Trimble
Annual Report 2010

Plain-text annual report

2010 Trimble Navigation Annual Report MARKETS SERVED PRODUCT EXAMPLES REPRESENTATIVE CUSTOMERS Engineering and Construction 55% of revenue Survey Integrated surveying solutions combine technologies such as GNSS, optical, 3D laser scanner & 3D spatial imaging with field-rugged, mobile computing, advanced mobile and office software, and real-time communications, providing surveyors with productivity enhancing solutions. The Trimble branded solutions are complemented by the Spectra PrecisionTM and Nikon branded solutions which target a different market segment. Construction Connected SiteTM solutions utilize GNSS, optical, laser and advanced information technologies to provide automated construction machine control, site positioning, measurement and alignment systems, Building Information Modeling (BIM) and life cycle project management solutions. These solutions enhance construction operations, provide project management and asset management, reducing waste and improving efficiency. Infrastructure GNSS reference networks, software and service. GeoSpatial Integrated LiDAR, photogrammetry and GNSS/INS systems, coupled with advanced processing and analysis tools, for road asset management, pavement inspection, mobile and airborne surveying. Field Solutions 25% of revenue Agriculture Connected farm solutions provide manual and automated steering systems for farm vehicles and implements to improve efficiency and reduce environmental impact; flow and overlap control for efficient chemical, fertilizer and seed application; grade control systems for irrigation and drainage; all coupled with farm reporting and planning software. Mapping and GIS Handheld GNSS data collectors with integrated field and office application software provide accurate solutions for Geographic Information System and digital mapping users. Utilities Utility outage management, incident management, asset management, work management and field inspection solutions enable utility operators to reduce outage times, improve safety and meet compliance requirements. Mobile Solutions 12% of revenue Fleet and Mobile Worker Management Integrated mobile resource management solutions for fleet operators provide scheduling and dispatch, as well as vehicle diagnostic and field service solutions that enhance driver safety, reduce fuel consumption costs and environmental impact, while improving customer service. Surveyors & civil engineers in the public and private sectors Cities and governmental agencies Cadastral agencies and companies Utilities Industrial plant engineers Oil and gas engineers Power generation facilities Mapping contractors Architects Specialized applications such as railway tunneling, monitoring and mining Earthmoving contractors General construction contractors Concrete contractors Mechanical, electrical, and plumbing contractors Wall and ceiling contractors Transportation agencies Civil engineering and design firms Construction rental companies Civil engineers Public and private sector GNSS network operators Utilities Natural resource agencies National & local government agencies Survey and civil engineering companies Transportation agencies Aerial mapping companies Government agencies Farmers Agricultural contractors Agrichemical companies Government agencies Environmental/natural resource agencies Utilities Transportation companies Water, electric and gas utilities Construction supply contractors Transportation and distribution companies Private fleets Communications companies Direct store delivery Field service Energy Utilities Government agencies Forestry Connected forest solutions integrate fleet management with forestry management software and measurement tools to optimize logging operations and improve efficiency. Forestry management companies Land management companies Public Safety Advanced public safety solutions provide systems for electronic citations and field-based reporting to improve accuracy and efficiency, along with solutions for accident scene measurement and investigation. Police and sheriffs’ departments National park, campus and business security agencies Embedded GNSS Products GNSS and communications component solutions for original equipment manufacturers, including GNSS chipsets, boards, embedded silicon and firmware. Electronics OEMs Portable appliance manufacturers Systems integrators Advanced Devices 8% of revenue Timing 3G and 4G base station GNSS clocks for telecommunications network synchronization; time and frequency boards and instruments for high-precision, GPS-based timing and synchronization. Wireless infrastructure providers Wireless location solution providers Applanix Very high precision integrated inertial/GNSS positioning and orientation systems used for positioning in land, marine and airborne data collection applications. Trimble indoor mobile mapping solution provides accurate and seamless 3D modeling of the interior of buildings and underground structures. Land, marine and airborne surveying and mapping contractors and systems integrators Building owners and facility managers Defense Military specification GPS receivers for aircraft; military time and frequency boards. Trimble Outdoors™ Service Web-based mapping and outdoor enthusiast social networking software used on a wide variety of GPS-enabled mobile phones. U.S. Department of Defense Allied defense ministries Defense contractors Outdoor enthusiasts TO OUR SHAREHOLDERS: Letter to Shareholders 2010 In Review 2010 represented a transition from a badly damaged marketplace in 2009 to an environment with oppor- tunities. Although some of our markets remained constrained throughout the year we were able to demonstrate meaningful improvement in 2010 with revenue up 15 percent, non-GAAP operating income up 27 percent, and non-GAAP EPS up 55 percent. Entering 2011, we find conditions that are undoubt- edly better than they have been for almost three years but that cannot yet be described as universally robust. This improvement has allowed us to turn our relative focus from cost control and margin maintenance back to growth. Our experience across the reported segments varied: • Engineering and Construction segment results demonstrated the most significant recovery with rev- enue growth of 24 percent and non-GAAP operating earnings growth of 84 percent. The most significant improvement was demonstrated in our heavy and highway business. Although most other businesses in the segment also demonstrated some level of recovery, a return to our historical growth trajectory awaits some recovery in commercial and residential construction in the U.S. and Europe. • Field Solutions segment results also demonstrated recovery with particularly strong results in the second half of the year. Revenue growth was 9 percent and non-GAAP operating earnings grew by 12 percent. Agriculture benefited from an improving farm econ- omy and GIS also reflected the improving economy, partially offset by the effects of lower government spending. • Mobile Solutions segment results remained unim- pressive. Revenue was effectively flat and operating earnings reflected a significant decline. The key issues in this segment were the loss of a large key account early in the year, the continued effects of the economy and, in some cases, our own execution. • Advanced Devices segment results reflected small revenue and operating earnings increases. Slower economic conditions and price pressure constrained the performance of the segment. Looking Forward We currently expect 2011 revenue growth to accelerate closer to 20 percent as a result of organic growth and acquisitions. We expect the growth in non-GAAP oper- ating income will be consistent with operating leverage of approximately 25 percent. This scenario assumes economic conditions remain relatively unchanged. Any economic shocks would moderate growth while any revival in commercial and residential construction, or an acceleration in U.S. or European economies, could provide us with meaningful upside. From 1999 through 2008 we demonstrated a com- pound annual revenue growth rate of almost 20 percent. The economic meltdown that intensified in late 2008 negatively impacted this trajectory. Regaining our long-term growth momentum will require us to demonstrate a combination of traditional growth enablers as well as new capabilities. Let me describe some of these requirements. Adjacencies One factor that enables Trimble’s growth strategy is the aggressive application of the concept of adjacency. Adjacencies can be either vertical or horizontal. A vertical adjacency is the expansion of solutions provided to our existing customers, leveraging our brand, our channel, and our domain knowledge. A horizontal adjacency occurs when we bring our existing product platforms into new market segments. Our current efforts in forestry, railroads, and utilities represent horizontal extensions. End-to-End Solutions We differentiate ourselves by emphasizing solutions that meet the total continuum of customer require- ments. The solution extends beyond the physical product and includes support, applications software, service, documentation, and training. One continuing example of this commitment is the Trimble Dimensions user conference, which provides a comprehensive ed- ucational forum for our users. The 2010 conference was held in Las Vegas with over 2,900 participants. Internationalization Our market opportunities are global and Trimble’s success is intimately tied to our increasingly global footprint. This is reflected in our physical and orga- nizational infrastructure with more than 100 facilities in 26 countries and dealer representation in virtually every country. We also emphasize a strong element of localization in our product solutions, particularly in the emerging economies. In many of those cases, we must be humble enough to reinvent ourselves when our world solution is not appropriate for the local market. Channels A number of fundamental long-term trends favor Trimble. These include infrastructure development in emerging economies, higher fertilizer costs, increasing environmental regulation, higher fuel prices, escalating labor costs, and higher expectations for supply chain performance. Our challenge will be to develop effective go-to-market strategies that can successfully capture the resulting opportunities. Central to the strategy is a strong and viable channel which will remain heavily reliant on third-party dealers. However, pioneering and penetrating our markets will require us to be conceptually flexible. In most cases we do not sell a product in competition with other products but we sell an alternative way of performing work. An innovative new channel currently being rolled out is the SITECH® Technology Dealership, a worldwide, commonly branded distribution network developed in collaboration with Caterpillar. Acquisitions and Alliances Although deal activity has never been central to our strategy it has played a supporting role. In 2010 we invested $147 million in acquisitions. In addition, we finalized a number of joint ventures during the year including the Rusnavgeoset joint venture with Russian Space Systems, and Intelligent Construction Tools, a joint venture with Hilti. These acquisitions and joint ventures allow us to establish or expand market beachheads and to fill in technology or product gaps. Virtually all of the more than fifty acquisitions we have made since 2000 have flourished under Trimble ownership as they provided access to increased dis- tribution, sources of new technology, and adequate capital resources. Innovation Research and Development spending in 2010 was 11 percent of revenue, which is consistent with our busi- ness model. Our challenge is to be alert to continually evolving capabilities that can be useful in our user applications. New wireless standards, faster proces- sors, new materials technologies, high-speed networks, and larger memory storage have all contributed to the creation of products and solutions. We are continuously evaluating new technologies that enable us either to create new classes of products and solutions or to significantly extend the capabilities of current product categories. For example, we have recently added RFID solutions to our range of capabilities. Commitment to Financial Returns The current Trimble portfolio is capable of generating a non-GAAP operating margin of greater than 20 percent—a level we achieved prior to the late 2008 economic crisis. This margin performance, combined with our rela- tively low level of capital intensity, has historically enabled us to generate superior long-term returns. Our performance in 2009 and 2010 reflects the robustness of our financial model in adverse circumstances and the adaptability of the Trimble organization. Organization The foundation for creating value is the Trimble organization. The quality, capabilities, and behavior of our organization enable us to undertake challenges that our competitors may not be equipped to take on. Our primary organizational challenge is to effectively map our significant technological capabilities onto a wide range of market opportunities without losing our inherent entrepreneurial edge. Our core organizational concept remains centered on focused divisions with an emphasis on responsiveness, accountability and transparency. This has resulted in a relatively large number of businesses, with each as- signed a clear market task and the resources necessary to achieve it. These relatively autonomous units have been the engines that have created much of our market and financial success over the last ten years. We continue to augment this core structure to better leverage the expanding Trimble technology capabilities, to address the requirements of international markets, to pursue larger-scale industry opportunities, and to more effectively participate in alliances with other companies. We have been through a demanding three-year period which posed significant challenges and uncertainties. The Trimble organization has responded to the challenges and elevated itself. My thanks to everyone who contributed. In particular, I want to acknowledge the approximately 200 Trimble employees in Christchurch, New Zealand. Christchurch suffered two major earthquakes within a six-month period in late 2010 and early 2011, both of which have been followed by innumerable aftershocks. In spite of the disruption and uncertainty, these Trimble employees have persevered in good Kiwi style. Steve Berglund President and CEO FINANCIAL HIGHLIGHTS Revenue in $ millions EBITDA in $ millions Cash Flow from Operations in $ millions 1400 _ 1200 _ 1000 _ 800 600 400 200 0 _ _ _ _ _ 300 250 200 150 100 50 0 _ _ _ _ _ _ _ 240 200 160 120 80 40 0 _ _ _ _ _ _ _ 06 07 08 09 10 06 07 08 09 10 06 07 08 09 10 COMPARISON OF 5-YEAR CUMULATIVE TOTAL RETURN* Among Trimble Navigation Limited, the NASDAQ composite index and the S&P information technology sector index $250 $200 $150 $100 $50 $0 12/05 12/06 12/07 12/08 12/09 12/10 Trimble Navigation Limited NASDAQ Composite S&P Information Technology The above graph compares the cumulative 5-year total return provided shareholders on Trimble Navigation Limited’s common stock relative to the cumulative total returns of the NASDAQ Composite index and the S&P Information Technology index. An investment of $100 (with reinvestment of all dividends) is assumed to have been made in our common stock and in each of the indices on 12/31/2005 and its relative performance is tracked through 12/31/2010. The Company has never paid dividends on its common stock and has no present plans to do so. * The Company adopted a 52-53 week fiscal year effective upon the end of fiscal year 1997 and the actual date of the Company’s 2010 fiscal year end was December 31, 2010. Any variations due to any differences between the actual date of a particular fiscal year end and the calendar year end for such year are not expected to be material. ——————­—————— MANAGEMENT INFORMATION EXECUTIVE MANAGEMENT BOARD OF DIRECTORS SHAREHOLDER INFORMATION Ulf J. Johansson, Ph.D Chairman Business Consultant Director, Telefon AB LM Ericsson Nickolas W. Vande Steeg Vice Chairman Trustee, Azusa Pacific University Venture Capital Investor Business Consultant Director, Wabtec Corporation Steven W. Berglund President and Chief Executive Officer John B. Goodrich Secretary Business Consultant William Hart Venture Capital Investor Business Consultant Merit E. Janow Professor International Economic Law and International Affairs, Columbia University Bradford W. Parkinson, Ph.D Executive Consultant Professor (Emeritus), Stanford University Mark S. Peek Co-President, Business Operations and Chief Financial Officer, VMware, Inc. Corporate Headquarters Trimble Navigation Limited 935 Stewart Drive Sunnyvale, California 94085 Phone: (408) 481-8000 www.trimble.com Independent Auditor Ernst & Young LLP San Jose, California Transfer Agent & Registrar American Stock Transfer & Trust Company 59 Maiden Lane Plaza Level New York, New York 10038 (800) 937-5449 Investor Relations Contact (408) 481-7838 investor_relations@trimble.com ADDITIONAL INFORMATION The Company’s annual report on Form 10-K, as filed with the Securities Exchange Commission, accompanies this annual report to shareholders and is also available on the Investor Relations section of the Company’s website at: www. trimble.com Trimble Investor Information Traded: The NASDAQ Stock Exchange Symbol: TRMB ©2011, Trimble Navigation Limited. All rights reserved. Trimble, the Globe and Triangle logo, SITECH and Spectra Precision are registered trademarks of Trimble Navigation Limited or its subsidiaries, registered in the United States and/or in other countries. Connected Site and Trimble Outdoors are trademarks of Trimble Navigation Limited. All other trademarks are the property of their respective owners. Steven W. Berglund President and Chief Executive Officer Rajat Bahri Chief Financial Officer Bryn Fosburgh Vice President Christopher W. Gibson Vice President Mark A. Harrington Vice President James Veneziano Vice President Erik J. Arvesen Vice President, Agriculture Division Ann Ciganer Vice President, Strategic Policy Joseph F. Denniston, Jr. Vice President, Spectra Precision Division John E. Huey Treasurer James A. Kirkland Vice President and General Counsel Jürgen D. Kliem Vice President, Strategy and Business Development Peter O. Large Vice President, Channel Development Bruce E. Peetz Vice President, Advanced Technology and Systems Julie Shepard Vice President, Finance Mary Kay Strangis Vice President, Human Resources Trimble Navigation Limited NASDAQ Composite S&P Information Technology Australia Fortitude Valley, QLD Melbourne, VIC Sydney, NSW Belgium Leper Brazil Campinas Canada Kamloops, British Columbia Vancouver, British Columbia Toronto, Ontario Montréal, Québec Chile Los Condes China Beijing Shanghai France Fontenay-sous-Bois Germany Biberach an der Riß Braunschweig Höhenkirchen-Siegertsbrunn Jena Kaiserslautern Kirchheim u.T.-Jesingen Raunheim Stuttgart Wunstorf India Chennai New Delhi Pune Ireland Cork Italy Vimercate (MI) Japan Tokyo Kenya Nairobi Korea Seoul Mexico Tecate, BC The Netherlands Eersel Sliedrecht New Zealand Christchurch Russia Moscow Singapore South Africa Gauteng Spain Madrid Sweden Danderyd Thailand Bangkok United Arab Emirates Dubai United Kingdom Derby Glossop Hook Ipswich United States Huntsville, AL Tempe, AZ Tucson, AZ Folsom, CA Long Beach, CA Milpitas, CA Redding, CA Sunnyvale, CA Ukiah, CA Englewood, CO Westminster, CO Deerfield Beach, FL Alpharetta, GA Ames, IA Mound City, IL Hamilton, IN Cambridge, MA Waltham, MA Dayton, OH Corvallis, OR Knoxville, TN Plano, TX Chantilly, VA Liberty Lake, WA CORPORATE HEADQUARTERS Trimble Navigation Limited 935 Stewart Drive Sunnyvale, California 94085 (408) 481-8000 www.trimble.com 

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