form10k-fy2005
UNITED
STATES
SECURITIES
AND
EXCHANGE COMMISSION
Washington,
D.C.
20549
FORM
10-K
(X)
ANNUAL REPORT
PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE
ACT OF
1934
For
the fiscal year
ended December
30,
2005
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 No.)
|
|
|
935
Stewart
Drive, Sunnyvale, CA
|
94085
|
(Address
of
principal executive offices)
|
(Zip
Code)
|
Registrant’s
telephone number, including area code: (408)
481-8000
Securities
registered pursuant to Section 12(b) of the Act: NONE
Securities
registered pursuant to Section 12(g) of the Act:
Common
Stock
Preferred
Share Purchase Rights
(Title
of
Class)
Indicate
by check
mark if the registrant is a well-known seasoned issuer, as defined in Rule
405
of the Securities Act.
Yes
[X] No [ ]
Indicate
by check
mark if the registrant is not required to file reports pursuant to Section
13 or
Section 15(d) of the Exchange Act.
Yes [
] No [
X ]
Indicate
by check
mark whether the registrant (1) has filed all reports required to be filed
by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding
12 months (or for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements for the
past
90 days.
Yes [
X ] No [
]
Indicate
by check
mark if disclosure of delinquent filers pursuant to Item 405 of Regulation
S-K
is not contained herein, and will not be contained, to the best of registrant’s
knowledge, in definitive proxy or information statements incorporated by
reference in Part III of this Form 10-K or any amendment to this Form
10-K.
[
X ]
Indicate
by check
mark whether the registrant is a large accelerated filer, an accelerated filer,
or a non-accelerated filer.
Large
Accelerated
Filer [
X ] Accelerated
Filer [
] Non-accelerated
Filer [
]
Indicate
by check
mark whether the registrant is a shell company (as defined in Rule 12b-2 of
the
Exchange Act).
Yes [
] No [
X ]
As
of July 1, 2005, the aggregate market value of the Common Stock held by
non-affiliates of the registrant was approximately $2.0 billion based on the
closing price as reported on the NASDAQ National Market.
Indicate
the number
of shares outstanding of each of the registrant's classes of common stock,
as of
the latest practicable date.
Class
|
Outstanding
at
March 6, 2006
|
Common
stock,
no par value
|
54,338,187
shares
|
DOCUMENTS
INCORPORATED BY REFERENCE
Certain
parts of
Trimble Navigation Limited's Proxy Statement relating to the annual meeting
of
stockholders to be held on May 18, 2006 (the "Proxy Statement") are incorporated
by reference into Part III of this Annual Report on Form 10-K.
SPECIAL
NOTE
ON FORWARD-LOOKING STATEMENTS
This
Annual Report
on Form 10-K contains forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933 and Section 21E of the
Securities Exchange Act of 1934, which are subject to the "safe harbor" created
by those sections. The forward-looking statements regarding
future
events and the future results of Trimble Navigation Limited (“Trimble” or “The
Company” or “We” or “Our” or “Us”) are based on current expectations, estimates,
forecasts, and projections about the industries in which Trimble operates and
the beliefs and assumptions of the management of Trimble.
Discussions
containing such forward-looking statements may be found in "Management's
Discussion and Analysis of Financial Condition and Results of Operations."
In
some cases, forward-looking statements can be identified by terminology such
as
"may," "will," "should," "could," "predicts," "potential," "continue,"
"expects," "anticipates," "future," "intends," "plans," "believes," "estimates,"
and similar expressions. These forward-looking statements involve certain risks
and uncertainties that could cause actual results, levels of activity,
performance, achievements and events to differ materially from those implied
by
such forward-looking statements,
but are not limited
to those discussed in this Report under the section entitled “Other Risk
Factors” and elsewhere, and in other reports Trimble files with the Securities
and Exchange Commission (“SEC”), specifically the most recent reports on
Form 8-K and Form 10-Q, each as it may be amended from time to
time.
These forward-looking statements are made as of the date of this Annual Report
on Form 10-K. We reserve the right to update these statements for any
reason, including the occurrence of material events. The risks and uncertainties
under the caption "Management's Discussion and Analysis of Financial Condition
and Results of Operations—Risks and Uncertainties" contained herein, among other
things, should be considered in evaluating our prospects and future financial
performance.
We have attempted
to identify forward-looking statements in this report by placing an asterisk
(*)
before paragraphs containing such material.
TRIMBLE
NAVIGATION LIMITED
2005
FORM
10-K ANNUAL REPORT
TABLE
OF
CONTENTS
|
PART
I
|
|
Item
1
|
Business
Overview
|
5
|
Item
1A
|
Risk
Factors
|
16
|
Item
1B
|
Unresolved
Staff Comments
|
23
|
Item
2
|
Properties
|
23
|
Item
3
|
Legal
Proceedings
|
23
|
Item
4
|
Submission
of
Matters to a Vote of Security Holders
|
23
|
|
|
|
|
PART
II
|
|
Item
5
|
Market
for
Registrant's Common Equity and Related Stockholder Matters
|
24
|
Item
6
|
Selected
Financial Data
|
25
|
Item
7
|
Management's
Discussion and Analysis of Financial Condition and Results of
Operations
|
26
|
Item
7A
|
Quantitative
and Qualitative Disclosures about Market Risk
|
41
|
Item
8
|
Financial
Statements and Supplementary Data
|
43
|
Item
9
|
Changes
in and
Disagreements with Accountants on Accounting and Financial
Disclosure
|
74
|
Item
9A
|
Controls
and
Procedures
|
74
|
Item
9B
|
Other
Information
|
74
|
|
|
|
|
PART
III
|
|
Item
10
|
Directors
and
Executive Officers of the Registrant
|
75
|
Item
11
|
Executive
Compensation
|
75
|
Item
12
|
Security
Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters
|
75
|
Item
13
|
Certain
Relationships and Related Transactions
|
75
|
Item
14
|
Principal
Accountant Fees and Services
|
75
|
|
|
|
|
PART
IV
|
|
Item
15
|
Exhibits,
Financial Statement Schedules and Reports on Form 8-K
|
76-89
|
TRADEMARKS
Trimble,
the globe
and triangle logo, EZ-Guide, Telvisant, Lassen, SiteVision, GeoExplorer, AgGPS,
Thunderbolt, FirstGPS, Spectra Precision, CrossCheck, Recon, and TrimTrac among
others are trademarks of Trimble Navigation Limited and its subsidiaries
registered in the United States and other countries. EZ-Steer, Force and Ranger
are trademarks of Trimble Navigation Limited and its subsidiaries. All other
trademarks are the property of their respective owners.
PART
I
Item
1 Business
Overview
Trimble
Navigation
Limited, a California corporation (“Trimble” or “the Company” or “we” or “our”
or “us”), provides advanced positioning product solutions, most typically to
commercial and government users. The principle applications served include
surveying, agriculture, machine guidance, asset and fleet management, and
telecommunications infrastructure. Our products typically provide benefits
that
can include lower operational costs, and higher productivity. Examples of
products include systems that guide agricultural and construction equipment,
surveying instruments, systems that track fleets of vehicles, and data
collection systems that enable the management of large amounts of geo-referenced
information. In addition, we also manufacture components for in vehicle
navigation and telematics systems, and timing modules used in the
synchronization of wireless networks.
Trimble
products
often combine knowledge of location or position together with a wireless link
to
provide a solution to a specific application. Position is provided through
a
number of alternative technologies including the Global Positioning System
(GPS)
and systems that use laser or optical technologies to establish position.
Wireless communication techniques include both public networks, such as
cellular, and private networks, such as business band radio. Our products are
augmented by our software algorithms; this includes embedded firmware that
enables the positioning solution and applications software that allows the
customer to make use of the positioning information.
We
design and market
our own products. Our manufacturing strategy includes a combination of in house
assembly as well as the use of third party subcontractors. Our global operations
include major development, manufacturing or logistics operations in the United
States, Sweden, Germany, New Zealand, France, Canada, and the Netherlands.
Products are sold through dealers, representatives, joint ventures, and other
channels throughout the world. These channels are supported by our sales offices
located in more than 15 countries.
We
began operations
in 1978 and incorporated in California in 1981. Our common stock has been
publicly traded on NASDAQ since 1990 under the symbol TRMB.
Technology
Overview
A
significant
portion of our revenue is derived from applying Global Navigation Satellite
Systems (GNSS) to terrestrial applications. GNSS systems include a system of
24
orbiting US based satellites and associated ground control that is funded and
maintained by the U. S. Government and is available worldwide free of charge,
a
Russian satellite based system, and the future European Galileo system. GNSS
positioning is based on a technique that precisely measures distances from
four
or more satellites. The satellites continuously transmit precisely timed radio
signals using extremely accurate atomic clocks. A GNSS receiver measures
distances from the satellites in view by determining the travel time of a signal
from the satellite to the receiver, and then uses those distances to compute
its
position. Under normal circumstances, a stand-alone GNSS receiver is able to
calculate its position at any point on earth, in the earth's atmosphere, or
in
lower earth orbit, to approximately 10 meters, 24 hours a day. Much better
accuracies are possible through a technique called “differential GNSS.” In
addition to providing position, GNSS provides extremely accurate time
measurement.
GNSS
accuracy is
dependent upon the locations of the receiver and the number of GNSS satellites
that are above the horizon at any given time. Reception of GNSS signals requires
line-of-sight visibility between the satellites and the receiver, which can
be
blocked by buildings, hills, and dense foliage. The receiver must have a line
of
sight to at least four satellites to determine its latitude, longitude, attitude
(angular orientation), and time. The accuracy of GNSS may also be limited by
distortion of GNSS signals from ionospheric and other atmospheric conditions.
Our
GNSS products
are based on proprietary receiver technology. Over time, the advances in
positioning, wireless communication, and information technologies have enabled
us to add more capability to our products and thereby deliver more value to
our
users. For example, the developments in wireless technology and deployments
of
next generation wireless networks have enabled less expensive wireless
communications. These developments allow for the efficient transfer of position
data to locations away from the positioning field device, allowing the data
to
be accessed by more users and thereby increasing productivity. This has allowed
us to include a wireless link in many of our products and connect remote field
operations to a central location.
Our
laser and
optical products either measure distances and angles to provide a position
in
three dimensional space or they provide highly accurate laser references from
which position can be established. The key element of these products is
typically a laser, which is generally a commercially available laser diode
and a
complex mechanical assembly. These elements are augmented by software
algorithms.
Business
Strategy
Our
business
strategy is developed around an analysis of several key elements:
· |
Attractive
markets
- We focus on
markets that offer potential for revenue growth, profitability, and
market
leadership.
|
· |
Innovative
solutions that provide significant benefits to our customers
-
We seek to
apply our technology to applications in which position data is important
and where we can create unique value. We look for opportunities in
which
the rate of technological change is high and which have a requirement
for
the integration of multiple technologies into a solution.
|
· |
Distribution
channels to best access our markets -
We select
distribution channels that best serve the needs of individual markets.
These channels can include independent dealers, direct sales, joint
ventures, OEM sales, and distribution alliances with key partners.
We view
international expansion as an important element of our strategy and
seek
to develop international channels.
|
Business
Segments and Markets
We
are organized
into five reporting segments encompassing our various applications and product
lines: Engineering and Construction, Field Solutions, Component Technologies,
Mobile Solutions, and Portfolio Technologies. Our segments are distinguished
by
the markets they serve. Each segment consists of businesses which are
responsible for product development, marketing, sales, strategy, and financial
performance.
Engineering
and Construction
Products
in the
Engineering and Construction segment improve productivity and accuracy
throughout the entire construction process including the initial survey,
planning, design, site preparation, and building phases. Our products are
intended to both improve the productivity of each phase, as well as facilitate
the entire process by improving information flow from one step to the next.
The
product
solutions typically include multiple technologies. The elements of these
solutions may incorporate GPS, optical, laser, radio or cellular communications.
An
example of the
customer benefits provided by our product is our GPS and robotic optical
surveying instruments which enable the surveyor to perform operations in the
field faster, more reliably than conventional surveying instruments and with
a
smaller crew. Similarly, our construction machine guidance products allow the
operator to achieve the desired landform by eliminating stakeout and reducing
rework. These steps in the construction process can be readily linked together
with data collection modules to minimize the time and effort required to
maintain data accuracy throughout the entire construction process.
We
sell and
distribute our products in this segment through a global network of independent
dealers that are supported by Trimble personnel. This channel is supplemented
by
relationships that create additional channel breadth including our joint
ventures with Caterpillar, Nikon, and private branding arrangements with other
companies.
We
also design and
market handheld data collectors and data collection software for field use
by
surveyors, contractors, and other professionals. These products are sold
directly, through dealers, and other survey manufacturers.
Competitors
in this
segment are typically companies that provide optical, laser, or GPS positioning
products. Our principal competitors are Topcon Corporation and Leica Geosystems.
Price points in this segment range from less than $1,000 for certain laser
systems to approximately $125,000 for a high-precision, three-dimensional,
machine control system.
Representative
products sold in this segment include:
Spectra
Precision® Laser System -
The Spectra
Precision Laser machine systems include a portfolio of laser-based machine
display and control systems for grading and excavating applications. These
machine systems can be used on a wide range of machines, including dozers,
backhoes, scrapers, skid steers and excavators. Furthermore, the Spectra Laser
grade control systems offers visual guidance to the operators while performing
such tasks as cutting the edge of the blade or bucket.
Trimble®
SPS700 Robotic Construction Total Station - The
Trimble SPS700
Robotic Total Station is used with the Trimble LM80 Layout Manager to provide
contractors with more control of their construction layout. The robotic
operation allows contractors to perform layout tasks significantly more
efficiently than with conventional mechanical systems leading to increased
productivity.
Trimble®
S6
Total Station - The
Trimble S6 Total
Station is a technologically advanced optical surveying system. Its advanced
servo motors make the Trimble S6 fast, silent, and precise, allowing surveyors
to measure points and collect data in the field efficiently and productively.
The Trimble S6 offers unique new Trimble technologies that enable cable-free
operation, longer battery life, and accuracy assurance, among many other
features. Its detachable Trimble CU controller is utilized to effectively
collect, display, and manage field data.
Trimble®
R8
GNSS System - The
Trimble R8 GNSS
System combines a GNSS receiver, radio, and battery in one compact unit to
produce a lightweight and versatile, cable-free GNSS surveying solution.
Surveyors can use the Trimble R8 system to achieve centimeter-level accuracy
in
their measurements in real time. The Trimble R8 GNSS offers R-Track technology,
which is a unique Trimble technology developed with GNSS capabilities to support
new GPS signals for civilian use and the Russian Glonass system. These new
signals such as the next-generation GPS L2C and L5 signals and GLONASS provide
our customers increased reliability and productivity.
Trimble®
Recon® Controller -
The Trimble Recon
Controller is a rugged handheld controller used by surveyors and engineers
in
the field. Running the Microsoft Pocket PC operating system, the Trimble Recon
controller enables users to run the Trimble software of their choice, plus
other
applications to support their business needs. The Trimble Recon controller
features a touch screen for quick and easy data entry and a color graphic
display. It tackles multiple surveying applications, including topographic
surveying, engineering, construction, and mapping.
GCS
family
of Grade Control Systems - Grade
control
systems meets construction contractors' needs with productivity-enhancing
solutions for earthmoving, site prep and roadwork. The Trimble GCS family
provides upgrade options that deliver earthmoving contractors with the
flexibility to select a system that meets their daily needs today, and later
add
on to meet their changing needs. For example, a single control system such
as
the GCS300 can provide for low-cost point of entry into grade control, and
over
time can be upgraded to the GCS400 dual sensor system, or to the full 3D GCS900
Grade Control System.
Spectra
Precision® Laser portable tools - Our
Spectra
Precision Laser portfolio includes a broad range of laser based tools for the
interior, drywalls and ceilings, HVAC, and mechanical contractor. Designed
to
replace traditional methods of measurement and leveling for a wide range of
interior construction applications, our laser tools are easy to learn and use.
Our Spectra Precision Laser product portfolio includes rotating lasers for
horizontal leveling and vertical alignment, as well as laser pointers and a
laser based distance measuring device. They are available through independent
and national construction supply houses both in the US and in Europe.
Field
Solutions
Our
Field Solutions
segment addresses the agriculture and geographic information system (GIS)
markets.
Our
agriculture
products consist of manual and automated navigation guidance for tractors and
other farm equipment used in spraying, planting, cultivation, and harvesting
applications. The benefits to the farmer include faster machine operation,
higher yields, and lower consumption of chemicals than conventional equipment.
We also provide positioning solutions for leveling agricultural fields in
irrigation applications and aligning drainage systems to better manage water
flow in fields.
We
use multiple
distribution channels to access the agricultural market, including independent
dealers and partners such as CNH Global . Competitors in this market are either
vertically integrated implement companies such as John Deere, or agricultural
instrumentation suppliers such as Raven, CSI Wireless and Novariant.
Our
GIS product line
is centered on handheld data collectors that gather information in the field
to
be incorporated into GIS databases. Typically this information includes
features, attributes, and positions of fixed infrastructure and natural resource
assets. An example would be that of a utility company performing a survey of
its
transmission poles including the age and condition of each telephone pole.
Our
handheld unit enables this data to be collected and automatically stored while
confirming the location of the asset. The data can then be downloaded into
a GIS
database. This stored data could later be used to navigate back to any
individual asset or item for maintenance or data update. Our mobile GIS
initiative goes one step further by allowing this information to be communicated
from the field worker to the back-office GIS database through the combination
of
wireless technologies, as well as giving the field worker the ability to
download information from the database. This capability provides significant
advantages to users including improved productivity, accuracy and access to
the
information in the field.
Distribution
for GIS
products is primarily through a network of independent dealers and business
partners, supported by Trimble personnel. Primary markets for our GIS products
and solutions include both governmental and commercial users. Government users
are most often municipal governments and natural resource agencies. Commercial
users include utility companies. Competitors in this market are typically survey
instrument companies utilizing GPS technology. Two examples are Leica Geosystems
and Thales.
Approximate
price
points in this segment range from $3,000 for a GIS handheld unit to $35,000
for
a fully automated, farm equipment control system.
Representative
products sold within this segment include:
AgGPS®
Autopilot™ System
- A GPS-enabled,
agricultural navigation system that connects to a tractor’s steering system and
automatically steers the tractor along a precise path to within three
centimeters or less. This enables both higher machine productivity and more
precise application of seed and chemicals, thereby reducing costs to the
farmer.
AgGPS®
EZ-Guide® Plus System
- A GPS-enabled,
manual guidance system that provides the tractor operator with steering visual
corrections required to stay on course to within 20 centimeters or less. This
system reduces the overlap or gap in spraying, fertilizing, and other field
applications.
AgGPS®
EZ-Steer™ System
- A value added
assisted steering system, that when combined with the EZ-Guide Plus system,
automatically steers agricultural vehicles along a path within 20 centimeters
or
less. This system installs in less than thirty minutes and is designed to reduce
gaps and overlaps in spraying, fertilizing, and other field applications as
well
as reduce operator fatigue.
GeoExplorer® 2005 Series
- Combines a GPS
receiver in a rugged handheld unit running industry standard Microsoft Windows
Mobile version 5.0, making it easy to collect and maintain data about objects
in
the field. The GeoExplorer series features three models ranging in accuracy
from
subfoot to 1-3 meters —allowing the user to select the system most appropriate
for their data collection and maintenance needs.
GPS
Pathfinder® Series - A
diverse collection
of rugged GPS receivers with a variety of accuracy options from subfoot to
submeter ideally
suited for
GIS data collection and maintenance applications. These receivers integrate
seamlessly with industry-standard GIS systems, providing the user with timely
and accurate data for decision-making.
Component
Technologies
Our
Component
Technologies segment provides GPS-based components for applications that require
embedded position or time. Our largest markets are in the telecommunications
and
automotive industries where we supply modules, boards, custom integrated
circuits and software, or single application IP licenses to the customer
according to the needs of the application. Sales are made directly to original
equipment manufacturers (OEMs) and system integrators who incorporate our
component into a sub-system or a complete system-level product.
In
the
telecommunications infrastructure market, we provide timing modules that keep
wireless networks synchronized and on frequency. For example, CDMA cellular
telephone networks require a high level of both short-term and long-term
frequency stability for proper operation (synchronization of information/voice
flow to avoid dropped calls). Our timing modules meet these needs at a much
lower cost than the atomic standards or other
specially
prepared
components that would otherwise be required. Customers include wireless
infrastructure companies such as Nortel, Samsung, and Andrew.
In
the automotive
and embedded market, we provide a GPS component that is embedded into in-vehicle
navigation (IVN), fleet management, vehicle security, asset management and
telematics applications. For the automotive market, in addition to core GPS
technology, we provide a location engine for IVN that blends GPS with advanced
dead reckoning (DR) technology to provide exceptional position density in the
most challenging navigation environments. The primary selling attributes in
this
market are quality, technology, logistics and customer support. Trimble supplies
several Tier-1 IVN system manufacturers in Europe and Asia.
Component
Technologies has developed GPS software technologies which it is making
available for license. This software can run on certain digital signal
processors (DSP) or microprocessors removing the need for dedicated GPS baseband
signal processor chips. Component Technologies has an agreement with u-Nav
Microelectronics to license Trimble GPS software technology for u-Nav GPS
chipsets.
The
major competitor
in the telecommunication infrastructure market is Symmetricom. Competitors
in
the automotive and embedded markets are typically component companies with
GPS
capability, including Japan Radio Corporation, Motorola, and SiRF.
Representative
products sold by this segment include:
Thunderbolt®
GPS Disciplined Clock
- The Thunderbolt
clock is used as a time source for the synchronization of wireless networks.
By
combining a GPS receiver with a high-quality quartz oscillator, the Thunderbolt
clock achieves the performance of an atomic standard with higher reliability
and
lower price.
FirstGPS®
Technology
- We license our
FirstGPS technology, which is a host-based, GPS system available as two
integrated circuits and associated software. The software runs on a customer’s
existing microprocessor system complementing the work done by the integrated
circuit to generate position, velocity, and time. This low-power technology
is
particularly suitable for small, mobile, battery-operated applications.
Lassen®
iQ Module
- The Lassen iQ
module adds complete GPS functionality to a mobile product in a postage
stamp-sized footprint with ultra-low power consumption, consuming less than
100mW at 3.3V. This module is designed for portable handheld, battery-powered
applications such as cell phones, pagers, PDAs, digital cameras, and many
others.
TrimTrac®
Locator
- Our TrimTrac
product is a complete end user device that combines GPS functionality with
tri-band global system for mobile communications (GSM) wireless communications.
It is intended for high volume personal vehicle and commercial asset management
applications that demand a low-cost locator device.
Mobile
Solutions
Our
Mobile Solutions
segment addresses the market for fleet management services by providing a
Trimble solution that includes both the hardware and subscription service needed
to run the application. The subscription service is web based. Our solutions
are
typically provided to the user through Internet-enabled access to our hosted
platform for a monthly service fee. This solution enables the fleet owner to
dispatch, track, and monitor the conditions of vehicles in the fleet on a
real-time basis. A vehicle-mounted unit consists of a single module including
a
GPS receiver, sensor interface, and a cellular modem. Our solution includes
the
communication service from the vehicle to our data center and access over the
Internet to the application software, relieving the user of the need to maintain
extensive computer operations.
One
element of our
market strategy targets opportunities in specific vertical markets where we
believe we can provide a unique value to the end user by tailoring our hardware
and subscription service solution for a particular industry. For example, one
vertical we are addressing is ready mix concrete. Here, we combine a suite
of
sensors into a solution that can automatically determine the status of a vehicle
without driver intervention. We plan on leveraging our technology and
capabilities and customers into other verticals, such as direct store delivery,
public safety and construction management.
We
also have a
horizontal market strategy that focuses on providing turnkey solutions to a
broad range of service fleets and mobile workers that span a large number of
market segments. Here, we leverage our capabilities without the same level
of
customization. These products are distributed through individual dealers as
well
as in the vertical applications.
Our
enterprise
strategy focuses on sales to large, enterprise accounts. Here, in addition
to a
Trimble-hosted solution, we can also integrate our service directly into the
customer’s IT infrastructure, giving them improved control of their information.
In this market we sell directly to end users and sales cycles tend to be long
due to field trials followed by an extensive decision-making
process.
Approximate
prices
for the hardware fall in the range of $400 to $3,000, while the monthly
subscription service fees range from approximately $20 to approximately $55,
depending on the customer service level. Competition comes largely from
service-oriented businesses such as @Road.
We
have also entered
new markets by acquisitions of MobileTech Solutions, Inc. and Advanced Public
Saftey, Inc. (APS) MobileTech provides field workforce automation solutions
and
has a leading position in the direct store delivery market. APS provides mobile
and handheld software products used by law enforcement, fire rescue and other
public safety agencies.
Representative
products sold by this segment include:
TrimWeb™
Systems
- Our fleet
management service offerings are comprised of the TrimWeb system and TrimFleet
system. The TrimWeb system provides different levels of service that run from
snapshots of fleet activity to real-time fleet dispatch capability via access
to
the TrimWeb platform network through a secure internet connection. The TrimWeb
system includes truck communication service and computer backbone support of
the
service. Variations of the TrimWeb system are tailored for specific industry
applications.
CrossCheck®
Module
- This hardware,
mounted on the vehicle, provides location and information through its built-in
cellular interface. This module also includes GPS positioning, sensor interfaces
for vehicle conditions, and built-in intelligence for distributed
decision-making.
RoutePower™
CE Mobile - This
software
operates in the Microsoft CE/Pocket PC environment and addresses the pre-sales,
delivery, routes sales and full service vending functions performed on the
routes of Direct Store Delivery (DSD) companies. In addition, RoutePower
software can communicate with digital phones, printers, GPS receivers, and
other
peripherals in a wireless non-tethered Bluetooth environment.
GateWay™
Middleware Software - This
software
handles all communications from/to the mobile computer as well as from/to the
host and any other decision support systems. In addition, the GateWay software
supports all functionality of the RoutePower™
mobile system
regardless of host system capabilities.
PocketCitation™
System - This
electronic
ticketing system enables law enforcement officers to issue traffic citations
utilizing a mobile handheld device. This system scans the traffic offender’s
driver’s license and automatically populates the appropriate information into
the citation.
QuickTicket™
System - This
system works in
conjunction with mobile software platforms to enable law enforcement officers
to
complete electronic traffic citations in under 30 seconds.
Portfolio
Technologies
Our
Portfolio
Technologies segment includes various operations that aggregate to less than
10
percent of our total revenue. The operations in this segment are Applanix,
Military and Advanced Systems (MAS), and Trimble Outdoors.
Applanix
develops,
manufactures, sells and supports high-value, precision products that combine
GPS
with inertial sensors for accurate measurement of the position and attitude
of
moving vehicles. Sales are made directly by our sales force to the end users
or
to systems integrators. Competitors include IGI in the airborne survey market,
and iXsea and TSS in the marine survey market.
Our
MAS business
supplies GPS receivers and embedded modules that use the military’s GPS advanced
capabilities. The modules are principally used in aircraft navigation and timing
application. Military products are sold directly to either the US Government
or
defense contractors. Sales are also made to authorized foreign end users.
Competitors in this market include Rockwell Collins, L3, and Raytheon.
The
Trimble Outdoors
service utilizes GPS-enabled cell phones to provide information for outdoor
recreational activities. Some of the recreational activities include hiking,
biking, backpacking, boating, and water sports. Consumers purchase the Trimble
Outdoors product through our wireless operator partners which include
Sprint-Nextel, SouthernLINC Wireless and Boost Mobile. In 2005, Trimble entered
into an agreement with Rodale Inc., owner of Backpacker Magazine, to bring
high
quality trip content to consumer GPS cell phones. The Trimble Outdoors service
operates on more than 20 different GPS cell phones.
Representative
products sold by this segment include:
Applanix
POS/AV™
- An integrated
GPS/inertial system for airborne surveying that measures aircraft position
to an
accuracy of a few centimeters and aircraft attitude (angular orientation) to
an
accuracy of 30 arc seconds or better. This system is typically interfaced to
large format cameras and scanning lasers for producing geo-referenced
topographic maps of the terrain.
Force™
5
GS
(GRAM-SAASM) Module
- A dual frequency,
embedded GPS module that is used in a variety of military airborne
applications.
Trimble®
Outdoors™ - Trip
planning and
navigation software that works with GPS-enabled cell phones and conventional
GPS
receivers. This software enables consumers to research specific trips online
as
part of trip pre-planning. In addition, users are able to share outdoor and
off-road experiences online with their friends and family.
Acquisitions
and Joint Ventures
Our
growth strategy
is centered on developing and marketing innovative and complete value-added
solutions to our existing customers, while also marketing them to new customers
and geographic regions. In some cases, this has led to partnering with or
acquiring companies that bring technologies, products or distribution
capabilities that will allow us to enter or penetrate a market more effectively
than if we had done so solely through internal development. Over the past five
years, this has led us to form two joint ventures and acquire multiple
companies. No assurance can be given that our previous or future acquisitions
will be successful or will not materially adversely affect our financial
condition or operating results.
Advanced
Public
Safety, Inc. (APS)
*
On December 30,
2005, we acquired APS of Deerfield Beach, Florida. APS provides mobile and
handheld software products used by law enforcement, fire-rescue and other public
safety agencies. With the APS acquisition, we plan to leverage our rugged mobile
computing devices and our fleet management systems to provide complete mobile
resource solutions for the public safety industry. APS will be reported within
our Mobile Solutions business segment.
MobileTech
Solutions Inc.
*
On October 25,
2005, we acquired MobileTech Solutions, Inc. of Plano, Texas. MobileTech
Solutions provides field workforce automation solutions and has a leading
position in the direct store delivery (DSD) market. We expect the MobileTech
Solutions acquisition to extend our portfolio of fleet management and field
workforce applications. MobileTech Solutions’ performance is reported under our
Mobile Solutions business segment.
Apache
Technologies, Inc.
On
April 19, 2005,
we acquired Apache Technologies Inc. of Dayton, Ohio. Apache is a leading
developer of laser detection technology. With the acquisition, we extended
our laser product portfolio for handheld laser detectors and entry-level machine
displays and control systems, as well as our distribution network in the United
States. Apache’s performance is reported under our Engineering and
Construction business segment.
Pacific
Crest
Corporation
On
January 10, 2005
we acquired Pacific Crest Corporation of Santa Clara, California, a supplier
of
wireless data communication systems for positioning and environmental monitoring
applications. The Pacific Crest acquisition has enhanced our wireless data
communications capabilities in the Engineering and Construction business
segment.
GeoNav
On
July 5, 2004 we
acquired GeoNav GmbH, a small provider of customized field data collection
solutions for the cadastral survey market in Europe. This acquisition augments
our capability for localization of our products in Europe. GeoNav’s performance
is reported under our Engineering and Construction segment.
TracerNET
Corporation
On
March 5, 2004 we
acquired TracerNET Corporation of Virginia, a provider of wireless fleet
management solutions. The TracerNET acquisition added more diverse and complete
fleet management solutions. TracerNET’s performance has been integrated into our
Mobile Solutions segment.
MENSI
S.A.
On
December 9, 2003,
we acquired MENSI S.A., a French developer of terrestrial 3D laser scanning
technology. The MENSI acquisition enhanced our technology portfolio and expanded
our product offerings. MENSI’s performance is reported under our Engineering and
Construction segment.
Applanix
Corporation
On
July 7, 2003, we
acquired Applanix Corporation, a Canadian developer of systems that integrate
inertial navigation system and GPS technologies. The Applanix acquisition
extended our technology portfolio and offers increased robustness and
capabilities in positioning products. Applanix’s performance is reported under
our Portfolio Technologies segment.
Nikon-Trimble
Co., Ltd.
On
March 28, 2003,
Trimble and Nikon Corporation agreed to form a joint venture in Japan,
Nikon-Trimble Co., Ltd., which assumed the operations of Nikon Geotecs Co.,
Ltd., a Japanese subsidiary of Nikon Corporation and Trimble Japan KK, our
Japanese subsidiary. Nikon-Trimble began operations in July of 2003.
Nikon-Trimble
is 50%
owned by us and 50% owned by Nikon, with equal voting rights. It is focusing
on
the design and manufacture of surveying instruments including mechanical total
stations and related products. In Japan, this joint venture distributes Nikon’s
survey products as well as our survey, agriculture, construction and GIS
products. Outside of Japan, we are the exclusive distributor of Nikon survey
and
construction products.
The
joint venture
has enhanced our market position in survey instruments through geographic
expansion and market penetration. The Nikon products broadens our survey and
construction product portfolio and enables us to better access emerging markets
such as Russia, China, and India. It also provides us with the ability to sell
our GPS and robotic technology to existing Nikon customers.
Caterpillar
Trimble Control Technologies, LLC
On
April 1, 2002, we
established and began operations of a joint venture with Caterpillar called
Caterpillar Trimble Control Technologies, LLC, in which each company has a
50%
ownership stake and equal voting rights. This joint venture develops and
manufactures machine control products for the construction and mining markets
for installation in the factory or as a dealer option.
Patents,
Licenses and Intellectual Property
We
hold
approximately 600 US patents and approximately 100 non-US patents, the majority
of which cover GPS technology and other applications such as optical and laser
technology.
We
prefer to own the
intellectual property used in our products, either directly or though
subsidiaries. From time to time we license technology from third parties.
There
are
approximately 200 trademarks registered to Trimble and its subsidiaries
including "Trimble," the globe and triangle logo, "AgGPS," "GeoExplorer," and
"Telvisant," among others that are registered in the United States and other
countries. Additional trademarks are pending registration.
Sales
and
Marketing
We
tailor the
distribution channel to the needs of our products and regional markets through
a
number of forms of sales channel solutions around the world. We sell our
products worldwide primarily through dealers, distributors, and authorized
representatives, occasionally granting exclusive rights to market certain
products within specific countries. This channel is supported and supplemented
(where third party distribution is not available) by our regional sales offices
throughout the world. We also utilize distribution alliances, OEM relationships
and joint ventures with other companies as a means to serve selected markets.
During
the 2005
fiscal year, United States represented 54%, Europe represented 25%, Asia Pacific
represented 11% and other regions represented 10% of our total revenues. During
the 2004 fiscal year, United States represented 50%, Europe represented 28%,
Asia Pacific represented 13% and other regions represented 9% of our total
revenues.
Warranty
The
warranty periods for our products are generally between one and three years.
Selected military programs may require extended warranty periods up to 5.5
years
and certain Nikon products have a five-year warranty period. We support our
GPS
products through a circuit board replacement program from locations in the
United Kingdom, Germany, Japan, and the United States. The repair and
calibration of our non-GPS products are available from company-owned or
authorized facilities. We reimburse dealers and distributors for all authorized
warranty repairs they perform.
While
we engage in
extensive product quality programs and processes, including actively monitoring
and evaluating the quality of component suppliers, our warranty obligation
is
affected by product failure rates, material usage, and service delivery costs
incurred in correcting a product failure. Should actual product failure rates,
material usage, or service delivery costs differ from the estimates, revisions
to the estimated warranty accrual and related costs may be required.
Seasonality
of Business
*
Our
individual
segment revenues may be affected by seasonal buying patterns. Typically the
second fiscal quarter has been the strongest quarter for the Company driven
by
the construction buying season. The second quarter has averaged 27% of total
revenue in the last two fiscal years.
Backlog
In
most of our
markets, the time between order placement and shipment is short. Therefore,
we
believe that backlog is not a reliable indicator of present or future business
conditions.
Manufacturing
Manufacturing
of
substantially all our GPS subsystems is subcontracted to Solectron Corporation.
During fiscal 2005 we continued to utilize Solectron's Suzhou facilities in
China for all of our Component Technologies products. During 2004 we expanded
our use of Solectron in Mexico for our Field Solutions products and handhelds.
We continue to utilize Solectron California for our high-end GPS products and
new product introduction services. Solectron is responsible for substantially
all material procurement, assembly, and testing. We continue to manage product
design through pilot production for the subcontracted products, and we are
directly involved in qualifying suppliers and key components used in all our
products. Our current contract with Solectron continues in effect until either
party gives the other ninety days written notice.
We
manufacture laser
and optics-based products at our plants in Dayton, Ohio; Danderyd, Sweden;
Jena
and Kaiserslautern, Germany; Paris, France; and Toronto, Canada. Some of these
products or portions of these products are also subcontracted to third parties
for assembly.
Our
manufacturing
sites in Dayton, Ohio; Danderyd, Sweden; Jena and Kaiserslautern, Germany are
registered to ISO9001:2000, covering the design, production, distribution,
and
servicing of all our products. The Component Technologies segment is registered
to QS9000 for its automotive products. QS9000 is the automotive version of
ISO9000 covering specific requirements for the market.
Research
and
Development
We
believe that our
competitive position is maintained through the development and introduction
of
new products that incorporate improved features, better performance, smaller
size and weight, lower cost, or some combination of these factors. We invest
substantially in the development of new products. We also make significant
investment in the positioning, communication, and information technologies
that
underlie our products and will likely provide competitive
advantages.
Our
research and
development expenditures, net of reimbursed amounts were $84.3 million for
fiscal 2005, $77.6 million for fiscal 2004, and $67.6 million for fiscal 2003.
*
We expect to
continue investing in research and development with the goal of maintaining
or
improving our competitive position, as well as the goal of entering new markets.
Employees
As
of December 30,
2005, we employed 2,462 employees, including 32% in sales and marketing, 28%
in
manufacturing, 26% in engineering, and 14% in general and administrative
positions. Approximately 40% of employees are in locations outside the United
States.
Our
employees are
not represented by unions except for those in Sweden and some in Germany. We
also employ temporary and contract personnel that are not included in the above
headcount numbers. We have not experienced work stoppages or similar labor
actions.
Available
Information
The
Company’s annual
reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form
8-K, and all amendments to those reports are available free of charge on the
Company’s web site through
www.trimble.com/investors.html,
as soon as
reasonably practicable after such material is electronically filed with or
furnished to the Securities and Exchange Commission. Information
contained on our web site is not part of this annual report on Form 10-K.
In
addition, you may
request a copy of these filings (excluding exhibits) at no cost by writing
or
telephoning us at our principal executive offices at the following address
or
telephone number:
Trimble
Navigation
Limited
935
Stewart Drive, Sunnyvale, CA 94085
Attention:
Investor
Relations Telephone: 408-481-8000
Executive
Officers
The
names, ages, and
positions of the Company's executive officers as of March 1, 2006 are as
follows:
Name
|
Age
|
Position
|
Steven
W.
Berglund
|
54
|
President
and
Chief Executive Officer
|
Rajat
Bahri
|
41
|
Chief
Financial Officer
|
Joseph
F.
Denniston, Jr.
|
45
|
Vice
President, Operations
|
Bryn
A.
Fosburgh
|
43
|
Vice
President
and General Manager, Engineering and Construction
|
Mark
A.
Harrington
|
50
|
Vice
President, Strategy and Business Development
|
Debi
Hirshlag
|
40
|
Vice
President, Human Resources
|
John
E.
Huey
|
56
|
Treasurer
|
Irwin
L.
Kwatek
|
66
|
Vice
President
and General Counsel
|
Michael
W.
Lesyna
|
45
|
Vice
President, Business Transformation
|
Bruce
E.
Peetz
|
54
|
Vice
President, Advanced Technology and Systems
|
Anup
V. Singh
|
35
|
Vice
President
and Corporate Controller
|
Alan
R.
Townsend
|
57
|
Vice
President
and General Manager, Field Solutions
|
Dennis
L.
Workman
|
61
|
Vice
President
and General Manager, Component Technologies
|
Steven
W. Berglund
- Steven Berglund
has served as president and chief executive officer of Trimble since March
1999.
Prior to joining Trimble, Mr. Berglund was president of Spectra Precision,
a
group within Spectra Physics AB, and a pioneer in the development of laser
systems. He spent 14 years at Spectra Physics in a variety of senior leadership
positions. In the early 1980s, Mr. Berglund spent a number of years at Varian
Associates in Palo Alto, where he held a variety of planning and manufacturing
roles. Mr. Berglund began his career as a process engineer at Eastman Kodak
in
Rochester, New York. He attended the University of Oslo and the University
of
Minnesota where he received a B.S. in chemical engineering in 1974. He later
received his M.B.A. from the University of Rochester in New York in
1977.
Rajat
Bahri
- Rajat Bahri
joined Trimble as Chief Financial Officer in January 2005. Prior to joining
Trimble, Mr. Bahri served for more than 15 years in various capacities within
the financial organization of several subsidiaries of Kraft Foods, Inc. and
General Foods Corporation. Most recently, he served as the chief financial
officer for Kraft Canada, Inc. From June 2000 to June 2001 he served as chief
financial officer of Kraft Pizza Company. From 1997 to 2000, Mr. Bahri was
Operations Controller for Kraft Jacobs Suchard Europe. Mr. Bahri holds a
Bachelor of Commerce from the University of Delhi in 1985 and an M.B.A. from
Duke University in 1987. In 2005, he was elected on the board of Simple
Technologies, Inc., a publicly traded company.
Joseph
F. Denniston, Jr.
-
Joseph Denniston
joined Trimble as vice president of operations in April 2001, responsible for
worldwide manufacturing, distribution and logistics. Prior to Trimble, Mr.
Denniston worked for 3Com Corporation. During his 14-year tenure, he served
as
vice president of supply chain management for the Americas and held several
positions in test engineering, manufacturing engineering and operations.
Previously at Sentry Schlumberger for seven years, he held several positions
including production engineering, production management and test engineering
over six years. Mr. Denniston received a B.S. in electrical engineering
technology from the Missouri Institute of Technology in 1981 and an M.S. in
computer science engineering from Santa Clara University in 1990.
Bryn
A.
Fosburgh - Bryn
Fosburgh joined
Trimble in 1994 as a technical service manager for surveying, mining, and
construction. In 1997, Mr. Fosburgh was appointed director of development for
the Company’s land survey business unit where he oversaw the development of
field and office software that enabled the interoperability of Trimble survey
products. From October 1999 to July 2002, he served as division vice president
of survey and infrastructure. From 2002 to 2005, Mr. Fosburgh served as vice
president and general manager of Trimble's Geomatics and Engineering (G&E)
business area, with responsibility for all the division-level activities
associated with survey, construction, and infrastructure solutions. In January
2005, he was appointed vice president and general manager of the Engineering
and
Construction Division. Prior to Trimble, he was a civil engineer with the
Wisconsin Department of Transportation responsible for coordinating the
planning, data acquisition, and data analysis for statewide GPS surveying
projects in support of transportation improvement projects. He has also held
various engineering, research and operational positions for the U.S. Army Corps
of Engineers and Defense Mapping Agency. Mr. Fosburgh received a B.S. in geology
from the University of Wisconsin in Green Bay in 1985 and an M.S. in civil
engineering from Purdue University in 1989.
Mark
A.
Harrington - Mark
Harrington
joined Trimble in January 2004 as vice president of strategy and business
development. Prior to joining Trimble, Mr. Harrington served as vice president
of finance at Finisar Corporation and chief financial officer for Cielo
Communications, Inc., a photonics components manufacturer, from February 1998
to
September 2002, and Vixel Corporation, a photonics manufacturer, from April
2003
to December 2003. His experience also includes 11 years at Spectra-Physics
where
he served in a variety of roles including vice president of finance for
Spectra-Physics Lasers, Inc. and vice president of finance for Spectra-Physics
Analytical, Inc. Mr. Harrington began his career at Varian Associates, Inc.
where he held a variety of management and individual positions in finance,
operations and IT. Mr. Harrington received his B.S. in Business Administration
from the University of Nebraska-Lincoln.
Debi
Hirshlag
-
Debi
Hirshlag joined
Trimble in July 2005 as vice president of human resources. Prior to joining
Trimble, Ms. Hirshlag served as vice president of human resources at Ariba
Inc.,
a purchasing technology company from January 2003 to July 2004, and vice
president of corporate services at Latitude Communications, a conferencing
software provider from January 2001 to December 2002. In addition, she has
held
human resources positions at Seagate Technology, Inc., Pepsi-Cola and Amoco
Corporation. Ms. Hirshlag received her B.S. in industrial management from
Carnegie Mellon University and an M.A. in labor and industrial relations from
the University of Illinois.
John
E.
Huey - John
Huey joined
Trimble in 1993 as director corporate credit and collections, and was promoted
to assistant treasurer in 1995 and treasurer in 1996. Past experience includes
two years with ENTEX Information Services, five years with National Refractories
and Minerals Corporation (formerly Kaiser Refractories), and thirteen years
with
Kaiser Aluminum and Chemical Sales, Inc. He has held positions in credit
management, market research, inventory control, sales, and as an assistant
controller. Mr. Huey received his B.A. degree in Business Administration in
1971
from Thiel College in Greenville, Pennsylvania and an MBA in 1972 from West
Virginia University in Morgantown, West Virginia.
Irwin
L.
Kwatek -
Irwin Kwatek has
served as vice president and general counsel of Trimble since November 2000.
Prior to joining Trimble, Mr. Kwatek was vice president and general counsel
of
Tickets.com, a ticketing service provider, from May 1999 to November 2000.
Prior
to Tickets.com, he was engaged in the private practice of law for more than
six
years. During his career, he has served as vice president and general counsel
to
several publicly held high-tech companies including Emulex Corporation, Western
Digital Corporation and General Automation, Inc. Mr. Kwatek received his B.B.A.
from Adelphi College in Garden City, New York and an M.B.A. from the University
of Michigan in Ann Arbor. He received his J.D. from Fordham University in New
York City in 1968.
Michael
W. Lesyna -Michael
Lesyna
joined Trimble in September 1999 as vice president of strategic marketing.
In
September 2000, he was appointed vice president and general manager of the
Mobile Solutions Division. In July 2004, Lesyna was appointed vice president
of
Business Transformation. In this cross-divisional role he focuses on driving
operational improvements based on the marketing, sales and distribution channel
strategies of Trimble's business segments. The scope of his work includes
tailored business prioritization as well as lean manufacturing and lean overhead
principles. Prior to Trimble, Mr. Lesyna spent six years at Booz Allen &
Hamilton where he most recently served as a principal in the operations
management group. Prior to Booz Allen & Hamilton, Mr. Lesyna held a variety
of engineering positions at Allied Signal Aerospace. Mr. Lesyna received his
M.B.A., as well as an M.S. and B.S. in mechanical engineering from Stanford
University.
Bruce
E.
Peetz -
Bruce Peetz has
served as vice president of Advanced Technology and Systems since 1998 and
has
been with Trimble for 15 years. From 1996 to 1998, Mr. Peetz served as general
manager of the Survey Business. Prior to joining Trimble, Mr. Peetz was a
research and development manager at Hewlett-Packard for 10 years. Mr. Peetz
received his B.S. in electrical engineering from Massachusetts Institute of
Technology in Cambridge, Massachusetts in 1973.
Anup
V.
Singh -
Anup Singh joined
Trimble in December 2001 as corporate controller. In August 2004 he was
appointed vice president and corporate controller. Prior to joining Trimble,
Mr.
Singh
was with Excite@Home
from July 1999 to
December 2001.
During
his tenure at
Excite@Home, he held
the positions
of senior director of Corporate Financial Planning and Analysis, and
international controller. Before Excite@Home, Mr. Singh also worked for 3Com
Corporation from December 1997 to July 1999, and Ernst & Young LLP in San
Jose, California and London, England. Mr. Singh received his B.A. in 1991 and
M.A. in 1995 in economics and management science from Cambridge University
in
England. He is also a chartered accountant and was admitted as a member of
the
Institute of Chartered Accountants in England and Wales in 1994.
Alan
R.
Townsend -
Alan
Townsend has
served as vice president and general manager of the Field Solutions business
area since November 2001. From 1995 to 2001, Mr. Townsend was general manager
of
Mapping and GIS. Mr. Townsend joined Trimble in 1991 as the manager of Trimble
Navigation New Zealand Ltd. Prior to Trimble, Mr. Townsend held a variety of
technical and senior management roles within the Datacom Group of companies
in
New Zealand including managing director of Datacom Software Research Ltd. from
1986 to 1991. In addition, Mr. Townsend is a director of IT Capital Ltd., a
venture capital company based in Auckland, New Zealand. He is also a fellow
of
the New Zealand Institute of Management and a past president of the New Zealand
Software Exporters Association. Mr. Townsend received a B.S.c in economics
from
the University of Canterbury in 1970.
Dennis
L. Workman - Dennis
Workman has
served as vice president and general manager of Trimble’s Component Technologies
segment since September 1999. From 1998 to 1999, Mr. Workman was senior director
and chief technical officer of the newly formed Mobile and Timing Technologies
(MTT) business group, also serving as general manager of Trimble's Automotive
and Timing group. In 1997, he was director of engineering for Software &
Component Technologies. Mr. Workman joined Trimble in 1995 as director of the
newly created Timing vertical market. Prior to Trimble, Mr. Workman held various
senior-level technical positions at Datum Inc. During his nine year tenure
at
Datum, he held the position of CTO. Mr. Workman received a B.S. in mathematics
and physics from St. Mary’s College in 1967 and an M.S. in electrical
engineering from the Massachusetts Institute of Technology in
1969.
Item
1A Risk
Factors
RISKS
AND
UNCERTAINTIES
You
should carefully
consider the following risk factors, in addition to the other information
contained in this Form 10-K and in any other documents to which we refer you
in
this Form 10-K, before purchasing our securities. The risks and uncertainties
described below are not the only ones we face.
Our
Inability to
Accurately Predict Orders and Shipments May Affect Our Revenue, Expenses and
Earnings per Share.
We
have not been
able in the past to consistently predict when our customers will place orders
and request shipments so that we cannot always accurately plan our manufacturing
requirements. As a result, if orders and shipments differ from what we predict,
we may incur additional expenses and build excess inventory, which may require
additional reserves and allowances. Any significant change in our customers’
purchasing patterns could have a material adverse effect on our operating
results and reported earnings per share for a particular quarter.
Our
Operating
Results in Each Quarter May Be Affected by Special Conditions, Such As
Seasonality, Late Quarter Purchases, Weather, and Other Potential
Issues.
Due
in part to the
buying patterns of our customers, a significant portion of our quarterly
revenues occurs from orders received and immediately shipped to customers in
the
last few weeks and days of each quarter, although our operating expenses tend
to
remain fairly predictable. Engineering and construction purchases tend to occur
in early spring, and governmental agencies tend to utilize funds available
at
the end of the government’s fiscal year for additional purchases at the end of
our third fiscal quarter in September of each year. Concentrations of orders
sometimes also occur at the end of our other two fiscal quarters. Additionally,
a majority of our sales force earns commissions on a quarterly basis which
may
cause concentrations of orders at the end of any fiscal quarter. If for any
reason expected sales are deferred, orders are not received, or shipments are
delayed a few days at the end of a quarter, our operating results and reported
earnings per share for that quarter could be significantly
impacted.
We
Are Dependent
on a Specific Manufacturer and Assembler for Many of Our Products and on
Specific Suppliers of Critical Parts for Our Products.
We
are substantially
dependent upon Solectron Corporation in California, China and Mexico as our
preferred manufacturing partner for many of our GPS products previously
manufactured out of our Sunnyvale facilities. Under the agreement with
Solectron, we provide to Solectron a twelve-month product forecast and place
purchase orders with Solectron at least thirty calendar days in advance of
the
scheduled delivery of products to our customers depending on production lead
time. Although purchase orders placed with Solectron are cancelable, the terms
of the agreement would require us to purchase from Solectron all inventory
not
returnable or usable by other Solectron customers. Accordingly, if we
inaccurately forecast demand for our products, we may be unable to obtain
adequate manufacturing capacity from Solectron to meet customers’ delivery
requirements or we may accumulate excess inventories, if such inventories are
not usable by other Solectron customers.
Our
current
contract with Solectron continues in effect until either party gives the other
ninety days written notice.
In
addition, we rely
on specific suppliers for a number of our critical components. We have
experienced shortages of components in the past. Our current reliance on
specific or a limited group of suppliers involves several risks, including
a
potential inability to obtain an adequate supply of required components and
reduced control over pricing. Any inability to obtain adequate deliveries or
any
other circumstance that would require us to seek alternative sources of supply
or to manufacture such components internally could significantly delay our
ability to ship our products, which could damage relationships with current
and
prospective customers and could harm our reputation and brand, and could have
a
material adverse effect on our business.
Our
Annual and
Quarterly Performance May Fluctuate.
Our
operating
results have fluctuated and can be expected to continue to fluctuate in the
future on a quarterly and annual basis as a result of a number of factors,
many
of which are beyond our control. Results in any period could be affected by:
·
|
changes
in
market demand,
|
·
|
competitive
market conditions,
|
·
|
market
acceptance of existing or new products,
|
·
|
fluctuations
in foreign currency exchange rates,
|
·
|
the
cost and
availability of components,
|
·
|
our
ability to
manufacture and ship products,
|
·
|
the
mix of our
customer base and sales channels,
|
·
|
the
mix of
products sold,
|
·
|
our
ability to
expand our sales and marketing organization effectively,
|
·
|
our
ability to
attract and retain key technical and managerial employees,
|
·
|
the
timing of
shipments of products under contracts and
|
·
|
general
global
economic conditions.
|
In
addition, demand
for our products in any quarter or year may vary due to the seasonal buying
patterns of our customers in the agricultural and engineering and construction
industries. Due to the foregoing factors, our operating results in one or more
future periods are expected to be subject to significant fluctuations. The
price
of our common stock could decline substantially in the event such fluctuations
result in our financial performance being below the expectations of public
market analysts and investors, which are based primarily on historical models
that are not necessarily accurate representations of the future.
Our
Gross Margin
Is Subject to Fluctuation.
Our
gross margin is
affected by a number of factors, including product mix, product pricing, cost
of
components, foreign currency exchange rates and manufacturing costs. For
example, sales of Nikon-branded products generally have lower gross margins
as
compared to our GPS survey products. Absent other factors, a shift in sales
towards Nikon-branded products would lead to a reduction in our overall gross
margins. A decline in gross margin could potentially negatively impact our
earnings per share.
Failure
to
maintain effective internal controls in compliance with Section 404 of the
Sarbanes-Oxley Act could have an adverse effect on our business and stock
price.
Section
404 of the
Sarbanes-Oxley Act requires us to include an internal control report of
management in our Annual Report on Form 10-K. For fiscal 2004 and 2005 we
satisfied the requirements of Section 404, which requires annual management
assessments of the effectiveness of our internal controls over financial
reporting and a report by our independent auditors addressing these assessments.
A
system of
controls, however well designed and operated, cannot provide absolute assurance
that the objectives of the system will be met. In addition, the design of a
control system is based in part upon certain assumptions about the likelihood
of
future events. Because of the inherent limitations of control systems, there
is
only reasonable assurance that our controls will succeed in achieving their
stated goals under all potential future conditions.
We
Are Dependent
on New Products.
Our
future revenue
stream depends to a large degree on our ability to bring new products to market
on a timely basis. We must continue to make significant investments in research
and development in order to continue to develop new products, enhance existing
products and achieve market acceptance of such products. We may incur problems
in the future in innovating and introducing new products. Our development stage
products may not be successfully completed or, if developed, may not achieve
significant customer acceptance. If we were unable to successfully define,
develop and introduce competitive new products, and enhance existing products,
our future results of operations would be adversely affected. Development and
manufacturing schedules for technology products are difficult to predict, and
we
might not achieve timely initial customer shipments of new products. The timely
availability of these products in volume and their acceptance by customers
are
important to our future success. A delay in new product introductions could
have
a significant impact on our results of operations.
We
Are Dependent
on Proprietary Technology.
Our
future success
and competitive position is dependent upon our proprietary technology, and
we
rely on patent, trade secret, trademark and copyright law to protect our
intellectual property. The patents owned or licensed by us may be invalidated,
circumvented, and challenged. The rights granted under these patents may not
provide competitive advantages to us. Any of our pending or future patent
applications may not be issued within the scope of the claims sought by us,
if
at all.
Others
may develop
technologies that are similar or superior to our technology, duplicate our
technology or design around the patents owned by us. In addition, effective
copyright, patent and trade secret protection may be unavailable, limited or
not
applied for in certain countries. The steps taken by us to protect our
technology might not prevent the misappropriation of such technology.
The
value of our
products relies substantially on our technical innovation in fields in which
there are many current patent filings. We recognize that as new patents are
issued or are brought to our attention by the holders of such patents, it may
be
necessary for us to withdraw products from the market, take a license from
such
patent holders, or redesign our products. We do not believe any of our products
currently infringe patents or other proprietary rights of third parties, but
we
cannot be certain they do not do so. In addition, the legal costs and
engineering time required to safeguard intellectual property or to defend
against litigation could become a significant expense of operations. Such events
could have a material adverse effect on our revenues or
profitability.
Our
products may
contain errors or defects, which could result in damage to our reputation,
lost
revenues, diverted development resources and increased service costs, warranty
claims and litigation.
Our
devices are
complex and must meet stringent requirements. We warrant that our products
will
be free of defect for various periods of time, depending on the product. In
addition, certain of our contracts include epidemic failure clauses. If invoked,
these clauses may entitle the customer to return or obtain credits for products
and inventory, or to cancel outstanding purchase orders even if the products
themselves are not defective.
We
must develop our
products quickly to keep pace with the rapidly changing market, and we have
a
history of frequently introducing new products. Products and services as
sophisticated as ours could contain undetected errors or defects, especially
when first introduced or when new models or versions are released. In general,
our products may not be free from errors or defects after commercial shipments
have begun, which could result in damage to our reputation, lost revenues,
diverted development resources, increased customer service and support costs
and
warranty claims and litigation which could harm our business, results of
operations and financial condition.
We
Are Dependent
on the Availability of Allocated Bands within the Radio Frequency
Spectrum.
Our
GPS technology
is dependent on the use of the Standard Positioning Service (“SPS”) provided by
the US Government’s GPS. The GPS SPS operates in radio frequency bands that are
globally allocated for radio navigation satellite services. International
allocations of radio frequency are made by the International Telecommunications
Union (“ITU”), a specialized technical agency of the United Nations. These
allocations are further governed by radio regulations that have treaty status
and which may be subject to modification every two to three years by the World
Radio Communication Conference.
Any
ITU reallocation
of radio frequency bands, including frequency band segmentation or sharing
of
spectrum, may materially and adversely affect the utility and reliability of
our
products. Many of our products use other radio frequency bands, together with
the GPS signal, to provide enhanced GPS capabilities, such as real-time
kinematic precision. The continuing availability of these non-GPS radio
frequencies is essential to provide enhanced GPS products to our precision
survey and construction machine controls markets. Any regulatory changes in
spectrum allocation or in allowable operating conditions may cause a material
adverse effect on our operating results.
In
addition,
unwanted emissions from mobile satellite services and other equipment operating
in adjacent frequency bands or in-band from licensed and unlicensed devices
may
materially and adversely affect the utility and reliability of our products.
The
FCC continually receives proposals for novel technologies and services, such
as
ultra-wideband technologies, which may seek to operate in, or across, the radio
frequency bands currently used by the GPS SPS and other public safety services.
Adverse decisions by the FCC that result in harmful interference to the delivery
of the GPS SPS and other radio frequency spectrum also used in our products
may
result in a material adverse effect on our business and financial
condition.
Many
of Our
Products Rely on the GPS Satellite System.
The
GPS satellites
and their ground support systems are complex electronic systems subject to
electronic and mechanical failures and possible sabotage. The satellites
currently in orbit were originally designed to have lives of 7.5 years and
are
subject to damage by the hostile space environment in which they operate.
However, of the current deployment of 29 satellites in place, some have already
been in operation for 12 years. To repair damaged or malfunctioning satellites
is currently not economically feasible. If a significant number of satellites
were to become inoperable, there could be a substantial delay before they are
replaced with new satellites. A reduction in the number of operating satellites
may impair the current utility of the GPS system and the growth of current
and
additional market opportunities.
In
2004, a
Presidential policy affirmed a 1996 Presidential Decision Directive that marked
the first time in the evolution of GPS that access for civilian use free of
direct user fees. In addition, Presidential policy has been complemented by
corresponding legislation, that was signed into law. However, there can be
no
assurance that the US Government will remain committed to the operation and
maintenance of GPS satellites over a long period, or that the policies of the
US
Government for the use of GPS without charge will remain unchanged. Because
of
ever-increasing commercial applications of GPS, other US Government agencies
may
become involved in the administration or the regulation of the use of GPS
signals. Any of the foregoing factors could affect the willingness of buyers
of
our products to select GPS-based systems instead of products based on competing
technologies.
Many
of our products
also use signals from systems that augment GPS, such as the Wide Area
Augmentation System (WAAS) and National Differential GPS System (NDGPS). Many
of
these augmentation systems are operated by the federal government and rely
on
continued funding and maintenance of these systems. In addition, some of our
products also use satellite signals from the Russian Glonass System. Any
curtailment of the operating capability of these systems could result in
decreased user capability thereby impacting our markets.
The
European
governments have begun development of an independent satellite navigation
system, known as Galileo. We believe we will have access to the signal design
to
develop compatible receivers. However, if access to the signal structure is
delayed it may have a materially adverse effect on our business and operating
results.
We
may be
Materially Affected by New Regulatory Requirements.
We
are subject to
various federal, state and local environmental laws and regulations that govern
our operations, including the handling and disposal of non-hazardous and
hazardous wastes, and emissions and discharges into the environment. Failure
to
comply with such laws and regulations could result in costs for corrective
action, penalties, or the imposition of other liabilities.
In
particular, under
certain of these laws and regulations, a current or previous owner or operator
of property may be liable for the costs of remediating hazardous substances
or
petroleum products on or from its property, without regard to whether the owner
or operator knew of, or caused, the contamination, as well as incur liability
to
third parties impacted by such contamination. In addition, we face increasing
complexity in our product design and procurement operations as we adjust to
new
and upcoming requirements relating to the materials composition of many of
our
products. The European Union (“EU”) has adopted new directives to facilitate the
recycling of electrical and electronic equipment sold in the EU. One of these
is
the Restriction on the Use of Certain Hazardous Substances in Electrical and
Electronic Equipment (“RoHS”) directive. The RoHS directive restricts the use of
lead, mercury and certain other substances in electrical and electronic products
placed on the market in the European Union after September 30, 2006.
Similar
laws and
regulations have been or may be enacted in other regions, including in the
United States, China and Japan. Other environmental regulations may require
us
to reengineer our products to utilize components which are more environmentally
compatible and such reengineering and component substitution may result in
additional costs to us. Although we do not anticipate any material adverse
effects based on the nature of our operations and the effect of such laws,
there
is no assurance that such existing laws or future laws will not have a material
adverse effect on our business.
Our
Business is
Subject to Disruptions and Uncertainties Caused by War or Terrorism.
Acts
of war or acts
of terrorism could have a material adverse impact on our business, operating
results, and financial condition. The threat of terrorism and war and heightened
security and military response to this threat, or
any
future acts of
terrorism, may cause further disruption to our economy and create further
uncertainties. To the extent that such disruptions or uncertainties result
in
delays or cancellations of orders, or the manufacture or shipment of our
products, our business, operating results, and financial condition could be
materially and adversely affected.
We
Are Exposed
to Fluctuations in Currency Exchange Rates.
A
significant
portion of our business is conducted outside the US, and as such, we face
exposure to movements in non-US currency exchange rates. These exposures may
change over time as business practices evolve and could have a material adverse
impact on our financial results and cash flows. Fluctuation in currency impacts
our operating results.
Currently,
we hedge
only those currency exposures associated with certain assets and liabilities
denominated in non-functional currencies. The hedging activities undertaken
by
us are intended to offset the impact of currency fluctuations on certain
non-functional currency assets and liabilities. Our attempts to hedge against
these risks may not be successful resulting in an adverse impact on our net
income.
We
Face Risks in
Investing in and Integrating New Acquisitions.
We
have recently
acquired several companies and may in the future acquire other companies.
Acquisitions of companies, divisions of companies, or products entail numerous
risks, including:
·
|
potential
inability to successfully integrate acquired operations and products
or to
realize cost savings or other anticipated benefits from integration;
|
·
|
diversion
of
management’s attention;
|
·
|
loss
of key
employees of acquired operations;
|
·
|
the
difficulty
of assimilating geographically dispersed operations and personnel
of the
acquired companies;
|
·
|
the
potential
disruption of our ongoing business;
|
·
|
unanticipated
expenses related to such integration;
|
·
|
the
correct
assessment of the relative percentages of in-process research and
development expense that can be immediately written off as compared
to the
amount which must be amortized over the appropriate life of the
asset;
|
·
|
the
impairment
of relationships with employees and customers of either an acquired
company or our own business;
|
·
|
the
potential
unknown liabilities associated with acquired business; and
|
·
|
inability
to
recover strategic investments in development stage entities.
|
As
a result of such acquisitions, we have significant assets that include goodwill
and other purchased intangibles. The testing of these intangibles under
established accounting guidelines for impairment requires significant use of
judgment and assumptions. Changes in business conditions could require
adjustments to the valuation of these assets. In addition, losses incurred
by a
company in which we have an investment may have a direct impact on our financial
statements or could result in our having to write-down the value of such
investment. Any such problems in integration or adjustments to the value of
the
assets acquired could harm our growth strategy and have a material adverse
effect on our business, financial condition and compliance with debt
covenants.
We
May Not Be
Able to Enter Into or Maintain Important Alliances.
We
believe that in
certain business opportunities our success will depend on our ability to form
and maintain alliances with industry participants, such as Caterpillar, Nikon,
and CNH Global. Our failure to form and maintain such alliances, or the
pre-emption of such alliances by actions of other competitors or us, will
adversely affect our ability to penetrate emerging markets. No assurances can
be
given that we will not experience problems from current or future alliances
or
that we will realize value from any such strategic alliances.
We
Face
Competition in Our Markets.
Our
markets are
highly competitive and we expect that both direct and indirect competition
will
increase in the future. Our overall competitive position depends on a number
of
factors including the price, quality and performance of our products, the level
of customer service, the development of new technology and our ability to
participate in emerging markets. Within each of our markets, we encounter direct
competition from other GPS, optical and laser suppliers and competition may
intensify from various larger US and non-US competitors and new market entrants,
some of which may be our current customers. The competition in the future may,
in some cases, result in price reductions, reduced margins or loss of market
share, any of which could materially and adversely affect our business,
operating results and financial condition. We believe that our ability to
compete successfully in the future against existing and additional competitors
will depend largely on our ability to execute our strategy to provide systems
and products with significantly differentiated features compared to currently
available products. We may not be able to implement this strategy successfully,
and our products may not be competitive with other technologies or products
that
may be developed by our competitors, many of whom have significantly greater
financial, technical, manufacturing, marketing, sales and other resources than
we do.
We
Must
Carefully Manage Our Future Growth.
Growth
in our sales
or continued expansion in the scope of our operations could strain our current
management, financial, manufacturing and other resources, and may require us
to
implement and improve a variety of operating, financial and other systems,
procedures, and controls. We have recently implemented a new enterprise resource
planning software system and we may experience in our financial and order
management processing as a result of new procedures. Problems associated with
any improvement or expansion of these systems, procedures or controls may
adversely affect our operations and these systems, procedures or controls may
not be designed, implemented or improved in a cost-effective and timely manner.
Any failure to implement, improve and expand such systems, procedures, and
controls in a timely and efficient manner could harm our growth strategy and
adversely affect our financial condition and ability to achieve our business
objectives.
We
Are Dependent
on Retaining and Attracting Highly Skilled Development and Managerial
Personnel.
Our
ability to
maintain our competitive technological position will depend, in a large part,
on
our ability to attract, motivate, and retain highly qualified development and
managerial personnel. Competition for qualified employees in our industry and
locations is intense, and there can be no assurance that we will be able to
attract, motivate, and retain enough qualified employees necessary for the
future continued development of our business and products.
We
Are Subject
to the Impact of Governmental and Other Similar Certifications.
We
market certain
products that are subject to governmental and similar certifications before
they
can be sold. For example, CE certification for radiated emissions is required
for most GPS receiver and data communications products sold in the European
Union. An inability to obtain such certifications in a timely manner could
have
an adverse effect on our operating results. Also, some of our products that
use
integrated radio communication technology require an end user to obtain
licensing from the Federal Communications Commission (FCC) for frequency-band
usage. These are secondary licenses that are subject to certain restrictions.
An
inability or delay in obtaining such certifications or changes to the rules
by
the FCC could adversely affect our ability to bring our products to market
which
could harm our customer relationships and have a material adverse effect on
our
business.
We
Are Subject
to the Adverse Impact of Radio Frequency Congestion.
We
have certain
products, such as GPS RTK systems, and surveying and mapping systems that use
integrated radio communication technology requiring access to available radio
frequencies allocated by the FCC (or the NTIA in the case of federal government
users of this equipment) for which the end user is required to obtain a license
in order to operate their equipment. In addition, access to these frequencies
by
state agencies is under management by state radio communications coordinators.
Some bands are experiencing congestion that excludes their availability for
access by state agencies in some states. To reduce congestion, the FCC announced
that it will require migration of radio technology from wideband to narrowband
operations in these bands. The rules require migration of users to narrowband
channels by 2011. In the meantime congestion could cause FCC coordinators to
restrict or refuse licenses. An inability to obtain access to these radio
frequencies by end users could have an adverse effect on our operating
results.
The
Volatility
of Our Stock Price Could Adversely Affect Your Investment in Our Common
Stock.
The
market price of
our common stock has been, and may continue to be, highly volatile. During
fiscal 2005, our stock price ranged from $44.55 to $26.64. We believe that
a
variety of factors could cause the price of our common stock to fluctuate,
perhaps substantially, including:
·
|
announcements
and rumors of developments related to our business or the industry
in
which we compete;
|
·
|
quarterly
fluctuations in our actual or anticipated operating results and
order
levels;
|
·
|
general
conditions in the worldwide economy, including fluctuations in
interest
rates;
|
·
|
announcements
of technological innovations;
|
·
|
new
products
or product enhancements by us or our competitors;
|
·
|
developments
in patents or other intellectual property rights and
litigation;
|
·
|
developments
in our relationships with our customers and suppliers;
and
|
·
|
any
significant acts of terrorism against the United
States.
|
In
addition, in recent years the stock market in general and the markets for shares
of "high-tech" companies in particular, have experienced extreme price
fluctuations which have often been unrelated to the operating performance of
affected companies. Any such fluctuations in the future could adversely affect
the market price of our common stock, and the market price of our common stock
may decline.
Provisions
in
Our Charter Documents and Under California Law Could Prevent or Delay a Change
of Control, which Could Reduce the Market Price of Our Common
Stock.
Certain
provisions
of our articles of incorporation, as amended and restated, our bylaws, as
amended and restated, and the California General Corporation Law may be deemed
to have an anti-takeover effect and could discourage a third party from
acquiring, or make it more difficult for a third party to acquire, control
of us
without approval of our board of directors. These provisions could also limit
the price that certain investors might be willing to pay in the future for
shares of our common stock. Certain provisions allow the board of directors
to
authorize the issuance of preferred stock with rights superior to those of
the
common stock.
We
have adopted a
Preferred Shares Rights Agreement, commonly known as a "poison pill." The
provisions described above, our poison pill and provisions of the California
General Corporation Law may discourage, delay or prevent a third party from
acquiring us.
Item
1B
Unresolved
Staff Comments
None
Item
2 Properties
The
following table
sets forth the significant real property that we own or lease:
Location
|
Segment(s)
served |
Size
in
Sq. Feet
|
Commitment |
Sunnyvale,
California |
All |
160,000
|
Leased,
expiring 2012
3
buildings
|
Huber
Heights (Dayton), Ohio |
Engineering
& Construction
Field
Solutions
Distribution
|
150,000
57,200
35,600
|
Owned,
no
encumbrances
Leased,
expiring in 2011
Leased,
month
to month
|
Westminster,
Colorado |
Engineering
& Construction, Field Solutions |
73,000
|
Leased,
expiring 2011
2
buildings
|
Corvallis,
Oregon |
Engineering
& Construction |
20,000
21,000
|
Owned,
no
encumbrances
Leased,
expiring 2006
|
Richmond
Hill, Canada |
Portfolio
Technologies |
50,200
|
Leased,
expiring 2007
|
Danderyd,
Sweden |
Engineering
& Construction |
93,900
|
Leased,
expiring 2010
|
Christchurch,
New Zealand |
Engineering
& Construction, Mobile Solutions, Field Solutions
|
65,000
|
Leased,
expiring 2010
2
buildings
|
New
Carlisle, Ohio |
Engineering
& Construction |
30,000
|
Leased,
expiring 2013
|
Jena,
Germany |
Engineering
& Construction |
28,700
|
Leased,
no
expiration date
12
months
notice
|
Kaiserslautern,
Germany |
Engineering
& Construction |
26,000
|
Leased,
expiring 2010
|
Raunheim,
Germany |
Sales |
28,700
|
Leased,
expiring 2011
|
In
addition, we
lease a number of smaller offices around the world primarily for sales
functions. For financial information regarding obligations under leases, see
Note 10 of the Notes to the Consolidated Financial Statements.
*
We believe that
our facilities are adequate to support current and near-term operations.
Item
3 Legal
Proceedings
*
We are from time
to time a party to disputes or litigation incidental to our business. We believe
that our ultimate liability as a result of such disputes, if any, would not
be
material to our overall financial position, results of operations, or
liquidity.
Item
4 Submission
of Matters to a Vote of Security Holders
No
matters were submitted to a vote of security holders during the fourth quarter
of 2005.
PART
II
Item
5. Market
for
Registrant's Common Equity and Related Stockholder Matters
Our
common stock is
traded on the NASDAQ National Market under the symbol "TRMB." The table below
sets forth, during the periods indicated, the high and low per share sale prices
for our common stock as reported on the NASDAQ National Market.
|
2005
|
2004
|
|
Sales
Price
|
Sales
Price
|
Quarter
Ended
|
High
|
Low
|
High
|
Low
|
First
quarter
|
$38.24
|
$30.04
|
$28.78
|
$20.15
|
Second
quarter
|
41.11
|
30.07
|
29.50
|
22.43
|
Third
quarter
|
44.55
|
31.15
|
32.16
|
21.55
|
Fourth
quarter
|
37.96
|
26.64
|
34.45
|
24.56
|
As
of December 30,
2005, there were approximately
1,044
holders
of record of our common stock.
Dividend
Policy
We
have not declared
or paid any cash dividends on our common stock during any period for which
financial information is provided in this Annual Report on Form 10-K. At
this time, we intend to retain future earnings, if any, to fund the development
and growth of our business and do not anticipate paying any cash dividends
on
our common stock in the foreseeable future.
Under
the existing
terms of our credit facility, we are allowed to pay dividends and repurchase
shares of our common stock in any twelve (12) month period, in an aggregate
amount equal to fifty percent (50%) of net income (plus to the extent deducted
in determining net income for such period, non-cash expenses in respect of
stock
options) for the previous twelve month period. Also, we are allowed to
spend an additional $50 million to pay dividends and repurchase shares if we
are
in compliance with our fixed charge coverage ratio.
Equity
Compensation Plan Information
The
following table
sets forth, as of December 30, 2005, the total number of securities outstanding
under our stock option plans, the weighted average exercise price of such
options, and the number of options available for grant under such plans. See
Note 15 of the Notes to the Consolidated Financial Statements for a summary
of
our plans.
Plan
Category
|
Number
of
securities to be issued upon exercise of outstanding options, warrants
and
rights
|
Weighted
average exercise price of outstanding options, warrants and
rights
|
Number
of
securities remaining available for future issuance under equity
compensation plans (excluding securities reflected in
column (a))
|
|
(a)
|
(b)
|
(c)
|
Stock
Option
Plans
|
6,413,995
|
$18.70
|
1,513,119
|
Total
|
6,413,995
|
$18.70
|
1,513,119
|
Item
6. Selected
Financial Data
The
following
selected consolidated financial data should be read in conjunction with
“Management’s Discussion and Analysis of Financial Condition and Results of
Operations” and our consolidated financial statements and related notes
appearing elsewhere in this annual report. Historical results are not
necessarily indicative of future results. In particular, because the results
of
operations and financial condition related to our acquisitions are included
in
our Consolidated Statements of Income and Consolidated Balance Sheets data
commencing on those respective acquisition dates, comparisons of our results
of
operations and financial condition for periods prior to and subsequent to those
acquisitions are not indicative of future results.
|
|
December
30,
|
|
December
31,
|
|
January
2,
|
|
January
3,
|
|
December
28,
|
As
of And For
the Fiscal Years Ended
|
|
2005
|
|
2004
|
|
2004
|
|
2003
|
|
2001
|
(Dollar
in
thousands, except per share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
$
|
774,913
|
$
|
668,808
|
$
|
540,903
|
$
|
466,602
|
$
|
475,292
|
Gross
margin
|
$
|
389,805
|
$
|
324,810
|
$
|
268,030
|
$
|
234,432
|
$
|
237,235
|
Gross
margin
percentage
|
|
50%
|
|
49%
|
|
50%
|
|
50%
|
|
50%
|
Income
(loss)
from continuing operations (1)
|
$
|
84,855
|
$
|
67,680
|
$
|
38,485
|
$
|
10,324
|
$
|
(23,492)
|
Gain
on
disposal of discontinued operations (net of tax)
|
$
|
-
|
$
|
-
|
$
|
-
|
$
|
-
|
$
|
613
|
Net
income
(loss)
|
$
|
84,855
|
$
|
67,680
|
$
|
38,485
|
$
|
10,324
|
$
|
(22,879)
|
Per
common
share:
|
|
|
|
|
|
|
|
|
|
|
Income
(loss)
from continuing operations
|
|
|
|
|
|
|
|
|
|
|
-
Basic
|
$
|
1.59
|
$
|
1.32
|
$
|
0.81
|
$
|
0.24
|
$
|
(0.63)
|
-
Diluted
|
$
|
1.49
|
$
|
1.23
|
$
|
0.77
|
$
|
0.24
|
$
|
(0.63)
|
Gain
on
disposal of discontinued operations (net of tax)
|
|
|
|
|
|
|
|
|
|
|
-
Basic
|
$
|
-
|
$
|
-
|
$
|
-
|
$
|
-
|
$
|
0.01
|
-
Diluted
|
$
|
-
|
$
|
-
|
$
|
-
|
$
|
-
|
$
|
0.01
|
Net
income
(loss)
|
|
|
|
|
|
|
|
|
|
|
-
Basic
|
$
|
1.59
|
$
|
1.32
|
$
|
0.81
|
$
|
0.24
|
$
|
(0.62)
|
-
Diluted
|
$
|
1.49
|
$
|
1.23
|
$
|
0.77
|
$
|
0.24
|
$
|
(0.62)
|
Shares
used in
calculating basic earnings per share
|
|
53,216
|
|
51,163
|
|
47,505
|
|
42,860
|
|
37,091
|
Shares
used in
calculating diluted earnings per share
|
|
56,819
|
|
54,948
|
|
50,012
|
|
43,578
|
|
37,091
|
Cash
dividends
per share
|
$
|
-
|
$
|
-
|
$
|
-
|
$
|
-
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
Total
assets
|
$
|
743,088
|
$
|
653,978
|
$
|
552,602
|
$
|
447,704
|
$
|
425,475
|
Non-current
portion of long term debt and other liabilities
|
$
|
19,474
|
$
|
38,226
|
$
|
85,880
|
$
|
114,051
|
$
|
131,759
|
(1) |
We
have
significant intangible assets on our Consolidated Balance Sheets
that
include goodwill and other purchased intangibles related to acquisitions.
At the beginning of fiscal 2002, we adopted Statement of Financial
Accounting Standards No. 141 (“SFAS 141”), Business Combinations, and No.
142, Goodwill and Other Intangible Assets (“SFAS 142”). Application of the
non-amortization provisions of SFAS 142 significantly reduced amortization
expense of purchased intangibles and goodwill to approximately $8.3
million for the fiscal year 2002 from $29.4 million in fiscal year
2001.
|
Item
7. Management's
Discussion and Analysis of Financial Condition and Results of
Operations
The
following
discussion should be read in conjunction with the consolidated financial
statements and the related notes. The following discussion contains
forward-looking statements that reflect our plans, estimates and beliefs. Our
actual results could differ materially from those discussed in the
forward-looking statements. Factors that could cause or contribute to these
differences include, but are not limited to, those discussed below and those
listed under "Risks Factors."
EXECUTIVE
LEVEL OVERVIEW
Trimble’s
foundation
remains positioning technology. We have augmented this technology with wireless
communication and application capabilities in order to enable us to participate
in a wider number of markets and to play a more central role in those markets.
Our efforts to market these technologies can generally be characterized as
falling into the categories of either end user markets or component markets.
The
Engineering and Construction, Field Solutions, and Mobile Solutions segments
can
be broadly described as end user markets and the Component Technologies and
Portfolio Technologies segments can be described as components markets. In
the
end user markets we provide a value added solution to the end user. Typically
this requires a solution that includes a hardware platform and customer support.
In the components businesses, we typically sell to another company that adds
significant value and brings the solution to the end user.
The
segments
constituting the end user, solutions activities, make up over 80% of our
revenue. The critical success factors in these businesses center around
attaining a significant understanding of the end users’ needs, applying that
knowledge to create highly innovative products, integrating those products
into
an effective system, and establishing a proficient global, third-party
distribution.
The
components
businesses require different characteristics to be successful. The customer
is
typically an OEM, system integrator, or other third party that integrates our
components into a system. To satisfy this customer group, our focus is on price,
product functionality, and quality. With recent product introductions we have
begun to add higher functionality into our products in order to provide greater
value and potentially capture higher average selling prices for our offerings.
Worldwide applications for the product range from vehicle tracking to remote
asset management, including by way of example monitoring and tracking of
construction materials, truck trailers and off-road equipment.
During
2005 we
continued to execute our strategy with a series of actions that can be
summarized in four categories.
Reinforcing
our position in existing markets
Generally,
we
believe that our markets provide us with additional, substantial potential
for
substituting our technology for traditional methods. In 2005 we continued to
develop new products and to strengthen our distribution channels to realize
these opportunities. The acquisitions of Pacific Crest and Apache provided
us
with additional hardware competencies and applications knowledge. A number
of
new products like Trimble S6 and machine control products strengthened our
competitive position and created new value for the user.
Extend
our
position in existing markets through new product
categories
We
are utilizing the
strength of the Trimble brand in our markets to expand our revenues by bringing
new products to existing users. A 2005 example was the introduction of Ag GPS
Steer System.
Bring
existing technology to new markets
*
We continue to
reinforce our position in existing markets, and positioned ourselves in newer
markets that will serve as important sources of future growth. Our efforts
in
China, India, Russia, Korea and Eastern Europe all reflected improving financial
results, with the promise of more in the future.
Entered
completely new markets
*
In fiscal 2005 we
acquired Advanced Public Safety, Inc. (APS), a software development company
that
provides mobile and handheld software products used by law enforcement,
fire-rescue and other public safety agencies. With this acquisition, we plan
to
leverage our rugged mobile computing devices and fleet management systems to
provide complete mobile resource solutions for the public safety industry.
The
APS acquisition opens up a new vertical
segment
in which we
can offer public safety agencies complete mobile computing and resource
management solutions. In addition, we
acquired
MobileTech Solutions, Inc., a provider of field workforce automation solutions
and that has a leading market position in the direct store delivery (DSD)
market. We expect the MobileTech Solutions acquisition to extend our portfolio
of fleet management and field workforce applications.
CRITICAL
ACCOUNTING POLICIES AND ESTIMATES
Our
accounting
policies are more fully described in Note 2 of the Notes to the Consolidated
Financial Statements. The preparation of financial statements and related
disclosures in conformity with accounting principles generally accepted in
the
United States requires us to make judgments, assumptions, and estimates that
affect the amounts reported in the Consolidated Financial Statements and
accompanying Notes to the Consolidated Financial Statements. We consider the
accounting polices described below to be our critical accounting polices. These
critical accounting policies are impacted significantly by judgments,
assumptions, and estimates used in the preparation of the Consolidated Financial
Statements, and actual results could differ materially from the amounts reported
based on these policies.
Revenue
Recognition
We
recognize revenue
in accordance with US GAAP. The accounting rules related to revenue recognition
are complex and are impacted by interpretations of the rules and an
understanding of industry practices, both of which are subject to
change.
We
recognize product
revenue when persuasive evidence of an arrangement exists, delivery has
occurred, the fee is fixed or determinable, and collectibility is reasonably
assured. In instances where final acceptance of the product is specified by
the
customer or is uncertain, revenue is deferred until all acceptance criteria
have
been met. Revenue is reduced by a sales return reserve as described under
“Allowance for Doubtful Accounts and Sales Returns.”
Contracts
and
customer purchase orders are generally used to determine the existence of an
arrangement. Shipping documents and customer acceptance, when applicable, are
used to verify delivery. We assess whether the fee is fixed or determinable
based on the payment terms associated with the transaction and whether the
sales
price is subject to refund or adjustment. We assess collectibility based
primarily on the creditworthiness of the customer as determined by credit checks
and analysis, as well as the customer’s payment history.
Our
shipment terms
for US orders, and international orders fulfilled from our European distribution
center are typically FCA (Free Carrier) shipping point, except certain sales
to
US government agencies which are shipped FOB destination. FCA shipping point
means that we fulfill the obligation to deliver when the goods are handed over,
cleared for export, and into the charge of the carrier named by the buyer at
the
named place or point. If no precise point is indicated by the buyer, we may
choose within the place or range stipulated where the carrier will take the
goods into carrier’s charge.
Other
international
orders are shipped FOB destination, which means these international orders
are
not recognized as revenue until the product is delivered and title has
transferred to the buyer or FCA shipping point. FOB destination means that
we
bear all costs and risks of loss or damage to the goods up to that point.
Revenue
to
distributors and resellers is recognized upon delivery, assuming all other
criteria for revenue recognition have been met. Distributors and resellers
do
not have a right of return.
Revenue
from
purchased extended warranty and support agreements is deferred and recognized
ratably over the term of the warranty/support period.
In
accordance with
Emerging Issues Task Force (EITF) Issue 00-21, “Accounting for Revenue
Arrangements with Multiple Deliverables,” when a sale involves multiple
elements, the entire fee from the arrangement is allocated to each respective
element based on its relative fair value and recognized when revenue recognition
criteria for each element are met.
Software
revenue is
recognized in accordance with Statement of Position (SOP) No. 97-2, “Software
Revenue Recognition” and Statement of Position (SOP) No. 98-9, “Modification of
SOP 97-2.” Our software arrangements generally consist of a perpetual license
fee and post-contract customer support (PCS). We have established
vendor-specific objective evidence (VSOE) of fair value for our PCS contracts
based on the renewal rate. The remaining value of the software arrangement
is
allocated to the license fee using the residual method, and revenue is primarily
recognized when the software has been delivered and there are no remaining
obligations. Revenue from PCS is recognized ratably over the term of the PCS
agreement.
Allowance
for
Doubtful Accounts and Sales Returns
Our
accounts
receivable balance, net of allowance for doubtful accounts, was $145.1 million
as of December 30, 2005, compared with $123.9 million as of December 31, 2004.
The allowance for doubtful accounts as of December 30, 2005 was $5.2 million,
compared with $9.0 million as of December 31, 2004. We make ongoing assumptions
relating to the collectibility of our accounts receivable in our calculation
of
the allowance for doubtful accounts. We evaluate the collectibility of our
trade
accounts receivable based on a number of factors such as age of the accounts
receivable balances, credit quality, historical experience, and current economic
conditions that may affect a customer’s ability to pay. In circumstances where
we are aware of a specific customer’s inability to meet its financial
obligations to us, a specific allowance for bad debts is estimated and recorded
which reduces the recognized receivable to the estimated amount we believe
will
ultimately be collected. In addition to specific customer identification of
potential bad debts, bad debt charges are recorded based on our recent past
loss
history and an overall assessment of past due trade accounts receivable amounts
outstanding.
A
reserve for sales
returns is established based on historical trends in product return rates
experienced in the ordinary course of business. The reserve for sales returns
as
of December 30, 2005 and December 31, 2004 included $1.5 million and $2.2
million, respectively, for estimated future returns that were recorded as a
reduction of our accounts receivable and revenue. If the actual future returns
were to deviate from the historical data on which the reserve had been
established, our revenue could be adversely affected.
Inventory
Valuation
Our
inventories, net
balance was $107.9 million as of December 30, 2005, compared with $87.7 million
as of December 31, 2004. Our inventory allowances as of December 30, 2005 were
$23.2 million, compared with $26.2 million as of December 31, 2004. Our
inventory is recorded at the lower of standard cost or market (net realizable
value). We generally use a standard cost accounting system to value inventory
and these standards are reviewed a minimum of once a year and multiple times
a
year in our most active manufacturing plants. We perform an in depth excess
and
obsolete analysis of our inventory based upon assumptions about future demand
and current market conditions. We adjust the inventory value based on estimated
excess and obsolete inventories determined primarily by future demand forecasts.
If actual future demand or market conditions are less favorable than those
projected by us, additional inventory write-downs may be required.
Income
Taxes
Judgments
and
estimates occur in the calculation of income tax and deferred tax assets and
liabilities.
Income
taxes are
accounted for under the liability method whereby deferred tax assets or
liability account balances are calculated at the balance sheet date using
current tax laws and rates in effect for the year in which the differences
are
expected to affect taxable income. A valuation allowance is recorded to reduce
the carrying amounts of deferred tax assets if it is more likely than not that
such assets will not be realized.
The
valuation
allowance decreased by $7.1 million in fiscal 2005, $21.8 million in fiscal
2004 and $13.1 million in fiscal 2003. Approximately, $1.2 million, $8.0
million and $14.1 million of the valuation allowance at December 30,
2005, December 31, 2004 and January 2, 2004 respectively relate to the tax
benefit of stock option deduction, which will be credited to equity if and
when
realized. In evaluating the need for a valuation allowance, we consider future
taxable income, resolution of tax uncertainties and prudent and feasible tax
planning strategies.
Goodwill
Impairment
Goodwill
as of
December 30, 2005 was $286.1 million, compared with $259.5 million as of
December 31, 2004. We performed goodwill impairment tests at the end of the
fiscal third quarter of 2005 and 2004 for each reporting unit and found there
was no impairment of our goodwill. We will continue to evaluate our goodwill
for
impairment on an annual basis at the end of each fiscal third quarter and
whenever events and changes in circumstances suggest that the carrying amount
may not be recoverable.
The
process of
evaluating the potential impairment of goodwill is subjective and requires
significant assumptions. For
goodwill, the
annual impairment evaluation includes a comparison of the carrying value of
the
reporting unit
(including
goodwill)
to that reporting unit’s fair value. If the reporting unit’s estimated fair
value exceeds the reporting unit’s carrying value, no impairment of goodwill
exists. If the fair value of the reporting unit does not exceed the unit’s
carrying value, then an additional analysis is performed to allocate the fair
value of the reporting unit to all of the assets and liabilities of that unit
as
if that unit had been acquired in a business combination and the fair value
of
the unit was the purchase price. If the excess of the fair value of the
reporting unit over the fair value of the identifiable assets and liabilities
is
less than the carrying value of the unit’s goodwill, an impairment charge is
recorded for the difference.
We
cannot predict
the occurrence of certain future events that might adversely affect the reported
value of goodwill. Such events include, but are not limited to, strategic
decisions made in response to economic and competitive conditions, the impact
of
the economic environment on our customer base, or a material negative change
in
our relationships with significant customers.
Accounting
for
Long-Lived Assets Including Intangibles Subject to
Amortization
Depreciation
and
amortization of our long-lived assets is provided using straight-line methods
over their estimated useful lives. Changes in circumstances such as the passage
of new laws or changes in regulations, technological advances, changes to our
business model, or changes in the capital strategy could result in the actual
useful lives differing from initial estimates. In those cases where we determine
that the useful life of a long-lived asset should be revised, we will depreciate
the net book value in excess of the estimated residual value over its revised
remaining useful life. Factors such as changes in the planned use of equipment,
customer attrition, contractual amendments, or mandated regulatory requirements
could result in shortened useful lives.
Long-lived
assets
and asset groups are evaluated for impairment whenever events or changes in
circumstances indicate that the carrying amount of such assets may not be
recoverable. The estimated future cash flows are based upon, among other things,
assumptions about expected future operating performance and may differ from
actual cash flows. Long-lived assets evaluated for impairment are grouped with
other assets to the lowest level for which identifiable cash flows are largely
independent of the cash flows of other groups of assets and liabilities. If
the
sum of the projected undiscounted cash flows (excluding interest) is less than
the carrying value of the assets, the assets will be written down to the
estimated fair value in the period in which the determination is made.
Warranty
Costs
The
liability for
product warranties was $7.5 million as of December 30, 2005, compared with
$6.4
million as of December 31, 2004. (See Note 2 of the Notes to the Consolidated
Financial Statements for further information regarding our warranty liability.)
The
warranty periods
for our
products are
generally between
one and
three years.
Selected
military programs
may require extended warranty periods up to 5.5 years and certain Nikon products
have a five year warranty period.
We accrue for
warranty costs as part of our cost of sales based on associated material costs,
technical support labor costs, and costs incurred by third parties performing
warranty work on our behalf. Our expected future cost is primarily estimated
based upon historical trends in the volume of product returns within the
warranty period and the cost to repair or replace the equipment.
While
we engage in
extensive product quality programs and processes, including actively monitoring
and evaluating the quality of our component suppliers, our warranty obligation
is affected by product failure rates, material usage, and service delivery
costs
incurred in correcting a product failure. Should actual product failure rates,
material usage, or service delivery costs differ from our estimates, revisions
to the estimated warranty accrual and related costs may be required.
Guarantees,
Including Indirect Guarantees of Indebtedness of Others
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 us, 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 our officers and directors, and our 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 the Company under these agreements were not material and no liabilities
have been recorded for these obligations on the Consolidated Balance Sheets
as
of December 30, 2005 and December 31, 2004.
Stock
Compensation
We
apply Accounting
Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees"
(APB
25) and related interpretations in accounting for our stock option plans and
stock purchase plan. Accordingly, we do not recognize compensation cost for
stock options granted at a price equal to fair market value.
In
accordance with
the provisions of Statement of Financial Accounting Standards No. 123 (“SFAS
123”), "Accounting for Stock-Based Compensation" and “Statement of Financial
Accounting Standards No. 148” (“SFAS 148”), “Accounting for Stock-Based
Compensation - Transition and Disclosure,” we estimated the fair value of the
options and purchases under the employee stock purchase plan, and determined
the
expense, net of related tax effects, that would have been included in the
determination of net income if the fair value based method had been applied
to
all awards. Stock-based compensation net of tax was $8.7 million, $8.6 million
and $9.8 million for fiscal 2005, fiscal 2004 and fiscal 2003.
For
options granted
prior to October 1, 2005, the fair value for these options was estimated at
the
date of grant using the Black-Scholes option-pricing model. For stock options
granted on or after October 1, 2005, the fair value of each award is
estimated on the date of grant using a binomial valuation model. Similar to
the
Black-Scholes model, the binomial model takes into account variables such as
volatility, dividend yield rate, and risk free interest rate. In
addition, the
binomial model
incorporates actual option-pricing behavior and changes in volatility over
the
option’s contractual term. For these reasons, we believe that the binomial model
provides a fair value that is more representative of actual experience and
future expected experience than the value calculated using the Black-Scholes
model. Below is a comparison of assumptions used in under each valuation model
in fiscal 2005:
|
Average
Assumptions for Q1-Q3 FY05 using Black-Scholes
|
Assumptions
for Q4 FY05 using
Binomial
|
Expected
dividend yield
|
-
|
-
|
Expected
stock
price volatility
|
52%
|
42%
|
Risk
free
interest rate
|
4.1%
|
4.5%
|
Expected
life
of options after vesting
|
1.7
years
|
1.6
years
|
Note
15 of the Notes
to the Consolidated Financial Statements describes the plans we operate, and
Note 2 of the Notes to the Consolidated Financial Statements contains a summary
of the pro forma effects to reported net income and earnings per share for
fiscal 2005, 2004, and 2003 as if we had elected to recognize compensation
cost
based on the fair value of the options granted at grant date.
Investment
in
Joint Ventures
We
have adopted the
equity method of accounting for our investments in the Caterpillar and Nikon
joint ventures. This requires that we record our share of the joint ventures’
profits or losses in a given fiscal period. See Note 5 of the Notes to the
Consolidated Financial Statements for joint venture accounting.
RECENT
BUSINESS DEVELOPMENTS
XYZ
of GPS, Inc.
(XYZ)
*
On February 26,
2006, we acquired the assets of XYZ of Dickerson, Maryland. XYZ develops
real-time GNSS reference station, integrity monitoring and dynamic positioning
software for meter, decimeter and centimeter applications. The purchase of
XYZ’s
intellectual property is expected to extend our product portfolio of
infrastructure solutions by providing software that enhances differential GNSS
correction systems used in marine aides to navigation, surveying, civil
engineering, hydrography, mapping and Geographic Information System (GIS),
and
scientific applications.
Advanced
Public
Safety, Inc. (APS)
*
On December 30,
2005, we acquired APS of Deerfield Beach, Florida. APS provides mobile and
handheld software products used by law enforcement, fire-rescue and other public
safety agencies. With the APS acquisition, we plan to leverage our rugged mobile
computing devices and our fleet management systems to provide complete mobile
resource solutions for the public safety industry. APS will be reported within
our Mobile Solutions business segment.
MobileTech
Solutions, Inc.
*
On October 25,
2005, we acquired MobileTech Solutions, Inc. of Plano, Texas. MobileTech
Solutions provides field workforce automation solutions and has a leading market
position in the Direct Store Delivery (DSD) market. We expect the MobileTech
Solutions acquisition to extend our portfolio of fleet management and field
workforce applications. MobileTech Solutions’ performance is reported under our
Mobile Solutions business segment.
Apache
Technologies, Inc.
On
April 19, 2005,
we acquired Apache Technologies Inc. of Dayton, Ohio. Apache is a leading
developer of laser detection technology. With the acquisition, we extended
our laser product portfolio for handheld laser detectors and entry-level machine
displays and control systems, as well as our distribution network in the United
States. Apache’s performance is reported under our Engineering and
Construction business segment.
Pacific
Crest
Corporation
On
January 10, 2005
we acquired Pacific Crest Corporation of Santa Clara, California, a supplier
of
wireless data communication systems for positioning and environmental monitoring
applications. The Pacific Crest acquisition has enhanced our wireless data
communications capabilities in the Engineering and Construction business
segment.
RESULTS
OF
OPERATIONS
Overview
The
following table
is a summary of revenue, gross margin and operating income for the periods
indicated and should be read in conjunction with the narrative descriptions
below.
|
December
30,
|
December
31,
|
January
2,
|
Fiscal
Years
Ended
|
2005
|
2004
|
2004
|
(Dollars
in thousands)
|
|
|
|
|
|
|
|
Total
consolidated revenue
|
$774,913
|
$668,808
|
$540,903
|
Gross
Margin
|
$389,805
|
$324,810
|
$268,030
|
Gross
Margin
%
|
50.3%
|
48.6%
|
49.6%
|
Total
consolidated operating income
|
$124,944
|
$85,625
|
$53,935
|
Operating
Income %
|
16.1%
|
12.8%
|
10.0%
|
Basis
of
Presentation
We
have a 52-53 week
fiscal year, ending on the Friday nearest to December 31, which for fiscal
2005
was December 30, 2005. Fiscal 2005 was a 53-week year and fiscal 2004 and fiscal
2003 were 52-week years. As a result of the extra week in fiscal 2005,
year-over-year results are not exactly comparable. Thus, due to the inherent
nature of adopting a 52-53 week fiscal year, the Company, analysts,
shareholders, investors, and others will have to make appropriate adjustments
to
any analysis performed when comparing our activities and results in fiscal
years
that contain 53 weeks to those that contain the standard 52 weeks.
Revenue
In
fiscal 2005,
total revenue increased by $106.1 million or 15.9% to $774.9 million from $668.8
million in fiscal 2004. The increase in fiscal 2005 was primarily due to
stronger performances across all our operating segments with the exception
of
Component Technologies. The Engineering and Construction, Field Solutions and
Mobile Solutions segments increased 19%, 21% and 34%, respectively, compared
to
fiscal 2004. Revenue growth within these segments was driven by new product
introductions and increased penetration of existing markets. Both the
Engineering and Construction and Mobile Solutions operating segments also
benefited from the impact of the Pacific Crest, Apache and MobileTech
acquisitions.
In
fiscal 2004,
total revenue increased by $127.9 million or 23.6% to $668.8 million from $540.9
million in fiscal 2003. This increase was primarily due to stronger performances
in most of our operating segments driven by new product offerings and increased
penetration of the markets we serve (primarily Engineering and Construction
and
Field Solutions), expanded distribution and selective acquisitions (primarily
Mobile Solutions and Portfolio Technologies), as well as the positive impact
of
the weaker US dollar on revenues generated in foreign currencies, primarily
the
Euro.
*
During the 2005
fiscal year, sales to customers in the United States represented 54%, Europe
represented 25%, Asia Pacific represented 11% and other regions represented
10%
of our total revenues. During the 2004 fiscal year, sales to customers in the
United States represented 50%, Europe represented 28%, Asia Pacific represented
13% and other regions represented 9% of our total revenues. We anticipate that
sales to international customers will continue to account for a major portion
of
our revenues.
*
No single customer
accounted for 10% or more of our total revenues in fiscal 2005, 2004, and 2003.
It is possible, however, that in future periods the failure of one or more
large
customers to purchase products in quantities anticipated by us may adversely
affect the results of operations.
Gross
Margin
Our
gross margin
varies due to a number of factors including product mix, pricing, distribution
channel used, the effects of production volumes, new product start-up costs,
and
foreign currency translations. Gross margin as a percentage of total revenues
was 50.3% in fiscal 2005 and 48.6% in fiscal 2004. The increase in gross margin
percentage for fiscal 2005, compared with fiscal 2004, was due to the success
of
our market segmentation strategy, higher service revenues, cost reductions,
and
introduction of higher margin products.
Gross
margin as a
percentage of total revenues was 48.6 % in fiscal 2004 and 49.6% in fiscal
2003.
The decrease in gross margin percentage for fiscal 2004, compared with fiscal
2003, was due to changes in the mix of products sold, principally related to
increased sales of lower margin Nikon-branded survey and construction products,
our agriculture products, pricing pressure in our Component Technologies
business (which typically demonstrates increased unit volumes coupled with
declining unit prices), the impact of the weaker US dollar on our non US
manufacturing, and distribution costs.
*
Because of
potential product mix changes within and among the industry markets, market
pressures on unit selling prices, fluctuations in unit manufacturing costs,
including increases in component prices and other factors, current level gross
margins cannot be assured.
Operating
Income
Operating
income as
a percentage of total revenue was 16.1% in fiscal 2005 compared to 12.8% in
fiscal 2004 and 10.0% in fiscal 2003. The increase is driven by improvement
in
revenues, in gross margins, and greater leverage of operating expenses.
Operating expenses represented 34.2% of total revenue in fiscal 2005 as compared
to 35.8% in fiscal 2004.
Results
by
Segment
To
achieve
distribution, marketing, production, and technology advantages in our targeted
markets, we manage our operations in the following five segments: Engineering
and Construction, Field Solutions, Component Technologies, Mobile Solutions,
and
Portfolio Technologies. Segment operating income (loss) is net revenue less
operating expenses, excluding general corporate expenses, amortization of
purchased intangibles, restructuring charges, non-operating income (expense),
and income taxes.
The
following table
is a breakdown of revenue and operating income by segment for the periods
indicated and should be read in conjunction with the narrative descriptions
below.
|
December
30,
|
December
31,
|
January
2,
|
Fiscal
Years
Ended
|
2005
|
2004
|
2004
|
(Dollars
in thousands)
|
|
|
|
|
|
|
|
Engineering
and Construction
|
|
|
|
Revenue
|
$524,461
|
$440,478
|
$367,058
|
Segment
revenue as a percent of total revenue
|
68%
|
66%
|
68%
|
Operating
income
|
117,993
|
79,505
|
60,664
|
Operating
income as a percent of segment revenue
|
22%
|
18%
|
17%
|
Field
Solutions
|
|
|
|
Revenue
|
127,843
|
105,591
|
79,879
|
Segment
revenue as a percent of total revenue
|
16%
|
16%
|
15%
|
Operating
income
|
32,527
|
25,151
|
14,500
|
Operating
income as a percent of segment revenue
|
25%
|
24%
|
18%
|
Component
Technologies
|
|
|
|
Revenue
|
53,902
|
65,522
|
64,193
|
Segment
revenue as a percent of total revenue
|
7%
|
9%
|
12%
|
Operating
income
|
8,034
|
13,880
|
16,560
|
Operating
income as a percent of segment revenue
|
15%
|
21%
|
26%
|
Mobile
Solutions
|
|
|
|
Revenue
|
31,481
|
23,531
|
12,981
|
Revenue
as a
percent of total consolidated revenue
|
4%
|
4%
|
2%
|
Operating
loss
|
(3,072)
|
(5,997)
|
(6,452)
|
Operating
loss
as a percent of segment revenue
|
(10%)
|
(25%)
|
(50%)
|
Portfolio
Technologies
|
|
|
|
Revenue
|
37,226
|
33,686
|
16,792
|
Segment
revenue as a percent of total revenue
|
5%
|
5%
|
3%
|
Operating
income (loss)
|
5,178
|
4,866
|
(1,686)
|
Operating
income (loss) as a percent of segment revenue
|
14%
|
14%
|
(10%)
|
A
reconciliation of
our consolidated segment operating income to consolidated income before income
taxes follows:
Fiscal
Years
Ended
|
December
30,
2005
|
December
31,
2004
|
January
2,
2004
|
(In
thousands)
|
|
|
|
|
|
|
|
Consolidated
segment operating income
|
$160,660
|
$117,405
|
$83,586
|
Unallocated
corporate expense
|
(27,483)
|
(22,901)
|
(20,320)
|
Restructuring
charges
|
(278)
|
(552)
|
(2,019)
|
Amortization
of purchased intangible assets
|
(6,855)
|
(8,327)
|
(7,312)
|
In-process
research and development
|
(1,100)
|
-
|
-
|
Non-operating
expense, net
|
(156)
|
(10,701)
|
(18,350)
|
Consolidated
income before income taxes
|
$124,788
|
$74,924
|
$35,585
|
Engineering
and
Construction
Engineering
and
Construction revenues increased by $84.0 million or 19% while segment operating
income increased by $38.5 million or 48.4% for fiscal 2005 as compared to fiscal
2004. The revenue growth was driven by the introduction of products such as
the
Trimble S6 and machine control products, and growth of existing products such
as
the Trimble R8 GPS System. Revenue growth was also attributed to the
acquisitions for fiscal 2005. Segment operating income increased as a result
of
higher revenues and increased sales of higher margin products.
Engineering
and
Construction revenues increased by $73.4 million or 20% while segment operating
income increased by $18.8 million or 31.1% for fiscal 2004 as compared to fiscal
2003. The relatively strong environment of fiscal 2003 continued into fiscal
2004, resulting in continued robust demand for survey, machine control, and
laser products. In addition, the full year effects for Nikon-branded products
contributed to the year over year increase. Targeted new product introductions,
such as the 5500 Servo Driven Total Station, provided improved market
penetration. The weaker US dollar also contributed to increased revenues in
this
operating segment. Operating income increased at a higher rate than revenue
growth due to greater operating leverage on expenses.
Field
Solutions
Field
Solutions
revenues increased by approximately $22.3 million or 21.1% while segment
operating income increased by $7.4 million or 29.3% for fiscal year 2005 as
compared to fiscal 2004. Revenue increased primarily due to successful new
products such as the AgGPS
EZ-Guide System
and AgGPS
EZ-Steer System
in our agriculture product line and as a result of higher demand for both
automated and manual guidance products into the agricultural market in the
first
quarter of the fiscal year.
Field
Solutions
revenues increased by approximately $25.7 million or 32.2% while segment
operating income increased by $10.7 million or 73.5% for fiscal year 2004 as
compared to fiscal 2003. Revenues increased primarily as a result of higher
demand for both automated and manual guidance products in the agricultural
market. In particular, revenues were enhanced by the introduction of EZ-Guide
Plus. We saw increases in our GIS product lines due to increases in our dealer
and distributor business. Additionally, programs designed to expand our
distribution channel by supplementing value-added, solutions focused business
partners to our traditional dealer profile were successful. In addition, we
saw
improved results in Europe and increased opportunities in China. Increases
in
this segment’s operating income were primarily due to higher
revenues.
Component
Technologies
Component
Technologies revenues decreased by $11.6 million or 17.7% and segment operating
income decreased by $5.8 million or 42.1% for the fiscal year 2005 as compared
to fiscal 2004. Revenues decreased primarily due to the decline in demand for
our in-vehicle navigation products as a result of changes in buying strategies
among certain automotive manufacturers, and softness in the timing businesses.
The decrease was partially offset by an increase in the OEM board business.
Operating income decreased primarily due to lower revenue and unfavorable
product mix.
Component
Technologies revenues increased by $1.3 million or 2.1%, while segment operating
income decreased by $2.7 million or 16.2% for the fiscal year 2004 as compared
to fiscal 2003. Revenues increased primarily due to higher demand from vehicle
navigation and tracking customers, partially offset by the decline in demand
from wireless infrastructure customers. The segment operating income decrease
was primarily due to pricing pressures from the embedded and in-vehicle
navigation product lines, a less favorable product mix, and increased spending
for development of new categories of products.
Mobile
Solutions
Mobile
Solutions
revenues increased by $8.0 million or 33.8% in fiscal 2005 over fiscal 2004
due
to increased subscriber growth, an increase in sales into the ready-mix
suppliers, and increased sales from our dealer channel as we continue to develop
and extend this channel. Operating loss decreased in fiscal 2005 compared to
fiscal 2004 primarily attributable to an increase in revenues and increase
in
gross margins due higher recurring service revenue.
Mobile
Solutions
revenues increased by $10.6 million or 81.3% in fiscal 2004 over fiscal 2003
due
primarily to increases sales into the construction materials market, higher
dealer sales and a significant enterprise sale. During the first quarter of
fiscal 2004, we completed the acquisition of TracerNET to strengthen our
presence in this segment. The benefits of the integration were not fully
reflected until the fourth quarter of fiscal 2004 and the full year impact
of
these activities were not realized until fiscal 2005. Segment operating loss
decreased by $0.5 million or 7.1% in fiscal 2004 over fiscal 2003 due to
increased revenues which was largely offset by increased expenses related to
the
integration of the TracerNET acquisition.
Portfolio
Technologies
Portfolio
Technologies revenues increased by $3.5 million or 10.5% while segment operating
income increased by $0.3 million or 6.4% for fiscal 2005 as compared to fiscal
2004. The increase in revenue and operating income was primarily due to stronger
performance in our Applanix airborne business which was offset by an increase
in
marketing expenses related to our Trimble Outdoors initiative.
Portfolio
Technologies revenues increased by $16.9 million or 100.6% while segment
operating income increased by $6.6 million or 388.6% for fiscal 2004 as compared
to fiscal 2003. The increases in revenues and operating income were primarily
due to the inclusion of full year results of Applanix, acquired in July 2003,
and higher sales of our military and advanced systems products.
Research
and
Development, Sales and Marketing, and General and Administrative Expenses
The
following table
shows research and development (“R&D”), sales and marketing, and general and
administrative (“G&A”) expenses in absolute dollars and as a percentage of
total net revenues for the fiscal years ended 2005, 2004 and 2003 and should
be
read in conjunction with the narrative descriptions of those operating expenses
below.
|
|
December
30,
2005
|
|
December
31,
2004
|
|
January
2,
2004
|
Fiscal
Years
Ended
|
|
|
|
(In
thousands)
|
|
|
|
|
|
|
|
|
|
Research
and
development
|
|
$
84,276
|
11%
|
|
$
77,558
|
11%
|
|
$
67,641
|
13%
|
Sales
and
marketing
|
|
120,215
|
15%
|
|
108,054
|
16%
|
|
97,870
|
18%
|
General
and
administrative
|
|
52,137
|
7%
|
|
44,694
|
7%
|
|
39,253
|
7%
|
|
|
$
256,628
|
33%
|
|
$
230,306
|
34%
|
|
$
204,764
|
38%
|
Overall,
R&D,
sales and marketing, and G&A increased by approximately $26.3 million in
fiscal 2005 compared to fiscal 2004.
Research
and
development expenses increased by $6.7 million in fiscal 2005 compared to fiscal
2004 primarily due to the inclusion of expenses from acquisitions not applicable
in the prior year in the amount of $2.8 million and increase in compensation
of
$2.8 million. All of our R&D costs have been expensed as incurred. Cost of
software developed for external sale subsequent to reaching technical
feasibility were not considered material and were expensed as
incurred.
Research
and
development expenses increased by $9.9 million in fiscal 2004 compared to fiscal
2003 primarily due to sustaining engineering expenses and costs incurred related
to new product development, continued investment in next generation
technologies, and the effect of foreign currency fluctuations.
*
Overall research
and development spending remained relatively constant at approximately 11%
of
revenues. We expect to continue to devote resources to the development of new
products and the enhancement of existing products. We believe that research
and
development is critical to our strategic product development objectives and
that
to leverage our leading technology and meet the changing requirements of our
customers, we will need to fund investments in several development projects
in
parallel.
Sales
and marketing
expenses increased by $12.2 million in fiscal 2005 compared to fiscal 2004,
but
decreased as a percent of total revenues. The increase was primarily due to
advertising and promotion costs associated with the launch of new products
of
$5.4 million, the inclusion of expenses from acquisitions not applicable in
the
prior year of $1.5 million, increase in travel expenses of $1.4 million,
increase in compensation of $1.7 million and an increase $0.6 million foreign
currency transaction loss.
Sales
and marketing
expenses increased by $10.2 million in fiscal 2004 compared to fiscal 2003,
but
decreased as a percent of total revenues. The majority of the increase was
due
to the increase
in revenue,
promotional programs associated with new products, and the foreign exchange
impact on expenses in our non US operations.
*
We intend to
continue to focus and expand our sales and marketing efforts across all the
geographies and markets we serve in order to increase market awareness of our
products and to better support our existing customers worldwide. Our future
growth will depend in part on the timely development and continued viability
of
the markets in which we currently compete as well as our ability to continue
to
identify and exploit new markets for our products.
General
and
administrative expenses increased by $7.4 million in fiscal 2005 compared to
fiscal 2004 primarily due to an increase in compensation expense of $5.9
million, increase in rent expense of $1.0 million as we were making duplicate
payments during our move to our new headquarters, the inclusion of expenses
from
acquisitions not applicable in the prior year of $1.8 million, and increase
of
$0.8 million in patent expense. This was partially offset by a decrease in
bad
debt expense of $1.7 million and an increase of $0.4 million foreign currency
transaction gain. Spending overall remained relatively constant at approximately
7% of revenues.
General
and
administrative expenses increased by $5.4 million in fiscal 2004 compared to
fiscal 2003 primarily due to the inclusion of G&A expenses from
acquisitions, expenses related to compliance with the Sarbanes-Oxley Act, and
bad debt expenses of $1.2 million.
Other
Operating Expenses
Restructuring
Charges
Restructuring
charges of $0.3 million, $0.6 million, and $2.0 million were recorded in fiscal
years 2005, 2004 and 2003, respectively. The
charges in
fiscal 2005 were primarily related to office closure costs due to integration
efforts of the Mensi acquisition. The charges in fiscal 2004 were primarily
related to severance costs due to the realignment of Trimble Mobile Solutions
Inc. while charges in fiscal 2003 were primarily related to our Japanese office
relocation due to the Nikon-Trimble joint venture formation. As a result of
these actions, the headcount of the affected operations decreased by 36 and
77
in fiscal 2004, and 2003, respectively. As of December 30, 2005, the remaining
accrual balance of $0.3 million is related to the office closure expected to
be
paid over the next several years.
In-Process
Research and Development
We
recorded
In-process research and development (IPR&D) expense of $1.1 million related
to acquisitions made in fiscal 2005. We did not record any IPR&D expense in
fiscal 2004 and fiscal 2003. At the date of each acquisition, the projects
associated with the IPR&D efforts had not yet reached technological
feasibility and the research and development in process had no alternative
future uses. The value of the IPR&D was determined using a discounted cash
flow model similar to the income approach, focusing on the income producing
capabilities of the in-process technologies. Accordingly, the value assigned
to
these IPR&D amounts were charged to expense on the respective acquisition
date of each of the acquired companies.
Amortization
of
Purchased and Other Intangible Assets
|
December
30,
|
December
31,
|
January
2,
|
Fiscal
Years
Ended
|
2005
|
2004
|
2004
|
(in
thousands)
|
|
|
|
Amortization
of purchased intangibles
|
$
6,855
|
$
8,327
|
$
7,312
|
Amortization
of other intangible assets
|
165
|
183
|
604
|
Amortization
of purchased and other intangible assets
|
$
7,020
|
$
8,510
|
$
7,916
|
Amortization
expense
of purchased and other intangibles represented 0.9% of revenue in fiscal 2005,
a
decrease of $1.5 million from fiscal 2004 when it represented 1.3% of revenue.
Although we had acquisitions in the current fiscal year, amortization decreased
due to the fact our Spectra Precision Group intangibles were fully amortized
in
the second quarter of fiscal 2005. Amortization expense of purchased and other
intangibles represented 1.3% of revenue in fiscal 2004, an increase of $0.6
million from fiscal 2003 when it represented 1.5% of revenue.
Non-operating
Expense, Net
The
following table
shows non-operating expense, net for the periods indicated and should be read
in
conjunction with the narrative descriptions of those expenses
below:
|
December
30,
|
December
31,
|
January
2,
|
Fiscal
Years
Ended
|
2005
|
2004
|
2004
|
(in
thousands)
|
|
|
|
|
|
|
|
Interest
income
|
$
836
|
$
436
|
$
465
|
Interest
expense
|
(2,331)
|
(3,888)
|
(11,938)
|
Foreign
exchange gain (loss)
|
1,022
|
(859)
|
(592)
|
Expenses
for
affiliated operations, net
|
(291)
|
(7,590)
|
(6,403)
|
Other
income
(expense)
|
608 |
1,200
|
118
|
Total
non-operating expense, net
|
$
(156)
|
$
(10,701)
|
$
(18,350)
|
Non-operating
expense, net decreased by $10.5 million or 98.5% during fiscal 2005 as compared
with fiscal 2004 primarily due to a decrease in net interest expense of $2.0
million as a result of the repayment of debt and interest earned on higher
cash
balances offset by a $0.9 million write-off of debt issuance costs relating
to
the 2003 Credit Facility, an increase of $1.9 million in foreign currency
transaction gain and a $7.3 million decrease in expenses for affiliated
operations as a result of increased profits from our joint ventures and
recognition of the remaining deferred gain from the Caterpillar joint venture.
This was partially offset by a decrease in other income primarily due to the
absence of a non-recurring gain in investments of approximately $1.0 million
in
fiscal year 2004.
*
Expenses for
affiliated operation decreased by $7.3 million in fiscal 2005 compared to fiscal
2004 due to the recognition of the remaining $9.2 million deferred gain related
to the Caterpillar joint venture. Since the joint venture is now profitable
on a
sustainable basis, future operating losses are not anticipated and there are
no
future outstanding financial obligations by us to the joint venture, we
recognized the gain. This amount was offset by an increased impact from the
incremental transfer pricing effects due to growth in our construction product
sales of $2.6 million. (See Note 5 of the Notes to the Consolidated Financial
Statements for financial information regarding joint ventures). Furthermore,
we
recorded our share of profits in the Caterpillar joint venture which increased
by $2.5 million. This was partially offset by a decrease in our share of profits
in our Nikon-Trimble joint venture of $1.1 million.
Non-operating
expense, net decreased by $7.6 million or 42% during fiscal 2004 as compared
with fiscal 2003 primarily due to lower interest expense after the repayment
of
the principal balance of a subordinated note in June 2003, the write off of
$2.3
million of debt issuance costs as a result of our debt refinancing in June
2003
and $1.3 million related to the write off of the remaining unamortized portion
of the warrants issued to Spectra-Physics Holdings USA, Inc. The increases
in
expense for affiliated operations were primarily due to our higher construction
machine control revenues which led to increased impact from the pricing effects
of transactions between us and the Caterpillar joint venture. This was partially
offset by an increase of $1.1 million related to our share of profits in the
Nikon-Trimble joint venture. The increase in other income (expense) was
primarily due to a net gain related to the sale of an investment.
Income
Tax
Provision
Our
effective income
tax rates for fiscal years 2005, 2004 and 2003 were 32%, 10% and (8%),
respectively. The 2004 and 2003 income tax rates are less than the US federal
statutory rate of 35%, primarily due to the realization of benefits from net
operating losses and other previously reserved deferred tax assets. Our 2005
income tax rate is less than US federal statutory rate, primarily due to the
benefit from the US incentive repatriation of undistributed foreign subsidiary
earnings provided by the American Jobs Creation Act of 2004.
Repatriation
of
foreign earnings. The American Jobs Creation Act of 2004 (the Act) provides
for
a special one-time elective dividends received deduction on the repatriation
of
certain foreign earnings to a U.S. taxpayer equal to 85% of the eligible
distribution. During the fourth quarter of 2005, the Company repatriated $39.5
million, of which $24 million qualified for the special one-time elective
dividends received deduction and $15.5 million constituted earnings that do
not
qualify under the Act; previously taxed income and return of capital. The
company recorded a $6.4 million tax benefit from these foreign
earnings.
Litigation
Matters
*
From time to time,
we are involved in litigation arising out of the ordinary course of our
business. There are no known claims or pending litigation that are expected
to
have a material effect on our overall financial position, results of operations,
or liquidity.
OFF-BALANCE
SHEET ARRANGEMENTS
Other
than lease
commitments incurred in the normal course of business (see Contractual
Obligation table below), we do not have any off-balance sheet financing
arrangements or liabilities, guarantee contracts, retained or contingent
interests in transferred assets, or any obligation arising out of a material
variable interest in an unconsolidated entity. We do not have any majority-owned
subsidiaries that are not included in the consolidated financial statements.
Additionally, we do not have any interest in, or relationship with, any special
purpose entities.
LIQUIDITY
AND CAPITAL RESOURCES
As
of and for
the Fiscal Year Ended
|
December
30,
2005
|
December
31,
2004
|
January
2,
2004
|
(dollars
in thousands)
|
|
|
|
|
|
|
|
Cash
and cash
equivalents
|
$
73,853
|
$
71,872
|
$
45,416
|
As
a
percentage of total assets
|
9.9%
|
11.0%
|
8.3%
|
Accounts
receivable days sales outstanding (DSO)
|
66
|
63
|
65
|
Inventory
turns per year
|
4
|
4
|
4
|
Total
debt
|
$
649
|
$
38,996
|
$
90,486
|
|
|
|
|
Cash
provided
by operating activities
|
$
92,880
|
$
74,576
|
$
29,565
|
Cash
used in
investing activities
|
$
(74,918)
|
$
(25,133)
|
$
(22,653)
|
Cash
provided
(used) by financing activities
|
$
(13,402)
|
$
(24,159)
|
$
54
|
Net
increase
in cash and cash equivalents
|
$
1,981
|
$
26,456
|
$
16,737
|
Cash
and Cash
Equivalents
Our
financial
condition further strengthened at December 30, 2005. Cash and cash equivalents
totaled $73.9 million with essentially no debt compared to cash and cash
equivalents of $71.9 million and debt of $39.0 million at December 31, 2004.
In
fiscal 2005, cash
provided by operating activities was $92.9 million, as compared to $74.6 million
in fiscal 2004. The increase of $18.3 million was primarily
driven by
the $17.2 million increase in net income during fiscal 2005 compared to fiscal
2004. Our
ability to
continue to generate cash from operations will depend in large part on
profitability, the rate of collections of accounts receivable, our inventory
turns, and our ability to manage other areas of working capital. Our accounts
receivable days for sales outstanding increased from 63 days at the end of
fiscal 2004 to 66 days at the end of fiscal 2005. The increase is due to
acquisitions, delayed payments from some government contracts, and past due
accounts from a couple of key customers. Our inventory turns was unchanged
at
four at the end of fiscal 2005 and 2004.
In
fiscal 2004, cash
provided by operating activities was $74.6 million, as compared to $29.6 million
in fiscal 2003. The increase of $45.0 million was primarily
driven by
the $29.2 million increase in net income during fiscal 2004 compared to fiscal
2003 and better management of working capital. Our
accounts
receivable days for sales outstanding decreased from 65 days at the end of
fiscal 2003 to 63 days at the end of fiscal 2004. Our inventory turns was
unchanged at four at the end of fiscal 2005 and 2004.
Cash
used in
investing activities was $74.9 million in fiscal 2005 as compared to $25.1
million in fiscal 2004. The
$49.8 million
increase was primarily due to an increase of $40.0 million in cash acquisitions
and an increase of $10.6 million in investment in capital equipment of
which $6.6
million was related to the relocation of our Sunnyvale headquarters.
Cash
used in
investing activities was $25.1 million in fiscal 2004 as compared to $22.7
million in fiscal 2003. The
increase was
primarily due to cash acquisitions and investment in capital equipment.
During
fiscal 2004, we spent approximately $12.8 million on capital expenditures.
Cash
used in
financing activities was $13.4 million in fiscal 2005 as compared to $24.2
million in fiscal 2004. The $10.8 million decrease was primarily due to a $12.9
million decrease in repayment of net debt as we repaid our entire debt balance
in the second fiscal quarter of 2005. This was partially offset by a $2.3M
decrease in proceeds received from issuance of common stock and warrants.
Cash
used in
financing activities was $24.2 million in fiscal 2004 as compared to $54,000
in
fiscal 2003. However, during fiscal 2004, we repaid approximately $65.2 million
of debt related to our previous 2003 Credit Facility. These debt payments were
funded by cash provided by operating activities, and the issuance of common
stock to employees pursuant to our stock option plan and employee stock purchase
plan of approximately $26.8 million.
*
We believe that
our cash and cash equivalents, together with our credit facilities ($200 million
as of December 30, 2005), will be sufficient to meet our anticipated operating
cash needs for at least the next twelve months.
*
We expect fiscal
2006 capital expenditures to be approximately $15 million to $20 million,
primarily for computer equipment, software upgrades, manufacturing tools and
test equipment, and leasehold improvements associated with business
expansion. Decisions
related to
how much cash is used for investing are influenced by the expected amount of
cash to be provided by operations.
Debt
At
the end of fiscal
2005, our total debt was comprised of government loans to foreign subsidiaries
in amount of approximately $649,000 as compared with approximately $39.0 million
at the end of fiscal 2004.
On
July 28, 2005, we
entered into a $200 million unsecured revolving credit agreement (“2005 Credit
Facility”) with a syndicate of 10 banks with The Bank of Nova Scotia as the
administrative agent. The 2005 Credit Facility replaces our $175 million secured
2003 Credit Facility. The funds available under the new 2005 Credit Facility
may
be used for our general corporate purposes and up to $25 million of the 2005
Credit Facility may be used for letters of credit. We incur a commitment fee
if
the 2005 Credit Facility is not used. The commitment fee is not material to
our
results during all periods presented. At December 30, 2005 and as of the date
of
this report, the Company has a zero balance outstanding and was in compliance
with all financial debt covenants. For additional discussion of our debt, see
Note 9 of Notes to the Consolidated Financial Statements.
CONTRACTUAL
OBLIGATIONS
The
following table
summarizes our contractual obligations at December 30, 2005:
|
|
Payments
Due
By Period
|
|
|
|
|
|
Less
than
|
|
2-3
|
|
4-5
|
|
More
than
|
|
|
|
Total
|
|
1
year
|
|
Years
|
|
years
|
|
5
years
|
(in
thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
debt
including interest
|
$
|
649
|
$
|
216
|
$
|
104
|
$
|
329
|
$
|
-
|
Operating
leases
|
|
42,024
|
|
9,664
|
|
15,021
|
|
11,560
|
|
5,779
|
Other
purchase
obligations and commitments
|
|
3,100
|
|
3,100
|
|
-
|
|
-
|
|
-
|
Total
|
|
$
|
45,773
|
$
|
12,980
|
$
|
15,125
|
$
|
11,889
|
$
|
5,779
|
Total
debt consists
of government loans to foreign subsidiaries.
(See Note 9 of the
Notes to the Consolidated Financial Statements for further financial information
regarding long-term debt)
Other
purchase
obligations and commitments represent open non-cancelable purchase orders for
material purchases with our vendors and a forecasted commitment with a supplier
for outsourced services as described in Note 10 of the Notes to the Consolidated
Financial Statements. Our pension obligation which is not included in the table
above, and is included in “Other non-current liabilities” on our Consolidated
Balance Sheets, is disclosed at Note 16 of the Notes to the Consolidated
Financial Statements.
NEW
ACCOUNTING STANDARDS
In
May 2005, the
Financial Accounting Standards Board (FASB) issued Statement of Financial
Accounting Standard (FASB) No. 154, "Accounting Changes and Error Corrections"
("SFAS 154") which replaces Accounting Principles Board Opinions No. 20
"Accounting Changes" and SFAS No. 3, "Reporting Accounting Changes in Interim
Financial Statements-An Amendment of APB Opinion No. 28." SFAS 154 provides
guidance on the accounting for and reporting of accounting changes and error
corrections. It establishes retrospective application, or the latest practicable
date, as the required method for reporting a change in accounting principle
and
the reporting of a correction of an error. SFAS 154 is effective for accounting
changes and corrections of errors made in fiscal years beginning after December
15, 2005 and is required to be adopted by the Company in the first quarter
of
fiscal 2006. The Company is currently evaluating the effect that the adoption
of
SFAS 154 will have on its consolidated results of operations and financial
condition but does not expect it to have a material impact.
In
March 2005, the
FASB issued FASB Interpretation Number (FIN) 47, "Accounting for Conditional
Asset Retirement Obligations, an interpretation of FASB Statement No. 143"
("FIN
47"). FIN 47 requires an entity to recognize a liability for the fair value
of a
conditional asset retirement obligation when incurred if the liability's fair
value can be reasonably estimated. FIN 47 is effective for fiscal years ending
after December 15, 2005. The Company was not impacted by the adoption of FIN
47
in fiscal 2005.
In
December 2004,
the FASB issued SFAS No. 123R, “Share-Based Payment.” SFAS No. 123R requires
employee stock options and rights to purchase shares under stock participation
plans to be accounted for under the fair value method, and eliminates the
ability to account for these instruments under the intrinsic value method
prescribed by APB Opinion No. 25, and allowed under the original provisions
of
SFAS No. 123. SFAS No. 123R requires the use of an option pricing model for
estimating fair value, which is amortized to expense over the service periods.
The
requirements of SFAS No. 123R are effective for fiscal years beginning after
June 15, 2005. SFAS No. 123R allows for either prospective recognition of
compensation expense or retrospective recognition, which may be back to the
original issuance of SFAS No. 123 or only to interim periods in the year of
adoption. The Company will use the prospective method for future fiscal period
after the SFAS No. 123R effective date of 12/31/05. As a result, financial
statements for fiscal periods after our SFAS No. 123R effective date will
include stock-based compensation expenses that are not comparable to financial
statements of fiscal periods prior to the SFAS No. 123R effective date. Due
to
constant fluctuations to the expected volatility, expected term, risk free
interest rate, and expected forfeiture assumptions used in valuating stock-based
compensation, expected stock-based compensation expense in future fiscal periods
is not predictable.
Item
7A. Quantitative
and Qualitative Disclosure about Market Risk
We
are exposed to
market risk related to changes in interest rates and foreign currency exchange
rates. We use certain derivative financial instruments to manage these risks.
We
do not use derivative financial instruments for speculative or trading purposes.
All financial instruments are used in accordance with policies approved by
our
board of directors.
Market
Interest Rate Risk
We
may be exposed to
market risk in the event we borrow against our 2005 Credit Facility. Borrowings
under the 2005 Credit Facility have interest payments based on a floating rate
of LIBOR plus a number of basis points tied to a formula based on our Leverage
Ratio. The 2005 Credit Facility had outstanding principal balances of zero
as of
December 30, 2005.
Foreign
Currency Exchange Rate Risk
We
enter into
foreign exchange forward contracts to minimize the short-term impact of foreign
currency fluctuations on certain trade and inter-company receivables and
payables, primarily denominated in Australian, Canadian, New Zealand, and
Swedish currencies, the Euro, and the British pound. These contracts reduce
the
exposure to fluctuations in exchange rate movements as the gains and losses
associated with foreign currency balances are generally offset with the gains
and losses on the forward contracts. These instruments are marked to market
through earnings every period and generally range from one to three months
in
original maturity. We do not enter into foreign exchange forward contract for
trading purposes.
Foreign
exchange
forward contracts outstanding as of December 30, 2005 and December 31, 2004
are
summarized as follows (in thousands):
|
|
December
30,
2005
|
|
December
31,
2004
|
|
|
Nominal
Amount
|
|
Fair
Value
|
|
Nominal
Amount
|
|
Fair
Value
|
Forward
contracts:
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchased
|
$
|
(14,426)
|
|
$
|
249
|
|
$
|
(15,875)
|
|
$
|
431
|
|
Sold
|
$
|
27,726
|
|
$
|
328
|
|
$
|
22,750
|
|
$
|
(970)
|
*
We do not
anticipate any material adverse effect on our consolidated financial position
utilizing our current hedging strategy.
TRIMBLE
NAVIGATION LIMITED
INDEX
TO
FINANCIAL STATEMENTS
Consolidated
Balance Sheets at December 30, 2005 and December 31, 2004
|
43
|
|
|
Consolidated
Statements of Income for each of the three fiscal years
|
|
in the period ended December 30, 2005
|
44
|
|
|
Consolidated
Statement of Shareholders' Equity for each of the three fiscal years
|
|
in the period ended December 30, 2005,
|
45
|
|
|
Consolidated
Statements of Cash Flows for each of the three fiscal years
|
|
in the period ended December 30, 2005
|
46
|
|
|
Notes
to
Consolidated Financial Statements
|
47
|
|
|
Reports
of
Ernst & Young LLP, Independent Registered Public Accounting
Firm
|
72
|
Item
8. Financial
Statements and Supplementary Data
CONSOLIDATED
BALANCE SHEETS
|
|
December
30,
|
|
|
|
December
31,
|
As
at
|
|
2005
|
|
|
|
2004
|
(in
thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ASSETS
|
|
|
|
|
|
|
Current
assets:
|
|
|
|
|
|
|
Cash
and cash
equivalents
|
$
|
73,853
|
|
|
$
|
71,872
|
Accounts
receivable, less allowance for doubtful
accounts
of
$5,230 and $8,952, and sales return reserve of $1,500 and $2,210,
respectively
|
|
145,100
|
|
|
|
123,938
|
Other
receivables
|
|
6,489
|
|
|
|
4,182
|
Inventories,
net
|
|
107,851
|
|
|
|
87,745
|
Deferred
income taxes
|
|
18,504
|
|
|
|
21,852
|
Other
current
assets
|
|
8,580
|
|
|
|
7,878
|
Total
current
assets
|
|
360,377
|
|
|
|
317,467
|
Property
and
equipment, net
|
|
42,664
|
|
|
|
30,991
|
Goodwill
|
|
286,146
|
|
|
|
259,522
|
Other
purchased intangible assets, net
|
|
27,310
|
|
|
|
13,835
|
Deferred
income taxes
|
|
3,580
|
|
|
|
8,019
|
Other
assets
|
|
23,011
|
|
|
|
24,144
|
Total
non-current assets
|
|
382,711
|
|
|
|
336,511
|
Total
assets
|
$
|
743,088
|
|
|
$
|
653,978
|
|
|
|
|
|
|
|
LIABILITIES
AND SHAREHOLDERS' EQUITY
|
|
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
|
|
Current
portion of long-term debt
|
$
|
216
|
|
|
$
|
12,500
|
Accounts
payable
|
|
45,206
|
|
|
|
43,551
|
Accrued
compensation and benefits
|
|
36,083
|
|
|
|
31,202
|
Accrued
liabilities
|
|
16,189
|
|
|
|
11,510
|
Deferred
revenues
|
|
12,588
|
|
|
|
9,317
|
Accrued
warranty expense
|
|
7,466
|
|
|
|
6,425
|
Deferred
income taxes
|
|
4,087
|
|
|
|
2,521
|
Income
taxes
payable
|
|
24,922
|
|
|
|
11,951
|
Total
current
liabilities
|
|
146,757
|
|
|
|
128,977
|
Non-current
portion of long-term debt
|
|
433
|
|
|
|
26,496
|
Deferred
gain
on joint venture
|
|
-
|
|
|
|
9,179
|
Deferred
income tax
|
|
5,602
|
|
|
|
5,435
|
Other
non-current liabilities
|
|
19,041
|
|
|
|
11,730
|
Total
liabilities
|
|
171,833
|
|
|
|
181,817
|
Commitments
and contingencies
|
|
|
|
|
|
|
Shareholders'
equity:
|
|
|
|
|
|
|
Preferred
stock no par value; 3,000 shares authorized;
none
outstanding
|
|
--
|
|
|
|
--
|
Common
stock,
no par value; 90,000 shares authorized;
53,910
and
52,213 shares issued and outstanding at December 30, 2005 and December
31,
2004, respectively
|
|
384,196
|
|
|
|
345,127
|
Retained
earnings
|
|
167,525
|
|
|
|
82,670
|
Accumulated
other comprehensive income
|
|
19,534
|
|
|
|
44,364
|
Total
shareholders' equity
|
|
571,255
|
|
|
|
472,161
|
Total
liabilities and shareholders' equity
|
$
|
743,088
|
|
|
$
|
653,978
|
See
accompanying
Note to the Consolidated Financial Statements.
CONSOLIDATED
STATEMENTS OF INCOME
|
|
|
December
30,
|
|
|
|
December
31,
|
|
|
January
2,
|
Fiscal
Years
Ended
|
|
|
2005
|
|
|
|
2004
|
|
|
2004
|
(in
thousands, except per share amounts)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
(1)
|
|
$
|
774,913
|
|
|
$
|
668,808
|
|
$
|
540,903
|
Cost
of sales
(1)
|
|
|
385,108
|
|
|
|
343,998
|
|
|
272,873
|
Gross
margin
|
|
|
389,805
|
|
|
|
324,810
|
|
|
268,030
|
|
|
|
|
|
|
|
|
|
|
|
Operating
expenses
|
|
|
|
|
|
|
|
|
|
|
Research
and
development
|
|
|
84,276
|
|
|
|
77,558
|
|
|
67,641
|
Sales
and
marketing
|
|
|
120,215
|
|
|
|
108,054
|
|
|
97,870
|
General
and
administrative
|
|
|
52,137
|
|
|
|
44,694
|
|
|
39,253
|
Restructuring
charges
|
|
|
278
|
|
|
|
552
|
|
|
2,019
|
Amortization
of purchased intangible assets
|
|
|
6,855
|
|
|
|
8,327
|
|
|
7,312
|
In-process
research and development
|
|
|
1,100
|
|
|
|
-
|
|
|
-
|
Total
operating expenses
|
|
|
264,861
|
|
|
|
239,185
|
|
|
214,095
|
Operating
income
|
|
|
124,944
|
|
|
|
85,625
|
|
|
53,935
|
Non-operating
income (expense), net
|
|
|
|
|
|
|
|
|
|
|
Interest
income
|
|
|
836
|
|
|
|
436
|
|
|
465
|
Interest
expense
|
|
|
(2,331)
|
|
|
|
(3,888)
|
|
|
(11,938)
|
Foreign
currency transaction gain (loss), net
|
|
|
1,022
|
|
|
|
(859)
|
|
|
(592)
|
Expenses
for
affiliated operations, net
|
|
|
(291)
|
|
|
|
(7,590)
|
|
|
(6,403)
|
Other
income
|
|
|
608
|
|
|
|
1,200
|
|
|
118
|
Total
non-operating expense, net
|
|
|
(156)
|
|
|
|
(10,701)
|
|
|
(18,350)
|
Income
before
taxes
|
|
|
124,788
|
|
|
|
74,924
|
|
|
35,585
|
Income
tax
provision (benefit)
|
|
|
39,933
|
|
|
|
7,244
|
|
|
(2,900)
|
Net
income
|
|
$
|
84,855
|
|
|
$
|
67,680
|
|
$
|
38,485
|
|
|
|
|
|
|
|
|
|
|
|
Basic
earnings
per share
|
|
$
|
1.59
|
|
|
$
|
1.32
|
|
$
|
0.81
|
Shares
used in
calculating basic earnings per share
|
|
|
53,216
|
|
|
|
51,163
|
|
|
47,505
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
earnings per share
|
|
$
|
1.49
|
|
|
$
|
1.23
|
|
$
|
0.77
|
Shares
used in
calculating diluted earnings per share
|
|
|
56,819
|
|
|
|
54,948
|
|
|
50,012
|
(1)
Sales to related
parties were $9.1 million, $7.6 million, and $4.0 million in fiscal 2005, 2004
and 2003, respectively, while cost of sales to those related parties were $4.0
million, $3.8 million, and $1.9 million in fiscal 2005, 2004 and 2003,
respectively. See Note 5 to these Consolidated Financial Statements for a
discussion of related parties.
See
accompanying
Notes to the Consolidated Financial Statements.
CONSOLIDATED
STATEMENT OF SHAREHOLDERS’ EQUITY
|
|
|
Common
stock
|
|
Accumulative
|
|
|
|
|
Retained
|
Other
|
Total
|
|
|
|
|
|
|
Earnings
|
Comprehensive
|
Shareholders'
|
|
|
|
Shares
|
|
Amount
|
(Deficit)
|
Income/(Loss)
|
Equity
|
(in
thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
at
January 3, 2003
|
43,965
|
|
$
225,872
|
$
(23,495)
|
$
(1,026)
|
$
201,351
|
|
Components
of
comprehensive income:
|
|
|
|
|
|
|
|
|
Net
income
|
|
|
|
38,485
|
|
38,485
|
|
|
Loss
on
interest rate swap
|
|
|
|
|
(7)
|
(7)
|
|
|
Unrealized
gain on investments
|
|
|
|
|
74
|
74
|
|
|
Foreign
currency translation adjustments
|
|
|
|
|
31,198
|
31,198
|
|
Total
comprehensive income
|
|
|
|
|
|
69,750
|
|
Issuance
of
common stock in connection with acquisitions and joint venture,
net
|
1,282
|
|
25,795
|
|
|
25,795
|
|
Issuance
of
common stock under employee plans and exercise of warrants
|
1,593
|
|
13,929
|
|
|
13,929
|
|
Issuance
of
warrants
|
|
|
836
|
|
|
836
|
|
Issuance
of
common stock in private placement
|
3,148
|
|
36,583
|
|
|
36,583
|
Balance
at
January 2, 2004
|
49,988
|
|
303,015
|
14,990
|
30,239
|
348,244
|
|
Components
of
comprehensive income:
|
|
|
|
|
|
|
|
|
Net
income
|
|
|
|
67,680
|
|
67,680
|
|
|
Loss
on
interest rate swap
|
|
|
|
|
106
|
106
|
|
|
Unrealized
loss on investments
|
|
|
|
|
(6)
|
(6)
|
|
|
Foreign
currency translation adjustments, net of tax
|
|
|
|
|
14,025
|
14,025
|
|
Total
comprehensive income
|
|
|
|
|
|
81,805
|
|
Issuance
of
common stock in connection with acquisitions, net
|
294
|
|
899
|
|
|
899
|
|
Issuance
of
common stock under employee plans and exercise of warrants
|
1,930
|
|
26,805
|
|
|
26,805
|
|
Tax
benefit
from stock option exercises
|
|
|
14,408
|
|
|
14,408
|
Balance
at
December 31, 2004
|
52,213
|
|
345,127
|
82,670
|
44,364
|
472,161
|
|
Components
of
comprehensive income:
|
|
|
|
|
|
|
|
|
Net
income
|
|
|
|
84,855
|
|
84,855
|
|
|
Loss
on
interest rate swap
|
|
|
|
|
(106)
|
(106)
|
|
|
Unrealized
loss on investments
|
|
|
|
|
(34)
|
(34)
|
|
|
Foreign
currency translation adjustments, net of tax
|
|
|
|
|
(24,690)
|
(24,690)
|
|
Total
comprehensive income
|
|
|
|
|
|
60,025
|
|
Issuance
of
common stock in connection with acquisitions, net
|
10
|
|
|
|
|
-
|
|
Issuance
of
common stock under employee plans and exercise of warrants
|
1,687
|
|
24,582
|
|
|
24,582
|
|
Tax
benefit
from stock option exercises
|
|
|
14,487
|
|
|
14,487
|
Balance
at
December 30, 2005
|
53,910
|
|
$
384,196
|
$
167,525
|
$
19,534
|
$
571,255
|
See
accompanying
Notes to the Consolidated Financial Statements.
CONSOLIDATED
STATEMENTS OF CASH FLOWS
|
|
December
30,
|
|
|
|
December
31,
|
|
|
January
2,
|
Fiscal
Years
Ended
|
|
2005
|
|
|
|
2004
|
|
|
2004
|
(In
thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
flows
from operating activities:
|
|
|
|
|
|
|
|
|
|
Net
income
|
$
|
84,855
|
|
|
$
|
67,680
|
|
$
|
38,485
|
Adjustments
to
reconcile net income to net cash
|
|
|
|
|
|
|
|
|
|
provided
by
operating activities:
|
|
|
|
|
|
|
|
|
|
Depreciation
|
|
10,671
|
|
|
|
8,874
|
|
|
8,864
|
Amortization
|
|
7,020
|
|
|
|
8,510
|
|
|
7,916
|
Provision
for
doubtful accounts
|
|
(502)
|
|
|
|
1,210
|
|
|
(32)
|
Deferred
gain
on joint venture
|
|
(9,180)
|
|
|
|
(665)
|
|
|
(947)
|
Amortization
of debt issuance cost
|
|
1,270
|
|
|
|
487
|
|
|
3,515
|
Deferred
income taxes
|
|
14,242
|
|
|
|
(1,482)
|
|
|
(6,532)
|
In-process
research and development
|
|
1,100
|
|
|
|
-
|
|
|
-
|
Other
|
|
(466)
|
|
|
|
(21)
|
|
|
2,533
|
Decrease
(increase) in assets and liabilities:
|
|
|
|
|
|
|
|
|
|
Accounts
receivable, net
|
|
(19,017)
|
|
|
|
(17,245)
|
|
|
(13,944)
|
Deferred
revenues
|
|
2,406
|
|
|
|
1,619
|
|
|
1,650
|
Other
receivables
|
|
(2,108)
|
|
|
|
2,231
|
|
|
(4,389)
|
Inventories,
net
|
|
(17,888)
|
|
|
|
(15,529)
|
|
|
(4,862)
|
Other
current
and non-current assets
|
|
(2,294)
|
|
|
|
(69)
|
|
|
(792)
|
Accounts
payable
|
|
1,078
|
|
|
|
14,668
|
|
|
(6,387)
|
Accrued
compensation and benefits
|
|
3,408
|
|
|
|
4,847
|
|
|
6,723
|
Accrued
liabilities
|
|
6,232
|
|
|
|
(1,757)
|
|
|
(6,437)
|
Income
taxes
payable
|
|
12,054
|
|
|
|
1,218
|
|
|
4,201
|
Net
cash
provided by operating activities
|
|
92,880
|
|
|
|
74,576
|
|
|
29,565
|
|
|
|
|
|
|
|
|
|
|
Cash
flows
from investing activities:
|
|
|
|
|
|
|
|
|
|
Acquisition
of
property and equipment
|
|
(23,436)
|
|
|
|
(12,750)
|
|
|
(10,901)
|
Proceeds
from
sale of assets
|
|
-
|
|
|
|
546
|
|
|
334
|
Cost
of
acquisitions, net of cash acquired
|
|
(51,379)
|
|
|
|
(11,388)
|
|
|
(6,606)
|
Cost
of joint
venture and equity investments
|
|
-
|
|
|
|
(1,500)
|
|
|
(4,810)
|
Costs
of
capitalized patents
|
|
(103)
|
|
|
|
(41)
|
|
|
(670)
|
Net
cash used
in investing activities
|
|
(74,918)
|
|
|
|
(25,133)
|
|
|
(22,653)
|
|
|
|
|
|
|
|
|
|
|
Cash
flows
from financing activities:
|
|
|
|
|
|
|
|
|
|
Issuance
of
common stock and warrants
|
|
24,463
|
|
|
|
26,805
|
|
|
50,514
|
Collection
of
notes receivable
|
|
385
|
|
|
|
271
|
|
|
1,326
|
Proceeds
from
long-term debt and revolving credit lines
|
|
6,000
|
|
|
|
14,000
|
|
|
138,288
|
Payments
on
long-term debt and revolving credit lines
|
|
(44,250)
|
|
|
|
(65,235)
|
|
|
(190,074)
|
Net
cash
provided by (used in) financing activities
|
|
(13,402)
|
|
|
|
(24,159)
|
|
|
54
|
|
|
|
|
|
|
|
|
|
|
Effect
of
exchange rate changes on cash and cash equivalents
|
|
(2,579)
|
|
|
|
1,172
|
|
|
9,771
|
|
|
|
|
|
|
|
|
|
|
Net
increase
in cash and cash equivalents
|
|
1,981
|
|
|
|
26,456
|
|
|
16,737
|
Cash
and cash
equivalents, beginning of fiscal year
|
|
71,872
|
|
|
|
45,416
|
|
|
28,679
|
Cash
and cash
equivalents, end of fiscal year
|
$
|
73,853
|
|
|
$
|
71,872
|
|
$
|
45,416
|
|
|
|
|
|
|
|
|
|
|
See
accompanying
Notes to the Consolidated Financial Statements.
NOTES
TO
CONSOLIDATED FINANCIAL STATEMENTS
NOTE
1:
DESCRIPTION OF BUSINESS
Trimble
Navigation
Limited began operations in 1978 and incorporated in California in 1981. Trimble
provides advanced positioning product solutions, most typically to commercial
and government users. The principal applications served include surveying,
construction, agriculture, machine guidance, asset and fleet management, and
telecommunications infrastructure. The Company’s products typically provide its
customers benefits that can include lower costs, and higher productivity.
Examples of products include systems that guide agricultural and construction
equipment, surveying instruments, systems that track fleets of vehicles, and
data collection systems that enable the management of large amounts of geo
referenced information. In addition, the Company also manufactures components
for in vehicle navigation and telematics systems, and timing modules used in
the
synchronization of wireless networks.
NOTE
2:
ACCOUNTING
POLICIES
Use
of
Estimates
The
preparation of
financial statements in conformity with generally accepted accounting principles
requires management to make estimates and assumptions that affect the amounts
reported in the financial statements and accompanying notes. Estimates are
used
for revenue recognition, allowances for doubtful accounts, sales returns
reserve, allowances for inventory valuation, warranty costs, investments,
goodwill impairments, and income taxes among others. The actual results
experienced by the Company may differ materially from management’s
estimates.
Basis
of
Presentation
Trimble
has a fiscal
year that ends on the Friday nearest to December 31. Fiscal
2005, a
53-week year, ended on December 30, 2005 and fiscal 2004 and fiscal 2003,
52-week years, ended on December 31, 2004 and January 2, 2004, respectively.
These
Consolidated
Financial Statements include the results of Trimble and its subsidiaries.
Inter-company accounts and transactions have been eliminated. Certain amounts
from prior years have been reclassified to conform to the current year
presentation.
In
2005 the Company
revised its statements of cash flows for 2004 and 2003. The changes relate
to
the Company’s classification of the foreign exchange impact on its cash and cash
equivalents that was erroneously included in cash flows from operations.
These
corrections have been made retrospectively modifying the presentation for
2004
and 2003. The changes resulted in an increase to cash flows from operations
of
$1.5 million and a decrease of $6.9 million in 2004 and 2003, respectively.
These revisions to the statements of cash flows had no impact on the Company’s
cash and cash equivalents, balance sheet, or income statement.
Foreign
Currency Translation
Assets
and
liabilities of non-U.S. subsidiaries that operate in local currencies are
translated to U.S. dollars at exchange rates in effect at the balance sheet
date, with the resulting translation adjustments directly recorded to a separate
component of accumulated other comprehensive income. Income and expense accounts
are translated at average exchange rates during the year. Where the U.S. dollar
is the functional currency, translation adjustments are recorded in foreign
currency transaction adjustments, net of tax in accumulated other comprehensive
income within the shareholders’ equity section of the consolidated balance
sheets.
Cash
and
Cash Equivalents
Cash
and cash
equivalents include all cash and highly liquid investments with insignificant
interest rate risk and maturities of three months or less at the date of
purchase. The carrying amount of cash and cash equivalents approximates fair
value because of the short maturity of those instruments.
Fair
Value
of Financial Instruments
The
fair value of
certain of the Company’s financial instruments, including cash and cash
equivalents, and other accrued liabilities approximate cost because of their
short maturities. The fair value of investments is determined using quoted
market prices for those securities or similar financial instruments.
Concentration
of Risk
Cash
and cash
equivalents are maintained with several financial institutions. Deposits held
with banks may exceed the amount of insurance provided on such deposits.
Generally, these deposits may be redeemed upon demand and are maintained with
financial institutions of reputable credit and therefore bear minimal credit
risk.
The
Company is also
exposed to credit risk in the Company’s trade receivables, which are derived
from sales to end user customers in diversified industries as well as various
resellers. Trimble performs ongoing credit evaluations of its customers’
financial condition and limits the amount of credit extended when deemed
necessary but generally does not require collateral.
With
the selection
of Solectron Corporation in August 1999 as an exclusive manufacturing partner
for many of its GPS products, Trimble became substantially dependent upon a
sole
supplier for the manufacture of many of its products. In addition, the Company
relies on sole suppliers for a number of its critical components.
Allowance
for Doubtful Accounts
Trimble
maintains
allowances for doubtful accounts for estimated losses resulting from the
inability of its customers to make required payments.
Trimble
evaluates
the collectibility of its trade accounts receivable based on a number of factors
such as age of the accounts receivable balances, credit quality, historical
experience, and current economic conditions that may affect a customer’s ability
to pay. In circumstances where the Company is aware of a specific customer’s
inability to meet its financial obligations to the Company, a specific allowance
for bad debts is estimated and recorded which reduces the recognized receivable
to the estimated amount Trimble believes will ultimately be collected. In
addition to specific customer identification of potential bad debts, bad debt
charges are recorded based on the Company’s recent past loss history and an
overall assessment of past due trade accounts receivable amounts outstanding.
Inventories
Inventories
are
stated at the lower of standard cost or market (net realizable value). Standard
costs approximate actual costs, which are generally on a first-in, first-out
basis. The Company uses a standard cost accounting system to value inventory
and
these standards are reviewed at a minimum of once a year and multiple times
a
year in the most active manufacturing plants. The Company provides inventory
allowances based on excess and obsolete inventories determined primarily by
future demand forecasts. If actual future demand or market conditions are less
favorable than those projected by management, additional inventory write-downs
may be required.
Software
Development Costs
The
Company
capitalizes material software development costs for internal use pursuant to
Statement of Position No. 98-1, “Accounting for the Costs of Computer Software
Developed or Obtained for Internal Use.”
Goodwill,
Purchased Intangible Assets and Long-Lived Assets
Intangible
assets
include goodwill, distribution channels, patents, licenses, technology, acquired
backlog and trademarks which are capitalized at cost. Intangible assets with
definite lives are amortized on the straight-line basis. Useful lives generally
range from three to seven years with weighted average useful life of 5.2 years.
If
facts and
circumstances indicate that intangible assets or property and equipment may
be
impaired, an evaluation of continuing value would be performed. If an evaluation
is required, the estimated future undiscounted cash flows associated with these
assets would be compared to their carrying amount to determine if a write-down
to fair market value or discounted cash flow value is required. Trimble
performed an annual impairment test of goodwill at the end of the third fiscal
quarter of 2005, 2004 and 2003, respectively, and found there was no impairment
of goodwill. Trimble will continue to evaluate its goodwill for impairment
on an
annual basis at the end of each fiscal third quarter and whenever events and
changes in circumstances suggest that the carrying amount may not be
recoverable.
Revenue
Recognition
Trimble’s
revenues
are recorded in accordance with the Securities and Exchange Commission’s (SEC)
Staff Accounting Bulletin (SAB) No. 104, “Revenue Recognition.” The Company
recognizes product revenue when
persuasive
evidence
of an arrangement exists, delivery has occurred, the fee is fixed or
determinable, and collectibility is reasonably assured. In instances where
final
acceptance of the product is specified by the customer or is uncertain, revenue
is deferred until all acceptance criteria have been met.
Contracts
and
customer purchase orders are typically used to determine the existence of an
arrangement. Shipping documents and customer acceptance, when applicable, are
used to verify delivery. The Company assesses whether the fee is fixed or
determinable based on the payment terms associated with the transaction and
whether the sales price is subject to refund or adjustment. The Company assesses
collectibility based primarily on the creditworthiness of the customer as
determined by credit checks and analysis, as well as the customer’s payment
history.
Trimble’s
shipment
terms for US orders, and international orders fulfilled from its European
distribution center are typically FCA (Free Carrier) shipping point, except
certain sales to US government agencies which are shipped FOB destination.
FCA
shipping point means that Trimble fulfills the obligation to deliver when the
goods are handed over, cleared for export, and into the charge of the carrier
named by the buyer at the named place or point. If no precise point is indicated
by the buyer, Trimble may choose within the place or range stipulated where
the
carrier will take the goods into carrier’s charge. Shipping and handling costs
are included in the cost of goods sold.
Other
international
orders are shipped FOB destination, which means these international orders
are
not recognized as revenue until the product is delivered and title has
transferred to the buyer or FCA shipping point. FOB destination means that
Trimble bears all costs and risks of loss or damage to the goods up to that
point.
Revenue
to
distributors and resellers is recognized upon delivery, assuming all other
criteria for revenue recognition have been met. Distributors and resellers
do
not have a right of return.
Revenues
from
purchased extended warranty and support agreements are deferred and recognized
ratably over the term of the warranty/support period.
In
accordance with
Emerging Issues Task Force (EITF) Issue 00-21, “Accounting for Revenue
Arrangements with Multiple Deliverables,” when a sale involves multiple elements
the entire fee from the arrangement is allocated to each respective element
based on its relative fair value and recognized when revenue recognition
criteria for each element are met.
Software
revenue is
recognized in accordance with Statement of Position (SOP) No. 97-2, “Software
Revenue Recognition” and Statement of Position (SOP) No. 98-9, “Modification of
SOP 97-2.” Trimble’s software arrangements generally consist of a perpetual
license fee and post contract customer support (PCS). Trimble has established
vendor-specific objective evidence (VSOE) of fair value for its PCS contracts
based on the renewal rate. The remaining value of the software arrangement
is
allocated to the license fee using the residual method, which revenue is
primarily recognized when the software has been delivered and there are no
remaining obligations. Revenue from PCS is recognized ratably over the term
of
the PCS agreement.
A
reserve for sales
returns is established based on historical trends in product return rates
experienced in the ordinary course of business. The reserve for estimated future
returns is recorded as a reduction of our accounts receivable and revenue.
If
the actual returns were to deviate from the historical data on which the sales
reserve had been established, the Company’s revenue could be adversely
affected.
Warranty
The
Company accrues
for warranty costs as part of its cost of sales based on associated material
product costs, technical support labor costs, and costs incurred by third
parties performing work on Trimble’s behalf. The products sold are generally
covered by a warranty for periods ranging from 90 days to three years, and
in
some instances up to 5.5 years.
While
the Company
engages in extensive product quality programs and processes, including actively
monitoring and evaluating the quality of component suppliers, its warranty
obligation is affected by product failure rates, material usage, and service
delivery costs incurred in correcting a product failure. Should actual product
failure rates, material usage, or service delivery costs differ from the
estimates, revisions to the estimated warranty accrual and related costs may
be
required.
Changes
in the
Company’s product warranty liability during the 12 months ended December 30,
2005 and December 31, 2004, are as follows:
|
|
December
30,
|
|
December
31,
|
Fiscal
Years
Ended
|
|
2005
|
|
2004
|
(In
thousands)
|
|
|
|
|
|
|
|
|
|
Beginning
balance
|
$
|
6,425
|
$
|
5,147
|
Warranties
accrued
|
|
7,960
|
|
7,333
|
Warranty
claims
|
|
(6,919)
|
|
(6,055)
|
Ending
Balance
|
$
|
7,466
|
$
|
6,425
|
Guarantees,
Including Indirect Guarantees of Indebtedness of Others
In
the normal course
of business to facilitate sales of its products, the Company indemnifies other
parties, including customers, lessors, and parties to other transactions with
the Company, with respect to certain matters. The Company has agreed to hold
the
other party harmless against losses arising from a breach of representations
or
covenants, or out of intellectual property infringement or other claims made
against certain parties. These agreements may limit the time within which an
indemnification claim can be made and the amount of the claim. In addition,
the
Company has entered into indemnification agreements with its officers and
directors, and the Company’s bylaws contain similar indemnification obligations
to the Company’s agents.
It
is not possible
to determine the maximum potential amount under these indemnification agreements
due to the limited history of prior indemnification claims and the unique facts
and circumstances involved in each particular agreement. Historically, payments
made by the Company under these agreements were not material and no liabilities
have been recorded for these obligations on the Consolidated Balance Sheets
as
of December 30, 2005 and December 31, 2004.
Advertising
Costs
The
Company expenses
all advertising costs as incurred. Advertising expenses were approximately
$14.8
million, $9.5 million, and $9.2 million in fiscal 2005, 2004, and 2003,
respectively.
Research
and
Development Costs
Research
and
development costs are charged to expense as incurred. Cost
of software
developed for external sale subsequent to reaching technical feasibility were
not considered material and were expensed as incurred. The
Company received
third party funding of approximately $9.0 million, $7.7 million, and $4.9
million in fiscal 2005, 2004, and 2003 respectively. The Company offsets
research and development expenses with any third party funding received. The
Company retains the rights to any technology developed under such
arrangements.
Stock-Based
Compensation
In
accordance with
the provisions of Statement of Financial Accounting Standards No. 123 (“SFAS
123”), "Accounting for Stock-Based Compensation" and “Statement of Financial
Accounting Standards No. 148” (“SFAS 148”), “Accounting for Stock-Based
Compensation - Transition and Disclosure,” Trimble applies Accounting Principles
Board Opinion No. 25, "Accounting for Stock Issued to Employees" (“APB 25”) and
related interpretations in accounting for its stock-based compensation.
Accordingly, the Company does not recognize compensation cost for stock options
granted at fair market value. Note 15 of the Consolidated Financial Statements
describe the plans operated by Trimble.
For
purposes of pro
forma disclosures, the estimated fair value of the options is amortized to
expense over the options' vesting period, and the estimated fair value of
purchases under the employee stock purchase plan is expensed in the year of
purchase as well as the stock-based employee compensation cost, net of related
tax effects, that would have been included in the determination of net income
if
the fair value based method had been applied to all awards.
Pro
forma
information regarding net income and earnings per share is required by SFAS
123
and has been determined as if Trimble had accounted for its employee stock
options and purchases under the employee stock purchase plan using the fair
value method of SFAS 123.
Options
For
options granted
prior to October 1, 2005, the fair value for these options was estimated at
the
date of grant using the Black-Scholes option-pricing model. For stock options
granted on or after October 1, 2005, the fair value of each award is
estimated on the date of grant using a binomial valuation model. Similar to
the
Black-Scholes model, the binomial model takes into account variables such as
volatility, dividend yield rate, and risk free interest rate. In
addition, the
binomial model
incorporates actual option-pricing behavior and changes in volatility over
the
option’s contractual term. For these reasons, Trimble believes that the binomial
model provides a fair value that is more representative of actual experience
and
future expected experience than the value calculated using the Black-Scholes
model.
Under
the
Black-Scholes and binomial models, the estimated values of employee stock
options granted during fiscal years 2005, 2004, and 2003 were $14.53, $13.85,
and $10.03, respectively. The value of each option grant is estimated on the
date of grant using the Black-Scholes option pricing model and binomial model
with the following assumptions:
|
December
30,
2005
|
December
31,
2004
|
January
2,
2004
|
Expected
dividend yield
|
-
|
-
|
-
|
Expected
stock
price volatility
|
47%
|
56%
|
60%
|
Risk
free
interest rate
|
4.3%
|
3.5%
|
3.3%
|
Expected
life
of options after vesting
|
1.7
years
|
1.6
years
|
1.6
years
|
An
analysis of
historical information is used to determine the Company’s assumptions, to the
extent that historical information is relevant, based on the terms of the grants
being issued in any given period. The expected life for options granted reflects
options granted to existing employees that generally vest ratably over five
years from the date of grant.
Employee
Stock
Purchase Plan
Under
the Employee
Stock Purchase Plan, rights to purchase shares are granted during the second
and
fourth quarter of each year. The fair value of rights granted under the Employee
Stock Purchase Plan was estimated at the date of grant using the Black-Scholes
option-pricing model. The estimated weighted average value of rights granted
under the Employee Stock Purchase Plan during fiscal years 2005, 2004, and
2003
were $9.88, $7.31, and $3.57 respectively. The fair value of rights granted
during 2005, 2004, and 2003 was estimated at the date of grant using the
following assumptions:
Fiscal
years
ended
|
December
30,
2005
|
December
31,
2004
|
January
2,
2004
|
Expected
dividend yield
|
-
|
-
|
-
|
Expected
stock
price volatility
|
47%
|
46%
|
60%
|
Risk
free
interest rate
|
3.5%
|
1.7%
|
1.1%
|
Expected
life
of purchase
|
0.5
years
|
0.5
years
|
0.5
years
|
Trimble's
pro forma
information is as follows:
|
|
|
December
30,
|
|
|
|
December
31,
|
|
|
January
2,
|
(in
thousands, except per share amounts)
|
|
|
2005
|
|
|
|
2004
|
|
|
2004
|
|
|
|
|
|
|
|
|
|
|
|
Net
income, as
reported
|
|
$
|
84,855
|
|
|
$
|
67,680
|
|
$
|
38,485
|
Compensation
expense, net of tax
|
|
|
8,682
|
|
|
|
8,617
|
|
|
9,817
|
Pro-forma
net
income
|
|
$
|
76,173
|
|
|
$
|
59,063
|
|
$
|
28,668
|
|
|
|
|
|
|
|
|
|
|
|
Reported
basic
earnings per share
|
|
$
|
1.59
|
|
|
$
|
1.32
|
|
$
|
0.81
|
Pro-forma
basic earnings per share
|
|
$
|
1.43
|
|
|
$
|
1.15
|
|
$
|
0.60
|
|
|
|
|
|
|
|
|
|
|
|
Reported
diluted earnings per share
|
|
$
|
1.49
|
|
|
$
|
1.23
|
|
$
|
0.77
|
Pro-forma
diluted earnings per share
|
|
$
|
1.34
|
|
|
$
|
1.07
|
|
$
|
0.57
|
SFAS
123 requires
the use of option pricing models that were not developed for use in valuing
employee stock options. The Black-Scholes option pricing model were developed
for use in estimating the fair value of short-lived exchange-traded options
that
have no vesting restrictions and are fully transferable. In addition, the models
require the input of highly subjective assumptions. Because the Company’s
stock-based compensation has characteristics significantly different from those
of traded options, and because changes in the subjective input assumptions
can
materially affect the fair value estimate, in the opinion of management, the
existing models do not necessarily provide a reliable single measure of the
fair
value of employee stock-based compensation.
Depreciation
Depreciation
of
property and equipment owned is computed using the straight-line method over
the
shorter of the estimated useful lives or the lease terms. Useful lives include
a
range from two to six years for machinery and equipment, five years for
furniture and fixtures, two to five years for computer equipment and software,
and the life of the lease for leasehold improvements. The
costs of repairs
and maintenance are expensed when incurred, while expenditures for
refurbishments and improvements that significantly add to the productive
capacity or extend the useful life of an asset are capitalized. Depreciation
expense
was $10.7 million in fiscal 2005, $8.9 million in fiscal 2004, and $8.9 million
in fiscal 2003.
Income
Taxes
Income
taxes are
accounted for under the liability method whereby deferred tax asset or liability
account balances are calculated at the balance sheet date using current tax
laws
and rates in effect for the year in which the differences are expected to affect
taxable income. A valuation allowance is recorded to reduce the carrying amounts
of deferred tax assets if it is more likely than not that such assets will
not
be realized.
Computation
of Earnings
Per
Share
Number
of shares
used in calculation of basic earnings per share represents the weighted average
common shares outstanding during the period and excludes any dilutive effects
of
options, warrants, and convertible securities. The dilutive effects of options,
warrants, and convertible securities are included in diluted earnings per share.
New
Accounting Standards
In
May 2005, the
FASB issued SFAS No. 154, "Accounting Changes and Error Corrections" ("SFAS
154") which replaces Accounting Principles Board Opinions No. 20 "Accounting
Changes" and SFAS No. 3, "Reporting Accounting Changes in Interim Financial
Statements-An Amendment of APB Opinion No. 28." SFAS 154 provides guidance
on
the accounting for and reporting of accounting changes and error corrections.
It
establishes retrospective application, or the latest practicable date, as the
required method for reporting a change in accounting principle and the reporting
of a correction of an error. SFAS 154 is effective for accounting changes and
corrections of errors made in fiscal years beginning after December 15, 2005
and
is required to be adopted by the Company in the first quarter of fiscal 2006.
The Company is currently evaluating the effect that the adoption of SFAS 154
will have on its consolidated results of operations and financial condition
but
does not expect it to have a material impact.
In
March 2005, the
FASB issued FIN 47, "Accounting for Conditional Asset Retirement Obligations,
an
interpretation of FASB Statement No. 143" ("FIN 47"). FIN 47 requires an entity
to recognize a liability for the fair value of a conditional asset retirement
obligation when incurred if the liability's fair value can be reasonably
estimated. FIN 47 is effective for fiscal years ending after December 15, 2005.
The Company was not impacted by the adoption of FIN 47 in fiscal
2005.
In
December 2004,
the FASB issued SFAS No. 123R, “Share-Based Payment.” SFAS No. 123R requires
employee stock options and rights to purchase shares under stock participation
plans to be accounted for under the fair value method, and eliminates the
ability to account for these instruments under the intrinsic value method
prescribed by APB Opinion No. 25, and allowed under the original provisions
of
SFAS No. 123. SFAS No. 123R requires the use of an option pricing model for
estimating fair value, which is amortized to expense over the service periods.
The
requirements of SFAS No. 123R are effective for fiscal years beginning after
June 15, 2005. SFAS No. 123R allows for either prospective recognition of
compensation expense or retrospective recognition, which may be back to the
original issuance of SFAS No. 123 or only to interim periods in the year of
adoption. The Company will use the prospective method for future fiscal periods
after the SFAS No. 123R effective date of 12/31/05. As a result, financial
statements for fiscal periods after our SFAS No. 123R effective date will
include stock-based compensation expenses that are not comparable to financial
statements of fiscal periods prior to the SFAS No. 123R effective date. Due
to
constant fluctuations to the expected volatility, expected term, risk free
interest rate, and expected forfeiture assumptions used in valuating stock-based
compensation, expected stock-based compensation expense in future fiscal periods
is not predictable.
NOTE
3:
EARNINGS PER SHARE
The
following data
show the amounts used in computing earnings per share and the effect on the
weighted-average number of shares of potentially dilutive common stock.
|
|
|
December
30,
|
|
|
|
December
31,
|
|
|
January
2,
|
Fiscal
Years
Ended
|
|
|
2005
|
|
|
|
2004
|
|
|
2004
|
(In
thousands, except per share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Numerator:
|
|
|
|
|
|
|
|
|
|
|
Income
available to common shareholders:
|
|
|
|
|
|
|
|
|
|
|
Used
in basic
and diluted earnings per share
|
|
$
|
84,855
|
|
|
$
|
67,680
|
|
$
|
38,485
|
|
|
|
|
|
|
|
|
|
|
|
Denominator:
|
|
|
|
|
|
|
|
|
|
|
Weighted
average number of common shares used in basic earnings per
share
|
|
|
53,216
|
|
|
|
51,163
|
|
|
47,505
|
Effect
of
dilutive securities (using treasury stock method):
|
|
|
|
|
|
|
|
|
|
|
Common
stock
options
|
|
|
2,950
|
|
|
|
2,947
|
|
|
2,058
|
Common
stock
warrants
|
|
|
653
|
|
|
|
838
|
|
|
449
|
Weighted
average number of common shares and dilutive potential common shares
used
in diluted earnings per share
|
|
|
56,819
|
|
|
|
54,948
|
|
|
50,012
|
|
|
|
|
|
|
|
|
|
|
|
Basic
earnings
per share
|
|
$
|
1.59
|
|
|
$
|
1.32
|
|
$
|
0.81
|
Diluted
earnings per share
|
|
$
|
1.49
|
|
|
$
|
1.23
|
|
$
|
0.77
|
3-for-2
Stock Split
Trimble’s
Board of
Directors approved a 3-for-2 split of all outstanding shares of the Company’s
Common Stock, payable March 4, 2004 to stockholders of record on February 17,
2004. Cash was paid in lieu of fractional shares. All shares and per share
information presented has been adjusted to reflect the stock split on a
retroactive basis for all periods presented.
NOTE
4:
BUSINESS COMBINATIONS
Acquisitions
The
following is a
summary of acquisitions made by Trimble during fiscal 2005, 2004 and 2003 all
of
which were accounted for as purchases:
Acquisition
|
Primary
Service or Product
|
Operating
Segment
|
Acquisition
Date
|
Advanced
Public Safety
|
Mobile
and
handheld software for public safety
|
Mobile
Solutions
|
December
30,
2005
|
MobileTech
Solutions
|
Field
workforce automation solutions
|
Mobile
Solutions
|
October
25,
2005
|
Apache
Technologies
|
Laser
detection technology
|
Engineering
& Construction
|
April
19,
2005
|
Pacific
Crest
Corporation
|
Wireless
data
communication systems
|
Engineering
& Construction
|
January
10,
2005
|
GeoNav
GmbH
|
Customized
field data collection solutions
|
Engineering
and Construction
|
July
5,
2004
|
TracerNET
Corp.
|
Wireless
fleet
management solutions
|
Mobile
Solutions
|
March
5,
2004
|
MENSI
S.A.
|
3D
laser
scanning technology
|
Engineering
& Construction
|
December
9,
2003
|
Applanix
|
Inertial
navigation systems and GPS
|
Portfolio
Technologies
|
July
7,
2003
|
The
Consolidated
Financial Statements include the operating results of each business from the
date of acquisition. Pro forma results of operations have not been presented
because the effects of each of these acquisitions were not material to the
Company’s results.
The
total purchase
consideration for each of the above acquisitions was allocated to the assets
acquired and liabilities assumed based on their estimated fair values as of
the
date of acquisition. Acquisition costs directly related to the acquisitions
are
capitalized. Assets acquired and liabilities assumed for certain acquisitions
in
the fourth quarter of fiscal 2005 were allocated based on preliminary estimates.
Trimble is in the process of finalizing these estimates pending the completion
of fair value assessments and asset appraisals on identified intangible assets.
Final changes to the value of estimated intangible assets will also adjust
the
amounts attributable from goodwill.
At
the date of each
acquisition, the projects associated with in-process research and development
(IPR&D) efforts had not yet reached technological feasibility and the
research and development in process had no alternative future uses. Accordingly,
the value assigned to these IPR&D amounts were charged to expense on the
respective acquisition date of each of the acquired companies. Trimble recorded
IPR&D expense of $1.1 million relating to acquisitions made in fiscal 2005.
As mentioned above, Trimble is in the process of finalizing the acquisitions
in
the fourth quarter of fiscal 2005, pending the completion of fair value
assessments. Final changes to the estimated value of the IPR&D will also
adjust the amounts attributable to goodwill. We did not record any IPR&D
expense in fiscal 2004 and fiscal 2003.
The
following table summarizes the Company’s business combinations completed during
fiscal years 2005, 2004 and 2003 (in thousands):
|
|
December
30,
|
December
31,
|
January
2,
|
Fiscal
Years
Ended
|
2005
|
2004
|
2004
|
|
|
|
|
Purchase
price
|
$
63,830
|
$
12,246
|
$
22,352
|
Purchase
price
adjustments
|
1,595
|
1,167
|
4,010
|
Acquisition
costs
|
466
|
279
|
810
|
|
Total
purchase
price
|
$
65,891
|
$
13,692
|
$
27,172
|
|
|
|
|
|
Purchase
price
allocation:
|
|
|
|
Fair
value of
net assets acquired
|
$
1,237
|
$
2,649
|
$
4,020
|
Identified
intangible assets
|
21,171
|
2,117
|
3,440
|
In-Process
Research & Development
|
1,100
|
-
|
-
|
Goodwill
|
42,383
|
8,926
|
11,749
|
|
Total
|
|
$
65,891
|
$
13,692
|
$
19,229
|
Certain
acquisitions
include additional earn-out cash payments based on future revenue derived from
existing products. These earn-out payments are considered additional purchase
price consideration. Earn-out cash payments made for fiscal 2005, fiscal 2004
and fiscal 2003 were $1.6 million, $1.2 million and $4.0 million respectively.
Earn-outs and changes in purchase price allocation estimates were recorded
as
purchase price adjustments and goodwill adjustments. Acquisitions made by
Trimble have additional potential earn-out cash payments not to exceed
approximately $44.7 million.
Intangible
Assets
The
following tables present details of the Company’s total intangible assets:
|
|
December
30,
|
|
|
|
December
31,
|
As
of
|
|
2005
|
|
|
|
2004
|
(In
thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Intangible
assets:
|
|
|
|
|
|
|
Intangible
assets with definite life:
|
|
|
|
|
|
|
Existing
technology
|
$
|
48,100
|
|
|
$
|
35,037
|
Trade
names,
trademarks, patents, backlog and other intellectual
properties
|
|
26,808
|
|
|
|
22,111
|
Total
intangible assets with definite life
|
|
74,908
|
|
|
|
57,148
|
Less
accumulated amortization
|
|
(47,598)
|
|
|
|
(43,313)
|
Total
net
intangible assets
|
$
|
27,310
|
|
|
$
|
13,835
|
Total
intangibles
assets before accumulated amortization increased by $17.8 million primarily
due
to $20.7 million increase in intangible assets purchased in connection with
acquisitions in fiscal 2005 offset by $2.5 million in exchange rate impact
on
non-US currency denominated intangible assets. Accumulated amortization
increased by $4.3 million primarily due to a $7.0 million increased in
amortization expense partially offset by $2.2 million in exchange rate impact
on
non-US currency denominated intangible assets. .
The
following table
presents details of the amortization expense of purchased and other intangible
assets as reported in the Consolidated Statements of Income:
Fiscal
Years
Ended
|
December
30,
2005
|
|
December
31,
2004
|
|
January
2,
2004
|
(In
thousands)
|
|
|
|
|
|
|
|
|
|
|
|
Reported
as:
|
|
|
|
|
|
Cost
of
sales
|
$
165
|
|
$
183
|
|
$
604
|
Operating
expenses
|
6,855
|
|
8,327
|
|
7,312
|
Total
|
$
7,020
|
|
$
8,510
|
|
$
7,916
|
The
decrease in
amortization expense is due to certain intangibles becoming fully amortized
in
the second quarter of fiscal 2005.
The
estimated future amortization expense of intangible assets as of December 30,
2005, is as follows (in thousands):
|
Amortization
Expense
|
2006
|
$
8,392
|
2007
|
6,603
|
2008
|
5,560
|
2009
|
3,976
|
2010
|
2,612
|
Thereafter
|
167
|
Total
|
$
27,310
|
Goodwill
Goodwill
consisted
of the following:
|
|
December
30,
|
|
|
|
December
31,
|
As
of
|
|
2005
|
|
|
|
2004
|
(In
thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Goodwill,
Spectra Precision acquisition
|
$
|
196,676
|
|
|
$
|
212,915
|
Goodwill,
other acquisitions
|
|
89,470
|
|
|
|
46,607
|
Goodwill
|
$
|
286,146
|
|
|
$
|
259,522
|
The
net increase in
goodwill of approximately $26.6 million during fiscal 2005 was primarily due
to
a $39.9 million increase in goodwill from acquisitions of Pacific Crest, Apache,
MobileTech Solutions and APS and $1.9 million in earn-out amounts recorded
fiscal 2005 related to the Apache, Mensi and Levelite acquisitions. This amount
was offset by the foreign exchange rate impact of approximately $15.8 million
on
non-US currency denominated goodwill assets. See Note 7 of the Notes to the
Consolidated Financial Statements for additional information regarding Trimble’s
goodwill by operating segment.
NOTE
5:
JOINT VENTURE
Caterpillar
Trimble Control Technologies Joint Venture
On
April 1, 2002,
Caterpillar Trimble Control Technologies LLC (“CTCT”), a joint venture formed by
Trimble and Caterpillar began operations. The joint venture is 50% owned by
Trimble and 50% owned by Caterpillar, with equal voting rights. The joint
venture is accounted for under the equity method of accounting. Under the equity
method, Trimble’s share of profits and losses are included in expenses for
affiliated operations, net in the non-operating income (expense), net section
of
the Consolidated Statements of Income. CTCT develops and markets advanced
electronic guidance and control products for earth moving machines in the
construction, mining and waste industries.
During
fiscal 2002,
Trimble received a special cash distribution of $11.0 million from CTCT. The
distribution was recorded as a deferred gain and amortized to the extent that
losses were attributable from CTCT under the equity method of accounting. Since
the joint venture is now profitable on a sustainable basis, future operating
losses are not anticipated and there are no future outstanding financial
obligations by Trimble to the joint venture, Trimble recognized the unamortized
portion of the gain or $9.2 million in fiscal 2005 as non operating
income.
Trimble
acts as a
contract manufacturer for CTCT. Products are manufactured based on orders
received from CTCT and are sold at cost plus a mark up to CTCT. CTCT resells
products to both Caterpillar and Trimble for sales through their respective
distribution channels. Generally, Trimble sells products to the after market
dealer channel, and Caterpillar sells products for factory and dealer
installation. CTCT does not hold inventory in that the resale of
products
to
Caterpillar and Trimble occur simultaneously when the products are purchased
from the subcontract manufacturer in Trimble.
The
net expenses for
affiliated operations at CTCT also includes incremental costs as a result of
purchasing products from CTCT at a higher price than Trimble's original
manufacturing costs, partially offset by contract manufacturing fees charged
to
CTCT. In addition, Trimble received reimbursement of employee-related costs
from
CTCT for Trimble employees dedicated to CTCT totaling $9.7 million for both
fiscal 2005 and fiscal 2004 and $7.9 million for fiscal 2003. The reimbursements
were offset against operating expenses.
|
December
30,
|
December
31,
|
January
2,
|
Fiscal
Years
Ended
|
2005
|
2004
|
2004
|
(In
millions)
|
|
|
|
|
|
|
|
CTCT
incremental pricing effects, net
|
$11.4
|
$
8.8
|
$
5.9
|
Trimble's
50%
share of CTCT's reported (gain) loss
|
(2.0)
|
0.5
|
0.9
|
Amortization
of deferred gain
|
(9.2)
|
(0.7)
|
(0.9)
|
Total
CTCT
expense for affiliated operations, net
|
$
0.2
|
$
8.6
|
$
5.9
|
The
net outstanding
balance due from CTCT was $0.2 million at December
30, 2005
and $0.7 million at December 31, 2004 and is included in account receivables,
net on the Consolidated Balance Sheets.
Nikon-Trimble
Joint Venture
On
March 28, 2003,
Nikon-Trimble Co., Ltd (“Nikon-Trimble”), a joint venture was formed by Trimble
and Nikon Corporation. The joint venture began operations in July 2003 and
is
50% owned by Trimble and 50% owned by Nikon, with equal voting rights. It
focuses on the design and manufacture of surveying instruments including
mechanical total stations and related products.
Nikon-Trimble
is the
distributor in Japan for Nikon and Trimble products. Trimble is the exclusive
distributor outside of Japan for Nikon branded survey products. For products
sold from Trimble to the Nikon-Trimble, revenue is recognized by Trimble on
a
sell-through basis from Nikon-Trimble to the end customer. Profits from these
inter-company sales are eliminated.
The
terms and
conditions of the sales of products from Trimble to Nikon-Trimble are comparable
with those of the standard distribution agreements which Trimble maintains
with
its dealer channel and margins earned are similar to those from third party
dealers. Similarly, the purchases of product by Trimble from the Nikon-Trimble
are made on terms comparable with the arrangements which Nikon maintained with
its international distribution channel prior to the formation of the joint
venture with Trimble.
Trimble
uses the
equity method of accounting for its investment in Nikon-Trimble, with 50% share
of profit or loss from this joint venture reported by Trimble in the
Consolidated Statements of Income under the heading of expenses for affiliated
operations, net. Trimble reported a loss of approximately $36,000 and a profit
of $1.1 million for fiscal 2005 and fiscal 2004, respectively, as its
proportionate share of the net income. At
December 30,
2005, the net payable by Trimble to Nikon-Trimble related to the purchase and
sale of products from and to Nikon-Trimble is $2.0 million and was included
in
accounts payable on the Consolidated Balance Sheets. In addition, Trimble
received reimbursement of employee-related costs from Nikon-Trimble for one
Trimble employee dedicated to Nikon-Trimble totaling $0.4 million for fiscal
2005. The reimbursements were offset against operating expenses. The carrying
amount of the investment was approximately $12.9 million at December 30, 2005
and $13.5 million at December 31, 2004.
NOTE
6:
CERTAIN
BALANCE SHEET COMPONENTS
The
following tables provide details of selected balance sheet items (in thousands):
|
December
30,
|
December
31,
|
As
of
|
2005
|
2004
|
Inventories:
|
|
|
Raw
materials
|
$
52,199
|
$
36,425
|
Work-in-process
|
7,249
|
3,989
|
Finished
goods
|
48,403
|
47,331
|
Total
|
$
107,851
|
$
87,745
|
Property
and
equipment, net:
|
|
|
Machinery
and
equipment
|
$
72,273
|
$
71,882
|
Furniture
and
fixtures
|
10,110
|
10,521
|
Leasehold
improvements
|
8,695
|
5,861
|
Buildings
|
5,707
|
5,297
|
Land
|
1,231
|
1,231
|
|
98,016
|
94,792
|
Less
accumulated depreciation
|
(55,352)
|
(63,801)
|
Total
|
$
42,664
|
$
30,991
|
Other
Non-Current Liabilities:
|
|
|
Deferred
compensation
|
$
3,234
|
$
1,761
|
Pension
|
5,529
|
6,247
|
Deferred
Rent
|
3,364
|
426
|
Other
long
term liabilities
|
6,917
|
3,296
|
Total
|
$
19,041
|
$
11,730
|
During
the year,
accumulated depreciation decreased by $8.4 million due to the write-off of
fully
depreciated assets and disposals in the amount of $16.2 million and the foreign
exchange rate impact of $2.6 million offset by $10.7 million in depreciation
expense.
Other
non-current
liabilities include deferred rent as a result of the new Sunnyvale lease
executed in fiscal 2005.
NOTE
7:
REPORTING SEGMENT AND GEOGRAPHIC INFORMATION
To
achieve
distribution, marketing, production, and technology advantages in Trimble's
targeted markets, the Company manages its operations in the following five
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 automated machine guidance
and
control. These products provide solutions for numerous construction
applications including surveying, general construction, site preparation
and excavation, road and runway construction, and underground
construction. During fiscal 2005 the Company acquired Apache
and
Pacific Crest and their performances
are reported in this business
segment.
|
· |
Field
Solutions — Consists of products that provide solutions in a variety of
agriculture and fixed asset applications, primarily in the areas
of
precise land leveling, machine guidance, yield monitoring, variable-rate
applications of fertilizers and chemicals, and fixed asset data collection
for a variety of governmental and private entities. This segment
is an
aggregation of the mapping and geographic information systems (GIS)
and
agriculture businesses. Trimble has aggregated these business operations
under a single general manager in order to continue to leverage its
research and development activities due to the similarities of products
across the segment.
|
· |
Component
Technologies — Consists of products including proprietary chipsets,
printed circuit boards, modules, and licenses of intellectual property.
The applications into which end users currently incorporate the component
products include timing applications for synchronizing wireless networks,
in-vehicle navigation and telematics systems, fleet management, security
systems, data collection networks, and wireless handheld consumer
products.
|
· |
Mobile
Solutions — Consists of products that enable end users to monitor and
manage their mobile assets by communicating location and activity-relevant
information from the field to the office. Trimble offers a range
of
products that address a number of sectors of this market including
truck
fleets, security, telematics, and public safety vehicles. During
fiscal
2005 the Company acquired MobileTech Solutions and Advanced Public
Safety
and their performances are reported in this business
segment.
|
· |
Portfolio
Technologies — The various operations that comprise this segment were
aggregated on the basis that no single operation accounted for more
than
10% of Trimble’s total revenue. The operations in this segment are
Applanix, Military and Advanced Systems (MAS) and Trimble Outdoors.
|
Trimble
evaluates
each of its segment's performance and allocates resources based on profit and
loss from operations before income taxes, and some corporate allocations.
Trimble and each of its segments employ the same accounting policies.
The
following table
presents revenues, operating income (loss), and identifiable assets for the
five
segments. Operating
income
(loss) is net revenue less operating expenses, excluding general corporate
expenses, amortization, restructuring charges, non-operating income (expense),
and income taxes. The identifiable assets that Trimble's chief operating
decision maker views by segment are accounts receivable and inventory.
|
December
30,
|
|
December
31,
|
|
January
2,
|
Fiscal
Years
Ended
|
2005
|
|
2004
|
|
2004
|
(in
thousands)
|
|
|
|
|
|
Engineering
& Construction
|
|
|
|
|
|
Revenue
|
$
524,461
|
|
$
440,478
|
|
$
367,058
|
Operating
income before corporate allocations
|
117,993
|
|
79,505
|
|
60,664
|
Accounts
receivable
|
105,980
|
|
90,743
|
|
84,897
|
Inventories
|
80,590
|
|
65,116
|
|
56,008
|
Goodwill
|
229,176
|
|
238,801
|
|
229,287
|
Field
Solutions
|
|
|
|
|
|
Revenue
|
127,843
|
|
105,591
|
|
79,879
|
Operating
income before corporate allocations
|
32,527
|
|
25,151
|
|
14,500
|
Accounts
receivable
|
21,823
|
|
19,141
|
|
16,589
|
Inventories
|
11,790
|
|
7,016
|
|
3,398
|
Goodwill
|
-
|
|
-
|
|
-
|
Component
Technologies
|
|
|
|
|
|
Revenue
|
53,902
|
|
65,522
|
|
64,193
|
Operating
income before corporate allocations
|
8,034
|
|
13,880
|
|
16,560
|
Accounts
receivable
|
6,283
|
|
9,377
|
|
10,003
|
Inventories
|
7,154
|
|
5,271
|
|
2,021
|
Goodwill
|
-
|
|
-
|
|
-
|
Mobile
Solutions
|
|
|
|
|
|
Revenue
|
31,481
|
|
23,531
|
|
12,981
|
Operating
loss
before corporate allocations
|
(3,072)
|
|
(5,997)
|
|
(6,452)
|
Accounts
receivable
|
10,789
|
|
9,073
|
|
4,103
|
Inventories
|
1,983
|
|
5,735
|
|
3,038
|
Goodwill
|
44,118
|
|
7,660
|
|
-
|
Portfolio
Technologies
|
|
|
|
|
|
Revenue
|
37,226
|
|
33,686
|
|
16,792
|
Operating
income (loss) before corporate allocations
|
5,178
|
|
4,866
|
|
(1,686)
|
Accounts
receivable
|
7,750
|
|
8,283
|
|
7,321
|
Inventories
|
6,334
|
|
4,607
|
|
6,361
|
Goodwill
|
12,852
|
|
13,061
|
|
12,138
|
Total
|
|
|
|
|
|
Revenue
|
$
774,913
|
|
$
668,808
|
|
$
540,903
|
Operating
income before corporate allocations
|
160,660
|
|
117,405
|
|
83,586
|
Accounts
receivable (1)
|
152,625
|
|
136,617
|
|
122,913
|
Inventories
|
107,851
|
|
87,745
|
|
70,826
|
Goodwill
|
286,146
|
|
259,522
|
|
241,425
|
(1)
As presented, accounts receivable represents trade receivables, gross, which
are
specified between segments.
The
following are reconciliations corresponding to totals in the accompanying
Consolidated Financial Statements:
|
December
30,
|
December
31,
|
January
4,
|
Fiscal
Years
Ended
|
2005
|
2004
|
2004
|
(in
thousands)
|
|
|
|
Consolidated
segment operating income
|
$
160,660
|
$
117,405
|
$
83,586
|
Unallocated
corporate expense
|
(27,483)
|
(22,901)
|
(20,320)
|
Restructuring
charges
|
(278)
|
(552)
|
(2,019)
|
Amortization
of purchased intangible assets
|
(6,855)
|
(8,327)
|
(7,312)
|
In-process
research and development
|
(1,100)
|
-
|
-
|
Non-operating
expense, net
|
(156)
|
(10,701)
|
(18,350)
|
Consolidated
income before income taxes
|
$
124,788
|
$
74,924
|
$
35,585
|
|
December
30,
|
December
31,
|
As
of
|
2005
|
2004
|
(in
thousands)
|
|
|
Assets:
|
|
|
Accounts
receivable total for reportable segments
|
$
152,625
|
$
136,617
|
Unallocated
(1)
|
(7,525)
|
(12,679)
|
Accounts
receivable, net
|
$
145,100
|
$
123,938
|
(1)
Includes
trade-related accruals and cash received in advance that are not allocated
by
segment.
The
distribution of
Trimble’s gross consolidated revenue by segment is summarized in the table
below. Gross consolidated revenue includes external and internal sales. Total
external consolidated revenue is reported net of eliminations of internal sales
between segments.
|
December
30,
|
December
31,
|
|
2005
|
2004
|
|
|
|
(In
thousands)
|
|
|
|
|
|
Engineering
and Construction
|
$
529,034
|
$
443,973
|
Field
Solutions
|
127,843
|
105,591
|
Component
Technologies
|
53,956
|
65,713
|
Mobile
Solutions
|
31,481
|
23,531
|
Portfolio
Technologies
|
37,226
|
33,686
|
Total
Gross
Consolidated Revenue
|
779,540
|
672,494
|
Eliminations
|
(4,627)
|
(3,686)
|
Total
External
Consolidated Revenue
|
$
774,913
|
$
668,808
|
The
geographic
distribution of Trimble’s revenues and identifiable assets is summarized in the
table below. Other foreign countries include Canada, and countries in South
and
Central America, the Middle East, Africa, and the Pacific Rim. Identifiable
assets indicated in the table below exclude inter-company receivables,
investments in subsidiaries, goodwill, and intangibles assets.
|
|
|
Geographic
Area
|
|
|
|
|
|
|
|
|
|
|
|
Other
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-US
|
|
|
|
|
Fiscal
Years
Ended
|
|
US
|
|
Europe
|
|
Asia
Pacific
|
|
Countries
|
|
Eliminations
|
|
Total
|
(In
thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December
30,
2005
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales
to
unaffiliated customers (1)
|
$
|
415,443
|
$
|
191,734
|
$
|
88,315
|
$
|
79,421
|
$
|
-
|
$
|
774,913
|
|
Inter-geographic
transfers
|
|
222,909
|
|
175,739
|
|
1,198
|
|
1,661
|
|
(401,507)
|
|
-
|
|
Total
revenue
|
$
|
638,352
|
$
|
367,473
|
$
|
89,513
|
$
|
81,082
|
$
|
(401,507)
|
$
|
774,913
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Identifiable
assets
|
$
|
295,196
|
$
|
120,582
|
$
|
4,602
|
$
|
9,251
|
$
|
-
|
$
|
429,631
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December
31,
2004
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales
to
unaffiliated customers (1)
|
$
|
331,607
|
$
|
186,197
|
$
|
86,117
|
$
|
64,886
|
$
|
-
|
$
|
668,808
|
|
Inter-geographic
transfers
|
|
149,499
|
|
138,159
|
|
3,479
|
|
2,640
|
|
(293,777)
|
|
-
|
|
Total
revenue
|
$
|
481,106
|
$
|
324,356
|
$
|
89,596
|
$
|
67,527
|
$
|
(293,777)
|
$
|
668,808
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Identifiable
assets
|
$
|
242,141
|
$
|
118,194
|
$
|
6,959
|
$
|
13,286
|
$
|
-
|
$
|
380,580
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
January
2,
2004
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales
to
unaffiliated customers (1)
|
$
|
265,846
|
$
|
160,094
|
$
|
70,257
|
$
|
44,706
|
$
|
-
|
$
|
540,903
|
|
Inter-geographic
transfers
|
|
112,623
|
|
116,185
|
|
3,755
|
|
-
|
|
(232,563)
|
|
-
|
|
Total
revenue
|
$
|
378,469
|
$
|
276,279
|
$
|
74,012
|
$
|
44,706
|
$
|
(232,563)
|
$
|
540,903
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
Sales attributed to countries based on the location of the
customer.
Transfers
between US
and non-US geographic areas are made at prices based on total costs and
contributions of the supplying geographic area. The Company's subsidiaries
in
Asia have derived revenue from commissions from US operations in each of the
periods presented. These commission revenues and expenses are excluded from
total revenue and operating income (loss) in the preceding table. Other than
the
United States, no other country comprised more than 10% of sales to unaffiliated
customers for any periods presented, except as disclosed above.
Revenues
by product
groups are not practicable to obtain and therefore are not presented.
No
single customer
accounted for 10% or more of Trimble's total revenues in fiscal years 2005,
2004, and 2003.
NOTE
8:
RESTRUCTURING CHARGES
Restructuring
charges of $0.3 million, $0.6 million, and $2.0 million were recorded in fiscal
years 2005, 2004 and 2003, respectively. The charges in fiscal 2005 were
primarily related to office closure costs due to integration efforts of the
Mensi acquisition. The charges in fiscal 2004 were primarily related to
severance costs due to the realignment of Trimble Mobile Solutions Inc. while
charges in fiscal 2003 were primarily related to our Japanese office relocation
due to the Nikon-Trimble joint venture formation. As a result of these actions,
the headcount of the affected operations decreased by 36 and 77 in fiscal 2004,
and 2003, respectively. As of December 30, 2005, the remaining accrual balance
of $0.3 million is related to facilities closure expected to be paid over the
next several years. The restructuring accrual is included in the Condensed
Consolidated Balance Sheets under the heading of “Accrued Liabilities”.
NOTE
9:
LONG-TERM
DEBT
Long-term
debt
consisted of the following:
|
|
|
|
December
30,
|
|
December
31,
|
As
of
|
|
|
2005
|
|
2004
|
(In
thousands)
|
|
|
|
|
|
|
|
|
|
|
|
Credit
Facilities:
|
|
|
|
|
|
Term
loan
|
$
|
-
|
$
|
31,250
|
|
Revolving
credit facility
|
|
-
|
|
7,000
|
Promissory
notes and other
|
|
649
|
|
746
|
|
|
|
|
649
|
|
38,996
|
|
|
|
|
|
|
|
Less
current
portion of long-term debt
|
|
216
|
|
12,500
|
|
Non-current
portion
|
$
|
433
|
$
|
26,496
|
The
following summarizes the future cash payment obligations (excluding interest)
as
of December 30, 2005:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2011
and
|
|
|
Total
|
|
2006
|
|
2007
|
|
2008
|
|
2009
|
|
2010
|
|
Beyond
|
(in
thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Promissory
note and other
|
|
649
|
|
216
|
|
-
|
|
104
|
|
329
|
|
-
|
|
-
|
Total
contractual cash obligations
|
$
|
649
|
$
|
216
|
$
|
-
|
$
|
104
|
$
|
329
|
$
|
-
|
$
|
-
|
Credit
Facilities
On
July 28, 2005,
the Company entered into a $200 million unsecured revolving credit agreement
(“2005 Credit Facility”) with a syndicate of 10 banks with The Bank of Nova
Scotia as the administrative agent. The 2005 Credit Facility replaces the
Company’s $175 million secured 2003 Credit Facility. The funds available under
the new 2005 Credit Facility may be used by the Company for general corporate
purposes and up to $25 million of the 2005 Credit Facility may be used for
letters of credit.
The
Company may
borrow funds under the 2005 Credit Facility in U.S. Dollars or in certain other
currencies, and will bear interest, at the Company's option, at either: (i)
a
base rate, based on the administrative agent's prime rate, plus a margin of
between 0% and 0.125%, depending on the Company's leverage ratio as of its
most
recently ended fiscal quarter, or (ii) a reserve-adjusted rate based on LIBOR,
EURIBOR, STIBOR or other agreed-upon rate, depending on the currency borrowed,
plus a margin of between 0.625% and 1.125%, depending on the Company's leverage
ratio as of the most recently ended fiscal quarter. The Company's obligations
under the 2005 Credit Facility are guaranteed by certain of the Company's
domestic subsidiaries.
The
2005 Credit
Facility contains customary affirmative, negative and financial covenants
including, among other requirements, negative covenants that restrict the
Company's ability to dispose of assets, create liens, incur indebtedness,
repurchase stock, pay dividends, make acquisitions, make investments, enter
into
mergers and consolidations and make capital expenditures, and financial
covenants that require the maintenance of leverage and fixed charge coverage
ratios. The 2005 Credit Facility contains events of default that include, among
others, non-payment of principal, interest or fees, breach of covenants,
inaccuracy of representations and warranties, cross defaults to certain other
indebtedness, bankruptcy and insolvency events, material judgments, and events
constituting a change of control. Upon the occurrence and during the continuance
of an event of default, interest on the obligations will accrue at an increased
rate and the lenders may accelerate the Company's obligations under the 2005
Credit Facility, however that acceleration will be automatic in the case of
bankruptcy and insolvency events of default. Trimble incurs a commitment fee
if
the 2005 Credit Facility is not used. The commitment fee is not material to
the
Company’s results during all periods presented.
At
December 30,
2005, the Company has a zero balance outstanding and was in compliance with
all
financial debt covenants.
Promissory
Note
As
of December 30,
2005, the Company had other notes payable totaling approximately $0.6 million
consisting of government loans to foreign subsidiaries.
NOTE
10:
COMMITMENTS AND CONTINGENCIES
Operating
Leases
On
May 13, 2005, Trimble entered into a lease agreement for the lease of real
property located in Sunnyvale, California. The lease agreement has a seven
year
term, commencing January 1, 2006 and ending December 31, 2012.
Trimble's
principal
facilities in the United States are leased under various cancelable and
non-cancelable operating leases that expire at various dates through 2012.
For
tenant improvement allowances and rent holidays, Trimble records a deferred
rent
liability on the consolidated balance sheets and amortizes the deferred rent
over the terms of the leases as reductions to rent expense on the consolidated
statements of income. The
Company has
options to renew certain of these leases for an additional five years.
Future
minimum
payments required under non-cancelable operating leases are as follows:
|
Operating
Lease
Payments
|
(In
thousands)
|
|
|
|
2006
|
$
9,664
|
2007
|
8.094
|
2008
|
6,927
|
2009
|
6,073
|
2010
|
5,487
|
Thereafter
|
5,779
|
Total
|
$
42,024
|
Net
rent expense
under operating leases was $12.6 million in fiscal 2005, $10.9 million in fiscal
2004, and $13.2 million in fiscal 2003. Sublease income was $39,000, $38,000,
and $1.7 million for fiscal 2005, 2004 and 2003, respectively.
Purchase
Commitments with a Supplier
Trimble
entered into
a significant supply agreement in fiscal 2004 that sets forth minimum purchase
commitments for outsourced services. The term of the supply agreement is the
earlier of four years from the initial product ship date, or when Trimble has
paid for a cumulative total of 200,000 billable hours (approximately $10.4
million). Should Trimble not purchase and pay for 200,000 hours, then Trimble
will compensate the supplier for 20% of the shortfall. Thereafter, the contract
continues in effect until terminated by either party with 30 days prior written
notice to the other party. As of December 30, 2005, based on current hours
earned to date the future obligation is approximately $3.1 million which is
expected to be paid over the next year. Trimble does not expect a shortfall
based on current hours earned to date.
NOTE
11:
FAIR VALUE
OF FINANCIAL INSTRUMENTS
The
estimated fair
values of financial instruments outstanding are as follows:
|
Carrying
Amount
|
Fair
Value
|
Carrying
Amount
|
Fair
Values
|
|
December
30,
2005
|
December
31,
2004
|
As
of
|
|
|
|
|
(In
thousands)
|
|
|
|
|
|
|
|
|
|
Assets:
|
|
|
|
|
Cash
and cash
equivalents
|
$
73,853
|
$
73,853
|
$
71,872
|
$
71,872
|
Forward
foreign currency exchange contracts
|
516
|
577
|
-
|
-
|
Accounts
and
other receivable, net
|
145,100
|
145,100
|
123,938
|
123,938
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
Credit
facilities
|
$
-
|
$
-
|
$
38,250
|
$
38,250
|
Forward
foreign currency exchange contracts
|
-
|
-
|
639
|
539
|
Promissory
note and other
|
649
|
562
|
746
|
737
|
Accounts
payable
|
45,206
|
45,206
|
43,551
|
43,551
|
The
fair value of
the bank borrowings, and promissory notes have been estimated using an estimate
of the interest rate Trimble would have had to pay on the issuance of notes
with
a similar maturity and discounting the cash flows at that rate. The fair values
do not give an indication of the amount that Trimble would currently have to
pay
to extinguish any of this debt.
The
fair value of
forward foreign exchange contracts is estimated based on the difference between
the market price and the carrying amount of comparable contracts. These
contracts are adjusted to fair value at the end of every month.
NOTE
12:
INCOME TAXES
Trimble's
income tax
provision (benefit) consisted of the following:
|
|
|
December
30,
|
|
December
31,
|
January
2,
|
Fiscal
Years
Ended
|
|
|
2005
|
|
2004
|
2004
|
(In
thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
US
Federal:
|
|
|
|
|
|
|
Current
|
|
$
|
36,493
|
$
|
18,196
|
513
|
Deferred
|
|
|
(1,534)
|
|
(17,995)
|
(7,000)
|
|
|
|
34,959
|
|
201
|
(6,487)
|
US
State:
|
|
|
|
|
|
|
Current
|
|
|
3,500
|
|
2,895
|
250
|
Deferred
|
|
|
(2,348)
|
|
(897)
|
(600)
|
|
|
|
1,152
|
|
1,998
|
(350)
|
Non-US:
|
|
|
|
|
|
|
Current
|
|
|
3,102
|
|
3,137
|
1,594
|
Deferred
|
|
|
720
|
|
1,908
|
2,343
|
|
|
|
3,822
|
|
5,045
|
3,937
|
Income
tax
provision (benefit)
|
|
$
|
39,933
|
$
|
7,244
|
(2,900)
|
The
pre-tax US
income was approximately $99.5 million, $70.0 million and $39.5 million in
fiscal years 2005, 2004 and 2003, respectively. The pre-tax non-US income
(loss) was approximately $25.3 million, $4.9 million and ($3.9) million in
fiscal years 2005, 2004 and 2003, respectively.
The
fiscal year 2005
and 2004 tax provisions reflected above were reduced by $14.5 million and $14.4
million of tax benefits, respectively attributable to stock option deductions
which were credited to equity.
The
income tax
provision (benefit) differs from the amount computed by applying the statutory
US federal income tax rate to income before taxes. The sources and tax effects
of the differences are as follows:
|
|
December
31,
|
|
December
31,
|
|
January
2,
|
Fiscal
Years
Ended
|
|
2005
|
|
2004
|
|
2004
|
(In
thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expected
tax
from continuing operations at 35% in all years
|
$
|
43,677
|
$
|
26,223
|
$
|
12,455
|
Change
in
valuation allowance
|
|
|
|
(24,004)
|
|
(15,028)
|
US
State
income taxes
|
|
749
|
|
1,299
|
|
-
|
Export
sales
incentives
|
|
(2,316)
|
|
(1,176)
|
|
-
|
Non-US
tax
rate differential and unbenefitted losses
|
|
3,684
|
|
5,134
|
|
-
|
US
Federal
research and development credit
|
|
(895)
|
|
(508)
|
|
-
|
Benefit
from
repatriation legislation
|
|
(6,445)
|
|
|
|
|
Other
|
|
1,479
|
|
276
|
|
(327)
|
Income
tax
provision (benefit)
|
$
|
39,933
|
$
|
7,244
|
$
|
(2,900)
|
|
|
|
|
|
|
|
Effective
tax
rate
|
|
32%
|
|
10%
|
|
(8%)
|
The
components of deferred taxes consist of the following:
|
|
December
30,
|
|
December
31,
|
|
January
2,
|
As
of
|
|
2005
|
|
2004
|
|
2004
|
(In
thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred
tax
liabilities:
|
|
|
|
|
|
|
Purchased
intangibles
|
$
|
11,058
|
$
|
3,247
|
$
|
1,338
|
Depreciation
and amortization
|
|
11,711
|
|
10,183
|
|
3,776
|
Other
individually immaterial items
|
|
1,516
|
|
229
|
|
251
|
Total
deferred
tax liabilities
|
|
24,285
|
|
13,659
|
|
5,365
|
|
|
|
|
|
|
|
Deferred
tax
assets:
|
|
|
|
|
|
|
Inventory
valuation differences
|
|
8,983
|
|
8,782
|
|
9,001
|
Expenses
not
currently deductible
|
|
6,233
|
|
8,034
|
|
5,528
|
US
Federal
credit carryforwards
|
|
|
|
5,619
|
|
9,150
|
Deferred
revenue
|
|
564
|
|
3,857
|
|
4,280
|
US
State
credit carryforwards
|
|
8,530
|
|
6,722
|
|
6,999
|
Warranty
|
|
2,361
|
|
2,216
|
|
2,374
|
|
|
|
|
0
|
|
2,871
|
US
Federal net
operating loss carryforward
|
|
2,669
|
|
2,998
|
|
-
|
Net
foreign
tax credits on undistributed foreign earnings
|
|
5,743
|
|
2,682
|
|
-
|
Other
individually immaterial items
|
|
7,452
|
|
7,655
|
|
3,106
|
Total
deferred
tax assets
|
|
42,535
|
|
48,565
|
|
43,309
|
Valuation
allowance
|
|
(5,855)
|
|
(12,989)
|
|
(34,756)
|
Total
deferred
tax assets
|
|
36,680
|
|
35,576
|
|
8,553
|
|
|
|
|
|
|
|
Total
net
deferred tax assets
|
$
|
12,395
|
$
|
21,917
|
$
|
3,188
|
The
Company has $2.7
million of tax effected US federal net operating loss carryforwards from an
acquisition, which is subject to certain limitations under IRC Section 382.
The
Company has state research and development credit carryforwards of approximately
$13.1 million, which do not expire.
The
valuation
allowance decreased by $7.1 million in fiscal 2005, $21.8 million in fiscal
2004
and $13.1 million in fiscal 2003. Approximately, $1.2
million, $8.0 million and $14.1 million of the valuation allowance at
December 30, 2005, December 31, 2004 and January 2, 2004 respectively
relate to the tax benefit of stock option deduction, which will be credited
to
equity if and when realized.
Repatriation
of
foreign earnings. The American Jobs Creation Act of 2004 (the Act) provides
for
a special one-time elective dividends received deduction on the repatriation
of
certain foreign earnings to a U.S. taxpayer equal to 85% of the eligible
distribution. During the fourth quarter of 2005, the Company repatriated $39.5
million, of which $24 million qualified for the special one-time elective
dividends received deduction and $15.5 million constituted earnings that do
not
qualify under the Act; previously taxed income and return of capital. The
company recorded a $6.4 million tax benefit from these foreign
earnings.
NOTE
13:
COMPREHENSIVE INCOME
The
components of comprehensive income and related tax effects were as follows:
Fiscal
Years
Ended
|
December
30,
2005
|
December
31,
2004
|
January
2,
2004
|
(in
thousands)
|
|
|
|
Net
income
|
$
84,855
|
$
67,680
|
$
38,485
|
Foreign
currency translation adjustments, net of tax of $308 in 2005 and
$(912) in
2004
|
(24,690)
|
14,025
|
31,198
|
Net
gain
(loss) on hedging transactions
|
(106)
|
106
|
(7)
|
Net
unrealized
gain (loss) on investments
|
(34)
|
(6)
|
74
|
Total
comprehensive income
|
$
60,025
|
$
81,805
|
$
69,750
|
The
components of accumulated other comprehensive, net of related tax were as
follows:
|
December
30,
|
December
31,
|
Fiscal
Years
Ended
|
2005
|
2004
|
(in
thousands)
|
|
|
Accumulated
foreign currency translation adjustments
|
$
19,504
|
$
44,191
|
Accumulated
net gain on hedging transactions
|
-
|
106
|
Accumulated
net unrealized gain on foreign currency
|
30
|
67
|
Total
accumulated other comprehensive income
|
$
19,534
|
$
44,364
|
NOTE
14:
EMPLOYEE STOCK BENEFIT PLANS
Employee
Stock Purchase Plan
The
Company has an
Employee Stock Purchase Plan (“Purchase Plan”) under which an aggregate of
5,325,000 shares of Common Stock have been reserved for sale to eligible
employees as approved by the shareholders to date. The plan permits full-time
employees to purchase Common Stock through payroll deductions at 85% of the
lower of the fair market value of the Common Stock at the beginning or at the
end of each six-month offering period. The Purchase Plan terminates on December
31, 2008. In fiscal 2005 and 2004, the shares issued under the Purchase Plan
were 179,999 and 183,214 shares, respectively. At December 30, 2005, the number
of shares reserved for future purchases by eligible employees was 367,836.
Restricted
Stock Award
During
the second
quarter of fiscal 2005, the Company granted 20,000 shares of restricted common
stock. The award vests 20% on June 30, 2005 and an additional 20% each June
30
thereafter. The Company recorded compensation expense of $120,000 for fiscal
2005. Trimble did not grant any restricted stock in fiscal 2004 and fiscal
2003.
2002
Stock
Plan
In
2002, Trimble’s
Board of Directors adopted the 2002 Stock Plan (“2002 Plan”). The 2002 Plan
approved by the shareholders provides for the granting of incentive and
non-statutory stock options for up to 4,500,000 shares plus any shares currently
reserved but un-issued to employees, consultants, and directors of Trimble.
Incentive stock options may be granted at exercise prices that are not less
than
100% of the fair market value of Common Stock on the date of grant. Employee
stock options granted under the 2002 Plan have 120-month terms, and vest at
a
rate of 20% at the first anniversary of grant, and monthly thereafter at an
annual rate of 20%, with full vesting occurring at the fifth anniversary of
the
grant. The exercise price of non-statutory stock options issued under the 2002
Plan must be at least 85% of the fair market value of Common Stock on the date
of grant. As of December 30, 2005, options to purchase 3,641,850 shares were
outstanding and 1,509,230 were available for future grant under the 2002 Plan.
1993
Stock
Option Plan
In
1992, Trimble's
Board of Directors adopted the 1993 Stock Option Plan (“1993 Plan”). The 1993
Plan, as amended to date and approved by shareholders, provided for the granting
of incentive and non-statutory stock options for up to 9,562,500 shares of
Common Stock to employees, consultants, and directors of Trimble. Incentive
stock options may be granted at exercise prices that are not less than 100%
of
the fair market value of Common Stock on the date of grant. Employee stock
options granted under the 1993 Plan have 120-month terms, and vest at a rate
of
20% at the first anniversary of grant, and monthly thereafter at an annual
rate
of 20%, with full vesting occurring at the fifth anniversary of grant. The
exercise price of non-statutory stock options issued under the 1993 Plan must
be
at least 85% of the fair market value of Common Stock on the date of grant.
As
of December 30, 2005 options to purchase 2,364,495 shares were outstanding
and
no shares were available for future grant.
1992
Management Discount Stock Option Plan
In
1992, Trimble's
Board of Directors approved the 1992 Management Discount Stock Option Plan
("Discount Plan"). As of December 30, 2005, options to purchase 187,500 shares
were outstanding and no shares were available for future grant under the 1992
Management Discount Stock Option Plan.
1990
Director Stock Option Plan
In
December 1990,
Trimble adopted a Director Stock Option Plan under which an aggregate of 570,000
shares of Common Stock have been reserved for issuance to non-employee directors
as approved by the shareholders to date. At December 30, 2005, options to
purchase 220,000 shares were outstanding, and no shares were available for
future grants under the Director Stock Option Plan.
SFAS
123
Disclosures
As
stated in Note 2
of the Notes to the Consolidated Financial Statements, Trimble has elected
to
follow APB 25 and related interpretations in accounting for its employee stock
options and stock purchase plans. The alternative fair value accounting provided
for under SFAS 123 requires use of option pricing models that were not developed
for use in valuing employee stock options. Under APB 25, because the exercise
price of Trimble's employee stock options equals the market price of the
underlying stock on date of grant, no compensation expense is recognized.
Exercise
prices for
options outstanding as of December 30, 2005, ranged from $5.33 to $43.43. The
weighted average remaining contractual life of those options is 6.46 years.
In
view of the wide range of exercise prices, Trimble considers it appropriate
to
provide the following additional information with respect to options outstanding
at December 30, 2005:
|
|
Options
Outstanding
|
|
Options
Exercisable
|
|
|
|
|
Weighted-
|
Weighted-
|
|
|
|
Weighted-
|
|
|
|
|
Average
|
Average
|
|
|
|
Average
|
|
|
Number
|
|
Exercise
Price
|
Remaining
|
|
Number
|
|
Exercise
Price
|
|
Range
|
Outstanding
|
|
per
Share
|
Contractual
Life (Years)
|
|
Exercisable
|
|
per
Share
|
$
|
5.33
-
7.13
|
693,327
|
|
$
5.80
|
3.33
|
|
678,527
|
|
$
5.78
|
|
7.67
-
10.23
|
1,006,555
|
|
9.36
|
5.61
|
|
708,522
|
|
9.14
|
|
10.25
-
11.65
|
805,720
|
|
11.25
|
5.12
|
|
687,278
|
|
11.23
|
|
11.67
-
16.04
|
472,282
|
|
13.22
|
4.05
|
|
455,292
|
|
13.16
|
|
17.00
|
858,000
|
|
17.00
|
7.54
|
|
369,181
|
|
17.00
|
|
17.55
-
27.42
|
832,755
|
|
25.15
|
5.86
|
|
650,221
|
|
26.10
|
|
27.56
|
3,300
|
|
27.56
|
8.06
|
|
525
|
|
27.56
|
|
29.06
|
722,456
|
|
29.06
|
8.81
|
|
168,173
|
|
29.06
|
|
30.57
-
33.99
|
893,350
|
|
33.37
|
9.69
|
|
30,167
|
|
32.49
|
|
34.46
-
43.43
|
126,250
|
|
37.75
|
8,46
|
|
34,498
|
|
35.67
|
Total
|
6,413,995
|
|
$
18.70
|
6.46
|
|
3,782,384
|
|
$
14.40
|
Activity
during
fiscal 2005, 2004, and 2003, under the combined plans was as follows:
|
December
30,
2005
|
December
31,
2004
|
January
2,
2004
|
Fiscal
Years
Ended
|
Options
|
Weighted
average exercise price
|
Options
|
Weighted
average exercise price
|
Options
|
Weighted
average exercise price
|
(In
thousands, except for per share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding
at
beginning of year
|
6,721
|
16.10
|
7,601
|
13.62
|
7,691
|
$
12.35
|
Granted
|
874
|
34.10
|
1,119
|
28.20
|
1,298
|
16.87
|
Exercised
|
(1,060)
|
14.74
|
(1,710)
|
12.92
|
(1,263)
|
8.90
|
Cancelled
|
(121)
|
20.39
|
(289)
|
16.55
|
(125)
|
15.51
|
Outstanding
at
end of year
|
6,414
|
18.70
|
6,721
|
16.10
|
7,601
|
$
13.62
|
|
|
|
|
|
|
|
Exercisable
at
end of year
|
3,782
|
14.40
|
3,721
|
13.40
|
4,136
|
$
12.76
|
Available
for
grant
|
1,513
|
|
2,275
|
|
1,605
|
|
Weighted-average
fair value of options granted during year
|
|
$
14.53
|
|
$
13.85
|
|
$
10.03
|
Non-statutory
Options
On
May 3, 1999,
Trimble entered into an agreement to grant a non-statutory option to purchase
up
to 45,000 shares of common stock at an exercise price of $6.50 per share, with
an expiration date of March 29, 2004. These non-statutory options were exercised
January 15, 2004.
Warrants
On
April 12, 2002,
the Company issued to Spectra-Physics Holdings USA, Inc., a warrant to purchase
up to 564,350 shares of Trimble’s Common Stock over a fixed period of time.
Initially, Spectra-Physics’ warrant entitled it to purchase 300,000 shares of
Common Stock over a five-year period at an exercise price of $10.07 per share.
On a quarterly basis beginning July 14, 2002, Spectra-Physics’ warrant became
exercisable for an additional 375 shares of Common Stock for every $1 million
of
principal and interest outstanding to Spectra-Physics until the obligation
was
paid off in full. These shares are purchasable at a price equal to the average
of Trimble’s closing price for the five days immediately proceeding the last
trading day of each quarter. On July 14, 2002 an additional 26,046 shares became
exercisable at an exercise price of $9.64 per share. On October 14, 2002 an
additional 26,736 shares became exercisable at an exercise price of $6.12.
On
January 14, 2003, an additional 27,426 shares became exercisable at an exercise
price of $9.03. On April 14, 2003, an additional 14,312 shares became
exercisable at an exercise price of $13.37. The additional shares are
exercisable over a 5-year period. No additional shares will be issuable under
the warrant as the underlying obligation has been paid off in full.
The
approximate fair
value of the warrants of $2.4 million was determined using the Black-Scholes
pricing model with the following assumptions: contractual life of 5-year period,
risk-free interest rate of 4%; volatility of 65%; and no dividends during the
contractual term. The value of the warrants was being amortized to interest
expense over the term of the Subordinated Note and the unamortized balance
was
written off to interest expense on June 2003 upon repayment of the
note.
On
December 21, 2001
and January 15, 2002, in connection with the first and second closing of the
private placement of the Company’s Common Stock, Trimble granted five-year
warrants to purchase an additional 919,008 shares of Common Stock, subject
to
certain adjustments, at an exercise price of $12.97 per share.
NOTE
15:
BENEFIT PLANS
401(k)
Plan
Under
Trimble's
401(k) Plan, US employee participants (including employees of certain
subsidiaries) may direct the investment of contributions to their accounts
among
certain mutual funds and the Trimble Navigation Limited Common Stock Fund.
The
Trimble Fund sold net 42,945 shares of Common Stock for an aggregate of $1.6
million in fiscal 2005. Trimble, at its discretion, matches individual employee
401(k) Plan contributions at a rate of fifty cents of every dollar that the
employee contributes to the 401(k) Plan up to 5% of the employee’s annual salary
to an annual maximum of $2,500. Trimble's matching contributions to the 401(k)
Plan were $2.2 million in fiscal 2005, $1.9 million in fiscal 2004 and $1.8
million in fiscal 2003.
Profit-Sharing
Plan
In
1995, Trimble
introduced an employee profit-sharing plan in which all employees, excluding
executives and certain levels of management, participate. The plan distributes
to employees approximately 5% of quarterly adjusted pre-tax income. Payments
under the plan during fiscal 2005, 2004 and 2003 were $5.9 million, $4.4
million, and $2.5 million, respectively.
Defined
Contribution Pension Plans
Certain
of the
Company’s European subsidiaries participate in state sponsored pension plans.
Contributions are based on specified percentages of employee salaries. For
these
plans, Trimble contributed and charged to expense approximately $0.6 million
for
fiscal 2005, $0.6 million for fiscal 2004, and $2.0 million for fiscal 2003.
Defined
Benefit Pension Plan
Trimble
provides
defined benefit pension plans in certain countries outside the United States,
including Sweden and Germany. The largest of these plans is provided by the
Swedish subsidiary which has an unfunded defined benefit pension plan that
covered substantially all of its full-time employees through 1993. Benefits
are
based on a percentage of eligible earnings. The employee must have had a
projected period of pensionable service of at least 30 years as of 1993. If
the
period was shorter, the pension benefits were reduced accordingly. Active
employees do not accrue any future benefits; therefore, there is no service
cost
and the liability will only increase for interest cost.
Net
periodic benefit
costs in fiscal 2005, 2004, and 2003 were not material.
The
changes in the
benefit obligations and plan assets of the significant non-US defined benefit
pension plans for fiscal 2005 and 2004 were as follows:
Fiscal
Years
Ended
|
December
30,
2005
|
December
31,
2004
|
(in
thousands)
|
|
|
|
|
|
Change
in
benefit obligation:
|
|
|
Benefit
obligation at beginning of year
|
$
7,208
|
$
6,204
|
Service
cost
|
90
|
74
|
Interest
cost
|
270
|
388
|
Benefits
paid
|
(312)
|
(196)
|
Foreign
exchange impact
|
(1,145)
|
699
|
Actuarial
(gains) losses
|
818
|
39
|
Benefit
obligation at end of year
|
6,929
|
7,208
|
Change
in plan
assets:
|
|
|
Fair
value of
plan assets at beginning of year
|
1,088
|
872
|
Actual
return
on plan assets
|
36
|
64
|
Employer
contribution
|
339
|
238
|
Plan
participants' contributions
|
-
|
-
|
Benefits
paid
|
(312)
|
(196)
|
foreign
exchange impact
|
(172)
|
110
|
Fair
value of
plan assets at end of year
|
980
|
1,088
|
Benefit
obligation in excess of plan assets
|
5,949
|
6,120
|
Unrecognized
prior service cost
|
-
|
-
|
Unrecognized
net actuarial gain (loss)
|
(419)
|
127
|
Accrued
pension costs (included in accrued liabilities)
|
$
5,529
|
$
6,247
|
Actuarial
assumptions used to determine the net periodic pension costs for the year ended
December 30, 2005 were as follows:
|
Swedish
Subsidiary
|
German
Subsidiaries
|
Discount
rate
|
4.8%
|
4.0%
|
Rate
of
compensation increase
|
2.5%
|
2.0%
|
Measurement
Date
|
12/30/05
|
12/30/05
|
Trimble’s
accumulated benefits obligation was $7.0 million and $7.3 million for fiscal
2005 and fiscal 2004 respectively.
Trimble’s
plan
assets are primarily located in our German subsidiaries. For fiscal 2005 and
fiscal 2004, the asset allocation of our total plan assets was approximately
as
follows: 89% local government bonds, 7% real estate and 4% equity securities.
Long-term asset allocation and expected return on assets assumptions are derived
from detailed annual studies conducted by Trimble’s asset management group and
actuaries. Trimble’s asset management group limits allocation to equity
securities and real estate to a maximum of 10% and 25%, respectively, with
the
remaining assets to be allocated to local government bonds. While the asset
allocation give appropriate consideration to recent performance and historical
returns, the strategy is focused primarily on conservative and sustainable
long-term returns. Based on historical returns, Trimble expects future return
on
assets to be approximately 4%.
Trimble
expects to
contribute approximately $300,000 to plan assets in fiscal year ended
2006.
The
following benefit payments, which reflect estimated future employee service,
as
appropriate, are expected to be paid:
|
|
Expected
Benefit Payments
|
(In
thousands)
|
|
|
|
|
|
2006
|
|
$222
|
2007
|
|
$265
|
2008
|
|
$310
|
2009
|
|
$368
|
2010
|
|
$869
|
2011-2015
|
|
$1,966
|
Total
|
|
$4,000
|
NOTE
16:
RELATED-PARTY TRANSACTIONS
Related-Party
Lease
Trimble
currently
leases office space in Ohio from an association of three individuals, one of
whom is an employee of the Company, under a non-cancelable operating lease
arrangement expiring in 2011. The annual rent is subject to adjustment based
on
the terms of the lease. The Consolidated Statements of Income include expenses
from this operating lease of $350,000 for fiscal years 2005, 2004, and
2003.
As
part of the
Apache Technologies, Inc. acquisition in the second quarter of fiscal 2005,
Trimble currently leases an office, manufacturing facility and equipment from
a
group of individuals, all of whom are now employees of the Company, under a
non-cancelable operating lease expiring in January 2013. The Consolidated
Statements of Income include expenses for this operating lease of approximately
$148,000 for fiscal year 2005.
These
related-party
leases were entered into at rates that were similar to comparable market
rates.
Related-Party
Notes Receivable
Trimble
has notes
receivable from employees of approximately $0.1 million as of December 30,
2005
and $0.4 million as of December 31, 2004. The notes bear interest from 4.52%
to
6.62% and have an average remaining life of 0.3 years as of December 30, 2005.
See
Note 5 to the
Notes to the Consolidated Financial Statements for additional information
regarding Trimble’s related party transactions with joint venture
partners.
NOTE
17:
STATEMENT
OF CASH FLOW DATA
|
|
December
30,
|
|
December
31,
|
|
January
2,
|
Fiscal
Years
Ended
|
|
2005
|
|
2004
|
|
2004
|
(in
thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental
disclosure of cash flow information:
|
|
|
|
|
|
|
Interest
paid
|
$
|
1,081
|
$
|
3,142
|
$
|
10,208
|
Income
taxes
paid
|
$
|
8,938
|
$
|
6,694
|
$
|
688
|
|
|
|
|
|
|
|
Significant
non-cash investing activities:
|
|
|
|
|
|
|
Issuance
of
shares related to investment in joint venture
|
$
|
-
|
$
|
-
|
$
|
5,922
|
Issuance
of
shares related to acquisition related earn-out payments
|
$
|
-
|
$
|
899
|
$
|
1,349
|
NOTE
18:
LITIGATION
From
time to time,
the Company is involved in litigation arising out of the ordinary course of
its
business. There are no known claims or pending litigation expected to have
a
material effect on the Company’s overall financial position, results of
operations, or liquidity.
NOTE
19:
SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
|
|
|
First
|
|
Second
|
|
Third
|
|
Fourth
|
|
|
Quarter
|
|
Quarter
|
|
Quarter
|
|
Quarter
|
(in
thousands, except per share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal
2005
|
|
|
|
|
|
|
|
|
|
Revenue
|
$
|
195,383
|
$
|
204,225
|
$
|
188,484
|
$
|
186,821
|
|
Gross
margin
|
|
97,807
|
|
102,407
|
|
97,292
|
|
92,299
|
|
Net
income
|
|
17,439
|
|
23,787
|
|
20,236
|
|
23,393
|
|
|
|
|
|
|
|
|
|
|
|
Basic
net
income per share
|
|
0.33
|
|
0.45
|
|
0.38
|
|
0.43
|
|
Diluted
net
income per share
|
|
0.31
|
|
0.42
|
|
0.35
|
|
0.41
|
|
|
|
|
|
|
|
|
|
|
Fiscal
2004
|
|
|
|
|
|
|
|
|
|
Revenue
|
$
|
156,510
|
$
|
179,451
|
$
|
170,164
|
$
|
162,683
|
|
Gross
margin
|
|
75,760
|
|
88,319
|
|
83,372
|
|
77,359
|
|
Net
income
|
|
12,840
|
|
20,518
|
|
17,917
|
|
16,405
|
|
|
|
|
|
|
|
|
|
|
|
Basic
net
income per share
|
|
0.25
|
|
0.40
|
|
0.35
|
|
0.32
|
|
Diluted
net
income per share
|
|
0.24
|
|
0.38
|
|
0.33
|
|
0.29
|
Significant
quarterly items for fiscal 2005 include the following: (i) in the first quarter
of 2005 a $0.2 million charge, or less than $0.01 per diluted share relating
to
facilities closure; (ii) in the third quarter of 2005 a $0.9 million charge,
or
$0.02 per diluted share relating to a write-off of debt issuance costs; (iii)
in
the fourth quarter of 2005 a $1.1 million charge, or $0.02 per diluted share
relating to in-process research and development and $9.2 million or $0.16 per
diluted share related to deferred gain on joint venture.
Significant
quarterly items for fiscal 2004 include the following: (i) in the second quarter
of 2004 a $1.2 million income, or $0.03 per diluted share relating to valuation
of investment; (ii) in the third quarter of 2004 a $0.2 million income, or
less
than $0.01 per diluted share relating to revaluation of investment; (iii) in
the
fourth quarter of 2004 a $0.4 million charge, or less than $0.01 per diluted
share relating to revaluation of investment.
Report
of
Independent Registered Public Accounting Firm
The
Board of
Directors and Shareholders of Trimble Navigation Limited
We
have audited the
accompanying consolidated balance sheets of Trimble Navigation Limited as of
December 30, 2005 and December 31, 2004, and the related consolidated statements
of income, shareholders' equity, and cash flows for each of the three years
in
the period ended December 30, 2005. Our audits also included the financial
statement schedule listed in the index at Item 15(a)(2). These financial
statements and schedule are the responsibility of the Company's management.
Our
responsibility is to express an opinion on these financial statements and
schedule based on our audits.
We
conducted our
audits in accordance with the standards of the Public Company Accounting
Oversight Board (United States). Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining,
on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used
and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In
our opinion, the
financial statements referred to above present fairly, in all material respects,
the consolidated financial position of Trimble Navigation Limited at December
30, 2005 and December 31, 2004, and the consolidated results of its operations
and its cash flows for each of the three years in the period ended December
30,
2005, in conformity with U.S. generally accepted accounting principles. Also,
in
our opinion, the related financial statement schedule, when considered in
relation to the basic consolidated financial statements taken as a whole,
presents fairly in all material respects the information set forth
therein.
We
also have
audited, in accordance with the standards of the Public Company Accounting
Oversight Board (United States), the effectiveness of Trimble Navigation
Limited’s internal control over financial reporting as of December 30, 2005,
based on criteria established in Internal Control-Integrated Framework issued
by
the Committee of Sponsoring Organizations of the Treadway Commission and our
report dated March 8, 2006,
expressed an
unqualified opinion thereon.
/s/
Ernst &
Young LLP
Palo
Alto,
California
March
8,
2006
Report
of
Independent Registered Public Accounting Firm
The
Board of
Directors and Shareholders of Trimble Navigation Limited
We
have audited
management’s assessment, included in the accompanying Management’s Report on
Internal Control Over Financial Reporting at Item 9A, that Trimble Navigation
Limited maintained effective internal control over financial reporting as of
December 30, 2005, based on criteria established in Internal Control—Integrated
Framework issued by the Committee of Sponsoring Organizations of the Treadway
Commission (the COSO criteria). Trimble Navigation Limited’s management is
responsible for maintaining effective internal control over financial reporting
and for its assessment of the effectiveness of internal control over financial
reporting. Our responsibility is to express an opinion on management’s
assessment and an opinion on the effectiveness of the company’s internal control
over financial reporting based on our audit.
We
conducted our
audit in accordance with the standards of the Public Company Accounting
Oversight Board (United States). Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether effective
internal control over financial reporting was maintained in all material
respects. Our audit included obtaining an understanding of internal control
over
financial reporting, evaluating management’s assessment, testing and evaluating
the design and operating effectiveness of internal control, and performing
such
other procedures as we considered necessary in the circumstances. We believe
that our audit provides a reasonable basis for our opinion.
A
company’s internal
control over financial reporting is a process designed to provide reasonable
assurance regarding the reliability of financial reporting and the preparation
of financial statements for external purposes in accordance with generally
accepted accounting principles. A company’s internal control over financial
reporting includes those policies and procedures that (1) pertain to the
maintenance of records that, in reasonable detail, accurately and fairly reflect
the transactions and dispositions of the assets of the company; (2) provide
reasonable assurance that transactions are recorded as necessary to permit
preparation of financial statements in accordance with generally accepted
accounting principles, and that receipts and expenditures of the company are
being made only in accordance with authorizations of management and directors
of
the company; and (3) provide reasonable assurance regarding prevention or timely
detection of unauthorized acquisition, use, or disposition of the company’s
assets that could have a material effect on the financial
statements.
Because
of its
inherent limitations, internal control over financial reporting may not prevent
or detect misstatements. Also, projections of any evaluation of effectiveness
to
future periods are subject to the risk that controls may become inadequate
because of changes in conditions, or that the degree of compliance with the
policies or procedures may deteriorate.
In
our opinion,
management’s assessment that Trimble Navigation Limited maintained effective
internal control over financial reporting as of December 30, 2005, is fairly
stated, in all material respects, based on the COSO criteria. Also, in our
opinion, Trimble Navigation Limited maintained, in all material respects,
effective internal control over financial reporting as of December 30, 2005,
based on the COSO criteria.
We
also have
audited, in accordance with the standards of the Public Company Accounting
Oversight Board (United States), the consolidated balance sheets of Trimble
Navigation Limited as of December 30, 2005 and December 31, 2004, and the
related consolidated statements of income, shareholders' equity, and cash flows
for each of the three years in the period ended December 30, 2005, of Trimble
Navigation Limited and our report dated March 8, 2006
expressed an
unqualified opinion thereon.
/s/
Ernst &
Young LLP
Palo
Alto,
California
March
8,
2006
Item
9 Changes
in
and Disagreements with Accountants on Accounting and Financial
Disclosure
None
Item
9A.
Controls and Procedures
(a)
Evaluation of Disclosure Controls and Procedures
Trimble’s
Chief
Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), after evaluating
the effectiveness of the company’s “disclosure controls and procedures” (as
defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act
of
1934 (the “Exchange Act”)), as of December 30, 2005, have concluded that as of
December 30, 2005, the company’s disclosure controls and procedures were
effective and designed to provide reasonable assurance that material information
relating to the company and its consolidated subsidiaries required to be
included in the company’s periodic filings under the Exchange Act would be made
known to them by others within those entities.
Inherent
Limitations on Effectiveness of Controls
The
company’s
management, including the CEO and CFO, does not expect that our internal control
over financial reporting will prevent or detect all error and all fraud. A
control system, no matter how well designed and operated, can provide only
reasonable, not absolute, assurance that the control system’s objectives will be
met. The design of any system of controls is based in part on certain
assumptions about the likelihood of future events, and there can be no assurance
that any design will succeed in achieving its stated goals under all potential
future conditions.
(b)
Management's Report on Internal Control over Financial Reporting
The
company’s
management is responsible for establishing and maintaining adequate internal
control over financial reporting, as such term is defined in Exchange Act Rule
13a-15(f). The company’s management, including the CEO and CFO, conducted an
evaluation of the effectiveness of its internal control over financial reporting
based on the Internal Control - Integrated Framework issued by the Committee
of
Sponsoring Organizations of the Treadway Commission. Based on the results of
this evaluation, the company’s management concluded that its internal control
over financial reporting was effective as of December 30, 2005.
Management's
assessment of the effectiveness of our internal control over financial reporting
as of December 30, 2005 has been audited by Ernst & Young LLP, an
independent registered public accounting firm, as stated in their report which
is included elsewhere herein.
(c)
Changes
in Internal Control over Financial Reporting
During
the quarter
ended December 30, 2005, there were no changes in the company’s internal control
over financial reporting that have materially affected, or are reasonably likely
to materially affect, the company’s internal control over financial
reporting.
Item
9B.
Other Information
None.
PART
III
Item
10 Directors
and Executive Officers of the Registrant
The
information
required by this item, insofar as it relates to Trimble's directors, will be
contained under the captions "Election of Directors" and "Section 16(a)
Beneficial Ownership Reporting Compliance" in the Proxy Statement and is
incorporated herein by reference. The information required by this item relating
to executive officers is set forth above in Item 1 Business Overview under
the
caption “Executive Officers.”
Code
of
Ethics
The
Company’s
Business Ethics and Conduct Policy applies to, among others, to the Company’s
Chief Executive Officer, Chief Financial Officer, Corporate Controller, and
other finance organization employees. The Business Ethics and Conduct Policy
is
available on the Company’s website at www.trimble.com under the heading
“Corporate Governance and Policies” on the Investor Information page of our
website. A copy will be provided, without charge, to any shareholder who
requests one by written request addressed to General Counsel, Trimble Navigation
Limited, 935 Stewart Drive, Sunnyvale, CA 94085.
If
any substantive
amendments to the Business Ethics and Conduct Policy are made or any waivers
are
granted, including any implicit waiver, from a provision of the Business Ethics
and Conduct Policy, to its Chief Executive Officer, Chief Financial Officer
or
Corporate Controller, the Company will disclose the nature of such amendment
or
waiver on the Company’s website at www.trimble.com or in a report on Form
8-K.
Item
11 Executive
Compensation
The
information
required by this item will be contained in the Proxy Statement under the caption
"Executive Compensation" and is incorporated herein by reference.
Item
12 Security
Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters
The
information
required by this item will be contained in the Proxy Statement under the caption
"Security Ownership of Certain Beneficial Owners and Management Related
Stockholder Matters" and is incorporated herein by reference.
Item
13 Certain
Relationships and Related Transactions
The
information
required by this item will be contained in the Proxy Statement under the caption
"Certain Relationships and Related Transactions" and is incorporated herein
by
reference.
Item
14 Principal
Accountant Fees and Services
The
information
required by this item will be contained in the Proxy Statement under the caption
"Principal Accountant Fees and Services" and is incorporated herein by
reference.
PART
IV
Item
15.
Exhibits,
Financial Statement Schedules.
(a) |
(1)
Financial
Statements
|
The
following
consolidated financial statements required by this item are included in Part
II
Item 8 hereof under the caption "Financial Statements and Supplementary Data."
|
Page
in this
Annual
Report
on
Form
10-K
|
Consolidated
Balance Sheets at December 30, 2005 and December 31, 2004
|
43
|
|
|
Consolidated
Statements of Income for each of the three fiscal years
|
|
in
the period
ended December 30, 2005
|
44
|
|
|
Consolidated
Statement of Shareholders' Equity for each of the three fiscal years
|
|
in
the period
ended December 30, 2005
|
45
|
|
|
Consolidated
Statements of Cash Flows for each of the three fiscal years
|
|
in
the period
ended December 30, 2005
|
46
|
|
|
Notes
to
Consolidated Financial Statements
|
47
|
|
|
Reports
of
Independent Registered Public Accounting Firm
|
72
|
(2) Financial
Statement Schedules
The
following
financial statement schedule is filed as part of this report:
|
Page
in this
Annual
Report
on
Form 10-K
|
Schedule
II -
Valuation and Qualifying Accounts
|
S-1
|
All
other schedules
have been omitted as they are either not required or not applicable, or the
required information is included in the consolidated financial statements or
the
notes thereto.
(3) Exhibits
Exhibit
Number
3.1
|
Restated
Articles of Incorporation of the Company filed June 25, 1986.
(5)
|
3.2
|
Certificate
of
Amendment of Articles of Incorporation of the Company filed October
6,
1988. (6)
|
3.3
|
Certificate
of
Amendment of Articles of Incorporation of the Company filed July
18, 1990.
(7)
|
3.4
|
Certificate
of
Determination of the Company filed February 19, 1999.
(8)
|
3.5
|
Certificate
of
Amendment of Articles of Incorporation of the Company filed May 29,
2003.
(17)
|
3.6
|
Certificate
of
Amendment of Articles of Incorporation of the Company filed March
4, 2004.
(21)
|
3.8
|
Bylaws
of the
Company (amended and restated through January 22, 2004).
(20)
|
4.1
|
Specimen
copy
of certificate for shares of Common Stock of the Company.
(1)
|
4.2
|
Preferred
Shares Rights Agreement dated as of February 18, 1999.
(4)
|
4.3
|
Agreement
of
Substitution and Amendment of Preferred Shares Rights Agreement dated
September 10, 2004. (22)
|
4.4
|
First
Amended
and Restated Stock and Warrant Purchase Agreement between and among
the
Company and the investors thereto dated January 14, 2002.
(13)
|
4.5
|
Form
of
Warrant to Purchase Shares of Common Stock dated January 14, 2002.
(14)
|
4.6
|
Form
of
Warrant dated April 12, 2002. (15)
|
10.1+
|
Form
of
Indemnification Agreement between the Company and its officers and
directors. (28)
|
10.
2+
|
1990
Director
Stock Option Plan, as amended, and form of Outside Director Non-statutory
Stock Option Agreement. (3)
|
10.3+
|
1992
Management Discount Stock Option and form of Non-statutory Stock
Option
Agreement. (2)
|
10.4+
|
1993
Stock
Option Plan, as amended October 24, 2003. (11)
|
10.5+
|
Trimble
Navigation 1988 Employee Stock Purchase Plan, as amended May 19,
2004.
(28)
|
10.6+
|
Employment
Agreement between the Company and Steven W. Berglund dated March
17, 1999.
(9)
|
10.7+
|
Trimble
Navigation Limited Deferred Compensation Plan effective December
30, 2004,
as amended May 19, 2005. (10)
|
10.8+
|
Australian
Addendum to the Trimble Navigation 1988 Employee Stock Purchase Plan.
(12)
|
10.9+
|
2002
Stock
Plan (as amended and restated January 20, 2005), including forms
of option
agreements. (19)
|
10.10
|
Credit
Agreement dated July 28, 2005 among Trimble Navigation Limited, The
Bank
of Nova Scotia (Administrative Agent, Issuing Bank and Swing Line
Bank),
The Bank of New York and Harris Nesbitt (Co-Syndication Agents),
Bank of
America, N.A. and Wells Fargo Bank N.A. (Co-Documentation Agents),
The
Bank of Nova Scotia and BNY Capital Markets, Inc. (Joint Lead Arrangers),
and The Bank of Nova Scotia (Sole Book Runner). (16)
|
10.11+
|
Employment
Agreement between the Company and Rajat Bahri dated December 6, 2004.
(23)
|
10.12+
|
Board
of
Directors Compensation Policy effective January 1, 2004.
(24)
|
10.13+
|
Form
of Change
in Control agreement between the Company and certain Company officers.
(18)
|
10.14+
|
Letter
of
Assignment between the Company and Alan Townsend dated November 12,
2003.
(25)
|
10.15+
|
Supplemental
agreement to Letter of Assignment between the Company and Alan Townsend
dated January 19, 2004. (26)
|
10.16+
|
Trimble
Navigation Limited 2006 Management Incentive Plan Description.
(27)
|
10.17
|
Lease
dated
May 11, 2005 between CarrAmerica Realty Operating Partnership, L.P.
and
the Company. (28)
|
21.1
|
Subsidiaries
of the Company. (28)
|
23.1
|
Consent
of
Ernst & Young LLP, independent registered public accounting firm.
(28)
|
24.1
|
Power
of
Attorney included on signature page herein.
|
31.1
|
Certification
of CEO pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
(28)
|
31.2
|
Certification
of CFO pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
(28)
|
32.1
|
Certification
of CEO pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
(28)
|
32.2
|
Certification
of CFO pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
(28)
|
|
|
+
|
Management
contract or compensatory plan or arrangement required to be filed
as an
exhibit to this Annual Report on Form 10-K pursuant to Item 14(c)
thereof.
|
(1)
|
Incorporated
by reference to exhibit number 4.1 to the Company's Registration
Statement
on Form S-1, as amended (File No. 33-35333), which became effective
July
19, 1990.
|
(2)
|
Incorporated
by reference exhibit number 10.46 to the Company's Registration Statement
on Form S-1 (File No. 33-45990), which was filed February 25,
1992.
|
(3)
|
Incorporated
by reference to exhibit number 10.32 to the Company's Annual Report
on
Form 10-K for the fiscal year ended December 31, 1993.
|
(4)
|
Incorporated
by reference to exhibit number 1 to the Company's Registration Statement
on Form 8-A, which was filed on February 18, 1999.
|
(5)
|
Incorporated
by reference to exhibit number 3.1 to the Company's Annual Report
on Form
10-K for the fiscal year ended January 1, 1999.
|
(6)
|
Incorporated
by reference to exhibit number 3.2 to the Company's Annual Report
on Form
10-K for the fiscal year ended January 1, 1999.
|
(7)
|
Incorporated
by reference to exhibit number 3.3 to the Company's Annual Report
on Form
10-K for the fiscal year ended January 1, 1999.
|
(8)
|
Incorporated
by reference to exhibit number 3.4 to the Company's Annual Report
on Form
10-K for the fiscal year ended January 1, 1999.
|
(9)
|
Incorporated
by reference to exhibit number 10.67 to the Company's Annual Report
on
Form 10-K for the fiscal year ended January 1, 1999.
|
(10)
|
Incorporated
by reference to exhibit number 10.1 to the Company's Current Report
on
Form 8-K filed on May 25, 2005.
|
(11)
|
Incorporated
by reference to exhibit number 10.3 to the Company's Quarterly Report
on
Form 10-Q for the quarter ended October 3, 2003.
|
(12)
|
Incorporated
by reference to exhibit number 10.77 to the Company's Annual Report
on
Form 10-K for the fiscal year ended December 29, 2000.
|
(13)
|
Incorporated
by reference to exhibit number 4.1 to the Company's Current Report
on Form
8-K filed on January 16, 2002.
|
(14)
|
Incorporated
by reference to exhibit number 4.2 to the Company's Current Report
on Form
8-K filed on January 16, 2002.
|
(15)
|
Incorporated
by reference to exhibit number 4.1 to the Company’s Registration Statement
on Form S-3 filed on April 19, 2002.
|
(16)
|
Incorporated
by reference to exhibit number 10.1 to the Company’s Quarterly Report on
Form 10-Q for the quarter ended September 30, 2005.
|
(17)
|
Incorporated
by reference to exhibit number 3.5 to the Company’s Quarterly Report on
Form 10-Q for the quarter ended July 4, 2003.
|
(18)
|
Incorporated
by reference to exhibit number 10.15 to the Company’s Annual Report on
Form 10-K for the year ended December 31, 2004.
|
(19)
|
Incorporated
by reference to exhibit number 10.2 to the Company’s Current Report on
Form 8-K filed on May 24, 2005.
|
(20)
|
Incorporated
by reference to exhibit number 3.8 to the Company’s Annual Report on Form
10-K for the year ended January 2, 2004.
|
(21)
|
Incorporated
by reference to exhibit number 3.6 to the Company’s Quarterly Report on
Form 10-Q for the quarter ended April 2, 2004.
|
(22)
|
Incorporated
by reference to exhibit number 4.3 to the Company’s Annual Report on Form
10-K for the year ended December 31, 2004.
|
(23)
|
Incorporated
by reference to exhibit number 10.13 to the Company’s Annual Report on
Form 10-K for the year ended December 31, 2004.
|
(24)
|
Incorporated
by reference to exhibit number 10.14 to the Company’s Annual Report on
Form 10-K for the year ended December 31, 2004.
|
(25)
|
Incorporated
by reference to exhibit number 10.16 to the Company’s Annual Report on
Form 10-K for the year ended December 31, 2004.
|
(26)
|
Incorporated
by reference to exhibit number 10.17 to the Company’s Annual Report on
Form 10-K for the year ended December 31, 2004.
|
(27)
|
Incorporated
by reference to exhibit number 10.1 to the Company’s Current Report on
Form 8-K filed on January 24, 2006.
|
(28)
|
Filed
herewith.
|
EXHIBIT
LIST
Exhibit
Number
3.1
|
Restated
Articles of Incorporation of the Company filed June 25, 1986.
(5)
|
3.2
|
Certificate
of
Amendment of Articles of Incorporation of the Company filed October
6,
1988. (6)
|
3.3
|
Certificate
of
Amendment of Articles of Incorporation of the Company filed July
18, 1990.
(7)
|
3.4
|
Certificate
of
Determination of the Company filed February 19, 1999.
(8)
|
3.5
|
Certificate
of
Amendment of Articles of Incorporation of the Company filed May 29,
2003.
(17)
|
3.6
|
Certificate
of
Amendment of Articles of Incorporation of the Company filed March
4, 2004.
(21)
|
3.8
|
Bylaws
of the
Company (amended and restated through January 22, 2004).
(20)
|
4.1
|
Specimen
copy
of certificate for shares of Common Stock of the Company.
(1)
|
4.2
|
Preferred
Shares Rights Agreement dated as of February 18, 1999.
(4)
|
4.3
|
Agreement
of
Substitution and Amendment of Preferred Shares Rights Agreement dated
September 10, 2004. (22)
|
4.4
|
First
Amended
and Restated Stock and Warrant Purchase Agreement between and among
the
Company and the investors thereto dated January 14, 2002.
(13)
|
4.5
|
Form
of
Warrant to Purchase Shares of Common Stock dated January 14, 2002.
(14)
|
4.6
|
Form
of
Warrant dated April 12, 2002. (15)
|
10.1+
|
Form
of
Indemnification Agreement between the Company and its officers and
directors. (28)
|
10.
2+
|
1990
Director
Stock Option Plan, as amended, and form of Outside Director Non-statutory
Stock Option Agreement. (3)
|
10.3+
|
1992
Management Discount Stock Option and form of Non-statutory Stock
Option
Agreement. (2)
|
10.4+
|
1993
Stock
Option Plan, as amended October 24, 2003. (11)
|
10.5+
|
Trimble
Navigation 1988 Employee Stock Purchase Plan, as amended May 19,
2004.
(28)
|
10.6+
|
Employment
Agreement between the Company and Steven W. Berglund dated March
17, 1999.
(9)
|
10.7+
|
Trimble
Navigation Limited Deferred Compensation Plan effective December
30, 2004,
as amended May 19, 2005. (10)
|
10.8+
|
Australian
Addendum to the Trimble Navigation 1988 Employee Stock Purchase Plan.
(12)
|
10.9+
|
2002
Stock
Plan (as amended and restated January 20, 2005), including forms
of option
agreements. (19)
|
10.10
|
Credit
Agreement dated July 28, 2005 among Trimble Navigation Limited, The
Bank
of Nova Scotia (Administrative Agent, Issuing Bank and Swing Line
Bank),
The Bank of New York and Harris Nesbitt (Co-Syndication Agents),
Bank of
America, N.A. and Wells Fargo Bank N.A. (Co-Documentation Agents),
The
Bank of Nova Scotia and BNY Capital Markets, Inc. (Joint Lead Arrangers),
and The Bank of Nova Scotia (Sole Book Runner). (16)
|
10.11+
|
Employment
Agreement between the Company and Rajat Bahri dated December 6, 2004.
(23)
|
10.12+
|
Board
of
Directors Compensation Policy effective January 1, 2004.
(24)
|
10.13+
|
Form
of Change
in Control agreement between the Company and certain Company officers.
(18)
|
10.14+
|
Letter
of
Assignment between the Company and Alan Townsend dated November 12,
2003.
(25)
|
10.15+
|
Supplemental
agreement to Letter of Assignment between the Company and Alan Townsend
dated January 19, 2004. (26)
|
10.16+
|
Trimble
Navigation Limited 2006 Management Incentive Plan Description.
(27)
|
10.17
|
Lease
dated
May 11, 2005 between CarrAmerica Realty Operating Partnership, L.P.
and
the Company. (28)
|
21.1
|
Subsidiaries
of the Company. (28)
|
23.1
|
Consent
of
Ernst & Young LLP, independent registered public accounting firm.
(28)
|
24.1
|
Power
of
Attorney included on signature page herein.
|
31.1
|
Certification
of CEO pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
(28)
|
31.2
|
Certification
of CFO pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
(28)
|
32.1
|
Certification
of CEO pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
(28)
|
32.2
|
Certification
of CFO pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
(28)
|
|
|
+
|
Management
contract or compensatory plan or arrangement required to be filed
as an
exhibit to this Annual Report on Form 10-K pursuant to Item 14(c)
thereof.
|
(1)
|
Incorporated
by reference to exhibit number 4.1 to the Company's Registration
Statement
on Form S-1, as amended (File No. 33-35333), which became effective
July
19, 1990.
|
(2)
|
Incorporated
by reference exhibit number 10.46 to the Company's Registration Statement
on Form S-1 (File No. 33-45990), which was filed February 25,
1992.
|
(3)
|
Incorporated
by reference to exhibit number 10.32 to the Company's Annual Report
on
Form 10-K for the fiscal year ended December 31, 1993.
|
(4)
|
Incorporated
by reference to exhibit number 1 to the Company's Registration Statement
on Form 8-A, which was filed on February 18, 1999.
|
(5)
|
Incorporated
by reference to exhibit number 3.1 to the Company's Annual Report
on Form
10-K for the fiscal year ended January 1, 1999.
|
(6)
|
Incorporated
by reference to exhibit number 3.2 to the Company's Annual Report
on Form
10-K for the fiscal year ended January 1, 1999.
|
(7)
|
Incorporated
by reference to exhibit number 3.3 to the Company's Annual Report
on Form
10-K for the fiscal year ended January 1, 1999.
|
(8)
|
Incorporated
by reference to exhibit number 3.4 to the Company's Annual Report
on Form
10-K for the fiscal year ended January 1, 1999.
|
(9)
|
Incorporated
by reference to exhibit number 10.67 to the Company's Annual Report
on
Form 10-K for the fiscal year ended January 1, 1999.
|
(10)
|
Incorporated
by reference to exhibit number 10.1 to the Company's Current Report
on
Form 8-K filed on May 25, 2005.
|
(11)
|
Incorporated
by reference to exhibit number 10.3 to the Company's Quarterly Report
on
Form 10-Q for the quarter ended October 3, 2003.
|
(12)
|
Incorporated
by reference to exhibit number 10.77 to the Company's Annual Report
on
Form 10-K for the fiscal year ended December 29, 2000.
|
(13)
|
Incorporated
by reference to exhibit number 4.1 to the Company's Current Report
on Form
8-K filed on January 16, 2002.
|
(14)
|
Incorporated
by reference to exhibit number 4.2 to the Company's Current Report
on Form
8-K filed on January 16, 2002.
|
(15)
|
Incorporated
by reference to exhibit number 4.1 to the Company’s Registration Statement
on Form S-3 filed on April 19, 2002.
|
(16)
|
Incorporated
by reference to exhibit number 10.1 to the Company’s Quarterly Report on
Form 10-Q for the quarter ended September 30, 2005.
|
(17)
|
Incorporated
by reference to exhibit number 3.5 to the Company’s Quarterly Report on
Form 10-Q for the quarter ended July 4, 2003.
|
(18)
|
Incorporated
by reference to exhibit number 10.15 to the Company’s Annual Report on
Form 10-K for the year ended December 31, 2004.
|
(19)
|
Incorporated
by reference to exhibit number 10.2 to the Company’s Current Report on
Form 8-K filed on May 24, 2005.
|
(20)
|
Incorporated
by reference to exhibit number 3.8 to the Company’s Annual Report on Form
10-K for the year ended January 2, 2004.
|
(21)
|
Incorporated
by reference to exhibit number 3.6 to the Company’s Quarterly Report on
Form 10-Q for the quarter ended April 2, 2004.
|
(22)
|
Incorporated
by reference to exhibit number 4.3 to the Company’s Annual Report on Form
10-K for the year ended December 31, 2004.
|
(23)
|
Incorporated
by reference to exhibit number 10.13 to the Company’s Annual Report on
Form 10-K for the year ended December 31, 2004.
|
(24)
|
Incorporated
by reference to exhibit number 10.14 to the Company’s Annual Report on
Form 10-K for the year ended December 31, 2004.
|
(25)
|
Incorporated
by reference to exhibit number 10.16 to the Company’s Annual Report on
Form 10-K for the year ended December 31, 2004.
|
(26)
|
Incorporated
by reference to exhibit number 10.17 to the Company’s Annual Report on
Form 10-K for the year ended December 31, 2004.
|
(27)
|
Incorporated
by reference to exhibit number 10.1 to the Company’s Current Report on
Form 8-K filed on January 24, 2006.
|
(28)
|
Filed
herewith.
|
SIGNATURES
Pursuant
to the
requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934,
the
registrant has duly caused this Report on Form 10-K to be signed on its behalf
by the undersigned, thereunto duly authorized.
TRIMBLE
NAVIGATION
LIMITED
By:
/s/ Steven W.
Berglund
Steven
W. Berglund,
President
and Chief
Executive Officer
March
10,
2006
POWER
OF
ATTORNEY
Know
all persons by
these presents, that each person whose signature appears below constitutes
and
appoints Steven W. Berglund as his attorney-in-fact, with the power of
substitution, for him in any and all capacities, to sign any amendments to
this
Report on Form 10-K, and to file the same, with exhibits thereto and other
documents in connection therewith, with the Securities and Exchange Commission,
hereby ratifying and confirming all that said attorney-in-fact, or his
substitute or substitutes, may do or cause to be done by virtue hereof.
Pursuant
to the
requirements of the Securities Exchange Act of 1934, this Annual Report on
Form
10-K has been signed below by the following persons on behalf of the registrant
and in the capacities and on the dates indicated:
Signature
|
Capacity
in
which Signed
|
|
|
|
|
|
|
|
/s/
Steven W.
Berglund
|
President,
Chief Executive Officer, Director
|
March
10,
2006
|
Steven
W.
Berglund
|
|
|
|
|
|
|
|
|
/s/
Rajat
Bahri
|
Chief
Financial Officer and Assistant
|
March
10,
2006
|
Rajat
Bahri
|
Secretary
(Principal Financial Officer)
|
|
|
|
|
|
|
|
/s/
Anup V.
Singh
|
Corporate
Controller
|
March
10,
2006
|
Anup
V. Singh
|
(Principal
Accounting Officer)
|
|
|
|
|
|
|
|
/s/
Robert S.
Cooper
|
Director
|
March
9,
2006
|
Robert
S.
Cooper
|
|
|
|
|
|
|
|
|
/s/
John B.
Goodrich
|
Director
|
March
7,
2006
|
John
B.
Goodrich
|
|
|
|
|
|
|
|
|
/s/
William
Hart
|
Director
|
March
6,
2006
|
William
Hart
|
|
|
|
|
|
|
|
|
/s/
Ulf J.
Johansson
|
Director
|
March
7,
2006
|
Ulf
J.
Johansson
|
|
|
|
|
|
|
|
|
|
|
|
/s/
Bradford
W. Parkinson
|
Director
|
March
6,
2006
|
Bradford
W.
Parkinson
|
|
|
|
|
|
|
|
|
/s/
Nickolas
W. Vande Steeg
|
Director
|
March
6,
2006
|
Nickolas
W.
Vande Steeg
|
|
|
SCHEDULE
II
TRIMBLE
NAVIGATION LIMITED
VALUATION
AND QUALIFYING ACCOUNTS
(IN
THOUSANDS OF DOLLARS)
Allowance
for
doubtful accounts:
|
December
30,
2005
|
December
31,
2004
|
January
2,
2004
|
Balance
at
beginning of period
|
$
8,952
|
$
9,953
|
$
9,900
|
Acquired
allowance
|
237
|
116
|
752
|
Bad
debt
expense
|
502
|
1,210
|
(32)
|
Write-offs,
net of recoveries
|
(3,459)
|
(2,327)
|
(667)
|
Balance
at end
of period
|
$
5,230
|
$
8,952
|
$
9,953
|
|
|
|
|
Inventory
allowance:
|
|
|
|
Balance
at
beginning of period
|
$
26,217
|
$
25,885
|
$
25,150
|
Acquired
allowance
|
357
|
591
|
1,292
|
Additions
to
allowance
|
5,612
|
3,765
|
5,762
|
Write-offs,
net of recoveries
|
(8,948)
|
(4,024)
|
(6,319)
|
Balance
at end
of period
|
$
23,238
|
$
26,217
|
$
25,885
|
|
|
|
|
Sales
return reserve:
|
|
|
|
Balance
at
beginning of period
|
$
2,210
|
$
3,252
|
$
2,650
|
Acquired
allowance
|
21
|
0
|
126
|
Additions
(Reductions) to allowance
|
(383)
|
(809)
|
2809
|
Write-offs,
net of recoveries
|
(348)
|
(233)
|
(2,333)
|
Balance
at end
of period
|
$
1,500
|
$
2,210
|
$
3,252
|
|
|
|
|