash payment of approximately Euro 3.5 million
(approximately US$4.3 million on December 9, 2003). The acquisition agreement
provides for Trimble at its option, may pay $3.25to make additional earn-out cash payments not to exceed
Euro 3 million in cash or $3.25(approximately US$3.7 million worth of Trimble common stock, valued on the date that the second milestone is
achieved.December 9, 2003) based on
future revenue derived from existing product sales. The additional consideration,payments, if
earned, will result in additional goodwill. Spectra Precision Group Restructuring Activities
AtMENSI's performance is reported
under our Engineering and Construction segment.
NOTE 3 - Joint Ventures:
Caterpillar Trimble Control Technologies Joint Venture
On April 1, 2002, Caterpillar Trimble Control Technologies LLC ("CTCT"), a joint
venture formed by Trimble and Caterpillar began operations. CTCT, based in
Dayton, Ohio, is 50% owned by Trimble and 50% owned by Caterpillar, with equal
voting rights. It develops and markets next generation advanced electronic
guidance and control products for earthmoving machines in the timeconstruction,
mining, and waste industries. Under the terms of the joint venture agreement,
Caterpillar contributed $11.0 million cash plus selected technology, for a total
contributed value of $14.5 million, and Trimble contributed selected existing
machine control product technologies valued at $25.5 million. Additionally, both
companies have licensed patents and other intellectual property from their
portfolios to CTCT. During the first fiscal quarter of 2002, Trimble received a
special cash distribution of $11.0 million from CTCT.
Trimble has recorded the cash distribution of $11.0 million as a deferred gain,
being amortized to the extent that losses are attributable from CTCT under the
equity method of accounting. When and if CTCT is profitable on a sustainable
basis, and future operating losses are not anticipated, then Trimble will
recognize as a gain, the un-amortized portion of the $11.0 million. To the
extent that it is possible that the Company acquiredwill have any future-funding
obligation relating to CTCT, then the Spectra Precision Group, the Company
formulated a restructuring plan and provided approximately $9.0 million for
costs to close certain duplicative office facilities, combine operations
including redundant domestic and foreign legal entities, reduce workforce in
overlapping areas, and relocate certain employees. These costs were accrued for
as partrelevant amount of the allocation$11.0 million will
be deferred until such a time, as the funding obligation no longer exists. Both
Trimble's share of profits (losses) under the equity method and the amortization
of the purchase price. Included$11.0 million deferred gain are recorded under the heading of "Expense
for affiliated operations, net" in Non-operating income (expense).
The expenses for affiliated operations at CTCT, net also includes incremental
costs as a result of purchasing products from CTCT at a higher price than
Trimble's original manufacturing costs, partially offset by contract
manufacturing fees charged to CTCT. In addition, Trimble received reimbursement
of employee-related costs from CTCT for Trimble employees devoted to CTCT
totaling $7.9 million in fiscal 2003 and $3.9 million in fiscal 2002. The
reimbursements were offset against operating expenses.
January 2, January 3,
Fiscal year ended 2004 2003
- ----------------- ---- ----
(In millions)
CTCT incremental pricing effects, net $ 5.9 $ 4.0
Trimble's 50% share of CTCT's reported gain (loss) (0.9) (0.2)
Amortization of deferred gain 0.9 0.2
--- ---
Total CTCT expense for affiliated operations, net (1) $ 5.9 $ 4.0
===== =====
(1) Due to the nature of the relationship between Trimble and CTCT, a related
party, the impact of these agreements is classified under non-operating income
(expense) under the heading of "Expense for affiliated operations, net".
At January 2, 2004, the net outstanding balance due from CTCT to Trimble was
approximately $0.8 million.
Nikon-Trimble Joint Venture
On March 28, 2003, Trimble and Nikon Corporation entered into an agreement to
form a joint venture in Japan, Nikon-Trimble Co., Ltd., which assumed the
operations of Nikon Geotecs Co., Ltd., a Japanese subsidiary of Nikon
Corporation and Trimble Japan KK, a Japanese subsidiary of Trimble.
Nikon-Trimble began operations in July 2003.
Under the terms of the Nikon-Trimble agreement, Nikon contributed (Y)1.2 billion
(approximately US$10 million on June 30, 2003) in cash, while Trimble
contributed (Y)500 million (approximately US$4.1 million on June 30, 2003) in
cash and (Y)700 million of its common stock or 349,251 shares valued at
approximately US$5.9 million on June 30, 2003. The Nikon-Trimble joint venture
purchased certain tangible and intangible assets from Nikon Geotecs Co., Ltd.
and Trimble Japan KK.
Nikon-Trimble is 50% owned by Trimble and 50% owned by Nikon, with equal voting
rights. It focuses on the design and manufacture of surveying instruments
including mechanical total stations and related products. In Japan, this joint
venture will distribute Nikon's survey products as well as Trimble's GPS survey
products and other Engineering and Construction products, including robotic
total stations. Outside Japan, Trimble is the exclusive distributor of Nikon
survey and construction products.
Trimble has adopted the equity method of accounting for its investment in
Nikon-Trimble, with 50% share of profit or loss from this joint venture to be
reported by Trimble in the total costNon-operating section of the Consolidated Statement
of Operations under the heading of "Expenses for affiliated operations, net."
During fiscal 2003, and the first year of its operations, Nikon-Trimble reported
a loss of $0.6 million of which Trimble's share is $0.3 million. At January 2,
2004, the outstanding balance from Nikon-Trimble due to Trimble was
approximately $2.7$1.4 million related to the discontinuancetransfer of overlapping product
lines which was included in our reserve for excesscertain tangible and
obsolete inventory. The
facility consolidation and employee relocations resulted primarilyintangible assets from combining certain office facilities and duplicative functions, including
management functions,Trimble Japan KK, recorded under the heading of the Spectra Precision Group. As of the end of fiscal
2001, the Company had charged against the reserve approximately $3.3 million
which consisted of $0.9 million for legal and tax consulting expenses relating
to consolidation of legal entities, $1.3 million for severance expenses, $0.7
million for facilities and direct sales offices closures, $0.3 million for an
underfunded pension plan,"Accounts
and other costsreceivables, net" and $2.0 million net payable by Trimble to
Nikon-Trimble related to the purchase and sale of $0.1 million.
The Company revised its final estimates for costsproducts from and to
completeNikon-Trimble recorded under the remaining
planned activities and accordingly reduced its restructuring reserve by
approximately $1.1 million, with a corresponding adjustment to Goodwill in the
fourth quarterheading of fiscal 2001. The reserve balance was approximately $1.9
million at December 28, 2001, and the Company anticipates completing the
majority of its remaining restructuring activities during fiscal 2002. These
activities consist principally of legal costs and other expenses required to
combine redundant legal entities.
The elements of the reserve at December 28, 2001,"Other accrued liabilities" on the
balance sheet
(included in accrued liabilities) are as follows:
Employee Severance and Facility Closure, Legal
Relocation and Tax Expense Total
(In thousands)
Total reserve $ 1,945 $ 4,370 $ 6,315
Amounts paid/written off (1,685) (1,610) (3,295)
Revision to estimates (260) (812) (1,072)
------------------------------------------------------------------------
Balance as of December 28, 2001 $ - $ 1,948 $ 1,948
========================================================================
55
Note 3 - Unaudited Pro Forma Information:
The consolidated statements of operations of Trimble presented throughout
this report include the operating results of the acquired companies from the
date of the respective acquisitions. The following pro forma information for
fiscal 2000 and fiscal 1999 presents net revenue, net loss from continuing
operations, and net loss for each of these periods as if the transactions with
the Spectra Precision Group were consummated on January 2, 1999. The following
pro forma information does not include Tripod Data Systems and Grid Data, as
these acquisitions were not material to the Company. This unaudited pro forma
data does not purport to represent the Company's actual results of operations
had the Spectra Precision Group acquisition occurred on January 2, 1999, and
should not serve as a forecast of the Company's operating results for any future
periods.
December 28, December 29, December 31,
Fiscal Years Ended 2001 2000 1999
- ----------------------------------------------------------- --------------- ---------------- ----------------
(In thousands, except for per share amounts)
Net revenue $ 475,292 $ 491,436 $ 488,728
Net loss from continuing operations (23,492) (1,920) (17,661)
Net loss (22,879) (1,920) (14,730)
Basic net loss per share from continuing operations $ (0.95) $ (0.08) $ (0.79)
Basic net income per share from discontinued
operations 0.02 -- 0.13
--------------- ---------------- ----------------
Basic net loss per share $ (0.93) $ (0.08) $ (0.66)
Diluted net loss per share from continuing operations $ (0.95) $ (0.08) $ (0.79)
Diluted net income per share from discontinued
operations 0.02 -- 0.13
--------------- ---------------- ----------------
Diluted net loss per share $ (0.93) $ (0.08) $ (0.66)
Consolidated Balance Sheets.
Note 4 - Goodwill and Intangible Assets:
Goodwill and purchased intangible assets consisted of the following:
December 28, December 29,
2001 2000
- -------------------------------------------------------------------------- --------------------- ----------------------
(In thousands)
Intangible assets with indefinite life:
Distribution channel $ 73,363 $ 76,408
Assembled workforce 17,773 18,081
----------------- ------------------
Total intangible assets with indefinite life 91,136 94,489
Intangible assets with definite life:
Existing technology 23,907 24,657
Trade names, trade marks, patents, and other intellectual properties 18,394 17,859
----------------- ------------------
Total intangible assets with definite life 42,301 42,516
Goodwill, Spectra Precision acquisition 116,001 119,013
Goodwill, other acquisitions 14,710 10,812
----------------- ------------------
264,148 266,830
Less accumulated amortization (43,844) (16,998)
----------------- ------------------
$ 220,304 $ 249,832
================ ==================
January 2, January 3,
As of 2004 2003
- ----- ---- ----
(in thousands)
Intangible assets:
Intangible assets with an indefinite life consist of distribution channel
and assembled workforce. Intangible assets with a definite life consist of
existinglife:
Existing technology trade$ 32,389 $ 25,986
Trade names, trademarks, patents, and other
intellectual 56
properties. The decrease in value of distribution channel, existing technology,
and assembled workforce from date of acquisition of theproperties 20,911 21,594
------ ------
Total intangible assets with definite life 53,300 47,580
Less accumulated amortization (33,559) (24,342)
------- -------
Total net intangible assets $ 19,741 $ 23,238
======== ========
Goodwill:
Goodwill, Spectra Precision Group,
to year end of 2000 and 2001, was principally due to foreign currency
translation differences related to foreign subsidiaries.acquisition 205,562 185,277
Goodwill, other acquisitions 35,863 20,656
------ ------
Total goodwill 241,425 205,933
======= =======
The increase in goodwill for other acquisitions is mainlyof approximately $35.5 million during fiscal 2003 was
primarily due to the Grid Dataacquisition of Applanix and MENSI of approximately $15.0
million and the exchange rate impact of approximately $18.0 million on non-US
currency denominated goodwill assets.
The intangible asset acquisition
completed in April 2001.
Upon adoptionamortization expense as of FAS 142 inJanuary 2, 2004 for the five
years following fiscal 2002,2003 is projected as follows:
Amortization
Expense
(In thousands)
2004 $8,177
2005 5,384
2006 2,522
2007 1,747
2008 824
Thereafter 1,087
-----
Total $ 19,741
========
For comparative purposes, the Company will no longer
amortizepro forma adjusted net income (loss) per share
excluding amortization of goodwill, distribution channel, and intangible assets with indefinite lives will be
reclassified to goodwill.assembled
workforce is as follows:
January 2, January 3, December 28,
Fiscal Years Ended 2004 2003 2001
- ------------------ ---- ---- ----
(in thousands, except per share data)
Net income (loss) $ 38,485 $ 10,324 $(22,879)
Add back SFAS 142 adjustments:
Amortization of goodwill - - 7,817
Amortization of distribution channel - - 11,230
Amortization of assembled workforce - - 1,834
-----
Adjusted net income (loss) $ 38,485 $ 10,324 $ (1,998)
========= ========= =========
Weighted average shares outstanding
Basic 47,505 42,860 37,091
Diluted 50,012 43,578 37,091
Diluted net income (loss) per share $ 0.81 $ 0.24 $ (0.05)
Pro forma adjusted diluted net income (loss) per share $ 0.77 $ 0.24 $ (0.05)
Note 5 - Certain Balance Sheet Components:
Inventories consisted of the following:
December 28, December 29,
2001 2000January 2, January 3,
As of 2004 2003
- ------------------------------------------------------------ ------------------
(In----- ---- ----
(in thousands)
Raw materials $ 25,79020,927 $ 27,87821,098
Work-in-process 7,177 6,9403,876 5,187
Finished goods 18,843 24,152
------------------ ------------------46,023 34,859
------ ------
$ 51,81070,826 $ 58,970
================== ==================61,144
========= ==========
Property and equipment consisted of the following:
December 28, December 29,
2001 2000January 2, January 3,
As of 2004 2003
- ------------------------------------------------------------ ------------------
(In----- ---- ----
(in thousands)
Machinery and equipment $ 66,26566,634 $ 67,24570,660
Furniture and fixtures 6,367 6,9949,085 6,538
Leasehold improvements 5,882 5,6334,502 6,451
Buildings 3,979 7,9485,236 2,905
Land 1,657 1,905
----------------- ------------------
84,150 89,7251,391 1,391
----- -----
86,848 87,945
Less accumulated depreciation (56,608) (55,666)
----------------- ------------------(59,469) (65,908)
-------- --------
$ 27,54227,379 $ 34,059
================= ==================22,037
========= =========
Other current assets consisted of the following:
December 28, December 29,
2001 2000January 2, January 3,
As of 2004 2003
- ------------------------------------------------------------ ------------------
(In----- ---- ----
(in thousands)
Notes receivable $ 2,130446 $ 3,0021,685
Prepaid expenses
4,150 4,7784,566 5,495
Other 256 237
------------------ -----------------647 1,221
--- -----
$ 6,5365,659 $ 8,017
================== =================
57
8,401
========= =========
Other noncurrentnon-current assets consisted of the following:
December 28, December 29,
2001 2000January 2, January 3,
As of 2004 2003
- ------------------------------------------------------------ ------------------
(In----- ---- ----
(in thousands)
Debt issuance costs, net $ 3,0461,691 $ 4,0082,493
Nikon-Trimble joint venture investment* 10,717 -
Other investments 2,737 3,4381,216 1,381
Deposits 1,241 1,405925 1,196
Demonstration equipment, net 3,226 2,665
Receivables from employees 801 1,223
Other 3,038 3,892
----------------- ------------------3,978 3,128
----- -----
$ 10,06222,554 $ 12,743
================= ==================12,086
========= =========
* Includes transaction costs of approximately $0.7 million.
Note 6 - Derivative Financial Instruments:
Interest Rate Swap
In order to reduce variable interest rate exposure on borrowings under its
existing credit facility, Trimble has an interest rate swap agreement on a
portion of the variable rate debt, which fixes the rate on a notional amount of
$25.0 million at 5.195%. In accordance with SFAS No. 133, the Company has
designated its swap agreements as a cash flow hedgetransacts business in various foreign currencies and recorded the change in
fair value of this hedge agreement as part of other comprehensive income. (See
also Note 18) Hedge interest payments are based on the same notional amount,
have the same reset dates and are based on the same benchmark interest rate,
therefore the Company concludes there will be no ineffectiveness in the hedge.
For fiscal 2001, the change in fair value of this derivative amounted to
$203,000 and is recorded as a reduction to other liabilities and an addition to
other comprehensive income. The fair value of this derivative as a liability
amounted to $203,000 at December 28, 2001. In February 2002, the interest rate
swap agreement expired and has not been renewed by the Company.
Forward foreign currency exchange contracts.
Trimble's policy is to hedgehedges identified
risks associated with foreign currency transactions in order to minimize the
impact of changes in foreign currency exchange rates on earnings. Trimble
utilizes forward contracts to hedge certain trade and intercompanyinter-company receivables
and payables. The Company enters intoThese contracts reduce the exposure to fluctuations in exchange
rate movements, as the gains and losses associated with foreign currency
balances are generally offset with the gains and losses on the hedge contracts
and are marked to market through earnings every period and generally range from
one to three months in original maturity. These hedge instruments are marked to
market through earnings every period. Gains and losses are not material to the
Company's financial position or results of operation.
From time to time, Trimble may also utilize forward foreign exchange contracts
designated as cash flow hedges of operational exposures represented by firm
backlog orders to either buy or sell currency if the net
foreign currency exposure exceeds $400,000. The forward foreign exchange
contract obligatesspecific accounts over a specific period of time. Trimble
to exchange predetermined amounts of specified
foreign currencies at specified exchange rates on specified dates, or to make an
equivalent U.S. dollar payment equal to the value of such exchange. For
contracts that are designated and effective as hedges, discounts or premiums
(the difference between the spot exchange rate and the forward exchange rate at
inception of the contract) are accreted or amortized to other operating expenses
over the contract lives, using the straight-line method, while realized and
unrealized gains and losses resulting from
records changes in the spot exchange rate
(including those from open, matured, and terminated contracts) are includedfair value of cash flow hedges in resultsaccumulated other
comprehensive income (loss), until the firm backlog transaction ships. Upon
recognition of revenue, the Company reclassifies the gain or loss on the cash
flow hedge to the statement of operations. Contract amounts are marked to market, with changes in
market value recorded in earnings as foreign exchange gains or losses. To date,
Trimble has entered into forward foreign currency exchange contracts to offsetFor the effects of changes in exchange rates on foreign-denominated intercompany
receivables. At December 28, 2001, Trimble had forward foreign currency exchange
contracts to sell approximately 181.0 million Japanese yen, approximately 3.0
million Euros, and to buy approximately 0.3 million British pounds sterling at
contracted rates that mature over the next six months ending June 30, 2002.
NOTE 7 - Discontinued Operations:
On October 2, 1998, Trimble adopted a plan to discontinue its General
Aviation division. Accordingly, the General Aviation division is being reported
as a discontinued operation for all periods presented in these financial
statements. Net assets of the discontinued operation at October 2, 1998 were
written off and consisted primarily of inventory, property, plant and equipment
and intangible assets. The estimated loss on disposal recorded in fiscal 1998
was $20.3 million.
58
In fiscal 1999, the Company revised its accrual for the remaining costs
expected to be incurred based on the status of the related liabilities
associated with the disposal of the discontinued General Aviation division. This
resulted in a reversal of approximately $2.9 million of prior amounts accrued
related to the discontinued operations.
During the fourth quarter of fiscal 2001, the Company re-evaluated the
adequacy of its accrual for the remaining obligations under the General Aviation
discontinued product line. This resulted in reversal of approximately $0.6
million of prior amounts accrued related to the discontinued operations.
As of December 28, 2001, Trimble did not have any remaining accrual balance
nor any obligations associated with the discontinuation of the General Aviation
division
NOTE 8 - Disposition of Line of Business and Assets:
Disposition of Line of Business:
On March 6, 2001, the Company sold certain product lines of its Air
Transport Systems, to Honeywell Inc. for approximately $4.5 million in cash.
Under the asset purchase agreement, Honeywell International, Inc. purchased
product lines that included the HT 1000, HT 9000, HT 9100 and Trimble's TNL
8100. As part of a strategic alliance that began in 1995, Trimble and Honeywell
jointly developed, manufactured, marketed and sold the HT product line. These
products are installed in many commercial aircraft and major airlines around the
world for Global Positioning System based navigation. As part of this sale,
during the third quarter of fiscal 2001, the Company also sold other product
lines and discontinued its manufacturing operations in Austin, Texas. These
actions resulted in a loss on disposal of approximately $113,000, which is
included in nonoperating income (expense) for fiscal 2001. The Company also
incurred severance costs of approximately $1,724,000 which is included in
restructuring charges related to the termination of employees associated with
the product lines disposed of in fiscal 2001.
At December 28, 2001, the Company has a provision of $1.4 million for
related liabilities associated with the disposition of these product lines and
the discontinuance of its manufacturing operations.
Disposition of Assets:
On August 10, 1999, Trimble signed an asset purchase agreement with
Solectron Corporation and Solectron Federal Systems, Inc. (collectively,
"Solectron"). The closing of the transaction occurred on August 13, 1999. At the
closing, Trimble transferred to Solectron substantially all of Trimble's
tangible manufacturing assets located at Trimble's Sunnyvale, California campus,
including but not limited to equipment, fixtures and work in progress, and
certain contract and other intangible assets and rights, together with certain
related obligations, including but not limited to real property subleases
covering Trimble's manufacturing floor space, and outstanding purchase order
commitments. In addition, the agreement also provided for Solectron's subsequent
purchase, on August 30, 1999, of Trimble's component inventory, on hand as of
August 13, 1999.
The final purchase price for these assets was $26.9 million.year ended January 3,
2003, Trimble recorded a gain of $57,000 reflecting the net change and ending
balance in relation to a firm backlog hedge. The critical terms of the cash flow
hedging instruments are the same as the underlying forecasted transactions. The
changes in fair value of the derivatives are intended to offset changes in the
expected cash flow from the forecasted transactions. All forward contracts have
maturity of less than 12 months. As of January 3, 2003, the effect of all
outstanding derivative instruments did not have a material impact on the
transactionCompany's financial position or results of $11.0 million. This gain was offset by
certain costs incurred or accrued resulting from the transition by the Companyoperations and included payroll for specified individuals ($1.4 million), free rent assumed
by the Company for space subleased by Solectron ($0.3 million), idle capacity on
facilities that will no longer be used ($2.9 million) and other miscellaneous
expenses ($0.4 million), netting to $5.9 million. The net gain was deferred and
is being recognizednone are outstanding
as a reduction to cost of sales, over the three-year
exclusive life of the supply agreement described below. In fiscal 2000, certain
contingencies were finalized relating to some employee and facility related
liabilities, and the deferred gain was reduced by $0.7 million.
Concurrently with the closing of the transaction, Trimble and Solectron
also entered into a supply agreement. The supply agreement provides for the
exclusive manufacture by Solectron of a significant portion of Trimble products
for the three year period ending August 13, 2002.
59
NOTE 9January 2, 2004.
Note 7 - The Company, Industry Segment, Geographic, and Customer Information:
Trimble is a designer and distributor of positioning products and applications
enabled by GPS, optical, laser, and wireless communications technology. The
Company designs and markets products, which deliverby delivering integrated information
solutions such as collecting, analyzing, and displaying position data to its end-users. The Companyend
users. Trimble offers an integrated product line for diverse applications in its
targeted markets.
To achieve distribution, marketing, production, and technology advantages in
Trimble's targeted markets, the Company currently manages itself withinits operations in the following
five segments:
o Engineering and Construction -- Consists of products currently used by
survey and construction professionals in the field for positioning data
collection, field computing, data management, and automated machine
guidance and control. These products provide solutions for numerous
construction applications including surveying;surveying, general construction;construction,
site preparation and excavation;excavation, road and runway construction;construction, and
underground construction.
o AgricultureField Solutions -- Consists of products that provide key advantagessolutions in a
variety of agriculture and fixed asset applications, primarily in the
areas of precise land leveling, machine guidance, yield monitoring,
and variable-rate applications of fertilizers and chemicals.
o Fleet and Asset Management -- Consists of products that enable
end-users to monitor and manage their mobile and fixed assets by
communicating location-relevant information from the field to the
office. The Company offers a range of products that address a number
of sectors of this market including truck fleets, security,
telematics, public safety vehicles,chemicals, and fixed
asset data collection for a variety of governmental and private
entities. This segment is an aggregation of the Company's Mappingmapping and GIS operationgeographic
information systems (GIS) and agriculture businesses. Trimble has
aggregated these business operations under a single general manager in
order to continue to leverage its research and development activities
due to the Company'ssimilarities of products across the segment.
o Mobile Solutions operation. The Mobile Solutions (Mobile
Positioning-- Consists of products that enable end users to
monitor and Communications) operation represents 5.5%manage their mobile assets by communicating
location-relevant information from the field to the office. Trimble
offers a range of products that address a number of sectors of this
market including truck fleets, security, telematics, and 2.7% of
consolidated revenue in fiscal years 2000 and 2001. The Company has
aggregated this business with its Mapping and GIS operation because of
the strong similarities in customers, production process and
distribution methods as well as complementary products.public safety
vehicles.
o Component Technologies -- Currently, the CompanyTrimble markets its GPS component
products through an extensive network of OEM relationships. These
products include proprietary chipsets, modules, and a variety of
intellectual property. The applications into which end-usersend users currently
incorporate the Company's component products include: timing applications for
synchronizing wireless and computer systems; in-vehicle navigation and
telematics (tracking) systems; fleet management; security systems; data
collection systems;networks; and wireless handheld consumer products.
o Portfolio Technologies -- The various operations that comprise this
segment were aggregated on the basis that no single operation accounted
for more than 10% of the total revenuerevenue. During the first two fiscal
quarters of the Company.
Consists of various markets that use accurate position, velocity, and
timing information. These markets include the operations2003, this segment was comprised solely of the Military and
Advanced Systems division andbusiness. Beginning with the third quarter of fiscal
2003, Applanix's performance is reported in this business segment.
At the beginning of fiscal 2003, Trimble realigned two of its reportable
segments. The Tripod Data Systems.Systems business is now included in the Engineering
and Construction segment, while previously it was included in the Portfolio
Technologies segment. The following table has been restated to reflect this
realignment.
Trimble evaluates each of theseits segment's performance and allocates resources
based on profit and loss from operations before income taxes, and some corporate
allocations. The accounting policies applied byTrimble and each of theits segments areemploy the same as
those used by Trimble in general.accounting
policies.
The following table presents revenues, operating income (loss), and identifiable
assets for Trimble'sthe five segments. The information includes the operations of the Spectra Precision Group after July 14, 2000, Tripod Data
Systems after November 14, 2000 and Grid
Data after April 2, 2001.2001, LeveLite after August 15, 2002, Applanix after July 7,
2003 and MENSI after December 9, 2003. Operating income (loss) is net revenue
less operating expenses, excluding general corporate expenses, goodwill
amortization, restructuring charges, nonoperatingnon-operating income (expense), and income
taxes. The identifiable assets that Trimble's Chief Operating Decision Maker
views by segment are accounts receivable and inventory.
60
-------------------------------------------------------------------------------------------
Fiscal Year Ended
December 28, 2001
-------------------------------------------------------------------------------------------
(in thousands)
-------------------------------------------------------------------------------------------Reporting Segments
------------------
Engineering Fleet and Field Mobile Component Portfolio
and Agriculture AssetFiscal Years Ended Construction Solutions Solutions Technologies Technologies Total
Construction Management
-------------------------------------------------------------------------------------------- ------------------ ------------ --------- --------- ------------ ------------ -----
(In thousands)
January 2, 2004
External net revenuerevenues $ 303,944367,058 $ 24,63279,879 $ 57,67812,981 $ 58,08364,193 $ 30,95516,792 $ 475,292
Inter-segment net revenue 2,080 - - - (2,080) -540,903
Operating income (loss)
before corporate
allocations 51,625 (617) 4,810 10,882 803 67,503
Corporate allocations60,664 14,500 (6,452) 16,560 (1,686) 83,586
Accounts receivable (1) - - - - - -
----------- ---------- ----------- ------------ ----------- ------------
Operating income (loss) $ 51,625 $ (617) $ 4,810 $ 10,882 $ 803 $ 67,503
----------- ---------- ----------- ------------ ----------- ------------
Assets:
Accounts receivable(2) $ 62,471 $ 2,241 $ 12,224 $ 7,392 $ 7,249 $ 91,577
Inventory 37,246 2,513 4,118 2,490 5,463 51,830
-------------------------------------------------------------------------------------------
Fiscal Year Ended
December 29, 2000
-------------------------------------------------------------------------------------------
(in thousands)
-------------------------------------------------------------------------------------------
Engineering Fleet and Component Portfolio
and Agriculture Asset Technologies Technologies Total
Construction Management
-------------------------------------------------------------------------------------------
84,897 16,589 4,103 10,003 7,321 122,913
Inventories 56,008 3,398 3,038 2,021 6,361 70,826
January 3, 2003
External net revenuerevenues $ 195,150319,615 $ 26,02467,259 $ 65,0998,486 $ 60,23059,755 $ 23,29511,487 $ 369,798
Inter-segment net revenue - - - - - -466,602
Operating income (loss)
before corporate
allocations 43,937 4,254 15,211 14,850 (1,540) 76,712
Corporate allocations53,453 9,676 (12,039) 10,673 557 62,320
Accounts receivable (1) (15,120) (2,724) (8,232) (4,788) (2,687) (33,551)
----------- ---------- ----------- ----------- ----------- ------------
Operating income (loss) $ 28,817 $ 1,530 $ 6,979 $ 10,062 $ (4,227) $ 43,161
----------- ---------- ----------- ------------ ----------- ------------
Assets:
Accounts receivable(2) $ 58,693 $ 4,649 $ 12,164 $ 11,892 $ 8,522 $ 95,920
Inventory 39,146 1,774 5,775 2,360 8,074 57,129
-------------------------------------------------------------------------------------------
Fiscal Year Ended73,474 11,598 1,960 11,276 1,966 100,274
Inventories 46,332 7,337 1,986 2,853 2,636 61,144
December 31, 1999
-------------------------------------------------------------------------------------------
(in thousands)
-------------------------------------------------------------------------------------------
Engineering Fleet and Component Portfolio
and Agriculture Asset Technologies Technologies Total
Construction Management
-------------------------------------------------------------------------------------------
28, 2001
External net revenuerevenues $ 108,536317,849 $ 12,83768,519 $ 67,27113,791 $ 58,66058,083 $ 24,06017,050 $ 271,364
Inter-segment net revenue - - - - - -475,292
Operating income (loss)
before corporate
allocations 37,223 2,407 14,677 15,055 (2,598) 66,764
Corporate allocations49,849 11,349 (9,990) 10,359 738 62,306
Accounts receivable (1) (16,067) (2,204) (8,108) (5,261) (3,422) (35,062)
----------- ---------- ----------- ----------- ----------- ------------
Operating income (loss) $ 21,156 $ 203 $ 6,569 $ 9,794 $ (6,020) $ 31,702
----------- ---------- ----------- ----------- ----------- ------------
Assets:
Accounts receivable(2) $ 22,304 $ 1,510 $ 11,009 $ 9,273 $ 5,313 $ 49,409
Inventory 6,653 2 2,180 2,392 5,208 16,43564,185 10,191 4,274 7,392 5,535 91,577
Inventories 38,921 4,639 1,992 2,490 3,438 51,480
- ---------------------------
(1) In fiscal 2001, the Company did not allocate corporate expenses to its
individual business segments. In fiscal, 2000 and 1999, the Company
determined the amount of corporate allocations charged to each of its
segments based on a percentage of the segments' monthly revenue, gross
profit, and controllable spending (research and development, sales and
marketing, and general and administrative).
61
(2) As presented, accounts receivable excludes cash received in advance and
reserves,allowances for doubtful accounts, which are not allocated between segments.
The following are reconciliations corresponding to totals in the accompanying
consolidated financial statements:
January 2, January 3, December 28, December 29, December 31,
Fiscal Years Ended 2004 2003 2001
2000 1999
- ------------------------------------------------- --------------- ---------------- --------------------------------- ---- ---- ----
(in thousands)
Operating income from continuing operations:
Total for reportable divisions (1) $ 67,50383,586 $ 43,16162,320 $ 31,70262,306
Unallocated corporate expenses (65,598) (16,942) (11,241)
--------- ----------- ---------(29,651) (28,497) (62,125)
------- ------- -------
Operating income from continuing operations $ 1,90553,935 $ 26,21933,823 $ 20,461181
========== ========= =========== =========
December 28, December 29,(1) Segment operating income for fiscal 2002 and fiscal 2001 2000have been restated
to reflect the allocations of certain corporate expenses so as to be comparable
with the allocation methodology in fiscal 2003.
January 2, January 3,
As of 2004 2003
- ---------------------------------------------- --------------- --------------------- ---- ----
(in thousands)
Assets:
Accounts receivable total for reportable segments $ 91,577122,913 $ 95,920100,274
Unallocated (1) (19,897) (12,320)
---------- ---------------(19,563) (20,629)
------- -------
Total $ 71,680103,350 $ 83,60079,645
========== ===============
Inventory total for reportable segments $ 51,830 $ 57,129
Common inventory (2) 330 3,717
---------- ---------------
Total $ 52,160 $ 60,846
========== ===============
- --------------------------=========
(1) Includes cash received in advance, other receivables, and reservesaccruals that are
not allocated by segment.
(2) Consists of inventory that is common between the segments. Parts can be
used by more than one segment.
The following table presents revenues by product groups.
January 2, January 3, December 28, December 29, December 31,
Fiscal Years Ended 2004 2003 2001
2000 1999
- -------------------------- ----------------- ----------------- ----------------------------------- ---- ---- ----
(in thousands)
GPS products $274,439 $274,215Products $ 271,364320.9 $ 274.5 $ 274.2
Laser and optical products 186,948 93,879 -Optical Products 199.7 186.9 93.9
Other 13,905 1,704 -
---------------- ------------------ ----------------20.3 13.9 1.7
---- ---- ---
Total revenue $475,292 $369,798 $271,364
================ ================== ================
62
$ 540.9 $ 475.3 $ 369.8
======= ======= =======
The geographic distribution of Trimble's revenues and identifiable assets is
summarized in the table below. Other foreign countries include Canada and
countries within South and Central America. Identifiable assets indicated in the
table below exclude intercompanyinter-company receivables, investments in subsidiaries,
goodwill, and intangibles assets.
Geographic Area
--------------------------------------------------------------------------
Europe Other
Europe/ Foreign
U.S. Middle East Non-US
Fiscal Years Ended US Africa Asia Countries Eliminations Total
- -------------------------------------- ------------- -------------- ------------- -------------- ---------------- ----------------------------- -- ------ ---- --------- ------------ -----
(In thousands)
FiscalJanuary 2, 2004
Sales to unaffiliated customers (1)
$ 265,846 $ 166,153 $ 70,257 $ 38,648 $ - $ 540,903
Inter-geographic transfers 112,623 116,185 - 3,755 (232,563) -
------- ------- ----- --------
Total revenue $ 378,469 $ 282,338 $ 70,257 $ 42,403 (232,563) $ 540,903
Identifiable assets $ 172,850 $ 91,008 $ 7,549 $ 12,330 $ - $ 283,737
January 3, 2003
Sales to unaffiliated customers (1) $ 235,716 $ 136,551 $ 60,878 $ 33,457 $ - $ 466,602
Inter-geographic transfers $ 62,843 73,625 - 4,121 (140,589) -
--------- ------ ----- --------
Total revenue $ 298,559 $ 210,176 $ 60,878 $ 37,578 (140,589) $ 466,602
Identifiable assets $ 127,594 $ 70,057 $ 9,955 $ 5,743 $ (864) $ 212,485
December 28, 2001
Sales to unaffiliated customers (1) $ 236,665 $ 143,051 $ 54,710 $ 40,866 $ - $475,292
Intergeographic$ 475,292
Inter-geographic transfers 57,481 49,940 2,137 - (109,558) -
------------- -------------- ------------- -------------- ---------------- ----------------- ------ ----- --------
Total revenue $ 294,146 $ 192,991 $ 56,847 $ 40,866 $(109,558) $ (109,558) $475,292
------------- -------------- ------------- -------------- ---------------- -----------475,292
Identifiable assets $ 120,403 $ 71,081 $ 10,048 $ 3,829 $ (5,494) $199,867
Fiscal 2000
Sales to unaffiliated customers (1) $ 175,993 $ 103,455 $ 43,922 $ 46,428 $ - $369,798
Intergeographic transfers 65,117 12,108 8,320 - (85,545) -
------------- -------------- ------------- -------------- ---------------- -----------
Total revenue $ 241,110 $ 115,563 $ 52,242 $ 46,428 $ (85,545) $369,798
------------- -------------- ------------- -------------- ---------------- -----------
Identifiable assets $ 146,821 $ 84,358 $ 12,016 $ 4,588 $ (6,274) $241,509
Fiscal 1999
Sales to unaffiliated customers (1) $ 131,395 $ 68,301 $ 37,707 $ 33,961 $ - $271,364
Intergeographic transfers 56,024 - 1,480 - (57,504) -
------------- -------------- ------------- -------------- ---------------- -----------
Total revenue $ 187,419 $ 68,301 $ 39,187 $ 33,961 $ (57,504) $271,364
------------- -------------- ------------- -------------- ---------------- -----------
Identifiable assets $ 155,163 $ 16,119 $ 10,550 $ 92 $ (173) $181,751199,867
- --------------------------------------
(1) Sales attributed to countries based on the location of the customer.
Transfers between U.S.US and foreignnon-US geographic areas are made at prices based on
total costs and contributions of the supplying geographic area. The Company's
subsidiaries in Asia, except for Japan, which is a buy/sell entity, have derived
revenue from commissions from domesticUS operations in each of the periods presented.
These commission revenues and expenses are excluded from total revenue and
operating income (loss) in the preceding table. The Japanese entity's revenuerevenues
and expenses are included in total revenue and operating income (loss) in the
preceding table. In fiscal 2002, Germany comprised approximately 16% of sales to
unaffiliated customers. Other than the United States, no other country comprised
more than 10% of sales to unaffiliated customers for any periods presented,
except as disclosed above.
No single customer accounted for 10% or more of Trimble's total revenues in
fiscal years 2001, 2000,2003, 2002, and 1999.
NOTE 10 --2001.
Note 8 - Restructuring Charges:
Restructuring charges of $3.6$2.0 million were recorded in fiscal 2003, $1.1 million
in fiscal 2002, and $3.6 million in fiscal 2001, all of which related to
severance costs.costs, except for $0.3 in 2003 which related to lease costs of
Trimble's Japanese office closure due to the Nikon joint venture. As a result of
these actions, Trimble'sthe restructuring activities, the Company's headcount decreased in fiscal 2003
by 77, 49 and 207 in fiscal 2003, 2002, and 2001, by 232 individuals.respectively. As of December 28, 2001, allJanuary 2,
2004, the restructuring accrual balance was approximately $0.4 million which
will be paid over the remaining term of the restructuring charges except for approximately $80,000 have been paid. The
remaining amounts are expected to be paid in fiscal 2002.
63
NOTE 11lease through 2006.
Note 9 - Long-term Debt:
Trimble's long-termLong-term debt consistsconsisted of the following:
December 28, December 29,
2001 2000
- --------------------------------------------------------------------------------------------------
(In thousands)
Credit Facilities:
Five Year Term Loan $ 61,300 $ 100,000
U.S. and Multi-Currency Revolving Credit Facility 40,000 62,000
Subordinated note 84,000 80,000
Promissory notes 5,189 9,037
Other 76 25
------------------- ------------------
190,565 251,062
Less current portion 63,468 113,721
------------------- ------------------
Noncurrent portion $ 127,097 $ 137,341
=================== ==================
January 2, January 3,
As of 2004 2003
(In thousands)
Credit Facilities:
Term loan $ 43,750 $ 32,600
Revolving credit facility 44,000 35,000
Subordinated note - 69,136
Promissory notes and other 2,736 1,789
----- -----
90,486 138,525
Less bank and other short-term borrowings - 6,556
Less current portion of long-term debt 12,885 24,104
------ ------
Non-current portion $ 77,601 $107,865
========= ========
The following summarizes the Company's future repaymentcash payment obligations (excluding
interest): as of January 2, 2004:
20062009 and
December 28, 2001 Total 2002 2003 2004 2005 2006 2007 2008 Beyond
- ----------------------------------------------------------------------------------------------------------------------
(In----- ---- ---- ---- ---- ---- ------
(in thousands)
Credit Facilities:
Five Year Term Loanloan $ 61,300 $20,000 $24,00043,750 $ 17,30012,500 $ 12,500 $ 12,500 $ 6,250 $ - $ -
$Revolving credit facility 44,000 - U.S. and Multi-Currency
Revolving Credit Facility 40,000 $40,000- 44,000 - - -
Subordinated note - - - - - Subordinated note 84,000 - - 84,000 - - -
Promissory notes 5,189 3,392 84 91 101note and other 2,736 385 165 285 110 1,411
Other 76 76 - - - - -
-------------------------------------------------------------------------------110 1,681
----- --- --- --- --- --- -----
Total contractual cash obligations $190,565 $63,468 $ 24,08490,486 $ 101,39112,885 $ 10112,665 $ 56,785 $ 6,360 $ 110 $ 1,411
===============================================================================1,681
========= ========= ======== ======== ======= ====== =======
Credit Facilities
In July 2000,On June 25, 2003, Trimble obtained $200a $175 million of senior, secured credit
facilities (the "Credit Facilities"Credit Facility ("2003
Credit Facility") from a syndicate of nine banks to supportrepay the acquisition of the Spectra Precision GroupSubordinated Note
and the Company'srefinance certain existing higher interest credit facilities, pay fees and
expenses related to this new credit facility, and for ongoing working capital
requirements and to refinance certain existing debt.general corporate needs.
At December 28,
2001,January 2, 2004, Trimble hashad approximately $101$87.8 million outstandingof borrowings under
the 2003 Credit Facilities,Facility, comprised of $61.3a $43.8 million under a $100 million five-year term loan $30and $44.0
million underof a $50$125 million three-year U.S. dollar only revolving credit
facility ("revolver"), and $10 million under a $50 million three-year
multi-currency revolver. The Company has access to $60an additional $81
million of cash under the terms of its three year revolver loans.the revolving credit facility. The Company
has commitment fees on the unused portion of 0.5% if the leverage ratioLeverage Ratio (which
is defined as all
outstanding debt, excluding the seller subordinated note, overtotal indebtedness to Earnings before Interest, Taxes,
Depreciation and Amortization (EBITDA), as defined in the related agreement) is
2.0 or greater and 0.375% if the leverage ratioLeverage Ratio is less than 2.0.
Pricing of interest for any borrowings under the 2003 Credit Facility was fixed
for the first six months at LIBOR plus 175 basis points (1.5% at January 2,
2004) and now is thereafter tied to a formula, based on the Leverage Ratio.
The Credit Facility is secured by all of the Company's material assets, except
for assets that are subject to foreign tax considerations. Financial covenants
of the 2003 Credit Facility include leverage, fixed charge, and minimum net
worth tests. At January 2, 2004, Trimble was in compliance with all financial
debt covenants. The amount due under the revolver loan is paid as the loan
matures on June 25, 2006, and the loan commitment fees are paid on a quarterly
basis.
Under the terms of the 2003 Credit Facility, the Company is allowed to pay
dividends and repurchase shares of common stock up to 25% of net income in the
previous fiscal year, under the existing terms of the credit facilities.
In July of 2000, Trimble obtained $200 million of senior, secured credit
facilities (the "2000 Credit Facility") from a syndicate of banks to support the
acquisition of Spectra Precision Group and its ongoing working capital
requirements and to refinance certain existing debt. At January 3, 2003, Trimble
had approximately $67.6 million outstanding under the 2000 Credit Facility,
comprised of $32.6 million under a $100 million five-year term loan, $25 million
under a $50 million US dollar only revolving credit facility ("revolver"), and
$10 million under a $50 million multi-currency revolver. The Company had
commitment fees on the unused portion of 0.5% assuming certain ratios were met.
Pricing for any borrowings under the 2000 Credit FacilitiesFacility was fixed for the
first six months at LIBOR plus 275 basis points and iswas thereafter tied to a
formula, based on the Company's leverage ratio.
The weighted average interest
rate underDue to the Credit Facilities was 5.7% for the month of December 28, 2001.
The Credit Facilities are secured by all material assetsfull repayment of the Company,
subject to foreign tax considerations. If Trimble is able to achieveSubordinated Note and maintain a leverage ratio (Debt/EBITDA) of 2.0x or less for four consecutive
quarters, the security for the Credit Facilities will be released. Financial
covenantsrefinancing of the
2000 Credit 64
Facilities include leverage, fixed charge, and minimum net worth tests. ShouldFacility, the Company default on one or more covenants, the Company will attempt to obtain
either waivers or amendments to the Facilities.
Twowrote off approximately $3.6 million of
the Company's financial covenants, minimum fixed charge coverageunamortized debt issuance costs and maximum leverage ratios are sensitive to EBITDA. EBITDA is correlated to the
Company's results of operations. Due to uncertainties associatedwarrants issued in connection with the
downturnSubordinated Note, as interest expense in the worldwide economy and other factors, future revenues by quarter
are difficult to forecast. New cost cutting measures have been put in place by
the management team; however, if revenues should decline at a higher rate than
cost cutting measures on a quarter to quarter basis, the Company may violate the
two above mentioned financial covenants.fiscal 2003.
Subordinated Note
In July of 2000, as part of the acquisition of the Spectra Precision Group, Trimblethe
Company issued Spectra PhysicsSpectra-Physics Holdings USA, Inc., a subordinated seller note
that hashad a stated two year maturity ($40 million was due in fiscal 2001 and $40
million in fiscal 2002).two-year maturity. On March 20, 2002, the Company renegotiated
the terms of the subordinated note and undernote. Under the revised agreement, Spectra PhysicsSpectra-Physics
Holdings, Inc., a subsidiary of Thermo Electron, will extendextended the termdue date of the
note until July 14, 2004, at the current interest rate of approximately 10.4%
per year.
As a result of January 3, 2003 the amendment,principal amount outstanding was approximately $69.1
million. As permitted by the outstanding balance of the note at
December 28, 2001 of $84,000 was reclassified as long-term.
In addition, on March 20, 2002, the Company used $21.2 million of net
proceeds from its private placement to retire accrued interest and principal
under2000 Credit Facility, Trimble repaid the
subordinated note reducing the outstanding principal amount to $68.7
million. To the extent that interestduring fiscal 2003.
Promissory Note and principal due on the maturity date
becomes delinquent, an additional 4% interest rate per annum will apply.
Currently, the note bears interest at a weighted average rate of 10.4%.
The Credit Facilities allow Trimble to repay the seller note at any time
(in part or in whole), provided that (a) Trimble's leverage ratio (Debt
(excluding the seller note)/EBITDA) prior to such repayment is less than 1.0x
and (b) after giving effect to such repayment Trimble would have (i) a leverage
ratio (Debt (excluding any remaining portion of the seller note)/EBITDA) of less
than 2.0x and (ii) cash and unused availability under the revolvers of the
Credit Facilities of at least $35 million. The note, by its terms, is
subordinated to the Credit Facilities.
Promissory NotesOthers
The promissory notes at the endnote and others mainly consists of fiscal 2001 include a $3.3$1.7 million obligation to the former owners of ZSP Geodetic Systems GmbH, a subsidiary of
Trimble, assumed by the Company when it acquired the Spectra Precision Group.
The $3.3 million debt obligation has a stated maturity of September 2002 and
bears interest at 6%.
In addition, these notes include a $1.9 million promissory noteliability
arising from the purchase of a building for the Company'sTrimble's Corvallis, Oregon site.site and
other government loans in our foreign subsidiaries. The $1.7 million note is
payable in monthly installments through April 2015, bearing a 3.99% variable
interest rate (7.140% at December 28, 2001).as of January 2, 2004.
Weighted Average Cost of Debt
The Company's weighted average cost of debt is approximately 8.0%2.9% for fiscal 20012003 and 9.5%7.6%
for fiscal 2000.
65
2002.
Note 1210 - Lease Obligations and Commitments:
Trimble's principal facilities in the United States are leased under
noncancelablenon-cancelable operating leases that expire at various dates through 2011. TrimbleThe
Company has options to renew certain of these leases for an additional five
years. The CompanyTrimble also leases facilities under operating leases in the United
Kingdom, Sweden, and Germany that expire in 2005.
Future minimum payments required under noncancelablenon-cancelable operating leases areasare as
follows:
Operating
Lease Payments
- ------------------------------------------- -----------------------------------------
(In thousands)
2002 *2004 $ 9,616
2003 * 9,833
2004 6,25110,129
2005 5,8439,401
2006 7842,322
2007 1,643
2008 1,489
Thereafter 2,089
------------3,157
-----
Total $ 34,416
============
Rent28,141
--------
Net rent expense under operating leases was $13.1$13.2 million in fiscal 2001, $10.62003, $5.9
million in fiscal 20002002, and $8.1$9.6 million in fiscal 1999.
Fiscal 2002 and 2003 are net of sublease2001. Sublease income of $3.1was
$1.7 million, $4.7 million, and $1.3$3.5 million, respectively.
Note 1311 - Fair Value of Financial Instruments:
Statement of Financial Accounting Standards No. 107, "Disclosures about
Fair Value of Financial Instruments" requires disclosure of the following
information about the fair value of certain financial instruments for which it
is currently practicable to estimate such value. None of the Company's financial
instruments are held or issued for trading purposes.
The carrying amounts and fair values of Trimble's financial instruments are as
follows:
Carrying Fair Carrying Fair
Amount Value Amount Values
------------------ ------------ -------------- ----------------
December 28, 2001 December 29, 2000
- --------------------------------------------------------------------------------------------------------------------------- ----- ------ ------
January 2, 2004 January 3, 2003
--------------- ---------------
(In thousands)
Assets:
Cash and Cashcash equivalents (See Note 1) $ 31,07845,416 $ 31,078 $40,876 $40,87645,416 $ 28,679 $ 28,679
Forward foreign currency exchange contracts 1,412 1,328 125 297
(See Note 6)
191 191 50 50
Accounts Receivable 71,680 71,680 83,600 83,600receivable 103,350 103,350 79,645 79,645
Liabilities:
Subordinated notes (See Note 11) $ 84,000 $ 81,290 $80,000 $69,6989) - - 69,136 65,798
Credit Facilitiesfacilities (See Note 11) 101,300 101,300 162,000 162,0009) 87,750 87,750 67,600 67,600
Promissory notesnote and other (See Note 11) 5,189 4,958 9,037 7,8769) 2,736 2,335 1,789 1,421
Accounts Payable 21,494 21,494 26,448 26,448payable 26,019 26,019 30,669 30,669
The fair value of the subordinated notes, bank borrowings, and promissory note
and the long-term commitmentnotes
have been estimated using an estimate of the interest rate Trimble would have
had to pay on the issuance of notes with a similar maturity and discounting the
cash flows at that rate. The fair values do not give an indication of the amount
that Trimble would currently have to pay to extinguish any of this debt.
66
The fair value of forward foreign exchange contracts is estimated based on quotedthe
difference between the market pricesprice and the carrying amount of comparable
contracts, and thesecontracts. These contracts are adjusted to the fair value at the end of every month.
Note 1412 - Income Taxes:
Trimble's income tax provision consists(benefit) consisted of the following:
January 2, January 3, December 28, December 29, December 31,
Fiscal Years Ended 2004 2003 2001
2000 1999
- ---------------------------- ------------------ --------------- -------------------- ---- ----
(In thousands)
US Federal:
Current $- $1,408 $1,089$ 513 $ - $ -
Deferred (7,000) - -
-------
(6,487) - ------------------ --------------- ----------------
-
1,408 1,089
------------------ --------------- -----------------------
US State:
Current 250 142 58
144 196
Deferred (600) - -
-
------------------ --------------- ---------------------
(350) 142 58
144 196
------------------ --------------- ----------------
Foreign:----- --- --
Non-US:
Current 1,594 2,052 2,729
931 770
Deferred 2,343 1,306 (887)
(908) 18
------------------ --------------- --------------------- ----- ----
3,937 3,358 1,842
23 788
------------------ --------------- --------------------- ----- -----
Income tax provision (benefit) $ (2,900) $ 3,500 $1,900
$ 1,575 $2,073
================== =============== ========================= ======= ======
The domesticpre-tax US income (loss) income from continuing operations before income taxes
(including royalty income subject to foreign withholding taxes) was approximately ($29.3 million), $14.4$39.5
million, $3.3 million and $19.7$(29.3) million in fiscal years 2001, 20002003, 2002 and 1999,2001,
respectively.
The income tax provision (benefit) differs from the amount computed by applying
the statutory federal income tax rate to income before taxes. The sources and
tax effects of the differences are as follows:
January 2, January 3, December 28, December 29, December 31, 1999
Fiscal Years Ended 2004 2003 2001
2000
- ----------------------------------------------------- ----------------- --------------- --------------------
(Dollars in------------------ ---- ---- ----
(In thousands)
Expected tax from continuing operations at $ 12,455 $ 4,839 $(7,557)
35% in all years
$ (7,557) $5,516 $7,258
Operating loss not utilized (utilized)Change in valuation allowance (15,028) (1,156) 9,704
(5,115) (6,176)
Foreign withholding taxes 115 141 299
ForeignNon-US tax rate differential (970) 307 109- (137) (855)
Goodwill amortization - - 747
370 -
Other (327) (46) (139)
356 583
----------------- --------------- ------------------------ --- ----
Income tax provision (benefit) $ (2,900) $ 3,500 $ 1,900
$ 1,575 $2,073
================= =============== ============================= ======== ========
Effective tax rate (8%) 25% (9%)
10% 10%
================= =============== ======================= == ===
67
The components of deferred taxes consist of the following:
December 28, December 29,
2001 2000January 2, January 3,
As of 2004 2003
- ------------------------------------------------------------------ ------------------ ---- ----
(In thousands)
Deferred tax liabilities:
Purchased intangibles $ 6,9331,338 $ 8,230381
Depreciation and amortization 3,776 2,258
Other individually immaterial items 300 288
--------------- -------------251 (78)
--- ---
Total deferred tax liabilities 7,233 8,518
--------------- -------------5,365 2,561
----- -----
Deferred tax assets:
Inventory valuation differences 11,741 8,8369,001 12,069
Expenses not currently deductible 5,103 5,6565,528 5,762
US Federal credit carryforwards 7,300 8,6869,150 8,172
Deferred revenue 808 2,6744,280 4,317
US State credit carryforwards 5,377 4,7256,999 6,215
Warranty 2,596 2,4552,374 2,374
Depreciation 6,091 1,724and amortization 2,871 3,184
US Federal net operating loss (NOL) carryforward 11,086 1,028- 4,451
Other individually immaterial items 1,147 2,751
--------------- -------------3,106 1,827
----- -----
Total deferred tax assets 51,249 38,53543,309 48,371
Valuation allowance (50,974) (37,861)
--------------- -------------(34,756) (47,878)
------- -------
Total deferred tax assets 275 674
--------------- -------------8,553 493
----- ---
Total net deferred tax liabilitiesassets/(liabilities) $ (6,958) $(7,844)
=============== =============3,188 $(2,068)
========== =======
The federal NOLCompany has US Federal credit carryforwards listed above expire beginning in 2018. The
federal credit carryforwardsof approximately $9.1 million
that expire beginning in 2004. The Company has state research and development
credit carryforwards of approximately $10.4 million which do not expire.
Valuation allowances reduceThe change in valuation allowance in 2003 includes net operating losses realized
as well as the benefit given to certain deferred tax assets toin the amount of
$7.6 million based on management's assessment that amount that,
based upon all available evidence,it is more likely than not
tothat such assets will be realized. The valuation allowance increaseddecreased by $13.1
million in 20012003 and increaseddecreased by $2.6$3.1 million in 2000.2002. Approximately $11.9$14.1
million of the valuation allowance at December 28, 2001January 2, 2004 relates to the tax
benefits of stock option deductions, which will be credited to equity if and
when realized.
Note 1513 - Shareholder'sShareholders' Equity:
3-for-2 Stock Split
Trimble's Board of Directors approved a 3-for-2 split of all outstanding shares
of the Company's Common Stock, payable March 4, 2004 to stockholders of record
on February 17, 2004. Cash will be paid in lieu of fractional shares. All share
and per share information have been adjusted to reflect the stock split on a
retroactive basis for all periods presented.
Common Stock
On April 14, 2003, Trimble sold 3,148,000 shares of its Common Stock, no par
value per share, to an investor at a price of $12.17 per share in an offering
pursuant to its shelf registration statement. The offering resulted in net
proceeds to Trimble of approximately $36.6 million, approximately $31 million of
which was used to pay down the principal balance and $5.6 million was used to
pay down the accrued interest due on the Subordinated Note (see Note 9 to the
Consolidated Financial Statements).
On December 21, 2001, Trimble completed a private placement of 1,783,3372,675,006 shares
of its common stockCommon Stock at a price of $15.00$10.00 per share to certain qualified
investors, resulting in gross proceeds of approximately $26.8 million to the
Company. On January 15, 2002, Trimble had a second closing of the private
placement issuing 1,280,0041,920,006 shares of common stockCommon Stock at $15.00$10.00 per share resulting
in gross proceeds of an additional $19.2 million.
2002 Stock Plan
In 2002, Trimble's Board of Directors adopted the 2002 Stock Plan ("2002 Plan").
The 2002 Plan approved by the shareholders provides for the granting of
incentive and non-statutory stock options for up to 3,000,000 shares plus any
shares currently reserved but un-issued to employees, consultants, and directors
of Trimble. Incentive stock options may be granted at exercise prices that are
not less than 100% of the fair market value of Common Stock on the date of
grant. Employee stock options granted under the 2002 Plan have 120-month terms,
and vest at a rate of 20% at the first anniversary of grant, and monthly
thereafter at an annual rate of 20%, with full vesting occurring at the fifth
anniversary of the grant. The exercise price of non-statutory stock options
issued under the 2002 Plan must be at least 85% of the fair market value of
Common Stock on the date of grant. As of January 2, 2004, options to purchase
2,326,742 shares were outstanding and 619,949 were available for future grant
under the 2002 Plan.
1993 Stock Option Plan
In 1992, Trimble's Board of Directors adopted the 1993 Stock Option Plan ("1993
Plan"). The 1993 Plan, as amended to date and approved by shareholders, provides
for the granting of incentive and nonstatutorynon-statutory stock options for up to
6,375,0009,562,500 shares of Common Stock to employees, consultants, and directors of
Trimble. Incentive stock options may be granted at exercise prices that are not
less than 100% of the fair market value of Common Stock on the date of grant.
Employee stock options granted under the 1993 Plan have 120-month terms, and
vest at a rate of 20% at the first anniversary of grant, and monthly thereafter
at an annual rate of 20%, with full vesting occurring at the fifth anniversary
of grant. The exercise price of nonstatutorynon-statutory stock options issued under the
1993 Plan must be at least 85% of the fair market value of Common Stock on the
date of grant. As of December 28, 2001,
68
January 2, 2004, options to purchase 4,297,9814,799,045 shares were
outstanding, and 436,348980,627 shares were available for future grant under the 1993
Plan.
1990 Director Stock Option Plan.Plan
In December 1990, Trimble adopted a Director Stock Option Plan under which an
aggregate of 380,000570,000 shares of Common Stock have been reserved for issuance to
non-employee directors as approved by the shareholders to date. At December
28, 2001,January 2,
2004, options to purchase 198,333287,501 shares were outstanding, and 60,416no shares were
available for future grants under the Director Stock Option Plan.
1992 Management Discount Stock Option Plan.Plan
In 1992, Trimble's Board of Directors approved the 1992 Management Discount
Stock Option Plan ("Discount Plan"). Under the Discount Plan, 300,000
nonstatutory450,000
non-statutory stock options were reserved for grant to management employees at
exercise prices that may be significantly discounted from the fair market value
of Common Stock on the dates of grant. Options are generally exercisable six
months from the date of grant. As of December 28, 2001,January 2, 2004, there were 4,974no shares
available for future grants. For accounting purposes, compensation cost on these
grants is measured by the excess over the discounted exercise prices of the fair
market value of Common Stock on the dates of option grant.grants. There were no
discounted options granted in the plan in fiscal 2001, 20002003, 2002, and 1999.2001. As of
December 28, 2001,January 2, 2004, options to purchase 125,000187,500 shares were outstanding under the
1992 Management Discount Stock Option Plan.
1988 Employee Stock Purchase Plan.Plan
In 1988, Trimble established an employee stock purchase plan under which an
aggregate of 3,150,0005,025,000 shares of Common Stock have been reserved for sale to
eligible employees as approved by the shareholders to date. The plan permits
full-time employees to purchase Common Stock through payroll deductions at 85%
of the lower of the fair market value of the Common Stock at the beginning or at
the end of each six-month offering period. In fiscal 20012003 and 2000, 208,1542002, 328,044
shares and 131,657362,412 shares, respectively, were issued under the plan for
aggregate proceeds to the Company of $3.1 million and $1.2$2.9 million,
respectively. At December 28, 2001,January 2, 2004, the number of shares reserved for future
purchases by eligible employees was 545,812.428,216.
SFAS 123 Disclosures
As stated in Note 1 of the Notes to the Consolidated Financial Statements,
Trimble has elected to follow APB 25 and related interpretations in accounting
for its employee stock options and stock purchase plans. The alternative fair
value accounting provided for under SFAS 123 requires use of option pricing
models that were not developed for use in valuing employee stock options. Under
APB 25, because the exercise price of Trimble's employee stock options equals
the market price of the underlying stock on date of grant, no compensation
expense is recognized.
Pro forma information regarding net income (loss) and earnings (loss) per
share is required by SFAS 123 and has been determined as if Trimble had
accounted for its employee stock options and purchases under the employee stock
purchase plan using the fair value method of SFAS 123. The fair value for these
options was estimated at the date of grant using a Black-Scholes option-pricing
model with the following weighted-average assumptions for fiscal 2001, 2000 and
1999:
December 28, December 29, December 31,
2001 2000 1999
---------------- --------------- -----------------
Expected dividend yield - - -
Expected stock price volatility 69.59% 66.41% 59.58%
Risk free interest rate 4.15% 6.21% 6.34%
Expected life of options after vesting 1.20 1.22 1.21
The Black-Scholes option valuation model was developed for use in
estimating the fair value of traded options that have no vesting restrictions
and are fully transferable. In addition, option valuation models require the
69
input of highly subjective assumptions, including the expected stock price
volatility. Because Trimble's employee stock options have characteristics
significantly different from those of traded options, and because changes in the
subjective input assumptions can materially affect the fair value estimate, in
management's opinion, the existing models do not necessarily provide a reliable
single measure of its employee stock options.
For purposes of pro forma disclosures, the estimated fair value of the
options is amortized to expense over the options' vesting period, and the
estimated fair value of purchases under the employee stock purchase plan is
expensed in the year of purchase. The effects on pro forma disclosure of
applying SFAS 123 are not likely to be representative of the effects on pro
forma disclosure of future years. Trimble's pro forma information is as follows:
December 28, December 29, December 31, 1999
Fiscal Years Ended 2001 2000
- --------------------------------------------------- ----------------- --------------- ------------------
(Dollars in thousands)
Net income (loss) - as reported $ (22,879) $14,185 $21,593
Net income (loss) - proforma $ (35,597) $ 5,898 $16,377
Basic income (loss) per share - as reported $ (0.93) $ 0.60 $ 0.96
Basic income (loss) per share - proforma $ (1.44) $ 0.25 $ 0.73
Diluted income (loss) per share - as reported $ (0.93) $ 0.55 $ 0.95
Diluted income (loss) per share - proforma $ (1.44) $ 0.23 $ 0.72
Exercise prices for options outstanding as of December 28, 2001,January 2, 2004, ranged from $8.00$5.33
to $51.69.$34.46. The weighted average remaining contractual life of those options is
7.496.91 years. In view of the wide range of exercise prices, Trimble considers it
appropriate to provide the following additional information in respect of
options outstanding:
Currently exercisable
---------------------------------------
Total Weighted-average Weighed-averageOptions Outstanding Options Exercisable
------------------- -------------------
Weighted- Weighted- Weighted-
Average Average Average
Number Weighted-averageExercise Price Remaining Number Exercise pricePrice
Range (in thousands) Exercise price contractual life (in thousands)Outstanding(1) per Share Contractual Life Exercisable(1) per Share
- ------------------------------ -------------- --------- ---------------- -------------------- ---------------------- ----------------- ---------------------------------- ---------
$8.0000$ 5.33 - $8.3125 493,673 $8.0401 7.07 273,704 $8.0427
$8.37006.63 908 5.70 5.01 873 $ 5.71
6.67 - $10.1250 488,077 $9.5614 4.61 370,785 $9.5164
$10.68758.53 861 7.91 6.03 614 7.89
8.75 - $11.9375 528,049 $11.7003 7.35 248,201 $11.6736
$12.00009.33 111 9.10 6.07 65 8.94
10.23 843 10.23 8.47 228 10.23
10.25 - $15.3750 491,852 $14.1806 5.14 455,663 $14.2705
$15.450011.43 957 10.81 6.13 585 10.66
11.65 - $17.1500 573,750 $16.6946 9.36 41,696 $17.0605
$17.470011.67 780 11.65 6.74 426 11.65
11.93 - $17.4700 488,188 $17.470015.71 783 13.29 6.18 525 13.13
16.04 21 16.04 6.02 17 16.04
17.00 1,064 17.00 9.53 5 17.00
17.55 - 34.46 1,274 26.37 6.86 800 27.01
----- ----- ---- --- -----
Total 7,601 13.61 6.91 4,136 $ 0.00000
$17.5000 - $19.5000 477,223 $18.4347 6.83 293,025 $18.2598
$19.5625 - $34.1250 338,922 $24.7012 8.16 122,867 $25.1293
$41.1250 - $41.1250 712,753 $41.1250 8.65 190,292 $41.1250
$51.6875 - $51.6875 33,100 $51.6875 8.55 9,893 $51.6875
- ------------------------- ---------------- ----------------- -------------------- ---------------- -------------------
$8.0000 - $51.6875 4,625,587 $19.0437 7.49 2,006,126 $16.258412.76
===== ===== ==== ===== =======
70
(1) In thousands
Activity during fiscal 2001, 2000,2003, 2002, and 19992001, under the combined plans was as
follows:
January 2, 2004 January 3, 2003 December 28, 2001
December 29, 2000 December 31, 1999
------------------------------- --------------------------- ------------------------------------------ --------------- -----------------
Weighted Weighted Weighted
average Weighted Weightedaverage average
exercise price average averageexercise exercise
Fiscal Years Ended Options Options exercise price Options exerciseprice Options price
- -------------------------------------- ------------ ----------------- ---------- --------------- ----------- ---------------------------------- ------- ----- ------- ----- ------- -----
(In thousands, except for per
share data)
Outstanding at beginning of year 4,260 $19.09 4,009 $12.36 3,026 $13.647,691 $ 12.35 6,932 $ 12.69 6,390 $ 12.73
Granted 1,070 17.08 1,379 34.39 1,813 10.221,298 16.87 1,275 9.88 1,605 11.39
Exercised (291) 12.91 (706) 13.08 (135) 11.64(1,263) 8.90 (199) 6.67 (436) 8.61
Cancelled (418) 18.55 (422)(125) 15.51 (695) 14.03
------------ ---------- -----------(317) 13.46 (627) 12.37
---- ----- ----- ----- ---- -----
Outstanding at end of year 4,621 $19.04 4,260 $19.07 4,009 $12.367,601 $ 13.61 7,691 $ 12.35 6,932 $ 12.69
Exercisable at end of year 2,006 $16.26 1,429 $12.94 1,334 $13.684,136 $ 12.76 4,005 $ 11.69 3,009 $ 10.84
Available for grant 1,605 2,790 1,565
Weighted-average fair value of
options granted during year $9.58 $19.04 $5.51$ 10.03 $ 5.64 $ 6.39
Non-statutory Options.
On May 25, 2000, Trimble entered into an agreement to grant a non-statutory
option to purchase up to 40,000 shares of common stock at an exercise price of
$13.44 per share. On October 29, 2001, the non-statutory option holder exercised
their rights to acquire 10,090 shares of common stock at an effective price of
$13.44 per share based on netting provisions, with no net proceeds to the
Company.Options
On May 3, 1999, Trimble entered into an agreement to grant a non-statutory
option to purchase up to 30,00045,000 shares of common stock at an exercise price of
$9.75$6.50 per share, with an expiration date of March 29, 2004.
As of December 28, 2001,January 2, 2004, these non-statutory options have not been exercised.
Warrants.Warrants
On May 31, 2001,April 12, 2002, the Company issued to Spectra-Physics Holdings USA, Inc., a
warrant holder exercised their rights to acquire 400,000purchase up to 564,350 shares of common stockTrimble's Common Stock over a fixed
period of time. Initially, Spectra-Physics' warrant entitles it to purchase
300,000 shares of Common Stock over a five-year period at an effectiveexercise price of
$10.95$10.07 per shareshare. On a quarterly basis beginning July 14, 2002, Spectra-Physics'
warrant became exercisable for aggregate
net proceedsan additional 375 shares of Common Stock for
every $1 million of principal and interest outstanding to Spectra-Physics until
the obligation is paid off in full. These shares are purchasable at a price
equal to the Companyaverage of $4.4 million.Trimble's closing price for the five days immediately
preceding the last trading day of each quarter. On July 14, 2002 an additional
26,046 shares became exercisable at an exercise price of $9.64 per share. On
October 14, 2002 an additional 26,736 shares became exercisable at an exercise
price of $6.12. On January 14, 2003, an additional 27,426 shares became
exercisable at an exercise price of $9.03. On April 14, 2003, an additional
14,312 shares became exercisable at an exercise price of $13.37. The additional
shares are exercisable over a 5-year period. No additional shares will be
issuable under the warrant to Spectra-Physics as the underlying obligation has
been paid off in full.
The approximate fair value of the warrants of $2.4 million was determined using
the Black-Scholes pricing model with the following assumptions: contractual life
of 5-year period, risk-free interest rate of 4%; volatility of 65%; and no
dividends during the contractual term. The value of the warrants was being
amortized to interest expense over the term of the subordinated note and the
unamortized balances was written off to interest expense on June 2003 upon
repayment of the note.
On December 21, 2001 and January 15, 2002, in connection with the first and
second closing of the private placement of the Company's Common Stock, Trimble
granted five-year warrants to purchase an additional 356,670919,008 shares of common stock at an exercise price of $19.475. These
warrants were granted as part of a private placement of the Company's common
stock.
On January 15, 2002, in connection with the second closing of the December
21, 2001 private placement, Trimble granted five-year warrants to purchase an
additional 256,002 shares of common stock,Common
Stock, subject to certain adjustments, at an exercise price of $19.475$12.97 per share.
Common Stock Reserved for Future Issuances.Issuances
As of December 28, 2001,January 2, 2004, Trimble had reserved 6,025,53411,371,652 common shares for
issuance upon exercise of options and warrants outstanding and options available
for grant under the 2002 Plan, the 1993 Plan, the 1990 Director Plan, and the
1992 Management Discount Plan, and available for issuance under the 1988
Employee Stock Purchase Plan.
71
Note 1614 - Benefit Plans:
401(k) Plans:Plan
Under Trimble's 401(k) Plan, U.S.US employee participants (including employees of
certain subsidiaries) may direct the investment of contributions to their
accounts among certain mutual funds and the Trimble Navigation Limited Common
Stock Fund. The Trimble Fund sold net 3,60861,238 shares of Common Stock for an
aggregate of $113,000$0.9 million in fiscal 2001.2003. Trimble, at its discretion, matchedmatches
individual employee 401(k) Plan contributions up to $100
per month for the first six monthsat a rate of fiscal 2001. Trimble changed its
discretionary match effective July 1, 2001, to fifty cents of every
dollar that the employee contributes to the plan401(k) Plan up to 5% of the
employee's annual salary to an annual maximum of $2,500. Trimble's matching
contributions to the 401(k) Plan were $1.2$1.8 million in fiscal 2001, $0.82003, $1.8 million
in fiscal 20002002, and $1.0$1.7 million in fiscal 1999. Certain of the Company's subsidiaries participate in a 401(k)2001.
Profit-Sharing Plan in which the Company matched fifty cents of every dollar that the employee
contributes to the plan up to 5 % of the employees annual contribution for the
first six months of fiscal 2001. From July 1, 2001 they matched Fifty cents of
every dollar that the employee contributes to the plan up to 5% of the
employee's annual salary to an annual maximum of $2,500. During fiscal 2001, the
Company contributed $0.5 million to the plan. The Company's Tripod Data Systems
subsidiary matches one dollar for every three dollars that the employee puts
into the plan up to 8% of their annual salary through December 5, 2001. As of
December 5, 2001, employees of Tripod Data Systems were converted over to the
Trimble plan. Through December 5, 2001, the Company contributed $67,000 to this
plan. Certain of the Company's subsidiaries merged into the Trimble 401(k) plan
on March 9, 2002.
Profit-Sharing Plan:
In 1995, Trimble introduced an employee profit-sharing plan in which all
employees, excluding executives and certain levels of management, participate.
The plan distributes to employees approximately 5% of quarterly income before
taxes.adjusted pre-tax
income. Payments under the plan during fiscal 2003, 2002 and 2001 2000were $2.5
million, $1.1 million, and 1999 were $0.9 million, $2.1 million, and $1.2 million, respectively.
Defined Contribution Pension Plans:Plans
Certain of the Company's European subsidiaries participate in European state sponsored
pension plans. Contributions are based on specified percentages of employee
salaries. For these plans, the CompanyTrimble contributed and charged to expense
$40,000 as of December 28, 2001approximately $2.0 million for fiscal 2003, $1.4 million for fiscal 2002, and
$275,000 from July 14, 2000 through
December 29,2000.$1.4 million for fiscal 2001.
Defined Benefit Pension Plan:Plan
The Company's Swedish and German subsidiaries have an unfunded defined benefit pension
plan that covered substantially all of itstheir full-time employees through 1993.
Benefits are based on a percentage of eligible earnings. The employee must have
had a projected period of pensionable service of at least 30 years as of 1993.
If the period was shorter, the pension benefits were reduced accordingly. Active
employees do not accrue any future benefits; therefore, there is no service cost
and the liability will only increase for interest cost.
Net periodic benefit costs in fiscal 2003, 2002, and 2001 were not material.
72
The fair valuechanges in the benefit obligations and plan assets of the plan assetssignificant non-US
defined benefit pension plans for fiscal 2003 and 2002 were as follows:
December 28, December 29,
2001 2000
- --------------------------------------------------------------------------------
(In thousands)
Fair value of plan assets at beginning of year $ 465 $ 404
Actual return on plan assets 56 63
Employer contribution - -
Plan participants' contributions 33 30
Benefits paid - -
Translation adjustment (51) (32)
-------------- -----------------
Fair value of plan assets at end of year $ 503 $ 465
============== =================
The Company's defined benefit plan activity was as follows:
December 28, December 29,
2001 2000
- --------------------------------------------------------------------------------
(In thousands)
Change in Benefit Obligation:
Benefit obligation at beginning of year $ 4,811 $ 3,927
Interest Cost 134 233
Translation adjustment (312) 15
Actuarial (gain) loss 73 -
--------------- ----------------
Benefit obligation at end of year $ 4,706 $ 4,175
Fiscal Years Ended January 2, 2004 January 3, 2003(1)
- ------------------ --------------- -----------------
(in thousands)
Change in benefit obligation:
Benefit obligation at beginning of year $ 4,972 $ 4,105
Interest cost 328 317
Benefits paid (256) (212)
Foreign exchange impact 1,102 814
Actuarial (gains) losses 58 (52)
-- ---
Benefit obligation at end of year 6,204 4,972
----- -----
Change in plan assets:
Fair value of plan assets at beginning of year 787 731
Actual return on plan assets 29 122
Employer contribution 150 121
Plan participants' contributions - -
Benefits paid (256) (212)
Foreign exchange impact 162 24
Fair value of plan assets at end of year 872 786
Benefit obligation in excess of plan assets 5,332 4,186
----- -----
Unrecognized prior service cost - -
Unrecognized net actuarial gain 35 25
-- --
Accrued pension costs (included in accrued liabilities) $ 5,297 $ 4,161
------- -------
(1) Prior Service Cost - -
Unrecognized Net Actuarial Gain - -
-------------- -----------------
Accrued Pension Costs (included in accrued
liabilities) $ 4,706 $ 4,175
============== =================year's disclosure has been restated to correct for a clerical error.
Actuarial assumptions used to determine the net periodic pension costs for the
year ended December 28, 2001January 2, 2004 were as follows:
Swedish Subsidiary German Subsidiaries
----------------------- ---------------------------------------- -------------------
Discount Raterate 5.5% 6.25%6.0%
Rate of Compensation Increasecompensation increase 2.5% 1.5%
Note 1715 - Earnings Per Share:
The following data show the amounts used in computing earnings (loss) per share
and the effect on the weighted-average number of shares of potentially dilutive
potential
Common Stock.
January 2, January 3, December 28, December 29, December 31,
Fiscal Years Ended 2004 2003 2001
2000 1999
- --------------------------------------------------- ---------------- --------------- ---------------
(In------------------ ---- ---- ----
(in thousands, except per share data)
Numerator:
Income available to common shareholders:
Used in basic and diluted incomeearnings (loss) per
share from continuing operations $ (23,492)38,485 $ 14,18510,324 $ 18,662(23,492)
Used in basic and diluted incomeearnings per share
from discontinued operations - - 613
- 2,931
------------ --------- -------------
Used in basic and diluted incomeearnings (loss) per
share $ 38,485 $ 10,324 $ (22,879)
$ 14,185 $ 21,593========== =========== ========= =========
73
===========
Denominator:
Weighted-average number of common shares used in
based incomebasic earnings (loss) per share 23,601 22,424
24,72747,505 42,860 37,091
Effect of dilutive securities(using Treasurysecurities (using treasury stock
method):
Common stock options 2,058 705 - 2,098 382
Common stock warrants 449 13 - 277 46
------------ --------- ----------
Weighted-average number of common shares and dilutive
potential common shares used in diluted income (loss) per
share 24,727 25,976 22,852
=========== ========= =========50,012 43,578 37,091
====== ====== ======
Basic incomeearnings (loss) per share from continuing operations $ (0.95)0.81 $ 0.600.24 $ 0.83(0.63)
Basic incomeearnings per share from discontinued operations 0.02 - 0.13
------------ --------- ----------- 0.01
Basic incomeearnings (loss) per share $ (0.93)0.81 $ 0.600.24 $ 0.96
============ ========= =========(0.62)
Diluted incomeearnings (loss) per share from continuing
operations $ (0.95)0.77 $ 0.550.24 $ 0.82(0.63)
Diluted incomeearnings per share from discontinued operations 0.02 - 0.13
------------ --------- ----------- 0.01
Diluted income (loss) per share $ (0.93)0.77 $ 0.550.24 $ 0.95
============ ========= =========(0.62)
OptionsDue to the fact that the Company reported a net loss in fiscal 2001, options and
warrants were not included in the computation of earnings per share in 2001 because the Company reported a net loss in fiscal
2001. If Trimblethe Company had reported net income in 2001, additional 938,0001,407,000
common equivalent shares related to outstanding options and warrants would have
been included in the calculation of diluted loss per share.
Note 1816 - Comprehensive Income (Loss):
The components of other comprehensive income (loss), net of related tax as follows:
January 2, January 3, December 28, December 29, December 31,
Fiscal Years Ended 2004 2003 2001
2000 1999
- --------------------------------------------------------------------------------
(In------------------ ---- ---- ----
(in thousands)
Net income (loss) $ 38,485 $10,324 $(22,879)
Foreign currency translation adjustments 31,198 17,697 (9,766)
Net gain (loss) on hedging transactions (7) 210 (203)
Net unrealized gain (loss) on investments 74 (17) 16
-- --- --
Comprehensive income (loss) $ 69,750 $28,214 $(32,832)
======== ======= ========
The components of accumulated other comprehensive (loss), net of related tax as
follows:
January 2, January 3,
Fiscal Years Ended 2004 2003
- ------------------ ---- ----
(in thousands)
Cumulative foreign currency translation adjustments $ (9,766)30,166 $ (8,045) $ (107)(1,032)
Net lossgain on interest rate swap (203)hedging transactions - -7
Net unrealized gain (loss) on investments 16 123 $ (142)
----------- ---------- ---------
Other comprehensive income (loss) $ (9,953) $ (7,922) $ (249)
=========== ========== =========
74
73 (1)
-- --
Accumulated other comprehensive income (loss) on the consolidated balance
sheets consists of unrealized gains on available for sale investments and
foreign currency translation adjustments.
The components of accumulated other comprehensive income (loss), net of related
tax as follows:
December 28, December 29,
2001 2000
- ------------------------------------------------------------------------- -----------------
(In thousands)
Cumulative foreign currency translation adjustments $ (18,729) $ (8,963)
Net loss on interest rate swap (203) -
Net unrealized gain on investments 16 -
------------------ -----------------
Accumulated other comprehensive loss $ (18,916) $ (8,963)
================== =================
$ 30,239 $ (1,026)
========= =========
Note 1917 - Related-Party Transactions:
Related-Party Lease
The CompanyTrimble currently leases office space in Ohio from an association of three
individuals, twoone of whom are employeesis an employee of one of the Company's U.S.US operating units, under
a noncancelablenon-cancelable operating lease arrangement expiring in 2011. The annual rent is $345,000 and
is subject to adjustment based on the terms of the lease. The Consolidated
Statements of Operations include expenses from this operating lease of $345,405$0.35
million for fiscal 20012003, fiscal 2002, and $172,702 for fiscal 2000.2001.
Related -Party Notes Receivable
The CompanyTrimble has notes receivable from officers and employees of $955,000 as
of December 28, 2001 and $1.3approximately $0.8
million as of December 29, 2000.January 2, 2004 and $1.2 million as of January 3, 2003. The notes
bear interest from 4.75%4.49% to 6.62% and have an average remaining life of 1.47
years as of January 2, 2004.
See Note 3 years.to the Notes to the Consolidated Financial Statements for additional
information regarding Trimble's related party transactions with joint venture
partners.
Note 2018 - Statement of Cash Flow Data:
January 2, January 3, December 28, 2001 December 29, 2000 December 31,
Fiscal Years Ended 19992004 2003 2001
- ------------------------------------------------------ ------------------ -------------------- ----------------
(In---- ---- ----
(in thousands)
Supplemental disclosure of cash flow information:
Interest paid $ 17,36310,208 $ 9,03712,215 $ 3,391
-------- -------- -------17,363
Income taxes paid $ 688 $ 2,635 $ 825
Significant non-cash investing activities:
Issuance of shares related to invest in joint venture $ 3,8355,922 $ 866
-------- -------- -------- $ -
Issuance of shares related to LeveLite earn-out
payments $ 1,349 $ 336 $ -
75
Note 2119 - Litigation:
In January 2001, Philip M. Clegg instituted a lawsuit in the United States
District Court for the District of Utah, Central Division, against
Spectra-Physics Laserplane, Inc., Spectra Precision AB and Trimble Navigation
Limited. The complaint alleges claims of infringement of U.S. Patent No.
4,807,131, breach of contract and unjust enrichment. The suit seeks damages and
an accounting for moneys allegedFrom time to be owed under a license agreement, plus
interest and attorney fees.
In August 2001, Lockheed Martin Corporation served a complaint alleging
patent infringement of U.S. Patent No. 4,949,089 ontime, the Company Spectra
Precision, Inc., Leica Geosystems, Inc., Sokkia Corporation and Carl Zeiss, Inc.
The lawsuit was filedis involved in the United States District Court for the Eastern
District of Texas, Marshall Division. Lockheed seeks treble damages, an
injunction and attorney fees.
In November 2001, Qualcomm Inc. filed a lawsuit against the Company in the
Superior Court of the State of California. The complaint alleges claims for an
unspecified amount of money damageslitigation arising out of Qualcomm's perceived lackthe
ordinary course of assurances in early 1999 that the Company's products purchased by Qualcomm would
work properly after a scheduled week number rollover event that took place in
August, 1999. Qualcomm is the only customer to make a claim against the Company
based on the week number rollover event.
In the opinion of management, the resolutions of the foregoing lawsuitsits business. There are notno known claims or pending litigation
expected to have a material adverse effect on the overall financial position
of the Company. However, depending on the amount and timing, an unfavorable
resolution in any one of these matters could materially affect the Company's
future operations or cash flow in a particular period.
The Company is also a party to other disputes incidental to its business.
The Company believes that the ultimate liability of the Company as a
result of such disputes, if any, would not be material to its overall financial position,
results of operations, or liquidity.
76
Note 2220 - Selected Quarterly Financial Data (unaudited):
First Second Third Fourth
Quarter Quarter Quarter Quarter
- ------------------------------------------- ---------------- ---------------- ---------------- ----------------
(In------- ------- ------- -------
(in thousands, except per share data)
Fiscal 2001
Total revenue2003
Revenue $ 117,863127,325 $ 133,587138,132 $ 117,437139,569 $ 106,405135,877
Gross margin 57,500 65,531 60,315 53,889
Net loss from continuing operations (11,587) (1,974) (2,686) (7,245)61,755 71,095 69,112 66,068
Net income from discontinued
operations - - - 613
Net loss (11,587) (1,974) (2,686) (6,632)
Basic net loss per share from
continuing operations $ (0.48) $ (0.08) $ (0.11) $ (0.28)5,353 8,105 9,936 15,091
Basic net income per share from
discontinued operations - - - 0.02
---------------- ---------------- ---------------- ----------------
Basic net loss per share $ (0.48) $ (0.08) $ (0.11) $ (0.26)
================ ================ ================ ================
Diluted net loss per share from
continuing operations $ (0.48) $ (0.08) $ (0.11) $ (0.28)0.12 0.17 0.20 0.30
Diluted net income per share from
discontinued operations - - - 0.02
---------------- ---------------- ---------------- ----------------
Diluted net loss per share0.12 0.16 0.19 0.28
Fiscal 2002
Revenue $ (0.48)104,029 $ (0.08)123,256 $ (0.11)114,748 $ (0.26)
================ ================ ================ ================
Fiscal 2000
Total revenue $ 65,140 $ 71,264 $ 109,227 $ 124,167124,569
Gross margin 37,045 41,885 55,932 61,69954,333 60,951 57,581 61,567
Net income (loss) 8,712 12,357 (4,268) (2,616)
---------------- ---------------- ---------------- ----------------(715) 4,326 2,708 4,005
Basic net income (loss) per share $ 0.38 $ 0.53 $ (0.18) $ (0.11)
================ ================ ================ ================
---------------- ---------------- ---------------- ----------------(0.02) 0.10 0.06 0.09
Diluted net income (loss) per share $ 0.35 $ 0.48 $ (0.18) $ (0.11)
================ ================ ================ ================(0.02) 0.10 0.06 0.09
Significant quarterly items for fiscal 2003 include the following: (i) in the
first quarter of 20012003 a $2.0$0.4 million charge or $0.08$0.01 per diluted share relating
to loss on
sale of Air Transport business and the exiting of certain product lines;workforce reduction; (ii) in the second quarter of 20012003 a $0.9$0.7 million
charge, or $0.04$0.01 per diluted share relating to work force reduction;reduction and $0.2$3.6
million in incomeof interest expenses, or $0.01$0.07 per diluted share relating to a gain on the
sale of a minority investment;Company's debt refinancing; (iii) in the third quarter of 20012003 a $0.4$0.6 million
charge, or $0.01 per diluted share relating to work force reduction; (iv) in the
fourth quarter of 20012003 a $0.5$0.3 million charge, or $0.02less than $0.01 per diluted
share relating to work force reduction.
Significant quarterly items for fiscal 2002 include the following: (i) in the
first quarter of 2002 a $0.3 million charge or $0.01 per diluted share relating
to workforce reduction; (ii) in the second quarter of 2002 a $0.2 million
charge, or less than $0.01 per diluted share relating to work force reduction;
(iii) in the third quarter of 2002 a $0.1$0.2 million charge, or less than $0.01 per
diluted share relating to work force reduction and a $0.2 million gain, or less
than $0.01 per diluted share relating to the sale of an investment; (iv) in the
fourth quarter of 2002 a $0.5 million charge, or $0.01 per diluted share
on sale of business;relating to work force reduction and a $0.1$1.5 million charge, or $0.01$0.03 per diluted
share relating to the write-down of an investment.
Significant quarterly items include the following: (i) in the third quarter
of 2000, net income includes an $2.9 million charge, or $0.11 per diluted share,
for an inventory purchase accounting adjustment; a $1.1 million charge, or $0.05
per diluted share relating to a debt extinguishment; a $0.7 million charge, or
$0.03 per diluted share for relocation costs related to opening a new office in
Boulder, Colorado; and $1.0 million in income, or $0.04 per diluted share
relating to a gain on the sale of a minority investment; (ii) in the fourth
quarter of 2000, net income includes a $1.7 million charge, or $0.07 per diluted
share, for an inventory purchase accounting adjustment; $0.3 million, or $0.01
per diluted share, of a gain on the sale of a minority investment; and a $0.2
million charge, or $0.01 per diluted share, of relocation costs related to
opening a new office in Boulder, Colorado.
77
Note 2321 - Subsequent Event:
On March 20, 2002, the Company used $21.2 millionEvents
3-for-2 Stock Split
Trimble's Board of net proceeds from its
private placement to retire accrued interest and principal under its
subordinated note with Spectra Physics Holdings, Inc.,Directors approved a subsidiary3-for-2 split of Thermo
Electron, reducing theall outstanding principal amount to $68.7 million. In
addition, the Company renegotiated the termsshares
of the subordinated note. UnderCompany's Common Stock, payable March 4, 2004 to stockholders of record
on February 17, 2004. Cash will be paid in lieu of fractional shares. All share
and per share information have been adjusted to reflect the revised agreement, the maturity of the note was extended until July 14, 2004, at
the current interest rate of approximately 10.4% per year. In connection with
the amendment, on March 20, 2002, the Company agreed to issue to Thermo Electron
a five-year warrant to purchase 200,000 shares of Trimble's common stock at an
exercise price of $15.11. Under the terms of the agreement, beginning on July
14, 2002, Trimble will also issue five-year warrants to purchase 250 shares of
common stocksplit on a
quarterlyretroactive basis for every $1 million of principal and interest
outstanding until the note is paid off. These warrants will be exercisable at a
price equal to Trimble's closing price on the last trading day of each quarter.
Under the five-year warrant, the total number of warrants issued will not exceed
376,233 shares.
78all periods presented.
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
The Board of Directors and Shareholders, Trimble Navigation Limited
We have audited the accompanying consolidated balance sheetsConsolidated Balance Sheets of Trimble
Navigation Limited as of December 28, 2001January 2, 2004 and December 29, 2000,January 3, 2003, and the related
consolidated statementsConsolidated Statements of operations, shareholders' equity,Operations, Shareholders' Equity, and cash
flowsCash Flows for
each of the three years in the period ended December 28, 2001.January 2, 2004. Our audits also
included the financial statement schedule listed in the index at Item 14(a)15(a)(2).
These financial statements and schedule are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements and schedule, based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and schedule referred to above present
fairly, in all material respects, the consolidated financial position of Trimble
Navigation Limited at December 28, 2001January 2, 2004 and December 29, 2000,January 3, 2003, and the consolidated
results of its operations and its cash flows for each of the three years in the
period ended December 28, 2001,January 2, 2004, in conformity with accounting principles generally
accepted in the United States. Also, in our opinion, the related financial
statement schedule, when considered in relation to the basic consolidated
financial statements taken as a whole, presents fairly in all material respects
the information set forth therein.
As discussed in Note 1 to the consolidated financial statements, effective
December 29, 2001, the company adopted Statement of Financial Accounting
Standards No. 142, "Goodwill and Other Intangible Assets."
/s/ Ernst & Young LLP
March 11, 2004
Palo Alto, California
January 25, 2002, except for the paragraphs under the caption "Subordinated
Note" of Note 11 and Note 23, as to which the date is March 20, 2002
79
Item 9.9 Changes in and Disagreements with Accountants on Accounting and Financial
Disclosure
Not applicable.None
Item 9a. Controls and Procedures
(a) Controls and Procedures.
The Company's management, with the participation of the Company's Chief
Executive Officer and Chief Financial Officer, has evaluated the effectiveness
of the Company's disclosure controls and procedures (as such term is defined in
Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as
amended (the "Exchange Act") as of the end of the period covered by this report.
Based on such evaluation, the Company's Chief Executive Officer and Chief
Financial Officer have concluded that, as of the end of such period, the
Company's disclosure controls and procedures are effective in recording,
processing, summarizing and reporting, on a timely basis, information required
to be disclosed by the Company in the reports that it files or submits under the
Exchange Act.
(b) Internal Control Over Financial Reporting.
There have not been any changes in the Company's internal control over financial
reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the
Exchange Act) during the fiscal year to which this report relates that have
materially affected, or are reasonably likely to materially affect, the
Company's internal control over financial reporting.
PART III
Item 10.10 Directors and Executive Officers of the Registrant
The information with respect to the executive officers of the Company
required by this item, insofar as it relates to Trimble's
directors, will be contained under the captions "Election of Directors" and
"Section 16(a) Beneficial Ownership Reporting Compliance" in the Proxy Statement
and is includedincorporated herein by reference. The information required by this item
relating to executive officers is set forth above in Part I hereofItem 1 Business Overview
under the caption "Executive OfficersOfficers."
Code of the Company."
Board of DirectorsEthics
The names of the current members of the Company's Board of DirectorsBusiness Ethics and certain information about them, are set forth below:
Name of Board Member Age Principal Occupation Director Since
- ----------------------- --------- ----------------------------------------------------- ---------------
Steven W. Berglund 50 President and Chief Executive Officer of the Company 1999
Robert S. Cooper 70 President, Chief Executive Officer and Chairman of the 1989
board of directors of Atlantic Aerospace
Electronic Corporation, Chairman of the Board of
Directors of the Company
John B. Goodrich 60 Business Consultant 1981
William Hart 61 Venture Capital Investor and Business Consultant 1984
Ulf J. Johansson 56 Chairman and Founder of Europolitan Holdings AB 1999
Bradford W. Parkinson 67 Professor at Stanford University and current 1984
consultantConduct Policy that applies, among others, to the Company
Steven W. Berglund joined the Company as President and Chief Executive Officer
in March 1999. Mr. Berglund was elected to the Company's Board of Directors at
the Annual Meeting of Shareholders held in June of 1999. Mr. Berglund has
experience in engineering, manufacturing, finance, and global operations. Prior
to joining the Company, Mr. Berglund was president of Spectra Precision, Inc., a
subsidiary of Spectra-Physics. Spectra Precision had global revenue of
approximately $200 million and developed and manufactured surveying instruments,
laser based construction instruments, and machine control systems. During his
fourteen years with Spectra-Physics, which was a pioneer in the development of
lasers, Mr. Berglund held a variety of positions that included four years based
in Europe. Prior to Spectra-Physics, Mr. Berglund spent a number of years at
Varian Associates in Palo Alto, California where he held a number of planning
and manufacturing roles. Mr. Berglund began his career as a process engineer at
Eastman Kodak in Rochester, New York. Mr. Berglund attended the University of
Oslo and the University of Minnesota where he received a B.S. degree in Chemical
Engineering in 1974 and received his M.B.A. from the University of Rochester in
1977.
Robert S. Cooper was appointed Chairman of the Company's Board of Directors in
August 1998. Dr. Cooper has served as a Director of the Company since April
1989. Since 1985, Dr. Cooper has been president, chief executive officer, and
chairman of the board of directors of Atlantic Aerospace Electronics
Corporation, an aerospace company. Dr. Cooper also serves on the board of
directors of BAE Systems North America. From 1981 to 1985, he was Assistant
Secretary of Defense for Research and Technology and simultaneously held the
position of Director for the Defense Advanced Research Projects Agency (DARPA).
Dr. Cooper received a B.S. degree in Electrical Engineering from State
University of Iowa in 1954, a M.S. degree in Electrical Engineering from Ohio
State University in 1958, and a Doctor of Science in Electrical Engineering from
the Massachusetts Institute of Technology in 1963.
80
John B. Goodrich has served as a Director of the Company since January 1981. Mr.
Goodrich retired from the law firm of Wilson Sonsini Goodrich & Rosati, where he
practiced from 1970 until February of 2002. Mr. Goodrich serves on the boards of
several privately held corporations in high technology businesses and as a
business consultant. Mr. Goodrich received a B.A. degree from Stanford
University in 1963, a J.D. from the University of Southern California in 1966,
and a L.L.M. in Taxation from New York University in 1970.
William Hart has served as a Director of the Company since December 1984. Mr.
Hart has been a venture capitalist in the area of information technology for 22
years. He was the founder of Technology Partners, a venture capital management
firm based in Palo Alto, California. Before founding Technology Partners in
1980, Mr. Hart was a senior officer and director of Cresap, McCormick and Paget,
management consultants. He previously held positions in field marketing and
manufacturing planning with IBM Corporation. Mr. Hart has served on the boards
of directors of numerous public and privately held technology companies. Mr.
Hart received a Bachelor of Management Engineering degree from Rensselaer
Polytechnic Institute in 1965 and a M.B.A. from the Amos Tuck School of Business
Administration at Dartmouth College in 1967.
Ulf J. Johansson has served as a Director of the Company since December 1999.
Dr. Johansson is a Swedish national with a distinguished career in
communications technology. He is a founder and chairman of Europolitan Holdings
AB, a GSM mobile telephone operator in Sweden. Dr. Johansson currently serves as
chairman of Frontec AB, an eBusiness consulting company, Zodiak Venture AB, a
venture fund focused on information technology, and the University Board of
Royal Institute of Technology in Stockholm. Dr. Johansson also currently serves
on the board of directors of Novo Nordisk A/S, a Danish pharmaceutical/life
science company as well as several privately held companies. Dr. Johansson
formerly served as president and chief executive officer of Spectra-Physics, and
executive vice president at Ericsson Radio Systems AB. Dr. Johansson received a
Master of Science in Electrical Engineering, and a Doctor of Technology
(Communication Theory) from the Royal Institute of Technology in Sweden.
Bradford W. Parkinson has served as a Director of the Company since 1984, and as
a consultant to the Company since 1982. Dr. Parkinson served as the Company's
President and Chief Executive Officer from August 1998 through March 1999. From
1980 to 1984 he was group vice president and general manager for Intermetrics,
Inc. where he directed five divisions. He also served as president of
Intermetrics' industrial subsidiary, PlantStar. In 1979, Dr. Parkinson served as
group vice president for Rockwell International directing business development
and advanced engineering. Currently, Dr. Parkinson is the Edward C. Wells
Endowed Chair professor (emeritus) at Stanford University and has been a
Professor of Aeronautics and Astronautics at Stanford University since 1984. Dr.
Parkinson has also directed the Gravity Probe-B spacecraft development project
at Stanford University, sponsored by NASA, which is the largest program
delegated by NASA to a university and has been program manager for several
Federal Aviation Administration sponsored research projects on the use of Global
Positioning Systems for navigation. Dr. Parkinson was on leave of absence from
Stanford University while serving as the Company's President and Chief Executive
Officer. Dr. Parkinson received a B.S. degree from the U.S. Naval Academy in
1957, a M.S. degree in Aeronautics/Astronautics Engineering from Massachusetts
Institute of Technology in 1961 and a Ph.D. in Astronautics Engineering from
Stanford University in 1966.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
the Company's executive officers and directors and persons who own more than 10%
of a registered class of the Company's equity securities during fiscal year 2001
to file reports of initial ownership on Form 3 and changes in ownership on Form
4 or 5 with the Securities and Exchange Commission (the "SEC"). Such officers,
directors and 10% shareholders are also required by SEC rules to furnish the
Company with copies of all Section 16(a) reports they file.
Based solely on its review of the copies of such forms received by it and
on written representations from its officers and directors and certain other
reporting persons that no Forms 5 were required for such persons, the Company
believes that, during the last fiscal year ended December 28, 2001, all Section
16(a) filing requirements applicable to its officers, directors and 10%
shareholders were complied with on a timely basis.
81
Item 11. Executive Compensation
The following table sets forth the compensation, including bonuses, for
each of the Company's last three fiscal years ending December 28, 2001 paid to
(i) all persons who served as
the Company's Chief Executive Officer, during last
completed fiscal year,Chief Financial Officer, Corporate
Controller, and (ii) the four other most highly compensated executive
officers of the Company.
Summary Compensation Table
Long-term
Annual Compensation(1) Compensation(2)
------------------------ ----------------
Securities
Underlying All Other
Salary Bonus Options Compensation
Name and Principal Position Year ($) ($) (#) (3) ($)
- ---------------------------------- ---- -------- --------------- ----------------- -----------------
Steven W. Berglund (4) 2001 440,000 166,523 (5) 25,000 97,298 (6)
President and Chief Executive
Officer 2000 400,000 154,500 (7) - 101,192 (8)
1999 320,000 0 400,000 (9) 137,016 (10)
Mary Ellen Genovese 2001 243,202 40,266 (11) 40,000 2,658 (12)
Chief Financial Officer and 2000 183,574 74,726 (13) 90,000 (14) 2,592 (15)
Vice President Finance 1999 180,366 0 26,000 1,939 (16)
Ronald C. Hyatt (17) 2001 222,115 36,495(18) 1,000
Senior Vice President and
General 2000 260,637 102,264 (19) 5,000 1,200
Manager, Agriculture Division 1999 250,000 0 0 1,200
Karl G. Ramstrom (20) 2001 206,934 0 35,000 131,850 (21)
Senior Vice President and
General 2000 85,254 0 80,000 (22) 35,000 (23)
Manager, E and C Division 1999 - - - -
Dennis L. Workman 2001 200,070 41,414 (24) 25,000 2,073
Vice President and General
Manager, 2000 197,359 62,402 (25) 10,000 1,200
Component Technologies Division 1999 175,934 0 20,000 1,200
- ------------------------------------------
(1) Compensation deferred at the election of executive is included in the category and in the year earned
(2) The Company has not issued stock appreciation rights or restricted stock
awards. The Company has no "long-term incentive plan" as the term is
defined in the applicable rules.
(3) Includes amounts contributed by the Company pursuant to Section 401(k) of
the Internal Revenue Code of 1986, as amended, for the periods in which
they accrued. All full-time employees are eligible to participate in the
Company's 401(k) plan.
(4) Mr. Berglund has served as the Company's President and Chief Executive Officer since March 1999.
(5) Represents a performance bonus earned for 2000, which was paid to Mr. Berglund during the 2001 year.
(6) Includes $95,840 as the portion of a loan, including related accrued interest, that was forgiven by the Company during the
year. The loan was originally made in connection with hiring Mr. Berglund
for the purpose of assisting him with relocating to California and
obtaining a primary residence. See "Certain Relationships and Related
Transactions" in Item 13. Also includes $1,458 paid by the Company for
fitness center dues provided to Mr. Berglund.
82
(7) Represents a performance bonus earned for 1999, which was paid to Mr. Berglund during the 2000 year.
(8) Includes $99,800 as the portion of a loan, including related accrued
interest, that was forgiven by the Company during the year. The loan was
originally made in connection with hiring Mr. Berglund for the purpose of
assisting him with relocating to California and obtaining a primary
residence. See "Certain Relationships and Related Transactions" presented
in Item 13. Also includes $1,392 paid by the Company for fitness center
dues provided to Mr. Berglund.
(9) Mr. Berglund received a one-time grant of an option to purchase 400,000 shares in connection with being hired as the
Company's President and Chief Executive Officer.
(10) Includes $42,333 as the portion of a loan, including related accrued
interest, that was forgiven by the Company during the year and $93,479 of
relocation costs paid by the Company in connection with the hiring of Mr.
Berglund. The loan was originally made in connection with hiring Mr.
Berglund for the purpose of assisting him with relocating to California
and obtaining a primary residence. See "Certain Relationships and Related
Transactions" presented in Item 13. Also includes $1,204 paid by the
Company for fitness center dues provided to Mr. Berglund.
(11) Represents a performance bonus earned for 2000, which was paid to Mrs. Genovese during the 2001 year.
(12) Includes $1,458 paid by the Company for fitness center dues provided to Mrs. Genovese.
(13) Includes $61,326 as a performance bonus earned for 1999, which was paid to Mrs. Genovese during the 2000 year.
(14) Ms. Genovese received a one-time grant of an option to purchase 90,000 shares in connection with her promotion to the
Company's Chief Financial Officer.
(15) Includes $1,392 paid by the Company for fitness center dues provided to Mrs. Genovese.
(16) Includes $739 paid by the Company for fitness center dues provided to Mrs. Genovese.
(17) Mr. Hyatt retired as an executive officer of the Company effective February 2002 but has agreed to remain as a consultant to
the Company through June 2002.
(18) Represents a performance bonus earned for 2000, which was paid to Mr. Hyatt during the 2001 year.
(19) Includes $83,960 as a performance bonus earned for 1999 which was paid to Mr. Hyatt during the 2000 year.
(20) Mr. Ramstrom has served as the Company's Senior Vice President and General Manager, Engineering and Construction Division
since July 14, 2000.
(21) Includes $125,000 paid by the Company to a Swedish pension fund provided to Mr. Ramstrom and $6,850 paid to Mr. Ramstrom as
an auto allowance.
(22) Mr. Ramstrom received a one-time grant of an option to purchase 80,000
shares in connection with being hired as the Company's Senior Vice
President and General Manager, Engineering and Construction Division.
(23) Includes $35,000 paid by the Company to a Swedish pension fund provided to Mr. Ramstrom.
(24) Includes $21,397 as a performance bonus earned for 2000 which was paid to Mr. Workman during the 2001 year.
(25) Includes $47,488 as a performance bonus earned for 1999 which was paid to Mr. Workman during the 2000 year.
finance organization employees. The following table sets forth the numberBusiness Ethics and
terms of options granted to
the persons named in the Summary Compensation Table presented above during the
last fiscal year ended December 28, 2001:
Option Grants in Last Fiscal Year
Individual Grants
- ------------------------------------------------------------------------------------- Potential Realizable
Number of % of Total Value at Assumed
Securities Options Annual Rates of Stock
Underlying Granted to Exercise Expiration Price Appreciation
Options Employees in Exercise Expiration for Option Term (4)
Granted Fiscal Year Price Date ---------------------
Name (#) (1) ($/Share) (2) (3) 5% ($) 10% ($)
- ---------------------- ---------- -------------- --------------- ---------- ---------- ----------
Steven W. Berglund 25,000 2.34 17.050 10/17/11 268,111 679,443
Mary Ellen Genovese 40,000 3.74 17.150 7/6/11 431,494 1,093,484
Ronald C. Hyatt - - - - - -
Karl G. Ramstrom 35,000 3.27 17.150 7/6/11 377,557 956,799
Dennis L. Workman 25,000 2.34 17.470 7/18/11 274,716 696,180
- ----------------------
(1) The Company granted options to purchase an aggregate of 1,070,029 shares of
the Company's Common Stock to employees, consultants and non-employee
directors during fiscal year 2001 pursuant to the Company's 1993 Stock
Option Plan and the 1990 Director Stock Option Plan.
(2) All options presented in this table were granted at an exercise price equal
to the then fair market value of a share of the Company's Common Stock on
the date of grant, as quoted on the Nasdaq National Market System.
83
(3) All options presented in this table may terminate before the stated
expiration upon the termination of optionee's status as an employee,
consultant or director, including upon the optionee's death or disability.
(4) The assumed 5% and 10% compound rates of annual stock appreciation are
mandated by the rules of the Securities and Exchange Commission and do not
represent the Company's estimate or projection of future Common Stock
prices. All grants listed in the table vest over five years and have a
ten-year term of exercise which, assuming the specified rates of annual
compounding, results in total appreciation of 62.9% (at 5% per year) and
159.4% (at 10% per year) for the ten-year option term.
The following table provides information on option exercises by the persons
named in the Summary Compensation Table presented above during the last fiscal
year ended December 28, 2001:
Aggregated Option Exercises in Last Fiscal Year and Fiscal Year-End Option Values
Number of Securities
Underlying Unexercised Value of Unexercised
Shares Options at In-the-Money Options
Acquired Value Fiscal Year-End (#) at Fiscal Year-End ($)(1)
on Exercise Realized ----------------------------- ----------------------------
Name (#) ($) Exercisable Unexercisable Exercisable Unexercisable
- ---------------------- ------------ ---------- ----------- -------------- ----------- -------------
Steven W. Berglund - - 220,000 205,000 1,806,200 1,477,800
Mary Ellen Genovese - - 61,234 120,766 116,998 81,088
Ronald C. Hyatt - - 168,667 6,333 1,077,358 10,525
Karl G. Ramstrom - - 24,980 90,020 0 0
Dennis L. Workman - - 24,667 47,833 65,028 67,529
- -------------------------
(1) Represents the market value of the Common Stock underlying the options at
fiscal year end, less the exercise price of "in-the-money" options. The
closing price of the Company's Common Stock on December 28, 2001 as quoted
on the Nasdaq National Market System was $16.21.
Compensation of Directors
Cash Compensation. In order to help attract additional new outside
candidates to serveConduct Policy is available on the Company's Boardwebsite at www.trimble.com under
the heading "Corporate Governance and Policies" on the Investor Information page
of Directors,our website. A copy will be provided, without charge, to any shareholder who
requests one by written request addressed to General Counsel, Trimble Navigation
Limited, 749 N. Mary Avenue, Sunnyvale, CA 94085.
If any substantive amendments to the Board of Directors
carefully consideredBusiness Ethics and adoptedConduct Policy are made
or any waivers are granted, including any implicit waiver, from a cash compensation policy effective January 2,
1999. Under this cash compensation plan, all non-employee directors receive an
annual cash retainer of $15,000 to be paid quarterly in addition to a fee of
$1,500 for each board meeting attended in person and $375 for each board meeting
attended via telephone conference. Members of designated committeesprovision of
the Board
of Directors receive $750 per meeting which is not held on the same day as a
meeting of the full Board of Directors. Non-employee directors are also
reimbursed for travel, including a per diem for international travel,Business Ethics and other
necessary business expenses incurred in the performance of their services as
directors of the Company.
1990 Director Stock Option Plan. The Company's 1990 Director Stock Option
Plan (the "Director Plan") was adopted by the Board of Directors on December 19,
1990 and approved by the shareholders on April 24, 1991. An aggregate of 380,000
shares of the Company's Common Stock has been previously reserved for grants
issuable pursuantConduct Policy, to the Director Plan ("Director Options"). The Director Plan
provides for the annual granting of nonstatutory stock options to each
non-employee director of the Company (the "Outside Directors"). Pursuant to the
terms of the Director Plan, new Outside Directors are granted a one-time option
to purchase 15,000 shares of the Company's Common Stock upon initially joining
the Board of Directors. Thereafter, each year, each Outside Director receives an
additional option grant to purchase 5,000 shares if re-elected at the annual
meeting of shareholders. All such Director Options have an exercise price equal
to the fair market value of the Company's Common Stock on the date of grant,
vest over three years, and have a ten year term of exercise. In addition, all
such grants are automatic and are not subject to the discretion of any person
upon the re-election of each such Outside Director.
As of March 24, 2002, options to purchase an aggregate of 198,333 shares,
having an average exercise price of $17.4722 per share and expiring from April
2002 to May 2011 were outstanding and 60,416 shares remained available for
future grant under the Director Plan. During the last fiscal year ended December
28, 2001,
84
directors Cooper, Goodrich, Hart, Johansson and Parkinson were each granted
Director Options to purchase 5,000 shares of the Company's Common Stock at an
exercise price of $16.80 per share.
Other Arrangements. Dr. Parkinson has served as a consultant to the Company
since 1982. He currently receives $6,000 per month for such consulting services
that he provides to the Company.
In the past, Dr. Parkinson and Dr. Cooper were also directly employed by
the Company in connection with serving as the Company's President andits Chief Executive Officer, and Chairman of the Board, respectively, and in providing
transitional services toChief
Financial Officer or Corporate Controller, the Company through August 1999. As partwill disclose the nature
of such agreements, each also entered into certain standby consulting agreements with
the Company. See "Employment Contracts and Termination of Employment and
Change-in-Control Arrangements" presented below and "Compensation Committee
Report" presented below. Dr. Cooper has continued as the Company's Chairman of
the Board of Directors since that time but has not received any special
compensation for such services.
In June 2000, the Company entered into an agreement for professional
services with Bjursund Invest AB, a company which is wholly-owned by Ulf J.
Johansson. Pursuant to the terms of this agreement, Mr. Johansson will provide
certain consulting and advisory services to the Company in Sweden and Europe in
addition to his servingamendment or waiver on the Company's Board of Directors.website at www.trimble.com or in a
report on Form 8-K.
Item 11 Executive Compensation
The Company will
pay $4,000 per day for such services with an annual guaranteed minimum payment
of $24,000 together with expenses invoiced at cost, but in no event will
payments during any one year exceed $60,000. Such agreement has a one-year term
and is subject to automatic renewals in one-year extensions unless previously
terminated with one month advance notice. The Company paid a total of $24,000
underinformation required by this agreement for services rendered during fiscal year 2001.
Employment Contracts and Termination of Employment and Change-in-Control
Arrangements
Steven W. Berglund
On March 17, 1999, Mr. Berglund entered into an employment agreement with
the Company to serve as the Company's President and Chief Executive Officer.
Such agreement provided that Mr. Berglund's base compensation would initially be
$33,333 per month and that he would be eligible for a bonus of up to 50% of his
base compensation pro rata for fiscal years 1999 and 2000. The employment
agreement guaranteed one half of this bonus amount for fiscal year 1999 and
specified that the other terms and conditions of such bonus payments would be as
negotiated with the Company's Board of Directors. In the event of Mr. Berglund's
involuntary termination or termination for other than defined cause, he will
receive 12 months of severance based upon his last annual base salary plus any
accrued bonus to date.
In addition, pursuant to his employment agreement upon joining the Company,
Mr. Berglund was granted options to purchase an aggregate of 400,000 shares of
the Company's Common Stock with an exercise price of $8.00 per share which was
the fair market value on the date of grant in accordance with the terms of such
agreement. Such options vest 20% at the first anniversary and monthly thereafter
for five years from the original date of grant and have a ten year term of
exercise. In the event of a change-of-control of the Company, Mr. Berglund will
receive an additional 12 months of vesting with respect to such options.
In connection with hiring Mr. Berglund and his original relocation to
California and pursuant to the terms of his employment agreement, the Company
provided him with interim housing and reimbursed him for certain moving costs
and expenses. The Company also provided him with a loan of $400,000 to assist in
the purchase of a new primary residence. Such loan is secured by a second deed
of trust on the residence and was made at the lending rate at which the Company
is able to borrow, as adjusted from time to time. Such loan is to be forgiven by
the Company ratably over five years contingent upon Mr. Berglund continuing to
be employed by the Company; provided, however, that any remaining unpaid
obligation would be due and payable to the Company upon the anniversary of any
separation if Mr. Berglund's employment relationship with the Company ends
during such time period.
Pursuant to the employment agreement, Mr. Berglund is also eligible for
other benefits and programs available to the Company's employees, including paid
vacation, medical, dental, life and disability insurance, and a
85
401(k)
Retirement Plan with a Company match and he will also be eligible to participate
in the Company's Executive Nonqualified Deferred Compensation Plan.
Robert S. Cooper
In connection with agreeing to serve as the Company's Chairman of the Board
of Directors beginning in August 1998, Dr. Cooper entered into employment and
consulting agreements with the Company though August 31, 1999. At that time, Dr.
Cooper also entered into a standby consulting agreement with the Company for
which heitem will be paid on an hourly basis for consulting services on an as needed
basis as determined by the Company's Chief Executive Officer through September
1, 2003.
Upon beginning service as the Company's Chairman of the Board, Dr. Cooper
was granted an option to purchase 60,000 shares of the Company's Common Stock
with an exercise price of $10.125 per share which was the fair market value on
the date of grantcontained in accordance with the terms of such agreements. Such options
vested ratably over 12 months from the original date of grant and have a five
year term of exercise contingent upon Dr. Cooper remaining as an employee,
consultant or director to the Company.
Bradford W. Parkinson
In connection with agreeing to serve as the Company's interim President and
Chief Executive Officer beginning in August 1998, Dr. Parkinson entered into
employment and consulting agreements with the Company though August 31, 1999. At
that time, Dr. Parkinson also entered into a consulting agreement with the
Company which provides Dr. Parkinson with a payment of $6,000 per month
commencing June 1, 1999 through June 1, 2002, unless terminated earlier. In
addition, Dr. Parkinson also entered into a standby consulting agreement with
the Company for which he will be paid on an hourly basis for consulting services
on an as needed basis as determined by the Company's Chief Executive Officer
through September 1, 2003.
Pursuant to his employment agreement and upon beginning service as the
Company's President and Chief Executive Officer in August 1998, Dr. Parkinson
was granted an option to purchase 100,000 shares of the Company's Common Stock
with an exercise price of $10.125 per share which was the fair market value on
the date of grant in accordance with the terms of such agreements. Such options
vested ratably over six months from the original date of grant and have a five
year term of exercise contingent upon Dr. Parkinson remaining as an employee,
consultant or director to the Company.
Compensation Committee Interlocks and Insider Participation
Robert S. Cooper, John B. Goodrich and William Hart served as the members
of the Company's Compensation Committee during the 2001 fiscal year. In August
1998, Dr. Cooper was appointed to serve as the Company's Chairman of the Board
of Directors and became an employee of the Company through August 1999 pursuant
to an agreement approved by a majority of the disinterested members of the Board
of Directors. In December 1998, Mr. Goodrich was appointed to serve as the
Company's corporate secretary; however; he is not, and has never been an
employee of the Company. In addition, Mr. Goodrich retired in February 2002 as a
member of the law firm of Wilson Sonsini Goodrich & Rosati, P.C. where he
practiced from 1970. The law firm was retained by the Company during the past
fiscal year as outside counsel to provide certain legal services to the Company.
Mr. Hart is not, and has never been, an employee or officer of the Company. See
"Compensation of Directors" presented above, "Employment Contracts and
Termination of Employment and Change-in-Control Arrangements" presented above
and "Certain Relationships and Related Transactions" presented in Item 13.
Compensation Committee Report
The Compensation Committee of the Board of Directors (the "Committee")
establishes the general compensation policies of the Company and the
compensation plans and specific compensation levels for executive officers of
the Company. The Committee believes that the compensation of the Chief Executive
Officer should be primarily influenced by the overall financial performance of
the Company.
86
The Committee believes that the compensation of the Chief Executive Officer
should be established within a range of compensation for similarly situated
chief executive officers of comparable companies in the high technology and
related industries in the Standard & Poor's High Technology Composite Index
("peer companies") and their performance according to data obtained by the
Committee from independent outside consultants and publicly available data, such
as proxy data from peer companies as adjusted by the Committee's consideration
of the particular factors influencing the Company's performance and current
situation. A portion of the Chief Executive Officer's compensation package is
established as base salary and the balance is variable and consists of an annual
cash bonus and/or stock option grants.
Within these established ranges and guidelines, and taking into account the
Company's historical performance compared to peer companies, the Committee and
Board of Directors also carefully considered the current risks and challenges
facing the Company as well as the individual qualifications, skills, and past
performance of Mr. Berglund. Based on these considerations, the Committee and
Board of Directors approved a base annual salary of $440,000 for Mr. Berglund
beginning effective as of January 1, 2001.
The Committee carefully reviewed and considered its cash bonus program for
fiscal year 2001 for executive officers of the Company. Such program provided
for an annual cash bonus, a portion of which is paid quarterly, based upon a
maximum eligible percentage of each executive's base salary within a range of
target incentives as reported by professional compensation surveys. The
percentage for each executive was then adjusted by factoring in an evaluation of
such individual's performance. The total size of the Company's bonus pool for
all employees, including executives, was determined with respect to the
Company's performance in meeting certain goals for both revenue and income for
fiscal year 2001. For fiscal year 2001, the total bonus pool for all employees,
including all executives other than the Chief Executive Officer, was
approximately $400,000. The Board of Director's and Committee have approved a
similar cash bonus program for fiscal year 2002; however, interim payments will
no longer be made on a quarterly basis and a single cash bonus will be paid at
the end of the year.
Pursuant to the terms of his employment agreement, Mr. Berglund was
eligible for a cash bonus of up to 50% of his base salary for fiscal year 2000
and he was guaranteed this bonus amount on a pro rata basis for fiscal year
1999. In 2001, Mr. Berglund was paid a bonus of $166,523 for meeting his goals
set by the Board of Directors for the prior fiscal year 2000. As also approved
by the Board of Directors, Mr. Berglund will be eligible for a bonus of up to
70% of his base salary for fiscal year 2001; however, the Committee and the
Board of Directors have not yet determined a final bonus amount for fiscal year
2001.
Based on the Board of Directors' and the Committee's evaluation of the
Chief Executive Officer's ability to influence the long-term growth and
profitability of the Company, the Board of Directors determined that Mr.
Berglund should receive an option grant to purchase 400,000 shares of the
Company's Common Stock upon his starting with the Company in March 1999 at the
then fair market value of $8.00 per share. In addition, in connection with his
performance review during the last fiscal year 2001, the Committee and the Board
of Directors approved a new option grant for Mr. Berglund to purchase an
additional 25,000 shares of the Company's Common Stock at the then current fair
market value of $17.050 per share. Both such options vest ratably over five
years and have partial acceleration provisions in certain change of control
situations.
The Committee also adopted similar policies with respect to the overall
compensation of other executive officers of the Company. A portion of each
compensation package was established as base salary and the balance is variable
and consists of an annual cash bonus and stock option grants. Using salary
survey data supplied by outside consultants and other publicly available data,
such as proxy data from peer companies, the Committee established base salaries
for each executive officer within a range of salaries of similarly situated
executive officers at comparable companies. In addition, these base salaries for
executive officers were then adjusted by the Committee taking into consideration
factors such as the relative performance of the Company, the performance of the
business unit for which the executive officer is responsible and the
individual's past performance and future potential.
The size of option grants, if any, to other executive officers was
determined by the Committee's evaluation of each executive's ability to
influence the Company's long-term growth and profitability. The Company also has
a metric measurement system in place with respect to option grants made to all
new employees under the Company's option plans in order to ensure consistency
among grants and competitiveness in the marketplace. Generally, these options
are granted at the then current market price and because the value of an option
bears a direct relationship to
87
the Company's stock price, it is an incentive for managers to create value for
shareholders. The Committee therefore views stock options as an important
component of its long-term, performance-based compensation philosophy.
During fiscal year 2001 the Compensation Committee and the Board of
Directors reviewed all employees and executive officers, other than the Chief
Executive Officer, of the Company as part of a single worldwide program. The
purpose of this single review plan is to provide a common, annual review date
for all levels of managers to review all employees of the Company. Under this
plan, all executive officers can also be reviewed by the Compensation Committee
at the same time. The annual review period for this single plan was set as July
30 for fiscal year 2001 and has not yet been set for fiscal year 2002.
Under the single review plan, the total compensation of all employees of
the Company, including executive officers, will be reviewed annually in
accordance with the same common criteria. Base salary guidelines have been
established and will be revised periodically based upon market conditions, the
economic climate and the Company's financial position. Merit increases, if any,
for all employees of the Company, including executive officers, will be based
upon the following criteria: the individual employee's performance for the year
as judged against his/her job goals and responsibilities, the individual
employee's salary and performance as compared to other employees in the same or
similar department, the individual employee's position in the salary grade, the
employee's salary relative to market data for the position and the Company's
fiscal budget and any associated restrictions.
Robert S. Cooper, Member John B. Goodrich, Chairman William Hart, Member
Compensation Committee Compensation Committee Compensation Committee
Steven W. Berglund, Ulf J. Johansson, Bradford W. Parkinson,
Board of Directors Board of Directors Board of Directors
Company Performance
The following graph shows a five year comparison of the cumulative total
return for the Company's Common Stock, the Nasdaq Composite Total Return Index
(U.S.), and the Standard & Poor's Technology Sector Index: (1)
88
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURNS(2)
AMONG TRIMBLE NAVIGATION LIMITED,
NASDAQ COMPOSITE TOTAL RETURN INDEX (U.S.),
AND THE STANDARD & POOR'S
TECHNOLOGY SECTOR INDEX
[The performance graph has been omitted. Performance Graph. The performance
graph required by Item 402(1) of Regulation S-K is set forth in the paper copy
of the Proxy Statement
immediately followingunder the caption "COMPARISON OF
FIVE YEAR CUMULATIVE TOTAL RETURNS."
The peformance graph plots the data points listed below the graph for the data
sets (i) Trimble Navigation Limited, (ii) Nasdaq Composite Total Return Index
(US)"Executive Compensation" and (iii) the Standard & Poor's Technology Sector Index. The graph has a
horizontal axis at its bottom which lists from left to right the dates 96, 97,
98, 99, 00, and 01. The graph has a vertical axis at its left which lists from
bottom to top numbers 0, 50, 100, 150, 200, 250, 300, 350, 400, and 450. The
data points for each data set are plotted on the graph and are connectedis incorporated herein by
line. The line connecting the data points in the Trimble Navigation Limited data
set is bold with square to mark the points, while the lines connecting the data
points in the Nasdaq Composite Total Return Index (US) data set and the S&P
Technology Sector Index data set are dashed with triangle to mark data point and
small square dashes with circle to mark data points, respectively.]
DATA POINTS FOR PERFORMANCE GRAPH
12/96 12/97 12/98 12/99 12/00 12/01
--------------------------------------------
Trimble Navigation
Limited TRMB 100 190 63 188 209 141
Nasdaq Stock Market
(U.S.) INAS 100 122 173 321 193 153
S&P Technology
Sector ITES 100 126 218 382 229 175
- --------------------------
(1) The data in the above graph is presented on a calendar year basis through
December 31, 2001 which is the most currently available data from the
indicated sources. The Company adopted a 52-53 week fiscal year effective
upon the end of fiscal year 1997 and the actual date of the Company's 2001
fiscal year end was December 28, 2001. Any variations due to any
differences between the actual date of a particular fiscal year end and the
calendar year end for such year are not expected to be material.
(2) Assumes an investment of $100 on December 31, 1996 in the Company's Common
Stock, the Nasdaq Composite Total Return Index (U.S.), and the Standard &
Poor's Technology Sector Index. Total returns assume the reinvestment of
dividends for the indexes. The Company has never paid dividends on its
Common Stock and has no present plans to do so.reference.
Item 12.12 Security Ownership of Certain Beneficial Owners and Management The following table sets forth the shares of Company's Common Stock
beneficially owned as of the March 24, 2002 (unless otherwise noted below) by:
(i) all persons known to the Company to be the beneficial owners of more than 5%
of the Company's outstanding Common Stock, (ii) each director of the Company
(including nominees), (iii) the executive officers of the Company named in the
Summary Compensation Table presented in Item 13, and
(iv) all directors and
executive officers of the Company, as a group:
89
Shares
Beneficially Owned (2)
-----------------------------
5% Shareholders, Directors and Nominees, and Executive Officers (1) Number Percent (%)
- ------------------------------------------------------------------------------ --------- ------------
Mellon Financial Corporation, The Boston Company, Inc. and The Boston Company 3,021,071 10.72
Asset Management, LLC (3).....................................................
One Mellon Bank Center
500 Grant Street
Pittsburgh, Pennsylvania 15258-0001
Capital Research and Management Company (4)................................... 2,163,300 7.68
333 South Hope Street, 55th Floor
Los Angeles, California 90071
Steven W. Berglund (5)........................................................ 255,843 *
Robert S. Cooper (6).......................................................... 137,861 *
John B. Goodrich (7).......................................................... 51,682 *
William Hart (8).............................................................. 86,803 *
Ulf J. Johansson (9).......................................................... 13,750 *
Bradford W. Parkinson (10).................................................... 67,514 *
Mary Ellen Genovese (11)...................................................... 84,420 *
Ronald C. Hyatt (12).......................................................... 263,517 *
Karl G. Ramstrom (13)......................................................... 35,397 *
Dennis L. Workman (14)........................................................ 30,607 *
All Directors and Executive Officers, as a group
(18 persons) (5)-(15).................................................... 1,286,062 4.41
- ---------------------------
* Indicates less than 1%
(1) Except as otherwise noted in the table, the business address of each of the
persons named in this table is: c/o Trimble Navigation Limited, 645 North
Mary Avenue, Sunnyvale, California 94088.
(2) Except as indicated in the footnotes to this table and pursuant to
applicable community property laws, the persons named in the table have
sole voting and investment power with respect to all shares of stock shown
as beneficially owned by them.
(3)Related Stockholder Matters
The information presented with respect to Mellon Financial Corporation
("MFC"), The Boston Company, Inc. ("BC") and The Boston Company Asset
Management, LLC ("BCAM") is as reported pursuant to Amendment No. 1 to a
Schedule 13G as jointly filed with the Securities and Exchange Commission
on January 24, 2002required by MFC, BC and BCAM. As reported on such joint Schedule
13G, MFC and BC are parent holding companies in accordance with Section
240.13-d(1)(b)(1)(ii)(G) of the Exchange Act and BCAM is an investment
adviser registered under Section 203 of the Investment Advisers Act of
1940. MFC was deemed tothis item will be the beneficial owner of all 3,021,071 shares as
of the date of such filing due to its sole dispositive power over such
shares. In addition, as of the date of such filing, BC was deemed to be the
beneficial owner of an aggregate of 2,583,680 shares and BCAM was deemed to
be the beneficial owner of an aggregate of 1,991,280 shares. According to
the Schedule 13G, all of the reported shares are beneficially owned by MFC
and direct or indirect subsidiaries in their various fiduciary capacities
and, as a result, another entity in every instance is entitled to any
dividends or proceeds from the sale of such shares and none of such
individual accounts hold an interest of 5% or more. The Company has not
attempted to independently verify any of the information contained in the Schedule 13G as filed.
(4) The information presented with respect to Capital ResearchProxy Statement
under the caption "Security Ownership of Certain Beneficial Owners and
Management Company ("CRMC")Related Stockholder Matters" and is as reported pursuant to Amendment No. 4 to a Schedule
13G as filed with the Securities and Exchange Commission on February 11,
2002incorporated herein by CRMC. As reported on such Schedule 13G, CRMC is an investment
adviser registered under Section 203 of the Investment Advisers Act of 1940
and was deemed to be the beneficial owner of all 2,163,300 shares as of the
date of such filing due to its sole dispositive power over such shares as a
result of acting as investment adviser to various investment companies
registered under Section 8 of the Investment Company Act of 1940. CRMC
disclaims beneficial ownership of all such shares pursuant to Rule 13d-4 of
the Exchange Act of 1934, as amended. The Company has not attempted to
independently verify any of the information contained in the Schedule 13G.
(5) Includes 253,333 shares subject to stock options exercisable within 60 days
March 24, 2002.
(6) Includes 104,861shares subject to stock options exercisable within 60 days
March 24, 2002.
(7) Includes 33,194 shares subject to stock options exercisable within 60 days
March 24, 2002.
(8) Includes 44,861 shares subject to stock options exercisable within 60 days
of the Record Date.
(9) Includes 13,750 shares subject to stock options exercisable within 60 days
March 24, 2002.
90
(10) Includes 3 shares held by Dr. Parkinson's spouse, 2,515 shares held in a
charitable remainder trust and 61,661 shares subject to stock options
exercisable within 60 days of March 24, 2002.
(11) Includes 76,192 shares subject to stock options exercisable within 60 days
of the March 24, 2002.
(12) Includes 141,500 shares subject to stock options exercisable within 60 days
of March 24, 2002. Mr. Hyatt retired as an executive officer of the
Company effective February 2002 but has agreed to remain as a consultant to
the Company through June 2002.
(13) Includes 33,960 shares subject to stock options exercisable within 60 days
of March 24, 2002.
(14) Includes 28,666 shares subject to stock options exercisable within 60 days
of March 24, 2002.
(15) Includes an aggregate of 969,232 shares subject to stock options
exercisable within 60 days of March 24, 2002.reference.
Item 13.13 Certain Relationships and Related Transactions
CertainThe information required by this item will be contained in the Proxy Statement
under the caption "Certain Relationships and Related Transactions
In May 2001, the Company entered into a settlement agreement with David M.
Hall, the Company's former Senior Vice President, MarketingTransactions" and Business
Development, pursuant to which the Company agreed to make monthly severance
paymentsis
incorporated herein by reference.
Item 14 Principal Accountant Fees and Services
The information required by this item will be contained in the aggregate amount of $252,405, provided that certain conditions
continue to be met. During fiscal year 2001, Mr. Hall received an aggregate of
$171,826Proxy Statement
under the agreement.
The following table sets forth information with regard to loans made to
executive officers of the Company who had outstanding amounts of more than
$60,000 at any time since the beginning of the Company's last fiscal year. Each
of these loans was madecaption "Principal Accountant Fees and Services" and is incorporated
herein by the Company for the purpose of assisting such
executive officer in the acquisition of his primary residence in an exceptional
housing market in a location for the benefit of the Company in accordance with
the Company's Bylaws. Each of these loans is secured by a second deed of trust
on such residence, has a term of five years and requires that the interest on
such principal amounts be paid currently each year. The principal balance is due
in full at the end of such five year term, but such executive officers may
pre-pay all or any portion of such balance without a prepayment penalty. The
interest rate for each of these loans was set with reference to the then
applicable mid-term annual federal rate.
Largest Amount
Principal Amount Outstanding
Annual Outstanding at During Fiscal
Name and Position Date of Loan Interest Rate Record Date ($) Year 2000 ($)
- ----------------------------------------- ------------ -------------- ---------------- ----------------
Steven W. Berglund 6/25/99 5.40% 186,667 286,667
President and Chief Executive
Officer
Irwin L. Kwatek 8/15/01 4.99% 150,000 150,000
Vice President and General Counsel
91
reference.
PART IV
Item 14.15. Exhibits, Financial Statement Schedules, and Reports on form 8-K
(a) 1. Financial Statements
The following consolidated financial statements required by this item are
included in Part II Item 8 hereof under the caption "Financial Statements and
Supplementary Data."
Page In Thisin this
Annual Report
Onon Form 10-K
Consolidated Balance Sheets at December 28, 2001January 2, 2004 and December 29, 2000 45January 3, 2003...........45
Consolidated Statements of Operations for each of the three
fiscal years in the period ended December 28, 2001 46January 2, 2004.............................46
Consolidated Statement of Shareholders' Equity for each of the three
fiscal years in the period ended December 28, 2001 47January 2, 2004.............................47
Consolidated Statements of Cash Flows for each of the three fiscal years
in the period ended December 28, 2001 48January 2, 2004..........................................48
Notes to Consolidated Financial Statements 49-78..................................49
Report of Ernst & Young LLP, Independent Auditors............................74
2. Financial Statement Schedules
The following financial statement schedule is filed as part of this report:
Page In Thisin this
Annual Report
Onon Form 10-K
Schedule II - Valuation and Qualifying Accounts S-1Accounts........................S-1
All other schedules have been omitted as they are either not required or not
applicable, or the required information is included in the consolidated
financial statements or the notes thereto.
3. Exhibits
Exhibit
Number
3.1 Restated Articles of Incorporation of the Company filed June 25, 1986. (6)(5)
3.2 Certificate of Amendment of Articles of Incorporation of the Company filed
October 6, 1988. (6)(5)
3.3 Certificate of Amendment of Articles of Incorporation of the Company filed
July 18, 1990. (6)(5)
3.4 Certificate of Determination of the Company filed February 19, 1999.(6) (5)
3.5 Certificate of Amendment of Articles of Incorporation of the Company filed
May 29, 2003. (15)
3.8 Amended and Restated Bylaws of the Company. (21)(16)
4.1 Specimen copy of certificate for shares of Common Stock of the Company. (1)
92
4.2 Preferred Shares Rights Agreement dated as of February 18, 1999. (5)(4)
4.3 First Amended and Restated Stock and Warrant Purchase Agreement between and
among the Company and the investors thereto dated January 14, 2002.(12) (9)
4.4 Form of Warrant to Purchase Shares of Common Stock dated January 14, 2002.(13)
(10)
4.5 Form of Warrant dated April 12, 2002. (11)
10.4+ Form of Indemnification Agreement between the Company and its officers and
directors. (1)
10.32+ 1990 Director Stock Option Plan, as amended, and form of Outside Director
Non-statutory Stock Option Agreement. (4)
10.35 Sublease Agreement dated January 2, 1991, between the Company, Aetna
Insurance Company, and Poqet Computer Corporation for property
located at 650 North Mary Avenue, Sunnyvale, California. (2)
10.40 Industrial Lease Agreement dated December 3, 1991, between the Company
and Aetna Life Insurance Company for property located at 585 North
Mary Avenue, Sunnyvale, California. (3)
10.41 Industrial Lease Agreement dated December 3, 1991, between the Company
and Aetna Life Insurance Company for property located at 570 Maude
Court, Sunnyvale, California. (3)
10.42 Industrial Lease Agreement dated December 3, 1991, between the Company
and Aetna Life Insurance Company for property located at 580 Maude
Court, Sunnyvale, California. (3)
10.43 Industrial Lease Agreement dated December 3, 1991, between the Company
and Aetna Life Insurance Company for property located at 490 Potrero
Avenue, Sunnyvale, California. (3)
10.46+ 1992 Management Discount Stock Option and form of NonstatutoryNon-statutory Stock
Option Agreement (3).Agreement. (2)
10.59+ 1993 Stock Option Plan, as amended May 11, 2000. (8)
10.60+(7)
10.60 + 1988 Employee Stock Purchase Plan, as amended May 11, 2000. (8)
10.64+ Consulting Agreement between the Company and Bradford W. Parkinson
dated September 1, 1998. (6)(7)
10.65+ Standby Consulting Agreement between the Company and Bradford W.
Parkinson dated September 1, 1998. (6)(5)
10.66+ Standby Consulting Agreement between the Company and Robert S. Cooper
dated September 1, 1998. (6)(5)
10.67+ Employment Agreement between the Company and Steven W. Berglund dated
March 17, 1999. (6)(5)
10.68+ Nonqualified deferred Compensation Plan of the Company effective February
10, 1994. (6)
10.69***Asset Purchase Agreement dated August 10, 1999 by and among Trimble
Navigation Limited and Solectron Corporation and Solectron Federal
Systems, Inc. (7)(5)
10.70***Supply Agreement dated August 10, 1999 by and among Trimble Navigation
Limited and Solectron Corporation and Solectron Federal Systems, Inc. (7)
93
10.72 Stock and Asset Purchase Agreement, dated as of May 11, 2000,
between Trimble Acquisition Corp., and Spectra Physics Holdings
USA, INC., Spectra Precision AB, and Spectra Precision Europe
Holdings, BV. (9)
10.73 Asset Purchase Agreement dated May 11, 2000 between Trimble Acquisition
Corp. and Spectra Precision AB. (9)
.
10.74 Credit Agreement dated July 14, 2000 between Trimble Navigation
Limited and ABN AMRO Bank N.V., Fleet National Bank, and The Bank of
Nova Scotia. (9)
10.75 Subordinated Seller Note dated July 14, 2000, for the principal amount
of $80,000,000 issued by Trimble Navigation Limited to Spectra
Precision Holdings, Inc. (9)
10.76+ Spectra Precision Supplement to the Trimble Navigation 1988 Employee
Stock Purchase Plan. (10)(6)
10.77+ Australian Addendum to the Trimble Navigation 1988 Employee Stock
Purchase Plan. (11)
10.78(8)
10.81+ 2002 Stock Plan, including form of Option. (12)
10.82 Credit Agreement - First Amendment.dated June 25, 2003. (14)
10.79 Credit10.83 Letter dated May 8, 2002 exercising renewal option of the Supply Agreement
- Second Amendment. (14)dated August 10, 1999 by and among Trimble Navigation Limited and Solectron
Corporation and Solectron Federal Systems, Inc. (13)
21.1 Subsidiaries of the Company. (14)(16)
23.1 Consent of Ernst & Young LLP, independent auditorsauditors. (16)
24.1 Power of Attorney (15).included on signature page herein.
31.1 Certification of CEO pursuant to Section 302 of the Sarbanes-Oxley Act of
2002. (16)
31.2 Certification of CFO pursuant to Section 302 of the Sarbanes-Oxley Act of
2002. (16)
32.1 Certification of CEO pursuant to Section 906 of the Sarbanes-Oxley Act of
2002. (16)
32.2 Certification of CFO pursuant to Section 906 of the Sarbanes-Oxley Act of
2002. (16)
*** Confidential treatment has been granted for certain portions of this exhibit
pursuant to an order dated effective October 5, 1999.
+ Management contract or compensatory plan or arrangement required to be filed
as an exhibit to this Annual Report on Form 10-K pursuant to Item 14(c) thereof.
(1) Incorporated by reference to identically numbered exhibits filed in
response to Item 16(a), "Exhibits," of the
registrant's Registration Statement on Form S-1, as amended (File No. 33-35333),
which became effective July 19, 1990.
(2) Incorporated by reference to identically numbered exhibits filed in
response to Item 14(a), "Exhibits," of the registrant's Annual Report
on Form 10-K for the fiscal year ended December 31, 1990.
(3) Incorporated by reference to identically numbered exhibits filed in
response to Item 16(a) "Exhibits," of the
registrant's Registration Statement on Form S-1 (File No. 33-45990), which was
filed February 18, 1992.
(4)(3) Incorporated by reference to identically numbered exhibits filed in
response to Item 14(a), "Exhibits," of the
registrant's Annual Report on Form 10-K for the fiscal year ended December 31,
1993.
(5)(4) Incorporated by reference to Exhibit No. 1 to the registrant's Registration
Statement on Form 8-A, which was filed on February 18,1999.
(6)18, 1999.
(5) Incorporated by reference to identically numbered exhibits filed in
response to Item 14(a), "Exhibits," of the
registrant's Annual Report on Form 10-K for the fiscal year ended January 1,
1999.
94
(7)(6) Incorporated by reference to identically numbered exhibits filed in
response to Item 7(c), "Exhibits," of the
registrant's Report on Form 8-K, which was filed on August 25, 1999.
(8)(7) Incorporated by reference to identically numbered exhibits filed in
response to Item 8, "Exhibits," of the
registrant's registration statement on Form S-8 filed on June 1, 2000.
(9)(8) Incorporated by reference to identically numbered exhibits filed in
response to Item 7(c), "Exhibits," of the registrant's Current Report
on Form 8-K filed on July 28, 2000.
(10) Incorporated by reference to identically numbered exhibits filed in
response to Item 6A, "Exhibits," of the registrant's Annual Report on
Form 10-Q for the quarter ended September 29, 2000.
(11) Incorporated by reference to identically numbered exhibits filed in
response to Item 14(a), "Exhibits," of the
registrant's Annual Report on Form 10-K for the fiscal year ended December 29,
2000.
(12)(9) Incorporated by reference to exhibit number 4.1 filed in response to
Item 7(c), "Exhibits," of the registrant's Current
Report on Form 8-K filed on January 16, 2002.
(13)(10) Incorporated by reference to exhibit number 4.2 filed in response to
Item 7(c), "Exhibits," of the registrant's Current
Report on Form 8-K filed on January 16, 2002.
(11) Incorporated by reference to exhibit number 4.1 to the registrant's
Registration Statement on Form S-3 filed on April 19, 2002.
(12) Incorporated by reference to exhibit number 10.82 to the registrant's
Quarterly Report on Form 10-Q for the quarter ended June 28, 2002.
(13) Incorporated by reference to exhibit number 10.83 to the registrant's
Annual Report on Form 10-K for the year ended January 3, 2003.
(14) Incorporated by reference to exhibit number 10.2 to the registrant's
Quarterly Report on Form 10-Q for the quarter ended July 4, 2003.
(15) Incorporated by reference to exhibit number 3.5 to the registrant's
Quarterly Report on Form 10-Q for the quarter ended July 4, 2003.
(16) Filed herewith.
(15) Previously filed.
(b) Reports on Form 8-K.
On December 21, 2001,October 28, 2003, the Company filed a report on Form 8-K reporting the
Company entered into a Stock and Warrant Purchase Agreement (the "Purchase
Agreement") with certain accredited investors (the "Investors") pursuant to
whichCompany's quarterly earnings for the Company sold 1,783,337 sharesthird fiscal quarter of its common stock at a price of $15.00
per share in a private placement transaction. The Investors also received
warrants having a five-year term of exercise to purchase up to 356,670
additional shares of the Company's common stock at an exercise price of $19.475
per share (the "Warrants").
On January 14, 2002, the Company filed a report on Form 8-K reporting the
entered into the First Amended and Restated Stock and Warrant Purchase Agreement
(the "Purchase Agreement") with certain accredited investors (the "Investors")
pursuant to which the Company sold an additional 1,280,004 shares of its common
stock at a price of $15.00 per share in the second closing under a previously
announced private placement transaction. The Investors also received warrants
having a five-year term of exercise to purchase up to 256,002 additional shares
of the Company's common stock at an exercise price of $19.475 per share (the
"Warrants").
95
2003.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this Report on Form 10-K to be
signed on its behalf by the undersigned, thereunto duly authorized.
TRIMBLE NAVIGATION LIMITED
By:/s/ /s/ Steven W. Berglund
---------------------------------------------------------------
Steven W. Berglund,
President and Chief Executive Officer
April 8, 2002
96March 10, 2004
POWER OF ATTORNEY
Know all persons by these presents, that each person whose signature appears
below constitutes and appoints Steven W. Berglund as his attorney-in-fact, with
the power of substitution, for him in any and all capacities, to sign any
amendments to this Report on Form 10-K, and to file the same, with exhibits
thereto and other documents in connection therewith, with the Securities and
Exchange Commission, hereby ratifying and confirming all that said
attorney-in-fact, or his substitute or substitutes, may do or cause to be done
by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, this Annual
Report on Form 10-K has been signed below by the following persons on behalf of
the registrant and in the capacities and on the dates indicated:
Signature Capacity in which Signed Date
/s/ Steven W. Berglund President, Chief Executive
- ---------------------- Officer, Director March 15, 2004
Steven W. Berglund
/s/ Mary Ellen Genovese Chief Financial Officer and Assistant
- ----------------------- Secretary
Mary Ellen Genovese (Principal Financial Officer) March 15, 2004
/s/ Anup V. Singh Corporate Controller
- ----------------- (Principal Accounting Officer) March 15, 2004
Anup V. Singh
/s/ Robert S. Cooper Director March 9, 2004
- --------------------
Robert S. Cooper
/s/ John B. Goodrich Director March 15, 2004
- --------------------
John B. Goodrich
/s/ William Hart Director March 9, 2004
- ----------------
William Hart
/s/ Ulf J. Johansson Director March 9, 2004
- --------------------
Ulf J. Johansson
/s/ Bradford W. Parkinson Director March 9, 2004
- -------------------------
Bradford W. Parkinson
/s/ Nickolas W. Vande Steeg Director March 9, 2004
- ---------------------------
Nickolas W. Vande Steeg
SCHEDULE II
TRIMBLE NAVIGATION LIMITED
VALUATION AND QUALIFYING ACCOUNTS
(IN THOUSANDS OF DOLLARS)
December 28, December 29, December 31,
Allowance for doubtful accounts: 2001 2000 1999
- -------------------------------- -------------------- ----------------- ------------------
Balance at beginning of period $ 6,538 $ 2,949 $ 2,220
Acquired allowance (1) - 4,445 -
Bad debt expense 5,077 1,198 1,875
Write-offs, net of recoveries (3,075) (2,054) (1,146)
-------------------- ----------------- ------------------
Balance at end of period $8,540 $6,538 $ 2,949
-------------------- ----------------- ------------------
Inventory Reserves:
Balance at beginning of period $19,285 $14, 109 $ 14,119
Acquired reserve (2) - 7,672 -
Additions to reserve 7,242 188 1,607
Write-offs, net of recoveries (3,253) (2,684) (1,617)
-------------------- ----------------- ------------------
Balance at end of period $23,274 $19,285 $14,109
-------------------- ----------------- ------------------
January 2, January 3, December 28,
Allowance for doubtful accounts: 2004 2003 2001
Balance at beginning of period $ 9,900 $ 8,540 $ 6,538
Acquired allowance (1) 752 - -
Bad debt expense (32) 5,443 5,077
Write-offs, net of recoveries (667) (4,083) (3,075)
---- ------ ------
Balance at end of period $ 9,953 $ 9,900 $ 8,540
-------- -------- --------
Inventory allowance:
Balance at beginning of period $ 25,150 $ 23,274 $ 19,285
Acquired allowance (2) 1,292 - -
Additions to allowance 5,762 3,901 7,242
Write-offs, net of recoveries (6,319) (2,025) (3,253)
------ ------ ------
Balance at end of period $ 25,885 $ 25,150 $ 23,274
-------- -------- --------
(1) Includes $4,419,000$168,000 acquired at July 14, 20007, 2003 as part of the acquisition of
the Spectra Precision GroupApplanix and $26,000$584,000 acquired at November 14, 2000December 9, 2003 as part of the
acquisition of Tripod Data Systems.MENSI.
(2) Includes $7,659,000$494,000 acquired at July 14, 20007, 2003 as part of the acquisition of
the Spectra Precision GroupApplanix and $13,000$797,000 acquired at November 14, 2000December 9, 2003 as part of the
acquisition of Tripod Data Systems.
S-1
97MENSI.
INDEX TO EXHIBITS
SEQUENTIALLY
NUMBERED
EXHIBIT ------------
NUMBER EXHIBIT PAGE
- -----------------------------------------------------------------------
10.78 Credit Agreement - First Amendment. 99-104
10.79 Credit Agreement - Second Amendment. 105-109
21.1 Subsidiaries of the Company 110-111
23.1 Consent of Ernst & Young LLP, Independent Auditors 112
98