UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1997
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
incorporation or organization) identification No.)
645 North Mary Avenue, Sunnyvale, California 94088
(Address of Principal Executive Offices) (Zip Code)
(408) 481-8000
(Registrant's telephone number, including area code)
Not Applicable
(Former name, former address and former fiscal year,
if changed since last report)
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 periods 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 June 30, 1997, there were 22,213,300 shares of Common Stock (no par value)
outstanding.
1
TRIMBLE NAVIGATION LIMITED
This report contains forward-looking statements within the meaning of Section
27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act
of 1934. Actual results could differ materially from those indicated in the
forward-looking statements as a result of the risk factors set forth in this
report. The Company has attempted to identify forward-looking statements in this
report by placing an asterisk (*) in the left-hand margin of paragraphs
containing those statements.
INDEX
Page
PART I. FINANCIAL INFORMATION Number
Item 1. Financial Statements
Condensed Consolidated Balance Sheets -
June 30, 1997 and December 31, 1996 3
Condensed Consolidated Statements of Operations -
Three and Six Months ended June 30, 1997
and 1996 4
Condensed Consolidated Statements of Cash Flows -
Six Months ended June 30, 1997 and 1996 5
Notes to Condensed Consolidated Financial
Statements 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 9
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders 16
Item 6. Exhibits and Reports on Form 8-K 17
SIGNATURES 18
2
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
TRIMBLE NAVIGATION LIMITED
CONDENSED CONSOLIDATED BALANCE SHEETS
June 30, December 31,
1997 1996
------------------------------------------------------------------------------
(In thousands) (Unaudited) (Note)
ASSETS
Current assets:
Cash and cash equivalents $ 31,443 $ 22,671
Short term investments 57,028 59,867
Accounts receivable, net 39,484 34,374
Inventories 38,481 38,858
Other current assets 2,895 3,633
------------ ---------------
Total current assets 169,331 159,403
Net property and equipment 22,339 21,504
Intangible assets 4,071 4,493
Deferred income taxes 366 383
Other assets 5,026 4,058
------------ ---------------
Total assets $ 201,133 $ 189,841
============ ===============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt $ 356 $ 316
Accounts payable 16,244 13,763
Accrued compensation and benefits 7,794 6,552
Customer advances 3,956 3,000
Accrued liabilities 9,699 10,358
Income taxes payable 2,364 869
------------ ---------------
Total current liabilities 40,413 34,858
------------ ---------------
Noncurrent portion of long-term debt and
other liabilities 30,789 30,938
------------ ---------------
Total liabilities 71,202 65,796
------------ ---------------
Shareholders' equity:
Common stock 126,404 125,535
Common stock warrants 700 700
Retained earnings (accumulated deficit) 2,690 (2,603)
Unrealized gain on short term investments 26 20
Foreign currency translation adjustment 111 393
------------ ---------------
Total shareholders' equity 129,931 124,045
------------ ---------------
Total liabilities and shareholders' equity $ 201,133 $ 189,841
============ ===============
See accompanying notes to condensed consolidated financial statements.
3
TRIMBLE NAVIGATION LIMITED
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
----------------------------- --------------------------------
1997 1996 1997 1996
- --------------------------------------------------------------------------------------------------------------
(In thousands, except per share data)
Total revenue $ 68,944 $ 58,602 $ 129,495 $ 115,324
------------- -------------- --------------- ---------------
Operating expenses:
Cost of sales 32,255 27,037 61,300 53,052
Research and development 10,113 9,144 19,114 17,969
Sales and marketing 14,916 16,844 29,264 32,908
General and administrative 7,306 9,057 13,712 16,468
------------- -------------- --------------- ---------------
64,590 62,082 123,390 120,397
------------- -------------- --------------- ---------------
Operating income (loss) 4,354 (3,480) 6,105 (5,073)
------------- -------------- --------------- ---------------
Nonoperating income (expense):
Interest income 1,089 1,150 2,142 2,397
Interest and other expenses (818) (926) (1,784) (1,895)
Foreign exchange gain (loss) 63 24 154 (93)
------------- -------------- --------------- ---------------
334 248 512 409
------------- -------------- --------------- ---------------
Income (loss) before income taxes 4,688 (3,232) 6,617 (4,664)
Income tax provision (benefit) 823 (647) 1,323 (933)
------------- -------------- --------------- ---------------
Net income (loss) $ 3,865 $ (2,585) $ 5,294 $ (3,731)
============= ============== =============== ===============
Net income (loss) per share $ 0.17 (0.12) $ 0.24 (0.17)
============= ============== =============== ===============
Weighted average common and dilutive common
equivalent shares 22,544 21,791 22,484 21,735
============= ============== =============== ===============
See accompanying notes to condensed consolidated financial statements.
4
TRIMBLE NAVIGATION LIMITED
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Six Months Ended
June 30,
1997 1996
- --------------------------------------------------------------------------------
(In thousands)
Net cash provided (used) by operating activities $ 12,104 $ (6,041)
-------------- -------------
Cash flow from investing activities:
Purchase of short term investments (50,160) (46,551)
Maturities of short term investments 32,875 34,252
Sales of short term investments 20,124 15,212
Equity investments (886) (1,400)
Acquisition of property and equipment (5,889) (6,624)
Capitalized patent expenditures (341) (438)
-------------- -------------
Net cash used in investing activities (4,277) (5,549)
-------------- -------------
Cash flow from financing activities:
Issuance of common stock 2,703 2,873
Repurchase of common stock (1,834) -
Collection/(payment) of notes receivable (9) 49
Proceeds/(payments) on long-term debt and
revolving credit facilities 85 (963)
-------------- -------------
Net cash provided by financing activities 945 1,959
-------------- -------------
Net increase (decrease) in cash and cash equivalents 8,772 (9,631)
Cash and cash equivalents -- beginning of period 22,671 29,711
-------------- -------------
Cash and cash equivalents -- end of period $ 31,443 $ 20,080
============== =============
Supplemental disclosures of cash flow information:
Cash paid (received) during the period for:
Interest $ 898 $ 787
Income taxes/(benefit), net of refunds $ (180) $ 83
See accompanying notes to condensed consolidated financial statements.
5
TRIMBLE NAVIGATION LIMITED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - Basis of Presentation:
The condensed consolidated financial statements for the three and six month
periods ended June 30, 1997, and 1996 presented in this Quarterly Report on Form
10-Q are unaudited. The balance sheet at December 31, 1996, 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 only 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 the Company's Annual Report to Shareholders for the year
ended December 31, 1996.
The results of operations for the three month and six month periods ended June
30, 1997 are not necessarily indicative of the results that may be expected for
the year ending December 31, 1997.
NOTE 2 - Inventories:
Inventories consist of the following:
June 30, December 31,
1997 1996
- -------------------------------------------------------------------
(In thousands)
Raw materials $ 22,789 $ 24,145
Work-in-process 4,710 5,174
Finished goods 10,982 9,539
----------- ----------------
$ 38,481 $ 38,858
----------- ----------------
NOTE 3 - New Accounting Standards:
Effective January 1, 1997, the Company adopted Statement of Financial Accounting
Standards No. 125 ("SFAS 125"), "Accounting for Transfers and Servicing of
Financial Assets and Extinguishments of Liabilities." At June 30, 1997, the
Company was contingently liable to a Japanese bank for $356,000 at month end
exchange rates arising from customers' notes receivable which the Company sold
with recourse to the bank. In accordance with SFAS 125, the Company has recorded
this amount as a liability.
6
* In February 1997, the Financial Accounting Standards Board issued Statement
No. 128, "Earnings Per Share", which is required to be adopted on December 31,
1997. At that time, the Company will be required to change the method currently
used to compute earnings per share and to restate all prior periods. Under the
new requirements for calculating primary earnings per share, the dilutive effect
of stock options will be excluded. The impact of Statement 128 on the
calculation of primary and fully diluted earnings per share for the quarters
reported is not expected to be material.
NOTE 4 - Contingencies:
Shareholder Litigation
On December 6, 1995, two shareholders filed a class action lawsuit against the
Company and certain directors and officers of the Company. Subsequent to that
date, additional lawsuits were filed by other shareholders. The lawsuits were
subsequently amended and consolidated into one complaint which was filed on
April 5, 1996. The amended consolidated complaint sought to bring an action as a
class action consisting of all persons who purchased the common stock of the
Company during the period April 18, 1995, through December 5, 1995 (the "Class
Period"). The plaintiffs alleged that the defendants sought to induce the
members of the Class to purchase the Company's common stock during the Class
Period at artificially inflated prices. The plaintiffs seek recissory or
compensatory damages with interest thereon, as well as reasonable attorneys'
fees and extraordinary equitable and/or injunctive relief. The Company filed a
motion to dismiss, which was heard by the Court on August 16, 1996. The court
rejected the plaintiffs' lawsuit, but allowed thirty days to resubmit its
complaint. On September 24, 1996, the plaintiffs filed an amended complaint. On
April 28, 1997, the Court granted in part, and denied in part, the Company's
motion to dismiss. The Court further granted the plaintiffs leave to replead
certain dismissed claims. On June 19, 1997 the plaintiffs filed a third amended
and consolidated complaint. The Company has filed a motion to dismiss. The
Company does not believe that it is possible to predict the outcome of this
litigation.
Other Litigation
* In October 1995, an employee who was terminated by the Company in 1992 filed a
Complaint against the Company, alleging that his incentive stock options
continued to vest subsequent to his termination. He seeks damages of
approximately $1,000,000. The Company has filed a general denial in answer to
the Complaint, and a trial date has been set for September 15, 1997. The Company
does not believe that the Complaint will be successful.
In September 1996, the British Technology Group ("BTG") brought suit for alleged
infringement of its RE.34,004 patent. BTG has also brought suit against two
other defendants over the same patent. Discovery is underway, and a Markman
hearing is scheduled in the Eastern District of Pennsylvania for September 9,
1997. Trial is set for January 8, 1998. The Company believes the suit is without
merit and intends to defend itself vigorously.
7
Note 5 - Line of Credit
In August 1995, the Company entered into a $30,000,000 unsecured line of credit
agreement with two banks which expired in July 1997. In July 1997 the Company
has received an amendment to extend the line of credit to September 1, 1997. The
agreement enables the Company to borrow up to $30,000,000 provided that certain
financial and other covenants are met. The agreement provides for payment of a
commitment fee of 0.5% for the unused portion of the line of credit. Borrowings
bear interest at the higher of (i) one of the bank's annual prime rate and (ii)
the federal funds rate plus 0.5%. To date, no borrowings have been made under
the line of credit. Under the current line of credit the Company is restricted
from paying dividends. The Company intends to obtain another line of credit on
similar terms on September 1, 1997.
Note 6 - Subsequent Events:
On July 25, 1997, the Company made a bridge loan for $1.5 million to Proshot
Golf, Inc, a minority investee of the Company, at prime plus 1.5%. The loan is
due on or before February 25, 1998 and is secured entirely by an irrevocable
stand-by letter of credit with a commercial bank having the Company as
beneficiary and Proshot as account party.
8
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Revenues
Revenues for the three month and six month periods ended June 30, 1997, were
$68,944,000 and $129,495,000 as compared with $58,602,000 and $115,324,000 in
the corresponding 1996 periods.The table below breaks out the Company's revenues
by business unit:
Three Months Ended June 30, Six Months Ended June 30,
------------------------------------ ----------------------------------------
1997 1996 Increase 1997 1996 Increase
- -------------------------------------------------------------------------------------------------------------------------
(In thousands)
Commercial Systems 45,042 42,442 6% 83,163 80,579 3%
Software & Component Technologies 12,209 8,885 37% 21,785 18,491 18%
Aerospace 11,693 7,275 61% 24,547 16,254 51%
----------- ----------- --------- ------------ ------------- -----------
Total $ 68,944 $ 58,602 18% $ 129,495 $ 115,324 12%
----------- ----------- --------- ------------ ------------- -----------
Commercial Systems
Commercial Systems revenues for the three month and six month periods ended June
30, 1997 increased in total over the prior year period, however, the Company
experienced a decrease in the Land Survey vertical market as compared to June
30, 1997. However, the Company believes that it has maintained its market share
worldwide.
The decreases in Land Survey sales in the second quarter of 1997, compared to
the second quarter of 1996, are due in part to the continued slow down of the
European and Japanese economies.
The decrease in Land Survey sales were offset by an increase in the overall
Commercial Systems' revenues for the second quarter of 1997, as compared to the
second quarter of 1996, which occurred primarily in the Precise Positioning,
GIS, and Tracking vertical markets.
Tracking and Communications revenues have increased in the second quarter of
1997 compared to the second quarter of 1996 due to the resumption of shipments
in March 1997 to American Mobile Satellite Corporation (AMSC), a company based
in Reston, Virginia, that provides a variety of voice and data services via
satellite. The shipments were originally discontinued late in the fourth quarter
of 1995 at the request of AMSC, in part due to delays in AMSC's completion of
software. On February 20, 1997, an agreement was signed between Trimble and AMSC
to resume shipments of Trimble's Galaxy/GPS terminals at the rate of 500 units
per month, beginning in March 1997.
9
Approximately 1,750 and 2,000 units were shipped in the three month and six
month periods ending June 30, 1997, respectively.
Software and Component Technologies
Software and Component Technologies revenues increased for the three month and
six month periods ended June 30, 1997, as compared with the corresponding
periods for 1996 due primarily to a $2.2 million technology license from Pioneer
Electronic Corporation in connection with the expansion of the original 1992
license for in-car navigation technology recorded in the 1997 periods.
Aerospace
* Sales of Aerospace products increased for the three and six month periods
ending June 30, 1997, compared to the same periods in 1996 primarily due to the
increased sales of the HT 9100, Honeywell Trimble product line. The Company
considers its Aerospace products to be a long term growth opportunity. It
believes that success in this area will be dependent upon the success of the
current strategic alliance with Honeywell.
* Military sales increased slightly in the second quarter of 1997, compared to
the second quarter of 1996. Military sales are highly dependent on contracts
that are subject to government approval and are, therefore, expected to continue
to fluctuate from period to period. The Company believes that opportunities in
this market have been substantially reduced by cutbacks in U.S. and foreign
military spending.
Revenue outside the US
* Sales to unaffiliated customers in locations outside the U.S. comprised
approximately 45% and 48% of revenue in the first six months of 1997 and 1996,
respectively. During the first six months of 1997, the Company experienced lower
revenues in Europe in many product lines, and in Japan primarily related to
surveying products. The Company anticipates that export revenue and sales made
by its subsidiaries in locations outside the U.S. will continue to account for a
significant portion of its revenue and, therefore, the Company is subject to the
risks inherent in these 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 would
support and maintain the GPS system, as well as eliminate the use of Selective
Availability (S/A) (a method of degrading GPS accuracy), customers in certain
foreign markets may be reluctant to purchase products based on GPS technology
given the control of GPS by the U.S. Government. The Company's results of
operations could be adversely affected if the Company were unable to continue to
generate significant sales in locations outside the U.S.
Gross Margin
* Gross margin varies on a quarterly basis due to a number of factors, including
product mix, technology license fees, domestic versus international sales,
customer type, the effects of production volumes and fixed manufacturing costs
on unit product costs and new product start-up costs. Gross margin as a
10
percentage of total product revenue was 53% for both the three month and six
month periods ended June 30, 1997, as compared with 54% in the corresponding
1996 periods. The 1997 margins have been enhanced by the positive impact of
non-product revenues recognized from Pioneer of $2.2 million in the second
quarter of 1997. Although, the Company has recorded similar non-recurring items
in the past, including $2,080,000 in the first six months of 1996, there can be
no assurance that similar items will recur in the future. The lower gross margin
percentage for the 1997 three month and six month periods, primarily reflect a
shift in product mix from higher margin Commercial Systems sales to lower margin
Avionics and OEM sales and decreases in the margins obtained on sales of
Commercial Systems products. There can be no assurance that these margins will
be sustained because of mix changes within and among the business units, market
pressures on unit selling prices, fluctuations in unit manufacturing costs and
other factors. While Commercial Systems products have the highest gross margins
of all the Company's products, those margins have decreased primarily because
the Company has reduced prices on these products in response to competition. The
Company expects competition to increase in its Commercial Systems markets and,
therefore, it is likely that further price erosion will occur, with consequently
lower gross margin percentages in the future.
* The Company also expects that a higher percentage of its business in the
future will be conducted through alliances with strategic partners, e.g.
Honeywell, Caterpillar, and Case. As a result of volume pricing and the
assumption of certain operating costs in connection with such partners, margins
are likely to be lower than sales directly to end-users.
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:
Three Months Ended June 30, Six Months Ended June 30,
-------------------------------- --------------------------------
Increase/ Increase/
1997 1996 (Decrease) 1997 1996 (Decrease)
- -----------------------------------------------------------------------------------------------
(In Thousands)
Research and development 10,113 9,144 11% 19,114 17,969 6%
Sales and marketing 14,916 16,844 (11)% 29,264 32,908 (11)%
General and administrative 7,306 9,057 (19)% 13,712 16,468 (17)%
---------- ---------- ---------- ----------
Total $ 32,335 $ 35,045 (8)% $ 62,090 $ 67,345 (8)%
---------- ---------- ---------- ----------
Research and Development
Research and development expenses increased in the three month and six month
periods ended June 30, 1997, as compared with the corresponding 1996 periods.
The higher research and development expense in the 1997 periods are due to an
increase in personnel and the related expenses which accompany an increase in
the number of employees. The increase in research and development personnel is
part of the Company's continuing focus on developing future products.
* The Company expects that a significant portion of its future revenues and
operating income will continue to be derived from sales of newly introduced
11
products. Consequently, the Company's future success depends in part on its
ability to continue to advance product technology and to develop and manufacture
new competitive products with high gross profit margins. Development and
manufacturing schedules for technology products are difficult to predict, and
there can be no assurance that the Company will achieve timely initial customer
shipments of new products. The timely availability of these products in volume
and their acceptance by customers are important to the future success of the
Company. In addition, certain of the Company's products are subject to
governmental and similar certifications before they can be sold. For example,
FAA certification is required for all aviation products. An inability or delay
in obtaining such certifications could have an adverse effect on the Company's
operating results.
Sales and Marketing
The decreased sales and marketing expenses for the three month and six month
periods ended June 30, 1997, as compared with the corresponding periods in 1996
is due primarily to a reduction in headcount and related expenses resulting from
the Company's restructuring in September 1996. In addition, the Company
experienced decreases in advertising and promotional items related to lower
costs for the annual report and lower media development costs.
The Company's future growth will depend upon the timely development and
continued viability of the markets in which the Company currently competes and
upon the Company's ability to continue to identify and exploit new markets for
its products. In addition, the Company has encountered significant competition
in selected markets, and the Company expects such competition to intensify as
the market for GPS applications receives acceptance. Several of the Company's
competitors are major corporations with substantially greater financial,
technical, marketing and manufacturing resources. Increased competition is
likely to result in reduced market share and in price reductions of GPS-based
products, which could adversely affect the Company's revenues and profitability.
General and Administrative
The decrease in general and administrative expense for the three month and six
month periods ended June 30, 1997, as compared with the corresponding periods
for 1996, primarily reflects lower legal expenses as a result of reduced
litigation.
Income Taxes
The effective tax rate was 18% for the three months ended June 30, 1997 and 20%
for the six months ended June 30, 1997 as compared with an effective tax rate of
20% for the same periods in 1996.
Inflation
The effects of inflation on the Company's financial results have not been
significant to date.
Liquidity and Capital Resources
* For the six month period ended June 30, 1997, cash provided from operating
activities was $12,104,000 as compared to cash used of $6,041,000 in the
corresponding period in 1996. Cash provided by sales of common stock in 1997
12
represents proceeds from purchases made pursuant to the Company's stock option
and employee stock purchase plans and totaled $2,703,000 for the six months
ended June 30, 1997. The Company has relied primarily on cash provided by
financing activities and net sales of short-term investments to fund operations,
capital expenditures, the repurchase the Company's common stock (see further
explanation below), and other investing activities. The Company's ability to
generate cash from operations will depend in a large part on revenues and the
rate of collections of accounts receivable. Management believes that its cash,
cash equivalents and short-term investment balances, with its existing credit
line, will be sufficient to meet its anticipated cash needs for at least one
year. At June 30, 1997, the Company had cash and cash equivalents of $31,443,000
and short-term investments of $57,028,000.
* In August 1995, the Company entered into an agreement with two banks for a
$30.0 million unsecured line of credit that expired in July 1997. The line of
credit was amended in July 1997 to extend the line of credit to September 1,
1997. The agreement enables the Company to borrow up to $30.0 million provided
that certain financial and other covenants are met. The agreement provides for
payment of a commitment fee of 0.5% for the unused portion of the line of
credit. Borrowings bear interest at the higher of (i) one of the bank's annual
prime rate, and (ii) the federal funds rate plus 0.5%. No borrowings have been
made under this line of credit. The Company intends to obtain another line of
credit on similar terms after this line expires.
In February 1996, the Company announced that it had approved a discretionary
program whereby up to 600,000 shares of its common stock may be repurchased by
the Company to offset potential dilutive effects to earnings per share from the
issuance of stock options. The Company intends to use existing cash, cash
equivalents and short-term investments to finance any such stock repurchases
under this program. In 1996, the Company purchased 250,000 shares at a cost of
$3,545,000. In the first quarter of 1997, the Company purchased 50,000 shares at
a cost of $673,000. In the second quarter of 1997 the Company purchased 89,500
shares at a cost of $1,161,000.
The Company is continually evaluating potential external investments in
technologies related to its business and to date has made relatively small
investments in GPS related technology companies. There can be no assurance that
investments made to date and potential future investments will be successful.
Other Risk Factors
In the past, revenue has tended to fluctuate on a quarterly basis due to the
timing of shipments of products under contracts, the sale of license rights and
seasonal patterns favoring spring and summer for the Commercial Systems
business. However, the seasonal patterns were not repeated in 1996, however,
there can be no assurances that prior seasonal revenue trends will be
experienced during 1997. A significant portion of the Company's quarterly
revenues are derived from orders received and immediately shipped to customers
in the last few weeks and days of a quarter. If orders are not received, or
shipments are delayed beyond the end of a quarter, operating results would be
significantly adversely impacted.
13
* The Company has a relatively fixed cost structure in the short term which is
determined by the business plans and strategies the Company intends to implement
in the markets it addresses. This effective leveraging means that increases or
decreases in revenues have more than a proportional impact on net income or
losses. The Company estimates that a change in product revenue of $1 million
would cause a corresponding change in the Company's earnings per share by 2 to 3
cents.
* In the longer term, the Company believes that the Software and Component
Technologies business unit will comprise a significant portion of the Company's
business. The Software and Component Technologies business unit differs in
nature from most of the Company's markets because volumes are high and margins
relatively low. Software and Component Technologies customers are extremely
price sensitive. To the extent, if any, that costs decrease through
technological advances, a portion of these cost savings will be passed on to the
customer. To compete in the Software and Component Technologies market requires
high-volume production and manufacturing techniques. Customers expect high
quality standards with very low defect rates. The Company is relatively
inexperienced compared to competitors with far greater resources in such
high-volume manufacturing and associated support activities. The Company's
failure to meet customer expectations in this market could cause the Company to
lose customer orders, which could result in a material adverse effect on the
Company's operating results.
The Company's stock price is subject to significant volatility. If revenues
and/or earnings fail to meet the expectations of the investment community, there
could be an immediate and significant impact on the trading price of the
Company's stock.
The value of the Company's products relies substantially on the Company's
technical innovation in fields in which there are many current patent filings.
The Company recognizes that as new patents are issued or are brought to the
Company's attention by the holders of such patents, it may be necessary for the
Company to withdraw products from the market, take a license from such patent
holders, or redesign its products. The Company does not believe any of its
products infringe patents or other proprietary rights of third parties, but
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 the Company's revenues or profitability.
(See Note 4- Other Litigation:, to the financial statements)
The Company is continually evaluating alliances and external investments in
technologies related to its business and has already entered into alliances and
made relatively small investments in GPS related technology companies.
Acquisitions of companies, divisions of companies, or products and alliances
entail numerous risks, including (i) the potential inability to successfully
integrate acquired operations and products or to realize anticipated synergies,
economies of scale or other value, (ii) diversion of management's attention, and
(iii) loss of key employees of acquired operations. Any such problems could have
a material adverse effect on the Company's business, financial condition and
results of operations. No assurances can be given that the Company will not
incur problems from current or future alliances, acquisitions, or investments.
Furthermore, there can be no assurance that the Company will realize value from
any such alliances, acquisitions, or investments.
14
The Company's products rely on signals from the GPS Navstar satellite system
built and maintained by the U.S. Department of Defense. Navstar satellites and
their ground support systems are complex electronic systems subject to
electronic and mechanical failures and possible sabotage. Some of these 24
satellites have exceeded their design lives of 7.5 years and are also subject to
damage by the hostile space environment in which they operate. Repair of damaged
or malfunctioning satellites is impossible. If a significant number of
satellites were to become inoperable, there could be a substantial delay before
they are replaced with new satellites. A reduction in the number of operating
satellites would impair the current utility of the GPS system and the growth of
current and additional market opportunities. In addition, there can be no
assurance that the U.S. Government will remain committed to the operation and
maintenance of GPS satellites over a long period of time, nor that policies of
the U.S. Government allowing for the use of GPS without charge will remain
unchanged. Because of ever increasing commercial applications of GPS, other U.S.
Government agencies may become involved in the administration or the regulation
of the use of GPS signals. Any of the foregoing factors could affect the
willingness of buyers of the Company's products to select GPS-based systems
instead of products based on competing technologies. Any resulting change in
market demand for GPS products would have a material adverse effect on the
Company's financial results. Certain European government organizations have
expressed concern regarding the susceptibility of GPS equipment to intentional
or inadvertent signal interference. Such concern could translate into reduced
demand for GPS products in certain geographic regions.
15
PART II. OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The annual meeting of shareholders of the company was held in Sunnyvale,
California, on May 15, 1997.
At the annual shareholder meeting, an election of Directors was held with the
following individuals being elected to the Company's Board of Directors.
VOTE
-----------------------------------
For Withheld
Robert S. Cooper 20,078,982 379,410
John B. Goodrich 20,075,615 382,777
William Hart 20,059,077 399,315
Bradford W. Parkinson 20,064,572 393,820
Charles R. Trimble 20,057,789 400,603
Other matters voted upon at the meeting and the results of the voting with
respect to each such matter were as follows:
(1) Approval of an increase of 600,000 shares of Common Stock available for
issuance under the Company's 1993 Stock Option Plan (16,858,081 in favor,
3,456,518 opposed, 143,793 abstentions, 1,845,522 broker non-votes).
(2) Ratification of the appointment of Ernst & Young LLP as the Company's
independent auditors for the year ending December 31, 1997 ( 20,249,572 in
favor, 123,205 opposed, 85,615 abstentions, 0 broker non-votes).
16
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
Page
A. Exhibits Number
3.7 Bylaws of the Company, as amended. 19-40
10.57 Revolving Credit Agreement - Fourth Amendment 41-43
11.1 Computation of Earnings Per Share 44
27 Financial Data Schedule 45
B. Report on Form 8-K
There were no reports on Form 8-K filed during the
quarter ended June 30, 1997.
17
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/Dennis R. Ing
-------------------------------------------------
Dennis R. Ing
(Vice President Finance, Chief Financial
Officer, and principal financial and principal accounting officer)
DATE: August 14, 1997
18