TRIMBLE NAVIGATION LTD /CA/ - 10-Q Quarterly Report

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

(Mark One)
[ X ] Quarterly report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the quarterly period ended JULY 4, 2003

OR

[ ] Transition report pursuant to Section 13 or 15(d) of the Securities Exchange
Act oF 1934 FOR THE TRANSITION PERIOD FROM __________ TO __________

Commission file number: 0-18645

TRIMBLE NAVIGATION LIMITED
(Exact name of registrant as specified in its charter)

California 94-2802192
---------- ----------
(State or other jurisdiction of (I.R.S. Employer Identification Number)
incorporation or organization)

645 North Mary Avenue, Sunnyvale, CA 94085
------------------------------------------
(Address of principal executive offices) (Zip Code)

Telephone Number (408) 481-8000
-------------------------------
(Registrant's telephone number, including area code)

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 whether the registrant is an accelerated filer (as
defined under in Rule 12b-2 of the Exchange Act).

Yes [ ] No [ X ]

As of August 7, 2003, there were 32,612,030 shares of Common Stock (no par
value) outstanding.

TRIMBLE NAVIGATION LIMITED

FORM 10-Q

INDEX

PART I - FINANCIAL INFORMATION

ITEM 1. Financial Statements

(1) Derived from the January 3, 2003 audited consolidated financial statements
included in the Annual Report on Form 10-K of Trimble Navigation Limited
for fiscal year 2002.

* See accompanying Notes to Consolidated Condensed Financial Statements.

* See accompanying Notes to Consolidated Condensed Financial Statements.

TRIMBLE NAVIGATION LIMITED
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)

Six Months Ended
----------------
July 4, June 28,
2003 2002
---- ----
(In thousands)

Cash flow from operating activities:
Net income $ 13,458 $3,611
Adjustments to reconcile net income to cash
flows provided by operating activities:
Depreciation expense 4,460 5,585
Amortization expense 3,908 4,697
Provision for doubtful accounts 150 1,542
Amortization of deferred gain - (796)
Amortization of debt issuance cost 3,273 -
Deferred income taxes 1,588 1,044
Other 1,875 892
Decrease (increase) in assets:
Accounts receivable, net (32,550) (14,001)
Inventories (10,795) (784)
Other assets (2,877) (1,239)
Effect of foreign currency translation adjustment 5,132 757
Increase (decrease) in liabilities:
Accounts payable 6,050 2,272
Accrued compensation and benefits 4,739 2,457
Deferred gain on joint venture (415) 11,000
Deferred gain - other - 324
Accrued liabilities (2,366) (2,752)
Income taxes payable 737 1,571
--- -----
Net cash provided (used) by operating activities (3,633) 16,180
------ ------

Cash flow from investing activities:
Acquisition of property and equipment, net (3,472) (4,213)
Acquisitions, net of cash acquired (5,453) (2,158)
Costs of capitalized patents (13) (48)
--- ---
Net cash used by investing activities (8,938) (6,419)
------ -------

Cash flow from financing activities:
Issuance of common stock and warrants 44,386 19,262
Collections (payment) of notes receivable 645 (665)
Payments on long-term debt and revolving credit lines (30,314) (31,700)
-------- --------
Net cash provided (used) by financing activities 14,717 (13,103)
------ --------

Net increase (decrease) in cash and cash equivalents 2,146 (3,342)
Cash and cash equivalents, beginning of period 28,679 31,078
------ ------
Cash and cash equivalents, end of period $ 30,825 $ 27,736
======== ========

Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest $ 7,993 $ 10,294
Income tax, net of refunds 290 1,733

* See accompanying Notes to Consolidated Condensed Financial Statements.

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS - UNAUDITED

NOTE 1 -- Basis of Presentation and New Accounting Standards:

Basis of Presentation

The Condensed Consolidated Financial Statements of Trimble Navigation
Limited and subsidiaries, ("Trimble" or the "Company") for the three and six
month periods ended July 4, 2003 and June 28, 2002, which are presented in this
Quarterly Report on Form 10-Q are unaudited. The balance sheet at January 3,
2003, has been derived from the audited financial statements at that date but
does not include all of the information and footnotes required by generally
accepted accounting principles for complete financial statements. In the opinion
of management, these statements include all adjustments (consisting of normal
recurring adjustments) necessary for a fair statement of the results for the
interim periods presented. Certain amounts from prior years have been
reclassified to conform to the current year presentation. The Condensed
Consolidated Financial Statements should be read in conjunction with the audited
consolidated financial statements and notes thereto included in Trimble's Annual
Report on Form 10-K for the fiscal year ended January 3, 2003.

The results of operations for the three and six month periods ended
July 4, 2003 are not necessarily indicative of the results that may be expected
for the fiscal year ending January 2, 2004.

New Accounting Standards

In November of 2002, the EITF reached a consensus on Issue No. 00-21,
"Revenue Arrangements with Multiple Deliverables." EITF Issue No. 00-21 provides
guidance on how to account for arrangements that involve the delivery or
performance of multiple products, services and/or rights to use assets. The
provisions of EITF Issue No. 00-21 will apply to revenue arrangements entered
into in fiscal periods beginning after June 15, 2003. The adoption of EITF Issue
No. 00-21 is not expected to have a material impact on the Company's financial
condition or results of operations.

In January of 2003, the FASB issued FIN No. 46, "Consolidation of
Variable Interest Entities." FIN No. 46 requires a variable interest entity
("VIE") to be consolidated by a company if that company is considered to be the
primary beneficiary in a VIE. Primary beneficiary is the party subject to a
majority of the risk of loss from the variable interest entity's activities or
entitled to receive a majority of the entity's residual returns or both. The
requirements of FIN No. 46 apply immediately to VIE's created after January 31,
2003. The consolidation requirements apply to older entities in the first fiscal
year or interim period beginning after June 15, 2003. The Company is currently
evaluating the provisions of FIN No. 46.

In May of 2003, the FASB issued SFAS No. 150, "Accounting for Certain
Financial Instruments With Characteristics of both Liabilities and Equity" which
requires freestanding financial instruments such as mandatory redeemable shares,
forward purchase contracts and written put options to be reported as liabilities
by their issuers as well as related new disclosure requirements. The provisions
of SFAS No. 150 are effective for instruments entered into or modified after May
31, 2003 and pre-existing instruments as of the beginning of the first interim
period that commences after June 15, 2003. The adoption of SFAS No. 150 is not
expected to have a material impact on the Company's financial condition or
results of operations.

Stock Compensation and SFAS 123 Disclosures

In accordance with the provisions of Statement of Financial Accounting
Standards No. 123 ("SFAS 123"), "Accounting for Stock-Based Compensation" and
"Statement of Financial Accounting Standards No. 148 ("SFAS 148"), "Accounting
for Stock-Based Compensation - Transition and Disclosure," Trimble applies
Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to
Employees" ("APB 25") and related interpretations in accounting for its stock
option plans and stock purchase plan. Accordingly, the Company does not
recognize compensation cost for stock options granted at fair market value.

For purposes of pro forma disclosures, the estimated fair value of the
options is amortized to expense over the options' vesting period, and the
estimated fair value of purchases under the employee stock purchase plan is
expensed in the year of purchase as well as the stock-based employee
compensation cost, net of related tax effects, that would have been included in
the determination of net income if the fair value based method had been applied
to all awards. The effects on pro forma disclosure of applying SFAS No. 123 are
not likely to be representative of the effects on pro forma disclosure of future
years.

Pro forma information regarding net income (loss) and earnings (loss)
per share is required by SFAS No. 123 and has been determined as if Trimble had
accounted for its employee stock options and purchases under the employee stock
purchase plan using the fair value method of SFAS No.123. The fair value for
these options was estimated at the date of grant using a Black-Scholes
option-pricing model with the following weighted-average assumptions at July 4,
2003 and June 28, 2002:

July 4, June 28,
2003 2002
---- ----
Expected stock price volatility 61.4% 53.3%
Risk free interest rate 2.9% 3.1%
Expected life of options after vesting 1.5 1.4
Expected dividend yield - -

The Black-Scholes option valuation model was developed for use in
estimating the fair value of traded options that have no vesting restrictions
and are fully transferable. In addition, option valuation models require the
input of highly subjective assumptions including the expected stock price
volatility. Because Trimble's employee stock options have characteristics
significantly different from those of traded options, and because changes in the
subjective input assumptions can materially affect the fair value estimate, in
management's opinion, the existing models do not necessarily provide a reliable
single measure of its employee stock options.

Trimble's pro forma information is as follows:

NOTE 2 - Acquisitions:

The consolidated condensed financial statements include the results of
operations of acquired companies commencing on the date of acquisition. The
total purchase consideration for each of the below acquisitions was allocated to
the assets acquired and liabilities assumed based on their estimated fair values
as of the date of acquisition.

Applanix Corporation

* At the beginning of the third fiscal quarter, Trimble acquired privately held
Applanix Corporation of Ontario, Canada in a stock transaction valued at CAD $25
million (769,493 shares valued at approximately US$18.7 million).

Applanix develops systems that integrate Inertial Navigation System (INS) and
Global Positioning System (GPS) technologies. Trimble expects the Applanix
acquisition to extend its technology portfolio and enable increased robustness
and capabilities in its future positioning products. Applanix's performance will
be reported under the Company's Portfolio Technologies business segment.

LeveLite Technology, Inc.

On August 15, 2002, Trimble acquired LeveLite Technology, Inc.
("LeveLite"), a California corporation, for approximately $5.7 million. This
strategic acquisition complements Trimble's entry-level construction instrument
product line. The purchase price consisted of 437,084 shares of common stock.
The merger agreement provides for Trimble to make additional earn-out payments
not to exceed $3.9 million (in common stock and cash payment) based on future
revenues derived from existing product sales to a certain customer. The
additional payments, if earned, result in additional goodwill. As of July 4,
2003, the total earn-out amount was approximately $1.1 million.

Also, if Trimble receives any proceeds from a pending litigation, a
portion will be paid to the former shareholders of LeveLite.

Grid Data, Inc.

On April 2, 2001, Trimble acquired certain assets of Grid Data, an
Arizona corporation, for approximately $3.5 million in cash and the assumption
of certain liabilities. In addition, the purchase agreement provided for Trimble
to make earn-out payments based upon the completion of certain business
milestones. In June 2002, Trimble issued 268,352 shares in settlement of all
earn-out payments, which resulted in additional goodwill of $4.8 million, with a
final purchase price of approximately $8.3 million.

NOTE 3 - Joint Ventures:

Caterpillar Trimble Control Technologies Joint Venture

On April 1, 2002, Caterpillar Trimble Control Technologies LLC
("CTCT"), a joint venture formed by Trimble and Caterpillar began operations.
CTCT is 50 percent owned by Trimble and 50 percent owned by Caterpillar, with
equal voting rights. It is developing and marketing next generation advanced
electronic guidance and control products for earthmoving machines in the
construction, mining, and waste industries. CTCT is based in Dayton, Ohio. Under
the terms of the joint venture agreement, Caterpillar contributed $11.0 million
cash plus selected technology, for a total contributed value of $14.5 million,
and Trimble contributed selected existing machine control product technologies
valued at $25.5 million. Additionally, both companies have licensed patents and
other intellectual property from their portfolios to CTCT. During the first
fiscal quarter of 2002, Trimble received a special cash distribution of $11.0
million from CTCT.

Trimble has elected to treat the cash distribution of $11.0 million as
a deferred gain, being amortized to the extent that losses are attributable from
CTCT under the equity method. When and if CTCT is profitable on a sustainable
basis, and future operating losses are not anticipated, then Trimble will
recognize as a gain, the portion of the $11.0 million, which is un-amortized. To
the extent that it is possible that the Company will have any future-funding
obligation relating to CTCT, then the relevant amount of the $11.0 million will
be deferred until such a time, as the funding obligation no longer exists. Both
Trimble's share of profits (losses) under the equity method and the amortization
of the $11.0 million deferred gain are recorded under the heading of "Expense
for affiliated operations, net" in Non-operating income (expense).

The expenses for affiliated operations at CTCT, net is comprised of
incremental costs as a result of purchasing products from CTCT at a higher price
than Trimble's original manufacturing costs, partially offset by contract
manufacturing fees charged to CTCT:

* Due to the nature of the relationship between Trimble and CTCT, a related
party, the impact of these agreements is classified under non-operating income
(expense) under the heading of "Expense for affiliated operations, net".

Reimbursement of costs from CTCT due to employee-related costs for
Trimble's employees devoted to CTCT:

Three Months Ended Six Months Ended
------------------ ----------------
July 4, June 28, July 4, June 28,
2003 2002 2003 2002
---- ---- ---- ----
(in millions)
Total reimbursed costs from CTCT $ 1.9 $ 1.2 $ 3.8 $ 1.2

Trimble has adopted the equity method of accounting for its investment
in CTCT. This requires that the Company records its share of CTCT profits or
losses in a given fiscal period, partially offset by the amortization of an
equal amount of the original deferred gain on the sale of technology to CTCT.
These transactions are recorded as a Non-operating expense under the heading of
"Expense for affiliated operations, net":

Three Months Ended Six Months Ended
------------------ ----------------
July 4, June 28, July 4, June 28,
2003 2002 2003 2002
---- ---- ---- ----
(in millions)
CTCT's reportable loss $ (0.4) $ (0.3) $ (0.8) $ (0.3)
Trimble's share of CTCT's reportable loss $ (0.2) $ (0.1) $ (0.4) $ (0.1)

At July 4, 2003, the outstanding balance due from CTCT to Trimble was
approximately $5.9 million while the outstanding balance due to CTCT from
Trimble was approximately $5.7 million.

Nikon-Trimble Joint Venture

On March 28, 2003, Trimble and Nikon Corporation entered into an agreement
to form a joint venture in Japan, Nikon-Trimble Co., Ltd. ("Nikon-Trimble"),
which would assume the operations of Nikon Geotecs Co., Ltd., a Japanese
subsidiary of Nikon Corporation and Trimble Japan KK, a Japanese subsidiary of
Trimble. Nikon-Trimble began operations in July 2003.

Under the terms of the Nikon-Trimble agreement, Nikon contributed (Y)1.2
billion (approximately US$10 million on June 30, 2003) in cash, while Trimble
contributed (Y)500 million (approximately US$4.1 million on June 30, 2003) in
cash and (Y)700 million of its common stock (232,834 shares valued at
approximately US$5.9 million on June 30, 2003). The Nikon-Trimble joint venture
purchased certain tangible and intangible assets from Nikon Geotecs Co., Ltd.
and Trimble Japan KK.

Nikon-Trimble is 50 percent owned by Trimble and 50 percent owned by Nikon,
with equal voting rights. It is focusing on the design and manufacture of
surveying instruments including mechanical total stations and related products.
In Japan, this joint venture will distribute Nikon's survey products as well as
Trimble's Global Positioning System (GPS) survey products and other Engineering
and Contstruction products, including robotic total stations. Outside of Japan,
Trimble will be the exclusive distributor of Nikon survey and construction
products.

Trimble has adopted the equity method of accounting for its investment in
Nikon-Trimble, with 50% share of profit or loss from this joint venture to be
reported by Trimble in the Non-operating section of the Consolidated Statement
of Operations under the heading of "Expenses for affiliated operations, net." At
July 4, 2003, the outstanding balance from Nikon-Trimble due to Trimble was
approximately $2.6 million related to the transfer of certain tangible and
intangible assets from Trimble Japan KK.

NOTE 4 - Goodwill and Intangible Assets:

Goodwill and purchased intangible assets consisted of the following:

* The increase in goodwill during the six-months of 2003 was primarily due to
the weakening of the US dollar versus Euro and Swedish Krona of approximately
$8.3 million.

NOTE 5 -- Certain Balance Sheet Components:

Inventories, net consisted of the following:
July 4, January 3,
As of 2003 2003
(in thousands)
Raw materials $ 20,922 $ 21,098
Work-in-process 3,322 5,187
Finished goods 46,864 34,859
------ ------
$ 71,108 $ 61,144
========= ========

Other current assets, net consisted of the following:

July 4, January 3,
As of 2003 2003
- ----- ---- ----
(in thousands)

Notes receivable $ 1,040 $ 1,685
Prepaid expenses 5,434 5,495
Other 924 1,297
--- -----
$ 7,398 $ 8,477
======== =========

Property and equipment consisted of the following:

July 4, January 3,
As of 2003 2003
- ----- ---- ----
(in thousands)

Machinery and equipment $ 70,686 $ 64,964
Furniture and fixtures 10,092 9,779
Leasehold improvements 6,649 6,558
Buildings 5,253 5,253
Land 1,391 1,391
----- -----
94,071 87,945
Less accumulated depreciation (72,480) (65,908)
------- -------
$ 21,591 $ 22,037
========= ==========

Other non-current assets consisted of the following:

July 4, January 3,
As of 2003 2003
- ----- ---- ----
(in thousands)

Debt issuance costs, net $ 1,826 $ 2,493
Nikon-Trimble joint venture investment* 10,570 -
Other investments 1,384 1,381
Deposits 1,112 1,196
Demonstration equipment, net 3,954 2,665
Receivables from employees 1,050 1,223
Other 3,089 3,128
----- -----
$ 22,985 $ 12,086
=========== ==========

* Includes transaction costs of approximately $0.5 million.

NOTE 6 -- Derivative Financial Instruments:

Trimble transacts business in various foreign currencies and hedges
certain identified risks associated with foreign currency transactions in order
to minimize the impact of changes in foreign currency exchange rates on
earnings. Trimble utilizes forward contracts to hedge certain trade and
inter-company receivables and payables. These contracts reduce the exposure to
fluctuations in exchange rate movements, as the gains and losses associated with
foreign currency balances are generally offset with the gains and losses on the
hedge contracts. These hedge instruments are marked to market through earnings
every period.

The following table provides information about our foreign exchange
forward contracts outstanding as of July 4, 2003:

Foreign Currency Contract Value Fair Value in
Amount USD USD
Currency Buy/Sell (in thousands) (in thousands) (in thousands)
- -------- -------- -------------- -------------- --------------
AUD Buy 1,300 $ (794) $ (881)
CAD Buy 470 (334) (351)
EUR Buy 1,693 (1,947) (1,944)
JPY Buy 122,864 (1,031) (1,040)
MXN Buy 320 (29) (31)
NZD Buy 4,100 (2,375) (2,438)
SEK Buy 112,241 (13,577) (13,991)
CAD Sell (700) 457 524
EUR Sell (28,859) 32,416 33,080
JPY Sell (551,795) 4,652 4,676
MXN Sell (5,000) 460 473
$ 17,898 $ 18,078
--------- ---------

NOTE 7 -- Long-Term Debt:

Trimble's long-term debt consists of the following:

July 4, January 3,
As of 2003 2003
- ----- ---- ----
(in thousands)

Credit Facilities:
Term loan $ 50,000 $ 32,600
Revolving credit facility 59,000 35,000
Subordinated note - 69,136
Promissory notes and other 1,737 1,789
----- -----
110,737 138,525

Less bank and other short-term borrowings - 6,556
Less current portion of long-term debt 12,623 24,104
------ ------
Non-current portion $ 98,114 $ 107,865
======== =========

The following table summarizes our future repayment obligations (excluding
interest):

Credit Facility

On June 25, 2003, Trimble obtained a $175 million secured credit
facility, ("the Credit Facility") from a syndicate of 9 banks to repay the
Thermo Subordinated Note ("the Subordinated Note") and certain existing higher
interest credit facilities, pay fees and expenses related to this new credit
facility, and for ongoing working capital and general corporate needs. Due to
the full repayment of the Subordinated Note and the amount outstanding under the
original higher interest credit facility, the Company recorded a non-cash charge
as Interest Expense of approximately $3.6 million.

At July 4, 2003, Trimble had approximately $109 million of borrowings
under the Credit Facility, comprised of a $50 million four-year term loan and
$59 million of a $125 million three-year revolver. The Company has access to an
additional $64 million of cash under the terms of the revolving credit facility.
The Company has commitment fees on the unused portion of 0.5% if the Leverage
Ratio (which is defined as total indebtedness to Earnings before Interest,
Taxes, Depreciation and Amortization (EBITDA), as defined in the related
agreement) is 2.0 or greater and 0.375% if the Leverage Ratio is less than 2.0.

Pricing for any borrowings under the Credit Facility is fixed for the
first six months at LIBOR plus 200 basis points (3.11 % at July 4, 2003) and is
thereafter tied to a formula, based on the Leverage Ratio.

The Credit Facility is secured by all of the Company's material assets,
except for assets that are subject to foreign tax considerations. Financial
covenants of the Credit Facility include leverage, fixed charge, and minimum net
worth tests. At July 4, 2003, Trimble was in compliance with all financial debt
covenants. The amount due under the revolver loan is paid as the loan matures on
June 25, 2006, and the loan commitment fees are paid on a quarterly basis.

Under the terms of the Credit Facility, the Company is currently
restricted from paying dividends and is limited as to the amount of its common
stock that it can repurchase. 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.

Subordinated Note

In the first fiscal quarter of 2002, the Company renegotiated the terms
of the Subordinated Note and under the revised agreement extended the term of
the Subordinated Note until July 14, 2004, at an interest rate of approximately
10.4% per year. The Subordinated Note was paid-off in full on June 25, 2003 as
permitted in the new Credit Facility Agreement dated June 25, 2003.

Promissory Note

The promissory note consists of a $1.7 million liability arising from
the purchase of a building for Trimble's Corvallis, Oregon site. The note is
payable in monthly installments through April 2015, bearing a 3.99% variable
interest rate as of July 4, 2003.

Weighted Average Cost of Debt

The weighted average cost of debt was approximately 3.11% for the
fiscal quarter ended July 4, 2003.

NOTE 8 -- Segment Information:

Trimble is a designer and distributor of positioning products and
applications enabled by GPS, optical, laser, and wireless communications
technology. The Company designs and markets products, by delivering integrated
information solutions such as collecting, analyzing, and displaying position
data to its end-users. Trimble offers an integrated product line for diverse
applications in its targeted markets.

To achieve distribution, marketing, production, and technology
advantages in Trimble's targeted markets, the Company manages its operations in
the following five segments:

o Engineering and Construction -- Consists of products currently used by
survey and construction professionals in the field for positioning data
collection, field computing, data management, and automated machine
guidance and control. These products provide solutions for numerous
construction applications including surveying, general construction,
site preparation and excavation, road and runway construction, and
underground construction.

o Field Solutions -- Consists of products that provide solutions in a
variety of agriculture and fixed asset applications, primarily in the
areas of precise land leveling, machine guidance, yield monitoring,
variable-rate applications of fertilizers and chemicals, and fixed
asset data collection for a variety of governmental and private
entities. This segment is an aggregation of the mapping and geographic
information systems (GIS) and Agriculture operations. Trimble has
aggregated these business operations under a single general manager in
order to continue to leverage its research and development activities
due to the similarities of products across the segment.

o Mobile Solutions -- Consists of products that enable end-users to
monitor and manage their mobile assets by communicating
location-relevant information from the field to the office. Trimble
offers a range of products that address a number of sectors of this
market including truck fleets, security, telematics, and public safety
vehicles.

o Component Technologies -- Currently, Trimble markets its GPS component
products through an extensive network of OEM relationships. These
products include proprietary chipsets, modules, and a variety of
intellectual property. The applications into which end-users currently
incorporate the component products include: timing applications for
synchronizing wireless and computer systems; in-vehicle navigation and
telematics (tracking) systems; fleet management; security systems; data
collection networks; and wireless handheld consumer products.

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. During the first two fiscal
quarters of 2003, this segment was comprised solely of the Military and
Advanced Systems business. The Tripod Data Systems business is now
included in the Engineering and Construction segment, while previously
it was included in this segment. Beginning with the third quarter of
fiscal 2003, Applanix's performance will be reported in this business
segment.

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 Company and each of its segments employ the same
accounting policies.

The following table presents revenues, operating income (loss), and
identifiable assets for the five segments. All financial information for fiscal
2002 has been re-stated in order to reflect the realignment of the reportable
segments. Operating income (loss) is net revenue less operating expenses,
excluding general corporate expenses, goodwill amortization, restructuring
charges, non-operating income (expense), and income taxes.

The identifiable assets that Trimble's Chief Operating Decision Maker (Trimble's
Chief Executive Officer) views by segment are accounts receivable and inventory.

(1) As presented, the accounts receivable number excludes cash received in
advance, deferred revenue and allowances, which are not allocated between
segments.

The following are reconciliations corresponding to totals in the
accompanying consolidated condensed financial statements:

Three Months Ended Six Months Ended
------------------ ----------------
July 4, June 28, July 4, June 28,
2003 2002 2003 2002
---- ---- ---- ----
(In thousands)
Operating income:
Total for reportable segments $24,325 $18,031 $42,295 $30,810
Unallocated corporate expenses 4,763 3,837 9,650 10,246
Amortization of purchased intangible assets 1,725 2,324 3,520 4,302
Restructuring charges 716 188 1,106 492
--- --- ----- ---
Operating income $17,121 $11,682 $28,019 $15,770
======= ======= ======= =======

July 4, January 3,
As of 2003 2003
- ----- ---- ----
(In thousands)
Assets:
Accounts receivable total for reportable divisions $132,025 $100,274
Unallocated (1) (17,364) (20,629)
------- -------
Total $114,661 $79,645
======== =======
- ----------
(1) Includes cash in advance, deferred revenue, reserves, and other receivables
that are not allocated by segment.

NOTE 9 -- Equity:

Comprehensive Income (Loss)

The components of comprehensive income, net of related tax, include:

Accumulated other comprehensive income on the consolidated condensed 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:

July 4, January 3,
As of 2003 2003
(In thousands)
Cumulative foreign currency translation adjustments $ 15,793 $ (1,032)
Net gain on hedging transactions 14 7
Net unrealized gain (loss) on investments 84 (1)
-- --
Accumulated other comprehensive income (loss) $ 15,891 (1,026)
========= ======

Equity Financing:

On April 14, 2003, Trimble sold 2,100,000 shares of its common stock,
no par value per share, to a certain investor at a price of $18.25 per share in
an offering pursuant to its shelf registration statement. The offering resulted
in net proceeds to Trimble of approximately $36.6 million, approximately $31
million of which was used to pay down the principal balance and $5.6 million was
used to pay down the accrued interest due on the Subordinated Note. This
Subordinated Note was paid off on June 25, 2003.

NOTE 10 -- Earnings Per Share:

The following data show the amounts used in computing earnings per
share and the effect on the weighted-average number of shares of dilutive
potential common stock.

NOTE 11 -- Related-Party Transactions:

Lease

Trimble currently leases office space in Ohio from an association of
three individuals, one of whom is an employee of one of the U.S. operating
units, under a non-cancelable operating lease arrangement expiring in 2011. The
annual rent is subject to adjustment based on the terms of the lease. The
Consolidated Condensed Statements of Operations include expenses from this
operating lease of $86,351 for each of fiscal quarters ended July 4, 2003 and
June 28, 2002, and $172,702 for each of six-month periods ended July 4, 2003 and
June 28, 2002.

Notes Receivable

Trimble has notes receivable from officers and employees of
approximately $1.05 million as of July 4, 2003 and $1.2 million as of January 3,
2003. The notes bear interest from 4.49% to 6.62% and have an average remaining
life of 2.17 years as of July 4, 2003.

Joint Ventures

See Note 3 of the Notes to Consolidated Condensed Financial Statements.

NOTE 12 -- Product Warranties:

While Trimble 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.

Changes in the product warranty liability during the six months ended July 4,
2003 are as follows:

(in thousands)
--------------
Balance at January 3, 2003 $ 6,394
Warranties accrued 2,746
Warranty claims (2,549)
------
Balance at July 4, 2003 $ 6,591
=======

NOTE 13 -- Litigation:

The Company is a party to other disputes incidental to its business,
including a current claim from a European distributor. The Company believes that
its ultimate liability as a result of such disputes, if any, would not be
material to its overall financial position, results of operations, or liquidity.

This Quarterly Report on Form 10-Q contains forward-looking statements within
the meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended, which are
subject to the "safe harbor" created by those sections. Actual results could
differ materially from those indicated in the forward-looking statements due to
a number of factors including, but not limited to, the risk factors discussed in
"Certain Other Risk Factors" below and elsewhere in this report as well as in
the Company's Annual Report on Form 10-K for fiscal year 2002 and other reports
and documents that the Company files from time to time with the Securities and
Exchange Commission. The Company has attempted to identify forward-looking
statements in this report by placing an asterisk (*) before paragraphs.
Discussions containing such forward-looking statements may be found in
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" below. In some cases, forward-looking statements can be identified
by terminology such as "may," "will," "should," " could," "predicts,"
"potential," "continue," "expects," "anticipates," "future," "intends," "plans,"
"believes," "estimates," and similar expressions. These forward-looking
statements are made as of the date of this Quarterly Report on Form 10-Q, and
the Company disclaims any obligation to update these statements or to explain
the reasons why actual results may differ.

ITEM 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations

Trimble's discussion and analysis of its financial condition and
results of operations are based upon our condensed 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,
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. See the discussion of our critical accounting
policies under the heading Management's Discussion and Analysis of Financial
Condition and Results of Operations in our Form 10K for fiscal 2002.

Recent Business Developments

Nikon-Trimble Joint Venture

On March 28, 2003, Trimble and Nikon Corporation entered into an agreement
to form a joint venture in Japan, Nikon-Trimble Co., Ltd. ("Nikon-Trimble"),
which would assume the operations of Nikon Geotecs Co., Ltd., a Japanese
subsidiary of Nikon Corporation and Trimble Japan KK, our Japanese subsidiary.
Nikon-Trimble began operations in July of 2003.

Under the terms of the Nikon-Trimble agreement, Nikon contributed (Y)1.2
billion (approximately US$10 million on June 30, 2003) in cash, while we
contributed (Y)500 million (approximately US$4.1 million on June 30, 2003) in
cash and (Y)700 million of our common stock (232,834 shares valued at
approximately US$5.9 million on June 30, 2003). Nikon-Trimble purchased certain
tangible and intangible assets from Nikon Geotecs Co., Ltd., and Trimble Japan
KK.

Nikon-Trimble is 50 percent owned by us and 50 percent owned by Nikon, with
equal voting rights. It is focusing on the design and manufacture of surveying
instruments including mechanical total stations and related products. In Japan,
this joint venture will distribute Nikon's survey products as well as our Global
Positioning System (GPS) survey products and other Engineering and Construction
products, including robotic total stations. Outside of Japan, we will be the
exclusive distributor of Nikon survey and construction products.

We have adopted the equity method of accounting for our investment in
Nikon-Trimble, therefore 50% share of profit or loss from this joint venture
will be reported by Trimble in the Non-operating section of the Consolidated
Statement of Operations under the heading of "Expenses for affiliated
operations, net." At July 4, 2003, the outstanding balance from Nikon-Trimble
due to Trimble was approximately $2.6 million related to the transfer of certain
tangible and intangible assets from Trimble Japan KK.

* We expect the joint venture to enhance our market position in survey
instruments through geographic expansion and market penetration. The Nikon
instruments will broaden our survey and construction product portfolio and
enable us to better access emerging markets. It will also provide us with the
ability to sell our GPS and robotic technology to existing Nikon customers.
Additionally, Nikon-Trimble is expected to improve our market position in Japan.

Acquisition of Applanix Corporation

* At the beginning of our third fiscal quarter, we acquired privately held
Applanix Corporation of Ontario, Canada in a stock transaction valued at CAD $25
million (769,493 shares valued at approximately US$18.7 million). Applanix
develops systems that integrate Inertial Navigation System (INS) and Global
Positioning System (GPS) technologies. We expect the Applanix acquisition to
extend our technology portfolio and enable increased robustness and capabilities
in our future positioning products. Applanix's performance will be reported
under our Portfolio Technologies business segment.

Results of Operations

Our revenues from operations from the three months and six months
periods ended July 4, 2003, were $138.1 million and $265.5 million, as compared
to $123.3 million and $227.3 million in the corresponding periods in fiscal
2002. The net income for the three and six months periods ended July 4, 2003 was
$8.1 million, or $0.25 diluted income per share and $13.5 million, or $0.43
diluted income per share, compared to a net income for the corresponding periods
in fiscal 2002, of $4.3 million, or $0.15 diluted income per share and $3.6
million or $0.13 diluted income per share.

The following table shows revenue and operating income by segment for
the periods indicated and should be read in conjunction with the narrative
descriptions below. Operating income by segment excludes unallocated corporate
expenses, which are comprised primarily of general and administrative costs,
amortization of purchased intangibles as well as other items not controlled by
the business segment.

At the beginning of fiscal 2003, we realigned two of our reportable
segments and therefore the following table shows restated revenue and operating
income by segment to reflect this realignment. The Tripod Data Systems business
is now included in the Engineering and Construction segment, while previously it
was included in the Portfolio segment.

A reconciliation of our consolidated segment operating income to consolidated
income before income taxes from operations follows:

Engineering and Construction

Engineering and Construction revenues increased by $11.9 million (or 14.2%)
and $25.6 million (or 16.4%) while segment operating income increased $3.5
million (or 23.1%) and $3.5 million (or 13%) for the three and six months ended
July 4, 2003 as compared to the same corresponding periods in fiscal 2002. We
continued to experience increased demand for survey equipment primarily due to
the strength of our products, our marketing actions and geographic expansion. We
also recorded approximately $1.9 million and $3.9 million in incremental
revenues for the three and six months ended July 4, 2003, respectively, from
LeveLite that was acquired in August of 2002. We benefited from new product
introductions and increased demand for TDS hand-held data collection products,
in particular the Recon (tm) data collector. The weakening of the US dollar
versus several major currencies during the year contributed approximately $4.6
million and $7.7 million of the revenue increases for the three and six months
ended July 4, 2003 as compared to the same corresponding periods in fiscal 2002.

Segment operating income increased as a result of higher revenues but
were partially offset by increased operating expenses overseas (largely driven
by the weaker US dollar), increased research and development ("R&D") spending as
we continue to invest in developing next generation technology, and strength in
our OEM business which typically has lower gross margins than sales through our
dealer channel.

Field Solutions

Field Solutions revenues increased by approximately $1.7 million (or 9.5%)
and $4.4 million (or 12%), while segment operating income increased by $0.4
million (or 12.8%) and decreased by $0.1 million (or 2%) for the three and six
months ended July 4, 2003 as compared to the same corresponding periods in
fiscal 2002. Revenues were up year over year due to continued strong sales of
the GeoExplorer (r) CE series handhelds and robust market acceptance of
Autopilot products. Despite increased revenues, segment operating income
decreased from the corresponding first six months of 2002 primarily due to lower
gross margins as a result of product mix changes and additional costs associated
with the introduction of new products.

Mobile Solutions

Mobile Solutions revenues increased by $1.8 million (or 98%) and $2.6
million (or 63%), while segment operating loss decreased by $1.1 million (or
36%) and $3.8 million (or 58%) for the three and six months ended July 4, 2003
as compared to the same corresponding periods in fiscal 2002. The increased
revenues were primarily attributable to the ready-mix vertical market, mainly
from increased sales of products and services related to the Televisant (tm)
system platform. During the past year, we also saw a shift in the composition of
revenue in this segment, with a growing portion attributed to this newer
service-based product offering while the legacy hardware-only business is
declining in importance. The reduction of the segment operating loss by $1.1
million was due to the implementation of cost reduction initiatives of over $0.9
million, and the positive impact in the first half of 2003 of increased gross
margins in this segment over prior year due to shift in demand to higher margin
products, led by the introduction of new General Packet Radio System ("GPRS")
products.

Component Technologies

Component Technologies revenues increased by $1.6 million (or 11%) and
$7.5 million (or 30%), while segment operating income increased by $2.4 million
(or 110%) and $5.2 million (or 162%) for the three and six months ended July 4,
2003 as compared to the same corresponding periods in fiscal 2002. The increase
in revenues during fiscal 2003 was primarily due to increased demand from our
wireless infrastructure customers. The increased revenues and higher gross
margins aided by favorable product mix, as well as lower costs due to the
transfer of the manufacturing of our products to China, which resulted in higher
segment operating income.

Portfolio Technologies

Portfolio Technologies revenues decreased by $2.3 million (or 54%) and
$1.9 million (or 33%), while operating loss increased by $1.1 million (or 151%)
and $0.9 million (or 368%) for the three and six months ended July 4, 2003 as
compared to the same corresponding periods in fiscal 2002. These results were
primarily driven by lower revenue of military-related products and unfavorable
product mix changes.

International Revenues

* Sales to our unaffiliated customers in locations outside the U.S. were
approximately 49% and 46% of total revenues for six months ended July 4, 2003
and June 28, 2002, respectively. North and South America represented 56% of
total revenue, Europe, the Middle East and Africa 31%, and Asia 13% in the first
six months of fiscal 2003. 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. 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.

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 approximately 51% and 50% for
the three and six months ended July 4, 2003, and approximately 50% and 51% for
the corresponding periods in fiscal 2002. Gross margin was higher due to strong
sales by Tripod Data Systems', GIS, wireless infrastructure, survey products,
and strong focus on product cost reductions.

* 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:

Three Months Ended Six Months Ended
------------------ ----------------
July 4, June 28, July 4, June 28,
2003 2002 2003 2002
---- ---- ---- ----
(In thousands)

Research and development $ 17,077 $ 14,986 $ 33,117 $ 30,024
Sales and marketing 24,560 21,897 48,557 44,024
General and administrative 9,896 9,874 18,531 20,672
Restructuring charges 716 188 1,106 492
Amortization of purchased intangibles 1,725 2,324 3,520 4,302
----- ----- ----- -----
Total $ 53,974 $ 49,269 $ 104,831 $ 99,514
======== ======== ========= ========

Research and Development

Research and development spending increased by $2.1 million and $3.1
million during the three and six month periods ended July 4, 2003, and
represented 12.4% and 12.5% of revenue, compared with 12.2% and 13.2% in the
same corresponding periods in fiscal 2002. The increase in fiscal 2003 was due
primarily to continued investment in next generation technology of approximately
$2.4 million and $3.7 million during the three and six months periods ended July
4, 2003, primarily in the Engineering and Construction segment and the weakness
of the US dollar versus major European currencies.

* We believe that the development and introduction of new products are critical
to the Company's future success and expect to continue the active development of
new products.

Sales and Marketing

Sales and marketing expense increased by $2.7 million and $4.5 million
during the three and six month periods ended July 4, 2003 and represents 17.8%
and 18.3% of revenue, compared with 17.8% and 19.4% in the same corresponding
periods in fiscal 2002. The increases in fiscal 2003 were primarily due to
increased compensation, commission, advertising and promotion related expenses
of approximately $1.5 million and $2.0 million during the three and six-month
periods ended July 4, 2003 compared with similar periods during the prior year
essentially driven by higher revenues and the weakness of the US dollar versus
major European currencies.

* Our future growth will depend in part on the timely development and continued
viability of the markets in which we currently compete as well as our ability to
continue to identify and exploit new markets for our products.

General and Administrative

General and administrative expense increased by $22,000 (representing
7.2% of revenue) during the second fiscal quarter of 2003 as compared to the
corresponding period during fiscal 2002 (representing 8.0% of revenue). General
and administrative expense decreased by $2.1 million (representing 7.0% of
revenue) during the six-month period ended July 4, 2003 over the corresponding
period during fiscal 2002 (representing 9.1% of revenue). The primary reasons
for lower general and administrative expense during the first six-months period
of fiscal 2003 as compared to the corresponding period in fiscal 2002 were lower
bad debt expenses of approximately $1.4 million and a decrease in legal expenses
of approximately $0.6 million principally due to the settlement of a lawsuit.

Restructuring Charges

Restructuring charges of $0.7 million and $1.1 million were recorded
during the three and six months periods ended July 4, 2003, respectively, which
related to severance costs and Trimble's Japanese office relocation due to the
Nikon-Trimble joint venture formation. As a result of these actions, our
headcount decreased during the six months period ended July 4, 2003 by 50
individuals and in the corresponding period of fiscal 2002 by 30 individuals. As
of July 4, 2003, the outstanding unpaid balance related to restructuring
activities was approximately $135,000.

Non-operating Expense, Net

The following table shows Non-operating expenses, net for the periods
indicated and should be read in conjunction with the narrative descriptions of
those expenses below:

Non-operating expense, net increased by $2.3 million during the second
quarter of fiscal 2003 as compared with the corresponding period in fiscal 2002,
while increasing by $3.0 million during the six-months period ended July 4, 2003
as compared with the corresponding period in fiscal 2002 primarily due to
increased interest expense and expenses for affiliated operations. The increase
in interest expense of $2.6 million was mainly due to $2.3 million of debt
issuance costs written off as a result of our debt refinancing in June 2003 and
$1.3 million related to the write off of the remaining unamortized portion of
the warrants issued to Spectra Physics Holdings, Inc. upon the full repayment of
the principal balance of the Subordinated Note in June 2003. The increase of
expenses for affiliated operations for the three-month period is due to the
shipment of a higher volume of Machine Control products containing CTCT
technology as compared to the corresponding period in fiscal 2002. The increase
of expenses for affiliated operations during the six-month period is due to the
fact that CTCT commenced operations in April of 2002, resulting in no such
expenses during the first fiscal quarter of 2002. Thess increases were partially
offset by a reduction in interest expenses mainly due to debt reduction and
lower interest rate.

Income Tax Provision

The Company recorded provisions for income taxes of $1.4 million for
the three months ended July 4, 2003 and $2.4 million for the six months ended
July 4, 2003. The provisions for income taxes for the comparable periods in 2002
were $2 million and $3 million, respectively. These amounts reflect foreign
taxes on profits in foreign jurisdictions and the ability to realize the benefit
from the net operating losses generated in the United States.

Off-Balance Sheet Financings and Liabilities

Other than lease commitments incurred in the normal course of business,
we do not have any off-balance sheet financing arrangements or liabilities. We
do not have any majority-owned subsidiaries that are not included in the
consolidated financial statements.

Liquidity And Capital Resources

July 4, January 3,
As of 2003 2003
- ----- ---- ----
(dollars in thousands)

Cash and cash equivalents $30,825 $28,679
As a percentage of total assets 6.1% 6.5%
Accounts receivable days sales outstanding (DSO) 69 58
Inventory turns per year 3.8 4.1

July 4, June 28,
Six Months Ended 2003 2002
- ---------------- ---- ----
(in thousands)

Cash provided (used) by operating activities $ (3,633) $ 16,180
Cash used by investing activities $ (8,938) $ (6,419)
Cash provided (used) by financing activities $ 14,717 $(13,103)
Net change in cash and cash equivalents $ 2,146 $ (3,342)

At July 4, 2003, our cash and cash equivalents increased by $2.1
million from January 3, 2003. We repaid our entire indebtedness under our
previous credit facility on June 25, 2003 as well as our subordinated note. We
simultaneously borrowed $109 million on our new Credit Facility dated June 25,
2003. We also increased our accounts receivables by approximately $32.6 million
during the first six months of fiscal 2003 and our inventories by approximately
$10.8 million. These increases resulted in net cash used in operating activities
of approximately $3.6 million during the first six months of fiscal 2003. We
also used approximately $3.5 million for capital expenditures.

At July 4, 2003, our debt mainly consisted of $109 million outstanding
under a secured credit facility. We have relied primarily on cash provided by
operating activities to fund capital expenditures and other investing
activities.

On April 14, 2003, the Company sold 2,100,000 shares of its common
stock, no par value per share, to a certain investor at a price of $18.25 per
share in an offering pursuant to the Company's shelf registration statement. The
offering resulted in net proceeds to the Company of approximately $36.6 million,
approximately $31 million of which was used to pay down the principal balance
and $5.6 million was used to pay down the accrued interest due on the
Subordinated Note.

* In the first six months of 2003, cash used by operating activities was $3.6
million, as compared to $16.2 million provided by operating activities during
the corresponding period in fiscal 2002. The decrease was primarily due to
increase in accounts receivable and inventories of $32.6 million and $10.8
million, respectively. Also, the prior year was positively impacted by a special
one-time distribution of $11.0 million by the CTCT joint venture to us. Our
ability to continue to generate cash from operations will depend in large part
on revenues, the rate of collections of accounts receivable, and profitability.

Cash flows used in investing activities were $8.9 million in the first
six months of fiscal 2003, as compared to $6.4 million in the corresponding
fiscal period in 2002. The increase was primarily due to a $4.2 million cash
outlay related to the company's cash contribution to the Nikon-Trimble joint
venture in June 2003.

Cash provided by financing activities was $14.7 million in the first
six months of 2003, as compared to $13.1 million used in financing activities in
the corresponding period in fiscal 2002. In the first six months ended July 4,
2003, we received net proceeds of approximately $36.6 million from the sale of
2.1 million shares of our common stock in April 2003, $7.8 million of cash from
the issuance of common stock to our employees under the stock option and stock
purchase plans. These receipts were partially offset by $30.3 million of debt
repayments. In the corresponding period in fiscal 2002, we made $31.7 million of
debt repayments and this was partially offset by $17.4 million of net proceeds
received from a private equity placement and $1.9 million related to the
issuance of common stock under the employee stock option and stock purchase
plans.

On June 25, 2003, we obtained a new Credit Facility which enabled us to
pay off our indebtedness under the previous credit facility and the Subordinated
Note in the amount of $109 million.

The new Credit Facility is secured by all material assets of our
Company, except for assets that are subject to foreign tax considerations.
Financial covenants of the Credit Facility include leverage, fixed charge, and
minimum net worth tests. At July 4, 2003 and as of the date of this report, we
are in compliance with debt covenants. The amounts due under the revolver loan
are paid as the loans mature, and the loan commitment fees are paid on a
quarterly basis. Under the four-year term loan portion of the Credit Facility,
we are due to make payments (excluding interest) of approximately $6.3 million
in fiscal 2003, $12.5 million in each of the following fiscal years for the next
3 years (2004, 2005, and 2006) and $6.2 million in fiscal 2007.

* We believe that our cash and cash equivalents, together with our Credit
Facility, will be sufficient to meet our anticipated operating cash needs for at
least the next twelve months. At July 4 2003, we had $30.8 million of cash and
cash equivalents, as well as access to $64 million of borrowings under the terms
of our revolver loans.

Under the terms of the Credit Facility, we are currently restricted
from paying dividends and are limited as to the amount of our common stock that
we can repurchase. We are allowed to pay dividends and repurchase shares of our
common stock up to 25% of net income in the previous fiscal year.

The following table summarizes our future repayment obligations
(excluding interest):

2007 and
July 3, 2003 Total 2003 2004 2005 2006 Beyond
- ------------ ----- ---- ---- ---- ---- ------
(in thousands)

Credit Facilities:
Term Loan $ 50,000 $ 6,250 $12,500 $12,500 $12,500 $ 6,250
Revolving credit facility 59,000 - - - 59,000 -
Promissory note and other 1,737 55 110 110 110 1,352
Total contractual cash
obligations $110,737 $ 6,305 $12,610 $12,610 $71,610 7,602

* We expect fiscal 2003 capital expenditures to be approximately $8 million to
$11 million, primarily for computer equipment, software, and leasehold
improvements associated with business expansion. Decisions related to how much
cash is used for investing are influenced by the expected amount of cash to be
provided by operations.

New Accounting Standards

In November of 2002, the EITF reached a consensus on Issue No. 00-21,
"Revenue Arrangements with Multiple Deliverables." EITF Issue No. 00-21 provides
guidance on how to account for arrangements that involve the delivery or
performance of multiple products, services, and/or rights to use assets. The
provisions of EITF Issue No. 00-21 will apply to revenue arrangements entered
into in fiscal periods beginning after June 15, 2003. The adoption of EITF Issue
No. 00-21 is not expected to have a material impact on the Company's financial
condition or results of operations.

In January of 2003, the FASB issued FIN No. 46, "Consolidation of
Variable Interest Entities." FIN No. 46 requires a variable interest entity
("VIE") to be consolidated by a company if that company is considered to be the
primary beneficiary in a VIE. Primary beneficiary is the party subject to a
majority of the risk of loss from the variable interest entity's activities or
entitled to receive a majority of the entity's residual returns or both. The
requirements of FIN No. 46 apply immediately to VIE's created after January 31,
2003. The consolidation requirements apply to older entities in the first fiscal
year or interim period beginning after June 15, 2003. We are currently
evaluating the provisions of FIN No. 46.

In May of 2003, the FASB issued SFAS No. 150, "Accounting for Certain
Financial Instruments With Characteristics of both Liabilities and Equity" which
requires freestanding financial instruments such as mandatory redeemable shares,
forward purchase contracts and written put options to be reported as liabilities
by their issuers as well as related new disclosure requirements. The provisions
of SFAS No. 150 are effective for instruments entered into or modified after May
31, 2003 and pre-existing instruments as of the beginning of the first interim
period that commences after June 15, 2003. The adoption of SFAS No. 150 is not
expected to have a material impact on the Company's financial condition or
results of operations.

Risks And Uncertainties

You should carefully consider the following risk factors, in addition
to the other information contained in this Form 10-Q and in any other documents
to which we refer you in this Form 10-Q, before purchasing our securities. The
risks and uncertainties described below are not the only ones we face.

Our Inability to Accurately Predict Orders and Shipments May Affect Our Revenue,
Expenses and Earnings per Share.

We have not been able in the past to consistently predict when our
customers will place orders and request shipments, so that we cannot always
accurately plan our manufacturing requirements. As a result, if orders and
shipments differ from what we predict, we may incur additional expenses and
build excess inventory, which may require additional accruals. Any significant
change in our customers' purchasing patterns could have a material adverse
effect on our operating results and reported earnings per share for a particular
quarter.

Our Operating Results in Each Quarter May Be Affected by Special Conditions,
Such As Seasonality, Late Quarter Purchases, and Other Potential Issues.

Due, in part, to the buying patterns of our customers, a significant
portion of our quarterly revenues occurs from orders received and immediately
shipped to customers in the last few weeks and days of each quarter, although
our operating expenses tend to remain fairly predictable. Engineering and
construction purchases tend to occur in early spring, and governmental agencies
tend to utilize funds available at the end of the government's fiscal year for
additional purchases at the end of our third fiscal quarter in September of each
year. Concentrations of orders sometimes also occur at the end of our other two
fiscal quarters. Additionally, a majority of our sales force earns commissions
on a quarterly basis, which may cause concentrations of orders at the end of any
fiscal quarter. If for any reason expected sales are deferred, orders are not
received, or shipments are delayed a few days at the end of a quarter, our
operating results and reported earnings per share for that quarter could be
significantly impacted.

We Are Dependent on a Sole Manufacturer and Assembler for Many of Our Products
and on Sole Suppliers of Critical Parts for Our Products.

Since August 1999, we have been substantially dependent upon Solectron
Corporation as the exclusive manufacturing partner for many of our GPS products
previously manufactured out of our Sunnyvale facilities. Under the agreement
with Solectron, we provide to Solectron a twelve-month product forecast and
place purchase orders with Solectron sixty calendar days in advance of the
scheduled delivery of products to our customers. Although purchase orders placed
with Solectron are cancelable, the terms of the agreement would require us to
purchase from Solectron all material inventory not returnable or usable by other
Solectron customers. Accordingly, if we inaccurately forecast demand for our
products, we may be unable to obtain adequate manufacturing capacity from
Solectron to meet customers' delivery requirements or we may accumulate excess
inventories, if such inventories are not usable by other Solectron customers.

Our current contract with Solectron continues in effect until either
party gives the other ninety days written notice.

Since January 2003, Solectron has been assembling most of our Component
Technology products in China. Although this initiative in China has brought cost
savings over assembling in California, we cannot predict potential effects that
may result in the future.

In addition, we rely on sole suppliers for a number of our critical
components. We have experienced shortages of components in the past. Our current
reliance on sole or a limited group of suppliers involves several risks,
including a potential inability to obtain an adequate supply of required
components and reduced control over pricing. Any inability to obtain adequate
deliveries or any other circumstance that would require us to seek alternative
sources of supply or to manufacture such components internally could
significantly delay our ability to ship our products, which could damage
relationships with current and prospective customers and could harm our
reputation and brand, which could have a material adverse effect on our
business.

Our Annual and Quarterly Performance May Fluctuate.

Our operating results have fluctuated and can be expected to continue
to fluctuate in the future on a quarterly and annual basis as a result of a
number of factors, many of which are beyond our control. Results in any period
could be affected by:

o changes in market demand,

o competitive market conditions,

o market acceptance of existing or new products, especially in our Mobile
Solutions business

o fluctuations in foreign currency exchange rates,

o the cost and availability of components,

o our ability to manufacture and ship products,

o the mix of our customer base and sales channels,

o the mix of products sold,

o our ability to expand our sales and marketing organization effectively,

o our ability to attract and retain key technical and managerial employees,

o the timing of shipments of products under contracts and sale of licensing
rights, and

o general global economic conditions.

In addition, demand for our products in any quarter or year may vary
due to the seasonal buying patterns of our customers in the agricultural and
engineering and construction industries. Due to the foregoing factors, our
operating results in one or more future periods are expected to be subject to
significant fluctuations. The price of our common stock could decline
substantially in the event such fluctuations result in our financial performance
being below the expectations of public market analysts and investors, which are
based primarily on historical models that are not necessarily accurate
representations of the future.

Our Gross Margin Is Subject to Fluctuation.

Our gross margin is affected by a number of factors, including product
mix, product pricing, cost of components, foreign currency exchange rates and
manufacturing costs. For example, since our Engineering and Construction (E&C)
and Geographic Information Systems (GIS) products generally have higher gross
margins than our Component Technologies products, absent other factors, a shift
in sales toward E&C and GIS products would lead to a gross margin improvement.
On the other hand, if market conditions in the highly competitive E&C and GIS
market segments forced us to lower unit prices, we would suffer a decline in
gross margin unless we were able to timely offset the price reduction by a
reduction in production costs or by sales of other products with higher gross
margins. A decline in gross margin could negatively impact our earnings per
share.

Our Business is Subject to Disruptions and Uncertainties Caused by War or
Terrorism.

Acts of war or acts of terrorism could have a material adverse impact
on our business, operating results, and financial condition. The threat of
terrorism and war and heightened security and military response to this threat,
or any future acts of terrorism, may cause further disruption to our economy and
create further uncertainties. To the extent that such disruptions or
uncertainties result in delays or cancellations of orders, or the manufacture or
shipment of our products, our business, operating results, and financial
condition could be materially and adversely affected.

Our Substantial Indebtedness Could Materially Restrict Our Operations and
Adversely Affect Our Financial Condition.

We now have, and for the foreseeable future expect to have, a
significant level of indebtedness. Our substantial indebtedness could:

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.

Our Credit Agreement Contains Stringent Financial Covenants.

On June 25, 2003, Trimble executed a Credit Agreement with Scotia
Capital and certain other banks, which provides for financial commitments
totaling up to $175 million. This credit facility contains financial covenants
regarding minimum fixed charge coverage and maximum leverage ratio, which are
extremely sensitive to changes in earnings before interest, taxes, depreciation
and amortization ("EBITDA"). In turn, EBITDA is highly correlated to revenues
and costs. Due to uncertainties associated with the downturn in the worldwide
economy, our future revenues by quarter are more difficult to forecast and we
have put in place various cost cutting measures, including the consolidation of
service functions and centers, offices, and of redundant product lines and
reductions in staff. If revenues should decline at a faster pace than the rate
of these cost cutting measures, on a quarter-to-quarter basis we may not be in
compliance with the two above-mentioned financial covenants. If we default on
one or more covenants, we will have to obtain either negotiated waivers or
amendments to the Credit Agreement. If we were unable to obtain such waivers or
amendments, the banks would have the right to accelerate the payment of our
outstanding obligations under the Credit Agreement, which would have a material
adverse effect on our financial condition and viability as an operating company.
In addition, a default under one of our debt instruments may also trigger
cross-defaults under our other debt instruments. An event of default under any
debt instrument, if not cured or waived, could have a material adverse effect on
us.

We Are Dependent on Key Customers.

We generate a portion of our revenue from large original equipment
manufacturers such as Siemens VDO Automotive AG and Nortel. A reduction or loss
of business with these customers could have a material adverse effect on our
financial condition and results of operations. There can be no assurance that we
will be able to continue to realize value from these relationships in the
future.

We Are Dependent on New Products.

Our future revenue stream depends to a large degree on our ability to
bring new products to market on a timely basis. We must continue to make
significant investments in research and development in order to continue to
develop new products, enhance existing products and achieve market acceptance of
such products. We may incur problems in the future in innovating and introducing
new products. Our development stage products may not be successfully completed
or, if developed, may not achieve significant customer acceptance. If we were
unable to successfully define, develop and introduce competitive new products,
and enhance existing products, our future results of operations would be
adversely affected. Development and manufacturing schedules for technology
products are difficult to predict, and we might not achieve timely initial
customer shipments of new products. The timely availability of these products in
volume and their acceptance by customers are important to our future success. A
delay in new product introductions could have a significant impact on our
results of operations.

We 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, such as Caterpillar, McNeilus, and CNH Global. 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 Are Dependent on the Availability of Allocated Bands Within the Radio
Frequency Spectrum.

Our GPS technology is dependent on the use of the Standard Positioning
Service ("SPS") provided by the U.S. Government's Global Positioning System
("GPS"). The GPS SPS operates in radio frequency bands that are globally
allocated for radio navigation satellite services. International allocations of
radio frequency are made by the International Telecommunications Union ("ITU"),
a specialized technical agency of the United Nations. These allocations are
further governed by radio regulations that have treaty status and which may be
subject to modification every two to three years by the World Radio
Communication Conference.

Any ITU reallocation of radio frequency bands, including frequency band
segmentation or sharing of spectrum, may materially and adversely affect the
utility and reliability of our products, which would, in turn, cause a material
adverse effect on our operating results. Many of our products use other radio
frequency bands, together with the GPS signal, to provide enhanced GPS
capabilities, such as real-time 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 in-band from licensed
and unlicensed devices may materially and adversely affect the utility and
reliability of our products, which could result in a material adverse effect on
our operating results. The FCC continually receives proposals for novel
technologies and services, such as ultra-wideband technologies, which may seek
to operate in, or across, the radio frequency bands currently used by the GPS
SPS and other public safety services. Adverse decisions by the FCC that result
in harmful interference to the delivery of the GPS SPS and other radio frequency
spectrum also used in our products may materially and adversely affect the
utility and reliability of our products, which could result in a material
adverse effect on our business and financial condition.

We Are Subject to the Adverse Impact of Radio Frequency Congestion.

We have certain RTK products, such as our 5800 RTK GPS Survey system,
that use integrated radio communication technology requiring access to available
radio frequencies allocated by the FCC. In addition, access to these frequencies
by state agencies is under management by state radio communications
coordinators. Some bands are experiencing congestion that excludes their
availability for access by state agencies in some states, including the state of
California. An inability to obtain access to these radio frequencies could have
an adverse effect on our operating results.

Many of Our Products Rely on the GPS Satellite System.

The GPS satellites and their ground support systems are complex
electronic systems subject to electronic and mechanical failures and possible
sabotage. The satellites were originally designed to have lives of 7.5 years and
are subject to damage by the hostile space environment in which they operate.
However, of the current deployment of 28 satellites in place, some have already
been in operation for 13 years. To repair damaged or malfunctioning satellites
is currently not economically feasible. If a significant number of satellites
were to become inoperable, there could be a substantial delay before they are
replaced with new satellites. A reduction in the number of operating satellites
may impair the current utility of the GPS system and the growth of current and
additional market opportunities.

In addition, there can be no assurance that the U.S. Government will
remain committed to the operation and maintenance of GPS satellites over a long
period, or that the policies of the U.S. Government for the use of GPS without
charge will remain unchanged. However, a 1996 Presidential Decision Directive
marks the first time in the evolution of GPS that access for civilian use free
of direct user fees is specifically recognized and supported by Presidential
policy. In addition, Presidential policy has been complemented by corresponding
legislation, signed into law. Because of ever-increasing commercial applications
of GPS, other U.S. Government agencies may become involved in the administration
or the regulation of the use of GPS signals. Any of the foregoing factors could
affect the willingness of buyers of our products to select GPS-based systems
instead of products based on competing technologies.

Any resulting change in market demand for GPS products could have a
material adverse effect on our financial results. For example, European
governments have expressed interest in building an independent satellite
navigation system, known as Galileo. Depending on the as yet undetermined design
and operation of this system, there may be interference to the delivery of the
GPS SPS and may materially and adversely affect the utility and reliability of
our products, which could result in a material adverse effect on our business
and operating results.

We Face Risks in Investing in and Integrating New Acquisitions.

We are continuously evaluating external investments in technologies
related to our business, and have made relatively small strategic equity
investments in a number of GPS-related and laser-related technology companies.
For example, we recently acquired Applanix Corporation. Acquisitions of, and
investments in, companies, divisions of companies, or products entail numerous
risks, including:

o potential inability to successfully integrate acquired operations and
products or to realize cost savings or other anticipated benefits from
integration;

o diversion of management's attention;

o loss of key employees of acquired operations;

o the difficulty of assimilating geographically dispersed operations and
personnel of the acquired companies;

o the potential disruption of our ongoing business;

o unanticipated expenses related to such integration;

o the correct assessment of the relative percentages of in-process research
and development expense that can be immediately written off as compared to
the amount which must be amortized over the appropriate life of the asset;

o the impairment of relationships with employees and customers of either an
acquired company or our own business;

o the potential unknown liabilities associated with acquired business; and

o inability to recover strategic investments in development stage entities.

As a result of such acquisitions, we have significant assets that
include goodwill and other purchased intangibles. The testing of these
intangibles under established accounting guidelines for impairment requires
significant use of judgment and assumptions. Changes in business conditions
could require adjustments to the valuation of these assets. In addition, losses
incurred by a company in which we have an investment may have a direct impact on
our financial statements or could result in our having to write-down the value
of such investment. Any such problems in integration or adjustments to the value
of the assets acquired could harm our growth strategy and have a material
adverse effect on our business, financial condition and compliance with debt
covenants.

We Face Competition in Our Markets.

Our markets are highly competitive and we expect that both direct and
indirect competition will increase in the future. Our overall competitive
position depends on a number of factors including the price, quality and
performance of our products, the level of customer service, the development of
new technology and our ability to participate in emerging markets. Within each
of our markets, we encounter direct competition from other GPS, optical and
laser suppliers and competition may intensify from various larger domestic and
international competitors and new market entrants, some of which may be our
current customers. The competition in the future, may, in some cases, result in
price reductions, reduced margins or loss of market share, any of which could
materially and adversely affect our business, operating results and financial
condition. We believe that our ability to compete successfully in the future
against existing and additional competitors will depend largely on our ability
to execute our strategy to provide systems and products with significantly
differentiated features compared to currently available products. We may not be
able to implement this strategy successfully, and our products may not be
competitive with other technologies or products that may be developed by our
competitors, many of whom have significantly greater financial, technical,
manufacturing, marketing, sales and other resources than we do.

We Must Carefully Manage Our Future Growth.

Growth in our sales or continued expansion in the scope of our
operations could strain our current management, financial, manufacturing and
other resources and may require us to implement and improve a variety of
operating, financial and other systems, procedures and controls. Specifically we
have experienced strain in our financial and order management system, as a
result of our acquisitions. We are expanding our sales, accounting,
manufacturing, and other information systems to meet these challenges. These
systems, procedures or controls may not be adequate to support our operations
and may not be designed, implemented or improved in a cost effective and timely
manner. Any failure to implement, improve and expand such systems, procedures
and controls in a timely and efficient manner could harm our growth strategy and
adversely affect our financial condition and ability to achieve our business
objectives.

We are Dependent on Proprietary Technology.

Our future success and competitive position is dependent upon our
proprietary technology, and we rely on patent, trade secret, trademark and
copyright law to protect our intellectual property. The patents owned or
licensed by us may be invalidated, circumvented and challenged. The rights
granted under these patents may not provide competitive advantages to us. Any of
our pending or future patent applications may not be issued within the scope of
the claims sought by us, if at all.

Others may develop technologies that are similar or superior to our
technology, duplicate our technology or design around the patents owned by us.
In addition, effective copyright, patent and trade secret protection may be
unavailable, limited or not applied for in certain foreign countries. The steps
taken by us to protect our technology might not prevent the misappropriation of
such technology.

The value of our products relies substantially on our technical
innovation in fields in which there are many current patent filings. We
recognize that as new patents are issued or are brought to our attention by the
holders of such patents or as other intellectual property claims are made, 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 a Party to Certain Litigation Matters From Time to Time in the Ordinary
Course of Our Business.

We are a party to certain litigation matters from time to time in the
ordinary course of our business. For example, we are a defendant in a lawsuit
filed by one of our European distributors. If we are found liable, we could be
required to pay significant damages, including punitive damages and attorneys'
fees.

We Are Dependent on Retaining and Attracting Highly Skilled Development and
Managerial Personnel.

Our ability to maintain our competitive technological position will
depend, in a large part, on our ability to attract, motivate, and retain highly
qualified development and managerial personnel. Competition for qualified
employees in our industry and location is intense, and there can be no assurance
that we will be able to attract, motivate and retain enough qualified employees
necessary for the future continued development of our business and products.

We May Encounter Problems Associated With International Operations and Sales.

Our customers are located throughout the world. Sales to unaffiliated
customers outside the United States comprised approximately 49% of our revenues
in the first six months of fiscal 2003, and 46% in the corresponding period in
fiscal 2002. In addition, we have significant international operations,
including manufacturing facilities, sales personnel and customer support
operations. Our international sales organization contains offices in 21 foreign
countries. Our international manufacturing facilities are in Sweden and Germany,
and we have a regional fulfillment center in the Netherlands. Our international
presence exposes us to risks not faced by wholly domestic companies.

Specifically, we have experienced issues relating to integration of
foreign operations, greater difficulty in accounts receivable collection, longer
payment cycles and currency fluctuations. Additionally, we face the following
risks, among others:

o unexpected changes in regulatory requirements;

o tariffs and other trade barriers;

o political, legal and economic instability in foreign markets, particularly
in those markets in which we maintain manufacturing and research
facilities;

o difficulties in staffing and management;

o language and cultural barriers; seasonal reductions in business activities
in the summer months in Europe and some other countries;

o war and acts of terrorism; and

o potentially adverse tax consequences.

In certain foreign markets there may be reluctance to purchase products
based on GPS technology, given the control of GPS by the U.S. Government.

We Are Exposed to Fluctuations in Currency Exchange Rates.

A significant portion of our business is conducted outside the United
States, and as such, we face exposure to adverse movements in non-U.S. currency
exchange rates. These exposures may change over time as business practices
evolve and could have a material adverse impact on our financial results and
cash flows. Compared to the first six months of 2002, in the first six months of
2003, the US currency has weakened against other currencies, especially against
the Euro and Swedish Krona.

Currently, we hedge only those currency exposures associated with
certain assets and liabilities denominated in nonfunctional currencies and
periodically will hedge anticipated foreign currency cash flows. The hedging
activities undertaken by us are intended to offset the impact of currency
fluctuations on certain nonfunctional currency assets and liabilities. Our
attempts to hedge against these risks may not be successful, resulting in an
adverse impact on our net income.

We Are Subject to the Impact of Governmental and Other Similar Certifications.

We market certain products that are subject to governmental and similar
certifications before they can be sold. For example, CE certification for
radiated emissions is required for most GPS receiver and data communications
products sold in the European Union. An inability to obtain such certifications
in a timely manner could have an adverse effect on our operating results. Also,
some of our products that use integrated radio communication technology require
an end-user to obtain licensing from the Federal Communications Commission (FCC)
for frequency-band usage. These are secondary licenses that are subject to
certain restrictions. 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 changes
to the rules by the FCC could adversely affect our ability to bring our products
to market, which could harm our customer relationships and have a material
adverse effect on our business.

The Volatility of Our Stock Price Could Adversely Affect Your Investment in Our
Common Stock.

The market price of our common stock has been, and may continue to be,
highly volatile. During the first six months of 2003, our stock price ranged
from a high of $27.75 to a low of $13.02. We believe that a variety of factors
could cause the price of our common stock to fluctuate, perhaps substantially,
including:

o announcements and rumors of developments related to our business or the
industry in which we compete;

o quarterly fluctuations in our actual or anticipated operating results and
order levels;

o general conditions in the worldwide economy, including fluctuations in
interest rates;

o announcements of technological innovations;

o new products or product enhancements by us or our competitors;

o developments in patents or other intellectual property rights and
litigation;

o developments in our relationships with our customers and suppliers; and

o any significant acts of terrorism against the United States.

In addition, in recent years the stock market in general and the
markets for shares of "high-tech" companies in particular, have experienced
extreme price fluctuations which have often been unrelated to the operating
performance of affected companies. Any such fluctuations in the future could
adversely affect the market price of our common stock, and the market price of
our common stock may decline.

We are Subject to Environmental Laws and Potential Exposure to Environmental
Liabilities.

We are subject to various federal, state and local environmental laws
and regulations that govern our operations, including the handling and disposal
of non-hazardous and hazardous wastes, and emissions and discharges into the
environment. Failure to comply with such laws and regulations could result in
costs for corrective action, penalties or the imposition of other liabilities.
We also are subject to laws and regulations that impose liability and clean-up
responsibility for releases of hazardous substances into the environment. Under
certain of these laws and regulations, a current or previous owner or operator
of property may be liable for the costs of remediating hazardous substances or
petroleum products on or from its property, without regard to whether the owner
or operator knew of, or caused, the contamination, as well as incur liability to
third parties impacted by such contamination. The presence of, or failure to
remediate properly, such substances could adversely affect the value and the
ability to transfer or encumber such property. Based on currently available
information, although there can be no assurance, we believe that such
liabilities will not have a material impact on our business.

Provisions in Our Charter Documents and Under California Law Could Prevent or
Delay a Change of Control, which Could Reduce the Market Price of Our Common
Stock.

Certain provisions of our articles of incorporation, as amended and
restated, our bylaws, as amended and restated, and the California General
Corporation Law may be deemed to have an anti-takeover effect and could
discourage a third party from acquiring, or make it more difficult for a third
party to acquire, control of us without approval of our board of directors.
These provisions could also limit the price that certain investors might be
willing to pay in the future for shares of our common stock. Certain provisions
allow the board of directors to authorize the issuance of preferred stock with
rights superior to those of the common stock.

We have adopted a Preferred Shares Rights Agreement, commonly known as
a "poison pill". The provisions described above, our poison pill and provisions
of the California General Corporation Law may discourage, delay or prevent a
third party from acquiring us.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE OF MARKET RISK

We are exposed to market risk related to changes in interest rates and
foreign currency exchange rates. We use certain derivative financial instruments
to manage these risks. We do not use derivative financial instruments for
speculative or trading purposes. All financial instruments are used in
accordance with policies approved by our board of directors.

Market Interest Rate Risk

We are exposed to market risk due to the possibility of changing
interest rates under our secured credit Facility. Our Credit Facility is
comprised of a three-year U.S. dollar-only revolver, and a four-year term loan
that expires on June 25, 2007. Borrowings under the Credit Facility have
interest payments based on a floating rate of LIBOR plus a number of basis
points tied to a formula based on our Leverage Ratio.

As of July 4, 2003, our debt to EBITDA, as defined under our Credit
Facility (Leverage Ratio) was approximately 2.05. At this Leverage Ratio our
interest rate on the Credit Facility is LIBOR plus 200 basis points. EBITDA, as
defined in our credit agreement, differs from the common definition of EBITDA in
so far as it excludes extraordinary non-cash charges.

Leverage Ratio Effect on Interest Expense:

LEVERAGE RATIO APPLICABLE EUROCURRENCY MARGIN
Less than 1.50 1.50%
1.50 or greater, but less than 2.00 1.75%
2.00 or greater, but less than 2.25 2.00%
2.25 or greater, but less than 2.50 2.50%
2.50 or greater, but less than 2.75 2.75%
2.75 or greater 3.00%

The revolver matures on June 25, 2006 and has an outstanding principal
balance of $59 million, while the term loan matures on June 25, 2007 and has an
outstanding principal balance of $50 million, as of July 4, 2003 (all in U.S.
currency only). The three-month LIBOR effective rate at July 4, 2003 was 1.11%.
A hypothetical 10% increase in three-month LIBOR rates could result in
approximately $121,000 annual increase in interest expense on the existing
principal balances.

In addition, we have a $1.7 million promissory note, of which
approximately $0.1 million was classified as a current liability at July 4,
2003. The note is payable in monthly installments, bearing a 3.99% variable
interest rate as of July 4, 2003. A hypothetical 10% increase in interest rates
would not have a material impact on the results of our operations.

* The hypothetical changes and assumptions made above will be different from
what actually occurs in the future. Furthermore, the computations do not
anticipate actions that may be taken by our management should the hypothetical
market changes actually occur over time. As a result, actual earnings effects in
the future will differ from those quantified above.

Foreign Currency Exchange Rate Risk

We transact business in various foreign currencies and hedges
identified risks associated with foreign currency transactions in order to
minimize the impact of changes in foreign currency exchange rates on earnings.
We utilize forward contracts to hedge certain trade and inter-company
receivables and payables. These contracts reduce the exposure to fluctuations in
exchange rate movements as the gains and losses associated with foreign currency
balances are generally offset with the gains and losses on the hedge contracts.
These hedge instruments are marked to market through earnings every period. From
time to time, we may also utilize forward foreign exchange contracts designated
as cash flow hedges of operational exposures represented by firm backlog orders
to specific accounts over a specific period of time. We record changes in the
fair value of cash flow hedges in accumulated, other comprehensive income
(loss), until the firm backlog transaction ships. Upon recognition of revenue,
we reclassify the gain or loss on the cash flow hedge to the statement of
operations. For the fiscal quarter ended July 4, 2003, we have no outstanding
contracts related to firm backlog hedges. The critical terms of the cash flow
hedging instruments are the same as the underlying forecasted transactions. The
changes in fair value of the derivatives are intended to offset changes in the
expected cash flow from the forecasted transactions. All forward contracts have
maturity of less than six months.

* We do not anticipate any material adverse effect on our consolidated financial
position utilizing our current hedging strategy.

The following table provides information about our foreign exchange
forward contracts outstanding as of July 4, 2003:

Foreign Currency Contract Value Fair Value in
Amount USD USD
Currency Buy/Sell (in thousands) (in thousands) (in thousands)
- -------- -------- -------------- -------------- --------------
AUD Buy 1,300 (794) $ (881)
CAD Buy 470 (334) (351)
EUR Buy 1,693 (1,947) (1,944)
JPY Buy 122,864 (1,031) (1,040)
MXN Buy 320 (29) (31)
NZD Buy 4,100 (2,375) (2,438)
SEK Buy 112,241 (13,577) (13,991)
CAD Sell (700) 457 524
EUR Sell (28,859) 32,416 33,080
JPY Sell (551,795) 4,652 4,676
MXN Sell (5,000) 460 473
--- ---
$ 17,898 $ 18,078

ITEM 4. CONTROLS AND PROCEDURES

(a) Controls and Procedures.

The Company's management, with the participation of the Company's Chief
Executive Officer and Chief Financial Officer, has evaluated the effectiveness
of the Company's disclosure controls and procedures (as such term is defined in
Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as
amended (the "Exchange Act")) as of the end of the period covered by this
report. Based on such evaluation, the Company's Chief Executive Officer and
Chief Financial Officer have concluded that, as of the end of such period, the
Company's disclosure controls and procedures are effective in recording,
processing, summarizing and reporting, on a timely basis, information required
to be disclosed by the Company in the reports that it files or submits under the
Exchange Act.

(b) Internal Controls Over Financial Reporting.

There have not been any changes in the Company's internal control over
financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f)
under the Exchange Act) during the fiscal quarter to which this report relates
that have materially affected, or are reasonably likely to materially affect,
the Company's internal control over financial reporting.

PART II. OTHER INFORMATION

ITEM 1. Legal Proceedings

The Company is a party to other disputes incidental to its business,
including a current claim from a European distributor. The Company believes that
its ultimate liability as a result of such disputes, if any, would not be
material to its overall financial position, results of operations, or liquidity.

ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS.

On April 23, 2003, Trimble issued 17,699 shares, of its common stock,
no par value per share, to former shareholders of LeveLite. This stock issuance,
combined with cash payments to each such shareholder, constituted the first
quarter of fiscal 2003, earn-out payments pursuant to the Company's merger
agreement with LeveLite. The merger agreement provides for Trimble to make
earn-out payments not to exceed an aggregate $3.9 million (in common stock and
cash payment) based on future revenues derived from existing product sales to a
certain customer. Upon a hearing before the California Department of
Corporations in which the terms and conditions of the offer to the LeveLite
shareholders were approved, the shares of Common Stock to be issued in the
transaction were exempt from registration by reason of qualification under
Section 3(a)(10) of the Securities Act of 1933, as amended.

On June 30, 2003, Trimble issued 232,834 shares of common stock to
Nikon-Trimble Co. Ltd. The Company issued these shares as a contribution to
capital in the formation of Nikon-Trimble Co. as a joint venture with Nikon
Corporation. The shares were valued at $25.43 per share and were exempt from
registration under Section 4(2) of the Securities Act of 1933, as amended, based
on the nature of the purchaser and the nature of the arms-length negotiated
transaction.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

The Company's annual meeting of shareholders ("Annual Meeting") was
held at the Sheraton Four Points Hotel in Sunnyvale, located at 1250 Lakeside
Drive, Sunnyvale, California 94086, on May 20, 2003.

At the Annual Meeting, an election of directors was held with the
following individuals being elected to the Company's Board of Directors.

VOTE
----
FOR WITHHELD
--- --------
Steven W. Berglund 26,055,409 803,980
Robert S. Cooper 16,380,506 10,478,883
John B. Goodrich 25,077,929 1,781,460
William Hart 25,043,285 1,816,104
Ulf J. Johansson 25,075,204 1,784,185
Bradford W. Parkinson 16,305,049 10,554,340

Other matters voted upon at the Annual Meeting and the results of the
voting with respect to each such matter were as follows:

1. To amend the Company's Articles of Incorporation to increase the amount of
authorized shares from 40,000,000 to 60,000,000.

BROKER
FOR AGAINST ABSTAINED NON-VOTE
--- ------- --------- --------
26,171,716 551,508 136,164 2,506,744

2. To ratify the appointment of Ernst & Young LLP as the independent auditors
of the Company for the current fiscal year ending January 2, 2004.

BROKER
FOR AGAINST ABSTAINED NON-VOTE
--- ------- --------- --------
24,801,387 2,025,325 32,676 2,506,744

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

(a) Exhibits

3.1 Restated Articles of Incorporation of Trimble Navigation Limited,
filed June 25, 1986. (1)

3.2 Certificate of Amendment of Articles of Incorporation of Trimble
Navigation Limited, filed October 6, 1988. (1)

3.3 Certificate of Amendment of Articles of Incorporation of Trimble
Navigation Limited, filed July 18, 1990. (1)

3.4 Certificate of Determination of Trimble Navigation Limited, filed
February 19, 1999. (1)

3.5 Certificate of Amendment of Articles of Incorporation of Trimble
Navigation Limited, filed May 29, 2003.

3.6 Amended and Restated Bylaws of Trimble Navigation Limited. (2)

10.2 Credit Agreement dated June 25, 2003.

31.1 Certification of Chief Executive Officer pursuant to Securities
Exchange Act Rules 13a-14 and 15d-14 as Adopted Pursuant to Section
302 of the Sarbanes-Oxley Act of 2002 dated August 15, 2003.

31.2 Certification of Chief Financial Officer pursuant to Securities
Exchange Act Rules 13a-14 and 15d-14 as Adopted Pursuant to Section
302 of the Sarbanes-Oxley Act of 2002 dated August 15, 2003.

32.1 Certification of Chief Executive Officer pursuant to section 18 U.S.C.
section 1350 as Adopted Pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002 dated August 15, 2003.

32.2 Certification of Chief Financial Officer pursuant to section 18 U.S.C.
section 1350 as Adopted Pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002 dated August 15, 2003.
- ----------

(1) 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, as filed with
the SEC on March 29, 1999.

(2) Incorporated by reference to exhibit number 3.8 to the registrant's
Quarterly Report on Form 10-Q for the quarter ended September 27,
2002.

(b) Reports on Form 8-K

On April 9, 2003, the Company filed a report on Form 8-K to make certain
information publicly available.

On April 14, 2003, the Company filed a report on Form 8-K to make certain
information publicly available.

On April 14, 2003, the Company filed a report on Form 8-K reporting the
sale of 2,100,000 shares of its common stock, no par value per share, to a
certain investor at a price of $18.25 per share.

On April 30, 2003, the Company filed a report on Form 8-K reporting the
financial results for the fiscal quarter ending April 4, 2003.

On June 20, 2003, the Company filed a report on Form 8-K reporting that it
had reached a definitive agreement to acquire Applanix Corporation of
Ontario, a Canadian corporation.

On June 26, 2003, the Company filed a report on Form 8-K reporting that it
had signed an agreement for a new $175 Million credit facility syndicated
by nine banks and arranged by the Bank of Nova Scotia.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.

TRIMBLE NAVIGATION LIMITED
--------------------------
(Registrant)

By: /s/ Mary Ellen Genovese
-----------------------
Mary Ellen Genovese
Chief Financial Officer
(Authorized Officer and Principal
Financial Officer)

DATE: August 15, 2003

EXHIBIT INDEX

Exhibit No. Description

3.1 Restated Articles of Incorporation of Trimble Navigation Limited,
filed June 25, 1986. (1)

3.2 Certificate of Amendment of Articles of Incorporation of Trimble
Navigation Limited, filed October 6, 1988. (1)

3.3 Certificate of Amendment of Articles of Incorporation of Trimble
Navigation Limited, filed July 18, 1990. (1)

3.4 Certificate of Determination of Trimble Navigation Limited, filed
February 19, 1999. (1)

3.5 Certificate of Amendment of Articles of Incorporation of Trimble
Navigation Limited, filed May 29, 2003.

3.6 Amended and Restated Bylaws of Trimble Navigation Limited. (2)

10.2 Credit Agreement dated June 25, 2003.

31.1 Certification of Chief Executive Officer pursuant to Securities
Exchange Act Rules 13a-14 and 15d-14 as Adopted Pursuant to Section
302 of the Sarbanes-Oxley Act of 2002 dated August 15, 2003.

31.2 Certification of Chief Financial Officer pursuant to Securities
Exchange Act Rules 13a-14 and 15d-14 as Adopted Pursuant to Section
302 of the Sarbanes-Oxley Act of 2002 dated August 15, 2003.

32.1 Certification of Chief Executive Officer pursuant to section 18 U.S.C.
section 1350 as Adopted Pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002 dated August 15, 2003.

32.2 Certification of Chief Financial Officer pursuant to section 18 U.S.C.
section 1350 as Adopted Pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002 dated August 15, 2003.
- ----------
(1) 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, as filed with
the SEC on March 29, 1999.

(2) Incorporated by reference to exhibit number 3.8 to the registrant's
Quarterly Report on Form 10-Q for the period ending September 27,
2002.