TRIMBLE NAVIGATION LTD /CA/ - 10-K Annual Report

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

FORM 10-K

(X) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended January 2, 2004

OR

( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ___________to______________

Commission File Number: 0-18645

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

California 94-2802192
(State or other jurisdiction of incorporation or organization)
(I.R.S. Employer Identification No.)

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

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

Securities registered pursuant to Section 12(b) of the Act: NONE

Securities registered pursuant to Section 12(g) of the Act:

Common Stock
Preferred Share Purchase Rights
(Title of Class)

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [ ]

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]

Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Act). Yes [X] No [ ]

The aggregate market value of the Common Stock held by non-affiliates of the
registrant, based upon the last sale price of the Common Stock reported on the
Nasdaq National Market on July 3, 2003 was approximately $795 million.

There were 50,537,119 shares of the registrant's Common Stock issued and
outstanding as of March 11, 2004.

DOCUMENTS INCORPORATED BY REFERENCE

Certain parts of Trimble Navigation Limited's Proxy Statement relating to the
annual meeting of stockholders to be held on May 19, 2004 (the "Proxy
Statement") are incorporated by reference into Part III of this Annual Report on
Form 10-K.

SPECIAL NOTE ON FORWARD-LOOKING STATEMENTS

This Annual Report on Form 10-K contains forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933 and Section 21E of the
Securities Exchange Act of 1934, which are subject to the "safe harbor" created
by those sections. The forward-looking statements regarding future events and
the future results of Trimble Navigation Limited ("Trimble" or " The Company" or
"We" or "Our" or "Us") are based on current expectations, estimates, forecasts,
and projections about the industries in which Trimble operates and the beliefs
and assumptions of the management of Trimble. Discussions containing such
forward-looking statements may be found in "Management's Discussion and Analysis
of Financial Condition and Results of Operations." In some cases,
forward-looking statements can be identified by terminology such as "may,"
"will," "should," "could," "predicts," "potential," "continue," "expects,"
"anticipates," "future," "intends," "plans," "believes," "estimates," and
similar expressions. These forward-looking statements involve certain risks and
uncertainties that could cause actual results, levels of activity, performance,
achievements and events to differ materially from those implied by such
forward-looking statements, but are not limited to those discussed in this
Report under the section entitled "Other Risk Factors" and elsewhere, and in
other reports Trimble files with the Securities and Exchange Commission ("SEC"),
specifically the most recent reports on Form 8-K and Form 10-Q, each as it may
be amended from time to time. These forward-looking statements are made as of
the date of this Annual Report on Form 10-K. We reserve the right to update
these statements for any reason, including the occurrence of material events.
The risks and uncertainties under the caption "Management's Discussion and
Analysis of Financial Condition and Results of Operations--Risks and
Uncertainties" contained herein, among other things, should be considered in
evaluating our prospects and future financial performance. We have attempted to
identify forward-looking statements in this report by placing an asterisk (*)
before paragraphs containing such material.

TRIMBLE NAVIGATION LIMITED

2003 FORM 10-K ANNUAL REPORT

TABLE OF CONTENTS

PART I
Item 1 Business...........................................................5
Item 2 Properties........................................................17
Item 3 Legal Proceedings.................................................17
Item 4 Submission of Matters to a Vote of Security Holders...............17

PART II
Item 5 Market for the Registrant's Common Equity and Related
Stockholder Matters...............................................18
Item 6 Selected Financial Data...........................................19
Item 7 Management's Discussion and Analysis of Financial Condition and
Results of Operations.............................................20
Item 7A Quantitative and Qualitative Disclosures about Market Risk........42
Item 8 Financial Statements and Supplementary Data.......................45
Item 9 Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure..............................................76
Item 9A Controls and Procedures...........................................76

PART III
Item 10 Directors and Executive Officers of the Registrant................76
Item 11 Executive Compensation............................................76
Item 12 Security Ownership of Certain Beneficial Owners and
Management and Related Stockholder Matters........................77
Item 13 Certain Relationships and Related Transactions....................77
Item 14 Principal Accountant Fees and Services............................77

PART IV
Item 15 Exhibits, Financial Statement Schedules and Reports on
Form 8-K.......................................................77-89

TRADEMARKS

Trimble, the globe and triangle logo, EZ-Guide, Telvisant, Lassen, SiteVision,
GeoExplorer, AgGPS, Thunderbolt, FirstGPS, and CrossCheck are trademarks of
Trimble Navigation Limited registered in the United States Patent and Trademark
Office and other countries. Force, Galaxy, Placer, TrimTrac and Trimble Toolbox
are trademarks of Trimble Navigation Limited. All other trademarks are the
property of their respective owners.

PART I

Item 1 Business Overview

Trimble Navigation Limited, a California corporation ("Trimble" or "the Company"
or "we" or "our" or "us"), provides advanced positioning product solutions to
commercial and government users in a large number of markets. These markets
include surveying, construction, agriculture, urban and resource management,
military, transportation, and telecommunications. Our products typically provide
benefits that can include cost savings, improved quality, or higher
productivity. Examples of our products include earthmoving equipment guidance
systems, surveying instruments, fleet management systems, components for in
vehicle navigation and telematics systems, farm equipment guidance systems,
field data collection handhelds, and timing modules used in the synchronization
of wireless networks.

Our products typically integrate positioning, communication, and information
technologies. Positioning technologies used include the Global Positioning
System (GPS), laser, optical, and inertial, while communication techniques
include both public networks, such as cellular, and private networks such as
business band radio. A significant amount of the differentiation in the products
is provided through software; both firmware that enables the positioning
solution and applications software that allows the customer to make use of the
positioning information.

We design and market our own products. Our manufacturing strategy includes a
combination of in house assembly and fabrication as well as subcontracting those
functions to third parties. We conduct our business globally with major
development, manufacturing or logistics operations in the United States, Sweden,
Germany, New Zealand, and the Netherlands. Products are sold through dealers,
representatives, joint ventures, and other channels throughout the world. These
channels are supported by our sales offices located in more than 20 countries.

We began operations in 1978 and incorporated in California in 1981. Our common
stock has been publicly traded on Nasdaq since 1990 under the symbol TRMB.

Technology Overview

A majority of our revenues is derived from applying GPS to terrestrial
applications. GPS is a system of 24 orbiting satellites and associated ground
control that is funded and maintained by the U. S. Government and is available
worldwide free of charge. GPS positioning is based on a technique that precisely
measures distances from four or more satellites. The satellites continuously
transmit precisely timed radio signals using extremely accurate atomic clocks. A
GPS receiver measures distances from the satellites in view by determining the
travel time of a signal from the satellite to the receiver, and then uses those
distances to compute its position. Under normal circumstances, a stand-alone GPS
receiver is able to calculate its position at any point on earth, in the earth's
atmosphere, or in lower earth orbit, to approximately 10 meters, 24 hours a day.
Much better accuracies are possible through a technique called "differential
GPS." In addition, GPS provides extremely accurate time measurement.

GPS accuracy is dependent upon the locations of the receiver and the number of
GPS satellites that are above the horizon at any given time. Reception of GPS
signals requires line-of-sight visibility between the satellites and the
receiver, which can be blocked by buildings, hills, and dense foliage. The
receiver must have a line of sight to at least four satellites to determine its
latitude, longitude, attitude (angular orientation), and time. The accuracy of
GPS may also be limited by distortion of GPS signals from ionospheric and other
atmospheric conditions.

Our GPS products are based on proprietary receiver technology. The convergence
of positioning, wireless, and information technologies enables significant new
value to be added to positioning systems, thereby creating a more robust
solution for the user. In addition, recent developments in wireless technology
and deployments of next generation wireless networks have enabled less expensive
wireless communications. These developments allow for the efficient transfer of
position data to locations away from the positioning field device, allowing the
data to be accessed by more users and thereby increasing productivity.

Our laser and optical products measure distances and angles accurately using
light. We generally use commercially available laser diodes to create light
beams for distance measurement. In addition, our proprietary precision mechanics

and software algorithms in these products combine to give robust, accurate
distance and angle measurements for a variety of agricultural, surveying, and
construction applications.

Business Strategy

Our business strategy leverages our expertise in positioning to provide
solutions for our customers, built around several key elements:

o Attractive markets - We focus on markets that offer potential for revenue
growth, profitability, and market leadership.

o Innovative solutions that provide significant benefits to our customers - We
seek to apply our technology to applications for which position data has a high
value. We anticipate that further advances in positioning, wireless, and
information technologies will enable new classes of solutions to emerge that
will create new opportunities.

o Distribution channels to best access our markets - We utilize a range of
distribution channels to best serve the needs of individual markets. These
channels can include independent dealers, direct sales, OEM sales, and
distribution alliances with key partners. In addition, we will continue to
extend our international distribution.

Business Segments and Markets

We are organized into four main operating segments encompassing our various
applications and product lines: Engineering and Construction, Field Solutions,
Component Technologies, and Mobile Solutions. We also operate in smaller
business areas, primarily focused on military and inertial integration
technologies, which aggregate into the Portfolio Technologies segment. Our
segments are distinguished by the markets they serve. Each segment consists of
businesses which are responsible for product development, marketing, sales,
strategy, and financial performance, and is headed by a general manager.

Segment Realignment

In the first fiscal quarter of 2003, we realigned two of our reportable
segments. The Tripod Data Systems (TDS) business is now included in the
Engineering and Construction segment. Previously it was included in the
Portfolio Technologies segment. All comparable information for earlier periods
has been restated to conform to the new basis.

Engineering and Construction

Products in the Engineering and Construction segment improve productivity and
accuracy throughout the entire construction process including the initial
survey, planning, design, earthmoving, and building phases. The product emphasis
is aimed at making each individual task more efficient, as well as speeding up
the entire process by improving information flow from one step to the next.

We typically combine a number of technologies into product solutions. The
elements of these solutions may incorporate GPS, optical, laser, radio or
cellular communications, and software.

An example of the customer benefits provided by our product is our GPS and
robotic optical surveying instruments which enable the surveyor to perform
operations in the field faster, more reliably and with a smaller crew.
Similarly, our construction machine guidance products allow the operator to
achieve the desired landform by eliminating stakeout and reducing rework. In
turn, these steps in the construction process can be readily linked together
with data collection modules and software to minimize the time and effort
required to maintain data accuracy throughout the entire construction process.

We sell and distribute our products from this segment through a global network
of independent dealers that are supported by our sales force. This channel is
supplemented by relationships that create additional channel breadth including
our joint ventures with Caterpillar, Nikon, and private branding arrangements
with other companies.

We also design and market handheld data collectors and data collection software
for field use by surveyors, contractors, and other professionals. These products
are sold directly, through dealers, and other survey manufacturers. Competitors
in this portion of the business are small and geographically diverse.

Competitors in this segment are typically companies that provide optical, laser,
or GPS positioning products. Our principal competitors are Topcon Corporation
and Leica Geosystems. Price points in this segment range from less than $1,000
for certain laser systems to approximately $125,000 for a high precision,
three-dimensional, machine control system.

Representative products sold in this segment include:

5800 RTK Rover - This is an integrated unit that allows the surveyor to make
centimeter-level measurements or do construction stakeout with only one person.
Wireless technology eliminates cables that could otherwise snag on foliage and
structures. The rover weighs 3.5kg for an entire system on a pole including
batteries.

5600 Total Station - This optical total station series provides a choice of
increasing levels of automation that allow the surveyor to choose a system that
will best suit his work. Depending on the job, these configurations enable
one-person stakeout and survey. The included Attachable Control Unit (ACU) also
works with the 5800 RTK Rover providing complete measurement compatibility
regardless of the technology used.

SiteVision(R) GPS System - SiteVision GPS is a machine-mounted, positioning
system that guides the operator by comparing the actual position of the blade
with the digitized design that resides in a computer on the machine. The use of
this system enables faster machine speed, eliminates the need for placing
stakes, and lowers the number of passes needed to get the desired grade.
Applications include road construction and site preparation.

Spectra Precision(R) Laser GL 700 Series - This laser product provides grade
control capability for heavy equipment on a construction site. The level surface
of the laser light can be precisely controlled, and machines with a laser
receiver can be controlled to establish a precise and uniform grade over the
desired area. Applications include trenching, pipe laying, machine control
grading, and road construction applications.

TDS Ranger(TM) Series - The TDS Ranger device is a handheld data collector
supporting Microsoft's Windows CE operating system. Running TDS survey software,
this unit can control and collect data from all major brands of optical and GPS
surveying instruments. The operator can also run his or her own application
programs for the Microsoft Windows CE operating system on the platform.

Field Solutions

Our Field Solutions segment addresses the agriculture and geographic information
system (GIS) markets.

Our agriculture products consist of manual and automated navigation guidance for
tractors and other farm equipment used in spraying, planting, cultivation, and
harvesting applications. The benefits to the farmer include faster machine
operation, higher yields, and lower consumption of chemicals. We also provide
positioning solutions for leveling agricultural fields in irrigation
applications and aligning drainage systems to better manage water flow in
fields.

Our distribution to the agricultural market is through multiple channels.
Revenue is generated through independent dealers and through partners such as
CNH Global. Competitors in this market are either vertically integrated
implement companies such as John Deere, or agricultural instrumentation
suppliers such as Raven, RHS, CSI Wireless, Beeline and Integrinautics.

Our GIS product line is centered on handheld data collectors that gather
information in the field to be incorporated into GIS databases. Typically this
information includes features, attributes, and positions of fixed infrastructure
and natural resource assets. An example would be that of a utility company
performing a survey of its transmission poles including the age and condition of
each telephone pole. Our handheld unit enables this data to be collected and
automatically stored while confirming the location of the asset. The data can

then be downloaded into a GIS database. This stored data could later be used to
navigate back to any individual asset or item for maintenance or data update.
Our mobile GIS initiative goes one step further by allowing this information to
be communicated from the field worker to the back-office GIS database through
the combination of wireless technologies (Bluetooth and cellular), as well as
giving the field worker the ability to download information from the database
using these same wireless technologies. This capability provides significant
advantages to users including improved productivity, accuracy and access to the
information in the field.

Distribution for GIS products is primarily through a network of independent
dealers and business partners, supported by our sales force. Primary markets for
our GIS products and solutions include government, defense and homeland
security, utility and communications and natural resources management.
Competitors in this market are typically either survey instrument companies
having GPS technology and/or consumer GPS companies. Two examples are Leica
Geosystems and Thales Navigation.

Approximate price points in this segment range from $3,000 for a GIS handheld
unit to $35,000 for a fully automated, farm equipment control system.

Representative products sold within this segment include:

GeoExplorer(R) CE Series - Combines a GPS receiver in a rugged handheld unit
running Microsoft's Windows CE operating system that makes it easy to collect
and maintain data about objects in the field.

AgGPS(R) Autopilot System - A GPS-enabled, agricultural navigation system that
connects to a tractor's steering system and automatically steers the tractor
along a precise path to within three centimeters or less. This enables both
higher machine productivity and more precise application of seed and chemicals,
thereby reducing costs to the farmer.

AgGPS(R) EZ-Guide(R) System - A GPS-enabled, manual guidance system that
provides the tractor operator with steering visual corrections required to stay
on course to within 25 centimeters. This system reduces the overlap or gap in
spraying, fertilizing, and other field applications.

Component Technologies

Our Component Technologies segment provides GPS-based components for
applications that require embedded position or time. Our largest markets are in
the telecommunications and automotive industries where we supply modules,
boards, custom integrated circuits and software, or single application IP
licenses to the customer according to the needs of the application. Sales are
made directly to original equipment manufacturers (OEMs) and system integrators
who incorporate our component into a sub-system or a complete system-level
product.

In the telecommunications infrastructure market, we provide timing modules that
keep wireless networks synchronized and on frequency. For example, CDMA cellular
telephone networks require a high level of both short-term and long-term
frequency stability for proper operation (synchronization of information/voice
flow to avoid dropped calls). Our timing modules meet these needs at a much
lower cost than the atomic standards or other specially prepared components that
would otherwise be required. Customers include wireless infrastructure companies
such as Nortel, Samsung, Nokia, UTStarcom, and Andrew.

In the automotive and embedded market, we provide a GPS component that is
embedded into in-vehicle navigation (IVN) systems. Our focus on high
reliability, continuous improvement, and low cost has earned us supplier awards
and continuing business in this market. Customers include IVN system
manufacturers and integrators such as Siemens VDO Automotive AG, Hyundai
Automotive Company, Robert Bosch GmbH, and Ixfin Magneti Marelli Sistemi
Electronici S.P.A .

* The declining size and power requirements for GPS components, coupled with
improving capabilities allow GPS to potentially be used in a new class of
applications such as position-aware cellular telephones or other wireless
handheld devices. We expect our strength in GPS technology will expand our
participation in this market.

* Component Technologies continues to explore other positioning solutions in
addition to GPS. An example of such a solution is the television triangulation
technology developed by Rosum. With Rosum, we intend to develop a family of
devices which will greatly extend the ability to locate both people and assets
in environments that would be difficult or impossible for GPS only solutions.

The major competitor in the telecommunication infrastructure market is
Symmetricom. Competitors in the automotive and embedded markets are typically
component companies with GPS capability, including Japan Radio Corporation,
Motorola, and SiRF.

Representative products sold by this segment include:

Thunderbolt(R) GPS Disciplined Clock - The Thunderbolt clock is used as a time
source for the synchronization of wireless networks. By combining a GPS receiver
with a high-quality quartz oscillator, the Thunderbolt achieves the performance
of an atomic standard with higher reliability and lower price.

FirstGPS(R) Technology - We license our FirstGPS technology, which is a
host-based, GPS system available as two integrated circuits and associated
software. The software runs on a customer's existing microprocessor system
complementing the work done by the integrated circuit to generate position,
velocity, and time. This low-power technology is particularly suitable for
small, mobile, battery-operated applications.

Lassen(R) SQ Module - The Lassen SQ module adds complete GPS functionality to a
mobile product in a postage stamp-sized footprint with ultra-low power
consumption, consuming less than 100mW at 3.3V. This module is designed for
portable handheld, battery-powered applications such as cell phones, pagers,
PDAs, digital cameras, and many others.

TrimTrac(TM) Locator - Our new TrimTrac product is a complete end user device
that combines GPS functionality with tri-band global system for mobile
communications (GSM) wireless communications. It is intended for high volume
personal vehicle and commercial asset management applications that demand a
low-cost locator device.

Mobile Solutions

Our Mobile Solutions segment addresses the market for fleet management services
by providing a Trimble-hosted platform solution that bundles both the hardware
and software needed to run the application. The software solution is typically
provided to the user through Internet-enabled access to our hosted platform for
a monthly service fee. This bundled solution enables the fleet owner to
dispatch, track, and monitor the conditions of vehicles in the fleet on a
real-time basis. A vehicle-mounted unit consists of a single module including a
GPS receiver, sensor interface, and a cellular modem. Our solution includes the
communication service from the vehicle to our data center and access over the
Internet to the application software, relieving the user of the need to maintain
extensive computer operations.

We market our fleet management services in three primary areas, leveraging the
core platform. Our vertical market strategy targets opportunities in specific
vertical markets where we believe we can provide a unique value to the end user
by customizing the hardware and software solution for a particular industry. For
example, the first vertical we are addressing is ready mix concrete. Here, we
combine a suite of sensors into a solution that can automatically determine the
status of a vehicle without driver intervention. Our agreement with McNeilus, a
major manufacturer of trucks for the ready mix concrete and waste management
industries, facilitates the delivery of a complete management solution to ready
mix concrete fleet operators and refuse haulers. McNeilus' sales force markets
our solution as a retrofit for trucks already in the field, or as a
factory-installed option. We plan on leveraging our technology, partners and
customers into other verticals, such as other construction material delivery
vehicles and waste management trucks, where a customized solution can provide
similar benefits as in ready mix.

We also have a horizontal market strategy that focuses on providing turnkey
solutions to a broad range of service fleets and mobile workers that span over
90 distinct markets. Here, we leverage the same general applications that are
used in our vertical markets, however, the same level of customization, such as
additional sensors, is typically not required. These products are distributed
through individual dealers and dealer service providers, as well as after-market
automotive electronics suppliers.

Our enterprise strategy focuses on sales to large, enterprise accounts. Here, in
addition to a Trimble-hosted solution, we can also integrate our software
directly into the customer's IT infrastructure, giving them control of the
information. In this market we sell directly to end users and sales cycles tend
to be long due to field trials followed by an extensive decision-making process.

Approximate prices for the hardware fall in the range of $300 to $3,000, while
the monthly software service fees range from approximately $20 to approximately
$55, depending on the customer service level. Competition comes largely from
service-oriented businesses such as @Road and software companies such as Command
Alkon.

Representative products sold by this division include:

Telvisant(R) System - Our fleet management service offering, Telvisant provides
different levels of service that run from snapshots of fleet activity to
real-time fleet dispatch capability. Telvisant includes truck communication
service and computer backbone support of the software. Variations of Telvisant
are tailored for specific industry applications.

CrossCheck(R) Module - This hardware, mounted on the vehicle, provides location
and information through its built-in cellular interface. This module also
includes GPS positioning, sensor interfaces for vehicle conditions, and built-in
intelligence for distributed decision-making.

Portfolio Technologies

Our Portfolio Technologies segment includes various operations that aggregate to
less than 10 percent of our total revenue. The products in this segment are
navigation modules and embedded sensors that are used in avionics, flight, and
military applications. The two operations in this segment are Applanix, and
Military and Advanced Systems (MAS).

Applanix develops, manufactures, sells and supports high-value, precision
products that combine GPS with inertial sensors for accurate measurement of the
position and attitude of moving vehicles. Sales are made directly by our sales
force to the end users or to systems integrators. Competitors include IGI in the
airborne survey market, and iXsea and VT TSS in the marine survey market.

Our MAS business supplies GPS modules that use the military's GPS advanced
capabilities. The modules are used for guiding aircraft. Military products are
sold directly by our sales force to either the US Government or a contractor.
Sales are also made to non-US governments, with the sales of the encrypted
components taking place through the US Government. Competitors in this market
include Rockwell, L3, Raytheon, and Thales.

Representative products sold by this segment include:

Applanix POS/AV - An integrated GPS/inertial system for airborne surveying that
measures aircraft position to an accuracy of a few centimeters and aircraft
attitude (angular orientation) to an accuracy of 30 arc seconds or better. This
system is typically interfaced to large format cameras and scanning lasers for
producing geo-referenced topographic maps of the terrain.

Force 5(TM) Module - A dual frequency, embedded GPS module that is used in a
variety of military airborne applications.

Acquisitions and Joint Ventures

Our growth strategy is centered around developing and marketing innovative and
complete value-added solutions to our existing customers, while also marketing
them to new customers and geographic regions. To do this, we believe it is
essential to continually enhance our market position, which has led to
partnering with or acquiring companies that bring technologies, products or
distribution capabilities that will allow us to enter or penetrate a market
quicker than if we had done so solely through internal development. Over the

past five years, this has led us to form two joint ventures and acquire six
companies. No assurance can be given that our previous or future acquisitions
will be successful or will not materially adversely affect our financial
condition or operating results.

Applanix Corporation

* On July 7, 2003, we acquired privately held Applanix Corporation, a Canadian
developer of systems that integrate inertial navigation system and GPS
technologies. We expect the Applanix acquisition to extend our technology
portfolio and enable increased robustness and capabilities in our future
positioning products. Applanix's performance is reported under our Portfolio
Technologies segment.

MENSI S.A.

* On December 9, 2003, we acquired privately held MENSI S.A., a French developer
of terrestrial 3D laser scanning technology. We expect the MENSI acquisition to
enhance our technology portfolio and expand our product offerings. MENSI's
performance is reported under our Engineering and Construction segment.

TracerNET Corporation

* On March 5, 2004, we acquired privately held TracerNET Corporation of
Virginia, a provider of wireless fleet management solutions. We expect the
TracerNET acquisition to offer more diverse and complete fleet management
solutions. TracerNET's performance will be reported under our Mobile Solutions
segment.

Nikon-Trimble Co., Ltd.

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

Nikon-Trimble is 50% owned by us and 50% owned by Nikon, with equal voting
rights. It is focusing on the design and manufacture of surveying instruments
including mechanical total stations and related products. In Japan, this joint
venture distributes Nikon's survey products as well as our survey, agriculture,
construction and GIS products. Outside of Japan, we are the exclusive
distributor of Nikon survey and construction products.

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

Caterpillar Trimble Control Technologies, LLC

On April 1, 2002, we established and began operations of a joint venture with
Caterpillar called Caterpillar Trimble Control Technologies, LLC, in which each
company has a 50% ownership stake and have equal voting rights. This joint
venture is developing new generations of machine control products for the
construction and mining markets for installation in the factory or as a dealer
option.

* Today, we sell construction machine control products to contractors through
our dealer channel, for installation on bulldozers, motorgraders, and excavators
that are already in the field (the "after-market"). However, both companies
believe the adoption of the technology will spur future demand for machine
control products that can be integrated into the design of new Caterpillar
machines, while also available for "after-market" installation.

Patents, Licenses and Intellectual Property

We hold approximately 600 US patents and 108 non-US patents, the majority of
which cover GPS technology and applications, and over 94 of which cover optical
and laser technology and applications.

We prefer to own the intellectual property used in our products, either directly
or though subsidiaries. From time to time we license technology from third
parties.

There are approximately 60 trademarks registered to Trimble including "Trimble,"
the globe and triangle logo, "AgGPS," "GeoExplorer," and "Telvisant," among
others that are registered to Trimble Navigation Limited in the United States
and other countries. Additional trademarks are pending registration.

Sales and Marketing

We currently have regional sales offices throughout North America and Europe.
Offices serving the rest of the world include Australia, China, Korea, New
Zealand, Singapore, and United Arab Emirates. We tailor the distribution channel
to the needs of our products and regional markets. Therefore, we have a number
of forms of sales channel solutions around the world.

North America

We sell our products in the United States and Canada primarily through dealers,
distributors, and authorized representatives. This channel is supplemented and
supported by our employees who provide additional sales support. In some cases,
where third party distribution is not available, we utilize a direct sales
force. We also utilize distribution alliances and OEM relationships with other
companies as a means to serve selected markets.

International

We market to end users through an extensive world wide network of dealers and
distributors. Distributors carry one or more product lines and are generally
assigned a territory. We occasionally grant exclusive rights to market certain
products within specified countries. See Note 3 of the Notes to the Consolidated
Financial Statements for financial information regarding joint ventures

Sales to unaffiliated customers outside the United States comprised
approximately 51% in 2003, 49% in 2002, and 50% in 2001. During the 2003 fiscal
year, North and South America represented 56%, Europe, the Middle East and
Africa represented 31%, and Asia represented 13% of our total revenues.

Support and Warranty

The warranty periods for our products are generally between one and three years
from date of shipment. Selected military programs may require extended warranty
periods up to 5.5 years, certain TDS products have a 90-day warranty period, and
certain Nikon products have a five-year warranty period. We support our GPS
products through a circuit board replacement program from locations in the
United Kingdom, Germany, Japan, and the United States. The repair and
calibration of our non-GPS products are available from company-owned or
authorized facilities. We reimburse dealers and distributors for all authorized
warranty repairs they perform.

While we engage in extensive product quality programs and processes, including
actively monitoring and evaluating the quality of component suppliers, our
warranty obligation is affected by product failure rates, material usage, and
service delivery costs incurred in correcting a product failure. Should actual
product failure rates, material usage, or service delivery costs differ from the
estimates, revisions to the estimated warranty accrual and related costs may be
required.

Seasonality of Business

* Our revenues are affected by seasonal buying patterns in some of our
businesses. Over half of our total revenue comes from our Engineering and
Construction business, which has the biggest seasonal impact on our total
revenue. This business, and therefore our total revenue, is seasonally strongest
during the second quarter due to the start of the construction buying season in
the northern hemisphere in spring. Typically, we expect the first and fourth
quarters to be the seasonal lows due to the lack of construction during the

winter months. If other factors such as economic conditions or underlying growth
in the business are removed, the historical variability in our total quarterly
revenue from seasonality has generally been less than 10 percent.

Backlog

In most of our markets, the time between order placement and shipment is short.
Therefore, we believe that backlog is not a reliable indicator of present or
future business conditions.

Manufacturing

Manufacturing of our GPS products is subcontracted to Solectron Corporation. We
completed the move of all Component Technologies products to Solectron in China
in the first quarter of 2003. During 2003 we started utilizing Solectron in
Mexico for some of our handheld products. We continue to utilize Solectron
California for our high-end GPS products and new product introduction services.
Solectron is responsible for substantially all material procurement, assembly,
and testing. We continue to manage product design up through pilot production
for the subcontracted products, and we are directly involved in qualifying
suppliers and key components used in all our products. Our current contract with
Solectron continues in effect until either party gives the other ninety days
written notice.

We manufacture laser and optics-based products at our plants in Dayton, Ohio;
Danderyd, Sweden; and Jena and Kaiserslautern, Germany. Some of these products
or portions of these products are also subcontracted to third parties for
assembly.

All of our manufacturing sites are registered to ISO9001:2000, covering the
design, production, distribution, and servicing of all our products. The
Component Technologies segment is registered to QS9000 for its automotive
products. QS9000 is the automotive version of ISO9000 covering specific
requirements for the market.

Research and Development

We believe that our competitive position is maintained through the development
and introduction of new products that incorporate improved features, better
performance, smaller size and weight, lower cost, or some combination of these
factors. We invest substantially in the development of new products. We also
make significant investment in the positioning, communication, and information
technologies that underlie our products and will likely provide competitive
advantages.

Our research and development expenditures, net of reimbursed amounts were $67.6
million for fiscal 2003, $61.2 million for fiscal 2002, and $62.9 million for
fiscal 2001.

* We expect to continue investing in research and development with the goal of
maintaining or improving our competitive position, as well as the goal of
entering new markets and satisfying new needs for positioning related solutions.
There can be no assurance that we will succeed in doing so.

Employees

As of January 2, 2004, we employed approximately 2,150 employees, including 30%
in sales and marketing, 29% in manufacturing, 28% in engineering, and 13% in
general and administrative positions. Approximately 45% of employees are in
locations outside the United States.

Our employees are not represented by unions except for those in Sweden and some
in Germany. We also employ temporary and contract personnel that are not
included in the above headcount numbers. We have not experienced work stoppages
or similar labor actions.

Available Information

The Company's annual reports on Form 10-K, quarterly reports on Form 10-Q,
current reports on Form 8-K, and all amendments to those reports are available
free of charge on the Company's website through www.trimble.com/investors.html,

as soon as reasonably practicable after such material is electronically filed
with or furnished to the Securities and Exchange Commission. Information
contained on our website is not part of this annual report on Form 10-K.

In addition, you may request a copy of these filings (excluding exhibits) at no
cost by writing or telephoning us at our principal executive offices at the
following address or telephone number:

Trimble Navigation Limited
749 North Mary Avenue, Sunnyvale, CA 94085
Attention: Investor Relations
Telephone: 408-481-8000

Executive Officers

The names, ages, and positions of the Company's executive officers as of March
1, 2004 are as follows:

Name Age Position
- ---------------------------------------------------------------------------
Steven W. Berglund 52 President and Chief Executive Officer
Mary Ellen P. Genovese 44 Chief Financial Officer
William C. Burgess 57 Vice President, Human Resources
Joseph F. Denniston, Jr. 43 Vice President, Operations
Bryn A. Fosburgh 41 Vice President and General Manager,
Geomatics and Engineering
Mark A. Harrington 48 Vice President of Strategy
and Business Development
John E. Huey 54 Treasurer
Irwin L. Kwatek 64 Vice President and General Counsel
Michael W. Lesyna 43 Vice President and General Manager,
Mobile Solutions
Bruce E. Peetz 52 Vice President, Advanced Technology and Systems
Christopher J. Shephard 41 Vice President and General Manager,
Construction Instruments
Anup V. Singh 33 Corporate Controller
Alan R. Townsend 55 Vice President and General Manager,
Field Solutions
Dennis L. Workman 58 Vice President and General Manager,
Component Technologies

Steven W. Berglund - Steven Berglund joined Trimble as president and chief
executive officer in March 1999. Prior to joining Trimble, Mr. Berglund was
president of Spectra Precision, a group within Spectra Physics AB, and a pioneer
in the development of laser systems. He spent 14 years at Spectra Physics in a
variety of senior leadership positions. In the early 1980s, Mr. Berglund spent a
number of years at Varian Associates in Palo Alto, where he held a variety of
planning and manufacturing roles. Mr. Berglund began his career as a process
engineer at Eastman Kodak in Rochester, New York. He attended the University of
Oslo and the University of Minnesota where he received a B.S. in chemical
engineering in 1974. He later received his M.B.A. from the University of
Rochester in New York in 1977.

Mary Ellen Genovese - Mary Ellen Genovese, chief financial officer, has been
responsible for the overall financial activities of Trimble since September
2000. Ms. Genovese was vice president of finance and corporate controller from
1997 to September 2000. From 1994 to 1997, Ms. Genovese served as business unit
controller for Software and Component Technologies, and Tracking and
Communications. She joined Trimble as controller of manufacturing operations in
December 1992. Prior to joining Trimble, Ms. Genovese was chief financial
officer for Minton Co., a distributing company to the commercial building
market, from 1991 to 1992. Prior to 1991, she worked for 10 years with General
Signal Corp. in several management positions. Ms. Genovese is a certified public
accountant and received her B.S. in accounting from Fairfield University in
Connecticut in 1981.

William C. Burgess - William Burgess joined Trimble in August of 2000 as vice
president of Human Resources. Prior to joining Trimble, Mr. Burgess was vice
president of Human Resources and Management Information Systems for Sonoma West
Holdings, Inc. From 1993 to 1997, he served as vice president of Human Resources
for Optical Coating Laboratory, from 1990 to 1993, he established and managed

the human resources function at Teknekron Communications Systems, and from 1985
to 1990 he was vice president of Human Resources for a $25 billion,
35,000-employee segment of Asea Brown Boveri (ABB), a global technology company.
Mr. Burgess received a B.S. from the University of Nebraska and an M.S. in
organizational development from Pepperdine University.

Joseph F. Denniston, Jr. - Joseph Denniston joined Trimble as vice president of
operations in April 2001, responsible for worldwide manufacturing, distribution
and logistics. Prior to Trimble, Mr. Denniston worked for 3Com Corporation.
During his 14-year tenure, he served as vice president of supply chain
management for the Americas and held several positions in test engineering,
manufacturing engineering and operations. Previously at Sentry Schlumberger for
seven years, he held several positions including production engineering,
production management and test engineering over six years. Mr. Denniston
received a B.S. in electrical engineering technology from the Missouri Institute
of Technology in 1981 and an M.S. in computer science engineering from Santa
Clara University in 1990.

Bryn A. Fosburgh - Bryn Fosburgh was appointed vice president and general
manager of the Geomatics and Engineering business in July 2002, with
responsibility for all the division-level activities associated with survey,
construction, and infrastructure solutions. From October 1999 to July 2002, Mr.
Fosburgh served as division vice president of survey and infrastructure. In
1997, Mr. Fosburgh was appointed director of development for the Company's land
survey business unit where he oversaw the development of field and office
software that enabled the interoperability of Trimble survey products. Mr.
Fosburgh joined Trimble in 1994 as technical service manager for surveying,
mining, and construction. Prior to Trimble, Mr. Fosburgh was a civil engineer
with the Wisconsin Department of Transportation where he was responsible for
coordinating the planning, data acquisition, and data analysis for statewide GPS
surveying projects in support of transportation improvement projects. He has
also held various engineering, research and operational positions for the US
Army Corps of Engineers and Defense Mapping Agency. Mr. Fosburgh received a B.S.
in geology from the University of Wisconsin in Green Bay in 1985 and an M.S. in
civil engineering from Purdue University in 1989.

Mark A. Harrington - Mark Harrington joined Trimble in January 2004 as vice
president of strategy and business development. Prior to joining Trimble, Mr.
Harrington served as vice president of finance at Finisar Corporation and chief
financial officer for both Cielo Communications, Inc. and Vixel Corporation. His
experience also includes 11 years at Spectra-Physics where he served in a
variety of roles including vice president of finance for Spectra-Physics Lasers,
Inc. and vice president of finance for Spectra-Physics Analytical, Inc. Mr.
Harrington began his career at Varian Associates, Inc. where he held a variety
of management and individual positions in finance, operations and IT. Mr.
Harrington received his B.S. in Business Administration from the University of
Nebraska-Lincoln.

John E. Huey - John Huey joined Trimble in 1993 as director corporate credit and
collections, and was promoted to assistant treasurer in 1995 and treasurer in
1996. Past experience includes two years with ENTEX Information Services, five
years with National Refractories and Minerals Corporation (formerly Kaiser
Refractories), and thirteen years with Kaiser Aluminum and Chemical Sales, Inc.
He has held positions in credit management, market research, inventory control,
sales, and as an assistant controller. Mr. Huey received his B.A. degree in
Business Administration in 1971 from Thiel College in Greenville, Pennsylvania
and an MBA in 1972 from West Virginia University in Morgantown, West Virginia.

Irwin L. Kwatek - Irwin Kwatek has served as vice president and general counsel
of Trimble since November 2000. Prior to joining Trimble, Mr. Kwatek was vice
president and general counsel of Tickets.com, a ticketing service provider, from
May 1999 to November 2000. Prior to Tickets.com, he was engaged in the private
practice of law for more than six years. During his career, he has served as
vice president and general counsel to several publicly held high-tech companies
including Emulex Corporation, Western Digital Corporation and General
Automation, Inc. Mr. Kwatek received his B.B.A. from Adelphi College in Garden
City, New York and an M.B.A. from the University of Michigan in Ann Arbor. He
received his J.D. from Fordham University in New York City in 1968.

Michael W. Lesyna - Michael Lesyna has been vice president and general manager
of the Mobile Solutions segment since September 2000. Prior to Trimble, Mr.
Lesyna spent six years at Booz Allen & Hamilton where he most recently served as
a principal in the operations management group. Prior to Booz Allen & Hamilton,
Mr. Lesyna held a variety of engineering positions at Allied Signal Aerospace.
Mr. Lesyna received his M.B.A., as well as an M.S. and B.S. in mechanical
engineering from Stanford University.

Bruce E. Peetz - Bruce Peetz has served as vice president of Advanced Technology
and Systems since 1998 and has been with Trimble for 15 years. From 1996 to
1998, Mr. Peetz served as general manager of the Survey Business. Prior to
joining Trimble, Mr. Peetz was a research and development manager at
Hewlett-Packard for 10 years. Mr. Peetz received his B.S. in electrical
engineering from Massachusetts Institute of Technology in Cambridge,
Massachusetts in 1973.

Anup V. Singh - Anup Singh has served as corporate controller since joining
Trimble in December 2001. Prior to joining Trimble, Mr. Singh was with
Excite@Home from July 1999 to December 2001. During his tenure at Excite@Home,
he held the positions of senior director of Corporate Financial Planning and
Analysis, and international controller. Before Excite@Home, Mr. Singh also
worked for 3Com Corporation from December 1997 to July 1999, and Ernst & Young
LLP in San Jose, California and London, England. Mr. Singh received his B.A. in
1991 and M.A. in 1995 in economics and management science from Cambridge
University in England. He is also a chartered accountant and was admitted as a
member of the Institute of Chartered Accountants in England and Wales in 1994.

Christopher J. Shephard - Chris Shephard was appointed vice president and
general manager of the Construction Instruments business area in July 2002 after
serving as division vice president of operations for Engineering and
Construction since Trimble's acquisition of Spectra Precision Group in July
2000. Prior to Trimble, Mr. Shephard served from 1998 to 2000 as Spectra
Precision's chief financial officer. Mr. Shephard also worked for more than
eight years at Booz Allen & Hamilton. Prior to Booz Allen & Hamilton, Mr.
Shephard spent three years at Copeland Corporation, a division of Emerson, in
their management-training program. Mr. Shephard received a B.A. in business
studies from Manchester Polytechnic in England in 1985 and an M.M. from the J.L.
Kellogg Graduate School of Management at Northwestern University, Evanston,
Illinois in 1990.

Alan R. Townsend - Alan Townsend has served as vice president and general
manager of the Field Solutions business area since November 2001. He also serves
as the managing director of Trimble Navigation New Zealand Ltd. for which he has
overall site responsibility. From 1995 to 2001, Mr. Townsend was general manager
of Mapping and GIS. Mr. Townsend joined Trimble in 1991 as the manager of
Trimble Navigation New Zealand Ltd. Prior to Trimble, Mr. Townsend held a
variety of technical and senior management roles within the Datacom Group of
companies in New Zealand including managing director of Datacom Software
Research Ltd. from 1986 to 1991. In addition, Mr. Townsend is a director of IT
Capital Ltd., a venture capital company based in Auckland, New Zealand. He is
also a fellow of the New Zealand Institute of Management and a past president of
the New Zealand Software Exporters Association. Mr. Townsend received a B.S.c in
economics from the University of Canterbury in 1970.

Dennis L. Workman - Dennis Workman has served as vice president and general
manager of Trimble's Component Technologies segment since September 1999. From
1998 to 1999, Mr. Workman was senior director and chief technical officer of the
newly formed Mobile and Timing Technologies (MTT) business group, also serving
as general manager of Trimble's Automotive and Timing group. In 1997, he was
director of engineering for Software & Component Technologies. Mr. Workman
joined Trimble in 1995 as director of the newly created Timing vertical market.
Prior to Trimble, Mr. Workman held various senior-level technical positions at
Datum Inc. During his nine year tenure at Datum, he held the position of CTO.
Mr. Workman received a B.S. in mathematics and physics from St. Mary's College
in 1967 and an M.S. in electrical engineering from the Massachusetts Institute
of Technology in 1969.

Item 2 Properties

The following table sets forth the significant real property that we own or
lease:

In addition, we lease a number of smaller offices around the world primarily for
sales functions. For financial information regarding obligations under leases,
see Note 10 of the Notes to the Consolidated Financial Statements.

* We believe that our facilities are adequate to support current and near-term
operations.

Item 3 Legal Proceedings

* We are from time to time a party to disputes or litigation incidental to our
business. We believe that our ultimate liability as a result of such disputes,
if any, would not be material to our overall financial position, results of
operations, or liquidity.

Item 4 Submission of Matters to a Vote of Security Holders

No matters were submitted to a vote of security holders during the fourth
quarter of 2003.

PART II

Item 5. Market for Registrant's Common Equity and Related Stockholder Matters

On January 22, 2004, our Board of Directors approved a 3-for-2 split of all
outstanding shares of our common stock, payable March 4, 2004 to stockholders of
record on February 17, 2004. All shares and per share information presented has
been adjusted to reflect the stock split on a retroactive basis for all periods
presented.

Our common stock is traded on the Nasdaq National Market under the symbol
"TRMB." The table below sets forth, during the periods indicated, the high and
low per share bid prices for our common stock as reported on the Nasdaq National
Market.

2003 2002
Sales Price Sales Price
Quarter Ended High Low High Low
------------- ---- --- ---- ---
First quarter $14.17 $8.68 $11.43 $7.84
Second quarter 18.50 12.43 12.33 9.98
Third quarter 19.57 14.97 10.00 6.85
Fourth quarter 25.60 13.49 9.65 5.35

As of January 2, 2004, there were approximately 1,055 holders of record of our
common stock.

We made the following sales of unregistered securities during the year ended
January 2, 2004.

Our merger agreement with LeveLite provides for us to make earn-out payments not
to exceed an aggregate $3.9 million (in common stock and cash payment) based on
certain future revenues and payments received. Upon a hearing before the
California Department of Corporations in which the terms and conditions of the
offer to the LeveLite shareholders were approved, the shares of Common Stock to
be issued in the transaction were exempt from registration by reason of
qualification under Section 3(a)(10) of the Securities Act of 1933, as amended.

We made the following earn-outs in common stock during fiscal 2003:

Date of Number of
issuance shares issued Price
-------- ------------- -----
January 22, 2003 35,994 $ 9.35
April 23, 2003 26,549 13.86
July 29, 2003 20,679 16.52
October 27, 2003 19,842 15.25

On June 30, 2003, we issued 349,251 shares of common stock to Nikon-Trimble Co.
Ltd. We issued these shares as a contribution to capital in the formation of
Nikon-Trimble Co. Ltd. as a joint venture with Nikon Corporation. The shares
were valued at $16.95 per share and were exempt from registration under Section
4(2) of the Securities Act of 1933, as amended, based on the nature of the
purchaser and the nature of the arms-length negotiated transaction.

Dividend Policy

We have not declared or paid any cash dividends on our common stock during any
period for which financial information is provided in this Annual Report on Form
10-K. At this time, we intend to retain future earnings, if any, to fund the
development and growth of our business and do not anticipate paying any cash
dividends on our common stock in the foreseeable future.

We are allowed to pay dividends and repurchase shares of our common stock up to
25% of net income in the previous fiscal year, under the existing terms of our
credit facilities.

Equity Compensation Plan Information

The following table sets forth, as of January 2, 2004, the total number of
securities outstanding under our stock option plans, the weighted average
exercise price of such options, and the number of options available for grant
under such plans.

Item 6. Selected Financial Data

The following selected consolidated financial data should be read in conjunction
with "Management's Discussion and Analysis of Financial Condition and Results of
Operations" and our consolidated financial statements and related notes
appearing elsewhere in this annual report. Historical results are not
necessarily indicative of future results. In particular, because the results of
operations and financial condition related to our acquisitions are included in
our Consolidated Statement of Operations and Consolidated Balance Sheets data
commencing on those respective acquisition dates, comparisons of our results of
operations and financial condition for periods prior to and subsequent to those
acquisitions are not indicative of future results.

We have significant intangible assets on our Consolidated Balance Sheets that
include goodwill and other purchased intangibles related to acquisitions. At the
beginning of fiscal 2002, we adopted Statement of Financial Accounting Standards
No. 141 ("SFAS 141"), Business Combinations, and No. 142, Goodwill and Other
Intangible Assets ("SFAS 142"). Application of the non-amortization provisions
of SFAS 142 significantly reduced amortization expense of purchased intangibles
and goodwill to approximately $8.3 million for the fiscal year 2002 from $29.4
million in fiscal year 2001.

(1) Earnings per share and shares used in calculating earnings per share have
been restated to reflect a three-for-two stock split in February 2004.

Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations

The following discussion should be read in conjunction with the consolidated
financial statements and the related notes. The following discussion contains
forward-looking statements that reflect our plans, estimates and beliefs. Our
actual results could differ materially from those discussed in the
forward-looking statements. Factors that could cause or contribute to these
differences include, but are not limited to, those discussed below and those
listed under "Risks and Uncertainties."

EXECUTIVE LEVEL OVERVIEW

We are a global provider of complete, integrated solutions that provide a
seamless flow of position information both in the field and between the field
and back office. To do this, we utilize advanced positioning technologies
(including GPS, optical, inertial and laser technologies) combined with wireless
communications and applications software, to get data points with accuracies
down to several millimeters. This can increase productivity through time and
cost savings, as the need for labor is reduced, rework from mistakes is less
frequent, and the time to complete a job is shortened.

Our solutions businesses, Engineering and Construction, Field Solutions, and
Mobile Solutions make up over 80% of our revenue. We believe our strength in
these businesses stems from our ability to bring innovative products or
solutions to the market, as well as effectively train and manage a global,
third-party distribution channel that is proficient in selling technology
solutions into markets that have historically utilized manual and low-tech
processes.

In 2003 we extended our market and product capabilities through internal
development, acquisitions, and alliances. In July, we established a joint
venture with Nikon Corporation, which will extend our presence in the global
construction positioning market. Our acquisitions of Applanix in July and MENSI
in December added important new technologies which will enable us to develop new
applications or broaden current application solutions. We also announced an
alliance with CNH Global, which will significantly extend our distribution reach
for our Autopilot agricultural product line.

Our other strategic business, Component Technologies, is different from the
"solution businesses", as it seeks to either provide GPS technology directly to
third parties, such as OEM's and system integrators, or to integrate GPS into
other technologies, such as wireless. These products allow for higher
functionality and therefore, a higher average selling price for our offerings.
Through greater integration we see potential future growth opportunities. For
example, our recently announced TrimTrac product integrates GPS and GSM cellular
technologies into a fully functional location device. It establishes a new asset
tracking or security capability at an aggressive price point and opens up a new
class of customers and applications which were previously not available to us.

In 2003 we positioned ourselves in newer markets that will serve as important
sources of future growth. Our efforts in China, India, Russia, Korea and Eastern
Europe all reflected improving financial results, with the promise of more in
the future.

With our improving profitability, we now have the opportunity to re-emphasize
revenue growth. We expect this growth to come from the continuation of several
trends that we saw in 2003. These trends include further penetrating existing
markets with current and new products, continued geographic expansion into
emerging markets such as Russia, China, India, Korea and Eastern Europe, taking
advantage of market consolidation, improving competitive position due to
offering complete solutions with a proficient dealer channel, and entering new
markets with new products such as our TrimTrac (tm) locator and Recon products,
fleet management services, and our inertial/GPS positioning and orientation
systems acquired as part of Applanix.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

Our accounting policies are more fully described in Note 1 of the Notes to the
Consolidated Financial Statements. The preparation of financial statements and
related disclosures in conformity with accounting principles generally accepted
in the United States requires us to make judgments, assumptions, and estimates
that affect the amounts reported in the Consolidated Financial Statements and
accompanying Notes to the Consolidated Financial Statements. We consider the
accounting polices described below to be our critical accounting polices. These
critical accounting policies are impacted significantly by judgments,
assumptions, and estimates used in the preparation of the Consolidated Financial
Statements, and actual results could differ materially from the amounts reported
based on these policies.

Revenue Recognition

We recognize product revenue when persuasive evidence of an arrangement exists,
delivery has occurred, the fee is fixed or determinable, and collectibility is
reasonably assured. In instances where final acceptance of the product is
specified by the customer or is uncertain, revenue is deferred until all
acceptance criteria have been met. Our total deferred revenue was $7.7 million
and $6.0 million as of January 2, 2004 and January 3, 2003, respectively.
Revenue is reduced by a sales return reserve as described under "Allowance for
Doubtful Accounts and Sales Returns."

Revenue from purchased extended warranty and support agreements is deferred and
recognized ratably over the term of the warranty/support period. Substantially
all technology licenses and research revenue have consisted of initial license
fees and royalties, which were recognized when earned, provided we had no
remaining obligations.

Contracts and customer purchase orders are generally used to determine the
existence of an arrangement. Shipping documents and customer acceptance, when
applicable, are used to verify delivery. We assess whether the fee is fixed or
determinable based on the payment terms associated with the transaction and
whether the sales price is subject to refund or adjustment. We assess
collectibility based primarily on the creditworthiness of the customer as
determined by credit checks and analysis, as well as the customer's payment
history.

Our shipment terms for US orders, and international orders fulfilled from our
European distribution center are typically FCA (Free Carrier) shipping point,
except certain sales to US government agencies which are shipped FOB
destination. FCA shipping point means that we fulfill the obligation to deliver
when the goods are handed over, cleared for export, and into the charge of the
carrier named by the buyer at the named place or point. If no precise point is
indicated by the buyer, we may choose within the place or range stipulated where
the carrier will take the goods into carrier's charge.

Other international orders are shipped FOB destination, which means these
international orders are not recognized as revenue until the product is
delivered and title has transferred to the buyer or FCA shipping point. FOB
destination means that we bear all costs and risks of loss or damage to the
goods up to that point. .

Revenue to distributors and resellers is recognized upon delivery, assuming all
other criteria for revenue recognition have been met. Distributors and resellers
do not have a right of return.

When a sale involves multiple elements, the entire fee from the arrangement is
allocated to each respective element based on its relative fair value and
recognized when revenue recognition criteria for each element are met. The
amount of product revenue allocated to an individual element is limited to the
lesser of its relative fair value or the amount not contingent on our delivery
of other elements under the arrangement, regardless of the probability of our
performance.

Our software arrangements generally consist of a license fee and post-contract
customer support (PCS). We have established vendor-specific objective evidence
(VSOE) of fair value for our PCS contracts based on the renewal rate. The
remaining value of the software arrangement is allocated to the license fee
using the residual method, and revenue is primarily recognized when the software
has been delivered and there are no remaining obligations. Revenue from PCS is
recognized ratably over the term of the PCS agreement.

Allowance for Doubtful Accounts and Sales Returns

Our accounts receivable balance, net of allowance for doubtful accounts, was
$96.2 million as of January 2, 2004, compared with $77.6 million as of January
3, 2003. The allowance for doubtful accounts as of January 2, 2004 was $10.0
million, compared with $9.9 million as of January 3, 2003. We evaluate the
collectibility of our trade accounts receivable based on a number of factors. In
circumstances where we are aware of a specific customer's inability to meet its
financial obligations to us, a specific allowance for bad debts is estimated and
recorded which reduces the recognized receivable to the estimated amount we
believe will ultimately be collected. In addition to specific customer
identification of potential bad debts, bad debt charges are recorded based on
our recent past loss history and an overall assessment of past due trade
accounts receivable amounts outstanding.

A reserve for sales returns is established based on historical trends in product
return rates experienced in the ordinary course of business. The reserve for
sales returns as of January 2, 2004 and January 3, 2003 included $3.3 million
and $2.7 million, respectively, for estimated future returns that were recorded
as a reduction of our accounts receivable and revenue. If the actual future
returns were to deviate from the historical data on which the reserve had been
established, our revenue could be adversely affected.

Inventory Valuation

Our inventory balance was $70.8 million as of January 2, 2004, compared with
$61.1 million as of January 3, 2003. Our inventory allowances as of January 2,
2004 were $25.9 million, compared with $25.2 million as of January 3, 2003. Our
inventory is recorded at the lower of cost or market. We use a standard cost
accounting system to value inventory and these standards are reviewed a minimum
of once a year and multiple times a year in our most active manufacturing
plants. We adjust the inventory value for estimated excess and obsolete

inventory based on our assessment of future demand and market conditions. If
actual future demand or market conditions are less favorable than those
projected by us, additional inventory write-downs may be required.

Income Taxes

Deferred taxes are provided on a liability method whereby deferred tax assets
are recognized for deductible temporary differences and deferred liabilities are
recognized for taxable temporary differences. Temporary differences are the
differences between the reported amounts of assets and liabilities and their tax
bases. Deferred tax assets are reduced by a valuation allowance when it is
determined to be more likely than not that some portion or all of the deferred
tax assets will not be realized. In evaluating the need for a valuation
allowance, we consider future taxable income, resolution of tax uncertainties
and prudent and feasible tax planning strategies. In fiscal year 2003, we have
recorded a deferred tax asset of $7.6 million that is more likely than not to be
realized. We need to generate $20.0 million of future US income to realize the
deferred tax asset.

If we determine that we would not be able to realize all or part of our deferred
tax assets in the future, an adjustment to the carrying value of the deferred
tax assets would be charged to income in the period in which such determination
is made.

Our effective income tax rates from continuing operations for fiscal years 2003,
2002 and 2001 were (8%), 25% and (9%), respectively. The 2002 and 2001 income
tax rates differ from the US federal statutory rate of 35%, due primarily to
non-US taxes and the inability to realize the benefit of net operating losses.
The 2003 income tax rate is less than the US federal statutory rate, due
primarily to the realization of benefits from net operating losses and other
previously reserved deferred tax assets.

Goodwill Impairment

Goodwill as of January 2, 2004 was $241.4 million, compared with $205.9 million
as of January 3, 2003. We perform goodwill impairment tests on an annual basis
for each reporting unit. Based on impairment tests performed, there was no
impairment of our goodwill in fiscal 2003 and 2002.

For goodwill, the annual impairment evaluation includes a comparison of the
carrying value of the reporting unit (including goodwill) to that reporting
unit's fair value. If the reporting unit's estimated fair value exceeds the
reporting unit's carrying value, no impairment of goodwill exists. If the fair
value of the reporting unit does not exceed the unit's carrying value, then an
additional analysis is performed to allocate the fair value of the reporting
unit to all of the assets and liabilities of that unit as if that unit had been
acquired in a business combination and the fair value of the unit was the
purchase price. If the excess of the fair value of the reporting unit over the
fair value of the identifiable assets and liabilities is less than the carrying
value of the unit's goodwill, an impairment charge is recorded for the
difference.

We cannot predict the occurrence of certain future events that might adversely
affect the reported value of goodwill. Such events include, but are not limited
to, strategic decisions made in response to economic and competitive conditions,
the impact of the economic environment on our customer base, or a material
negative change in our relationships with significant customers.

Accounting for the Long-Lived Assets Including Intangibles Subject to
Amortization

Depreciation and amortization of our long-lived assets is provided using
straight-line methods over their estimated useful lives. Changes in
circumstances such as the passage of new laws or changes in regulations,
technological advances, changes to our business model, or changes in the capital
strategy could result in the actual useful lives differing from initial
estimates. In those cases where we determine that the useful life of a
long-lived asset should be revised, we will depreciate the net book value in
excess of the estimated residual value over its revised remaining useful life.
Factors such as changes in the planned use of equipment, customer attrition,
contractual amendments, or mandated regulatory requirements could result in
shortened useful lives.

Long-lived assets and asset groups are evaluated for impairment whenever events
or changes in circumstances indicate that the carrying amount of such assets may
not be recoverable. The estimated future cash flows are based upon, among other

things, assumptions about expected future operating performance and may differ
from actual cash flows. Long-lived assets evaluated for impairment are grouped
with other assets to the lowest level for which identifiable cash flows are
largely independent of the cash flows of other groups of assets and liabilities.
If the sum of the projected undiscounted cash flows (excluding interest) is less
than the carrying value of the assets, the assets will be written down to the
estimated fair value in the period in which the determination is made.

Warranty Costs

The liability for product warranties was $5.1 million as of January 2, 2004,
compared with $6.4 million as of January 3, 2003. (See Note 1 of the Notes to
the Consolidated Financial Statements for further information regarding our
warranty liability.) The warranty periods for our products are generally between
one and three years from date of shipment. Selected military programs may
require extended warranty periods up to 5.5 years, certain TDS products have a
five year or 90-day warranty period, and certain Nikon products have a five year
warranty period. We accrue for warranty costs as part of our cost of sales based
on associated material costs and technical support labor costs. Material cost is
primarily estimated based upon historical trends in the volume of product
returns within the warranty period and the cost to repair or replace the
equipment.

While we engage in extensive product quality programs and processes, including
actively monitoring and evaluating the quality of our component suppliers, our
warranty obligation is affected by product failure rates, material usage, and
service delivery costs incurred in correcting a product failure. Should actual
product failure rates, material usage, or service delivery costs differ from our
estimates, revisions to the estimated warranty accrual and related costs may be
required.

Stock Compensation

We apply Accounting Principles Board Opinion No. 25, "Accounting for Stock
Issued to Employees" (APB 25) and related interpretations in accounting for our
stock option plans and stock purchase plan. Accordingly, we do not recognize
compensation cost for stock options granted at a price equal to fair market
value. Note 13 of the Notes to the Consolidated Financial Statements describes
the plans we operate, and Note 1 of the Notes to the Consolidated Financial
Statements contains a summary of the pro forma effects to reported net income
(loss) and earnings (loss) per share for fiscal 2003, 2002, and 2001 as if we
had elected to recognize compensation cost based on the fair value of the
options granted at grant date.

Investment in Joint Ventures

We have adopted the equity method of accounting for our investments in the
Caterpillar and Nikon joint ventures. This requires that we record our share of
the joint ventures' profits or losses in a given fiscal period. See Note 3 of
the Notes to the Consolidated Financial Statements for joint venture accounting.

Upon the formation of our Caterpillar joint venture in April 2002, we received a
cash distribution of $11.0 million. We have elected to treat the cash
distribution as a deferred gain, being amortized to the extent that losses are
attributable from the Caterpillar joint venture under the equity method
described above. When and if the joint venture is profitable on a sustainable
basis and future operating losses are not anticipated, then we will recognize as
a gain, the portion of the $11.0 million, which is unamortized. To the extent
that it is possible that we will have any future-funding obligation relating to
the Caterpillar joint venture, then the relevant amount of the $11.0 million
will be deferred until such time that the funding obligation no longer exists.
As of January 2, 2004, the balance of the unamortized deferred gain was $9.8
million.

RECENT BUSINESS DEVELOPMENTS

Nikon-Trimble Joint Venture

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

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 as of June 30, 2003) in cash and
(Y)700 million of our common stock or 349,251 shares valued at approximately
US$5.9 million on June 30, 2003. Nikon-Trimble purchased certain tangible and
intangible assets from Nikon Geotecs Co., Ltd., and Trimble Japan KK.

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

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

Acquisitions

Applanix Corporation

* On July 7, 2003, we acquired privately held Applanix Corporation, a Canadian
developer of systems that integrate inertial navigation system and GPS
technologies. We expect the Applanix acquisition to extend our technology
portfolio and enable increased robustness and capabilities in our future
positioning products. Applanix's performance is reported under our Portfolio
Technologies segment.

MENSI S.A.

* On December 9, 2003, we acquired privately held MENSI S.A., a French developer
of terrestrial 3D laser scanning technology. We expect the MENSI acquisition to
enhance our technology portfolio and expand our product offerings. MENSI's
performance is reported under our Engineering and Construction segment.

The combined purchase price of Applanix and MENSI was approximately $25 million.

TracerNET Corporation

* On March 5, 2004, we acquired privately held TracerNET Corporation of
Virginia, a provider of wireless fleet management solutions. We expect the
TracerNET acquisition to offer more diverse and complete fleet management
solutions. TracerNET's performance will be reported under our Mobile Solutions
segment.

RESULTS OF OPERATIONS

The following table shows revenue and operating income by segment for the
periods indicated and should be read in conjunction with the narrative
descriptions below. Operating income by segment excludes unallocated corporate
expenses which are comprised primarily of general and administrative costs,
amortization of purchased intangibles as well as other items not controlled by
the business segment. Segment operating income for fiscal 2002 and fiscal 2001
have been restated to reflect the allocations of certain corporate expenses so
as to be comparable with the allocation methodology in fiscal 2003.

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

A reconciliation of our consolidated segment operating income (loss) to
consolidated income before income taxes follows:

Basis of Presentation

We have a 52-53 week fiscal year, ending on the Friday nearest to December 31,
which for fiscal 2003 was January 2, 2004. Fiscal 2003 was a 52-week year and
fiscal 2002 a 53-week year. As a result of the extra week in fiscal 2002,
year-over-year results are not exactly comparable. Thus, due to the inherent
nature of adopting a 52-53 week fiscal year, the Company, analysts,
shareholders, investors, and others will have to make appropriate adjustments to
any analysis performed when comparing our activities and results in fiscal years
that contain 53 weeks to those that contain the standard 52 weeks. Fiscal year
2001 comprised 52 weeks.

Impact of Weaker US Dollar on Operating Income in Fiscal 2003

The depreciation of the US dollar versus major European currencies positively
impacted revenues by approximately $15.3 million in fiscal 2003 compared with
fiscal 2002. As a result of our significant manufacturing, distribution,
research and development, and selling expenses incurred outside of the US, the
weaker US dollar negatively impacted our operating income by approximately $5.9
million in fiscal 2003.

Revenue

In fiscal 2003, total revenue increased by $74.3 million or 15.9% to $540.9
million from $466.6 million in fiscal 2002. The increase in fiscal 2003 was
primarily due to stronger performances in all of our operating segments driven
by the new product offerings, increased acceptance of our products in the
markets we serve, expanded distribution and selective acquisitions, as well the
positive impact of the weaker US dollar on revenues generated in foreign
currencies, primarily the Euro. Total revenue in fiscal 2002 decreased by $8.7
million or 1.8% to $466.6 million from $475.3 million in fiscal 2001, primarily
due to the reduction of revenue in Mobile Solutions and Portfolio Technologies
segments.

International Revenues

* Total revenue outside the United States comprised approximately 51% in 2003,
49% in 2002, and 50% in 2001. During the 2003 fiscal year, North and South
America represented 56%, Europe, the Middle East and Africa represented 31%, and
Asia represented 13% of total revenues. In fiscal 2003, the United States
comprised approximately 49% of total revenues. We anticipate that sales to
international customers will continue to account for a significant portion of
our revenue. For this reason, we are subject to the risks inherent in these
foreign sales, including unexpected changes in regulatory requirements, exchange
rates, governmental approval, tariffs, or other barriers. Even though the US
Government announced on March 29, 1996, that it supports and maintains the GPS
system, and on May 1, 2000, stated that it has no intent to restore Selective
Availability, a method of degrading GPS accuracy, there may be reluctance in
certain non-US markets to purchase such products given the control of GPS by the
US Government. Our results of operations could be adversely affected if we were
unable to continue to generate significant sales in locations outside the US.

* No single customer accounted for 10% or more of our total revenues in fiscal
2003, 2002, and 2001. It is possible, however, that in future periods the
failure of one or more large customers to purchase products in quantities
anticipated by us may adversely affect the results of operations.

Gross Margin

Our gross margin varies due to a number of factors including product mix,
international sales mix, customer type, the effects of production volumes and
fixed manufacturing costs on unit product costs, new product start-up costs, and
foreign currency translations. Gross margin as a percentage of total revenues
was 49.6 % in fiscal 2003 and 50.2% in fiscal 2002. The slight decrease in gross
margin percentage for fiscal 2003, compared with fiscal 2002, was due primarily
to the introduction of the Nikon products in the third quarter which generated a
lower consolidated gross margin of approximately 0.8%. This was partially offset
by stronger sales of TDS, GIS, wireless infrastructure, survey products as well
as our ongoing focus on product cost reductions. Shipping and handling costs are
included in cost of goods sold.

Gross margin as a percentage of total revenues was 50.2% in fiscal 2002 and
49.9% in fiscal 2001. The slight increase in gross margin percentage for fiscal
2002, compared with fiscal 2001, was due in part to approximately $3.3 million
of additional charges associated with the write down of obsolete inventory in
fiscal 2001 related to the rationalization and simplification of product lines
and inventories in excess of our forecasted 12-month demand.

* Because of potential product mix changes within and among the industry
markets, market pressures on unit selling prices, fluctuations in unit
manufacturing costs, including increases in component prices and other factors,
current level gross margins cannot be assured. In addition, should the global
economic conditions deteriorate, gross margin could be further adversely
impacted.

Engineering and Construction

Engineering and Construction revenues increased by $47.4 million or 14.8% while
segment operating income increased by $7.2 million or 13.5% for fiscal 2003 as
compared to fiscal 2002. Approximately half of the revenue increase was driven
by new product introductions and our increased marketing efforts. The remaining
increase was split evenly between geographic expansion, especially in Asia and
Russia, and the impact of the weaker US dollar. Segment operating income
increased due to higher revenues that were partially offset by increased
operating expenses outside the United States (largely driven by the weaker US
dollar), increased research and development spending on certain programs as we
continue to invest in developing next generation technology and lower margins
earned on the sale of Nikon products. Overall, segment operating income remained
consistent at 17% of revenues.

Engineering and Construction revenues increased by $1.8 million or 0.6% during
fiscal 2002 as compared to fiscal 2001 primarily due to the LeveLite acquisition
which added $3.6 million of revenues, and strong performance by our machine
control product offering as we continue to penetrate the after-market for
machine guidance on earthmoving equipment. Increased revenues were partially
offset by a reduction in revenues in several product areas due to continued
difficult global economic conditions. Segment operating income increased by $3.6
million or 7.2% in fiscal 2002 over fiscal 2001 primarily due to a reduction of
$4.2 million of operating expenses due to the transfer of employee-related
expenses to Caterpillar Trimble Control Technologies. Higher revenues and lower
operating expenses were partially offset by a reduction in gross margin as a
result of product sales mix during fiscal 2002.

Field Solutions

Field Solutions revenues increased by approximately $12.6 million or 18.8% while
segment operating income increased by $4.8 million or 49.9% for fiscal year 2003
as compared to fiscal 2002. Revenues were up year over year due to continued
strong sales of the GeoExplorer(R) CE series handhelds released at the end of
fiscal 2002, and due to the expansion of our automatic guidance products onto
new agricultural vehicles.

Segment operating income increased in 2003 from the fiscal year 2002 primarily
due to higher revenues. This increase was partially offset by fractionally lower
gross margins and more investment in research and development and sales
functions. This enabled the segment operating income to increase from 14% to 18%
of revenues.

Field Solutions experienced a revenue decline in fiscal 2002 of $1.3 million or
1.8% compared with fiscal 2001 primarily due to the decline in the United States
federal, state, and local government spending and a delay in the release of the
new GeoExplorer(R) CE Series due to component supply issues. This decrease was
partially offset by the increased demand for both the manual and auto guidance
product lines. Segment operating income decreased by $1.7 million or 14.7% in
fiscal 2002 over fiscal 2001 primarily due to the decrease in government
spending described above and lower gross margin due to product sales mix, which
was more weighted toward the relatively lower margin agricultural business area.

Mobile Solutions

Mobile Solutions revenues increased by $4.5 million or 53% in fiscal 2003 over
fiscal 2002 due primarily to an increase in our CrossCheck product sales and
higher fleet management services revenues as a result of an expanded customer
base. Segment operating loss decreased by $5.6 million or 46.4% in fiscal 2003
over fiscal 2002 due to increased revenues and lower operating expenses.
Operating expenses decreased by approximately $3.0 million primarily due to a
reduction in outside services and our personnel related to the completion of our
Telvisant system.

Mobile Solutions revenues decreased by $5.3 million or 38.5% in fiscal 2002 over
fiscal 2001 primarily due to the reduction of approximately $3.0 million in our
satellite communications business as a result of our decision to discontinue the
Galaxy(TM) Inmarsat-C product line in early 2001, a slow down in system
integration projects due to reduced spending at municipalities, and reduced
sales of wireless products of $0.9 million due to a transition from a sensor
provider to a fully integrated service provider. Sales of some product lines
were down as a result of the economic slow down and the shift of technology from
analog to digital.

Segment operating loss increased by $2.0 million or 20.5% in fiscal 2002 over
fiscal 2001 primarily due to the lower revenues as described above, and
increased costs incurred in the development and marketing of a service platform
to enable a range of asset management solutions.

Component Technologies

Component Technologies revenues increased by $4.4 million or 7.4%, while segment
operating income increased by $5.9 million or 55.2% for the fiscal year 2003 as
compared to fiscal 2002. The increase in revenues was primarily due to increased
demand from our existing wireless infrastructure customers. Segment operating
income increased from 18% to 26% of revenues. The increase was primarily due to
a reduction in costs of goods sold due to the transfer of the manufacturing of
our products to China, reduced costs of raw materials, increased revenues and
higher margins aided by favorable product mix.

Component Technologies revenues increased by $1.7 million or 2.9% in fiscal 2002
over fiscal 2001 due primarily to a timing products increase of $4.6 million in
fiscal 2002 over fiscal 2001 due to significant demand during the second half of
fiscal 2002 from new and existing wireless infrastructure customers. IVN revenue
decreased $1.0 million in fiscal 2002 over fiscal 2001 as average selling prices
declined by more than 9%, and license revenue decreased $1.7 million in fiscal
2002 over fiscal 2001 due to an expired license contract. Component Technologies
operating income increased by $0.3 million or 3% in fiscal 2002 over fiscal 2001
as a result of higher gross margins resulting from higher revenues and favorable
product mix, partially offset by higher operating expenses, primarily in
research and development and marketing.

Portfolio Technologies

Portfolio Technologies revenues increased by $5.3 million or 46.2% for the
fiscal year 2003 as compared to fiscal 2002. The increase in revenues was mostly
driven by the inclusion of revenue from Applanix acquired in 2003, while offset
by lower revenue of military-related products. Segment operating income
decreased by $2.2 million or 402.7% for fiscal 2003 as compared to fiscal 2002
due to weaker operating results from military products.

Portfolio Technologies revenues decreased by $5.6 million or 32.6% in fiscal
2002 over fiscal 2001 primarily due to lost revenues of $4.4 million as a result
of the sale of our air transport product line to Honeywell in fiscal 2001.
Portfolio Technologies operating income decreased by $0.2 million or 24.5% in
fiscal 2002 over fiscal 2001 due to the lower revenues which was offset by cost
reduction initiatives.

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:

Research and Development

Research and development expenses increased by $6.4 million to $67.6 million in
fiscal 2003 over fiscal 2002 due to continued investment in next generation
technology primarily in the Engineering and Construction segment, the weakness
of the US dollar versus major European and New Zealand currencies, and also the
inclusion of the research and development expenses from Applanix after the
acquisition in July 2003. Overall spending remained relatively constant at
approximately 13% of revenues. All of our research and development costs have
been expensed as incurred.

Research and development spending decreased by $1.6 million during fiscal 2002
as compared to fiscal 2001 and represented 13% of revenue, consistent with 13%
in fiscal 2001, primarily due to the transfer of employee-related expenses to
our Caterpillar joint venture of approximately $2.8 million, partially offset by
an increase in engineering expenses associated with the introduction of new
products.

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

Sales and Marketing

Sales and marketing expenses increased by $8.5 million to $97.9 million in
fiscal 2003 over fiscal 2002 primarily due to higher revenue, increased sales
efforts mostly in emerging geographic areas such as China and Russia, the impact
of the weaker US dollar in Europe, and the inclusion of Applanix sales and
marketing expenses not applicable in the prior fiscal year. As a percentage of
revenue, sales and marketing expenses decreased from 19% to 18%.

Sales and marketing expenses decreased by $14.4 million in fiscal 2002 and
represented 19% of revenue, compared with 22% in fiscal 2001. During fiscal
2001, we sold off many of our direct sales offices which decreased sales and
marketing expenses by approximately $7.0 million for fiscal 2002, and we
decreased overall compensation, travel, advertising, promotional, and trade show
expenses by approximately $7.4 million for fiscal 2002 compared to the
corresponding period in fiscal 2001.

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

General and Administrative

General and administrative expenses in fiscal 2003 decreased by $1.4 million to
$39.3 million and represented 7.3% of revenues compared with 8.7% in fiscal
2002. In fiscal 2002, we experienced higher bad debt expenses, primarily due to

the bankruptcy of a large Japanese distributor. In addition, in fiscal 2003 we
incurred $3.0 million less in information systems expenses. These reductions
were offset in fiscal 2003 by lower sublease income received, expenses from
Applanix after the acquisition in July 2003, and higher compensation costs.

General and administrative expenses increased by $3.2 million in fiscal 2002
representing 9% of revenue, compared with 8% in fiscal 2001 primarily due to an
increase in bad debt provisions related to customers in an uncertain economic
environment and bad debt expenses for accounts written off during the year due
to customer defaults.

Restructuring Charges

Restructuring charges of $2.0 million were recorded in fiscal 2003, $1.1 million
in fiscal 2002, and $3.6 million in fiscal 2001, all of which related to
severance costs, except for $0.3 in 2003 which related to lease costs of our
Japanese office closure due to the Nikon joint venture. As a result of the
restructuring activities, our headcount decreased by 77, 49, and 207 in fiscal
2003, 2002, and 2001, respectively. As of January 2, 2004, the restructuring
accrual balance was approximately $0.4 million which will be paid over the
remaining term of the lease through 2006.

Amortization of Goodwill, Purchased and Other Intangible Assets

January 2, January 3, December 28,
Fiscal Years Ended 2004 2003 2001
- ------------------ ---- ---- ----
(in thousands)
Amortization of goodwill and purchased
intangibles(1) $ 7,312 $ 8,300 $ 29,389
Amortization of other intangible assets 604 868 917
--- --- ---
Total amortization of goodwill, purchased,
and other intangible assets $ 7,916 $ 9,168 $ 30,306
========= ======== ========

(1) Amortization of goodwill in 2001 only.

Amortization expense of purchased and other intangibles decreased in fiscal 2003
by approximately $1.3 million representing 1.5% of revenue, compared with 2% in
fiscal 2002. The decrease was due to certain Spectra intangibles being fully
amortized during fiscal 2003.

Amortization expense of goodwill, purchased, and other intangibles decreased in
fiscal 2002 by approximately $21.1 million representing 2% of revenue, compared
with 6% in fiscal 2001. The decrease was primarily due to the adoption of FAS
142 in fiscal 2002 that does not require the amortization of goodwill and
intangible assets with indefinite lives.

Non-operating Expense, Net

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

January 2, January 3, December 28,
Fiscal Years Ended 2004 2003 2001
- ------------------ ---- ---- ----
(in thousands)

Interest income $ 465 $ 659 $ 1,118
Interest expense (11,938) (14,710) (22,224)
Foreign exchange loss (592) (823) (237)
Expenses for affiliated operations, net (6,403) (3,954) -
Other income (expense) 118 (1,171) (430)
--- ------ ----
Total non-operating expense, net $ (18,350) $(19,999) $ (21,773)
========= ======== =========

Non-operating expense, net decreased by $1.6 million or 8% during fiscal 2003 as
compared with fiscal 2002 primarily due to a reduction in interest expense of
$2.8 million offset by an increase in expenses for affiliated operations. The

increase in expenses for affiliated operations is primarily due to the full year
impact of transfer pricing effects on transactions between us and our
Caterpillar joint venture, which commenced operations in April 2002. (See Note 3
of the Notes to the Consolidated Financial Statements for financial information
regarding joint ventures). In addition, we recorded approximately $0.3 million
relating to our share of the losses in our Nikon joint venture established in
2003.

In fiscal 2003, interest expense decreased by approximately $2.8 million due to
continued debt repayment during the year of approximately $51.8 million,
combined with the effect of lower interest rates. Offsetting the lower debt
interest, during the year, we recorded approximately $3.6 million of interest
expense due to the write off of $2.3 million of unamortized debt issuance costs
as a result of our debt refinancing in June 2003, as well as $1.3 million
related to the unamortized portion of warrants associated with the principal
balance of our Subordinated Note. (See Note 9 of the Notes to the Consolidated
Financial Statements for financial information regarding our Subordinated Note.)

Non-operating expense, net decreased by $1.8 million during fiscal 2002 as
compared with fiscal 2001, as a result of a decrease in net interest expense of
$7.1 million due to significant repayment of debt balances during the year of
approximately $52 million, combined with the effect of lower interest rates.
This was partially offset by expenses recorded for affiliated operations of $4.0
million as a result of transfer pricing effects on transactions between us and
our Caterpillar joint venture, an increase in foreign exchange loss of $0.6
million, and a write-down of minority investment of $1.5 million.

Income Tax Provision

Our effective income tax rates from continuing operations for fiscal years 2003,
2002, and 2001 were (8%), 25% and (9%), respectively. The fiscal 2002 and 2001
income tax rates differ from the US federal statutory rate of 35% due primarily
to non-US taxes and the inability to realize the benefit of net operating
losses. The 2003 income tax rate is less than the US federal statutory rate,
primarily due to the realization of benefits from net operating losses and other
previously reserved deferred tax assets.

Litigation Matters

* From time to time, we are involved in litigation arising out of the ordinary
course of our business. There are no known claims or pending litigation that are
expected to have a material effect on our overall financial position, results of
operations, or liquidity.

Off-balance Sheet Financings and Liabilities

Other than lease commitments incurred in the normal course of business, we do
not have any off-balance sheet financing arrangements or liabilities, guarantee
contracts, retained or contingent interests in transferred assets, or any
obligation arising out of a material variable interest in an unconsolidated
entity. We do not have any majority-owned subsidiaries that are not included in
the consolidated financial statements. Additionally, we do not have any interest
in, or relationship with, any special purpose entities.

LIQUIDITY AND CAPITAL RESOURCES

Cash and Cash Equivalents

In fiscal 2003, our cash and cash equivalents increased by $16.7 million from
fiscal 2002. The increase was primarily due to cash generated by operating
activities, partially offset by cash used in investing activities.

In fiscal 2003, cash provided by operating activities was $36.5 million, as
compared to $32.3 million in fiscal 2002. The increase of $4.1 million was
primarily driven by the $28.2 million increase in net income during fiscal 2003
compared to fiscal 2002 offset by an increase in accounts receivable and
inventory and a decrease in accounts payable. Also, fiscal 2002 was positively
impacted by a special one-time distribution of $11.0 million to us from our
Caterpillar joint venture. Our ability to continue to generate cash from
operations will depend in large part on profitability, the rate of collections
of accounts receivable, our inventory turns, and our ability to manage other
areas of working capital. Our accounts receivable days for sales outstanding
increased from 58 days at the end of fiscal 2002 to 60 days at the end of fiscal
2003. Our inventory turns decreased from five at the end of fiscal 2002 to four
at the end of fiscal 2003.

Cash used in investing activities were $22.7 million in fiscal 2003 as compared
to $5.8 million in fiscal 2002. The increase was primarily due to approximately
$4.8 million invested in our Nikon joint venture upon its formation, $2.2
million and $4.3 million cash outlays related to our acquisitions of Applanix
and MENSI, respectively, certain earn-out payments made as a result of our
previous LeveLite acquisition, and increased expenditure on capital equipment.
During fiscal 2003, we spent approximately $10.9 million on capital
expenditures.

Cash provided by financing activities, net, was neutral in fiscal 2003, as
compared to $31.7 million cash used in fiscal 2002. However during fiscal 2003,
we repaid approximately $69 million of debt-related to our previous Subordinated
Note and Credit Facility. These debt payments were funded primarily by proceeds
from the issuance of common stock to employees pursuant to our stock option plan
and employee stock purchase plan of approximately $13.9 million, as well as
issuance of common stock under a private equity placement of $38.3 million. On
April 14, 2003, we sold 3,148,000 shares of our common stock, no par value per
share, to an investor at a price of $12.17 per share in an offering pursuant to
our shelf registration statement. The offering resulted in net proceeds to us of
approximately $36.6 million, approximately $31 million of which was used to pay
down the principal balance on the Subordinated Note and $5.6 million was used to
pay down the accrued interest on that Note.

* We believe that our cash and cash equivalents, together with our credit
facilities, will be sufficient to meet our anticipated operating cash needs for
at least the next twelve months. At January 2, 2004, we had $45.4 million of
cash and cash equivalents as well as access to $81 million of cash under the
terms of our revolver loans.

* We expect fiscal 2004 capital expenditures to be approximately $12 million to
$14 million, primarily for computer equipment, software, manufacturing tools and
test equipment, and leasehold improvements associated with business expansion.
Decisions related to how much cash is used for investing are influenced by the
expected amount of cash to be provided by operations.

Debt

At the end of fiscal 2003, our total debt was approximately $90.5 million as
compared with approximately $138.5 million at the end of fiscal 2002. This
balance primarily consists of $43.8 million outstanding under a term loan and
$44.0 million outstanding under a senior secured revolving credit facility. On
June 25, 2003, we obtained a new Credit Facility (comprising of a term loan and
revolver) in the amount of $109 million that enabled us to pay off our
indebtedness under our previous credit facility and the Subordinated Note.

The new Credit Facility is secured by all material assets of our Company, except
for a portion of assets that are not pledged due to foreign tax considerations.
Financial covenants of the Credit Facility include leverage, fixed charge, and
minimum net worth tests. At January 2, 2004 and as of the date of this report,
we are in compliance with all debt covenants. The amortized principal, interest,
and commitment fees due under the Credit Facility are paid quarterly. Under the

four-year term loan portion of the Credit Facility, we are due to make payments
(excluding interest) of approximately $12.5 million in each of the next three
fiscal years (2004, 2005, and 2006), and $6.3 million in fiscal 2007.

Under the terms of the Credit Facility, we are allowed to pay dividends and
repurchase shares of our common stock up to 25% of net income in the previous
fiscal year. For additional discussion of our debt, see Note 9 of Notes to the
Consolidated Financial Statements.

CONTRACTUAL OBLIGATIONS

The following table summarizes our future payment obligations:

* As of January 2, 2004, $65.9 million of our total debt was subject to variable
quarterly interest rates. Per our loan agreement, we pay a three-month LIBOR
rate plus a certain spread that depends on our leverage ratio. Our spread is
expected to be 1.5% over the remaining life of our obligation of the debt. We
have assumed a three-month LIBOR rate of 1.20% for each quarter in fiscal 2004
and have forecasted an increase of 25 basis points quarter over quarter to a
maximum of 3.25%. (See Note 9 of the Notes to the Consolidated Financial
Statements for further financial information regarding long-term debt)

Purchase obligations represent open purchase orders for material purchases with
our customers. Our pension obligation which is not included in the table above,
and is included in "Other non-current liabilities" on our Consolidated Balance
Sheets, is disclosed at Note 14 of the Notes to the Consolidated Financial
Statements.

New Accounting Standards

In November of 2002, the Emerging Issues Task Force (EITF) reached a consensus
on Issue No. 00-21, "Revenue Arrangements with Multiple Deliverables." EITF
Issue No. 00-21 provides guidance on how to account for arrangements that
involve the delivery or performance of multiple products, services, and/or
rights to use assets. The provisions of EITF Issue No. 00-21 apply to revenue
arrangements entered into in fiscal periods beginning after June 15, 2003.
Adoption of EITF Issue No. 00-21 did not have a material effect on our results.

Financial Accounting Standards Board (FASB) Interpretation No. 46 (FIN 46),
"Consolidation of Variable Interest Entities," was issued in January 2003, and a
revised interpretation of FIN 46 (FIN 46-R) was issued in December 2003. FIN 46
requires certain variable interest entities to be consolidated by the primary
beneficiary of the entity if the equity investors in the entity do not have the
characteristics of a controlling financial interest or do not have sufficient
equity at risk for the entity to finance its activities without additional
subordinated financial support from other parties. The provisions of FIN 46 are
effective immediately for all arrangements entered into after January 31, 2003.
Since January 31, 2003, we have not obtained any variable interests in any
entities we believe are variable interest entities. For arrangements entered
into prior to February 1, 2003, we are required to adopt the provisions of FIN
46-R in the first quarter of fiscal 2004. We are in the process of determining
the effect, if any, the adoption of FIN 46-R will have on our financial
statements.

In April 2003, the FASB issued Statement of Financial Accounting Standard (SFAS)
No. 149, "Amendment of Statement 133 on Derivative Instruments and Hedging
Activities." SFAS No. 149 amends and clarifies financial accounting and
reporting for derivative instruments, including certain derivative instruments

embedded in other contracts (collectively referred to as derivatives) and for
hedging activities under SFAS No. 133, "Accounting for Derivative Instruments
and Hedging Activities." SFAS No. 149 is effective for contracts entered into or
modified after June 30, 2003, and for hedging relationships designated after
June 30, 2003. The adoption of this Statement did not have an effect on our
financial statements.

In May 2003, the FASB issued SFAS No. 150, "Accounting for Certain Financial
Instruments with Characteristics of Both Liabilities and Equity." SFAS No. 150
establishes standards for how an issuer classifies and measures certain
financial instruments with characteristics of both liabilities and equity. Many
of these instruments were previously classified as equity. SFAS No. 150 is
effective for financial instruments entered into or modified after May 31, 2003
and otherwise was effective at the beginning of the first interim period
beginning after June 15, 2003. The adoption of this Statement did not have an
effect on our financial statements.

RISKS AND UNCERTAINTIES

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

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

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

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

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

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

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

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

Solectron is assembling all of our Component Technologies products in China.
Although this initiative in China has brought cost savings over assembling in
California, we may experience quality control issues, shipping delays, or other
problems associated with manufacturing in China.

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

Our Annual and Quarterly Performance May Fluctuate.

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

o changes in market demand,
o competitive market conditions,
o market acceptance of existing or new products,
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, sales of Nikon products generally have lower
gross margins as compared to our GPS survey products. Absent other factors, a
shift in sales towards Nikon would lead to a reduction in our overall gross
margins A decline in gross margin could negatively impact our earnings per
share.

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

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

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 Financial Covenants.

On June 25, 2003, we executed a Credit Agreement with Scotia Capital and certain
other banks which provides for financial commitments totaling up to $175
million. This credit facility contains financial covenants regarding minimum
fixed charge coverage and maximum leverage ratio which are extremely sensitive
to changes in earnings before interest, taxes, depreciation and amortization, or
EBITDA. In turn, EBITDA is highly correlated to revenues and costs. If we
default on one or more covenants, we will have to obtain either negotiated
waivers or amendments to the Credit Agreement. If we were unable to obtain such
waivers or amendments, the banks would have the right to accelerate the payment
of our outstanding obligations under the Credit Agreement which would have a
material adverse effect on our financial condition and viability as an operating
company. In addition, a default under one of our debt instruments may also
trigger cross defaults under our other debt instruments. An event of default
under any debt instrument, if not cured or waived, could have a material adverse
effect on us.

We Rely on Key Customers.

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

We Are Dependent on New Products.

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

We May Not Be Able to Enter Into or Maintain Important Alliances.

We believe that in certain business opportunities our success will depend on our
ability to form and maintain alliances with industry participants, such as
Caterpillar, Nikon, McNeilus, and CNH Global. Our failure to form and maintain
such alliances, or the pre-emption of such alliances by actions of other
competitors or us, will adversely affect our ability to penetrate emerging

markets. No assurances can be given that we will not experience problems from
current or future alliances or that we will realize value from any such
strategic alliances.

We Are Dependent on the Availability of Allocated Bands Within the Radio
Frequency Spectrum.

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

Any ITU reallocation of radio frequency bands, including frequency band
segmentation or sharing of spectrum, may materially and adversely affect the
utility and reliability of our products, which would, in turn, cause a material
adverse effect on our operating results. Many of our products use other radio
frequency bands, together with the GPS signal, to provide enhanced GPS
capabilities, such as real-time kinematics precision. The continuing
availability of these non-GPS radio frequencies is essential to provide enhanced
GPS products to our precision survey markets. Any regulatory changes in spectrum
allocation or in allowable operating conditions may materially and adversely
affect the utility and reliability of our products, which would, in turn, cause
a material adverse effect on our operating results.

In addition, unwanted emissions from mobile satellite services and other
equipment operating in adjacent frequency bands or in-band from licensed and
unlicensed devices may materially and adversely affect the utility and
reliability of our products, which could result in a material adverse effect on
our operating results. The FCC continually receives proposals for novel
technologies and services, such as ultra-wideband technologies, which may seek
to operate in, or across, the radio frequency bands currently used by the GPS
SPS and other public safety services. Adverse decisions by the FCC that result
in harmful interference to the delivery of the GPS SPS and other radio frequency
spectrum also used in our products may materially and adversely affect the
utility and reliability of our products, which could result in a material
adverse effect on our business and financial condition.

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

We have certain products, such as GPS RTK systems, surveying and mapping
systems, and Robotic Total Stations, that use integrated radio communication
technology requiring access to available radio frequencies allocated by the FCC
(or the NTIA in the case of federal government users of this equipment) for
which the end user is required to obtain a license in order to operate their
equipment. In addition, access to these frequencies by state agencies is under
management by state radio communications coordinators. Some bands are
experiencing congestion that excludes their availability for access by state
agencies in some states, including the State of California. To reduce
congestion, the FCC announced that it will require migration of radio technology
from wideband to narrowband operations in these bands. In December 2003, the FCC
stayed the effectiveness of its new rules until it acts on petitions requesting
a reconsideration of this new requirement. The stay is indefinite at this point
and the outcome of this proceeding is unknown at this time. An inability to
obtain access to these radio frequencies by end users, and for new products to
comply with FCC requirements, could have an adverse effect on our operating
results.

Many of Our Products Rely on the GPS Satellite System.

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

In addition, there can be no assurance that the US Government will remain
committed to the operation and maintenance of GPS satellites over a long period,
or that the policies of the US Government for the use of GPS without charge will

remain unchanged. However, a 1996 Presidential Decision Directive marks the
first time in the evolution of GPS that access for civilian use free of direct
user fees is specifically recognized and supported by Presidential policy. In
addition, Presidential policy has been complemented by corresponding
legislation, signed into law. Because of ever-increasing commercial applications
of GPS, other US Government agencies may become involved in the administration
or the regulation of the use of GPS signals. Any of the foregoing factors could
affect the willingness of buyers of our products to select GPS-based systems
instead of products based on competing technologies.

Many of our products also use signals from systems that augment GPS, such as the
Wide Area Augmentation System (WAAS) and national Differential GPS System
(NDGPS). Many of these augmentation systems are operated by the federal
government and rely on continued funding and maintenance of these systems. Any
curtailment of the operating capability of these systems could result in
decreased user capability thereby impacting our markets.

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

We Face Risks in Investing in and Integrating New Acquisitions.

Acquisitions of companies, divisions of companies, or products entail numerous
risks, including:

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 US and non-US competitors and new
market entrants, some of which may be our current customers. The competition in
the future, may, in some cases, result in price reductions, reduced margins or
loss of market share, any of which could materially and adversely affect our

business, operating results and financial condition. We believe that our ability
to compete successfully in the future against existing and additional
competitors will depend largely on our ability to execute our strategy to
provide systems and products with significantly differentiated features compared
to currently available products. We may not be able to implement this strategy
successfully, and our products may not be competitive with other technologies or
products that may be developed by our competitors, many of whom have
significantly greater financial, technical, manufacturing, marketing, sales and
other resources than we do.

We Are Dependent on Proprietary Technology.

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

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

The value of our products relies substantially on our technical innovation in
fields in which there are many current patent filings. We recognize that as new
patents are issued or are brought to our attention by the holders of such
patents, it may be necessary for us to withdraw products from the market, take a
license from such patent holders, or redesign our products. We do not believe
any of our products currently infringe patents or other proprietary rights of
third parties, but we cannot be certain they do not do so. In addition, the
legal costs and engineering time required to safeguard intellectual property or
to defend against litigation could become a significant expense of operations.
Such events could have a material adverse effect on our revenues or
profitability.

We Must Carefully Manage Our Future Growth.

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

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

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

We May Encounter Problems Associated With International Operations and Sales.

Our customers are located throughout the world. Sales to unaffiliated customers
in non-US locations represented approximately 51% of our revenues in our fiscal
year 2003, 49% in our fiscal year 2002 and 50% in our fiscal year 2001. In
addition, we have significant international operations, including manufacturing
facilities, sales personnel and customer support operations. We have sales
offices outside the US. Our non-US manufacturing facilities are in Sweden and
Germany, and we have a regional fulfillment center in the Netherlands. Our
non-US presence exposes us to risks not faced by wholly US companies.

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

o unexpected changes in regulatory requirements;
o tariffs and other trade barriers;
o political, legal and economic instability in non-US markets,
particularly in those markets in which we maintain manufacturing and
research facilities;
o difficulties in staffing and management;
o language and cultural barriers;
o 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 non-US markets, there may be reluctance to purchase products based on
GPS technology, given the control of GPS by the US Government.

We Are Exposed to Fluctuations in Currency Exchange Rates.

A significant portion of our business is conducted outside the United States,
and as such, we face exposure to adverse movements in non-US currency exchange
rates. These exposures may change over time as business practices evolve and
could have a material adverse impact on our financial results and cash flows. In
fiscal 2003, the US dollar weakened against several major currencies in which we
do business, adversely impacting our financial results.

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

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

We market certain products that are subject to governmental and similar
certifications before they can be sold. For example, CE certification for
radiated emissions is required for most GPS receiver and data communications
products sold in the European Union. An inability to obtain such certifications
in a timely manner could have an adverse effect on our operating results. Also,
our products that use integrated radio communication technology require an end
user to obtain licensing from the Federal Communications Commission (FCC) for
frequency-band usage. These are secondary licenses that are subject to certain
restrictions. During the fourth quarter of 1998, the FCC temporarily suspended
the issuance of licenses for certain of our real-time kinematics products
because of interference with certain other users of similar radio frequencies.
An inability or delay in obtaining such certifications or changes to the rules
by the FCC could adversely affect our ability to bring our products to market
which could harm our customer relationships and have a material adverse effect
on our business.

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

The market price of our common stock has been, and may continue to be, highly
volatile. During fiscal 2003, our stock price ranged from $8.68 to $25.60. We
believe that a variety of factors could cause the price of our common stock to
fluctuate, perhaps substantially, including:

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 7A. Quantitative and Qualitative Disclosure about Market Risk

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

Market Interest Rate Risk

We are exposed to market risk due to the possibility of changing interest rates
under our secured Credit Facility. Our Credit Facility is comprised of a
three-year, US dollar-only revolver that expires on June 25, 2006, and a
four-year term loan that expires on June 25, 2007. Borrowings under the Credit
Facility have interest payments based on a floating rate of LIBOR plus a number
of basis points tied to a formula based on our Leverage Ratio. The revolver
matures on June 25, 2006 and has an outstanding principal balance of $44
million, while the term loan matures on June 25, 2007 and has an outstanding
principal balance of $43.8 million, as of January 2, 2004 (all in US currency
only). The three-month LIBOR effective rate at January 2, 2004 was 1.155%. A
hypothetical 10% increase in three-month LIBOR rates could result in
approximately $101,790 annual increase in interest expense on the existing

principal balances. We have hedged the market risk with an interest rate swap on
50% of our term loan. The rate on that interest rate swap is 2.517%.

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

Foreign Currency Exchange Rate Risk

We enter into foreign exchange forward contracts to minimize the short-term
impact of foreign currency fluctuations on certain trade and inter-company
receivables and payables, primarily denominated in Australian, Canadian, New
Zealand, and Swedish currencies, the Euro, and the British pound. These
contracts reduce the exposure to fluctuations in exchange rate movements as the
gains and losses associated with foreign currency balances are generally offset
with the gains and losses on the forward contracts. These instruments are marked
to market through earnings every period and generally range from one to three
months in original maturity. We do not enter into foreign exchange forward
contract for trading purposes.

Foreign exchange forward contracts outstanding as of January 2, 2004 and January
3, 2003 are summarized as follows (in thousands):

January 2, 2004 January 3, 2003
--------------- ---------------
Nominal Amount Fair Value Nominal Amount Fair Value
-------------- ---------- -------------- ----------
Forward contracts:
Purchased $ 15,767 $ (1,666) $ 24,414 $ (658)
Sold $ 44,236 2,994 24,539 955

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

From time to time, we may also utilize forward foreign exchange contracts
designated as cash flow hedges of operational exposures represented by firm
backlog orders to specific accounts over a specific period of time. We record
changes in the fair value of cash flow hedges in accumulated, other
comprehensive income (loss), until the firm backlog transaction ships. Upon
recognition of revenue, we reclassify the gain or loss on the cash flow hedge to
the statement of operations. The critical terms of the cash flow hedging
instruments are the same as the underlying forecasted transactions. The changes
in fair value of the derivatives are intended to offset changes in the expected
cash flow from the forecasted transactions. All forward contracts have
maturities of less than 12 months. For the fiscal year ended January 3, 2003, we
recorded a gain of $57,000 reflecting the net change and ending balance in
relation to a firm backlog hedge. We did not hedge against backlog orders during
fiscal 2003.

TRIMBLE NAVIGATION LIMITED
INDEX TO FINANCIAL STATEMENTS

Consolidated Balance Sheets at January 2, 2004 and January 3, 2003...........45

Consolidated Statements of Operations for each of the three fiscal years
in the period ended January 2, 2004.......................................46

Consolidated Statement of Shareholders' Equity for each of the three
fiscal years in the period ended January 2, 2004..........................47

Consolidated Statements of Cash Flows for each of the three fiscal years
in the period ended January 2, 2004.......................................48

Notes to Consolidated Financial Statements...................................49

Report of Ernst & Young LLP, Independent Auditors............................74

Item 8. Financial Statements and Supplementary Data

CONSOLIDATED BALANCE SHEETS

See accompanying Notes to the Consolidated Financial Statements.

CONSOLIDATED STATEMENTS OF OPERATIONS

(1) Includes sales to related parties of $4.0 million for fiscal 2003. None in
fiscal 2001 and 2002.

See accompanying Notes to the Consolidated Financial Statements.

CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY

See accompanying Notes to the Consolidated Financial Statements.

CONSOLIDATED STATEMENTS OF CASH FLOWS

See accompanying Notes to the Consolidated Financial Statements.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 1 - Summary of Significant Accounting Policies:

Use of Estimates

The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the amounts reported in the financial statements and accompanying notes.
Due to the inherent nature of those estimates, actual results could differ from
expectations.

Basis of Presentation

Trimble has a 52-53 week fiscal year, ending on the Friday nearest to December
31, which for fiscal 2003 was January 2, 2004. Fiscal 2002 was a 53-week year.
The financial results of fiscal year 2002 have an extra week, and therefore will
not be exactly comparable to the prior and subsequent 52-week fiscal years.
Fiscal year 2001 comprised 52 weeks.

The consolidated financial statements include the results of Trimble and its
subsidiaries. Inter-company accounts and transactions have been eliminated.
Certain amounts from prior years have been reclassified to conform to the
current year presentation.

Foreign Currency

Assets and liabilities of the Company's non-US subsidiaries are translated into
US dollars at year-end exchange rates, and revenues and expenses are translated
at average rates prevailing during the year. Local currencies are considered to
be the functional currencies for the Company's non-US subsidiaries. Translation
adjustments are included in shareholders' equity in the consolidated balance
sheet caption "Accumulated other comprehensive income (loss)." Foreign currency
transaction gains and losses are included in results of operations as incurred
and have not been significant to the Company's operating results in any fiscal
year presented. The effect of foreign currency rate changes on cash and cash
equivalents is not material. Cumulative translation adjustment increased by
approximately $31.2 million due to weakening US dollar against other currencies
affecting the translation of our assets dominated in non-US currencies.

Cash and Cash Equivalents

Cash and cash equivalents include all cash and highly liquid investments with
insignificant interest rate risk and maturities of three months or less at the
date of purchase. The carrying amount of cash and cash equivalents approximates
fair value because of the short maturity of those instruments.

Concentration of Risk

In entering into forward foreign exchange contracts, Trimble has assumed the
risk that might arise from the possible inability of counter-parties to meet the
terms of their contracts. The counter-parties to these contracts are major
multinational investment and commercial banks, and the Company does not expect
any losses as a result of counter-party defaults (see Note 6 of the Notes to the
Consolidated Financial Statements). The Company is also exposed to credit risk
in the Company's trade receivables, which are derived from sales to end user
customers in diversified industries as well as various resellers. Trimble
performs ongoing credit evaluations of its customers' financial condition and
limits the amount of credit extended when deemed necessary but generally does
not require collateral.

With the selection of Solectron Corporation in August 1999 as an exclusive
manufacturing partner for many of its GPS products, Trimble became substantially
dependent upon a sole supplier for the manufacture of many of its products. In
addition, the Company relies on sole suppliers for a number of its critical
components.

Many of Trimble's products use GPS as the positioning technology. GPS is a
system of 24 orbiting satellites established and funded by the US Government,
which has been fully operational since March 1995. A significant reduction in
the number of operating satellites would impair the current utility of the GPS
system and the growth of current and additional market opportunities. In
addition, the US Government may not remain committed to the operation and
maintenance of GPS satellites over a long period, and the policy of the US
Government for the use of GPS without charge may change.

Allowance for Doubtful Accounts

Trimble maintains allowances for doubtful accounts for estimated losses
resulting from the inability of its customers to make required payments.

Trimble evaluates the collectibility of its trade accounts receivable based on a
number of factors. In circumstances where the Company is aware of a specific
customer's inability to meet its financial obligations to the Company, a
specific allowance for bad debts is estimated and recorded which reduces the
recognized receivable to the estimated amount Trimble believes will ultimately
be collected. In addition to specific customer identification of potential bad
debts, bad debt charges are recorded based on the Company's recent past loss
history and an overall assessment of past due trade accounts receivable amounts
outstanding. The amount was not significant in fiscal 2003 and the expenses
recorded for doubtful accounts were $5.4 million in fiscal 2002 and $5.1 million
in fiscal 2001.

Inventories

Inventories are stated at the lower of standard cost or market (net realizable
value). Standard costs approximate average actual costs. The Company uses a
standard cost accounting system to value inventory and these standards are
reviewed at a minimum of once a year and multiple times a year in the most
active manufacturing plants. The Company provides for the inventory value for
estimated excess and obsolete inventory, based on management's assessment of
future demand and market conditions. If actual future demand or market
conditions are less favorable than those projected by management, additional
inventory write-downs may be required.

Intangible and Non-Current Assets

Intangible assets include goodwill, assembled workforce, distribution channels,
patents, licenses, technology, and trademarks which are capitalized at cost.
Intangible assets with definite lives are amortized on the straight-line basis.
Useful lives generally range from five to seven years, with weighted average
useful life of 5.7 years. Prior to December 29, 2001, goodwill was amortized
over 20 years, except for goodwill from the Grid Data purchase, which was
amortized over five years.

If facts and circumstances indicate that the goodwill, other intangible assets,
or property and equipment may be impaired, an evaluation of continuing value
would be performed. If an evaluation is required, the estimated future
undiscounted cash flows associated with these assets would be compared to their
carrying amount to determine if a write-down to fair market value or discounted
cash flow value is required. Trimble performed an impairment test of goodwill
upon transition to FAS No. 142 on December 29, 2001, and an annual impairment
test at the end of the third fiscal quarter of 2002 and 2003, respectively, and
found no impairment. Trimble will continue to evaluate its goodwill for
impairment on an annual basis at the end of each fiscal third quarter and
whenever events and changes in circumstances suggest that the carrying amount
may not be recoverable.

Trimble adopted SFAS No. 142 on December 29, 2001. As a result, goodwill is no
longer amortized and intangible assets with indefinite lives were reclassified
to goodwill.

Revenue Recognition

Trimble's revenues are recorded in accordance with the Securities and Exchange
Commission's (SEC) Staff Accounting Bulletin (SAB) No. 104, "Revenue
Recognition." The Company recognizes product revenue when persuasive evidence of
an arrangement exists, delivery has occurred, the fee is fixed or determinable,
and collectibility is reasonably assured. In instances where final acceptance of
the product is specified by the customer or is uncertain, revenue is deferred
until all acceptance criteria have been met.

Revenues from purchased extended warranty and support agreements are deferred
and recognized ratably over the term of the warranty/support period.
Substantially all technology licenses and research revenue have consisted of
initial license fees and royalties, which were recognized when earned, provided
we had no remaining obligations.

Contracts and customer purchase orders are generally used to determine the
existence of an arrangement. Shipping documents and customer acceptance, when
applicable, are used to verify delivery. The Company assesses whether the fee is
fixed or determinable based on the payment terms associated with the transaction
and whether the sales price is subject to refund or adjustment. The Company
assesses collectibility based primarily on the creditworthiness of the customer
as determined by credit checks and analysis, as well as the customer's payment
history.

Trimble's shipment terms for US orders, and international orders fulfilled from
its European distribution center are typically FCA (Free Carrier) shipping
point, except certain sales to US government agencies which are shipped FOB
destination. FCA shipping point means that Trimble fulfills the obligation to
deliver when the goods are handed over, cleared for export, and into the charge
of the carrier named by the buyer at the named place or point. If no precise
point is indicated by the buyer, Trimble may choose within the place or range
stipulated where the carrier will take the goods into carrier's charge. Shipping
and handling costs are included in the cost of goods sold.

Other international orders are shipped FOB destination, which means these
international orders are not recognized as revenue until the product is
delivered and title has transferred to the buyer or FCA shipping point. FOB
destination means that Trimble bears all costs and risks of loss or damage to
the goods up to that point.

Revenue to distributors and resellers is recognized upon delivery, assuming all
other criteria for revenue recognition have been met. Distributors and resellers
do not have a right of return.

When a sale involves multiple elements the entire fee from the arrangement is
allocated to each respective element based on its relative fair value and
recognized when revenue recognition criteria for each element are met. The
amount of product revenue allocated to an individual element is limited to the
lesser of its relative fair value or the amount not contingent on the Company's
delivery of other elements under the arrangement, regardless of the probability
of the Company's performance.

Trimble's software arrangements generally consist of a license fee and post
contract customer support (PCS). Trimble has established vendor-specific
objective evidence (VSOE) of fair value for its PCS contracts based on the
renewal rate. The remaining value of the software arrangement is allocated to
the license fee using the residual method, which revenue is primarily recognized
when the software has been delivered and there are no remaining obligations.
Revenue from PCS is recognized ratably over the term of the PCS agreement.

Support and Warranty

The warranty periods for the Company's products are generally between one and
three years from date of shipment. Selected military programs may require
extended warranty periods up to 5.5 years, certain TDS products have a five year
or 90-day warranty period, and certain Nikon products have a five year warranty
period. Trimble supports its GPS products through a circuit board replacement
program from locations in the United Kingdom, Germany, Japan, and the United
States. The repair and calibration of Trimble's non-GPS products are available
from company- owned or authorized facilities. The Company reimburses dealers and
distributors for all authorized warranty repairs they perform.

While the Company engages in extensive product quality programs and processes,
including actively monitoring and evaluating the quality of component suppliers,
its warranty obligation is affected by product failure rates, material usage,
and service delivery costs incurred in correcting a product failure. Should
actual product failure rates, material usage, or service delivery costs differ
from the estimates, revisions to the estimated warranty accrual and related
costs may be required.

Changes in the Company's product warranty liability during the 12 months, ended
January 2, 2004 and January 3, 2003, are as follows:

January 2, January 3,
Fiscal Years Ended 2004 2003
- ------------------ ---- ----
(In thousands)

Beginning balance $ 6,394 $ 6,827
Warranties accrued 4,417 2,821
Warranty claims (5,664) (3,254)
------ ------
Ending Balance $ 5,147 $ 6,394
========== ==========

Guarantees, Including Indirect Guarantees of Indebtedness of Others

In addition to product warranties, the Company, from time to time, in the normal
course of business, indemnifies other parties with whom it enters into
contractual relationships, including customers, lessors, and parties to other
transactions with the Company, with respect to certain matters. The Company has
agreed to hold the other party harmless against specified losses, such as those
arising from a breach of representations or covenants, third party claims that
the Trimble's products when used for their intended purpose(s) infringe the
intellectual property rights of such third party or other claims made against
certain parties. It is not possible to determine the maximum potential amount of
liability under these indemnification obligations due to the limited history of
prior indemnification claims and the unique facts and circumstances that are
likely to be involved in each particular claim. Historically, payments made by
the Company under these obligations were not material and no liabilities have
been recorded for these obligations on the balance sheets as of January 2, 2004
and January 3, 2003.

Advertising Costs

Trimble expenses advertising costs as incurred. Advertising expenses were
approximately $9.2 million, $6.3 million, and $6.8 million in fiscal 2003, 2002,
and 2001, respectively.

Research and Development Costs

Research and development costs are charged to expense as incurred. Trimble
received third party funding of approximately $4.9 million, $5.3 million, and
$4.1 million in fiscal 2003, 2002, and 2001, respectively. The Company offsets
research and development expenses with any third party funding received.

The Company retains the rights to any technology developed.

Stock Compensation

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

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

Pro forma information regarding net income (loss) and earnings (loss) per share
is required by SFAS No. 123 and has been determined as if Trimble had accounted
for its employee stock options and purchases under the employee stock purchase

plan using the fair value method of SFAS No.123. The fair value for these
options was estimated at the date of grant using a Black-Scholes option-pricing
model with the following weighted-average assumptions for fiscal 2003, 2002, and
2001:

January 2, January 3, December 28,
2004 2003 2001
---- ---- ----

Expected dividend yield - - -
Expected stock price volatility 59.87% 52.70% 69.59%
Risk free interest rate 3.34% 3.13% 4.15%
Expected life of options after vesting 1.56 1.18 1.20

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

Trimble's pro forma information is as follows:

Depreciation

Depreciation of property and equipment owned or under capitalized leases is
computed using the straight-line method over the shorter of the estimated useful
lives or the lease terms. Useful lives include a range from two to six years for
machinery and equipment, five years for furniture and fixtures, two to five
years for computer equipment and software, and the life of the lease for
leasehold improvements.

Income Taxes

Income taxes are accounted for under the liability method whereby deferred tax
asset or liability account balances are calculated at the balance sheet date
using current tax laws and rates in effect for the year in which the differences
are expected to affect taxable income. A valuation allowance is recorded to
reduce the carrying amounts of deferred tax assets if it is more likely than
not, that such assets will not be realized.

Earnings (Loss) Per Share

Number of shares used in calculation of basic earnings per share represents the
weighted average common shares outstanding during the period and excludes any
dilutive effects of options, warrants, and convertible securities. The dilutive
effects of options, warrants, and convertible securities are included in diluted
earnings per share. (See Note 21 to the Consolidated Financial Statements
regarding a 3 for 2 stock split subsequent to year end.)

New Accounting Standards

In November of 2002, the EITF reached a consensus on Issue No. 00-21, "Revenue
Arrangements with Multiple Deliverables." EITF Issue No. 00-21 provides guidance
on how to account for arrangements that involve the delivery or performance of
multiple products, services and/or rights to use assets. The provisions of EITF
Issue No. 00-21 apply to revenue arrangements entered into after June, 2003. The
effect of adoption of EITF Issue No. 00-21 on Trimble's results of operations
and financial condition was immaterial.

Financial Accounting Standards Board (FASB) Interpretation No. 46 (FIN 46),
"Consolidation of Variable Interest Entities," was issued in January 2003, and a
revised interpretation of FIN 46 (FIN 46-R) was issued in December 2003. FIN 46
requires certain variable interest entities to be consolidated by the primary
beneficiary of the entity if the equity investors in the entity do not have the
characteristics of a controlling financial interest or do not have sufficient
equity at risk for the entity to finance its activities without additional
subordinated financial support from other parties. The provisions of FIN 46 are
effective immediately for all arrangements entered into after January 31, 2003.
Since January 31, 2003, Trimble has not obtained any variable interests in any
entities it believes are variable interest entities. For arrangements entered
into prior to February 1, 2003, Trimble would be required to adopt the
provisions of FIN 46-R in the first quarter of fiscal 2004. Trimble is in the
process of determining the effect, if any, the adoption of FIN 46-R will have on
its financial statements.

In April 2003, the FASB issued SFAS No. 149, "Amendment of Statement 133 on
Derivative Instruments and Hedging Activities." SFAS No. 149 amends and
clarifies financial accounting and reporting for derivative instruments,
including certain derivative instruments embedded in other contracts
(collectively referred to as derivatives) and for hedging activities under SFAS
No. 133, "Accounting for Derivative Instruments and Hedging Activities." SFAS
No. 149 is effective for contracts entered into or modified after June 30, 2003,
and for hedging relationships designated after June 30, 2003. The adoption of
this Statement did not have an effect on Trimble's financial statements.

In May 2003, the FASB issued SFAS No. 150, "Accounting for Certain Financial
Instruments with Characteristics of Both Liabilities and Equity." SFAS No. 150
establishes standards for how an issuer classifies and measures certain
financial instruments with characteristics of both liabilities and equity. Many
of these instruments were previously classified as equity. SFAS No. 150 is
effective for financial instruments entered into or modified after May 31, 2003
and otherwise was effective at the beginning of the first interim period
beginning after June 15, 2003, which for Trimble, was the fourth quarter of
2003. The adoption of this Statement did not have an effect on Trimble's
financial statements.

Note 2 - Acquisitions:

The following is a summary of acquisitions made by Trimble during fiscal 2003,
2002, and 2001, all of which were accounted for as purchases:

Acquisition Primary Service or Product Acquisition Date
- ----------- -------------------------- ----------------
Grid Data Wireless application service provider April 2, 2001
LeveLite Low-end construction instrument products August 15, 2002
Applanix Inertial navigation systems and GPS July 7, 2003
MENSI 3D laser scanning technology December 9, 2003

The consolidated financial statements include the results of operations of
acquired companies commencing on the date of acquisition. Pro forma information
is not presented, as these acquisitions did not have a material effect on the
Company's results of operations.

Allocation of Purchase Consideration

The total purchase consideration for each of the above acquisitions was
allocated to the assets acquired and liabilities assumed based on their
estimated fair values as of the date of acquisition. The following is a summary
of purchase price, acquisition costs and purchase price allocation of the Grid
Data, and LeveLite, Applanix, and MENSI acquisitions:

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 402,528 shares of common stock in settlement of all
earn-out payments, which resulted in additional goodwill of $4.8 million, with a
final purchase price of approximately $8.3 million.

LeveLite Technology, Inc.

On August 15, 2002, Trimble acquired LeveLite Technology, Inc., a California
corporation, for approximately $5.7 million. This strategic acquisition
complements Trimble's entry-level construction instrument product line. The
purchase price consisted of 655,626 shares of common stock. The merger agreement
provides for Trimble to make additional earn-out payments not to exceed $3.9
million (in common stock and cash payment) based on future revenues derived from
existing product sales to a certain customer and a share of the payments
received from the settlement of potential litigation. As of January 2, 2004, the
total earn-out amount was approximately $1.8 million resulting in additional
goodwill and a final purchase price of approximately $7.5 million.

Applanix Corporation

* On July 7, 2003, Trimble acquired privately held Applanix Corporation of
Ontario, Canada for approximately $17.8 million. Applanix develops systems that
integrate inertial navigation system (INS) and GPS technologies. The purchase
price consisted of 1,154,240 shares of Trimble common stock, of which 720,404
were issued. Former Applanix shareholders have the right to receive the
remaining 433,836 shares of Trimble common stock upon the surrender of
exchangeable shares of a Trimble subsidiary. Trimble expects the Applanix
acquisition to extend its technology portfolio and enable increased robustness
and capabilities in its future positioning products. Applanix's performance is
reported under the Company's Portfolio Technologies segment. Trimble's allocated
a portion of the purchase price to existing technology, which is being amortized
over seven years.

MENSI S.A.

On December 9, 2003, we acquired privately held MENSI S.A., a French developer
of terrestrial 3D laser scanning technology. This strategic acquisition will
enhance our technology portfolio and expand our product offerings. The purchase
price consisted of an initial cash payment of approximately Euro 3.5 million
(approximately US$4.3 million on December 9, 2003). The acquisition agreement
provides for Trimble to make additional earn-out cash payments not to exceed
Euro 3 million (approximately US$3.7 million on December 9, 2003) based on
future revenue derived from existing product sales. The additional payments, if
earned, will result in additional goodwill. MENSI's performance is reported
under our Engineering and Construction segment.

NOTE 3 - Joint Ventures:

Caterpillar Trimble Control Technologies Joint Venture

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

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

The expenses for affiliated operations at CTCT, net also includes incremental
costs as a result of purchasing products from CTCT at a higher price than
Trimble's original manufacturing costs, partially offset by contract
manufacturing fees charged to CTCT. In addition, Trimble received reimbursement
of employee-related costs from CTCT for Trimble employees devoted to CTCT
totaling $7.9 million in fiscal 2003 and $3.9 million in fiscal 2002. The
reimbursements were offset against operating expenses.

January 2, January 3,
Fiscal year ended 2004 2003
- ----------------- ---- ----
(In millions)

CTCT incremental pricing effects, net $ 5.9 $ 4.0
Trimble's 50% share of CTCT's reported gain (loss) (0.9) (0.2)
Amortization of deferred gain 0.9 0.2
--- ---
Total CTCT expense for affiliated operations, net (1) $ 5.9 $ 4.0
===== =====

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

At January 2, 2004, the net outstanding balance due from CTCT to Trimble was
approximately $0.8 million.

Nikon-Trimble Joint Venture

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

Under the terms of the Nikon-Trimble agreement, Nikon contributed (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 or 349,251 shares valued at
approximately US$5.9 million on June 30, 2003. The Nikon-Trimble joint venture
purchased certain tangible and intangible assets from Nikon Geotecs Co., Ltd.
and Trimble Japan KK.

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

Trimble has adopted the equity method of accounting for its investment in
Nikon-Trimble, with 50% share of profit or loss from this joint venture to be
reported by Trimble in the Non-operating section of the Consolidated Statement
of Operations under the heading of "Expenses for affiliated operations, net."
During fiscal 2003, and the first year of its operations, Nikon-Trimble reported
a loss of $0.6 million of which Trimble's share is $0.3 million. At January 2,
2004, the outstanding balance from Nikon-Trimble due to Trimble was
approximately $1.4 million related to the transfer of certain tangible and
intangible assets from Trimble Japan KK, recorded under the heading of "Accounts
and other receivables, net" and $2.0 million net payable by Trimble to
Nikon-Trimble related to the purchase and sale of products from and to
Nikon-Trimble recorded under the heading of "Other accrued liabilities" on the
Consolidated Balance Sheets.

Note 4 - Goodwill and Intangible Assets:

Goodwill and purchased intangible assets consisted of the following:

January 2, January 3,
As of 2004 2003
- ----- ---- ----
(in thousands)
Intangible assets:
Intangible assets with definite life:
Existing technology $ 32,389 $ 25,986
Trade names, trademarks, patents, and other
intellectual properties 20,911 21,594
------ ------
Total intangible assets with definite life 53,300 47,580
Less accumulated amortization (33,559) (24,342)
------- -------
Total net intangible assets $ 19,741 $ 23,238
======== ========
Goodwill:
Goodwill, Spectra Precision acquisition 205,562 185,277
Goodwill, other acquisitions 35,863 20,656
------ ------
Total goodwill 241,425 205,933
======= =======

The increase in goodwill of approximately $35.5 million during fiscal 2003 was
primarily due to the acquisition of Applanix and MENSI of approximately $15.0
million and the exchange rate impact of approximately $18.0 million on non-US
currency denominated goodwill assets.

The intangible asset amortization expense as of January 2, 2004 for the five
years following fiscal 2003 is projected as follows:

Amortization
Expense
(In thousands)
2004 $8,177
2005 5,384
2006 2,522
2007 1,747
2008 824
Thereafter 1,087
-----
Total $ 19,741
========

For comparative purposes, the pro forma adjusted net income (loss) per share
excluding amortization of goodwill, distribution channel, and assembled
workforce is as follows:

Note 5 - Certain Balance Sheet Components:

Inventories consisted of the following:

January 2, January 3,
As of 2004 2003
- ----- ---- ----
(in thousands)
Raw materials $ 20,927 $ 21,098
Work-in-process 3,876 5,187
Finished goods 46,023 34,859
------ ------
$ 70,826 $ 61,144
========= ==========

Property and equipment consisted of the following:

January 2, January 3,
As of 2004 2003
- ----- ---- ----
(in thousands)

Machinery and equipment $ 66,634 $ 70,660
Furniture and fixtures 9,085 6,538
Leasehold improvements 4,502 6,451
Buildings 5,236 2,905
Land 1,391 1,391
----- -----
86,848 87,945
Less accumulated depreciation (59,469) (65,908)
-------- --------
$ 27,379 $ 22,037
========= =========

Other current assets consisted of the following:

January 2, January 3,
As of 2004 2003
- ----- ---- ----
(in thousands)

Notes receivable $ 446 $ 1,685
Prepaid expenses
4,566 5,495
Other 647 1,221
--- -----
$ 5,659 $ 8,401
========= =========

Other non-current assets consisted of the following:

January 2, January 3,
As of 2004 2003
- ----- ---- ----
(in thousands)

Debt issuance costs, net $ 1,691 $ 2,493
Nikon-Trimble joint venture investment* 10,717 -
Other investments 1,216 1,381
Deposits 925 1,196
Demonstration equipment, net 3,226 2,665
Receivables from employees 801 1,223
Other 3,978 3,128
----- -----
$ 22,554 $ 12,086
========= =========

* Includes transaction costs of approximately $0.7 million.

Note 6 - Derivative Financial Instruments:

Trimble transacts business in various foreign currencies and hedges identified
risks associated with foreign currency transactions in order to minimize the
impact of changes in foreign currency exchange rates on earnings. Trimble
utilizes forward contracts to hedge certain trade and inter-company receivables
and payables. These contracts reduce the exposure to fluctuations in exchange
rate movements, as the gains and losses associated with foreign currency
balances are generally offset with the gains and losses on the hedge contracts
and are marked to market through earnings every period and generally range from
one to three months in original maturity. These hedge instruments are marked to
market through earnings every period. Gains and losses are not material to the
Company's financial position or results of operation.

From time to time, Trimble may also utilize forward foreign exchange contracts
designated as cash flow hedges of operational exposures represented by firm
backlog orders to specific accounts over a specific period of time. Trimble

records changes in the fair value of cash flow hedges in accumulated other
comprehensive income (loss), until the firm backlog transaction ships. Upon
recognition of revenue, the Company reclassifies the gain or loss on the cash
flow hedge to the statement of operations. For the fiscal year ended January 3,
2003, Trimble recorded a gain of $57,000 reflecting the net change and ending
balance in relation to a firm backlog hedge. The critical terms of the cash flow
hedging instruments are the same as the underlying forecasted transactions. The
changes in fair value of the derivatives are intended to offset changes in the
expected cash flow from the forecasted transactions. All forward contracts have
maturity of less than 12 months. As of January 3, 2003, the effect of all
outstanding derivative instruments did not have a material impact on the
Company's financial position or results of operations and none are outstanding
as of January 2, 2004.

Note 7 - The Company, Industry Segment, Geographic, and Customer Information:

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

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

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 businesses. Trimble has
aggregated these business operations under a single general manager in
order to continue to leverage its research and development activities
due to the similarities of products across the segment.

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. Beginning with the third quarter of fiscal
2003, Applanix's performance is reported in this business segment.

At the beginning of fiscal 2003, Trimble realigned two of its reportable
segments. The Tripod Data Systems business is now included in the Engineering
and Construction segment, while previously it was included in the Portfolio
Technologies segment. The following table has been restated to reflect this
realignment.

Trimble evaluates each of its segment's performance and allocates resources
based on profit and loss from operations before income taxes, and some corporate
allocations. Trimble and each of its segments employ the same accounting
policies.

The following table presents revenues, operating income (loss), and identifiable
assets for the five segments. The information includes the operations of Grid
Data after April 2, 2001, LeveLite after August 15, 2002, Applanix after July 7,
2003 and MENSI after December 9, 2003. Operating income (loss) is net revenue
less operating expenses, excluding general corporate expenses, goodwill
amortization, restructuring charges, non-operating income (expense), and income
taxes. The identifiable assets that Trimble's Chief Operating Decision Maker
views by segment are accounts receivable and inventory.

(1) As presented, accounts receivable excludes cash received in advance and
allowances for doubtful accounts, which are not allocated between segments.

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

(1) Segment operating income for fiscal 2002 and fiscal 2001 have been restated
to reflect the allocations of certain corporate expenses so as to be comparable
with the allocation methodology in fiscal 2003.

January 2, January 3,
As of 2004 2003
- ----- ---- ----
(in thousands)
Assets:
Accounts receivable total for reportable segments $ 122,913 $ 100,274
Unallocated (1) (19,563) (20,629)
------- -------
Total $ 103,350 $ 79,645
========== =========

(1) Includes cash received in advance, other receivables, and accruals that are
not allocated by segment.

The following table presents revenues by product groups.

January 2, January 3, December 28,
Fiscal Years Ended 2004 2003 2001
- ------------------ ---- ---- ----
(in thousands)

GPS Products $ 320.9 $ 274.5 $ 274.2
Laser and Optical Products 199.7 186.9 93.9
Other 20.3 13.9 1.7
---- ---- ---
Total revenue $ 540.9 $ 475.3 $ 369.8
======= ======= =======

The geographic distribution of Trimble's revenues and identifiable assets is
summarized in the table below. Other foreign countries include Canada and
countries within South and Central America. Identifiable assets indicated in the
table below exclude inter-company receivables, investments in subsidiaries,
goodwill, and intangibles assets.

(1) Sales attributed to countries based on the location of the customer.

Transfers between US and non-US geographic areas are made at prices based on
total costs and contributions of the supplying geographic area. The Company's
subsidiaries in Asia, except for Japan, which is a buy/sell entity, have derived
revenue from commissions from US operations in each of the periods presented.
These commission revenues and expenses are excluded from total revenue and
operating income (loss) in the preceding table. The Japanese entity's revenues
and expenses are included in total revenue and operating income (loss) in the
preceding table. In fiscal 2002, Germany comprised approximately 16% of sales to
unaffiliated customers. Other than the United States, no other country comprised
more than 10% of sales to unaffiliated customers for any periods presented,
except as disclosed above.

No single customer accounted for 10% or more of Trimble's total revenues in
fiscal years 2003, 2002, and 2001.

Note 8 - Restructuring Charges:

Restructuring charges of $2.0 million were recorded in fiscal 2003, $1.1 million
in fiscal 2002, and $3.6 million in fiscal 2001, all of which related to
severance costs, except for $0.3 in 2003 which related to lease costs of
Trimble's Japanese office closure due to the Nikon joint venture. As a result of
the restructuring activities, the Company's headcount decreased in fiscal 2003
by 77, 49 and 207 in fiscal 2003, 2002, and 2001, respectively. As of January 2,
2004, the restructuring accrual balance was approximately $0.4 million which
will be paid over the remaining term of the lease through 2006.

Note 9 - Long-term Debt:

Long-term debt consisted of the following:

January 2, January 3,
As of 2004 2003
(In thousands)

Credit Facilities:
Term loan $ 43,750 $ 32,600
Revolving credit facility 44,000 35,000
Subordinated note - 69,136
Promissory notes and other 2,736 1,789
----- -----
90,486 138,525
Less bank and other short-term borrowings - 6,556
Less current portion of long-term debt 12,885 24,104
------ ------
Non-current portion $ 77,601 $107,865
========= ========

The following summarizes the future cash payment obligations (excluding
interest) as of January 2, 2004:

Credit Facilities

On June 25, 2003, Trimble obtained a $175 million secured Credit Facility ("2003
Credit Facility") from a syndicate of nine banks to repay the Subordinated Note
and refinance certain existing higher interest credit facilities, pay fees and
expenses related to this new credit facility, and for ongoing working capital
and general corporate needs.

At January 2, 2004, Trimble had approximately $87.8 million of borrowings under
the 2003 Credit Facility, comprised of a $43.8 million term loan and $44.0
million of a $125 million revolver. The Company has access to an additional $81
million of cash under the terms of the revolving credit facility. The Company
has commitment fees on the unused portion of 0.5% if the Leverage Ratio (which
is defined as total indebtedness to Earnings before Interest, Taxes,
Depreciation and Amortization (EBITDA), as defined in the related agreement) is
2.0 or greater and 0.375% if the Leverage Ratio is less than 2.0.

Pricing of interest for any borrowings under the 2003 Credit Facility was fixed
for the first six months at LIBOR plus 175 basis points (1.5% at January 2,
2004) and now is thereafter tied to a formula, based on the Leverage Ratio.

The Credit Facility is secured by all of the Company's material assets, except
for assets that are subject to foreign tax considerations. Financial covenants
of the 2003 Credit Facility include leverage, fixed charge, and minimum net
worth tests. At January 2, 2004, Trimble was in compliance with all financial
debt covenants. The amount due under the revolver loan is paid as the loan
matures on June 25, 2006, and the loan commitment fees are paid on a quarterly
basis.

Under the terms of the 2003 Credit Facility, the Company is allowed to pay
dividends and repurchase shares of common stock up to 25% of net income in the
previous fiscal year, under the existing terms of the credit facilities.

In July of 2000, Trimble obtained $200 million of senior, secured credit
facilities (the "2000 Credit Facility") from a syndicate of banks to support the
acquisition of Spectra Precision Group and its ongoing working capital
requirements and to refinance certain existing debt. At January 3, 2003, Trimble
had approximately $67.6 million outstanding under the 2000 Credit Facility,
comprised of $32.6 million under a $100 million five-year term loan, $25 million
under a $50 million US dollar only revolving credit facility ("revolver"), and
$10 million under a $50 million multi-currency revolver. The Company had
commitment fees on the unused portion of 0.5% assuming certain ratios were met.
Pricing for any borrowings under the 2000 Credit Facility was fixed for the
first six months at LIBOR plus 275 basis points and was thereafter tied to a
formula, based on the leverage ratio.

Due to the full repayment of the Subordinated Note and the refinancing of the
2000 Credit Facility, the Company wrote off approximately $3.6 million of
unamortized debt issuance costs and warrants issued in connection with the
Subordinated Note, as interest expense in fiscal 2003.

Subordinated Note

In July of 2000, as part of the acquisition of Spectra Precision Group, the
Company issued Spectra-Physics Holdings USA, Inc., a subordinated seller note
that had a stated two-year maturity. On March 20, 2002, the Company renegotiated
the terms of the subordinated note. Under the revised agreement, Spectra-Physics
Holdings, Inc., a subsidiary of Thermo Electron, extended the due date of the
note until July 14, 2004, at the current interest rate of approximately 10.4%
per year.

As of January 3, 2003 the principal amount outstanding was approximately $69.1
million. As permitted by the 2000 Credit Facility, Trimble repaid the
subordinated note during fiscal 2003.

Promissory Note and Others

The promissory note and others mainly consists of a $1.7 million liability
arising from the purchase of a building for Trimble's Corvallis, Oregon site and
other government loans in our foreign subsidiaries. The $1.7 million note is
payable in monthly installments through April 2015, bearing a 3.99% variable
interest rate as of January 2, 2004.

Weighted Average Cost of Debt

The weighted average cost of debt is approximately 2.9% for fiscal 2003 and 7.6%
for fiscal 2002.

Note 10 - Lease Obligations and Commitments:

Trimble's principal facilities in the United States are leased under
non-cancelable operating leases that expire at various dates through 2011. The
Company has options to renew certain of these leases for an additional five
years. Trimble also leases facilities under operating leases in the United
Kingdom, Sweden, and Germany that expire in 2005.

Future minimum payments required under non-cancelable operating leases are as
follows:

Operating
Lease Payments
--------------
(In thousands)

2004 $ 10,129
2005 9,401
2006 2,322
2007 1,643
2008 1,489
Thereafter 3,157
-----
Total $ 28,141
--------

Net rent expense under operating leases was $13.2 million in fiscal 2003, $5.9
million in fiscal 2002, and $9.6 million in fiscal 2001. Sublease income was
$1.7 million, $4.7 million, and $3.5 million, respectively.

Note 11 - Fair Value of Financial Instruments:

The carrying amounts and fair values of Trimble's financial instruments are as
follows:

The fair value of the subordinated notes, bank borrowings, and promissory notes
have been estimated using an estimate of the interest rate Trimble would have
had to pay on the issuance of notes with a similar maturity and discounting the
cash flows at that rate. The fair values do not give an indication of the amount
that Trimble would currently have to pay to extinguish any of this debt.

The fair value of forward foreign exchange contracts is estimated based on the
difference between the market price and the carrying amount of comparable
contracts. These contracts are adjusted to fair value at the end of every month.

Note 12 - Income Taxes:

Trimble's income tax provision (benefit) consisted of the following:

January 2, January 3, December 28,
Fiscal Years Ended 2004 2003 2001
- ------------------ ---- ---- ----
(In thousands)

US Federal:
Current $ 513 $ - $ -
Deferred (7,000) - -
-------
(6,487) - -
-------
US State:
Current 250 142 58
Deferred (600) - -
-----
(350) 142 58
----- --- --
Non-US:
Current 1,594 2,052 2,729
Deferred 2,343 1,306 (887)
----- ----- ----
3,937 3,358 1,842
----- ----- -----
Income tax provision (benefit) $ (2,900) $ 3,500 $1,900
========= ======= ======

The pre-tax US income (loss) from continuing operations was approximately $39.5
million, $3.3 million and $(29.3) million in fiscal years 2003, 2002 and 2001,
respectively.

The income tax provision (benefit) differs from the amount computed by applying
the statutory federal income tax rate to income before taxes. The sources and
tax effects of the differences are as follows:

The components of deferred taxes consist of the following:

January 2, January 3,
As of 2004 2003
- ----- ---- ----
(In thousands)

Deferred tax liabilities:
Purchased intangibles $ 1,338 $ 381
Depreciation and amortization 3,776 2,258
Other individually immaterial items 251 (78)
--- ---
Total deferred tax liabilities 5,365 2,561
----- -----
Deferred tax assets:
Inventory valuation differences 9,001 12,069
Expenses not currently deductible 5,528 5,762
US Federal credit carryforwards 9,150 8,172
Deferred revenue 4,280 4,317
US State credit carryforwards 6,999 6,215
Warranty 2,374 2,374
Depreciation and amortization 2,871 3,184
US Federal net operating loss (NOL) carryforward - 4,451
Other individually immaterial items 3,106 1,827
----- -----
Total deferred tax assets 43,309 48,371
Valuation allowance (34,756) (47,878)
------- -------
Total deferred tax assets 8,553 493
----- ---
Total net deferred tax assets/(liabilities) $ 3,188 $(2,068)
========== =======

The Company has US Federal credit carryforwards of approximately $9.1 million
that expire beginning in 2004. The Company has state research and development
credit carryforwards of approximately $10.4 million which do not expire.

The change in valuation allowance in 2003 includes net operating losses realized
as well as the benefit given to certain deferred tax assets in the amount of
$7.6 million based on management's assessment that it is more likely than not
that such assets will be realized. The valuation allowance decreased by $13.1
million in 2003 and decreased by $3.1 million in 2002. Approximately $14.1
million of the valuation allowance at January 2, 2004 relates to the tax
benefits of stock option deductions, which will be credited to equity if and
when realized.

Note 13 - Shareholders' Equity:

3-for-2 Stock Split

Trimble's Board of Directors approved a 3-for-2 split of all outstanding shares
of the Company's Common Stock, payable March 4, 2004 to stockholders of record
on February 17, 2004. Cash will be paid in lieu of fractional shares. All share
and per share information have been adjusted to reflect the stock split on a
retroactive basis for all periods presented.

Common Stock

On April 14, 2003, Trimble sold 3,148,000 shares of its Common Stock, no par
value per share, to an investor at a price of $12.17 per share in an offering
pursuant to its shelf registration statement. The offering resulted in net
proceeds to Trimble of approximately $36.6 million, approximately $31 million of
which was used to pay down the principal balance and $5.6 million was used to
pay down the accrued interest due on the Subordinated Note (see Note 9 to the
Consolidated Financial Statements).

On December 21, 2001, Trimble completed a private placement of 2,675,006 shares
of its Common Stock at a price of $10.00 per share to certain qualified
investors, resulting in gross proceeds of approximately $26.8 million to the
Company. On January 15, 2002, Trimble had a second closing of the private
placement issuing 1,920,006 shares of Common Stock at $10.00 per share resulting
in gross proceeds of an additional $19.2 million.

2002 Stock Plan

In 2002, Trimble's Board of Directors adopted the 2002 Stock Plan ("2002 Plan").
The 2002 Plan approved by the shareholders provides for the granting of
incentive and non-statutory stock options for up to 3,000,000 shares plus any
shares currently reserved but un-issued to employees, consultants, and directors
of Trimble. Incentive stock options may be granted at exercise prices that are
not less than 100% of the fair market value of Common Stock on the date of
grant. Employee stock options granted under the 2002 Plan have 120-month terms,
and vest at a rate of 20% at the first anniversary of grant, and monthly
thereafter at an annual rate of 20%, with full vesting occurring at the fifth
anniversary of the grant. The exercise price of non-statutory stock options
issued under the 2002 Plan must be at least 85% of the fair market value of
Common Stock on the date of grant. As of January 2, 2004, options to purchase
2,326,742 shares were outstanding and 619,949 were available for future grant
under the 2002 Plan.

1993 Stock Option Plan

In 1992, Trimble's Board of Directors adopted the 1993 Stock Option Plan ("1993
Plan"). The 1993 Plan, as amended to date and approved by shareholders, provides
for the granting of incentive and non-statutory stock options for up to
9,562,500 shares of Common Stock to employees, consultants, and directors of
Trimble. Incentive stock options may be granted at exercise prices that are not
less than 100% of the fair market value of Common Stock on the date of grant.
Employee stock options granted under the 1993 Plan have 120-month terms, and
vest at a rate of 20% at the first anniversary of grant, and monthly thereafter
at an annual rate of 20%, with full vesting occurring at the fifth anniversary
of grant. The exercise price of non-statutory stock options issued under the
1993 Plan must be at least 85% of the fair market value of Common Stock on the
date of grant. As of January 2, 2004, options to purchase 4,799,045 shares were
outstanding, and 980,627 shares were available for future grant under the 1993
Plan.

1990 Director Stock Option Plan

In December 1990, Trimble adopted a Director Stock Option Plan under which an
aggregate of 570,000 shares of Common Stock have been reserved for issuance to
non-employee directors as approved by the shareholders to date. At January 2,
2004, options to purchase 287,501 shares were outstanding, and no shares were
available for future grants under the Director Stock Option Plan.

1992 Management Discount Stock Option Plan

In 1992, Trimble's Board of Directors approved the 1992 Management Discount
Stock Option Plan ("Discount Plan"). Under the Discount Plan, 450,000
non-statutory stock options were reserved for grant to management employees at
exercise prices that may be significantly discounted from the fair market value
of Common Stock on the dates of grant. Options are generally exercisable six
months from the date of grant. As of January 2, 2004, there were no shares
available for future grants. For accounting purposes, compensation cost on these
grants is measured by the excess over the discounted exercise prices of the fair
market value of Common Stock on the dates of option grants. There were no
discounted options granted in the plan in fiscal 2003, 2002, and 2001. As of
January 2, 2004, options to purchase 187,500 shares were outstanding under the
1992 Management Discount Stock Option Plan.

1988 Employee Stock Purchase Plan

In 1988, Trimble established an employee stock purchase plan under which an
aggregate of 5,025,000 shares of Common Stock have been reserved for sale to
eligible employees as approved by the shareholders to date. The plan permits
full-time employees to purchase Common Stock through payroll deductions at 85%
of the lower of the fair market value of the Common Stock at the beginning or at
the end of each six-month offering period. In fiscal 2003 and 2002, 328,044
shares and 362,412 shares, respectively, were issued under the plan for
aggregate proceeds to the Company of $3.1 million and $2.9 million,
respectively. At January 2, 2004, the number of shares reserved for future
purchases by eligible employees was 428,216.

SFAS 123 Disclosures

As stated in Note 1 of the Notes to the Consolidated Financial Statements,
Trimble has elected to follow APB 25 and related interpretations in accounting
for its employee stock options and stock purchase plans. The alternative fair
value accounting provided for under SFAS 123 requires use of option pricing
models that were not developed for use in valuing employee stock options. Under
APB 25, because the exercise price of Trimble's employee stock options equals
the market price of the underlying stock on date of grant, no compensation
expense is recognized.

Exercise prices for options outstanding as of January 2, 2004, ranged from $5.33
to $34.46. The weighted average remaining contractual life of those options is
6.91 years. In view of the wide range of exercise prices, Trimble considers it
appropriate to provide the following additional information in respect of
options outstanding:

(1) In thousands

Activity during fiscal 2003, 2002, and 2001, under the combined plans was as
follows:

Non-statutory Options

On May 3, 1999, Trimble entered into an agreement to grant a non-statutory
option to purchase up to 45,000 shares of common stock at an exercise price of
$6.50 per share, with an expiration date of March 29, 2004.

As of January 2, 2004, these non-statutory options have not been exercised.

Warrants

On April 12, 2002, the Company issued to Spectra-Physics Holdings USA, Inc., a
warrant to purchase up to 564,350 shares of Trimble's Common Stock over a fixed
period of time. Initially, Spectra-Physics' warrant entitles it to purchase
300,000 shares of Common Stock over a five-year period at an exercise price of
$10.07 per share. On a quarterly basis beginning July 14, 2002, Spectra-Physics'
warrant became exercisable for an additional 375 shares of Common Stock for
every $1 million of principal and interest outstanding to Spectra-Physics until
the obligation is paid off in full. These shares are purchasable at a price
equal to the average of Trimble's closing price for the five days immediately
preceding the last trading day of each quarter. On July 14, 2002 an additional
26,046 shares became exercisable at an exercise price of $9.64 per share. On
October 14, 2002 an additional 26,736 shares became exercisable at an exercise
price of $6.12. On January 14, 2003, an additional 27,426 shares became
exercisable at an exercise price of $9.03. On April 14, 2003, an additional
14,312 shares became exercisable at an exercise price of $13.37. The additional
shares are exercisable over a 5-year period. No additional shares will be
issuable under the warrant to Spectra-Physics as the underlying obligation has
been paid off in full.

The approximate fair value of the warrants of $2.4 million was determined using
the Black-Scholes pricing model with the following assumptions: contractual life
of 5-year period, risk-free interest rate of 4%; volatility of 65%; and no
dividends during the contractual term. The value of the warrants was being
amortized to interest expense over the term of the subordinated note and the
unamortized balances was written off to interest expense on June 2003 upon
repayment of the note.

On December 21, 2001 and January 15, 2002, in connection with the first and
second closing of the private placement of the Company's Common Stock, Trimble
granted five-year warrants to purchase an additional 919,008 shares of Common
Stock, subject to certain adjustments, at an exercise price of $12.97 per share.

Common Stock Reserved for Future Issuances

As of January 2, 2004, Trimble had reserved 11,371,652 common shares for
issuance upon exercise of options and warrants outstanding and options available
for grant under the 2002 Plan, the 1993 Plan, the 1990 Director Plan, and the
1992 Management Discount Plan, and available for issuance under the 1988
Employee Stock Purchase Plan.

Note 14 - Benefit Plans:

401(k) Plan

Under Trimble's 401(k) Plan, US employee participants (including employees of
certain subsidiaries) may direct the investment of contributions to their
accounts among certain mutual funds and the Trimble Navigation Limited Common
Stock Fund. The Trimble Fund sold net 61,238 shares of Common Stock for an
aggregate of $0.9 million in fiscal 2003. Trimble, at its discretion, matches
individual employee 401(k) Plan contributions at a rate of fifty cents of every
dollar that the employee contributes to the 401(k) Plan up to 5% of the
employee's annual salary to an annual maximum of $2,500. Trimble's matching
contributions to the 401(k) Plan were $1.8 million in fiscal 2003, $1.8 million
in fiscal 2002, and $1.7 million in fiscal 2001.

Profit-Sharing Plan

In 1995, Trimble introduced an employee profit-sharing plan in which all
employees, excluding executives and certain levels of management, participate.
The plan distributes to employees approximately 5% of quarterly adjusted pre-tax
income. Payments under the plan during fiscal 2003, 2002 and 2001 were $2.5
million, $1.1 million, and $0.9 million, respectively.

Defined Contribution Pension Plans

Certain of the Company's European subsidiaries participate in state sponsored
pension plans. Contributions are based on specified percentages of employee
salaries. For these plans, Trimble contributed and charged to expense
approximately $2.0 million for fiscal 2003, $1.4 million for fiscal 2002, and
$1.4 million for fiscal 2001.

Defined Benefit Pension Plan

The Swedish and German subsidiaries have an unfunded defined benefit pension
plan that covered substantially all of their full-time employees through 1993.
Benefits are based on a percentage of eligible earnings. The employee must have
had a projected period of pensionable service of at least 30 years as of 1993.
If the period was shorter, the pension benefits were reduced accordingly. Active
employees do not accrue any future benefits; therefore, there is no service cost
and the liability will only increase for interest cost.

Net periodic benefit costs in fiscal 2003, 2002, and 2001 were not material.

The changes in the benefit obligations and plan assets of the significant non-US
defined benefit pension plans for fiscal 2003 and 2002 were as follows:

(1) Prior year's disclosure has been restated to correct for a clerical error.

Actuarial assumptions used to determine the net periodic pension costs for the
year ended January 2, 2004 were as follows:

Swedish Subsidiary German Subsidiaries
------------------ -------------------
Discount rate 5.5% 6.0%
Rate of compensation increase 2.5% 1.5%

Note 15 - Earnings Per Share:

The following data show the amounts used in computing earnings (loss) per share
and the effect on the weighted-average number of shares of potentially dilutive
Common Stock.

Due to the fact that the Company reported a net loss in fiscal 2001, options and
warrants were not included in the computation of earnings per share in fiscal
2001. If the Company had reported net income in 2001, additional 1,407,000
common equivalent shares related to outstanding options and warrants would have
been included in the calculation of diluted loss per share.

Note 16 - Comprehensive Income (Loss):

The components of comprehensive income (loss), net of related tax as follows:

January 2, January 3, December 28,
Fiscal Years Ended 2004 2003 2001
- ------------------ ---- ---- ----
(in thousands)
Net income (loss) $ 38,485 $10,324 $(22,879)
Foreign currency translation adjustments 31,198 17,697 (9,766)
Net gain (loss) on hedging transactions (7) 210 (203)
Net unrealized gain (loss) on investments 74 (17) 16
-- --- --
Comprehensive income (loss) $ 69,750 $28,214 $(32,832)
======== ======= ========

The components of accumulated other comprehensive (loss), net of related tax as
follows:

January 2, January 3,
Fiscal Years Ended 2004 2003
- ------------------ ---- ----
(in thousands)
Cumulative foreign currency translation adjustments $ 30,166 $ (1,032)
Net gain on hedging transactions - 7
Net unrealized gain (loss) on investments 73 (1)
-- --
Accumulated other comprehensive income (loss) $ 30,239 $ (1,026)
========= =========

Note 17 - Related-Party Transactions:

Related-Party Lease

Trimble currently leases office space in Ohio from an association of three
individuals, one of whom is an employee of one of the US operating units, under
a non-cancelable operating lease arrangement expiring in 2011. The annual rent
is subject to adjustment based on the terms of the lease. The Consolidated
Statements of Operations include expenses from this operating lease of $0.35
million for fiscal 2003, fiscal 2002, and fiscal 2001.

Related -Party Notes Receivable

Trimble has notes receivable from officers and employees of approximately $0.8
million as of January 2, 2004 and $1.2 million as of January 3, 2003. The notes
bear interest from 4.49% to 6.62% and have an average remaining life of 1.47
years as of January 2, 2004.

See Note 3 to the Notes to the Consolidated Financial Statements for additional
information regarding Trimble's related party transactions with joint venture
partners.

Note 18 - Statement of Cash Flow Data:

Note 19 - Litigation:

From time to time, the Company is involved in litigation arising out of the
ordinary course of its business. There are no known claims or pending litigation
expected to have a material effect on the Company's overall financial position,
results of operations, or liquidity.

Note 20 - Selected Quarterly Financial Data (unaudited):

Significant quarterly items for fiscal 2003 include the following: (i) in the
first quarter of 2003 a $0.4 million charge or $0.01 per diluted share relating
to workforce reduction; (ii) in the second quarter of 2003 a $0.7 million
charge, or $0.01 per diluted share relating to work force reduction and $3.6
million of interest expenses, or $0.07 per diluted share relating to the
Company's debt refinancing; (iii) in the third quarter of 2003 a $0.6 million
charge, or $0.01 per diluted share relating to work force reduction; (iv) in the
fourth quarter of 2003 a $0.3 million charge, or less than $0.01 per diluted
share relating to work force reduction.

Significant quarterly items for fiscal 2002 include the following: (i) in the
first quarter of 2002 a $0.3 million charge or $0.01 per diluted share relating
to workforce reduction; (ii) in the second quarter of 2002 a $0.2 million
charge, or less than $0.01 per diluted share relating to work force reduction;
(iii) in the third quarter of 2002 a $0.2 million charge, or less than $0.01 per
diluted share relating to work force reduction and a $0.2 million gain, or less
than $0.01 per diluted share relating to the sale of an investment; (iv) in the
fourth quarter of 2002 a $0.5 million charge, or $0.01 per diluted share
relating to work force reduction and a $1.5 million charge, or $0.03 per diluted
share relating to the write-down of an investment.

Note 21 - Subsequent Events

3-for-2 Stock Split

Trimble's Board of Directors approved a 3-for-2 split of all outstanding shares
of the Company's Common Stock, payable March 4, 2004 to stockholders of record
on February 17, 2004. Cash will be paid in lieu of fractional shares. All share
and per share information have been adjusted to reflect the stock split on a
retroactive basis for all periods presented.

REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS

The Board of Directors and Shareholders, Trimble Navigation Limited

We have audited the accompanying Consolidated Balance Sheets of Trimble
Navigation Limited as of January 2, 2004 and January 3, 2003, and the related
Consolidated Statements of Operations, Shareholders' Equity, and Cash Flows for
each of the three years in the period ended January 2, 2004. Our audits also
included the financial statement schedule listed in the index at Item 15(a)(2).
These financial statements and schedule are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements and schedule, based on our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.

In our opinion, the financial statements and schedule referred to above present
fairly, in all material respects, the consolidated financial position of Trimble
Navigation Limited at January 2, 2004 and January 3, 2003, and the consolidated
results of its operations and its cash flows for each of the three years in the
period ended January 2, 2004, in conformity with accounting principles generally
accepted in the United States. Also, in our opinion, the related financial
statement schedule, when considered in relation to the basic consolidated
financial statements taken as a whole, presents fairly in all material respects
the information set forth therein.

As discussed in Note 1 to the consolidated financial statements, effective
December 29, 2001, the company adopted Statement of Financial Accounting
Standards No. 142, "Goodwill and Other Intangible Assets."

/s/ Ernst & Young LLP

March 11, 2004
Palo Alto, California

Item 9 Changes in and Disagreements with Accountants on Accounting and Financial
Disclosure

None

Item 9a. Controls and Procedures

(a) Controls and Procedures.

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

(b) Internal Control Over Financial Reporting.

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

PART III

Item 10 Directors and Executive Officers of the Registrant

The information required by this item, insofar as it relates to Trimble's
directors, will be contained under the captions "Election of Directors" and
"Section 16(a) Beneficial Ownership Reporting Compliance" in the Proxy Statement
and is incorporated herein by reference. The information required by this item
relating to executive officers is set forth above in Item 1 Business Overview
under the caption "Executive Officers."

Code of Ethics

The Company's Business Ethics and Conduct Policy that applies, among others, to
the Company's Chief Executive Officer, Chief Financial Officer, Corporate
Controller, and other finance organization employees. The Business Ethics and
Conduct Policy is available on the Company's website at www.trimble.com under
the heading "Corporate Governance and Policies" on the Investor Information page
of our website. A copy will be provided, without charge, to any shareholder who
requests one by written request addressed to General Counsel, Trimble Navigation
Limited, 749 N. Mary Avenue, Sunnyvale, CA 94085.

If any substantive amendments to the Business Ethics and Conduct Policy are made
or any waivers are granted, including any implicit waiver, from a provision of
the Business Ethics and Conduct Policy, to its Chief Executive Officer, Chief
Financial Officer or Corporate Controller, the Company will disclose the nature
of such amendment or waiver on the Company's website at www.trimble.com or in a
report on Form 8-K.

Item 11 Executive Compensation

The information required by this item will be contained in the Proxy Statement
under the caption "Executive Compensation" and is incorporated herein by
reference.

Item 12 Security Ownership of Certain Beneficial Owners and Management and
Related Stockholder Matters

The information required by this item will be contained in the Proxy Statement
under the caption "Security Ownership of Certain Beneficial Owners and
Management Related Stockholder Matters" and is incorporated herein by reference.

Item 13 Certain Relationships and Related Transactions

The information required by this item will be contained in the Proxy Statement
under the caption "Certain Relationships and Related Transactions" and is
incorporated herein by reference.

Item 14 Principal Accountant Fees and Services

The information required by this item will be contained in the Proxy Statement
under the caption "Principal Accountant Fees and Services" and is incorporated
herein by reference.

PART IV

Item 15. Exhibits, Financial Statement Schedules, and Reports on form 8-K

(a) 1. Financial Statements

The following consolidated financial statements required by this item are
included in Part II Item 8 hereof under the caption "Financial Statements and
Supplementary Data."

Page in this
Annual Report
on Form 10-K

Consolidated Balance Sheets at January 2, 2004 and January 3, 2003...........45

Consolidated Statements of Operations for each of the three
fiscal years in the period ended January 2, 2004.............................46

Consolidated Statement of Shareholders' Equity for each of the three
fiscal years in the period ended January 2, 2004.............................47

Consolidated Statements of Cash Flows for each of the three fiscal years
in the period ended January 2, 2004..........................................48

Notes to Consolidated Financial Statements ..................................49

Report of Ernst & Young LLP, Independent Auditors............................74

2. Financial Statement Schedules

The following financial statement schedule is filed as part of this report:

Page in this
Annual Report
on Form 10-K

Schedule II - Valuation and Qualifying Accounts........................S-1

All other schedules have been omitted as they are either not required or not
applicable, or the required information is included in the consolidated
financial statements or the notes thereto.

3. Exhibits

Exhibit
Number

3.1 Restated Articles of Incorporation of the Company filed June 25, 1986. (5)

3.2 Certificate of Amendment of Articles of Incorporation of the Company filed
October 6, 1988. (5)

3.3 Certificate of Amendment of Articles of Incorporation of the Company filed
July 18, 1990. (5)

3.4 Certificate of Determination of the Company filed February 19, 1999. (5)

3.5 Certificate of Amendment of Articles of Incorporation of the Company filed
May 29, 2003. (15)

3.8 Amended and Restated Bylaws of the Company. (16)

4.1 Specimen copy of certificate for shares of Common Stock of the Company. (1)

4.2 Preferred Shares Rights Agreement dated as of February 18, 1999. (4)

4.3 First Amended and Restated Stock and Warrant Purchase Agreement between and
among the Company and the investors thereto dated January 14, 2002. (9)

4.4 Form of Warrant to Purchase Shares of Common Stock dated January 14, 2002.
(10)

4.5 Form of Warrant dated April 12, 2002. (11)

10.4+ Form of Indemnification Agreement between the Company and its officers and
directors. (1)

10.32+ 1990 Director Stock Option Plan, as amended, and form of Outside Director
Non-statutory Stock Option Agreement. (3)

10.46+ 1992 Management Discount Stock Option and form of Non-statutory Stock
Option Agreement. (2)

10.59+ 1993 Stock Option Plan, as amended May 11, 2000. (7)

10.60 + 1988 Employee Stock Purchase Plan, as amended May 11, 2000. (7)

10.65+ Standby Consulting Agreement between the Company and Bradford W.
Parkinson dated September 1, 1998. (5)

10.66+ Standby Consulting Agreement between the Company and Robert S. Cooper
dated September 1, 1998. (5)

10.67+ Employment Agreement between the Company and Steven W. Berglund dated
March 17, 1999. (5)

10.68+ Nonqualified deferred Compensation Plan of the Company effective February
10, 1994. (5)

10.70***Supply Agreement dated August 10, 1999 by and among Trimble Navigation
Limited and Solectron Corporation and Solectron Federal Systems, Inc. (6)

10.77+ Australian Addendum to the Trimble Navigation 1988 Employee Stock
Purchase Plan. (8)

10.81+ 2002 Stock Plan, including form of Option. (12)

10.82 Credit Agreement dated June 25, 2003. (14)

10.83 Letter dated May 8, 2002 exercising renewal option of the Supply Agreement
dated August 10, 1999 by and among Trimble Navigation Limited and Solectron
Corporation and Solectron Federal Systems, Inc. (13)

21.1 Subsidiaries of the Company. (16)

23.1 Consent of Ernst & Young LLP, independent auditors. (16)

24.1 Power of Attorney included on signature page herein.

31.1 Certification of CEO pursuant to Section 302 of the Sarbanes-Oxley Act of
2002. (16)

31.2 Certification of CFO pursuant to Section 302 of the Sarbanes-Oxley Act of
2002. (16)

32.1 Certification of CEO pursuant to Section 906 of the Sarbanes-Oxley Act of
2002. (16)

32.2 Certification of CFO pursuant to Section 906 of the Sarbanes-Oxley Act of
2002. (16)

*** Confidential treatment has been granted for certain portions of this exhibit
pursuant to an order dated effective October 5, 1999.

+ Management contract or compensatory plan or arrangement required to be filed
as an exhibit to this Annual Report on Form 10-K pursuant to Item 14(c) thereof.

(1) Incorporated by reference to identically numbered exhibits to the
registrant's Registration Statement on Form S-1, as amended (File No. 33-35333),
which became effective July 19, 1990.

(2) Incorporated by reference to identically numbered exhibits to the
registrant's Registration Statement on Form S-1 (File No. 33-45990), which was
filed February 18, 1992.

(3) Incorporated by reference to identically numbered exhibits to the
registrant's Annual Report on Form 10-K for the fiscal year ended December 31,
1993.

(4) Incorporated by reference to Exhibit No. 1 to the registrant's Registration
Statement on Form 8-A, which was filed on February 18, 1999.

(5) Incorporated by reference to identically numbered exhibits to the
registrant's Annual Report on Form 10-K for the fiscal year ended January 1,
1999.

(6) Incorporated by reference to identically numbered exhibits to the
registrant's Report on Form 8-K, which was filed on August 25, 1999.

(7) Incorporated by reference to identically numbered exhibits to the
registrant's registration statement on Form S-8 filed on June 1, 2000.

(8) Incorporated by reference to identically numbered exhibits to the
registrant's Annual Report on Form 10-K for the fiscal year ended December 29,
2000.

(9) Incorporated by reference to exhibit number 4.1 to the registrant's Current
Report on Form 8-K filed on January 16, 2002.

(10) Incorporated by reference to exhibit number 4.2 to the registrant's Current
Report on Form 8-K filed on January 16, 2002.

(11) Incorporated by reference to exhibit number 4.1 to the registrant's
Registration Statement on Form S-3 filed on April 19, 2002.

(12) Incorporated by reference to exhibit number 10.82 to the registrant's
Quarterly Report on Form 10-Q for the quarter ended June 28, 2002.

(13) Incorporated by reference to exhibit number 10.83 to the registrant's
Annual Report on Form 10-K for the year ended January 3, 2003.

(14) Incorporated by reference to exhibit number 10.2 to the registrant's
Quarterly Report on Form 10-Q for the quarter ended July 4, 2003.

(15) Incorporated by reference to exhibit number 3.5 to the registrant's
Quarterly Report on Form 10-Q for the quarter ended July 4, 2003.

(16) Filed herewith.

(b) Reports on Form 8-K.

On October 28, 2003, the Company filed a report on Form 8-K reporting the
Company's quarterly earnings for the third fiscal quarter of 2003.

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this Report on Form 10-K to be
signed on its behalf by the undersigned, thereunto duly authorized.

TRIMBLE NAVIGATION LIMITED

By: /s/ Steven W. Berglund
-----------------------
Steven W. Berglund,
President and Chief Executive Officer

March 10, 2004

POWER OF ATTORNEY

Know all persons by these presents, that each person whose signature appears
below constitutes and appoints Steven W. Berglund as his attorney-in-fact, with
the power of substitution, for him in any and all capacities, to sign any
amendments to this Report on Form 10-K, and to file the same, with exhibits
thereto and other documents in connection therewith, with the Securities and
Exchange Commission, hereby ratifying and confirming all that said
attorney-in-fact, or his substitute or substitutes, may do or cause to be done
by virtue hereof.

Pursuant to the requirements of the Securities Exchange Act of 1934, this Annual
Report on Form 10-K has been signed below by the following persons on behalf of
the registrant and in the capacities and on the dates indicated:

SCHEDULE II

TRIMBLE NAVIGATION LIMITED
VALUATION AND QUALIFYING ACCOUNTS
(IN THOUSANDS OF DOLLARS)

January 2, January 3, December 28,
Allowance for doubtful accounts: 2004 2003 2001

Balance at beginning of period $ 9,900 $ 8,540 $ 6,538
Acquired allowance (1) 752 - -
Bad debt expense (32) 5,443 5,077
Write-offs, net of recoveries (667) (4,083) (3,075)
---- ------ ------
Balance at end of period $ 9,953 $ 9,900 $ 8,540
-------- -------- --------

Inventory allowance:
Balance at beginning of period $ 25,150 $ 23,274 $ 19,285
Acquired allowance (2) 1,292 - -
Additions to allowance 5,762 3,901 7,242
Write-offs, net of recoveries (6,319) (2,025) (3,253)
------ ------ ------
Balance at end of period $ 25,885 $ 25,150 $ 23,274
-------- -------- --------

(1) Includes $168,000 acquired at July 7, 2003 as part of the acquisition of
Applanix and $584,000 acquired at December 9, 2003 as part of the
acquisition of MENSI.

(2) Includes $494,000 acquired at July 7, 2003 as part of the acquisition of
Applanix and $797,000 acquired at December 9, 2003 as part of the
acquisition of MENSI.