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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, 1999
-----------------
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)
645 North Mary Avenue, Sunnyvale, CA 94088
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (408) 481-8000
Securities registered pursuant to Section 12(b) of the Act: NONE
Securities registered pursuant to Section 12(g) of the Act:
Common Stock
Preferred Share Purchase Rights
(Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]
The aggregate market value of the registrant's Common Stock held by
non-affiliates of the registrant was approximately $673,572,000 as of March 13,
2000, based on the closing sale price of the common stock on the Nasdaq Stock
Market for that date.
There were 22,930,113 shares of the registrant's Common Stock issued and
outstanding as of March 13, 2000.
DOCUMENTS INCORPORATED BY REFERENCE
Items 10, 11, 12 and 13 of Part III incorporate information by reference
from the registrant's Proxy Statement for its 2000 Annual Meeting of
Shareholders to be held on May 11, 2000. Except with respect to information
specifically incorporated by reference into this Form 10-K, the Proxy Statement
is not deemed to be filed as a part hereof.
This report contains forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934. Actual results could differ materially from those
indicated in the forward-looking statements as a result of the risk factors set
forth in, or incorporated by reference into, this report and other reports and
documents that the Company files with the Securities and Exchange Commission.
The Company has attempted to identify forward-looking statements in this report
by placing an asterisk (*) before paragraphs containing such material.
PART I
Item 1. Business
General
Trimble Navigation Limited, a California corporation ("Trimble" or the
"Company"), develops, markets, and distributes innovative products and systems
enabled by Global Positioning System ("GPS") technology. We provide end-user and
original equipment manufacturer (OEM) solutions for diverse applications
including Architecture/Engineering/Construction, Asset Management and Tracking,
Agriculture, and GPS Component Technologies. Trimble designs and markets
electronic products that determine precise geographic location. Our principal
products, which utilize proprietary software and firmware, are integrated
systems for collecting, analyzing and displaying position data in forms
optimized for specific end-user applications.
Background
Precise determination of locations both on and above the earth's surface is
a fundamental requirement in many applications. For example, position data is
used for navigation on land, sea and air, and to conduct surveys and draw maps.
Previous technologies have limited users to simultaneous determination of only
two dimensions--latitude and longitude--while altitude and time required
separate measurements with different equipment. GPS technology provides users
with all of these measurements, using a single instrument. GPS is a system of 27
orbiting Navstar satellites established and funded by the U.S. Government. On
April 27, 1995, GPS was declared by the U.S. Air Force Space Command to have
achieved Full Operational Capability. GPS can complement or replace many other
forms of electronic navigation and position data systems. GPS offers major
advantages over prior technologies in terms of ease of use, precision, and
accuracy, with worldwide coverage in three dimensions, and does so in addition
to providing time and velocity measurement capabilities.
GPS positioning is based on a triangulation technique that precisely
measures distances from three or more Navstar satellites. The satellites
continuously transmit precisely timed radio signals using extremely accurate
atomic clocks. A GPS receiver calculates distances from the satellites in view
by determining the travel time of a signal from the satellite to the receiver.
The receiver then triangulates its position using its known distance from
various satellites, and calculates latitude, longitude and altitude. Under
normal circumstances, a current 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 within 100 meters, 24 hours a day. When a GPS receiver is coupled with
a reference receiver with known precise position, accuracies of less than ten
centimeters are possible. In addition, GPS provides highly accurate time
measurement.
* The usefulness of GPS is dependent upon the locations of the receiver and
the GPS satellites that are above the horizon at any given time. The current
deployment of 27 satellites permits three-dimensional worldwide coverage 24
hours a day. However, reception of GPS signals requires line-of-sight visibility
between the Navstar satellites and the receiver, which can be blocked by
buildings, hills and dense foliage. For the receiver to collect a sufficient
signal, each satellite must be above the horizon, and the receiver must have a
line of sight to at least three satellites in order to determine its location in
two dimensions--latitude and longitude--and at least four satellites to
determine its location in three dimensions-latitude, longitude, and altitude.
The accuracy of GPS may also be limited by distortion of GPS signals from
ionospheric and other atmospheric conditions, and intentional or inadvertent
signal interference or Selective Availability (SA). Selective Availability,
which is the largest component of GPS distortion, is controlled by the U.S.
Department of Defense and is a currently activated, intentional system-wide
degradation of stand-alone GPS accuracy from approximately twenty-five to one
hundred meters. Selective Availability may be implemented by the U.S. Department
of Defense in order to deny hostile forces the highly accurate position, time
and velocity information supplied by GPS. In certain military applications,
classified devices are utilized to decode the SA degradation and return
accuracies to their original levels.
2
By using a technique called "differential GPS" involving two or more GPS
receivers, accuracies can currently be improved to approximately one to three
meters for navigation, sub-meter for precision positioning, and less than ten
centimeters for survey and machine guidance applications, even with SA
activated. This technique compensates for a number of potential measurement
distortions, including distortions caused by ionospheric and other atmospheric
conditions, as well as distortions intentionally introduced into the satellite
data itself, such as SA. Differential GPS involves placing one receiver at a
known location and continuously comparing its calculated location with its known
location to measure distortions in the signal transmission and errors in the
satellite data. At any one time, such distortions and errors are reasonably
constant over large areas, so that one or more remote GPS receivers can use
these measurements to correct their own position calculations. Measurement
corrections can be transmitted either in-real time over a suitable communication
link such as radio or telephone, or integrated later with accumulated data, as
is frequently the practice in survey applications.
Each of Trimble's GPS products is based on proprietary GPS receiver
technology. Trimble's GPS receivers are capable of tracking all satellites in
view and automatically selecting the optimum combination of satellites necessary
to provide the most accurate set of measurements possible. Communications and
computational modules, such as databases, database management systems, radio and
other communication equipment, and various user interfaces, are added to these
receivers to create fully integrated application-specific solutions.
Navstar satellites and their ground support systems are complex electronic
systems subject to electronic and mechanical failures and possible sabotage. The
satellites were originally designed to have lives of 7.5 years and are subject
to damage by the hostile space environment in which they operate. However, of
the current deployment of 27 satellites in place, some have already been in
place for 11 years and have an average age of 6 years. To repair damaged or
malfunctioning satellites is currently not economically feasible. If a
significant number of satellites were to become inoperable, there could be a
substantial delay before they are replaced with new satellites. A reduction in
the number of operating satellites would impair the current utility of the GPS
system and the growth of current and additional market opportunities. In
addition, there can be no assurance that the U.S. government will remain
committed to the operation and maintenance of GPS satellites over a long period,
or that the policies of the U.S. Government for the use of GPS without charge
will remain unchanged. However, a 1996 Presidential Decision Directive marks the
first time in the evolution of GPS that access for civilian use has a solid
foundation in law. Because of ever-increasing commercial applications of GPS,
other U.S. Government agencies may become involved in the administration or the
regulation of the use of GPS signals. Any of the foregoing factors could affect
the willingness of buyers of the Company's products to select GPS-based systems
instead of products based on competing technologies. Any resulting change in
market demand for GPS products could have a material adverse effect on Trimble's
financial results. In 1995, certain European government organizations expressed
concern regarding the susceptibility of GPS equipment to intentional or
inadvertent signal interference. Such concern could translate into reduced
demand for GPS products in certain geographic regions in the future.
Business Strategy
Trimble sees GPS as an information utility. In order to exploit the wide
range of applications made possible by this information utility, we are
implementing the following strategies:
* Targeted Markets. Trimble targets a number of specific markets, based on
end-user applications. The markets that we currently target are
Architecture/Engineering/Construction, Asset Management and Tracking,
Agriculture and GPS Component Technology. We believe that by adding
application-specific features and functionality to our core GPS technology we
can deliver value-added products and enhance productivity in our targeted
markets. In the Architecture/Engineering/Construction market, Trimble focuses on
the centimeter positioning, data collection management, wireless communication,
and machine guidance and control. In the Asset Management and Tracking market
Trimble focuses on asset tracking, fleet management, intelligent transportation
systems, and public safety through integration of GPS, information technology
and wireless communication. In the Agriculture market we focus on precise
machine guidance, yield monitoring, and variable rate application of fertilizer
and chemicals. We intend to continue to leverage our GPS component technology
directly to Original Equipment Manufacturers (OEMs) for integration into various
applications.
Differentiated Product Solutions. Trimble seeks to establish and sustain
leadership in its targeted markets by offering products that are differentiated
through software, firmware, customized user interfaces, and quality service and
support. Where feasible, we emphasize application-specific systems that solve
end-user problems in our targeted markets. We believe that a substantial portion
of the value of our products is derived from the firmware that is embedded in
the product or software provided to enable superior performance. In addition,
Trimble incorporates
3
other technologies into many of its products, such as wireless
communications, information technologies and non-GPS positioning technologies in
order to optimize product features for our end-users.
Multichannel Distribution and Strategic Alliances. Trimble seeks direct
communication with its customers in order to develop and modify its product
designs as necessary to maximize utility and payback to the user. We have built
a worldwide sales and service organization made up of Company employees,
distributors and dealers. In addition, we intend to continue to develop new
alliances and to strengthen existing alliances and OEM relationships to increase
our leverage of GPS component technologies. Trimble has pursued such alliances
with several companies, including VDO Car Communication (a division of the
Mannesmann Group), Pioneer Electronics Corporation, Seiko Epson, Blaupunkt (a
wholly owned subsidiary of Robert Bosch GmbH), NortelNetworks, British Telecom,
E-systems, Honeywell, and Intel in the Mobile and Timing Technology segment; and
Caterpillar, Inc., Topcon, and CNH Global (formerly Case Corporation) in the
Precision Positioning segment.
INDUSTRY SEGMENTS
Trimble operates in a single industry segment as a leader in designing and
developing innovative products enabled by GPS technology. We provide end-user
and Original Equipment Manufacture solutions for diverse applications in our
target markets. These applications include:
o Architecture/Engineering/Construction -- surveying, mapping, machine
guidance/control;
o Asset Management and Tracking -- fixed asset mapping and fleet management
using mobile positioning;
o Agriculture -- mapping, yield monitoring, variable rate applications and
machine guidance/control; and
o GPS Component Technologies -- automotive navigation, timing systems,
commercial avionics, and military systems.
We design, market, and distribute electronic products that determine
precise geographic location combined with data communications and applications
software. We sell our products through a direct-sales force located in fifteen
countries, as well as through a worldwide network of dealers, distributors and
authorized representatives.
Research and development activities are conducted at Trimble's facilities
in Sunnyvale, California, and Christchurch, New Zealand. Solectron currently
manufactures most of Trimble's products. In addition, we have a manufacturing
facility in Austin, Texas, focused primarily on FAA-certified products for
commercial aviation and military systems.
To achieve distribution, marketing, production, and technology advantages
for our targeted markets, we manage our industry segment within two Business
Units: the Precision Positioning Group (PPG) and the Mobile and Timing
Technologies Group (MTT). Each Business Unit is managed by a senior vice
president who is responsible for strategy, marketing, product development and
financial performance.
The Precision Positioning Group derives its revenue from precision
positioning solutions for the architecture, engineering, construction, asset
management, and agriculture markets. These markets require sub-centimeter to
meter 3D positioning accuracy for surveying, mapping, and machine
guidance/control applications. The Mobile and Timing Technologies Group derives
its revenues from automotive, timing, fleet management, commercial aviation, and
military systems, as well as from development of software licenses and other
rights for the use of our GPS technology to third parties.
Although we believe that these Business Units have growth potential for
sales of GPS products, there can be no assurance that such Business Units will
continue to develop, particularly given that GPS-based systems are still in an
early stage of adoption in some of these markets. Our future growth will depend
on the timely development of the industry markets in which Trimble currently
competes, and on our ability to continue to identify and exploit new markets for
our products.
Precision Positioning Group
The Precision Positioning Group focuses its efforts in markets where the
distribution chain uses independent distributors or a direct sales force to sell
directly to the end-users. The products are typically system solutions in
high-end, value-added markets.
4
A key business strategy of PPG is interoperability, which involves the
focus on, and development of systems that integrate sensors utilizing a wide
variety of technologies and communications with GPS. We believe this
interoperability developed by Trimble is an extremely important advantage over
any of the competition. The emphasis is on providing solutions for applications,
which combine GPS and other technologies, and results in a higher real value to
the customer. The concept of interoperability applies to electronic and
mechanical accommodations of other technologies, together with GPS, to solve a
problem. Probably the most important area of interoperability, and often the
least recognizable until the integrated solution is put into use, is in the area
of data interchange.
Products
The following is a table of some of the Precision Positioning Group products.
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PRODUCT BRIEF DESCRIPTION
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- ----------------------------------- --------------------------------------------
4000 Series GPS receiver and associated antennas
that provide position information for
surveying.
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- ----------------------------------- --------------------------------------------
4600 LS(TM) Low-cost single-frequency survey system.
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- ----------------------------------- --------------------------------------------
4700/4800 GPS Total Station Real time surveying system that incorporates
dual frequency receiver and antenna
with a radio modem and antenna.
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- ----------------------------------- --------------------------------------------
4000 MSGR P/Y Survey System Turnkey solution for military land survey
applications.
- ----------------------------------- --------------------------------------------
- ----------------------------------- --------------------------------------------
TTS(TM)300/500 Total Station Optical extension of the GPS Total Station
utilizing, reflectorless technology for
surveying in areas where GPS signals are
obstructed.
- ----------------------------------- --------------------------------------------
- ----------------------------------- --------------------------------------------
Trimble Geomatics Office(TM) Application software for GPS
and Survey Controller postprocessing, survey project management,
and field data collection.
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- ----------------------------------- --------------------------------------------
TRIMTALK(TM), TRIMMARK(TM), Radio modems used for
and TRIMCOMM(TM) Radios real-time GPS applications that
provide broadcast and receive
functions for VHF, UHF, and 900
MHz spread spectrum data
transmissions.
- ----------------------------------- --------------------------------------------
- ----------------------------------- --------------------------------------------
MS750(TM) Real-time Kinematic GPS technology
that provides precise positioning
to hydrographic survey, marine
construction, and machine
guidance/control applications.
- ----------------------------------- --------------------------------------------
- ----------------------------------- --------------------------------------------
4000RSi(TM)/ DSi Uses advanced GPS technology
to create high-precision
Differential GPS (DGPS) system for
marine survey, navigation, and
positioning.
- ----------------------------------- --------------------------------------------
- ----------------------------------- --------------------------------------------
DSM(TM) Sub-meter marine survey sensor.
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- ----------------------------------- --------------------------------------------
Beacon Control System A complete solution for establishing a
network of remote stations for the broadcast
of differential GPS correction data.
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- ----------------------------------- --------------------------------------------
GeoExplorer(R)3 Rugged handheld GIS data collection and
maintenance system.
- ----------------------------------- --------------------------------------------
- ----------------------------------- --------------------------------------------
Pathfinder Pro Family GIS data collection and maintenance systems
that provide real-time sub-meter accuracy.
The systems are used in a wide range off
applications, such as utility asset
management, environmental monitoring
and scientific research, hazardous waste
cleanup, and natural resource and land
management.
- ----------------------------------- --------------------------------------------
- ----------------------------------- --------------------------------------------
Pathfinder Office Microsoft Windows-based application provides fast,
simple data processing and export from
data collected, including planning,
data dictionary creation, batch
processing, and sophisticated editing and
output of collected data.
- ----------------------------------- --------------------------------------------
- ----------------------------------- --------------------------------------------
Pathfinder Card Easy-to-use mobile GIS data collection and
maintenance system that works with a
standard pen and notebook PCs.
- ----------------------------------- --------------------------------------------
- ----------------------------------- --------------------------------------------
Pathfinder Tools(TM) Software Powerful software development kit (SDK)
Development Kit designed to integrate Trimble GPS
receivers with custom mapping and GIS
applications.
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- ----------------------------------- --------------------------------------------
BenchGuide(TM) Provides mining machine operators with
precision GPS-based guidance in locating
correct bench or terrain elevations
without using survey stakes.
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- ----------------------------------- --------------------------------------------
CAES Machine guidance system for mining
applications.
- ----------------------------------- --------------------------------------------
- ----------------------------------- --------------------------------------------
TrimFlight GPS(TM) An advanced aerial guidance and mapping
tool that provides highly accurate guidance
suitable for many precise airborne
operations.
- ----------------------------------- --------------------------------------------
5
- ----------------------------------- --------------------------------------------
AgGPS(R)132 High-performance GPS receiver used
to calculate sub-meter positions
in real time. Used by farmers to
tag soil type, insect infestation,
or crop yield.
- ----------------------------------- --------------------------------------------
- ----------------------------------- --------------------------------------------
AgGPS(R)170 Field Computer Rugged mobile computing platform that
adds data logging and field mapping to
AgGPS receivers and enhanced guidance to
the AgGPS Parallel Swathing Option. The
AgGPS 170 Field Computer is a tool for
custom applicators who desire top-of-the-
line field guidance with data storage for
environmental reporting, and customer
billing.
- ----------------------------------- --------------------------------------------
- ----------------------------------- --------------------------------------------
SiteVision(TM)GPS Earthmoving grade control system that
enables machine operators to view the
site plan in the cab.
- ----------------------------------- --------------------------------------------
Mobile and Timing Technologies
The Mobile and Timing Technologies Group focuses its efforts in markets
where the majority of its products are sold directly to OEMs or system
integrators. The products are designed to support system solutions in
high-volume applications. In some instances the Business Unit's products are in
the form of software and chipset licenses and other rights for the use of our
GPS technology by third parties.
This Business Unit focuses on product lines that address the fleet
management market, and leverage GPS component technologies for use in automotive
navigation, timing for telecommunications, commercial aviation and military
systems. The product lines in these markets involve full-function,
high-performance embedded GPS engines that are frequently utilized in some
markets with integrated communication systems such as cellular, satellite, and
special mobile radio systems. The GPS equipment provides accurate position,
velocity, and timing information for use in such diverse applications as car
navigation, airborne navigation, munitions guidance, vehicle and high-value
cargo tracking.
Trimble supplies GPS boards and chipsets, and licenses technology to some
of the leading automotive electronics suppliers, including Pioneer Electronics,
Magneti Marelli, VDO Car Communication (a division of the Mannesmann Group), and
Blaupunkt (a wholly owned subsidiary of Robert Bosch GmbH). Trimble is also part
of the reference design for Intel's initiative to develop in-car Pentium
processor-based computing, and Microsoft's Auto PC platform. Trimble airborne
navigation products are flown by more than 100 of the world's major airlines.
Trimble supplies timing products to major telecommunications infrastructure
suppliers, including NortelNetworks, AT&T Wireless, Qualcomm, and Glenayre.
These products include frequency synthesis hardware, which is timed by precision
GPS receiver and is used to control most of the time and frequency functions
within wireless base stations. Cellular telephones, paging networks, and
wireless local loop telephony use these base stations. Precision timing is
expected to become even more important as wireless traffic migrates from voice
centric to data centric applications.
Products
The following is a table of some of the Mobile and Timing Technologies Group
products.
- ----------------------------------- --------------------------------------------
PRODUCT BRIEF DESCRIPTION
- ----------------------------------- --------------------------------------------
- ----------------------------------- --------------------------------------------
ACE II GPS(TM) Module Powerful miniature 8-channel GPS board
designed for applications requiring
high performance at low cost.
- ----------------------------------- --------------------------------------------
- ----------------------------------- --------------------------------------------
Lassen(TM)-SKII Miniature 8-channel GPS receiver ideal for
in-car navigation and telemetric systems.
- ----------------------------------- --------------------------------------------
- ----------------------------------- --------------------------------------------
SveeEight Plus GPS Module 8-channel GPS technology in a convenient
plug-and play-form factor.
- ----------------------------------- --------------------------------------------
- ----------------------------------- --------------------------------------------
CrossCheck(TM) Family Integrates GPS, wireless cellular, and
computing technologies into a single
low-cost mobile positioning and
communications system for
commercial fleet management.
- ----------------------------------- --------------------------------------------
- ----------------------------------- --------------------------------------------
Placer(TM)Family and Mobile positioning and communication system
Placer(TM)GPS 450/455 with various communications interfaces.
- ----------------------------------- --------------------------------------------
- ----------------------------------- --------------------------------------------
Galaxy Immarsat-C/GPS(TM) The first commercial product which
integrates two-way wireless satellite
communications with GPS location data for
long-haul trucking and marine applications.
- ----------------------------------- --------------------------------------------
6
- ----------------------------------- --------------------------------------------
Trimble GPS/AVL Subsystem A system which combines radio communications
and GPS technologies to enable public safety
agencies to decrease emergency response call
times and improve operational efficiency.
- ----------------------------------- --------------------------------------------
- ----------------------------------- --------------------------------------------
FleetVision(R)3.2 Microsoft Windows-based application which
provides fleet operators with cost-effective
and easy-to-use solution for tracking mobile
assets.
- ----------------------------------- --------------------------------------------
- ----------------------------------- --------------------------------------------
Palisade(TM) NTP High-performance, cost-effective reference
Synchronization Kit time source that uses GPS technology to
synchronize computers, servers, and internet
applications.
- ----------------------------------- --------------------------------------------
- ----------------------------------- --------------------------------------------
ThunderBolt(TM) GPS Disciplined GPS clock designed specifically for
Clock precision timing and synchronization of
wireless networks. Variations of this
basic design are used by major
telecommunication infrastructure providers
such as NortelNetworks, AT&T Wireless,
and Qualcomm.
- ----------------------------------- --------------------------------------------
- ----------------------------------- --------------------------------------------
ACE UTC GPS A unit that integrates GPS timing technology
into the ACE form factor, which is
slightly bigger than a business card.
Ideal for precision timing applications.
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- ----------------------------------- --------------------------------------------
Bullet(TM) II/Bullet(TM)II HE Rugged GPS antenna for timing systems
installed outdoors.
- ----------------------------------- --------------------------------------------
- ----------------------------------- --------------------------------------------
Trimble 8100 An IFR-certified C129-A1 aviation navigation
system that provides GPS position, velocity,
and course data, plus flight management
information for the business, commercial and
air transport markets.
- ----------------------------------- --------------------------------------------
- ----------------------------------- --------------------------------------------
HT9100(TM) A product created from the Trimble/
Honeywell partnership combines Trimble's GPS
technology with Honeywell's flight
management technology to create a complete
system for Communications, Navigation, and
Surveillance/Air Traffic Management for air
transport operations.
- ----------------------------------- --------------------------------------------
- ----------------------------------- --------------------------------------------
Trimble 2101 Approach Plus and Is a Dzus rail-mount, GPS-based flight
I/O Approach Plus management and navigation system for
corporate, helicopter and regional commuter
aviation.
- ----------------------------------- --------------------------------------------
- ----------------------------------- --------------------------------------------
Force(TM) TM GPS Module Series A GPS module that has been developed
for embedded integration into
high-performance land, sea, aircraft and
missile applications.
- ----------------------------------- --------------------------------------------
- ----------------------------------- --------------------------------------------
TA-12 High-performance, all-in-view, PPS GPS
receiver for military aircraft operating
within the US National Airspace System.
The TA-12 receiver is FAA TSO-C129A
certified and designed for integration
with Flight Management Systems (FMS) that
require Instrument Flight Rules (IFR) -
certified operations.
- ----------------------------------- --------------------------------------------
- ----------------------------------- --------------------------------------------
Cargo Utility GPS Receiver (CUGR) A complete GPS-based navigation system
for military aircraft operations.
- ----------------------------------- --------------------------------------------
Sales and Marketing
Trimble currently has nine regional sales offices in the United States and
six in Europe, as well as offices in Australia, Canada, China, Japan, Mexico,
New Zealand, Russia, and Singapore. We have substantial variation in the needs
of our sales and distribution channels, which are rapidly changing.
Domestic. Trimble sells its products in the United States primarily through
dealers, distributors, and authorized representatives, supplemented and
supported by our direct salesforce. We have also pursued alliances and OEM
relationships with established foreign and domestic companies to assist us in
penetrating certain markets.
International. Trimble markets to end-users through a network of more than
100 dealers and distributors in more than 85 countries. Distributors carry one
or more product lines and are generally limited to selling either in one country
or in a portion of a country. Trimble occasionally grants exclusive rights to
market certain products within specified countries.
Sales to unaffiliated customers in foreign locations represented
approximately 52%, 46%, and 46% of Trimble's total revenue in fiscal years 1999,
1998 and 1997, respectively. Sales to unaffiliated customers in Europe
represented 25%, 25%, and 22% of net revenue in such periods, and sales to
unaffiliated customers in the Far East represented 14%, 13%, and 15% of total
revenue in such periods, respectively.
7
Support. Trimble's general terms and conditions for sales of its products
include a one-year warranty. Commercial Aviation products, however, are
generally sold with a basic three-year warranty period with an additional
two-year warranty sold with some units; select military programs may require
extended warranty periods. We support our products on a board replacement level
from locations in the United Kingdom, Singapore, Japan, and New Zealand, as well
as Sunnyvale, California. Trimble's dealers and distributors also provide
factory-trained third-party maintenance, including warranty and non warranty
repairs. We reimburse dealers and distributors for all authorized warranty
repairs they perform. Trimble does not derive a significant portion of its
revenues from support activities.
Competition
* In the segments currently being addressed by Trimble, competition is
intense. Within each of its segments, Trimble has encountered direct competition
from both foreign and domestic suppliers, and expects that competition will
continue to intensify. Indirect competition is also beginning to emerge,
particularly from semiconductor and consumer electronic manufacturers that are
anticipating the emergence of high-volume, customer-oriented GPS applications.
The PPG segment faces competition from Leica AG, Spectra Precision (Thermo
Electron), Topcon, Sokkia, Ashtech Precision Products (part of Magellan Corp.
via Orbital Sciences Corp.), Novatel (Canadian Marconi), Allen Osborne, Javad
Positioning Systems, Communications Systems International, Corvallis
Microtechnology, Inc., and Tripod Data Systems.
The MTT segment faces ongoing competition from Motorola, Inc.; Japan Radio
Corporation, Rockwell International Corporation, Symmetricom, Datum, Odetics,
Rockwell Collins, Universal Navigation Corporation, Canadian Marconi Company (a
subsidiary of the General Electric Company plc), Northstar Avionics (a
subsidiary of Canadian Marconi), and UPS Aviation Technologies (a division of
United Parcel Service of America, Inc.), The New Honeywell Incorporated (Merged
Allied Signal and Honeywell), Smiths Industries, ARNAV, Interstate Electronics
(subsidiary of Figgie International), Raytheon, and Litton Industries, Orbital
Sciences Corp., and Wireless Link.
A number of Trimble's markets are also served primarily by non-GPS
technologies, many of which are currently more accepted and less expensive than
GPS-based systems. The success of GPS-based systems against these competing
technologies depends in part on whether GPS systems can offer significant
improvements in productivity, accuracy, and reliability in a cost-effective
manner, as well as continued market education about such products.
The principal competitive factors in the markets that Trimble addresses
include ease of use, physical characteristics (including size, weight, and power
consumption), product features (including differential GPS), product
performance, product reliability, price, size of installed base, vendor
reputation, and financial resources. We believe that our products currently
compete favorably with other products on most of the foregoing factors, though
we may be at a competitive disadvantage against other companies having greater
financial, marketing, and service and support resources.
* Trimble believes that its ability to compete successfully in the future
against existing and additional competitors will depend largely on its ability
to provide systems products and services that have significantly differentiated
features with improved cost/benefit ratios to our end-users. There can be no
assurances that we will be able to implement this strategy successfully, or that
our competitors, many of whom have substantially greater resources than Trimble,
will not apply those resources to compete successfully against us on the basis
of system features and end-user cost/benefit ratios.
Research and Development
Trimble's leadership position in its targeted markets is the result, in
large part, of its strong commitment to research and development. Trimble
invests heavily in developing positioning and information technologies and
wireless communications, including the design of proprietary software and
integrated circuits for GPS receivers. Moreover, Trimble develops substantial
systems expertise and user interfaces for a variety of applications. Below is a
table of Trimble's expenditures on research and development over the last three
fiscal years.
8
Fiscal Years ended
----------------------------------------------------
December 31, January 1, January 2,
1999 1999 1998
- --------------------------------------------------------------------------------
(In thousands)
Research and development $ 36,493 $ 45,763 $ 38,242
Often a new product is developed initially for an individual customer who
is willing to purchase development-stage products. We have used feedback from
such initial customers as a primary source of information in designing and
refining our products and in defining, with greater precision, customer needs in
emerging market areas. During 1996, Trimble established an advanced technology
laboratory where we devote a portion of our corporate research and development
expenditures to advance core GPS technology and its integration into synergistic
technologies such as communications, sensors, and information technologies.
These technological advances are sometimes supported financially through
strategic alliances and partnerships.
* Trimble expects that a significant portion of future revenues will be
derived from sales of newly introduced products. Consequently, our future
success depends in part on our ability to continue to develop new competitive
products with timely market introduction. Advances in product technology will
require continued substantial investment in research and development in order to
maintain and enhance our market position. Development and manufacturing
schedules for technology products are difficult to predict, and there can be no
assurance that we will achieve timely initial customer sales of new products.
The timely availability of these products in volume, and their acceptance by
customers, are important to Trimble's future success. In addition, some of our
products 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 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.
Manufacturing
Trimble seeks to be a low-cost provider and to serve the growth in demand
for GPS-based products and systems through the outsourcing of manufacturing, and
the design of products around a common core of receivers.
On August 10, 1999, Trimble signed an Asset Purchase Agreement with
Solectron Corporation and Solectron Federal Systems, Inc. (collectively,
"Solectron"). The closing of the transaction occurred on August 13, 1999. At the
closing of the Asset Purchase Agreement, Trimble transferred to Solectron
substantially all of our tangible manufacturing assets located at the Company's
Sunnyvale, California, campus. These assets include but are not limited to
equipment, fixtures and work in progress, as well as certain contract and other
intangible assets and rights, together with certain related obligations,
including but not limited to real property subleases covering Trimble's
manufacturing floor space, and outstanding purchase order commitments. The Asset
Purchase Agreement also provided for Solectron's subsequent purchase, on August
30, 1999, of Trimble's entire component inventory on hand as of August 13, 1999.
Concurrent with the closing of the Asset Purchase Agreement, Trimble and
Solectron also entered into a Supply Agreement. The Supply Agreement provides
for the exclusive manufacture by Solectron of almost all Trimble products for a
period of three years. In addition, Trimble maintains a manufacturing facility
in Austin, Texas, primarily focused on FAA certified products for commercial
aviation and military systems.
Solectron offered employment to approximately 230 Trimble manufacturing,
engineering and related support personnel, and Trimble understands that
substantially all such employees initially accepted such employment with
Solectron.
* The utilization of Electronic Manufacturing Services (EMS) provided by
Solectron will enable the management of Trimble to focus on the true core
competencies of Trimble's business, while still deriving the benefits from a
world-class manufacturing organization. Benefits which Trimble hopes to receive
from this outsourcing of manufacturing include:
o The purchasing power of a company with a multibillion-dollar procurement
budget.
o Supply chain management and order fulfillment models developed to support
the stringent demands of current customers.
9
o Flexibility and ability to respond to upside/market opportunities due to
the large scale of Solectron's manufacturing capacity.
o Manufacturing, service and distribution capabilities on a worldwide
scale, enabling Trimble to provide more cost-effective supply solutions,
closer to its customers.
o Manufacturing practices yielding stable processes and providing better
quality output.
o Availability of the latest and most cost-effective product assembly
technologies.
o Provision of latest design services to participate in the product
development cycle with a fresh and unbiased focus on design
for manufacturability, lower cost, higher quality and higher reliability.
Trimble will continue to provide state-of-the art Computer Aided Design and
Computer Integrated Manufacturing service capabilities to the development
community relating to PCB layout, assembly drawing and schematic development. We
intend to remain self-sufficient in this field to ensure that the development
entities can have the maximum benefit from the utilization of their time,
contributing to faster and more effective product release cycles.
Trimble maintains quality control procedures for its products, including
testing during design, prototype, and pilot stages of production, and inspection
and testing of finished products using automated test equipment.
Trimble takes a modular and upgradable approach to its products, building
around a common core of GPS receivers with customized software and hardware
systems to analyze and present position data. Our core receiver technology has
evolved since the development of our first GPS receiver product in 1984, as we
have worked to reduce the size, weight, power consumption and cost of the basic
GPS receiver. In this process, we have designed our own semi-custom, single-chip
GPS processor.
Backlog
Trimble believes that due to the volume of products delivered from shelf
inventories and the shortening of product delivery schedules, backlog is not a
meaningful indicator of future business prospects. Therefore, we believe that
backlog information is not material to an understanding of our business.
Patents, Trademarks, and Licenses
Trimble currently holds approximately 280 U.S. patents and 18 related
foreign patents that expire at various dates no earlier than 2005. It also has
more than 180 U.S. and foreign patent applications pending. We currently license
certain peripheral aspects of our technology from Spectrum Information
Technologies and GeoResearch.
Although we believe that our patents and trademarks have value, there can
be no assurance that those patents and trademarks, or any additional patents and
trademarks that may be obtained in the future, will provide meaningful
protection from competition. We actively develop and protect our intellectual
property through a program of patenting, enforcement, and licensing.
We do not believe that any of our products infringe patent or other
proprietary rights of third parties, but we cannot be certain that they do not
do so. (See Note 17 to Consolidated Financial Statements.) If infringement is
alleged, legal defense costs could be material, and there can be no assurance
that the necessary licenses could be obtained on terms or conditions that would
not have a material adverse effect on our profitability.
In the second quarter of 1997, Trimble expanded a prior license agreement
with Pioneer Electronic Corporation for certain of the technology contained in
our TANS product for inclusion in in-vehicle navigation products sold in Japan.
We received a one-time $2.2 million licensing fee in consideration for the
expansion of this license.
* Trimble expects that we will enter into other licensing arrangements
relating to its technologies.
"Trimble" with the sextant logo, "Trimble Navigation," "GeoExplorer,"
"Flightmate," "GPS Total Station," "Scout GPS," and "Aspen" are trademarks of
Trimble Navigation Limited, registered in the United States and other countries.
Additional trademarks are pending. Trimble Navigation Limited acknowledges the
trademarks of other organizations for their respective products or services
mentioned in this document.
10
Employees
As of December 31, 1999, Trimble employed 978 persons: 317 in research and
product development, 400 in sales and marketing, 118 in manufacturing, and 143
in administration and finance. Of these, 75 were located in Europe, 175 in New
Zealand, 16 in Japan, 6 in Singapore, 5 in Australia, and 701 in the United
States. We also employ temporary and contract personnel. Use of such personnel
has decreased over the last year and is not included in the above headcount
numbers. Competition in recruiting personnel is intense. We believe that our
continued ability to attract and retain highly skilled management, marketing,
and technical personnel is essential to our future growth and success. Our
employees are not represented by a labor union, and we have not experienced work
stoppages.
Trimble's success depends in part on the continued contribution and
long-term effectiveness of our executive officers and key technical, sales,
marketing, support, research and development, manufacturing, and administrative
personnel, many of whom would be difficult to replace.
11
Executive Officers of the Company
The names, ages, and positions of the Company's executive officers as of
March 27, 2000 are as follows:
Name Age Position
- --------------------------------------------------------------------------------
Steven W. Berglund........... 48 President, Chief Executive Officer
Mary Ellen Genovese.......... 40 Vice President, Finance, Chief Financial
Officer and Corporate Controller
Charles E. Armiger, Jr....... 45 Vice President, Worldwide Sales
David M. Hall................ 51 Group Vice President, Mobile and Timing
Technologies
Patrick J. Hehir............. 38 Senior Vice President, Chief Manufacturing
Officer
John E. Huey................. 50 Treasurer
Ron C. Hyatt................. 60 Group Vice President, Precision Positioning
Michael W. Lesyna............ 39 Vice President, Strategic Marketing
Bruce E. Peetz............... 48 Vice President, Advanced Technology and
Systems
All officers serve at the discretion of the Board of Directors. There are
no family relationships between any of the directors or executive officers of
the Company.
Steven W. Berglund joined Trimble as President and Chief Executive Officer
in March 1999. Mr. Berglund has a diverse background with experience in
engineering, manufacturing, finance and global operations. Most recently, Mr.
Berglund was president of Spectra Precision, Inc., with global sales of
approximately $200 million, develops and manufactures surveying instruments,
laser-based construction alignment instruments, and construction machine control
systems. During his fourteen years with Spectra-Physics, Mr. Berglund held a
variety of positions that included four years based in Europe. Prior to Spectra
Precision, Mr. Berglund spent a number of years in the early 1980s at Varian
Associates in Palo Alto where he held a number of planning and manufacturing
roles. Varian is a technology company specializing in microwave communications,
semiconductor manufacturing equipment, analytical instruments, and medical
diagnostic equipment. Mr. Berglund began his career as a process engineer at
Eastman Kodak in Rochester, New York. He attended the University of Oslo and
University of Minnesota where he received a B.S. in chemical engineering in
1974. He received his MBA from the University of Rochester in 1977.
Mary Ellen Genovese joined Trimble in December 1992 as controller of
manufacturing operations. From 1994 to 1997 she served as business unit
controller for software and component technologies, and for the tracking and
communications business unit. She was appointed corporate controller in
October1997 and vice president of finance and corporate controller in February
1998. Currently, she is Trimble's interim chief financial officer. Prior to
joining Trimble, Mrs. Genovese was chief financial officer and president for
Minton Co., a distributing company to the commercial building market, from 1991
to 1992. In her position as chief financial officer, she was responsible for the
accounting, management reporting and bank and investor financing for the
company. In March of 1992, the board of directors asked her to assume the role
of president of Minton to reorganize the company, including the divestiture of
the manufacturing operations. Prior to 1991, she worked for 10 years with
General Signal Corporation. She was appointed European financial controller in
July 1990, and was responsible for the company's three European operations --
Germany, France and the United Kingdom. From 1988 to 1990 she served as unit
financial officer -- for General Signal's Semiconductor Systems Division. She
held several other management positions, including materials manager, and
controller of manufacturing operation and international projects controller for
General Signal's Ultratech Stepper Division from 1984 to 1988. Mrs. Genovese is
a Certified Public Accountant and received her B.S. in accounting from Fairfield
University in Connecticut in 1981.
Charles E. Armiger, Jr. joined Trimble in January 1989 as Sales and
Marketing Manager for aviation products. From January 1991 to December 1993, he
served as Director of U.S. Domestic Sales. Mr. Armiger held the post of Director
of Sales for North American West from January 1993 to November 1994. In December
1994 he moved to Trimble's European office in Hook, England, to serve as
Director of Sales for Europe, the Middle East and Africa. In September 1996, he
was appointed to serve as Vice President for Commercial Systems Sales. In
September 1998, Mr. Armiger was appointed Vice President of Worldwide Sales.
Prior to joining Trimble, he was Director of Sales and Marketing for ARNAV
Systems, Inc. He received a B.S. degree in Business from the University of the
State of New York, Regents College, in 1996.
12
David M. Hall joined Trimble in February 1994 as Managing Director, OEM
products. In November 1996 he was appointed Vice President and General Manager
of the Software and Component Technologies business unit, focusing on
application and operating system software, component board level, and chipset
volume aspects of the GPS business. In November 1998 he was appointed Group Vice
President of the Mobile and Timing Technologies business unit, managing mobile
positioning and communications, timing, automotive, military, and commercial
aviation businesses. Previously, he worked for Raychem Corporation for
twenty-one years in a variety of positions and divisions. He served as Director
of Sales and Marketing for the Automotive Division, National Distribution
Manager for the Electronics Sector, and Director of Marketing and Product
Management for the Interconnect Systems Division, as well as District Sales
Manager, Area Sales Manager, and Operations Manager. Mr. Hall received his B.S.
degree in Industrial Technology in 1971 and his MBA in Marketing and Finance
in1973 from the California Polytechnic State University in San Luis Obispo,
California.
Patrick J. Hehir joined Trimble in February 1999 as Senior Vice President
and Chief Manufacturing Officer. Prior to Trimble, Mr. Hehir worked for Dovatron
International, where he held several positions during his eight-year tenure,
including quality/program manager, director of operations, executive director of
operations and vice president of worldwide business development. Dovatron, a $1
billion international manufacturing company with offices in Ireland, Mexico,
Asia, Eastern Europe and the U.S., serves clients such as Hewlett-Packard,
Hughes Corporation, I.B.M., and Lucent Technologies. Prior to Dovatron, he
worked for Western Digital in several positions, including process/quality
engineer, quality improvement process coordinator, senior quality engineer and
quality manager. Mr. Hehir also held process engineering, production and quality
positions at Pulse Engineering in Ireland. He has a broad range of educational
qualifications from technical colleges and universities in Ireland and the
United Kingdom. He graduated from Galway's Institute of Technology with an
electronic engineering certificate in 1981. He received a quality-assurance
post-graduate diploma from the Galway's University College in 1984. In 1987, Mr.
Hehir received a production and operations management certificate from the
United Kingdom's Institute of Industrial Engineering, and a post-graduate
diploma in health, safety and social welfare from Cork's University College in
1993. Mr. Hehir also served on Ireland's technical committee for the development
of the environmental system standard, ISO 14000, published by the International
Standards Organization.
John E. Huey joined Trimble in 1993 as Director, Corporate Credit and
Collections. He was promoted to Assistant Treasurer in 1995 and Treasurer in
1996. As Treasurer, Mr. Huey has responsibility for the Company's banking
relationships including syndicated credit facilities, domestic and international
cash management, credit/collection/DSO management and worldwide risk management,
including setting and execution of the Company's hedging policy and stock
administration. Past business experience includes two years with ENTEX
Information Services, five years with National Refractories & Minerals
Corporation (formerly Kaiser Refractories), and thirteen years with Kaiser
Aluminum & 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.
Ron C. Hyatt joined Trimble in August 1983 as Director of
Instrumentation Products. In 1985, he was appointed Vice President for Surveying
and Mapping Products, managing the marketing and application software
development aspects of the business until February 1993. In January 1997 he
returned to the Company as Senior Vice President of Trimble Labs, focusing on
next-generation ASIC developments. In November 1998, Mr. Hyatt was promoted to
Group Vice President of Precision Positioning Group. He is responsible for
managing surveying, mapping/GIS, and machine guidance/control product lines.
Prior to joining Trimble, Mr. Hyatt worked for Hewlett-Packard from 1964 to 1983
in various engineering and management positions, focusing on precision frequency
and time instrumentation. Mr. Hyatt received his B.S. degree in electrical
engineering from Texas Tech University in 1962 and his M.S. degree in electrical
engineering from Stanford University in 1963.
Michael W. Lesyna joined Trimble as Vice President of Strategic Marketing
in September 1999. Mr. Lesyna brings broad experience in developing business and
marketing strategies for high-technology companies. Mr. Lesyna joins Trimble
from Booz Allen & Hamilton, where he spent six years, most recently serving as a
principal in the operations management group. While at Booz Allen & Hamilton, he
was responsible for advising companies on a wide range of strategic issues.
Prior to Booz Allen & Hamilton, Mr. Lesyna held a variety of engineering
positions at Allied Signal Aerospace. He served as a project engineer for Allied
Signal's European consortium in Germany, was a development and test engineer for
the altitude chamber, and was a design engineer for the company's first jet
fighter engine afterburner. Mr. Lesyna received an MBA from Stanford University.
He also received an MS in mechanical engineering and a B.S. in mechanical
engineering from Stanford.
13
Bruce E. Peetz joined Trimble in June 1988 as Program Manager for GPS
Systems. From January 1990 to January 1994 he served as Development Manager for
commercial dual-frequency products, and from January 1993 to December 1995 he
served as Engineering Manager for Surveying and Core Engineering. In 1996 he was
appointed General Manager of the Land Surveying unit, and from February 1998
started the Advanced Systems division as General Manager. In October 1998 he was
named Vice President of Advanced Technology and Systems, consolidating Systems
and Trimble Laboratories. Prior to joining Trimble, Mr. Peetz served in a
variety of engineering and management positions during eleven years at Hewlett
Packard and four years at Hughes Aircraft Company. Mr. Peetz received his B.S.
degree in Electrical Engineering from the Massachusetts Institute of Technology
in 1973, and did graduate work in computer science at UCLA.
Item 2. Properties
Trimble currently leases an aggregate of 396,500 square feet in fifteen
buildings in Sunnyvale, California. Trimble uses approximately 221,000 square
feet; and the balance is subleased to others. The leases and subleases on these
buildings expire at various dates through 2004. In addition, we lease three
buildings in Austin, Texas, totaling approximately 50,600 square feet. Trimble
uses approximately 25,000 square feet to manufacture GPS-based aviation
products. The balance is subleased; the leases and subleases expire at various
dates through 2004. We also lease 65,000 square feet in two buildings in
Christchurch, New Zealand, for software development. These leases expire in 2005
and 2010. Trimble's two largest international sales offices are those in the
United Kingdom (15,465 square feet) and Japan (5,640 square feet). In addition,
our sales offices in Australia, China, France, Germany, Hungary, Italy, Mexico,
Spain, Singapore, Russia, and in various cities throughout the United States are
leased. Trimble currently does not own any real estate or buildings. Trimble's
international office leases expire at various dates through 2005. Certain of the
leases have renewal options. We believe that our facilities are adequate to
support our current and anticipated near-term future operations.
Item 3. Legal Proceedings
The information with respect to legal proceedings required by this item is
included in Part II, Item 8, Note 17 to the Consolidated Financial Statements,
hereof under the caption "Pending Matters."
Item 4. Submission of Matters to a Vote of Security Holders
Not applicable.
14
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder
Matters
Trimble's Common Stock is traded on the Nasdaq Stock Market(R) under the
symbol TRMB. The following table sets forth, for the quarters indicated, the
range of high and low closing sales prices for Trimble's Common Stock on the
Nasdaq Stock Market(R):
High Low
1999:
Fourth 23 1/8 10 1/2
Third 13 1/4 9
Second 13 3/4 9 3/8
First 10 1/2 7 1/4
1998:
Fourth 10 1/4 7
Third 16 3/8 9 1/4
Second 19 13/16 13 7/8
First 24 3/8 17 1/4
Trimble had 1,357 registered shareholders of record as of March 13, 2000.
Trimble's stock price is subject to significant volatility. If revenues or
earnings fail to meet the expectations of the investment community, there could
be an immediate and significant impact on the trading price for the Company's
stock. Due to stock market forces that are beyond our control, and due also to
the nature of our business, such short falls can be sudden.
Trimble has never paid cash dividends on its Common Stock. Trimble
presently intends to retain its earnings to finance the development of its
business, and does not presently intend to declare any cash dividends in the
foreseeable future. Under our current $50,000,000 revolving line of credit
agreement, Trimble is restricted from paying dividends without the lender's
consent. Under Trimble's Note Purchase Agreement, pursuant to which the Company
issued $30,000,000 of its subordinated promissory notes in June 1994, Trimble is
also restricted from paying dividends. See Notes 7 and 9 to the Consolidated
Financial Statements contained in Item 8.
15
Item 6. Selected Financial Data
HISTORICAL FINANCIAL REVIEW
Summary Consolidated Statements of Operations Data
December 31, January 1, January 2, December 31, December 31,
Fiscal Years ended 1999 1999 1998 1996 1995
- ---------------------------------------------------------------------------------------------------------------------------
(In thousands, except per share data)
Revenue $ 271,364 $ 268,323 $ 266,442 $ 226,784 $ 227,859
-------------------------------------------------------------
Operating expenses
Cost of sales 127,117 141,075 124,411 107,744 96,792
Research and development 36,493 45,763 38,242 27,833 30,518
Sales and marketing 53,543 61,874 57,661 61,112 60,321
General and administrative 33,750 33,245 27,424 35,136 23,395
Restructuring charges - 10,280 - 2,134 -
-------------------------------------------------------------
Total operating expenses 250,903 292,237 247,738 233,959 211,026
-------------------------------------------------------------
Operating income (loss) from continuing operations 20,461 (23,914) 18,704 (7,175) 16,833
Nonoperating income (expense), net 274 (2,041) 1,172 706 773
-------------------------------------------------------------
Income (loss) before income taxes from continuing operations 20,735 (25,955) 19,876 (6,469) 17,606
Income tax provision (benefit) 2,073 1,400 2,496 (300) 3,121
-------------------------------------------------------------
Net income (loss) from continuing operations $ 18,662 $ (27,355) $ 17,380 $ (6,169) $ 14,485
-------------------------------------------------------------
Loss from discontinued operations (net of tax) - (5,760) (8,101) (5,134) (3,224)
Estimated gain (loss) on disposal of discontiued operations
(net of tax) 2,931 (20,279) - - -
-------------------------------------------------------------
Net income (loss) $ 21,593 $ (53,394) $ 9,279 $ (11,303) $ 11,261
=============================================================
Basic net income(loss) per share from continuing operations $ 0.83 $ (1.22) $ 0.78 $ (0.28) $ 0.73
Basic net income(loss) per share from discontinued operations $ 0.13 $ (1.16) $ (0.36) $ (0.23) $ (0.16)
-------------------------------------------------------------
Basic net income(loss) per share $ 0.96 $ (2.38) $ 0.42 $ (0.51) $ 0.56
=============================================================
Shares used in calculating basic
earnings per share 22,424 22,470 22,293 22,005 19,949
=============================================================
Diluted net income(loss) per share from continuing operations $ 0.82 $ (1.22) $ 0.75 $ (0.28) $ 0.68
Diluted net income(loss) per share from discontinued operations $ 0.13 $ (1.16) $ (0.35) $ (0.23) $ (0.15)
-------------------------------------------------------------
Diluted net income(loss) per share $ 0.95 $ (2.38) $ 0.40 $ (0.51) $ 0.53
=============================================================
Shares used in calculating diluted
earnings per share 22,852 22,470 22,947 22,005 21,318
=============================================================
Cash dividends per share $ - $ - $ - $ - $ -
=============================================================
Other Operating Data: December 31, January 1, January 2, December 31, December 31,
Fiscal Years ended 1999 1999 1998 1996 1995
- ---------------------------------------------------------------------------------------------------------------------------
(In thousands, except percentages)
Gross margin percentage 53% 47% 53% 52% 58%
Operating income (loss) percentage 8% (9%) 7% (3%) 7%
EBITDA (1) $ 29,534 $ (11,404) $ 30,911 $ 2,965 $ 24,875
Depreciation and amortization 9,073 12,510 12,207 10,140 8,042
EBITDA percentage 11% (4%) 12% 1% 11%
Selected Consolidated Balance Sheet: December 31, January 1, January 2, December 31, December 31,
As of 1999 1999 1998 1996 1995
- ---------------------------------------------------------------------------------------------------------------------------
(In thousands)
Working capital $ 111,808 $ 81,956 $ 133,434 $ 122,409 $ 135,097
Total assets 181,751 156,279 207,663 189,841 196,763
Noncurrent portion of long-term debt 33,821 31,640 30,697 30,938 31,316
Shareholders' equity $ 100,796 $ 74,691 $ 139,483 $ 124,045 $ 129,937
(1) EBITDA consists of earnings from continuing operations before interest income, interest expense, other
nonoperating income and expense, income taxes, depreciation and amortization. EBITDA is not a measure of
financial performance under generally accepted accounting principles and should not be considered in isolation or
as an alternative to net income as an indicator of a company's performance or to cash flows from operating
activities as a measure of liquidity.
16
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations
RESULTS OF CONTINUING OPERATIONS
In fiscal 1999, Trimble's annual revenues from continuing operations
increased to $271.4 million from $268.3 million in fiscal 1998. In fiscal 1999,
Trimble had net income from continuing operations of $18.7 million, or $0.82 per
share, diluted, compared to a net loss from continuing operations of $27.4
million, or ($1.22) per share, diluted, in fiscal 1998. The total net income for
fiscal 1999, including discontinued operations, was $21.6 million, or $0.95 per
share, diluted, compared to a total net loss for fiscal 1998, including
discontinued operations, of $53.4 million, or ($2.38) per share, diluted.
The following table sets forth, for the periods indicated, certain financial
data as a percentage of total revenue:
December 31, January 1, January 2,
Fiscal Years ended 1999 1999 1998
- ----------------------------------------------------------------------------------------------------------------------------
Revenue 100% 100% 100%
---------------- ----------------- -----------------
Operating expenses:
Cost of sales 47% 53% 47%
Research and development 13% 17% 14%
Sales and marketing 20% 23% 22%
General and administrative 12% 12% 10%
Restructuring charges 0% 4% 0%
---------------- ----------------- -----------------
Total operating expenses 92% 109% 93%
---------------- ----------------- -----------------
Operating income (loss) from Continuing Operations 8% (9%) 7%
Nonoperating income (expense), net 0% (1%) 0%
---------------- ----------------- -----------------
Income (loss) before income taxes from Continuing Operations 8% (10%) 7%
Income tax provision 1% 1% 1%
---------------- ----------------- -----------------
Net income (loss) from Continuing Operations 7% (10%) 7%
---------------- ----------------- -----------------
Loss from Discontinued Operations (net of tax) 0% (2%) (3%)
Estimated gain (loss) on disposal of Discontiued Operations
(net of tax) 1% (8%) 0%
---------------- ----------------- -----------------
Net Income (loss) 8% (20%) 3%
================ ================= =================
Revenue. In fiscal 1999, total revenue increased to $271.4 million from
$268.3 million in fiscal 1998, which represents a percentage increase of 1%.
Total revenue increased in fiscal 1998 to $268.3 million from $266.4 million in
fiscal 1997, which represents a percentage increase of less than 1%. The
following table breaks out Trimble's revenues by industry segment:
---------------------------------------------------------------------------
December 31, % Total January 1, % Total January 2, % Total
1999 Revenue 1999 Revenue 1998 Revenue
- -------------------------------------------------------------------------------------------------------------
(In thousands)
Precision Positioning Group $ 161,294 59% $165,951 62% $ 142,449 53%
Mobile and Timing Technologies 110,070 41% 102,372 38% 123,993 47%
-------------- -------- -------------- ------- ------------- --------
Total revenue $ 271,364 100% $268,323 100% $ 266,442 100%
-------------- -------- -------------- ------- ------------- --------
Precision Positioning Group
The Precision Positioning Group revenues decreased by 3% in fiscal 1999
over fiscal 1998. The 1999 revenue decrease compared to 1998 is due to the
following:
o Sales were impacted from the change in commission structure for some of
our products from commission dealers to buy/sell dealers in fiscal 1999.
Under the buy/sell arrangement, the product is discounted to the dealer,
as opposed to end-user pricing with commissions recorded under sales and
marketing expense.
o Sales to Original Equipment Manufacturers such as CNH Global and
Caterpillar decreased as compared to 1998 sales due to an economic
slowdown in the United States for mining and agriculture related
products.
17
o In the fourth quarter of 1999, delivery problems due to critical part
shortages in our supply chain, and transitional issues with outsourcing
our manufacturing, had a negative impact on revenue for the fiscal year
ended 1999.
Precision Positioning Group revenues had a growth rate of 16% in fiscal
1998 over fiscal 1997. The 1998 increase compared to 1997 was primarily due to
increases in revenues in the land surveying, marine surveying, mapping, and GIS
systems, and mining, construction, and agriculture markets. The increase in land
surveying was due to the continued strong customer acceptance of Trimble's GPS
Total Station 4800 and 4700 products. Also, the increase in marine survey,
mapping, and GIS, as well as mining, construction and agriculture reflects
increased demand for these products.
Mobile and Timing Technologies
Mobile and Timing Technologies revenues increased 8% in fiscal 1999 over
fiscal 1998. The increase is attributable to strong growth in our automotive and
timing markets which was partially offset by decreases in commercial marine,
commercial air transport, and military systems, due to the following:
o Trimble decided to exit the commercial marine business in the fourth
quarter of 1998 and sold the last of such products in the second
quarter of 1999.
o Commercial air transport was down, due to decreases in market demand and
the successful conclusion of shipments in fiscal 1998 to American
Airlines and Continental Airlines through our Honeywell alliance, which
were not repeated in fiscal 1999.
o Military systems declined due to the completion of our CUGR contract in
the first quarter of 1998 which sales were not repeated in 1999.
The Mobile and Timing Technologies revenues decreased 17% in fiscal 1998
from fiscal 1997. The 1998 decrease was primarily in automotive, commercial air
transport and military aerospace systems. The softness in the automotive market
was due to the financial difficulties of a major customer and a delay in our new
product introductions. The commercial air transport decrease was due to
less-than-anticipated demand from Honeywell, and the military aerospace system
decrease was due to the large dollar shipment on the CUGR contract in the fourth
quarter of 1997, which was not repeated in 1998. In addition, Mobile and Timing
Technologies revenues in 1997, included $1.8 million in revenues from a
development agreement in connection with an irrevocable nonrefundable,
nonrecurring engineering fee and a nonrecurring one-time $2.2 million technology
license from Pioneer Electronic Corporation in connection with expansion of its
prior license for in-car navigation.
* Military sales are highly dependent on contracts that are subject to
government approval and are, therefore, expected to continue to fluctuate from
period to period. Trimble believes that opportunities in this market have been
substantially reduced by cutbacks in U.S. and foreign military spending.
Export Sales
* Export sales from domestic operations, as a percentage of total revenue,
were 38% in 1999, 34% in 1998, and 28% in 1997. Sales to unaffiliated customers
in foreign locations, as a percentage of total revenue, were 52% in 1999, and
46% in both 1998 and 1997. Trimble anticipates that export revenue and sales
made by its subsidiaries in locations outside the U.S. will continue to account
for a significant portion of its revenue. For this reason, Trimble is subject to
the risks inherent in these sales, including unexpected changes in regulatory
requirements, exchange rates, governmental approval, and tariffs or other
barriers. Even though the U.S. Government announced on March 29, 1996, that it
would support and maintain the GPS system, as well as eliminate the use of
Selective Availability (SA) -- a method of degrading GPS accuracy -- there may
be a reluctance in certain foreign markets to purchase products based on GPS
technology, given the control of GPS by the U.S. Government. Trimble's results
of operations could be adversely affected if we were unable to continue to
generate significant sales in locations outside the U.S.
No single customer, including the U.S. Government and its agencies,
accounted for 10% or more of Trimble's total revenues in fiscal 1999, 1998 or
1997. It is possible; however, that in future periods the failure of one or more
large customers to purchase products in quantities anticipated by the Company
may adversely affect the results of operations.
* Gross Margin. Gross margin varies due to a number of factors, including
product mix, domestic versus international sales, customer type, the effects of
production volumes and fixed manufacturing costs on unit product
18
costs, and new product start-up costs. In fiscal 1999, the gross margin
percentage on product sales was 53%, compared with 47% in 1998 and 53% in 1997.
The increase in gross margin percentages primarily reflect improved
manufacturing cost controls achieved through the consolidation of the
manufacturing organization, resulting in improved efficiencies and reduced
inventory. In addition, gross margins in the second half of fiscal 1999 were
favorably impacted by the cost benefits of outsourcing our manufacturing to
Solectron. The 1997 margins were enhanced by the positive impact of nonproduct
revenues of $2.2 million recognized from Pioneer Electronic Corporation and from
a development agreement in connection with an irrevocable, nonrefundable,
nonrecurring engineering fee of $1.8 million; however, there can be no assurance
that similar items will recur in the future. In addition, because of product mix
changes within and among the industry markets, market pressures on unit selling
prices, fluctuations in unit manufacturing costs, and other factors, positive
future gross margins cannot be assured.
* Trimble expects that in the future a higher percentage of its business
will be conducted through alliances with strategic partners. As a result of
volume pricing and the assumption of certain operating costs by the partner,
margins on this business are likely to be lower than sales directly to
end-users.
Operating Expenses. The following table shows operating expenses for the
periods indicated. It should be read in conjunction with the narrative
descriptions of those operating expenses below:
Fiscal Years Ended
----------------------------------------------------
December 31, January 1, January 2,
1999 1999 1998
- -------------------------------------------------------------------------------
(In thousands)
Research and development $ 36,493 $ 45,763 $ 38,242
Sales and marketing 53,543 61,874 57,661
General and administrative 33,750 33,245 27,424
Restructuring charges - 10,280 -
--------------- --------------- -------------
Total $ 123,786 $ 151,162 $ 123,327
--------------- --------------- -------------
Research and Development. Research and development spending decreased in
absolute dollars during fiscal 1999, representing 13% of revenues as compared
with 17% in 1998 and 14% in 1997. The lower research and development expenses in
1999 are due primarily to Trimble's receiving approximately $4.2 million more
funds from cost reimbursement projects in 1999 as compared to 1998. Also, there
were decreases in our expenses of approximately $5.0 million related to
electronic parts, depreciation, travel, personnel, and other supplies as part of
the Company's restructuring plans which were implemented in the last half of
fiscal 1998.
The dollar increase from 1997 to 1998 is due primarily to Trimble's
receiving approximately$3.5 million fewer funds from cost reimbursement projects
in 1998 as compared with 1997.
Trimble plans to continue its aggressive development of future products.
* Sales and Marketing. Sales and marketing expenses decreased during fiscal
1999, representing 20% of revenues, as compared with 23% in 1998 and 22% in
1997. The primary reason for the dollar and percentage decrease in expenses from
1998 to 1999 is decreases of approximately $7.7 million in personnel,
consultants, travel, advertising, trade shows, expensed demo equipment, and
other office supplies as part of the Company's restructuring plan, which was
implemented in the last half of fiscal 1998. In addition, sales commissions were
lower as a percentage of sales, due to the change in dealer structure for some
of our product lines from commission dealers to buy/sell.
The primary reason for the dollar and percentage increases in expenses from
1997 to 1998 was an increase of approximately $2.1 million in personnel and
related expenses that accompany an increase in the number of employees. In
addition, Trimble experienced increases in expenses of approximately $1.1
million related to trade shows, advertising, and demo equipment expenses.
* Trimble's future growth will depend in part on the timely development and
continued viability of the markets in which we currently compete, and on our
ability to continue to identify and exploit new markets for our products. In
addition, we have encountered significant competition in selected markets, and
we expect such competition to intensify as the market for GPS applications
receives acceptance. Several of Trimble's competitors
19
are major corporations with substantially greater financial, technical, and
marketing resources. Increased competition may result in reduced market share
and is likely to result in price reductions of GPS-based products, which could
adversely affect Trimble's revenues and profitability.
General and Administrative. General and administrative expenses increased
in absolute dollars during fiscal 1999, representing 12% of revenues, as
compared with 12% in 1998 and 10% in 1997. The increase in fiscal 1999 as
compared to 1998 is due to an increase in the allowance for doubtful accounts
related to customers in South America for 1999; and an increase in building
rental costs due to the renewal of many of our building leases. This increase
was partially offset by space consolidations as part of our restructuring
efforts in the fourth quarter of 1998.
The increase from 1997 to 1998 was due primarily to an increase of
approximately $1.7 million in personnel and the related expenses that accompany
an increase in the number of employees and consultants, as well as an increase
of approximately $1.7 million in outside services related to legal fees
associated with certain litigation matters during 1998.
Restructuring Charges. As noted in Note 8 to the Consolidated Financial
Statements during the year ended January 1, 1999, Trimble recorded a
restructuring charge of $10.3 million classified in operating expenses. These
charges were a result of Trimble's reorganization to improve business processes
and to decrease organizational redundancies, to improve management
accountability and to improve our focus on profitable operations. As a result of
the reorganization, Trimble downsized its operations, including reducing
headcount and facilities space usage, and canceled its enterprisewide
information system project and certain research and development projects. The
impact of these decisions was that significant amounts of our fixed assets,
prepaid expenses, and purchased technology had been impaired and certain
liabilities incurred. Trimble wrote down the related assets to their net
realizable values and made provisions for the estimated liabilities.
The elements of the charges incurred in fiscal 1998 and the amounts
remaining at December 31, 1999, on the balance sheet are as follows (in
thousands):
Total
charged to Amounts paid/ Amounts paid/ Remaining in
expense in written off written off accrued liabilites
fiscal 1998 in fiscal 1998 in fiscal 1999 as of December 31, 1999
--------------- ------------------------ ----------------------- --------------------------
Employee termination benefits $ 2,864 $ (1,200) $ (371) $ 1,293
Facility space reductions 1,061 - $ (1,053) 8
ERP system abandonment 6,360 (4,895) $ (1,465) -
------------ --------------------------- ----------------------- --------------------------
Subtotal $ 10,285 $ (6,095) $ (2,889) $ 1,301
============ ============================ ======================= ==========================
The cash expenditures associated with the remaining obligations will occur
primarily in fiscal 2000.
Nonoperating income (expense), net.Nonoperating income (expense), net,
includes interest income and expense, as well as gains and losses on foreign
currency transactions.
Foreign exchange gains were $28,000 in fiscal 1999, compared with gains of
$234,000 in 1998 and 1997. Trimble's policy is to hedge its exposure to foreign
currency transactions in order to minimize the effect of changes in foreign
currency exchange rates on consolidated results of operations. Gains and losses
arising from foreign currency forward contracts offset gains and losses
resulting from the underlying hedged transactions.
Interest income increased in 1999 from 1998 and decreased in 1998 from
1997. The higher interest income in 1999 is due primarily to the increased
interest income received on cash and short-term investments because of higher
average balance for fiscal 1999 over fiscal 1998.
The decrease in 1998 from 1997 was because of lower interest income
received on cash and short-term investments due to lower average balances for
the year, over the prior year.
Interest expense decreased slightly in 1999 due to lower fees in foreign
locations. Interest expense includes interest on a $30.0 million note issued in
August 1995, and fees on unused lines of credit. (See Notes 7 and 9 to the
Consolidated Financial Statements for details of long-term debt and lines of
credit.)
Income Tax Provision. Trimble's effective tax rates from continuing
operations for fiscal years 1999, 1998 and 1997 are 10%, (6%), and 12%,
respectively. The 1999 and 1997 income tax rates are less than the federal
20
statutory rate of 35%, due primarily to the realization of the benefits from
prior net operating losses and previously reserved deferred tax assets. The 1998
income tax rate differs from the federal statutory rate, due primarily to
foreign taxes and the inability to realize the benefit of net operating losses.
Inflation. The effects of inflation on Trimble's financial results have not
been significant to date.
LITIGATION
* Trimble is involved in a number of legal matters as discussed in Note 17
to the Consolidated Financial Statements. While Trimble does not expect to
suffer significant adverse effects from these litigation matters or from
unasserted claims, the nature of litigation is unpredictable and there can be no
assurance that it will not do so.
LIQUIDITY AND CAPITAL RESOURCES
* At December 31, 1999, Trimble had cash and cash equivalents of $49.3
million and $52.7 million in short-term investments. Trimble's cash and cash
equivalents and short-term investments increased from the prior year, due to an
increase in net income and the receipt of $26.9 million in cash as part of an
agreement with Solectron for the outsourcing of Trimble's manufacturing
operations located in Sunnyvale, California (See Note 4 to the consolidated
financial statements). Trimble's long-term debt consisted primarily of a $30.0
million note obligation due in 2001. We had no debt outstanding under our
$50,000,000 unsecured line of credit but had issued certain letters of credit as
of December 31, 1999, amounting to approximately $283,000. Trimble has relied
primarily on cash provided by operating and financing activities and net sales
of short-term investments to fund capital expenditures, the repurchase of the
Company's common stock, and other investing activities. Management believes that
its cash, cash equivalents, and short-term investment balances, together with
its existing credit line, will be sufficient to meet its anticipated operating
cash needs for at least the next twelve months.
* In fiscal 1999, the cash provided by operating activities was $23.6
million, as compared to cash provided of $7.0 million in the corresponding
period in 1998. Cash provided by operating activities in 1999 arose from the
Company's net income, plus depreciation and amortization and decreases in
inventories and offset partially by increases in accounts receivable and
decreases in accrued liabilities. Inventory from continuing operations as of
December 31, 1999 decreased by $20.6 million from the 1998 year-end levels
primarily, due to the transition of certain manufacturing operations to
Solectron as well as a focused effort by Trimble to reduce inventory by supply
chain synchronization, reducing lead and cycle times, simplifying product lines,
and implementing tighter control over its material forecasting process (See Note
4 to the consolidated financial statements.) Trimble's ability to continue to
generate cash from operations will depend in a large part on revenues, the rate
of collections of accounts receivable, and the successful management of the
Solectron manufacturing relationship.
Cash provided by sales of common stock in 1999 represents the proceeds from
purchases made by employees pursuant to Trimble's stock option plan and employee
stock purchase plan, and totaled $4.5 million for the year ended December 13,
1999.
* In August 1997, Trimble entered into a three-year, $50,000,000 unsecured
revolving credit facility with four banks (the "Credit Agreement"). The Credit
Agreement enables Trimble to borrow up to $50,000,000, provided that certain
financial and other covenants are met. As of October 20, 1999, Trimble, the
Agent, and the Lenders agreed to change and amend certain covenants for the life
of the loan, which expires in August of 2000. The $50,000,000 revolving credit
facility was modified to include Trimble's prior separate $5,000,000 line of
credit and to simplify the entire arrangement. The Credit Agreement provides for
payment of a commitment fee of 0.25% and borrowings to bear interest at 1% over
LIBOR if the total funded debt to EBITDA is less than or equal to 1.00 times,
0.3% and borrowings to bear interest at 1.25% over LIBOR if the ratio is greater
than 1.00 times and less than or equal to 2.00 times, or 0.4%, and borrowings to
bear interest at 1.75% over LIBOR if the ratio is greater than 2.00 times. In
addition to borrowing at the specified LIBOR rate, Trimble has the right to
borrow with interest at the higher of (i) one of the bank's annual prime rate
and (ii) the federal funds rate plus 0.5%. To date, Trimble has not made any
borrowings under the $50,000,00 unsecured revolving credit facility, but has
issued certain letters of credit as of December 31, 1999, amounting to
approximately $283,000. In addition, Trimble is restricted from paying dividends
under the terms of the Credit Agreement.
In June 1994, Trimble issued $30.0 million of subordinated promissory notes
bearing interest at an annual rate of 10%, with principal due on June 15, 2001.
Interest payments are due monthly in arrears. The notes are subordinated to the
Company's senior debt, which is defined as all pre-existing indebtedness for
borrowed money
21
and certain future indebtedness for borrowed money (including, subject to
certain restrictions, secured bank borrowings and borrowed money for the
acquisition of property and capital equipment) and trade debt incurred in the
ordinary course of business. If Trimble prepays any portion of the principal, it
is required to pay additional amounts if U.S. Treasury obligations of a similar
maturity exceed a specified yield. Under the agreement, Trimble is also
restricted from paying dividends.
The issuance of the subordinated promissory notes also included the
issuance of warrants entitling holders to purchase 400,000 shares of common
stock at a price of $10.95 per share at any time through June 15, 2001. The net
proceeds of the notes were $29,348,000. The notes are recorded as noncurrent
liabilities, net of appraised fair value attributed to the warrants. The value
of the warrants and the issuance costs are being amortized to interest expense,
using the interest rate method over the term of the subordinated promissory
notes. The effective annual interest rate on the notes is 11.5%. Under the terms
of the note, Trimble is required to meet a minimum consolidated net worth
requirement. If Trimble falls below the minimum consolidated net worth
requirement we could be in default of our loan covenants. Such events could have
a material adverse effect on Trimble's operations and liquidity.
Trimble announced in February 1996 that it had approved a discretionary
program whereby up to 600,000 shares of its common stock could be repurchased on
the open market by the Company to offset the potential dilutive effects to
earnings (loss) per share from the issuance of additional stock options. In
1998, Trimble approved the repurchase of an additional 1.6 million shares under
the discretionary program. During 1997, Trimble purchased 139,500 shares at a
cost of $1.8 million. During 1998, Trimble purchased 1.08 million shares at a
cost of $16.1 million. During fiscal 1999, no shares were repurchased under the
discretionary program.
* Trimble presently expects capital expenditures in fiscal 2000 to be
approximately $5.4 million, primarily for computer equipment, software, and
leasehold improvements associated with business expansion.
Trimble is continually evaluating potential external investments in
technologies related to its business and, to date, has made relatively small
strategic investments in a number of GPS related technology companies. There can
be no assurance that any such outside investments made to date nor any potential
future investments will be successful.
* Trimble has evaluated the issues raised by the introduction of the Single
European Currency (Euro) for initial implementation as of January 1, 1999, and
during the transition period through January 1, 2002. Trimble does not currently
believe that the introduction of the Euro will have a material effect on its
foreign exchange and hedging activities. Trimble has also assessed the potential
impact the Euro conversion will have in regard to its internal systems
accommodating Euro-denominated transactions. Trimble will continue to evaluate
the impact of the Euro introduction over time, based on currently available
information. Trimble does not currently anticipate any adverse impact of the
Euro conversion on the Company.
YEAR 2000 IMPACT
Year 2000 Issues
Computers and software, as well as other equipment that relied on only two
digits to identify or represent a year may be unable to accurately process or
display certain information at or after the Year 2000. This is commonly referred
to as the "Year 2000 issue." Trimble is not aware of any year 2000 issues that
have affected its business. In preparation for the year 2000, we incurred
internal staff costs as well as consulting and other expenses. The year 2000
expenses for external services totaled less than $1.0 million. During 1999,
Trimble updated a significant portion of its computer software to be year 2000
compliant.
* Trimble is also not aware of any material problems with customers or
suppliers. Accordingly, Trimble does not anticipate incurring material expenses
or experiencing any material operational disruption as a result of any year 2000
issues.
CERTAIN OTHER RISK FACTORS
Trimble's revenues have historically tended to fluctuate on a quarterly
basis due to the timing of shipments of products under contracts and the sale of
licensing rights. A significant portion of Trimble's quarterly revenues occurs
from orders received and immediately shipped to customers in the last few weeks
and days of a quarter. If
22
orders are not received, or if shipments were to be delayed a few days at
the end of a quarter, the operating results and reported earnings per share for
that quarter could be significantly impacted. Future revenues are difficult to
predict, and projections are based primarily on historical models, which are not
necessarily accurate representations of the future.
Due to competitive pressure, prices of certain of Trimble's products have
declined substantially since their introduction, and increased competition is
likely to result in further price reduction and loss of market share, which
could adversely affect our net revenue.
With the selection of Solectron as an exclusive manufacturing partner,
Trimble is substantially dependent upon a sole supplier for the manufacture of
its precision positioning and mobile and timing technologies products. In
addition, we rely on sole suppliers for a number of our critical ASICS. The
dependence upon these sole suppliers subjects Trimble to risks associated with
an interruption of supply if we are not able to find alternative sources on a
timely basis. There can be no assurance that any delay, disruptions, or quality
problems resulting from the use of a sole supplier will not have a material
adverse effect on Trimble's business and results of operations.
Trimble's stock price is subject to significant volatility. If revenues
and/or earnings fail to meet the expectations of the investment community, there
could be an immediate and significant impact on the trading price of Trimble's
stock. Additionally, certain macro-economic factors such as changes in interest
rates could also have an impact on the trading price of Trimble stock.
The value of Trimble's products relies substantially on our technical
innovation in fields in which there are many current patent filings. Trimble
recognizes 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.
Trimble does not believe any of its 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
Trimble's revenues or profitability. (See Note 17 to the Condensed Consolidated
Financial Statements.)
Trimble's future revenue stream depends to a large degree on our ability to
bring new products to market on a timely basis. In some of our markets -- for
example, Land Survey and GIS where we have a market leadership position, a delay
in new product introductions could have a significant impact on our results of
operations. No assurance can be given that we will not incur problems in the
future in innovating and introducing new products.
Trimble is continuously evaluating alliances and external investments in
technologies related to its business, and has already entered into certain
strategic alliances and has made relatively small strategic investments in a
number of GPS related technology companies. Acquisitions of companies, divisions
of companies, or products and alliances and strategic investments entail
numerous risks, including (i) the potential inability to successfully integrate
acquired operations and products or to realize anticipated synergies, economies
of scale, or other value; (ii) diversion of management's attention; (iii) loss
of key employees of acquired operations; and (iv) inability to recover strategic
investments in development stage entities. Any such problems could have a
material adverse effect on Trimble's business, financial condition, and results
of operations. No assurances can be given that we will not incur problems from
current or future alliances, acquisitions, or investments. Furthermore, there
can be no assurance that we will realize value from any such strategic
alliances, acquisitions, or investments.
Trimble currently enjoys strong relationships with a few key customers. An
increasing amount of our revenue is generated from large OEMs such as Philips
VDO, Nortel, Caterpillar, CNH Global (formerly Case Corporation), and others. A
reduction or loss of business with these customers could have a material adverse
effect on our financial condition and results of operations. There can be no
assurance that Trimble will realize value from these relationships in the
future.
The ability of Trimble to maintain its competitive technological position
will depend, in a large part, on its ability to attract, motivate, and retain
highly qualified development and managerial personnel. Competition for qualified
employees in our industry and location is intense, and there can be no assurance
that we will be able to attract,