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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(X) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended January 2, 1998
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from _____________ to ___________
Commission File Number: 0-18645
TRIMBLE NAVIGATION LIMITED
(Exact name of Registrant as specified in its charter)
California 94-2802192
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
645 North Mary Avenue
Sunnyvale, CA 94088
(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
(Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]
The aggregate market value of the registrant's Common Stock held by
non-affiliates of the registrant was approximately $430,009,338 as of March 13,
1998, based upon the closing sale price of the common stock on the Nasdaq Stock
Market for that date.
There were 23,243,748 shares of the registrant's Common Stock issued and
outstanding as of March 13, 1998.
DOCUMENTS INCORPORATED BY REFERENCE
Items 10, 11, 12 and 13 of Part III incorporate information by reference
from the registrant's Proxy Statement for its 1998 Annual Meeting of
Shareholders to be held on May 5, 1998. Except with respect to information
specifically incorporated by reference into this Form 10-K, the Proxy Statement
is not deemed to be filed as a part hereof.
This report contains forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934. Actual results could differ materially from those
indicated in the forward-looking statements as a result of the risk factors set
forth in, or incorporated by reference into, this report. The Company has
attempted to identify forward-looking statements in this report by placing an
asterisk (*) in the left-hand margin of paragraphs containing such material.
PART I
Item 1. Business
General
Trimble Navigation Limited, a California corporation (Trimble or the
Company), is a leader in the emerging markets for satellite-based navigation,
position and communication data products using the Global Positioning System
(GPS). Trimble designs, manufactures and markets electronic products that
determine precise geographic location. The Company's principal products, which
utilize substantial amounts of proprietary software and firmware, are integrated
systems for collecting, analyzing and displaying position data in forms
optimized for specific end-user applications.
* Trimble has defined and currently addresses a number of markets
for its GPS products: surveying, mapping, marine navigation, mining and
construction, tracking systems, aviation, military systems, OEM and cellular and
mobile computing platforms. The Company has developed or is developing systems
for seismology, geographic information systems, delivery fleets, buses, ships,
airplanes, automobiles and hand-held units. Trimble anticipates that additional
markets will emerge to make use of the highly accurate position data obtainable
from GPS.
Background
Precise determination of locations both on and above the earth's surface is
a fundamental requirement for many human activities. For example, position data
is used for navigation on land, sea and air, and to conduct surveys and draw
maps. Previous technologies have limited users to simultaneous determination of
only two dimensions-latitude and longitude-while altitude and time required
separate measurements with different equipment. GPS technology provides users
with all of these measurements using one instrument. GPS is a system of 24
orbiting Navstar satellites established and funded by the U.S. Government. On
April 27, 1995, GPS was declared to have achieved Full Operational Capability by
the U.S. Air Force Space Command. The U.S. Government intends for GPS to
complement or replace many other forms of electronic navigation and position
data systems. GPS offers major advantages over previous technologies in
precision and accuracy with worldwide coverage in three dimensions (in addition
to providing time and velocity measurement capabilities).
GPS positioning is based on a triangulation technique that precisely
measures distances from three or more Navstar satellites. The satellites
continuously transmit precisely timed radio signals using extremely accurate
atomic clocks. A GPS receiver calculates distances from the satellites in view
by determining the travel time of the satellites' signals. The receiver then
triangulates its position using its known distance from various satellites and
calculates latitude, longitude and altitude. 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 within 100 meters,
24 hours a day. When a GPS receiver is coupled with a known precise position,
accuracies of less than one centimeter are possible. In addition, GPS provides
highly accurate time measurement.
* The usefulness of GPS is dependent on the number and locations of GPS
satellites that are above the horizon at any given time. The current deployment
of 24 satellites permits three-dimensional worldwide coverage 24 hours a day.
However, reception of GPS signals requires line-of-sight visibility between the
Navstar satellites and the receiver, which can be blocked by buildings, hills
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and dense foliage. For the receiver to collect a sufficient signal, each
satellite must be above the horizon and the receiver must have a line of sight
to at least three satellites to determine its location in two
dimensions-latitude and longitude-and at least four satellites to determine its
location in three dimensions-latitude, longitude, and altitude. The accuracy of
GPS may also be limited by distortion of GPS signals from ionospheric and other
atmospheric conditions, and intentional or inadvertent signal interference or
Selective Availability (SA). Selective Availability, the largest component of
GPS distortion, is controlled by the Department of Defense and is a currently
activated, intentional system-wide degradation of stand-alone GPS accuracy from
approximately 25 meters to approximately 100 meters. Selective Availability may
be implemented by the Department of Defense in order to deny hostile forces the
highly accurate position, time and velocity information supplied by GPS. In
certain military applications, classified devices are utilized to decode the SA
degradation and return accuracies to their original levels.
By using a technique called "differential GPS" involving two or more GPS
receivers, accuracies can currently be improved to approximately one to five
meters for navigation and one centimeter for survey applications, even in the
presence of SA. This technique compensates for a number of potential measurement
distortions, including distortions caused by ionospheric and other atmospheric
conditions, as well as distortions intentionally introduced into the satellite
data itself, such as SA. Differential GPS involves placing one receiver at a
known location and continuously comparing its calculated location with its known
location to measure distortions in the signal transmission and errors in the
satellite data. At any one time, such distortions and errors are reasonably
constant over large areas, so that one or more remote GPS receivers can use
these measurements to correct their own position calculations. Measurement
corrections can be transmitted either in real-time over a suitable communication
link such as radio or telephone, or integrated later with accumulated data, as
is frequently the practice in survey applications.
Each of Trimble's GPS products is based on proprietary GPS receivers.
Trimble's GPS receivers are capable of tracking all satellites in view and
automatically selecting the optimum combination of satellites necessary to
provide the most accurate set of measurements possible. Communications and
computational modules, such as databases, database management systems, radio and
other communication equipment and various user interfaces, are added to these
receivers to create fully integrated application solutions.
Navstar satellites and their ground support systems are complex electronic
systems subject to electronic and mechanical failures and possible sabotage. The
satellites have design lives of 7.5 years and are subject to damage by the
hostile space environment in which they operate. To repair damaged or
malfunctioning satellites is not economically feasible. If a significant number
of satellites were to become inoperable, there could be a substantial delay
before they are replaced with new satellites. A reduction in the number of
operating satellites would impair the current utility of the GPS system and the
growth of current and additional market opportunities. In addition, there can be
no assurance that the U.S. government will remain committed to the operation and
maintenance of GPS satellites over a long period of time, or that the policies
of the U.S. Government for the use of GPS without charge will remain unchanged.
However, the 1996 Presidential Decision Directive marks the first time in the
evolution of GPS that access and use for the consumer, civilian and commercial
use has a solid foundation in law. Because of ever-increasing commercial
applications of GPS, other U.S. Government agencies may become involved in the
administration or the regulation of the use of GPS signals. Any of the foregoing
factors could affect the willingness of buyers of the Company's products to
select GPS-based systems instead of products based on competing technologies.
Any resulting change in market demand for GPS products would have a material
adverse effect on the Company's financial results. In 1995, certain European
government organizations expressed concern regarding the susceptibility of GPS
equipment to intentional or inadvertent signal interference. Such concern could
translate into reduced demand for GPS products in certain geographic regions in
the future.
Business Strategy
The Company sees GPS as an information utility. In order to exploit the
wide range of applications made possible by this information utility, the
Company has implemented the following strategies:
* Targeted markets. The Company targets specific markets for its GPS
products based on end-user applications. The Company believes that by adding
application-specific features and functionality to its GPS technology, it can
deliver value-added products into its targeted markets. To date, the Company has
identified markets that it believes represent significant economic opportunities
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due to the broad range of potential applications for accurate and cost-effective
position, velocity and time information. The Company also continuously seeks to
identify new markets into which GPS products and systems can be introduced. The
Company believes that its continued growth will depend in large part on its
ability to identify and penetrate new markets for GPS applications.
Differentiated Product Solutions. The Company seeks to establish and
sustain leadership in its targeted markets by offering products that are
differentiated through software, firmware, customized user interfaces and the
Company's service and support. Where feasible, the Company emphasizes
application-specific systems that solve specific sets of problems in its various
markets. The Company believes that a substantial portion of the value of its
products is derived from the firmware that is embedded in the product or
software provided, along with the product for post-processing applications. In
addition, the Company incorporates other technologies into some of its products,
such as communications, computational capabilities and non-GPS positioning
technologies in order to optimize product features for specific markets.
Time-to-Market Advantage. The modular design of Trimble's products enables
the Company to create and maintain a broad line of products without necessarily
repeating development efforts or requiring extensive redesigns for product
upgrades. To facilitate fast product introduction while minimizing manufacturing
costs and maximizing quality, the Company has acquired advanced automated
manufacturing equipment that allows rapid turnaround of prototypes during
development and rapid changeovers between product lines during production.
Trimble further believes that its approach of providing many product software
features enables the Company to respond quickly to the needs of rapidly evolving
markets through software upgrades.
* Multichannel Distribution. The Company seeks direct communication with
its customers in order to develop and modify its product designs as necessary to
maximize utility and payback to the user. Trimble has built a worldwide sales
and service organization of Company employees, distributors and dealers for each
major market it addresses. In addition, the Company intends to continue to
develop new, and to strengthen existing, alliances and OEM relationships with
established foreign and domestic companies as part of its strategy to penetrate
certain targeted markets. The Company has pursued such alliances with several
companies in various markets, including Philips Car Systems, Pioneer Electronics
Corporation, Delco Electronics and Xanavi Informatics Corporation in car
navigation; Honeywell Inc. in aviation and military; E-systems, Inc. in transit;
PRC Public Sector, Inc. in public safety; Adobe Systems Incorporated and Intel
Corporation in the emerging consumer applications area; American Mobile
Satellite Corporation in long-haul fleet management; Caterpillar, Inc. in mining
and construction; and Case Corporation for agricultural applications.
Integration with Communication Technologies. GPS technology is increasingly
being integrated with wireless communication technologies, offering economic and
strategic advantages in areas such as navigation, vehicle fleet management,
long-haul trucking and public safety. Accordingly, the Company is currently
devoting research and development efforts to products that integrate the
Company's proprietary GPS receivers with wireless communication technologies.
Markets
Trimble currently addresses multiple markets for the application of GPS
technology, which the Company has divided into three business units: Commercial
Systems, Software and Component Technologies (including OEM) and Aerospace.
Though the Company believes that these markets have growth potential for sales
of GPS products, there can be no assurance that such markets will continue to
develop, particularly given that GPS-based systems are still in an early stage
of adoption in some of these markets. The Company's future growth will depend on
the timely development of the markets in which the Company currently competes,
and on the Company's ability to continue to identify and exploit new markets for
its products. Each business unit is managed by a vice president who has
responsibility for strategy, marketing, manufacturing, product development and
financial performance. The business units are further split into vertical
markets that address specific product markets.
4
Commercial Systems
The Commercial Systems business unit consists of the following vertical
markets: Land Survey; Mapping and GIS Systems; Mobile Positioning and
Communications; Marine; and Precise Positioning.
Land Survey. Surveying involves establishing precise points and boundaries
for legal and construction purposes. It consists primarily of collecting and
processing position information. Typically, surveying accuracy is expected to be
within a centimeter. The Company believes that its products substantially reduce
the cost, time, and number of people required to obtain and process surveying
and mapping data points for a given level of accuracy, compared to optical and
laser products. Applications, which the Company addresses in the surveying
market, include control surveying, construction and engineering surveying, route
surveying and geodetic research. GPS does not require line-of-sight between
land-based reference points and is not affected by most adverse weather
conditions (as compared to traditional methods such as optical or laser
measurements), providing advantages in many survey applications.
The Company's GPS surveying products lead the control surveying
instrumentation market. Control surveying is the precise determination of the
location of local geodetic reference points from which further local surveying
can be based. The GPS technique has reduced the cost of establishing control
points, compared to conventional techniques, and has become the preferred
technology for conducting control surveying.
The Company's surveying products are also used in large-scale construction
projects, such as new housing developments or public works projects, in which
the position of a large number of points needs to be cost-effectively
established. Trimble products are particularly efficient for applications in
areas with ground-level obstructions to visibility. Trimble also supplies route
surveying markets, which require a cost-and time-effective means of precisely
locating a large number of points and physical features along routes and
rights-of-way, such as roads, pipelines, and telephone and power lines. The
Company has introduced a product with kinematic data collection features, which
provides the capabilities for surveying applications while the equipment is in
motion. This kinematic product is targeted at the engineering and topographic
surveying markets, which represent a major portion of the overall surveying
market. Through the use of the kinematic GPS surveying technique, large numbers
of points can be rapidly measured to accuracies approaching those for control
surveying. The kinematic product allows one surveyor, on foot, to collect data
enabling creation of a construction-grade topographic map.
With conventional post-processed GPS techniques, GPS satellite signal data
are collected at the point, but the point coordinates aren't actually determined
until later, back in the office on a personal computer with specialized
software. In 1993 the Company introduced "real-time" GPS surveying
instrumentation. With real-time GPS surveying, the point coordinates are
generated virtually instantaneously as the surveyor surveys or "occupies" the
point. Compared to traditional post-processed GPS surveying and conventional
optical-based land surveying techniques (which can also generate
centimeter-level coordinates as the point is surveyed), real-time GPS surveying
allows surveyors to enjoy the many field logistics advantages of GPS, such as
saving time by eliminating the data processing step in the office. The
advantages and cost savings of real-time GPS surveying results in large
productivity gains for surveyors when compared to both traditional
post-processed GPS and conventional surveying techniques.
In addition to serving the commercial surveying market, GPS has become a
standard technique for geodetic research. Research geodesists have found that
long baseline accuracies using GPS are significantly greater than those
obtainable with optical and electronic distance-measuring equipment. This
capability has led to programs to remeasure previous geodetic control points to
sharply increase precision and eliminate errors. High accuracy has also created
a significant market for GPS in seismic research where earth movements of less
than one centimeter can now be measured and monitored.
In the surveying market, the Company faces growing competition from other
GPS vendors, such as Ashtech, Inc. (now part of Magellan via Orbital Sciences
Corp), and NovAtel Inc.; and from vendors of traditional optical surveying
products, such as Leica AG, Sokkia Company, Ltd., Karl Zeiss, and Spectra
Precision of which all have entered the GPS surveying market and are introducing
GPS products of their own.
5
Mapping and GIS Systems. For mapping applications, large amounts of
position and attribute data (such as color, size and condition of the object)
must be obtained. Compared to surveying, mapping involves more extensive but
less precise location and plotting of geographical and man-made features.
Mapping applications include large-scale mapping of geographic and man-made
features, data collection for Geographic Information Systems (GIS) databases,
natural resource management and ground contour mapping. Required accuracies are
typically from twenty-five centimeters to three meters.
Currently, large-scale accurate mapping is usually accomplished by
photogrammetric analysis of aerial photographs, a complex and expensive
technique. The Company supplies the mapping market with its products, enabling
the user to capture position data while in aircraft, or traversing terrain on
foot or in a vehicle. The Company is also developing additional products for the
mapping market. The Company believes that these products can lower the cost of
position and attribute data collection.
GIS databases are used by federal, state, county, and city governments and
by utility companies for a variety of applications requiring accurate
information on the location of natural resources and municipal infrastructure,
such as utilities and transport networks. Currently, building such a database
requires time-consuming compilation of data from numerous existing maps and
digitized photographs, as well as costly physical surveys. The Company's
products, used in connection with commercially available databases, have the
potential to reduce substantially the cost of constructing GIS databases and to
increase their accuracy.
In the mapping market, the Company faces competition from Ashtech, Inc.
(now part of Magellan via Orbital Sciences Corp), NovAtel Inc., CMT, Inc.,
Garmin Corporation, Magellan Corporation (a subsidiary of Orbital Sciences
Corporation), Motorola, Inc., Sokkia Company, Ltd., and others. Competition in
the mapping market has increased as competitors have introduced new products.
Mobile Positioning and Communications. The Company is an established leader
in providing tracking and communications products in the public safety, long
haul trucking, and marine markets. These products typically include GPS,
combined with conventional radios or satellite communications, and application
software for use in the vehicles and at a base station. The software generally
addresses the need for map displays, communications control, vehicle monitoring,
and messaging. These products are used in a variety of fleets, such as transit
buses, police cars, fire trucks, ambulances, trucking, and ships. In some
instances the Company provides additional services such as training,
installation, custom features, and program management. More recently, the
Company has introduced similar products for trunked radio and cellular
communications which are addressing productivity and security needs in the
commercial fleet markets.
In some instances, the Company markets its products directly to end-users,
but the large majority of its products are sold through resellers. Direct sales
to end-users are focused on opportunities in which the Company's standard
products closely match the customer's requirements. Public sector sales often
require significant customization, and the Company uses integrator partners such
as E-Systems, IBM, and Motorola to interface directly with the end-user. Other
tracking and communication products are sold through OEM integrators and
value-added resellers, some of whom address the international market.
The public sector customers are highly dependent on government funding for
fleet modernization. Capital equipment funding for U.S. public transit operators
comes primarily from congressional appropriations under the Intermodal Surface
Transportation Efficiency Act. Public safety organizations are dependent largely
on local government funding. Failure of the funding authorities to appropriate
funds for these purposes could have substantial impact on the Company's future
revenue.
Because the availability of GPS is still new, its use and subsequent
benefits have not been understood by the broad vehicle tracking market. The
Company must therefore devote considerable resources to communicating these GPS
benefits and to educating the market. This market education requirement could
result in a delay in market development and growth.
In addition, because the Company is involved in these market segments at
the component, subsystem, and system level, other companies, such as Motorola
and Qualcomm, have at various times been both customers and competitors. The
Company believes that its GPS and data communications management technologies
6
are superior to those of its competitors in these market segments. The Company
intends to leverage its GPS technology to continue to supply these market
segments at the component, subsystem and system levels. However, there is
significant competition, and since the markets and products are in the early
phases of their maturity, with competition that has far greater resources and is
well established in these markets, there is no assurance that the Company will
be successful in its effort.
In the Mobile Positioning and Communications market, the Company faces
competition from Rockwell International Corp., AutoTrac, Thrane & Thrane,
Motorola, Inc., Coded Communication, QUALCOMM Incorporated, Orbital Sciences
Corporation, and others.
Marine. Trimble has pioneered GPS in many marine markets and is an active
leader in the marine navigation, marine survey and marine construction markets.
Trimble's GPS receivers are used on recreational, commercial, research, and
military vessels to provide real-time latitude, longitude, time, course and
speed information. This data may be displayed on digital readouts or graphic
displays and may be integrated with other on-board electronic mapping databases
to indicate vessel position and performance in an easily understood manner. The
Company's navigation products conform to a number of international standards,
making them capable of providing navigation information to other on-board
equipment such as radars and autopilots. The Company faces competition in the
GPS commercial and recreational marine navigation market from manufacturers such
as Northstar (subsidiary of Canadian Marconi Corp.) and Leica AG.
Marine survey, which is concerned with precise, dynamic positioning,
includes such activities as oil exploration, hydrographic surveys, environmental
surveys, marine construction, cable and pipe laying, dredging, barge
positioning, ship trialing and many others. The Company provides complete
software solutions that utilize its GPS sensors, often in conjunction with other
equipment, for many of these applications. Trimble's marine survey activities
also include the design and marketing of MSK Radiobeacon Differential GPS (DGPS)
reference stations, and equipment to monitor the integrity of DGPS broadcasts.
In marine survey and marine construction applications, the Company faces
competition from CSI, Sercel, Leica, Ashtech, Inc. (now part of Magellan via
Orbital Sciences Corp), and Coastal Engineering.
Precise Positioning. Trimble's GPS receivers and data communications
products are used on machine-type vehicles to provide real-time positioning and
other key information for the vehicle operator. This information may be
displayed on digital readouts or graphic displays and may be integrated with
other on-board electronic information systems to guide and indicate machine
position and performance in an easily understood manner. As the availability of
highly accurate, cost-effective and robust real-time GPS solutions has
increased, numerous potential machine guidance and control applications have
been identified. Among the emerging applications on large, mobile field machines
are precision farming equipment, mining equipment, construction machinery and
aerial spraying.
Guidance and control of large, mobile field machines has traditionally been
done by the machine operator without the aid of advanced navigation and
positioning technology. Lasers have been used on a limited, though increasing,
basis for some applications. These traditional techniques have frequently proven
less than optimal because they are limited to positioning in elevation, or have
complex methods for horizontal guidance. Lasers, for example, provide good
vertical height information but are not inherently well-suited to three
dimensional position information and rely on line-of-sight to function
effectively. As field machinery is very expensive to own and operate, maximizing
efficiency is paramount and even small productivity gains can have significant
economic returns. GPS has the potential to provide more accurate and robust
positioning information. When this information is used in conjunction with other
critical information about the materials being worked on, such as location of
target ores, overall operational efficiency can increase.
Products, including sensors and systems, are marketed to OEMs, systems
integrators and directly to end-users. Because some mobile machine markets are
dominated by a relatively small number of OEMs, success can be influenced by the
ability to maintain favorable relationships with selected OEMs. Currently,
Trimble has established a relationship with many of these OEMs, including
Caterpillar Inc. and Case Corporation. However, this type of dependency on key
OEMs results in a measure of risk in this type of business.
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Since the applicability of GPS for these types of applications is still
new, its use and subsequent benefits are not yet widely understood or adapted.
The Company must, therefore, devote significant efforts to educating the market
and evangelizing the advantages of GPS in these applications. This can result in
a delay in market development.
The Company faces competition from traditional GPS manufacturers such as
Ashtech, Inc. (now part of Magellan via Orbital Sciences Corp), Leica AG, and
NovAtel Inc., as well as from established, laser-based integrated system
providers.
Software and Component Technologies (including OEM)
The Software and Component Technologies (SCT) business unit consists of
four vertical markets: Embedded GPS, Automotive, Timing, and Consumer. In
addition, this business unit is responsible for developing software licenses and
other rights for the use of GPS to third parties.
The Company's SCT group has built a leadership position in the worldwide
market for embedded GPS products. Already in its seventh-generation design, SCT
products provide full-function, high-performance embedded GPS engines for
systems integrators. The extensive range of GPS products is used in such diverse
applications as car navigation, vehicle and high-value cargo tracking, precision
agriculture, mobile computing, and synchronization of communications networks.
Trimble's SCT Group has a reputation for providing high-performance
products, high-level technical support, and custom product engineering. Trimble
continues to maintain leadership in the embedded GPS board market for tracking
applications, thus securing a strong position through partnerships with key
customers. In the tracking market, new applications such as safety, loss
prevention, and emergency assistance systems continue to emerge as a result of
the increased availability of smaller-sized and lower power boards. Trimble's
SCT group provides key technology for these applications.
* According to the U.S. GPS Industry Council, the car navigation market is
expected to grow to $3 billion by 2000. Trimble with approximately 30 percent of
the world-wide market is at the center of this fast growing sector of the GPS
industry. Trimble supplies GPS boards, chipsets, and licenses technology to some
of the leading automotive electronics suppliers, including Xanavi Informatics
Corporation; Philips Car Systems; Pioneer Electronics; Magneti Marelli; VDO Car
Communication (a division of the Mannesmann Group); and Blaupunkt (a wholly
owned subsidiary of Robert Bosch GMBH). Trimble is also part of the reference
design for Intel's initiative to develop in-car Pentium processor-based
computing, and Microsoft's Auto PC platform.
The growth and expansion of data and wireless communication networks has
increased the need for GPS timing products. Trimble's timing products are
popular with system integrators who require reliable, precise synchronization of
wireless network infrastructure. By accessing the cesium clocks on board the GPS
satellites, a GPS receiver can provide atomic clock accuracy at a fraction of
the cost of rubidium. Trimble's SCT group provides technically advanced timing
products to major infrastructure providers in this market, such as Nortel. Such
timing products range from smart antennas, a GPS receiver combined with an
antenna in one enclosure, to a time and frequency output device, Thunderbolt GPS
disciplined clock.
Competitors in the embedded GPS board market are Motorola, Inc., Japan
Radio Corporation, Rockwell International Corporation, and others.
Aerospace
The Aerospace business unit consists of the Commercial Avionics Systems,
General Aviation Avionics Systems and Military and Advanced Systems businesses.
During 1994, the Federal Aviation Administration (FAA) adopted a policy
establishing GPS as the future standard for aviation navigation and initiated
the Wide Area Augmented System (WAAS) program to allow the use of GPS for
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primary navigation and precision approaches by 1998. This followed the December
1992 FAA publication of certification procedures that allow the use of GPS as a
supplemental source of navigation information for aircraft operating under
Instrument Flight Rules (IFR). In 1995, the FAA published procedures for
approving GPS as a primary means of navigation for oceanic flights.
Commercial Avionics Systems. The Company was the first to certify its
equipment under the regulations, as discussed above. The Company also has
certified equipment that is used in conjunction with other FAA certified
navigation systems incorporating Omega and LORAN-C capabilities. Currently, the
Company believes it has received FAA Certification for the Technical Standard
Order C-129, covering more products than any competitor.
The Company believes that GPS has significant advantages in terms of
accuracy and coverage over current primary and supplemental systems. During
1994, the U.S. Government issued statements to the International Civil Aviation
Organization (ICAO) guaranteeing the GPS signal for a minimum of 10 years. In
addition, GPS technology faces competition from more mature and established
technologies that are currently in widespread use and have in place the
infrastructure required for administering these systems.
* Currently, the primary FAA required navigation system is the VOR/DME
system, a ground-based transmitter network. The Company believes GPS has the
potential to replace VOR/DME as the primary FAA and ICAO-required navigation
system. The range for VOR/DME is limited to 50 to 150 miles, line of sight from
a transmitter, leaving large areas of the world uncovered, including significant
portions of the airspace within the U.S. Though VOR/DME accuracy is adequate for
two-dimensional navigation, GPS provides greater accuracy while also providing
precise timing information.
* Aviation navigation also currently utilizes supplemental technologies to
VOR/DME, including LORAN C, Omega, Inertial Navigation Systems (INS) and GPS.
The Company believes GPS will eventually replace all these technologies as the
primary and sole means of aircraft navigation. The Omega system was
decommissioned during 1997 and LORAN C is scheduled for decommission by the end
of this decade. INS units are useable anywhere in the world, but they cost as
much as $150,000 per unit and multiple units are often required. GPS provides
greater accuracy than INS and provides worldwide coverage as well. In addition,
GPS has the additional advantages of having lower maintenance costs than
existing navigation systems, and GPS can be used in remote regions of the globe
without additional infrastructure investment.
The Company has recognized the potential of GPS for aviation and, in
addition to airborne navigation and flight management units, is also pursuing
GPS technology in flight trajectory truth systems, tracking systems, sensors and
other aviation applications. During 1995, the Company began an alliance with
Honeywell Incorporated, a major supplier of aviation equipment, to produce
GPS-based equipment for the air transport, commercial and business aviation
markets.
* The Company's strategy for Commercial Avionics Systems is to build on its
advanced position in GPS navigation as the foundation for developing full lines
of avionics products. Trimble acquired the assets of Terra Corporation in 1996,
and continues to market those products under the brand Terra by Trimble. In
addition, technology acquired in the Terra acquisition is helping the Company to
build new avionics product lines, including TrimLine, which was announced during
1997. This new line of aircraft audio panels, communication radios, navigation
radios, transponders, and displays will be targeted to OEM and retrofit
customers of general aviation aircraft. The Company also expects to develop a
leadership position in future advances in aircraft communications and
surveillance. These two areas, in combination with the navigation revolution
enabled by GPS, is changing the fundamental architecture of airspace management
worldwide. The Company expects product innovation and market growth to continue
well into the next century as modern Communication/Navigation/Surveillance (CNS)
is implemented.
Competition in the Commercial Avionics Systems market comes from
manufacturers of GPS products, as well as traditional navigation and flight
management system manufacturers. Competing manufacturers of GPS products include
Rockwell Collins, AlliedSignal Aerospace (through its Electronics & Avionics
Systems Division), Universal Navigation Corporation, Canadian Marconi Company (a
subsidiary of the General Electric Company plc), Garmin Corporation, Northstar
Avionics (a subsidiary of Canadian Marconi), IIMorrow, Inc. (a division of
United Parcel Service of America, Inc.), and Magellan Corporation (a subsidiary
of Orbital Sciences Corporation). Traditional navigation and flight management
system manufacturers include Honeywell Incorporated, AlliedSignal Aerospace
(through its Air Transport Avionics Division) and Smiths Industries. Competition
in the flight trajectory truth system is from Ashtech, Inc. (now part of
Magellan via Orbital Sciences Corp), and in the tracking system from ARNAV.
9
Military and Advanced Systems. The Company has been developing GPS
receivers for aerospace and military applications since 1986. The Company's
approach to the market has been as a commercial manufacturer of GPS electronics,
modified and enhanced for military use. The Aerospace business unit designs and
manufactures GPS equipment capable of utilizing the civilian C/A code, as well
as the P(Y) code reserved for users authorized by the United States Department
of Defense. These Precise Positioning Service (PPS) receivers provide authorized
users with GPS equipment that removes the effects of Selective Availability
(allowing higher accuracy), and includes anti-spoofing protection and additional
immunity from jamming signals. The Company sells equipment to the United States
Department of Defense, aerospace prime contractors, and foreign military
organizations.
Applications of GPS in aerospace and military markets include ground
vehicles, handheld units, military aircraft, missiles, unmanned air vehicles,
and navy vessels. Military GPS equipment efficiently provides accurate position,
velocity, and timing information to and from battlefield management systems that
coordinate and control the deployment of equipment and personnel.
The Company's Military and Advanced Systems strategy is to build on its
advanced position in GPS technology as the foundation for developing
partnerships with major military manufacturers and to offer complete airborne
and ground- based, time and positioning solutions for military and aerospace
applications. In these markets, Trimble competes, partners, and subcontracts
with a number of companies, some of which have substantially greater financial
and marketing resources, and substantial experience and resources devoted to
military sales. Interstate Electronics (subsidiary of Figgie International),
Magnavox (subsidiary of Hughes), Raytheon, Litton Industries, and Rockwell
International Corp., as well as a number of European companies, manufacture
products that are competitive with the Company's military products.
Military sales are subject to various uncertainties, including the timing
and availability of funding for U.S. and foreign military contracts, and the
competitive nature of government contracting in general. There is no assurance
that the Company will be awarded future U.S. military contracts. In addition,
the U.S. government retains the right to impose restrictions on the sale of GPS
products to foreign military organizations at any time.
Products
The following is a list of the Company's principal products, organized by
its strategic markets:
Commercial Systems Products
Land Survey Products
- --------------------
4000 Series. Historically one of the Company's most successful product
lines, the 4000 series GPS receivers and their associated GPS antennas are
instruments that, in the survey mode, provide position information that is
accurate down to 5mm. The Company offers survey grade 4000 series receivers that
use the L1 frequency (i.e., single frequency receivers) and both the L1 and L2
frequencies (i.e., dual frequency receivers) broadcast by the Navstar
satellites. Dual frequency receivers offer users greater productivity and, in
some cases, better accuracy, especially over longer distances. Single frequency
receivers are less costly and include the 4600 and 4000Si receivers. Dual
frequency receivers include the 4000SSi, 4400, and 4800. Products differ from
one another in their form factor and in certain specific functions that they
provide the surveyor. The units can be used in either a real-time mode
(positions are generated virtually instantaneously for the surveyor as he or she
surveys a point), or in a post-processing mode (in post-processing, raw
satellite data are collected and stored for subsequent processing on a computer
utilizing specialized software).
GPS Total Station. In 1994 Trimble introduced the GPS Total Station
surveying system. This complete surveying system consists of two or more survey
grade GPS receivers (for example 4000SSi's), GPS antennas, a handheld Survey
Controller for managing the real-time GPS survey and collecting coordinates as a
land survey is conducted, plus radio modems for transmitting data between the
GPS receivers. One receiver is used as a base station and the other as a "rover"
that a surveyor carries around in order to survey individual points. The system
10
incorporates advanced features that make real-time GPS surveying practical as an
everyday surveying technique. The GPS Total Station 4800, introduced in 1997, is
a highly compact system that integrates all of its rover elements onto a single
lightweight pole, thereby eliminating the need for a backpack and any cables
strung between the surveyor and the survey pole. The GPS Total Station 4400 and
4000 each utilize a separate GPS antenna that can offer logistical advantages in
certain situations. The system's advanced handheld controller, the TSC1, is
designed and manufactured by the Company.
GPSurvey, Trimble Survey Office, Survey Controller and TRIMMAP software.
GPSurvey, Trimble Survey Office and TRIMMAP are PC-based office software suites
that provide surveyors with the tools they need to complete their GPS surveying
projects. GPSurvey post-processes data collected in the field and provides the
user with finished data sets and reports. GPSurvey also includes project
planning and network adjustment capabilities. Trimble Survey Office manages data
collected by real-time GPS and conventional optical survey methods, and reduces
the data into finished data sets. TRIMMAP software includes many specific
surveying modules that use the finished data for such applications as drawing
contour maps or creating profiles. Survey Controller software resides on the
TSC1 handheld and is used to control and manage survey tasks in the field. All
of these products are generally sold as part of survey product systems.
Trimble Exchange. Trimble Exchange for Microsoft Windows based software is
an aid for civil engineers, project engineers, and surveyors to achieve high
levels of accuracy and productivity when staking out with Trimble's GPS systems.
The Trimble Exchange software converts design data from highway design systems
into a suitable format for loading into a Trimble handheld Survey Controller,
which is then combined with a Trimble GPS Total Station system for higher
productivity. The Trimble Exchange software offers significant improvements in
efficiency by dramatically reducing the time spent transferring data from the
client's construction design package to a usable GPS format.
TRIMTALK and TRIMMARK Radios. These radio modems are used for real-time GPS
applications. They provide broadcast and receive functions for VHF, UHF and 900
MHz spread spectrum data transmission, and they operate at baud rates sufficient
to carry the data needed for real-time GPS survey applications. These products
are sold as part of survey product systems.
Mapping and GIS Products
- ------------------------
Mapping and GIS Systems. The Company's products are typically used for
mapping and GPS/GIS data collection in such markets as utilities, natural
resources, urban and municipal government, environmental and scientific
monitoring, and public safety.
Pathfinder Pro Family. The GPS Pathfinder Pro XR/XRS system's integrated
real-time positioning capabilities allow the user to collect, relocate and
update geographic information with an accuracy of better than one meter. When
combined with Trimble's handheld Asset Surveyor or pen computer-based ASPEN
software, the Pro XR/XRS offers a complete system for real-time mapping and
GPS/GIS data collection.
Pathfinder Card. The GPS Pathfinder Card is a GPS receiver, in an
industry-standard PC Card format, that is capable of collecting data with an
accuracy of 1 to 3 meters. The GeoExplorer II is a self-contained handheld
system offering submeter mapping and GPS/GIS data collection at a reduced cost.
The GPS positions and descriptive information collected by each of these
systems are downloaded to a personal computer using Trimble's Pathfinder Office
software, where the information can be processed, edited, and plotted or output
into standard GIS, CAD and database formats.
Mobile Positioning and Communications Products
The Company offers a line of products designed to meet many of the needs of
customers desiring to track mobile assets using wireless communications. These
products include GPS receivers, and GPS receivers integrated with other
technologies such as dead reckoning, industry specific applications processors,
mobile radio modems, cellular telephones, satellite communications, mobile data
terminals, communications control software, and automatic vehicle location (AVL)
display software.
11
GPS Receivers. The Company's tracking product line includes the Placer GPS
400 (a stand-alone receiver) and the Placer 450 family (receivers configurable
for fleet tracking applications). The Placer 455 is a GPS receiver integrated
with a gyroscope and an odometer interface.
Integrated GPS and Cellular Phone Products. The Company offers a line of
GPS/cellular products known as GPS Cellular Messenger, targeted at small fleets
and transportation of high-value cargo.
Communications Control Software. The Company offers a software program
designed to manage communications between its Intelligent Communications
Controller mobile units and a customer's command center.
AVL Display Software. AVL Manager displays the locations of vehicles in
tabular form. FleetVision displays vehicle locations for small fleets
graphically on scanned maps.
Public Sector Services. In some public safety opportunities, the Company
provides certain services including training, equipment installations,
integration of third party radios and computers and program management.
Galaxy Inmarsat-C/GPS. Galaxy is the first system to combine Inmarsat-C
with GPS to provide rapid digital global communication with precise global
positioning. Inmarsat-C provides worldwide, two-way store-and-forward text
communication via Packet Switched Data Network (PSDN) or Public Switched
Telephone Network, and fax delivery of inbound messages. Galaxy is designed for
use by truck, rail and other land applications, as well as merchant ships,
commercial fishing boats, yachts and other vessels requiring cost-effective
two-way communication links plus precise position information for emergency,
safety, navigation and tracking needs.
Marine Products
- ---------------
NT Series. This is a series of three marine GPS navigation products that
provide position and graphical steering information on a high-resolution LCD
display. The models in the NT Series provide a range of price and performance to
satisfy the needs of a wide range of customers. The high-end version of this
product includes a built-in differential receiver. The NT 200D receives
international standard differential corrections that are broadcast on the marine
beacon band, and which greatly improve the accuracy of the position and velocity
solution. The NT Series GPS is sold to recreational boaters, coast guards,
navies, workboat operators, shipping lines and operators of commercial fishing
fleets.
NT300D. This product is a high resolution display which can be added to the
single frequency GPS and dual channel DGPS receivers, which provides navigation
and positioning features. The NT300D is ideal for many marine survey
applications.
7400RSi/DSi. The marine versions of the 7400 series products bring
centimeter level accuracy to the marine environment for the first time. The 7400
series products utilize Trimble's Real-Time Kinematic/On The Fly (RTK/OTF)
technology to achieve high accuracy even in the dynamic and fluid marine
environment by removing the need for static calibration stations. The dynamic
performance of the 7400 RSi/DSi GPS sensors makes it suited for applications
such as the control and docking of high-speed ferries and the positioning of
large marine structures, such as bridge spans for marine construction.
4000RSi/DSi. The 4000 series products provide sub-meter accuracy and are
suited to marine survey applications that do not require the performance of the
7400 series products described above. The 4000 series GPS sensors address a
broad segment of the marine survey market and provide customers with a choice of
price and performance in GPS sensors. The 4000 series products also integrate
well with total solutions, such as Hydro and Target: Structures products,
discussed below. The 4000 series products also form the basis of Trimble's DGPS
MSK Reference Station and Integrity Monitoring offerings, which comply with
internationally accepted Radio Technical Committee Marine (RTCM) standards for
broadcast on radio beacon frequencies. Trimble equipment is in use in more than
20 countries, broadcasting DGPS corrections and monitoring their integrity.
12
DSM. These products are GPS sensors and reference stations targeted mainly
to value-added resellers. They provide a source of accurate GPS data in the form
of a "black box". The DSM allows for comprehensive custom solutions developed by
third parties.
Hydro. This software program provides total solutions for many marine
survey applications. It provides the capability to integrate the best of Trimble
designed and built GPS sensors with additional equipment, such as depth
sounders, to provide customers with highly customizable solutions to a wide
range of marine survey and construction challenges. The newest program in this
line is HydroPro, which is a Windows 95 and Windows NT software suite.
Target: Structures. This Windows and Windows NT based program provides for
precise positioning of large mobile offshore structures or platforms. Utilizing
real-time GPS receivers such as the 7400RSi and 7400DSi, this innovative
software enables barge and crane operators to efficiently and safely guide large
structures to any target location for marine contruction.
Precise Positioning Products
- -----------------------------
7400MSi. The rugged 7400MSi is designed specifically for dynamic machine
guidance and control applications. Centimeter-level position updates are
computed five times per second, ensuring the response and accuracy necessary for
precise dynamic applications on moving equipment.
Eurocard DSM. The Eurocard DSM is based on Trimble's advanced low-power,
low-noise, high-accuracy Maxwell chip technology. Advanced carrier-aided
filtering techniques applied to exceptionally low-noise C/A code measurements
are used to generate real-time, sub-meter differential (DGPS) positions at a
maximum rate of 10 Hz, even under challenging conditions.
BenchGuide. The Trimble BenchGuide system provides mining machine operators
with precision GPS-based guidance in locating correct bench or terrain
elevations without using survey stakes. It can be used with Trimble radio
modems, and it provides accurate, low-latency GPS positions in a local
coordinate system. BenchGuide provides numerous benefits over traditional bench
elevation systems. It is maintenance free and operates in bad weather or under
dusty conditions that limit the range of other systems.
TRIMCOMM 900. The rugged TRIMCOMM 900 is a high-speed data radio link for
real-time differential and real-time kinematic (RTK) GPS solutions, and is ideal
for machine guidance applications. It provides a versatile means of establishing
a wireless broadcast network, supporting up to four repeaters for extended
coverage. A dual port TRIMCOMM 900 makes it possible to maintain two-way
communications throughout the coverage area, allowing real-time machine position
and office design information updates.
TrimFlight. TrimFlight is a sub-meter guidance, logging, and mapping system
for aircraft that provides assurance of proper application of farm chemicals
when used in crop spraying. TrimFlight eliminates the need for human flaggers
and it generates reports and maps providing flight information and the exact
location of application. TrimFlight's computer interface allows for integration
to other applications, such as photogrammetry and remote sensing. TrimFlight
data is compatible with most major GIS software.
AgGPS 122. The AgGPS 122 is a combined MSK beacon and differential GPS
receiver for sub-meter agricultural positioning applications. The system
integrates with other devices such as harvest yield monitors.
AgGPS 132. The AgGPS 132 is a combined MSK beacon and differential GPS
receiver plus an L-band satellite differential receiver, all in one system. The
system integrates with other devices, such as harvest yield monitors, and can
provide sub-meter positions which can be output to yield monitors, variable rate
planters, application controllers and field computers. A Parallel Swathing
Option further enhances productivity, especially in low-visibility conditions
and reduces operator fatigue.
13
Software And Component Technologies Products
Embedded and Automotive Products
- --------------------------------
ACE GPS Module. The newest miniature board product is the ACE GPS Module.
This powerful 8-channel architecture, with the popular Core Module form factor,
is designed for applications requiring high performance at low cost. ACE GPS
delivers fast GPS signal acquisition and low power consumption, making it ideal
for mobile and battery-powered applications.
Lassen-SK8. The Lassen-SK8 board, based on the Sierra GPS technology, is
used in the automotive and embedded markets. Two-thirds the size of a business
card, this miniature 8-channel GPS board provides high performance, fast
acquisition and reacquisition time, low power consumption and two-meter
accuracy.
Sierra GPS Chipset. The Sierra GPS Chipset features state-of-the-art
performance, small size, low power consumption and low cost. The chipset
consists of two ASICs, fully developed software and unmatched technical support.
The two ASICs are composed of Trimble's GPS DSP ASIC and RF/IF down-converter
chip.
SveeSix. SVeeSix is a family of GPS boards and assemblies designed for
high-performance embedded GPS applications for tracking. The family includes
SVeeSix and Sveesix-CM3.
SCT Antennas. Trimble offers a variety of miniature GPS antennas for mobile
or vehicle applications. These antennas include the Miniature GPS Antenna, a
compact, active micropatch antenna with a 5-meter cable and magnetic mount; the
Hard-mount Antenna, a compact, hard mount, active micropatch antenna with
single-hole 0.75" threaded mount and TNC connector; and the Rooftop Antenna,
consisting of the Bullet II HE antenna with 23-meter cable and SMB adapter.
These antennas are widely used for vehicle tracking, car navigation systems, and
harsh timing environments.
SCT Starter Kits. Trimble offers Starter Kits for developers who want to
evaluate and integrate GPS receivers and antennas. The kits contain all
components required to evaluate the receiver's features and to begin integration
into the user's application. Generally, a starter kit will include a GPS
receiver, a GPS antenna, documentation and required cables and software.
Timing Products
- ---------------
SCT Timing Products. The newest generation of GPS synchronization devices
is the Company's Thunderbolt GPS disciplined clock. This clock combines an
8-channel GPS receiver, control circuitry and a high quality ovenized oscillator
on a single board. This level of integration provides superior performance to
precise timing applications, such as CDMA wireless infrastructure, Enhanced 911
(E911) positioning and wireless local loop.
Smart Antennas. Trimble's family of smart antennas includes Palisade and
AcutimeII. Smart antennas combine a GPS receiver and an antenna in one package.
They provide OEMs and system integrators with a "plug-in" GPS module, allowing
them to quickly and easily add GPS capability to their product lines. AcutimeII
offers integrators a stand alone GPS time source with one micro-second-level
accuracy at a fraction of the cost of other time sources with similar
performance. Palisade, based on Trimble's Sierra GPS technology, is an 8-channel
receiver designed to provide accurate synchronization and frequency control for
wireless voice and data networks.
Consumer Products
- -----------------
ScoutMaster GPS. The ScoutMaster is a handheld GPS receiver designed
exclusively for land users to provide an affordable GPS solution in a broad
range of professional and recreational applications. The ScoutMaster has many
features some of which are patented. Features include Over and Up which enables
users to pinpoint their location on any topographical map and to calculate
specific map locations without having to interpolate latitude/longitude
coordinates. Target Track is a function which displays distance, direction,
speed and estimated time of arrival (ETA). ScoutMaster can store up to 250
14
locations and display navigation information in familiar terms. In addition the
ScoutMaster is a real-time differential-capable receiver which records location
data within 2-5 meters. The ScoutMaster can also tell the user where the sun and
moon will be at any time of day, anywhere on Earth, and when they will rise and
set. The ScoutMaster Library Utility (SMLTU) provides the ability to upload
location data from a computer to ScoutMaster or download data collected in the
field from the ScoutMaster to a computer.
Aerospace Products
Commercial Aviation Products
- ----------------------------
Trimble 2000 A and 2000 Approach Plus. This product family is an aviation
navigation system available for VFR or IFR navigation. The 2000 Approach Plus
was introduced in 1997. It is certified to FAA TSO C129-A1 for IFR operations,
including non-precision approaches. In addition, it was the first product in its
class to support the new European Basic Area Navigation Requirements. These
products are targeted toward general aviation customers worldwide.
Trimble 2101 Plus and 2101 I/O Plus. These new products were introduced in
1997. Both feature certification to FAA TSO C129-A1 allowing IFR operations,
including non-precision approaches. In addition, both products support new
European Basic Area Navigation Requirements. The 2101 I/O Plus provides
extensive interfacing to other aircraft systems to drive flight instruments and
other aircraft systems in integrated digital and analog cockpits. The 2101 I/O
Plus is also approved for primary navigation in remote/oceanic areas.
Trimble 8100. This product family is an IFR certified C129-A1 aviation
navigation system and provides GPS position, velocity and course data, plus
flight management information for the business, commercial and air transport
markets. It incorporates an electronically replaceable navigation database. The
system is capable of extensive interface with other compatible aircraft systems
to drive flight and other instruments. The Trimble 8100 is approved for Primary
Oceanic Navigation and non-precision IFR Approaches.
Honeywell/Trimble HT9100/HT9000. These products are developed and marketed
in partnership with Honeywell Incorporated and are true GPS FMS systems, which
enable air transport customers to upgrade existing analog air transport and
commercial aircraft to modern GPS navigation. Used by many of the world's
leading airlines, these products are in continuous service around the world on a
daily basis.
Other aviation products. Trimble also provides training tools for advanced
GPS navigation systems. Trimble introduced Computer Based Training for its
HT9100, 2000 Approach and 2000 Approach Plus, and 2101 Plus and 2101 I/O Plus.
These products allow initial pilot training and recurrent training in a
classroom setting, and have received excellent acceptance among customers, the
aviation press, and the editorial community.
General Aviation Products
- -------------------------
Terra by Trimble. This product line provides sport and general aviation
customers with advanced and feature-rich audio panels, communication radios,
navigation radios, transponders, radar altimeters, and navigation displays. This
long standing product line is a market leader in the sport aviation field, and
is now in production in the Company's Austin factory.
TrimLine Avionics System. This comprehensive IFR avionics suite provides
the general aviation community with the most innovative technology in the
industry while maintaining its ease of use. TrimLine includes the communications
transceiver, IFR approved GPS navigator, audio system, nav receiver with
glideslope, Mode C transponder and altitude digitizer. Overall, the full cockpit
solution offers significant benefits in space, weight and power consumption that
are unmatched in the industry.
TrimConnect 3100D. A high quality, cost-effective communications solution
for corporate aviation, this Flight Telephone System provides airborne wireless
voice and data communications and full compatibility with a wide spectrum of
15
U.S. ground mobile networks. TrimConnect 3100D is a versatile tool for business
aircraft users who want to equip their aircraft with state-of-the art
telecommunications without sacrificing cost-effectiveness.
Military and Advanced Systems Products
- --------------------------------------
Cargo Utility GPS Receiver (CUGR). Introduced in 1997, this product is a
Dzus-mount P(Y) GPS navigational system for world-wide military aviation
operations. It provides U.S. military helicopter pilots Precise Positioning
Service GPS navigation and capabilities similar to Trimble's FAA certified 2101
I/O Approach, and meets the performance standards for Instrument Flight Rules
for en route, terminal and non-precision approach phases of flight.
TRIMPACK. The TRIMPACK, a four-pound, portable, ruggedized, handheld GPS
product, is approximately the size of a pair of binoculars (120 cubic inches).
Position information is displayed on a four-line, 20-character-per-line,
back-lit LCD screen. Troops deployed in Operation Desert Storm used TRIMPACK
units to determine their location in the featureless desert.
CENTURIAN. The CENTURIAN is a precision positioning version of the
Trimpack, developed for vehicle applications. The sale and distribution of this
set is restricted to the U.S. Armed Forces and selected allies.
MUGR. MUGR (Military Underwater GPS Receiver) is a handheld product
developed under contract to the U.S. Navy. It is marketed primarily for Navy and
Marine special forces activities. The receiver is reduced in size and sealed so
that it can be carried by shallow water divers.
TANS Series. The Trimble Advanced Navigation System (TANS) series of
products includes a ruggedized sensor consisting of the basic GPS receiver, an
antenna, and a digital interface to transmit GPS information to various other
devices; a further ruggedized version with enhanced tolerance for vibration; and
a version that is upgradable to PPS. The TANS series has been sold primarily to
the military for vehicles piloted from a remote station. The system was designed
to replace Omega systems currently used in such vehicles and its primary purpose
is to add GPS capabilities to other existing systems.
TASMAN. A PPS version of the TANS III, TASMAN is used where high
anti-jamming and spoof requirements exist. It is sold primarily to U.S. Armed
Forces and selected allies.
"FORCE" GPS Module Series. The "FORCE" family of military GPS modules has
been developed for integration into higher tier navigation system equipment. A
series of custom designs has been developed and delivered into numerous military
programs for the U.S. Army, Navy and Air Force, as well as foreign military
organizations.
Sales and Marketing
The Company recognizes that selling, marketing, and product distribution
are critical to its future success. The Company currently has nine regional
sales offices in the United States and six in Europe, and offices in Australia,
Brazil, Canada, Japan, Mexico, New Zealand, Russia and Singapore. The Company
has developed its sales and marketing capabilities to anticipate and respond to
customer needs as they arise in its multiple markets. Each market requires
specific attention to the needs of its sales and distribution channels, which
are rapidly changing. The Company must continue to manage its future growth
effectively, otherwise, customer support and operating results may be adversely
affected.
Domestic. The Company sells its products in the United States primarily
through dealers, distributors and authorized representatives, supplemented and
supported by the Company's direct sales force. The Company has also pursued
alliances and OEM relationships with established foreign and domestic companies
to assist it in penetrating certain markets.
International. Trimble markets to end-users through a network of more than
150 dealers and distributors in more than 85 countries. Distributors carry one
or more product lines and are generally limited to selling either in one country
or in a portion of a country. Trimble occasionally grants exclusive rights to
market certain products within specified countries.
16
Sales to unaffiliated customers in foreign locations represents
approximately 45%, 47%, and 53% of Trimble's total revenue in fiscal years 1997,
1996, and 1995, respectively. Sales to unaffiliated customers from shipments to
Europe represented 22%, 21%, and 23% of net revenue in such periods, and sales
to unaffiliated customers from shipments to the Far East represented 15%, 19%,
and 23% of total revenue in such periods, respectively. See Note 2 to the
Consolidated Financial Statements.
Support. The Company's general terms and conditions for sale of its
products include a one-year warranty. Aviation navigation products, however, are
generally sold with a three-year warranty period, while select military programs
may require extended warranty periods. The Company supports its products on a
board replacement level from locations in the United Kingdom, Singapore, Japan,
and Sunnyvale, California. The Company's dealers and distributors also provide
factory-trained third-party maintenance, including warranty and nonwarranty
repairs. The Company reimburses dealers and distributors for all authorized
warranty repairs they perform. The Company does not derive a significant portion
of its revenues from support activities.
Competition
* In the markets currently being addressed by the Company, competition is
intense. Within each of its markets, the Company has encountered direct
competition from both foreign and domestic GPS suppliers, and expects that
competition will continue to intensify. Specific competitors in each of the
markets the Company currently addresses are mentioned in the section "Markets."
Due to competitive pressure, prices of certain of the Company's products have
declined substantially since their introduction, and increased competition is
likely to result in further price reduction and loss of market share, which
could adversely affect the Company's net revenue.
A number of these markets are also served primarily by non-GPS
technologies, many of which are currently more accepted and less expensive than
GPS-based systems. The success of GPS-based systems against these competing
technologies depends in part on whether GPS systems can offer significant
improvements in productivity, accuracy, and reliability in a cost-effective
manner.
The principal competitive factors in the markets that the Company addresses
include ease of use, physical characteristics (including size, weight, and power
consumption), product features (including differential GPS), product
performance, product reliability, price, size of installed base, vendor
reputation and financial resources. The Company believes that its products
currently compete favorably with other products on most of the foregoing
factors, though the Company may be at a competitive disadvantage against other
companies having greater financial, marketing, service and support resources.
* The Company believes that its ability to compete successfully in the
future against existing and additional competitors will depend largely on its
ability to execute its strategy to provide systems and products having
significantly differentiated features which are more responsive to customer
needs. There can be no assurances that the Company will be able to implement
this strategy successfully, or that the Company's competitors, many of whom have
substantially greater resources than the Company, will not apply those resources
to compete successfully against the Company on the basis of systems and product
features.
Research and Development
The Company's leadership position in commercial GPS technology is the
result, in large part, of its strong commitment to research and development. The
Company invests heavily in developing GPS technology, including the design of
proprietary software and integrated circuits for GPS receivers. Moreover,
Trimble develops substantial systems expertise and user interfaces for a variety
of applications. Below is a table showing how much Trimble has spent on research
and development over the last three years.
17
Years Ended December 31,
------------------------------------------------
1997 * 1996 1995
- ----------------------------------------------------------------------------
(In thousands)
Research and development $ 40,662 $ 36,705 $ 31,895
* Actual year end for 1997 is January 2, 1998. See Note 1 of the Consolidated
Financial Statements.
Often a new product is initially developed for an individual customer who
is willing to purchase development stage products. The Company has used feedback
from such initial customers as a primary source of information in designing and
refining its products, and in defining, with greater precision, customer needs
in emerging market areas. During 1996, the Company created Trimble Labs, where
it devotes a portion of its corporate research and development expenditures to
advance core GPS technology and its integration into synergistic technologies
such as communications, sensors, and computing technologies. These technological
advances are often financially supported through strategic alliances and
partnerships.
* The Company expects that a significant portion of future revenues will be
derived from sales of newly introduced products. Consequently, the Company's
future success depends on its ability to continue to develop and manufacture new
competitive products with timely market introduction. Advances in product
technology will require continued substantial investment in research and
development in order to maintain and enhance the Company's market position and
achieve high gross profit margins. Development and manufacturing schedules for
technology products are difficult to predict, and there can be no assurance that
the Company will achieve timely initial customer sales of new products. The
timely availability of these products in volume, and their acceptance by
customers, are important to the future success of the Company. In addition,
certain of the Company's products are subject to governmental and similar
certifications before they can be sold. For example, FAA certification is
required for all aviation products. An inability or delay in obtaining such
certifications could have an adverse effect on the Company's operating results.
Manufacturing
The Company seeks to be a low-cost producer and to serve the growth in
demand for GPS-based products and systems through flexible automation of
assembly lines, semiconductor integration, and the design of products around a
common core of receivers.
The Company's manufacturing operations consist primarily of assembly and
testing of products, material and procurement management, quality assurance and
manufacturing engineering. The Company first installed surface mount technology
(SMT) assembly equipment in a dedicated facility in 1991. This facility was
upgraded in 1995, increasing its capacity by thirty percent. The Company's
experience with SMT has allowed it not only to reduce the reliance on
independent third parties for printed circuit board assembly, but also to
significantly reduce the turnaround time to produce prototype printed circuit
board assemblies.
The Company maintains quality control procedures for its products,
including testing during design, prototype, and pilot stages of production,
inspection of incoming raw materials and subassemblies, and testing of finished
products using automated test equipment in strife chambers.
The Company has historically manufactured its products in relatively small
quantities. However, the Company must successfully manage the transition to
higher volume manufacturing, including the establishment of adequate facilities,
the control of overhead expenses and inventories, and the management and
training of its employee base. Although the Company has substantially increased
the number of its senior manufacturing personnel and significantly expanded its
manufacturing capacity, there can be no assurance that the Company will not
experience manufacturing or other delays which could adversely affect the
Company's operating results.
18
The Company takes a modular and upgradable approach to its products,
building around a common core of GPS receivers with customized software and
hardware systems to analyze and present position data. The Company's core
receiver technology has evolved since the development of its first GPS receiver
product in 1984, as the Company has worked to reduce the size, weight, power
consumption, and cost of the basic GPS receiver. In this process, the Company
has designed its own semi-custom, single-chip GPS processor, but, when possible,
the Company attempts to utilize standard parts and components, including RAM and
ROM devices that are available from multiple vendors.
The Company believes that there are a number of acceptable vendors for most
of the parts and components used in its products. However, a significant number
of components are available only from sole sources. Furthermore, despite the
availability of multiple sources, the Company may in many cases select a single
source in order to maintain quality control and to develop a strategic
relationship with the supplier. Components for which the Company currently does
not have multiple sources include application-specific integrated circuits
manufactured to the Company's proprietary design by Lucent Technologies and
Motorola Inc.; displays manufactured by Optrex Corporation, Kyocera Corporation
and Hosiden Corporation; and filters supplied by Murata Electronics of North
America, Inc., Tokyo America, Inc., and Transtech, Inc. and microprocessors
supplied by Motorola. The Company is taking steps to protect its supply of
component parts, either by qualifying alternative sources or by creating a
strategic stocking plan. However, if the Company is unable to obtain a
sufficient supply of components from its current vendors, it is likely the
Company could experience a delay or interruption in product shipments, adversely
affecting the Company's operating results and damaging customer relationships.
Furthermore, a significant increase in the price of one or more of these
components could adversely affect the Company's operating results. In the past,
the Company has experienced delays in production caused by insufficient supply
of certain components, but to date, such delays have not caused significant
adverse effects on the Company's operating results.
The Company has experienced problems with the quality of certain high
volume electronic components that have required modification of products both in
manufacturing and in the field. Although the Company has instituted vendor audit
programs, there can be no assurance that the Company will not in the future face
problems with the quality of components, problems that could cause delays in
supplies, interrupt shipments and require modification of products already sold
by the Company, any of which could adversely affect the Company's operating
results.
Backlog
The Company believes that backlog is not a meaningful indicator of future
business prospects due to the volume of products delivered from shelf
inventories and the shortening of product delivery schedules. Therefore, the
Company believes that backlog information is not material to an understanding of
its business.
Patents, Trademarks, and Licenses
The Company currently holds 146 U.S. patents and 16 related foreign patents
that expire at various dates no earlier than 2005, and also has numerous U.S.
and foreign patent applications pending. The Company currently licenses certain
peripheral aspects of its technology from Spectrum Information Technologies.
Although the Company believes that its patents and trademarks may have
value, there can be no assurance that those patents and trademarks, or any
additional patents and trademarks that may be obtained in the future, will
provide meaningful protection from competition. The Company believes its success
will depend primarily on the experience, creative skills, technical expertise,
and marketing and sales ability of its personnel.
The Company does not believe that any of its products infringe patent or
other proprietary rights of third parties, but it cannot be certain that they do
not do so. (See Note 14 to Consolidated Financial Statements.) If infringement
is alleged, legal defense costs could be material, and there can be no assurance
that the necessary licenses could be obtained on terms or conditions that would
not have a material adverse effect on the Company.
In 1992, the Company entered into a Memorandum of Understanding with
Pioneer Electronic Corporation, pursuant to which the Company licensed certain
19
of the technology contained in its TANS product for inclusion in in-vehicle
navigation products sold in Japan to entities that integrate such products into
other products sold within or outside Japan under Japanese trademarks. In the
third quarter of 1995, a $1,333,000 licensing fee was received from Pioneer
Electronics Corporation in connection with expansion of the original 1992
license for in-vehicle navigation technology. In the second quarter of 1997, a
$2,222,000 licensing fee was received from Pioneer Electronics Corporation in
connection with expansion of the original 1992 license for in-vehicle navigation
technology.
The Company has also granted a license to DMT Marinetechnik GmbH, formerly
AEG Aktiengesellschaft, to design, manufacture, sell, and repair products
incorporating an improved version of the Company's TANS technology. The license
is exclusive as to such activities in Germany, and is nonexclusive in Austria
and Switzerland. The license terminates automatically (except as to the
licensee's right to replace, repair, and service existing products) after the
production of 10,000 units of such products, and may also be terminated by
either party upon six months prior notice.
In 1993, the Company entered into a contract with Space Systems/Loral,
pursuant to which the Company licensed certain technology based on its TANS
product. The license is irrevocable, exclusive and limited to certain space
flight market applications.
The Company expects that it will continue to enter into licensing
arrangements relating to its technologies.
Trimble with the sextant logo, "TrimbleNavigation," "GeoExplorer,"
"Flightmate," "GPS Total Station," "Scout GPS," and "Aspen" are trademarks of
Trimble Navigation Limited, registered in the United States and other countries.
Additional trademarks are pending. Trimble Navigation Limited acknowledges the
trademarks of other organizations for their respective products or services
mentioned in this document.
Employees
As of December 31, 1997, the Company employed 1,292 persons: 345 in
research and product development, 385 in sales and marketing, 407 in
manufacturing, and 155 in administration and finance. Of these, 72 were located
in Europe, 155 in New Zealand, 23 in Japan, 9 in Singapore, 5 in Australia, and
1,028 in the U.S. The Company also currently employs temporary and contract
personnel. Use of such personnel has increased over the last three years, and is
not included in the above headcount numbers. Competition in recruiting personnel
is intense. The Company believes that its continued ability to attract and
retain highly skilled management, marketing, and technical personnel is
essential to its future growth and success. None of the Company's employees is
represented by a labor union, and the Company has experienced no work stoppages.
The Company's future success depends in large part on the continued
availability and participation of Charles R. Trimble, its President and Chief
Executive Officer. Mr. Trimble founded the Company and continues to be the only
executive with full responsibility for all aspects of the Company's operations,
including marketing and manufacturing strategies and resource allocation among
the Company's strategic business units. The loss of Mr. Trimble, for any reason,
could have a material adverse effect on the Company.
The Company's success also depends on the continued contribution and
long-term effectiveness of its other executive officers and key technical,
sales, marketing, support, research and development, manufacturing, and
administrative personnel, many of whom would be difficult to replace.
20
Executive Officers of the Registrant
The names, ages, and positions of the Company's executive officers are as
follows:
Name Age Position
---- --- --------
Charles R. Trimble.................. 56 President, Chief Executive Officer,
and Director
Dennis R. Ing....................... 50 Executive Vice President and Chief
Financial Officer
Charles E. Armiger, Jr. ............ 43 Vice President, Sales
Ralph F. Eschenbach................. 52 Vice President, Chief Technical
Officer
Michael P. Gagliardi................ 40 Vice President, Aerospace
David M. Hall....................... 49 Vice President, Software & Component
Technologies
James L. Sorden..................... 60 Executive Vice President,
Commercial Systems
David E. Vaughn .................... 52 Executive Vice President, Business
Development
Mary Ellen Genovese ................ 38 Vice President, Finance, and
Corporate Controller
All officers serve at the discretion of the Board of Directors. There are
no family relationships between any of the directors or executive officers of
the Company.
Charles R. Trimble has served as President, Chief Executive Officer and a
director of the Company since 1981 and was one of the founders and the senior
executive officer of the predecessor limited partnership organized in November
1978 and has strategically guided Trimble to its dominant role in the GPS
information technology market. Prior to founding the Company, Mr. Trimble was
Manager of Integrated Circuit Research and Development at Hewlett Packard's
Santa Clara division. He holds four patents in signal processing and one in GPS,
and is currently serving as the Chairman of the United States GPS Industry
Council (USGIC). Mr. Trimble received his B.S. degree in Engineering (Physics)
with honors in 1963 and an M.S. degree in Electrical Engineering in 1964 from
the California Institute of Technology.
Dennis R. Ing joined Trimble in May 1996 as Vice President, Corporate
Controller. In September 1996 he was appointed Vice President of Finance, and
Chief Financial Officer and appointed Executive Vice President in November 1997.
Prior to Trimble, Mr. Ing was employed by Amdahl Corporation, a high technology
company based in Sunnyvale, California, most recently serving in Amdahl's
Corporate Alliances and Acquisitions group. Prior to that, Mr. Ing served as
Chief Financial Officer of Open Enterprise Systems, a $200 million division of
Amdahl. He also served as Vice President of Finance and Administration for both
Amdahl Canada Limited and Amdahl Communications Inc. Before joining Amdahl
Corporation in 1979, Mr. Ing worked at Touche Ross & Co., Chicago & NorthWestern
Transportation, and the Chicago Hospital Council. He currently serves on the
Board of Directors of Lexa Software Corporation. Mr. Ing received his MBA from
DePaul University in 1977 and a B.S. in Engineering from the University of
Illinois in 1972.
Charles E. Armiger, Jr. joined Trimble in January 1989 as Sales and
Marketing Manager for aviation products. From January 1991 to December 1993, he
served as Director of U.S. Domestic Sales. Mr. Armiger held the post of Director
of Sales for North American West from January 1993 to November 1994. Then in
December 1994 he moved to Trimble's European office in Hook, England, to serve
as Director of Sales for Europe, the Middle East and Africa. In September 1996
he was appointed to serve as Vice President for Commercial Systems Sales. Prior
to joining Trimble, Mr. Armiger was Director of Sales and Marketing for ARNAV
Systems, Inc. He received a B.S. degree in Business from the University of the
State of New York, Regents College, in 1996.
Ralph F. Eschenbach joined Trimble as Vice President of Research and
Development in 1983. From November 1989 to February 1993 he served as Vice
President of Avionics and Sensor Products, and from February 1993 to July 1994
as Vice President of Navigation Products. In July 1994, Mr. Eschenbach was
appointed to the position of Vice President of Business Development, where he
was responsible for defining and developing business opportunities to create new
solutions for the GPS market in areas not covered by Trimble's current product
lines. In September 1996 he was appointed to the post of Vice President, Chief
21
Technology Officer. Prior to joining the Company, he was an engineering manager
with Hewlett-Packard Company from June 1968, where he was responsible for the
development of a low-cost GPS receiver. In 1997, Mr. Eschenbach was appointed
Chairman of the Federal Aviation Administration's Research, Engineering and
Development (RE&D) Advisory Committee. He is also a member of NASA's Research &
Development Advisory Committee. Mr. Eschenbach currently serves on the Boards of
Directors of ProShot Golf, Inc., Pinpoint Golf Advertising, and Powerstream
Technologies. He received a B.S. degree in Electrical Engineering from the
University of California at Berkeley in 1968 and an M.S. degree in Electrical
Engineering from Stanford University in 1970.
Michael P. Gagliardi joined Trimble in January 1997 as Vice President and
General Manager of the Aerospace Business Unit based in Austin, Texas. He came
to Trimble from BFGoodrich Company where, he served as Group Vice President of
the Water Systems and Services Group; President of Arrowhead Industrial Water,
Inc.; and President of FlightSystems, Inc. Prior to his tenure at BFGoodrich, he
worked for 11 years at The General Electric Company in several management
positions, including technical engineering assignments, then progressing through
critical marketing roles, and on to general management and executive positions.
Mr. Gagliardi received his B.S. degree in Electrical Engineering from the
University of Pittsburgh in 1979, an M.S. degree in Electrical Engineering from
Southern Methodist University in 1981, and an MBA from Duke University in 1989.
David M. Hall joined Trimble in February 1994 as Managing Director, OEM
products. In November 1996 he was appointed Vice President and General Manager
of the Software and Component Technologies business unit. He previously worked
for Raychem Corporation for twenty-one years in a variety of positions and
divisions. He served as Director of Sales and Marketing for the Automotive
Division, National Distribution Manager for the Electronics Sector, and Director
of Marketing and Product Management for the Interconnect Systems Division, as
well as District Sales Manager, Area Sales Manager, and Operations Manager. Mr.
Hall received his B.S. degree in Industrial Technology in 1971 and his MBA in
Marketing and Finance in 1973 from the California Polytechnic State University
in San Luis Obispo, California.
James L. Sorden joined Trimble as Vice President of Product Development in
May 1987. From February 1993 to 1994, he served as Vice President of Surveying
and Mapping. In November 1994, Mr. Sorden was appointed to the position of
Executive Vice President of Surveying, Mapping, Military and Marine
Instrumentation Systems. In September 1996, he was appointed Executive Vice
President of Commercial Systems, which consolidates Surveying & Mapping and
Tracking & Communications. Prior to joining Trimble, Mr. Sorden worked in
various engineering, marketing and management positions at Hewlett-Packard
between 1964 and 1987. He holds U.S. and foreign patents in the fields of
electronic measurement, surveying instrumentation, and vehicle safety. Mr.
Sorden currently serves on the Board of Directors of Datacom Software Research,
New Zealand, and Aquila Mining Systems Ltd, Canada. He received his BSEE from
the University of Wisconsin in 1962 and undertook engineering graduate studies
at Wisconsin and Stanford University.
David E. Vaughn joined Trimble as Vice President of Operations in May 1991.
From 1993 to 1994, he served as Vice President of Tracking Systems and
Communications. In November 1994 he became Executive Vice President of Tracking
Systems and Communications. In September 1996 he was appointed to the post of
Executive Vice President of Business Development, which includes Trimble's newly
formed Trimble Labs. Prior to joining Trimble, Mr. Vaughn was President and
Chief Executive Officer of Magnesys, a manufacturer of integrated circuits, from
1987 to 1991. From 1985 to 1987 he was Vice President of Manufacturing for Asyst
Technologies, a manufacturer of clean room material handling robots. Prior to
1985, he worked in manufacturing management positions with Apple Computer and
Hewlett-Packard. Mr. Vaughn currently serves on the Board of Directors of TEN (
The Enterprise Network), a non-profit organization dedicated to the growth and
expansion of start up corporations in Silicon Valley. Mr. Vaughn received his
B.S. degree in Electronics in 1971 and an MBA in Operations Research in 1973
from California Polytechnic State University.
Mary Ellen Genovese joined Trimble as Controller of Manufacturing
Operations in December 1992. From 1994 to 1997, she served as Business Unit
Controller for Software and Component Technologies, and Tracking and
Communications Business Unit. In December 1997 she was appointed Vice President,
Finance and Corporate Controller. Prior to joining Trimble, Ms. Genovese was CFO
for Minton Company, a distributing company to the commercial building market,
from 1991 to 1992. Prior to 1991, she worked for 10 years with General Signal
Corporation in several management positions including European Financial
Controller for the Semiconductor Equipment Group International, Director of
Finance for Semiconductor Systems, and Materials Manager for Ultratech Stepper.
Ms. Genovese is a Certified Public Accountant and received her B.S. degree in
accounting in 1981 from Fairfield University in Connecticut.
22
Item 2. Properties
The Company currently leases and occupies 14 buildings in Sunnyvale,
California, totaling approximately 387,000 square feet. The leases on these
buildings expire at various dates through 2003. In addition, the Company leases
and occupies three buildings in Austin, Texas, approximately 50,600 square feet,
to manufacture GPS-based aviation products; the leases expire at various dates
through 2001. The Company also leases a 47,000 square-foot facility in
Christchurch, New Zealand, for software development. The Company's two largest
international sales offices are those in the United Kingdom (16,800 square feet)
and Japan (5,900 square feet). In addition the Company leases sales offices in
Australia, Brazil, France, Germany, Mexico, Spain, Singapore, and Russia, and in
various cities throughout the United States. The Company's international office
leases expire at various dates through 2005. Certain of the leases have renewal
options. The Company believes that its facilities are adequate to support its
current and anticipated near-term future operations.
Item 3. Legal Proceedings
The information with respect to legal proceedings required by this item is
included in Part II, Item 8, Note 14 to the Consolidated Financial Statements,
hereof under the caption "Pending Matters."
Item 4. Submission of Matters to a Vote of Security Holders
Not applicable.
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters
The Company's Common Stock is traded on the Nasdaq National Market under
the symbol TRMB. The following table sets forth, for the quarter indicated, the
range of high and low closing sales prices for the Company's Common Stock on the
Nasdaq National Market:
High Low
---- ---
1996:
First 24 15 3/4
Second 26 1/4 18 3/8
Third 21 3/8 14 3/4
Fourth 16 5/8 10 7/8
1997:
First 14 3/4 11 1/4
Second 19 10 7/8
Third 21 5/8 16 1/2
Fourth 24 5/16 18 1/8
The Company had 1,686 shareholders of record as of March 13, 1998.
The Company's stock price is subject to significant volatility. If revenues
or earnings fail to meet the expectations of the investment community, there
could be an immediate and significant impact on the trading price for the
23
Company's stock. Due to stock market forces that are beyond the Company's
control, and due also to the nature of the Company's business, such shortfalls
can be sudden.
The Company has never paid cash dividends on its Common Stock. The Company
presently intends to retain earnings to finance the development of the Company's
business and does not presently intend to declare any cash dividends in the
foreseeable future. Under the Company's current $50,000,000 revolving line of
credit agreement, the Company is restricted from paying dividends without the
lender's consent. Under the Company's Subordinated Promissory Notes Agreement,
pursuant to which the Company issued $30,000,000 of its subordinated promissory
notes in June 1994, the Company is also restricted from paying dividends. See
Notes 4 and 7 to the Consolidated Financial Statements contained in Item 8.
24
Item 6. Selected Financial Data
HISTORICAL FINANCIAL REVIEW
Summary Consolidated Statements of Operations Data
Years ended December 31, 1997 * 1996 1995 1994 1993
- -------------------------------------------------------------------------------------------------------------
(In thousands, except per share data)
Revenue $ 272,305 $ 233,660 $ 235,360 $ 175,694 $ 149,491
------------------------------------------------------------------
Operating expenses:
Cost of sales 132,104 112,596 102,666 69,294 67,814
Research and development 40,662 36,705 31,895 24,763 23,070
Sales and marketing 60,327 64,391 62,672 51,621 37,409
General and administrative 28,785 30,142 24,824 14,735 13,414
Restructuring charges - 2,134 - - -
------------------------------------------------------------------
Total operating expenses 261,878 245,968 222,057 160,413 141,707
------------------------------------------------------------------
Operating income (loss) 10,427 (12,308) 13,303 15,281 7,784
Nonoperating income (expense), net 1,172 706 773 (3,057) (3,580)
------------------------------------------------------------------
Income (loss) before income taxes 11,599 (11,602) 14,076 12,224 4,204
Income tax provision (benefit) 2,320 (300) 2,815 2,200 755
------------------------------------------------------------------
Net income (loss) $ 9,279 $ (11,302) $ 11,261 $ 10,024 $ 3,449
==================================================================
==================================================================
Basic net income (loss) per share $ 0.42 $ (0.51) $ 0.56 $ 0.55 $ 0.20
==================================================================
Shares used in calculating basic
earnings per share 22,293 22,005 19,949 18,340 17,665
==================================================================
Cash dividends per share $ - $ - $ - $ - $ -
==================================================================
==================================================================
Diluted net income (loss) per share $ 0.40 $ (0.51) $ 0.53 $ 0.53 $ 0.19
==================================================================
Shares used in calculating diluted
earnings per share 22,947 22,005 21,318 19,053 18,408
==================================================================
Cash dividends per share $ - $ - $ - $ - $ -
==================================================================
Selected Balance Sheet Data
As of December 31, 1997 * 1996 1995 1994 1993
- -------------------------------------------------------------------------------------------------------------
(In thousands)
Working capital $ 136,708 $ 124,545 $ 135,896 $ 70,207 $ 29,251
Total assets 207,663 189,841 196,763 109,363 67,647
Bank borrowings - - - - 1,311
Noncurrent portion of long-term debt 29,600 29,507 29,739 31,736 4,539
Shareholders' equity $ 139,483 $ 124,045 $ 129,937 $ 53,574 $ 38,890
* Actual year end for 1997 is January 2, 1998.
25
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
During fiscal year 1997, the Company changed its fiscal year from a
calendar year ending on December 31 to an annual period which varies from 52 to
53 weeks and which always ends on the Friday nearest to December 31, effective
for the Company's 1997 fiscal year end, such that the actual date of the
Company's fiscal year-end for 1997 is January 2, 1998. For ease of financial
statement presentation, comparison and consistency, the Company has continued to
present each prior fiscal year as ending on December 31 and has not otherwise
restated or adjusted its prior financial statements on this new fiscal year
basis. (See Note 1 of the Consolidated Financial Statements).
In 1997, the Company's annual revenues increased by 17% to $272.3 million.
In 1997, the Company had net income of $9.3 million, or $0.40 diluted earnings
per share, compared to a net loss of $11.3 million, or ($0.51) diluted loss per
share, in 1996.
In September 1996, the Company implemented a workforce reduction of
approximately 10% and consolidated certain manufacturing facilities and
services. These actions reduced sales and general and administrative expenses by
approximately 10% in the fourth quarter of 1996, compared to the third quarter
of 1996.
RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, certain
financial data as a percentage of total revenue:
Years ended December 31 1997 * 1996 1995
- --------------------------------------------------------------------------------
Revenue 100% 100% 100%
----------- ------------ ------------
Operating expenses:
Cost of sales 49 48 44
Research and development 15 16 13
Sales and marketing 22 27 27
General and administrative 10 13 10
Restructuring charges 0 1 0
----------- ------------ ------------
Total operating expenses 96 105 94
----------- ------------ ------------
Operating income (loss) 4 (5) 6
Nonoperating income (expense), net 0 0 0
----------- ------------ ------------
Income (loss) before income taxes 4 (5) 6
Income tax provision 1 0 1
------------ ------------ ------------
Net income (loss) 3% (5%) 5%
=========== ============ ============
* Actual year end for 1997 is January 2, 1998.
26
Revenue. In 1997, total revenue increased to $272.3 million from $233.7
million in 1996, which represents a percentage increase of 17%. Total revenue
decreased in 1996 to $233.7 million from $235.4 million in 1995, which
represents a percentage decrease of less than 1%. The following table breaks out
the Company's revenues by business unit:
Years Ended December 31,
-----------------------------------------------------------------------------------------------
% Total % Total % Total
1997 * Revenue 1996 Revenue 1995 Revenue
- ------------------------------------------------------------------------------------------------------------------------------------
(In thousands)
Commercial Systems $ 168,606 62% $ 158,273 68% $ 162,393 69%
Software & Component Technologies 43,417 16% 38,054 16% 35,416 15%
Aerospace 60,282 22% 37,333 16% 37,551 16%
---------------- ------------ --------------- ------------ --------------- ------------
Total revenue $ 272,305 100% $ 233,660 100% $ 235,360 100%
---------------- ------------ --------------- ------------ --------------- ------------
* Actual year end for 1997 is January 2, 1998.
Commercial Systems
The Commercial Systems business unit revenues had a growth rate of 7% in
1997 over 1996, and a decrease of 3% in 1996 from 1995. The 1997 increase
compared to 1996 is primarily in the GIS Systems, Precise Positioning, and
Mobile Positioning and Communications vertical markets. The decrease in 1996
compared to 1995 was primarily in the Land Survey and Mobile Positioning and
Communications vertical markets.
The increase in the GIS Systems market came from strong sales of the
Pathfinder product line, where unit sales increased 50% in 1997 compared to
1996. Precise Positioning products continued to grow from the prior year and
were up 51% on an annual basis.
Mobile Positioning and Communications revenues also increased in 1997
compared to 1996, due to the resumption of shipments in March 1997 to American
Mobile Satellite Corporation (AMSC), a company based in Reston, Virginia, that
provides a variety of voice and data services via satellite. In March 1995, the
Company signed a large contract for the supply of Galaxy/GPS land mobile
satellite terminals to AMSC. AMSC contracted for delivery of product beginning
in mid-1995 and continuing through 1996. Late in the fourth quarter of 1995,
AMSC requested that the Company cease delivery, in part due to delays in AMSC's
completion of software. Shipments under the original contract were halted in the
fourth quarter of 1995 and the contract was amended. On February 20, 1997, an
agreement was signed between Trimble and AMSC to resume shipments of its
Galaxy/GPS terminals at the rate of 500 units per month, beginning in March
1997. On August 28, 1997, an amendment to the February 1997 agreement was
signed, to reduce the number of units shipped from 500 units to 250 units per
month. Mobile Positioning and Communications revenues in 1997 included
$6,400,000 in sales to AMSC on 3,750 units shipped. Revenues from shipments to
Systems under this contract during 1995 were $4,176,000 in the second quarter
and $3,125,000 in the third quarter. Contract renegotiation fees of $1,080,000
were recognized in the first quarter of 1996. The amended contract between the
Company and AMSC calls for production line shutdown fees for the time that
Trimble is not manufacturing product for shipment to AMSC. Due to the
uncertainty about AMSC's ability to pay, revenues for products shipped and
contractual shutdown fees were not recognized until collection was considered
probable. In the second quarter of 1996, the Company recognized $1,700,000 in
revenue from products shipped in December 1995 and March 1996, and $1,000,000 of
shutdown fees, all of which have been paid. During the second half of 1996, the
Company recognized $400,000 of shutdown fees after the payments were received.
The decrease in the Land Survey vertical market sales in 1997 compared to
1996 and 1996 compared to 1995 is primarily due to a continued slowdown in sales
in Japan. Shipments of the higher-end Real-Time Kinematic (RTK) survey product
27
in Japan have slowed due to the Japanese Government's decision to evaluate RTK
survey methods before certifying its use for official surveys. The Company is
now selling at the low cost end of the market as opposed to the high cost end of
the market. Also, new product introductions for Land Survey occurred late in
third quarter, therefore, customers held off on placing orders until the new
product introductions. Shipments of these products in the U.S., Europe, and
Latin America were higher than last year.
* In September 1996, the Company entered into a contract with Caterpillar
Inc. to develop and market products for the construction and mining markets. The