TRIMBLE LOCATIONS WORLDWIDE
Corporate Headquarters
Trimble Navigation Limited
749 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-07740 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
Applanix
85 Leek Crescent
Richmond Hill, Ontario
Canada L4B 3B3
MENSI
30, rue de la Fontaine du Vaisseau
94120 Fontenay-sous-Bois
France
International Sales Centers
Europe
Trimble France
Parc Hightec VI
9 Avenue du Canada, Les Ulis
91966 Courtaboeuf, Cedex
France
Trimble Germany
Am Prime Parc 11
D-65479 Raunheim
Germany
Trimble Italy
Largo Temistocle Solera, 7
00199 Rome
Italy
Centro Torri Bianche
Palazzo Larice, 3
20059 Vimercate (MI)
Italy
Trimble Russia
23, 1st Tverskaya-Yamskaya St.
Moscow, 125047
Russia
Trimble Spain
Via de las Dos Castillas No. 33
Atica. Edificio 6. Planta 3
Despacho B-2
28224 Pozuelo de Alarcon
Madrid
Spain
Trimble Nordic
Box 64, Rinkebyvägen 17
182 11, Danderyd
Sweden
Trimble UK
Trimble House
Meridian Office Park
Osborn Way, Hook
Hampshire RG27 9HX
U.K.
Annual Report 2003
Technology Solutions for the Right Place and Time
Technology Solutions for the Right Place and Time
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Middle East
Trimble Dubai
LOB 14 Office 322
PO Box 17760
Jebel Ali Free Zone
Dubai
UAE
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
Haixin Plaza
Shanghai 200001
China
Trimble Korea
8F, Geumwon Bldg., 943-12 Daechi3-dong
Kangnam-gu, Seoul 135-845
Korea
Trimble Singapore
80 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
Joint Ventures
Caterpillar Trimble Control Technologies
LLC
5475 Kellenburger Road
Dayton, Ohio 45424
Nikon-Trimble Co., Ltd.
Technoport Mitsuiseimei Building
16-2, Minamikamata 2-chome, Ota-ku
Tokyo 144-0035, Japan
THIS IS TRIMBLE
Trimble is a world leader in providing advanced, position-centric solutions to commercial, governmental
and professional customers. Our solutions enable our users to work with greater productivity, convenience
and safety and, in many cases, do things they couldn’t do before.
Market & Segments
% % %
Representative Products
*
Engineering & Construction
Engineering & Construction
Engineering & Construction
68%
Surveying
Construction
Infrastructure
3D Scanning
GPS, optical, robotic and mechanical total stations
Digital levels and theodolites
Data collectors and field computers
Field and office application software
Data communication solutions
Machine guidance systems
Laser and optical positioning and alignment tools
Field and office application software
Data communication solutions
Typical Customers
Surveyors
Civil engineers
Construction contractors
Transportation agencies
Utility companies
Earth-moving contractors
General construction contractors
Utility contractors
Wall and ceiling contractors
Transportation agencies
GPS reference networks and software
Government and scientific agencies
Laser scanners
Field and office application software
Civil and plant engineers
Surveyors
Field Solutions
15%
Mapping & GIS
Handheld GPS field data collectors
Field and office application software
Utility companies
Natural resource agencies
Government agencies
Agriculture Vehicle Guidance
Manual and automated steering systems for farm vehicles
Farmers
Agriculture Water Management
Grade control systems for irrigation and drainage
Farmers
Agricultural contractors
ologie
ologies
Component Technologies
12%
OEM (Silicon Integration)
OEM (Modules)
Timing
Mobile Solutions
Mobile Solutions
Fleet Management
2%
GPS chipsets
Embedded silicon and companion firmware
Modules supplying position, velocity and time solutions
or raw GPS measurement data
Automobile tier-one suppliers
Portable appliance manufacturers
Automobile tier-one suppliers
Asset management integrators
Security device suppliers
CDMA base station clocks
Time and frequency boards and instruments
Wireless infrastructure providers
Wireless location solution providers
Mobile devices combining wireless communication and GPS
Internet-delivered fleet management application services
Trucking, ready-mix cement, refuse,
and other local fleet operators
Construction contractors
Municipal fleet operators
Security
Mobile devices combining wireless communication and GPS
Commercial vehicle and equipment owners
Mobile Workforce Management
Internet-delivered wireless workforce application services
Sales, service, and delivery businesses
Portfolio Business
3%
Military
Applanix
* Percent of total revenue
GPS receivers for military operations
Military time and frequency boards
Integrated inertial/GPS positioning and orientation
surveying and mapping
systems for surveying and mapping
surveying and mapping
U.S. Department of Defense
Allied defense ministries
Defense contractors
Land, marine, and aerial surveying and
mapping contractors
Military
Executive Officers
Board of Directors
Shareholder Information
Robert S. Cooper, Ph.D., Chairman
President
Aerospace Electronics Division
Titan Corporation
Steven W. Berglund
President & CEO
Trimble Navigation Limited
John B. Goodrich, Secretary
Business Consultant
William Hart
Venture Capital Investor and
Business Consultant
Ulf J. Johansson, Ph.D.
Chairman
Europolitan Vodafone AB
Bradford W. Parkinson, Ph.D.
Professor (Emeritus)
Department of Aeronautics and
Astronautics
Stanford University
Nickolas W. Vande Steeg
Executive Vice President & COO
Parker Hannifin Corporation
Corporate Headquarters:
Trimble Navigation Limited
749 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) 329-8660 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 also available on the
Investor Relations portion of the
Company’s website at:
http://www.trimble.com/ir_reports.html
Trimble Investor Information
Traded: The NASDAQ Stock Exchange
Symbol: TRMB
Trimble’s website:
http://www.trimble.com
Steven W. Berglund
President and Chief Executive Officer
Mary Ellen P. Genovese
Chief Financial Officer
Bryn Fosburgh
Vice President
General Manager, Geomatics & Engineering
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
Mark A. Harrington
Vice President
Strategy & Business Development
Irwin L. Kwatek
Vice President & General Counsel
Bruce E. Peetz
Vice President
Advanced Technology & Systems
John E. Huey
Treasurer
Anup V. Singh
Corporate Controller
© 2004, Trimble Navigation Limited. All rights reserved. Trimble, the Globe & Triangle logo, AgGPS and EZ-Guide are trademarks of Trimble Navigation Limited registered
in the United States Patent and Trademark Office. DriveSafe, Force-5, and TrimTrac are trademarks of Trimble Navigation Limited. All other trademarks are the property of
their respective owners. TID 13400 (3/04)
FINANCIAL HIGHLIGHTS
Fiscal Year Ended
(in thousands except per-share amounts)
2003 2002
2001
Operating Data:
Net revenue
EBITDA
Cash flow from operations
Net income (loss)
from continuing operations
Diluted net income (loss) per share
Diluted net income (loss) per share
Diluted net income (loss) per share
from continuing operations (1)
(1)
$ 540,903 $ 466,602 $ 475,292
$ 63,838 $ 45,832 $ 39,454
$ 36,460 $ 32,316 $ 26,370
$ 38,485 $ 10,324 $ (23,492)
$ 0.77 $ 0.24 $ (0.63)
Revenue
540.9
475.3
466.6
466.6
600
500
400
300
200
100
0
01 02
01 02 03
01 02 03
01 02
01 02
01 02
EBITDA
63.8
45.8
39.5
60
40
20
0
Earnings per share (1)
0.77
0.24
(0.63)
0.80
0.40
0.00
(0.40)
(0.40)
(0.80)
(0.80)
01 02 03
Balance Sheet Data:
Cash and equivalents
Total assets
Non-current portion of long-term debt
and other non-current liabilities
01 02
01 02 03
01 02 03
01 02
01 02
01 02
Shareholders’ equity
$ 45,416 $ 28,679 $ 31,078
$ 544,903 $ 441,656 $ 419,395
$ 85,880 $ 114,051 $ 131,759
$ 348,244 $ 201,351 $ 138,489
$ 38,485 $ 10,324 $ (23,492)
14,051 $ 21,106
$ 11,473 $
$ (2,900) $ 3,500 $ 1,900
$ 8,864 $ 9,850 $ 11,218
$ 7,916 $ 8,107 $ 28,722
EBITDA Reconciliation:
Net income (loss)
from continuing operations
Add back:
Interest expense, net
Interest tax (benefit) provision
Depreciation expense
Amortization expense
EBITDA
$ 63,838 $ 45,832 $ 39,454
In millions except for earnings per share
(1)
All share and per-share information has been adjusted to reflect the 3 for 2 stock split on a retroactive basis for all periods presented.
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.
1
TO OUR SHAREHOLDERS, EMPLOYEES AND PARTNERS
Trimble demonstrated significant progress in 2003. Although our external environment remained uncertain in
some markets and geographies, we continued to produce improved financial and market performance across the
Company.
In Retrospect
In last year’s letter I identified a number of objectives for 2003. Let me begin by reviewing our progress against
those objectives.
• Grow revenues in spite of the environment.
Revenues grew by 16% in 2003 and have grown at an annual compound rate of 19% since 1999. The underlying
growth of our business in 2003 was positively impacted by the weaker U.S. dollar and by the effects of acquisitions.
Revenues grew by 16% in 2003 and have grown at an annual
compound rate of 19% since 1999. More importantly, earnings
grew at a rate higher than the rate of sales growth.
All major segments reflected growth in
the year—most producing double-digit
percentage increases.
More importantly, earnings grew at a
rate higher than the rate of sales growth.
Reported operating income was up 59% for the year and GAAP EPS were up 221%. This growth in earnings
occurred in spite of a significant negative impact from the weaker dollar. The relative paradox of receiving
a foreign exchange benefit on revenues while experiencing a negative impact on earnings is a result of the
internationalization of our development and manufacturing.
• Extend our presence in emerging markets—both new geographies and new market categories.
We continue to position ourselves in newer markets that are potential important sources of future growth. Our
efforts in China, India, Russia, Korea and Eastern Europe resulted in improving financial results—with the
promise of more in the future.
We also continued to extend our market and product capabilities through internal development, acquisitions and
alliances. For example, we established a joint venture with Nikon, which will extend our presence in the con-
struction positioning market. In addition, our acquisitions of Applanix and MENSI both added important new
technologies, which will enable us to develop new applications or to extend current application solutions. We also
announced an alliance with CNH Global, which will extend our distribution reach for our AgGPS
AgGPS
Ag
agricultural product line.
The TrimTrac™ locator product, which was developed during 2003 and introduced in early 2004, is an impor-
tant step towards creating a new market category for Trimble. It establishes a new asset tracking and security
monitoring capability at an aggressive price point and opens up a new class of customers and applications that
were previously not available to Trimble.
® Autopilot
• Continue to make advances in operational performance that are valuable to our customers.
We made progress towards the long-term standards that will enable us to differentiate ourselves competitively on
many of the elements of the user solution that matter most. During 2003 we recovered from the initial imple-
mentation difficulties of our 2002 Regional Fulfillment Center initiative and reestablished the trajectory to meet
our performance goals. These include: improving delivery performance, making it easier to work with Trimble,
and eliminating cost from the entire distribution channel. Other points of operational emphasis include improv-
ing both the “out-of-the-box” and lifetime quality of our products and improving the level of support available
to our users—whether it is made available from a dealer, directly from Trimble or over the Internet.
• Build our organizational capabilities.
Trimble’s success relies on the quality of our organization. We continue to evolve as a company and have been
successful at adding a number of strong players to the company in the last few years. The emphasis in 2003
continued the shift from the question of “Do we have the right players?” to “How do we develop our talent to
create more organizational leverage?”
2
• Manage the Mobile Solutions business to demonstrate improved financial results.
During the year we increased our subscribers by over 600%, albeit from a low base. This progress began to
reflect itself in our financial performance with revenues up 53% from the level of 2002 and with our loss
decreasing by 46%. The early 2004 acquisition of TracerNET provides us with important new sources of
strength in this market. We are positioned to see steady progression towards breakeven during 2004 while
maintaining a rapid increase in subscribers.
Beyond the defined goals for the year, we demonstrated progression throughout the company. The Engineering
and Construction (E&C) segment had a strong year. Revenues increased 15% in a market that, although better,
has not recovered to the levels of a few years ago. Segment operating profits were up over 13%, in spite of sig-
nificant negative exchange-rate impacts. Survey instrument and software sales were particularly strong as we saw
growth coming from continuing industry consolidation, emerging markets and new product categories.
Machine control results in 2003 were less robust than expected. The year represented a transition period:
our Caterpillar Trimble Controls Technology joint venture was preparing the rollout of its first major
We continue to position ourselves in markets which
we believe will be important sources of future growth.
products; the Caterpillar channel was not yet a signifi-
cant factor in the sales of joint-venture products; and
the Trimble distribution channel was adapting to the
post-joint-venture environment.
Our construction layout tools business, principally laser positioning devices, demonstrated some revenue
improvement during the year, but has not yet reached its targeted operating performance levels. Overall, we
remain pleased with our positioning in E&C. With the acquisitions of MENSI and Applanix and the joint
venture with Nikon, we continued to put the strategic building blocks in place for the “intelligent construction
site” of the future.
The Field Solutions segment also demonstrated impressive improvements in performance in 2003. Revenues
increased by 19%, and segment operating profits increased 50%. Both constituent businesses in the segment,
geographic information systems (GIS) and agriculture, reflected improved performance in the year. GIS ben-
efited from better economic conditions, improved geographic coverage, and a revamped distribution channel.
Agriculture benefited from an improved farm economy and, more importantly, from the strong positioning of
our products in the market.
The Component Technologies segment made a major earnings contribution to Trimble. Revenues grew by 7%
and segment operating profits grew by 55%. The strong earnings leverage resulted both from a richer product
mix and from the benefits of our move of production to
China. Our timing product line, which provides high-
accuracy timing solutions for the wireless infrastructure
market, continues to perform well and has successfully
established an Asian market position.
Because we are fundamentally a solutions company,
redefining ourselves and redefining the nature of the
solutions we offer provides significant opportunities
to create additional growth.
Looking Forward
Our objectives continue to be consistent with past years.
We target our internal managerial process on achieving long-term market leadership, consistent double-digit
revenue growth, and a return on capital that will place us well within the top quartile of the universe of
comparable companies.
Given the external environment of the past several years, our emphasis has been on improving return on capi-
tal with revenue growth being, of necessity, a secondary emphasis. As a result, since 1999 we have successfully
increased our operating income at a significantly faster rate than revenue. Our on-going challenge will be to
take advantage of the more growth-friendly environment and continue to produce strong incremental
profitability on additions to revenue. While the effect of the weaker dollar during the year lowered the
improvement we would have otherwise shown, we remain on track towards the goal of achieving a reported
operating margin of 14 to 15% of revenues.
3
With our improving profitability, we now have the opportunity to
emphasize revenue growth. This growth will come from four sources:
• Existing markets
We expect significant gains can still be achieved through continued
penetration of our current markets. We believe that the right formula
to achieve this goal includes the elements of improving our market
insight, continued innovation, channel development, operational
improvement and willingness to play the role of an opportunistic
market consolidator.
• Leveraging our existing product and technology base into new market areas
An example of addressing new markets is our success in bringing
our products and technology to emerging geographic regions such
as China, Russia and India. We are also evaluating the potential of
bringing Trimble capabilities into other emerging new application
areas, such as homeland security.
• Leveraging our domain knowledge within our existing markets into new
value-added products and services for those markets
During 2003 we expanded the range of product categories available
to our existing markets. Examples include the addition of Nikon
and MENSI products to the portfolio offered to Engineering and
Construction customers. We are also offering the asset management
capabilities from our Mobile Solutions segment to construction con-
tractors for managing their assets on the construction site. Because
we are fundamentally a solutions company, the ability to redefine
ourselves and redefine the nature of the solutions we offer provides
numerous ways to create additional growth.
• Pioneering new product concepts into new markets
We continue to explore new products in entirely new markets. Our
effort in Mobile Solutions continues to pioneer new markets, such as
the ready-mix and refuse markets, with product categories that are new
to Trimble. Other examples include the TrimTrac locater and Recon
computer (a rugged handheld unit developed at our Corvallis facility)
—both of which represent beachhead products in new markets.
We had a good year in 2003 and are positioned to have a better year in
2004. Trimble employees and Trimble partners remain the foundations
of our successes. Thanks to all of you.
Steven W. Berglund
President and Chief Executive Officer
4
TECHNOLOGY SOLUTIONS FOR
THE RIGHT PLACE AND TIME
THE RIGHT PLACE AND TIME
In 2003, Trimble celebrated its first quarter-century
of innovation. Throughout those 25 years, we have
provided advanced positioning solutions to enhance
the way people work. Our markets range from
construction to telecommunications and from
agriculture to urban and resource management.
For most of our first 25 years, we focused on using
Global Positioning System (GPS) technology to accu-
rately determine location and time. In recent years, we
have added a variety of new technologies to expand our
core competencies and product portfolio beyond GPS.
We now have the broadest portfolio of advanced posi-
tioning and location-based solutions in the industry.
As a result, we are able to provide solutions for new
applications and more comprehensive solutions for
existing applications.
During our first 25 years we have increased workplace
efficiencies, productivity and profitability for our
customers.
We’re just getting started.
5
GPS
LASERS
OPTICS
ROBOTICS
3D SCANNING
INERTIAL NAVIGATION
WIRELESS COMMUNICATION
APPLICATIONS SOFTWARE
INTERNET SERVICES
ENGINEERING & CONSTRUCTIO
ENGINEERING & CONSTRUCTION
ENGINEERING & CONSTRUCTION
Trimble historically has been the recognized GPS
technology leader in surveying. In 2000, we expanded
our leadership position to the overall engineering and
construction market. We are extending our leadership
with new technologies that enhance our customers’
ability to do construction tasks faster, better and
more profitably. Our integrated line of GPS-, laser-,
optical-, and robotic-based tools and specialized
software helps to speed any construction project
from concept to completion.
“The advanced Trimble survey systems we use have
helped us treat our clients like gold.”
John Kantner
Director of Field Services
The Schneider Corporation
6
“GPS machine control
improves our efficiency and
accuracy—and our bottom
line.”
Mark Trucco, CEO
Trucco Companies
“Trimble equipment pro-
vides the accuracy we need
and the time and labor
savings we want.”
Steve Newell, PS
Survey Project Manager
Woolpert
“We bought the TS315
Total Station because it lets
us do very accurate build-
ing layouts much faster.”
Daniel Boutri
Managing Director
Boutri Bati
(France)
New developments:
• R-track technology will enable Trimble users to realize the
performance benefits of the U.S. Government’s planned GPS
Modernization Program.
• 3D laser scanning makes precise measurements of large, complex
objects such as bridges, buildings, and process plants much faster
and easier.
• Field layout software simplifies complex operations, enabling
contractors to do on-site measurements and layout operations
themselves, saving time and money.
• A next-generation machine-control system for dozers from
our joint venture with Caterpillar (Caterpillar Trimble Control
Technologies, LLC) further increases productivity for earth-moving
operations.
• Our joint venture with Nikon (Nikon-Trimble Co., Ltd.) broad-
ens our portfolio of survey and construction products and enables
us to better access emerging markets in Russia, Eastern Europe,
India and China.
• A rugged, handheld field computer that can be bundled with a
variety of Trimble application software provides a new tool for our
traditional markets and entrée into new, specialized applications.
7
COM
COMPONENT TECHNOLOGIES
COMPONENT TECHNOLOGIES
In 2003, we expanded our range of high-volume prod-
ucts to include complete end-user devices. We also
increased our capabilities to include wireless com-
munications and alternative positioning technologies.
These enhance our existing lines of chipsets, boards and
modules for original equipment manufacturers (OEMs)
and system integrators in automobile navigation, fleet
management and security applications. In addition, our
timing solutions for wireless infrastructure providers
continued to gain market share.
New developments:
• The TrimTrac locator, a milestone in our technology roadmap for
integrating GPS and wireless capabilities, sets a new price/perfor-
mance standard for vehicle monitoring, security and recovery services.
Service providers and system integrators can now make these services
more affordable and convenient for the end users.
• We increased our Asian presence with the successful ramp-up of full-
scale production in China. In addition, we attained significant expansion
of sales to customers in Asia including Nortel and Samsung.
• We entered into a technology development and licensing agreement
with Rosum Corporation for television-based positioning technology.
This technology complements GPS by providing additional capability
in dense urban areas and building interiors.
8
FIELD SOLUTIONS
Our mapping & GIS solutions enable data collect-
ing in the field to record position and other infor-
mation for geographic information systems (GIS).
A GIS is an information system that works with
geo-referenced data to help utilities, government
agencies and businesses manage assets and resources.
We are a pioneer in the rapidly developing Mobile
GIS market, which uses wireless communications,
GPS and other technologies to enable field person-
nel to access and manipulate massive GIS data bases
for greater efficiency.
In agriculture, we are a leading provider of GPS-
based manual guidance and automated steering
systems for farm vehicles. Our systems significantly
increase farm efficiencies and crop yields through
more accurate steering and faster in-field driving
with less stress on the driver.
New developments:
• Our mapping & GIS products have been used effectively to
map large, rapidly evolving events such as the southern California
fires in mid-2003 and the expanding threat from West Nile virus.
•Building on a six-year relationship, we entered into a new agree-
Building on a six-year relationship, we entered into a new
Building on a six-year relationship, we entered into a new agree-
ment with CNH Global, which enables them to offer our auto-
mated steering and guidance systems as factory options on their
Case IH and New Holland agricultural tractors.
• Our AgAgA GPS EZ-Guide® Plus lightbar guidance system brings a
new level of performance at a significantly lower price point to a
wider segment of the agricultural market.
“This project has totally changed our utility mapping process. Your
products have made our jobs easier and have helped us to improve
some of the largest datasets that our city maintains.”
Christopher Ryan Laingen
GIS Technician, City of Sioux Falls, GIS Division
“Autopilot saved us after hail ruined our crops—I couldn't have re-
planted in time without it. I won’t own another tractor without it.”
Kenny Lunsford, Lunsford Farms
9
MOBILE SOLUTIONS
We are expanding our productivity-enhancing fleet
management services beyond our initial target
markets of ready-mix concrete, refuse hauling and
aggregate trucks into a broad range of commercial
fleets. Our GPS-based software and service provide
the fleet operator with Internet access to current
vehicle locations and conditions and offer extensive
reporting capabilities that can be used to evaluate
and maximize the efficiency of the fleet routes and
operations.
New developments:
• Our unique DriveSafe™ service enables fleet operators to mini-
mize accidents by detecting and correcting unsafe driving habits.
Developed in conjunction with McNeilus Companies, Inc., the
largest ready-mix truck manufacturer in North America, DriveSafe
is now included as a standard feature on selected new McNeilus
truck models. The system is readily adaptable for use with other
types of fleet applications.
• The acquisition of TracerNET Corporation in March 2004
provides new expertise in integrating fleet information with
enterprise software applications. We expect to combine the
capabilities of both companies to provide large enterprise fleets
with more diverse and complete fleet management solutions.
10
PORTFOLIO BUSINES
PORTFOLIO BUSINESS
PORTFOLIO BUSINESS
Military
Trimble is the leading supplier offering Federal Aviation
Administration (FAA)-certified GPS equipment that
supports both military and civil GPS signals. We also
are the preferred GPS source for military timing appli-
cations and key space/strategic programs.
New developments:
• During 2003, our market position was enhanced with the develop-
ment and implementation of Trimble’s TA-12S GPS receiver on the
KC-10 tanker upgrade program and selection of our Force-5™ GPS
embedded receiver on a major military transport platform.
Applanix
Applanix, acquired by Trimble in 2003, develops posi-
tioning systems that integrate inertial navigation system
(INS) and GPS technologies. The INS capability can
extend a GPS solution’s effectiveness in difficult envi-
ronments, such as high-rise urban or heavily forested
areas. This integrated solution enhances the perfor-
mance of precision GPS-based products for airborne
photogrammetry, marine survey, and GIS applications.
11
OUR PEOPLE AND OUR PARTNER
OUR PEOPLE AND OUR PARTNERS
OUR PEOPLE AND OUR PARTNERS
Our performance would not be possible without the
outstanding contributions of the more than 2,000
Trimble employees around the world.
Working for a growing company is a demanding proposition in
terms of time, energy, productivity and ideas. Trimble employees
met those demands—and more—in 2003:
• The sun seldom sets on Trimble business—our facilities around
the world are at work around the clock.
• The sun often sets on our traveling employees, who spent almost
14,000 nights on the road (equivalent to 37+ years) and flew
more than 23 million miles (942 times around the world).
• Our engineers wrote and tested more than 3 million lines of
software and firmware code. We applied for 55 patents and more
than 100 new ideas are in the pre-application process.
• Our Regional Fulfillment Centers in Ohio and Europe shipped
some 580,000 boxes of products to customers and partners.
• We produced over 30,000 pages of user documentation in
11 languages to support our products.
• We collectively quaffed more than 1,200,000 cups of coffee and
tea to help fuel all of the other activities.
For all of the above and a great deal more, we thank all of our
employees in all of our offices around the world.
Trimble’s wide range of solutions and markets
requires multiple means of serving our customers
throughout the world. Our partners—dealers,
distributors, original equipment manufacturers
(OEMs), value-added resellers (VARs) and others—
play critical roles in making Trimble a success.
We are especially cognizant of the work of our partners. These
individuals and companies know the customers’ needs in their
markets and geographic areas. They provide us with information
that helps us optimize the products and solutions we offer. And
they work with their customers before and after the sale to ensure
that their needs are truly met. We appreciate their efforts and are
proud that they have made the decision to share their destiny
with Trimble.
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 2, 2004
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)
(State or other jurisdiction of incorporation or organization)
(I.R.S. Employer Identification No.)
California
94-2802192
749 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]
Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act).
Yes X No
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 July 3, 2003 was approximately $795
million.
There were 50,537,119 shares of the registrant's Common Stock issued and outstanding as of March 11, 2004.
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 19, 2004 (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
2003 FORM 10-K ANNUAL REPORT
TABLE OF CONTENTS
Item 1
Item 2
Item 3
Item 4
PART I
Business Overview................................................................................................................................................... 5
Properties...................................................................................................................................................................17
Legal Proceedings ....................................................................................................................................................17
Submission of Matters to a Vote of Security Holders ........................................................................................17
PART II
Market for Registrant's Common Equity and Related Stockholder Matters ...................................................18
Item 5
Selected Financial Data ...........................................................................................................................................19
Item 6
Item 7
Management's Discussion and Analysis of Financial Condition and Results of Operations .......................20
Item 7A Quantitative and Qualitative Disclosures about Market Risk ............................................................................42
Financial Statements and Supplementary Data....................................................................................................45
Item 8
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure ......................76
Item 9
Controls and Procedures .........................................................................................................................................76
Item 9a
Item 10
Item 11
Item 12
Item 13
Item 14
PART III
Directors and Executive Officers of the Registrant.............................................................................................76
Executive Compensation.........................................................................................................................................76
Security Ownership of Certain Beneficial Owners and Management and
Related Stockholder Matters..............................................................................................................................77
Certain Relationships and Related Transactions..................................................................................................77
Principal Accountant Fees and Services...............................................................................................................77
Item 15
PART IV
Exhibits, Financial Statement Schedules and Reports on Form 8-K................................................................77-88
TRADEMARKS
Trimble, the globe and triangle logo, EZ-Guide, Telvisant, Lassen, SiteVision, GeoExplorer, AgGPS, Thunderbolt,
FirstGPS, and CrossCheck are trademarks of Trimble Navigation Limited registered in the United States Patent and
Trademark Office and other countries. Force, Galaxy, Placer, TrimTrac, and Trimble Toolbox are trademarks of Trimble
Navigation Limited. All other trademarks are the property of their respective owners.
4
PART I
Item 1 Business Overview
Trimble Navigation Limited, a California corporation (“Trimble” or “the Company” or “we” or “our” or “us”),
provides advanced positioning product solutions to commercial and government users in a large number of markets.
These markets include surveying, construction, agriculture, urban and resource management, military,
transportation, and telecommunications. Our products typically provide benefits that can include cost savings,
improved quality, or higher productivity. Examples of our products include earthmoving equipment guidance
systems, surveying instruments, fleet management systems, components for in vehicle navigation and telematics
systems, farm equipment guidance systems, field data collection handhelds, and timing modules used in the
synchronization of wireless networks.
Our products typically integrate positioning, communication, and information technologies. 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. A significant
amount of the differentiation in the products is provided through software; 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. Our manufacturing strategy includes a combination of in house assembly
and fabrication as well as subcontracting those functions to third parties. We conduct our business globally with
major development, manufacturing or logistics operations in the United States, Sweden, Germany, New Zealand,
and the Netherlands. Products are sold through dealers, representatives, joint ventures, and other channels
throughout the world. These channels are supported by our sales offices located in more than 20 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 majority 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.
GPS accuracy is dependent upon the locations of the receiver and the number of 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, attitude (angular orientation), and time. The accuracy of GPS
may also be limited by distortion of GPS signals from ionospheric and other atmospheric conditions.
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 next
generation wireless networks have enabled less expensive wireless communications. These developments allow for
the efficient transfer of position data to locations away from the positioning field device, allowing the data to be
accessed by more users and thereby increasing productivity.
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
5
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 elements:
• Attractive markets – We focus on markets that offer potential for revenue growth, profitability, and market
leadership.
•
Innovative solutions that provide significant benefits to our customers – We seek to apply our technology
to applications 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.
• 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 focused on military and inertial integration technologies, which aggregate into the
Portfolio Technologies segment. Our segments are distinguished by the markets they serve. Each segment consists
of businesses which are responsible for product development, marketing, sales, strategy, and financial performance,
and is headed by a general manager.
Segment Realignment
In the first fiscal quarter of 2003, we realigned two of our reportable segments. The Tripod Data Systems (TDS)
business is now included in the Engineering and Construction segment. Previously it was included in the Portfolio
Technologies segment. All comparable information for earlier periods has been restated to conform to the new basis.
Engineering and Construction
Products in the Engineering and Construction segment improve productivity and accuracy throughout the entire
construction process including the initial survey, planning, design, earthmoving, and building phases. The product
emphasis is 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.
We typically combine a number of technologies into product solutions. The elements of these solutions may
incorporate GPS, optical, laser, radio or cellular communications, and software.
An example of the customer benefits provided by our product is our GPS and robotic optical surveying instruments
which enable the surveyor to perform operations in the field faster, more reliably and with a smaller crew.
Similarly, our construction machine guidance products allow the operator to achieve the desired landform by
eliminating stakeout and reducing rework. In turn, these steps in the construction process can be readily linked
together with data collection modules and software to minimize the time and effort required to maintain data
accuracy throughout the entire construction process.
We sell and distribute our products from this segment through a global network of independent dealers that are
supported by our sales force. This channel is supplemented by relationships that create additional channel breadth
including our joint ventures with Caterpillar, Nikon, and private branding arrangements with other companies.
6
We also design and market handheld data collectors and data collection software for field use by surveyors,
contractors, and other professionals. These products are sold directly, through dealers, and other survey
manufacturers. Competitors in this portion of the business are small and geographically diverse.
Competitors in this segment are typically companies that provide optical, laser, or GPS positioning products. Our
principal competitors are Topcon Corporation and Leica Geosystems. Price points in this segment range from less
than $1,000 for certain laser systems to approximately $125,000 for a high precision, three-dimensional, machine
control system.
Representative products sold in this segment include:
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.
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.
Field Solutions
Our Field Solutions segment addresses the agriculture and geographic information system (GIS) markets.
Our agriculture products consist of manual and automated navigation guidance for tractors and other farm
equipment used in spraying, planting, cultivation, and harvesting applications. The benefits to the farmer include
faster machine operation, higher yields, and lower consumption of chemicals. 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, RHS, CSI
Wireless, Beeline and Integrinautics.
Our GIS product line is centered on handheld data collectors that gather information in the field to be incorporated
into GIS databases. Typically this information includes features, attributes, and positions of fixed infrastructure and
natural resource assets. An example would be that of a utility company performing a survey of its transmission poles
including the age and condition of each telephone pole. Our handheld unit enables this data to be collected and
automatically stored while confirming the location of the asset. The data can then be downloaded into a GIS
7
database. This stored data could later be used to navigate back to any individual asset or item for maintenance or
data update. Our mobile GIS initiative goes one step further by allowing this information to be communicated from
the field worker to the back-office GIS database through the combination of wireless technologies (Bluetooth and
cellular), as well as giving the field worker the ability to download information from the database using these same
wireless technologies. This capability provides significant advantages to users including improved productivity,
accuracy and access to the information in the field.
Distribution for GIS products is primarily through a network of independent dealers and business partners,
supported by our sales force. Primary markets for our GIS products and solutions include government, defense and
homeland security, utility and communications and natural resources management. Competitors in this market are
typically either survey instrument companies having GPS technology and/or consumer GPS companies. Two
examples are Leica Geosystems and Thales Navigation.
Approximate price points in this segment range from $3,000 for a GIS handheld unit to $35,000 for a fully
automated, farm equipment control system.
Representative products sold within this segment include:
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 GPS-based components for applications that require embedded
position or time. Our largest markets are in the telecommunications and automotive industries where we supply
modules, boards, custom integrated circuits and software, or single application IP licenses to the customer according
to the needs of the application. Sales are made directly to original equipment manufacturers (OEMs) and system
integrators who incorporate our component into a sub-system or a complete system-level product.
In the telecommunications infrastructure market, we provide timing modules that keep wireless networks
synchronized and on frequency. For example, CDMA cellular telephone networks require a high level of both short-
term and long-term frequency stability for proper operation (synchronization of information/voice flow to avoid
dropped calls). Our timing modules meet these needs at a much lower cost than the atomic standards or other
specially prepared components that would otherwise be required. Customers include wireless infrastructure
companies such as Nortel, Samsung, Nokia, UTStarcom, and Andrew.
In the automotive and embedded market, we provide a GPS component that is embedded into in-vehicle navigation
(IVN) 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, Hyundai Automotive Company, Robert Bosch GmbH, and Ixfin Magneti Marelli
Sistemi Electronici S.P.A .
* 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.
8
* Component Technologies continues to explore other positioning solutions in addition to GPS. An example of such
a solution is the television triangulation technology developed by Rosum. With Rosum, we intend to develop a
family of devices which will greatly extend the ability to locate both people and assets in environments that would
be difficult or impossible for GPS only solutions.
The major competitor in the telecommunication infrastructure market is Symmetricom. Competitors in the
automotive and embedded markets are typically component companies with GPS capability, including Japan Radio
Corporation, Motorola, and SiRF.
Representative products sold by this segment include:
Thunderbolt® GPS Disciplined Clock – The Thunderbolt clock is used as a time source for the synchronization of
wireless networks. By combining a GPS receiver with a high-quality quartz oscillator, the Thunderbolt achieves the
performance of an atomic standard with higher reliability and lower price.
FirstGPS® Technology – We license our FirstGPS technology, which is a host-based, GPS system available as two
integrated circuits and associated software. The software runs on a customer’s existing microprocessor system
complementing the work done by the integrated circuit to generate position, velocity, and time. This low-power
technology is particularly suitable for small, mobile, battery-operated applications.
Lassen® SQ Module – The 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.
TrimTrac™ Locator – Our new TrimTrac product is a complete end user device that combines GPS functionality
with tri-band global system for mobile communications (GSM) wireless communications. It is intended for high
volume personal vehicle and commercial asset management applications that demand a low-cost locator device.
Mobile Solutions
Our Mobile Solutions segment addresses the market for fleet management services by providing a Trimble-hosted
platform solution that bundles both the hardware and software needed to run the application. The software solution
is typically provided to the user through Internet-enabled access to our hosted platform for a monthly service fee.
This 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.
We market our fleet management services in three primary areas, leveraging the core platform. Our vertical market
strategy targets opportunities in specific vertical markets where we believe we can provide a unique value to the end
user by customizing the hardware and software solution for a particular industry. For example, the first vertical we
are addressing is ready mix concrete. Here, we combine a suite of sensors into a solution that can automatically
determine the status of a vehicle without driver intervention. Our agreement with McNeilus, a major manufacturer
of trucks for the ready mix concrete and waste management industries, facilitates the delivery of a complete
management solution to ready mix concrete fleet operators and refuse haulers. McNeilus’ sales force markets our
solution as a retrofit for trucks already in the field, or as a factory-installed option. We plan on leveraging our
technology, partners and customers into other verticals, such as other construction material delivery vehicles and
waste management trucks, where a customized solution can provide similar benefits as in ready mix.
We also have a horizontal market strategy that focuses on providing turnkey solutions to a broad range of service
fleets and mobile workers that span over 90 distinct markets. Here, we leverage the same general applications that
are used in our vertical markets, however, the same level of customization, such as additional sensors, is typically
not required. These products are distributed through individual dealers and dealer service providers, as well as after-
market automotive electronics suppliers.
9
Our enterprise strategy focuses on sales to large, enterprise accounts. Here, in addition to a Trimble-hosted solution,
we can also integrate our software directly into the customer’s IT infrastructure, giving them control of the
information. In this market we sell directly to end users and sales cycles tend to be long due to field trials followed
by an extensive decision-making process.
Approximate prices for the hardware fall in the range of $300 to $3,000, 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 and software companies such as Command Alkon.
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 Technologies
Our Portfolio Technologies segment includes various operations that aggregate to less than 10 percent of our total
revenue. The products in this segment are navigation modules and embedded sensors that are used in avionics,
flight, and military applications. The two operations in this segment are Applanix, and Military and Advanced
Systems (MAS).
Applanix develops, manufactures, sells and supports high-value, precision products that combine GPS with inertial
sensors for accurate measurement of the position and attitude of moving vehicles. Sales are made directly by our
sales force to the end users or to systems integrators. Competitors include IGI in the airborne survey market, and
iXsea and VT TSS in the marine survey market.
Our MAS business supplies GPS modules that use the military’s GPS advanced capabilities. The modules are used
for guiding aircraft. Military products are sold directly by our sales force to either the US Government or a
contractor. Sales are also made to non-US governments, with the sales of the encrypted components taking place
through the US Government. Competitors in this market include Rockwell, L3, Raytheon, and Thales.
Representative products sold by this segment include:
Applanix POS/AV - An integrated GPS/inertial system for airborne surveying that measures aircraft position to an
accuracy of a few centimeters and aircraft attitude (angular orientation) to an accuracy of 30 arc seconds or better.
This system is typically interfaced to large format cameras and scanning lasers for producing geo-referenced
topographic maps of the terrain.
Force 5™ Module – A dual frequency, embedded GPS module that is used in a variety of military airborne
applications.
Acquisitions and Joint Ventures
Our growth strategy is centered around developing and marketing innovative and complete value-added solutions to
our existing customers, while also marketing them to new customers and geographic regions. To do this, we believe
it is essential to continually enhance our market position, which has led to partnering with or acquiring companies
that bring technologies, products or distribution capabilities that will allow us to enter or penetrate a market quicker
than if we had done so solely through internal development. Over the past five years, this has led us to form two
10
joint ventures and acquire six companies. No assurance can be given that our previous or future acquisitions will be
successful or will not materially adversely affect our financial condition or operating results.
Applanix Corporation
* On July 7, 2003, we acquired privately held Applanix Corporation, a Canadian developer of systems that integrate
inertial navigation system and GPS technologies. We expect the Applanix acquisition to extend our technology
portfolio and enable increased robustness and capabilities in our future positioning products. Applanix’s
performance is reported under our Portfolio Technologies segment.
MENSI S.A.
* On December 9, 2003, we acquired privately held MENSI S.A., a French developer of terrestrial 3D laser
scanning technology. We expect the MENSI acquisition to enhance our technology portfolio and expand our product
offerings. MENSI’s performance is reported under our Engineering and Construction segment.
TracerNET Corporation
* On March 5, 2004, we acquired privately held TracerNET Corporation of Virginia, a provider of wireless fleet
management solutions. We expect the TracerNET acquisition to offer more diverse and complete fleet management
solutions. TracerNET’s performance will be reported under our Mobile Solutions segment.
Nikon-Trimble Co., Ltd.
On March 28, 2003, Trimble and Nikon Corporation entered into an agreement to form a joint venture in Japan,
Nikon-Trimble Co., Ltd., which would assume the operations of Nikon Geotecs Co., Ltd., a Japanese subsidiary of
Nikon Corporation and Trimble Japan KK, our Japanese subsidiary. Nikon-Trimble began operations in July of
2003.
Nikon-Trimble is 50% owned by us and 50% owned by Nikon, with equal voting rights. It is focusing on the design
and manufacture of surveying instruments including mechanical total stations and related products. In Japan, this
joint venture distributes Nikon’s survey products as well as our survey, agriculture, construction and GIS products.
Outside of Japan, we are the exclusive distributor of Nikon survey and construction products.
* We expect the joint venture to enhance our market position in survey instruments through geographic expansion
and market penetration. The Nikon instruments will broaden our survey and construction product portfolio and
enable us to better access emerging markets such as Russian, Chinese, and Indian markets. It will also provide us
with the ability to sell our GPS and robotic technology to existing Nikon customers. Additionally, Nikon-Trimble is
expected to improve our market position in Japan.
Caterpillar Trimble Control Technologies, LLC
On April 1, 2002, we established and began operations of a joint venture with Caterpillar called Caterpillar Trimble
Control Technologies, LLC, in which each company has a 50% ownership stake and have equal voting rights. This
joint venture is developing new generations of machine control products for the construction and mining markets for
installation in the factory or as a dealer option.
* 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 the adoption of the technology will spur future demand for machine control products that can be
integrated into the design of new Caterpillar machines, while also available for “after-market” installation.
Patents, Licenses and Intellectual Property
We hold approximately 600 US patents and 108 non-US patents, the majority of which cover GPS technology and
applications, and over 94 of which cover optical and laser technology and applications.
11
We prefer to own the intellectual property used in our products, either directly or though subsidiaries. From time to
time we license technology from third parties.
There are approximately 60 trademarks registered to Trimble including "Trimble," the globe and triangle logo,
"AgGPS," "GeoExplorer," and "Telvisant," among others that are registered to Trimble Navigation Limited in the
United States and other countries. Additional trademarks are pending registration.
Sales and Marketing
We currently have regional sales offices throughout North America and Europe. Offices serving the rest of the world
include Australia, China, Korea, New Zealand, Singapore, and United Arab Emirates. We tailor the distribution
channel to the needs of our products and regional markets. 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 an extensive world wide network of dealers and distributors. Distributors carry one
or more product lines and are generally assigned a territory. We occasionally grant exclusive rights to market certain
products within specified countries. See Note 3 of the Notes to the Consolidated Financial Statements for financial
information regarding joint ventures
Sales to unaffiliated customers outside the United States comprised approximately 51% in 2003, 49% in 2002, and
50% in 2001. During the 2003 fiscal year, North and South America represented 56%, Europe, the Middle East and
Africa represented 31%, and Asia represented 13% of our total revenues.
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 up to 5.5 years, certain TDS products have a 90-day
warranty period, and certain Nikon products have a five-year warranty period. We support our GPS products
through a circuit board replacement program from locations in the United Kingdom, Germany, Japan, and the
United States. The repair and calibration of our non-GPS products are available from company-owned or authorized
facilities. We reimburse dealers and distributors for all authorized warranty repairs they perform.
While we engage in extensive product quality programs and processes, including actively monitoring and evaluating
the quality of component suppliers, our warranty obligation is affected by product failure rates, material usage, and
service delivery costs incurred in correcting a product failure. Should actual product failure rates, material usage, or
service delivery costs differ from the estimates, revisions to the estimated warranty accrual and related costs may be
required.
Seasonality of Business
* Our revenues are affected by seasonal buying patterns in some of our businesses. 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. Typically, we expect the first and fourth
quarters to be the seasonal lows due to the lack of construction during the winter months. If other factors such as
12
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.
Backlog
In most of our markets, the time between order placement and shipment is short. Therefore, we believe that backlog
is not a reliable indicator of present or future business conditions.
Manufacturing
Manufacturing of our GPS products is subcontracted to Solectron Corporation. We completed the move of all
Component Technologies products to Solectron in China in the first quarter of 2003. During 2003 we started
utilizing Solectron in Mexico for some of our handheld products. We continue to utilize Solectron California for our
high-end GPS products and new product introduction services. Solectron is responsible for substantially all material
procurement, assembly, and testing. We continue to manage product design up through pilot production for the
subcontracted products, and we are directly involved in qualifying suppliers and key components used in all our
products. Our current contract with Solectron continues in effect until either party gives the other ninety days written
notice.
We manufacture laser and optics-based products at our plants in Dayton, Ohio; Danderyd, Sweden; and Jena and
Kaiserslautern, Germany. Some of these products or portions of these products are also subcontracted to third parties
for assembly.
All of our manufacturing sites are registered to ISO9001:2000, covering the design, production, distribution, and
servicing of all our products. The Component Technologies segment is registered to QS9000 for its automotive
products. QS9000 is the automotive version of ISO9000 covering specific requirements for the market.
Research and Development
We believe that our competitive position is maintained through the development and introduction of new products
that incorporate improved features, better performance, smaller size and weight, lower cost, or some combination of
these factors. We invest substantially in the development of new products. We also make significant investment in
the positioning, communication, and information technologies that underlie our products and will likely provide
competitive advantages.
Our research and development expenditures, net of reimbursed amounts were $67.6 million for fiscal 2003, $61.2
million for fiscal 2002, and $62.9 million for fiscal 2001.
* 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.
Employees
As of January 2, 2004, we employed approximately 2,150 employees, including 30% in sales and marketing, 29% in
manufacturing, 28% in engineering, and 13% in general and administrative positions. Approximately 45% of
employees are in locations outside the United States.
Our employees are not represented by unions except for those in Sweden and some in Germany. We also employ
temporary and contract personnel that are not included in the above headcount numbers. We have not experienced
work stoppages or similar labor actions.
Available Information
The Company’s annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and all
the Company’s website through
amendments
those reports are available free of charge on
to
13
www.trimble.com/investors.html, as soon as reasonably practicable after such material is electronically filed with or
furnished to the Securities and Exchange Commission. Information contained on our website is not part of this annual
report on Form 10-K.
In addition, you may request a copy of these filings (excluding exhibits) at no cost by writing or telephoning us at our
principal executive offices at the following address or telephone number:
Trimble Navigation Limited
749 North Mary Avenue, Sunnyvale, CA 94085
Attention: Investor Relations
Telephone: 408-481-8000
Executive Officers
The names, ages, and positions of the Company's executive officers as of March 1, 2004 are as follows:
Age
Position
Name
---------------------------------------------------------------------------------------------------------------------------------
Steven W. Berglund
Mary Ellen P. Genovese
William C. Burgess
Joseph F. Denniston, Jr.
Bryn A. Fosburgh
Mark A. Harrington
John E. Huey
Irwin L. Kwatek
Michael W. Lesyna
Bruce E. Peetz
Christopher J. Shephard
Anup V. Singh
Alan R. Townsend
Dennis L. Workman
President and Chief Executive Officer
Chief Financial Officer
Vice President, Human Resources
Vice President, Operations
Vice President and General Manager, Geomatics and Engineering
Vice President of Strategy and Business Development
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
52
44
57
43
41
48
54
64
43
52
41
33
55
58
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, a group within Spectra Physics AB, and a
pioneer in the development of laser systems. He spent 14 years at Spectra Physics in a variety of senior leadership
positions. In the early 1980s, Mr. Berglund spent a number of years at Varian Associates in Palo Alto, where he
held a variety of planning and manufacturing roles. Mr. Berglund began his career as a process engineer at
Eastman Kodak in Rochester, New York. He attended the University of Oslo and the University of Minnesota where
he received a B.S. in chemical engineering in 1974. He later received his M.B.A. from the University of Rochester
in New York in 1977.
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.
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
14
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. Prior to Trimble, Mr. Denniston worked for
3Com Corporation. During his 14-year tenure, he served as vice president of supply chain management for the
Americas and held several positions in test engineering, manufacturing engineering and operations. Previously at
Sentry Schlumberger for seven years, he held several positions including production engineering, production
management and test engineering over six years. Mr. Denniston received a B.S. in electrical engineering technology
from the Missouri Institute of Technology in 1981 and an M.S. in computer science engineering from Santa Clara
University in 1990.
Bryn A. Fosburgh – Bryn Fosburgh was appointed vice president and general manager of the Geomatics and
Engineering business 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 US Army Corps of Engineers and Defense Mapping
Agency. Mr. Fosburgh received a B.S. in geology from the University of Wisconsin in Green Bay in 1985 and an
M.S. in civil engineering from Purdue University in 1989.
Mark A. Harrington – Mark Harrington joined Trimble in January 2004 as vice president of strategy and business
development. Prior to joining Trimble, Mr. Harrington served as vice president of finance at Finisar Corporation and
chief financial officer for both Cielo Communications, Inc. and Vixel Corporation. His experience also includes 11
years at Spectra-Physics where he served in a variety of roles including vice president of finance for Spectra-Physics
Lasers, Inc. and vice president of finance for Spectra-Physics Analytical, Inc. Mr. Harrington began his career at
Varian Associates, Inc. where he held a variety of management and individual positions in finance, operations and
IT. Mr. Harrington received his B.S. in Business Administration from the University of Nebraska-Lincoln.
John E. Huey – John Huey joined Trimble in 1993 as director corporate credit and collections, and was promoted to
assistant treasurer in 1995 and treasurer in 1996. Past experience includes two years with ENTEX Information
Services, five years with National Refractories and Minerals Corporation (formerly Kaiser Refractories), and
thirteen years with Kaiser Aluminum and Chemical Sales, Inc. He has held positions in credit management, market
research, inventory control, sales, and as an assistant controller. Mr. Huey received his B.A. degree in Business
Administration in 1971 from Thiel College in Greenville, Pennsylvania and an MBA in 1972 from West Virginia
University in Morgantown, West Virginia.
Irwin L. Kwatek – Irwin Kwatek has served as vice president and general counsel of Trimble since November 2000.
Prior to joining Trimble, Mr. Kwatek was vice president and general counsel of Tickets.com, a ticketing service
provider, from May 1999 to November 2000. Prior to Tickets.com, he was engaged in the private practice of law
for more than six years. During his career, he has served as vice president and general counsel to several publicly
held high-tech companies including Emulex Corporation, Western Digital Corporation and General Automation,
Inc. Mr. Kwatek received his B.B.A. from Adelphi College in Garden City, New York and an M.B.A. from the
University of Michigan in Ann Arbor. He received his J.D. from Fordham University in New York City in 1968.
Michael W. Lesyna – Michael Lesyna has been vice president and general manager of the Mobile Solutions
segment 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.
15
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 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 Datacom Group
of companies in New Zealand including managing director of Datacom Software Research Ltd. from 1986 to 1991.
In addition, Mr. Townsend is a director of IT Capital Ltd., a venture capital company based in Auckland, New
Zealand. He is also a fellow of the New Zealand Institute of Management and a past president of the New Zealand
Software Exporters Association. Mr. Townsend received a B.S.c in economics from the University of Canterbury in
1970.
Dennis L. Workman – Dennis Workman has served as vice president and general manager of Trimble’s Component
Technologies segment since September 1999. From 1998 to 1999, Mr. Workman was senior director and chief
technical officer of the newly formed Mobile and Timing Technologies (MTT) business group, also serving as
general manager of Trimble's Automotive and Timing group. In 1997, he was director of engineering for Software
& Component Technologies. Mr. Workman joined Trimble in 1995 as director of the newly created Timing vertical
market. Prior to Trimble, Mr. Workman held various senior-level technical positions at Datum Inc. During his nine
year tenure at Datum, he held the position of CTO. Mr. Workman received a B.S. in mathematics and physics from
St. Mary’s College in 1967 and an M.S. in electrical engineering from the Massachusetts Institute of Technology in
1969.
16
Item 2
Properties
The following table sets forth the significant real property that we own or lease:
Location
Segment(s) served
Size in sq. feet Commitment
Sunnyvale, California
All
Huber Heights (Dayton),
Ohio
Westminster, Colorado
Engineering & Construction,
Field Solutions
Distribution
Engineering & Construction,
Field Solutions
Corvallis, Oregon
Engineering & Construction
150,000
150,000
57,200
32,800
73,000
20,000
21,000
Leased, expiring 2005
4 buildings
Owned, no encumbrances
Leased, expiring in 2011
Leased, month to month
Leased, expiring 2006
2 buildings
Owned, encumbered by $1.7M mortgage
Leased, expiring 2006
Chandler, Arizona
Mobile Solutions
11,500
Leased, expiring 2004
Toronto, Canada
Portfolio Technologies
50,500
Leased, expiring 2004
Danderyd, Sweden
Engineering & Construction
93,900
Leased, expiring 2005
Christchurch, New Zealand
Engineering & Construction,
Mobile Solutions, Field
Solutions
65,000
Leased, expiring 2011
2 buildings
Jena, Germany
Engineering & Construction
28,700
Leased, no expiration date
12 months notice
Kaiserslautern, Germany
Engineering & Construction
26,000
Leased, expiring 2005
Raunheim, Germany
Sales
28,700
Leased, expiring 2011
In addition, we lease a number of smaller offices around the world primarily for sales functions. For financial
information regarding obligations under leases, see Note 10 of the Notes to the Consolidated Financial Statements.
* We believe that our facilities are adequate to support current and near-term operations.
Item 3
Legal Proceedings
* We are from time to time a party to disputes or litigation incidental to our business. We believe that our ultimate
liability as a result of such disputes, if any, would not be material to our overall financial position, results of
operations, or liquidity.
Item 4
Submission of Matters to a Vote of Security Holders
No matters were submitted to a vote of security holders during the fourth quarter of 2003.
17
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters
PART II
On January 22, 2004, our Board of Directors approved a 3-for-2 split of all outstanding shares of our common stock,
payable March 4, 2004 to stockholders of record on February 17, 2004. All shares and per share information
presented has been adjusted to reflect the stock split on a retroactive basis for all periods presented.
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.
2003
Sales Price
Low
Quarter Ended
First quarter
Second quarter
Third quarter
Fourth quarter
High
$14.17
18.50
19.57
25.60
$8.68
12.43
14.97
13.49
2002
Sales Price
Low
High
$11.43
12.33
10.00
9.65
$7.84
9.98
6.85
5.35
As of January 2, 2004, there were approximately 1,055 holders of record of our common stock.
We made the following sales of unregistered securities during the year ended January 2, 2004.
Our merger agreement with LeveLite provides for us to make earn-out payments not to exceed an aggregate $3.9 million
(in common stock and cash payment) based on certain future revenues and payments received. Upon a hearing before the
California Department of Corporations in which the terms and conditions of the offer to the LeveLite shareholders were
approved, the shares of Common Stock to be issued in the transaction were exempt from registration by reason of
qualification under Section 3(a)(10) of the Securities Act of 1933, as amended.
We made the following earn-out payments in common stock during fiscal 2003:
Date of
issuance
January 22, 2003
April 23, 2003
July 29, 2003
October 27, 2003
Number of
shares issued
35,994
26,549
20,679
19,842
Price
$ 9.35
13.86
16.52
15.25
On June 30, 2003, we issued 349,251 shares of common stock to Nikon-Trimble Co. Ltd. We issued these shares as a
contribution to capital in the formation of Nikon-Trimble Co. Ltd. as a joint venture with Nikon Corporation. The shares
were valued at $16.95 per share and were exempt from registration under Section 4(2) of the Securities Act of 1933, as
amended, based on the nature of the purchaser and the nature of the arms-length negotiated transaction.
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 allowed to pay dividends and repurchase shares of our common stock up to 25% of net income in the
previous fiscal year, under the existing terms of our credit facilities.
18
Equity Compensation Plan Information
The following table sets forth, as of January 2, 2004, 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
(a)
Equity compensation
plans approved by
security holders:
Stock Option Plans ….
Equity compensation
plans not approved
by security holders...
Total ………………...
7,600,787
-
7,600,787
Item 6. Selected Financial Data
Weighted average
exercise price of
outstanding options,
warrants and rights
(b)
$13.61
-
$13.61
Number of securities remaining
available for future issuance
under equity compensation
plans (excluding securities
reflected in column (a))
(c)
1,643,555
-
1,643,555
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 Consolidated Balance Sheets data commencing on those respective
acquisition dates, comparisons of our results of operations and financial condition for periods prior to and
subsequent to those acquisitions are not indicative of future results.
We have significant intangible assets on our Consolidated Balance Sheets that include goodwill and other purchased
intangibles related to acquisitions. At the beginning of fiscal 2002, we adopted Statement of Financial Accounting
Standards No. 141 (“SFAS 141”), Business Combinations, and No. 142, Goodwill and Other Intangible Assets
(“SFAS 142”). Application of the non-amortization provisions of SFAS 142 significantly reduced amortization
expense of purchased intangibles and goodwill to approximately $8.3 million for the fiscal year 2002 from $29.4
million in fiscal year 2001.
19
Fiscal Years Ended
(Dollar in thousands, except per share data)
Revenue
Gross margin
Gross margin percentage
Income (loss) from continuing operations
Gain on disposal of discontinued operations
(net of tax)
Net income (loss)
Per common share: (1)
Income (loss) from continuing operations
- Basic
- Diluted
Gain on disposal of discontinued operations
(net of tax)
- Basic
- Diluted
Net income (loss)
- Basic
- Diluted
Shares used in calculating basic earnings per
January 2,
2004
January 3,
2003
December
28,
2001
December
29,
2000
December
31,
1999
$ 540,903 $ 466,602 $ 475,292 $ 369,798 $ 271,364
$ 268,030 $ 234,432 $ 237,235 $ 196,561 $ 144,247
53%
$ 38,485 $ 10,324 $ (23,492) $ 14,185 $ 18,662
53%
50%
50%
50%
- $
$
- $ 2,931
$ 38,485 $ 10,324 $ (22,879) $ 14,185 $ 21,593
- $ 613 $
$ 0.81 $ 0.24 $ (0.63) $ 0.40 $ 0.55
$ 0.77 $ 0.24 $ (0.63) $ 0.37 $ 0.54
$
$
- $
- $
- $ 0.01 $
- $ 0.01 $
- $ 0.09
- $ 0.09
$ 0.81 $ 0.24 $ (0.62) $ 0.40 $ 0.64
$ 0.77 $ 0.24 $ (0.62) $ 0.37 $ 0.63
share (1)
47,505
42,860
37,091
35,402
33,636
Shares used in calculating diluted earnings
per share (1)
Cash dividends per share
Total assets
Non-current portion of long term debt and
50,012
43,578
37,091
38,964
$
- $
- $
- $
- $
34,278
-
$ 544,903 $ 441,656 $ 419,395 $ 488,628 $ 181,751
other liabilities
$ 85,880 $ 114,051 $ 131,759 $ 143,553 $ 33,821
(1) Earnings per share and shares used in calculating earnings per share have been restated to reflect a three-for-two stock split in February 2004.
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."
EXECUTIVE LEVEL OVERVIEW
We are a global provider of complete, integrated solutions that provide a seamless flow of position information both
in the field and between the field and back office. To do this, we utilize advanced positioning technologies
(including GPS, optical, inertial and laser technologies) combined with wireless communications and applications
software, to get data points with accuracies down to several millimeters. This can increase productivity through time
and cost savings, as the need for labor is reduced, rework from mistakes is less frequent, and the time to complete a
job is shortened.
20
Our solutions businesses, Engineering and Construction, Field Solutions, and Mobile Solutions make up over 80%
of our revenue. We believe our strength in these businesses stems from our ability to bring innovative products or
solutions to the market, as well as effectively train and manage a global, third-party distribution channel that is
proficient in selling technology solutions into markets that have historically utilized manual and low-tech processes.
In 2003 we extended our market and product capabilities through internal development, acquisitions, and alliances.
In July, we established a joint venture with Nikon Corporation, which will extend our presence in the global
construction positioning market. Our acquisitions of Applanix in July and MENSI in December added important
new technologies which will enable us to develop new applications or broaden current application solutions. We
also announced an alliance with CNH Global, which will significantly extend our distribution reach for our
Autopilot agricultural product line.
Our other strategic business, Component Technologies, is different from the “solution businesses”, as it seeks to
either provide GPS technology directly to third parties, such as OEM's and system integrators, or to integrate GPS
into other technologies, such as wireless. These products allow for higher functionality and therefore, a higher
average selling price for our offerings. Through greater integration we see potential future growth opportunities. For
example, our recently announced TrimTrac product integrates GPS and GSM cellular technologies into a fully
functional location device. It establishes a new asset tracking or security capability at an aggressive price point and
opens up a new class of customers and applications which were previously not available to us.
In 2003 we positioned ourselves in newer markets that will serve as important sources of future growth. Our efforts
in China, India, Russia, Korea and Eastern Europe all reflected improving financial results, with the promise of more
in the future.
With our improving profitability, we now have the opportunity to re-emphasize revenue growth. We expect this
growth to come from the continuation of several trends that we saw in 2003. These trends include further penetrating
existing markets with current and new products, continued geographic expansion into emerging markets such as
Russia, China, India, Korea and Eastern Europe, taking advantage of market consolidation, improving competitive
position due to offering complete solutions with a proficient dealer channel, and entering new markets with new
products such as our TrimTrac & Recon products, fleet management services, and our inertial/GPS positioning and
orientation systems acquired as part of Applanix.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
Our accounting policies are more fully described in Note 1 of the Notes to the Consolidated Financial Statements.
The preparation of financial statements and related disclosures in conformity with accounting principles generally
accepted in the United States requires us to make judgments, assumptions, and estimates that affect the amounts
reported in the Consolidated Financial Statements and accompanying Notes to the Consolidated Financial
Statements. We consider the accounting polices described below to be our critical accounting polices. These critical
accounting policies are impacted significantly by judgments, assumptions, and estimates used in the preparation of
the Consolidated Financial Statements, and actual results could differ materially from the amounts reported based on
these policies.
Revenue Recognition
We recognize product revenue when persuasive evidence of an arrangement exists, delivery has occurred, the fee is
fixed or determinable, and collectibility is reasonably assured. In instances where final acceptance of the product is
specified by the customer or is uncertain, revenue is deferred until all acceptance criteria have been met. Our total
deferred revenue was $7.7 million and $6.0 million as of January 2, 2004 and January 3, 2003, respectively.
Revenue is reduced by a sales return reserve as described under “Allowance for Doubtful Accounts and Sales
Returns.”
Revenue from purchased extended warranty and support agreements is 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.
21
Contracts and customer purchase orders are generally used to determine the existence of an arrangement. Shipping
documents and customer acceptance, when applicable, are used to verify delivery. We assess whether the fee is
fixed or determinable based on the payment terms associated with the transaction and whether the sales price is
subject to refund or adjustment. We assess collectibility based primarily on the creditworthiness of the customer as
determined by credit checks and analysis, as well as the customer’s payment history.
Our shipment terms for US orders, and international orders fulfilled from our European distribution center are
typically FCA (Free Carrier) shipping point, except certain sales to US government agencies which are shipped FOB
destination. FCA shipping point means that we fulfill the obligation to deliver when the goods are handed over,
cleared for export, and into the charge of the carrier named by the buyer at the named place or point. If no precise
point is indicated by the buyer, we may choose within the place or range stipulated where the carrier will take the
goods into carrier’s charge.
Other international orders are shipped FOB destination, which means these international orders are not recognized
as revenue until the product is delivered and title has transferred to the buyer or FCA shipping point. FOB
destination means that we bear all costs and risks of loss or damage to the goods up to that point. .
Revenue to distributors and resellers is recognized upon delivery, assuming all other criteria for revenue recognition
have been met. Distributors and resellers do not have a right of return.
When a sale involves multiple elements, the entire fee from the arrangement is allocated to each respective element
based on its relative fair value and recognized when revenue recognition criteria for each element are met. The
amount of product revenue allocated to an individual element is limited to the lesser of its relative fair value or the
amount not contingent on our delivery of other elements under the arrangement, regardless of the probability of our
performance.
Our software arrangements generally 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 renewal
rate. The remaining value of the software arrangement is allocated to the license fee using the residual method, and
revenue is primarily recognized when the software has been delivered and there are no remaining obligations.
Revenue from PCS is recognized ratably over the term of the PCS agreement.
Allowance for Doubtful Accounts and Sales Returns
Our accounts receivable balance, net of allowance for doubtful accounts, was $96.2 million as of January 2, 2004,
compared with $77.6 million as of January 3, 2003. The allowance for doubtful accounts as of January 2, 2004 was
$10.0 million, compared with $9.9 million as of January 3, 2003. 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.
A reserve for sales returns is established based on historical trends in product return rates experienced in the
ordinary course of business. The reserve for sales returns as of January 2, 2004 and January 3, 2003 included $3.3
million and $2.7 million, respectively, for estimated future returns that were recorded as a reduction of our accounts
receivable and revenue. If the actual future returns were to deviate from the historical data on which the reserve had
been established, our revenue could be adversely affected.
Inventory Valuation
Our inventory balance was $70.8 million as of January 2, 2004, compared with $61.1 million as of January 3, 2003.
Our inventory allowances as of January 2, 2004 were $25.9 million, compared with $25.2 million as of January 3,
2003. 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 our
22
assessment of future demand and market conditions. If actual future demand or market conditions are less favorable
than those projected by us, additional inventory write-downs may be required.
Income 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. In fiscal year
2003, we have recorded a deferred tax asset of $7.6 million that is more likely than not to be realized. We need to
generate $20.0 million of future US income to realize the deferred tax asset.
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 is made.
Our effective income tax rates from continuing operations for fiscal years 2003, 2002 and 2001 were (8%), 25% and
(9%), respectively. The 2002 and 2001 income tax rates differ from the US federal statutory rate of 35%, due
primarily to non-US taxes and the inability to realize the benefit of net operating losses. The 2003 income tax rate is
less than the US federal statutory rate, due primarily to the realization of benefits from net operating losses and other
previously reserved deferred tax assets.
Goodwill Impairment
Goodwill as of January 2, 2004 was $241.4 million, compared with $205.9 million as of January 3, 2003. We
perform goodwill impairment tests on an annual basis for each reporting unit. Based on impairment tests performed,
there was no impairment of our goodwill in fiscal 2003 and 2002.
For goodwill, the annual impairment evaluation includes a comparison of the carrying value of the reporting unit
(including goodwill) to that reporting unit’s fair value. If the reporting unit’s estimated fair value exceeds the
reporting unit’s carrying value, no impairment of goodwill exists. If the fair value of the reporting unit does not
exceed the unit’s carrying value, then an additional analysis is performed to allocate the fair value of the reporting
unit to all of the assets and liabilities of that unit as if that unit had been acquired in a business combination and the
fair value of the unit was the purchase price. If the excess of the fair value of the reporting unit over the fair value of
the identifiable assets and liabilities is less than the carrying value of the unit’s goodwill, an impairment charge is
recorded for the difference.
We cannot predict the occurrence of certain future events that might adversely affect the reported value of goodwill.
Such events include, but are not limited to, strategic decisions made in response to economic and competitive
conditions, the impact of the economic environment on our customer base, or a material negative change in our
relationships with significant customers.
Accounting for the Long-Lived Assets Including Intangibles Subject to Amortization
Depreciation and amortization of our long-lived assets is provided using straight-line methods over their estimated
useful lives. Changes in circumstances such as the passage of new laws or changes in regulations, technological
advances, changes to our business model, or changes in the capital strategy could result in the actual useful lives
differing from initial estimates. In those cases where we determine that the useful life of a long-lived asset should be
revised, we will depreciate the net book value in excess of the estimated residual value over its revised remaining
useful life. Factors such as changes in the planned use of equipment, customer attrition, contractual amendments, or
mandated regulatory requirements could result in shortened useful lives.
Long-lived assets and asset groups are evaluated for impairment whenever events or changes in circumstances
indicate that the carrying amount of such assets may not be recoverable. The estimated future cash flows are based
23
upon, among other things, assumptions about expected future operating performance and may differ from actual
cash flows. Long-lived assets evaluated for impairment are grouped with other assets to the lowest level for which
identifiable cash flows are largely independent of the cash flows of other groups of assets and liabilities. If the sum
of the projected undiscounted cash flows (excluding interest) is less than the carrying value of the assets, the assets
will be written down to the estimated fair value in the period in which the determination is made.
Warranty Costs
The liability for product warranties was $5.1 million as of January 2, 2004, compared with $6.4 million as of
January 3, 2003. (See Note 1 of the Notes to the Consolidated Financial Statements for further information regarding
our warranty liability.) The warranty periods for our products are generally between one and three years from date of
shipment. Selected military programs may require extended warranty periods up to 5.5 years, certain TDS products
have a five year or 90-day warranty period, and certain Nikon products have a five year warranty period. We accrue
for warranty costs as part of our cost of sales based on associated material costs and technical support labor costs.
Material cost is primarily estimated based upon historical trends in the volume of product returns within the
warranty period and the cost to repair or replace the equipment.
While we engage in extensive product quality programs and processes, including actively monitoring and evaluating
the quality of our component suppliers, our warranty obligation is affected by product failure rates, material usage,
and service delivery costs incurred in correcting a product failure. Should actual product failure rates, material
usage, or service delivery costs differ from our estimates, revisions to the estimated warranty accrual and related
costs may be required.
Stock Compensation
We apply Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees" (APB 25) and
related interpretations in accounting for our stock option plans and stock purchase plan. Accordingly, we do not
recognize compensation cost for stock options granted at a price equal to fair market value. Note 13 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 2003, 2002, and 2001 as if we had elected to recognize compensation cost based on the fair value
of the options granted at grant date.
Investment in Joint Ventures
We have adopted the equity method of accounting for our investments in the Caterpillar and Nikon joint ventures.
This requires that we record our share of the joint ventures’ profits or losses in a given fiscal period. See Note 3 of
the Notes to the Consolidated Financial Statements for joint venture accounting.
Upon the formation of our Caterpillar joint venture in April 2002, we received a cash distribution of $11.0 million.
We have elected to treat the cash distribution as a deferred gain, being amortized to the extent that losses are
attributable from the Caterpillar 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 unamortized. To the extent that it is possible that we will have any
future-funding obligation relating to the Caterpillar joint venture, then the relevant amount of the $11.0 million will
be deferred until such time that the funding obligation no longer exists. As of January 2, 2004, the balance of the
unamortized deferred gain was $9.8 million.
RECENT BUSINESS DEVELOPMENTS
Nikon-Trimble Joint Venture
On March 28, 2003, Trimble and Nikon Corporation entered into an agreement to form a joint venture in Japan,
Nikon-Trimble Co., Ltd. (“Nikon-Trimble”), which would assume the operations of Nikon Geotecs Co., Ltd., a
Japanese subsidiary of Nikon Corporation and Trimble Japan KK, our Japanese subsidiary. Nikon-Trimble began
operations in July of 2003.
24
Under the terms of the Nikon-Trimble agreement, Nikon contributed ¥1.2 billion (approximately US$10 million on
June 30, 2003) in cash, while we contributed ¥500 million (approximately US$4.1 million as of June 30, 2003) in
cash and ¥700 million of our common stock or 349,251 shares valued at approximately US$5.9 million on June 30,
2003. Nikon-Trimble purchased certain tangible and intangible assets from Nikon Geotecs Co., Ltd., and Trimble
Japan KK.
Nikon-Trimble is 50% owned by us and 50% owned by Nikon, with equal voting rights for both. Nikon-Trimble
focuses on the design and manufacture of surveying instruments including mechanical total stations and related
products. In Japan, this joint venture will distribute Nikon’s survey products as well as our GPS survey products and
other Engineering and Construction products, including robotic total stations. Outside Japan, we will be the
exclusive distributor of Nikon survey and construction products.
* We expect the joint venture to enhance our market position in survey instruments through geographic expansion
and market penetration. Nikon’s line of instruments will broaden our survey and construction product portfolio and
enable us to better access emerging markets. It will also provide us with the ability to sell our GPS and robotic
technology to existing Nikon customers. Additionally, we expect to improve our market position in Japan because of
the Nikon-Trimble distribution network.
Acquisitions
Applanix Corporation
* On July 7, 2003, we acquired privately held Applanix Corporation, a Canadian developer of systems that
integrate inertial navigation system and GPS technologies. We expect the Applanix acquisition to extend our
technology portfolio and enable increased robustness and capabilities in our future positioning products. Applanix’s
performance is reported under our Portfolio Technologies segment.
MENSI S.A.
* On December 9, 2003, we acquired privately held MENSI S.A., a French developer of terrestrial 3D laser
scanning technology. We expect the MENSI acquisition to enhance our technology portfolio and expand our product
offerings. MENSI’s performance is reported under our Engineering and Construction segment.
The combined purchase price of Applanix and MENSI was approximately $25 million.
TracerNET Corporation
* On March 5, 2004, we acquired privately held TracerNET Corporation of Virginia, a provider of wireless fleet
management solutions. We expect the TracerNET acquisition to offer more diverse and complete fleet management
solutions. TracerNET’s performance will be reported under our Mobile Solutions segment.
RESULTS OF OPERATIONS
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 purchased intangibles
as well as other items not controlled by the business segment. Segment operating income for fiscal 2002 and fiscal
2001 have been restated to reflect the allocations of certain corporate expenses so as to be comparable with the
allocation methodology in fiscal 2003.
At the beginning of fiscal 2003, we realigned two of our reportable segments. The following table shows restated
revenue and operating income by segment to reflect this realignment. The Tripod Data Systems business is now
included in the Engineering and Construction segment and was previously included in the Portfolio Technologies
segment.
25
Fiscal Years Ended
(Dollars in thousands)
January 2,
2004
January 3,
2003
December 28,
2001
Total consolidated revenue
Total consolidated operating income
$540,903
$ 83,586
$466,602
$ 62,320
$475,292
$ 62,306
Engineering and Construction
Revenue
Segment revenue as a percent of total revenue
Operating income
Operating income as a percent of segment revenue
Field Solutions
Revenue
Segment revenue as a percent of total revenue
Operating income
Operating income as a percent of segment revenue
Mobile Solutions
Revenue
Revenue as a percent of total consolidated revenue
Operating loss
Operating loss as a percent of segment revenue
Component Technologies
Revenue
Segment revenue as a percent of total revenue
Operating income
Operating income as a percent of segment revenue
Portfolio Technologies
Revenue
Segment revenue as a percent of total revenue
Operating income (loss)
Operating income (loss) as a percent of segment
revenue
$367,058
68%
60,664
17%
$319,615
68%
53,453
17%
$317,849
67%
49,849
16%
79,879
15%
14,500
18%
12,981
2%
(6,452)
(50%)
64,193
12%
16,560
26%
16,792
3%
(1,686)
(10%)
67,259
14%
9,676
14%
8,486
2%
(12,039)
(142%)
59,755
13%
10,673
18%
11,487
2%
557
5%
68,519
14%
11,349
17%
13,791
3%
(9,990)
(72%)
58,083
12%
10,359
18%
17,050
4%
738
4%
A reconciliation of our consolidated segment operating income (loss) to consolidated income before income taxes
follows:
Fiscal Years Ended
(In thousands)
Consolidated segment operating income from
continuing operations
Unallocated corporate expense
Amortization of purchased intangible assets
Restructuring charges
Non-operating expense, net
Consolidated income (loss) before income taxes
January 2,
2004
January 3,
2003
December 28,
2001
$83,586
(20,320)
(7,312)
(2,019)
(18,350)
$ 35,585
$ 62,320
(19,098)
(8,300)
(1,099)
(19,999)
$ 13,824
$ 62,306
(29,137)
(29,389)
(3,599)
(21,773)
$ (21,592)
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Basis of Presentation
We have a 52-53 week fiscal year, ending on the Friday nearest to December 31, which for fiscal 2003 was January
2, 2004. Fiscal 2003 was a 52-week year and fiscal 2002 a 53-week year. As a result of the extra week in fiscal
2002, year-over-year results are not exactly comparable. Thus, due to the inherent nature of adopting a 52-53 week
fiscal year, the Company, analysts, shareholders, investors, and others will have to make appropriate adjustments to
any analysis performed when comparing our activities and results in fiscal years that contain 53 weeks to those that
contain the standard 52 weeks. Fiscal year 2001 comprised 52 weeks.
Impact of Weaker US Dollar on Operating Income in Fiscal 2003
The depreciation of the US dollar versus major European currencies positively impacted revenues by approximately
$15.3 million in fiscal 2003 compared with fiscal 2002. As a result of our significant manufacturing, distribution,
research and development, and selling expenses incurred outside of the US, the weaker US dollar negatively
impacted our operating income by approximately $5.9 million in fiscal 2003.
Revenue
In fiscal 2003, total revenue increased by $74.3 million or 15.9% to $540.9 million from $466.6 million in fiscal
2002. The increase in fiscal 2003 was primarily due to stronger performances in all of our operating segments driven
by the new product offerings, increased acceptance of our products in the markets we serve, expanded distribution
and selective acquisitions, as well the positive impact of the weaker US dollar on revenues generated in foreign
currencies, primarily the Euro. Total revenue in fiscal 2002 decreased by $8.7 million or 1.8% to $466.6 million
from $475.3 million in fiscal 2001, primarily due to the reduction of revenue in Mobile Solutions and Portfolio
Technologies segments.
International Revenues
* Total revenue outside the United States comprised approximately 51% in 2003, 49% in 2002, and 50% in 2001.
During the 2003 fiscal year, North and South America represented 56%, Europe, the Middle East and Africa
represented 31%, and Asia represented 13% of total revenues. In fiscal 2003, the United States comprised
approximately 49% of total revenues. 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 US 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 restore Selective Availability, a method of degrading GPS
accuracy, there may be reluctance in certain non-US markets to purchase such products given the control of GPS by
the US Government. Our results of operations could be adversely affected if we were unable to continue to generate
significant sales in locations outside the US.
* No single customer accounted for 10% or more of our total revenues in fiscal 2003, 2002, and 2001. It is possible,
however, that in future periods the failure of one or more large customers to purchase products in quantities
anticipated by us may adversely affect the results of operations.
Gross Margin
Our gross margin varies due to a number of factors including product mix, international sales mix, customer type,
the effects of production volumes and fixed manufacturing costs on unit product costs, new product start-up costs,
and foreign currency translations. Gross margin as a percentage of total revenues was 49.6 % in fiscal 2003 and
50.2% in fiscal 2002. The slight decrease in gross margin percentage for fiscal 2003, compared with fiscal 2002,
was due primarily to the introduction of the Nikon products in the third quarter which generated a lower
consolidated gross margin of approximately 0.8%. This was partially offset by stronger sales of TDS, GIS, wireless
infrastructure, survey products as well as our ongoing focus on product cost reductions. Shipping and handling costs
are included in cost of goods sold.
27
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 in part to approximately
$3.3 million of additional charges associated with the write down of obsolete inventory in fiscal 2001 related to the
rationalization and simplification of product lines and 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, gross
margin could be further adversely impacted.
Engineering and Construction
Engineering and Construction revenues increased by $47.4 million or 14.8% while segment operating income
increased by $7.2 million or 13.5% for fiscal 2003 as compared to fiscal 2002. Approximately half of the revenue
increase was driven by new product introductions and our increased marketing efforts. The remaining increase was
split evenly between geographic expansion, especially in Asia and Russia, and the impact of the weaker US dollar.
Segment operating income increased due to higher revenues that were partially offset by increased operating
expenses outside the United States (largely driven by the weaker US dollar), increased research and development
spending on certain programs as we continue to invest in developing next generation technology and lower margins
earned on the sale of Nikon products. Overall, segment operating income remained consistent at 17% of revenues.
Engineering and Construction revenues increased by $1.8 million or 0.6% during fiscal 2002 as compared to fiscal
2001 primarily due to the LeveLite acquisition which added $3.6 million of revenues, and 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 product areas
due to continued difficult global economic conditions. Segment operating income increased by $3.6 million or 7.2%
in fiscal 2002 over fiscal 2001 primarily due to 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.
Field Solutions
Field Solutions revenues increased by approximately $12.6 million or 18.8% while segment operating income
increased by $4.8 million or 49.9% for fiscal year 2003 as compared to fiscal 2002. Revenues were up year over
year due to continued strong sales of the GeoExplorer® CE series handhelds released at the end of fiscal 2002, and
due to the expansion of our automatic guidance products onto new agricultural vehicles.
Segment operating income increased in 2003 from the fiscal year 2002 primarily due to higher revenues. This
increase was partially offset by fractionally lower gross margins and more investment in research and development
and sales functions. This enabled the segment operating income to increase from 14% to 18% of revenues.
Field Solutions experienced a revenue decline in fiscal 2002 of $1.3 million or 1.8% compared with fiscal 2001
primarily 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. This decrease was partially offset by
the increased demand for both the manual and auto guidance product lines. Segment operating income decreased by
$1.7 million or 14.7% in fiscal 2002 over fiscal 2001 primarily due to the decrease in government spending
described above and lower gross margin due to product sales mix, which was more weighted toward the relatively
lower margin agricultural business area.
Mobile Solutions
Mobile Solutions revenues increased by $4.5 million or 53% in fiscal 2003 over fiscal 2002 due primarily to an
increase in our CrossCheck product sales and higher fleet management services revenues as a result of an expanded
customer base. Segment operating loss decreased by $5.6 million or 46.4% in fiscal 2003 over fiscal 2002 due to
increased revenues and lower operating expenses. Operating expenses decreased by approximately $3.0 million
primarily due to a reduction in outside services and our personnel related to the completion of our Telvisant system.
28
Mobile Solutions revenues decreased by $5.3 million or 38.5% in fiscal 2002 over fiscal 2001 primarily due to the
reduction of approximately $3.0 million in our satellite communications business as a result of our decision to
discontinue the Galaxy Inmarsat-C™ product line in early 2001, a slow down in system integration projects due to
reduced spending at municipalities, and 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.
Segment operating loss increased by $2.0 million or 20.5% in fiscal 2002 over fiscal 2001 primarily due to the lower
revenues as described above, and increased costs incurred in the development and marketing of a service platform to
enable a range of asset management solutions.
Component Technologies
Component Technologies revenues increased by $4.4 million or 7.4%, while segment operating income increased by
$5.9 million or 55.2% for the fiscal year 2003 as compared to fiscal 2002. The increase in revenues was primarily
due to increased demand from our existing wireless infrastructure customers. Segment operating income increased
from 18% to 26% of revenues. The increase was primarily due to a reduction in costs of goods sold due to the
transfer of the manufacturing of our products to China, reduced costs of raw materials, increased revenues and
higher margins aided by favorable product mix.
Component Technologies revenues increased by $1.7 million or 2.9% in fiscal 2002 over fiscal 2001 due primarily
to a timing products increase of $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. IVN revenue decreased $1.0
million in fiscal 2002 over fiscal 2001 as average selling prices declined by more than 9%, and license revenue
decreased $1.7 million in fiscal 2002 over fiscal 2001 due to an expired license contract. Component Technologies
operating income increased by $0.3 million or 3% in fiscal 2002 over fiscal 2001 as a result of higher gross margins
resulting from higher revenues and favorable product mix, partially offset by higher operating expenses, primarily in
research and development and marketing.
Portfolio Technologies
Portfolio Technologies revenues increased by $5.3 million or 46.2% for the fiscal year 2003 as compared to fiscal
2002. The increase in revenues was mostly driven by the inclusion of revenue from Applanix acquired in 2003,
while offset by lower revenue of military-related products. Segment operating income decreased by $2.2 million or
402.7% for fiscal 2003 as compared to fiscal 2002 due to weaker operating results from military products.
Portfolio Technologies revenues decreased by $5.6 million or 32.6% in fiscal 2002 over fiscal 2001 primarily due to
lost revenues of $4.4 million as a result of the sale of our air transport product line to Honeywell in fiscal 2001.
Portfolio Technologies operating income decreased by $0.2 million or 24.5% in fiscal 2002 over fiscal 2001 due to
the lower revenues which was offset by cost reduction initiatives.
29
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)
Research and development
Sales and marketing
General and administrative
Restructuring charges
Amortization of goodwill and other purchased
intangible assets
Total operating expenses
Research and Development
January 2,
2004
January 3,
2003
December 28,
2001
$ 67,641
97,870
39,253
2,019
7,312
$ 214,095
$ 61,232
89,344
40,634
1,099
8,300
$ 200,609
$ 62,881
103,778
37,407
3,599
29,389
$ 237,054
Research and development expenses increased by $6.4 million to $67.6 million in fiscal 2003 over fiscal 2002 due
to continued investment in next generation technology primarily in the Engineering and Construction segment, the
weakness of the US dollar versus major European and New Zealand currencies, and also the inclusion of the
research and development expenses from Applanix after the acquisition in July 2003. Overall spending remained
relatively constant at approximately 13% of revenues. All of our research and development costs have been
expensed as incurred.
Research and development spending decreased by $1.6 million during fiscal 2002 as compared to fiscal 2001 and
represented 13% of revenue, consistent with 13% in fiscal 2001, primarily due to the transfer of employee-related
expenses to our Caterpillar joint venture of approximately $2.8 million, partially offset by an increase in engineering
expenses associated with the introduction of new products.
* We believe that the development and introduction of new products are critical to the our future success and we
expect to continue active development of new products.
Sales and Marketing
Sales and marketing expenses increased by $8.5 million to $97.9 million in fiscal 2003 over fiscal 2002 primarily
due to higher revenue, increased sales efforts mostly in emerging geographic areas such as China and Russia, the
impact of the weaker US dollar in Europe, and the inclusion of Applanix sales and marketing expenses not
applicable in the prior fiscal year. As a percentage of revenue, sales and marketing expenses decreased from 19% to
18%.
Sales and marketing expenses decreased by $14.4 million in fiscal 2002 and represented 19% of revenue, compared
with 22% in fiscal 2001. 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, and we decreased overall compensation, travel,
advertising, promotional, and trade show expenses by approximately $7.4 million for fiscal 2002 compared to the
corresponding period in fiscal 2001.
* 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 expenses in fiscal 2003 decreased by $1.4 million to $39.3 million and represented 7.3%
of revenues compared with 8.7% in fiscal 2002. In fiscal 2002, we experienced higher bad debt expenses, primarily
30
due to the bankruptcy of a large Japanese distributor. In addition, in fiscal 2003 we incurred $3.0 million less in
information systems expenses. These reductions were offset in fiscal 2003 by lower sublease income received,
expenses from Applanix after the acquisition in July 2003, and higher compensation costs.
General and administrative expenses increased by $3.2 million in fiscal 2002 representing 9% of revenue, compared
with 8% in fiscal 2001 primarily due to an increase in bad debt provisions related to customers in an uncertain
economic environment and bad debt expenses for accounts written off during the year due to customer defaults.
Restructuring Charges
Restructuring charges of $2.0 million were recorded in fiscal 2003, $1.1 million in fiscal 2002, and $3.6 million in
fiscal 2001, all of which related to severance costs, except for $0.3 in 2003 which related to lease costs of our
Japanese office closure due to the Nikon joint venture. As a result of the restructuring activities, our headcount
decreased by 77, 49, and 207 in fiscal 2003, 2002, and 2001, respectively. As of January 2, 2004, the restructuring
accrual balance was approximately $0.4 million which will be paid over the remaining term of the lease through
2006.
Amortization of Goodwill, Purchased and Other Intangible Assets
Fiscal Years Ended
(in thousands)
Amortization of goodwill and purchased
intangibles (1)
Amortization of other intangible assets
Total amortization of goodwill, purchased, and
other intangible assets
(1) Amortization of goodwill in 2001 only.
January 2,
2004
January 3,
2003
December 28,
2001
$ 7,312
604
$ 8,300
868
$ 29,389
917
$ 7,916
$ 9,168
$ 30,306
Amortization expense of purchased and other intangibles decreased in fiscal 2003 by approximately $1.3 million
representing 1.5% of revenue, compared with 2% in fiscal 2002. The decrease was due to certain Spectra intangibles
being fully amortized during fiscal 2003.
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 in fiscal 2002 that does not require the amortization of goodwill and intangible assets with
indefinite lives.
Non-operating Expense, Net
The following table shows non-operating expense, net for the periods indicated and should be read in conjunction
with the narrative descriptions of those expenses below:
Fiscal Years Ended
(in thousands)
Interest income
Interest expense
Foreign exchange loss
Expenses for affiliated operations, net
Other income (expense)
Total non-operating expense, net
January 2,
2004
January 3,
2003
December 28,
2001
$ 465
(11,938)
(592)
(6,403)
118
$ (18,350)
$ 659
(14,710)
(823)
(3,954)
(1,171)
$ (19,999)
$ 1,118
(22,224)
(237)
-
(430)
$ (21,773)
Non-operating expense, net decreased by $1.6 million or 8% during fiscal 2003 as compared with fiscal 2002
primarily due to a reduction in interest expense of $2.8 million offset by an increase in expenses for affiliated
31
operations. The increase in expenses for affiliated operations is primarily due to the full year impact of transfer
pricing effects on transactions between us and our Caterpillar joint venture, which commenced operations in April
2002. (See Note 3 of the Notes to the Consolidated Financial Statements for financial information regarding joint
ventures). In addition, we recorded approximately $0.3 million relating to our share of the losses in our Nikon joint
venture established in 2003.
In fiscal 2003, interest expense decreased by approximately $2.8 million due to continued debt repayment during the
year of approximately $51.8 million, combined with the effect of lower interest rates. Offsetting the lower debt
interest, during the year, we recorded approximately $3.6 million of interest expense due to the write off of $2.3
million of unamortized debt issuance costs as a result of our debt refinancing in June 2003, as well as $1.3 million
related to the unamortized portion of warrants associated with the principal balance of our Subordinated Note. (See
Note 9 of the Notes to the Consolidated Financial Statements for financial information regarding our Subordinated
Note.)
Non-operating expense, net decreased by $1.8 million during fiscal 2002 as compared with fiscal 2001, as a result of
a 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 us and
our Caterpillar joint venture, an increase in foreign exchange loss of $0.6 million, and a write-down of minority
investment of $1.5 million.
Income Tax Provision
Our effective income tax rates from continuing operations for fiscal years 2003, 2002, and 2001 were (8%), 25%
and (9%), respectively. The fiscal 2002 and 2001 income tax rates differ from the US federal statutory rate of 35%
due primarily to non-US taxes and the inability to realize the benefit of net operating losses. The 2003 income tax
rate is less than the US federal statutory rate, primarily due to the realization of benefits from net operating losses
and other previously reserved deferred tax assets.
Litigation Matters
* From time to time, we are involved in litigation arising out of the ordinary course of our business. There are no
known claims or pending litigation that are expected to have a material effect on our overall financial position,
results of operations, or liquidity.
OFF-BALANCE SHEET FINANCINGS AND LIABILITIES
Other than lease commitments incurred in the normal course of business, we do not have any off-balance sheet
financing arrangements or liabilities, guarantee contracts, retained or contingent interests in transferred assets, or any
obligation arising out of a material variable interest in an unconsolidated entity. We do not have any majority-owned
subsidiaries that are not included in the consolidated financial statements. Additionally, we do not have any interest
in, or relationship with, any special purpose entities.
LIQUIDITY AND CAPITAL RESOURCES
As of and for the Fiscal Year Ended
(dollars in thousands)
Cash and cash equivalents
As a percentage of total assets
Accounts receivable days sales outstanding (DSO)
Inventory turns per year
Total debt
January 2,
2004
January 3,
2003
December 28,
2001
$ 45,416
8.3%
60
4
$ 90,486
$ 28,679
6.5%
58
5
$ 138,525
$ 31,078
7.4%
53
4
$ 190,565
Cash provided by operating activities
$ 36,460
$ 32,316
$ 26,370
32
Cash used by investing activities
Cash provided (used) by financing activities
Net increase/(decrease) in cash and cash equivalents
$(22,653)
$ 54
$ 16,737
$ (5,766)
$(31,729)
$ (2,399)
$(11,441)
$(23,450)
$ (9,798)
Cash and Cash Equivalents
In fiscal 2003, our cash and cash equivalents increased by $16.7 million from fiscal 2002. The increase was
primarily due to cash generated by operating activities, partially offset by cash used in investing activities.
In fiscal 2003, cash provided by operating activities was $36.5 million, as compared to $32.3 million in fiscal 2002.
The increase of $4.1 million was primarily driven by the $28.2 million increase in net income during fiscal 2003
compared to fiscal 2002 offset by an increase in accounts receivable and inventory and a decrease in accounts
payable. Also, fiscal 2002 was positively impacted by a special one-time distribution of $11.0 million to us from our
Caterpillar joint venture. Our ability to continue to generate cash from operations will depend in large part on
profitability, the rate of collections of accounts receivable, our inventory turns, and our ability to manage other areas
of working capital. Our accounts receivable days for sales outstanding increased from 58 days at the end of fiscal
2002 to 60 days at the end of fiscal 2003. Our inventory turns decreased from five at the end of fiscal 2002 to four at
the end of fiscal 2003.
Cash used in investing activities were $22.7 million in fiscal 2003 as compared to $5.8 million in fiscal 2002. The
increase was primarily due to approximately $4.8 million invested in our Nikon joint venture upon its formation,
$2.2 million and $4.3 million cash outlays related to our acquisitions of Applanix and MENSI, respectively, certain
earn-out payments made as a result of our previous LeveLite acquisition, and increased expenditure on capital
equipment. During fiscal 2003, we spent approximately $10.9 million on capital expenditures.
Cash provided by financing activities, net, was neutral in fiscal 2003, as compared to $31.7 million cash used in
fiscal 2002. However during fiscal 2003, we repaid approximately $69 million of debt-related to our previous
Subordinated Note and Credit Facility. These debt payments were funded primarily by proceeds from the issuance
of common stock to employees pursuant to our stock option plan and employee stock purchase plan of
approximately $13.9 million, as well as issuance of common stock under a private equity placement of $38.3
million. On April 14, 2003, we sold 3,148,000 shares of our common stock, no par value per share, to an investor at
a price of $12.17 per share in an offering pursuant to our shelf registration statement. The offering resulted in net
proceeds to us of approximately $36.6 million, approximately $31 million of which was used to pay down the
principal balance on the Subordinated Note and $5.6 million was used to pay down the accrued interest on that Note.
* 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 2, 2004, we had $45.4 million of
cash and cash equivalents as well as access to $81 million of cash under the terms of our revolver loans.
* We expect fiscal 2004 capital expenditures to be approximately $12 million to $14 million, primarily for
computer equipment, software, manufacturing tools and test equipment, and leasehold improvements associated
with business expansion. Decisions related to how much cash is used for investing are influenced by the expected
amount of cash to be provided by operations.
Debt
At the end of fiscal 2003, our total debt was approximately $90.5 million as compared with approximately $138.5
million at the end of fiscal 2002. This balance primarily consists of $43.8 million outstanding under a term loan and
$44.0 million outstanding under a senior secured revolving credit facility. On June 25, 2003, we obtained a new
Credit Facility (comprising of a term loan and revolver) in the amount of $109 million that enabled us to pay off our
indebtedness under our previous credit facility and the Subordinated Note.
The new Credit Facility is secured by all material assets of our Company, except for a portion of assets that are not
pledged due to foreign tax considerations. Financial covenants of the Credit Facility include leverage, fixed charge,
and minimum net worth tests. At January 2, 2004 and as of the date of this report, we are in compliance with all debt
covenants. The amortized principal, interest, and commitment fees due under the Credit Facility are paid quarterly.
33
Under the four-year term loan portion of the Credit Facility, we are due to make payments (excluding interest) of
approximately $12.5 million in each of the next three fiscal years (2004, 2005, and 2006), and $6.3 million in fiscal
2007.
Under the terms of the Credit Facility, we are allowed to pay dividends and repurchase shares of our common stock
up to 25% of net income in the previous fiscal year. For additional discussion of our debt, see Note 9 of Notes to the
Consolidated Financial Statements.
CONTRACTUAL OBLIGATIONS
The following table summarizes our future payment obligations:
Contractual Obligations
(in thousands)
Total
Less than
1 year
1-3
Years
3-5
years
More than
5 years
Total debt including
$
99,941
$
17,310
$
73,570
$
7,851
$
1,210
interest
Operating leases
Purchase obligations
Total
28,141
33,062
161,144
$
10,129
31,485
58,924
$
11,723
1,577
86,870
$
3,132
-
10,983
$
3,157
-
4,367
$
* As of January 2, 2004, $65.9 million of our total debt was subject to variable quarterly interest rates. Per our loan
agreement, we pay a three-month LIBOR rate plus a certain spread that depends on our leverage ratio. Our spread is
expected to be 1.5% over the remaining life of our obligation of the debt. We have assumed a three-month LIBOR
rate of 1.20% for each quarter in fiscal 2004 and have forecasted an increase of 25 basis points quarter over quarter
to a maximum of 3.25%. (See Note 9 of the Notes to the Consolidated Financial Statements for further financial
information regarding long-term debt)
Purchase obligations represent open purchase orders for material purchases with our customers. Our pension
obligation which is not included in the table above, and is included in “Other non-current liabilities” on our
Consolidated Balance Sheets, is disclosed at Note 14 of the Notes to the Consolidated Financial Statements.
NEW ACCOUNTING STANDARDS
In November of 2002, the Emerging Issues Task Force (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 apply to revenue arrangements entered into in fiscal periods beginning after
June 15, 2003. Adoption of EITF Issue No. 00-21 did not have a material effect on our results.
Financial Accounting Standards Board (FASB) Interpretation No. 46 (FIN 46), “Consolidation of Variable Interest
Entities,” was issued in January 2003, and a revised interpretation of FIN 46 (FIN 46-R) was issued in
December 2003. FIN 46 requires certain variable interest entities to be consolidated by the primary beneficiary of
the entity if the equity investors in the entity do not have the characteristics of a controlling financial interest or do
not have sufficient equity at risk for the entity to finance its activities without additional subordinated financial
support from other parties. The provisions of FIN 46 are effective immediately for all arrangements entered into
after January 31, 2003. Since January 31, 2003, we have not obtained any variable interests in any entities we
believe are variable interest entities. For arrangements entered into prior to February 1, 2003, we are required to
adopt the provisions of FIN 46-R in the first quarter of fiscal 2004. We are in the process of determining the effect,
if any, the adoption of FIN 46-R will have on our financial statements.
In April 2003, the FASB issued Statement of Financial Accounting Standard (SFAS) No. 149, “Amendment of
Statement 133 on Derivative Instruments and Hedging Activities.” SFAS No. 149 amends and clarifies financial
accounting and reporting for derivative instruments, including certain derivative instruments embedded in other
34
contracts (collectively referred to as derivatives) and for hedging activities under SFAS No. 133, “Accounting for
Derivative Instruments and Hedging Activities.” SFAS No. 149 is effective for contracts entered into or modified
after June 30, 2003, and for hedging relationships designated after June 30, 2003. The adoption of this Statement did
not have an effect on our financial statements.
In May 2003, the FASB issued SFAS No. 150, “Accounting for Certain Financial Instruments with Characteristics
of Both Liabilities and Equity.” SFAS No. 150 establishes standards for how an issuer classifies and measures
certain financial instruments with characteristics of both liabilities and equity. Many of these instruments were
previously classified as equity. SFAS No. 150 is effective for financial instruments entered into or modified after
May 31, 2003 and otherwise was effective at the beginning of the first interim period beginning after June 15, 2003.
The adoption of this Statement did not have an effect on our financial statements.
RISKS AND UNCERTAINTIES
You should carefully consider the following risk factors, in addition to the other information contained in this Form
10-K and in any other documents to which we refer you in this Form 10-K, before purchasing our securities. The
risks and uncertainties described below are not the only ones we face.
Our Inability to Accurately Predict Orders and Shipments May Affect Our Revenue, Expenses and Earnings per
Share.
We have not been able in the past to consistently predict when our customers will place orders and request
shipments so that we cannot always accurately plan our manufacturing requirements. As a result, if orders and
shipments differ from what we predict, we may incur additional expenses and build excess inventory, which may
require additional reserves and allowances. Any significant change in our customers’ purchasing patterns could have
a material adverse effect on our operating results and reported earnings per share for a particular quarter.
Our Operating Results in Each Quarter May Be Affected by Special Conditions, Such As Seasonality, Late Quarter
Purchases, and Other Potential Issues.
Due in part to the buying patterns of our customers, a significant portion of our quarterly revenues occurs from orders
received and immediately shipped to customers in the last few weeks and days of each quarter, although our operating
expenses tend to remain fairly predictable. Engineering and construction purchases tend to occur in early spring, and
governmental agencies tend to utilize funds available at the end of the government’s fiscal year for additional purchases
at the end of our third fiscal quarter in September of each year. Concentrations of orders sometimes also occur at the
end of our other two fiscal quarters. Additionally, a majority of our sales force earns commissions on a quarterly basis
which may cause concentrations of orders at the end of any fiscal quarter. If for any reason expected sales are deferred,
orders are not received, or shipments are delayed a few days at the end of a quarter, our operating results and reported
earnings per share for that quarter could be significantly impacted.
We Are Dependent on a Sole Manufacturer and Assembler for Many of Our Products and on Sole Suppliers of
Critical Parts for Our Products.
We are substantially dependent upon Solectron Corporation in California, China and Mexico 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 at least thirty calendar days in advance of the scheduled delivery of products to our customers depending on
production lead time. Although purchase orders placed with Solectron are cancelable, the terms of the agreement would
require us to purchase from Solectron all inventory not returnable or usable by other Solectron customers. Accordingly,
if we inaccurately forecast demand for our products, we may be unable to obtain adequate manufacturing capacity from
Solectron to meet customers’ delivery requirements or we may accumulate excess inventories, if such inventories are
not usable by other Solectron customers.
Our current contract with Solectron continues in effect until either party gives the other ninety days written notice.
35
Solectron is assembling all of our Component Technologies products in China. Although this initiative in China has
brought cost savings over assembling in California, we may experience quality control issues, shipping delays, or
other problems associated with manufacturing in China.
In addition, we rely on sole suppliers for a number of our critical components. We have experienced shortages of
components in the past. 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, and could have a
material adverse effect on our business.
Our Annual and Quarterly Performance May Fluctuate.
Our operating results have fluctuated and can be expected to continue to fluctuate in the future on a quarterly and
annual basis as a result of a number of factors, many of which are beyond our control. Results in any period could be
affected by:
changes in market demand,
competitive market conditions,
•
•
• market acceptance of existing or new products,
•
fluctuations in foreign currency exchange rates,
•
the cost and availability of components,
•
our ability to manufacture and ship products,
•
the mix of our customer base and sales channels,
•
the mix of products sold,
•
our ability to expand our sales and marketing organization effectively,
•
our ability to attract and retain key technical and managerial employees,
•
the timing of shipments of products under contracts and 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, sales of Nikon products generally have lower
gross margins as compared to our GPS survey products. Absent other factors, a shift in sales towards Nikon would lead
to a reduction in our overall 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.
36
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.
Our Credit Agreement Contains Financial Covenants.
On June 25, 2003, we executed a Credit Agreement with Scotia Capital and certain other banks which provides for
financial commitments totaling up to $175 million. This credit facility contains financial covenants regarding
minimum fixed charge coverage and maximum leverage ratio which are extremely sensitive to changes in earnings
before interest, taxes, depreciation and amortization, or EBITDA. In turn, EBITDA is highly correlated to revenues and
costs. 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.
We Rely on Key Customers.
We generate a portion of our revenue from large original equipment manufacturers such as Siemens VDO Automotive
AG and Nortel. 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 May Not Be Able to Enter Into or Maintain Important Alliances.
We believe that in certain business opportunities our success will depend on our ability to form and maintain alliances
with industry participants, such as Caterpillar, Nikon, McNeilus, and CNH Global. Our failure to form and maintain
such alliances, or the pre-emption of such alliances by actions of other competitors or us, will adversely affect our
37
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 US
Government’s GPS. The GPS SPS operates in radio frequency bands that are globally allocated for radio navigation
satellite services. International allocations of radio frequency are made by the International Telecommunications
Union (“ITU”), a specialized technical agency of the United Nations. These allocations are further governed by radio
regulations that have treaty status and which may be subject to modification every two to three years by the World
Radio Communication Conference.
Any ITU reallocation of radio frequency bands, including frequency band segmentation or sharing of spectrum, may
materially and adversely affect the utility and reliability of our products, 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 products, such as GPS RTK systems, surveying and mapping systems, and Robotic Total Stations, that
use integrated radio communication technology requiring access to available radio frequencies allocated by the FCC (or
the NTIA in the case of federal government users of this equipment) for which the end user is required to obtain a
license in order to operate their equipment. In addition, access to these frequencies by state agencies is under
management by state radio communications coordinators. Some bands are experiencing congestion that excludes their
availability for access by state agencies in some states, including the State of California. To reduce congestion, the FCC
announced that it will require migration of radio technology from wideband to narrowband operations in these bands.
In December 2003, the FCC stayed the effectiveness of its new rules until it acts on petitions requesting a
reconsideration of this new requirement. The stay is indefinite at this point and the outcome of this proceeding is
unknown at this time. An inability to obtain access to these radio frequencies by end users, and for new products to
comply with FCC requirements, 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.
In addition, there can be no assurance that the US Government will remain committed to the operation and maintenance
of GPS satellites over a long period, or that the policies of the US Government for the use of GPS without charge will
38
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 US Government agencies may become involved in the
administration or the regulation of the use of GPS signals. Any of the foregoing factors could affect the willingness of
buyers of our products to select GPS-based systems instead of products based on competing technologies.
Many of our products also use signals from systems that augment GPS, such as the Wide Area Augmentation System
(WAAS) and national Differential GPS System (NDGPS). Many of these augmentation systems are operated by the
federal government and rely on continued funding and maintenance of these systems. Any curtailment of the operating
capability of these systems could result in decreased user capability thereby impacting our markets.
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.
Acquisitions of companies, divisions of companies, or products entail numerous risks, including:
•
•
•
•
•
•
•
•
•
•
potential inability to successfully integrate acquired operations and products or to realize cost savings
or other anticipated benefits from integration;
diversion of management’s attention;
loss of key employees of acquired operations;
the difficulty of assimilating geographically dispersed operations and personnel of the acquired
companies;
the potential disruption of our ongoing business;
unanticipated expenses related to such integration;
the correct assessment of the relative percentages of in-process research and development expense that
can be immediately written off as compared to the amount which must be amortized over the
appropriate life of the asset;
the impairment of relationships with employees and customers of either an acquired company or our
own business;
the potential unknown liabilities associated with acquired business; and
inability to recover strategic investments in development stage entities.
As a result of such acquisitions, we have significant assets that include goodwill and other purchased intangibles.
The testing of these intangibles under established accounting guidelines for impairment requires significant use of
judgment and assumptions. Changes in business conditions could require adjustments to the valuation of these
assets. In addition, losses incurred by a company in which we have an investment may have a direct impact on our
financial statements or could result in our having to write-down the value of such investment. Any such problems in
integration or adjustments to the value of the assets acquired could harm our growth strategy and have a material
adverse effect on our business, financial condition and compliance with debt covenants.
We Face Competition in Our Markets.
Our markets are highly competitive and we expect that both direct and indirect competition will increase in the future.
Our overall competitive position depends on a number of factors including the price, quality and performance of our
products, the level of customer service, the development of new technology and our ability to participate in emerging
markets. Within each of our markets, we encounter direct competition from other GPS, optical and laser suppliers and
competition may intensify from various larger US and non-US competitors and new market entrants, some of which
may be our current customers. The competition in the future, may, in some cases, result in price reductions, reduced
margins or loss of market share, any of which could materially and adversely affect our business, operating results and
financial condition. We believe that our ability to compete successfully in the future against existing and additional
39
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 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. 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.
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 non-US locations represented
approximately 51% of our revenues in our fiscal year 2003, 49% in our fiscal year 2002 and 50% in our fiscal year
2001. In addition, we have significant international operations, including manufacturing facilities, sales personnel and
customer support operations. We have sales offices outside the US. Our non-US manufacturing facilities are in Sweden
and Germany, and we have a regional fulfillment center in the Netherlands. Our non-US presence exposes us to risks
not faced by wholly US companies.
40
Specifically, we have experienced issues relating to integration of non-US 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 non-US 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.
In certain non-US markets, there may be reluctance to purchase products based on GPS technology, given the control
of GPS by the US 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-US currency exchange rates. These exposures may change over time as business
practices evolve and could have a material adverse impact on our financial results and cash flows. In fiscal 2003, the
US dollar weakened against several major currencies in which we do business, adversely impacting our financial
results.
Currently, we hedge only those currency exposures associated with certain assets and liabilities denominated in non-
functional 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 non-functional currency assets
and liabilities. Our attempts to hedge against these risks may not be successful resulting in an adverse impact on our
net income.
We 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.
The Volatility of Our Stock Price Could Adversely Affect Your Investment in Our Common Stock.
The market price of our common stock has been, and may continue to be, highly volatile. During fiscal 2003, our
stock price ranged from $8.68 to $25.60. We believe that a variety of factors could cause the price of our common
stock to fluctuate, perhaps substantially, including:
•
•
•
•
•
announcements and rumors of developments related to our business or the industry in which we
compete;
quarterly fluctuations in our actual or anticipated operating results and order levels;
general conditions in the worldwide economy, including fluctuations in interest rates;
announcements of technological innovations;
new products or product enhancements by us or our competitors;
41
•
•
•
developments in patents or other intellectual property rights and litigation;
developments in our relationships with our customers and suppliers; and
any significant acts of terrorism against the United States.
In addition, in recent years the stock market in general and the markets for shares of "high-tech" companies in
particular, have experienced extreme price fluctuations which have often been unrelated to the operating
performance of affected companies. Any such fluctuations in the future could adversely affect the market price of
our common stock, and the market price of our common stock may decline.
We are Subject to Environmental Laws and Potential Exposure to Environmental Liabilities.
We are subject to various federal, state and local environmental laws and regulations that govern our operations,
including the handling and disposal of non-hazardous and hazardous wastes, and emissions and discharges into the
environment. Failure to comply with such laws and regulations could result in costs for corrective action, penalties,
or the imposition of other liabilities. We also are subject to laws and regulations that impose liability and clean-up
responsibility for releases of hazardous substances into the environment. Under certain of these laws and
regulations, a current or previous owner or operator of property may be liable for the costs of remediating hazardous
substances or petroleum products on or from its property, without regard to whether the owner or operator knew of,
or caused, the contamination, as well as incur liability to third parties impacted by such contamination. The
presence of, or failure to remediate properly, such substances could adversely affect the value and the ability to
transfer or encumber such property. Based on currently available information, although there can be no assurance,
we believe that such liabilities will not have a material impact on our business.
Provisions in Our Charter Documents and Under California Law Could Prevent or Delay a Change of Control,
which Could Reduce the Market Price of Our Common Stock.
Certain provisions of our articles of incorporation, as amended and restated, our bylaws, as amended and restated,
and the California General Corporation Law may be deemed to have an anti-takeover effect and could discourage a
third party from acquiring, or make it more difficult for a third party to acquire, control of us without approval of our
board of directors. These provisions could also limit the price that certain investors might be willing to pay in the
future for shares of our common stock. Certain provisions allow the board of directors to authorize the issuance of
preferred stock with rights superior to those of the common stock.
We have adopted a Preferred Shares Rights Agreement, commonly known as a "poison pill." The provisions
described above, our poison pill and provisions of the California General Corporation Law may discourage, delay or
prevent a third party from acquiring us.
Item 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 secured Credit Facility. Our
Credit Facility is comprised of a three-year, US dollar-only revolver that expires on June 25, 2006, and a four-year
term loan that expires on June 25, 2007. 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. The revolver
matures on June 25, 2006 and has an outstanding principal balance of $44 million, while the term loan matures on
June 25, 2007 and has an outstanding principal balance of $43.8 million, as of January 2, 2004 (all in US currency
only). The three-month LIBOR effective rate at January 2, 2004 was 1.155%. A hypothetical 10% increase in three-
month LIBOR rates could result in approximately $101,790 annual increase in interest expense on the existing
42
principal balances. We have hedged the market risk with an interest rate swap on 50% of our term loan. The rate on
that interest rate swap is 2.517%.
* 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 enter into foreign exchange forward contracts to minimize the short-term impact of foreign currency fluctuations
on certain trade and inter-company receivables and payables, primarily denominated in Australian, Canadian, New
Zealand, and Swedish currencies, the Euro, and the British pound. These contracts reduce the exposure to
fluctuations in exchange rate movements as the gains and losses associated with foreign currency balances are
generally offset with the gains and losses on the forward contracts. These instruments are marked to market through
earnings every period and generally range from one to three months in original maturity. We do not enter into
foreign exchange forward contract for trading purposes.
Foreign exchange forward contracts outstanding as of January 2, 2004 and January 3, 2003 are summarized as
follows (in thousands):
January 2, 2004
January 3, 2003
Nominal Amount
Fair Value
Nominal Amount
Fair Value
Forward contracts:
Purchased
Sold
$ 15,767
$ 44,236
$ (1,666)
$ 2,994
$ 24,414
$ 24,539
$ (658)
$ 955
* We do not anticipate any material adverse effect on our consolidated financial position utilizing our current
hedging strategy.
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. 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 maturities of less than 12 months. 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. We did not hedge against backlog orders during fiscal 2003.
43
TRIMBLE NAVIGATION LIMITED
INDEX TO FINANCIAL STATEMENTS
Consolidated Balance Sheets at January 2, 2004 and January 3, 2003..........................................................................45
Consolidated Statements of Operations for each of the three fiscal years
in the period ended January 2, 2004 ............................................................................................................................46
Consolidated Statement of Shareholders' Equity for each of the three fiscal years
in the period ended January 2, 2004 ............................................................................................................................47
Consolidated Statements of Cash Flows for each of the three fiscal years
in the period ended January 2, 2004 ............................................................................................................................48
Notes to Consolidated Financial Statements...................................................................................................................49
Report of Ernst & Young LLP, Independent Auditors...................................................................................................75
44
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 $9,953 and
$9,900, respectively
Inventories, net
Deferred income taxes
Other current assets
Total current assets
Property and equipment, at cost less accumulated depreciation
Goodwill
Other purchased intangible assets, less accumulated amortization
Deferred income taxes
Other assets
Total non-current assets
January 2,
2004
January 3,
2003
$ 45,416
$ 28,679
103,350
70,826
4,380
5,659
229,631
27,379
241,425
19,741
4,173
22,554
315,272
79,645
61,144
76
8,401
177,945
22,037
205,933
23,238
417
12,086
263,711
Total assets
$ 544,903
$ 441,656
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
Deferred income taxes
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; 90,000 shares authorized; 49,988, and 43,965
shares outstanding, respectively
Retained earnings (accumulated deficit)
Accumulated other comprehensive income (loss)
Total shareholders' equity
Total liabilities and shareholders' equity
See accompanying Notes to the Consolidated Financial Statements.
45
$
-
12,885
26,019
25,950
15,599
5,147
1,136
9,969
96,705
77,601
9,845
4,229
8,279
196,659
$ 6,556
24,104
30,669
17,728
21,000
6,394
-
6,450
112,901
107,865
10,792
2,561
6,186
240,305
-
-
303,015
14,990
30,239
348,244
225,872
(23,495)
(1,026)
201,351
$ 544,903
$ 441,656
CONSOLIDATED STATEMENTS OF OPERATIONS
Fiscal Years Ended
(in thousands, except per share data)
Revenue (1)
Cost of revenue
Gross margin
Operating expenses
Research and development
Sales and marketing
General and administrative
Restructuring charges
Amortization of purchased intangible assets and goodwill
Total operating expenses
Operating income from continuing operations
Non-operating income (expense), net
Interest income
Interest expense
Foreign currency transaction loss, net
Expenses for affiliated operations, net
Other income (expense), net
Total non-operating expense, net
Income (loss) before income taxes from continuing operations
Income tax provision (benefit)
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 2,
2004
January 3,
2003
December 28,
2001
$ 540,903 $ 466,602 $ 475,292
272,873 232,170 238,057
237,235
234,432
268,030
67,641
97,870
39,253
2,019
62,881
61,232
103,778
89,344
37,407
40,634
3,599
1,099
7,312 8,300 29,389
214,095 200,609 237,054
181
33,823
53,935
465
659
(11,938)
(14,710)
(592)
(823)
(3,954)
(6,403)
118 (1,171)
(19,999)
(18,350)
35,585
13,824
(2,900)
38,485
-
1,118
(22,224)
(237)
-
(430)
(21,773)
(21,592)
3,500 1,900
(23,492)
613
$ 38,485 $ 10,324 $ (22,879)
10,324
-
$ 0.81 $ 0.24 $ (0.63)
0.01
$ 0.81 $ 0.24 $ (0.62)
37,091
42,860
47,505
-
$ 0.77 $ 0.24 $ (0.63)
0.01
$ 0.77 $ 0.24 $ (0.62)
37,091
43,578
50,012
-
-
(1) Includes sales to related parties of $4.0 million for fiscal 2003. None in fiscal 2001 and 2002.
See accompanying Notes to the Consolidated Financial Statements.
46
CONSOLIDATED STATEMENT OF SHAREHOLDERS’ EQUITY
Common stock and warrants
Shares
Amount
Retained
Earnings
(Deficit)
Accumulative
Other
Total
Comprehensive Shareholders'
Income/(Loss)
Equity
(in thousands)
Balance at December 29, 2000
36,243
$ 154,846
$ (10,940)
$ (8,963)
$ 134,943
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
exercise of warrants
Issuance of warrants
Issuance of stock in private placement
Balance at January 3, 2003
Components of comprehensive income (loss):
Net income
Gain on interest rate swap
Unrealized gain on investments
Foreign currency translation adjustments
Comprehensive income
Subtotal
Issuance of stock for acquisition
Issuance of stock for Joint Venture with Nikon
Issuance of stock under employee plans and
exercise of warrants
Issuance of stock for Levelite
Issuance of warrants
Issuance of stock in private placement
Balance at January 2, 2004
(22,879)
(203)
16
(9,766)
(33,819)
(18,916)
10,324
210
(17)
17,697
(23,495)
(1,026)
38,485
(7)
74
31,198
$ 14,990
$ 30,239
(22,879)
(203)
16
(9,766)
(32,832)
102,111
11,344
25,034
138,489
10,234
210
(17)
17,697
28,214
166,703
12,033
4,091
1,528
16,996
201,351
38,485
(7)
74
31,198
69,750
271,101
18,524
5,922
13,929
1,349
836
36,583
$ 348,244
1,376
2,675
40,294
11,344
25,034
191,224
1,190
12,033
561
1,920
43,965
4,091
1,528
16,996
225,872
825
350
1,593
107
3,148
49,988
18,524
5,922
13,929
1,349
836
36,583
$ 303,015
See accompanying Notes to the Consolidated Financial Statements.
47
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
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
Effect of exchange rate changes on cash and cash
equivalents
Cash flow from investing activities:
Acquisition of property and equipment
Proceeds from sale of assets
Acquisitions, net of cash acquired
Investment in Nikon-Trimble Joint Venture
Costs of capitalized patents
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 2,
2004
January 3,
2003
December
28,
2001
$
38,485
$
10,324
$
(22,879)
8,864
7,916
(32)
-
-
3,515
(6,532)
2,533
(16,683)
(4,862)
(792)
6,895
(6,387)
6,723
(947)
(6,437)
4,201
36,460
2,876
(10,901)
334
(6,606)
(4,810)
(670)
(22,653)
50,514
1,326
138,288
(190,074)
54
9,850
9,168
5,443
423
(1,061)
1,197
1,464
193
(10,615)
(7,649)
(3,920)
438
8,593
3,452
10,792
(4,823)
(953)
32,316
2,780
(7,157)
1,407
1,718
-
(1,734)
(5,766)
21,393
(1,082)
18,000
(70,040)
(31,729)
(2,399)
31,078
28,679
$
11,218
30,306
5,077
(135)
(1,584)
960
(887)
(508)
6,842
7,442
2,393
(3,261)
(4,954)
(3,112)
-
(2,946)
2,398
26,370
(1,277)
(7,254)
1,177
(4,430)
-
(934)
(11,441)
36,378
872
30,062
(90,762)
(23,450)
(9,798)
40,876
31,078
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents, beginning of period
Cash and cash equivalents, end of period
$
16,737
28,679
45,416
$
See accompanying Notes to the Consolidated Financial Statements.
48
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 2003 was
January 2, 2004. Fiscal 2002 was a 53-week year. The financial results of fiscal year 2002 have an extra week, and
therefore will not be exactly comparable to the prior and subsequent 52-week fiscal years. Fiscal year 2001
comprised 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.
Foreign Currency
Assets and liabilities of the Company’s non-US subsidiaries are translated into US 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-US 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. Cumulative translation adjustment increased by
approximately $31.2 million due to weakening US dollar against other currencies affecting the translation of our
assets dominated in non-US currencies.
Cash and Cash Equivalents
Cash and cash equivalents include all cash and highly liquid investments with insignificant interest rate risk and
maturities of three months or less at the date of purchase. The carrying amount of cash and cash equivalents
approximates fair value because of the short maturity of those instruments.
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 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.
49
Many of Trimble’s products use GPS as the positioning technology. GPS is a system of 24 orbiting satellites
established and funded by the US 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 US Government may not remain committed to the
operation and maintenance of GPS satellites over a long period, and the policy of the US 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 amount was not significant in fiscal 2003 and the
expenses recorded for doubtful accounts were $5.4 million in fiscal 2002 and $5.1 million in fiscal 2001.
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 five to seven years, with weighted average useful life of 5.7 years. Prior to
December 29, 2001, goodwill was amortized over 20 years, except for goodwill from the Grid Data purchase, which
was amortized over five 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 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 December 29, 2001, and an annual impairment test at the end of the
third fiscal quarter of 2002 and 2003, respectively, 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 December 29, 2001. 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. 104, “Revenue Recognition.” The Company recognizes product revenue when
persuasive evidence of an arrangement exists, delivery has occurred, the fee is fixed or determinable, and
collectibility is reasonably assured. In instances where final acceptance of the product is specified by the customer
or is uncertain, revenue is deferred until all acceptance criteria have been met.
50
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.
Contracts and customer purchase orders are generally used to determine the existence of an arrangement. Shipping
documents and customer acceptance, when applicable, are used to verify delivery. The Company assesses whether
the fee is fixed or determinable based on the payment terms associated with the transaction and whether the sales
price is subject to refund or adjustment. The Company assesses collectibility based primarily on the creditworthiness
of the customer as determined by credit checks and analysis, as well as the customer’s payment history.
Trimble’s shipment terms for US orders, and international orders fulfilled from its European distribution center are
typically FCA (Free Carrier) shipping point, except certain sales to US government agencies which are shipped FOB
destination. FCA shipping point means that Trimble fulfills the obligation to deliver when the goods are handed
over, cleared for export, and into the charge of the carrier named by the buyer at the named place or point. If no
precise point is indicated by the buyer, Trimble may choose within the place or range stipulated where the carrier
will take the goods into carrier’s charge. Shipping and handling costs are included in the cost of goods sold.
Other international orders are shipped FOB destination, which means these international orders are not recognized
as revenue until the product is delivered and title has transferred to the buyer or FCA shipping point. FOB
destination means that Trimble bears all costs and risks of loss or damage to the goods up to that point.
Revenue to distributors and resellers is recognized upon delivery, assuming all other criteria for revenue recognition
have been met. Distributors and resellers do not have a right of return.
When a sale involves multiple elements the entire fee from the arrangement is allocated to each respective element
based on its relative fair value and recognized when revenue recognition criteria for each element are met. The
amount of product revenue allocated to an individual element is limited to the lesser of its relative fair value or the
amount not contingent on the Company’s delivery of other elements under the arrangement, regardless of the
probability of the Company’s performance.
Trimble’s software arrangements generally 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
renewal rate. The remaining value of the software arrangement is allocated to the license fee using the residual
method, which revenue is primarily recognized when the software has been delivered and there are no remaining
obligations. Revenue from PCS is recognized ratably over the term of the PCS agreement.
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 up to 5.5 years, certain TDS products have a five
year or 90-day warranty period, and certain Nikon products have a five year 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 2, 2004 and January 3,
2003, are as follows:
51
Fiscal Years Ended
(In thousands)
Beginning balance
Warranties accrued
Warranty claims
Ending Balance
January 2,
2004
January 3,
2003
$ 6,394
4,417
(5,664)
$ 5,147
$
$
6 ,827
2,821
(3,254)
6,394
Guarantees, Including Indirect Guarantees of Indebtedness of Others
In addition to product warranties, the Company, from time to time, in the normal course of business, indemnifies
other parties with whom it enters into contractual relationships, including customers, lessors, and parties to other
transactions with the Company, with respect to certain matters. The Company has agreed to hold the other party
harmless against specified losses, such as those arising from a breach of representations or covenants, third party
claims that the Trimble’s products when used for their intended purpose(s) infringe the intellectual property rights of
such third party or other claims made against certain parties. It is not possible to determine the maximum potential
amount of liability under these indemnification obligations due to the limited history of prior indemnification claims
and the unique facts and circumstances that are likely to be involved in each particular claim. Historically, payments
made by the Company under these obligations were not material and no liabilities have been recorded for these
obligations on the balance sheets as of January 2, 2004 and January 3, 2003.
Advertising Costs
Trimble expenses advertising costs as incurred. Advertising expenses were approximately $9.2 million, $6.3 million,
and $6.8 million in fiscal 2003, 2002, and 2001, respectively.
Research and Development Costs
Research and development costs are charged to expense as incurred. Trimble received third party funding of
approximately $4.9 million, $5.3 million, and $4.1 million in fiscal 2003, 2002, and 2001, respectively. The
Company offsets research and development expenses with any third party funding received.
The Company retains the rights to any technology developed.
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 13 of the Consolidated Financial
Statements describe the plans operated by Trimble.
For purposes of pro forma disclosures, the estimated fair value of the options is amortized to expense over the
options' vesting period, and the estimated fair value of purchases under the employee stock purchase plan is
expensed in the year of purchase as well as the stock-based employee compensation cost, net of related tax effects,
that would have been included in the determination of net income if the fair value based method had been applied to
all awards. 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
52
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 2003, 2002, and 2001:
Expected dividend yield
Expected stock price volatility
Risk free interest rate
Expected life of options after vesting
January 2,
2004
-
59.87%
3.34%
1.56
January 3,
2003
-
52.70%
3.13%
1.18
December 28,
2001
-
69.59%
4.15%
1.20
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.
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
Depreciation
January 2,
2004
January 3,
2003
December 28,
2001
$ 38,485
$ 10,324
$ (22,879)
11,549
$ 26,936
0.81
0.57
0.77
0.54
11,641
$ (1,317)
0.24
(0.03)
0.24
(0.03)
12,718
$ (35,597)
(0.62)
(0.96)
(0.62)
(0.96)
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 six
years for machinery and equipment, five years for furniture and fixtures, two to five years for computer equipment
and software, and the life of the lease for leasehold improvements.
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.
53
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. (See Note
21 to the Consolidated Financial Statements regarding a 3 for 2 stock split subsequent to year end.)
New Accounting Standards
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 apply to revenue arrangements entered into after June, 2003. The effect of adoption of EITF Issue No. 00-21
on Trimble’s results of operations and financial condition was immaterial.
Financial Accounting Standards Board (FASB) Interpretation No. 46 (FIN 46), “Consolidation of Variable Interest
Entities,” was issued in January 2003, and a revised interpretation of FIN 46 (FIN 46-R) was issued in
December 2003. FIN 46 requires certain variable interest entities to be consolidated by the primary beneficiary of
the entity if the equity investors in the entity do not have the characteristics of a controlling financial interest or do
not have sufficient equity at risk for the entity to finance its activities without additional subordinated financial
support from other parties. The provisions of FIN 46 are effective immediately for all arrangements entered into
after January 31, 2003. Since January 31, 2003, Trimble has not obtained any variable interests in any entities it
believes are variable interest entities. For arrangements entered into prior to February 1, 2003, Trimble would be
required to adopt the provisions of FIN 46-R in the first quarter of fiscal 2004. Trimble is in the process of
determining the effect, if any, the adoption of FIN 46-R will have on its financial statements.
In April 2003, the FASB issued SFAS No. 149, “Amendment of Statement 133 on Derivative Instruments and
Hedging Activities.” SFAS No. 149 amends and clarifies financial accounting and reporting for derivative
instruments, including certain derivative instruments embedded in other contracts (collectively referred to as
derivatives) and for hedging activities under SFAS No. 133, “Accounting for Derivative Instruments and Hedging
Activities.” SFAS No. 149 is effective for contracts entered into or modified after June 30, 2003, and for hedging
relationships designated after June 30, 2003. The adoption of this Statement did not have an effect on Trimble’s
financial statements.
In May 2003, the FASB issued SFAS No. 150, “Accounting for Certain Financial Instruments with Characteristics
of Both Liabilities and Equity.” SFAS No. 150 establishes standards for how an issuer classifies and measures
certain financial instruments with characteristics of both liabilities and equity. Many of these instruments were
previously classified as equity. SFAS No. 150 is effective for financial instruments entered into or modified after
May 31, 2003 and otherwise was effective at the beginning of the first interim period beginning after June 15, 2003,
which for Trimble, was the fourth quarter of 2003. The adoption of this Statement did not have an effect on
Trimble’s financial statements.
Note 2 - Acquisitions:
The following is a summary of acquisitions made by Trimble during fiscal 2003, 2002, and 2001, all of which were
accounted for as purchases:
Acquisition
Grid Data
LeveLite
Applanix
MENSI
Primary Service or Product
Wireless application service provider
Low-end construction instrument products
Inertial navigation systems and GPS
3D laser scanning technology
Acquisition Date
April 2, 2001
August 15, 2002
July 7, 2003
December 9, 2003
The consolidated financial statements include the results of operations of acquired companies commencing on the
date of acquisition. Pro forma information is not presented, as these acquisitions did not have a material effect on the
Company’s results of operations.
54
Allocation of Purchase Consideration
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 following is a summary of
purchase price, acquisition costs and purchase price allocation of the Grid Data, and LeveLite, Applanix, and
MENSI acquisitions:
(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:
Existing technology
Goodwill
Total
Grid Data, Inc.
Grid Data
LeveLite
Applanix
MENSI
$ 8,248
50
-
$ 8,298
$ 7,506
144
555
$ 8,205
$ 17,401
438
-
$ 17,839
$ 4,273
372
-
$ 4,645
(141)
-
6,115
-
3,742
(1,153)
1,434
-
-
8,439
$ 8,298
-
2,090
$ 8,205
3,440
11,810
$ 17,839
-
3,211
$ 4,645
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
402,528 shares of common stock 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., a California corporation, for approximately $5.7
million. This strategic acquisition complements Trimble’s entry-level construction instrument product line. The
purchase price consisted of 655,626 shares of 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 and a share of the payments received from the
settlement of potential litigation. As of January 2, 2004, the total earn-out amount was approximately $1.8 million
resulting in additional goodwill and a final purchase price of approximately $7.5 million.
Applanix Corporation
* On July 7, 2003, Trimble acquired privately held Applanix Corporation of Ontario, Canada for approximately
$17.8 million. Applanix develops systems that integrate inertial navigation system (INS) and GPS technologies. The
purchase price consisted of 1,154,240 shares of Trimble common stock, of which 720,404 were issued. Former
Applanix shareholders have the right to receive the remaining 433,836 shares of Trimble common stock upon the
surrender of exchangeable shares of a Trimble subsidiary. Trimble expects the Applanix acquisition to extend its
technology portfolio and enable increased robustness and capabilities in its future positioning products. Applanix’s
performance is reported under the Company’s Portfolio Technologies segment. Trimble’s allocated a portion of the
purchase price to existing technology, which is being amortized over seven years.
55
MENSI S.A.
On December 9, 2003, we acquired privately held MENSI S.A., a French developer of terrestrial 3D laser scanning
technology. This strategic acquisition will enhance our technology portfolio and expand our product offerings. The
purchase price consisted of an initial cash payment of approximately Euro 3.5 million (approximately US$4.3
million on December 9, 2003). The acquisition agreement provides for Trimble to make additional earn-out cash
payments not to exceed Euro 3 million (approximately US$3.7 million on December 9, 2003) based on future
revenue derived from existing product sales. The additional payments, if earned, will result in additional goodwill.
MENSI’s performance is reported under our Engineering and Construction segment.
Note 3 – Joint Ventures:
Caterpillar Trimble Control Technologies Joint Venture
On April 1, 2002, Caterpillar Trimble Control Technologies LLC (“CTCT”), a joint venture formed by Trimble and
Caterpillar began operations. CTCT, based in Dayton, Ohio, is 50% owned by Trimble and 50% owned by
Caterpillar, with equal voting rights. It develops and markets next generation advanced electronic guidance and
control products for earthmoving machines in the construction, mining, and waste industries. 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 CTCT. During the first fiscal quarter of 2002, Trimble received a special cash distribution of $11.0
million from CTCT.
Trimble has recorded the cash distribution of $11.0 million as a deferred gain, being amortized to the extent that
losses are attributable from CTCT under the equity method of accounting. When and if CTCT is profitable on a
sustainable basis, and future operating losses are not anticipated, then Trimble will recognize as a gain, the un-
amortized portion of the $11.0 million. To the extent that it is possible that the Company will have any future-
funding obligation relating to CTCT, 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 the $11.0 million deferred gain are recorded under the heading of "Expense for affiliated
operations, net" in Non-operating income (expense).
The expenses for affiliated operations at CTCT, net also includes incremental costs as a result of purchasing
products from CTCT at a higher price than Trimble's original manufacturing costs, partially offset by contract
manufacturing fees charged to CTCT. In addition, Trimble received reimbursement of employee-related costs from
CTCT for Trimble employees devoted to CTCT totaling $7.9 million in fiscal 2003 and $3.9 million in fiscal 2002.
The reimbursements were offset against operating expenses.
Fiscal year ended
(In millions)
CTCT incremental pricing effects, net
Trimble's 50% share of CTCT's reported gain (loss)
Amortization of deferred gain
Total CTCT expense for affiliated operations, net (1)
January 2,
2004
$ 5.9
(0.9)
0.9
$ 5.9
January 3,
2003
$ 4.0
(0.2)
0.2
$ 4.0
(1) Due to the nature of the relationship between Trimble and CTCT, a related party, the impact of these agreements is classified under non-
operating income (expense) under the heading of "Expense for affiliated operations, net".
At January 2, 2004, the net outstanding balance due from CTCT to Trimble was approximately $0.8 million.
56
Nikon-Trimble Joint Venture
On March 28, 2003, Trimble and Nikon Corporation entered into an agreement to form a joint venture in Japan,
Nikon-Trimble Co., Ltd., which assumed the operations of Nikon Geotecs Co., Ltd., a Japanese subsidiary of Nikon
Corporation and Trimble Japan KK, a Japanese subsidiary of Trimble. Nikon-Trimble began operations in July
2003.
Under the terms of the Nikon-Trimble agreement, Nikon contributed ¥1.2 billion (approximately US$10 million on
June 30, 2003) in cash, while Trimble contributed ¥500 million (approximately US$4.1 million on June 30, 2003) in
cash and ¥700 million of its common stock or 349,251 shares valued at approximately US$5.9 million on June 30,
2003. The Nikon-Trimble joint venture purchased certain tangible and intangible assets from Nikon Geotecs Co.,
Ltd. and Trimble Japan KK.
Nikon-Trimble is 50% owned by Trimble and 50% owned by Nikon, with equal voting rights. It focuses on the
design and manufacture of surveying instruments including mechanical total stations and related products. In Japan,
this joint venture will distribute Nikon’s survey products as well as Trimble’s GPS survey products and other
Engineering and Construction products, including robotic total stations. Outside Japan, Trimble is the exclusive
distributor of Nikon survey and construction products.
Trimble has adopted the equity method of accounting for its investment in Nikon-Trimble, with 50% share of profit
or loss from this joint venture to be reported by Trimble in the Non-operating section of the Consolidated Statement
of Operations under the heading of “Expenses for affiliated operations, net.” During fiscal 2003, and the first year
of its operations, Nikon-Trimble reported a loss of $0.6 million of which Trimble’s share is $0.3 million. At January
2, 2004, the outstanding balance from Nikon-Trimble due to Trimble was approximately $1.4 million related to the
transfer of certain tangible and intangible assets from Trimble Japan KK, recorded under the heading of “Accounts
and other receivables, net” and $2.0 million net payable by Trimble to Nikon-Trimble related to the purchase and
sale of products from and to Nikon-Trimble recorded under the heading of “Other accrued liabilities” on the
Consolidated Balance Sheets.
Note 4 – Goodwill and Intangible Assets:
Goodwill and purchased intangible assets consisted of the following:
January 2,
2004
January 3,
2003
As of
(in thousands)
Intangible assets:
Intangible assets with definite life:
$ 32,389 $ 25,986
Existing technology
Trade names, trademarks, patents, and other intellectual properties 20,911 21,594
53,300 47,580
Total intangible assets with definite life
(33,559) (24,342)
Less accumulated amortization
$ 19,741 $ 23,238
Total net intangible assets
Goodwill:
Goodwill, Spectra Precision acquisition
Goodwill, other acquisitions
Total goodwill
$ 205,562 $ 185,277
35,863 20,656
$ 241,425 $ 205,933
The increase in goodwill of approximately $35.5 million during fiscal 2003 was primarily due to the acquisition of
Applanix and MENSI of approximately $15.0 million and the exchange rate impact of approximately $18.0 million
on non-US currency denominated goodwill assets.
57
The intangible asset amortization expense as of January 2, 2004 for the five years following fiscal 2003 is projected
as follows:
(In thousands)
2004
2005
2006
2007
2008
Thereafter
Total
Amortization
Expense
$ 8,177
5,384
2,522
1,747
824
1,087
$ 19,741
For comparative purposes, the pro forma adjusted net income (loss) per share excluding amortization of goodwill,
distribution channel, and assembled workforce is as follows:
Fiscal Years Ended
(in thousands, except per share data)
Net income (loss)
Add back SFAS 142 adjustments:
Amortization of goodwill
Amortization of distribution channel
Amortization of assembled workforce
Adjusted net income (loss)
Weighted average shares outstanding
Basic
Diluted
Diluted net income (loss) per share
Pro forma adjusted diluted net income (loss) per share
Note 5 – Certain Balance Sheet Components:
Inventories consisted of the following:
As of
(in thousands)
Raw materials
Work-in-process
Finished goods
January 2,
2004
January 3,
2003
December 28,
2001
$ 38,485 $ 10,324 $ (22,879)
-
-
-
7,817
11,230
1,834
$ 38,485 $ 10,324 $ (1,998)
-
-
-
47,505
50,012
37,091
42,860
37,091
43,578
$ 0.81 $ 0.24 $ (0.05)
$ 0.77 $ 0.24 $ (0.05)
January 2,
2004
January 3,
2003
$ 20,927
3,876
46,023
$ 70,826
$ 21,098
5,187
34,859
$ 61,144
58
Property and equipment consisted of the following:
As of
(in thousands)
Machinery and equipment
Furniture and fixtures
Leasehold improvements
Buildings
Land
Less accumulated depreciation
Other current assets consisted of the following:
As of
(in thousands)
Notes receivable
Prepaid expenses
Other
Other non-current assets consisted of the following:
As of
(in thousands)
Debt issuance costs, net
Nikon-Trimble joint venture investment*
Other investments
Deposits
Demonstration equipment, net
Receivables from employees
Other
January 2,
2004
January 3,
2003
$ 66,634
9,085
4,502
5,236
1,391
86,848
(59,469)
$ 27,379
$ 70,660
6,538
6,451
2,905
1,391
87,945
(65,908)
$ 22,037
January 2,
2004
January 3,
2003
$ 446
4,566
647
$ 5,659
$ 1,685
5,495
1,221
$ 8,401
January 2,
2004
January 3,
2003
$ 1,691
10,717
1,216
925
3,226
801
3,978
$ 22,554
$ 2,493
-
1,381
1,196
2,665
1,223
3,128
$ 12,086
* Includes transaction costs of approximately $0.7 million.
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 and are marked to market through
earnings every period and generally range from one to three months in original maturity. These hedge instruments
are marked to market through earnings every period. Gains and losses are not material to the Company’s financial
position or results of operation.
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.
59
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 did not have a material impact on the Company’s financial position or results of operations
and none are outstanding as of January 2, 2004.
Note 7 - 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 geographic information systems
(GIS) and agriculture businesses. Trimble has aggregated these business operations under a single general
manager in order to continue to leverage its research and development activities due to the similarities of
products across the segment.
• 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 networks; 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. During the first two fiscal
quarters of 2003, this segment was comprised solely of the Military and Advanced Systems business.
Beginning with the third quarter of fiscal 2003, Applanix’s performance is reported in this business
segment.
At the beginning of fiscal 2003, Trimble realigned two of its reportable segments. The Tripod Data Systems
business is now included in the Engineering and Construction segment, while previously it was included in the
Portfolio Technologies segment. The following table has been restated to reflect this realignment.
60
Trimble evaluates each of its segment's performance and allocates resources based on profit and loss from
operations before income taxes, and some corporate allocations. Trimble and each of its segments employ the same
accounting policies.
The following table presents revenues, operating income (loss), and identifiable assets for the five segments. The
information includes the operations of Grid Data after April 2, 2001, LeveLite after August 15, 2002, Applanix after
July 7, 2003 and MENSI after December 9, 2003. 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 Years Ended
(In thousands)
January 2, 2004
External net revenues
Operating income (loss)
before corporate
allocations
Accounts receivable (1)
Inventories
January 3, 2003
External net revenues
Operating income (loss)
before corporate
allocations
Accounts receivable (1)
Inventories
December 28, 2001
External net revenues
Operating income (loss)
before corporate
allocations
Accounts receivable (1)
Inventories
Reporting Segments
Engineering
and
Construction
Field
Mobile
Component
Portfolio
Solutions Solutions Technologies Technologies
Total
$
367,058
$
79,879 $
12,981 $
64,193 $
16,792 $ 540,903
60,664
84,897
56,008
14,500
16,589
3,398
(6,452)
4,103
3,038
16,560
10,003
2,021
(1,686)
7,321
6,361
83,586
122,913
70,826
$
319,615
$
67,259 $
8,486 $
59,755 $
11,487 $ 466,602
53,453
73,474
46,332
9,676
11,598
7,337
(12,039)
1,960
1,986
10,673
11,276
2,853
557
1,966
2,636
62,320
100,274
61,144
$
317,849
$
68,519 $
13,791 $
58,083 $
17,050 $ 475,292
49,849
64,185
38,921
11,349
10,191
4,639
(9,990)
4,274
1,992
10,359
7,392
2,490
738
5,535
3,438
62,306
91,577
51,480
(1) As presented, accounts receivable excludes cash received in advance and allowances for doubtful accounts, which are not allocated between
segments.
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 (1)
Unallocated corporate expenses
Operating income from continuing operations
January 2,
2004
January 3,
2003
December 28,
2001
$ 83,586
(29,651)
$ 53,935
$ 62,320
(28,497)
$ 33,823
$ 62,306
(62,125)
$ 181
61
(1) Segment operating income for fiscal 2002 and fiscal 2001 have been restated to reflect the allocations of certain corporate expenses so as to be
comparable with the allocation methodology in fiscal 2003.
As of
(in thousands)
Assets:
Accounts receivable total for reportable segments
Unallocated (1)
Total
January 2,
2004
January 3,
2003
$ 122,913
(19,563)
$ 103,350
$ 100,274
(20,629)
$ 79,645
(1) Includes cash received in advance, other receivables, and accruals that are not allocated by segment.
The following table presents revenues by product groups.
Fiscal Years Ended
(in thousands)
GPS products
Laser and optical products
Other
Total revenue
January 2,
2004
January 3,
2003
December 28,
2001
$ 320.9
199.7
20.3
$ 540.9
$ 274.5
186.9
13.9
$ 475.3
$ 274.2
93.9
1.7
$ 369.8
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 Years Ended
(In thousands)
January 2, 2004
Sales to unaffiliated customers (1)
Inter-geographic transfers
Total revenue
Geographic Area
Europe
Middle East
Africa
Other
Non-US
Countries
Asia
US
Eliminations
Total
$ 265,846 $ 166,153 $ 70,257 $ 38,648 $
- 3,755
- $ 540,903
-
$ 378,469 $ 282,338 $ 70,257 $ 42,403 $ (232,563) $ 540,903
116,185
(232,563)
112,623
Identifiable assets
$ 172,850 $ 91,008 $ 7,549 $ 12,330 $
- $ 283,737
January 3, 2003
Sales to unaffiliated customers (1)
Inter-geographic transfers
Total revenue
Identifiable assets
December 28, 2001
Sales to unaffiliated customers (1)
Inter-geographic transfers
Total revenue
$ 235,716 $ 136,551 $ 60,878 $ 33,457 $
- 4,121
- $ 466,602
-
$ 298,559 $ 210,176 $ 60,878 $ 37,578 $ (140,589) $ 466,602
73,625
(140,589)
62,843
$ 127,594 $ 70,057 $ 9,955 $ 5,743 $ (864) $ 212,485
$ 236,665 $ 143,051 $ 54,710 $ 40,866 $
-
49,940 2,137
- $ 475,292
-
$ 294,146 $ 192,991 $ 56,847 $ 40,866 $ (109,558) $ 475,292
(109,558)
57,481
Identifiable assets
$ 120,403 $ 71,081 $ 10,048 $ 3,829 $ (5,494) $ 199,867
(1) Sales attributed to countries based on the location of the customer.
62
Transfers between US and non-US geographic areas are made at prices based on total costs and contributions of the
supplying geographic area. The Company's subsidiaries in Asia, except for Japan, which is a buy/sell entity, have
derived revenue from commissions from US operations in each of the periods presented. These commission
revenues and expenses are excluded from total revenue and operating income (loss) in the preceding table. The
Japanese entity’s revenues and expenses are included in total revenue and operating income (loss) in the preceding
table. In fiscal 2002, Germany comprised approximately 16% of sales to unaffiliated customers. Other than the
United States, no other country comprised more than 10% of sales to unaffiliated customers for any periods
presented, except as disclosed above.
No single customer accounted for 10% or more of Trimble's total revenues in fiscal years 2003, 2002, and 2001.
Note 8 - Restructuring Charges:
Restructuring charges of $2.0 million were recorded in fiscal 2003, $1.1 million in fiscal 2002, and $3.6 million in
fiscal 2001, all of which related to severance costs, except for $0.3 in 2003 which related to lease costs of Trimble’s
Japanese office closure due to the Nikon joint venture. As a result of the restructuring activities, the Company’s
headcount decreased in fiscal 2003 by 77, 49 and 207 in fiscal 2003, 2002, and 2001, respectively. As of January 2,
2004, the restructuring accrual balance was approximately $0.4 million which will be paid over the remaining term
of the lease through 2006.
Note 9 - Long-term Debt:
Long-term debt consisted of the following:
As of
(In thousands)
Credit Facilities:
Term loan
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 2,
2004
January 3,
2003
$
$
43,750
44,000
-
2,736
90,486
-
12,885
77,601
$
$
32,600
35,000
69,136
1,789
138,525
6,556
24,104
107,865
The following summarizes the future cash payment obligations (excluding interest) as of January 2, 2004:
Total
2004
2005
2006
2007
2009 and
2008 Beyond
(in thousands)
Credit Facilities:
Term loan
Revolving credit facility
Subordinated note
Promissory note and other
Total contractual cash obligations
$ 43,750 $ 12,500 $ 12,500 $ 12,500 $ 6,250 $ - $ -
-
-
1,681
$ 90,486 $ 12,885 $ 12,665 $ 56,785 $ 6,360 $ 110 $ 1,681
44,000
-
2,736
44,000
-
285
-
-
385
-
-
165
-
-
110
-
-
110
63
Credit Facilities
On June 25, 2003, Trimble obtained a $175 million secured Credit Facility (“2003 Credit Facility”) from a syndicate
of nine banks to repay the Subordinated Note and refinance certain existing higher interest credit facilities, pay fees
and expenses related to this new credit facility, and for ongoing working capital and general corporate needs.
At January 2, 2004, Trimble had approximately $87.8 million of borrowings under the 2003 Credit Facility,
comprised of a $43.8 million term loan and $44.0 million of a $125 million revolver. The Company has access to an
additional $81 million of cash under the terms of the revolving credit facility. The Company has commitment fees
on the unused portion of 0.5% if the Leverage Ratio (which is defined as total indebtedness to 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 of interest for any borrowings under the 2003 Credit Facility was fixed for the first six months at LIBOR
plus 175 basis points (1.5% at January 2, 2004) and now is thereafter tied to a formula, based on the Leverage Ratio.
The Credit Facility is secured by all of the Company’s material assets, except for assets that are subject to foreign
tax considerations. Financial covenants of the 2003 Credit Facility include leverage, fixed charge, and minimum net
worth tests. At January 2, 2004, Trimble was in compliance with all financial debt covenants. The amount due under
the revolver loan is paid as the loan matures on June 25, 2006, and the loan commitment fees are paid on a quarterly
basis.
Under the terms of the 2003 Credit Facility, the Company is allowed to pay dividends and repurchase shares of
common stock up to 25% of net income in the previous fiscal year, under the existing terms of the credit facilities.
In July of 2000, Trimble obtained $200 million of senior, secured credit facilities (the "2000 Credit Facility") 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 had approximately $67.6 million
outstanding under the 2000 Credit Facility, comprised of $32.6 million under a $100 million five-year term loan,
$25 million under a $50 million US dollar only revolving credit facility ("revolver"), and $10 million under a $50
million multi-currency revolver. The Company had commitment fees on the unused portion of 0.5% assuming
certain ratios were met. Pricing for any borrowings under the 2000 Credit Facility was fixed for the first six months
at LIBOR plus 275 basis points and was thereafter tied to a formula, based on the leverage ratio.
Due to the full repayment of the Subordinated Note and the refinancing of the 2000 Credit Facility, the Company
wrote off approximately $3.6 million of unamortized debt issuance costs and warrants issued in connection with the
Subordinated Note, as interest expense in fiscal 2003.
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. 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. As permitted by the 2000
Credit Facility, Trimble repaid the subordinated note during fiscal 2003.
Promissory Note and Others
The promissory note and others mainly consists of a $1.7 million liability arising from the purchase of a building for
Trimble’s Corvallis, Oregon site and other government loans in our foreign subsidiaries. The $1.7 million note is
payable in monthly installments through April 2015, bearing a 3.99% variable interest rate as of January 2, 2004.
64
Weighted Average Cost of Debt
The weighted average cost of debt is approximately 2.9% for fiscal 2003 and 7.6% for fiscal 2002.
Note 10 - 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)
2004
2005
2006
2007
2008
Thereafter
Total
Operating
Lease Payments
$ 10,129
9,401
2,322
1,643
1,489
3,157
$ 28,141
Net rent expense under operating leases was $13.2 million in fiscal 2003, $5.9 million in fiscal 2002, and $9.6
million in fiscal 2001. Sublease income was $1.7 million, $4.7 million, and $3.5 million, respectively.
Note 11 - Fair Value of Financial Instruments:
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 9)
Credit facilities (See Note 9)
Promissory note and other (See Note 9)
Accounts payable
Carrying
Amount
Fair
Value
Carrying
Amount
Fair
Values
January 2, 2004
January 3, 2003
$ 45,416
1,412
$ 45,416
1,328
$ 28,679
125
$ 28,679
297
103,350
103,350
79,645
79,645
-
87,750
2,736
26,019
-
87,750
2,335
26,019
69,136
67,600
1,789
30,669
65,798
67,600
1,421
30,669
The fair value of the subordinated notes, bank borrowings, and promissory notes have been estimated using an
estimate of the interest rate Trimble would have had to pay on the issuance of notes with a similar maturity and
discounting the cash flows at that rate. The fair values do not give an indication of the amount that Trimble would
currently have to pay to extinguish any of this debt.
65
The fair value of forward foreign exchange contracts is estimated based on the difference between the market price
and the carrying amount of comparable contracts. These contracts are adjusted to fair value at the end of every
month.
Note 12 - Income Taxes:
Trimble's income tax provision (benefit) consisted of the following:
Fiscal Years Ended
(In thousands)
US Federal:
Current
Deferred
US State:
Current
Deferred
Non-US:
Current
Deferred
Income tax provision (benefit)
January 2,
2004
January 3,
2003
December 28,
2001
$ 513
(7,000)
(6,487)
$
250
(600)
(350)
$
-
-
-
-
142
-
-
-
-
58
142
58
1,594
2,343
3,937
$ (2,900)
2,052
1,306
3,358
$ 3,500
2,729
(887)
1,842
$ 1,900
The pre-tax US income (loss) from continuing operations was approximately $39.5 million, $3.3 million and $(29.3)
million in fiscal years 2003, 2002 and 2001, respectively.
The income tax provision (benefit) 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
(In thousands)
January 2,
2004
January 3,
2003
December 28,
2001
Expected tax from continuing operations at
$
12,455
$ 4,839
$
35% in all years
Change in valuation allowance
Non-US tax rate differential
Goodwill amortization
Other
Income tax provision (benefit)
Effective tax rate
(15,028)
-
-
(327)
(2,900)
(1,156)
(137)
-
(46)
$ 3,500
$
(7,557)
9,704
(855)
747
(139)
$ 1,900
(8%)
25%
(9%)
The components of deferred taxes consist of the following:
As of
(In thousands)
Deferred tax liabilities:
66
January 2,
2004
January 3,
2003
Purchased intangibles
Depreciation and amortization
Other individually immaterial items
Total deferred tax liabilities
Deferred tax assets:
Inventory valuation differences
Expenses not currently deductible
US Federal credit carryforwards
Deferred revenue
US State credit carryforwards
Warranty
Depreciation and amortization
US Federal net operating loss (NOL) carryforward
Other individually immaterial items
Total deferred tax assets
Valuation allowance
Total deferred tax assets
$
$
1,338
3,776
251
5,365
381
2,258
(78)
2,561
9,001
5,528
9,150
4,280
6,999
2,374
2,871
-
3,106
43,309
(34,756)
8,553
12,069
5,762
8,172
4,317
6,215
2,374
3,184
4,451
1,827
48,371
(47,878)
493
Total net deferred tax assets/(liabilities)
$
3,188
$
(2,068)
The Company has US Federal credit carryforwards of approximately $9.1 million that expire beginning in 2004. The
Company has state research and development credit carryforwards of approximately $10.4 million which do not
expire.
The change in valuation allowance in 2003 includes net operating losses realized as well as the benefit given to
certain deferred tax assets in the amount of $7.6 million based on management’s assessment that it is more likely
than not that such assets will be realized. The valuation allowance decreased by $13.1 million in 2003 and decreased
by $3.1 million in 2002. Approximately $14.1 million of the valuation allowance at January 2, 2004 relates to the
tax benefits of stock option deductions, which will be credited to equity if and when realized.
Note 13 – Shareholder’s Equity:
3-for-2 Stock Split
Trimble’s Board of Directors approved a 3-for-2 split of all outstanding shares of the Company's Common Stock,
payable March 4, 2004 to stockholders of record on February 17, 2004. Cash will be paid in lieu of fractional shares.
All share and per share information have been adjusted to reflect the stock split on a retroactive basis for all periods
presented.
Common Stock
On April 14, 2003, Trimble sold 3,148,000 shares of its Common Stock, no par value per share, to an investor at a
price of $12.17 per share in an offering pursuant to its shelf registration statement. The offering resulted in net
proceeds to Trimble of approximately $36.6 million, approximately $31 million of which was used to pay down the
principal balance and $5.6 million was used to pay down the accrued interest due on the Subordinated Note (see
Note 9 to the Consolidated Financial Statements).
On December 21, 2001, Trimble completed a private placement of 2,675,006 shares of its Common Stock at a price
of $10.00 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 1,920,006 shares of
Common Stock at $10.00 per share resulting in gross proceeds of an additional $19.2 million.
67
2002 Stock Plan
In 2002, Trimble’s Board of Directors adopted the 2002 Stock Plan (“2002 Plan”). The 2002 Plan approved by the
shareholders provides for the granting of incentive and non-statutory stock options for up to 3,000,000 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 2, 2004, options to
purchase 2,326,742 shares were outstanding and 619,949 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 9,562,500 shares of Common Stock to employees, consultants, and directors of Trimble. Incentive
stock options may be granted at exercise prices that are not less than 100% of the fair market value of Common
Stock on the date of grant. Employee stock options granted under the 1993 Plan have 120-month terms, and vest at a
rate of 20% at the first anniversary of grant, and monthly thereafter at an annual rate of 20%, with full vesting
occurring at the fifth anniversary of grant. The exercise price of non-statutory stock options issued under the 1993
Plan must be at least 85% of the fair market value of Common Stock on the date of grant. As of January 2, 2004,
options to purchase 4,799,045 shares were outstanding, and 980,627 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 570,000 shares of
Common Stock have been reserved for issuance to non-employee directors as approved by the shareholders to date.
At January 2, 2004, options to purchase 287,501 shares were outstanding, and no 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, 450,000 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 2, 2004, 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
grants. There were no discounted options granted in the plan in fiscal 2003, 2002, and 2001. As of January 2, 2004,
options to purchase 187,500 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 5,025,000 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 2003
and 2002, 328,044 shares and 362,412 shares, respectively, were issued under the plan for aggregate proceeds to the
Company of $3.1 million and $2.9 million, respectively. At January 2, 2004, the number of shares reserved for
future purchases by eligible employees was 428,216.
68
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.
Exercise prices for options outstanding as of January 2, 2004, ranged from $5.33 to $34.46. The weighted average
remaining contractual life of those options is 6.91 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:
Options Outstanding
Options Exercisable
Weighted-
Average
Exercise Price
per Share
Weighted-
Average
Remaining
Contractual Life
Number
Outstanding (1)
908 $ 5.70 5.01
7.91 6.03
861
9.10 6.07
111
10.23 8.47
843
10.81 6.13
957
11.65 6.74
780
13.29 6.18
783
16.04 6.02
21
17.00 9.53
1,064
1,274
26.37 6.86
7,601 $ 13.61 6.91
Number
Exercisable (1)
Weighted-
Average
Exercise Price
per Share
873 $ 5.71
7.89
614
8.94
65
10.23
228
10.66
585
11.65
426
13.13
525
16.04
17
17.00
5
800
27.01
4,136 $ 12.76
Range
$ 5.33 - 6.63
6.67 - 8.53
8.75 - 9.33
10.23
10.25 - 11.43
11.65 - 11.67
11.93 - 15.71
16.04
17.00
17.55 - 34.46
Total
(1) In thousands
Activity during fiscal 2003, 2002, and 2001, under the combined plans was as follows:
January 2, 2004
January 3, 2003
December 28, 2001
Fiscal Years Ended
(In thousands, except for per
share data)
Options
Weighted
average
exercise
price
Weighted
average
exercise
price
Weighted
average
exercise
price
Options
Options
Outstanding at beginning of year
Granted
Exercised
Cancelled
Outstanding at end of year
7,691
1,298
(1,263)
(125)
7,601
$ 12.35
6,932
16.87 1,275
8.90 (199)
15.51 (317)
7,691
$ 13.61
6,390
$ 12.69
1,605
9.88
6.67 (436)
13.46 (627)
6,932
$ 12.35
Exercisable at end of year
Available for grant
Weighted-average fair value of
options granted during year
4,136
1,605
$ 12.76
4,005
2,790
$ 11.69
3,009
1,565
$ 12.73
11.39
8.61
12.37
$ 12.69
$ 10.84
$ 10.03
$ 5.64
$ 6.39
69
Non-statutory Options
On May 3, 1999, Trimble entered into an agreement to grant a non-statutory option to purchase up to 45,000 shares
of common stock at an exercise price of $6.50 per share, with an expiration date of March 29, 2004.
As of January 2, 2004, these non-statutory options have not been exercised.
Warrants
On April 12, 2002, the Company issued to Spectra-Physics Holdings USA, Inc., a warrant to purchase up to 564,350
shares of Trimble’s Common Stock over a fixed period of time. Initially, Spectra-Physics’ warrant entitles it to
purchase 300,000 shares of Common Stock over a five-year period at an exercise price of $10.07 per share. On a
quarterly basis beginning July 14, 2002, Spectra-Physics’ warrant became exercisable for an additional 375 shares of
Common Stock for every $1 million of principal and interest outstanding to Spectra-Physics until the obligation 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 26,046 shares
became exercisable at an exercise price of $9.64 per share. On October 14, 2002 an additional 26,736 shares became
exercisable at an exercise price of $6.12. On January 14, 2003, an additional 27,426 shares became exercisable at an
exercise price of $9.03. On April 14, 2003, an additional 14,312 shares became exercisable at an exercise price of
$13.37. The additional shares are exercisable over a 5-year period. No additional shares will be issuable under the
warrant to Spectra-Physics as the underlying obligation has been paid off in full.
The approximate fair value of the warrants of $2.4 million was determined using the Black-Scholes pricing model
with the following assumptions: contractual life of 5-year period, risk-free interest rate of 4%; volatility of 65%; and
no dividends during the contractual term. The value of the warrants was being amortized to interest expense over the
term of the subordinated note and the unamortized balances was written off to interest expense on June 2003 upon
repayment of the note.
On December 21, 2001 and January 15, 2002, in connection with the first and second closing of the private
placement of the Company’s Common Stock, Trimble granted five-year warrants to purchase an additional 919,008
shares of Common Stock, subject to certain adjustments, at an exercise price of $12.97 per share.
Common Stock Reserved for Future Issuances
As of January 2, 2004, Trimble had reserved 11,371,652 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 14 – Benefit Plans:
401(k) Plan
Under Trimble's 401(k) Plan, US employee participants (including employees of certain subsidiaries) may direct the
investment of contributions to their accounts among certain mutual funds and the Trimble Navigation Limited
Common Stock Fund. The Trimble Fund sold net 61,238 shares of Common Stock for an aggregate of $0.9 million
in fiscal 2003. Trimble, at its discretion, matches individual employee 401(k) Plan contributions at a rate of fifty
cents of every dollar that the employee contributes to the 401(k) Plan up to 5% of the employee’s annual salary to an
annual maximum of $2,500. Trimble's matching contributions to the 401(k) Plan were $1.8 million in fiscal 2003,
$1.8 million in fiscal 2002, and $1.7 million in fiscal 2001.
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 2003, 2002 and 2001 were $2.5 million, $1.1 million, and
$0.9 million, respectively.
70
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 $2.0 million for fiscal 2003, $1.4 million for fiscal 2002, and $1.4 million for fiscal 2001.
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 2003, 2002, and 2001 were not material.
The changes in the benefit obligations and plan assets of the significant non-US defined benefit pension plans for
fiscal 2003 and 2002 were as follows:
Fiscal Years Ended
(in thousands)
January 2, 2004
January 3, 2003 (1)
Change in benefit obligation:
Benefit obligation at beginning of year
Interest cost
Benefits paid
Foreign exchange impact
Actuarial (gains) losses
Benefit obligation at end of year
Change in plan assets:
Fair value of plan assets at beginning of year
Actual return on plan assets
Employer contribution
Plan participants' contributions
Benefits paid
Foreign exchange impact
Fair value of plan assets at end of year
Benefit obligation in excess of plan assets
Unrecognized prior service cost
Unrecognized net actuarial gain
Accrued pension costs (included in accrued liabilities)
(1) Prior year’s disclosure has been restated to correct for a clerical error.
$ 4,972
328
(256)
1,102
58
6,204
787
29
150
-
(256)
162
872
5,332
-
35
$ 5,297
$ 4,105
317
(212)
814
(52)
4,972
731
122
121
-
(212)
24
786
4,186
-
25
$ 4,161
Actuarial assumptions used to determine the net periodic pension costs for the year ended January 2, 2004 were as
follows:
Discount rate
Rate of compensation increase
Note 15 - Earnings Per Share:
Swedish Subsidiary
5.5%
2.5%
German Subsidiaries
6.0%
1.5%
The following data show the amounts used in computing earnings (loss) per share and the effect on the weighted-
average number of shares of potentially dilutive Common Stock.
71
Fiscal Years Ended
(in thousands, except per share data)
Numerator:
Income available to common shareholders:
Used in basic and diluted earnings (loss) per share
January 2,
2004
January 3,
2003
December 28,
2001
from continuing operations
$ 38,485 $ 10,324 $ (23,492)
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
-
613
$ 38,485 $ 10,324 $ (22,879)
-
47,505
42,860
37,091
2,058
449
705
13
-
-
50,012
43,578
37,091
$ 0.81 $ 0.24 $ (0.63)
0.01
$ 0.81 $ 0.24 $ (0.62)
-
-
$ 0.77 $ 0.24 $ (0.63)
0.01
$ 0.77 $ 0.24 $ (0.62)
-
-
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
1,407,000 common equivalent shares related to outstanding options and warrants would have been included in the
calculation of diluted loss per share.
Note 16 - Comprehensive Income (Loss):
The components of comprehensive income (loss), net of related tax as follows:
Fiscal Years Ended
(in thousands)
Net income (loss)
Foreign currency translation adjustments
Net gain (loss) on hedging transactions
Net unrealized gain (loss) on investments
Comprehensive income (loss)
January 2,
2004
January 3,
2003
December 28,
2001
$38,485
31,198
(7)
74
$ 69,750
$10,324
17,697
210
(17)
$ 28,214
$(22,879)
(9,766)
(203)
16
$ (32,832)
72
The components of accumulated other comprehensive (loss), net of related tax as follows:
Fiscal Years Ended
(in thousands)
Cumulative foreign currency translation adjustments
Net gain on hedging transactions
Net unrealized gain (loss) on investments
Accumulated other comprehensive income (loss)
Note 17 - Related-Party Transactions:
Related-Party Lease
January 2,
2004
January 3,
2003
$ 30,166
-
73
$ 30,239
$ (1,032)
7
(1)
$ (1,026)
Trimble currently leases office space in Ohio from an association of three individuals, one of whom is an employee
of one of the US 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 $0.35 million for fiscal 2003, fiscal 2002, and fiscal 2001.
Related –Party Notes Receivable
Trimble has notes receivable from officers and employees of approximately $0.8 million as of January 2, 2004 and
$1.2 million as of January 3, 2003. The notes bear interest from 4.49% to 6.62% and have an average remaining life
of 1.47 years as of January 2, 2004.
See Note 3 to the Notes to the Consolidated Financial Statements for additional information regarding Trimble’s
related party transactions with joint venture partners.
Note 18 - Statement of Cash Flow Data:
Fiscal Years Ended
(in thousands)
Supplemental disclosure of cash flow information:
Interest paid
Income taxes paid
Significant non-cash investing activities:
January 2,
2004
January 3,
2003
December 28,
2001
$ 10,208 $ 12,215 $
$ 688 $ 2,635 $
17,363
825
Issuance of shares related to invest in joint venture
Issuance of shares related to LeveLite earn-out
payments
$
$
5,922 $
- $
1,349 $
336 $
-
-
Note 19 - Litigation:
From time to time, the Company is involved in litigation arising out of the ordinary course of its business. There are
no known claims or pending litigation expected to have a material effect on the Company’s overall financial
position, results of operations, or liquidity.
73
Note 20 - Selected Quarterly Financial Data (unaudited):
First
Quarter
Second
Quarter
Third
Quarter
Fourth
Quarter
(in thousands, except per share data)
Fiscal 2003
Revenue
Gross margin
Net income
Basic net income per share
Diluted net income per share
Fiscal 2002
Revenue
Gross margin
Net income (loss)
$
$
127,325 $
61,755
5,353
138,132 $
71,095
8,105
139,569 $
69,112
9,936
0.12
0.12
0.17
0.16
0.20
0.19
104,029 $
54,333
(715)
123,256 $
60,951
4,326
114,748 $
57,581
2,708
Basic net income (loss) per share
Diluted net income (loss) per share
(0.02)
(0.02)
0.10
0.10
0.06
0.06
135,877
66,068
15,091
0.30
0.28
124,569
61,567
4,005
0.09
0.09
Significant quarterly items for fiscal 2003 include the following: (i) in the first quarter of 2003 a $0.4 million charge
or $0.01 per diluted share relating to workforce reduction; (ii) in the second quarter of 2003 a $0.7 million charge, or
$0.01 per diluted share relating to work force reduction and $3.6 million of interest expenses, or $0.07 per diluted
share relating to the Company's debt refinancing; (iii) in the third quarter of 2003 a $0.6 million charge, or $0.01 per
diluted share relating to work force reduction; (iv) in the fourth quarter of 2003 a $0.3 million charge, or less than
$0.01 per diluted share relating to work force reduction.
Significant quarterly items for fiscal 2002 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
less than $0.01 per diluted share relating to work force reduction; (iii) in the third quarter of 2002 a $0.2 million
charge, or less than $0.01 per diluted share relating to work force reduction and a $0.2 million gain, or less than
$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 $0.01 per diluted share relating to work force reduction and a $1.5 million charge, or $0.03 per diluted share
relating to the write-down of an investment.
Note 21 - Subsequent Events:
3-for-2 Stock Split
Trimble’s Board of Directors approved a 3-for-2 split of all outstanding shares of the Company's Common Stock,
payable March 4, 2004 to stockholders of record on February 17, 2004. Cash will be paid in lieu of fractional shares.
All share and per share information have been adjusted to reflect the stock split on a retroactive basis for all periods
presented.
74
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 2,
2004 and January 3, 2003, and the related Consolidated Statements of Operations, Shareholders' Equity, and Cash
Flows for each of the three years in the period ended January 2, 2004. Our audits also included the financial
statement schedule listed in the index at Item 15(a)(2). These financial statements and schedule are the responsibility
of the Company's management. Our responsibility is to express an opinion on these financial statements and
schedule, based on our audits.
We conducted our audits in accordance with 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 2, 2004 and January 3, 2003, and the
consolidated results of its operations and its cash flows for each of the three years in the period ended January 2,
2004, 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.
As discussed in Note 1 to the consolidated financial statements, effective December 29, 2001, the company adopted
Statement of Financial Accounting Standards No. 142, "Goodwill and Other Intangible Assets."
/s/ Ernst & Young LLP
January 23, 2004*
Palo Alto, California
*Date of report as amended in the Company’s Form 10-K/A, as filed with the Securities Exchange Commission.
75
Item 9 Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
None
Item 9a. Controls and Procedures
(a) Controls and Procedures.
The Company's management, with the participation of the Company's Chief Executive Officer and Chief Financial
Officer, has evaluated the effectiveness of the Company's disclosure controls and procedures (as such term is
defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the "Exchange
Act") as of the end of the period covered by this report. Based on such evaluation, the Company's Chief Executive
Officer and Chief Financial Officer have concluded that, as of the end of such period, the Company's disclosure
controls and procedures are effective in recording, processing, summarizing and reporting, on a timely basis,
information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act.
(b) Internal Control Over Financial Reporting.
There have not been any changes in the Company's internal control over financial reporting (as such term is defined
in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the fiscal year to which this report relates that
have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial
reporting.
PART III
Item 10
Directors and Executive Officers of the Registrant
The information required by this item, insofar as it relates to Trimble's directors, will be contained under the captions
"Election of Directors" and "Section 16(a) Beneficial Ownership Reporting Compliance" in the Proxy Statement and is
incorporated herein by reference. The information required by this item relating to executive officers is set forth above in
Item 1 Business Overview under the caption “Executive Officers.”
Code of Ethics
The Company’s Business Ethics and Conduct Policy that applies, among others, to the Company’s Chief Executive
Officer, Chief Financial Officer, Corporate Controller, and other finance organization employees. The Business Ethics
and Conduct Policy is available on the Company’s website at www.trimble.com under the heading “Corporate
Governance and Policies” on the Investor Information page of our website. A copy will be provided, without charge, to
any shareholder who requests one by written request addressed to General Counsel, Trimble Navigation Limited, 749 N.
Mary Avenue, Sunnyvale, CA 94085.
If any substantive amendments to the Business Ethics and Conduct Policy are made or any waivers are granted,
including any implicit waiver, from a provision of the Business Ethics and Conduct Policy, to its Chief Executive
Officer, Chief Financial Officer or Corporate Controller, the Company will disclose the nature of such amendment or
waiver on the Company’s website at www.trimble.com or in a report on Form 8-K.
Item 11
Executive Compensation
The information required by this item will be contained in the Proxy Statement under the caption "Executive
Compensation" and is incorporated herein by reference.
76
Item 12
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters
The information required by this item will be contained in the Proxy Statement under the caption "Security Ownership of
Certain Beneficial Owners and Management Related Stockholder Matters" and is incorporated herein by reference.
Item 13
Certain Relationships and Related Transactions
The information required by this item will be contained in the Proxy Statement under the caption "Certain Relationships
and Related Transactions" and is incorporated herein by reference.
Item 14
Principal Accountant Fees and Services
The information required by this item will be contained in the Proxy Statement under the caption "Principal Accountant
Fees and Services" and is incorporated herein by reference.
Item 15. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
(a) 1. Financial Statements
PART IV
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 2, 2004 and January 3, 2003........................................................... 45
Consolidated Statements of Operations for each of the three fiscal years
in the period ended January 2, 2004................................................................................................................. 46
Consolidated Statement of Shareholders' Equity for each of the three fiscal years
in the period ended January 2, 2004................................................................................................................. 47
Consolidated Statements of Cash Flows for each of the three fiscal years
in the period ended January 2, 2004................................................................................................................. 48
Notes to Consolidated Financial Statements ................................................................................................... 49
Report of Ernst & Young LLP, Independent Auditors.................................................................................... 75
2. Financial Statement Schedules
The following financial statement schedule is filed as part of this report:
Page in this
Annual Report
on Form 10-K
Schedule II - Valuation and Qualifying Accounts........................................................................................ S-1
77
All other schedules have been omitted as they are either not required or not applicable, or the required information is
included in the consolidated financial statements or the notes thereto.
3. Exhibits
Exhibit
Number
3.1
3.2
3.3
3.4
3.5
3.8
4.1
4.2
4.3
4.4
4.5
Restated Articles of Incorporation of the Company filed June 25, 1986. (5)
Certificate of Amendment of Articles of Incorporation of the Company filed October 6, 1988. (5)
Certificate of Amendment of Articles of Incorporation of the Company filed July 18, 1990. (5)
Certificate of Determination of the Company filed February 19, 1999. (5)
Certificate of Amendment of Articles of Incorporation of the Company filed May 29, 2003. (15)
Amended and Restated Bylaws of the Company. (16)
Specimen copy of certificate for shares of Common Stock of the Company. (1)
Preferred Shares Rights Agreement dated as of February 18, 1999. (4)
First Amended and Restated Stock and Warrant Purchase Agreement between and among the Company
and the investors thereto dated January 14, 2002. (9)
Form of Warrant to Purchase Shares of Common Stock dated January 14, 2002. (10)
Form of Warrant dated April 12, 2002. (11)
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. (3)
10.46+ 1992 Management Discount Stock Option and form of Non-statutory Stock Option Agreement. (2)
10.59+ 1993 Stock Option Plan, as amended May 11, 2000. (7)
10.60 + 1988 Employee Stock Purchase Plan, as amended May 11, 2000. (7)
10.65+ Standby Consulting Agreement between the Company and Bradford W. Parkinson dated September 1,
1998. (5)
10.66+ Standby Consulting Agreement between the Company and Robert S. Cooper dated September 1, 1998. (5)
10.67+ Employment Agreement between the Company and Steven W. Berglund dated March 17, 1999. (5)
10.68+ Nonqualified deferred Compensation Plan of the Company effective February 10, 1994. (5)
10.70***Supply Agreement dated August 10, 1999 by and among Trimble Navigation Limited and Solectron
Corporation and Solectron Federal Systems, Inc. (6)
10.77+ Australian Addendum to the Trimble Navigation 1988 Employee Stock Purchase Plan. (8)
78
10.81+ 2002 Stock Plan, including form of Option. (12)
10.82
Credit Agreement dated June 25, 2003. (14)
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.
(13)
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.
31.1
Certification of CEO pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. (16)
31.2
Certification of CFO pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. (16)
32.1
Certification of CEO pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. (16)
32.2
Certification of CFO pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. (16)
***
+
(1)
(2)
(3)
(4)
(5)
(6)
(7)
(8)
Confidential treatment has been granted for certain portions of this exhibit pursuant to an order dated
effective October 5, 1999.
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 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.
(9)
Incorporated by reference to exhibit number 4.1 to the registrant's Current Report on Form 8-K filed on
January 16, 2002.
79
(10)
(11)
(12)
(13)
(14)
(15)
Incorporated by reference to exhibit number 4.2 to the registrant's Current Report on Form 8-K filed on
January 16, 2002.
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 10.82 to the registrant’s Quarterly Report on Form 10-Q for
the quarter ended June 28, 2002.
Incorporated by reference to exhibit number 10.83 to the registrant’s Annual Report on Form 10-K for the
year ended January 3, 2003.
Incorporated by reference to exhibit number 10.2 to the registrant’s Quarterly Report on Form 10-Q for the
quarter ended July 4, 2003.
Incorporated by reference to exhibit number 3.5 to the registrant’s Quarterly Report on Form 10-Q for the
quarter ended July 4, 2003.
(16)
Filed herewith.
(b) Reports on Form 8-K.
On October 28, 2003, the Company filed a report on Form 8-K reporting the Company’s quarterly earnings for the
third fiscal quarter of 2003.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly
caused this Report on Form 10-K to be signed on its behalf by the undersigned, thereunto duly authorized.
TRIMBLE NAVIGATION LIMITED
By: /s/ Steven W. Berglund
Steven W. Berglund,
President and Chief Executive Officer
March 10, 2004
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:
80
Signature Capacity in which Signed Date
/s/ Steven W. Berglund
Steven W. Berglund
President, Chief Executive
Officer, Director
March 15, 2004
/s/ Mary Ellen Genovese
Mary Ellen Genovese
Chief Financial Officer and Assistant
Secretary (Principal Financial Officer)
March 15, 2004
/s/ Anup V. Singh
Anup V. Singh
Corporate Controller
(Principal Accounting Officer)
March 15, 2004
March 9, 2004
March 15, 2004
March 9, 2004
March 9, 2004
March 9, 2004
March 9, 2004
/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
Ulf J. Johansson
Director
/s/ Bradford W. Parkinson Director
Bradford W. Parkinson
/s/ Nickolas W. Vande Steeg Director
Nickolas W. Vande Steeg
81
EXHIBIT 31.1
CERTIFICATION OF CHIEF EXECUTIVE OFFICER
I, Steven W. Berglund, certify that:
1.
2.
3.
4.
5.
6.
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 10, 2004
/s/ Steven W. Berglund
Steven W. Berglund
Chief Executive Officer
82
EXHIBIT 31.2
CERTIFICATION OF CHIEF FINANCIAL OFFICER
I, Mary Ellen Genovese, certify that:
1.
2.
3.
4.
5.
6.
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 15, 2004
/s/ Mary Ellen Genovese
Mary Ellen Genovese
Chief Financial Officer
83
EXHIBIT 32.1
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 2, 2004 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 10, 2004
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.
EXHIBIT 32.2
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 2, 2004 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 her 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 15, 2004
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.
84
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 2,
2004
January 3,
2003
December 28,
2001
$ 9,900
752
(32)
(667)
$ 9,953
$ 25,150
1,292
5,762
(6,319)
$ 25,885
$ 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
(1) Includes $168,000 acquired at July 7, 2003 as part of the acquisition of Applanix and $584,000 acquired at
December 9, 2003 as part of the acquisition of MENSI.
(2) Includes $494,000 acquired at July 7, 2003 as part of the acquisition of Applanix and $797,000 acquired at
December 9, 2003 as part of the acquisition of MENSI.
85
EXHIBIT 21.1
TRIMBLE NAVIGATION LIMITED
LIST OF SUBSIDIARIES AS OF 3/5/04
Name of Subsidiary
Jurisdiction of Incorporation
Trimble Navigation Australia Pty Limited
Spectra Precision Pty Ltd.
Trimble Austria Handels mbH
Trimble Belgium BVBA
Trimble Brasil Limitada
Jamestown Manufacturing Corporation
Trimble Export Limited
Trimble Navigation International Limited
Trimble Specialty Products, Inc.
TR Navigation Corporation
Applanix Corporation
Trimble Canada Ltd.
Trimble Exchangeco Ltd.
Trimble Holdings Co.
Trimble Electronic Products (Shanghai) Co. Ltd.
Trimble Navigation Technology (Shanghai) Co. Ltd.
MENSI, Inc.
SPHM Inc.
Trimble Middle East WLL
MENSI, S.A.
Trimble France S.A.S.
Trimble GmbH
Trimble Holdings GmbH
Trimble Kaiserslautern GmbH
86
Australia
Australia
Austria
Belgium
Brazil
California
California
California
California
California
Canada
Canada
Canada
Canada
China
China
Delaware
Delaware
Egypt
France
France
Germany
Germany
Germany
Trimble terraSat GmbH
Trimble Jena GmbH
Trimble Italia SRL
Trimble Navigation Italia s.r.l
MENSI, KK
Trimble Japan K.K.
Spectra Precision de Mexico, SA de CV
Trimble Mexico S de RL
Trimble Europe B.V.
Datacom Software Research Limited
Trimble Navigation New Zealand 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
Applanix LLC
TNL Flight Services, Inc
Trimble Navigation Europe Limited
Trimble U.K. Ltd.
Trimble Mobile Solutions, Inc.
Germany
Germany
Italy
Italy
Japan
Japan
Mexico
Mexico
Netherlands
New Zealand
New Zealand
Oregon
Singapore
Spain
Spain
Sweden
Sweden
Texas
Texas
United Kingdom
United Kingdom
Virginia
87
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, 333-97979, and Form S-3 Nos. 333-76986,
333-86656, 333-103676, 333-106893, pertaining to the 1983 Stock Option Plan, the Trimble Navigation Savings
and Retirement Plan, the 1990 Director Stock Option Plan, the "Position 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, the 2002 Stock Option Plan, the 1988 Employee Stock Purchase Plan, and various sales of
Trimble Navigation Limited common stock, and the related Prospectuses, of our report dated January 23, 2004 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 2, 2004.
/s/ Ernst & Young LLP
March 11, 2004
Palo Alto, California
88
THIS IS TRIMBLE
Trimble is a world leader in providing advanced, position-centric solutions to commercial, governmental
and professional customers. Our solutions enable our users to work with greater productivity, convenience
and safety and, in many cases, do things they couldn’t do before.
Market & Segments
% % %
Representative Products
*
Engineering & Construction
Engineering & Construction
Engineering & Construction
68%
Surveying
Construction
Infrastructure
3D Scanning
GPS, optical, robotic and mechanical total stations
Digital levels and theodolites
Data collectors and field computers
Field and office application software
Data communication solutions
Machine guidance systems
Laser and optical positioning and alignment tools
Field and office application software
Data communication solutions
Typical Customers
Surveyors
Civil engineers
Construction contractors
Transportation agencies
Utility companies
Earth-moving contractors
General construction contractors
Utility contractors
Wall and ceiling contractors
Transportation agencies
GPS reference networks and software
Government and scientific agencies
Laser scanners
Field and office application software
Civil and plant engineers
Surveyors
Field Solutions
15%
Mapping & GIS
Handheld GPS field data collectors
Field and office application software
Utility companies
Natural resource agencies
Government agencies
Agriculture Vehicle Guidance
Manual and automated steering systems for farm vehicles
Farmers
Agriculture Water Management
Grade control systems for irrigation and drainage
Farmers
Agricultural contractors
ologie
ologies
Component Technologies
12%
OEM (Silicon Integration)
OEM (Modules)
Timing
Mobile Solutions
Mobile Solutions
Fleet Management
2%
GPS chipsets
Embedded silicon and companion firmware
Modules supplying position, velocity and time solutions
or raw GPS measurement data
Automobile tier-one suppliers
Portable appliance manufacturers
Automobile tier-one suppliers
Asset management integrators
Security device suppliers
CDMA base station clocks
Time and frequency boards and instruments
Wireless infrastructure providers
Wireless location solution providers
Mobile devices combining wireless communication and GPS
Internet-delivered fleet management application services
Trucking, ready-mix cement, refuse,
and other local fleet operators
Construction contractors
Municipal fleet operators
Security
Mobile devices combining wireless communication and GPS
Commercial vehicle and equipment owners
Mobile Workforce Management
Internet-delivered wireless workforce application services
Sales, service, and delivery businesses
Portfolio Business
3%
Military
Applanix
* Percent of total revenue
GPS receivers for military operations
Military time and frequency boards
Integrated inertial/GPS positioning and orientation
surveying and mapping
systems for surveying and mapping
surveying and mapping
U.S. Department of Defense
Allied defense ministries
Defense contractors
Land, marine, and aerial surveying and
mapping contractors
Military
Executive Officers
Board of Directors
Shareholder Information
Robert S. Cooper, Ph.D., Chairman
President
Aerospace Electronics Division
Titan Corporation
Steven W. Berglund
President & CEO
Trimble Navigation Limited
John B. Goodrich, Secretary
Business Consultant
William Hart
Venture Capital Investor and
Business Consultant
Ulf J. Johansson, Ph.D.
Chairman
Europolitan Vodafone AB
Bradford W. Parkinson, Ph.D.
Professor (Emeritus)
Department of Aeronautics and
Astronautics
Stanford University
Nickolas W. Vande Steeg
Executive Vice President & COO
Parker Hannifin Corporation
Corporate Headquarters:
Trimble Navigation Limited
749 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) 329-8660 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 also available on the
Investor Relations portion of the
Company’s website at:
http://www.trimble.com/ir_reports.html
Trimble Investor Information
Traded: The NASDAQ Stock Exchange
Symbol: TRMB
Trimble’s website:
http://www.trimble.com
Steven W. Berglund
President and Chief Executive Officer
Mary Ellen P. Genovese
Chief Financial Officer
Bryn Fosburgh
Vice President
General Manager, Geomatics & Engineering
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
Mark A. Harrington
Vice President
Strategy & Business Development
Irwin L. Kwatek
Vice President & General Counsel
Bruce E. Peetz
Vice President
Advanced Technology & Systems
John E. Huey
Treasurer
Anup V. Singh
Corporate Controller
© 2004, Trimble Navigation Limited. All rights reserved. Trimble, the Globe & Triangle logo, AgGPS and EZ-Guide are trademarks of Trimble Navigation Limited registered
in the United States Patent and Trademark Office. DriveSafe, Force-5, and TrimTrac are trademarks of Trimble Navigation Limited. All other trademarks are the property of
their respective owners. TID 13400 (3/04)
TRIMBLE LOCATIONS WORLDWIDE
Corporate Headquarters
Trimble Navigation Limited
749 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-07740 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
Applanix
85 Leek Crescent
Richmond Hill, Ontario
Canada L4B 3B3
MENSI
30, rue de la Fontaine du Vaisseau
94120 Fontenay-sous-Bois
France
International Sales Centers
Europe
Trimble France
Parc Hightec VI
9 Avenue du Canada, Les Ulis
91966 Courtaboeuf, Cedex
France
Trimble Germany
Am Prime Parc 11
D-65479 Raunheim
Germany
Trimble Italy
Largo Temistocle Solera, 7
00199 Rome
Italy
Centro Torri Bianche
Palazzo Larice, 3
20059 Vimercate (MI)
Italy
Trimble Russia
23, 1st Tverskaya-Yamskaya St.
Moscow, 125047
Russia
Trimble Spain
Via de las Dos Castillas No. 33
Atica. Edificio 6. Planta 3
Despacho B-2
28224 Pozuelo de Alarcon
Madrid
Spain
Trimble Nordic
Box 64, Rinkebyvägen 17
182 11, Danderyd
Sweden
Trimble UK
Trimble House
Meridian Office Park
Osborn Way, Hook
Hampshire RG27 9HX
U.K.
Annual Report 2003
Technology Solutions for the Right Place and Time
Technology Solutions for the Right Place and Time
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Middle East
Trimble Dubai
LOB 14 Office 322
PO Box 17760
Jebel Ali Free Zone
Dubai
UAE
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
Haixin Plaza
Shanghai 200001
China
Trimble Korea
8F, Geumwon Bldg., 943-12 Daechi3-dong
Kangnam-gu, Seoul 135-845
Korea
Trimble Singapore
80 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
Joint Ventures
Caterpillar Trimble Control Technologies
LLC
5475 Kellenburger Road
Dayton, Ohio 45424
Nikon-Trimble Co., Ltd.
Technoport Mitsuiseimei Building
16-2, Minamikamata 2-chome, Ota-ku
Tokyo 144-0035, Japan