form10q.htm
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
______________________
FORM
10-Q
______________________
(Mark
One)
T QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 26, 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
|
94-2802192
|
(State
or other jurisdiction of incorporation or organization)
|
(I.R.S.
Employer Identification
Number)
|
935
Stewart Drive, Sunnyvale, CA 94085
(Address
of principal executive offices) (Zip Code)
Telephone Number (408)
481-8000
(Registrant's
telephone number, including area code)
Indicate
by check mark whether the registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days.
Yes T 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
|
T
|
Accelerated
Filer
|
£
|
|
Non-accelerated
Filer
|
£ (Do not
check if a smaller reporting company)
|
Smaller
Reporting Company
|
£
|
Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act).
Yes £ No T
As of
October 31, 2008, there were 119,548,196 shares of Common Stock (no par value)
outstanding.
TRIMBLE NAVIGATION LIMITED
FORM
10-Q for the Quarter Ended September 26, 2008
TABLE
OF CONTENTS
PART
I.
|
|
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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22
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ITEM
3.
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32
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ITEM
4.
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32
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PART
II.
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Other
Information
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ITEM
1.
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32
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ITEM
1A.
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32
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ITEM
2.
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33
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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)
|
|
September 26, 2008
|
|
|
December 28, 2007
|
|
(In
thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ASSETS
|
|
|
|
|
|
|
Current
assets:
|
|
|
|
|
|
|
Cash
and cash equivalents
|
|
$ |
70,479 |
|
|
$ |
103,202 |
|
Accounts
receivable, net
|
|
|
257,548 |
|
|
|
239,884 |
|
Other
receivables
|
|
|
8,724 |
|
|
|
10,201 |
|
Inventories,
net
|
|
|
162,033 |
|
|
|
143,018 |
|
Deferred
income taxes
|
|
|
49,637 |
|
|
|
44,333 |
|
Other
current assets
|
|
|
16,738 |
|
|
|
15,661 |
|
Total
current assets
|
|
|
565,159 |
|
|
|
556,299 |
|
Property
and equipment, net
|
|
|
50,819 |
|
|
|
51,444 |
|
Goodwill
|
|
|
716,191 |
|
|
|
675,850 |
|
Other
purchased intangible assets, net
|
|
|
181,196 |
|
|
|
197,777 |
|
Other
non-current assets
|
|
|
60,332 |
|
|
|
57,989 |
|
Total
assets
|
|
$ |
1,573,697 |
|
|
$ |
1,539,359 |
|
|
|
|
|
|
|
|
|
|
LIABILITIES
AND SHAREHOLDERS' EQUITY
|
|
|
|
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
|
|
|
|
Current
portion of long-term debt
|
|
$ |
129 |
|
|
$ |
126 |
|
Accounts
payable
|
|
|
68,446 |
|
|
|
67,589 |
|
Accrued
compensation and benefits
|
|
|
47,994 |
|
|
|
55,133 |
|
Deferred
revenue
|
|
|
56,559 |
|
|
|
49,416 |
|
Accrued
warranty expense
|
|
|
12,077 |
|
|
|
10,806 |
|
Income
taxes payable
|
|
|
17,201 |
|
|
|
14,802 |
|
Other
current liabilities
|
|
|
35,808 |
|
|
|
51,980 |
|
Total
current liabilities
|
|
|
238,214 |
|
|
|
249,852 |
|
Non-current
portion of long-term debt
|
|
|
51,487 |
|
|
|
60,564 |
|
Non-current
deferred revenue
|
|
|
12,921 |
|
|
|
15,872 |
|
Deferred
income taxes
|
|
|
56,373 |
|
|
|
47,917 |
|
Other
non-current liabilities
|
|
|
54,672 |
|
|
|
56,128 |
|
Total
liabilities
|
|
|
413,667 |
|
|
|
430,333 |
|
|
|
|
|
|
|
|
|
|
Commitments
and contingencies
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shareholders'
equity:
|
|
|
|
|
|
|
|
|
Preferred
stock no par value; 3,000 shares authorized; none
outstanding
|
|
|
-- |
|
|
|
-- |
|
Common
stock, no par value; 180,000 shares authorized; 119,523 and 121,596 shares
issued and outstanding at September 26, 2008 and December 28, 2007,
respectively
|
|
|
681,019 |
|
|
|
660,749 |
|
Retained
earnings
|
|
|
421,155 |
|
|
|
388,557 |
|
Accumulated
other comprehensive income
|
|
|
57,856 |
|
|
|
59,720 |
|
Total
shareholders' equity
|
|
|
1,160,030 |
|
|
|
1,109,026 |
|
Total
liabilities and shareholders' equity
|
|
$ |
1,573,697 |
|
|
$ |
1,539,359 |
|
See
accompanying Notes to the Condensed Consolidated Financial
Statements.
TRIMBLE NAVIGATION LIMITED
CONDENSED
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
|
|
Three Months Ended
|
|
|
Nine Months Ended
|
|
|
|
September 26, 2008
|
|
|
September 28, 2007
|
|
|
September 26, 2008
|
|
|
September 28, 2007
|
|
(In
thousands, except per share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue (1)
|
|
$ |
328,087 |
|
|
$ |
296,023 |
|
|
$ |
1,061,150 |
|
|
$ |
909,487 |
|
Cost
of sales (1)
|
|
|
162,464 |
|
|
|
149,083 |
|
|
|
534,052 |
|
|
|
452,248 |
|
Gross
margin
|
|
|
165,623 |
|
|
|
146,940 |
|
|
|
527,098 |
|
|
|
457,239 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research
and development
|
|
|
35,348 |
|
|
|
31,707 |
|
|
|
112,097 |
|
|
|
96,737 |
|
Sales
and marketing
|
|
|
48,664 |
|
|
|
45,274 |
|
|
|
151,727 |
|
|
|
134,967 |
|
General
and administrative
|
|
|
22,072 |
|
|
|
21,262 |
|
|
|
70,051 |
|
|
|
67,182 |
|
Restructuring
charges
|
|
|
21 |
|
|
|
- |
|
|
|
2,435 |
|
|
|
3,025 |
|
Amortization
of purchased intangible assets
|
|
|
5,462 |
|
|
|
4,911 |
|
|
|
15,768 |
|
|
|
14,212 |
|
In-process
research and development
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
2,112 |
|
Total
operating expenses
|
|
|
111,567 |
|
|
|
103,154 |
|
|
|
352,078 |
|
|
|
318,235 |
|
Operating
income
|
|
|
54,056 |
|
|
|
43,786 |
|
|
|
175,020 |
|
|
|
139,004 |
|
Non-operating
income, net
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
income
|
|
|
404 |
|
|
|
770 |
|
|
|
1,369 |
|
|
|
2,607 |
|
Interest
expense
|
|
|
(214 |
) |
|
|
(1,616 |
) |
|
|
(1,389 |
) |
|
|
(5,476 |
) |
Foreign
currency transaction gain (loss), net
|
|
|
117 |
|
|
|
(459 |
) |
|
|
2,338 |
|
|
|
(532 |
) |
Income
from joint ventures
|
|
|
2,163 |
|
|
|
1,943 |
|
|
|
6,796 |
|
|
|
6,445 |
|
Other
income (expense ), net
|
|
|
(907 |
) |
|
|
451 |
|
|
|
(1,661 |
) |
|
|
1,173 |
|
Total
non-operating income, net
|
|
|
1,563 |
|
|
|
1,089 |
|
|
|
7,453 |
|
|
|
4,217 |
|
Income
before taxes
|
|
|
55,619 |
|
|
|
44,875 |
|
|
|
182,473 |
|
|
|
143,221 |
|
Income
tax provision
|
|
|
16,552 |
|
|
|
17,501 |
|
|
|
54,740 |
|
|
|
52,138 |
|
Net
income
|
|
$ |
39,067 |
|
|
$ |
27,374 |
|
|
$ |
127,733 |
|
|
$ |
91,083 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
earnings per share
|
|
$ |
0.32 |
|
|
$ |
0.23 |
|
|
$ |
1.05 |
|
|
$ |
0.77 |
|
Shares
used in calculating basic earnings per share
|
|
|
120,603 |
|
|
|
120,591 |
|
|
|
121,171 |
|
|
|
118,553 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
earnings per share
|
|
$ |
0.31 |
|
|
$ |
0.22 |
|
|
$ |
1.02 |
|
|
$ |
0.74 |
|
Shares
used in calculating diluted earnings per share
|
|
|
124,423 |
|
|
|
125,687 |
|
|
|
125,071 |
|
|
|
123,691 |
|
(1) Sales
to related parties, Caterpillar Trimble Control Technologies Joint Venture
(CTCT) and Nikon-Trimble Joint Venture (Nikon-Trimble) were $7.1 million and
$6.4 million for the three months ended September 26, 2008 and September
28, 2007, respectively, with associated cost of sales of $6.2 million and $4.7
million, respectively. Sales to CTCT and Nikon-Trimble were $22.4
million and $17.8 million for the nine months ended September 26, 2008 and
September 28, 2007, respectively, with associated cost of sales of $17.9 million
and $12.5 million, respectively. In addition, cost of sales
associated with CTCT net inventory purchases was $4.5 million and $5.6 million
for the three months ended September 26, 2008 and September 28, 2007,
respectively, and $18.0 million and $19.8 million for the nine months ended
September 26, 2008 and September 28, 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)
|
|
Nine Months Ended
|
|
|
|
September 26, 2008
|
|
|
September 28, 2007
|
|
(In
thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
flow from operating activities:
|
|
|
|
|
|
|
Net
income
|
|
$ |
127,733 |
|
|
$ |
91,083 |
|
Adjustments
to reconcile net income to net cash provided by operating
activities:
|
|
|
|
|
|
|
|
|
Depreciation
expense
|
|
|
14,287 |
|
|
|
12,733 |
|
Amortization
expense
|
|
|
32,999 |
|
|
|
28,615 |
|
Provision
for doubtful accounts
|
|
|
597 |
|
|
|
684 |
|
Amortization
of debt issuance costs
|
|
|
169 |
|
|
|
162 |
|
Deferred
income taxes
|
|
|
(14,235 |
) |
|
|
(6,547 |
) |
Non-cash
restructuring charges
|
|
|
- |
|
|
|
1,725 |
|
Stock-based
compensation
|
|
|
11,603 |
|
|
|
10,949 |
|
In-process
research and development
|
|
|
- |
|
|
|
2,112 |
|
Equity
gain from joint venture
|
|
|
(6,796 |
) |
|
|
(6,445 |
) |
Excess
tax benefit for stock-based compensation
|
|
|
(5,847 |
) |
|
|
(13,283 |
) |
Provision
for excess and obsolete inventories
|
|
|
2,672 |
|
|
|
3,513 |
|
Other
non-cash items
|
|
|
179 |
|
|
|
144 |
|
Add
decrease (increase) in assets:
|
|
|
- |
|
|
|
|
|
Accounts
receivable
|
|
|
(16,230 |
) |
|
|
(42,971 |
) |
Other
receivables
|
|
|
1,598 |
|
|
|
4,619 |
|
Inventories
|
|
|
(16,165 |
) |
|
|
(15,512 |
) |
Other
current and non-current assets
|
|
|
(201 |
) |
|
|
6,353 |
|
Add
increase (decrease) in liabilities:
|
|
|
|
|
|
|
|
|
Accounts
payable
|
|
|
(1,859 |
) |
|
|
(7,518 |
) |
Accrued
compensation and benefits
|
|
|
(7,426 |
) |
|
|
(6,182 |
) |
Accrued
liabilities
|
|
|
725 |
|
|
|
5,350 |
|
Deferred
revenue
|
|
|
2,862 |
|
|
|
25,989 |
|
Income
taxes payable
|
|
|
15,280 |
|
|
|
33,511 |
|
Net
cash provided by operating activities
|
|
|
141,945 |
|
|
|
129,084 |
|
|
|
|
|
|
|
|
|
|
Cash
flow from investing activities:
|
|
|
|
|
|
|
|
|
Acquisitions
of businesses, net of cash acquired
|
|
|
(69,310 |
) |
|
|
(285,523 |
) |
Acquisitions
of property and equipment
|
|
|
(11,293 |
) |
|
|
(9,208 |
) |
Dividends
received
|
|
|
3,148 |
|
|
|
2,888 |
|
Other
|
|
|
(154 |
) |
|
|
361 |
|
Net
cash used in investing activities
|
|
|
(77,609 |
) |
|
|
(291,482 |
) |
|
|
|
|
|
|
|
|
|
Cash
flow from financing activities:
|
|
|
|
|
|
|
|
|
Issuances
of common stock
|
|
|
22,119 |
|
|
|
27,830 |
|
Excess
tax benefit for stock-based compensation
|
|
|
5,847 |
|
|
|
13,283 |
|
Repurchase
and retirement of common stock
|
|
|
(115,851 |
) |
|
|
- |
|
Proceeds
from long-term debt and revolving credit lines
|
|
|
51,000 |
|
|
|
250,000 |
|
Payments
on long-term debt and revolving credit lines
|
|
|
(60,316 |
) |
|
|
(170,037 |
) |
Net
cash provided by (used in) financing activities
|
|
|
(97,201 |
) |
|
|
121,076 |
|
|
|
|
|
|
|
|
|
|
Effect
of exchange rate changes on cash and cash equivalents
|
|
|
142 |
|
|
|
(4,227 |
) |
|
|
|
|
|
|
|
|
|
Net
decrease in cash and cash equivalents
|
|
|
(32,723 |
) |
|
|
(45,549 |
) |
Cash
and cash equivalents, beginning of period
|
|
|
103,202 |
|
|
|
129,621 |
|
Cash
and cash equivalents, end of period
|
|
$ |
70,479 |
|
|
$ |
84,072 |
|
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 third quarters of fiscal 2008 and
fiscal 2007 ended on September 26, 2008 and September 28, 2007,
respectively. Fiscal 2008 is a 53-week year and fiscal 2007 was 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 unaudited financial data as of September 26, 2008 and for the three
and nine months ended September 26, 2008 and September 28, 2007 has been
prepared by the Company 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
September 26, 2008, results of operations for the three and nine months ended
September 26, 2008 and September 28, 2007 and cash flows for the nine months
ended September 26, 2008 and September 28, 2007, as applicable, have been
made. The results of operations for the three and nine months ended
September 26, 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
nine months ended September 26, 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 position, 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.
In May
2008, the FASB issued Statement No. 162 “The Hierarchy of Generally Accepted
Accounting Principles”. This Statement identifies the sources of
accounting principles and the framework for selecting principles to be used in
the preparation of financial statements of nongovernmental entities that are
presented in conformity with generally accepted accounting principles (GAAP) in
the United States (the GAAP hierarchy). This Statement shall be
effective November 16, 2008. Management does not expect the
application of Statement No. 162 to 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 has
expanded 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) 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 outstanding 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 options 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 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
|
|
|
137,916 |
|
|
|
|
|
|
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
|
|
$ |
264,768 |
|
Net
Tangible Assets
(in
thousands)
|
|
As
of February 16, 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
|
|
|
41,146 |
|
Other
non-current assets
|
|
|
7,935 |
|
|
|
|
|
|
Total
assets acquired
|
|
$ |
180,592 |
|
|
|
|
|
|
Accounts
payable
|
|
|
19,285 |
|
Deferred
revenue
|
|
|
7,365 |
|
Other
current liabilities
|
|
|
16,026 |
|
|
|
|
|
|
Total
liabilities assumed
|
|
$ |
42,676 |
|
|
|
|
|
|
Total
net assets acquired
|
|
$ |
137,916 |
|
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 $264.8 million assigned to goodwill, approximately $6.7
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:
|
|
Nine Months Ended
|
|
|
|
September 28,
2007 (a)
|
|
(in
thousands, except per share data)
|
|
|
|
Pro-forma
revenue
|
|
$ |
925,103 |
|
Pro-forma
net income
|
|
|
88,437 |
|
Pro-forma
basic net income per share
|
|
$ |
0.74 |
|
Pro-forma
diluted net income per share
|
|
$ |
0.71 |
|
(a)
|
The
pro-forma results of operations represent the Company’s results for the
nine months ended September 28, 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 $1.4 million
increase 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 $0.5 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 three months
ended September 26, 2008, the Company repurchased approximately 2,452,000 shares
of common stock in open market purchases at an average price of $32.43 per
share. During the nine months ended September 26, 2008, the
Company repurchased approximately 3,707,000 shares of common stock in open
market purchases at an average price of $31.23 per share. The total
purchase price of $115.9 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 trade date for accounting purposes. All common shares
repurchased under this program have been retired. As of September 26, 2008, the
2008 Stock Repurchase Program had remaining authorized funds of $134.1
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 nine
months ended September 26, 2008 and September 28, 2007.
|
|
Three Months Ended
|
|
|
Nine Months Ended
|
|
|
|
September 26,
2008
|
|
|
September 28,
2007
|
|
|
September 26,
2008
|
|
|
September 28,
2007
|
|
(in
thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost
of sales
|
|
$ |
453 |
|
|
$ |
469 |
|
|
$ |
1,433 |
|
|
$ |
1,240 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research
and development
|
|
|
796 |
|
|
|
868 |
|
|
|
2,629 |
|
|
|
2,619 |
|
Sales
and marketing
|
|
|
937 |
|
|
|
1,059 |
|
|
|
2,898 |
|
|
|
2,800 |
|
General
and administrative
|
|
|
1,640 |
|
|
|
1,408 |
|
|
|
4,643 |
|
|
|
4,290 |
|
Total
operating expenses
|
|
|
3,373 |
|
|
|
3,335 |
|
|
|
10,170 |
|
|
|
9,709 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
stock-based compensation expense
|
|
|
3,826 |
|
|
|
3,804 |
|
|
|
11,603 |
|
|
|
10,949 |
|
Tax
benefit (1)
|
|
|
(188 |
) |
|
|
294 |
|
|
|
(740 |
) |
|
|
(574 |
) |
Total
stock-based compensation expense, net of tax
|
|
$ |
3,638 |
|
|
$ |
4,098 |
|
|
$ |
10,863 |
|
|
$ |
10,375 |
|
(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
nine months ended September 26, 2008 and September 28, 2007, the following
weighted average assumptions were used:
|
|
Three Months Ended
|
|
|
Nine Months Ended
|
|
|
|
September 26,
2008
|
|
|
September 28,
2007
|
|
|
September 26,
2008
|
|
|
September 28,
2007
|
|
Expected
dividend yield
|
|
|
-- |
|
|
|
-- |
|
|
|
-- |
|
|
|
-- |
|
Expected
stock price volatility
|
|
|
39.8 |
% |
|
|
37.0 |
% |
|
|
39.7 |
% |
|
|
37.2 |
% |
Risk
free interest rate
|
|
|
2.6 |
% |
|
|
4.4 |
% |
|
|
2.7 |
% |
|
|
4.5 |
% |
Expected
life of option
|
|
3.9
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 nine months
ended September 26, 2008, the Company recorded $2.0 million and $6.7
million, respectively, as its proportionate share of CTCT net
income. During the comparable period of 2007 the Company recorded
$1.6 million and $6.1 million, respectively, as its proportionate share of
CTCT net income. During the nine months ended September 26, 2008 and
September 28, 2007, there were $3.0 million and $2.3 million dividends,
respectively, received from CTCT. The carrying amount of the
investment in CTCT was $13.3 million at September 26, 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 nine months ended September 26, 2008,
the Company recorded $2.9 million and $9.1 million of revenue,
respectively, and $2.7 million and $8.1 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 nine months ended September 28, 2007, the Company recorded
$3.9 million and $8.8 million of revenue, respectively, and
$3.4 million and $7.8 million of cost of sales, respectively. In
addition, during the three and nine months ended September 26, 2008, the Company
recorded $4.5 million and $18.0 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 nine
months ended September 28, 2007 were $5.6 million and $19.8 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
$3.2 million and $10.7 million for the three and nine months ended September 26,
2008, respectively, and totaling $3.7 million and $10.0 million for the three
and nine months ended September 28, 2007, respectively. The reimbursements were
offset against operating expenses.
At
September 26, 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 September 26, 2008 and December 28, 2007, the
receivables from CTCT were $5.7 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 $6.0 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
nine months ended September 26, 2008, the Company recorded a profit of
$0.2 million and a profit of $0.1 million, respectively. During the
three and nine months ended September 28, 2007, the Company recorded a profit of
$0.4 million and a profit of $0.4 million, respectively, as its proportionate
share of Nikon-Trimble net income. During the nine months ended
September 26, 2008 and September 28, 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
$14.0 million at September 26, 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 nine months
ended September 26, 2008, the Company recorded $4.2 million and $13.3 million of
revenue and $3.5 million and $9.8 million of cost of sales for the manufacturing
of products sold by the Company to Nikon-Trimble. During the three and nine
months ended September 28, 2007, the Company recorded $2.5 million and $9.0
million of revenue and $1.3 million and $4.7 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 $5.2 million and $12.2 million during the three and nine
months ended September 26, 2008; and $3.4 million and $16.3 million during the
three and nine months ended September 28, 2007, respectively.
At
September 26, 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 September 26, 2008
and December 28, 2007, the amounts due from Nikon-Trimble were $2.7 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 $6.6 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:
|
|
September 26, 2008
|
|
|
|
|
|
|
|
|
|
|
|
(in
thousands)
|
|
Gross
Carrying Amount
|
|
|
Accumulated
Amortization
|
|
|
Net
Carrying Amount
|
|
Developed
product technology
|
|
$ |
162,472 |
|
|
|
(76,157 |
) |
|
$ |
86,315 |
|
Trade
names and trademarks
|
|
|
20,000 |
|
|
|
(12,974 |
) |
|
|
7,026 |
|
Customer
relationships and other intellectual properties
|
|
|
134,127 |
|
|
|
(46,272 |
) |
|
|
87,855 |
|
|
|
$ |
316,599 |
|
|
|
(135,403 |
) |
|
$ |
181,196 |
|
|
|
December 28,
2007
|
|
|
|
|
|
|
|
|
|
|
|
(in
thousands)
|
|
Gross
Carrying Amount
|
|
|
Accumulated
Amortization
|
|
|
Net
Carrying 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 September 26,
2008, is as follows (in thousands):
2008
(Remaining)
|
|
$ |
11,061 |
|
2009
|
|
|
41,234 |
|
2010
|
|
|
38,830 |
|
2011
|
|
|
33,997 |
|
2012
|
|
|
25,707 |
|
Thereafter
|
|
|
30,367 |
|
Total
|
|
$ |
181,196 |
|
Goodwill
The
changes in the carrying amount of goodwill for the nine months ended September
26, 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
|
|
|
35,230 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
35,230 |
|
Purchase
price adjustments
|
|
|
1,661 |
|
|
|
2,046 |
|
|
|
1,521 |
|
|
|
- |
|
|
|
5,228 |
|
Foreign
currency translation adjustments
|
|
|
1,326 |
|
|
|
- |
|
|
|
(915 |
) |
|
|
(528 |
) |
|
|
(117 |
) |
Balance
as of September 26,2008
|
|
$ |
356,103 |
|
|
$ |
7,270 |
|
|
$ |
338,267 |
|
|
$ |
14,551 |
|
|
$ |
716,191 |
|
The
purchase price adjustments relate entirely to previous business
acquisitions. The total purchase price adjustments of $5.2 million
recorded during the nine months ended September 26, 2008 is comprised of
earn-out payments of $3.2 million, tax adjustments of $1.9 million and $0.1
million for changes in purchase price allocation estimates.
NOTE 7.
CERTAIN BALANCE SHEET COMPONENTS
Inventories,
net consisted of the following:
As of
|
|
September 26,
2008
|
|
|
December 28,
2007
|
|
(in
thousands)
|
|
|
|
|
|
|
Raw
materials
|
|
$ |
75,562 |
|
|
$ |
63,465 |
|
Work-in-process
|
|
|
7,809 |
|
|
|
9,267 |
|
Finished
goods
|
|
|
78,662 |
|
|
|
70,286 |
|
Total
inventories, net
|
|
$ |
162,033 |
|
|
$ |
143,018 |
|
Deferred
costs of revenue are included within finished goods and were $15.4 million at
September 26, 2008 and $11.0 million at December 28, 2007.
Other
non-current liabilities consisted of the following:
As of
|
September 26,
2008
|
|
December 28,
2007
|
|
(in
thousands)
|
|
|
|
|
|
|
|
|
|
Deferred
compensation
|
|
$ |
7,582 |
|
|
$ |
8,646 |
|
Unrecognized
tax benefits
|
|
|
29,560 |
|
|
|
25,774 |
|
Other
non-current liabilities
|
|
|
17,530 |
|
|
|
21,708 |
|
Total
other non-current liabilities
|
|
$ |
54,672 |
|
|
$ |
56,128 |
|
As of
September 26, 2008 and December 28, 2007, the Company has $29.6 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.
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 inventories.
|
|
Reporting Segments
|
|
|
|
|
|
|
Engineering
and Construction
|
|
|
Field
Solutions
|
|
|
Mobile
Solutions
|
|
|
Advanced
Devices
|
|
|
Total
|
|
(in
thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three
Months Ended September 26, 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment
revenue
|
|
$ |
191,858 |
|
|
$ |
64,354 |
|
|
$ |
40,822 |
|
|
$ |
31,053 |
|
|
$ |
328,087 |
|
Operating
income
|
|
|
41,560 |
|
|
|
22,058 |
|
|
|
3,602 |
|
|
|
6,835 |
|
|
|
74,055 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three
Months Ended September 28, 2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment
revenue
|
|
$ |
182,135 |
|
|
$ |
44,763 |
|
|
$ |
39,204 |
|
|
$ |
29,921 |
|
|
$ |
296,023 |
|
Operating
income
|
|
|
42,824 |
|
|
|
11,931 |
|
|
|
2,855 |
|
|
|
4,893 |
|
|
|
62,503 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine
Months Ended September 26, 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment
revenue
|
|
$ |
599,057 |
|
|
$ |
242,461 |
|
|
$ |
127,118 |
|
|
$ |
92,514 |
|
|
$ |
1,061,150 |
|
Operating
income
|
|
|
123,675 |
|
|
|
91,961 |
|
|
|
7,997 |
|
|
|
18,105 |
|
|
|
241,738 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine
Months Ended September 28, 2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment
revenue
|
|
$ |
556,592 |
|
|
$ |
150,998 |
|
|
$ |
109,988 |
|
|
$ |
91,909 |
|
|
$ |
909,487 |
|
Operating
income
|
|
|
137,359 |
|
|
|
46,957 |
|
|
|
6,778 |
|
|
|
13,620 |
|
|
|
204,714 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As
of September 26, 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts
receivable (1)
|
|
$ |
161,185 |
|
|
$ |
41,619 |
|
|
$ |
30,520 |
|
|
$ |
24,224 |
|
|
$ |
257,548 |
|
Inventories
|
|
|
106,920 |
|
|
|
20,063 |
|
|
|
16,821 |
|
|
|
18,229 |
|
|
|
162,033 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 the Company’s consolidated segment operating income to
consolidated income before income taxes is as follows:
|
|
Three Months Ended
|
|
|
Nine Months Ended
|
|
|
|
September 26,
2008
|
|
|
September 28,
2007
|
|
|
September 26,
2008
|
|
|
September 28,
2007
|
|
(in
thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated
segment operating income
|
|
$ |
74,055 |
|
|
$ |
62,503 |
|
|
$ |
241,738 |
|
|
$ |
204,707 |
|
Unallocated
corporate expense
|
|
|
(8,405 |
) |
|
|
(8,543 |
) |
|
|
(30,058 |
) |
|
|
(32,065 |
) |
Amortization
of purchased intangible assets
|
|
|
(11,143 |
) |
|
|
(10,174 |
) |
|
|
(32,865 |
) |
|
|
(28,501 |
) |
In-process
research and development expense
|
|
|
-- |
|
|
|
-- |
|
|
|
-- |
|
|
|
(2,112 |
) |
Restructuring
charges
|
|
|
(451 |
) |
|
|
-- |
|
|
|
(3,795 |
) |
|
|
(3,025 |
) |
Consolidated
operating income
|
|
|
54,056 |
|
|
|
43,786 |
|
|
|
175,020 |
|
|
|
139,004 |
|
Non-operating
income, net
|
|
|
1,563 |
|
|
|
1,089 |
|
|
|
7,453 |
|
|
|
4,217 |
|
Consolidated
income before taxes
|
|
$ |
55,619 |
|
|
$ |
44,875 |
|
|
$ |
182,473 |
|
|
$ |
143,221 |
|
NOTE 9.
LONG-TERM DEBT, COMMITMENTS AND CONTINGENCIES
Long-term
debt consisted of the following:
As of
|
|
September 26,
2008
|
|
|
December 28,
2007
|
|
(in
thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Credit
Facilities:
|
|
|
|
|
|
|
Term
loan
|
|
$ |
- |
|
|
$ |
60,000 |
|
Revolving
credit facility
|
|
|
51,000 |
|
|
|
- |
|
Promissory
notes and other
|
|
|
616 |
|
|
|
690 |
|
Total
debt
|
|
|
51,616 |
|
|
|
60,690 |
|
|
|
|
|
|
|
|
|
|
Less
current portion of long-term debt
|
|
|
129 |
|
|
|
126 |
|
Non-current
portion
|
|
$ |
51,487 |
|
|
$ |
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 paying off other debts or loans. 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
September 26, 2008, the Company had $51 million drawn on the revolving credit
line and was in compliance with all financial debt covenants.
The
Company may borrow funds under the 2007 Credit Facility in U.S. Dollars or in
certain other currencies, and borrowings will bear interest, at the Company's
option, at either: (i) a base rate, based on the administrative agent's prime
rate, plus a margin of between 0% and 0.125%, depending on the Company's
leverage ratio as of its most recently ended fiscal quarter, or (ii) a
reserve-adjusted rate based on the London Interbank Offered Rate (LIBOR), Euro
Interbank Offered Rate (EURIBOR), Stockholm Interbank Offered Rate (STIBOR), or
other agreed-upon rate, depending on the currency borrowed, plus a margin of
between 0.625% and 1.125%, depending on the Company's leverage ratio as of the
most recently ended fiscal quarter. The Company's obligations under the 2007
Credit Facility are guaranteed by certain of the Company's domestic
subsidiaries.
The 2007
Credit Facility contains customary affirmative, negative and financial covenants
including, among other requirements, negative covenants that restrict the
Company's ability to dispose of assets, create liens, incur indebtedness,
repurchase stock, pay dividends, make acquisitions, make investments, enter into
mergers and consolidations and make capital expenditures, 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
September 26, 2008 and December 28, 2007, the Company had notes payable totaling
approximately $616,000 and $690,000, respectively, consisting of government
loans to foreign subsidiaries.
Leases
and other commitments
The
estimated future minimum operating lease commitments as of September 26, 2008,
are as follows (in thousands):
2008
(Remaining)
|
|
$ |
4,926 |
|
2009
|
|
|
18,258 |
|
2010
|
|
|
12,153 |
|
2011
|
|
|
7,676 |
|
2012
|
|
|
5,710 |
|
Thereafter
|
|
|
1,023 |
|
Total
|
|
$ |
49,746 |
|
Additionally,
as of September 26, 2008, the Company had acquisition-related earn-outs of $6.9
million and holdbacks of $14.6 million recorded in Other current liabilities and
Other non-current liabilities. The maximum remaining payments, including the
$6.9 million and $14.6 million recorded, will not exceed $88.4
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
September 26, 2008, the Company had unconditional purchase obligations of
approximately $68.1 million. These unconditional purchase obligations primarily
represent open non-cancelable purchase orders for material purchases with the
Company’s 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 defines fair value, establishes a
framework for measuring fair value, and requires enhanced disclosures about
assets and liabilities measured at fair value, became effective for the Company
beginning in its first quarter of fiscal 2008. 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 September 26, 2008
|
|
(in
thousands)
|
|
Level
I
|
|
|
Level
II
|
|
|
Level
III
|
|
|
Total
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred
compensation plan assets (1)
|
|
|
7,693 |
|
|
|
— |
|
|
|
— |
|
|
|
7,693 |
|
Derivative
assets (2)
|
|
|
— |
|
|
|
160 |
|
|
|
— |
|
|
|
160 |
|
Total
|
|
|
7,693 |
|
|
|
160 |
|
|
|
— |
|
|
|
7,853 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred
compensation plan liabilities (1)
|
|
|
7,582 |
|
|
|
— |
|
|
|
— |
|
|
|
7,582 |
|
Derivative
liabilities (2)
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Total
|
|
|
7,582 |
|
|
|
— |
|
|
|
— |
|
|
|
7,582 |
|
(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 nine months ended
September 26, 2008 are as follows (in thousands):
Balance
as of December 28, 2007
|
|
$ |
10,806 |
|
Accruals
for warranties issued
|
|
|
16,387 |
|
Changes
in estimates
|
|
|
-- |
|
Warranty
settlements (in cash or in kind)
|
|
|
(15,116 |
) |
Balance
as of September 26, 2008
|
|
$ |
12,077 |
|
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
|
|
|
Nine Months Ended
|
|
|
|
September 26,
2008
|
|
|
September 28,
2007
|
|
|
September 26,
2008
|
|
|
September 28,
2007
|
|
(in
thousands, except per share amounts)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Numerator:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
available to common shareholders:
|
|
$ |
39,067 |
|
|
$ |
27,374 |
|
|
$ |
127,733 |
|
|
$ |
91,083 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Denominator:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
average number of common shares used in basic earnings per
share
|
|
|
120,603 |
|
|
|
120,591 |
|
|
|
121,171 |
|
|
|
118,553 |
|
Effect
of dilutive securities (using treasury stock method):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
stock options and restricted stock units
|
|
|
3,820 |
|
|
|
5,025 |
|
|
|
3,893 |
|
|
|
4,848 |
|
Common
stock warrants
|
|
|
-- |
|
|
|
71 |
|
|
|
7 |
|
|
|
290 |
|
Weighted
average number of common shares and dilutive potential common shares used
in diluted earnings per share
|
|
|
124,423 |
|
|
|
125,687 |
|
|
|
125,071 |
|
|
|
123,691 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
earnings per share
|
|
$ |
0.32 |
|
|
$ |
0.23 |
|
|
$ |
1.05 |
|
|
$ |
0.77 |
|
Diluted
earnings per share
|
|
$ |
0.31 |
|
|
$ |
0.22 |
|
|
$ |
1.02 |
|
|
$ |
0.74 |
|
NOTE 13:
RESTRUCTURING CHARGES:
Restructuring
expenses for the three and nine months ended September 26, 2008 and September
28, 2007 were as follows:
|
|
Three Months Ended
|
|
|
Nine Months Ended
|
|
|
|
September 26,
2008
|
|
|
September 28,
2007
|
|
|
September 26,
2008
|
|
|
September 28,
2007
|
|
(in
thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Severance
and benefits
|
|
$ |
451 |
|
|
$ |
-- |
|
|
$ |
3,795 |
|
|
$ |
3,025 |
|
During
the three and nine months ended September 26, 2008, restructuring expenses
of $0.5 million and $3.8 million, respectively, and were related to
decisions to streamline processes and reduce the cost structure of the Company,
with approximately 90 employees affected worldwide. The amount for
the three month period is related to the Engineering and Construction
segment. Of the total for the nine month period, $3.3 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 $2.2 million
through the first quarter of 2010.
During
the three and nine months ended September 28, 2007, restructuring expenses of
$0.0 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 nine months ended September 26,
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 nine months ended September
26, 2008.
In
addition to the restructuring expenses in the nine months ended September 28,
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 nine months
ended September 28, 2007.
Restructuring
liability:
Restructuring
activity for the nine months ended September 26, 2008 was as follows (in
thousands):
Balance
as of December 28, 2007
|
|
$ |
1,326 |
|
Charges
|
|
|
3,795 |
|
Payments
|
|
|
(2,793 |
) |
Adjustment
|
|
|
(1,020 |
) |
Balance
as of September 26,2008
|
|
$ |
1,308 |
|
The $1.3
million restructuring accrual consists of severance and benefits. Of
the $1.3 million restructuring accrual, $0.4 million is included in Other
current liabilities and is expected to be settled by the fourth quarter of
fiscal 2008. The remaining balance of $0.9 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
The
Company’s effective income tax rate for the three and nine months ended
September 26, 2008 was 29.8% and 30.0%, respectively, as compared to 39.0% and
36.4% for the three and nine months ended September 28, 2007.
The Emergency
Economic Stabilization Act of 2008, Energy Improvement and Extension Act of 2008
and Tax Extenders and Alternative Minimum Tax Relief Act of 2008 (HR1424) was signed into
law on October 3, 2008. This legislation includes a provision that
retroactively extends the research tax credit from January 1, 2008 to December
31, 2009. The Company has not yet completed the analysis of the 2008
benefit which will be recognized in the fourth quarter of fiscal
2008.
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. The Company does not anticipate a
significant impact to the unrecognized tax benefits balance with respect to
current tax examinations. 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 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 $32.6 million and $28.4 million at September 26, 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 September 26, 2008 and December 30, 2007, of $3.9
million and $3.1 million, respectively, which were recorded in Other non-current
liabilities in the accompanying Condensed Consolidated Balance
Sheets.
NOTE 15:
COMPREHENSIVE INCOME:
The
components of comprehensive income, net of related tax, are as
follows:
|
|
Three Months Ended
|
|
|
Nine Months Ended
|
|
|
|
September 26,
2008
|
|
|
September 28,
2007
|
|
|
September 26,
2008
|
|
|
September 28,
2007
|
|
(in
thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income
|
|
$ |
39,067 |
|
|
$ |
27,374 |
|
|
$ |
127,733 |
|
|
$ |
91,083 |
|
Foreign
currency translation adjustments, net of tax
|
|
|
(19,835 |
) |
|
|
12,662 |
|
|
|
(1,688 |
) |
|
|
18,761 |
|
Net
unrealized actuarial gain (loss)
|
|
|
21 |
|
|
|
(12 |
) |
|
|
(3 |
) |
|
|
(20 |
) |
Net
unrealized gain (loss) on investments
|
|
|
(173 |
) |
|
|
(15 |
) |
|
|
(173 |
) |
|
|
20 |
|
Comprehensive
income
|
|
$ |
19,080 |
|
|
$ |
40,009 |
|
|
$ |
125,869 |
|
|
$ |
109,844 |
|
NOTE 16:
SUBSEQUENT EVENT
Borrowing
from revolving credit line
In
October 2008, the Company borrowed an additional $100 million on its revolving
credit agreement for working capital needs and potential future
acquisitions. See Note 9 for more information as to the
detailed terms of this credit facility.
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 nine
months ended September 26, 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 position, 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.
In May
2008, the FASB issued Statement No. 162 “The Hierarchy of Generally Accepted
Accounting Principles”. This Statement identifies the sources of
accounting principles and the framework for selecting principles to be used in
the preparation of financial statements of nongovernmental entities that are
presented in conformity with generally accepted accounting principles (GAAP) in
the United States (the GAAP hierarchy). This Statement shall be
effective November 16, 2008. We do not expect the application of
Statement No. 162 to 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. This year we introduced the AgGPS® EZ-Guide® Lightbar
Guidance System, GPS Pathfinder® ProXTR Receiver, Trimble® GeoExplorer® 2008
Series in our Field Solutions Segment. In the Engineering and Construction
Segment, we introduced the Trimble MEP layout solution, a new wireless data
controller for the LM80 Layout Manager, Trimble GCS900 Grade Control System
version 10.8, Trimble Coastal Center™ Software, and Trimble NetR8™ GNSS
Reference Receiver. We also introduced further enhancements to our complete
surveying portfolio as part of its Connected Site™ solutions: new models of the
Trimble S8 Total Station with options for monitoring and tunneling applications;
a new version of Trimble Business Center; a scalable Trimble VX™ Spatial
Station; and improved field to office solutions for German surveyors .In the
Mobile Solutions Segment, we announced that Carrier Corporation, the world
leader in air-conditioning, heating, and refrigeration systems is rolling out
Trimble's Mobile Resource Management (MRM) solution within its Carrier
Commercial Service (CCS) fleet. All of these 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. This year we
introduced the Agriculture Manager™ Asset Management System AgGPS EZ-Office™ Software in
our Field Solutions Segment. In the Engineering and Construction Segment, we
introduced a new sensor for the Trimble CCS900 Compaction Control System that
provides real-time material density information to earthworks operators, the
TrimTrac® Pro Locator as a hardware enabler for Trimble Construction Manager. 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 and in the state of Florida 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. We also announced that Saab and Trimble will integrate marine
navigation solutions to deliver DGPS error correction messages to ships at sea
through automatic identification system (AIS) coast stations and
networks.
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, India, Middle-East and Russia reflected improving financial
results. We announced a GPS software technology licensing agreement
with Marvell, a leader in the development of storage, communications and
consumer silicon. The licensing agreement will enable Marvell to provide
customers with comprehensive GPS solutions based on innovative architectures
that are tailored for high performance and low overall system power
consumption.
Entering
new market segments
* In the
first quarter of fiscal 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. In the third quarter of fiscal
2008, we acquired privately-held SECO Manufacturing Company of Redding,
California, a leading manufacturer of accessories for the geomatics, surveying,
mapping, and construction industries which complements the Crain Enterprises
acquisition. SECO specializes in the development, fabrication and machining of
metallic accessory products while Crain is more focused on polymer and
composite-based products. These capabilities are expected to permit marked
improvements in functionality for customers in next generation products. In
addition, Trimble, SECO and Crain will be able to leverage distribution channels
throughout the world. In the third quarter of fiscal 2008, we introduced the
Blue Ox™ System for forestry transportation management.
RECENT
BUSINESS DEVELOPMENTS
During
the twelve months ended September 26, 2008, we acquired the following companies
and the results of their operations have been combined with our operations from
the date of acquisition:
SECO
On July
29, 2008, we acquired privately-held SECO Manufacturing Company of Redding,
California, a leading manufacturer of accessories for the geometrics, surveying,
mapping, and construction industries. SECO’s performance is reported under our
Engineering and Construction business segment.
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.
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
|
|
|
Nine Months Ended
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
($
in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
consolidated revenue
|
|
$ |
328,087 |
|
|
$ |
296,023 |
|
|
$ |
1,061,150 |
|
|
$ |
909,487 |
|
Gross
margin
|
|
$ |
165,623 |
|
|
$ |
146,940 |
|
|
$ |
527,098 |
|
|
$ |
457,239 |
|
Gross
margin %
|
|
|
50.5 |
% |
|
|
49.6 |
% |
|
|
49.7 |
% |
|
|
50.3 |
% |
Total
consolidated operating income
|
|
$ |
54,056 |
|
|
$ |
43,786 |
|
|
$ |
175,020 |
|
|
$ |
139,004 |
|
Operating
income %
|
|
|
16.5 |
% |
|
|
14.8 |
% |
|
|
16.5 |
% |
|
|
15.3 |
% |
Revenue
In the
three months ended September 26, 2008, total revenue increased by $32.1 million
or 11%, as compared to the corresponding period in fiscal 2007. The increase
resulted from revenue growth across all segments. Engineering and
Construction revenue increased $9.7 million, Field Solutions increased $19.7
million, Mobile Solutions increased $1.6 million, and Advanced Devices increased
$1.1 million, as compared to the same corresponding period in fiscal
2007. Revenue growth was driven primarily by new products, a robust
agricultural environment, and acquisitions. The revenue growth was partially
offset by softness in the U.S. and European markets in Engineering and
Construction.
In the
nine months ended September 26, 2008, total revenue increased by $151.7 million
or 17%, as compared to the 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 $42.5 million, Field Solutions increased $91.5
million, Mobile Solutions increased $17.1 million, and Advanced Devices
increased $0.6 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 market, international growth
and a full quarter of @Road for the first quarter of fiscal 2008 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.
markets 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 $18.7 million and $69.9 million for the three and nine
months ended September 26, 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 September 26, 2008 was 50.5%, as compared to
49.6% for the three months ended September 28, 2007. Gross margin as a
percentage of total revenue for the nine months ended September 26, 2008 was
49.7% as compared to 50.3% for the nine months ended September 28,
2007.
The
increase in gross margin for the three and nine month periods was primarily due
to higher revenue. The increase in gross margin percentage for the
three month period was driven primarily by product mix and product cost
reductions. The decrease in gross margin percentage for the nine month period
was driven primarily by increased amortization of purchased intangibles,
restructuring costs, product mix and foreign exchange.
Operating
Income
Operating
income increased by $10.3 million and $36.0 million for the three and nine
months ended September 26, 2008, respectively, as compared to the corresponding
period in the prior year. Operating income as a percentage of total
revenue was 16.5% for the three months ended September 26, 2008, as compared to
14.8% for the three months ended September 28, 2007. Operating income
as a percentage of total revenue was 16.5% for the nine months ended September
26, 2008 as compared to 15.3% for the nine months ended September 28,
2007.
The
increase in operating income for both the three and nine month periods was
primarily driven by increased revenue. The increase in operating
income percentage for the three month period was primarily due to gross margin
improvement and strong operating expense control. The increase for the nine
month periods was primarily due to strong operating expense
control.
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
|
|
|
Nine Months Ended
|
|
|
|
September 26,
2008
|
|
|
September 28,
2007
|
|
|
September 26,
2008
|
|
|
September 28,
2007
|
|
(in thousands, except
percentages)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Engineering
and Construction
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
$ |
191,858 |
|
|
$ |
182,135 |
|
|
$ |
599,057 |
|
|
$ |
556,592 |
|
Segment
revenue as a percent of total revenue
|
|
|
59 |
% |
|
|
62 |
% |
|
|
56 |
% |
|
|
61 |
% |
Operating
income
|
|
$ |
41,560 |
|
|
$ |
42,824 |
|
|
$ |
123,675 |
|
|
$ |
137,359 |
|
Operating
income as a percent of segment revenue
|
|
|
22 |
% |
|
|
24 |
% |
|
|
21 |
% |
|
|
25 |
% |
Field
Solutions
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
$ |
64,354 |
|
|
$ |
44,763 |
|
|
$ |
242,461 |
|
|
$ |
150,998 |
|
Segment
revenue as a percent of total revenue
|
|
|
20 |
% |
|
|
15 |
% |
|
|
23 |
% |
|
|
17 |
% |
Operating
income
|
|
$ |
22,058 |
|
|
$ |
11,931 |
|
|
$ |
91,961 |
|
|
$ |
46,957 |
|
Operating
income as a percent of segment revenue
|
|
|
34 |
% |
|
|
27 |
% |
|
|
38 |
% |
|
|
31 |
% |
Mobile
Solutions
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
$ |
40,822 |
|
|
$ |
39,204 |
|
|
$ |
127,118 |
|
|
$ |
109,988 |
|
Revenue
as a percent of total revenue
|
|
|
12 |
% |
|
|
13 |
% |
|
|
12 |
% |
|
|
12 |
% |
Operating
income
|
|
$ |
3,602 |
|
|
$ |
2,855 |
|
|
$ |
7,997 |
|
|
$ |
6,778 |
|
Operating
income as a percent of segment revenue
|
|
|
9 |
% |
|
|
7 |
% |
|
|
6 |
% |
|
|
6 |
% |
Advanced
Devices
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
$ |
31,053 |
|
|
$ |
29,921 |
|
|
$ |
92,514 |
|
|
$ |
91,909 |
|
Segment
revenue as a percent of total revenue
|
|
|
9 |
% |
|
|
10 |
% |
|
|
9 |
% |
|
|
10 |
% |
Operating
income
|
|
$ |
6,835 |
|
|
$ |
4,893 |
|
|
$ |
18,105 |
|
|
$ |
13,620 |
|
Operating
income as a percent of segment revenue
|
|
|
22 |
% |
|
|
16 |
% |
|
|
20 |
% |
|
|
15 |
% |
A
reconciliation of our consolidated segment operating income to consolidated
income before income taxes follows:
|
|
Three Months Ended
|
|
|
Nine Months Ended
|
|
|
|
September 26,
2008
|
|
|
September 28,
2007
|
|
|
September 26,
2008
|
|
|
September 28,
2007
|
|
(in
thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated
segment operating income
|
|
$ |
74,055 |
|
|
$ |
62,503 |
|
|
$ |
241,738 |
|
|
$ |
204,707 |
|
Unallocated
corporate expense
|
|
|
(8,405 |
) |
|
|
(8,543 |
) |
|
|
(30,058 |
) |
|
|
(32,065 |
) |
Amortization
of purchased intangible assets
|
|
|
(11,143 |
) |
|
|
(10,174 |
) |
|
|
(32,865 |
) |
|
|
(28,501 |
) |
In-process
research and development expense
|
|
|
-- |
|
|
|
-- |
|
|
|
-- |
|
|
|
(2,112 |
) |
Restructuring
charges
|
|
|
(451 |
) |
|
|
-- |
|
|
|
(3,795 |
) |
|
|
(3,025 |
) |
Consolidated
operating income
|
|
|
54,056 |
|
|
|
43,786 |
|
|
|
175,020 |
|
|
|
139,004 |
|
Non-operating
income, net
|
|
|
1,563 |
|
|
|
1,089 |
|
|
|
7,453 |
|
|
|
4,217 |
|
Consolidated
income before taxes
|
|
$ |
55,619 |
|
|
$ |
44,875 |
|
|
$ |
182,473 |
|
|
$ |
143,221 |
|
Engineering
and Construction
Engineering
and Construction revenue increased by $9.7 million or 5% and $42.5 million or 8%
for the three and nine months ended September 26, 2008, respectively, as
compared to the corresponding periods in fiscal 2007. Segment
operating income decreased $1.3 million or 3% and $13.7 million or 10% for the
three and nine months ended September 26, 2008, respectively, as compared to the
same corresponding periods in fiscal 2007.
The
revenue growth for both the three month and nine month periods ended September
26, 2008 was driven by acquisitions and international sales growth, partially
offset by softness in the U.S. and European markets. Operating income
for both the three and nine month periods ended September 26, 2008 decreased
primarily due to higher operating expenses due to the impact of acquisitions
made during the last twelve months and product mix.
Field
Solutions
Field
Solutions revenue increased by $19.7 million or 44% and $91.5 million or 61% for
the three and nine months ended September 26, 2008, respectively, as compared to
the corresponding period in fiscal 2007. Segment operating income
increased by $10.1 million or 85% and $45.0 million or 96% for the three and
nine months ended September 26, 2008, respectively, as compared to the same
corresponding period in fiscal 2007.
The
revenue increase for both the three and nine month periods ended September 26,
2008 was driven by the introduction of new agricultural products and a worldwide
robust agricultural market. Operating income for both the three and nine month
periods ended September 26, 2008 increased primarily due to higher revenue,
gross margin improvement, and operating expense control.
Mobile
Solutions revenue increased by $1.6 million or 4% and $17.1 million or 16% for
the three and nine months ended September 26, 2008, respectively, as compared to
the corresponding period in fiscal 2007. Segment operating income
increased by $0.7 million or 26% for the three months ended September 26, 2008,
respectively, as compared to the corresponding period in fiscal
2007. Segment operating income increased by $1.2 million or 18% for
the nine months ended September 26, 2008, as compared to the corresponding
period in fiscal 2007.
Revenue
for the three month period ended September 26, 2008, as compared to the
corresponding period of fiscal 2007, grew due to increased subscription
revenue. Revenue for the nine month period grew due to increase
subscription revenue and a full first quarter of @Road revenue as compared to
partial quarter of @Road revenue in the corresponding period in fiscal 2007.
Operating income for both the three and nine months increased due to increased
subscription revenue and operating expense control.
Advanced
Devices
Advanced
Devices revenue increased by $1.1 million or 4% and $0.6 million or 1% for the
three and nine months ended September 26, 2008, respectively, as compared to the
same corresponding period in fiscal 2007. Segment operating income
increased by $1.9 million or 40% and $4.5 million or 33% for the three and nine
months ended September 26, 2008, respectively, as compared to the corresponding
period in fiscal 2007.
For the
three and nine months ended September 26, 2008 revenue increased in Military and
Applanix, while segment operating income increased primarily due to product mix
and operating expense control 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:
|
|
Three Months Ended
|
|
|
Nine Months Ended
|
|
|
|
September 26,
|
|
|
September 28,
|
|
|
September 26,
|
|
|
September 28,
|
|
|
|
2008
|
|
|
2007
|
|
|
2008
|
|
|
2007
|
|
(in thousands, except
percentages)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research
and development
|
|
$ |
35,348 |
|
|
$ |
31,707 |
|
|
$ |
112,097 |
|
|
$ |
96,737 |
|
Percentage
of revenue
|
|
|
11 |
% |
|
|
11 |
% |
|
|
11 |
% |
|
|
11 |
% |
Sales
and marketing
|
|
|
48,664 |
|
|
|
45,274 |
|
|
|
151,727 |
|
|
|
134,967 |
|
Percentage
of revenue
|
|
|
15 |
% |
|
|
15 |
% |
|
|
14 |
% |
|
|
15 |
% |
General
and administrative
|
|
|
22,072 |
|
|
|
21,262 |
|
|
|
70,051 |
|
|
|
67,182 |
|
Percentage
of revenue
|
|
|
7 |
% |
|
|
7 |
% |
|
|
7 |
% |
|
|
7 |
% |
Total
|
|
$ |
106,084 |
|
|
$ |
98,243 |
|
|
$ |
333,875 |
|
|
$ |
298,886 |
|
Percentage
of revenue
|
|
|
32 |
% |
|
|
33 |
% |
|
|
31 |
% |
|
|
33 |
% |
Total
R&D, S&M, and G&A expenses increased by approximately $7.8 million
and $35.0 million for the three and nine months ended September 26, 2008, as
compared to the corresponding period in fiscal 2007.
The
increase in R&D expense in the third quarter of fiscal 2008, as compared to
the third quarter of fiscal 2007, was primarily due to an increase in
compensation related expenses of $1.6 million, an increase in expense due to
changes in foreign currency exchange rates of $0.5 million, and an increase to
R&D expenses of $1.0 million as a result of acquisitions. The increase in
R&D expense in the first nine months of fiscal 2008, as compared with the
corresponding period in fiscal 2007, was due to an increase in compensation
related expenses of $6.5 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 for the nine month period was also
attributable to an increase in expenses due to changes in foreign currency
exchange rates of $3.5 million, non-recurring consulting costs of $1.5 million,
and additional operating expenses associated with business acquisitions of
$3.0 million.
All of
our R&D costs have been 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 third quarter of fiscal 2008, as compared to
the corresponding period of fiscal 2007, was primarily due to an increase in
expense due to changes in foreign currency exchange rates of $0.7 million,
marketing communication expenses of $0.9 million and additional
acquisition-related expenses of $1.1million. The increase in S&M
expenses in the first nine months of fiscal 2008 as compared with the
corresponding period of fiscal 2007 was due to an increase in compensation
related expenses of $3.2 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 for the nine month period was also
attributable to an increase in expense due to changes in foreign currency
exchange rates of $4.2 million, marketing communication expenses of $3.8
million, travel and other personnel related expense of $3.0 million, and
additional operating expenses associated with recent business acquisitions of
$2.6 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 third 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 $0.8 million. The
increase in G&A expenses in the first nine months of fiscal 2008 compared
with the corresponding period in fiscal 2007 was primarily due to additional
operating expenses associated with business acquisitions of $2.8
million.
Amortization
of Purchased Intangible Assets
Amortization
of purchased intangible assets was $11.1 million in the third quarter of fiscal
2008, as compared to $10.2 million in the third quarter of fiscal
2007. The increase was due primarily to acquisitions not applicable
in the corresponding period of fiscal 2007, primarily UAI, Crain, HHK, and
SECO. Amortization of purchased intangible assets was $32.9 million
in the first nine months of fiscal 2008, as compared to $28.5 million in the
first nine months of fiscal 2007, due to acquisitions not applicable in the
corresponding period of fiscal 2007.
As of
September 26, 2008, future amortization of intangible assets is expected to be
$11.1 million during the fourth quarter of fiscal 2008, $41.2 million during
2009, $38.8 million during 2010, $34.0 million during 2011, $25.7 million during
2012, and $30.4 million thereafter.
In-Process
Research and Development
We
recorded no in-process research and development (IPR&D) expense during the
three and nine months ended September 26, 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 nine months ended September 26, 2008 and September
28, 2007 were as follows (in thousands):
|
|
Three Months Ended
|
|
|
Nine Months Ended
|
|
|
|
September 26,
2008
|
|
|
September 28,
2007
|
|
|
September 26,
2008
|
|
|
September 28,
2007
|
|
(in
thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Severance
and benefits
|
|
$ |
451 |
|
|
$ |
-- |
|
|
$ |
3,795 |
|
|
$ |
3,025 |
|
During
the three and nine months ended September 26, 2008, restructuring expenses
of $0.5 million and $3.8 million, respectively, and were related to
decisions to streamline processes and reduce the cost structure of the Company,
with approximately 90 employees affected worldwide. The amount for
the three month period is related to the Engineering and Construction
segment. Of the total for the nine month period, $3.3 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 $2.2 million
through the first quarter of 2010.
During
the three and nine months ended September 28, 2007, restructuring expenses of
$0.0 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 nine months ended September 26,
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 nine months ended September
26, 2008.
In
addition to the restructuring expenses in the nine months ended September 28,
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 nine months
ended September 28, 2007.
Restructuring
liability:
Restructuring
activity for the nine months ended September 26, 2008 was as
follows:
Balance
as of December 28, 2007
|
|
$ |
1,326 |
|
Charges
|
|
|
3,795 |
|
Payments
|
|
|
(2,793 |
) |
Adjustment
|
|
|
(1,020 |
) |
Balance
as of September 26,2008
|
|
$ |
1,308 |
|
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, $0.4 million is included in Other current
liabilities and is expected to be settled by the fourth quarter of fiscal
2008. The remaining balance of $0.9 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
|
|
|
Nine Months Ended
|
|
|
|
September 26,
2008
|
|
|
September 28,
2007
|
|
|
September 26,
2008
|
|
|
September 28,
2007
|
|
(in
thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
income
|
|
$ |
404 |
|
|
$ |
770 |
|
|
$ |
1,369 |
|
|
$ |
2,607 |
|
Interest
expense
|
|
|
(214 |
) |
|
|
(1,616 |
) |
|
|
(1,389 |
) |
|
|
(5,476 |
) |
Foreign
currency transaction gain (loss), net
|
|
|
117 |
|
|
|
(459 |
) |
|
|
2,338 |
|
|
|
(532 |
) |
Income
from joint ventures
|
|
|
2,163 |
|
|
|
1,943 |
|
|
|
6,796 |
|
|
|
6,445 |
|
Other
income (expense), net
|
|
|
(907 |
) |
|
|
451 |
|
|
|
(1,661 |
) |
|
|
1,173 |
|
Total
non-operating income, net
|
|
$ |
1,563 |
|
|
$ |
1,089 |
|
|
$ |
7,453 |
|
|
$ |
4,217 |
|
Non-operating
income, net, increased $0.5 million for the third quarter of fiscal 2008, as
compared to the corresponding period in fiscal 2007 due to a decrease in
interest expense of $1.4 million and an increase in foreign exchange gains of
$0.6 million, partially offset by a decrease in Other income (expense) of
$1.4 million primarily due to deferred compensation plan losses and a
decrease in interest income of $0.4 million.
Non-operating
income, net, increased by $3.2 million during the first nine months of fiscal
2008, as compared to the corresponding period in fiscal 2007, due to a decrease
in interest expense of $4.1 million and an increase in foreign exchange gains of
$2.9 million, partially offset by a decrease in Other income (expense) of $2.8
million primarily due to deferred compensation plan losses and a
decrease in interest income of $1.2 million.
Income
Tax Provision
Our
effective income tax rate for the three and nine months ended September 26, 2008
was 29.8% and 30.0%, respectively, as compared to 39.0% and 36.4% for the three
and nine months ended September 28, 2007. The 2008 third 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 third 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 29.0% 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 September 26, 2008 and December 28,
2007.
LIQUIDITY
AND CAPITAL RESOURCES
As of
|
|
September 26,
2008
|
|
|
December 28,
2007
|
|
(in
thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
and cash equivalents
|
|
$ |
70,479 |
|
|
$ |
103,202 |
|
Total
debt
|
|
$ |
51,616 |
|
|
$ |
60,690 |
|
Nine Months Ended
|
|
September 26,
2008
|
|
|
September 28,
2007
|
|
(in
thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
provided by operating activities
|
|
$ |
141,945 |
|
|
$ |
129,084 |
|
Cash
used in investing activities
|
|
$ |
(77,609 |
) |
|
$ |
(291,482 |
) |
Cash
provided by (used in) financing activities
|
|
$ |
(97,201 |
) |
|
$ |
121,076 |
|
Effect
of exchange rate changes on cash and cash equivalents
|
|
$ |
142 |
|
|
$ |
(4,227 |
) |
Net
decrease in cash and cash equivalents
|
|
$ |
(32,723 |
) |
|
$ |
(45,549 |
) |
Cash
and Cash Equivalents
As of
September 26, 2008, cash and cash equivalents totaled $70.5 million compared to
$103.2 million at December 30, 2007. We had debt of $51.6 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 $141.9 million for the nine months ended
September 26, 2008, as compared to $129.1 million for the nine months ended
September 28, 2007. This increase of $12.8 million was primarily
driven by an increase in net income before non-cash depreciation expense and
amortization, offset by a decrease in income taxes due.
Investing
Activities
Cash used
in investing activities was $77.6 million for the nine months ended September
26, 2008, as compared to $291.5 million for the nine months ended September 28,
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 $97.2 million for the nine months ended September
26, 2008, as compared to cash provided of $121.1 million for the nine months
ended September 28, 2007, primarily due to the stock repurchase of $115.9
million nine months of 2008 as compared to outstanding debt of $80.0 million
that was incurred for the @Road acquisition in the corresponding period in
fiscal 2007.
Accounts
Receivable and Inventory Metrics
|
September 26,
|
|
December 28,
|
|
As of
|
2008
|
|
2007
|
|
|
|
|
|
|
Accounts
receivable days sales outstanding
|
|
|
71 |
|
|
|
70 |
|
Inventory
turns per year
|
|
|
4.4 |
|
|
|
4.3 |
|
Accounts
receivable days sales outstanding were 71 days as of September 26, 2008, as
compared to 70 days as of December 28, 2007. 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 4.4 as of
September 26, 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 $51.6 million as of September 26, 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 paying off other debts or loans. 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
September 26, 2008, we were in compliance with all financial debt
covenants. During the fourth quarter of fiscal 2008, we borrowed an
additional $100 million on our revolving credit agreement for working capital
needs and potential future acquisitions.
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.
ITEM 4. CONTROLS AND PROCEDURES
(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.
In
addition to the other information set forth in this report, you should consider
the risk factors discussed under "Risks and Uncertainties" in Item 1A of Part I
of our 2007 Annual Report on Form 10-K, which could materially affect our
business, financial condition or future results, and which are incorporated
herein by reference. The risk factors in our Form 10-K have not
materially changed other than as set forth below. The risk factors
described in our Form 10-K, and the risk factor described below, are not the
only risks facing our Company. Additional risks and uncertainties not
currently known to us or that we currently deem to be immaterial also may
materially adversely affect our business, financial conditions and/or operating
results.
Current
economic conditions and the global financial crisis may have an impact on our
business and financial condition in ways that we currently cannot
predict.
The
Company’s operations and performance depend on worldwide economic conditions and
their impact on levels of business spending, which have deteriorated
significantly in many countries and regions, including without limitation the
United States, and may remain depressed for the foreseeable future.
Uncertainties in the financial and credit markets have caused our customers to
postpone purchases, and continued uncertainties may reduce future sales of our
products and services. Continued adverse economic conditions are likely to
depress tax revenues of federal, state and local government entities, which are
significant purchasers of the Company’s products. With the exception of our
Mobile Solutions and Advanced Devices segments, our products are generally sold
through a dealer channel, and our dealers depend on the availability of credit
to finance purchases of our products for their inventory. Customer collections
are our primary source of cash. While we believe we have a strong customer
base and have experienced strong collections in the past, if the current market
conditions continue to deteriorate we may experience increased collection times
or greater write-offs, which could have a material adverse effect on our cash
flow. Finally, our ability to access the capital markets may be restricted
at a time when we would like, or need, to do so, which could have an impact on
our flexibility to pursue additional expansion opportunities and maintain our
desired level of revenue growth in the future. These and other economic factors
could have a material adverse effect on demand for the Company’s products and
services and on the Company’s financial condition and operating
results.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF
PROCEEDS
(a) None
(b) None
(c) The
following table provides information relating to our purchases of equity
securities for the third 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)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June
28, 2008 – August 1, 2008
|
|
|
889,746 |
|
|
|
33.21 |
|
|
|
889,746 |
|
|
|
184,148,003 |
|
August
2, 2008 – August 29, 2008
|
|
|
587,043 |
|
|
|
34.06 |
|
|
|
587,043 |
|
|
|
164,142,807 |
|
August
30, 2008 – September 26, 2008
|
|
|
974,871 |
|
|
|
30.75 |
|
|
|
974,871 |
|
|
|
134,149,431 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
Activities
|
|
|
2,451,660 |
|
|
|
32.43 |
|
|
|
2,451,660 |
|
|
|
|
|
|
(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.
|
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. (4)
|
3.6
|
Certificate
of Amendment of Articles of Incorporation of the Company filed March 4,
2004. (5)
|
3.7
|
Certificate
of Amendment of Articles of Incorporation of the Company filed February
21, 2007. (8)
|
3.8
|
Bylaws
of the Company, amended and restated through July 20, 2006.
(7)
|
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. (6)
|
31.1
|
Certification
of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002 dated November 4, 2008.
(9)
|
31.2
|
Certification
of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002 dated November 4, 2008.
(9)
|
32.1
|
Certification
of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 dated November
4, 2008. (9)
|
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 November
4, 2008. (9)
|
(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 3.5 to the registrant’s Quarterly Report on
Form 10-Q for the quarter ended July 4,
2003.
|
(5)
|
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.
|
(6)
|
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.
|
(7)
|
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.
|
(8)
|
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.
|
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 Bahr
|
|
|
Rajat
Bahri
|
|
|
Chief
Financial Officer
|
|
|
(Authorized
Officer and Principal
|
|
|
Financial
Officer)
|
|
DATE:
November 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. (4)
|
3.6
|
Certificate
of Amendment of Articles of Incorporation of the Company filed March 4,
2004. (5)
|
3.7
|
Certificate
of Amendment of Articles of Incorporation of the Company filed February
21, 2007. (8)
|
3.8
|
Bylaws
of the Company, amended and restated through July 20, 2006.
(7)
|
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. (6)
|
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 November 4, 2008.
(9)
|
|
Certification
of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002 dated November 4, 2008.
(9)
|
|
Certification
of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 dated November
4, 2008. (9)
|
|
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 November
4, 2008. (9)
|
(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 3.5 to the registrant’s Quarterly Report on
Form 10-Q for the quarter ended July 4,
2003.
|
(5)
|
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.
|
(6)
|
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.
|
(7)
|
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.
|
(8)
|
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.
|
35