UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[ X ] Quarterly report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the quarterly period ended APRIL 4, 2003
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
---------- ----------
(State or other jurisdiction of (I.R.S. Employer Identification Number)
incorporation or organization)
645 North Mary Avenue, Sunnyvale, CA 94085
------------------------------------------
(Address of principal executive offices) (Zip Code)
Telephone Number (408) 481-8000
-------------------------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes [ X ] No [ ]
As of May 5, 2003, there were 31,656,722 shares of Common Stock (no par
value) outstanding.
<page>
TRIMBLE NAVIGATION LIMITED
FORM 10-Q
INDEX
Page
Number
PART I - FINANCIAL INFORMATION
ITEM 1. Financial Statements:
Consolidated Condensed Balance Sheets -
April 4, 2003 and January 3, 2003 (unaudited)...................... 3
Consolidated Condensed Statements of Operations -
Three Months Ended April 4, 2003 and March 29, 2002 (unaudited).... 4
Consolidated Condensed Statements of Cash Flows -
Three Months Ended April 4, 2003 and March 29, 2002 (unaudited).... 5
Notes to Consolidated Condensed Financial Statements............ 6 - 16
ITEM 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations......................................... 17-34
ITEM 3. Quantitative and Qualitative Disclosures about Market Risk....... 35-36
ITEM 4. Controls and Procedures............................................ 36
PART II - OTHER INFORMATION
ITEM 1. Legal Proceedings................................................... 37
ITEM 2. Changes in Securities and Use of Proceeds........................... 37
ITEM 6. Exhibits and Reports on Form 8-K................................ 38, 44
Signatures................................................................ 39-43
PART I - FINANCIAL INFORMATION
ITEM 1. Financial Statements
TRIMBLE NAVIGATION LIMITED
CONSOLIDATED CONDENSED BALANCE SHEETS
(Unaudited)
<table>
<caption>
April 4, January 3,
As at 2003 2003 (1)
- ----- ---- --------
(in thousands)
<s> <c> <c>
ASSETS
Current assets:
Cash and cash equivalents $ 13,529 $ 28,679
Accounts and other receivable, net 94,214 79,645
Inventories, net 64,513 61,144
Other current assets 9,405 8,477
----- -----
Total current assets 181,661 177,945
Property and equipment, at cost less accumulated depreciation 21,590 22,037
Goodwill 208,591 205,933
Other intangible assets, less accumulated amortization 21,328 23,238
Deferred income taxes 417 417
Other assets 13,200 12,086
------ ------
Total non-current assets 265,126 263,711
------- -------
Total assets $ 446,787 $ 441,656
========= ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Bank and other short-term borrowings $ - $ 6,556
Current portion of long-term debt 24,085 24,104
Accounts payable 30,511 30,669
Accrued compensation and benefits 17,861 17,728
Accrued liabilities 20,777 21,000
Accrued warranty expense 6,429 6,394
Deferred income tax liabilities 342 -
Income taxes payable 7,135 6,450
----- -----
Total current liabilities 107,140 112,901
Non-current portion of long-term debt 107,265 107,865
Deferred gain on joint venture 10,571 10,792
Deferred income tax liabilities 2,651 2,561
Other non-current liabilities 6,517 6,186
----- -----
Total liabilities 234,144 240,305
------- -------
Commitments and Contingencies
Shareholders' equity:
Common stock, no par value; 40,000 shares authorized;
29,399 and 29,309 shares outstanding, respectively 227,583 225,872
Accumulated deficit (18,142) (23,495)
Accumulated other comprehensive income (loss) 3,202 (1,026)
----- ------
Total shareholders' equity 212,643 201,351
------- -------
Total liabilities and shareholders' equity $ 446,787 $ 441,656
========= ==========
</table>
(1) Derived from the January 3, 2003 audited consolidated financial statements
included in the Annual Report on Form 10-K of Trimble Navigation Limited
for fiscal year 2002.
* See accompanying Notes to Consolidated Condensed Financial Statements.
<page>
TRIMBLE NAVIGATION LIMITED
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended
------------------
April 4, March 29,
Three Months Ended 2003 2002
- ------------------ ---- ----
(in thousands, except per share data)
Revenue $127,325 $104,029
Cost of revenue 65,570 49,696
------ ------
Gross margin 61,755 54,333
Operating expenses
Research and development 16,040 15,038
Sales and marketing 23,997 22,127
General and administrative 8,635 10,798
Restructuring charges 390 304
Amortization of purchased intangible assets 1,795 1,978
----- -----
Total operating expenses 50,857 50,245
------ ------
Operating income 10,898 4,088
Non-operating income (expense), net
Interest income 105 87
Interest expense (3,480) (4,030)
Foreign currency transaction gain (loss), net 92 (59)
Expenses for affiliated operations, net (1,215) ----
Other expense (47) (199)
---- -----
Total non-operating expense, net (4,545) (3,803)
------- -------
Income before income taxes 6,353 285
Income tax provision 1,000 1,000
----- -----
Net income (loss) $ 5,353 $ (715)
======== ========
Basic earnings (loss) per share $ 0.18 $ (0.03)
======== ========
Shares used in calculating basic
earnings per share 29,360 27,959
====== ======
Diluted earnings (loss) per share $ 0.18 $ (0.03)
======== ========
Shares used in calculating diluted
earnings per share 30,092 27,959
* See accompanying Notes to Consolidated Condensed Financial Statements.
TRIMBLE NAVIGATION LIMITED
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
Three Months Ended
------------------
April 4, March 29,
Three Months Ended 2003 2002
- ------------------ ---- ----
(In thousands)
Cash flow from operating activities:
Net income (loss) $ 5,353 $ (715)
Adjustments to reconcile net income (loss) to cash
flows provided by operating activities:
Depreciation expense 2,217 2,671
Amortization expense 1,977 2,186
Provision for doubtful accounts 449 1,232
Amortization of deferred gain - (398)
Amortization of debt issuance cost 513 -
Deferred income taxes 461 -
Other 272 803
Decrease (increase) in assets:
Accounts receivable, net (15,114) (2,357)
Inventories (3,370) (1,677)
Other assets (1,359) (980)
Effect of foreign currency translation adjustment 2,008 (1,284)
Increase (decrease) in liabilities:
Accounts payable (158) (448)
Accrued compensation and benefits 133 2,901
Deferred gain on joint venture (221) 11,000
Deferred gain - other - 345
Accrued liabilities 426 (4,540)
Income taxes payable 685 508
--- ---
Net cash provided (used) by operating activities (5,728) 9,247
------- -----
Cash flow from investing activities:
Acquisition of property and equipment, net (1,429) (1,783)
Acquisitions, net of cash acquired (397) (2,158)
Costs of capitalized patents (4) (48)
--- ----
Net cash used by investing activities (1,830) (3,989)
------- -------
Cash flow from financing activities:
Issuance of common stock and warrants 540 17,433
Collections (payment) of notes receivable (188) 80
Proceeds from (payments on) long-term debt and
revolving credit lines (7,944) (20,828)
------- --------
Net cash used by financing activities (7,592) (3,315)
------ -------
Net increase (decrease) in cash and cash equivalents (15,150) 1,943
Cash and cash equivalents, beginning of period 28,679 31,078
------ ------
Cash and cash equivalents, end of period $13,529 $33,021
======= =======
* See accompanying Notes to Consolidated Condensed Financial Statements.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS - UNAUDITED
NOTE 1 -- Basis of Presentation and New Accounting Standards:
Basis of Presentation
The Condensed Consolidated Financial Statements of Trimble Navigation
Limited and subsidiaries, ("Trimble" or the "Company") for the three-month
periods ended April 4, 2003, and March 29, 2002, which are presented in this
Quarterly Report on Form 10-Q are unaudited. The balance sheet at January 3,
2003, has been derived from the audited financial statements at that date but
does not include all of the information and footnotes required by generally
accepted accounting principles for complete financial statements. In the opinion
of management, these statements include all adjustments (consisting of normal
recurring adjustments) necessary for a fair statement of the results for the
interim periods presented. The Condensed Consolidated Financial Statements
should be read in conjunction with the audited consolidated financial statements
and notes thereto included in Trimble's Annual Report on Form 10-K for the
fiscal year ended January 3, 2003.
The results of operations for the three-month period ended April 4,
2003 are not necessarily indicative of the results that may be expected for the
fiscal year ending January 2, 2004.
New Accounting Standards
In November of 2002, the EITF reached a consensus on Issue No. 00-21,
"Revenue Arrangements with Multiple Deliverables." EITF Issue No. 00-21 provides
guidance on how to account for arrangements that involve the delivery or
performance of multiple products, services and/or rights to use assets. The
provisions of EITF Issue No. 00-21 will apply to revenue arrangements entered
into in fiscal periods beginning after June 15, 2003. Trimble is currently
evaluating the effect that the adoption of EITF Issue No. 00-21 will have on its
results of operations and financial condition.
In January of 2003, the FASB issued FIN No. 46, "Consolidation of
Variable Interest Entities." FIN No. 46 requires a variable interest entity to
be consolidated by a company if that company is subject to a majority of the
risk of loss from the variable interest entity's activities or entitled to
receive a majority of the entity's residual returns or both. The consolidation
requirements of FIN No. 46 apply immediately to variable interest entities
created after January 31, 2003. The consolidation requirements apply to older
entities in the first fiscal year or interim period beginning after June 15,
2003. The Company is currently evaluating the provisions of FIN No. 46.
Stock Compensation and SFAS 123 Disclosures
In accordance with the provisions of Statement of Financial Accounting
Standards No. 123 ("SFAS 123"), "Accounting for Stock-Based Compensation" and
"Statement of Financial Accounting Standards No. 148 ("SFAS 148"), "Accounting
for Stock-Based Compensation - Transition and Disclosure," Trimble applies
Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to
Employees" ("APB 25") and related interpretations in accounting for its stock
option plans and stock purchase plan. Accordingly, the Company does not
recognize compensation cost for stock options granted at fair market value.
In December of 2002, the Financial Accounting Standards Board issued
SFAS No. 148, which amends SFAS No. 123, to provide alternative methods of
transition for an entity that changes to the fair value method of accounting for
stock-based employee compensation. In addition, SFAS No. 148 amends the
disclosure provisions of SFAS No. 123 to require expanded and more prominent
disclosure of the effects of an entity's accounting policy with respect to
stock-based employee compensation.
For purposes of pro forma disclosures, the estimated fair value of the
options is amortized to expense over the options' vesting period, and the
estimated fair value of purchases under the employee stock purchase plan is
expensed in the year of purchase as well as the stock-based employee
compensation cost, net of related tax effects, that would have been included in
the determination of net income if the fair value based method had been applied
to all awards. The effects on pro forma disclosure of applying SFAS No. 123 are
not likely to be representative of the effects on pro forma disclosure of future
years.
<page>
Pro forma information regarding net income (loss) and earnings (loss)
per share is required by SFAS No. 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 No.123. The fair value for
these options was estimated at the date of grant using a Black-Scholes
option-pricing model with the following weighted-average assumptions at April 4,
2003 and March 29, 2002:
April 4, March 29,
2003 2002
---- ----
Expected dividend yield - -
Expected stock price volatility 61.27% 67.50%
Risk free interest rate 3.13% 4.15%
Expected life of options after vesting 1.30 1.34
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.
Trimble's pro forma information is as follows:
April 4, March 29,
Three Months Ended 2003 2002
- ------------------ ---- ----
(dollars in thousands)
Net income (loss) - as reported $ 5,353 $ (715)
Stock-based employee compensation expense 2,394
determined under fair value method based for
all awards, net of related tax effects 2,907
Net earnings (loss) - pro forma 2,959 (3,622)
Basic earnings (loss) per share - as reported 0.18 (0.03)
Basic earnings (loss) per share - pro forma 0.10 (0.13)
Diluted earnings (loss) per share - as reported 0.18 (0.03)
Diluted earnings (loss) per share - pro forma 0.10 (0.13)
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.
NOTE 2 - Acquisitions:
The consolidated condensed financial statements include the results of
operations of acquired companies commencing on the date of acquisition. The
total purchase consideration for each of the above acquisitions was allocated to
the assets acquired and liabilities assumed based on their estimated fair values
as of the date of acquisition.
LeveLite Technology, Inc.
On August 15, 2002, Trimble acquired LeveLite Technology, Inc.
("LeveLite"), a California corporation, for approximately $5.7 million. This
strategic acquisition complements Trimble's entry-level construction instrument
product line. The purchase price consisted of 437,084 shares of the common
stock. The merger agreement provides for Trimble to make additional earn-out
payments not to exceed $3.9 million (in common stock and cash payment) based on
future revenues derived from existing product sales to a certain customer. On
January 22, 2003, Trimble issued the first earn-out payment (combination of
stock and cash) with a fair market value of
<page>
approximately $0.4 million, related to the earn-out for the quarter ended
January 3, 2003. On April 23, 2003, Trimble issued the second earn-out payment
(combination of stock and cash) with a fair market value of approximately $0.4
million, related to the earn-out for the quarter ended April 4, 2003. Also, if
Trimble receives any proceeds from a pending litigation, a portion will be paid
to the former shareholders of LeveLite. The additional payments, if earned,
result in additional goodwill.
Grid Data, Inc.
On April 2, 2001, Trimble acquired certain assets of Grid Data, an
Arizona corporation, for approximately $3.5 million in cash and the assumption
of certain liabilities. In addition, the purchase agreement provided for Trimble
to make earn-out payments based upon the completion of certain business
milestones. In June 2002, Trimble issued 268,352 in settlement of all earn-out
payments, which resulted in additional goodwill of $4.8 million, with a final
purchase price of approximately $8.3 million.
NOTE 3 - Goodwill and Intangible Assets:
Goodwill and purchased intangible assets consisted of the following:
April 4, January 3,
As of 2003 2003
- ----- ---- ----
(in thousands)
Goodwill:
Goodwill, Spectra Precision acquisition 187,537 185,277
Goodwill, other acquisitions 21,054 20,656
------ ------
Total goodwill* $ 208,591 $ 205,933
========= ==========
Intangible assets:
Intangible assets with definite life:
Existing technology 26,256 25,986
Trade names, trademarks, patents, and other
intellectual property 21,528 21,594
------ ------
Total intangible assets 47,784 47,580
Less accumulated amortization (26,456) (24,342)
------- -------
Total net intangible assets $ 21,328 $ 23,238
========= ==========
* Increase in the first fiscal quarter of 2003 was primarily due to the
weakening of the US dollar versus Euro and Swedish Krona (approximately $2.26
million) and the issuance of the second earn-out payment related to the LeveLite
acquisition of approximately $0.4 million.
NOTE 4 -- Certain Balance Sheet Components:
Inventories consisted of the following:
April 4, January 3,
As of 2003 2003
- ----- ---- ----
(in thousands)
Raw materials $ 22,095 $ 21,098
Work-in-process 3,431 5,187
Finished goods 38,987 34,859
------ ------
$ 64,513 $ 61,144
========== ==========
<page>
Property and equipment consisted of the following:
April 4, January 3,
As of 2003 2003
- ----- ---- ----
in thousands)
Machinery and equipment $ 70,080 $ 70,660
Furniture and fixtures 10,065 6,538
Leasehold improvements 6,514 6,451
Buildings 2,909 2,905
Land 1,391 1,391
----- -----
90,959 87,945
Less accumulated depreciation (69,369) (65,908)
-------- -------
$ 21,590 $ 22,037
=========== ==========
Other current assets consisted of the following:
April 4, January 3,
As of 2003 2003
- ----- ---- ----
(in thousands)
Notes receivable $ 1,873 $ 1,685
Prepaid expenses 5,806 5,495
Other 1,726 1,297
----- -----
$ 9,405 $ 8,477
=========== ==========
Other non-current assets consisted of the following:
April 4, January 3,
As of 2003 2003
- ----- ---- ----
(in thousands)
Debt issuance costs, net $ 2,749 $ 2,493
Other investments 1,410 1,381
Deposits 1,177 1,196
Demonstration inventory, net 3,383 2,665
Receivables from employees 1,094 1,223
Other 3,387 3,128
----- -----
$ 13,200 $ 12,086
=========== ==========
NOTE 5 -- Derivative Financial Instruments:
Trimble transacts business in various foreign currencies and hedges
certain identified risks associated with foreign currency transactions in order
to minimize the impact of changes in foreign currency exchange rates on
earnings. Trimble utilizes forward contracts to hedge certain trade and
inter-company 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. These hedge instruments are marked to market through earnings
every period.
<page>
The following table provides information about our foreign exchange
forward contracts outstanding as of April 4, 2003:
Foreign Currency Contract Value Fair Value in
Amount USD USD
Currency Buy/Sell (in thousands) (in thousands) (in thousands)
- -------- -------- -------------- -------------- --------------
AUD BUY (1,300) $ (764) $ (778)
CAD BUY (800) (539) (544)
EUR BUY (11,100) (11,936) (11,937)
GBP BUY (526) (832) (826)
JPY BUY (335,000) (2,828) (2,835)
MXN BUY (1,280) (117) (119)
NZD BUY (2,800) (1,546) (1,523)
SEK BUY (115,660) (13,533) (13,582)
CAD SELL 1,630 1,086 1,110
EUR SELL 19,559 20,977 21,095
GBP SELL 263 412 413
JPY SELL 881,431 7,363 7,460
MXN SELL 5,000 435 465
$ (1,822) $ (1,601)
========== =========
NOTE 6 -- Long-Term Debt:
Trimble's long-term debt consists of the following:
April 4, January 3,
As of 2003 2003
- ----- ---- ----
(in thousands)
Credit Facilities:
Five-year term loan $ 26,600 $ 32,600
U.S. and multi-currency revolving credit facility 33,850 35,000
Subordinated note 69,136 69,136
Promissory notes and other 1,764 1,789
----- -----
131,350 138,525
Less bank and other short-term borrowings - 6,556
Less current portion of long-term debt 24,085 24,104
------ ------
Non-current portion $ 107,265 $ 107,865
========= =========
Credit Facilities
In July of 2000, Trimble obtained $200 million of senior, secured
credit facilities (the "Credit Facilities") from a syndicate of banks to support
the acquisition of Spectra Precision Group and its ongoing working capital
requirements and to refinance certain existing debt. At April 4, 2003, Trimble
has approximately $60.5 million outstanding under the Credit Facilities,
comprised of $26.6 million under a $100 million five-year term loan, $18.8
million under a $50 million U.S. dollar only revolving credit facility
("revolver"), and $15.1 million under a $50 million multi-currency revolver. The
Company has access to an additional $66.1 million of cash under the terms of the
revolver loans. The Company has commitment fees on the unused portion of 0.5% if
the leverage ratio (which is defined as all outstanding debt, excluding the
seller subordinated note, divided by Earnings before Interest, Taxes,
Depreciation and Amortization (EBITDA), as defined in the related agreement) is
2.0 or greater and 0.375% if the leverage ratio is less than 2.0.
Pricing for any borrowings under the Credit Facilities was fixed for
the first six months at LIBOR plus 275 basis points and is thereafter tied to a
formula, based on the leverage ratio.
<page>
The Credit Facilities are secured by all of the Company's material
assets, except for assets that are subject to foreign tax considerations.
Financial covenants of the Credit Facilities include leverage, fixed charge, and
minimum net worth tests, all of which were amended during the third quarter of
2002. At April 4, 2003, Trimble was in compliance with these financial debt
covenants. The amounts due under the revolver loans are paid as the loans
mature, and the loan commitment fees are paid on a quarterly basis.
Two of the financial covenants, minimum fixed charge coverage and
maximum leverage ratios are sensitive to EBITDA. EBITDA is correlated to
Trimble's results of operations. Due to uncertainties associated with the
downturn in the worldwide economy and other factors, future revenues by quarter
are difficult to forecast. Cost cutting measures have been put in place by the
management team; however, if revenues should decline at a higher rate than cost
cutting measures on a quarter-to-quarter basis, Trimble may violate the two
above-mentioned financial covenants.
Subordinated Note
In the first fiscal quarter of 2002, the Company renegotiated the terms
of its subordinated note and under the revised agreement, Spectra Physics
Holdings, Inc., a subsidiary of Thermo Electron, extended the term of the note
until July 14, 2004, at the current interest rate of approximately 10.4% per
year.
The Credit Facilities allow Trimble to repay the subordinated 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 subordinated note)/EBITDA)
of less than 2.0x and (ii) cash and unused availability under the revolvers of
the Credit Facilities of at least $35 million. The note, by its terms, is
subordinated to the borrowings under Credit Facilities.
As of April 4, 2003 the principal amount outstanding was approximately
$69.1 million. To the extent that interest and principal due on the maturity
date becomes delinquent, an additional 4% interest rate per annum will apply.
On April 14, 2003, the Company sold 2,100,000 shares of its common
stock, no par value per share, to a certain investor at a price of $18.25 per
share in an offering pursuant to the Company's "shelf" registration statement
which was declared effective by the Securities and Exchange Commission on March
28, 2003. The offering resulted in net proceeds to the Company of approximately
$36.7 million (less commission and fees), approximately $31 million of which was
used to pay down the principal balance and $5.7 million was used to pay down the
accrued interest due on the Subordinated Note.
Promissory Note
The promissory note consists of a $1.7 million liability arising from
the purchase of a building for Trimble's Corvallis, Oregon site. The note is
payable in monthly installments through April 2015, bearing a variable interest
rate (3.99% as of April 4, 2003).
Weighted Average Cost of Debt
The weighted average cost of debt was approximately 5.9% for the fiscal
quarter ended April 4, 2003.
NOTE 7 -- Segment Information:
Trimble is a designer and distributor of positioning products and
applications enabled by GPS, optical, laser, and wireless communications
technology. The Company designs and markets products, by delivering integrated
information solutions such as collecting, analyzing, and displaying position
data to its end-users. Trimble offers an integrated product line for diverse
applications in its targeted markets.
<page>
To achieve distribution, marketing, production, and technology
advantages in Trimble's targeted markets, the Company manages its operations in
the following five segments:
o Engineering and Construction -- Consists of products currently used by
survey and construction professionals in the field for positioning data
collection, field computing, data management, and automated machine
guidance and control. These products provide solutions for numerous
construction applications including surveying, general construction, site
preparation and excavation, road and runway construction, and underground
construction.
o Field Solutions -- Consists of products that provide solutions in a variety
of agriculture and fixed asset applications, primarily in the areas of
precise land leveling, machine guidance, yield monitoring, variable-rate
applications of fertilizers and chemicals, and fixed asset data collection
for a variety of governmental and private entities. This segment is an
aggregation of the Mapping and GIS operation and the Agriculture operation.
Trimble has aggregated these business operations under a single general
manager in order to continue to leverage its research and development
activities due to the similarities of products across the segment.
o Mobile Solutions -- Consists of products that enable end-users to monitor
and manage their mobile assets by communicating location-relevant
information from the field to the office. Trimble offers a range of
products that address a number of sectors of this market including truck
fleets, security, telematics, and public safety vehicles.
o Component Technologies -- Currently, Trimble markets its GPS component
products through an extensive network of OEM relationships. These products
include proprietary chipsets, modules, and a variety of intellectual
property. The applications into which end-users currently incorporate the
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 -- 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. In the first fiscal quarter of 2003, this
segment was comprised solely of the Military and Advanced Systems business.
The Tripod Data Systems business is now included in the Engineering and
Construction segment, while previously it was included in this segment.
Trimble evaluates each of these segment's performance and allocates
resources based on profit and loss from operations before income taxes, and some
corporate allocations. 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 the five segments. All financial information for fiscal
2002 has been re-stated in order to reflect the realignment of the reportable
segments. Operating income (loss) is net revenue less operating expenses,
excluding general corporate expenses, goodwill amortization, restructuring
charges, non-operating income (expense), and income taxes. The identifiable
assets that Trimble's Chief Operating Decision Maker views by segment are
accounts receivable and inventory.
<page>
<table>
<caption>
Engineering & Field Mobile Component Portfolio
Construction Solutions Solutions Technologies Technologies Total
(In thousands)
<s> <c> <c> <c> <c> <c> <c>
Three months ended April 4, 2003:
External net revenues $ 85,663 $ 20,681 $ 3,168 $ 15,866 $ 1,947 $ 127,325
Operating income (loss)
before corporate allocations $ 12,240 $ 3,314 $ (687) $ 3,855 $ (752) $ 17,970
Three months ended March 29, 2002:
External net revenues $ 72,049 $ 18,031 $ 2,352 $ 10,025 $ 1,572 $ 104,029
Operating income (loss)
before corporate allocations $ 12,195 $ 3,862 $(3,323) $ 1,042 $ (997) $ 12,779
As of April 4, 2003
Accounts receivable (1) $ 85,470 $ 15,433 $ 2,955 $ 10,076 $ 2,424 $ 116,358
Inventories $ 50,566 $ 5,823 $ 2,782 $ 2,607 $ 2,735 $ 64,513
As of January 3, 2003
Accounts receivable (1) $ 73,474 $ 11,598 $ 1,960 $ 11,276 $ 1,966 $ 100,274
Inventories $ 46,332 $ 7,337 $ 1,986 $ 2,853 $ 2,636 $ 61,144
</table>
(1) As presented, the accounts receivable number excludes cash received in
advance, deferred revenue and allowances, which are not allocated between
segments.
The following are reconciliations corresponding to totals in the
accompanying consolidated condensed financial statements:
April 4, March 29,
Three Months Ended 2003 2002
- ------------------ ---- ----
(In thousands)
Operating income (loss):
Total for reportable segments $ 17,970 $ 12,779
Unallocated corporate expenses (4,887) (6,409)
Amortization of purchased intangible assets (1,795) (1,978)
Restructuring charges (390) (304)
---- ----
Operating income $ 10,898 $ 4,088
======== ========
April 4, January 3,
As of 2003 2003
- ----- ---- ----
(In thousands)
Assets:
Accounts receivable total for reportable divisions $116,358 $100,274
Unallocated (1) (22,144) (20,629)
-------- --------
Total $ 94,214 $ 79,645
======== ========
- ----------------------------
(1) Includes cash in advance, deferred revenue and reserves that are not
allocated by segment.
NOTE 8-- Equity:
Comprehensive Income (Loss)
The components of comprehensive loss, net of related tax, include:
April 4, March 29,
Three Months Ended 2003 2002
- ------------------ ---- ----
(In thousands)
Net income (loss) $ 5,353 $ (715)
Foreign currency translation adjustments 4,208 (216)
Net gain (loss) on hedging transactions (7) 203
Net unrealized gain on investments 28 -
--
Comprehensive income (loss) $ 9,582 $ (728)
======== =======
<page>
Accumulated other comprehensive income (loss) on the consolidated
balance sheets consists of unrealized gains on available for sale investments
and foreign currency translation adjustments.
The components of accumulated other comprehensive income (loss), net of
related tax as follows:
April 4, January 3,
As of 2003 2003
- ----- ---- ----
(In thousands)
Cumulative foreign currency translation adjustments $ 3,176 $ (1,032)
Net loss on hedging transactions - 7
Net unrealized gain on investments 26 (1)
-- --
Accumulated other comprehensive income (loss) $ 3,202 $ (1,026)
======== =========
NOTE 9 -- Earnings Per Share:
The following data show the amounts used in computing earnings (loss)
per share and the effect on the weighted-average number of shares of dilutive
potential Common Stock.
April 4, March 29,
Three Months Ended 2003 2002
- ------------------ ---- ----
(in thousands, except per share data)
Numerator:
Income available to common shareholders used in
Basic and diluted earnings (loss) per share $ 5,353 $ (715)
======= =======
Denominator:
Weighted-average number of common shares
used in basic earnings (loss) per share 29,360 27,959
Effect of dilutive securities (using treasury
stock method):
Common stock options 720 -
Common stock warrants 12 -
-- --
Weighted-average number of common shares
and dilutive potential common shares used
in diluted income per share 30,092 27,959
====== ======
Basic earnings (loss) per share $ 0.18 $ (0.03)
Diluted income (loss) per share $ 0.18 $ (0.03)
NOTE 10 -- Related-Party Transactions:
Related-Party Lease
Trimble currently leases office space in Ohio from an association of
three individuals, one of whom is an employee of one of the U.S. operating
units, under a non-cancelable operating lease arrangement expiring in 2011. The
annual rent is subject to adjustment based on the terms of the lease. The
Consolidated Condensed Statements of Operations include expenses from this
operating lease of $96,882 for fiscal quarter ended April 4, 2003, and $88,025
for fiscal quarter ended March 29, 2002.
<page>
Related-Party Notes Receivable
Trimble has notes receivable from officers and employees of
approximately $1.1 million as of April 4, 2003 and $1.2 million as of January 3,
2003. The notes bear interest from 4.49% to 6.62% and have an average remaining
life of 2.15 years as of April 4, 2003.
Caterpillar Joint Venture
On April 1, 2002, Caterpillar Trimble Control Technologies LLC (CTCT,
or "Joint Venture"), a Joint Venture formed by Trimble and Caterpillar began
operations. The Joint Venture, 50 percent owned by Trimble and 50 percent owned
by Caterpillar, with equal voting rights, is developing and marketing next
generation advanced electronic guidance and control products for earthmoving
machines in the construction, mining, and waste industries. The Joint Venture is
based in Dayton, Ohio. Under the terms of the joint venture agreement,
Caterpillar contributed $11.0 million cash plus selected technology, for a total
contributed value of $14.5 million, and Trimble contributed selected existing
machine control product technologies valued at $25.5 million. Additionally, both
companies have licensed patents and other intellectual property from their
portfolios to the Joint Venture. During the first fiscal quarter of 2002,
Trimble received a special cash distribution of $11.0 million from the Joint
Venture.
Trimble has elected to treat the cash distribution of $11.0 million as
a deferred gain, being amortized to the extent that losses are attributable from
the Joint Venture under the equity method described above. When and if the Joint
Venture is profitable on a sustainable basis, and future operating losses are
not anticipated, then Trimble will recognize as a gain, the portion of the $11.0
million, which is un-amortized. To the extent that it is possible that the
Company will have any future-funding obligation relating to the Joint Venture,
then the relevant amount of the $11.0 million will be deferred until such a
time, as the funding obligation no longer exists. Both Trimble's share of
profits (losses) under the equity method and the amortization of the $11.0
million deferred gain are recorded under the heading of "Expense for affiliated
operations, net" in Non-operating income (expense).
During the fiscal quarter ended April 4, 2003, Trimble recorded
approximately $1.2 million of expenses under the heading of "Expense for
affiliated operations, net" in non-operating income (expense) related to certain
transactions between the Joint Venture and Trimble. This was comprised of
approximately $1.6 million of incremental costs incurred by Trimble as a result
of purchasing products from the Joint Venture at a higher price than its
original manufacturing costs, offset by approximately $0.4 million of contract
manufacturing fees charged to the Joint Venture by Trimble. Due to the nature of
the relationship between Trimble and the Joint Venture, a related party, the
impact of these agreements is classified under non-operating income (expense) in
the condensed consolidated income statement.
In addition, during the fiscal quarter ended April 4, 2003, Trimble
recorded lower operating expenses of approximately $1.9 million due to the
transfer of employee related expenses for research and development ($1.2
million), and sales, marketing, and administrative functions ($0.7 million) to
the Joint Venture. These employees are devoted to the Joint Venture and are
primarily engaged in developing next generation products and technology for that
entity.
Trimble has adopted the equity method of accounting for its investment
in the Joint Venture. This requires that the Company records its share of the
Joint Venture profits or losses in a given fiscal period. During fiscal quarter
ended April 4, 2003, the Joint Venture reported a loss of $0.4 million of which
Trimble's share is $0.2 million, which was recorded as a Non-operating expense
under the heading of "Expense for affiliated operations, net", but which was
offset by the amortization of an equal amount of the original deferred gain on
the sale of technology to the Joint Venture.
Nikon Joint Venture
On March 28, 2003, Trimble and Nikon Corporation reached a definitive
agreement to form a 50-50 percent joint venture in Japan, Nikon-Trimble Co.,
Ltd., which will assume the operations of Nikon Geotecs Co., Ltd. in Japan.
Financially, Nikon will contribute (Y)1.2 billion (approximately US$10 million
on April 4, 2003) in cash, while Trimble will contribute (Y)500 million in the
second fiscal quarter of 2003 (approximately US$4.2 million on April 4, 2003) in
cash and (Y)700 million (approximately US$5.9 million on April 4, 2003) in its
common stock. Nikon-Trimble Co., Ltd. will purchase assets from Nikon Geotecs
Co., Ltd., a Japanese subsidiary of Nikon
<page>
Corporation, and Trimble Japan KK, a wholly owned subsidiary of Trimble, and is
expected to begin operations during the second fiscal quarter of 2003.
This new entity will focus on the design and manufacture of surveying
instruments including mechanical total stations and related products. In Japan,
the joint venture will distribute Nikon's survey products as well as Trimble's
survey products including Global Positioning System (GPS) and robotic total
stations. Outside of Japan, Trimble will become the exclusive distributor of
Nikon survey and construction products.
NOTE 11 -- Product Warranties:
While Trimble engages in extensive product quality programs and
processes including actively monitoring and evaluating the quality of component
suppliers, the Company's warranty obligation is affected by product failure
rates, material usage, and service delivery costs incurred in correcting a
product failure. Should actual product failure rates, material usage, or service
delivery costs differ from the estimates, revisions to the estimated warranty
accrual and related costs may be required.
Changes in the product warranty liability during the three-months, ended April
4, 2003 are as follows:
(in thousands)
--------------
Balance at January 3, 2003 $ 6,394
Warranties accrued 1,318
Warranty claims (1,283)
-------
Balance at April 4, 2003 $ 6,429
=========
The product warranty liability is classified as accrued warranty in the
accompanying condensed consolidated balance sheet.
NOTE 12 -- Litigation:
In January 2001, Philip M. Clegg instituted a lawsuit in the United States
District Court for the District of Utah, Central Division, against
Spectra-Physics Laserplane, Inc., Spectra Precision AB and Trimble Navigation
Limited. On January 29, 2003, Trimble and Mr. Clegg settled this patent
infringement lawsuit whereby Trimble has purchased a fully paid up,
non-exclusive license under U.S. Patent No. 4,807,131 from Mr. Clegg.
In November 2001, Qualcomm Inc. filed a lawsuit against Trimble in the
Superior Court of the State of California. The complaint asked for damages
arising out of Qualcomm's perceived lack of assurances in early 1999 that
Trimble's products purchased by Qualcomm would work properly after a scheduled
week number rollover event that took place in August 1999. Qualcomm is the only
customer to make a claim against Trimble based on the week number rollover
event. On March 12, 2003, Qualcomm was awarded a verdict of $916,000, which,
except for a small deductible, is covered by the Company's insurance.
The Company is also a party to other disputes incidental to its
business, including a current claim from a European distributor. The Company
believes that its ultimate liability as a result of such disputes, if any, would
not be material to its overall financial position, results of operations, or
liquidity.
This Quarterly Report on Form 10-Q contains forward-looking statements within
the meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended, which are
subject to the "safe harbor" created by those sections. Actual results could
differ materially from those indicated in the forward-looking statements due to
a number of factors including, but not limited to, the risk factors discussed in
"Certain Other Risk Factors" below and elsewhere in this report as well as in
the Company's Annual Report on Form 10-K for fiscal year 2002 and other reports
and documents that the Company files from time to time with the Securities and
Exchange Commission. The Company has attempted to identify forward-looking
statements in this report by placing an asterisk (*) before paragraphs.
Discussions containing such forward-looking statements may be found in
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" below. In some cases, forward-looking statements can be identified
by terminology such as "may," "will," "should," " could," "predicts,"
"potential," "continue," "expects," "anticipates," "future," "intends," "plans,"
"believes," "estimates," and similar expressions. These forward-looking
statements are made as of the date of this Quarterly Report on Form 10-Q, and
the Company disclaims any obligation to update these statements or to explain
the reasons why actual results may differ.
ITEM 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Trimble's discussion and analysis of its financial condition and
results of operations are based upon our condensed consolidated financial
statements, which have been prepared in accordance with accounting principles
generally accepted in the United States. The preparation of these financial
statements requires us to make estimates and judgments that affect the reported
amounts of assets, liabilities, revenues and expenses, and related disclosure of
contingent assets and liabilities. On an on-going basis, we evaluate our
estimates, including those related to product returns, doubtful accounts,
inventories, investments, intangible assets, income taxes, warranty obligations,
restructuring costs, and contingencies and litigation. We base our estimates on
historical experience and on various other assumptions that are believed to be
reasonable under the circumstances, the results of which form the basis for
making judgments about the amount and timing of revenue and expenses and the
carrying values of assets and liabilities that are not readily apparent from
other sources. Actual results may differ from these estimates under different
assumptions or conditions. See the discussion of our critical accounting
policies under the heading Management's Discussion and Analysis of Financial
Condition and Results of Operations in our Form 10K for fiscal 2002.
Recent Business Developments
Nikon Joint Venture
On March 28, 2003, Trimble and Nikon Corporation reached a definitive
agreement to form a 50-50 percent joint venture in Japan, Nikon-Trimble Co.,
Ltd., which will assume the operations of Nikon Geotecs Co., Ltd. in Japan.
Financially, Nikon will contribute(Y)1.2 billion (approximately US$10 million on
April 4, 2003) in cash, while we will contribute(Y)500 million the second fiscal
quarter of 2003 (approximately US$4.2 million on April 4, 2003) in cash
and(Y)700 million (approximately US$5.9 million on April 4, 2003) in our common
stock. Nikon-Trimble Co., Ltd. will purchase assets from Nikon Geotecs Co.,
Ltd., a Japanese subsidiary of Nikon Corporation, and Trimble Japan KK, our
wholly owned subsidiary, and is expected to begin operations during the second
fiscal quarter of 2003.
This new entity will focus on the design and manufacture of surveying
instruments including mechanical total stations and related products. In Japan,
the joint venture will distribute Nikon's survey products as well as Trimble's
survey products including Global Positioning System (GPS) and robotic total
stations. Outside of Japan, Trimble will become the exclusive distributor of
Nikon survey and construction products.
* We expect the joint venture to enhance our market position in survey
instruments through geographic expansion and market penetration. The Nikon
instruments will broaden our survey and construction product portfolio and
enable us to better access emerging markets in Russia, Eastern Europe, India and
China. It will provide us with the ability to sell its GPS and robotic
technology to existing Nikon customers around the world. Additionally, the new
company is expected to improve our market position in Japan, which remains a
major market for survey instruments.
<page>
Equity Financing
On March 7, 2003, we filed a common stock shelf registration
statement with the Securities and Exchange Commission to sell up to $100 million
of our common stock, from time to time. We plan to use the net proceeds of any
offering of these securities for general corporate purposes, which may include
repayment of debt, working capital, capital expenditures, possible acquisitions
and any other purpose that we may specify in any supplemental filing. The
registration statement was filed with the Securities and Exchange Commission on
Form S-3 and became affective on March 28, 2003.
On April 14, 2003, the Company sold 2,100,000 shares of its common
stock, no par value per share, to a certain investor at a price of $18.25 per
share in an offering pursuant to the Company's shelf registration statement.
Gerard Klauer Mattison & Co., Inc. served as placement agent for the
transaction. The offering resulted in net proceeds to the Company of
approximately $36.7 million, approximately $31 million of which was used to pay
down the principal balance and $5.7 million was used to pay down the accrued
interest due on the Subordinated Note, payable to Spectra Physics Holdings,
Inc., a subsidiary of Thermo Electron.
Results of Operations
Our quarterly revenues from operations increased from $104 million in
the first fiscal quarter of 2002 to $127.3 million in the first fiscal quarter
of 2003. In the first fiscal quarter of 2003, we had net income of $5.4 million,
or $0.18 diluted earnings per share, compared to a net loss of $0.7 million, or
$0.03 loss per share, in the first fiscal quarter of 2002.
The following table shows revenue and operating income by segment for
the periods indicated and should be read in conjunction with the narrative
descriptions below. Operating income by segment excludes unallocated corporate
expenses, which are comprised primarily of general and administrative costs,
amortization of goodwill and other purchased intangibles as well as other items
not controlled by the business segment.
In the first fiscal quarter of fiscal 2003, we realigned two of our
reportable segments and therefore the following table shows restated revenue and
operating income by segment to reflect this realignment. The TDS business is now
included in the Engineering and Construction segment, while previously it was
included in the Portfolio segment.
<table>
<caption>
% of % of
April 4, Total March 29, Total
Three Months Ended 2003 Revenue 2002 Revenue
- ------------------ ---- ------- ---- -------
(Dollars in thousands)
<s> <c> <c> <c> <c>
Engineering and Construction
Revenue $ 85,663 67% $ 72,049 69%
Segment operating income $ 12,240 $ 12,195
Segment operating income 14% 17%
as a percent of segment
revenue
Field Solutions
Revenue $ 20,681 16% $ 18,031 17%
Segment operating income $ 3,314 $ 3,862
Segment operating income 16% 21%
(loss) as a percent of
segment revenue
Mobile Solutions
Revenue $ 3,168 2% $ 2,352 2%
Segment operating loss $ (687) $(3,323)
Segment operating loss (22%) (141%)
as a percent of segment
revenue
Component Technologies
Revenue $ 15,866 13% $ 10,025 10%
Segment operating income $ 3,855 $ 1,042
Segment operating income 24% 10%
as a percent of segment
revenue
Portfolio Technologies
Revenue $ 1,947 2% $ 1,572 2%
Segment operating income $ (752) $ (997)
Segment operating income (39%) (63%)
as a percent of segment
revenue
Total Revenue $127,325 $104,029
Total Segment operating $ 17,970 $ 12,779
income
</table>
A reconciliation of our consolidated segment operating income to consolidated
income (loss) before income taxes from operations follows:
April 4, March 29,
Three Months Ended 2003 2002
(In thousands)
Consolidated segment operating income $17,970 $12,779
Unallocated corporate expenses $ 4,887 $ 6,409
Amortization of purchased $ 1,795 $ 1,978
intangible assets
Restructuring charges $ 390 $ 304
Non-operating expense, net $ 4,545 $ 3,803
------- -------
Income from operations before
income taxes $ 6,353 $ 285
======= =======
Engineering and Construction
Engineering and Construction revenues increased by $13.6 million, or
18.9% while segment operating income was flat during the first fiscal quarter of
2003 as compared to the first fiscal quarter of 2002. We continued to experience
strong demand for 3-D machine control systems such as the SiteVision product
line as our technology continues to be well accepted, and strong demand for
survey GPS equipment primarily due to the strength of our products, our
marketing actions and geographic expansion (especially in Asia). We also
recorded approximately $1.9 million in incremental revenues from LeveLite that
was acquired in August of 2002, and benefited from new product introductions and
increased demand for existing TDS hand-held data collection products, in
particular the Ranger and Recon data collectors. The weakening of the US dollar
versus several major currencies during the year contributed approximately $3.1
million of the revenue increase year over year.
Despite the increased revenues, segment operating income was flat year
over year due to increased operating expenses overseas (largely driven by the
weaker US dollar), increased research and development spending as we continue to
invest in developing next generation technology, lower gross margins resulting
from product mix changes, and strength in our OEM business which typically has
lower gross margins than sales through our dealer channel.
Field Solutions
Field Solutions revenues increased by approximately $2.7 million or
15%, and segment operating income decreased by $0.5 million or 14% during the
first fiscal quarter of 2003 as compared the first fiscal quarter of 2002. The
GeoExplorer product family for GIS that began shipping in the fourth quarter of
fiscal 2002 continues to receive a positive response. GIS sales are typically
weaker during the first quarter, but still increased by more than 10% from the
previous year, driven primarily by sales of the Geo CE series of products.
Agriculture sales benefited from seasonal strength due to the planting season
and continued success of autoguidance products partially offset by weakness in
the water management segment. Our high-end Autopilot product, which
automatically guides a tractor, continues to be met with strong customer
acceptance. Despite increased revenues, segment operating income decreased from
the first quarter of 2002 primarily due to lower gross margins as a result of
product mix changes and additional costs associated with the introduction of new
products.
<page>
Mobile Solutions
Mobile Solutions revenues increased by $0.8 million or 35%, and its
segment operating loss decreased by $2.6 million or 79% during the first fiscal
quarter of 2003 as compared to the first fiscal quarter of 2002. The increased
revenues were primarily attributable to the ready mix vertical market, mainly
from the CrossCheck product family. During the past year, we also saw a shift in
the composition of revenue in this segment, with a growing portion attributed to
the newer service-based products while the legacy hardware-only business is
declining in importance. The reduction of the segment operating loss by $2.6
million was due to the implementation of cost reduction initiatives of
approximately $1.0 million in this business segment, plus the positive impact in
the first quarter of 2003 of approximately $1.1 million of other items, $0.7
million of which was a reduction in product related allowances for inventory
which has been sold. Gross margins in this segment also increased over prior
year due to shift demand to higher margin products, led by the introduction of
new GPRS products.
Component Technologies
Component Technologies revenues increased by $5.8 million or 58%, and
segment operating income increased by $2.8 million or 270% during the first
fiscal quarter of 2003 as compared to the first fiscal quarter of 2002. Timing
revenue increased by $4 million primarily due to strong demand from our wireless
infrastructure customers, embedded product lines increased by $0.9 million
primarily due to a new product introduced during the second fiscal quarter of
2002. We also saw stronger demand for in-vehicle-navigation products and
increases in our chipset license revenues. The increased revenues plus higher
gross margins aided by favorable product mix, as well as lower manufacturing
costs due to the transfer of the manufacture of some of our products to
Solectron China, resulted in higher segment operating income.
Portfolio Technologies
Portfolio Technologies revenues increased by $0.4 million or 24% during
the first fiscal quarter of 2003 as compared to the first fiscal quarter of 2002
due to delayed shipments experienced during the first fiscal quarter of 2002 in
the Military and Advanced Systems business, while the operating loss decreased
by approximately $0.2 million or 25% due to higher revenues.
International Revenues
Sales to unaffiliated customers outside the United States comprised
approximately 50% of total revenues for both three months ended April 4, 2003
and March 29, 2002, respectively. During the first fiscal quarter of 2003, North
and South America represented 55%, Europe, the Middle East and Africa
represented 31%, and Asia represented 14%. We anticipate that sales to
international customers will continue to account for a significant portion of
our revenue. For this reason, we are subject to the risks inherent in these
foreign sales, including unexpected changes in regulatory requirements, exchange
rates, governmental approval, tariffs, or other barriers. Even though the U.S.
Government announced on March 29, 1996, that it supports and maintains the GPS
system, and on May 1, 2000, stated that it has no intent to ever again use
Selective Availability (SA), a method of degrading GPS accuracy, there may be
reluctance in certain foreign markets to purchase such products given the
control of GPS by the U.S. Government. Our results of operations could be
adversely affected if we were unable to continue to generate significant sales
in locations outside the U.S.
Gross Margin
Gross margin varies due to a number of factors including product mix,
international sales mix, customer type, the effects of production volumes and
fixed manufacturing costs on unit product costs, and new product start-up costs.
Gross margin as a percentage of total revenues was 49% for the three months
ended April 4, 2003, and 52% for the three months ended March 29, 2002. Gross
margin was down due to product mix shifts, strength in OEM sales, including
Component Technologies and portions of Agriculture and Construction Instruments,
as well as strong revenue from large contracts such as GSI in Japan. These sales
typically have lower gross margin than sales to the dealer channel. In addition,
$1.1 million in information technology service and other service expense,
previously reported as operating expense, was reclassified to cost of sales. We
also experienced a drop in margin
<page>
related to foreign exchange rates fluctuation unfavorable to the U.S. currency
due to foreign produced products. Gross margins in the prior year were also
unusually high due to favorable product mix and sales of our virtual reference
software product.
Because of potential product mix changes within and among the industry
markets, market pressures on unit selling prices, fluctuations in unit
manufacturing costs, including increases in component prices and other factors,
current level gross margins cannot be assured. In addition, should the global
economic conditions deteriorate further, gross margin could be further adversely
impacted.
Operating Expenses
The following table shows operating expenses for the periods indicated
and should be read in conjunction with the narrative descriptions of those
operating expenses below:
April 4, March 29,
Three months ended 2003 2002
- ------------------ ---- ----
(In thousands)
Research and development $ 16,040 $ 15,038
Sales and marketing 23,997 22,127
General and administrative 8,635 10,798
Restructuring charges 390 304
Amortization of purchased intangible assets 1,795 1,978
----- -----
Total $ 50,857 $ 50,245
======== ========
Research and Development
Research and development spending increased by $1 million during the
first fiscal quarter of 2003 representing 12.6% of total revenues, compared with
14.4% in the same corresponding period in fiscal 2002. We experienced an
increase of approximately $0.9 million due to the weakness of the US dollar
versus major European currencies, and an increase of approximately $1.2 million
due to continued investment in next generation technology, primarily in the
Engineering and Construction segment. These increases were partially offset by a
reduction of approximately $1.2 million due to the transfer of employee related
expenses to the CTCT Joint Venture.
* We believe that the development and introduction of new products are critical
to the Company's future success and expect to continue the active development of
new products.
Sales and Marketing
Sales and marketing expense increased by $1.9 million during the first
fiscal quarter of 2003 and represented 18.8% of total revenues, compared with
21.3% in the same corresponding period in fiscal 2002. We experienced an
increase of approximately $1.3 million due to the weakness of the US dollar
versus major European currencies, and an increase of approximately $0.6 million
in compensation, commission, advertising and promotion related expenses driven
primarily by higher revenues.
* Our future growth will depend in part on the timely development and continued
viability of the markets in which we currently compete as well as our ability to
continue to identify and exploit new markets for our products.
General and Administrative
General and administrative expense decreased by $ 2.2 million during
the first fiscal quarter of 2003 and represented 6.8% of total revenues,
compared with 10.4% in the same corresponding period in fiscal 2002. The primary
reasons for lower general and administrative expense were lower bad debt
expenses of approximately $1.0 million
<page>
and a decrease in legal expenses of approximately $0.4 million principally due
to the settlement of the Clegg lawsuit.
Restructuring Charges
Restructuring charges of $0.4 million and $0.3 million were recorded
for the three months periods ended April 4, 2003 and March 29, 2002,
respectively, which related to severance costs. As a result of these actions,
our headcount decreased during the first fiscal quarter of 2003 by 30
individuals and in the corresponding period of fiscal 2002 by 7 individuals. As
of April 4, 2003, all of the restructuring charges have been paid.
Non-operating Expense, Net
The following table shows Non-operating expenses, net for the periods
indicated and should be read in conjunction with the narrative descriptions of
those expenses below:
April 4, March 29,
Three Months Ended 2003 2002
- ------------------ ---- ----
(in thousands)
Interest income $ 105 $ 87
Interest expense (3,480) (4,030)
Foreign currency transaction gain 92 (59)
(loss)
Expenses for affiliated operations, net (1,215) -
Other expense (47) (199)
---- -----
Total $(4,545) $(3,803)
======== ========
Non-operating expense, net increased by $0.7 million during the first
fiscal quarter of 2003 as compared with the corresponding period in fiscal 2002
primarily due to a reduction in net interest expense of approximately $0.6
million offset by expenses of $1.2 million incurred as a result of transfer
pricing effects between the company and its CTCT Joint Venture.
Income Tax Provision
We recorded provisions for income taxes of $1.0 million in each of the
three months ended April 4, 2003 and March 29, 2002. These tax provisions
reflected mainly foreign taxes on profits in foreign jurisdictions and the
ability to realize benefits from the net operating losses generated in the
United States.
Off-Balance Sheet Financings and Liabilities
Other than lease commitments incurred in the normal course of business,
we do not have any off-balance sheet financing arrangements or liabilities. We
do not have any majority-owned subsidiaries that are not included in the
consolidated financial statements. Additionally, we do not have any interest in,
or relationship with, any variable interest entities.
Liquidity And Capital Resources
April 4, January 3,
As of 2003 2003
- ----- ---- ----
(dollars in thousands)
Cash and cash equivalents $13,529 $28,679
As a percentage of total assets 3.0% 6.5%
Accounts receivable days sales outstanding (DSO) 56 58
Inventory turns per year 4.1 4.1
<page>
April 4, March 29,
Three Months Ended 2003 2002
- ------------------ ---- ----
(dollars in thousands)
Cash provided (used) by operating activities $ (5,728) $ 9,247
Cash used by investing activities $ (1,830) $ (3,989)
Cash used by financing activities $ (7,592) $ (3,315)
Net decrease in cash and cash equivalents $ 15,150 $ 1,943
At April 4, 2003, our cash and cash equivalents decreased by $15.2
million from January 3, 2003. We repaid approximately $7.2 million of our debt
outstanding during the first fiscal quarter. We also increased our accounts
receivables by approximately $14.6 million during the quarter (primarily due to
strong shipments in the third month of the quarter), and our inventories by
approximately $3.4 million in anticipation of our seasonally strong second
fiscal quarter. These increases resulted in a net cash used in operating
activities of approximately $5.7 million during the quarter. We also used
approximately $1.4 million for capital expenditures.
At April 4, 2003, our debt mainly consisted of $60.5 million
outstanding under senior secured credit facilities, and $69.1 million
outstanding under the subordinated promissory note related to the acquisition of
the Spectra Precision Group. We have relied primarily on cash provided by
operating activities to fund capital expenditures and other investing
activities.
On April 14, 2003, the Company sold 2,100,000 shares of its common
stock, no par value per share, to a certain investor at a price of $18.25 per
share in an offering pursuant to the Company's "shelf" registration statement
which was declared effective by the Securities and Exchange Commission on March
28, 2003. The offering resulted in net proceeds to the Company of approximately
$36.7 million (less commissions and fees), approximately $31 million of which
was used to pay down the principal balance and $5.7 million was used to pay down
the accrued interest due on the Subordinated Note.
* In the first fiscal quarter of 2003, cash used by operating activities was
$(5.7) million, as compared to $9.3 million provided by operating activities
during the corresponding period in fiscal 2002. The prior year was positively
impacted by a special one-time distribution of $11.0 million by the CTCT Joint
Venture to us. Our ability to continue to generate cash from operations will
depend in large part on revenues, the rate of collections of accounts
receivable, and profitability.
Cash flows used in investing activities were $1.8 million in the first
fiscal quarter of 2003, as compared to $4.0 million in the corresponding quarter
in fiscal 2002 primarily due to $2.2 million cash outlay related to additional
25% equity interest in TerraSat, a German Corporation during the first quarter
of fiscal 2002.
Cash used in financing activities was $7.6 million in the first fiscal
quarter of 2003, as compared to $3.3 million in the corresponding quarter in
fiscal 2002. During the first quarter of fiscal 2002, the company received $17.4
million related to private equity placement offset by $20.8 million repayment of
subordinated debt. In the first fiscal quarter of fiscal 2003 the Company
received $0.5 million of cash from the issuance of stock to the Trimble's
employees under the stock option plan offset by $7.9 million of debt repayments.
In July 2000, we obtained $200 million of senior, secured credit
facilities (the "Credit Facilities") from a syndicate of banks to support our
acquisition of the Spectra Precision Group, the Company's ongoing working
capital requirements, and to refinance certain existing debt (see Note 6- of the
Notes to the to the Condensed Consolidated Financial Statements). The Credit
Facilities consisted of $100 million available as a term loan and $100 million
available under the two revolvers. On January 14, 2003, Trimble executed an
Amended and Restated Credit Agreement, which restructured the $100 million
revolver into four Tranches. Tranches A and C belong to the $50 million U.S.
dollar revolver and Tranches B and D belong to the $50 million multi-currency
revolver. Allocated to Tranche A is $12.5 million with an expiration date of
July 14, 2003 and allocated to Tranche C is $37.5 million with an expiration
date of April 7, 2004. Allocated to Tranche B is $1.5 million with an expiration
date of July 14, 2003 and allocated to Tranche D is $48.5 million with an
expiration date of April 7, 2004. As a result, the $100 million revolver will
remain in effect through July 14, 2003 and be reduced to $86 million for the
period starting
<page>
July 15, 2003 through April 7, 2004. As of April 4, 2003, outstanding balance
under the revolver was $33.9 million and under the term loan was $26.6 million.
The Credit Facilities are secured by all material assets of our
Company, except for assets that are subject to foreign tax considerations.
Financial covenants of the Credit Facilities include leverage, fixed charge, and
minimum net worth tests. At April 4, 2003 and as of the date of this report, we
are in compliance with debt covenants. The amounts due under the revolver loans
are paid as the loans mature, and the loan commitment fees are paid on a
quarterly basis. Under the five-year term loan portion of the Credit Facility,
we are due to make payments (excluding interest) of approximately $24 million in
fiscal 2003 and the remaining $2.6 million in fiscal 2004.
* We believe that our cash and cash equivalents, together with our credit
facilities, will be sufficient to meet our anticipated operating cash needs for
at least the next twelve months. At April 4 2003, we had $13.5 million of cash
and cash equivalents, as well as access to $66.1 million of cash under the terms
of our revolver loans.
Under the terms of the Credit Facilities, we are currently restricted
from paying dividends and are limited as to the amount of our common stock that
we can repurchase. We are allowed to pay dividends and repurchase shares of our
common stock up to 25% of net income in the previous fiscal year.
* We expect fiscal 2003 capital expenditures to be approximately $8 million to
$11 million, primarily for computer equipment, software, and leasehold
improvements associated with business expansion. Decisions related to how much
cash is used for investing are influenced by the expected amount of cash to be
provided by operations.
New Accounting Standards
In November of 2002, the EITF reached a consensus on Issue No. 00-21,
"Revenue Arrangements with Multiple Deliverables." EITF Issue No. 00-21 provides
guidance on how to account for arrangements that involve the delivery or
performance of multiple products, services, and/or rights to use assets. The
provisions of EITF Issue No. 00-21 will apply to revenue arrangements entered
into in fiscal periods beginning after June 15, 2003. We are currently
evaluating the effect that the adoption of EITF Issue No. 00-21 will have on our
results of operations and financial condition.
In January of 2003, the FASB issued FIN No. 46, "Consolidation of
Variable Interest Entities." FIN No. 46 requires a variable interest entity to
be consolidated by a company if that company is subject to a majority of the
risk of loss from the variable interest entity's activities or entitled to
receive a majority of the entity's residual returns or both. The consolidation
requirements of FIN No. 46 apply immediately to variable interest entities
created after January 31, 2003. The consolidation requirements apply to older
entities in the first fiscal year or interim period beginning after June 15,
2003. We are currently evaluating the provisions of FIN No. 46.
Risks And Uncertainties
You should carefully consider the following risk factors, in addition to
the other information contained in this Form 10-Q and in any other documents to
which we refer you in this Form 10-Q, before purchasing our securities. The
risks and uncertainties described below are not the only ones we face.
Our Inability to Accurately Predict Orders and Shipments May Affect Our Revenue,
Expenses and Earnings per Share.
We have not been able in the past to consistently predict when our
customers will place orders and request shipments, so that we cannot always
accurately plan our manufacturing requirements. As a result, if orders and
shipments differ from what we predict, we may incur additional expenses and
build excess inventory, which may require additional accruals. Any significant
change in our customers' purchasing patterns could have a material adverse
effect on our operating results and reported earnings per share for a particular
quarter.
Our Operating Results in Each Quarter May Be Affected by Special Conditions,
Such As Seasonality, Late Quarter Purchases, and Other Potential Issues.
Due, in part, to the buying patterns of our customers, a significant
portion of our quarterly revenues occurs from orders received and immediately
shipped to customers in the last few weeks and days of each quarter, although
our operating expenses tend to remain fairly predictable. Engineering and
construction purchases tend to occur in early spring, and governmental agencies
tend to utilize funds available at the end of the government's fiscal year for
additional purchases at the end of our third fiscal quarter in September of each
year. Concentrations of orders sometimes also occur at the end of our other two
fiscal quarters. Additionally, a majority of our sales force earn commissions on
a quarterly basis, which may cause concentrations of orders at the end of any
fiscal quarter. If for any reason expected sales are deferred, orders are not
received, or shipments are delayed a few days at the end of a quarter, our
operating results and reported earnings per share for that quarter could be
significantly impacted.
We Are Dependent on a Sole Manufacturer and Assembler for Many of Our Products
and on Sole Suppliers of Critical Parts for Our Products.
Since August 1999, we have been substantially dependent upon Solectron
Corporation as the exclusive manufacturing partner for many of our GPS products
previously manufactured out of our Sunnyvale facilities. Under the agreement
with Solectron, we provide to Solectron a twelve-month product forecast and
place purchase orders with Solectron sixty calendar days in advance of the
scheduled delivery of products to our customers. Although purchase orders placed
with Solectron are cancelable, the terms of the agreement would require us to
purchase from Solectron all material inventory not returnable or usable by other
Solectron customers. Accordingly, if we inaccurately forecast demand for our
products, we may be unable to obtain adequate manufacturing capacity from
Solectron to meet customers' delivery requirements or we may accumulate excess
inventories, if such inventories are not usable by other Solectron customers.
Our current contract with Solectron expires in August of 2003 and is
automatically renewable 90-days prior to this expiration date.
During the first quarter of 2003, Solectron was assembling most of our
Component Technology products in China. Although we believe that this initiative
in China will bring significant cost savings, we cannot predict potential
effects that may result from this program.
In addition, we rely on sole suppliers for a number of our critical
components. We have experienced shortages of components in the past. Our current
reliance on sole or a limited group of suppliers involves several risks,
including a potential inability to obtain an adequate supply of required
components and reduced control over pricing. Any inability to obtain adequate
deliveries or any other circumstance that would require us to seek alternative
sources of supply or to manufacture such components internally could
significantly delay our ability to ship our products, which could damage
relationships with current and prospective customers and could harm our
reputation and brand, which could have a material adverse effect on our
business.
<page>
Our Annual and Quarterly Performance May Fluctuate.
Our operating results have fluctuated and can be expected to continue to
fluctuate in the future on a quarterly and annual basis as a result of a number
of factors, many of which are beyond our control. Results in any period could be
affected by:
o changes in market demand,
o competitive market conditions,
o market acceptance of existing or new products, especially in our
Mobile Solutions business
o fluctuations in foreign currency exchange rates,
o the cost and availability of components,
o our ability to manufacture and ship products,
o the mix of our customer base and sales channels,
o the mix of products sold,
o our ability to expand our sales and marketing organization
effectively,
o our ability to attract and retain key technical and managerial
employees,
o the timing of shipments of products under contracts and sale of
licensing rights, and
o general global economic conditions.
In addition, demand for our products in any quarter or year may vary due to
the seasonal buying patterns of our customers in the agricultural and
engineering and construction industries. Due to the foregoing factors, our
operating results in one or more future periods are expected to be subject to
significant fluctuations. The price of our common stock could decline
substantially in the event such fluctuations result in our financial performance
being below the expectations of public market analysts and investors, which are
based primarily on historical models that are not necessarily accurate
representations of the future.
Our Gross Margin Is Subject to Fluctuation.
Our gross margin is affected by a number of factors, including product mix,
product pricing, cost of components, foreign currency exchange rates and
manufacturing costs. For example, since our Engineering and Construction (E&C)
and Geographic Information Systems (GIS) products generally have higher gross
margins than our Component Technologies products, absent other factors, a shift
in sales toward E&C and GIS products would lead to a gross margin improvement.
On the other hand, if market conditions in the highly competitive E&C and GIS
market segments forced us to lower unit prices, we would suffer a decline in
gross margin unless we were able to timely offset the price reduction by a
reduction in production costs or by sales of other products with higher gross
margins. A decline in gross margin could have negatively impact our earnings per
share.
Our Business is Subject to Disruptions and Uncertainties Caused by War or
Terrorism.
Acts of war or acts of terrorism could have a material adverse impact on
our business, operating results, and financial condition. The threat of
terrorism and war and heightened security and military response to this threat,
or any future acts of terrorism, may cause further disruption to our economy and
create further uncertainties. To the extent that such disruptions or
uncertainties result in delays or cancellations of orders, or the manufacture or
shipment of our products, our business, operating results, and financial
condition could be materially and adversely affected.
<page>
The Spread of Severe Acute Respiratory Syndrome May Have a Negative Impact on
Our Business and Results of Operations.
The recent outbreak of severe acute respiratory syndrome, or SARS, which
has had particular impact in China, Hong Kong, and Singapore, could have a
negative effect on our operations. Our operations may be impacted by a number of
SARS-related factors, including, among other things, disrupting operations at
the Solectron facility in China and delaying or preventing our expansion in
China. If the number of SARS cases continues to spread to other areas, our
international and domestic sales and operations could be harmed.
Our Substantial Indebtedness Could Materially Restrict Our Operations and
Adversely Affect Our Financial Condition.
We now have, and for the foreseeable future expect to have, a significant
level of indebtedness. Our substantial indebtedness could:
- increase our vulnerability to general adverse economic and industry
conditions;
- limit our ability to fund future working capital, capital
expenditures, research and development and other general corporate
requirements, or to make certain investments that could benefit us;
- require us to dedicate a substantial portion of our cash flow to
service interest and principal payments on our debt;
- limit our flexibility to react to changes in our business and the
industry in which we operate; and - limit our ability to borrow
additional funds.
Our Credit Agreement Contains Stringent Financial Covenants.
Two of the financial covenants in our Credit Agreement with The Bank of
Nova Scotia and certain other banks, dated as of July 14, 2000 as amended (the
"Credit Agreement"), minimum fixed charge coverage and maximum leverage ratio,
are extremely sensitive to changes in earnings before interest, taxes,
depreciation and amortization ("EBITDA"). In turn, EBITDA is highly correlated
to revenues and costs. Due to uncertainties associated with the downturn in the
worldwide economy, our future revenues by quarter are more difficult to forecast
and we have put in place various cost cutting measures, including the
consolidation of service functions and centers, offices, and of redundant
product lines and reductions in staff. If revenues should decline at a faster
pace than the rate of these cost cutting measures, on a quarter-to-quarter basis
we may not be in compliance with the two above-mentioned financial covenants. If
we default on one or more covenants, we will have to obtain either negotiated
waivers or amendments to the Credit Agreement. If we were unable to obtain such
waivers or amendments, the banks would have the right to accelerate the payment
of our outstanding obligations under the Credit Agreement, which would have a
material adverse effect on our financial condition and viability as an operating
company. In addition, a default under one of our debt instruments may also
trigger cross-defaults under our other debt instruments. An event of default
under any debt instrument, if not cured or waived, could have a material adverse
effect on us. In September of 2002, we reached an agreement, to ease our
financial covenants. These revised covenants will remain in effect through the
term of the current credit facility. On January 14, 2003, Trimble executed an
Amended and Restated Credit Agreement, which restructured the $100 million
revolver into four Tranches. Tranches A & C belong to the $50 million US dollar
revolver and Tranches B & D belong to the $50 million multi-currency revolver.
Allocated to Tranche A is $12.5 million with an expiration date of July 14, 2003
and allocated to Tranche C is $37.5 million with an expiration date of April 7,
2004. Allocated to Tranche B is $1.5 million with an expiration date of July 14,
2003 and allocated to Tranche D is $48.5 million with an expiration date of
April 07, 2004. As a result, the $100 million revolver will remain in effect
through July 14, 2003 and be reduced to $86 million for the period starting July
15, 2003 through April 7, 2004.
We Are Dependent on Key Customers.
An increasing amount of our revenue is generated from large original
equipment manufacturers such as Siemens VDO Automotive AG, Nortel, McNeilus,
Caterpillar, CNH Global, DeWalt, Hilti, and Blaupunkt. 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.
<page>
We Are Dependent on New Products.
Our future revenue stream depends to a large degree on our ability to bring
new products to market on a timely basis. We must continue to make significant
investments in research and development in order to continue to develop new
products, enhance existing products and achieve market acceptance of such
products. We may incur problems in the future in innovating and introducing new
products. Our development stage products may not be successfully completed or,
if developed, may not achieve significant customer acceptance. If we were unable
to successfully define, develop and introduce competitive new products, and
enhance existing products, our future results of operations would be adversely
affected. Development and manufacturing schedules for technology products are
difficult to predict, and we might not achieve timely initial customer shipments
of new products. The timely availability of these products in volume and their
acceptance by customers are important to our future success. A delay in new
product introductions could have a significant impact on our results of
operations.
We Face Risks of Entering Into and Maintaining Alliances.
We believe that in certain emerging markets our success will depend on our
ability to form and maintain alliances with established system providers and
industry leaders. Our failure to form and maintain such alliances, or the
preemption of such alliances by actions of other competitors or us will
adversely affect our ability to penetrate emerging markets. No assurances can be
given that we will not experience problems from current or future alliances or
that we will realize value from any such strategic alliances.
We Are Dependent on the Availability of Allocated Bands Within the Radio
Frequency Spectrum.
Our GPS technology is dependent on the use of the Standard Positioning
Service ("SPS") provided by the 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 that have treaty status and which may be
subject to modification every two to three years by the World Radio
Communication Conference.
Any ITU reallocation of radio frequency bands, including frequency band
segmentation or sharing of spectrum, may materially and adversely affect the
utility and reliability of our products, which would, in turn, cause a material
adverse effect on our operating results. Many of our products use other radio
frequency bands, together with the GPS signal, to provide enhanced GPS
capabilities, such as real-time kinematics precision. The continuing
availability of these non-GPS radio frequencies is essential to provide enhanced
GPS products to our precision survey markets. Any regulatory changes in spectrum
allocation or in allowable operating conditions may materially and adversely
affect the utility and reliability of our products, which would, in turn, cause
a material adverse effect on our operating results.
In addition, unwanted emissions from mobile satellite services and other
equipment operating in adjacent frequency bands or in-band from licensed and
unlicensed devices may materially and adversely affect the utility and
reliability of our products, which could result in a material adverse effect on
our operating results. The FCC continually receives proposals for novel
technologies and services, such as ultra-wideband technologies, which may seek
to operate in, or across, the radio frequency bands currently used by the GPS
SPS and other public safety services. Adverse decisions by the FCC that result
in harmful interference to the delivery of the GPS SPS and other radio frequency
spectrum also used in our products may materially and adversely affect the
utility and reliability of our products, which could result in a material
adverse effect on our business and financial condition.
We Are Subject to the Adverse Impact of Radio Frequency Congestion.
We have certain real-time kinematics products, such as our Land Survey
5700, that use integrated radio communication technology requiring access to
available radio frequencies allocated by the FCC. In addition, access to these
frequencies by state agencies is under management by state radio communications
coordinators. Some bands are experiencing congestion that excludes their
availability for access by state agencies in some states, including the state of
California. An inability to obtain access to these radio frequencies could have
an adverse effect on our operating results.
<page>
Many of Our Products Rely on the GPS Satellite System.
The GPS satellites and their ground support systems are complex electronic
systems subject to electronic and mechanical failures and possible sabotage. The
satellites were originally designed to have lives of 7.5 years and are subject
to damage by the hostile space environment in which they operate. However, of
the current deployment of 28 satellites in place, some have already been in
operation for 13 years. To repair damaged or malfunctioning satellites is
currently not economically feasible. If a significant number of satellites were
to become inoperable, there could be a substantial delay before they are
replaced with new satellites. A reduction in the number of operating satellites
may impair the current utility of the GPS system and the growth of current and
additional market opportunities.
In addition, there can be no assurance that the 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 our 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 our financial results. For example, European
governments have expressed interest in building an independent satellite
navigation system, known as Galileo. Depending on the as yet undetermined design
and operation of this system, there may be interference to the delivery of the
GPS SPS and may materially and adversely affect the utility and reliability of
our products, which could result in a material adverse effect on our business
and operating results.
We Face Risks in Investing in and Integrating New Acquisitions.
We are continuously evaluating external investments in technologies related
to our business, and have made relatively small strategic equity investments in
a number of GPS-related and laser-related technology companies. Acquisitions of,
and investments, in companies, divisions of companies, or products entail
numerous risks, including:
o potential inability to successfully integrate acquired operations and
products or to realize cost savings or other anticipated benefits from
integration;
o diversion of management's attention;
o loss of key employees of acquired operations;
o the difficulty of assimilating geographically dispersed operations and
personnel of the acquired companies;
o the potential disruption of our ongoing business;
o unanticipated expenses related to such integration;
o the correct assessment of the relative percentages of in-process
research and development expense that can be immediately written off
as compared to the amount which must be amortized over the appropriate
life of the asset;
o the impairment of relationships with employees and customers of either
an acquired company or our own business;
o the potential unknown liabilities associated with acquired business;
and
o inability to recover strategic investments in development stage
entities.
<page>
As a result of such acquisitions, we have significant assets that include
goodwill and other purchased intangibles. The testing of these intangibles under
established accounting guidelines for impairment requires significant use of
judgment and assumptions. Changes in business conditions could require
adjustments to the valuation of these assets. In addition, losses incurred by a
company in which we have an investment may have a direct impact on our financial
statements or could result in our having to write-down the value of such
investment. Any such problems in integration or adjustments to the value of the
assets acquired could harm our growth strategy and have a material adverse
effect on our business, financial condition and compliance with debt covenants.
We Face Competition in Our Markets.
Our markets are highly competitive and we expect that both direct and
indirect competition will increase in the future. Our overall competitive
position depends on a number of factors including the price, quality and
performance of our products, the level of customer service, the development of
new technology and our ability to participate in emerging markets. Within each
of our markets, we encounter direct competition from other GPS, optical and
laser suppliers and competition may intensify from various larger domestic and
international competitors and new market entrants, some of which may be our
current customers. The competition in the future, may, in some cases, result in
price reductions, reduced margins or loss of market share, any of which could
materially and adversely affect our business, operating results and financial
condition. We believe that our ability to compete successfully in the future
against existing and additional competitors will depend largely on our ability
to execute our strategy to provide systems and products with significantly
differentiated features compared to currently available products. We may not be
able to implement this strategy successfully, and our products may not be
competitive with other technologies or products that may be developed by our
competitors, many of whom have significantly greater financial, technical,
manufacturing, marketing, sales and other resources than we do.
We Must Carefully Manage Our Future Growth.
Growth in our sales or continued expansion in the scope of our operations
could strain our current management, financial, manufacturing and other
resources and may require us to implement and improve a variety of operating,
financial and other systems, procedures and controls. Specifically we have
experienced strain in our financial and order management system, as a result of
our acquisitions. We are expanding our sales, accounting, manufacturing, and
other information systems to meet these challenges. These systems, procedures or
controls may not be adequate to support our operations and may not be designed,
implemented or improved in a cost effective and timely manner. Any failure to
implement, improve and expand such systems, procedures and controls in a timely
and efficient manner could harm our growth strategy and adversely affect our
financial condition and ability to achieve our business objectives.
We are Dependent on Proprietary Technology.
Our future success and competitive position is dependent upon our
proprietary technology, and we rely on patent, trade secret, trademark and
copyright law to protect our intellectual property. The patents owned or
licensed by us may be invalidated, circumvented and challenged. The rights
granted under these patents may not provide competitive advantages to us. Any of
our pending or future patent applications may not be issued within the scope of
the claims sought by us, if at all.
Others may develop technologies that are similar or superior to our
technology, duplicate our technology or design around the patents owned by us.
In addition, effective copyright, patent and trade secret protection may be
unavailable, limited or not applied for in certain foreign countries. The steps
taken by us to protect our technology might not prevent the misappropriation of
such technology.
The value of our products relies substantially on our technical innovation
in fields in which there are many current patent filings. We recognize that as
new patents are issued or are brought to our attention by the holders of such
patents or as other intellectual property claims are made, 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.
<page>
We are a Party to Certain Litigation Matters From Time to Time in the Ordinary
Course of Our Business.
We are a party to certain litigation matters from time to time in the
ordinary course of our business. For example, we are a defendant in a lawsuit
filed by one of our European distributors. If we are found liable, we could be
required to pay significant damages, including punitive damages and attorneys'
fees.
We Are Dependent on Retaining and Attracting Highly Skilled Development and
Managerial Personnel.
Our ability to maintain our competitive technological position will depend,
in a large part, on our ability to attract, motivate, and retain highly
qualified development and managerial personnel. Competition for qualified
employees in our industry and location is intense, and there can be no assurance
that we will be able to attract, motivate and retain enough qualified employees
necessary for the future continued development of our business and products.
We May Encounter Problems Associated With International Operations and Sales.
Our customers are located throughout the world. Sales to unaffiliated
customers outside the United States comprised approximately 50% of total
revenues for both three months ended April 4, 2003 and March 29, 2002,
respectively. In addition, we have significant international operations,
including manufacturing facilities, sales personnel and customer support
operations. Our international sales organization contains offices in 21 foreign
countries. Our international manufacturing facilities are in Sweden and Germany,
and we have a regional fulfillment center in the Netherlands. Our international
presence exposes us to risks not faced by wholly domestic companies.
Specifically, we have experienced issues relating to integration of foreign
operations, greater difficulty in accounts receivable collection, longer payment
cycles and currency fluctuations. Additionally, we face the following risks,
among others:
o unexpected changes in regulatory requirements;
o tariffs and other trade barriers;
o political, legal and economic instability in foreign markets,
particularly in those markets in which we maintain manufacturing and
research facilities;
o difficulties in staffing and management;
o language and cultural barriers; seasonal reductions in business
activities in the summer months in Europe and some other countries;
o war and acts of terrorism; and
o potentially adverse tax consequences.
Although we implemented a program to attempt to manage foreign exchange
risks through hedging and other strategies, there can be no assurance that this
program will be successful and that currency exchange rate fluctuations will not
have a material adverse effect on our results of operations. In addition, in
certain foreign markets, there may be reluctance to purchase products based on
GPS technology, given the control of GPS by the U.S. Government.
We are Exposed to Fluctuations in Currency Exchange Rates.
A significant portion of our business is conducted outside the United
States, and as such, we face exposure to adverse movements in non-U.S. currency
exchange rates. These exposures may change over time as business practices
evolve and could have a material adverse impact on our financial results and
cash flows. Compared to the first fiscal quarter of 2002, in the first fiscal
quarter of 2003, the US currency has weakened against other currencies,
especially against Euro and Swedish Krona.
<page>
Currently, we hedge only those currency exposures associated with certain
assets and liabilities denominated in nonfunctional currencies and periodically
will hedge anticipated foreign currency cash flows. The hedging activities
undertaken by us are intended to offset the impact of currency fluctuations on
certain nonfunctional currency assets and liabilities. Our attempts to hedge
against these risks may not be successful resulting in an adverse impact on our
net income.
We Are Subject to the Impact of Governmental and Other Similar Certifications.
We market certain products that are subject to governmental and similar
certifications before they can be sold. For example, CE certification for
radiated emissions is required for most GPS receiver and data communications
products sold in the European Union. An inability to obtain such certifications
in a timely manner could have an adverse effect on our operating results. Also,
our products that use integrated radio communication technology require an
end-user to obtain licensing from the Federal Communications Commission (FCC)
for frequency-band usage. These are secondary licenses that are subject to
certain restrictions. During the fourth quarter of 1998, the FCC temporarily
suspended the issuance of licenses for certain of our real-time kinematics
products because of interference with certain other users of similar radio
frequencies. An inability or delay in obtaining such certifications or changes
to the rules by the FCC could adversely affect our ability to bring our products
to market, which could harm our customer relationships and have a material
adverse effect on our business.
The Volatility of Our Stock Price Could Adversely Affect Your Investment in Our
Common Stock.
The market price of our common stock has been, and may continue to be,
highly volatile. During the first fiscal quarter of 2003, our stock price ranged
from a high of $20.45 to a low of $13.19. We believe that a variety of factors
could cause the price of our common stock to fluctuate, perhaps substantially,
including:
- - announcements and rumors of developments related to our business or the
industry in which we compete;
- - quarterly fluctuations in our actual or anticipated operating results and
order levels;
- - general conditions in the worldwide economy, including fluctuations in
interest rates;
- - announcements of technological innovations;
- - new products or product enhancements by us or our competitors;
- - developments in patents or other intellectual property rights and
litigation;
- - developments in our relationships with our customers and suppliers; and
- - any significant acts of terrorism against the United States.
In addition, in recent years the stock market in general and the markets
for shares of "high-tech" companies in particular, have experienced extreme
price fluctuations which have often been unrelated to the operating performance
of affected companies. Any such fluctuations in the future could adversely
affect the market price of our common stock, and the market price of our common
stock may decline.
We are Subject to Environmental Laws and Potential Exposure to Environmental
Liabilities.
We are subject to various federal, state and local environmental laws and
regulations that govern our operations, including the handling and disposal of
non-hazardous and hazardous wastes, and emissions and discharges into the
environment. Failure to comply with such laws and regulations could result in
costs for corrective action, penalties or the imposition of other liabilities.
We also are subject to laws and regulations that impose liability and clean-up
responsibility for releases of hazardous substances into the environment. Under
certain of these laws and regulations, a current or previous owner or operator
of property may be liable for the costs of remediating hazardous substances or
petroleum products on or from its property, without regard to whether the owner
or operator knew of, or caused, the contamination, as well as incur liability to
third parties impacted by such contamination. The presence of, or failure to
remediate properly, such substances could adversely affect the value and the
ability to transfer or encumber such property. Based on currently available
information, although there can be no assurance, we believe that such
liabilities will not have a material impact on our business.
<page>
Provisions in Our Charter Documents and Under California Law Could Prevent or
Delay a Change of Control, which Could Reduce the Market Price of Our Common
Stock.
Certain provisions of our articles of incorporation, as amended and
restated, our bylaws, as amended and restated, and the California General
Corporation Law may be deemed to have an anti-takeover effect and could
discourage a third party from acquiring, or make it more difficult for a third
party to acquire, control of us without approval of our board of directors.
These provisions could also limit the price that certain investors might be
willing to pay in the future for shares of our common stock. Certain provisions
allow the board of directors to authorize the issuance of preferred stock with
rights superior to those of the common stock.
We have adopted a Preferred Shares Rights Agreement, commonly known as a
"poison pill". The provisions described above, our poison pill and provisions of
the California General Corporation Law may discourage, delay or prevent a third
party from acquiring us.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE OF MARKET RISK
We are exposed to market risk related to changes in interest rates and
foreign currency exchange rates. We use certain derivative financial instruments
to manage these risks. We do not use derivative financial instruments for
speculative or trading purposes. All financial instruments are used in
accordance with policies approved by our board of directors.
Market Interest Rate Risk
We are exposed to market risk due to the possibility of changing interest
rates under our senior secured credit facilities. Our credit facilities are
comprised of U.S. dollar-only tranches A and C revolvers and multi-currency
tranches B and D revolvers. A and B expire July 14, 2003, and C and D expire
April 7, 2004, while the five-year term loan expires June 30, 2004. Borrowings
under the credit facility have interest payments based on a floating rate of
LIBOR plus a number of basis points tied to a formula based on our leverage
ratio.
As of April 4, 2003, our senior debt to EBITDA, as defined under our credit
agreement (senior leverage ratio) was approximately 1.15. At this leverage ratio
our interest rate on the credit facility is LIBOR plus 125 basis points. EBITDA,
as defined in our credit agreement, differs from the common definition of EBITDA
in so far as it excludes extraordinary non-cash charges. We have presented the
senior leverage ratio from our credit agreement so that readers can see how it
impacts our interest expense. If our senior leverage ratio were to decrease to
1.5 the interest rate on the Credit Facility would be LIBOR plus 1.75 basis
points. If our senior leverage ratio were to increase to 2.00 the interest rate
on the Credit Facility would be LIBOR plus 2.25 basis points.
The U.S. dollar and the multi-currency revolvers run through April 2004 and
have outstanding principal balances of $35 million, in U.S. currency only, as of
April 4, 2003. The U.S. dollar and the multi-currency revolvers (tranches A and
B) that run through July of 2003 have been paid down to zero as of April 4,
2003. The term loan expires on June 30, 2004 and has an outstanding principal
balance of $26.6 million at April 4, 2003. The three-month LIBOR effective rate
at April 4, 2003 was 1.28%. A hypothetical 10% increase in three-month LIBOR
rates could result in approximately $77,000 annual increase in interest expense
on the existing principal balances.
In addition, we have a $1.7 million promissory note, of which $85,000 was
classified as a current liability at April 4, 2003. The note is payable in
monthly installments, bearing a variable interest rate of 3.99% as of April 4,
2003. A hypothetical 10% increase in interest rates would not have a material
impact on the results of our operations.
* The hypothetical changes and assumptions made above will be different from
what actually occurs in the future. Furthermore, the computations do not
anticipate actions that may be taken by our management should the hypothetical
market changes actually occur over time. As a result, actual earnings effects in
the future will differ from those quantified above.
Foreign Currency Exchange Rate Risk
We transact business in various foreign currencies and hedges identified
risks associated with foreign currency transactions in order to minimize the
impact of changes in foreign currency exchange rates on earnings. We utilize
forward contracts to hedge certain trade and inter-company 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. These hedge
instruments are marked to market through earnings every period. From time to
time, we may also utilize forward foreign exchange contracts designated as cash
flow hedges of operational exposures represented by firm backlog orders to
specific accounts over a specific period of time. We record changes in the fair
value of cash flow hedges in accumulated, other comprehensive income (loss),
until the firm backlog transaction ships. Upon recognition of revenue, we
reclassify the gain or loss on the cash flow hedge to the statement of
operations. For the fiscal quarter ended April 4, 2003, we recorded a loss of
approximately $7,000 reflecting the net change and ending balance in relation to
a firm backlog hedge. The critical terms of the cash flow hedging instruments
are the same as the underlying forecasted transactions. The changes in fair
value of the derivatives are intended to offset changes in the expected cash
flow from the forecasted transactions. All forward contracts have maturity of
less than six months.
* We do not anticipate any material adverse effect on our consolidated financial
position utilizing our current hedging strategy.
<page>
The following table provides information about our foreign exchange forward
contracts outstanding as of April 4, 2003:
Foreign Currency Contract Value Fair Value in
Amount USD USD
Currency Buy/Sell (in thousands) (in thousands) (in thousands)
- -------- -------- -------------- -------------- --------------
AUD BUY (1,300) $ (764) $ (778)
CAD BUY (800) (539) (544)
EUR BUY (11,100) (11,936) (11,937)
GBP BUY (526) (832) (826)
JPY BUY (335,000) (2,828) (2,835)
MXN BUY (1,280) (117) (119)
NZD BUY (2,800) (1,546) (1,523)
SEK BUY (115,660) (13,533) (13,582)
CAD SELL 1,630 1,086 1,110
EUR SELL 19,559 20,977 21,095
GBP SELL 263 412 413
JPY SELL 881,431 7,363 7,460
MXN SELL 5,000 435 465
----- --- ---
$ (1,822) $ (1,601)
--------- ---------
ITEM 4. CONTROLS AND PROCEDURES
(a) Evaluation of disclosure controls and procedures.
Our chief executive officer and chief financial officer evaluated the
effectiveness of our disclosure controls and procedures (as defined in Rule
13a-14(c) and 15(d)-14(c) under the Securities Exchange Act of 1934, as amended)
within 90 days of the filing of this Form 10-Q (the "Evaluation Date") and,
based on that evaluation, concluded that, as of the Evaluation Date, our
disclosure controls and procedures are effective to timely alert management to
material information relating to Trimble (including our consolidated
subsidiaries) required to be included in the Company's reports filed under the
Exchange Act during the period when our periodic reports are being prepared.
(b) Changes in internal controls.
Since the Evaluation Date, there have not been any significant changes to
our internal controls or in other factors that could significantly affect these
controls, including any corrective actions with regard to significant
deficiencies and material weaknesses.
PART II. OTHER INFORMATION
ITEM 1. Legal Proceedings
In January 2001, Philip M. Clegg instituted a lawsuit in the United States
District Court for the District of Utah, Central Division, against
Spectra-Physics Laserplane, Inc., Spectra Precision AB and Trimble Navigation
Limited. On January 29, 2003, Trimble and Mr. Clegg settled this patent
infringement lawsuit whereby Trimble has purchased a fully paid up,
non-exclusive license under U.S. Patent No. 4,807,131 from Mr. Clegg.
In November 2001, Qualcomm Inc. filed a lawsuit against Trimble in the
Superior Court of the State of California. The complaint asked for damages
arising out of Qualcomm's perceived lack of assurances in early 1999 that
Trimble's products purchased by Qualcomm would work properly after a scheduled
week number rollover event that took place in August 1999. Qualcomm is the only
customer to make a claim against Trimble based on the week number rollover
event. On March 12, 2003, Qualcomm was awarded a verdict of $916,000, which,
except for a small deductible, is covered by insurance.
The Company is also a party to other disputes incidental to its business,
including a current claim from a European distributor. The Company believes that
its ultimate liability as a result of such disputes, if any, would not be
material to its overall financial position, results of operations, or liquidity.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS.
On January 22, 2003, Trimble issued 23,996 shares of its common stock, no
par value per share, to former shareholders of LeveLite. This stock issuance,
combined with a cash payment to each such shareholder, constituted the first
earn-out payment pursuant to the Company's merger agreement with LeveLite. The
merger agreement provides for Trimble to make earn-out payments not to exceed an
aggregate $3.9 million (in common stock and cash payment) based on future
revenues derived from existing product sales to a certain customer. Upon a
hearing before the California Department of Corporations in which the terms and
conditions of the offer to the LeveLite shareholders were approved, the shares
of Common Stock to be issued in the transaction were exempt from registration by
reason of qualification under Section 3(a)(10) of the Securities Act of 1933, as
amended.
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
3.1 Restated Articles of Incorporation of Trimble Navigation Limited,
filed June 25, 1986. (1)
3.2 Certificate of Amendment of Articles of Incorporation of Trimble
Navigation Limited, filed October 6, 1988. (1)
3.3 Certificate of Amendment of Articles of Incorporation of Trimble
Navigation Limited, filed July 18, 1990. (1)
3.4 Certificate of Determination of Trimble Navigation Limited, filed
February 19, 1999. (1)
3.8 Amended and Restated Bylaws of Trimble Navigation Limited. (2)
10.1 Amended and Restated Credit Agreement dated January 14, 2003.
99.1 Certification of CEO pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002.
99.2 Certification of CFO pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002.
-------------------------
(1) 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, as filed with
the SEC on March 29, 1999.
(2) Incorporated by reference to exhibit number 3.8 to the registrant's
Quarterly Report on Form 10-Q for the quarter ended September 27,
2002.
(b) Reports on Form 8-K
On January 27, 2003, the Company filed a report on Form 8-K reporting
updated financial guidance for the quarter ending January 3, 2003.
On February 4, 2003, the Company filed a report on Form 8-K reporting
the financial results for the quarter ending January 3, 2003.
On March 28, 2003, the Company filed a report on Form 8-K, reporting
that it reached a definitive agreement with Nikon Corporation to form
a joint venture in Japan.
On March 28, 2003, the Company filed a report on Form 8-K reporting
the non-GAAP financial measure, as defined by Regulation G promulgated
under Section 401(b) of the Sarbanes-Oxley Act of 2002 ("Regulation
G"), which became effective on March 28, 2003.
On March 28, 2003, the Company filed a report on Form 8-K reporting
information required under Form 10-K, Part III, promulgated under the
Securities Exchange Act of 1934, as amended (the "Exchange Act") that
was omitted from the Company's annual report on Form 10-K pursuant to
Form 10-K, General Instruction G(3). General Instruction G(3) provides
that information required by Part III may be incorporated by reference
from the registrant's definitive proxy statement (filed or to be filed
pursuant to Regulation 13A under the Exchange Act) which involves the
election of directors, if such definitive proxy statement is filed
with the Commission not later than 120 days after the end of the
fiscal year covered by the Form 10-K.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
TRIMBLE NAVIGATION LIMITED
(Registrant)
By: /s/ Mary Ellen Genovese
- ---------------------------
Mary Ellen Genovese
Chief Financial Officer
(Authorized Officer and Principal
Financial Officer)
DATE: May 15, 2003
Certification of CEO Pursuant to
Securities Exchange Act Rules 13a-14 and 15d-14
as Adopted Pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002
I, Steven W. Berglund, the Chief Executive Officer of Trimble Navigation
Limited, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Trimble Navigation
Limited;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
(a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which the quarterly report
is being prepared;
(b) evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the date of the
filing of this quarterly report (the "Evaluation Date"); and
(c) presented in this quarterly report, our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and to the audit
committee of registrant's board of directors (or persons performing the
equivalent function):
(a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; and
(b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and material
weaknesses.
Dated: May 15, 2003 /s/ Steven W. Berglund
----------------------
Steven W. Berglund
Chief Executive Officer
Certification of CFO Pursuant to
Securities Exchange Act Rules 13a-14 and 15d-14
as Adopted Pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002
I, Mary Ellen Genovese, the Chief Financial Officer of Trimble Navigation
Limited, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Trimble Navigation
Limited;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
(a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which the quarterly report
is being prepared;
(b) evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the date of the
filing of this quarterly report (the "Evaluation Date"); and
(c) presented in this quarterly report, our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and to the audit
committee of registrant's board of directors (or persons performing the
equivalent function):
(a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; and
(b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and material
weaknesses.
Dated: May 15, 2003 /s/ Mary Ellen Genovese
-----------------------
Mary Ellen Genovese
Chief Financial Officer
EXHIBIT INDEX
Exhibit No. Description
3.1 Restated Articles of Incorporation of Trimble Navigation Limited,
filed June 25, 1986. (1)
3.2 Certificate of Amendment of Articles of Incorporation of Trimble
Navigation Limited, filed October 6, 1988. (1)
3.3 Certificate of Amendment of Articles of Incorporation of Trimble
Navigation Limited, filed July 18, 1990. (1)
3.4 Certificate of Determination of Trimble Navigation Limited, filed
February 19, 1999. (1)
3.8 Amended and Restated Bylaws of Trimble Navigation Limited. (2)
10.1 Amended and Restated Credit Agreement, dated January 14, 2003.
99.1 Certification of CEO Pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002.
99.2 Certification of CFO Pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002.
- --------
(1) 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, as filed with
the SEC on March 29, 1999.
(2) Incorporated by reference to exhibit number 3.8 to the registrant's
Quarterly Report on Form 10-Q for the period ending September 27,
2002.
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