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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 1, 1999
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from _____________ to ___________
Commission File Number: 0-18645
TRIMBLE NAVIGATION LIMITED
(Exact name of Registrant as specified in its charter)
California 94-2802192
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
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 $180,915,000 as of March 15,
1999, based upon the closing sale price of the common stock on the Nasdaq Stock
Market for that date.
There were 22,266,475 shares of the registrant's Common Stock issued
and outstanding as March 15, 1999.
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 1999 Annual Meeting of
Shareholders to be held on June 2, 1999. 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.
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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 designing and developing innovative products enabled
by GPS technology. The Company provides end-user and Original Equipment
Manufacture solutions for diverse applications including surveying, mapping,
marine survey, mining, construction and agriculture, mobile positioning,
commercial avionics, military systems, automotive, timing, and geographic
information systems. 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.
* The Company has developed or is developing systems for seismology,
machine control, delivery fleets, buses, ships, airplanes, automobiles and
cellular infrastructures. 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 27 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, and does so in addition to providing time and velocity measurement
capabilities.
GPS positioning is based on a triangulation technique that precisely
measures distances from three or more Navstar satellites. The satellites
continuously transmit precisely timed radio signals using extremely accurate
atomic clocks. A GPS receiver calculates distances from the satellites in view
by determining the travel time of 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
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within 100 meters, 24 hours a day. When a GPS receiver is coupled with a
reference receiver with known precise position, accuracies of less than 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 27 satellites permits three-dimensional worldwide coverage 24 hours a day.
However, reception of GPS signals requires line-of-sight visibility between the
Navstar satellites and the receiver, which can be blocked by buildings, hills
and dense foliage. For the receiver to collect a sufficient signal, each
satellite must be above the horizon, and the receiver must have a line of sight
to at least three satellites in order to determine its location in two
dimensions-latitude and longitude-and at least four satellites to determine its
location in three dimensions-latitude, longitude, and altitude. The accuracy of
GPS may also be limited by distortion of GPS signals from ionospheric and other
atmospheric conditions, and intentional or inadvertent signal interference or
Selective Availability (SA). Selective Availability, which is the largest
component of GPS distortion, is controlled by the Department of Defense and is a
currently activated, intentional system-wide degradation of stand-alone GPS
accuracy from approximately twenty-five to one hundred meters. Selective
Availability may be implemented by the U.S. Department of Defense in order to
deny hostile forces the highly accurate position, time and velocity information
supplied by GPS. In certain military applications, classified devices are
utilized to decode the SA degradation and return accuracies to their original
levels.
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 with SA
activated. This technique compensates for a number of potential measurement
distortions, including distortions caused by ionospheric and other atmospheric
conditions, as well as distortions intentionally introduced into the satellite
data itself, such as SA. Differential GPS involves placing one receiver at a
known location and continuously comparing its calculated location with its known
location to measure distortions in the signal transmission and errors in the
satellite data. At any one time, such distortions and errors are reasonably
constant over large areas, so that one or more remote GPS receivers can use
these measurements to correct their own position calculations. Measurement
corrections can be transmitted either in real time over a suitable communication
link such as radio or telephone, or integrated later with accumulated data, as
is frequently the practice in survey applications.
Each of Trimble's GPS products is based on proprietary GPS 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, 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 for consumer, civilian and commercial use has a
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solid foundation in law. Because of ever-increasing commercial applications of
GPS, other U.S. Government agencies may become involved in the administration or
the regulation of the use of GPS signals. Any of the foregoing factors could
affect the willingness of buyers of the Company's products to select GPS-based
systems instead of products based on competing technologies. Any resulting
change in market demand for GPS products could have a material adverse effect on
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 a number of specific markets for
its GPS products, based on end-user applications. (See Industry Segments below
for further discussion of the Company's segments). 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 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
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
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 to enable superior performance. 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 its two segments.
Technology Leverage. 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. 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 Original Equipment
Manufacture 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 including VDO Car Systems, Pioneer
Electronics Corporation, Delco Electronics, Nortel, British Telecom, American
Mobile Satellite Corporation, E-systems, PRC Public Sector, Honeywell, and Intel
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in the Mobile Timing and Technology segment; Caterpillar, Inc., Topcon, and Case
Corporation in the Precision Positioning segment.
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, public safety, and real-time applications for
mining, surveying, and mapping. Accordingly, the Company is currently devoting
research and development efforts to products that integrate the Company's
proprietary GPS receivers with wireless communication technologies.
INDUSTRY SEGMENTS
The Company operates in a single industry segment as a leader in
designing and developing innovative products enabled by GPS technology. The
Company provides end-user and Original Equipment Manufacture solutions for
diverse applications including surveying, mapping, marine survey, mining,
construction and agriculture, mobile positioning, commercial avionics, military
systems, automotive, timing, and geographic information systems. During 1998,
the Company announced that it was discontinuing its participation in General
Aviation. The Company sells its products through a direct-sales force located in
fifteen countries, as well as through a worldwide network of dealers,
distributors and authorized representatives. Research and development activities
are conducted at the Company's facilities in Sunnyvale, California, and
Christchurch, New Zealand. Manufacturing is performed in Sunnyvale, California
and Austin, Texas.
The Company manages its industry segment within two Business Units: the
Precision Positioning Group (PPG) and the Mobile and Timing Technologies (MTT)
Group.
The industry segment is managed in two Business Units to achieve
different distribution, marketing, production, and technology strategies. The
Precision Positioning Group derives its revenues from GPS-based land surveying,
mining, construction and agriculture, geographic information systems mapping,
and marine survey markets. The Mobile and Timing Technologies market derives its
revenues from GPS-based automotive, timing, mobile positioning technologies,
commercial aviation, and military systems markets, and from development of
software licenses and other rights for the use of GPS to third parties.
Although the Company believes that these Business Units have growth
potential for sales of GPS products, there can be no assurance that such
Business Units will continue to develop, particularly given that GPS-based
systems are still in an early stage of adoption in some of these markets. The
Company's future growth will depend on the timely development of the industry
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 group vice president who has responsibility for strategy,
marketing, product development and financial performance.
Precision Positioning Group
The Precision Positioning Group focuses its efforts in markets where
the distribution chain uses independent distributors or a direct sales force to
sell directly to the end users. The products are system solutions in a high-end,
value-added market.
A key business strategy of PPG is interoperability, which involves the
focus on, and development of systems that integrate sensors utilizing a wide
variety of technologies and communications with GPS. This interoperability
developed by the Company is an extremely important advantage over any of the
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competition. The emphasis is on providing solutions for applications rather than
just GPS technology, and results in a higher real value to the customer. The
concept of interoperability applies to electronic and mechanical accommodations
of other technologies, together with GPS, to solve a problem. Probably the most
important area of interoperability, and often the least recognizable until the
integrated solution is put into use, is in the area of data interchange. In the
Land Surveying product line for example, the Trimble Survey Controller data
collector software and Trimble Survey Office PC software products enable the
seamless collection, processing and use of data from Trimble's Real-time
Kinematic (RTK) GPS surveying products and conventional (optomechanical)
instrument surveys using products of other manufactures.
The Precision Positioning Group consists of four product lines
addressing the following markets: Land Surveying; Marine Surveying; Mapping and
GIS Systems; and Mining, Construction and Agriculture.
Land Surveying. Surveying involves establishing precise points and
boundaries for legal, construction and mining purposes. It consists primarily of
collecting and processing position information. Surveying accuracy is expected
to be within a centimeter. The Company believes that its GPS surveying products
substantially reduce the cost, time, and number of people required to survey and
process precise position information for a given level of accuracy. Many of the
applications which the Company addresses in the surveying market include,
control surveying, construction and engineering surveying, topographic
surveying, property line surveying and geodetic research. The Company addresses
the land surveying market with GPS systems and a recently introduced
conventional (optomechanical) surveying instrument with reflectorless technology
and application software. GPS does not require line-of-sight between land-based
reference points and is unaffected by most adverse weather conditions (as
compared to traditional methods such as optical or laser measurements),
providing advantages in many survey applications. Reflectorless technology
provides the ability to survey in areas where GPS signals are obstructed-for
example, tunnels, parking garages, and dense forests, as well as building
facades or dam faces that are difficult or dangerous to reach. A key competitive
advantage of the land surveying product line is the seamless interchange between
GPS and conventional surveying tools and laser range-finders, with full support
from the office and field software. Additionally, the land surveying products
support two-way data exchange with third-party CAD, design and Geographic
Information Systems (GIS) packages.
For a number of years the Company's GPS surveying products have been
one of the first choices for control surveying applications. Control surveying
is the precise determination of the location of local geodetic reference points
from which further local surveying is based. The Company's GPS surveying systems
have reduced the cost of establishing control points, compared to conventional
techniques, and have led to programs to remeasure previous geodetic control
points to sharply increase precision and eliminate errors. Additionally, GPS has
become a standard tool for geodetic research. Research geodesists have found
that long baseline precisions using GPS are significantly greater than those
obtainable with optical and electronic distance-measuring equipment. This high
degree of precision 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. Today GPS is the preferred technology for both control and
geodetic surveying.
The Company's GPS surveying products are also used in large-scale
construction projects in which the position of a large number of points needs to
be cost-effectively established. The Company's products are particularly
efficient for applications in areas where ground-level obstructions to
visibility prevent line-of-sight conventional surveying techniques. The Company
also supplies route surveying applications, which provide 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.
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Real-time Kinematic GPS surveying has made GPS surveying
instrumentation a successful alternative to conventional surveying instruments
for a wide variety of applications. Today, a significant portion of the land
survey business is for applications where conventional instruments could have
been used. This is possible through the use of Real-time Kinematic GPS
surveying. The Company was the first to introduce RTK GPS in 1993. RTK GPS
involves the computation of precise positions in real time, instead of
postprocessing the observed data. Vectors are computed between a precisely known
fixed base station and one or more roving GPS surveying systems. This is done by
transmitting information from the base station to the rovers, using a radio
link. These rovers use the information to calculate a precise position. The data
collector software converts the position from the World Geodetic System 1984
(WGS-84, the worldwide coordinate system used by GPS) to the local coordinate
system used for the area of the survey work. This enables the productive use of
RTK GPS surveying systems by a single surveyor on foot, for construction layout,
topographic mapping, and demarcation and division of large tracts of land.
In 1998 the Company introduced the TTS 500 optical total station with
reflectorless technology as an extension and complementary tool to GPS. A
significant competitive advantage of the TTS 500 is the reflectorless
technology, which allows for the use of non cooperative target technology.
Traditional conventional surveying instruments require a prism target for making
distance measurements in order to precisely survey a site. Reflectorless
technology allows the user to point the telescope of the TTS 500 at virtually
any target within a 250-meter range to make millimeter level distance
measurements.
In the surveying market, the Company faces on going competition from
other GPS vendors, such as Ashtech, Inc. (now part of Magellan via Orbital
Sciences Corp) and NovAtel Inc. The Company also faces competition from vendors
of traditional optical surveying products, such as Carl Zeiss; Leica AG; Sokkia
Company, Ltd.; Spectra Precision; and Topcon Corporation. All have entered the
GPS surveying market and are introducing GPS products of their own.
Marine Surveying. Marine surveying is focused on precise, dynamic
positioning, and precise navigation in marine environments. The applications
cover offshore oil exploration, hydrographic surveys, environmental surveys,
marine construction, cable and pipe laying, dredging, barge positioning and many
others. The Company provides complete solutions that utilize its GPS sensors and
extensive software product capabilities, often in conjunction with other
equipment, for many of these applications. Trimble's marine surveying activities
also include the design and marketing of Differential GPS (DGPS) systems, which
include reference stations, integrity monitors and control stations, used to
establish and monitor the integrity of DGPS and RTK broadcasts.
In marine surveying 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.
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 products enabling the
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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 substantially reduce the cost of constructing GIS databases, and
increasing 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.; Topcon Corporation; and
others. Competition in the mapping market has increased as competitors have
introduced new products.
Mining, Construction & Agriculture. 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 to 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 for some applications on a
limited, though increasing, basis. 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. Because 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 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.
Trimble's products, including sensors and systems, are marketed to
Original Equipment Manufacturers (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 some of these OEMs, including Caterpillar Inc. and Case
Corporation.
* Since the applicability of GPS for these types of applications is still
new, its use and subsequent benefits are not yet widely understood or adopted.
The Company must, therefore, devote significant efforts to educating the market
as to the advantages of GPS in these applications. This can result in a delay in
market development.
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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., Topcon, Spectra Precision, as well as from established,
laser-based integrated system providers.
Mobile and Timing Technologies
The Mobile and Timing Technologies Group focuses its efforts in markets
where the majority of its products are sold directly to OEMs or system
integrators. The products are designed to support system solutions in
high-volume applications. In some instances the Business Unit's products are in
the form of software licenses and other rights for the use of GPS by third
parties. This Business Unit focuses on five product lines: automotive, timing,
mobile positioning, air transport systems, and military aerospace systems.
Automotive. The Company's Automotive market has built a leadership
position in the worldwide market for embedded GPS products. Already in its
seventh-generation design, MTT offers products that 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, and mobile
computing.
Trimble's Automotive market 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-size and lower-power
boards. Trimble's MTT business unit provides key technology for these
applications. Competitors are Motorola, Inc.; Japan Radio Corporation; Rockwell
International Corporation; and others.
Trimble supplies GPS boards, chipsets, and licenses technology to some
of the leading automotive electronics suppliers, including 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.
Timing. The growth and expansion of data and wireless communication
networks have increased the need for GPS timing products. Trimble's MTT market
provides technically advanced timing products to major infrastructure providers
who require reliable, precise synchronization of wireless network infrastructure
in this market, such as Nortel and other system integrators. 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 traditional methods involving the
use of rubidium. Such timing products range from smart antennas and a GPS
receiver combined with an antenna in one enclosure, to a time and frequency
output device.
In the Timing market, the Company faces competition from Hewlett
Packard; Datum; Odetics; and others. Trimble remains the cost and performance
leader in this market.
Mobile Positioning. The Company is an established leader in providing
tracking and communications products in the public safety, long-haul trucking,
and fleet management. These products typically include GPS, combined with
conventional radios, cellular, or satellite communications and application
software for use in the vehicles and at a base station. The Company's software
generally addresses the need for map displays, communications control, vehicle
monitoring, and messaging. These products are used in a variety of fleets, such
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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-products that are addressing productivity and security needs in
the commercial fleet markets.
In some instances, Mobile Positioning 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 depend
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.
Air Transport Systems. The Company believes that GPS has significant
advantages in terms of accuracy and coverage over current primary and
supplemental systems for air transportation. 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.
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 commercial air transport market.
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
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.
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.
10
* 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 fifty to one hundred fifty miles,
line of sight from a transmitter. This leaves large areas of the world
uncovered, including significant portions of the airspace within the United
States. Though VOR/DME accuracy is adequate for two-dimensional navigation, GPS
provides even greater accuracy while also providing precise timing information.
Competition in the Air Transport 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), Northstar Avionics (a
subsidiary of Canadian Marconi), and IIMorrow, Inc. (a division of United Parcel
Service of America, Inc.). 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.
Military Aerospace Systems. The Company has been developing GPS
receivers for military applications since 1986. Its approach to the market has
been as a commercial manufacturer of GPS electronics, modified and enhanced for
military use. The Military Aerospace industry market 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 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 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, as well as 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 can be 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.
11
Discontinued Market - General Aviation
On October 2, 1998, the Company adopted a plan to discontinue its
General Aviation division. The decision to discontinue the General Aviation
division was one of the strategies focused on by the Company to return the
business to profitability. Accordingly, the General Aviation division is being
reported as a discontinued operation for all periods presented in these
financial statements. Net assets of the discontinued operation at October 2,
1998, were written off and consisted primarily of inventory, property, plant and
equipment, and intangible assets.
The Company plans to dispose of the discontinued operations through a
closure of the division. The assets of Terra Corporation, which were acquired in
1996 by Trimble, are included in the discontinued operation.
Business Unit Products
The following is a list of the Company's principal products, organized
by its business units:
Precision Positioning Group
Land Surveying 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 provide position information with precisions as good as 5mm.
The Company offers survey grade 4000 series GPS 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 better accuracy,
especially over longer distances. The 4000 GPS receiver is available in two
configurations for high-end control and geodetic research applications. The
products differ from one another in the specific functions that they provide the
user. The systems can be used in either a real-time mode (positions are
generated virtually instantaneously) or in a postprocessing mode (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, GPS antennas, radio modems for transmitting data between
the GPS receivers, a TSC1 data collector running Trimble Survey Controller
software for managing the real-time GPS survey and storing data, plus office
processing software. One receiver is used as a base station and the other as a
"rover" that the user carries around in order to survey individual points. The
system incorporates advanced features that make Real-time Kinematic 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 components 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 4700, introduced in 1998, is a small, lightweight, modular
system with integrated radio and separated GPS and radio antenna, that offers
logistical advantages over the fully integrated GPS Total Station 4800. The GPS
Total Station 4700 and 4800 are fully compatible, and customers often mix the
systems for complete versatility in the field. The system's advanced handheld
data collector, the TSC1, is designed and manufactured by the Company.
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TTS 500 Total Station. In 1998, Trimble introduced the TTS 500 as an
extension to the GPS Total Station. The revolutionary TTS 500 total station
consists of a single optomechanical surveying instrument with reflectorless
technology and software. Unlike traditional surveying instruments, which require
a target, the TTS 500 utilizes reflectorless technology to make millimeter
measurements off non-cooperative targets. This extends the user's ability to
survey in areas where GPS signals are obstructed, or in locations that are
difficult or dangerous to reach. As with the GPS Total Station, the
reflectorless technology means a single user can survey. Reflectorless
technology removes the need for a second person to hold the prism target that is
required by traditional conventional surveying instruments. In the field, users
can seamlessly interchange between the TTS 500 and the GPS Total Station 4700 or
4800, using the TSC1 data collector running Trimble Survey Controller software.
GPSurvey, Trimble Survey Office and Trimble Survey Controller. GPSurvey
and Trimble Survey Office are PC-based office software suites that provide
surveyors with the tools they need for project planning and processing of their
GPS surveying projects. GPSurvey postprocesses data collected in the field and
provides the user with finished data sets and reports. GPSurvey also includes
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. Both Trimble Survey Office and GPSurvey provide the
functionality to export data to third-party CAD, design, and GIS packages. The
Trimble Survey Office software also imports and converts design data from design
packages into a suitable format for transfer to Trimble Survey Controller
software running on the TSC1. This data is used for construction and road
stakeout. Trimble Survey Controller software runs on the TSC1 data collector and
is used to control and manage survey and stakeout tasks in the field. All of
these products are sold as part of the land survey product systems. The TSC1
with Trimble Survey Controller is also available as a controller for
conventional surveying instruments from leading manufacturers.
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.
Marine Surveying Products
NT300D. This product combines the graphics display and navigation
features of a marine GPS receiver with the sub-meter positioning accuracy and
performance of a marine survey grade DGPS receiver. The unit features 12 GPS
channels and 2 MSK channels for reception of DGPS correction data from Marine
Radiobeacons. The NT300D is ideal for many marine surveying applications,
providing-in one product-the ability to both navigate and position.
MS750. This product brings the latest in Real-time Kinematic GPS
technology to the marine environment. With the fast, reliable OTF
initializations and rapid position updates, the product is ideally suited for
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 MS750 series products. 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.
DSM. These products are combined MSK beacon and differential GPS
sensors and reference stations targeted mainly to value-added resellers. They
13
provide sub-meter GPS data in the form of a "black box." The DSM allows for
comprehensive custom solutions developed by third parties.
Hydro. This line of software programs 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 MS750, this innovative software
enables barge and crane operators to efficiently and safely guide large
structures to any target location for marine construction.
Beacon Control System. The 4000 series products form the hardware 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 30 countries, broadcasting DGPS corrections and monitoring
their integrity. The Beacon Control Software is a Windows-based program that is
often provided as part of the complete system. The software allows complete
control of all hardware components, providing updates and status information.
Mapping and GIS Products
Geoexplorer II. The GeoExplorer II is a self-contained handheld system
providing a few meters of accuracy for mapping and GPS/GIS data collection at a
reduced cost.
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 Office. 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.
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.
Pathfinder Tools Software Development Kit. Trimble's Pathfinder Tools
SDK is a powerful software development kit (SDK) designed to integrate Trimble
GPS receivers with custom mapping and GIS applications. It includes an extensive
library of software components, including ActiveX controls and programmable
automation objects that can be integrated using standard development languages
such as Microsoft Visual Basic and Visual C++.
Mining, Construction & Agriculture Products
MS750. The rugged MS750 is designed specifically for dynamic machine
guidance and control applications. Centimeter-level position updates are
computed twenty times per second, ensuring the response and accuracy necessary
for precise dynamic applications on moving equipment.
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Eurocard DSM. The Eurocard DSM is based on Trimble's advanced
low-power, low-noise, high-accuracy 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 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 packages.
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 that 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.
Mobile and Timing Technologies Products
Automotive Products
ACE II GPS Module. The newest miniature board product is the ACE II 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
II 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. Just 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.
15
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.
Mobile Positioning Products
The Company offers a line of products designed to meet many of the
needs of customers who need to monitor and 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.
MTT 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.
MTT 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.
GPS Receivers. The Company's product line includes the Placer 450
family (receivers configurable for fleet tracking applications) and the Placer
455 a GPS receiver integrated with a gyroscope and an odometer interface for
precise position information.
Integrated GPS and Cellular Phone Products. The Company offers a line
of GPS/cellular products known as GPS Cellular Messenger, targeted at high-value
cargo security, driver compliance, and fleet asset management applications.
Public Sector Services. In some public safety sectors, the Company
provides certain services including training, equipment installations,
integration of third-party radios, and computers and program management. Also,
the Company provides AVL subsystems, consisting of in-vehicle hardware and base
station communications and display software.
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.
16
Timing Products
MTT 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
microsecond-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 for wireless
voice and data networks.
Commercial Air Transport Products
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 nonprecision IFR Approaches.
Honeywell/Trimble HT9100/HT9000. These products are developed and
marketed in partnership with Honeywell Incorporated and are true GPS FMS
systems, that 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. The HT9100 is uniquely capable of interfacing to both
analog and digital Flight Instruments and Autopilot Systems. The system also
meets the requirement of TSO C-129 for GPS Navigation, as well as, Oceanic and
Remote Primary Means Operations to FAA notice 8110.60.
Military Aerospace Systems Products
ForceTM GPS Module Series. The Force series of GPS modules has been
developed for embedded integration into high-performance land, sea, aircraft and
missile applications. A variety of standard and custom form factors are
available, including VME and SEM. Both Standard Positioning Service (SPS) and
Precise Positioning Service (PPS) models are available, with the PPS models
correcting for Selective Availability (SA) and using Anti-Spoof (A-S) augmented
with Receiver Autonomous Integrity Monitoring (RAIM) to protect against
satellite or system anomalies and signal spoofing. The newest models in this
family are designed in accordance with the GPS Joint Program Office (GPS JPO)
GPS Receiver Application Module (GRAM) Guidelines for military avionics
platforms.
TA-1. This 12-channel, all-in-view, Precise Positioning Service (PPS)
receiver is currently under review by the Federal Aviation Administration for
certification under FAA TSO C-129a. It has state-of-the-art technology and
shares a common architecture with other Trimble GPS PPS receivers. The TA-12
receiver was designed and developed for military and commercial aviation
applications requiring a robust GPS receiver for integration with existing or
new Flight Management Systems that required IFR certified operations and/or GPS
capabilities.
17
Cargo Utility GPS Receiver (CUGR). Introduced in 1997, this product is
a Dzus-mount (P)Y GPS navigational system for worldwide military aviation
operations. It provides U.S. military helicopter pilots Precise Positioning
Service GPS navigation capabilities, and meets the performance standards for
Instrument Flight Rules for en route, terminal and non-precision approach phases
of flight.
TRIMPACK and Centurion. These are portable, ruggedized, handheld GPS
products that are approximately the size of a pair of binoculars (120 cubic
inches). Position information is displayed on a four-line, 20
character-per-line, backlit LCD screen. Troops deployed in Operation Desert
Storm used TRIMPACK units to determine their location in the featureless desert.
The Centurion is an upgraded PPS receiver that provides full Selective
Availability and Anti-Spoof performance.
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 as a remote mounted GPS navigation sensor and for vehicles piloted
from a remote station.
Sales and Marketing
The Company currently has nine regional sales offices in the United
States and six in Europe, as well as offices in Australia, Canada, China, Japan,
Mexico, New Zealand, Russia and Singapore. The Company has substantial variation
in the needs of its sales and distribution channels, which are rapidly changing.
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 100 dealers and distributors in more than 85 countries. Distributors carry
one or more product lines and are generally limited to selling either in one
country or in a portion of a country. Trimble occasionally grants exclusive
rights to market certain products within specified countries.
Sales to unaffiliated customers in foreign locations represented
approximately 46%, 46%, and 47% of Trimble's total revenue in fiscal years 1998,
1997 and 1996, respectively. Sales to unaffiliated customers in Europe
represented 25%, 22%, and 21% of net revenue in such periods, and sales to
unaffiliated customers in the Far East represented 13%, 15%, and 19% of total
revenue in such periods, respectively.
Support. The Company's general terms and conditions for sale of its
products include a one-year warranty. Air Transport products, however, are
generally sold with a basic three year warranty period with an additional two
year warranty sold with some units, 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
New Zealand, as well as 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.
18
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. Indirect competition is also beginning
to emerge, particularly from semiconductor and consumer electronic manufacturers
that are anticipating the emergence of high-volume consumer-orientated GPS
applications. Specific competitors in each of the markets the Company currently
addresses are mentioned in the section "Industry Segments." 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, as well as continued market education about such products.
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 provide systems and products having significantly differentiated
features and improved cost-benefit ratios over those provided by competitors.
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 as well as cost-benefit ratios of their products.
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 of Trimble's expenditures on research and
development over the last three years.
19
January 1, January 2, December 31,
Years ended 1999 1998 1996
- ------------------------------------------------------------------------------
(In thousands)
Research and development $ 44,826 $ 37,097 $ 32,716
Often a new product is developed initially 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 established an
advanced technology laboratory 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 sometimes supported
financially 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 in part 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 operates surface mount technolgy (SMT)
assembly equipment in its manufacturing facility.
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.
20
The Company has historically manufactured its products in relatively small
quantities. However, the Company must successfully transition to higher volume
manufacturing. The Company is currently negotiating to commence contract
manufacturing with respect to certain of its products.
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. When possible, though,
the Company attempts to utilize standard parts and components, including RAM and
ROM devices that are available from multiple vendors.
Backlog
The Company believes that due to the volume of products delivered from
shelf inventories and the shortening of product delivery schedules, backlog is
not a meaningful indicator of future business prospects. Therefore, the Company
believes that backlog information is not material to an understanding of its
business.
Patents, Trademarks, and Licenses
The Company currently holds 215 U.S. patents and 18 related foreign
patents that expire at various dates no earlier than 2005. It also has over 180
U.S. and foreign patent applications pending. The Company currently licenses
certain peripheral aspects of its technology from Spectrum Information
Technologies and GeoResearch.
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 actively develops
and protects its intellectual property through a program of patenting,
enforcement, and licensing.
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 15 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 the second quarter of 1997, the Company expanded a prior license
agreement with Pioneer Electronic Corporation for certain of the technology
contained in its TANS product for inclusion in in-vehicle navigation products
sold in Japan and received a $2,222,000 licensing fee in consideration for the
expansion of the original license.
The Company expects that it will enter into other 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.
21
Employees
As of January 1, 1999, the Company employed 1,291 persons: 346 in
research and product development, 346 in sales and marketing, 423 in
manufacturing, and 176 in administration and finance. Of these, 73 were located
in Europe, 173 in New Zealand, 16 in Japan, 12 in Singapore, 2 in Australia, and
1,015 in the United States. The Company also currently employs temporary and
contract personnel. Use of temporary and contract personnel has decreased over
the last year, 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 success depends in part 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.
22
Executive Officers of the Registrant
The names, ages, and positions of the Company's executive officers as of March
26, 1999 are as follows:
Name Age Position
- ----------------------------------- --- ----------------------------------
Steven W. Berglund............... 47 President, Chief Executive Officer
Bradford W. Parkinson............ 64 Current Director, served as
President and Cheif Executive
Officer from August 1998 to March
1999
Mary Ellen P. Genovese........... 39 Vice President, Finance, Chief
Financial Officer and Corporate
Controller
Charles E. Armiger, Jr........... 44 Vice President, Worldwide Sales
David M. Hall.................... 50 Group Vice President, Mobile and
Timing Technologies
Patrick J. Hehir................. 37 Senior Vice President, Chief
Manufacturing Officer
John E. Huey..................... 49 Treasurer
Ronald C. Hyatt.................. 58 Group Vice President,
Precision Positioning
Bruce E. Peetz................... 47 Vice President, Advance Technology
and Systems
All officers serve at the discretion of the Board of Directors. There
are no family relationships between any of the directors or executive officers
of the Company.
Steven W. Berglund joined Trimble as President and Chief Executive
Officer in March 1999. Mr. Berglund has a diverse background with experience in
engineering, manufacturing, finance and global operations. Most recently,
Berglund was president of Spectra Precision, Inc. Spectra Precision, with global
sales of approximately $200 million, develops and manufactures surveying
instruments, laser based construction alignment instruments, and construction
machine control systems. Spectra Precision is a subsidiary of Spectra-Physics
AB. During his fourteen years within Spectra-Physics, which was an early Silicon
Valley pioneer in the development of laser systems, Mr. Berglund held a variety
of positions that included 4 years based in Europe. Prior to Spectra Precision,
Mr. Berglund spent a number of years in the early 1980's at Varian Associates in
Palo Alto where he held a number of planning and manufacturing roles. Varian is
a technology company specializing in microwave communications, semiconductor
manufacturing equipment, analytical instruments, and medical diagnostic
equipment. Mr. Berglund began his career as a process engineer at Eastman Kodak
in Rochester, New York. He attended the University of Oslo and University of
Minnesota where he received a B.S. in chemical engineering in 1974. He received
his MBA from the University of Rochester in 1977.
Bradford W. Parkinson has been a member of Trimble's Board of Directors
since 1984 and has served as a consultant to the Company since 1982. Dr.
Parkinson is currently a professor at Stanford University and holds the Edward
C. Wells Endowed Chair in the Department of Aeronautics and Astronautics. He was
on leave of absence from Stanford while serving as Trimble's President and CEO
from August 1998 to March 1999. Prior to joining Trimble, Dr. Parkinson served
23
as an Air Force colonel. He created and ran the NavStar GPS Joint Program Office
from 1972 through 1978, during which time he received the Defense Department
Superior Performance Award as the best program director in the Air Force. As the
program director, he led the definition, development, launch, and test of GPS,
including five types of user equipment. After retiring from the Air Force, he
became a professor of mechanical engineering at Colorado State University in
1978 for one year. Beginning in 1979, Parkinson served as group vice president
for Rockwell International. There he directed business development and a
300-person advanced engineering organization. From 1980 to 1984 he was a group
vice president and general manager for Intermetrics, where he directed five
divisions. He also was president of the industrial subsidiary, Plantstar, which
sold productivity monitoring equipment. Dr. Parkinson is a distinguished
graduate of the U.S. Naval Academy and has an M.S. degree in aeronautics and
astronautics from Massachusetts Institute of Technology (MIT) and a Ph.D. in
aeronautics and astronautics from Stanford University. He is a distinguished
graduate of the U.S. Naval War College; was head of the department of
astronautics and computer science at the U.S. Air Force Academy; and was an
academic instructor for the USAF Test Pilot School.
Mary Ellen P. 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 for the tracking and
communications business unit. She was appointed corporate controller in October
1997 and vice president of finance and corporate controller in February 1998.
Currently, she is the interim chief financial officer. Prior to joining Trimble,
Mrs. Genovese was chief financial officer and president for Minton Co., a
distributing company to the commercial building market, from 1991 to 1992. In
her position as chief financial officer she was responsible for the accounting,
management reporting and bank and investor financing for the company. In March
of 1992, the board of directors asked her to assume the role of president to
reorganize the company, including the divestiture of the manufacturing
operations. Prior to 1991, she worked for 10 years with General Signal
Corporation. She was appointed European financial controller in July 1990, where
she was responsible for the company's three European operations, Germany, France
and the United Kingdom. From 1988 to 1990 she served as unit financial officer,
for General Signal's Semiconductor Systems Division. She held several other
management positions including materials manager, controller of manufacturing
operation and international projects controller for General Signal's Ultratech
Stepper Division from 1984 to 1988. Mrs. Genovese is a Certified Public
Accountant and received her B.S. in accounting from Fairfield University in
Connecticut in 1981.
Charles E. Armiger, Jr. joined Trimble in January 1989 as Sales and
Marketing Manager for aviation products. From January 1991 to December 1993, he
served as Director of U.S. Domestic Sales. Mr. Armiger held the post of Director
of Sales for North American West from January 1993 to November 1994. 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. In
September 1998, Mr. Armiger was appointed Vice President of Worldwide Sales.
Prior to joining Trimble, he was Director of Sales and Marketing for ARNAV
Systems, Inc. He received a B.S. degree in Business from the University of the
State of New York, Regents College, in 1996.
David M. Hall joined Trimble in February 1994 as Managing Director, OEM
products. In November 1996 he was appointed Vice President and General Manager
of the Software and Component Technologies business unit, focusing on
application and operating system software, component board level, and chipset
volume aspects of the GPS business. In November 1998 he was appointed Group Vice
President of the Mobile and Timing Technologies business unit, managing mobile
positioning and communications, timing, automotive, military, and commercial
aviation businesses. Previously, he worked for Raychem Corporation for
twenty-one years in a variety of positions and divisions. He served as Director
of Sales and Marketing for the Automotive Division, National Distribution
Manager for the Electronics Sector, and Director of Marketing and Product
24
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.
Patrick J. Hehir joined Trimble in February 1999 as senior vice
president and chief manufacturing officer. Prior to Trimble, Hehir worked for
Dovatron International where he held several positions during his eight year
tenure including, quality/program manager, director of operations, executive
director of operations and vice president of worldwide business development.
Dovatron, a $1 billion international manufacturing company with offices in
Ireland, Mexico, Asia, Eastern Europe and the U.S., serves clients such as
Hewlett-Packard, Hughes Corporation, I.B.M., and Lucent Technologies. Prior to
Dovatron, he worked for Western Digital in several positions including,
process/quality engineer, quality improvement process coordinator, senior
quality engineer and quality manager. Hehir also held process engineering,
production and quality positions at Pulse Engineering in Ireland. Hehir has a
broad range of educational qualifications from technical colleges and
universities in Ireland and the United Kingdom. He graduated from Galway's
Institute of Technology with an electronic engineering certificate in 1981. He
received a quality assurance post-graduate diploma from the Galway's University
College in 1984. In 1987, Hehir received a production and operations management
certificate from the United Kingdom's Institute of Industrial Engineering, and a
post-graduate diploma in health, safety and social welfare from Cork's
University College in 1993. Hehir also served on Ireland's technical committee
for the development of the environmental system standard, ISO 14000, published
by the International Standards Organization.
John E. Huey joined Trimble in 1993 as Director Corporate Credit and
Collections, promoted to Assistant Treasurer in 1995 and Treasurer in 1996. Past
experience includes two years with ENTEX Information Services, five years with
National Refractories & Minerals Corporation (formerly Kaiser Refractories), and
thirteen years with Kaiser Aluminum & Chemical Sales, Inc. He has held positions
in Credit Management, Market Research, Inventory Control, Sales and as an
Assistant Controller. Mr. Huey received his B.A. degree in Business
Administration in 1971 from Thiel College in Greenville, Pennsylvania and an MBA
in 1972 from West Virginia University in Morgantown, West Virginia.
Ronald C. Hyatt joined Trimble in August 1983 as Director of
Instrumentation Products. In 1985, he was appointed Vice President for Surveying
and Mapping Products, managing the marketing and application software
development aspects of the business until February 1993. In January 1997 he
returned to the Company as Senior Vice President of Trimble Labs, focusing on
next-generation ASIC developments. In November 1998, Mr. Hyatt was promoted to
Group Vice President of Precision Positioning. He is responsible for managing
land survey, marine, marine survey, mapping/GIS, and mining, construction, and
agricultural applications. Prior to joining Trimble, Mr. Hyatt worked for
Hewlett-Packard from 1964 to 1983 in various engineering and management
positions, focusing on precision frequency and time instrumentation. Mr. Hyatt
received his B.S. degree in electrical engineering from Texas Tech University in
1962 and his M.S. degree in electrical engineering from Stanford University in
1963.
Bruce E. Peetz joined Trimble in June 1988 as Program Manager for GPS
Systems. From January 1990 to January 1994 he served as Development Manager for
commercial dual-frequency products, and from January 1993 to December 1995 he
served as Engineering Manager for Surveying and Core Engineering. In January
1996 he was appointed General Manager of the Land Surveying unit, and from
February 1998 started the Advanced Systems division as General Manager. In
October 1998 he was named Vice President of Advanced Technology and Systems,
consolidating Systems and Trimble Laboratories. Prior to joining Trimble, Mr.
Peetz served in a variety of engineering and management positions during eleven
25
years at Hewlett Packard. Mr. Peetz received his BSEE from the Massachusetts
Institute of Technology (MIT) in 1973, and did graduate work at UCLA.
Item 2. Properties
The Company currently leases and occupies sixteen buildings in
Sunnyvale, California, totaling approximately 396,000 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, totaling approximately
50,600 square feet, to manufacture GPS-based aviation products; the leases
expire at various dates through 2001. The Company also leases a
45,000-square-foot facility in Christchurch, New Zealand, for software
development. The Company's two largest international sales offices are those in
the United Kingdom (13,700 square feet) and Japan (5,900 square feet). In
addition, the Company leases sales offices in Australia, Brazil, China, 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 15 to the Consolidated Financial
Statements, hereof under the caption "Pending Matters."
Item 4. Submission of Matters to a Vote of Security Holders
Not applicable.
26
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 quarters
indicated, the range of high and low closing sales prices for the Company's
Common Stock on the Nasdaq National Market:
High Low
1998:
Fourth 10 1/4 7
Third 16 3/8 9 1/4
Second 19 13/16 13 7/8
First 24 3/8 17 1/4
1997:
Fourth 24 5/16 18 1/8
Third 21 5/8 16 1/2
Second 19 10 7/8
First 14 3/4 11 1/4
The Company had 1,664 shareholders of record as of March 15, 1999.
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
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 Note Purchase 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 5 and 7 to the Consolidated Financial Statements contained in Item 8.
27
Item 6. Selected Financial Data
HISTORICAL FINANCIAL REVIEW
Summary Consolidated Statements of Operations Data
January 1, January 2, December 31, December 31, December 31,
Years ended 1999 1998 1996 1995 1994
- -------------------------------------------------------------------------------------------------------------------------------
(In thousands, except per share data)
Revenue $ 260,279 $ 258,894 $ 221,924 $ 221,236 $ 159,264
--------------------------------------------------------------------------
Operating expenses
Cost of sales 134,723 118,903 104,881 93,544 60,193
Research and development 44,826 37,097 32,716 29,869 22,772
Sales and marketing 61,227 56,457 60,358 59,317 48,241
General and administrative 32,403 26,592 28,452 22,141 10,872
Restructuring charges 10,280 - 2,134 - -
--------------------------------------------------------------------------
Total operating expenses 283,459 239,049 228,541 204,871 142,078
--------------------------------------------------------------------------
Operating income (loss) from continuing
operations (23,180) 19,845 (6,617) 16,365 17,186
Nonoperating income (expense), net (2,041) 1,172 706 773 (3,057)
--------------------------------------------------------------------------
Income (loss) before income taxes from
continuing operations (25,221) 21,017 (5,911) 17,138 14,129
Income tax provision (benefit) 1,400 2,496 (300) 3,121 2,391
--------------------------------------------------------------------------
Net income (loss) from continuing operations $ (26,621) $ 18,521 $ (5,611) $ 14,017 $ 11,738
--------------------------------------------------------------------------
Loss from discontinued operations (net of tax) ($6,911) ($9,242) ($5,691) ($2,756) ($1,714)
Estimated loss on disposal of discontinued operations
(net of tax) ($19,862) - - - -
==========================================================================
Net income (loss) $ (53,394) $ 9,279 (11,302) $ 11,261 $ 10,024
==========================================================================
Basic net income (loss) per share from
continuing operations $ (1.19) $ 0.83 $ (0.25) $ 0.70 $ 0.64
Basic net income (loss) per share from
discontinued operations (1.19) (0.41) (0.26) (0.14) (0.09)
==========================================================================
Basic net income (loss) per share $ (2.38) $ 0.42 $ (0.51) $ 0.56 $ 0.55
==========================================================================
Shares used in calculating basic earnings per share 22,470 22,293 22,005 19,949 18,340
==========================================================================
Diluted net income (loss) per share from
continuing operations $ (1.19) $ 0.80 $ (0.25) $ 0.66 $ 0.62
Diluted net income (loss) per share from
discontinued operations (1.19) (0.40) (0.26) (0.13) (0.09)
==========================================================================
Diluted net income (loss) per share $ (2.38) $ 0.40 $ (0.51) $ 0.53 $ 0.53
==========================================================================
Shares used in calculating diluted earnings per share 22,470 22,947 22,005 21,318 19,053
==========================================================================
Cash dividends per share $ - $ - $ - $ - $ -
==========================================================================
Selected Consolidated Balance Sheet Data
January 1, January 2, December 31, December 31, December 31,
As of 1999 1998 1996 1995 1994
- -------------------------------------------------------------------------------------------------------------------------------
(In thousands)
Working capital $ 81,956 $ 131,272 $ 121,026 $ 134,602 $ 68,486
Total assets 156,279 207,663 189,841 196,763 109,363
Noncurrent portion of long-term debt 31,640 30,697 30,938 29,739 31,736
Shareholders' equity $ 74,691 $ 139,483 $ 124,045 $ 129,937 $ 53,574
28
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Management Changes and Subsequent Events
Charles R. Trimble, the Company's founder, resigned as President and Chief
Executive Officer in August of 1998. Mr. Trimble remains on the Company's Board
of Directors and serves as a consultant to the Company. Dr. Bradford W.
Parkinson, a member of the Board of Directors since 1984 and a consultant to the
Company since 1982, assumed the role of President and CEO while the Company
conducted a search for a permanent replacement. On March 17, 1999, subsequent to
the financial statement date Steven W. Berglund joined the Company as President
and CEO. Dr. Robert S. Cooper, a member of the Company's Board of Directors
since 1989, was appointed to serve as the Chairman of the Board of Directors in
August of 1998.
During the third quarter of fiscal 1998, the Board of Directors
performed an intensive investigation and review of each of the individual
business lines of the Company. Under the direction of Dr. Parkinson, the Company
has undertaken actions that focus on the review, restructuring and elimination
of unprofitable businesses, the implementation of stronger cost controls, the
reorganization of business units and the improvement of manufacturing
efficiencies. As part of the changes taken to strengthen the Company's
competitive position in the marketplace, a decision was made to discontinue the
Company's General Aviation Division, located in Austin, Texas. In the third
quarter of 1998, the Company incurred a charge of $19.9 million related to the
discontinued operation. (See Note 3 of the Consolidated Financial Statements).
In the third quarter and continuing in the fourth quarter of fiscal
1998, Trimble realigned its management structure, reduced its worldwide
workforce by approximately 8 percent, reduced its facilities and wrote down
certain assets. (See note 6 of the Consolidated Financial Statements). The
Company took steps to further strengthen and improve employee relationships and
incentives by extending the period of exercisability for all current outstanding
employee stock options from five years and three months to ten years, effective
as of November 3, 1998. The Company is evaluating further cost reduction
programs to improve its overall cost structure.
The realignment of the management structure is expected to strengthen
the relationships between the Company's businesses and product lines and to
provide the Company with a better focus on the markets it serves. The Company
realigned its Business Units, consolidated its worldwide sales team and created
an international business development function.
The Company's restructuring included renaming its Business Units. The
Commercial Systems Group has been renamed Precision Positioning Group (PPG). The
Software and Component Technologies group has been renamed Mobile and Timing
Technologies (MTT). The Aerospace Group no longer exists as a separate unit and
the General Aviation Division has been discontinued. (See Note 3 of the
Consolidated Financial Statements). Mobile Positioning products previously
reported under the Commercial System Group are now managed by MTT. Air transport
systems and military systems products previously managed by the Aerospace Group
are now managed by MTT. PPG continues to be responsible for the management of
Land Surveying, Mapping and GIS, Marine Surveying and Mining, Construction and
Agriculture (previously referred to as Precise Positioning). MTT continues to be
responsible for the management of Automotive and Timing. The discussions
throughout this document are based on the management structure that existed at
the end of the year.
29
The Board of Directors has declared a dividend distribution of Preferred
shares Purchase Rights to shareholders of record on March 1, 1999.
The Rights are designed to protect and maximize the value of your interest
in the Company. We believe that the Rights Plan, while not intending to prevent
a takeover, will provide protection to you, our shareholders, from the abusive
and coercive tactics that often occur in takeover attempts.
The Rights contain provisions to protect shareholders in the event of an
unsolicited takeover attempt through such methods as a gradual accumulation of
shares in of 15% or more of the outstanding stock followed by a two-tier tender
offer or other tactics that do not treat all shareholders equally. These tactics
may unfairly pressure shareholders, deprive them of the full value of their
shares, or squeeze them out of their investment without giving them any real
choice. With over 2,000 companies having established rights plans to protect
shareholders, we consider the Rights Plan to be the best available means of
protecting the full value of your investment in the Company, while not
preventing a fair acquisition offer for the Company.
The Rights will initially trade with shares of the Company's Common Stock
and have no impact on the way in which you can presently trade the Company's
shares. As explained in detail in the attached Summary of Rights, the Rights are
not exercisable until ten days after a person or group announces acquisition of
15% or more of the Company's outstanding Common Stock or the commencement of a
tender offer which would result in ownership of the person or group of 15% or
more of the outstanding stock.
During fiscal year 1997, and effective as of the Company's 1997 fiscal
year-end, the Company changed from a calendar fiscal year-end and adopted a
52-53 week fiscal year ending on the Friday nearest to December 31, which for
fiscal 1998 was January 1, 1999. The Company does not expect the effects of any
differences due to the change of fiscal years to have a material impact on the
Company's financial position, results of operations, or cash flows. The Company
has not restated or adjusted its prior financial statements on this new fiscal
year basis. (See Note 1 of the Consolidated Financial Statements).
RESULTS OF CONTINUING OPERATIONS
In 1998, the Company's annual revenues from continuing operations
increased slightly to $260.3 million from $258.9 million in 1997. In 1998, the
Company had a net loss from continuing operations of $26.6 million, or ($1.18)
diluted loss per share, compared to net income from continuing operations of
$18.5 million, or $0.81 diluted earnings per share, in 1997. The total net loss
for fiscal 1998, including discontinued operations, was $53.4 million, or
($2.38) diluted loss per share.
30
The following table sets forth, for the periods indicated, certain
financial data as a percentage of total revenue:
January 1, January 2, December 31,
Years ended 1999 1998 1996
- --------------------------------------------------------------------------------------------------------------
Revenue 100% 100% 100%
------------ ----------- ------------
Operating expenses:
Cost of sales 52% 46% 47%
Research and development 17% 14% 15%
Sales and marketing 24% 22% 27%
General and administrative 12% 10% 13%
Restructuring charges 4% - 1%
------------ ----------- ------------
Total operating expenses 109% 92% 103%
------------ ----------- ------------
Operating income (loss) from continuing operations (9%) 8% (3%)
Nonoperating income (expense), net (1%) - -
------------ ----------- ------------
Income (loss) before income taxes from continuing operations (10%) 8% (3%)
Income tax provision 1% 1% 0%
------------ ----------- ------------
Net income (loss) from continuing operations (10%) 7% (3%)
------------ ----------- ------------
Loss from discontinued operations (net of tax) (3%) (4%) (2%)
Estimated loss on disposal of discontiued operations (net of tax) (8%) - -
============ =========== ============
Net income (loss) (21%) 4% (5%)
============ =========== ============
Revenue. In 1998, total revenue increased to $260.3 million from $258.9
million in 1997, which represents a percentage increase of less than 1%. Total
revenue increased in 1997 to $258.9 million from $221.9 million in 1996, which
represents a percentage increase of 17%. The following table breaks out the
Company's revenues by industry market:
January 1, % Total January 2, % Total December 31, % Total
1999 Revenue 1998 Revenue 1996 Revenue
- -----------------------------------------------------------------------------------------------------------------------------
(In thousands)
Precision Positioning Group $ 165,951 64% $ 142,449 55% $ 140,934 64%
Mobile and Timing Technologies 94,328 36% 116,445 45% 80,990 36%
-------------- ----------- --------------- ----------- ------------------ -----------
Total revenue $ 260,279 100% $ 258,894 100% $ 221,924 100%
-------------- ----------- --------------- ----------- ------------------ -----------
Precision Positioning Group
The Precision Positioning Group revenues had a growth rate of 16% in
1998 over 1997. The 1998 increase compared to 1997 is primarily from revenues in
the land surveying, marine surveying, mapping and GIS systems, and mining,
construction, and agriculture markets. The increase in land surveying was due to
the continued strong customer acceptance of the Company's GPS Total Station 4800
and 4700 products. Also, the increase in marine survey, mapping and GIS and
mining, construction and agriculture reflects increased demand for these
products.
In the fourth quarter of 1998, the FCC suspended the processing of
certain Real-time Kinematic product line license ap