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

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

FORM 10-K

(X) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2004

OR

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

Commission File Number: 0-18645

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

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

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

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

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

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

Common Stock
Preferred Share Purchase Rights
(Title of Class)

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

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

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

The aggregate market value of the Common Stock held by non-affiliates of the
registrant, based upon the last sale price of the Common Stock reported on the
NASDAQ National Market on July 2, 2004 was approximately $1.3 billion.

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

DOCUMENTS INCORPORATED BY REFERENCE

Certain parts of Trimble Navigation Limited's Proxy Statement relating to the
annual meeting of stockholders to be held on May 19, 2005 (the "Proxy
Statement") are incorporated by reference into Part III of this Annual Report on
Form 10-K.

SPECIAL NOTE ON FORWARD-LOOKING STATEMENTS

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

TRIMBLE NAVIGATION LIMITED

2004 FORM 10-K ANNUAL REPORT

TABLE OF CONTENTS

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

PART II
Item 5 Market for Registrant's Common Equity and Related
Stockholder Matters.............................................18
Item 6 Selected Financial Data............................................19
Item 7 Management's Discussion and Analysis of Financial Condition
and Results of Operations.......................................20
Item 7A Quantitative and Qualitative Disclosures about Market Risk.........42
Item 8 Financial Statements and Supplementary Data........................44
Item 9 Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure........................................75
Item 9a Controls and Procedures............................................75

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

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

TRADEMARKS

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

PART I

Item 1 Business Overview

Trimble Navigation Limited, a California corporation ("Trimble" or "the Company"
or "we" or "our" or "us"), provides advanced positioning product solutions, most
typically to commercial and government users. The principle applications served
include surveying, construction, agriculture, urban and natural resource
management, and fleet and asset management. Our products typically provide
benefits that can include lower operational costs, and higher productivity.
Examples of products include systems that guide agricultural and construction
equipment, surveying instruments, systems that track fleets of vehicles, and
data collection systems that enable the management of large amounts of
geo-referenced information. In addition, we also manufacture components for in
vehicle navigation and telematics systems, and timing modules used in the
synchronization of wireless networks.

Trimble products often combine knowledge of location or position together with
applications software and a wireless link to provide a solution to a specific
application. Position is provided through a number of alternative technologies
including the Global Positioning System (GPS) and systems that use laser or
optical technologies to establish position. Wireless communication techniques
include both public networks, such as cellular, and private networks, such as
business band radio. A significant amount of the differentiation in our products
is provided through software; this includes embedded firmware that enables the
positioning solution and applications software that allows the customer to make
use of the positioning information.

We design and market our own products. Our manufacturing strategy includes a
combination of in house assembly as well as the use of third party
subcontractors. Our global operations include major development, manufacturing
or logistics operations in the United States, Sweden, Germany, New Zealand,
France, Canada, and the Netherlands. Products are sold through dealers,
representatives, joint ventures, and other channels throughout the world. These
channels are supported by our sales offices located in more than 20 countries.

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

Technology Overview

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

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

Our GPS products are based on proprietary receiver technology. Over time, the
advances in positioning, wireless communication, and information technologies
have enabled us to add more capability to our products and thereby deliver more
value to our users. For example, the recent developments in wireless technology
and deployments of next generation wireless networks have enabled less expensive
wireless communications. These developments allow for the efficient transfer of
position data to locations away from the positioning field device, allowing the
data to be accessed by more users and thereby increasing productivity. This has
allowed us to include a wireless link in many of our products and connect remote
field operations to a central location.

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

Business Strategy

Our business strategy is developed around an analysis of several key elements:

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

o Innovative solutions that provide significant benefits to our
customers - We seek to apply our technology to applications for which
position data is important and where we can create unique value. We
look for opportunities in which the rate of technological change is
high and which have a requirement for the integration of multiple
technologies into a solution.

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

Business Segments and Markets

We are organized into four main operating segments encompassing our various
applications and product lines: Engineering and Construction, Field Solutions,
Component Technologies, and Mobile Solutions. Our Portfolio Technologies segment
aggregates smaller businesses, primarily focused on defense and the integration
of GPS and inertial technologies. Our segments are distinguished by the markets
they serve. Each segment consists of businesses which are responsible for
product development, marketing, sales, strategy, and financial performance.

Engineering and Construction

Products in the Engineering and Construction segment improve productivity and
accuracy throughout the entire construction process including the initial
survey, planning, design, site preparation, and building phases. Our products
are intended to both improve the productivity of each phase, as well as
facilitate the entire process by improving information flow from one step to the
next.

The product solutions typically include multiple technologies. The elements of
these solutions may incorporate GPS, optical, laser, radio or cellular
communications, and software.

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

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

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

Competitors in this segment are typically companies that provide optical, laser,
or GPS positioning products. Our principal competitors are Topcon Corporation
and Leica Geosystems. Price points in this segment range from less than $1,000

for certain laser systems to approximately $125,000 for a high precision,
three-dimensional, machine control system.

Representative products sold in this segment include:

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

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

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

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

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

Field Solutions

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

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

We use multiple distribution channels to access the agricultural market,
including independent dealers and partners such as CNH Global. Competitors in
this market are either vertically integrated implement companies such as John
Deere, or agricultural instrumentation suppliers such as Raven, RHS, CSI
Wireless, Beeline and Novariant.

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

navigate back to any individual asset or item for maintenance or data update.
Our mobile GIS initiative goes one step further by allowing this information to
be communicated from the field worker to the back-office GIS database through
the combination of wireless technologies, as well as giving the field worker the
ability to download information from the database. This capability provides
significant advantages to users including improved productivity, accuracy and
access to the information in the field.

Distribution for GIS products is primarily through a network of independent
dealers and business partners, supported by Trimble personnel. Primary markets
for our GIS products and solutions include both governmental and commercial
users. Government users are most often municipal governments and natural
resource agencies. Commercial users include utility companies. Competitors in
this market are typically survey instrument companies utilizing GPS technology.
Two examples are Leica Geosystems and Thales.

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

Representative products sold within this segment include:

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

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

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

Component Technologies

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

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

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

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

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

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

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

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

Representative products sold by this segment include:

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

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

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

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

Mobile Solutions

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

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

We also have a horizontal market strategy that focuses on providing turnkey
solutions to a broad range of service fleets and mobile workers that span a
large number of market segments. Here, we leverage the same general applications
that are used in our vertical markets without the same level of customization.
These products are distributed through individual dealers as well as
after-market automotive electronics suppliers.

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

Approximate prices for the hardware fall in the range of $400 to $3,000, while
the monthly software service fees range from approximately $20 to approximately
$55, depending on the customer service level. Competition comes largely from
service-oriented businesses such as @Road.

Representative products sold by this segment include:

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

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

Portfolio Technologies

Our Portfolio Technologies segment includes various operations that aggregate to
less than 10 percent of our total revenue. The operations in this segment are
Applanix, Military and Advanced Systems (MAS), and Trimble Outdoors.

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

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

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

Representative products sold by this segment include:

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

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

Acquisitions and Joint Ventures

Our growth strategy is centered on developing and marketing innovative and
complete value-added solutions to our existing customers, while also marketing
them to new customers and geographic regions. In some cases, this has led to
partnering with or acquiring companies that bring technologies, products or
distribution capabilities that will allow us to enter or penetrate a market more

effectively than if we had done so solely through internal development. Over the
past five years, this has led us to form two joint ventures and acquire multiple
companies. No assurance can be given that our previous or future acquisitions
will be successful or will not materially adversely affect our financial
condition or operating results.

GeoNav

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

TracerNET Corporation

* On March 5, 2004 we acquired TracerNET Corporation of Virginia, a provider of
wireless fleet management solutions. We expect the TracerNET acquisition to
offer more diverse and complete fleet management solutions. TracerNET's
performance has been integrated into our Mobile Solutions segment.

MENSI S.A.

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

Applanix Corporation

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

Nikon-Trimble Co., Ltd.

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

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

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

Caterpillar Trimble Control Technologies, LLC

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

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

Patents, Licenses and Intellectual Property

We hold approximately 600 US patents and 108 non-US patents, the majority of
which cover GPS technology and applications, and over 93 of which cover optical
and laser technology and applications.

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

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

Sales and Marketing

We tailor the distribution channel to the needs of our products and regional
markets through a number of forms of sales channel solutions around the world.
We sell our products worldwide primarily through dealers, distributors, and
authorized representatives, occasionally granting exclusive rights to market
certain products within specific countries. This channel is supported and
supplemented (where third party distribution is not available) by our regional
sales offices in North America, Europe, Australia, China, Korea, New Zealand,
Singapore, and United Arab Emirates. We also utilize distribution alliances, OEM
relationships and joint ventures with other companies as a means to serve
selected markets.

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

Support and Warranty

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

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

Seasonality of Business

* Our revenues are affected by seasonal buying patterns in some of our
businesses. Over half of our total revenue comes from our Engineering and
Construction business, which has the biggest seasonal impact on our total
revenue. This business, and therefore our total revenue, is seasonally strongest
during the second quarter due to the start of the construction buying season in
the northern hemisphere in spring. Typically, we expect the first and fourth
quarters to be the seasonal lows due to the lack of construction during the
winter months. The second quarter has averaged to 26.2% of total revenue in the
last two fiscal years versus a straight line of 25% per quarter.

Backlog

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

Manufacturing

Manufacturing of substantially all our GPS products is subcontracted to
Solectron Corporation. During fiscal 2004 we utilized Solectron's Suzhou
facilities in China for all of our Component Technologies products. During 2004
we expanded our use of Solectron in Mexico for our Field Solutions products and
handhelds. We continue to utilize Solectron California for our high-end GPS
products and new product introduction services. Solectron is responsible for
substantially all material procurement, assembly, and testing. We continue to
manage product design through pilot production for the subcontracted products,
and we are directly involved in qualifying suppliers and key components used in
all our products. Our current contract with Solectron continues in effect until
either party gives the other ninety days written notice.

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

Our manufacturing sites in Dayton, Ohio; Danderyd, Sweden; Jena and
Kaiserslautern, Germany are registered to ISO9001:2000, covering the design,
production, distribution, and servicing of all our products. The Component
Technologies segment is registered to QS9000 for its automotive products. QS9000
is the automotive version of ISO9000 covering specific requirements for the
market.

Research and Development

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

Our research and development expenditures, net of reimbursed amounts were $77.6
million for fiscal 2004, $67.6 million for fiscal 2003, and $61.2 million for
fiscal 2002.

* We expect to continue investing in research and development with the goal of
maintaining or improving our competitive position, as well as the goal of
entering new markets.

Employees

As of December 31, 2004, we employed approximately 2,160 employees, including
31% in sales and marketing, 27% in manufacturing, 28% in engineering, and 14% in
general and administrative positions. Approximately 44% of employees are in
locations outside the United States.

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

Available Information

The Company's annual reports on Form 10-K, quarterly reports on Form 10-Q,
current reports on Form 8-K, and all amendments to those reports are available
free of charge on the Company's web site through www.trimble.com/investors.html,
as soon as reasonably practicable after such material is electronically filed
with or furnished to the Securities and Exchange Commission. Information
contained on our web site is not part of this annual report on Form 10-K.

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

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

Executive Officers

The names, ages, and positions of the Company's executive officers as of March
1, 2005 are as follows:

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

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

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

William C. Burgess - William Burgess joined Trimble in August of 2000 as vice
president of Human Resources. Prior to joining Trimble, Mr. Burgess was vice
president of Human Resources and Management Information Systems for Sonoma West
Holdings, Inc. From 1993 to 1997, he served as vice president of Human Resources
for Optical Coating Laboratory, from 1990 to 1993, he established and managed
the human resources function at Teknekron Communications Systems, and from 1985
to 1990 he was vice president of Human Resources for a $25 billion,
35,000-employee segment of Asea Brown Boveri (ABB), a global technology company.
Mr. Burgess received a B.S. from the University of Nebraska and an M.S. in
organizational development from Pepperdine University.

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

Bryn A. Fosburgh - Bryn Fosburgh joined Trimble in 1994 as a technical service
manager for surveying, mining, and construction. In 1997, Mr. Fosburgh was
appointed director of development for the Company's land survey business unit
where he oversaw the development of field and office software that enabled the
interoperability of Trimble survey products. From October 1999 to July 2002, he
served as division vice president of survey and infrastructure. From 2002 to
2005, Mr. Fosburgh served as vice president and general manager of Trimble's
Geomatics and Engineering (G&E) business area, with responsibility for all the
division-level activities associated with survey, construction, and
infrastructure solutions. In January 2005, he was appointed vice president and
general manager of the Engineering and Construction Division. Prior to Trimble,
he was a civil engineer with the Wisconsin Department of Transportation
responsible for coordinating the planning, data acquisition, and data analysis
for statewide GPS surveying projects in support of transportation improvement
projects. He has also held various engineering, research and operational
positions for the U.S. Army Corps of Engineers and Defense Mapping Agency. Mr.
Fosburgh received a B.S. in geology from the University of Wisconsin in Green
Bay in 1985 and an M.S. in civil engineering from Purdue University in 1989.

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

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

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

Michael W. Lesyna -Michael Lesyna joined Trimble in September 1999 as vice
president of strategic marketing. In September 2000, he was appointed vice
president and general manager of the Mobile Solutions Division. In July 2004,
Lesyna was appointed vice president of Business Transformation. In this
cross-divisional role he focuses on driving operational improvements based on
the marketing, sales and distribution channel strategies of Trimble's business
segments. The scope of his work includes tailored business prioritization as
well as lean manufacturing and lean overhead principles. Prior to Trimble, Mr.
Lesyna spent six years at Booz Allen & Hamilton where he most recently served as
a principal in the operations management group. Prior to Booz Allen & Hamilton,
Mr. Lesyna held a variety of engineering positions at Allied Signal Aerospace.
Mr. Lesyna received his M.B.A., as well as an M.S. and B.S. in mechanical
engineering from Stanford University.

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

Anup V. Singh - Anup Singh joined Trimble in December 2001 as corporate
controller. In August 2004 he was appointed vice president and corporate
controller. Prior to joining Trimble, Mr. Singh was with Excite@Home from July
1999 to December 2001. During his tenure at Excite@Home, he held the positions
of senior director of Corporate Financial Planning and Analysis, and
international controller. Before Excite@Home, Mr. Singh also worked for 3Com

Corporation from December 1997 to July 1999, and Ernst & Young LLP in San Jose,
California and London, England. Mr. Singh received his B.A. in 1991 and M.A. in
1995 in economics and management science from Cambridge University in England.
He is also a chartered accountant and was admitted as a member of the Institute
of Chartered Accountants in England and Wales in 1994.

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

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

Item 2 Properties

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

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

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

Item 3 Legal Proceedings

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

Item 4 Submission of Matters to a Vote of Security Holders

No matters were submitted to a vote of security holders during the fourth
quarter of 2004.

PART II

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

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

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

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

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

Dividend Policy

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

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

Equity Compensation Plan Information

The following table sets forth, as of December 31, 2004, the total number of
securities outstanding under our stock option plans, the weighted average
exercise price of such options, and the number of options available for grant
under such plans. See Note 15 of the Notes to the Consolidated Financial
Statements for a summary of our plans.

Item 6. Selected Financial Data

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

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

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

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

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

EXECUTIVE LEVEL OVERVIEW

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

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

The components businesses require different characteristics to be successful.
The customer is typically an OEM, system integrator, or other third party that
integrates our components into a system. To satisfy this customer group, our
focus is on price, product functionality, and quality. With recent product
introductions we have begun to add higher functionality into our products in
order to provide greater value and potentially capture higher average selling
prices for our offerings. For example, our TrimTrac product integrates GPS and
GSM cellular technologies into a fully functional location device. It
establishes a new asset tracking or security capability at an aggressive price
point and opens up a new class of customers and applications which were
previously not available to us.

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

Reinforcing our position in existing markets

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

Extend our position in existing markets through new product categories

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

Bring existing technology to new markets

We continue to reinforce our position in existing markets, and positioned
ourselves in newer markets that will serve as important sources of future
growth. Our efforts in China, India, Russia, Korea and Eastern Europe all
reflected improving financial results, with the promise of more in the future.

Pioneer completely new markets

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

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

Our accounting policies are more fully described in Note 2 of the Notes to the
Consolidated Financial Statements. The preparation of financial statements and
related disclosures in conformity with accounting principles generally accepted
in the United States requires us to make judgments, assumptions, and estimates
that affect the amounts reported in the Consolidated Financial Statements and
accompanying Notes to the Consolidated Financial Statements. We consider the
accounting polices described below to be our critical accounting polices. These
critical accounting policies are impacted significantly by judgments,
assumptions, and estimates used in the preparation of the Consolidated Financial
Statements, and actual results could differ materially from the amounts reported
based on these policies.

Revenue Recognition

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

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

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

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

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

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

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

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

Allowance for Doubtful Accounts and Sales Returns

Our accounts receivable balance, net of allowance for doubtful accounts, was
$123.9 million as of December 31, 2004, compared with $104.6 million as of
January 2, 2004. The allowance for doubtful accounts as of December 31, 2004 was
$9.0 million, compared with $10.0 million as of January 2, 2004. We evaluate the
collectibility of our trade accounts receivable based on a number of factors
such as age of the accounts receivable balances, credit quality, historical
experience, and current economic conditions that may affect a customer's ability
to pay. In circumstances where we are aware of a specific customer's inability
to meet its financial obligations to us, a specific allowance for bad debts is
estimated and recorded which reduces the recognized receivable to the estimated
amount we believe will ultimately be collected. In addition to specific customer
identification of potential bad debts, bad debt charges are recorded based on
our recent past loss history and an overall assessment of past due trade
accounts receivable amounts outstanding.

A reserve for sales returns is established based on historical trends in product
return rates experienced in the ordinary course of business. The reserve for
sales returns as of December 31, 2004 and January 2, 2004 included $2.2 million
and $3.3 million, respectively, for estimated future returns that were recorded
as a reduction of our accounts receivable and revenue. If the actual future
returns were to deviate from the historical data on which the reserve had been
established, our revenue could be adversely affected.

Inventory Valuation

Our inventories, net balance was $87.7 million as of December 31, 2004, compared
with $70.8 million as of January 2, 2004. Our inventory allowances as of
December 31, 2004 were $26.2 million, compared with $25.9 million as of January
2, 2004. Our inventory is recorded at the lower of standard cost or market (net
realizable value). We generally use a standard cost accounting system to value
inventory and these standards are reviewed a minimum of once a year and multiple
times a year in our most active manufacturing plants. We adjust the inventory
value based on estimated excess and obsolete inventories determined primarily by
future demand forecasts. If actual future demand or market conditions are less
favorable than those projected by us, additional inventory write-downs may be
required.

Income Taxes

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

The valuation allowance decreased by $21.8 million in fiscal 2004 and $13.1
million in fiscal 2003. Approximately $8 million of the valuation allowance at
December 31, 2004 and $14.1 million at January 2, 2004 relates to the tax
benefit of stock option deductions, which will be credited to equity if and when
realized. In evaluating the need for a valuation allowance, we consider future
taxable income, resolution of tax uncertainties and prudent and feasible tax
planning strategies.

Goodwill Impairment

Goodwill as of December 31, 2004 was $259.5 million, compared with $241.4
million as of January 2, 2004. We performed goodwill impairment tests at the end
of the fiscal third quarter of 2004 and 2003 for each reporting unit and found
there was no impairment of our goodwill. We will continue to evaluate our
goodwill for impairment on an annual basis at the end of each fiscal third
quarter and whenever events and changes in circumstances suggest that the
carrying amount may not be recoverable.

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

fair value of the identifiable assets and liabilities is less than the carrying
value of the unit's goodwill, an impairment charge is recorded for the
difference.

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

Accounting for Long-Lived Assets Including Intangibles Subject to Amortization

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

Long-lived assets and asset groups are evaluated for impairment whenever events
or changes in circumstances indicate that the carrying amount of such assets may
not be recoverable. The estimated future cash flows are based upon, among other
things, assumptions about expected future operating performance and may differ
from actual cash flows. Long-lived assets evaluated for impairment are grouped
with other assets to the lowest level for which identifiable cash flows are
largely independent of the cash flows of other groups of assets and liabilities.
If the sum of the projected undiscounted cash flows (excluding interest) is less
than the carrying value of the assets, the assets will be written down to the
estimated fair value in the period in which the determination is made.

Warranty Costs

The liability for product warranties was $6.4 million as of December 31, 2004,
compared with $5.1 million as of January 2, 2004. (See Note 2 of the Notes to
the Consolidated Financial Statements for further information regarding our
warranty liability.) The warranty periods for our products are generally between
one and three years. Selected military programs may require extended warranty
periods up to 5.5 years, certain TDS products have a five year or 90-day
warranty period, and certain Nikon products have a five year warranty period. We
accrue for warranty costs as part of our cost of sales based on associated
material costs, technical support labor costs, and costs incurred by third
parties performing warranty work on our behalf. Our expected future cost is
primarily estimated based upon historical trends in the volume of product
returns within the warranty period and the cost to repair or replace the
equipment.

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

Stock Compensation

We apply Accounting Principles Board Opinion No. 25, "Accounting for Stock
Issued to Employees" (APB 25) and related interpretations in accounting for our
stock option plans and stock purchase plan. Accordingly, we do not recognize
compensation cost for stock options granted at a price equal to fair market
value. Note 15 of the Notes to the Consolidated Financial Statements describes
the plans we operate, and Note 2 of the Notes to the Consolidated Financial
Statements contains a summary of the pro forma effects to reported net income
and earnings per share for fiscal 2004, 2003, and 2002 as if we had elected to
recognize compensation cost based on the fair value of the options granted at
grant date.

Investment in Joint Ventures

We have adopted the equity method of accounting for our investments in the
Caterpillar and Nikon joint ventures. This requires that we record our share of
the joint ventures' profits or losses in a given fiscal period. See Note 5 of
the Notes to the Consolidated Financial Statements for joint venture accounting.

Upon the formation of our Caterpillar joint venture in April 2002, we received a
cash distribution of $11.0 million. We have elected to treat the cash
distribution as a deferred gain, being amortized to the extent that losses are
attributable from the Caterpillar joint venture under the equity method
described above. When and if the joint venture is profitable on a sustainable
basis and future operating losses are not anticipated, then we will recognize as
a gain, the portion of the $11.0 million, which is unamortized. To the extent
that it is possible that we will have any future-funding obligation relating to
the Caterpillar joint venture, then the relevant amount of the $11.0 million
will be deferred until such time that the funding obligation no longer exists.
As of December 31, 2004, the balance of the unamortized deferred gain was $9.2
million.

RECENT BUSINESS DEVELOPMENTS

Trimble Outdoors

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

GeoNav

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

TracerNET Corporation

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

Pacific Crest Corporation

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

RESULTS OF OPERATIONS

Overview

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

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

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

Basis of Presentation

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

Impact of Weaker US Dollar on Operating Results in Fiscal 2004

The depreciation of the US dollar versus major European currencies positively
impacted revenues by approximately $12.6 million in fiscal 2004 when compared
with rates used throughout fiscal 2003. As a result of our significant
manufacturing, distribution, research and development, and selling expenses
incurred outside of the US, the weaker US dollar negatively impacted our
operating income by approximately $3.0 million in fiscal 2004 when compared with
rates used throughout fiscal 2003.

Revenue

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

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

* No single customer accounted for 10% or more of our total revenues in fiscal
2004, 2003, and 2002. It is possible, however, that in future periods the
failure of one or more large customers to purchase products in quantities
anticipated by us may adversely affect the results of operations.

Gross Margin

Our gross margin varies due to a number of factors including product mix,
pricing, distribution channel used, the effects of production volumes, new
product start-up costs, and foreign currency translations. Gross margin as a
percentage of total revenues was 48.6 % in fiscal 2004 and 49.6% in fiscal 2003.
The decrease in gross margin percentage for fiscal 2004, compared with fiscal
2003, was due to changes in the mix of products sold, principally related to
increased sales of lower margin Nikon-branded survey and construction products,
our agriculture products, pricing pressure in our Component Technologies
business (which typically demonstrates increased unit volumes coupled with
declining unit prices), the impact of the weaker US dollar on our non US
manufacturing, and distribution costs.

Gross margin as a percentage of total revenues was 49.6% in fiscal 2003 and
50.2% in fiscal 2002. The slight decrease in gross margin percentage for fiscal
2003, compared with fiscal 2002, was due primarily to the introduction of the
Nikon products in the third quarter, which was responsible for a margin decline
of approximately 0.8%. This was partially offset by stronger sales of handheld
survey products, GIS, wireless infrastructure, survey products as well as our
ongoing focus on product cost reductions.

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

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

Operating Income

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

Results by Segment

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

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

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

Engineering and Construction

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

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

Field Solutions

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

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

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

Component Technologies

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

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

Mobile Solutions

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

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

Portfolio Technologies

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

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

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

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

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

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

Research and development expenses increased by $6.4 million in fiscal 2003
compared to fiscal 2002 due to continued investment in next generation
technology primarily in the Engineering and Construction segment, the weakness
of the US dollar versus major European and New Zealand currencies, and also the
inclusion of the research and development expenses from Applanix after its
acquisition in July 2003.

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

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

Sales and marketing expenses increased by $8.5 million in fiscal 2003 compared
to fiscal 2002 primarily due to higher revenue, increased sales efforts mostly
in emerging geographic areas such as China and Russia, the impact of the weaker
US dollar in Europe, and the inclusion of Applanix sales and marketing expenses
not applicable in the prior fiscal year.

* We intend to continue to focus and expand our sales and marketing efforts
across all the geographies and markets we serve in order to increase market
awareness of our products and to better support our existing customers
worldwide. Our future growth will depend in part on the timely development and
continued viability of the markets in which we currently compete as well as our
ability to continue to identify and exploit new markets for our products.

General and administrative expenses increased by $5.4 million in fiscal 2004
compared to fiscal 2003 primarily due to the inclusion of G&A expenses from
acquisitions, compliance with Sarbanes-Oxley, and bad debt expenses of $1.2
million. Spending overall remained relatively constant at approximately 7% of
revenues.

General and administrative expenses in fiscal 2003 decreased by $1.4 million and
represented 7.3% of revenues compared with 8.7% in fiscal 2002. In fiscal 2002,
we experienced higher bad debt expenses, primarily due to the bankruptcy of a
large Japanese distributor. In addition, in fiscal 2003 we incurred $3.0 million
less in information systems expenses. These reductions were offset in fiscal
2003 by lower sublease income received, expenses from Applanix after the
acquisition in July 2003, and higher compensation costs.

Other Operating Expenses

Restructuring Charges

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

Amortization of Purchased and Other Intangible Assets

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

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

Non-operating Expense, Net

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

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

Non-operating expense, net decreased by $1.