2002 Annual Report
THIS IS TRIMBLE
Trimble is a world leader in providing advanced, position-centric products, services and solutions to industrial,
commercial and professional customers. Our products and services enable our users to achieve greater productivity,
convenience and safety and, in many cases, to do things they couldn’t do before.
OUR MARKETS
Market/Segments % of Revenue
Representative Products
Typical Customers
Engineering & Construction
66
Surveying
Machine Control
Infrastructure
Construction Instruments
• GPS, optical, robotic and mechanical total stations • Surveyors
• Digital levels and theodolites
• Data collectors and field computers
• Field and office software
• Data communication solutions
• Machine guidance systems
• Automatic blade control systems
• Data communication solutions
• GPS reference networks
• Laser and optical positioning and alignment tools
• Civil engineers
• Construction contractors
• Transportation agencies
• Earthmoving contractors
• Construction contractors
• Transportation agencies
• Governmental agencies
• General construction contractors
• Utility contractors
• Wall and ceiling contractors
Field Solutions
Mapping & GIS
14
• GPS field data collectors
• Field and office software
Agriculture Vehicle Guidance
• Manual and automated steering systems for
Agriculture Water Management
• Laser- and GPS-based grade control systems
tractors and other farm machines
for irrigation and draining
• Utility companies
• Natural resource agencies
• Local, state and federal government agencies
• Farmers
• Farmers
• Agricultural contractors
Component Technologies
13
OEM (Silicon Integration)
OEM (Modules)
Timing
Mobile Solutions
Fleet Management
2
• Stand-alone GPS chipsets
• Embedded silicon and companion firmware
• Modules supplying position, velocity, & time
• Measurement platform modules supplying
raw GPS measurement data
• CDMA base station sync modules
• Time and frequency boards and instruments
• Automobile tier-one suppliers
• Portable appliance manufacturers
• Automobile tier-one suppliers
• Asset management integrators
• Security device suppliers
• Wireless infrastructure providers
• Wireless location solution providers
• Mobile communication devices combining wireless • Trucking, ready mix cement, refuse, and
and GPS
other local fleet operators
• Internet-delivered fleet management application • Construction contractors
services
• Government fleet operators
Security
• Mobile communication devices combining wireless • Commercial vehicle and equipment
and GPS
owners
Mobile Workforce Management • Internet-delivered wireless workforce productivity • Sales, service, and delivery businesses
application services
Portfolio Business
Tripod Data Systems
5
Military
• Mobile computing hardware
• Field and office application software
• GPS receivers for military operations—
surface, airborne and the digital battlefield
• Military time and frequency boards
• Surveyors
• Utility companies
• Natural resource agencies
• U.S. Department of Defense
• Allied ministries of defense
• Defense contractors
FINANCIAL HIGHLIGHTS
Fiscal Year Ended
(in thousands except per-share amounts)
2002
2001
2000
Operating Data:
Net revenue
EBITDA
Net income (loss)
from continuing operations
Diluted net income (loss) per share
from continuing operations
Balance Sheet Data:
Cash, cash equivalents,
and short-term investments
Working capital
Total assets
Non-current portion of long-term debt
and other non-current liabilities
Shareholders’ equity
Adjusted Operating Data: (1)
Adjusted net income
from continuing operations
Adjusted net income per share
from continuing operations
$ 466,602
$ 46,025
$ 475,292
$ 41,038
$369,798
$ 49,196
$ 10,324
$ (23,492)
$ 14,185
$
0.36
$ (0.95)
$ 0.55
$ 28,679
$ 65,044
$ 441,656
$ 114,051
$ 201,351
$ 31,078
$ 19,304
$ 419,395
$ 131,759
$ 138,489
$ 40,876
$(10,439)
$488,628
$143,553
$ 134,943
$ 21,011
$ 9,475
$ 31,135
$
0.72
$ 0.38
$
1.20
60
40
20
0
475.3
466.6
369.8
500
400
300
200
100
0
00 01 02
Revenue
In millions except for earnings per share
49.2
46.0
41.0
1.20
0.72
0.38
1.20
.80
.40
0
00 01 02
00 01 02
EBITDA
Adjusted EPS (1)
(1)
Adjusted Operating Data represent net income (loss) from continuing operations excluding infrequent and aquisition-related charges.
This document may contain forward-looking statements based on current expectations that involve a number of risks and uncertainties. Other potential
risks and uncertainties that could cause actual results to differ materially are included in the SEC filings, such as Form 10-K and Form 10-Q and Form 8-K,
for Trimble.
LETTER TO SHAREHOLDERS AND EMPLOYEES
Trimble’s challenge in 2002 was to
improve in an uncertain environment. We
responded to the immediate circumstances
and continued to build the foundations for
long-term growth and profitability.
Looking Back
In our 2001 letter, we defined the factors
Operating income in the second half,
before the effects of intangible amortization,
was the highest for any six-month period in
Trimble’s history.
that would determine success in 2002. Let me begin by reviewing our performance against those factors.
“We will continue to confront economic realities.” Recognizing the economic uncertainties during 2002, we
continued to emphasize tight cost control and to strengthen our balance sheet. Initiatives during the year
included the closure or sale of a number of sales outlets, the integration of our Atlanta development center
into our Westminster operation, and the start of component production in China. As a result of these and
other actions, operating earnings improved 143.9% during the year despite
a 1.8% decline in revenue. This cost discipline should serve us well when revenues recover. The upside
leverage that our lower cost structure provides should enable us to grow earnings faster than revenues.
We reduced debt to $138.5 million, down $52 million from the year before. This resulted in an
improvement in the debt-to-equity ratio (total liability/total equity) from 2.02 at December 28, 2001
to 1.19 at January 3, 2003. This not only reduces our interest load but also creates additional freedom
in pursuing potential opportunities.
“Mobile Solutions should begin to show the results of our investments.” We were not as successful in demon-
strating financial progression in our Mobile Solutions segment as soon as we had anticipated. As a result, we
reduced costs in this segment at the beginning of the fourth quarter to bring costs and revenues into closer
alignment. However, during the second half of the year, we began to see meaningful growth in our key
metrics in this business. For example, the subscriber base, the ultimate determinant of success in a service
business, grew 113% in the second half of the year. In addition, the ratio of revenues coming from new,
service-related sales compared to legacy products increased significantly.
We established an important new alliance with McNeilus Companies Inc., the leading supplier of ready-
mix trucks in the U.S. This relationship opens the ready-mix concrete fleet management market to us. In
addition, we introduced our GPRS-based product offering. This hardware platform, with the accompanying
service, provides us with a highly competitive tool in bringing cost-effective fleet management solutions to a
number of industries.
“Engineering & Construction should demonstrate the leader’s advantage by increasing market share and
penetrating under-served market segments.” Trimble is the leading provider of positioning systems for the
construction industry. Although construction had a difficult year in many parts of the world, Trimble
increased revenues in its Engineering and Construction segment and improved its market position. Our
strategy continues to be centered on the expectations that users will increasingly demand solutions that
2
provide useful information and deliver greater productivity and that the industry will continue to consolidate
around fewer, more-capable competitors that can provide the complete information solution.
This segment ended the year strongly. The GPS survey instruments product line achieved record
quarterly sales in the fourth quarter. In addition, construction machine control sales were up over 20%
for the year. To accelerate the development of the construction machine control market, we established
a 50/50 joint venture with Caterpillar Inc. The joint venture will develop on-board, machine control
technology for the construction heavy equipment of the future. We are pleased with the strong market
demand for machine productivity and the early results from the joint venture.
“Field Solutions should reflect
improved profitability as new agricul-
tural products offset the agricultural
recession.” We accomplished our
goal of increasing both revenues
and profits in our agricultural
business. Agricultural revenues
for the year grew strongly over
2001 and profitability improved as a result. However, Geographic Information System (GIS) prod-
ucts encountered lower-than-anticipated revenues as a result of the slowdown in U.S. federal and
state governmental spending.
Many of our product solutions are recession-
resistant because they offer significant productivity
savings to professional users and enable users to
reduce costs in tough times.
In agriculture, we sharpened our focus on the vehicle guidance and water management applications and
reduced our emphasis on the agricultural data management application. The Ag GPS® Autopilot steering
system performed well in the market and delivered a considerable year-over-year increase in revenues.
In our GIS business, we announced a major new product platform— the GeoExplorer® CE Series.
This platform is the introductory offering in a new class of GPS handhelds for the professional field
worker and is intended to pioneer a new concept called “Mobile GIS,” which will link data that is col-
lected or used in the field with the back office. We are fortunate to partner with ESRI, the world’s lead-
ing supplier of GIS software, to jointly develop the Mobile GIS concept.
“Component Technologies should demonstrate progress towards providing usable GPS technology for the
wireless market.” From a depressed level of activity in the first half of the year, our components business
achieved all-time-high quarterly revenues in the fourth quarter. We released a new product, the Lassen™
SQ, a small, power-efficient, GPS module that is suitable for inclusion in medium-volume, wireless
devices. We also announced a number of new relationships with wireless-centered companies that will
enable us to participate in the marriage of GPS and portable wireless devices. In addition, we are benefit-
ing by the development of wireless infrastructure around the world using our GPS-based timing products
to synchronize wireless networks.
“We should show progress towards operational excellence.” Trimble has always provided the marketplace
with compelling technology. During 2002 we continued to build the foundations for sustained,
long-term improvements in our operations. We began operations in our regional fulfillment centers in
3
Ohio and the Netherlands. This represents the first phase of a program to improve delivery performance,
lower costs and make Trimble easier to work with. We also began manufacturing our high-volume compo-
nents in China and have already experienced lower costs.
We continue to emphasize the smooth introduction of Trimble technology into the marketplace. Trimble’s
Product Development Program, rolled out across the entire company during 2002, ensures that each new
product is rigorously subjected to the discipline to improve time to market, consistency with market and
financial needs, manufacturability and product costs.
Other 2002 Observations
The first and second halves of the year were two different experiences for us. First-half revenues were
down almost 10% from the same period in the prior year, while second-half revenues were up about 7%.
Operating income in the second half, before the effects of intangible amortization, was the highest for any
six-month period in Trimble’s history. This provides us with significant momentum as we enter 2003.
Our investment in the Mobile Solutions segment is masking notable operational progress in the baseline rep-
resented by all the other businesses. Although these baseline businesses saw a revenue drop of less than 1% for
all of 2002, their operating profits, before restructuring costs and intangible amortization, grew by 29%.
Operating margins for these businesses grew to approximately 12% of sales, which represents a high point in
Trimble’s recent history. Progression in Mobile Solutions’ performance and a continued decline in interest cost
should enable us to reflect this underlying operational improvement in our reported earnings per share.
Looking Ahead
Our goals remain consistent. Our key success criteria in 2003 include the following elements, many
of which are a continuation of the themes in 2002:
• Grow revenues in spite of the environment.
We continue to anticipate uncertainty in both the general economic outlook and the international
environment. This uncertainty disrupts normal purchasing behavior within our customer group and makes
accurate forecasting difficult. Nonetheless, we believe 2003 will continue the trend of progression. Many of
our product solutions are recession-resistant because they offer significant productivity savings to professional
users and enable users to reduce costs in tough times. We also believe unexplored market segments remain
available to us. We are confident in our competitive position and expect it to provide us with a platform
for further growth.
• Manage the Mobile Solutions business to demonstrate improved financial results.
We saw early signs of market success in this business in late 2002. In 2003, we need to translate this early
momentum into both strong market position and convincing financial progression, leading to profitability
and increased shareholder value.
• Extend our presence in emerging markets—both new geographies and new market categories.
We expect to provide new product solutions to our existing users and extend the use of our existing
products to new user groups. In 2002, we extended our geographical reach by establishing operations
in Korea and increasing our presence in China. In 2003, we expect to bring our technology to other
4
emerging markets. We also expect to
create extended product categories,
particulary those that leverage
the convergence of positioning, infor-
mation, and wireless communication.
• Continue to improve operational
performance and add value for our
customers.
We expect to demonstrate
Trimble is the leading provider of positioning
systems for the construction industry. Although
construction had a difficult year in many parts
of the world, Trimble increased revenues in its
Engineering and Construction segment and
improved its market position.
advances in product quality, delivery
performance, and support. These
changes will directly benefit our
customers and enable their success. The multiphase programs that we have instituted will continue.
• Build our organizational capabilities.
Ultimate success for Trimble and its shareholders depends upon the ability of Trimble employees
to establish and execute strong strategies while dealing with changing circumstances. We instituted
important organizational changes over the last few years and have significantly “deepened our bench.”
The management task will be to develop this organizational raw material to achieve our aggressive
agenda of the next few years.
Trimble progressed in spite of the environmental challenges in 2002. Once again, Trimble employees
responded with commitment to our goals, intelligence and a desire to succeed. I thank them all.
Steven W. Berglund
President and Chief Executive Officer
5
IMPROVING CUSTOMERS’ POSITIONS
In 2002, customers around the world improved their businesses with Trimble solutions. From control
systems for huge construction earth-moving machines to tiny GPS receivers for in-car navigation systems,
Trimble products and services are improving the ways people work.
AUSTRALIA’S PORT OF BRISBANE MOTORWAY
Phase One of Australia’s $100+ million Port of Brisbane Motorway
construction project is well ahead of schedule. Trimble is there.
For this major project, Leighton Contractors, Australia’s largest civil
contractor, is using Trimble GPS and robotic surveying equipment as well
as Trimble SiteVision® and BladePro® 3D machine control systems for
earth moving operations such as bulk earthworks, laying road base and,
for the first time, excavation. Both machine control systems can provide
final grades or excavation cuts accurate to within a few millimeters,
without the time and expense of setting stakes and string lines.
Through detailed analysis, Leighton has determined that Trimble’s 3D solutions are far more productive
than conventional earth-moving control systems. This enhanced productivity contributes significantly to
Leighton’s ahead-of-schedule performance and to their bottom line. That’s why the company has chosen
Trimble systems for a number of other projects throughout Australia.
"THE BEST INVESTMENT EVER" FOR HALE FARMS
Hale Farms now works thousands of acres of potatoes with half as
many tractors as before and gets better results. Trimble is there.
A diversified farming operation in Hermiston, Oregon, Hale Farms works
30,000 acres, producing 250 million pounds of potatoes and 175 million pounds
of onions, as well as other crops. Before using Trimble, they used
row markers to help planter tractors drive straight lines.
During 2002, Hale Farms installed Trimble’s AgGPS® Autopilot system on
two of their Caterpillar tractors. The Autopilot system automatically steers the
tractor in straight, parallel swaths, accurate to within 3 centimeters. The Autopilot-controlled tractors were
used to simultaneously form rows and plant and fertilize potato crops and to do "blind" cultivating around
the growing but not emerged plants.
Hale Farms is realizing increased operational efficiency, higher yield and a projected one-year cost recovery.
"We’ve tried a lot of high-tech innovations over the years," says Hale Farms Vice President Craig Reeder.
"This is the first one where we’re able to stand at the edge of the field and realize we‘re using about half
as many tractors as before—and doing a better job."
6
OEM IN-VEHICLE NAVIGATION SYSTEMS
Siemens VDO navigation systems are in some of the world’s
most prestigious automobiles, including BMW, Peugeot, Renault,
Land Rover, VW and Ford Europe. Trimble is there.
Trimble has been the GPS supplier for Siemens VDO Automotive
AG since 1992. Siemens VDO uses Trimble GPS receivers in its
in-vehicle navigation systems for luxury automobiles as well as its s
ystems for mass market and aftermarket distribution.
Four generations of Trimble GPS receiver boards have been the
backbone products of this relationship. For next-generation models,
Siemens VDO and Trimble are working to increase the value of the positioning modules by integrating
dead-reckoning capability for improved accuracy and reliability under all driving conditions, such as
inside tunnels, parking garages, and dense urban areas.
As one of the world’s largest, most respected automotive suppliers, Siemens VDO is known for its
stringent quality standards. Trimble’s record of product quality was instrumental in our 2002 receipt of
the "Supplier of the Year" award from Siemens VDO, honoring Trimble’s high level of service, logistics,
quality and innovative products at competitive prices.
QUECREEK MINE RESCUE
For three days in July, the world watched while nine
Pennsylvania coal miners were rescued from a partially flooded
chamber nearly 75 meters underground. Trimble was there.
In most applications, Trimble equipment saves time for the
customer. In this case, it helped save lives.
Bob Long, an engineer technician for Civil Mining Environmental
Engineering Inc. in Somerset, PA, got the late-night call. He and his
GPS surveying gear were needed to determine where to drill an
exploratory hole to locate nine miners trapped in the Quecreek Mine.
Using existing mine maps, Long and a team of mine rescue experts determined the most likely part
of the mine to which the men might have retreated to escape the rising waters. He then used his Trimble
GPS RTK surveying system to locate the point on the surface directly over the estimated location. The
position had to be exact. And it was. After roughly two hours of drilling, they broke into the tunnel, and
heard the miners pounding on the drill bit with their hammers to signal they were there—and alive.
According to Long, it was the sweetest sound he had ever heard.
7
IMPROVING TRIMBLE’S POSITION
2002 also brought positive developments in Trimble’s competitive position. We introduced significant
new products, formed key alliances, and made major improvements in our internal operations that will
help Trimble to become more efficient and an easier company with which to do business.
ENGINEERING AND CONSTRUCTION
The Trimble Toolbox™ of Integrated Surveying
solutions was expanded with the introduction of
the all-new 5800 RTK Rover and a new 5600
Total Station, providing advanced surveying capa-
bilities in both the GPS and the optical robotic
environments. In addition, a new ACU control unit
mounts on each of the new systems as well as the
5600 robotic rover and the 3600 series of mechani-
cal total stations to provide cable-free convenience
and greater operating productivity for any survey job.
Trimble’s line of Spectra Precision Laser™ brand
instruments has been expanded to provide industry-
leading capability for virtually any measurement
task on the construction site. Trimble’s grade laser
transmitters and receivers are used both for tradi-
tional grading work and in automatic machine-
control earth-moving applications. A new line of
small, handheld laser tools, more accurate and easier
to use than plumb bobs and string lines, help the
individual tradesman and even do-it-yourselfers
install fixtures, align walls, and level foundations.
FIELD SOLUTIONS
The new handheld GeoExplorer CE Series
integrates GPS technology, powerful GIS software,
and a Windows CE operating system to set a new
standard for field mapping and mobile GIS appli-
cations. As one result of the Trimble/ESRI alliance,
ESRI will resell the GeoExplorer CE Series loaded
with its industry-leading ArcPad mobile GIS soft-
ware. This arrangement leverages ESRI’s distribu-
tion network to make the GeoExplorer CE Series
readily available throughout the GIS marketplace.
8
MOBILE SOLUTIONS
Trimble’s alliance with McNeilus Companies,
Inc., has accelerated the entry of our Telvisant™
Fleet Management System into the ready-mix
concrete market. McNeilus has the largest direct
sales and service network for ready mix trucks in
North America. McNeilus offers the truck-mounted
hardware components as a factory-installed option
on its new trucks as well as to the aftermarket.
Trimble’s Telvisant subscription service includes
vehicle location and tracking, as well as messaging
and reporting for a monthly fee per vehicle.
COMPONENT TECHNOLOGIES
The new Lassen SQ module combines power-
ful GPS performance with ultra-low power usage
and small, postage-stamp size. Based on Trimble’s
FirstGPS® technology, it is targeted at OEMs for
designing into new battery-powered portable
devices such as personal digital assistants (PDAs),
cell phones, digital cameras, in-car security and
tracking systems, and other uses that benefit from
an integrated GPS positioning capability.
SERVING OUR CUSTOMERS BETTER
The links between Trimble’s suppliers, manufacturing points, dealers and customers are now
simpler and shorter. Two regional fulfillment centers—one in Eersel, Netherlands, and one in
Dayton, Ohio —opened in 2002. Coupled with a new order entry system, these centers will
enable our customers to place orders more easily and receive their products faster. Each center
is accountable for predictable order fulfillment of all products to customers and sales locations
within its region. This lowers our total costs by reducing aggregate inventory levels and stocking
locations as well as leveraging freight and logistics costs.
9
TRIMBLE PEOPLE MAKE IT POSSIBLE
Trimble’s more than 2,000 employees worldwide generate the ideas for the technical innovations
that keep Trimble ahead of the competition. Our people provide the international perspective that
helps us open and expand new markets and they deliver the drive and teamwork that make things
happen. Here are just a few examples from across the company during 2002.
GEOEXPLORER CE DEVELOPMENT TEAM
The GeoExplorer CE Series, introduced in May, is the first product in the world to combine powerful
sub-meter GPS accuracy with the Windows CE operating system in a rugged handheld device. This new
product was quickly developed from start to launch by Trimble engineers and marketing employees in
New Zealand, California, and Colorado. Its successful development and introduction in a short time frame
resulted from the teamwork and collaborative efforts of the Trimble people in each location.
California
New Zealand
THE CATERPILLAR/TRIMBLE TEAM
Launching a joint venture with another company
requires a new level of teamwork. People from both
Trimble and Caterpillar worked together in 2002 to
launch Caterpillar Trimble Control Technologies
LLC (CTCT). Today the CTCT staff is working at
several locations to blend the expertise and technolo-
gies of each company. Their mission is to develop
advanced guidance and control products for earth-
moving machines in the construction, mining and
waste industries. Caterpillar will offer the products
as an integrated, factory-installed option on its new
machines. Trimble will continue to address the after-
market through its global dealer channel.
Ohio
10
ACU DEVELOPMENT TEAM
The Attachable Control Unit (ACU) is a prime example of Trimble’s international scope and
the "let’s get it done" cooperative mindset of our product development teams around the world.
The ACU enables surveyors to enhance their productivity and improve workflow. The unit can fully
control the operation of Trimble’s 3600, 5600, and 5800 surveying instruments. It provides a color,
graphical, touch-screen display with a Windows CE operating system and uses Bluetooth wireless
technology for communications.
The ACU was defined by Trimble marketing personnel in Colorado and developed and tested by
engineers in Sweden, Oregon, and New Zealand. It is a major addition to Trimble’s industry-leading
surveying product line.
Sweden
Oregon
Colorado
New Zealand
11
TECHNICAL AWARD WINNERS
Trimble selects a Technical Award recipient each
quarter based on an outstanding technical achieve-
ment that benefits Trimble in any of a variety of
ways. There were six award recipients in 2002
(including two sets of co-winners), who work in four
different Trimble locations. Their achievements
included: (1) inventing an automatic setup and cali-
bration process for our rotating lasers that makes
them much more user friendly; (2) greatly increasing
the achievable distance between the RTK base station
and rover receivers, keeping Trimble well ahead of the
competition in real-time kinematic technology; (3)
solving a serious pilot run and production problem
by replacing an unworkable purchased flash driver
with a reliable internal design; and (4) enhancing the
signal-tracking performance of a Trimble chipset to
meet a major customer’s critical requirements without
lengthy and costly redesign.
California
Ohio
New Zealand
Australia
TRIMBLE TIMING IN ASIA
Trimble timing products are used by wireless service providers in many parts of the world. This is now true
in Asia as well, thanks to the efforts of a team of Trimble people who saw an opportunity and grabbed it.
Responding to a time-critical requirement of Samsung Electronics Co., Ltd., a global leader in semiconductor,
telecommunication, and digital convergence technology, the Trimble timing team designed, fabricated, and delivered
a custom CDMA clock in record time for evaluation. The result: Samsung selected Trimble as its primary supplier
for GPS time and frequency receivers for its next-generation CDMA base stations that will be used in KDDI
Corporation’s mobile network in Japan. KDDI is a leading Japanese mobile carrier.
California
12
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 January 3, 2003
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
(State or other jurisdiction of incorporation or organization)
94-2802192
(I.R.S. Employer Identification No.)
645 North Mary Avenue, 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 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]
The aggregate market value of the Common Stock held by non-affiliates of the registrant, based
upon the last sale price of the Common Stock reported on the Nasdaq National Market on June 28, 2002
was approximately $455 million.
There were 29,350,366 shares of the registrant's Common Stock issued and outstanding as of
March 5, 2003.
1
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 20, 2003 (the "Proxy Statement") are incorporated by reference into Part III of this Annual
Report on Form 10-K.
2
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.
3
TRIMBLE NAVIGATION LIMITED
2002 FORM 10-K ANNUAL REPORT
TABLE OF CONTENTS
Item 1
Item 2
Item 3
Item 4
Item 5
Item 6
Item 7
Item 7A
Item 8
Item 9
Item 10
Item 11
Item 12
Item 13
Item 14
PART I
Business ................................................................................................................................................................................
Properties ..............................................................................................................................................................................
Legal Proceedings.................................................................................................................................................................
Submission of Matters to a Vote of Security Holders………………………………………………………………....
PART II
19
Market for the Registrant's Common Equity and Related Stockholder Matters ...............................................................
20
Selected Financial Data ........................................................................................................................................................
23
Management's Discussion and Analysis of Financial Condition and Results of Operations............................................
Quantitative and Qualitative Disclosures about Market Risk………………………………………………………… 52
56
Financial Statements and Supplementary Data...................................................................................................................
94
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure...........................................
5
17
17
18
PART III
Directors and Executive Officers of the Registrant ............................................................................................................
Executive Compensation......................................................................................................................................................
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters........................
Certain Relationships and Related Transactions.................................................................................................................
Controls and Procedures.......................................................................................................................................................
94
94
94
94
94
Item 15
PART IV
Exhibits, Financial Statement Schedules and Reports on Form 8-K ................................................................................. 95-108
TRADEMARKS
Trimble, SiteVision, GeoExplorer, AgGPS, Thunderbolt, FirstGPS, and CrossCheck are trademarks
of Trimble Navigation Limited registered in the United States Patent and Trademark Office. Spectra Precision,
Lassen, Force, Galaxy, EZ-Guide, Placer, Trimble Toolbox and Telvisant are trademarks of Trimble
Navigation Limited. All other trademarks are the property of their respective owners.
4
ITEM 1
BUSINESS OVERVIEW
PART I
agriculture,
Trimble Navigation Limited, a California corporation (“Trimble” or “ the Company” or “we” or
“our” or “us”), provides advanced positioning products and solutions to industrial, commercial,
governmental entities, and professional customers in a number of markets including surveying,
construction,
and
telecommunications. Customer benefits resulting from our products typically include cost savings or
avoidance, improved quality, higher productivity, and increased efficiency. Examples of our products and
solutions include guidance for earthmoving operations, surveying instrumentation, fleet management for
specialized trucks such as concrete mixers, positioning technology for vehicle navigation and telematics
products, tractor guidance for farming, field data collection equipment, and timing technology for
synchronization of wireless networks.
resource management, military,
transportation,
urban
and
Our expertise is focused in positioning, communication, and information technologies, which form
the core of our products. Positioning technologies used include the Global Positioning System (GPS),
laser, optical, and inertial, while communication techniques include both public networks such as cellular,
and private networks such as business band radio. The unique nature of many of our products and solutions
is created through information technologies – both 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. Assembly and manufacturing for many of our products
are subcontracted to third parties. We conduct our business globally with major operations in the United
States, Sweden, Germany, New Zealand, and the Netherlands. Products are sold through dealers,
representatives, partners, and other channels throughout the world. Products are supported by sales offices
in 22 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 major portion of our revenues is derived from applying GPS to terrestrial applications. GPS is a
system of 24 orbiting satellites and associated ground control that is funded and maintained by the U. S.
Government and is available worldwide free of charge. GPS 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 GPS 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 GPS 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 GPS.” In addition, GPS provides extremely accurate time measurement.
The usefulness of GPS is dependent upon the locations of the receiver and the GPS satellites that
are above the horizon at any given time. Reception of GPS 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, altitude, and time. The
accuracy of GPS may also be limited by distortion of GPS signals from ionospheric and other atmospheric
conditions, and intentional or inadvertent signal interference or Selective Availability. Selective
Availability, which was the largest component of GPS distortion, is controlled by the U.S. Department of
Defense and was deactivated on May 1, 2000.
5
Our GPS products are based on proprietary receiver technology. The convergence of positioning,
wireless, and information technologies enables significant new value to be added to positioning systems,
thereby creating a more robust solution for the user. In addition, recent developments in wireless
technology and deployments of 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.
Our laser and optical products measure distances and angles accurately using light. We generally
use commercially available laser diodes to create light beams for distance measurement. In addition, our
proprietary precision mechanics and software algorithms in these products combine to give robust, accurate
distance and angle measurements for a variety of agricultural, surveying, and construction applications.
Business Strategy
Our business strategy leverages our expertise in positioning to provide solutions for our
customers, built around several key initiatives:
• Focus on attractive markets – We focus on markets that offer potential for revenue growth,
profitability, and market leadership.
• Create innovative solutions that provide significant economic benefits to our customers – We seek
to apply our technology to applications for which position data has a high value. We anticipate
that further advances in positioning, wireless, and information technologies will enable new
classes of solutions to emerge that will create new opportunities.
• Develop distribution channels to best access our markets – We utilize a range of distribution
channels to best serve the needs of individual markets. These channels can include independent
dealers, direct sales, OEM sales, and distribution alliances with key partners. In addition, we will
continue to extend our international distribution.
Business Segments and Markets
We are organized into four main operating segments encompassing our various applications and
product lines: Engineering and Construction, Field Solutions, Component Technologies, and Mobile
Solutions. We also operate in smaller business areas, primarily Military and Advanced Systems, and
Tripod Data Systems, which aggregate into the Portfolio Business segment. Our segments are
distinguished by the markets they serve. Each division is responsible for product development, marketing,
sales, strategy, financial performance, and is headed by a general manager.
Segment Realignment
In the first fiscal quarter of 2002, we realigned two of our reportable segments. The Agriculture
segment was combined with the Mapping and Geographic Information Systems (GIS) business to form
Field Solutions. Mapping and GIS were previously part of Fleet and Asset Management. The Mobile
Positioning business that was part of Fleet and Asset Management is now Mobile Solutions.
We began breaking out Mobile Solutions as a separate reporting segment during the first quarter
of 2002 to address the growing importance of the mobile asset management business and its impact on our
profitability. At the same time, we combined our GIS and Agriculture businesses to create a new segment
called Field Solutions in order to recognize the synergies and similar product requirements between the two
businesses.
6
Engineering and Construction
We employ GPS, optical, lasers, communications, and information technology to pursue the
opportunities in the Engineering and Construction industry segment. Products in this segment increase
productivity and accuracy for the entire construction process including the initial survey, planning, design,
earthmoving, and building phases. These products are aimed at making each individual task more efficient,
as well as speeding up the entire process by improving information flow from one step to the next, and
facilitating faster redesign when needed.
For example, our GPS and robotic optical technology allows surveying tasks to be completed
faster and with a smaller crew. Similarly, construction machine guidance products allow the operator to
achieve the desired landform by eliminating stakeout and reducing rework. These steps in the operation
can be readily linked together with data collection modules and software to minimize the time and effort
required to get the job done accurately.
We sell and distribute our products from this segment through a global network of independent
dealers and our sales staff. This channel is supplemented by relationships that create additional channel
breadth including our joint venture with Caterpillar and private branding arrangements with other
companies.
Competition in this segment comes from 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:
5800 RTK Rover – This is an integrated unit that allows the surveyor to make centimeter-level
measurements or do construction stakeout with only one person. Wireless technology eliminates cables
that could otherwise snag on foliage and structures. The rover weighs 3.5kg for an entire system on a pole
including batteries.
5600 Total Station – This optical total station series provides a choice of increasing levels of automation
that allow the surveyor to choose a system that will best suit his work. Depending on the job, these
configurations enable one-person stakeout and survey. The included Attachable Control Unit (ACU) also
works with the 5800 RTK Rover providing complete measurement compatibility regardless of the
technology used.
SiteVision® GPS System – SiteVision GPS is a machine-mounted, positioning system that guides the
operator by comparing the actual position of the blade with the digitized design that resides in a computer
on the machine. The use of this system enables faster machine speed, eliminates the need for placing
stakes, and lowers the number of passes needed to get the desired grade. Applications include road
construction and site preparation.
Spectra Precision™ Laser GL 700 Series – This laser product provides grade control capability for heavy
equipment on a construction site. The level surface of the laser light can be precisely controlled, and
machines with a laser receiver can be controlled to establish a precise and uniform grade over the desired
area. Applications include trenching, pipe laying, machine control grading, and road construction
applications.
Field Solutions
Our Field Solutions division addresses the two business areas of Agriculture and Geographical
Information System (GIS). Products and solutions from the GIS business area are targeted at collecting
feature and attribute information in the field to be used within GIS databases and providing position-related
7
information directly to a person working in the field in the mobile GIS market. The manner in which
information is presented or collected is of key importance to the customer, as well as the applicability and
value of the information itself.
In the agricultural market, our products provide 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. We also provide
positioning solutions for leveling agricultural fields in irrigation applications and aligning drainage systems
to better manage water flow in fields.
Our distribution to the agricultural market is through multiple channels. Revenue is generated
through independent dealers and through 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 Integrinautics.
The other principle market within Field Solutions is GIS. Our products enable the efficient
acquisition of features, attributes, and positions of fixed infrastructure and natural resource assets. An
example of the type of data being collected 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 collected 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.
Distribution for GIS applications is primarily through a network of independent dealers and
business partners, supported by an internal sales staff. Competitors in this market are typically either
survey instrument companies having GPS technology and/or consumer GPS companies. Two examples are
Leica Geosystems and Garmin.
Approximate price points in this segment range from $2,500 for a handheld unit to $35,000 for a
fully automated, farm equipment control system.
Representative products sold within this segment include:
GeoExplorer® CE Series – Combines a GPS receiver in a rugged handheld unit running Microsoft’s
Windows CE operating system that makes it easy to collect and maintain data about objects in the field.
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™ System – A GPS-enabled, manual guidance system that provides the tractor
operator with steering visual corrections required to stay on course to within 25 centimeters. This system
reduces the overlap or gap in spraying, fertilizing, and other field applications.
Component Technologies
Our Component Technologies segment provides components for applications that require
embedded position or time, primarily based on GPS technology. 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.
8
In the telecommunication 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, UTStarcom, and Grayson
Wireless.
In the automotive market, we provide a GPS component that is embedded into in-vehicle
navigation systems. Our focus on high reliability, continuous improvement, and low cost has earned us
supplier awards and continuing business in this market. Customers include IVN system manufacturers and
integrators such as Siemens VDO Automotive AG, Blaupunkt, and Magnetti Marelli.
The declining size and power requirements for GPS components, coupled with improving
*
capabilities, allow GPS to potentially be used in a new class of applications such as position-aware cellular
telephones or other wireless handheld devices. We expect our strength in GPS technology will expand our
participation in this market.
Competitors in the telecommunication infrastructure market include Symmetricom. Competitors
in the automotive market 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 achieves the performance of an atomic standard with much higher reliability and much
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™ SQ Module – Our new Lassen SQ 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.
Mobile Solutions
Our Mobile Solutions segment addresses the market for fleet management by providing a bundled
solution including both hardware and software needed to run the application. In almost all cases, the
software solution is provided to the user through Internet-enabled access for a monthly service fee. The
bundled 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.
Our agreement with McNeilus Companies, Inc., a major manufacturer of trucks for the ready mix
concrete and waste management industries, facilitates the delivery of a complete management solution
when a new fleet is acquired. McNeilus’ sales team will market our solution, which includes our GPS-
9
enabled hardware and hosted software provided for a monthly service fee to its customers as a retrofit for
trucks already in the field, or as a factory-installed option.
Our Mobile Solutions segment maintains multiple distribution channels including independent
dealers, key accounts and strategic partners such as McNeilus. Approximate prices for the hardware fall in
the range of $300 to $3000, while the monthly software 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, @Track, Aether Systems, and Minorplanet.
Representative products sold by this division include:
Telvisant™ System – Our fleet management service offering, Telvisant provides different levels of service
that run from snapshots of fleet activity to real-time fleet dispatch capability. Telvisant includes truck
communication service and computer backbone support of the software. Variations of Telvisant 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.
Portfolio Business
Our Portfolio Business segment includes various operations that each equal less than 10 percent of
our total operating revenue. The products in this segment are data collection products as well as navigation
modules and embedded sensors that are used in avionics, flight, and military applications. The two most
significant components in this segment are Tripod Data Systems (TDS), and Military and Advanced
Systems (MAS).
TDS designs and markets handheld data collectors and data collection software for field use by
surveyors and other professionals. Products are sold directly, through dealers, and other survey
manufacturers. Competitors in this portion of the business are small and geographically diverse.
Our MAS business supplies GPS modules that use the military’s GPS Precise Positioning Service.
These modules are most often used in aviation or ground-based military equipment. Military products are
sold directly by our sales force to either the U.S. Government or a contractor. Sales are also made to
foreign governments, with the sales of the encrypted components taking place through the U.S.
Government. Competitors in this market include Rockwell, L3, Raytheon, and Thales.
Representative products sold by this segment include:
TDS Ranger™ Series – The TDS Ranger device is a handheld data collector supporting Microsoft’s
Windows CE operating system. Running TDS survey software, this unit can control and collect data from
all major brands of optical and GPS surveying instruments. The operator can also run his or her own
application programs for the Microsoft Windows CE operating system on the platform.
Force™ 5 Module – The Force 5 GPS Receiver Application Module (GRAM) is a dual-frequency, GPS
module that is used in a variety of military GPS signal embedded airborne and ground applications.
Acquisitions and Joint Ventures
The markets in which we compete require a wide variety of technologies, products, and
capabilities. Through acquisitions, investments, and joint development agreements or alliances, we are able
to deliver products and services to customers in target markets. We employ the following strategies to
satisfy the need for new or enhanced products and solutions: develop new technologies and products
10
internally; enter into joint ventures with strategic partners; resell another company’s product; or acquire all
or part of another company.
Acquisitions
*
We have acquired a number of companies in the past and we expect to make acquisitions in the
future. Mergers and acquisitions of high-technology companies are inherently risky. 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. The risks associated with acquisitions are more fully discussed in
the “Risks and Uncertainties” section contained in Part II, Item 7 of this Report.
LeveLite - On August 15, 2002, we acquired LeveLite Technology, Inc. This was a strategic
acquisition for us, as it not only extended the product portfolio of our commercial construction business in
the entry-level market for laser-levels, but it also strengthened our presence in certain distribution channels,
such as the construction supply houses and power tool manufacturers.
Caterpillar Joint Venture
On April 1, 2002, Trimble and Caterpillar established and began operations of a joint venture
called Caterpillar Trimble Control Technologies, LLC, in which each company has a 50% ownership stake
and have equal voting rights. The purpose of this joint venture is to develop the next generation of machine
control products for the construction and mining markets.
Today, we sell construction machine control products to contractors through our dealer channel,
*
for installation on bulldozers, motorgraders, and excavators that are already in the field (the “after-
market”). However, both companies believe that this “after-market” solution will spur future demand for a
machine control product that can be integrated into the design of new Caterpillar machines, while also still
being available for “after-market” installation.
Patents, Licenses and Intellectual Property
We hold 582 U.S. patents and 114 foreign patents, the majority of which cover GPS technology
and applications, and over 100 of which cover optical and laser technology and applications.
We prefer to own the intellectual property used in our products, either directly or though
subsidiaries. Although this is not a significant factor in our business, from time to time we license
technology from third parties.
There are 74 trademarks registered to Trimble and its subsidiaries. Specifically, "Trimble" with
the sextant logo, "AgGPS", "GeoExplorer," and "GPS Total Station," are examples of trademarks of
Trimble Navigation Limited registered in the United States and other countries. Additional trademarks are
pending registration.
Although we believe that our patents and trademarks have value, we cannot be sure that those
patents and trademarks, or any additional patents and trademarks that may be obtained in the future, will
provide meaningful protection from competition. We actively develop and protect our intellectual property
through a program of patenting, enforcement, and licensing.
We do not believe that any of our products infringe patent or other proprietary rights of third
parties, but we cannot be certain that they do not do so. (See Note 20 of the Notes to the Consolidated
Financial Statements.) If infringement is alleged, legal defense costs could be material, and there can be no
11
assurance that the necessary licenses could be obtained on terms or conditions that would not have a
material adverse effect on our profitability.
Sales and Marketing
We currently have regional sales offices throughout North America and Europe. Offices serving
the rest of the world include Australia, China, Japan, Philippines, New Zealand, Singapore, and United
Arab Emirates. We tailor the distribution channel to the needs of the product and regional market.
Therefore, we have a number of forms of sales channel solutions around the world.
North America
We sell our products in the United States and Canada primarily through dealers, distributors, and
authorized representatives. This channel is supplemented and supported by our employees who provide
additional sales support. In some cases, where third party distribution is not available, we utilize a direct
sales force. We also utilize distribution alliances and OEM relationships with other companies as a means
to serve selected markets.
International
We market to end-users through a network of dealers and distributors in more than 85 countries.
Distributors carry one or more product lines and are generally limited to selling either in one country or in a
portion of a country. We occasionally grant exclusive rights to market certain products within specified
countries.
Sales to unaffiliated customers outside the United States comprised approximately 49% in 2002,
50% in 2001, and 52% in 2000. During the 2002 fiscal year, North and South America represented 55%,
and Europe, the Middle East and Africa represented 32%, and Asia represented 13%. In fiscal 2002, the
United States comprised approximately 51% and Germany 16% of sales to unaffiliated customers.
Support and Warranty
The warranty periods for our products are generally between one and three years from date of
shipment. Selected military programs may require extended warranty periods, and certain products sold by
our TDS subsidiary have a 90-day 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 revenues are affected by seasonal buying patterns in some of our business areas. Over half of
*
our total revenue comes from our Engineering and Construction business, which has the biggest seasonal
impact on our total revenue. This business, and therefore our total revenue, is seasonally strongest during
the second quarter due to the start of the construction buying season in the northern hemisphere in spring.
12
Typically, we expect the first and fourth quarters to be the seasonal lows due to the lack of construction and
farming during the winter months. If other factors such as economic conditions or underlying growth in the
business are removed, the historical variability in our total quarterly revenue from seasonality has generally
been less than 10 percent.
Working Capital
Our working capital needs are typically for inventories, accounts receivable, and short-term debt.
As the business is generally dependent upon a steady stream of new products, some amount of working
capital is devoted to the ramp up and ramp down of product volumes as new products get introduced and
older models are taken out of production.
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 for most of our GPS products is subcontracted to Solectron Corporation. Solectron
is responsible for substantially all material procurement, assembly, and testing. We continue to manage
product design up through pilot production for the subcontracted products, and we are directly involved in
qualifying suppliers and key components used in all our products. During the fourth quarter of 2002,
Solectron began assembling some of our Component Technologies products in China. Our current contract
with Solectron is due to expire in August 2003.
We manufacture laser and optics-based products at our plants in Dayton, Ohio; Danderyd,
Sweden; and Jena and Kaiserslautern, Germany. Some of these products or portions of these products are
also subcontracted to third parties for assembly.
Most of the components used in our products are standard parts readily available from more than
one supplier. A few components are from sole suppliers or are custom parts unique to our company. While
custom parts make our products hard to imitate, they also represent a manufacturing risk due to the lack of
alternative suppliers. If these parts became unavailable, redesign or modification of our products could be
required. In addition, suppliers may cease manufacturing common components, replacing them with newer
parts, which require requalification. These risks could cause an interruption in our ability to provide a
steady stream of products to our customers.
Research and Development
We believe that our competitive position is maintained through the development and introduction
of new products having 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.
Recent developments have produced small, low-power, OEM GPS receivers, accurate and
versatile rotating lasers for construction use, and light weight and compact GPS surveying rovers.
Our research and development expenditure, net of reimbursed amounts was $61.2 million for
fiscal 2002, $62.9 million for fiscal 2001, and $46.5 million for fiscal 2000.
13
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 and satisfying new needs
for positioning related solutions. There can be no assurance that we will succeed in doing so.
Employment
As of January 3, 2003, we employed a total of 2,050 employees, including 686 in sales and
marketing, 631 in manufacturing, 505 in engineering, and 228 in general and administrative positions. Of
these employees, 607 were located in Europe and in the Middle East (primarily in Germany and Sweden),
252 were situated in the Asia Pacific region (primarily in New Zealand), and 1,191 employed in the
Americas (primarily in the United States).
Our employees are not represented by unions except for those in Sweden and 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
Our Internet address is www.trimble.com. Information contained on our website is not part of this
annual report on Form 10-K. We make available free of charge on www.trimble.com, our annual report on
Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports
filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act, as soon as reasonably practicable
after we electronically file such material with, or furnish it to, the SEC.
In addition, you may request a copy of these filings (excluding exhibits) at no cost by writing or
telephoning us at the following address or telephone number:
Trimble Navigation Limited
645 North Mary Avenue, Sunnyvale, CA 94088
Attention: Investor Relations
Telephone: 408-481-8000
Executive Officers
The names, ages, and positions of the Company's executive officers as of March 5, 2003 are as follows:
Age
Position
Name
---------------------------------------------------------------------------------------------------------------------------------
Steven W. Berglund............ 51
Mary Ellen P. Genovese.….43
William C. Burgess.............56
Joseph F. Denniston, Jr. … 42
Bryn A. Fosburgh. ………. 40
John E. Huey.......................53
Irwin L. Kwatek.................. 63
Michael W. Lesyna............. 42
Bruce E. Peetz.....................51
Christopher J. Shephard.... 40
Anup V. Singh ……........... 32
Alan R. Townsend.............. 54
Dennis L. Workman............57
President and Chief Executive Officer
Chief Financial Officer
Vice President, Human Resources
Vice President, Operations
Vice President and General Manager, Geomatics and Engineering
Treasurer
Vice President and General Counsel
Vice President and General Manager, Mobile Solutions
Vice President, Advanced Technology and Systems
Vice President and General Manager, Construction Instruments
Corporate Controller
Vice President and General Manager, Field Solutions
Vice President and General Manager, Component Technologies
14
Steven W. Berglund – Steven Berglund joined Trimble as president and chief executive officer in March
1999. Prior to joining Trimble, Mr. Berglund was president of Spectra Precision, Inc., a pioneer in the
development of laser systems. He spent 14 years at Spectra Precision 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.
Mary Ellen Genovese – Mary Ellen Genovese, chief financial officer, has been responsible for the overall
financial activities of Trimble since September 2000. Ms. Genovese was vice president of finance and
corporate controller from 1997 to September 2000. From 1994 to 1997, Ms. Genovese served as business
unit controller for Software and Component Technologies, and Tracking and Communications. She joined
Trimble as controller of manufacturing operations in December 1992. Prior to joining Trimble, Ms.
Genovese was chief financial officer for Minton Co., a distributing company to the commercial building
market, from 1991 to 1992. Prior to 1991, she worked for 10 years with General Signal Corp. in several
management positions. Ms. Genovese is a certified public accountant and received her B.S. in accounting
from Fairfield University in Connecticut in 1981.
William C. Burgess – William Burgess joined Trimble in August of 2000 as vice president of Human
Resources, with global responsibility for Human Resources. Prior to joining Trimble, Mr. Burgess was
vice president of Human Resources and Management Information Systems for Sonoma West Holdings, Inc.
From 1993 to 1997, he served as vice president of Human Resources for Optical Coating Laboratory, from
1990 to 1993, he established and managed the human resources function at Teknekron Communications
Systems, and from 1985 to 1990 he was vice president of Human Resources for a $25 billion, 35,000-
employee segment of Asea Brown Boveri (ABB), a global technology company. Mr. Burgess received a
B.S. from the University of Nebraska and an M.S. in organizational development from Pepperdine
University.
Joseph F. Denniston, Jr. – Joseph Denniston joined Trimble as vice president of operations in April 2001,
responsible for worldwide manufacturing, distribution and logistics strategy. Prior to Trimble, 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, 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 was appointed vice president and general manager of the Geomatics
and Engineering (G&E) business area in July 2002, with responsibility for all the division-level activities
associated with survey, construction, and infrastructure solutions. From October 1999 to July 2002, Mr.
Fosburgh served as division vice president of survey and infrastructure. 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. Mr.
Fosburgh joined Trimble in 1994 as technical service manager for surveying, mining, and construction.
Prior to Trimble, Mr. Fosburgh was a civil engineer with the Wisconsin Department of Transportation
where he was 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.
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
15
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 has been vice president and general manager of the Mobile
Solutions business area since September 2000. 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 has served as corporate controller since joining Trimble in December 2001.
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.
Christopher J. Shephard – Chris Shephard was appointed vice president and general manager of the
Construction Instruments (CI) business area in July 2002 after serving as division vice president of
operations for Engineering and Construction since Trimble’s acquisition of Spectra Precision Group in July
2000. Prior to Trimble, Mr. Shephard served from 1998 to 2000 as Spectra Precision’s chief financial
officer. Mr. Shephard also worked for more than eight years at Booz Allen & Hamilton. Prior to Booz
Allen & Hamilton, Mr. Shephard spent three years at Copeland Corporation, a division of Emerson, in their
management-training program. Mr. Shephard received a B.A. in business studies from Manchester
Polytechnic in England in 1985 and an M.M. from the J.L. Kellogg Graduate School of Management at
Northwestern University, Evanston, Illinois in 1990.
Alan R. Townsend – Alan Townsend has served as vice president and general manager of the Field
Solutions business area since November 2001. He also serves as the managing director of Trimble
Navigation New Zealand Ltd. for which he has overall site responsibility. 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 Datacomm group of companies in New Zealand
including Managing Director of Datacomm 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.
16
Dennis L. Workman – Dennis Workman has served as vice president and general manager of Trimble’s
Component Technologies business area 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 9-year tenure at Datum, he held the position of
CTO. Mr. Workman received a B.S. in mathematics and physics from St. Marys College in 1967 and an
M.S. in electrical engineering from the Massachusetts Institute of Technology in 1969.
ITEM 2
PROPERTIES
The following table sets forth the significant real property that we own or lease:
Location
Sunnyvale, California;
14 buildings
Corvallis, Oregon
Chandler, Arizona
Westminster, Colorado;
2 buildings
Huber Heights
(Dayton), Ohio
Danderyd, Sweden
Segment(s) served
Size in
sq. feet
309,400 All
20,000 Engineering & Construction
12,500 Mobile Solutions
73,000 Engineering & Construction,
Field Solutions
Engineering & Construction,
Field Solutions
150,000
57,200
32,800 Distribution
93,900 Engineering & Construction
Jena, Germany
28,700 Engineering & Construction
26,000 Engineering & Construction
Commitment
Leased, expiring 2003 – 2005;
approximately 100,000 sq. ft. subleased
Owned, encumbered by $1.8M
mortgage
Leased, expiring 2003
Leased, expiring 2006;
44,000 sq. ft. vacant
Owned, no encumbrances
Leased, expiring in 2011
Leased, month to month
Leased, expiring 2005, 24 month notice,
auto renewal for 3 years
Leased, no expiration date,
12 month notice
Leased, expiring 2005
Kaiserslautern,
Germany
Raunheim, Germany
Christchurch, New
Zealand; 2 buildings
28,700 Sales
65,000 Engineering & Construction,
Leased, expiring 2011
Leased, expiring 2005 – 2010
Mobile Solutions, Field
Solutions
In addition, we lease a number of smaller offices around the world primarily for sales.
*
We believe that our facilities are adequate to support current and near-term operations.
ITEM 3
LEGAL PROCEEDINGS
In January of 2001, Philip M. Clegg instituted a lawsuit in the United States District Court for the
District of Utah, Central Division, against Spectra-Physics Laserplane, Inc., Spectra Precision AB and
Trimble Navigation Limited. On January 29, 2003, we settled this patent infringement lawsuit with Mr.
Clegg whereby we have purchased a fully paid-up, non-exclusive license under U.S. Patent No. 4,807,131
from Mr. Clegg.
*
In November of 2001, Qualcomm Inc. filed a lawsuit against us in the Superior Court of the State
of California. The complaint alleges claims for an unspecified amount of money damages arising out of
Qualcomm’s perceived lack of assurances in early 1999 that our products purchased by Qualcomm would
17
work properly after a scheduled week number rollover event that took place in August of 1999. Qualcomm
is the only customer to make a claim against us based on the week number rollover event. In the opinion of
management, the resolution of this lawsuit is not expected to have a material adverse effect on our overall
financial position.
We are also a party to other disputes 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 2002.
18
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 bid prices for our common stock as
reported on the Nasdaq National Market.
2002
2001
First Quarter
Second Quarter
Third Quarter
Fourth Quarter
High
$17.14
18.50
15.00
14.47
Low
$11.76
14.97
10.28
8.02
High
$28.50
21.25
19.80
18.41
Low
$16.50
12.75
13.06
12.89
As of January 3, 2003, there were approximately 1,132 holders of record of our common stock. We
made no sales of unregistered securities during the year-ended January 3, 2003.
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.
We are currently restricted from paying dividends and are limited as to the amount of our common
stock that we can repurchase under the terms of our credit facilities. We are allowed to pay dividends and
repurchase shares of our common stock up to 25% of net income in the previous fiscal year.
Equity Compensation Plan Information
The following table sets forth, as of January 3, 2003, 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.
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))
Equity compensation
plans
approved by
security holders.….….
Equity compensation
plans not approved by
security holders …….
Total ……………….
(a)
5,126,633
-
5,126,633
(c)
1,859,656
-
1,859,656
(b)
$18.53
-
$18.53
19
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 statement of operations and
balance sheet 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.
We have significant intangible assets on our balance sheet 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. We reclassified identifiable
intangible assets with indefinite lives, with a net book value of $73.6 million, as defined by SFAS 142, to
goodwill at the date of adoption.
For comparative purposes, the pro forma adjusted net income per share excluding amortization of
goodwill, distribution channel, and assembled workforce is as follows:
(In thousands)
Net income (loss)
Add back SFAS 142 adjustments:
Amortization of goodwill
Amortization of distribution channel
Amortization of assembled workforce
January 3,
2003
December 28,
2001
December 29,
2000
$ 10,324
$ (22,879)
$ 14,185
7,817
11,230
1,834
3,116
5,176
1,225
Adjusted net income (loss)
$ 10,324
$ (1,998)
$ 23,702
Weighted average shares outstanding
Basic
Diluted
Diluted net income (loss) per share
28,573
29,052
$ 0.36
24,727
24,727
$ (0.93)
23,601
25,976
$ 0.55
Pro forma adjusted diluted net income (loss) per share
$ 0.36
$ (0.08)
$ 0.92
20
SUMMARY CONSOLIDATED STATEMENTS OF OPERATIONS DATA
Fiscal Years Ended
(In thousands of dollars, except per
share data)
Revenue
Cost of revenue
Gross margin
Operating expenses
Research and development
Sales and marketing
General and administrative
Restructuring charges
Amortization of goodwill and other
purchased intangible assets
Total operating expenses
Operating income (loss) from
continuing operations
Non-operating income (expense), net
Income (loss) before income taxes
from continuing operations
Income tax provision
Net income (loss) from continuing
operations
Loss from discontinued operations
(net of tax)
Gain (loss) on disposal of
discontinued operations (net of tax)
Net income (loss)
Basic earnings (loss) per share from
continuing operations
Basic earnings (loss) per share from
discontinued operations
Basic earnings (loss) per share
Shares used in calculating basic
earnings per share
Diluted earnings (loss) per share
from continuing operations
Diluted earnings (loss) per share
from discontinued operations
Diluted net income (loss) per share
Shares used in calculating diluted
earnings per share
January 3,
2003
December 28,
2001
December 29,
2000
December 31,
1999
January 1,
1999
$ 466,602
232,170
$ 234,432
$ 475,292
238,057
$ 237,235
$ 369,798
173,237
$ 196,561
$ 271,364
127,117
$ 144,247
$ 268,323
141,075
$ 127,248
61,232
89,344
40,634
1,099
8,300
200,609
33,823
(19,999)
13,824
3,500
62,881
103,778
37,407
3,599
29,389
237,054
181
(21,773)
(21,592)
1,900
46,520
79,901
30,514
--
13,407
170,342
26,219
(10,459)
15,760
1,575
36,493
53,543
33,750
--
--
123,786
20,461
274
20,735
2,073
45,763
61,874
33,245
10,280
--
151,162
(23,914)
(2,041)
(25,955)
1,400
$ 10,324
$ (23,492)
$ 14,185
$ 18,662
$ (27,355)
--
--
--
--
(5,760)
--
$ 10,324
613
$ (22,879)
--
$ 14,185
2,931
$ 21,593
(20,279)
$ (53,394)
$ 0.36
$ (0.95)
$ 0.60
$ 0.83
$ (1.22)
--
$ 0.36
0.02
$ (0.93)
--
$ 0.60
0.13
$ 0.96
(1.16)
$ (2.38)
28,573
24,727
23,601
22,424
22,470
$ 0.36
$ (0.95)
$ 0.55
$ 0.82
$ (1.22)
--
$ 0.36
0.02
$ (0.93)
--
$ 0.55
0.13
$ 0.95
(1.16)
$ (2.38)
29,052
24,727
25,976
22,852
22,470
Cash dividends per share
$ --
$ --
$ --
$ --
$ --
21
Fiscal Years ended
(In thousand of dollars, except where
shown as a percentage of revenue)
Gross margin percentage
Operating income (loss) percentage
EBITDA (1)
EBITDA as a percentage of revenue (1)
Depreciation and amortization
Cash provided by operating
activities
Cash provided (used) by investing
activities
Cash provided (used) by financing
activities
OTHER OPERATING DATA
January 3
2003
December 28,
2001
December 29,
2000
December31,
1999
January 1,
1999
50%
7%
$ 46,025
10%
$ 18,150
50%
0%
$41,038
9%
$41,524
53%
7%
$49,196
13%
$23,476
53%
8%
$29,345
11%
$9,073
47%
(9%)
$(13,637)
(5%)
$12,510
$ 35,096
$25,093
$19,835
$23,625
$6,968
$ (5,766)
$(11,441)
$(167,180)
$(17,882)
$22,484
$ (31,729)
$(23,450)
$138,957
$2,656
$(8,538)
SELECTED CONSOLIDATED BALANCE SHEET DATA
As of
(In thousands)
Working capital (deficit)
Total assets
Non-current portion of long-term debt
and other liabilities
Shareholders’ equity
January 3,
2003
December 28,
2001
December 29,
2000
December 31,
1999
January 1,
1999
$ 65,044
441,656
114,051
$ 19,304
419,395
131,759
$ (10,439)
488,628
143,553
$ 111,808
181,751
33,821
$ 81,956
156,279
31,640
201,351
138,489
134,943
100,796
74,691
(1) EBITDA consists of earnings from continuing operations before interest income, interest expense,
income taxes, depreciation and amortization. Our EBITDA is presented because it is a widely accepted
financial indicator. EBITDA is not a measure of financial performance in accordance with generally
accepted accounting principles and should not be considered in isolation or as an alternative to net
income (loss) as an indicator of our performance or to cash flows from operating activities as a
measure of liquidity. Our EBITDA may not be comparable to similarly titled measures as defined by
other companies.
22
The following table sets forth, for the periods indicated, certain financial data as a percentage of
total revenue:
Fiscal Years ended
Revenue
Cost of revenue
Gross margin
Operating expenses:
Research and development
Sales and marketing
General and administrative
Restructuring charges
Amortization of goodwill and
other purchased intangibles
Total operating expense
Operating income (loss) from
continuing operations
Non-operating income (expense),
net
Income (loss) before income taxes
from continuing operations
Income tax provision
Net income (loss) from
continuing operations
Loss from discontinued
operations, (net of tax)
Gain (loss) on disposal of
discontinued operations
(net of tax)
Net income (loss)
January 3,
2003
100%
50%
50%
December 28,
2001
December 29,
2000
December 31,
1999
January 1,
1999
100% 100% 100% 100%
50% 47% 47% 53%
47%
50%
53%
53%
13%
19%
9%
-
13%
22%
8%
1%
13%
22%
8%
-
13%
21%
12%
-
17%
23%
12%
4%
2%
43%
6% 4% 0% 0%
50% 46% 46% 56%
7%
-
7%
8%
(9%)
(4%)
(5%)
(3%)
-
(1%)
3%
1%
(5%)
-
4%
-
(10%)
1% 1%
8%
2%
(5%)
4% 7% (10%)
-
-
-
-
(2%)
-
-
-
1% (8%)
2%
(5%)
4% 8% (20%)
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 and Uncertainties."
Critical Accounting Policies And Estimates
Our critical accounting estimates and the related assumptions are evaluated periodically as conditions
warrant, and changes to such estimates are recorded as new information or changed conditions require revision.
Application of the critical accounting policies requires management's judgments, often as the result of the need
to make estimates of matters that are inherently uncertain. If actual results were to differ materially from the
estimates made, the reported results could be materially affected. For a summary of all of our significant
accounting policies, including critical accounting policies discussed below, see Note 1 - "Summary of
Significant Accounting Policies" of the Notes to the Consolidated Financial Statements.
23
Revenue Recognition
Our revenues are recorded in accordance with the Securities and Exchange Commission’s (SEC)
Staff Accounting Bulletin (SAB) No. 101, “Revenue Recognition.” Prior to recognizing revenue, we
require the following: (i) execution of a written customer order, (ii) delivery of the product, (iii) a fixed or
determinable fee, and (iv) probable collectibility of the proceeds. We recognize revenue from product sales
when the products are shipped to the customer, title has transferred, and no significant obligations remain.
We defer revenue if there is uncertainty about customer acceptance. We reduce product revenue for
estimated customer returns and for any discounts that may occur under programs we have with our
customers and partners.
Our shipment terms are either FOB shipping point or FCA shipping point. FOB (Free on Board)
shipping point term means that the seller fulfills the obligation to deliver when the goods have passed over
the ship's rail at the named port of shipment. This means that the buyer has to bear all costs and risks of loss
of or damage to the goods from that point. The FOB term requires the seller to clear the goods for export.
FCA (Free Carrier) shipping point term means that the seller 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, the seller may choose within the place or
range stipulated where the carrier shall take the goods into carrier’s charge.
Our shipment terms for domestic orders are typically FOB shipping point. International orders
fulfilled from our European distribution center are typically shipped FCA shipping point. Other
international orders are shipped FOB destination, and accordingly these international orders are not
recognized as revenue until the product is delivered and title has transferred.
Revenues from purchased extended warranty and support agreements are deferred and recognized
ratably over the term of the warranty/support period. Substantially all technology licenses and research
revenue have consisted of initial license fees and royalties, which were recognized when earned, provided
we had no remaining obligations.
Sales to distributors and resellers are recognized upon shipment providing that there is evidence of
such an arrangement through a distribution agreement or purchase order, title has transferred, no remaining
performance obligations exist, the price and terms of the sale are fixed, and collection is probable.
Distributors and resellers do not have a right of return.
Our software arrangements consist of a 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 price of 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 period of the
PCS agreement.
Allowance for Doubtful Accounts
We evaluate the collectibility of our trade accounts receivable based on a number of factors. 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.
24
Inventory Valuation
Our inventory is recorded at the lower of cost or market. We 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 adjust the inventory value for estimated excess and
obsolete inventory based on management’s assessment of future demand and market conditions. If actual
future demand or market conditions are less favorable than those projected by management, additional
inventory write-downs may be required.
Deferred Taxes
Deferred taxes are provided on a liability method whereby deferred tax assets are recognized for
deductible temporary differences and deferred liabilities are recognized for taxable temporary differences.
Temporary differences are the differences between the reported amounts of assets and liabilities and their
tax bases. Deferred tax assets are reduced by a valuation allowance when it is determined to be more likely
than not that some portion or all of the deferred tax assets will not be 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. If we determine that we would not be able to realize all or part of our
deferred tax assets in the future, an adjustment to the carrying value of the deferred tax assets would be
charged to income in the period in which such determination was made.
Goodwill and Other Purchased Intangible Assets
We have significant intangible assets on our balance sheet 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 the prior year. We reclassified identifiable intangible assets with
indefinite lives and net book value of $73.6 million, as defined by SFAS 142, to goodwill at the date of
adoption.
For comparative purposes, the pro forma adjusted net income per share excluding amortization of
goodwill, distribution channel, and assembled workforce is as follows:
(In thousands)
Net income (loss)
Add back SFAS 142 adjustments:
Amortization of goodwill
Amortization of distribution channel
Amortization of assembled workforce
January 3,
2003
December 28,
2001
December 29,
2000
$ 10,324
$ (22,879)
$ 14,185
7,817
11,230
1,834
3,116
5,176
1,225
Adjusted net income (loss)
$ 10,324
$ (1,998)
$ 23,702
Weighted average shares outstanding
Basic
Diluted
Diluted net income (loss) per share
28,573
29,052
$ 0.36
24,727
24,727
$ (0.93)
23,601
25,976
$ 0.55
Pro forma adjusted diluted net income (loss) per share
$ 0.36
$ (0.08)
$ 0.92
25
In assessing the recoverability of goodwill and indefinite life intangible assets, we must make
assumptions about the estimated future cash flows and other factors to determine the fair value of these
assets. Assumptions about future revenue and cash flows require significant judgment because of the
current state of the economy, the fluctuation of actual revenue, and the timing of expenses.
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.
Similarly, the impairment evaluation for indefinite life intangible assets includes a comparison of the
asset’s carrying value to the asset’s fair value. When the carrying value exceeds fair value an impairment
charge is recorded for the amount of the difference. An intangible asset is determined to have an indefinite
useful life when there are no legal, regulatory, contractual, competitive, economic or any other factors that
may limit the period over which the asset is expected to contribute directly or indirectly to the future cash
flows of our company. In each reporting period, we also evaluate the remaining useful life of an intangible
asset that is not being amortized to determine whether events and circumstances continue to support an
indefinite useful life. If an intangible asset that is not being amortized is determined to have a finite useful
life, the asset will be amortized prospectively over the estimated remaining useful life and accounted for in
the same manner as intangible assets subject to amortization.
We tested goodwill for impairment using the process prescribed in SFAS No. 142. The first step is
a screen for potential impairment, while the second step measures the amount of the impairment, if any. No
impairment charge resulted from the impairment tests. For comparative purposes that depict the effect of
adopting SFAS No. 141 and 142 above, we have included the pro forma adjusted net income per share
excluding amortization of goodwill, distribution channel, and assembled workforce.
Accounting for the Long-Lived Assets Including Intangibles Subject to Amortization
We adopted Statement of Financial Accounting Standards No. 144, "Accounting for the
Impairment or Disposal of Long-lived Assets,” at the beginning of fiscal 2002. The effect of adopting
SFAS 144 did not have a material impact on our financial position or results of operations.
Depreciation and amortization of our long-lived assets is provided using accelerated and 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.
26
Warranties
We provide for the estimated cost of product warranties at the time revenue is recognized. While
we engage in extensive product quality programs and processes, including actively monitoring and
evaluating the quality of our component suppliers, our warranty obligation is affected by product failure
rates, material usage, and service delivery costs incurred in correcting a product failure. Should actual
product failure rates, material usage, or service delivery costs differ from our estimates, revisions to the
estimated warranty accrual and related costs may be required.
Stock Compensation
As permitted by the provisions of Statement of Financial Accounting Standards (SFAS) No. 148,
“Accounting for Stock-Based Compensation – Transition and Disclosure,” and Statement of Financial
Accounting Standards (“SFAS 123”) No. 123, "Accounting for Stock-Based 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. Note 14 of
the Notes to the Consolidated Financial Statements describes the plans we operate, and Note 1 of the Notes
to the Consolidated Financial Statements contains a summary of the pro forma effects to reported net
income (loss) and earnings (loss) per share for fiscal 2002, 2001, and 2000 as if we had elected to recognize
compensation cost based on the fair value of the options granted at grant date, as prescribed by SFAS No.
123.
Investment in the Caterpillar Trimble Control Technologies LLC (CTCT or "Joint Venture")
We have adopted the equity method of accounting for our investment in the Joint Venture. This
requires that we record our share of the Joint Venture profits or losses in a given fiscal period. During fiscal
year 2002, the Joint Venture reported a loss of $0.4 million of which our share is $0.2 million, which was
recorded as a Non-operating expense under the heading of “Expense for affiliated operations, net,” but
which was offset by the amortization of an equal amount of the original deferred gain on the sale of
technology to the Joint Venture.
We have elected to treat the cash distribution of $11.0 million as a deferred gain, being amortized
to the extent that losses are attributable from the Joint Venture under the equity method described above.
When and if the Joint Venture is profitable on a sustainable basis and future operating losses are not
anticipated, then we will recognize as a gain, the portion of the $11.0 million, which is un-amortized. To
the extent that it is possible that we will have any future-funding obligation relating to the Joint Venture,
then the relevant amount of the $11.0 million will be deferred until such time, the funding obligation no
longer exists. Both our share of profits (losses) under the equity method and the amortization of our $11.0
million deferred gain are recorded under the heading of "Expense for affiliated operations, net" in Non-
operating income (expense).
For further information, see ‘Recent Business Developments – Caterpillar Joint Venture’ section
of Item 7 in this Report.
Recent Business Developments
Caterpillar Joint Venture
On April 1, 2002, Caterpillar Trimble Control Technologies LLC, a Joint Venture formed by
Trimble and Caterpillar, began operations. The Joint Venture, 50 percent owned by Trimble and 50 percent
owned by Caterpillar, with equal voting rights, is developing and marketing next generation advanced
electronic guidance and control products for earthmoving machines in the construction, mining, and waste
27
industries. The Joint Venture is based in Dayton, Ohio. Under the terms of the joint venture agreement,
Caterpillar contributed $11.0 million cash plus selected technology, for a total contributed value of $14.5
million, and we contributed selected existing machine control product technologies valued at $25.5 million.
Additionally, both companies have licensed patents and other intellectual property from their portfolios to
the Joint Venture. During the first fiscal quarter of 2002, we received a special cash distribution of $11.0
million from the Joint Venture.
During fiscal year 2002, we recorded approximately $4.0 million of expenses under the heading of
"Expense for affiliated operations, net" in Non-operating income (expense) related to certain transactions
between the Joint Venture and us. This was comprised of approximately $4.9 million of incremental costs
incurred by us as a result of purchasing products from the Joint Venture at a higher transfer price than our
original manufacturing costs, offset by approximately $0.9 million of contract manufacturing fees charged
to the Joint Venture by us. Due to the nature of the transfer price agreements between Trimble and the
Joint Venture, a related party, the impact of these agreements is classified under Non-operating income
(expense).
In addition, during fiscal year 2002, we recorded lower operating expenses of approximately $4.2
million due to the transfer of employee-related expenses for research and development ($2.8 million), and
sales, marketing and administrative functions ($1.4 million) to the Joint Venture. These employees are
devoted to the Joint Venture and are primarily engaged in developing next generation products and
technology for that entity.
Acquisition of LeveLite Technology, Inc
On August 15, 2002, we acquired LeveLite Technology, Inc. (“LeveLite”), a California
corporation, for approximately $5.7 million. This strategic acquisition complements our entry-level
construction instrument product line. The purchase price consisted of 437,084 shares of our common stock.
The merger agreement provides for Trimble to make additional earn-out payments not to exceed $3.9
million (in common stock and cash payment) based on future revenues derived from existing product sales
to a certain customer. On January 22, 2003, we issued the first earn-out payment (stock and cash
combination) with a fair market value of approximately $0.4 million, related to the earn-out for the quarter
ended January 3, 2003. Also, if we receive any proceeds from a pending litigation, a portion will be paid
to the former shareholders of LeveLite. The additional payments, if earned, will result in additional
goodwill.
28
Results From Continuing Operations Excluding Infrequent, And Acquisition Related Adjustments
Income (loss) from continuing operations include certain infrequent and acquisition-related
charges that management believes are not reflective of on-going operations. The following table, which
does not purport to present the results of continuing operations in accordance with generally accepted
accounting principles, reflects results of operations to exclude the effects of such items as follows (in
thousands):
Fiscal Years Ended
Income (loss) before income taxes from continuing
operations
Infrequent and acquisition-related charges:
Loss on sale of business (other income and
expense)
Amortization of goodwill and other purchased
intangibles
Restructuring charges
Gain on sale of minority investment
(other income and expense)
Inventory purchase accounting adjustment
(cost of sales)
Debt extinguishment costs (interest
income and expense)
Write down of investment
(other income and expense)
Facility relocation costs – Boulder, Colorado
(general and administrative)
Total infrequent and acquisition-related charges
Adjusted income before income taxes from
continuing operations
Income tax provision
Adjusted net income
Results Of Continuing Operations
January 3,
2003
December 28, December 29,
2001
2000
$13,824
$(21,592)
$15,760
—
8,300
1,099
(165)
—
—
1,453
113
29,389
3,599
—
13,407
—
(270)
(1,274)
—
—
136
4,600
1,185
—
—
10,687
—
32,967
917
18,835
24,511
3,500
$ 21,011
11,375
1,900
$ 9,475
34,595
3,460
$ 31,135
Our annual revenues from continuing operations decreased from $475.3 million in fiscal 2001 to
$466.6 million in fiscal 2002. In fiscal 2001, our annual revenues from continuing operations increased to
$475.3 million from $369.8 million in fiscal 2000. In fiscal 2002, we had net income from continuing
operations of $10.3 million, or $0.36 diluted earnings per share, compared to a net loss of $23.5 million, or
$0.95 loss per share, in fiscal 2001, and a net income from continuing operations of $14.2 million, or $0.55
diluted earnings per share, in fiscal 2000. The total net income for fiscal 2002, including discontinued
operations, was $10.3 million, or $0.36 diluted earnings per share, compared to a total net loss for 2001,
including discontinued operations of $22.9 million, or $0.93 loss per share, and a total net income for fiscal
2000, including discontinued operations of $14.2 million, or $0.55 diluted earnings per share. A summary
of financial data by business segment is as follows.
The following table shows revenue and operating income by segment for the periods indicated and
should be read in conjunction with the narrative descriptions below. Operating income by segment
excludes unallocated corporate expenses, which are comprised primarily of general and administrative
costs, amortization of goodwill and other purchased intangibles as well as other items not controlled by the
business segment.
29
In the first fiscal quarter of fiscal 2002, we realigned two of our reportable segments and therefore
the following table shows restated revenue and operating income by segment to reflect this realignment.
The Agriculture segment was combined with the Mapping and GIS business to form Field Solutions.
Mapping and GIS were previously part of Fleet and Asset Management. The Mobile Positioning business
that was part of Fleet and Asset Management is now Mobile Solutions.
We began breaking out Mobile Solutions as a separate reporting segment during the first quarter
of 2002 to address the growing importance of the mobile asset management business and its impact on our
profitability. At the same time, we combined our GIS and Agriculture businesses to create a new segment
called Field Solutions in order to recognize the synergies and similar product requirements between the two
businesses.
Fiscal Years Ended
(Dollars in thousands)
Engineering and Construction
Revenue
Segment operating income
from continuing operations
Segment operating income
as a percent of segment
revenue
Field Solutions
Revenue
Segment operating income
from continuing
operations
Segment operating income
(loss) as a percent of
segment revenue
Mobile Solutions
Revenue
Segment operating loss
from continuing operations
Segment operating loss
as a percent of segment
revenue
Component Technologies
Revenue
Segment operating income
from continuing operations
Segment operating income
as a percent of segment
revenue
Portfolio Technologies
Revenue
Segment operating income
from continuing operations
Segment operating income
as a percent of segment
revenue
Total Revenue
Total Segment operating
income from continuing
operations
January 3,
2003
% of
Total
Revenue
December 28,
2001
% of
Total
Revenue
December 29,
2000
% of
Total
Revenue
$ 305,490
66% $ 303,944
64%
$ 195,150
53%
54,931
18%
51,625
17%
43,937
23%
67,259
14%
68,519
14%
70,652
19%
12,395
13,652
19,834
18%
8,486
(10,830)
(128%)
20%
28%
2%
13,791
3%
20,471
6%
(8,966)
(65%)
(369)
(2%)
59,755
13%
58,083
12%
60,230
16%
11,290
19%
10,882
19%
14,850
25%
25,612
5% 30,955
7% 23,295
6%
5,072
4,037
965
20%
$466,602
13%
$475,292
4%
$369,798
$72,858
$71,230
$79,217
30
A reconciliation of our consolidated segment operating income from continuing operations to consolidated
income (loss) before income taxes from continuing operations follows:
Fiscal Years Ended
(In thousands)
Consolidated segment operating income from
continuing operations
Unallocated corporate expense
Amortization of goodwill and other purchased
intangible assets
Restructuring charges
Non-operating expense, net
Income (loss) from continuing operations before
income taxes
January 3,
2003
December 28,
2001
December 29,
2000
$ 72,858
(29,636)
$ 71,230
(38,061)
$ 79,217
(39,591)
(8,300)
(1,099)
(19,999)
(29,389)
(3,599)
(21,773)
(13,407)
-
(10,459)
$ 13,824
$ (21,592)
$ 15,760
Basis of Presentation
We have a 52-53 week fiscal year, ending on the Friday nearest to December 31, which for fiscal
2002 was January 3, 2003. Fiscal 2002 was a 53-week year and as a result, we recorded an extra week of
revenues, costs, and related financial activities.
Therefore, the financial results of fiscal year 2002, having the extra week, will not be exactly
comparable to the prior and subsequent 52-week fiscal years. Thus, due to the inherent nature of adopting a
52-53 week fiscal year, Trimble, 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. Fiscal years 2001 and 2000 were both comprised of
52-weeks.
Revenue
In fiscal 2002, total revenue decreased by $8.7 million or 1.8% to $466.6 million from $475.3
million in fiscal 2001. The decrease in fiscal 2002 was primarily due to the reduction of revenue in Mobile
Solutions and Portfolio Technologies. Total revenue in fiscal 2001 increased by $105.5 million or 28.5% to
$475.3 million from $369.8 million in fiscal 2000, primarily due to the full-year revenue effect of the
Spectra Precision Group, acquired in July 2000.
31
Engineering and Construction
Revenue
Engineering and Construction revenues increased by $1.5 million or 0.5% during fiscal 2002 as
compared to fiscal 2001 due to the following:
•
•
•
Revenues increased due to the LeveLite acquisition by $3.6 million;
Strong performance by our machine control product offering as we continue to penetrate the after-
market for machine guidance on earthmoving equipment;
Increased revenues were partially offset by a reduction in revenues in several other product areas
due to continued difficult global economic conditions.
Engineering and Construction revenues increased by $108.8 million or 56% in fiscal 2001 over
fiscal 2000 due to the following:
•
•
•
In fiscal 2001, we recorded a full year of revenues generated from the Spectra Precision Group
compared to approximately half-year results in fiscal 2000, which accounted for approximately
$85.0 million;
Strong demand for our land survey product line primarily due to the introduction of the Trimble
ToolboxTM in the first fiscal quarter of 2001;
Higher demand for GPS machine guidance equipment.
Operating Income
Engineering and Construction operating income increased by $3.3 million or 6.4% in fiscal 2002
over fiscal 2001 due to the following:
•
•
A reduction of $4.2 million of operating expenses, due to the transfer of employee-related
expenses to Caterpillar Trimble Control Technologies;
Higher revenues and lower operating expenses were partially offset by a reduction in gross margin
as a result of product sales mix during fiscal 2002.
Engineering and Construction operating income increased by $7.7 million or 17% in fiscal 2001
over fiscal 2000 due to the following:
•
•
Fiscal 2001 included a full year of revenue from the Spectra Precision Group acquisition and the
benefits of the consolidation of product lines in the Engineering and Construction business areas;
The worldwide cost reduction program, implemented as part of Trimble and the Spectra Precision
Group integration, also favorably impacted operating income.
Field Solutions
Revenue
Field Solutions experienced a revenue decline in fiscal 2002 of $1.3 million or 1.9% compared
with fiscal 2001 due to the following:
•
Overall revenue decreased during the year due to the decline in the United States federal, state,
and local government spending and a delay in the release of the new GeoExplorer® CE Series due
to component supply issues;
32
•
This decrease was partially offset by the increased demand for both the manual and auto guidance
product lines.
Field Solutions revenue decreased by $2.1 million or 3% in fiscal 2001 over fiscal 2000 due to the
following:
•
•
Small decrease in GIS revenues due to lower demand in the second half of fiscal 2001;
Significant decrease in price points in the Agriculture market on flat demand.
Operating Income
Field Solutions operating income decreased by $1.3 million or 9.2% in fiscal 2002 over fiscal
2001 due to the following:
•
•
Lower revenues primarily from the decrease in government spending described above;
Lower gross margin due to product sales mix, which was more weighted toward the relatively
lower margin Agricultural business area.
Field Solutions operating income decreased by $6.2 million or 31.2% in fiscal 2001 over fiscal
2000 due to the following:
•
•
•
A product mix shift toward lower-priced products with a general reduction in prices;
Overall weak demand in the agricultural market in fiscal 2001;
The startup development, selling, and support costs associated with the ramp up of the Autopilot
product line.
Mobile Solutions
Revenue
Mobile Solutions revenues decreased by $5.3 million or 39% in fiscal 2002 over fiscal 2001 due to
the following:
•
•
•
•
Revenue reduction of approximately $3 million in our satellite communications business as a
result of our decision to discontinue the GalaxyTM Inmarsat-C product line in early 2001;
Slow down in system integration projects due to reduced spending at municipalities;
Reduced sales of wireless products of $0.9 million due to a transition from a sensor provider to a
fully integrated service provider;
Sales of some product lines were down as a result of the economic slow down and the shift of
technology from analog to digital.
Mobile Solutions revenues decreased by $6.7 million or 33% in fiscal 2001 over fiscal 2000 due to
the following:
•
A reduction of approximately $3.7 million in our GalaxyTM Inmarsat-C line due to the
announcement of our intention to discontinue certain of these product lines in early 2001,
Mexico’s satellite communications systems capacity limitations, and the general economic slow-
down;
33
•
Sales of the CrossCheck and Placer™ receiver product lines were down by approximately $3.0
million as a result of the economic slow down.
Operating Loss
Mobile Solutions operating loss increased by $1.9 million or 21% in fiscal 2002 over fiscal 2001
due to the following:
•
•
Lower revenues as described above;
Increased costs incurred in the development and marketing of a service platform to enable a range
of asset management solutions.
Mobile Solutions operating loss increased by $8.6 million in fiscal 2001 over fiscal 2000 due to
the following:
•
•
•
Lower revenues as described above;
Decrease in margins due to the sell-off of existing Satcom inventory at reduced prices;
Significant costs incurred in the development of a service platform to enable a range of asset
management solutions including an Internet delivered, cellular-based solution for vehicle fleet
management.
Component Technologies
Revenue
Component Technologies revenues increased by $1.7 million or 3% in fiscal 2002 over fiscal 2001
due to the following:
•
•
•
Timing revenue increased $4.6 million in fiscal 2002 over fiscal 2001 due to significant demand
during the second half of fiscal 2002 from new and existing wireless infrastructure customers;
In-vehicle navigation revenue decreased $1.0 million in fiscal 2002 over fiscal 2001 as average
selling prices declined by more than 9%;
License revenue decreased $1.7 million in fiscal 2002 over fiscal 2001 due to an expired license
contract.
Component Technologies revenues decreased by $2.1 million or 4% in fiscal 2001 over fiscal
2000 due to the following:
•
•
•
Embedded product lines were down approximately $2.7 million due to the economic slowdown;
Timing product
telecommunications market;
In-vehicle navigation sales increased by approximately $0.9 million. Volume grew by 29%, which
was offset by a decrease of 19% in an average selling price of these products during the year.
lines were down by $1.5 million due
to reduced spending
the
in
34
Operating Income
Component Technologies operating income increased by $0.4 million or 4% in fiscal 2002 over
fiscal 2001 due to the following factors:
•
•
Higher gross margins resulting from higher revenues and favorable product mix;
This increase was partially offset by higher operating expenses, primarily in research &
development and marketing.
Component Technologies operating income decreased by $4.0 million or 27% in fiscal 2001 over
fiscal 2000 due to the following:
•
•
Lower revenue as described above;
Higher expenses primarily due to new product development and channel development.
Portfolio Technologies
Revenue
Portfolio Technologies revenues decreased by $5.3 million or 17 % in fiscal 2002 over fiscal 2001
due to the following:
•
•
Reduction of $4.4 million due to the sale of our air transport product line to Honeywell in fiscal
2001;
Revenues from the military business declined by $1.1 million.
Portfolio Technologies revenues increased by $7.7 million or 33% in fiscal 2001 over fiscal 2000
due to the following:
•
•
In fiscal 2001, Trimble experienced a full year of revenues generated from the purchase of Tripod
Data Systems as compared to one and one-half months in fiscal 2000, which accounted for an
increase of approximately $12.2 million;
The above increase was partially offset by a $4.5 million reduction in our commercial aviation
product line during fiscal 2001. The sale of the air transport product line to Honeywell was
completed in March 2001.
Operating Income
Portfolio Technologies operating income increased by $1 million or 26% in fiscal 2002 over fiscal
2001 due to the following:
•
Increased operating performance from Tripod Data Systems business.
Portfolio Technologies operating income increased by $3.1 million or 318% in fiscal 2001 over
fiscal 2000 primarily due to the following:
•
An incremental increase resulting from a full years operating results of Tripod Data Systems
acquired on November 14, 2000.
35
International Revenues
Sales to unaffiliated customers outside the United States comprised approximately 49% in 2002,
50% in 2001, and 52% in 2000. During the 2002 fiscal year, North and South America represented 55%,
Europe, the Middle East and Africa represented 32%, and Asia represented 13%. In fiscal 2002, the United
States comprised approximately 51% and Germany 16% of sales to unaffiliated customers. We anticipate
that sales to international customers will continue to account for a significant portion of our revenue. For
this reason, we are subject to the risks inherent in these foreign sales, including unexpected changes in
regulatory requirements, exchange rates, governmental approval, tariffs, or other barriers. Even though the
U.S. Government announced on March 29, 1996, that it supports and maintains the GPS system, and on
May 1, 2000, stated that it has no intent to ever again use Selective Availability (SA), a method of
degrading GPS accuracy, there may be reluctance in certain foreign markets to purchase such products
given the control of GPS by the U.S. Government. Our results of operations could be adversely affected if
we were unable to continue to generate significant sales in locations outside the U.S.
No single customer accounted for 10% or more of our total revenues in fiscal 2002, 2001, and
2000. 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
Gross margin varies due to a number of factors including product mix, international sales mix,
customer type, the effects of production volumes and fixed manufacturing costs on unit product costs, and
new product start-up costs. Gross margin as a percentage of total revenues was 50.2% in fiscal 2002 and
49.9% in fiscal 2001. The slight increase in gross margin percentage for fiscal 2002, compared with fiscal
2001, was due partially to approximately $3.3 million of additional charges associated with the write-down
of excess and obsolete inventory in fiscal 2001, related to the rationalization and simplification of product
lines, and partially due to inventories in excess of our forecasted 12-month demand.
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. In addition, should the global
economic conditions deteriorate further, gross margin could be further adversely impacted.
Operating Expenses
The following table shows operating expenses for the periods indicated and should be read in
conjunction with the narrative descriptions of those operating expenses below:
Fiscal Years Ended
(In thousands)
January 3,
2003
December 28,
2001
December 29,
2000
Research and development
Sales and marketing
General and administrative
Restructuring charges
Amortization of goodwill and other purchased intangible assets
Total
$ 61,232
89,344
40,634
1,099
8,300
$ 200,609
$ 62,881
103,778
37,407
3,599
29,389
$ 237,054
$ 46,520
79,901
30,514
--
13,407
$ 170,342
36
Research and Development
Research and development spending decreased by $1.6 million during fiscal 2002 and represented
13% of revenue, consistent with 13% in fiscal 2001 due primarily to:
•
The transfer of employee-related expenses to the Caterpillar joint venture of approximately $2.8
million, partially offset by an increase in engineering expenses associated with the introduction of
new products.
Research and development spending increased by $16.4 million during fiscal 2001, and
represented 13% of revenue, consistent with 13% in fiscal 2000 due primarily to the following:
•
•
In fiscal 2001, we experienced a full year of operations of the Spectra Precision Group compared
with half a year in fiscal 2000, which accounted for approximately $11.7 million of the increase;
The increase was also due to approximately $5.0 million related to a full year of operations of
Tripod Data Systems in fiscal 2001 compared with one and one-half months for fiscal 2000, as
well as the inclusion of Grid Data for approximately nine months in fiscal 2001.
*
future success and expects to continue its active development of new products.
We believe that the development and introduction of new products are critical to the Company’s
Sales and Marketing
Sales and marketing expense decreased by $14.4 million in fiscal 2002 and represents 19% of
revenue, compared with 22% in fiscal 2001 due primarily to the following:
•
•
During fiscal 2001, we sold off many of our direct sales offices, which decreased sales and
marketing expenses by approximately $7.0 million for fiscal 2002;
A decrease in overall compensation, travel, advertising, promotional, and trade show expenses of
approximately $7.4 million for fiscal 2002 compared to the corresponding period in fiscal 2001.
Sales and marketing expense increased by $23.9 million in fiscal 2001 and represents 22% of
revenue, consistent with 22% in fiscal 2000 primarily due to the following:
•
Inclusion of a full year of operations of the Spectra Precision Group as compared with half a year
in fiscal 2000, which accounted for approximately $23.1 million of the increase.
*
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
General and administrative expense increased by $3.2 million in fiscal 2002 representing 9% of
revenue, compared with 8% in fiscal 2001 primarily due to the following:
•
•
Increase in bad debt provisions related to customers in an uncertain economic environment;
Bad debt expenses for accounts written off during the year due to customer defaults.
37
General and administrative expense increased by $6.9 million in fiscal 2001 representing 8% of
revenue, consistent with 8% in fiscal 2000 due primarily to the following:
•
•
In fiscal 2001, we experienced a full year of operations of the Spectra Precision Group as
compared with half a year in fiscal 2000, which accounted for approximately $5.6 million of the
increase;
The increase was also due to approximately $0.9 million related to a full year of operations of
Tripod Data Systems in fiscal 2001, as compared with one and one-half months for fiscal 2000.
Restructuring Charges
Restructuring charges of $1.1 million were recorded in fiscal 2002 and $3.6 million were recorded
in fiscal 2001, which related to severance costs. As a result of these actions, our headcount decreased in
fiscal 2002 by 49 and in fiscal 2001 by 207 individuals. As of January 3, 2003, all of the restructuring
charges have been paid.
Amortization of Goodwill, Purchased and Other Intangible Assets
Fiscal Years Ended
(in thousands)
Amortization of goodwill
Amortization of purchased intangibles
Amortization of other intangible assets
Total amortization of goodwill, purchased, and
January 3,
2003
December 28,
2001
December 29,
2000
$ -
8,300
868
$ 7,647
21,742
917
$ 3,116
10,291
930
other intangible assets
$ 9,168
$ 30,306
$ 14,337
We adopted SFAS No. 142 on January 1, 2002. As a result, goodwill is no longer amortized and
intangible assets with indefinite lives with net book value of $73.6 million were reclassified to goodwill.
Amortization expense of goodwill, purchased and other intangibles decreased in fiscal 2002 by
approximately $21.1 million representing 2% of revenue, compared with 6% in fiscal 2001. The decrease
was primarily due to the adoption of FAS 142 that does not require the amortization of goodwill and
intangible assets with indefinite lives.
Amortization expense of goodwill and other purchased intangibles increased in fiscal 2001 by
approximately $16.0 million representing 6% of revenue, compared with 4% in fiscal 2000. The increase
was primarily due to the acquisition of the Spectra Precision Group in July 2000, which resulted in a year-
over-year increase of approximately $15.0 million in goodwill and intangibles amortization.
38
Non-operating Expense, Net
The following table shows Non-operating expenses, net for the periods indicated and should be
read in conjunction with the narrative descriptions of those expenses below:
Fiscal Years Ended
(in thousands)
January 3,
2003
December 28, December 29,
2001
2000
Interest income
Interest expense
Foreign exchange loss
Expenses for affiliated operations, net
Other expense
Total
$ 659
(14,710)
(823)
(3,954)
(1,171)
$ (19,999)
$ 1,118
(22,224)
(237)
-
(430)
$ 4,478
(14,438)
(376)
-
(123)
$ (21,773) $ (10,459)
Non-operating expense, net decreased by $1.8 million during fiscal 2002 as compared with fiscal
2001. The primary reasons for the decrease were as follows:
•
•
Decrease in net interest expense of $7.1 million due to significant repayment of debt balances
during the year of approximately $52 million, combined with the effect of lower interest rates;
This was partially offset by expenses recorded for affiliated operations of $4.0 million as a result
of transfer pricing effects on transactions between Trimble and CTCT, an increase in foreign
exchange loss of $0.6 million, and a write-down of minority investment of $1.5 million.
Non-operating expense, net increased by $11.3 million during fiscal 2001 as compared with fiscal
2000. The primary reasons for the increase were as follows:
•
•
Increase in interest expenses related to loans and credit facilities incurred primarily to finance the
acquisition of the Spectra Precision Group accounted for approximately $7.8 million;
Decreased interest income resulting from the sale and maturities of short-term investments used to
finance the acquisition of the Spectra Precision Group accounted for approximately $3.4 million.
Income Tax Provision
Our effective income tax rates from continuing operations for fiscal years 2002, 2001, and 2000
were 25%, (9%) and 10%, respectively. The fiscal 2002 and 2001 income tax rates differ from the federal
statutory rate of 35%, due primarily to foreign taxes and the inability to realize the benefit of net operating
losses. The fiscal 2000 income tax rate is less than the federal statutory rate due primarily to the realization
of the benefits from prior net operating losses and previously reserved deferred tax assets.
Litigation Matters
*
In November 2001, Qualcomm Inc. filed a lawsuit against Trimble in the Superior Court of the
State of California. The complaint alleges claims for an unspecified amount of money damages arising out
of Qualcomm’s perceived lack of assurances in early 1999 that our products purchased by Qualcomm
would work properly after a scheduled week number rollover event that took place in August of 1999.
Qualcomm is the only customer to make a claim against us based on the week number rollover event. In
our opinion, the resolution of this lawsuit is not expected to have a material adverse effect on our overall
financial position.
39
We are also a party to other disputes 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.
Off-Balance Sheet Financings and Liabilities
Other than lease commitments incurred in the normal course of business, we do not have any off-
balance sheet financing arrangements or liabilities. 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 year ended
(dollars in thousands)
Cash and cash equivalents
As a percentage of total assets
Accounts receivable days sales outstanding (DSO)
Inventory turns per year
Cash provided by operating activities
Cash used by investing activities
Cash provided (used) by financing activities
Net decrease in cash and cash equivalents
January 3,
2003
December 28,
2001
December 29,
2000
$28,679
6.5%
58
5.3
$35,096
$(5,766)
$(31,729)
$(2,399)
$ 31,078
7.4%
55
4.1
$ 25,093
$(11,441)
$(23,450)
$ (9,798)
$ 40,876
8.4%
57
4.2
$ 19,835
$(167,180)
$ 138,957
$ (8,388)
In fiscal 2002, our cash and cash equivalents decreased by $2.4 million from fiscal 2001. We
repaid $52.1 million of our debt outstanding. This was financed by the issuance of common stock of
approximately $21.4 million and cash generated from operating activities of approximately $35.1 million.
We also used approximately $7.2 million for capital expenditures.
At January 3, 2003, our debt mainly consisted of $67.6 million outstanding under senior secured
credit facilities, and $69.1 million outstanding under the subordinated promissory note related to the
acquisition of the Spectra Precision Group. We have relied primarily on cash provided by operating
activities to fund capital expenditures and other investing activities.
On March 20, 2002, we used $21.4 million of net proceeds from our private placement to retire
accrued interest and principal under our subordinated note with Spectra-Physics Holdings, Inc., a
subsidiary of Thermo Electron Corporation, reducing the outstanding principal amount to $68.7 million. In
addition, we renegotiated the terms of the subordinated note. Under the revised agreement, the maturity of
the note was extended until July 14, 2004, at the current interest rate of approximately 10.4% per year. In
connection with the amendment, on March 20, 2002 we agreed to issue to Thermo Electron a five-year
warrant to purchase 200,000 shares of our common stock at an exercise price of $15.11. Under the five-
year warrant, the total number of warrants issued will not exceed 376,233 shares. On a quarterly basis
beginning July 14, 2002, Spectra-Physics’ warrant became exercisable for an additional 250 shares of
common stock for every $1 million of principal and interest outstanding until the note is paid off in full.
These shares are purchasable at a price equal to the average of our stock’s closing price for the five days
immediately preceding the last trading day of each quarter. On July 14, 2002 an additional 17,364 shares
became exercisable at an exercise price of $14.46 per share. On October 14, 2002 an additional 17,824
shares became exercisable at an exercise price of $9.18. On January 14, 2003 an additional 18,284 shares
became exercisable at an exercise price of $13.54. These additional shares are exercisable over a 5-year
period. The approximate fair value of the warrants of $1.5 million was determined using the Black-Scholes
pricing model with the following assumptions: contractual life of 5-year period; risk-free interest rate of
40
4%; volatility of 65%; and no dividends during the contractual term. The value of the warrants is amortized
to interest expense over the term of the subordinated note.
*
In fiscal 2002, cash provided by operating activities was $35.1 million, as compared to
$25.1 million in fiscal 2001. The increase of $10 million was primarily due to a one-time special cash
distribution of $11 million from Caterpillar Trimble Control Technologies upon its formation in the first
quarter of fiscal 2002. Trimble's ability to continue to generate cash from operations will depend in large
part on revenues, the rate of collections of accounts receivable, and profitability. Both the inventory turns
and accounts receivable days sales outstanding metrics were similar at the end of fiscal 2002 to the fiscal
2001 level.
Cash flows used in investing activities were $5.8 million in fiscal 2002 as compared to $11.4
million in fiscal 2001, mostly due to investment activities associated with the acquisition of an additional
25 percent equity interest in Terrasat, a German Corporation, and the acquisition in property and equipment
partially offset by cash acquired through LeveLite acquisition. Cash used in investing activities in fiscal
2001 included amounts paid for the Grid Data acquisition.
Cash used in financing activities was $31.7 million in fiscal 2002, as compared to $23.5 million in
fiscal 2001. During fiscal 2002, we made $52.1 million of payments against our debt outstanding. These
payments were offset by proceeds from the issuance of common stock to employees pursuant to our stock
option plan and employee stock purchase plan of $4.1 million, as well as issuance of common stock under a
private equity placement of $17 million.
In July 2000, we obtained $200 million of senior, secured credit facilities (the "Credit Facilities")
from a syndicate of banks to support our acquisition of the Spectra Precision Group, the Company's
ongoing working capital requirements, and to refinance certain existing debt (see Note 10 of the Notes to
the to the Consolidated Financial Statements). The Credit Facilities consisted of $100 million available as
a term loan and $100 million available under the two revolvers. On January 14, 2003, Trimble executed an
Amended and Restated Credit Agreement, which restructured the $100 million revolver into four Tranches.
Tranches A and C belong to the $50 million U.S. dollar revolver and Tranches B and D belong to the $50
million multi-currency revolver. Allocated to Tranche A is $12,500,000 with an expiration date of July 14,
2003 and allocated to Tranche C is $37,500,000 with an expiration date of April 7, 2004. Allocated to
Tranche B is $1,500,000 with an expiration date of July 14, 2003 and allocated to Tranche D is
$48,500,000 with an expiration date of April 7, 2004. As a result, the $100 million revolver will remain in
effect through July 14, 2003 and be reduced to $86 million for the period starting July 15, 2003 through
April 7, 2004. As of January 3, 2003, outstanding balance under the revolver was $35 million and under the
term loan was $32.6 million.
The Credit Facilities are secured by all material assets of our company, except for assets that are
subject to foreign tax considerations. Financial covenants of the Credit Facilities include leverage, fixed
charge, and minimum net worth tests and all were amended during the third quarter of fiscal 2002. At
January 3, 2003, and as of the date of this report, we are in compliance with debt covenants. The amounts
due under the revolver loans are paid as the loans mature, and the loan commitment fees are paid on a
quarterly basis. Under the five-year term loan portion of the Credit Facility, we are due to make payments
(excluding interest) of approximately $24 million in fiscal 2003 and the remaining $8.6 million in fiscal
2004.
*
We believe that our cash and cash equivalents, together with our credit facilities, will be sufficient
to meet our anticipated operating cash needs for at least the next twelve months. At January 3, 2003, we
had $28.7 million of cash and cash equivalents, as well as access to $65 million of cash under the terms of
our revolver loans.
Under the terms of the Credit Facilities, we are currently restricted from paying dividends and are
limited as to the amount of our common stock that we can repurchase. We are allowed to pay dividends and
repurchase shares of our common stock up to 25% of net income in the previous fiscal year. We have
obligations under non-cancelable operating leases for our office facilities (see Note 11 of the Notes to the
41
Consolidated Financial Statements). In fiscal 2003, the payments under these non-cancelable operating
leases are expected to be approximately $12.1 million.
*
We expect fiscal 2003 capital expenditures to be approximately $8 million to $11 million,
primarily for computer equipment, software, 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.
The following table summarizes our future repayment obligations (excluding interest):
January 3, 2003
(in thousands)
Credit facilities:
Five year term loan
U.S. and multi-currency
revolving credit facility
Subordinated note
Promissory note and other
Total contractual cash obligations
Total
2003
2004
2005
2006
2006 and
Beyond
$32,600 $ 24,000
$8,600
$ -
$ - $ -
35,000 6,550
69,136
-
1,789 110
28,450
69,136
110
$ 30,660 $ 106,296
$138,525
-
-
110
-
-
-
-
1,349
110
$ 110 $ 110 $ 1,349
Our future minimum payments required under non-cancelable operating leases are follows:
(In thousands)
2003
2004
2005
2006
2007
Thereafter
Total
Operating
Lease Payments
$ 12,067
7,438
6,958
1,795
1,461
5,115
$ 34,834
New Accounting Standards
We adopted Statement of Financial Accounting Standards (“SFAS”) No. 141, Business
Combinations, and SFAS No. 142, Goodwill and Other Intangible Assets, at the beginning of fiscal 2002.
Application of the non-amortization provisions of SFAS No. 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 the prior year. We reclassified identifiable intangible assets with indefinite lives with net
book value of $73.6 million, as defined by SFAS No. 142, to goodwill at the date of adoption. We tested
goodwill for impairment using the two-step process prescribed in SFAS No. 142. The first step is a screen
for potential impairment, while the second step measures the amount of the impairment, if any. No
impairment charge resulted from the impairment tests.
In October of 2001, the FASB issued SFAS No.144, "Accounting for the Impairment or Disposal
of Long-lived Assets,” which amends accounting guidance on asset impairment and provides a single
accounting model for long-lived assets to be disposed of. Among other provisions, the new rules change
42
the criteria for classifying an asset as held-for-sale. The standard also broadens the scope of businesses to
be disposed of that qualify for reporting as discontinued operations, and changes the timing of recognizing
losses on such operations. We adopted SFAS No. 144 at the beginning of fiscal 2002. The effect of
adopting SFAS No. 144 did not have a material impact on our financial position or results of operations.
In July of 2002, the FASB issued SFAS No. 146, “Accounting for Costs Associated with Exit or
Disposal Activities.” SFAS No. 146 addresses the financial accounting and reporting for obligations
associated with an exit activity, including restructuring, or with a disposal of long-lived assets. Exit
activities include, but are not limited to, eliminating or reducing product lines, terminating employees and
contracts, and relocating plant facilities or personnel. SFAS No. 146 specifies that a company will record a
liability for a cost associated with an exit or disposal activity only when that liability is incurred and can be
measured at fair value. Therefore, commitment to an exit plan or a plan of disposal expresses only our
intended future actions and, therefore, does not meet the requirement for recognizing a liability and the
related expense. SFAS No. 146 is effective prospectively for exit or disposal activities initiated after
December 31, 2002, with earlier adoption encouraged. We do not anticipate that the adoption of SFAS No.
146 will have a material effect on our financial position or results of operations.
In November of 2002, the FASB issued FASB Interpretation (“FIN”) No. 45, "Guarantor's
Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of
Others." FIN No. 45 requires that a liability be recorded in the guarantor's balance sheet upon issuance of a
guarantee. In addition, FIN No. 45 requires disclosures about the guarantees that an entity has issued,
including a roll-forward of the entity's product warranty liabilities. We will apply the recognition provisions
of FIN No. 45 prospectively to guarantees issued after December 31, 2002.
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.
Changes in our product warranty liability during the 12 months, ended January 3, 2003 are as follows:
(in thousands)
Balance at December 28, 2001 $ 6,827
2,821
Warranties accrued
(3,254)
Warranty claims
$ 6,394
Balance at January 3, 2003
Our product warranty liability is classified as accrued warranty in the accompanying balance sheet.
In November of 2002, the EITF reached a consensus on Issue No. 00-21, "Revenue Arrangements
with Multiple Deliverables." EITF Issue No. 00-21 provides guidance on how to account for arrangements
that involve the delivery or performance of multiple products, services, and/or rights to use assets. The
provisions of EITF Issue No. 00-21 will apply to revenue arrangements entered into in fiscal periods
beginning after June 15, 2003. We are currently evaluating the effect that the adoption of EITF Issue
No. 00-21 will have on our results of operations and financial condition.
In December of 2002, FASB issued FASB No. 148, “Accounting for Stock-Based Compensation
– Transition and Disclosure.” SFAS No. 148 amends FASB No. 123, “Accounting for Stock-Based
Compensation,” to provide alternative methods of transition for an entity that changes to the fair value
method of accounting for stock-based employee compensation. In addition, SFAS No. 148 amends the
disclosure provisions of SFAS No. 123 to require expanded and more prominent disclosure of the effects of
43
an entity's accounting policy with respect to stock-based employee compensation. This disclosure is
required in the summary of significant accounting policies footnote or its equivalent in annual and interim
financial statements. SFAS No. 148 does not amend SFAS No. 123 to require companies to account for
their stock-based employee awards using the fair value method. As discussed in Note 1 of the Notes to the
Consolidated Financial Statements, for purposes of pro forma disclosures, we amortized the estimated fair
value of the options 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. The effects on pro forma
disclosure of applying SFAS No. 123 are not likely to be representative of the effects on pro forma
disclosure of future years.
In January of 2003, the FASB issued FIN No. 46, "Consolidation of Variable Interest Entities."
FIN No. 46 requires a variable interest entity to be consolidated by a company if that company is subject to
a majority of the risk of loss from the variable interest entity’s activities or entitled to receive a majority of
the entity's residual returns or both. The consolidation requirements of FIN No. 46 apply immediately to
variable interest entities created after January 31, 2003. The consolidation requirements apply to older
entities in the first fiscal year or interim period beginning after June 15, 2003. We are currently evaluating
the provisions of FIN No. 46; however, we do not believe as of January 3, 2003, the Company has any
investments in variable interest entities.
Risks And Uncertainties
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 accruals. 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, 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.
44
We Are Dependent on a Sole Manufacturer and Assembler for Many of Our Products and on Sole
Suppliers of Critical Parts for Our Products.
Since August 1999, we have been substantially dependent upon Solectron Corporation as the
exclusive 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 sixty calendar days in advance of the scheduled delivery of products to
our customers. Although purchase orders placed with Solectron are cancelable, the terms of the agreement
would require us to purchase from Solectron all material 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 expires in August of 2003.
During the fourth quarter of 2002, Solectron began assembling some of our Component
Technology products in China. Although we believe that this initiative in China will bring significant cost
savings, we cannot predict potential effects that may result from this program.
In addition, we rely on sole suppliers for a number of our critical components. We have
experienced shortages of components in the past. As an example, we were affected by the inability of a
display supplier to provide adequate quantities to meet our requirements in the third fiscal calendar quarter of
2002 that resulted in the deferral of $2.4 million in orders into the fourth quarter of 2002. Our current reliance
on sole 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,
which 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, especially in our Mobile Solutions business
•
•
•
•
•
•
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,
45
•
•
•
our ability to attract and retain key technical and managerial employees,
the timing of shipments of products under contracts and sale of licensing rights, 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, since our Engineering
and Construction (E&C) and Geographic Information Systems (GIS) products generally have higher gross
margins than our Component Technologies (CT) products, absent other factors, a shift in sales toward E&C
and GIS products would lead to a gross margin improvement. On the other hand, if market conditions in the
highly competitive E&C and GIS market segments forced us to lower unit prices, we would suffer a decline in
gross margin unless we were able to timely offset the price reduction by a reduction in production costs or by
sales of other products with higher gross margins. A decline in gross margin could negatively impact our
earnings per share.
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.
Our Substantial Indebtedness Could Materially Restrict Our Operations and Adversely Affect Our
Financial Condition.
We now have, and for the foreseeable future expect to have, a significant level of indebtedness. Our
substantial indebtedness could:
•
•
•
•
•
increase our vulnerability to general adverse economic and industry conditions;
limit our ability to fund future working capital, capital expenditures, research and
development and other general corporate requirements, or to make certain investments that
could benefit us;
require us to dedicate a substantial portion of our cash flow to service interest and principal
payments on our debt;
limit our flexibility to react to changes in our business and the industry in which we operate;
and
limit our ability to borrow additional funds.
46
Our Credit Agreement Contains Stringent Financial Covenants.
Two of the financial covenants in our Credit Agreement with The Bank of Nova Scotia and certain
other banks, dated July 14, 2000 as amended (the “Credit Agreement”), minimum fixed charge coverage and
maximum leverage ratio, are extremely sensitive to changes in earnings before interest, taxes, depreciation
and amortization (“EBITDA”). In turn, EBITDA is highly correlated to revenues and costs. Due to
uncertainties associated with the downturn in the worldwide economy, our future revenues by quarter are
more difficult to forecast and we have put in place various cost cutting measures, including the consolidation
of service functions and centers, offices, and of redundant product lines and reductions in staff. If revenues
should decline at a faster pace than the rate of these cost cutting measures, on a quarter-to-quarter basis we
may not be in compliance with the two above-mentioned financial covenants. If we default on one or more
covenants, we will have to obtain either negotiated waivers or amendments to the Credit Agreement. If we
were unable to obtain such waivers or amendments, the banks would have the right to accelerate the payment
of our outstanding obligations under the Credit Agreement, which would have a material adverse effect on our
financial condition and viability as an operating company. In addition, a default under one of our debt
instruments may also trigger cross defaults under our other debt instruments. An event of default under any
debt instrument, if not cured or waived, could have a material adverse effect on us. In September of 2002, we
reached an agreement to ease our financial covenants. These revised covenants will remain in effect through
the term of the current credit facility. On January 14, 2003, Trimble executed an Amended and Restated
Credit Agreement, which restructured the $100 million revolver into four Tranches. Tranches A & C
belong to the $50 million US dollar revolver and Tranches B & D belong to the $50 million multi-currency
revolver. Allocated to Tranche A is $12,500,000 with an expiration date of July 14, 2003 and allocated to
Tranche C is $37,500,000 with an expiration date of April 07, 2004. Allocated to Tranche B is $1,500,000
with an expiration date of July 14, 2003 and allocated to Tranche D is $48,500,000 with an expiration date
of April 07, 2004. As a result, the $100 million revolver will remain in effect through July 14, 2003 and be
reduced to $86 million for the period starting July 15, 2003 through April 7, 2004.
We Are Dependent on Key Customers.
An increasing amount of our revenue is generated from large original equipment manufacturers such
as Siemens VDO Automotive AG, Nortel, McNeilus, Caterpillar, CNH Global, DeWalt, Hilti, and Blaupunkt.
A reduction or loss of business with these customers could have a material adverse effect on our financial
condition and results of operations. There can be no assurance that we will be able to continue to realize value
from these relationships in the future.
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 Face Risks of Entering Into and Maintaining Alliances.
We believe that in certain emerging markets our success will depend on our ability to form and
maintain alliances with established system providers and industry leaders. Our failure to form and maintain
47
such alliances, or the preemption 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 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 U.S. Government’s Global Positioning System (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, which would, in turn,
cause a material adverse effect on our operating results. Many of our products use other radio frequency
bands, together with the GPS signal, to provide enhanced GPS capabilities, such as real-time kinematics
precision. The continuing availability of these non-GPS radio frequencies is essential to provide enhanced
GPS products to our precision survey markets. Any regulatory changes in spectrum allocation or in allowable
operating conditions may materially and adversely affect the utility and reliability of our products, which
would, in turn, 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, which could result in a material adverse effect on our
operating results. 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
materially and adversely affect the utility and reliability of our products, which could result in a material
adverse effect on our business and financial condition.
We Are Subject to the Adverse Impact of Radio Frequency Congestion.
We have certain real-time kinematics products, such as our Land Survey 5700, that use integrated
radio communication technology requiring access to available radio frequencies allocated by the FCC. 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, including the state of California. An inability to obtain access to these radio
frequencies could have an adverse effect on our operating results.
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 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 28 satellites in place, some have already been in operation for 13 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.
48
In addition, there can be no assurance that the U.S. Government will remain committed to the
operation and maintenance of GPS satellites over a long period, or that the policies of the U.S. Government
for the use of GPS without charge will remain unchanged. However, a 1996 Presidential Decision Directive
marks the first time in the evolution of GPS that access for civilian use free of direct user fees is specifically
recognized and supported by Presidential policy. In addition, Presidential policy has been complemented by
corresponding legislation, signed into law. Because of ever-increasing commercial applications of GPS, other
U.S. Government agencies may become involved in the administration or the regulation of the use of GPS
signals. Any of the foregoing factors could affect the willingness of buyers of our products to select GPS-
based systems instead of products based on competing technologies.
Any resulting change in market demand for GPS products could have a material adverse effect on
our financial results. For example, European governments have expressed interest in building an independent
satellite navigation system, known as Galileo. Depending on the as yet undetermined design and operation of
this system, there may be interference to the delivery of the GPS SPS and may materially and adversely affect
the utility and reliability of our products, which could result in a material adverse effect on our business and
operating results.
We Face Risks in Investing in and Integrating New Acquisitions.
We are continuously evaluating external investments in technologies related to our business, and
have made relatively small strategic equity investments in a number of GPS-related and laser-related
technology 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. Any such problems in integration or adjustments to the
49
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 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
domestic and international 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 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 foreign 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.
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. Specifically we have experienced
strain in our financial and order management system, as a result of our acquisitions. We are expanding our
sales, accounting, manufacturing, and other information systems to meet these challenges. These systems,
procedures or controls may not be adequate to support our operations and 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.
50
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 location 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 May Encounter Problems Associated With International Operations and Sales.
Our customers are located throughout the world. Sales to unaffiliated customers in foreign locations
represented approximately 49% of our revenues in our fiscal year 2002, 50% in our fiscal year 2001 and 52%
in our fiscal year 2000. In addition, we have significant international operations, including manufacturing
facilities, sales personnel and customer support operations. Our international sales organization contains
offices in 21 foreign countries. Our international manufacturing facilities are in Sweden and Germany, and
we have a regional fulfillment center in the Netherlands. Our international presence exposes us to risks not
faced by wholly domestic companies. Specifically, we have experienced issues relating to integration of
foreign operations, greater difficulty in accounts receivable collection, longer payment cycles and currency
fluctuations. Additionally, we face the following risks, among others:
•
•
•
•
•
unexpected changes in regulatory requirements;
tariffs and other trade barriers;
political, legal and economic instability in foreign markets, particularly in those markets in which we
maintain manufacturing and research facilities;
difficulties in staffing and management;
language and cultural barriers; seasonal reductions in business activities in the summer months in
Europe and some other countries;
• war and acts of terrorism; and
•
potentially adverse tax consequences.
Although we implemented a program to attempt to manage foreign exchange risks through hedging
and other strategies, there can be no assurance that this program will be successful and that currency exchange
rate fluctuations will not have a material adverse effect on our results of operations. In addition, in certain
foreign markets, there may be reluctance to purchase products based on GPS technology, given the control of
GPS by the U.S. Government.
We are exposed to fluctuations in Currency Exchange Rates.
A significant portion of our business is conducted outside the United States, and as such, we face
exposure to adverse movements in non-U.S. currency exchange rates. These exposures may change over
time as business practices evolve and could have a material adverse impact on our financial results and cash
flows. Compared to fiscal 2001, in fiscal 2002, the US currency has weakened against other currencies.
51
Currently, we hedge only those currency exposures associated with certain assets and liabilities
denominated in nonfunctional currencies and periodically will hedge anticipated foreign currency cash
flows. The hedging activities undertaken by us are intended to offset the impact of currency fluctuations on
certain nonfunctional currency assets and liabilities. Our attempts to hedge against these risks may not be
successful resulting in an adverse impact on our net income.
The affect of the movement in foreign exchange rates has been reflected in the Cumulative
Translation Adjustment included in the Accumulative Other Comprehensive Loss under Shareholders’
Equity on our Consolidated Balance Sheet Statement located in this Report.
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, 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. During the fourth quarter of 1998, the FCC temporarily suspended the issuance of licenses for
certain of our real-time kinematics products because of interference with certain other users of similar radio
frequencies. 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.
Our Stock Price May Be Volatile.
The price of our common stock can be expected to fluctuate substantially as it has in the past. The
price could react to actual or anticipated quarterly variations in results of operations, announcements of
technological innovations or new products by us or our competitors, developments related to patents or other
intellectual property rights, developments in our relationship with customers, suppliers, or strategic partners
and other events or factors. In addition, any shortfall or changes in revenue, gross margins, earnings, or other
financial results from analysts’ expectations could cause the price of our common stock to fluctuate
significantly. Additionally, macro-economic factors as well as market climate for the high-technology sector
could also impact the trading price of our stock.
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 are exposed to market risk due to the possibility of changing interest rates under our senior
secured credit facilities. Our credit facilities are comprised of a U.S. dollar-only revolver, a multi-currency
revolver both expiring April 7, 2004, and a five-year term loan expiring July 14, 2004. Borrowings under
the 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. As of January 3, 2003, our senior debt to EBITDA (senior
leverage ratio) was approximately 1.41. At this leverage ratio our pricing on the Credit Facility is LIBOR
plus 125 basis points. The U.S. dollar and the multi-currency revolvers run through April 2004 and have
outstanding principal balances at January 3, 2003 of $25.0 million and $10.0 million, respectively. As of
January 3, 2003, we have borrowed from the Multi-Currency revolver in U.S. currency only. The term
52
loan expires on July 14, 2004 and has an outstanding principal balance of $32.6 million at January 3, 2003.
The three-month LIBOR effective rate at January 3, 2003 was 1.38%. A hypothetical 10% increase in
three-month LIBOR rates could result in approximately $93,000 annual increase in interest expense on the
existing principal balances.
In addition, we have a $1.8 million promissory note, of which $110,000 was classified as a current
liability at the end of fiscal 2002. The note is payable in monthly installments, bearing a variable interest
rate of 5.4% as of January 3, 2003. A hypothetical 10% increase in interest rates would not have a material
impact on the results of our operations.
*
The hypothetical changes and assumptions made above will be different from what actually occurs
in the future. Furthermore, the computations do not anticipate actions that may be taken by our
management should the hypothetical market changes actually occur over time. As a result, actual earnings
effects in the future will differ from those quantified above.
Foreign Currency Exchange Rate Risk
We transact business in various foreign currencies and hedges identified risks associated with
foreign currency transactions in order to minimize the impact of changes in foreign currency exchange rates
on earnings. We utilize forward contracts to hedge certain trade and inter-company receivables and
payables. 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 hedge
contracts. These hedge instruments are marked to market through earnings every period. From time to
time, we may also utilize forward foreign exchange contracts designated as cash flow hedges of operational
exposures represented by firm backlog orders to specific accounts over a specific period of time. We
record changes in the fair value of cash flow hedges in accumulated, other comprehensive income (loss),
until the firm backlog transaction ships. Upon recognition of revenue, we reclassify the gain or loss on the
cash flow hedge to the statement of operations. For the fiscal year ended January 3, 2003, we recorded a
gain of $57,000 reflecting the net change and ending balance in relation to a firm backlog hedge. The
critical terms of the cash flow hedging instruments are the same as the underlying forecasted transactions.
The changes in fair value of the derivatives are intended to offset changes in the expected cash flow from
the forecasted transactions. All forward contracts have maturity of less than 12 months.
*
our current hedging strategy.
We do not anticipate any material adverse effect on our consolidated financial position utilizing
The following table provides information about our foreign exchange forward contracts
outstanding as of January 3, 2003:
Currency
CAD
MXN
JPY
EUR
EUR
NZD
SEK
SEK
Buy/Sell
Sell
Sell
Sell
Buy
Sell
Buy
Buy
Sell
Foreign Currency
Amount
(in thousands)
1,630
5,000
751,668
(6,200)
14,939
(2,017)
(158,572)
19,836
Contract Value
USD
(in thousands)
$ 1,033
469
6,259
(6,348)
14,652
(967)
(17,099)
2,126
$ 125
Fair Value in
USD
(in thousands)
$ 1,039
475
6,302
(6,024)
15,534
(1,060)
(17,988)
2,144
$ 422
53
The following table provides information about our foreign exchange forward contracts
outstanding as of December 28, 2001:
Currency
EURO
EURO
STERLING
YEN
YEN
Buy/Sell
Sell
Buy
Buy
Sell
Buy
Foreign Currency
Amount
(in thousands)
3,769
(800)
(298)
225,000
(44,000)
Contract Value
USD
(in thousands)
$ 3,365
(716)
(423)
1,903
(363)
$ 3,766
Fair Value in
USD
(in thousands)
$ 3,332
(712)
(433)
1,714
(335)
$ 3,566
54
TRIMBLE NAVIGATION LTD
INDEX TO FINANCIAL STATEMENTS
Page in this
Annual Report
on Form 10-K
Consolidated Balance Sheets at January 3, 2003 and December 28, 2001
56
Consolidated Statements of Operations for each of the three fiscal years
in the period ended January 3, 2003
57
Consolidated Statement of Shareholders' Equity for the three fiscal years
in the period ended January 3, 2003
58
Consolidated Statements of Cash Flows for each of the three fiscal years
in the period ended January 3, 2003
59
Notes to Consolidated Financial Statements
Report of Ernst & Young LLP, Independent Auditors
60-92
93
55
ITEM 8.
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
CONSOLIDATED BALANCE SHEETS
As at
(in thousands)
ASSETS
Current assets:
Cash and cash equivalents
Accounts receivable, less allowance for doubtful accounts of
$9,900 and $8,540, respectively
Inventories, net
Other current assets
Total current assets
Property and equipment, at cost less accumulated depreciation
Goodwill, less accumulated amortization
Other intangible assets, less accumulated amortization
Deferred income taxes
Other assets
Total non-current assets
January 3,
2003
December 28,
2001
$ 28,679
$ 31,078
79,645
61,144
8,477
177,945
22,037
205,933
23,238
417
12,086
263,711
71,680
51,810
6,536
161,104
27,542
120,052
100,252
383
10,062
258,291
Total assets
$ 441,656
$ 419,395
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Bank and other short-term borrowings
Current portion of long-term debt
Accounts payable
Accrued compensation and benefits
Accrued liabilities
Accrued warranty expense
Income taxes payable
Total current liabilities
Non-current portion of long-term debt
Deferred gain on joint venture
Deferred income tax
Other non-current liabilities
Total liabilities
Commitments and Contingencies
Shareholders’ equity:
Preferred stock no par value; 3,000 shares authorized; none
outstanding
Common stock, no par value; 40,000 shares authorized;
29,309, and 26,862 shares outstanding, respectively
Accumulated deficit
Accumulated other comprehensive loss
Total shareholders’ equity
$ 6,556
24,104
30,669
17,728
21,000
6,394
6,450
112,901
$ 40,025
23,443
21,494
13,786
28,822
6,827
7,403
141,800
107,865
10,792
2,561
6,186
240,305
127,097
-
7,347
4,662
280,906
--
--
225,872
(23,495)
(1,026)
201,351
191,224
(33,819)
(18,916)
138,489
Total liabilities and shareholders’ equity
$ 441,656
$ 419,395
*See accompanying Notes to the Consolidated Financial Statements.
56
CONSOLIDATED STATEMENTS OF OPERATIONS
Fiscal Years Ended
(in thousands, except per share data)
Revenue
Cost of revenue
Gross margin
Operating expenses
Research and development
Sales and marketing
General and administrative
Restructuring charges
Amortization of goodwill and other purchased
intangible assets
Total operating expenses
Operating income from continuing
operations
Non-operating income (expense), net
Interest income
Interest expense
Foreign exchange loss
Expenses for affiliated operations, net
Other expense
Total non-operating expense, net
Income (loss) before income taxes from
continuing operations
Income tax provision
Net income (loss) from continuing operations
Gain on disposal of discontinued
operations (net of tax)
Net income (loss)
Basic earnings (loss) per share from
continuing operations
Basic earnings per share from
discontinued operations
Basic earnings (loss) per share
Shares used in calculating basic
earnings per share
Diluted earnings (loss) per share from
continuing operations
Diluted earnings per share from
discontinued operations
Diluted earnings (loss) per share
Shares used in calculating diluted
earnings per share
January 3,
2003
December 28,
2001
December 29,
2000
$ 466,602
232,170
234,432
$ 475,292
238,057
237,235
$ 369,798
173,237
196,561
61,232
89,344
40,634
1,099
8,300
200,609
33,823
659
(14,710)
(823)
(3,954)
(1,171)
(19,999)
62,881
103,778
37,407
3,599
29,389
237,054
181
1,118
(22,224)
(237)
--
(430)
(21,773)
46,520
79,901
30,514
--
13,407
170,342
26,219
4,478
(14,438)
(376)
--
(123)
(10,459)
13,824
3,500
10,324
(21,592)
1,900
(23,492)
15,760
1,575
14,185
--
$ 10,324
613
$ (22,879)
--
$ 14,185
$ 0.36
$ (0.95)
$ 0.60
--
0.02
--
$ 0.36
$ (0.93)
$ 0.60
28,573
24,727
23,601
$ 0.36
$ (0.95)
$ 0.55
--
$ 0.36
0.02
$ (0.93)
--
$ 0.55
29,052
24,727
25,976
*See accompanying Notes to the Consolidated Financial Statements.
57
CONSOLIDATED STATEMENT OF SHAREHOLDERS’ EQUITY
Common stock
and warrants
Shares
Amount
Retained
earnings
(deficit)
Accumulative
Other
Comprehensive
Income/(loss)
Total
Shareholders’
Equity
22,742
$ 126,962
$ (25,125)
$ (1,041)
$ 100,796
843
577
--
24,162
12,043
14,995
846
154,846
14,185
123
(8,045)
(10,940)
(8,963)
(22,879)
(203)
16
(9,766)
11,344
917
25,034
1,783
26,862 $ 191,224
$ (33,819) $ (18,916)
10,324
210
(17)
17,697
793
374
1,280
29,309
12,033
4,091
1,528
16,996
$ 225,872 $ (23,495)
$ (1,026)
14,185
123
(8,045)
6,263
107,059
12,043
14,995
846
134,943
(22,879)
(203)
16
(9,766)
(32,832)
102,111
11,344
25,034
$ 138,489
10,324
210
(17)
17,697
28,214
166,703
12,033
4,091
1,528
16,996
$ 201,351
(in thousands)
Balance at January 1, 2000
Components of comprehensive income (loss):
Net income
Unrealized gain on short-term investments
Foreign currency translation adjustments
Comprehensive income
Subtotal
Issuance of stock under employee plans and
exercise of warrants
Issuance of stock for acquisition
Issuance of warrants
Balance at December 29, 2000
Components of comprehensive income (loss):
Net loss
Loss on interest rate swap
Unrealized gain on investments
Foreign currency translation adjustments
Comprehensive loss
Subtotal
Issuance of stock under employee plans and
exercise of warrants
Issuance of stock in private placement
Balance at December 28, 2001
Components of comprehensive income (loss):
Net income
Gain on interest rate swap
Unrealized loss on investments
Foreign currency translation adjustments
Comprehensive income
Subtotal
Issuance of stock for acquisition
Issuance of stock under employee plans
Issuance of warrants
Issuance of stock in private placement
Balance at January 3, 2003
*See accompanying Notes to the Consolidated Financial Statements.
58
CONSOLIDATED STATEMENTS OF CASH FLOWS
Fiscal Years Ended
(In thousands)
Cash flow from operating activities:
Net income (loss)
Adjustments to reconcile net income (loss) to cash
flows provided by operating activities:
Depreciation expense
Amortization expense
Provision for doubtful accounts
(Gain) loss on sale of fixed assets
Amortization of deferred gain
Amortization of debt issuance cost
Deferred income taxes
Other
Decrease (increase) in assets:
Accounts receivable, net
Inventories
Other current and non-current assets
Effect of foreign currency translation adjustment
Increase (decrease) in liabilities:
Accounts payable
Accrued compensation and benefits
Deferred gain on joint venture
Accrued liabilities
Income taxes payable
Net cash provided by operating activities
Cash flow from investing activities:
Acquisition of property and equipment
Proceeds from sale of assets
Acquisitions, net of cash acquired
Costs of capitalized patents
Purchase of short-term investments
Maturities/sales of short-term investments
Net cash used by investing activities
Cash flow from financing activities:
Issuance of common stock and warrants
(Payment)/collection of notes receivable
Proceeds from long-term debt and revolving credit
lines
Payments on long-term debt and revolving credit
lines
Net cash provided (used) by financing activities
January 3,
2003
December 28,
2001
December 29,
2000
$ 10,324
$ (22,879)
$ 14,185
9,850
9,168
5,443
423
(1,061)
1,197
1,464
193
11,218
30,306
5,077
(135)
(1,584)
960
(887)
(508)
9,139
14,337
1,198
--
(2,555)
440
(908)
(2,505)
(10,615)
(7,649)
(3,920)
3,218
6,842
7,442
2,393
(4,538)
(7,289)
(5,994)
(3,743)
(1,116)
8,593
3,452
10,792
(4,823)
(953)
35,096
(4,954)
(3,112)
--
(2,946)
2,398
25,093
7,554
(6,362)
--
5,595
(2,141)
19,835
(7,157)
1,407
1,718
(1,734)
--
--
(5,766)
(7,254)
1,177
(4,430)
(934)
--
--
(11,441)
21,393
(1,082)
18,000
(70,040)
(31,729)
36,378
872
30,062
(90,762)
(23,450)
(7,555)
--
(211,488)
(900)
(6,423)
59,186
(167,180)
12,043
196
162,000
(35,282)
138,957
Decrease in cash and cash equivalents
Cash and cash equivalents, beginning of period
Cash and cash equivalents, end of period
*See accompanying Notes to the Consolidated Financial Statements.
(2,399)
31,078
$ 28,679
(9,798)
40,876
$ 31,078
(8,388)
49,264
$ 40,876
59
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1 - Summary of Significant 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. Due to the inherent nature of those estimates, actual results
could differ from expectations.
Basis of Presentation
Trimble has a 52-53 week fiscal year, ending on the Friday nearest to December 31, which for
fiscal 2002 was January 3, 2003. Fiscal 2002 was a 53-week year and as a result, the Company has
included an extra week of revenues, costs and related financial activities.
Therefore, the financial results of those fiscal years (as this fiscal year 2002) having the extra
week will not be exactly comparable to the prior and subsequent 52-week fiscal years. Fiscal years 2001
and 2000 were both comprised of 52 weeks.
The 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. Accrued interest expense and Deferred gain on
sale of assets have been reclassified to Accrued liability in the Consolidated Balance Sheet at December 28,
2001. Certain previously allocated corporate charges to the Portfolio Technologies business segment have
been reclassified to unallocated corporate charges in fiscal 2001 and fiscal 2000 to conform to current year
presentation.
Foreign Currency
Assets and liabilities of the Company’s foreign subsidiaries are translated into U.S. dollars at year-
end exchange rates, and revenues and expenses are translated at average rates prevailing during the year.
Local currencies are considered to be the functional currencies for the Company’s non-U.S. subsidiaries.
Translation adjustments are included in shareholders’ equity in the consolidated balance sheet caption
“Accumulated other comprehensive income (loss).” Foreign currency transaction gains and losses are
included in results of operations as incurred, and have not been significant to the Company’s operating
results in any fiscal year presented. The effect of foreign currency rate changes on cash and cash
equivalents is not material.
Cash and Cash Equivalents
Cash and cash equivalents include all cash and highly liquid investments with insignificant interest
rate risk and original maturities of three months or less. The carrying amount of cash and cash equivalents
approximates fair value because of the short maturity of those instruments.
Concentration of Risk
In entering into forward foreign exchange contracts, Trimble has assumed the risk that might arise
from the possible inability of counter-parties to meet the terms of their contracts. The counter-parties to
60
these contracts are major multinational investment and commercial banks, and the Company does not
expect any losses as a result of counter-party defaults (see Note 6 of the Notes to the Consolidated
Financial Statements). 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.
Many of Trimble’s products use GPS as the positioning technology. GPS is a system of 24
orbiting satellites established and funded by the U.S. Government, which has been fully operational since
March 1995. A significant reduction in the number of operating satellites would impair the current utility
of the GPS system and the growth of current and additional market opportunities. In addition, the U.S.
Government may not remain committed to the operation and maintenance of GPS satellites over a long
period, and the policy of the U.S. Government for the use of GPS without charge may change.
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.
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. The expenses recorded for doubtful accounts were approximately $5.4 million in
fiscal 2002, $5.1 million in fiscal 2001, and $1.2 million in fiscal 2000.
Inventories
Inventories are stated at the lower of standard cost or market (net realizable value). Standard costs
approximate average actual costs. 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 for the inventory value for estimated excess and obsolete
inventory, based on management’s assessment of future demand and market conditions. If actual future
demand or market conditions are less favorable than those projected by management, additional inventory
write-downs may be required.
Intangible and Non-Current Assets
Intangible assets include goodwill, assembled workforce, distribution channels, patents, licenses,
technology, and trademarks, which are capitalized at cost. Intangible assets with definite lives are
amortized on the straight-line basis. Useful lives generally range from 2 to 10 years, with weighted average
useful life of 5.5 years. Prior to January 1, 2002, goodwill was amortized over 20 years, except for goodwill
from the Grid Data purchase, which was amortized over 5 years.
If facts and circumstances indicate that the goodwill, other intangible assets or property and
equipment may be impaired, an evaluation of continuing value would be performed. If an evaluation is
61
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 impairment test of goodwill upon transition to FAS No. 142 on January 1,
2002, and an annual impairment test on September 30, 2002, and found no impairment. 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.
Trimble adopted SFAS No. 142 on January 1, 2002. As a result, goodwill is no longer amortized
and intangible assets with indefinite lives were reclassified to goodwill.
Revenue Recognition
Trimble’s revenues are recorded in accordance with the Securities and Exchange Commission’s
(SEC) Staff Accounting Bulletin (SAB) No. 101, “Revenue Recognition.” The Company requires the
following: (i) execution of a written customer order, (ii) delivery of the product, (iii) fee is fixed or
determinable, and (iv) collectibility of the proceeds is probable. The Company recognizes revenue from
product sales when the products are shipped to the customer, title has transferred, and no significant
obligations remain. Trimble defers revenue if there is uncertainty about customer acceptance. Deferred
revenue is included in accrued liabilities on the consolidated balance sheet. Trimble reduces product
revenue for estimated customer returns, and any discount, which may occur under programs it has with its
customers and partners.
The Company’s shipment terms are either FOB shipping point or FCA shipping point. FOB (Free
on Board) - shipping point term means that the seller fulfills the obligation to deliver when the goods have
passed over the ship's rail at the named port of shipment. This means that the buyer has to bear all costs and
risks of loss of or damage to the goods from that point. The FOB term requires the seller to clear the goods
for export. FCA (Free Carrier) shipping point term means that the seller 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, the seller may choose within the
place or range stipulated where the carrier shall take the goods into carrier’s charge.
The Company’s shipment terms for domestic orders are typically FOB shipping point.
International orders fulfilled from the European distribution center are typically shipped FCA shipping
point. Other international orders are shipped FOB destination, and accordingly these international orders
are not recognized as revenue until the product is delivered and title has transferred.
Revenues from purchased extended warranty and support agreements are deferred and recognized
ratably over the term of the warranty/support period. Substantially all technology licenses and research
revenue have consisted of initial license fees and royalties, which were recognized when earned, provided
the Company has no remaining obligations.
Sales to distributors and resellers are recognized upon shipment providing that there is evidence of
the arrangement through a distribution agreement or purchase order, title has transferred, no remaining
performance obligations exist, the price and terms of the sale are fixed, and collection is probable.
Distributors and resellers do not have a right of return.
Software arrangements consist of a 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
price of the renewal rate. The remaining value of the software arrangement is allocated to the license fee
using the residual method, under 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 period
of the PCS agreement.
62
Support and Warranty
The warranty periods for the Company’s products are generally between one and three years from
date of shipment. Selected military programs may require extended warranty periods, and certain products
sold by Trimble’s TDS business have a 90-day warranty period. Trimble supports its 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 Trimble’s non-GPS products are available from company-
owned or authorized facilities. The Company reimburses dealers and distributors for all authorized
warranty repairs they perform.
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 January 3, 2003
are as follows:
(in thousands)
Balance at December 28, 2001 $ 6,827
2,821
Warranties accrued
(3,254)
Warranty claims
$ 6,394
Balance at January 3, 2003
The Company’s warranty liability is classified as accrued warranty in the accompanying balance sheet.
Guarantees, Including Indirect Guarantees of Indebtedness of Others
In November of 2002, the FASB issued FIN No. 45, "Guarantor's Accounting and Disclosure
Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others." FIN No. 45
requires that a liability be recorded in the guarantor's balance sheet upon issuance of a guarantee. In
addition, FIN No. 45 requires disclosures about the guarantees that an entity has issued including a roll-
forward of the entity's product warranty liabilities. Trimble will apply the recognition provisions of FIN
No. 45 prospectively to guarantees issued after December 31, 2002.
Advertising Costs
Trimble’s expenses advertising costs as incurred. Advertising expenses were approximately $6.3
million, $6.8 million, and $7.9 million in fiscal 2002, 2001, and 2000, respectively.
Research and Development Costs
Research and development costs are charged to expense when incurred. Trimble received third
party funding of approximately $5.3 million, $4.1 million, and $4.8 million in fiscal 2002, 2001, and 2000,
respectively. Trimble offsets research and development expenses with any third party funding received.
The Company retains the rights to any technology developed.
63
Stock 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 option plans and stock
purchase plan. Accordingly, the Company does not recognize compensation cost for stock options granted
at fair market value. Note 14 of the Notes to the Consolidated Financial Statements describes the plans
operated by Trimble.
In December of 2002, the Financial Accounting Standards Board issued SFAS No. 148, which
amends SFAS No. 123, to provide alternative methods of transition for an entity that changes to the fair
value method of accounting for stock-based employee compensation. In addition, SFAS No. 148 amends
the disclosure provisions of SFAS No. 123 to require expanded and more prominent disclosure of the
effects of an entity's accounting policy with respect to stock-based employee compensation.
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. The effects on pro forma disclosure of applying SFAS
No. 123 are not likely to be representative of the effects on pro forma disclosure of future years.
Pro forma information regarding net income (loss) and earnings (loss) per share is required by
SFAS No. 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 No.123. The fair
value for these options was estimated at the date of grant using a Black-Scholes option-pricing model with
the following weighted-average assumptions for fiscal 2002, 2001, and 2000:
Expected dividend yield
Expected stock price volatility
Risk free interest rate
Expected life of options after vesting
January 3,
2003
-
52.70%
3.13%
1.18
December 28,
2001
-
69.59%
4.15%
1.20
December 29,
2000
-
66.41%
6.21%
1.22
The Black-Scholes option valuation model was developed for use in estimating the fair value of
traded options that have no vesting restrictions and are fully transferable. In addition, option valuation
models require the input of highly subjective assumptions including the expected stock price volatility.
Because Trimble's employee stock options have characteristics significantly different from those of traded
options, and because changes in the subjective input assumptions can materially affect the fair value
estimate, in management's opinion, the existing models do not necessarily provide a reliable single measure
of its employee stock options.
64
Trimble's pro forma information is as follows:
Fiscal Years Ended
(dollars in thousands)
Net income (loss) – as reported
Stock-based employee compensation expense
determined under fair value method based for
all awards, net of related tax effects
Net earnings (loss) – pro forma
Basic earnings (loss) per share – as reported
Basic earnings (loss) per share – pro forma
Diluted earnings (loss) per share – as reported
Diluted earnings (loss) per share – pro forma
January 3,
2003
December 28,
2001
December 29,
2000
$10,324
$ (22,879)
$ 14,185
11,641
(1,317)
0.36
(0.05)
0.36
(0.05)
12,718
(35,597)
(0.93)
(1.44)
(0.93)
(1.44)
8,287
5,898
0.60
0.25
0.55
0.23
Depreciation
Depreciation of property and equipment owned or under capitalized leases 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 four years for machinery and equipment, four to five years for furniture and fixtures, and
four to five years for leasehold improvements.
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.
Earnings (Loss) 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
Trimble adopted SFAS No. 144, at the beginning of fiscal 2002. The effect of adopting SFAS No.
144 did not have a material impact on the Company’s financial position or results of operations.
Trimble adopted SFAS No. 141, Business Combinations, and SFAS No. 142, Goodwill and Other
Intangible Assets, at the beginning of fiscal 2002. Application of the non-amortization provisions of SFAS
No. 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 the prior year. The Company
reclassified identifiable intangible assets with indefinite lives with net book value of $73.6 million, as
defined by SFAS No. 142, to goodwill at the date of adoption. The Company tested goodwill for
65
impairment using the two-step process prescribed in SFAS No. 142. The first step is a screen for potential
impairment, while the second step measures the amount of the impairment, if any. No impairment charge
resulted from the impairment tests.
In October of 2001, the FASB issued SFAS No.144, "Accounting for the Impairment or Disposal
of Long-lived Assets,” which amends accounting guidance on asset impairment and provides a single
accounting model for long-lived assets to be disposed of. Among other provisions, the new rules change
the criteria for classifying an asset as held-for-sale. The standard also broadens the scope of businesses to
be disposed of that qualify for reporting as discontinued operations, and changes the timing of recognizing
losses on such operations.
In July of 2002, the FASB approved SFAS No. 146, “Accounting for Costs Associated with Exit
or Disposal Activities.” SFAS No. 146 addresses the financial accounting and reporting for obligations
associated with an exit activity, including restructuring, or with a disposal of long-lived assets. Exit
activities include, but are not limited to, eliminating or reducing product lines, terminating employees and
contracts and relocating plant facilities or personnel. SFAS No. 146 specifies that a company will record a
liability for a cost associated with an exit or disposal activity only when that liability is incurred and can be
measured at fair value. Therefore, commitment to an exit plan or a plan of disposal expresses only
management’s intended future actions and, therefore, does not meet the requirement for recognizing a
liability and the related expense. SFAS No. 146 is effective prospectively for exit or disposal activities
initiated after December 31, 2002, with earlier adoption encouraged. The Company does not anticipate that
the adoption of SFAS No. 146 will have a material effect on its financial position or results of operations.
In November of 2002, the FASB issued FIN No. 45 "Guarantor's Accounting and Disclosure
Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others." FIN No. 45
requires that a liability be recorded in the guarantor's balance sheet upon issuance of a guarantee. In
addition, FIN No. 45 requires disclosures about the guarantees that an entity has issued, including a roll-
forward of the entity's product warranty liabilities. Trimble will apply the recognition provisions of FIN
No. 45 prospectively to guarantees issued after December 31, 2002. The disclosure provisions of FIN No.
45 are effective for financial statements of Trimble's fiscal year 2002.
In November of 2002, the EITF reached a consensus on Issue No. 00-21, "Revenue Arrangements
with Multiple Deliverables." EITF Issue No. 00-21 provides guidance on how to account for arrangements
that involve the delivery or performance of multiple products, services and/or rights to use assets. The
provisions of EITF Issue No. 00-21 will apply to revenue arrangements entered into in fiscal periods
beginning after June 15, 2003. Trimble is currently evaluating the effect that the adoption of EITF Issue
No. 00-21 will have on its results of operations and financial condition.
In January of 2003, the FASB issued FIN No. 46, "Consolidation of Variable Interest Entities."
FIN No. 46 requires a variable interest entity to be consolidated by a company if that company is subject to
a majority of the risk of loss from the variable interest entity’s activities or entitled to receive a majority of
the entity's residual returns or both. The consolidation requirements of FIN No. 46 apply immediately to
variable interest entities created after January 31, 2003. The consolidation requirements apply to older
entities in the first fiscal year or interim period beginning after June 15, 2003. The Company is currently
evaluating the provisions of FIN No. 46, however, it does not believe as at January 3, 2003, that the
Company has any investment in variable interest entities.
66
Note 2 - Acquisitions:
The following is a summary of acquisitions made by Trimble during fiscal 2002, 2001, and 2000,
all of which were accounted for as purchases:
Acquisition
Spectra Precision Group
Tripod Data Systems
Grid Data
LeveLite Technology
Primary Service or Product
Optical and laser products
Software for data collection applications
Wireless application service provider
Low-end construction instrument products August 15, 2002
Acquisition Date
July 14, 2000
November 14, 2000
April 2, 2001
The consolidated financial statements include the results of operations of acquired companies
commencing on the date of acquisition. The total purchase consideration for each of the above acquisitions
was allocated to the assets acquired and liabilities assumed based on their estimated fair values as of the
date of acquisition. The Grid Data transaction was an asset purchase.
Allocation Of Purchase Consideration
The following is a summary of purchase price, acquisition costs and purchase price allocation of
the Spectra Precision Group, Tripod Data Systems, Grid Data, and LeveLite acquisitions:
Spectra
Precision
Group
Tripod Data
Systems
Grid Data
LeveLite
Technology
$292,700
7,719
7,851
$308,270
$14,995
391
-
$15,386
$8,248
50
-
$8,298
$6,031
144
555
$6,730
65,913
(9,138)
4,261
-
(141)
-
6,115
-
78,600
25,200
18,300
-
-
-
-
-
-
-
-
-
10,800
118,595
$308,270
-
11,125
$15,386
-
8,439
$8,298
-
615
$6,730
(In thousands)
Purchase price
Acquisition costs
Restructuring costs
Total purchase price
Purchase Price Allocation:
Fair value of tangible net assets acquired
Deferred tax
Identified intangible assets:
Distribution Channel
Existing Technology
Assembled Workforce
Trade names, trademarks, patents, and
other intellectual properties
Goodwill
Total
Spectra Precision Group
Spectra Precision, a group of wholly-owned businesses, formerly owned by Thermo Electron
Corporation, collectively known as the "Spectra Precision Group," was acquired on July 14, 2000. The
acquisition was completed for an aggregate purchase price, excluding acquisition and restructuring costs, of
approximately $293.8 million. Subsequently, in March 2002, the purchase price was adjusted by $1.1
million as a result of the completion of final negotiations with Thermo Electron relating to certain assets
and liabilities acquired. This adjustment subsequently decreased the purchase price to approximately
$292.7 million and goodwill to approximately $118.6 million. The acquisition included 100% of the stock
of Spectra Precision Inc., a Delaware corporation; Spectra Precision SRL, an Italian corporation; Spectra
67
Physics Holdings GmbH, a German corporation; and Spectra Precision BV, a Netherlands corporation. The
acquisition also included certain assets and liabilities of Spectra Precision AB, a Swedish corporation;
including 100% of the shares of Spectra Precision SA, a French corporation; Spectra Precision Scandinavia
AB, a Swedish corporation; Spectra Precision of Canada Ltd., a Canadian corporation; and Spectra
Precision Handelsges GmbH, an Austrian corporation.
Spectra Precision Group Restructuring Activities
At the time the Company acquired the Spectra Precision Group, the management formulated a
restructuring plan and provided approximately $9.0 million for costs to close certain duplicative office
facilities, combine operations including redundant domestic and foreign legal entities, reduce workforce in
overlapping areas, and relocate certain employees. These costs were accrued for as part of the allocation of
the purchase price. Included in the total cost was approximately $2.7 million related to the discontinuance
of overlapping product lines, which was included in the accrual for excess and obsolete inventory. The
facility consolidation and employee relocations resulted primarily from combining certain office facilities
and duplicative functions, including management functions, of the Spectra Precision Group.
In fiscal 2002, the Company used approximately $1.9 million of the accrual, which consisted of
$1.5 million for legal and tax consulting expenses relating to consolidation of legal entities and, $0.4
million for facilities and direct sales office closures. As of January 3, 2003, the accrual was fully utilized.
In fiscal 2001, the Company had used approximately $3.3 million of the accrual, which consisted
of $0.9 million for legal and tax consulting expenses relating to consolidation of legal entities, $1.3 million
for severance expenses, $0.7 million for facilities and direct sales office closures, $0.3 million for an
underfunded pension plan, and other costs of $0.1 million. The Company revised its final estimates for
costs to complete the remaining planned activities and accordingly reduced its restructuring accrual by
approximately $1.1 million, with a corresponding adjustment to goodwill, in the fourth quarter of fiscal
2001.
The elements of the restructuring accrual, which are included in accrued liabilities in the balance
sheet, are as follows:
(in thousands)
Employee Severance and
Relocation
Facility Closure, Legal and
Tax Expense
Total
Total accrual
Amounts paid
Revision to estimates
Balance as of December 28, 2001
$ 1,945
(1,685)
(260)
$ -
Amounts paid
Balance as of January 3, 2003
-
$ -
$ 4,370
(1,610)
(812)
$ 1,948
(1,948)
$ -
$ 6,315
(3,295)
(1,072)
$ 1,948
(1,948)
$ -
Tripod Data Systems
Tripod Data Systems, Inc., an Oregon corporation, was purchased on November 14, 2000 for an
aggregate final purchase price of approximately $15.0 million. The purchase price consisted of 576,726
shares of Trimble’s common stock valued at the average closing price for the five trading days preceding
the closing date.
68
Grid Data, Inc.
On April 2, 2001, Trimble acquired certain assets of Grid Data, an Arizona corporation, for
approximately $3.5 million in cash and the assumption of certain liabilities. In addition, the purchase
agreement provided for Trimble to make earn-out payments based upon the completion of certain business
milestones. In June 2002, Trimble issued 268,352 in settlement of all earn-out payments, which resulted in
additional goodwill of $4.8 million, with a final purchase price of approximately $8.3 million.
LeveLite Technology, Inc.
On August 15, 2002, Trimble acquired LeveLite Technology, Inc. (“LeveLite”), a California
corporation, for approximately $5.7 million. This strategic acquisition complements our entry-level
construction instrument product line. The purchase price consisted of 437,084 shares of our common stock.
The merger agreement provides for Trimble to make additional earn-out payments not to exceed $3.9
million (in common stock and cash payment) based on future revenues derived from existing product sales
to a certain customer. On January 22, 2003, Trimble issued the first earn-out payment (stock and cash
combination) with a fair market value of approximately $0.4 million, related to the earn-out for the quarter
ended January 3, 2003. Also, if Trimble receives any proceeds from a pending litigation, a portion will be
paid to the former shareholders of LeveLite. The additional payments, if earned, will result in additional
goodwill.
Note 3 - Unaudited Pro Forma Information:
The consolidated statements of operations of Trimble presented throughout this report include the
operating results of the acquired companies from the date of the respective acquisitions. The following pro
forma information for fiscal 2002, 2001, and 2000 presents net revenue, net loss from continuing
operations, and net loss for each of these periods as if the transactions with Spectra Precision Group were
consummated on January 1, 2000. The following pro forma information does not include Tripod Data
Systems, Grid Data, and Levelite, as these acquisitions were not material to the Company. This unaudited
pro forma data does not purport to represent the Company's actual results of operations had the Spectra
Precision Group acquisition occurred on January 1, 2000, and should not serve as a forecast of the
Company's operating results for any future periods.
Fiscal Years Ended
(In thousands, except for per share amounts)
Net revenue
Net income (loss) from continuing operations
Net income (loss)
Basic earnings (loss) per share from continuing
operations
Basic earnings per share from discontinued
operations
Basic earnings (loss) per share
Diluted earnings (loss) per share from continuing
operations
Diluted earnings per share from discontinued
operations
Diluted earnings (loss) per share
January 3,
2003
December 28,
2001
December 29,
2000
$ 466,602
10,324
10,324
$ 0.36
$ 475,292
(23,492)
(22,879)
$ (0.95)
$ 491,436
(1,920)
(1,920)
$ (0.08)
--
$ 0.36
0.02
$ (0.93)
--
$ (0.08)
$ 0.36
$ (0.95)
$ (0.08)
--
$ 0.36
0.02
$ (0.93)
--
$ (0.08)
69
Note 4 – Goodwill and Intangible Assets:
Goodwill and purchased intangible assets consisted of the following:
As of
(in thousands)
Intangible assets:
Intangible assets with indefinite life:
Distribution channel
Assembled workforce
Total intangible assets with indefinite life
Intangible assets with definite life:
Existing technology
Trade names, trademarks, patents, and other intellectual properties
Total intangible assets with definite life
Total intangible assets
Less accumulated amortization
Total net intangible assets
Goodwill:
Goodwill, Spectra Precision acquisition*
Goodwill, other acquisitions*
Total goodwill
Less accumulated amortization *
Total net goodwill
* Goodwill as of January 3, 2003 includes assembled workforce and
distribution channel amounts, which were reclassified to goodwill
in accordance with SFAS 142. Also, January 3, 2003 amounts are
shown net of accumulated depreciation from December 28, 2001.
January 3,
2003
December 28,
2001
$ -
-
-
25,986
21,594
47,580
47,580
(24,342)
$ 23,238
185,277
20,656
205,933
-
$ 205,933
$ 73,363
17,773
91,136
23,907
18,394
42,301
$ 133,437
(33,185)
$ 100,252
116,001
14,710
130,711
(10,659)
$ 120,052
The intangible asset amortization expense as of January 3, 2003 for the five years following fiscal 2002 is
projected as follows:
Year
2003
2004
2005
2006
2007
Thereafter
Total
(in thousands)
$ 7,126
7,084
5,327
1,892
1,116
693
$ 23,238
Trimble adopted SFAS No. 142 on January 1, 2002. As a result, goodwill is no longer amortized
and intangible assets with indefinite lives were reclassified to goodwill.
70
For comparative purposes, the pro forma adjusted net income per share excluding amortization of
goodwill, distribution channel, and assembled workforce is as follows:
(in thousands)
Net income (loss)
Add back SFAS 142 adjustments:
Amortization of goodwill
Amortization of distribution channel
Amortization of assembled workforce
January 3,
2003
December 28,
2001
December 29,
2000
$ 10,324
$ (22,879)
$ 14,185
7,817
11,230
1,834
3,116
5,176
1,225
Adjusted net income (loss)
$ 10,324
$ (1,998)
$ 23,702
Weighted average shares outstanding
Basic
Diluted
Diluted net income (loss) per share
Pro forma adjusted diluted net income (loss) per share
28,573
29,052
$ 0.36
$ 0.36
24,727
24,727
$ (0.93)
$ (0.08)
23,601
25,976
$ 0.55
$ 0.92
Note 5 – Certain Balance Sheet Components:
Inventories consisted of the following:
(in thousands)
Raw materials
Work-in-process
Finished goods
Property and equipment consisted of the following:
in thousands)
Machinery and equipment
Furniture and fixtures
Leasehold improvements
Buildings
Land
Less accumulated depreciation
January 3,
2003
December 28,
2001
$ 21,098
5,187
34,859
$ 61,144
$ 25,790
7,177
18,843
$ 51,810
January 3,
2003
December 28,
2001
$ 70,660
6,538
6,451
2,905
1,391
87,945
(65,908)
$ 22,037
$ 66,265
6,367
5,882
3,979
1,657
84,150
(56,608)
$ 27,542
71
Other current assets consisted of the following:
(in thousands)
Notes receivable
Prepaid expenses
Other
Other non-current assets consisted of the following:
(in thousands)
Debt issuance costs, net
Other investments
Deposits
Demo inventory, net
Receivables from employees
Other
January 3,
2003
December 28,
2001
$ 1,685
5,495
1,297
$ 8,477
$ 2,130
4,150
256
$ 6,536
January 3,
2003
December 28,
2001
$ 2,493
1,381
1,196
2,665
1,223
3,128
$ 12,086
$ 3,046
2,737
1,241
1,961
955
122
$ 10,062
Note 6 - Derivative Financial Instruments:
Trimble transacts business in various foreign currencies and hedges identified risks associated
with foreign currency transactions in order to minimize the impact of changes in foreign currency exchange
rates on earnings. Trimble utilizes forward contracts to hedge certain trade and inter-company receivables
and payables. 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
hedge contracts. These hedge instruments are marked to market through earnings every period. From time
to time, Trimble may also utilize forward foreign exchange contracts designated as cash flow hedges of
operational exposures represented by firm backlog orders to specific accounts over a specific period of
time. Trimble records changes in the fair value of cash flow hedges in accumulated other comprehensive
income (loss), until the firm backlog transaction ships. Upon recognition of revenue, the Company
reclassifies the gain or loss on the cash flow hedge to the statement of operations. For the fiscal year ended
January 3, 2003, Trimble recorded a gain of $57,000 reflecting the net change and ending balance in
relation to a firm backlog hedge. The critical terms of the cash flow hedging instruments are the same as
the underlying forecasted transactions. The changes in fair value of the derivatives are intended to offset
changes in the expected cash flow from the forecasted transactions. All forward contracts have maturity of
less than 12 months. As of January 3, 2003, the effect of all outstanding derivative instruments does not
have a material impact on the Company’s financial position or results of operations.
In July 2002, Trimble expanded its worldwide hedging program to include inter-company
transactions among the former Spectra Precision Group entities in order to minimize the impact of changes
in foreign exchange rates on earnings. The forward foreign currency exchange contracts mature over the
next twelve months. As of January 3, 2003, the effect of all outstanding derivative instruments does not
have a material impact on the Company’s financial position or results of operations.
72
Note 7 - Disposition of Line of Business and Assets:
On March 6, 2001, the Company sold certain product lines of its Air Transport Systems to
Honeywell Inc. for approximately $4.5 million in cash. Under the asset purchase agreement, Honeywell
International, Inc. purchased product lines that included the HT 1000, HT 9000, HT 9100 and Trimble's
TNL 8100. As part of this sale, during the third quarter of fiscal 2001, the Company also sold other product
lines and discontinued its manufacturing operations in Austin, Texas. The Company also incurred
severance costs of approximately $1.7 million, which are included in restructuring charges, related to the
termination of employees associated with the product lines disposed of in fiscal 2001.
At January 3, 2003, the Company had an accrual of approximately $1.1 million for related
liabilities associated with the disposition of these product lines and the discontinuance of its manufacturing
operations.
Note 8 - The Company, Industry Segment, Geographic, and Customer Information:
Trimble is a designer and distributor of positioning products and applications enabled by GPS,
optical, laser, and wireless communications technology. The Company designs and markets products, by
delivering integrated information solutions such as collecting, analyzing, and displaying position data to its
end-users. Trimble offers an integrated product line for diverse applications in its targeted markets.
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.
• 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 GIS operation
and the Agriculture operation. 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.
• Mobile Solutions — Consists of products that enable end-users to monitor and manage their mobile
assets by communicating location-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.
• Component Technologies — Currently, Trimble markets its GPS component products through an
extensive network of OEM relationships. These products include proprietary chipsets, modules, and a
variety of intellectual property. The applications into which end-users currently incorporate the
component products include: timing applications for synchronizing wireless and computer systems; in-
vehicle navigation and telematics (tracking) systems; fleet management; security systems; data
collection systems; and wireless handheld consumer products.
• Portfolio Technologies — The various operations that comprise this segment were aggregated on the
basis that no single operation accounted for more than 10% of the total revenue. These markets include
the operations of the Military and Advanced Systems business and Tripod Data Systems.
73
In the first fiscal quarter of fiscal 2002, Trimble realigned two of its reportable segments and
therefore the following table shows restated revenue and operating income by segment to reflect this
realignment. The Agriculture segment was combined with the Mapping and GIS business to form Field
Solutions. Mapping and GIS were previously part of Fleet and Asset Management. The Mobile
Positioning business that was part of Fleet and Asset Management is now Mobile Solutions.
The Company began breaking out Mobile Solutions as a separate reporting segment during the
first quarter of 2002 to address the growing importance of the mobile asset management business and its
impact on Trimble’s profitability. At the same time, the Company combined its GIS and Agriculture
businesses to create a new segment called Field Solutions in order to recognize the synergies and similar
product requirements between the two businesses.
Trimble evaluates each of these segment's performance and allocates resources based on profit and
loss from operations before income taxes, and some corporate allocations.
The accounting policies applied by each of the segments are the same as those used by Trimble in
general.
The following table presents revenues, operating income (loss), and identifiable assets for the five
segments. The information includes the operations of Spectra Precision Group after July 14, 2000, Tripod
Data Systems after November 14, 2000, Grid Data after April 2, 2001, and LeveLite Technology, Inc. after
August 15, 2002. Operating income (loss) is net revenue less operating expenses, excluding general
corporate expenses, goodwill 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.
Fiscal Year Ended
January 3, 2003
(in thousands)
External net revenue
Inter-segment net
Revenue
Operating income (loss)
before corporate
allocations
Operating income (loss)
Assets:
Accounts receivable (2)
Inventories
Engineering
and
Construction
Field
Solutions
$ 305,490 $ 67,259
Mobile
Solutions
$ 8,486
Component
Technologies
Portfolio
Technologies
$ 59,755 $ 25,612 $ 466,602
Total
6,193
-
-
-
(6,193)
-
54,931
72,858
$ 54,931 $ 12,395 $ (10,830) $ 11,290 $ 5,072 $ 72,858
(10,830)
12,395
11,290
5,072
$ 71,415 $ 11,598 $ 1,960 $ 11,276 $ 4,025
$ 100,274
$ 44,905 $ 7,337 $ 1,986 $ 2,853 $ 4,063 $ 61,144
74
Fiscal Year Ended
December 28, 2001
(in thousands)
Engineering
and
Construction
Field
Solutions
$ 303,944 $ 68,519
Mobile
Solutions
$ 13,791
Component
Technologies
Portfolio
Technologies
$ 58,083 $ 30,955 $ 475,292
Total
2,080
-
-
- (2,080)
-
51,625
71,230
$ 51,625 $ 13,652 $ (8,966) $ 10,882 $ 4,037 $ 71,230
(8,966)
10,882
13,652
4,037
$ 62,471 $ 10,191
$ 36,896 $ 4,639
$ 4,274
$ 1,992
$ 7,392
$ 2,490
$ 7,249
$ 5,463
$ 91,577
$ 51,480
Fiscal Year Ended
December 29, 2000
(in thousands)
Engineering
and
Construction
Field
Solutions
Mobile
Solutions
Component
Technologies
Portfolio
Technologies
Total
$ 195,150 $ 70,652
$ 20,471
$ 60,230 $ 23,295 $ 369,798
965
43,937
19,834
(15,120) (8,112)
(2,844) (4,788) (2,687)
$ 28,817 $ 11,722 $ (3,213) $ 10,062 $ (1,722)
14,850
(369)
79,217
(33,551)
$ 45,666
$ 58,693 $ 12,439
$ 4,416
$ 39,146
$ 4,374
$ 3,133
$ 11,892
$ 2,360
$ 8,522
$ 8,074
$ 95,920
$ 57,129
External net revenue
Inter-segment net
revenue
Operating income (loss)
before corporate
allocations
Operating income (loss)
Assets:
Accounts receivable (2)
Inventories
External net revenue
Operating income (loss)
before corporate
allocations
Corporate allocations (1)
Operating income (loss)
Assets:
Accounts receivable (2)
Inventories
________________________
(1) In fiscal 2002 and 2001, Trimble did not allocate corporate expenses to its individual business
segments. In fiscal 2000, the Company determined the amount of corporate allocations charged to
each of its segments based on a percentage of the segments' monthly revenue, gross profit, and
controllable spending (research and development, sales and marketing, and general and
administrative).
(2) As presented, accounts receivable excludes cash received in advance and allowances for doubtful
accounts, which are not allocated between segments.
75
The following are reconciliations corresponding to totals in the accompanying consolidated
financial statements:
Fiscal Years Ended
(in thousands)
Operating income from continuing operations:
Total for reportable divisions
Unallocated corporate expenses
Operating income from continuing operations
January 3,
2003
December 28, December 29,
2001
2000
$ 72,858
(39,035)
$ 33,823
$ 71,230
(71,049)
$ 181
$45,666
(19,447)
$ 26,219
As of
(in thousands)
Assets:
January 3,
2003
December 28,
2001
Accounts receivable total for reportable
segments
Unallocated (1)
Total
$ 100,274
(20,629)
$ 79,645
$ 91,577
(19,897)
$ 71,680
Inventory total for reportable segments
Common inventory (2)
Total
$ 61,144
-
$ 61,144
$ 51,480
330
$ 51,810
__________________________
(1) Includes cash in advance, other receivables, and accruals that are not allocated by segment.
(2) Consists of common inventory that can be used by multiple segments.
The following table presents revenues by product groups.
Fiscal Years Ended
(in thousands)
GPS products
Laser and optical products
Other
Total revenue
January 3,
2003
December 28,
2001
December 29,
2000
$ 269,835
182,650
14,117
$ 466,602
$ 274,439
186,948
13,905
$ 475,292
$ 274,215
93,879
1,704
$ 369,798
76
The geographic distribution of Trimble’s revenues and identifiable assets is summarized in the
table below. Other foreign countries include Canada and countries within South and Central America.
Identifiable assets indicated in the table below exclude inter-company receivables, investments in
subsidiaries, goodwill, and intangibles assets.
Fiscal year ended
(In thousands)
January 3, 2003
Sales to unaffiliated customers (1)
Inter-geographic transfers
Total revenue
Geographic Area
Europe/
Middle
East/Africa
U.S.
Asia
Other
Foreign
Countries
Eliminations
Total
$ 235,716
62,843
$ 298,559
$ 136,551
73,625
$ 210,176
$ 60,878
-
$ 60,878
$ 33,457
4,121
$ 37,578
$ -
(140,589)
(140,589)
$466,602
-
$466,602
Identifiable assets
$ 127,594
$ 70,057
$ 9,955
$ 5,743
(864)
$212,485
December 28, 2001
Sales to unaffiliated customers (1)
Inter-geographic transfers
Total revenue
$ 236,665
57,481
$ 294,146
$ 143,051
49,940
$ 192,991
$ 54,710
2,137
$ 56,847
$ 40,866
-
$ 40,866
$ -
(109,558)
$ (109,558)
$475,292
-
$475,292
Identifiable assets
$ 120,403
$ 71,081
$ 10,048
$ 3,829
$ (5,494)
$199,867
December 29, 2000
Sales to unaffiliated customers (1)
Inter-geographic transfers
Total revenue
$ 175,993
65,117
$ 241,110
$ 103,455
12,108
$ 115,563
$ 43,922
8,320
$ 52,242
$ 46,428
-
$ 46,428
$ -
(85,545)
$ (85,545)
$369,798
-
$369,798
Identifiable assets
$ 146,821
$ 84,358
$ 12,016
$ 4,588
$ (6,274)
$241,509
(1) Sales attributed to countries based on the location of the customer.
Transfers between U.S. and foreign geographic areas are made at prices based on total costs and
contributions of the supplying geographic area. The Company's subsidiaries in Asia, except for Japan,
which is a buy/sell entity, have derived revenue from commissions from domestic 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. The Japanese entity’s revenue and expenses are included in total
revenue and operating income (loss) in the preceding table. In fiscal 2002, the United States comprised
approximately 51% and Germany 16% of sales to unaffiliated customers.
No single customer accounted for 10% or more of Trimble's total revenues in fiscal years 2002,
2001, and 2000.
Note 9 - Restructuring Charges:
Restructuring charges of $1.1 million were recorded in fiscal 2002 and $3.6 million was recorded
in fiscal 2001, which related to severance costs. As a result of these actions, Trimble’s headcount decreased
in fiscal 2002 by 49 and in fiscal 2001 by 207 individuals. As of January 3, 2003, all of the restructuring
charges have been paid.
77
Note 10 - Long-term Debt:
Trimble’s long-term debt consists of the following:
As of
(in thousands)
Credit Facilities:
Five-year term loan
U.S. and multi-currency revolving credit facility
Subordinated note
Promissory notes and other
Less bank and other short-term borrowings
Less current portion of long-term debt
Non-current portion
January 3,
2003
December 28,
2001
$ 32,600
35,000
69,136
1,789
138,525
6,556
24,104
$ 107,865
$ 61,300
40,000
84,000
5,265
190,565
40,025
23,443
$ 127,097
The following summarizes the future cash payment obligations (excluding interest):
January 3, 2003
(in thousands)
Credit Facilities:
Five-year term loan
U.S. and multi-currency
revolving credit facility
Subordinated note
Promissory note and other
Total contractual cash obligations
Credit Facilities
Total
2003
2004
2005
2006
2006 and
Beyond
$32,600 $ 24,000 $ 8,600 $ - $ - $ -
35,000 6,550
69,136
-
1,789 110
-
-
1,349
$138,525 $ 30,660 $ 106,296 $ 110 $ 110 $ 1,349
28,450
69,136
110
-
-
110
-
-
110
In July of 2000, Trimble obtained $200 million of senior, secured credit facilities (the "Credit
Facilities") from a syndicate of banks to support the acquisition of Spectra Precision Group and its ongoing
working capital requirements and to refinance certain existing debt. At January 3, 2003, Trimble has
approximately $67.6 million outstanding under the Credit Facilities, comprised of $32.6 million under a
$100 million five-year term loan, $25 million under a $50 million U.S. dollar only revolving credit facility
(“revolver”), and $10 million under a $50 million multi-currency revolver. The Company has access to an
additional $65 million of cash under the terms of the revolver loans. The Company has commitment fees on
the unused portion of 0.5% if the leverage ratio (which is defined as all outstanding debt, excluding the
seller subordinated note, over Earnings before Interest, Taxes, Depreciation and Amortization (EBITDA),
as defined in the related agreement) is 2.0 or greater and 0.375% if the leverage ratio is less than 2.0.
Pricing for any borrowings under the Credit Facilities was fixed for the first six months at LIBOR
plus 275 basis points and is thereafter tied to a formula, based on the leverage ratio. The weighted average
interest rate under the Credit Facilities was 4.9% for the month of December ending January 3, 2003.
The Credit Facilities are secured by all of the Company’s material assets, except for assets that are
subject to foreign tax considerations. Financial covenants of the Credit Facilities include leverage, fixed
78
charge, and minimum net worth tests, all of which were amended during the third quarter of 2002. At
January 3, 2003, Trimble was in compliance with these debt covenants. The amounts due under the
revolver loans are paid as the loans mature, and the loan commitment fees are paid on a quarterly basis.
Two of the financial covenants, minimum fixed charge coverage and maximum leverage ratios are
sensitive to EBITDA. EBITDA is correlated to Trimble’s results of operations. Due to uncertainties
associated with the downturn in the worldwide economy and other factors, future revenues by quarter are
difficult to forecast. Cost cutting measures have been put in place by the management team; however, if
revenues should decline at a higher rate than cost cutting measures on a quarter-to-quarter basis, Trimble
may violate the two above-mentioned financial covenants.
Subordinated Note
In July of 2000, as part of the acquisition of Spectra Precision Group, the Company issued
Spectra-Physics Holdings USA, Inc., a subordinated seller note that had a stated two-year maturity
($40 million was due in fiscal 2001 and $40 million in fiscal 2002). On March 20, 2002, the Company
renegotiated the terms of the subordinated note. Under the revised agreement, Spectra-Physics Holdings,
Inc., a subsidiary of Thermo Electron, extended the due date of the note until July 14, 2004, at the current
interest rate of approximately 10.4% per year.
As of January 3, 2003 the principal amount outstanding was approximately $69.1 million. To the
extent that interest and principal due on the maturity date becomes delinquent, an additional 4% interest
rate per annum will apply.
The Credit Facilities allow Trimble to repay the subordinated note at any time (in part or in
whole), provided that (a) Trimble's leverage ratio (Debt (excluding the seller note)/EBITDA) prior to such
repayment is less than 1.0x and (b) after giving effect to such repayment Trimble would have (i) a leverage
ratio (Debt (excluding any remaining portion of the subordinated note)/EBITDA) of less than 2.0x and (ii)
cash and unused availability under the revolvers of the Credit Facilities of at least $35 million. The note, by
its terms, is subordinated to the Credit Facilities.
Promissory Note
The promissory note consists of a $1.8 million liability arising from the purchase of a building for
Trimble’s Corvallis, Oregon site. The note is payable in monthly installments through April 2015, bearing
a variable interest rate (5.4% as of January 3, 2003).
Weighted Average Cost of Debt
The weighted average cost of debt is approximately 7.6% for fiscal 2002 and 8.0% for fiscal 2001.
79
Note 11 - Lease Obligations and Commitments:
Trimble's principal facilities in the United States are leased under non-cancelable operating leases
that expire at various dates through 2011. The Company has options to renew certain of these leases for an
additional five years. Trimble also leases facilities under operating leases in the United Kingdom, Sweden,
and Germany that expire in 2005.
Future minimum payments required under non-cancelable operating leases are as follows:
(In thousands)
2003
2004
2005
2006
2007
Thereafter
Total
Operating
Lease Payments
$ 12,067
7,438
6,958
1,795
1,461
5,115
$ 34,834
Rent expense under operating leases was $11.6 million in fiscal 2002, $13.1 million in fiscal 2001,
and $10.6 million in fiscal 2000.
Note 12 - Fair Value of Financial Instruments:
Statement of Financial Accounting Standards No. 107, "Disclosures about Fair Value of Financial
Instruments" requires disclosure of the following information about the fair value of certain financial
instruments for which it is currently practicable to estimate such value. None of the Company’s financial
instruments are held or issued for trading purposes. The carrying amounts and fair values of Trimble's
financial instruments are as follows:
(In thousands)
Assets:
Cash and cash equivalents (See Note 1*)
Forward foreign currency exchange contracts
(See Note 6*)
Accounts receivable
Liabilities:
Subordinated notes (See Note 10*)
Credit facilities (See Note 10*)
Promissory notes and other (See Note 10*)
Accounts payable
Carrying
Amount
Fair
Value
Carrying
Amount
Fair
Values
January 3, 2003
December 28, 2001
$28,679
93
$28,679
93
$ 31,078
191
$ 31,078
191
79,645
79,645
71,680
71,680
$69,136
67,600
1,789
30,669
$65,798
67,600
1,421
30,669
$ 84,000
101,300
5,189
21,494
$ 81,290
101,300
4,958
21,494
* See the Notes to the Consolidated Financial Statements
80
The fair value of the subordinated notes, bank borrowings, promissory note, and the long-term
commitment 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 quoted market prices
of comparable contracts. These contracts are adjusted to fair value at the end of every month.
Note 13 - Income Taxes:
Trimble's income tax provision consists of the following:
Fiscal Years Ended
(in thousands)
Federal:
Current
Deferred
State:
Current
Deferred
Foreign:
Current
Deferred
Income tax provision
January 3,
2003
December 28,
2001
December 29,
2000
$ -
-
-
$ -
-
-
$ 1, 408
-
1,408
142
142
58
-
58
144
-
144
2,052
1,306
3,358
$ 3,500
2,729
(887)
1,842
$ 1,900
931
(908)
23
$ 1,575
The domestic (loss) income from continuing operations before income taxes was approximately
$3.3 million, $(29.3) million and $14.4 million in fiscal years 2002, 2001 and 2000, respectively.
The income tax provision differs from the amount computed by applying the statutory federal
income tax rate to income before taxes. The sources and tax effects of the differences are as follows:
Fiscal Years Ended
(dollars in thousands)
Expected tax from continuing operations at 35%
in all years
Operating loss not utilized (utilized)
Foreign withholding taxes
Foreign tax rate differential
Goodwill amortization
Other
Income tax provision
Effective tax rate
January 3,
2003
December 28,
2001
December 29,
2000
$ 4,839
(1,156)
-
(137)
-
(46)
$ (7,557)
9,704
115
(970)
747
(139)
$ 3,500
$ 1,900
$ 5,516
(5,115)
141
307
370
356
$ 1,575
25%
(9%)
10%
81
The components of deferred taxes consist of the following:
(in thousands)
Deferred tax liabilities:
Purchased intangibles
Depreciation and amortization
Other items
Total deferred tax liabilities
Deferred tax assets:
Inventory valuation differences
Expenses not currently deductible
Federal credit carry forwards
Deferred revenue
State credit carry forwards
Warranty
Depreciation and amortization
Federal net operating loss (NOL) carry forward
Other items
Total deferred tax assets
Valuation allowance
Total deferred tax assets
January 3,
2003
December 28,
2001
$ 381
2,258
(78)
2,561
$ 6,933
-
300
7,233
12,069
5,762
8,172
4,317
6,215
2,374
3,184
4,451
1,827
48,371
11,741
5,103
7,300
808
5,377
2,596
6,091
11,086
1,147
51,249
(47,878)
493
(50,974)
275
Total net deferred tax liabilities
$ (2,068)
$ (6,958)
The Company has $12.7 million federal net operating loss carry forwards, which expire beginning
in 2022. The total federal credit carry forwards of $8.2 million expire beginning in 2005. The Company
has state research and development credit carry forwards of approximately $6.2 million, which do not
expire.
Valuation allowances reduce the deferred tax assets to that amount that, based upon all available
evidence, is more likely than not to be realized. The valuation allowance decreased by $3.1 million in 2002
and increased by $13.1 million in 2001. Approximately $12.1 million of the valuation allowance at
January 3, 2003 relates to the tax benefits of stock option deductions, which will be credited to equity if and
when realized.
Note 14 – Shareholder’s Equity:
Common Stock
On December 21, 2001, Trimble completed a private placement of 1,783,337 shares of its
common stock at a price of $15.00 per share to certain qualified investors, resulting in gross proceeds of
approximately $26.8 million to the Company. On January 15, 2002, Trimble had a second closing of the
private placement issuing 1,280,004 shares of common stock at $15.00 per share resulting in gross
proceeds of an additional $19.2 million.
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
82
to 2,000,000 shares plus any shares currently reserved but un-issued to employees, consultants, and
directors of Trimble. Incentive stock options may be granted at exercise prices that are not less than 100%
of the fair market value of Common Stock on the date of grant. Employee stock options granted under the
2002 Plan 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 January 3, 2003, options to purchase 782,715
shares were outstanding and 1,217,285 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, provides for the granting of incentive and
non-statutory stock options for up to 6,375,000 shares of Common Stock to employees, consultants, and
directors of Trimble. Incentive stock options may be granted at exercise prices that are not less than 100%
of the fair market value of Common Stock on the date of grant. Employee stock options granted under the
1993 Plan have 120-month terms, and vest at a rate of 20% at the first anniversary of grant, and monthly
thereafter at an annual rate of 20%, with full vesting occurring at the fifth anniversary of grant. The
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 January 3, 2003, options to purchase 4,009,585
shares were outstanding, and 606,955 shares were available for future grant under the 1993 Plan.
1990 Director Stock Option Plan
In December 1990, Trimble adopted a Director Stock Option Plan under which an aggregate of
380,000 shares of Common Stock have been reserved for issuance to non-employee directors as approved
by the shareholders to date. At January 3, 2003, options to purchase 208,333 shares were outstanding, and
35,416 shares were available for future grants under the Director Stock Option Plan.
1992 Management Discount Stock Option Plan
In 1992, Trimble's Board of Directors approved the 1992 Management Discount Stock Option
Plan ("Discount Plan"). Under the Discount Plan, 300,000 non-statutory stock options were reserved for
grant to management employees at exercise prices that may be significantly discounted from the fair market
value of Common Stock on the dates of grant. Options are generally exercisable six months from the date
of grant. As of January 3, 2003, there were no shares available for future grants. For accounting purposes,
compensation cost on these grants is measured by the excess over the discounted exercise prices of the fair
market value of Common Stock on the dates of option grant. There were no discounted options granted in
the plan in fiscal 2002, 2001, and 2000. As of January 3, 2003, options to purchase 126,000 shares were
outstanding under the 1992 Management Discount Stock Option Plan.
1988 Employee Stock Purchase Plan
In 1988, Trimble established an employee stock purchase plan under which an aggregate of
3,350,000 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. In fiscal 2002 and 2001, 241,608 shares and 208,154 shares,
respectively, were issued under the plan for aggregate proceeds to the Company of $2.9 million and $3.1
million, respectively. At January 3, 2003, the number of shares reserved for future purchases by eligible
employees was 504,203.
83
SFAS 123 Disclosures
As stated in Note 1 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.
For purposes of pro forma disclosure assumptions, see the related SFAS 123 information in Note 1
of the Notes to the Consolidated Financial Statements.
Exercise prices for options outstanding as of January 3, 2003, ranged from $8.00 to $51.69. The
weighted average remaining contractual life of those options is 7.13 years. In view of the wide range of
exercise prices, Trimble considers it appropriate to provide the following additional information in respect
of options outstanding:
Range
$8.00 - $ 8.66
$8.88 - $11.94
$12.00 - $13.99
$15.34 - $15.34
$15.38 - $17.05
$17.13 - $17.47
$17.50 - $19.94
$21.00 - $34.13
$41.13 - $41.13
$51.69 - $51.69
$8.00 - $51.69
Number
(in thousands)
574,141
819,055
344,701
608,765
545,163
734,211
557,278
228,382
688,037
26,900
5,126,633
Total
Weighted-average
Exercise price
Weighted-average
Remaining
contractual life
$8.13
$10.99
$12.81
$15.34
$15.80
$17.35
$18.63
$26.92
$41.13
$51.69
$18.53
5.64
6.25
6.55
9.47
6.23
8.51
6.22
7.02
7.65
7.55
7.13
Currently exercisable
Number
(in thousands)
444,958
583,583
190,177
-
350,324
230,411
400,771
134,454
321,806
13,401
2,669,885
Weighed-
average
Exercise price
8.14
$10.90
$12.57
-
$15.60
$17.34
$18.48
$27.20
$41.13
$51.69
$17.54
Activity during fiscal 2002, 2001, and 2000, under the combined plans was as follows:
Fiscal Years Ended
Options
Weighted
average
exercise price
January 3, 2003
December 28, 2001
Weighted
average
exercise price
Options
December 29, 2000
Weighted
average
exercise price
Options
(In thousands, except for per
share data)
Outstanding at beginning of year
Granted
Exercised
Cancelled
Outstanding at end of year
Exercisable at end of year
Available for grant
Weighted-average fair value of
options granted during year
4,621
850
(132)
(211)
5,127
2,670
1,860
4,260
1,070
(291)
(418)
4,621
2,006
1,043
$19.04
14.82
10.00
20.19
$18.53
$17.54
$8.46
4,009
1,379
(706)
(422)
4,260
1,429
1,527
$19.09
17.08
12.91
18.55
$19.04
$16.26
$9.58
$12.36
34.39
13.08
15.51
$19.07
$12.94
$19.04
84
Non-Statutory Options
On May 3, 1999, Trimble entered into an agreement to grant a non-statutory option to purchase up
to 30,000 shares of common stock at an exercise price of $9.75 per share, with an expiration date of March
29, 2004.
As of January 3, 2003, these non-statutory options have not been exercised.
Warrants
On December 21, 2001, Trimble granted five-year warrants to purchase 356,670 shares of
common stock at an exercise price of $19.475 per share. These warrants were granted to investors as part of
a private placement of the Company’s common stock.
On January 15, 2002, in connection with the second closing of the December 21, 2001 private
placement of the Company’s common stock, Trimble granted five-year warrants to purchase an additional
256,002 shares of common stock, subject to certain adjustments, at an exercise price of $19.475 per share.
On April 12, 2002, the Company issued to Spectra-Physics Holdings USA, Inc., a warrant to
purchase up to 376,233 shares of Trimble’s common stock over a fixed period of time. Initially, Spectra-
Physics’ warrant entitles it to purchase 200,000 shares of common stock over a five-year period at an
exercise price of $15.11 per share. On a quarterly basis beginning July 14, 2002, Spectra-Physics’ warrant
became exercisable for an additional 250 shares of common stock for every $1 million of principal and
interest outstanding until the note is 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 preceding the last trading day of each
quarter. On July 14, 2002 an additional 17,364 shares became exercisable at an exercise price of $14.46 per
share. On October 14, 2002 an additional 17,824 shares became exercisable at an exercise price of $9.18.
On January 14, 2003, an additional 18,284 shares became exercisable at an exercise price of $13.54. The
additional shares are exercisable over a 5-year period.
The approximate fair value of the warrants of $1.5 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 is
amortized to interest expense over the term of the subordinated note.
Common Stock Reserved for Future Issuances
As of January 3, 2003, Trimble had reserved 8,478,397 common shares for issuance upon exercise
of options and warrants outstanding and options available for grant under the 2002 Plan, the 1993 Plan, the
1990 Director Plan, and the 1992 Management Discount Plan, and available for issuance under the 1988
Employee Stock Purchase Plan.
Note 15 – Benefit Plans:
401(k) Plan
Under Trimble's 401(k) Plan, U.S. 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 23,813 shares of
Common Stock for an aggregate of $291,565 in fiscal 2002. 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
85
matching contributions to the 401(k) Plan were $1.8 million in fiscal 2002, $1.7 million in fiscal 2001, and
$0.8 million in fiscal 2000.
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 2002, 2001 and 2000 were
$1.1 million, $0.9 million, and $2.1 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 $1.4 million for fiscal 2002, $1.4 million for fiscal 2001,
and $0.3 million for fiscal 2000.
Defined Benefit Pension Plan
The Swedish and German subsidiaries have an unfunded defined benefit pension plan that covered
substantially all of their 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 2002 and 2001 were not material.
The fair value of the plan assets were as follows:
(in thousands)
Fair value of plan assets at beginning of year
Actual return on plan assets
Employer contribution
Plan participants' contributions
Benefits paid
Translation adjustment
Fair value of plan assets at end of year
January 3, 2003
December 28, 2001
$ 503
60
-
23
-
76
$ 662
$ 465
56
-
33
-
(51)
$ 503
86
The defined benefit plan activity was as follows:
(in thousands)
Change in benefit obligation:
Benefit obligation at beginning of year
Interest cost
Translation adjustment
Actuarial (gain) loss
Benefit obligation at end of year
Unrecognized prior service cost
Unrecognized net actuarial gain
January 3, 2003
December 28, 2001
$ 4,706
131
(237)
282
$ 4,318
-
-
$ 4,811
134
(312)
73
$ 4,706
-
-
Accrued pension costs (included in accrued
liabilities)
$ 4,318
$ 4,706
Actuarial assumptions used to determine the net periodic pension costs for the year ended January
3, 2003 were as follows:
Discount rate
Rate of compensation increase
Swedish Subsidiary
5.5%
2.5%
German Subsidiaries
6.25%
1.5%
87
Note 16 - Earnings Per Share:
The following data show the amounts used in computing earnings (loss) per share and the effect
on the weighted-average number of shares of dilutive potential Common Stock.
Fiscal Years Ended
(in thousands, except per share data)
Numerator:
Income available to common shareholders:
Used in basic and diluted earnings (loss)
per share from continuing operations
Used in basic and diluted earnings
per share from discontinued operations
Used in basic and diluted earnings (loss)
per share
Denominator:
Weighted-average number of common shares
used in basic earnings (loss) per share
Effect of dilutive securities (using treasury
stock method):
Common stock options
Common stock warrants
Weighted-average number of common shares
and dilutive potential common shares used
in diluted income per share
Basic earnings (loss) per share from continuing
operations
Basic earnings per share from discontinued
operations
Basic earnings (loss) per share
Diluted earnings (loss) per share from
continuing operations
Diluted earnings per share from discontinued
operations
Diluted income (loss) per share
January 3,
2003
December 28,
2001
December 29,
2000
$ 10,324
$ (23,492)
$ 14,185
--
613
-
$ 10,324
$ (22,879)
$ 14,185
28,573
24,727
23,601
470
9
-
-
2,098
277
29,052
24,727
25,976
$ 0.36
$ (0.95)
$ 0.60
-
$ 0.36
0.02
$ (0.93)
-
$ 0.60
$ 0.36
$ (0.95)
$ 0.55
-
$ 0.36
0.02
$ (0.93)
-
$ 0.55
Due to the fact that the Company reported a net loss in fiscal 2001, options and warrants were not
included in the computation of earnings per share in fiscal 2001. If the Company had reported net income
in 2001, additional 938,000 common equivalent shares related to outstanding options and warrants would
have been included in the calculation of diluted loss per share.
88
Note 17 - Comprehensive Income (Loss):
The components of other comprehensive income (loss), net of related tax as follows:
Fiscal Years Ended
(in thousands)
Cumulative foreign currency translation
adjustments
Net gain (loss) on interest rate swap
Net unrealized gain (loss) on investments
Other comprehensive income (loss)
January 3,
2003
December 28,
2001
December 29,
2000
$ 17,697
210
(17)
$ 17,890
$ (9,766)
(203)
16
$ (9,953)
$ (8,045)
-
123
$ (7,922)
Accumulated other comprehensive income (loss) on the consolidated balance sheets consists of unrealized
gains on available for sale investments and foreign currency translation adjustments.
The components of accumulated other comprehensive (loss), net of related tax as follows:
(in thousands)
Cumulative foreign currency translation adjustments
Unrealized gain-hedges of forecasted transactions
Net gain (loss) on interest rate swap
Net unrealized gain (loss) on investments
Accumulated other comprehensive loss
January 3
2003
December 28,
2001
$ (1,032)
7
-
(1)
$ (1,026)
$ (18,729)
0
(203)
16
$ (18,916)
Note 18 - 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 one of the U.S. operating units, 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 Operations include expenses from this operating lease of $0.345 million for
fiscal 2002, $0.345 million for fiscal 2001, and $0.172 million for fiscal 2000.
Related –Party Notes Receivable
Trimble has notes receivable from officers and employees of approximately $1.2 million as of
January 3, 2003 and $955,000 as of December 28, 2001. The notes bear interest from 4.49% to 6.62% and
have an average remaining life of 2.89 years as of January 3, 2003.
89
Caterpillar Joint Venture
On April 1, 2002, Caterpillar Trimble Control Technologies LLC (CTCT, or "Joint Venture"), a
Joint Venture formed by Trimble and Caterpillar began operations. The Joint Venture, 50 percent owned by
Trimble and 50 percent owned by Caterpillar, with equal voting rights, is developing and marketing next
generation advanced electronic guidance and control products for earthmoving machines in the
construction, mining, and waste industries. The Joint Venture is based in Dayton, Ohio. Under the terms of
the joint venture agreement, Caterpillar contributed $11.0 million cash plus selected technology, for a total
contributed value of $14.5 million, and Trimble contributed selected existing machine control product
technologies valued at $25.5 million. Additionally, both companies have licensed patents and other
intellectual property from their portfolios to the Joint Venture. During the first fiscal quarter of 2002,
Trimble received a special cash distribution of $11.0 million from the Joint Venture.
Trimble has elected to treat the cash distribution of $11.0 million as a deferred gain, being
amortized to the extent that losses are attributable from the Joint Venture under the equity method
described above. When and if the Joint Venture is profitable on a sustainable basis, and future operating
losses are not anticipated, then Trimble will recognize as a gain, the portion of the $11.0 million, which is
un-amortized. To the extent that it is possible that the Company will have any future-funding obligation
relating to the Joint Venture, then the relevant amount of the $11.0 million will be deferred until such a
time, as the funding obligation no longer exists. Both Trimble’s share of profits (losses) under the equity
method and the amortization of our $11.0 million deferred gain are recorded under the heading of "Expense
for affiliated operations, net" in Non-operating income (expense).
During fiscal year 2002, Trimble recorded approximately $4.0 million of expenses under the
heading of "Expense for affiliated operations, net" in Non-operating income (expense) related to certain
transactions between the Joint Venture and Trimble. This was comprised of approximately $4.9 million of
incremental costs incurred by Trimble as a result of purchasing products from the Joint Venture at a higher
transfer price than its original manufacturing costs, offset by approximately $0.9 million of contract
manufacturing fees charged to the Joint Venture by Trimble. Due to the nature of the transfer price
agreements between Trimble and the Joint Venture, a related party, the impact of these agreements is
classified under Non-operating income (expense).
In addition, during fiscal year 2002, Trimble recorded lower operating expenses of approximately
$4.2 million due to the transfer of employee related expenses for research and development ($2.8 million),
and sales, marketing, and administrative functions ($1.4 million) to the Joint Venture. These employees are
devoted to the Joint Venture and are primarily engaged in developing next generation products and
technology for that entity.
Trimble has adopted the equity method of accounting for its investment in the Joint Venture. This
requires that the Company records its share of the Joint Venture profits or losses in a given fiscal period.
During fiscal year 2002, the Joint Venture reported a loss of $0.4 million of which Trimble’s share is $0.2
million, which was recorded as a Non-operating expense under the heading of “Expense for affiliated
operations, net”, but which was offset by the amortization of an equal amount of the original deferred gain
on the sale of technology to the Joint Venture.
Note 19 - Statement of Cash Flow Data:
Fiscal Years Ended
(in thousands)
Supplemental disclosure of cash flow information:
Interest paid
Income taxes paid
January 3,
2003
December 28,
2001
December 29,
2000
$ 12,215
$ 2,635
$ 17,363
$ 825
$ 9,037
$ 3,835
90
Note 20 - Litigation:
In January of 2001, Philip M. Clegg instituted a lawsuit in the United States District Court for the
District of Utah, Central Division, against Spectra-Physics Laserplane, Inc., Spectra Precision AB and
Trimble Navigation Limited. On January 29, 2003, Trimble and Mr. Clegg settled this patent infringement
lawsuit whereby Trimble has purchased a fully paid up, non-exclusive license under U.S. Patent No.
4,807,131 from Mr. Clegg.
In November of 2001, Qualcomm Inc. filed a lawsuit against Trimble in the Superior Court of the
State of California. The complaint alleges claims for an unspecified amount of money damages arising out
of Qualcomm’s perceived lack of assurances in early 1999 that Trimble’s products purchased by
Qualcomm would work properly after a scheduled week number rollover event that took place in August of
1999. Qualcomm is the only customer to make a claim against Trimble based on the week number rollover
event. In the opinion of management, the resolution of this lawsuit is not expected to have a material
adverse effect on the Company’s overall financial position.
The Company is also a party to other disputes incidental to its business. Trimble believes that its
ultimate liability as a result of such disputes, if any, would not be material to its overall financial position,
results of operations, or liquidity.
Note 21 - Selected Quarterly Financial Data (unaudited):
(in thousands, except per share data)
Fiscal 2002
Total revenue
Gross margin
Net income (loss)
First
Quarter
Second
Quarter
Third
Quarter
Fourth
Quarter
$ 104,029
54,333
(715)
$ 123,256
60,951
4,326
$ 114,748
57,581
2,708
$ 124,569
61,567
4,005
Basic net income (loss) per share
$ (0.03)
$ 0.15
$ 0.09
$ 0.14
Diluted net income (loss) per share
$ (0.03)
$ 0.15
$ 0.09
$ 0.14
Fiscal 2001
Total revenue
Gross margin
Net loss
$ 117,863
57,500
(11,587)
$ 133,587
65,531
(1,974)
$ 117,437
60,315
(2,686)
$ 106,405
53,889
(6,632)
Basic net loss per share
$ (0.48)
$ (0.08)
$ (0.11)
$ (0.26)
Diluted net loss per share
$ (0.48)
$ (0.08)
$ (0.11)
$ (0.26)
Significant quarterly items include the following: (i) in the first quarter of 2002 a $0.3 million
charge or $0.01 per diluted share relating to workforce reduction (ii) in the second quarter of 2002 a $0.2
million charge, or $0.01 per diluted share relating to work force reduction (iii) in the third quarter of 2002
a $0.2 million charge, or $0.01 per diluted share relating to work force reduction and a $0.2 million gain, or
$0.01 per diluted share relating to the sale of an investment; (iv) in the fourth quarter of 2002 a $0.5 million
charge, or $0.02 per diluted share relating to work force reduction and a $1.5 million charge, or $0.05 per
diluted share relating to the write-down of an investment.
91
Significant quarterly items include the following: (i) in the first quarter of 2001 a $2.0 million
charge or $0.08 per diluted share relating to loss on sale of Air Transport business and the exiting of certain
product lines; (ii) in the second quarter of 2001 a $0.9 million charge, or $0.04 per diluted share relating to
work force reduction; and $0.2 million in income or $0.01 per diluted share relating to a gain on the sale of
a minority investment; (iii) in the third quarter of 2001 a $0.4 million charge, or $0.01 per diluted share
relating to work force reduction; (iv) in the fourth quarter of 2001 a $0.5 million charge, or $0.02 per
diluted share relating to work force reduction; a $0.1 million gain, or $0.01 per diluted share on sale of
business; and a $0.1 million charge, or $0.01 per diluted share relating to the write-down of an investment.
92
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
The Board of Directors and Shareholders, Trimble Navigation Limited
We have audited the accompanying consolidated balance sheets of Trimble Navigation Limited as
of January 3, 2003 and December 28, 2001, and the related consolidated statements of operations,
shareholders' equity, and cash flows for each of the three years in the period ended January 3, 2003. Our
audits also included the financial statement schedule listed in the index at Item 14(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 auditing standards generally accepted in the 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 and schedule referred to above present fairly, in all
material respects, the consolidated financial position of Trimble Navigation Limited at January 3, 2003 and
December 28, 2001, and the consolidated results of its operations and its cash flows for each of the three
years in the period ended January 3, 2003, in conformity with accounting principles generally accepted in
the United States. 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.
January 24, 2003
Palo Alto, California
/s/ Ernst & Young LLP
93
TRIMBLE NAVIGATION LIMITED
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
ITEM 9
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
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 Beneficial Ownership Reporting Compliance" in the
Proxy Statement and is incorporated herein by reference.
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
CONTROLS AND PROCEDURES
(a) Evaluation of disclosure controls and procedures.
Our chief executive officer and chief financial officer evaluated the effectiveness of our disclosure
controls and procedures (as defined in Rule 13a-14(c) and 15(d)-14(c) under the Securities Exchange Act of
1934, as amended) within 90 days of the filing of this Form 10-K (the "Evaluation Date") and, based on that
evaluation, concluded that, as of the Evaluation Date, our disclosure controls and procedures are effective to
timely alert management to material information relating to Trimble during the period when our periodic
reports are being prepared.
(b) Changes in internal controls.
Since the Evaluation Date, there have not been any significant changes to our internal controls or in
other factors that could significantly affect these controls, including any corrective actions with regard to
significant deficiencies and material weaknesses.
94
PART IV
ITEM 15.
EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(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 January 3, 2003 and December 28, 2001
56
Consolidated Statements of Operations for each of the three fiscal years
in the period ended January 3, 2003
57
Consolidated Statement of Shareholders' Equity for the three fiscal years
in the period ended January 3, 2003
58
Consolidated Statements of Cash Flows for each of the three fiscal years
in the period ended January 3, 2003
59
Notes to Consolidated Financial Statements
Report of Ernst & Young LLP, Independent Auditors
60 - 92
93
2. Financial Statement Schedules
The following financial statement schedule is filed as part of this report:
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.
Page in this
Annual Report
on Form 10-K
3. Exhibits
Exhibit
Number
3.1
3.2
3.3
3.4
Restated Articles of Incorporation of the Company filed June 25, 1986. (6)
Certificate of Amendment of Articles of Incorporation of the Company filed October 6, 1988. (6)
Certificate of Amendment of Articles of Incorporation of the Company filed July 18, 1990. (6)
Certificate of Determination of the Company filed February 19, 1999. (6)
95
3.8
4.1
4.2
4.3
4.4
4.5
Amended and Restated Bylaws of the Company. (15)
Specimen copy of certificate for shares of Common Stock of the Company. (1)
Preferred Shares Rights Agreement dated as of February 18, 1999. (5)
First Amended and Restated Stock and Warrant Purchase Agreement between and among the
Company and the investors thereto dated January 14, 2002. (10)
Form of Warrant to Purchase Shares of Common Stock dated January 14, 2002. (11)
Form of Warrant dated April 12, 2002. (12)
10.4+
Form of Indemnification Agreement between the Company and its officers and directors. (1)
10.32+ 1990 Director Stock Option Plan, as amended, and form of Outside Director Non-statutory Stock
Option Agreement. (4)
10.35
Sublease Agreement dated January 2, 1991, between the Company, Aetna Insurance Company,
and Poqet Computer Corporation for property located at 650 North Mary Avenue, Sunnyvale,
California. (2)
10.40
Industrial Lease Agreement dated December 3, 1991, between the Company and Aetna Life
Insurance Company for property located at 585 North Mary Avenue, Sunnyvale, California. (3)
10.41
Industrial Lease Agreement dated December 3, 1991, between the Company and Aetna Life
Insurance Company for property located at 570 Maude Court, Sunnyvale, California. (3)
10.42
Industrial Lease Agreement dated December 3, 1991, between the Company and Aetna Life
Insurance Company for property located at 580 Maude Court, Sunnyvale, California. (3)
10.46+ 1992 Management Discount Stock Option and form of Non-statutory Stock Option Agreement. (3)
10.59+ 1993 Stock Option Plan, as amended May 11, 2000. (8)
10.60 + 1988 Employee Stock Purchase Plan, as amended May 11, 2000. (8)
10.65+ Standby Consulting Agreement between the Company and Bradford W. Parkinson dated
September 1, 1998. (6)
10.66+ Standby Consulting Agreement between the Company and Robert S. Cooper dated September 1,
1998. (6)
10.67+ Employment Agreement between the Company and Steven W. Berglund dated March 17, 1999.
(6)
10.68+ Nonqualified deferred Compensation Plan of the Company effective February 10, 1994. (6)
10.70***Supply Agreement dated August 10, 1999 by and among Trimble Navigation Limited and
Solectron Corporation and Solectron Federal Systems, Inc. (7)
10.77+ Australian Addendum to the Trimble Navigation 1988 Employee Stock Purchase Plan. (9)
10.80 Amended and Restated Subordinated Promissory Note dated March 20, 2002. (13)
10.81+ 2002 Stock Plan, including form of Option. (14)
96
10.82 Amended and Restated Credit Agreement dated January 14, 2003. (16)
10.83
Letter dated May 8, 2002 exercising renewal option of the Supply Agreement dated August 10,
1999 by and among Trimble Navigation Limited and Solectron Corporation and Solectron
Federal Systems, Inc. (16)
21.1
Subsidiaries of the Company. (16)
23.1
Consent of Ernst & Young LLP, independent auditors. (16)
24.1
Power of Attorney included on signature page herein.
99.1
Certification of CEO pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. (16)
99.2
Certification of CFO pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. (16)
***
Confidential treatment has been granted for certain portions of this exhibit pursuant to an order
dated effective October 5, 1999.
+
(1)
(2)
(3)
(4)
(5)
(6)
(7)
(8)
(9)
(10)
(11)
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.
Incorporated by reference to identically numbered exhibits to the registrant's Registration
Statement on Form S-1, as amended (File No. 33-35333), which became effective July 19, 1990.
Incorporated by reference to identically numbered exhibits to the registrant's Annual Report on
Form 10-K for the fiscal year ended December 31, 1990.
Incorporated by reference to identically numbered exhibits to the registrant's Registration
Statement on Form S-1 (File No. 33-45990), which was filed February 18, 1992.
Incorporated by reference to identically numbered exhibits to the registrant's Annual Report on
Form 10-K for the fiscal year ended December 31, 1993.
Incorporated by reference to Exhibit No. 1 to the registrant's Registration Statement on Form 8-A,
which was filed on February 18, 1999.
Incorporated by reference to identically numbered exhibits to the registrant's Annual Report on
Form 10-K for the fiscal year ended January 1, 1999.
Incorporated by reference to identically numbered exhibits to the registrant's Report on Form 8-K,
which was filed on August 25, 1999.
Incorporated by reference to identically numbered exhibits to the registrant's registration statement
on Form S-8 filed on June 1, 2000.
Incorporated by reference to identically numbered exhibits to the registrant's Annual Report on
Form 10-K for the fiscal year ended December 29, 2000.
Incorporated by reference to exhibit number 4.1 to the registrant's Current Report on Form 8-K
filed on January 16, 2002.
Incorporated by reference to exhibit number 4.2 to the registrant's Current Report on Form 8-K
filed on January 16, 2002.
97
(12)
(13)
(14)
(15)
Incorporated by reference to exhibit number 4.1 to the registrant’s Registration Statement on Form
S-3 filed on April 19, 2002.
Incorporated by reference to exhibit number 10.80 to the registrant’s Quarterly Report on Form
10-Q for the quarter ended March 29, 2002.
Incorporated by reference to exhibit number 10.82 to the registrant’s Quarterly Report on Form
10-Q for the quarter ended June 28, 2002.
Incorporated by reference to exhibit number 3.8 to the registrant’s Quarterly Report on Form 10-Q
for the quarter ended September 27, 2002.
(16)
Filed herewith.
(b) Reports on Form 8-K.
On October 24, 2002, the Company filed a report on Form 8-K reporting the Company’s quarterly
earnings for the third fiscal quarter of 2002.
98
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 6, 2003
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 Date
/s/ Steven W. Berglund President, Chief Executive
Steven W. Berglund
Officer, Director
March 6, 2003
/s/ Mary Ellen Genovese Chief Financial Officer and Assistant
Secretary (Principal Financial Officer)
Mary Ellen Genovese
March 7, 2003
/s/ Anup V. Singh Corporate Controller
Anup V. Singh
(Principal Accounting Officer)
March 7, 2003
99
/s/ Robert S. Cooper Director
Robert S. Cooper
/s/ John B. Goodrich Director
John B. Goodrich
/s/ William Hart Director
William Hart
/s/ Ulf J. Johansson Director
Ulf J. Johansson
/s/ Bradford W. Parkinson Director
Bradford W. Parkinson
March 4, 2003
March 7, 2003
March 6, 2003
March 4, 2003
March 4, 2003
100
CERTIFICATIONS
CERTIFICATION OF CHIEF EXECUTIVE OFFICER
I, Steven W. Berglund, certify that:
I have reviewed this annual report on Form 10-K of Trimble Navigation Limited.
Based on my knowledge, this Annual Report does not contain any untrue statement of a material
fact or omit to state a material fact necessary to make the statements made, in light of the
circumstances under which such statements were made, not misleading with respect to the period
covered by this Annual Report;
Based on my knowledge, the financial statements, and other financial information included in this
annual report, fairly present in all material respects the financial condition, results of operations
and cash flows of the registrant as of, and for, the periods presented in this Annual Report;
The registrant's other certifying officers and I are responsible for establishing and maintaining
disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the
registrant and have:
a)
b)
c)
Designed such disclosure controls and procedures to ensure that material information
relating to the registrant, including its consolidated subsidiaries, is made known to us by
others within those entities, particularly during the period in which this Annual Report is
being prepared;
Evaluated the effectiveness of the registrant's disclosure controls and procedures as of a
date within 90 days prior to the filing date of this Annual Report (the "Evaluation Date");
and
Presented in this annual report our conclusions about the effectiveness of the disclosure
controls and procedures based on our evaluation as of the Evaluation Date.
The registrant's other certifying officers and I have disclosed, based on our most recent evaluation,
to the registrant's auditors and the audit committee of registrant's board of directors (or persons
performing the equivalent functions):
a)
b)
All significant deficiencies in the design or operation of internal controls which could
adversely affect the registrant's ability to record, process, summarize and report financial
data and have identified for the registrant's auditors any material weaknesses in internal
controls; and
Any fraud, whether or not material, that involves management or other employees who
have a significant role in the registrant's internal controls;
The registrant's other certifying officers and I have indicated in this Annual Report whether there
were significant changes in internal controls or in other factors that could significantly affect
internal controls subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.
1.
2.
3.
4.
5.
6.
Date: March 6, 2003
/s/ Steven W. Berglund
Steven W. Berglund
Chief Executive Officer
101
1.
2.
3.
4.
5.
6.
CERTIFICATION OF CHIEF FINANCIAL OFFICER
I, Mary Ellen Genovese, certify that:
I have reviewed this annual report on Form 10-K of Trimble Navigation Limited.
Based on my knowledge, this Annual Report does not contain any untrue statement of a material
fact or omit to state a material fact necessary to make the statements made, in light of the
circumstances under which such statements were made, not misleading with respect to the period
covered by this Annual Report;
Based on my knowledge, the financial statements, and other financial information included in this
annual report, fairly present in all material respects the financial condition, results of operations
and cash flows of the registrant as of, and for, the periods presented in this Annual Report;
The registrant's other certifying officers and I are responsible for establishing and maintaining
disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the
registrant and have:
a)
b)
c)
Designed such disclosure controls and procedures to ensure that material information
relating to the registrant, including its consolidated subsidiaries, is made known to us by
others within those entities, particularly during the period in which this Annual Report is
being prepared;
Evaluated the effectiveness of the registrant's disclosure controls and procedures as of a
date within 90 days prior to the filing date of this Annual Report (the "Evaluation Date");
and
Presented in this annual report our conclusions about the effectiveness of the disclosure
controls and procedures based on our evaluation as of the Evaluation Date;
The registrant's other certifying officers and I have disclosed, based on our most recent evaluation,
to the registrant's auditors and the audit committee of registrant's board of directors (or persons
performing the equivalent functions):
a)
b)
All significant deficiencies in the design or operation of internal controls which could
adversely affect the registrant's ability to record, process, summarize and report financial
data and have identified for the registrant's auditors any material weaknesses in internal
controls; and
Any fraud, whether or not material, that involves management or other employees who
have a significant role in the registrant's internal controls;
The registrant's other certifying officers and I have indicated in this Annual Report whether there
were significant changes in internal controls or in other factors that could significantly affect
internal controls subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.
Date: March 7, 2003
/s/ Mary Ellen Genovese
Mary Ellen Genovese
Chief Financial Officer
102
EXHIBIT NO. 99.1
CERTIFICATION OF CEO PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report on Form 10-K of Trimble Navigation Limited (the
"Company") for the period ended January 3, 2003 as filed with the Securities and Exchange Commission
on the date hereof (the "Report"), Steven W. Berglund, as Chief Executive Officer of the Company, hereby
certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002, to the best of his knowledge, that:
(1) the Report fully complies with the requirements of Section 13(a) of the Securities Exchange
Act of 1934, and
(2) the information contained in the Report fairly presents, in all material respects, the financial
condition and results of operations of the Company.
/s/ Steven W. Berglund
Steven W. Berglund
Chief Executive Officer
March 6, 2003
This certification accompanies this Report pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and
shall not, except to the extent required by the Sarbanes-Oxley Act of 2002, be deemed filed by the
Company for purposes of Section 18 of the Securities Exchange Act of 1934, as amended.
103
EXHIBIT NO. 99.2
CERTIFICATION OF CFO PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report on Form 10-K of Trimble Navigation Limited (the
"Company") for the period ended January 3, 2003 as filed with the Securities and Exchange Commission
on the date hereof (the "Report"), Mary Ellen Genovese, as Chief Financial Officer of the Company, hereby
certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002, to the best of his knowledge, that:
(1) the Report fully complies with the requirements of Section 13(a) of the Securities Exchange
Act of 1934, and
(2) the information contained in the Report fairly presents, in all material respects, the financial
condition and results of operations of the Company.
/s/ Mary Ellen Genovese
Mary Ellen Genovese
Chief Financial Officer
March 7, 2003
This certification accompanies this Report pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and
shall not, except to the extent required by the Sarbanes-Oxley Act of 2002, be deemed filed by the
Company for purposes of Section 18 of the Securities Exchange Act of 1934, as amended.
104
SCHEDULE II
TRIMBLE NAVIGATION LIMITED
VALUATION AND QUALIFYING ACCOUNTS
(IN THOUSANDS OF DOLLARS)
Allowance for doubtful accounts:
Balance at beginning of period
Acquired allowance (1)
Bad debt expense
Write-offs, net of recoveries
Balance at end of period
Inventory allowance:
Balance at beginning of period
Acquired allowance (2)
Additions to allowance
Write-offs, net of recoveries
Balance at end of period
January 3,
2003
December 28,
2001
December 29,
2000
$ 8,540
-
5,443
(4,083)
$ 9,900
$ 23,274
-
3,901
(2,025)
$ 25,150
$ 6,538
-
5,077
(3,075)
$ 8,540
$ 19,285
-
7,242
(3,253)
$ 23,274
$ 2,949
4,445
1,198
(2,054)
$ 6,538
$ 14, 109
7,672
188
(2,684)
$ 19,285
(1) Includes $4,419,000 acquired at July 14, 2000 as part of the acquisition of Spectra Precision Group and
$26,000 acquired at November 14, 2000 as part of the acquisition of Tripod Data Systems.
(2) Includes $7,659,000 acquired at July 14, 2000 as part of the acquisition of Spectra Precision Group and
$13,000 acquired at November 14, 2000 as part of the acquisition of Tripod Data Systems.
105
EXHIBIT 21.1
TRIMBLE NAVIGATION LIMITED
LIST OF SUBSIDIARIES OF REGISTRANT
Name of Subsidiary
Jurisdiction of Incorporation
Trimble Navigation Australia Pty Limited
Spectra Precision Pty Ltd.
Trimble Austria Ges.mbH
Trimble Belgium BVBA
Trimble Brasil Limitada
Datacom Software Limited
Jamestown Manufacturing Corporation
Trimble Export Limited
Trimble Navigation International Limited
Trimble Specialty Products, Inc.
TR Navigation Corporation
Trimble Canada Ltd.
Trimble Navigation Technology (Shanghai) Co. Ltd.
SPHM Inc.
Trimble Middle East WLL
Trimble France S.A.S.
Trimble GmbH
Trimble Holdings GmbH
Trimble Kaiserslautern GmbH
Trimble Terrasat GmbH
ZSP Geodetic Systems GmbH
Trimble Italia SRL
Trimble Navigation Italia s.r.l
Trimble Japan K.K.
Spectra Precision de Mexico, SA de CV
106
Australia
Australia
Austria
Belgium
Brazil
California
California
California
California
California
California
Canada
China
Delaware
Egypt
France
Germany
Germany
Germany
Germany
Germany
Italy
Italy
Japan
Mexico
EXHIBIT 21.1 (continued)
TRIMBLE NAVIGATION LIMITED
LIST OF SUBSIDIARIES OF REGISTRANT
Trimble Mexico S de RL
Trimble Europe B.V.
Trimble Navigation New Zealand Limited
Datacom Software Research Limited
Tripod Data Systems
Trimble Navigation Singapore PTE Limited
Trimble International Holdings S.L.
Trimble Navigation Iberica S.L.
Spectra Precision Scandinavia AB
Trimble AB
TNL Flight Services, Inc
Trimble Navigation Europe Limited
Trimble Pty Ltd.
Mexico
Netherlands
New Zealand
New Zealand
Oregon
Singapore
Spain
Spain
Sweden
Sweden
Texas
United Kingdom
United Kingdom
107
EXHIBIT 23.1
TRIMBLE NAVIGATION LIMITED
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration Statements (Form S-8 Nos. 33-
37384, 33-39647, 33-45167, 33-45604, 33-46719, 33-50944, 33-57522, 33-62078, 33-78502, 33-84362,
33-91858, 333-04670, 333-28429, 333-53703, 333-84949, 333-38264, 333-65758, 333-65760, and 333-
97979) pertaining to the 1983 Stock Option Plan, the Trimble Navigation Savings and Retirement Plan, the
1990 Director Stock Option Plan, the "Position for Us for Progress" 1992 Employee Stock Bonus Plan, the
1992 Management Discount Stock Option Plan, the 1993 Stock Option Plan, C. Trimble Non-statutory
Option Plan, and the 2002 Stock Option Plan and the related Prospectuses, of our report dated January 24,
2003 with respect to the consolidated financial statements and schedule of Trimble Navigation Limited
included in the Annual Report (Form 10-K) for the year ended January 3, 2003.
/s/ Ernst & Young LLP
March 4, 2003
Palo Alto, California
108
EXECUTIVE OFFICERS
BOARD OF DIRECTORS
SHAREHOLDER INFORMATION
Steven W. Berglund
President and Chief Executive Officer
Robert S. Cooper, Ph.D., Chairman
Titan Corporation
Mary Ellen P. Genovese
Chief Financial Officer
Steven W. Berglund
Trimble Navigation Limited
Bryn Fosburgh
Vice President
General Manager, Geomatics & Engineering
John B. Goodrich, Secretary
Retired Partner
Wilson, Sonsini, Goodrich & Rosati
William Hart
Hart Ventures
Ulf J. Johansson, Ph.D.
Europolitan Vodafone AB
Bradford W. Parkinson, Ph.D.
Department of Aeronautics and
Astronautics
Stanford University
Michael W. Lesyna
Vice President
General Manager, Mobile Solutions
Chris Shephard
Vice President
General Manager, Construction Instruments
Alan R. Townsend
Vice President
General Manager, Field Solutions
Dennis L. Workman
Vice President
General Manager, Component Technologies
William C. Burgess
Vice President
Human Resources
Joseph F. Denniston, Jr.
Vice President
Operations
Irwin L. Kwatek
Vice President & General Counsel
Bruce E. Peetz
Vice President
Advanced Technology & Systems
John E. Huey
Treasurer
Anup V. Singh
Corporate Controller
Corporate Headquarters:
Trimble Navigation Limited
645 North Mary Avenue
Sunnyvale, California 94085
Phone: (408) 481-8000
Fax: (408) 481-2218
Independent Auditors:
Ernst & Young LLP
Palo Alto, California
Transfer Agent & Registrar:
Mellon Investor Services
P.O. Box 3315
South Hackensack, NJ 07606
(800) 522-6645 for U.S.A.
(201)329-8660 for International
TDD for Hearing Impaired:
(800) 231-5469 for U.S.A.
(201) 329-8354 for International
http://www.melloninvestor.com
Investor Relations Contact:
Brian Siegel
(408) 481-6914
investor_relations@trimble.com
Additional Information
The Company's annual report on
Form 10-K, as filed with the Securities
Exchange Commission, is available
through the Investor Relations portion
of the Company's website at:
http://www.trimble.com/ir_reports.html
Trimble Investors Information:
Traded: The NASDAQ Stock Exchange
Symbol: TRMB
Closing price for year-end: $13.39
at Jan.3, 2003
Closing year range: $8.02–$18.50
Trimble’s Web Site:
http://www.trimble.com
© 2003, Trimble Navigation Limited. All rights reserved. Trimble,
Ag GPS, BladePro, FirstGPS, GeoExplorer, and SiteVision are
trademarks of Trimble Navigation Limited registered in the United
States Patent and Trademark Office. The Globe & Triangle logo,
Lassen, Spectra Precision Lasers, Telvisant, and Trimble Toolbox are
trademarks of Trimble Navigation Limited. All other trademarks are
the property of their respective owners. TID 13128 (3/03)
TRIMBLE LOCATIONS WORLDWIDE
CORPORATE HEADQUARTERS
Trimble Navigation Limited
645 North Mary Avenue
Sunnyvale, CA 94085
OPERATIONS
United States
Trimble Chandler
7408 West Detroit Street
Suite 100
Chandler, Arizona 85226
Trimble Rockies
7403 Church Ranch Boulevard, Suite 100
Westminster, Colorado 80021
Trimble Dayton
5475 Kellenburger Road
Dayton, Ohio 45424
Tripod Data Systems
345 SW Avery Avenue
Corvallis, Oregon 97333
Americas Regional Fulfillment Center
5475 Kellenburger Road
Dayton, Ohio 45424
International
Trimble TerraSat
Haringstrasse 19 D-85635
Höhenkirchen-Siegertsbrunn
Germany
Trimble Jena
Carl-Zeiss Promenade 10
D-07745 Jena
Germany
Trimble Kaiserslautern
Am Sportplatz 5, D-67661
Kaiserslautern
Germany
Trimble New Zealand
11 Birmingham Drive
P.O. Box 8729
Riccarton, Christchurch
New Zealand
Trimble Sweden
Box 64, Rinkebyvägen 17
182 11, Danderyd
Sweden
European Regional Fulfillment Center
Meerheide 45
5521DZ Eersel
Netherlands
INTERNATIONAL SALES CENTERS
Europe
Pacific Rim
Trimble Australia
Level 1/123 Gotha Street
Fortitude Valley QLD 4006
Australia
Trimble China
Suite 16D, Building 2, Epoch Center
4 Beiwa Road, Haidian District
Beijing 100089
China
666 Fuzhuo Road Suite 7B
Haixin Plaza
Shanghai 200001
China
Trimble Japan
Shin-Ohashi Riverside Building 101
1-8-2, Shin-Ohashi, Kohtoh-ku
Tokyo 135-0007
Japan
Trimble Korea
27th Fl, Korea World Trade Center
Suite 107
159-1 Samsung-dong, Kangnam-gu
Seoul 135-729
Korea
Trimble Singapore
88 Marine Parade Road
22-06, Parkway Parade
Singapore 449269
Singapore
The Americas
Trimble Canada
41 Horner Avenue, Unit 5
Toronto, Ontario M8Z 4X4
Canada
Trimble Latin America
6505 Blue Lagoon Drive
Suite 120
Miami, Florida 33126
Trimble Austria
Linke Wienzeile 110
A-1060 Wien
Austria
Trimble France
Parc Hightec VI
9, avenue du Canada
Les Ulis 91966 Courtaboef
Cedex
France
Trimble Germany
Am Prime Parc 11
D-65479 Raunheim
Germany
Trimble Italy
Largo Temistocle Solera, 7
00199 Rome
Italy
Via Salvo D’Acquisto 27
20049 Concorezzo (Mi)
Italy
Trimble Russia
23, 1st Tverskaya-Yamskaya St.
Moscow, 125047
Russia
Trimble Spain
Via de las Dos Castillas No. 33
Atica. Edificio 6. Despacho B-2
28224 Pozuelo de Alarcon
Madrid
Spain
Trimble UK
Trimble House
Meridian Office Park
Osborn Way, Hook
Hampshire RG27 9HX
U.K.
Middle East
Trimble Dubai
LOB 14322
PO Box 17760
Jebel Ali Free Zone
Dubai
UAE