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 JUNE 30, 2006
OR
o 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)
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California
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94-2802192
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(State
or other jurisdiction of
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(I.R.S.
Employer Identification Number)
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incorporation
or organization)
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935
Stewart Drive, Sunnyvale, CA 94085
(Address
of principal executive offices) (Zip Code)
Telephone
Number (408) 481-8000
(Registrant's
telephone number, including area code)
Indicate
by check mark whether the registrant (1) has filed all reports required to
be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements
for
the past 90 days.
Yes x No o
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, or a non-accelerated filer. See definition of “accelerated
filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check
one):
Large
Accelerated Filer x Accelerated
Filer o Non-accelerated
Filer o
Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act).
Yes o No x
As
of
August 1, 2006, there were 55,109,638 shares of
Common
Stock (no par value) outstanding.
TRIMBLE
NAVIGATION LIMITED
FORM
10-Q for the Quarter ended June 30, 2006
TABLE
OF CONTENTS
PART
I.
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Page
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ITEM
1.
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3
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4
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5
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6
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ITEM
2.
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18
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ITEM
3.
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26
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ITEM
4.
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26
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PART
II.
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ITEM
1.
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27
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ITEM
1A.
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27
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ITEM
4.
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33
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ITEM
6.
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34
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35
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PART
I - FINANCIAL INFORMATION
ITEM
1.
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
TRIMBLE
NAVIGATION LIMITED
CONDENSED
CONSOLIDATED BALANCE SHEETS
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June
30,
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December
30,
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2006
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2005
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(In
thousands)
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(UNAUDITED)
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(1)
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ASSETS
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Current
assets:
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Cash
and cash equivalents
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$
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107,726
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$
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73,853
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Accounts
receivable, net
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171,942
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145,100
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Other
receivables
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9,336
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|
6,489
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Inventories,
net
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113,925
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107,851
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Deferred
income taxes
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19,015
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18,504
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Other
current assets
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9,587
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8,580
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Total
current assets
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431,531
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360,377
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Property
and equipment, net
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47,278
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42,664
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Goodwill
and other purchased intangible assets, net
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370,946
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313,456
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Deferred
income taxes
|
|
|
6,483
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3,580
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Other
assets
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24,166
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23,011
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Total
non-current assets
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448,873
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382,711
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Total
assets
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$
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880,404
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$
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743,088
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LIABILITIES
AND SHAREHOLDERS' EQUITY
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Current
liabilities:
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Current
portion of long-term debt
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$
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431
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$
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216
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Accounts
payable
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47,984
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45,206
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Accrued
compensation and benefits
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38,152
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36,083
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Accrued
liabilities
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22,686
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16,189
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Deferred
revenue
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24,502
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12,588
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Accrued
warranty expense
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7,475
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7,466
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Deferred
income taxes
|
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3,996
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4,087
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Income
taxes payable
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28,497
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24,922
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Total
current liabilities
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173,723
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146,757
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Non-current
portion of long-term debt
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459
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433
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Deferred
income tax
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14,373
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5,602
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Other
non-current liabilities
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27,110
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19,041
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Total
liabilities
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215,665
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171,833
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Shareholders'
equity:
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Preferred
stock no par value; 3,000 shares authorized; none
outstanding
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--
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--
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Common
stock, no par value; 90,000 shares authorized;55,031
and 53,910 shares issued and outstanding at June 30, 2006 and December
30,
2005, respectively
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413,619
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384,196
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Retained
earnings
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221,857
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167,525
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Accumulated
other comprehensive income
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29,263
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19,534
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Total
shareholders' equity
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664,739
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571,255
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Total
liabilities and shareholders' equity
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$
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880,404
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$
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743,088
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(1)
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Derived
from the December 30, 2005 audited Consolidated Financial Statements
included in the Annual Report on Form 10-K of Trimble Navigation
Limited
for fiscal year 2005.
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See
accompanying Notes to the Condensed Consolidated Financial
Statements.
TRIMBLE
NAVIGATION LIMITED
CONDENSED
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
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Three
Months Ended
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Six
Months Ended
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June
30,
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July
1,
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June
30,
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July
1,
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2006
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2005
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2006
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2005
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(In
thousands, except per share data)
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Revenue
(1)
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$
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245,326
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$
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204,225
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$
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471,180
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$
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399,608
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Cost
of sales (1)
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123,670
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101,818
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242,061
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199,394
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Gross
margin
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121,656
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102,407
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229,119
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200,214
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Operating
expenses
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Research
and development
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27,607
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20,865
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52,053
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42,693
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Sales
and marketing
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35,747
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28,704
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68,453
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59,075
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General
and administrative
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16,205
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11,924
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31,966
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24,756
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Restructuring
charges
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-
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-
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-
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278
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In-process
research and development
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1,020
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-
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1,020
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-
|
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Amortization
of purchased intangible assets
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2,408
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2,177
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3,893
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4,475
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Total
operating expenses
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82,987
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63,670
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157,385
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131,277
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Operating
income
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38,669
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|
38,737
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71,734
|
|
|
68,937
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Non-operating
income (expense), net
|
|
|
|
|
|
|
|
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Interest
income (expense), net
|
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598
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|
(419
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)
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1,032
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(1,030
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)
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Foreign
currency transaction gain, net
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334
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163
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927
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6
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Income
(expense) for affiliated operations, net
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1,575
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|
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(2,499
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)
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3,191
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(5,538
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)
|
Other
income, net
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|
18
|
|
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138
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|
|
182
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|
|
168
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Total
non-operating income (expense), net
|
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|
2,525
|
|
|
(2,617
|
)
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|
5,332
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|
(6,394
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)
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Income
before taxes
|
|
|
41,194
|
|
|
36,120
|
|
|
77,066
|
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62,543
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|
Income
tax provision
|
|
|
12,691
|
|
|
12,333
|
|
|
22,735
|
|
|
21,317
|
|
Net
income
|
|
$
|
28,503
|
|
$
|
23,787
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$
|
54,331
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$
|
41,226
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Basic
earnings per share
|
|
$
|
0.52
|
|
$
|
0.45
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|
$
|
1.00
|
|
$
|
0.78
|
|
Shares
used in calculating basic earnings per share
|
|
|
54,847
|
|
|
52,959
|
|
|
54,544
|
|
|
52,729
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
earnings per share
|
|
$
|
0.49
|
|
$
|
0.42
|
|
$
|
0.94
|
|
$
|
0.73
|
|
Shares
used in calculating diluted earnings per share
|
|
|
58,128
|
|
|
57,057
|
|
|
57,761
|
|
|
56,780
|
|
(1) Sales
to related parties
were $5.5 million and $2.5 million for the three months period ended June
30,
2006 and July 1, 2005, respectively, while cost of sales to those related
parties were $3.2 million and $1.0 million for the comparable periods. Sales
to
related parties were $10.4 million and $4.7 million for the six month period
ended June 30, 2006 and July 1, 2005, respectively, while cost of sales to
those
related parties were $6.2 million and $2.0 million for the comparable periods.
See
accompanying Notes to the Condensed Consolidated Financial
Statements.
TRIMBLE
NAVIGATION LIMITED
CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
|
|
Six
Months Ended
|
|
|
|
June
30,
|
|
July
1,
|
|
|
|
2006
|
|
2005
|
|
(In
thousands)
|
|
|
|
|
|
|
|
|
|
|
|
Cash
flow from operating activities:
|
|
|
|
|
|
Net
income
|
|
$
|
54,331
|
|
$
|
41,226
|
|
Adjustments
to reconcile net income to net cash provided by operating
activities:
|
|
|
|
|
|
|
|
Depreciation
expense
|
|
|
6,489
|
|
|
4,890
|
|
Amortization
expense
|
|
|
6,145
|
|
|
4,548
|
|
Provision
for doubtful accounts
|
|
|
95
|
|
|
(678
|
)
|
Amortization
of debt issuance cost
|
|
|
90
|
|
|
244
|
|
Deferred
income taxes
|
|
|
(1,678
|
)
|
|
3,846
|
|
Stock-based
compensation
|
|
|
6,489
|
|
|
-
|
|
In-process
research and development
|
|
|
1,020
|
|
|
-
|
|
Excess
tax benefit for stock-based compensation
|
|
|
(4,770
|
)
|
|
-
|
|
Other
|
|
|
262
|
|
|
(48
|
)
|
Add
decrease (increase) in assets:
|
|
|
|
|
|
|
|
Accounts
receivable, net
|
|
|
(19,417
|
)
|
|
(26,986
|
)
|
Other
receivables
|
|
|
(2,649
|
)
|
|
1,709
|
|
Inventories
|
|
|
(2,860
|
)
|
|
(4,061
|
)
|
Other
current and non-current assets
|
|
|
(2,097
|
)
|
|
(1,452
|
)
|
Add
increase (decrease) in liabilities:
|
|
|
|
|
|
|
|
Accounts
payable
|
|
|
1,386
|
|
|
(1,997
|
)
|
Accrued
compensation and benefits
|
|
|
1,185
|
|
|
158
|
|
Accrued
liabilities
|
|
|
(2,138
|
)
|
|
300
|
|
Deferred
gain on joint venture
|
|
|
-
|
|
|
124
|
|
Deferred
revenue
|
|
|
9,862
|
|
|
2,210
|
|
Income
taxes payable
|
|
|
7,624
|
|
|
12,537
|
|
Net
cash provided by operating activities
|
|
|
59,369
|
|
|
36,570
|
|
|
|
|
|
|
|
|
|
Cash
flow from investing activities:
|
|
|
|
|
|
|
|
Acquisitions,
net of cash acquired
|
|
|
(38,137
|
)
|
|
(20,233
|
)
|
Acquisition
of property and equipment
|
|
|
(10,943
|
)
|
|
(7,734
|
)
|
Dividends
received
|
|
|
-
|
|
|
515
|
|
Costs
of capitalized patents
|
|
|
-
|
|
|
(89
|
)
|
Net
cash used in investing activities
|
|
|
(49,080
|
)
|
|
(27,541
|
)
|
|
|
|
|
|
|
|
|
Cash
flow from financing activities:
|
|
|
|
|
|
|
|
Issuance
of common stock
|
|
|
17,162
|
|
|
15,453
|
|
Excess
tax benefit for stock-based compensation
|
|
|
4,770
|
|
|
-
|
|
Proceeds
from long-term debt and revolving credit lines
|
|
|
-
|
|
|
6,000
|
|
Payments
on long-term debt and revolving credit lines
|
|
|
-
|
|
|
(44,250
|
)
|
Other
|
|
|
(777
|
)
|
|
307
|
|
Net
cash provided (used) in financing activities
|
|
|
21,155
|
|
|
(22,490
|
)
|
|
|
|
|
|
|
|
|
Effect
of exchange rate changes on cash and cash equivalents
|
|
|
2,429
|
|
|
(1,551
|
)
|
|
|
|
|
|
|
|
|
Net
increase (decrease) in cash and cash equivalents
|
|
|
33,873
|
|
|
(15,012
|
)
|
Cash
and cash equivalents, beginning of period
|
|
|
73,853
|
|
|
71,872
|
|
Cash
and cash equivalents, end of period
|
|
$
|
107,726
|
|
$
|
56,860
|
|
See
accompanying Notes to the Condensed Consolidated Financial
Statements.
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -
UNAUDITED
NOTE
1.
OVERVIEW AND BASIS OF PRESENTATION
Trimble
Navigation Limited (“we,” “Trimble” or the “Company”), incorporated in
California in 1981, provides positioning product solutions to commercial
and
government users in a large number of markets. These markets include surveying,
construction, agriculture, urban and resource management, military,
transportation and telecommunications.
Trimble
has a 52-53 week fiscal year, ending on the Friday nearest to December 31,
which
for fiscal 2005 was December 30. The second fiscal quarters of 2006 and 2005
ended on June 30, 2006 and July 1, 2005, respectively. Fiscal 2006 and 2005
are
52-week years. Unless otherwise stated, all dates refer to its fiscal year
and
fiscal periods.
The
Condensed Consolidated Financial Statements include the results of Trimble
and
its subsidiaries. Inter-company accounts and transactions have been eliminated.
Certain amounts from prior periods have been reclassified to conform to the
current period presentation.
The
accompanying financial data as of June 30, 2006 and for the three and six
months
ended June 30, 2006 and July 1, 2005 has been prepared by the Company, without
audit, pursuant to the rules and regulations of the Securities and Exchange
Commission. Certain information and footnote disclosures normally included
in
financial statements prepared in accordance with accounting principles generally
accepted in the U.S. have been condensed or omitted pursuant to such rules
and
regulations. The following discussion should be read in conjunction with
Trimble’s 2005 Annual Report on Form 10-K.
In
the
opinion of management, all adjustments (which include normal recurring
adjustments) necessary to present a fair statement of financial position
as of
June 30, 2006, results of operations for the three and six months ended June
30,
2006 and July 1, 2005 and cash flows for the six months ended June 30, 2006
and
July 1, 2005, as applicable, have been made. The results of operations for
the
three and six months ended June 30, 2006 are not necessarily indicative of
the
operating results for the full fiscal year or any future periods.
The
preparation of financial statements in accordance with accounting principles
generally accepted in the U.S. requires management to make estimates and
assumptions that affect the amounts reported in its condensed consolidated
financial statements and accompanying notes. Management bases its estimates
on
historical experience and various other assumptions believed to be reasonable.
Although these estimates are based on management’s best knowledge of current
events and actions that may impact the company in the future, actual results
may
be different from the estimates. Trimble’s critical accounting policies are
those that affect its financial statements materially and involve difficult,
subjective or complex judgments by management. In the first quarter of fiscal
2006, the Company changed its critical accounting policy related to stock-based
compensation. See Note 2 to the Notes to the Condensed Consolidated Financial
Statements for additional information. For more information on the Company’s
significant accounting principles, refer to Trimble’s 2005 Annual Report on Form
10-K.
NOTE
2.
NEW ACCOUNTING PRONOUNCEMENTS
In
July
2006, the Financial Accounting Standards Board (“FASB”) issued Interpretation
No. 48, “Accounting
for Uncertainty in Income Taxes” (“FIN 48”). FIN 48 applies to all tax positions
related to income taxes subject to FASB Statement 109, “Accounting for Income
Taxes.” Under FIN 48 a company would recognize the benefit from a tax
position only if it is more-likely-than-not that the position would be sustained
upon audit based solely on the technical merits of the tax position. FIN
48
clarifies how a company would measure the income tax benefits from the tax
positions that are recognized, provides guidance as to the timing of the
derecognition of previously recognized tax benefits and describes the methods
for classifying and disclosing the liabilities within the financial statements
for any unrecognized tax benefits. FIN 48 also addresses when a
company should record interest and penalties related to tax positions and
how
the interest and penalties may be classified within the income statement
and
presented in the balance sheet. FIN 48 is effective for fiscal years
beginning after December 15, 2006. For Trimble, FIN 48 will be effective
for our 2007 fiscal year. Differences between the amounts recognized in
the statements of operations prior to and after the adoption of FIN 48 would
be
accounted for as a cumulative effect adjustment to the beginning balance
of
retained earnings. The Company is currently evaluating FIN 48 and
its possible impacts on the Company’s financial statements. Upon
adoption, there is a possibility that the cumulative effect would result
in a
charge or benefit to the beginning balance of retained earnings.
In
December 2004, the Financial Accounting Standards Board (“FASB”) issued Standard
of Financial Accounting Standards No. 123(R), “Share-Based Payment” (“SFAS
123(R)”). SFAS 123(R) requires employee stock options and rights to purchase
shares under stock participation plans to be accounted for under the fair
value
method, and eliminates the ability to account for these instruments under
the
intrinsic value method prescribed by APB Opinion No. 25, and allowed under
the
original provisions of SFAS 123.
Trimble
has adopted SFAS 123(R) using the
modified prospective method which requires the adoption of the accounting
standard for fiscal years beginning after June 15, 2005. As a result, the
Company’s financial statements for fiscal periods after December 30, 2005
include stock-based compensation expenses that are not comparable to financial
statements of fiscal periods prior to December 30, 2005. SFAS 123(R) requires
stock-based compensation to be estimated using the fair value on the date
of
grant using an option-pricing model. The value of the portion of the award
that
is expected to vest is recognized as expense over the related employees’
requisite service periods in the Company’s Condensed Consolidated Statements of
Income. Prior to the adoption of SFAS 123(R), the Company accounted for
stock-based compensation to employees and directors using the intrinsic value
method in accordance with APB Opinion No. 25 as allowed under Statement of
Financial Accounting Standards No. 123, “Accounting for Stock-Based
Compensation” (“SFAS 123”). Under the intrinsic value method, no stock-based
compensation expense had been recognized in the Company’s Condensed Consolidated
Statement of Income because the exercise price of the Company’s stock options
granted to employees and directors equaled the fair market value of the
underlying stock at the date of grant.
See
Note
3 to the Notes to the Condensed Consolidated Financial Statements for additional
information.
NOTE
3.
STOCK-BASED COMPENSATION
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 applied
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 prior to fiscal 2006. Accordingly, Trimble
did not recognize compensation cost for stock-based compensation prior to
fiscal
2006. For periods subsequent to fiscal 2005, Trimble recognized expense related
to stock-based compensation in accordance with SFAS 123(R)
The
following table summarizes stock-based compensation expense, net of tax,
related
to employee stock-based compensation included in the Condensed Consolidated
Statements of Income in
accordance with SFAS 123(R) for
the
three
and
six months ended June 30, 2006 and July 1, 2005.
|
|
Three
Months Ended
|
|
Six
Months Ended
|
|
|
|
June
30,
|
|
July
1,
|
|
June
30,
|
|
July
1,
|
|
|
|
2006
|
|
2005
|
|
2006
|
|
2005
|
|
(in
thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost
of sales
|
|
$
|
309
|
|
$
|
-
|
|
$
|
596
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research
& development
|
|
|
667
|
|
|
-
|
|
|
1,306
|
|
|
-
|
|
Sales
& marketing
|
|
|
711
|
|
|
-
|
|
|
1,452
|
|
|
-
|
|
General
& administrative
|
|
|
1,572
|
|
|
-
|
|
|
3,134
|
|
|
-
|
|
Stock-based
compensation expense included in operating expenses
|
|
|
2,950
|
|
|
-
|
|
|
5,892
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
stock-based compensation
|
|
|
3,259
|
|
|
-
|
|
|
6,489
|
|
|
-
|
|
Tax
benefit
|
(1) |
|
(294
|
)
|
|
-
|
|
|
(588
|
)
|
|
-
|
|
Total
stock-based compensation, net of tax
|
|
$
|
2,965
|
|
$
|
-
|
|
$
|
5,901
|
|
|
-
|
|
The
table
below provides pro forma information for the three and six months ended July
1,
2005 as if Trimble had accounted for its employee stock options and purchases
under the employee stock purchase plan in accordance with SFAS 123.
|
|
Three
Months Ended
|
|
Six
Months Ended
|
|
|
|
July
1,
|
|
July
1,
|
|
|
|
2005
|
|
2005
|
|
(in
thousands, except per share amounts)
|
|
|
|
|
|
|
|
|
|
|
|
Net
income - as reported
|
|
$
|
23,787
|
|
$
|
41,226
|
|
Stock-based
compensation expense, net of tax
|
(2) |
|
2,745
|
|
|
5,808
|
|
Net
income - pro forma
|
|
$
|
21,042
|
|
$
|
35,418
|
|
|
|
|
|
|
|
|
|
Basic
earnings per share - as reported
|
|
$
|
0.45
|
|
$
|
0.78
|
|
Basic
earnings per share - pro forma
|
|
$
|
0.40
|
|
$
|
0.67
|
|
|
|
|
|
|
|
|
|
Diluted
earnings per share - as reported
|
|
$
|
0.42
|
|
$
|
0.73
|
|
Diluted
earnings per share - pro forma
|
|
$
|
0.37
|
|
$
|
0.62
|
|
(2)
Includes compensation expense for employee stock purchase plan for the three
and
six months ended July 1, 2005 and reduction of tax benefits for stock-based
compensation other than non-qualified stock options which were not included
in
the pro forma disclosure of Trimble’s second quarter of fiscal 2005 Form 10-Q.
Tax benefit relates to non-qualified options only as allowed by the applicable
tax requirements using the statutory tax rate as of the second quarter of
fiscal
2005.
OPTIONS
Stock
option expense recognized during the period is based on the value of the
portion
of share-based payment awards that is expected to vest during the period.
Stock
option expense recognized in the Company’s Condensed Consolidated of Income for
the three and six months ended June 30, 2006 included compensation expense
for
stock options granted prior to, but not yet vested as of December 30, 2005
based
on the grant date fair value estimated in accordance with the provisions
of SFAS
123 and compensation expense for the stock options granted subsequent to
December 30, 2005 based on the grant date fair value estimated in accordance
with the provisions of SFAS 123(R). In conjunction with the adoption of SFAS
123(R), the Company changed its method of attributing the value of stock
option
to expense from the accelerated multiple-option approach to the straight-line
single option method. Compensation expense for all stock options granted
on or
prior to December 30, 2005 will continue to be recognized using the
accelerated multiple-option approach while compensation expense for all stock
options granted subsequent to December 30, 2005 is recognized using the
straight-line single-option method. SFAS 123(R) requires forfeitures to be
estimated at the time of grant and revised, if necessary, in subsequent periods
if actual forfeitures differ from those estimates. In the Company’s pro forma
information required under SFAS 123 for the periods prior to fiscal 2006,
the
Company accounted for forfeitures as they occurred.
Stock
Option Plans
Trimble
issues new shares upon exercises of stock options related to the following
plans.
2002
Stock Plan
In
2002,
Trimble’s Board of Directors adopted the 2002 Stock Plan (“2002 Plan”). The 2002
Plan, as amended to date and approved by shareholders, provides for the granting
of incentive and non-statutory stock options for up to 6,000,000 shares plus
any
shares currently reserved but unissued to employees, consultants, and directors
of Trimble. Incentive stock options may be granted at exercise prices that
are
not less than 100% of the fair market value of Common Stock on the date of
grant. Employee stock options granted under the 2002 Plan have 120-month
terms,
and vest at a rate of 20% at the first anniversary of grant, and monthly
thereafter at an annual rate of 20%, with full vesting occurring at the fifth
anniversary of the grant. The exercise price of non-statutory stock options
issued under the 2002 Plan must be at least 85% of the fair market value
of
Common Stock on the date of grant.
1993
Stock Option Plan
In
1992,
Trimble's Board of Directors adopted the 1993 Stock Option Plan (“1993 Plan”).
The 1993 Plan, as amended to date and approved by shareholders, provided
for the
granting of incentive and non-statutory stock options for up to 9,562,500
shares
of Common Stock to employees, consultants, and directors of Trimble. Incentive
stock options may be granted at exercise prices that are not less than 100%
of
the fair market value of Common Stock on the date of grant. Employee stock
options granted under the 1993 Plan have 120-month terms, and vest at a rate
of
20% at the first anniversary of grant, and monthly thereafter at an annual
rate
of 20%, with full vesting occurring at the fifth anniversary of grant. The
exercise price of non-statutory stock options issued under the 1993 Plan
must be
at least 85% of the fair market value of Common Stock on the date of
grant.
1992
Management Discount Stock Option Plan
In
1992,
Trimble's Board of Directors and shareholders approved the 1992 Management
Discount Stock Option Plan ("Discount Plan"). Employee stock options granted
under the 1992 Plan have 120-month terms, and vest at a rate of 20% at the
first
anniversary of grant, and monthly thereafter at an annual rate of 20%, with
full
vesting occurring at the fifth anniversary of the grant.
1990
Director Stock Option Plan
In
December 1990, Trimble adopted a Director Stock Option Plan under which an
aggregate of 570,000 shares of Common Stock have been reserved for issuance
to
non-employee directors as approved by the shareholders to date. Stock options
issued under this plan vest generally over a three year period.
Option
Activity
Activity
during the first six months of fiscal 2006 under the combined plans was as
follows:
|
|
June
30, 2006
|
|
Six
Months Ended
|
|
Options
|
|
Weighted
average exercise price
|
|
(In
thousands, except for per share data)
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding
at December 30, 2005
|
|
|
6,414
|
|
$
|
18.70
|
|
Granted
|
|
|
131
|
|
|
40.46
|
|
Exercised
|
|
|
(857
|
)
|
|
14.41
|
|
Forfeited/Cancelled/Expired
|
|
|
(38
|
)
|
|
23.69
|
|
Outstanding
at June 30, 2006
|
|
|
5,650
|
|
|
19.82
|
|
Options
Outstanding and Exercisable
Exercise
prices for options outstanding and exercisable as of June 30, 2006, ranged
from
$5.33 to $48.11. Options outstanding and exercisable consist of fully vested
options and options expected to vest at June 30, 2006. The
aggregate intrinsic value is the total pretax intrinsic value based on the
Company’s closing stock price of $44.64 as of June
30,
2006,
which would have been received by the option holders had all option holders
exercised their options as of that date.
|
|
|
|
Weighted-
|
|
Weighted-
|
|
|
|
|
|
|
|
Average
|
|
Average
|
|
Aggregate
|
|
|
|
Number
|
|
Exercise
Price
|
|
Remaining
|
|
Intrinsic
|
|
|
|
Of
Shares
|
|
per
Share
|
|
Contractual
Term
|
|
Value
|
|
|
|
|
|
|
|
(in
years)
|
|
(in
thousands)
|
|
Options
Outstanding and Expected to Vest
|
|
|
5,512,221
|
|
$
|
19.58
|
|
|
5.6
|
|
$
|
138,185
|
|
Options
Exercisable
|
|
|
3,389,809
|
|
|
15.01
|
|
|
5.0
|
|
|
100,444
|
|
As
of
June 30, 2006, the total unamortized stock option expense is $16.1 million
with
weighted-average recognition period of 1.5 years.
Valuation
Assumptions
For
options granted prior to October 1, 2005, the fair value for these options
was
estimated at the date of grant using the Black-Scholes option-pricing model.
For
stock options granted on or after October 1, 2005, the fair value of each
award is estimated on the date of grant using a binomial valuation model.
Similar to the Black-Scholes model, the binomial model takes into account
variables such as volatility, dividend yield rate, and risk free interest
rate.
In addition, the
binomial model incorporates actual option-pricing behavior and changes in
volatility over the option’s contractual term. For these reasons, the Company
believes that the binomial model provides a fair value that is more
representative of actual experience and future expected experience than the
value calculated using the Black-Scholes model.
Under
the
binomial models and Black-Scholes, the estimated values of each employee
stock
option granted during the second quarter of fiscal 2006 and 2005 were $17.93
and
$17.67, respectively. The value of each option grant is estimated on the
date of
grant using the binomial model for options granted during the second quarter
of
fiscal 2006 and the Black-Scholes option pricing model for options granted
during the second quarter of fiscal 2005 and with the following
assumptions:
|
|
Three
Months Ended
|
|
Six
Months Ended
|
|
|
|
June
30, 2006
|
|
July
1, 2005
|
|
June
30, 2006
|
|
July
1, 2005
|
|
Expected
dividend yield
|
|
|
--
|
|
|
--
|
|
|
--
|
|
|
--
|
|
Expected
stock price volatility
|
|
|
42.0
|
%
|
|
41.8
|
%
|
|
42.0
|
%
|
|
49.6
|
%
|
Risk
free interest rate
|
|
|
4.5
|
%
|
|
3.9
|
%
|
|
4.5
|
%
|
|
4.0
|
%
|
Expected
life of options (in years)
|
|
|
4.6
|
|
|
4.8
|
|
|
4.6
|
|
|
4.8
|
|
Expected
Dividend Yield
-
The
dividend yield assumption is based on the Company’s history and expectation of
dividend payouts.
Expected
Stock Price Volatility
-
The
Company’s computation of expected volatility is based on a combination of
implied volatilities from traded options on the Company’s stock and historical
volatility. The Company used implied and historical volatility as the
combination was more representative of future stock price trends than historical
volatility alone.
Expected
Risk Free Interest Rate
-
The
risk-free interest rate is based on the U.S. Treasury yield curve in effect
at
the time of grant for the expected term of the option.
Expected
Life Of Option
-
The
Company’s expected term represents the period that the Company’s stock options
are expected to be outstanding and was determined based on historical experience
of similar stock options with consideration to the contractual terms of the
stock options, vesting schedules and expectations of future employee
behavior.
EMPLOYEE
STOCK PURCHASE PLAN
Stock-based
compensation expense related to the Company’s employee stock purchase plan is
recognized during the purchase vesting period which is generally six
months.
Employee
Stock Purchase Plan
The
Company has an Employee Stock Purchase Plan (“Purchase Plan”) under which an
aggregate of 5,775,000 shares of Common Stock have been reserved for sale
to
eligible employees as approved by the shareholders to date. The plan permits
full-time employees to purchase Common Stock through payroll deductions at
85%
of the lower of the fair market value of the Common Stock at the beginning
or at
the end of each six-month offering period. The Purchase Plan terminates on
September 8, 2008.
Valuation
Assumptions
The
fair
value of rights granted under the Employee Stock Purchase Plan is estimated
at
the date of grant using the Black-Scholes option-pricing model. The following
weighted-average assumptions were used at June 30, 2006 and July 1,
2005:
|
|
Three
Months Ended
|
|
Six
Months Ended
|
|
|
|
June
30, 2006
|
|
July
1, 2005
|
|
June
30, 2006
|
|
July
1, 2005
|
|
Expected
dividend yield
|
|
|
--
|
|
|
--
|
|
|
--
|
|
|
--
|
|
Expected
stock price volatility
|
|
|
34.9
|
%
|
|
35.1
|
%
|
|
34.9
|
%
|
|
35.1
|
%
|
Risk
free interest rate
|
|
|
4.4
|
%
|
|
3.4
|
%
|
|
4.4
|
%
|
|
3.4
|
%
|
Expected
life of purchase
|
|
|
0.5
|
|
|
0.5
|
|
|
0.5
|
|
|
0.5
|
|
Expected
Dividend Yield
-
The
dividend yield assumption is based on the Company’s history and expectation of
dividend payouts.
Expected
Stock Price Volatility
-
The
Company’s computation of expected volatility is based on implied volatilities
from traded options on the Company’s stock. The Company used implied volatility
because it is representative of future stock price trends during the six
month
purchase period.
Expected
Risk Free Interest Rate
-
The
risk-free interest rate is based on the U.S. Treasury yield curve in effect
at
the time of grant for the expected term of the purchase period.
Expected
Life Of Purchase
-
The
Company’s expected life of the purchase is based on the 6 month offering period
of the purchase plan.
NOTE
4.
JOINT
VENTURES:
Caterpillar
Trimble Control Technologies Joint Venture
On
April
1, 2002, Caterpillar Trimble Control Technologies LLC (“CTCT”), a joint venture
formed by Trimble and Caterpillar began operations. The joint venture is
50%
owned by Trimble and 50% owned by Caterpillar, with equal voting rights.
The
joint venture is accounted for under the equity method of accounting. Under
the
equity method, Trimble’s share of profits and losses are included in expenses
for affiliated operations, net in the non-operating income (expense), net
section of the Condensed
Consolidated Statements
of Income. CTCT develops advanced electronic guidance and control products
for
earth moving machines in the construction and mining industries.
Trimble
acts as a contract manufacturer for CTCT. Products are manufactured based
on
orders received from CTCT and are sold at cost plus a mark up to CTCT. CTCT
resells products to both Caterpillar and Trimble for sales through their
respective distribution channels. Generally, Trimble sells products to its
after
market dealer channel, and Caterpillar sells products for factory and dealer
installation. CTCT does not hold inventory in that the resale of products
to
Caterpillar and Trimble occur simultaneously when the products are purchased
from Trimble.
Beginning
in the first fiscal quarter of 2006, Trimble included the impact of certain
transactions with CTCT in revenue and cost of sales. Revenue and cost of
sales
were recorded for the manufacturing of products that are sold to CTCT and
then
sold through the Caterpillar distribution channel. Cost of sales transactions
also include the purchasing of products from CTCT at a higher price than
Trimble's original manufacturing costs for products sold through the Trimble
distribution channel. Prior to the first fiscal quarter of 2006, these
transactions were included in expenses for affiliated operations, net in
the
non-operating income (expense), net section of the Consolidated Statements
of
Income. The change in presentation resulted from the Company’s assessment of
CTCT’s advancement and ability to function as a stand-alone company. In
addition, the Company’s exclusive manufacturing agreement with CTCT ended during
fiscal 2005. As a result, during the first quarter of fiscal 2006, the Company
deemed transactions between CTCT and Trimble to be arms-length and concluded
they should be presented similarly to other vendor and customer relationships.
The impact of this change in presentation was a $5.1 million decrease and
$10.4
million decrease in gross margins for the three and six month periods ended
June
30, 2006. There was no impact on net income.
Trimble
received reimbursement of employee-related costs from CTCT for Trimble employees
dedicated to CTCT or performing work for CTCT totaling $3.5 million and $2.5
million for the three months ended June 30, 2006 and July 1, 2005, respectively,
and $6.9 million and $5.1 million for the six months ended June 30, 2006
and
July 1, 2005, respectively. The reimbursements were offset against operating
expenses.
|
|
June
30,
|
|
July
1,
|
|
Three
Months Ended
|
|
2006
|
|
2005
|
|
(In
millions)
|
|
|
|
|
|
|
|
|
|
|
|
CTCT
incremental pricing effects, net
|
|
$ |
-
|
|
$
|
3.0
|
|
Trimble's
50% share of CTCT's reported (gain) loss
|
|
|
(1.4
|
)
|
|
(0.8
|
)
|
Total
CTCT expense (income) for affiliated operations, net
|
|
$
|
(1.4
|
)
|
$
|
2.2
|
|
|
|
June
30,
|
|
July
1,
|
|
Six
Months Ended
|
|
2006
|
|
2005
|
|
(In
millions)
|
|
|
|
|
|
|
|
|
|
|
|
CTCT
incremental pricing effects, net
|
|
$ |
-
|
|
$
|
6.1
|
|
Trimble's
50% share of CTCT's reported (gain) loss
|
|
|
(3.0
|
)
|
|
(1.1
|
)
|
Total
CTCT expense (income) for affiliated operations, net
|
|
$
|
(3.0
|
)
|
$
|
5.0
|
|
The
net
outstanding balance due from CTCT was $0.2 million at June 30, 2006 and at
December 30, 2005 and is included in account receivables, net. As of June
30,
2006, dividend receivable from CTCT was $3.4 million and was included in
other
receivables.
Nikon-Trimble
Joint Venture
On
March
28, 2003, Trimble and Nikon Corporation entered into an agreement to form
a
joint venture in Japan, Nikon-Trimble Co., Ltd., as described in Trimble’s 2005
Annual Report on Form 10-K. Nikon-Trimble began operations in July,
2003
and is
equally owned by Trimble and Nikon, with equal voting rights.
Nikon-Trimble
is the distributor in Japan for Nikon and Trimble products. Trimble is the
exclusive distributor outside of Japan for Nikon branded survey products.
For
products sold from Trimble to the Nikon-Trimble, revenue is recognized by
Trimble on a sell-through basis from Nikon-Trimble to the end customer. Profits
from these inter-company sales are eliminated.
The
terms
and conditions of the sales of products from Trimble to Nikon-Trimble are
comparable with those of the standard distribution agreements which Trimble
maintains with its dealer channel and margins earned are similar to those
from
third party dealers. Similarly, the purchases of product by Trimble from
the
Nikon-Trimble are made on terms comparable with the arrangements which Nikon
maintained with its international distribution channel prior to the formation
of
the joint venture with Trimble.
Trimble
has adopted the equity method of accounting for its investment in Nikon-Trimble,
with 50% share of profit or loss from this joint venture to be reported by
Trimble in the Non-operating section of the Condensed Consolidated Statement
of
Income under the heading of “Expenses for affiliated operations, net.” For the
three months ended June 30, 2006 and July 1, 2005, Trimble reported a profit
of
$0.2 million and a loss of $0.3 million, respectively, and a profit of
approximately $0.2 million and a loss of $0.5 million for the six months
ending
June 30, 2006 and July 1, 2005, as its proportionate share of the results
of the
joint venture. In the second quarter of fiscal 2006, Trimble began
recording its proportionate share of profit or loss in the joint venture
one
month in arrears. The impact is not considered to be material. At June 30,
2006, the net receivable from Nikon-Trimble to Trimble, related to the purchase
and sale of products from and to Nikon-Trimble, is $1.7 million and was recorded
within accounts receivable, net on the Condensed Consolidated Balance
Sheet. At December 30, 2005, the net payable by Trimble to Nikon-Trimble
is $2.0 million and was recorded within accounts payable on the Condensed
Consolidated Balance Sheets. The
carrying amount of the investment in Nikon Trimble was approximately $13.2
million at June 30, 2006 and $12.9 million at December 30, 2005 and is recorded
in other long-term assets on the Condensed Consolidated Balance
Sheets.
NOTE
5.
GOODWILL AND INTANGIBLE ASSETS:
Intangible
Assets
Intangible
Assets consisted of the following:
|
|
June
30,
|
|
December
30,
|
|
As
of
|
|
2006
|
|
2005
|
|
(in
thousands)
|
|
|
|
|
|
|
|
|
|
|
|
Intangible
assets:
|
|
|
|
|
|
Intangible
assets with definite life:
|
|
|
|
|
|
Existing
technology
|
|
$
|
71,185
|
|
$
|
48,100
|
|
Trade
names, trademarks, patents, and other intellectual
properties
|
|
|
27,980
|
|
|
26,808
|
|
Total
intangible assets with definite life
|
|
|
99,165
|
|
|
74,908
|
|
Less
accumulated amortization
|
|
|
(54,801
|
)
|
|
(47,598
|
)
|
Total
net intangible assets
|
|
$
|
44,364
|
|
$
|
27,310
|
|
Goodwill
Goodwill,
by reporting segment, consisted of the following:
|
|
June
30,
|
|
December
30,
|
|
As
of
|
|
2006
|
|
2005
|
|
(in
thousands)
|
|
|
|
|
|
|
|
|
|
|
|
Engineering
and Construction
|
|
$
|
256,177
|
|
$
|
229,176
|
|
Mobile
Solutions
|
|
|
56,996
|
|
|
44,118
|
|
Advanced
Devices
|
|
|
13,409
|
|
|
12,852
|
|
|
|
|
|
|
|
|
|
Total
Goodwill
|
|
$
|
326,582
|
|
$
|
286,146
|
|
NOTE
6.
CERTAIN
BALANCE SHEET COMPONENTS:
Inventories
consisted of the following:
|
|
June
30,
|
|
December
30,
|
|
As
of
|
|
2006
|
|
2005
|
|
(in
thousands)
|
|
|
|
|
|
Raw
materials
|
|
$
|
62,930
|
|
$
|
52,199
|
|
Work-in-process
|
|
|
7,919
|
|
|
7,249
|
|
Finished
goods
|
|
|
43,075
|
|
|
48,403
|
|
|
|
$
|
113,925
|
|
$
|
107,851
|
|
Property
and equipment consisted of the following:
|
|
June
30,
|
|
December
30,
|
|
As
of
|
|
2006
|
|
2005
|
|
(in
thousands)
|
|
|
|
|
|
|
|
|
|
|
|
Machinery
and equipment
|
|
$
|
76,511
|
|
$
|
72,273
|
|
Furniture
and fixtures
|
|
|
11,463
|
|
|
10,110
|
|
Leasehold
improvements
|
|
|
10,056
|
|
|
8,695
|
|
Buildings
|
|
|
5,707
|
|
|
5,707
|
|
Land
|
|
|
1,231
|
|
|
1,231
|
|
|
|
|
104,968
|
|
|
98,016
|
|
Less
accumulated depreciation
|
|
|
(57,690
|
)
|
|
(55,352
|
)
|
|
|
$
|
47,278
|
|
$
|
42,664
|
|
NOTE
7.
THE
COMPANY AND SEGMENT INFORMATION:
Trimble
is a designer and distributor of positioning products and applications enabled
by GPS, optical, laser, and wireless communications technology. The Company
provides products for diverse applications in its targeted markets.
To
achieve distribution, marketing, production, and technology advantages, the
Company manages its operations in the following four segments:
|
·
|
Engineering
and Construction — Consists of products currently used by survey and
construction professionals in the field for positioning, data collection,
field computing, data management, and machine guidance and control.
The
applications served include surveying, road, runway, construction,
site
preparation and building construction.
|
|
·
|
Field
Solutions — Consists of products that provide solutions in a variety of
agriculture and geographic information systems (GIS) applications.
In
agriculture these include precise land leveling and machine guidance
systems. In GIS they include handheld devices and software that
enable the
collection of data on assets for a variety of governmental and
private
entities.
|
|
·
|
Mobile
Solutions — Consists of products that enable end users to monitor and
manage their mobile assets by communicating location and activity-relevant
information from the field to the office. Trimble offers a range
of
products that address a number of sectors of this market including
truck
fleets, security, and public safety
vehicles.
|
|
·
|
Advanced
Devices — The various operations that comprise this segment were
aggregated on the basis that no single operation accounted for
more than
10% of Trimble’s total revenue, operating income and assets. This segment
is comprised of the Component Technologies, Military and Advanced
Systems,
Applanix and Trimble Outdoors
businesses.
|
Trimble
evaluates each of its segment's performance and allocates resources based
on
segment operating income from operations before income taxes, and some corporate
allocations. Trimble and each of its segments employ the same accounting
policies.
In
the
first quarter of 2006, Trimble combined the operating results of the former
Components Technologies and Portfolio Technologies segments and included
the
combined operating results in the Advanced Devices segment. The change in
presentation was made in recognition of the small size of each of the businesses
relative to the total company. The presentation of prior period’s segment
operating results has been changed to conform to the Company’s current segment
presentation.
The
following table presents revenues, operating income (loss), and identifiable
assets for the four segments. Operating
income (loss) is net revenue less operating expenses, excluding general
corporate expenses, 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.
|
|
Reporting
Segments
|
|
|
|
|
|
Engineering
and
|
|
Field
|
|
Mobile
|
|
Advanced
|
|
|
|
|
|
Construction
|
|
Solutions
|
|
Solutions
|
|
Devices
|
|
Total
|
|
(In
thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three
Months Ended June 30, 2006
|
|
|
|
|
|
|
|
|
|
|
|
External
net revenues
|
|
$
|
168,041
|
|
$
|
36,320
|
|
$
|
14,851
|
|
$
|
26,114
|
|
$
|
245,326
|
|
Operating
income before corporate allocations
|
|
|
38,803
|
|
|
11,299
|
|
|
374
|
|
|
2,243
|
|
|
52,719
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three
Months Ended July 1, 2005
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
External
net revenues
|
|
$
|
141,096
|
|
$
|
32,187
|
|
$
|
6,437
|
|
$
|
24,505
|
|
$
|
204,225
|
|
Operating
income (loss) before corporate allocations
|
|
|
37,173
|
|
|
8,044
|
|
|
(1,879
|
)
|
|
4,578
|
|
|
47,916
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six
Months Ended June 30, 2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
External
net revenues
|
|
$
|
314,775
|
|
$
|
79,363
|
|
$
|
27,458
|
|
$
|
49,584
|
|
$
|
471,180
|
|
Operating
income before corporate allocations
|
|
|
65,182
|
|
|
25,207
|
|
|
597
|
|
|
4,566
|
|
|
95,552
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six
Months Ended July 1, 2005
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
External
net revenues
|
|
$
|
261,294
|
|
$
|
77,612
|
|
$
|
13,838
|
|
$
|
46,864
|
|
$
|
399,608
|
|
Operating
income (loss) before corporate allocations
|
|
|
58,663
|
|
|
23,621
|
|
|
(2,515
|
)
|
|
7,810
|
|
|
87,579
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As
of June 30, 2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts
receivable (1)
|
|
$
|
130,561
|
|
$
|
23,280
|
|
$
|
10,891
|
|
$
|
16,516
|
|
$
|
181,248
|
|
Inventories
|
|
|
83,947
|
|
|
12,377
|
|
|
2,388
|
|
|
15,213
|
|
|
113,925
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As
of December 30, 2005
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts
receivable (1)
|
|
$
|
105,980
|
|
$
|
21,823
|
|
$
|
10,789
|
|
$
|
14,033
|
|
$
|
152,625
|
|
Inventories
|
|
|
80,590
|
|
|
11,790
|
|
|
1,983
|
|
|
13,488
|
|
|
107,851
|
|
|
(1)
|
As
presented, accounts receivable represents trade receivables, gross,
which
are specified between segments.
|
The
following are reconciliations corresponding to totals in the accompanying
Condensed Consolidated Financial Statements:
|
|
Three
Months Ended
|
|
Six
Months Ended
|
|
|
|
June
30,
|
|
July
1,
|
|
June
30,
|
|
July
1,
|
|
|
|
2006
|
|
2005
|
|
2006
|
|
2005
|
|
(In
thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
income:
|
|
|
|
|
|
|
|
|
|
Total
for reportable divisions
|
|
$
|
52,719
|
|
$
|
47,916
|
|
$
|
95,552
|
|
$
|
87,579
|
|
Unallocated
corporate expenses
|
|
|
(14,050
|
)
|
|
(9,179
|
)
|
|
(23,818
|
)
|
|
(18,642
|
)
|
Operating
income
|
|
$
|
38,669
|
|
$
|
38,737
|
|
$
|
71,734
|
|
$
|
68,937
|
|
|
|
June
30,
|
|
December
30,
|
|
As
of
|
|
2006
|
|
2005
|
|
(in
thousands)
|
|
|
|
|
|
Assets:
|
|
|
|
|
|
Accounts
receivable total for reporting segments
|
|
$
|
181,248
|
|
$
|
152,625
|
|
Unallocated
(1)
|
|
|
(9,306
|
)
|
|
(7,525
|
)
|
Total
|
|
$
|
171,942
|
|
$
|
145,100
|
|
(1)
Includes trade-related accruals, allowances, and cash received in advance
that
are not allocated by segment.
The
distribution of Trimble’s gross consolidated revenue by segment is summarized in
the table below. Gross consolidated revenue includes external and internal
sales. Total external consolidated revenue is reported net of eliminations
of
internal sales between segments.
|
|
Three
Months Ended
|
|
Six
Months Ended
|
|
|
|
June
30,
|
|
July
1,
|
|
June
30,
|
|
July
1,
|
|
|
|
2006
|
|
2005
|
|
2006
|
|
2005
|
|
(In
thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Engineering
and Construction
|
|
$
|
169,102
|
|
$
|
141,868
|
|
$
|
316,560
|
|
$
|
265,156
|
|
Field
Solutions
|
|
|
36,320
|
|
|
32,186
|
|
|
79,362
|
|
|
77,613
|
|
Mobile
Solutions
|
|
|
14,851
|
|
|
6,437
|
|
|
27,458
|
|
|
13,838
|
|
Advanced
Devices
|
|
|
26,114
|
|
|
24,552
|
|
|
49,586
|
|
|
46,921
|
|
Total
Gross Consolidated Revenue
|
|
$
|
246,387
|
|
$
|
205,043
|
|
$
|
472,966
|
|
$
|
403,528
|
|
Eliminations
|
|
|
(1,061
|
)
|
|
(818
|
)
|
|
(1,786
|
)
|
|
(3,920
|
)
|
Total
External Consolidated Revenue
|
|
$
|
245,326
|
|
$
|
204,225
|
|
$
|
471,180
|
|
$
|
399,608
|
|
NOTE
8.
LONG
TERM DEBT
Credit
Facilities
On
July
28, 2005, Trimble entered into a $200 million unsecured revolving credit
agreement (“2005 Credit Facility”) with a syndicate of 10 banks with The Bank of
Nova Scotia as the administrative agent. The 2005 Credit Facility replaced
the
Company’s $175 million secured 2003 Credit Facility. The funds available under
the new 2005 Credit Facility may be used by the Company for general corporate
purposes and up to $25 million of the 2005 Credit Facility may be used for
letters of credit.
The
Company may borrow funds under the 2005 Credit Facility in U.S. Dollars or
in
certain other currencies, and will bear interest, at the Company's option,
at
either: (i) a base rate, based on the administrative agent's prime rate,
plus a
margin of between 0% and 0.125%, depending on the Company's leverage ratio
as of
its most recently ended fiscal quarter, or (ii) a reserve-adjusted rate based
on
LIBOR, EURIBOR, STIBOR or other agreed-upon rate, depending on the currency
borrowed, plus a margin of between 0.625% and 1.125%, depending on the Company's
leverage ratio as of the most recently ended fiscal quarter. The Company's
obligations under the 2005 Credit Facility are guaranteed by certain of the
Company's domestic subsidiaries.
The
2005
Credit Facility contains customary affirmative, negative and financial covenants
including, among other requirements, negative covenants that restrict the
Company's ability to dispose of assets, create liens, incur indebtedness,
repurchase stock, pay dividends, make acquisitions, make investments, enter
into
mergers and consolidations and make capital expenditures, and financial
covenants that require the maintenance of leverage and fixed charge coverage
ratios. The 2005 Credit Facility contains events of default that include,
among
others, non-payment of principal, interest or fees, breach of covenants,
inaccuracy of representations and warranties, cross defaults to certain other
indebtedness, bankruptcy and insolvency events, material judgments, and events
constituting a change of control. Upon the occurrence and during the continuance
of an event of default, interest on the obligations will accrue at an increased
rate and the lenders may accelerate the Company's obligations under the 2005
Credit Facility, however that acceleration will be automatic in the case
of
bankruptcy and insolvency events of default. Trimble incurs a commitment
fee if
the 2005 Credit Facility is not used. The commitment fee is not material
to the
Company’s results during all periods presented.
At
June
30, 2006, the Company had a zero balance outstanding under the 2005 Credit
Facility and was in compliance with all financial covenants.
Notes
Payable
As
of
June 30, 2006, the Company had other notes payable totaling approximately
$0.9
million consisting of government loans to foreign subsidiaries and
loans
assumed from acquisitions.
NOTE
9.
PRODUCT WARRANTIES:
The
Company accrues for warranty costs as part of its cost of sales based on
associated material product costs, technical support labor costs, and costs
incurred by third parties performing work on Trimble's behalf. The products
sold
are generally covered by a warranty for periods ranging from 90 days to three
years, and in some instances up to 5.5 years.
While
the
Company engages in extensive product quality programs and processes, including
actively monitoring and evaluating the quality of component suppliers, its
warranty obligation is affected by product failure rates, material usage,
and
service delivery costs incurred in correcting a product failure. Should actual
product failure rates, material usage, or service delivery costs differ from
the
estimates, revisions to the estimated warranty accrual and related costs
may be
required.
Changes
in the Company’s product warranty liability during the three and six months
ended June 30, 2006 and July 1, 2005 are as follows:
|
|
Three
Months Ended
|
|
Six
Months Ended
|
|
|
|
June
30,
|
|
July
1,
|
|
June
30,
|
|
July
1,
|
|
|
|
2006
|
|
2005
|
|
2006
|
|
2005
|
|
(In
thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning
balance
|
|
$
|
7,445
|
|
$
|
6,844
|
|
$
|
7,466
|
|
$
|
6,425
|
|
Warranty
accrued
|
|
|
1,413
|
|
|
1,802
|
|
|
3,257
|
|
|
4,159
|
|
Warranty
claims
|
|
|
(1,383
|
)
|
|
(1,454
|
)
|
|
(3,248
|
)
|
|
(3,392
|
)
|
Ending
Balance
|
|
$
|
7,475
|
|
$
|
7,192
|
|
$
|
7,475
|
|
$
|
7,192
|
|
The
product warranty liability is classified as accrued warranty in the accompanying
condensed consolidated balance sheets.
NOTE
10.
EARNINGS PER SHARE:
The
following data was used in computing earnings per share and the effect on
the
weighted-average number of shares of potentially dilutive Common
Stock.
|
|
Three
Months Ended
|
|
Six
Months Ended
|
|
|
|
June
30,
|
|
July
1,
|
|
June
30,
|
|
July
1,
|
|
|
|
2006
|
|
2005
|
|
2006
|
|
2005
|
|
(In
thousands, except per share amounts)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Numerator:
|
|
|
|
|
|
|
|
|
|
Income
available to common shareholders:
|
|
|
|
|
|
|
|
|
|
Used
in basic and diluted earnings per share
|
|
$
|
28,503
|
|
$
|
23,787
|
|
$
|
54,331
|
|
$
|
41,226
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Denominator:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
average number of common shares used in basic earnings per
share
|
|
|
54,847
|
|
|
52,959
|
|
|
54,544
|
|
|
52,729
|
|
Effect
of dilutive securities (using treasury stock method):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
stock options
|
|
|
2,634
|
|
|
3,215
|
|
|
2,679
|
|
|
3,246
|
|
Common
stock warrants
|
|
|
647
|
|
|
883
|
|
|
538
|
|
|
805
|
|
Weighted
average number of common shares and dilutive potential common shares
used
in diluted earnings per share
|
|
|
58,128
|
|
|
57,057
|
|
|
57,761
|
|
|
56,780
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
earnings per share
|
|
$
|
0.52
|
|
$
|
0.45
|
|
$
|
1.00
|
|
$
|
0.78
|
|
Diluted
earnings per share
|
|
$
|
0.49
|
|
$
|
0.42
|
|
$
|
0.94
|
|
$
|
0.73
|
|
NOTE
11.
RESTRUCTURING CHARGES:
The
Company did not record any restructuring charge during the second quarter
of
fiscal 2006 and fiscal 2005. Payments
of $0.1 million and $0.2 million, and $0.2 million and $0.3 million, were
made
during the three and six months ended June 30, 2006 and July 1, 2005,
respectively, relating to previous restructuring plans. As
of
June 30, 2006, the remaining restructuring accrual balance is $0.2 million
which
relates to the closure of one of Trimble’s sales offices and is expected to be
paid over the next several years. The restructuring accrual is included on
the
Condensed Consolidated Balance Sheets under the heading of “Accrued
Liabilities”.
NOTE
12.
COMPREHENSIVE INCOME:
The
components of comprehensive income, net of related tax in the Condensed
Consolidated Statement of Income as follows:
|
|
Three
Months Ended
|
|
Six
Months Ended
|
|
|
|
June
30,
|
|
July
1,
|
|
June
30,
|
|
July
1,
|
|
|
|
2006
|
|
2005
|
|
2006
|
|
2005
|
|
(In
thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income
|
|
$
|
28,503
|
|
$
|
23,787
|
|
$
|
54,331
|
|
$
|
41,226
|
|
Foreign
currency translation adjustments
|
|
|
8,448
|
|
|
(13,966
|
)
|
|
9,743
|
|
|
(22,794
|
)
|
Net
gain (loss) on hedging transactions
|
|
|
-
|
|
|
(226
|
)
|
|
-
|
|
|
(108
|
)
|
Net
unrealized gain (loss) on investments
|
|
|
(4
|
)
|
|
17
|
|
|
(14
|
)
|
|
(7
|
)
|
Comprehensive
income
|
|
$
|
36,947
|
|
$
|
9,612
|
|
$
|
64,060
|
|
$
|
18,317
|
|
The
components of accumulated other comprehensive income, net of related tax
in the
Condensed Consolidated Balance Sheets as follows:
|
|
June
30,
|
|
December
30,
|
|
As
of
|
|
2006
|
|
2005
|
|
(In
thousands)
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated
foreign currency translation adjustments
|
|
$
|
29,247
|
|
$
|
19,504
|
|
Accumulated
net unrealized gain on investments
|
|
|
16
|
|
|
30
|
|
Total
accumulated other comprehensive income
|
|
$
|
29,263
|
|
$
|
19,534
|
|
NOTE
13.
LITIGATION:
From
time
to time, the Company is involved in litigation arising out of the ordinary
course of its business. There are no known claims or pending litigation expected
to have a material effect on the Company’s 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 “Risks and
Uncertainties” below and elsewhere in this report as well as in the Company's
Annual Report on Form 10-K for fiscal year 2005 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.
|
MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
|
The
discussion and analysis of our financial condition and results of operations
are
based upon our condensed consolidated financial statements, which have been
prepared in accordance with accounting principles generally accepted in the
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 10-K for fiscal 2005.
RECENT
BUSINESS DEVELOPMENTS
BitWyse
Solutions, Inc.
On
May 1,
2006, we acquired BitWyse Solutions, Inc. in an all-cash transaction. BitWyse
is
a provider of engineering & construction information management software
dedicated to providing engineering companies and owner operators a competitive
advantage. BitWyse’s performance is reported under our Engineering and
Constructions business segment.
Eleven
Technology, Inc.
On
April
28, 2006, we acquired Eleven Technology, Inc. of Cambridge, Massachusetts
in an
all-cash transaction. Eleven is a mobile application software company with
a
leading market and technology position in the Consumer Packaged Goods or,
CPG,
industry. Eleven’s performance is reported under our Mobile Solutions business
segment.
Quantm
International, Inc.
On
April
5, 2006, we acquired privately-held Quantm International, Inc. a leading
provider of transportation route optimization solutions used for planning
highways, railways, pipelines and canals. Quantm’s innovative software system
enables infrastructure planners to examine and select route corridors and
alignments that simultaneously optimize construction costs, environmental
restrictions, existing feature avoidance and legislative obligations. The
improved solution for the proposed route may result in significant reductions
to
the customer in project planning time and cost. Quantm’s performance
is
reported under our Engineering and Construction business segment.
XYZ
of GPS, Inc..
On
February 26, 2006, we acquired the assets of XYZ of Dickerson, Maryland.
XYZ
develops real-time Global
Navigation Satellite System
or,
GNSS, reference station, integrity monitoring and dynamic positioning software
for meter, decimeter and centimeter applications. The purchase of XYZ’s
intellectual property is expected to extend our product portfolio of
infrastructure solutions by providing software that enhances differential
GNSS
correction systems used in marine aides to navigation, surveying, civil
engineering, hydrography, mapping and Geographic Information System or, GIS,
and
scientific applications. XYZ’s performance
is
reported under our Engineering and Construction business segment.
Advanced
Public Safety, Inc.
On
December 30, 2005, we acquired APS of Deerfield Beach, Florida. APS provides
mobile and handheld software products used by law enforcement, fire-rescue
and
other public safety agencies. With the APS acquisition, we plan to leverage
our
rugged mobile computing devices and our fleet management systems to provide
complete mobile resource solutions for the public safety industry. APS is
reported within our Mobile Solutions business segment.
MobileTech
Solutions, Inc.
On
October 25, 2005, we acquired MobileTech Solutions, Inc. of Plano, Texas.
MobileTech Solutions provides field workforce automation solutions and has
a
leading market position in the Direct Store Delivery or, DSD, market. We
expect
the MobileTech Solutions acquisition to extend our portfolio of fleet management
and field workforce applications. MobileTech Solutions’ performance is reported
under our Mobile Solutions business segment.
Apache
Technologies, Inc.
On
April
19, 2005, we acquired Apache Technologies Inc. of Dayton, Ohio. Apache is
a leading developer of laser detection technology. With the acquisition,
we extended our laser product portfolio for handheld laser detectors and
entry-level machine displays and control systems, as well as our distribution
network in the United States. Apache’s performance is reported under our
Engineering and Construction business segment.
The
effects of these acquisitions were not material to our overall results during
all periods presented.
RESULTS
OF OPERATIONS
Overview
The
following table is a summary of revenue and operating income for the periods
indicated and should be read in conjunction with the narrative descriptions
below.
|
|
Three
Months Ended
|
|
Six
Months Ended
|
|
|
|
June
30,
|
|
July
1,
|
|
June
30,
|
|
July
1,
|
|
|
|
2006
|
|
2005
|
|
2006
|
|
2005
|
|
(in
thousands)
|
|
|
|
|
|
|
|
|
|
Total
consolidated revenue
|
|
$
|
245,326
|
|
$
|
204,225
|
|
$
|
471,180
|
|
$
|
399,608
|
|
Gross
margin
|
|
|
121,656
|
|
|
102,407
|
|
|
229,119
|
|
|
200,214
|
|
Gross
margin %
|
|
|
49.6
|
%
|
|
50.1
|
%
|
|
48.6
|
%
|
|
50.1
|
%
|
Total
consolidated operating income
|
|
|
38,669
|
|
|
38,737
|
|
|
71,734
|
|
|
68,937
|
|
Operating
income %
|
|
|
15.8
|
%
|
|
19.0
|
%
|
|
15.2
|
%
|
|
17.3
|
%
|
Revenue
In
the
three months ended June 30, 2006, total revenue increased by $41.1 million
or
20%, as compared to the same corresponding period in fiscal 2005. The increase
was primarily due to stronger performances in our Engineering and Construction
and Mobile Solutions segments. The Engineering and Construction and Mobile
Solutions segments increased $26.9 million and $8.4 million, respectively,
compared to the same corresponding period in fiscal 2005. Revenue growth
within
these segments was primarily driven by new product introductions and increased
penetration of existing markets. Both segments also benefited from acquisitions.
In
the
six months ended June 30, 2006, total revenue increased by $71.6 million
or 18%,
as compared to the same corresponding period in fiscal 2005. The increase
was
primarily due to stronger performances in our Engineering and Construction
and
Mobile Solutions segments. The Engineering and Construction and Mobile Solutions
segments increased $53.5 million and $13.6 million, respectively, compared
to
the same corresponding period in fiscal 2005. Revenue growth within these
segments was primarily driven by new product introductions and increased
penetration of existing markets, as well as the impact of acquisitions for
the
six month period ended June 30, 2006 that were not applicable in the comparable
period in 2005.
During
the second fiscal quarter of fiscal 2006, sales to customers in the United
States represented 55%, Europe represented 25%, Asia Pacific represented
11% and
other regions represented 9% of our total revenues. During the same
corresponding period in fiscal 2005, sales to customers in the United States
represented 54%, Europe represented 25%, Asia Pacific represented 11% and
other
regions represented 10% of our total revenues.
Gross
Margin
Gross
margin varies due to a number of factors including product mix, pricing,
distribution channel used, the effects of production volumes, new product
start-up costs, and foreign currency translations. Gross margin as a percentage
of total revenues was 49.6% and 48.6% for the three and six months ended
June
30, 2006, respectively, compared to 50.1% for the three and six months ended
July 1, 2005. Gross margin for the three months ended June 30, 2006 decreased
primarily due to the impact of CTCT transactions of $5.1 million previously
recorded in non-operating expenses, amortization of software-related purchased
intangibles of $1.3 million and stock-based compensation expense of $0.3
million
that were not included in gross margin during the second quarter of fiscal
2005,
for a total impact of 2.7%. Gross margin for the six months ended June 30,
2006
decreased primarily due to the impact of CTCT transactions of $10.4 million
previously recorded in non-operating expenses, amortization of software-related
purchased intangibles of $2.2 million and stock-based compensation expense
of
$0.6 million that were not included in gross margin during the same period
in
fiscal 2005, for a total impact of 2.8%. Underlying margins increased due
to
stronger sales of our new, higher margin products, and higher
revenue.
Operating
Income
Operating
income as a percentage of total revenue was 15.8% and 19.0% for the second
quarter of fiscal 2006 and 2005, respectively and 15.2% and 17.3% for the
first
six months of fiscal 2006 and 2005, respectively. The decrease in operating
income for the three months ended June 30, 2006 compared to the corresponding
period last year is driven by the impact of CTCT transactions of $5.1 million
and stock-based compensation expense of $3.3 million that were not included
in
operating income during the second quarter of fiscal 2005. In addition, expenses
related to acquisitions, namely amortization of purchased intangibles and
purchased in-process research and development expenses, increased by $2.6
million versus the same period last year. The decrease in operating income
for
the six months ended June 30, 2006 is driven by the impact of CTCT transactions
of $10.4 million and stock-based compensation expense of $6.5 million that
were
not included in operating income during the same period last year. In addition,
expenses related to acquisitions, namely amortization of purchased intangibles
and purchased in-process research and development expenses, increased by
$2.6
million versus the same period last year. The fluctuations for both three
and
six month periods ended June 30, 2006 were partially offset by an increase
in
revenue and an increase in the underlying gross margins.
Results
by Segment
To
achieve distribution, marketing, production, and technology advantages in
our
targeted markets, we manage our operations in the following four segments:
Engineering and Construction, Field Solutions, Mobile Solutions, and Advanced
Devices. Operating
income (loss) equals net revenue less cost of sales and operating expenses,
excluding general corporate expenses, amortization of purchased intangibles,
restructuring charges, non-operating income (expense), and income taxes.
In
the
first fiscal quarter of 2006, we combined the operating results of the former
Components Technologies and Portfolio Technologies segments and included
the
combined operating results in the Advanced Devices segment. The change in
presentation was made in recognition of the small size of each of the businesses
relative to the total company. The presentation of prior period’s segment
operating results has been changed to conform to our current segment
presentation.
The
following table is a breakdown of revenue and operating income by segment
(in
thousands, except percentages):
|
|
Three
Months Ended
|
|
Six
Months Ended
|
|
|
|
June
30,
|
|
July
1,
|
|
June
30,
|
|
July
1,
|
|
|
|
2006
|
|
2005
|
|
2006
|
|
2005
|
|
|
|
|
|
|
|
|
|
|
|
Engineering
and Construction
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
$
|
168,041
|
|
$
|
141,096
|
|
$
|
314,775
|
|
$
|
261,294
|
|
Segment
revenue as a percent of total revenue
|
|
|
68
|
%
|
|
69
|
%
|
|
67
|
%
|
|
65
|
%
|
Operating
income
|
|
$
|
38,803
|
|
$
|
37,173
|
|
$
|
65,182
|
|
$
|
58,663
|
|
Operating
income as a percent of segment revenue
|
|
|
23
|
%
|
|
26
|
%
|
|
21
|
%
|
|
22
|
%
|
Field
Solutions
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
$
|
36,320
|
|
$
|
32,187
|
|
$
|
79,363
|
|
$
|
77,612
|
|
Segment
revenue as a percent of total revenue
|
|
|
15
|
%
|
|
16
|
%
|
|
17
|
%
|
|
19
|
%
|
Operating
income
|
|
$
|
11,299
|
|
$
|
8,044
|
|
$
|
25,207
|
|
$
|
23,621
|
|
Operating
income as a percent of segment revenue
|
|
|
31
|
%
|
|
25
|
%
|
|
32
|
%
|
|
30
|
%
|
Mobile
Solutions
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
$
|
14,851
|
|
$
|
6,437
|
|
$
|
27,458
|
|
$
|
13,838
|
|
Revenue
as a percent of total revenue
|
|
|
6
|
%
|
|
3
|
%
|
|
6
|
%
|
|
4
|
%
|
Operating
income (loss)
|
|
$
|
374
|
|
$
|
(1,879
|
)
|
$
|
597
|
|
$
|
(2,515
|
)
|
Operating
income (loss) as a percent of segment revenue
|
|
|
3
|
%
|
|
(29
|
%)
|
|
2
|
%
|
|
(18
|
%)
|
Advanced
Devices
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
$
|
26,114
|
|
$
|
24,507
|
|
|
49,584
|
|
|
46,864
|
|
Segment
revenue as a percent of total revenue
|
|
|
11
|
%
|
|
12
|
%
|
|
11
|
%
|
|
12
|
%
|
Operating
income
|
|
$
|
2,243
|
|
$
|
4,578
|
|
$
|
4,566
|
|
$
|
7,810
|
|
Operating
income as a percent of segment revenue
|
|
|
9
|
%
|
|
19
|
%
|
|
9
|
%
|
|
17
|
%
|
A
reconciliation of our consolidated segment operating income to consolidated
income before income taxes follows:
|
|
Three
Months Ended
|
|
Six
Months Ended
|
|
|
|
June
30,
|
|
July
1,
|
|
June
30,
|
|
July
1,
|
|
|
|
2006
|
|
2005
|
|
2006
|
|
2005
|
|
(In
thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated
segment operating income
|
|
$
|
52,719
|
|
$
|
47,916
|
|
$
|
95,552
|
|
$
|
87,579
|
|
Unallocated
corporate expense
|
|
|
(9,287
|
)
|
|
(7,002
|
)
|
|
(16,716
|
)
|
|
(13,889
|
)
|
Amortization
of purchased intangible assets
|
|
|
(3,742
|
)
|
|
(2,177
|
)
|
|
(6,082
|
)
|
|
(4,475
|
)
|
In-process
research and development expense
|
|
|
(1,020
|
)
|
|
--
|
|
|
(1,020
|
)
|
|
|
|
Restructuring
charges
|
|
|
--
|
|
|
--
|
|
|
--
|
|
|
(278
|
)
|
Non-operating
income (expense), net
|
|
|
2,524
|
|
|
(2,617
|
)
|
|
5,332
|
|
|
(6,394
|
)
|
Consolidated
income before income taxes
|
|
$
|
41,194
|
|
$
|
36,120
|
|
$
|
77,066
|
|
$
|
62,543
|
|
Engineering
and Construction
Engineering
and Construction revenues increased by $26.9 million or 19% and $53.5 million
or
20% while segment operating income increased $1.6 million or 4% and $6.5
million
or 11% for the three and six months ended June 30, 2006 as compared to the
same
corresponding periods in fiscal 2005.
The
revenue growth for both the three and six months ended June 30, 2006 was
driven
by a steady market, strong sales of new products and aggressive marketing
programs. In addition, for the three months ended June 30, 2006 segment
operating income increased as a result of higher revenues and increased sales
of
higher margin products, partially offset by $4.9 million in expenses related
to
CTCT transactions and $1.1 million in stock-based compensation expense that
were
not present in the corresponding period of fiscal 2005, as well as higher
costs
incurred due to meeting the requirements of a European lead free initiative
(known as RoHS). For the six months ended June 30, 2006 segment operating
income
increased as a result of higher revenues and increased sales of higher margin
products, partially offset by $9.7 million in expenses related to CTCT
transactions and $2.1 million in stock-based compensation expense that were
not
present in the corresponding period of fiscal 2005.
Field
Solutions
Field
Solutions revenues increased by $4.1 million or 13% and $1.7 million or 2%
while
segment operating income increased $3.3 million or 40% and $1.6 million or
7%
for the three and six months ended June 30, 2006 as compared to the same
corresponding periods in fiscal 2005.
Revenues
increased for the second quarter ended June 30, 2006 compared to the
corresponding period of fiscal 2005 due to double digit growth in both our
agricultural and GIS businesses. In GIS, growth was due to new products and
a
continuing shift to a higher value, differentiated distribution channel.
In
agriculture, growth was driven by higher demand for both automated and manual
guidance products as farmers increasingly utilized technology to increase
yields
and improve productivity. Operating income increased primarily due to higher
revenue and stronger operating leverage.
Revenue
growth for the first six months of 2006 was relatively flat to fiscal 2005
due
to the strong revenue generated by new products introduced, primarily in
agriculture, in the prior year. Operating income was up, driven by the timing
of
expenses related to new product introduction.
Mobile
Solutions
Mobile
Solutions revenues increased by $8.4 million or 131% and $13.6 million or
98%
while segment operating income increased $2.3 million or 120% and $3.1 million
or 124% for the three and six months ended June 30, 2006 as compared to the
same
corresponding periods in fiscal 2005.
Revenues
for the three and six months ended June 30, 2006 compared to the corresponding
periods of fiscal 2005 grew due to increased subscriber growth, an increase
in
recurring revenues, the benefit of acquisitions not in the prior period,
and our
entry into new vertical markets. Operating income for three and six months
ended
June 30, 2006 compared to the corresponding periods of fiscal 2005 increased
primarily due to higher subscription revenue and gross margins.
Advanced
Devices
Advanced
Devices revenues increased by $1.6 million or 7% and $2.7 million or 6% while
operating income decreased by $2.3 million or 51% and $3.2 million or 42%
for
the three and six months ended June 30, 2006 as compared to the corresponding
period in fiscal 2005.
For
the
three and six months ended June 30, 2006 compared to the corresponding periods
in fiscal 2005, the increase in revenue was primarily due to stronger
performance in our Applanix airborne business and sales of components to
our
non-automotive Original Equipment Manufacturers (“OEM’s”). Operating income for
the three and six months ended June 30, 2006 compared to the same period
in
fiscal 2005 decreased primarily due to a reduction in revenue in our automotive
and timing businesses and relatively flat sales in our Military and Advanced
Systems product line. Operating income year over year also declined due to
development costs related to the introduction of the TrimTrac® GSM version,
costs incurred due to meeting the requirements of the European lead free
initiative, and product mix.
Research
and Development, Sales and Marketing, and General and Administrative Expenses
Research
and development (“R&D”), sales and marketing (“S&M”), and general and
administrative (“G&A”) expenses are summarized in the following table (in
thousands, except percentages):
|
|
Three
Months Ended
|
|
Six
Months Ended
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June
30,
|
|
July
1,
|
|
June
30,
|
|
July
1,
|
|
|
|
2006
|
|
2005
|
|
2006
|
|
2005
|
|
Research
and development
|
|
$
|
27,607
|
|
$
|
20,865
|
|
$
|
52,053
|
|
$
|
42,693
|
|
Percentage
of revenue
|
|
|
11.3
|
%
|
|
10.2
|
%
|
|
11.0
|
%
|
|
10.7
|
%
|
Sales
and marketing
|
|
|
35,747
|
|
|
28,704
|
|
|
68,453
|
|
|
59,075
|
|
Percentage
of revenue
|
|
|
14.6
|
%
|
|
14.1
|
%
|
|
14.5
|
%
|
|
14.8
|
%
|
General
and administrative
|
|
|
16,205
|
|
|
11,924
|
|
|
31,966
|
|
|
24,756
|
|
Percentage
of revenue
|
|
|
6.6
|
%
|
|
5.8
|
%
|
|
6.8
|
%
|
|
6.2
|
%
|
Total
|
|
$
|
79,559
|
|
$
|
61,493
|
|
$
|
152,472
|
|
$
|
126,524
|
|
Percentage
of revenue
|
|
|
32.4
|
%
|
|
30.1
|
%
|
|
32.4
|
%
|
|
31.7
|
%
|
Overall,
R&D, S&M, and G&A expense increased by approximately $18.1 million
and $25.9 million for the three and six months ended June 30, 2006 compared
to
the same corresponding periods in fiscal 2005. Included in the increase were
approximately $2.9 million and $5.9 million of stock-based compensation for
the
three and six months ended June 30, 2006, respectively, not included in the
prior year periods.
The
increase in R&D expenses in the second quarter of fiscal 2006 as compared
with the second quarter of fiscal 2005 was primarily due to the inclusion
of
expenses of $1.6 million from acquisitions not applicable in the prior fiscal
quarter, $1.5 million increase in compensation related expenses, $0.7 million
in
stock-based compensation expense which was not present in the second quarter
of
fiscal 2005, $0.5 million increase in consulting fees, and $3.0 million increase
in R&D outside services and parts expenses which was primarily due to
compliance with the European lead free initiative.
The
increase in R&D expenses in the first six months of fiscal 2006 as compared
with the corresponding period in fiscal 2005 was primarily due to the to
the
inclusion of expenses of $2.6 million from acquisitions not applicable in
the
prior corresponding period, $1.1 million increase in compensation related
expenses, $1.3 million in stock-based compensation expense which was not
present
in the six months ended July 1, 2005, and $3.0 million increase in R&D
outside services and parts expenses which was primarily due to compliance
with
the European lead free initiative.
All
of
our R&D costs have been expensed as incurred. Cost of software developed for
external sale subsequent to reaching technical feasibility were not considered
material and were expensed as incurred.
*
We
believe that the development and introduction of new products are critical
to
our future success and we expect to continue active development of new
products.
The
increase in S&M expenses in the second quarter of fiscal 2006 as compared
with the corresponding period of fiscal 2005 was primarily due the inclusion
of
expenses from acquisitions not applicable in the prior period in the amount
of
$2.1 million, $3.0 million increase in compensation related expenses, $0.7
million in stock-based compensation expense which was not present in the
second
quarter of fiscal 2005, and $0.6 million increase in tradeshow related expenses.
The increase in S&M expenses in the first six months of fiscal 2006 as
compared with the corresponding period of fiscal 2005 was primarily due the
inclusion of expenses from acquisitions not applicable in the prior period
in
the amount of $2.7 million, $3.4 million increase in compensation related
expenses, $1.5 million in stock-based compensation expense which was not
present
in the six months ended July 1, 2005, $1.8 million increase in tradeshow
related
expenses, and $0.7 million increase in travel expenses.
*
Our
future growth will depend in part on the timely development and continued
viability of the markets in which we currently compete as well as our ability
to
continue to identify and develop new markets for our products.
The
increase in G&A expenses in the second quarter of fiscal 2006 as compared
with the corresponding period in fiscal 2005 was primarily due the inclusion
of
expenses from acquisitions not applicable in the prior year in the amount
of
$0.4 million, $1.3 million increase in compensation related expenses, $1.6
million in stock-based compensation expense which was not present in the
second
quarter of fiscal 2005, and $0.7 increase in bad debt expense, partially
offset
by $0.3 million decrease in G&A equipment and material related expenses. The
increase in G&A expenses in the first six months of fiscal 2006 compared
with the corresponding period in fiscal 2005 was primarily due the inclusion
of
expenses from acquisitions not applicable in the prior year in the amount
of
$1.8 million, $2.2 million increase in compensation related expenses, $3.1
million in stock-based compensation expense which was not present in the
second
quarter of fiscal 2005, and $1.1 million increase in facilities expenses,
partially offset by $0.3 million decrease in G&A equipment and material
related expenses and $0.7 million decrease in consulting expenses.
Amortization
of Purchased Intangible Assets
Amortization
of purchased intangible assets was $3.7 million, of which $1.3 million was
recorded in cost of sales, in the second quarter of fiscal 2006, compared
with
$2.2 million in the second quarter of fiscal 2005. The increase was due to
several acquisitions made by the Company since the last fiscal year.
Amortization of purchased intangible assets was $6.1 million, of which $2.2
was
recorded in cost of revenue, in the first six months of fiscal 2006, compared
with $4.5 million in the first six months of fiscal 2005. The increase was
primarily due to the acquisition of certain technology and patent intangibles
as
a result of acquisitions not applicable in the comparable period of fiscal
2005,
partially offset by Spectra-related intangible assets that were fully amortized
in June 2005.
In-Process
Research and Development
We
recorded In-process research and development (IPR&D) expense of $1.0 million
related to acquisitions during the three and six month period ended June
30,
2006. We did not record any IPR&D expense during the same corresponding
periods in fiscal 2005. At the date of each acquisition, the projects associated
with the IPR&D efforts had not yet reached technological feasibility and the
research and development in process had no alternative future uses. The value
of
the IPR&D was determined using a discounted cash flow model similar to the
income approach, focusing on the income producing capabilities of the in-process
technologies. Accordingly, the value assigned to these IPR&D amounts were
charged to expense on the respective acquisition date of each of the acquired
companies.
Restructuring
Charges
We
did
not record any restructuring charges during the second quarter of fiscal
2006
and 2005. During the first quarter of fiscal 2005, we recorded a
restructuring charge of approximately $0.3 million associated with the closure
of one of our sales offices as a result of integration efforts of a previous
acquisition. There were no restructuring charges recorded during the first
quarter of 2006. Payments of $0.1 million and $0.2 million, and $0.2 million
and
$0.3 million, were made during the three and six months ended June 30, 2006
and
July 1, 2005, respectively, relating to previous restructuring plans. As
of June 30, 2006, the remaining restructuring accrual balance is $0.2 million
which is related to the office closure expected to be paid over the next
several
years. The restructuring accrual is included on the Condensed Consolidated
Balance Sheets under the heading of “Accrued Liabilities.”
Non-operating
Income (Expense), Net
The
components of non-operating income (expense), net, are as follows (in
thousands):
|
|
Three
Months Ended
|
|
Six
Months Ended
|
|
|
|
June
30,
|
|
July
1,
|
|
June
30,
|
|
July
1,
|
|
|
|
2006
|
|
2005
|
|
2006
|
|
2005
|
|
(In
thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
income (expense), net
|
|
$
|
598
|
|
$
|
(419
|
)
|
$
|
1,032
|
|
$
|
(1,030
|
)
|
Foreign
currency transaction gain, net
|
|
|
334
|
|
|
163
|
|
|
927
|
|
|
6
|
|
Income
(expenses) for affiliated operations, net
|
|
|
1,575
|
|
|
(2,499
|
)
|
|
3,191
|
|
|
(5,538
|
)
|
Other
income, net
|
|
|
18
|
|
|
138
|
|
|
182
|
|
|
168
|
|
Total
non-operating income (expense), net
|
|
$
|
2,525
|
|
$
|
(2,617
|
)
|
$
|
5,332
|
|
$
|
(6,394
|
)
|
Non-operating
income, net increased $5.1 million or 196% for second quarter of fiscal 2006
compared with the corresponding period in fiscal 2005 primarily due to a
$4.1
million increase in income from affiliated operations, resulting from a $1.1
million increase in profits from our joint ventures and the absence of $3.0
million in transfer pricing expense with CTCT that were included in the second
quarter of fiscal 2005 but now included in operating income in fiscal 2006.
In
addition, non-operating income increased due to an increase in net interest
income of $1.0 million as a result of interest expense incurred in the second
quarter of fiscal 2005 on debt subsequently repaid and higher interest income
earned on the investment of cash balances.
Non-operating
income, net increased by $11.7 million or 183% during the first six months
of
fiscal 2006 compared with the corresponding period in fiscal 2005 primarily
due
to a $8.7 million increase in income from affiliated operations, resulting
from
a $2.6 million increase in gains from our joint ventures and the absence
of $6.1
million in transfer pricing expense with CTCT that were included in the first
six months of fiscal 2005, but now included in operating income in fiscal
2006.
In addition, non-operating income increased due to an increase in net interest
income of $2.0 million as a result of interest expense incurred in the second
quarter of fiscal 2005 on debt subsequently repaid and higher interest income
earned on the investment of cash balances, as well as due to $0.9 million
increase in foreign currency transaction gains.
Income
Tax Provision
Our
income tax provision reflects an effective tax rate of 31% and 30% for the
three
and six months ended June 30, 2006, respectively. The effective tax rates
for
the comparable periods in fiscal 2005 were 34%. The 2006 year-to-date tax
rate
is lower than the 2005 tax rate due to the favorable outcomes of two foreign
income tax audits which were partially offset by the impact of the accounting
for stock based compensation in accordance with SFAS 123R.
*
We
expect the tax rate to normalize at 35% for the second half of fiscal 2006,
for
an estimated effective annual tax rate of approximately 32% for the balance
of
fiscal 2006. The effective tax rate could be affected by several factors
including stock option activity, geographic mix of our pre-tax income,
legislative changes, or changes to our existing valuation allowance or
contingent tax liabilities.
Critical
Accounting Policies
We
believe that there have been no significant changes during the six months
ended
June 30, 2006 to the items that we disclosed as our critical accounting policies
and estimates in our discussion and analysis of financial condition and results
of operations in our 2005 Form 10-K, except as noted below.
Stock-based
Compensation
We
have
adopted the Financial Accounting Standards Board (“FASB”) issued SFAS No. 123R,
“Share-Based Payment” (“SFAS 123(R)”) using the modified prospective method
which requires the adoption of the accounting standard for fiscal years
beginning June 15, 2005. As a result, our financial statements for fiscal
periods after December 30, 2005 will include stock-based compensation expenses
that are not comparable to financial statements of fiscal periods prior to
December 30, 2005. SFAS 123(R) requires stock-based compensation to be estimated
using the fair value on the date of grant using an option-pricing model.
The
value of the portion of the award that is expected to vest is recognized
as
expense over the requisite service periods of the related employees’ in the
Company’s Condensed Consolidated Statement of Income. Prior to the adoption of
SFAS 123(R), the Company accounted for stock-based compensation to employees
and
directors using the intrinsic value method in accordance with APB Opinion
No. 25
as allowed under Statement of Financial Accounting Standards No. 123,
“Accounting for Stock-Based Compensation” (“SFAS 123”). Under the intrinsic
value method, no stock-based compensation expense had been recognized in
the
Company’s Condensed Consolidated Statement of Income because the exercise price
of the Company’s stock options granted to employees and directors equaled the
fair market value of the underlying stock at the date of grant.
For
options granted prior to October 1, 2005, the fair value for these options
was
estimated at the date of grant using the Black-Scholes option-pricing model.
For
stock options granted on or after October 1, 2005, the fair value of each
award is estimated on the date of grant using a binomial valuation model.
Similar to the Black-Scholes model, the binomial model takes into account
variables such as volatility, dividend yield rate, and risk free interest
rate.
In addition, the
binomial model incorporates actual option-pricing behavior and changes in
volatility over the option’s contractual term. For these reasons, we believe
that the binomial model provides a fair value for stock options that is more
representative of actual experience and future expected experience than the
value calculated using the Black-Scholes model. The
fair
value of rights granted under the Employee Stock Purchase Plan is estimated
at
the date of grant using the Black-Scholes option-pricing model.
For
the
three and six months ended 2006, we recognized $3.0 million and $5.9 million
in
net stock-based compensation expense, respectively. This is compared to the
three and six months ended 2005 pro forma net stock-based compensation expense
of $2.7 million and $5.8, respectively. As of June 30, 2006, the total
unamortized stock option expense is $16.1 million with a weighted-average
recognition period of 1.5 years.
See
Note
3 to the Notes to the Condensed Consolidated Financial Statements for additional
information.
OFF-BALANCE
SHEET FINANCINGS AND LIABILITIES
Other
than lease commitments incurred in the normal course of business, we do not
have
any off-balance sheet financing arrangements or liabilities, guarantee
contracts, retained or contingent interests in transferred assets, or any
obligation arising out of a material variable interest in an unconsolidated
entity. We do not have any majority-owned subsidiaries that are not included
in
the condensed consolidated financial statements. Additionally, we do not
have
any interest in, or relationship with, any special purpose entities.
LIQUIDITY
AND CAPITAL RESOURCES
As
of
|
|
June
30, 2006
|
|
December
30,
2005
|
|
(dollars
in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
Cash
and cash equivalents
|
|
$
|
107,726
|
|
$
|
73,853
|
|
Accounts
receivable days sales outstanding
|
|
|
55
|
|
|
66
|
|
Inventory
turns per year
|
|
|
4
|
|
|
4
|
|
Total
debt
|
|
$
|
890
|
|
$
|
649
|
|
|
|
|
|
|
|
|
|
Six
Months Ended
|
|
|
June
30, 2006
|
|
|
July
1, 2005
|
|
(in
thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
cash provided by operating activities
|
|
$
|
59,369
|
|
$
|
36,570
|
|
Net
cash used in investing activities
|
|
$
|
(49,080
|
)
|
$
|
(27,541
|
)
|
Net
cash provided (used) in financing activities
|
|
$
|
21,155
|
|
$
|
(22,490
|
)
|
Net
increase (decrease) in cash and cash equivalents
|
|
$
|
33,873
|
|
$
|
(15,012
|
)
|
Cash
and Cash Equivalents
Our
financial condition further strengthened at June 30, 2006. Cash and cash
equivalents totaled $107.7 million compared to $73.9 million at December
30,
2005. We essentially have no debt at June 30, 2006.
*
For the
first six months of fiscal 2006, cash provided by operating activities was
$59.4
million, compared to $36.6 million in cash provided by operating activities
during the first six months of fiscal 2005. This increase of $22.8 million
was
primarily driven by a $13.1 million increase in net income and a $7.7 million
increase in deferred revenue. Our ability to continue to generate cash from
operations will depend in large part on profitability, the rate of collections
of accounts receivable, our inventory turns, and our ability to manage other
areas of working capital. Our accounts receivable days for sales outstanding
improved to 55 days at the end of the second quarter of fiscal 2006, from
66
days at the end of fiscal 2005. The decrease is due to increased collection
efforts and improvement in monitoring of outstanding receivables. Our inventory
turns were unchanged at four for the first six months of fiscal 2006 and
at
fiscal year end 2005.
We
used
$49.1 million in net cash for investing activities during the first six months
of 2006, compared to $27.6 million in the first six months of 2005. The
$21.5
million increase in spending was primarily due to an increase of $17.9 million
in cash used for acquisitions and an increase of $3.2 million in investment
in
Enterprise Resource Planning systems.
*
We
expect fiscal 2006 capital expenditures to be approximately $15 million to
$20
million, primarily for computer equipment, software, manufacturing tools
and
test equipment, and leasehold improvements associated with business
expansion. Decisions
related to how much cash is used for investing are influenced by the expected
amount of cash to be provided by operations.
We
generated $21.2 million in net cash from financing activities in the first
six
months of 2006, compared to $22.5 million in cash used during the first six
months of 2005. The $43.7 million improvement was primarily due to a $38.3
million decrease in repayment of net debt, $4.8 million in excess tax benefits
relating to stock-based compensation which was not present in the first quarter
of fiscal 2005 and a $1.7 million increase in proceeds received from issuance
of
common stock.
*
We
believe that our cash and cash equivalents, together with our credit facilities
($200 million as of June 30, 2006), will be sufficient to meet our anticipated
operating cash needs for at least the next twelve months.
Debt
At
June
30, 2006, our total debt was approximately $0.9 million compared to $0.6
million
at the end of fiscal 2005. This relates to government
loans to foreign subsidiaries and loans assumed from
acquisitions.
On
July
28, 2005, we entered into a $200 million unsecured revolving credit agreement
(“2005 Credit Facility”) with a syndicate of 10 banks with The Bank of Nova
Scotia as the administrative agent. The 2005 Credit Facility replaces our
$175
million secured 2003 Credit Facility. The funds available under the new 2005
Credit Facility may be used for our general corporate purposes and up to
$25
million of the 2005 Credit Facility may be used for letters of credit. We
incur
a commitment fee if the 2005 Credit Facility is not used. The commitment
fee is
not material to our results during all periods presented. As of June 30,
2006,
the Company had a zero balance outstanding under the 2005 Credit Facility
and
was in compliance with all financial covenants.
|
QUANTITATIVE
AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
|
We
are
exposed to market risk related to changes in interest rates and foreign currency
exchange rates. We use certain derivative financial instruments to manage
these
risks. We do not use derivative financial instruments for speculative or
trading
purposes. All financial instruments are used in accordance with policies
approved by our board of directors.
Market
Interest Rate Risk
There
has
been no change to our market interest rate risk assessment. Refer to our
2005
Annual Report on Form 10-K.
Foreign
Currency Exchange Rate Risk
We
enter
into foreign exchange forward contracts to minimize the short-term impact
of
foreign currency fluctuations on certain trade and inter-company receivables
and
payables, primarily denominated in Australian, Canadian, Japanese, New Zealand,
and Swedish currencies, the Euro, and the British pound. These contracts
reduce
the exposure to fluctuations in exchange rate movements as the gains and
losses
associated with foreign currency balances are generally offset with the gains
and losses on the forward contracts. These instruments are marked to market
through earnings every period and generally range from one to three months
in
original maturity. We do not enter into foreign exchange forward contract
for
trading purposes.
Foreign
exchange forward contracts outstanding as of June 30, 2006 are summarized
as
follows (in thousands):
|
|
|
June
30, 2006
|
|
|
|
|
Nominal
Amount
|
|
Fair
Value
|
|
|
Forward
contracts:
|
|
|
|
|
|
|
Purchased
|
|
$
|
(14,583
|
)
|
$
|
0
|
|
|
Sold
|
|
$
|
29,612
|
|
$
|
(169
|
)
|
*
We do
not anticipate any material adverse effect on our consolidated financial
position utilizing our current hedging strategy.
(a)
Disclosure Controls and Procedures.
The
Company's management, with the participation of the Company's Chief Executive
Officer and Chief Financial Officer, has evaluated the effectiveness of the
Company's disclosure controls and procedures (as such term is defined in
Rules
13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended
(the "Exchange Act")) as of the end of the period covered by this report.
Based
on such evaluation, the Company's Chief Executive Officer and Chief Financial
Officer have concluded that, as of the end of such period, the Company's
disclosure controls and procedures are effective in recording, processing,
summarizing and reporting, on a timely basis, information required to be
disclosed by the Company in the reports that it files or submits under the
Exchange Act.
(b)
Internal Control Over Financial Reporting.
There
have not been any changes in the Company's internal control over financial
reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under
the
Exchange Act) during the fiscal quarter to which this report relates that
have
materially affected, or are reasonably likely to materially affect, the
Company’s internal control over financial reporting.
PART
II. OTHER
INFORMATION
From
time
to time, the Company is involved in litigation arising out of the ordinary
course of its business. There are no known claims or pending litigation expected
to have a material effect on the Company’s overall financial position, results
of operations, or liquidity.
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 reserves and allowances. Any significant change
in
our customers’ purchasing patterns could have a material adverse effect on our
operating results and reported earnings per share for a particular quarter.
Our
Operating Results in Each Quarter May Be Affected by Special Conditions,
Such As
Seasonality, Late Quarter Purchases, Weather, and Other Potential
Issues.
Due
in
part to the buying patterns of our customers, a significant portion of our
quarterly revenues occurs from orders received and immediately shipped to
customers in the last few weeks and days of each quarter, although our operating
expenses tend to remain fairly predictable. Engineering and construction
purchases tend to occur in early spring, and governmental agencies tend to
utilize funds available at the end of the government’s fiscal year for
additional purchases at the end of our third fiscal quarter in September
of each
year. Concentrations of orders sometimes also occur at the end of our other
two
fiscal quarters. Additionally, a majority of our sales force earns commissions
on a quarterly basis which may cause concentrations of orders at the end
of any
fiscal quarter. If for any reason expected sales are deferred, orders are
not
received, or shipments are delayed a few days at the end of a quarter, our
operating results and reported earnings per share for that quarter could
be
significantly impacted.
We
Are Dependent on a Specific Manufacturer and Assembler for Many of Our Products
and on Specific Suppliers of Critical Parts for Our Products.
We
are
substantially dependent upon Solectron Corporation in California, China and
Mexico as our preferred manufacturing partner for many of our GPS products
previously manufactured out of our Sunnyvale facilities. Under the agreement
with Solectron, we provide to Solectron a twelve-month product forecast and
place purchase orders with Solectron at least thirty calendar days in advance
of
the scheduled delivery of products to our customers depending on production
lead
time. Although purchase orders placed with Solectron are cancelable, the
terms
of the agreement would require us to purchase from Solectron all inventory
not
returnable or usable by other Solectron customers. Accordingly, if we
inaccurately forecast demand for our products, we may be unable to obtain
adequate manufacturing capacity from Solectron to meet customers’ delivery
requirements or we may accumulate excess inventories, if such inventories
are
not usable by other Solectron customers. Our current contract with Solectron
continues in effect until either party gives the other ninety days written
notice.
In
addition, we rely on specific suppliers for a number of our critical components.
We have experienced shortages of components in the past. Our current reliance
on
specific 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, and could
have a
material adverse effect on our business.
Our
Annual and Quarterly Performance May Fluctuate.
Our
operating results have fluctuated and can be expected to continue to fluctuate
in the future on a quarterly and annual basis as a result of a number of
factors, many of which are beyond our control. Results in any period could
be
affected by:
·
|
changes
in market demand,
|
·
|
competitive
market conditions,
|
·
|
market
acceptance of existing or new products,
|
·
|
fluctuations
in foreign currency exchange rates,
|
·
|
the
cost and availability of components,
|
·
|
our
ability to manufacture and ship products,
|
·
|
the
mix of our customer base and sales channels,
|
·
|
the
mix of products sold,
|
·
|
our
ability to expand our sales and marketing organization effectively,
|
·
|
our
ability to attract and retain key technical and managerial employees,
|
·
|
the
timing of shipments of products under contracts and
|
·
|
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, sales of Nikon-branded products generally have lower
gross
margins as compared to our GPS survey products. Absent other factors, a shift
in
sales towards Nikon-branded products would lead to a reduction in our overall
gross margins. A decline in gross margin could potentially negatively impact
our
earnings per share.
Failure
to maintain effective internal controls in compliance with Section 404 of
the
Sarbanes-Oxley Act could have an adverse effect on our business and stock
price.
Section
404 of the Sarbanes-Oxley Act requires us to include an internal control
report
of management in our Annual Report on Form 10-K. For fiscal 2004 and 2005
we
satisfied the requirements of Section 404, which requires annual management
assessments of the effectiveness of our internal controls over financial
reporting and a report by our independent auditors addressing these assessments.
A
system
of controls, however well designed and operated, cannot provide absolute
assurance that the objectives of the system will be met. In addition, the
design
of a control system is based in part upon certain assumptions about the
likelihood of future events. Because of the inherent limitations of control
systems, there is only reasonable assurance that our controls will succeed
in
achieving their stated goals under all potential future conditions.
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
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 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,
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.
Our
products may contain errors or defects, which could result in damage to our
reputation, lost revenues, diverted development resources and increased service
costs, warranty claims and litigation.
Our
devices are complex and must meet stringent requirements. We warrant that
our
products will be free of defect for various periods of time, depending on
the
product. In addition, certain of our contracts include epidemic failure clauses.
If invoked, these clauses may entitle the customer to return or obtain credits
for products and inventory, or to cancel outstanding purchase orders even
if the
products themselves are not defective.
We
must
develop our products quickly to keep pace with the rapidly changing market,
and
we have a history of frequently introducing new products. Products and services
as sophisticated as ours could contain undetected errors or defects, especially
when first introduced or when new models or versions are released. In general,
our products may not be free from errors or defects after commercial shipments
have begun, which could result in damage to our reputation, lost revenues,
diverted development resources, increased customer service and support costs
and
warranty claims and litigation which could harm our business, results of
operations and financial condition.
We
Are Dependent on the Availability of Allocated Bands within the Radio Frequency
Spectrum.
Our
GPS
technology is dependent on the use of the Standard Positioning Service (“SPS”)
provided by the US Government’s GPS. The GPS SPS operates in radio frequency
bands that are globally allocated for radio navigation satellite services.
International allocations of radio frequency are made by the International
Telecommunications Union (“ITU”), a specialized technical agency of the United
Nations. These allocations are further governed by radio regulations that
have
treaty status and which may be subject to modification every two to three
years
by the World Radio Communication Conference.
Any
ITU
reallocation of radio frequency bands, including frequency band segmentation
or
sharing of spectrum, may materially and adversely affect the utility and
reliability of our products. Many of our products use other radio frequency
bands, together with the GPS signal, to provide enhanced GPS capabilities,
such
as real-time kinematic precision. The continuing availability of these non-GPS
radio frequencies is essential to provide enhanced GPS products to our precision
survey and construction machine controls markets. Any regulatory changes
in
spectrum allocation or in allowable operating conditions may 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. 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 result in a material adverse effect on our
business and financial condition.
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 currently in orbit 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 29 satellites in place, some
have
already been in operation for 12 years. To repair damaged or malfunctioning
satellites is currently not economically feasible. If a significant number
of
satellites were to become inoperable, there could be a substantial delay
before
they are replaced with new satellites. A reduction in the number of operating
satellites may impair the current utility of the GPS system and the growth
of
current and additional market opportunities.
In
2004,
a Presidential policy affirmed a 1996 Presidential Decision Directive that
marked the first time in the evolution of GPS that access for civilian use
free
of direct user fees. In addition, Presidential policy has been complemented
by
corresponding legislation, that was signed into law. However, there can be
no
assurance that the US Government will remain committed to the operation and
maintenance of GPS satellites over a long period, or that the policies of
the US
Government for the use of GPS without charge will remain unchanged. Because
of
ever-increasing commercial applications of GPS, other US Government agencies
may
become involved in the administration or the regulation of the use of GPS
signals. Any of the foregoing factors could affect the willingness of buyers
of
our products to select GPS-based systems instead of products based on competing
technologies.
Many
of
our products also use signals from systems that augment GPS, such as the
Wide
Area Augmentation System (WAAS) and National Differential GPS System (NDGPS).
Many of these augmentation systems are operated by the federal government
and
rely on continued funding and maintenance of these systems. In addition,
some of
our products also use satellite signals from the Russian Glonass System.
Any
curtailment of the operating capability of these systems could result in
decreased user capability thereby impacting our markets.
The
European governments have begun development of an independent satellite
navigation system, known as Galileo. We have access to the preliminary signal
design, which is subject to change. Although an operational Galileo system
is
several years away, if we are unable to timely develop a commercial product,
it
may have a materially adverse effect on our business and operating results.
We
may be Materially Affected by New Regulatory Requirements.
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.
In
particular, 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.
In
addition, we face increasing complexity in our product design and procurement
operations as we adjust to new and upcoming requirements relating to the
materials composition of many of our products. The European Union (“EU”) has
adopted new directives to facilitate the recycling of electrical and electronic
equipment sold in the EU. One of these is the Restriction on the Use of Certain
Hazardous Substances in Electrical and Electronic Equipment (“RoHS”) directive.
The RoHS directive restricts the use of lead, mercury and certain other
substances in electrical and electronic products placed on the market in
the
European Union after July 1, 2006.
Similar
laws and regulations have been or may be enacted in other regions, including
in
the United States, China and Japan. Other environmental regulations may require
us to reengineer our products to utilize components which are more
environmentally compatible and such reengineering and component substitution
may
result in additional costs to us. Although we do not anticipate any material
adverse effects based on the nature of our operations and the effect of such
laws, there is no assurance that such existing laws or future laws will not
have
a material adverse effect on our business.
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.
We
Are Exposed to Fluctuations in Currency Exchange Rates.
A
significant portion of our business is conducted outside the US, and as such,
we
face exposure to movements in non-US currency exchange rates. These exposures
may change over time as business practices evolve and could have a material
adverse impact on our financial results and cash flows. Fluctuation in currency
impacts our operating results.
Currently,
we hedge only those currency exposures associated with certain assets and
liabilities denominated in non-functional currencies. The hedging activities
undertaken by us are intended to offset the impact of currency fluctuations
on
certain non-functional currency assets and liabilities. Our attempts to hedge
against these risks may not be successful resulting in an adverse impact
on our
net income.
We
Face Risks in Investing in and Integrating New Acquisitions.
We
have
recently acquired several companies and may in the future acquire other
companies. Acquisitions of companies, divisions of companies, or products
entail
numerous risks, including:
·
|
potential
inability to successfully integrate acquired operations and products
or to
realize cost savings or other anticipated benefits from integration;
|
·
|
diversion
of management’s attention;
|
·
|
loss
of key employees of acquired operations;
|
·
|
the
difficulty of assimilating geographically dispersed operations
and
personnel of the acquired companies;
|
·
|
the
potential disruption of our ongoing business;
|
·
|
unanticipated
expenses related to such integration;
|
·
|
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;
|
·
|
the
impairment of relationships with employees and customers of either
an
acquired company or our own business;
|
·
|
the
potential unknown liabilities associated with acquired business;
and
|
·
|
inability
to recover strategic investments in development stage entities.
|
As
a
result of such acquisitions, we have significant assets that include goodwill
and other purchased intangibles. The testing of these intangibles under
established accounting guidelines for impairment requires significant use
of
judgment and assumptions. Changes in business conditions could require
adjustments to the valuation of these assets. In addition, losses incurred
by a
company in which we have an investment may have a direct impact on our financial
statements or could result in our having to write-down the value of such
investment. Any such problems in integration or adjustments to the value
of the
assets acquired could harm our growth strategy and have a material adverse
effect on our business, financial condition and compliance with debt
covenants.
We
May Not Be Able to Enter Into or Maintain Important Alliances.
We
believe that in certain business opportunities our success will depend on
our
ability to form and maintain alliances with industry participants, such as
Caterpillar, Nikon, and CNH Global. Our failure to form and maintain such
alliances, or the pre-emption of such alliances by actions of other competitors
or us, will adversely affect our ability to penetrate emerging markets. No
assurances can be given that we will not experience problems from current
or
future alliances or that we will realize value from any such strategic
alliances.
We
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 US and non-US competitors and
new
market entrants, some of which may be our current customers. The competition
in
the future may, in some cases, result in price reductions, reduced margins
or
loss of market share, any of which could materially and adversely affect
our
business, operating results and financial condition. We believe that our
ability
to compete successfully in the future against existing and additional
competitors will depend largely on our ability to execute our strategy to
provide systems and products with significantly differentiated features compared
to currently available products. 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. We have recently implemented a new enterprise
resource planning software system and we may experience in our financial
and
order management processing as a result of new procedures. Problems associated
with any improvement or expansion of these systems, procedures or controls
may
adversely affect our operations and these systems, procedures or controls
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 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, some of 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. 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.
We
Are Subject to the Adverse Impact of Radio Frequency
Congestion.
We
have
certain products, such as GPS RTK systems, and surveying and mapping systems
that use integrated radio communication technology requiring access to available
radio frequencies allocated by the FCC (or the NTIA in the case of federal
government users of this equipment) for which the end user is required to
obtain
a license in order to operate their equipment. In addition, access to these
frequencies by state agencies is under management by state radio communications
coordinators. Some bands are experiencing congestion that excludes their
availability for access by state agencies in some states. To reduce congestion,
the FCC announced that it will require migration of radio technology from
wideband to narrowband operations in these bands. The rules require migration
of
users to narrowband channels by 2011. In the meantime congestion could cause
FCC
coordinators to restrict or refuse licenses. An inability to obtain access
to
these radio frequencies by end users could have an adverse effect on our
operating results.
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 second fiscal quarter of 2006, our stock price ranged
from
$48.52 to $39.36. 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.
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.
|
SUBMISSION
OF MATTERS TO A VOTE OF SECURITY
HOLDERS.
|
(a)
The
Company's annual meeting of shareholders, (the “Annual Meeting”), was held at
the Hyatt Regency Hotel, located at 5101 Great America Parkway, Santa Clara,
California 95054, on May 18, 2006.
(b)
At
the Annual Meeting, an election of directors was held, with the following
individuals being elected to the Company's Board of Directors.
|
|
|
VOTE
FOR
|
|
WITHHELD
|
|
Steven
W. Berglund
|
|
50,377,681
|
|
1,950,080
|
|
Robert
S. Cooper
|
|
48,922,399
|
|
3,405,363
|
|
John
B. Goodrich
|
|
34,743,101
|
|
17,584,661
|
|
William
Hart
|
|
50,101,745
|
|
2,226,017
|
|
Ulf
J. Johansson
|
|
51,111,748
|
|
1,216,013
|
|
Bradford
W. Parkinson
|
|
49,295,282
|
|
3,032,480
|
|
Nickolas
W. Vande Steeg
|
|
50,762,161
|
|
1,565,601
|
(c)
Other
matters voted upon at the Annual Meeting and the results of the voting with
respect to each such matter were as follows:
1.
|
To
approve an amendment to the Company’s 2002 Stock Plan to increase the
amount of shares available for grant or award thereunder.
|
|
FOR
|
|
AGAINST
|
|
ABSTAIN
|
|
BROKER
NON-VOTE
|
|
39,401,930
|
|
5,301,636
|
|
67,613
|
|
7,556,581
|
2.
|
To
approve an amendment to the Company’s 1988 Employee Stock Purchase Plan to
increase the amount of shares available for purchase thereunder.
|
|
FOR
|
|
AGAINST
|
|
ABSTAIN
|
|
BROKER
NON-VOTE
|
|
43,131,996
|
|
1,573,780
|
|
65,401
|
|
7,556,583
|
3.
|
To
ratify the appointment of Ernst & Young LLP as the independent
auditors of the Company for the current fiscal year ending
December 29,
2006.
|
|
FOR
|
|
AGAINST
|
|
ABSTAIN
|
|
|
50,703,752
|
|
1,574,800
|
|
49,208
|
|
3.1
|
|
Restated
Articles of Incorporation of the Company filed June 25, 1986.
(3)
|
3.2
|
|
Certificate
of Amendment of Articles of Incorporation of the Company filed
October 6,
1988. (3)
|
3.3
|
|
Certificate
of Amendment of Articles of Incorporation of the Company filed
July 18,
1990. (3)
|
3.4
|
|
Certificate
of Determination of Rights, Preferences and Privileges of Series
A
Preferred Participating Stock of the Company filed February 19,
1999.
(3)
|
3.5
|
|
Certificate
of Amendment of Articles of Incorporation of the Company filed
May 29,
2003. (7)
|
3.6
|
|
Certificate
of Amendment of Articles of Incorporation of the Company filed
March 4,
2004. (9)
|
3.8
|
|
Bylaws
of the Company, amended and restated through January 22, 2004.
(8)
|
4.1
|
|
Specimen
copy of certificate for shares of Common Stock of the Company.
(1)
|
4.2
|
|
Preferred
Shares Rights Agreement dated as of February 18, 1999.
(2)
|
4.3
|
|
Agreement
of Substitution and Amendment of Preferred Shares Rights Agreement
dated
September 10, 2004. (10)
|
4.4
|
|
First
Amended and Restated Stock and Warrant Purchase Agreement between
and
among the Company and the investors thereto dated January 14, 2002.
(4)
|
4.5
|
|
Form
of Warrant to Purchase Shares of Common Stock dated January 14,
2002.
(5)
|
4.6
|
|
Form
of Warrant dated April 12, 2002. (6)
|
10.1+
|
|
Trimble
Navigation 1988 Employee Stock Purchase Plan, as amended January 19, 2006.
(11)
|
10.2+
|
|
Trimble
Navigation Limited 2002 Stock Plan, as amended and restated January
19,
2006. (11)
|
31.1
|
|
Certification
of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002 dated August __, 2006. (11)
|
31.2
|
|
Certification
of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002 dated August __, 2006. (11)
|
32.1
|
|
Certification
of Chief Executive Officer pursuant to 18 U.S.C. Section 1350,
as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 dated
August __,
2006. (11)
|
32.2
|
|
Certification
of Chief Financial Officer pursuant to 18 U.S.C. Section 1350,
as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 dated
August __,
2006. (11)
|
(1)
|
|
Incorporated
by reference to exhibit number 4.1 to the registrant's Registration
Statement on Form S-1, as amended (File No. 33-35333), which became
effective July 19, 1990.
|
(2)
|
|
Incorporated
by reference to exhibit number 1 to the registrant's Registration
Statement on Form 8-A, which was filed on February 18, 1999.
|
(3)
|
|
Incorporated
by reference to identically numbered exhibits to the registrant's
Annual
Report on Form 10-K for the fiscal year ended January 1, 1999.
|
(4)
|
|
Incorporated
by reference to exhibit number 4.1 to the registrant's Current
Report on
Form 8-K filed on January 16, 2002.
|
(5)
|
|
Incorporated
by reference to exhibit number 4.2 to the registrant's Current
Report on
Form 8-K filed on January 16, 2002.
|
(6)
|
|
Incorporated
by reference to exhibit number 4.1 to the registrant’s Registration
Statement on Form S-3 filed on April 19, 2002.
|
(7)
|
|
Incorporated
by reference to exhibit number 3.5 to the registrant’s Quarterly Report on
Form 10-Q for the quarter ended July 4, 2003.
|
(8)
|
|
Incorporated
by reference to exhibit number 3.8 to the registrant’s Annual Report on
Form 10-K for the year ended January 2, 2004.
|
(9)
|
|
Incorporated
by reference to exhibit number 3.6 to the registrant’s Quarterly Report on
Form 10-Q for the quarter ended April 2, 2004.
|
(10)
|
|
Incorporated
by reference to exhibit number 4.3 to the registrant’s Annual Report on
Form 10-K for the year ended December 31, 2004.
|
(11)
|
|
Filed
herewith.
|
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:
|
|
|
|
Rajat
Bahri
|
|
|
Chief
Financial Officer
|
|
|
(Authorized
Officer and Principal
|
|
|
Financial
Officer)
|
|
DATE:
August 7, 2006
EXHIBIT
INDEX
|
|
|
3.1
|
|
Restated
Articles of Incorporation of the Company filed June 25, 1986.
(3)
|
3.2
|
|
Certificate
of Amendment of Articles of Incorporation of the Company filed
October 6,
1988. (3)
|
3.3
|
|
Certificate
of Amendment of Articles of Incorporation of the Company filed
July 18,
1990. (3)
|
3.4
|
|
Certificate
of Determination of Rights, Preferences and Privileges of Series
A
Preferred Participating Stock of the Company filed February 19,
1999.
(3)
|
3.5
|
|
Certificate
of Amendment of Articles of Incorporation of the Company filed
May 29,
2003. (7)
|
3.6
|
|
Certificate
of Amendment of Articles of Incorporation of the Company filed
March 4,
2004. (9)
|
3.8
|
|
Bylaws
of the Company, amended and restated through January 22, 2004.
(8)
|
4.1
|
|
Specimen
copy of certificate for shares of Common Stock of the Company.
(1)
|
4.2
|
|
Preferred
Shares Rights Agreement dated as of February 18, 1999.
(2)
|
4.3
|
|
Agreement
of Substitution and Amendment of Preferred Shares Rights Agreement
dated
September 10, 2004. (10)
|
4.4
|
|
First
Amended and Restated Stock and Warrant Purchase Agreement between
and
among the Company and the investors thereto dated January 14, 2002.
(4)
|
4.5
|
|
Form
of Warrant to Purchase Shares of Common Stock dated January 14,
2002.
(5)
|
4.6
|
|
Form
of Warrant dated April 12, 2002. (6)
|
10.1+
|
|
|
10.2+
|
|
|
31.1
|
|
|
31.2
|
|
|
32.1
|
|
|
32.2
|
|
|
(1)
|
|
Incorporated
by reference to exhibit number 4.1 to the registrant's Registration
Statement on Form S-1, as amended (File No. 33-35333), which became
effective July 19, 1990.
|
(2)
|
|
Incorporated
by reference to exhibit number 1 to the registrant's Registration
Statement on Form 8-A, which was filed on February 18, 1999.
|
(3)
|
|
Incorporated
by reference to identically numbered exhibits to the registrant's
Annual
Report on Form 10-K for the fiscal year ended January 1,
1999.
|
(4)
|
|
Incorporated
by reference to exhibit number 4.1 to the registrant's Current
Report on
Form 8-K filed on January 16, 2002.
|
(5)
|
|
Incorporated
by reference to exhibit number 4.2 to the registrant's Current
Report on
Form 8-K filed on January 16, 2002.
|
(6)
|
|
Incorporated
by reference to exhibit number 4.1 to the registrant’s Registration
Statement on Form S-3 filed on April 19, 2002.
|
(7)
|
|
Incorporated
by reference to exhibit number 3.5 to the registrant’s Quarterly Report on
Form 10-Q for the quarter ended July 4, 2003.
|
(8)
|
|
Incorporated
by reference to exhibit number 3.8 to the registrant’s Annual Report on
Form 10-K for the year ended January 2, 2004.
|
(9)
|
|
Incorporated
by reference to exhibit number 3.6 to the registrant’s Quarterly Report on
Form 10-Q for the quarter ended April 2, 2004.
|
(10)
|
|
Incorporated
by reference to exhibit number 4.3 to the registrant’s Annual Report on
Form 10-K for the year ended December 31, 2004.
|
(11)
|
|
Filed
herewith.
|