form10q.htm
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
10-Q
(Mark
One)
S QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 27, 2008
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
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94-2802192
|
(State
or other jurisdiction of incorporation or organization)
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(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 S No £
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company. See
definition of “accelerated filer”, “large accelerated filer” and “smaller
reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
Large
Accelerated Filer
|
S
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|
Accelerated
Filer
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£
|
Non-accelerated
Filer
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£
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(Do
not check if a smaller reporting company)
|
Smaller
Reporting Company
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£
|
Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act).
Yes £ No S
As of
July 31, 2008, there were 120,905,512 shares of Common Stock (no par value)
outstanding.
TRIMBLE
NAVIGATION LIMITED
FORM
10-Q for the Quarter Ended June 27, 2008
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PART
I.
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Financial
Information
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Page
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ITEM
1.
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3
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4
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5
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6
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ITEM
2.
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21
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ITEM
3.
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30
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ITEM
4.
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31
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PART
II.
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Other
Information
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ITEM
1.
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31
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ITEM
1A.
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31
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ITEM
2.
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31
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ITEM
4.
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32
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ITEM
6.
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33
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34
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PART I –
FINANCIAL INFORMATION
ITEM 1.
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
TRIMBLE
NAVIGATION LIMITED
CONDENSED
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
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June 27,
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December 28,
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2008
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2007
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(In
thousands)
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ASSETS
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Current
assets:
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Cash
and cash equivalents
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$ |
79,823 |
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$ |
103,202 |
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Accounts
receivable, net
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267,200 |
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239,884 |
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Other
receivables
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9,985 |
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10,201 |
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Inventories,
net
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153,369 |
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143,018 |
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Deferred
income taxes
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42,257 |
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44,333 |
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Other
current assets
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17,004 |
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15,661 |
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Total
current assets
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569,638 |
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556,299 |
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Property
and equipment, net
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51,615 |
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51,444 |
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Goodwill
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713,010 |
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675,850 |
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Other
purchased intangible assets, net
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186,971 |
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197,777 |
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Other
non-current assets
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62,598 |
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57,989 |
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Total
assets
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$ |
1,583,832 |
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$ |
1,539,359 |
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LIABILITIES
AND SHAREHOLDERS' EQUITY
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Current
liabilities:
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Current
portion of long-term debt
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$ |
137 |
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$ |
126 |
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Accounts
payable
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73,581 |
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67,589 |
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Accrued
compensation and benefits
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56,149 |
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55,133 |
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Deferred
revenue
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59,077 |
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49,416 |
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Accrued
warranty expense
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11,942 |
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10,806 |
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Income
taxes payable
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14,060 |
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14,802 |
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Other
current liabilities
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36,333 |
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51,980 |
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Total
current liabilities
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251,279 |
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249,852 |
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Non-current
portion of long-term debt
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432 |
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60,564 |
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Non-current
deferred revenue
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10,719 |
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15,872 |
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Deferred
income taxes
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59,976 |
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47,917 |
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Other
non-current liabilities
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52,503 |
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56,128 |
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Total
liabilities
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374,909 |
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430,333 |
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Commitments
and contingencies
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Shareholders'
equity:
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Preferred
stock no par value; 3,000 shares authorized; none
outstanding
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-- |
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-- |
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Common
stock, no par value; 180,000 shares authorized; 121,652 and 121,596 shares
issued and outstanding at June 27, 2008 and December 28, 2007,
respectively
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683,274 |
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660,749 |
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Retained
earnings
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447,806 |
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388,557 |
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Accumulated
other comprehensive income
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77,843 |
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59,720 |
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Total
shareholders' equity
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1,208,923 |
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1,109,026 |
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Total
liabilities and shareholders' equity
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$ |
1,583,832 |
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$ |
1,539,359 |
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See
accompanying Notes to the Condensed Consolidated Financial
Statements.
TRIMBLE
NAVIGATION LIMITED
(UNAUDITED)
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Three
Months Ended
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Six
Months Ended
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June
27,
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June
29,
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June
27,
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June
29,
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2008
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2007
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2008
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2007
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(In
thousands, except per share data)
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Revenue (1)
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$ |
377,767 |
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$ |
327,732 |
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$ |
733,063 |
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$ |
613,464 |
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Cost
of sales (1)
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190,668 |
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160,563 |
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371,588 |
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303,165 |
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Gross
margin
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187,099 |
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167,169 |
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361,475 |
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310,299 |
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Operating
expenses
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Research
and development
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39,405 |
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33,867 |
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76,750 |
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65,030 |
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Sales
and marketing
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51,904 |
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47,546 |
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103,062 |
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89,693 |
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General
and administrative
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25,289 |
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24,278 |
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47,979 |
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45,920 |
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Restructuring
charges
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2,414 |
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333 |
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2,414 |
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3,025 |
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Amortization
of purchased intangible assets
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5,163 |
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5,195 |
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10,306 |
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9,301 |
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In-process
research and development
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-- |
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-- |
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-- |
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2,112 |
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Total
operating expenses
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124,175 |
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111,219 |
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240,511 |
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215,081 |
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Operating
income
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62,924 |
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55,950 |
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120,964 |
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95,218 |
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Non-operating
income, net
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Interest
income
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508 |
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593 |
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965 |
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1,837 |
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Interest
expense
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(413 |
) |
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(2,459 |
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(1,175 |
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(3,860 |
) |
Foreign
currency transaction gain (loss), net
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1,253 |
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(430 |
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2,221 |
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(73 |
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Income
from joint ventures
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2,618 |
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2,080 |
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4,633 |
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4,502 |
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Other
income (expense ), net
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153 |
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|
487 |
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(754 |
) |
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722 |
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Total
non-operating income, net
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4,119 |
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|
271 |
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5,890 |
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3,128 |
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Income
before taxes
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67,043 |
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56,221 |
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126,854 |
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98,346 |
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Income
tax provision
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18,444 |
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21,195 |
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38,188 |
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34,637 |
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Net
income
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$ |
48,599 |
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$ |
35,026 |
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$ |
88,666 |
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$ |
63,709 |
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Basic
earnings per share
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$ |
0.40 |
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$ |
0.29 |
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$ |
0.73 |
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$ |
0.54 |
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Shares
used in calculating basic earnings per share
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121,523 |
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119,621 |
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121,495 |
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117,535 |
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Diluted
earnings per share
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$ |
0.39 |
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$ |
0.28 |
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$ |
0.71 |
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$ |
0.52 |
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Shares
used in calculating diluted earnings per share
|
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|
125,712 |
|
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|
124,584 |
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|
125,435 |
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|
122,539 |
|
(1) Sales
to related parties, Caterpillar Trimble Control Technologies Joint Venture
(CTCT) and Nikon-Trimble Joint Venture (Nikon-Trimble), were $8.7 million and
$6.3 million for the
three months ended June 27, 2008 and June 29, 2007, respectively, with
associated cost of sales of $7.2 million and $4.2 million,
respectively. Sales to CTCT and Nikon-Trimble were $15.2 million and
$11.4 million for the six months ended June 27, 2008 and June 29, 2007,
respectively, with associated cost of sales of $11.8 million and $7.7 million,
respectively. In addition, cost of sales associated with CTCT net
inventory purchases was $7.4 million and $7.5 million for the three months ended
June 27, 2008 and June 29, 2007, respectively, and $13.5 million and $14.2
million for the six months ended June 27, 2008 and June 29, 2007,
respectively. See Note 5 regarding joint ventures for further
information about related party transactions.
See
accompanying Notes to the Condensed Consolidated Financial
Statements.
TRIMBLE
NAVIGATION LIMITED
CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
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Six
Months Ended
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|
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June 27,
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June 29,
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2008
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2007
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(In
thousands)
|
|
|
|
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|
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Cash
flow from operating activities:
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Net
income
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$
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88,666
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$
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63,709
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Adjustments to
reconcile net income to net cash provided
by operating activities:
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Depreciation
expense
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9,274
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8,426
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Amortization
expense
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21,811
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18,394
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Provision
for doubtful accounts
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|
119
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358
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Amortization
of debt issuance cost
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|
113
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|
105
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Deferred
income taxes
|
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|
(2,791
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)
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|
(8,636
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)
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Non-cash
restructuring charges
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|
--
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|
1,725
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Stock-based
compensation
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|
7,777
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|
7,145
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In-process
research and development
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|
--
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|
2,112
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Equity
gain from joint venture
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|
(4,633
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)
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|
(4,503
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)
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Excess
tax benefit for stock-based compensation
|
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|
(5,249
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) |
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(5,929
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)
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Provision
for excess and obsolete inventories
|
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|
3,283
|
|
|
|
1,941
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Other
non-cash items
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|
1
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|
140
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Add
decrease (increase) in assets:
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Accounts
receivable
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(26,832
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) |
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(41,832
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)
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Other
receivables
|
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|
481
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|
|
|
2,968
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Inventories
|
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(8,997
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) |
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(11,760
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)
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Other
current and non-current assets
|
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(464
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) |
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|
9,414
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|
Add
increase (decrease) in liabilities:
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Accounts
payable
|
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|
4,637
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|
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|
(6,298
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)
|
Accrued
compensation and benefits
|
|
|
(303
|
) |
|
|
80
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|
Accrued
liabilities
|
|
|
(597
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) |
|
|
3,136
|
|
Deferred
revenue
|
|
|
3,974
|
|
|
|
12,132
|
|
Income
taxes payable
|
|
|
10,093
|
|
|
|
33,630
|
|
Net
cash provided by operating activities
|
|
|
100,363
|
|
|
|
86,457
|
|
|
|
|
|
|
|
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|
|
Cash
flow from investing activities:
|
|
|
|
|
|
|
|
|
Acquisitions
of businesses, net of cash acquired
|
|
|
(45,082
|
) |
|
|
(277,743
|
) |
Acquisitions
of property and equipment
|
|
|
(7,932
|
) |
|
|
(6,270)
|
|
Other
|
|
|
137
|
|
|
|
959
|
|
Net
cash used in investing activities
|
|
|
(52,877
|
)
|
|
|
(283,054
|
)
|
|
|
|
|
|
|
|
|
|
Cash
flow from financing activities:
|
|
|
|
|
|
|
|
|
Issuances
of common stock
|
|
|
15,425
|
|
|
|
15,761
|
|
Excess
tax benefit for stock-based compensation
|
|
|
5,249
|
|
|
|
5,929
|
|
Repurchase
and retirement of common stock
|
|
|
(36,293
|
) |
|
|
--
|
|
Proceeds
from long-term debt and revolving credit lines
|
|
|
--
|
|
|
|
250,000
|
|
Payments
on long-term debt and revolving credit lines
|
|
|
(60,314)
|
|
|
|
(127,517
|
)
|
Net
cash provided by (used in) financing activities
|
|
|
(75,933
|
)
|
|
|
144,173
|
|
|
|
|
|
|
|
|
|
|
Effect
of exchange rate changes on cash and cash equivalents
|
|
|
5,068
|
|
|
|
(3,437
|
) |
|
|
|
|
|
|
|
|
|
Net
decrease in cash and cash equivalents
|
|
|
(23,379
|
) |
|
|
(55,861
|
) |
Cash
and cash equivalents, beginning of period
|
|
|
103,202
|
|
|
|
129,621
|
|
Cash
and cash equivalents, end of period
|
|
$
|
79,823
|
|
|
$
|
73,760
|
|
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 (the Company), incorporated in California in 1981, provides
positioning solutions to commercial and government users in a large number of
markets. These markets include surveying, agriculture, construction,
asset management, mapping and mobile resource management.
The
Company has a 52-53 week fiscal year, ending on the Friday nearest to December
31, which for fiscal 2007 was December 28. The second quarters of fiscal 2008
and fiscal 2007 ended on June 27, 2008 and June 29, 2007,
respectively. Fiscal 2008 is a 53-week year and fiscal 2007 is a
52-week year. Unless otherwise stated, all dates refer to the
Company’s fiscal year and fiscal periods.
The
Condensed Consolidated Financial Statements include the results of the Company
and its subsidiaries. Inter-company accounts and transactions have
been eliminated. The Condensed Consolidated Balance Sheet is derived
from the December 28, 2007 audited Consolidated Financial Statements included in
the Annual Report on Form 10-K of Trimble Navigation Limited for fiscal year
2007. Certain amounts from prior periods have been reclassified to conform to
the current period presentation.
The
accompanying financial data as of June 27, 2008 and for the three and six months
ended June 27, 2008 and June 29, 2007 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 the Company’s 2007 Annual Report on Form 10-K.
In the
opinion of management, all adjustments (which include only normal recurring
adjustments) necessary to present a fair statement of financial position as of
June 27, 2008, results of operations for the three and six months ended June 27,
2008 and June 29, 2007 and cash flows for the six months ended June 27, 2008 and
June 29, 2007, as applicable, have been made. The results of
operations for the three and six months ended June 27, 2008 are not necessarily
indicative of the operating results for the full fiscal year or any future
periods. Individual segment revenue 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, the Company’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 have 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 the Company’s significant accounting polices during the
six months ended June 27, 2008 from those disclosed in the Company’s 2007 Form
10-K.
Recent
Accounting Pronouncements
Updates
to recent accounting standards as disclosed in the Company’s Annual Report on
Form 10-K for the fiscal year ended December 28, 2007 are as
follows:
In
September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements,” which
clarifies the definition of fair value, establishes a framework for measuring
fair value within GAAP and expands the disclosures regarding fair value
measurements. In February 2008, the FASB issued FASB Staff Position
No. FAS 157-2 deferring the effective date of SFAS No. 157 to fiscal years
beginning after November 15, 2008, and interim periods within those fiscal years
for nonfinancial assets and nonfinancial liabilities that are recognized or
disclosed at fair value in the financial statements on a nonrecurring
basis. SFAS No. 157 became effective for the Company beginning in its
first quarter of fiscal 2008. The adoption of SFAS No.
157 did not have a material impact on the Company’s financial condition, results
of operations or cash flows.
In
February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for
Financial Assets and Financial Liabilities, including an amendment of FASB
Statement No. 115.” SFAS No. 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 No.
159 also establishes additional disclosure requirements. SFAS No. 159 became
effective for the Company at the beginning of its first quarter of fiscal
2008. The Company did not elect the fair value option for any of its
financial assets or liabilities. However, the Company may decide to
elect the fair value option on new items in the future. The adoption
did not have a material impact on the Company’s financial position, results of
operations or cash flows.
In March
2008, the FASB issued SFAS No. 161, “Disclosures About Derivative Instruments
and Hedging Activities - An Amendment of FASB Statement No. 133” which requires
enhanced disclosures about (a) how and why an entity uses derivative
instruments, (b) how derivative instruments and related hedged items are
accounted for under SFAS 133 and its related interpretations, and (c) how
derivative instruments and related hedged items affect an entity’s financial
position, financial performance, and cash flows. SFAS No. 161 is effective for
financial statements issued for fiscal years and interim periods beginning after
November 15, 2008, with early application encouraged. The Company
does not expect the adoption of SFAS No. 161 will have a material impact on the
Company’s financial position, results of operations or cash flows.
NOTE 3.
BUSINESS COMBINATIONS
@Road,
Inc.
On
December 10, 2006, the Company and @Road, Inc. (@Road) entered into a
definitive merger agreement. The acquisition became effective on
February 16, 2007. @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
of @Road expands the Company’s investment and reinforces the existing growth
strategy for its Mobile Solutions segment. @Road’s results of
operations since February 17, 2007 have been included in the Company’s Condensed
Consolidated Statements of Income within the Mobile Solutions business
segment.
Purchase
Price
Under the
terms of the agreement, the Company acquired all of the outstanding shares of
@Road common stock for $7.50 per share. The Company elected to issue
$2.50 per share of the consideration in the form of the Company’s common stock
(Common Stock) to be based upon the five-day average closing price of the
Company’s shares six trading days prior to the closing of the transaction and
the remaining $5.00 per share consideration was paid in cash. 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 the
Company.
Concurrent
with the merger, the Company amended 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.
The
Company paid approximately $327.4 million in cash from debt and existing cash,
and issued approximately 5.9 million shares of the Company’s common stock
based on an exchange ratio of 0.0893 shares of the Company’s common stock
for each outstanding share of @Road common stock as of February 16, 2007. The
common stock issued had a fair value of $161.9 million and was valued using
the average closing price of the Company’s 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 the Company’s shares to be issued in accordance with
the merger agreement was settled. The total purchase price is estimated as
follows (in thousands):
Cash
consideration
|
|
$ |
327,370 |
|
Common
stock consideration
|
|
|
161,947 |
|
Merger
costs *
|
|
|
5,712 |
|
Total
Purchase price
|
|
$ |
495,029 |
|
* Merger
costs consist of legal, advisory, accounting and administrative
fees.
Purchase
Price Allocation
In
accordance with SFAS 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, identifiable
intangible assets and in-process research and development was recorded as
goodwill. The fair values assigned to tangible and identifiable intangible
assets acquired and liabilities assumed are based on estimates and assumptions
provided by management.
The total
purchase price has been allocated as follows (in thousands):
Value
to be allocated to assets, based upon merger consideration
|
|
$ |
495,029 |
|
Less:
value of @Road’s assets acquired:
|
|
|
|
|
Net
tangible assets acquired
|
|
|
138,132 |
|
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 |
|
Deferred
tax liability
|
|
|
(56,855 |
) |
|
|
|
|
|
Goodwill
|
|
$ |
264,552 |
|
Net
Tangible Assets
|
|
As
of
|
|
|
|
February 16,
|
|
(in
thousands)
|
|
2007
|
|
Cash
and cash equivalents
|
|
$ |
74,729 |
|
Accounts
receivable, net
|
|
|
14,255 |
|
Other
receivables
|
|
|
8,774 |
|
Inventories,
net
|
|
|
15,272 |
|
Other
current assets
|
|
|
12,627 |
|
Property
and equipment, net
|
|
|
5,854 |
|
Deferred
income taxes
|
|
|
42,147 |
|
Other
non-current assets
|
|
|
7,935 |
|
|
|
|
|
|
Total
assets acquired
|
|
$ |
181,593 |
|
|
|
|
|
|
Accounts
payable
|
|
|
19,285 |
|
Deferred
revenue
|
|
|
7,365 |
|
Other
current liabilities
|
|
|
16,811 |
|
|
|
|
|
|
Total
liabilities assumed
|
|
$ |
43,461 |
|
|
|
|
|
|
Total
net assets acquired
|
|
$ |
138,132 |
|
The
Company 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 – the Company decreased @Road's historical value of fixed assets by
$2.1 million to adjust fixed assets to an amount equivalent to fair
value.
Deferred
revenue and cost of sales – the Company reduced @Road's historical value of
deferred revenue by $39.6 million 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, licensed product, extended warranty and maintenance. The
Company 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
receivables and non-current assets – Other receivables and non-current 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 the Company’s Condensed Consolidated Statements of
Income.
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. The Company expects
to amortize the developed and core technology over a weighted average estimated
life of seven years.
Customer
relationships represent the value placed on @Road’s distribution channels and
end users. The Company expects to amortize the fair value of these assets over a
weighted average estimated life of seven years.
Trademarks
and trade names represent the value placed on the @Road brand and recognition in
the mobile resource management market. The Company expects to amortize the fair
value of these assets over a weighted average estimated life of eight
years.
In-process Research and
Development
The
Company 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
The
excess purchase price over the net tangible, identifiable intangible assets and
in-process research and development was recorded as goodwill. The goodwill was
attributed to the premium paid for the opportunity to expand and better serve
the global mobile resource management market and achieve greater long-term
growth opportunities than either company had operating alone. The Company
believes these opportunities could include accelerating the rate at which
products are brought to market and increasing the diversity and global reach of
those products. In addition, the Company expects that the combined companies may
be able to obtain greater operating leverage by reducing costs in areas of
redundancy. Of the total $264.6 million assigned to goodwill, approximately $4.4
million is expected to be deductible for tax purposes.
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 the Company's
operations have been recorded as expenses in the Company's Condensed
Consolidated Statements of Income in the period that the costs are
incurred.
Deferred Tax
Assets/Liabilities
The
Company 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, the Company assumed all @Road unvested
stock options that had exercise prices of $7.50 or less. The Company
issued approximately 795,000 stock options based on an exchange ratio of
0.268 shares of the Company’s 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 the Company’s fiscal 2007 Form 10-K.
Pro-Forma
Results
The
following table presents pro-forma results of operations of the Company and
@Road, as if the companies had been combined as of December 31, 2005. The
unaudited pro-forma results of operations are not necessarily indicative of
results that would have occurred had the acquisition taken place on
December 31, 2005 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.
The
Company excluded the effect of non-recurring items as the impact is short-term
in nature. The pro-forma information is as follows:
|
|
Six
Months Ended
|
|
|
|
June 29,
|
|
|
|
2007
(a)
|
|
(in
thousands, except per share data)
|
|
|
|
Pro-forma
revenue
|
|
$ |
627,582 |
|
Pro-forma
net income
|
|
|
60,964 |
|
Pro-forma
basic net income per share
|
|
$ |
0.51 |
|
Pro-forma
diluted net income per share
|
|
$ |
0.51 |
|
(a)
|
The
pro-forma results of operations represent the Company’s results for the
six months ended June 29, 2007 together with @Road’s historical results
through the acquisition date of February 16, 2007 as though they had been
combined as of December 31, 2005. Pro-forma adjustments have
been made based on the fair values of assets acquired and liabilities
assumed as of February 16, 2007. Pro-forma revenue includes a
$0.1
million decrease due to the timing of recognizing deferred revenue
write-downs and customer contracts where the product was delivered prior
to the acquisition date. Pro-forma net income includes a $0.3 million
increase due to the timing of recognizing revenue write-downs and related
deferred cost of sales write-downs, amortization of intangible assets
related to the acquisition of $2.2 million, and interest expense for
debt used to purchase @Road of $1.4 million. The pro-forma amounts
provided herein include adjustments to previously filed pro-forma numbers
in the Company’s 10-Q’s.
|
NOTE 4.
SHAREHOLDERS’ EQUITY
Stock
Repurchase Activities
In
January 2008, the Company’s Board authorized a stock repurchase program (“2008
Stock Repurchase Program”), authorizing the Company to repurchase up to $250
million of Trimble’s common stock under this program. During the six
months ended June 27, 2008, the Company repurchased approximately 1,255,000
shares of common stock in open market purchases at an average price of $28.90
per share. The total purchase price of $36.3 million was
reflected as a decrease to common stock based on the average stated value per
share with the remainder to retained earnings. Common stock
repurchases under the program were recorded based upon the settlement date of
the applicable trade for accounting purposes. All common shares
repurchased under this program have been retired. As of June 27, 2008, the 2008
Stock Repurchase Program had remaining authorized funds of $213.7
million. The timing and actual number of future shares repurchased
will depend on a variety of factors including price, regulatory requirements,
capital availability, and other market conditions. The program does
not require the purchase of any minimum number of shares and may be suspended or
discontinued at any time without public notice.
Stock-Based
Compensation
The
Company accounts for its employee stock options and rights to purchase shares
under its stock participation plans at fair value, in accordance with SFAS
123(R), “Share-Based Payment.” SFAS 123(R) requires stock-based compensation to
be estimated using the fair value on the date of grant using an option-pricing
model. The value of the portion of the award that is expected to vest is
recognized as expense over the related employees’ requisite service periods in
the Company’s Condensed Consolidated Statements of Income.
The
following table summarizes stock-based compensation expense, net of tax, related
to employee stock-based compensation included in the Consolidated Condensed
Statements of Income in accordance with SFAS 123(R) for the three and six months
ended June 27, 2008 and June 29, 2007.
|
|
Three
Months Ended
|
|
|
Six
Months Ended
|
|
|
|
June 27,
|
|
|
June 29,
|
|
|
June 27,
|
|
|
June 29,
|
|
|
|
2008
|
|
|
2007
|
|
|
2008
|
|
|
2007
|
|
(in
thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of
sales
|
|
$ |
487 |
|
|
$ |
429 |
|
|
$ |
980 |
|
|
$ |
771 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research
and development
|
|
|
916 |
|
|
|
1,022 |
|
|
|
1,833 |
|
|
|
1,751 |
|
Sales and
marketing
|
|
|
931 |
|
|
|
974 |
|
|
|
1,961 |
|
|
|
1,741 |
|
General and
administrative
|
|
|
1,461 |
|
|
|
1,367 |
|
|
|
3,003 |
|
|
|
2,882 |
|
Total operating
expenses
|
|
|
3,308 |
|
|
|
3,363 |
|
|
|
6,797 |
|
|
|
6,374 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total stock-based compensation
expense
|
|
|
3,795 |
|
|
|
3,792 |
|
|
|
7,777 |
|
|
|
7,145 |
|
Tax benefit
(1)
|
|
|
(458 |
) |
|
|
(520 |
) |
|
|
(552 |
) |
|
|
(868 |
) |
Total stock-based compensation
expense, net of tax
|
|
$ |
3,337 |
|
|
$ |
3,272 |
|
|
$ |
7,225 |
|
|
$ |
6,277 |
|
(1) Tax benefit related to U.S. non-qualified options and restricted
stock units, applying a Federal statutory and State (Federal effected) tax rate
for the respective periods.
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. The Black-Scholes model was used to value those options granted
prior to the fourth quarter of fiscal 2005. 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 the three and
six months ended June 27, 2008 and June 29, 2007, the following assumptions were
used:
|
|
Three
Months Ended
|
|
|
Six
Months Ended
|
|
|
|
June 27,
2008
|
|
|
June 29,
2007
|
|
|
June
27,
2008
|
|
|
June 29,
2007
|
|
Expected
dividend yield
|
|
--
|
|
|
--
|
|
|
--
|
|
|
--
|
|
Expected
stock price volatility
|
|
39.8%
|
|
|
36.9%
|
|
|
39.7%
|
|
|
37.2%
|
|
Risk
free interest rate
|
|
2.7%
|
|
|
4.5%
|
|
|
2.7%
|
|
|
4.5%
|
|
Expected
life of option
|
|
4.1
years
|
|
|
3.9
years
|
|
|
4.1
years
|
|
|
3.9
years
|
|
Expected Dividend Yield – The
dividend yield assumption is based on the Company’s history and expectation of
dividend payouts.
Expected Stock Price
Volatility – The Company’s computation of expected volatility is based on
a combination of implied volatilities from traded options on the Company’s stock
and historical volatility, 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
options.
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.
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 the Company 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 the
Company 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, the Company’s share of profits and losses are included in Income from
joint ventures in the Non-operating income, net section of the Condensed
Consolidated Statements of Income. During the three and six months
ended June 27, 2008, the Company recorded $2.9 million and $4.7 million,
respectively, as its proportionate share of CTCT net income. During
the comparable period of 2007 the Company recorded $2.3 million and $4.5 million,
respectively, as its proportionate share of CTCT net income. During
the fiscal quarters ended June 27, 2008 and June 29, 2007, there were no
dividends received from CTCT. The carrying amount of the investment
in CTCT was $14.3 million at June 27, 2008 and $9.6 million at December 28,
2007, and is included in Other non-current assets on the Condensed Consolidated
Balance Sheets.
The
Company 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 the Company’s overhead costs to CTCT. CTCT then resells
products at cost plus a mark-up in consideration for CTCT’s research and
development efforts to both Caterpillar and to the Company for sales through
their respective distribution channels. Generally, the Company sells products
through its after-market dealer channel, and Caterpillar sells products for
factory and dealer installation. CTCT does not have net inventory on
its balance sheet in that the resale of products to Caterpillar and the Company
occur simultaneously when the products are purchased from the
Company. During the three and six months ended June 27, 2008, the
Company recorded $3.5 million and $6.2 million of
revenue, respectively, and $3.1 million and $5.4 million of
cost of sales, respectively, for the manufacturing of products sold by the
Company to CTCT and then sold through the Caterpillar distribution
channel. During the comparable three and six months ended June 29,
2007, the Company recorded $2.7 million and $4.9 million of
revenue, respectively, and $2.4 million and $4.4 million of
cost of sales, respectively. In addition, during the three and six
months ended June 27, 2008, the Company recorded $7.4 million and $13.5 million
in net cost of sales for the manufacturing of products sold by the Company to
CTCT and then repurchased by the Company upon sale through the Company’s
distribution channel. The comparable net cost of sales recorded by
the Company for the three and six months ended June 29, 2007 were $7.5 million
and $14.2 million, respectively.
In
addition, the Company received reimbursement of employee-related costs from CTCT
for company employees dedicated to CTCT or performance of work for CTCT totaling
$3.5 million and $7.5 million for the three and six months ended June 27, 2008,
respectively, and totaling $3.0 million and $6.3 million for the three and six
months ended June 29, 2007, respectively. The reimbursements were offset against
operating expenses.
At June
27, 2008 and December 28, 2007, the Company 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 gross basis in the Condensed Consolidated Balance
Sheets. At June 27, 2008 and December 28, 2007, the receivables from
CTCT were $5.9 million
and $5.6 million,
respectively, and are included within Accounts receivable, net, on the Condensed
Consolidated Balance Sheets. As of the same dates, the payables due
to CTCT were $5.9 million and $5.2 million, respectively, and
are included within Accounts payable 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
the Company and Nikon Corporation. The joint venture began operations
in July 2003 and is 50% owned by the Company 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, the Company’s share of profits and losses are included in
Income from joint ventures in the Non-operating income, net section of the
Condensed Consolidated Statements of Income. During the three and six
months ended June 27, 2008, the Company recorded a loss of $0.3 million and a loss of
$0.1 million,
respectively, and during the three and six months ended June 29, 2007, the
Company recorded a loss of $0.3 million and a profit of $4,000, respectively, as
its proportionate share of Nikon-Trimble net income. During the six
months ended June 27, 2008 and June 29, 2007, dividends received from
Nikon-Trimble, amounted to $0.2 million and $0.6 million, and were recorded
against Other non-current assets on the Condensed Consolidated Balance
Sheets. The carrying amount of the investment in Nikon-Trimble was
$13.8 million at June 27, 2008 and $13.4 million at December 28, 2007, and is
included in Other non-current assets on the Condensed Consolidated Balance
Sheets.
Nikon-Trimble
is the distributor in Japan for Nikon and the Company’s products. The
Company is the exclusive distributor outside of Japan for Nikon branded survey
products. For products sold by the Company to Nikon-Trimble, revenue is
recognized by the Company on a sell-through basis from Nikon-Trimble to the end
customer.
The terms
and conditions of the sales of products from the Company to Nikon-Trimble are
comparable with those of the standard distribution agreements which the Company
maintains with its dealer channel and margins earned are similar to those from
third party dealers. Similarly, the purchases of product by the Company 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 the Company. During the three and six months
ended June 27, 2008, the Company recorded $5.1 million and $9.0 million of
revenue and $4.1 million and $6.4 million of cost of sales for the manufacturing
of products sold by the Company to Nikon-Trimble. During the three and six
months ended June 29, 2007, the Company recorded $3.6 million and $6.5 million
of revenue and $1.8 million and $3.3 million of
cost of sales for the manufacturing of products sold by the Company to
Nikon-Trimble. The Company also purchases product from Nikon-Trimble
for future sales to third party customers. Purchases of inventory from
Nikon-Trimble were $4.1 million and $7.0 million during the three and six months
ended June 27, 2008; and $6.0 million and $12.9 million during the three and six
months ended June 29, 2007, respectively.
At June
27, 2008 and December 28, 2007, the Company 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 gross basis in the
Condensed Consolidated Balance Sheets. At June 27, 2008 and December 28, 2007,
the amounts due from Nikon-Trimble were $3.5 million and $3.3 million, respectively, and
are included within Accounts receivable, net on the Condensed Consolidated
Balance Sheets. As of the same dates, the amounts due to
Nikon-Trimble were $5.6 million and $5.7 million, respectively, and are included
within Accounts payable on the Condensed Consolidated Balance
Sheets.
NOTE 6.
GOODWILL AND INTANGIBLE ASSETS
Intangible
Assets
Intangible
Assets consisted of the following:
|
|
June 27,
2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross
|
|
|
|
|
|
|
|
|
|
Carrying
|
|
|
Accumulated
|
|
|
Net
Carrying
|
|
(in
thousands)
|
|
Amount
|
|
|
Amortization
|
|
|
Amount
|
|
Developed
product technology
|
|
$ |
165,246 |
|
|
$ |
(72,074 |
) |
|
$ |
93,172 |
|
Trade
names and trademarks
|
|
|
19,486 |
|
|
|
(12,839 |
) |
|
|
6,647 |
|
Customer
relationships and other intellectual properties
|
|
|
129,358 |
|
|
|
(42,206 |
) |
|
|
87,152 |
|
|
|
$ |
314,090 |
|
|
$ |
(127,119 |
) |
|
$ |
186,971 |
|
|
|
December 28,
2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross
|
|
|
|
|
|
|
|
|
|
Carrying
|
|
|
Accumulated
|
|
|
Net
Carrying
|
|
(in
thousands)
|
|
Amount
|
|
|
Amortization
|
|
|
Amount
|
|
Developed
product technology
|
|
$ |
157,394 |
|
|
$ |
(58,273 |
) |
|
$ |
99,121 |
|
Trade
names and trademarks
|
|
|
19,192 |
|
|
|
(12,490 |
) |
|
|
6,702 |
|
Customer
relationships and other intellectual properties
|
|
|
124,281 |
|
|
|
(32,327 |
) |
|
|
91,954 |
|
|
|
$ |
300,867 |
|
|
$ |
(103,090 |
) |
|
$ |
197,777 |
|
The
estimated future amortization expense of intangible assets as of June 27, 2008,
is as follows:
|
|
Amortization
Expense
|
|
(in
thousands)
|
|
|
|
2008
(Remaining)
|
|
$ |
21,704 |
|
2009
|
|
|
40,134 |
|
2010
|
|
|
37,887 |
|
2011
|
|
|
33,033 |
|
2012
|
|
|
25,010 |
|
Thereafter
|
|
|
29,203 |
|
Total
|
|
$ |
186,971 |
|
Goodwill
The
changes in the carrying amount of goodwill for the six months ended June 27,
2008, are as follows:
|
|
Engineering
and Construction
|
|
|
Field
Solutions
|
|
|
Mobile
Solutions
|
|
|
Advanced
Devices
|
|
|
Total
|
|
(in
thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
as of December 28, 2007
|
|
$ |
317,886 |
|
|
$ |
5,224 |
|
|
$ |
337,661 |
|
|
$ |
15,079 |
|
|
$ |
675,850 |
|
Additions
due to acquisitions
|
|
|
14,963 |
|
|
|
-- |
|
|
|
-- |
|
|
|
-- |
|
|
|
14,963 |
|
Purchase
price adjustments
|
|
|
5,578 |
|
|
|
2,046 |
|
|
|
1,218 |
|
|
|
-- |
|
|
|
8,842 |
|
Foreign
currency translation adjustments
|
|
|
13,612 |
|
|
|
-- |
|
|
|
(77 |
) |
|
|
(180 |
) |
|
|
13,355 |
|
Balance
as of June 27, 2008
|
|
$ |
352,039 |
|
|
$ |
7,270 |
|
|
$ |
338,802 |
|
|
$ |
14,899 |
|
|
$ |
713,010 |
|
The
purchase price adjustments relate entirely to previous business
acquisitions. The total purchase price adjustments of $8.8 million
recorded during the six months ended June 27, 2008 is comprised of earn-out
payments of $3.1 million, tax adjustments of $5.6 million and $0.1 million for
changes in purchase price allocation estimates.
NOTE 7.
CERTAIN BALANCE SHEET COMPONENTS
Inventories,
net consisted of the following:
|
|
June 27,
|
|
|
December 28,
|
|
As
of
|
|
2008
|
|
|
2007
|
|
(in
thousands)
|
|
|
|
|
|
|
Raw
materials
|
|
$ |
66,743 |
|
|
$ |
63,465 |
|
Work-in-process
|
|
|
7,739 |
|
|
|
9,267 |
|
Finished
goods
|
|
|
78,887 |
|
|
|
70,286 |
|
Total
inventories, net
|
|
$ |
153,369 |
|
|
$ |
143,018 |
|
Deferred
costs of revenue are included within finished goods and were $15.9 million
at June 27, 2008 and $11.0 million at December 28, 2007.
Other
non-current liabilities consisted of the following:
|
|
June 27,
|
|
|
December 28,
|
|
As
of
|
|
2008
|
|
|
2007
|
|
(in
thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred
compensation
|
|
$ |
8,240 |
|
|
$ |
8,646 |
|
Unrecognized
tax benefits
|
|
|
28,103 |
|
|
|
25,774 |
|
Other
non-current liabilities
|
|
|
16,160 |
|
|
|
21,708 |
|
Total
other non-current liabilities
|
|
$ |
52,503 |
|
|
$ |
56,128 |
|
As of
June 27, 2008 and December 28, 2007, the Company has $28.1 million and $25.8
million, respectively, of unrecognized tax benefits included in Other
non-current liabilities that, if recognized, would favorably affect the
effective income tax rate in future periods and interest and/or penalties
related to income tax matters.
NOTE 8.
THE COMPANY AND SEGMENT INFORMATION
The
Company is a designer and distributor of positioning solutions 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 these 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. The Company 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 the Company’s total revenue, operating income and assets. This
segment is comprised of the Component Technologies, Military and Advanced
Systems, Applanix and Trimble Outdoors
businesses.
|
The
Company evaluates each of its segment's performance and allocates resources
based on segment operating income from operations before income taxes, and some
corporate allocations. The Company and each of its segments employ consistent
accounting policies.
The
following table presents revenue, operating income, and identifiable assets for
the four segments. Operating income is revenue less cost of sales and operating
expenses, excluding general corporate expenses, amortization of purchase
intangibles, in-process research and development expenses and restructuring
charges. The identifiable assets that the Company's Chief Operating Decision
Maker views by segment are accounts receivable and inventory.
|
Reporting
Segments
|
|
|
|
|
|
|
Engineering
and
|
|
|
Field
|
|
|
Mobile
|
|
|
Advanced
|
|
|
|
|
|
|
Construction
|
|
|
Solutions
|
|
|
Solutions
|
|
|
Devices
|
|
|
Total
|
|
(In
thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three
Months Ended June 27, 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment
revenue
|
|
$ |
213,019 |
|
|
$ |
90,070 |
|
|
$ |
42,285 |
|
|
$ |
32,393 |
|
|
$ |
377,767 |
|
Operating
income
|
|
|
45,161 |
|
|
|
34,808 |
|
|
|
1,942 |
|
|
|
6,578 |
|
|
|
88,489 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three
Months Ended June 29, 2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment
revenue
|
|
$ |
198,853 |
|
|
$ |
55,273 |
|
|
$ |
40,927 |
|
|
$ |
32,679 |
|
|
$ |
327,732 |
|
Operating
income
|
|
|
52,371 |
|
|
|
18,398 |
|
|
|
2,906 |
|
|
|
5,384 |
|
|
|
79,059 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six
Months Ended June 27, 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment
revenue
|
|
$ |
407,199 |
|
|
$ |
178,107 |
|
|
$ |
86,296 |
|
|
$ |
61,461 |
|
|
$ |
733,063 |
|
Operating
income
|
|
|
82,115 |
|
|
|
69,903 |
|
|
|
4,395 |
|
|
|
11,270 |
|
|
|
167,683 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six
Months Ended June 29, 2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment
revenue
|
|
$ |
374,457 |
|
|
$ |
106,235 |
|
|
$ |
70,784 |
|
|
$ |
61,988 |
|
|
$ |
613,464 |
|
Operating
income
|
|
|
94,535 |
|
|
|
35,026 |
|
|
|
3,923 |
|
|
|
8,727 |
|
|
|
142,211 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As
of June 27, 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts
receivable (1)
|
|
$ |
170,728 |
|
|
$ |
48,471 |
|
|
$ |
27,812 |
|
|
$ |
20,189 |
|
|
$ |
267,200 |
|
Inventories
|
|
|
99,725 |
|
|
|
18,618 |
|
|
|
17,829 |
|
|
|
17,197 |
|
|
|
153,369 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As
of December 28, 2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts
receivable (1)
|
|
$ |
158,913 |
|
|
$ |
37,294 |
|
|
$ |
25,469 |
|
|
$ |
18,208 |
|
|
$ |
239,884 |
|
Inventories
|
|
|
89,780 |
|
|
|
15,745 |
|
|
|
18,781 |
|
|
|
18,712 |
|
|
|
143,018 |
|
(1)
|
As
presented, accounts receivable represents trade receivables, net, which
are specified between segments.
|
A
reconciliation of our consolidated segment operating income to consolidated
income before income taxes is as follows:
|
|
Three
Months Ended
|
|
|
Six
Months Ended
|
|
|
|
June 27,
|
|
|
June 29
|
|
|
June 27,
|
|
|
June 29
|
|
|
|
2008
|
|
|
2007
|
|
|
2008
|
|
|
2007
|
|
(In
thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated
segment operating income
|
|
$ |
88,489 |
|
|
$ |
79,059 |
|
|
$ |
167,683 |
|
|
$ |
142,211 |
|
Unallocated
corporate expense
|
|
|
(11,303 |
) |
|
|
(12,344 |
) |
|
|
(21,653 |
) |
|
|
(23,529 |
) |
Amortization
of purchased intangible assets
|
|
|
(10,918 |
) |
|
|
(10,432 |
) |
|
|
(21,722 |
) |
|
|
(18,327 |
) |
In-process
research and development expense
|
|
|
-- |
|
|
|
-- |
|
|
|
-- |
|
|
|
(2,112 |
) |
Restructuring
charges
|
|
|
(3,344 |
) |
|
|
(333 |
) |
|
|
(3,344 |
) |
|
|
(3,025 |
) |
Consolidated
operating income
|
|
|
62,924 |
|
|
|
55,950 |
|
|
|
120,964 |
|
|
|
95,218 |
|
Non-operating
income (expense), net
|
|
|
4,119 |
|
|
|
271 |
|
|
|
5,890 |
|
|
|
3,128 |
|
Consolidated
income before income taxes
|
|
$ |
67,043 |
|
|
$ |
56,221 |
|
|
$ |
126,854 |
|
|
$ |
98,346 |
|
NOTE 9.
LONG-TERM DEBT, COMMITMENTS AND CONTINGENCIES
Long-term
debt consisted of the following:
|
|
June
27,
|
|
|
December
28,
|
|
As
of
|
|
2008
|
|
|
2007
|
|
(In
thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Credit
Facilities:
|
|
|
|
|
|
|
Term
loan
|
|
$ |
- |
|
|
$ |
60,000 |
|
Promissory
notes and other
|
|
|
569 |
|
|
|
690 |
|
Total
debt
|
|
|
569 |
|
|
|
60,690 |
|
|
|
|
|
|
|
|
|
|
Less
current portion of long-term debt
|
|
|
137 |
|
|
|
126 |
|
Non-current
portion
|
|
$ |
432 |
|
|
$ |
60,564 |
|
Credit
Facilities
On July 28, 2005, the Company entered into a $200
million unsecured revolving credit agreement (the 2005 Credit Facility) with a
syndicate of 10 banks with The Bank of Nova Scotia as the administrative
agent. On February 16, 2007, the Company amended 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. 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, during the first quarter of
fiscal 2007 the Company incurred a five-year term loan under the 2007 Credit
Facility in an aggregate principal amount of $100 million, which has
subsequently been paid off. The maximum leverage ratio under the 2007
Credit Facility is 3.00:1. The funds available under the 2007 Credit
Facility may be used by the Company for acquisitions, stock repurchases, and
general corporate purposes.
As of June 27, 2008 and December 28, 2007, the Company did not have an
outstanding balance on the revolving credit line. The term loan
balance was fully paid off in the second quarter of
2008. The
Company 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, within certain limitations, 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 June 27, 2008 and December 28, 2007, the Company had notes payable totaling
approximately $569,000 and $690,000, respectively, consisting of government
loans to foreign subsidiaries and loans assumed from
acquisitions.
Leases
and other commitments
The
estimated future minimum operating lease commitments as of June 27, 2008, is as
follows (in thousands):
2008
(Remaining)
|
|
$ |
9,806 |
|
2009
|
|
|
17,819 |
|
2010
|
|
|
12,007 |
|
2011
|
|
|
7,571 |
|
2012
|
|
|
5,920 |
|
Thereafter
|
|
|
1,501 |
|
Total
|
|
$ |
54,624 |
|
Additionally,
as of June 27, 2008, the Company had acquisition-related earn-outs of $6.9
million and holdbacks of $11.7 million recorded in Other current liabilities and
Other non-current liabilities. The maximum remaining payments, including the
$6.9 million and $11.7 million recorded, will not exceed $72.9
million. The remaining payments are based upon targets achieved or
events occurring over time that would result in amounts paid that may be lower
than the maximum remaining payments. The remaining earn-outs and
holdbacks are payable through 2010.
At June 27, 2008, the Company had unconditional purchase
obligations of approximately $68.7 million. These unconditional purchase
obligations primarily represent open non-cancelable purchase orders for material
purchases with our vendors. Purchase obligations exclude agreements that are
cancelable without penalty. These unconditional purchase obligations are related
primarily to inventory and other items.
NOTE
10. FAIR VALUE OF FINANCIAL INSTRUMENTS
As
discussed in Note 2, SFAS No. 157, which requires enhanced disclosures about
assets and liabilities measured at fair value, became effective for the Company
beginning in its first quarter of fiscal 2008. The Company’s forward foreign currency
exchange contracts and its
deferred compensation plan assets and liabilities are presented at fair value in the
Condensed Consolidated Balance Sheets. Fair value is defined as the price at
which an asset could be exchanged in a current transaction between
knowledgeable, willing parties. A liability’s fair value is defined as the
amount that would be paid to transfer the liability to a new obligor, not the
amount that would be paid to settle the liability with the creditor. Where
available, fair value is based on observable market prices or parameters or
derived from such prices or parameters. Where observable prices or inputs are
not available, valuation models are applied. These valuation techniques involve
some level of management estimation and judgment, the degree of which is
dependent on the price transparency for the instruments or market and the
instruments’ complexity.
Assets and liabilities recorded at fair value on a recurring
basis in the Condensed Consolidated Balance Sheets are categorized based upon
the level of judgment associated with the inputs used to measure their fair
value. Hierarchical levels, defined by SFAS No. 157 and directly related to the
amount of subjectivity associated with the inputs to fair valuation of these
assets and liabilities, are as follows:
Level I – Observable inputs such as unadjusted, quoted prices in active
markets for identical assets or liabilities at the measurement
date.
Level II – Inputs (other than quoted
prices included in Level I) are either directly or indirectly observable for the
asset or liability. These include quoted prices
for similar assets or liabilities in active markets and quoted prices for
identical or similar assets or liabilities in markets that are not
active.
Level III – Unobservable inputs that reflect management’s best estimate of
what market participants would use in pricing the asset or liability at the
measurement date. Consideration is given to the risk inherent in the valuation
technique and the risk inherent in the inputs to the model.
Fair Value on a Recurring
Basis
Assets and liabilities measured at fair
value on a recurring basis are categorized in the tables below based upon the
lowest level of significant input to the valuations.
|
|
Fair Values as of June 27, 2008
|
|
(In
thousands)
|
|
Level I
|
|
|
Level II
|
|
|
Level III
|
|
|
Total
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred
compensation plan assets (1)
|
|
|
8,340 |
|
|
|
— |
|
|
|
— |
|
|
|
8,340 |
|
Derivative
assets (2)
|
|
|
— |
|
|
|
172 |
|
|
|
— |
|
|
|
172 |
|
Total
|
|
|
8,340 |
|
|
|
172 |
|
|
|
— |
|
|
|
8,512 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred
compensation plan liabilities (1)
|
|
|
8,240 |
|
|
|
— |
|
|
|
— |
|
|
|
8,240 |
|
Derivative
liabilities (2)
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Total
|
|
|
8,240 |
|
|
|
— |
|
|
|
— |
|
|
|
8,240 |
|
(1)
|
Deferred compensation plan assets
and liabilities: The Company maintains a self-directed,
non-qualified deferred compensation plan for certain executives and other
highly compensated employees. The investment assets and liabilities
included in Level I are valued using quoted market
prices.
|
(2)
|
Derivative assets and
liabilities: Derivative assets and liabilities included
in Level II primarily represent forward currency exchange
contracts. The fair values are determined
using inputs based on observable quoted
prices.
|
NOTE 11.
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. The Company’s expected future costs are primarily estimated
based upon historical trends in the volume of product returns within the
warranty period and the costs 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 six months ended June 27,
2008 are as follows (in thousands):
Balance
as of December 28, 2007
|
|
$ |
10,806 |
|
Accruals
for warranties issued
|
|
|
10,683 |
|
Changes
in estimates
|
|
|
-- |
|
Warranty
settlements (in cash or in kind)
|
|
|
(9,547 |
) |
Balance
as of June 27, 2008
|
|
$ |
11,942 |
|
NOTE 12.
EARNINGS PER SHARE
The
following data was used in computing earnings per share and the effect on the
weighted-average number of shares of potentially dilutive common
stock.
|
|
Three
Months Ended
|
|
Six
Months Ended
|
|
|
|
June 27,
|
|
|
|
June 29,
|
|
|
|
June 27,
|
|
|
|
June 29,
|
|
|
|
|
2008
|
|
|
|
2007
|
|
|
|
2008
|
|
|
|
2007
|
|
(In
thousands, except per share amounts)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Numerator:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
available to common shareholders:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Used
in basic and diluted earnings per share
|
|
$
|
48,599
|
|
|
$
|
35,026
|
|
|
$
|
88,666
|
|
|
$
|
63,709
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Denominator:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
average number of common shares used in basic earnings per
share
|
|
|
121,523
|
|
|
|
119,621
|
|
|
|
121,495
|
|
|
|
117,535
|
|
Effect
of dilutive securities (using treasury stock method):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
stock options and restricted stock units
|
|
|
4,189
|
|
|
|
4,713
|
|
|
|
3,929
|
|
|
|
4,757
|
|
Common
stock warrants
|
|
|
--
|
|
|
|
250
|
|
|
|
11
|
|
|
|
247
|
|
Weighted
average number of common shares and dilutive potential common shares used
in diluted earnings per share
|
|
|
125,712
|
|
|
|
124,584
|
|
|
|
125,435
|
|
|
|
122,539
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
earnings per share
|
|
$
|
0.40
|
|
|
$
|
0.29
|
|
|
$
|
0.73
|
|
|
$
|
0.54
|
|
Diluted
earnings per share
|
|
$
|
0.39
|
|
|
$
|
0.28
|
|
|
$
|
0.71
|
|
|
$
|
0.52
|
|
NOTE 13:
RESTRUCTURING CHARGES:
Restructuring
expenses for the three and six months ended June 27, 2008 and June 29, 2007 were
as follows:
|
|
|
Three
Months Ended
|
|
|
|
Six
Months Ended
|
|
|
|
|
June
27,
|
|
|
|
June
29,
|
|
|
|
June
27,
|
|
|
|
June
29,
|
|
|
|
|
2008
|
|
|
|
2007
|
|
|
|
2008
|
|
|
|
2007
|
|
(in
thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Severance and
Benefits
|
|
$ |
3,344 |
|
|
$ |
333 |
|
|
$ |
3,344 |
|
|
$ |
3,025 |
|
During
the three and six months ended June 27, 2008, restructuring expenses of $3.3
million were related to management decisions designed to improve operational
efficiency and financial results. The restructuring expenses,
included in cost of sales and operating expenses, were related to a decision to
streamline processes and reduce the cost structure of the Company, with
approximately 90 employees affected worldwide. Of the total, $2.8 million is
related to the Engineering and Construction segment and $0.5 million is related
to the Mobile Solutions segment. As a result of these decisions, the Company
expects restructuring activities in the Engineering and Construction segment to
result in additional restructuring expenses totaling approximately $2.6 million
through the first quarter of 2010.
During
the three and six months ended June 29, 2007, restructuring expenses of $0.3
million and $3.0 million, respectively were for charges associated with the
Company’s acquisition of @Road. The restructuring expenses were related to the
acceleration of vesting of employee stock options for certain terminated @Road
employees, of which $1.4 million was settled in cash and $1.6 million was
recorded as Shareholders’ equity.
Restructuring
costs associated with a business combination:
In
addition to the restructuring expenses in the six months ended June 27, 2008,
the Company had $0.9 million in restructuring activity reversals related to
costs associated with exiting activities of pre-merger @Road. The
reversals were primarily due to severance and benefits costs for employees whose
positions were retained in a variety of functions. The reversals were
recognized in the first quarter of fiscal 2008 as a reduction of the liability
assumed in the purchase business combination that had been included in the
allocation of the cost to acquire @Road and, accordingly, resulted in a decrease
to goodwill rather than an expense reduction in the six months ended June 27,
2008.
In
addition to the restructuring expenses in the six months ended June 29, 2007,
costs associated with exiting activities of pre-merger @Road of $3.6 million,
consisted of severance and benefits costs. These costs were
recognized as a liability assumed in the purchase business combination and were
included in the allocation of the cost to acquire @Road and accordingly,
resulted in an increase to goodwill rather than an expense in the six months
ended June 29, 2007.
Restructuring
activity:
Restructuring
activity for the six months ended June 27, 2008 was as follows (in
thousands):
Balance
as of December 28, 2007
|
|
$ |
1,326 |
|
Charges
|
|
|
3,344 |
|
Payments
|
|
|
(2,450 |
) |
Adjustment
|
|
|
(909 |
) |
Balance
as of June 27, 2008
|
|
$ |
1,311 |
|
The $1.3
million restructuring accrual consists of severance and benefits. Of
the $1.3 million restructuring accrual, $0.9 million is included in Other
current liabilities and is expected to be settled by the fourth quarter of
fiscal 2008. The remaining balance of $0.4 million is included in
Other non-current liabilities and is expected to be settled by the first quarter
of fiscal 2010.
NOTE 14:
INCOME TAXES
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 (UTB). 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.
The
Company adopted FIN 48 on December 30, 2006, and the amount of liabilities for
unrecognized tax benefits (net of the federal benefit on state issues) that, if
recognized, would favorably affect the effective income tax rate in any future
period are $30.5 million and $28.4 million at June 27, 2008 and December 28,
2007, respectively. The unrecognized tax benefits are recorded in
Other non-current liabilities and within the deferred tax accounts in the
accompanying Condensed Consolidated Balance Sheets.
The
Company’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 June 27, 2008 and December 30, 2007, of $3.7 million
and $3.1 million, respectively, which were recorded in Other Non-Current
Liabilities in the accompanying Condensed Consolidated Balance
Sheets.
The
Company and its U.S. subsidiaries are subject to U.S. federal and state income
tax. The Company has substantially concluded all U.S. federal and
state income tax matters for years through 1992. Non-U.S. income tax
matters have been concluded for years through 2000. The Company is
currently in various stages of multiple year examinations by Federal, State, and
foreign taxing authorities. At this point in the examinations, the
Company does not anticipate a significant impact to the unrecognized tax
benefits balance with respect to current tax
examinations. Furthermore, although the timing of the resolution
and/or the closure on audits is highly uncertain, the Company does not believe
that the unrecognized tax benefits would materially change in the next twelve
months.
The
Company’s effective income tax rate for the three and six months
ended June 27, 2008 was 27.5% and 30.1%, respectively, as compared to 37.7% and
35.2% for the three and six months ended June 29, 2007.
NOTE 15:
COMPREHENSIVE INCOME:
The
components of comprehensive income, net of related tax, are as
follows:
|
|
Three
Months Ended
|
|
|
Six
Months Ended
|
|
|
|
|
June
27,
|
|
|
|
June
29,
|
|
|
|
June
27,
|
|
|
|
June
29,
|
|
|
|
|
2008
|
|
|
|
2007
|
|
|
|
2008
|
|
|
|
2007
|
|
(In
thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income
|
|
$
|
48,599
|
|
|
$
|
35,026
|
|
|
$
|
88,666
|
|
|
$
|
63,709
|
|
Foreign
currency translation adjustments, net of tax
|
|
|
(2,560)
|
|
|
|
6,210
|
|
|
|
18,148
|
|
|
|
6,099
|
|
Net
unrealized actuarial losses
|
|
|
3
|
|
|
|
-
|
|
|
|
(24)
|
|
|
|
(8)
|
|
Net
unrealized gain (loss) on investments
|
|
|
-
|
|
|
|
(9)
|
|
|
|
-
|
|
|
|
35
|
|
Comprehensive
income
|
|
$
|
46,042
|
|
|
$
|
41,227
|
|
|
$
|
106,790
|
|
|
$
|
69,835
|
|
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 “Risk
Factors” below and elsewhere in this report as well as in the Company's Annual
Report on Form 10-K for fiscal year 2007 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 U.
S. The preparation of these financial statements requires us to make estimates
and judgments that affect the reported amounts of assets, liabilities, revenue
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.
CRITICAL
ACCOUNTING POLICIES AND ESTIMATES
There
have been no changes to our significant accounting polices during the six months
ended June 27, 2008 from those disclosed in our 2007 Form
10-K.
Recent
Accounting Pronouncements
Updates
to recent accounting standards as disclosed in our Annual Report on Form 10-K
for the fiscal year ended December 28, 2007 are as follows:
In
September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements,” which
clarifies the definition of fair value, establishes a framework for measuring
fair value within GAAP and expands the disclosures regarding fair value
measurements. In February 2008, the FASB issued FASB Staff Position No. FAS
157-2 deferring the effective date of SFAS No. 157 to fiscal years beginning
after November 15, 2008, and interim periods within those fiscal years for
nonfinancial assets and nonfinancial liabilities that are recognized or
disclosed at fair value in the financial statements on a nonrecurring basis. We
adopted SFAS 157 in the first quarter of fiscal 2008. The adoption did not have
a material impact on our financial condition, results of operations or cash
flows.
In
February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for
Financial Assets and Financial Liabilities, including an amendment of FASB
Statement No. 115.” SFAS No. 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 No.
159 also establishes additional disclosure requirements. SFAS No. 159 became
effective for us at the beginning of its first quarter of fiscal
2008. We did not elect the fair value option for any of our financial
assets or liabilities. However, we may decide to elect the fair value
option on new items in the future. The adoption did not have a
material impact on our financial position, results of operations or cash
flows.
In March
2008, the FASB issued SFAS No. 161, “Disclosures About Derivative Instruments
and Hedging Activities - An Amendment of FASB Statement No. 133” which requires
enhanced disclosures about (a) how and why an entity uses derivative
instruments, (b) how derivative instruments and related hedged items are
accounted for under SFAS 133 and its related interpretations, and (c) how
derivative instruments and related hedged items affect an entity’s financial
position, financial performance, and cash flows. SFAS No. 161 is effective for
financial statements issued for fiscal years and interim periods beginning after
November 15, 2008, with early application encouraged. We do not
expect the adoption of SFAS No. 161 will have a material impact on our financial
position, results of operations or cash flows.
EXECUTIVE
LEVEL OVERVIEW
Trimble’s focus is on combining positioning
technology with wireless communication and application capabilities to create
system-level solutions that enhance productivity and accuracy for our customers.
The majority of our markets are end-user markets, including engineering and
construction firms, governmental organizations, public safety workers, farmers
and companies who must manage fleets of mobile workers and assets. In our
Advanced Devices segment, we also provide components to original equipment
manufacturers to incorporate into their products. In the end user
markets, we provide a system that includes a hardware platform that may contain
software and customer support. Some examples of our solutions include products
that automate and simplify the process of surveying land, products that automate
the utilization of equipment such as tractors and bulldozers, products that
enable a company to manage its mobile workforce and assets, and products that
allow municipalities to manage their fixed assets. In addition, we also provide software
applications on a stand-alone basis.
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 Mobile Solutions and Advanced Devices segments, our products
are generally sold through a dealer channel, and it is crucial that we maintain
a proficient global, third-party distribution channel.
We continued to execute our strategy
with a series of actions that can be summarized in four
categories.
Reinforcing our position in existing
markets
* We believe that our markets provide us
with additional, substantial potential for substituting our technology for
traditional methods. We are
continuing to develop new products and to
strengthen our distribution channels in order to expand our market opportunity.
In the first quarter of
fiscal 2008, we introduced the AgGPS® EZ-Guide® lightbar guidance system,
GPS Pathfinder® ProXTR receiver, and
Trimble® MEP layout solution for the mechanical, electrical, and plumbing trades
as well as a new wireless data controller for the LM80 Layout Manager to connect
the office and job site. In the second quarter of fiscal 2008, we
introduced the Trimble® GeoExplorer® 2008 Series for mapping and Geographic
Information System (GIS), Trimble GCS900 Grade Control
System version 10.8, that provides automatic blade control and configurable
earthworks progress monitoring in higher gears, and Trimble Coastal Center™
software that provides network operators the ability to monitor and control
multiple differential GPS (DGPS) beacon stations from one central location. All of these new products
strengthened our
competitive position and created new value for the user.
Extending 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. In the first quarter of fiscal 2008, we
introduced the Agriculture Manager™ asset management system, a new sensor for
the Trimble CCS900 compaction control system that provides real-time material
density information to earthworks operators, and EZ-Office™ software for
agriculture. In the
second quarter of fiscal 2008, we were chosen to supply
Trimble VRS™ (Virtual Reference Station) technology to establish a nationwide
GNSS infrastructure network for the Republic of Croatia called the CROatian
POsitioning System (CROPOS). We launched Trimble VRS Now™ Service in
Madrid, Spain to provide surveyors, civil engineers and geospatial professionals
in the area with instant access to real-time kinematic (RTK) GNSS corrections
without the need for a base station.
Bringing existing technology to new
markets
* We continue to reinforce our position in
existing markets and position ourselves in newer markets that will serve as
important sources of future growth. Our efforts in Africa, China, Europe, India, Middle-East and Russia reflected improving financial results,
with the promise of more in the future.
Entering new market
segments
* In Q1 2008, we acquired Crain
Enterprises, of Mound
City, Illinois. Crain is a leading manufacturer of
accessories for the geomatics, surveying, mapping, and construction industries.
We also acquired
Géo-3D Inc. of Montreal, Canada. Géo-3D is a leader in roadside infrastructure
asset inventory solutions for the geospatial market.
RECENT
BUSINESS DEVELOPMENTS
During
the last twelve months ended June 27, 2008, we acquired the following companies
and the results of their operations have been combined with our operations from
the date of acquisition:
Géo-3D
On January 22, 2008, we acquired privately-held Géo-3D Inc.
of Montreal, Canada, a leader in roadside infrastructure
asset inventory solutions. Géo-3D’s performance is reported under
our Engineering and Construction business segment.
Crain
On
January 8, 2008, we acquired privately-held Crain Enterprises, Inc. of Mound
City, Illinois, a leading manufacturer of accessories for the geomatics,
surveying, mapping, and construction industries. Crain’s performance
is reported under our Engineering and Construction business
segment.
HHK
On December 19, 2007, we acquired privately-held HHK
Datentechnik GmbH of Braunschweig, Germany, a provider of customized office and
field software solutions for the cadastral survey market in Germany. HHK’s performance is
reported under our Engineering and Construction business
segment.
UtilityCenter
On November 8, 2007, we acquired the UtilityCenter assets
from privately-held UAI, Inc. of Huntsville, Alabama. UAI is a leading provider of
Geographic Information System (GIS)-based workflow automation and outage
management solutions for electric and gas utilities. UtilityCenter’s
performance is reported under our Field Solutions business
segment.
Ingenieurbüro Breining GmbH
On September 19, 2007, we acquired Ingenieurbüro Breining GmbH of Kirchheim,
Germany, a provider of customized field data
collection and office software solutions for the survey market in Germany. Ingenieurbüro Breining’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
|
|
|
Six
Months Ended
|
|
|
|
June 27,
|
|
|
June 29,
|
|
|
June 27,
|
|
|
June 29,
|
|
|
|
2008
|
|
|
2007
|
|
|
2008
|
|
|
2007
|
|
($
in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
consolidated revenue
|
|
$ |
377,767 |
|
|
$ |
327,732 |
|
|
$ |
733,063 |
|
|
$ |
613,464 |
|
Gross
margin
|
|
$ |
187,099 |
|
|
$ |
167,169 |
|
|
$ |
361,475 |
|
|
$ |
310,299 |
|
Gross
margin %
|
|
|
49.5 |
% |
|
|
51.0 |
% |
|
|
49.3 |
% |
|
|
50.6 |
% |
Total
consolidated operating income
|
|
$ |
62,924 |
|
|
$ |
55,950 |
|
|
$ |
120,964 |
|
|
$ |
95,218 |
|
Operating
income %
|
|
|
16.7 |
% |
|
|
17.1 |
% |
|
|
16.5 |
% |
|
|
15.5 |
% |
Revenue
In the
three months ended June 27, 2008, total revenue increased by $50.0 million or
15%, as compared to the same corresponding period in fiscal 2007. The increase
resulted from strong revenue growth across Engineering and Construction and
Field Solutions segments. Engineering and Construction revenue
increased $14.2 million, Field Solutions increased $34.8 million, Mobile
Solutions increased $1.4 million, while Advanced Devices decreased $0.3 million,
as compared to the same corresponding period in fiscal 2007. Revenue
growth was driven by new products, a robust agricultural environment, and strong
international growth. The revenue growth was partially offset by softness in the
U.S. market in Engineering and Construction.
In the
six months ended June 27, 2008, total revenue increased by $119.6 million or
19%, as compared to the same corresponding period in fiscal 2007. The increase
was primarily due to strong revenue performances across Engineering and
Construction, Field Solutions, and Mobile Solutions. Engineering and
Construction revenue increased $32.7 million, Field Solutions increased $71.9
million, Mobile Solutions increased $15.5 million, while Advanced Devices
decreased $0.5 million, compared to the same corresponding period in fiscal
2007. Revenue growth within these segments was primarily driven by
new product introductions, a robust agricultural environment, strong
international growth and a full quarter of @Road for the first quarter as
compared to a partial quarter of @Road revenue in the corresponding period in
fiscal 2007. The revenue growth was partially offset by softness in
the U.S. market in Engineering and Construction.
Gross
Margin
Gross
margin varies due to a number of factors including product mix, pricing,
distribution channel, production volumes, and foreign currency
translations.
Gross
margin increased by $19.9 million and $51.2 million for the three and six months
ended June 27, 2008, respectively, as compared to the corresponding period in
the prior year. Gross margin as a percentage of total revenue for the
three months ended June 27, 2008 was 49.5%, as compared to 51.0% for the three
months ended June 29, 2007. Gross margin as a
percentage of total revenue for the six months ended June 27, 2008 was 49.3% as
compared to 50.6% for the six months ended June 29, 2007.
The
increase in gross margin for the three and six month periods was primarily due
to higher revenue. The slight decrease in gross margin percentage for
the three month and six month periods was driven by product mix, increased
amortization of purchased intangibles, and restructuring costs.
Operating
Income
Operating
income increased by $7.0 million and $25.7 million for the three and six months
ended June 27, 2008, respectively, as compared to the corresponding period in
the prior year. Operating income as a percentage of total revenue was
16.7% for the three months ended June 27, 2008, as compared to 17.1% for the
three months ended June 29, 2007. Operating income as a percentage of
total revenue was 16.5% for the six month period ended June 27, 2008 as compared
to 15.5% for the six months ended June 29, 2007.
The
increase in operating income for both the three and six month periods was
primarily driven by increased revenue. The slight decrease in
operating income percentage for the three month period was primarily due to
restructuring costs and lower gross margin, offset by strong operating expense
control in Field Solutions and Mobile Solutions. The increase in
operating income percentage for the six month periods was primarily due to
strong operating expense control in Field Solutions and Mobile Solutions, offset
partially by lower gross margin and also IPR&D expenses in the corresponding
period in the prior year.
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 equals net revenue less cost of sales and
operating expenses, excluding general corporate expenses, amortization of
purchased intangibles, in-process research and development expenses, and
restructuring charges.
The
following table is a breakdown of revenue and operating income by
segment:
|
|
Three
Months Ended
|
|
|
Six
Months Ended
|
|
|
|
June 27,
|
|
|
June 29,
|
|
|
June 27,
|
|
|
June 29,
|
|
|
|
2008
|
|
|
2007
|
|
|
2008
|
|
|
2007
|
|
(in thousands, except
percentages)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Engineering
and Construction
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
$ |
213,019 |
|
|
$ |
198,853 |
|
|
$ |
407,199 |
|
|
$ |
374,457 |
|
Segment
revenue as a percent of total revenue
|
|
|
56 |
% |
|
|
61 |
% |
|
|
56 |
% |
|
|
61 |
% |
Operating
income
|
|
$ |
45,161 |
|
|
$ |
52,371 |
|
|
$ |
82,115 |
|
|
$ |
94,535 |
|
Operating
income as a percent of segment revenue
|
|
|
21 |
% |
|
|
26 |
% |
|
|
20 |
% |
|
|
25 |
% |
Field
Solutions
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
$ |
90,070 |
|
|
$ |
55,273 |
|
|
$ |
178,107 |
|
|
$ |
106,235 |
|
Segment
revenue as a percent of total revenue
|
|
|
24 |
% |
|
|
17 |
% |
|
|
24 |
% |
|
|
17 |
% |
Operating
income
|
|
$ |
34,808 |
|
|
$ |
18,398 |
|
|
$ |
69,903 |
|
|
$ |
35,026 |
|
Operating
income as a percent of segment revenue
|
|
|
39 |
% |
|
|
33 |
% |
|
|
39 |
% |
|
|
33 |
% |
Mobile
Solutions
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
$ |
42,285 |
|
|
$ |
40,927 |
|
|
$ |
86,296 |
|
|
$ |
70,784 |
|
Revenue
as a percent of total revenue
|
|
|
11 |
% |
|
|
12 |
% |
|
|
12 |
% |
|
|
12 |
% |
Operating
income
|
|
$ |
1,942 |
|
|
$ |
2,906 |
|
|
$ |
4,395 |
|
|
$ |
3,923 |
|
Operating
income as a percent of segment revenue
|
|
|
5 |
% |
|
|
7 |
% |
|
|
5 |
% |
|
|
6 |
% |
Advanced
Devices
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
$ |
32,393 |
|
|
$ |
32,679 |
|
|
$ |
61,461 |
|
|
$ |
61,988 |
|
Segment
revenue as a percent of total revenue
|
|
|
9 |
% |
|
|
10 |
% |
|
|
8 |
% |
|
|
10 |
% |
Operating
income
|
|
$ |
6,578 |
|
|
$ |
5,384 |
|
|
$ |
11,270 |
|
|
$ |
8,727 |
|
Operating
income as a percent of segment revenue
|
|
|
20 |
% |
|
|
16 |
% |
|
|
18 |
% |
|
|
14 |
% |
A
reconciliation of our consolidated segment operating income to consolidated
income before income taxes follows:
|
|
Three
Months Ended
|
|
|
Six
Months Ended
|
|
|
|
|
June 27,
|
|
|
|
June 29,
|
|
|
|
June 27,
|
|
|
|
June 29,
|
|
|
|
|
2008
|
|
|
|
2007
|
|
|
|
2008
|
|
|
|
2007
|
|
(In
thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated
segment operating income
|
|
$
|
88,489
|
|
|
$
|
79,059
|
|
|
$
|
167,683
|
|
|
$
|
142,211
|
|
Unallocated
corporate expense
|
|
|
(11,303)
|
|
|
|
(12,344)
|
|
|
|
(21,653)
|
|
|
|
(23,529)
|
|
Amortization
of purchased intangible assets
|
|
|
(10,918)
|
|
|
|
(10,432)
|
|
|
|
(21,722)
|
|
|
|
(18,327)
|
|
In-process
research and development expense
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
(2,112)
|
|
Restructuring
charges
|
|
|
(3,344)
|
|
|
|
(333)
|
|
|
|
(3,344)
|
|
|
|
(3,025)
|
|
Consolidated
operating income
|
|
|
62,924
|
|
|
|
55,950
|
|
|
|
120,964
|
|
|
|
95,218
|
|
Non-operating
income, net
|
|
|
4,119
|
|
|
|
271
|
|
|
|
5,890
|
|
|
|
3,128
|
|
Consolidated
income before income taxes
|
|
$
|
67,043
|
|
|
$
|
56,221
|
|
|
$
|
126,854
|
|
|
$
|
98,346
|
|
Engineering
and Construction
Engineering
and Construction revenue increased by $14.2 million or 7% and $32.7 million or
9% for the three and six months ended June 27, 2008, as compared to the same
corresponding periods in fiscal 2007. Segment operating income
decreased $7.2 million or 14% and $12.4 million or 13% for the three and six
months ended June 27, 2008, as compared to the same corresponding periods in
fiscal 2007.
The
revenue growth for both the three month and six month periods ended June 27,
2008 was driven by strong international sales, partially offset by softness in
the U.S. markets. Operating income for both the three and six month
periods ended June 27, 2008 decreased primarily due to lower gross margin due to
product mix and higher operating expenses due to the impact of acquisitions made
during the last twelve months.
Field
Solutions
Field
Solutions revenue increased by $34.8 million or 63% and $71.9 million or 68% for
the three and six months ended June 27, 2008, as compared to the same
corresponding period in fiscal 2007. Segment operating income
increased by $16.4 million or 89% and $34.9 million or 100% for the three and
six months ended June 27, 2008, as compared to the same corresponding period in
fiscal 2007.
The
revenue increase for both the three and six month periods ended June 27, 2008
was driven by the introduction of new agricultural products and a worldwide
robust agricultural market. Operating income for both the three and six month
periods ended June 27, 2008 increased primarily due to higher revenue, gross
margin improvement, and operating expense control.
Mobile
Solutions revenue increased by $1.4 million or 3% and $15.5 million or 22% for
the three and six months ended June 27, 2008, as compared to the same
corresponding period in fiscal 2007. Segment operating income
decreased by $1.0 million or 33% for the three months ended June 27, 2008, as
compared to the same corresponding period in fiscal 2007. Segment
operating income increased by $0.5 million or 12% for the six months ended June
27, 2008, as compared to the same corresponding period in fiscal
2007.
Revenue,
for the three month period ended June 27, 2008, as compared to the corresponding
period of fiscal 2007 grew due to increased subscription
revenue. Revenue for the six month period grew due to increase
subscription revenue and a full quarter of @Road revenue as compared to partial
quarter of @Road revenue in the corresponding period in fiscal 2007. Operating
income for the three month period ended June 27, 2008 decreased due to lower
revenue in the handheld business partially offset by increased subscription
revenue and operating expense control. .Operating income for the six
months increased due to increased subscription revenue and operating expense
control, partially offset by lower revenue in the handheld
business.
Advanced
Devices
Advanced
Devices revenue decreased by $0.3 million or 1% and $0.5 million or 1% for the
three and six months ended June 27, 2008, as compared to the same corresponding
period in fiscal 2007. Segment operating income increased by $1.2
million or 22% and $2.5 million or 29% for the three and six months ended June
27, 2008, as compared to the same corresponding period in fiscal
2007.
For the
three and six months ended June 27, 2008, as compared to the corresponding
periods in fiscal 2007, revenue remained relatively flat while segment operating
income increased primarily due to product mix in Component Technologies and
Military.
Research
and Development, Sales and Marketing, and General and Administrative
Expenses
Research
and development (R&D), sales and marketing (S&M), and general and
administrative (G&A) expenses are summarized in the following table (in
thousands, except percentages):
|
|
Three
Months Ended
|
|
|
Six
Months Ended
|
|
|
|
June
27,
|
|
|
June
29,
|
|
|
June
27,
|
|
|
June
29,
|
|
|
|
2008
|
|
|
2007
|
|
|
2008
|
|
|
2007
|
|
(in thousands, except
percentages)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research
and development
|
|
$ |
39,405 |
|
|
$ |
33,867 |
|
|
$ |
76,750 |
|
|
$ |
65,030 |
|
Percentage
of revenue
|
|
|
10 |
% |
|
|
10 |
% |
|
|
10 |
% |
|
|
11 |
% |
Sales
and marketing
|
|
|
51,904 |
|
|
|
47,546 |
|
|
|
103,062 |
|
|
|
89,693 |
|
Percentage
of revenue
|
|
|
14 |
% |
|
|
15 |
% |
|
|
14 |
% |
|
|
15 |
% |
General
and administrative
|
|
|
25,289 |
|
|
|
24,278 |
|
|
|
47,979 |
|
|
|
45,920 |
|
Percentage
of revenue
|
|
|
7 |
% |
|
|
7 |
% |
|
|
7 |
% |
|
|
7 |
% |
Total
|
|
$ |
116,598 |
|
|
$ |
105,691 |
|
|
$ |
227,791 |
|
|
$ |
200,643 |
|
Percentage
of revenue
|
|
|
31 |
% |
|
|
32 |
% |
|
|
31 |
% |
|
|
33 |
% |
Overall,
R&D, S&M, and G&A expense increased by approximately $10.9 million
and $27.1 million for the three and six months ended June 27, 2008, as compared
to the corresponding period in fiscal 2007.
The
increase in R&D expense in the second quarter of fiscal 2008, as compared to
the second quarter of fiscal 2007, was primarily due to an increase in
compensation related expenses of $1.4 million, foreign currency exchange rates
of $1.5 million, engineering costs associated with new product roll-outs of $1.6
million and additional acquisition-related expenses of $1.1
million. The increase in R&D expense in the first six months of
fiscal 2008, as compared with the corresponding period in fiscal 2007, was due
to an increase in compensation related expenses of $4.9 million due in part to a
full quarter of @Road compensation expenses in the first quarter as compared to
a partial quarter of @Road compensation expenses in the corresponding period in
fiscal 2007. The R&D expense increase was also attributable to an
increase foreign currency exchange rates of $3.0 million, engineering costs
associated with new product roll-outs of $1.4 million, and additional operating
expenses associated with recent business acquisitions of $2.1
million.
All of
our R&D costs have been expensed as incurred. Costs of software developed
for external sale subsequent to reaching technical feasibility were not
considered material and were expensed as incurred.
* We
believe that the development and introduction of new products are critical to
our future success and we expect to continue active development of new
products.
The
increase in S&M expenses in the second quarter of fiscal 2008, as compared
to the corresponding period of fiscal 2007, was primarily due to an increase in
foreign currency exchange rates of $1.8 million, marketing communication
expenses of $1.2 million and additional acquisition-related expenses of $0.8
million. The increase in S&M expenses in the first six months of
fiscal 2008 as compared with the corresponding period of fiscal 2007 was due to
an increase in compensation related expenses of $2.7 million due in part to a
full quarter of @Road compensation expenses in the first quarter as compared to
a partial quarter of @Road compensation expenses in the corresponding period in
fiscal 2007. The S&M expense increase was also attributable to an
increase in foreign currency exchange rates of $3.5 million, marking
communication expenses of $2.9 million and additional operating expenses
associated with recent business acquisitions of $1.5 million.
* Our
future growth will depend in part on the timely development and continued
viability of the markets in which we currently compete as well as our ability to
continue to identify and develop new markets for our products.
The
increase in G&A expenses in the second quarter of fiscal 2008, as compared
to the corresponding period in fiscal 2007, was primarily due to additional
operating expenses associated with business acquisitions of $1.1 million and
foreign currency exchange rates of $0.7 million, partially offset by lower tax
and legal fees of $1.1 million. The increase in G&A expenses in the first
six months of fiscal 2008 compared with the corresponding period in fiscal 2007
was primarily due to additional operating expenses associated with business
acquisitions of $2.0 million and foreign currency exchange rates of $1.3
million, partially offset by lower tax and legal fees of $1.7
million.
Amortization
of Purchased Intangible Assets
Amortization
of purchased intangible assets was $10.9 million in the second quarter of fiscal
2008, as compared to $10.4 million in the second quarter of fiscal
2007. The increase was due primarily to acquisitions not applicable
in the corresponding period of fiscal 2007, primarily UAI, Crain and
HHK. Amortization of purchased intangible assets was $21.7 million in
the first six months of fiscal 2008, as compared to $18.3 million in the first
six months of fiscal 2007, due to acquisitions not applicable in the
corresponding period of fiscal 2007, primarily @Road.
As of
June 27, 2008, future amortization of intangible assets is expected to be $21.7
million during the remaining two quarters of fiscal 2008, $40.1 million during
2009, $37.9 million during 2010, $33.0 million during 2011, $25.0 million during
2012, and $29.2 million thereafter.
In-Process
Research and Development
We
recorded no in-process research and development (IPR&D) expense during the
three and six months ended June 27, 2008, respectively, as compared to $0
million and $2.1 million in the corresponding periods in 2007. At the
date of each acquisition, the projects associated with the IPR&D efforts had
not yet reached technological feasibility and the research and development in
process had no alternative future uses. The value of the IPR&D was
determined using a discounted cash flow model similar to the income approach,
focusing on the income producing capabilities of the in-process technologies.
Accordingly, the value assigned to these IPR&D amounts was charged to
expense on the respective acquisition date of each of the acquired
companies.
Restructuring
Charges
Restructuring
expenses for the three and six months ended June 27, 2008 and June 29, 2007 were
as follows:
|
|
Three
Months Ended
|
|
|
|
Six
Months Ended
|
|
|
|
|
June 27,
|
|
|
|
June 29,
|
|
|
|
June 27,
|
|
|
|
June 29,
|
|
|
|
|
2008
|
|
|
|
2007
|
|
|
|
2008
|
|
|
|
2007
|
|
(in
thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Severance and
Benefits
|
|
$
|
3,344
|
|
|
$
|
333
|
|
|
$
|
3,344
|
|
|
$
|
3,025
|
|
During
the three and six months ended June 27, 2008, restructuring expenses of $3.3
million were related to management decisions designed to improve operational
efficiency and financial results. The restructuring expenses,
included in cost of sales and operating expenses, were related to a decision to
streamline processes and reduce the cost structure of the company, with
approximately 90 employees affected worldwide within our Engineering and
Construction and Mobile Solutions segments. As a result of these decisions, we
expect these restructuring activities to result in additional restructuring
expenses totaling approximately $2.6 million through the first quarter of
2010.
During
the three and six months ended June 29, 2007, restructuring expenses of $0.3
million and $3.0 million, respectively were for charges associated with our
acquisition of @Road. The restructuring expenses were related to the
acceleration of vesting of employee stock options for certain terminated @Road
employees, of which $1.4 million was settled in cash and $1.6 million was
recorded as Shareholders’ equity.
Restructuring
costs associated with a business combination:
In
addition to the restructuring expenses in the six months ended June 27, 2008,
the Company had $0.9 million in reversals related to restructuring costs
associated with exiting activities of pre-merger @Road. The reversals
were primarily due to severance and benefits costs for employees whose positions
were retained in a variety of functions. The reversals were
recognized in the first quarter of fiscal 2008 as a reduction of the liability
assumed in the purchase business combination that had been included in the
allocation of the cost to acquire @Road and, accordingly, resulted in a decrease
to goodwill rather than an expense reduction in the three and six months ended
June 27, 2008.
In
addition to the restructuring expenses in the six months ended June 29, 2007,
restructuring costs, associated with exiting activities of pre-merger @Road of
$3.6 million, consisted of severance and benefits costs. These costs
were recognized as a liability assumed in the purchase business combination and
were included in the allocation of the cost to acquire @Road and accordingly,
resulted in an increase to goodwill rather than an expense in the six months
ended June 29, 2007.
Restructuring
activity:
Restructuring
activity for the six months ended June 27, 2008 was as follows (in
thousands):
Balance
as of December 28, 2007
|
|
$ |
1,326 |
|
Charges
|
|
|
3,344 |
|
Payments
|
|
|
(2,450 |
) |
Adjustment
|
|
|
(909 |
) |
Balance
as of June 27, 2008
|
|
$ |
1,311 |
|
The $1.3
million restructuring accrual consists of severance and benefits. The
severance charges will be paid through the first quarter of fiscal 2010. Of the
$1.3 million restructuring accrual, $0.9 million is included in Other current
liabilities and is expected to be settled by the fourth quarter of fiscal
2008. The remaining balance of $0.4 million is included in Other
non-current liabilities and is expected to be settled by the first quarter of
fiscal 2010.
Non-operating
Income, Net
The
components of non-operating income, net, are as follows (in
thousands):
|
|
Three
Months Ended
|
|
|
Six
Months Ended
|
|
|
|
June 27,
|
|
|
|
June 29,
|
|
|
|
June 27,
|
|
|
|
June 29,
|
|
|
|
|
2008
|
|
|
|
2007
|
|
|
|
2008
|
|
|
|
2007
|
|
(In
thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
income
|
|
$
|
508
|
|
|
$
|
593
|
|
|
$
|
965
|
|
|
$
|
1,837
|
|
Interest
expense
|
|
|
(413)
|
|
|
|
(2,459)
|
|
|
|
(1,175)
|
|
|
|
(3,860)
|
|
Foreign
currency transaction gain (loss), net
|
|
|
1,253
|
|
|
|
(430)
|
|
|
|
2,221
|
|
|
|
(73)
|
|
Income
from joint ventures
|
|
|
2,618
|
|
|
|
2,080
|
|
|
|
4,633
|
|
|
|
4,502
|
|
Other
income (expense), net
|
|
|
153
|
|
|
|
487
|
|
|
|
(754)
|
|
|
|
722
|
|
Total
non-operating income, net
|
|
$
|
4,119
|
|
|
$
|
271
|
|
|
$
|
5,890
|
|
|
$
|
3,128
|
|
Non-operating
income, net, increased $3.8 million for the second quarter of fiscal 2008, as
compared to the corresponding period in fiscal 2007 due to a decrease in
interest expense of $2.0 million and an increase in foreign exchange gains of
$1.7 million.
Non-operating
income, net, increased by $2.8 million during the first six months of fiscal
2008, as compared to the corresponding period in fiscal 2007, due to decrease in
interest expense of $2.7 million and an increase in foreign exchange gains of
$2.3 million, partially offset by losses on deferred compensation plan
investments included in Other income (expense) of $0.9 million and a decrease in
interest income of $0.9 million.
Income
Tax Provision
Our
effective income tax rate for the three and six months ended June 27, 2008 was
27.5% and 30.1%, respectively, as compared to 37.7% and 35.2% for the three and
six months ended June 29, 2007. The 2008 second quarter fiscal rate
is lower than the statutory federal income tax rate of 35% primarily due to the
implementation of a global supply chain management structure. The
2007 second quarter fiscal rate was greater than the statutory federal income
tax rate of 35% primarily due to impacts resulting from SFAS No. 123( R ),
“Share-Based Payment” and state income tax expense.
* We
anticipate an annual estimated effective tax rate of 31.0% for fiscal year 2008.
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 allowances or contingent tax liabilities, and/or discrete
quarterly events.
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.
In the normal course of business to
facilitate sales of its products, we indemnify other parties, including
customers, lessors, and parties to other transactions with the Company, with
respect to certain matters. We have agreed to hold the other party harmless
against losses arising from a breach of representations or covenants, or out of
intellectual property infringement or other claims made against certain parties.
These agreements may limit the time within which an indemnification claim can be
made and the amount of the claim. In addition, we have entered into
indemnification agreements with its officers and directors, and the Company’s
bylaws contain similar indemnification obligations to our
agents.
It is not possible to determine the
maximum potential amount under these indemnification agreements due to the
limited history of prior indemnification claims and the unique facts and
circumstances involved in each particular agreement. Historically, payments made
by us under these agreements were not material and no liabilities have been
recorded for these obligations on the Condensed Consolidated Balance Sheets as
of June 27, 2008 and December 28, 2007.
LIQUIDITY
AND CAPITAL RESOURCES
As
of
|
|
June 27,
2008
|
|
|
December 28,
2007
|
|
(In
thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
and cash equivalents
|
|
$ |
79,823 |
|
|
$ |
103,202 |
|
Total
debt
|
|
$ |
569 |
|
|
$ |
60,690 |
|
|
|
|
|
|
|
|
|
|
Three
Months Ended
|
|
June 27,
2008
|
|
|
June 29,
2007
|
|
(In
thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
provided by operating activities
|
|
$ |
100,363 |
|
|
$ |
86,457 |
|
Cash
used in investing activities
|
|
$ |
(52,877 |
) |
|
$ |
(283,054 |
) |
Cash
provided by (used in) financing activities
|
|
$ |
(75,933 |
) |
|
$ |
144,173 |
|
Effect
of exchange rate changes on cash and cash equivalents
|
|
$ |
5,068 |
|
|
$ |
(3,437 |
) |
Net
decrease in cash and cash equivalents
|
|
$ |
(23,379 |
) |
|
$ |
(55,861 |
) |
Cash
and Cash Equivalents
As of
June 27, 2008, cash and cash equivalents totaled $79.8 million compared to
$103.2 million at December 30, 2007. We had debt of $0.6 million compared to
$60.7 million at December 28, 2007.
* 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
believe that our cash and cash equivalents, together with our revolving credit
facilities will be sufficient to meet our anticipated operating cash needs and
stock purchases under the stock repurchase program for at least the next twelve
months.
* We
anticipate that planned capital expenditures primarily for computer equipment,
software, manufacturing tools and test equipment, and leasehold improvements
associated with business expansion, will constitute a partial use of our cash
resources. Decisions related to how much cash is used for investing
are influenced by the expected amount of cash to be provided by
operations.
Operating
Activities
Cash
provided by operating activities was $100.4 million for the six months ended
June 27, 2008, as compared to $86.5 million for the six months ended June 29,
2007. This increase of $13.9 million was primarily driven by an
increase in net income before non-cash depreciation expense and amortization and
working capital improvements in accounts receivables and inventories, offset by
a decrease in income taxes due.
Investing
Activities
Cash used
in investing activities was $52.9 million for the six months ended June 27,
2008, as compared to $283.1 million for the six months ended June 29,
2007. The decrease was due to cash used for acquisitions,
attributable primarily to @Road which was acquired in the first quarter of
fiscal 2007.
Financing
Activities
Cash used
by financing activities was $75.9 million for the six months ended June 27,
2008, as compared to cash provided of $144.2 million for the six months ended
June 29, 2007, primarily due to the stock repurchase of $36.3 million and
repayment of outstanding debt of $60.3 million in the first six months of 2008
as compared to outstanding debt of $122.5 million that was incurred for the
@Road acquisition in the corresponding period in fiscal 2007.
Accounts Receivable and Inventory
Metrics
As of
|
|
June 27,
2008
|
|
|
December 28,
2007
|
|
|
|
|
|
|
|
|
Accounts receivable days sales
outstanding
|
|
|
64
|
|
|
|
70
|
|
Inventory turns per
year
|
|
|
4.5
|
|
|
|
4.3
|
|
Accounts receivable days sales
outstanding were 64 days as of June 27, 2008, as compared to 70 days as of
December 28, 2007 due to increased revenue linearily. Our accounts receivable days sales
outstanding are calculated based on ending accounts receivable, net divided by
revenue times 91 days. Our
inventory turns were at 4.5 as of June 27, 2008 as compared to 4.3 for the fourth
quarter of fiscal 2007. Our inventory turnover is based on the
total cost of sales for the fiscal period over the average inventory for the
corresponding fiscal period.
Debt
Our total
debt was approximately $0.6 million as of June 27, 2008 compared to $60.7
million as of December 28, 2007.
On July
28, 2005, we entered into a $200 million unsecured revolving credit agreement
(the 2005 Credit Facility) with a syndicate of 10 banks with The Bank of Nova
Scotia as the administrative agent. On February 16, 2007, the Company
amended 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. 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, during the first quarter of
fiscal 2007 the Company incurred a five-year term loan under the 2007 Credit
Facility in an aggregate principal amount of $100 million, which has
subsequently been paid off. The maximum leverage ratio under the 2007
Credit Facility is 3.00:1. The funds available under the new
2007 Credit Facility may be used by the Company for acquisitions, stock
repurchases, and general corporate purposes. For additional
discussion of our debt, see Note 9 of Notes to the Condensed Consolidated
Financial Statements.
We 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, within certain
limitations, 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. As of June 27, 2008 we were in compliance with all financial
debt covenants.
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
have been no changes to our market interest rate risk
assessment. Refer to our 2007 Annual Report on Form
10-K.
Foreign
Currency Exchange Rate Risk
There
have been no changes to our foreign currency exchange rate risk
assessment. Refer to our 2007 Annual Report on Form
10-K.
(a)
Disclosure Controls and Procedures.
The
management, with the participation of our Chief Executive Officer and Chief
Financial Officer, has evaluated the effectiveness of our 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,
our Chief Executive Officer and Chief Financial Officer have concluded that, as
of the end of such period, our disclosure controls and procedures are
effective.
(b)
Internal Control Over Financial Reporting.
There
have not been any changes in our 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, our internal control
over financial reporting.
PART
II. OTHER INFORMATION
ITEM
1. LEGAL PROCEEDINGS
From time
to time, we are involved in litigation arising out of the ordinary course of its
business. There are no known claims or pending litigation expected to have a
material effect on our overall financial position, results of operations or
liquidity.
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 2007 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 2007 Annual Report on Form
10-K.
ITEM
2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF
PROCEEDS
(a) On
March 31, 2008, we issued 21,930 shares of our common stock to a warrant holder
pursuant to the exercise of the warrant held by such warrant
holder. The warrant holder exercised such warrants on a cashless
basis by surrendering their right to purchase a portion of the shares of common
stock based on a value of $28.60 per share, representing the average closing
price of our common stock on the ten-day period prior to the exercise
date. In connection with the cashless exercise of the warrants, the
warrants were surrendered and no underwriting discounts or commissions were
paid. We offered and sold the common stock issued in connection with
these warrants in reliance on the exemption from registration for exchanges of
securities with existing security holders by virtue of Section 3(a)(9) of the
Securities Act of 1933, as amended.
(b) None
(c) The
following table provides information relating to our purchases of equity
securities for the second quarter of fiscal 2008.
|
|
Total
Number of Shares Purchased
|
|
|
Average
Price Paid per Share
|
|
|
Total
Number of Shares Purchased as Part of Publicly Announced
Program
|
|
|
Maximum
Dollar Value of Shares that May Yet Be Purchased Under the Program
(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March
29, 2008 – May 2, 2008
|
|
|
-- |
|
|
|
-- |
|
|
|
-- |
|
|
|
-- |
|
May
3, 2008 – May 30, 2008
|
|
|
139,280 |
|
|
|
35.88 |
|
|
|
139,280 |
|
|
|
219,130,242 |
|
May
31, 2008 – June 27, 2008
|
|
|
148,100 |
|
|
|
36.60 |
|
|
|
148,100 |
|
|
|
213,706,957 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
287,380 |
|
|
|
36.25 |
|
|
|
287,380 |
|
|
|
|
|
(1)
|
In
January 2008, the Company announced that its board of directors had
authorized a stock repurchase program for up to $250 million, effective
February 1, 2008. The timing and actual number of shares repurchased will
depend on a variety of factors including price, regulatory requirements,
capital availability, and other market conditions. The program does not
require the purchase of any minimum number of shares and may be suspended
or discontinued at any time without public
notice.
|
ITEM
4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY
HOLDERS
(a)
|
The
Company’s annual meeting of shareholders, (the “Annual Meeting”), was held
at the Hyatt Regency Hotel, located at 5101 Great America Parkway, Santa
Clara, California 95054, on May 22,
2008.
|
(b)
|
At
the Annual Meeting, an election of directors was held, with the following
individuals being elected to the Company’s Board of
Directors.
|
DIRECTOR
|
|
VOTE
FOR
|
|
|
WITHHELD
|
|
Steven
W. Berglund
|
|
108,395,735
|
|
|
1,224,240
|
|
John
B. Goodrich
|
|
107,975,200
|
|
|
1,644,775
|
|
William
Hart
|
|
108,354,177
|
|
|
1,265,798
|
|
Merit
E. Janow
|
|
109,009,301
|
|
|
610,674
|
|
Ulf
J. Johansson
|
|
108,632,667
|
|
|
987,308
|
|
Bradford
W. Parkinson
|
|
107,820,009
|
|
|
1,799,966
|
|
Nickolas
W. Vande Steeg
|
|
108,998,732
|
|
|
621,243
|
|
(c)
|
Other
matters voted upon at the Annual Meeting and the results of the voting
with respect to each such matter were as
follows:
|
To
approve an amendment to the Company’s Employee Stock Purchase Plan
FOR
|
AGAINST
|
ABSTAIN
|
BROKER
NON-VOTE
|
95,767,806
|
623,917
|
96,770
|
13,131,482
|
To ratify
the appointment of Ernst & Young, LLP as the independent auditor of the
Company for the current fiscal year ending January 2, 2009.
FOR
|
AGAINST
|
ABSTAIN
|
107,445,834
|
2,045,927
|
128,214
|
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. (9)
|
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)
|
31.1
|
|
Certification
of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002 dated August 4, 2008. (10)
|
31.2
|
|
Certification
of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002 dated August 4, 2008. (10)
|
32.1
|
|
Certification
of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 dated August 4,
2008. (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 August 4,
2008. (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 3.7 to the Company’s Quarterly Report on
Form 10-Q for the quarter ended March 30, 2007.
|
(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:
August 4, 2008
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)
|
3.7
|
|
Certificate
of Amendment of Articles of Incorporation of the Company filed February
21, 2007. (9)
|
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)
|
|
|
Certification
of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002 dated August 4, 2008. (10)
|
|
|
Certification
of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002 dated August 4, 2008. (10)
|
|
|
Certification
of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 dated August 4,
2008. (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 August 4,
2008. (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 3.7 to the Company’s Quarterly Report on
Form 10-Q for the quarter ended March 30, 2007.
|
(10)
|
|
Filed
herewith.
|
35