UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM 10-Q

 

 

(Mark One)

 

xQUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED APRIL 1, 2011

FOR THE QUARTERLY PERIOD ENDED JULY 1, 2011

OR

 

¨TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM             TO             

FOR THE TRANSITION PERIOD FROM             TO             

Commission file number: 001-14845

 

 

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 Number)

935 Stewart Drive, Sunnyvale, CA 94085

(Address of principal executive offices) (Zip Code)

Telephone Number (408) 481-8000

(Registrant’s telephone number, including area code)

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    No  ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  x    No  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definition of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

 

Large Accelerated Filer x  Accelerated Filer ¨
Non-accelerated Filer ¨  (Do not check if a smaller reporting company)  Smaller Reporting Company ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨    No  x

As of May 6,August 4, 2011, there were 122,627,594122,799,179 shares of Common Stock (no par value) outstanding.

 

 

 


TRIMBLE NAVIGATION LIMITED

FORM 10-Q for the Quarter Ended AprilJuly 1, 2011

TABLE OF CONTENTS

 

PART I.

Financial Information

   Page 

ITEM 1.

PART I.
 

Financial Statements (Unaudited):Information

  

ITEM 1.

Financial Statements (Unaudited):

Condensed Consolidated Balance Sheets — as of AprilJuly 1, 2011 and December 31, 2010

   3  
 

Condensed Consolidated Statements of Income — for the Three and Six Months Ended AprilJuly 1, 2011 and

April July 2, 2010

   4  
 

Condensed Consolidated Statements of Cash Flows — for the ThreeSix Months Ended AprilJuly 1, 2011 and

April July 2, 2010

   5  

Notes to Condensed Consolidated Financial Statements

   6  

ITEM 2.

 

Management’s Discussion and Analysis of Financial Condition and Results of Operations

   1719  

ITEM 3.

 

Quantitative and Qualitative DisclosuresDisclosure about Market Risk

   2835  

ITEM 4.

 

Controls and Procedures

   2836  
PART II. 

Other Information

  

ITEM 1.

 

Legal Proceedings

   2836  

ITEM 1A.

 

Risk Factors

   2836  

ITEM 6.

 

Exhibits

   3037  

SIGNATURES

   3139  

PART I – FINANCIAL INFORMATION

ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

TRIMBLE NAVIGATION LIMITED

TRIMBLE NAVIGATION LIMITED

CONDENSED CONSOLIDATED BALANCE SHEETS

(UNAUDITED)

 

  April 1,
2011
   December 31,
2010
   July 1,
2011
   December 31,
2010
 
(In thousands)            

ASSETS

        

Current assets:

        

Cash and cash equivalents

  $244,342    $220,788    $249,811    $220,788  

Accounts receivable, net

   265,693     222,820     257,176     222,820  

Other receivables

   25,983     21,069     27,635     21,069  

Inventories, net

   203,014     192,852     216,080     192,852  

Deferred income taxes

   36,620     36,924     35,791     36,924  

Other current assets

   20,279     19,917     26,245     19,917  
          

 

   

 

 

Total current assets

   795,931     714,370     812,738     714,370  

Property and equipment, net

   51,634     50,692     53,391     50,692  

Goodwill

   863,459     828,737     894,514     828,737  

Other purchased intangible assets, net

   215,394     204,948     230,921     204,948  

Other non-current assets

   73,286     68,145     78,241     68,145  
          

 

   

 

 

Total assets

  $1,999,704    $1,866,892    $2,069,805    $1,866,892  
  

 

   

 

 
        

LIABILITIES

        

Current liabilities:

        

Current portion of long-term debt

  $153,029    $1,993    $1,969    $1,993  

Accounts payable

   89,357     72,349     87,608     72,349  

Accrued compensation and benefits

   51,987     60,976     59,640     60,976  

Deferred revenue

   81,501     73,888     91,033     73,888  

Accrued warranty expense

   12,829     12,868     13,163     12,868  

Other current liabilities

   32,977     29,741     39,171     29,741  
          

 

   

 

 

Total current liabilities

   421,680     251,815     292,584     251,815  

Non-current portion of long-term debt

   271     151,160     125,287     151,160  

Non-current deferred revenue

   7,736     10,777     8,612     10,777  

Deferred income taxes

   31,447     24,598     37,575     24,598  

Other non-current liabilities

   49,569     42,843     45,745     42,843  
          

 

   

 

 

Total liabilities

   510,703     481,193     509,803     481,193  
          

 

   

 

 

Commitments and contingencies

        

EQUITY

        

Shareholders’ equity:

        

Preferred stock, no par value; 3,000 shares authorized; none outstanding

   —       —       0     0  

Common stock, no par value; 180,000 shares authorized; 122,561 and 120,939 shares issued and outstanding at April 1, 2011 and December 31, 2010, respectively

   826,495     781,779  

Common stock, no par value; 180,000 shares authorized; 122,749 and 120,939 shares issued and outstanding at July 1, 2011 and December 31, 2010, respectively

   839,716     781,779  

Retained earnings

   575,968     536,350     629,576     536,350  

Accumulated other comprehensive income

   67,826     48,027     72,057     48,027  
          

 

   

 

 

Total Trimble Navigation Ltd. shareholders’ equity

   1,470,289     1,366,156     1,541,349     1,366,156  

Noncontrolling interests

   18,712     19,543     18,653     19,543  
          

 

   

 

 

Total equity

   1,489,001     1,385,699     1,560,002     1,385,699  
          

 

   

 

 

Total liabilities and equity

  $1,999,704    $1,866,892    $2,069,805    $1,866,892  
          

 

   

 

 

See accompanying Notes to the Condensed Consolidated Financial Statements.

TRIMBLE NAVIGATION LIMITED

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(UNAUDITED)

 

  Three Months Ended   Three Months Ended Six Months Ended 
  April 1,
2011
 April 2,
2010
   July 1,
2011
 July 2,
2010
 July 1,
2011
 July 2,
2010
 
(In thousands, except per share data)                

Revenue (1)

  $384,293   $319,015    $407,169   $333,363   $791,462   $652,378  

Cost of sales (1)

   192,763    160,018     198,435    169,937    391,198    329,955  
         

 

  

 

  

 

  

 

 

Gross margin

   191,530    158,997     208,734    163,426    400,264    322,423  

Operating expenses

        

Research and development

   43,232    35,890     46,292    36,552    89,524    72,442  

Sales and marketing

   61,207    49,768     63,490    50,522    124,697    100,290  

General and administrative

   33,472    28,547     37,157    27,290    70,629    55,837  

Restructuring charges

   767    631     361    375    1,128    1,006  

Amortization of purchased intangible assets

   9,177    8,046     9,867    8,126    19,044    16,172  
         

 

  

 

  

 

  

 

 

Total operating expenses

   147,855    122,882     157,167    122,865    305,022    245,747  
         

 

  

 

  

 

  

 

 

Operating income

   43,675    36,115     51,567    40,561    95,242    76,676  

Non-operating income, net

        

Interest income

   285    399     319    244    604    643  

Interest expense

   (496  (398   (1,350  (411  (1,846  (809

Foreign currency transaction gain, net

   306    746  

Foreign currency transaction gain (loss), net

   6,496    (1,869  6,802    (1,123

Income from equity method investments, net

   2,763    2,474     3,418    3,147    6,181    5,621  

Other income (expense), net

   (252  314  

Other expense, net

   (252  (825  (504  (511
         

 

  

 

  

 

  

 

 

Total non-operating income, net

   2,606    3,535     8,631    286    11,237    3,821  
         

 

  

 

  

 

  

 

 

Income before taxes

   46,281    39,650     60,198    40,847    106,479    80,497  

Income tax provision

   7,409    11,498     6,020    34,076    13,429    45,574  
         

 

  

 

  

 

  

 

 

Net income

   38,872    28,152     54,178    6,771    93,050    34,923  

Less: Net income (loss) attributable to noncontrolling interests

   (831  254     500    418    (331  672  
         

 

  

 

  

 

  

��

 

 

Net income attributable to Trimble Navigation Ltd.

  $39,703   $27,898    $53,678   $6,353   $93,381   $34,251  
         

 

  

 

  

 

  

 

 

Basic earnings per share

  $0.33   $0.23    $0.44   $0.05   $0.76   $0.28  
         

 

  

 

  

 

  

 

 

Shares used in calculating basic earnings per share

   121,819    120,760     122,667    120,654    122,243    120,707  

Diluted earnings per share

  $0.32   $0.23    $0.43   $0.05   $0.74   $0.28  
         

 

  

 

  

 

  

 

 

Shares used in calculating diluted earnings per share

   125,856    123,829     126,192    124,099    126,024    123,964  

 

(1)Sales to Caterpillar Trimble Control Technologies Joint Venture (CTCT) and Nikon-Trimble Joint Venture (Nikon-Trimble), were $5.8$5.2 million and $5.5$4.8 million for the three months ended AprilJuly 1, 2011 and AprilJuly 2, 2010, respectively, with associated cost of sales to those related parties of $3.9$3.5 million and $3.7$3.4 million, respectively. Sales to CTCT and Nikon-Trimble were $11.0 million and $10.3 million for the six months ended July 1, 2011 and July 2, 2010, respectively, with associated cost of sales of $7.4 million and $7.1 million, respectively. In addition, cost of sales associated with related party net inventory purchases was $7.9were $10.6 million and $6.1$8.5 million for the three months ended AprilJuly 1, 2011 and AprilJuly 2, 2010, respectively, and $18.5 million and $14.6 million for the six months ended July 1, 2011 and July 2, 2010, respectively. See Note 4 regarding joint ventures for further information about related party transactions.

See accompanying Notes to the Condensed Consolidated Financial Statements.

TRIMBLE NAVIGATION LIMITED

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

 

  Three Months Ended   Six Months Ended 
  April 1,
2011
 April 2,
2010
   July 1,
2011
 July 2,
2010
 
(Dollars in thousands)            

Cash flow from operating activities:

      

Net income

  $38,872   $28,152    $93,050   $34,923  

Adjustments to reconcile net income to net cash provided by operating activities:

      

Depreciation expense

   4,603    4,451     9,175    8,736  

Amortization expense

   16,065    13,817     32,641    27,733  

Provision for doubtful accounts

   359    1,038     640    2,596  

Deferred income taxes

   (1,393  103     (4,139  (4,461

Stock-based compensation

   6,798    5,641     13,927    10,625  

Income from equity method investments, net

   (2,763  (2,474   (6,181  (5,621

Excess tax benefit for stock-based compensation

   (8,357  (482   (10,950  (1,412

Provision for excess and obsolete inventories

   2,489    1,902     4,731    3,173  

Other non-cash items

   577    (1,760   2,031    (3,334

Add decrease (increase) in assets:

      

Accounts receivable

   (40,624  (31,546   (30,650  (15,398

Other receivables

   5,776    8,060     5,988    7,647  

Inventories

   (8,717  (9,441   (16,100  (19,747

Other current and non-current assets

   4,927    (2,103   1,478    1,003  

Add increase (decrease) in liabilities:

      

Accounts payable

   16,377    27,319     8,776    17,315  

Accrued compensation and benefits

   (10,241  4,741     (5,453  8,142  

Accrued liabilities

   4,398    2,617     3,164    (21,680

Deferred revenue

   (1,219  5,468     8,588    676  

Income tax payable

   0    44,393  
         

 

  

 

 

Net cash provided by operating activities

   27,927    55,503     110,716    95,309  
         

 

  

 

 

Cash flow from investing activities:

      

Acquisitions of businesses, net of cash acquired

   (38,979  (21,571   (91,449  (33,605

Acquisitions of property and equipment

   (4,036  (5,299   (9,322  (11,030

Acquisitions of intangible assets

   (250  (297   (566  (297

Purchases of equity method investments

   —      (2,750   (267  (3,692

Increase in restricted cash for business acquisition

   0    (17,151

Dividends received

   7,500    5,000  

Other

   44    1     (357  67  
         

 

  

 

 

Net cash used in investing activities

   (43,221  (29,916   (94,461  (60,708
         

 

  

 

 

Cash flow from financing activities:

      

Issuances of common stock, net

   27,785    8,649     30,663    17,867  

Repurchase and retirement of common stock

   0    (60,510

Excess tax benefit for stock-based compensation

   8,357    482     10,950    1,412  

Payments on long-term debt and revolving credit lines

   (672  (54

Proceeds from long-term debt, net of debt issuance costs

   144,225    0  

Payments on short-term and long-term debt

   (177,831  (94
         

 

  

 

 

Net cash provided by financing activities

   35,470    9,077  

Net cash provided by (used in) financing activities

   8,007    (41,325
         

 

  

 

 

Effect of exchange rate changes on cash and cash equivalents

   3,378    (1,439   4,761    (5,464
         

 

  

 

 

Net increase in cash and cash equivalents

   23,554    33,225  

Net increase (decrease) in cash and cash equivalents

   29,023    (12,188

Cash and cash equivalents, beginning of period

   220,788    273,848     220,788    273,848  
         

 

  

 

 

Cash and cash equivalents, end of period

  $244,342   $307,073    $249,811   $261,660  
         

 

  

 

 

See accompanying Notes to the Condensed Consolidated Financial Statements.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – UNAUDITED

NOTE 1. OVERVIEW AND BASIS OF PRESENTATION

Trimble Navigation Limited (the Company), incorporated in California in 1981, provides positioning solutions to commercial and government users in a large number of markets. These markets include surveying, agriculture, construction, asset management, mapping, and mobile resource management.

The Company has a 52-53 week fiscal year, ending on the Friday nearest to December 31, which for fiscal 2010 was December 31, 2010. The firstsecond quarter of fiscal 2011 and fiscal 2010 ended on AprilJuly 1, 2011 and AprilJuly 2, 2010, respectively. Fiscal 2011 and 2010 were both 52-week years. Unless otherwise stated, all dates refer to the Company’s fiscal year and fiscal periods.

The Condensed Consolidated Financial Statements include the results of the Company and its consolidated subsidiaries. Inter-company accounts and transactions have been eliminated. Noncontrolling interests represent the noncontrolling shareholders’ proportionate share of the net assets and results of operations of the Company’s consolidated subsidiaries.

The accompanying financial data as of AprilJuly 1, 2011 and for the three and six months ended AprilJuly 1, 2011 and AprilJuly 2, 2010 has been prepared by the Company, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). Certain information and footnote disclosures normally included in financial statements, prepared in accordance with U.S. generally accepted accounting principles, have been condensed or omitted pursuant to such rules and regulations. The Condensed Consolidated Balance Sheet as of December 31, 2010 is derived from the audited Consolidated Financial Statements included in the Annual Report on Form 10-K of Trimble Navigation Limited for fiscal year 2010. The following discussion should be read in conjunction with the Company’s 2010 Annual Report on Form 10-K.

The preparation of financial statements in accordance with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in its Condensed Consolidated Financial Statements and accompanying notes. Management bases its estimates on historical experience and various other assumptions believed to be reasonable. Although these estimates are based on management’s best knowledge of current events and actions that may impact the company in the future, actual results may be different from the estimates.

In the opinion of management, all adjustments (which include only normal recurring adjustments) necessary to present a fair statement of financial position as of AprilJuly 1, 2011, results of operations for the three and six months ended AprilJuly 1, 2011 and AprilJuly 2, 2010 and cash flows for the threesix months ended AprilJuly 1, 2011 and AprilJuly 2, 2010, as applicable, have been made. The results of operations for the three and six months ended AprilJuly 1, 2011 are not necessarily indicative of the operating results for the full fiscal year or any future periods. Individual segment revenue may be affected by seasonal buying patterns and general economic conditions. The Company has evaluated all subsequent events through the date that these financial statements have been filed with the Securities and Exchange Commission.SEC.

NOTE 2. UPDATES TO SIGNIFICANT ACCOUNTING POLICIES

There have been no material changes to the Company’s significant accounting polices during the threesix months ended AprilJuly 1, 2011 from those disclosed in the Company’s 2010 Form 10-K.

Recent Accounting Pronouncements

There are no updatesUpdates to recent accounting standards as disclosed in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2010.2010 are as follows:

In May 2011, the Financial Accounting Standards Board (“FASB”) issued amended guidance on fair value measurement and related disclosures. The new guidance clarified the concepts applicable for fair value measurement of non-financial assets and requires the disclosure of quantitative information about the unobservable inputs used in a fair value measurement. This guidance will be effective for reporting periods beginning after December 15, 2011, and will be applied prospectively. The Company is in the process of evaluating the financial and disclosure impact of this guidance. The Company does not anticipate a material impact on its consolidated financial statements as a result of the adoption of this amended guidance.

In June 2011, the FASB issued amended guidance on the presentation of comprehensive income. The amended guidance eliminates the option provided by current U.S. GAAP to present the components of other comprehensive income as part of the statement of changes in stockholders’ equity. In addition, it gives an entity the option to present the total of comprehensive income, the components of net income, and the components of other comprehensive income either in a single continuous statement of comprehensive income or in two separate but consecutive statements. This guidance will be effective for reporting periods beginning after December 15, 2011 and will be applied retrospectively. The Company will apply the guidance when it becomes effective.

NOTE 3. SHAREHOLDERS’ EQUITY

Stock Repurchase Activities

In January 2008, the Company’s Board of Directors authorized a stock repurchase program (“2008 Stock Repurchase Program”), authorizing the Company to repurchase up to $250 million of Trimble’s common stock under this program. No shares of common stock were repurchased during the three months and six months ended AprilJuly 1, 20112011. During the three and Aprilsix months ended July 2, 2010.2010, the Company repurchased approximately 2,360,000 shares of common stock in open market purchases at an average price of $28.69 per share, for a total of $67.7 million. Since January 2008, the Company has repurchased approximately 6,819,000 shares of common stock in open market purchases at an average price of $29.29 per share, for a total of $199.7 million. The purchase price was reflected as a decrease to common stock based on the average stated value per share with the remainder to retained earnings. Common stock repurchases under the program were recorded based upon the trade date for accounting purposes. All common shares repurchased under this program have been retired. As of AprilJuly 1, 2011, the 2008 Stock Repurchase Program had remaining authorized funds of $50.3 million. The timing and actual number of future shares repurchased will depend on a variety of factors including price, regulatory requirements, capital availability, and other market conditions. The program does not require the purchase of any minimum number of shares and may be suspended or discontinued at any time without public notice.

Stock-Based Compensation

The Company accounts for its employee stock options and rights to purchase shares under its stock participation plans under the fair value method, which requires the fair value of stock-based compensation to be estimated using the fair value on the date of grant using an option-pricing model. The value of the portion of the award that is expected to vest is recognized as expense over the related employees’ requisite service periods in the Company’s Condensed Consolidated Statements of Income.

The following table summarizes stock-based compensation expense, net of tax, related to employee stock-based compensation included in the Condensed Consolidated Statements of Income for the three and six months ended AprilJuly 1, 2011 and AprilJuly 2, 2010.

 

  Three Months Ended   Three Months Ended Six Months Ended 
  April 1,
2011
 April 2,
2010
   July 1,
2011
 July 2,
2010
 July 1,
2011
 July 2,
2010
 
(Dollars in thousands)                

Cost of sales

  $468   $501    $502   $486   $970   $987  
  

 

  

 

  

 

  

 

 
       

Research and development

   1,096    947     1,126    984    2,222    1,931  

Sales and marketing

   1,634    1,383     1,659    1,347    3,293    2,730  

General and administrative

   3,600    2,810     3,842    2,167    7,442    4,977  
         

 

  

 

  

 

  

 

 

Total operating expenses

   6,330    5,140     6,627    4,498    12,957    9,638  
         

 

  

 

  

 

  

 

 

Total stock-based compensation expense

   6,798    5,641     7,129    4,984    13,927    10,625  

Tax benefit (1)

   (2,203  (776   (2,139  (1,419  (4,342  (2,195
         

 

  

 

  

 

  

 

 

Total stock-based compensation expense, net of tax

  $4,595   $4,865    $4,990   $3,565   $9,585   $8,430  
         

 

  

 

  

 

  

 

 

 

(1)Tax benefit related to U.S. non-qualified options, restricted stock units, and disqualified disposition of incentive stock options, applying a Federal statutory and State (Federal effected) tax rate for the respective periods.

Options

Stock option expense recognized during the period is based on the fair value of the portion of the stock option that is expected to vest during the period and is net of estimated forfeitures. The fair value of each stock option is estimated on the date of grant using a binomial valuation model. The binomial model takes into account variables such as volatility, dividend yield rate, and risk free interest rate. For options granted during the three and six months ended AprilJuly 1, 2011 and AprilJuly 2, 2010, the following weighted average assumptions were used:

 

  Three Months Ended   Three Months Ended Six Months Ended 
  April 1,
2011
 April 2,
2010
   July 1,
2011
 July 2,
2010
 July 1,
2011
 July 2,
2010
 

Expected dividend yield

   —      —       0    0    0    0  

Expected stock price volatility

   41.9  43.5   43.7  43.7  43.6  43.8

Risk free interest rate

   1.0  2.1   1.6  1.8  1.6  1.8

Expected life of option

   4.2 years    4.2 years     4.2 years    4.2 years    4.2 years    4.2 years  

Expected Dividend Yield The dividend yield assumption is based on the Company’s history and expectation of dividend payouts.

Expected Stock Price Volatility The Company’s computation of expected volatility is based on a combination of implied volatilities from traded options on the Company’s stock and historical volatility, commensurate with the expected life of the stock options.

Expected Risk Free Interest Rate The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of grant for the expected life of the stock options.

Expected Life Of Option The Company’s expected life represents the period that the Company’s stock options are expected to be outstanding and is determined based on historical experience of similar stock options with consideration to the contractual terms of the stock options, vesting schedules, and expectations of future employee behavior.

NOTE 4. JOINT VENTURES

Caterpillar Trimble Control Technologies Joint Venture

On April 1, 2002, Caterpillar Trimble Control Technologies LLC (CTCT), a joint venture formed by the Company and Caterpillar, began operations. CTCT develops advanced electronic guidance and control products for earth moving machines in the construction and mining industries. The joint venture is 50% owned by the Company and 50% owned by Caterpillar, with equal voting rights. The joint venture is accounted for under the equity method of accounting. Under the equity method, the Company’s share of profits and losses are included in Income from equity method investments, net in the Non-operating income, net section of the Condensed Consolidated Statements of Income. During the three and six months ended AprilJuly 1, 2011, the Company recorded $2.4$3.4 million and $5.8 million, respectively, as its proportionate share of CTCT net income. During the comparable periodperiods of 2010, the Company recorded $1.72.7 million and $4.4 million, respectively, as its proportionate share of CTCT net income. During the fiscal quartersthree and six months ended AprilJuly 1, 2011, and April 2, 2010, there were no dividends received from CTCT.CTCT, amounted to $7.5 million, and were recorded against Other non-current assets on the Condensed Consolidated Balance Sheets. During the comparable period of 2010, dividends received from CTCT, amounted to $5.0 million, and were recorded against Other non-current assets on the Condensed Consolidated Balance Sheets. The carrying amount of the investment in CTCT was $11.3$7.2 million at AprilJuly 1, 2011 and $8.9 million at December 31, 2010, and is included in Other non-current assets on the Condensed Consolidated Balance Sheets.

The Company acts as a contract manufacturer for CTCT. Products are manufactured based on orders received from CTCT and are sold at direct cost, plus a mark-up for the Company’s overhead costs to CTCT. CTCT then resells products at cost, plus a mark-up in consideration for CTCT’s research and development efforts to both Caterpillar and to the Company for sales through their respective distribution channels. Generally, the Company sells products through its after-market dealer channel, and Caterpillar sells products for factory and dealer installation. CTCT does not have net inventory on its balance sheet in that the resale of products to Caterpillar and the Company occur simultaneously when the products are purchased from the Company. During the three and six months ended AprilJuly 1, 2011, the Company recorded $1.4$1.3 million and $2.7 million of revenue, respectively, and $1.4$1.3 million and $2.7 million of cost of sales, respectively, for the manufacturing of products sold by the Company to CTCT and then sold through the Caterpillar distribution channel. During the comparable three month period of fiscaland six months ended July 2, 2010, the Company recorded $0.9 million and $1.8 million of revenue, respectively, and $0.9$0.8 million and $1.7 million of cost of sales for the manufacturing of products sold by the Company to CTCT and then sold through the Caterpillar distribution channel. In addition, during the three and six months ended AprilJuly 1, 2011, and April 2, 2010, the Company recorded $7.9$10.6 million and $6.1$18.5 million in net cost of sales for the manufacturing of products sold by the Company to CTCT and then repurchased by the Company upon sale through the Company’s distribution channel. The comparable net cost of sales recorded by the Company for the three and six months ended July 2, 2010 were $8.5 million and $14.6 million, respectively.

In addition, the Company received reimbursement of employee-related costs from CTCT for company employees dedicated to CTCT or performance of work for CTCT totaling $3.9$3.7 million and $2.7$7.6 million for the three and six months ended AprilJuly 1, 2011, respectively, and Apriltotaling 2.7 million and $5.6 million for the three and six months ended July 2, 2010, respectively. The reimbursements were offset against operating expense.

At AprilJuly 1, 2011 and December 31, 2010, the Company had amounts due to and from CTCT. Receivables and payables to CTCT are settled individually with terms comparable to other non-related parties. The amounts due to and from CTCT are presented on a gross basis in the Condensed Consolidated Balance Sheets. At AprilJuly 1, 2011 and December 31, 2010, the receivables from CTCT were $8.8$7.3 million and $4.4 million, respectively, and are included within Accounts receivable, net, on the Condensed Consolidated Balance Sheets. As of the same dates, the payables due to CTCT were $10.7$9.1 million and $5.7 million, respectively, and are included within Accounts payable on the Condensed Consolidated Balance Sheets.

Nikon-Trimble Joint Venture

On March 28, 2003, Nikon-Trimble Co., Ltd (Nikon-Trimble), a joint venture, was formed by the Company and Nikon Corporation. The joint venture began operations in July 2003 and is 50% owned by the Company and 50% owned by Nikon, with equal voting rights. It focuses on the design and manufacture of surveying instruments including mechanical total stations and related products.

The joint venture is accounted for under the equity method of accounting. Under the equity method, the Company’s share of profits and losses are included in Income from equity method investments, net in the Non-operating income, net section of the Condensed Consolidated Statements of Income. During the three and six months ended AprilJuly 1, 2011, and April 2, 2010, the Company recorded a profit of both $0.8$0.3 million and $1.0 million, respectively, and during the three and six months ended July 2, 2010, the Company recorded loss of $0.5 million and $1.3 million, respectively, as its proportionate share of Nikon-Trimble net income. During the three and six months ended AprilJuly 1, 2011 and AprilJuly 2, 2010, there were no dividends received from Nikon-Trimble. The carrying amount of the investment in Nikon-Trimble was $15.8$16.5 million at AprilJuly 1, 2011 and $15.0$15.5 million at December 31, 2010, and is included in Other non-current assets on the Condensed Consolidated Balance Sheets.

Nikon-Trimble is the distributor in Japan for Nikon and the Company’s products. The Company is the exclusive distributor outside of Japan for Nikon branded survey products. For products sold by the Company to Nikon-Trimble, revenue is recognized by the Company on a sell-through basis from Nikon-Trimble to the end customer.

The terms and conditions of the sales of products from the Company to Nikon-Trimble are comparable with those of the standard distribution agreements which the Company maintains with its dealer channel and margins earned are similar to those from third party dealers. Similarly, the purchases of product by the Company from Nikon-Trimble are made on terms comparable with the arrangements which Nikon maintained with its international distribution channel prior to the formation of the joint venture with the Company. During the three and six months ended AprilJuly 1, 2011, the Company recorded $4.4$3.9 million and $8.3 million of revenue and $2.5$2.2 million and $4.7 million of cost of sales for the manufacturing of products sold by the Company to Nikon-Trimble. During the three and six months ended AprilJuly 2, 2010, the Company recorded $4.6$3.9 million and $8.5 million of revenue and $2.8$2.6 million and $5.4 million of cost of sales for the manufacturing of products sold by the Company to Nikon-Trimble. The Company also purchases product from Nikon-Trimble for future sales to third party customers. Purchases of inventory from Nikon-Trimble were $5.9$6.0 million and $5.4$11.9 million during the three and six months ended AprilJuly 1, 2011, respectively, and April$2.9 million and $8.3 million during the three and six months ended July 2, 2010, respectively.

At AprilJuly 1, 2011 and December 31, 2010, the Company had amounts due to and from Nikon-Trimble. Receivables and payables to Nikon-Trimble are settled individually with terms comparable to other non-related parties. The amounts due to and from Nikon-Trimble are presented on a gross basis in the Condensed Consolidated Balance Sheets. At AprilJuly 1, 2011 and December 31, 2010, the amounts due from Nikon-Trimble were $2.5$3.9 million and $3.5 million, respectively, and are included within Accounts receivable, net on the Condensed Consolidated Balance Sheets. As of the same dates, the amounts due to Nikon-Trimble were $5.8$6.0 million and $7.0 million, respectively, and are included within Accounts payable on the Condensed Consolidated Balance Sheets.

NOTE 5. GOODWILL AND INTANGIBLE ASSETS

Intangible Assets

Intangible AssetsOther purchased intangible assets, net consisted of the following:

 

  July 1, 2011 
  April 1, 2011   Gross
Carrying
Amount
   Accumulated
Amortization
 Net Carrying
Amount
 

(Dollars in thousands)

  Gross
Carrying
Amount
   Accumulated
Amortization
 Net Carrying
Amount
           

Developed product technology

  $255,433    $(158,847 $96,586    $275,666    $(168,330 $107,336  

Trade names and trademarks

   22,932     (16,923  6,009     23,876     (17,436  6,440  

Customer relationships

   162,970     (73,765  89,205     169,747     (78,432  91,315  

Distribution rights and other intellectual properties

   50,513     (26,919  23,594     54,250     (28,420  25,830  
             

 

   

 

  

 

 
  $491,848    $(276,454 $215,394    $523,539    $(292,618 $230,921  
             

 

   

 

  

 

 

  December 31, 2010 
  January 1, 2010   Gross
Carrying
Amount
   Accumulated
Amortization
 Net Carrying
Amount
 

(Dollars in thousands)

  Gross
Carrying
Amount
   Accumulated
Amortization
 Net Carrying
Amount
           

Developed product technology

  $247,575    $(148,171 $99,404    $247,575    $(148,171 $99,404  

Trade names and trademarks

   22,136     (16,449  5,687     22,136     (16,449  5,687  

Customer relationships

   143,125     (68,104  75,021     143,125     (68,104  75,021  

Distribution rights and other intellectual properties

   50,207     (25,371  24,836     50,207     (25,371  24,836  
             

 

   

 

  

 

 
  $463,043    $(258,095 $204,948    $463,043    $(258,095 $204,948  
             

 

   

 

  

 

 

The estimated future amortization expense of intangible assets as of AprilJuly 1, 2011, is as follows:

 

(Dollars in thousands)

        

2011 (Remaining)

  $47,177    $34,451  

2012

   55,477     62,253  

2013

   49,586     56,333  

2014

   27,497     34,048  

2015

   17,754     22,263  

Thereafter

   17,903     21,573  
      

 

 

Total

  $215,394    $230,921  
      

 

 

Goodwill

The changes in the carrying amount of goodwill by operating segment for the threesix months ended AprilJuly 1, 2011, arewere as follows:

 

   Engineering
and
Construction
  Field
Solutions
   Mobile
Solutions
   Advanced
Devices
   Total 
(Dollars in thousands)                   

Balance as of December 31, 2010

  $432,364   $26,211    $348,166    $21,996    $828,737  

Additions due to acquisitions

   22,855    —       —       —       22,855  

Purchase price adjustments

   (3  —       —       —       (3

Foreign currency translation adjustments

   10,329    73     973     495     11,870  
                        

Balance as of April 1, 2011

  $465,545   $26,284    $349,139    $22,491    $863,459  
                        

   Engineering
and
Construction
   Field
Solutions
   Mobile
Solutions
   Advanced
Devices
   Total 
(Dollars in thousands)                    

Balance as of December 31, 2010

  $432,364    $26,211    $348,166    $21,996    $828,737  

Additions due to acquisitions

   37,977     0     11,466     2,163     51,606  

Purchase price adjustments

   291     0     0     0     291  

Foreign currency translation adjustments

   12,462     121     873     424     13,880  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance as of July 1, 2011

  $483,094    $26,332    $360,505    $24,583    $894,514  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

NOTE 6. CERTAIN BALANCE SHEET COMPONENTS

Inventories, net consisted of the following:

 

As of

  April 1,
2011
   December 31,
2010
   July 1,
2011
   December 31,
2010
 
(Dollars in thousands)                

Raw materials

  $82,223    $79,057    $89,411    $79,057  

Work-in-process

   7,426     5,672     7,177     5,672  

Finished goods

   113,365     108,123     119,492     108,123  
          

 

   

 

 

Total inventories, net

  $203,014    $192,852    $216,080    $192,852  
          

 

   

 

 

Deferred costs of revenue are included within finished goods and were $14.4$17.5 million at AprilJuly 1, 2011 and $14.0 million at December 31, 2010.

Other non-current liabilities consisted of the following:

 

As of

  April 1,
2011
   December 31,
2010
   July 1,
2011
   December 31,
2010
 
(Dollars in thousands)                

Deferred compensation

  $10,894    $9,736    $10,724    $9,736  

Unrecognized tax benefits

   19,102     17,830     15,280     17,830  

Other non-current liabilities

   19,573     15,277     19,741     15,277  
          

 

   

 

 

Total other non-current liabilities

  $49,569    $42,843    $45,745    $42,843  
          

 

   

 

 

As of AprilJuly 1, 2011 and December 31, 2010, the Company has $19.1$15.3 million and $17.8 million, respectively, of unrecognized tax benefits included in Other non-current liabilities that, if recognized, would favorably affect the effective income tax rate and interest and/or penalties related to income tax matters in future periods.

NOTE 7. SEGMENT INFORMATION

The Company is a designer and distributor of positioning solutions enabled by GPS, optical, laser, and wireless communications technology. The Company provides products for diverse applications in its targeted markets.

To achieve distribution, marketing, production, and technology advantages, the Company manages its operations in the following four segments:

 

Engineering and Construction — Consists of products currently used by survey and construction professionals in the field for positioning, data collection, field computing, data management, and machine guidance and control. The applications served include surveying, road, runway, construction, site preparation, and building construction.

 

Field Solutions — Consists of products that provide solutions in a variety of agriculture and geographic information systems (GIS) applications. In agriculture, these include precise land leveling and machine guidance systems. In GIS, these include handheld devices and software that enable the collection of data on assets for a variety of governmental and private entities.

 

Mobile Solutions — Consists of products that enable end-users to monitor and manage their mobile assets by communicating location and activity-relevant information from the field to the office. The Company offers a range of products that address a number of sectors of this market including truck fleets, security, and public safety vehicles.

 

Advanced Devices — The various operations that comprise this segment are aggregated on the basis that no single operation accounts for more than 10% of the Company’s total revenue, operating income, and assets. This segment is comprised of the Component Technologies, Military and Advanced Systems, Applanix, Trimble Outdoors, and ThingMagic businesses.

The Company evaluates each of its segment’s performance and allocates resources based on segment operating income before income taxes and some corporate allocations. The Company and each of its segments employ consistent accounting policies.

The following table presents revenue, operating income (loss), and identifiable assets for the four segments. Operating income (loss) is revenue less cost of sales and operating expense, excluding general corporate expense, amortization of purchased intangibles, amortization of acquisition-related inventory step-up, non-recurring acquisition costs and restructuring charges.costs. The identifiable assets that the Company’s Chief Operating Decision Maker, its Chief Executive Officer, views by segment are accounts receivable, inventories, and goodwill.

  Reporting Segments   Total   Reporting Segments   Total 
  Engineering
and
Construction
   Field
Solutions
   Mobile
Solutions
 Advanced
Devices
     Engineering
and
Construction
   Field
Solutions
   Mobile
Solutions
 Advanced
Devices
   
(Dollars in thousands)                                    

Three Months Ended April 1, 2011

         

Three Months Ended July 1, 2011

         

Segment revenue

  $236,668    $104,029    $40,224   $26,248    $407,169  

Operating income (loss)

   46,987     42,543     (2,684  2,607     89,453  

Three Months Ended July 2, 2010

         

Segment revenue

  $190,034    $123,053    $44,421   $26,785    $384,293    $188,441    $80,158    $38,188   $26,576    $333,363  

Operating income

   22,779     52,505     (1,334  3,863     77,813     33,921     28,980     324    5,181     68,406  

Three Months Ended April 2, 2010

         

Six Months Ended July 1, 2011

         

Segment revenue

  $426,702    $227,082    $84,645   $53,033    $791,462  

Operating income (loss)

   69,766     95,048     (4,018  6,470     167,266  

Six Months Ended July 2, 2010

         

Segment revenue

  $157,618    $95,901    $37,959   $27,537    $319,015    $346,059    $176,059    $76,147   $54,113    $652,378  

Operating income

   18,807     39,313     1,899    5,625     65,644     52,728     68,293     2,223    10,806     134,050  

As of April 1, 2011

         

As of July 1, 2011

         

Accounts receivable

  $142,348    $81,457    $25,374   $16,514    $265,693    $163,007    $51,433    $26,103   $16,633    $257,176  

Inventories

   130,211     37,255     18,004    17,544     203,014     134,339     41,536     18,395    21,810     216,080  

Goodwill

   465,545     26,284     349,139    22,491     863,459     483,094     26,332     360,505    24,583     894,514  

As of December 31, 2010

                  

Accounts receivable

  $131,808    $52,065    $24,806   $14,141    $222,820    $131,808    $52,065    $24,806   $14,141    $222,820  

Inventories

   123,780     33,964     16,721    18,387     192,852     123,780     33,964     16,721    18,387     192,852  

Goodwill

   432,364     26,211     348,166    21,996     828,737     432,364     26,211     348,166    21,996     828,737  

Unallocated corporate expense includes general corporate expense, amortization of acquisition-related inventory step-up and non-recurring acquisitionrestructuring costs. A reconciliation of the Company’s consolidated segment operating income to consolidated income before income taxes is as follows:

 

  Three Months Ended   Three Months Ended Six Months Ended 
  April 1,
2011
 April 2,
2010
   July 1,
2011
 July 2,
2010
 July 1,
2011
 July 2,
2010
 
(Dollars in thousands)                

Consolidated segment operating income

  $77,813   $65,644    $89,453   $68,406   $167,266   $134,050  

Unallocated corporate expense

   (17,207  (15,038   (17,621  (12,155  (32,739  (27,329

Amortization of purchased intangible assets

   (16,065  (13,817   (16,576  (13,916  (32,641  (27,733

Restructuring charges

   (866  (674

Acquisition costs

   (3,689  (1,774  (6,644  (2,312
         

 

  

 

  

 

  

 

 

Consolidated operating income

   43,675    36,115     51,567    40,561    95,242    76,676  

Non-operating income, net

   2,606    3,535     8,631    286    11,237    3,821  
         

 

  

 

  

 

  

 

 

Consolidated income before taxes

  $46,281   $39,650    $60,198   $40,847   $106,479   $80,497  
         

 

  

 

  

 

  

 

 

NOTE 8. DEBT, COMMITMENTS AND CONTINGENCIES

Debt consisted of the following:

As of

  April 1,
2011
   December 31,
2010
   July 1,
2011
   December 31,
2010
 
(Dollars in thousands)            

Credit Facilities:

        

Revolving credit facility

  $151,000    $151,000    $125,000    $151,000  

Promissory notes and other

   2,300     2,153     2,256     2,153  
          

 

   

 

 

Total debt

   153,300     153,153     127,256     153,153  

Less current portion of long-term debt

   153,029     1,993     1,969     1,993  
          

 

   

 

 

Non-current portion

  $271    $151,160    $125,287    $151,160  
          

 

   

 

 

Credit Facilities

On July 28, 2005, the Company entered into a $200 million unsecured revolving credit agreement (the 2005 Credit Facility) with a syndicate of 10 banks with The Bank of Nova Scotia as the administrative agent. On February 16, 2007, the Company amended its existing $200 million unsecured revolving credit agreement with a syndicate of 11 banks with The Bank of Nova Scotia as the administrative agent (the 2007 Credit Facility). Under the 2007 Credit Facility, the Company exercised the option in the existing credit agreement to increase the availability under the revolving credit line by $100 million, for an aggregate availability of up to $300 million, and extended the maturity date of the revolving credit line by 18 months, from July 2010 to February 2012. Up to $25 million of the availability under the revolving credit line was available to be used to issue letters of credit, and up to $20 million may be used to pay off other debts or loans. The maximum leverage ratio under the 2007 Credit Facility was 3.00:1.00. The funds available under the 2007 Credit Facility may be used by the Company for acquisitions, stock repurchases, and general corporate purposes. As of August 20, 2008, the Company amended its 2007 Credit Facility to allow it to redeem, retire or purchase common stock of the Company without limitation so long as no default or unmatured default then existed, and leverage ratio for the two most recently completed periods was less than 2.00:1.00. In addition, the definition of the fixed charge was amended to exclude the impact of redemptions, retirements, or purchases common stock of the Company from the fixed charges coverage ratio.

As of AprilJuly 1, 2011, the Company had an outstanding balance on the revolving credit line in the amount of $151.0$125.0 million, which is classified as short-term aslong-term in the Condensed Consolidated Balance Sheet.

On May 6, 2011, the Company entered into a new credit agreement, (the 2011 Credit Facility), with a group of lenders. This credit facility provides for unsecured credit facilities in the aggregate principal amount of $1.1 billion, comprised of a five-year revolving loan facility of $700.0 million and a five-year $400.0 million term loan facility. Subject to the terms of the 2011 Credit Facility, the revolving loan facility and the term loan facility may be increased by up to $300.0 million in the aggregate. The term loan facility may be drawn on or before the 180th day following the date of the 2011 Credit Facility.

The funds available under the 2011 Credit Facility may be used for general corporate purposes, the financing of certain acquisitions and the payment of transaction fees and expenses related to such acquisitions. On May 6, 2011, the Company made an initial borrowing of $151.0 million under the revolving credit line matures in February 2012. The Company replacedof the 20072011 Credit Facility to repay all of the amounts outstanding under the then existing Amended and Restated Credit Agreement dated February 16, 2007.

Under the 2011 Credit Facility, the Company may borrow, repay and reborrow funds under the revolving loan facility until its maturity on May 6, 2016, at which time the revolving facility will terminate, and all outstanding loans, together with all accrued and unpaid interest, must be repaid. Amounts not borrowed under the revolving facility will be subject to a commitment fee, to be paid in arrears on the last day of each fiscal quarter, ranging from 0.20% to 0.40% per annum depending on our leverage ratio as described under Note 14 regarding subsequent events.of the most recently ended fiscal quarter. The term loan will be repaid in quarterly installments, with the last quarterly payment to be made at April 1, 2016. On an annualized basis, the amortization of the term loan is as follows: 5%, 5%, 10%, 10%, and 70% for years one through five respectively. The term loan may be prepaid in whole or in part, subject to certain minimum thresholds, without penalty or premium. Amounts repaid or prepaid with respect to the term loan facility may not be reborrowed.

The Company was able tomay borrow funds under the 20072011 Credit Facility in U.S. Dollars, Euros or in certain other agreed currencies, and borrowings will bear interest, at the Company’s option, at either: (i) a floating per annum base rate based on the administrative agent’s prime rate plus a margin of between 0% and 0.125%, depending on the Company’s leverage ratio as of its most recently ended fiscal quarter, or (ii) a reserve-adjusted rate based on the London Interbank Offered Rate (LIBOR), Euro Interbank Offered Rate (EURIBOR), Stockholm Interbank Offered Rate (STIBOR), or other agreed-upon rate, depending on the currency borrowed, plus a margin of between 0.625%0.25% and 1.125%1.25%, depending on the Company’s leverage ratio as of the most recently ended fiscal quarter, or (ii) a reserve-adjusted fixed per annum rate based on LIBOR, EURIBOR, STIBOR or other agreed-upon rate, depending on the currency borrowed, plus a margin of between 1.25% and 2.25%, depending on the Company’s leverage ratio as of the most recently ended fiscal quarter. Interest will be paid on the last day of each fiscal quarter with respect to borrowings bearing interest based on a floating rate, or on the last day of an interest period, but at least every three months, with respect to borrowings bearing interest at a fixed rate. The Company’s obligations under the 20072011 Credit Facility wereare guaranteed by certainseveral of the Company’sits domestic subsidiaries.

The 20072011 Credit Facility containedcontains various customary representations and warranties by the Company, which include customary use of materiality, material adverse effect and knowledge qualifiers. The 2011 Credit Facility also contains customary affirmative negative, and financialnegative covenants including, among other requirements, negative covenants that restrict the Company’s ability to dispose of assets, create liens, incur indebtedness, repurchase stock, pay dividends, make acquisitions make investments, enter into mergers and consolidations and make capital expenditures, within certain limitations, andinvestments. Further, the 2011 Credit Facility contains financial covenants that require the maintenance of minimum interest coverage and maximum leverage ratios. Specifically, the Company must maintain as of the end of each fiscal quarter a ratio of (a) EBITDA (as defined in the 2011 Credit Facility) to (b) interest expenses for the most recently ended period of four fiscal quarters of not less than 3.5 to 1. The Company must also maintain, at the end of each fiscal quarter, a ratio of (x) total indebtedness to (y) EBITDA (as defined in the 2011 Credit Facility) for the most recently ended period of four fiscal quarters of not greater than the applicable ratio set forth in the table below; provided, that on the completion of a material acquisition, the Company may increase the applicable ratio in the table below by 0.25 for the fiscal quarter during which such acquisition occurred and fixed charge coverage ratios. each of the three subsequent fiscal quarters.

Fiscal Quarter Ending

Maximum Leverage Ratio

Prior to March 30, 2012

3.50 to 1

On and after March 30, 2012 and prior to June 29, 2012

3.25 to 1

On and after June 29, 2012

3 to 1

The 2007Company was in compliance with these restrictive covenants as of July 1, 2011.

The 2011 Credit Facility containedcontains events of default that included,include, among others, non-payment of principal, interest or fees, breach of covenants, inaccuracy of representations and warranties, cross defaults to certain other indebtedness, bankruptcy and insolvency events, material judgments, and events constituting a change of control. Upon the occurrence and during the continuance of an event of default, interest on the obligations wouldwill accrue at an increased rate and the lenders couldmay accelerate the Company’s obligations under the 20072011 Credit Facility, however that acceleration wouldwill be automatic in the case of bankruptcy and insolvency events of default. As of April 1, 2011, the Company was in compliance with all financial debt covenants.

Promissory Notes and Other

As of AprilJuly 1, 2011 and December 31, 2010, the Company had promissory notes and other totaling approximately $2.3 million and $2.2 million. Of these amounts, the Company had outstanding notes payable of $1.9 million which consisted primarily of notes payable to noncontrolling interest holders. The notes bear interest at 6% and have undefined payment terms, but are callable with a six month notification.

Leases and Other Commitments

The estimated future minimum operating lease commitments as of AprilJuly 1, 2011, are as follows (dollars in thousands):

2011 (Remaining)

  $16,402    $11,101  

2012

   15,945     19,050  

2013

   10,993     10,994  

2014

   8,163     7,822  

2015

   5,904     5,645  

Thereafter

   6,702     6,606  
      

 

 

Total

  $64,109    $61,218  
      

 

 

Additionally, as of AprilJuly 1, 2011, the Company had acquisition-related earn-outs of $4.6$7.4 million and holdbacks of $8.1$7.9 million recorded in Other current liabilities and Other non-current liabilities. The maximum remaining payments, including the $4.6$7.4 million and $8.1$7.9 million recorded, will not exceed $23.5$26.3 million. The remaining payments are based upon targets achieved or events occurring over time that would result in amounts paid that may be lower than the maximum remaining payments. The remaining earn-outs and holdbacks are payable through 2016.2013.

At AprilJuly 1, 2011, the Company had unconditional purchase obligations of approximately $73.2$66.6 million. These unconditional purchase obligations primarily represent open non-cancelable purchase orders for material purchases with the Company’s vendors. Purchase obligations exclude agreements that are cancelable without penalty. These unconditional purchase obligations are related primarily to inventory and other items.

NOTE 9. FAIR VALUE MEASUREMENTS

The guidance on fair value measurements and disclosures defines fair value, establishes a framework for measuring fair value, and requires enhanced disclosures about assets and liabilities measured at fair value. Fair value is defined as the price at which an asset could be exchanged in a current transaction between knowledgeable, willing parties. A liability’s fair value is defined as the amount that would be paid to transfer the liability to a new obligor, not the amount that would be paid to settle the liability with the creditor. Where available, fair value is based on observable market prices or parameters or derived from such prices or parameters. Where observable prices or inputs are not available, valuation models are applied. These valuation techniques involve some level of management estimation and judgment, the degree of which is dependent on the price transparency for the instruments or market, and the instruments’ complexity.

Assets and liabilities, recorded at fair value on a recurring basis in the Condensed Consolidated Balance Sheets, are categorized based upon the level of judgment associated with the inputs used to measure their fair value. Hierarchical levels, defined by the guidance on fair value measurements are directly related to the amount of subjectivity associated with the inputs to fair valuation of these assets and liabilities, and are as follows:

Level I Observable inputs such as unadjusted, quoted prices in active markets for identical assets or liabilities at the measurement date.

Level II Inputs (other than quoted prices included in Level I) are either directly or indirectly observable for the asset or liability. These include quoted prices for similar assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are not active.

Level III Unobservable inputs that reflect management’s best estimate of what market participants would use in pricing the asset or liability at the measurement date. Consideration is given to the risk inherent in the valuation technique and the risk inherent in the inputs to the model.

Fair Value on a Recurring Basis

Assets and liabilities measured at fair value on a recurring basis are categorized in the tables below based upon the lowest level of significant input to the valuations.

 

  Fair Values as of April 1, 2011   Fair Values as of July 1, 2011 

(Dollars in thousands)

  Level I   Level II   Level III   Total   Level I   Level II   Level III   Total 

Assets

                

Money market funds(1)

  $98,301    $—      $—      $98,301    $76,484    $0    $0    $76,484  

Deferred compensation plan assets (2)

   10,735     —       —       10,735     10,634     0     0     10,634  

Derivative assets (3)

   —       563     —       563     0     6,177     0     6,177  
                  

 

   

 

   

 

   

 

 

Total

  $109,036    $563    $—      $109,599    $87,118    $6,177    $0    $93,295  
                  

 

   

 

   

 

   

 

 

Liabilities

                

Deferred compensation plan liabilities (2)

  $10,894    $—      $—      $10,894    $10,724    $0    $0    $10,724  

Derivative liabilities (3)

   —       574     —       574     0     226     0     226  

Contingent consideration liabilities (4)

   —       —       4,550     4,550     0     0     7,439     7,439  
                  

 

   

 

   

 

   

 

 

Total

  $10,894    $574    $4,550    $16,018    $10,724    $226    $7,439    $18,389  
                  

 

   

 

   

 

   

 

 

(1)These investments are highly liquid investments such as money market funds. The fair values are determined using observable quoted prices in active markets. Money market funds are included in Cash and cash equivalents on the Company’s Condensed Consolidated Balance Sheets.
(2)The Company maintains a self-directed, non-qualified deferred compensation plan for certain executives and other highly compensated employees. As of AprilJuly 1, 2011 the plan assets and liabilities are invested in actively traded mutual funds and individual stocks valued using observable quoted prices in active markets. Deferred compensation plan assets and liabilities are included in Other non-current assets and Other non-current liabilities on the Company’s Condensed Consolidated Balance Sheets.
(3)Derivative assets and liabilities included in Level II primarily represent forward currency exchange contracts. The Company enters into these contracts to minimize the short-term impact of foreign currency fluctuations on certain trade and inter-company receivables and payables. During the second quarter of fiscal 2011 the Company entered into a forward currency exchange contract in anticipation of the foreign currency that was needed to pay for a business combination expected to close during the third quarter of fiscal 2011. A gain of $5.6 million on foreign exchange associated with this forward currency exchange contract was recognized and included in Foreign currency transaction gain (loss), net on the Company’s Condensed Consolidated Statement of Income. The derivatives are not designated as hedging instruments. The fair values are determined using inputs based on observable quoted prices. Derivative assets and liabilities are included in Other current assets and Other current liabilities, respectively, on the Company’s Condensed Consolidated Balance Sheets.
(4)The Company has sixseven contingent consideration arrangements that require it to pay the former owners of certain companies it acquired during fiscal 2009 andthrough fiscal 2010.2011. The undiscounted maximum payment under all sixseven arrangements is $12.0$15.1 million, based on future revenues or gross margins over a 3 year period. The Company estimated the fair value of these liabilities using the expected cash flow approach with inputs being probability-weighted revenue or gross margin projections, as the case may be, and discount rates ranging from 0.07%0.10% to 0.80%3.50%. Of the total contingent consideration liability, $4.8 million and $2.6 million and $2.0 million werewas included in Other current liabilities and Other non-current liabilities, respectively, on the Company’s Condensed Consolidated Balance Sheets.

The table below sets forth a summary of changes in the fair value of the Level III contingent consideration liabilities for the threesix month ended AprilJuly 1, 2011.

 

As of

  Level III liabilities
April 1, 2011
   Level III liabilities
July 1, 2011
 
(Dollars in thousands)      

Balance as of December 31, 2010

  $3,719    $3,719  

Losses included in earnings

   605  

Acquisitions

   2,344  

Contingent consideration fair value changes included in earnings

   1,065  

Losses recognized in other comprehensive income

   226     311  
      

 

 

Balance as of April 1, 2011

  $4,550  

Balance as of July 1, 2011

  $7,439  
      

 

 

The losses included in earnings represent the changes in fair value of the contingent consideration arrangements which are recognized in Other income (expense),expense, net in the Condensed Consolidated Statements of Income. The losses recognized in other comprehensive income are a result of foreign currency translation adjustments.

Additional Fair Value Information

The following table provides additional fair value information relating to the Company’s financial instruments outstanding:

 

As of

  Carrying
Amount
   Fair
Value
   Carrying
Amount
   Fair
Value
 
  Carrying
Amount
   Fair
Value
   Carrying
Amount
   Fair
Value
 

As of

April 1, 2011   December 31, 2010   July 1, 2011   December 31, 2010 
                        

Assets:

                

Cash and cash equivalents

  $244,342    $244,342    $220,788    $220,788    $249,811    $249,811    $220,788    $220,788  

Forward foreign currency exchange contracts

   563     563     407     407     6,177     6,177     407     407  

Liabilities:

                

Credit facility

  $151,000    $151,000    $151,000    $148,367    $125,000    $115,345    $151,000    $148,367  

Forward foreign currency exchange contracts

   574     574     140     140     226     226     140     140  

Promissory note and other

   2,300     2,277     2,153     2,133     2,256     2,255     2,153     2,133  

The fair value of the bank borrowings and promissory notes has been calculated using an estimate of the interest rate the Company would have had to pay on the issuance of notes with a similar maturity and discounting the cash flows at that rate. The fair values do not give an indication of the amount that Trimble would currently have to pay to extinguish any of this debt.

NOTE 10. PRODUCT WARRANTIES

The Company accrues for warranty costs as part of its cost of sales based on associated material product costs, technical support labor costs, and costs incurred by third parties performing work on the Company’s behalf. The Company’s expected future costs are primarily estimated based upon historical trends in the volume of product returns within the warranty period and the costs to repair or replace the equipment. The products sold are generally covered by a warranty for periods ranging from 90 days to three years.

While the Company engages in extensive product quality programs and processes, including actively monitoring and evaluating the quality of component suppliers, its warranty obligation is affected by product failure rates, material usage, and service delivery costs incurred in correcting a product failure. Should actual product failure rates, material usage, or service delivery costs differ from the estimates, revisions to the estimated warranty accrual and related costs may be required.

Changes in the Company’s product warranty liability during the threesix months ended AprilJuly 1, 2011 are as follows:

 

(Dollars in thousands)

      

Balance as of December 31, 2010

  $12,868    $12,868  

Acquired warranties

   381  

Accruals for warranties issued

   3,751     7,847  

Changes in estimates

   (513   (800

Warranty settlements (in cash or in kind)

   (3,277   (7,133
      

 

 

Balance as of April 1, 2011

  $12,829  

Balance as of July 1, 2011

  $13,163  
      

 

 

NOTE 11. EARNINGS PER SHARE

The following data was used in computing earnings per share and the effect on the weighted-average number of shares of potentially dilutive common stock.

 

  Three Months Ended   Three Months Ended   Six Months Ended 
  April 1,
2011
   April 2,
2010
   July 1,
2011
   July 2,
2010
   July 1,
2011
   July 2,
2010
 
(Dollars in thousands, except per share amounts)                

Numerator:

            

Net income attributable to Trimble Navigation Ltd.

  $39,703    $27,898    $53,678    $6,353    $93,381    $34,251  
          

 

   

 

   

 

   

 

 

Denominator:

            

Weighted average number of common shares used in basic earnings per share

   121,819     120,760     122,667     120,654     122,243     120,707  

Effect of dilutive securities (using treasury stock method):

    

Common stock options and restricted stock units

   4,037     3,069  

Effect of dilutive securities (using treasury stock method): Common stock options and restricted stock units

   3,525     3,445     3,781     3,257  
          

 

   

 

   

 

   

 

 

Weighted average number of common shares and dilutive

   125,856     123,829  

Weighted average number of common shares and dilutive potential common shares used in diluted earnings per share

   126,192     124,099     126,024     123,964  
          

 

   

 

   

 

   

 

 

potential common shares used in diluted earnings per share Basic earnings per share

  $0.33    $0.23  

Basic earnings per share

  $0.44    $0.05    $0.76    $0.28  
          

 

   

 

   

 

   

 

 

Diluted earnings per share

  $0.32    $0.23    $0.43    $0.05    $0.74    $0.28  
          

 

   

 

   

 

   

 

 

For the first quarter of fiscalthree months ended July 1, 2011 and the first quarter of fiscalJuly 2, 2010, the Company excluded 0.91.6 million shares and 3.32.1 million shares of outstanding stock options, respectively, from the calculation of diluted earnings per shareshare. For the six months ended July 1, 2011 and July 2, 2010, the Company excluded 1.2 million and 2.8 million shares of outstanding stock options, respectively, from the calculation of diluted earnings per share. These shares were excluded from the three and six month periods because the exercise prices of these stock options were greater than or equal to the average market value of the common shares during the respective periods. Inclusion of these shares would be antidilutive. These options could be included in the calculation in the future if the average market value of the common shares increases and is greater than the exercise price of these options.

NOTE 12. INCOME TAXES

TheIn the three months ended July 1, 2011, the Company’s effective income tax rate for the three months ended April 1, 2011 was 16.0%,10.0% as compared to 29.0% for83.4% in the threecorresponding period in 2010, primarily due to geographic mix of pretax income, the closure of the 2008 and 2009 IRS examination which resulted in a net benefit of $2.3 million, as compared to a $27.5 million net charge in the second quarter of 2010 resulting from the U.S. Internal Revenue Service (IRS) audit settlement of the Company’s 2005 through 2007 tax years. In the six months ended April 2,July 1, 2011, the Company’s effective income tax rate was 12.8% as compared to 56.6% in the corresponding period in 2010, primarily due to the cessationsame reasons mentioned above.

In June 2011, the IRS closed its examination of the payment arrangementCompany’s income tax returns for the 2006 non-exclusive licenseyears 2008 and 2009. The audit settlement included federal tax and interest charges of specified Trimble intellectual property rights to$8.1 million, offset by the reversal of related unrecognized tax benefits and other items of $10.4 million which resulted in a foreign-based Trimble subsidiary as a resultnet benefit of the IRS settlement in May 2010 and reinstatement of the federal R&D credit in December 2010. Additionally, the$2.3 million.

The 2011 and 2010 firstsecond quarter effective income tax rates wererate is lower than the statutory federal income tax rate of 35% primarily due to the geographical mix of pre-tax income and the closure of the 2008 and 2009 IRS examination. The 2010 second quarter effective tax rate is higher than the statutory federal income tax rate primarily due to the net charge resulting from the IRS audit settlement of the Company’s 2005 through 2007 tax years, partially offset by the geographical mix of pre-tax income.

The Company and its U.S. subsidiaries are subject to U.S. federal and state income tax. The Company has concluded all U.S. federal income tax matters for the years through 20072009 and state income tax matters for years through 1992. Generally, non-U.S. income tax matters have been

concluded for years through 2000. The Company is currently in various stages of multiple year examinations by federal, state,State and foreign taxing authorities. It is reasonably possible that the total amount of unrecognized tax benefits will change in the next twelve months. The amount of change cannot be reasonably estimated at this time. However, the Company does not believe that the unrecognized tax benefits will materiallycould change in the next twelve months. Such changes could occur based on the normal expiration of various statutes of limitations or the possible conclusion of ongoing tax audits in various jurisdictions around the world.

The amount of liabilities for unrecognized tax benefits (net of the federal benefit on state issues) that, if recognized, would favorably affect the effective income tax rate in any future period are $29.7$25.9 million and $28.1 million at AprilJuly 1, 2011 and December 31, 2010, respectively. The primary component of the net change is a realization of unrecognized tax benefits due to the effective settlement of the IRS 2008 and 2009 income tax audit, partially offset by other reserves. Unrecognized tax benefits are recorded in Other non-current liabilities and in the deferred tax accounts in the accompanying Condensed Consolidated Balance Sheets.

The Company’s continuing practice is to recognize interest and/or penalties related to income tax matters in income tax expense. The Company’s unrecognized tax benefit liabilities include interest and penalties at AprilJuly 1, 2011 and December 31, 2010, of $3.0$2.6 million and $2.6 million, respectively, which were recorded in Other non-current liabilities in the accompanying Condensed Consolidated Balance Sheets.

NOTE 13. COMPREHENSIVE INCOME (LOSS)

The components of comprehensive income (loss), net of related tax, were as follows:

 

   Three Months Ended 
   April 1,
2011
  April 2,
2010
 
(Dollars in thousands)       

Net income

  $38,872   $28,152  

Foreign currency translation adjustments

   19,881    (7,499

Net unrealized gain on investments/actuarial gain (loss)

   (82  (5
         

Comprehensive income

   58,671    20,648  

Less: Comprehensive income attributable to the noncontrolling interests

   (831  254  
         

Comprehensive income attributable to Trimble Navigation Ltd.

  $59,502   $20,394  
         
   Three Months Ended  Six Months Ended 
   July 1,
2011
  July 2,
2010
  July 1,
2011
  July 2,
2010
 

(Dollars in thousands)

     

Net income

  $54,178   $6,771   $93,050   $34,923  

Foreign currency translation adjustments

   4,235    (20,153  24,115    (27,652

Net unrealized actuarial gain (loss)

   (3  31    (85  25  
  

 

 

  

 

 

  

 

 

  

 

 

 

Comprehensive income (loss)

   58,410    (13,351  117,080    7,296  

Less: Comprehensive income (loss) attributable to the noncontrolling interests

   500    418    (331  672  
  

 

 

  

 

 

  

 

 

  

 

 

 

Comprehensive income (loss) attributable to Trimble Navigation Ltd.

  $57,910   $(13,769 $117,411   $6,624  
  

 

 

  

 

 

  

 

 

  

 

 

 

NOTE 14. SUBSEQUENT EVENTS

On May 9,July 8, 2011, the Company announcedcompleted a public tender offer (“Tender Offer”) for all issued and outstanding shares in Finland-based Tekla Corporation (“Tekla”) for EUR 15.0014.20 per share (net of the additional dividend distributed by Tekla of EUR 18 million, or EUR 0.80 per share, which was paid on July 8, 2011) in cash representing an aggregate equity purchase price of approximately EUR 337319 million, (orequivalent to $454 million. The shares tendered to Trimble Finland represent approximately $489 million). Tekla’s99.46% of the outstanding shares are publicly listed on the NASDAQ OMX Helsinki stock exchange.in Tekla. In connection with the announcementclosing of the Tender Offer,tender offer, the Company entered into a combination agreement with Teklaalso announced Trimble Finland’s intention to make a public tender offer to purchase all the issued andacquire remaining outstanding shares in Tekla that are not owned by Tekla itself. Pursuant to the agreement, the offer period for the Tender Offer is expected to commence on May 19, 2011 and expire on June 17, 2011. Gerako Oy, holding approximately 38 percent of the shares and 38 percent of the votes in Tekla, has given an irrevocable and unconditional undertaking to accept the Tender Offer.

On May 6, 2011, in connection with the announcement of the Tender Offer, the Company and several of its subsidiaries entered into a new credit agreement with a group of lenders for which JPMorgan Chase Bank, N.A. is acting as administrative agent, which we call our 2011 Credit Facility. This credit agreement provides for unsecured credit facilitiesacquired in the aggregate principal amount of $1.1 billion comprised of a five-year revolvingtender offer through compulsory redemption proceeding under the Finnish Companies Act, which may take up to approximately 10 months to complete. The Company drew down $400 million on the term loan facility of $700.0 million and a five-year $400.0 million term loan facility. Subject to the terms of the 2011 Credit Facility to fund the revolving loan facility and the term loan facility may be increased by up to $300.0 million in the aggregate. The funds available under the 2011 Credit Facility may be used by the Company for general corporate purposes and for financing certain acquisitions, including the financingmajority of the Tender Offer and the payment of transaction fees and expenses related thereto.

As of May 9, 2011, $151 million was outstanding under the 2011 Credit Facility. The Company expects to make additional borrowings under the 2011 Credit Facility of approximately $400 million in connection with the Tender Offer.Tekla purchase price.

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, which are subject to the “safe harbor” created by those sections. Actual results could differ materially from those indicated in the forward-looking statements due to a number of factors including, but not limited to, the risk factors discussed in “Risk Factors” below and elsewhere in this report as well as in the Company’s Annual Report on Form 10-K for fiscal year 2010 and other reports and documents that the Company files from time to time with the Securities and Exchange Commission. The Company has attempted to identify forward-looking statements in this report by placing an asterisk (*) before paragraphs. Discussions containing such forward-looking statements may be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” below. In some cases, forward-looking statements can be identified by terminology such as “may,” “will,” “should,” “could,” “predicts,” “potential,” “continue,” “expects,” “anticipates,” “future,” “intends,” “plans,” “believes,” “estimates,” and similar expressions. These forward-looking statements are made as of the date of this Quarterly Report on Form 10-Q, and the Company disclaims any obligation to update these statements or to explain the reasons why actual results may differ.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The discussion and analysis of our financial condition and results of operations are based upon our condensed consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the U. S. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenue and expense, and related disclosure of contingent assets and liabilities. On an on-going basis, we evaluate our estimates, including those related to product returns, doubtful accounts, inventories, investments, intangible assets, income taxes, warranty obligations, restructuring costs, contingencies, and litigation. We base our estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the amount and timing of revenue and expense 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.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

There have been no material changes to the Company’s significant accounting polices during the threesix months ended AprilJuly 1, 2011 from those disclosed in the Company’s 2010 Form 10-K.

Recent Accounting Pronouncements

There are no updatesUpdates to recent accounting standards as disclosed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2010.2010 are as follows:

In May 2011, the Financial Accounting Standards Board (“FASB”) issued amended guidance on fair value measurement and related disclosures. The new guidance clarified the concepts applicable for fair value measurement of non-financial assets and requires the disclosure of quantitative information about the unobservable inputs used in a fair value measurement. This guidance will be effective for reporting periods beginning after December 15, 2011, and will be applied prospectively. We are in the process of evaluating the financial and disclosure impact of this guidance. We do not anticipate a material impact on our consolidated financial statements as a result of the adoption of this amended guidance.

In June 2011, the FASB issued amended guidance on the presentation of comprehensive income. The amended guidance eliminates the option provided by current U.S. GAAP to present the components of other comprehensive income as part of the statement of changes in stockholders’ equity. In addition, it gives an entity the option to present the total of comprehensive income, the components of net income, and the components of other comprehensive income either in a single continuous statement of comprehensive income or in two separate but consecutive statements. This guidance will be effective for reporting periods beginning after December 15, 2011 and will be applied retrospectively. We will apply the guidance when it becomes effective.

EXECUTIVE LEVEL OVERVIEW

Trimble’s focus is on combining positioning technology with wireless communication and application capabilities to create system-level solutions that enhance productivity and accuracy for our customers. The majority of our markets are end-user markets, including engineering and construction firms, governmental organizations, public safety workers, farmers, and companies who must manage fleets of mobile workers and assets. In our Advanced Devices segment, we also provide components to original equipment manufacturers to incorporate into their products. In the end-user markets, we provide a system that includes a hardware platform that may contain software and customer support. Some examples of our solutions include products that automate and simplify the process of surveying land, products that automate the utilization of equipment such as tractors and bulldozers, products that enable a company to manage its mobile workforce and assets, and products that allow municipalities to manage their fixed assets. In addition, we also provide software applications on a stand-alone basis. For example, we provide software for project management on construction sites.

Solutions targeted at the end-user make up a significant majority of our revenue. To create compelling products, we must attain an understanding of the end-users’ needs and work flow, and how location-based technology can enable that end-user to work faster, more efficiently, and more accurately. We use this knowledge to create highly innovative products that change the way work is done by the end-user. With the exception of our Mobile Solutions and Advanced Devices segments, our products are generally sold through a dealer channel, and it is crucial that we maintain a proficient, global, third-party distribution channel.

We continued to execute our strategy with a series of actions that can be summarized in three categories.

Reinforcing our position in existing markets

* We believe these markets provide us with additional, substantial potential for substituting our technology for traditional methods. WeIn the first half of fiscal 2011, we are continuing to develop new products and to strengthen our distribution channels in order to expand our market.

In our Engineering and Construction segment, we demonstrated our leadership in technology innovation by introducing a breakthrough high accuracy Global Navigation Satellite System (GNSS) correction technology with the Trimble RTX technology. RTX combines real-time data with innovative positioning and compression algorithms to deliver better than 4 centimeter (1.5 inch) repeatable accuracy with as little as one minute convergence in selected areas, enabling work to start immediately. We also introduced our next generation TSC3 Handheld Controllerthe Trimble RealWorks software version 7.0, which provides surveyors with a range of new features and functions from multiple devices into a single handheld: a digital camera, integrated communications as well as a GPS navigator, compass and accelerometer. These features facilitate more efficient communication between field and office. For contractors, this product allows

construction professionals to stay connected and to be equipped with accurate positioning, digital design information andwas the ability to locate, measure and record information anywhere onfirst commercially available software suite that incorporates the construction site with just one device. Furthermore, we released the next generation of Trimble Ranger 3 rugged handheld computer which meets or exceeds rigorous military standardsnewly approved standard for temperature extremes, drops, vibration, humidity and altitude.3D imaging systems.

In our Field Solutions segment, we releasedexpanded our GIS Data Collection Portfolio to include a new rangefinder for remote measurement applications with the launching of the new Trimble’s DCM-300 ModemTrimble LaserAce 1000 rangefinder. This easy-to-use handheld measurement tool combines a laser distance meter, digital inclinometer, sighting scope and Bluetooth wireless technology.

In our Mobile Solutions segment, we introduced a new cloud-based field service solution to manage fleet productivity through the Trimble GeoManager WorkManagement - a software solution that provides on-demand visibility into vehicle and mobile worker utilization. The service facilitates routing, scheduling and dispatch, and makes it easy for organizations to maximize the mobile worker’s schedule. Furthermore, it allows for easy integration with Microsoft Dynamics CRM through an open environment which facilitates asset tracking and data transfer for Agriculture. The DCM-300 allows farmers to save time withoutenables the need to hand-deliver electronic data cards or jump drives from the farm office. We also introduced new capabilities for our Field-IQ Crop Input Control System that allows farmers to optimize planter operation by delivering more accurate seed placement thereby giving the operators more confidence in their plantingeasy creation of extensible applications.

In our Advanced Devices segment, we announcedreleased new versions of AllSport GPS for Trimble Outdoors, which feature popular fitness apps for smartphones running Google Android that enable the availabilitytracking of 14 outdoor fitness activities, including running, cycling, skiing and walking. Furthermore, to support a growing number of applications demanding high-performance under diverse operating conditions, we expanded the functionality of our line of ThingMagic Embedded RFID Readers - Mercury6e (M6e), Mercury5e (M5e), and Mercury5e-Compact (M5e-C), by releasing a firmware upgrade that optimizes several RFID Reader Module, which is the world’s smallest 1 Watt, four port UHF reader module on the market today. This product’s extensive feature set, small sizetag read/write operations resulting in an overall performance improvement. Our acquisition of Beartooth also expands Trimble’s ability to offer unique map content and performance provide developers with more latitude when creating high-performance RFID-enabled solutions. new outdoor-centric products while simultaneously enhancing current popular applications.

All of these products strengthened our competitive position and created new value for the user.

Extending our position in new and existing markets through new product categories

* We are utilizing the strength of the Trimble brand in our markets to expand our revenue by bringing new products to new and existing users. In our EngineeringField Solutions segment, the expanded strategic alliance between Trimble and Construction segment, through our acquisitionCase New Holland for the development of Sinning Vermessungsbedarf GmbH of Bavaria, Germany,advanced precision agriculture applications and services will facilitate bringing innovative new products more rapidly to the market. Furthermore, we introduced the Trimble GEDO CE Trolley System, which is a system and software that allows railway track recording and documentation to be completed easily and economically. Furthermore, our acquisition of the assets of OmniSTAR allows us to provide space-based Global Navigation Satellite System, or GNSS,CenterPoint RTX correction servicesservice that can improvedeliver a fully-converged position in less than one minute at startup within the accuracy of a GNSS receiver for precise positioning applications. This acquisition is expectedfive central U.S. “corn belt” states from Nebraska to significantly expand Trimble’s worldwide ability to provide land-based correction services for agriculture, construction, mapping and Geographic Information System (GIS) and survey applications.Illinois.

In our FieldMobile Solutions segment, throughwe also acquired Yamei Electronics Technology, Co. Ltd, which will allow us to expand our acquisition ofsolutions for the Corridor Analyst from Photo Science of Lexington, we introduced the Trimble Corridor Analyst routing softwareautomotive and related markets in China, Asia Pacific and India. Yamei manufactures automotive electronics products used for power transmission lines. This software helps select the most appropriate corridors for high voltage power transmission lines.anti-theft GPS monitoring and tracking, RFID-based smart key and start and on-board diagnostics systems.

Bringing existing technology to new markets

* We continue to reinforce our position in existing markets and position ourselves in newer markets that will serve as important sources of future growth. In our Engineering and Construction segment, our acquisition of Mesta’s software suite allows us to expand our Construction applications to the Nordic Markets. This software suite includes office, field data collection and on-machine solutions specifically designed for the Nordic construction market. In our Mobile Solutions segment, we announced our collaboration efforts with Zurich, one of the largest fleet insurers in North America and globally, with its new, integrated fleet risk management program called Zurich Fleet Intelligence (ZFI). Trimble will offer telematics devices to Zurich’s insurance customers seeking ways to minimize their fleet’s operating costs and reduce crashes to improve productivity and driver safety. Our efforts continue to beNew initiatives are focused in emerging markets in Africa, China, India, the Middle-East and Russia. We further expanded our network of SITECH Technology Dealers during the quarter by adding new dealerships to serve geographic markets such as Italy, Canada, Israel, Taiwan, China, Argentina, Bolivia, Chile and Uruguay. These dealers represent the Trimble and Caterpillar machine control systems for the contractor’s entire fleet of heavy equipment across all machine brands. In addition, our acquisition of Ashtech S.A.S., headquartered in Carquefou, France, with offices in Beijing, China, Singapore, USA and Moscow, will also help expand Trimble’s Spectra Precision portfolio of survey solutions and allow us to better address emerging markets worldwide.

RECENT BUSINESS DEVELOPMENTS

The following companies and joint ventures were acquired or formed during twelve months ended Aprilsince July 2, 2010 and are combined in our results of operations since the date of acquisition or formation:

PeopleNet

On August 5, 2011, we acquired privately-held PeopleNet, headquartered in Minnetonka, Minnesota, and its affiliates. PeopleNet is a leading provider of integrated onboard computing and mobile communications systems for effective fleet management. PeopleNet provides fleets with software and hardware solutions that help manage regulatory compliance, fuel costs, driver safety and customer visibility. PeopleNet’s performance will be reported under our Mobile Solutions business segment.

Tekla Corporation

On July 8, 2011, we acquired Tekla Corporation, headquartered in Espoo, Finland, and its subsidiaries. Tekla is a leading provider of Building Information Modeling (“BIM”) software and offers model driven solutions for customers in the infrastructure and energy industries (in particular energy distribution, public administration and civil engineering and utilities). Tekla’s performance will be reported under our Engineering and Construction business segment.

Yamei

On June 7, 2011, we acquired Yamei Electronics Technology, Co. Ltd, a Chinese wholly owned foreign entity (WOFE) of Digisec Group which is incorporated in the Cayman Islands. Yamei manufactures automotive electronics products used for anti-theft GPS monitoring and tracking, RFID-based smart key and start and on-board diagnostics systems. Yamei’s performance is reported under our Mobile Solutions business segment.

Dynamic Survey Solutions

On May 10, 2011, we acquired seismic survey software provider Dynamic Survey Solutions, Inc. of Essex, Vermont. Dynamic Survey Solutions, Inc. is a leader in seismic survey software. Dynamic Survey Solutions’ performance is reported under our Engineering and Construction business segment.

Ashtech

On May 3, 2011, we acquired privately-held Ashtech S.A.S., headquartered in Carquefou, France, and its affiliates. Ashtech is a leading provider of precision GNSS products for positioning, guidance, navigation and timing, with a wide range of solutions for diverse applications in science, education, government, industry and commerce. Ashtech’s performance is reported under our Engineering and Construction business segment.

Beartooth Mapping

On April 19, 2011, we acquired privately-held Beartooth Mapping, Inc. based in Billings, Montana. Beartooth is a leading provider of print and digital maps for outdoor enthusiasts using MyTopo software and web services. Beartooth’s performance is reported under our Advanced Devices business segment.

OmniSTAR

On March 24, 2011, we acquired certain assets related to the OmniSTAR™ GNSS signal corrections business from Fugro N.V. OmniSTAR provides space-based GNSS correction services that can improve the accuracy of a GNSS receiver for precise positioning applications. The correction services business performance is reported under our Engineering and Construction business segment.

GEDO CE Trolley System

On February 11, 2011, we acquired the GEDO CE Trolley System and software from Sinning Vermessungsbedarf GmbH of Bavaria, Germany. The new trolley system and software provide as-built surveysurveying and documentation for railway track maintenance and modernization. The GEDO CE Trolley System’s performance is reported under our Engineering and Construction business segment.

Mesta

On February 9, 2011, we acquired a suite of software solutions from Mesta Entreprener AS, a subsidiary of Mesta Konsern AS. Mesta Konsern AS is one of Norway’s largest contracting groups for road and highway construction as well as related operations and maintenance. Mesta’s performance is reported under our Engineering and Construction business segment.

Tata AutoComp Mobility Telematics Limited

On December 14, 2010, we acquired Tata AutoComp Mobility Telematics Limited, or TMT, a wholly-owned subsidiary of Tata AutoComp Systems Limited of Pune, India. TMT is a leading provider of telematics solutions and mobile resource management services in India. TMT’s performance is reported under our Mobile Solutions business segment.

ThingMagic, Inc.

On October 22, 2010, we acquired privately-held ThingMagic, Inc. of Cambridge, Massachusetts. ThingMagic is a leading developer of radio frequency identification technology and offers advanced development services to facilitate the integration of this technology into a wide range of applications. ThingMagic’s performance is reported under our Advanced Devices business segment.

Novariant

On October 8, 2010, we acquired the Terralite assets from Novariant of Fremont, California to expand our portfolio of positioning solutions. The Terralite XPS technology is a scalable infrastructure that generates signals for real-time positioning to augment existing GPS coverage. The Terralite assets’assets performance is reported under our Engineering and Construction business segment.

Intelligent Construction Tools, LLC.

On September 29, 2010, we and the Hilti Group formed a joint venture, Intelligent Construction Tools, LLC. The joint venture, 50 percent owned by us and 50 percent owned by Hilti, will focus on leveraging technologies from both companies to develop measuring solutions for the building construction trades.

Cengea

On September 10, 2010, we acquired privately-held Cengea Solutions Inc., based in British Columbia, Canada. Cengea is a leading provider of spatially-enabled business operations and supply chain management software for the forestry, agriculture and natural resource industries. Cengea’s performance is reported under our Mobile Solutions business segment.

Accubid Systems

On August 12, 2010, we acquired the assets of privately-held Accubid Systems, based in Ontario, Canada. Accubid is a leading provider of estimating, project management and service management software and services for electrical and mechanical contractors. Accubid’s performance is reported under our Engineering and Construction business segment.

Punch Telematix NV

On July 7, 2010, we acquired control of Punch Telematix NV. Punch was a public company based in Belgium and engaged in the development and marketing of transport management solutions. Punch’s performance is reported under our Mobile Solutions business segment.

Zhongtie Trimble Digital Engineering and Construction Limited Company

Seasonalityof Business

On June 28, 2010, we and the China Railway Eryuan Engineering Group Co. Ltd. (CREEC) formed a joint venture, Zhongtie Trimble Digital Engineering and Construction Limited Company (ZTD). The joint venture is 50 percent owned by us and 50 percent by CREEC and will leverage Trimble’s commercial positioning, communications and software technologies, as well as CREEC’s expertise in rail design and construction, to develop and provide digital railway solutions that address the design, construction and maintenance for the Chinese railway industry.

Definiens

On June 10, 2010, we acquired Definiens’ Earth Sciences business assets and licenses of its software technology platform. Definiens is a Germany-based company specializing in image analysis solutions. Definiens’ performance is reported under our Engineering and Construction business segment.

Rusnavgeoset Limited Liability Company

On May 14, 2010, we and Russian Space Systems formed a joint venture, Rusnavgeoset Limited Liability Company. We and Russian Space Systems both maintain a 50 percent ownership of Rusnavgeoset. Rusnavgeoset will be responsible for selling commercial GNSS geodetic network infrastructure systems localized for Russia and the Commonwealth of Independent States.

Seasonality of Business

* Our individual segment revenue may be affected by seasonal buying patterns. Typically, the second fiscal quarter has been the strongest quarter for the Company driven by the construction buying season.

*Our individual segment revenue may be affected by seasonal buying patterns. Typically, the second fiscal quarter has been the strongest quarter for the Company driven by the construction buying season.

RESULTS OF OPERATIONS

Overview

The following table is a summary of revenue, gross margin, and operating income for the periods indicated and should be read in conjunction with the narrative descriptions below.

 

  Three Months Ended   Three Months Ended Six Months Ended 
  April 1,
2011
 April 2,
2010
   July 1,
2011
 July 2,
2010
 July 1,
2011
 July 2,
2010
 
(Dollars in thousands)                

Total consolidated revenue

  $384,293   $319,015    $407,169   $333,363   $791,462   $652,378  

Gross margin

  $191,530   $158,997    $208,734   $163,426   $400,264   $322,423  

Gross margin %

   49.8  49.8   51.3  49.0  50.6  49.4

Total consolidated operating income

  $43,675   $36,115    $51,567   $40,561   $95,242   $76,676  

Operating income %

   11.4  11.3   12.7  12.2  12.0  11.8

Revenue

In the three months ended AprilJuly 1, 2011, total revenue increased by $65.3$73.8 million or 20%22%, as compared to the same corresponding period in fiscal 2010. Of the increase, Engineering and Construction revenue increased $32.4$48.2 million, Field Solutions increased $27.2$23.9 million, and Mobile Solutions increased $6.5$2.0 million, which was slightly offset by a decrease in Advanced Devices of $0.8$0.3 million. The revenue increase was primarily due to thesome economic recovery inand increased penetration particularly across the U.S., and also the rest of the world, marketsparticularly in bothEurope in Engineering and Construction. Additionally, Field Solutions revenue increased primarily due to the increase in demand for agricultural products as relatively high commodity prices increased farmer income and spending. Agriculture sales were particularly strong in Europe in our Field Solutions segment.

In the six months ended July 1, 2011, total revenue increased by $139.1 million or 21%, as compared to the same corresponding period in fiscal 2010. Of the increase, Engineering and Construction revenue increased $80.6 million, Field Solutions increased $51.0 million, Mobile Solutions increased $8.5 million, which was slightly offset by a decrease in Advanced Devices of $1.1 million. The revenue growth was primarily due to economic recovery and growth across the U.S. and the rest of the world, particularly in Europe, in Engineering and Construction. Additionally, Field Solutions.Solutions revenue increased primarily due to the increase in demand for agricultural products as relatively high commodity prices increased farmer income and spending. Agriculture sales were particularly strong in Europe in our Field Solutions segment.

Gross Margin

Gross margin varies due to a number of factors including product mix, pricing, distribution channel, production volumes, and foreign currency translations.

Gross margin increased by $32.5$45.3 million and $77.8 million for the three and six months ended AprilJuly 1, 2011, respectively, as compared to the corresponding periodperiods in the prior year, primarily due to increased sales in Engineering and Construction and Field Solutions. Gross margin as a percentage of total revenue for the three months ended AprilJuly 1, 2011 was 49.8%51.3%, consistent withas compared to 49.0% for the prior year.three months ended July 2, 2010. Gross margin as a percentage of total revenue for the six months ended July 1, 2011 was 50.6%, as compared to 49.4% for the six months ended July 2, 2010. The increase in gross margin percentage for the three and six month periods ended July 1, 2011 was primarily due to an increase in sales of higher margin products, primarily software and subscription revenue, which were partially offset by higher amortization of purchased intangibles.

Operating Income

Operating income increased by $7.6$11.0 million and $18.6 million for the three and six months ended AprilJuly 1, 2011, respectively, as compared to the corresponding periodperiods in the prior year.year, primarily due to higher revenue. Operating income as a percentage of total revenue was 11.4%12.7% for the three months ended AprilJuly 1, 2011, as compared to 11.3%12.2% for the three months ended AprilJuly 2, 2010. Operating income as a percentage of total revenue was 12.0% for the six months ended July 1, 2011, as compared to 11.8% for the six months ended July 2, 2010. The increase in operating income percentage for both the three and six month periods was primarily driven bydue to higher revenue and higher gross margin, partially offset by increased operating expense. The slight increase in operating income percentage for the three month period was primarily due to increased operating leverage in Field Solutions.expenses resulting from acquisitions.

Results by Segment

To achieve distribution, marketing, production, and technology advantages in our targeted markets, we manage our operations in the following four segments: Engineering and Construction, Field Solutions, Mobile Solutions, and Advanced Devices. Operating income equals net revenue less cost of sales and operating expense, excluding general corporate expense, amortization of purchased intangibles, amortization of inventory step-up, charges, non-recurring acquisition costs and restructuring charges.costs.

The following table is a summary of revenue and operating income (loss) by segment:

   Three Months Ended  Six Months Ended 
   July 1,
2011
  July 2,
2010
  July 1,
2011
  July 2,
2010
 
(Dollars in thousands)             

Engineering and Construction

     

Revenue

  $236,668   $188,441   $426,702   $346,059  

Segment revenue as a percent of total revenue

   58  57  53  53

Operating income

  $46,987   $33,921   $69,766   $52,728  

Operating income as a percent of segment revenue

   20  18  16  15

Field Solutions

     

Revenue

  $104,029   $80,158   $227,082   $176,059  

Segment revenue as a percent of total revenue

   26  24  29  27

Operating income

  $42,543   $28,980   $95,048   $68,293  

Operating income as a percent of segment revenue

   41  36  42  39

Mobile Solutions

     

Revenue

  $40,224   $38,188   $84,645   $76,147  

Segment revenue as a percent of total revenue

   10  11  11  12

Operating income (loss)

  ($2,684 $324   ($4,018 $2,223  

Operating income (loss) as a percent of segment revenue

   -7  1  -5  3

Advanced Devices

     

Revenue

  $26,248   $26,576   $53,033   $54,113  

Segment revenue as a percent of total revenue

   6  8  7  8

Operating income

  $2,607   $5,181   $6,470   $10,806  

Operating income as a percent of segment revenue

   10  19  12  20

   Three Months Ended 
   April 1,
2011
  April 2,
2010
 
(Dollars in thousands)       

Engineering and Construction

   

Revenue

  $190,034   $157,618  

Segment revenue as a percent of total revenue

   49  49

Operating income

  $22,779   $18,807  

Operating income as a percent of segment revenue

   12  12

Field Solutions

   

Revenue

  $123,053   $95,901  

Segment revenue as a percent of total revenue

   32  30

Operating income

  $52,505   $39,313  

Operating income as a percent of segment revenue

   43  41

Mobile Solutions

   

Revenue

  $44,421   $37,959  

Segment revenue as a percent of total revenue

   12  12

Operating income

  ($1,334 $1,899  

Operating income as a percent of segment revenue

   -3  5

Advanced Devices

   

Revenue

  $26,785   $27,537  

Segment revenue as a percent of total revenue

   7  9

Operating income

  $3,863   $5,625  

Operating income as a percent of segment revenue

   14  20

Unallocated corporate expense includes general corporate expense, amortization of inventory step-up, charges, and non-recurring acquisitionrestructuring costs. A reconciliation of our consolidated segment operating income to consolidated income before income taxes follows:

 

  Three Months Ended   Three Months Ended Six Months Ended 
  April 1,
2011
 April 2,
2010
   July 1,
2011
 July 2,
2010
 July 1,
2011
 July 2,
2010
 
(Dollars in thousands)                

Consolidated segment operating income

  $77,813   $65,644    $89,453   $68,406   $167,266   $134,050  

Unallocated corporate expense

   (17,207  (15,038   (17,621  (12,155  (32,739  (27,329

Amortization of purchased intangible assets

   (16,065  (13,817   (16,576  (13,916  (32,641  (27,733

Restructuring charges

   (866  (674

Acquisition costs

   (3,689  (1,774  (6,644  (2,312
         

 

  

 

  

 

  

 

 

Consolidated operating income

   43,675    36,115     51,567    40,561    95,242    76,676  

Non-operating income, net

   2,606    3,535     8,631    286    11,237    3,821  
         

 

  

 

  

 

  

 

 

Consolidated income before taxes

  $46,281   $39,650    $60,198   $40,847   $106,479   $80,497  
         

 

  

 

  

 

  

 

 

Engineering and Construction

Engineering and Construction revenue increased by $32.4$48.2 million or 21%26% and $80.6 million or 23% for the three and six months ended AprilJuly 1, 2011, respectively, as compared to the same corresponding periodperiods in fiscal 2010. Segment operating income increased $4.0$13.1 million or 21%39% and $17.0 million or 32% for the three and six months ended AprilJuly 1, 2011, respectively, as compared to the same corresponding periodperiods in fiscal 2010.

The revenue increasegrowth for both the three months ended April 1, 2011and six month periods was primarily driven by improving economies as well assome economic recovery and increased penetration due to expanded distribution particularly across the strengthU.S., and also the rest of the newly formed SITECHworld for survey and construction channel.product lines. Although residential and commercial construction were relatively weak, products sales associated with infrastructure build out were robust. Segment operating income for both the three and six month periods increased primarily due to higher revenue.revenue, higher gross margin, and increased operating leverage.

Field Solutions

Field Solutions revenue increased by $27.2$23.9 million or 28%30% and $51.0 million or 29% for the three and six months ended AprilJuly 1, 2011, respectively, as compared to the same corresponding periodperiods in fiscal 2010. Segment operating income increased by $13.2$13.6 million or 34%47% and $26.8 million or 39% for the three and six months ended AprilJuly 1, 2011, respectively, as compared to the same corresponding periodperiods in fiscal 2010.

The revenue increasegrowth for the three month and six month periods ended April 1, 2011 was primarily due to higher sales across the world for our agricultural products due to increased farmer demand. Operatingdemand for agricultural products as relatively high commodity prices increased farmer income increased primarily dueand spending. Sales were particularly strong in Europe. Expanded product offerings also contributed to higher revenue and strong operating expense control in our agricultural business.

the sales increase.

Mobile Solutions

Mobile Solutions revenue increased by $6.5$2.0 million or 17%5% and $8.5 million or 11% for the three and six months ended AprilJuly 1, 2011, respectively, as compared to the same corresponding periodperiods in fiscal 2010. Segment operating income decreased $3.2by $3.0 million or 170%928% and $6.2 million or 281% for the three and six months ended AprilJuly 1, 2011, respectively, as compared to the same corresponding periodperiods in fiscal 2010.

The revenue increase for both the three and six month periods ended April 1, 2011 was primarily due to the revenue from acquisitions completed in the prior year, as well as the recognition of approximately $4.4 million of revenue previously deferred as a result of a material modification to the terms of an existing customer arrangement, partially offset by a loss of a large customer in the second quarter of fiscal 2010. The decrease in operating income for both the three and six month periods was primarily due to the mix of hardware and subscription services revenue, the impact of acquisitions and the loss of a decreaselarge customer in gross margin due to product mix.the second quarter of fiscal 2010.

Advanced Devices

Advanced Devices revenue decreased by $0.8$0.3 million or 3%1% and $1.1 million or 2% for the three and six months ended AprilJuly 1, 2011, respectively, as compared to the same corresponding periodperiods in fiscal 2010. Segment operating income decreased by $1.8$2.6 million or 31%50% and $4.3 million or 40% for the three and six months ended AprilJuly 1, 2011, respectively, as compared to the same corresponding periodperiods in fiscal 2010.

The slight decrease in revenue for both the three and six month periods was primarily due todriven by a decreasereduction in the sale ofdemand for GPS-based timing and synchronization devices, partially offset by acquisition revenue not applicable in the prior year.acquisitions. The decrease in operating income for both the three and six month periods was primarily due todriven by product mix.mix and acquisitions.

Research and Development, Sales and Marketing, and General and Administrative Expense

Research and development (R&D), sales and marketing (S&M), and general and administrative (G&A) expense are summarized in the following table:

 

  Three Months Ended   Three Months Ended Six Months Ended 
  April 1,
2011
 April 2,
2010
   July 1,
2011
 July 2,
2010
 July 1,
2011
 July 2,
2010
 
(Dollars in thousands)                

Research and development

   43,232    35,890     46,292    36,552    89,524    72,442  

Percentage of revenue

   11  11   11  11  11  11

Sales and marketing

   61,207    49,768     63,490    50,522    124,697    100,290  

Percentage of revenue

   16  16   16  15  16  15

General and administrative

   33,472    28,547     37,157    27,290    70,629    55,837  

Percentage of revenue

   9  9   9  8  9  9
         

 

  

 

  

 

  

 

 

Total

   137,911    114,205     146,939    114,364    284,850    228,569  
         

 

  

 

  

 

  

 

 

Percentage of revenue

   36  36   36  34  36  35
         

 

  

 

  

 

  

 

 

Overall, R&D, S&M, and G&A expense increased by approximately $23.7$32.6 million and $56.3 million for the three and six months ended AprilJuly 1, 2011, respectively, as compared to the corresponding periodperiods in fiscal 2010.

Research and development expense increased by $7.3$9.7 million inand $17.1 million for the first quarter of fiscalthree and six month periods ended July 1, 2011, respectively, as compared to the first quarter ofsame corresponding periods in fiscal 2010, primarily due to increased compensation related expense and the inclusion of expense from acquisitions not applicable in the prior year.2010. All of our R&D costs have been expensed as incurred. Costs of software developed for external sale subsequent to reaching technical feasibility were not considered material and were expensed as incurred. Spending overall was at approximately 11% of revenue in both the firstthree and six months ended July 1, 2011 and the same corresponding periods in fiscal 2010.

The increase in R&D expense in the second quarter of fiscal 2011, andas compared to the second quarter of fiscal 2010 was primarily due to the inclusion of expense of $3.3 million from acquisitions not applicable in the prior corresponding period, a $2.1 million increase in engineering costs associated with new product roll-outs, a $1.9 million increase due to unfavorable foreign currency exchange rates, a $1.7 million increase in compensation related expense and a $0.4 million increase in consulting fees.

The increase in R&D expense in the first six months of fiscal 2010.2011, as compared to the corresponding period in fiscal 2010 was primarily due to the inclusion of expense of $5.9 million from acquisitions not applicable in the prior corresponding period, a $5.0 million increase in engineering costs associated with new product roll-outs, a $2.6 million increase in compensation related expense and a $2.3 million increase due to unfavorable foreign currency exchange rates.

* We believe that the development and introduction of new products are critical to our future success and we expect to continue active development of new products.

Sales and marketing expense increased by $11.4$13.0 million and $24.4 million for the three and six months ended July 1, 2011, respectively, as compared to the same corresponding periods in fiscal 2010. Spending overall was approximately 16% of revenue in the firstthree and six months ended July 1, 2011, as compared to 15% in the same corresponding periods in fiscal 2010.

The increase in S&M expense in the second quarter of fiscal 2011, as compared to the corresponding period of fiscal 2010. The increase2010 was primarily due to increased compensation related expense, trade show cost and the inclusion of a $6.4 million expense from acquisitions not applicable in the prior year. Spending overall was at approximately 16% of revenueperiod, a $3.2 million increase in bothcompensation related expense, a $2.5 million increase due to unfavorable foreign currency exchange rates and a $0.9 million increase in travel expense.

The increase in S&M expense in the first quartersix months of fiscal 2011, andas compared to the corresponding period of fiscal 2010.2010 was primarily due to the inclusion of a $12.2 million expense from acquisitions not applicable in the prior period, a $5.9 million increase in compensation related expense, a $2.9 million increase due to unfavorable foreign currency exchange rates, a $1.3 million increase in travel expense and a $0.7 million increase in tradeshow related expenses.

* Our future growth will depend in part on the timely development and continued viability of the markets in which we currently compete, as well as our ability to continue to identify and develop new markets for our products.

General and administrative expense increased by $4.9$9.9 million and $14.8 million for the three and six months ended July 1, 2011, respectively, as compared to the same corresponding periods in fiscal 2010. Spending overall was at approximately 9% of revenue in the firstthree and six months ended July 1, 2011, as compared to 8% and 9% in the same corresponding periods in fiscal 2010.

The increase in G&A expenses in the second quarter of fiscal 2011, as compared to the corresponding period in fiscal 2010 was primarily due to the inclusion of expense of $3.8 million from acquisitions not applicable in the prior year, a $1.5 million increase in compensation related expense, a $1.1 million increase in tax, legal and consulting expense, a $1.4 million increase in stock-based compensation expense and a $0.7 increase due to unfavorable foreign currency exchange rates, which was partially offset by lowera $1.6 million decrease in bad debt expense. Spending overall was at approximately 9% of revenue

The increase in bothG&A expense in the first quartersix months of fiscal 2011, andas compared to the corresponding period in fiscal 2010 was primarily due to the inclusion of fiscal 2010.expense of $7.2 million from acquisitions not applicable in the prior year, a $1.3 million increase in compensation related expense, a $1.4 million increase in tax, legal and consulting expense, a $1.9 million increase in stock-based compensation expense and a $0.9 increase due to unfavorable foreign currency exchange rates, which was partially offset by a $2.7 million decrease in bad debt expense.

Amortization of Purchased Intangible Assets

Amortization of purchased intangible assets was $16.1$16.6 million in the firstsecond quarter of fiscal 2011, as compared to $13.8$13.9 million in the firstsecond quarter of fiscal 2010. Of the total $16.1$16.6 million in the firstsecond quarter of fiscal 2011, $9.2$9.9 million is presented as a separate line within Operating expense and $6.9$6.7 million is included within Cost of sales on our Condensed Consolidated Statements of Income. The increase was due primarily to business acquisitions and asset purchases not included in the corresponding period of fiscal 2010. As of AprilJuly 1, 2011, future amortization of intangible assets is expected to be $47.2$34.5 million during the remaining threetwo quarters of fiscal 2011, $55.5$62.3 million during 2012, $49.6$56.3 million during 2013, $27.5$34.0 million during 2014, $17.7$22.3 million during 2015, and $17.9$21.6 million thereafter.

Non-operating Income, Net

The components of non-operating income, net, were as follows:

 

  Three Months Ended   Three Months Ended Six Months Ended 
  April 1,
2011
 April 2,
2010
   July 1,
2011
 July 2,
2010
 July 1,
2011
 July 2,
2010
 
(Dollars in thousands)           

Interest income

  $285   $399    $319   $244   $604   $643  

Interest expense

   (496  (398   (1,350  (411  (1,846  (809

Foreign currency transaction gains

   306    746  

Foreign currency transaction gain (loss), net

   6,496    (1,869  6,802    (1,123

Income from equity method investments, net

   2,763    2,474     3,418    3,147    6,181    5,621  

Other income (expense), net

   (252  314  

Other expense, net

   (252  (825  (504  (511
         

 

  

 

  

 

  

 

 

Total non-operating income, net

  $2,606   $3,535    $8,631   $286   $11,237   $3,821  
         

 

  

 

  

 

  

 

 

The non-operatingNon-operating income, net decreased $0.9increased $8.3 million and $7.4 million for the first quarterthree and six months of fiscal 2011, respectively, as compared to the same corresponding periodperiods in fiscal 2010. The decreaseincrease in the three month period was primarily due to a decreasean increase in foreign exchangecurrency transaction gains, changes in deferred compensation plan asset gains and other,losses included in Other expense, net, and an increase in income from equity method investments. The increase in the six month period was primarily due to an increase in foreign currency transaction gains and higher income from equity method investments, which was partially offset by changes in deferred compensation plan asset gains and losses included in Other expense, net and higher profitability from joint ventures.interest expense.

Income Tax Provision

OurIn the three months ended July 1, 2011, our effective income tax rate for the three months ended April 1, 2011 was 16.0%,10.0% as compared to 29.0% for83.4% in the threecorresponding period in 2010, primarily due to geographic mix of pretax income, the closure of the 2008 and 2009 IRS examination which resulted in a net benefit of $2.3 million, as compared to a $27.5 million net charge in the second quarter of 2010 resulting from the U.S. Internal Revenue Service (IRS) audit settlement of our 2005 through 2007 tax years. In the six months ended April 2,July 1, 2011, our effective income tax rate was 12.8% as compared to 56.6% in the corresponding period in 2010, primarily due to the cessationsame reasons mentioned above.

In June 2011, the IRS closed its examination of the payment arrangementour income tax returns for the 2006 non-exclusive licenseyears 2008 and 2009. The audit settlement included federal tax and interest charges of specified Trimble intellectual property rights to$8.1 million, offset by the reversal of related unrecognized tax benefits and other items of $10.4 million which resulted in a foreign-based Trimble subsidiary as a resultnet benefit of the IRS settlement in May 2010 and reinstatement of the federal R&D credit in December 2010. Additionally, the$2.3 million.

The 2011 and 2010 firstsecond quarter effective income tax rates wererate is lower than the statutory federal income tax rate of 35% primarily due to the geographical mix of pre-tax income and the closure of the 2008 and 2009 IRS examination. The 2010 second quarter effective tax rate is higher than the statutory federal income tax rate primarily due to the net charge resulting from the IRS audit settlement of our 2005 through 2007 tax years, partially offset by the geographical mix of pre-tax income.

OFF-BALANCE SHEET FINANCINGS AND LIABILITIES

Other than lease commitments incurred in the normal course of business, we do not have any off-balance sheet financing arrangements or liabilities, guarantee contracts, retained or contingent interests in transferred assets, or any obligation arising out of a material variable interest in an unconsolidated entity. We do not have any majority-owned subsidiaries that are not included in the condensed consolidated financial statements. Additionally, we do not have any interest in, or relationship with, any special purpose entities.

In the normal course of business to facilitate sales of itsour products, we indemnify other parties, including customers, lessors, and parties to other transactions with us, with respect to certain matters. We have agreed to hold the other party harmless against losses arising from a breach of representations or covenants, or out of intellectual property infringement or other claims made against certain parties. These agreements may limit the time within which an indemnification claim can be made and the amount of the claim. In addition, we have entered into indemnification agreements with our officers and directors, and our bylaws contain similar indemnification obligations to our agents.

It is not possible to determine the maximum potential amount under these indemnification agreements due to the limited history of prior indemnification claims and the unique facts and circumstances involved in each particular agreement. Historically, payments made by us under these agreements were not material and no liabilities have been recorded for these obligations on the Condensed Consolidated Balance Sheets as of AprilJuly 1, 2011 and December 31, 2010.

LIQUIDITY AND CAPITAL RESOURCES

As of

  April 1,
2011
 December 31,
2010
   July 1,
2011
 December 31,
2010
 
(Dollars in thousands)         

Cash and cash equivalents

  $244,342   $220,788    $249,811   $220,788  

Total debt

   153,300    153,153     127,256    153,153  
Three Months Ended  April 1,
2011
 April 2, 2010 

Six Months Ended

  July 1,
2011
 July 2,
2010
 
(Dollars in thousands)         

Cash provided by operating activities

  $27,927   $55,503    $110,716   $95,309  

Cash used in investing activities

   (43,221  (29,916   (94,461  (60,708

Cash provided by financing activities

   35,470    9,077  

Cash provided by (used in) financing activities

   8,007    (41,325

Effect of exchange rate changes on cash and cash equivalents

   3,378    (1,439   4,761    (5,464
         

 

  

 

 

Net increase in cash and cash equivalents

  $23,554   $33,225  

Net increase (decrease) in cash and cash equivalents

  $29,023   $(12,188

Cash and Cash Equivalents

As of AprilJuly 1, 2011, cash and cash equivalents totaled $244.3$249.8 million as compared to $220.8 million at December 31, 2010. Debt was $153.3$127.3 million as of AprilJuly 1, 2011, as compared to $153.2 million at December 31, 2010.

* Our ability to continue to generate cash from operations will depend in large part on profitability, the rate of collections of accounts receivable, our inventory turns, and our ability to manage other areas of working capital.

*We believe that our cash and cash equivalents, together with borrowings under our 2011 Credit Facility as described below under the heading “Debt”,revolving credit facilities will be sufficient to meet our anticipated operating cash needs, acquisition purchases, and stock purchases under the stock repurchase program for at least the next twelve months.

* We anticipate that planned capital expenditures primarily for computer equipment, software, manufacturing tools and test equipment, and leasehold improvements associated with business expansion, will constitute a partial use of our cash resources. Decisions related to how much cash is used for investing are influenced by the expected amount of cash to be provided by operations.

Operating Activities

Cash provided by operating activities was $27.9$110.7 million for the first quarter of fiscalsix months ended July 1, 2011, as compared to $55.5$95.3 million for the first quarter of fiscalsix months ended July 2, 2010. This decreaseincrease of $27.6$15.4 million was primarily driven by an increase in net income before non-cash depreciation and amortization primarily attributable to Engineering and Construction and Field Solutions segments’ increased revenue and a decrease in Income taxes payable and Accrued liabilities associated with the IRS tax settlement from last year, offset by an increase in accounts receivable due to higher revenue a decrease in accounts payable which is largely due to timingfrom Engineering and a decrease in accrued compensationConstruction and benefits, partially offset by an increase in income tax payable.Field Solutions segments.

Investing Activities

Cash used in investing activities was $43.2$94.5 million for the first quarter of fiscalsix months ended July 1, 2011, as compared to $29.9$60.7 million for the first quarter of fiscalsix months ended July 2, 2010. The increase of $33.8 million was due to higher cash requirementsrequirement for business and intangible asset acquisitions.

Financing Activities

Cash provided by financing activities was $35.5$8.0 million for the first quarter of fiscalsix months ended July 1, 2011, as compared to cash used of $9.1$41.3 million for the first quarter of fiscalsix months ended July 2, 2010. The increase of $49.3 million was primarily due to an increase in proceeds received from the issuance of common stock related to stock option exercises, inoffset by the firstrepurchase of common stock during the second quarter of fiscal 2010, and by payments on long-term debt and debt issuance costs during the second quarter of fiscal 2011.

Accounts Receivable and Inventory Metrics

 

As of

  April 1,
2011
   December 31,
2010
   July 1,
2011
   December 31,
2010
 

Accounts receivable days sales outstanding

   63     63     57     63  

Inventory turns per year

   3.7     3.8     3.5     3.8  

Accounts receivable days sales outstanding were both57 days as of July 1, 2011, as compared to 63 days as of April 1, 2011 and December 31, 2010. Our accounts receivable days sales outstanding areis calculated based on ending accounts receivable, net, divided by revenue for the corresponding fiscal quarter, times a quarterly

average of 91 days. Our inventory turns were 3.73.5 as of AprilJuly 1, 2011, as compared to 3.8 as of December 31, 2010. Our inventory turnover is calculated based on total cost of sales for the most recent twelve months divided by average ending inventory, net, for this same twelve month period.

Repatriation of Foreign Earnings and Income Taxes

A significant portion of our foreign earnings continue to be permanently reinvested in our foreign subsidiaries and it is anticipated this reinvestment will not impede cash needs at the parent company level. In our determination of which foreign earning are permanently reinvested, we consider numerous factors, including the financial requirements of the U.S. parent company, the financial requirements of the foreign subsidiaries, and the tax consequences of remitting the foreign earnings back to the U.S. There are no other material impediments to our ability to access sources of liquidity and our resulting ability to meet short and long-term liquidity needs, other than in the event we are not in compliance with the covenants under our 2011 Credit Facility or the tax costs of remitting foreign earnings back to the U.S.

Debt

As of AprilJuly 1, 2011, our total debt was comprised primarily of our revolving credit line in the amount of $151.0$125.0 million, which is classified as short-term aslong-term in the credit line was due to mature in February 2012.Condensed Consolidated Balance Sheet. As of AprilJuly 1, 2011 and December 31, 2010, we had promissory notes and other totaling approximately $2.3 million and $2.2 million. Of these amounts, we had outstanding notes payable of $1.9 million which consisted primarily of notes payable to noncontrolling interest holders. The notes bear interest at 6% and have undefined payment terms, but are callable with a six month notification.

On May 6, 2011, we entered into a new credit agreement, (the 2011 Credit Facility), with a group of lenders for which JPMorgan Chase Bank, N.A. is acting as administrative agent, which we call our 2011 Credit Facility.lenders. This credit facility provides for unsecured credit facilities in the aggregate principal amount of $1.1 billion, comprised of a five-year revolving loan facility of $700.0 million and a five-year $400.0 million term loan facility. Subject to the terms of the 2011 Credit Facility, the revolving loan facility and the term loan facility may be increased by up to $300.0 million in the aggregate. The term loan facility may be drawn on or before the 180th day following the date of the 2011 Credit Facility.

The funds available under the 2011 Credit Facility may be used for general corporate purposes, and forthe financing of certain acquisitions and the payment of transaction fees and expenses related to such acquisitions. On May 6, 2011, we made an initial borrowing of $151.0 million under the term loan facilityrevolving credit line of the 2011 Credit Facility to repay all of the amounts outstanding under the then existing Amended and Restated Credit Agreement dated February 16, 2007. We expect to make additional borrowings underOn July 5, 2011, we borrowed $400 million on the term loan facility of the 2011 Credit Facility to fund the majority of approximately $400the Tekla purchase price. In addition, on August 5, 2011, the Company borrowed $108 million in connectionon the revolving loan facility to fund a substantial portion of the acquisition of PeopleNet. The Company also drew down an additional $50 million on a uncommitted revolving loan facility with Intesa Sanpaolo to fund a smaller portion of the tender offer for all issuedPeopleNet acquisition. The $50 million uncommitted facility, which was entered into on July 14, 2011, is callable by the bank at any time and outstanding shares in Finland-based Tekla Corporation.has no covenants. The interest rate is LIBOR plus 1.00% or as otherwise agreed upon by the bank and us.

WeUnder the 2011 Credit Facility, we may borrow, repay and reborrow funds under the revolving loan facility until its maturity on May 6, 2016, at which time the revolving facility will terminate, and all outstanding loans, together with all accrued and unpaid interest, must be repaid. Amounts not borrowed under the revolving facility will be subject to a commitment fee, to be paid in arrears on the last day of each fiscal quarter, ranging from 0.20% to 0.40% per annum depending on our leverage ratio as of the most recently ended fiscal quarter. The term loan will be repaid in quarterly installments, with the last quarterly payment to be made at April 1, 2016. On an annualized basis, the amortization of the term loan is as follows: 5%, 5%, 10%, 10%, and 70% for years one through five respectively. The term loan may be prepaid in whole or in part, subject to certain minimum thresholds, without penalty or premium. Amounts repaid or prepaid with respect to the term loan facility may not be reborrowed.

We may borrow funds under the 2011 Credit Facility in U.S. Dollars, Euros or in certain other agreed currencies, and borrowings will bear interest, at our option, at either: (i) a floating per annum base rate based on the administrative agent’s prime rate or other agreed-upon rate, depending on the currency borrowed, plus a margin of between 0.25% and 1.25%, depending on our leverage ratio as of the most recently ended fiscal quarter, or (ii) a reserve-adjusted fixed per annum rate based on LIBOR, EURIBOR, STIBOR or other agreed-upon rate, depending on the currency borrowed, plus a margin of between 1.25% and 2.25%, depending on our leverage ratio as of the most recently ended fiscal quarter. Interest will be paid on the last day of each fiscal quarter with respect to borrowings bearing interest based on a floating rate, or on the last day of an interest period, but at least every three months, with respect to borrowings bearing interest at a fixed rate. Our obligations under the 2011 Credit Facility are guaranteed by several of our domestic subsidiaries.

The 2011 Credit Facility contains various customary representations and warranties by us, which include customary use of materiality, material adverse effect and knowledge qualifiers. The 2011 Credit Facility also contains customary affirmative and negative covenants including, among other requirements, negative covenants that restrict our ability to dispose of assets, create liens, incur indebtedness, repurchase stock, pay dividends, make acquisitions and make investments. Further, the 2011 Credit Facility contains financial covenants that require the maintenance of minimum interest coverage and maximum leverage ratios. Specifically, we must maintain as of the end of each fiscal quarter a ratio of (a) EBITDA (as defined in the 2011 Credit Facility) to (b) interest expenses for the most recently ended period of four fiscal quarters of not less than 3.5 to 1. We must also maintain, at the end of each fiscal quarter, a ratio of (x) total indebtedness to (y) EBITDA (as defined in the 2011 Credit Facility) for the most recently ended period of four fiscal quarters of not greater than the applicable ratio set forth in the table below; provided, that on the completion of a material acquisition, we may increase the applicable ratio in the table below by 0.25 for the fiscal quarter during which such acquisition occurred and minimum fixed charge coverage ratios. each of the three subsequent fiscal quarters.

Fiscal Quarter Ending

Maximum Leverage Ratio

Prior to March 30, 2012

3.50 to 1

On and after March 30, 2012 and prior to June 29, 2012

3.25 to 1

On and after June 29, 2012

3 to 1

We were in compliance with these restrictive covenants as of July 1, 2011.

The 2011 Credit Facility contains events of default that include, among others, non-payment of principal, interest or fees, breach of covenants, inaccuracy of representations and warranties, cross defaults to certain other indebtedness, bankruptcy and insolvency events, material judgments, and events constituting a change of control. Upon the occurrence and during the continuance of an event of default, interest on the obligations will accrue at an increased rate and the lenders may accelerate our obligations under the 2011 Credit Facility, however that acceleration will be automatic in the case of bankruptcy and insolvency events of default.

RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES

Our non-GAAP measures are not meant to be considered in isolation or as a substitute for comparable GAAP measures. The non-GAAP financial measures included in the previousfollowing table are set forth below:

Non-GAAP gross margin

We believe our investors benefit by understanding our non-GAAP gross margin non-GAAPas a way of understanding how product mix, pricing decisions and manufacturing costs influence our business. Non-GAAP gross margin excludes restructuring costs, amortization of purchased intangibles, stock-based compensation and amortization of acquisition-related inventory step-up from GAAP gross margin. We believe that these exclusions offer investors additional information that may be useful to view trends in our gross margin performance.

Non-GAAP operating expenses

We believe this measure is important to investors evaluating our non-GAAP spending in relation to revenue. Non-GAAP operating expenses exclude restructuring costs, amortization of purchased intangibles, stock-based compensation and acquisition costs from GAAP operating expenses. We believe that these exclusions offer investors supplemental information to facilitate comparison of our operating expenses to our prior results.

Non-GAAP operating income

We believe our investors benefit by understanding our non-GAAP operating income non-GAAPtrends which are driven by revenue, gross margin, and spending. Non-GAAP operating income excludes restructuring costs, amortization of purchased intangibles, stock-based compensation, amortization of acquisition-related inventory step-up and acquisition costs associated with external and incremental costs resulting directly from merger and acquisition activities such as legal, due diligence and integration costs. We believe that these exclusions offer an alternative means for our investors to evaluate current operating performance compared to results of other periods.

Non-GAAP non-operating income, net

We believe this measure helps investors evaluate our non-operating income trends. Non-GAAP non-operating income, net excludes acquisition costs associated with unusual acquisition related items such as a gain on bargain purchase (resulting from the fair value of identifiable net assets acquired exceeding the consideration transferred), adjustments to the fair value of earn-out liabilities and payments made or received to settle earn-out and holdback disputes. These costs are specific to particular acquisitions and vary significantly in amount and timing. Non-GAAP non-operating income, net also excludes the write-off of debt issuance costs associated with a terminated credit facility as well as a foreign exchange gain specifically associated with one of our acquisitions. We believe that these exclusions provide investors with a supplemental view of our ongoing financial results.

Non-GAAP income tax provision

Investors benefit from the exclusion of an IRS settlement because it facilitates comparisons to our past income tax provision. Non-GAAP income tax provision excludes an IRS settlement from GAAP income tax provision and includes non-GAAP items tax effected. Non-GAAP items tax effected adjusts the provision for income taxes to reflect the effect of certain non-GAAP items on non-GAAP net income. We believe this information is useful to investors because it provides for consistent treatment of the excluded items in our non-GAAP presentation.

Non-GAAP net income

This measure provides a supplemental view of net income trends which are driven by non-GAAP income before taxes and our non-GAAP tax rate. Non-GAAP net income excludes restructuring costs, amortization of purchased intangibles, stock-based compensation, amortization of acquisition-related inventory step-up, acquisition costs, the write-off of debt issuance costs, a foreign exchange gain associated with an acquisition, and non-GAAP tax adjustments from GAAP net income. We believe our investors benefit from understanding these exclusions and from an alternative view of our net income performance as compared to our past net income performance.

Non-GAAP diluted net income per share

We believe our investors benefit by understanding our non-GAAP operating performance as reflected in a per share calculation as a way of measuring non-GAAP operating performance by ownership in the company. Non-GAAP diluted net income per share excludes restructuring costs, amortization of purchased intangibles, stock-based compensation, amortization of acquisition-related inventory step-up, acquisition costs, the write-off of debt issuance costs, a foreign exchange gain associated with an acquisition, and non-GAAP tax adjustments from GAAP diluted net income per share. We believe that these exclusions offer investors a useful view of our diluted net income per share as compared to our past diluted net income per share.

Non-GAAP operating leverage

We believe this information is beneficial to investors as a measure of how much incremental revenue is contributed to our operating income. Non-GAAP operating leverage is the increase in non-GAAP operating income as a percentage of the increase in revenue. We believe that this information offers investors supplemental information to evaluate our current performance and to compare to our past non-GAAP operating leverage.

Non-GAAP segment operating income

Non-GAAP segment operating income before corporate allocations. excludes stock-based compensation from GAAP segment operating income. We believe this information is useful to investors because some may exclude stock-based compensation as an alternative view when assessing trends in the operating income of our segments.

These non-GAAP measures can be used to evaluate our historical and prospective financial performance, as well as our performance relative to competitors. We believe some of our investors track our “core operating performance” as a means of evaluating our performance in the ordinary, ongoing, and customary course of our operations. Core operating performance excludes items that are non-cash, not expected to recur or not reflective of ongoing financial results. Management also believes that looking at our core operating performance provides a supplemental way to provide consistency in period to period comparisons. Accordingly, management excludes from non-GAAP those items relating to restructuring, amortization of purchased intangibles, stock based compensation, amortization of acquisition-related inventory step-up, acquisition costs, the write-off of debt issuance costs, a foreign exchange gain associated with an acquisition, and non-recurring acquisition costs. We do not believe that these items are indicativecertain tax charges/benefits of our core operating performance.which $27.5 million is associated with the IRS settlement. For a detailed explanations of the adjustments made to comparable GAAP measures, see items (A) – (H)(K) below.

     Three Months Ended     Three Months Ended Six Months Ended 
(Dollars In thousands, except per share data)     April-1,
2011
 Apr-2,
2010
     Jul-1,
2011
 Jul-2,
2010
 Jul-1,
2011
 Jul-2,
2010
 
     Dollar
Amount
 % of
Revenue
 Dollar
Amount
 % of
Revenue
     Dollar
Amount
 % of
Revenue
 Dollar
Amount
 % of
Revenue
 Dollar
Amount
 % of
Revenue
 Dollar
Amount
 % of
Revenue
 

GROSS MARGIN:

                

GAAP gross margin:

   $191,530    49.8 $158,997    49.8   $208,734    51.3 $163,426    49.0 $400,264    50.6 $322,423    49.4

Restructuring

  (A)     99    0.0  43    0.0   ( A   189    0.0  55    0.0  288    0.0  98    0.0

Amortization of purchased intangibles

  (B)     6,888    1.9  5,769    1.8   ( B   6,709    1.7  5,790    1.7  13,597    1.8  11,559    1.8

Stock-based compensation

  (C)     468    0.1  501    0.2   ( C   502    0.1  486    0.2  970    0.1  987    0.2

Amortization of acquisition-related inventory step-up

  (D)     508    0.1  71    0.0   ( D   1,201    0.3  0    0.0  1,709    0.2  71    0.0
                 

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

 

Non-GAAP gross margin:

   $199,493    51.9 $165,381    51.8   $217,335    53.4 $169,757    50.9 $416,828    52.7 $335,138    51.4
                 

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

 

OPERATING EXPENSES:

                

GAAP operating expenses:

   $147,855    38.5 $122,882    38.5   $157,167    38.5 $122,865    36.9 $305,021    38.5 $245,747    37.7

Restructuring

  (A)     (767  -0.2  (631  -0.2   ( A   (361  -0.1  (375  -0.1  (1,128  -0.1  (1,006  -0.2

Amortization of purchased intangibles

  (B)     (9,177  -2.4  (8,046  -2.5   ( B   (9,867  -2.4  (8,126  -2.5  (19,044  -2.4  (16,172  -2.4

Stock-based compensation

  (C)     (6,330  -1.6  (5,140  -1.6   ( C   (6,627  -1.6  (4,498  -1.4  (12,957  -1.6  (9,638  -1.5

Non-recurring acquisition costs

  (E)     (2,190  -0.6  (738  -0.2

Acquisition costs

   ( E   (3,304  -0.8  (1,764  -0.5  (5,494  -0.7  (2,502  -0.4
                 

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

 

Non-GAAP operating expenses:

   $129,391    33.7 $108,327    34.0   $137,008    33.6 $108,102    32.4 $266,398    33.7 $216,429    33.2
                 

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

 

OPERATING INCOME:

                

GAAP operating income:

   $43,675    11.4 $36,115    11.3   $51,567    12.7 $40,561    12.2 $95,243    12.0 $76,676    11.7

Restructuring

  (A)     866    0.2  674    0.2   ( A   550    0.1  430    0.1  1,416    0.2  1,104    0.2

Amortization of purchased intangibles

  (B)     16,065    4.2  13,815    4.4   ( B   16,576    4.0  13,916    4.2  32,641    4.1  27,731    4.3

Stock-based compensation

  (C)     6,798    1.8  5,641    1.8   ( C   7,129    1.8  4,984    1.5  13,927    1.8  10,625    1.6

Amortization of acquisition-related inventory step-up

  (D)     508    0.1  71    0.0   ( D   1,201    0.3  0    0.0  1,709    0.2  71    0.0

Non-recurring acquisition costs

  (E)     2,190    0.5  738    0.2

Acquisition costs

   ( E   3,304    0.8  1,764    0.5  5,494    0.7  2,502    0.4
             ��   

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

 

Non-GAAP operating income:

   $70,102    18.2 $57,054    17.9   $80,327    19.7 $61,655    18.5 $150,430    19.0 $118,709    18.2
                 

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

 

NON-OPERATING INCOME, NET:

                

GAAP non-operating income, net:

   $2,606    $3,535      $8,631    $286    $11,237    $3,821   

Non-recurring acquisition (gains) costs

  (E)     765     (200 

Acquisition costs

   ( E   385     10     1,149     (190 

Debt issuance cost write-off

   ( I   377     0     377     0   

Foreign exchange gains associated with acquisition

   ( J   (5,646   0     (5,646   0   
             

 

   

 

   

 

   

 

  

Non-GAAP non-operating income, net:

   $3,371    $3,335      $3,747    $296    $7,117    $3,631   
             

 

   

 

   

 

   

 

  
       GAAP and
Non-GAAP
Tax Rate %  (F)
   GAAP and
Non-GAAP
Tax Rate %  (F)
       GAAP and
Non-GAAP
Tax Rate % ( F )
   GAAP and
Non-GAAP
Tax Rate % ( F )
   GAAP and
Non-GAAP
Tax Rate % ( F )
   GAAP and
Non-GAAP
Tax Rate % ( F )
 

INCOME TAX PROVISION (BENEFIT):

      

GAAP income tax provision (benefit):

   $7,409    16 $11,498    29

Income tax effect on non-GAAP adjustments

  (G)     4,353     6,014   

INCOME TAX PROVISION:

          

GAAP income tax provision:

    6,020    10 $34,076    83 $13,429    13 $45,574    57

IRS settlement

   ( G   0     (27,540   0     (27,540 

Non-GAAP items tax effected:

   ( H   2,388     3,375     6,741     9,389   
                 

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

 

Non-GAAP income tax provision (benefit):

   $11,762    16 $17,512    29

Non-GAAP income tax provision:

   $8,408    10 $9,911    16 $20,170    13 $27,423    22
                 

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

 

NET INCOME:

                

GAAP net income attributable to Trimble Navigation Ltd.

   $39,703    $27,898      $53,679    $6,353    $93,382    $34,251   

Restructuring

  (A)     866     674      ( A   550     430     1,416     1,104   

Amortization of purchased intangibles

  (B)     16,065     13,815      ( B   16,576     13,916     32,641     27,731   

Stock-based compensation

  (C)     6,798     5,641      ( C   7,129     4,984     13,927     10,625   

Amortization of acquisition-related inventory step-up

  (D)     508     71      ( D   1,201     0     1,709     71   

Non-recurring acquisition costs

  (E)     2,955     538   

Income tax effect on non-GAAP adjustments

  (G)     (4,353   (6,014 

Acquisition costs

   ( E   3,689     1,774     6,644     2,312   

Debt issuance cost write-off

   ( I   377     0     377     0   

Foreign exchange gains associated with acquisition

   ( J   (5,646   0     (5,646   0   

Non-GAAP tax adjustments

   (G), ( H )   (2,388   24,165     (6,741   18,151   
             

 

   

 

   

 

   

 

  

Non-GAAP net income attributable to Trimble Navigation Ltd.

   $62,542    $42,623      $75,167    $51,622    $137,709    $94,245   
             

 

   

 

   

 

   

 

  

DILUTED NET INCOME PER SHARE:

                

GAAP diluted net income per share attributable to Trimble Navigation Ltd.

   $0.32    $0.23      $0.43    $0.05    $0.74    $0.28   

Restructuring

  (A)     0.01     0.01      ( A   0     0     0.01     0.01   

Amortization of purchased intangibles

  (B)     0.13     0.11      ( B   0.13     0.11     0.26     0.22   

Stock-based compensation

  (C)     0.05     0.04      ( C   0.06     0.04     0.11     0.09   

Amortization of acquisition-related inventory step-up

  (D)     —       —        ( D   0.01     0     0.01     0   

Non-recurring acquisition costs

  (E)     0.02     —     

Income tax effect on non-GAAP adjustments

  (G)     (0.03   (0.05 

Acquisition costs

   ( E   0.03     0.02     0.05     0.02   

Debt issuance cost write-off

   ( I   0     0     0     0   

Foreign exchange gains associated with acquisition

   ( J   (0.04   0     (0.04   0   

Non-GAAP tax adjustments

   (G), ( H )   (0.02   0.20     (0.05   0.14   
             

 

   

 

   

 

   

 

  

Non-GAAP diluted net income per share attributable to Trimble Navigation Ltd.

   $0.50    $0.34   

Non-GAAP diluted net income per share attributable to Trimble Navigation Ltd.

   

 $0.60    $0.42    $1.09    $0.76   
             

 

   

 

   

 

   

 

  

OPERATING LEVERAGE:

                

Increase in non-GAAP operating income

   $13,048    $11,146      $18,672    $9,283    $31,721    $20,429   

Increase in revenue

   $65,278    $30,061      $73,806    $43,300    $139,084    $73,361   

Operating leverage (increase in non-GAAP operating income as a % of increase in revenue)

    20.0   37.1     25.3   21.4   22.8   27.8 

    Three Months Ended     Three Months Ended Six Months Ended 
(Dollars In thousands, except per share data)    April-1,
2011
 Apr-2,
2010
     July-1,
2011
 Jul-2,
2010
 July-1,
2011
 Jul-2,
2010
 
        

% of
Segment

    Revenue    

      

% of
Segment

    Revenue    

       % of Segment
Revenue
   % of Segment
Revenue
   % of Segment
Revenue
   % of Segment
Revenue
 

SEGMENT OPERATING INCOME:

               

Engineering and Construction

                 

GAAP operating income before corporate allocations:

   $22,779    12.0 $18,807     11.9   $46,987    19.9 $33,921    18.0 $69,766    16.4 $52,728    15.2

Stock-based compensation

   (H  2,338    1.2  1,726     1.1   ( K   2,443    1.0  1,878    1.0  4,781    1.1  3,603    1.0
                  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

 

Non-GAAP operating income before corporate allocations:

   $25,117    13.2 $20,533     13.0   $49,430    20.9 $35,799    19.0 $74,547    17.5 $56,331    16.3
                  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

 
          

Field Solutions

                 

GAAP operating income before corporate allocations:

   $52,505    42.7 $39,313     41.0   $42,543    40.9 $28,980    36.2 $95,048    41.9 $68,293    38.8

Stock-based compensation

   (H)    512    0.4  455     0.5   ( K   548    0.5  477    0.6  1,060    0.5  932    0.5
                  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

 

Non-GAAP operating income before corporate allocations:

   $53,017    43.1 $39,768     41.5   $43,091    41.4 $29,457    36.7 $96,108    42.3 $69,225    39.3
                  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

 

Mobile Solutions

                 

GAAP operating income (loss) before corporate allocations:

   $(1,334  -3.0 $1,899     5.0   $(2,684  -6.7 $324    0.8 $(4,018  -4.7 $2,223    2.9

Stock-based compensation

   (H  996    2.2  1,202     3.2   ( K   809    2.0  217    0.6  1,805    2.1  1,419    1.9
                  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

 

Non-GAAP operating income before corporate allocations:

   $(338  -0.8 $3,101     8.2
               

Non-GAAP operating income (loss) before corporate allocations:

   $(1,875  -4.7 $541    1.4 $(2,213  -2.6 $3,642    4.8
   

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

 

Advanced Devices

                 

GAAP operating income before corporate allocations:

   $3,863    14.4 $5,625     20.4   $2,607    9.9 $5,181    19.5 $6,470    12.2 $10,806    20.0

Stock-based compensation

   (H  651    2.5  443     1.6   ( K   668    2.5  457    1.7  1,319    2.5  900    1.7
                  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

 

Non-GAAP operating income before corporate allocations:

   $4,514    16.9 $6,068     22.0   $3,275    12.5 $5,638    21.2 $7,789    14.7 $11,706    21.6
                  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

 

 

A.Restructuring.Restructuring. Included in our GAAP presentation of cost of sales and operating expenses, restructuring costs recorded are primarily for employee compensation resulting from reductions in employee headcount in connection with our company restructurings. We exclude restructuring costs from our non-GAAP measures because we believe they do not reflect expected future operating expenses, they are not indicative of our core operating performance, and they are not meaningful in comparisons to our past operating performance.

 

B.Amortization of purchased intangibles.intangibles. Included in our GAAP presentation of cost of sales and operating expenses, amortization of purchased intangibles recorded arises from prior acquisitions and are non-cash in nature. We exclude these expenses from our non-GAAP measures because we believe they are not indicative of our core operating performance.

C.Stock-based compensationcompensation.. Included in our GAAP presentation of cost of sales and operating expenses, stock-based compensation consists of expenses for employee stock options and awards and purchase rights under our employee stock purchase plan. We exclude stock-based compensation expense from our non-GAAP measures because some investors may view it as not reflective of our core operating performance as it is a non-cash expense. For the three months and six months ended AprilJuly 1, 2011 and AprilJuly 2, 2010, stock-based compensation was allocated as follows:

 

  Three Months Ended   Three Months Ended   Six Months Ended 
  April-
1,
2011
   Apr-2,
2010
   Jul-1,
2011
   Jul-2,
2010
   Jul-1,
2011
   Jul-2,
2010
 
(Dollars in thousands)                        

Cost of sales

  $468    $501    $502    $486    $970    $987  

Research and development

   1,096     947     1,126     984     2,222     1,931  

Sales and Marketing

   1,634     1,383     1,659     1,347     3,293     2,730  

General and administrative

   3,600     2,810     3,842     2,167     7,442     4,977  
          

 

   

 

   

 

   

 

 
  $6,798    $5,641    $7,129    $4,984    $13,927    $10,625  
          

 

   

 

   

 

   

 

 

 

D.Amortization of acquisition-related inventory step-up.step-up. The purchase accounting entries associated with our business acquisitions require us to record inventory at its fair value, which is sometimes greater than the previous book value of the inventory. Included in our GAAP presentation of cost of sales, the increase in inventory value is amortized to cost of sales over the period that the related product is sold. We exclude inventory step-up amortization from our non-GAAP measures because it is a non-cash expense that we do not believe it is indicative of our coreongoing operating performance.results. We further believe that excluding this item from our non-GAAP results is useful to investors in that it allows for period-over-period comparability.

 

E.Non-recurring acquisition (gains) costs.Acquisition costs. Included in our GAAP presentation of operating expenses, and non-operating income, net, non-recurring acquisition costs consist of external and incremental costs resulting directly from merger and acquisition activities such as legal, due diligence and integration costs. Also included areIncluded in our GAAP presentation of non-operating income, net, acquisition costs include unusual acquisition related items such as a gain on bargain purchase (resulting from the fair value of identifiable net assets acquired exceeding the consideration transferred), adjustments to the fair value of earnoutearn-out liabilities and payments made or received to settle earnoutearn-out and holdback disputes. We exclude these items because theyAlthough we do numerous acquisitions, the costs that have been excluded from the non-GAAP measures are non-recurringcosts specific to particular acquisitions. These are one-time costs that vary significantly in amount and unique to specific acquisitions timingand are not indicative of our core operating performance.

F.GAAP and non-GAAP tax rate %.%. These percentages are defined as GAAP income tax provision as a percentage of GAAP income before taxes and non-GAAP income tax provision as a percentage of non-GAAP income before taxes. We believe that investors benefit from a presentation of non-GAAP tax rate percentage as a way of facilitating a comparison to non-GAAP tax rates in prior periods.

 

G.IncomeIRS settlement. This amount represents a net charge of $27.5 million in the second quarter of 2010 resulting from the IRS audit settlement. We excluded this because it is not indicative of our future operating results. We believe that investors benefit from excluding this charge from our operating results to facilitate comparisons to past operating performance.

H.Non-GAAP items tax effect on non-GAAP adjustments.effected.This amount adjusts the provision for income taxes to reflect the effect of the non-GAAP items (A) - (E), (I), (J) on non-GAAP net income. We believe this information is useful to investors because it provides for consistent treatment of the excluded items in this non-GAAP presentation.

 

H.I.Debt issuance cost write-off. Included in our non-operating income, this amount represents a write-off of debt issuance cost for a terminated credit facility. We excluded the debt issuance cost write-off from our non-GAAP measures. We believe that investors benefit from excluding this item from our non-operating income to facilitate a more meaningful evaluation of our non-operating income trends.

J.Foreign exchange gains associated with acquisition. This amount represents a gain on foreign exchange associated with the Tekla acquisition. We excluded the foreign exchange gain from our non-GAAP measures because we believe that the exclusion of this item provides investors an enhanced view of the cost structure of our operations and facilitates comparisons with the results of other periods.

K.Stock-based Compensation.compensation.The amounts consist of expenses for employee stock options and awards and purchase rights under our employee stock purchase plan. As referred to above we exclude stock-based compensation here because investors may view it as not reflective of our core operating performance.performance as it is a non-cash expense. However, management does include stock-based compensation for budgeting and incentive plans as well as for reviewing internal financial reporting. We discuss our operating results by segment with and without stock-based compensation expense, as we believe it is useful to investors. Stock-based compensation not allocated to the reportable segments was approximately $2.3$2.7 million and $1.8$2.0 million for the three months ended AprilJuly 1, 2011 and AprilJuly 2, 2010, respectively and $5.0 million and $3.8 million for the six months ended July 1, 2011 and July 2, 2010, respectively.

Non-GAAP Operating Income

Non-GAAP operating income increased by $13.0$18.7 million for the three months ended AprilJuly 1, 2011, as compared to the corresponding period in the prior year. Non-GAAP Operatingoperating income as a percentage of total revenue was 18.2%19.7% for the three months ended AprilJuly 1, 2011, as compared to 17.9%18.5% for the three months ended AprilJuly 2, 2010. Non-GAAP operating income increased by $31.7 million for the six months ended July 1, 2011, as compared to the corresponding period in the prior year. Non-GAAP operating income as a percentage of total revenue was 19.0% for the six months ended July 1, 2011, as compared to 18.2% for the six months ended July 2, 2010. The increase in operating income for both the three and six month periods was primarily driven by higher revenue and associated gross margin in Engineering and Construction and Field Solutions. The increase in operating income percentage for both the three and six month periodperiods was primarily due to increased operating leverage in Engineering and Construction and Field Solutions.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

We are exposed to market risk related to changes in interest rates and foreign currency exchange rates. We use certain derivative financial instruments to manage these risks. We do not use derivative financial instruments for speculative purposes. All financial instruments are used in accordance with policies approved by our Board of Directors.

Market Interest Rate Risk

There have been no significantOur cash equivalents consisted primarily of money market funds, treasury bills, commercial paper (FDIC insured), interest and non-interest bearing bank deposits. The main objective of these instruments was safety of principal and liquidity while maximizing return, without significantly increasing risk.

* Due to the short-term nature of our cash equivalents, we do not anticipate any material effect on our portfolio due to fluctuations in interest rates.

We are exposed to market risk due to the possibility of changing interest rates under our senior secured credit facilities. Our credit facility is comprised of an unsecured revolving credit agreement with a maturity date of May 2016. We may borrow funds under the revolving credit agreement in U.S. Dollars or in certain other currencies and borrowings will bear interest as described under Note 8 of Notes to the Condensed Consolidated Financial Statements.

As of July 1, 2011, we had an outstanding balance on the revolving credit line of $125.0 million. A hypothetical 10% increase in the three-month LIBOR rates could result in approximately $31,000 annual increase in interest expense on the existing principal balances.

* The hypothetical changes toand assumptions made above will be different from what actually occurs in the future. Furthermore, the computations do not anticipate actions that may be taken by our management should the hypothetical market interest rate risk assessment. Refer to our 2010 Annual Report on Form 10-K on page 53.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

There have been no significant changesWe enter into foreign exchange forward contracts to ourminimize the short-term impact of foreign currency fluctuations on cash and certain trade and inter-company receivables and payables, primarily denominated in Australian, Canadian, Singapore and New Zealand Dollars, Japanese Yen, Indian Rupee, South African Rand, Swedish Krona, Euro, and British pound. These contracts reduce the exposure to fluctuations in exchange rate risk assessment. Refermovements as the gains and losses associated with foreign currency balances are generally offset with the gains and losses on the forward contracts. During the second quarter of fiscal 2011 we entered into a forward currency exchange contract to sell US dollars for 319 million Euro to use for the purchase of our acquisition of Tekla, which closed on July 8, 2011. These instruments are marked to market through earnings every period and generally range from one to three months in original maturity. We do not enter into foreign exchange forward contracts for trading purposes.

Foreign exchange forward contracts outstanding as of July 1, 2011 and December 31, 2010 Annual Report on Form 10-K on page 44.are summarized as follows (in thousands):

   July 1, 2011   December 31, 2010 
   Nominal Amount  Fair Value   Nominal Amount  Fair Value 

Forward contracts:

      

Purchased

  $(482,306 $5,591    $(30,106 $93  

Sold

  $58,099   $360    $18,834   $174  

*We do not anticipate any material adverse effect on our consolidated financial position utilizing our current hedging strategy.

ITEM 4. CONTROLS AND PROCEDURES

(a) Disclosure Controls and Procedures.

The management, with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of the end of the period covered by this report. Based on such evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that, as of the end of such period, our disclosure controls and procedures are effective.

(b) Internal Control Over Financial Reporting.

There have not been any changes in our 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 quarter to which this report relates that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

From time to time, we are involved in litigation arising out of the ordinary course of our business. There are no material legal proceedings, other than ordinary routine litigation incidental to the business, to which we or any of our subsidiaries is a party or of which any of our or their property is subject.

ITEM 1A. RISK FACTORS

ITEM 1A.RISK FACTORS

A description of factors that could materially affect our business, financial condition, or operating results is included under “Risk and Uncertainties” in Item 1A of Part I of our 2010 Annual Report on Form 10-K and is incorporated herein by reference. There have been no material changes to the risk factor disclosure since our 2010 Annual Report on Form 10-K.10-K, however, please see our updated risk factor entitled “Our Debt Could Adversely Affect Our Cash Flow and Prevent Us From Fulfilling Our Financial Obligations”, included below. The risk factors described in our Form 10-K are not the only risks we face.facing our Company. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial conditions and/or operating results.

For risks and uncertainties that may exist regarding our acquisition of Tekla pursuant to the Tender Offer, see “Investing in and Integrating New Acquisitions Could be Costly and May Place a Significant Strain on Our Management Systems and Resources Which Could Negatively Impact Our Operating Results” under Item 1A (Risk Factors – Risk and Uncertainties) of Part I of our 2010 Annual Report on Form 10-K and incorporated herein by reference.

The following risk factor, which is included in our 2010 Annual Report on Form 10-K, has been updated to account for the new credit agreement we recently entered into:

Our Debt Could Adversely Affect Our Cash Flow and Prevent Us from Fulfilling Our Financial Obligations

As of May 6, 2011, we have existing unsecured credit facilities in the aggregate principal amount of $1.1 billion comprised of five-year revolving loan facility of $700.0 million and a five-year $400.0 million term loan facility. Subject to the terms of the credit agreement, the revolving loan facility and the term loan facility may be increased by up to $300.0 million in the aggregate. As of May 9,July 1, 2011, $151$125 million was outstanding under the credit agreement. On July 5, 2011, we borrowed $400 million on the term loan facility of the 2011 Credit Facility to fund the majority of the Tekla purchase price. In addition, on August 5, 2011, the Company borrowed $108 million on the revolving loan facility to fund a substantial portion of the acquisition of PeopleNet. The Company expectsalso drew down an additional $50 million on an uncommitted revolving loan facility with Intesa Sanpaolo, which was entered into on July 14, 2011, to make additional borrowings underfund a smaller portion of the credit agreement of approximately $400 million in connection with the Tender Offer. PeopleNet acquisition.

Debt incurred under the credit agreementagreements could have important consequences, such as:

 

requiring us to dedicate a portion of our cash flow from operations and other capital resources to debt service, thereby reducing our ability to fund working capital, capital expenditures, and other cash requirements,

 

increasing our vulnerability to adverse economic and industry conditions,

 

limiting our flexibility in planning for, or reacting to, changes and opportunities in, our industry, which may place us at a competitive disadvantage, and

 

limiting our ability to incur additional debt on acceptable terms, if at all.

Additionally, if we were to default under the credit agreement and were unable to obtain a waiver for such a default, interest on the obligations would accrue at an increased rate and the lenders could accelerate our obligations under the credit agreement, however that acceleration will be automatic in the case of bankruptcy and insolvency events of default. Additionally, our subsidiaries that have guaranteed the credit agreement could be required to pay the full amount of our obligations under the credit agreement. Any such action on the part of the lenders against us could harm our financial condition.

A description of factors that could materially affect our business, financial condition, or operating results is included under “Risk and Uncertainties” in Item 1A of Part I of our 2010 Annual Report on Form 10-K and is incorporated herein by reference. There have been no material changes to the risk factor disclosure since our 2010 Annual Report on Form 10-K. The risk factors described in our Form 10-K are not the only risks facing our Company. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial conditions and/or operating results.

ITEM 6. EXHIBITS

 

3.1

  Restated Articles of Incorporation of the Company filed June 25, 1986. (2)

3.2

  Certificate of Amendment of Articles of Incorporation of the Company filed October 6, 1988. (2)

3.3

  Certificate of Amendment of Articles of Incorporation of the Company filed July 18, 1990. (2)

3.4

  Certificate of Amendment of Articles of Incorporation of the Company filed May 29, 2003. (3)

3.5

  Certificate of Amendment of Articles of Incorporation of the Company filed March 4, 2004. (4)

3.6

  Certificate of Amendment of Articles of Incorporation of the Company filed February 21, 2007. (6)

3.7

  Bylaws of the Company, amended and restated through February 24, 2010. (5)

4.1

  Specimen copy of certificate for shares of Common Stock of the Company. (1)

10.1

  FormCredit Agreement dated May 6, 2011. (9)

  10.2

Combination Agreement, dated as of U.S. officer stock option agreement under the Company’s 2002 Stock Plan.May 8, 2011, by and between Trimble Navigation Limited and Tekla Corporation. (7)
10.2

  10.3

  FormIrrevocable Undertaking, dated as of Non-U.S. officer stock option agreement under the Company’s 2002 Stock Plan. (7)May 8, 2011, by and between Trimble Navigation Limited and Gerako Oy. (8)
10.3

  10.4

  FormTrimble Navigation Limited Board of U.S. director stock option agreement under the Company’s 2002 Stock Plan. (7)Directors Compensation Policy dated May 3, 2011. (9)
10.4Form of non-U.S. director stock option agreement under the Company’s 2002 Stock Plan. (7)

31.1

  Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 dated May 10,August 9, 2011. (7)(9)

31.2

  Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 dated May 10,August 9, 2011. (7)(9)

32.1

  Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 dated May 10,August 9, 2011. (7)(9)

32.2

  Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 dated May 10,August 9, 2011. (7)(9)

101.INS

  XBRL Instance Document. (8)(10)

101.SCH

  XBRL Taxonomy Extension Schema Document. (8)(10)

101.CAL

  XBRL Taxonomy Extension Calculation Linkbase Document. (8)(10)

101.DEF

  XBRL Taxonomy Extension Label Linkbase Document. (8)(10)

101.LAB

  XBRL Taxonomy Extension Presentation Linkbase Document. (8)(10)

101.PRE

  XBRL Taxonomy Extension Definition Linkbase Document. (8)(10)

(1)

Incorporated by reference to exhibit number 4.1 to the registrant’s Registration Statement on Form S-1, as amended (File No. 33-35333), which became effective July 19, 1990.

(2)

Incorporated by reference to identically numbered exhibits to the registrant’s Annual Report on Form 10-K for the fiscal year ended January 1, 1999.

(3)

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.

(4)

Incorporated by reference to exhibit number 3.6 to the registrant’s Quarterly Report on Form 10-Q for the quarter ended April 2, 2004.

(5)

Incorporated by reference to exhibit number 3.1 to the Company’s Current Report on Form 8-K, filed March 2, 2010.

(6)

Incorporated by reference to exhibit number 3.7 to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 30, 2007.

(7)

Incorporated by reference to exhibit 10.1 to the Company’s Current Report on Form 8-k filed on May 9, 2011.

    (8)

Incorporated by reference to exhibit 10.2 to the Company’s Current Report on Form 8-k filed on May 9, 2011.

    (9)

Filed herewith.
(8)

  (10)

Pursuant to applicable securities laws and regulations, the Company is deemed to have complied with the reporting obligation relating to the submission of interactive data files in such exhibits and is not subject to liability under any anti-fraud provisions of the federal securities laws as long as the Company has made a good faith attempt to comply with the submission requirements and promptly amends the interactive data files after becoming aware that the interactive data files fails to comply with the submission requirements. Users of this data are advised that, pursuant to Rule 406T, these interactive data files are deemed not filed and otherwise are not subject to liability.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

 TRIMBLE NAVIGATION LIMITED
 (Registrant)

By:

 

/s/ Rajat Bahri

 Rajat Bahri
 Chief Financial Officer
 

(Authorized Officer and Principal

Financial Officer)

DATE: May 10,August 9, 2011

EXHIBIT INDEX

 

3.1 Restated Articles of Incorporation of the Company filed June 25, 1986. (2)
3.2 Certificate of Amendment of Articles of Incorporation of the Company filed October 6, 1988. (2)
3.3 Certificate of Amendment of Articles of Incorporation of the Company filed July 18, 1990. (2)
3.4 Certificate of Amendment of Articles of Incorporation of the Company filed May 29, 2003. (3)
3.5 Certificate of Amendment of Articles of Incorporation of the Company filed March 4, 2004. (4)
3.6 Certificate of Amendment of Articles of Incorporation of the Company filed February 21, 2007. (6)
3.7 Bylaws of the Company, amended and restated through February 24, 2010. (5)
4.1 Specimen copy of certificate for shares of Common Stock of the Company. (1)
10.1 FormCredit Agreement dated May 6, 2011. (9)
  10.2Combination Agreement, dated as of U.S. officer stock option agreement under the Company’s 2002 Stock Plan.May 8, 2011, by and between Trimble Navigation Limited and Tekla Corporation. (7)
10.2Form of Non-U.S. officer stock option agreement under the Company’s 2002 Stock Plan. (7)
10.3 FormIrrevocable Undertaking, dated as of U.S. director stock option agreement under the Company’s 2002 Stock Plan. (7)May 8, 2011, by and between Trimble Navigation Limited and Gerako Oy. (8)
10.4 FormTrimble Navigation Limited Board of non-U.S. director stock option agreement under the Company’s 2002 Stock Plan. (7)Directors Compensation Policy dated May 3, 2011. (9)
31.1 Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 dated May 10,August 9, 2011. (7)(9)
31.2 Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 dated May 10,August 9, 2011. (7)(9)
32.1 Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 dated May 10,August 9, 2011. (7)(9)
32.2 Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 dated May 10,August 9, 2011. (7)(9)
101.INS XBRL Instance Document. (8)(10)
101.SCH XBRL Taxonomy Extension Schema Document. (8)(10)
101.CAL XBRL Taxonomy Extension Calculation Linkbase Document. (8)(10)
101.DEF XBRL Taxonomy Extension Label Linkbase Document. (8)(10)
101.LAB XBRL Taxonomy Extension Presentation Linkbase Document. (8)(10)
101.PRE XBRL Taxonomy Extension Definition Linkbase Document. (8)(10)

(1)Incorporated by reference to exhibit number 4.1 to the registrant’s Registration Statement on Form S-1, as amended (File No. 33-35333), which became effective July 19, 1990.
(2)Incorporated by reference to identically numbered exhibits to the registrant’s Annual Report on Form 10-K for the fiscal year ended January 1, 1999.
(3)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.
(4)Incorporated by reference to exhibit number 3.6 to the registrant’s Quarterly Report on Form 10-Q for the quarter ended April 2, 2004.
(5)Incorporated by reference to exhibit number 3.1 to the Company’s Current Report on Form 8-K, filed March 2, 2010.
(6)Incorporated by reference to exhibit number 3.7 to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 30, 2007.
(7)Incorporated by reference to exhibit 10.1 to the Company’s Current Report on Form 8-k filed on May 9, 2011.
(8)Incorporated by reference to exhibit 10.2 to the Company’s Current Report on Form 8-k filed on May 9, 2011.
(9)Filed herewith.
(8)
(10)Pursuant to applicable securities laws and regulations, the Company is deemed to have complied with the reporting obligation relating to the submission of interactive data files in such exhibits and is not subject to liability under any anti-fraud provisions of the federal securities laws as long as the Company has made a good faith attempt to comply with the submission requirements and promptly amends the interactive data files after becoming aware that the interactive data files fails to comply with the submission requirements. Users of this data are advised that, pursuant to Rule 406T, these interactive data files are deemed not filed and otherwise are not subject to liability.

 

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