Trimble Navigation 10-K 12-29-2006
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
10-K
x ANNUAL
REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE
ACT OF 1934
For
the
fiscal year ended December
29, 2006
OR
¨ TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES
EXCHANGE ACT OF 1934
For
the
transition period from ___________to______________
Commission
File Number: 0-18645
TRIMBLE
NAVIGATION LIMITED
(Exact
name of Registrant as specified in its charter)
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California
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94-2802192
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(State
or other jurisdiction of incorporation or organization)
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(I.R.S.
Employer Identification No.)
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935
Stewart Drive, Sunnyvale, CA
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94085
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(Address
of principal executive offices)
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(Zip
Code)
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Registrant’s
telephone number, including area code: (408)
481-8000
Securities
registered pursuant to Section 12(b) of the Act:
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Title
of each class |
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Name
of each exchange on which stock registered
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Common
Stock
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NASDAQ
Global Select Market
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Preferred
Share Purchase Rights
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NASDAQ
Global Select Market
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Securities
registered pursuant to Section 12(g) of the Act: NONE
Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined
in
Rule 405 of the Securities Act.
Yes ¨ No x
Indicate
by check mark if the registrant is not required to file reports pursuant to
Section 13 or Section 15(d) of the Exchange Act.
Yes ¨ No x
Indicate
by check mark whether the registrant (1) has filed all reports required to
be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements
for
the past 90 days.
Yes x No ¨
Indicate
by check mark if disclosure of delinquent filers pursuant to Item 405 of
Regulation S-K is not contained herein, and will not be contained, to the best
of registrant’s knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this
Form 10-K. ¨
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, or a non-accelerated filer.
Large
Accelerated Filer
|
x
|
Accelerated
Filer
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¨
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Non-accelerated
Filer
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¨
|
Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act).
Yes ¨ No x
As
of
June 30, 2006, the aggregate market value of the Common
Stock held by non-affiliates of the registrant
was
approximately
$2.5 billion based on the closing price as reported on the NASDAQ Global Select
Market.
Indicate
the number of share outstanding of each of the issuer’s classes of common stock,
as of the latest practicable date.
Class
|
|
Outstanding
at February 21, 2007
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Common
stock, no par value
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59,099,854
shares
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DOCUMENTS
INCORPORATED BY REFERENCE
Certain
parts of Trimble Navigation Limited's Proxy Statement relating to the annual
meeting of stockholders to be held on May 17, 2007 (the "Proxy Statement")
are
incorporated by reference into Part III of this Annual Report on Form
10-K.
SPECIAL
NOTE ON FORWARD-LOOKING STATEMENTS
This
Annual Report on Form 10-K contains forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933 and Section 21E
of the Securities Exchange Act of 1934, which are subject to the "safe harbor"
created by those sections. The forward-looking statements regarding
future events and the future results of Trimble Navigation Limited (“Trimble” or
“The Company” or “We” or “Our” or “Us”) are based on current expectations,
estimates, forecasts, and projections about the industries in which Trimble
operates and the beliefs and assumptions of the management of
Trimble.
Discussions containing such forward-looking statements may be found in
"Management's Discussion and Analysis of Financial Condition and Results of
Operations." 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 involve
certain risks and uncertainties that could cause actual results, levels of
activity, performance, achievements and events to differ materially from those
implied by such forward-looking statements,
but are
not limited to those discussed in this Report under the section entitled “Other
Risk Factors” and elsewhere, and in other reports Trimble files with the
Securities and Exchange Commission (“SEC”), specifically the most recent reports
on Form 8-K and Form 10-Q, each as it may be amended from time to
time.
These
forward-looking statements are made as of the date of this Annual Report on
Form 10-K. We reserve the right to update these statements for any reason,
including the occurrence of material events. The risks and uncertainties under
the caption "Management's Discussion and Analysis of Financial Condition and
Results of Operations—Risks and Uncertainties" contained herein, among other
things, should be considered in evaluating our prospects and future financial
performance.
We have
attempted to identify forward-looking statements in this report by placing
an
asterisk (*) before paragraphs containing such material.
TRIMBLE
NAVIGATION LIMITED
2006
FORM 10-K ANNUAL REPORT
TABLE
OF CONTENTS
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PART
I
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Item
1
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5
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Item
1A
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16
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Item
1B
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23
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Item
2
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23
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Item
3
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23
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Item
4
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24
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PART
II
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Item
5
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24
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Item
6
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25
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Item
7
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26
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Item
7A
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40
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Item
8
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42
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Item
9
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76
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Item
9A
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76
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Item
9B
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76
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PART
III
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Item
10
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77
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Item
11
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77
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Item
12
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77
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Item
13
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77
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Item
14
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77
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PART
IV
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Item
15
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78-83
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TRADEMARKS
Trimble,
the globe and triangle logo, EZ-Guide, GeoExplorer, AgGPS, Spectra Precision,
Autopilot, Fieldport, Copernicus, Recon, TrimTrac, EZ-Steer, and Force, among
others are trademarks of Trimble Navigation Limited and its subsidiaries. All
other trademarks are the property of their respective owners.
PART
I
Trimble
Navigation Limited, a California corporation (“Trimble” or “the Company” or “we”
or “our” or “us”), provides advanced positioning product solutions, typically to
commercial and government users. The principle applications served include
surveying, agriculture, machine guidance, construction alignment, asset and
fleet management, and telecommunications infrastructure. Our products provide
benefits that can include lower operational costs, and higher productivity.
Examples of products include systems that guide agricultural and construction
equipment, surveying instruments, systems that track fleets of vehicles, and
data collection systems that enable the management of large amounts of
geo-referenced information. In addition, we also manufacture components for
in-vehicle navigation and telematics systems, and timing modules used in the
synchronization of wireless networks.
Trimble
products often combine knowledge of location or position together with a
wireless link to provide a solution for a specific application. Position is
provided through a number of technologies including the Global Positioning
System (GPS) and systems that use laser or optical technologies to establish
position. Wireless communication techniques include both public networks, such
as cellular, and private networks, such as business band radio. Our products
are
augmented by our software; this includes embedded firmware that enables the
positioning solution and applications software that allows the customer to
make
use of the positioning information.
We
design
and market our own products. Our manufacturing strategy includes a combination
of in-house assembly and third party subcontractors. Our global operations
include major development, manufacturing or logistics operations in the United
States, Sweden, Germany, New Zealand, France, Canada, the Netherlands, and
India. Products are sold through dealers, representatives, joint ventures,
and
other channels throughout the world. These channels are supported by our sales
offices located in more than 15 countries.
We
began
operations in 1978 and incorporated in California in 1981. Our common stock
has
been publicly traded on NASDAQ since 1990 under the symbol TRMB.
On
January 17, 2007, Trimble’s Board of Directors approved a 2-for-1 split of all
outstanding shares of the Company’s Common Stock, payable February 22, 2007 to
stockholders of record on February 8, 2007. All shares and per share information
presented has been adjusted to reflect the stock split on a retroactive basis
for all periods presented.
Technology
Overview
A
significant portion of our revenue is derived from applying Global Navigation
Satellite System (GNSS) technology to terrestrial applications. The GNSS
includes a network of 24 orbiting US based satellites and associated ground
control that is funded and maintained by the U. S. Government and is available
worldwide free of charge, a Russian satellite based system, and the future
European Galileo system. GNSS positioning is based on a technique that precisely
measures distances from four or more satellites. The satellites continuously
transmit precisely timed radio signals using extremely accurate atomic clocks.
A
GNSS receiver measures distances from the satellites in view by determining
the
travel time of a signal from the satellite to the receiver, and then uses those
distances to compute its position. Under normal circumstances, a stand-alone
GNSS receiver is able to calculate its position at any point on earth, in the
earth's atmosphere, or in lower earth orbit, to approximately 10 meters, 24
hours a day. Much better accuracies are possible through a technique called
“differential GNSS.” In addition to providing position, GNSS provides extremely
accurate time measurement.
GNSS
accuracy is dependent upon the locations of the receiver and the number of
GNSS
satellites that are above the horizon at any given time. Reception of GNSS
signals requires line-of-sight visibility between the satellites and the
receiver, which can be blocked by buildings, hills, and dense foliage. The
receiver must have a line of sight to at least four satellites to determine
its
latitude, longitude, attitude (angular orientation), and time. The accuracy
of
GNSS may also be limited by distortion of GNSS signals from ionospheric and
other atmospheric conditions.
Our
GNSS
products are based on proprietary receiver technology. Over time, the advances
in positioning, wireless communication, and information technologies have
enabled us to add more capability to our products and thereby deliver more
value
to our users. For example, the developments in wireless technology and
deployments of next generation wireless networks have enabled less expensive
wireless communications. These developments allow for the efficient transfer
of
position data to locations away from the positioning field device, allowing
the
data to be accessed by more users and thereby increasing productivity. This
has
allowed us to include a wireless link in many of our products and connect remote
field operations to a central location.
Our
laser
and optical products either measure distances and angles to provide a position
in three dimensional space or they provide highly accurate laser references
from
which position can be established. The key element of these products is
typically a laser, which is generally a commercially available laser diode
and a
complex mechanical assembly. These elements are augmented by software
algorithms.
Business
Strategy
Our
business strategy is developed around an analysis of several key elements:
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Attractive
markets
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We focus on underserved markets that offer potential for revenue
growth,
profitability, and market leadership.
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·
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Innovative
solutions that provide significant benefits to our customers
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We seek to apply our technology to applications in which position
data is
important and where we can create unique value by enabling enhanced
productivity in the field or field to back office. We look for
opportunities in which the rate of technological change is high and
which
have a requirement for the integration of multiple technologies into
a
solution.
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|
·
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Distribution
channels to best access our markets -
We select distribution channels that best serve the needs of individual
markets. These channels can include independent dealers, direct sales,
joint ventures, OEM sales, and distribution alliances with key partners.
We view international expansion as an important element of our strategy
and seek to develop international channels.
|
Business
Segments and Markets
We
are
organized into four reporting segments encompassing our various applications
and
product lines: Engineering and Construction, Field Solutions, Mobile Solutions
and Advanced Devices. Our segments are distinguished by the markets they serve.
Each segment consists of businesses which are responsible for product
development, marketing, sales, strategy, and financial performance.
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 conformed to the Company’s current segment
presentation.
Engineering
and Construction
Products
in the Engineering and Construction segment improve productivity and accuracy
throughout the entire construction process including the initial survey,
planning, design, site preparation, and building phases. Our products are
intended to both improve the productivity of each phase, as well as facilitate
the entire process by improving information flow from one step to the next.
The
product solutions typically include multiple technologies. The elements of
these
solutions may incorporate GPS, optical, laser, radio or cellular communications.
An
example of the customer benefits provided by our product is our GPS and robotic
optical surveying instruments which enable the surveyor to perform operations
in
the field faster, more reliably than conventional surveying instruments and
with
a smaller crew. Similarly, our construction machine guidance products allow
the
operator to achieve the desired landform while eliminating stakeout and reducing
rework. These steps in the construction process can be readily linked together
with data collection modules to minimize the time and effort required to
maintain data accuracy throughout the entire construction process.
We
sell
and distribute our products in this segment through a global network of
independent dealers that are supported by Trimble personnel. This channel is
supplemented by relationships that create additional channel breadth including
our joint ventures with Caterpillar, Nikon, and private branding arrangements
with other companies.
We
also
design and market handheld data collectors and data collection software for
field use by surveyors, contractors, and other professionals. These products
are
sold directly, through dealers, and other survey manufacturers.
Competitors
in this segment are typically companies that provide optical, laser, or GPS
positioning products. Our principal competitors are Topcon Corporation and
Leica
Geosystems. Price points in this segment range from less than $1,000 for certain
laser systems to approximately $125,000 for a high-precision, three-dimensional,
machine control system.
Representative
products sold in this segment include:
Trimble®
S6 Total Station - The
Trimble S6 Total Station is a technologically advanced optical surveying system.
Its advanced servo motors make the Trimble S6 fast, silent, and precise,
allowing surveyors to measure points and collect data in the field efficiently
and productively. The Trimble S6 offers unique new Trimble technologies that
enable cable-free operation, longer battery life, and accuracy assurance, among
many other features. Its detachable Trimble CU controller is utilized to
effectively collect, display, and manage field data.
Trimble®
VX™ Spatial Station
-
Trimble VX Spatial Station is an advanced positioning system that combines
optical, 3D scanning and video capabilities—Trimble VISION™ technology—to
measure objects in 3D to produce 2D and 3D data sets for spatial imaging
projects. The Trimble VX Spatial Station enables users to blend extremely
accurate ground-based information with airborne data to provide comprehensive
datasets for use in the geospatial information industry.
GCS
family of Grade Control Systems - Grade
control systems meet construction contractors' needs with productivity-enhancing
solutions for earthmoving, site prep and roadwork. The Trimble GCS family
provides upgrade options that deliver earthmoving contractors the flexibility
to
select a system that meets their daily needs today, and later add on to meet
their changing needs. For example, a single control system such as the GCS300
can provide for low-cost point of entry into grade control, and over time can
be
upgraded to the GCS400 dual sensor system, or to the full 3D GCS900 Grade
Control System.
Spectra
Precision® Laser portable tools - Our
Spectra Precision Laser portfolio includes a broad range of laser based tools
for the interior, drywall and ceilings, HVAC, and mechanical contractor.
Designed to replace traditional methods of measurement and leveling for a wide
range of interior construction applications, our laser tools are easy to learn
and use. Our Spectra Precision Laser product portfolio includes rotating lasers
for horizontal leveling and vertical alignment, as well as laser pointers and
a
laser based distance measuring devices. They are available through independent
and national construction supply houses both in the US and in Europe.
Proliance®
-
Proliance® allows infrastructure-intensive organizations to optimize the
Plan-Build-Operate project lifecycle for complex capital projects, construction
and real estate programs, and extensive facility portfolios. Proliance was
designed for large building owner/operators, real estate developers and
engineering-driven organizations managing $250M or more annually in new project
construction or facility renovations.
Field
Solutions
Our
Field
Solutions segment addresses the agriculture and geographic information system
(GIS) markets.
Our
agriculture products consist of manual and automated navigation guidance for
tractors and other farm equipment used in spraying, planting, cultivation,
and
harvesting applications. The benefits to the farmer include faster machine
operation, higher yields, and lower consumption of chemicals than conventional
equipment. We also provide positioning solutions for leveling agricultural
fields in irrigation applications and aligning drainage systems to better manage
water flow in fields.
In
2006,
Field Solutions entered the agricultural flow controls market with the
introduction of the AgGPS® EZ-Boom™ 2010 automated application control system.
The new system is designed to help growers cut input costs and reduce operator
fatigue by providing precise automatic control of field spraying applications.
The AgGPS
EZ-Boom 2010 system provides both application flow control and automatic boom
section control that integrates with the Trimble AgGPS
EZ-Guide® Plus and/or Field Manager™ display. The combination of the
AgGPS
EZ-Boom 2010 system and EZ-Guide Plus Field Manager display allows the user
to
consolidate guidance, flow control, and precision agriculture functions into
one
integrated package controlling up to 10 boom sections automatically with GPS
guidance.
We
use
multiple distribution channels to access the agricultural market, including
independent dealers and partners such as CNH Global. Competitors in this market
are either vertically integrated implement companies such as John Deere, or
agricultural instrumentation suppliers such as Raven, CSI Wireless and Autofarm.
Our
Mapping and GIS product line is centered on handheld data collectors that gather
information in the field to be incorporated into GIS databases. Typically this
information includes features, attributes, and positions of fixed infrastructure
and natural resource assets. An example would be that of a utility company
performing a survey of its transmission poles including the age and condition
of
each telephone pole. Our handheld unit enables this data to be collected and
automatically stored while confirming the location of the asset. The data can
then be downloaded into a GIS database. This stored data could later be used
to
navigate back to any individual asset or item for maintenance or data update.
Our mobile GIS initiative goes one step further by allowing this information
to
be communicated from the field worker to the back-office GIS database through
the combination of wireless technologies, as well as giving the field worker
the
ability to download information from the database. This capability provides
significant advantages to users including improved productivity, accuracy and
access to the information in the field.
Distribution
for GIS products is primarily through a network of independent dealers and
business partners, supported by Trimble personnel. Primary markets for our
GIS
products and solutions include both governmental and commercial users.
Government users are most often municipal governments and natural resource
agencies. Commercial users include utility companies. Competitors in this market
are typically survey instrument companies utilizing GPS technology. Two examples
are Topcon and Thales.
Approximate
product price points in this segment range from $3,000 for a GIS handheld unit
to $35,000 for a fully automated, farm equipment control system.
Representative
products sold within this segment include:
AgGPS®
EZ-Boom™ 2010
- The
AgGPS EZ-Boom 2010 automated application control system is designed to help
growers cut input costs and reduce operator fatigue by providing precise
automatic control of field spraying applications. It works with the
Trimble AgGPS EZ-Guide Plus lightbar guidance system, AgGPS EZ-Steer® assisted
steering system or the AgGPS Autopilot™ automated steering system.
AgGPS®
Autopilot™ System
- A
GPS-enabled, agricultural navigation system that connects to a tractor’s
steering system and automatically steers the tractor along a precise path to
within three centimeters or less. This enables both higher machine productivity
and more precise application of seed and chemicals, thereby reducing costs
to
the farmer.
AgGPS®
EZ-Steer® System
- A
value added assisted steering system, that when combined with the EZ-Guide
Plus
system, automatically steers agricultural vehicles along a path within 20
centimeters or less. This system installs in less than thirty minutes and is
designed to reduce gaps and overlaps in spraying, fertilizing, and other field
applications as well as reduce operator fatigue.
GeoExplorer® 2005 Series
-
Combines a GPS receiver in a rugged handheld unit running industry standard
Microsoft Windows Mobile version 5.0, making it easy to collect and maintain
data about objects in the field. The GeoExplorer series features three models
ranging in accuracy from subfoot to 1-3 meters —allowing the user to select the
system most appropriate for their data collection and maintenance needs.
Spacient®
Fieldport®
Software
-
Focuses on automating field service processes, operational efficiency and
profitability for water and wastewater utility customers. Sales and distribution
of Fieldport software solutions are direct to the customer. A Fieldport software
installation involves a degree of integration and professional
services.
Mobile
Solutions
Our
Mobile Solutions segment addresses solutions for vehicles and mobile
workers by providing both hardware and software for managing mobile work,
mobile workers and mobile assets. The software is provided in both a client
server model or web based. Our software is provided through our
hosted platform for a monthly subscription service fee; or as a perpetual
license with annual maintenance and support fees.
Our
vehicle solutions include an onboard computer consisting of a GPS receiver,
business logic, sensor interface, and a cellular modem. Our solution includes
the communication service to and from the vehicle to our data center and access
over the Internet to the application software.
Our
mobile worker solutions include a rugged PC and software. The
solutions will also include communication gateway for back office
integration.
One
element of our market strategy targets opportunities in specific vertical
markets where we believe we can provide a unique value to the end-user by
tailoring our solutions for a particular industry. Sample markets include
Ready Mix Concrete, Direct Store Delivery and Public Safety. Our ready mix
concrete solution combines a suite of sensors with our in-vehicle wireless
platform providing fleets with updated vehicle status that requires no driver
interaction - referred to as “auto-status.”
We
also
sell our vehicle solutions using a horizontal market strategy that
focuses on providing turnkey solutions to a broad range of service fleets that
span a large number of market segments. Here, we leverage our capabilities
without the same level of customization. These solutions are sold to the general
service fleets as well as transportation and distribution fleets both on a
direct basis and through dealer channels.
Our
enterprise strategy focuses on sales to large, enterprise accounts with more
than 1,000 vehicles or routes. Here, in addition to a Trimble-hosted solution,
we can also integrate our service directly into the customer’s IT
infrastructure, giving them improved control of their information. In this
market we sell directly to end-users. Sales cycles tend to be long due to field
trials followed by an extensive decision-making process.
Approximate
prices for hardware fall in the range of $400 to $4,000, while the monthly
subscription service fees range from approximately $25 to approximately $55,
depending on the customer service level.
We
have
also entered into new markets by acquisitions of Advanced Public Safety,
Inc. (APS) and Visual Statement Inc. (VS). APS provides mobile and
handheld software products used by law enforcement, fire rescue and other public
safety agencies. VS provides desktop software and enterprise solutions for
collision and crime incident analysis, reporting and workflow
management.
Representative
products sold in this segment include:
Trimble Fleet
Productivity -
Our
fleet productivity solution offerings are comprised of the TrimView and TrimWeb
mobile platforms. The TrimWeb system provides different levels of service that
run from snapshots of fleet activity to real-time fleet dispatch capability
via
access to the web based platform through a secure internet connection. The
TrimWeb system includes truck communication service and computer backbone
support of the service. TrimView is sold to fleets where system integration
into
back office applications are required for more robust information
flow.
Trimble
Consumer Packaged Goods (CPG)- This
software solution operates in the Microsoft CE/Pocket or WinMobile PC
environment and addresses the pre-sales, delivery, routes sales and full service
vending functions performed by mobile workers. Customers within the CPG
market purchase a combination of both license software and handheld PCs.
The software handles all communications from/to the mobile computer as well
as
from/to the host and any other ERP or decision support systems.
Trimble
Public Safety - We
provide a suite of solutions for the public safety sector including our Pocket
Citation System which is an electronic ticketing system enables law
enforcement officers to issue traffic citations utilizing a mobile handheld
device. This system scans the traffic offender’s driver’s license and
automatically populates the appropriate information into the citation. We also
provide a variation of this solution which enables law enforcement
officers to complete electronic traffic citations in under 30 seconds. Within
this sector we also provide desktop software which enables accident
investigators and other public safety professionals to reconstruct and simulate
vehicle accidents.
Advanced
Devices
In
the
first quarter of 2006, we began reporting a new segment called Advanced Devices
that combines our previously reported Component Technologies and Portfolio
segments. This was done in recognition of the small size of each of the
businesses comprising the new segment, relative to the total company. Advanced
Devices includes the product lines from our Component Technologies, Applanix,
Trimble Outdoors, and Military and Advanced Systems (MAS) businesses. It is
helpful to recognize that with the exception of Trimble Outdoors and Applanix
these businesses share several characteristics: they are hardware centric,
generally rely on OEM distribution, and have products that can be utilized
in a
number of different end-user markets.
Within
Component Technologies, we provide GPS-based components for applications that
require embedded position or time to markets such as the telecommunications
and
automotive industries where we supply modules, boards, custom integrated
circuits, or single application IP licenses to the customer according to the
needs of the application. Sales are made directly to original equipment
manufacturers (OEMs) and system integrators who incorporate our component into
a
sub-system or a complete system-level product. Component Technologies has
developed GPS technologies which it is making available for license. These
technologies can run on certain digital signal processors (DSP) or
microprocessors removing the need for dedicated GPS baseband signal processor
chips. Advanced Devices has an agreement with u-Nav Microelectronics to license
Trimble GPS technology for u-Nav GPS chipsets. We also have a cooperative
licensing deal with Nokia for Trimble's Global Navigation Satellite System
(GNSS) patents related to designated wireless products and services involving
location technologies, such as GPS, assisted GPS or Galileo. The licensing
agreement is exclusive to Nokia for the wireless consumer product and service
domain and includes sublicensing rights. In return, Trimble receives a
non-exclusive license to Nokia’s location-based patents for use in Trimble's
commercial products and services.
Our
Applanix business develops, manufactures, sells and supports high-value,
precision products that combine GPS with inertial sensors for accurate
measurement of the position and attitude. Sales are made directly by our sales
force to the end users or to systems integrators. Competitors include IGI in
the
airborne survey market, and iXsea and TSS in the marine survey
market.
Our
MAS
business supplies GPS receivers and embedded modules that use the military’s GPS
advanced capabilities. The modules are principally used in aircraft navigation
and timing applications. Military products are sold directly to either the
US
Government or defense contractors. Sales are also made to authorized foreign
end
users. Competitors in this market include Rockwell Collins, L3, and Raytheon.
The
Trimble Outdoors service utilizes GPS-enabled cell phones to provide information
for outdoor recreational activities. Some of the recreational activities include
hiking, biking, backpacking, boating, and water sports. Consumers purchase
the
Trimble Outdoors product through our wireless operator partners which include
Sprint-Nextel, SouthernLINC Wireless and Boost Mobile. In 2005, Trimble entered
into an agreement with Rodale Inc., owner of Backpacker Magazine, to bring
high
quality trip content to consumer GPS cell phones.
Representative
products sold by this segment include:
Copernicus™
GPS Receiver-Copernicus
is Trimble’s first product built upon the uNav Microelectonics GPS chipset. It
is a full-function GPS receiver in a surface mount package the size of a postage
stamp.
TrimTrac®
Locator
- Our
TrimTrac product is a complete end user device that combines GPS functionality
with global system for mobile communications (GSM) wireless communications.
In
2006, we added to the TrimTrac locator full quad-band GSM and general packet
radio service (GPRS) support along with several important application level
features. The device is suitable for high volume personal vehicle and commercial
asset management applications that demand a low-cost locator.
Applanix
POS/AV™
- An
integrated GPS/inertial system for airborne surveying that measures aircraft
position to an accuracy of a few centimeters and aircraft attitude (angular
orientation) to an accuracy of 30 arc seconds or better. This system is
typically interfaced to large format cameras and scanning lasers for producing
geo-referenced topographic maps of the terrain.
Applanix
DSS™
322 Digital Sensor System
- A
medium-format, digital aerial camera system with direct georeferencing
capability designed for streamlined airborne digital image acquisition. Used
for
corridor surveys, photogrammetric mapping, GIS analysis and feature
identification, and other airborne remote sensing applications requiring
high-quality digital imagery.
Force™
5 GS (GRAM-SAASM) Module
- A dual
frequency, embedded GPS module that is used in a variety of military airborne
applications.
Trimble®
Outdoors™ - Trip
planning and navigation software that works with GPS-enabled cell phones and
conventional GPS receivers. This software enables consumers to research specific
trips online as part of trip pre-planning. In addition, users are able to share
outdoor and off-road experiences online with their friends and family.
Acquisitions
and Joint Ventures
Our
growth strategy is centered on developing and marketing innovative and complete
value-added solutions to our existing customers, while also marketing them
to
new customers and geographic regions. In some cases, this has led to partnering
with or acquiring companies that bring technologies, products or distribution
capabilities that will allow us to establish a market beach head, penetrate
a
market more effectively, or develop solutions more quickly than if we had done
so solely through internal development. Since 1999, this has led us to form
two
joint ventures and acquire twenty one companies. Most of these acquisitions
have
been small both in dollar terms and in number of people added to the Trimble
employee base. No assurance can be given that our previous or future
acquisitions will be successful or will not materially adversely affect our
financial condition or operating results.
@Road,
Inc.
On
February 16, 2007, we acquired @Road, Inc. of Fremont, California. @Road, Inc.
is a global provider of solutions designed to automate the management of mobile
resources and to optimize the service delivery process for customers across
a
variety of industries. @Road will be reported within our Mobile Solutions
business segment. This acquisition was the largest in acquisition value in
the
company’s history. It significantly increases our presence in the mobile
resource management, or MRM, market which Trimble believes is a large and fast
growing market.
*
With
the addition of @Road, Trimble’s TMS segment will be better able to service
larger customers, with a broader and more robust solution set.
INPHO
GmbH
On
February 13, 2007, we acquired INPHO GmbH of Stuttgart, Germany. INPHO is a
leader in photogrammetry and digital surface modeling for aerial surveying,
mapping and remote sensing applications. INPHO will be reported within Trimble’s
Engineering and Construction segment.
Spacient
Technologies, Inc.
On
November 21, 2006, we acquired privately-held Spacient Technologies, Inc. of
Long Beach, California. Spacient is a leading provider of enterprise field
service management and mobile mapping solutions for municipalities and
utilities. Spacient’s performance is reported under our Field Solutions business
segment.
Meridian
Project Systems, Inc.
On
November 7, 2006, we acquired privately-held Meridian Project Systems, Inc.
of
Folsom, California. Meridian provides enterprise project management and
lifecycle software for optimizing the plan, build and operate lifecycle for
real
estate, construction and other physical infrastructure projects. Meridian’s
performance is reported under our Engineering and Construction business segment.
XYZ
Solutions, Inc.
On
October 27, 2006, we acquired privately-held XYZ Solutions, Inc., of Alpharetta,
Georgia. XYZ Solutions provides real-time, interactive 3D intelligence software
to manage the spatial aspects of a construction project. XYZ Solutions’
performance is reported under our Engineering and Construction business
segment.
Visual
Statement, Inc.
On
October 11, 2006, we acquired privately-held Visual Statement, Inc. of Kamloops,
British Columbia, Canada. Visual Statement provides desktop software tools
for
crime and collision incident investigation, analysis, and reconstitution as
well
as state-wide enterprise solutions for reporting and analysis used by public
safety agencies. Visual Statement’s performance is reported under our Mobile
Solutions business segment.
BitWyse
Solutions, Inc.
On
May 1,
2006, we acquired the assets of privately-held BitWyse Solutions, Inc. of Salem,
Massachusetts. BitWyse is a provider of engineering and construction information
management software. BitWyse’s performance is reported under our Engineering and
Construction business segment.
Eleven
Technology, Inc.
On
April
28, 2006, we acquired privately-held Eleven Technology, Inc. of Cambridge,
Massachusetts. Eleven is a mobile application software company with a leading
position in the Consumer Packaged Goods 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 provider
of
transportation route optimization solutions used for planning highways,
railways, pipelines and canals. Quantm’s performance is reported under our
Engineering and Construction business segment.
XYZs
of
GPS, Inc.
On
February 26, 2006, we acquired the assets of XYZs of GPS, Inc. 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. XYZs’ performance is reported
under our Engineering and Construction business segment.
Patents,
Licenses and Intellectual Property
We
hold
approximately 625 US patents and approximately 85 non-US patents, the majority
of which cover GPS technology and other applications such as optical and laser
technology.
We
prefer
to own the intellectual property used in our products, either directly or though
subsidiaries. From time to time we license technology from third parties.
There
are
approximately 190 trademarks registered to Trimble and its subsidiaries
including "Trimble," the globe and triangle logo, "AgGPS," "GeoExplorer," and
"Recon," among others that are registered in the United States and other
countries. Additional trademarks are pending registration.
Sales
and Marketing
We
tailor
the distribution channel to the needs of our products and regional markets
through a number of sales channel solutions around the world. We sell our
products worldwide primarily through dealers, distributors, and authorized
representatives, occasionally granting exclusive rights to market certain
products within specific countries. This channel is supported and supplemented
(where third party distribution is not available) by our regional sales offices
throughout the world. We also utilize distribution alliances, OEM relationships
and joint ventures with other companies as a means to serve selected markets.
During
fiscal 2006, sales to customers in the United States represented 54%, Europe
represented 25%, Asia Pacific represented 12% and other regions represented
9%
of our total revenues. During 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.
Warranty
The
warranty
periods
for our products are
generally between 90 days and
three
years. Selected
military
programs may require extended warranty periods
up to
5.5 years
and
certain Nikon products have a five-year warranty period. We support our GPS
products through a
circuit
board
replacement
program
from locations in the United Kingdom, Germany, Japan,
and the
United States. The repair and calibration of our non-GPS products are available
from company-owned or authorized facilities. We reimburse dealers and
distributors for all authorized warranty repairs they perform.
While
we
engage in extensive product quality programs and processes, including actively
monitoring and evaluating the quality of component suppliers, our 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.
Seasonality
of Business
* Our
individual segment revenues may be affected by seasonal buying patterns.
Typically the second fiscal quarter has been the strongest quarter for the
Company driven by the construction buying season.
Backlog
In
most
of our markets, the time between order placement and shipment is short. Orders
are generally placed by customers on an as-needed basis. In general, customers
may cancel or reschedule orders without penalty. For these reasons, we do not
believe that orders are an accurate measure of backlog and, therefore, we
believe that backlog is not a meaningful indicator of future revenues or
material to an understanding of our business.
Manufacturing
Manufacturing
of substantially all our GPS subsystems is subcontracted to Solectron
Corporation. During fiscal 2006 we continued to utilize Solectron's Suzhou
facilities in China for all of our Component Technologies products. During
2006
and 2004 we expanded our use of Solectron in Mexico for our Construction and
Field Solutions products and handhelds, respectively. We continue to utilize
Solectron California for our high-end GPS products and new product introduction
services. Solectron is responsible for substantially all material procurement,
assembly, and testing. We continue to manage product design through pilot
production for the subcontracted products, and we are directly involved in
qualifying suppliers and key components used in all our products. Our current
contract with Solectron continues in effect until either party gives the other
ninety days written notice.
We
manufacture laser and optics-based products at our plants in Dayton, Ohio;
Danderyd, Sweden; Jena and Kaiserslautern, Germany; and Toronto, Canada. Some
of
these products or portions of these products are also subcontracted to third
parties for assembly.
Our
design and manufacturing sites in Dayton, Ohio; Sunnyvale, California; Danderyd,
Sweden; Jena and Kaiserslautern, Germany are registered to ISO9001:2000,
covering the design, production, distribution, and servicing of all our
products.
Research
and Development
We
believe that our competitive position is maintained through the development
and
introduction of new products that incorporate improved features, better
performance, smaller size and weight, lower cost, or some combination of these
factors. We invest substantially in the development of new products. We also
make significant investment in the positioning, communication, and information
technologies that underlie our products and will likely provide competitive
advantages.
Our
research and development expenditures, net of reimbursed amounts were $103.8
million for fiscal 2006, $84.3 million for fiscal 2005, and $77.6 million for
fiscal 2004.
*
We
expect to continue investing in research and development with the goal of
maintaining or improving our competitive position, as well as the goal of
entering new markets.
Employees
As
of
December 29, 2006, we employed 2,842 employees, including 25% in sales and
marketing, 36% in manufacturing, 28% in engineering, and 11% in general and
administrative positions. Approximately 41% of employees are in locations
outside the United States.
Our
employees are not represented by unions except for those in Sweden and some
in
Germany. We also employ temporary and contract personnel that are not included
in the above headcount numbers. We have not experienced work stoppages or
similar labor actions.
Available
Information
The
Company’s annual reports on Form 10-K, quarterly reports on Form 10-Q, current
reports on Form 8-K, and all amendments to those reports are available free
of
charge on the Company’s web site through
www.trimble.com/investors.html,
as soon
as reasonably practicable after such material is electronically filed with
or
furnished to the Securities and Exchange Commission. Information
contained on our web site is not part of this annual report on Form 10-K.
In
addition, you may request a copy of these filings (excluding exhibits) at no
cost by writing or telephoning us at our principal executive offices at the
following address or telephone number:
Trimble
Navigation Limited
935
Stewart Drive, Sunnyvale, CA 94085
Attention:
Investor Relations Telephone: 408-481-8000
Executive
Officers
The
names, ages, and positions of the Company's executive officers as of February
22, 2007 are as follows:
Name
|
|
Age
|
|
Position
|
Steven
W. Berglund
|
|
55
|
|
President
and Chief Executive Officer
|
Rajat
Bahri
|
|
42
|
|
Chief
Financial Officer
|
Rick
Beyer
|
|
49
|
|
Vice
President, Mobile Solutions
|
Joseph
F. Denniston, Jr.
|
|
46
|
|
Vice
President, Operations
|
Bryn
A. Fosburgh
|
|
44
|
|
Vice
President, Engineering and Construction
|
Mark
A. Harrington
|
|
51
|
|
Vice
President, Strategy and Business Development
|
Debi
Hirshlag
|
|
41
|
|
Vice
President, Human Resources
|
John
E. Huey
|
|
57
|
|
Treasurer
|
Irwin
L. Kwatek
|
|
67
|
|
Vice
President and General Counsel
|
Michael
W. Lesyna
|
|
46
|
|
Vice
President, Business Transformation
|
Bruce
E. Peetz
|
|
55
|
|
Vice
President, Advanced Technology and Systems
|
Julie
Shepard
|
|
49
|
|
Vice
President, Finance
|
Alan
R. Townsend
|
|
58
|
|
Vice
President, Field Solutions
|
Dennis
L. Workman
|
|
62
|
|
Vice
President and Chief Technical Officer, Advanced
Devices
|
Steven
W. Berglund
- Steven
Berglund has served as president and chief executive officer of Trimble since
March 1999. Prior to joining Trimble, Mr. Berglund was president of Spectra
Precision, a group within Spectra Physics AB, and a pioneer in the development
of laser systems. He spent 14 years at Spectra Physics in a variety of senior
leadership positions. In the early 1980s, Mr. Berglund spent a number of years
at Varian Associates in Palo Alto, where he held a variety of planning and
manufacturing roles. Mr. Berglund began his career as a process engineer at
Eastman Kodak in Rochester, New York. He attended the University of Oslo and
the
University of Minnesota where he received a B.S. in chemical engineering. He
later received his M.B.A. from the University of Rochester.
Rajat
Bahri
- Rajat
Bahri joined Trimble as Chief Financial Officer in January 2005. Prior to
joining Trimble, Mr. Bahri served for more than 15 years in various capacities
within the financial organization of several subsidiaries of Kraft Foods, Inc.
and General Foods Corporation. Most recently, he served as the chief financial
officer for Kraft Canada, Inc. From June 2000 to June 2001 he served as chief
financial officer of Kraft Pizza Company. From 1997 to 2000, Mr. Bahri was
Operations Controller for Kraft Jacobs Suchard Europe. Mr. Bahri holds a
Bachelor of Commerce from the University of Delhi in 1985 and an M.B.A. from
Duke University in 1987. In 2005, he was elected on the board of Simple
Technologies, Inc., a publicly traded company.
Rick
Beyer
- Rick
Beyer joined Trimble in March 2004 as president of Trimble Mobile Solutions
(TMS) and in May 2006, Mr. Beyer was appointed a Vice President of Trimble.
Prior to joining Trimble, Mr. Beyer held senior executive positions within
the
wireless mobile solutions industry since 1987. Part of the original senior
executive team that launched Qualcomm's OmniTRAC's mobile satellite
communication solution, Mr. Beyer also held the positions of general manager
at
Rockwell Collins, on-board computing division, from 1994 to 1995; executive
vice
president of Norcom Networks from 1995 to 1999; president of Husky Technologies,
now part of Itronix, from 1999 to 2000; and CEO of TracerNet, now Trimble Mobile
Solutions, from 2002 to 2004. Mr. Beyer holds a B.A. from Olivet College and
was
Chairman of the Board at the college from 2000 to 2003. He was elected Trustee
Emeritus in 2007. Rick also served as a member of the Council of Board Chairs
for the Association of Governing Boards for Colleges and Universities from
2002
to 2005.
Joseph
F. Denniston, Jr.
-
Joseph
Denniston joined Trimble as vice president of operations in April 2001,
responsible for worldwide manufacturing, distribution and logistics. Prior
to
Trimble, Mr. Denniston worked for 3Com Corporation. During his 14-year tenure,
he served as vice president of supply chain management for the Americas and
held
several positions in test engineering, manufacturing engineering and operations.
Previously at Sentry Schlumberger for seven years, he held several positions
including production engineering, production management and test engineering
over six years. Mr. Denniston received a B.S. in electrical engineering
technology from the Missouri Institute of Technology in 1981 and an M.S. in
computer science engineering from Santa Clara University in 1990.
Bryn
A. Fosburgh - Bryn
Fosburgh joined Trimble in 1994 as a technical service manager for surveying,
mining, and construction. In 1997, Mr. Fosburgh was appointed director of
development for the Company’s land survey business unit where he oversaw the
development of field and office software that enabled the interoperability
of
Trimble survey products. From October 1999 to July 2002, he served as division
vice president of survey and infrastructure. From 2002 to 2005, Mr. Fosburgh
served as vice president and general manager of Trimble's Geomatics and
Engineering (G&E) business area, with responsibility for all the
division-level activities associated with survey, construction, and
infrastructure solutions. In January 2005, he was appointed vice president
and
general manager of the Engineering and Construction Division. Prior to Trimble,
he was a civil engineer with the Wisconsin Department of Transportation
responsible for coordinating the planning, data acquisition, and data analysis
for statewide GPS surveying projects in support of transportation improvement
projects. He has also held various engineering, research and operational
positions for the U.S. Army Corps of Engineers and Defense Mapping Agency.
Mr.
Fosburgh received a B.S. in geology from the University of Wisconsin in Green
Bay in 1985 and an M.S. in civil engineering from Purdue University in
1989.
Mark
A. Harrington - Mark
Harrington joined Trimble in January 2004 as vice president of strategy and
business development. Prior to joining Trimble, Mr. Harrington served as vice
president of finance at Finisar Corporation and chief financial officer for
Cielo Communications, Inc., a photonics components manufacturer, from February
1998 to September 2002, and Vixel Corporation, a photonics manufacturer, from
April 2003 to December 2003. His experience also includes 11 years at
Spectra-Physics where he served in a variety of roles including vice president
of finance for Spectra-Physics Lasers, Inc. and vice president of finance for
Spectra-Physics Analytical, Inc. Mr. Harrington began his career at Varian
Associates, Inc. where he held a variety of management and individual positions
in finance, operations and IT. Mr. Harrington received his B.S. in Business
Administration from the University of Nebraska-Lincoln.
Debi
Hirshlag
- Debi
Hirshlag joined Trimble in July 2005 as vice president of human resources.
Prior
to joining Trimble, Ms. Hirshlag served as vice president of human resources
at
Ariba Inc., a purchasing technology company from January 2003 to July 2004,
and
vice president of corporate services at Latitude Communications, a conferencing
software provider from January 2001 to December 2002. In addition, she has
held
human resources positions at Seagate Technology, Inc., Pepsi-Cola and Amoco
Corporation. Ms. Hirshlag received her B.S. in industrial management from
Carnegie Mellon University and an M.A. in labor and industrial relations from
the University of Illinois.
John
E. Huey - John
Huey
joined Trimble in 1993 as director corporate credit and collections, and was
promoted to assistant treasurer in 1995 and treasurer in 1996. Past experience
includes two years with ENTEX Information Services, five years with National
Refractories and Minerals Corporation (formerly Kaiser Refractories), and
thirteen years with Kaiser Aluminum and Chemical Sales, Inc. He has held
positions in credit management, market research, inventory control, sales,
and
as an assistant controller. Mr. Huey received his B.A. degree in Business
Administration in 1971 from Thiel College in Greenville, Pennsylvania and an
MBA
in 1972 from West Virginia University in Morgantown, West Virginia.
Irwin
L. Kwatek -
Irwin
Kwatek has served as vice president and general counsel of Trimble since
November 2000. Prior to joining Trimble, Mr. Kwatek was vice president and
general counsel of Tickets.com, a ticketing service provider, from May 1999
to
November 2000. Prior to Tickets.com, he was engaged in the private practice
of
law for more than six years. During his career, he has served as vice president
and general counsel to several publicly held high-tech companies including
Emulex Corporation, Western Digital Corporation and General Automation, Inc.
Mr.
Kwatek received his B.B.A. from Adelphi College in Garden City, New York and
an
M.B.A. from the University of Michigan in Ann Arbor. He received his J.D. from
Fordham University in New York City in 1968.
Michael
W. Lesyna -Michael
Lesyna joined Trimble in September 1999 as vice president of strategic
marketing. In September 2000, he was appointed vice president and general
manager of the Mobile Solutions Division. In July 2004, Lesyna was appointed
vice president of Business Transformation. In this cross-divisional role he
focuses on driving operational improvements based on the marketing, sales and
distribution channel strategies of Trimble's business segments. The scope of
his
work includes tailored business prioritization as well as lean manufacturing
and
lean overhead principles. Prior to Trimble, Mr. Lesyna spent six years at Booz
Allen & Hamilton where he most recently served as a principal in the
operations management group. Prior to Booz Allen & Hamilton, Mr. Lesyna held
a variety of engineering positions at Allied Signal Aerospace. Mr. Lesyna
received his M.B.A., as well as an M.S. and B.S. in mechanical engineering
from
Stanford University.
Bruce
E. Peetz -
Bruce
Peetz has served as vice president of Advanced Technology and Systems since
1998
and has been with Trimble for 18 years. From 1996 to 1998, Mr. Peetz served
as
general manager of the Survey Business. Prior to joining Trimble, Mr. Peetz
was
a research and development manager at Hewlett-Packard for 10 years. Mr. Peetz
received his B.S. in electrical engineering from Massachusetts Institute of
Technology in Cambridge, Massachusetts in 1973.
Julie
Shepard -
Julie
Shepard joined Trimble in December of 2006 as vice president of
finance. Ms. Shepard brings with her over 20 years of experience in a
broad range of finance roles. She is responsible for Trimble's
worldwide finance operations including financial planning, accounting, external
reporting, and compliance. Most recently, Ms. Shepard served as vice president
of finance and corporate controller at Quantum Corporation, from 2004 to 2006,
and vice president of finance at Nishan Systems, from 2000 to 2003. Ms. Shepard
began her career at Price Waterhouse and is a Certified Public Accountant.
She
received a B.S from California State University where she majored in Accounting.
Alan
R. Townsend -
Alan
Townsend has served as vice president and general manager of the Field Solutions
business area since November 2001. From 1995 to 2001, Mr. Townsend was general
manager of Mapping and GIS. Mr. Townsend joined Trimble in 1991 as the manager
of Trimble Navigation New Zealand Ltd. Prior to Trimble, Mr. Townsend held
a
variety of technical and senior management roles within the Datacom Group of
companies in New Zealand including managing director of Datacom Software
Research Ltd. from 1986 to 1991. In addition, Mr. Townsend is a director of
IT
Capital Ltd., a venture capital company based in Auckland, New Zealand. He
is
also a fellow of the New Zealand Institute of Management and a past president
of
the New Zealand Software Exporters Association. Mr. Townsend received a B.S.c
in
economics from the University of Canterbury in 1970.
Dennis
L. Workman - Dennis
Workman has served as vice president and general manager of Trimble’s Component
Technologies segment since September 1999. From 1998 to 1999, Mr. Workman was
senior director and chief technical officer of the newly formed Mobile and
Timing Technologies (MTT) business group, also serving as general manager of
Trimble's Automotive and Timing group. In 1997, he was director of engineering
for Software & Component Technologies. Mr. Workman joined Trimble in 1995 as
director of the newly created Timing vertical market. Prior to Trimble, Mr.
Workman held various senior-level technical positions at Datum Inc. During
his
nine year tenure at Datum, he held the position of CTO. Mr. Workman received
a
B.S. in mathematics and physics from St. Mary’s College in 1967 and an M.S. in
electrical engineering from the Massachusetts Institute of Technology in
1969.
RISKS
AND
UNCERTAINTIES
You
should carefully consider the following risk factors, in addition to the other
information contained in this Form 10-K and in any other documents to which
we
refer you in this Form 10-K, 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 of 2002 requires us to include an internal control
report of management in our Annual Report on Form 10-K. For fiscal 2004, 2005,
and 2006 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 Federal Communications Commission (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 GNSS technology, the GPS and other Satellite
Systems
GNSS
technology, 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 30 satellites in
place, some have already been in operation for more than 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
was
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 U.S. Government will remain committed to the operation and
maintenance of GPS satellites over a long period, or that the policies of the
U.S. Government for the use of GPS without charge will remain unchanged. Because
of ever-increasing commercial applications of GPS, other U.S. Government
agencies may become involved in the administration or the regulation of the
use
of GPS signals. Any of the foregoing factors could affect the willingness of
buyers of our products to select GPS-based systems instead of products based
on
competing technologies.
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 develop a timely 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”) adopted
new directives to manage the use of hazardous materials and 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.
China
adopted the Management Measures on Electronic Information Product Pollution
Control to manage toxic and hazardous substances in electronic information
products in 2006. Also known as “China RoHS,” the new regulations will require
labeling of products containing toxic or hazardous substances placed on the
Chinese market after March 1, 2007. Similar laws and regulations have been
or
may be enacted in other regions, including in the United States 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 U.S., and as such,
we face exposure to movements in non-U.S. currency exchange rates. These
exposures may change over time as business practices evolve and could have
a
material adverse impact on our financial results and cash flows. 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 a number of companies, including @Road, and intend to continue
to acquire other companies. Acquisitions of companies 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 from on-going business concerns;
|
·
|
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;
|
·
|
inability
to recover strategic investments in development stage entities; and
|
·
|
insufficient
revenues to offset increased expenses associated with
acquisitions.
|
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.
Our
Debt Could Adversely Affect Our Cash Flow and Prevent Us from Fulfilling Our
Obligations.
Upon
consummation of the @Road acquisition, on February 20, 2007, we borrowed $250
million under an amended credit agreement and term loan which has increased
our
outstanding indebtedness and interest expense. Our debt could have important
consequences, such as:
·
|
requiring
us to dedicate a portion of our cash flow from operations and other
capital resources to debt service, thereby reducing our ability to
fund
working capital, capital expenditures and other cash
requirements;
|
·
|
increasing
our vulnerability to adverse economic and industry
conditions;
|
·
|
limiting
our flexibility in planning for, or reacting to, changes and opportunities
in, our industry, which may place us at a competitive disadvantage;
and
|
·
|
limiting
our ability to incur additional debt on acceptable terms, if at
all.
|
Additionally,
if we were to default under our amended credit agreement and were unable to
obtain a waiver for such a default, interest on the obligations would
accrue at an increased rate and the lenders could accelerate our
obligations under the amended credit agreement, however that acceleration
will be automatic in the case of bankruptcy and insolvency events of
default. Additionally, our subsidiaries that have guaranteed the amended
credit agreement could be required to pay the full amount of our
obligations under the amended credit agreement. Any such action on
the part of the lenders against us could have a materially adverse impact on
our
business, financial condition, and results of operations.
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 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 U.S. and non-U.S. competitors
and
new market entrants, particularly from emerging markets such as China and India,
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 product
type
certification and some products require an end user to obtain licensing from
the
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 fiscal 2006, our stock price ranged from $17.51 to $26.18,
on a
post-split basis. 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;
|
·
|
acquisition
announcements;
|
·
|
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.
Item
1B.
|
Unresolved
Staff
Comments.
|
None
The
following table sets forth the significant real property that we own or lease
as
of February 23, 2007:
Location
|
|
Segment(s)
served
|
|
Size
in Sq. Feet
|
|
Commitment
|
Sunnyvale,
California
|
|
All
|
|
160,000
|
|
Leased,
expiring 2012
3
buildings
|
Huber
Heights (Dayton), Ohio
|
|
Engineering
& Construction
Field
Solutions
Distribution
|
|
150,000
57,200
35,600
|
|
Owned,
no encumbrances
Leased,
expiring in 2011
Leased,
month to month
|
Westminster,
Colorado
|
|
Engineering
& Construction, Field Solutions
|
|
76,000
|
|
Leased,
expiring 2013
|
Corvallis,
Oregon
|
|
Engineering
& Construction
|
|
20,000
38,000
|
|
Owned,
no encumbrances
Leased,
expiring 2007
|
Richmond
Hill, Canada
|
|
Advanced
Devices
|
|
50,200
|
|
Leased,
expiring 2007
|
Danderyd,
Sweden
|
|
Engineering
& Construction
|
|
93,900
|
|
Leased,
expiring 2010
|
Christchurch,
New Zealand
|
|
Engineering
& Construction, Mobile Solutions, Field Solutions
|
|
65,000
|
|
Leased,
expiring 2010
2
buildings
|
Fremont,
California (@Road)
|
|
Mobile
Solutions
|
|
102,544
|
|
Leased,
expiring 2010
2
buildings
|
Chennai,
India
(@Road)
|
|
Mobile
Solutions
|
|
37,910
|
|
Leased,
expiring 2009
|
In
addition, we lease a number of smaller offices around the world primarily for
sales and manufacturing functions. For financial information regarding
obligations under leases, see Note 10 of the Notes to the Consolidated Financial
Statements.
*
We
believe that our facilities are adequate to support current and near-term
operations.
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 our overall financial position, results of
operations, or liquidity.
Item
4. |
Submission
of Matters to a Vote of Security
Holders.
|
No
matters were submitted to a vote of security holders during the fourth quarter
of 2006.
PART
II
Item
5. |
Market
for Registrant's Common Equity, Related Stockholder
Matters and Issuer Purchases of Equity
Securities.
|
Our
common stock is traded on the NASDAQ National Market under the symbol "TRMB."
The table below sets forth, during the periods indicated, the high and low
per
share sale prices for our common stock as reported on the NASDAQ National
Market.
|
|
2006
Sales
Price
|
|
2005
Sales
Price
|
|
Quarter
Ended
|
|
High
|
|
Low
|
|
High
|
|
Low
|
|
First
quarter
|
|
$
|
22.53
|
|
$
|
17.51
|
|
$
|
19.12
|
|
$
|
15.02
|
|
Second
quarter
|
|
|
24.26
|
|
|
19.68
|
|
|
20.56
|
|
|
15.04
|
|
Third
quarter
|
|
|
25.55
|
|
|
21.29
|
|
|
22.28
|
|
|
15.58
|
|
Fourth
quarter
|
|
|
26.18
|
|
|
22.10
|
|
|
18.98
|
|
|
13.32
|
|
2-for-1
Stock Split
On
January 17, 2007, Trimble’s Board of Directors approved a 2-for-1 split of all
outstanding shares of the Company’s Common Stock, payable February 22, 2007 to
stockholders of record on February 8, 2007. All shares and per share information
presented has been adjusted to reflect the stock split on a retroactive basis
for all periods presented.
As
of
December 29, 2006, there were approximately
1,009 holders
of
record of our common stock.
Dividend
Policy
We
have
not declared or paid any cash dividends on our common stock during any period
for which financial information is provided in this Annual Report on
Form 10-K. At this time, we intend to retain future earnings, if any, to
fund the development and growth of our business and do not anticipate paying
any
cash dividends on our common stock in the foreseeable future.
Under
the
existing terms of our credit facility, we are allowed to pay dividends and
repurchase shares of our common stock in any twelve (12) month period, in an
aggregate amount equal to fifty percent (50%) of net income (plus to the extent
deducted in determining net income for such period, non-cash expenses in respect
of stock options) for the previous twelve month period. Also, we are
allowed to spend an additional $50 million to pay dividends and repurchase
shares if we are in compliance with our fixed charge coverage ratio.
The
following selected consolidated financial data should be read in conjunction
with “Management’s Discussion and Analysis of Financial Condition and Results of
Operations” and our consolidated financial statements and related notes
appearing elsewhere in this annual report. Historical results are not
necessarily indicative of future results. In particular, because the results
of
operations and financial condition related to our acquisitions are included
in
our Consolidated Statements of Income and Consolidated Balance Sheets data
commencing on those respective acquisition dates, comparisons of our results
of
operations and financial condition for periods prior to and subsequent to those
acquisitions are not indicative of future results.
As
of And For the Fiscal Years Ended
|
|
December
29,
2006
|
|
December
30,
2005
|
|
December
31,
2004
|
|
January
2,
2004
|
|
January
3,
2003
|
|
(Dollar
in thousands, except per share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
$
|
940,150
|
|
$
|
774,913
|
|
$
|
668,808
|
|
$
|
540,903
|
|
$
|
466,602
|
|
Gross
margin
|
|
$
|
461,081
|
|
$
|
389,805
|
|
$
|
324,810
|
|
$
|
268,030
|
|
$
|
234,432
|
|
Gross
margin percentage
|
|
|
49
|
%
|
|
50
|
%
|
|
49
|
%
|
|
50
|
%
|
|
50
|
%
|
Income
from continuing operations
|
|
$
|
103,658
|
|
$
|
84,855
|
|
$
|
67,680
|
|
$
|
38,485
|
|
$
|
10,324
|
|
Net
income
|
|
$
|
103,658
|
|
$
|
84,855
|
|
$
|
67,680
|
|
$
|
38,485
|
|
$
|
10,324
|
|
Per
common share (1):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income (1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
Basic
|
|
$
|
0.94
|
|
$
|
0.80
|
|
$
|
0.66
|
|
$
|
0.41
|
|
$
|
0.12
|
|
-
Diluted
|
|
$
|
0.89
|
|
$
|
0.75
|
|
$
|
0.62
|
|
$
|
0.38
|
|
$
|
0.12
|
|
Shares
used in calculating basic earnings per share (1)
|
|
|
110,044
|
|
|
106,432
|
|
|
102,326
|
|
|
95,010
|
|
|
85,720
|
|
Shares
used in calculating diluted earnings per share (1)
|
|
|
116,072
|
|
|
113,638
|
|
|
109,896
|
|
|
100,024
|
|
|
87,156
|
|
Cash
dividends per share
|
|
$
|
-
|
|
$
|
-
|
|
$
|
-
|
|
$
|
-
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
assets
|
|
$
|
978,431
|
|
$
|
743,088
|
|
$
|
653,978
|
|
$
|
552,602
|
|
$
|
447,704
|
|
Non-current
portion of long term debt and other non-current
liabilities
|
|
$
|
28,000
|
|
$
|
19,474
|
|
$
|
38,226
|
|
$
|
85,880
|
|
$
|
114,051
|
|
|
(1)
|
2-for-1
Stock Split - On January 17, 2007, Trimble’s Board of Directors approved a
2-for-1 split of all outstanding shares of the Company’s Common Stock,
payable February 22, 2007 to stockholders of record on February 8,
2007.
All shares and per share information presented has been adjusted
to
reflect the stock split on a retroactive basis for all periods presented.
|
Item
7. |
Management's
Discussion and Analysis of Financial Condition and
Results of Operations
|
The
following discussion should be read in conjunction with the consolidated
financial statements and the related notes. The following discussion contains
forward-looking statements that reflect our plans, estimates and beliefs. Our
actual results could differ materially from those discussed in the
forward-looking statements. Factors that could cause or contribute to these
differences include, but are not limited to, those discussed below and those
listed under "Risks Factors."
EXECUTIVE
LEVEL OVERVIEW
Trimble’s
focus is on combining positioning technology with wireless communication and
application capabilities to create system-level solutions that enhance
productivity and accuracy for our customers. The majority of our markets are
end-user markets, including engineering and construction firms, governmental
organizations, public safety workers, farmers and companies who must manage
fleets of mobile workers and assets. In our Advanced Devices segment, we also
provide components to original equipment manufacturers to incorporate into
their
products. In the end user markets, we provide a system that includes a hardware
platform that may contain software and customer support. Some examples of our
solutions include products that automate and simplify the process of surveying
land, products that automate the utilization of equipment such as tractors
and
bulldozers, products that enable a company to manage its mobile workforce and
assets, and products that allow municipalities to manage their fixed assets.
Solutions
targeted at the end-user make up a significant majority of our revenue. To
create compelling products, we must attain an understanding of the end users’
needs and work flow, and how location-based technology can enable that end
user
to work faster, more efficiently and more accurately. We use this knowledge
to
create highly innovative products that change the way work is done by the
end-user. With the exception of our TMS segment, our products are generally
sold
through a dealer channel, and it is crucial that we maintain a proficient
global, third-party distribution channel.
During
2006 we continued to execute our strategy with a series of actions that can
be
summarized in four categories.
Reinforcing
our position in existing markets
Generally,
we believe that our markets provide us with additional, substantial potential
for substituting our technology for traditional methods. In 2006 we continued
to
develop new products and to strengthen our distribution channels to realize
these opportunities. A number of new products such as Trimble S6, Trimble SPS700
Robotic Construction Total Station and the enhanced Trimble GCS900 Grade Control
System strengthened our competitive position and created new value for the
user.
Extend
our position in existing markets through new product
categories
We
are
utilizing the strength of the Trimble brand in our markets to expand our
revenues by bringing new products to existing users. A 2006 example was the
introduction of the AgGPS EZ-Boom 2010 product. In order to create new
categories of products on the construction site we acquired Quantm, Meridian,
XYZ Solutions, and Bitwyse.
Bring
existing technology to new markets
*
We
continue to reinforce our position in existing markets and positioned ourselves
in newer markets that will serve as important sources of future growth. Our
efforts in China, India, Russia, Korea and Eastern Europe all reflected
improving financial results, with the promise of more in the future.
Entered
completely new markets
In
fiscal
2006 we acquired Visual Statement, which provides desktop software tools for
crime and collision incident investigation, analysis, and reconstitution as
well
as state-wide enterprise solutions for reporting and analysis used by public
safety agencies, and Eleven Technology, Inc., which is a mobile application
software company with a leading position in the Consumer Packaged Goods
industry. In addition, we increased our reach with existing products in new
markets, particularly emerging markets such as China and India.
CRITICAL
ACCOUNTING POLICIES AND ESTIMATES
Our
accounting policies are more fully described in Note 2 of the Notes to the
Consolidated Financial Statements. The preparation of financial statements
and
related disclosures in conformity with accounting principles generally accepted
in the United States requires us to make judgments, assumptions, and estimates
that affect the amounts reported in the Consolidated Financial Statements and
accompanying Notes to the Consolidated Financial Statements. We consider the
accounting polices described below to be our critical accounting polices. These
critical accounting policies are impacted significantly by judgments,
assumptions, and estimates used in the preparation of the Consolidated Financial
Statements, and actual results could differ materially from the amounts reported
based on these policies.
Revenue
Recognition
Our
revenues are recorded in accordance with the Securities and Exchange
Commission’s (SEC) Staff Accounting Bulletin (SAB) No. 104, “Revenue
Recognition” and in accordance with Statement of Position (SOP) No. 97-2,
“Software Revenue Recognition” and Statement of Position (SOP) No. 98-9,
“Modification of SOP 97-2”. The Company recognizes product revenue when
persuasive evidence of an arrangement exists, delivery has occurred, the fee
is
fixed or determinable, and collectibility is reasonably assured. In instances
where final acceptance of the product is specified by the customer or is
uncertain, revenue is deferred until all acceptance criteria have been met.
Contracts
and customer purchase orders are typically used to determine the existence
of an
arrangement. Shipping documents and customer acceptance, when applicable, are
used to verify delivery. We assess whether the fee is fixed or determinable
based on the payment terms associated with the transaction and whether the
sales
price is subject to refund or adjustment. We assess collectibility based
primarily on the creditworthiness of the customer as determined by credit checks
and analysis, as well as the customer’s payment history.
Our
shipment terms for US orders, and international orders fulfilled from its
European distribution center are typically FCA (Free Carrier) shipping point,
except certain sales to US government agencies which are shipped FOB
destination. FCA shipping point means that we fulfill the obligation and title
has passed to the buyer upon delivery of the goods to the carrier named by
the
buyer at the named place or point. If no precise point is indicated by the
buyer, we may choose within the place or range stipulated where the carrier
will
take the goods into carrier’s charge. FOB destination means revenue for orders
are not recognized until the product is delivered and title has transferred
to
the buyer. We bear all costs and risks of loss or damage to the goods up to
that
point. Shipping and handling costs are included in the cost of goods
sold.
Revenue
to distributors and resellers is recognized upon delivery, assuming all other
criteria for revenue recognition have been met. Distributors and resellers
do
not have a right of return.
Revenues
from purchased extended warranty and support agreements are deferred and
recognized ratably over the term of the warranty/support period.
We
apply
Statement of Position (SOP) No. 97-2, “Software Revenue Recognition” to products
where the embedded software is more than incidental to the functionality of
the
hardware. This determination requires significant judgment including a
consideration of factors such as marketing, research and development efforts
and
any postcustomer contract support relating to the embedded
software.
In
accordance with Emerging Issues Task Force (EITF) Issue 00-21, “Accounting for
Revenue Arrangements with Multiple Deliverables,” when a non-software sale
involves multiple elements the entire fee from the arrangement is allocated
to
each respective element based on its relative fair value and recognized when
revenue recognition criteria for each element are met.
Our
software arrangements generally consist of a perpetual license fee and post
contract customer support (PCS). We have established vendor-specific objective
evidence (VSOE) of fair value for our PCS contracts based on the renewal rate.
The remaining value of the software arrangement is allocated to the license
fee
using the residual method, which revenue is primarily recognized when the
software has been delivered and there are no remaining obligations. Revenue
from
PCS is recognized ratably over the term of the PCS agreement.
Allowance
for Doubtful Accounts and Sales Returns
Our
accounts receivable balance, net of allowance for doubtful accounts, was $172.0
million as of December 29, 2006, compared with $145.1 million as of December
30,
2005. We evaluate the collectibility of our trade accounts receivable based
on a
number of factors such as age of the accounts receivable balances, credit
quality, historical experience, and current economic conditions that may affect
a customer’s ability to pay. In circumstances where we are aware of a specific
customer’s inability to meet its financial obligations to us, a specific
allowance for bad debts is estimated and recorded which reduces the recognized
receivable to the estimated amount we believe will ultimately be collected.
In
addition to specific customer identification of potential bad debts, bad debt
charges are recorded based on our recent past loss history and an overall
assessment of past due trade accounts receivable amounts
outstanding.
A
reserve
for sales returns is established based on historical trends in product return
rates experienced in the ordinary course of business. The reserve for sales
returns as of December 29, 2006 and December 30, 2005 were $900,000 and $1.5
million, respectively, for estimated future returns that were recorded as a
reduction of our accounts receivable and revenue. If the actual future returns
were to deviate from the historical data on which the reserve had been
established, our revenue could be adversely affected.
Inventory
Valuation
Our
inventories, net balance was $112.6 million as of December 29, 2006 compared
with $107.9 million as of December 30, 2005. Our inventory allowances as of
December 29, 2006 were $28.6 million, compared with $23.2 million as of December
30, 2005. Our inventories are stated at the lower of cost or market, with costs
primarily computed on a standard cost basis. Adjustments to reduce the cost
of
inventory to its net realizable value, if required, are made for estimated
excess, obsolescence, or impaired inventory. Factors influencing these
adjustments include decline in demand, technological changes, product life
cycle
and development plans, component cost trends, product pricing, physical
deterioration, and quality issues. If actual factors are less favorable than
those projected by us, additional inventory write-downs may be required.
Income
Taxes
Income
taxes are accounted for under the liability method whereby deferred tax assets
or liability account balances are calculated at the balance sheet date using
current tax laws and rates in effect for the year in which the differences
are
expected to affect taxable income. A valuation allowance is recorded to reduce
the carrying amounts of deferred tax assets if it is more likely than not such
assets will not be realized.
The
company’s valuation allowance is attributable to, primarily, the California
Research Credit and acquisition Net Operating Loss carryforwards.
Valuation allowance amounts are offsets to related deferred tax assets.
Management believes that it is more likely than not that the Company will not
realize these deferred tax assets and, accordingly, a valuation allowance has
been established for such amounts. When the tax credits are utilized and the
valuation allowance is released, the benefit of the release of the valuation
allowance will be accounted for as a credit to shareholder’s equity rather than
as a reduction of the income tax provision.
Annual
Goodwill Impairment Test
Goodwill
as of December 29, 2006 was $374.5 million, compared with $286.1 million as
of
December 30, 2005. The process of evaluating the potential impairment of
goodwill is subjective and requires significant assumptions. If an evaluation
is
required, the estimated future undiscounted cash flows associated with these
assets would be compared to their carrying amount to determine if a write-down
to fair market value or discounted cash flow value is required.
We
performed an annual impairment test of goodwill at the end of the third fiscal
quarter of 2006 and 2005 and found there was no impairment of goodwill. We
will
continue to evaluate our goodwill for impairment on an annual basis at the
end
of each fiscal third quarter and whenever events and changes in circumstances
suggest
that the carrying amount may not be recoverable. The determination of the net
carrying value of goodwill and the extent to which, if any, there is impairment
are dependent on material estimates and judgments on our part, including the
useful life over which the intangible assets are to be amortized, and the
estimates of the value of future net cash flows, which are based upon further
estimates of future revenues, expenses and operating income.
Accounting
for Long-Lived Assets Including Intangibles Subject to
Amortization
Depreciation
and amortization of our long-lived assets is provided using straight-line
methods over their estimated useful lives. Changes in circumstances such as
technological advances, changes to our business model, or changes in the capital
strategy could result in the actual useful lives differing from initial
estimates. In those cases where we determine that the useful life of a
long-lived asset should be revised, we will depreciate the net book value in
excess of the estimated residual value over its revised remaining useful life.
Factors such as changes in the planned use of equipment, customer attrition,
contractual amendments, or mandated regulatory requirements could result in
shortened useful lives.
Long-lived
assets and asset groups are evaluated for impairment whenever events or changes
in circumstances indicate that the carrying amount of such assets may not be
recoverable. The estimated future cash flows are based upon, among other things,
assumptions about expected future operating performance and may differ from
actual cash flows. Long-lived assets evaluated for impairment are grouped with
other assets to the lowest level for which identifiable cash flows are largely
independent of the cash flows of other groups of assets and liabilities. If
the
sum of the projected undiscounted cash flows (excluding interest) is less than
the carrying value of the assets, the assets will be written down to the
estimated fair value in the period in which the determination is made.
Warranty
Costs
The
liability for product warranties was $8.6 million as of December 29, 2006,
compared with $7.5 million as of December 30, 2005. We
accrue
for warranty costs as part of cost of sales based on associated material product
costs, technical support labor costs, and costs incurred by third parties
performing work on our behalf. Our expected future cost is primarily estimated
based upon historical trends in the volume of product returns within the
warranty period and the cost to repair or replace the equipment. 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
we
engage in extensive product quality programs and processes, including actively
monitoring and evaluating the quality of our component suppliers, our 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 our
estimates, revisions to the estimated warranty accrual and related costs may
be
required.
Stock
Compensation
We
apply
Standard of Financial Accounting Standards (“SFAS”) No. 123(R), “Share-Based
Payment” (“SFAS 123(R)”) and related interpretations in accounting for our stock
option plans and stock purchase plan for fiscal 2006. As a result, the Company’s
financial statements for fiscal 2006 include stock-based compensation expenses
that are not comparable to financial statements prior to fiscal 2006. Prior
to
fiscal 2006, we applied Accounting Principles Board Opinion No. 25, "Accounting
for Stock Issued to Employees" (APB 25) and related interpretations in
accounting for our stock option plans and stock purchase plan. Accordingly,
we
did not recognize compensation cost for stock options granted at a price equal
to fair market value prior to fiscal 2006.
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. For these reasons,
we believe 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.
Note
14
of the Notes to the Consolidated Financial Statements describes the plans we
operate, and Note 2 of the Notes to the Consolidated Financial Statements
contains a summary of the effects to reported net income and earnings per share
for fiscal 2006, and pro forma net income and earnings per share for fiscal
2005
and 2004 as if we had elected to recognize compensation cost based on the fair
value of the options granted at grant date.
RECENT
BUSINESS DEVELOPMENTS
@Road,
Inc.
On
February 16, 2007, we acquired @Road, Inc. of Fremont, California. @Road, Inc.
is a global provider of solutions designed to automate the management of mobile
resources and to optimize the service delivery process for customers across
a
variety of industries. @Road will be reported within our Mobile Solutions
business segment. This acquisition was the largest in acquisition value in
the
company’s history. It significantly increases our presence in the mobile
resource management, or MRM, market which Trimble believes is a large and fast
growing market.
*
With
the addition of @Road, Trimble’s TMS segment will be better able to service
larger customers, with a broader and more robust solution set.
INPHO
GmbH
On
February 13, 2007, we acquired INPHO GmbH of Stuttgart, Germany. INPHO is a
leader in photogrammetry and digital surface modeling for aerial surveying,
mapping and remote sensing applications. INPHO will be reported within Trimble’s
Engineering and Construction segment.
Spacient
Technologies, Inc.
On
November 21, 2006, we acquired privately-held Spacient Technologies, Inc. of
Long Beach, California. Spacient is a leading provider of enterprise field
service management and mobile mapping solutions for municipalities and
utilities. Spacient’s performance is reported under our Field Solutions business
segment.
Meridian
Project Systems, Inc.
On
November 7, 2006, we acquired privately-held Meridian Project Systems, Inc.
of
Folsom, California. Meridian provides enterprise project management and
lifecycle software for optimizing the plan, build and operate lifecycle for
real
estate, construction and other physical infrastructure projects. Meridian’s
performance is reported under our Engineering and Construction business segment.
XYZ
Solutions, Inc.
On
October 27, 2006, we acquired privately-held XYZ Solutions, Inc., of Alpharetta,
Georgia. XYZ Solutions provides real-time, interactive 3D intelligence software
to manage the spatial aspects of a construction project. XYZ Solutions’
performance is reported under our Engineering and Construction business
segment.
Visual
Statement, Inc.
On
October 11, 2006, we acquired privately-held Visual Statement, Inc. of Kamloops,
British Columbia, Canada. Visual Statement provides desktop software tools
for
crime and collision incident investigation, analysis, and reconstitution as
well
as state-wide enterprise solutions for reporting and analysis used by public
safety agencies. Visual Statement’s performance is reported under our Mobile
Solutions business segment.
BitWyse
Solutions, Inc.
On
May 1,
2006, we acquired the assets of privately-held BitWyse Solutions, Inc. of Salem,
Massachusetts. BitWyse is a provider of engineering and construction information
management software. BitWyse’s performance is reported under our Engineering and
Construction business segment.
Eleven
Technology, Inc.
On
April
28, 2006, we acquired privately-held Eleven Technology, Inc. of Cambridge,
Massachusetts. Eleven is a mobile application software company with a leading
position in the Consumer Packaged Goods 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 provider
of
transportation route optimization solutions used for planning highways,
railways, pipelines and canals. Quantm’s performance is reported under our
Engineering and Construction business segment.
XYZs
of
GPS, Inc.
On
February 26, 2006, we acquired the assets of XYZs of GPS, Inc. 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. XYZs’ performance is reported
under our Engineering and Construction business segment.
RESULTS
OF OPERATIONS
Overview
The
following table is a summary of revenue, gross margin and operating income
for
the periods indicated and should be read in conjunction with the narrative
descriptions below.
Fiscal
Years Ended
|
|
December
29,
2006
|
|
December
30,
2005
|
|
December
31,
2004
|
|
(Dollars
in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
consolidated revenue
|
|
$
|
940,150
|
|
$
|
774,913
|
|
$
|
668,808
|
|
Gross
Margin
|
|
$
|
461,081
|
|
$
|
389,805
|
|
$
|
324,810
|
|
Gross
Margin %
|
|
|
49%
(1)
|
|
|
50
|
%
|
|
49
|
%
|
Total
consolidated operating income
|
|
$
|
135,365
|
|
$
|
124,944
|
|
$
|
85,625
|
|
Operating
Income %
|
|
|
14%
(1)
|
|
|
16
|
%
|
|
13
|
%
|
Basis
of Presentation
We
have a
52-53 week fiscal year, ending on the Friday nearest to December 31, which
for
fiscal 2006 was December 29, 2006. Fiscal 2006, 2005, and 2004 were 52-week
years.
Revenue
In
fiscal
2006, total revenue increased by $165.3 million or 21% to $940.2 million from
$774.9 million in fiscal 2005. The increase in fiscal 2006 was primarily due
to
stronger performances across all our operating segments. The Engineering and
Construction, Field Solutions, Mobile Solutions and Advanced Devices segments
increased 21%, 9%, 93%, and 13% respectively, compared to fiscal 2005. Revenue
growth within these segments was driven by new product introductions, increased
penetration of existing markets, and geographical expansion. Mobile Solutions
growth in particular benefited from the prior year acquisitions. Overall, 2006
acquisitions impacted total company revenue growth by approximately
2%.
In
fiscal
2005, total revenue increased by $106.1 million or 16% to $774.9 million from
$668.8 million in fiscal 2004. The increase in fiscal 2005 was primarily due
to
stronger performances across all our operating segments with the exception
of
Component Technologies. The Engineering and Construction, Field Solutions and
Mobile Solutions segments increased 19%, 21% and 34%, respectively, compared
to
fiscal 2004. Revenue growth within these segments was driven by new product
introductions and increased penetration of existing markets. Both the
Engineering and Construction and Mobile Solutions operating segments also
benefited from the impact of the Pacific Crest, Apache and MobileTech
acquisitions.
*
During
the 2006 fiscal year, sales to customers in the United States represented 54%,
Europe represented 25%, Asia Pacific represented 12% and other regions
represented 9% of our total revenues. During the 2005 fiscal year, 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.
We anticipate that sales to international customers will continue to account
for
a major portion of our revenues.
*
No
single customer accounted for 10% or more of our total revenues in fiscal 2006,
2005, and 2004. It is possible, however, that in future periods the failure
of
one or more large customers to purchase products in quantities anticipated
by us
may adversely affect the results of operations.
Gross
Margin
Our
gross
margin varies due to a number of factors including product mix, pricing,
distribution channel used, effects of production volumes, new product start-up
costs, and foreign currency translations. In fiscal 2006, our gross margin
increased by $71.3 million as compared to fiscal 2005 due to higher revenue
and
the success of higher margin products, including survey and machine control
products and higher subscription revenues. The increase was partially offset
by
decreases due to the impact of the reclassification of the CTCT transactions
of
$18.1 million previously recorded in non-operating expenses, amortization of
software-related purchased intangibles of $5.2 million and stock-based
compensation expense of $1.2 million that were not included in gross margin
during the same period in fiscal 2005. Gross margin as a percentage of total
revenues was 49% in fiscal 2006 and 50% in fiscal 2005. The 1% decrease in
the
gross margin percentage was driven by a decrease of 3% due to the CTCT impact,
amortization of purchased intangibles and stock-based compensation, offset
by an
increase of 2% due to higher margin products and subscription revenues.
In
fiscal
2005, our gross margin increased by $65.0 million due to due to higher revenue
and success of our market segmentation strategy, higher service revenues, cost
reductions, and introduction of higher margin products. Gross margin as a
percentage of total revenues was 50 % in fiscal 2005 and 49% in fiscal 2004.
*
Because
of potential product mix changes within and among the industry markets, market
pressures on unit selling prices, fluctuations in unit manufacturing costs,
including increases in component prices and other factors, current level gross
margins cannot be assured.
Operating
Income
Operating
income increased by $10.4 million for fiscal 2006 as compared to fiscal 2005
due
to higher revenues and the success of higher margin products, offset by
decreases due to the impact of the reclassification of the CTCT transactions
previously recorded in non-operating expenses and stock-based compensation
expense that was not included in operating income during the same period in
fiscal 2005.
Operating
income as a percentage of total revenue was 14% for fiscal 2006 compared to
16%
in fiscal 2005. The
2%
decrease in operating income was due to a 4% CTCT transaction reclassification
impact, amortization of purchased intangibles, increased acquisition
expenses, and stock-based compensation impact, partially offset by 2%
increase driven by gross margin expansion.
Operating
income increased by $39.3 million for fiscal 2005 as compared to fiscal 2004.
Operating income as a percentage of total revenue was 16% as compared to 13%
in
fiscal 2004. The increase was due to improvement in revenues along with gross
margins and greater leverage of operating expenses. Operating expenses
represented 34% of total revenue in fiscal 2005 as compared to 36% in fiscal
2004.
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,
in-process research and development expenses, restructuring charges,
non-operating income (expense), and income taxes.
In
the
first fiscal quarter of 2006, we combined the operating results of the former
Component 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 for
the periods indicated and should be read in conjunction with the narrative
descriptions below.
Fiscal
Years Ended
|
|
December
29,
2006
|
|
December
30,
2005
|
|
December
31,
2004
|
|
(Dollars
in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Engineering
and Construction
|
|
|
|
|
|
|
|
Revenue
|
|
$
|
637,118
|
|
$
|
524,461
|
|
$
|
440,478
|
|
Segment
revenue as a percent of total revenue
|
|
|
68
|
%
|
|
68
|
%
|
|
66
|
%
|
Operating
income
|
|
$
|
136,157
|
|
$
|
117,993
|
|
$
|
79,505
|
|
Operating
income as a percent of segment revenue
|
|
|
21
|
%
|
|
22
|
%
|
|
18
|
%
|
Field
Solutions
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
$
|
139,230
|
|
$
|
127,843
|
|
$
|
105,591
|
|
Segment
revenue as a percent of total revenue
|
|
|
15
|
%
|
|
16
|
%
|
|
16
|
%
|
Operating
income
|
|
$
|
37,377
|
|
$
|
32,527
|
|
$
|
25,151
|
|
Operating
income as a percent of segment revenue
|
|
|
27
|
%
|
|
25
|
%
|
|
24
|
%
|
Mobile
Solutions
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
$
|
60,854
|
|
$
|
31,481
|
|
$
|
23,531
|
|
Revenue
as a percent of total consolidated revenue
|
|
|
6
|
%
|
|
4
|
%
|
|
4
|
%
|
Operating
income (loss)
|
|
$
|
2,550
|
|
$
|
(3,072
|
)
|
$
|
(5,997
|
)
|
Operating
income (loss) as a percent of segment revenue
|
|
|
4
|
%
|
|
(10
|
%)
|
|
(25
|
%)
|
Advanced
Devices
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
$
|
102,948
|
|
$
|
91,128
|
|
$
|
99,208
|
|
Segment
revenue as a percent of total revenue
|
|
|
11
|
%
|
|
12
|
%
|
|
15
|
%
|
Operating
income
|
|
$
|
10,084
|
|
$
|
13,212
|
|
$
|
18,746
|
|
Operating
income as a percent of segment revenue
|
|
|
10
|
%
|
|
14
|
%
|
|
19
|
%
|
A
reconciliation of our consolidated segment operating income to consolidated
income before income taxes follows:
Fiscal
Years Ended
|
|
December
29,
2006
|
|
December
30,
2005
|
|
December
31,
2004
|
|
(In
thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated
segment operating income
|
|
$
|
186,168
|
|
$
|
160,660
|
|
$
|
117,405
|
|
Unallocated
corporate expense
|
|
|
(35,799
|
)
|
|
(27,483
|
)
|
|
(22,901
|
)
|
Restructuring
charges
|
|
|
|
|
|
(278
|
)
|
|
(552
|
)
|
Amortization
of purchased intangible assets
|
|
|
(13,074
|
)
|
|
(6,855
|
)
|
|
(8,327
|
)
|
In-process
research and development
|
|
|
(1,930
|
)
|
|
(1,100
|
)
|
|
-
|
|
Non-operating
income (expense), net
|
|
|
12,727
|
|
|
(156
|
)
|
|
(10,701
|
)
|
Consolidated
income before income taxes
|
|
$
|
148,092
|
|
$
|
124,788
|
|
$
|
74,924
|
|
Engineering
and Construction
Engineering
and Construction revenues increased by $112.7 million or 21% while segment
operating income increased by $18.2 million or 15% for fiscal 2006 as compared
to fiscal 2005. The revenue growth was driven by the continued strength in
survey products as well as increased sales of machine control products,
aggressive marketing programs and geographic expansion. Segment operating income
increased as a result of higher revenues and increased sales of higher margin
products, partially offset by $5.7 million in expenses related to CTCT
transactions, $4.0 million in stock-based compensation expense that were not
present in the corresponding period of fiscal 2005.
Engineering
and Construction revenues increased by $84.0 million or 19% while segment
operating income increased by $38.5 million or 48% for fiscal 2005 as compared
to fiscal 2004. The revenue growth was driven by the introduction of products
such as the Trimble S6 and machine control products, and growth of existing
products such as the Trimble R8 GPS System. Revenue growth was also attributed
to the acquisitions for fiscal 2005. Segment operating income increased as
a
result of higher revenues and increased sales of higher margin products.
Field
Solutions
Field
Solutions revenues increased by approximately $11.4 million or 9% while segment
operating income increased by $4.9 million or 15% for fiscal year 2006 as
compared to fiscal 2005. Revenue increased primarily due growth in our GIS
business. In GIS, growth was due to new products and a continuing shift to
a
higher value, differentiated distribution channel. The agricultural business
remained stable as compared to the prior year due to a steady agricultural
market. Operating income increased primarily due to strong operating leverage
and increased revenue, partially offset by the inclusion of stock-based
compensation that was not present in the corresponding periods of fiscal
2005.
Field
Solutions revenues increased by approximately $22.3 million or 21% while segment
operating income increased by $7.4 million or 29% for fiscal year 2005 as
compared to fiscal 2004. Revenue increased primarily due to successful new
products such as the AgGPS
EZ-Guide system and AgGPS
EZ-Steer system in our agriculture product line and as a result of higher demand
for both automated and manual guidance products into the agricultural market.
Operating income increased primarily due to increased revenue and associated
gross margins.
Mobile
Solutions
Mobile
Solutions revenues increased by $29.4 million or 93% while segment operating
income increased by $5.6 million or 183% for fiscal 2006 as compared to fiscal
2005. Revenue increased due to increased subscriber growth, an increase in
recurring subscription revenues, the benefit of acquisitions, especially
MobileTech, and entry into new vertical markets. Operating income increased
primarily due to higher subscription revenue and associated gross margins,
partially offset by the inclusion of stock-based compensation that was not
present in fiscal 2005.
Mobile
Solutions revenues increased by $8.0 million or 34% in fiscal 2005 over fiscal
2004 due to increased subscriber growth, an increase in sales into the ready-mix
suppliers, and increased sales from our dealer channel as we continue to develop
and extend this channel. Operating loss decreased by $2.9 million or 49% in
fiscal 2005 compared to fiscal 2004 primarily attributable to an increase in
revenues and increase in gross margins due higher recurring service revenue.
Advanced
Devices
Advanced
Devices revenues increased by $11.8 million or 13% while segment operating
income decreased by $3.1 million or 24% for fiscal 2006 as compared to fiscal
2005. The increase in revenue was primarily due to stronger performance in
our
embedded and airborne products as well as licensing revenues associated with
a
Nokia intellectual property agreement signed in the third quarter of fiscal
2006. Operating income decreased for fiscal 2006 due to sales of lower gross
margin products, a reduction in revenue in our Military and Advanced Systems
product line, increased costs related to the TrimTrac product line and inclusion
of stock-based compensation that were not present in the corresponding periods
of fiscal 2005, partially offset by stronger embedded and airborne product
revenue and intellectual property licensing revenue.
Advanced
Devices revenues decreased by $8.1 million or 8% while segment operating income
decreased by $5.5 million or 30% for fiscal 2005 as compared to fiscal 2004.
The
decrease in revenue and operating income were primarily due to the decline
in
demand for our in-vehicle navigation products as a result of changes in buying
strategies among certain automotive manufacturers, and softness in the timing
business, which was offset by a stronger performance in our Applanix airborne
business.
Research
and Development, Sales and Marketing, and General and Administrative Expenses
The
following table shows research and development (“R&D”), sales and marketing,
and general and administrative (“G&A”) expenses in absolute dollars and as a
percentage of total revenues for the fiscal years ended 2006, 2005 and 2004
and
should be read in conjunction with the narrative descriptions of those operating
expenses below.
Fiscal
Years Ended
|
|
December
29,
2006
|
|
December
30,
2005
|
|
December
31,
2004
|
|
(In
thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research
and development
|
|
$
|
103,840
|
|
|
11
|
%
|
$
|
84,276
|
|
|
11
|
%
|
$
|
77,558
|
|
|
11
|
%
|
Sales
and marketing
|
|
|
143,623
|
|
|
15
|
%
|
|
120,215
|
|
|
15
|
%
|
|
108,054
|
|
|
16
|
%
|
General
and administrative
|
|
|
68,416
|
|
|
7
|
%
|
|
52,137
|
|
|
7
|
%
|
|
44,694
|
|
|
7
|
%
|
|
|
|
315,879
|
|
|
34
|
%
|
$
|
256,628
|
|
|
33
|
%
|
$
|
230,306
|
|
|
34
|
%
|
Overall,
R&D, sales and marketing, and G&A expenses increased by approximately
$59.3 million in fiscal 2006 compared to fiscal 2005.
Research
and development expenses increased by $19.6 million in fiscal 2006 compared
to
fiscal 2005 primarily due to the inclusion of expenses of $4.6 million from
acquisitions not applicable in the prior year, $4.9 million increase in
compensation related expenses, $2.6 million in stock-based compensation expense
not present in fiscal 2005 and $2.3 million increase in R&D materials,
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.
Research
and development expenses increased by $6.7 million in fiscal 2005 compared
to
fiscal 2004 primarily due to the inclusion of expenses from acquisitions not
applicable in the prior year in the amount of $2.8 million and increase in
compensation of $2.8 million.
*
Overall
research and development spending remained relatively constant at approximately
11% of revenues. We expect to continue to devote resources to the development
of
new products and the enhancement of existing products. We believe that research
and development is critical to our strategic product development objectives
and
that to leverage our leading technology and meet the changing requirements
of
our customers, we will need to fund investments in several development projects
in parallel.
Sales
and
marketing expenses increased by $23.4 million in fiscal 2006 compared to fiscal
2005. The increase was
primarily due the inclusion of expenses from acquisitions not applicable in
the
prior period in the amount of $7.5 million, $8.0 million increase in
compensation related expenses, $2.8 million in stock-based compensation expense
not present in the third quarter of fiscal 2005, and $1.9 million in customer
trade show expenses due to increased size and attendance at the shows. Spending
overall remained relatively constant at approximately 15% of
revenues.
Sales
and
marketing expenses increased by $12.2 million in fiscal 2005 compared to fiscal
2004, but decreased as a percent of total revenues. The increase was primarily
due to advertising and promotion costs associated with the launch of new
products of $5.4 million, the inclusion of expenses from acquisitions not
applicable in the prior year of $1.5 million, increase in travel expenses of
$1.4 million, and an increase in compensation of $1.7 million.
*
We
intend to continue to focus and expand our sales and marketing efforts across
all the geographies and markets we serve in order to increase market awareness
of our products and to better support our existing customers worldwide. Our
future growth will depend in part on the timely development and continued
viability of the markets in which we currently compete as well as our ability
to
continue to identify and exploit new markets for our products.
General
and administrative expenses increased by $16.3 million in fiscal 2006 compared
to fiscal 2005 primarily due to the
inclusion of expenses from acquisitions not applicable in the prior year of
$4.3
million, $3.9 million increase in compensation-related expenses, and $6.0
million in stock-based compensation expense not present in fiscal 2005. Spending
overall remained relatively constant at approximately 7% of
revenues.
General
and administrative expenses increased by $7.4 million in fiscal 2005 compared
to
fiscal 2004 primarily due to an increase in compensation expense of $5.9
million, increase in rent expense of $1.0 million as we were making duplicate
payments during our move to our new headquarters, the inclusion of expenses
from
acquisitions not applicable in the prior year of $1.8 million, and increase
of
$0.8 million in patent expense. This was partially offset by a decrease in
bad
debt expense of $1.7 million.
Other
Operating Expenses
Restructuring
Charges
There
were no restructuring charges recorded in fiscal 2006. Restructuring charges
of
$0.3 million, and $0.6 million were recorded in fiscal years 2005 and 2004
respectively. The
charges in fiscal 2005 were primarily related to office closure costs due to
integration efforts of the Mensi acquisition. The charges in fiscal 2004 were
primarily related to severance costs due to the realignment of Trimble Mobile
Solutions Inc. As a result of the realignment, the headcount decreased by 36
in
fiscal 2004. As of December 29, 2006, an accrual balance of $0.1 million,
related to the fiscal 2005 office closure, is expected to be paid over the
next
several years.
In-Process
Research and Development
We
recorded in-process research and development (IPR&D) expense of $1.9 million
and $1.1 million related to acquisitions made in fiscal 2006 and 2005
respectively. We did not record any IPR&D expense in fiscal 2004. 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.
Amortization
of Purchased and Other Intangible Assets
Fiscal
Years Ended
|
|
December
29,
2006
|
|
December
30,
2005
|
|
December
31,
2004
|
|
(in
thousands)
|
|
|
|
|
|
|
|
Amortization
of purchased intangibles included in cost of sales
|
|
$
|
5,168
|
|
$
|
-
|
|
$
|
-
|
|
Amortization
of purchased intangibles included in operating expenses
|
|
|
7,906
|
|
$
|
6,855
|
|
$
|
8,327
|
|
Amortization
of other intangible assets
|
|
|
185
|
|
|
165
|
|
|
183
|
|
Total
amortization of purchased and other intangible assets
|
|
$
|
13,259
|
|
$
|
7,020
|
|
$
|
8,510
|
|
Total
amortization expense of purchased and other intangible assets was $13.3 million
in fiscal 2006, of which $5.4 million was recorded in cost of sales and $7.9
million was recorded in operating expenses. Total amortization expense of
purchased and other intangibles represented 1.4% of revenue in fiscal 2006,
an
increase of $6.2 million from fiscal 2005 when it represented 0.9% of revenue.
The increase was primarily due to the acquisition of certain technology and
patent intangibles as a result of acquisitions made in fiscal 2006 as well
as
fiscal 2005 acquisition intangibles that included a full year of amortization
expense in fiscal 2006, but only partial year amortization expense in fiscal
2005 due to the timing of the acquisitions.
Amortization
expense of purchased and other intangibles represented 0.9% of revenue in fiscal
2005, a decrease of $1.5 million from fiscal 2004 when it represented 1.3%
of
revenue. Although there were acquisitions in fiscal 2005, amortization expense
decreased due to the fact our Spectra Precision Group intangibles were fully
amortized in the second quarter of fiscal 2005.
Non-operating
Expense, Net
The
following table shows non-operating expense, net for the periods indicated
and
should be read in conjunction with the narrative descriptions of those expenses
below:
Fiscal
Years Ended
|
|
December
29,
2006
|
|
December
30,
2005
|
|
December
31,
2004
|
|
(in
thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
income
|
|
$
|
3,799
|
|
$
|
836
|
|
$
|
436
|
|
Interest
expense
|
|
|
(558
|
)
|
|
(2,331
|
)
|
|
(3,888
|
)
|
Foreign
exchange gain (loss)
|
|
|
1,719
|
|
|
1,022
|
|
|
(859
|
)
|
Income
(expenses) for affiliated operations, net
|
|
|
6,989
|
|
|
(291
|
)
|
|
(7,590
|
)
|
Other
income
|
|
|
777
|
|
|
608
|
|
|
1,200
|
|
Total
non-operating income (expense), net
|
|
$
|
12,726
|
|
$
|
(156
|
)
|
$
|
(10,701
|
)
|
Non-operating
income, net increased by $12.9 million during fiscal 2006 compared with fiscal
2005. Of this increase, $4.7M was due to higher interest income and lower
interest expense as a result of interest income earned on higher cash balances
and debt repaid in fiscal 2005 and also a $0.7 million increase in foreign
currency transaction gains. In addition, expenses for affiliated operations,
net
increased by $7.3 million due a $5.2 million increase in income from affiliated
operations and the absence of $11.6 million of net transfer pricing expense
with
CTCT that was included in fiscal 2005, but is now included in operating income,
partially offset by the recognition of a one-time deferred gain on the CTCT
joint venture of $9.3 million in fiscal 2005.
Non-operating
expense, net decreased by $10.5 million during fiscal 2005 as compared with
fiscal 2004 primarily due to a decrease in net interest expense of $2.0 million
as a result of the repayment of debt and interest earned on higher cash balances
offset by a $0.9 million write-off of debt issuance costs relating to the 2003
Credit Facility, an increase of $1.9 million in foreign currency transaction
gain and a $7.3 million decrease in expenses for affiliated operations as a
result of increased profits from our joint ventures and recognition of the
remaining deferred gain from the Caterpillar joint venture. This was partially
offset by a decrease in other income primarily due to the absence of a
non-recurring gain in investments of approximately $1.0 million in fiscal year
2004.
Income
Tax Provision
Our
effective income tax rate for fiscal years 2006, 2005 and 2004 was 30%, 32%
and
10% respectively. The 2006 rate was less that the US federal statutory rate
of
35% primarily due to operations in foreign jurisdictions subject to an effective
tax rate lower than the US and Extraterritorial Income Exclusion (ETI)
deduction. The
2005
income tax rate was less that the US federal statutory rate, primarily due
to
the benefit from the repatriation of undistributed foreign subsidiary earnings
provided by the American Jobs Creation Act of 2004. The 2004 income tax rate
was
less than the federal statutory rate primarily due to the realization of
benefits from net operating losses and other previously reserved deferred tax
assets.
Litigation
Matters
*
From
time to time, we are involved in litigation arising out of the ordinary course
of our business. There are no known claims or pending litigation that are
expected to have a material effect on our overall financial position, results
of
operations, or liquidity.
OFF-BALANCE
SHEET ARRANGEMENTS
Other
than lease commitments incurred in the normal course of business (see
Contractual Obligation table below), 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 consolidated financial
statements. Additionally, we do not have any interest in, or relationship with,
any special purpose entities.
LIQUIDITY
AND CAPITAL RESOURCES
As
of and for the Fiscal Year Ended
|
|
December
29,
2006
|
|
December
30,
2005
|
|
December
31,
2004
|
|
(dollars
in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
and cash equivalents
|
|
$
|
129,621
|
|
$
|
73,853
|
|
$
|
71,872
|
|
As
a percentage of total assets
|
|
|
13.2
|
%
|
|
9.9
|
%
|
|
11.0
|
%
|
Accounts
receivable days sales outstanding (DSO)
|
|
|
55
|
|
|
66
|
|
|
63
|
|
Inventory
turns per year
|
|
|
4
|
|
|
4
|
|
|
4
|
|
Total
debt
|
|
$
|
481
|
|
$
|
649
|
|
$
|
38,996
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
provided by operating activities
|
|
$
|
138,087
|
|
$
|
92,880
|
|
$
|
74,576
|
|
Cash
used in investing activities
|
|
$
|
(116,432
|
)
|
$
|
(74,918
|
)
|
$
|
(25,133
|
)
|
Cash
provided (used) by financing activities
|
|
$
|
34,162
|
|
$
|
(13,402
|
)
|
$
|
(24,159
|
)
|
Net
increase in cash and cash equivalents
|
|
$
|
55,768
|
|
$
|
1,981
|
|
$
|
26,456
|
|
Cash
and Cash Equivalents
Our
financial condition further strengthened as cash and cash equivalents totaled
$129.6 million at December 29, 2006, compared to $73.9 million at December
30,
2005. We essentially had no debt at December 29, 2006 and December 20,
2005.
In
fiscal
2006, cash provided by operating activities was $138.1 million, compared to
$92.9 million in cash provided by operating activities in fiscal 2005. This
increase of $45.2 million was primarily driven by a $22.8 million increase
in
net income before stock-based compensation expense and associated excess tax
benefits, with the remainder due to working capital improvements in inventories
and account receivables.
Our
accounts receivable days of sales outstanding improved to 55 days at the end
of
fiscal 2006, from 66 days at the end of fiscal 2005. The decrease is primarily
due to increased collection efforts and improvement in monitoring of outstanding
receivables. In addition, in the first quarter of 2006, the Company established
a dealer floor plan financing program in the U.S. and Canada through a
non-recourse financing facility. Our accounts receivable days of sales
outstanding is based upon the latest month revenues plus any uncollected
accounts receivable from prior months’ revenues calculated into days. Our
inventory turns were at 4.1 for fiscal 2006 as compared to 3.9 for fiscal 2005.
Our inventory turnover is based on the total cost of sales for the fiscal period
over the average inventory for the corresponding fiscal period.
In
fiscal
2005, cash provided by operating activities was $92.9 million, as compared
to
$74.6 million in fiscal 2004. The increase of $18.3 million was primarily
driven by the $17.2 million increase in net income during fiscal 2005 compared
to fiscal 2004. 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 increased from 63 days at the end of
fiscal 2004 to 66 days at the end of fiscal 2005. The increase is due to
acquisitions, delayed payments from some government contracts, and past due
accounts from a couple of key customers. Our inventory turns was unchanged
at
4.0 at the end of fiscal 2005 and 2004.
Cash
used
in investing activities was $116.4 million in fiscal 2006, compared to $74.9
million in fiscal 2005. The
$41.5
million increase in spending was due to an increase of $48.5 million in cash
used for acquisitions, partially offset by a decrease of $6.9 million in capital
equipment spending.
Cash
used
in investing activities was $74.9 million in fiscal 2005 as compared to $25.1
million in fiscal 2004. The
$49.8
million increase was primarily due to an increase of $40.0 million in cash
used
for acquisitions and an increase of $10.6 million in investment in capital
equipment of
which
$6.6 million was related to the relocation of our Sunnyvale headquarters.
Cash
provided from financing activities was $34.2 million for fiscal 2006 compared
to
cash used of $13.4 million in fiscal 2005. The $47.6 million improvement was
primarily due to a $38.3 million decrease in repayment of net debt, $8.8 million
in excess tax benefits relating to stock-based compensation upon the exercise
of
stock options which were not present in fiscal 2005 and a $2.1 million increase
in proceeds received from issuance of common stock.
Cash
used
in financing activities was $13.4 million in fiscal 2005 as compared to $24.2
million in fiscal 2004. The $10.8 million decrease was primarily due to a $12.9
million decrease in repayment of net debt as we repaid our entire debt balance
in the second fiscal quarter of 2005. This was partially offset by a $2.3
million decrease in proceeds received from issuance of common stock and
warrants.
*
We
believe that our cash and cash equivalents, together with our credit facilities
($200 million as of December 29, 2006), will be sufficient to meet our
anticipated operating cash needs for at least the next twelve months.
*
We
anticipate that planned capital expenditures primarily
for computer equipment, software, manufacturing tools and test equipment, and
leasehold improvements associated with business expansion,
will
constitute a partial use of our cash resources.
Decisions related to how much cash is used for investing are influenced by
the
expected amount of cash to be provided by operations.
*
Additionally, on February 16, 2007, we acquired @Road which was funded through
cash of Trimble and a new debt financing arrangement. Post acquisition
expenditures will be funded through anticipated positive cash flow from
operations. The positive cash flow from operations is a result of our
belief that we will be able to manage our assets efficiently and achieve our
overall financial projections.
Debt
At
the
end of fiscal 2006, our total debt was comprised of government loans to foreign
subsidiaries in amount of approximately $481,000 as compared with approximately
$649,000 at the end of fiscal 2005.
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. At December 29, 2006
and as of the date of this report, the Company has a zero balance outstanding
and was in compliance with all financial debt covenants. For additional
discussion of our debt, see Note 9 of Notes to the Consolidated Financial
Statements.
On
February 16, 2007, the Company amended and restated its existing $200 million
unsecured revolving credit agreement with a syndicate of 11 banks with The
Bank
of Nova Scotia as the administrative agent (the “2007 Credit Facility”). Under
the 2007 Credit Facility, the Company exercised the accordion option in the
existing credit agreement to increase the availability under the revolving
credit line by $100,000,000, for an aggregate availability of up to
$300,000,000, and extended the maturity date of the revolving credit line
by 18
months, from July 2010 to February 2012. Up to $25 million of the
availability under the revolving credit line may be used to issue letters
of
credit, and up to $20 million may be used for swing line loans. In addition,
the
Company incurred five-year term loan under the 2007 Credit Facility in an
aggregate principal amount of $100,000,000, which will mature concurrently
with
the revolving credit line. The term loan will be repaid in quarterly
installments, with principal being amortized at the following annual rates:
year
1 at 10%, year 2 at 15%, year 3 at 15%, year 4 at 20%, year 5 at 20%, and
the
last quarterly payment to be made at maturity, together with a final payment
of
20%. Under the existing facility, the Company was required to maintain a
maximum leverage ratio of 2:75:1. The 2007 Credit Facility increased the
maximum
leverage ratio to 3.00:1. The funds available under the new 2007
Credit Facility may be used by the Company for acquisitions and general
corporate purposes.
As
of
February 20, 2007, the Company had
$150
million
drawn on the revolving credit line and $100 million in term loan
outstanding.
CONTRACTUAL
OBLIGATIONS
The
following table summarizes our contractual obligations at December 29, 2006:
|
|
Payments
Due By Period
|
|
|
|
Total
|
|
Less
than
1
year
|
|
2-3
Years
|
|
4-5
years
|
|
More
than
5
years
|
|
(in
thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
debt including interest (1)
|
|
$
|
481
|
|
$
|
-
|
|
$
|
481
|
|
$
|
-
|
|
$
|
-
|
|
Operating
leases
|
|
|
41,857
|
|
|
10,852
|
|
|
17,505
|
|
|
9,944
|
|
|
3,556
|
|
Other
purchase obligations and commitments
|
|
|
32,129
|
|
|
32,129
|
|
|
-
|
|
|
-
|
|
|
-
|
|
Total
|
|
$
|
74,467
|
|
$
|
42,981
|
|
$
|
17,986
|
|
$
|
9,944
|
|
$
|
3,556
|
|
(1)
Excludes the impact of debt resulting from the @Road acquisition. See Note
18 of
the Notes to the Consolidated Financial Statements for further financial
information.
Total
debt consists of government loans to foreign subsidiaries.
(See
Note 9 of the Notes to the Consolidated Financial Statements for further
financial information regarding long-term debt)
Other
purchase obligations and commitments represent open non-cancelable purchase
orders for material purchases with our vendors and a forecasted commitment
with
a supplier for outsourced services as described in Note 10 of the Notes to
the
Consolidated Financial Statements. Our pension obligation which is not included
in the table above, and is included in “Accrued compensation and benefits” and
“Other non-current liabilities” on our Consolidated Balance Sheets, is disclosed
at Note 15 of the Notes to the Consolidated Financial Statements.
EFFECT
OF NEW ACCOUNTING PRONOUNCEMENTS
The
impact of recent accounting pronouncements is disclosed in Note 2 of the
Notes to Consolidated Financial Statements.
Item
7A.
|
Quantitative
and Qualitative Disclosure about Market Risk
|
We
are
exposed to market risk related to changes in interest rates and foreign currency
exchange rates. We use certain derivative financial instruments to manage these
risks. We do not use derivative financial instruments for speculative purposes.
All financial instruments are used in accordance with policies approved by
our
board of directors.
Market
Interest Rate Risk
Our
cash
equivalents and short-term investments consisted primarily of money market
funds
and certificate of deposits for fiscal 2006 and 2005. The main objective of
these investments was safety of principal and liquidity while maximizing return,
without significantly increasing risk.
*
Due to
the short-term nature of our cash equivalents and short-term investments, we
do
not anticipate any material effect on our portfolio due to fluctuations in
interest rates.
.
We
may be
exposed to market risk in the event we borrow against our 2005 Credit Facility.
Borrowings under the 2005 Credit Facility have interest payments based on a
floating rate of LIBOR plus a number of basis points tied to a formula based
on
our Leverage Ratio. The 2005 Credit Facility had outstanding principal balances
of zero as of December 29, 2006.
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,
South African 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 December 29, 2006 and December
30,
2005 are summarized as follows (in thousands):
|
|
December
29, 2006
|
|
December
30, 2005
|
|
|
|
Nominal
Amount
|
|
Fair
Value
|
|
Nominal
Amount
|
|
Fair
Value
|
|
Forward
contracts:
|
|
|
|
|
|
|
|
|
|
Purchased
|
|
$
|
(21,442
|
)
|
$
|
201
|
|
$
|
(14,426
|
)
|
$
|
249
|
|
Sold
|
|
$
|
38,579
|
|
$
|
(358
|
)
|
$
|
27,726
|
|
$
|
328
|
|
*
We do
not anticipate any material adverse effect on our consolidated financial
position utilizing our current hedging strategy.
TRIMBLE
NAVIGATION LIMITED
INDEX
TO FINANCIAL STATEMENTS
Consolidated
Balance Sheets at December 29, 2006 and December 30, 2005
|
42
|
|
|
Consolidated
Statements of Income for each of the three fiscal years in the period
ended December 29, 2006
|
43
|
|
|
Consolidated
Statement of Shareholders' Equity for each of the three fiscal years
in
the period ended December 29, 2006
|
44
|
|
|
Consolidated
Statements of Cash Flows for each of the three fiscal years in the
period
ended December 29, 2006
|
45
|
|
|
Notes
to Consolidated Financial Statements
|
46
|
|
|
Reports
of Ernst & Young LLP, Independent Registered Public Accounting
Firm
|
74
|
Item
8.
|
Financial
Statements and Supplementary
Data
|
CONSOLIDATED
BALANCE SHEETS
As
at
|
|
December
29,
2006
|
|
December
30,
2005
|
|
(in
thousands)
|
|
|
|
|
|
|
|
|
|
|
|
ASSETS
|
|
|
|
|
|
Current
assets:
|
|
|
|
|
|
Cash
and cash equivalents
|
|
$
|
129,621
|
|
$
|
73,853
|
|
Accounts
receivable, less allowance for doubtful accounts of $4,063 and $5,230,
and
sales return reserve of $859 and $1,500, respectively
|
|
|
172,008
|
|
|
145,100
|
|
Other
receivables
|
|
|
6,014
|
|
|
6,489
|
|
Inventories,
net
|
|
|
112,552
|
|
|
107,851
|
|
Deferred
income taxes
|
|
|
25,905
|
|
|
18,504
|
|
Other
current assets
|
|
|
13,026
|
|
|
8,580
|
|
Total
current assets
|
|
|
459,126
|
|
|
360,377
|
|
Property
and equipment, net
|
|
|
47,998
|
|
|
42,664
|
|
Goodwill
|
|
|
374,510
|
|
|
286,146
|
|
Other
purchased intangible assets, net
|
|
|
67,172
|
|
|
27,310
|
|
Deferred
income taxes
|
|
|
399
|
|
|
3,580
|
|
Other
assets
|
|
|
29,226
|
|
|
23,011
|
|
Total
non-current assets
|
|
|
519,305
|
|
|
382,711
|
|
Total
assets
|
|
$
|
978,431
|
|
$
|
743,088
|
|
|
|
|
|
|
|
|
|
LIABILITIES
AND SHAREHOLDERS' EQUITY
|
|
|
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
|
|
|
Current
portion of long-term debt
|
|
$
|
--
|
|
$
|
216
|
|
Accounts
payable
|
|
|
44,148
|
|
|
45,206
|
|
Accrued
compensation and benefits
|
|
|
47,006
|
|
|
36,083
|
|
Accrued
liabilities
|
|
|
24,973
|
|
|
16,189
|
|
Deferred
revenues
|
|
|
28,060
|
|
|
12,588
|
|
Accrued
warranty expense
|
|
|
8,607
|
|
|
7,466
|
|
Deferred
income taxes
|
|
|
4,525
|
|
|
4,087
|
|
Income
taxes payable
|
|
|
23,814
|
|
|
24,922
|
|
Total
current liabilities
|
|
|
181,133
|
|
|
146,757
|
|
Non-current
portion of long-term debt
|
|
|
481
|
|
|
433
|
|
Deferred
income tax
|
|
|
21,633
|
|
|
5,602
|
|
Other
non-current liabilities
|
|
|
27,519
|
|
|
19,041
|
|
Total
liabilities
|
|
|
230,766
|
|
|
171,833
|
|
Commitments
and contingencies
|
|
|
|
|
|
|
|
Shareholders'
equity:
|
|
|
|
|
|
|
|
Preferred
stock no par value; 3,000 shares authorized; none
outstanding
|
|
|
--
|
|
|
--
|
|
Common
stock, no par value; 180,000 shares authorized; 111,718 and 107,820
shares
issued and outstanding at December 29, 2006 and December 30, 2005,
respectively
|
|
|
435,371
|
|
|
384,196
|
|
Retained
earnings
|
|
|
271,183
|
|
|
167,525
|
|
Accumulated
other comprehensive income
|
|
|
41,111
|
|
|
19,534
|
|
Total
shareholders' equity
|
|
|
747,665
|
|
|
571,255
|
|
Total
liabilities and shareholders' equity
|
|
$
|
978,431
|
|
$
|
743,088
|
|
CONSOLIDATED
STATEMENTS OF INCOME
Fiscal
Years Ended
|
|
December
29,
2006
|
|
December
30,
2005
|
|
December
31,
2004
|
|
(in
thousands, except per share amounts)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
(1)
|
|
$
|
940,150
|
|
$
|
774,913
|
|
$
|
668,808
|
|
Cost
of sales (1)
|
|
|
479,069
|
|
|
385,108
|
|
|
343,998
|
|
Gross
margin
|
|
|
461,081
|
|
|
389,805
|
|
|
324,810
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
expenses
|
|
|
|
|
|
|
|
|
|
|
Research
and development
|
|
|
103,840
|
|
|
84,276
|
|
|
77,558
|
|
Sales
and marketing
|
|
|
143,623
|
|
|
120,215
|
|
|
108,054
|
|
General
and administrative
|
|
|
68,416
|
|
|
52,137
|
|
|
44,694
|
|
Restructuring
charges
|
|
|
--
|
|
|
278
|
|
|
552
|
|
Amortization
of purchased intangible assets
|
|
|
7,906
|
|
|
6,855
|
|
|
8,327
|
|
In-process
research and development
|
|
|
1,930
|
|
|
1,100
|
|
|
-
|
|
Total
operating expenses
|
|
|
325,715
|
|
|
264,861
|
|
|
239,185
|
|
Operating
income
|
|
|
135,366
|
|
|
124,944
|
|
|
85,625
|
|
Non-operating
income (expense), net
|
|
|
|
|
|
|
|
|
|
|
Interest
income
|
|
|
3,799
|
|
|
836
|
|
|
436
|
|
Interest
expense
|
|
|
(558
|
)
|
|
(2,331
|
)
|
|
(3,888
|
)
|
Foreign
currency transaction gain (loss), net
|
|
|
1,719
|
|
|
1,022
|
|
|
(859
|
)
|
Income
(expenses) for affiliated operations, net
|
|
|
6,989
|
|
|
(291
|
)
|
|
(7,590
|
)
|
Other
income
|
|
|
777
|
|
|
608
|
|
|
1,200
|
|
Total
non-operating income (expense), net
|
|
|
12,726
|
|
|
(156
|
)
|
|
(10,701
|
)
|
Income
before taxes
|
|
|
148,092
|
|
|
124,788
|
|
|
74,924
|
|
Income
tax provision
|
|
|
44,434
|
|
|
39,933
|
|
|
7,244
|
|
Net
income
|
|
$
|
103,658
|
|
$
|
84,855
|
|
$
|
67,680
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
earnings per share
|
|
$
|
0.94
|
|
$
|
0.80
|
|
$
|
0.66
|
|
Shares
used in calculating basic earnings per share
|
|
|
110,044
|
|
|
106,432
|
|
|
102,326
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
earnings per share
|
|
$
|
0.89
|
|
$
|
0.75
|
|
$
|
0.62
|
|
Shares
used in calculating diluted earnings per share
|
|
|
116,072
|
|
|
113,638
|
|
|
109,896
|
|
(1)
Sales
to related parties were $22.3 million, $9.1 million and $7.6 million in fiscal
2006, 2005 and 2004, respectively, while cost of sales to those related parties
were $13.9 million, $4.0 million and $3.8 million in fiscal 2006, 2005 and
2004,
respectively. See Note 5 to these Consolidated Financial Statements for a
discussion of related parties.
See
accompanying Notes to the Consolidated Financial Statements.
CONSOLIDATED
STATEMENT OF SHAREHOLDERS’ EQUITY
|
|
|
|
|
|
|
|
Accumulative
|
|
|
|
|
|
|
|
|
|
Other
|
|
Total
|
|
|
|
Common
stock
|
|
Retained
|
|
Comprehensive
|
|
Shareholders'
|
|
|
|
Shares
|
|
Amount
|
|
Earnings
|
|
Income/(Loss)
|
|
Equity
|
|
(in
thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
at January 2, 2004
|
|
|
99,976
|
|
$
|
303,015
|
|
$
|
14,990
|
|
$
|
30,239
|
|
$
|
348,244
|
|
Components
of comprehensive income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income
|
|
|
|
|
|
|
|
|
67,680
|
|
|
|
|
|
67,680
|
|
Gain
on interest rate swap
|
|
|
|
|
|
|
|
|
|
|
|
106
|
|
|
106
|
|
Unrealized
loss on investments
|
|
|
|
|
|
|
|
|
|
|
|
(6
|
)
|
|
(6
|
)
|
Foreign
currency translation adjustments, net of tax
|
|
|
|
|
|
|
|
|
|
|
|
14,025
|
|
|
14,025
|
|
Total
comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
81,805
|
|
Issuance
of common stock in connection with acquisitions and joint venture,
net
|
|
|
589
|
|
|
899
|
|
|
|
|
|
|
|
|
899
|
|
Issuance
of common stock under employee plans and exercise of
warrants
|
|
|
3,861
|
|
|
26,805
|
|
|
|
|
|
|
|
|
26,805
|
|
Tax
benefit from stock option exercises
|
|
|
|
|
|
14,408
|
|
|
|
|
|
|
|
|
14,408
|
|
Balance
at December 31, 2004
|
|
|
104,426
|
|
|
345,127
|
|
|
82,670
|
|
|
44,364
|
|
|
472,161
|
|
Components
of comprehensive income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income
|
|
|
|
|
|
|
|
|
84,855
|
|
|
|
|
|
84,855
|
|
Loss
on interest rate swap
|
|
|
|
|
|
|
|
|
|
|
|
(106
|
)
|
|
(106
|
)
|
Unrealized
loss on investments
|
|
|
|
|
|
|
|
|
|
|
|
(34
|
)
|
|
(34
|
)
|
Foreign
currency translation adjustments, net of tax
|
|
|
|
|
|
|
|
|
|
|
|
(24,690
|
)
|
|
(24,690
|
)
|
Total
comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
60,025
|
|
Issuance
of common stock in connection with acquisitions, net
|
|
|
20
|
|
|
|
|
|
|
|
|
|
|
|
-
|
|
Issuance
of common stock under employee plans and exercise of
warrants
|
|
|
3,374
|
|
|
24,582
|
|
|
|
|
|
|
|
|
24,582
|
|
Tax
benefit from stock option exercises
|
|
|
|
|
|
14,487
|
|
|
|
|
|
|
|
|
14,487
|
|
Balance
at December 30, 2005
|
|
|
107,820
|
|
|
384,196
|
|
|
167,525
|
|
|
19,534
|
|
|
571,255
|
|
Components
of comprehensive income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income
|
|
|
|
|
|
|
|
|
103,658
|
|
|
|
|
|
103,658
|
|
Unrealized
gain on investments
|
|
|
|
|
|
|
|
|
|
|
|
3
|
|
|
3
|
|
Foreign
currency translation adjustments, net of tax
|
|
|
|
|
|
|
|
|
|
|
|
21,709
|
|
|
21,709
|
|
Adjustment
to initially apply FASB Statement No. 158, net of tax
|
|
|
|
|
|
|
|
|
|
|
|
(136
|
)
|
|
(136
|
)
|
Total
comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
125,234
|
|
Issuance
of common stock in connection with acquisitions, net
|
|
|
52
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance
of common stock under employee plans and exercise of
warrants
|
|
|
3,846
|
|
|
26,781
|
|
|
|
|
|
|
|
|
26,781
|
|
Stock
based compensation
|
|
|
|
|
|
12,705
|
|
|
|
|
|
|
|
|
12,706
|
|
Tax
benefit from stock option exercises
|
|
|
|
|
|
11,689
|
|
|
|
|
|
|
|
|
11,689
|
|
Balance
at December 29, 2006
|
|
|
111,718
|
|
$
|
435,371
|
|
$
|
271,183
|
|
$
|
41,110
|
|
$
|
747,665
|
|
See
accompanying Notes to the Consolidated Financial Statements.
CONSOLIDATED
STATEMENTS OF CASH FLOWS
Fiscal
Years Ended
|
|
December
29,
2006
|
|
December
30,
2005
|
|
December
31,
2004
|
|
(In
thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
flows from operating activities:
|
|
|
|
|
|
|
|
Net
income
|
|
$
|
103,658
|
|
$
|
84,855
|
|
$
|
67,680
|
|
Adjustments
to reconcile net income to net cash provided by operating
activities:
|
|
|
|
|
|
|
|
|
|
|
Depreciation
|
|
|
13,523
|
|
|
10,671
|
|
|
8,874
|
|
Amortization
|
|
|
13,259
|
|
|
7,020
|
|
|
8,510
|
|
Provision
for doubtful accounts
|
|
|
163
|
|
|
(502
|
)
|
|
1,210
|
|
Amortization
of debt issuance cost
|
|
|
180
|
|
|
1,270
|
|
|
487
|
|
Deferred
income taxes
|
|
|
10,368
|
|
|
14,242
|
|
|
(1,482
|
)
|
Stock-based
compensation
|
|
|
12,571
|
|
|
-
|
|
|
-
|
|
In-process
research and development
|
|
|
1,930
|
|
|
1,100
|
|
|
-
|
|
Equity
(gain) loss from joint ventures
|
|
|
(6,989
|
)
|
|
290
|
|
|
(1,212
|
)
|
Excess
tax benefit for stock-based compensation
|
|
|
(8,761
|
)
|
|
-
|
|
|
-
|
|
Other
|
|
|
720
|
|
|
(756
|
)
|
|
1,191
|
|
Add
decrease (increase) in assets:
|
|
|
|
|
|
|
|
|
|
|
Accounts
receivable, net
|
|
|
(12,185
|
)
|
|
(19,018
|
)
|
|
(17,245
|
)
|
Other
receivables
|
|
|
1,949
|
|
|
(2,108
|
)
|
|
2,231
|
|
Inventories,
net
|
|
|
(374
|
)
|
|
(17,888
|
)
|
|
(15,529
|
)
|
Other
current and non-current assets
|
|
|
(18,692
|
)
|
|
(2,294
|
)
|
|
(69
|
)
|
Add
increase (decrease) in liabilities:
|
|
|
|
|
|
|
|
|
|
|
Accounts
payable
|
|
|
(4,487
|
)
|
|
1,078
|
|
|
14,668
|
|
Accrued
compensation and benefits
|
|
|
7,807
|
|
|
3,408
|
|
|
4,847
|
|
Accrued
liabilities
|
|
|
9,952
|
|
|
6,232
|
|
|
(1,757
|
)
|
Deferred
gain on joint venture
|
|
|
-
|
|
|
(9,180
|
)
|
|
(665
|
)
|
Deferred
revenues
|
|
|
3,263
|
|
|
2,406
|
|
|
1,619
|
|
Income
taxes payable
|
|
|
10,232
|
|
|
12,054
|
|
|
1,218
|
|
Net
cash provided by operating activities
|
|
|
138,087
|
|
|
92,880
|
|
|
74,576
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
flows from investing activities:
|
|
|
|
|
|
|
|
|
|
|
Acquisition
of property and equipment
|
|
|
(16,529
|
)
|
|
(23,436
|
)
|
|
(12,750
|
)
|
Acquisitions,
net of cash acquired
|
|
|
(99,887
|
)
|
|
(51,379
|
)
|
|
(11,388
|
)
|
Other
|
|
|
(16
|
)
|
|
(103
|
)
|
|
(995
|
)
|
Net
cash used in investing activities
|
|
|
(116,432
|
)
|
|
(74,918
|
)
|
|
(25,133
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Cash
flows from financing activities:
|
|
|
|
|
|
|
|
|
|
|
Issuance
of common stock and warrants
|
|
|
26,566
|
|
|
24,463
|
|
|
26,805
|
|
Excess
tax benefit for stock-based compensation
|
|
|
8,761
|
|
|
-
|
|
|
-
|
|
Proceeds
from long-term debt and revolving credit lines
|
|
|
-
|
|
|
6,000
|
|
|
14,000
|
|
Payments
on long-term debt and revolving credit lines
|
|
|
-
|
|
|
(44,250
|
)
|
|
(65,235
|
)
|
Other
|
|
|
(1,165
|
)
|
|
385
|
|
|
271
|
|
Net
cash provided by (used in) financing activities
|
|
|
34,162
|
|
|
(13,402
|
)
|
|
(24,159
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Effect
of exchange rate changes on cash and cash equivalents
|
|
|
(49
|
)
|
|
(2,579
|
)
|
|
1,172
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
increase in cash and cash equivalents
|
|
|
55,768
|
|
|
1,981
|
|
|
26,456
|
|
Cash
and cash equivalents, beginning of fiscal year
|
|
|
73,853
|
|
|
71,872
|
|
|
45,416
|
|
Cash
and cash equivalents, end of fiscal year
|
|
$
|
129,621
|
|
$
|
73,853
|
|
$
|
71,872
|
|
See
accompanying Notes to the Consolidated Financial Statements.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE
1: DESCRIPTION OF BUSINESS
Trimble
Navigation Limited (Trimble or the Company) began operations in 1978 and
incorporated in California in 1981. Trimble provides positioning product
solutions, most typically to commercial and government users. The principal
applications served include surveying, construction, agriculture, urban and
resource management, military, transportation and telecommunications. The
Company’s products typically provide its customers benefits that can include
lower costs, and higher productivity. Examples of products include systems
that
guide agricultural and construction equipment, surveying instruments, systems
that track fleets of vehicles, and data collection systems that enable the
management of large amounts of geo referenced information. In addition, the
Company also manufactures components for in vehicle navigation and telematics
systems, and timing modules used in the synchronization of wireless networks.
NOTE
2: ACCOUNTING
POLICIES
Use
of Estimates
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 the financial statements and
accompanying notes. Estimates are used for allowances for doubtful accounts,
sales returns reserve, allowances for inventory valuation, warranty costs,
investments, goodwill impairments, and income taxes among others. 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 differ materially from management’s
estimates.
Basis
of Presentation
Trimble
has a 52-53 week fiscal year, ending on the Friday nearest to December 31.
Fiscal
2006, a 52-week year, ended on December 29, 2006, fiscal 2005, a 52-week year,
and fiscal 2004, a 52-week year, ended on December 30, 2005 and December 31,
2004, respectively. Unless otherwise stated, all dates refer to its fiscal
year.
These
Consolidated Financial Statements include the results of Trimble and its
subsidiaries. Inter-company accounts and transactions have been eliminated.
Certain segment disclosures from prior years have been reclassified to conform
to the current year presentation.
On
January 17, 2007, Trimble’s Board of Directors approved a 2-for-1 split of all
outstanding shares of the Company’s Common Stock, payable February 22, 2007 to
stockholders of record on February 8, 2007. All shares and per share information
presented has been adjusted to reflect the stock split on a retroactive basis
for all periods presented.
Foreign
Currency Translation
Assets
and liabilities of non-U.S. subsidiaries that operate in local currencies are
translated to U.S. dollars at exchange rates in effect at the balance sheet
date, with the resulting translation adjustments directly recorded to a separate
component of accumulated other comprehensive income. Income and expense accounts
are translated at average exchange rates during the year. Where the U.S. dollar
is the functional currency, translation adjustments are recorded in foreign
currency transaction adjustments, net of tax in accumulated other comprehensive
income within the shareholders’ equity section of the consolidated balance
sheets.
Cash
and Cash Equivalents
Cash
and
cash equivalents include all cash and highly liquid investments with
insignificant interest rate risk and maturities of three months or less at
the
date of purchase. The carrying amount of cash and cash equivalents approximates
fair value because of the short maturity of those instruments.
Fair
Value of Financial Instruments
The
fair
value of certain of the Company’s financial instruments, including cash and cash
equivalents, and other accrued liabilities approximate cost because of their
short maturities. The fair value of investments is determined using quoted
market prices for those securities or similar financial instruments.
Concentration
of Risk
Cash
and
cash equivalents are maintained with several financial institutions. Deposits
held with banks may exceed the amount of insurance provided on such deposits.
Generally, these deposits may be redeemed upon demand and are maintained with
financial institutions of reputable credit and therefore bear minimal credit
risk.
The
Company is also exposed to credit risk in the Company’s trade receivables, which
are derived from sales to end user customers in diversified industries as well
as various resellers. Trimble performs ongoing credit evaluations of its
customers’ financial condition and limits the amount of credit extended when
deemed necessary but generally does not require collateral.
With
the
selection of Solectron Corporation in August 1999 as an exclusive manufacturing
partner for many of its GPS products, Trimble became substantially dependent
upon a sole supplier for the manufacture of many of its products. In addition,
the Company relies on sole suppliers for a number of its critical components.
Allowance
for Doubtful Accounts
Trimble
maintains allowances for doubtful accounts for estimated losses resulting from
the inability of its customers to make required payments.
Trimble
evaluates the collectibility of its trade accounts receivable based on a number
of factors such as age of the accounts receivable balances, credit quality,
historical experience, and current economic conditions that may affect a
customer’s ability to pay. In circumstances where the Company is aware of a
specific customer’s inability to meet its financial obligations to the Company,
a specific allowance for bad debts is estimated and recorded which reduces
the
recognized receivable to the estimated amount Trimble believes will ultimately
be collected. In addition to specific customer identification of potential
bad
debts, bad debt charges are recorded based on the Company’s recent past loss
history and an overall assessment of past due trade accounts receivable amounts
outstanding.
Inventories
Trimble’s
inventories are stated at the lower of cost or market, with costs primarily
computed on a standard cost basis. Adjustments to reduce the cost of inventory
to its net realizable value, if required, are made for estimated excess,
obsolescence, or impaired balances. Factors influencing these adjustments
include decline in demand, technological changes, product life cycle and
development plans, component cost trends, product pricing, physical
deterioration, and quality issues. If actual factors are less favorable than
those projected by us, additional inventory write-downs may be
required
Internal-Use
Software Development Costs
The
Company capitalizes material software development costs for internal use
pursuant to Statement of Position No. 98-1, “Accounting for the Costs of
Computer Software Developed or Obtained for Internal Use.”
Goodwill,
Purchased Intangible Assets and Long-Lived Assets
Intangible
assets include goodwill, distribution channels, patents, licenses, technology,
acquired backlog and trademarks which are capitalized at acquisition cost.
Intangible assets with definite lives are amortized on the straight-line basis.
Useful lives generally range from three to seven years with weighted average
useful life of 5.3 years.
If
facts
and circumstances indicate that intangible assets or property and equipment
may
be impaired, an evaluation of continuing value would be performed. The process
of evaluating the potential impairment of goodwill is subjective and requires
significant assumptions If an evaluation is required, the estimated future
undiscounted cash flows associated with these assets would be compared to their
carrying amount to determine if a write-down to fair market value or discounted
cash flow value is required.
Trimble
performed an annual impairment test of goodwill at the end of the third fiscal
quarter of 2006, 2005, and 2004, respectively, and concluded there was no
impairment of goodwill. Trimble will continue to evaluate its goodwill for
impairment on an annual basis at the end of each fiscal third quarter and
whenever events and changes in circumstances suggest that the carrying amount
may not be recoverable.
Revenue
Recognition
Trimble’s
revenues are recorded in accordance with the Securities and Exchange
Commission’s (SEC) Staff Accounting Bulletin (SAB) No. 104, “Revenue
Recognition.” The Company recognizes product revenue when persuasive evidence of
an arrangement exists, delivery has occurred, the fee is fixed or determinable,
and collectibility is reasonably assured. In instances where final acceptance
of
the product is specified by the customer or is uncertain, revenue is deferred
until all acceptance criteria have been met.
Contracts
and customer purchase orders are typically used to determine the existence
of an
arrangement. Shipping documents and customer acceptance, when applicable, are
used to verify delivery. The Company assesses whether the fee is fixed or
determinable based on the payment terms associated with the transaction and
whether the sales price is subject to refund or adjustment. The Company assesses
collectibility based primarily on the creditworthiness of the customer as
determined by credit checks and analysis, as well as the customer’s payment
history.
Trimble’s
shipment terms for US orders, and international orders fulfilled from its
European distribution center are typically FCA (Free Carrier) shipping point,
except certain sales to US government agencies which are shipped FOB
destination. FCA shipping point means that we fulfill the obligation and title
has passed to the buyer upon delivery of the goods to the carrier named by
the
buyer at the named place or point. If no precise point is indicated by the
buyer, Trimble may choose within the place or range stipulated where the carrier
will take the goods into carrier’s charge. FOB destination means revenue for
orders are not recognized until the product is delivered and title has
transferred to the buyer. We bear all costs and risks of loss or damage to
the
goods up to that point. Shipping and handling costs are included in the cost
of
goods sold.
Revenue
to distributors and resellers is recognized upon delivery, assuming all other
criteria for revenue recognition have been met. Distributors and resellers
do
not have a right of return.
Revenues
from purchased extended warranty and support agreements are deferred and
recognized ratably over the term of the warranty/support period.
The
Company applies Statement of Position (SOP) No. 97-2, “Software Revenue
Recognition” to products where the embedded software is more than incidental to
the functionality of the hardware. This determination requires significant
judgment including a consideration of factors such as the marketing, research
and development efforts and any postcustomer contract support relating to the
embedded software.
In
accordance with Emerging Issues Task Force (EITF) Issue 00-21, “Accounting for
Revenue Arrangements with Multiple Deliverables,” when a non-software sale
involves multiple elements the entire fee from the arrangement is allocated
to
each respective element based on its relative fair value and recognized when
revenue recognition criteria for each element are met.
Software
revenue is recognized in accordance with Statement of Position (SOP) No. 97-2,
“Software Revenue Recognition” and Statement of Position (SOP) No. 98-9,
“Modification of SOP 97-2.” Trimble’s software arrangements generally consist of
a perpetual license fee and post contract customer support (PCS). Trimble has
established vendor-specific objective evidence (VSOE) of fair value for its
PCS
contracts based on the renewal rate. The remaining value of the software
arrangement is allocated to the license fee using the residual method, which
revenue is primarily recognized when the software has been delivered and there
are no remaining obligations. Revenue from PCS is recognized ratably over the
term of the PCS agreement.
A
reserve
for sales returns is established based on historical trends in product return
rates experienced in the ordinary course of business. The reserve for estimated
future returns is recorded as a reduction of our accounts receivable and
revenue. If the actual returns were to deviate from the historical data on
which
the sales reserve had been established, the Company’s revenue could be adversely
affected.
Warranty
The
Company accrues for warranty costs as part of its cost of sales based on
associated material product costs, technical support labor costs, and costs
incurred by third parties performing work on the Company’s behalf. Trimble’s
expected future cost is primarily estimated based upon historical trends in
the
volume of product returns within the warranty period and the cost to repair
or
replace the equipment. 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 12 months ended December
29, 2006 and December 30, 2005, are as follows:
Fiscal
Years Ended
|
|
December
29,
2006
|
|
December
30,
2005
|
|
(In
thousands)
|
|
|
|
|
|
|
|
|
|
|
|
Beginning
balance
|
|
$
|
7,466
|
|
$
|
6,425
|
|
Warranties
accrued
|
|
|
8,446
|
|
|
7,960
|
|
Warranty
claims
|
|
|
(7,305
|
)
|
|
(6,919
|
)
|
Ending
Balance
|
|
$
|
8,607
|
|
$
|
7,466
|
|
Guarantees,
Including Indirect Guarantees of Indebtedness of Others
In
the
normal course of business to facilitate sales of its products, the Company
indemnifies other parties, including customers, lessors, and parties to other
transactions with the Company, with respect to certain matters. The Company
has
agreed to hold the other party harmless against losses arising from a breach
of
representations or covenants, or out of intellectual property infringement
or
other claims made against certain parties. These agreements may limit the time
within which an indemnification claim can be made and the amount of the claim.
In addition, the Company has entered into indemnification agreements with its
officers and directors, and the Company’s bylaws contain similar indemnification
obligations to the Company’s agents.
It
is not
possible to determine the maximum potential amount under these indemnification
agreements due to the limited history of prior indemnification claims and the
unique facts and circumstances involved in each particular agreement.
Historically, payments made by the Company under these agreements were not
material and no liabilities have been recorded for these obligations on the
Consolidated Balance Sheets as of December 29, 2006 and December 30, 2005.
Advertising
Costs
The
Company expenses all advertising costs as incurred. Advertising expenses were
approximately $16.1 million, $14.8 million, and $9.5 million, in fiscal 2006,
2005, and 2004, respectively.
Research
and Development Costs
Research
and development costs are charged to expense as incurred. Cost
of
software developed for external sale subsequent to reaching technical
feasibility were not considered material and were expensed as incurred.
The
Company received third party funding of approximately $7.8 million, $9.0
million, and $7.7 million in fiscal 2006, 2005, and 2004 respectively. The
Company offsets research and development expenses with any third party funding
received. The Company retains the rights to any technology developed under
such
arrangements.
Stock-Based
Compensation
In
December 2004, the Financial Accounting Standards Board (“FASB”) issued Standard
of Financial Accounting Standards (“SFAS”) 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 Accounting Principals Board
(“APB”) Opinion No. 25, and allowed under the original provisions of SFAS 123.
Trimble
has adopted SFAS 123(R) using the modified prospective method. 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 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 SFAS 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 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. Note 14 of the
Consolidated Financial Statements describe the plans operated by Trimble.
The
following table summarizes stock-based compensation expense, net of tax, related
to employee stock-based compensation included in the Consolidated Statements
of
Income in
accordance with SFAS 123(R) for
the
year ended December 29, 2006.
Year
Ended
|
|
|
|
December
29,
2006
|
|
December
30,
2005
|
|
December
31,
2004
|
|
(in
thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost
of sales
|
|
|
|
|
$
|
1,173
|
|
$
|
-
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research
& development
|
|
|
|
|
|
2,554
|
|
|
-
|
|
|
-
|
|
Sales
& marketing
|
|
|
|
|
|
2,814
|
|
|
-
|
|
|
-
|
|
General
& administrative
|
|
|
|
|
|
6,029
|
|
|
-
|
|
|
-
|
|
Stock-based
compensation expense included in operating expenses
|
|
|
|
|
|
11,397
|
|
|
-
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
stock-based compensation
|
|
|
|
|
|
12,570
|
|
|
-
|
|
|
-
|
|
Tax
benefit
|
|
|
(1)
|
|
|
(1,185
|
)
|
|
-
|
|
|
-
|
|
Total
stock-based compensation, net of tax
|
|
|
|
|
$
|
11,385
|
|
$
|
-
|
|
$
|
-
|
|
Effect
of FAS 123(R) on basic earnings per share
|
|
|
|
|
$
|
0.10
|
|
$
|
-
|
|
$
|
-
|
|
Effect
of FAS 123(R) on diluted earnings per share
|
|
|
|
|
$
|
0.10
|
|
$
|
-
|
|
$
|
-
|
|
(1)
Tax
benefit related to US non-qualified options only as allowed by the applicable
tax requirements using the statutory tax rate for
the
year ended December 29, 2006.
The
table
below provides pro forma information for
the
year ended December 30, 2005 and December 31, 2004, respectively, as
if
Trimble had accounted for its employee stock options and purchases under the
employee stock purchase plan in accordance with SFAS 123.
Fiscal
Years Ended
|
|
|
|
December
30,
2005
|
|
December
31,
2004
|
|
(in
thousands, except per share amounts)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income - as reported
|
|
|
|
|
$
|
84,855
|
|
$
|
67,680
|
|
Stock-based
compensation expense, net of tax
|
|
|
(1)
|
|
|
11,149
|
|
|
9,986
|
|
Net
income - pro forma
|
|
|
|
|
$
|
73,706
|
|
$
|
57,694
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
earnings per share - as reported
|
|
|
|
|
$
|
0.80
|
|
$
|
0.66
|
|
Basic
earnings per share - pro forma
|
|
|
|
|
$
|
0.69
|
|
$
|
0.56
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
earnings per share - as reported
|
|
|
|
|
$
|
0.75
|
|
$
|
0.62
|
|
Diluted
earnings per share - pro forma
|
|
|
|
|
$
|
0.65
|
|
$
|
0.52
|
|
(1)
Includes compensation expense for employee stock purchase plan for
the
year ended December 30, 2005 and December 31, 2004, respectively,
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
fiscal 2005 and 2004 Form 10-K. Tax benefit relates to non-qualified options
only as allowed by the applicable tax requirements using the statutory tax
rate
as of December
30, 2005 and December 31, 2004, respectively.
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 Consolidated of Income for the year
ended December 29, 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 will be 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.
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 and Black-Scholes models, the estimated fair values of each employee
stock option granted during fiscal years 2006, 2005, and 2004 were $8.04, $7.27
and $6.93, respectively. The value of each option grant is estimated on the
date
of grant using the binomial model for options granted during and after the
fourth quarter of fiscal 2005, and the Black-Scholes option pricing model for
options granted during and prior to the third quarter of fiscal 2005, with
the
following assumptions:
|
December
29,
2006
|
December
30,
2005
|
December
31,
2004
|
Expected
dividend yield
|
-
|
-
|
-
|
Expected
stock price volatility
|
42%
|
47%
|
56%
|
Risk
free interest rate
|
4.8%
|
4.3%
|
3.5%
|
Expected
life of options after vesting
|
1.3
years
|
1.7
years
|
1.6
years
|
Expected
Dividend Yield
-
The
dividend yield assumption is based on the Company’s history and expectation of
dividend payouts.
Expected
Stock Price Volatility
-
The
Company’s computation of expected volatility is based on a combination of
implied volatilities from traded options on the Company’s stock and historical
volatility. 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
Under
the
Employee Stock Purchase Plan, rights to purchase shares are generally granted
during the second and fourth quarter of each year. The fair value of rights
granted under the Employee Stock Purchase Plan was estimated at the date of
grant using the Black-Scholes option-pricing model. The estimated weighted
average value of rights granted under the Employee Stock Purchase Plan during
fiscal years 2006, 2005, and 2004 were $5.16, $4.94 and $3.66, respectively.
The
fair value of rights granted during 2006, 2005, and 2004 was estimated at the
date of grant using the following assumptions:
Fiscal
years ended
|
December
29,
2006
|
December
30,
2005
|
December
31,
2004
|
Expected
dividend yield
|
-
|
-
|
-
|
Expected
stock price volatility
|
35.5%
|
47%
|
46%
|
Risk
free interest rate
|
4.8%
|
3.5%
|
1.7%
|
Expected
life of purchase
|
0.6
years
|
0.5
years
|
0.5
years
|
Expected
Dividend Yield
-
The
dividend yield assumption is based on the Company’s history and expectation of
dividend payouts.
Expected
Stock Price Volatility
-
The
Company’s computation of expected volatility is based on 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 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 term of the offering
period of the purchase plan.
Depreciation
Depreciation
of property and equipment owned is computed using the straight-line method
over
the shorter of the estimated useful lives or the lease terms. Useful lives
include a range from two to six years for machinery and equipment, five years
for furniture and fixtures, two to five years for computer equipment and
software, and the life of the lease for leasehold improvements. The
costs
of repairs and maintenance are expensed when incurred, while expenditures for
refurbishments and improvements that significantly add to the productive
capacity or extend the useful life of an asset are capitalized. Depreciation
expense was $13.5 million in fiscal 2006, $10.7 million in fiscal 2005, and
$8.9
million in fiscal 2004.
Income
Taxes
Income
taxes are accounted for under the liability method whereby deferred tax asset
or
liability account balances are calculated at the balance sheet date using
current tax laws and rates in effect for the year in which the differences
are
expected to affect taxable income. A valuation allowance is recorded to reduce
the carrying amounts of deferred tax assets if it is more likely than not that
such assets will not be realized.
Computation
of Earnings Per Share
Number
of
shares used in calculation of basic earnings per share represents the weighted
average common shares outstanding during the period and excludes any dilutive
effects of options, warrants, and convertible securities. The dilutive effects
of options, warrants, and convertible securities are included in diluted
earnings per share.
New
Accounting Pronouncements
In
September 2006, the FASB issued SFAS No. 158, "Employers' Accounting for Defined
Benefit Pension and Other Postretirement Plans, an amendment of FASB Statements
No. 87, 88, 106, and 132(R)." SFAS 158 requires companies to recognize the
overfunded or underfunded status of a defined benefit post-retirement plan
as an
asset or liability in its balance sheet, recognize as a component of accumulated
other comprehensive income, net of tax, amounts accumulated at the date of
adoption due to delayed recognition of actuarial gains and losses, prior service
costs and credits, and transition assets and obligations, and provide additional
disclosures, effective for fiscal years ending after December 15, 2006. On
December 29, 2006, Trimble adopted the recognition and disclosure provisions
of
SFAS 158. The effect of adopting these provisions of SFAS 158 on the Company’s
financial condition at December 29, 2006 has been included in the accompanying
consolidated financial statements. These provisions of SFAS 158 did not have
an
effect on the Company’s consolidated financial condition at December 30, 2005 or
December 31, 2004. See Note 15 to the Notes to Consolidated Financial Statements
for additional information.
SFAS
158
also requires companies to measure the funded status of the plan as of the
date
of its fiscal year-end, with limited exceptions, effective for fiscal years
ending after December 15, 2008. For Trimble, this provision of SFAS 158 will
be
effective for the fiscal year ended 2008. The Company is currently
evaluating this provision of SFAS 158 and its possible impacts on the Company’s
financial statements.
In
July
2006, the 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 SFAS 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 the first
quarter of fiscal 2007. 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.
NOTE
3: EARNINGS PER SHARE
The
following data show the amounts used in computing earnings per share and the
effect on the weighted-average number of shares of potentially dilutive common
stock.
Fiscal
Years Ended
|
|
December
29,
2006
|
|
December
30,
2005
|
|
December
31,
2004
|
|
(In
thousands, except per share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Numerator:
|
|
|
|
|
|
|
|
Income
available to common shareholders:
|
|
|
|
|
|
|
|
Used
in basic and diluted earnings per share
|
|
$
|
103,658
|
|
$
|
84,855
|
|
$
|
67,680
|
|
|
|
|
|
|
|
|
|
|
|
|
Denominator:
|
|
|
|
|
|
|
|
|
|
|
Weighted
average number of common shares used in basic earnings per
share
|
|
|
110,044
|
|
|
106,432
|
|
|
102,326
|
|
Effect
of dilutive securities (using treasury stock method):
|
|
|
|
|
|
|
|
|
|
|
Common
stock options
|
|
|
5,134
|
|
|
5,900
|
|
|
5,894
|
|
Common
stock warrants
|
|
|
894
|
|
|
1,306
|
|
|
1,676
|
|
Weighted
average number of common shares and dilutive potential common shares
used
in diluted earnings per share
|
|
|
116,072
|
|
|
113,638
|
|
|
109,896
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
earnings per share
|
|
$
|
0.94
|
|
$
|
0.80
|
|
$
|
0.66
|
|
Diluted
earnings per share
|
|
$
|
0.89
|
|
$
|
0.75
|
|
$
|
0.62
|
|
NOTE
4: BUSINESS COMBINATIONS
Acquisitions
The
following is a summary of acquisitions made by Trimble during fiscal 2006,
2005
and 2004 all of which were accounted for as purchases:
Acquisition
|
|
Primary
Service or Product
|
|
Operating
Segment
|
|
Acquisition
Date
|
Spacient
Technologies, Inc.
|
|
Enterprise
field service management and mobile mapping solutions
|
|
Field
Solutions
|
|
November
21, 2006
|
Meridian
Project Systems, Inc.
|
|
Enterprise
project management and lifecycle software
|
|
Engineering
& Construction
|
|
November
7, 2006
|
XYZ
Solutions, Inc.
|
|
Real-time,
interactive 3D intelligence software
|
|
Engineering
& Construction
|
|
October
27, 2006
|
Visual
Statement, Inc.
|
|
Desktop
software tools
|
|
Mobile
Solutions
|
|
October
11, 2006
|
Intransix
|
|
Mobile
GPS applications
|
|
Advanced
Devices
|
|
April
21, 2006
|
BitWyse
Solutions, Inc.
|
|
Engineering
and construction information management software
|
|
Engineering
& Construction
|
|
May
1, 2006
|
Eleven
Technology, Inc.
|
|
Mobile
application software
|
|
Mobile
Solutions
|
|
April
28, 2006
|
Quantm
International, Inc.
|
|
Transportation
route optimization solution
|
|
Engineering
& Construction
|
|
April
5, 2006
|
XYZs
of GPS, Inc.
|
|
Real-time
Global Navigation Satellite System
|
|
Engineering
& Construction
|
|
February
26, 2006
|
Advanced
Public Safety, Inc.
|
|
Mobile
and handheld software for public safety
|
|
Mobile
Solutions
|
|
December
30, 2005
|
MobileTech
Solutions, Inc.
|
|
Field
workforce automation solutions
|
|
Mobile
Solutions
|
|
October
25, 2005
|
Apache
Technologies, Inc.
|
|
Laser
detection technology
|
|
Engineering
& Construction
|
|
April
19, 2005
|
Pacific
Crest Corporation
|
|
Wireless
data communication systems
|
|
Engineering
& Construction
|
|
January
10, 2005
|
GeoNav
GmbH
|
|
Customized
field data collection solutions
|
|
Engineering
and Construction
|
|
July
5, 2004
|
TracerNET
Corp.
|
|
Wireless
fleet management solutions
|
|
Mobile
Solutions
|
|
March
5, 2004
|
The
Consolidated Financial Statements include the operating results of each business
from the date of acquisition. Pro forma results of operations have not been
presented because the effects of each of these acquisitions were not material
to
the Company’s results.
The
total
purchase consideration for each of the above acquisitions was allocated to
the
assets acquired and liabilities assumed based on their estimated fair values
as
of the date of acquisition. The fair value of intangible assets acquired is
generally determined based on the discount cash flow analysis performed by
third-party experts. Acquisition costs directly related to the acquisitions
were
capitalized.
At
the
date of each acquisition, the projects associated with in-process research
and
development (IPR&D) efforts had not yet reached technological feasibility
and the research and development in process had no alternative future uses.
Accordingly, the value assigned to these IPR&D amounts were charged to
expense on the respective acquisition date of each of the acquired companies.
Trimble recorded IPR&D expense of $1.9 million and $1.1 million relating to
acquisitions made in fiscal 2006 and 2005. We did not record any IPR&D
expense in fiscal 2004.
The
following table summarizes the Company’s business combinations completed during
fiscal years 2006, 2005 and 2004 (in thousands):
Fiscal
Years Ended
|
|
December
29,
2006
|
|
December
30,
2005
|
|
December
31,
2004
|
|
|
|
|
|
|
|
|
|
Purchase
price
|
|
$
|
114,442
|
|
$
|
63,830
|
|
$
|
12,246
|
|
Purchase
price adjustments
|
|
|
4,964
|
|
|
1,595
|
|
|
1,167
|
|
Acquisition
costs
|
|
|
2,127
|
|
|
466
|
|
|
279
|
|
Total
purchase price
|
|
$
|
121,533
|
|
$
|
65,891
|
|
$
|
13,692
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchase
price allocation:
|
|
|
|
|
|
|
|
|
|
|
Fair
value of net assets acquired
|
|
$
|
1,142
|
|
$
|
1,237
|
|
$
|
2,649
|
|
Identified
intangible assets
|
|
|
52,471
|
|
|
21,171
|
|
|
2,117
|
|
In-Process
Research & Development
|
|
|
1,930
|
|
|
1,100
|
|
|
-
|
|
Goodwill
|
|
|
65,990
|
|
|
42,383
|
|
|
8,926
|
|
Total
|
|
$
|
121,533
|
|
$
|
65,891
|
|
$
|
13,692
|
|
Certain
acquisitions include additional earn-out cash payments based on future revenue
derived from existing products. These earn-out payments are considered
additional purchase price consideration. Earn-out cash payments made for fiscal
2006, fiscal 2005 and fiscal 2004 were $4.5 million, $1.6 million and $1.2
million respectively. Earn-outs and changes in purchase price allocation
estimates were recorded as purchase price adjustments and goodwill adjustments.
Acquisitions made by Trimble have additional potential earn-out cash payments
not to exceed approximately $73.3 million.
Intangible
Assets
The
following tables present details of the Company’s total intangible assets:
As
of
|
|
December
29,
2006
|
|
December
30,
2005
|
|
(In
thousands)
|
|
|
|
|
|
|
|
|
|
|
|
Intangible
assets:
|
|
|
|
|
|
Intangible
assets with definite life:
|
|
|
|
|
|
Existing
technology
|
|
$
|
92,430
|
|
$
|
48,100
|
|
Trade
names, trademarks, patents, backlog and other intellectual
properties
|
|
|
37,690
|
|
|
26,808
|
|
Total
intangible assets with definite life
|
|
|
130,120
|
|
|
74,908
|
|
Less
accumulated amortization
|
|
|
(62,948
|
)
|
|
(47,598
|
)
|
Total
net intangible assets
|
|
$
|
67,172
|
|
$
|
27,310
|
|
Total
intangible assets before accumulated amortization increased by $55.2 million
primarily due to $52.5 million in intangible assets purchased in connection
with
acquisitions in fiscal 2006 and $2.4 million in foreign exchange rate
translation impact on non-US currency denominated intangible assets. Accumulated
amortization increased by $15.4 million primarily due to amortization expenses
of $13.3 million and $2.1 million in foreign exchange rate translation impact
on
non-US currency denominated intangible assets.
The
following table presents details of the amortization expense of purchased and
other intangible assets as reported in the Consolidated Statements of Income:
Fiscal
Years Ended
|
|
December
29,
2006
|
|
December
30,
2005
|
|
December
31,
2004
|
|
(In
thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reported
as:
|
|
|
|
|
|
|
|
Cost
of sales
|
|
$
|
5,168
|
|
$
|
165
|
|
$
|
183
|
|
Operating
expenses
|
|
|
8,091
|
|
|
6,855
|
|
|
8,327
|
|
Total
|
|
$
|
13,259
|
|
$
|
7,020
|
|
$
|
8,510
|
|
Total
amortization expense of intangible assets for fiscal 2006 increased by $6.2
million primarily due to an increase in intangible assets purchased in
connection with acquisitions in fiscal 2006.
The
estimated future amortization expense of intangible assets as of December 29,
2006, is as follows (in thousands):
|
|
Amortization
Expense
|
|
2007
|
|
$
|
17,805
|
|
2008
|
|
|
15,916
|
|
2009
|
|
|
12,919
|
|
2010
|
|
|
10,721
|
|
2011
|
|
|
6,470
|
|
Thereafter
|
|
|
3,341
|
|
Total
|
|
$
|
67,172
|
|
Goodwill
Goodwill
consisted of the following:
As
of
|
|
December
29,
2006
|
|
December
30,
2005
|
|
(In
thousands)
|
|
|
|
|
|
|
|
|
|
|
|
Goodwill,
Spectra Precision acquisition
|
|
$
|
209,693
|
|
$
|
196,676
|
|
Goodwill,
other acquisitions
|
|
|
164,817
|
|
|
89,470
|
|
Goodwill
|
|
$
|
374,510
|
|
$
|
286,146
|
|
The
increase in goodwill of approximately $88.4 million during fiscal 2006 was
primarily due to $56.5 million in goodwill from acquisitions in fiscal 2006
and
$4.5 million in earn-out amounts recorded in fiscal 2006 related to the Apache,
Mensi, XYZs of GPS, Mobile-Tech Solutions and Tracer-Net acquisitions. Goodwill
also increased by $13.5 million due to the foreign exchange rate translation
impact on non-US currency denominated goodwill assets. See Note 7 of the Notes
to the Consolidated Financial Statements for additional information regarding
Trimble’s goodwill by operating segment.
NOTE
5: 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 Consolidated Statements of Income. CTCT develops and markets
advanced electronic guidance and control products for earth moving machines
in
the construction and mining industries.
During
the first quarter of fiscal 2002, Trimble received a special cash distribution
of $11.0 million from CTCT. Trimble had recorded the cash distribution of $11.0
million as a deferred gain and amortized it to the extent that losses were
attributable from CTCT under the equity method of accounting. Since the joint
venture is now profitable on a sustainable basis and future operating losses
are
not anticipated, Trimble recognized the unamortized portion of the gain or
$9.2
million in fiscal 2005 as income in non operating income/expense.
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 the
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 income (expense) 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 an $18.1 million decrease in
gross
margins for fiscal 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 $13.5 million for fiscal
2006 and $9.7 million for both fiscal 2005 and fiscal 2004. The reimbursements
were offset against operating expenses. Dividends received from CTCT amounted
to
$2.0 million in fiscal 2006 and $0 in fiscal 2005 and were recorded against
long-term investments on the Consolidated Balance Sheets.
Fiscal
Years Ended
|
|
December
29,
2006
|
|
December
30,
2005
|
|
December
31,
2004
|
|
(In
millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CTCT
incremental pricing effects, net
|
|
$
|
-
|
|
$
|
11.4
|
|
$
|
8.8
|
|
Trimble's
50% share of CTCT's reported (gain) loss
|
|
|
(5.7
|
)
|
|
(2.0
|
)
|
|
0.5
|
|
Amortization
of deferred gain
|
|
|
-
|
|
|
(9.2
|
)
|
|
(0.7
|
)
|
Total
CTCT expense (gain) for affiliated operations, net
|
|
|
($5.7
|
)
|
$
|
0.2
|
|
$
|
8.6
|
|
The
net
outstanding balance due from CTCT was $0.3 million at December 29, 2006 and
$0.2
million at December
30, 2005 and was included in other receivables, net on the Consolidated Balance
Sheets.
Nikon-Trimble
Joint Venture
On
March
28, 2003, Nikon-Trimble Co., Ltd (“Nikon-Trimble”), a joint venture was formed
by Trimble and Nikon Corporation. The joint venture began operations in July
2003 and is 50% owned by Trimble and 50% owned by Nikon, with equal voting
rights. It focuses on the design and manufacture of surveying instruments
including mechanical total stations and related products.
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
uses the equity method of accounting for its investment in Nikon-Trimble, with
50% share of profit or loss from this joint venture reported by Trimble in
the
non-operating income (expense), net section of the Consolidated Statements
of
Income under the heading of income (expense) for affiliated operations, net.
Trimble reported a profit of approximately $1.3 million for fiscal 2006, a
loss
of $36,000 for fiscal 2005 and a profit of $1.1 million for fiscal 2004,
respectively, as its proportionate share of the net income. 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 of
this change was not material. In
fiscal
2006 and 2005, dividends received from Nikon-Trimble, amounted to $257,000
and
$515,000, respectively, and were recorded against long-term investments on
the
Consolidated Balance Sheets.
At
December 29, 2006, the net payable to Trimble by Nikon-Trimble, related to
the
purchase and sale of products from and to Nikon-Trimble, is $0.5 million and
is
recorded within accounts payable, net on the Consolidated Balance Sheet.
At
December 30, 2005, the net payable by Trimble to Nikon-Trimble, related to
the
purchase and sale of products from and to Nikon-Trimble, was $2.0 million and
was included in accounts payable on the Consolidated Balance Sheet. The carrying
amount of the investment was approximately $14.0 million at December 29, 2006
and $12.9 million at December 30, 2005 and was recorded in other non-current
assets on the Consolidated Balance Sheets.
NOTE
6: CERTAIN BALANCE SHEET COMPONENTS
The
following tables provide details of selected balance sheet items (in thousands):
As
of
|
|
December
29,
2006
|
|
December
30,
2005
|
|
Inventories:
|
|
|
|
|
|
Raw
materials
|
|
$
|
66,853
|
|
$
|
52,199
|
|
Work-in-process
|
|
|
6,181
|
|
|
7,249
|
|
Finished
goods
|
|
|
39,518
|
|
|
48,403
|
|
Total
|
|
$
|
112,552
|
|
$
|
107,851
|
|
|
|
|
|
|
|
|
|
Property
and equipment, net:
|
|
|
|
|
|
Machinery
and equipment
|
|
$
|
79,238
|
|
$
|
72,273
|
|
Furniture
and fixtures
|
|
|
12,399
|
|
|
10,110
|
|
Leasehold
improvements
|
|
|
13,124
|
|
|
8,695
|
|
Buildings
|
|
|
5,689
|
|
|
5,707
|
|
Land
|
|
|
1,231
|
|
|
1,231
|
|
|
|
|
111,681
|
|
|
98,016
|
|
Less
accumulated depreciation
|
|
|
(63,683
|
)
|
|
(55,352
|
)
|
Total
|
|
$
|
47,998
|
|
$
|
42,664
|
|
|
|
|
|
|
|
Other
Non-Current Liabilities:
|
|
|
|
|
|
Deferred
compensation
|
|
$
|
5,887
|
|
$
|
3,231
|
|
Pension
|
|
|
6,616
|
|
|
5,529
|
|
Deferred
Rent
|
|
|
5,327
|
|
|
3,364
|
|
Other
long term liabilities
|
|
|
9,689
|
|
|
6,917
|
|
Total
|
|
$
|
27,519
|
|
$
|
19,041
|
|
During
the year, accumulated depreciation increased by $8.3 million primarily due
to
$13.5 million in depreciation expense and $2.1 million in foreign exchange
translation rate impact, offset by the write-off of fully depreciated assets
and
disposals in the amount of $7.6 million.
Other
non-current liabilities include deferred rent primarily as a result of the
Sunnyvale, California lease, executed in fiscal 2005 and a new Westminster,
Colorado lease, executed in fiscal 2006.
NOTE
7: REPORTING SEGMENT AND GEOGRAPHIC 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
in-process research and development expenses, 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.
Fiscal
Years Ended
|
|
December
29,
2006
|
|
December
30,
2005
|
|
December
31,
2004
|
|
(in
thousands)
|
|
|
|
|
|
|
|
Engineering
& Construction
|
|
|
|
|
|
|
|
Revenue
|
|
$
|
637,118
|
|
$
|
524,461
|
|
$
|
440,478
|
|
Operating
income before corporate allocations
|
|
|
136,157
|
|
|
117,993
|
|
|
79,505
|
|
Accounts
receivable
|
|
|
127,567
|
|
|
105,980
|
|
|
90,743
|
|
Inventories
|
|
|
82,827
|
|
|
80,590
|
|
|
65,116
|
|
Goodwill
|
|
|
296,597
|
|
|
229,176
|
|
|
238,801
|
|
Field
Solutions
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
$
|
139,230
|
|
$
|
127,843
|
|
$
|
105,591
|
|
Operating
income before corporate allocations
|
|
|
37,377
|
|
|
32,527
|
|
|
25,151
|
|
Accounts
receivable
|
|
|
21,016
|
|
|
21,823
|
|
|
19,141
|
|
Inventories
|
|
|
10,946
|
|
|
11,790
|
|
|
7,016
|
|
Goodwill
|
|
|
1,517
|
|
|
-
|
|
|
-
|
|
Mobile
Solutions
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
$
|
60,854
|
|
$
|
31,481
|
|
$
|
23,531
|
|
Operating
income (loss) before corporate allocations
|
|
|
2,550
|
|
|
(3,072
|
)
|
|
(5,997
|
)
|
Accounts
receivable
|
|
|
15,630
|
|
|
10,789
|
|
|
9,073
|
|
Inventories
|
|
|
1,666
|
|
|
1,983
|
|
|
5,735
|
|
Goodwill
|
|
|
63,430
|
|
|
44,118
|
|
|
7,660
|
|
Advanced
Devices
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
$
|
102,948
|
|
$
|
91,128
|
|
$
|
99,208
|
|
Operating
income before corporate allocations
|
|
|
10,084
|
|
|
13,212
|
|
|
18,746
|
|
Accounts
receivable
|
|
|
16,474
|
|
|
14,033
|
|
|
17,660
|
|
Inventories
|
|
|
17,113
|
|
|
13,488
|
|
|
9,878
|
|
Goodwill
|
|
|
12,966
|
|
|
12,852
|
|
|
13,061
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
$
|
940,150
|
|
$
|
774,913
|
|
$
|
668,808
|
|
Operating
income before corporate allocations
|
|
|
186,168
|
|
|
160,660
|
|
|
117,405
|
|
Accounts
receivable (1)
|
|
|
180,687
|
|
|
152,625
|
|
|
136,617
|
|
Inventories
|
|
|
112,552
|
|
|
107,851
|
|
|
87,745
|
|
Goodwill
|
|
|
374,510
|
|
|
286,146
|
|
|
259,522
|
|
(1)
As
presented, accounts receivable represents trade receivables, gross, which
are
specified between segments.
The
following are reconciliations corresponding to totals in the accompanying
Consolidated Financial Statements:
Fiscal
Years Ended
|
|
December
29,
2006
|
|
December
30,
2005
|
|
December
31,
2004
|
|
(in
thousands)
|
|
|
|
|
|
|
|
Consolidated
segment operating income
|
|
$
|
186,168
|
|
$
|
160,660
|
|
$
|
117,405
|
|
Unallocated
corporate expense
|
|
|
(35,798
|
)
|
|
(27,483
|
)
|
|
(22,901
|
)
|
Restructuring
charges
|
|
|
|
|
|
(278
|
)
|
|
(552
|
)
|
Amortization
of purchased intangible assets
|
|
|
(13,074
|
)
|
|
(6,855
|
)
|
|
(8,327
|
)
|
In-process
research and development
|
|
|
(1,930
|
)
|
|
(1,100
|
)
|
|
-
|
|
Non-operating
expense, net
|
|
|
12,726
|
|
|
(156
|
)
|
|
(10,701
|
)
|
Consolidated
income before income taxes
|
|
$
|
148,092
|
|
$
|
124,788
|
|
$
|
74,924
|
|
As
of
|
|
December
29,
2006
|
|
December
30,
2005
|
|
(in
thousands)
|
|
|
|
|
|
Assets:
|
|
|
|
|
|
Accounts
receivable total for reportable segments
|
|
$
|
180,687
|
|
$
|
152,625
|
|
Unallocated
(1)
|
|
|
(8,679
|
)
|
|
(7,525
|
)
|
Accounts
receivable, net
|
|
$
|
172,008
|
|
$
|
145,100
|
|
(1)
Includes trade-related accruals, allowances, and cash received in
advance.
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.
|
|
December
29,
2006
|
|
December
30,
2005
|
|
|
|
|
|
|
|
(In
thousands)
|
|
|
|
|
|
|
|
|
|
|
|
Engineering
and Construction
|
|
$
|
641,352
|
|
$
|
529,034
|
|
Field
Solutions
|
|
|
139,230
|
|
|
127,843
|
|
Mobile
Solutions
|
|
|
60,854
|
|
|
31,481
|
|
Advanced
Devices
|
|
|
102,873
|
|
|
91,182
|
|
Total
Gross Consolidated Revenue
|
|
|
944,309
|
|
|
779,540
|
|
Eliminations
|
|
|
(4,159
|
)
|
|
(4,627
|
)
|
Total
External Consolidated Revenue
|
|
$
|
940,150
|
|
$
|
774,913
|
|
The
geographic distribution of Trimble’s revenues and identifiable assets is
summarized in the tables below. Other foreign countries include Canada, and
countries in South and Central America, the Middle East, and Africa. Revenue
is
defined as revenues from external customers. Identifiable assets indicated
in
the table below exclude inter-company receivables, investments in subsidiaries,
goodwill, and intangibles assets.
Fiscal
Years Ended
|
|
December
29,
2006
|
|
December
30,
2005
|
|
December
31,
2004
|
|
(in
thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
(1):
|
|
|
|
|
|
|
|
United
States
|
|
$
|
511,030
|
|
$
|
415,443
|
|
$
|
331,607
|
|
Europe
|
|
|
231,428
|
|
|
191,734
|
|
|
186,197
|
|
Asia
Pacific
|
|
|
112,465
|
|
|
88,315
|
|
|
86,117
|
|
Other
Non-US Countries
|
|
|
85,227
|
|
|
79,421
|
|
|
64,886
|
|
Total
Consolidated Revenue
|
|
$
|
940,150
|
|
$
|
774,913
|
|
$
|
668,808
|
|
(1)
Revenue attributed to countries based on the location of the
customer.
As
of
|
|
December
29,
2006
|
|
December
30,
2005
|
|
(in
thousands)
|
|
|
|
|
|
|
|
|
|
|
|
Identifiable
assets:
|
|
|
|
|
|
United
States
|
|
$
|
347,474
|
|
$
|
295,196
|
|
Europe
|
|
|
143,038
|
|
|
120,582
|
|
Asia
Pacific and Other Non-US Countries
|
|
|
30,190
|
|
|
13,853
|
|
Total
Identifiable Assets
|
|
$
|
520,702
|
|
$
|
429,631
|
|
Transfers
between US and non-US geographic areas are made at prices based on total
costs
and contributions of the supplying geographic area. The Company's subsidiaries
in Asia have derived revenue from commissions from US operations in each
of the
periods presented. These commission revenues and expenses are excluded from
total revenue and operating income (loss) in the preceding table. Other than
the
United States, no other country comprised more than 10% of sales to unaffiliated
customers for any periods presented, except as disclosed above.
No
single
customer accounted for 10% or more of Trimble's total revenues in fiscal
years
2006, 2005, and 2004.
NOTE
8: RESTRUCTURING CHARGES
There
were no restructuring charges recorded in fiscal 2006. Restructuring charges
of
$0.3 million, and $0.6 million were recorded in fiscal years 2005 and 2004
respectively. The charges in fiscal 2005 were primarily related to office
closure costs due to integration efforts of the Mensi acquisition. The charges
in fiscal 2004 were primarily related to severance costs due to the realignment
of Trimble Mobile Solutions Inc. As a result of the realignment, the headcount
decreased by 36 in fiscal 2004. As of December 29, 2006, an accrual balance
of
$0.1 million, related to the fiscal 2005 office closure, is expected to be
paid
over the next several years. The restructuring accrual is included in the
Condensed Consolidated Balance Sheets under the heading of “Accrued
Liabilities”.
NOTE
9: LONG-TERM DEBT
Long-term
debt consisted of the following:
As
of
|
|
December
29,
2006
|
|
December
30,
2005
|
|
(In
thousands)
|
|
|
|
|
|
|
|
|
|
|
|
Credit
Facilities:
|
|
|
|
|
|
Term
loan
|
|
$
|
-
|
|
$
|
-
|
|
Revolving
credit facility
|
|
|
-
|
|
|
-
|
|
Promissory
notes and other
|
|
|
481
|
|
|
649
|
|
|
|
|
481
|
|
|
649
|
|
|
|
|
|
|
|
|
|
Less
current portion of long-term debt
|
|
|
-
|
|
|
216
|
|
Non-current
portion
|
|
$
|
481
|
|
$
|
433
|
|
The
following summarizes the future cash payment obligations (excluding interest)
as
of December 29, 2006:
|
|
Total
|
|
2007
|
|
2008
|
|
2009
|
|
2010
|
|
2011
|
|
2011
and
Beyond
|
|
(in
thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Promissory
note and other
|
|
|
481
|
|
|
-
|
|
|
115
|
|
|
366
|
|
|
|
|
|
-
|
|
|
-
|
|
Total
contractual cash obligations
|
|
$
|
481
|
|
$
|
-
|
|
$
|
115
|
|
$
|
366
|
|
$ |
|
|
$
|
-
|
|
$
|
-
|
|
Credit
Facilities
On
July
28, 2005, the Company 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
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
December 29, 2006, the Company has a zero balance outstanding and was in
compliance with all financial debt covenants.
Notes
Payable
As
of
December 29, 2006, the Company had other notes payable totaling approximately
$0.5 million consisting of government loans to foreign subsidiaries and loans
assumed from acquisitions.
NOTE
10: COMMITMENTS AND CONTINGENCIES
Operating
Leases
On January
13, 2006, Trimble
entered into a lease agreement for the lease of real property located in
Westminster, Colorado. The lease agreement has a seven year term, commencing
June 1, 2006 and ending May 31, 2013.
On
May
13, 2005, Trimble entered into a lease agreement for the lease of real property
located in Sunnyvale, California. The lease agreement has a seven year term,
commencing January 1, 2006 and ending December 31, 2012.
Trimble's
principal facilities in the United States are leased under various cancelable
and non-cancelable operating leases that expire at various dates through 2013.
For
tenant improvement allowances and rent holidays, Trimble records a deferred
rent
liability on the consolidated balance sheets and amortizes the deferred rent
over the terms of the leases as reductions to rent expense on the consolidated
statements of income. The
Company has options to renew certain of these leases for an additional five
years.
Future
minimum payments required under non-cancelable operating leases are as follows:
|
|
Operating
Lease
Payments
|
|
(In
thousands)
|
|
|
|
|
|
|
|
2007
|
|
$
|
10,852
|
|
2008
|
|
|
9,318
|
|
2009
|
|
|
8,187
|
|
2010
|
|
|
6,414
|
|
2011
|
|
|
3,530
|
|
Thereafter
|
|
|
3,556
|
|
Total
|
|
$
|
41,857
|
|
Net
rent
expense under operating leases was $10.5 million in fiscal 2006, $12.6 million
in fiscal 2005, and $10.9 million in fiscal 2004. Sublease income was $44,000,
$39,000, and $38,000, for fiscal 2006, 2005, and 2004, respectively.
Purchase
Commitments with a Supplier
Trimble
entered into a significant supply agreement in fiscal 2004 that sets forth
minimum purchase commitments for outsourced services. The term of the supply
agreement is the earlier of four years from the initial product ship date,
or
when Trimble has paid for a cumulative total of 200,000 billable hours
(approximately $10.4 million). Should Trimble not purchase and pay for 200,000
hours, then Trimble will compensate the supplier for 20% of the shortfall.
Thereafter, the contract continues in effect until terminated by either party
with 30 days prior written notice to the other party. As of December 29, 2006,
based on current hours earned to date the future obligation is approximately
$380,000 which is expected to be paid over the next year. Trimble does not
expect a shortfall based on current hours earned to date.
NOTE
11: FAIR VALUE OF FINANCIAL INSTRUMENTS
The
estimated fair values of financial instruments outstanding are as follows:
|
|
Carrying
Amount
|
|
Fair
Value
|
|
Carrying
Amount
|
|
Fair
Values
|
|
|
|
December
29, 2006
|
|
December
30, 2005
|
|
As
of
|
|
|
|
|
|
|
|
|
|
(In
thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
Cash
and cash equivalents
|
|
$
|
129,621
|
|
$
|
129,621
|
|
$
|
73,853
|
|
$
|
73,853
|
|
Forward
foreign currency exchange contracts
|
|
|
-
|
|
|
-
|
|
|
516
|
|
|
577
|
|
Accounts
receivable, net
|
|
|
172,008
|
|
|
172,008
|
|
|
145,100
|
|
|
145,100
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Credit
facilities
|
|
$
|
-
|
|
$
|
-
|
|
$
|
-
|
|
$
|
-
|
|
Forward
foreign currency exchange contracts
|
|
|
70
|
|
|
157
|
|
|
-
|
|
|
-
|
|
Promissory
note and other
|
|
|
481
|
|
|
406
|
|
|
649
|
|
|
562
|
|
Accounts
payable
|
|
|
44,418
|
|
|
44,418
|
|
|
45,206
|
|
|
45,206
|
|
The
fair
value of the bank borrowings, and promissory notes have been estimated using
an
estimate of the interest rate Trimble would have had to pay on the issuance
of
notes with a similar maturity and discounting the cash flows at that rate.
The
fair values do not give an indication of the amount that Trimble would currently
have to pay to extinguish any of this debt.
The
fair
value of forward foreign exchange contracts is estimated based on the difference
between the market price and the carrying amount of comparable contracts. These
contracts are adjusted to fair value at the end of every month.
NOTE
12: INCOME TAXES
The
components of income before income taxes are as follows:
Fiscal
Years Ended
|
|
December
29,
2006
|
|
December
30,
2005
|
|
December
31,
2004
|
|
(In
thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
United
States
|
|
$
|
123,800
|
|
|
99,500
|
|
|
70,000
|
|
Foreign
|
|
$
|
24,300
|
|
|
25,300
|
|
|
4,900
|
|
Total
|
|
$
|
148,100
|
|
$
|
124,800
|
|
|
74,900
|
|
Trimble's
income tax provision consisted of the following:
Fiscal
Years Ended
|
|
December
29,
2006
|
|
December
30,
2005
|
|
December
31,
2004
|
|
|
|
|
|
|
|
|
|
(In
thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
US
Federal:
|
|
|
|
|
|
|
|
Current
|
|
$
|
47,795
|
|
$
|
36,493
|
|
|
18,196
|
|
Deferred
|
|
|
(2,972
|
)
|
|
(1,534
|
)
|
|
(17,995
|
)
|
|
|
|
44,823
|
|
|
34,959
|
|
|
201
|
|
US
State:
|
|
|
|
|
|
|
|
|
|
|
Current
|
|
|
2,967
|
|
|
3,500
|
|
|
2,895
|
|
Deferred
|
|
|
(2,168
|
)
|
|
(2,348
|
)
|
|
(897
|
)
|
|
|
|
799
|
|
|
1,152
|
|
|
1,998
|
|
Foreign:
|
|
|
|
|
|
|
|
|
|
|
Current
|
|
|
(1,493
|
)
|
|
3,102
|
|
|
3,137
|
|
Deferred
|
|
|
305
|
|
|
720
|
|
|
1,908
|
|
|
|
|
(1,188
|
)
|
|
3,822
|
|
|
5,045
|
|
Income
tax provision
|
|
$
|
44,434
|
|
$
|
39,933
|
|
|
7,244
|
|
The
income tax provision differs from the amount computed by applying the statutory
US federal income tax rate to income before taxes. The sources and tax effects
of the differences are as follows:
Fiscal
Years Ended
|
|
December
29,
2006
|
|
December
30,
2005
|
|
December
31,
2004
|
|
(In
thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expected
tax from continuing operations at 35% in all years
|
|
$
|
51,832
|
|
$
|
43,677
|
|
$
|
26,223
|
|
Change
in valuation allowance
|
|
|
-0-
|
|
|
-0-
|
|
|
(24,004
|
)
|
US
State income taxes
|
|
|
(110
|
)
|
|
749
|
|
|
1,299
|
|
Export
sales incentives
|
|
|
(4,138
|
)
|
|
(2,316
|
)
|
|
(1,176
|
)
|
NonForeign
components
|
|
|
(7,682
|
)
|
|
3,684
|
|
|
5,134
|
|
US
Federal research and development credit
|
|
|
(662
|
)
|
|
(895
|
)
|
|
(508
|
)
|
In
process research & development
|
|
|
1,046
|
|
|
-0-
|
|
|
-0-
|
|
Stock
option compensation
|
|
|
3.626
|
|
|
-0-
|
|
|
-0-
|
|
Benefit
from repatriation legislation
|
|
|
(1,050
|
)
|
|
(6,445
|
)
|
|
-0-
|
|
Other
|
|
|
1,572
|
|
|
1,479
|
|
|
276
|
|
Income
tax provision
|
|
$
|
44,434
|
|
$
|
39,933
|
|
$
|
7,244
|
|
|
|
|
|
|
|
|
|
|
|
|
Effective
tax rate
|
|
|
30
|
%
|
|
32
|
%
|
|
10
|
%
|
The
components of deferred taxes consist of the following:
As
of
|
|
December
29,
2006
|
|
December
30,
2005
|
|
(In
thousands)
|
|
|
|
|
|
|
|
|
|
|
|
Deferred
tax liabilities:
|
|
|
|
|
|
Purchased
intangibles
|
|
$
|
25,263
|
|
$
|
11,058
|
|
Depreciation
and amortization
|
|
|
21,283
|
|
|
11,711
|
|
Other
|
|
|
175
|
|
|
1,516
|
|
Total
deferred tax liabilities
|
|
|
46,721
|
|
|
24,285
|
|
|
|
|
|
|
|
|
|
Deferred
tax assets:
|
|
|
|
|
|
|
|
Inventory
valuation differences
|
|
|
9,469
|
|
|
8,983
|
|
Expenses
not currently deductible
|
|
|
8,546
|
|
|
6,233
|
|
US
Federal credit carryforwards
|
|
|
-0-
|
|
|
-0-
|
|
Deferred
revenue
|
|
|
1,298
|
|
|
564
|
|
US
State credit carryforwards
|
|
|
8,869
|
|
|
8,530
|
|
Warranty
|
|
|
2,738
|
|
|
2,361
|
|
|
|
|
|
|
|
|
|
US
Federal net operating losscarryforward
|
|
|
2,055
|
|
|
2,669
|
|
Net
foreign tax credits on undistributed foreign earnings
|
|
|
9,344
|
|
|
5,743
|
|
Accruals
not currently deductible
|
|
|
8,803
|
|
|
7,452
|
|
Total
deferred tax assets
|
|
|
51,121
|
|
|
42,535
|
|
Valuation
allowance
|
|
|
(4,254
|
)
|
|
(5,855
|
)
|
Total
deferred tax assets
|
|
|
46,867
|
|
|
36,680
|
|
|
|
|
|
|
|
|
|
Total
net deferred tax assets
|
|
$
|
146
|
|
$
|
12,395
|
|
The
Company has $2.1 million of tax effected US federal net operating loss
carryforwards from an acquisition. Utilization of the Company’s net operating
loss carryforwards are subject to annual limitations provided by the Internal
Revenue Code of 1986, as amended. The Company has state research and development
credit carryforwards of approximately $13.6 million which can be carried over
indefinitely.
The
company’s valuation allowance is attributable to, primarily, the California
Research Credit and acquisition Net Operating Loss carryforwards.
Valuation allowance amounts are offsets to related deferred tax assets.
Management believes that it is more likely than not that the Company will not
realize these deferred tax assets and, accordingly, a valuation allowance has
been established for such amounts. When the tax credits are utilized and the
valuation allowance is released, the benefit of the release of the valuation
allowance will be accounted for as a credit to shareholder’s equity rather than
as a reduction of the income tax provision.
The
American Jobs Creation Act of 2004 (the Act) provides for a special one-time
elective dividends received deduction on the repatriation of certain foreign
earnings to a U.S. taxpayer equal to 85% of the eligible distribution. During
the fourth quarter of 2005, the Company repatriated $39.5 million, of which
$24
million qualified for the special one-time elective dividends received deduction
and $15.5 million constituted earnings that do not qualify under the Act;
previously taxed income and return of capital. The company recorded a $6.4
million tax benefit from these foreign earnings in 2005. The $1.0 million tax
benefit recorded in 2006 represents a true-up adjustment to the amount recorded
in 2005.
In
July
2006, the 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 SFAS 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 the first
quarter of fiscal 2007. 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.
NOTE
13: COMPREHENSIVE INCOME
The
components of comprehensive income and related tax effects are as follows:
Fiscal
Years Ended
|
|
December
29,
2006
|
|
December
30,
2005
|
|
December
31,
2004
|
|
(in
thousands)
|
|
|
|
|
|
|
|
Net
income
|
|
$
|
103,658
|
|
$
|
84,855
|
|
$
|
67,680
|
|
Foreign
currency translation adjustments, net of tax of $(108) in 2006 and
$308 in
2005
|
|
|
21,709
|
|
|
(24,690
|
)
|
|
14,025
|
|
Net
gain (loss) on hedging transactions
|
|
|
-
|
|
|
(106
|
)
|
|
106
|
|
Adjustment
to initially apply SFAS 158, net of tax
|
|
|
(136
|
)
|
|
-
|
|
|
-
|
|
Net
unrealized gain (loss) on investments
|
|
|
3
|
|
|
(34
|
)
|
|
(6
|
)
|
Total
comprehensive income
|
|
$
|
125,234
|
|
$
|
60,025
|
|
$
|
81,805
|
|
The
components of accumulated other comprehensive, net of related tax were as
follows:
Fiscal
Years Ended
|
|
December
29,
2006
|
|
December
30,
2005
|
|
(in
thousands)
|
|
|
|
|
|
Accumulated
foreign currency translation adjustments
|
|
$
|
41,214
|
|
$
|
19,504
|
|
Adjustment
to initially apply FASB Statement No. 158, net of tax
|
|
|
(136
|
)
|
|
-
|
|
Accumulated
net unrealized gain on foreign currency
|
|
|
33
|
|
|
30
|
|
Total
accumulated other comprehensive income
|
|
$
|
41,111
|
|
$
|
19,534
|
|
NOTE
14: EMPLOYEE STOCK BENEFIT PLANS
Employee
Stock Purchase Plan
The
Company has an Employee Stock Purchase Plan (“Purchase Plan”) under which an
aggregate of 11,550,000 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 offering period, which is generally six months. The Purchase
Plan terminates on September 8, 2008. In fiscal 2006 and 2005, the shares issued
under the Purchase Plan were 195,398 and 359,998 shares, respectively. At
December 29, 2006, the number of shares reserved for future purchases by
eligible employees was 1,440,274.
Restricted
Stock Award
Trimble
did not grant any restricted stock in fiscal 2006 or fiscal 2004. During the
second quarter of fiscal 2005, the Company granted 40,000 shares of restricted
common stock. The award vests 20% on June 30, 2005 and an additional 20% each
June 30 thereafter. The Company recorded compensation expense in the
Consolidated Statements of Income of $191,000 and $120,000 for fiscal 2006
and
2005, respectively.
2002
Stock Plan
In
2002,
Trimble’s Board of Directors adopted the 2002 Stock Plan (“2002 Plan”). The 2002
Plan approved by the shareholders provides for the granting of incentive and
non-statutory stock options for up to 12,000,000 shares plus any shares
currently reserved but un-issued 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 generally have 84-120 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. In certain instances, grants vest at a rate of 40%
at
the second anniversary of grant and monthly thereafter at an annual rate of
20%
with full vesting occurring at the fifth anniversary of the grant. The Company
issues new shares for option exercises. As of December 29, 2006, options to
purchase 8,038,610 shares were outstanding and 4,453,838 were available for
future grant under the 2002 Plan.
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 19,125,000
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 Company issues new shares for option exercises. As of December 29,
2006 options to purchase 2,692,736 shares were outstanding and no shares were
available for future grant.
1992
Management Discount Stock Option Plan
In
1992,
Trimble's Board of Directors approved the 1992 Management Discount Stock Option
Plan ("Discount Plan"). As of December 29, 2006, options to purchase 295,000
shares were outstanding and no shares were available for future grant under
the
1992 Management Discount Stock Option Plan.
1990
Director Stock Option Plan
In
December 1990, Trimble adopted a Director Stock Option Plan under which an
aggregate of 1,140,000 shares of Common Stock have been reserved for issuance
to
non-employee directors as approved by the shareholders to date. At December
29,
2006, options to purchase 285,000 shares were outstanding, and no shares were
available for future grants under the Director Stock Option Plan.
Options
Outstanding and Exercisable
Exercise
prices for options outstanding as of December 29, 2006, ranged from $2.67 to
$25.48. In view of the wide range of exercise prices, Trimble considers it
appropriate to provide the following additional information with respect to
options outstanding at December 29, 2006:
|
|
Options
Outstanding
|
|
Options
Exercisable
|
|
Range
|
|
Number
Outstanding
|
|
Weighted-
Average Exercise Price per Share
|
|
Weighted-
Average Remaining Contractual Life (Years)
|
|
Number
Exercisable
|
|
Weighted-
Average Exercise Price per Share
|
|
$
2.67 - 4.27
|
|
|
1,198,584
|
|
$
|
3.40
|
|
|
2.84
|
|
|
1,151,164
|
|
$
|
3.38
|
|
4.40 - 5.45
|
|
|
1,137,822
|
|
|
5.08
|
|
|
5.38
|
|
|
962,556
|
|
|
5.08
|
|
5.60 - 6.50
|
|
|
1,185,640
|
|
|
5.88
|
|
|
4.04
|
|
|
1,185,640
|
|
|
5.88
|
|
6.52 - 8.02
|
|
|
251,048
|
|
|
7.29
|
|
|
4.84
|
|
|
238,928
|
|
|
7.29
|
|
8.50
|
|
|
1,468,152
|
|
|
8.5
|
|
|
6.55
|
|
|
832,356
|
|
|
8.5
|
|
8.78 - 13.71
|
|
|
1,144,950
|
|
|
12.44
|
|
|
5.03
|
|
|
922,590
|
|
|
12.82
|
|
13.78
|
|
|
4,350
|
|
|
13.78
|
|
|
7.07
|
|
|
600
|
|
|
13.78
|
|
14.53
|
|
|
1,244,334
|
|
|
14.53
|
|
|
7.81
|
|
|
457,570
|
|
|
14.53
|
|
15.29 - 16.53
|
|
|
525,700
|
|
|
15.98
|
|
|
8.04
|
|
|
204,620
|
|
|
15.99
|
|
17.00 - 25.48
|
|
|
3,147,600
|
|
|
20.41
|
|
|
7.95
|
|
|
356,744
|
|
|
17.80
|
|
Total
|
|
|
11,308,180
|
|
$
|
12.04
|
|
|
6.18
|
|
|
6,312,768
|
|
$
|
8.35
|
|
|
|
Number
Of Shares
|
|
Weighted-
Average Exercise Price per Share
|
|
Weighted-
Average Remaining Contractual Term (in
years)
|
|
Aggregate
Intrinsic Value (in
thousands)
|
|
Options
Outstanding
|
|
|
11,308,180
|
|
$
|
12.04
|
|
|
6.2
|
|
$
|
150,669
|
|
Options
Outstanding and Expected to Vest
|
|
|
10,977,900
|
|
|
11.84
|
|
|
6.1
|
|
|
148,469
|
|
Options
Exercisable
|
|
|
6,312,768
|
|
|
8.35
|
|
|
5.1
|
|
|
107,456
|
|
Options
outstanding and expected to vest are adjusted for expected forfeitures. The
aggregate intrinsic value is the total pretax intrinsic value based on the
Company’s closing stock price of $25.37 as of December
29,
2006,
which would have been received by the option holders had all option holders
exercised their options as of that date.
As
of
December 29, 2006, the total unamortized stock option expense is $22.0 million
with a weighted-average recognition period of 1.7 years.
Option
Activity
Activity
during fiscal 2006, 2005, and 2004, under the combined plans was as follows:
|
|
December
29, 2006
|
|
December
30, 2005
|
|
December
31, 2004
|
|
Fiscal
Years Ended
|
|
Options
|
|
Weighted
average exercise price
|
|
Options
|
|
Weighted
average exercise price
|
|
Options
|
|
Weighted
average exercise price
|
|
(In
thousands, except for per share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding
at beginning of year
|
|
|
12,828
|
|
$
|
9.35
|
|
|
13,442
|
|
$
|
8.05
|
|
|
15,202
|
|
$
|
6.81
|
|
Granted
|
|
|
1,744
|
|
|
22.94
|
|
|
1,748
|
|
|
17.05
|
|
|
2,238
|
|
|
14.1
|
|
Exercised
|
|
|
(3,082
|
)
|
|
6.95
|
|
|
(2,120
|
)
|
|
7.37
|
|
|
(3,420
|
)
|
|
6.46
|
|
Cancelled
|
|
|
(178
|
)
|
|
12.99
|
|
|
(242
|
)
|
|
10.20
|
|
|
(578
|
)
|
|
8.28
|
|
Outstanding
at end of year
|
|
|
11,308
|
|
|
12.04
|
|
|
12,828
|
|
|
9.35
|
|
|
13,442
|
|
|
8.05
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Available
for grant
|
|
|
4,460
|
|
|
|
|
|
3,026
|
|
|
|
|
|
4,550
|
|
|
|
|
Weighted-average
fair value of options granted during year
|
|
|
|
|
$
|
8.04
|
|
|
|
|
$
|
7.27
|
|
|
|
|
$
|
6.93
|
|
Warrants
On
April
12, 2002, the Company issued to Spectra-Physics Holdings USA, Inc., a warrant
to
purchase up to 1,128,700 shares of Trimble’s Common Stock over a fixed period of
time. Initially, Spectra-Physics’ warrant entitled it to purchase 600,000 shares
of Common Stock over a five-year period at an exercise price of $5.04 per share.
On a quarterly basis beginning July 14, 2002, Spectra-Physics’ warrant became
exercisable for an additional 750 shares of Common Stock for every $1 million
of
principal and interest outstanding to Spectra-Physics until the obligation
was
paid off in full. These shares are purchasable at a price equal to the average
of Trimble’s closing price for the five days immediately proceeding the last
trading day of each quarter. On July 14, 2002 an additional 52,092 shares became
exercisable at an exercise price of $4.82 per share. On October 14, 2002 an
additional 53,472 shares became exercisable at an exercise price of $3.06.
On
January 14, 2003, an additional 54,852 shares became exercisable at an exercise
price of $4.52. On April 14, 2003, an additional 28,624 shares became
exercisable at an exercise price of $6.69. The approximate fair value of the
warrants of $2.4 million was determined using the Black-Scholes pricing model
with the following assumptions: contractual life of 5-year period, risk-free
interest rate of 4%; volatility of 65%; and no dividends during the contractual
term. The additional shares are exercisable over a 5-year period. No additional
shares will be issuable under the warrant as the underlying obligation has
been
paid off in full. For fiscal 2006 and 2005, there were no shares exercised
related to the warrants. As of December 29, 2006, there are 789,040 shares
outstanding and exercisable under the warrants.
On
December 21, 2001 and January 14, 2002, in connection with the first and second
closing of the private placement of the Company’s Common Stock, Trimble granted
five-year warrants to purchase an additional 1,838,016 shares of Common Stock,
subject to certain adjustments, at an exercise price of $6.49 per share. As
of
December 29, 2006, there are 162,562 shares outstanding and exercisable under
the warrants.
NOTE
15: BENEFIT PLANS
401(k)
Plan
Under
Trimble’s 401(k) Plan, US employee participants (including employees of certain
subsidiaries) may direct the investment of contributions to their accounts
among
certain mutual funds and the Trimble Navigation Limited Common Stock Fund.
The
Trimble Fund sold net 129,834 shares of Common Stock for an aggregate of $3.0
million in fiscal 2006. Trimble, at its discretion, matches individual employee
401(k) Plan contributions at a rate of fifty cents of every dollar that the
employee contributes to the 401(k) Plan up to 5% of the employee’s annual salary
to an annual maximum of $2,500. Trimble’s matching contributions to the 401(k)
Plan were $2.5 million in fiscal 2006, $2.2 million in fiscal 2005, and $1.9
million in fiscal 2004.
Defined
Contribution Pension Plans
Certain
of the Company’s European subsidiaries participate in state sponsored pension
plans. Contributions are based on specified percentages of employee salaries.
For these plans, Trimble contributed and charged to expense approximately $0.7
million for fiscal 2006, $0.6 million for fiscal 2005, and $0.6 million for
fiscal 2004.
Defined
Benefit Pension Plan
Trimble
provides defined benefit pension plans in Sweden, Germany, and the Netherlands.
The largest of these plans is provided by the Swedish subsidiary which has
an
unfunded defined benefit pension plan that covered substantially all of its
full-time employees through 1993. Benefits are based on a percentage of eligible
earnings. The employee must have had a projected period of pensionable service
of at least 30 years as of 1993. If the period was shorter, the pension benefits
were reduced accordingly. Active employees do not accrue any future benefits;
therefore, there is no service cost and the liability will only increase for
interest cost.
On
December 29, 2006, the Company adopted the recognition and disclosure provisions
of SFAS158. SFAS 158 required the Company to recognize the funded status (i.e.,
the difference between the fair value of plan assets and the projected benefit
obligations) of its pension
plan in the December 29, 2006 Consolidated Balance Sheet, with a corresponding
adjustment to accumulated other comprehensive income, net of tax. The adjustment
to accumulated other comprehensive income at adoption represents the net
unrecognized actuarial losses and unrecognized transition obligation remaining
from the initial adoption of SFAS 87, all of which were previously netted
against the plan’s funded status in the Company’s Consolidated Balance Sheets
pursuant to the provisions of Statement 87. These amounts will be subsequently
recognized as net periodic pension cost pursuant to the Company’s historical
accounting policy for amortizing such amounts. Further, actuarial gains and
losses that arise in subsequent periods and are not recognized as net periodic
pension cost in the same periods will be recognized a component of other
comprehensive income. Those amounts will be subsequently recognized as a
component of net periodic pension cost on the same basis as the amounts
recognized in accumulated other comprehensive income at adoption of SFAS
158.
The
incremental effects of adopting the provisions of SFAS 158 on the Company’s
consolidated balance sheet at December 29, 2006 are presented in the following
table. The adoption of SFAS 158 had no effect on the Company’s consolidated
statement of income for the year ended December 29, 2006, or for any prior
period presented, and it will not effect the Company’s operating results in
future periods. Had the Company not been required to adopt SFAS 158 at December
29, 2006, it would have recognized an additional minimum liability pursuant
to
then provisions of SFAS 87. The effect of recognizing the additional minimum
liability is included in table below in the column labeled “Prior to Application
of SFAS 158.”
|
|
At
December 29. 2006
|
|
|
|
Prior
to Application of SFAS 158
|
|
Effect
of Application of SFAS 158
|
|
As
Reported at December 29. 2006
|
|
(in
thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Intangible
asset (pension)
|
|
$
|
82
|
|
$
|
(82
|
)
|
$
|
-
|
|
Total
assets
|
|
|
978,513
|
|
|
(82
|
)
|
|
978,431
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
accrued pension liability
|
|
|
-
|
|
|
218
|
|
|
218
|
|
Non-current
accrued pension liability
|
|
|
6,594
|
|
|
22
|
|
|
6,616
|
|
Deferred
income taxes
|
|
|
4,629
|
|
|
(104
|
)
|
|
4,525
|
|
Total
liabilities
|
|
|
230,630
|
|
|
136
|
|
|
230,766
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated
other comprehensive income
|
|
|
41,128
|
|
|
(17
|
)
|
|
41,111
|
|
Total
shareholders’ equity
|
|
|
747,682
|
|
|
(17
|
)
|
|
747,665
|
|
The
changes in the benefit obligations and plan assets of the significant non-US
defined benefit pension plans for fiscal 2006 and 2005 were as
follows:
Fiscal
Years Ended
|
|
December
29, 2006
|
|
December
30, 2005
|
|
(in
thousands)
|
|
|
|
|
|
|
|
|
|
|
|
Change
in benefit obligation:
|
|
|
|
|
|
Benefit
obligation at beginning of year
|
|
$
|
6,929
|
|
$
|
7,208
|
|
Adjustment
to include benefit obligation for the Netherlands subsidiary
(1)
|
|
|
1,412
|
|
|
-
|
|
Benefit
obligation at beginning of year (restated)
|
|
|
8,341
|
|
$
|
7,208
|
|
Service
cost
|
|
|
323
|
|
|
90
|
|
Interest
cost
|
|
|
396
|
|
|
270
|
|
Benefits
paid
|
|
|
(311
|
)
|
|
(312
|
)
|
Foreign
exchange impact
|
|
|
1,253
|
|
|
(1,145
|
)
|
Actuarial
(gains) losses
|
|
|
(268
|
)
|
|
818
|
|
Benefit
obligation at end of year
|
|
|
9,734
|
|
|
6,929
|
|
Change
in plan assets:
|
|
|
|
|
|
|
|
Fair
value of plan assets at beginning of year
|
|
|
980
|
|
|
1,088
|
|
Adjustment
to include fair value of plan assets for the Netherlands subsidiary
(1)
|
|
|
1,242
|
|
|
-
|
|
Fair
value of plan assets at beginning of year (restated)
|
|
|
2,222
|
|
|
1,088
|
|
Actual
return on plan assets
|
|
|
106
|
|
|
36
|
|
Employer
contribution
|
|
|
455
|
|
|
339
|
|
Plan
participants’ contributions
|
|
|
-
|
|
|
-
|
|
Benefits
paid
|
|
|
(311
|
)
|
|
(312
|
)
|
Foreign
exchange impact
|
|
|
428
|
|
|
(172
|
)
|
Fair
value of plan assets at end of year
|
|
|
2,900
|
|
|
980
|
|
|
|
|
|
|
|
|
|
Benefit
obligation in excess of plan assets at end of year
|
|
$
|
6,834
|
|
$
|
5,949
|
|
|
|
|
|
|
|
|
|
Current
portion (included in accrued compensation and benefits)
|
|
|
218
|
|
|
-
|
|
Non-current
portion (included in other non-current liabilities)
|
|
|
6,616
|
|
|
5,529
|
|
|
(2)
|
In
2006, the Company began incorporating the net effect of the projected
benefit obligation and the plan assets of its defined benefit plan
in the
Netherlands in its Consolidated Balance Sheets. In prior years, the
Company could not obtain the necessary information to include the
net
impact of this plan on its Consolidated Balance Sheets. As a result,
the
benefit obligation and fair value of plan assets at the beginning
of year
have been restated. The net effect of recording the benefit obligation
in
excess of plan assets of this plan to the Consolidated Statements
of
Income and the Consolidated Balance Sheets was not material
for both fiscal 2006 and fiscal
2005.
|
The
underfunded status of the plan of $6.8 million at December 29, 2006 is
recognized in the accompanying consolidated balance sheets as a short-term
and
long-term accrued pension liability. No plan assets are expected to be returned
to Trimble during the fiscal year-ended December 28, 2007.
Net
periodic benefit costs in fiscal 2006, 2005, and 2004 were not material.
Actuarial
assumptions used to determine the net periodic pension costs for the year ended
December 29, 2006 were as follows:
|
Swedish
Subsidiary
|
German
Subsidiaries
|
Netherlands
Subsidiary
|
Discount
rate
|
4.5%
|
4.3%
|
4.0%
|
Rate
of compensation increase
|
2.0%
|
2.0%
|
2.0%
|
Measurement
Date
|
12/29/06
|
12/29/06
|
12/29/06
|
Trimble’s
accumulated benefits obligation was $7.5 million and $7.0 million for fiscal
2006 and 2005, respectively.
Trimble’s
plan assets are primarily located in our German subsidiaries and the Netherlands
subsidiary. For German subsidiaries, for fiscal 2005 and fiscal 2004, the asset
allocation of our total plan assets was approximately as follows: 89% local
government bonds, 7% real estate and 4% equity securities. Long-term asset
allocation and expected return on assets assumptions are derived from detailed
annual studies conducted by Trimble’s asset management group and actuaries.
Trimble’s asset management group limits allocation to equity securities and real
estate to a maximum of 10% and 25%, respectively, with the remaining assets
to
be allocated to local government bonds. For the Netherlands subsidiary, 100%
of
the assets are invested in an insurance contract. While the asset allocation
give appropriate consideration to recent performance and historical returns,
the
strategy is focused primarily on conservative and sustainable long-term returns.
Based on historical returns, Trimble expects future return on assets to be
approximately 4%.
Trimble
expects to contribute approximately $500,000 to plan assets in fiscal year
ended
2007.
The
following benefit payments, which reflect estimated future employee service,
as
appropriate, are expected to be paid:
|
|
Expected
Benefit Payments
|
|
(In
thousands)
|
|
|
|
|
|
|
|
2007
|
|
$
|
320
|
|
2008
|
|
$
|
380
|
|
2009
|
|
$
|
461
|
|
2010
|
|
$
|
529
|
|
2011
|
|
$
|
558
|
|
2012-2016
|
|
$
|
3,040
|
|
Total
|
|
$
|
5,288
|
|
NOTE
16: STATEMENT OF CASH FLOW DATA
Fiscal
Years Ended
|
|
December
29,
2006
|
|
December
30,
2005
|
|
December
31,
2004
|
|
(in
thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental
disclosure of cash flow information:
|
|
|
|
|
|
|
|
Interest
paid
|
|
$
|
8
|
|
$
|
1,081
|
|
$
|
3,142
|
|
Income
taxes paid
|
|
$
|
36,000
|
|
$
|
8,938
|
|
$
|
6,694
|
|
|
|
|
|
|
|
|
|
|
|
|
Significant
non-cash investing activities:
|
|
|
|
|
|
|
|
|
|
|
Issuance
of shares related to acquisition related earn-out payments
|
|
$
|
-
|
|
$
|
-
|
|
$
|
1,798
|
|
NOTE
17: 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.
NOTE
18: SUBSEQUENT EVENTS
Acquisition
of @Road, Inc.
On
February 16, 2007, we acquired @Road, Inc. of Fremont, California for a total
purchase price of approximately $493.1 million.
@Road, Inc. is a global provider of solutions designed to automate the
management of mobile resources and to optimize the service delivery process
for
customers across a variety of industries. @Road will be reported within our
Mobile Solutions business segment. This acquisition was the largest in
acquisition value in the company’s history. It significantly increases our
presence in the mobile resource management (MRM) market which Trimble believes
is a large and fast growing market. With the addition of @Road, Trimble’s TMS
segment will be better able to service larger customers, with a broader and
more
robust solution set.
Trimble
elected to pay the $7.50 per share purchase consideration with $5.00 in cash
and
$2.50 in newly issued shares of Trimble common stock, payable to @Road
stockholders. Pursuant to this election and the merger agreement, the stock
portion of the merger consideration payable to @Road shareholders was 0.0447
shares of Trimble common stock per share of @Road common stock or a total of
2.9
million shares valued at $164.4 million.
Amended
and Restated Credit Facilities
On
February 16, 2007, the Company amended and restated its existing $200 million
unsecured revolving credit agreement with a syndicate of 11 banks with The
Bank
of Nova Scotia as the administrative agent (the “2007 Credit Facility”). Under
the 2007 Credit Facility, the Company exercised the accordion option in the
existing credit agreement to increase the availability under the revolving
credit line by $100,000,000, for an aggregate availability of up to
$300,000,000, and extended the maturity date of the revolving credit line by
18
months, from July 2010 to February 2012. Up to $25 million of the
availability under the revolving credit line may be used to issue letters of
credit, and up to $20 million may be used for swing line loans. In addition,
the
Company incurred five-year term loan under the 2007 Credit Facility in an
aggregate principal amount of $100,000,000, which will mature concurrently
with
the revolving credit line. The term loan will be repaid in quarterly
installments, with principal being amortized at the following annual rates:
year
1 at 10%, year 2 at 15%, year 3 at 15%, year 4 at 20%, year 5 at 20%, and the
last quarterly payment to be made at maturity, together with a final payment
of
20%. Under the existing facility, the Company was required to maintain a
maximum leverage ratio of 2:75:1. The 2007 Credit Facility increased the maximum
leverage ratio to 3.00:1. The funds available under the new 2007
Credit Facility may be used by the Company for acquisitions and general
corporate purposes.
As
of
February 20, 2007, the Company had
$150
million
drawn on the revolving credit line and $100 million in term loan
outstanding.
2-for-1
Stock Split
On
January 17, 2007, Trimble’s Board of Directors approved a 2-for-1 split of all
outstanding shares of the Company’s Common Stock, payable February 22, 2007 to
stockholders of record on February 8, 2007. All shares and per share information
presented has been adjusted to reflect the stock split on a retroactive basis
for all periods presented.
NOTE
19: SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
Fiscal
period ended
|
|
March
31,
2006
|
|
June
30,
2006
|
|
September
29,
2006
|
|
December
29,
2006
|
|
(in
thousands, except per share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
$
|
225,854
|
|
$
|
245,326
|
|
$
|
234,851
|
|
$
|
234,120
|
|
Gross
margin
|
|
|
107,463
|
|
|
121,656
|
|
|
116,191
|
|
|
115,771
|
|
Net
income
|
|
|
25,828
|
|
|
28,503
|
|
|
25,342
|
|
|
23,983
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
net income per share
|
|
|
0.24
|
|
|
0.26
|
|
|
0.23
|
|
|
0.22
|
|
Diluted
net income per share
|
|
|
0.23
|
|
|
0.25
|
|
|
0.22
|
|
|
0.21
|
|
Fiscal
period ended
|
|
April
1,
2005
|
|
July
1,
2005
|
|
September
30,
2005
|
|
December
30,
2005
|
|
(in
thousands, except per share data)
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
$
|
195,383
|
|
$
|
204,225
|
|
$
|
188,484
|
|
$
|
186,821
|
|
Gross
margin
|
|
|
97,807
|
|
|
102,407
|
|
|
97,292
|
|
|
92,299
|
|
Net
income
|
|
|
17,439
|
|
|
23,787
|
|
|
20,236
|
|
|
23,393
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
net income per share
|
|
|
0.17
|
|
|
0.23
|
|
|
0.19
|
|
|
0.22
|
|
Diluted
net income per share
|
|
|
0.16
|
|
|
0.21
|
|
|
0.18
|
|
|
0.21
|
|
Trimble
has a 52-53 week fiscal year, ending on the Friday nearest to December 31.
As a
result of the extra week, year-over-year results are not exactly comparable.
Thus, due to the inherent nature of adopting a 52-53 week fiscal year, the
Company, analysts, shareholders, investors, and others will have to make
appropriate adjustments to any analysis performed when comparing our activities
and results.
Significant
quarterly items for fiscal 2006 include the following: (i) in the first quarter
of 2006 a $2.6 million benefit, or a $0.03 per diluted share resulting from
the
settlement of foreign income tax audits; (ii) in the second quarter of 2006
a
$1.0 million charge, or $0.00 per diluted share relating to in-process research
and development and a $2.2 million benefit, or a $0.02 per diluted share
resulting from the settlement of foreign income tax audits; (iii) in the third
quarter a $1.7 million benefit, or a $0.02 per diluted share resulting from
the
amendment of a federal income tax return; (iv) in the fourth quarter of 2006
a
$930,000 charge, or $0.00 per diluted share relating to in-process research
and
development and $1.8 million benefit, or a $0.02 per diluted share resulting
from the settlement of foreign income tax audits.
Significant
quarterly items for fiscal 2005 include the following: (i) in the first quarter
of 2005 a $0.2 million charge, or less than $0.01 per diluted share relating
to
facilities closure; (ii) in the third quarter of 2005 a $0.9 million charge,
or
$0.02 per diluted share relating to a write-off of debt issuance costs; (iii)
in
the fourth quarter of 2005 a $1.1 million charge, or $0.02 per diluted share
relating to in-process research and development and $9.2 million or $0.16 per
diluted share related to deferred gain on joint venture.
Report
of Independent Registered Public Accounting Firm
The
Board of Directors and Shareholders of Trimble Navigation Limited
We
have
audited the accompanying consolidated balance sheets of Trimble Navigation
Limited as of December 29, 2006 and December 30, 2005, and the related
consolidated statements of income, shareholder’s equity, and cash flows for each
of the three years in the period ended December 29, 2006. Our audits also
included the financial statement schedule listed in the index at Item 15(a)(2).
These financial statements and schedule are the responsibility of the Company’s
management. Our responsibility is to express an opinion on these financial
statements and schedule based on our audits.
We
conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we
plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining,
on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used
and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In
our
opinion, the financial statements referred to above present fairly, in all
material respects, the consolidated financial position of Trimble Navigation
Limited at December 29, 2006 and December 30, 2005, and the consolidated results
of its operations and its cash flows for each of the three years in the period
ended December 29, 2006, in conformity with U.S generally accepted accounting
principles. Also, in our opinion, the related financial statement schedule,
when
considered in relation to the basic consolidated financial statements taken
as a
whole, presents fairly in all material respects the information set forth
therein.
As
discussed in Note 2 to the consolidated financial statements, in fiscal 2006
the
Company changed its method of accounting for stock based compensation in
accordance with guidance provided in Statement of Financial Accounting Standards
No. 123R, “Share-Based Payment”.
We
also
have audited, in accordance with the standards of the Public Company Accounting
Oversight Board (United States), the effectiveness of Trimble Navigation
Limited’s internal control over financial reporting as of December 29, 2006,
based on criteria established in Internal Control-Integrated Framework issued
by
the Committee of Sponsoring Organizations of the Treadway Commission and our
report dated February 22, 2007, expressed an unqualified opinion
thereon.
/s/
Ernst
& Young LLP
San
Jose,
California
February
22, 2007
Report
of Independent Registered Public Accounting Firm
The
Board of Directors and Shareholders of Trimble Navigation
Limited
We
have
audited management’s assessment, included in the accompanying Management’s
Report on Internal Control Over Financial Reporting at Item 9A, that Trimble
Navigation Limited maintained effective internal control over financial
reporting as of December 29, 2006, based on criteria established in Internal
Control—Integrated Framework issued by the Committee of Sponsoring Organizations
of the Treadway Commission (the COSO criteria). Trimble Navigation Limited’s
management is responsible for maintaining effective internal control over
financial reporting and for its assessment of the effectiveness of internal
control over financial reporting. Our responsibility is to express an opinion
on
management’s assessment and an opinion on the effectiveness of the company’s
internal control over financial reporting based on our audit.
We
conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we
plan
and perform the audit to obtain reasonable assurance about whether effective
internal control over financial reporting was maintained in all material
respects. Our audit included obtaining an understanding of internal control
over
financial reporting, evaluating management’s assessment, testing and evaluating
the design and operating effectiveness of internal control, and performing
such
other procedures as we considered necessary in the circumstances. We believe
that our audit provides a reasonable basis for our opinion.
A
company’s internal control over financial reporting is a process designed to
provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance
with generally accepted accounting principles. A company’s internal control over
financial reporting includes those policies and procedures that (1) pertain
to
the maintenance of records that, in reasonable detail, accurately and fairly
reflect the transactions and dispositions of the assets of the company; (2)
provide reasonable assurance that transactions are recorded as necessary to
permit preparation of financial statements in accordance with generally accepted
accounting principles, and that receipts and expenditures of the company are
being made only in accordance with authorizations of management and directors
of
the company; and (3) provide reasonable assurance regarding prevention or timely
detection of unauthorized acquisition, use, or disposition of the company’s
assets that could have a material effect on the financial
statements.
Because
of its inherent limitations, internal control over financial reporting may
not
prevent or detect misstatements. Also, projections of any evaluation of
effectiveness to future periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree of compliance
with the policies or procedures may deteriorate.
In
our
opinion, management’s assessment that Trimble Navigation Limited maintained
effective internal control over financial reporting as of December 29, 2006,
is
fairly stated, in all material respects, based on the COSO criteria. Also,
in
our opinion, Trimble Navigation Limited maintained, in all material respects,
effective internal control over financial reporting as of December 29, 2006,
based on the
COSO
criteria.
We
also
have audited, in accordance with the standards of the Public Company Accounting
Oversight Board (United States), the consolidated balance sheets of Trimble
Navigation Limited as of December 29, 2006 and December 30, 2005, and the
related consolidated statements of income, shareholders’ equity, and cash flows
for each of the three years in the period ended December 29, 2006, of Trimble
Navigation Limited and our report dated February 22, 2007 expressed an
unqualified opinion thereon.
/s/
Ernst
& Young LLP
San
Jose,
California
February
22, 2007
Item
9.
|
Changes
in and Disagreements with Accountants on Accounting and
Financial Disclosure.
|
None
|
(3)
|
Evaluation
of Disclosure Controls and Procedures
|
Trimble’s
Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), after
evaluating the effectiveness of the company’s “disclosure controls and
procedures” (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities
Exchange Act of 1934 (the “Exchange Act”)), as of December 29, 2006, have
concluded that as of December 29, 2006, the company’s disclosure controls and
procedures were effective and designed to provide reasonable assurance that
material information relating to the company and its consolidated subsidiaries
required to be included in the company’s periodic filings under the Exchange Act
would be made known to them by others within those entities.
Inherent
Limitations on Effectiveness of Controls
The
company’s management, including the CEO and CFO, does not expect that our
internal control over financial reporting will prevent or detect all error
and
all fraud. A control system, no matter how well designed and operated, can
provide only reasonable, not absolute, assurance that the control system’s
objectives will be met. The design of any system of controls is based in part
on
certain assumptions about the likelihood of future events, and there can be
no
assurance that any design will succeed in achieving its stated goals under
all
potential future conditions.
(b)
Management’s Report on Internal Control over Financial Reporting
The
company’s management is responsible for establishing and maintaining adequate
internal control over financial reporting, as such term is defined in Exchange
Act Rule 13a-15(f). The company’s management, including the CEO and CFO,
conducted an evaluation of the effectiveness of its internal control over
financial reporting based on the Internal Control - Integrated Framework issued
by the Committee of Sponsoring Organizations of the Treadway Commission. Based
on the results of this evaluation, the company’s management concluded that its
internal control over financial reporting was effective as of December 29,
2006.
Management’s
assessment of the effectiveness of our internal control over financial reporting
as of December 29, 2006 has been audited by Ernst & Young LLP, an
independent registered public accounting firm, as stated in their report which
is included elsewhere herein.
Changes
in Internal Control over Financial Reporting
During
the quarter ended December 29, 2006, there were no changes in the company’s
internal control over financial reporting that have materially affected, or
are
reasonably likely to materially affect, the company’s internal control over
financial reporting.
None.
PART
III
Item
10.
|
Directors,
Executive Officers and Corporate Governance.
|
The
information required by this item, insofar as it relates to Trimble’s directors,
will be contained under the captions “Election of Directors” and
“Section 16(a) Beneficial Ownership Reporting Compliance” in the Proxy
Statement and is incorporated herein by reference. The information required
by
this item relating to executive officers is set forth above in Item 1 Business
Overview under the caption “Executive Officers.”
Code
of Ethics
The
Company’s Business Ethics and Conduct Policy applies to, among others, to the
Company’s Chief Executive Officer, Chief Financial Officer, Corporate
Controller, and other finance organization employees. The Business Ethics and
Conduct Policy is available on the Company’s website at www.trimble.com under
the heading “Corporate Governance and Policies” on the Investor Information page
of our website. A copy will be provided, without charge, to any shareholder
who
requests one by written request addressed to General Counsel, Trimble Navigation
Limited, 935 Stewart Drive, Sunnyvale, CA 94085.
If
any
substantive amendments to the Business Ethics and Conduct Policy are made or
any
waivers are granted, including any implicit waiver, from a provision of the
Business Ethics and Conduct Policy, to its Chief Executive Officer, Chief
Financial Officer or Corporate Controller, the Company will disclose the nature
of such amendment or waiver on the Company’s website at www.trimble.com or in a
report on Form 8-K.
The
information required by this item will be contained in the Proxy Statement
under
the caption “Executive Compensation” and is incorporated herein by reference.
Item
12.
|
Security
Ownership of Certain Beneficial Owners and Management
and Related Stockholder
Matters.
|
The
information required by this item will be contained in the Proxy Statement
under
the caption “Security Ownership of Certain Beneficial Owners and Management and
Related Stockholder Matters” and is incorporated herein by reference.
Item
13. |
Certain
Relationships and Related Transactions, and Director
Independence.
|
The
information required by this item will be contained in the Proxy Statement
under
the caption “Certain Relationships and Related Transactions, and Director
Independence” and is incorporated herein by reference.
Item
14. |
Principal
Accounting Fees and
Services.
|
The
information required by this item will be contained in the Proxy Statement
under
the caption “Principal Accounting Fees and Services” and is incorporated herein
by reference.
PART
IV
Item
15.
|
Exhibits,
Financial Statement Schedules.
|
(a)
|
(1)
Financial Statements
|
The
following consolidated financial statements required by this item are included
in Part II Item 8 hereof under the caption “Financial Statements and
Supplementary Data.”
|
Page
in this Annual Report
on
Form 10-K
|
Consolidated
Balance Sheets at December 29, 2006 and December 30, 2005
|
42
|
|
|
Consolidated
Statements of Income for each of the three fiscal years in the
period
ended December 29, 2006
|
43
|
|
|
Consolidated
Statement of Shareholders’ Equity for each of the three fiscal years in
the period ended December 29, 2006
|
44
|
|
|
Consolidated
Statements of Cash Flows for each of the three fiscal years in
the period
ended December 29, 2006
|
45
|
|
|
Notes
to Consolidated Financial Statements
|
46
|
|
|
Reports
of Independent Registered Public Accounting Firm
|
74
|
|
(4)
|
Financial
Statement Schedules
|
The
following financial statement schedule is filed as part of this report:
|
Page
in this Annual
Report
on Form
10-K
|
Schedule
II - Valuation and Qualifying Accounts
|
S-1
|
All
other
schedules have been omitted as they are either not required or not applicable,
or the required information is included in the consolidated financial statements
or the notes thereto.
Exhibit
Number
2.1
|
|
Agreement
and Plan of Merger, by and among Trimble Navigation Limited, Roadrunner
Acquisition Corp. and @Road, Inc., dated as of December 10, 2006.
(27)
|
2.2
|
|
Form
of Voting Agreement, by and among Trimble Navigation Limited and
certain
stockholders of @Road, Inc., dated as of December 10, 2006.
(28)
|
3.1
|
|
Restated
Articles of Incorporation of the Company filed June 25, 1986.
(5)
|
3.2
|
|
Certificate
of Amendment of Articles of Incorporation of the Company filed October
6,
1988. (6)
|
3.3
|
|
Certificate
of Amendment of Articles of Incorporation of the Company filed July
18,
1990. (7)
|
3.4
|
|
Certificate
of Determination of the Company filed February 19, 1999.
(8)
|
3.5
|
|
Certificate
of Amendment of Articles of Incorporation of the Company filed May
29,
2003. (15)
|
3.6
|
|
Certificate
of Amendment of Articles of Incorporation of the Company filed March
4,
2004. (19)
|
3.7
|
|
Bylaws
of the Company (amended and restated through July 20, 2006).
(18)
|
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.
(4)
|
4.3
|
|
Agreement
of Substitution and Amendment of Preferred Shares Rights Agreement
dated
September 10, 2004. (20)
|
4.4
|
|
Form
of Warrant dated April 12, 2002. (13)
|
10.1+
|
|
Form
of Indemnification Agreement between the Company and its officers
and
directors. (26)
|
10.
2+
|
|
1990
Director Stock Option Plan, as amended, and form of Outside Director
Non-statutory Stock Option Agreement. (3)
|
10.3+
|
|
1992
Management Discount Stock Option and form of Non-statutory Stock
Option
Agreement. (2)
|
10.4+
|
|
1993
Stock Option Plan, as amended October 24, 2003. (11)
|
10.5+
|
|
Trimble
Navigation 1988 Employee Stock Purchase Plan, as amended January
17, 2007.
(31)
|
10.6+
|
|
Employment
Agreement between the Company and Steven W. Berglund dated March
17, 1999.
(9)
|
10.7+
|
|
Trimble
Navigation Limited Deferred Compensation Plan effective December
30, 2004,
as amended May 19, 2005. (10)
|
10.8+
|
|
Australian
Addendum to the Trimble Navigation Limited 1988 Employee Stock
Purchase
Plan. (12)
|
10.9+
|
|
Trimble
Navigation Limited 2002 Stock Plan (as amended and restated October
20,
2006), including forms of option agreements. (32)
|
10.10
|
|
Credit
Agreement dated July 28, 2005 among Trimble Navigation Limited,
The Bank
of Nova Scotia (Administrative Agent, Issuing Bank and Swing Line
Bank),
The Bank of New York and Harris Nesbitt (Co-Syndication Agents),
Bank of
America, N.A. and Wells Fargo Bank N.A. (Co-Documentation Agents),
The
Bank of Nova Scotia and BNY Capital Markets, Inc. (Joint Lead Arrangers),
and The Bank of Nova Scotia (Sole Book Runner). (14)
|
10.11+
|
|
Employment
Agreement between the Company and Rajat Bahri dated December 6,
2004.
(21)
|
10.12+
|
|
Board
of Directors Compensation Policy effective January 1, 2004.
(22)
|
10.13+
|
|
Form
of Change in Control severance agreement between the Company and
certain
Company officers. (16)
|
10.14+
|
|
Letter
of Assignment between the Company and Alan Townsend dated November
12,
2003. (23)
|
10.15+
|
|
Supplemental
agreement to Letter of Assignment between the Company and Alan
Townsend
dated January 19, 2004. (24)
|
10.16+
|
|
Trimble
Navigation Limited 2006 Management Incentive Plan Description.
(25)
|
10.17
|
|
Lease
dated May 11, 2005 between CarrAmerica Realty Operating Partnership,
L.P.
and the Company. (30)
|
10.18+
|
|
Trimble
Navigation Limited 2007 Management Incentive Plan Description.
(29)
|
10.19+
|
|
@Road,
Inc. 2000 Stock Option Plan. (31)
|
21.1
|
|
Subsidiaries
of the Company. (31)
|
23.1
|
|
Consent
of Ernst & Young LLP, independent registered public accounting firm.
(31)
|
24.1
|
|
Power
of Attorney included on signature page herein.
|
31.1
|
|
Certification
of CEO pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
(31)
|
31.2
|
|
Certification
of CFO pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
(31)
|
32.1
|
|
Certification
of CEO pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
(31)
|
32.2
|
|
Certification
of CFO pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
(31)
|
|
|
|
+
|
|
Management
contract or compensatory plan or arrangement required to be filed
as an
exhibit to this Annual Report on Form 10-K pursuant to Item 14I
thereof.
|
(1)
|
|
Incorporated
by reference to exhibit number 4.1 to the Company’s Registration Statement
on Form S-1, as amended (File No. 33-35333), which became effective
July
19, 1990.
|
(2)
|
|
Incorporated
by reference exhibit number 10.46 to the Company’s Registration Statement
on Form S-1 (File No. 33-45990), which was filed February 25,
1992.
|
(3)
|
|
Incorporated
by reference to exhibit number 10.32 to the Company’s Annual Report on
Form 10-K for the fiscal year ended December 31, 1993.
|
(4)
|
|
Incorporated
by reference to exhibit number 1 to the Company’s Registration Statement
on Form 8-A, which was filed on February 18, 1999.
|
(5)
|
|
Incorporated
by reference to exhibit number 3.1 to the Company’s Annual Report on Form
10-K for the fiscal year ended January 1, 1999.
|
(6)
|
|
Incorporated
by reference to exhibit number 3.2 to the Company’s Annual Report on Form
10-K for the fiscal year ended January 1, 1999.
|
(7)
|
|
Incorporated
by reference to exhibit number 3.3 to the Company’s Annual Report on Form
10-K for the fiscal year ended January 1, 1999.
|
(8)
|
|
Incorporated
by reference to exhibit number 3.4 to the Company’s Annual Report on Form
10-K for the fiscal year ended January 1, 1999.
|
(9)
|
|
Incorporated
by reference to exhibit number 10.67 to the Company’s Annual Report on
Form 10-K for the fiscal year ended January 1, 1999.
|
(10)
|
|
Incorporated
by reference to exhibit number 10.1 to the Company’s Current Report on
Form 8-K filed on May 25, 2005.
|
(11)
|
|
Incorporated
by reference to exhibit number 10.3 to the Company’s Quarterly Report on
Form 10-Q for the quarter ended October 3, 2003.
|
(12)
|
|
Incorporated
by reference to exhibit number 10.77 to the Company’s Annual Report on
Form 10-K for the fiscal year ended December 29, 2000.
|
(13)
|
|
Incorporated
by reference to exhibit number 4.1 to the Company’s Registration Statement
on Form S-3 filed on April 19, 2002.
|
(14)
|
|
Incorporated
by reference to exhibit number 10.1 to the Company’s Quarterly Report on
Form 10-Q for the quarter ended September 30, 2005.
|
(15)
|
|
Incorporated
by reference to exhibit number 3.5 to the Company’s Quarterly Report on
Form 10-Q for the quarter ended July 4, 2003.
|
(16)
|
|
Incorporated
by reference to exhibit number 10.15 to the Company’s Annual Report on
Form 10-K for the year ended December 31, 2004.
|
(18)
|
|
Incorporated
by reference to exhibit number 3.7 to the Company’s Quarterly Report on
Form 10-Q for the quarter ended September 29, 2006.
|
(19)
|
|
Incorporated
by reference to exhibit number 3.6 to the Company’s Quarterly Report on
Form 10-Q for the quarter ended April 2, 2004.
|
(20)
|
|
Incorporated
by reference to exhibit number 4.3 to the Company’s Annual Report on Form
10-K for the year ended December 31, 2004.
|
(21)
|
|
Incorporated
by reference to exhibit number 10.13 to the Company’s Annual Report on
Form 10-K for the year ended December 31, 2004.
|
(22)
|
|
Incorporated
by reference to exhibit number 10.14 to the Company’s Annual Report on
Form 10-K for the year ended December 31, 2004.
|
(23)
|
|
Incorporated
by reference to exhibit number 10.16 to the Company’s Annual Report on
Form 10-K for the year ended December 31, 2004.
|
(24)
|
|
Incorporated
by reference to exhibit number 10.17 to the Company’s Annual Report on
Form 10-K for the year ended December 31, 2004.
|
(25)
|
|
Incorporated
by reference to exhibit number 10.1 to the Company’s Current Report on
Form 8-K filed on January 24, 2006.
|
(26)
|
|
Incorporated
by reference to exhibit number 10.1 to the Company’s Annual Report on Form
10-K for the year ended December 20, 3005.
|
(27) |
|
Incorporated
by reference to exhibit number 2.1 to the Company’s Current Report on Form
8-K filed on December 11, 2006. |
(28)
|
|
Incorporated
by reference to exhibit number 2.2 to the Company’s Current Report on Form
8-K filed on December 11, 2006.
|
(29)
|
|
Incorporated
by reference to exhibit number 10.1 to the Company’s Current Report on
Form 8-K filed on January 30, 2006.
|
(30)
|
|
Incorporated
by reference to exhibit number 10.17 to the Company’s Annual Report on
Form 10-K for the year ended December 30, 2005.
|
(31)
|
|
Filed
herewith.
|
EXHIBIT
LIST
Exhibit
Number
2.1
|
|
Agreement
and Plan of Merger, by and among Trimble Navigation Limited, Roadrunner
Acquisition Corp. and @Road, Inc., dated as of December 10, 2006.
(27)
|
2.2
|
|
Form
of Voting Agreement, by and among Trimble Navigation Limited and
certain
stockholders of @Road, Inc., dated as of December 10, 2006.
(28)
|
3.1
|
|
Restated
Articles of Incorporation of the Company filed June 25, 1986.
(5)
|
3.2
|
|
Certificate
of Amendment of Articles of Incorporation of the Company filed
October 6,
1988. (6)
|
3.3
|
|
Certificate
of Amendment of Articles of Incorporation of the Company filed
July 18,
1990. (7)
|
3.4
|
|
Certificate
of Determination of the Company filed February 19, 1999.
(8)
|
3.5
|
|
Certificate
of Amendment of Articles of Incorporation of the Company filed
May 29,
2003. (15)
|
3.6
|
|
Certificate
of Amendment of Articles of Incorporation of the Company filed
March 4,
2004. (19)
|
3.7
|
|
Bylaws
of the Company (amended and restated through July 20, 2006).
(18)
|
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.
(4)
|
4.3
|
|
Agreement
of Substitution and Amendment of Preferred Shares Rights Agreement
dated
September 10, 2004. (20)
|
4.4
|
|
Form
of Warrant dated April 12, 2002. (13)
|
10.1+
|
|
Form
of Indemnification Agreement between the Company and its officers
and
directors. (26)
|
10.
2+
|
|
1990
Director Stock Option Plan, as amended, and form of Outside Director
Non-statutory Stock Option Agreement. (3)
|
10.3+
|
|
1992
Management Discount Stock Option and form of Non-statutory Stock
Option
Agreement. (2)
|
10.4+
|
|
1993
Stock Option Plan, as amended October 24, 2003. (11)
|
|
|
Trimble
Navigation 1988 Employee Stock Purchase Plan, as amended January
17, 2007.
(31)
|
10.6+
|
|
Employment
Agreement between the Company and Steven W. Berglund dated March
17, 1999.
(9)
|
10.7+
|
|
Trimble
Navigation Limited Deferred Compensation Plan effective December
30, 2004,
as amended May 19, 2005. (10)
|
10.8+
|
|
Australian
Addendum to the Trimble Navigation Limited 1988 Employee Stock
Purchase
Plan. (12)
|
|
|
Trimble
Navigation Limited 2002 Stock Plan (as amended and restated October
20,
2006), including forms of option agreements. (32)
|
10.10
|
|
Credit
Agreement dated July 28, 2005 among Trimble Navigation Limited,
The Bank
of Nova Scotia (Administrative Agent, Issuing Bank and Swing Line
Bank),
The Bank of New York and Harris Nesbitt (Co-Syndication Agents),
Bank of
America, N.A. and Wells Fargo Bank N.A. (Co-Documentation Agents),
The
Bank of Nova Scotia and BNY Capital Markets, Inc. (Joint Lead Arrangers),
and The Bank of Nova Scotia (Sole Book Runner). (14)
|
10.11+
|
|
Employment
Agreement between the Company and Rajat Bahri dated December 6,
2004.
(21)
|
10.12+
|
|
Board
of Directors Compensation Policy effective January 1, 2004.
(22)
|
10.13+
|
|
Form
of Change in Control severance agreement between the Company and
certain
Company officers. (16)
|
10.14+
|
|
Letter
of Assignment between the Company and Alan Townsend dated November
12,
2003. (23)
|
10.15+
|
|
Supplemental
agreement to Letter of Assignment between the Company and Alan
Townsend
dated January 19, 2004. (24)
|
10.16+
|
|
Trimble
Navigation Limited 2006 Management Incentive Plan Description.
(25)
|
10.17
|
|
Lease
dated May 11, 2005 between CarrAmerica Realty Operating Partnership,
L.P.
and the Company. (30)
|
10.18+
|
|
Trimble
Navigation Limited 2007 Management Incentive Plan Description.
(29)
|
|
|
@Road,
Inc. 2000 Stock Option Plan. (31)
|
|
|
Subsidiaries
of the Company. (31)
|
|
|
Consent
of Ernst & Young LLP, independent registered public accounting firm.
(31)
|
24.1
|
|
Power
of Attorney included on signature page herein.
|
|
|
Certification
of CEO pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
(31)
|
|
|
Certification
of CFO pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
(31)
|
|
|
Certification
of CEO pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
(31)
|
|
|
Certification
of CFO pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
(31)
|
+
|
|
Management
contract or compensatory plan or arrangement required to be filed
as an
exhibit to this Annual Report on Form 10-K pursuant to Item 14I
thereof.
|
(1)
|
|
Incorporated
by reference to exhibit number 4.1 to the Company’s Registration Statement
on Form S-1, as amended (File No. 33-35333), which became effective
July
19, 1990.
|
(2)
|
|
Incorporated
by reference exhibit number 10.46 to the Company’s Registration Statement
on Form S-1 (File No. 33-45990), which was filed February 25,
1992.
|
(3)
|
|
Incorporated
by reference to exhibit number 10.32 to the Company’s Annual Report on
Form 10-K for the fiscal year ended December 31, 1993.
|
(4)
|
|
Incorporated
by reference to exhibit number 1 to the Company’s Registration Statement
on Form 8-A, which was filed on February 18, 1999.
|
(5)
|
|
Incorporated
by reference to exhibit number 3.1 to the Company’s Annual Report on Form
10-K for the fiscal year ended January 1, 1999.
|
(6)
|
|
Incorporated
by reference to exhibit number 3.2 to the Company’s Annual Report on Form
10-K for the fiscal year ended January 1, 1999.
|
(7)
|
|
Incorporated
by reference to exhibit number 3.3 to the Company’s Annual Report on Form
10-K for the fiscal year ended January 1, 1999.
|
(8)
|
|
Incorporated
by reference to exhibit number 3.4 to the Company’s Annual Report on Form
10-K for the fiscal year ended January 1, 1999.
|
(9)
|
|
Incorporated
by reference to exhibit number 10.67 to the Company’s Annual Report on
Form 10-K for the fiscal year ended January 1, 1999.
|
(10)
|
|
Incorporated
by reference to exhibit number 10.1 to the Company’s Current Report on
Form 8-K filed on May 25, 2005.
|
(11)
|
|
Incorporated
by reference to exhibit number 10.3 to the Company’s Quarterly Report on
Form 10-Q for the quarter ended October 3, 2003.
|
(12)
|
|
Incorporated
by reference to exhibit number 10.77 to the Company’s Annual Report on
Form 10-K for the fiscal year ended December 29, 2000.
|
(13)
|
|
Incorporated
by reference to exhibit number 4.1 to the Company’s Registration Statement
on Form S-3 filed on April 19, 2002.
|
(14)
|
|
Incorporated
by reference to exhibit number 10.1 to the Company’s Quarterly Report on
Form 10-Q for the quarter ended September 30, 2005.
|
(15)
|
|
Incorporated
by reference to exhibit number 3.5 to the Company’s Quarterly Report on
Form 10-Q for the quarter ended July 4, 2003.
|
(16)
|
|
Incorporated
by reference to exhibit number 10.15 to the Company’s Annual Report on
Form 10-K for the year ended December 31, 2004.
|
(18)
|
|
Incorporated
by reference to exhibit number 3.7 to the Company’s Quarterly Report on
Form 10-Q for the quarter ended September 29, 2006.
|
(19)
|
|
Incorporated
by reference to exhibit number 3.6 to the Company’s Quarterly Report on
Form 10-Q for the quarter ended April 2, 2004.
|
(20)
|
|
Incorporated
by reference to exhibit number 4.3 to the Company’s Annual Report on Form
10-K for the year ended December 31, 2004.
|
(21)
|
|
Incorporated
by reference to exhibit number 10.13 to the Company’s Annual Report on
Form 10-K for the year ended December 31, 2004.
|
(22)
|
|
Incorporated
by reference to exhibit number 10.14 to the Company’s Annual Report on
Form 10-K for the year ended December 31, 2004.
|
(23)
|
|
Incorporated
by reference to exhibit number 10.16 to the Company’s Annual Report on
Form 10-K for the year ended December 31, 2004.
|
(24)
|
|
Incorporated
by reference to exhibit number 10.17 to the Company’s Annual Report on
Form 10-K for the year ended December 31, 2004.
|
(25)
|
|
Incorporated
by reference to exhibit number 10.1 to the Company’s Current Report on
Form 8-K filed on January 24, 2006.
|
(26)
|
|
Incorporated
by reference to exhibit number 10.1 to the Company’s Annual Report on Form
10-K for the year ended December 20, 3005.
|
(27)
|
|
Incorporated
by reference to exhibit number 2.1 to the Company’s Current Report on Form
8-K filed on December 11, 2006.
|
(28)
|
|
Incorporated
by reference to exhibit number 2.2 to the Company’s Current Report on Form
8-K filed on December 11, 2006.
|
(29)
|
|
Incorporated
by reference to exhibit number 10.1 to the Company’s Current Report on
Form 8-K filed on January 30, 2006.
|
(30)
|
|
Incorporated
by reference to exhibit number 10.17 to the Company’s Annual Report on
Form 10-K for the year ended December 30, 2005.
|
(31)
|
|
Filed
herewith.
|
SIGNATURES
Pursuant
to the requirements of Section 13 or 15(d) of the Securities Exchange Act of
1934, the registrant has duly caused this Report on Form 10-K to be signed
on
its behalf by the undersigned, thereunto duly authorized.
TRIMBLE
NAVIGATION LIMITED
By:
/s/
Steven W. Berglund
Steven
W.
Berglund,
President
and Chief Executive Officer
February
23, 2007
POWER
OF ATTORNEY
Know
all
persons by these presents, that each person whose signature appears below
constitutes and appoints Steven W. Berglund as his attorney-in-fact, with the
power of substitution, for him in any and all capacities, to sign any amendments
to this Report on Form 10-K, and to file the same, with exhibits thereto and
other documents in connection therewith, with the Securities and Exchange
Commission, hereby ratifying and confirming all that said attorney-in-fact,
or
his substitute or substitutes, may do or cause to be done by virtue hereof.
Pursuant
to the requirements of the Securities Exchange Act of 1934, this Annual Report
on Form 10-K has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated:
Signature
|
|
Capacity
in which Signed
|
|
|
|
|
|
|
|
|
|
|
|
|
/s/
Steven W. Berglund
|
|
President,
Chief Executive Officer, Director
|
|
February
21, 2007
|
Steven
W. Berglund
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
/s/
Rajat Bahri
|
|
Chief
Financial Officer and Assistant
|
|
February
23, 2007
|
Rajat
Bahri
|
|
Secretary
(Principal Financial Officer and Principal Accounting
Officer)
|
|
|
|
|
|
|
|
|
|
|
|
|
/s/
Robert S. Cooper
|
|
Director
|
|
February
22, 2007
|
Robert
S. Cooper
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
/s/
John B. Goodrich
|
|
Director
|
|
February
21, 2007
|
John
B. Goodrich
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
/s/
William Hart
|
|
Director
|
|
February
22, 2007
|
William
Hart
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
/s/
Ulf J. Johansson
|
|
Director
|
|
February
20, 2007
|
Ulf
J. Johansson
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
/s/
Bradford W. Parkinson
|
|
Director
|
|
February
20, 2007
|
Bradford
W. Parkinson
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
/s/
Nickolas W. Vande Steeg
|
|
Director
|
|
February
22, 2007
|
Nickolas
W. Vande Steeg
|
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SCHEDULE
II
TRIMBLE
NAVIGATION LIMITED
VALUATION
AND QUALIFYING ACCOUNTS
(IN
THOUSANDS OF DOLLARS)
Allowance
for doubtful accounts:
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December
29,
2006
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December
30,
2005
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December
31,
2005
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Balance
at beginning of period
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|
$
|
5,230
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|
$
|
8,952
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$
|
9,953
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Acquired
allowance
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|
494
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|
237
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116
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Bad
debt expense
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163
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502
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1,210
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Write-offs,
net of recoveries
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|
(1,824
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)
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(3,459
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)
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(2,327
|
)
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Balance
at end of period
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$
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4,063
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$
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5,230
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$
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8,952
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Inventory
allowance:
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Balance
at beginning of period
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$
|
23,238
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$
|
26,217
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$
|
25,885
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Acquired
allowance
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1
|
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|
357
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|
|
591
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Additions
to allowance
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7,061
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5,612
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3,765
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Write-offs,
net of recoveries
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|
(1,718
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)
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(8,948
|
)
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(4,024
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)
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Balance
at end of period
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|
$
|
28,582
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|
$
|
23,238
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$
|
26,217
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Sales
return reserve:
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Balance
at beginning of period
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$
|
1,500
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$
|
2,210
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$
|
3,252
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Acquired
allowance
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|
55
|
|
|
21
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-
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Additions
(Reductions) to allowance
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|
(586
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)
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(383
|
)
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(809
|
)
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Write-offs,
net of recoveries
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|
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(110
|
)
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(348
|
)
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(233
|
)
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Balance
at end of period
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$
|
859
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$
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1,500
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$
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2,210
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S-1