UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(X) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended December 29, 2000
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from _____________ to ___________
Commission File Number: 0-18645
TRIMBLE NAVIGATION LIMITED
(Exact name of Registrant as specified in its charter)
California 94-2802192
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
645 North Mary Avenue, Sunnyvale, CA 94088
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (408) 481-8000
Securities registered pursuant to Section 12(b) of the Act: NONE
Securities registered pursuant to Section 12(g)
of the Act:
Common Stock
Preferred Share Purchase Rights
(Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]
The aggregate market value of the registrant's Common Stock held by
non-affiliates of the registrant was approximately $480,406,000 as of March 9,
2001, based on the closing sale price of the common stock on the NASDAQ Stock
Market for that date.
There were 24,247,608 shares of the registrant's Common Stock issued and
outstanding as of March 9, 2001.
DOCUMENTS INCORPORATED BY REFERENCE
Items 10, 11, 12 and 13 of Part III incorporate information by reference
from the registrant's Proxy Statement for its 2001 Annual Meeting of
Shareholders to be held on May 10, 2001. Except with respect to information
specifically incorporated by reference into this Form 10-K, the Proxy Statement
is not deemed to be filed as a part hereof.
This report contains forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934. Actual results could differ materially from those
indicated in the forward-looking statements as a result of the risk factors set
forth in, or incorporated by reference into, this report and other reports and
documents that the Company files with the Securities and Exchange Commission.
The Company has attempted to identify forward-looking statements in this report
by placing an asterisk (*) before paragraphs containing such material.
PART I
Item 1. Business
General
Trimble Navigation Limited, a California corporation ("Trimble" or "the
Company"), develops, manufactures, and distributes innovative products enabled
by Global Positioning System ("GPS"), optical, laser, and wireless
communications technology. We provide end-users and Original Equipment
Manufacturers (OEM's) with solutions for diverse applications including
agriculture, engineering and construction, fleet and asset management, timing,
automobile navigation, and military. Our principal products, which utilize
substantial amounts of proprietary software and firmware, are integrated systems
for collecting, analyzing and utilizing position data in forms optimized for
specific end-user applications.
In July 2000, Trimble completed the acquisition of Spectra Precision, a
wholly owned business (the "Spectra Precision Group" or "SPG"), formerly owned
by a subsidiary of Thermo Electron Corporation. This acquisition provides
Trimble with optical and laser based positioning solutions for two of our key
strategic markets, and enhances the Company's sales and distribution
capabilities.
Background
Trimble provides positioning solutions through three fundamental
technologies: GPS, optical, and laser. Precise determination of locations both
on and above the earth's surface is a fundamental requirement in many
applications and industries. For example, position data is used for navigation
on land, sea and air, and to conduct surveys, draw maps, and guide heavy
machinery. Position solutions are used in many industries including
construction, engineering, agriculture, trucking, maritime, automotive,
aviation, fleet and asset management, consumer, mobile appliances, military,
in-vehicle navigation, timing, and recreation. Previous position technologies
limited users to the simultaneous determination of only two dimensions--latitude
and longitude--while altitude and time required separate measurements with
different equipment. Global Positioning Systems can complement or replace many
other forms of electronic navigation and positioning data systems. GPS offers
major advantages over prior technologies in terms of ease of use, precision, and
accuracy, with worldwide coverage in three dimensions, in addition to providing
time and velocity measurement capabilities. GPS technology provides users with
latitude, longitude, altitude and time measurements using a single solution.
GPS is a system of 27 orbiting Navstar satellites established and funded by
the U.S. government, which have been fully operational since March 1995. GPS
positioning is based on a trilateration technique that precisely measures
distances from three or more Navstar satellites. The satellites continuously
transmit precisely timed radio signals using extremely accurate atomic clocks. A
GPS receiver calculates distances from the satellites in view by determining the
travel time of a signal from the satellite to the receiver. The receiver then
trilaterates its position using its known distance from various satellites, and
calculates latitude, longitude and altitude. Under normal circumstances, a
current stand-alone GPS receiver is able to calculate its position at any point
on earth, in the earth's atmosphere, or in lower earth orbit, to approximately
10 meters, 24 hours a day. When a GPS receiver is coupled with a reference
receiver with known precise position, accuracy of less than ten centimeters is
possible. In addition, GPS provides highly accurate time measurement.
* The usefulness of GPS is dependent upon the locations of the receiver and
the GPS satellites that are above the horizon at any given time. The current
deployment of 27 satellites permits three-dimensional worldwide coverage 24
hours a day. However, reception of GPS signals requires line-of-sight visibility
between the Navstar satellites and the receiver, which can be blocked by
buildings, hills and dense foliage. For the receiver to collect a sufficient
signal, the receiver must have a line of sight to at least three satellites in
order to determine its location in two dimensions--latitude and longitude--and
at least four satellites to determine its location in three dimensions -
latitude, longitude, and altitude. The accuracy of GPS may also be limited by
distortion of GPS signals from ionospheric and other atmospheric conditions, and
intentional or inadvertent signal interference or Selective
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Availability (SA).Selective Availability, which was the largest component of GPS
distortion, is controlled by the U.S. Department of Defense and on May 1, 2000
was deactivated. Selective Availability may be implemented at any time by the
U.S. Department of Defense in order to deny hostile forces the highly accurate
position, time and velocity information supplied by GPS. In certain military
applications, classified devices are utilized to decode the SA component and
compute an undegraded solution.
By using a technique called "differential GPS" involving two or more GPS
receivers, position accuracies can currently be improved to approximately one to
three meters for navigation, sub-meter for precision positioning, and less than
ten centimeters for survey and machine guidance applications, even if SA is
activated. This technique compensates for a number of potential measurement
distortions, including distortions caused by ionospheric and other atmospheric
conditions, as well as distortions intentionally introduced into the satellite
data itself, such as SA. Differential GPS involves placing one receiver at a
known location and continuously comparing its calculated location with its known
location to measure distortions in the signal transmission and errors in the
satellite data. At any one time, most distortions and errors are reasonably
constant over large areas, so that one or more remote GPS receivers can use
these measurements to correct their own position calculations. Measurement
corrections can be transmitted either in real-time over a suitable communication
link such as radio or telephone, or integrated later with accumulated data, as
is in some highly precise scientific applications.
* Each of Trimble's GPS products is based on proprietary GPS receiver
technology. Trimble's GPS receivers are capable of tracking all satellites in
view and automatically selecting the optimum combination of satellites necessary
to provide the most accurate set of measurements possible. GPS positioning data
is most useful when presented, communicated, and managed in an efficient and
functional manner. The recent technological convergence of positioning,
wireless, and information technologies enables significant new capabilities in
positioning systems. GPS data coupled with value-added functionality from
wireless communications, information technology, non-GPS positioning
technologies and customized user interfaces can provide a complete position
solution. In addition, recent developments in wireless technology and
deployments of wireless networks have enabled more efficient and less expensive
wireless communications. Such developments allow for the rapid and efficient
transfer of GPS data to locations away from the GPS field device, improving data
usefulness and functionality by making the data accessible to an increased
number of users. Accessing, delivering and using position-centric information
efficiently can result in significant productivity increases to the end-user.
With the convergence of GPS and advanced information and communication
technologies, Trimble is focused on creating integrated application-specific
systems that solve end-user problems in targeted markets by optimizing product
features and functionality and increasing end-user productivity, thus providing
a complete value-added positioning solution.
* Navstar satellites and their ground support systems are complex
electronic systems subject to electronic and mechanical failures and possible
sabotage. The satellites were originally designed to have lives of 7.5 years and
are subject to damage by the hostile space environment in which they operate.
However, of the current deployment of 27 satellites in place, some have already
been in place for 12 years and they have an average age of 6 years. To repair
damaged or malfunctioning satellites is currently not economically feasible. If
a significant number of satellites were to become inoperable, there could be a
substantial delay before they are replaced with new satellites. A reduction in
the number of operating satellites would impair the current utility of the GPS
system and the growth of current and additional market opportunities. In
addition, there can be no assurance that the U.S. government will remain
committed to the operation and maintenance of GPS satellites over a long period,
or that the policies of the U.S. Government for the use of GPS without charge
will remain unchanged. However, a 1996 Presidential Decision Directive marks the
first time in the evolution of GPS that access for civilian use has a solid
foundation in law. Because of ever-increasing commercial applications of GPS,
other U.S. Government agencies may become involved in the administration or the
regulation of the use of GPS signals. Any of the foregoing factors could affect
the willingness of buyers of the Company's products to select GPS-based systems
instead of products based on competing technologies. Any resulting change in
market demand for GPS products could have a material adverse effect on Trimble's
financial results. In 1995, certain European government organizations expressed
concern regarding the susceptibility of GPS equipment to intentional or
inadvertent signal interference. Such concern could translate into reduced
demand for GPS products in certain geographic regions in the future.
Laser and optical products measure distances very accurately by means of a
light beam. Trimble generally uses laser diodes to create laser light beams for
its applications. The light emitted by lasers is more concentrated around a
single frequency than conventional light sources, allowing a more accurate
distance measurement.
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Business Strategy
Trimble's strategy is to leverage our expertise in GPS and other position
solutions, coupled with information and communication technologies to provide a
comprehensive product offering to our customers. Our primary objectives are:
* Focus on growth markets. We target markets which offer the greatest
potential for growth, profitability, and a leadership position. Currently, we
focus on four market segments: Engineering and Construction, Agriculture, Fleet
and Asset Management and Component Technologies. In addition, we serve other
smaller markets and manage these as the Portfolio Technologies segment. We
believe these market segments can be characterized by a need for improved
productivity, lower cost, and better information. We intend to continuously
evaluate and identify new market segments as well as numerous specific vertical
markets within each of these segments as driven by new applications and
development of our technology.
* Continue to provide innovative, differentiated product solutions. Our
objective is to continuously provide innovative solutions that deliver
significant value to our end-users. We intend to maintain our leading market
position through research and development spending which provides us with
products differentiated through software, hardware, and application specific
features. Trimble intends to pioneer advances in positioning component
technology, continuing to improve the state of the art in size, power, and
sensitivity. In addition, we will target solutions aimed at specific
applications. Also, we intend to leverage the intellectual property resulting
from these efforts through licensing to third parties.
* Develop products that integrate communications technologies. In
developing our products we intend to integrate within our markets the
functionality brought about by the convergence of positioning, wireless, and
information technologies. We seek to combine these technologies to create
products that provide end-users with comprehensive positioning solutions, which
enable the real-time management of information and enhance productivity and
efficiency.
* Leverage extensive distribution network across vertical markets. We have
established an extensive distribution network across our targeted market
segments with strong customer relationships. Our recent acquisition of the
Spectra Precision Group served to extend our reach into new market segments both
domestically and internationally. We intend to further leverage our distribution
channels vertically and across market segments in order to access customers in
different business areas and geographic regions.
* Continue pursuing strategic alliances. Strategic alliances have been an
essential component of our success thus far. We have established such alliances
with companies including Caterpillar, Inc.; CNH Global N.V.; Honeywell, Inc.;
Mannesmann Telecommunications (formerly Phillips Car System); Siemens
Corporation; Nortel Networks Limited; Blaupunkt-Werke GmbH, a wholly owned
subsidiary of Robert Bosch GmbH (Bosch); and Brience Inc. These relationships
have enhanced our ability to enter new markets, develop new products and
strengthen our distribution network. As a result, we have gained substantial
market share and penetration and secured our position within target markets. As
our markets develop and new markets emerge, we believe it will be critical for
us to continue to forge and maintain strategic alliances. As our industry grows,
we may take advantage of acquisition opportunities, which complement our product
portfolio, expand our technology, enable us to enter new markets, or solidify
our current market position. Additionally, we may use acquisitions to increase
our customer base and facilitate our entry into new markets. In each case, our
focus will be to leverage existing technologies, distribution networks,
marketing resources, and to identify and achieve synergies.
INDUSTRY SEGMENTS
Trimble operates in five primary industry segments that are increasingly
deploying a variety of positioning-based solutions, including: (i) Engineering
and Construction, (ii) Agriculture, (iii) Fleet and Asset Management, (iv)
Component Technologies, and (v) Portfolio Technologies.
We design, market, and distribute products that determine precise
geographic location combined with data communications and applications software.
We sell our products through a network of direct salespeople, independent
dealers, distributors and authorized sales representatives supported by sales
offices throughout the world.
Research and development activities are conducted at Trimble's facilities
in Sunnyvale, California; Dayton, Ohio; Atlanta, Georgia; Corvallis, Oregon;
Westminster, Colorado; Danderyd, Sweden; Christchurch, New Zealand
4
and in Jena, Munich and Kaiserslautern in Germany. Solectron Corporation and
Solectron Federal Systems, Inc. (collectively, "Solectron") currently
manufactures most of Trimble's GPS products. We also have production facilities
in Danderyd, Sweden, Jena and Kaiserslautern in Germany and Dayton, Ohio for the
manufacture of our optical and laser products.
To achieve distribution, marketing, production, and technology advantages
for our targeted markets, we manage our five industry segments within
corresponding divisions. To focus on market needs, we manage our five industry
segments through a divisional structure. Each division is responsible for
strategy, sales and marketing, product development and financial performance.
Each division is headed by a General Manager.
Although we believe that these divisions have growth potential for sales of
our products, there can be no assurance that such divisions will continue to
grow, particularly given that GPS-based systems are still in an early stage of
adoption in some of these markets. Our future growth will depend on our ability
to develop the industry markets in which we currently compete, and on our
ability to continue to identify and exploit new markets for our products.
Engineering and Construction
We continue to focus on the large market opportunities in the Engineering
and Construction market segment. In addressing this market segment, we employ
all of our key technologies to develop and introduce position-based solutions,
including GPS, optical, laser, wireless communication and software-based
information technologies. We currently offer a range of hardware and software
products that are used by survey and construction professionals in the field for
determining position data collection, field computing, data management, and
automated machine guidance and control. These products provide solutions for
numerous construction applications, including: surveying; general construction;
site preparation and excavation; road and runway construction; and underground
construction.
Our engineering and construction products reduce the need for manual
calculations and operations in the field, thereby improving productivity and
providing significant potential cost savings that can be achieved by decreasing
project completion times and reducing the need for rework resulting from human
error. Building on our leadership position in the construction arena, our goal
is to provide comprehensive "field-to-office" solutions that enable our
end-users to tightly integrate field construction operations with their office
information systems through the use of our positioning, wireless communication
and software technologies. We believe that considerable productivity
improvements and cost savings can be achieved by such solutions that will
effectively streamline the use of information in the engineering and
construction process, from project concept to completion. For example, if the
field and the office are tightly integrated, data collected and created in the
project feasibility phase can be used and modified in the design phase. Data
resulting from the design phase can be used to automate processes in the
construction phase. Finally, data collected from the construction site can be
used not only for important monitoring purposes, but also to effect required
design changes back at the office, which can then be implemented in the field.
By providing complete solutions that link the field to the office through
positioning, wireless and software technologies, we believe that we will enable
the end-users of our products to achieve significant cost savings from reducing
rework costs, shortening project schedules and improving project monitoring
capabilities.
Products
The following is a table of some of the key Engineering and Construction
products.
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Product Description
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GPS Total Station 5700 Provides surveyors and civil engineers with innovative
features that bring a new level of confidence, speed
and efficiency to the construction cycle. With the
intuitive, easy-to-use Trimble Survey Controller(TM)
field software and Trimble Geomatics Office Software,
survey and design tasks are unified in one powerful
system.
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5600DR 200+ A powerful reflectorless optical surveying instrument.
Surveyors can survey previously unreachable objects of
over 200 meters away without a reflector. The
instrument can, in its robotic version, be operated
remotely which enables one operator to execute all
applications without assistance.
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Product Description
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SiteVision(TM) A grade control system for the construction market
that combines a ruggedized on-board computer, a high
precision dual frequency receiver, two duel frequency
GPS antennas, three light bars and a radio that
provides a complete solution to help bulldozer
operators increase productivity in a stakeless
environment.
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Agriculture
In today's competitive agriculture market, where low cost producers have a
significant advantage, efficient field operation and data management can be
critical to success. We provide high accuracy, real-time positioning, water
management, machine guidance and field management solutions to enhance the
productivity of agricultural assets, both land and equipment. Our products
provide key advantages in a variety of agriculture applications, primarily in
the areas of precise land leveling, machine guidance, yield monitoring and
variable-rate applications of fertilizers and chemicals. By improving monitoring
capabilities and reducing the margin for human error, our products can
significantly improve productivity and enhance crop yields. For example, our
GPS-based machinery guidance systems and field monitoring systems enable
machinery operators to achieve improved accuracy when planting row crops and
applying fertilizers and chemicals. In addition, machine utilization can be
significantly improved.
* We believe that there is considerable growth opportunity in this market,
which is in the early stages of adopting position-based solutions. Given the
recent introduction of the technology, the market is relatively unpenetrated. To
date, machine guidance systems have primarily been sold and installed in the
aftermarket. Original equipment manufacturers are increasingly integrating these
capabilities into new machines. We believe that we are well positioned to
address the opportunities in the new equipment market as the result of our
strategic alliance with CNH Global (formerly Case Corporation), a leading global
manufacturer and distributor of agricultural equipment. Since 1997, CNH Global
has utilized our GPS receivers for advanced farming systems. Our customers in
the agriculture market segment include family farmers, commercial growers, crop
consultants, equipment manufacturers, farm centers and service providers.
Products
The following is a table of some of the key Agriculture products.
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Product Description
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AgGPS(R)132 Farmers use the AgGPS 132 to tag soil type, insect
infestation, or crop yield information with precise,
sub-meter location data. Mapping this data highlights
problem areas and helps farmers target their use of
agricultural products, saving money and increasing
productivity.
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AgGPS(R)Parallel Provides farm equipment operators with precision
Swathing Option guidance information for driving straight rows during
field preparation, planting, and agricultural product
applications. The system works under any condition -
day or night, dust or fog, wind or rain - allowing
farmers to extend hours for chemical spraying, lime
and fertilizer application, tilling, and seedbed
preparation.
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AgGPS(R)Autopilot A system that automatically steers tractors to within
inches for row-crop applications. The driver, with
hands-free operation, can now concentrate on working
the implements for listing, bed preparation, planting
and cultivating. This technology breakthrough
translates into increased productivity for the farmer
through more efficient utilization of tractors and
extended working hours.
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Product Description
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Laser-based Water Laser-based water management allows the agricultural
Management Systems industry to make topographical maps of their fields,
design solutions for drainage or irrigation, and
control the machines that grade the land using a
rotating plane of laser light. Growers almost always
have either too much water or too little water to
grow a crop. Landleveling and farm tile drainage is a
high productivity long-term investment for a grower to
guarantee consistent crops at high yields.
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Fleet and Asset Management
Our Fleet and Asset Management segment includes the mapping and GIS market
and the mobile positioning and communications market. These markets have been
aggregated, as the products have similar technologies and address a converging
customer base.
We integrate our wireless, GPS and information technologies to provide
solutions for a variety of applications in fleet management and asset tracking.
Our products enable end-users to efficiently monitor and manage their mobile and
fixed assets by communicating location-relevant and time-sensitive information
from the field to the office. The key to these applications is not just the
ability to accurately locate assets, but also the ability to rapidly collect and
transfer a wide range of asset-related data from the field to the office for
monitoring and verification, and for use in business decisions and other
analysis. Depending on the application, our solutions provide numerous
advantages to the end-user, including enhanced productivity, increased
efficiency, reduced costs, and improved safety and security. We currently offer
a range of products that address a number of sectors of this market: long-haul
trucking; public safety vehicles; municipal fleet management; marine shipping;
and fixed asset data collection for a wide variety of governmental and private
entities.
Our mobile asset management products offer a range of asset management
solutions, including a turnkey satellite-based solution for vehicle fleet
management that provides all the functionality necessary to actively manage
vehicles in the field, including position and event reporting and two-way
messaging capabilities. Using our mobile asset management products, end-users
can effectively track the movement of their vehicles, employees, and goods and
services. This enables them to make real-time, informed decisions regarding
asset utilization, which can enhance productivity and profitability. For
example, positioning data enables end-users to route vehicles in their fleet
more efficiently, reducing vehicle downtime, and potentially increasing the
number of deliveries or trips per vehicle. In addition, these improvements to
vehicle management can result in more efficient vehicle maintenance and reduced
misuse of vehicles. Finally, end-users can be more responsive to their customers
by more effectively managing their mobile resources and providing their
customers with more detailed information on the location of products and
services.
With respect to fixed asset tracking, the combined forces of the Internet
and deregulation of telecommunications are providing asset-rich organizations
such as utilities, natural resource-based entities and local governments with
access to timely and accurate data on their field assets. Our customers are
discovering improvements to their customer service and operating efficiencies
resulting from the provision of their spatial asset data, both internal to the
organization and via the Internet. One key to this market is the creation and
maintenance of GIS databases. Our range of GPS based GIS data collection and
maintenance products enable these organizations to cost effectively capture and
maintain the features and attributes of their field assets.
As with our other targeted market segments, we believe that there is
considerable growth opportunity in this market, which is in the early stages of
adopting positioning-based solutions. Currently, mobile resources are often
tracked using inefficient and incomplete systems such as wireless telephones and
pagers. We believe that penetration of GPS-based positioning systems in this
market segment will accelerate as the cost of such systems decreases and
functionality increases.
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Products
The following is a table of some of the key Fleet and Asset Management products.
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Product Description
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Pathfinder Pro Family The GPS Pathfinder(R)Pro XR and Pro XRS Systems are
easy-to-use GIS data collection and maintenance
systems that provide real-time submeter accuracy.
These powerful systems are used in a wide range of
applications, including utility asset management,
environmental monitoring, scientific research,
hazardous waste clean-up, municipal asset management,
and natural resource management.
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CrossCheck(R)Product A cellular mobile unit - the first device to combine
Family GPS, cellular, and computing technologies onto a
single module - provides a more efficient, cost-
effective asset and route management tool for fleet
management.
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GeoExplorer(R)3 A data collection and maintenance system that provides
the industry's most rugged and technologically
advanced handheld GPS solution available for creating
and maintaining GIS databases for management of
utility, urban, and natural resources.
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Component Technologies
As a leading provider of GPS components, we currently market our component
products through an extensive network of OEM relationships. These products
include proprietary chipsets, modules and a variety of intellectual property.
The applications into which end-users currently incorporate our component
products include: timing applications for synchronizing wireless and computer
systems; in-vehicle navigation and telematics systems; fleet management;
security systems; data collection systems; and wireless handheld consumer
products. Our timing products are used in applications such as wireless clocks
and network synchronization. We provide timing products to major
telecommunications infrastructure suppliers such as Nortel Networks and Glenayre
Technologies.
* We believe that technological advances in component technology, including
reduced size, cost and power consumption and increased functionality, will
continue to drive GPS into a variety of new, high volume applications. In
particular, as GPS-based timing and location information becomes available at
reduced cost, it will migrate from current commercial uses to the high volume
consumer markets. The following is a selected list of some of the products that
we believe will incorporate GPS functionality: wireless handheld products (smart
phones, pagers, E911/SOS phones, child and personal locators); automobile
products (in-car navigation systems, car security systems, auto emergency
response systems, telematics systems); PC-based products (autoPC/in-car
computers, portable PCs, PDAs and other wireless devices); and general consumer
and marine products (recreational and entertainment products, wristwatches,
portable navigation systems, marine handheld systems, pet locators).
* Our in-vehicle navigation and telematics technologies are sold to OEMs
that sell directly to automobile manufacturers, including Pioneer, Bosch,
Blaupunkt, Siemens AT, Mannesmann Group (formerly Philips Car System), and
Magneti Marelli. Automobile manufacturers that currently purchase products
incorporating our GPS technology include: Alfa Romeo, BMW, Fiat, Honda,
Mercedes, Opel, Porsche, Renault, Toyota, and VW/Audi. Japan is currently the
world's largest GPS automobile navigation system market, with Eurpoe as the
second largest market. To date, GPS automobile navigation system penetration in
the U.S. market has been relatively low due to high prices and the lack of
digital maps. In 1998, however, a number of automobile OEMs in the U.S. started
making navigation and emergency response systems standard in some high-end
vehicles, such as the GM OnStar system for Cadillac. We believe that in-car
navigation systems will eventually become commonplace as system prices continue
to decline.
* The largest domestic consumer market for GPS components is expected to
become the wireless handset market. The FCC has mandated that all cellular
phones must identify their location to within 125 meters for 911 emergency
calls. This Enhanced 911 (E911) mandate takes effect in October 2001 and is
creating the need for the wireless carriers and handset manufacturers to find
ways to meet the mandate's requirements. GPS technology provides an attractive
solution to meet or exceed the requirements of the E911 mandate. This market
will require very small, low-cost GPS components that consume very little power.
We believe that we are well positioned to
8
address these requirements and other high volume consumer applications. We were
the first GPS company that provided components used in a GPS-enabled consumer
Personal Digital Assistant (PDA) product, known as the Locatio, which is
manufactured and marketed by Seiko Epson in Japan.
Products
The following is a table of some of the key Component Technologies products.
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Product Description
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FirstGPS(TM) Specifically developed for power-sensitive mobile
information devices such as laptops, PDAs, digital
cameras, smart phones, pagers and automobile
navigation systems. The architecture allows high-
volume manufacturers of consumer products to add GPS
location with minimal impact on the device's size or
battery life.
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Thunderbolt(TM) A GPS clock designed specifically for precision timing
GPS-disciplined Clock and synchronization of wireless networks. Wireless
systems need precise timing to optimize use of their
assigned radio spectrums across wide geographic areas.
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GPSTM CDMA Clock A GPS clock supplied to Nortel Networks for CDMA base
station synchronization. Nortel Networks is expanding
the use of GPS clocks to other air interfaces besides
CDMA.
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Lassen(TM) LP GPS A miniature, low-power GPS receiver module for
battery-powered applications. It is ideal for
embedding GPS in portable devices such as PDAs,
personal communication systems, data terminals,
recorders and instrumentation units.
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Portfolio Technologies
This segment is comprised of several markets that use accurate position,
velocity, and timing information. The products in this segment are navigation
modules and embedded sensors that are used in avionics, flight, and military
applications. This segment is an aggregation of various operations that each
equal less than ten percent of the Company's total operating revenue. Also,
included in this segment are the operations of our Tripod Data Systems
subsidiary for the period November 14, 2000 through December 29, 2000.
On March 6, 2001, the Company sold its Air Transport Systems (ATS) business
to Honeywell. The ATS business was a part of our Portfolio Technologies segment.
The sale to Honeywell consisted of the Trimble 8100, the HT 9100 and two other
product lines, which were included in the ATS business.
Products
The following is a table of some of the key Portfolio Technologies products.
- --------------------------------------------------------------------------------
TA-12(TM) A high-performance, all-in-view, PPS GPS receiver for
military aircraft operating within the US National
Airspace System. The TA-12 receiver is FAA TSO-C129A
certified and designed for integration with Flight
Management Systems that require Instrument Flight
Rules certified operations.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Force 5 GRAM-S(TM) An all-in-view, dual frequency PPS embedded GPS
receiver card designed for integration with military
inertial navigation systems for use on high
performance aircraft and missiles.
- --------------------------------------------------------------------------------
Sales and Marketing
Trimble currently has a number of regional sales offices in the United
States and Europe, as well as offices in Australia, Canada, China, Dubai, Japan,
Manila, Mexico, New Zealand, Singapore and others. The Company has substantial
variation in the needs of its sales and distribution channels across its
markets.
9
Domestic. Trimble sells its products in the United States primarily through
dealers, distributors, and authorized representatives, supplemented and
supported by our direct sales force. We have also pursued alliances and OEM
relationships with established foreign and domestic companies to assist us in
penetrating selected markets.
International. Trimble markets to end-users through a network of many
dealers and distributors in more than 85 countries. Distributors carry one or
more product lines and are generally limited to selling either in one country or
in a portion of a country. Trimble occasionally grants exclusive rights to
market certain products within specified countries.
Sales to unaffiliated customers in foreign locations represented
approximately 52%, 52%, and 46% of Trimble's total revenue in fiscal years 2000,
1999 and 1998, respectively. Sales to unaffiliated customers in Europe
represented 28%, 25%, and 25% of net revenue in such periods, and sales to
unaffiliated customers in the Far East represented 12%, 14%, and 13% of total
revenue in such periods, respectively.
Support. Trimble generally provides a one year warranty on the sale of its
products. Certain programs may require extended warranty periods. General
warranty terms for software sold by our Tripod Data Systems subsidiary is 90
days. We support our GPS products on a board replacement level from locations in
the United Kingdom, Germany, Japan, and Sunnyvale, California. The repair and
calibration of our line of Optical/Electronic Surveying, Laser and Machine
Control equipment is available from company-owned or -funded facilities.
Additionally over 200 service providers globally perform warranty servicing of
our products. We reimburse dealers and distributors for all authorized warranty
repairs they perform. Trimble does not derive a significant portion of its
revenues from support activities.
Competition
Within each of our five market segments, we encounter direct competition
from other GPS, optical and laser suppliers.
In the Engineering and Construction segment, the Company faces ongoing
competition primarily from other GPS and optical vendors, such as Leica AG and
Topcon Corporation. Other competitors include Magellan Corporation; NovAtel
Inc., Sokkia Company, Ltd.; and Nikon Geosystems.
In the Agriculture segment we face competition from John Deere, CSI
Wireless, Starlink, AgSystems, and Topcon Corporation.
In the Component Technologies segment high volume markets the primary
competitors are Motorola, Conexant, and Japan Radio Corporation (JRC). In the
timing markets, the primary competitor is Symmetricom.
In the Fleet and Asset management segment we face competition from CSI
Wireless, AirIQ, Leica AG; Garmin Corporation; and Magellan Corporation.
In the Portfolio Technologies segment, we face ongoing competition from
Rockwell Collins, Universal Navigation Corporation, Canadian Marconi Company,
IIMorrow, Inc. (a division of United Parcel Service of America, Inc.), Honeywell
Incorporated, Smiths Industries, L3 Communications, Raytheon, Litton Industries
and Alliant TechSystems.
The principal competitive factors vary widely from segment to segment.
Typical competitive factors include ease of use, size, weight, power
consumption, features, performance, reliability and price. In the commercial
solution applications, ease of use and user functionality become the
differentiating factors. We believe that our products currently compare
favorably with respect to these factors. We intend to maintain our leadership
position through:
o Systems, products and services that have significantly differentiated
features with improved benefits to end-users.
o A strong commitment to new product development. Trimble currently offers
more than 100 products and continues to improve and expand the line.
o Our technology leadership with approximately 490 patents issued.
10
o Extensive worldwide distribution.
* We believe that our ability to compete successfully in the future against
existing and additional competitors will depend largely on our ability to
provide more complete solutions, as well as products and services that have
significantly differentiated features with improved cost/benefit ratios to our
end-users. There can be no assurances that we will be able to implement this
strategy successfully, or that our competitors, many of whom have substantially
greater resources, will not apply those resources to compete successfully
against us.
Research and Development
Our leadership position in our targeted market segments is the result, in
large part, of our strong commitment to research and development. We invest in
developing positioning and information technologies and wireless communications,
including the design of proprietary software, optics, laser systems, control
systems, integrated circuits, network radios, GPS receivers, and real time
kinematic (RTK) technology. Trimble has an advanced technology laboratory
located in Sunnyvale, California where we devote a portion of our corporate
research and development expenditures to advancing core positioning technologies
and integrating them with synergistic technologies such as communications,
sensors, and information technologies.
Significant portions of our research and development are targeted at
developing the products for a variety of applications that utilize these
technologies. Recent examples include:
o 3-D passive positioning through the use of rotating lasers for the
construction market o 5600DR 200+ reflectorless robotic total station
for the surveying and construction market
o Crosscheck GSM, integrating cellular and GPS technology for fleet
management
o Introduction of an autosteer tractor utilizing GPS and control system
technology for the agricultural market.
o The GPS Total Station 5700 incorporating Trimble's latest RTK
technology for surveying and stake out
o The FirstGPS technology, offering small, low-power GPS for
automotive and other embedded applications.
Below is a table of Trimble's expenditures on research and development over
the last three fiscal years.
Fiscal Years ended
-----------------------------------------------------
December 29, December 31, January 1,
2000 1999 1999
- --------------------------------------------------------------------------------
(In thousands)
Research and development $ 46,520 $ 36,493 $ 45,763
* Trimble expects that a significant portion of future revenues will be
derived from sales of newly introduced products. Consequently, our future
success depends in part on our ability to continue to develop and manufacture
new competitive products with timely market introductions. Advances in product
technology will require continued investment in research and development in
order to maintain and enhance our market position.
Manufacturing
In August of 1999, Trimble began outsourcing the manufacture of our
GPS-based products, reducing our need to make costly investments. Solectron
Corporation (Solectron) currently manufactures our GPS products and is
responsible for nearly all material procurement, assembly and testing. Product
design through pilot production remains in the hands of Trimble. While Solectron
is responsible for most facets of the manufacturing process, we are directly
involved in qualifying vendors and the key components used in our products.
We manufacture our optical and laser-based products at four manufacturing
facilities located in Dayton, Ohio; Danderyd, Sweden; and Kaiserslautern and
Jena, Germany. Some of these products and subassemblies are also assembled on a
contract basis.
11
In addition, as of December 2000 Trimble maintains a manufacturing facility
in Austin, Texas, primarily focused on FAA certified products for commercial
aviation and military systems. As discussed in the industry segment section, as
of March 6, 2001, we have sold our Air Transport Systems business that is
located in Austin, and it is our intent to close our Austin operations in August
of 2001. At that time, we will transfer the FAA certified military systems
business to our manufacturing facility in Sunnyvale, California. We are
currently in the process of transferring our FAA certifications to our Sunnyvale
manufacturing facility.
While most of the components used in our products are standard and can be
obtained from multiple qualified manufactures, some of our key components are
proprietary or sole sourced and require extended lead times. If we were required
to find new vendors for these sole or limited sourced components, we would have
to qualify replacement components and possibly reconfigure our products. This
qualification or reconfiguration process could result in product shipment
delays. Our supply management team works closely with strategically important
suppliers who provide sole or limited sourced products.
We will continue to provide state-of-the art computer aided design service
capabilities to our development community relating to printed circuit board
(PCB) layout, assembly drawing and schematic development. We intend to remain
self-sufficient in this field to ensure that the development entities can have
the maximum benefit from the utilization of their time, while including
automatic test capability on the board, contributing to faster and more
effective product release cycles.
Backlog
Trimble believes that due to the volume of products delivered from shelf
inventories and the shortening of product delivery schedules, backlog is not a
meaningful indicator of future business prospects. Therefore, we believe that
backlog information is not material to an understanding of our business.
Patents, Trademarks, and Licenses
Our success depends to a significant extent on technical innovation. We
pursue an active program of filing patent applications to protect
technologically sensitive features of our products. We currently hold
approximately 370 U.S. GPS related patents and approximately 20 foreign GPS
related patents that expire at various dates no earlier than 2005. We also have
approximately 100 laser or optical related patents worldwide. We currently
license certain peripheral aspects of our technology from Spectrum Information
Technologies and GeoResearch. Trimble may enter into additional licensing
arrangements in the future relating to its technologies.
At present there are 87 trademarks registered to Trimble and its
subsidiaries. Specifically, "Trimble" with the sextant logo, "Trimble
Navigation," "GeoExplorer," and "GPS Total Station," are trademarks of Trimble
Navigation Limited, registered in the United States and other countries.
"Trimble" with the globe and triangle logo and additional trademarks are pending
registration. Trimble Navigation Limited acknowledges the trademarks of other
organizations for their respective products or services mentioned in this
document.
Although we believe that our patents and trademarks have value, there can
be no assurance that those patents and trademarks, or any additional patents and
trademarks that may be obtained in the future, will provide meaningful
protection from competition. We actively develop and protect our intellectual
property through a program of patenting, enforcement, and licensing.
We do not believe that any of our products infringe patent or other
proprietary rights of third parties, but we cannot be certain that they do not
do so. (See Note 21 to Consolidated Financial Statements.) If infringement is
alleged, legal defense costs could be material, and there can be no assurance
that the necessary licenses could be obtained on terms or conditions that would
not have a material adverse effect on our profitability.
Employees
As of December 29, 2000, Trimble employed 2,306 people: 536 in research and
development, 926 in sales and marketing, 619 in manufacturing, and 225 in
general administration. Of these, 596 were located in Europe (of which 75 were
in Germany and 236 were in Sweden), 207 in New Zealand, 53 in the Asia and the
Pacific region and 1,450 in the United States, Canada and Mexico. We also employ
temporary and contract personnel, not included in the above headcount numbers.
12
Trimble's success depends in part on the continued contribution and
long-term effectiveness of our employees. Competition in recruiting personnel
can be significant in some labor markets and our continued ability to attract
and retain highly skilled employees is essential to our future growth and
success. Our employees are not represented by labor unions, except in certain
European countries where union membership is almost universal. We have not
experienced work stoppages.
13
Executive Officers of the Company
The names, ages, and positions of the Company's executive officers as of
March 29, 2001 are as follows:
Name Age Position
- --------------------------------------------------------------------------------
Steven W. Berglund........ 49 President, Chief Executive Officer
Mary Ellen P. Genovese.... 41 Chief Financial Officer
William C. Burgess........ 54 Vice President, Human Resources
David M. Hall............. 52 Senior Vice President, Marketing
and Business Development
John E. Huey.............. 51 Treasurer
Ronald C. Hyatt........... 61 Senior Vice President and General
Manager, Agriculture Division
Irwin L. Kwatek........... 62 Vice President and General Counsel
Bonnie L. Lemon........... 41 Corporate Controller
Michael W. Lesyna......... 40 Vice President and General Manager, Mobile
Positioning and Communications Division
Bruce E. Peetz............ 49 Vice President, Advance Technology and
Systems
Karl G. Ramstrom.......... 57 Senior Vice President and General Manager,
Engineering and Construction Division
Alan R. Townsend.......... 52 Vice President and General Manager,
Mapping and GIS Division
Dennis L. Workman......... 55 Vice President and General Manager,
Component Technologies Division
All officers serve at the discretion of the Board of Directors. There are
no family relationships between any of the directors or executive officers of
the Company.
Steven W. Berglund joined Trimble as President and Chief Executive Officer
in March 1999. Mr. Berglund has a diverse background with experience in
engineering, manufacturing, finance and global operations. Prior to joining
Trimble, Mr. Berglund was President of Spectra Precision, Inc. which had global
revenue of approximately $200 million and developed and manufactured surveying
instruments, laser based construction alignment instruments, and construction
machine control systems. Spectra Precision, Inc. was a subsidiary of
Spectra-Physics AB. During his fourteen years within Spectra-Physics, which was
an early Silicon Valley pioneer in the development of laser systems, Mr.
Berglund held a variety of management positions that included four years based
in Europe. Prior to Spectra-Physics, Mr. Berglund spent a number of years at
Varian Associates in Palo Alto where he held a number of planning and
manufacturing roles. Varian is a technology company specializing in microwave
communications, semiconductor manufacturing equipment, analytical instruments,
and medical diagnostic equipment. Mr. Berglund began his career as a process
engineer at Eastman Kodak in Rochester, New York. Mr. Berglund attended the
University of Oslo and University of Minnesota where he received a B.S. in
Chemical Engineering in 1974 and received his MBA from the University of
Rochester in 1977.
Mary Ellen P. Genovese joined Trimble as Controller of Manufacturing
Operations in December 1992. From 1994 to 1997 she served as Business Unit
Controller for Software and Component Technologies, and for the tracking and
communications business units. She was appointed Corporate Controller in October
1997 and Vice President of Finance and Corporate Controller in February 1998. In
September 2000 she was appointed Chief Financial Officer. Prior to joining
Trimble, Mrs. Genovese was Chief Financial Officer and President for Minton Co.,
a distributing company to the commercial building market, from 1991 to 1992. In
her position as Chief Financial Officer she was responsible for the accounting,
management reporting and bank and investor financing for the company. In March
of 1992, the board of directors asked her to assume the role of President to
reorganize the company, including the divestiture of the manufacturing
operations. Prior to 1991, she worked for 10 years with General Signal
Corporation. She was appointed European Financial Controller in July 1990, where
she was responsible for the company's three European operations, Germany, France
and the United Kingdom. From 1988 to 1990 she served as Unit Financial Officer,
for General Signal's Semiconductor Systems Division. She held several other
management positions including Materials Manager, Controller of Manufacturing
Operation and International Projects Controller for General Signal's Ultratech
Stepper Division from 1984 to 1988. Mrs. Genovese is a Certified Public
Accountant and received her B.S. in accounting from Fairfield University in
Connecticut in 1981.
14
William C. Burgess joined Trimble in August 2000 as Vice President of Human
Resources. From August 1998 to July 2000, Mr. Burgess was Vice President of
Human Resources and Management Information Systems for Sonoma West Holdings,
Inc. Mr. Burgess also served as Vice President of Human Resources from May 1995
through July 1998 for Optical Coating Laboratory, a large high-tech manufacturer
of fiber optic products. Mr. Burgess' experience also includes Telenekron
Communications Systems, a developer of telecommunications software; and Asea
Brown Boveri (ABB), a global technology company. Mr. Burgess received his B.S.
from the University of Nebraska in 1973 and an M.S. in organizational
development from Pepperdine University in 1978.
David M. Hall joined Trimble in February 1994 as Managing Director, OEM
products. In November 1996 he was appointed Vice President and General Manager
of the Software and Component Technologies business unit, focusing on
application and operating system software, component board level, and chipset
volume aspects of the GPS business. In November 1998 he was appointed Group Vice
President of the Mobile and Timing Technologies business unit, managing mobile
positioning and communications, timing, automotive, military, and commercial
aviation businesses. In August 2000, Mr. Hall was appointed Senior Vice
President of Marketing and Business Development. Previously, he worked for
Raychem Corporation for twenty-one years in a variety of positions and
divisions. He served as Director of Sales and Marketing for the Automotive
Division, National Distribution Manager for the Electronics Sector, and Director
of Marketing and Product Management for the Interconnect Systems Division, as
well as District Sales Manager, Area Sales Manager, and Operations Manager. Mr.
Hall received his B.S. degree in Industrial Technology in 1971 and his MBA in
Marketing and Finance in 1973 from the California Polytechnic State University
in San Luis Obispo, California.
John E. Huey joined Trimble in 1993 as Director Corporate Credit and
Collections, and was promoted to Assistant Treasurer in 1995 and Treasurer in
1996. Past experience includes two years with ENTEX Information Services, five
years with National Refractories & Minerals Corporation (formerly Kaiser
Refractories), and thirteen years with Kaiser Aluminum & Chemical Sales, Inc. He
has held positions in Credit Management, Market Research, Inventory Control,
Sales and as an Assistant Controller. Mr. Huey received his B.A. degree in
Business Administration in 1971 from Thiel College in Greenville, Pennsylvania
and an MBA in 1972 from West Virginia University in Morgantown, West Virginia.
Ronald C. Hyatt joined Trimble in August 1983 as Director of
Instrumentation Products. In 1985, he was appointed Vice President for Surveying
and Mapping Products, managing the marketing and application software
development aspects of the business until February 1993. In January 1997 he
returned to the Company as Senior Vice President of Trimble Labs, focusing on
next-generation ASIC developments. In November 1998, Mr. Hyatt was promoted to
Group Vice President of Precision Positioning. He was responsible for managing
land survey, marine, marine survey, mapping/GIS, and mining, construction, and
agricultural applications. In August 2000, Mr. Hyatt was appointed Senior Vice
President and General Manager of the Agriculture Division. Prior to joining
Trimble, Mr. Hyatt worked for Hewlett-Packard from 1964 to 1983 in various
engineering and management positions, focusing on precision frequency and time
instrumentation. Mr. Hyatt received his B.S. degree in electrical engineering
from Texas Tech University in 1962 and his M.S. degree in electrical engineering
from Stanford University in 1963.
Irwin L. Kwatek joined Trimble as Vice President and General Counsel in
November 2000. Mr. Kwatek was Vice President and General Counsel of Tickets.com,
Inc., a ticketing services provider, from May 1999 to November 2000. Prior to
that he was engaged in the private practice of law for more than six years. In
his career, Mr. Kwatek has served as Vice President and General Counsel to
several publicly-held high-tech companies, including Emulex Corporation, Western
Digital Corporation and General Automation, Inc. Mr. Kwatek received his B.B.A.
from Adelphi College in Garden City, New York and an M.B.A. from the University
of Michigan in Ann Arbor. He received his J.D. from Fordham University in New
York City in 1968.
Bonnie L. Lemon joined Trimble in April of 1998 as Assistant Corporate
Controller where she was responsible for the financial reporting and accounting
transaction systems. She was appointed Corporate Controller in November 2000.
Prior to joining Trimble, Ms. Lemon worked for 5 years for Dexter Corporation
where she held the position of Business Controller in the Aerospace Materials
Division. Ms. Lemon worked at Hexcel from 1989 to 1993, where she served as the
Group Accounting Manager for the Advanced Composites Division and also
Accounting Supervisor for the company's Advanced Products Division. Prior to
joining Hexcel, she worked at Motorola, Inc. as a Financial Analyst for the
Government Electronics Group and Supervising Senior Auditor at the company's
corporate headquarters. Ms. Lemon also served as the Corporate Controller for
Quinton Hazell, Inc. and as a Senior Auditor for Ernst & Young. Ms. Lemon
received her B.B.A. in accounting from the University of Michigan in 1981. She
is also a certified public accountant.
15
Michael W. Lesyna joined Trimble as Vice President of Strategic Marketing
in September 1999. In September 2000, he was appointed Vice President and
General Manager of the Mobile Positioning and Communications Division. Mr.
Lesyna brings broad experience in developing business and marketing strategies
for high tech companies. Prior to Trimble, Mr. Lesyna worked for Booz Allen &
Hamilton, where he spent six years, most recently serving as a principal in the
operations management group. While at Booz Allen & Hamilton, he was responsible
for advising companies on a wide range of strategic issues. Prior to Booz Allen
& Hamilton, Mr. Lesyna held a variety of engineering positions at Allied Signal
Aerospace. He served as a Project Engineer for Allied Signal's European
consortium in Germany, was a Development and Test Engineer for the altitude
chamber, and was a Design Engineer for the company's first jet fighter engine
afterburner. Mr. Lesyna received an MBA from Stanford University in 1994. He
also received an M.S. in mechanical engineering in 1983 and a B.S. in mechanical
engineering in 1982, both from Stanford University.
Bruce E. Peetz joined Trimble in June 1988 as Program Manager for GPS
Systems. From January 1990 to January 1993 he served as Development Manager for
commercial dual-frequency products, and from January 1993 to December 1995 he
served as Engineering Manager for Surveying and Core Engineering. In January1996
he was appointed General Manager of the Land Surveying unit, and from February
1998 started the Advanced Systems division as General Manager. In October 1998
he was named Vice President of Advanced Technology and Systems, consolidating
Systems and Trimble Laboratories. Prior to joining Trimble, Mr. Peetz served in
a variety of engineering and management positions during eleven years at Hewlett
Packard. Mr. Peetz received his BSEE from the Massachusetts Institute of
Technology in 1973, and did graduate work at UCLA.
Karl G. Ramstrom joined Trimble in August 2000 as Senior Vice President and
General Manager of the Engineering and Construction Division. Prior to joining
Trimble, Mr. Ramstrom served as President of the Spectra Precision Group, which
was acquired by Trimble in July 2000. During his 31-year tenure at Spectra
Precision and its predecessor companies, he held a variety of positions,
including marketing, sales management, general management, and finally executive
responsibilities. Before his appointment as President, Mr. Ramstrom headed
Spectra Precision's Survey business unit headquartered in Danderyd, Sweden.
After completing his education in his native Sweden, Mr. Ramstrom began his
career as a surveyor with the Swedish Road Administration before joining Spectra
Precision in 1969.
Alan R. Townsend joined Trimble in 1991 as the Manager of Trimble
Navigation New Zealand Ltd., a product development subsidiary of Trimble
Navigation Ltd. In 1995, he was appointed General Manager of the Mapping and GIS
systems group. In January 2001, he was promoted to Vice President and General
Manager of the Mapping and GIS Division. He is also serving as the Managing
Director of Trimble Navigation New Zealand Ltd. Prior to Trimble, Mr. Townsend
served in a variety of roles within the Datacom group of companies in New
Zealand including Managing Director of Datacom Software Research Ltd. from 1986
to 1991. Trimble acquired Datacom Software Research Ltd. in 1991. In addition,
Mr. Townsend is a Director of IT Capital Ltd., a venture capital company based
in Auckland, New Zealand; and a Director of Pulse Data Ltd., an electronics
company that produces aids for the visually impaired in Christchurch, New
Zealand. He is also a fellow of the New Zealand Institute of Management and a
past president of the New Zealand Software Exporters Association. Mr. Townsend
received a B.Sc. in economics from the University of Canterbury in 1970.
Dennis L. Workman joined Trimble in 1995 as Director of Timing, where he
led the development of GPS-based precision timing products for the wireless
telecom market. In 1997, he was promoted to Director of Engineering for Software
and Component Technologies. In 1998, Mr. Workman was appointed Senior Director
and Chief Technical Officer of the newly formed Mobile and Timing Technologies
(MTT) business group. Mr. Workman also served as General Manager of Trimble's
Automotive and Timing group, as well as Chief Technology Officer for MTT. In
September 1999, he was appointed to serve as Vice President and General Manager
of the Component Technologies Division. Prior to Trimble, Mr. Workman held
various senior-level technical positions at Datum Inc. During his 9-year tenure
at Datum, he spearheaded technology development for GPS products. Mr. Workman
also led the development of board-level products unrelated to GPS for Datum's
Bancomm division. In 1978, Mr. Workman co-founded Bancomm, which manufactures
board-level and instrumentation products for precision timing and data logging
applications. In 1984, he was appointed President of Bancomm. Prior to Bancomm,
Mr. Workman co-founded Compression Labs in 1977 and served as Chief Technical
Officer. Mr. Workman began his career at Chicago Aerial Industries as lead
engineer. He then joined Goodyear Aerospace, now Loral, as program manager. Mr.
Workman received a B.S. in mathematics from St. Marys College in 1967 and an
M.S. in electrical engineering from the Massachusetts Institute of Technology in
1969.
16
Item 2. Properties
Trimble currently leases an aggregate of 309,480 square feet in fourteen
buildings in Sunnyvale, California. Trimble uses approximately 200,480 square
feet, with approximately 30,000 square feet used for final assembly and shipping
of GPS-based products and the balance is subleased to others. The leases and
subleases on these buildings expire at various dates through 2005. We are
leasing two buildings in Westminster, Colorado totaling 73,000 square feet of
which the 28,000 square foot facility will be used by Trimble and the 45,000
square foot building will be subleased. The leases and sublease expire at
various dates through 2006. In addition, we lease three buildings in Austin,
Texas, totaling approximately 50,600 square feet. Trimble uses approximately
12,000 square feet to manufacture GPS-based aviation products and the balance is
subleased. The leases and subleases expire at various dates through 2004, with a
lease for two buildings totaling approximately 47,000 square feet (including the
12,000 square feet used by Trimble) terminating on August 31, 2001. Trimble
leases 65,000 square feet in two buildings in Christchurch, New Zealand, for
software development. The leases expire in 2005 and 2010. We also lease a 57,200
square foot building in Huber Heights, Ohio (our Dayton, Ohio facility) where
22,300 square feet are used in the manufacturing of optical and laser based
products, and the balance is used for sales, marketing and administration. The
lease expires July 16, 2011. The Company owns an additional 150,000 square feet
in Huber Heights, Ohio of which approximately 96,500 square feet is used for
manufacturing and warehousing and the remainder is used for administration
activities. We also lease a 21,600 square foot building in Atlanta, Georgia
where approximately 2,100 square feet is used in manufacturing/warehouse space
and 19,500 square feet is used for sales, marketing and administration. Trimble
leases a 93,900 square foot building in Danderyd, Sweden and a 26,000 square
foot building in Kaiserslautern, Germany. Both buildings are primarily used for
manufacturing. Trimble's largest international sales office is leased in the
United Kingdom (9,542 square feet). In addition, our sales offices in Australia,
China, France, Germany, Hungary, Italy, Japan, Mexico, Spain, Singapore, Russia,
and in various cities throughout the United States are leased. Trimble's
international office leases expire at various dates through 2010. Certain of the
leases have renewal options. Trimble owns a two story, 20,000 square foot
building in Corvallis, Oregon, used by our Tripod Data Systems subsidiary, of
which a $1.9 million dollar loan is encumbered. We believe that our facilities
are adequate to support our current and anticipated near-term future operations.
Item 3. Legal Proceedings
The information with respect to legal proceedings required by this item is
included in Part II, Item 8, Note 21 to the Consolidated Financial Statements,
hereof.
Item 4. Submission of Matters to a Vote of Security Holders
Not applicable.
17
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters
Trimble's Common Stock is traded on the Nasdaq Stock Market under the
symbol TRMB. The following table sets forth, for the quarters indicated, the
range of high and low closing sales prices for Trimble's Common Stock on the
Nasdaq Stock Market:
High Low
2000:
Fourth 28 3/16 18
Third 62 13/16 20 7/16
Second 50 3/4 18 7/16
First 30 1/4 19
1999:
Fourth 23 1/8 10 1/2
Third 13 1/4 9
Second 13 3/4 9 3/8
First 10 1/2 7 1/4
Trimble had 1,146 registered shareholders of record as of March 9, 2001.
Trimble's stock price is subject to significant volatility. If revenues or
earnings fail to meet the expectations of the investment community, there could
be an immediate and significant impact on the trading price of the Company's
stock. Due to stock market forces that are beyond our control and due also to
the nature of our business, such short falls can be sudden.
The Company has never paid cash dividends on its Common Stock. The Company
presently intends to retain earnings to finance the development of the Company's
business, and does not presently intend to declare any cash dividends in the
foreseeable future. Under the Company's $200,000,000 senior credit facilities,
the Company is restricted from paying dividends and is limited as to the amount
of its common stock it can repurchase. Under the provisions of the bank
agreement, the Company is allowed to repurchase shares of its common stock only
up to 25% of net income for the previous year. See Notes 2 and 10 to the
Consolidated Financial Statements contained in Item 8.
18
Item 6. Selected Financial Data
HISTORICAL FINANCIAL REVIEW
Summary Consolidated Statements of Operations Data
December 29, December 31, January 1, January 2, December 31,
Fiscal Years ended 2000 (2) 1999 1999 1998 1996
- ---------------------------------------------------------------------------------------------------------------------------------
(In thousands, except per share data)
Revenue $ 369,798 $ 271,364 $ 268,323 $ 266,442 $ 226,784
-------------------------------------------------------------------
Operating expenses
Cost of sales 173,237 127,117 141,075 124,411 107,744
Research and development 46,520 36,493 45,763 38,242 27,833
Sales and marketing 79,901 53,543 61,874 57,661 61,112
General and administrative 30,514 33,750 33,245 27,424 35,136
Restructuring charges - - 10,280 - 2,134
Amortization of goodwill & other purchased intangibles 13,407 - - - -
-------------------------------------------------------------------
Total operating expenses 343,579 250,903 292,237 247,738 233,959
-------------------------------------------------------------------
Operating income (loss) from continuing operations 26,219 20,461 (23,914) 18,704 (7,175)
Nonoperating income (expense), net (10,459) 274 (2,041) 1,172 706
-------------------------------------------------------------------
Income (loss) before income taxes from continuing operations 15,760 20,735 (25,955) 19,876 (6,469)
Income tax provision (benefit) 1,575 2,073 1,400 2,496 (300)
-------------------------------------------------------------------
-------------------------------------------------------------------
Net income (loss) from continuing operations $ 14,185 $ 18,662 $ (27,355) $ 17,380 $ (6,169)
-------------------------------------------------------------------
Loss from discontinued operations (net of tax) - - (5,760) (8,101) (5,134)
Estimated gain (loss) on disposal of discontinued operations
(net of tax) - 2,931 (20,279) - -
-------------------------------------------------------------------
Net income (loss) $ 14,185 $ 21,593 $ (53,394) $ 9,279 $ (11,303)
===================================================================
Basic net income(loss) per share from continuing operations $ 0.60 $ 0.83 $ (1.22) $ 0.78 $ (0.28)
Basic net income(loss) per share from discontinued operations $ - $ 0.13 $ (1.16) $ (0.36) $ (0.23)
-------------------------------------------------------------------
Basic net income(loss) per share $ 0.60 $ 0.96 $ (2.38) $ 0.42 $ (0.51)
===================================================================
Shares used in calculating basic
earnings per share 23,601 22,424 22,470 22,293 22,005
===================================================================
Diluted net income(loss) per share from continuing operations $ 0.55 $ 0.82 $ (1.22) $ 0.75 $ (0.28)
Diluted net income(loss) per share from discontinued operations $ - $ 0.13 $ (1.16) $ (0.35) $ (0.23)
-------------------------------------------------------------------
Diluted net income(loss) per share $ 0.55 $ 0.95 $ (2.38) $ 0.40 $ (0.51)
===================================================================
Shares used in calculating diluted
earnings per share 25,976 22,852 22,470 22,947 22,005
===================================================================
Cash dividends per share $ - $ - $ - $ - $ -
===================================================================
Other Operating Data: December 29, December 31, January 1, January 2, December 31,
Fiscal Years ended 2000 (2) 1999 1999 1998 1996
- ----------------------------------------------------------------------------------------------------------------------------------
(In thousands, except percentages)
Gross margin percentage 53% 53% 47% 53% 52%
Operating income (loss) percentage 7% 8% (9%) 7% (3%)
EBITDA (1) 49,695 29,534 (11,404) 30,911 2,965
Depreciation and amortization 23,476 9,073 12,510 12,207 10,140
EBITDA percentage (1) 13% 11% (4%) 12% 1%
Selected Consolidated Balance Sheet: December 29, December 31, January 1, January 2, December 31,
As of 2000 (2) 1999 1999 1998 1996
- ------------------------------------------------------------------------------------------------------------------------------------
(In thousands)
Working capital (deficit) $ (10,439) $ 111,808 $ 81,956 $ 133,434 $ 122,409
Total assets 490,504 181,751 156,279 207,663 189,841
Noncurrent portion of long-term debt 143,553 33,821 31,640 30,697 30,938
Shareholders' equity 134,943 100,796 74,691 139,483 124,045
- ----------------------------------------------------------------------------------------------------------------------------
<FN>
(1) EBITDA consists of earnings from continuing operations before interest income, interest expense, other nonoperating income
and expense, income taxes, depreciation and amortization and a $4.6 million inventory purchase accounting adjustment. EBITDA is
not a measure of financial performance under generally accepted accounting principles and should not be considered in isolation
or as an alternative to net income as an indicator of a company's performance or to cash flows from operating activities as a
measure of liquidity.
(2) Includes financial informaiton of the Spectra Precision Group, which was acquired on July 14, 2000 and of Tripod Data
Systems, which was acquired on November 14, 2000. (See Footnote 2 and 3 to the Consolidated Financial Statements
included in Part II, Item 8.)
</FN>
19
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations
RECENT BUSINESS DEVELOPMENTS
Effective as of July 14, 2000, Trimble completed the acquisition of the
Spectra Precision wholly owned businesses formerly owned by Thermo Electron
Corporation ("Thermo Electron"), collectively known as the "Spectra Precision
Group" for an aggregate purchase price of approximately $294 million, subject to
a final adjustment in the purchase price as provided for in the acquisition
agreements. The acquisition included 100% of the stock of Spectra Precision
Inc., a Delaware corporation, Spectra Precision SRL, an Italian corporation,
Spectra Physics Holdings GmbH, a German corporation, and Spectra Precision BV, a
Netherlands corporation. The acquisition also consisted of certain assets and
liabilities of Spectra Precision AB, a Swedish corporation, including 100% of
the shares of Spectra Precision SA, a French corporation, Spectra Precision
Scandinavia AB, a Swedish corporation, Spectra Precision of Canada Ltd., a
Canadian corporation, and Spectra Precision Handelsges mbH, an Austrian
corporation. The acquisition was accounted for as a purchase transaction. (See
"Liquidity and Capital Resources" for a description of how this acquisition was
financed.)
The Spectra Precision Group develops instruments and systems that provide
positioning solutions for two market segments, Engineering & Construction and
Agriculture. Within those segments are four major customer applications:
surveying, construction site positioning, construction and agricultural machine
control, and software.
Spectra Precision Group products generally measure distances very
accurately by means of a light beam. In addition, they have capabilities that
provide the capability to uniquely solve positioning problems such as the
determination of angles with high accuracy.
* The Company expects that the acquisition of the Spectra Precision Group
will strengthen Trimble's position as a leading provider of positioning
solutions worldwide. The acquisition also gives Trimble one of the most
comprehensive product portfolios in the industry, strengthens its distribution
network, and serves as a platform for future growth. The complementary product
lines and technologies of Trimble and the Spectra Precision Group, should help
the combined Company to become a leader in the Engineering and Construction,
Agriculture, and Fleet and Asset Management market segments. In addition, the
Spectra Precision Group's well-established and extensive distribution network
should extend Trimble's reach into new segments of its target market segments
both domestically and internationally. Although there was very little overlap
between each of the companies' product offerings, two areas of overlap were
identified and the Company has announced plans to discontinue Trimble's TTS
Optical Survey Family and the Spectra Precision Group's Elta and Geotracer GPS
receivers.
* As part of the acquisition of the Spectra Precision Group, Trimble has
identified approximately $20 million of annual cost synergies. We expect to
realize $8 to $10 million of these benefits in fiscal 2001 and realize the full
benefit in fiscal 2002 and beyond. However, the Company is still in the early
stages of combining Trimble and the Spectra Precision Group and this involves
certain inherent risks, including: the potential inability to successfully
integrate acquired operations and businesses or to realize anticipated
synergies, economies of scale or other value; diversion of management's
attention; difficulties in coordinating the management of operations at new
sites; and the possible loss of key employees of acquired operations. The
Company's profitability may suffer if we are unable to successfully integrate
and manage this acquisition, or if we do not generate sufficient revenue to
offset the increased expenses associated with this acquisition.
Trimble's current strategy for the on-going integration of the Spectra
Precision Group is to focus on leveraging existing technologies, distribution,
and marketing resources and identifying and taking advantage of synergies
between the companies. The Company's initial priorities for the combined
entities are centered on the following:
o The reconciliation and alignment of distribution channels and the
achievement of our market targets and cost synergies. The largest
portion of the cost synergies result from the consolidation of redundant
facilities.
o Defining the basic corporate organization, reporting and structure. This
included the announcement by Trimble in August 2000 of its new
segment and management organization. As part of the August 2000
announcement, the Engineering and Construction division of Trimble is
headquartered from our
20
Dayton, Ohio facility. Trimble's Agriculture and Component Technologies
divisions continue to operate from our Sunnyvale, California facility.
The Mobile Positioning and Communications market of the Fleet and
Asset Management division is headquartered from our Sunnyvale,
California facility. The GIS market of the Fleet and Asset Management
division is headquartered in New Zealand.
o Coordinating manufacturing facilities. The manufacturing facilities
acquired, as a result of the acquisition of the Spectra Precision Group,
support the Engineering and Construction divisions and report
through that segment management.
As part of integrating the two companies, Trimble reorganized management
responsibilities in the third quarter of fiscal year 2000 by realigning its
reportable market segments from the previous two segments: Precision Positioning
Group (PPG) and Mobile Timing and Technologies Group (MTT) to five segments: (i)
Engineering and Construction, (ii) Agriculture, (iii) Fleet and Asset
Management, (iv) Component Technologies, and (v) Portfolio Technologies. The
Engineering and Construction segment includes the Spectra Precision Group
surveying and construction markets and the land survey, marine survey, mining
and construction markets that had been under Trimble's PPG segment. The
Agriculture segment includes the Spectra Precision Group agriculture market and
the agriculture market that had been under Trimble's PPG segment. The Fleet and
Asset Management segment includes the mapping and GIS market that had been under
Trimble's PPG segment, as well as, the mobile positioning market that had been
under Trimble's MTT segment. The Component Technologies segment includes the
embedded, IVN and timing markets that had been under Trimble's MTT segment. The
Portfolio Technologies segment includes air transport, military, commercial
marine and advance technology markets that had been under Trimble's MTT segment.
* In the Engineering and Construction segment, we focus on centimeter
positioning, data collection management, wireless communication, and machine
guidance and control. In the Agriculture segment we focus on precise machine
guidance, yield monitoring, variable rate application of fertilizer and
chemicals, and water management. In the Fleet and Asset Management segment we
focus on asset tracking, fleet management, intelligent transportation systems,
and public safety through integration of our technologies, information
technology and wireless communication. In the Component Technologies segment we
provide our GPS technology to various applications (automotive navigation, and
timing systems) for OEMs. We intend to establish and sustain our leadership
position in each of these market segments by offering products that are
differentiated by unique product capabilities provided by our positioning
technology, complemented by the additional value provided by our software and
finally by the value provided by our distribution channels in providing high
quality service and support. In many cases, we emphasize application-specific
systems that solve end-user problems in its targeted market segments.
Effective as of November 14, 2000, Trimble completed the acquisition of
Tripod Data Systems, Inc., an Oregon corporation for an aggregate purchase price
of approximately $15 million, which is subject to a final adjustment in the
purchase price as provided for in the acquisition agreements. The purchase price
was in the form of shares of the common stock of Trimble. The acquisition was
accounted for as a purchase transaction. Tripod Data Systems operates as a
wholly owned subsidiary of Trimble.
Tripod Data Systems is a leading developer of data collection software for
the land survey, construction and GIS markets. Tripod Data Systems has three
core business components. The company develops software for data collection
applications, manufactures rugged Windows CE-based handheld data collectors such
as their TDS Ranger, and develops software for pen computer applications.
* The Company expects that the acquisition of Tripod Data Systems will
strengthen Trimble's ability to aggressively address a number of targeted
markets including land survey, construction and GIS.
On March 6, 2001, the Company sold its Air Transport Systems (ATS) business
to Honeywell. The ATS business was a part of our Portfolio Technologies segment.
The sale to Honeywell consisted of the Trimble 8100, the HT 9100 and two other
product lines, which were included in the ATS business.
21
RESULTS EXCLUDING ONE-TIME, ACQUISITION, AND DISCONTINUED OPERATION ADJUSTMENTS
The income from operations measurement utilized by management excludes
certain one-time and acquisition related charges and discontinued operations
adjustments that management believes are not reflective of on-going operations.
The following table reflects results of operations adjusted to exclude the
effects of such items as follows (in thousands):
Twelve Months Ended
Dec. 29, Dec. 31,
2000 1999
-------------- -------------
Net income $ 14,185 (2) $ 21,593
One time and acquisition related charges 16,950 (1) -
Estimated Loss on disposal of Discontinued Operations (net of tax) - (2,931)
-------------- -------------
Adjusted net income from Continuing Operations $ 31,135 $ 18,662
============== =============
Adjusted net income per share $ 1.20 $ 0.82
============== =============
<FN>
(1) Reflects after tax acquisition charges of $16.3 million or $0.62 per
diluted share for amortization of goodwill and other purchased intangibles,
as well as an inventory purchase accounting adjustment. Also includes an
after tax debt extinguishment charge of $1.1 million or $0.04 per diluted
share and a one time after tax charge of $0.8 million or $0.03 per diluted
share for relocation costs related to opening a new office in Boulder,
Colorado. In addition, there was a one time after tax gain on sale of a
minority investment of $1.2 million or $0.04 per diluted share.
(2) Net income for the twelve months ended December 29, 2000 includes income of
the Spectra Precision Group for the period July 14, 2000 through December
29, 2000 and of Tripod Data Systems for the period November 14, 2000
through December 29, 2000.
</FN>
RESULTS OF CONTINUING OPERATIONS
In fiscal 2000, the Company's annual revenues from continuing operations
increased to $369.8 million from $271.4 million in fiscal 1999. In fiscal 2000,
the Company had net income from continuing operations of $14.2 million, or $0.55
diluted income per share, compared to a net income from continuing operations of
$18.7 million, or $0.82 diluted earnings per share, in fiscal 1999. The total
net income for fiscal 2000, including discontinued operations, was $ 14.2
million, or $0.55 diluted income per share, compared to a total net income for
fiscal 1999, including discontinued operations, of $21.6 million, or $0.95
diluted income per share.
22
The following table sets forth, for the periods indicated, certain financial
data as a percentage of total revenue:
December 29, December 31, January 1,
Fiscal Years ended 2000 1999 1999
- ------------------------------------------------------------------------------------------------------------------------------------
Revenue 100% 100% 100%
----------------- ----------------- -------------
Operating expenses:
Cost of sales 47% 47% 53%
Research and development 13% 13% 17%
Sales and marketing 22% 20% 23%
General and administrative 8% 12% 12%
Restructuring charges 0% 0% 4%
Amortization of goodwill & other purchased intangibles 4% 0% 0%
----------------- ----------------- -------------
Total operating expenses 93% 92% 109%
----------------- ----------------- -------------
Operating income (loss) from Continuing Operations 7% 8% (9%)
Nonoperating income (expense), net (3%) 0% (1%)
----------------- ----------------- -------------
Income (loss) before income taxes from Continuing Operations 4% 8% (10%)
Income tax provision 0% 1% 1%
----------------- ----------------- -------------
Net income (loss) from Continuing Operations 4% 7% (10%)
----------------- ----------------- -------------
Loss from Discontinued Operations (net of tax) 0% 0% (2%)
Estimated gain (loss) on disposal of Discontiued Operations (net of tax) 0% 1% (8%)
----------------- ----------------- -------------
Net Income (loss) 4% 8% (20%)
================= ================= =============
Revenue. In fiscal 2000, total revenue increased to $369.8 million from
$271.4 million in fiscal 1999, which represents a percentage increase of 36.3%.
Total revenue increased in fiscal 1999 to $271.4 million from $268.3 million in
fiscal 1998, which represents a percentage increase of 1%. The following table
breaks out the Company's revenues by industry segment:
--------------------------------------------------------------------------------------
December 29, % Total December 31, % Total January 1, % Total
2000 Revenue 1999 Revenue 1999 Revenue
- ---------------------------------------------------------------------------------------------------------------------
(In thousands)
Engineering and Construction $ 195,150 53% $ 108,536 40% $ 123,491 46%
Agriculture $ 26,024 7% $ 12,837 5% $ - 0%
Fleet and Asset Management $ 65,099 18% $ 67,271 25% $ 64,515 24%
Component Technologies $ 60,230 16% $ 58,660 21% $ 36,296 14%
Portfolio Technologies $ 23,295 6% $ 24,060 9% $ 44,021 16%
---------------- ----------- ---------------- ----------- ------------- -----------
Total revenue $ 369,798 100% $ 271,364 100% $ 268,323 100%
---------------- ----------- ---------------- ----------- ------------- -----------
Engineering and Construction
Engineering and Construction revenues increased by 80% in fiscal 2000 over
fiscal 1999. The increase in 2000 revenue compared to 1999 is due to the
following:
o Revenues generated since the purchase of the Spectra Precision Group in
July 2000, which accounted for approximately $87.0 million for the
period July 14, 2000 through December 29, 2000.
o Strong demand for GPS machine guidance equipment for construction
applications.
o These increases were partially offset due to continued delivery
problems related to critical part shortages in our supply chain.
23
Engineering and Construction revenues decreased 12% in fiscal 1999 from
fiscal 1998. The 1999 decrease is due to the following:
o Sales were impacted from the change in commission structure for some of
our products from commission dealers to buy/sell dealers in fiscal 1999.
Under the buy/sell arrangement, the product is discounted to the dealer,
as opposed to end-user pricing with commissions recorded under sales
and marketing expense.
o In the fourth quarter of 1999, delivery problems due to critical part
shortages in our supply chain, and transitional issues with outsourcing
our manufacturing, had a negative impact on revenue for the fiscal year
ended 1999.
Agriculture
Agriculture revenues increased by 103% in fiscal 2000 over fiscal 1999. The
2000 increase in revenue compared to 1999 is due to the following:
o Revenues generated since the purchase of the Spectra Precision Group in
July 2000, which accounted for approximately $6.9 million for the
period July 14, 2000 through December 29, 2000.
o Introduction of new products, including the AgGPS 170 Field Computer,
the AgGPS 114, and the PSO Plus Parallel Swathing Option with Data
Logging.
o Strong growth in demand for GPS Agriculture products in general.
o These increases were partially offset due to continued delivery problems
related to critical part shortages in our supply chain.
Agriculture revenues were not broken out separately for fiscal year 1998
because it is impracticable to do so. Therefore there is no comparison of the
increase in revenue in the Agriculture segment from fiscal 1998 to fiscal 1999.
The results of this division were included in the Engineering and Construction
segment for fiscal 1998.
Fleet and Asset Management
Fleet and Asset Management revenues decreased by 3% in fiscal 2000 over
fiscal 1999. The 2000 revenue change compared to 1999 is due to the following:
o Asset management and tracking product revenues were down due to
continued delivery problems related to critical part shortages in our
supply chain.
o These decreases were partially offset by increased demand in our
Mapping products, especially our new GeoExplorer 3 used for GIS data
collection and data maintenance. In addition, unit sales for our
Crosscheck family of products increased by 30% over prior year.
Fleet and Asset Management revenues increased by 4% in fiscal 1999 from
fiscal 1998. The 1999 increase is due primarily to the growth of revenue in our
pathfinder ProXR and Pathfinder ProXRS products, based on volume growth.
Component Technologies
Component Technologies revenues increased by 3% in fiscal 2000 over fiscal
1999. The 2000 revenue change compared to 1999 is due to the following:
o Strong demand for GPS embedded applications such as vehicle tracking
and safety and security.
o The above increases were partially offset by continued delivery
problems related to critical part shortages in our supply chain.
Component Technologies revenues increased by 62% in fiscal 1999 from fiscal
1998. The 1999 increase is due primarily to strong growth in our automotive and
timing markets.
Portfolio Technologies
Portfolio Technologies revenues decreased by 3% in fiscal 2000 over fiscal
1999. The 2000 revenue decrease compared to 1999 is due to the following:
o Decreases in revenues for Military and air transport products.
o Trimble's decision to exit the commercial marine business in the
fourth quarter of 1998 and the sale of the last of such products in the
second quarter of 1999.
24
Portfolio Technologies revenues decreased by 45% in fiscal 1999 from fiscal
1998. The 1999 decrease is due to the following:
o Trimble decided to exit the commercial marine business in the fourth
quarter of 1998 and sold the last of such products in the second
quarter of 1999.
o Commercial air transport was down, due to decreases in market
demand and the successful conclusion of shipments in fiscal 1998 to
American Airlines and Continental Airlines through our Honeywell
alliance, which were not repeated in fiscal 1999.
o Military systems declined due to the completion of our CUGR contract in
the first quarter of 1998 which sales were not repeated in 1999.
* Export Sales. Export sales from domestic operations, as a percentage of
total revenue, were 34% in 2000, 38% in 1999, and 34% in 1998. Sales to
unaffiliated customers in foreign locations, as a percentage of total revenue,
were 52% in 2000, 52% in 1999, and 46% in 1998. Trimble anticipates that export
revenue and sales made by its subsidiaries in locations outside the U.S. will
continue to account for a significant portion of its revenue. For this reason,
Trimble is subject to the risks inherent in these sales, including unexpected
changes in regulatory requirements, exchange rates, governmental approval, and
tariffs or other barriers. Even though the U.S. government announced on March
29, 1996, that it would support and maintain the GPS system, and on May 1, 2000
eliminated the use of Selective Availability (S/A) -- a method of degrading GPS
accuracy -- there may be a reluctance in certain foreign markets to purchase
products based on GPS technology, given the control of GPS by the U.S.
Government. Trimble's results of operations could be adversely affected if the
Company were unable to continue to generate significant sales in locations
outside the U.S.
No single customer, including the U.S. Government and its agencies,
accounted for 10% or more of the Company's total revenues in 2000, 1999 or1998.
It is possible; however, that in future periods the failure of one or more large
customers to purchase products in quantities anticipated by the Company may
adversely affect the results of operations.
* Gross Margin. Gross margin varies due to a number of factors, including
product mix, domestic versus international sales, customer type, the effects of
production volumes and fixed manufacturing costs on unit product costs, and new
product start-up costs. The gross margin percentage on product sales, not
including a $4.6 million charge for inventory purchase accounting adjustments
for the acquisition of the Spectra Precision group, was 54% in 2000 and 53% for
1999, compared with 47% in fiscal 1998. The fiscal 2000 gross margin percentage
increased over fiscal year 1999 due to the favorable product mix of Engineering
and Construction and Agriculture products, which yield higher margins through
the integration of software and wireless communications. In addition, it was
favorably impacted by the cost benefits of outsourcing our manufacturing to
Solectron. These increases were partially offset by higher costs to acquire
components due to the worldwide component shortages. The increase in gross
margin percentage in fiscal 1999 as compared to fiscal 1998 primarily reflect
improved manufacturing cost controls achieved through the consolidation of the
manufacturing organization, resulting in improved efficiencies and reduced
inventory. In addition gross margins in the second half of fiscal 1999 were
favorably impacted by the cost benefits of outsourcing our manufacturing to
Solectron. Because of product mix changes within and among the industry markets,
market pressures on unit selling prices, fluctuations in unit manufacturing
costs, including increases in component prices and other factors, current level
gross margins cannot be assured.
* Trimble expects that in the future a higher percentage of its business
will be conducted through alliances with strategic partners. As a result of
volume pricing and the assumption of certain operating costs by the partner,
margins on this business are likely to be lower than sales directly to
end-users.
25
Operating Expenses. The following table shows operating expenses for the
periods indicated. It should be read in conjunction with the narrative
descriptions of those operating expenses below:
Fiscal Years Ended
-------------------------------------------------------------
December 29, December 31, January 1,
2000 1999 1999
- ---------------------------------------------------------------------------------------------------------------------
(In thousands)
Research and development $ 46,520 $ 36,493 $ 45,763
Sales and marketing 79,901 53,543 61,874
General and administrative 30,514 33,750 33,245
Restructuring charges - - 10,280
Amortization of goodwill & other purchased intangibles 13,407 - -
-------------------- ---------------- ---------------
Total $ 170,342 $ 123,786 $ 151,162
-------------------- ---------------- ---------------
Research and Development. Research and development spending increased in
absolute dollars during fiscal 2000, representing 13% of revenue, compared with
13% in 1999 and 17% in 1998. The increase in absolute dollars in research and
development expenses in 2000 are due primarily to the purchase of the Spectra
Precision Group in July 2000, which accounted for approximately $9.9 million of
the increase. The increase was also due to approximately $2.2 million less of
cost reimbursement funds received for projects. There were also increases in our
facilities costs of approximately $1 million. The increases are partially offset
by decreases in our expense of approximately $3.4 million related to personnel,
temporary help and consulting.
The dollar decrease from 1998 to 1999 is due to Trimble's receiving
approximately $4.2 million more funds from cost reimbursement projects in 1999
as compared to 1998. Also, there were decreases in our expenses of approximately
$5.0 million related to electronics parts, depreciation, travel, personnel, and
other supplies as part of the Company's restructuring plans which were
implemented in the last half of fiscal 1998.
Sales and Marketing. Sales and marketing expenses increased during fiscal
2000, representing 22% of revenues, as compared with 20% in 1999 and 23% in
1998. The primary reason for the dollar and percentage increase in expenses from
1999 to 2000 is the purchase of the Spectra Precision Group in July 2000, which
had approximately $26.6 million in sales and marketing expenses recorded in the
period subsequent to Trimble's acquisition.
The primary reason for the dollar and percentage decline in expenses from
1998 to 1999 is decreases of approximately $7.7 million in personnel,
consultants, travel, advertising, trade shows, expensed demo equipment, and
other office supplies as part of the Company's restructuring plan, which was
implemented in the last half of fiscal 1998. In addition, sales commissions were
lower as a percentage of sales, due to the change in dealer structure for some
of our product lines from commission dealers to buy/sell arrangements.
* Trimble's future growth will depend in part on the timely development and
continued viability of the markets in which we currently compete, and on our
ability to continue to identify and exploit new markets for our products. In
addition, we have encountered significant competition in selected markets, and
we expect such competition to intensify as the market for GPS applications
receives acceptance. Several of Trimble's competitors are major corporations
with substantially greater financial, technical, and marketing resources.
Increased competition may result in reduced market share and is likely to result
in price reductions of GPS-based products, which could adversely affect
Trimble's revenues and profitability.
General and Administrative. General and administrative expenses decreased
during fiscal 2000, representing 8% of revenues, compared with 12% in both 1999
and 1998. The decrease in fiscal 2000 as compared to fiscal 1999 is due to an
allowance for doubtful accounts charge in fiscal 1999 related to certain
customers in South America which was not repeated in fiscal 2000. We also had
decreases of approximately $6.1 million in expenses related for personnel,
legal, facilities, equipment and other office supplies. The decreases were
partially offset by approximately $3.0 million of the Spectra Precision Group's
expenses included since its purchase in July 2000.
The increase in absolute dollars from 1998 to 1999 is due to an increase in
the allowance for doubtful accounts related to certain customers in South
America for 1999; and an increase in building rental costs due to the renewal of
many of our building leases. This increase was partially offset by space
consolidations as part of our restructuring efforts in the fourth quarter of
1998.
26
Restructuring Reserves.
2000 Acquisition Restructuring Reserves. As noted in Note 9 to the
Consolidated Financial Statements, as a result of the acquisition of the Spectra
Precision Group, the Company accrued approximately $9.0 million for costs to
close certain duplicative office facilities and combine operations and relocate
certain employees. These costs were accrued as part of the preliminary
allocation of the purchase price. The facility consolidation and employee
relocations will result from primarily combining certain office facilities and
duplicative functions, including management functions, of the Spectra Precision
Group. The Company has not yet finalized its plans to consolidate facilities and
to relocate employees, nor has it finalized a determination of the total costs
to be incurred upon the termination of certain office facility leases or its
ability to sublease vacated office space. Accordingly, unresolved issues could
result in an increase or decrease in the liabilities for facility consolidation,
the discontinuance of overlapping product lines, employee relocation, and
related tax and legal expenses. These adjustments, if any, will be reported as
an increase or decrease in goodwill. Through December 29, 2000, the Company had
charged $ 809,000 (which consisted of inventory write-offs related to the
discontinuance of overlapping product lines) against the reserve, and the
accrual for future costs to be incurred was $8.2 million at December 29, 2000.
The Company anticipates on utilizing this reserve by the end of fiscal 2001.
The elements of the reserve at fiscal year end 2000 on the balance sheet
are as follows (in thousands):
Employee Relocation Expense $ 390
Inventory Obsolescence 1,876
Legal and Tax Expense 1,175
Restructuring Expenses 4,750
---------------
Subtotal $ 8,191
===============
1998 Restructuring Charges. As noted in Note 9 to the Consolidated
Financial Statements during the year ended January 1, 1999, the Company recorded
a restructuring charge of $10.3 million classified as operating expenses. These
charges were a result of the Company's reorganization to improve business
processes and to decrease organizational redundancies, to improve management
accountability and to improve the Company's focus on profitable operations. As a
result of the reorganization, the Company downsized its operations, including
reducing headcount and facilities space usage, and canceled its enterprise wide
information system project and certain research and development projects. The
impact of these decisions was that significant amounts of the Company's fixed
assets, prepaid expenses, and purchased technology were impaired and certain
liabilities incurred. The Company wrote down the related assets to their net
realizable values and made provisions for the estimated liabilities.
The elements of the charges in fiscal 1998 and the amounts remaining at
December 29, 2000, on the balance sheet are as follows (in thousands):
Total
charged to Amounts paid/ Amounts paid/ Amounts paid/ Remaining in
expense in written off written off written off accrued liabilites
fiscal 1998 in fiscal 1998 in fiscal 1999 in fiscal 2000 as of December 29, 2000
--------------- ----------------- -------------- ---------------- -----------------------
Employee termination benefits $ 2,864 $ (1,200) $ (371) $ (1,293) $ -
Facility space reductions 1,061 - $ (1,053) $ (8) -
ERP system abandonment 6,360 (4,895) $ (1,465) $ - -
--------------- ----------------- -------------- ---------------- -----------------------
Subtotal $ 10,285 $ (6,095) $ (2,889) $ (1,301) $ -
=============== ================= ============== ================ =======================
Goodwill and Other Purchased Intangibles. Amortization expense of goodwill
and other intangibles increased for the year ended December 29, 2000 by
approximately $13.4 million related to the purchase of Spectra Precision Group.
Nonoperating income (expense), net. Nonoperating income (expense), net,
includes interest income and expense, as well as gains and losses on foreign
currency transactions.
27
Foreign exchange losses were $376,000 in fiscal 2000, compared with gains
of $28,000 in 1999 and gains of $234,000 in 1998. Trimble's policy is to hedge
its exposure to foreign currency transactions in order to minimize the effect of
changes in foreign currency exchange rates on consolidated results of
operations. Gains and losses arising from foreign currency forward contracts
offset gains and losses resulting from the underlying hedged transactions.
Interest income increased in 2000 from 1999 as well as in 1999 from 1998.
The higher interest income in 2000 and 1999 is due primarily to the increased
interest income received on cash and short-term investments because of higher
average balances.
Interest expense increased in fiscal 2000 due to financing obtained for the
acquisition of the Spectra Precision Group. Interest expense includes interest
on a $200.0 million credit facility and an $80.0 million subordinated sellers
note both issued in July 2000. (See Note 11 to the Consolidated Financial
Statements for details of long-term debt.)
Income Tax Provision. Trimble's effective income tax rates from continuing
operations for fiscal years 2000, 1999 and 1998 are 10%, 10% and (6%),
respectively. The 2000 and 1999 income tax rates are less than the federal
statutory rate of 35%, due primarily to the realization of the benefits from
prior net operating losses and previously reserved deferred tax assets. The 1998
income tax rate differs from the federal statutory rate, due primarily to
foreign taxes and the inability to realize the benefit of net operating losses.
Inflation. The effects of inflation on Trimble's financial results have not
been significant to date.
LITIGATION
* Trimble is involved in a number of legal matters as discussed in Note 21
to the Consolidated Financial Statements. While Trimble does not expect to
suffer significant adverse effects from these litigation matters or from
unasserted claims, the nature of litigation is unpredictable and there can be no
assurance that it will not do so.
LIQUIDITY AND CAPITAL RESOURCES
* At December 29, 2000, Trimble had cash and cash equivalents of $40.9
million and had no short-term investments. Trimble's cash and cash equivalents
and short-term investments decreased from the prior year, due to the purchase of
the Spectra Precision Group in July 2000. Trimble's long-term debt consists of
$162 million outstanding under senior secured credit facilities, and a $80
million subordinated promissory note. In the past, Trimble has relied primarily
on cash provided by operating and financing activities and net sales of
short-term investments to fund capital expenditures, the repurchase of the
Company's common stock, and other investing activities. Management believes that
its cash, and cash equivalents balances, together with its new credit facility,
will be sufficient to meet its anticipated operating cash needs for at least the
next twelve months.
* In fiscal 2000, the cash provided by operating activities was $21.9
million, as compared to cash provided of $23.6 million in the corresponding
period in fiscal 1999. Cash provided by operating activities in fiscal 2000
arose from the Company's net income, plus depreciation and amortization and
increase in accounts payable and offset partially by increases in inventories
and increases in accounts receivable. Trimble's ability to continue to generate
cash from operations will depend in a large part on revenues, the rate of
collections of accounts receivable, and the successful management of the
Company's manufacturing relationship with Solectron Corporation.
Cash provided by sales of common stock in fiscal year 2000 represents the
proceeds from purchases made by employees pursuant to Trimble's stock option
plan and employee stock purchase plan and totaled $12.0 million for the fiscal
year ended December 29, 2000.
Effective as of July 14, 2000, Trimble completed the acquisition of the
Spectra Precision Group for an aggregate purchase price of approximately $294
million. The acquisition was financed with $80 million in seller subordinated
debt, $140 million of debt provided through a syndicate of banks, and $74
million of the Company's then available cash on hand. The Company also expects
to incur up to $8 million of total costs and expenses in connection with the
acquisition of which approximately $7 million has already been incurred to date.
In order to finance the acquisition of the Spectra Precision Group, fund
the Company's on-going working capital requirements, and pay related fees and
expenses of the acquisition, Trimble (i) obtained a new senior secured
28
credit facility, (ii) issued an $80 million subordinated seller promissory note,
(iii) terminated its existing $50 million unsecured revolving credit facility
and (iv) prepaid its existing $30 million outstanding subordinated promissory
notes. (See Note 2 to the Condensed Consolidated Financial Statements under
Acquisition Financing.)
In 1996 and 1998, Trimble approved a discretionary program whereby up to a
total of 2.2 million shares of its common stock could be repurchased on the open
market by the Company to offset the potential dilutive effects to earnings per
share from the issuance of additional stock options. During 1997 and 1998,
Trimble purchased a total of 1.22 million shares at a cost of $17.9 million.
During fiscal 1999 and fiscal 2000, no shares were repurchased under the
discretionary program. Trimble's current credit facility limits the amount of
its common stock it can repurchase. The Company is allowed to repurchase shares
of its common stock only up to 25% of net income in the previous fiscal year.
* The Company presently expects fiscal 2001 capital expenditures to be
approximately $12.0 million, primarily for computer equipment, software, and
leasehold improvements associated with business expansion.
* Trimble has evaluated the issues raised by the introduction of the Single
European Currency (Euro) for initial implementation as of January 1, 1999, and
during the transition period through January 1, 2002. Trimble does not currently
believe that the introduction of the Euro will have a material effect on its
foreign exchange and hedging activities. Trimble has also assessed the potential
impact the Euro conversion will have in regard to its internal systems
accommodating Euro-denominated transactions. Trimble will continue to evaluate
the impact of the Euro introduction over time, based on currently available
information. Trimble does not currently anticipate any adverse impact of the
Euro conversion on the Company.
CERTAIN OTHER RISK FACTORS
Difficulties in Integrating New Acquisitions Could Adversely Affect Our
Business.
Critical to the success of our growth is the effective and timely
integration of acquired businesses into our organization. If our integration
efforts are unsuccessful, our businesses will suffer. We have recently acquired
the Spectra Precision Group. The acquisition presents unique product, marketing,
research and development, facilities, information systems, accounting, personnel
and other integration challenges. This transition is still in its early stages
and involves certain risks, including: the potential inability to successfully
integrate acquired operations and businesses; the inability to realize
anticipated synergies or cost reductions or other value; diversion of
management's attention; difficulties in scaling up production at new sites and
coordinating management of operations at new sites; and loss of key employees of
acquired operations. Also, our information systems and those of the companies we
acquire are often incompatible, requiring substantial upgrades to one or the
other. Further, our current senior combined management is a combination of the
prior senior management teams of Trimble and the Spectra Precision Group several
of whom have not previously worked with other members of management. The
benefits to us of the acquisition and our success, as a whole, depends upon our
succeeding in each of these and other integration challenges. Nevertheless, the
integration of our business with another may result in unanticipated operations
problems, expenses and liabilities and the diversion of management attention
Our sales force is and will be in the future a combination of our sales
force and the sales forces of the businesses we acquire, which must be
effectively integrated for us to remain successful. Our acquisition of the
Spectra Precision Group has resulted in sales forces differing in products sold,
marketing channels used and sales cycles and models applied. Accordingly, we may
experience disruption in sales and marketing in connection with our efforts to
integrate our various sales and marketing forces, and we may be unable to
efficiently or effectively correct any such disruptions or achieve our sales and
marketing objectives if we fail in these efforts. Furthermore, it may be
difficult to retain key sales personnel. As a result, we may fail to take full
advantage of the combined sales forces' efforts, and one company's sales
approaches and distribution channels may be ineffective in promoting another
entity's products, all of which may materially harm our business, financial
condition or operating results.
Risks Associated with Sole Suppliers and Limited Sources.
With the selection of Solectron Corporation in August 1999 as an exclusive
manufacturing partner for many of our GPS products previously manufactured out
of our Sunnyvale facilities, Trimble is substantially dependent upon a sole
supplier for the manufacture of its products. Under the agreement with
Solectron, Trimble provides to Solectron a twelve-month product forecast and
places purchase orders with Solectron sixty calendar days in advance of the
scheduled delivery of products to Trimble customers. Although Trimble purchase
orders placed
29
with Solectron are cancelable, the terms of the agreement would require Trimble
to purchase from Solectron all material inventory not returnable or usable by
other Solectron customers. Accordingly, if Trimble inaccurately forecasts demand
for its products, Trimble may be unable to obtain adequate manufacturing
capacity from Solectron to meet customers' delivery requirements or Trimble may
accumulate excess inventories. In addition, we rely on sole suppliers for a
number of our critical ASICS. We have experienced shortages of such supplies in
the past. Our reliance on sole or a limited group of suppliers involves several
risks, including a potential inability to obtain an adequate supply of required
components and reduced control over pricing. The disruption or termination of
any of these sources could have a material adverse effect on our business,
operating results and financial condition. Any inability to obtain adequate
deliveries or any other circumstance that would require us to seek alternative
sources of supply or to manufacture such components internally could
significantly delay our ability to ship our products, which could damage
relationships with current and prospective customers and could have a material
adverse effect on our business, operating results and financial condition.
Fluctuations in Annual and Quarterly Performance.
Our operating results have fluctuated and can be expected to continue to
fluctuate in the future on a quarterly and annual basis as a result of a number
of factors, many of which are beyond our control. Results in any period could be
affected by changes in market demand, competitive market conditions, market
acceptance of new or existing products, fluctuations in foreign currency
exchange rates, the cost and availability of components, our ability to
manufacture and ship products, the mix of our customer base and sales channels,
the mix of products sold, our ability to expand our sales and marketing
organization effectively, our ability to attract and retain key technical and
managerial employees and general economic conditions. Due to the foregoing
factors, our operating results in one or more future periods are expected to be
subject to significant fluctuations. In the event such fluctuations result in
our financial performance being below the expectations of public market analysts
and investors, the price of our common stock could decline substantially.
Our revenues have historically tended to fluctuate on a quarterly basis due
to the timing of shipments of products under contracts and the sale of licensing
rights. A significant portion of Trimble's quarterly revenues occurs from orders
received and immediately shipped to customers in the last few weeks and days of
a quarter. If orders are not received, or if shipments were to be delayed a few
days at the end of a quarter, the operating results and reported earnings per
share for that quarter could be significantly impacted. Future revenues are
difficult to predict, and projections are based primarily on historical models,
which are not necessarily accurate representations of the future.
Despite the fluctuations in its quarterly sales patterns, the Company's
operating expenses are incurred on an approximately ratable basis. As a result,
if expected sales are deferred for any reason, the Company's business, operating
results and financial condition could be materially adversely affected.
Trimble's gross margin is affected by a number of factors, including
product mix, product pricing, cost of components, foreign currency exchange
rates and manufacturing costs. For example, since Engineering & Construction and
Agriculture products generally have higher gross margins than Component
Technologies products, absent other factors, a shift in sales toward Engineering
& Construction and Agriculture products would lead to a gross margin improvement
for Trimble. On the other hand, if market conditions in the highly competitive
Engineering & Construction and Agriculture market segments forced us to lower
unit prices, we would suffer a decline in gross margin unless we were able to
timely offset the price reduction by a reduction in production costs or by sales
of other products with higher gross margins. Either of these events could have a
material effect on our business, operating results and financial condition.
Risks of Managing Future Growth.
Any significant growth in our sales or any significant expansion in the
scope of our operations could strain our management, financial, manufacturing
and other resources and may require us to implement and improve a variety of
operating, financial and other systems, procedures and controls. While Trimble
plans significant expansion of its sales, accounting, manufacturing, and other
information systems to meet these challenges, there can be no assurance that
these efforts will succeed, or that any existing or new systems, procedures or
controls will be adequate to support our operations or that our systems,
procedures and controls will be designed, implemented or improved in a cost
effective and timely manner. Any failure to implement, improve and expand such
systems, procedures and controls in a timely and efficient manner could have a
material adverse effect on our business, operating results and financial
condition.
30
Competition.
Trimble's markets are highly competitive. Our overall competitive position
depends on a number of factors including the price, quality and performance of
our products, the level of customer service, the development of new technology
and our ability to participate in emerging markets. Within each of our markets,
we encounter direct competition from other GPS, optical and laser suppliers and
competition may intensify from various larger domestic and international
competitors and new market entrants, some of which may be current Trimble
customers. The competition in the future, may, in some cases, result in price
reductions, reduced margins or loss of market share, any of which could
materially and adversely affect our business, operating results and financial
condition. We believe that our ability to compete successfully in the future
against existing and additional competitors will depend largely on our ability
to execute our strategy to provide systems and products with significantly
differentiated features compared to currently available products. There can be
no assurance that we will be able to implement this strategy successfully, or
that any such products will be competitive with other technologies or products
that may be developed by our competitors, many of whom have significantly
greater financial, technical, manufacturing, marketing, sales and other
resources than we do. There can be no assurance that we will be able to compete
successfully against current or future competitors or that competitive pressures
faced by us will not have a material adverse effect on our business, operating
results and financial condition. We expect that both direct and indirect
competition will increase in the future. Additional competition could adversely
affect our business, operating results and financial condition through price
reductions or loss of market share.
Risks Associated With International Operations and Sales.
Our customers are located throughout the world. In addition, we have
significant offshore operations, including manufacturing facilities, sales
personnel and customer support operations. Our offshore operations include
facilities in Australia, Canada, China, France, Germany, Great Britain, Japan,
Mexico, New Zealand, Sweden, Russia, Singapore and others. Our international
presence exposes us to risks not faced by wholly-domestic companies.
Specifically, we face the following risks, among others, unexpected changes in
regulatory requirements; tariffs and other trade barriers; political, legal and
economic instability in foreign markets, particularly in those markets in which
we maintain manufacturing and research facilities; difficulties in staffing and
management; language and cultural barriers; seasonal reductions in business
activities in the summer months in Europe and some other countries; integration
of foreign operations; longer payment cycles; greater difficulty in accounts
receivable collection; currency fluctuations; and potentially adverse tax
consequences. Although we implemented a program to manage foreign exchange risks
through hedging and other strategies, there can be no assurance that this
program will be successful and that currency exchange rate fluctuations will not
have a material adverse effect on our results of operations. In addition, in
certain foreign markets, there may be reluctance to purchase products based on
GPS technology, given the control of GPS by the U.S. Government.
Volatility of Stock Price.
Our common stock has experienced and can be expected to experience
substantial price volatility in response to actual or anticipated quarterly
variations in results of operations, announcements of technological innovations
or new products by us or our competitors, developments related to patents or
other intellectual property rights, developments in our relationship with
customers, suppliers, or strategic partners and other events or factors. In
addition, any short fall or changes in revenue, gross margins, earnings, or
other financial results from analysts' expectations could cause the price of our
common stock to fluctuate significantly. Additionally, certain macro-economic
factors such as changes in interest rates as well as market climate for the
high-technology sector could also have an impact on the trading price of our
stock.
Dependence on Proprietary Technology; Risk of Patent Infringement Claims.
Trimble's future success and competitive position is dependent upon its
proprietary technology, and we rely on patent, trade secret, trademark and
copyright law to protect our intellectual property. There can be no assurance
that the patents owned or licensed by us will not be invalidated, circumvented,
challenged or licensed to others, that the rights granted thereunder will
provide competitive advantages to us or that any of our pending or future patent
applications will be issued within the scope of the claims sought by Trimble, if
at all. Furthermore, there can be no assurance that others will not develop
technologies that are similar or superior to our technology, duplicate our
technology or design around the patents owned by Trimble. In addition, effective
copyright, patent and trade secret protection may be unavailable, limited or not
applied for in certain foreign countries. There can be no assurance that the
steps taken by Trimble to protect its technology will prevent the
misappropriation of such technology.
31
The value of our products relies substantially on our technical innovation
in fields in which there are many current patent filings. Trimble recognizes
that as new patents are issued or are brought to our attention by the holders of
such patents, it may be necessary for us to withdraw products from the market,
take a license from such patent holders, or redesign our products. We do not
believe any of our products currently infringe patents or other proprietary
rights of third parties, but we cannot be certain they do not do so. In
addition, the legal costs and engineering time required to safeguard
intellectual property or to defend against litigation could become a significant
expense of operations. Such events could have a material adverse effect on our
revenues or profitability. (See also Note 21 to the Consolidated Financial
Statements.)
Dependence on New Products.
Trimble's future revenue stream depends to a large degree on our ability to
bring new products to market on a timely basis. We must continue to make
significant investments in research and development in order to continue to
develop new products, enhance existing products and achieve market acceptance of
such products. However, there can be no assurance that development stage
products will be successfully completed or, if developed, will achieve
significant customer acceptance. If we were unable to successfully define,
develop and introduce competitive new products, and enhance existing products,
our future results of operations would be adversely affected. Development and
manufacturing schedules for technology products are difficult to predict, and
there can be no assurance that we will achieve timely initial customer shipments
of new products. The timely availability of these products in volume and their
acceptance by customers are important to the future success of Trimble. In some
of our markets -- for example, Engineering & Construction where we currently
have a market leadership position, a delay in new product introductions could
have a significant impact on our results of operations. No assurance can be
given that we will not incur problems in the future in innovating and
introducing new products. In addition, some of our products are subject to
governmental and similar certifications before they can be sold. For example, CE
certification for radiated emissions is required for most GPS receiver and data
communications products sold in the European Union. An inability to obtain such
certifications in a timely manner could have an adverse effect on our operating
results.
Strategic Alliances and External Investments.
We are continuously evaluating alliances and external investments in
technologies related to our business, and have entered into many strategic
alliances including making relatively small strategic equity investments in a
number of GPS related technology companies. Acquisitions of companies, divisions
of companies, or products and alliances and strategic investments entail
numerous risks, including (i) the potential inability to successfully integrate
acquired operations and products or to realize anticipated synergies, economies
of scale, or other value; (ii) diversion of management's attention; (iii) loss
of key employees of acquired operations; and (iv) inability to recover strategic
investments in development stage entities. Any such problems could have a
material adverse effect on our business, financial condition, and results of
operations.
We also believe that in certain emerging markets our success will depend on
our ability to form and maintain strategic alliances with established system
providers and industry leaders. Our failure to form and maintain such alliances,
or the preemption of such alliances by actions of other competitors or us will
adversely affect our ability to penetrate emerging markets. No assurances can be
given that we will not incur problems from current or future alliances,
acquisitions, or investments. Furthermore, there can be no assurance that we
will realize value from any such strategic alliances, acquisitions, or
investments.
Dependence on Key Customers.
We currently enjoy strong relationships with key customers. An increasing
amount of our revenue is generated from large OEMs such as Philips VDO, Nortel,
Caterpillar, CNH Global (formerly Case Corporation), Bosch, and others. A
reduction or loss of business with these customers could have a material adverse
effect on our financial condition and results of operations. There can be no
assurance that we will be able to continue to realize value from these
relationships in the future.
Dependence on Key Markets and Successful Identification of New Markets.
Trimble's current products serve many applications in Engineering &
Construction, Agriculture, Fleet & Asset Management, Component Technologies, and
Portfolio Technologies market segments. No assurances can be given that these
market segments will continue to generate significant or consistent demand for
our products.
32
Existing market segments could be significantly diminished by new technologies
or products that replace or render obsolete our technologies and products.
Trimble is dependent on successfully identifying new markets for its products.
There can be no assurance that the Company will be able to successfully identify
new high-growth markets in the future. Moreover, there can be no assurance that
new markets will develop for Trimble or its customers' products, or that our
technology or pricing will enable such markets to develop.
Dependence on Retaining and Attracting Highly Skilled Development and Managerial
Personnel.
The ability of Trimble to maintain its competitive technological position
will depend, in a large part, on its ability to attract, motivate, and retain
highly qualified development and managerial personnel. Competition for qualified
employees in our industry and location is intense, and there can be no assurance
that we will be able to attract, motivate and retain enough qualified employees
necessary for the future continued development of our business and products.
Potential Adverse Impact of Governmental and Other Similar Certifications.
Trimble has certain products that are subject to governmental and similar
certifications before they can be sold. For example, FAA certification is
required for all aviation products. Also, our products that use integrated radio
communication technology require an end-user to obtain licensing from the
Federal Communications Commission (FCC) for frequency-band usage. During the
fourth quarter of 1998, the FCC temporarily suspended the issuance of licenses
for certain of our real-time kinematic products because of interference with
certain other users of similar radio frequencies. An inability or delay in
obtaining such certifications or delays of the FCC could have an adverse effect
on our operating results.
Dependence on Radio Frequency Spectrum.
Trimble's GPS technology is dependent on the use of the Standard
Positioning Service (SPS) provided by the U.S. Government's Global Positioning
System (GPS). The GPS SPS operates in radio frequency bands that are globally
allocated for radio navigation satellite services. International allocations of
radio frequency are made by the International Telecommunications Union (ITU), a
specialized technical agency of the United Nations. These allocations are
further governed by Radio Regulations which have treaty status and which may be
subject to modification every two-three years by the World Radio communication
Conference. Any ITU reallocation of radio frequency bands, including frequency
band segmentation or sharing of spectrum, may materially and adversely affect
the utility and reliability of our products, which would, in turn, cause a
material adverse effect on our operating results. In addition, unwanted
emissions from mobile satellite services and other equipment operating in
adjacent frequency bands or inband from licensed and unlicensed devices may
materially and adversely affect the utility and reliability of our products,
which could result in a material adverse effect on our operating results. The
Federal Communications Commission (FCC) continually receives proposals for novel
technologies and services which may seek to operate in, or across, the radio
frequency bands currently used by the GPS SPS and other public safety services.
Adverse decisions by the FCC that result in harmful interference to the delivery
of the GPS SPS may materially and adversely affect the utility and reliability
of our products, which could result in a material adverse effect on our
operating results.
Reliance on GPS Satellite Network.
NAVSTAR satellites and their ground support systems are complex electronic
systems subject to electronic and mechanical failures and possible sabotage. The
satellites were originally designed to have lives of 7.5 years and are subject
to damage by the hostile space environment in which they operate. However, of
the current deployment of 27 satellites in place, some have already been in
place for 12 years and have an average age of 6 years. To repair damaged or
malfunctioning satellites is currently not economically feasible. If a
significant number of satellites were to become inoperable, there could be a
substantial delay before they are replaced with new satellites. A reduction in
the number of operating satellites would impair the current utility of the GPS
system and the growth of current and additional market opportunities. In
addition, there can be no assurance that the U.S. government will remain
committed to the operation and maintenance of GPS satellites over a long period,
or that the policies of the U.S. Government for the use of GPS without charge
will remain unchanged. However, a 1996 Presidential Decision Directive marks the
first time in the evolution of GPS that access for civilian use free of direct
user fees is specifically recognized and supported by Presidential policy. In
addition, Presidential policy has been complemented by corresponding
legislation, signed into law. Because of ever-increasing commercial applications
of GPS, other U.S. Government agencies may become involved in the administration
or the regulation of the use of GPS signals. Any of the foregoing factors could
affect the willingness of buyers of the Company's products to select
33
GPS-based systems instead of products based on competing technologies. Any
resulting change in market demand for GPS products could have a material adverse
effect on Trimble's financial results. For example, European governments have
expressed interest in building an independent satellite navigation system, known
as Galileo. Depending on the as yet undetermined design and operation of this
system, there may be interference to the delivery of the GPS SPS and may
materially and adversely affect the utility and reliability of our products,
which could result in a material adverse effect on our operating results.
Reliance on a continuous power supply.
* California is in the midst of an energy crisis that could disrupt our
operations and increase our expenses. In the event of an acute power shortage,
that is, when power reserves for the State of California fall below certain
critical levels, California has on some occasions implemented, and may in the
future continue to implement, rolling blackouts throughout California. We
currently do not have backup generators or alternate sources of power in the
event of a blackout, and our current insurance does not provide coverage for any
damages we or our customers may suffer as a result of any interruption in our
power supply. If blackouts interrupt our power supply or Solectron's power
supply, we would be temporarily unable to continue operations at our California
facilities. Any such interruption in our ability to continue operations at our
facilities or Solectron to manufacture product at its facilities could damage
our reputation, harm our ability to retain existing customers and to obtain new
customers, and could result in lost revenue, any of which could substantially
harm our business and results of operations.
NEW ACCOUNTING STANDARDS
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, (SFAS 133) "Accounting for Derivative
Instruments and Hedging Activities", as amended by SFAS No. 138. SFAS 133 will
require Trimble to record all derivatives held on the balance sheet at fair
value. Derivatives that are not hedges must be adjusted to fair value through
income. With respect to derivatives which are hedges, depending on the nature of
the hedge, changes in the fair value of derivatives either will be offset
against the change in fair value of the hedged assets, liabilities, or firm
commitments through earnings, or will be recognized in other comprehensive
income until the hedged item is recognized in earnings. The ineffective portion
of a derivative's change in fair value will be immediately recognized in
earnings. In June of 1999 the Financial Accounting Standards Board delayed the
effective date of implementation for one year; therefore, SFAS 133 is effective
for fiscal years beginning after June 15, 2000. Trimble will adopt SFAS 133 as
of the beginning of its fiscal year 2001. The effect of adopting the SFAS 133
has been evaluated, and does not have a material adverse effect on Trimble's
financial position or results of operations.
In December 1999, the Securities and Exchange Commission ("SEC") issued
Staff Accounting Bulletin ("SAB") 101, Revenue Recognition in Financial
Statements which provides guidance related to revenue recognition based on
interpretations and practices followed by the SEC. SAB 101 was effective the
first fiscal quarter of fiscal years beginning after December 15, 1999 and
requires companies to report any changes in revenue recognition as cumulative
change in accounting principle at the time of implementation in accordance with
Accounting Principles Board Opinion No. 20, "Accounting Changes." In March 2000,
the SEC issued SAB 101A "Amendment: Revenue Recognition in Financial
Statements," which delayed implementation of SAB 101 until the Company's first
fiscal quarter of 2000. In June 2000, the SEC issued SAB 101B "Second Amendment:
Revenue Recognition in Financial Statements," which delayed the implementation
of SAB 101 until the Company's fourth fiscal quarter of 2000. SAB 101 was
adopted by the Company in the fourth fiscal quarter of 2000 and it did not have
any material effect on the Company's financial position or results of
operations.
Item 7A. Quantitative and Qualitative Disclosure about Market Risk
The following is a discussion of Trimble's exposure to market risk related
to changes in interest rates and foreign currency exchange rates. Trimble uses
certain derivative financial instruments to manage these risks. Trimble does not
use derivative financial instruments for speculative or trading purposes. All
financial instruments are used in accordance with polices approved by Trimble's
board of directors.
Market Interest Rate Risk
Short-term Investments Owned by the Company. As of December 29, 2000,
Trimble had no short-term investments.
34
As of December 31, 1999, Trimble had short-term investments of $52.7
million. These short-term investments consisted of $50.2 million of highly
liquid investments, with original maturities at the date of purchase between
three and twelve months and a $2.5 million liquid investment with an original
maturity at the date of purchase of 15 months, (See Note 4 to the Consolidated
Financial Statements.) These investments were subject to interest rate risk and
decreased in value if market interest rates increased. A hypothetical 10 percent
increase in market interest rates from levels at December 31, 1999, would cause
the fair value of these short-term investments to decline by an immaterial
amount. Because Trimble had the ability to hold these investments until
maturity, we did not expect the value of these investments to be affected to any
significant degree by the effect of a sudden change in market interest rates.
Declines in interest rates over time will, however, reduce our interest income.
Outstanding Debt of the Company. The Company is exposed to market risk due
to the possibility of changing interest rates under the new senior secured
credit facilities. The Company's new credit facilities are comprised of a 3-year
US dollar-only revolver, a 3-year Multi-Currency revolver, and a 5-year term
loan. (See Note 2 to the Consolidated Financial Statements under Acquisition
Financing.) The entire credit facility has interest payments based on a floating
rate of LIBOR plus 275 basis points for the first 6 months and thereafter tied
to a formula based on the Company's leverage ratio. The US dollar and the
Multi-Currency revolvers run through July 2003 and have outstanding principle
balances at December 29, 2000 of $50,000,000 and $12,000,000, respectively. As
of December 29, 2000 the Company has borrowed from the Multi-Currency revolver
in US currency only. The term loan runs through July 2005 and has an outstanding
principle balance of $100,000,000 at December 29, 2000. The 3-month LIBOR
effective rate at December 29, 2000 was 6.438%. A 10% increase in 3-month LIBOR
rates could result in approximately $1.0 million annual increase in interest
expense on the existing principal balances.
The Company also has $7.1 million of Euro-denominated debt. At December 29,
2000 $3.7 million was current. The interest rate on the current portion of this
instrument is fixed at 6%. A hypothetical 10% decrease in interest rates would
not have a material impact on the Company as related to this debt.
In addition, the Company has a $1.9 million promissory note, of which
$67,000 was current at December 29, 2000. The note is payable in monthly
installments, bearing an 8.940% variable interest rate. A hypothetical 10%
increase in interest rates would not have a material impact on the Company.
As of December 31, 1999, Trimble had outstanding long-term debt of
approximately $30.0 million of subordinated promissory notes at a fixed interest
rate of 10%. The interest rate of this instrument was fixed. A hypothetical 10%
decrease in the interest rates would not have a material impact on Trimble.
Increases in interest rates could, however, increase interest expense associated
with future borrowings of Trimble, if any.
The Company may consider utilizing interest rate swap agreements to alter
interest rate exposures. There were no interest rate swap agreements outstanding
as of December 29, 2000 or December 30, 1999.
Foreign Currency Exchange Rate Risk
Trimble hedges risks associated with foreign currency transactions in order
to minimize the impact of changes in foreign currency exchange rates on
earnings. Trimble utilizes forward contracts to hedge trade and intercompany
receivables and payables. These contracts reduce the exposure to fluctuations in
exchange rate movements, as the gains and losses associated with foreign
currency balances are generally offset with the gains and losses on the hedge
contracts. All hedge instruments are marked to market through earnings every
period.
* Trimble does not anticipate any material adverse effect on its
consolidated financial position utilizing our current hedging strategy.
All contracts have a maturity of less than one year, and we do not defer
any gains and losses, as they are all accounted for through earnings every
period.
35
The following table provides information about the Company's foreign
exchange forward contracts outstanding as of December 29, 2000:
Foreign Contract Value Fair Value
Buy/ Currency Amount USD in USD
Currency Sell (in thousands) (in thousands) (in thousands)
- ----------------------- ----------- ------------------------ ------------------------ --------------------
YEN Sell 125,600 $ 1,136 $ 1,106
NZD Buy 4,619 $ 1,934 $ 2,045
NZD Sell 200 $ 80 $ 89
EURO Sell 4,109 $ 3,569 $ 3,863
Sterling Buy 1,665 $ 2,416 $ 2,489
The following table provides information about Trimble's foreign exchange
forward contracts outstanding as of December 31, 1999:
Foreign Contract Value Fair Value
Buy/ Currency Amount USD in USD
Currency Sell (in thousands) (in thousands) (in thousands)
- ----------------------- ----------- ------------------------ ------------------------ --------------------
YEN Buy 67,000 $ 657 $ 656
YEN Sell 261,000 $ 2,517 $ 2,568
NZD Buy 4,400 $ 2,257 $ 2,289
EURO Sell 2,955 $ 3,097 $ 3,014
Sterling Buy 1,230 $ 2,002 $ 1,996
* The hypothetical changes and assumptions made above will be different
from what actually occurs in the future. Furthermore, the computations do not
anticipate actions that may be taken by Trimble's management, should the
hypothetical market changes actually occur over time. As a result, actual
earnings effects in the future will differ from those quantified above.
36
Item 8. Financial Statements and Supplementary Data
CONSOLIDATED BALANCE SHEETS
December 29, December 31,
2000 1999
- --------------------------------------------------------------------------------------------------------------------
(In thousands)
ASSETS
Current assets:
Cash and cash equivalents $ 40,876 $ 49,264
Short-term investments - 52,728
Accounts receivable, less allowance for doubtful
accounts of $6,538 and $2,949, respectively 83,600 36,005
Inventories 60,846 16,435
Other current assets 8,017 4,510
------------------ ------------------
Total current assets 193,339 158,942
Property and equipment, at cost less accumulated
depreciation 34,059 12,333
Intangible assets, less accumulated amortization of
$16,998 and $5,127, respectively 249,832 1,238
Deferred income taxes 531 387
Other assets 12,743 8,851
------------------ ------------------
Total long-term assets 297,165 22,809
------------------ ------------------
Total assets $ 490,504 $ 181,751
================== ==================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Bank & other short-term borrowings $ 62,000 $ -
Current portion of long-term debt 51,721 1,388
Accounts payable 26,448 11,710
Accrued compensation and benefits 16,771 7,011
Accrued liabilities 31,626 14,091
Accrued liabilities related to disposal of General Aviation 867 2,212
Accrued warranty expense 7,749 5,786
Income taxes payable 5,005 2,983
Deferred gain on sale of assets 1,591 1,953
------------------ ------------------
Total current liabilities 203,778 47,134
Noncurrent portion of long-term debt and other liabilities 137,341 30,566
Deferred tax liability 8,230 -
Other noncurrent liabilities 6,212 3,255
------------------ ------------------
Total liabilities 355,561 80,955
------------------ ------------------
Commitments and contingencies
Shareholders' equity:
Preferred stock, no par value; 3,000 shares
authorized; none outstanding - -
Common stock, no par value; 40,000 shares
authorized; 24,162 and 22,742 shares outstanding, respectively 153,853 125,969
Common stock warrants 993 993
Accumulated deficit (10,940) (25,125)
Accumulated other comprehensive loss (8,963) (1,041)
------------------ ------------------
Total shareholders' equity 134,943 100,796
------------------ ------------------
Total liabilities and shareholders' equity $ 490,504 $ 181,751
================== ==================
See accompanying notes to consolidated financial statements.
37
CONSOLIDATED STATEMENTS OF OPERATIONS
December 29, December 31, Janaury 1,
Fiscal Years ended 2000 1999 1999
- ------------------------------------------------------------------------------------------------------------------------------------
(In thousands, except per share data)
Revenue $ 369,798 $ 271,364 $ 268,323
--------------------- ----------------- ------------------
Operating expenses:
Cost of sales 173,237 127,117 141,075
Research and development 46,520 36,493 45,763
Sales and marketing 79,901 53,543 61,874
General and administrative 30,514 33,750 33,245
Restructuring charges - - 10,280
Amortization of goodwill & other purchased intangibles 13,407 - -
--------------------- ----------------- ------------------
Total operating expenses 343,579 250,903 292,237
--------------------- ----------------- ------------------
Operating income (loss) from continuing operations 26,219 20,461 (23,914)
Nonoperating income (expense):
Interest and investment income 4,478 3,857 3,588
Interest and other expense (14,561) (3,611) (5,863)
Foreign exchange gain (loss) (376) 28 234
--------------------- ----------------- ------------------
Total nonoperating income (expense) (10,459) 274 (2,041)
--------------------- ----------------- ------------------
Income (loss) before income taxes from continuing operations 15,760 20,735 (25,955)
Income tax provision 1,575 2,073 1,400
--------------------- ----------------- ------------------
Net income (loss) from continuing operations $ 14,185 $ 18,662 $ (27,355)
--------------------- ----------------- ------------------
Discontinued Operations:
Loss from discontinued operations (net of income tax
benefit of $0) $ - $ - $ (5,760)
Estimated gain (loss) on disposal of discontinued operations
(net of tax) $ - $ 2,931 $ (20,279)
--------------------- ----------------- ------------------
Gain (loss) on discontinued operations $ - $ 2,931 $ (26,039)
--------------------- ----------------- ------------------
Net income (loss) $ 14,185 $ 21,593 $ (53,394)
===================== ================= ==================
Basic net income (loss) per share from continuing operations $ 0.60 $ 0.83 $ (1.22)
Basic net income (loss) per share from discontinued operations $ - $ 0.13 $ (1.16)
--------------------- ----------------- ------------------
Basic net income (loss) per share $ 0.60 $ 0.96 $ (2.38)
===================== ================= ==================
Shares used in calculating basic
net income (loss) per share 23,601 22,424 22,470
===================== ================= ==================
Diluted net income (loss) per share from continuing operations $ 0.55 $ 0.82 $ (1.22)
Diluted net income (loss) per share from discontinued operations $ - $ 0.13 $ (1.16)
--------------------- ----------------- ------------------
Diluted net income (loss) per share $ 0.55 $ 0.95 $ (2.38)
===================== ================= ==================
Shares used in calculating diluted
net income (loss) per share 25,976 22,852 22,470
===================== ================= ==================
See accompanying notes to consolidated financial statements.
38
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
Accumulative
Common stock Retained other Total
and warrants earnings comprehensive shareholders'
Shares Amount (deficit) income/(loss) equity
- ----------------------------------------------------------------------------------------------------------------------------------
(In thousands)
Balance at January 2, 1998 22,813 $ 133,355 $ 6,676 $ (548) $ 139,483
Components of comprehensive income:
Net loss (53,394) (53,394)
Unrealized gain on short-term investments 11 11
Currency translation adjustments (255) (255)
----------------
Total comprehensive income (53,638)
----------------
Subtotal 85,845
----------------
Issuances of stock under employee plans 514 4,977 - - 4,977
Repurchases of common stock (1,080) (16,131) - - (16,131)
-----------------------------------------------------------------------------
Balance at January 1, 1999 22,247 122,201 (46,718) (792) 74,691
Components of comprehensive income:
Net income 21,593 21,593
Unrealized loss on short-term investments (142) (142)
Currency translation adjustments (107) (107)
------------------
Total comprehensive income 21,344
------------------
Subtotal 96,035
------------------
Issuances of stock under employee plans 495 4,468 - - 4,468
Issuance of warrants - 293 - - 293
-----------------------------------------------------------------------------
Balance at December 31, 1999 22,742 126,962 (25,125) (1,041) 100,796
Components of comprehensive income:
Net income 14,185 14,185
Unrealized gain on short-term investments 123 123
Currency translation adjustments (8,045) (8,045)
------------------
Total comprehensive income 6,263
------------------
Subtotal 107,059
------------------
Issuances of stock under employee plans
and exercise of warrants 843 12,043 - - 12,043
Issuances of stock for acquisition 577 14,995 14,995
Issuance of warrants - 846 - - 846
-----------------------------------------------------------------------------
Balance at December 29, 2000 24,162 $ 154,846 $ (10,940) $ (8,963) $ 134,943
=============================================================================
See accompanying notes to consolidated financial statements.
39
CONSOLIDATED STATEMENTS OF CASH FLOWS
December 29, December 31, January 1,
Fiscal Years ended 2000 1999 1999
- ----------------------------------------------------------------------------------------------------------------------------------
(In thousands)
Cash flow from operating activities of continuing operations:
Net income (loss) from continuing operations $ 14,185 $ 18,662 $ (27,355)
Adjustments to reconcile net income (loss) from continuing
operations to cash flows provided by operating activities
of continuing operations:
Depreciation and amortization expense 23,476 9,073 12,510
Writedown of fixed assets due to restructure - - 5,343
Amortization of deferred gain (2,555) (651) -
Other (3,621) (51) (835)
Decrease (increase) in assets:
Accounts receivable, net (6,091) (2,574) 15,475
Inventories (4,118) 6,653 5,219
Other current and noncurrent assets (3,303) (354) 1,622
Deferred income taxes (144) 18 (49)
Increase (decrease) in liabilities:
Accounts payable 7,554 (1,290) (5,724)
Accrued compensation and benefits (6,362) 2,315 (1,134)
Customer advances - (808) (22)
Accrued liabilities 2,955 (8,193) 10,482
Income taxes payable (2,141) 825 (506)
----------------- --------------- ---------------
Net cash provided by operating activities of continuing operations 19,835 23,625 15,026
Net cash used by operating activities of discontinued operations - - (8,058)
----------------- --------------- ---------------
Net cash provided (used) by operating activities 19,835 23,625 6,968
----------------- --------------- ---------------
Cash flow from investing activities:
Equity investments 35 (748) (1,548)
Acquisition of property and equipment (7,555) (6,411) (11,539)
Proceeds from sale of assets - 26,863 -
Acquisitions, net of cash acquired (211,488) - -
Costs of capitalized patents (900) (1,127) (992)
Purchase of short-term investments (6,458) (54,809) (53,854)
Maturities/Sales of short-term investments 59,186 18,350 90,756
----------------- --------------- ---------------
Net cash provided (used) by investing activities of continuing operations (167,180) (17,882) 22,823
Net cash used by investing activities of discontinued operations - - (339)
----------------- --------------- ---------------
Net cash provided (used) by investing activities (167,180) (17,882) 22,484
----------------- --------------- ---------------
Cash flow from financing activities:
Issuance of common stock 12,043 4,468 4,977
Repurchase of common stock - - (16,131)
(Payment)/collection of notes receivable 196 (540) (219)
Proceeds from long-term debt and revolving credit lines 162,000 - 2,835
(Payments) on long-term debt and revolving credit lines (35,282) (1,272) -
----------------- --------------- ---------------
Net cash provided (used) by financing activities of continuing operations 138,957 2,656 (8,538)
Net cash provided by financing activities of discontinued operations - - -
----------------- --------------- ---------------
Net cash provided (used) by financing activities 138,957 2,656 (8,538)
----------------- --------------- ---------------
Increase (decrease) in cash and cash equivalents (8,388) 8,399 20,914
Cash and cash equivalents, beginning of period 49,264 40,865 19,951
----------------- --------------- ---------------
Cash and cash equivalents, end of period $ 40,876 $ 49,264 $ 40,865
================= =============== ===============
See accompanying notes to consolidated financial statements
40
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1 - Summary of significant accounting policies:
Use of estimates. The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the amounts reported in the financial
statements and accompanying notes. Due to the inherent nature of those
estimates, actual results could differ from expectations.
Basis of presentation. Trimble Navigation Limited ("Trimble" or the
"Company") fiscal year is an annual period that varies from 52 to 53 weeks and
always ends on the Friday nearest to December 31, which for fiscal 2000 was
December 29, 2000.
Trimble's fiscal year will normally consist of four equal quarters of 13
weeks each, or 52 weeks; however, due to the fact that there are not exactly 52
weeks in a calendar year and that there is slightly more than one additional day
per year (not including the effects of leap year) in each calendar year as
compared to a 52-week fiscal year, Trimble will have a fiscal year comprising 53
weeks in certain fiscal years, as determined by when Friday falls closest to
December 31 in consecutive calendar years.
In those resulting fiscal years that have 53 weeks, Trimble will record an
extra week of revenues, costs and related financial activity. Therefore, the
financial results of those fiscal years, and the associated quarter, having the
extra week, will not be exactly comparable to the prior and subsequent 52-week
fiscal years, and the associated quarters having only 13 weeks. Thus, due to the
inherent nature of adopting a 52-53 week fiscal year, Trimble, analysts,
shareholders, investors and others will have to make appropriate adjustments to
any analysis performed when comparing the Company's activities and results in
fiscal years that contain 53 weeks, to those that contain the standard 52 weeks.
Fiscal years 2000, 1999, and 1998 were all comprised of 52 weeks.
The consolidated financial statements of Trimble include the operating
results of the Spectra Precision Group since the effective date of acquisition
of July 14, 2000 and also include the operating results of Tripod Data Systems
since the effective date of acquisition of November 14, 2000.
Principles of consolidation. The consolidated financial statements include
the accounts of Trimble and its wholly owned subsidiaries after elimination of
all material intercompany balances and transactions.
Foreign currency translation. Assets and liabilities of Trimble's foreign
subsidiaries are translated into U.S. dollars at year-end exchange rates, and
revenues and expenses are translated at average rates prevailing during the
year. Local currencies are considered to be the functional currencies for the
Company's non-U.S. subsidiaries. Translation adjustments are deferred in a
separate component of shareholders' equity. Foreign currency transaction gains
and losses are included in results of operations as incurred.
Forward foreign currency exchange contracts. Trimble's policy is to hedge
its known exposure to foreign currency transactions to minimize the effect of
changes in foreign currency exchange rates on consolidated results of
operations. Trimble's policy is to enter into simple forward foreign exchange
contracts to either buy or sell currency if the net position exceeds $400,000.
The forward foreign exchange contract obligates Trimble to exchange
predetermined amounts of specified foreign currencies at specified exchange
rates on specified dates, or to make an equivalent U.S. dollar payment equal to
the value of such exchange. For contracts that are designated and effective as
hedges, discounts, or premiums (the difference between the spot exchange rate
and the forward exchange rate at inception of the contract) are accreted or
amortized to other operating expenses over the contract lives, using the
straight-line method, while realized and unrealized gains and losses resulting
from changes in the spot exchange rate (including those from open, matured, and
terminated contracts) are included in results of operations. The related amounts
due to or from counterparties are included in other assets or other liabilities.
Contract amounts are marked to market, with changes in market value recorded in
earnings as foreign exchange gains or losses. To date, Trimble has entered into
simple forward foreign currency exchange contracts to offset the effects of
changes in exchange rates on foreign-denominated intercompany receivables. At
December 29, 2000, Trimble had forward foreign currency exchange contracts to
sell 125,600,000 Japanese yen, 4,109,000 European Currency units, and 200,000
New Zealand dollars and to buy 4,619,000 New Zealand dollars and 1,665,000
British pounds sterling at contracted rates that mature over the next six
months.
41
Cash and cash equivalents.Cash and cash equivalents include all cash and
highly liquid investments with original maturities of three months or less. The
carrying amount of cash and cash equivalents approximates fair value because of
the short maturity of those instruments.
Short term/Marketable securities. Trimble has classified all its
short-term/marketable investments as "available-for-sale" securities.
Available-for-sale securities are carried at fair value, with the unrealized
holding gains and losses, net of tax effects, reported as a separate component
of shareholders' equity. Fair value is based on quoted market prices. The cost
of debt securities in this classification is adjusted for amortization of
premiums and accretion of discounts to maturity. Such amortization, as well as
interest, dividends, and realized gains and losses, is included in interest and
investment income. The cost of securities sold is based on the specific
identification method. Trimble has classified all investments as short-term.
(See Note 4 to the Consolidated Financial Statements.)
Concentration of credit risk. In entering into forward foreign exchange
contracts, Trimble has assumed the risk that might arise from the possible
inability of counterparties to meet the terms of their contracts. The
counterparties to these contracts are major multinational commercial banks, and
Trimble does not expect any losses as a result of counterparty defaults. Trimble
is also exposed to credit risk in its accounts receivable and performs ongoing
credit evaluations of its customers and generally does not require collateral.
The expenses recorded for doubtful accounts receivable were $1,198,000 in fiscal
2000, $1,875,000 in fiscal 1999, and $195,000 in fiscal 1998.
Inventories. Inventories are stated at the lower of standard cost or
market. Standard costs approximate average actual costs.
Revenue recognition. Trimble recognizes revenue from product sales when the
products are shipped to the customer, title has transferred, and no significant
obligations remain. Trimble also requires the following: (i) execution of a
written customer order, (ii) delivery of the product, (iii) fee is fixed and
determinable, and (iv) collectibility of the proceeds is probable. In
circumstances where the customer has delayed their acceptance of our product, we
defer recognition of revenue until acceptance. Revenues from purchased extended
warranty and support agreements are deferred and recognized ratably over the
term of the warranty/support period. Substantially all technology licenses and
research revenue have consisted of initial license fees and royalties, which
were recognized when earned, when Trimble had no remaining obligations.
Sales to distributors are recognized upon shipment providing that there is
evidence of the arrangement through a distribution agreement or purchase order,
and the Company has no remaining performance obligations, the price and terms of
the sale are fixed and collection is probable. As a normal practice,
distributors do not have a right of return.
In fiscal 1999, Trimble adopted Statement of Position 97-2 (SOP 97-2) as
set forth by FASB, "Software Revenue Recognition," which requires that revenue
recognized from software arrangements be allocated to each element of the
arrangement based on the relative fair values of the elements, such as software
products, upgrades, enhancements, post-contract customer support, installation,
or training. Revenue from post-contract customer support (PCS) is recognized
ratably over the period of the PCS agreement. The implementation of SOP 97-2 did
not have a material impact on the recognized revenue of the Company.
Trimble accounts for long-term development contracts on the percentage of
completion method, and income is recognized as work on contracts progress, but
estimated losses on contracts in progress are immediately charged to operations.
In December 1999, the Securities and Exchange Commission issued Staff
Accounting Bulletin No. 101 (SAB 101). SAB 101 summarizes certain areas of the
staff's views in applying generally accepted accounting principles to revenue
recognition in financial statements. In the fourth quarter of the fiscal year
ended December 29, 2000, Trimble adopted SAB 101 and reviewed the recognition of
revenue for qualifying contracts. The result did not have a material effect on
Trimble's financial position or results of operations.
Product warranty. Trimble provides for estimated warranty costs at the time
of sale. The warranty period is generally for one year from date of shipment,
except for air transport products, for which the period is generally a basic
three-year warranty period with an additional two-year warranty sold with some
units. The Company's optic and laser products generally carry one to three year
warranties. In addition, select military
42
programs may require extended warranty periods and certain products sold by our
Tripod Data Systems subsidiary have a 90 day warranty period.
Advertising costs. Trimble expenses advertising costs as incurred.
Advertising expenses were $7,879,000, $4,229,000, and $6,490,000 in fiscal 2000,
1999, and 1998, respectively.
Research and Development and Engineering Costs. Research, development and
engineering costs are charged to expense when incurred. Trimble has received
third party funding of $4.8 million, $7.1 million and $2.9 million in 2000,
1999, and 1998, respectively. Trimble has offset research, development and
engineering expenses by the third party funding. Trimble retains the rights to
any technology that is developed.
Stock compensation. In accordance with the provisions of Statement of
Financial Accounting Standards (SFAS) No. 123, "Accounting for Stock-Based
Compensation," Trimble applies Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees" (APB 25) and related interpretations
in accounting for its stock option plans and stock purchase plan. Accordingly,
it does not recognize compensation cost for stock options granted at or above
market. Note 15 to the Consolidated Financial Statements describes the plans
operated by Trimble, and contains a summary of the pro forma effects to reported
net income (loss) and earnings (loss) per share for fiscal 2000, 1999, and 1998
as if Trimble had elected to recognize compensation cost based on the fair value
of the options granted at grant date, as prescribed by SFAS No. 123.
Depreciation. Depreciation of property and equipment owned or under
capitalized leases is computed using the straight-line method over the shorter
of the estimated useful lives or the lease terms. Useful lives include a range
from three to eight years for machinery and equipment and four to five years for
furniture and fixtures.
Intangible and Long-lived Assets. Intangible assets include goodwill and
other intangible assets such as assembled workforce, patents, licenses,
technology and trademarks, which are capitalized at cost and amortized on the
straight-line basis over their estimated useful lives. Useful lives range from 3
to 10 years, with the exception of goodwill, which is amortized over 20 years.
If facts and circumstances indicate that the goodwill, other intangible
assets or property and equipment may be impaired, an evaluation of continuing
value would be performed. If an evaluation is required, the estimated future
undiscounted cash flows associated with these assets would be compared to their
carrying amount to determine if a write down to fair market value or discounted
cash flow value is required.
Interest. All interest costs incurred have been charged to interest
expense.
Earnings (loss) per share. Basic earnings per share represents the weighted
average common shares outstanding during the period and excludes any dilutive
effects of options, warrants, and convertible securities. The dilutive effects
of options, warrants, and convertible securities are included in diluted
earnings per share.
New accounting standards. In June 1998, the Financial Accounting Standards
Board issued Statement of Financial Accounting Standards No. 133, (SFAS 133), as
amended by SFAS No. 138 "Accounting for Derivative Instruments and Hedging
Activities." SFAS 133 will require Trimble to record all derivatives held on the
balance sheet at fair value. Derivatives that are not hedges must be adjusted to
fair value through income. With respect to derivatives which are hedges,
depending on the nature of the hedge, changes in the fair value of derivatives
either will be offset against the change in fair value of the hedged assets,
liabilities, or firm commitments through earnings, or will be recognized in
other comprehensive income until the hedged item is recognized in earnings. The
ineffective portion of a derivative's change in fair value will be immediately
recognized in earnings. In June of 1999 the Financial Accounting Standards Board
delayed the effective date of implementation for one year; therefore, SFAS 133
is effective for fiscal years beginning after June 15, 2000. Trimble will adopt
SFAS 133 as of the beginning of its fiscal year 2001. The effect of adopting the
SFAS 133 has been evaluated, and will not have a material adverse effect on
Trimble's financial position or results of operations.
In December 1999, the Securities and Exchange Commission ("SEC") issued
Staff Accounting Bulletin ("SAB") 101, Revenue Recognition in Financial
Statements which provides guidance related to revenue recognition based on
interpretations and practices followed by the SEC. SAB 101 was effective the
first fiscal quarter of fiscal years beginning after December 15, 1999 and
requires companies to report any changes in revenue recognition as cumulative
change in accounting principle at the time of implementation in accordance with
Accounting Principles
43
Board Opinion No. 20, "Accounting Changes." In March 2000, the SEC issued SAB
101A "Amendment: Revenue Recognition in Financial Statements," which delayed
implementation of SAB 101 until the Company's first fiscal quarter of 2000. In
June 2000, the SEC issued SAB 101B "Second Amendment: Revenue Recognition in
Financial Statements," which delayed the implementation of SAB 101 until the
Company's fourth fiscal quarter of 2000. SAB 101 was adopted by the Company in
the fourth fiscal quarter of 2000 and it did not have any material effect on the
Company's financial position or results of operations.
Note 2 - Acquisitions:
SPECTRA PRECISION GROUP ACQUISTION
Effective as of July 14, 2000, Trimble completed the acquisition of the
Spectra Precision wholly owned businesses formerly owned by Thermo Electron
Corporation ("Thermo Electron"), collectively known as the "Spectra Precision
Group" for an aggregate purchase price of approximately $294 million. This
purchase price is subject to a final adjustment as provided for in the
acquisition agreements. This final adjustment is not expected to be material.
The acquisition included 100% of the stock of Spectra Precision Inc., a
Delaware corporation, Spectra Precision SRL, an Italian corporation, Spectra
Physics Holdings GmbH, a German corporation, and Spectra Precision BV, a
Netherlands corporation. The acquisition also included certain assets and
liabilities of Spectra Precision AB, a Swedish corporation, including 100% of
the shares of Spectra Precision SA, a French corporation, Spectra Precision
Scandinavia AB, a Swedish corporation, Spectra Precision of Canada Ltd., a
Canadian corporation, and Spectra Precision Handelsges mbH, an Austrian
corporation. The acquisition has been accounted for as a purchase for accounting
purposes; accordingly, Trimble's consolidated results of operations include the
operating results of the Spectra Precision Group since the effective date of the
acquisition. The acquisition was financed with $80 million in seller
subordinated debt, $140 million of debt provided through a syndicate of banks,
and $74 million of the Company's available cash on hand. (See further
discussions below under "Acquisition Financing".) The Company acquired
approximately $133 million of identifiable intangible assets as part of the
acquisition which the Company is amortizing over various time periods ranging
from 5 to 10 years. The preliminary allocation of purchase price has also
resulted in the recording of approximately $133 million of goodwill due to the
acquisition, which will be amortized over 20 years. Acquisition costs relating
to the purchase of the Spectra Precision Group approximated $7 million.
In connection with the acquisition of the Spectra Precision Group, the
Company accrued approximately $9.0 million for costs to close certain
duplicative office facilities and combine operations and relocate certain
employees. These costs were accrued for as part of the preliminary allocation of
the purchase price. The facility consolidation and employee relocations will
result from primarily combining certain office facilities and duplicative
functions, including management functions, of the Spectra Precision Group. The
Company has not yet finalized its plans to consolidate facilities and to
relocate employees, nor has it finalized a determination of the total costs to
be incurred upon the termination of certain office facility leases or its
ability to sublease vacated office space. Accordingly, unresolved issues could
result in an increase or decrease in the liabilities for facility consolidation,
the discontinuance of overlapping product lines, employee relocation, and
related tax and legal expenses. These adjustments, if any, will be reported as
an increase or decrease in goodwill. Through December 29, 2000, the Company had
charged $809,000 (which consisted of inventory write-offs related to the
discontinuance of overlapping product lines) against the reserve, and the
accrual for future costs to be incurred was $8.2 million at December 29, 2000.
The elements of the reserve at fiscal year end 2000 on the balance sheet
are as follows (in thousands):
Employee Relocation Expense $ 390
Inventory Obsolescence 1,876
Legal and Tax Expense 1,175
Restructuring Expenses 4,750
---------------
Subtotal $ 8,191
===============
44
Acquisition Financing:
In order to finance the acquisition of the Spectra Precision Group, fund
the Company's on-going working capital requirements, and pay related fees and
expenses of the acquisition, Trimble (i) obtained a new senior secured credit
facility, (ii) issued an $80 million subordinated seller promissory note, (iii)
terminated its then existing $50 million unsecured revolving credit facility and
(iv) prepaid its then existing $30 million outstanding subordinated promissory
notes, as briefly summarized below.
New Credit Facilities: In July 2000, ABN AMRO Bank, N.V. led a syndicate of
banks which underwrote $200 million of new senior, secured credit facilities for
the Company (the "New Credit Facilities") to support the acquisition of the
Spectra Precision Group and the Company's ongoing working capital requirements
and to refinance certain existing debt. (See Note 10 to the Consolidated
Financial Statements for the specific terms of the New Credit Facilities.)
New Seller Promissory Note: The Company issued an $80 million promissory
note to the seller, which is subordinated to the New Credit Facilities. (See
Note 11 to the Consolidated Financial Statements for the specific terms of the
New Seller Promissory Note.)
Prepayment of Existing $30 million Subordinated Notes: In June 1994,
Trimble issued $30 million of subordinated promissory notes to John Hancock
bearing interest at an annual rate of 10%, with principal and interest due on
June 15, 2001. In order to effect the acquisition of the Spectra Precision Group
and as part of obtaining the New Credit Facilities, Trimble prepaid all such
outstanding long-term note obligations to John Hancock for a total of
$31,069,108, which consisted of $30 million in principal, $183,333 in accrued
interest and $885,775 as a prepayment penalty. Pursuant to the terms of such
original notes, any prepayment of any portion of the outstanding principal
required Trimble to pay additional amounts if U.S. Treasury obligations of a
similar maturity exceed a specified yield. The prepayment penalty is included in
interest expense.
Termination of Existing $50 million Unsecured Revolving Credit Facility: In
August 1997, Trimble entered into a three-year, $50,000,000 unsecured revolving
credit facility with four banks (the "Credit Agreement"). This Credit Agreement
enabled Trimble to borrow up to $50,000,000, provided that certain financial and
other covenants were met. Trimble never made any borrowings under such
$50,000,00 unsecured revolving portion of the Credit Agreement, but had issued
certain letters of credit amounting to approximately $1.2 million as of June 30,
2000. In order to effect the acquisition of the Spectra Precision Group, in July
2000 Trimble completely terminated this Credit Agreement in favor of obtaining
the New Credit Facilities described above.
TRIPOD DATA SYSTEMS ACQUISITION
Effective as of November 14, 2000, Trimble completed the acquisition of
Tripod Data Systems, Inc., an Oregon corporation for an aggregate purchase price
of less than $15 million. The purchase price was paid in the form of 576,726
shares of the common stock of Trimble.
The acquisition has been accounted for as a purchase for accounting
purposes; accordingly, Trimble's consolidated results of operations include the
operating results of Tripod Data Systems since the effective date of the
acquisition. The allocation of the purchase price has resulted in the recording
of approximately $10.7 million of goodwill due to the acquisition, which will be
amortized over 20 years. Acquisition costs relating to the purchase of Tripod
Data Systems approximated $194,000.
45
Note 3 - Unaudited pro forma information:
The accompanying consolidated statements of operations of Trimble include
the accounts of the Spectra Precision Group for the period July 14, 2000 through
December 29, 2000 and of Tripod Data Systems for the period November 14, 2000
through December 29, 2000. The following pro forma information for the twelve
months ended December 29, 2000 and December 31, 1999 presents net sales, income
(loss) before extraordinary items, and net loss for each of these periods as if
the transaction with the Spectra Precision Group was consummated on January 2,
1999. This unaudited pro forma data does not purport to represent the Company's
actual results of operations had the Spectra Precision Group acquisition
occurred on January 2, 1999 and should not serve as a forecast of the Company's
operating results for any future periods.
(in thousands, except per share amounts)
------------------------------------------
Twelve Months Ended
December 29, December 31,
2000 1999
-----------------------------------------
Net revenue $ 491,436 $ 488,728
Net loss from continuing operations (1,920) (17,661)
Net loss (1,920) (14,730)
Basic net loss per share from continuing operations $ (0.08) $ (0.79)
Basic net income (loss) per share from discontinued operations - $ 0.13
------------------- ------------------
Basic net loss per share $ (0.08) $ (0.66)
Diluted net loss per share from continuing operations $ (0.08) $ (0.79)
Diluted net income (loss) per share from discontinued operations - $ 0.13
------------------- ------------------
Diluted net loss per share $ (0.08) $ (0.66)
Note 4 - Short term investments:
All marketable securities are intended by management to be available for
sale and are reported at fair value with net unrealized gains or losses reported
within shareholders' equity. Realized gains and losses are recorded based on the
specific identification method.
At December 29, 2000, Trimble had no short-term investments. The table
below shows the carrying amount of Trimble's investments at December 31, 1999.
Fiscal Year ended
December 31, 1999
-------------------------------------------------------------------
Gross Gross
Amortized Unamortized Unamortized Estimated
Cost Gains Losses Fair Value
- -------------------------------------------------------------------------------------------------
(In thousands)
Investments:
U.S. government
obligations $ 32,631 $ - $ (99) $ 32,532
State and municipal -
securities 7,658 - (1) 7,657
Certificates of deposit 2,500 - (2) 2,498
Corporate debt securities 7,462 - (20) 7,442
Other 2,600 - (1) 2,599
- -------------------------------------------------------------------------------------------------
Total $ 52,851 $ - $ (123) $ 52,728
===================================================================
At December 31, 1999, investments with scheduled maturities within one year
were $50.2 million and for maturities between one to three years were $2.5
million.
46
Note 5 - Balance sheet components:
December 29, December 31,
2000 1999
- ------------------------------------------------------------------------------------------
(In thousands)
Inventories
Raw materials $ 27,878 $ 2,582
Work-in-process 6,940 2,232
Finished goods 26,028 11,621
------------------ -------------------
$ 60,846 $ 16,435
================== ===================
Property and equipment
Machinery and equipment $ 67,245 $ 50,831
Furniture and fixtures 6,994 5,930
Leasehold improvements 5,633 5,387
Buildings 7,948 -
Land 1,905 -
------------------ -------------------
89,725 62,148
Less accumulated depreciation (55,666) (49,815)
------------------ -------------------
$ 34,059 $ 12,333
================== ===================
Increases in inventory from December 31, 1999 are due to the purchases of
the Spectra Precision Group in July 2000 and Tripod Data Systems in November
2000, which accounted for an aggregate of $30.3 million of the balance at
December 29, 2000 and additional purchases to help mitigate the continued
delivery problems related to critical part shortages in our supply chain
Increases in property and equipment from December 31, 1999 are due to the
purchases of the Spectra Precision Group in July 2000 and Tripod Data Systems in
November 2000, which accounted for an aggregate of $18.3 million of net
property, plant and equipment at December 29, 2000.
Note 6 - Disposition of assets:
On August 10, 1999, Trimble signed an Asset Purchase Agreement with
Solectron Corporation and Solectron Federal Systems, Inc. (collectively,
"Solectron"). The closing of the transaction occurred on August 13, 1999. At the
closing of the Asset Purchase Agreement, Trimble transferred to Solectron
substantially all of Trimble's tangible manufacturing assets located at
Trimble's Sunnyvale, California campus, including but not limited to equipment,
fixtures and work in progress, and certain contract and other intangible assets
and rights, together with certain related obligations, including but not limited
to real property subleases covering Trimble's manufacturing floor space, and
outstanding purchase order commitments. In addition, the Asset Purchase
Agreement also provided for Solectron's subsequent purchase, on August 30, 1999,
of Trimble's entire component inventory, on hand as of August 13, 1999.
The final purchase price for these assets was $26.9 million. As part of
this agreement Trimble incurred some employee and facility related liabilities,
which have been accrued for and offset against the gain on the sale of these
assets. The net gain on the transaction to Trimble of $5.9 million has been
deferred and is being recognized over the three-year exclusive life of the
Supply Agreement described below. In the fourth quarter of fiscal 2000, certain
contingencies were finalized, and the deferred gain was reduced by $695,000. The
remaining gain will be amortized over the remaining period of the supply
agreement.
Concurrently with the closing of the Asset Purchase Agreement, Trimble and
Solectron also entered into a Supply Agreement. The Supply Agreement provides
for the exclusive manufacture by Solectron of almost all Trimble products for a
period of three years. Solectron offered employment to approximately 230 Trimble
manufacturing, engineering and related support personnel, and Trimble
understands that substantially all such employees accepted such employment with
Solectron.
47
Note 7 - Discontinued operations:
On October 2, 1998, Trimble adopted a plan to discontinue its General
Aviation division. Accordingly, the General Aviation division is being reported
as a discontinued operation for all periods presented in these financial
statements. Net assets of the discontinued operation at October 2, 1998 were
written off and consisted primarily of inventory, property, plant and equipment
and intangible assets.
The original estimated loss on the disposal of the discontinued operation
in fiscal 1998 was $19.9 million, but was adjusted in March 1999 for certain
product lines that were subsequently retained. The adjusted estimated loss on
the disposal is $20.3 million. The original fiscal 1998 estimate included a
write-off of net assets of $12.7 million and a provision of $7.2 million for
costs of disposal, including severance costs, facility and certain other
contractual costs, and anticipated operating losses through the estimated date
of disposal. The adjusted fiscal 1999 estimate included the write-off of net
assets of $12.7 million and a provision of $7.6 million for costs of disposal,
including severance costs, facility and certain other contractual costs, and
anticipated operating losses through the estimated date of disposal.
During the fourth fiscal quarter of 1999, the Company had revised its
accrual for the remaining costs expected to be incurred based on the status of
the related liabilities associated with the disposal of the discontinued General
Aviation division. This resulted in a reversal of approximately $2.9 million of
prior amounts accrued related to the discontinued operations.
As of December 29, 2000, Trimble has a remaining provision of $870,000
associated with the disposal of the General Aviation Division, which includes
$300,000 for the estimated remaining operating losses for service and warranty
support and remaining severance costs, and $570,000 for facility and certain
other contractual costs.
Note 8 - The Company, industry segment, geographic, and customer information:
Trimble is a leading worldwide designer and distributor of innovative
positioning products and applications enabled by GPS, optical, laser, and
wireless communications technology. We design and market products, which deliver
integrated information solutions, such as, collecting, analyzing, and displaying
position data to our end-users. We offer an integrated product line for diverse
applications in our targeted markets.
Effective in the third quarter of fiscal year 2000, management changed the
number of its reportable segments from two to five segments. The five segments
are now the following: (i) Engineering and Construction, (ii) Agriculture, (iii)
Fleet and Asset management, (iv) Component Technologies, and (v) Portfolio
Technologies. This change resulted primarily from a reorganization of overall
management responsibility announced in August 2000 in connection with the
completion of the purchase of the Spectra Precision Group. (See Note 2 of Notes
to the Consolidated Financial Statements.)
To achieve distribution, marketing, production, and technology advantages
in our targeted markets, we manage ourselves within five segments:
o Engineering and Construction - Consists of products currently used
by construction professionals in the field for positioning data
collection, field computing, data management, and automated machine
guidance and control. These products provide solutions for numerous
construction applications, including: surveying; general construction;
site preparation and excavation; road and runway construction; and
underground construction.
o Agriculture - Consists of products that provide key advantages in a
variety of agriculture applications, primarily in the areas of
precise land leveling, machine guidance, yield monitoring and variable-
rate applications of fertilizers and chemicals.
o Fleet and Asset Management - Consists of products that enable end-users
to efficiently monitor and manage their mobile and fixed assets
by transmitting location-relevant and time-sensitive information from
the field to the office. We currently offer a range of products that
address the following: long-haul trucking; municipal fleet management;
shipping; and fixed asset data collection for a wide variety of
governmental and private entities. This segment is an aggregation of
our Mapping and GIS operation and our Mobile Positioning and
Communications operation. These operations have been aggregated
based on the fact that the products mentioned above are complimentary
in our asset management solutions and there is a strong similarity
in the production process, the types of customers, and distribution
methods.
48
o Component Technologies - Currently, we market our component products
through an extensive network of OEM relationships. These products
include proprietary chipsets, modules and a variety of intellectual
property. The applications into which end-users currently incorporate
our component products include: timing applications for synchronizing
wireless and computer systems; in-vehicle navigation and telematics
(tracking) systems; fleet management; security systems; data collection
systems; and wireless handheld consumer products.
o Portfolio Technologies - This segment is comprised of various markets
that use accurate position, velocity, and timing information. The
products in this segment are used in airborne navigation, flight
management, commercial marine navigation, and military applications.
Also, included in this segment are the operations of our Tripod Data
Systems subsidiary. The various operations that comprise this segment
were aggregated on the basis that no single operation accounted for
more than 10% of the total revenue of the Company.
Trimble evaluates each of these segment's performance and allocates
resources based on profit and loss from operations before income taxes.
The accounting policies applied by each of the segments are the same as
those used by Trimble in general.
The following table presents revenues, operating income (loss), and
identifiable assets for Trimble's five segments. The information includes the
operations of the Spectra Precision Group after July 14, 2000, Tripod Data
Systems after November 14, 2000, and the information for 1999 and 1998 has been
reclassified in order to conform to the new basis of presentation. There is no
recognition of inter-segment sales or transfers. Operating income (loss) is net
sales less operating expenses, excluding general corporate expenses, interest
income (expense), and income taxes. The identifiable assets that Trimble's Chief
Operating Decision Maker (CODM) views by segment are accounts receivable and
inventory, except for the accounts receivable and inventory for Spectra
Precision Group and Tripod Data Systems which are not currently allocated to
business segments. Trimble does not report depreciation and amortization or
capital expenditures by segment to the CODM.
49
-------------------------------------------------------------------------------
Twelve Months Ended
December 29, 2000
-------------------------------------------------------------------------------
(in thousands)
-------------------------------------------------------------------------------
Fleet and
Engineering & Asset Component Portfolio
Construction Agriculture Management Technologies Technologies Total
-------------------------------------------------------------------------------
External net revenue $ 195,150 $ 26,024 $ 65,099 $ 60,230 $ 23,295 $ 369,798
Operating profit (loss) before corporate allocations 43,937 4,254 15,211 14,850 (1,540) 76,712
Corporate allocations (1) (15,120) (2,724) (8,232) (4,788) (2,687) (33,551)
------------------------------------------------------------------------------
Operating profit (loss) $ 28,817 $ 1,530 $ 6,979 $ 10,062 $ (4,227) $ 43,161
Assets:
Accounts recievable (2) $ 23,685 $ 4,649 $ 12,164 $ 11,892 $ 6,469 $ 58,859
Inventory (3) 10,046 1,774 5,775 2,360 6,774 26,729
-------------------------------------------------------------------------------
Twelve Months Ended
December 31, 1999
-------------------------------------------------------------------------------
(in thousands)
-------------------------------------------------------------------------------
Fleet and
Engineering & Asset Component Portfolio
Construction Agriculture Management Technologies Technologies Total
-------------------------------------------------------------------------------
External net revenue $ 108,536 $ 12,837 $ 67,271 $ 58,660 $ 24,060 $ 271,364
Operating profit (loss) before corporate allocations 37,223 2,407 14,677 15,055 (2,598) 66,764
Corporate allocations (1) (16,067) (2,204) (8,108) (5,261) (3,422) (35,062)
------------------------------------------------------------------------------
Operating profit (loss) $ 21,156 $ 203 $ 6,569 $ 9,794 $ (6,020) $ 31,702
Assets:
Accounts recievable (4) $ 22,304 $ 1,510 $ 11,009 $ 9,273 $ 5,313 $ 49,409
Inventory $ 6,653 $ 2 $ 2,180 $ 2,392 $ 5,208 16,435
-------------------------------------------------------------------------------
Twelve Months Ended
January 1, 1999
-------------------------------------------------------------------------------
(in thousands)
-------------------------------------------------------------------------------
Fleet and
Engineering & Asset Component Portfolio
Construction Agriculture Management Technologies Technologies Total
-------------------------------------------------------------------------------
External net revenue $ 123,491 $ - $ 64,515 $ 36,296 $ 44,021 $ 268,323
Operating profit (loss) before corporate allocations 13,708 - 6,305 5,367 (5,920) 19,460
Corporate allocations (1) (11,437) - (4,982) (3,068) 88 (19,399)
-------------------------------------------------------------------------------
Operating profit (loss) $ 2,271 $ - $ 1,323 $ 2,299 $ (5,832) $ 61
Assets:
Accounts recievable (4) $ 20,957 $ - $ 10,790 $ 7,936 $ 7,392 $ 47,075
Inventory 8,396 - 5,820 4,379 7,729 26,324
- ------------------------------------------------------------------------------------------------------------------------------------
<FN>
(1) For the fiscal years ended December 29, 2000 and December 31, 1999, the
Company determined the amount of corporate allocations charged to each of its
segments based on a percentage of the segments' monthly revenue, gross profit,
and controllable spending (research and development, marketing, and general and
adminstrative). For the Fiscal year ended January 1, 1999 the Company determined
the amount of corporate allocations charged to each of its segments, based on a
percentage of the segments monthly inventory balance and gross profit.
Allocation percentages were determined at the beginning of each of the
respective fiscal years.
(2) As presented, the accounts receivable number excludes cash in advance and
reserves, and the Spectra Precision Group's and Tripod Data System's accounts
recievable as of December 29, 2000, which are not allocated between segments.
(3) As presented, the inventory number excludes the Spectra Precision Group's
and Tripod Data System's inventory as of December 29, 2000, which is not
allocated between segments.
(4) As presented, the accounts receivable number excludes cash in advance and
reserves, which are not allocated between segments.
(5) The company determined that it is impracticable to obtain all of the
applicable information for the twelve months ended January 1, 1999 to report its
Agriculture operating segment for that period in accordance with the new
internal reporting structure. The Company does not believe the amounts are
significant for fiscal 1998 and have included them in the Engineering and
Construction division.
</FN>
50
The following are reconciliations corresponding to totals in the
accompanying consolidated financial statements (in thousands):
Fiscal Years Ended
--------------------------------------------------------------
December 29, December 31, January 1,
Revenues: 2000 1999 1999
- ------------------------------------------------- ------------------ ------------------- ------------------
Total for reportable divisions $ 369,798 $ 271,364 $ 268,323
================= =================== ==================
Operating profit:
- --------------------------------------------------
Total for reportable divisions $ 43,161 $ 31,702 $ 61
Unallocated corporate expenses (16,942) (11,241) (23,975)(3)
----------------- ------------------- ------------------
Income before income taxes $ 26,219 $ 20,461 $ (23,914)
================= =================== ==================
Assets:
- --------------------------------------------------
Accounts receivable total for reportable divisions $ 58,859 $ 49,409 $ 47,075
Unallocated (1) 24,741 (13,404) (13,644)
----------------- ------------------- ------------------
Total $ 83,600 $ 36,005 $ 33,431
================= =================== ==================
Inventory total for reportable divisions $ 26,729 $ 16,435 $ 26,324
Common inventory (2) 34,117 - 10,842
----------------- ------------------- ------------------
Net inventory $ 60,846 $ 16,435 $ 37,166
================= =================== ==================
<FN>
- --------------------------------------------------------------------------------
(1) Includes cash in advance and reserves that are not allocated by segment.
Also for December 29, 2000 accounts receivable includes the Spectra Precison
Group and Tripod Data System as their accounts receivable are not allocated by
segment.
(2) Consists of inventory that is common between the segments. Parts can be used
by either segment. Also for December 29, 2000 inventory consists of $29.1
million and $1.3 million of Spectra Precision Group and Tripod Data Systems,
respectively as their inventory is not allocated by segment.
(3) Includes approximately $10.3 million of restructuring charges.
</FN>
The geographic distribution of Trimble's revenues and identifiable
assets by fiscal year-end is summarized in the table below in thousands.
Geographic Area
---------------------------------------------------------
Europe/ Other
U.S. Middle East Asia Foreign Countries Eliminations Total
---------------------------------------------------------------------------------------
2000
Sales to unaffiliated customers (1) $ 175,993 $103,455 $ 43,922 $ 46,428 $ 369,798
Intergeographic transfers 65,117 12,108 8,320 (85,545) -
--------------------------------------------------------------------------------------
Total revenue $ 241,110 $115,563 $ 52,242 $ 46,428 $(85,545) $ 369,798
--------------------------------------------------------------------------------------
Identifiable assets $ 146,821 $ 84,358 $ 12,016 $ 4,588 $(6,274) $ 241,509
1999
Sales to unaffiliated customers (1) $ 131,395 $ 68,301 $ 37,707 $ 33,961 $ - $ 271,364
Intergeographic transfers 56,024 - 1,480 - (57,504) -
--------------------------------------------------------------------------------------
Total revenue $ 187,419 $ 68,301 $ 39,187 $ 33,961 $(57,504) $ 271,364
--------------------------------------------------------------------------------------
Identifiable assets $ 155,163 $ 16,119 $ 10,550 $ 92 $ (173) $ 181,751
1998
Sales to unaffiliated customers (1) $ 143,828 $ 66,446 $ 34,712 $ 23,337 $ - $ 268,323
Intergeographic transfers 79,416 - 1,153 - (80,569) -
--------------------------------------------------------------------------------------
Total revenue $ 223,244 $ 66,446 $ 35,865 $ 23,337 $(80,569) $ 268,323
--------------------------------------------------------------------------------------
Identifiable assets $ 134,170 $ 13,384 $ 9,460 $ 28 $ (763) $ 156,279
- ------------------------------------------------------------------------------------------------------
<FN>
(1) Sales attributed to countries based on the location of the customer.
</FN>
51
Transfers between U.S. and foreign geographic areas are made at prices
based on total costs and contributions of the supplying geographic area. The
Company's subsidiaries in the Pacific Rim and Asia have derived revenue from
commissions from domestic operations in each of the periods presented. These
commission revenues and expenses are excluded from total revenue and operating
income (loss) in the preceding table. Sales to unaffiliated customers in Europe,
Japan, Australia, and Mexico are made by the Company's subsidiaries in those
countries.
No single customer accounted for 10% or more of Trimble's total revenues in
fiscal years 2000, 1999, or 1998.
Note 9 - Restructuring reserves:
1998 Restructuring Charges:
In fiscal 1998, Trimble recorded restructuring charges totaling $10.3
million in operating expenses. These charges were a result of Trimble's
reorganization activities, through which the Company downsized its operations,
including reducing headcount and facilities space usage, and canceled its
enterprise-wide information system project and certain research and development
projects. The impact of these decisions was that significant amounts of
Trimble's fixed assets, prepaid expenses, and purchased technology had been
impaired and certain liabilities incurred. Trimble wrote down the related assets
to their net realizable values and made provisions for the estimated
liabilities.
The activity in fiscal 2000, 1999 and 1998 related to the restructuring
charges and the amounts remaining at December 29, 2000 on the balance sheet are
as follows (in thousands):
Total
charged to Amounts paid/ Amounts paid/ Amounts paid/ Remaining in
expense in written off written off written off accrued liabilites
fiscal 1998 in fiscal 1998 in fiscal 1999 in fiscal 2000 as of December 29, 2000
--------------- -------------- --------------- -------------- ------------------------
Employee termination benefits $ 2,864 $ (1,200) $ (371) $ (1,293) $ -
Facility space reductions 1,061 - $ (1,053) $ (8) -
ERP system abandonment 6,360 (4,895) $ (1,465) $ - $ -
--------------- -------------- --------------- -------------- ------------------------
Subtotal $ 10,285 $ (6,095) $ (2,889) $ (1,301) $ -
=============== ============== =============== ============== ========================
Also see Note 2 to the Consolidated Financial Statements for the
restructuring reserve recorded as part of the acquisition of the Spectra
Precision Group.
Note 10 - Bank line of credit:
In July 2000, ABN AMRO Bank, N.V. led a syndicate of banks which underwrote
$200 million of new senior, secured credit facilities for the Company (the "New
Credit Facilities") to support the acquisition of the Spectra Precision Group
and the Company's ongoing working capital requirements and to refinance certain
existing debt. The New Credit Facilities are comprised of a $50 million 3-year
U.S. dollar only revolver; a $50 million 3-year multi-currency revolver; and a
$100 million 5-year term loan. Pricing for any borrowings under the New Credit
Facilities is fixed for the first 6 months at LIBOR plus 275 basis points and is
thereafter tied to a formula, based on the Company's leverage ratio (which is
defined as all outstanding debt (excluding the seller subordinated note) over
EBITDA). Trimble immediately used approximately $170 million available under the
New Credit Facilities to fund the acquisition of the Spectra Precision Group.
$30 million was used to pay off the principal portion of Company's existing
subordinated notes to John Hancock (as described in Note 2 to the Consolidated
Financial Statements under "Acquisition Financing") and $140 million was paid in
cash to the seller. The New Credit Facilities are secured by all material
tangible and intangible assets of the Company, subject to foreign tax
considerations. If Trimble is able to achieve and maintain a leverage ratio
(Debt/EBITDA) of 2.0x or less for four consecutive quarters, the security for
the New Credit Facilities will be released. Financial covenants of the New
Credit Facilities include leverage, fixed charge, and minimum net worth tests.
The Company was in compliance with these covenants at December 29, 2000. The two
$50 million revolvers are paid as the loans mature and the loan commitment fees
are paid on a quarterly basis. The 5-year term loan is payable commencing March
31, 2001 in quarterly installments (excluding interest) of $4 million over the
first year, $5 million over the second year, $6 million over the next year and a
half and $7 million for the remaining quarters until the debt is paid off. In
addition, Trimble is restricted from paying dividends and is limited as to the
amount of its common stock it can repurchase under the terms of the New Credit
Facilities.
52
The Company is allowed to repurchase shares of its common stock only up to 25%
of net income in the previous fiscal year.
Note 11 - Long-term debt:
Long-term debt consists of the following:
December 29, December 31,
2000 1999
- --------------------------------------------------------------------------------------------------
(In thousands)
New Credit Facilities $ 162,000 $ -
Subordinated note 80,000 -
Subordinated notes repaid in 2000 (See Note 2) - 29,819
Promissory note and Long-term commitment 9,037 -
Installment loan obligations - 1,388
Other 25 747
------------------ ----------------
251,062 31,954
Less current portion 113,721 1,388
------------------ ----------------
Noncurrent portion $ 137,341 $ 30,566
================== ================
Trimble's long-term debt primarily consists of $162 million outstanding
under the New Credit Facilities (See Note 10 to the Consolidated Financial
Statements), and an $80 million subordinated promissory note (see below). The
Company's current portion of long-term debt consists of amounts payable within
one year on the term loan portion of the New Credit Facilities, the revolver
portion of the New Credit Facilities and $40 million of the subordinated note.
The $80 million subordinated note to the seller carries a 10% coupon,
payable in cash or additional seller paper at the Company's option. The
subordinated seller note has a stated two year maturity ($40 million due in
fiscal 2001 and $40 million due in fiscal 2002), but carries an automatic
maturity deferral provision which effectively extends the maturity date to that
date on which Trimble is allowed to repay the note without triggering a default
under the New Credit Facilities. The New Credit Facilities allow Trimble to
repay the seller note at any time (in part or in whole), provided that (a)
Trimble's leverage ratio (Debt (excluding the seller note)/EBITDA) prior to such
repayment is less than 1.0x and (b) after giving effect to such repayment
Trimble would have (i) a leverage ratio (Debt (excluding any remaining portion
of the seller note)/EBITDA) of less than 2.0x and (ii) cash and unused
availability under the revolvers of the New Credit Facilities of at least $35
million. Although the subordinated seller note will carry certain limited
covenants and defaults, the seller will be barred in the event of default from
pursuing such rights and remedies for the stated maturity of the New Credit
Facilities (i.e., a five-year standstill). The New Credit Facilities also
prohibit cash payments of interest or principal on the subordinated seller note
during a period of default.
The promissory note and long-term commitment includes a $7.1 million
obligation to former owners of ZSP Geodetic Systems GmbH, a subsidiary of the
Company which was purchased by the Spectra Precision Group in 1999 (prior to the
Company's purchase of the Spectra Precision Group). Of this obligation, $3.7
million is payable equally on a quarterly basis through the end of September
2001, and bears interest at 6.0%. The remaining $3.4 million of the obligation
has a stated maturity of September 2002.
Outstanding promissory note and long-term commitment also include a $1.9
million promissory note from the purchase of a building for our Corvallis,
Oregon site. The note is payable in monthly installments through April 2015
bearing a variable interest rate (8.94% at December 29, 2000).
The $1.4 million installment loan at December 31, 1999 related to loans for
capitalized software and was repaid in 2000.
53
Note 12 - Lease obligations and commitments:
Trimble's principal facilities in the United States are leased under
noncancelable operating leases that expire at various dates from 2000 through
2011. Trimble has options to renew certain of these leases for an additional
five years. The Company also leases facilities under operating leases in the
United Kingdom, Sweden and Germany that expire in 2005.
Future minimum payments required under noncancelable operating leases are as
follows:
Operating
Lease Payments
- ----------------------------------------------------------------------------
(In thousands)
2001 $ 13,793
2002 12,327
2003 10,700
2004 5,777
2005 5,241
Thereafter 2,627
---------------------------
Total $ 50,466
===========================
Rent expense under operating leases was $10.6 million in 2000, $8.1 million in
fiscal 1999, and $6.3 million in 1998.
Note 13 - Fair value of financial instruments:
Statement of Financial Accounting Standard No. 107, "Disclosures about Fair
Value of Financial Instruments" requires disclosure of the following information
about the fair value of certain financial instruments for which it is currently
practicable to estimate such value. None of the Company's financial instruments
are held or issued for trading purposes. The carrying amounts and fair values of
Trimble's financial instruments are as follows:
Carrying Fair
Amount Value
----------------- -----------------
December 29, 2000
- -------------------------------------------------------------------------------------------------------------
(In thousands)
Assets:
Cash and cash equivalents (See Note 1) $ 40,876 $ 40,876
Forward foreign exchange contracts (See Note 1) 50 50
Accounts Receivable 90,138 90,138
Liabilities:
Subordinated notes (See Note 11) $ 80,000 $ 89,044
Bank Borrowing (See Note 11) 162,000 162,000
Promissory note and Long-term commitment 9,037 7,876
Accounts Payable 26,448 26,448
The fair value of the subordinated notes, bank borrowings, promissory note
and the long-term commitment have been estimated using an estimate of the
interest rate Trimble would have had to pay on the issuance of notes with a
similar maturity, and discounting the cash flows at that rate. The fair values
do not give an indication of the amount that Trimble would currently have to pay
to extinguish any of this debt.
The fair value of forward foreign exchange contracts is estimated, based on
quoted market prices of comparable contracts, and these contracts are restated
to the fair value at the end of every month.
54
Note 14 - Income taxes:
Trimble's income tax provision consists of the following (in thousands):
Fiscal Years ended
---------------------------------------------------------
---------------------------------------------------------
December 29, December 31, January 1,
2000 1999 1999
Federal:
Current $ 1,408 $ 1,089 $ 233
Deferred - - -
---------------------------------------------------------
1,408 1,089 233
---------------------------------------------------------
State:
Current 144 196 20
Deferred - - -
---------------------------------------------------------
144 196 20
---------------------------------------------------------
Foreign:
Current 931 770 1,195
Deferred (908) 18 (48)
---------------------------------------------------------
23 788 1,147
---------------------------------------------------------
Income tax provision $ 1,575 $ 2,073 $ 1,400
=========================================================
The domestic income (loss) from continuing operations before income taxes
(including royalty income subject to foreign withholding taxes) was
approximately $14,380,000, $19,700,000, and ($26,220,000) in fiscal years 2000,
1999 and 1998.
The income tax provision differs from the amount computed by applying the
statutory federal income tax rate to income before taxes. The sources and tax
effects of the differences are as follows (in thousands):
Fiscal Years ended
----------------------------------------------------------
December 29, December 31, January 1,
2000 1999 1999
Expected tax from continuing operations at 35%
in all years $ 5,516 $ 7,258 $(8,827)
Operating loss not utilized (utilized) (5,115) (6,176) 9,178
Foreign withholding taxes 141 299 467
Foreign tax rate differential 307 109 329
Other 726 583 253
----------------------------------------------------------
Income tax provision $ 1,575 $ 2,073 $ 1,400
==========================================================
Effective tax rate 10% 10% (6%)
==========================================================
55
The components of deferred taxes consist of the following (in thousands):
December 29, December 31,
2000 1999
Deferred tax liabilities:
Purchased intangibles $ 8,230 $ -
Other individually immaterial items 288 246
---------------------------------------
Total deferred tax liabilities 8,518 246
---------------------------------------
Deferred tax assets:
Inventory valuation differences 8,836 9,437
Expenses not currently deductible 5,656 7,461
Federal credit carryforwards 8,686 6,108
Deferred revenue 2,674 3,243
State credit carryforwards 4,725 3,786
Warranty 2,455 2,352
Depreciation 1,724 1,770
Federal net operating loss (NOL) carryforward 1,028 -
Other individually immaterial items 2,751 1,763
---------------------------------------
Total deferred tax assets 38,535 35,920
Valuation allowance (37,861) (35,287)
---------------------------------------
Total deferred tax assets 674 633
---------------------------------------
Total net deferred tax assets (liabilities) $(7,844) $ 387
=======================================
The NOL and credit carryforwards listed above expire in 2001 through 2020.
The valuation allowance increased by $2.6 million in 2000 and decreased by
$6.0 million in 1999. Approximately $11.3 million of the valuation allowance at
December 29, 2000 relates to the tax benefits of stock option deductions, which
will be credited to equity when realized.
Note 15 - Shareholder's Equity:
1993 Stock Option Plan. In 1992, Trimble's Board of Directors adopted the
1993 Stock Option Plan ("1993 Plan"). The 1993 Plan, as amended to date and
approved by shareholders, provides for the granting of incentive and
nonstatutory stock options for up to 5,925,000 shares of Common Stock to
employees, consultants and directors of Trimble. At Trimble's 2001 annual
meeting of shareholders to be held on May 10, 2001, the shareholders are being
asked to approve an increase of 450,000 shares under the 1993 Plan. Incentive
stock options may be granted at exercise prices that are not less than 100% of
the fair market value of Common Stock on the date of grant. Employee stock
options granted under the 1993 Plan have 120-month terms, and vest at a rate of
20% at the first anniversary of grant, and monthly thereafter at an annual rate
of 20%, with full vesting occurring at the fifth anniversary of grant. The
exercise price of nonstatutory stock options issued under the 1993 Plan must be
at least 85% of the fair market value of Common Stock on the date of grant. As
of December 29, 2000, options to purchase 3,961,581 shares were outstanding and
610,454 shares were available for future grant under the 1993 Plan.
1990 Director Stock Option Plan. In December 1990, Trimble adopted a
Director Stock Option Plan under which an aggregate of 380,000 shares of Common
Stock have been reserved for issuance to non-employee directors as approved by
the shareholders to date. At December 29, 2000, options to purchase 173,333
shares were outstanding and 85,416 shares were available for future grants under
the Director Stock Option Plan.
56
1992 Management Discount Stock Option Plan. In 1992, Trimble's Board of
Directors approved the 1992 Management Discount Stock Option Plan ("Discount
Plan"). Under the Discount Plan, 300,000 nonstatutory stock options were
reserved for grant to management employees at exercise prices that may be
significantly discounted from the fair market value of Common Stock on the dates
of grant. Options are generally exercisable six months from the date of grant.
As of December 29, 2000, there were 4,974 shares available for future grants.
For accounting purposes, compensation cost on these grants is measured by the
excess over the discounted exercise prices of the fair market value of Common
Stock on the dates of option grant. There were no discounted options granted in
the plan in fiscal 2000 1999, and 1998. As of December 29, 2000, options to
purchase 125,000 shares were outstanding under the 1992 Management Discount
Stock Option Plan.
1988 Employee Stock Purchase Plan. In 1988, Trimble established an employee
stock purchase plan under which an aggregate of 3,150,000 shares of Common Stock
have been reserved for sale to eligible employees as approved by the
shareholders to date. The plan permits full-time employees to purchase Common
Stock through payroll deductions at 85% of the lower of the fair market value of
the Common Stock at the beginning or at the end of each six-month offering
period. In fiscal 2000 and 1999, 131,657 shares and 317,210 shares,
respectively, were issued under the plan for aggregate proceeds to the Company
of $1.2 million and $2.5 million, respectively. At December 29, 2000, the number
of shares reserved for future purchases by eligible employees was 831,216.
As stated in Note 1 to the Consolidated Financial Statements, Trimble has
elected to follow APB 25 and related interpretations in accounting for its
employee stock options and stock purchase plans. The alternative fair value
accounting provided for under SFAS 123 requires use of option pricing models
that were not developed for use in valuing employee stock options. Under APB 25,
because the exercise price of Trimble's employee stock options equals the market
price of the underlying stock on date of grant, no compensation expense is
recognized.
Pro forma information regarding net income and earnings per share is
required by SFAS 123 and has been determined as if Trimble had accounted for its
employee stock options and purchases under the employee stock purchase plan
using the fair value method of SFAS 123. The fair value for these options was
estimated at the date of grant using a Black-Scholes option-pricing model with
the following weighted-average assumptions for fiscal 2000, 1999, and 1998:
December 29, December 31, January 1,
2000 1999 1999
---------------------- ----------------------- ----------------------
Expected dividend yield - - -
Expected stock price volatility 66.41% 59.58% 55.65%
Risk-free interest rate 6.21% 6.34% 5.76%
Expected life of options after vesting 1.22 1.21 1.20
The Black-Scholes option valuation model was developed for use in
estimating the fair value of traded options that have no vesting restrictions
and are fully transferable. In addition, option valuation models require the
input of highly subjective assumptions, including the expected stock price
volatility. Because Trimble's employee stock options have characteristics
significantly different from those of traded options, and because changes in the
subjective input assumptions can materially affect the fair value estimate, in
management's opinion, the existing models do not necessarily provide a reliable
single measure of its employee stock options.
For purposes of pro forma disclosures, the estimated fair value of the
options is amortized to expense over the options' vesting period, and the
estimated fair value of purchases under the employee stock purchase plan is
expensed in the year of purchase. The effects on pro forma disclosure of
applying SFAS 123 are not likely to be representative of the effects on pro
forma disclosure of future years. Trimble's pro forma information (in thousands
except for per share data) is as follows:
57
December 29, December 31, January 1,
2000 1999 1999
---------------------- ----------------------- ----------------------
Net income (loss) - as reported $ 14,185 $ 21,593 $ (53,394)
Net income (loss) - pro forma $ 5,898 $ 16,377 $ (58,661)
Basic income (loss) per share - as reported $ 0.60 $ 0.96 $ (2.38)
Basic income (loss) per share - pro forma $ 0.25 $ 0.73 $ (2.61)
Diluted income (loss) per share - as reported $ 0.55 $ 0.95 $ (2.38)
Diluted income (loss) per share - pro forma $ 0.23 $ 0.72 $ (2.61)
Exercise prices for options outstanding as of December 29, 2000, ranged
from $8.00 to $51.69. The weighted average remaining contractual life of those
options is 7.88 years. In view of the wide range of exercise prices, Trimble
considers it appropriate to provide the following additional information in
respect of options outstanding:
Total Currently exercisable
Number Weighted-average Weighted-average Number Weighted-average
Range (in thousands) exercise price remaining contractul life (in thousands) exercise price
- ---------------------- ------------- ------------------ ------------------------- -------------- -------------------
$8.0000 - $8.2500 451,532 $8.01 8.07 163,159 $8.02
$8.3125 - $9.9375 637,445 $9.21 6.61 291,965 $9.21
$10.0000 - $11.5625 306,145 $10.99 6.82 146,566 $10.69
$11.9375 - $11.9375 474,591 $11.94 8.59 121,336 $11.94
$12.0000 - $15.3750 593,321 $14.27 6.12 400,464 $14.31
$16.8750 - $19.2500 427,143 $17.90 6.92 244,364 $17.90
$19.3125 - $23.0000 433,689 $20.24 9.11 54,337 $21.49
$23.2500 - $34.1250 121,500 $31.95 9.29 6,388 $31.49
$41.1250 - $41.1250 772,250 $41.13 9.65 - $0.00
$51.6875 - $51.6875 42,500 $51.69 9.55 - $0.00
- ---------------------- ------------- ------------------ ------------------------- -------------- -------------------
$8.0000 - $51.6875 4,260,116 $19.07 7.88 1,428,579 $12.94
Activity during fiscal 2000, 1999 and 1998 under the combined plans was as
follows:
IN THOUSANDS, EXCEPT FOR PER SHARE DATA
December 29, December 31, January 1,
2000 1999 1999
---------------------------- -------------------------- ----------------------------
Weighted average Weighted average Weighted average
Options exercise price Options exercise price Options exercise price
---------- ---------------- -------- ---------------- --------- -----------------
Outstanding at beginning of year 4,009 $12.36 3,026 $13.64 2,696 $15.10
Granted 1,379 34.39 1,813 10.22 1,117 11.40
Exercised (706) 13.08 (135) 11.64 (132) 11.41
Canceled (422) 15.51 (695) 14.03 (655) 16.30
---------- -------- --------
Outstanding at end of year 4,260 $19.07 4,009 $12.36 3,026 $13.64
Exercisable at end of year 1,429 $12.94 1,334 $13.68 1,110 $13.91
Weighted-average fair value of options
granted during year $19.04 $5.51 $5.21
Non-statutory options. On May 25, 2000, Trimble entered into an agreement
to grant a non-statutory option to purchase up to 40,000 shares of common stock
at an exercise price of $13.44 per share, which expire no later than December
15, 2001. On May 3, 1999, Trimble entered into an agreement to grant a
non-statutory option to purchase up to 30,000 shares of common stock at an
exercise price of $9.75 per share, which expire on March 29, 2004. As of
December 29, 2000, none of these non-statutory options had been exercised.
Common shares reserved for future issuances. As of December 29, 2000,
Trimble had reserved 5,791,974 common shares for issuance upon exercise of
options outstanding and options available for grant under the 1993 Stock Option,
1990 Director Stock Option, and 1992 Management Discount Stock Option plans, and
available for issuance under the 1988 Employee Stock Purchase plan.
58
Note 16 - Benefit plans:
401(k) Plans:
Under Trimble's 401(k) Plan, U.S. employee participants may direct the
investment of contributions to their accounts among certain mutual funds and the
Trimble Navigation Limited Common Stock Fund. The Trimble Fund purchased 15,700
shares of Common Stock for an aggregate of $434,000 in 2000. Trimble, at its
discretion, matches individual employee 401(k) Plan contributions up to $100 per
month. Trimble's matching contributions to the 401(k) Plan were $798,000 in
fiscal 2000, $1.0 million in fiscal 1999, and $1.2 million in 1998. Certain of
the Company's subsidiaries acquired as part of the acquisition of the Spectra
Precision Group participate in a 401(k) Plan where the Company matches fifty
cents of every dollar the employee contributes to the plan up to 5 % of the
employees annual contribution. For the period July 14, 2000 to December 29, 2000
the Company contributed $236,000 to the plan. The Company's Tripod Data Systems
subsidiary matches one dollar for every three dollars the employee puts into the
plan up to 8% of their annual salary. From November 14, 2000 to December 29,
2000 the Company contributed $11,000 to this plan.
Profit-Sharing Plan:
In 1995, Trimble introduced an employee profit-sharing plan in which all
employees, excluding executives and certain levels of management, participate.
The plan distributes to employees approximately 5% of quarterly income before
taxes. Payments under the plan during fiscal 2000, 1999, and 1998 were $2.1
million, $1.2 million, and $138,000, respectively.
Defined Contribution Pension Plans:
Certain of the Company's subsidiaries acquired in the acquisition of the
Spectra Precision Group participate in European state sponsored pension plans.
Contributions are based on specified percentages of employee salaries. For these
plans, the Company contributed and charged to expense $275,000 from July 14,
2000 through December 29, 2000.
Defined Benefit Pension Plan
The Company's Swedish subsidiary acquired in the acquisition of the Spectra
Precision Group has an unfunded defined benefit pension plan that covered
substantially all of its full-time employees through 1993. Benefits are based on
a percentage of eligible earnings. The employee must have had a projected period
of pensionable service of at least 30 years as of 1993. If the period was
shorter, the pension benefits were reduced accordingly. Active employees do not
accrue any future benefits, therefore there is no service cost and the liability
will only increase for interest cost.
Net periodic benefit costs for the period July 14, 2000 though December 29,
2000 was not material.
59
The Company's defined benefit plan activity was as follows:
December 29,
2000
- --------------------------------------------------------------------------------
(In Thousands)
Change in Benefit Obligation:
Benefit obligation at acquisition date $ 3,927
Interest Cost 233
Actuarial (gain) loss 15
--------------------------
Benefit obligation at end of year 4,175
Unrecognized Prior Service Cost -
Unrecognized Net Actuarial Gain -
--------------------------
Accrued Pension Costs $ 4,175
==========================
Actuarial assumptions used to determine the net periodic pension costs for
the year ended December 29, 2000 were as follows:
Discount Rate 4%
Rate of Compensation Increase 3%
Note 17 - Earning Per Share:
The following data show the amounts used in computing earnings (loss) per
share and the effect on the weighted-average number of shares of dilutive
potential Common Stock.
December 29, December 31, January 1,
2000 1999 1999
- ---------------------------------------------------------------------------------------------------------------------------------
(In thousands except per share amounts)
Numerator:
Income available to common shareholders:
Used in basic and diluted income (loss) per share from
continuing operations $ 14,185 $ 18,662 $ (27,355)
Used in basic and diluted income (loss) per share from
discontinued operations - 2,931 (26,039)
----------------- ------------------- --------------------
Used in basic and diluted income (loss) per share $ 14,185 $ 21,593 $ (53,394)
================= =================== ====================
Denominator:
Weighted-average number of common
shares used in basic income (loss) per share 23,601 22,424 22,470
Effect of dilutive securities:
Common stock options 2,098 382 -
Common stock warrants 277 46 -
----------------- ------------------- --------------------
Weighted-average number of common
shares and dilutive potential common shares
used in diluted income (loss) per share 25,976 22,852 22,470
================= =================== ====================
Basic income (loss) per share from continuing operations $ 0.60 $ 0.83 $ (1.22)
Basic loss per share from discontinued operations - 0.13 (1.16)
----------------- ------------------- --------------------
Basic income (loss) per share $ 0.60 $ 0.96 $ (2.38)
================= =================== ====================
Diluted income (loss) per share from continuing operations $ 0.55 $ 0.82 $ (1.22)
Diluted loss per share from discontinued operations - 0.13 (1.16)
----------------- ------------------- --------------------
Diluted income (loss) per share $ 0.55 $ 0.95 $ (2.38)
================= =================== ====================
60
If Trimble had reported net income in 1998, additional 387 common
equivalent shares related to outstanding options and warrants would have been
included in the calculation of diluted loss per share.
Note 18 - Comprehensive income (loss):
The components of other comprehensive income (loss), net of related tax
include:
December 29, December 31, Janaury 1,
Fiscal Years ended 2000 1999 1999
- ------------------------------------------------------------------------------------------------------------
(In thousands)
Cumulative foreign currency translation adjustments $ (8,045) $ (107) $ (255)
Net unrealized gain (loss) on short-term investments 123 (142) 11
---------------- ---------------- ---------------
Other comprehensive income (loss) $ (7,922) $ (249) $ (244)
================ ================ ===============
Accumulated other comprehensive income (loss) on the condensed consolidated
balance sheets consists of unrealized gains on available for sale investments
and foreign currency translation adjustments. The components of accumulated
other comprehensive income (loss), net of related tax include:
December 29, December 31,
Fiscal Years ended 2000 1999
- ------------------------------------------------------------------------------------------------
(In thousands)
Cumulative foreign currency translation adjustments $ (8,963) $ (918)
Net unrealized gain (loss) on short-term investments - (123)
---------------- ----------------
Accumulated other comprehensive income (loss) $ (8,963) $ (1,041)
================ ================
Note 19 - Related-Party transactions:
Related-Party Lease
The Company currently leases office space in Ohio from an association of
three individuals, two of whom are employees of one of the Company's U.S.
operating units, under a noncancelable operating lease arrangement expiring in
2011 entered into in connection with the acquisition of the Spectra Precision
Group. The annual rent is $345,000, and is subject to adjustment based on the
terms of the lease. The condensed consolidated statements of operations include
expenses from this operating lease of $172,702 for the year ended December 29,
2000.
Note 20 - Statement of cash flow data:
December 29, December 31, January 1,
Fiscal Years ended 2000 1999 1999
- -------------------------------------------------------------------------------------------------------------------------
(In thousands)
Supplemental disclosure of cash flow information:
Interest paid $ 9,037 $ 3,391 $ 3,377
------------------- ------------------- --------------
Income taxes paid $ 3,835 $ 866 $ 1,585
------------------- ------------------- --------------
The purchase of Tripod Data Systems in 2000, a non-cash financing and
investing activity, was made with shares of stock with a value of less than $15
million.
The purchase of the Spectra Precision Group in 2000 included $80 million of
a seller-financed note, which is a non-cash financing and investing activity.
61
Note 21 - Litigation:
In January 2001 Philip M. Clegg filed suit in the United States District
Court for the District of Utah, Central Division, against Spectra-Physics
Laserplane, Inc., Spectra Precision AB and Trimble Navigation Limited. The
complaint alleges claims of infringement of U.S. Patent No. 4,807,131, breach of
contract and unjust enrichment. The suit seeks damages and an accounting for
moneys alleged to be owed under a license agreement, plus interest and attorney
fees. The suit is in its very early stages. Management believes the case to be
without merit and intends to defend the lawsuit vigorously. In the opinion of
management, resolution of this litigation is not expected to have a material
adverse effect on the financial position of the Company. However, depending on
the amount and timing, an unfavorable resolution of this matter could materially
affect the Company's future operations or cash flows in a particular period.
The Company believes that the ultimate liability of the Company as a result
of all disputes, if any, would not be material to its overall financial
position, results of operations, liquidity.
Note 22 - Selected quarterly financial data (unaudited):
First Second Third Fourth
Quarter Quarter Quarter Quarter
- ------------------------------------------------------------------------------------------------------------------------------------
(In thousands, except per share data)
2000
Total revenue $ 65,140 $ 71,264 $ 109,227 $ 124,167
Gross margin 37,045 41,885 55,932 61,699
Operating income 9,222 12,023 1,506 3,468
Net income from continuing operations 8,712 12,357 (4,268) (2,616)
Net income from discontinued operations - - - -
Net income 8,712 12,357 (4,268) (2,616)
Basic net income per share from continuing operations 0.38 0.53 (0.18) (0.11)
Basic net income per share from discontinued operations - - - -
------------- ------------- -------------- --------------
Basic net income $ 0.38 $ 0.53 $ (0.18) $ (0.11)
============= ============= ============== ==============
Diluted net income per share from continuing operations 0.35 0.48 (0.18) (0.11)
Diluted net income per share from discontinued operations - - - -
------------- ------------- -------------- --------------
Diluted net income $ 0.35 $ 0.48 $ (0.18) $ (0.11)
============= ============= ============== ==============
1999
Total revenue $ 68,770 $ 70,839 $ 69,636 $ 62,119
Gross margin 35,567 37,611 36,979 34,090
Operating income 3,733 5,565 5,812 5,351
Net income from continuing operations 3,014 4,656 5,124 5,868
Net income from discontinued operations - - 2,931 -
Net income 3,014 4,656 8,055 5,868
Basic net income per share from continuing operations 0.14 0.21 0.23 0.26
Basic net income per share from discontinued operations - - 0.13 -
------------- ------------- -------------- --------------
Basic net income $ 0.14 $ 0.21 $ 0.36 $ 0.26
============= ============= ============== ==============
Diluted net income per share from continuing operations 0.14 0.20 0.22 0.25
Diluted net income per share from discontinued operations - - 0.13 -
------------- ------------- -------------- --------------
Diluted net income $ 0.14 $ 0.20 $ 0.35 $ 0.25
============= ============= ============== ==============
Significant quarterly items include the following: (i) in the third quarter
of 2000, net income includes an $8.8 million charge, or $0.38 per diluted share,
for amortization of goodwill and other purchased intangibles, as well as an
inventory purchase accounting adjustment; a $1.1 million charge, or $0.05 per
diluted share relating to a debt extinguishment; a $0.7 million charge, or $0.03
per diluted share for relocation costs related to opening a new office
62
in Boulder, Colorado; and $1.0 million in income, or $0.04 per diluted share
relating to a gain on the sale of a minority investment; (ii) in the fourth
quarter of 2000, net income includes a $9.2 million charge, or $0.36 per diluted
share, for amortization of goodwill and other purchased intangibles, as well as
an inventory purchase accounting adjustment; $0.3 million, or $0.01 per diluted
share, of a gain on the sale of a minority investment; and a $0.2 million
charge, or $0.01 per diluted share, of relocation costs related to opening a new
office in boulder, Colorado.
Note 23 - Subsequent Event:
On March 6, 2001, the Company sold its Air Transport Systems business,
which is primarily located in Austin, Texas, to Honeywell for approximately $4.5
million in cash, resulting in a loss to be recorded of approximately $2.5
million. As part of this sale the Company also intends to discontinue its
manufacturing operations in Austin, Texas. The Austin facility, which employs
fewer than 65 people, is scheduled to close in August of 2001.
Under the agreement, Honeywell has purchased our Air Transport Systems'
product lines which include the HT 1000, HT 9000, HT 9100 and Trimble's TNL
8100. As part of a strategic alliance that began in 1995, Trimble and Honeywell
jointly developed, manufactured, marketed, and sold the HT product line. These
products are installed in many commercial aircraft and major airlines around the
world for Global Positioning System (GPS)-based navigation.
63
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
The Board of Directors and Shareholders, Trimble Navigation Limited
We have audited the accompanying consolidated balance sheets of Trimble
Navigation Limited as of December 29, 2000 and December 31, 1999, and the
related consolidated statements of operations, shareholders' equity, and cash
flows for each of the three years in the period ended December 29, 2000. Our
audits also included the financial statement schedule listed in the index at
Item 14(a)(2). These financial statements and schedule are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements and schedule, based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements and schedule referred to above
present fairly, in all material respects, the consolidated financial position of
Trimble Navigation Limited at December 29, 2000 and December 31, 1999, and the
consolidated results of its operations and its cash flows for each of the three
years in the period ended December 29, 2000, in conformity with accounting
principles generally accepted in the United States. Also, in our opinion, the
related financial statement schedule, when considered in relation to the basic
financial statements taken as a whole, presents fairly in all material respects
the information set forth therein.
/s/ ERNST & YOUNG LLP
Palo Alto, California
January 26, 2001
64
Item 9. Changes in and Disagreements with Accountants on Accounting Financial
Disclosure
Not applicable.
PART III
Item 10. Directors and Executive Officers of the Registrant
The section titled "Nominees" and the section titled "Section 16(a)
Beneficial Ownership Reporting Compliance" in the Company's Proxy Statement for
its 2001 annual meeting of shareholders to be held on May 10, 2001 ("Proxy
Statement"), with respect to directors of the Company and compliance of the
directors and executive officers of the Company with Section 16(a) of the
Exchange Act required by this item are incorporated herein by reference.
The information with respect to the executive officers of the Company
required by this item is included in Part I hereof under the caption "Executive
Officers of the Company."
Item 11. Executive Compensation
The following sections of the Proxy Statement are incorporated herein by
reference: "Compensation of Executive Officers," "Compensation of Directors,"
"Compensation Committee Interlocks and Insider Participation," and "Compensation
Committee Report" and "Company Performance."
Item 12. Security Ownership of Certain Beneficial Owners and Management
The section titled "Security Ownership of Certain Beneficial Owners and
Management" of the Proxy Statement is incorporated herein by reference.
Item 13. Certain Relationships and Related Transactions
The section titled "Certain Relationships and Related Transactions" of the
Proxy Statement is incorporated herein by reference.
65
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on form 8-K
(a) 1. Financial Statements
The following consolidated financial statements required by this item are
included in Part II Item 8 hereof under the caption "Financial Statements and
Supplementary Data."
Page In This
Annual Report
On Form 10-K
Consolidated Balance Sheets at December 29, 2000 and December 31, 1999 37
Consolidated Statements of Operations for each of the three fiscal years
in the period ended December 29, 2000 38
Consolidated Statement of Shareholders' Equity for the three fiscal years
in the period ended December 29, 2000 39
Consolidated Statements of Cash Flows for each of the three fiscal years
in the period ended December 29, 2000 40
Notes to Consolidated Financial Statements 41-63
2. Financial Statement Schedules
The following financial statement schedule is filed as part of this report:
Page In This
Annual Report
On Form 10-K
Schedule II - Valuation and Qualifying Accounts S-1
All other schedules have been omitted as they are either not required or
not applicable, or the required information is included in the consolidated
financial statements or the notes thereto.
3. Exhibits
Exhibit
Number
3.1 Restated Articles of Incorporation of the Company filed June 25, 1986.
(17)
3.2 Certificate of Amendment of Articles of Incorporation of the Company
filed October 6, 1988. (17)
3.3 Certificate of Amendment of Articles of Incorporation of the Company
filed July 18, 1990. (17)
3.4 Certificate of Determination of the Company filed February 19, 1999.
(17)
3.8 Amended and Restated Bylaws of the Company. (21)
4.1 Specimen copy of certificate for shares of Common Stock of the Company.
(1)
4.2 Preferred Shares Rights Agreement dated as of February 18, 1999. (16)
66
10.4+ Form of Indemnification Agreement between the Company and its officers
and directors. (1)
10.5 Loan Agreement dated December 21, 1984, between the Company and certain
lenders. (1)
10.6 Note Purchase Agreement dated July 7, 1986, between the Company and
certain purchasers. (1)
10.7 Form of Common Stock Purchase Agreement dated March 1989 between the
Company and certain investors. (1)
10.8* Memorandum of Understanding dated March 11, 1988, and License Agreement
dated September 5,1988, between the Company and AEG Aktiengesellschaft,
with Amendments No. 1, No. 2, and No. 3 thereto, and Letter Agreement
dated December 22, 1989, between Trimble and Telefunken Systemtechnik
GmbH. (1)
10.9 Note Purchase Agreement dated December 6, 1988, between the Company and
AEG Aktiengesellschaft. (1)
10.10 Master Equipment Lease Agreement dated April 26, 1990, between the
Company and MATSCO Financial Corporation, and schedule of lease
extensions. (1)
10.11* Agreement dated February 6, 1989, between the Company and Pioneer
Electronic Corporation. (1)
10.15 International OEM Agreement dated May 30, 1989, between the Company and
Geotronics AB. (1)
10.16 Patent License Agreement dated January 18, 1990, between the Company
and the United States Navy. (1)
10.18 Asset Purchase Agreement dated April 19, 1990, between the Company;
TR Navigation Corporation, a subsidiary of the Company; and Tracor
Aerospace, Inc. (1)
10.19 Promissory Note dated April 20, 1990, for the principal amount of
$400,000 issued by TR Navigation Corporation to DAC International,
Inc. (1)
10.20 Guarantee dated April 20, 1990, between the Company and DAC
International, Inc. (1)
10.21 Indemnification Agreement dated April 20, 1990, between the Company;
TR Navigation Corporation, a subsidiary of the Company; DAC
International, Inc.; and Banner Industries, Inc. (1)
10.22 Distributor Agreement dated April 20, 1990, between TR Navigation
Corporation, a subsidiary of the Company, and DAC International,
Inc. (1)
10.23 Distributor Agreement dated December 6, 1989, between the Company and
DAC International, Inc. (1)
10.24 Lease Agreement dated April 26, 1990, between the Company and NCNB
Texas National Bank, Trustee for the Company's offices located at
2105 Donley Drive, Austin, Texas. (1)
10.32+ 1990 Director Stock Option Plan, as amended, and form of Outside
Director Non-statutory Stock Option Agreement. (8)
10.35 Sublease Agreement dated January 2, 1991, between the Company, Aetna
Insurance Company, and Poqet Computer Corporation for property
located at 650 North Mary Avenue, Sunnyvale, California. (2)
10.36 Lease Agreement dated February 20, 1991, between the Company, John
Arrillaga Separate Property Trust, and Richard T. Peery Separate
Property Trust for property located at 880 West Maude, Sunnyvale,
California. (2)
10.37 Share and Asset Purchase Agreement dated February 22, 1991, among the
Company and Datacom Group Limited and Datacom Software Research
Limited. (3)
10.38 License Agreement dated June 29, 1991, between the Company and Avion
Systems, Inc. (3)
67
10.40 Industrial Lease Agreement dated December 3, 1991, between the Company
and Aetna Life Insurance Company for property located at 585 North
Mary Avenue, Sunnyvale, California. (5)
10.41 Industrial Lease Agreement dated December 3, 1991, between the Company
and Aetna Life Insurance Company for property located at 570 Maude
Court, Sunnyvale, California. (5)
10.42 Industrial Lease Agreement dated December 3, 1991, between the Company
and Aetna Life Insurance Company for property located at 580 Maude
Court, Sunnyvale, California. (5)
10.43 Industrial Lease Agreement dated December 3, 1991, between the Company
and Aetna Life Insurance Company for property located at 490 Potrero
Avenue, Sunnyvale, California. (5)
10.44 Master Lease Agreement dated September 18, 1991, between the Company
and United States Leasing Corporation. (5)
10.45 Equipment Financing Agreement dated May 15, 1991, between the Company
and Corestates Bank, N.A. (5)
10.46+ 1992 Management Discount Stock Option and form of Nonstatutory Stock
Option Agreement (5).
10.48 Equipment Financing Agreement dated April 27, 1992, with AT&T Systems
Leasing Corporation. (7)
10.49** Memorandum of Understanding dated December 24, 1992, between the
Company and Pioneer Electronics Corporation. (7)
10.51 Revolving Credit Agreement for $15,000,000 dated January 27, 1993, with
Barclays Business Credit, Inc. (7)
10.52 $30,000,000 Note and Warrant Purchase Agreement dated June 13, 1994,
with John Hancock Life Insurance Company. (9)
10.53 Revolving Credit Agreement for $20,000,000 and $10,000,000, dated
August 4, 1995, with the First National Bank of Boston and Mellon Bank
N.A., respectively. (1)
10.54 Revolving Credit Agreement - First Amendment. (12)
10.55 Revolving Credit Agreement - Second Amendment. (12)
10.56 Revolving Credit Agreement - Third Amendment. (13)
10.58 Revolving Credit Agreement for $50,000,000 dated August 27, 1997,
with Fleet National Bank, Bank of Boston N.A., Sanwa Bankof California,
and ABN Amro Bank N.V., respectively. (15)
10.59+ 1993 Stock Option Plan, as amended May 11, 2000. (21)
10.60+ 1988 Employee Stock Purchase Plan, as amended May 11, 2000. (21)
10.61 Revolving Credit Agreement - Loan - Third Amendment. (17)
10.62+ Employment Agreement between the Company and Bradford W. Parkinson
dated September 1, 1998. (17)
10.63+ Employment Agreement between the Company and Robert S. Cooper dated
September 1, 1998. (17)
10.64+ Consulting Agreement between the Company and Bradford W. Parkinson
dated September 1, 1998. (17)
10.65+ Standby Consulting Agreement between the Company and Bradford W.
Parkinson dated September 1, 1998. (17)
10.66+ Consulting Agreement between the Company and Robert S. Cooper dated
September 1, 1998. (17)
68
10.67+ Employment Agreement between the Company and Steven W. Berglund dated
March 17, 1999. (17)
10.68+ Nonqualified deferred Compensation Plan of the Company effective
February 10, 1994. (17)
10.69*** Asset Purchase Agreement dated August 10, 1999 by and among Trimble
Navigation Limited and Solectron Corporation and Solectron Federal
Systems, Inc. (19)
10.70*** Supply Agreement dated August 10, 1999 by and among Trimble
Navigation Limited and Solectron Corporation and Solectron Federal
Systems, Inc. (19)
10.71 Revolving Credit Agreement - Loan - Fourth Amendment. (20)
10.72 Stock and Asset Purchase Agreement, dated as of May 11, 2000,
between Trimble Acquisition Corp., and Spectra Physics Holdings
USA, INC., Spectra Precision AB, and Spectra Precision Europe Holdings,
BV. (22)
10.73 Asset Purchase Agreement dated May 11, 2000 between Trimble Acquisition
Corp. and Spectra Precision AB. (22)
.
10.74 $200.0 million Credit Agreement dated July 14, 2000 between
Trimble Navigation Limited and ABN AMRO Bank N.V., Fleet National Bank,
and The Bank of Nova Scotia. (22)
10.75 Subordinated Seller Note dated July 14, 2000, for the principal amount
of $80,000,000 issued by Trimble Navigation Limited to Spectra
Precision Holdings, Inc. (22)
10.76+ Spectra Precision Supplement to the Trimble Navigation 1988 Employee
Stock Purchase Plan. (23)
10.77+ Australian Addendum to the Trimble Navigation 1988 Employee Stock
Purchase Plan. (24)
21.1 Subsidiaries of the Company. (24)
23.1 Consent of Ernst & Young LLP, independent auditors (see page 78).
24.1 Power of Attorney (included on page 72).
* Confidential treatment has been previously granted for certain portions
of this exhibit pursuant to an order dated July 11, 1990.
** Confidential treatment has been previously granted for certain portions
of this exhibit pursuant to an order dated March 2, 1995.
*** Confidential treatment has been granted for certain portions of this
exhibit pursuant to an order dated effective October 5, 1999.
+ Management contract or compensatory plan or arrangement required to be
filed as an exhibit to this Annual Report on Form 10-K pursuant to Item
14(c) thereof.
(1) Incorporated by reference to identically numbered exhibits filed in
response to Item 16(a), "Exhibits," of the registrant's Registration
Statement on Form S-1, as amended (File No. 33-35333), which became
effective July 19, 1990.
(2) Incorporated by reference to identically numbered exhibits filed in
response to Item 14(a), "Exhibits," of the registrant's Annual Report
on Form 10-K for the fiscal year ended December 31, 1990.
(3) Incorporated by reference to identically numbered exhibits filed in
response to Item 16, "Exhibits and Forms 8-K," of the registrant's
Report on 10-Q for the quarter ended September 30, 1991, as amended on
Form 8, filed February 11, 1992.
69
(4) Incorporated by reference to Exhibit No. 4.1 filed in response to
Item 8, "Exhibits," of the registrant's Registration Statement on
Form S-8 (File No. 33-45167), which became effective January 21, 1992.
(5) Incorporated by reference to identically numbered exhibits filed in
response to Item 16(a) "Exhibits," of the registrant's Registration
Statement on Form S-1 (File No. 33-45990), which was filed February 18,
1992.
(6) Incorporated by reference to Exhibits 4.1, 4.2 and 4.3 filed in
response to Item 8, "Exhibits," of the registrant's Registration
Statement on Form S-8 (File No. 33-57522), which was filed on January
28, 1993.
(7) Incorporated by reference to identically numbered exhibits filed in
response to Item 14(a), "Exhibits," of the registrant's Annual Report
on Form 10-K for the fiscal year ended December 31, 1992.
(8) Incorporated by reference to identically numbered exhibits filed in
response to Item 14(a), "Exhibits," of the registrant's Annual Report
on Form 10-K for the fiscal year ended December 31, 1993.
(9) Incorporated by reference to identically numbered exhibits filed in
response to Item 6A, "Exhibits," of the registrant's Annual Report on
Form 10-Q for the quarter ended June 30, 1994.
(10) Incorporated by reference to identically numbered exhibits filed in
response to Item 14(a), "Exhibits," of the registrant's Annual Report
on Form 10-K for the fiscal year ended December 31, 1994.
(11) Incorporated by reference to identically numbered exhibits filed in
response to Item 14(a), "Exhibits," of the registrant's Annual Report
on Form 10-K for the fiscal year ended December 31, 1995.
(12) Incorporated by reference to identically numbered exhibits filed in
response to Item 6A, "Exhibits," of the registrant's Annual Report on
Form 10-Q for the quarter ended June 30, 1996.
(13) Incorporated by reference to identically numbered exhibits filed in
response to Item 6A, "Exhibits," of the registrant's Annual Report on
Form 10-Q for the quarter ended September 30, 1996.
(14) Incorporated by reference to identically numbered exhibits filed in
response to Item 6A, "Exhibits," of the registrant's Annual Report on
Form 10-Q for the quarter ended June 30, 1997.
(15) Incorporated by reference to identically numbered exhibits filed in
response to Item 6A, "Exhibits," of the registrant's Annual Report on
Form 10-Q for the quarter ended September 30, 1997.
(16) Incorporated by reference to Exhibit No. 1 to the registrant's
Registration Statement on Form 8-A, which was filed on February 18,
1999.
(17) Incorporated by reference to identically numbered exhibits filed in
response to Item 14(a), "Exhibits," of the registrant's Annual Report
on Form 10-K for the fiscal year ended January 1, 1999.
(18) Incorporated by reference to identically numbered exhibits filed in
response to Item 6A, "Exhibits," of the registrant's Annual Report on
Form 10-Q for the quarter ended July 2, 1999.
(19) Incorporated by reference to identically numbered exhibits filed in
response to Item 7(c), "Exhibits," of the registrant's Report on Form
8-K, which was filed on August 25, 1999.
(20) Incorporated by reference to identically numbered exhibits filed in
response to Item 6A, "Exhibits," of the registrant's Annual Report on
Form 10-Q for the quarter ended October 1, 1999.
(21) Incorporated by reference to identically numbered exhibits filed in
response to Item 8, "Exhibits," of the registrant's registration
statement on Form S-8 filed on June 1, 2000.
(22) Incorporated by reference to identically numbered exhibits filed in
response to Item 7(c), "Exhibits," of the registrant's Current Report
on Form 8-K filed on July 28, 2000.
(23) Incorporated by reference to identically numbered exhibits filed in
response to Item 6A, "Exhibits," of the registrant's Annual Report on
Form 10-Q for the quarter ended September 29, 2000.
70
(24) Filed herewith.
(b) Reports on Form 8-K.
No reports on Form 8-K were filed by the registrant during the fourth
quarter ended December 29, 2000.
71
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this Report on Form 10-K to
be signed on its behalf by the undersigned, thereunto duly authorized.
TRIMBLE NAVIGATION LIMITED
By: /s/ Steven W. Berglund
----------------------
Steven W. Berglund,
President and Chief Executive Officer
March 28, 2001
POWER OF ATTORNEY
Know all persons by these presents, that each person whose signature
appears below constitutes and appoints Steven W. Berglund as his
attorney-in-fact, with the power of substitution, for him in any and all
capacities, to sign any amendments to this Report on Form 10-K, and to file the
same, with exhibits thereto and other documents in connection therewith, with
the Securities and Exchange Commission, hereby ratifying and confirming all that
said attorney-in-fact, or his substitute or substitutes, may do or cause to be
done by virtue hereof.
72
Pursuant to the requirements of the Securities Exchange Act of 1934,
this Annual Report on Form 10-K has been signed below by the following persons
on behalf of the registrant and in the capacities and on the dates indicated:
Signature Capacity in which Signed Date
- --------------------------- ------------------------------ ----------------
/s/ Steven W. Berglund President, Chief Executive March 28, 2001
- --------------------------- Officer, Director
Steven W. Berglund
/s/ Mary Ellen Genovese Chief Financial Officer and March 28, 2001
- --------------------------- Assistant Secretary (principal
Mary Ellen Genovese financial officer)
/s/ Robert S. Cooper Director March 13, 2001
- ---------------------------
Robert S. Cooper
/s/ John B. Goodrich Director March 19, 2001
- ---------------------------
John B. Goodrich
/s/ William Hart Director March 12, 2001
- ---------------------------
William Hart
/s/ Ulf J. Johansson Director March 16, 2001
- ---------------------------
Ulf J. Johansson
/s/ Bradford W. Parkinson Director March 13, 2001
- ---------------------------
Bradford W. Parkinson
73
SCHEDULE II
TRIMBLE NAVIGATION LIMITED
VALUATION AND QUALIFIYING ACCOUNTS
(IN THOUSANDS OF DOLLARS)
Balance at Balance at
beginning of (Reductions) end of
Allowance for doubtful accounts: period Additions Write-offs ** period
------------------- ----------------- ---------------- ----------------
Year ended January 1, 1999 2,464 458 702 2,220
Year ended December 31, 1999 2,220 1,901 1,172 2,949
Year ended December 29, 2000 (1) 2,949 5,008 1,419 6,538
Balance at Balance at
beginning of (Reductions) end of
Inventory Reserves: period Additions Write-offs ** period
------------------- ----------------- ---------------- ----------------
Year ended January 1, 1999 9,409 7,057 2,347 14,119
Year ended December 31, 1999 14,119 1,607 1,617 14,109
Year ended December 29, 2000 (2) 14,109 5,984 2,684 17,409
- -------------------------------------------------
** Net of recoveries
(1) Additions include $4,419,000 acquired at July 14, 2000 as part of the
acquisition of the Spectra Precision Group and $26,000 acquired at November
14, 2000 as part of the acquisition of Tripod Data Systems.
(2) Additions include $7,659,000 acquired at July 14, 2000 as part of the
acquisition of the Spectra Precision Group and $13,000 acquired at November
14, 2000 as part of the acquisition of Tripod Data Systems.
S-1
74
INDEX TO EXHIBITS
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER EXHIBIT PAGE
10.77 Australian Addendum to the Trimble Navigation 1988
Employee Stock Purchase Plan 76-78
21.1 Subsidiaries of the Company 79-80
23.1 Consent of Ernst & Young LLP, Independent Auditors 81
75