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

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

FORM 10-Q
---------

(Mark One)
[ X ] Quarterly report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the quarterly period ended SEPTEMBER 27, 2002.

OR

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

Commission file number: 0-18645

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

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

645 North Mary Avenue, Sunnyvale, CA 94088
(Address of principal executive offices) (Zip Code)

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

Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.

Yes [ X ] No [ ]

As of November 1, 2002, there were 29,075,613 shares of Common Stock
(no par value) outstanding.

- --------------------------------------------------------------------------------

TRIMBLE NAVIGATION LIMITED

FORM 10-Q

INDEX

Page
Number

PART I - FINANCIAL INFORMATION

ITEM 1. Financial Statements:

Condensed Consolidated Balance Sheets--
September 27, 2002 and December 28, 2001 (unaudited)..... 3

Condensed Consolidated Statements of Operations--
Three and Nine Months Ended September 27, 2002
and June 29, 2001 (unaudited)............................ 4

Consolidated Statements of Cash Flows--
Nine Months Ended September 27, 2002
and September 28, 2001(unaudited)........................ 5

Notes to Condensed Consolidated Financial Statements......... 6

ITEM 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations.................................... 20

ITEM 3. Quantitative and Qualitative Disclosures about Market Risk... 40

ITEM 4. Controls and Procedures...................................... 42

PART II - OTHER INFORMATION

ITEM 1. Legal Proceedings............................................ 43

ITEM 2. Changes in Securities and Use of Proceeds.................... 43

ITEM 6. Exhibits and Reports on Form 8-K............................. 43

Signatures............................................................ 45

PART I - FINANCIAL INFORMATION

ITEM 1. Financial Statements

TRIMBLE NAVIGATION LIMITED
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)

September 27, December 28,
2002 2001 (1)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(In thousands)

ASSETS
Current assets:
Cash and cash equivalents $ 30,352 $ 31,078
Accounts and other receivable, net 82,015 71,680
Inventories 57,368 51,810
Other current assets 7,702 6,536
--------- ----------
Total current assets 177,437 161,104
Property and equipment, net 23,015 27,542
Goodwill, net 200,220 120,052
Intangible assets, net 23,531 100,252
Deferred income taxes 433 383
Other assets 11,237 10,062
--------- ----------
Total assets $435,873 $419,395
======== ========

LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Bank and other short-term borrowings $ 40,019 $ 40,025
Current portion of long-term debt 22,317 23,443
Accounts payable 25,962 21,494
Accrued compensation and benefits 18,089 13,786
Accrued liabilities 21,660 28,822
Accrued warranty expense 7,299 6,827
Income taxes payable 7,977 7,403
--------- ---------
Total current liabilities 143,323 141,800
------- -------

Noncurrent portion of long-term debt and other
liabilities 87,532 127,097
Noncurrent portion of deferred gain 11,000 -
Deferred tax liabilities 1,842 7,347
Other noncurrent liabilities 4,853 4,662
--------- --------
Total liabilities 248,550 280,906
--------- ---------

Shareholders' equity:
Common stock, no par value; 40,000 shares
authorized; 28,681 and 26,862 shares
outstanding, respectively 223,781 191,224
Accumulated deficit (27,500) (33,819)
Accumulated other comprehensive loss (8,958) (18,916)
--------- -------
Total shareholders' equity 187,323 138,489
-------- -------
Total liabilities and shareholders' equity $435,873 $419,395
======== ========

(1) Derived from the December 28, 2001 audited consolidated
financial statements included in the Annual Report on
Form 10-K of Trimble Navigation Limited for fiscal year 2001.

See accompanying notes to Condensed Consolidated Financial Statements.

TRIMBLE NAVIGATION LIMITED
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)

See accompanying notes to Condensed Consolidated Financial Statements.

TRIMBLE NAVIGATION LIMITED
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)

Nine Months Ended
---------------------
September 27, September 28,
2002 2001
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(In thousands)

Cash flow from operating activities:
Net income (loss) $6,319 $(16,247)
-------- ---------

Adjustment to reconcile net income (loss) to net
cash provided by operating activities:
Depreciation expense 7,804 8,945
Amortization expense 6,775 22,088
Provision for bad debt 3,590 2,949
Amortization of deferred gain (1,061) (1,193)
Other 2,277 21

Add decrease (increase) in assets:
Accounts receivables, net (11,132) (1,133)
Inventories (3,873) 2,281
Deferred income taxes 731 38
Other current and noncurrent assets (2,395) 2,228
Effect of foreign currency translation
adjustment 506 (3,544)

Add increase (decrease) in liabilities:
Accounts payable 3,886 (3,405)
Accrued compensation 3,813 1,550
Deferred tax liability (860)
Other accrued liabilities (3,743) (3,185)
Deferred gain short term (7) -
Deferred gain long term 11,000 -
Income taxes payable 574 430
--------- -------

Net cash provided by operating activities 25,064 10,963
------ ------

Cash flows from investing activities:
Acquisitions, net of cash acquired 1,717 (4,886)
Acquisition of property and equipment (5,474) (6,366)
Capitalized patents, software and intangibles (48) (1,166)
--------- ---------
Net cash used in investing activities (3,805) (12,418)
--------- ---------

Cash flow from financing activities:
Issuance of common stock 19,302 9,348
(Payment)/Collections of notes receivable (590) 404
Proceeds from long-term debt and revolving
credit lines 13,000 34,062
Payments on long-term debt and revolving
credit lines (53,697) (40,832)
--------- --------
Net cash provided (used) by financing activities (21,985) 2,982
--------- -------

Net increase (decrease) in cash and cash equivalents (726) 1,527
Cash and cash equivalents-- beginning of period 31,078 40,876
-------- -------
Cash and cash equivalents-- end of period $30,352 $42,403
======= =======

Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest $11,163 $14,916
======= =======
Income taxes, net of refunds 1,906 1,426
======== =======

In 2002, the purchase of LeveLite Technology, Inc., a non-cash financing
and investing activity, was made with common stock of the Company with a value
of approximately $5.7 million.

See accompanying notes to Condensed Consolidated Financial Statements.

NOTE 1 -- Basis of Presentation:

Basis of Presentation

The Condensed Consolidated Financial Statements of Trimble Navigation
Limited and subsidiaries, ("Trimble" or the "Company") for the three and nine
month periods ended September 27, 2002, and September 28, 2001, which are
presented in this Quarterly Report on Form 10-Q are unaudited. The balance sheet
at December 28, 2001, has been derived from the audited financial statements at
that date but does not include all of the information and footnotes required by
generally accepted accounting principles for complete financial statements. In
the opinion of management, these statements include all adjustments (consisting
only of normal recurring adjustments) necessary for a fair statement of the
results for the interim periods presented. The Condensed Consolidated Financial
Statements should be read in conjunction with the audited consolidated financial
statements and notes thereto included in Trimble's Annual Report on Form 10-K
for the fiscal year ended December 28, 2001.

The results of operations for the three and nine month periods ended
September 27, 2002 are not necessarily indicative of the results that may be
expected for the fiscal year ending January 3, 2003.

New Accounting Standards

Trimble adopted Statement of Financial Accounting Standards (SFAS) No. 144,
"Accounting for the Impairment or Disposal of Long-lived Assets," at the
beginning of fiscal 2002. The effect of adopting SFAS 144 did not have a
material impact on the Company's financial position or results of operations.

Trimble adopted Statement of Financial Accounting Standards No. 141,
Business Combinations, and No. 142, Goodwill and Other Intangible Assets ("SFAS
142"), at the beginning of fiscal 2002. Application of the nonamortization
provisions of SFAS 142 significantly reduced amortization expense of purchased
intangibles and goodwill to approximately $6.1 million for the nine month period
ended September 27, 2002 from $22.1 million in the prior year. The Company
reclassified identifiable intangible assets with indefinite lives, as defined by
SFAS 142, to goodwill at the date of adoption. The Company tested goodwill for
impairment using the two-step process prescribed in SFAS 142. The first step is
a screen for potential impairment, while the second step measures the amount of
the impairment, if any. No impairment charge resulted from the impairment tests.
The effect of adopting SFAS No. 141 and 142 did not have a material impact on
the Company's financial position or results of operations.

In July 2002, the FASB approved SFAS No. 146, "Accounting for Costs
Associated with Exit or Disposal Activities." SFAS No. 146 addresses the
financial accounting and reporting for obligations associated with an exit
activity, including restructuring, or with a disposal of long-lived assets. Exit
activities include, but are not limited to, eliminating or reducing product
lines, terminating employees and contracts and relocating plant facilities or
personnel. SFAS No. 146 specifies that a company will record a liability for a
cost associated with an exit or disposal activity only when that liability is
incurred and can be measured at fair value. Therefore, commitment to an exit
plan or a plan of disposal expresses only management's intended future actions
and, therefore, does not meet the requirement for recognizing a liability and
the related expense. SFAS No. 146 is effective prospectively for exit or
disposal activities initiated after December 31, 2002, with earlier adoption
encouraged. The Company does not anticipate that the adoption of SFAS No. 146
will have a material effect on its financial position or results of operations.

NOTE 2 -- Acquisitions:

LeveLite Technology, Inc.

On August 15, 2002, Trimble acquired LeveLite Technology, Inc., a
California corporation, for approximately $5.7 million. This strategic
acquisition complements the Company's low-end construction instrument product
line. The purchase price consisted of 437,084 shares of Trimble's common stock.
The merger agreement provides for Trimble to make earn-out payments not to
exceed $3.9 million based on future revenues derived from existing product sales
to a certain customer. Also, if Trimble receives any proceeds from a pending
litigation, a portion will be paid to the former shareholders of Levelite. The
additional payments, if earned, will result in additional goodwill.

Grid Data

On April 2, 2001, Trimble acquired certain assets of Grid Data, an Arizona
corporation, for approximately $3.5 million in cash and the assumption of
certain liabilities. In addition, the purchase agreement provided for Trimble to
make earn-out payments based upon the completion of certain business milestones.
In April 2002, Trimble agreed to issue 268,352 shares of Trimble's common stock
to Grid Data in settlement of all earn-out payments due under the purchase
agreement. These shares were issued in June 2002 and resulted in additional
goodwill of $4.7 million, with a final purchase price of approximately $8.2
million.

Spectra Precision Group Restructuring Activities

At the time the Company acquired the Spectra Precision Group in July 2000,
the Company formulated a restructuring plan and provided approximately $9.0
million for costs to close certain duplicative office facilities, combine
operations including redundant domestic and foreign legal entities, reduce
workforce in overlapping areas, and relocate certain employees. These estimated
costs were accrued for as part of the allocation of the purchase price. Included
in the total estimated cost was approximately $2.7 million related to the
discontinuance of overlapping product lines, which was included in reserves for
excess and obsolete inventory. As of September 27, 2002, the Company had charged
against the reserve approximately $4.5 million of non-inventory related charges,
which consisted of $1.8 million for legal and tax consulting expenses relating
to consolidation of legal entities, $1.3 million for severance expenses, $1.0
million for facilities and direct sales office closures, $0.3 million for an
underfunded pension plan, and other costs of $0.1 million, of which $1.2 million
was paid in the first nine months of 2002.

The Company revised its final estimates for costs to complete the remaining
planned activities and accordingly reduced its restructuring reserve by
approximately $1.1 million, with a corresponding adjustment to Goodwill, in the
fourth quarter of fiscal 2001. The reserve balance was approximately $0.8
million at September 27, 2002, and the Company anticipates completing the
majority of its remaining restructuring activities during the fourth fiscal
quarter of 2002. These activities consist principally of legal costs and other
expenses required to combine redundant legal entities.

The elements of the reserve at September 27, 2002, on the balance sheet
(included in accrued liabilities) are as follows:

Employee Severance Facility Closure,
and Relocation Legal and Tax
and Other Expense Total
(In thousands)

Total reserve $ 1,945 $ 4,370 $ 6,315
Amounts paid/written off (1,685) (2,788) (4,473)
Revision to estimates (260) (812) (1,072)
-------------------------------------------------
Balance as of
September 27, 2002 $ - $ 770 $ 770
=================================================

NOTE 3 -- Goodwill and Intangible Assets:

Goodwill and intangible assets consisted of the following:

September 27, December 28,
2002 2001
- ---------------------------------------------------- ---------------------------
- ---------------------------------------------------- ---------------------------
(In thousands)

Intangible assets:
Intangible assets with indefinite life:
Distribution channel $ - $ 73,363
Assembled workforce - 17,773
---------- ---------
Total intangible assets with indefinite life - 91,136
Intangible assets with definite life:
Existing technology 25,096 23,907
Trade names, trade marks, patents, and
other intellectual properties 19,475 18,394
---------- ---------
Total intangible assets with definite life 44,571 42,301
---------- ---------
Total intangible assets 44,571 $ 133,437
Less accumulated amortization (21,040) (33,185)
----------- ----------
Total net intangible assets $ 23,531 $ 100,252
========== ==========

Goodwill:
Goodwill, Spectra Precision acquisition* 179,518 116,001
Goodwill, other acquisitions* 20,702 14,710
---------- ---------
Total goodwill 200,220 130,711
Less accumulated amortization * - (10,659)
-------------- ----------
Total net goodwill $ 200,220 $ 120,052
========== ==========

--------------------------------------------------------------------------
* Goodwill as of September 27, 2002 includes assembled workforce and
distribution channel amounts, which were reclassified to goodwill in
accordance with FAS 142. Also, September 27, 2002 amounts are shown net of
accumulated depreciation from December 2001.

The Company adopted SFAS No. 142 on January 1, 2002. As a result, goodwill
is no longer amortized and intangible assets with indefinite lives were
reclassified to goodwill.

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

NOTE 4 -- Certain Balance Sheet Components:

Inventories consisted of the following:

September 27, December 28,
2002 2001
- -------------------------------------------- -------------------- --------------
- -------------------------------------------- -------------------- --------------
(In thousands)

Raw materials $ 20,896 $ 25,790
Work-in-process 6,337 7,177
Finished goods 30,135 18,843
------------- ------------
$ 57,368 $ 51,810
============ ============

Property and equipment consisted of the following:

September 27, December 28,
2002 2001
- ------------------------------------------ ------------------ ------------------
- ------------------------------------------ ------------------ ------------------
(In thousands)

Machinery and equipment $ 69,606 $ 66,265
Furniture and fixtures 6,506 6,367
Leasehold improvements 6,340 5,882
Buildings 2,908 3,979
Land 1,391 1,657
------------ -----------
86,751 84,150
Less accumulated depreciation (63,736) (56,608)
------------ -----------
$ 23,015 $ 27,542
============= ===========

Other current assets consisted of the following:

September 27, December 28,
2002 2001
- ----------------------------------------- ------------------- ------------------
- ----------------------------------------- ------------------- ------------------
(In thousands)

Notes receivable $ 1,193 $ 2,130
Prepaid expenses 5,669 4,150
Other 840 256
------------- --------------
$ 7,702 $ 6,536
============ =============

Other noncurrent assets consisted of the following:

September 27, December 28,
2002 2001
- ----------------------------------------- -------------------- -----------------
- ----------------------------------------- -------------------- -----------------
(In thousands

Debt issuance costs, net $ 2,888 $ 3,046
Other investments 2,835 2,737
Deposits 1,206 1,241
Other 4,308 3,038
------------ -----------
$ 11,237 $ 10,062
============ ===========

NOTE 5 -- Derivative Financial Instruments:

Forward foreign currency exchange contracts.

At September 27, 2002, Trimble had the following forward foreign currency
exchange contracts:

Amount (in
Currency Buy/Sell millions)
- -------- -------- ---------
Japanese Yen* Sell 855.0
Mexican Pesos Sell 5.0
Euro Sell 17.0
Canadian Dollars Sell 1.6
Swedish Krona Sell 10.7
British Pounds Sell 2.5
Swedish Krona Buy 180.0
New Zealand Dollar Buy 1.9
Euro Buy 4.0
British Pounds Buy 1.6

* approximately 295 million Yen was
designated to hedge firm orders to one
particular customer

In July 2002, the Company expanded its worldwide hedging program to include
intercompany transactions among the former Spectra Precision Group entities in
order to minimize the impact of changes in foreign exchange rates on earnings.
The forward foreign currency exchange contracts mature over the next twelve
months.

NOTE 6 -- Disposition of Line of Business:

Disposition of Line of Business:

On March 6, 2001, the Company sold certain product lines of its Air
Transport Systems to Honeywell Inc. for approximately $4.5 million in cash.
Under the asset purchase agreement, Honeywell International, Inc. purchased
product lines that included the HT 1000, HT 9000, HT 9100 and Trimble's TNL
8100. As part of this sale, during the third quarter of fiscal 2001, the Company
also sold other product lines and discontinued its manufacturing operations in
Austin, Texas. The Company also incurred severance costs of approximately $1.7
million which are included in restructuring charges related to the termination
of employees associated with the product lines disposed of in fiscal 2001.

At September 27, 2002, the Company has a provision of $1.3 million for
related liabilities associated with the disposition of these product lines and
the discontinuance of its manufacturing operations.

NOTE 7 -- Long-Term Debt:

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

September 27, December 28,
2002 2001
- --------------------------------------------------------------------------------
(In thousands)

Credit Facilities:
Five Year Term Loan $ 37,600 $ 61,300
U.S. and Multi-Currency Revolving
Credit Facility 40,000 40,000
Subordinated note
69,136 84,000
Promissory notes 3,113
5,189
Other
19 76
------------- ------------
149,868 190,565
Less current portion 62,336 63,468
------------- ------------
Noncurrent portion $ 87,532 $ 127,097
============= ============

Credit Facilities

In July 2000, Trimble obtained $200 million of senior, secured credit
facilities (the "Credit Facilities") from a syndicate of banks to support the
acquisition of the Spectra Precision Group, the Company's ongoing working
capital requirements and to refinance certain existing debt. At September 27,
2002, Trimble has approximately $77.6 million outstanding under the Credit
Facilities, comprised of $37.6 million under a $100 million five-year term loan,
$25 million under a $50 million three-year U.S. dollar only revolving credit
facility, and $15 million under a $50 million three-year multi-currency
revolver. The Company has access to $60 million of cash under the terms of its
three-year revolver loans. The Company has annual commitment fees on the unused
portion of 0.5% if the leverage ratio (which is defined as all outstanding debt,
excluding the seller subordinated note, divided by the last twelve months
Earnings before Interest, Taxes, Depreciation and Amortization (EBITDA), as
defined in the related agreement) is 2.0 or greater and 0.375% if the leverage
ratio is less than 2.0.

Pricing for any borrowings under the Credit Facilities was fixed for the
first six months at LIBOR plus 275 basis points and is thereafter tied to a
formula, based on the Company's leverage ratio. The weighted average interest
rate under the Credit Facilities was 4.2% for the month of September 2002.

The Credit Facilities are secured by all material assets of the Company,
except for assets that are subject to foreign tax considerations. Financial
covenants of the Credit Facilities include leverage, fixed charge, and minimum
net worth tests. Should the Company default on one or more covenants, the
Company will attempt to obtain either waivers or amendments to the Facilities.
There can be no assurances that the Company will be able to obtain any necessary
waivers or amendments.

Two of the Company's financial covenants, minimum fixed charge coverage and
maximum leverage ratios are sensitive to EBITDA. EBITDA is correlated to the
Company's results of operations. Due to uncertainties associated with the
downturn in the worldwide economy and other factors, future revenues by quarter
are difficult to forecast. New cost cutting measures have been put in place by
management; however, if revenues should decline at a higher rate than cost
cutting measures reduce our expenses on a quarterly basis, the Company may
violate the two above mentioned financial covenants.
Subordinated Note

In the first fiscal quarter of 2002, the Company renegotiated the terms of
its subordinated note and under the revised agreement, Spectra Physics Holdings,
Inc., a subsidiary of Thermo Electron, extended the term of the note until July
14, 2004, at the current interest rate of approximately 10.4% per year. As of
September 27, 2002 the principal amount outstanding was approximately $69.1
million. To the extent that interest and principal due on the maturity date
becomes delinquent, an additional 4% interest rate per annum will apply.

The Credit Facilities allow Trimble to repay the subordinated note at any
time (in part or in whole), provided that (a) Trimble's leverage ratio (Debt
(excluding the seller note)/EBITDA) prior to such repayment is less than 1.0x
and (b) after giving effect to such repayment Trimble would have (i) a leverage
ratio (Debt (excluding any remaining portion of the subordinated note)/EBITDA)
of less than 2.0x and (ii) cash and unused availability under the revolvers of
the Credit Facilities of at least $35 million. The note, by its terms, is
subordinated to the Credit Facilities.

Promissory Notes

The promissory notes at the end of September 27, 2002 include a $1.3
million obligation to the former owners of ZSP Geodetic Systems GmbH, a
subsidiary of Trimble, assumed by the Company when it acquired the Spectra
Precision Group which was paid subsequent to September 27, 2002.

In addition, these notes include a $1.8 million promissory note arising
from the purchase of a building for the Company's Corvallis, Oregon site. The
note is payable in monthly installments through April 2015 bearing a variable
interest rate (5.4% at September 27, 2002).

The Company's weighted average cost of debt is approximately 6.6% as of
September 27, 2002.

NOTE 8 -- Segment Information:

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

In the first fiscal quarter of 2002, Trimble realigned two of its
reportable segments. The Agriculture segment has been combined with the mapping
and Geographic Information Systems (GIS) market to form Trimble Field Solutions.
Mapping and GIS was previously part of Fleet and Asset Management. The mobile
positioning market that was part of Fleet and Asset Management is now Trimble
Mobile Solutions.

To achieve distribution, marketing, production, and technology advantages
in Trimble's targeted markets, the Company currently manages itself within five
segments:

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

o Trimble Field Solutions -- Consists of products that provide solutions
in a variety of agriculture and fixed asset applications, primarily in
the areas of precise land leveling, machine guidance, yield
monitoring, variable-rate applications of fertilizers and chemicals
and fixed asset data collection for a variety of governmental and
private entities. This segment is an aggregation of the Company's
Mapping and GIS operation and the Company's Agriculture operation. The
Company has aggregated these business operations under a single
general manager in order to take advantage of the convergence of
wireless communications and internet applications to provide field
solutions, and to continue to leverage its research and development
activities due to the similarities of products across the segment.

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

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

o Portfolio Technologies -- The various operations that comprise this
segment were aggregated on the basis that no single operation
accounted for more than 10% of the total revenue of the Company. These
markets include the operations of the Military Advanced Systems
business and Tripod Data Systems.

Trimble evaluates each of these segment's performance and allocates
resources based on profit and loss from operations before income taxes, and some
corporate allocations.

The accounting policies applied by each of the segments are the same as
those used by Trimble in general.

The following table presents revenues, operating income (loss), and
identifiable assets for Trimble's five segments. The information for fiscal 2001
has been reclassified in order to conform to the new basis of presentation. The
information includes the operations of Grid Data after April 2, 2001 and
LeveLite Technology, Inc. after August 15, 2002. Operating income (loss) is net
revenue less operating expenses, excluding general corporate expenses, goodwill
amortization, restructuring charges, nonoperating income (expense), and income
taxes. The identifiable assets that Trimble's Chief Operating Decision Maker,
the CEO, views by segment are accounts receivable and inventory.

----------------------------------------------------------------------------------

------------------------------------------------------------------------------------

------------------------------------------------------------------------------------

----------------------------------------------------------------------------------

----------------------------------------------------------------------------------

- ----------------------------

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

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

September 27, December 28,
2002 2001
- -------------------------------------------------- --------------- -------------
- -------------------------------------------------- --------------- -------------
(In thousands)
Assets:
Accounts receivable total for reportable
divisions $100,015 $91,577
Unallocated (1) (20,800) (19,897)
-------- --------
Total $ 79,215 $71,680
======== =======

Inventory total for reportable divisions $56,728 $51,480
Common inventory (2) 640 330
------- -------
Net inventory $57,368 $51,810
======= =======
- ----------------------------

(1) Includes cash in advance, deferred revenue and reserves that are not
allocated by segment.
(2) Consists of inventory that is common between the segments. Parts can be
used by more than one segment.

The following table presents revenues by product groups.

Three Months Ended Nine Months Ended
September 27, September 28, September 27, September 28,
2002 2001 2002 2001
- ------------------------------------- -------------- ---------------------------
(In thousands)

GPS products $58,556 $68,260 $177,680 $ 211,258
Laser and optical
products 53,147 43,723 153,704 146,303
Other 3,045 5,454 10,649 11,326

----------- ----------- ------------- --------------
Total revenue $114,748 $117,437 $342,033 $368,887
=========== ============ ============ ==============

NOTE 9 -- Equity:

Comprehensive Income (Loss)

The components of other comprehensive loss, net of related tax, include:

The change in cumulative foreign currency translation for the nine months
ended September 27, 2002 was primarily due to the weakening of the U.S. dollar
against the Euro and Swedish Krona.

Accumulated other comprehensive income (loss) on the consolidated balance
sheets consists of unrealized gains on available for sale investments and
foreign currency translation adjustments.

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

September 27, December 28,
2002 2001
- ---------------------------------------------------- -------------- ------------
- --------------------------------------------------- -------------- ------------
(In thousands)
Cumulative foreign currency translation adjustments $(9,008) $(18,729)
Unrealized gain on hedges of forecasted transactions 50 -
Net loss on interest rate swap - (203)
Net unrealized gain on investments - 16
-------- ---------
Accumulated other comprehensive loss $(8,958) $(18,916)
======== =========

Warrants

On April 12, 2002, the Company issued to Spectra Physics Holdings USA,
Inc., a subsidiary of Thermo Electron Corporation, a warrant to purchase up to
376,233 shares of Trimble's common stock over a fixed period of time. Initially,
Spectra Physics' warrant entitles it to purchase 200,000 shares of common stock
over a five-year period at an exercise price of $15.11 per share. On a quarterly
basis beginning July 14, 2002, Spectra Physics' warrant became exercisable for
an additional 250 shares of common stock for every $1 million of principal and
interest outstanding until the note is paid off in full. These shares are
purchasable at a price equal to the average of Trimble's closing price for the
five days immediately preceding the last trading day of each quarter. On July
14, 2002 an additional 17,364 shares became exercisable at an exercise price of
$14.46 per share. On October 14, 2002 an additional 17,824 shares became
exercisable at an exercise price of $9.18. The additional shares are exercisable
over a 5-year period. Under the terms of the warrant, the total number of shares
issued will not exceed 376,233 shares. The warrant was valued at approximately
$1.3 million and is being amortized to interest expense over the remaining term
of the related subordinated note.

NOTE 10 -- Earnings Per Share:

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

Options and warrants were not included in the computation of earnings per
share in the three and nine months ended September 28, 2001 because the Company
reported a net loss. If Trimble had reported net income, additional 855,000 and
1,025,000 common equivalent shares related to outstanding options and warrants
would have been included in the calculation of diluted income (loss) per share
for the three and nine months ended September 28, 2001, respectively.

NOTE 11 -- Related-Party Transactions:

Related-Party Lease

The Company currently leases office space in Ohio from an association of
three individuals, two of whom are employees of one of the Company's U.S.
operating units, under a noncancelable operating lease arrangement expiring in
2011. The annual rent is $345,000 and is subject to adjustment based on the
terms of the lease. The Condensed Consolidated Statements of Operations include
expenses from this operating lease of $86,351 and $259,054 for the three and
nine month periods ended September 27, 2002 and September 28, 2001,
respectively.

Related-Party Notes Receivable

The Company has notes receivable from officers and employees of $1,213,000
as of September 27, 2002 and $955,000 as of December 28, 2001. The notes bear
interest from 4.49% to 6.62% and have an average remaining life of 2.89 years as
of September 27, 2002.

NOTE 12 -- Contingencies:

In January 2001, Philip M. Clegg instituted a lawsuit in the United States
District Court for the District of Utah, Central Division, against
Spectra-Physics Laserplane, Inc., Spectra Precision AB and Trimble Navigation
Limited. The complaint alleges claims of infringement of U.S. Patent No.
4,807,131, breach of contract and unjust enrichment. The suit seeks damages and
an accounting for moneys alleged to be owed under a license agreement, plus
interest and attorney fees.

In November 2001, Qualcomm Inc. filed a lawsuit against the Company in the
Superior Court of the State of California. The complaint alleges claims for an
unspecified amount of money damages arising out of Qualcomm's perceived lack of
assurances in early 1999 that the Company's products purchased by Qualcomm would
work properly after a scheduled week number rollover event that took place in
August, 1999. Qualcomm is the only customer to make a claim against the Company
based on the week number rollover event.

In the opinion of management, the resolutions of the foregoing lawsuits are
not expected to have a material adverse effect on the overall financial position
of the Company. However, depending on the amount and timing, an unfavorable
resolution in any one of these matters could materially affect the Company's
future operations or cash flow in a particular period.

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

NOTE 13 -- Restructuring Charges:

Restructuring charges of $ 154,000 and $646,000 were recorded for the three
and nine month periods ended September 27, 2002 respectively, which are
primarily related to severance costs. For the nine month period ended September
28, 2001, restructuring charges of $3.0 million were recorded, which are
primarily related to severance costs. These restructuring activities impacted 40
individuals in the first nine months of fiscal 2002. In the nine months of
fiscal 2001, 160 individuals were impacted. As of September 27, 2002, all of the
restructuring charges have been paid.

NOTE 14 -- Joint Venture:

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

During the third fiscal quarter of 2002, Trimble recorded approximately
$1.5 million of expenses under the heading of "Expense for affiliated
operations, net" in Non operating income (expense) related to certain
transactions between the Company and the Joint Venture. This was comprised of
approximately $1.8 million of incremental costs incurred by Trimble as a result
of purchasing products from the Joint Venture at a higher transfer price than
its original manufacturing costs, offset by approximately $0.3 million of
contract manufacturing fees charged to the Joint Venture by Trimble. Due to the
nature of the transfer price agreements between Trimble and the Joint Venture, a
related party, the impact of these agreements are classified under Non operating
income (expense).

In addition, during the third fiscal quarter of 2002, the Company recorded
lower operating expenses of approximately $1.3 million due to the transfer of
employee related expenses for research and development ($0.8 million), and
sales, marketing and administrative functions ($0.5 million) to the Joint
Venture. These employees are devoted to the Joint Venture and are primarily
engaged in developing next generation products and technology for that entity.

Trimble has adopted the equity method of accounting for its investment in
the Joint Venture. This requires the company to record 50 percent of the Joint
Venture profits or losses in a given fiscal period. During the third fiscal
quarter of 2002, the Joint Venture reported a loss of $185,000 of which
Trimble's share is $92,500. During the nine month period ended September 27,
2002, the joint venture reported a gain of $77,000 of which Trimble share is
$38,500.

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

This Quarterly Report on Form 10-Q contains forward-looking statements
within the meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended, which are
subject to the "safe harbor" created by those sections. Actual results could
differ materially from those indicated in the forward-looking statements due to
a number of factors including, but not limited to, the risk factors discussed in
"Certain Other Risk Factors" below and elsewhere in this report as well as in
the Company's Annual Report on Form 10-K for fiscal year 2001 and other reports
and documents that the Company files from time to time with the Securities and
Exchange Commission. The Company has attempted to identify forward-looking
statements in this report by placing an asterisk (*) before paragraphs.
Discussions containing such forward-looking statements may be found in
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" below. In some cases, forward-looking statements can be identified
by terminology such as "may," "will," "should," " could," "predicts,"
"potential," "continue," "expects," "anticipates," "future," "intends," "plans,"
"believes," "estimates," and similar expressions. These forward-looking
statements are made as of the date of this Quarterly Report on Form 10-Q, and
the Company disclaims any obligation to update these statements or to explain
the reasons why actual results may differ.

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

Trimble's discussion and analysis of its financial condition and results of
operations are based upon our condensed consolidated financial statements, which
have been prepared in accordance with accounting principles generally accepted
in the United States. The preparation of these financial statements requires us
to make estimates and judgments that affect the reported amounts of assets,
liabilities, revenues and expenses, and related disclosure of contingent assets
and liabilities. On an on-going basis, we evaluate our estimates, including
those related to product returns, doubtful accounts, inventories, investments,
intangible assets, income taxes, warranty obligations, restructuring costs, and
contingencies and litigation. We base our estimates on historical experience and
on various other assumptions that are believed to be reasonable under the
circumstances, the results of which form the basis for making judgments about
the amount and timing of revenue and expenses and the carrying values of assets
and liabilities that are not readily apparent from other sources. Actual results
may differ from these estimates under different assumptions or conditions. See
the discussion of our critical accounting policies under the heading
Management's Discussion and Analysis of Financial Condition and Results of
Operations in our Form 10K for fiscal 2001.

BUSINESS DEVELOPMENTS

On August 15, 2002, Trimble acquired LeveLite Technology, Inc., a
California corporation, for approximately $5.7 million. This strategic
acquisition complements the Company's low-end construction instrument product
line. The purchase price consisted of 437,084 shares of Trimble's common stock.
The merger agreement provides for Trimble to make earn-out payments not to
exceed $3.9 million based on future revenues derived from existing product sales
to a certain customer. Also, if Trimble receives any proceeds from a pending
litigation, a portion will be paid to the former shareholders of Levelite. The
additional payments, if earned, will result in additional goodwill.

On April 2, 2001, Trimble acquired certain assets of Grid Data, an Arizona
corporation, for approximately $3.5 million in cash and the assumption of
certain liabilities. In addition, the purchase agreement provided for Trimble to
make earn-out payments based upon the completion of certain business milestones.
In April 2002, Trimble agreed to issue 268,352 shares of Trimble's common stock
to Grid Data in settlement of all earn-out payments due under the purchase
agreement. These shares were issued in June 2002 and resulted in additional
goodwill of $4.7 million, with a final purchase price of approximately $8.2
million.

In August 1999, Trimble and Solectron entered into a supply agreement that
provided for the exclusive manufacture by Solectron of a significant portion of
Trimble's products for the three-year period ending August 13, 2002. The
agreement was extended for a one year period expiring in August 2003. As of the
date of this report, the Company is engaged in negotiations with Solectron
regarding the nature of the manufacturing agreement going forward. The Company
does not expect to experience any disruptions in its product supply as a result
of these negotiations. During the fourth quarter of fiscal 2002, the Company
began shipping certain of its products out of Solectron's China manufacturing
facilities.

CATERPILLAR JOINT VENTURE

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

During the third fiscal quarter of 2002, Trimble recorded approximately
$1.5 million of expenses under the heading of "Expense for affiliated
operations, net" in Non operating income (expense) related to certain
transactions between the Company and the Joint Venture. This was comprised of
approximately $1.8 million of incremental costs incurred by Trimble as a result
of purchasing products from the Joint Venture at a higher transfer price than
its original manufacturing costs, offset by approximately $0.3 million of
contract manufacturing fees charged to the Joint Venture by Trimble. Due to the
nature of the transfer price agreements between Trimble and the Joint Venture, a
related party, the impact of these agreements are classified under Non operating
income (expense).

In addition, during the third fiscal quarter of 2002, the Company recorded
lower operating expenses of approximately $1.3 million due to the transfer of
employee related expenses for research and development ($0.8 million), and
sales, marketing and administrative functions ($0.5 million) to the Joint
Venture. These employees are devoted to the Joint Venture and are primarily
engaged in developing next generation products and technology for that entity.

Trimble has adopted the equity method of accounting for its investment in
the Joint Venture. This requires the company to record 50 percent of the Joint
Venture profits or losses in a given fiscal period. During the third fiscal
quarter of 2002, the Joint Venture reported a loss of $185,000 of which
Trimble's share is $92,500. During the nine month period ended September 27,
2002, the joint venture reported a gain of $77,000 of which Trimble share is
$38,500.

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

RESULTS FROM CONTINUING OPERATIONS EXCLUDING INFREQUENT AND ACQUISITION
RELATED ADJUSTMENTS

Income (loss) from continuing operations include certain infrequent and
acquisition related charges that management believes are not reflective of
on-going operations. The following table, which does not purport to present the
results of continuing operations in accordance with generally accepted
accounting principles, reflects results of operations to exclude the effects of
such items as follows (in thousands):

RESULTS OF OPERATIONS

The Company's annual revenues from operations for the three and nine month
periods ended September 27, 2002 were $114.7 million and $342.0 million, as
compared with $117.4 million and $368.9 million in the corresponding periods in
fiscal 2001. The net income for the three and nine months ended September 27,
2002, was $2.7 million, or $0.09 diluted income per share and $6.3 million, or
$0.22 diluted income per share, compared to a net loss for the corresponding
periods in fiscal 2001, of $2.7 million, or $0.11 loss per share and $16.2
million or $0.66 loss per share.

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

A reconciliation of Trimble's consolidated segment operating income to
consolidated income (loss) before income taxes from operations follows:

Revenue

For the three months ended September 27, 2002, total revenue decreased by
$2.7 million or 2% to $114.7 million from $117.4 million in the corresponding
period in fiscal 2001.

For the nine months ended September 27, 2002, total revenue decreased by
$26.9 million or 7% to $342.0 million from $368.9 million in the corresponding
period in fiscal 2001.

Engineering and Construction

Revenue

Products within the Engineering and Construction segment include surveying,
general construction, site preparation, excavation, road and runway
construction, interior construction and underground construction systems.
Engineering and Construction revenues increased by $4.8 million or 6% for the
three months ended September 27, 2002 as compared with the same corresponding
period in fiscal 2001. The increase was due to the following:

o Continued strong demand for our Machine Control products combined with new
Survey product introductions during the quarter.

o Inclusion of revenues from the acquisition of LeveLite on August 15, 2002
of approximately $1.3 million.

Engineering and Construction revenues decreased by $7.6 million or 3% for
the nine months ended September 27, 2002 as compared with the same corresponding
period in fiscal 2001. The decrease was due to the following:

o A shift in the distribution model from direct sales offices to dealer
dependent channels, resulted in reduced revenue for the Construction
Instruments and Machine Control product lines, due to discount offered on
sales to dealers.

o Survey equipment revenues decreased due to the general economic slowdown.

The decrease in Survey equipment and Construction Instrument revenues was
partially offset by an increase in Machine Control revenues due to strong
acceptance of the GPS site vision product line.

Operating Income

Engineering and Construction operating income increased by $1.9 million and
$1.5 million or 15% and 4% for the three and nine months ended September 27,
2002 as compared with the same corresponding periods in fiscal 2001. The
increases were due to the continued realization of cost synergies from actions
implemented in 2001 as a result of the acquisition of the Spectra Precision
Group. These actions included the integration of sales forces, rationalization
of overlapping product lines, and the elimination of redundant development, and
sales and service facilities. These cost savings helped to offset a decline in
gross margins caused by shifting product mix, as well as reduced revenue due to
the general economic slowdown.

Trimble Field Solutions

Revenue

Products within the Trimble Field Solutions segment include GPS-based
machine guidance systems, field management systems, laser-based water management
systems and solutions for a variety of applications in asset tracking. Trimble
Field Solutions revenues decreased by $4.8 million and by $4.5 million or 26%
and 8% for the three and nine months ended September 27, 2002 as compared with
the same corresponding periods in fiscal 2001. The decreases were due to the
following:

o Delays in shipping of a recently announced new product, the GeoExplorer CE
series GPS handheld for mobile mapping applications, as a result of
delivery delays of a critical component by one of our vendors.

o Lower volumes for GIS data capture products partially due to weakness in US
federal, state, and local government spending for the three and nine month
period ended September 27, 2002, compared to the corresponding period in
2001. For the nine month period ended September 27, 2002, the decrease in
US federal, state and local government revenues was partially offset by
increased Agriculture revenues compared to the corresponding period in
2001.

Operating Income

Trimble Field Solutions operating income decreased by $2.7 million and $1.4
million or 65% and 13% for the three and nine months ended September 27, 2002 as
compared with the same corresponding periods in fiscal 2001. The decreases in
operating income were primarily due to lower revenues.

Trimble Mobile Solutions

Revenue

Products within the Trimble Mobile Solutions segment combine GPS and
information technologies to provide solutions for a variety of applications in
fleet management. Trimble Mobile Solutions revenues decreased by $2.2 million
and $3.9 million or 49% and 38% for the three months and nine months ended
September 27, 2002 as compared with the corresponding periods in fiscal 2001.
The decreases in revenue were due to the following factors:

o Reduction in our Satcom Galaxy Inmarsat C business. We announced early last
year that we would exit this product line due to the wide availability and
significant cost savings of cellular products.

o Slow down in system integration projects due to reduced spending at
municipalities.

o Reduced sales of wireless products due to a transition from a sensor
provider to a full integrated service provider.

Operating Income

Trimble Mobile Solutions operating loss increased by $1.1 million and $1.6
million or 65% and 22% for the three and nine months ended September 27, 2002 as
compared with the corresponding periods in fiscal 2001. The increases in
operating loss were due to the following:

o Lower revenue base as compared to the same corresponding period of the
previous year.

o Decrease in margins due to the sell-off of existing Satcom inventory at
reduced prices.

o Significant costs incurred in the development of a service platform to
enable a range of asset management solutions including an internet
delivered cellular based solution for vehicle fleet management.

Component Technologies

Revenue

Products within the Component Technologies segment consist principally of
proprietary GPS chipsets and modules marketed to original equipment
manufacturers. Component Technologies revenues increased by $2.0 million or 16%
for the three months ended September 27, 2002 as compared with the corresponding
period in fiscal 2001. The increase is primarily due to introduction of our low
power LassenTM SQ product which was introduced in our second fiscal quarter.

Component Technologies revenues decreased by $5.6 million or 12% from $45.4
million to $39.8 million for the nine months ended September 27, 2002 as
compared with the corresponding period in fiscal 2001. The decrease in revenue
was due to the following factors:

o A reduction in sales of Embedded product lines due to the economic
slowdown, primarily in the first half of the year, and a decrease in Timing
product lines due to reduced spending in the telecommunications market.

* A slight decrease of In-vehicle navigation sales due to decrease in average
selling prices. We expect this trend to continue, as technology advances in
component technology will enable among other things, reduced costs.

Operating Income

Component Technologies operating income increased by $0.4 million or 19%
for the three months ended September 27, 2002 as compared with the corresponding
period in fiscal 2001. The increase in operating income was due primarily to
higher revenue, and partially offset by higher operating expenses.

Component Technologies operating income decreased by $1.3 million or 17%
for the nine months ended September 27, 2002 as compared with the corresponding
period in fiscal 2001. The decrease in operating income was due primarily to
lower revenue, and partially offset by reductions in operating expenses.

Portfolio Technologies

Revenue

This segment is an aggregation of various operations that each equal less
than ten percent of the Company's total operating revenue. These markets include
the operations of the Military Advanced Systems business and Tripod Data
Systems, or TDS. Portfolio Technologies revenues decreased by $2.5 million and
$5.4 million or 31% and 22% for the three and nine months ended September 27,
2002 as compared with the same corresponding periods in fiscal 2001. The
decrease in revenue was primarily due to a reduction of $1.3 million and $4.4
million for the three and nine month, respectively, in our commercial aviation
product line as a result of the sale of the air transport product line to
Honeywell in the first fiscal quarter of 2001. In addition, the economic
slowdown resulted in lower TDS revenues.

Operating Income

Portfolio Technologies operating income increased by $1.1 million or 301%,
and $4.2 million or 494% for the three and nine months ended September 27, 2002
as compared with the same corresponding periods in fiscal 2001. The increase in
operating income was primarily due to the following:

o A decrease in research and development expenses of approximately $0.7
million and $1.3 million, which was primarily due to an increase in cost
reimbursement for military research and development programs and a
reduction in temporary help and consultants.

o Disposal of the loss generating commercial aviation product line, which
accounted for approximately $1.9 million in the nine months of fiscal 2001.

International Revenues

* Sales to our unaffiliated customers in locations outside the U.S.
comprised approximately 49% and 48% of total revenues for nine months ended
September 27, 2002 and September 28, 2001, respectively. North and South America
represented 59% of total revenue, Europe 29%, and Asia 12% in the first nine
months of fiscal 2002. We anticipate that sales to international customers will
continue to account for a significant portion of our revenue. For this reason,
we are subject to the risks inherent in these foreign sales, including
unexpected changes in regulatory requirements, exchange rates, governmental
approval, and tariffs or other barriers. Even though the U.S. Government
announced on March 29, 1996, that it would support and maintain the GPS system,
and on May 1, 2000, stated that it has no intent to ever again use Selective
Availability (SA), a method of degrading GPS accuracy, there may be reluctance
in certain foreign markets to purchase such products given the control of GPS by
the U.S. Government. Trimble's results of operations could be adversely affected
if we were unable to continue to generate significant sales in locations outside
the U.S.

Gross Margin

Gross margin varies due to a number of factors, including product mix,
international sales mix, customer type, the effects of production volumes and
fixed manufacturing costs on unit product costs, and new product start-up costs.
Gross margin as a percentage of total revenues was 50% and 51% for the three and
nine months ended September 27, 2002 and 50% and 51% for the same corresponding
periods in fiscal 2001. The gross margin was slightly impacted by shifting
product mix; lower revenue from high margin Geographic Information Systems
products was offset by higher revenue from lower margin Component Technologies.

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

Operating Expenses

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

Three Months Ended Nine Months Ended
September 27, September 28, September 27, September 28,
2002 2001 2002 2001
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
(In thousands)

Research and development $ 15,235 $ 15,726 $ 45,259 $ 47,281
Sales and marketing 21,338 25,345 65,362 81,016
General and administrative 10,812 9,727 31,358 29,098
Restructuring charges 154 363 646 2,997
Amortization of goodwill
and other purchased
intangibles 1,832 7,378 6,134 22,088
--------- ---------- ----------- ---------
Total $ 49,371 $ 58,539 $ 148,885 $ 182,480
========= ========= ========== =========

Research and Development

Research and development spending decreased by $0.5 million and $2.0 million
during the three and nine month periods ended September 27, 2002, and
represented 13% and 12% of revenue, compared with 13% for the three and nine
month ended September 28, 2001. The reduction of research and development
expenses was primarily due to the transfer of employee related expenses to the
CTCT joint venture of approximately $0.9 million and $1.5 million for the three
and nine months ended September 27, 2002.

* The Company believes that the development and introduction of new
products is critical to its future success and expects to continue its active
development of future products.

Sales and Marketing

Sales and marketing expense decreased by $ 4.0 million and $15.7 million
during the three and nine month periods ended September 27, 2002, and represents
13% of revenue, compared with 13% in the same corresponding periods in fiscal
2001. The decreases in 2002 were due primarily to the following factors:

o During fiscal 2001, the Company sold off many of its direct sales offices
which decreased sales and marketing expense by approximately $1.7 million
and $6.6 million for the three and the nine months ended September 27, 2002
as compared to the same periods in prior year 2001.

o Decreased in compensation and related expenses, as well as temporary help
and consulting expenses of approximately $0.9 million and $3.8 million for
the three and the nine months ended September 27, 2002.

o Decrease in travel, advertising, promotional, trade show and sales
commission expenses of approximately $1.8 million and $4.0 million for the
three and nine months ended September 27, 2002 compared with the
corresponding periods in fiscal 2001.

o Reduction in facility, equipment, office and telephone expenses of
approximately $1.5 million for the nine months ended September 27, 2002
compared to the corresponding period in fiscal 2001.

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

General and Administrative

General and administrative expense increased by $1.1 million and $2.3
million during the three and the nine month periods ended September 27, 2002,
representing 9% of revenue, compared with 8% in the same corresponding periods
in fiscal 2001. The increases in 2002 was due primarily to increased provisions
for receivables due from customers in troubled South American economies and a
$1.5 million charge resulting from the write-off of receivables due from a
Japanese distributor, partially offset by reduction in compensation and
professional fees of approximately $0.6 million.

Restructuring charges

Restructuring charges of $ 154,000 and $646,000 were recorded for the three
and nine month periods ended September 27, 2002 respectively, which are
primarily related to severance costs. For the nine month period ended September
28, 2001, restructuring charges of $3.0 million were recorded, which are
primarily related to severance costs. These restructuring activities impacted 40
individuals in the first nine months of fiscal 2002. In the nine months of
fiscal 2001, 160 individuals were impacted. As of September 27, 2002, all of the
restructuring charges have been paid.

Spectra Precision Group Restructuring Activities

At the time the Company acquired the Spectra Precision Group in July 2000,
the Company formulated a restructuring plan and provided approximately $9.0
million for costs to close certain duplicative office facilities, combine
operations including redundant domestic and foreign legal entities, reduce
workforce in overlapping areas, and relocate certain employees. These estimated
costs were accrued for as part of the allocation of the purchase price. Included
in the total estimated cost was approximately $2.7 million related to the
discontinuance of overlapping product lines, which was included in our reserve
for excess and obsolete inventory. As of September 27, 2002, the Company had
charged against the reserve approximately $4.5 million of non-inventory related
charges, which consisted of $1.8 million for legal and tax consulting expenses
relating to consolidation of legal entities, $1.3 million for severance
expenses, $1.0 million for facilities and direct sales office closures, $0.3
million for an underfunded pension plan, and other costs of $0.1 million, of
which $1.2 million was paid in the first nine months of 2002.

The Company revised its final estimates for costs to complete the remaining
planned activities and accordingly reduced its restructuring reserve by
approximately $1.1 million, with a corresponding adjustment to Goodwill, in the
fourth quarter of fiscal 2001. The reserve balance was approximately $0.8
million at September 27, 2002, and the Company anticipates completing the
majority of its remaining restructuring activities during the fourth fiscal
quarter of 2002. These activities consist principally of legal costs and other
expenses required to combine redundant legal entities.

The elements of the reserve at September 27, 2002, on the balance sheet
(included in accrued liabilities) are as follows:

Employee Severance Facility Closure,
and Relocation Legal and Tax
Expense Total
(In thousands)

Total reserve $ 1,945 $ 4,370 $ 6,315
Amounts paid/written off (1,685) (2,788) (4,473)
Revision to estimates (260) (812) (1,072)
-----------------------------------------------
Balance as of September 27, 2002 $ - $ 770 $ 770
===============================================

Amortization of Goodwill, Purchased and Other Intangibles

Amortization expense of goodwill, purchased and other intangibles decreased
during the three and nine month periods ended September 27, 2002 by
approximately $5.6 million and $16.0 million. Total amortization expense of
goodwill, purchased and other intangibles represented 2% of revenue in the first
nine month period of fiscal 2002, compared with 4% in the same period in 2001.
The decrease was primarily due to the adoption of SFAS 142, which does not
require the amortization of goodwill and intangible assets with indefinite
useful lives.

Nonoperating income (expense), net

The following table shows nonoperating income (expenses), net for the
periods indicated and should be read in conjunction with the narrative
descriptions of those expenses below:

Nonoperating expense, net increased by $1.0 million during the three months
ended September 27, 2002 as compared with same fiscal period in 2001. The
primary reasons for the increase were as follows:

o Expense for affiliated operations of $1.5 million is primarily a result of
transfer pricing effects on transactions between Trimble and the CTCT joint
venture.

o Foreign exchange loss of $0.4 million in the third fiscal quarter of 2002
compared to a $0.8 million gain in third fiscal quarter of 2001.

o The increase above was offset by lower interest expense due to reduction of
the debt balance of approximately $95 million and lower interest rates.

Nonoperating expense, net decreased by $2.7 million during the first nine
months of fiscal 2002 as compared with same fiscal period in 2001. The primary
reasons for the decrease were as follows:

o Lower interest expense due to reduction of the debt balance of
approximately $95 million accounted for $5.6 million.

o Lower interest expense was offset by expense for affiliated operations of
$2.7 million as a result of transfer pricing effects on transactions
between Trimble and the CTCT joint venture and a foreign exchange loss of
$1.1 million in the nine months ended September 27, 2002.

Income Taxes

The Company recorded provisions for income taxes of $0.25 million for the
three months ended September 27, 2002 and $3.3 million for the nine months ended
September 27, 2002. The provisions for income taxes for the comparable periods
in 2001 were $0.2 million and $1.7 million, respectively. These amounts reflect
foreign taxes on profits in foreign jurisdictions,