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 December 31, 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 (I.R.S. Employer Identification No.)
incorporation or organization)

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 2, 2004 was approximately $1.3 billion.

There were 52,581,679 shares of the registrant's Common Stock issued and
outstanding as of March 9, 2005.

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, 2005 (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

2004 FORM 10-K ANNUAL REPORT

TABLE OF CONTENTS

PART I
Item 1 Business Overview...................................................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 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........................44
Item 9 Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure........................................75
Item 9a Controls and Procedures............................................75

PART III
Item 10 Directors and Executive Officers of the Registrant.................75
Item 11 Executive Compensation.............................................76
Item 12 Security Ownership of Certain Beneficial Owners and Management
and Related Stockholder Matters.................................76
Item 13 Certain Relationships and Related Transactions.....................76
Item 14 Principal Accountant Fees and Services.............................76

PART IV
Item 15 Exhibits, Financial Statement Schedules and Reports on
Form 8-K.....................................................76-91

TRADEMARKS

Trimble, the globe and triangle logo, EZ-Guide, Telvisant, Lassen, SiteVision,
GeoExplorer, AgGPS, Thunderbolt, FirstGPS, Spectra Precision and CrossCheck are
trademarks of Trimble Navigation Limited and its subsidiaries registered in the
United States Patent and Trademark Office and other countries. Force, Ranger,
Recon and TrimTrac are trademarks of Trimble Navigation Limited and its
subsidiaries. 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, most
typically to commercial and government users. The principle applications served
include surveying, construction, agriculture, urban and natural resource
management, and fleet and asset management. Our products typically provide
benefits that can include lower operational costs, and higher productivity.
Examples of products include systems that guide agricultural and construction
equipment, surveying instruments, systems that track fleets of vehicles, and
data collection systems that enable the management of large amounts of
geo-referenced information. In addition, we also manufacture components for in
vehicle navigation and telematics systems, and timing modules used in the
synchronization of wireless networks.

Trimble products often combine knowledge of location or position together with
applications software and a wireless link to provide a solution to a specific
application. Position is provided through a number of alternative technologies
including the Global Positioning System (GPS) and systems that use laser or
optical technologies to establish position. Wireless communication techniques
include both public networks, such as cellular, and private networks, such as
business band radio. A significant amount of the differentiation in our products
is provided through software; this includes embedded 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 as well as the use of third party
subcontractors. Our global operations include major development, manufacturing
or logistics operations in the United States, Sweden, Germany, New Zealand,
France, Canada, 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 revenue 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 to providing position, 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. Over time, the
advances in positioning, wireless communication, and information technologies
have enabled us to add more capability to our products and thereby deliver more
value to our users. For example, the 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. This has
allowed us to include a wireless link in many of our products and connect remote
field operations to a central location.

Our laser and optical products either measure distances and angles to provide a
position in three dimensional space or they provide highly accurate laser
references from which position can be established. The key elements of these
products are typically a laser, which is generally a commercially available
laser diode and a complex mechanical assembly. These elements are augmented by
software algorithms.

Business Strategy

Our business strategy is developed around an analysis of 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 is important and where we can create unique value. We
look for opportunities in which the rate of technological change is
high and which have a requirement for the integration of multiple
technologies into a solution.

o Distribution channels to best access our markets - We select
distribution channels that best serve the needs of individual markets.
These channels can include independent dealers, direct sales, joint
ventures, OEM sales, and distribution alliances with key partners. We
view international expansion as an important element of our strategy
and seek to develop international channels.

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. Our Portfolio Technologies segment
aggregates smaller businesses, primarily focused on defense and the integration
of GPS and inertial technologies. 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.

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, site preparation, and building phases. Our products
are intended to both improve the productivity of each phase, as well as
facilitate the entire process by improving information flow from one step to the
next.

The product solutions typically include multiple technologies. 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. 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 in this segment through a global network of
independent dealers that are supported by Trimble personnel. 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:

Trimble(R) S6 Total Station - The Trimble S6 Total Station is a technologically
advanced optical surveying system. Its advanced servo motors make the Trimble S6
fast, silent, and precise, allowing surveyors to measure points and collect data
in the field efficiently and productively. The Trimble S6 offers unique new
Trimble technologies that enable cable-free operation, longer battery life, and
accuracy assurance, among many other features. Its detachable Trimble CU
controller runs powerful Trimble field software for collecting, displaying, and
managing field data.

Trimble(R) R8 GPS System - The Trimble R8 GPS System combines a GPS receiver,
radio, and battery in one compact unit to produce a lightweight and versatile,
cable-free GPS surveying solution. Surveyors can use the Trimble R8 system to
achieve centimeter-level accuracy in their measurements in real time. The
Trimble R8 system offers R-Track technology, which is a unique Trimble
technology developed to support new GPS signals for civilian use. These new
signals will be transmitted from modernized GPS satellites that the U.S.
Department of Defense has scheduled for launch in 2005.

Trimble(R) Recon(TM) Controller - The Trimble Recon Controller is a rugged
handheld controller used by surveyors and engineers in the field. Running the
Microsoft Pocket PC operating system, the Trimble Recon controller enables users
to run the Trimble software of their choice, plus other applications to support
their business needs. The Trimble Recon controller features a touch screen for
quick and easy data entry and a color graphic display. It tackles multiple
surveying applications, including topographic surveying, engineering,
construction, and mapping.

GCS family of Grade Control Systems - Grade control systems meets construction
contractors' needs with productivity-enhancing solutions for earthmoving, site
prep and roadwork. The Trimble(R) GCS family provides upgrade options that
deliver earthmoving contractors with the flexibility to select a system that
meets their daily needs today, and later add on to meet their changing needs.
For example, a single control system such as the GCS300 can provide for low-cost
point of entry into grade control, and over time can be upgraded to the GCS400
dual sensor system, or to the full 3D GCS900 Grade Control System.

Spectra Precision(R) Laser portable tools - Our Spectra Precision Laser
portfolio includes a broad range of laser based tools for the interior, drywalls
and ceilings, HVAC, and mechanical contractor. Designed to replace traditional
methods of measurement and leveling for a wide range of interior construction
applications, our laser tools are easy to learn and use. Our Spectra Precision
Laser product portfolio includes rotating lasers for horizontal leveling and
vertical alignment, as well as laser pointers and a laser based distance
measuring device. They are available through independent and national
construction supply houses both in the US and in Europe.

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.

We use multiple distribution channels to access the agricultural market,
including independent dealers and 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 Novariant.

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, as well as giving the field worker the
ability to download information from the database. 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 Trimble personnel. Primary markets
for our GIS products and solutions include both governmental and commercial
users. Government users are most often municipal governments and natural
resource agencies. Commercial users include utility companies. Competitors in
this market are typically survey instrument companies utilizing GPS technology.
Two examples are Leica Geosystems and Thales.

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(TM) 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, and Andrew.

In the automotive and embedded market, we provide a GPS component that is
embedded into in-vehicle navigation (IVN), fleet management, vehicle security,
asset management and telematics applications. For the automotive market, in
addition to core GPS technology, we provide a location engine for IVN that
blends GPS with advanced dead reckoning (DR) technology to provide exceptional
position density in the most challenging navigation environments. The primary
selling attributes in this market are quality, technology, logistics and
customer support. Trimble supplies several Tier-1 IVN system manufacturers in
Europe and Asia.

* The requirements for smaller size and lower power of GPS components, coupled
with improving capabilities allow GPS to potentially be used in a new class of
wireless devices. Indicative of this trend, in 2004 we announced a new product
category, the TrimTrac, which combines a cellular phone in the same package as a
GPS receiver. We expect our strength in GPS technology will expand our
participation in this market.

* Component Technologies has developed GPS software technologies which it is
making available for license. This software can run on certain digital signal
processors (DSP) or microprocessors removing the need for dedicated GPS baseband

signal processor chips. Component Technologies has a partnership with u-Nav
Microelectronics to license Trimble GPS software technology for u-Nav GPS
chipsets.

* 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) iQ Module - The Lassen iQ 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 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 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 factory installations of our management solution to
ready mix concrete fleet operators. McNeilus', along with a Trimble 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 a
large number of market segments. Here, we leverage the same general applications
that are used in our vertical markets without the same level of customization.
These products are distributed through individual dealers 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 $400 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.

Representative products sold by this segment include:

TrimWeb(TM) and TrimFleet(TM) Systems - Our fleet management service offerings
are comprised of the TrimWeb system and TrimFleet system. The TrimWeb system
provides different levels of service that run from snapshots of fleet activity
to real-time fleet dispatch capability via access to the TrimWeb platform
network through a secure internet connection. The TrimWeb system includes truck
communication service and computer backbone support of the software. The
TrimFleet system offers many of the same features, though the software resides
on the end users servers and is accessed by the customer through their own
internal networks, not via the internet. Variations of the TrimWeb system and
TrimFleet system 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 operations in this segment are
Applanix, Military and Advanced Systems (MAS), and Trimble Outdoors.

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 receivers and embedded modules that use the
military's GPS advanced capabilities. The modules are principally used in
aircraft navigation and timing application. Military products are sold directly
to either the US Government or defense contractors. Sales are also made to
authorized foreign end users. Competitors in this market include Rockwell
Collins, L3, and Raytheon.

During fiscal 2004, we announced our newest business, Trimble Outdoors. Trimble
Outdoors is a consumer business utilizing GPS enabled cell phones to provide
information for outdoor recreational activities.

Representative products sold by this segment include:

Applanix POS/AV(TM) - 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(TM) 5 GS (GRAM-SAASM) 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 on developing and marketing innovative and
complete value-added solutions to our existing customers, while also marketing
them to new customers and geographic regions. In some cases, this 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 more

effectively 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 multiple
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.

GeoNav

* On July 5, 2004 we acquired GeoNav GmbH, a small provider of customized field
data collection solutions for the cadastral survey market in Europe. We expect
the acquisition to augment our capability for localization of our products in
Europe. GeoNav's performance is reported under our Engineering and Construction
segment.

TracerNET Corporation

* On March 5, 2004 we acquired 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 has been integrated into our Mobile Solutions segment.

MENSI S.A.

On December 9, 2003, we acquired MENSI S.A., a French developer of terrestrial
3D laser scanning technology. The MENSI acquisition enhanced our technology
portfolio and expanded our product offerings. MENSI's performance is reported
under our Engineering and Construction segment.

Applanix Corporation

On July 7, 2003, we acquired Applanix Corporation, a Canadian developer of
systems that integrate inertial navigation system and GPS technologies. The
Applanix acquisition extended our technology portfolio and offers increased
robustness and capabilities in our future positioning products. Applanix's
performance is reported under our Portfolio Technologies segment.

Nikon-Trimble Co., Ltd.

On March 28, 2003, Trimble and Nikon Corporation agreed 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, 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
products will broaden our survey and construction product portfolio and enable
us to better access emerging markets such as Russia, China, and India. 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 93 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 and its subsidiaries
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 tailor the distribution channel to the needs of our products and regional
markets through a number of forms of sales channel solutions around the world.
We sell our products worldwide primarily through dealers, distributors, and
authorized representatives, occasionally granting exclusive rights to market
certain products within specific countries. This channel is supported and
supplemented (where third party distribution is not available) by our regional
sales offices in North America, Europe, Australia, China, Korea, New Zealand,
Singapore, and United Arab Emirates. We also utilize distribution alliances, OEM
relationships and joint ventures with other companies as a means to serve
selected markets.

Sales to unaffiliated customers outside the United States comprised
approximately 50% in 2004, 51% in 2003, and 49% in 2002. During the 2004 fiscal
year, North and South America represented 57%, Europe, the Middle East and
Africa represented 30%, and Asia represented 13% of our total revenues.

Support and Warranty

The warranty periods for our products are generally between one and three years.
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. The second quarter has averaged to 26.2% of total revenue in the
last two fiscal years versus a straight line of 25% per quarter.

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 substantially all our GPS products is subcontracted to
Solectron Corporation. During fiscal 2004 we utilized Solectron's Suzhou
facilities in China for all of our Component Technologies products. During 2004
we expanded our use of Solectron in Mexico for our Field Solutions products and
handhelds. 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 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; Jena and Kaiserslautern, Germany; Paris, France; and Toronto,
Canada. Some of these products or portions of these products are also
subcontracted to third parties for assembly.

Our manufacturing sites in Dayton, Ohio; Danderyd, Sweden; Jena and
Kaiserslautern, Germany 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 $77.6
million for fiscal 2004, $67.6 million for fiscal 2003, and $61.2 million for
fiscal 2002.

* 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.

Employees

As of December 31, 2004, we employed approximately 2,160 employees, including
31% in sales and marketing, 27% in manufacturing, 28% in engineering, and 14% in
general and administrative positions. Approximately 44% 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 web site 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 web site 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, 2005 are as follows:

Name Age Position
- ---- --- --------
Steven W. Berglund 53 President and Chief Executive Officer
Rajat Bahri 40 Chief Financial Officer
William C. Burgess 58 Vice President, Human Resources
Joseph F. Denniston, Jr. 44 Vice President, Operations
Bryn A. Fosburgh 42 Vice President and General Manager,
Engineering and Construction
Mark A. Harrington 49 Vice President, Strategy and Business
Development
John E. Huey 55 Treasurer
Irwin L. Kwatek 65 Vice President and General Counsel
Michael W. Lesyna 44 Vice President, Business Transformation
Bruce E. Peetz 53 Vice President, Advanced Technology and
Systems
Anup V. Singh 34 Vice President and Corporate Controller
Alan R. Townsend 56 Vice President and General Manager,
Field Solutions
Dennis L. Workman 60 Vice President and General Manager,
Component Technologies

Steven W. Berglund - Steven Berglund has served as president and chief executive
officer of Trimble since 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.

Rajat Bahri - Rajat Bahri joined Trimble as Chief Financial Officer in January
2005. Prior to joining Trimble, Mr. Bahri served for more than 15 years in
various capacities within the financial organization of several subsidiaries of
Kraft Foods, Inc. and General Foods Corporation. Most recently, he served as the
chief financial officer for Kraft Canada, Inc. From June 2000 to June 2001 he
served as chief financial officer of Kraft Pizza Company. From 1997 to 2000, Mr.
Bahri was Operations Controller for Kraft Jacobs Suchard Europe. Mr. Bahri holds
a Bachelor of Commerce from the University of Delhi in 1985 and an M.B.A. from
Duke University in 1987.

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 joined Trimble in 1994 as a technical service
manager for surveying, mining, and construction. 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. From October 1999 to July 2002, he
served as division vice president of survey and infrastructure. From 2002 to
2005, Mr. Fosburgh served as vice president and general manager of Trimble's
Geomatics and Engineering (G&E) business area, with responsibility for all the
division-level activities associated with survey, construction, and
infrastructure solutions. In January 2005, he was appointed vice president and
general manager of the Engineering and Construction Division. Prior to Trimble,
he was a civil engineer with the Wisconsin Department of Transportation
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 U.S. 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 joined Trimble in September 1999 as vice
president of strategic marketing. In September 2000, he was appointed vice
president and general manager of the Mobile Solutions Division. In July 2004,
Lesyna was appointed vice president of Business Transformation. In this
cross-divisional role he focuses on driving operational improvements based on
the marketing, sales and distribution channel strategies of Trimble's business
segments. The scope of his work includes tailored business prioritization as
well as lean manufacturing and lean overhead principles. 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 joined Trimble in December 2001 as corporate
controller. In August 2004 he was appointed vice president and corporate
controller. 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.

Alan R. Townsend - Alan Townsend has served as vice president and general
manager of the Field Solutions business area since November 2001. 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 2004.

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 sale prices for our common stock as reported on the NASDAQ
National Market.

2004 2003
Sales Price Sales Price
Quarter Ended High Low High Low
------------- ---- --- ---- ---
First quarter $28.78 $20.15 $14.17 $8.68
Second quarter 29.50 22.43 18.50 12.43
Third quarter 32.16 21.55 19.57 14.97
Fourth quarter 34.45 24.56 25.60 13.49

As of December 31, 2004, there were approximately 1,075 holders of record of our
common stock.

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 December 31, 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. See Note 15 of the Notes to the Consolidated Financial
Statements for a summary of our 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 Statements of Income 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.

(1) 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.

(2) We have reclassified deferred revenues previously included in accounts
receivable, net to the liabilities section in the Consolidated Balance
Sheets in fiscal year 2004. All prior periods have been changed to reflect
this reclassification.

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

Trimble's foundation remains positioning technology. We have augmented this
technology with wireless communication and software capabilities in order to
enable us to participate in a wider number of markets and to play a more central
role in those markets. Our efforts to market these technologies can generally be
characterized as falling into the categories of either end user markets or
component markets. The Engineering and Construction, Field Solutions, and Mobile
Solutions segments can be broadly described as end user markets and the
Component Technologies and Portfolio Technologies segments can be described as
components markets. In the end user markets we provide a value added solution to
the end user. Typically this requires a solution that includes a hardware
platform, significant applications software, and substantial levels of customer
support. In the components businesses, we typically sell to another company that
adds significant value and brings the solution to the end user.

The segments constituting the end user, solutions activities, make up over 80%
of our revenue. The critical success factors in these businesses center around
attaining a significant understanding of the end users' needs, applying that
knowledge to create highly innovative products, integrating those products into
an effective system, and establishing a proficient global, third-party
distribution.

The components businesses require different characteristics to be successful.
The customer is typically an OEM, system integrator, or other third party that
integrates our components into a system. To satisfy this customer group, our
focus is on price, product functionality, and quality. With recent product
introductions we have begun to add higher functionality into our products in
order to provide greater value and potentially capture higher average selling
prices for our offerings. For example, our 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.

During 2004 we continued to execute our strategy with a series of actions that
can be summarized in four categories.

Reinforcing our position in existing markets

Generally, we believe that our markets provide us with additional, substantial
potential for substituting our technology for traditional methods. In 2004 we
continued to develop new products and to strengthen our distribution channels to
realize these opportunities. The acquisitions of GeoNav and TracerNET provided
us with additional software capability and applications knowledge. A number of
new products, such as the Easy Guide Plus, strengthened our competitive position
and created new value for the user. The first full year of operation of our
joint venture with Nikon proved successful in extending our position in
surveying instruments.

Extend our position in existing markets through new product categories

We are utilizing the strength of the Trimble brand in our markets to expand our
revenues by bringing new products to existing users. A 2004 example was the
introduction of asset and fleet management services to the construction
industry.

Bring existing technology to new markets

We continue to reinforce our position in existing markets, and 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.

Pioneer completely new markets

In 2004 we introduced the TrimTrac product and Trimble Outdoors. Both products
embed new feature sets and are intended to address markets not traditionally
served by Trimble.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

Our accounting policies are more fully described in Note 2 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. 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
$123.9 million as of December 31, 2004, compared with $104.6 million as of
January 2, 2004. The allowance for doubtful accounts as of December 31, 2004 was
$9.0 million, compared with $10.0 million as of January 2, 2004. We evaluate the
collectibility of our trade accounts receivable based on a number of factors
such as age of the accounts receivable balances, credit quality, historical
experience, and current economic conditions that may affect a customer's ability
to pay. 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 December 31, 2004 and January 2, 2004 included $2.2 million
and $3.3 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 inventories, net balance was $87.7 million as of December 31, 2004, compared
with $70.8 million as of January 2, 2004. Our inventory allowances as of
December 31, 2004 were $26.2 million, compared with $25.9 million as of January
2, 2004. Our inventory is recorded at the lower of standard cost or market (net
realizable value). We generally 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 based on estimated excess and obsolete inventories determined primarily by
future demand forecasts. If actual future demand or market conditions are less
favorable than those projected by us, additional inventory write-downs may be
required.

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.

The valuation allowance decreased by $21.8 million in fiscal 2004 and $13.1
million in fiscal 2003. Approximately $8 million of the valuation allowance at
December 31, 2004 and $14.1 million at January 2, 2004 relates to the tax
benefit of stock option deductions, which will be credited to equity if and when
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.

Goodwill Impairment

Goodwill as of December 31, 2004 was $259.5 million, compared with $241.4
million as of January 2, 2004. We performed goodwill impairment tests at the end
of the fiscal third quarter of 2004 and 2003 for each reporting unit and found
there was no impairment of our goodwill. We will continue to evaluate our
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.

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 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 $6.4 million as of December 31, 2004,
compared with $5.1 million as of January 2, 2004. (See Note 2 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. 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, technical support labor costs, and costs incurred by third
parties performing warranty work on our behalf. Our expected future 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 15 of the Notes to the Consolidated Financial Statements describes
the plans we operate, and Note 2 of the Notes to the Consolidated Financial
Statements contains a summary of the pro forma effects to reported net income
and earnings per share for fiscal 2004, 2003, and 2002 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 5 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 December 31, 2004, the balance of the unamortized deferred gain was $9.2
million.

RECENT BUSINESS DEVELOPMENTS

Trimble Outdoors

During the fourth quarter of fiscal 2004, we announced our newest business,
Trimble Outdoors. Trimble Outdoors is a consumer business utilizing GPS enabled
cell phones to provide information for outdoor recreational activities. Trimble
Outdoors performance is reported under our Portfolio segment.

GeoNav

* On July 5, 2004 we acquired GeoNav GmbH, a small provider of customized field
data collection solutions for the cadastral survey market in Europe. We expect
the acquisition to augment our capability for localization of our products in
Europe. GeoNav's performance is reported under our Engineering and Construction
segment.

TracerNET Corporation

* On March 5, 2004 we acquired 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 is reported under our Mobile Solutions segment.

Pacific Crest Corporation

* On January 10, 2005 we acquired Pacific Crest Corporation of Santa Clara, a
supplier of wireless data communication systems for positioning and
environmental monitoring applications. We expect the Pacific Crest acquisition
to further enhance our wireless data communications capabilities in the
Engineering and Construction business segment.

RESULTS OF OPERATIONS

Overview

The following table is a breakdown of revenue and operating income for the
periods indicated and should be read in conjunction with the narrative
descriptions below.

December 31, January 2, January 3,
Fiscal Years Ended 2004 2004 2003
- ------------------ ---- ---- ----
(Dollars in thousands)

Total consolidated revenue $ 668,808 $ 540,903 $ 466,602
Gross Margin $ 324,810 $ 268,030 $ 234,432
Total consolidated operating income $ 117,405 $ 83,586 $ 62,320

Basis of Presentation

We have a 52-53 week fiscal year, ending on the Friday nearest to December 31,
which for fiscal 2004 was December 31, 2004. Fiscal 2004 and fiscal 2003 were
52-week years 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.

Impact of Weaker US Dollar on Operating Results in Fiscal 2004

The depreciation of the US dollar versus major European currencies positively
impacted revenues by approximately $12.6 million in fiscal 2004 when compared
with rates used throughout fiscal 2003. 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 $3.0 million in fiscal 2004 when compared with
rates used throughout fiscal 2003.

Revenue

In fiscal 2004, total revenue increased by $127.9 million or 23.6% to $668.8
million from $540.9 million in fiscal 2003. The increase in fiscal 2004 was
primarily due to stronger performances in most of our operating segments driven
by the new product offerings and increased penetration in the markets we serve
(primarily Engineering and Construction and Field Solutions), expanded
distribution and selective acquisitions (primarily Mobile Solutions and
Portfolio Technologies), as well the positive impact of the weaker US dollar on
revenues generated in foreign currencies, primarily the Euro. Total revenue in
fiscal 2003 increased by $74.3 million or 15.9% to $540.9 million from $466.6
million in fiscal 2002. This increase was primarily due to the same factors
outlined above as all of our operating segments demonstrated stronger
performances versus prior periods.

* Total revenue outside the United States comprised approximately 50% in 2004,
51% in 2003, and 49% in 2002. During the 2004 fiscal year, North and South
America represented 57%, Europe, the Middle East and Africa represented 30%, and
Asia represented 13% of total revenues. In fiscal 2004, the United States
comprised approximately 50% of total revenues. We anticipate that sales to
international customers will continue to account for a significant portion of
our revenue.

* No single customer accounted for 10% or more of our total revenues in fiscal
2004, 2003, and 2002. 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,
pricing, distribution channel used, the effects of production volumes, new
product start-up costs, and foreign currency translations. Gross margin as a
percentage of total revenues was 48.6 % in fiscal 2004 and 49.6% in fiscal 2003.
The decrease in gross margin percentage for fiscal 2004, compared with fiscal
2003, was due to changes in the mix of products sold, principally related to
increased sales of lower margin Nikon-branded survey and construction products,
our agriculture products, pricing pressure in our Component Technologies
business (which typically demonstrates increased unit volumes coupled with
declining unit prices), the impact of the weaker US dollar on our non US
manufacturing, and distribution costs.

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 was responsible for a margin decline
of approximately 0.8%. This was partially offset by stronger sales of handheld
survey products, GIS, wireless infrastructure, survey products as well as our
ongoing focus on product cost reductions.

* Because of potential product mix changes within and among the industry
markets, market pressures on unit selling prices, fluctuations in unit
manufacturing costs, including increases in component prices and other factors,

current level gross margins cannot be assured. In addition, should the global
economic conditions deteriorate, gross margin could be further adversely
impacted.

Operating Income

Operating income as a percentage of total revenue was 12.8% in fiscal 2004
compared to 10% in fiscal 2003 and 7.2% in fiscal 2002. The increase is driven
by disciplined management of operating expenses and greater leverage due to
revenue growth. The operating expenses represented 35.8% of total revenue in
fiscal 2004 as compared to 39.6% in fiscal 2003.

Results by Segment

To achieve distribution, marketing, production, and technology advantages in our
targeted markets, we manage our operations in the following five segments:
Engineering and Construction, Field Solutions, Component Technologies, Mobile
Solutions, and Portfolio Technologies. Operating income (loss) is net revenue
less operating expenses, excluding general corporate expenses, amortization of
purchased intangibles, restructuring charges, non-operating income (expense),
and income taxes.

The following table is a breakdown of revenue and operating income by segment
for the periods indicated and should be read in conjunction with the narrative
descriptions below.

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

Engineering and Construction

Engineering and Construction revenues increased by $73.4 million or 20% while
segment operating income increased by $18.8 million or 31.1% for fiscal 2004 as
compared to fiscal 2003. The relatively strong environment of fiscal 2003
continued into fiscal 2004, resulting in continued robust demand for survey,
machine control, and laser products. In addition, the full year effects for
Nikon-branded products contributed to the year over year increase. Targeted new
product introductions, such as the 5500 Servo Driven Station, provided improved
market penetration. The weaker US dollar also contributed to increased revenues
in this operating segment. Operating income increased at a higher rate than
revenue growth due to greater operating leverage on expenses.

Engineering and Construction revenues increased by $47.4 million or 14.8% during
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.

Field Solutions

Field Solutions revenues increased by approximately $25.7 million or 32.2% while
segment operating income increased by $10.7 million or 73.5% for fiscal year
2004 as compared to fiscal 2003. Revenues increased primarily as a result of
higher demand for both automated and manual guidance products in the
agricultural market. In particular, revenues were enhanced by the introduction
of EZ-Guide(R) Plus. We saw increases in our GIS product lines due to increases
in our dealer and distributor business. Additionally, programs designed to
expand our distribution channel by supplementing adding value-added, solutions
focused business partners to our traditional dealer profile were successful. In
addition, we saw improved results in Europe and increased opportunities in
China. Increases in segment operating income were primarily due to higher
revenues.

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.

Component Technologies

Component Technologies revenues increased by $1.3 million or 2.1%, while segment
operating income decreased by $2.7 million or 16.2% for the fiscal year 2004 as
compared to fiscal 2003. Revenues increased primarily due to higher demand from
vehicle navigation and tracking customers, partially offset by the decline in
demand from wireless infrastructure customers. The segment operating income
decrease was primarily due to pricing pressures from the embedded and in-vehicle
navigation product lines, a less favorable product mix, and increased spending
for development of new categories of products.

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.

Mobile Solutions

Mobile Solutions revenues increased by $10.6 million or 81.3% in fiscal 2004
over fiscal 2003 due primarily to increases sales into the construction
materials market, higher dealer sales and a significant enterprise sale. During
the first quarter of fiscal 2004, we completed the acquisition of TracerNET to
strengthen our presence in this segment. The benefits of the integration were
not fully reflected until the fourth quarter of fiscal 2004 and the full year
impact of these activities will not be realized until fiscal 2005. Segment
operating loss decreased by $0.5 million or 7.1% in fiscal 2004 over fiscal 2003
due to increased revenues which was largely offset by increased expenses related
to the integration of the TracerNET acquisition.

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.

Portfolio Technologies

Portfolio Technologies revenues increased by $16.9 million or 100.6% while
segment operating income increased by $6.6 million or 388.6% for fiscal 2004 as
compared to fiscal 2003. The increases in revenues and operating income were
primarily due to the inclusion of full year results of Applanix, acquired in
July 2003, and higher sales of our military and advanced systems products.

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.

Research and Development, Sales and Marketing, and General and Administrative
Expenses

The following table shows research and development ("R&D"), sales and marketing,
and general and administrative ("G&A") expenses in absolute dollars and as a
percentage of total net revenues for the fiscal years ended 2004, 2003 and 2002
and should be read in conjunction with the narrative descriptions of those
operating expenses below.

Overall, R&D, sales and marketing, and G&A increased by approximately $25.5
million in fiscal 2004 compared to fiscal 2003. Incremental expenses arising
from acquisitions were approximately $13.7 million and the impact of the weaker
US dollar on non US operating expenses were approximately $7.6 million.

Research and development expenses increased by $9.9 million in fiscal 2004
compared to fiscal 2003 primarily due to sustaining engineering expenses and
costs incurred related to new product development, continued investment in next
generation technologies, and the effect of foreign currency fluctuations.

Research and development expenses increased by $6.4 million in fiscal 2003
compared to 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 its
acquisition in July 2003.

* Overall spending remained relatively constant at approximately 13% of
revenues. We expect to continue to devote resources to the development of new
products and the enhancement of existing products. We believe that research and
development is critical to our strategic product development objectives and that
to leverage our leading technology and meet the changing requirements of our
customers, we will need to fund investments in several development projects in
parallel.

Sales and marketing expenses increased by $10.2 million in fiscal 2004 compared
to fiscal 2003, but decreased as a percent of total revenues. The majority of
the increase was due to the increase in revenue, promotional programs associated
with new products, and the foreign exchange impact on expenses in our non US
operations.

Sales and marketing expenses increased by $8.5 million in fiscal 2003 compared
to 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.

* We intend to continue to focus and expand our sales and marketing efforts
across all the geographies and markets we serve in order to increase market
awareness of our products and to better support our existing customers
worldwide. 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 expenses increased by $5.4 million in fiscal 2004
compared to fiscal 2003 primarily due to the inclusion of G&A expenses from
acquisitions, compliance with Sarbanes-Oxley, and bad debt expenses of $1.2
million. Spending overall remained relatively constant at approximately 7% of
revenues.

General and administrative expenses in fiscal 2003 decreased by $1.4 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.

Other Operating Expenses

Restructuring Charges

Restructuring charges of $0.6 million, $2.0 million, and $1.1 million were
recorded in fiscal years 2004, 2003 and 2002, respectively. The charges in
fiscal 2004 were primarily related to severance costs due to the realignment of
Trimble Mobile Solutions, Inc., while charges in fiscal 2003 were primarily
related to our Japanese office relocation due to the Nikon-Trimble joint venture
formation As a result of these actions, the headcount of the affected operations
decreased by 36, 77 and 49 in fiscal 2004, 2003, and 2002, respectively. As of
December 31, 2004, the remaining accrual balance of $0.4 million is primarily
related to severance expected to be paid in fiscal 2005.

Amortization of Purchased and Other Intangible Assets

Amortization expense of purchased and other intangibles represented 1.3% of
revenue in fiscal 2004, having increased $0.6 million from fiscal 2003 when it
represented 1.5% of revenue.

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

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:

Non-operating expense, net decreased by $7.6 million or 42% during fiscal 2004
as compared with fiscal 2003 primarily due to lower interest expense after the
repayment of the principal balance of a subordinated note in June 2003, the
write off of $2.3 million of debt issuance costs as a result of our debt
refinancing in June 2003 and $1.3 million related to the write off of the
remaining unamortized portion of the warrants issued to Spectra Physics
Holdings, Inc. The increases in expense for affiliated operations were primarily
due to our higher construction machine control revenues which led to increased
impact from the pricing effects of transactions between us and the Caterpillar
joint venture. (See Note 5 of the Notes to the Consolidated Financial Statements
for financial information regarding joint ventures). This was partially offset
by $1.1 million related to our share of profits in the Nikon-Trimble joint
venture. The increase in other income (expense) was primarily due to a net gain
related to the sale of an investment.

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. 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 a subordinated note.

Income Tax Provision

Our effective income tax rates for fiscal years 2004, 2003 and 2002 were 10%,
(8%) and 25%, respectively. The fiscal 2002 income tax rate differs 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 2004 and 2003 income tax rates
are 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.

* We expect our effective income tax rate to go up in fiscal year 2005 because
of the significant realization of the valuation allowance for deferred taxes in
fiscal year 2004. The Company expects its effective income tax rate to
approximate 35%.

* In October 2004, The American Jobs Creation Act of 2004 was signed into law
providing changes in the tax law including an incentive to repatriate
undistributed earnings of foreign subsidiaries. We are currently evaluating the
potential impact of these provisions, including assessing the details of the
Act, analyzing the funds available for repatriation, the economic cost of doing
so and assessing the qualified uses of repatriated funds. However, given the
preliminary stage of our evaluation, it is not possible to determine the impact
to our fiscal year 2005 income tax provision. The Company expects to complete
its evaluation by September 30, 2005.

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 ARRANGEMENTS

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

(1) We have reclassified deferred revenues previously included in accounts
receivable, net to the liabilities section in the Consolidated Balance
Sheets in fiscal year 2004 and for all periods presented. As such, the DSO
calculation for all fiscal periods has been restated.

Cash and Cash Equivalents

In fiscal 2004, our cash and cash equivalents increased by $26.5 million from
fiscal 2003. The increase was primarily due to cash generated by operating
activities, partially offset by cash used in investing activities for
acquisitions and cash used in financing activities for debt repayment.

In fiscal 2004, cash provided by operating activities was $73.1 million, as
compared to $36.5 million in fiscal 2003. The increase of $36.7 million was
primarily driven by the $29.2 million increase in net income during fiscal 2004
compared to fiscal 2003 and better management of working capital. 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 decreased from 65 days at the end of
fiscal 2003 to 61 days at the end of fiscal 2004. Our inventory turns was
unchanged at four at the end of fiscal 2004 and 2003.

Cash used in investing activities was $25.1 million in fiscal 2004 as compared
to $22.7 million in fiscal 2003. The increase was primarily due to cash
acquisitions and investment in capital equipment. During fiscal 2004, we spent
approximately $12.8 million on capital expenditures.

Cash used in financing activities was $24.2 million in fiscal 2004 as compared
to $54,000 in fiscal 2003. However, during fiscal 2004, we repaid approximately
$65.2 million of debt related to our previous Credit Facility. These debt
payments were funded by cash provided by operating activities, and the issuance
of common stock to employees pursuant to our stock option plan and employee
stock purchase plan of approximately $26.8 million.

* 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 December 31, 2004, we had $71.9 million of
cash and cash equivalents as well as access to $118 million of cash under the
terms of our revolver loans.

* We expect fiscal 2005 capital expenditures to be approximately $14 million to
$15 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 2004, our total debt was approximately $39 million as
compared with approximately $90.5 million at the end of fiscal 2003. This
balance primarily consists of $31.3 million outstanding under a term loan and $7
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 a subordinated note used to
finance the Spectra Physics acquisition.

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 December 31, 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 two
fiscal years (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 contractual obligations at December 31, 2004:

(1) Total excludes contractual obligations already recorded on our balance sheet
as current liabilities, or certain obligations as discussed below.

* As of December 31, 2004, $22.6 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 the debt. We have assumed a
three-month LIBOR rate of 2.56% for the first quarter of fiscal 2005 and have
forecasted an increase of 25 basis point quarter over quarter to a maximum of
4.81%. (See Note 9 of the Notes to the Consolidated Financial Statements for
further financial information regarding long-term debt)

Other purchase obligations and commitments represent open purchase orders for
material purchases with our customers and a forecasted commitment with a
supplier for outsourced services as described in Note 10 of the Notes to the
Consolidated Financial Statements. 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 16 of the Notes to the
Consolidated Financial Statements.

NEW ACCOUNTING STANDARDS

In December 2004, the FASB issued SFAS No. 123R, "Share-Based Payment." SFAS No.
123R requires employee stock options and rights to purchase shares under stock
participation plans to be accounted for under the fair value method, and
eliminates the ability to account for these instruments under the intrinsic
value method prescribed by APB Opinion No. 25, and allowed under the original
provisions of SFAS No. 123. SFAS No. 123R requires the use of an option pricing
model for estimating fair value, which is amortized to expense over the service
periods. The requirements of SFAS No. 123R are effective for fiscal periods
beginning after June 15, 2005. If we had applied the provisions of SFAS No. 123R
to the financial statements for the period ending December 31, 2004, assuming
that adoption would result in amounts similar to the current pro forma
disclosures under SFAS 123R, net income would have been reduced by approximately
$8.6 million. SFAS No. 123R allows for either prospective recognition of
compensation expense or retrospective recognition, which may be back to the
original issuance of SFAS No. 123 or only to interim periods in the year of
adoption. We are currently evaluating these transition methods.

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, Weather, 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 Specific Manufacturer and Assembler for Many of Our
Products and on Specific Suppliers of Critical Parts for Our Products.

We are substantially dependent upon Solectron Corporation in California, China
and Mexico as our preferred 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.

In addition, we rely on specific suppliers for a number of our critical
components. We have experienced shortages of components in the past. Our current
reliance on specific 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
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-branded products generally have
lower gross margins as compared to our GPS survey products. Absent other
factors, a shift in sales towards Nikon-branded products would lead to a
reduction in our overall gross margins. A decline in gross margin could
potentially negatively impact our earnings per share.

Failure to maintain effective internal controls in compliance with Section 404
of the Sarbanes-Oxley Act could have an adverse effect on our business and stock
price.

Section 404 of the Sarbanes-Oxley Act requires us to include an internal control
report of management in our Annual Report on Form 10-K. For fiscal 2004 we
satisfied the requirements of Section 404, which requires annual management
assessments of the effectiveness of our internal controls over financial
reporting and a report by our independent auditors addressing these assessments.

A system of controls, however well designed and operated, cannot provide
absolute assurance that the objectives of the system will be met. In addition,
the design of a control system is based in part upon certain assumptions about
the likelihood of future events. Because of the inherent limitations of control
systems, there is only reasonable assurance that our controls will succeed in
achieving their stated goals under all potential future conditions.

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.

Our products may contain errors or defects, which could result in damage to our
reputation, lost revenues, diverted development resources and increased service
costs, warranty claims and litigation.

Our devices are complex and must meet stringent requirements. We warrant that
our products will be free of defect for various periods of time, depending on
the product. In addition, certain of our contracts include epidemic failure
clauses. If invoked, these clauses may entitle the customer to return or obtain
credits for products and inventory, or to cancel outstanding purchase orders
even if the products themselves are not defective.

We must develop our products quickly to keep pace with the rapidly changing
market, and we have a history of frequently introducing new products. Products
and services as sophisticated as ours could contain undetected errors or
defects, especially when first introduced or when new models or versions are
released. In general, our products may not be free from errors or defects after
commercial shipments have begun, which could result in damage to our reputation,
lost revenues, diverted development resources, increased customer service and
support costs and warranty claims and litigation which could harm our business,
results of operations and financial condition.

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 kinematic precision. The continuing availability
of these non-GPS radio frequencies is essential to provide enhanced GPS products
to our precision survey and construction machine controls 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, and surveying and mapping
systems 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. 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 29 satellites in place, some have already been in
operation for 12 years. To repair damaged or malfunctioning satellites is
currently not economically feasible. If a significant number of satellites were
to become inoperable, there could be a substantial delay before they are
replaced with new satellites. A reduction in the number of operating satellites

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
reaffirmed in 2004. 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.

The European governments have begun development of an independent satellite
navigation system, known as Galileo. We believe we will have access to the
signal design to develop compatible receivers. However, if access to the signal
structure is delayed it may have a materially adverse effect on our business and
operating results.

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 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. An event of default under any debt instrument, if not cured or waived,
could have a material adverse effect on us.

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. Problems associated with any improvement or expansion of these
systems, procedures or controls may adversely affect our operations and these
systems, procedures or controls 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 locations 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 50% of our revenues in our fiscal
year 2004, 51% of our revenues in our fiscal year 2003, and 49% in our fiscal
year 2002, respectively. In addition, we have significant international
operations, including a joint venture, manufacturing facilities, sales personnel
and customer support operations. We have sales offices outside the US. Our
non-US manufacturing facilities are in Sweden, Canada, France, 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 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
2004, the US dollar continued to weaken against several major currencies in
which we do business, adversely impacting our financial results. The weaker US
dollar negatively impacts our operating income due to significant manufacturing,
distribution, research and development, and selling expenses incurred outside of
the US, while the weaker US dollar positively impacts our revenues generated in
foreign currencies, primarily the Euro.

Currently, we hedge only those currency exposures associated with certain assets
and liabilities denominated in non-functional currencies. 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,
some of our products that use integrated radio communication technology require
an end user to obtain licensing from the Federal Communications Commission (FCC)
for frequency-band usage. These are secondary licenses that are subject to
certain restrictions. During the fourth quarter of 1998, the FCC temporarily
suspended the issuance of licenses for certain of our real-time kinematic
products because of interference with certain other users of similar radio
frequencies. An inability or delay in obtaining such certifications or changes
to the rules by the FCC could adversely affect our ability to bring our products
to market which could harm our customer relationships and have a material
adverse effect on our business.

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

The market price of our common stock has been, and may continue to be, highly
volatile. During fiscal 2004, our stock price ranged from $20.15 to $34.45. 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 may be Materially Affected by New Regulatory Requirements.

We face increasing complexity in our product design and procurement operations
as we adjust to new and upcoming requirements relating to the materials
composition of many of our products. The European Union ("EU") has adopted two
directives to facilitate the recycling of electrical and electronic equipment
sold in the EU. The first of these is the Waste Electrical and Electronic
Equipment (WEEE) directive, which directs EU member states to enact laws,
regulations, and administrative provisions to ensure that producers of
electrical and electronic equipment are financially responsible for specified
collection, recycling, treatment and environmentally sound disposal of products
placed on the market after August 13, 2005 and from products in use prior to
that date that are being replaced. The EU has also adopted the Restriction on
the Use of Certain Hazardous Substances in Electrical and Electronic Equipment
("RoHS") directive. The RoHS directive restricts the use of lead, mercury and
certain other substances in electrical and electronic products placed on the
market in the European Union after July 1, 2006.

Similar laws and regulations have been or may be enacted in other regions,
including in the United States, China and Japan. Other environmental regulations
may require us to reengineer our products to utilize components which are more
environmentally compatible and such reengineering and component substitution may
result in additional costs to us. Although we do not anticipate any material
adverse effects based on the nature of our operations and the effect of such
laws, there is no assurance that such existing laws or future laws will not have
a material adverse effect on our business.

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 $7 million,
while the term loan matures on June 25, 2007 and has an outstanding principal
balance of $31.25 million, as of December 31, 2004 (all in US currency only).
The three-month LIBOR effective rate at December 31, 2004 was 2.56%. A
hypothetical 10% increase in three-month LIBOR rates could result in
approximately $98,000 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 December 31, 2004 and
January 2, 2004 are summarized as follows (in thousands):

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

TRIMBLE NAVIGATION LIMITED
INDEX TO FINANCIAL STATEMENTS

Consolidated Balance Sheets at December 31, 2004 and January 2, 2004..........44

Consolidated Statements of Income for each of the three fiscal years
in the period ended December 31, 2004......................................45

Consolidated Statement of Shareholders' Equity for each of the three
fiscal years in the period ended December 31, 2004.........................46

Consolidated Statements of Cash Flows for each of the three fiscal years
in the period ended December 31, 2004......................................47

Notes to Consolidated Financial Statements....................................48

Reports of Ernst & Young LLP, Independent Registered Public Accounting Firm...72

Item 8. Financial Statements and Supplementary Data

CONSOLIDATED BALANCE SHEETS

See accompanying Note to the Consolidated Financial Statements.

CONSOLIDATED STATEMENTS OF INCOME

(1) Sales to related parties were $7.6 million, $4.0 million, and $0 in fiscal
2004, 2003 and 2002, respectively, while cost of sales to those related parties
were $3.8 million, $1.9 million, and $0 in fiscal 2004, 2003 and 2002,
respectively. See Note 5 to these Consolidated Financial Statements for a
discussion of related parties.

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: DESCRIPTION OF BUSINESS

Trimble Navigation Limited began operations in 1978 and incorporated in
California in 1981. Trimble provides advanced positioning product solutions,
most typically to commercial and government users. The principal applications
served include surveying, construction, agriculture, urban and natural resource
management, defense, and fleet and asset management. The Company's products
typically provide its customers benefits that can include lower costs, and
higher productivity. Examples of products include systems that guide
agricultural and construction equipment, surveying instruments, systems that
track fleets of vehicles, and data collection systems that enable the management
of large amounts of geo referenced information. In addition, the Company also
manufactures components for in vehicle navigation and telematics systems, and
timing modules used in the synchronization of wireless networks.

NOTE 2: 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.
Estimates are used for revenue recognition, allowances for doubtful accounts,
sales returns reserve, allowances for inventory valuation, warranty costs,
investments, goodwill impairments, and income taxes among others. The actual
results experienced by the Company may differ materially from management's
estimates.

Basis of Presentation

Trimble has a fiscal year that ends on the Friday nearest to December 31. Fiscal
2004, a 52-week year, ended on December 31, 2004 and fiscal 2003, also a 52-week
year, ended on January 2, 2004. Fiscal year 2002 was a 53-week year that ended
on January 2, 2003. 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.

These 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. The Company has reclassified deferred revenues
previously included in accounts receivable, net to the liabilities section in
the Consolidated Balance Sheets in fiscal year 2004 and for all periods
presented.

Foreign Currency Translation

Assets and liabilities of non-U.S. subsidiaries that operate in local currencies
are translated to U.S. dollars at exchange rates in effect at the balance sheet
date, with the resulting translation adjustments directly recorded to a separate
component of accumulated other comprehensive income. Income and expense accounts
are translated at average exchange rates during the year. Where the U.S. dollar
is the functional currency, translation adjustments are recorded in foreign
currency transaction loss, net.

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.

Fair Value of Financial Instruments

The fair value of certain of the Company's financial instruments, including cash
and cash equivalents, and other accrued liabilities approximate cost because of
their short maturities. The fair value of investments is determined using quoted
market prices for those securities or similar financial instruments.

Concentration of Risk

Cash and cash equivalents are maintained with several financial institutions.
Deposits held with banks may exceed the amount of insurance provided on such
deposits. Generally, these deposits may be redeemed upon demand and are
maintained with financial institutions of reputable credit and therefore bear
minimal credit risk.

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.

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 such as age of the accounts receivable balances, credit
quality, historical experience, and current economic conditions that may affect
a customer's ability to pay. 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.

Inventories

Inventories are stated at the lower of standard cost or market (net realizable
value). Standard costs approximate actual costs, which are generally on a
first-in, first out basis. 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 inventory allowances based on excess and obsolete inventories
determined primarily by future demand forecasts. If actual future demand or
market conditions are less favorable than those projected by management,
additional inventory write-downs may be required.

Software Development Costs

Software development costs for internal use required to be capitalized pursuant
to Statement of Position No. 98-1, "Accounting for the Costs of Computer
Software Developed or Obtained for Internal Use," have not been material to
date.

Goodwill, Purchased Intangible Assets and Long-Lived Assets

Intangible assets include goodwill, assembled workforce, distribution channels,
patents, licenses, technology, acquired backlog 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.

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 annual impairment test of
goodwill at the end of the third fiscal quarter of 2004, 2003 and 2002,
respectively, and found there was no impairment of goodwill. 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.

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 typically 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.

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
estimated future returns is recorded as a reduction of our accounts receivable
and revenue. If the actual returns were to deviate from the historical data on
which the sales reserve had been established, the Company's revenue could be
adversely affected.

Support and Warranty

The Company accrues for warranty costs as part of its cost of sales based on
associated material product costs, technical support labor costs, and costs
incurred by third parties performing work on Trimble's behalf. The products sold
are generally covered by a warranty for periods ranging from 90 days to three
years, and in some instances up to 5.5 years.

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
December 31, 2004 and January 2, 2004, are as follows:

December 31, January 2,
Fiscal Years Ended 2004 2004
- ------------------ ---- ----
(In thousands)

Beginning balance $ 5,147 $ 6,394
Warranties accrued 7,333 4,417
Warranty claims (6,055) (5,664)
------- -------
Ending Balance $ 6,425 $ 5,147
============ ==========

Guarantees, Including Indirect Guarantees of Indebtedness of Others

In the normal course of business to facilitate sales of its products, the
Company indemnifies other parties, 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 losses arising from
a breach of representations or covenants, or out of intellectual property
infringement or other claims made against certain parties. These agreements may
limit the time within which an indemnification claim can be made and the amount
of the claim. In addition, the Company has entered into indemnification
agreements with its officers and directors, and the Company's bylaws contain
similar indemnification obligations to the Company's agents.

It is not possible to determine the maximum potential amount under these
indemnification agreements due to the limited history of prior indemnification
claims and the unique facts and circumstances involved in each particular
agreement. Historically, payments made by the Company under these agreements
were not material and no liabilities have been recorded for these obligations on
the Consolidated Balance Sheets as of December 31, 2004 and January 2, 2004.

Advertising Costs

The Company expenses all advertising costs as incurred. Advertising expenses
were approximately $9.5 million, $9.2 million, and $6.3 million in fiscal 2004,
2003, and 2002, respectively.

Research and Development Costs

Research and development costs are charged to expense as incurred. The Company
received third party funding of approximately $7.7 million, $4.9 million, and
$5.3 million in fiscal 2004, 2003, and 2002, respectively. The Company offsets
research and development expenses with any third party funding received. The
Company retains the rights to any technology developed under such arrangements.

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
15 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 and earnings 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.

Under the Black-Scholes option pricing model, the weighted-average estimated
values of employee stock options granted during fiscal years 2004, 2003, and
2002 were $13.85, $10.03, and $5.64, respectively. The value of each option
grant is estimated on the date of grant using the Black-Scholes option pricing
model with the following weighted-average assumptions:

An analysis of historical information is used to determine the Company's
assumptions, to the extent that historical information is relevant, based on the
terms of the grants being issued in any given period. The expected life for
options granted reflects options granted to existing employees that generally
vest ratably over five years from the date of grant.

Under the Employee Stock Purchase Plan, rights to purchase shares are granted
during the second and fourth quarter of each year. The estimated weighted
average value of rights granted under the Employee Stock Purchase Plan during
fiscal years 2004, 2003, and 2002 were $7.31, $3.57, and $3.06 respectively. The
fair value of rights granted during 2004, 2003 and 2002 was estimated at the
date of grant using the following weighted average assumptions:

Trimble's pro forma information is as follows:

SFAS No. 123 requires the use of option pricing models that were not developed
for use in valuing employee stock options. The Black-Scholes option pricing
model was developed for use in estimating the fair value of short-lived
exchange-traded options that have no vesting restrictions and are fully
transferable. In addition, option pricing models require the input of highly
subjective assumptions, including the option's expected life and the price
volatility of the underlying stock. Because the Company'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 the opinion of management, the existing models do not
necessarily provide a reliable single measure of the fair value of employee
stock options.

Depreciation and Amortization

Depreciation of property and equipment owned 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.

Computation of Earnings Per Share

Number of shares used in calculation of basic earnings per share represents the
weighted average common shares outstanding during the period and excludes any
dilutive effects of options, warrants, and convertible securities. The dilutive
effects of options, warrants, and convertible securities are included in diluted
earnings per share.

New Accounting Standards

In January 2003, the Financial Accounting Standards Board issued Interpretation
No. 46, "Consolidation of Variable Interest Entities" (FIN 46), which was
amended by FIN 46R issued in December 2003. This interpretation of Accounting
Research Bulletin No. 51, "Consolidated Financial Statements," addresses
consolidation by business enterprises of variable interest entities (VIEs) that
either: (1) do not have sufficient equity investment at risk to permit the
entity to finance its activities without additional subordinated financial
support, or (2) for which the equity investors lack an essential characteristic
of a controlling financial interest. This Interpretation applies immediately to
VIEs created after January 31, 2003. It also applies in the first fiscal year or
interim period ending after March 15, 2004, to VIEs created before February 1,
2003 in which an enterprise holds a variable interest. FIN 46 requires
disclosure of VIEs in financial statements issued after January 31, 2003, if it
is reasonably possible that as of the transition date: (1) the company will be
the primary beneficiary of an existing VIE that will require consolidation or,
(2) the company will hold a significant variable interest in, or have

significant involvement with, an existing VIE. Trimble completed its review of
the requirements of FIN 46 and as a result of that review, no entities were
identified requiring disclosure or consolidation under FIN 46.

In December 2004, the FASB issued SFAS No. 123R, "Share-Based Payment." SFAS No.
123R requires employee stock options and rights to purchase shares under stock
participation plans to be accounted for under the fair value method, and
eliminates the ability to account for these instruments under the intrinsic
value method prescribed by APB Opinion No. 25, and allowed under the original
provisions of SFAS No. 123. SFAS No. 123R requires the use of an option pricing
model for estimating fair value, which is amortized to expense over the service
periods. The requirements of SFAS No. 123R are effective for fiscal periods
beginning after June 15, 2005. If the Company had applied the provisions of SFAS
No. 123R to the financial statements for the period ending December 31, 2004,
assuming that adoption would result in amounts similar to the current pro forma
disclosures under SFAS 123R, net income would have been reduced by approximately
$8.6 million. SFAS No. 123R allows for either prospective recognition of
compensation expense or retrospective recognition, which may be back to the
original issuance of SFAS No. 123 or only to interim periods in the year of
adoption. The Company is currently evaluating these transition methods.

NOTE 3: EARNINGS PER SHARE

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

NOTE 4: BUSINESS COMBINATIONS

Acquisitions

The following is a summary of acquisitions made by Trimble during fiscal 2004,
2003 and 2002 all of which were accounted for as purchases:

The Consolidated Financial Statements include the operating results of each
business from the date of acquisition. Pro forma results of operations have not
been presented because the effects of these acquisitions were not material to
the Company's results.

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 table
summarizes the Company's business combinations completed during fiscal years
2004, 2003 and 2002 (in thousands):

Purchase consideration for the acquisition in fiscal 2002 included 655,626
shares of common stock and 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 December 31, 2004,
the total earn-out amount was approximately $3.2 million resulting in additional
goodwill and a purchase price of approximately $8.9 million.

The purchase consideration for Applanix consisted of 1,154,240 shares of Trimble
common stock, of which 1,083,294 are issued. Former Applanix shareholders have
the right to receive the 17,214 shares of Trimble common stock upon the
surrender of exchangeable shares of a Trimble subsidiary and another 53,732
pursuant to meeting performance criteria under the terms of the agreement.

The MENSI S.A. 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. As of December 31, 2004, the total earn-out amount was
approximately $0.7 million resulting in additional goodwill and a purchase price
of approximately $5.0 million.

Intangible Assets

The following tables present details of the Company's total intangible assets:

The following table presents details of the amortization expense of purchased
and other intangible assets as reported in the Consolidated Statements of
Income:

December 31, January 2, January 3,
Fiscal Years Ended 2004 2004 2003
- ------------------ ---- ---- ----
(In thousands)

Reported as:
Cost of sales $ 183 $ 604 $ 868
Operating expenses 8,327 7,312 8,300
----- ----- -----
Total $ 8,510 $ 7,916 $ 9,168

The estimated future amortization expense of intangible assets as of December
31, 2004, is as follows (in thousands):

Amortization
Expense
-------

2005 $ 6,581
2006 2,784
2007 1,980
2008 1,080
2009 967
Thereafter 443
---------
Total $ 13,835
=========

Goodwill

Goodwill consisted of the following:

December 31, January 2,
As of 2004 2004
- ----- ---- ----
(In thousands)

Goodwill, Spectra Precision acquisition $ 212,915 $ 205,562
Goodwill, other acquisitions 46,607 35,863
------ ------
Goodwill $ 259,522 $ 241,425

The increase in goodwill of approximately $18.1 million during fiscal 2004 was
primarily due to the acquisition of TracerNET and GeoNav of approximately $7.8
million and the foreign exchange rate impact of approximately $9.2 million on
non-US currency denominated goodwill assets. See Note 7 of the Notes to the
Consolidated Financial Statements for additional information regarding Trimble's
goodwill by operating segment.

NOTE 5: JOINT VENTURE

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, Trimble will recognize
the un-amortized portion of the $11.0 million as a gain. 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. This un-amortized portion of
the deferred gain was approximately $9.2 million at December 31, 2004 and $9.8
million at January 2, 2004. Both Trimble's share of profits (losses) under the
equity method and the amortization of the $11.0 million deferred gain are
included in expense for affiliated operations, net in the Consolidated
Statements of Income.

The expenses for affiliated operations at CTCT 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. Reimbursed costs totaled
$9.7 million, $7.9 million, and $3.9 million in fiscal 2004, 2003, and 2002,
respectively. The reimbursements were offset against operating expenses.

The net outstanding balance due from CTCT was $0.7 million at December 31, 2004
and $0.8 million at January 2, 2004 and is included in account receivables, net
on the Consolidated Balance Sheets.

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. It focuses 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 Trimble's products. Outside Japan, Trimble is the exclusive
distributor of Nikon survey and construction products.

Under the terms of the Nikon-Trimble agreement, Nikon contributed approximately
$10 million in cash, while Trimble contributed approximately $4.1 million in
cash and 349,251 common stock shares valued at approximately $5.9 million. The
Nikon-Trimble joint venture purchased certain tangible and intangible assets
from Nikon Geotecs Co., Ltd. and Trimble Japan KK. The carrying amount of the
investment was approximately $13.5 million at December 31, 2004 and $10.7
million at January 2, 2004.

Nikon-Trimble is 50% owned by Trimble and 50% owned by Nikon, with equal voting
rights. Trimble has adopted the equity method of accounting for its investment
in Nikon-Trimble, with its share of profit or loss from this joint venture
included in expenses for affiliated operations, net in the Consolidated
Statements of Income. During fiscal 2004, Trimble recorded a profit of
approximately $1.1 million as its proportionate share of the net income. During
fiscal 2003, and the first year of the joint venture's operations, Trimble's
proportionate share of the net loss was $0.3 million.

At December 31, 2004, the net payable by Trimble to Nikon-Trimble related to the
purchase and sale of products from and to Nikon-Trimble is $2.5 million and is
included in accounts payable on the Consolidated Balance Sheets. 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, included in 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 included
in accrued liabilities on the Consolidated Balance Sheets.

NOTE 6: CERTAIN BALANCE SHEET COMPONENTS

The following tables provide details of selected balance sheet items (in
thousands):

December 31, January 2,
As of 2004 2004
- ----- ---- ----
Inventories:
Raw materials $ 26,062 $ 20,927
Work-in-process 3,989 3,876
Finished goods 57,694 46,023
------ ------
Total $ 87,745 $ 70,826
=========== =========
Property and equipment, net:
Machinery and equipment $ 71,882 $ 66,634
Furniture and fixtures 10,521 9,085
Leasehold improvements 5,861 4,502
Buildings 5,297 5,396
Land 1,231 1,231
----- -----
94,792 86,848
Less accumulated depreciation (63,801) (59,469)
------- -------
Total $ 30,991 $ 27,379
=========== =========
Other current assets:
Prepaid expenses $ 5,775 $ 5,122
Other 2,103 3,725
----- -----
Total $ 7,878 $ 8,847
=========== =========

NOTE 7: OPERATING SEGMENT AND GEOGRAPHIC INFORMATION

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. During the third quarter of fiscal 2004 the Company acquired
GeoNav GmbH and its performance is reported in this business segment

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 Component Technologies -- Consists of products including proprietary
chipsets, printed circuit boards, modules, and licenses of intellectual
property. The applications into which end users currently incorporate the
component products include timing applications for synchronizing wireless
networks, in-vehicle navigation and telematics systems, fleet management,
security systems, data collection networks, and wireless handheld consumer
products.

o Mobile Solutions -- Consists of products that enable end users to monitor
and manage their mobile assets by communicating location and
activity-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.
During the first quarter of fiscal 2004 the Company acquired TracerNET and
its performance is reported in this business segment.

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 Trimble's total revenue. During the first two fiscal quarters
of 2003, this segment was comprised solely of the Military and Advanced
Systems business. During the third quarter of fiscal 2003 the Company
completed the acquisition of Applanix and its performance is reported in
this business segment. During the fourth quarter of fiscal 2004 the Company
introduced Trimble Outdoors and its performance is reported in this
business segment.

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. Operating income (loss) is net revenue less
operating expenses, excluding general corporate expenses, 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 represents trade receivables, gross, which
are specified between segments.

The following are reconciliations corresponding to totals in the accompanying
Consolidated Financial Statements:

December 31, January 2, January 3,
Fiscal Years Ended 2004 2004 2003
- ------------------ ---- ---- ----
(in thousands)
Operating income:
Total for reportable divisions $ 117,405 $ 83,586 $ 62,320
Unallocated corporate expenses (31,780) (29,651) (28,497)
------- ------- -------
Operating income $ 85,625 $ 53,935 $ 33,823
========== ========== =========

December 31, January 2,
As of 2004 2004
- ----- ---- ----
(in thousands)
Assets:
Accounts receivable total for reportable segments $ 136,617 $ 122,913
Unallocated (1) (12,679) (18,279)
------- -------
Accounts receivable, net $ 123,938 $ 104,634
========== ==========

(1) Includes trade-related accruals and cash received in advance that are not
allocated by segment.

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 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.
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.

Revenues by product groups are not practicable to obtain and therefore are not
presented.

No single customer accounted for 10% or more of Trimble's total revenues in
fiscal years 2004, 2003, and 2002.

NOTE 8: RESTRUCTURING CHARGES

Restructuring charges of $0.6 million, $2.0 million, and $1.1 million were
recorded in fiscal years 2004, 2003 and 2002. The charges in fiscal 2004 were
primarily related to severance costs due to the realignment of Trimble Mobile
Solutions, Inc., while charges in fiscal 2003 were primarily related to
Trimble's Japanese office relocation due to the Nikon-Trimble joint venture
formation. As a result of these actions, the headcount of the affected
operations decreased by 36, 77 and 49 in fiscal 2004, 2003, and 2002,
respectively.

As of December 31, 2004, the remaining accrual balance of $0.4 million is
primarily related to severance expected to be paid in fiscal 2005. As of January
2, 2004, the restructuring accrual balance was approximately $0.4 million. The
liability for restructuring costs is recorded in other accrued liabilities in
the Consolidated Balance Sheets.

NOTE 9: LONG-TERM DEBT

Long-term debt consisted of the following:

December 31, January 2,
As of 2004 2004
- ----- ---- ----
(In thousands)

Credit Facilities:
Term loan $ 31,250 $ 43,750
Revolving credit facility 7,000 44,000
Promissory notes and other 746 2,736
--- -----
38,996 90,486

Less current portion of long-term debt 12,500 12,885
------ ------
Non-current portion $ 26,496 $ 77,601
============= ============

The following summarizes the future cash payment obligations (excluding
interest) as of December 31, 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 a Subordinated Note
and refinance $200 million of senior, secured credit facilities obtained in July
of 2000. The 2003 Credit Facility is also used for ongoing working capital and
general corporate needs.

At December 31, 2004, Trimble had approximately $38.3 million of borrowings
under the 2003 Credit Facility, comprised of a $31.3 million term loan and $7.0
million of a $125 million revolver. The Company has access to an additional $118
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 borrowings under the 2003 Credit Facility as of December
31, 2004 is at LIBOR plus a spread of 1.50%. The spread is 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 December 31, 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.

Due to the full repayment of the subordinated note which financed the Spectra
Precision Group acquisition 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.

Promissory Note and Others

As of December 31, 2004, the Company had other notes payable totaling
approximately $0.8 million consisting of government loans to foreign
subsidiaries.

NOTE 10: COMMITMENTS AND CONTINGENCIES

Operating Leases

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)

2005 $ 11,412
2006 3,652
2007 2,939
2008 2,078
2009 1,940
Thereafter 1,936
-----
Total $ 23,957
--------

Net rent expense under operating leases was $10.9 million in fiscal 2004, $13.2
million in fiscal 2003, and $5.9 million in fiscal 2002. Sublease income was
$38,000, $1.7 million, and $4.7 million, respectively.

Purchase Commitments with a Supplier

Trimble entered into a significant supply agreement in fiscal 2004 that sets
forth minimum purchase commitments for outsourced services. The term of the
supply agreement is the earlier of four years from the initial product ship
date, or when Trimble has paid for a cumulative total of 200,000 billable hours
(approximately $10.4 million). Should Trimble not purchase and pay for 200,000
hours, then Trimble will compensate the supplier for 20% of the shortfall.
Thereafter, the contract continues in effect until terminated by either party
with 30 days prior written notice to the other party. As of December 31, 2004,
based on current hours earned to date the future obligation is approximately
$7.7 million which is expected to be paid over the next two years. Trimble does
not expect a shortfall based on current hours earned to date.

NOTE 11: FAIR VALUE OF FINANCIAL INSTRUMENTS

The estimated fair values of financial instruments outstanding are as follows:

The fair value of the 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:

December 31, January 2, January 3,
Fiscal Years Ended 2004 2004 2003
- ------------------ ---- ---- ----
(In thousands)

US Federal:
Current $ 18,196 $ 513 $ -
Deferred (17,995) (7,000) -
------- ------
201 (6,487) -
--- ------
US State:
Current 2,895 250 142
Deferred (897) (600) -
---- ----
1,998 (350) 142
----- ---- ---
Non-US:
Current 3,137 1,594 2,052
Deferred 1,908 2,343 1,306
----- ----- -----
5,045 3,937 3,358
----- ----- -----
Income tax provision (benefit) $ 7,244 $ (2,900) $ 3,500
=========== =========== ==========

The pre-tax US income was approximately $70.0 million, $39.5 million and $3.3
million in fiscal years 2004, 2003 and 2002, respectively.

The fiscal year 2004 tax provision reflected above was reduced by $14.4 million
of tax benefits attributable to stock option deductions which were credited to
equity.

The income tax provision (benefit) differs from the amount computed by applying
the statutory US 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:

December 31, January 2,
As of 2004 2004
- ----- ---- ----
(In thousands)

Deferred tax liabilities:
Purchased intangibles $ 3,247 $ 1,338
Depreciation and amortization 10,901 3,776
Other individually immaterial items 229 251
--- ---

Total deferred tax liabilities 14,377 5,365
------ -----
Deferred tax assets:
Inventory valuation differences 8,782 9,001
Expenses not currently deductible 8,034 5,528
US Federal credit carryforwards 5,619 9,150
Deferred revenue 3,857 4,280
US State credit carryforwards 6,722 6,999
Warranty 2,216 2,374
Depreciation and amortization 718 2,871
US Federal net operating loss carryforward 2,998 -
US residual tax on foreign earnings 2,682 -
Other individually immaterial items 7,655 3,106
----- -----
Total deferred tax assets 49,283 43,309
Valuation allowance (12,989) (34,756)
------- -------
Total deferred tax assets 36,294 8,553

Total net deferred tax assets (liabilities) $ 21,917 $ 3,188
============ ==========

The Company has $3.0 million of tax effected US federal net operating loss
carryforwards from a recent acquisition, which is subject to certain limitations
under IRC Section 382. The total US federal credit carryforwards of
approximately $5.6 million expire beginning in 2005. The Company has state
research and development credit carryforwards of approximately $10.3 million,
which do not expire.

The valuation allowance decreased by $21.8 million in fiscal 2004 and $13.1
million in fiscal 2003. Approximately $8 million of the valuation allowance at
December 31, 2004 and $14.1 million at January 2, 2004 relates to the tax
benefit of stock option deductions, which will be credited to equity if and when
realized.

In October 2004, The American Jobs Creation Act of 2004 was signed into law
providing changes in the tax law including an incentive to repatriate
undistributed earnings of foreign subsidiaries. Trimble is currently evaluating
the potential impact of these provisions, including assessing the details of the
Act, analyzing the funds available for repatriation, the economic cost of doing
so and assessing the qualified uses of repatriated funds. However, given the
preliminary stage of the Company's evaluation, it is not possible to determine
the impact to its fiscal year 2005 income tax provision. The Company expects to
complete its evaluation by September 30, 2005.

NOTE 13: SHAREHOLDER'S EQUITY

3-for-2 Stock Split

Trimble's Board of Directors approved a 3-for-2 split of all outstanding shares
of the Company's Common Stock, payable March 4, 2004 to stockholders of record
on February 17, 2004. Cash was paid in lieu of fractional shares. All share and
per share information has 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.

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.

NOTE 14: COMPREHENSIVE INCOME

The components of comprehensive income and related tax effects were as follows:

The components of accumulated other comprehensive, net of related tax were as
follows:

NOTE 15: EMPLOYEE STOCK BENEFIT PLANS

Employee Stock Purchase Plan

The Company has an Employee Stock Purchase Plan ("Purchase Plan") under which an
aggregate of 5,325,000 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. The Purchase Plan terminates on
December 31, 2008. In fiscal 2004 and 2003, the shares issued under the Purchase
Plan were 183,214 and 328,044 shares, respectively. At December 31, 2004, the
number of shares reserved for future purchases by eligible employees was
547,834.

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 4,500,000 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 December 31, 2004, options to purchase
3,074,987 shares were outstanding and 2,271,021 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, provided
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 December 31, 2004 options to purchase 3,223,144 shares were
outstanding and no shares were available for future grant.

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 December 31,
2004, options to purchase 235,000 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 December 31, 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 2004, 2003, and 2002. As of
December 31, 2004, options to purchase 187,500 shares were outstanding under the
1992 Management Discount Stock Option Plan.

SFAS 123 Disclosures

As stated in Note 2 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 December 31, 2004, ranged from
$5.33 to $34.46. The weighted average remaining contractual life of those
options is 6.73 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 at December 31, 2004:

Activity during fiscal 2004, 2003, and 2002, 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. These non-statutory
options were exercised January 15, 2004.

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 entitled 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 was 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
proceeding 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 balance 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 December 31, 2004, Trimble had reserved 10,940,975 common shares for
issuance upon exercise of options and warrants outstanding and options available
for grant under the various employee stock benefit plans.

NOTE 16: 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 89,806 shares of Common Stock for an
aggregate of $0.7 million in fiscal 2004. 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 $1.9 million in fiscal 2004, $1.8 million
in fiscal 2003 and $1.8 million in fiscal 2002.

Profit-Sharing Plan

In 1995, Trimble introduced an employee profit-sharing plan in which all
employees, excluding executives and certain levels of management, participate.
The plan distributes to employees approximately 5% of quarterly adjusted pre-tax
income. Payments under the plan during fiscal 2004, 2003 and 2002 were $4.4
million, $2.5 million, and $1.1 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 $0.6 million for fiscal 2004, $2.0 million for fiscal 2003, and
$1.4 million for fiscal 2002.

Defined Benefit Pension Plan

Trimble provides defined benefit pension plans in certain countries outside the
United States, including Sweden and Germany. The largest of these plans is
provided by the Swedish subsidiary which has an unfunded defined benefit pension
plan that covered substantially all of its full-time employees through 1993.
Benefits are based on a percentage of eligible earnings. The employee must have
had a projected period of pensionable service of at least 30 years as of 1993.
If the period was shorter, the pension benefits were reduced accordingly. Active
employees do not accrue any future benefits; therefore, there is no service cost
and the liability will only increase for interest cost.

Net periodic benefit costs in fiscal 2004, 2003, and 2002 were not material.

The changes in the benefit obligations and plan assets of the significant non-US
defined benefit pension plans for fiscal 2004 and 2003 were as follows:

Actuarial assumptions used to determine the net periodic pension costs for the
year ended December 31, 2004 were as follows:

Swedish Subsidiary German Subsidiaries
------------------ -------------------
Discount rate 5.5% 5.25%
Rate of compensation increase 2.5% 2.0%

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 the Company, 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
Income include expenses from this operating lease of $0.35 million for fiscal
years 2004, 2003, and 2002.

Related-Party Notes Receivable

Trimble has notes receivable from officers and employees of approximately $0.4
million as of December 31, 2004 and $0.8 million as of January 2, 2004. The
notes bear interest from 4.49% to 6.62% and have an average remaining life of
0.8 years as of December 31, 2004.

See Note 5 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 2004 include the following: (i) in the
second quarter of 2004 a $1.2 million income, or $0.03 per diluted share
relating to valuation of investment; (ii) in the third quarter of 2004 a $0.2
million income, or less than $0.01 per diluted share relating to revaluation of
investment; (iii) in the fourth quarter of 2004 a $0.4 million charge, or less
than $0.01 per diluted share relating to revaluation of investment.

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.

Report of Independent Registered Public Accounting Firm

The Board of Directors and Shareholders of Trimble Navigation Limited

We have audited the accompanying consolidated balance sheets of Trimble
Navigation Limited as of December 31, 2004 and January 2, 2004, and the related
consolidated statements of income, shareholders' equity, and cash flows for each
of the three years in the period ended December 31, 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 based on our audits.

We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (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 referred to above present fairly, in
all material respects, the consolidated financial position of Trimble Navigation
Limited at December 31, 2004 and January 2, 2004, and the consolidated results
of its operations and its cash flows for each of the three years in the period
ended December 31, 2004, in conformity with U.S. generally accepted accounting
principles. 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.

We also have audited, in accordance with the standards of the Public Company
Accounting Oversight Board (United States), the effectiveness of Trimble
Navigation Limited's internal control over financial reporting as of December
31, 2004, based on criteria established in Internal Control--Integrated
Framework issued by the Committee of Sponsoring Organizations of the Treadway
Commission and our report dated March 11, 2005 expressed an unqualified opinion
thereon.

/s/ Ernst & Young LLP

Palo Alto, California
March 11, 2005

Report of Independent Registered Public Accounting Firm

The Board of Directors and Shareholders of Trimble Navigation Limited

We have audited management's assessment, included in Management's Report on
Internal Control Over Financial Reporting at Item 9a, that Trimble Navigation
Limited maintained effective internal control over financial reporting as of
December 31, 2004, based on criteria established in Internal Control--Integrated
Framework issued by the Committee of Sponsoring Organizations of the Treadway
Commission (the COSO criteria). Trimble Navigation Limited's management is
responsible for maintaining effective internal control over financial reporting
and for its assessment of the effectiveness of internal control over financial
reporting. Our responsibility is to express an opinion on management's
assessment and an opinion on the effectiveness of the company's internal control
over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether effective
internal control over financial reporting was maintained in all material
respects. Our audit included obtaining an understanding of internal control over
financial reporting, evaluating management's assessment, testing and evaluating
the design and operating effectiveness of internal control, and performing such
other procedures as we considered necessary in the circumstances. We believe
that our audit provides a reasonable basis for our opinion.

A company's internal control over financial reporting is a process designed to
provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance
with generally accepted accounting principles. A company's internal control over
financial reporting includes those policies and procedures that (1) pertain to
the maintenance of records that, in reasonable detail, accurately and fairly
reflect the transactions and dispositions of the assets of the company; (2)
provide reasonable assurance that transactions are recorded as necessary to
permit preparation of financial statements in accordance with generally accepted
accounting principles, and that receipts and expenditures of the company are
being made only in accordance with authorizations of management and directors of
the company; and (3) provide reasonable assurance regarding prevention or timely
detection of unauthorized acquisition, use, or disposition of the company's
assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting
may not prevent or detect misstatements. Also, projections of any evaluation of
effectiveness to future periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree of compliance
with the policies or procedures may deteriorate.

In our opinion, management's assessment that Trimble Navigation Limited
maintained effective internal control over financial reporting as of December
31, 2004, is fairly stated, in all material respects, based on the COSO
criteria. Also, in our opinion, Trimble Navigation Limited maintained, in all
material respects, effective internal control over financial reporting as of
December 31, 2004, based on the COSO criteria.

We also have audited, in accordance with the standards of the Public Company
Accounting Oversight Board (United States), the consolidated balance sheets of
Trimble Navigation Limited as of December 31, 2004 and January 2, 2004, and the
related consolidated statements of income, shareholders' equity, and cash flows
for each of the three years in the period ended December 31, 2004 of Trimble
Navigation Limited and our report dated March 11, 2005 expressed an unqualified
opinion thereon.

/s/ Ernst & Young LLP

Palo Alto, California
March 11, 2005

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

None

Item 9a. Controls and Procedures

(a) Evaluation of Disclosure Controls and Procedures

Trimble's Chief Executive Officer ("CEO") and Chief Financial Officer ("CFO"),
after evaluating the effectiveness of the company's "disclosure controls and
procedures" (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities
Exchange Act of 1934 (the "Exchange Act")), as of December 31, 2004, have
concluded that as of December 31, 2004, the company's disclosure controls and
procedures were effective and designed to provide reasonable assurance that
material information relating to the company and its consolidated subsidiaries
required to be included in the company's periodic filings under the Exchange Act
would be made known to them by others within those entities.

Inherent Limitations on Effectiveness of Controls

The company's management, including the CEO and CFO, does not expect that our
internal control over financial reporting will prevent or detect all error and
all fraud. A control system, no matter how well designed and operated, can
provide only reasonable, not absolute, assurance that the control system's
objectives will be met. The design of any system of controls is based in part on
certain assumptions about the likelihood of future events, and there can be no
assurance that any design will succeed in achieving its stated goals under all
potential future conditions.

(b) Management's Report on Internal Control over Financial Reporting

The company's management is responsible for establishing and maintaining
adequate internal control over financial reporting, as such term is defined in
Exchange Act Rule 13a-15(f). The company's management, including the CEO and
CFO, conducted an evaluation of the effectiveness of its internal control over
financial reporting based on the Internal Control - Integrated Framework issued
by the Committee of Sponsoring Organizations of the Treadway Commission. Based
on the results of this evaluation, the company's management concluded that its
internal control over financial reporting was effective as of December 31, 2004.

Management's assessment of the effectiveness of our internal control over
financial reporting as of December 31, 2004 has been audited by Ernst & Young
LLP, an independent registered public accounting firm, as stated in their report
which is included elsewhere herein.

(c) Changes in Internal Control over Financial Reporting

During the quarter ended December 31, 2004, there were no changes in the
company's internal control over financial reporting 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 to, 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.

(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 31, 2004 and January 2, 2004........44

Consolidated Statements of Income for each of the three fiscal years
in the period ended January 31, 2004.......................................45

Consolidated Statement of Shareholders' Equity for each of the
three fiscal years in the period ended January 31, 2004....................46

Consolidated Statements of Cash Flows for each of the three
fiscal years in the period ended January 31, 2004..........................47

Notes to Consolidated Financial Statements ................................48

Reports of Independent Registered Public Accounting Firm...................72

(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. (6)

3.3 Certificate of Amendment of Articles of Incorporation of the Company filed
July 18, 1990. (7)

3.4 Certificate of Determination of the Company filed February 19, 1999. (8)

3.5 Certificate of Amendment of Articles of Incorporation of the Company filed
May 29, 2003. (20)

3.6 Certificate of Amendment of Articles of Incorporation of the Company filed
March 4, 2004. (24)

3.8 Amended and Restated Bylaws of the Company. (23)

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 Agreement of Substitution and Amendment of Preferred Shares Rights
Agreement dated September 10, 2004. (25)

4.4 First Amended and Restated Stock and Warrant Purchase Agreement between and
among the Company and the investors thereto dated January 14, 2002. (15)

4.5 Form of Warrant to Purchase Shares of Common Stock dated January 14, 2002.
(16)

4.6 Form of Warrant dated April 12, 2002. (17)

10.1+Form of Indemnification Agreement between the Company and its officers and
directors. (25)

10.2+1990 Director Stock Option Plan, as amended, and form of Outside
Director Non-statutory Stock Option Agreement. (3)

10.3+1992 Management Discount Stock Option and form of Non-statutory Stock
Option Agreement. (2)

10.4+ 1993 Stock Option Plan, as amended May 11, 2000. (12)

10.5+ 1988 Employee Stock Purchase Plan, as amended May 11, 2000. (13)

10.6+Employment Agreement between the Company and Steven W. Berglund dated
March 17, 1999. (9)

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

10.8***Supply Agreement dated August 10, 1999 by and among Trimble Navigation
Limited and Solectron Corporation and Solectron Federal Systems, Inc. (11)

10.9+Australian Addendum to the Trimble Navigation 1988 Employee Stock Purchase
Plan. (14)

10.10+ Amended and Restated 2002 Stock Plan (as of July 22, 2004), including
forms of option agreements. (22)

10.11 Credit Agreement dated June 25, 2003. (19)

10.12Letter 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. (18)

10.13+ Employment Agreement between the Company and Rajat Bahri dated December
7, 2004. (25)

10.14+ Board of Directors annual compensation policy effective January 1, 2004.
(25)

10.15+ Form of Change in Control agreement between the Company and certain
Company officers. (21)

10.16+ Letter of Assignment between the Company and Alan Townsend dated November
12, 2003. (25)

10.17+ Supplemental agreement to Letter of Assignment between the Company and
Alan Townsend dated January 19, 2004. (25)

21.1 Subsidiaries of the Company. (25)

23.1 Consent of Ernst & Young LLP, independent registered public accounting
firm. (25)

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. (25)

31.2 Certification of CFO pursuant to Section 302 of the Sarbanes-Oxley Act of
2002. (25)

32.1 Certification of CEO pursuant to Section 906 of the Sarbanes-Oxley Act of
2002. (25)

32.2 Certification of CFO pursuant to Section 906 of the Sarbanes-Oxley Act of
2002. (25)

*** 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 exhibit number 4.1 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 exhibit number 10.46 to the registrant's
Registration Statement on Form S-1 (File No. 33-45990), which was filed
February 25, 1992.

(3) Incorporated by reference to exhibit number 10.32 to the registrant's
Annual Report on Form 10-K for the fiscal year ended December 31, 1993.

(4) Incorporated by reference to exhibit number 1 to the registrant's
Registration Statement on Form 8-A, which was filed on February 18, 1999.

(5) Incorporated by reference to exhibit number 3.1 to the registrant's Annual
Report on Form 10-K for the fiscal year ended January 1, 1999.

(6) Incorporated by reference to exhibit number 3.2 to the registrant's Annual
Report on Form 10-K for the fiscal year ended January 1, 1999.

(7) Incorporated by reference to exhibit number 3.3 to the registrant's Annual
Report on Form 10-K for the fiscal year ended January 1, 1999.

(8) Incorporated by reference to exhibit number 3.4 to the registrant's Annual
Report on Form 10-K for the fiscal year ended January 1, 1999.

(9) Incorporated by reference to exhibit number 10.67 to the registrant's
Annual Report on Form 10-K for the fiscal year ended January 1, 1999.

(10) Incorporated by reference to exhibit number 10.68 to the registrant's
Annual Report on Form 10-K for the fiscal year ended January 1, 1999.

(11) Incorporated by reference to exhibit number 10.69 to the registrant's
Report on Form 8-K, which was filed on August 25, 1999.

(12) Incorporated by reference to exhibit number 10.59 to the registrant's
registration statement on Form S-8 filed on June 1, 2000.

(13) Incorporated by reference to exhibit number 10.60 to the registrant's
registration statement on Form S-8 filed on June 1, 2000.

(14) Incorporated by reference to exhibit number 10.77 to the registrant's
Annual Report on Form 10-K for the fiscal year ended December 29, 2000.

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

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

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

(18) 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.

(19) 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.

(20) 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.

(21) Incorporated by reference to exhibit number 10.1 to the registrant's
Quarterly Report on Form 10-Q for the quarter ended October 1, 2004.

(22) Incorporated by reference to exhibit number 10.2 to the registrant's
Quarterly Report on Form 10-Q for the quarter ended October 1, 2004.

(23) Incorporated by reference to exhibit number 3.8 to the registrant's Annual
Report on Form 10-K for the year ended January 2, 2004.

(24) Incorporated by reference to exhibit number 3.6 to the registrant's
Quarterly Report on Form 10-Q for the quarter ended April 2, 2004.

(25) Filed herewith.

EXHIBIT LIST

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. (6)

3.3 Certificate of Amendment of Articles of Incorporation of the Company filed
July 18, 1990. (7)

3.4 Certificate of Determination of the Company filed February 19, 1999. (8)

3.5 Certificate of Amendment of Articles of Incorporation of the Company filed
May 29, 2003. (20)

3.6 Certificate of Amendment of Articles of Incorporation of the Company filed
March 4, 2004. (24)

3.8 Amended and Restated Bylaws of the Company. (23)

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 Agreement of Substitution and Amendment of Preferred Shares Rights
Agreement dated September 10, 2004. (25)

4.4 First Amended and Restated Stock and Warrant Purchase Agreement between and
among the Company and the investors thereto dated January 14, 2002. (15)

4.5 Form of Warrant to Purchase Shares of Common Stock dated January 14, 2002.
(16)

4.6 Form of Warrant dated April 12, 2002. (17)

10.1+Form of Indemnification Agreement between the Company and its officers and
directors. (25)

10.2+1990 Director Stock Option Plan, as amended, and form of Outside Director
Non-statutory Stock Option Agreement. (3)

10.3+1992 Management Discount Stock Option and form of Non-statutory Stock
Option Agreement. (2)

10.4+ 1993 Stock Option Plan, as amended May 11, 2000. (12)

10.5+ 1988 Employee Stock Purchase Plan, as amended May 11, 2000. (13)

10.6+Employment Agreement between the Company and Steven W. Berglund dated
March 17, 1999. (9)

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

10.8 ***Supply Agreement dated August 10, 1999 by and among Trimble Navigation
Limited and Solectron Corporation and Solectron Federal Systems, Inc. (11)

10.9+Australian Addendum to the Trimble Navigation 1988 Employee Stock Purchase
Plan. (14)

10.10+ Amended and Restated 2002 Stock Plan (as of July 22, 2004), including
forms of option agreements. (22)

10.11 Credit Agreement dated June 25, 2003. (19)

10.12Letter 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. (18)

10.13+ Employment Agreement between the Company and Rajat Bahri dated December
7, 2004. (25)

10.14+ Board of Directors annual compensation policy effective January 1, 2004.
(25)

10.15+ Form of Change in Control agreement between the Company and certain
Company officers. (21)

10.16+ Letter of Assignment between the Company and Alan Townsend dated November
12, 2003. (25)

10.17+ Supplemental agreement to Letter of Assignment between the Company and
Alan Townsend dated January 19, 2004. (25)

21.1 Subsidiaries of the Company. (25)

23.1 Consent of Ernst & Young LLP, independent registered public accounting
firm. (25)

24.2 Power of Attorney included on signature page herein.

31.1 Certification of CEO pursuant to Section 302 of the Sarbanes-Oxley Act of
2002. (25)

31.2 Certification of CFO pursuant to Section 302 of the Sarbanes-Oxley Act of
2002. (25)

32.1 Certification of CEO pursuant to Section 906 of the Sarbanes-Oxley Act of
2002. (25)

32.2 Certification of CFO pursuant to Section 906 of the Sarbanes-Oxley Act of
2002. (25)

*** 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 exhibit number 4.1 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 exhibit number 10.46 to the registrant's
Registration Statement on Form S-1 (File No. 33-45990), which was filed
February 25, 1992.

(3) Incorporated by reference to exhibit number 10.32 to the registrant's
Annual Report on Form 10-K for the fiscal year ended December 31, 1993.

(4) Incorporated by reference to exhibit number 1 to the registrant's
Registration Statement on Form 8-A, which was filed on February 18, 1999.

(5) Incorporated by reference to exhibit number 3.1 to the registrant's Annual
Report on Form 10-K for the fiscal year ended January 1, 1999.

(6) Incorporated by reference to exhibit number 3.2 to the registrant's Annual
Report on Form 10-K for the fiscal year ended January 1, 1999.

(7) Incorporated by reference to exhibit number 3.3 to the registrant's Annual
Report on Form 10-K for the fiscal year ended January 1, 1999.

(8) Incorporated by reference to exhibit number 3.4 to the registrant's Annual
Report on Form 10-K for the fiscal year ended January 1, 1999.

(9) Incorporated by reference to exhibit number 10.67 to the registrant's
Annual Report on Form 10-K for the fiscal year ended January 1, 1999.

(10) Incorporated by reference to exhibit number 10.68 to the registrant's
Annual Report on Form 10-K for the fiscal year ended January 1, 1999.

(11) Incorporated by reference to exhibit number 10.69 to the registrant's
Report on Form 8-K, which was filed on August 25, 1999.

(12) Incorporated by reference to exhibit number 10.59 to the registrant's
registration statement on Form S-8 filed on June 1, 2000.

(13) Incorporated by reference to exhibit number 10.60 to the registrant's
registration statement on Form S-8 filed on June 1, 2000.

(14) Incorporated by reference to exhibit number 10.77 to the registrant's
Annual Report on Form 10-K for the fiscal year ended December 29, 2000.

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

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

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

(18) 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.

(19) 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.

(20) 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.

(21) Incorporated by reference to exhibit number 10.1 to the registrant's
Quarterly Report on Form 10-Q for the quarter ended October 1, 2004.

(22) Incorporated by reference to exhibit number 10.2 to the registrant's
Quarterly Report on Form 10-Q for the quarter ended October 1, 2004.

(23) Incorporated by reference to exhibit number 3.8 to the registrant's Annual
Report on Form 10-K for the year ended January 2, 2004.

(24) Incorporated by reference to exhibit number 3.6 to the registrant's
Quarterly Report on Form 10-Q for the quarter ended April 2, 2004.

(25) Filed herewith.

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 14, 2005

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:

Signature Capacity in which Signed Date

/s/ Steven W. Berglund President, Chief Executive March 14, 2005
- ---------------------- Officer, Director
Steven W. Berglund

/s/ Rajat Bahri Chief Financial Officer and March 14, 2005
- --------------- Assistant Secretary
Rajat Bahri (Principal Financial Officer)

/s/ Anup Singh Corporate Controller March 14, 2005
- -------------- (Principal Accounting Officer)
Anup V. Singh

/s/ Robert S. Cooper Director March 10, 2005
- --------------------
Robert S. Cooper

_________________ Director March __, 2005
John B. Goodrich

/s/ William Hart Director March 14, 2005
- ----------------
William Hart

/s/ Ulf J. Johansson Director March 10, 2005
- --------------------
Ulf J. Johansson

/s/ Bradford W. Parkinson Director March 12, 2005
- -------------------------
Bradford W. Parkinson

/s/ Nickolas W. Vande Steeg Director March 11, 2005
- ---------------------------
Nickolas W. Vande Steeg

SCHEDULE II

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