form10-q.htm
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
10-Q
(Mark
One)
x QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 30, 2007
OR
¨ TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM __________ TO __________
Commission
file number: 0-18645
TRIMBLE
NAVIGATION LIMITED
(Exact
name of registrant as specified in its charter)
|
California
|
|
94-2802192
|
|
|
(State
or other jurisdiction of incorporation or organization)
|
|
(I.R.S.
Employer Identification Number)
|
|
935
Stewart Drive, Sunnyvale, CA 94085
(Address
of principal executive offices) (Zip Code)
Telephone
Number (408) 481-8000
(Registrant's
telephone number, including area code)
Indicate
by check mark whether the registrant (1) has filed all reports required to
be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements
for
the past 90 days.
Yes
x
No ¨
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, or a non-accelerated filer. See definition of “accelerated
filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check
one):
Large
Accelerated Filer x
|
Accelerated
Filer ¨
|
Non-accelerated
Filer ¨
|
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 May 4, 2007, there were 119,452,677 shares of Common Stock (no par
value) outstanding.
TRIMBLE
NAVIGATION LIMITED
FORM
10-Q for the Quarter ended March 30, 2007
TABLE
OF CONTENTS
PART
I.
|
Financial
Information
|
Page
|
|
|
|
ITEM
1.
|
Financial
Statements (Unaudited):
|
|
|
|
|
|
|
3
|
|
|
|
|
|
4
|
|
|
|
|
|
5
|
|
|
|
|
|
6
|
|
|
|
ITEM
2.
|
|
22
|
|
|
|
ITEM
3.
|
|
33
|
|
|
|
ITEM
4.
|
|
33
|
|
|
|
PART
II.
|
Other
Information
|
|
|
|
|
ITEM
1.
|
|
35
|
|
|
|
ITEM
1A.
|
|
35
|
|
|
|
ITEM
6.
|
|
36
|
|
|
|
|
37
|
PART
I –
FINANCIAL INFORMATION
ITEM
1.
|
CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
|
TRIMBLE
NAVIGATION LIMITED
CONDENSED
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
|
|
March
30
2007
|
|
|
December
29,
2006
|
|
(In
thousands)
|
|
|
|
|
|
(1)
|
|
|
|
|
|
|
|
|
|
ASSETS
|
|
|
|
|
|
|
|
Current
assets:
|
|
|
|
|
|
|
|
Cash
and cash equivalents
|
|
$ |
63,571
|
|
|
$ |
129,621
|
|
Accounts
receivable, net
|
|
|
216,099
|
|
|
|
172,008
|
|
Other
receivables
|
|
|
12,323
|
|
|
|
6,014
|
|
Inventories,
net
|
|
|
127,620
|
|
|
|
112,552
|
|
Deferred
income taxes
|
|
|
29,286
|
|
|
|
25,905
|
|
Other
current assets
|
|
|
13,456
|
|
|
|
13,026
|
|
Total
current assets
|
|
|
462,355
|
|
|
|
459,126
|
|
Property
and equipment, net
|
|
|
53,735
|
|
|
|
47,998
|
|
Goodwill
|
|
|
653,835
|
|
|
|
374,510
|
|
Other
purchased intangible assets, net
|
|
|
212,058
|
|
|
|
67,172
|
|
Deferred
income taxes
|
|
|
407
|
|
|
|
399
|
|
Other
assets
|
|
|
44,162
|
|
|
|
29,226
|
|
Total
non-current assets
|
|
|
964,197
|
|
|
|
519,305
|
|
Total
assets
|
|
$ |
1,426,552
|
|
|
$ |
978,431
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES
AND SHAREHOLDERS' EQUITY
|
|
|
|
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
|
|
|
|
Current
portion of long-term debt
|
|
$ |
9,994
|
|
|
$ |
--
|
|
Accounts
payable
|
|
|
67,770
|
|
|
|
44,148
|
|
Accrued
compensation and benefits
|
|
|
38,527
|
|
|
|
47,006
|
|
Accrued
liabilities
|
|
|
37,325
|
|
|
|
24,973
|
|
Deferred
revenue
|
|
|
35,039
|
|
|
|
28,060
|
|
Accrued
warranty expense
|
|
|
9,616
|
|
|
|
8,607
|
|
Deferred
income taxes
|
|
|
1,334
|
|
|
|
4,525
|
|
Income
taxes payable
|
|
|
12,951
|
|
|
|
23,814
|
|
Total
current liabilities
|
|
|
212,562
|
|
|
|
181,133
|
|
Non-current
portion of long-term debt
|
|
|
160,487
|
|
|
|
481
|
|
Deferred
income tax
|
|
|
37,400
|
|
|
|
21,633
|
|
Other
non-current liabilities
|
|
|
58,694
|
|
|
|
27,519
|
|
Total
liabilities
|
|
|
469,137
|
|
|
|
230,766
|
|
|
|
|
|
|
|
|
|
|
Shareholders'
equity:
|
|
|
|
|
|
|
|
|
Preferred
stock no par value; 3,000 shares authorized; none
outstanding
|
|
|
--
|
|
|
|
--
|
|
Common
stock, no par value; 180,000 shares authorized; 118,782 and
111,718 shares issued and outstanding at March 30, 2007 and December
29,
2006, respectively
|
|
|
616,512
|
|
|
|
435,371
|
|
Retained
earnings
|
|
|
299,867
|
|
|
|
271,183
|
|
Accumulated
other comprehensive income
|
|
|
41,036
|
|
|
|
41,111
|
|
Total
shareholders' equity
|
|
|
957,415
|
|
|
|
747,665
|
|
Total
liabilities and shareholders' equity
|
|
$ |
1,426,552
|
|
|
$ |
978,431
|
|
(1)
|
Derived
from the December 29, 2006 audited Consolidated Financial Statements
included in the Annual Report on Form 10-K of Trimble Navigation
Limited
for fiscal year 2006.
|
See
accompanying Notes to the Condensed Consolidated Financial
Statements.
TRIMBLE
NAVIGATION LIMITED
CONDENSED
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
|
|
Three
Months Ended
|
|
|
|
March
30,
2007
|
|
|
March
31,
2006
|
|
(In
thousands, except per share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue (1)
|
|
$ |
285,732
|
|
|
$ |
225,854
|
|
Cost
of sales (1)
|
|
|
142,602
|
|
|
|
118,391
|
|
Gross
margin
|
|
|
143,130
|
|
|
|
107,463
|
|
|
|
|
|
|
|
|
|
|
Operating
expenses
|
|
|
|
|
|
|
|
|
Research
and development
|
|
|
31,163
|
|
|
|
24,446
|
|
Sales
and marketing
|
|
|
42,147
|
|
|
|
32,706
|
|
General
and administrative
|
|
|
21,642
|
|
|
|
15,761
|
|
Restructuring
charges
|
|
|
2,692
|
|
|
|
-
|
|
Amortization
of purchased intangible assets
|
|
|
4,106
|
|
|
|
1,485
|
|
In-process
research and development
|
|
|
2,112
|
|
|
|
-
|
|
Total
operating expenses
|
|
|
103,862
|
|
|
|
74,398
|
|
Operating
income
|
|
|
39,268
|
|
|
|
33,065
|
|
Non-operating
income (expense), net
|
|
|
|
|
|
|
|
|
Interest
income (expense), net
|
|
|
(157 |
) |
|
|
434
|
|
Foreign
currency transaction gain, net
|
|
|
357
|
|
|
|
593
|
|
Income
from joint ventures
|
|
|
2,422
|
|
|
|
1,616
|
|
Other
income, net
|
|
|
235
|
|
|
|
164
|
|
Total
non-operating income, net
|
|
|
2,857
|
|
|
|
2,807
|
|
Income
before taxes
|
|
|
42,125
|
|
|
|
35,872
|
|
Income
tax provision
|
|
|
13,442
|
|
|
|
10,044
|
|
Net
income
|
|
$ |
28,683
|
|
|
$ |
25,828
|
|
|
|
|
|
|
|
|
|
|
Basic
earnings per share
|
|
$ |
0.25
|
|
|
$ |
0.24
|
|
Shares
used in calculating basic earnings per share
|
|
|
115,449
|
|
|
|
108,484
|
|
|
|
|
|
|
|
|
|
|
Diluted
earnings per share
|
|
$ |
0.24
|
|
|
$ |
0.23
|
|
Shares
used in calculating diluted earnings per share
|
|
|
120,896
|
|
|
|
115,718
|
|
(1)
Sales
to related parties were $5.1 million with an associated cost of sales of $3.6
million for the three months ended March 30, 2007. Sales to related parties
were
$4.9 million with an associated cost of sales of $3.0 million for the three
months ended March 31, 2006. In addition, cost of sales associated with related
party net inventory purchases was $6.7 million and $5.5 million for the three
months ended March 30, 2007 and March 31, 2006, respectively. See Note 5
regarding joint ventures for further information about related party
transactions.
See
accompanying Notes to the Condensed Consolidated Financial
Statements.
TRIMBLE
NAVIGATION LIMITED
CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
|
|
Three
Months Ended
|
|
|
|
March
30,
2007
|
|
|
March
31,
2006
|
|
(In
thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
flow from operating activities:
|
|
|
|
|
|
|
Net
income
|
|
$ |
28,683
|
|
|
$ |
25,828
|
|
Adjustments
to reconcile net income to net cash provided by operating activities,
net
of effect of acquisitions:
|
|
|
|
|
|
|
|
|
Depreciation
expense
|
|
|
4,121
|
|
|
|
3,104
|
|
Excess
and obsolescence reserve
|
|
|
1,055
|
|
|
|
2,710
|
|
Amortization
expense
|
|
|
7,894
|
|
|
|
2,380
|
|
Provision
for doubtful accounts
|
|
|
288
|
|
|
|
360
|
|
Stock-based
compensation
|
|
|
3,353
|
|
|
|
3,230
|
|
Non-cash
restructuring expense
|
|
|
1,391
|
|
|
|
-
|
|
In-process
research and development
|
|
|
2,112
|
|
|
|
-
|
|
Gain
from joint ventures
|
|
|
(2,423 |
) |
|
|
(1,616 |
) |
Excess
tax benefit for stock-based compensation
|
|
|
(2,193 |
) |
|
|
(3,941 |
) |
Other
|
|
|
153
|
|
|
|
414
|
|
Add
decrease (increase) in assets:
|
|
|
|
|
|
|
|
|
Accounts
receivable, net
|
|
|
(28,262 |
) |
|
|
(26,211 |
) |
Other
receivables
|
|
|
1,867
|
|
|
|
2,157
|
|
Inventories
|
|
|
(1,025 |
) |
|
|
3,160
|
|
Deferred
income taxes
|
|
|
(6,402 |
) |
|
|
(1,880 |
) |
Other
current and non-current assets
|
|
|
11,167
|
|
|
|
(6,827 |
) |
Add
increase (decrease) in liabilities:
|
|
|
|
|
|
|
|
|
Accounts
payable
|
|
|
3,265
|
|
|
|
4,361
|
|
Accrued
compensation and benefits
|
|
|
(11,618 |
) |
|
|
(6,601 |
) |
Accrued
liabilities
|
|
|
2,063
|
|
|
|
3,503
|
|
Deferred
revenue
|
|
|
3,296
|
|
|
|
5,410
|
|
Income
taxes payable
|
|
|
12,962
|
|
|
|
7,336
|
|
Net
cash provided by operating activities
|
|
|
31,747
|
|
|
|
16,877
|
|
|
|
|
|
|
|
|
|
|
Cash
flow from investing activities:
|
|
|
|
|
|
|
|
|
Acquisitions,
net of cash acquired
|
|
|
(272,050 |
) |
|
|
(2,272 |
) |
Acquisition
of property and equipment
|
|
|
(3,873 |
) |
|
|
(4,972 |
) |
Other
|
|
|
12
|
|
|
|
-
|
|
Net
cash used in investing activities
|
|
|
(275,911 |
) |
|
|
(7,244 |
) |
|
|
|
|
|
|
|
|
|
Cash
flow from financing activities:
|
|
|
|
|
|
|
|
|
Issuance
of common stock
|
|
|
10,474
|
|
|
|
7,149
|
|
Excess
tax benefit for stock-based compensation
|
|
|
2,193
|
|
|
|
3,941
|
|
Proceeds
from long-term debt and revolving credit lines
|
|
|
250,000
|
|
|
|
-
|
|
Payments
on long-term debt and revolving credit lines
|
|
|
(80,000 |
) |
|
|
-
|
|
Other
|
|
|
- |
|
|
|
10
|
|
Net
cash provided by financing activities
|
|
|
182,667
|
|
|
|
11,100
|
|
|
|
|
|
|
|
|
|
|
Effect
of exchange rate changes on cash and cash equivalents
|
|
|
(4,553 |
) |
|
|
3,062
|
|
|
|
|
|
|
|
|
|
|
Net
increase (decrease) in cash and cash equivalents
|
|
|
(66,050 |
) |
|
|
23,795
|
|
Cash
and cash equivalents, beginning of period
|
|
|
129,621
|
|
|
|
73,853
|
|
Cash
and cash equivalents, end of period
|
|
$ |
63,571
|
|
|
$ |
97,648
|
|
See
accompanying Notes to the Condensed Consolidated Financial
Statements.
NOTES
TO
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS –
UNAUDITED
NOTE
1. OVERVIEW AND BASIS OF
PRESENTATION
|
Trimble
Navigation Limited (“we,” “Trimble” or the “Company”), incorporated in
California in 1981, provides positioning product solutions to commercial and
government users in a large number of markets. These markets include surveying,
construction, agriculture, urban and resource management, military,
transportation and telecommunications.
Trimble
has a 52-53 week fiscal year, ending on the Friday nearest to December 31,
which
for fiscal 2006 was December 29. The first fiscal quarters of 2007
and 2006 ended on March 30, 2007 and March 31, 2006, respectively. Fiscal 2007
and 2006 are 52-week years. Unless otherwise stated, all dates refer to its
fiscal year and fiscal periods.
The
Condensed Consolidated Financial Statements include the results of Trimble
and
its subsidiaries. Inter-company accounts and transactions have been
eliminated. Certain amounts from prior periods have been reclassified
to conform to the current period presentation.
The
accompanying financial data as of March 30, 2007 and for the three months ended
March 30, 2007 and March 31, 2006 has been prepared by the Company, without
audit, pursuant to the rules and regulations of the Securities and Exchange
Commission. Certain information and footnote disclosures normally included
in
financial statements prepared in accordance with accounting principles generally
accepted in the U.S. have been condensed or omitted pursuant to such rules
and
regulations. The following discussion should be read in conjunction with
Trimble’s 2006 Annual Report on Form 10-K.
In
the
opinion of management, all adjustments (which include normal recurring
adjustments) necessary to present a fair statement of financial position as
of
March 30, 2007, results of operations for the three months ended March 30,
2007
and March 31, 2006 and cash flows for the three months ended March 30, 2007
and
March 31, 2006, as applicable, have been made. The results of
operations for the three months ended March 30, 2007 are not necessarily
indicative of the operating results for the full fiscal year or any future
periods. Individual segment revenues may be affected by seasonal buying
patterns.
The
preparation of financial statements in accordance with accounting principles
generally accepted in the U.S. requires management to make estimates and
assumptions that affect the amounts reported in its condensed consolidated
financial statements and accompanying notes. Management bases its estimates
on
historical experience and various other assumptions believed to be reasonable.
Although these estimates are based on management’s best knowledge of current
events and actions that may impact the company in the future, actual results
may
be different from the estimates.
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
2.
UPDATES TO SIGNIFICANT ACCOUNTING POLICIES
There
have been no changes to our significant accounting polices during the three
months ended March 30, 2007 from those disclosed in our 2006 Form 10-K.
However, Trimble is providing updated disclosures surrounding certain accounting
policies, as provided below.
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,” SOP No. 98-9, “Modification of SOP 97-2,” and
Emerging Issues Task Force (EITF) Issue 00-3, "Application of AICPA Statement
of
Position 97-2 to Arrangements That Include the Right to Use Software Stored
on
Another Entity's Hardware." 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
SOP No. 97-2 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 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.
We
apply
EITF Issue 00-3 for hosted arrangements which the customer does not have the
contractual right to take possession of the software at any time during the
hosting period without incurring a significant penalty and it is not feasible
for the customer to run the software either on its own hardware or on a
third-party’s hardware. Subscription revenues related to the Company’s hosted
arrangements are recognized ratably over the contract period. Upfront fees
for
the Company’s hosted solution primarily consist of amounts for the in-vehicle
enabling hardware device and peripherals, if any. For upfront fees relating
to
propriety hardware where the firmware is more than incidental to the
functionality of the hardware in accordance with SOP No. 97-2, the Company
defers upfront fees at installation and recognizes them ratably over the minimum
service contract period, generally one to five years. Product costs are also
deferred and amortized over such period.
Inventories
Inventories
are stated at the lower of standard cost (which approximates actual cost on
a
first-in, first-out basis) or market. 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.
Goodwill
and Purchased Intangible Assets
Goodwill
represents the excess of the purchase price over the fair value of the net
tangible and identifiable intangible assets acquired in a business combination.
Intangible assets resulting from the acquisitions of entities accounted for
using the purchase method of accounting are estimated by management based
on the
fair value of assets received. Identifiable intangible assets are comprised
of
distribution channels, patents, licenses, technology, acquired backlog and
trademarks. Identifiable intangible assets are being amortized over the
period of estimated benefit using the straight-line method and estimated
useful
lives ranging from 1 to 10 years with a weighted average useful life of
6.2 years. Goodwill is not subject to amortization, but is subject to at
least an annual assessment for impairment, applying a fair-value based
test.
Impairment
of Goodwill, Intangible Assets and Other Long-Lived Assets
The
Company evaluates goodwill, at a minimum, on an annual basis and whenever events
and changes in circumstances suggest that the carrying amount may not be
recoverable. The Company performs its annual goodwill impairment testing in
the
fourth fiscal quarter of each year, using information as of the end of its
third
fiscal quarter. Goodwill is reviewed for impairment utilizing a two-step
process. First, impairment of goodwill is tested at the reporting unit
level by comparing the reporting unit’s carrying amount, including goodwill, to
the fair value of the reporting unit. The fair values of the
reporting units are estimated using a discounted cash flow approach. If
the carrying amount of the reporting unit exceeds its fair value, a second
step
is performed to measure the amount of impairment loss, if any. In step two,
the
implied fair value of goodwill is calculated as the excess of the fair value
of
a reporting unit over the fair values assigned to its assets and liabilities.
If
the implied fair value of goodwill is less than the carrying value of the
reporting unit’s goodwill, the difference is recognized as an impairment
loss.
Depreciation
and amortization of our intangible assets and other 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 an asset should be revised, we will depreciate the net book
value
in excess of the estimated residual value over its revised remaining useful
life. These assets 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. The 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.
New
Accounting Pronouncements
In
June
2006, the FASB reached a consensus on EITF Issue 06-3, “How Taxes Collected
from Customers and Remitted to Governmental Authorities Should Be Presented
in
the Income Statement (That Is, Gross versus Net Presentation).” EITF 06-3
indicates that the income statement presentation on either a gross basis or
a
net basis of the taxes within the scope of the issue is an accounting policy
decision that should be disclosed. EITF 06-3 is effective for interim and annual
periods beginning after December 15, 2006. Trimble presents revenue
net of sales taxes and any similar assessments. EITF No. 06-3
had no effect on our financial position and results of operations.
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 Statement of Financial Accounting Standard (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. On December 30, 2006, Trimble adopted
FIN 48 and, as a result of the implementation, the Company recognized no change
to liabilities for uncertain tax positions (compared to amounts under SFAS
5,
“Accounting for Contingencies,” represented in the financial statements for the
2006 year).
In
September 2006, the FASB issued SFAS 157, “Fair Value Measurements.”
SFAS 157 establishes a framework for measuring the fair value of assets and
liabilities. This framework is intended to provide increased consistency in
how
fair value determinations are made under various existing accounting standards
which permit, or in some cases require, estimates of fair market value. SFAS
157
is effective for fiscal years beginning after November 15, 2007, and
interim periods within those fiscal years. Earlier application is encouraged,
provided that the reporting entity has not yet issued financial statements
for
that fiscal year, including any financial statements for an interim period
within that fiscal year. We are currently in the process of evaluating the
impact of SFAS 157 on our financial position, results of operations, and
cash flows.
In
February 2007, the FASB issued SFAS 159, “The Fair Value Option for Financial
Assets and Financial Liabilities, including an amendment of FASB Statement
No. 115.” SFAS 159 allows an entity the irrevocable option to
elect fair value for the initial and subsequent measurement for certain
financial assets and liabilities under an instrument-by-instrument election.
Subsequent measurements for the financial assets and liabilities an entity
elects to fair value will be recognized in earnings. SFAS 159 also establishes
additional disclosure requirements. SFAS 159 is effective for fiscal years
beginning after November 15, 2007, with early adoption permitted provided
that the entity also adopts SFAS 157. The Company is currently evaluating
the possible impact of the adoption of SFAS 159 on the Company’s financial
position, results of operations, and cash flows.
NOTE
3.
ACQUISITIONS
Acquisition
of @Road, Inc.
On
December 10, 2006, Trimble and @Road, Inc. ("@Road") entered into a
definitive merger agreement. Under the terms of the agreement,
Trimble acquired all of the outstanding shares of @Road common stock for a
total
merger consideration of $7.50 per share. @Road 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. The
acquisition became effective on February 16, 2007. The acquisition of
@Road expands Trimble’s investment and reinforces the existing growth strategy
for its Mobile Solutions (TMS) segment. @Road’s results of operations
from February 17, 2006 to March 30, 2007 were included in Trimble’s
consolidated statement of operations for quarter ended March 30, 2007 within
our
Mobile Solutions business segment.
Trimble
elected to issue $2.50 per share of the total merger consideration in the form
of Trimble common stock ("Common Stock") to be based upon the 5-day average
closing price of Trimble shares six trading days prior to the closing of the
transaction. Further, each share of Series A-1 and Series A-2 Redeemable
Preferred Stock, par value $0.001 per share, of @Road was converted into the
right to receive an amount in cash equal to $100.00 plus all declared or
accumulated but unpaid dividends with respect to such shares as of immediately
prior to the effective time of the merger and each share of Series B-1
Redeemable Preferred Stock, par value $0.001 per share, of @Road and each share
of Series B-2 Redeemable Preferred Stock, par value $0.001 per share, of
@Road was converted into the right to receive an amount in cash equal to $831.39
plus all declared or accumulated but unpaid dividends with respect to such
shares as of immediately prior to the effective time of the merger. In addition,
all @Road vested stock options were terminated and the holders of each such
option were entitled to receive the excess, if any, of the aggregate
consideration over the exercise price. At the effective time of the merger,
all
unvested @Road stock options with an exercise price in excess of $7.50 were
terminated and all unvested stock options that had exercise prices of $7.50
or
less were assumed by Trimble.
Concurrently
with the merger, Trimble 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”) and
incurred a five-year term loan under the 2007 Credit Facility. See
Note 9 to the Condensed Consolidated Financial Statements for additional
information.
As
a
result of the acquisition, Trimble paid approximately $327.3 million in cash
from debt and existing cash, and issued approximately 5.9 million shares of
Trimble common stock based on an exchange ratio of 0.0894 shares of Trimble
common stock for each outstanding share of @Road common stock as of February
16,
2007 upon the approval of the merger by @Road shareholders. The common stock
issued had a fair value of $161.9 million and was valued using the average
closing price of Trimble common stock of $27.69 over a range of two trading
days (February 14, 2007 through February 15, 2007) prior to, and including,
the
close date (February 16, 2007) of the transaction, which is also the date
that
the amount of Trimble shares to be issued in accordance with the merger
agreement was settled.
The
total
purchase price is estimated as follows (in thousands, except per share
data):
Cash
consideration
|
|
$ |
327,370
|
|
Common
stock consideration
|
|
|
161,948
|
|
Merger
costs *
|
|
|
5,099
|
|
Total
Purchase price
|
|
$ |
494,417
|
|
*
Merger
costs consist of legal, advisory, accounting and administrative
fees.
Preliminary
Purchase Price Allocation
In
accordance with FASB issued Statement No. 141, "Business Combinations,” the
total purchase price was allocated to @Road net tangible assets, identifiable
intangible assets and in-process research and development based upon their
estimated fair values as of February 16, 2007. The excess purchase price over
the net tangible and identifiable intangible assets was recorded as goodwill,
which consisted of anticipated higher growth and cost savings from the combined
company as compared to the financial results of the two companies on a
stand-alone basis. The fair values assigned to tangible and
identifiable intangible assets acquired and liabilities assumed are based on
estimates and assumptions provided by management. The allocation of the total
estimated purchase price is preliminary and may differ from the actual purchase
price allocation upon realization of any accrued costs and final fair value
determination of certain tangible assets, intangible assets and liabilities
assumed.
The
total
preliminary purchase price has been allocated as follows (in
thousands):
Value
to be allocated to assets, based upon merger consideration
|
|
$ |
494,417
|
|
Less:
value of @Road’s assets acquired:
|
|
|
|
|
Net
tangible assets acquired
|
|
|
82,642
|
|
Amortizable
intangibles assets:
|
|
|
|
|
Developed
product technology
|
|
|
66,600
|
|
Customer
relationships
|
|
|
75,300
|
|
Trademarks
and tradenames
|
|
|
5,200
|
|
Subtotal
|
|
|
147,100
|
|
In-process
research and development
|
|
|
2,100
|
|
|
|
|
|
|
Goodwill
|
|
$ |
262,574
|
|
Net
Tangible Assets
(in
thousands)
|
|
As
of
February
16,
2007
|
|
|
|
|
|
Cash
and cash equivalents
|
|
$ |
10,357
|
|
Investments
|
|
|
64,371
|
|
Accounts
receivable, net
|
|
|
14,136
|
|
Inventory
|
|
|
15,284
|
|
Property
and equipment, net
|
|
|
5,854
|
|
Other
assets
|
|
|
28,231
|
|
|
|
|
|
|
Total
assets acquired
|
|
$ |
138,233
|
|
|
|
|
|
|
Accounts
payable
|
|
|
19,575
|
|
Deferred
tax liabilities
|
|
|
14,746
|
|
Other
accrued liabilities
|
|
|
21,270
|
|
|
|
|
|
|
Total
liabilities assumed
|
|
$ |
55,591
|
|
|
|
|
|
|
Total
net assets acquired
|
|
$ |
82,642
|
|
Trimble
reviewed and adjusted @Road's net tangible assets and liabilities to fair value,
as necessary, as of February 16, 2007, including the following
adjustments:
Fixed
assets – Trimble decreased @Road's historical value of fixed assets by
$2.1 million to adjust fixed assets to an amount equivalent to fair market
value.
Deferred
revenue and cost of sales – Trimble reduced @Road's historical value of deferred
revenue by $39.6 to adjust deferred revenue to the fair value of the direct
cost
associated with servicing the underlying obligation plus a reasonable margin.
@Road’s deferred revenue balance consists of upfront payments of its hosted
product, license product, extended warranty and maintenance. Trimble reduced
@Road's historical value of deferred product cost by $47.1 million to adjust
deferred product cost to the asset's underlying fair value. The deferred product
costs adjustment to fair value related to deferral of cost of sales of hardware
that have shipped, resulting in no fair value relating to the associated
deferred product costs.
Other
assets – Other assets were increased by $15.4 million to adjust for the fair
value of future cash collections from customer contracts assumed for products
delivered prior to the acquisition date.
As the products were delivered prior to the acquisition date, revenue is not
recognizable in Trimble’s statement of operations.
Intangible
Assets
Developed
product technology, which is comprised of products that have reached
technological feasibility, includes products in @Road's current product
offerings. @Road's technology includes hardware, software and services that
serve the mobile resource management market internationally. Trimble expects
to
amortize the developed and core technology over an average estimated life of
6 years.
Customer
relationships represent the value placed on @Road’s distribution channels and
end users. Trimble expects to amortize the fair value of these assets over
an
average estimated life of 7 years.
Trademarks
and tradenames represent the value placed on the @Road brand and recognition
in
the mobile resource management market. Trimble expects to amortize the fair
value of these assets over an average estimated life of 9 years.
In-process
Research and Development
Trimble
recorded an expense of $2.1 million relating to in-process research and
development projects in @Road’s license business. In-process
research and development represents incomplete @Road research and development
projects that had not reached technological feasibility and had no alternative
future use as of the consummation of the merger.
Goodwill
Goodwill
represents the excess of the purchase price of an acquired business over the
fair value of the underlying net tangible and intangible assets and in-process
research and development. In accordance with FASB issued Statement No. 142,
"Goodwill and other intangibles,” goodwill will be tested for impairment at
least annually (more frequently if certain indicators are present). In the
event
that Trimble's management determines that the value of goodwill has become
impaired, Trimble will incur an accounting charge for the amount of impairment
during the fiscal quarter in which the determination is made.
Restructuring
Liabilities
related to restructuring @Road's operations that meet the requirements of EITF
95-3, “Recognition of Liabilities in Connection with a Purchase Business
Combination,” have been recorded as adjustments to the purchase price and an
increase in goodwill. Liabilities related to restructuring Trimble's operations
have been recorded as expenses in Trimble's statement of operations in the
period that the costs are incurred.
Trimble
is in the process of finalizing the total restructuring liability related to
the
@Road acquisition and will be implementing the plan as soon as
feasible. See Note 12 to the Condensed Consolidated Financial
Statements for additional information.
Deferred
tax assets/liabilities
Trimble
recognized $56.9 million in net deferred tax liabilities for the tax effects
of
differences between assigned values in the purchase price and the tax bases
of
assets acquired and liabilities assumed.
@Road
stock options assumed
In
accordance with the merger agreement, Trimble assumed all @Road unvested stock
options that had exercise prices of $7.50 or less. Trimble issued
approximately 795,000 Trimble stock options based on an exchange ratio of
0.268 shares of Trimble common stock for each unvested stock option with
exercise prices of $7.50 or less as of February 16, 2007. The fair
value of these assumed options was determined to be $10.1 million which will
be
expensed over the remaining vesting terms of the assumed options which is
approximately three to four years. The assumed options were valued
using the binomial model similar to previously granted Trimble stock options
as
discussed in Trimble’s fiscal 2006 Form 10-K.
Pro
Forma Results
The
following table presents pro forma results of operations of Trimble and @Road,
as if the companies had been combined as of the beginning of the earliest
period
presented. The unaudited pro forma results of operations are not necessarily
indicative of results that would have occurred had the acquisition taken
place
on December 30, 2006 or of future results. Included in the
pro-forma results are fair value adjustments based on the fair values of
assets
acquired and liabilities assumed as of the acquisition date of February 16,
2007
and adjustments for interest expense related to debt and stock options assumed
as part of the merger consideration.
We
excluded the effect of non-recurring items for all periods presented as the
impact is short-term in nature. The unaudited pro forma information is as
follows:
|
|
Three
Months Ended
|
|
|
|
|
|
|
|
|
|
|
March
30,
2007
(a)
|
|
|
March
31,
2006
(b)
|
|
Pro-forma
revenue
|
|
$ |
295,206
|
|
|
$ |
244,489
|
|
Pro-forma
net income
|
|
|
19,088
|
|
|
|
20,159
|
|
Basic
net income per share
|
|
$ |
0.17
|
|
|
$ |
0.18
|
|
Diluted
net income per share
|
|
$ |
0.16
|
|
|
$ |
0.16
|
|
|
(a)
|
The
results of operations include Trimble’s results for the three months ended
March 30, 2007, including @Road beginning from February 17, 2007,
and
@Road historical results from the beginning of its first quarter
of fiscal
2007 to February 16, 2007, including fair value adjustments based
on the
fair values of assets acquired and liabilities assumed as of the
acquisition date of February 16, 2007. Pro-forma revenue
includes a $4.8 million decrease due to deferred revenue write-downs
and
customer contracts where the product was delivered prior to the
acquisition date. Pro-forma net income includes revenue
write-downs, related deferred cost of sales write-downs of $0.7
million,
amortization of intangible assets related to the acquisition of
$5.6 million, interest expense for debt used to purchase @Road of
$2.8 million, and stock-based compensation for @Road options assumed
of
$1.3 million
|
|
(b)
|
The
results of operations include Trimble’s results for the three months ended
March 31, 2006, including @Road’s historical results for the three months
ended March 31, 2006, including amortization related to fair value
adjustments based on the fair values of assets acquired and liabilities
assumed as of the acquisition date of February 16,
2007. Pro-forma revenue includes a $6.1
million decrease due to deferred revenue write-downs and
customer contracts which the product was delivered prior to the
acquisition date. Pro-forma net income includes revenue
write-downs, related deferred cost of sales write-down of $1.2
million, amortization of intangible assets related to the acquisition
of
$5.6 million, interest expense for debt used to purchase @Road of
$2.8 million, and stock-based compensation for @Road options assumed
of
$1.3 million
|
NOTE
4.
STOCK-BASED COMPENSATION
We
account for stock-based compensation under Statement 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. 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.
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 three months ended March 30,
2007
and March 31, 2006.
Three
Months Ended |
|
|
March
30,
2007
|
|
|
March
31,
2006
|
|
(in
thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost
of sales
|
|
|
$ |
342
|
|
|
$ |
287
|
|
|
|
|
|
|
|
|
|
|
|
Research
& development
|
|
|
|
729
|
|
|
|
639
|
|
Sales
& marketing
|
|
|
|
767
|
|
|
|
741
|
|
General
& administrative
|
|
|
|
1,514
|
|
|
|
1,563
|
|
Stock-based
compensation expense included in operating expenses
|
|
|
|
3,010
|
|
|
|
2,943
|
|
|
|
|
|
|
|
|
|
|
|
Total
stock-based compensation
|
|
|
|
3,353
|
|
|
|
3,230
|
|
Tax
benefit
|
(1)
|
|
|
(347 |
) |
|
|
(294 |
) |
Total
stock-based compensation, net of tax
|
|
|
$ |
3,006
|
|
|
$ |
2,936
|
|
(1)
Tax
benefit related to US non-qualified options only as allowed by the applicable
tax requirements using the statutory tax rate for the respective
quarters.
Options
Stock
option expense recognized during the period is based on the value of the portion
of the stock option that is expected to vest during the period. The fair value
of each stock option 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. For options granted for quarter ended March 30, 2007 and March
31, 2006, the following assumptions were used:
|
March
30,
2007
|
March
31,
2006
|
Expected
dividend yield
|
-
|
--
|
Expected
stock price volatility
|
41.0%
|
42.0%
|
Risk
free interest rate
|
4.8%
|
4.5%
|
Expected
life of options after vesting
|
3.9
|
4.6
|
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, commensurate with the expected life
of the stock options.
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 life
of the stock option.
Expected
Life Of Option– The Company’s expected life 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 first and third 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 fair value of the rights
granted for quarters ended March 30, 2007 and March 31, 2006, was calculated
using the following assumptions:
Fiscal
years ended
|
March
30,
2007
|
March
31,
2006
|
Expected
dividend yield
|
-
|
--
|
Expected
stock price volatility
|
34.8%
|
34.9%
|
Risk
free interest rate
|
5.2%
|
4.4%
|
Expected
term
|
0.6
year
|
0.5
year
|
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,
commensurate with the expected term.
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.
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. CTCT develops
advanced electronic guidance and control products for earth moving machines
in
the construction and mining industries. 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 Income from joint
ventures in the non-operating income (expense), net section of the Condensed
Consolidated Statements of Income. During the three month ended March
30, 2007 and March 31, 2006, Trimble recorded $2.2 million and $1.6 million,
respectively, as its proportionate share of CTCT net income. The
carrying amount of the investment in CTCT was $6.3 million at March 30, 2007
and
$4.1 million at December 29, 2006, and is included in Other assets on the
Condensed Consolidated Balance Sheets.
Trimble
acts as a contract manufacturer for CTCT. Products are manufactured based on
orders received from CTCT and are sold at direct cost plus a mark up for
Trimble’s overhead costs to CTCT. Then, CTCT resells products at cost plus a
mark up in consideration for CTCT’s research and development efforts to both
Caterpillar and back to Trimble for sales through their respective distribution
channels. Generally, Trimble sells products through its after market dealer
channel, and Caterpillar sells products for factory and dealer installation.
CTCT does not hold inventory in that the resale of products to Caterpillar
and
Trimble occur simultaneously when the products are purchased from
Trimble. During the three month ended March 30, 2007 and March 31,
2006, Trimble recorded $2.3 million and $2.0 million of revenue and $2.1 million
and $1.8 million of cost of sales for the manufacturing of products sold by
Trimble to CTCT and then sold through the Caterpillar distribution channel.
In
addition, during the three month periods ended March 30, 2007 and March 31,
2006, Trimble recorded $6.7 million and $5.5 million in net cost of sales for
the manufacturing of products sold by Trimble to CTCT and then repurchased
by
Trimble upon sale through Trimble’s distribution channel.
In
addition, Trimble received reimbursement of employee-related costs from CTCT
for
Trimble employees dedicated to CTCT or performing work for CTCT totaling $3.2
million and $3.4 million for the three month periods ended March 30, 2007 and
March 31, 2006, respectively. The reimbursements were offset against operating
expenses.
At
March
30, 2007 and December 29, 2006, Trimble had amounts due to and from
CTCT. Receivables and payables to CTCT are settled individually with
terms comparable to other non-related parties. The amounts due to and
from CTCT are presented on a net basis on the Consolidated Balance
Sheets. At March 30, 2007 and December 29, 2006, the net receivable
due to Trimble from CTCT was $0.4 million and $0.3 million, respectively, and
is
included within Accounts receivables, net on the Condensed 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.
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 Income from joint
ventures in the non-operating income (expense), net section of the Condensed
Consolidated Statements of Income. During the three month periods
ended March 30, 2007 and March 31, 2006, Trimble recorded a profit of $0.3
million and a loss of $15,000, respectively, as its proportionate share of
Nikon-Trimble net income (loss). 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. The carrying amount of the investment in Nikon-Trimble was
$14.3 million at March 30, 2007 and $14.0 million at December 29, 2006, and
is
included in Other assets on the Consolidated Balance Sheets.
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 by Trimble to 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
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. During the three month ended March
30, 2007 and March 31, 2006, Trimble recorded $2.9 million and $2.8 million
of
revenue and $1.5 million and $1.2 million of cost of sales for the manufacturing
of products sold by Trimble to Nikon-Trimble.
At
March
30, 2007 and December 29, 2006, Trimble had amounts due to and from
Nikon-Trimble. Receivables and payables to Nikon-Trimble are settled
individually with terms comparable to other non-related parties. The
amounts due to and from Nikon-Trimble are presented on a net basis on the
Consolidated Balance Sheets. At March 30, 2007 and December 29, 2006,
the net payable by Trimble to Nikon-Trimble was $3.1 million and $0.5 million,
respectively, and is included within Accounts payable on the Condensed
Consolidated Balance Sheets.
NOTE
6.
GOODWILL AND INTANGIBLE ASSETS
Intangible
Assets
Intangible
assets consisted of the following:
As
of
|
|
March
30,
2007
|
|
|
December
29,
2006
|
|
(in
thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Intangible
assets:
|
|
|
|
|
|
|
Intangible
assets with definite life:
|
|
|
|
|
|
|
Existing
technology
|
|
$ |
161,672
|
|
|
$ |
92,430
|
|
Trade
names, trademarks, patents, and other intellectual
properties
|
|
|
121,187
|
|
|
|
37,690
|
|
Total
intangible assets with definite life
|
|
|
282,859
|
|
|
|
130,120
|
|
Less
accumulated amortization
|
|
|
(70,801 |
) |
|
|
(62,948 |
) |
Total
net intangible assets
|
|
$ |
212,058
|
|
|
$ |
67,172
|
|
Total
intangible assets before accumulated amortization increased by $152.7 million
primarily due to $152.5 million in intangible assets purchased in connection
with acquisitions in the first quarter of fiscal 2007 and $0.3 million in
foreign exchange rate translation impact on non-US currency denominated
intangible assets. Accumulated amortization increased by $7.9 million
due to the amortization of these intangible assets.
The
estimated future amortization expense of intangible assets as of March 30,
2007,
is as follows (in thousands):
|
|
Amortization
Expense
|
|
2007
(Remaining)
|
|
$ |
30,354
|
|
2008
|
|
|
39,053
|
|
2009
|
|
|
36,006
|
|
2010
|
|
|
33,808
|
|
2011
|
|
|
28,570
|
|
Thereafter
|
|
|
44,268
|
|
Total
|
|
$ |
212,058
|
|
Goodwill
Goodwill,
by reporting segment, consisted of the following:
As
of
|
|
March
30,
2007
|
|
|
December
29,
2006
|
|
(in
thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Engineering
and Construction
|
|
$ |
306,592
|
|
|
$ |
296,597
|
|
Field
Solutions
|
|
|
1,556
|
|
|
|
1,517
|
|
Mobile
Solutions
|
|
|
332,755
|
|
|
|
63,430
|
|
Advanced
Devices
|
|
|
12,932
|
|
|
|
12,966
|
|
|
|
|
|
|
|
|
|
|
Total
Goodwill
|
|
$ |
653,835
|
|
|
$ |
374,510
|
|
NOTE
7.
CERTAIN BALANCE SHEET COMPONENTS
Inventories
net consisted of the following:
As
of
|
|
March
30,
2007
|
|
|
December
29,
2006
|
|
(in
thousands)
|
|
|
|
|
|
|
Raw
materials
|
|
$ |
64,219
|
|
|
$ |
66,853
|
|
Work-in-process
|
|
|
13,678
|
|
|
|
6,181
|
|
Finished
goods
|
|
|
49,723
|
|
|
|
39,518
|
|
|
|
$ |
127,620
|
|
|
$ |
112,552
|
|
Property
and equipment consisted of the following:
As
of
|
|
March
30,
2007
|
|
|
December
29,
2006
|
|
(in
thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Machinery
and equipment
|
|
$ |
87,704
|
|
|
$ |
79,238
|
|
Furniture
and fixtures
|
|
|
12,577
|
|
|
|
12,399
|
|
Leasehold
improvements
|
|
|
14,133
|
|
|
|
13,124
|
|
Buildings
|
|
|
5,689
|
|
|
|
5,689
|
|
Land
|
|
|
1,231
|
|
|
|
1,231
|
|
|
|
|
121,334
|
|
|
|
111,681
|
|
Less
accumulated depreciation
|
|
|
(67,599 |
) |
|
|
(63,683 |
) |
|
|
$ |
53,735
|
|
|
$ |
47,998
|
|
Accrued
liabilities consisted of the following:
As
of
|
|
March
30,
2007
|
|
|
December
29,
2006
|
|
(in
thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restructuring
reserve
|
|
$ |
2,447
|
|
|
$ |
744
|
|
Acquisition
costs
|
|
|
14,629
|
|
|
|
10,384
|
|
Other
accrued liabilities
|
|
|
20,249
|
|
|
|
13,845
|
|
|
|
$ |
37,325
|
|
|
$ |
24,973
|
|
Other
accrued liabilities primarily include earnout and holdback accruals resulting
from acquisitions, accrued accounting fees, and accrued property
taxes.
Other
non-current liabilities consisted of the following:
As
of
|
|
March
30,
2007
|
|
|
December
29,
2006
|
|
(in
thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred
compensation
|
|
$ |
7,521
|
|
|
$ |
5,887
|
|
Pension
|
|
|
6,610
|
|
|
|
6,616
|
|
Deferred
rent
|
|
|
5,776
|
|
|
|
5,327
|
|
Deferred
revenue
|
|
|
4,987
|
|
|
|
--
|
|
FIN
48 liability
|
|
|
22,208
|
|
|
|
--
|
|
Other
non-current liabilities
|
|
|
11,592
|
|
|
|
9,689
|
|
|
|
$ |
58,694
|
|
|
$ |
27,519
|
|
Other
non-current liabilities include deferred rent primarily as a result of the
Sunnyvale, California lease, executed in fiscal 2005, the Westminster, Colorado
lease, executed in fiscal 2006, and the Fremont, California lease, resulting
from the acquisition of @Road.
FIN
48
liability includes unrecognized tax benefits that, if recognized, would
favorably affect the effective income tax rate in future periods and interest
and/or penalties related to income tax matters. As of December 29.
2006 these balances are included in Income taxes payable on the Condensed
Consolidated Balance Sheets. Pursuant to the requirements of FIN 48,
as of March 30, 2007, these liabilities are classified in Other non-current
liabilities in the Condensed Consolidated Balance Sheets.
NOTE
8.
THE COMPANY AND SEGMENT INFORMATION
Trimble
is a designer and distributor of positioning products and applications enabled
by GPS, optical, laser, and wireless communications technology. The Company
provides products for diverse applications in its targeted markets.
To
achieve distribution, marketing, production, and technology advantages, the
Company manages its operations in the following four segments:
|
·
|
Engineering
and Construction — Consists of products currently used by survey and
construction professionals in the field for positioning, data collection,
field computing, data management, and machine guidance and control.
The
applications served include surveying, road, runway, construction,
site
preparation and building
construction.
|
|
·
|
Field
Solutions — Consists of products that provide solutions in a variety of
agriculture and geographic information systems (GIS) applications.
In
agriculture these include precise land leveling and machine guidance
systems. In GIS they include handheld devices and software that enable
the
collection of data on assets for a variety of governmental and private
entities.
|
|
·
|
Mobile
Solutions — Consists of products that enable end users to monitor and
manage their mobile assets by communicating location and activity-relevant
information from the field to the office. Trimble offers a range
of
products that address a number of sectors of this market including
truck
fleets, security, and public safety
vehicles.
|
|
·
|
Advanced
Devices — The various operations that comprise this segment were
aggregated on the basis that no single operation accounted for more
than
10% of Trimble’s total revenue, operating income and assets. This segment
is comprised of the Component Technologies, Military and Advanced
Systems,
Applanix and Trimble Outdoors
businesses.
|
Trimble
evaluates each of its segment's performance and allocates resources based on
segment operating income from operations before income taxes, and some corporate
allocations. Trimble and each of its segments employ the same accounting
policies.
The
following table presents revenues, operating income, and identifiable assets
for
the four segments. Operating income is net revenue less operating expenses,
excluding general corporate expenses, amortization of purchase intangibles,
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.
|
|
Reporting
Segments
|
|
|
|
|
|
|
Engineering
and Construction
|
|
|
Field
Solutions
|
|
|
Mobile Solutions
|
|
|
Advanced
Devices
|
|
|
Total
|
|
(In
thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three
Months Ended March 30, 2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
External
net revenues
|
|
$ |
175,604
|
|
|
$ |
50,962
|
|
|
$ |
29,857
|
|
|
$ |
29,309
|
|
|
$ |
285,732
|
|
Operating
income before corporate allocations
|
|
|
42,164
|
|
|
|
16,628
|
|
|
|
1,017
|
|
|
|
3,343
|
|
|
|
63,152
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three
Months Ended March 31, 2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
External
net revenues
|
|
$ |
146,733
|
|
|
$ |
43,042
|
|
|
$ |
12,607
|
|
|
$ |
23,472
|
|
|
$ |
225,854
|
|
Operating
income before corporate allocations
|
|
|
26,377
|
|
|
|
13,908
|
|
|
|
223
|
|
|
|
2,323
|
|
|
|
42,831
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As
of March 30, 2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts
receivable (1)
|
|
$ |
139,057
|
|
|
$ |
38,519
|
|
|
$ |
30,175
|
|
|
$ |
17,599
|
|
|
$ |
225,350
|
|
Inventories
|
|
|
82,301
|
|
|
|
12,259
|
|
|
|
16,873
|
|
|
|
16,187
|
|
|
|
127,620
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As
of December 29, 2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts
receivable (1)
|
|
$ |
127,567
|
|
|
$ |
21,016
|
|
|
$ |
15,630
|
|
|
$ |
16,474
|
|
|
$ |
180,687
|
|
Inventories
|
|
|
82,827
|
|
|
|
10,946
|
|
|
|
1,666
|
|
|
|
17,113
|
|
|
|
112,552
|
|
(1)
|
As
presented, accounts receivable represents trade receivables, gross,
which
are specified between segments.
|
The
following are reconciliations corresponding to totals in the accompanying
Condensed Consolidated Financial Statements:
|
|
Three
Months Ended
|
|
|
|
March
30,
2007
|
|
|
March
31,
2006
|
|
(In
thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
income:
|
|
|
|
|
|
|
Total
for reportable divisions
|
|
$ |
63,152
|
|
|
$ |
42,831
|
|
Unallocated
corporate expenses
|
|
|
(23,884 |
) |
|
|
(9,766 |
) |
Operating
income
|
|
$ |
39,268
|
|
|
$ |
33,065
|
|
As
of
|
|
March
30,
2007
|
|
|
December
29,
2006
|
|
(in
thousands)
|
|
|
|
|
|
|
Assets:
|
|
|
|
|
|
|
Accounts
receivable total for reporting segments
|
|
$ |
225,350
|
|
|
$ |
180,687
|
|
Unallocated
(1)
|
|
|
(9,251 |
) |
|
|
(8,679 |
) |
Total
|
|
$ |
216,099
|
|
|
$ |
172,008
|
|
(1) Includes
trade-related accruals, allowances, and cash received in advance that are not
allocated by segment.
The
distribution of Trimble’s gross consolidated revenue by segment is summarized in
the table below. Gross consolidated revenue includes external and internal
sales. Total external consolidated revenue is reported net of eliminations
of
internal sales between segments.
|
|
Three
Months Ended
|
|
|
|
March
30,
2007
|
|
|
March
31,
2006
|
|
(In
thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Engineering
and Construction
|
|
$ |
176,864
|
|
|
$ |
147,457
|
|
Field
Solutions
|
|
|
50,962
|
|
|
|
43,042
|
|
Mobile
Solutions
|
|
|
29,857
|
|
|
|
12,607
|
|
Advanced
Devices
|
|
|
29,318
|
|
|
|
23,471
|
|
Total
Gross Consolidated Revenue
|
|
$ |
287,001
|
|
|
$ |
226,578
|
|
Eliminations
|
|
|
(1,269 |
) |
|
|
(724 |
) |
Total
External Consolidated Revenue
|
|
$ |
285,732
|
|
|
$ |
225,854
|
|
NOTE
9.
LONG-TERM DEBT
Long-term
debt consisted of the following:
As
of
|
|
March
30,
2007
|
|
|
December
29,
2006
|
|
(In
thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Credit
Facilities:
|
|
|
|
|
|
|
Term
loan
|
|
$ |
100,000
|
|
|
$ |
-
|
|
Revolving
credit facility
|
|
|
70,000
|
|
|
|
-
|
|
Promissory
notes and other
|
|
|
481
|
|
|
|
481
|
|
|
|
|
170,481
|
|
|
|
481
|
|
|
|
|
|
|
|
|
|
|
Less
current portion of long-term debt
|
|
|
9,994
|
|
|
|
-
|
|
Non-current
portion
|
|
$ |
160,487
|
|
|
$ |
481
|
|
The
following summarizes the future cash payment obligations (excluding interest)
as
of March 30, 2007:
|
|
Total
|
|
|
2007
Remaining
|
|
|
2008
|
|
|
2009
|
|
|
2010
|
|
|
2011
|
|
|
2012
and Beyond
|
|
(in
thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Term
loan
|
|
$ |
100,000
|
|
|
$ |
7,500
|
|
|
$ |
13,750
|
|
|
$ |
15,000
|
|
|
$ |
18,750
|
|
|
$ |
20,000
|
|
|
$ |
25,000
|
|
Revolving
credit facility
|
|
|
70,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
70,000
|
|
Promissory
note and other
|
|
|
481
|
|
|
|
-
|
|
|
|
115
|
|
|
|
366
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Total
debt obligations
|
|
$ |
170,481
|
|
|
$ |
7,500
|
|
|
$ |
13,865
|
|
|
$ |
15,366
|
|
|
$ |
18,750
|
|
|
$ |
20,000
|
|
|
$ |
95,000
|
|
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 option in the existing
credit agreement to increase the availability under the revolving credit line
by
$100 million, for an aggregate availability of up to $300 million, and extended
the maturity date of the revolving credit line by 18 months, from July 2010
to
February 2012. During the three months ended March 30, 2007, the Company
drew down $150 million on the revolving credit line.
In
addition, during the three months ended March 30, 2007 the Company incurred
a
five-year term loan under the 2007 Credit Facility in an aggregate principal
amount of $100 million, 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 previous 2005 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.
At
March
30, 2007, the Company had $70 million drawn on the revolving credit line and
$100 million in term loan outstanding and was in compliance with all financial
debt covenants.
The
Company may borrow funds under the 2007 Credit Facility in U.S. Dollars or
in
certain other currencies, and borrowings 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 the London Interbank Offered Rate (“LIBOR”), Euro
Interbank Offered Rate (“EURIBOR”), Stockholm Interbank Offered Rate (“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 2007
Credit Facility are guaranteed by certain of the Company's domestic
subsidiaries.
The
2007
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 2007 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 2007
Credit Facility, however that acceleration will be automatic in the case of
bankruptcy and insolvency events of default.
Notes
Payable
As
of
March 30, 2007 and 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. These notes
payable are classified as Non-current portion of long-term debt in the
accompanying Condensed Consolidated Balance sheets and are payable within two
to
three years from December 29, 2006.
NOTE
10.
PRODUCT WARRANTIES
The
Company accrues for warranty costs as part of its cost of sales based on
associated material product costs, technical support labor costs, and costs
incurred by third parties performing work on 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 three months ended March
30, 2007 and March 31, 2006 are as follows:
|
|
Three
Months Ended
|
|
|
|
March
30,
2007
|
|
|
March
31,
2006
|
|
(In
thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning
balance
|
|
$ |
8,607
|
|
|
$ |
7,466
|
|
Warranty
accrued
|
|
|
4,456
|
|
|
|
1,492
|
|
Warranty
claims
|
|
|
(3,447 |
) |
|
|
(1,513 |
) |
Ending
Balance
|
|
$ |
9,616
|
|
|
$ |
7,445
|
|
The
product warranty liability is classified as accrued warranty in the accompanying
condensed consolidated balance sheets.
NOTE
11.
EARNINGS PER SHARE
The
following data was used in computing earnings per share and the effect on the
weighted-average number of shares of potentially dilutive Common
Stock.
|
|
Three
Months Ended
|
|
|
|
March
30,
2007
|
|
|
March
31,
2006
|
|
(In
thousands, except per share amounts)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Numerator:
|
|
|
|
|
|
|
Income
available to common shareholders:
|
|
|
|
|
|
|
Used
in basic and diluted earnings per share
|
|
$ |
28,683
|
|
|
$ |
25,828
|
|
|
|
|
|
|
|
|
|
|
Denominator:
|
|
|
|
|
|
|
|
|
Weighted
average number of common shares used in basic earnings per
share
|
|
|
115,449
|
|
|
|
108,484
|
|
Effect
of dilutive securities (using treasury stock method):
|
|
|
|
|
|
|
|
|
Common
stock options
|
|
|
4,805
|
|
|
|
5,304
|
|
Common
stock warrants
|
|
|
642
|
|
|
|
1,930
|
|
Weighted
average number of common shares and dilutive potential common shares
used
in diluted earnings per share
|
|
|
120,896
|
|
|
|
115,718
|
|
|
|
|
|
|
|
|
|
|
Basic
earnings per share
|
|
$ |
0.25
|
|
|
$ |
0.24
|
|
Diluted
earnings per share
|
|
$ |
0.24
|
|
|
$ |
0.23
|
|
NOTE
12.
RESTRUCTURING CHARGES
During
the three months ended March 30, 2007, the Company accrued $3.6 million of
severance and benefits related to the acquisition of @Road. These restructuring
costs were recorded in accordance with EITF 95-3. During the three
months ended March 30, 2007, the Company paid $1.9 million against this
restructuring accrual.
In
addition, during the three months ended March 30, 2007, the Company reversed
$0.1 million against the restructuring accrual, which related to office closure
costs due to integration efforts of the Mensi acquisition.
The
remaining restructuring accrual of $2.4 million as of March 30, 2007 is included
in Accrued liabilities in our Condensed Consolidated Balance Sheet and is
expected to be paid by the end of fiscal 2007.
The
Company also recorded additional restructuring costs of $2.8 million for charges
associated with the acceleration of vesting of employee stock options for
certain terminated @Road employees, of which $1.4 million was settled in cash
and $1.4 million was recorded as Stockholder’s Equity. The $2.8
million was recorded in Trimble’s Statement of Operations for the months ended
March 30, 2007 under “Restructuring.”
NOTE
13:
INCOME TAXES
Trimble
adopted FASB Interpretation 48, Accounting for Uncertainty in Income Taxes
(“FIN
48”), on December 30, 2006. As a result of the implementation
the Company recognized no change to liability for uncertain tax positions
(compared to amounts under FAS 5, represented in the financial statements for
the 2006 year). A total (net of the federal benefit on state issues)
of $19.1 million and $19.7 million represents the amount of unrecognized tax
benefits that, if recognized, would favorably affect the effective income tax
rate in any future periods, at December 30, 2006 and March 30, 2007,
respectively. The unrecognized tax benefits are recorded in
Other non-current liabilities in the accompanying Condensed Consolidated Balance
Sheets.
Trimble
and its subsidiaries are subject to U.S. federal, state, and foreign income
tax. The Company has substantially concluded all U.S. federal and
state income tax matters for years through 1992. Foreign income tax
matters have been concluded for years through 2000.
Trimble’s
continuing practice is to recognize interest and/or penalties related to income
tax matters in income tax expense. The Company’s liability includes interest and
penalties at December 30, 2006 and March 30, 2007, of $2.2 and $2.4 million,
respectively, recorded in Other non- current liabilities in the accompanying
Condensed Consolidated Balance Sheets.
NOTE
14.
COMPREHENSIVE INCOME
The
components of comprehensive income, net of related tax in the Condensed
Consolidated Statement of Income are as follows:
|
|
Three
Months Ended
|
|
|
|
March
30,
2007
|
|
|
March
31,
2006
|
|
(In
thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income
|
|
$ |
28,683
|
|
|
$ |
25,828
|
|
Foreign
currency translation adjustments, net of tax
|
|
|
(111 |
) |
|
|
1,295
|
|
Net
unrealized actuarial losses
|
|
|
(8 |
) |
|
|
-
|
|
Net
unrealized gain (loss) on investments
|
|
|
44
|
|
|
|
(10 |
) |
Comprehensive
income
|
|
$ |
28,608
|
|
|
$ |
27,113
|
|
The
components of accumulated other comprehensive income, net of related tax in
the
Condensed Consolidated Balance Sheets are as follows:
As
of
|
|
March
30,
2007
|
|
|
December
30,
2006
|
|
(In
thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated
foreign currency translation adjustments
|
|
|
41,103
|
|
|
$ |
41,214
|
|
Net
unrealized actuarial losses
|
|
|
(144 |
) |
|
|
(136 |
) |
Accumulated
net unrealized gain on investments
|
|
|
77
|
|
|
|
33
|
|
Total
accumulated other comprehensive income
|
|
|
41,036
|
|
|
$ |
41,111
|
|
NOTE
15.
LITIGATION
From
time
to time, the Company is involved in litigation arising out of the ordinary
course of its business. There are no known claims or pending litigation expected
to have a material effect on the Company’s overall financial position, results
of operations, or liquidity.
This
Quarterly Report on Form 10-Q contains forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933, as amended, and Section
21E of the Securities Exchange Act of 1934, as amended, which are subject to
the
“safe harbor” created by those sections. Actual results could differ materially
from those indicated in the forward-looking statements due to a number of
factors including, but not limited to, the risk factors discussed in “Risks and
Uncertainties” below and elsewhere in this report as well as in the Company's
Annual Report on Form 10-K for fiscal year 2005 and other reports and documents
that the Company files from time to time with the Securities and Exchange
Commission. The Company
has attempted to identify forward-looking
statements in this
report by placing an asterisk (*) before paragraphs. Discussions
containing such forward-looking statements may be found in “Management’s
Discussion and Analysis of Financial Condition and Results of Operations” below.
In some cases, forward-looking statements can be identified by terminology
such
as “may,” ”will,” “should,” “could,” “predicts,” “potential,” “continue,”
“expects,” “anticipates,” “future,” “intends,” “plans,” “believes,” “estimates,”
and similar expressions. These forward-looking statements are made as of the
date of this Quarterly Report on Form 10-Q, and the Company disclaims any
obligation to update these statements or to explain the reasons why actual
results may differ.
ITEM
2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The
discussion and analysis of our financial condition and results of operations
are
based upon our condensed consolidated financial statements, which have been
prepared in accordance with accounting principles generally accepted in the
United States. The preparation of these financial statements requires us to
make
estimates and judgments that affect the reported amounts of assets, liabilities,
revenues and expenses, and related disclosure of contingent assets and
liabilities. On an on-going basis, we evaluate our estimates, including those
related to product returns, doubtful accounts, inventories, investments,
intangible assets, income taxes, warranty obligations, restructuring costs,
and
contingencies and litigation. We base our estimates on historical experience
and
on various other assumptions that are believed to be reasonable under the
circumstances, the results of which form the basis for making judgments about
the amount and timing of revenue and expenses and the carrying values of assets
and liabilities that are not readily apparent from other sources. Actual results
may differ from these estimates under different assumptions or
conditions.
EXECUTIVE
LEVEL OVERVIEW
Trimble’s
focus is on combining positioning technology with wireless communication and
software 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
the three months ended March 30, 2007, 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 the first
quarter of fiscal 2007 we continued to develop new products and to strengthen
our distribution channels to realize these opportunities. A number of new
products such as AgGPS® EZ-Guide® 500, Juno™ST , Spectra Precision® GL412 and
422, and Trimble VX™Spatial Station 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. For example in April we
introduced a suite of interactive training modules for the engineering and
construction industry. In order to create new categories we acquired
INPHO.
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. For example, in the first quarter of fiscal 2007 we announced
that Poland has selected Trimble for its nationwide GNSS infrastructure
network.
Entered
completely new markets
In
the
first quarter of fiscal 2007, we acquired @Road, which 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, and INPHO, which is a leader in photogrammetry and digital surface
modeling for aerial surveying, mapping and remote sensing
applications. 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
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 Condensed Consolidated Financial Statements and accompanying Notes to the
Condensed 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,” Statement of Position (SOP) No. 98-9,
“Modification of SOP 97-2,” and Emerging Issues Task Force (EITF) Issue 00-3,
"Application of AICPA Statement of Position 97-2 to Arrangements That Include
the Right to Use Software Stored on Another Entity's Hardware." We
recognize 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.
We
apply
Emerging Issues Task Force (EITF) Issue 00-3, "Application of AICPA Statement
of
Position 97-2 to Arrangements That Include the Right to Use Software Stored
on
Another Entity's Hardware" for hosted arrangements which the customer does
not
have the contractual right to take possession of the software at any time during
the hosting period without incurring a significant penalty and it is not
feasible for the customer to run the software either on its own hardware or
on a
third-party’s hardware. Subscription revenues related to our hosted arrangements
are recognized ratably over the contract period. Upfront fees for our hosted
solution primarily consist of amounts for the in-vehicle enabling hardware
device and peripherals, if any. For upfront fees relating to propriety hardware
where the firmware is more than incidental to the functionality of the hardware
in accordance with Position (SOP) No. 97-2, “Software Revenue Recognition,” we
defer upfront fees at installation and recognizes them ratably over the minimum
service contract period, generally one to five years. Product costs are also
deferred and amortized over such period.
Allowance
for Doubtful Accounts and Sales Returns
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 and is 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 are stated at the lower of standard cost (which approximates actual
cost on a first-in, first-out basis) or market. 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.
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.
Our
valuation allowance is attributable to, primarily, 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
we
will not realize these deferred tax assets and, accordingly, a valuation
allowance has been established for such amounts. When the tax benefits 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 goodwill rather
than as a reduction of the income tax provision.
Impairment
of Goodwill, Intangible Assets and Other Long-Lived Assets
The
process of evaluating the potential impairment of goodwill, intangible assets
and other long-lived assets is subjective and requires significant
assumptions.
We
evaluate goodwill, at a minimum, on an annual basis and whenever events and
changes in circumstances suggest that the carrying amount may not be
recoverable. We perform our annual goodwill impairment testing in the fourth
fiscal quarter of each year, using information as of the end of its third fiscal
quarter. Goodwill is reviewed for impairment utilizing a two-step process.
First, impairment of goodwill is tested at the reporting unit level by comparing
the reporting unit’s carrying amount, including goodwill, to the fair value of
the reporting unit. The fair values of the reporting units are
estimated using a discounted cash flow approach. If the carrying amount of
the reporting unit exceeds its fair value, a second step is performed to measure
the amount of impairment loss, if any. In step two, the implied fair value
of
goodwill is calculated as the excess of the fair value of a reporting unit
over
the fair values assigned to its assets and liabilities. If the implied fair
value of goodwill is less than the carrying value of the reporting unit’s
goodwill, the difference is recognized as an impairment loss.
Depreciation
and amortization of our intangible assets and other 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 an asset should be revised, we will depreciate the net book
value
in excess of the estimated residual value over its revised remaining useful
life. These assets 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. The 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
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
The
determination of fair value of share-based payment awards on the date of grant
using an option-pricing model is affected by our stock price as well as
assumptions regarding a number of highly complex and subjective variables.
These
variables include our expected stock price volatility over the term of the
awards, actual and projected employee stock option exercise behaviors, risk-free
interest rates, and expected dividends. In addition, the binomial model
incorporates actual option-pricing behavior and changes in volatility over
the
option’s contractual term.
Beginning
in fiscal 2006, our expected stock price volatility for stock purchase rights
is
based on implied volatilities of traded options on our stock and our expected
stock price volatility for stock options is based on a combination of our
historical stock price volatility for the period commensurate with the expected
life of the stock option and the implied volatility of traded options. The
use
of implied volatilities was based upon the availability of actively traded
options on our stock with terms similar to our awards and also upon our
assessment that implied volatility is more representative of future stock price
trends than historical volatility. However, because the expected life of our
stock options is greater than the terms of our traded options, we used a
combination of our historical stock price volatility commensurate with the
expected life of our stock options and implied volatility of traded
options.
We
estimated the expected life of the awards based on an analysis of our historical
experience of employee exercise and post-vesting termination behavior considered
in relation to the contractual life of the options and purchase rights. The
risk-free interest rate assumption is based upon observed interest rates
appropriate for the expected term of the awards.
We
do not
currently pay cash dividends on our common stock and do not anticipate doing
so
in the foreseeable future. Accordingly, our expected dividend yield is
zero.
Because
stock-based compensation expense recognized in the Consolidated Statement of
Operations for fiscal 2007 and 2006 is based on awards ultimately expected
to
vest, it has been reduced for estimated forfeitures. 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.
Forfeitures were estimated based on historical experience.
If
factors change and we employ different assumptions in the application of SFAS
123(R) in future periods, the compensation expense that we record under SFAS
123(R) may differ significantly from what we have recorded in the current
period. In addition, valuation models, including the Black-Scholes and
binomial models, may not provide reliable measures of the fair values of our
stock-based compensation. Consequently, there is a risk that our estimates
of
the fair values of our stock-based compensation awards on the grant dates may
bear little resemblance to the actual values realized upon the exercise,
expiration, early termination, or forfeiture of those stock-based payments
in
the future. Certain stock-based payments, such as employee stock options, may
expire worthless or otherwise result in zero intrinsic value as compared to
the
fair values originally estimated on the grant date and reported in our financial
statements. Alternatively, value may be realized from these instruments that
is
significantly higher than the fair values originally estimated on the grant
date
and reported in our financial statements.
As
of
March 30, 2007, the total unamortized stock option expense is $28.5 million
with
a weighted-average recognition period of 1.6 years.
RECENT
BUSINESS DEVELOPMENTS
@Road,
Inc.
On
February 16, 2007, we acquired publicly-held @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’s performance is
reported under our Mobile Solutions business segment.
INPHO
GmbH
On
February 13, 2007, we acquired privately-held INPHO GmbH of Stuttgart,
Germany. INPHO provides photogrammetry and digital surface modeling
for aerial surveying, mapping and remote sensing
applications. INPHO’s performance is reported under our Engineering
and Construction business segment.
Spacient
Technologies, Inc.
On
November 21, 2006, we acquired privately-held Spacient Technologies, Inc. of
Long Beach, California. Spacient is a 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.
RESULTS
OF OPERATIONS
Overview
The
following table is a summary of revenue and operating income for the periods
indicated and should be read in conjunction with the narrative descriptions
below.
|
|
Three
Months Ended
|
|
|
|
March
30
2007
|
|
|
March
31,
2006
|
|
(in
thousands)
|
|
|
|
|
|
|
Total
consolidated revenue
|
|
$ |
285,732
|
|
|
$ |
225,854
|
|
Gross
margin
|
|
|
143,130
|
|
|
|
107,463
|
|
Gross
margin %
|
|
|
50.1 |
% |
|
|
47.6 |
% |
Total
consolidated operating income
|
|
$ |
39,268
|
|
|
$ |
33,065
|
|
Operating
income %
|
|
|
13.7 |
% |
|
|
14.6 |
% |
Revenue
In
the
three months ended March 30, 2007, total revenue increased by $59.9 million
or
27%, as compared to the same corresponding period in fiscal 2006. The increase
resulted from a strong revenue growth across all segments. Engineering and
Construction revenue increased $28.9 million, Mobile Solutions increased $17.2
million, Field Solutions increased $7.9 million, and Advanced Devices increased
$5.8 million, compared to the same corresponding period in fiscal 2006. Revenue
growth within these segments was driven by new product introductions, increased
penetration of existing markets, and acquisitions made in the Engineering and
Construction and Mobile Solution segments. Acquisitions made during
the last twelve months contributed $19.3 million to revenue with the @Road
acquisition contributing $11.3 million.
During
the first fiscal quarter of fiscal 2007, sales to customers in the United States
represented 52%, Europe represented 26%, Asia Pacific represented 11% and other
regions represented 11% of our total revenues. During the same corresponding
period in fiscal 2006, sales to customers in the United States represented
56%,
Europe represented 25%, Asia Pacific represented 10% and other regions
represented 9% of our total revenues.
Gross
Margins
Our
gross
margin varies due to a number of factors including product mix, pricing,
distribution channel used, the effects of production volumes, and foreign
currency translations. In the three months ended March 30, 2007,
gross margins increased by $35.7 million Gross margin as a percentage of total
revenues was 50.1% for the three months ended March 30, 2007, compared to 47.6%
for the three months ended March 31, 2006. The 2.5 point increase in
the gross margin was driven by an increase in higher margin products and
subscription revenues, foreign exchange rate gains, and improved manufacturing
utilization of 3.5 points, offset by a decrease of 1.1 points due to the
amortization of purchased intangibles.
Operating
Income
Operating
income increased by $6.2 million for the first quarter of fiscal 2007 compared
to the first quarter of fiscal 2006 primarily due to higher revenues and
associated gross margins, offset by amortization of intangibles, restructuring
expenses, and an increase in operating expenses. Operating income as
percentage of total revenues was 13.7% for the three months ended March 30,
2007, compared to 14..6% for the three months ended March 31, 2006. The 0.9
point decrease in operating income margin was due primarily to higher
amortization of intangibles and restructuring expenses of 6.6 points, partially
offset by higher revenues, and gross margin and operating expense improvements
of 5.7 points.
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.
The
following table is a breakdown of revenue and operating income by segment (in
thousands, except percentages):
|
|
Three
Months Ended
|
|
|
March
30,
2007
|
|
|
March
31,
2006
|
|
|
|
|
|
|
Engineering
and Construction
|
|
|
|
|
|
Revenue
|
|
$ |
175,604
|
|
|
$ |
146,733
|
|
Segment
revenue as a percent of total revenue
|
|
|
62 |
% |
|
|
65 |
% |
Operating
income
|
|
$ |
42,164
|
|
|
$ |
26,377
|
|
Operating
income as a percent of segment revenue
|
|
|
24 |
% |
|
|
18 |
% |
Field
Solutions
|
|
|
|
|
|
|
Revenue
|
|
$ |
50,962
|
|
|
$ |
43,042
|
|
Segment
revenue as a percent of total revenue
|
|
|
18 |
% |
|
|
19 |
% |
Operating
income
|
|
$ |
16,628
|
|
|
$ |
13,908
|
|
Operating
income as a percent of segment revenue
|
|
|
33 |
% |
|
|
32 |
% |
Mobile
Solutions
|
|
|
|
|
|
|
Revenue
|
|
$ |
29,857
|
|
|
$ |
12,607
|
|
Revenue
as a percent of total revenue
|
|
|
10 |
% |
|
|
6 |
% |
Operating
income (loss)
|
|
$ |
1,017
|
|
|
$ |
223
|
|
Operating
income (loss) as a percent of segment revenue
|
|
|
3 |
% |
|
|
2 |
% |
Advanced
Devices
|
|
|
|
|
|
|
Revenue
|
|
$ |
29,309
|
|
|
$ |
23,471
|
|
Segment
revenue as a percent of total revenue
|
|
|
10 |
% |
|
|
10 |
% |
Operating
income
|
|
$ |
3,343
|
|
|
$ |
2,323
|
|
Operating
income as a percent of segment revenue
|
|
|
11 |
% |
|
|
10 |
% |
A
reconciliation of our consolidated segment operating income to consolidated
income before income taxes follows:
|
|
Three
Months Ended
|
|
|
|
March
30,
2007
|
|
|
March
31,
2006
|
|
(In
thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated
segment operating income
|
|
$ |
63,152
|
|
|
$ |
42,831
|
|
Unallocated
corporate expense
|
|
|
(11,188 |
) |
|
|
(7,425 |
) |
Amortization
of purchased intangible assets
|
|
|
(7,892 |
) |
|
|
(2,341 |
) |
In-process
research and development expense
|
|
|
(2,112 |
) |
|
|
- |
|
Restructuring
charges
|
|
|
(2,692 |
) |
|
|
- |
|
Non-operating
income, net
|
|
|
2,857
|
|
|
|
2,807
|
|
Consolidated
income before income taxes
|
|
$ |
42,125
|
|
|
$ |
35,872
|
|
Engineering
and Construction
Engineering
and Construction revenues increased by $28.9 million or 20% for the three
months
ended March 30, 2007 compared to the same corresponding period in fiscal
2006.
Segment operating income increased by $15.8 million or 60% for the three
months
ended March 30, 2007 as compared to the same corresponding period in fiscal
2006.
The
revenue growth for the three months ended March 30, 2007 was driven by a
steady
market, strong sales of construction products, acquisitions made during the
last
twelve months, and foreign exchange gains. For the three months ended March
30, 2007, segment operating income increased as a result of the higher revenues,
particularly machine control products, and stronger gross
margins.
Field
Solutions revenues increased by $7.9 million or 18% for the three months
ended
March 30, 2007 compared to the same corresponding periods in fiscal 2006.
Segment operating income increased by $2.7 million or 20% for the three months
ended March 30, 2007 as compared to the same corresponding period in fiscal
2006.
Revenues
increased for the three months ended March 30, 2007 compared to the
corresponding period of fiscal 2006 due primarily to growth in our agricultural
business. In agriculture, growth was driven by the introduction of
the EZ Guide 500, a tractor guidance product and a stronger agricultural
market. Operating income increased primarily due to strong revenues
and associated gross margins.
Mobile
Solutions revenues increased by $17.2 million or 137% for the three months
ended
March 30, 2007 compared to the same corresponding period in fiscal 2006.
Segment
operating income increased by $0.8 million or 356% for the three months ended
March 30, 2007 as compared to the same corresponding period in fiscal
2006.
Revenues
for the three months ended March 30, 2007 compared to the corresponding period
of fiscal 2006 grew due to increased subscriber growth, an increase in recurring
revenues, and the benefit of the @Road acquisition which was not in the
corresponding period of fiscal 2006. Operating income increased for
the three months ended March 30, 2007 compared to the corresponding period
of
fiscal 2006 primarily due to higher subscription revenues and gross margins,
partially offset by the inclusion of @Road operating expenses that were not
present in the corresponding period of fiscal 2006.
Advanced
Devices
Advanced
Devices revenues increased by $5.8 million or 25% for the three months ended
March 30, 2007 compared to the same corresponding period in fiscal 2006.
Segment
operating income increased by $1.0 million or 44% for the three months ended
March 30, 2007 as compared to the corresponding period in fiscal
2006.
For
the
three months ended March 30, 2007 compared to the corresponding period in
fiscal
2006, the increase in revenue was primarily due to an increase in a new product
introduction in our integrated product line, an increase in our embedded
product
revenue as well as licensing revenues associated with a Nokia intellectual
property agreement signed in the third quarter of 2006. Operating
income for the three months ended March 30, 2007 increased compared to the
same
period in fiscal 2006, primarily due to the Nokia licensing
revenue.
Research
and Development, Sales and Marketing, and General and Administrative
Expenses
Research
and development (“R&D”), sales and marketing (“S&M”), and general and
administrative (“G&A”) expenses are summarized in the following table (in
thousands, except percentages):
|
|
Three
Months Ended
|
|
|
|
|
|
|
|
|
|
|
March
30,
2007
|
|
|
March
31,
2006
|
|
Research
and development
|
|
$ |
31,163
|
|
|
$ |
24,446
|
|
Percentage
of revenue
|
|
|
10.9 |
% |
|
|
10.8 |
% |
Sales
and marketing
|
|
$ |
42,147
|
|
|
$ |
32,706
|
|
Percentage
of revenue
|
|
|
14.8 |
% |
|
|
14.5 |
% |
General
and administrative
|
|
$ |
21,642
|
|
|
$ |
15,761
|
|
Percentage
of revenue
|
|
|
7.6 |
% |
|
|
7.0 |
% |
Total
|
|
$ |
94,952
|
|
|
$ |
72,913
|
|
Percentage
of revenue
|
|
|
33.2 |
% |
|
|
32.3 |
% |
Overall,
research and development, sales and marketing and general and administrative
expenses increased by approximately $22.0 million for the three months ended
March 30, 2007 compared to the same corresponding period in fiscal
2006.
Research
and development expenses increased by $6.7 million in the first quarter of
fiscal 2007 compared with the first quarter of fiscal 2006, primarily due to
the
inclusion of expenses of $4.4 million in expenses from acquisitions not
applicable in the prior fiscal quarter and a $2.4 million increase in
compensation related expenses,.
All
of
our research and development costs have been expensed as
incurred. Cost of software developed for external sale subsequent to
reaching technical feasibility were not considered material and were expensed
as
incurred.
*
We
believe that the development and introduction of new products are critical
to
our future success and we expect to continue active development of new
products.
Sales
and
marketing expenses increased by $9.4 million in the first quarter of fiscal
2007
compared with the corresponding period of fiscal 2006, primarily due to the
inclusion of expenses from acquisitions not applicable in the prior period
of
$6.1 million, a $2.8 million increase in compensation-related expenses, and
a
$0.6 million increase due to foreign currency exchange rates.
*
Our
future growth will depend in part on the timely development and continued
viability of the markets in which we currently compete as well as our ability
to
continue to identify and develop new markets for our products.
General
and administrative expenses increased by $5.9 million in the first quarter
of
fiscal 2007 compared with the corresponding period in fiscal 2006, primarily
due
to the inclusion of expenses from acquisitions not applicable in the prior
year
of $3.2 million, a $1.1 million increase in compensation-related expenses,
a
$1.6 million increase in legal and tax fees associated with litigation and
tax
consulting, and a $0.3 million increase due to foreign currency exchange
rates.
Amortization
of Purchased Intangible Assets
Amortization
of purchased intangible assets was $7.9 million, an increase of $5.6 million
compared with the first quarter of fiscal 2006. Of the $7.9 million, $3.8
million was recorded in cost of sales. The increase was due to the acquisition
of certain technology and patent intangibles as a result of acquisitions not
applicable in the comparable period of fiscal 2006.
In-Process
Research and Development
We
recorded in-process research and development (IPR&D) expense of $2.1 million
related to the @Road acquisition during the three month period ended March
30,
2007. We did not record any IPR&D expense during the same corresponding
periods in fiscal 2006. At the date of the 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 the IPR&D amount was
charged to expense on the respective acquisition date.
Restructuring
Charges
During
the three months ended March 30, 2007, we accrued $3.6 million of severance
and
benefits related to the acquisition of @Road. These restructuring costs were
recorded in accordance with EITF 95-3. During the three months ended
March 30, 2007, we paid $1.9 million against this restructuring
accrual.
In
addition, during the three months ended March 30, 2007, we reversed $0.1 million
against the restructuring accrual, which related to office closure costs due
to
integration efforts of the Mensi acquisition.
The
remaining restructuring accrual of $2.4 million as of March 30, 2007 is included
in Accrued liabilities in our Condensed Consolidated Balance Sheet and is
expected to be paid by the end of fiscal 2007.
We
also
recorded additional restructuring costs of $2.8 million for charges associated
with the acceleration of vesting of employee stock options for certain
terminated @Road employees, of which $1.4 million was settled in cash and $1.4
million was recorded as Stockholder’s Equity. The $2.8 million was
recorded in Trimble’s Statement of Operations for the months ended March 30,
2007 under “Restructuring.”
Non-operating
Income, Net
The
components of non-operating income (expense), net, are as follows (in
thousands):
|
|
Three
Months Ended
|
|
(In
thousands)
|
|
March
30,
2007
|
|
|
March
31,
2006
|
|
|
|
|
|
|
|
|
Interest
income
|
|
$ |
1,243
|
|
|
$ |
512
|
|
Interest expense
|
|
|
(1,400 |
) |
|
|
(78 |
) |
Foreign
currency transaction gain, net
|
|
|
357
|
|
|
|
593
|
|
Income
from joint ventures
|
|
|
2,422
|
|
|
|
1,616
|
|
Other
income, net
|
|
|
235
|
|
|
|
164
|
|
Total
non-operating income, net
|
|
$ |
2,857
|
|
|
$ |
2,807
|
|
Non-operating
income, net, of $2.9 million remained relatively flat compared with the
corresponding period in fiscal 2006; interest income increased by $0.7 million
primarily due to higher average cash balances during the first three months
of
fiscal 2007 and interest expense increased by $1.3 million due to an increase
in
debt associated with the @Road acquisition. Income from equity
investments increased by $0.8 million primarily due to increased profits from
our CTCT joint venture.
Income
Tax Provision
Our
income tax provision reflects a tax rate of 32.0% and 28.0% for the three months
ended March 30, 2007 and March 31, 2006, respectively. The 2007 first
fiscal quarter rate is higher than the 2006 first quarter rate primarily due
to
a reduction in benefits from operations in foreign jurisdictions, which are
subject to a lower effective tax rate than the US, and the expiration
of the Extraterritorial Income Exclusion (ETI) deduction.
We
anticipate an annual estimated effective tax rate of 38.0% for fiscal year
2007.
The tax rate could be affected by several factors including stock option
activity, geographic mix of our pre-tax income, legislative changes, changes
to
our existing valuation allowance(s) or contingent tax liabilities, and/or
discrete quarterly events. The first quarter rate (32.0%, as noted
above) is lower than the 2007 estimated rate, resulting primarily from a
discrete event release of the valuation allowance related to California Research
and Development Credit carryforwards.
OFF-BALANCE
SHEET FINANCINGS AND LIABILITIES
Other
than lease commitments incurred in the normal course of business, we do not
have
any off-balance sheet financing arrangements or liabilities, guarantee
contracts, retained or contingent interests in transferred assets, or any
obligation arising out of a material variable interest in an unconsolidated
entity. We do not have any majority-owned subsidiaries that are not included
in
the condensed consolidated financial statements. Additionally, we do not have
any interest in, or relationship with, any special purpose
entities.
LIQUIDITY
AND CAPITAL RESOURCES
As
of
|
|
March
30,
2007
|
|
|
December
29
2006
|
|
(dollars
in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
and cash equivalents
|
|
$ |
63,571
|
|
|
$ |
129,621
|
|
Total
debt
|
|
$ |
170,481
|
|
|
$ |
481
|
|
Three
Months Ended
|
|
March
30,
2007
|
|
|
March
31,
2006
|
|
(dollars
in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
provided by operating activities
|
|
$ |
31,747
|
|
|
$ |
16,877
|
|
Cash
used in investing activities
|
|
$ |
(275,911 |
) |
|
$ |
(7,244 |
) |
Cash
provided by financing activities
|
|
$ |
182,667
|
|
|
$ |
11,100
|
|
Net
increase (decrease) in cash and cash equivalents
|
|
$ |
(66,050 |
) |
|
$ |
23,795
|
|
Cash
and Cash Equivalents
Cash
and
cash equivalents totaled $63.6 million at March 30, 2007, compared to $129.6
million at December 29, 2006. Debt was $170.5 million compared to
$0.5 million at December 29, 2006, primarily due to debt incurred for the @Road
acquisition.
For
the
first three months of fiscal 2007, cash provided by operating activities was
$31.7 million, compared to $16.9 million in cash provided by operating
activities during the first three months of fiscal 2006. This increase of $14.8
million was primarily driven by an increase in net income before amortization
expense, in-process research write-off, and non-cash restructuring related
to
acquisitions. 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.
We
used
$275.9 million in net cash for investing activities during the first three
months of 2007, compared to $7.2 million in the first three months of
2006. The $268.7 million increase was primarily attributable to cash
used for the @Road acquisition.
We
generated $182.7 million in net cash from financing activities in the first
three months of 2007, compared to $11.1 million during the first three months
of
2006, primarily related to debt incurred for the @Road acquisition.
*
We
believe that our cash and cash equivalents, together with our revolving credit
facilities, will be sufficient to meet our anticipated operating cash needs
for
at least the next twelve months.
*
We
anticipate that planned 2007 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.
Accounts
Receivable and Inventory Metrics
As
of
|
|
March
30,
2007
|
|
|
December
29
2006
|
|
|
|
|
|
|
|
|
Accounts
receivable days sales outstanding
|
|
|
54
|
|
|
|
55
|
|
Inventory
turns per year
|
|
|
4.2
|
|
|
|
4.1
|
|
Our
accounts receivable days for sales outstanding improved to 54 days at March
30,
2007, from 55 days at December 9, 2006. 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 rolled
out a
dealer floor plan financing program in the U.S. and Canada through a
non-recourse financing facility. Our inventory turns increased to 4.2
turns for the first three months of fiscal 2007.
Debt
At
March
30, 2007, our total debt was approximately $170.5 million compared to $0.5
million as of December 29, 2006, attributable to debt incurred for the @Road
acquisition.
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 replaced our $175
million secured 2003 Credit Facility.
On
February 16, 2007, we amended and restated our 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, we exercised the option in the existing credit agreement to
increase the availability under the revolving credit line by $100 million,
for
an aggregate availability of up to $300 million, 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, we incurred a five-year term loan
under the 2007 Credit Facility in an aggregate principal amount of $100 million,
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 previous 2005 facility, we
were 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 us
for acquisitions and general corporate purposes.
As
of
March 30, 2007, the Company had $70 million drawn on the revolving credit line
and a $100 million in term loan outstanding.
Contractual
Obligations
The
following table summarizes our contractual obligations at March 30,
2007:
|
|
Payments
Due In
|
|
|
|
Total
Payments Due
|
|
|
Fiscal
2007 (1)
|
|
|
Fiscal
2008 and 2009
|
|
|
Fiscal
2010 and 2011
|
|
|
Thereafter
|
|
(in
thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
debt excluding interest (2)
|
|
$ |
170,481
|
|
|
$ |
7,500
|
|
|
$ |
29,231
|
|
|
$ |
38,750
|
|
|
$ |
95,000
|
|
Operating
leases
|
|
|
47,727
|
|
|
|
9,973
|
|
|
|
20,780
|
|
|
|
12,504
|
|
|
|
4,470
|
|
Other
purchase obligations and commitments
|
|
|
36,333
|
|
|
|
36,333
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Total
|
|
$ |
254,541
|
|
|
$ |
53,806
|
|
|
$ |
50,011
|
|
|
$ |
51,254
|
|
|
$ |
99,470
|
|
(1)
Represents obligations for the last 3 quarters of fiscal 2007.
(2)
We
may borrow funds under the 2007 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 our leverage
ratio as of the most recently ended fiscal quarter. Our obligations under the
2007 Credit Facility are guaranteed by certain of the Company's domestic
subsidiaries.
Total
debt consists of a term loan, a revolving line of credit, and government loans
to foreign subsidiaries. (See Note 9 in the Condensed 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. Purchase obligations exclude
agreements that are cancelable without penalty. Our pension
obligation which is not included in the table above, is included in “Accrued
compensation and benefits” and “Other non-current liabilities” on our Condensed
Consolidated Balance Sheets. .Additionally, as of March 30, 2007, we
had acquisition earn-outs of $15.0 million and holdbacks of $8.6 million
recorded in “Accrued liabilities” and “Other non-current
liabilities.” The maximum remaining payments, including the $15.0
million and $8.6 million recorded, will not exceed $73.2 million. The
remaining earn-outs and holdbacks are payable through 2009.
Trimble
adopted FASB Interpretation 48, Accounting for Uncertainty in Income Taxes
(“FIN
48”), on December 30, 2006. A total (net of the federal benefit on
state issues and interest and/or penalty amounts) of $19.7 million represents
the FIN 48 liability at March 30, 2007. At this time, we cannot make
a reasonably reliable estimate of the period of cash settlement with respective
tax authorities regarding this liability.
ITEM
3. 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
There
has
been no change to our market interest rate risk assessment. Refer to our 2006
Annual Report on Form 10-K.
Foreign
Currency Exchange Rate Risk
We
enter
into foreign exchange forward contracts to minimize the short-term impact of
foreign currency fluctuations on certain trade and inter-company receivables
and
payables, primarily denominated in Australian, Canadian, Japanese, New Zealand,
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 contracts
for
trading purposes.
Foreign
exchange forward contracts outstanding as of March 30, 2007 are summarized
as
follows (in thousands):
|
|
March
30, 2007
|
|
|
|
Nominal
Amount
|
|
|
Fair
Value
|
|
Forward
contracts:
|
|
|
|
|
|
|
Purchased
|
|
$ |
(28,329 |
) |
|
$ |
142
|
|
Sold
|
|
$ |
23,821
|
|
|
$ |
(271 |
) |
*
We do
not anticipate any material adverse effect on our consolidated financial
position utilizing our current hedging strategy.
ITEM
4. CONTROLS AND PROCEDURES
(a)
Disclosure Controls and Procedures.
The
Company's management, with the
participation of the Company's Chief Executive Officer and Chief Financial
Officer, has evaluated the effectiveness of the Company's disclosure controls
and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under
the Securities Exchange Act of 1934, as amended (the "Exchange Act")) as of
the
end of the period covered by this report. Based on such evaluation,
the Company's Chief Executive Officer and Chief Financial Officer have concluded
that, as of the end of such period, the Company's disclosure controls and
procedures are effective in recording, processing, summarizing and reporting,
on
a timely basis, information required to be disclosed by the Company in the
reports that it files or submits under the Exchange Act.
(b)
Internal Control Over Financial Reporting.
There
have not been any changes in the Company's internal control over financial
reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the
Exchange Act) during the fiscal quarter to which this report relates that have
materially affected, or are reasonably likely to materially affect, the
Company’s internal control over financial reporting.
2006
@Road Internal Control Matter
On
February 16, 2007, we completed the acquisition of @Road. For fiscal year
2006,
a material weakness, was identified
in @Road's internal controls over accounting for revenue
recognition. @Road's material weakness had no material impact on Trimble's
condensed consolidated financial statements as of and for the quarterly
period
ended, March 30, 2007, and did not result in any changes which materially
affected or are reasonably likely to materially affect the Company's internal
control over financial reporting. The historical results reported for @Road
in Trimble's Form 8-K/A filed on April 30, 2007 continue to be fairly
stated.
PART
II. OTHER
INFORMATION
ITEM
1. LEGAL PROCEEDINGS
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.
A
description of factors that could materially affect our business, financial
condition or operating results is included under “Risk and Uncertainties” in
Item 1A of Part I of our 2006 Annual Report on Form 10-K and is
incorporated herein by reference. There have been no material changes
to the risk factor disclosure since our 2006 Annual Report on Form
10-K.
3.1
|
Restated
Articles of Incorporation of the Company filed June 25, 1986.
(3)
|
3.2
|
Certificate
of Amendment of Articles of Incorporation of the Company filed October
6,
1988. (3)
|
3.3
|
Certificate
of Amendment of Articles of Incorporation of the Company filed July
18,
1990. (3)
|
3.4
|
Certificate
of Determination of Rights, Preferences and Privileges of Series
A
Preferred Participating Stock of the Company filed February 19, 1999.
(3)
|
3.5
|
Certificate
of Amendment of Articles of Incorporation of the Company filed May
29,
2003. (5)
|
3.6
|
Certificate
of Amendment of Articles of Incorporation of the Company filed March
4,
2004. (6)
|
3.7
|
Certificate
of Amendment of Articles of Incorporation of the Company filed February
21, 2007. (10)
|
3.8
|
Bylaws
of the Company, amended and restated through July 20, 2006.
(8)
|
4.1
|
Specimen
copy of certificate for shares of Common Stock of the Company.
(1)
|
4.2
|
Preferred
Shares Rights Agreement dated as of February 18, 1999.
(2)
|
4.3
|
Agreement
of Substitution and Amendment of Preferred Shares Rights Agreement
dated
September 10, 2004. (7)
|
4.4
|
Form
of Warrant dated April 12, 2002. (4)
|
10.1
|
Amended
and Restated Credit Agreement dated February 16, 2007.
(10)
|
10.2
|
Trimble
Navigation 1988 Employee Stock Purchase Plan, as amended January
17, 2007.
(10)
|
10.3
|
@Road,
Inc. 2000 Stock Option Plan. (9)
|
31.1
|
Certification
of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002 dated May 8, 2007. (9)
|
31.2
|
Certification
of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002 dated May 8, 2007. (9)
|
32.1
|
Certification
of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as
adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 dated May
8,
2007. (10)
|
32.2
|
Certification
of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as
adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 dated May
8,
2007. (10)
|
(1)
|
Incorporated
by reference to exhibit number 4.1 to the registrant's Registration
Statement on Form S-1, as amended (File No. 33-35333), which
became effective July 19, 1990.
|
(2)
|
Incorporated
by reference to exhibit number 1 to the registrant's Registration
Statement on Form 8-A, which was filed on February 18,
1999.
|
(3)
|
Incorporated
by reference to identically numbered exhibits to the registrant's
Annual
Report on Form 10-K for the fiscal year ended January 1,
1999.
|
(4)
|
Incorporated
by reference to exhibit number 4.1 to the registrant’s Registration
Statement on Form S-3 filed on April 19, 2002.
|
(5)
|
Incorporated
by reference to exhibit number 3.5 to the registrant’s Quarterly Report on
Form 10-Q for the quarter ended July 4, 2003.
|
(6)
|
Incorporated
by reference to exhibit number 3.6 to the registrant’s Quarterly Report on
Form 10-Q for the quarter ended April 2, 2004.
|
(7)
|
Incorporated
by reference to exhibit number 4.3 to the registrant’s Annual Report on
Form 10-K for the year ended December 31, 2004.
|
(8)
|
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.
|
(9)
|
Incorporated
by reference to exhibit number 10.19 to the Company’s Annual Report on
Form 10-K for the year ended December 29, 2006.
|
(10)
|
Filed
herewith.
|
Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant
has
duly caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.
|
TRIMBLE
NAVIGATION LIMITED
|
|
|
(Registrant)
|
|
|
|
|
|
|
|
|
|
|
By:
|
/s/
Rajat Bahri
|
|
|
Rajat
Bahri
|
|
|
Chief
Financial Officer
|
|
|
(Authorized
Officer and Principal Financial Officer)
|
|
DATE:
May
8, 2007
EXHIBIT
INDEX
3.1
|
Restated
Articles of Incorporation of the Company filed June 25, 1986.
(3)
|
3.2
|
Certificate
of Amendment of Articles of Incorporation of the Company filed October
6,
1988. (3)
|
3.3
|
Certificate
of Amendment of Articles of Incorporation of the Company filed July
18,
1990. (3)
|
3.4
|
Certificate
of Determination of Rights, Preferences and Privileges of Series
A
Preferred Participating Stock of the Company filed February 19, 1999.
(3)
|
3.5
|
Certificate
of Amendment of Articles of Incorporation of the Company filed May
29,
2003. (5)
|
3.6
|
Certificate
of Amendment of Articles of Incorporation of the Company filed March
4,
2004. (6)
|
|
Certificate
of Amendment of Articles of Incorporation of the Company filed February
21, 2007. (10)
|
3.8
|
Bylaws
of the Company, amended and restated through July 20, 2006.
(8)
|
4.1
|
Specimen
copy of certificate for shares of Common Stock of the Company.
(1)
|
4.2
|
Preferred
Shares Rights Agreement dated as of February 18, 1999.
(2)
|
4.3
|
Agreement
of Substitution and Amendment of Preferred Shares Rights Agreement
dated
September 10, 2004. (7)
|
4.4
|
Form
of Warrant dated April 12, 2002. (4)
|
|
Amended
and Restated Credit Agreement dated February 16, 2007.
(10)
|
|
Trimble
Navigation 1988 Employee Stock Purchase Plan, as amended January
17, 2007.
(10)
|
10.3
|
@Road,
Inc. 2000 Stock Option Plan. (9)
|
|
Certification
of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002 dated May 8, 2007. (9)
|
|
Certification
of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002 dated May 8, 2007. (9)
|
|
Certification
of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as
adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 dated May
8,
2007. (10)
|
|
Certification
of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as
adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 dated May
8,
2007. (10)
|
(1)
|
Incorporated
by reference to exhibit number 4.1 to the registrant's Registration
Statement on Form S-1, as amended (File No. 33-35333), which
became effective July 19, 1990.
|
(2)
|
Incorporated
by reference to exhibit number 1 to the registrant's Registration
Statement on Form 8-A, which was filed on February 18,
1999.
|
(3)
|
Incorporated
by reference to identically numbered exhibits to the registrant's
Annual
Report on Form 10-K for the fiscal year ended January 1,
1999.
|
(4)
|
Incorporated
by reference to exhibit number 4.1 to the registrant’s Registration
Statement on Form S-3 filed on April 19, 2002.
|
(5)
|
Incorporated
by reference to exhibit number 3.5 to the registrant’s Quarterly Report on
Form 10-Q for the quarter ended July 4, 2003.
|
(6)
|
Incorporated
by reference to exhibit number 3.6 to the registrant’s Quarterly Report on
Form 10-Q for the quarter ended April 2, 2004.
|
(7)
|
Incorporated
by reference to exhibit number 4.3 to the registrant’s Annual Report on
Form 10-K for the year ended December 31, 2004.
|
(8)
|
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.
|
(9)
|
Incorporated
by reference to exhibit number 10.19 to the Company’s Annual Report on
Form 10-K for the year ended December 29, 2006.
|
(10)
|
Filed
herewith.
|
38