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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(X) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended December 28, 2001
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OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from _____________ to ___________
Commission File Number: 0-18645
TRIMBLE NAVIGATION LIMITED
(Exact name of Registrant as specified in its charter)
California 94-2802192
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
645 North Mary Avenue, Sunnyvale, CA 94088
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (408) 481-8000
Securities registered pursuant to Section 12(b) of the Act: NONE
Securities registered pursuant to Section 12(g) of the Act:
Common Stock
Preferred Share Purchase Rights
(Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]
The aggregate market value of the registrant's Common Stock held by
non-affiliates of the registrant was approximately $446,702,176 as of March 22,
2002, based on the closing sale price of the common stock on the NASDAQ Stock
Market for that date.
There were 28,181,736 shares of the registrant's Common Stock issued and
outstanding as of March 22, 2002.
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FORWARD-LOOKING STATEMENTS
This report 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. Actual results could differ materially from those
indicated in the forward-looking statements as a result of the risk factors set
forth in, or incorporated by reference into, this report and other reports and
documents that the Company files with the Securities and Exchange Commission.
The Company has attempted to identify forward-looking statements in this report
by placing an asterisk (*) before paragraphs containing such material.
PART I
Item 1. Business
General
Trimble Navigation Limited, a California corporation ("Trimble" or "the
Company"), develops, manufactures, and distributes products enabled by Global
Positioning System ("GPS"), optical, laser, and wireless communications
technology. We provide end-users, value added resellers ("VAR's") and original
equipment manufacturers ("OEM's") with positioning solutions principally
targeted for the agriculture, engineering and construction, fleet and asset
management, timing, automobile navigation, and military markets.
Background
Trimble provides positioning solutions for many applications requiring
precise determination of location using GPS, optical, laser, communications and
information technologies. Positioning solutions are used in many industries
including construction, engineering, agriculture, trucking, maritime,
automotive, aviation, fleet and asset management, consumer, mobile appliances,
military, in-vehicle navigation, timing, and recreation.
The majority of Trimble product sales use GPS as the positioning
technology. GPS offers major advantages over earlier technologies in ease of
use, precision, and accuracy. It provides worldwide coverage in three dimensions
and can also provide data to enable time and velocity measurements
GPS is a system of 28 orbiting Navstar satellites established and funded by
the U.S. government, which has been fully operational since March 1995. GPS
positioning is based on a trilateration technique that precisely measures
distances from three or more Navstar satellites. The satellites continuously
transmit precisely timed radio signals using extremely accurate atomic clocks. A
GPS receiver calculates distances from the satellites in view by determining the
travel time of a signal from the satellite to the receiver. The receiver then
trilaterates its position using its known distance from various satellites, and
calculates latitude, longitude and altitude. 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. Greater accuracies are possible through a technique
called "differential GPS." In addition, GPS provides highly accurate time
measurement.
* The usefulness of GPS is dependent upon the locations of the receiver and
the GPS satellites that are above the horizon at any given time. Reception of
GPS signals requires line-of-sight visibility between the Navstar satellites and
the receiver, which can be blocked by buildings, hills, cloud cover and dense
foliage. The receiver must have a line of sight to at least three satellites in
order to determine its location in two dimensions--latitude and longitude--and
at least four satellites to determine its location in three dimensions -
latitude, longitude, and altitude. The accuracy of GPS may also be limited by
distortion of GPS signals from ionospheric and other atmospheric conditions, and
intentional or inadvertent signal interference or Selective Availability ("SA").
SA, which was the largest component of GPS distortion, is controlled by the U.S.
Department of Defense and on May 1, 2000, was deactivated.
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Different applications require different accuracies - for example
navigation typically requires one to three meters and survey and machine
guidance typically require less than ten centimeters. By using a technique
called "differential GPS" using two or more GPS receivers, position accuracy can
be improved over unaided GPS. This technique compensates for a number of
measurement distortions, including ionospheric and other atmospheric distortions
as well as SA. Differential GPS involves placing one GPS receiver at a known
location and continuously comparing its calculated location to its actual
location to measure signal distortions and errors in the satellite data.
Measurement corrections can be transmitted in real-time over a radio or
telephone link or integrated later with accumulated data. Most distortions and
errors are reasonably constant over large areas, so that multiple GPS receivers
can use these measurements to correct their own position calculations.
* Trimble's GPS products are based on proprietary receiver technology.
Trimble's GPS receivers track all satellites in view and automatically select
the optimum combination of satellites to provide the most accurate set of
measurements. The convergence of positioning, wireless, and information
technologies enables significant new value to be added to positioning systems,
thereby creating a more robust solution for the user. In addition, recent
developments in wireless technology and deployments of wireless networks have
enabled less expensive wireless communications. These developments allow for the
efficient transfer of position data to locations away from the positioning field
device, allowing the data to be accessed by more users and thereby increasing
productivity.
* Navstar 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.
The U.S. Department of Defense is committed to maintaining a 24 satellite
constellation. The total number of GPS satellites that are currently operational
is 28, some of which have been in place for 12 years. Repairing damaged or
malfunctioning satellites is currently not 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 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, there can be
no assurance that the U.S. government will remain committed to the operation and
maintenance of GPS satellites over a long period, or that the policies of the
U.S. Government for the use of GPS without charge will remain unchanged.
However, a 1996 Presidential Decision Directive marks the first time that access
to GPS for civilian use has a solid foundation in law. Because of increasing
commercial GPS applications, other U.S. Government agencies may become involved
in the administration or the regulation of the use of GPS signals. Any of these
factors could affect the willingness of buyers of the Trimble products to select
GPS-based systems instead of products based on competing technologies. Any
resulting change in market demand for GPS products could have a material adverse
effect on Trimble's financial results. In 1995, certain European government
organizations expressed concern regarding the susceptibility of GPS equipment to
intentional or inadvertent signal interference. Such concern could translate
into reduced demand for GPS products in certain geographic regions in the
future.
Laser and optical products measure distances very accurately by means of a
light beam. Trimble generally uses commercially available laser diodes to create
laser light beams for its applications. Trimble's proprietary precision
mechanics and software algorithms in these products combine to give robust,
accurate distance and angle measurements for a variety of agricultural,
surveying, and construction applications.
Business Strategy
Our strategy leverages our expertise in GPS and other positioning
technologies to provide product solutions to our customers. Our primary
objectives are:
* Focus on growth markets. We target markets which offer potential for
growth, profitability, and market leadership. Our current focus is on four
primary market segments: Engineering and Construction, Agriculture, Fleet and
Asset Management and Component Technologies. In addition, we serve other smaller
markets and include these in the Portfolio Technologies segment. In general, the
customers needs within these market segments can be characterized by a need for
improved productivity, lower cost, higher convenience or better information. We
intend to continuously evaluate new market segments as well as specific vertical
markets within these segments as we develop new applications for our technology.
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* Provide innovative, differentiated product solutions. We strive to
provide innovative solutions that deliver significant value to our end-users by
developing products with hardware capabilities and software features designed
for specific applications. Trimble continues to focus on hardware advances that
lead to smaller size, lower power requirements, improved sensitivity and greater
accuracy. Our products typically bundle hardware and software together. In some
cases, we license the results of our developments to third parties.
* Develop products that integrate positioning communications and
information technologies. We intend to leverage the advances in positioning,
wireless, and information technologies by integrating them in new classes of
products that provide the user with higher functionality and greater access to
information.
* Develop distribution channels to improve market penetration. We have
developed extensive distribution channels within our targeted market segments
and have established strong customer relationships based on Trimble's strong
product position and commitment to support. The acquisition of the Spectra
Precision Group added significant new distribution capability internationally. A
major focus will be to further develop our channels, both by increasing the
capabilities in regions currently served as well as through international
expansion.
* Pursue key customer alliances. Key customer alliances have been a
significant element of our success. We have established such alliances with
companies including Caterpillar Inc.; CNH Global N.V.; Siemens VDO Automotive
AG; Infineon Technologies; Nortel Networks Limited; Blaupunkt-Werke GmbH, a
wholly owned subsidiary of Robert Bosch GmbH (Bosch); McNeilus Companies, Inc.,
a subsidiary of Oshkosh Truck Corporation; and Seiko Epson. These relationships
have enhanced our ability to enter new markets, develop new products and
strengthen our distribution network. These relationships are generally
terminable at will by either party. As our markets develop and new markets
emerge, we expect that alliances will be a significant factor in our success. We
may also form other types of alliances or take advantage of acquisition
opportunities that complement our product portfolio, extend our technology,
enable us to enter new markets, or solidify our current market position.
INDUSTRY SEGMENTS
We operate in four primary industry segments that use a variety of
positioning-based solutions, including: (i) Engineering and Construction, (ii)
Agriculture, (iii) Fleet and Asset Management, (iv) Component Technologies, and
other smaller segments included in Portfolio Technologies.
We design, market, and distribute products that determine precise
geographic location or position, sometimes combined with data communications and
applications software. We sell our products through a network of direct
salespeople, OEMs, VARs, independent dealers, distributors and authorized sales
representatives supported by sales offices throughout the world.
We conduct research and development activities at our facilities in
Sunnyvale, California; Dayton, Ohio; Corvallis, Oregon; Chandler, Arizona;
Westminster, Colorado; Danderyd, Sweden; Christchurch, New Zealand and in Jena,
Munich and Kaiserslautern in Germany. Solectron Corporation and Solectron
Federal Systems, Inc. (collectively, "Solectron") currently manufacture most of
Trimble's GPS products. We also have production facilities in Danderyd, Sweden,
Jena and Kaiserslautern in Germany and Dayton, Ohio for the manufacture of our
optical and laser products.
To achieve distribution, marketing, production, and technology advantages
for our targeted markets, we manage our industry segments within corresponding
divisions. Each division is responsible for strategy, sales and marketing,
product development and financial performance, and is headed by a general
manager.
Engineering and Construction
To pursue the opportunities in the Engineering and Construction industry
segment, we employ GPS, optical, laser, communications and information
technology. We offer a range of hardware and software products that are used by
survey and construction professionals in the field to perform precise position
determination, data collection, field computing, data management, and automated
machine guidance and control. The applications served include surveying, general
construction, site preparation, excavation, road and runway construction,
interior construction and underground construction.
4
Our products reduce the need for manual calculations and operations,
thereby improving productivity and providing potential cost savings. These
improvements can also lead to improved project completion times and reduced
errors that lead to rework. Our goal is to provide comprehensive
"field-to-office" solutions that enable users to integrate field construction
operations with their office information systems. These solutions streamline the
use of information in the engineering and construction process, from project
concept to completion. For example, if the field and the office are tightly
integrated, data collected and created in the project feasibility phase can be
used and modified in the design phase. Data resulting from the design phase can
be used to automate processes in the construction phase. Finally, data collected
from the construction site can be used for both monitoring progress and quality,
and as an input to required design changes.
In 2001, Trimble generated approximately 64% of its revenue from this
segment. The current market size is estimated at approximately, one billion
dollars, and we believe we have the leadership position with approximately 29%
market share.
Products
The following is a table of some of the key Engineering and Construction
products.
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Product Description
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GPS Total Station(R)5700 A GPS measurement system that provides three dimensional position
within 10 millimeters. Provides surveyors and civil engineers with
features that improve speed and accuracy. Combined with Trimble
Survey Controller(TM)field software and Trimble Geomatics Office
Software(TM), survey and design tasks are unified in one system.
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5600DR 200+ Total Station A reflectorless total station surveying instrument that does not
require a reflecting prism. Surveyors can survey objects that cannot
be physically reached from over 200 meters away. The instrument
can, in its robotic version, be operated remotely which enables one
operator to execute all applications without assistance.
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SiteVision(R) GPS 3D Machine Control System A grade control system for the
construction market that combines a ruggedized on-board computer, a
high precision dual frequency receiver, two duel frequency GPS
antennas, three light bars and a radio. The System enables a
bulldozer operator to grade to the design that is displayed in the cab
and eliminate the need to follow stakes.
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Spectra Precision Laser GL700 series An innovative series of laser
transmitters designed for a variety of machine control, general
construction and agricultural applications. Simple to setup and
use they offer higher stability and more consistent accuracy over wide
areas. The transmitters improve productivity and reduce rework for
a range of site prep and general construction grading applications.
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Agriculture
In today's competitive agriculture market, where low cost producers have a
significant advantage, efficient field operation and data management can be
critical to success. We provide water management, machine guidance and field
management solutions to enhance the productivity of equipment assets, to improve
yields and shorten key processes. Our products serve a number of agriculture
applications including precise land leveling, machine guidance, yield monitoring
and variable-rate applications of fertilizers and chemicals. For example, our
GPS-based machinery guidance systems and field monitoring systems enable
machinery operators to achieve improved accuracy when planting row crops and
applying fertilizers and chemicals.
5
* We believe that there is a considerable growth opportunity in replacing
traditional positioning technologies in the agriculture market with GPS and
laser positioning technology. Given the recent introduction of the technology,
the Company believes that the market remains relatively unpenetrated. Machine
guidance systems have primarily been sold and installed in the aftermarket.
Original equipment manufacturers are increasingly integrating these capabilities
into new machines. We believe that we are positioned to address the
opportunities in the new equipment market as the result of our relationship with
CNH Global (formerly Case Corporation), a global manufacturer and distributor of
agricultural equipment. Since 1997, CNH Global has utilized our GPS receivers
for advanced farming systems. Our customers in the agriculture market segment
include family farmers, commercial growers, crop consultants, equipment
manufacturers, farm centers and service providers.
In 2001 this segment represented approximately 5% of Trimble's revenue.
Products
The following is a table of some of the key Agriculture products.
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Product Description
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AgGPS(R)132 Farmers use the AgGPS 132 to tag soil type, insect infestation, or
crop yield information with precise, sub-meter location data.
Mapping this data highlights problem areas and helps farmers
target their use of agricultural products, saving money and
increasing productivity.
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AgGPS(R)Autopilot A system that automatically steers tractors to within centimeters for
row-crop applications. The driver, with hands-free operation, can now
concentrate on working the implements for listing, bed preparation,
planting and cultivating. This technology translates into increased
productivity for the farmer through more efficient utilization of
tractors and extended working hours.
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Laser-based Water Management Systems Laser-based water management allows
the agricultural industry to make topographical maps of their fields,
design solutions for drainage or irrigation, and control the
machines that grade the land using a rotating plane of laser light.
Growers generally have either too much water or too little water to
grow a crop. Landleveling and farm tile drainage is a high
productivity long-term investment for a grower to enhance crop yields.
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AgGPS(R)EZ-GuideTM 110 The AgGPS EZ-Guide 110 is a low-cost, easy-to-use parallel swathing
system that uses GPS technology to help the operator guide farm
machinery in precise rows. The system allows farmers to increase
productivity and profitability through more efficient utilization of
agriculture vehicles, extending working hours available in a day and
reducing costs. The EZ-Guide system is fully upgradable with
Trimble's EZ-Map and Field Manager products for field mapping or
variable rate management.
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Fleet and Asset Management
Our Fleet and Asset Management segment includes the mapping and Geographic
Information Systems (GIS) market and the mobile positioning and communications
market.
We integrate wireless, GPS and information technologies to provide
solutions for a variety of applications in fleet management and asset tracking.
Our products enable end-users to monitor and manage their mobile and fixed
assets by communicating location-relevant information from the field to the
office. The keys to these applications is the ability to accurately locate
assets and to rapidly collect and transfer a wide range of asset-related data
from the field to the office for monitoring and verification and for use in
decisions. We currently offer a range
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of products that address a number of sectors of this market including truck
fleets, security, telematics, public safety vehicles, and fixed asset data
collection for a variety of governmental and private entities.
Our mobile asset management products offer a range of asset management
solutions, including an internet delivered, cellular based solution for vehicle
fleet management that provides all the functionality necessary to actively
manage vehicles in the field. End-users can track the movement of their
vehicles, employees, and goods and services. This allows them to improve their
decisions regarding asset utilization. For example, end-users can route vehicles
in their fleet more efficiently, reducing vehicle downtime, and potentially
increasing the number of deliveries or trips per vehicle. Other benefits may
include more efficient vehicle maintenance, reduced misuse of vehicles and
providing their customers with more detailed information on the location of
products and services.
In fixed asset tracking, the increased use of the Internet and wireless
communication is providing asset-rich organizations such as utilities, natural
resource agencies and local governments with better access to data on their
field assets. A key to this market is the creation and maintenance of GIS
databases. Our range of GPS based GIS data collection and maintenance products
enable these organizations to capture and maintain the features and attributes
of their field assets.
As with our other targeted market segments, we believe that there is
considerable growth opportunity in this market, which is in the early stages of
adopting positioning-based solutions. Currently, mobile resources are often
tracked using inefficient and incomplete systems such as wireless telephones and
pagers. We believe that penetration of GPS-based positioning systems in this
market segment will accelerate as the cost of such systems decreases and
functionality increases.
In 2001, this segment represented approximately 12% of Trimble's revenue.
We estimate that the current market size is approximately $500 million.
Products
The following is a table of some of the key Fleet and Asset Management products.
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Product Description
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Pathfinder Pro Family The GPS Pathfinder(R)Pro XR and Pro XRS Systems are GIS data
collection and maintenance systems that provide real-time submeter
accuracy. These systems are used in a range of applications
including utility asset management, environmental monitoring,
scientific research, hazardous waste clean up, municipal asset
management, and natural resource management.
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CrossCheck(R) Product Family A cellular mobile unit that combines GPS, cellular,
and computing technologies onto a single module - provides a
cost-effective asset and route management tool for fleet management.
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GeoExplorer(R)3 A data collection and maintenance system that provides a rugged
handheld GPS solution for creating and maintaining GIS databases for
management of utility, urban, and natural resources.
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Component Technologies
We market our component products through a network of OEM relationships.
The products include proprietary chipsets, printed circuit boards, modules and
intellectual property licenses. The products are incorporated into timing
sources for synchronizing wireless and computer systems; in-vehicle navigation
and telematics systems; fleet management; security systems; data collection
systems; and wireless handheld consumer products.
* We believe that technological advances in GPS components will result in
reduced size, lower cost, lower power consumption and improved capability. These
improvements will allow GPS to be potentially useful for a number of new, high
volume applications, many of them in consumer markets. The applications may
include
7
wireless handheld products (smart phones, pagers, child and personal locators);
automobile products (navigation systems, security systems, auto emergency
response systems, and telematics systems); PC-based products (in-car computers,
portable PCs, and PDAs); and general consumer products (wristwatches, portable
navigation systems, and pet locators).
* Our in-vehicle navigation and telematics technologies are sold to OEMs
that sell directly to automobile manufacturers, including Pioneer, Bosch
Blaupunkt-Werke GmbH, Siemens VDO Automotive AG, and Magneti Marelli. Automobile
manufacturers that currently purchase products incorporating our GPS technology
include: Alfa Romeo, BMW, Fiat, Honda, Mercedes, Opel, Porsche, Renault, and
VW/Audi.
* A significant consumer market for GPS components is expected to be the
wireless handset market. The FCC has mandated that wireless carriers must be
able to provide location data for all 911 emergency calls made from cellular
phones. This Enhanced 911 (E911) mandate now requires all carriers and all
markets to deploy the location capability by 2006. The mandate is creating the
need for the wireless carriers and handset manufacturers to find ways to meet
the mandate's accuracy requirements of 50 meters, 67 percent of the time and
within 150 meters, 95 percent of the time for handsets. GPS technology provides
a potential solution to meet or exceed the requirements of the E911 mandate.
This market will require very small, low-cost GPS components that consume very
little power. Trimble's current products and technical development plans are
aligned with the needs of the high volume market and we expect to be an active
participant in the market. The mandate also allows for network based solutions
that can provide accuracy of 100 meters 67 percent of the time and within 300
meters 95 percent of the time. We also offer precision GPS timing products
designed for the network based E911 solutions.
This segment represented approximately 12% of Trimble's 2001 revenue. We
estimate the market size today is approximately $300 million.
Products
The following is a table of some of the key Component Technologies products.
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Product Description
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FirstGPS(TM) Specifically developed for power-sensitive mobile information
devices such as laptops, PDAs, digital cameras, smart phones,
pagers and automobile navigation systems. The architecture allows
high-volume manufacturers of consumer products to add GPS
location with minimal impact on the device's size or battery life.
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Thunderbolt(TM) GPS-disciplined Clock A GPS clock designed specifically for precision
timing and synchronization of wireless networks. Wireless systems
need precise timing to optimize use of their assigned radio spectrums
across wide geographic areas.
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Custom CDMA Clock A GPS clock supplied to major supplies of CDMA equipment.
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Lassen(TM) LP GPS A miniature, low-power GPS receiver module for battery-powered
applications. It is suited to embedding GPS in portable devices
such as PDAs, personal communication systems, data
terminals, recorders and instrumentation units.
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Portfolio Technologies
This segment is an aggregation of various operations that each equal less
than ten percent of the Company's total operating revenue. The products in this
segment are navigation modules and embedded sensors that are used in avionics,
flight, and military applications. Also, included in this segment are the
operations of our Tripod Data Systems subsidiary, which was acquired on November
14, 2000.
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On March 6, 2001, the Company sold its Air Transport Systems (ATS) business
to Honeywell. The ATS business was a part of our Portfolio Technologies segment
and involved the Trimble 8100, the HT 9100 and two other product lines.
Products
The following is a table of some of the key Portfolio Technologies products.
- ----------------------------------------------- ----------------------------------------------------------------------
TA-12(TM) An all-in-view, PPS GPS receiver for military aircraft operating
within the US National Airspace System. The TA-12 receiver is
FAA TSO-C129A certified and designed for integration with
Flight Management Systems that require Instrument Flight Rules
certified operations.
- ----------------------------------------------- ----------------------------------------------------------------------
- ----------------------------------------------- ----------------------------------------------------------------------
Force 5 GRAM-S(TM) An all-in-view, dual frequency PPS embedded GPS receiver card
designed for integration with military inertial navigation systems
for use on high performance aircraft and missiles.
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Sales and Marketing
Trimble currently has regional sales offices throughout North America and
Europe. Offices serving the rest of the world include Australia, Canada, China,
Dubai, Japan, Manila, New Zealand, and Singapore. We tailor the distribution
channel to the needs of the product and regional market. Therefore, we have a
number of forms of sales channel solutions around the world.
North America. Trimble sells its products in the United States primarily
through dealers, distributors, and authorized representatives. This channel is
supplemented and supported by 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. Trimble markets to end-users through a network of dealers
and distributors in more than 85 countries. Distributors carry one or more
product lines and are generally limited to selling either in one country or in a
portion of a country. Trimble occasionally grants exclusive rights to market
certain products within specified countries.
Sales to unaffiliated customers in locations outside the U.S. comprised
approximately 50% of total revenues in fiscal 2001, 52% in fiscal 2000 and 52%
in fiscal 1999. North and South America represented 58% of our revenue, Europe
30%, and Asia 12% in fiscal 2001.
Support. The warranty periods for Trimble's products are generally between
one and three years from date of shipment. Selected military programs may
require extended warranty periods, and certain products sold by our Tripod Data
Systems subsidiary have a 90 day warranty period. We support our GPS products
through an on-board replacement program from locations in the United Kingdom,
Germany, Japan, and Sunnyvale, California. The repair and calibration of our
non-GPS products is available from company owned or funded facilities.
Additionally over 200 service providers globally perform warranty servicing of
our products. We reimburse dealers and distributors for all authorized warranty
repairs they perform. Trimble does not derive a significant portion of its
revenues from support or service activities.
Competition
In the Engineering and Construction segment, we face competition primarily
from other GPS and optical vendors, including Leica AG, Topcon Corporation
Thales Group, NovAtel Inc., Sokkia Company, Ltd., and Nikon Geosystems.
In the Agriculture segment we face competition from John Deere, CSI
Wireless, Starlink, AgSystems, Integrinautics, and Topcon Corporation.
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In the Component Technologies segment for GPS components the primary
competitors are Japan Radio Corporation (JRC), Motorola, SirF, uBlox, and
Leadtech. In the timing markets, the primary competitor is Symmetricom.
In the Fleet and Asset management segment we face competition from CSI
Wireless, @Road, MinorPlanet, @Track, AirIQ, Leica AG, Garmin Corporation, and
Corvallis Micro Technologies.
In the Portfolio Technologies segment, we face competition from Rockwell
Collins Inc., L3 Communications, Raytheon Company, and Thales Group.
* The principal competitive factors vary widely from segment to segment,
but typically include ease of use, size, weight, power consumption, features,
performance, reliability and price. In the commercial solution applications,
ease of use and user functionality become the differentiating factors. We
believe that our products currently compare favorably with respect to these
factors. We intend to maintain our leadership position through:
o systems, products and services that have significantly differentiated
features with improved benefits to end-users.
o a strong commitment to new product development. Trimble currently
offers more than 100 products and continues to improve and expand the
line.
o our technology leadership with approximately 531 patents issued.
o extensive worldwide distribution.
* We believe that our ability to compete successfully in the future against
existing and additional competitors will depend largely on our ability to
provide more complete solutions, as well as products and services that have
significantly differentiated features with improved cost/benefit ratios to our
end-users. There can be no assurances that we will be able to implement this
strategy successfully, or that our competitors, many of whom have substantially
greater resources, will not apply those resources to compete successfully
against us.
Research and Development
Our leadership position in our targeted market segments is the result, in
large part, of our strong commitment to research and development. We invest in
developing positioning technologies, information technologies, and wireless
communications, realized in the design of proprietary software, optics, laser
systems, control systems, integrated circuits, network radios, GPS receivers,
and real time kinematic (RTK) technology. We devote a portion of our research
and development expenditures to advancing core positioning technologies and
integrating them with synergistic technologies such as communications, sensors,
and information technologies.
The majority of our research and development staff develops products for a
variety of applications that utilize these technologies. Recent examples
include:
o 3-D passive positioning through the use of rotating lasers for the
construction market
o 5600DR 200+ reflectorless robotic total station for the surveying and
construction market
o Crosscheck GSM, integrating cellular and GPS technology for fleet
management
o Autosteer tractor controls utilizing GPS and sensor technologies for
the agricultural market.
o The GPS Total Station 5700 incorporating Trimble's latest RTK
technology for surveying and stake out, and
o The FirstGPS technology, offering small, low-power GPS for automotive
and other embedded applications.
10
Below is a table of Trimble's expenditures on research and development over
the last three fiscal years.
December 28, December 29, December 31,
Fiscal Years Ended 2001 2000 1999
- ------------------------- ----------------- ------------------ -----------------
(In thousands)
Research and development $62,881 $46,520 $36,493
* Trimble expects that a significant portion of future revenues will be
derived from sales of newly introduced products. Consequently, our future
success depends in part on our ability to continue to develop and manufacture
new competitive products with timely market introductions. Advances in product
technology will require continued investment in research and development in
order to maintain and enhance our market position.
Manufacturing
In August of 1999, we began outsourcing the manufacture of our GPS-based
products, to Solectron Corporation (Solectron). Solectron continues to
manufacture our GPS products and is responsible for substantially all material
procurement, assembly and testing. Trimble continues to manage product design
through pilot production. While Solectron is responsible for most facets of the
physical manufacturing process, we are directly involved in qualifying suppliers
and the key components used in our products.
We manufacture our optical and laser-based products at four manufacturing
facilities located in Dayton, Ohio; Danderyd, Sweden; and Kaiserslautern and
Jena, Germany. Some of these products and subassemblies are also assembled on a
contract basis.
In addition, as of August 2001, Trimble completed the transfer of its
manufacturing activities in Austin, Texas, to Sunnyvale, California. We are
currently in the process of transferring our FAA certifications to our Sunnyvale
manufacturing facility.
While most of the components used in our products are standard and can be
obtained from multiple qualified manufactures, some of our key components are
proprietary or sole sourced and require extended lead times. If we were required
to find new vendors for these sole or limited sourced components, we would have
to qualify replacement components and possibly reconfigure our products. This
qualification or reconfiguration process could result in product shipment
delays. Our supply management team works closely with strategically important
suppliers who provide sole or limited sourced products.
Backlog
Trimble believes that due to the volume of products delivered from shelf
inventories and the shortening of product delivery schedules, backlog is not a
meaningful indicator of future business prospects. Therefore, we believe that
backlog information is not material to an understanding of our business.
Patents, Trademarks, and Licenses
Our success depends to a significant extent on technical innovation. We
pursue an active program of filing patent applications to protect
technologically sensitive features of our products. We currently hold
approximately 370 U.S. GPS related patents and approximately 20 foreign GPS
related patents that expire at various dates no earlier than 2005, and we hold
approximately 40 other technology patents. We also have approximately 100 laser
or optical related patents worldwide. We currently license certain peripheral
aspects of our technology from Spectrum Information Technologies and
GeoResearch. Trimble may enter into additional licensing arrangements in the
future relating to its technologies.
At present there are 92 trademarks registered to Trimble and its
subsidiaries. Specifically, "Trimble" with the sextant logo, "Trimble
Navigation," "GeoExplorer," and "GPS Total Station," are trademarks of Trimble
11
Navigation Limited, registered in the United States and other countries.
"Trimble" with the globe and triangle logo and additional trademarks are pending
registration.
Although we believe that our patents and trademarks have value, there can
be no assurance that those patents and trademarks, or any additional patents and
trademarks that may be obtained in the future, will provide meaningful
protection from competition. We actively develop and protect our intellectual
property through a program of patenting, enforcement, and licensing.
We do not believe that any of our products infringe patent or other
proprietary rights of third parties, but we cannot be certain that they do not
do so. (See Note 21 to Consolidated Financial Statements.) If infringement is
alleged, legal defense costs could be material, and there can be no assurance
that the necessary licenses could be obtained on terms or conditions that would
not have a material adverse effect on our profitability.
Employees
As of December 28, 2001, Trimble employed 2,099 people: 555 in research
and development, 715 in sales and marketing, 583 in manufacturing, and 246 in
general administration. Of these, 598 were located in Europe (of which 246 were
in Germany and 245 were in Sweden), 196 in New Zealand, 39 in the Asia Pacific
region and 1,266 in the United States, Canada and Mexico. We also employ
temporary and contract personnel that are not included in the above headcount
numbers.
Trimble's success depends in part on the continued contribution and
long-term effectiveness of our employees. Competition in recruiting personnel
can be significant in some labor markets and our continued ability to attract
and retain highly skilled employees is essential to our future growth and
success. Our employees are not represented by labor unions, except in certain
European countries where union membership is almost universal. We have not
experienced work stoppages.
12
Executive Officers of the Company
The names, ages, and positions of the Company's executive officers as of
March 5, 2002 are as follows:
Name Age Position
- -----------------------------------------------------------------------------------------------------------------------------
Steven W. Berglund.................. 50 President, Chief Executive Officer
Mary Ellen P. Genovese.............. 42 Chief Financial Officer
William C. Burgess.................. 55 Vice President, Human Resources
Joe F. Denniston, Jr................ 41 Vice President of Operations
John E. Huey........................ 52 Treasurer
Irwin L. Kwatek..................... 63 Vice President and General Counsel
Michael W. Lesyna................... 41 Vice President and General Manager, Mobile Solutions Division
Bruce E. Peetz...................... 50 Vice President, Advance Technology and Systems
Karl G. Ramstrom.................... 58 Senior Vice President and General Manager,
Engineering and Construction Division
Anup V. Singh....................... 31 Corporate Controller
Alan R. Townsend.................... 53 Vice President and General Manager, Trimble Field Solutions Division
Dennis L. Workman................... 56 Vice President and General Manager, Component Technologies Division
All officers serve at the discretion of the Board of Directors. There are
no family relationships between any of the directors or executive officers of
the Company.
Steven W. Berglund joined the Company as President and Chief Executive
Officer in March 1999. Mr. Berglund was elected to the Company's Board of
Directors at the Annual Meeting of Shareholders held in June of 1999. Mr.
Berglund has experience in engineering, manufacturing, finance, and global
operations. Prior to joining the Company, Mr. Berglund was president of Spectra
Precision, Inc., a subsidiary of Spectra-Physics. Spectra Precision had global
revenue of approximately $200 million and developed and manufactured surveying
instruments, laser based construction instruments, and machine control systems.
During his fourteen years with Spectra-Physics, which was a pioneer in the
development of lasers, Mr. Berglund held a variety of positions that included
four years based in Europe. Prior to Spectra-Physics, Mr. Berglund spent a
number of years at Varian Associates in Palo Alto, California where he held a
number of planning and manufacturing roles. Mr. Berglund began his career as a
process engineer at Eastman Kodak in Rochester, New York. Mr. Berglund attended
the University of Oslo and the University of Minnesota where he received a B.S.
degree in Chemical Engineering in 1974 and received his M.B.A. from the
University of Rochester in 1977.
Mary Ellen P. Genovese joined Trimble as Controller of Manufacturing
Operations in December 1992. From 1994 to 1997 she served as Business Unit
Controller for Component Technologies, and for the tracking and communications
business units. She was appointed Corporate Controller in October 1997 and Vice
President of Finance and Corporate Controller in February 1998. In September
2000 she was appointed Chief Financial Officer. Prior to joining Trimble, Mrs.
Genovese was Chief Financial Officer and President for Minton Co., a
distributing company to the commercial building market, from 1991 to 1992. In
her position as Chief Financial Officer she was responsible for the accounting,
management reporting and bank and investor financing for the company. In March
of 1992, the board of directors asked her to assume the role of President to
reorganize the company, including the divestiture of the manufacturing
operations. Prior to 1991, she worked for 10 years with General Signal
Corporation. She was appointed European Financial Controller in July 1990, where
she was responsible for the company's three European operations, Germany, France
and the United Kingdom. From 1988 to 1990 she served as Unit Financial Officer,
for General Signal's Semiconductor Systems Division. She held several other
management positions including Materials Manager, Controller of Manufacturing
Operation and International Projects Controller for General Signal's Ultratech
Stepper Division from 1984 to 1988. Mrs. Genovese is a Certified Public
Accountant and received her B.S. in accounting from Fairfield University in
Connecticut in 1981.
13
William C. Burgess joined Trimble in August 2000 as Vice President of Human
Resources. From August 1998 to July 2000, Mr. Burgess was Vice President of
Human Resources and Management Information Systems for Sonoma West Holdings,
Inc. Mr. Burgess also served as Vice President of Human Resources from May 1995
through July 1998 for Optical Coating Laboratory, a large high-tech manufacturer
of fiber optic products. Mr. Burgess' experience also includes Telenekron
Communications Systems, a developer of telecommunications software; and Asea
Brown Boveri (ABB), a global technology company. Mr. Burgess received his B.S.
from the University of Nebraska in 1973 and a M.S. in organizational development
from Pepperdine University in 1978.
Joe F. Denniston, Jr. joined Trimble in April 2001 as vice president of
operations. In his role, he is responsible for worldwide manufacturing,
distribution and logistics strategy. Prior to Trimble, Denniston worked for 3Com
Corporation. During his 14-year tenure, he held several positions in test
engineering, manufacturing engineering and operations. Most recently he served
as vice president of supply chain management for the Americas. Prior to joining
3Com, he served over five years at Sentry Schlumberger in various roles. He
received a B.S. in electrical engineering technology from the Missouri Institute
of Technology in 1981 and a M.S. in computer science engineering from Santa
Clara University in 1990.
John E. 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 joined Trimble as Vice President and General Counsel in
November 2000. Mr. Kwatek was Vice President and General Counsel of Tickets.com,
Inc., a ticketing services provider, from May 1999 to November 2000. Prior to
that he was engaged in the private practice of law for more than six years. In
his career, Mr. Kwatek 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 a 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 joined Trimble as Vice President of Strategic Marketing
in September 1999. In September 2000, he was appointed Vice President and
General Manager of the Mobile Positioning and Communications Division (recently
renamed Mobile Solutions Division). Mr. Lesyna brings broad experience in
developing business and marketing strategies for high tech companies. Prior to
Trimble, Mr. Lesyna worked for Booz Allen and Hamilton, where he spent six
years, most recently serving as a principal in the operations management group.
While at Booz Allen and Hamilton, he was responsible for advising companies on a
wide range of strategic issues. Prior to Booz Allen and Hamilton, Mr. Lesyna
held a variety of engineering positions at Allied Signal Aerospace. He served as
a Project Engineer for Allied Signal's European consortium in Germany, was a
Development and Test Engineer for the altitude chamber, and was a Design
Engineer for the company's first jet fighter engine afterburner. Mr. Lesyna
received an MBA from Stanford University in 1994. He also received an M.S. in
mechanical engineering in 1983 and a B.S. in mechanical engineering in 1982,
both from Stanford University.
Bruce E. Peetz joined Trimble in June 1988 as Program Manager for GPS
Systems. From January 1990 to January 1993 he served as Development Manager for
commercial dual-frequency products, and from January 1993 to December 1995 he
served as Engineering Manager for Surveying and Core Engineering. In January1996
he was appointed General Manager of the Land Surveying unit, and from February
1998 started the Advanced Systems division as General Manager. In October 1998
he was named Vice President of Advanced Technology and Systems, consolidating
Systems and Trimble Laboratories. Prior to joining Trimble, Mr. Peetz served in
a variety of engineering and management positions during eleven years at Hewlett
Packard. Mr. Peetz received his BSEE from the Massachusetts Institute of
Technology in 1973, and did graduate work at UCLA.
Karl G. Ramstrom joined Trimble in August 2000 as Senior Vice President and
General Manager of the Engineering and Construction Division. Prior to joining
Trimble, Mr. Ramstrom served as President of the Spectra
14
Precision Group, which was acquired by Trimble in July 2000. During his 31-year
tenure at Spectra Precision and its predecessor companies, he held a variety of
positions, including marketing, sales management, general management, and
finally executive responsibilities. Before his appointment as President, Mr.
Ramstrom headed Spectra Precision's Survey business unit headquartered in
Danderyd, Sweden. After completing his education in his native Sweden, Mr.
Ramstrom began his career as a surveyor with the Swedish Road Administration
before joining Spectra Precision in 1969.
Anup V. Singh joined Trimble in December 2001 as corporate controller.
Prior to joining Trimble, Mr. Singh worked for Excite@Home from July 1999 to
December 2001. During his tenure there, he held the position of senior director
of Corporate Financial Planning and Analysis where he was responsible for
worldwide budgeting, forecasting, management reporting and long-term strategic
financial planning. He also held the position of international controller,
responsible for all Finance and Administrative functions of the International
Business Unit. In this role he developed and managed the execution of business
plans for several joint ventures and overseas subsidiaries. Before Excite@Home,
Mr. Singh also worked for 3Com Corporation from December 1997 to July 1999, and
Ernst and Young LLP in both San Jose, California, and London, England. He
received his B.A. in 1991 and M.A. in 1995 in economics and management science
from Cambridge University in England. He is also a chartered accountant, and was
admitted as a member of the Institute of Chartered Accountants in England and
Wales in 1994.
Alan R. Townsend joined Trimble in 1991 as the Manager of Trimble
Navigation New Zealand Ltd., a product development subsidiary of Trimble
Navigation Ltd. In 1995, he was appointed General Manager of the Mapping and GIS
systems group. In January 2001, he was promoted to Vice President and General
Manager of the Mapping and GIS Division and in November 2001 he assumed
responsibility for the Agriculture business. He is also serving as the Managing
Director of Trimble Navigation New Zealand Ltd. Prior to Trimble, Mr. Townsend
served in a variety of roles within the Datacom group of companies in New
Zealand including Managing Director of Datacom Software Research Ltd. from 1986
to 1991. Trimble acquired Datacom Software Research Ltd. in 1991. In addition,
Mr. Townsend is a Director of IT Capital Ltd., a venture capital company based
in Auckland, New Zealand; and a Director of Pulse Data Ltd., an electronics
company that produces aids for the visually impaired in Christchurch, 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.Sc. in economics from the University of Canterbury in 1970.
Dennis L. Workman joined Trimble in 1995 as Director of Timing, where he
led the development of GPS-based precision timing products for the wireless
telecom market. In 1997, he was promoted to Director of Engineering for Software
and Component Technologies. In 1998, Mr. Workman was appointed Senior Director
and Chief Technical Officer of the newly formed Mobile and Timing Technologies
(MTT) business group. Mr. Workman also served as General Manager of Trimble's
Automotive and Timing group, as well as Chief Technology Officer for MTT. In
September 1999, he was appointed to serve as Vice President and General Manager
of the Component Technologies Division. Prior to Trimble, Mr. Workman held
various senior-level technical positions at Datum Inc. During his 9-year tenure
at Datum, he spearheaded technology development for GPS products. Mr. Workman
also led the development of board-level products unrelated to GPS for Datum's
Bancomm division. In 1978, Mr. Workman co-founded Bancomm, which manufactures
board-level and instrumentation products for precision timing and data logging
applications. In 1984, he was appointed President of Bancomm. Prior to Bancomm,
Mr. Workman co-founded Compression Labs in 1977 and served as Chief Technical
Officer. Mr. Workman began his career at Chicago Aerial Industries as lead
engineer. He then joined Goodyear Aerospace, now Loral, as program manager. Mr.
Workman received a B.S. in mathematics from St. Mary's College in 1967 and a
M.S. in electrical engineering from the Massachusetts Institute of Technology in
1969.
Item 2. Properties
Trimble currently leases an aggregate of 309,480 square feet in fourteen
buildings in Sunnyvale, California. Trimble uses approximately 165,000 square
feet, with approximately 30,000 square feet used for final assembly and shipping
of GPS-based products and the balance is subleased to others. The leases and
subleases on these buildings expire at various dates through 2005. We are
leasing two buildings in Westminster, Colorado totaling 73,000 square feet of
which Trimble uses the 28,000 square foot facility. It is expected that Trimble
will use approximately 10,000 square feet of the 45,000 square foot building
with the balance subleased. The leases expire in 2006. We lease a
15
building in Chandler, Arizona totaling 26,039 square feet and the lease expires
in November 2002. Trimble leases 65,000 square feet in two buildings in
Christchurch, New Zealand, for software development. The leases expire in 2005
and 2010. We also lease a 57,200 square foot building in Huber Heights, Ohio
(our Dayton, Ohio facility) where 22,300 square feet are used in the
manufacturing of optical and laser based products, and the balance is used for
sales, marketing, research and development and administration. The lease expires
July 16, 2011. The Company owns an additional 150,000 square feet in Huber
Heights, Ohio of which approximately 96,500 square feet is used for
manufacturing and warehousing and the remainder are used for administration
activities. We also lease a 21,600 square foot building in Atlanta, Georgia
where approximately 2,100 square feet is used in manufacturing/warehouse space
and 19,500 square feet is used for sales, marketing, research and development
and administration and this lease expires in September 2002. Trimble leases a
93,900 square foot building in Danderyd, Sweden and a 26,000 square foot
building in Kaiserslautern, Germany and a 28,700 square foot building in Jena,
Germany. These buildings are primarily used for manufacturing. Trimble's largest
international sales office is leased in Raunheim, Germany (28,700 square feet).
In addition, our sales offices in Austria, Australia, Belgium, China, France,
Germany, Italy, Japan, Mexico, Netherlands, Philippines, Spain, Singapore,
Russia, United Kingdom, United Arab Emirates, and in various cities throughout
the United States are leased. Trimble's international office leases expire at
various dates through 2010. Certain of the leases have renewal options. Trimble
owns a two story, 20,000 square foot building in Corvallis, Oregon, used by our
Tripod Data Systems subsidiary, that is encumbered by a $1.9 million dollar
loan. We believe that our facilities are adequate to support our current and
anticipated near-term future operations.
Item 3. Legal Proceedings
The information with respect to legal proceedings required by this item is
included in Part II, Item 8, Note 21 to the Consolidated Financial Statements,
hereof.
Item 4. Submission of Matters to a Vote of Security Holders
Not applicable.
16
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder
Matters
Trimble's Common Stock is quoted on the Nasdaq National Market under the
symbol TRMB. The following table sets forth, for the quarters indicated, the
range of high and low closing sales prices for Trimble's Common Stock on the
Nasdaq National Market:
High Low
----- ----
2001:
Fourth $18.41 $12.89
Third 19.80 13.06
Second 21.25 12.75
First 28.50 16.50
2000:
Fourth $28.19 $18.00
Third 62.81 20.44
Second 50.75 18.44
First 30.25 19.00
As of March 22, 2002 there were 1,112 registered shareholders of record,
and the closing price of Trimble's common stock on that day was $15.95 per share
as reported on the Nasdaq National Market.
Trimble has never paid cash dividends on its Common Stock. We presently
intend to retain earnings to finance our business, and do not intend to declare
any cash dividends in the foreseeable future. Under the provisions of the Credit
Facilities, the Company is allowed to pay dividends and repurchase shares of its
common stock up to 25% of net income for the prior fiscal year. See Note 11 to
the Consolidated Financial Statements contained in Item 8 below.
Recent Sales of Unregistered Securities
On May 31, 2001, affiliates of John Hancock Life Insurance Company
exercised warrants to acquire 400,000 shares of common stock at a purchase price
of $10.95 for aggregate cash proceeds of approximately $4.4 million. The
warrants were issued in a privately negotiated transaction in 1994. These
securities were exempt from registration under Section 4(2) of the Securities
Act of 1933, as amended.
On December 21, 2001, we completed the first closing of a private placement
equity offering of 1,783,337 shares of our common stock at a price of $15.00 per
share to certain qualified investors for aggregate cash proceeds of
approximately $26.8 million. Additionally, we granted these investors five-year
warrants to purchase an additional 356,670 shares of stock, subject to certain
adjustments, at an exercise price of $19.475 per share.
On January 15, 2002, we completed the second closing of the private
placement equity offering, through which, we issued 1,280,004 additional shares
of our common stock at a price of $15.00 per share to certain qualified
investors for aggregate cash proceeds of approximately $19.2 million.
Additionally, we granted these investors five-year warrants to purchase an
additional 256,002 shares of common stock, subject to certain adjustments, at an
exercise price of $19.475 per share.
On March 20 2002, in connection with the amendment to the subordinated
note, the Company agreed to issue to Thermo Electron a five-year warrant to
purchase 200,000 shares of Trimble's common stock at an exercise price of
$15.11. Under the terms of the agreement, beginning on July 14, 2002, Trimble
will also issue five-year warrants to purchase 250 shares of common stock on a
quarterly basis for every $1 million of principal and interest outstanding until
the note is paid off. These warrants will be exercisable at a price equal to
Trimble's closing price on the last trading day of each quarter. Under the
five-year warrant, the total number of warrants issued will not exceed 376,233
shares.
17
These sales of securities in the private placement were deemed exempt from
the registration in reliance on Section 4(2) of the Securities Act, as amended,
or Regulation D promulgated thereunder, based on the nature of the purchasers
and the nature of the arms-length negotiated transaction, and the filing of a
Form D.
The Warrant exercise price and/or the number and kind of shares purchasable
upon the exercise of the warrant is subject to certain adjustments such as
subdivision or combination of stock, dividends or distributions in common stock,
other stock or property, reorganization, consolidation or merger, or sale or
issuance of securities below warrant price.
We used the net proceeds of the sales for working capital purposes and to
pay down a portion of our outstanding debt.
Item 6. Selected Financial Data
HISTORICAL FINANCIAL REVIEW
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 the Spectra Precision Group which
was acquired on July 14, 2000, Tripod Data Systems which was acquired on
November 14, 2000, and the acquired assets of Grid Data, Inc. on April 2, 2001,
are included in our consolidated statement of operations and balance sheet data
commencing on those 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.
Summary Consolidated Statements of Operations Data
December 28, December 29, December 31, January 1, January 2,
Fiscal Years Ended 2001 2000 1999 1999 1998
- ------------------------------------------- ---------------- ---------------- ---------------- ---------------- ----------------
(In thousands of dollars, except per
share data)
Revenue $ 475,292 $ 369,798 $ 271,364 $ 268,323 $ 266,442
Cost of sales 238,057 173,237 127,117 141,075 124,411
---------------- ---------------- ---------------- ---------------- ----------------
Gross Margin $ 237,235 $ 196,561 $ 144,247 $ 127,248 $ 142,031
Operating expenses
Research and development 62,881 46,520 36,493 45,763 38,242
Sales and marketing 103,778 79,901 53,543 61,874 57,661
General and administrative 37,407 30,514 33,750 33,245 27,424
Restructuring charges 3,599 -- -- 10,280 --
Amortization of goodwill and other
purchased intangibles 29,389 13,407 -- -- --
---------------- ---------------- ---------------- ---------------- ----------------
Total operating expenses 237,054 170,342 123,786 151,162 123,327
---------------- ---------------- ---------------- ---------------- ----------------
Operating income (loss) from
continuing operations 181 26,219 20,461 (23,914) 18,704
Nonoperating income (expense), net (10,459) 274 (2,041) 1,172
(21,773)
---------------- ---------------- ---------------- ---------------- ----------------
Income (loss) before income taxes
from continuing operations (21,592) (25,955)
15,760 20,735 19,876
Income tax provision 1,900 1,575 2,073 1,400 2,496
---------------- ---------------- ---------------- ---------------- ----------------
Net income (loss) from continuing
operations $ (23,492) $ 14,185 $ 18,662 $ (27,355) $ 17,380
---------------- ---------------- ---------------- ---------------- ----------------
Loss from discontinued operations
(net of tax) -- -- -- (5,760) (8,101)
Gain (loss) on disposal of
discontinued operations (net of tax) 613 -- 2,931 (20,279) --
---------------- ---------------- ---------------- ---------------- ----------------
Net income (loss) $ (22,879) $ 14,185 $ 21,593 $ (53,394) $ 9,279
================ ================ ================ ================ ================
18
Basic net income (loss) per share from
continuing operations $ (0.95) $ 0.60 $ 0.83 $ (1.22) $ 0.78
Basic net income (loss) per share from
discontinued operations 0.02 -- 0.13 (1.16) (0.36)
---------------- ---------------- ---------------- ---------------- ----------------
Basic net income (loss) per share $ (0.93) $ 0.60 $ 0.96 $ (2.38) $ 0.42
================ ================ ================ ================ ================
Shares used in calculating basic
earnings per share 24,727 23,601 22,424 22,470 22,293
================ ================ ================ ================ ================
Diluted net income (loss) per share
from continuing operations $ (0.95) $ 0.55 $ 0.82 $ (1.22) $ 0.75
Diluted net income (loss) per share
from discontinued operations 0.02 -- 0.13 (1.16) (0.35)
---------------- ---------------- ---------------- ---------------- ----------------
Diluted net income (loss) per share $ (0.93) $ 0.55 $ 0.95 $ (2.38) $ 0.40
================ ================ ================ ================ ================
Shares used in calculating diluted
earnings per share 24,727 25,976 22,852 22,470 22,947
================ ================ ================ ================ ================
Cash dividends per share $ -- $ -- $ -- $ -- $ --
================ ================ ================ ================ ================
Other Operating Data:
December 28, December 29, December 31, January 1, January 2,
Fiscal Years ended 2001 2000 1999 1999 1998
- ------------------------------------------- ---------------- ---------------- ---------------- ---------------- ----------------
(In thousand of dollars, except where
shown as a percentage of revenue)
Gross margin percentage 50% 53% 53% 47% 53%
Operating income (loss) percentage 0% 7% 8% (9%) 7%
EBITDA (1) 41,038 49,196 29,345 (13,637) 31,130
EBITDA percentage (1) 9% 13% 11% (5%) 12%
Depreciation and amortization 41,524 23,476 9,073 12,510 12,207
Cash provided (used) by operating
activities 25,093 19,835 23,625 6,968 (2,051)
Cash provided (used) by investing
activities (11,441) (167,180) (17,882) 22,484 (7,106)
Cash provided (used) by financing
activities (23,450) 138,957 2,656 (8,538) 6,437
Selected Consolidated Balance Sheet:
December 28, December 29, December 31, January 1, January 2,
As of 2001 2000 1999 1999 1998
- ------------------------------------------- ---------------- ---------------- ---------------- ---------------- ----------------
(In thousands)
Working capital (deficit) $ 19,304 $ (10,439) $ 111,808 $ 81,956 $ 133,434
Total assets 419,395 488,628 181,751 156,279 207,663
Noncurrent portion of long-term debt 131,759 143,553 33,821 31,640 30,697
Shareholders' equity 138,489 134,943 100,796 74,691 139,483
- --------------------------------------------------------------------------------
(1) EBITDA consists of earnings from continuing operations before interest
income, interest expense, income taxes, depreciation and amortization. Our
EBITDA is presented because it is a widely accepted financial indicator.
EBITDA is not a measure of financial performance in accordance with
generally accepted accounting principles and should not be considered in
isolation or as an alternative to net income (loss) as an indicator of a
Company's performance or to cash flows from operating activities as a
measure of liquidity. Trimble's EBITDA may not be comparable to similarly
titled measures as defined by other companies.
19
The following table sets forth, for the periods indicated, certain
financial data as a percentage of total revenue:
December 28, December 29, December 31, January 1, January 2,
Fiscal Years ended 2001 2000 1999 1999 1998
Revenue 100% 100% 100% 100% 100%
Cost of sales 50% 47% 47% 53% 47%
------ ------ ------ ------ ------
Gross margin 50% 53% 53% 47% 53%
Operating expenses:
Research and development 13% 13% 13% 17% 14%
Sales and marketing 22% 22% 21% 23% 22%
General and administrative 8% 8% 12% 12% 10%
Restructuring charges 1% 0% 0% 4% 0%
Amortization of goodwill and
other purchased intangibles 6% 4% 0% 0% 0%
------ ------ ------ ------ ------
Total operating expense 50% 46% 46% 56% 46%
------ ------ ------ ------ ------
Operating income (loss) from
continuing operations 0% 7% 8% (9%) 7%
Nonoperating income (expense), net (5%) (3%) 0% (1%) 0%
------ ------ ------ ------ ------
Income (loss) before income taxes
from continuing operations (5%) 4% 8% (10%) 7%
Income tax provision 0% 0% 1% 1% 1%
------ ------ ------ ------ ------
Net income (loss) from
continuing operations (5%) 4% 7% (10%) 7%
------ ------ ------ ------ ------
Loss from discontinued
operations, (net of tax) 0% 0% 0% (2%) (3%)
Gain (loss) on disposal of
discontinued operations (net of tax) 0% 0% 1% (8%) 0%
------ ------ ------ ------ ------
Net income (loss) (5%) 4% 8% (20%) 3%
====== ====== ====== ====== ======
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations
For a more complete understanding of our financial condition and results of
operations, and some of the risks that could affect future results, see "Risk
Factors" beginning on page 34. This section should also be read in conjunction
with the Consolidated Financial Statements and Supplementary Data, which
immediately follow this section.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
Trimble's discussion and analysis of its financial condition and results of
operations are based upon our consolidated financial statements, which have been
prepared in accordance with accounting principles generally accepted in the
United States. The preparation of these financial statements requires us to make
estimates and judgments that affect the reported amounts of assets, liabilities,
revenues and expenses, and related disclosure of contingent assets and
liabilities. On an on-going basis, we evaluate our estimates, including those
related to product returns, doubtful accounts, inventories, investments,
intangible assets, income taxes, warranty obligations,
20
restructuring costs, and contingencies and litigation. We base our estimates on
historical experience and on various other assumptions that are believed to be
reasonable under the circumstances, the results of which form the basis for
making judgments about the amount and timing of revenue and expenses and the
carrying values of assets and liabilities that are not readily apparent from
other sources. Actual results may differ from these estimates under different
assumptions or conditions.
We believe the following critical accounting policies affect our more
significant judgments and estimates used in the preparation of our consolidated
financial statements.
Revenue Recognition
Trimble's revenues are recorded in accordance with the Securities and
Exchange Commission's (SEC) Staff Accounting Bulletin (SAB) No. 101, " Revenue
Recognition". We require the following: (i) execution of a written customer
order, (ii) delivery of the product, (iii) fee is fixed and determinable, and
(iv) collectibility of the proceeds is probable. We recognize revenue from
product sales when the products are shipped to the customer, title has
transferred, and no significant obligations remain. The Company defers revenue
if there is uncertainty about customer acceptance. The Company reduces product
revenue for estimated customer returns and for any discounts that may occur
under programs the Company has with its customers and partners.
Our shipment terms for domestic orders are typically FOB shipping point.
Our international orders are typically shipped FOB destination, and accordingly,
international orders are not recognized as revenue until the product is
delivered and title has transferred.
Revenues from purchased extended warranty and support agreements are
deferred and recognized ratably over the term of the warranty/support period.
Substantially all technology licenses and research revenue have consisted of
initial license fees and royalties, which were recognized when earned, provided
Trimble had no remaining obligations.
Sales to distributors and resellers are recognized upon shipment providing
that there is evidence of such an arrangement through a distribution agreement
or purchase order, title has transferred, no remaining performance obligations
exist, the price and terms of the sale are fixed and collection is probable.
Distributors and resellers do not have a right of return.
The Company's software arrangements consist of a license fee and post
contract customer support (PCS). The Company has established vendor specific
objective evidence (VSOE) of fair value for its PCS contracts based on the price
of the renewal rate. The remaining value of the software arrangement is
allocated to license fee using the residual method, which revenue is primarily
recognized when the software has been delivered and there are no remaining
obligations. Revenue from PCS is recognized ratably over the period of the PCS
agreement.
Allowance for Doubtful Accounts
Trimble maintains allowances for doubtful accounts for estimated losses
resulting from the inability of its customers to make required payments. If the
financial condition of our customers were to deteriorate, resulting in an
impairment of their ability to make payments, additional allowances may be
required.
Inventory Valuation
Inventory is recorded at the lower of cost or market. We use a standard
cost accounting system to value inventory and these standards are reviewed a
minimum of once a year and multiple times a year in our most active
manufacturing plants. We adjust the inventory value for estimated excess and
obsolete inventory, based on management's assessment of future demand and market
conditions. If actual future demand or market conditions are less favorable than
those projected by management, additional inventory write-downs may be required.
21
Goodwill and Other Purchased Intangible Assets
Trimble has significant tangible and intangible assets on its balance sheet
that include goodwill and other purchased intangibles related to acquisitions.
The valuation and classification of these assets and the assignment of useful
amortization lives involve significant judgments and the use of estimates. The
testing of these intangibles under established accounting guidelines for
impairment also requires significant use of judgment and assumptions. Trimble's
assets are tested and reviewed for impairment on an ongoing basis under the
established accounting guidelines. Changes in business conditions could
potentially require future adjustments to asset valuations.
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.
Warranties
We provide for the estimated cost of product warranties at the time revenue
is recognized. While we engage in extensive product quality programs and
processes, including actively monitoring and evaluating the quality of our
component suppliers, our warranty obligation is affected by product failure
rates, material usage and service delivery costs incurred in correcting a
product failure. Should actual product failure rates, material usage or service
delivery costs differ from our estimates, revisions to the estimated warranty
accrual and related costs may be required.
BUSINESS DEVELOPMENTS
* On March 15, 2002, Trimble and Caterpillar Inc. announced that they have
reached a definitive agreement to form Caterpillar Trimble Control Technologies
LLC. The joint venture, 50 percent owned by Trimble and 50 percent owned by
Caterpillar, will develop the next generation of advanced electronic guidance
and control products for earthmoving machines in the construction, mining and
waste industries. Caterpillar Trimble Control Technologies LLC will be based in
Dayton, Ohio and is expected to begin operations on April 1, 2002. Under the
terms of the agreement, Caterpillar contributed $14.5 million cash and selected
technology, and Trimble contributed select existing machine control product
technologies valued at $25.5 million. Additionally, both companies have licensed
patents and other intellectual property from their portfolios to the joint
venture. Also, Trimble has received a special cash distribution of $11 million
from the joint venture.
The joint venture's intention is to develop machine control products that
integrate site design information with accurate positioning technology to
automatically control blades and other machine functions This machine control
technology will combine historical Trimble positioning technology with
capability gained through the acquisition of Spectra Precision.
Effective as of April 2, 2001, Trimble completed the acquisition of certain
assets of Grid Data, Inc. ("Grid Data"), an Arizona corporation, for
approximately $3.5 million in cash and the assumption of certain liabilities. In
addition, Trimble may make certain earn-out payments based upon the completion
of certain business milestones. If the first milestone is achieved by April 2,
2002, 218,352 shares of Trimble common stock will be paid out to the
shareholders of Grid Data. If the first milestone is achieved and a second
milestone is completed by October 2, 2003, an additional 141,928 shares of
Trimble common stock will be paid out. However, if at the time the second
milestone is achieved Trimble's common stock is at a price less than the price
per share as defined in the agreement, then Trimble may, at its option, pay
$3.25 million in cash or $3.25 million in Trimble common stock, valued on the
date that the second milestone is achieved. The additional consideration, if
earned, will be recorded as additional goodwill. At the date of this report, it
was uncertain whether the first milestone will be achieved by April 2, 2002.
On March 6, 2001, Trimble sold certain product lines of its Air Transport
Systems business, to Honeywell International Inc. for approximately $4.5 million
in cash. The Air Transport System business was not material to the
22
Company's financial results and was not considered strategic to Trimble's future
operations. Under the asset purchase agreement, Honeywell purchased the Air
Transport Systems' product lines that included the HT 1000, HT 9000, HT 9100 and
Trimble's TNL 8100. As part of an alliance that began in 1995, Trimble and
Honeywell jointly developed, manufactured, marketed, and sold the HT product
line. These products are installed in many commercial aircraft and major
airlines around the world for GPS based navigation. During the third quarter of
fiscal 2001 Trimble also sold off other related product lines and discontinued
its manufacturing operations in Austin, Texas. These actions resulted in a loss
on disposal of approximately $113,000, which is included in nonoperating income
(expense) for fiscal 2001. The Company also incurred severance costs of
approximately $1,724,000 which is included in restructuring charges related to
the termination of employees associated with the product lines disposed of in
fiscal 2001.
Trimble acquired the Spectra Precision Group on July 14, 2000, which
resulted in Trimble's emergence as the leader in the Engineering and
Construction market. An integration team was immediately created to manage the
transition, reduce risks, and achieve approximately $20 million of annualized
cost synergies. Management believes the integration efforts have proceeded in
accordance with the plans. The sales force has been integrated, the global
distribution channel has been extended, the survey and machine guidance product
lines have been rationalized, redundant development has been eliminated and
redundant sales and service facilities have been consolidated. Overall, these
actions have resulted in approximately $19 million of annualized cost synergies
implemented by the end of fiscal 2001. We expect these cost synergies to
primarily benefit our sales and marketing expenses, but operational efficiencies
will also reduce our administrative expenses, and costs of goods sold with the
elimination of duplicate product lines, and consolidation of purchasing and
manufacturing operations. We have realized to date approximately $13 million of
these cost reductions, primarily in sales and marketing expenses, and expect to
realize the balance in fiscal 2002. The remaining savings are expected to
benefit our sales and marketing expenses, as well as favorably impact our gross
margins through increased manufacturing efficiencies. [Additional cost reduction
activities are planned for fiscal 2002 such as further consolidation of sales
and service facilities primarily in Europe, which are expected to enable us to
meet the original $20 million estimate in cost synergies.
RESULTS FROM CONTINUING OPERATIONS EXCLUDING INFREQUENT, AND ACQUISITION RELATED
ADJUSTMENTS
Income (loss) from continuing operations include certain infrequent and
acquisition related charges that management believes are not reflective of
on-going operations. The following table, which does not purport to present the
results of continuing operations in accordance with generally accepted
accounting principles, reflects results of operations to exclude the effects of
such items as follows (in thousands):
23
December 28, December 29, December 31,
Fiscal Years Ended 2001 2000 1999
- ------------------------------------------------------------------------------------------------------------
Income (loss) before income taxes from continuing
Operations $(21,592) $15,760 $20,735
Infrequent and acquisition-related charges:
Loss on sale of business (Other income and
expense) 113 -- --
Amortization of goodwill and other purchased
intangibles 29,389 13,407 --
Restructuring charges 3,599 -- --
Gain on sale of minority investment (Other income
and expense) (270) (1,274) --
Inventory purchase accounting adjustment (Cost of
sales) -- 4,600 --
Debt extinguishment costs (Interest income and
expense) -- 1,185 --
Write down of investment
(Other income and expense) 136 -- --
Facility relocation costs - Boulder, Colorado
(General and administrative) -- 917 --
--------------- --------------- -------------
Total infrequent and acquisition-related charges 32,967 18,835 20,735
--------------- --------------- -------------
Adjusted income before income taxes from continuing
operations 11,375 34,595 20,735
Income tax provision 1,900 3,460 2,073
-------------- --------------- -------------
Adjusted net income $ 9,475 $31,135 $18,662
============== =============== =============
RESULTS OF CONTINUING OPERATIONS
In fiscal 2001, the Company's annual revenues from continuing operations
increased to $475.3 million from $369.8 million in fiscal 2000 and $271.4
million in fiscal 1999. In fiscal 2001, the Company had net loss from continuing
operations of $23.5 million, or $0.95 diluted loss per share, compared to a net
income from continuing operations of $14.2 million, or $0.55 diluted earnings
per share, in fiscal 2000 and $18.7 million or $0.82 diluted earnings per share
in fiscal 1999. The total net loss for fiscal 2001, including discontinued
operations, was $22.9 million, or $0.93 diluted loss per share, compared to a
total net income for fiscal 2000, including discontinued operations, of $14.2
million, or $0.55 diluted earnings per share and $21.6 million, or $0.95 diluted
earning per share for fiscal 1999. Summary of financial data by business segment
is as follows:
The following table shows revenue and operating income by segment for the
periods indicated and should be read in conjunction with the narrative
descriptions below. Operating income by segment excludes unallocated corporate
expenses, which are comprised primarily of general and administrative costs,
amortization of goodwill and other purchased intangibles, as well as other items
not controlled by the business segment.
24
% of % of % of
December 28, Total December 29, Total December 31, Total
Fiscal Years Ended 2001 Revenue 2000 Revenue 1999 Revenue
- ----------------------------------- --------------- ----------- ---------------- ----------- --------------- -----------
(Dollars in thousands)
Engineering and Construction
Revenue $ 303,944 64% $ 195,150 53% $ 108,536 40%
Segment Operating income
from continuing operations 51,625 43,937 37,223
Segment Operating income
as a percentage of segment
revenue 17% 23% 34%
Agriculture
Revenue 24,632 5% 26,024 7% 12,837 5%
Segment Operating income
(loss) from continuing (617) 4,254 2,407
operations
Segment Operating income
(loss) as a percentage of
segment revenue (3%) 16% 19%
Fleet and Asset Management
Revenue 57,678 12% 65,099 18% 67,271 25%
Segment Operating income
from continuing operations 4,810 15,211 14,677
Segment Operating income
as a percentage of segment
revenue 8% 23% 22%
Component Technologies
Revenue 58,083 12% 60,230 16% 58,660 22%
Segment Operating income
from continuing operations 10,882 14,850 15,055
Segment Operating income
as a percentage of segment
revenue 19% 25% 26%
Portfolio Technologies
Revenue 30,955 7% 23,295 6% 24,060 9%
Segment Operating income
from continuing operations 803 (1,540) (2,598)
Segment Operating income
as a percentage of segment
revenue 3% (7%) (11%)
Total Revenue $475,292 $369,798 $271,364
Total Segment Operating
income from continuing
operations $67,503 $76,712 $66,764
25
A reconciliation of Trimble's consolidated segment operating income from
continuing operations to consolidated income (loss) before income taxes from
continuing operations follows:
December 28, December 29, December 31,
Fiscal Years Ended 2001 2000 1999
- ------------------------------------------------------- ---------------- ----------------- ----------------
(In thousands)
Consolidated segment operating income from
continuing operations $ 67,503 $ 76,712 $ 66,764
Unallocated corporate expense (34,334) (37,086) (46,303)
Amortization of goodwill and other purchased
intangibles (29,389) (13,407) -
Restructuring charges (3.599) - -
Non-operating income (expense), net (21,773) (10,459) 274
---------------- ----------------- ----------------
Income (loss) from continuing operations before
income taxes $ (21,592) $ 15,760 $ 20,735
================ ================= ================
Revenue.
In fiscal 2001, total revenue increased by $105.5 million or 28.5% to
$475.3 million from $369.8 million in fiscal 2000. Total revenue increased in
fiscal 2000 by $98.4 million or 36.3% from $271.4 million in fiscal 1999.
Engineering and Construction
Revenue
Products within the Engineering and Construction segment include surveying,
general construction, site preparation, excavation, road and runway
construction, interior construction and underground construction systems.
Engineering and Construction revenues increased by $108.8 million or 56% in
fiscal 2001 over fiscal 2000. The increase in 2001 revenue compared to 2000 was
due to the following factors:
o In fiscal 2001 Trimble experienced a full year of revenues generated from
the purchase of the Spectra Precision Group compared to approximately
half-year results in fiscal 2000, which accounted for approximately $85.0
million.
o Strong demand for land survey product line primarily due to the
introduction of the "Trimble ToolboxTM" in first fiscal quarter of 2001.
The new Trimble Toolbox is a set of integrated surveying tools that
provides significantly higher functionality to surveyors and other
construction professionals.
o Higher demand for GPS machine guidance equipment.
Engineering and Construction revenues increased by $86.6 million or 80% in
fiscal 2000 over fiscal 1999. The increase in 2000 revenue compared to 1999 was
due to the following factors:
o Higher revenues in 2000 resulting from the partial year effect of the
purchase of the Spectra Precision Group in July 2000.This accounted for
approximately $87 million of additional revenues for the period July 14,
2000 through December 29, 2000.
o Higher demand for GPS machine guidance equipment.
o These increases were partially offset due to delivery problems related to
critical part shortages from suppliers.
Operating Income
Engineering and Construction operating income increased by $7.7 million or
17% in fiscal 2001 over fiscal 2000. The increase in fiscal 2001 operating
income compared to fiscal 2000 was due to the following:
o Fiscal 2001 included a full year of the Spectra Precision acquisition and
the benefits of the consolidation of product lines in the Engineering and
Construction business areas. In addition, results were favorably impacted
by the introduction of the Trimble Toolbox survey products in the first
quarter of 2001.
26
o The worldwide cost reduction program, implemented as part of the Trimble
and Spectra Precision integration, also favorably impacted operating
income.
Engineering and Construction operating income increased by $6.7 million or
18% in fiscal 2000 over fiscal 1999. The increase in 2000 operating income
compared to 1999 was primarily due to the partial year effect in fiscal year
2000 of consolidating Spectra Precision for the period July 14, 2000 through
December 29, 2000. This added approximately $5.6 million of operating income.
Agriculture
Revenue
Products within the Agriculture segment include GPS-based machine guidance
systems, field management systems and laser-based water management systems.
Agriculture revenues decreased by $1.4 million or 5% in fiscal 2001 over fiscal
2000. The 2001 decrease in revenue compared to 2000 was due to the following
factors:
o Increased revenues generated from the water management product line
acquired with the purchase of Spectra Precision Group in July 2000
accounted for an increase of approximately $2.7 million through the
reporting of a full year's revenue in 2001.
o This was more than offset by lower demand for our GPS machine control
products due to the slowdown in the U.S. agricultural economy.
Agriculture revenues increased by $13.2 million or 103% in fiscal 2000 over
fiscal 1999. The 2000 increase in revenue compared to 1999 was due to the
following factors:
o Increased revenues generated from the partial year effect of including
Spectra Precision revenues for the period July 14, 2000 through December
29, 2000. This added approximately $6.9 million.
o Introduction of new products, including the AgGPS 170 Field Computer, the
AgGPS 114, and the PSO Plus Parallel Swathing Option with Data Logging.
o Higher general demand for GPS agriculture products.
o These increases were partially offset due to delivery problems related to
critical part shortages from suppliers.
Operating Income
Agriculture operating income decreased by $4.9 million or 115% in fiscal
2001 over fiscal 2000. The decrease in 2001 operating income compared to 2000
was due to the following factors:
o A product mix shift towards lower priced products and a general reduction
in prices.
o Startup development, selling and support costs associated with the ramp up
of the Autopilot product line.
Agriculture operating income increased by $1.8 million or 77% in fiscal
2000 over fiscal 1999. The increase in 2000 operating income compared to 1999
was due to sharply higher sales volumes.
Fleet and Asset Management
Revenue
Products within the Fleet and Asset Management segment use GPS and
information technologies to provide solutions for a variety of applications in
fleet management and asset tracking. Fleet and Asset Management revenues
decreased by $7.4 million or 11% in fiscal 2001 over fiscal 2000. The 2001
decrease in revenue compared to 2000 was due to the following factors:
o A reduction of approximately $4.0 million in our Satcom GalaxyTM Inmarsat-C
line due to the announcement of our intention to discontinue certain of
these product lines in early 2001, Mexico's satellite communications
systems capacity limitations, and as a result of the general economic
slowdown.
o Sales of the CrossCheck(R)and Placer product lines were down by
approximately $3.0 million as a result of the economic slow down.
27
Fleet and Asset Management revenues decreased by $2.2 million or 3% in
fiscal 2000 over fiscal 1999. The 2000 revenue change compared to 1999 was due
to the following factors:
o Asset management and tracking product revenues were down due to delivery
problems related to critical part shortages from suppliers.
o These decreases were partially offset by increased demand in our Mapping
products, especially our new GeoExplorer 3 used for GIS data collection and
data maintenance. In addition, unit sales for our Crosscheck family of
products increased by 30% over the prior year.
Operating Income
Fleet and Asset Management operating income decreased by $10.4 million or
68% in fiscal 2001 over fiscal 2000. The decrease in 2001 operating income
compared to 2000 was due to the following factors:
o Decrease in margins due to the sell-off of existing Satcom inventory at
reduced prices.
o Competitive price pressures on wireless hardware
o Significant costs incurred in the development of a service platform to
enable a range of asset management solutions including an internet
delivered cellular based solution for vehicle fleet management.
Fleet and Asset Management operating income increased by $0.5 million or 4%
in fiscal 2000 over fiscal 1999. The increase in 2000 operating income compared
to 1999 was due to an increase in revenue of Geographic Information Systems
product lines with higher margins, partially offset by decreasing Satcom
revenue.
Component Technologies
Revenues
Products within the Component Technologies segment consist principally of
proprietary GPS chipsets and modules marketed to original equipment
manufacturers. Component Technologies revenues decreased by $2.1 million or 4%
in fiscal 2001 over fiscal 2000. The 2001 revenue change compared to 2000 was
due to the following:
o Embedded product lines were down approximately $2.7 million or 16% year
over year due to the economic slowdown.
o Timing product lines were down due to reduced spending in the
telecommunications market.
o In-vehicle navigation unit sales increased by approximately $0.9 million.
Volume grew by 29%, which was offset by a decrease of 19% in an average
selling price of these products during the year. We expect this trend to
continue as technology advances in component technology will enable among
other things, reduced cost.
Component Technologies revenues increased by $1.6 million or 3% in fiscal
2000 over fiscal 1999. The 2000 revenue change compared to 1999 was due to the
following:
o Strong demand for GPS embedded applications such as vehicle tracking and
safety and security.
o The sales increase was partially offset by delivery problems related to
critical part shortages from our suppliers.
Operating Income
Component Technologies operating income decreased by $4.0 million or 27% in
fiscal 2001 over fiscal 2000. The decrease in 2001 operating income compared to
2000 was due to the following:
o Lower revenue and product mix changes.
o Higher expenditures primarily in research and development and sales and
marketing areas due to new product and channel development.
Component Technologies operating income decreased by $0.2 million or 1% in
fiscal 2000 over fiscal 1999. The decrease in 2000 operating income compared to
1999 was due primarily to product mix changes.
28
Portfolio Technologies
Revenues
This segment is an aggregation of various operations that each equal less
than ten percent of the Company's total operating revenue. The products in this
segment are navigation modules and embedded sensors that are used in avionics,
flight, and military applications. Also, included in this segment are the
operations of our Tripod Data Systems subsidiary which was acquired on November
14, 2000. Portfolio Technologies revenues increased by $7.7 million or 33% in
fiscal 2001 over fiscal 2000. The 2001 revenue increase compared to 2000 was due
to the following factors:
o In fiscal 2001, Trimble experienced a full year of revenues generated from
the purchase of Tripod Data Systems as compared to one and one-half months
in fiscal 2000, which accounted for an increase of approximately $12.2
million.
o The above increase was partially offset by a $4.1 million or 48% reduction
in our commercial aviation product line during fiscal 2001. The sale of the
air transport product line to Honeywell was completed in March 2001. See
Note 8 to the Consolidated Financial Statements.
Portfolio Technologies revenues decreased by $0.8 million or 3% in fiscal
2000 over fiscal 1999. The 2000 revenue decrease compared to 1999 was due to the
following:
o Decreases in revenues for military and air transport products.
o Trimble's decision to exit the commercial marine business in the fourth
quarter of 1998 and the sale of the last of such products in the second
quarter of 1999.
Operating Income
Portfolio Technologies operating income increased by $2.3 million or 152%
in fiscal 2001 over fiscal 2000. The increase in fiscal 2001 operating income
compared to fiscal 2000 was primarily due to an incremental $2.5 million
resulting from a full years operating results of Tripod Data Systems acquired on
November 14, 2000.
Portfolio Technologies operating income increased by $1.1 million or 41% in
fiscal 2000 over fiscal 1999. The increase in fiscal 2000 operating income
compared to fiscal 1999 was due to the following:
o In fiscal 2000, we had a decrease in research and development expenses of
approximately $0.5 million.
o We had an increase of approximately $0.2 million in cost reimbursement
funds received for research and development projects.
International Revenues.
* Sales to our unaffiliated customers in locations outside the U.S.
comprised approximately 50% of total revenues in fiscal 2001, 52% in fiscal 2000
and 52% in fiscal 1999. North and South America represented 58% of total
revenue, Europe 30%, and Asia 12% in fiscal 2001. 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, and tariffs or other barriers. Even though the
U.S. Government announced on March 29, 1996, that it would support and maintain
the GPS system, and on May 1, 2000, stated that it has no intent to ever again
use Selective Availability (SA), a method of degrading GPS accuracy, there may
be reluctance in certain foreign markets to purchase such products given the
control of GPS by the U.S. Government. Trimble's results of operations could be
adversely affected if we were unable to continue to generate significant sales
in locations outside the U.S.
No single customer, including the U.S. Government and its agencies,
accounted for 10% or more of the Company's total revenues in fiscal 2001, 2000
or 1999. It is possible; however, that in future periods the failure of one or
more large customers to purchase products in quantities anticipated by the
Company may adversely affect the results of operations.
29
Gross Margin.
* Gross margin varies due to a number of factors, including product mix,
international sales mix, customer type, the effects of production volumes and
fixed manufacturing costs on unit product costs, and new product start-up costs.
Gross margin as a percentage of total revenues was 50% in fiscal 2001 and 53% in
fiscal 2000. Not including a $4.6 million charge for inventory purchase
accounting adjustment for the acquisition of the Spectra Precision group, gross
margin was 54% in fiscal 2000 and 53% in fiscal 1999. The decrease in gross
margin percentage for fiscal 2001, compared with fiscal 2000, is due largely to
approximately $6.0 million of charges associated with the write-down of excess
and obsolete inventory partially related to the consolidation and simplification
of product lines, and partially due to components in excess of our demand
forecast horizon of twelve months, which impacted gross margin by approximately
1.3%. We expect that these excess and obsolete products will be disposed of
during fiscal 2002. These disposals may result from selling at deeply discounted
prices, use in research and development, or scrap. Also during fiscal 2001, we
exited a number of our direct sales offices, in an ongoing effort to change our
sales model from direct to dealer discount, which impacted gross margin by
approximately 0.8%. The remaining decrease in gross margin percentage is
attributable to product mix changes and a full year sale of Spectra Precision
Group's products (as compared to half a year in fiscal 2000), which typically
are sold at lower gross margins than Trimble's traditional products. In
addition, there were unabsorbed fixed manufacturing overheads due to lower than
expected revenues in fiscal 2001, resulting from the economic slowdown.
In fiscal 2000, adjusted gross margin increased by one percentage point
over fiscal year 1999 due to the favorable product mix of Engineering and
Construction and Agriculture products, which yielded higher margins through the
integration of software and wireless communications. In addition, it was
favorably impacted by the cost benefits of outsourcing our manufacturing to
Solectron. These increases were partially offset by higher costs to acquire
components due to worldwide component shortages.
Because of potential product mix changes within and among the industry
markets, market pressures on unit selling prices, fluctuations in unit
manufacturing costs, including increases in component prices and other factors,
current level gross margins cannot be assured. In addition, should the global
economic conditions deteriorate further, gross margin could be further adversely
impacted.
Operating Expenses.
The following table shows operating expenses for the periods indicated and
should be read in conjunction with the narrative descriptions of those operating
expenses below:
December 28, December 29, December 31,
Fiscal Years Ended 2001 2000 1999
- ---------------------------------------------------------------- ----------------- ------------------ -----------------
(In thousands)
Research and development $ 62,881 $ 46,520 $ 36,493
Sales and marketing 103,778 79,901 53,543
General and administrative 37,407 30,514 33,750
Restructuring charges 3,599 -- --
Amortization of goodwill and other purchased intangibles 29,389 13,407 --
--------------- --------------- ------------------
Total $ 237,054 $ 170,342 $ 123,786
=============== =============== ==================
Research and Development.
Research and development spending increased by $16.4 million during fiscal
2001, and represented 13% of revenue, consistent with 13% in fiscal 2000. The
dollar increase in 2001 was due primarily to the following factors:
o In fiscal 2001 Trimble experienced a full year of operations of the Spectra
Precision Group compared with half a year in fiscal 2000, which accounted
for approximately $11.7 million of the increase.
30
o The increase was also due to approximately $5.0 million related to a full
year of operations of Tripod Data Systems in fiscal 2001 compared with one
and one-half months for fiscal 2000, as well as the inclusion of Grid Data
for approximately nine months in fiscal 2001.
Research and development spending increased by $10.0 million during fiscal
2000, representing 13% of revenue, consistent with 13% in 1999. The dollar
change in 2000 was due primarily to the following factors:
o The acquisition of Spectra Precision in July 2000, which accounted for
approximately $10.0 million of the increase.
o Lower cost reimbursement for development projects of approximately $2.0
million.
o Net reductions in spending of approximately $2.0 million related to
personnel, temporary help, facilities and consulting.
* The Company believes that the development and introduction of new
products is critical to its future success and expects to continue its active
development of future products.
Sales and Marketing.
Sales and marketing expense increased by $23.9 million in fiscal 2001 and
represents 22% of revenue, consistent with 22% in fiscal 2000. The dollar change
in 2001 was due primarily to the inclusion of a full year of operations of the
Spectra Precision Group as compared with half a year in fiscal 2000, which
accounted for approximately $23.1 million of the increase.
Sales and marketing expenses increased by $26.4 million during fiscal 2000
and represents 22% of revenues, compared with 21% in 1999. The primary reason
for the increase in expenses from 1999 to 2000 was due to the purchase of the
Spectra Precision Group in July 2000, which had approximately $26.6 million in
sales and marketing expenses recorded in July 14, 2000 through December 29,
2000.
* Trimble's future growth will depend in part on the timely development and
continued viability of the markets in which we currently compete, and on our
ability to continue to identify and exploit new markets for our products.
General and Administrative.
General and administrative expense increased by $6.9 million in fiscal
2001, representing 8% of revenue, consistent with 8% in fiscal 2000. The dollar
increase in 2001 was due primarily to the following:
o In fiscal 2001, Trimble experienced a full year of operations of the
Spectra Precision Group as compared with half a year in fiscal 2000, which
accounted for approximately $5.6 million of the increase.
o The increase was also due to approximately $0.9 million related to a full
year of operations of Tripod Data Systems in fiscal 2001 as compared with
one and one-half months for fiscal 2000.
General and administrative expenses decreased by $3.2 million during fiscal
2000, representing 8% of revenues, compared with 12% in fiscal 1999. The
decrease in fiscal 2000 as compared to fiscal 1999 was due to the following:
o An allowance for doubtful accounts charge of approximately $1.4 million in
fiscal 1999, of which approximately $1.0 million related to collectibility
issues for certain customers in Brazil who were impacted by a significant
devaluation of the Brazilian real against the United States dollar during
that year.
o Trimble also had decreases of approximately $6.1 million in expenses
related to personnel, legal, facilities, equipment and other office
supplies.
o These decreases were partially offset by approximately $3.0 million of the
Spectra Precision Group's expenses included since its purchase in July
2000.
Restructuring Charges
Restructuring charges of $3.6 million were recorded in fiscal 2001, which
related to severance costs incurred as a result of the Company being impacted by
the global economic slow down, as well as severance costs
31
related to employees terminated due to the disposition of certain product lines.
As a result of these actions, Trimble's headcount decreased in fiscal 2001 by
232 individuals. This headcount reduction will reduce our on-going operating
expenses and enable us to be better positioned to achieve our strategic goals.
As of December 28, 2001, all of the restructuring charges except for
approximately $80,000 have been paid. The remaining amounts are expected to be
paid in fiscal 2002.
Spectra Precision Group Restructuring Activities
At the time we acquired the Spectra Precision Group, we formulated a
restructuring plan and provided approximately $9.0 million for costs to close
certain duplicative office facilities, combine operations including redundant
domestic and foreign legal entities, reduce workforce in overlapping areas, and
relocate certain employees. These costs were accrued for as part of the
allocation of the purchase price. Included in the total cost was approximately
$2.7 million related to the discontinuance of overlapping product lines which
was included in our reserve for excess and obsolete inventory. The facility
consolidation and employee relocations resulted primarily from combining certain
office facilities and duplicative functions, including management functions, of
the Spectra Precision Group. Through the end of fiscal 2001, we had charged
against the reserve approximately $3.3 million which consisted of $0.9 million
for legal and tax consulting expenses relating to consolidation of legal
entities, $1.3 million for severance expenses, $0.7 million for facilities and
direct sales offices closures, $0.3 million for an underfunded pension plan, and
other costs of $0.1 million.
We revised our final estimates of the costs to complete the remaining
planned activities and accordingly reduced the restructuring reserve by
approximately $1.1 million, with a corresponding adjustment to goodwill in the
fourth quarter of fiscal 2001. The reserve balance was approximately $1.9
million at December 28, 2001 and we anticipate completing the majority of our
restructuring activities during fiscal 2002.
The elements of the reserve at December 28, 2001 on the balance sheet
(included in accrued liabilities) are as follows:
Employee Severance and Facility Closure, Legal
Relocation and Tax Expense Total
(In thousands)
Total reserve $ 1,945 $ 4,370 $ 6,315
Amounts paid/written off (1,685) (1,610) (3,295)
Revision to estimates (260) (812) (1,072)
------------------------------------------------------------------------
Balance as of December 28, 2001 $ - $ 1,948 $ 1,948
========================================================================
Amortization of Goodwill and Other Purchased Intangibles.
December 28, December 29, December 31,
Fiscal Years Ended 2001 2000 1999
- ------------------------------------------------------------- -------------------- -------------------- --------------------
- ------------------------------------------------------------- -------------------- -------------------- --------------------
(In thousands)
Amortization of goodwill $ 7,647 $ 3,116 $ -
Amortization of other purchased intangibles 21,742 10,291 -
Amortization of other intangibles 917 930 961
-------------------- -------------------- --------------------
Total amortization of goodwill, other purchased, and other
intangibles $ 30,306 $ 14,337 $ 961
==================== ==================== ====================
Amortization expense of goodwill and other purchased intangibles increased
in fiscal 2001 by approximately $16.0 million representing 6% of revenue,
compared with 4% in fiscal 2000. The increase was primarily due to the
acquisition of the Spectra Precision Group in July 2000, which resulted in a
year over year increase of approximately $15.0 million in goodwill and
intangibles amortization.
32
Amortization of goodwill and other purchased intangibles increased by $13.4
million during fiscal 2000, representing 4% of revenues, compared with 0% in
fiscal 1999. The increase in fiscal 2000, as compared to fiscal 1999, is due to
the purchase of the Spectra Precision Group in July 2000, which had
approximately $13.4 million in amortization of goodwill and other purchased
intangibles recorded in July 14, 2000 through December 29, 2000.
Nonoperating Income (Expense), Net.
The following table shows nonoperating income (expenses), net for the
periods indicated and should be read in conjunction with the narrative
descriptions of those expenses below:
December 28, December 29, December 31,
Fiscal Years Ended 2001 2000 1999
- ---------------------------------------------- --------------- ----------------
- ---------------------------------------------- --------------- ----------------
(In thousands)
Interest income $ 1,118 $ 4,478 $ 3,857
Interest expense (22,224) (14,438) (3,394)
Foreign exchange gain (loss) (237) (376) 28
Other income (expense) (430) (123) (217)
--------------- ---------------- ----------------
Total $ (21,773) $ (10,459) $ 274
=============== ================ ================
Nonoperating expense, net increased by $11.3 million during fiscal 2001 as
compared with fiscal 2000. The primary reasons for the increase were as follows:
o Increase in interest expenses related to loans and Credit Facilities
incurred primarily to finance the acquisition of the Spectra Precision
Group accounted for approximately $7.8 million.
o Decreased interest income resulting from the sale and maturities of
short-term investments used to finance the acquisition of Spectra Precision
Group accounted for approximately $3.4 million.
Nonoperating income (expense), net increased by $10.7 million during fiscal
2000 as compared with fiscal 1999. The primary reason for the increase was an
increase in interest expenses related to loans and credit facilities resulting
from the acquisition of the Spectra Precision Group of approximately $10.7
million
Income Tax Provision. Trimble's effective income tax rates from continuing
operations for fiscal years 2001, 2000 and 1999 were (9%), 10% and 10%,
respectively. The 2001 income tax rate differs from the federal statutory rate
of 35%, due primarily to foreign taxes and the inability to realize the benefit
of net operating losses. The 2000 and 1999 income tax rates are less than the
federal statutory rate, due primarily to the realization of the benefits from
prior net operating losses and previously reserved deferred tax assets.
Inflation. The effects of inflation on Trimble's financial results have not
been significant to date.
LITIGATION
* Trimble is involved in a number of legal matters as discussed in Note 21
to the Consolidated Financial Statements. While Trimble does not expect to
suffer significant adverse effects from these litigation matters or from
unasserted claims, the nature of litigation is unpredictable and there can be no
assurance that it will not do so.
33
LIQUIDITY AND CAPITAL RESOURCES
December 28, December 29, 2000 December 31,
As of 2001 1999
- --------------------------------------------------------- ----------------- -------------------- -------------------
(Dollars in thousands)
Cash and cash equivalents $ 31,078 $ 40,876 $ 49,264
As a percentage of total assets 7.4% 8.4% 27.1%
Accounts receivable days sales outstanding (DSO) 55 57 46
Inventory turns per year 4.1 4.2 6.6
Cash provided by operating activities $ 25,093 $ 19,835 $ 23,625
25,093
Cash used by investing activities $(11,441) $(167,180) $(17,882)
Cash provided (used) by financing
activities $(23,450) $ 138,957 $ 2,656
Net increase (decrease) in cash and
cash equivalents $ (9,798) $ (8,388) $ 8,399
In fiscal 2001, Trimble's cash and cash equivalents decreased by $9.8
million from fiscal 2000. The Company repaid $60.7 million of its debt
outstanding under its senior secured credit facilities. This was financed by the
issuance of common stock of approximately $36.4 million, and cash generated from
operating activities of approximately $25.1 million. The Company also used
approximately $3.5 million for the purchase of certain assets of Grid Data, and
approximately $7.3 million for net capital expenditures.
At December 28, 2001, Trimble's debt mainly consisted of $101.3 million
outstanding under senior secured credit facilities, and an $84 million
subordinated promissory note related to the acquisition of the Spectra Precision
Group. Trimble has relied primarily on cash provided by operating activities to
fund capital expenditures, and other investing activities. During December 2001
and January 2002, the Company raised $26.8 million and $19.2 million,
respectively, in a private placement of equity.
On March 20, 2002, the Company used $21.2 million of net proceeds from its
private placement to retire accrued interest and principal under its
subordinated note with Spectra Physics Holdings, Inc., a subsidiary of Thermo
Electron, reducing the outstanding principal amount to $68.7 million. In
addition, the Company renegotiated the terms of the subordinated note. Under the
revised agreement, the maturity of the note was extended until July 14, 2004, at
the current interest rate of approximately 10.4% per year. In connection with
the amendment, on March 20, 2002, the Company agreed to issue to Thermo Electron
a five-year warrant to purchase 200,000 shares of Trimble's common stock at an
exercise price of $15.11. Under the terms of the agreement, beginning on July
14, 2002, Trimble will also issue five-year warrants to purchase 250 shares of
common stock on a quarterly basis for every $1 million of principal and interest
outstanding until the note is paid off. These warrants will be exercisable at a
price equal to Trimble's closing price on the last trading day of each quarter.
Under the five-year warrant, the total number of warrants issued will not exceed
376,233 shares.
* In fiscal 2001, cash provided by operating activities was $25.1 million,
as compared to $19.8 million in fiscal 2000. Trimble's ability to continue to
generate cash from operations will depend in large part on revenues, the rate of
collections of accounts receivable, and continued focus on reducing operating
costs and the move towards profitability. Both the inventory turns and accounts
receivable days sales outstanding metrics were similar at the end of fiscal 2001
to the fiscal 2000 level. The decrease in inventory turns from fiscal 1999 to
fiscal 2000 was primarily due to the acquisition of the Spectra Precision Group
in July 14, 2000. We moved from an outsource model in 1999 to significant in
house manufacturing in fiscal 2000 as a result of the factories acquired in the
USA, Sweden and Germany. Also, the increase in accounts receivable days sales
outstanding from fiscal 1999 to fiscal 2000 was due to the Spectra Precision
Group conducting a significant portion of its business with international
customers, who are traditionally slower payers.
34
Cash flows used in investing activities were $11.4 million in fiscal 2001
as compared to $167.2 million in fiscal 2000. Cash used in investing activities
in fiscal 2000 was primarily related to the purchase of the Spectra Precision
Group, offset by net sales of short term investments.
Cash used by financing activities was $23.5 million in fiscal 2001 as
compared with cash provided by financing activities of $139.0 million in fiscal
2000. During fiscal 2001, the Company made $60.7 million of payments against its
senior secured credit facilities. These payments were offset by proceeds from
the issuance of common stock to employees pursuant to Trimble's stock option
plan and employee stock purchase plan of $6.9 million, as well as issuance of
common stock under a private equity placement of $26.8 million. Also in fiscal
2001, John Hancock Life Insurance Company exercised warrants of $4.4 million.
In July 2000, Trimble obtained $200 million of senior, secured credit
facilities (the "Credit Facilities") from a syndicate of banks to support the
acquisition of the Spectra Precision Group and the Company's ongoing working
capital requirements and to refinance certain existing debt (see Note 11 to the
Consolidated Financial Statements). At December 28, 2001, Trimble had
approximately $101 million outstanding under the Credit Facilities, comprised of
$61 million under a five-year $100 million term loan, $30 million under a $50
million three-year U.S. dollar only revolving Credit Facility ("revolver"), and
$10 million under a $50 million three-year multi-currency revolver.
The Credit Facilities are secured by all material assets of the Company,
subject to foreign tax considerations. If Trimble is able to achieve and
maintain a leverage ratio (Debt/EBITDA) of 2.0x or less for four consecutive
quarters, the security for the Credit Facilities will be released. Financial
covenants of the Credit Facilities include leverage, fixed charge, and minimum
net worth tests. During December 2001, the Company received a waiver with
respect to compliance with the fixed charge ratio for the quarter ended December
28, 2001, and modified the fixed charge ratio for the quarter ended March 29,
2002. At December 28, 2001, the Company is in compliance with debt covenants.
The amounts due under the three year revolver loans are paid as the loans
mature, and the loan commitment fees are paid on a quarterly basis. Under the
five-year term loan, the Company is due to make payments (excluding interest) of
approximately $20 million in fiscal 2002, $24 million in fiscal 2003 and the
remaining $17 million in fiscal 2004. In order to reduce variable interest rate
exposure on borrowings under its existing credit facility, Trimble had an
interest rate swap agreement on a portion of the variable rate debt, which fixes
the rate on the notional amount of $25.0 million at 5.195%. This agreement
expired in February 2002 and was not renewed.
Management believes that its cash and cash equivalents, together with its
credit facilities, will be sufficient to meet its anticipated operating cash
needs beyond the next twelve months. At December 28, 2001, the Company had $31.1
million of cash and cash equivalents, as well as access to $60 million of cash
under the terms of its three-year revolver loans. On January 15, 2002, we
completed the second closing of the private placement equity offering, through
which, we received aggregate cash proceeds of approximately $19.2 million. These
proceeds were used to repay debt.
Trimble is currently restricted from paying dividends and is limited as to
the amount of its common stock that it can repurchase under the terms of the
Credit Facilities. The Company is allowed to pay dividends and repurchase shares
of its common stock up to 25% of net income in the previous fiscal year. The
Company has obligations under noncancelable operating leases for its office
facilities (see Note 12 to the Consolidated Financial Statements). In fiscal
2002, the payments under these noncancelable operating leases are expected to be
approximately $12.7 million.
* The Company expects fiscal 2002 capital expenditures to be approximately
$7.0 million to $9.0 million, primarily for computer equipment, software, and
leasehold improvements associated with business expansion. Decisions related to
how much cash is used for investing are influenced by the expected amount of
cash to be provided by operations.
* Trimble has evaluated the issues and does not currently believe that the
introduction of the Euro for widespread business use in January 2002 will have a
material effect on its foreign exchange and hedging activities. Trimble has also
assessed the potential impact that the Euro conversion will have in regard to
its internal systems accommodating Euro-denominated transactions and does not
currently anticipate any adverse impact to the Company.
35
* Trimble has entered into forward foreign currency exchange contracts to
offset the effects of changes in exchange rates on foreign-denominated
intercompany receivables. At December 28, 2001, we had forward foreign currency
exchange contracts to sell approximately 181.0 million Japanese yen,
approximately 3.0 million Euros, and to buy approximately 0.3 million British
pounds sterling at contracted rates that mature over the next six months.
CERTAIN OTHER RISK FACTORS
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 new or existing 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 Operating Results in Each Quarter May Not Accurately Reflect Business
Activity in Each Quarter.
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 constant. If for any reason expected sales
are deferred, orders are not received, or shipments were to be 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.
Our Gross Margin Is Subject to Fluctuation.
Our gross margin is affected by a number of factors, including product mix,
product pricing, cost of components, foreign currency exchange rates and
manufacturing costs. For example, since our Engineering and Construction and
Geographic Information Systems (GIS) products generally have higher gross
margins than our Component Technologies products, absent other factors, a shift
in sales toward Engineering and Construction and GIS products would lead to a
gross margin improvement. On the other hand, if market conditions in the highly
competitive Engineering and Construction and GIS market segments forced us to
lower unit prices, we would suffer a decline in gross margin unless we were able
to timely offset the price reduction by a reduction in production costs or by
sales of other products with higher gross margins. A decline in gross margin
could have a material effect on our operating results.
We Are Dependent on a Sole Manufacturer for Our Products and on Sole Suppliers
of Critical Parts for Our Products.
With the selection of Solectron Corporation in August 1999 as an exclusive
manufacturing partner for many of our GPS products previously manufactured out
of our Sunnyvale facilities, we are substantially dependent upon a sole supplier
for the manufacture of our products. Under the agreement with Solectron, we
provide to Solectron a twelve-month product forecast and place purchase orders
with Solectron sixty calendar days in advance of the scheduled delivery of
products to our customers. Although purchase orders placed with Solectron are
cancelable, the terms of the agreement would require us to purchase from
Solectron all material inventory not returnable or usable by other Solectron
customers. Accordingly, if we inaccurately forecast demand for our products, we
may be unable to obtain adequate manufacturing capacity from Solectron to meet
customers' delivery requirements or we may accumulate excess inventories, if
such inventories are not usable by other Solectron customers.
36
In addition, we rely on sole suppliers for a number of our critical ASICS.
We have experienced shortages of supplies, including ASICS, in the past. As an
example, we were affected by industry-wide shortages of memory devices and
electronic components that reached their most severe impact in the third
calendar quarter of 2000. Our current reliance on sole or a limited group of
suppliers involves several risks, including a potential inability to obtain an
adequate supply of required components and reduced control over pricing. Any
inability to obtain adequate deliveries or any other circumstance that would
require us to seek alternative sources of supply or to manufacture such
components internally could significantly delay our ability to ship our
products, which could damage relationships with current and prospective
customers and could harm our reputation and brand, which could have a material
adverse effect on our business.
Our Credit Agreement Contains Stringent Financial Covenants.
Two of the financial covenants in our Credit Agreement with ABN AMRO Bank,
N.V. and certain other banks, dated as of July 14, 2000 as amended (the "Credit
Agreement"), minimum fixed charge coverage and maximum leverage ratio, are
extremely sensitive to changes in earnings before interest, taxes, depreciation
and amortization ("EBITDA"). In turn, EBITDA is highly correlated to revenues
and cost cutting. Due to uncertainties associated with the downturn in the
worldwide economy, our future revenues by quarter are becoming increasingly more
difficult to forecast and we have recently put in place various cost cutting
measures, including the consolidation of service functions and centers, closure
of redundant offices, consolidation of redundant product lines and reductions in
staff. If revenues should decline at a faster pace than the rate of these cost
cutting measures, on a quarter to quarter basis we may not be in compliance with
the two above mentioned financial covenants. If we default on one or more
covenants, we will have to obtain either negotiated waivers or amendments to the
Credit Agreement. If we are 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.
Our Substantial Indebtedness Could Materially Restrict Our Operations and
Adversely Affect Our Financial Condition.
We now have, and for the foreseeable future will have, a significant level
of indebtedness. Our substantial indebtedness could:
o increase our vulnerability to general adverse economic and industry
conditions;
o 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;
o require us to dedicate a substantial portion of our cash flow to
service interest and principal payments on our debt;
o limit our flexibility to react to changes in our business and the
industry in which we operate; and
o limit our ability to borrow additional funds.
We Face Competition in Our Markets.
Our markets are highly competitive and we expect that both direct and
indirect competition will increase in the future. Our overall competitive
position depends on a number of factors including the price, quality and
performance of our products, the level of customer service, the development of
new technology and our ability to participate in emerging markets. Within each
of our markets, we encounter direct competition from other GPS, optical and
laser suppliers and competition may intensify from various larger domestic and
international competitors and new market entrants, some of which may be our
current customers. The competition in the future, may, in some cases, result in
price reductions, reduced margins or loss of market share, any of which could
materially and adversely affect our business, operating results and financial
condition. We believe that our ability to compete successfully in the future
against existing and additional competitors will depend largely on our ability
to execute our strategy to provide systems and products with significantly
differentiated features compared to currently available products. There can be
no assurance that we will be able to implement this strategy successfully, or
that any such products will be competitive
37
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. There can be no assurance that
we will be able to compete successfully against current or future competitors or
that competitive pressures cause us to lose market share or force us to engage
in price reductions that could have a material adverse effect on our business.
We May Encounter Problems Associated With International Operations and Sales.
Our customers are located throughout the world. Sales to unaffiliated
customers in foreign locations represented approximately 50% of our revenues in
our fiscal year 2001 and 52% in each of our fiscal years 2000 and 1999. In
addition, we have significant international operations, including manufacturing
facilities, sales personnel and customer support operations. Our international
sales operations include offices in Australia, Canada, China, France, Germany,
Great Britain, Japan, Mexico, New Zealand, Sweden, Russia, Singapore and others.
Our international manufacturing facilities are in Sweden and Germany. Our
international presence exposes us to risks not faced by wholly-domestic
companies. Specifically, we have experienced issues relating to integration of
foreign operations, greater difficulty in accounts receivable collection, longer
payment cycles and currency fluctuations. Additionally, we face the following
risks, among others: unexpected changes in regulatory requirements; tariffs and
other trade barriers; political, legal and economic instability in foreign
markets, particularly in those markets in which we maintain manufacturing and
research facilities; difficulties in staffing and management; language and
cultural barriers; seasonal reductions in business activities in the summer
months in Europe and some other countries; and potentially adverse tax
consequences. Although we implemented a program to attempt to manage foreign
exchange risks through hedging and other strategies, there can be no assurance
that this program will be successful and that currency exchange rate
fluctuations will not have a material adverse effect on our results of
operations. In addition, in certain foreign markets, there may be reluctance to
purchase products based on GPS technology, given the control of GPS by the U.S.
Government.
We are 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. There can be no assurance
that the patents owned or licensed by us will not be invalidated, circumvented,
challenged, or that the rights granted thereunder will provide competitive
advantages to us or that any of our pending or future patent applications will
be issued within the scope of the claims sought by us, if at all. We are
currently defending two separate lawsuits for alleged patent infringement, one
alleging infringement of a patent by some of our grade control systems and
another alleging infringement by our surveying products. In the event that in
either or both of these suits our products are held to be infringing a valid
patent, we could be prevented from continuing to sell these products and could
be required to pay substantial damages, or, alternatively, enter into a
royalty-bearing license agreement.
There can be no assurance that others will not develop technologies that
are similar or superior to our technology, duplicate our technology or design
around the patents owned by us. In addition, effective copyright, patent and
trade secret protection may be unavailable, limited or not applied for in
certain foreign countries. There can be no assurance that the steps taken by us
to protect our technology will 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 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. However, there can be no assurance that development stage products
will be successfully completed or, if developed, will achieve significant
customer acceptance. If we were unable to successfully define, develop and
introduce competitive new
38
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 there can be no assurance that we will
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. In some of our markets where we currently have
a market leadership position, a delay in new product introductions could have a
significant impact on our results of operations. No assurance can be given that
we will not incur problems in the future in innovating and introducing new
products.
Our Stock Price May Be Volatile.
Our common stock has experienced and can be expected to experience
substantial price volatility in response to actual or anticipated quarterly
variations in results of operations, announcements of technological innovations
or new products by us or our competitors, developments related to patents or
other intellectual property rights, developments in our relationship with
customers, suppliers, or strategic partners and other events or factors. In
addition, any shortfall or changes in revenue, gross margins, earnings, or other
financial results from analysts' expectations could cause the price of our
common stock to fluctuate significantly. Additionally, certain macro-economic
factors such as changes in interest rates as well as market climate for the
high-technology sector could also have an impact on the trading price of our
stock.
We Face Risks of Entering Into and Maintaining Alliances.
We believe that in certain emerging markets our success will depend on our
ability to form and maintain alliances with established system providers and
industry leaders. Our failure to form and maintain such alliances, or the
preemption of such alliances by actions of other competitors or us will
adversely affect our ability to penetrate emerging markets. No assurances can be
given that we will not experience problems from current or future alliances or
that we will realize value from any such strategic alliances.
We Face Risks in Investing in and Integrating New Acquisitions.
We are continuously evaluating external investments in technologies related
to our business, and have made relatively small strategic equity investments in
a number of GPS related technology companies. Acquisitions of companies,
divisions of companies, or products entail numerous risks, including (i) the
potential inability to successfully integrate acquired operations and products
or to realize cost savings or other anticipated benefits from integration; (ii)
diversion of management's attention; (iii) loss of key employees of acquired
operations; and (iv) inability to recover strategic investments in development
stage entities. Any such problems could harm our growth strategy and have a
material adverse effect on our business and financial condition.
We Are Dependent on Key Customers.
We currently enjoy strong relationships with key customers. An increasing
amount of our revenue is generated from large original equipment manufacturers
such as Siemens VDO Automotive, Nortel, Caterpillar, CNH Global, Bosch, and
others. 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 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.
39
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. During the fourth quarter of 1998, the FCC temporarily
suspended the issuance of licenses for certain of our real-time kinematic
products because of interference with certain other users of similar radio
frequencies. An inability or delay in obtaining such certifications or delays of
the FCC could adversely affect our ability to bring our products to market,
which could harm our customer relationships and have a material adverse effect
on our business.
We Are Dependent on the Availability of Allocated Bands Within the Radio
Frequency Spectrum.
Our GPS technology is dependent on the use of the Standard Positioning
Service ("SPS") provided by the U.S. Government's Global Positioning System
("GPS"). The GPS SPS operates in radio frequency bands that are globally
allocated for radio navigation satellite services. International allocations of
radio frequency are made by the International Telecommunications Union ("ITU"),
a specialized technical agency of the United Nations. These allocations are
further governed by radio regulations that have treaty status and which may be
subject to modification every two-three years by the World Radiocommunication
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 kinematic 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 inband from licensed and unlicensed devices may materially and
adversely affect the utility and reliability of our products, which could result
in a material adverse effect on our operating results. The FCC continually
receives proposals for novel technologies and services, such as ultra-wideband
technologies, which may seek to operate in, or across, the radio frequency bands
currently used by the GPS SPS and other public safety services. Adverse
decisions by the FCC that result in harmful interference to the delivery of the
GPS SPS and other radio frequency spectrum also used in our products may
materially and adversely affect the utility and reliability of our products,
which could result in a material adverse effect on our business and financial
condition.
We Are Subject to the Adverse Impact of Radio Frequency Congestion.
We have certain real-time kinematic products, such as our Land Survey 5700,
that use integrated radio communication technology that requires access to
available radio frequencies allocated by the FCC. In addition, access to these
frequencies by state agencies is under management by state radio communications
coordinators. Some bands are experiencing congestion that excludes their
availability for access by state agencies in some states, including the state of
California. An inability to obtain access to these radio frequencies could have
an adverse effect on our operating results.
We Are Reliant on the GPS Satellite Network.
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
place for 12 years. To repair damaged or malfunctioning satellites is currently
not economically feasible. If a significant number of satellites were to become
inoperable, there could be a substantial delay before they are replaced with new
satellites. A reduction in the number of operating satellites would 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 U.S.
Government will remain committed to the operation and maintenance of GPS
satellites over a long period, or that the policies of the U.S. Government for
the use of GPS without charge will remain
40
unchanged. However, a 1996 Presidential Decision Directive marks the first time
in the evolution of GPS that access for civilian use free of direct user fees is
specifically recognized and supported by Presidential policy. In addition,
Presidential policy has been complemented by corresponding legislation, signed
into law. Because of ever-increasing commercial applications of GPS, other U.S.
Government agencies may become involved in the administration or the regulation
of the use of GPS signals. Any of the foregoing factors could affect the
willingness of buyers of our products to select GPS-based systems instead of
products based on competing technologies. Any resulting change in market demand
for GPS products could have a material adverse effect on our financial results.
For example, European governments have expressed interest in building an
independent satellite navigation system, known as Galileo. Depending on the as
yet undetermined design and operation of this system, there may be interference
to the delivery of the GPS SPS and may materially and adversely affect the
utility and reliability of our products, which could result in a material
adverse effect on our business and operating results.
We Are Reliant on a Continuous Power Supply.
California recently experienced an energy crisis that threatened to disrupt
our operations and resulted in increased expenses for our California facilities.
In the event of an acute power shortage, that is, when power reserves for the
State of California fall below certain critical levels, California has on some
occasions implemented, and may in the future continue to implement, rolling
blackouts throughout the state. We currently do not have adequate backup
generators or alternate sources of power in the event of a blackout, and our
current insurance does not provide coverage for any damages we or our customers
may suffer as a result of any interruption in our power supply. If blackouts
interrupt our power supply or Solectron's power supply, we would be temporarily
unable to continue operations at our California facilities. Any such
interruption in our ability to continue operations at our facilities or
Solectron's ability to manufacture product at its facilities could damage our
reputation, harm our ability to retain existing customers and to obtain new
customers, and could result in lost revenue, any of which could substantially
harm our business and results of operations.
We Must Carefully Manage Our Future Growth.
Any continued growth in our sales or any continued expansion in the scope
of our operations could strain our current management, financial, manufacturing
and other resources and may require us to implement and improve a variety of
operating, financial and other systems, procedures and controls. Specifically we
have experienced strain in our financial and order management system, as a
result of our acquisitions. While we plan to expand our sales, accounting,
manufacturing, and other information systems to meet these challenges, there can
be no assurance that these efforts will succeed, or that any existing or new
systems over time, procedures or controls will be adequate to support our
operations or that our systems, procedures and controls will 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.
New Accounting Standards
In August 2001, the Financial Accounting Standards Board issued FAS No.
144, "Accounting for the Impairment or Disposal of Long-lived Assets". FAS No.
144 supercedes FAS No. 121, "Accounting for the Impairment of Long-lived Assets
and Assets to be Disposed of" and the accounting and reporting provisions of
Accounting Principles Board Opinion No. 30, "Reporting the Results of Operations
- -Reporting the Effects of Disposal of a Segment of a Business, and
Extraordinary, Unusual and Infrequently Occurring Events and Transactions." FAS
No. 144 also amends Accounting Research Bulletin No. 51, "Consolidated Financial
Statements," to eliminate the exception to consolidation for a subsidiary for
which control is likely to be temporary. The provisions of FAS No. 144 will be
effective for fiscal years beginning after December 15, 2001. The effect of
adopting FAS No. 144 has been evaluated by the Company, and does not have a
material adverse effect on Trimble's financial position or results of
operations.
In June 2001, the Financial Accounting Standards Board issued Statements of
Financial Accounting Standards No. 141, Business Combinations, and No. 142,
Goodwill and Other Intangible Assets. Statement 141 requires that the purchase
method of accounting be used for all business combinations initiated after June
30, 2001. Statement 141 also includes guidance on the initial recognition and
measurement of goodwill and other intangible
41
assets arising from business combinations completed after June 30, 2001.
Statement 142 prohibits the amortization of goodwill and intangible assets with
indefinite useful lives. Statement 142 requires that these assets be reviewed
for impairment at least annually. Intangible assets with finite lives will
continue to be amortized over their estimated useful lives. Additionally,
Statement 142 requires that goodwill included in the carrying value of equity
method investments no longer be amortized.
The Company will apply Statement 142 beginning in the first quarter of
2002. Application of the nonamortization provisions of Statement 142 will
significantly reduce amortization expense which was approximately $26.8 million
in fiscal 2001. The Company will reclassify identifiable intangible assets with
indefinite lives, as defined by Statement 142, to goodwill at the date of
adoption. The Company will test goodwill for impairment using the two-step
process prescribed in Statement 142. The first step is a screen for potential
impairment, while the second step measures the amount of the impairment, if any.
The Company expects to perform the first of the required impairment tests of
goodwill and indefinite lived intangible assets as of January 1, 2002 in the
first quarter of 2002. Any impairment charge resulting from these transitional
impairment tests will be reflected as the cumulative effect of a change in
accounting principle in the first quarter of 2002. Based on the preliminary
unaudited analysis completed to date, we do not believe that the application of
these statements will have an adverse material impact on the earnings and
financial position of the Company.
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. Trimble uses certain derivative financial
instruments to manage these risks. Trimble does not use derivative financial
instruments for speculative or trading purposes. All financial instruments are
used in accordance with polices approved by Trimble's board of directors.
Market Interest Rate Risk
The Company is exposed to market risk due to the possibility of changing
interest rates under its senior secured credit facilities. The Company's credit
facilities are comprised of a three-year US dollar-only revolver, a three-year
Multi-Currency revolver, and a five-year term loan. 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 the Company's leverage ratio. As of
December 28, 2001, our senior debt to EBITDA (senior leverage ratio) was
approximately 2.25. At this leverage ratio our pricing will be LIBOR plus 225
basis points. The U.S. dollar and the Multi-Currency revolvers run through July
2003 and have outstanding principal balances at December 28, 2001 of $30.0
million and $10.0 million, respectively. As of December 28, 2001 the Company has
borrowed from the Multi-Currency revolver in U.S. currency only. The term loan
runs through July 2005 and has an outstanding principal balance of $61.3 million
at December 28, 2001. The three-month LIBOR effective rate at December 28, 2001
was 1.9%. A hypothetical ten percent increase in three-month LIBOR rates could
result in approximately $193,000 annual increase in interest expense on the
existing principal balances.
In order to reduce variable interest rate exposure on borrowings under its
existing credit facility, Trimble had an interest rate swap agreement on a
portion of the variable rate debt, which fixes the rate on the notional amount
of $25.0 million at 5.195%. This agreement expired in February 2002 and was not
renewed.
The Company also has $3.3 million of Euro-denominated debt, classified as a
current liability at the end of fiscal 2001. The interest rate on this
instrument is fixed at six percent. A hypothetical ten percent decrease in
interest rates would not have a material impact on the results of operations of
the Company as related to this debt.
In addition, the Company has a $1.9 million promissory note, of which
$87,000 was classified as a current liability at the end of fiscal 2001. The
note is payable in monthly installments, bearing a variable interest rate of
7.14% as of December 28, 2001. A hypothetical ten percent increase in interest
rates would not have a material impact on the results of operations of the
Company.
* 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 Trimble's management, should
42
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
Trimble 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 intercompany 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. All hedge instruments are marked to market
through earnings every period. Certain intercompany transactions such as the
sale of products between our Spectra Precision Group entities are not
specifically hedged utilizing forward contracts, because the Company believes
that it has a natural hedge through its worldwide operating structure. The
Company's practice is to settle these intercompany transactions on a timely
basis which reduces our exposure to fluctuations in exchange rate movements.
* Trimble does not anticipate any material adverse effect on its
consolidated financial position utilizing our current hedging strategy.
All forward contracts have a maturity of less than six months, and we do
not defer any gains and losses with respect to such contracts, as they are all
accounted for through earnings in each period.
The following table provides information about Trimble's foreign exchange
forward contracts outstanding as of December 28, 2001:
Foreign Currency Contract Value Fair Value in
Amount USD USD
Currency Buy/Sell (in thousands) (in thousands) (in thousands)
- ----------------------- --------------------- -------------------- --------------------- --------------------
EURO Sell 3,769 $ 3,365 $ 3,332
EURO Buy 800 $ 716 $ 712
STERLING Buy 298 $ 423 $ 433
YEN Sell 225,000 $ 1,903 $ 1,714
YEN Buy 44,000 $ 363 $ 335
The following table provides information about the Company's foreign
exchange forward contracts outstanding as of December 29, 2000:
Foreign Currency Contract Value Fair Value in
Amount USD USD
Currency Buy/Sell (in thousands) (in thousands) (in thousands)
- ----------------------- --------------------- -------------------- --------------------- --------------------
YEN Sell 125,600 $ 1,136 $ 1,106
NZD Buy 4,619 $ 1,934 $ 2,045
NZD Sell 200 $ 80 $ 89
EURO Sell 4,109 $ 3,569 $ 3,863
STERLING Buy 1.665 $ 2,416 $ 2,489
43
Item 8. Financial Statements and Supplementary Data
CONSOLIDATED BALANCE SHEETS
December 28, December 29,
2001 2000
- --------------------------------------------------------------------- ---------------- ------------------
(In thousands)
ASSETS
Current assets:
Cash and cash equivalents $ 31,078 $ 40,876
Accounts receivable, less allowance for doubtful accounts of
$8,540 and $6,538, respectively 71,680 83,600
Inventories 51,810 58,970
Other current assets 6,536 8,017
---------------- ------------------
Total current assets 161,104 191,463
Property and equipment, at cost less accumulated depreciation 27,542 34,059
Goodwill and other purchased intangible assets, less accumulated
amortization 220,304 249,832
Deferred income taxes 383 531
Other assets 10,062 12,743
---------------- ------------------
Total long-term assets 258,291 297,165
---------------- ------------------
Total assets $ 419,395 $ 488,628
================ ==================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Bank and other short-term borrowings $ 40,025 $ 62,000
Current portion of long-term debt 23,443 51,721
Accounts payable 21,494 26,448
Accrued compensation and benefits 13,786 16,771
Accrued liabilities 24,138 26,660
Accrued interest expense 3,616 3,957
Accrued warranty expense 6,827 7,749
Income taxes payable 7,403 5,005
Deferred gain on sale of assets 1,068 1,591
---------------- ------------------
Total current liabilities 141,800 201,902
Noncurrent portion of long-term debt and other liabilities 127,097 137,341
Deferred income tax 7,347 8,230
Other noncurrent liabilities 4,662 6,212
---------------- ------------------
Total liabilities 280,906 353,685
---------------- ------------------
Commitments and Contingencies
Shareholders' equity:
Preferred stock no par value; 3,000 shares authorized; none
outstanding -- --
Common stock, no par value; 40,000 shares authorized;
26,862, and 24,162 shares outstanding, respectively 191,224 154,846
Accumulated deficit (33,819) (10,940)
Accumulated other comprehensive loss (18,916) (8,963)
---------------- ------------------
Total shareholders' equity 138,489 134,943
---------------- ------------------
Total liabilities and shareholders' equity $ 419,395 $ 488,628
================ ==================
See accompanying notes to consolidated financial statements.
44
CONSOLIDATED STATEMENTS OF OPERATIONS
December 28, December 29, December 31,
Fiscal Years Ended 2001 2000 1999
- ---------------------------------------------------- ---------------- ---------------- ------------------
(In thousands, except per share data)
Revenue $ 475,292 $ 369,798 $ 271,364
Cost of sales 238,057 173,237 127,117
---------------- ---------------- ------------------
Gross Margin 237,235 196,561 144,247
Operating expenses
Research and development 62,881 46,520 36,493
Sales and marketing 103,778 79,901 53,543
General and administrative 37,407 30,514 33,750
Restructuring charges 3,599 -- --
Amortization of goodwill and other
purchased intangibles 29,389 13,407 --
---------------- ---------------- ------------------
Total operating expenses 237,054 170,342 123,786
---------------- ---------------- ------------------
Operating income from continuing
operations 181 26,219 20,461
Nonoperating income (expense), net
Interest income 1,118 4,478 3,857
Interest expense (22,224) (14,438) (3,394)
Foreign exchange gain (loss) (237) (376) 28
Other income (expense) (430) (123) (217)
---------------- ---------------- ------------------
Total nonoperating income (expense), net (21,773) (10,459) 274
---------------- ---------------- ------------------
Income (loss) before income taxes from
continuing operations (21,592) 15,760 20,735
Income tax provision 1,900 1,575 2,073
---------------- ---------------- ------------------
Net income (loss) from continuing operations (23,492) 14,185 18,662
---------------- ---------------- ------------------
Gain on disposal of discontinued
operations (net of tax) 613 -- 2,931
---------------- ---------------- ------------------
Net income (loss) $ (22,879) $ 14,185 $ 21,593
================ ================ ==================
Basic net income (loss) per share from
continuing operations $ (0.95) $ 0.60 $ 0.83
Basic net income per share from
discontinued operations 0.02 -- 0.13
---------------- ---------------- ------------------
Basic net income (loss) per share $ (0.93) $ 0.60 $ 0.96
================ ================ ==================
Shares used in calculating basic
earnings per share 24,727 23,601 22,424
================ ================ ==================
Diluted net income (loss) per share from
continuing operations $ (0.95) $ 0.55 $ 0.82
Diluted net income per share from
discontinued operations 0.02 -- 0.13
---------------- ---------------- ------------------
Diluted net income (loss) per share $ (0.93) $ 0.55 $ 0.95
================ ================ ==================
Shares used in calculating diluted
earnings per share 24,727 25,976 22,852
================ ================ ==================
See accompanying notes to consolidated financial statements.
45
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
Common stock
and warrants
----------------------------
Accumulative
Retained other Total
earnings comprehensive shareholders'
Shares Amount (deficit) income/(loss) Equity
- -------------------------------------------------- ------------ ------------- ---------------- ---------------- -----------------
(In thousands)
Balance at January 1, 1999 22,247 $ 122,201 $ (46,718) $ (792) $ 74,691
Components of comprehensive income (loss):
Net income 21,593 21,593
Unrealized loss on short-term investments (142) (142)
Currency translation adjustments (107) (107)
-----------------
Comprehensive income (loss) 21,344
-----------------
Subtotal 96,035
-----------------
Issuance of stock under employee plans 495 4,468 4,468
Issuance of warrants -- 293 293
------------ ------------- ---------------- ---------------- -----------------
Balance at December 31, 1999 22,742 126,962 (25,125) (1,041) 100,796
Components of comprehensive income (loss):
Net income 14,185 14,185
Unrealized gain on short-term investments 123 123
Currency translation adjustments (8,045) (8,045)
-----------------
Comprehensive income (loss) 6,263
-----------------
Subtotal 107,059
-----------------
Issuance of stock under employee plans and
exercise of warrants 843 12,043 12,043
Issuance of stock for acquisition 577 14,995 14,995
Issuance of warrants -- 846 846
------------ ------------- ---------------- ---------------- -----------------
Balance at December 29, 2000 24,162 154,846 (10,940) (8,963) 134,943
Components of comprehensive income (loss):
Net loss (22,879) (22,879)
Loss on interest rate swap (203) (203)
Unrealized gain on investments 16 16
Currency translation adjustments (9,766) (9,766)
-----------------
Comprehensive income (loss) (32,832)
-----------------
Subtotal 102,111
-----------------
Issuance of stock under employee plans and
exercise of warrants 917 11,344 11,344
Issuance of stock for private placement 1,783 25,034 25,034
------------ ------------- ---------------- ---------------- -----------------
Balance at December 28, 2001 26,862 $ 191,244 $ (33,819) $ (18,916) $ 138,489
============ ============= ================ ================ =================
See accompanying notes to consolidated financial statements.
46
CONSOLIDATED STATEMENTS OF CASH FLOWS
December 28, December 29, December 31,
Fiscal Years Ended 2001 2000 1999
- --------------------------------------------------------- ----------------- ----------------- -----------------
(In thousands)
Cash flow from operating activities:
Net income (loss) $ (22,879) $ 14,185 $ 18,662
Adjustments to reconcile net income (loss) to cash
flows provided by operating activities:
Depreciation expense 11,218 9,139 8,112
Amortization expense 30,306 14,337 961
Gain on sale of fixed assets (135) -- --
Amortization of deferred gain (1,584) (2,555) (651)
Amortization of debt issuance cost 960 440 --
Deferred income taxes (887) (908) 18
Other (508) (2,505) 56
Decrease (increase) in assets:
Accounts receivable, net 11,919 (6,091) (2,574)
Inventories 7,442 (5,994) 6,653
Other current and noncurrent assets 2,393 (3,743) (354)
Effect of foreign currency translation adjustment (4,538) (1,116) (107)
Increase (decrease) in liabilities:
Accounts payable (4,954) 7,554 (1,290)
Accrued compensation and benefits (3,112) (6,362) 2,315
Customer advances -- -- (808)
Accrued liabilities (2,946) 5,595 (8,193)
Income taxes payable 2,398 (2,141) 825
----------------- ----------------- -----------------
Net cash provided by operating activities 25,093 19,835 23,625
----------------- ----------------- -----------------
Cash flow from investing activities:
Equity investments -- 35 (748)
Acquisition of property and equipment (7,254) (7,555) (6,411)
Proceeds from sale of assets 1,177 -- 26,863
Acquisitions, net of cash acquired (4,430) (211,488) --
Costs of capitalized patents (934) (900) (1,127)
Purchase of short-term investments -- (6,458) (54,809)
Maturities/sales of short-term investments -- 59,186 18,350
----------------- ----------------- -----------------
Net cash used by investing activities (11,441) (167,180) (17,882)
----------------- ----------------- -----------------
Cash flow from financing activities:
Issuance of common stock and warrants 36,378 12,043 4,468
(Payment)/collection of notes receivable 872 196 (540)
Proceeds from long-term debt and revolving credit
lines 30,062 162,000 --
Payments on long-term debt and revolving credit
lines (90,762) (35,282) (1,272)
----------------- ----------------- -----------------
Net cash provided (used) by financing activities (23,450) 138,957 2,656
----------------- ----------------- -----------------
Increase (decrease) in cash and cash equivalents (9,798) (8,388) 8,399
Cash and cash equivalents, beginning of period 40,876 49,264 40,865
----------------- ----------------- -----------------
Cash and cash equivalents, end of period $ 31,078 $ 40,876 $ 49,264
================= ================= =================
See accompanying notes to consolidated financial statements.
47
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 Navigation Limited ("Trimble" or "the Company") has a 52-53 week
fiscal year, ending on the Friday nearest to December 31, which for fiscal 2001
was December 28, 2001. The Company's fiscal year normally consists of 52 weeks
divided into four equal quarters of 13 weeks each. However, due to the fact that
there are not exactly 52 weeks in a calendar year and that there is slightly
more than one additional day per calendar year, as compared to a 52-week fiscal
year, the Company will have a fiscal year composed of 53 weeks in certain fiscal
years.
In those resulting fiscal years that have 53 weeks, Trimble will record an
extra week of revenues, costs and related financial activity. Therefore, the
financial results of those fiscal years and the associated quarter, having the
extra week, will not be exactly comparable to the prior and subsequent 52-week
fiscal years and the associated quarters having only 13 weeks. Thus, due to the
inherent nature of adopting a 52-53 week fiscal year, Trimble, analysts,
shareholders, investors and others will have to make appropriate adjustments to
any analysis performed when comparing the Company's activities and results in
fiscal years that contain 53 weeks, to those that contain the standard 52 weeks.
Fiscal years 2001, 2000 and 1999 were all comprised of 52 weeks. The next
53-week year will be fiscal year 2002.
The consolidated financial statements include the results of Trimble and
its subsidiaries. Intercompany accounts and transactions have been eliminated.
Certain amounts from prior years have been reclassified to conform to the
current year presentation.
Foreign Currency Translation.
Assets and liabilities of Trimble's foreign subsidiaries are translated
into U.S. dollars at year-end exchange rates, and revenues and expenses are
translated at average rates prevailing during the year. Local currencies are
considered to be the functional currencies for the Company's non-U.S.
subsidiaries. Translation adjustments are included in shareholders' equity in
the consolidated balance sheet caption "Accumulated other comprehensive income
(loss)." Foreign currency transaction gains and losses are included in results
of operations as incurred, and have not been significant to the Company's
operating results in any fiscal year. The effect of foreign currency rate
changes on cash and cash equivalents is not material.
Cash and Cash Equivalents.
Cash and cash equivalents include all cash and highly liquid investments
with insignificant interest rate risk and original maturities of three months or
less. The carrying amount of cash and cash equivalents approximates fair value
because of the short maturity of those instruments.
Concentration of Risk.
In entering into forward foreign exchange contracts, Trimble has assumed
the risk that might arise from the possible inability of counterparties to meet
the terms of their contracts. The counterparties to these contracts are major
multinational commercial banks, and Trimble does not expect any losses as a
result of counterparty defaults (see Note 6). Trimble is also exposed to credit
risk in its trade receivables, which are derived from sales to end user
48
customers in diversified industries, as well as various resellers. The Company
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 the Company's GPS products, the Company is
substantially dependent upon a sole supplier for the manufacture of its
products. In addition, The Company relies on sole suppliers for a number of its
critical components.
The majority of Trimble product sales use GPS as the positioning
technology. GPS is a system of 28 orbiting Navstar satellites established and
funded by the U.S. government, which has been fully operational since March
1995. A significant reduction in the number of operating satellites would impair
the current utility of the GPS system and the growth of current and additional
market opportunities. In addition, there can be no assurance that the U.S.
government will remain committed to the operation and maintenance of GPS
satellites over a long period, or that the policies of the U.S. Government for
the use of GPS without charge will remain unchanged.
Allowance for Doubtful Accounts.
Trimble maintains allowances for doubtful accounts for estimated losses
resulting from the inability of its customers to make required payments. If the
financial condition of the Company's customers were to deteriorate, resulting in
an impairment of their ability to make payments, additional allowances may be
required. The expenses recorded for doubtful accounts were approximately $5.1
million in fiscal 2001, $1.2 million in fiscal 2000, and $1.9 million in fiscal
1999.
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 writes down 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 Long-lived Assets.
Intangible assets include goodwill, assembled workforce, distribution
channels, patents, licenses, technology and trademarks, which are capitalized at
cost and amortized on the straight-line basis over their estimated useful lives.
Useful lives generally range from 2 to 10 years. Goodwill is amortized over 20
years, except for goodwill from the Grid Data purchase, which is amortized over
5 years.
If facts and circumstances indicate that the goodwill, other intangible
assets or property and equipment may be impaired, an evaluation of continuing
value would be performed. If an evaluation is 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.
Starting in fiscal 2002, Trimble will adopt FAS 142 (see "New accounting
standards" section below). Intangible assets relating to assembled workforce and
distribution channels will be reclassified as goodwill and goodwill will no
longer be amortized.
Revenue Recognition.
The Company designs, markets, and distributes products that determine
precise geographic location or position, sometimes combined with data
communications and applications software. Trimble sells its products through a
network of direct salespeople, OEMs, VARs, independent dealers, distributors and
authorized sales representatives supported by sales offices throughout the
world.
49
Trimble's revenues are recorded in accordance with the Securities and
Exchange Commission's (SEC) Staff Accounting Bulletin (SAB) No. 101, "Revenue
Recognition." Trimble requires the following: (i) execution of a written
customer order, (ii) delivery of the product, (iii) fee is fixed and
determinable, and (iv) collectibility of the proceeds is probable. The Company
recognizes revenue from product sales when the products are shipped to the
customer, title has transferred, and no significant obligations remain. The
Company defers revenue if there is uncertainty about customer acceptance.
Deferred revenue is included in accrued liabilities on the consolidated balance
sheet. The Company reduces product revenue for estimated customer returns, and
any discount which may occur under programs the Company has with its customers
and partners.
The Company's shipment terms for domestic orders are typically FOB shipping
point. International orders are typically shipped FOB destination, and
accordingly international orders are not recognized as revenue until the product
is delivered and title has transferred.
Revenues from purchased extended warranty and support agreements are
deferred and recognized ratably over the term of the warranty/support period.
Substantially all technology licenses and research revenue have consisted of
initial license fees and royalties, which were recognized when earned, provided
Trimble has no remaining obligations.
Sales to distributors and resellers are recognized upon shipment providing
that there is evidence of the arrangement through a distribution agreement or
purchase order, title has transferred, no remaining performance obligations
exist, the price and terms of the sale are fixed and collection is probable.
Distributors and resellers do not have a right of return.
The Company's software arrangements consist of a license fee and post
contract customer support (PCS). The Company has established vendor specific
objective evidence (VSOE) of fair value for its PCS contracts based on the price
of the renewal rate. The remaining value of the software arrangement is
allocated to license fee using the residual method, which revenue is primarily
recognized when the software has been delivered and there are no remaining
obligations. Revenue from PCS is recognized ratably over the period of the PCS
agreement.
Product Warranty.
Trimble provides for the estimated cost of product warranties at the time
revenue is recognized. The warranty period is generally between one to three
years from date of shipment. In addition, select military programs may require
extended warranty periods and certain products sold by Tripod Data Systems have
a 90 day warranty period. While the Company engages in extensive product quality
programs and processes, including actively monitoring and evaluating the quality
of component suppliers, the Company's 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.
Advertising Costs.
Trimble expenses advertising costs as incurred. Advertising expenses were
approximately $6.8 million, $7.9 million and $4.2 million in fiscal 2001, 2000
and 1999, respectively.
Research and Development Costs.
Research and development costs are charged to expense when incurred.
Trimble has received third party funding of approximately $4.1 million, $4.8
million and $7.1 million in fiscal 2001, 2000, and 1999, respectively. The
Company offsets research and development expenses with any third party funding
received. Trimble retains the rights to any technology developed.
50
Stock Compensation.
In accordance with the provisions of Statement of Financial Accounting
Standards (SFAS) No. 123, "Accounting for Stock-Based Compensation," 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, it does not recognize
compensation cost for stock options granted at or above market. Note 16 to the
Consolidated Financial Statements describes the plans operated by Trimble, and
contains a summary of the pro forma effects to reported net income (loss) and
earnings (loss) per share for fiscal 2001, 2000 and 1999 as if Trimble had
elected to recognize compensation cost based on the fair value of the options
granted at grant date, as prescribed by SFAS No. 123.
Depreciation.
Depreciation of property and equipment owned or under capitalized leases is
computed using the straight-line method over the shorter of the estimated useful
lives or the lease terms. Useful lives include a range from two to four years
for machinery and equipment, four to five years for furniture and fixtures, and
four to five years for leasehold improvements.
Income Taxes.
Income taxes are accounted for under the liability method whereby deferred
tax asset or liability account balances are calculated at the balance sheet date
using current tax laws and rates in effect for the year in which the differences
are expected to affect taxable income. A valuation allowance is recorded to
reduce the carrying amounts of deferred tax assets if it is more likely than not
that such assets will not be realized.
Earnings (Loss) Per Share.
Number of shares used in calculation of basic earnings per share represents
the weighted average common shares outstanding during the period and excludes
any dilutive effects of options, warrants, and convertible securities. The
dilutive effects of options, warrants, and convertible securities are included
in diluted earnings per share.
New Accounting Standards.
In August 2001, the Financial Accounting Standards Board issued FAS No.
144, "Accounting for the Impairment or Disposal of Long-lived Assets." FAS No.
144 supercedes FAS No. 121, "Accounting for the Impairment of Long-lived Assets
and Assets to be Disposed of" and the accounting and reporting provisions of
Accounting Principles Board Opinion No. 30, "Reporting the Results of Operations
Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary,
Unusual and Infrequently Occurring Events and Transactions." FAS No. 144 also
amends Accounting Research Bulletin No. 51, "Consolidated Financial Statements,"
to eliminate the exception to consolidation for a subsidiary for which control
is likely to be temporary. The provisions of FAS No. 144 will be effective for
fiscal years beginning after December 15, 2001. The effect of adopting FAS No.
144 has been evaluated by the Company, and does not have a material adverse
effect on Trimble's financial position or results of operations.
In June 2001, the Financial Accounting Standards Board issued Statements of
Financial Accounting Standards No. 141, Business Combinations, and No. 142,
Goodwill and Other Intangible Assets. Statement 141 requires that the purchase
method of accounting be used for all business combinations initiated after June
30, 2001. Statement 141 also includes guidance on the initial recognition and
measurement of goodwill and other intangible assets arising from business
combinations completed after June 30, 2001. Statement 142 prohibits the
amortization of goodwill and intangible assets with indefinite useful lives.
Statement 142 requires that these assets be reviewed for impairment at least
annually. Intangible assets with finite lives will continue to be amortized over
their estimated useful lives. Additionally, Statement 142 requires that goodwill
included in the carrying value of equity method investments no longer be
amortized.
51
The Company will apply Statement 142 beginning in the first quarter of
2002. Application of the nonamortization provisions of Statement 142 will
significantly reduce amortization expense which was approximately $26.8 million
in fiscal 2001. The Company will reclassify identifiable intangible assets with
indefinite lives, as defined by Statement 142, to goodwill at the date of
adoption. The Company will test goodwill for impairment using the two-step
process prescribed in Statement 142. The first step is a screen for potential
impairment, while the second step measures the amount of the impairment, if any.
The Company expects to perform the first of the required impairment tests of
goodwill and indefinite lived intangible assets as of January 1, 2002 in the
first quarter of 2002. Any impairment charge resulting from these transitional
impairment tests will be reflected as the cumulative effect of a change in
accounting principle in the first quarter of 2002. Based on the preliminary
unaudited analysis completed to date, the Company does not believe that the
application of these statements will have an adverse material impact on the
earnings and financial position of the Company.
Trimble adopted Statement of Financial Accounting Standards No. 133, (SFAS
133) "Accounting for Derivative Instruments and Hedging Activities," at the
beginning of fiscal 2001. The effect of adopting SFAS 133 did not have a
material impact on the Company's financial position or results of operations.
Note 2 - Acquisitions:
The following is a summary of acquisitions made by the Company during
fiscal 2001 and fiscal 2000, all of which were accounted for as purchases:
Acquisition Primary Service or Product Acquisition Date
- ------------------------------------- -------------------------------------------- --------------------------
Spectra Precision Group Optical and laser products July 14, 2000
Tripod Data Systems Software for data collection applications November 14, 2000
Grid Data Wireless Application Service Provider April 2, 2001
The Company's consolidated financial statements include the results of
operations of acquired companies commencing on the date of acquisition. The
total purchase consideration for each of the above acquisitions was allocated to
the assets acquired and liabilities assumed based on their estimated fair values
as of the date of acquisition. The Grid Data transaction was an asset purchase.
Goodwill represents the excess of purchase consideration over the fair
value of the assets, including identifiable intangible assets, net of the fair
value of liabilities assumed. Goodwill and intangible assets related to the
acquisitions are amortized to expense on a straight-line basis over their
estimated useful lives. Useful lives range generally from 3 to 10 years.
Goodwill is amortized over 20 years, except for goodwill on Grid Data which is
amortized over 5 years
52
Allocation of Purchase Consideration
The following is a summary of purchase price, acquisition costs and
purchase price allocation of the Spectra Precision Group, Tripod Data Systems,
and Grid Data acquisitions:
Spectra Precision Group Tripod Data Systems Grid Data
--------------------------- ---------------------- -----------------------
(In thousands)
Purchase price $293,800 $14,995 $3,504
Acquisition costs 7,719 391 50
Restructuring costs 7,851 - -
----------- --------- ---------
Total purchase price $309,370 $15,386 $3,554
=========== ========= =========
Purchase Price Allocation:
Fair value of tangible net assets acquired 65,913 4,261 204
Deferred tax (9,138) - -
Identified intangible assets:
Distribution Channel 78,600 - -
Existing Technology 25,200 - -
Assembled Workforce 18,300 - -
Trade names, trade marks, patents, and
other intellectual properties 10,800 - -
Goodwill 119,695 11,125 3,350
----------- --------- ----------
Total $309,370 $15,386 $3,554
=========== ========= ==========
Spectra Precision Group
Spectra Precision, a group of wholly-owned businesses, formerly owned by
Thermo Electron Corporation, collectively known as the "Spectra Precision
Group," was acquired on July 14, 2000. The acquisition was completed for an
aggregate purchase price, excluding acquisition and restructuring costs, of
approximately $293.8 million. Subsequently, in March 2002, the purchase price
was adjusted by $1.1 million as a result of the completion of final negotiations
with Thermo Electron relating to certain assets and liabilities acquired. This
adjustment subsequently decreased the purchase price to approximately $292.7
million and goodwill to approximately $118.6 million. The acquisition included
100% of the stock of Spectra Precision Inc., a Delaware corporation, Spectra
Precision SRL, an Italian corporation, Spectra Physics Holdings GmbH, a German
corporation, and Spectra Precision BV, a Netherlands corporation. The
acquisition also included certain assets and liabilities of Spectra Precision
AB, a Swedish corporation, including 100% of the shares of Spectra Precision SA,
a French corporation, Spectra Precision Scandinavia AB, a Swedish corporation,
Spectra Precision of Canada Ltd., a Canadian corporation, and Spectra Precision
Handelsges mbH, an Austrian corporation.
The acquisition was financed with $80 million in seller subordinated debt,
$140 million of cash provided through a syndicate of banks, and approximately
$74 million of Trimble's then available cash on hand.
Tripod Data Systems
Tripod Data Systems, Inc., an Oregon corporation was purchased on November
14, 2000 for an aggregate final purchase price of approximately $14.995 million.
The purchase price consisted of 576,726 shares of Trimble's common stock valued
at the average closing price for the five trading days proceeding the closing
date.
Grid Data
On April 2, 2002, 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, Trimble may make certain earn-out
53
payments based upon the completion of certain business milestones. If the first
milestone is achieved by April 2, 2002, 218,352 shares of Trimble common stock
will be paid out. If the first milestone is achieved and a second milestone is
completed by October 2, 2003, an additional 141,928 shares of Trimble common
stock will be paid out. However, if at the time the second milestone is achieved
Trimble's common stock is at a price less than an undisclosed price per share,
then Trimble, at its option, may pay $3.25 million in cash or $3.25 million
worth of Trimble common stock, valued on the date that the second milestone is
achieved. The additional consideration, if earned, will result in additional
goodwill.
Spectra Precision Group Restructuring Activities
At the time the Company acquired the Spectra Precision Group, the Company
formulated a restructuring plan and provided approximately $9.0 million for
costs to close certain duplicative office facilities, combine operations
including redundant domestic and foreign legal entities, reduce workforce in
overlapping areas, and relocate certain employees. These costs were accrued for
as part of the allocation of the purchase price. Included in the total cost was
approximately $2.7 million related to the discontinuance of overlapping product
lines which was included in our reserve for excess and obsolete inventory. The
facility consolidation and employee relocations resulted primarily from
combining certain office facilities and duplicative functions, including
management functions, of the Spectra Precision Group. As of the end of fiscal
2001, the Company had charged against the reserve approximately $3.3 million
which consisted of $0.9 million for legal and tax consulting expenses relating
to consolidation of legal entities, $1.3 million for severance expenses, $0.7
million for facilities and direct sales offices closures, $0.3 million for an
underfunded pension plan, and other costs of $0.1 million.
The Company revised its final estimates for costs to complete the remaining
planned activities and accordingly reduced its restructuring reserve by
approximately $1.1 million, with a corresponding adjustment to Goodwill in the
fourth quarter of fiscal 2001. The reserve balance was approximately $1.9
million at December 28, 2001, and the Company anticipates completing the
majority of its remaining restructuring activities during fiscal 2002. These
activities consist principally of legal costs and other expenses required to
combine redundant legal entities.
The elements of the reserve at December 28, 2001, on the balance sheet
(included in accrued liabilities) are as follows:
Employee Severance and Facility Closure, Legal
Relocation and Tax Expense Total
(In thousands)
Total reserve $ 1,945 $ 4,370 $ 6,315
Amounts paid/written off (1,685) (1,610) (3,295)
Revision to estimates (260) (812) (1,072)
------------------------------------------------------------------------
Balance as of December 28, 2001 $ - $ 1,948 $ 1,948
========================================================================
54
Note 3 - Unaudited Pro Forma Information:
The consolidated statements of operations of Trimble presented throughout
this report include the operating results of the acquired companies from the
date of the respective acquisitions. The following pro forma information for
fiscal 2000 and fiscal 1999 presents net revenue, net loss from continuing
operations, and net loss for each of these periods as if the transactions with
the Spectra Precision Group were consummated on January 2, 1999. The following
pro forma information does not include Tripod Data Systems and Grid Data, as
these acquisitions were not material to the Company. This unaudited pro forma
data does not purport to represent the Company's actual results of operations
had the Spectra Precision Group acquisition occurred on January 2, 1999, and
should not serve as a forecast of the Company's operating results for any future
periods.
December 28, December 29, December 31,
Fiscal Years Ended 2001 2000 1999
- ----------------------------------------------------------- --------------- ---------------- ----------------
(In thousands, except for per share amounts)
Net revenue $ 475,292 $ 491,436 $ 488,728
Net loss from continuing operations (23,492) (1,920) (17,661)
Net loss (22,879) (1,920) (14,730)
Basic net loss per share from continuing operations $ (0.95) $ (0.08) $ (0.79)
Basic net income per share from discontinued
operations 0.02 -- 0.13
--------------- ---------------- ----------------
Basic net loss per share $ (0.93) $ (0.08) $ (0.66)
Diluted net loss per share from continuing operations $ (0.95) $ (0.08) $ (0.79)
Diluted net income per share from discontinued
operations 0.02 -- 0.13
--------------- ---------------- ----------------
Diluted net loss per share $ (0.93) $ (0.08) $ (0.66)
Note 4 - Goodwill and Intangible Assets:
Goodwill and purchased intangible assets consisted of the following:
December 28, December 29,
2001 2000
- -------------------------------------------------------------------------- --------------------- ----------------------
(In thousands)
Intangible assets with indefinite life:
Distribution channel $ 73,363 $ 76,408
Assembled workforce 17,773 18,081
----------------- ------------------
Total intangible assets with indefinite life 91,136 94,489
Intangible assets with definite life:
Existing technology 23,907 24,657
Trade names, trade marks, patents, and other intellectual properties 18,394 17,859
----------------- ------------------
Total intangible assets with definite life 42,301 42,516
Goodwill, Spectra Precision acquisition 116,001 119,013
Goodwill, other acquisitions 14,710 10,812
----------------- ------------------
264,148 266,830
Less accumulated amortization (43,844) (16,998)
----------------- ------------------
$ 220,304 $ 249,832
================ ==================
Intangible assets with an indefinite life consist of distribution channel
and assembled workforce. Intangible assets with a definite life consist of
existing technology, trade names, trademarks, patents and other intellectual
55
properties. The decrease in value of distribution channel, existing technology,
and assembled workforce from date of acquisition of the Spectra Precision Group,
to year end of 2000 and 2001, was principally due to foreign currency
translation differences related to foreign subsidiaries. The increase in
goodwill for other acquisitions is mainly due to the Grid Data asset acquisition
completed in April 2001.
Upon adoption of FAS 142 in fiscal 2002, the Company will no longer
amortize goodwill and intangible assets with indefinite lives will be
reclassified to goodwill.
Note 5 - Certain Balance Sheet Components:
Inventories consisted of the following:
December 28, December 29,
2001 2000
- ------------------------------------------------------------ ------------------
(In thousands)
Raw materials $ 25,790 $ 27,878
Work-in-process 7,177 6,940
Finished goods 18,843 24,152
------------------ ------------------
$ 51,810 $ 58,970
================== ==================
Property and equipment consisted of the following:
December 28, December 29,
2001 2000
- ------------------------------------------------------------ ------------------
(In thousands)
Machinery and equipment $ 66,265 $ 67,245
Furniture and fixtures 6,367 6,994
Leasehold improvements 5,882 5,633
Buildings 3,979 7,948
Land 1,657 1,905
----------------- ------------------
84,150 89,725
Less accumulated depreciation (56,608) (55,666)
----------------- ------------------
$ 27,542 $ 34,059
================= ==================
Other current assets consisted of the following:
December 28, December 29,
2001 2000
- ------------------------------------------------------------ ------------------
(In thousands)
Notes receivable $ 2,130 $ 3,002
Prepaid expenses 4,150 4,778
Other 256 237
------------------ -----------------
$ 6,536 $ 8,017
================== =================
56
Other noncurrent assets consisted of the following:
December 28, December 29,
2001 2000
- ------------------------------------------------------------ ------------------
(In thousands)
Debt issuance costs, net $ 3,046 $ 4,008
Other investments 2,737 3,438
Deposits 1,241 1,405
Other 3,038 3,892
----------------- ------------------
$ 10,062 $ 12,743
================= ==================
Note 6 - Derivative Financial Instruments:
Interest Rate Swap
In order to reduce variable interest rate exposure on borrowings under its
existing credit facility, Trimble has an interest rate swap agreement on a
portion of the variable rate debt, which fixes the rate on a notional amount of
$25.0 million at 5.195%. In accordance with SFAS No. 133, the Company has
designated its swap agreements as a cash flow hedge and recorded the change in
fair value of this hedge agreement as part of other comprehensive income. (See
also Note 18) Hedge interest payments are based on the same notional amount,
have the same reset dates and are based on the same benchmark interest rate,
therefore the Company concludes there will be no ineffectiveness in the hedge.
For fiscal 2001, the change in fair value of this derivative amounted to
$203,000 and is recorded as a reduction to other liabilities and an addition to
other comprehensive income. The fair value of this derivative as a liability
amounted to $203,000 at December 28, 2001. In February 2002, the interest rate
swap agreement expired and has not been renewed by the Company.
Forward foreign currency exchange contracts.
Trimble's policy is to hedge 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 intercompany receivables and payables. The Company enters into
forward foreign exchange contracts to either buy or sell currency if the net
foreign currency exposure exceeds $400,000. The forward foreign exchange
contract obligates Trimble to exchange predetermined amounts of specified
foreign currencies at specified exchange rates on specified dates, or to make an
equivalent U.S. dollar payment equal to the value of such exchange. For
contracts that are designated and effective as hedges, discounts or premiums
(the difference between the spot exchange rate and the forward exchange rate at
inception of the contract) are accreted or amortized to other operating expenses
over the contract lives, using the straight-line method, while realized and
unrealized gains and losses resulting from changes in the spot exchange rate
(including those from open, matured, and terminated contracts) are included in
results of operations. Contract amounts are marked to market, with changes in
market value recorded in earnings as foreign exchange gains or losses. To date,
Trimble has entered into forward foreign currency exchange contracts to offset
the effects of changes in exchange rates on foreign-denominated intercompany
receivables. At December 28, 2001, Trimble had forward foreign currency exchange
contracts to sell approximately 181.0 million Japanese yen, approximately 3.0
million Euros, and to buy approximately 0.3 million British pounds sterling at
contracted rates that mature over the next six months ending June 30, 2002.
NOTE 7 - Discontinued Operations:
On October 2, 1998, Trimble adopted a plan to discontinue its General
Aviation division. Accordingly, the General Aviation division is being reported
as a discontinued operation for all periods presented in these financial
statements. Net assets of the discontinued operation at October 2, 1998 were
written off and consisted primarily of inventory, property, plant and equipment
and intangible assets. The estimated loss on disposal recorded in fiscal 1998
was $20.3 million.
57
In fiscal 1999, the Company revised its accrual for the remaining costs
expected to be incurred based on the status of the related liabilities
associated with the disposal of the discontinued General Aviation division. This
resulted in a reversal of approximately $2.9 million of prior amounts accrued
related to the discontinued operations.
During the fourth quarter of fiscal 2001, the Company re-evaluated the
adequacy of its accrual for the remaining obligations under the General Aviation
discontinued product line. This resulted in reversal of approximately $0.6
million of prior amounts accrued related to the discontinued operations.
As of December 28, 2001, Trimble did not have any remaining accrual balance
nor any obligations associated with the discontinuation of the General Aviation
division
NOTE 8 - Disposition of Line of Business and Assets:
Disposition of Line of Business:
On March 6, 2001, the Company sold certain product lines of its Air
Transport Systems, to Honeywell Inc. for approximately $4.5 million in cash.
Under the asset purchase agreement, Honeywell International, Inc. purchased
product lines that included the HT 1000, HT 9000, HT 9100 and Trimble's TNL
8100. As part of a strategic alliance that began in 1995, Trimble and Honeywell
jointly developed, manufactured, marketed and sold the HT product line. These
products are installed in many commercial aircraft and major airlines around the
world for Global Positioning System based navigation. As part of this sale,
during the third quarter of fiscal 2001, the Company also sold other product
lines and discontinued its manufacturing operations in Austin, Texas. These
actions resulted in a loss on disposal of approximately $113,000, which is
included in nonoperating income (expense) for fiscal 2001. The Company also
incurred severance costs of approximately $1,724,000 which is included in
restructuring charges related to the termination of employees associated with
the product lines disposed of in fiscal 2001.
At December 28, 2001, the Company has a provision of $1.4 million for
related liabilities associated with the disposition of these product lines and
the discontinuance of its manufacturing operations.
Disposition of Assets:
On August 10, 1999, Trimble signed an asset purchase agreement with
Solectron Corporation and Solectron Federal Systems, Inc. (collectively,
"Solectron"). The closing of the transaction occurred on August 13, 1999. At the
closing, Trimble transferred to Solectron substantially all of Trimble's
tangible manufacturing assets located at Trimble's Sunnyvale, California campus,
including but not limited to equipment, fixtures and work in progress, and
certain contract and other intangible assets and rights, together with certain
related obligations, including but not limited to real property subleases
covering Trimble's manufacturing floor space, and outstanding purchase order
commitments. In addition, the agreement also provided for Solectron's subsequent
purchase, on August 30, 1999, of Trimble's component inventory, on hand as of
August 13, 1999.
The final purchase price for these assets was $26.9 million. Trimble
recorded a gain on the transaction of $11.0 million. This gain was offset by
certain costs incurred or accrued resulting from the transition by the Company
and included payroll for specified individuals ($1.4 million), free rent assumed
by the Company for space subleased by Solectron ($0.3 million), idle capacity on
facilities that will no longer be used ($2.9 million) and other miscellaneous
expenses ($0.4 million), netting to $5.9 million. The net gain was deferred and
is being recognized as a reduction to cost of sales, over the three-year
exclusive life of the supply agreement described below. In fiscal 2000, certain
contingencies were finalized relating to some employee and facility related
liabilities, and the deferred gain was reduced by $0.7 million.
Concurrently with the closing of the transaction, Trimble and Solectron
also entered into a supply agreement. The supply agreement provides for the
exclusive manufacture by Solectron of a significant portion of Trimble products
for the three year period ending August 13, 2002.
58
NOTE 9 - 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, which deliver integrated
information solutions, such as collecting, analyzing, and displaying position
data to its end-users. The Company 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 currently manages itself within five
segments:
o Engineering and Construction -- Consists of products currently used by
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.
o Agriculture -- Consists of products that provide key advantages in a
variety of agriculture applications, primarily in the areas of precise
land leveling, machine guidance, yield monitoring and variable-rate
applications of fertilizers and chemicals.
o Fleet and Asset Management -- Consists of products that enable
end-users to monitor and manage their mobile and fixed assets by
communicating location-relevant information from the field to the
office. The Company offers a range of products that address a number
of sectors of this market including truck fleets, security,
telematics, public safety vehicles, and fixed asset data collection
for a variety of governmental and private entities. This segment is an
aggregation of the Company's Mapping and GIS operation and the
Company's Mobile Solutions operation. The Mobile Solutions (Mobile
Positioning and Communications) operation represents 5.5% and 2.7% of
consolidated revenue in fiscal years 2000 and 2001. The Company has
aggregated this business with its Mapping and GIS operation because of
the strong similarities in customers, production process and
distribution methods as well as complementary products.
o Component Technologies -- Currently, the Company markets its 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 Company's component products include: timing
applications for synchronizing wireless and computer systems;
in-vehicle navigation and telematics (tracking) systems; fleet
management; security systems; data collection systems; and wireless
handheld consumer products.
o 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 of the Company.
Consists of various markets that use accurate position, velocity, and
timing information. These markets include the operations of the
Military Advanced Systems division and Tripod Data Systems.
Trimble evaluates each of these segment's performance and allocates
resources based on profit and loss from operations before income taxes, and some
corporate allocations.
The accounting policies applied by each of the segments are the same as
those used by Trimble in general.
The following table presents revenues, operating income (loss), and
identifiable assets for Trimble's five segments. The information includes the
operations of the Spectra Precision Group after July 14, 2000, Tripod Data
Systems after November 14, 2000 and Grid Data after April 2, 2001. Operating
income (loss) is net revenue less operating expenses, excluding general
corporate expenses, goodwill amortization, restructuring charges, nonoperating
income (expense), and income taxes. The identifiable assets that Trimble's Chief
Operating Decision Maker views by segment are accounts receivable and inventory.
59
-------------------------------------------------------------------------------------------
Fiscal Year Ended
December 28, 2001
-------------------------------------------------------------------------------------------
(in thousands)
-------------------------------------------------------------------------------------------
Engineering Fleet and Component Portfolio
and Agriculture Asset Technologies Technologies Total
Construction Management
-------------------------------------------------------------------------------------------
External net revenue $ 303,944 $ 24,632 $ 57,678 $ 58,083 $ 30,955 $ 475,292
Inter-segment net revenue 2,080 - - - (2,080) -
Operating income (loss)
before corporate
allocations 51,625 (617) 4,810 10,882 803 67,503
Corporate allocations (1) - - - - - -
----------- ---------- ----------- ------------ ----------- ------------
Operating income (loss) $ 51,625 $ (617) $ 4,810 $ 10,882 $ 803 $ 67,503
----------- ---------- ----------- ------------ ----------- ------------
Assets:
Accounts receivable(2) $ 62,471 $ 2,241 $ 12,224 $ 7,392 $ 7,249 $ 91,577
Inventory 37,246 2,513 4,118 2,490 5,463 51,830
-------------------------------------------------------------------------------------------
Fiscal Year Ended
December 29, 2000
-------------------------------------------------------------------------------------------
(in thousands)
-------------------------------------------------------------------------------------------
Engineering Fleet and Component Portfolio
and Agriculture Asset Technologies Technologies Total
Construction Management
-------------------------------------------------------------------------------------------
External net revenue $ 195,150 $ 26,024 $ 65,099 $ 60,230 $ 23,295 $ 369,798
Inter-segment net revenue - - - - - -
Operating income (loss)
before corporate
allocations 43,937 4,254 15,211 14,850 (1,540) 76,712
Corporate allocations (1) (15,120) (2,724) (8,232) (4,788) (2,687) (33,551)
----------- ---------- ----------- ----------- ----------- ------------
Operating income (loss) $ 28,817 $ 1,530 $ 6,979 $ 10,062 $ (4,227) $ 43,161
----------- ---------- ----------- ------------ ----------- ------------
Assets:
Accounts receivable(2) $ 58,693 $ 4,649 $ 12,164 $ 11,892 $ 8,522 $ 95,920
Inventory 39,146 1,774 5,775 2,360 8,074 57,129
-------------------------------------------------------------------------------------------
Fiscal Year Ended
December 31, 1999
-------------------------------------------------------------------------------------------
(in thousands)
-------------------------------------------------------------------------------------------
Engineering Fleet and Component Portfolio
and Agriculture Asset Technologies Technologies Total
Construction Management
-------------------------------------------------------------------------------------------
External net revenue $ 108,536 $ 12,837 $ 67,271 $ 58,660 $ 24,060 $ 271,364
Inter-segment net revenue - - - - - -
Operating income (loss)
before corporate
allocations 37,223 2,407 14,677 15,055 (2,598) 66,764
Corporate allocations (1) (16,067) (2,204) (8,108) (5,261) (3,422) (35,062)
----------- ---------- ----------- ----------- ----------- ------------
Operating income (loss) $ 21,156 $ 203 $ 6,569 $ 9,794 $ (6,020) $ 31,702
----------- ---------- ----------- ----------- ----------- ------------
Assets:
Accounts receivable(2) $ 22,304 $ 1,510 $ 11,009 $ 9,273 $ 5,313 $ 49,409
Inventory 6,653 2 2,180 2,392 5,208 16,435
- ---------------------------
(1) In fiscal 2001, the Company did not allocate corporate expenses to its
individual business segments. In fiscal, 2000 and 1999, the Company
determined the amount of corporate allocations charged to each of its
segments based on a percentage of the segments' monthly revenue, gross
profit, and controllable spending (research and development, sales and
marketing, and general and administrative).
60
(2) As presented, accounts receivable excludes cash received in advance and
reserves, which are not allocated between segments.
The following are reconciliations corresponding to totals in the
accompanying consolidated financial statements:
December 28, December 29, December 31,
Fiscal Years Ended 2001 2000 1999
- ------------------------------------------------- --------------- ---------------- ---------------
(in thousands)
Operating income from continuing operations:
Total for reportable divisions $ 67,503 $ 43,161 $ 31,702
Unallocated corporate expenses (65,598) (16,942) (11,241)
--------- ----------- ---------
Operating income from continuing operations $ 1,905 $ 26,219 $ 20,461
========= =========== =========
December 28, December 29,
2001 2000
- ---------------------------------------------- --------------- ----------------
(in thousands)
Assets:
Accounts receivable total for reportable
segments $ 91,577 $ 95,920
Unallocated (1) (19,897) (12,320)
---------- ---------------
Total $ 71,680 $ 83,600
========== ===============
Inventory total for reportable segments $ 51,830 $ 57,129
Common inventory (2) 330 3,717
---------- ---------------
Total $ 52,160 $ 60,846
========== ===============
- --------------------------
(1) Includes cash in advance and reserves that are not allocated by segment.
(2) Consists of inventory that is common between the segments. Parts can be
used by more than one segment.
The following table presents revenues by product groups.
December 28, December 29, December 31,
Fiscal Years Ended 2001 2000 1999
- -------------------------- ----------------- ----------------- -----------------
(in thousands)
GPS products $274,439 $274,215 $ 271,364
Laser and optical products 186,948 93,879 -
Other 13,905 1,704 -
---------------- ------------------ ----------------
Total revenue $475,292 $369,798 $271,364
================ ================== ================
61
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 intercompany receivables, investments in subsidiaries,
goodwill and intangibles assets.
Geographic Area
-----------------------------------------------------------
Other
Europe/ Foreign
U.S. Middle East Asia Countries Eliminations Total
- -------------------------------------- ------------- -------------- ------------- -------------- ---------------- -----------
(In thousands)
Fiscal 2001
Sales to unaffiliated customers (1) $ 236,665 $ 143,051 $ 54,710 $ 40,866 $ - $475,292
Intergeographic transfers 57,481 49,940 2,137 - (109,558) -
------------- -------------- ------------- -------------- ---------------- -----------
Total revenue $ 294,146 $ 192,991 $ 56,847 $ 40,866 $ (109,558) $475,292
------------- -------------- ------------- -------------- ---------------- -----------
Identifiable assets $ 120,403 $ 71,081 $ 10,048 $ 3,829 $ (5,494) $199,867
Fiscal 2000
Sales to unaffiliated customers (1) $ 175,993 $ 103,455 $ 43,922 $ 46,428 $ - $369,798
Intergeographic transfers 65,117 12,108 8,320 - (85,545) -
------------- -------------- ------------- -------------- ---------------- -----------
Total revenue $ 241,110 $ 115,563 $ 52,242 $ 46,428 $ (85,545) $369,798
------------- -------------- ------------- -------------- ---------------- -----------
Identifiable assets $ 146,821 $ 84,358 $ 12,016 $ 4,588 $ (6,274) $241,509
Fiscal 1999
Sales to unaffiliated customers (1) $ 131,395 $ 68,301 $ 37,707 $ 33,961 $ - $271,364
Intergeographic transfers 56,024 - 1,480 - (57,504) -
------------- -------------- ------------- -------------- ---------------- -----------
Total revenue $ 187,419 $ 68,301 $ 39,187 $ 33,961 $ (57,504) $271,364
------------- -------------- ------------- -------------- ---------------- -----------
Identifiable assets $ 155,163 $ 16,119 $ 10,550 $ 92 $ (173) $181,751
- --------------------------------------
(1) Sales attributed to countries based on the location of the customer.
Transfers between U.S. and foreign geographic areas are made at prices
based on total costs and contributions of the supplying geographic area. The
Company's subsidiaries in Asia, except for Japan which is a buy/sell entity,
have derived revenue from commissions from domestic operations in each of the
periods presented. These commission revenues and expenses are excluded from
total revenue and operating income (loss) in the preceding table. The Japanese
entity's revenue and expenses are included in total revenue and operating income
(loss) in the preceding table.
No single customer accounted for 10% or more of Trimble's total revenues in
fiscal years 2001, 2000, and 1999.
NOTE 10 -- Restructuring Charges:
Restructuring charges of $3.6 million were recorded in fiscal 2001, which
related to severance costs. As a result of these actions, Trimble's headcount
decreased in fiscal 2001 by 232 individuals. As of December 28, 2001, all of the
restructuring charges except for approximately $80,000 have been paid. The
remaining amounts are expected to be paid in fiscal 2002.
62
NOTE 11 - Long-term Debt:
Trimble's long-term debt consists of the following:
December 28, December 29,
2001 2000
- --------------------------------------------------------------------------------------------------
(In thousands)
Credit Facilities:
Five Year Term Loan $ 61,300 $ 100,000
U.S. and Multi-Currency Revolving Credit Facility 40,000 62,000
Subordinated note 84,000 80,000
Promissory notes 5,189 9,037
Other 76 25
------------------- ------------------
190,565 251,062
Less current portion 63,468 113,721
------------------- ------------------
Noncurrent portion $ 127,097 $ 137,341
=================== ==================
The following summarizes the Company's future repayment obligations
(excluding interest):
2006 and
December 28, 2001 Total 2002 2003 2004 2005 2006 Beyond
- ----------------------------------------------------------------------------------------------------------------------
(In thousands)
Credit Facilities:
Five Year Term Loan $ 61,300 $20,000 $24,000 $ 17,300 $ - $ - $ -
U.S. and Multi-Currency
Revolving Credit Facility 40,000 $40,000 - - - - -
Subordinated note 84,000 - - 84,000 - - -
Promissory notes 5,189 3,392 84 91 101 110 1,411
Other 76 76 - - - - -
-------------------------------------------------------------------------------
Total contractual cash obligations $190,565 $63,468 $ 24,084 $ 101,391 $ 101 $ 110 $ 1,411
===============================================================================
Credit Facilities
In July 2000, Trimble obtained $200 million of senior, secured credit
facilities (the "Credit Facilities") from a syndicate of banks to support the
acquisition of the Spectra Precision Group and the Company's ongoing working
capital requirements and to refinance certain existing debt. At December 28,
2001, Trimble has approximately $101 million outstanding under the Credit
Facilities, comprised of $61.3 million under a $100 million five-year term loan,
$30 million under a $50 million three-year U.S. dollar only revolving credit
facility ("revolver"), and $10 million under a $50 million three-year
multi-currency revolver. The Company has access to $60 million of cash under the
terms of its three year revolver loans. The Company has commitment fees on the
unused portion of 0.5% if the leverage ratio (which is defined as all
outstanding debt, excluding the seller subordinated note, over Earnings before
Interest, Taxes, Depreciation and Amortization (EBITDA), as defined in the
related agreement) is 2.0 or greater and 0.375% if the leverage ratio is less
than 2.0.
Pricing for any borrowings under the Credit Facilities was fixed for the
first six months at LIBOR plus 275 basis points and is thereafter tied to a
formula, based on the Company's leverage ratio. The weighted average interest
rate under the Credit Facilities was 5.7% for the month of December 28, 2001.
The Credit Facilities are secured by all material assets of the Company,
subject to foreign tax considerations. If Trimble is able to achieve and
maintain a leverage ratio (Debt/EBITDA) of 2.0x or less for four consecutive
quarters, the security for the Credit Facilities will be released. Financial
covenants of the Credit
63
Facilities include leverage, fixed charge, and minimum net worth tests. Should
the Company default on one or more covenants, the Company will attempt to obtain
either waivers or amendments to the Facilities.
Two of the Company's financial covenants, minimum fixed charge coverage and
maximum leverage ratios are sensitive to EBITDA. EBITDA is correlated to the
Company's results of operations. Due to uncertainties associated with the
downturn in the worldwide economy and other factors, future revenues by quarter
are difficult to forecast. New cost cutting measures have been put in place by
the management team; however, if revenues should decline at a higher rate than
cost cutting measures on a quarter to quarter basis, the Company may violate the
two above mentioned financial covenants.
Subordinated Note
In July 2000, as part of the acquisition of the Spectra Precision Group,
Trimble issued Spectra Physics Holdings USA, Inc. a subordinated seller note
that has a stated two year maturity ($40 million was due in fiscal 2001 and $40
million in fiscal 2002). On March 20, 2002, the Company renegotiated the terms
of the subordinated note and under the revised agreement, Spectra Physics
Holdings, Inc., a subsidiary of Thermo Electron, will extend the term of the
note until July 14, 2004, at the current interest rate of approximately 10.4%
per year. As a result of the amendment, the outstanding balance of the note at
December 28, 2001 of $84,000 was reclassified as long-term.
In addition, on March 20, 2002, the Company used $21.2 million of net
proceeds from its private placement to retire accrued interest and principal
under the subordinated note, reducing the outstanding principal amount to $68.7
million. To the extent that interest and principal due on the maturity date
becomes delinquent, an additional 4% interest rate per annum will apply.
Currently, the note bears interest at a weighted average rate of 10.4%.
The Credit Facilities allow Trimble to repay the seller note at any time
(in part or in whole), provided that (a) Trimble's leverage ratio (Debt
(excluding the seller note)/EBITDA) prior to such repayment is less than 1.0x
and (b) after giving effect to such repayment Trimble would have (i) a leverage
ratio (Debt (excluding any remaining portion of the seller note)/EBITDA) of less
than 2.0x and (ii) cash and unused availability under the revolvers of the
Credit Facilities of at least $35 million. The note, by its terms, is
subordinated to the Credit Facilities.
Promissory Notes
The promissory notes at the end of fiscal 2001 include a $3.3 million
obligation to the former owners of ZSP Geodetic Systems GmbH, a subsidiary of
Trimble, assumed by the Company when it acquired the Spectra Precision Group.
The $3.3 million debt obligation has a stated maturity of September 2002 and
bears interest at 6%.
In addition, these notes include a $1.9 million promissory note arising
from the purchase of a building for the Company's Corvallis, Oregon site. The
note is payable in monthly installments through April 2015 bearing a variable
interest rate (7.140% at December 28, 2001).
The Company's weighted average cost of debt is approximately 8.0% for
fiscal 2001 and 9.5% for fiscal 2000.
64
Note 12 - Lease Obligations and Commitments:
Trimble's principal facilities in the United States are leased under
noncancelable operating leases that expire at various dates through 2011.
Trimble has options to renew certain of these leases for an additional five
years. The Company also leases facilities under operating leases in the United
Kingdom, Sweden and Germany that expire in 2005.
Future minimum payments required under noncancelable operating leases areas
follows:
Operating
Lease Payments
- ------------------------------------------- ---------------------------
(In thousands)
2002 * $ 9,616
2003 * 9,833
2004 6,251
2005 5,843
2006 784
Thereafter 2,089
------------
Total $ 34,416
============
Rent expense under operating leases was $13.1 million in fiscal 2001, $10.6
million in fiscal 2000 and $8.1 million in fiscal 1999.
Fiscal 2002 and 2003 are net of sublease income of $3.1 million and $1.3
million, respectively.
Note 13 - Fair Value of Financial Instruments:
Statement of Financial Accounting Standards No. 107, "Disclosures about
Fair Value of Financial Instruments" requires disclosure of the following
information about the fair value of certain financial instruments for which it
is currently practicable to estimate such value. None of the Company's financial
instruments are held or issued for trading purposes. The carrying amounts and
fair values of Trimble's financial instruments are as follows:
Carrying Fair Carrying Fair
Amount Value Amount Values
------------------ ------------ -------------- ----------------
December 28, 2001 December 29, 2000
- ---------------------------------------------------------------------------------------------------------------------
(In thousands)
Assets:
Cash and Cash equivalents (See Note 1) $ 31,078 $ 31,078 $40,876 $40,876
Forward foreign currency exchange contracts (See
Note 6) 191 191 50 50
Accounts Receivable 71,680 71,680 83,600 83,600
Liabilities:
Subordinated notes (See Note 11) $ 84,000 $ 81,290 $80,000 $69,698
Credit Facilities (See Note 11) 101,300 101,300 162,000 162,000
Promissory notes (See Note 11) 5,189 4,958 9,037 7,876
Accounts Payable 21,494 21,494 26,448 26,448
The fair value of the subordinated notes, bank borrowings, promissory note
and the long-term commitment have been estimated using an estimate of the
interest rate Trimble would have had to pay on the issuance of notes with a
similar maturity, and discounting the cash flows at that rate. The fair values
do not give an indication of the amount that Trimble would currently have to pay
to extinguish any of this debt.
65
The fair value of forward foreign exchange contracts is estimated, based on
quoted market prices of comparable contracts, and these contracts are adjusted
to the fair value at the end of every month.
Note 14 - Income Taxes:
Trimble's income tax provision consists of the following:
December 28, December 29, December 31,
Fiscal Years Ended 2001 2000 1999
- ---------------------------- ------------------ --------------- ----------------
(In thousands)
Federal:
Current $- $1,408 $1,089
Deferred - - -
------------------ --------------- ----------------
- 1,408 1,089
------------------ --------------- ----------------
State:
Current 58 144 196
Deferred - - -
------------------ --------------- ----------------
58 144 196
------------------ --------------- ----------------
Foreign:
Current 2,729 931 770
Deferred (887) (908) 18
------------------ --------------- ----------------
1,842 23 788
------------------ --------------- ----------------
Income tax provision $1,900 $ 1,575 $2,073
================== =============== ================
The domestic (loss) income from continuing operations before income taxes
(including royalty income subject to foreign withholding taxes) was
approximately ($29.3 million), $14.4 million and $19.7 million in fiscal years
2001, 2000 and 1999, respectively.
The income tax provision differs from the amount computed by applying the
statutory federal income tax rate to income before taxes. The sources and tax
effects of the differences are as follows:
December 28, December 29, December 31, 1999
Fiscal Years Ended 2001 2000
- ----------------------------------------------------- ----------------- --------------- --------------------
(Dollars in thousands)
Expected tax from continuing operations at 35% in
all years $ (7,557) $5,516 $7,258
Operating loss not utilized (utilized) 9,704 (5,115) (6,176)
Foreign withholding taxes 115 141 299
Foreign tax rate differential (970) 307 109
Goodwill amortization 747 370 -
Other (139) 356 583
----------------- --------------- --------------------
Income tax provision $ 1,900 $ 1,575 $2,073
================= =============== ====================
Effective tax rate (9%) 10% 10%
================= =============== ====================
66
The components of deferred taxes consist of the following:
December 28, December 29,
2001 2000
- ------------------------------------------------------------------ -------------
(In thousands)
Deferred tax liabilities:
Purchased intangibles $ 6,933 $ 8,230
Other individually immaterial items 300 288
--------------- -------------
Total deferred tax liabilities 7,233 8,518
--------------- -------------
Deferred tax assets:
Inventory valuation differences 11,741 8,836
Expenses not currently deductible 5,103 5,656
Federal credit carryforwards 7,300 8,686
Deferred revenue 808 2,674
State credit carryforwards 5,377 4,725
Warranty 2,596 2,455
Depreciation 6,091 1,724
Federal net operating loss (NOL) carryforward 11,086 1,028
Other individually immaterial items 1,147 2,751
--------------- -------------
Total deferred tax assets 51,249 38,535
Valuation allowance (50,974) (37,861)
--------------- -------------
Total deferred tax assets 275 674
--------------- -------------
Total net deferred tax liabilities $ (6,958) $(7,844)
=============== =============
The federal NOL carryforwards listed above expire beginning in 2018. The
federal credit carryforwards expire beginning in 2004. The state credit
carryforwards do not expire.
Valuation allowances reduce the deferred tax assets to that amount that,
based upon all available evidence, is more likely than not to be realized. The
valuation allowance increased by $13.1 million in 2001 and increased by $2.6
million in 2000. Approximately $11.9 million of the valuation allowance at
December 28, 2001 relates to the tax benefits of stock option deductions, which
will be credited to equity if and when realized.
Note 15 - Shareholder's Equity:
Common Stock
On December 21, 2001, Trimble completed a private placement of 1,783,337
shares of its common stock at a price of $15.00 per share to certain qualified
investors, resulting in gross proceeds of approximately $26.8 million to the
Company. On January 15, 2002, Trimble had a second closing of the private
placement issuing 1,280,004 shares of common stock at $15.00 per share resulting
in gross proceeds of an additional $19.2 million.
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 nonstatutory stock options for up to
6,375,000 shares of Common Stock to employees, consultants and directors of
Trimble. Incentive stock options may be granted at exercise prices that are not
less than 100% of the fair market value of Common Stock on the date of grant.
Employee stock options granted under the 1993 Plan have 120-month terms, and
vest at a rate of 20% at the first anniversary of grant, and monthly thereafter
at an annual rate of 20%, with full vesting occurring at the fifth anniversary
of grant. The exercise price of nonstatutory stock options issued under the 1993
Plan must be at least 85% of the fair market value of Common Stock on the date
of grant. As of December 28, 2001,
67
options to purchase 4,297,981 shares were outstanding, and 436,348 shares were
available for future grant under the 1993 Plan.
1990 Director Stock Option Plan.
In December 1990, Trimble adopted a Director Stock Option Plan under which
an aggregate of 380,000 shares of Common Stock have been reserved for issuance
to non-employee directors as approved by the shareholders to date. At December
28, 2001, options to purchase 198,333 shares were outstanding and 60,416 shares
were available for future grants under the Director Stock Option Plan.
1992 Management Discount Stock Option Plan.
In 1992, Trimble's Board of Directors approved the 1992 Management Discount
Stock Option Plan ("Discount Plan"). Under the Discount Plan, 300,000
nonstatutory 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 December 28, 2001, there were 4,974 shares
available for future grants. For accounting purposes, compensation cost on these
grants is measured by the excess over the discounted exercise prices of the fair
market value of Common Stock on the dates of option grant. There were no
discounted options granted in the plan in fiscal 2001, 2000 and 1999. As of
December 28, 2001, options to purchase 125,000 shares were outstanding under the
1992 Management Discount Stock Option Plan.
1988 Employee Stock Purchase Plan.
In 1988, Trimble established an employee stock purchase plan under which an
aggregate of 3,150,000 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 2001 and 2000, 208,154
shares and 131,657 shares, respectively, were issued under the plan for
aggregate proceeds to the Company of $3.1 million and $1.2 million,
respectively. At December 28, 2001, the number of shares reserved for future
purchases by eligible employees was 545,812.
SFAS 123 Disclosures
As stated in Note 1, 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.
Pro forma information regarding net income (loss) and earnings (loss) per
share is required by SFAS 123 and has been determined as if Trimble had
accounted for its employee stock options and purchases under the employee stock
purchase plan using the fair value method of SFAS 123. 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 2001, 2000 and
1999:
December 28, December 29, December 31,
2001 2000 1999
---------------- --------------- -----------------
Expected dividend yield - - -
Expected stock price volatility 69.59% 66.41% 59.58%
Risk free interest rate 4.15% 6.21% 6.34%
Expected life of options after vesting 1.20 1.22 1.21
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
68
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.
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. The effects on pro forma disclosure of
applying SFAS 123 are not likely to be representative of the effects on pro
forma disclosure of future years. Trimble's pro forma information is as follows:
December 28, December 29, December 31, 1999
Fiscal Years Ended 2001 2000
- --------------------------------------------------- ----------------- --------------- ------------------
(Dollars in thousands)
Net income (loss) - as reported $ (22,879) $14,185 $21,593
Net income (loss) - proforma $ (35,597) $ 5,898 $16,377
Basic income (loss) per share - as reported $ (0.93) $ 0.60 $ 0.96
Basic income (loss) per share - proforma $ (1.44) $ 0.25 $ 0.73
Diluted income (loss) per share - as reported $ (0.93) $ 0.55 $ 0.95
Diluted income (loss) per share - proforma $ (1.44) $ 0.23 $ 0.72
Exercise prices for options outstanding as of December 28, 2001, ranged
from $8.00 to $51.69. The weighted average remaining contractual life of those
options is 7.49 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:
Currently exercisable
---------------------------------------
Total Weighted-average Weighed-average
Number Weighted-average Remaining Number Exercise price
Range (in thousands) Exercise price contractual life (in thousands)
- ------------------------- ---------------- -------------------- ---------------------- ----------------- --------------------
$8.0000 - $8.3125 493,673 $8.0401 7.07 273,704 $8.0427
$8.3700 - $10.1250 488,077 $9.5614 4.61 370,785 $9.5164
$10.6875 - $11.9375 528,049 $11.7003 7.35 248,201 $11.6736
$12.0000 - $15.3750 491,852 $14.1806 5.14 455,663 $14.2705
$15.4500 - $17.1500 573,750 $16.6946 9.36 41,696 $17.0605
$17.4700 - $17.4700 488,188 $17.4700 9.53 - $ 0.00000
$17.5000 - $19.5000 477,223 $18.4347 6.83 293,025 $18.2598
$19.5625 - $34.1250 338,922 $24.7012 8.16 122,867 $25.1293
$41.1250 - $41.1250 712,753 $41.1250 8.65 190,292 $41.1250
$51.6875 - $51.6875 33,100 $51.6875 8.55 9,893 $51.6875
- ------------------------- ---------------- ----------------- -------------------- ---------------- -------------------
$8.0000 - $51.6875 4,625,587 $19.0437 7.49 2,006,126 $16.2584
69
Activity during fiscal 2001, 2000, and 1999 under the combined plans was as
follows:
December 28, 2001 December 29, 2000 December 31, 1999
------------------------------- --------------------------- ---------------------------
Weighted average Weighted Weighted
exercise price average average
Fiscal Years Ended Options Options exercise price Options exercise price
- -------------------------------------- ------------ ----------------- ---------- --------------- ----------- ----------------
(In thousands, except for per share
data)
Outstanding at beginning of year 4,260 $19.09 4,009 $12.36 3,026 $13.64
Granted 1,070 17.08 1,379 34.39 1,813 10.22
Exercised (291) 12.91 (706) 13.08 (135) 11.64
Cancelled (418) 18.55 (422) 15.51 (695) 14.03
------------ ---------- -----------
Outstanding at end of year 4,621 $19.04 4,260 $19.07 4,009 $12.36
Exercisable at end of year 2,006 $16.26 1,429 $12.94 1,334 $13.68
Weighted-average fair value of
options granted during year $9.58 $19.04 $5.51
Non-statutory Options.
On May 25, 2000, Trimble entered into an agreement to grant a non-statutory
option to purchase up to 40,000 shares of common stock at an exercise price of
$13.44 per share. On October 29, 2001, the non-statutory option holder exercised
their rights to acquire 10,090 shares of common stock at an effective price of
$13.44 per share based on netting provisions, with no net proceeds to the
Company.
On May 3, 1999, Trimble entered into an agreement to grant a non-statutory
option to purchase up to 30,000 shares of common stock at an exercise price of
$9.75 per share, with an expiration date of March 29, 2004.
As of December 28, 2001, these non-statutory options have not been
exercised.
Warrants.
On May 31, 2001, a warrant holder exercised their rights to acquire 400,000
shares of common stock at an effective price of $10.95 per share for aggregate
net proceeds to the Company of $4.4 million.
On December 21, 2001, Trimble granted five-year warrants to purchase an
additional 356,670 shares of common stock at an exercise price of $19.475. These
warrants were granted as part of a private placement of the Company's common
stock.
On January 15, 2002, in connection with the second closing of the December
21, 2001 private placement, Trimble granted five-year warrants to purchase an
additional 256,002 shares of common stock, subject to certain adjustments, at an
exercise price of $19.475 per share. Common Stock Reserved for Future Issuances.
As of December 28, 2001, Trimble had reserved 6,025,534 common shares for
issuance upon exercise of options and warrants outstanding and options available
for grant under the 1993 Plan, the 1990 Director Plan, and the Discount Plan,
and available for issuance under the 1988 Employee Stock Purchase Plan.
70
Note 16 - Benefit Plans:
401(k) Plans:
Under Trimble's 401(k) Plan, U.S. employee participants 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 3,608
shares of Common Stock for an aggregate of $113,000 in fiscal 2001. Trimble, at
its discretion, matched individual employee 401(k) Plan contributions up to $100
per month for the first six months of fiscal 2001. Trimble changed its
discretionary match effective July 1, 2001, to fifty cents of every dollar that
the employee contributes to the 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 $1.2 million in fiscal 2001, $0.8 million in fiscal 2000 and $1.0 million
in fiscal 1999. Certain of the Company's subsidiaries participate in a 401(k)
Plan in which the Company matched fifty cents of every dollar that the employee
contributes to the plan up to 5 % of the employees annual contribution for the
first six months of fiscal 2001. From July 1, 2001 they matched Fifty cents of
every dollar that the employee contributes to the plan up to 5% of the
employee's annual salary to an annual maximum of $2,500. During fiscal 2001, the
Company contributed $0.5 million to the plan. The Company's Tripod Data Systems
subsidiary matches one dollar for every three dollars that the employee puts
into the plan up to 8% of their annual salary through December 5, 2001. As of
December 5, 2001, employees of Tripod Data Systems were converted over to the
Trimble plan. Through December 5, 2001, the Company contributed $67,000 to this
plan. Certain of the Company's subsidiaries merged into the Trimble 401(k) plan
on March 9, 2002.
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 income before
taxes. Payments under the plan during fiscal 2001, 2000 and 1999 were $0.9
million, $2.1 million, and $1.2 million, respectively.
Defined Contribution Pension Plans:
Certain of the Company's subsidiaries participate in European state
sponsored pension plans. Contributions are based on specified percentages of
employee salaries. For these plans, the Company contributed and charged to
expense $40,000 as of December 28, 2001 and $275,000 from July 14, 2000 through
December 29,2000.
Defined Benefit Pension Plan:
The Company's Swedish and German subsidiaries have an unfunded defined
benefit pension plan that covered substantially all of its full-time employees
through 1993. Benefits are based on a percentage of eligible earnings. The
employee must have had a projected period of pensionable service of at least 30
years as of 1993. If the period was shorter, the pension benefits were reduced
accordingly. Active employees do not accrue any future benefits; therefore,
there is no service cost and the liability will only increase for interest cost.
Net periodic benefit costs in fiscal 2001 were not material.
71
The fair value of the plan assets were as follows:
December 28, December 29,
2001 2000
- --------------------------------------------------------------------------------
(In thousands)
Fair value of plan assets at beginning of year $ 465 $ 404
Actual return on plan assets 56 63
Employer contribution - -
Plan participants' contributions 33 30
Benefits paid - -
Translation adjustment (51) (32)
-------------- -----------------
Fair value of plan assets at end of year $ 503 $ 465
============== =================
The Company's defined benefit plan activity was as follows:
December 28, December 29,
2001 2000
- --------------------------------------------------------------------------------
(In thousands)
Change in Benefit Obligation:
Benefit obligation at beginning of year $ 4,811 $ 3,927
Interest Cost 134 233
Translation adjustment (312) 15
Actuarial (gain) loss 73 -
--------------- ----------------
Benefit obligation at end of year $ 4,706 $ 4,175
Unrecognized Prior Service Cost - -
Unrecognized Net Actuarial Gain - -
-------------- -----------------
Accrued Pension Costs (included in accrued
liabilities) $ 4,706 $ 4,175
============== =================
Actuarial assumptions used to determine the net periodic pension costs for
the year ended December 28, 2001 were as follows:
Swedish Subsidiary German Subsidiaries
----------------------- ----------------------
Discount Rate 5.5% 6.25%
Rate of Compensation Increase 2.5% 1.5%
Note 17 - Earnings Per Share:
The following data show the amounts used in computing earnings (loss) per
share and the effect on the weighted-average number of shares of dilutive
potential Common Stock.
December 28, December 29, December 31,
Fiscal Years Ended 2001 2000 1999
- --------------------------------------------------- ---------------- --------------- ---------------
(In thousands, except per share data)
Numerator:
Income available to common shareholders:
Used in basic and diluted income (loss)
per share from continuing operations $ (23,492) $ 14,185 $ 18,662
Used in basic and diluted income
per share from discontinued operations 613 - 2,931
------------ --------- ----------
Used in basic and diluted income (loss)
per share $ (22,879) $ 14,185 $ 21,593
=========== ========= =========
72
Denominator:
Weighted-average number of common shares
used in based income (loss) per share 23,601 22,424
24,727
Effect of dilutive securities(using Treasury
stock method):
Common stock options - 2,098 382
Common stock warrants - 277 46
------------ --------- ----------
Weighted-average number of common shares
and dilutive potential common shares used
in diluted income (loss) per share 24,727 25,976 22,852
=========== ========= =========
Basic income (loss) per share from continuing
operations $ (0.95) $ 0.60 $ 0.83
Basic income per share from discontinued
operations 0.02 - 0.13
------------ --------- ----------
Basic income (loss) per share $ (0.93) $ 0.60 $ 0.96
============ ========= =========
Diluted income (loss) per share from
continuing operations $ (0.95) $ 0.55 $ 0.82
Diluted income per share from discontinued
operations 0.02 - 0.13
------------ --------- ----------
Diluted income (loss) per share $ (0.93) $ 0.55 $ 0.95
============ ========= =========
Options and warrants were not included in the computation of earnings per
share in 2001 because the Company reported a net loss in fiscal 2001. If Trimble
had reported net income in 2001, additional 938,000 common equivalent shares
related to outstanding options and warrants would have been included in the
calculation of diluted loss per share.
Note 18 - Comprehensive Income (Loss):
The components of other comprehensive income (loss), net of related tax as
follows:
December 28, December 29, December 31,
Fiscal Years Ended 2001 2000 1999
- --------------------------------------------------------------------------------
(In thousands)
Cumulative foreign currency translation
adjustments $ (9,766) $ (8,045) $ (107)
Net loss on interest rate swap (203) - -
Net unrealized gain (loss) on investments 16 123 $ (142)
----------- ---------- ---------
Other comprehensive income (loss) $ (9,953) $ (7,922) $ (249)
=========== ========== =========
73
Accumulated other comprehensive income (loss) on the consolidated balance
sheets consists of unrealized gains on available for sale investments and
foreign currency translation adjustments.
The components of accumulated other comprehensive income (loss), net of related
tax as follows:
December 28, December 29,
2001 2000
- ------------------------------------------------------------------------- -----------------
(In thousands)
Cumulative foreign currency translation adjustments $ (18,729) $ (8,963)
Net loss on interest rate swap (203) -
Net unrealized gain on investments 16 -
------------------ -----------------
Accumulated other comprehensive loss $ (18,916) $ (8,963)
================== =================
Note 19 - Related-Party Transactions:
Related-Party Lease
The Company currently leases office space in Ohio from an association of
three individuals, two of whom are employees of one of the Company's U.S.
operating units, under a noncancelable operating lease arrangement expiring in
2011. The annual rent is $345,000 and is subject to adjustment based on the
terms of the lease. The Consolidated Statements of Operations include expenses
from this operating lease of $345,405 for fiscal 2001 and $172,702 for fiscal
2000.
Related -Party Notes Receivable
The Company has notes receivable from officers and employees of $955,000 as
of December 28, 2001 and $1.3 million as of December 29, 2000. The notes bear
interest from 4.75% to 6.62% and have an average remaining life of 3 years.
Note 20 - Statement of Cash Flow Data:
December 28, 2001 December 29, 2000 December 31,
Fiscal Years Ended 1999
- ------------------------------------------------------ ------------------ -------------------- ----------------
(In thousands)
Supplemental disclosure of cash flow information:
Interest paid $ 17,363 $ 9,037 $ 3,391
-------- -------- -------
Income taxes paid $ 825 $ 3,835 $ 866
-------- -------- -------
74
Note 21 - Litigation:
In January 2001, Philip M. Clegg instituted a lawsuit in the United States
District Court for the District of Utah, Central Division, against
Spectra-Physics Laserplane, Inc., Spectra Precision AB and Trimble Navigation
Limited. The complaint alleges claims of infringement of U.S. Patent No.
4,807,131, breach of contract and unjust enrichment. The suit seeks damages and
an accounting for moneys alleged to be owed under a license agreement, plus
interest and attorney fees.
In August 2001, Lockheed Martin Corporation served a complaint alleging
patent infringement of U.S. Patent No. 4,949,089 on the Company, Spectra
Precision, Inc., Leica Geosystems, Inc., Sokkia Corporation and Carl Zeiss, Inc.
The lawsuit was filed in the United States District Court for the Eastern
District of Texas, Marshall Division. Lockheed seeks treble damages, an
injunction and attorney fees.
In November 2001, Qualcomm Inc. filed a lawsuit against the Company in the
Superior Court of the State of California. The complaint alleges claims for an
unspecified amount of money damages arising out of Qualcomm's perceived lack of
assurances in early 1999 that the Company's products purchased by Qualcomm would
work properly after a scheduled week number rollover event that took place in
August, 1999. Qualcomm is the only customer to make a claim against the Company
based on the week number rollover event.
In the opinion of management, the resolutions of the foregoing lawsuits are
not expected to have a material adverse effect on the overall financial position
of the Company. However, depending on the amount and timing, an unfavorable
resolution in any one of these matters could materially affect the Company's
future operations or cash flow in a particular period.
The Company is also a party to other disputes incidental to its business.
The Company believes that the ultimate liability of the Company as a
result of such disputes, if any, would not be material to its overall financial
position, results of operations, or liquidity.
75
Note 22 - Selected Quarterly Financial Data (unaudited):
First Second Third Fourth
Quarter Quarter Quarter Quarter
- ------------------------------------------- ---------------- ---------------- ---------------- ----------------
(In thousands, except per share data)
Fiscal 2001
Total revenue $ 117,863 $ 133,587 $ 117,437 $ 106,405
Gross margin 57,500 65,531 60,315 53,889
Net loss from continuing operations (11,587) (1,974) (2,686) (7,245)
Net income from discontinued
operations - - - 613
Net loss (11,587) (1,974) (2,686) (6,632)
Basic net loss per share from
continuing operations $ (0.48) $ (0.08) $ (0.11) $ (0.28)
Basic net income per share from
discontinued operations - - - 0.02
---------------- ---------------- ---------------- ----------------
Basic net loss per share $ (0.48) $ (0.08) $ (0.11) $ (0.26)
================ ================ ================ ================
Diluted net loss per share from
continuing operations $ (0.48) $ (0.08) $ (0.11) $ (0.28)
Diluted net income per share from
discontinued operations - - - 0.02
---------------- ---------------- ---------------- ----------------
Diluted net loss per share $ (0.48) $ (0.08) $ (0.11) $ (0.26)
================ ================ ================ ================
Fiscal 2000
Total revenue $ 65,140 $ 71,264 $ 109,227 $ 124,167
Gross margin 37,045 41,885 55,932 61,699
Net income (loss) 8,712 12,357 (4,268) (2,616)
---------------- ---------------- ---------------- ----------------
Basic net income (loss) per share $ 0.38 $ 0.53 $ (0.18) $ (0.11)
================ ================ ================ ================
---------------- ---------------- ---------------- ----------------
Diluted net income (loss) per share $ 0.35 $ 0.48 $ (0.18) $ (0.11)
================ ================ ================ ================
Significant quarterly items include the following: (i) in the first quarter
of 2001 a $2.0 million charge or $0.08 per diluted share relating to loss on
sale of Air Transport business and the exiting of certain product lines; (ii) in
the second quarter of 2001 a $0.9 million charge, or $0.04 per diluted share
relating to work force reduction; and $0.2 million in income or $0.01 per
diluted share relating to a gain on the sale of a minority investment; (iii) in
the third quarter of 2001 a $0.4 million charge, or $0.01 per diluted share
relating to work force reduction; (iv) in the fourth quarter of 2001 a $0.5
million charge, or $0.02 per diluted share relating to work force reduction; a
$0.1 million gain, or $0.01 per diluted share on sale of business; and a $0.1
million charge, or $0.01 per diluted share relating to the write-down of an
investment.
Significant quarterly items include the following: (i) in the third quarter
of 2000, net income includes an $2.9 million charge, or $0.11 per diluted share,
for an inventory purchase accounting adjustment; a $1.1 million charge, or $0.05
per diluted share relating to a debt extinguishment; a $0.7 million charge, or
$0.03 per diluted share for relocation costs related to opening a new office in
Boulder, Colorado; and $1.0 million in income, or $0.04 per diluted share
relating to a gain on the sale of a minority investment; (ii) in the fourth
quarter of 2000, net income includes a $1.7 million charge, or $0.07 per diluted
share, for an inventory purchase accounting adjustment; $0.3 million, or $0.01
per diluted share, of a gain on the sale of a minority investment; and a $0.2
million charge, or $0.01 per diluted share, of relocation costs related to
opening a new office in Boulder, Colorado.
76
Note 23 - Subsequent Event:
On March 20, 2002, the Company used $21.2 million of net proceeds from its
private placement to retire accrued interest and principal under its
subordinated note with Spectra Physics Holdings, Inc., a subsidiary of Thermo
Electron, reducing the outstanding principal amount to $68.7 million. In
addition, the Company renegotiated the terms of the subordinated note. Under the
revised agreement, the maturity of the note was extended until July 14, 2004, at
the current interest rate of approximately 10.4% per year. In connection with
the amendment, on March 20, 2002, the Company agreed to issue to Thermo Electron
a five-year warrant to purchase 200,000 shares of Trimble's common stock at an
exercise price of $15.11. Under the terms of the agreement, beginning on July
14, 2002, Trimble will also issue five-year warrants to purchase 250 shares of
common stock on a quarterly basis for every $1 million of principal and interest
outstanding until the note is paid off. These warrants will be exercisable at a
price equal to Trimble's closing price on the last trading day of each quarter.
Under the five-year warrant, the total number of warrants issued will not exceed
376,233 shares.
77
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 December 28, 2001 and December 29, 2000, and the
related consolidated statements of operations, shareholders' equity, and cash
flows for each of the three years in the period ended December 28, 2001. Our
audits also included the financial statement schedule listed in the index at
Item 14(a)(2). These financial statements and schedule are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements and schedule, based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements and schedule referred to above
present fairly, in all material respects, the consolidated financial position of
Trimble Navigation Limited at December 28, 2001 and December 29, 2000, and the
consolidated results of its operations and its cash flows for each of the three
years in the period ended December 28, 2001, 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.
/s/ Ernst & Young LLP
Palo Alto, California
January 25, 2002, except for the paragraphs under the caption "Subordinated
Note" of Note 11 and Note 23, as to which the date is March 20, 2002
78
Item 9. Changes in and Disagreements with Accountants on Accounting
Financial Disclosure
Not applicable.
PART III
Item 10. Directors and Executive Officers of the Registrant
The information with respect to the executive officers of the Company
required by this item is included in Part I hereof under the caption "Executive
Officers of the Company."
Board of Directors
The names of the current members of the Company's Board of Directors and
certain information about them, are set forth below:
Name of Board Member Age Principal Occupation Director Since
- ----------------------- --------- ----------------------------------------------------- ---------------
Steven W. Berglund 50 President and Chief Executive Officer of the Company 1999
Robert S. Cooper 70 President, Chief Executive Officer and Chairman of the 1989
board of directors of Atlantic Aerospace
Electronic Corporation, Chairman of the Board of
Directors of the Company
John B. Goodrich 60 Business Consultant 1981
William Hart 61 Venture Capital Investor and Business Consultant 1984
Ulf J. Johansson 56 Chairman and Founder of Europolitan Holdings AB 1999
Bradford W. Parkinson 67 Professor at Stanford University and current 1984
consultant to the Company
Steven W. Berglund joined the Company as President and Chief Executive Officer
in March 1999. Mr. Berglund was elected to the Company's Board of Directors at
the Annual Meeting of Shareholders held in June of 1999. Mr. Berglund has
experience in engineering, manufacturing, finance, and global operations. Prior
to joining the Company, Mr. Berglund was president of Spectra Precision, Inc., a
subsidiary of Spectra-Physics. Spectra Precision had global revenue of
approximately $200 million and developed and manufactured surveying instruments,
laser based construction instruments, and machine control systems. During his
fourteen years with Spectra-Physics, which was a pioneer in the development of
lasers, Mr. Berglund held a variety of positions that included four years based
in Europe. Prior to Spectra-Physics, Mr. Berglund spent a number of years at
Varian Associates in Palo Alto, California where he held a number of planning
and manufacturing roles. Mr. Berglund began his career as a process engineer at
Eastman Kodak in Rochester, New York. Mr. Berglund attended the University of
Oslo and the University of Minnesota where he received a B.S. degree in Chemical
Engineering in 1974 and received his M.B.A. from the University of Rochester in
1977.
Robert S. Cooper was appointed Chairman of the Company's Board of Directors in
August 1998. Dr. Cooper has served as a Director of the Company since April
1989. Since 1985, Dr. Cooper has been president, chief executive officer, and
chairman of the board of directors of Atlantic Aerospace Electronics
Corporation, an aerospace company. Dr. Cooper also serves on the board of
directors of BAE Systems North America. From 1981 to 1985, he was Assistant
Secretary of Defense for Research and Technology and simultaneously held the
position of Director for the Defense Advanced Research Projects Agency (DARPA).
Dr. Cooper received a B.S. degree in Electrical Engineering from State
University of Iowa in 1954, a M.S. degree in Electrical Engineering from Ohio
State University in 1958, and a Doctor of Science in Electrical Engineering from
the Massachusetts Institute of Technology in 1963.
79
John B. Goodrich has served as a Director of the Company since January 1981. Mr.
Goodrich retired from the law firm of Wilson Sonsini Goodrich & Rosati, where he
practiced from 1970 until February of 2002. Mr. Goodrich serves on the boards of
several privately held corporations in high technology businesses and as a
business consultant. Mr. Goodrich received a B.A. degree from Stanford
University in 1963, a J.D. from the University of Southern California in 1966,
and a L.L.M. in Taxation from New York University in 1970.
William Hart has served as a Director of the Company since December 1984. Mr.
Hart has been a venture capitalist in the area of information technology for 22
years. He was the founder of Technology Partners, a venture capital management
firm based in Palo Alto, California. Before founding Technology Partners in
1980, Mr. Hart was a senior officer and director of Cresap, McCormick and Paget,
management consultants. He previously held positions in field marketing and
manufacturing planning with IBM Corporation. Mr. Hart has served on the boards
of directors of numerous public and privately held technology companies. Mr.
Hart received a Bachelor of Management Engineering degree from Rensselaer
Polytechnic Institute in 1965 and a M.B.A. from the Amos Tuck School of Business
Administration at Dartmouth College in 1967.
Ulf J. Johansson has served as a Director of the Company since December 1999.
Dr. Johansson is a Swedish national with a distinguished career in
communications technology. He is a founder and chairman of Europolitan Holdings
AB, a GSM mobile telephone operator in Sweden. Dr. Johansson currently serves as
chairman of Frontec AB, an eBusiness consulting company, Zodiak Venture AB, a
venture fund focused on information technology, and the University Board of
Royal Institute of Technology in Stockholm. Dr. Johansson also currently serves
on the board of directors of Novo Nordisk A/S, a Danish pharmaceutical/life
science company as well as several privately held companies. Dr. Johansson
formerly served as president and chief executive officer of Spectra-Physics, and
executive vice president at Ericsson Radio Systems AB. Dr. Johansson received a
Master of Science in Electrical Engineering, and a Doctor of Technology
(Communication Theory) from the Royal Institute of Technology in Sweden.
Bradford W. Parkinson has served as a Director of the Company since 1984, and as
a consultant to the Company since 1982. Dr. Parkinson served as the Company's
President and Chief Executive Officer from August 1998 through March 1999. From
1980 to 1984 he was group vice president and general manager for Intermetrics,
Inc. where he directed five divisions. He also served as president of
Intermetrics' industrial subsidiary, PlantStar. In 1979, Dr. Parkinson served as
group vice president for Rockwell International directing business development
and advanced engineering. Currently, Dr. Parkinson is the Edward C. Wells
Endowed Chair professor (emeritus) at Stanford University and has been a
Professor of Aeronautics and Astronautics at Stanford University since 1984. Dr.
Parkinson has also directed the Gravity Probe-B spacecraft development project
at Stanford University, sponsored by NASA, which is the largest program
delegated by NASA to a university and has been program manager for several
Federal Aviation Administration sponsored research projects on the use of Global
Positioning Systems for navigation. Dr. Parkinson was on leave of absence from
Stanford University while serving as the Company's President and Chief Executive
Officer. Dr. Parkinson received a B.S. degree from the U.S. Naval Academy in
1957, a M.S. degree in Aeronautics/Astronautics Engineering from Massachusetts
Institute of Technology in 1961 and a Ph.D. in Astronautics Engineering from
Stanford University in 1966.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
the Company's executive officers and directors and persons who own more than 10%
of a registered class of the Company's equity securities during fiscal year 2001
to file reports of initial ownership on Form 3 and changes in ownership on Form
4 or 5 with the Securities and Exchange Commission (the "SEC"). Such officers,
directors and 10% shareholders are also required by SEC rules to furnish the
Company with copies of all Section 16(a) reports they file.
Based solely on its review of the copies of such forms received by it and
on written representations from its officers and directors and certain other
reporting persons that no Forms 5 were required for such persons, the Company
believes that, during the last fiscal year ended December 28, 2001, all Section
16(a) filing requirements applicable to its officers, directors and 10%
shareholders were complied with on a timely basis.
80
Item 11. Executive Compensation
The following table sets forth the compensation, including bonuses, for
each of the Company's last three fiscal years ending December 28, 2001 paid to
(i) all persons who served as the Company's Chief Executive Officer during last
completed fiscal year, and (ii) the four other most highly compensated executive
officers of the Company.
Summary Compensation Table
Long-term
Annual Compensation(1) Compensation(2)
------------------------ ----------------
Securities
Underlying All Other
Salary Bonus Options Compensation
Name and Principal Position Year ($) ($) (#) (3) ($)
- ---------------------------------- ---- -------- --------------- ----------------- -----------------
Steven W. Berglund (4) 2001 440,000 166,523 (5) 25,000 97,298 (6)
President and Chief Executive
Officer 2000 400,000 154,500 (7) - 101,192 (8)
1999 320,000 0 400,000 (9) 137,016 (10)
Mary Ellen Genovese 2001 243,202 40,266 (11) 40,000 2,658 (12)
Chief Financial Officer and 2000 183,574 74,726 (13) 90,000 (14) 2,592 (15)
Vice President Finance 1999 180,366 0 26,000 1,939 (16)
Ronald C. Hyatt (17) 2001 222,115 36,495(18) 1,000
Senior Vice President and
General 2000 260,637 102,264 (19) 5,000 1,200
Manager, Agriculture Division 1999 250,000 0 0 1,200
Karl G. Ramstrom (20) 2001 206,934 0 35,000 131,850 (21)
Senior Vice President and
General 2000 85,254 0 80,000 (22) 35,000 (23)
Manager, E and C Division 1999 - - - -
Dennis L. Workman 2001 200,070 41,414 (24) 25,000 2,073
Vice President and General
Manager, 2000 197,359 62,402 (25) 10,000 1,200
Component Technologies Division 1999 175,934 0 20,000 1,200
- ------------------------------------------
(1) Compensation deferred at the election of executive is included in the category and in the year earned
(2) The Company has not issued stock appreciation rights or restricted stock
awards. The Company has no "long-term incentive plan" as the term is
defined in the applicable rules.
(3) Includes amounts contributed by the Company pursuant to Section 401(k) of
the Internal Revenue Code of 1986, as amended, for the periods in which
they accrued. All full-time employees are eligible to participate in the
Company's 401(k) plan.
(4) Mr. Berglund has served as the Company's President and Chief Executive Officer since March 1999.
(5) Represents a performance bonus earned for 2000, which was paid to Mr. Berglund during the 2001 year.
(6) Includes $95,840 as the portion of a loan, including related accrued interest, that was forgiven by the Company during the
year. The loan was originally made in connection with hiring Mr. Berglund
for the purpose of assisting him with relocating to California and
obtaining a primary residence. See "Certain Relationships and Related
Transactions" in Item 13. Also includes $1,458 paid by the Company for
fitness center dues provided to Mr. Berglund.
81
(7) Represents a performance bonus earned for 1999, which was paid to Mr. Berglund during the 2000 year.
(8) Includes $99,800 as the portion of a loan, including related accrued
interest, that was forgiven by the Company during the year. The loan was
originally made in connection with hiring Mr. Berglund for the purpose of
assisting him with relocating to California and obtaining a primary
residence. See "Certain Relationships and Related Transactions" presented
in Item 13. Also includes $1,392 paid by the Company for fitness center
dues provided to Mr. Berglund.
(9) Mr. Berglund received a one-time grant of an option to purchase 400,000 shares in connection with being hired as the
Company's President and Chief Executive Officer.
(10) Includes $42,333 as the portion of a loan, including related accrued
interest, that was forgiven by the Company during the year and $93,479 of
relocation costs paid by the Company in connection with the hiring of Mr.
Berglund. The loan was originally made in connection with hiring Mr.
Berglund for the purpose of assisting him with relocating to California
and obtaining a primary residence. See "Certain Relationships and Related
Transactions" presented in Item 13. Also includes $1,204 paid by the
Company for fitness center dues provided to Mr. Berglund.
(11) Represents a performance bonus earned for 2000, which was paid to Mrs. Genovese during the 2001 year.
(12) Includes $1,458 paid by the Company for fitness center dues provided to Mrs. Genovese.
(13) Includes $61,326 as a performance bonus earned for 1999, which was paid to Mrs. Genovese during the 2000 year.
(14) Ms. Genovese received a one-time grant of an option to purchase 90,000 shares in connection with her promotion to the
Company's Chief Financial Officer.
(15) Includes $1,392 paid by the Company for fitness center dues provided to Mrs. Genovese.
(16) Includes $739 paid by the Company for fitness center dues provided to Mrs. Genovese.
(17) Mr. Hyatt retired as an executive officer of the Company effective February 2002 but has agreed to remain as a consultant to
the Company through June 2002.
(18) Represents a performance bonus earned for 2000, which was paid to Mr. Hyatt during the 2001 year.
(19) Includes $83,960 as a performance bonus earned for 1999 which was paid to Mr. Hyatt during the 2000 year.
(20) Mr. Ramstrom has served as the Company's Senior Vice President and General Manager, Engineering and Construction Division
since July 14, 2000.
(21) Includes $125,000 paid by the Company to a Swedish pension fund provided to Mr. Ramstrom and $6,850 paid to Mr. Ramstrom as
an auto allowance.
(22) Mr. Ramstrom received a one-time grant of an option to purchase 80,000
shares in connection with being hired as the Company's Senior Vice
President and General Manager, Engineering and Construction Division.
(23) Includes $35,000 paid by the Company to a Swedish pension fund provided to Mr. Ramstrom.
(24) Includes $21,397 as a performance bonus earned for 2000 which was paid to Mr. Workman during the 2001 year.
(25) Includes $47,488 as a performance bonus earned for 1999 which was paid to Mr. Workman during the 2000 year.
The following table sets forth the number and terms of options granted to
the persons named in the Summary Compensation Table presented above during the
last fiscal year ended December 28, 2001:
Option Grants in Last Fiscal Year
Individual Grants
- ------------------------------------------------------------------------------------- Potential Realizable
Number of % of Total Value at Assumed
Securities Options Annual Rates of Stock
Underlying Granted to Exercise Expiration Price Appreciation
Options Employees in Exercise Expiration for Option Term (4)
Granted Fiscal Year Price Date ---------------------
Name (#) (1) ($/Share) (2) (3) 5% ($) 10% ($)
- ---------------------- ---------- -------------- --------------- ---------- ---------- ----------
Steven W. Berglund 25,000 2.34 17.050 10/17/11 268,111 679,443
Mary Ellen Genovese 40,000 3.74 17.150 7/6/11 431,494 1,093,484
Ronald C. Hyatt - - - - - -
Karl G. Ramstrom 35,000 3.27 17.150 7/6/11 377,557 956,799
Dennis L. Workman 25,000 2.34 17.470 7/18/11 274,716 696,180
- ----------------------
(1) The Company granted options to purchase an aggregate of 1,070,029 shares of
the Company's Common Stock to employees, consultants and non-employee
directors during fiscal year 2001 pursuant to the Company's 1993 Stock
Option Plan and the 1990 Director Stock Option Plan.
(2) All options presented in this table were granted at an exercise price equal
to the then fair market value of a share of the Company's Common Stock on
the date of grant, as quoted on the Nasdaq National Market System.
82
(3) All options presented in this table may terminate before the stated
expiration upon the termination of optionee's status as an employee,
consultant or director, including upon the optionee's death or disability.
(4) The assumed 5% and 10% compound rates of annual stock appreciation are
mandated by the rules of the Securities and Exchange Commission and do not
represent the Company's estimate or projection of future Common Stock
prices. All grants listed in the table vest over five years and have a
ten-year term of exercise which, assuming the specified rates of annual
compounding, results in total appreciation of 62.9% (at 5% per year) and
159.4% (at 10% per year) for the ten-year option term.
The following table provides information on option exercises by the persons
named in the Summary Compensation Table presented above during the last fiscal
year ended December 28, 2001:
Aggregated Option Exercises in Last Fiscal Year and Fiscal Year-End Option Values
Number of Securities
Underlying Unexercised Value of Unexercised
Shares Options at In-the-Money Options
Acquired Value Fiscal Year-End (#) at Fiscal Year-End ($)(1)
on Exercise Realized ----------------------------- ----------------------------
Name (#) ($) Exercisable Unexercisable Exercisable Unexercisable
- ---------------------- ------------ ---------- ----------- -------------- ----------- -------------
Steven W. Berglund - - 220,000 205,000 1,806,200 1,477,800
Mary Ellen Genovese - - 61,234 120,766 116,998 81,088
Ronald C. Hyatt - - 168,667 6,333 1,077,358 10,525
Karl G. Ramstrom - - 24,980 90,020 0 0
Dennis L. Workman - - 24,667 47,833 65,028 67,529
- -------------------------
(1) Represents the market value of the Common Stock underlying the options at
fiscal year end, less the exercise price of "in-the-money" options. The
closing price of the Company's Common Stock on December 28, 2001 as quoted
on the Nasdaq National Market System was $16.21.
Compensation of Directors
Cash Compensation. In order to help attract additional new outside
candidates to serve on the Company's Board of Directors, the Board of Directors
carefully considered and adopted a cash compensation policy effective January 2,
1999. Under this cash compensation plan, all non-employee directors receive an
annual cash retainer of $15,000 to be paid quarterly in addition to a fee of
$1,500 for each board meeting attended in person and $375 for each board meeting
attended via telephone conference. Members of designated committees of the Board
of Directors receive $750 per meeting which is not held on the same day as a
meeting of the full Board of Directors. Non-employee directors are also
reimbursed for travel, including a per diem for international travel, and other
necessary business expenses incurred in the performance of their services as
directors of the Company.
1990 Director Stock Option Plan. The Company's 1990 Director Stock Option
Plan (the "Director Plan") was adopted by the Board of Directors on December 19,
1990 and approved by the shareholders on April 24, 1991. An aggregate of 380,000
shares of the Company's Common Stock has been previously reserved for grants
issuable pursuant to the Director Plan ("Director Options"). The Director Plan
provides for the annual granting of nonstatutory stock options to each
non-employee director of the Company (the "Outside Directors"). Pursuant to the
terms of the Director Plan, new Outside Directors are granted a one-time option
to purchase 15,000 shares of the Company's Common Stock upon initially joining
the Board of Directors. Thereafter, each year, each Outside Director receives an
additional option grant to purchase 5,000 shares if re-elected at the annual
meeting of shareholders. All such Director Options have an exercise price equal
to the fair market value of the Company's Common Stock on the date of grant,
vest over three years, and have a ten year term of exercise. In addition, all
such grants are automatic and are not subject to the discretion of any person
upon the re-election of each such Outside Director.
As of March 24, 2002, options to purchase an aggregate of 198,333 shares,
having an average exercise price of $17.4722 per share and expiring from April
2002 to May 2011 were outstanding and 60,416 shares remained available for
future grant under the Director Plan. During the last fiscal year ended December
28, 2001,
83
directors Cooper, Goodrich, Hart, Johansson and Parkinson were each granted
Director Options to purchase 5,000 shares of the Company's Common Stock at an
exercise price of $16.80 per share.
Other Arrangements. Dr. Parkinson has served as a consultant to the Company
since 1982. He currently receives $6,000 per month for such consulting services
that he provides to the Company.
In the past, Dr. Parkinson and Dr. Cooper were also directly employed by
the Company in connection with serving as the Company's President and Chief
Executive Officer and Chairman of the Board, respectively, and in providing
transitional services to the Company through August 1999. As part of such
agreements, each also entered into certain standby consulting agreements with
the Company. See "Employment Contracts and Termination of Employment and
Change-in-Control Arrangements" presented below and "Compensation Committee
Report" presented below. Dr. Cooper has continued as the Company's Chairman of
the Board of Directors since that time but has not received any special
compensation for such services.
In June 2000, the Company entered into an agreement for professional
services with Bjursund Invest AB, a company which is wholly-owned by Ulf J.
Johansson. Pursuant to the terms of this agreement, Mr. Johansson will provide
certain consulting and advisory services to the Company in Sweden and Europe in
addition to his serving on the Company's Board of Directors. The Company will
pay $4,000 per day for such services with an annual guaranteed minimum payment
of $24,000 together with expenses invoiced at cost, but in no event will
payments during any one year exceed $60,000. Such agreement has a one-year term
and is subject to automatic renewals in one-year extensions unless previously
terminated with one month advance notice. The Company paid a total of $24,000
under this agreement for services rendered during fiscal year 2001.
Employment Contracts and Termination of Employment and Change-in-Control
Arrangements
Steven W. Berglund
On March 17, 1999, Mr. Berglund entered into an employment agreement with
the Company to serve as the Company's President and Chief Executive Officer.
Such agreement provided that Mr. Berglund's base compensation would initially be
$33,333 per month and that he would be eligible for a bonus of up to 50% of his
base compensation pro rata for fiscal years 1999 and 2000. The employment
agreement guaranteed one half of this bonus amount for fiscal year 1999 and
specified that the other terms and conditions of such bonus payments would be as
negotiated with the Company's Board of Directors. In the event of Mr. Berglund's
involuntary termination or termination for other than defined cause, he will
receive 12 months of severance based upon his last annual base salary plus any
accrued bonus to date.
In addition, pursuant to his employment agreement upon joining the Company,
Mr. Berglund was granted options to purchase an aggregate of 400,000 shares of
the Company's Common Stock with an exercise price of $8.00 per share which was
the fair market value on the date of grant in accordance with the terms of such
agreement. Such options vest 20% at the first anniversary and monthly thereafter
for five years from the original date of grant and have a ten year term of
exercise. In the event of a change-of-control of the Company, Mr. Berglund will
receive an additional 12 months of vesting with respect to such options.
In connection with hiring Mr. Berglund and his original relocation to
California and pursuant to the terms of his employment agreement, the Company
provided him with interim housing and reimbursed him for certain moving costs
and expenses. The Company also provided him with a loan of $400,000 to assist in
the purchase of a new primary residence. Such loan is secured by a second deed
of trust on the residence and was made at the lending rate at which the Company
is able to borrow, as adjusted from time to time. Such loan is to be forgiven by
the Company ratably over five years contingent upon Mr. Berglund continuing to
be employed by the Company; provided, however, that any remaining unpaid
obligation would be due and payable to the Company upon the anniversary of any
separation if Mr. Berglund's employment relationship with the Company ends
during such time period.
Pursuant to the employment agreement, Mr. Berglund is also eligible for
other benefits and programs available to the Company's employees, including paid
vacation, medical, dental, life and disability insurance, and a
84
401(k)
Retirement Plan with a Company match and he will also be eligible to participate
in the Company's Executive Nonqualified Deferred Compensation Plan.
Robert S. Cooper
In connection with agreeing to serve as the Company's Chairman of the Board
of Directors beginning in August 1998, Dr. Cooper entered into employment and
consulting agreements with the Company though August 31, 1999. At that time, Dr.
Cooper also entered into a standby consulting agreement with the Company for
which he will be paid on an hourly basis for consulting services on an as needed
basis as determined by the Company's Chief Executive Officer through September
1, 2003.
Upon beginning service as the Company's Chairman of the Board, Dr. Cooper
was granted an option to purchase 60,000 shares of the Company's Common Stock
with an exercise price of $10.125 per share which was the fair market value on
the date of grant in accordance with the terms of such agreements. Such options
vested ratably over 12 months from the original date of grant and have a five
year term of exercise contingent upon Dr. Cooper remaining as an employee,
consultant or director to the Company.
Bradford W. Parkinson
In connection with agreeing to serve as the Company's interim President and
Chief Executive Officer beginning in August 1998, Dr. Parkinson entered into
employment and consulting agreements with the Company though August 31, 1999. At
that time, Dr. Parkinson also entered into a consulting agreement with the
Company which provides Dr. Parkinson with a payment of $6,000 per month
commencing June 1, 1999 through June 1, 2002, unless terminated earlier. In
addition, Dr. Parkinson also entered into a standby consulting agreement with
the Company for which he will be paid on an hourly basis for consulting services
on an as needed basis as determined by the Company's Chief Executive Officer
through September 1, 2003.
Pursuant to his employment agreement and upon beginning service as the
Company's President and Chief Executive Officer in August 1998, Dr. Parkinson
was granted an option to purchase 100,000 shares of the Company's Common Stock
with an exercise price of $10.125 per share which was the fair market value on
the date of grant in accordance with the terms of such agreements. Such options
vested ratably over six months from the original date of grant and have a five
year term of exercise contingent upon Dr. Parkinson remaining as an employee,
consultant or director to the Company.
Compensation Committee Interlocks and Insider Participation
Robert S. Cooper, John B. Goodrich and William Hart served as the members
of the Company's Compensation Committee during the 2001 fiscal year. In August
1998, Dr. Cooper was appointed to serve as the Company's Chairman of the Board
of Directors and became an employee of the Company through August 1999 pursuant
to an agreement approved by a majority of the disinterested members of the Board
of Directors. In December 1998, Mr. Goodrich was appointed to serve as the
Company's corporate secretary; however; he is not, and has never been an
employee of the Company. In addition, Mr. Goodrich retired in February 2002 as a
member of the law firm of Wilson Sonsini Goodrich & Rosati, P.C. where he
practiced from 1970. The law firm was retained by the Company during the past
fiscal year as outside counsel to provide certain legal services to the Company.
Mr. Hart is not, and has never been, an employee or officer of the Company. See
"Compensation of Directors" presented above, "Employment Contracts and
Termination of Employment and Change-in-Control Arrangements" presented above
and "Certain Relationships and Related Transactions" presented in Item 13.
Compensation Committee Report
The Compensation Committee of the Board of Directors (the "Committee")
establishes the general compensation policies of the Company and the
compensation plans and specific compensation levels for executive officers of
the Company. The Committee believes that the compensation of the Chief Executive
Officer should be primarily influenced by the overall financial performance of
the Company.
85
The Committee believes that the compensation of the Chief Executive Officer
should be established within a range of compensation for similarly situated
chief executive officers of comparable companies in the high technology and
related industries in the Standard & Poor's High Technology Composite Index
("peer companies") and their performance according to data obtained by the
Committee from independent outside consultants and publicly available data, such
as proxy data from peer companies as adjusted by the Committee's consideration
of the particular factors influencing the Company's performance and current
situation. A portion of the Chief Executive Officer's compensation package is
established as base salary and the balance is variable and consists of an annual
cash bonus and/or stock option grants.
Within these established ranges and guidelines, and taking into account the
Company's historical performance compared to peer companies, the Committee and
Board of Directors also carefully considered the current risks and challenges
facing the Company as well as the individual qualifications, skills, and past
performance of Mr. Berglund. Based on these considerations, the Committee and
Board of Directors approved a base annual salary of $440,000 for Mr. Berglund
beginning effective as of January 1, 2001.
The Committee carefully reviewed and considered its cash bonus program for
fiscal year 2001 for executive officers of the Company. Such program provided
for an annual cash bonus, a portion of which is paid quarterly, based upon a
maximum eligible percentage of each executive's base salary within a range of
target incentives as reported by professional compensation surveys. The
percentage for each executive was then adjusted by factoring in an evaluation of
such individual's performance. The total size of the Company's bonus pool for
all employees, including executives, was determined with respect to the
Company's performance in meeting certain goals for both revenue and income for
fiscal year 2001. For fiscal year 2001, the total bonus pool for all employees,
including all executives other than the Chief Executive Officer, was
approximately $400,000. The Board of Director's and Committee have approved a
similar cash bonus program for fiscal year 2002; however, interim payments will
no longer be made on a quarterly basis and a single cash bonus will be paid at
the end of the year.
Pursuant to the terms of his employment agreement, Mr. Berglund was
eligible for a cash bonus of up to 50% of his base salary for fiscal year 2000
and he was guaranteed this bonus amount on a pro rata basis for fiscal year
1999. In 2001, Mr. Berglund was paid a bonus of $166,523 for meeting his goals
set by the Board of Directors for the prior fiscal year 2000. As also approved
by the Board of Directors, Mr. Berglund will be eligible for a bonus of up to
70% of his base salary for fiscal year 2001; however, the Committee and the
Board of Directors have not yet determined a final bonus amount for fiscal year
2001.
Based on the Board of Directors' and the Committee's evaluation of the
Chief Executive Officer's ability to influence the long-term growth and
profitability of the Company, the Board of Directors determined that Mr.
Berglund should receive an option grant to purchase 400,000 shares of the
Company's Common Stock upon his starting with the Company in March 1999 at the
then fair market value of $8.00 per share. In addition, in connection with his
performance review during the last fiscal year 2001, the Committee and the Board
of Directors approved a new option grant for Mr. Berglund to purchase an
additional 25,000 shares of the Company's Common Stock at the then current fair
market value of $17.050 per share. Both such options vest ratably over five
years and have partial acceleration provisions in certain change of control
situations.
The Committee also adopted similar policies with respect to the overall
compensation of other executive officers of the Company. A portion of each
compensation package was established as base salary and the balance is variable
and consists of an annual cash bonus and stock option grants. Using salary
survey data supplied by outside consultants and other publicly available data,
such as proxy data from peer companies, the Committee established base salaries
for each executive officer within a range of salaries of similarly situated
executive officers at comparable companies. In addition, these base salaries for
executive officers were then adjusted by the Committee taking into consideration
factors such as the relative performance of the Company, the performance of the
business unit for which the executive officer is responsible and the
individual's past performance and future potential.
The size of option grants, if any, to other executive officers was
determined by the Committee's evaluation of each executive's ability to
influence the Company's long-term growth and profitability. The Company also has
a metric measurement system in place with respect to option grants made to all
new employees under the Company's option plans in order to ensure consistency
among grants and competitiveness in the marketplace. Generally, these options
are granted at the then current market price and because the value of an option
bears a direct relationship to
86
the Company's stock price, it is an incentive for managers to create value for
shareholders. The Committee therefore views stock options as an important
component of its long-term, performance-based compensation philosophy.
During fiscal year 2001 the Compensation Committee and the Board of
Directors reviewed all employees and executive officers, other than the Chief
Executive Officer, of the Company as part of a single worldwide program. The
purpose of this single review plan is to provide a common, annual review date
for all levels of managers to review all employees of the Company. Under this
plan, all executive officers can also be reviewed by the Compensation Committee
at the same time. The annual review period for this single plan was set as July
30 for fiscal year 2001 and has not yet been set for fiscal year 2002.
Under the single review plan, the total compensation of all employees of
the Company, including executive officers, will be reviewed annually in
accordance with the same common criteria. Base salary guidelines have been
established and will be revised periodically based upon market conditions, the
economic climate and the Company's financial position. Merit increases, if any,
for all employees of the Company, including executive officers, will be based
upon the following criteria: the individual employee's performance for the year
as judged against his/her job goals and responsibilities, the individual
employee's salary and performance as compared to other employees in the same or
similar department, the individual employee's position in the salary grade, the
employee's salary relative to market data for the position and the Company's
fiscal budget and any associated restrictions.
Robert S. Cooper, Member John B. Goodrich, Chairman William Hart, Member
Compensation Committee Compensation Committee Compensation Committee
Steven W. Berglund, Ulf J. Johansson, Bradford W. Parkinson,
Board of Directors Board of Directors Board of Directors
Company Performance
The following graph shows a five year comparison of the cumulative total
return for the Company's Common Stock, the Nasdaq Composite Total Return Index
(U.S.), and the Standard & Poor's Technology Sector Index: (1)
87
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURNS(2)
AMONG TRIMBLE NAVIGATION LIMITED,
NASDAQ COMPOSITE TOTAL RETURN INDEX (U.S.),
AND THE STANDARD & POOR'S
TECHNOLOGY SECTOR INDEX
[The performance graph has been omitted. Performance Graph. The performance
graph required by Item 402(1) of Regulation S-K is set forth in the paper copy
of the Proxy Statement immediatley following the caption "COMPARISON OF
FIVEYEAR CUMMULATIVE TOTATL RETURNS."
The peformance graph plots the data points listed below the graph for the data
sets (i) Trimble Navigation Limited, (ii) Nasdaq Composite Total Return Index
(US) and (iii) the Standard & Poor's Technology Sector Index. The graph has a
horizontal axis at its bottom which lists from left to right the dates 96, 97,
98, 99, 00, and 01. The graph has a vertical axis at its left which lists from
bottom to top numbers 0, 50, 100, 150, 200, 250, 300, 350, 400, and 450. The
data points for each data set are plotted on the graph and are connected by
line. The line connecting the data points in the Trimble Navigation Limited data
set is bold with square to mark the points, while the lines connecting the data
points in the Nasdaq Composite Total Return Index (US) data set and the S&P
Technology Sector Index data set are dashed with triangle to mark data point and
small square dashes with circle to mark data points, respectively.]
DATA POINTS FOR PERFORMANCE GRAPH
12/96 12/97 12/98 12/99 12/00 12/01
--------------------------------------------
Trimble Navigation
Limited TRMB 100 190 63 188 209 141
Nasdaq Stock Market
(U.S.) INAS 100 122 173 321 193 153
S&P Technology
Sector ITES 100 126 218 382 229 175
- --------------------------
(1) The data in the above graph is presented on a calendar year basis through
December 31, 2001 which is the most currently available data from the
indicated sources. 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 2001
fiscal year end was December 28, 2001. 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.
(2) Assumes an investment of $100 on December 31, 1996 in the Company's Common
Stock, the Nasdaq Composite Total Return Index (U.S.), and the Standard &
Poor's Technology Sector Index. Total returns assume the reinvestment of
dividends for the indexes. The Company has never paid dividends on its
Common Stock and has no present plans to do so.
Item 12. Security Ownership of Certain Beneficial Owners and Management
The following table sets forth the shares of Company's Common Stock
beneficially owned as of the March 24, 2002 (unless otherwise noted below) by:
(i) all persons known to the Company to be the beneficial owners of more than 5%
of the Company's outstanding Common Stock, (ii) each director of the Company
(including nominees), (iii) the executive officers of the Company named in the
Summary Compensation Table presented in Item 13, and (iv) all directors and
executive officers of the Company, as a group:
88
Shares
Beneficially Owned (2)
-----------------------------
5% Shareholders, Directors and Nominees, and Executive Officers (1) Number Percent (%)
- ------------------------------------------------------------------------------ --------- ------------
Mellon Financial Corporation, The Boston Company, Inc. and The Boston Company 3,021,071 10.72
Asset Management, LLC (3).....................................................
One Mellon Bank Center
500 Grant Street
Pittsburgh, Pennsylvania 15258-0001
Capital Research and Management Company (4)................................... 2,163,300 7.68
333 South Hope Street, 55th Floor
Los Angeles, California 90071
Steven W. Berglund (5)........................................................ 255,843 *
Robert S. Cooper (6).......................................................... 137,861 *
John B. Goodrich (7).......................................................... 51,682 *
William Hart (8).............................................................. 86,803 *
Ulf J. Johansson (9).......................................................... 13,750 *
Bradford W. Parkinson (10).................................................... 67,514 *
Mary Ellen Genovese (11)...................................................... 84,420 *
Ronald C. Hyatt (12).......................................................... 263,517 *
Karl G. Ramstrom (13)......................................................... 35,397 *
Dennis L. Workman (14)........................................................ 30,607 *
All Directors and Executive Officers, as a group
(18 persons) (5)-(15).................................................... 1,286,062 4.41
- ---------------------------
* Indicates less than 1%
(1) Except as otherwise noted in the table, the business address of each of the
persons named in this table is: c/o Trimble Navigation Limited, 645 North
Mary Avenue, Sunnyvale, California 94088.
(2) Except as indicated in the footnotes to this table and pursuant to
applicable community property laws, the persons named in the table have
sole voting and investment power with respect to all shares of stock shown
as beneficially owned by them.
(3) The information presented with respect to Mellon Financial Corporation
("MFC"), The Boston Company, Inc. ("BC") and The Boston Company Asset
Management, LLC ("BCAM") is as reported pursuant to Amendment No. 1 to a
Schedule 13G as jointly filed with the Securities and Exchange Commission
on January 24, 2002 by MFC, BC and BCAM. As reported on such joint Schedule
13G, MFC and BC are parent holding companies in accordance with Section
240.13-d(1)(b)(1)(ii)(G) of the Exchange Act and BCAM is an investment
adviser registered under Section 203 of the Investment Advisers Act of
1940. MFC was deemed to be the beneficial owner of all 3,021,071 shares as
of the date of such filing due to its sole dispositive power over such
shares. In addition, as of the date of such filing, BC was deemed to be the
beneficial owner of an aggregate of 2,583,680 shares and BCAM was deemed to
be the beneficial owner of an aggregate of 1,991,280 shares. According to
the Schedule 13G, all of the reported shares are beneficially owned by MFC
and direct or indirect subsidiaries in their various fiduciary capacities
and, as a result, another entity in every instance is entitled to any
dividends or proceeds from the sale of such shares and none of such
individual accounts hold an interest of 5% or more. The Company has not
attempted to independently verify any of the information contained in the
Schedule 13G as filed.
(4) The information presented with respect to Capital Research and Management
Company ("CRMC") is as reported pursuant to Amendment No. 4 to a Schedule
13G as filed with the Securities and Exchange Commission on February 11,
2002 by CRMC. As reported on such Schedule 13G, CRMC is an investment
adviser registered under Section 203 of the Investment Advisers Act of 1940
and was deemed to be the beneficial owner of all 2,163,300 shares as of the
date of such filing due to its sole dispositive power over such shares as a
result of acting as investment adviser to various investment companies
registered under Section 8 of the Investment Company Act of 1940. CRMC
disclaims beneficial ownership of all such shares pursuant to Rule 13d-4 of
the Exchange Act of 1934, as amended. The Company has not attempted to
independently verify any of the information contained in the Schedule 13G.
(5) Includes 253,333 shares subject to stock options exercisable within 60 days
March 24, 2002.
(6) Includes 104,861shares subject to stock options exercisable within 60 days
March 24, 2002.
(7) Includes 33,194 shares subject to stock options exercisable within 60 days
March 24, 2002.
(8) Includes 44,861 shares subject to stock options exercisable within 60 days
of the Record Date.
(9) Includes 13,750 shares subject to stock options exercisable within 60 days
March 24, 2002.
89
(10) Includes 3 shares held by Dr. Parkinson's spouse, 2,515 shares held in a
charitable remainder trust and 61,661 shares subject to stock options
exercisable within 60 days of March 24, 2002.
(11) Includes 76,192 shares subject to stock options exercisable within 60 days
of the March 24, 2002.
(12) Includes 141,500 shares subject to stock options exercisable within 60 days
of March 24, 2002. Mr. Hyatt retired as an executive officer of the
Company effective February 2002 but has agreed to remain as a consultant to
the Company through June 2002.
(13) Includes 33,960 shares subject to stock options exercisable within 60 days
of March 24, 2002.
(14) Includes 28,666 shares subject to stock options exercisable within 60 days
of March 24, 2002.
(15) Includes an aggregate of 969,232 shares subject to stock options
exercisable within 60 days of March 24, 2002.
Item 13. Certain Relationships and Related Transactions
Certain Relationships and Related Transactions
In May 2001, the Company entered into a settlement agreement with David M.
Hall, the Company's former Senior Vice President, Marketing and Business
Development, pursuant to which the Company agreed to make monthly severance
payments in the aggregate amount of $252,405, provided that certain conditions
continue to be met. During fiscal year 2001, Mr. Hall received an aggregate of
$171,826 under the agreement.
The following table sets forth information with regard to loans made to
executive officers of the Company who had outstanding amounts of more than
$60,000 at any time since the beginning of the Company's last fiscal year. Each
of these loans was made by the Company for the purpose of assisting such
executive officer in the acquisition of his primary residence in an exceptional
housing market in a location for the benefit of the Company in accordance with
the Company's Bylaws. Each of these loans is secured by a second deed of trust
on such residence, has a term of five years and requires that the interest on
such principal amounts be paid currently each year. The principal balance is due
in full at the end of such five year term, but such executive officers may
pre-pay all or any portion of such balance without a prepayment penalty. The
interest rate for each of these loans was set with reference to the then
applicable mid-term annual federal rate.
Largest Amount
Principal Amount Outstanding
Annual Outstanding at During Fiscal
Name and Position Date of Loan Interest Rate Record Date ($) Year 2000 ($)
- ----------------------------------------- ------------ -------------- ---------------- ----------------
Steven W. Berglund 6/25/99 5.40% 186,667 286,667
President and Chief Executive
Officer
Irwin L. Kwatek 8/15/01 4.99% 150,000 150,000
Vice President and General Counsel
90
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on form 8-K
(a) 1. Financial Statements
The following consolidated financial statements required by this item are
included in Part II Item 8 hereof under the caption "Financial Statements and
Supplementary Data."
Page In This
Annual Report
On Form 10-K
Consolidated Balance Sheets at December 28, 2001 and
December 29, 2000 44
Consolidated Statements of Operations for each of the
three fiscal years in the period ended December 28, 2001 45
Consolidated Statement of Shareholders' Equity for the
three fiscal years in the period ended December 28, 2001 46
Consolidated Statements of Cash Flows for each of the
three fiscal years in the period ended December 28, 2001 47
Notes to Consolidated Financial Statements 48-77
2. Financial Statement Schedules
The following financial statement schedule is filed as part of this report:
Page In This
Annual Report
On Form 10-K
Schedule II - Valuation and Qualifying Accounts S-1
All other schedules have been omitted as they are either not required or
not applicable, or the required information is included in the consolidated
financial statements or the notes thereto.
3. Exhibits
Exhibit
Number
3.1 Restated Articles of Incorporation of the Company filed June 25,
1986. (6)
3.2 Certificate of Amendment of Articles of Incorporation of the Company
filed October 6, 1988. (6)
3.3 Certificate of Amendment of Articles of Incorporation of the Company
filed July 18, 1990. (6)
3.4 Certificate of Determination of the Company filed February 19, 1999.(6)
3.8 Amended and Restated Bylaws of the Company. (21)
4.1 Specimen copy of certificate for shares of Common Stock of the
Company. (1)
91
4.2 Preferred Shares Rights Agreement dated as of February 18, 1999. (5)
4.3 First Amended and Restated Stock and Warrant Purchase Agreement
between and among the Company and the investors thereto dated
January 14, 2002.(12)
4.4 Form of Warrant to Purchase Shares of Common Stock dated January 14,
2002.(13)
10.4+ Form of Indemnification Agreement between the Company and its officers
and directors. (1)
10.32+ 1990 Director Stock Option Plan, as amended, and form of Outside
Director Non-statutory Stock Option Agreement. (4)
10.35 Sublease Agreement dated January 2, 1991, between the Company, Aetna
Insurance Company, and Poqet Computer Corporation for property
located at 650 North Mary Avenue, Sunnyvale, California. (2)
10.40 Industrial Lease Agreement dated December 3, 1991, between the Company
and Aetna Life Insurance Company for property located at 585 North
Mary Avenue, Sunnyvale, California. (3)
10.41 Industrial Lease Agreement dated December 3, 1991, between the Company
and Aetna Life Insurance Company for property located at 570 Maude
Court, Sunnyvale, California. (3)
10.42 Industrial Lease Agreement dated December 3, 1991, between the Company
and Aetna Life Insurance Company for property located at 580 Maude
Court, Sunnyvale, California. (3)
10.43 Industrial Lease Agreement dated December 3, 1991, between the Company
and Aetna Life Insurance Company for property located at 490 Potrero
Avenue, Sunnyvale, California. (3)
10.46+ 1992 Management Discount Stock Option and form of Nonstatutory Stock
Option Agreement (3).
10.59+ 1993 Stock Option Plan, as amended May 11, 2000. (8)
10.60+ 1988 Employee Stock Purchase Plan, as amended May 11, 2000. (8)
10.64+ Consulting Agreement between the Company and Bradford W. Parkinson
dated September 1, 1998. (6)
10.65+ Standby Consulting Agreement between the Company and Bradford W.
Parkinson dated September 1, 1998. (6)
10.66+ Consulting Agreement between the Company and Robert S. Cooper dated
September 1, 1998. (6)
10.67+ Employment Agreement between the Company and Steven W. Berglund dated
March 17, 1999. (6)
10.68+ Nonqualified deferred Compensation Plan of the Company effective
February 10, 1994. (6)
10.69***Asset Purchase Agreement dated August 10, 1999 by and among Trimble
Navigation Limited and Solectron Corporation and Solectron Federal
Systems, Inc. (7)
10.70***Supply Agreement dated August 10, 1999 by and among Trimble
Navigation Limited and Solectron Corporation and Solectron Federal
Systems, Inc. (7)
92
10.72 Stock and Asset Purchase Agreement, dated as of May 11, 2000,
between Trimble Acquisition Corp., and Spectra Physics Holdings
USA, INC., Spectra Precision AB, and Spectra Precision Europe
Holdings, BV. (9)
10.73 Asset Purchase Agreement dated May 11, 2000 between Trimble Acquisition
Corp. and Spectra Precision AB. (9)
.
10.74 Credit Agreement dated July 14, 2000 between Trimble Navigation
Limited and ABN AMRO Bank N.V., Fleet National Bank, and The Bank of
Nova Scotia. (9)
10.75 Subordinated Seller Note dated July 14, 2000, for the principal amount
of $80,000,000 issued by Trimble Navigation Limited to Spectra
Precision Holdings, Inc. (9)
10.76+ Spectra Precision Supplement to the Trimble Navigation 1988 Employee
Stock Purchase Plan. (10)
10.77+ Australian Addendum to the Trimble Navigation 1988 Employee Stock
Purchase Plan. (11)
10.78 Credit Agreement - First Amendment. (14)
10.79 Credit Agreement - Second Amendment. (14)
21.1 Subsidiaries of the Company. (14)
23.1 Consent of Ernst & Young LLP, independent auditors
24.1 Power of Attorney (included on page 95).
*** 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.
(1) Incorporated by reference to identically numbered exhibits filed in
response to Item 16(a), "Exhibits," of the registrant's Registration
Statement on Form S-1, as amended (File No. 33-35333), which became
effective July 19, 1990.
(2) Incorporated by reference to identically numbered exhibits filed in
response to Item 14(a), "Exhibits," of the registrant's Annual Report
on Form 10-K for the fiscal year ended December 31, 1990.
(3) Incorporated by reference to identically numbered exhibits filed in
response to Item 16(a) "Exhibits," of the registrant's Registration
Statement on Form S-1 (File No. 33-45990), which was filed February 18,
1992.
(4) Incorporated by reference to identically numbered exhibits filed in
response to Item 14(a), "Exhibits," of the registrant's Annual Report
on Form 10-K for the fiscal year ended December 31, 1993.
(5) Incorporated by reference to Exhibit No. 1 to the registrant's
Registration Statement on Form 8-A, which was filed on
February 18,1999.
(6) Incorporated by reference to identically numbered exhibits filed in
response to Item 14(a), "Exhibits," of the registrant's Annual Report
on Form 10-K for the fiscal year ended January 1, 1999.
93
(7) Incorporated by reference to identically numbered exhibits filed in
response to Item 7(c), "Exhibits," of the registrant's Report on Form
8-K, which was filed on August 25, 1999.
(8) Incorporated by reference to identically numbered exhibits filed in
response to Item 8, "Exhibits," of the registrant's registration
statement on Form S-8 filed on June 1, 2000.
(9) Incorporated by reference to identically numbered exhibits filed in
response to Item 7(c), "Exhibits," of the registrant's Current Report
on Form 8-K filed on July 28, 2000.
(10) Incorporated by reference to identically numbered exhibits filed in
response to Item 6A, "Exhibits," of the registrant's Annual Report on
Form 10-Q for the quarter ended September 29, 2000.
(11) Incorporated by reference to identically numbered exhibits filed in
response to Item 14(a), "Exhibits," of the registrant's Annual Report
on Form 10-K for the fiscal year ended December 29, 2000.
(12) Incorporated by reference to exhibit number 4.1 filed in response to
Item 7(c), "Exhibits," of the registrant's Current Report on Form
8-K filed on January 16, 2002.
(13) Incorporated by reference to exhibit number 4.2 filed in response to
Item 7(c), "Exhibits," of the registrant's Current Report on Form
8-K filed on January 16, 2002.
(14) Filed herewith.
(b) Reports on Form 8-K.
On December 21, 2001, the Company filed a report on Form 8-K reporting the
Company entered into a Stock and Warrant Purchase Agreement (the "Purchase
Agreement") with certain accredited investors (the "Investors") pursuant to
which the Company sold 1,783,337 shares of its common stock at a price of $15.00
per share in a private placement transaction. The Investors also received
warrants having a five-year term of exercise to purchase up to 356,670
additional shares of the Company's common stock at an exercise price of $19.475
per share (the "Warrants").
On January 14, 2002, the Company filed a report on Form 8-K reporting the
entered into the First Amended and Restated Stock and Warrant Purchase Agreement
(the "Purchase Agreement") with certain accredited investors (the "Investors")
pursuant to which the Company sold an additional 1,280,004 shares of its common
stock at a price of $15.00 per share in the second closing under a previously
announced private placement transaction. The Investors also received warrants
having a five-year term of exercise to purchase up to 256,002 additional shares
of the Company's common stock at an exercise price of $19.475 per share (the
"Warrants").
94
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 28, 2001
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.
95
Pursuant to the requirements of the Securities Exchange Act of 1934,
this Annual Report on Form 10-K has been signed below by the following persons
on behalf of the registrant and in the capacities and on the dates indicated:
Signature Capacity in which Signed Date
- -----------------------------------------------------------------------------------------------------------------
/s/ Steven W. Berglund President, Chief Executive March 28, 2001
- ---------------------------------------------------- Officer, Director
Steven W. Berglund
/s/ Mary Ellen Genovese Chief Financial Officer and Assistant March 27, 2001
- -------------------------------------------------- Secretary (Principal Financial Officer)
Mary Ellen Genovese
/s/ Anup V. Singh Corporate Controller March 27, 2001
- -------------------------------------------------- (Principal Accounting Officer)
Anup V. Singh
/s/ Robert S. Cooper Director March 28, 2001
- ---------------------------------------------------
Robert S. Cooper
Director
- ----------------------------------------------------
John B. Goodrich
/s/ William Hart Director March 28, 2001
- ----------------------------------------------------
William Hart
/s/ Ulf J. Johansson Director March 28, 2001
- ---------------------------------------------------
Ulf J. Johansson
/s/ Bradford W. Parkinson Director March 28, 2001
- ---------------------------------------------------
Bradford W. Parkinson
96
SCHEDULE II
TRIMBLE NAVIGATION LIMITED
VALUATION AND QUALIFYING ACCOUNTS
(IN THOUSANDS OF DOLLARS)
December 28, December 29, December 31,
Allowance for doubtful accounts: 2001 2000 1999
- -------------------------------- -------------------- ----------------- ------------------
Balance at beginning of period $ 6,538 $ 2,949 $ 2,220
Acquired allowance (1) - 4,445 -
Bad debt expense 5,077 1,198 1,875
Write-offs, net of recoveries (3,075) (2,054) (1,146)
-------------------- ----------------- ------------------
Balance at end of period $8,540 $6,538 $ 2,949
-------------------- ----------------- ------------------
Inventory Reserves:
Balance at beginning of period $19,285 $14, 109 $ 14,119
Acquired reserve (2) - 7,672 -
Additions to reserve 7,242 188 1,607
Write-offs, net of recoveries (3,253) (2,684) (1,617)
-------------------- ----------------- ------------------
Balance at end of period $23,274 $19,285 $14,109
-------------------- ----------------- ------------------
(1) Includes $4,419,000 acquired at July 14, 2000 as part of the acquisition of
the Spectra Precision Group and $26,000 acquired at November 14, 2000 as
part of the acquisition of Tripod Data Systems.
(2) Includes $7,659,000 acquired at July 14, 2000 as part of the acquisition of
the Spectra Precision Group and $13,000 acquired at November 14, 2000 as
part of the acquisition of Tripod Data Systems.
S-1
97
INDEX TO EXHIBITS
SEQUENTIALLY
NUMBERED
EXHIBIT ------------
NUMBER EXHIBIT PAGE
- -----------------------------------------------------------------------
10.78 Credit Agreement - First Amendment. 99-104
10.79 Credit Agreement - Second Amendment. 105-109
21.1 Subsidiaries of the Company 110-111
23.1 Consent of Ernst & Young LLP, Independent Auditors 112
98