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EX-10.5 - EXHIBIT 10.5 - TRIMBLE INC. | ex10_5.htm |
EX-21.1 - EXHIBIT 21.1 - TRIMBLE INC. | ex21_1.htm |
EX-10.9 - EXHIBIT 10.9 - TRIMBLE INC. | ex10_9.htm |
EX-24.1 - EXHIBIT 24.1 - TRIMBLE INC. | ex24_1.htm |
EX-32.2 - EXHIBIT 32.2 - TRIMBLE INC. | ex32_2.htm |
EX-32.1 - EXHIBIT 32.1 - TRIMBLE INC. | ex32_1.htm |
EX-31.1 - EXHIBIT 31.1 - TRIMBLE INC. | ex31_1.htm |
EX-31.2 - EXHIBIT 31.2 - TRIMBLE INC. | ex31_2.htm |
EX-23.1 - EXHIBIT 23.1 - TRIMBLE INC. | ex23_1.htm |
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
10-K
T ANNUAL
REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE
ACT OF 1934
For the
fiscal year ended January 1,
2010
OR
o 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: 001-14845
TRIMBLE
NAVIGATION LIMITED
(Exact
name of Registrant as specified in its charter)
California
|
94-2802192
|
|
(State
or other jurisdiction of incorporation or organization)
|
(I.R.S.
Employer Identification No.)
|
935 Stewart Drive, Sunnyvale,
CA
|
94085
|
|
(Address
of principal executive offices)
|
(Zip
Code)
|
Registrant’s
telephone number, including area code: (408) 481-8000
Securities
registered pursuant to Section 12(b) of the Act:
Title
of each class
|
Name
of each exchange on which stock registered
|
|
Common
Stock
|
NASDAQ
Global Select Market
|
|
Preferred
Share Purchase Rights
|
NASDAQ
Global Select Market
|
|
(Title
of Class)
|
Securities
registered pursuant to Section 12(g) of the Act: NONE
Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in
Rule 405 of the Securities Act.
Yes T No
o
Indicate
by check mark if the registrant is not required to file reports pursuant to
Section 13 or Section 15(d) of the Exchange Act.
Yes o No
T
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 T No
o
Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding
12 months (or for such shorter period that the registrant was required to submit
and post such files).
Yes o No
o
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. o
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, or a non-accelerated filer.
Large Accelerated Filer T | Accelerated Filer o |
Non-accelerated Filer o (Do not check if a smaller reporting company) | Smaller Reporting Company o |
1
Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act).
Yes o No
T
As of
July 3, 2009, the aggregate market value of the Common Stock held by
non-affiliates of the registrant was approximately $2.3 billion based on the
closing price as reported on the NASDAQ Global Select Market.
Indicate
the number of share outstanding of each of the issuer’s classes of common stock,
as of the latest practicable date.
Class
|
Outstanding
at February 24, 2010
|
|
Common
stock, no par value
|
120,691,284
shares
|
2
DOCUMENTS
INCORPORATED BY REFERENCE
Certain
parts of Trimble Navigation Limited's Proxy Statement relating to the annual
meeting of stockholders to be held on May 19, 2010 (the "Proxy Statement") are
incorporated by reference into Part III of this Annual Report on Form
10-K.
3
SPECIAL
NOTE ON FORWARD-LOOKING STATEMENTS
This
Annual Report on Form 10-K contains forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933 and Section 21E of the
Securities Exchange Act of 1934, which are subject to the "safe harbor" created
by those sections. The forward-looking statements regarding future events and
the future results of Trimble Navigation Limited (“Trimble” or “the Company” or
“we” or “our” or “us”) are based on current expectations, estimates, forecasts,
and projections about the industries in which Trimble operates and the beliefs
and assumptions of the management of Trimble. Discussions containing
such forward-looking statements may be found in "Management's Discussion and
Analysis of Financial Condition and Results of Operations." In some cases,
forward-looking statements can be identified by terminology such as "may,"
"will," "should," "could," "predicts," "potential," "continue," "expects,"
"anticipates," "future," "intends," "plans," "believes," "estimates," and
similar expressions. These forward-looking statements involve certain risks and
uncertainties that could cause actual results, levels of activity, performance,
achievements, and events to differ materially from those implied by such
forward-looking statements, but are not limited to those discussed in this
Report under the section entitled “ Risk Factors” and elsewhere, and in other
reports Trimble files with the Securities and Exchange Commission (“SEC”),
specifically the most recent reports on Form 8-K and Form 10-Q, each as it may
be amended from time to time. These forward-looking statements are made as of
the date of this Annual Report on Form 10-K. We reserve the right to update
these statements for any reason, including the occurrence of material
events. The risks and uncertainties under the caption "Risks and
Uncertainties" contained herein, among other things, should be considered in
evaluating our prospects and future financial performance. We have attempted to
identify forward-looking statements in this report by placing an asterisk (*)
before paragraphs containing such material.
4
TRIMBLE
NAVIGATION LIMITED
2009
FORM 10-K ANNUAL REPORT
TABLE OF CONTENTS
PART
I
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Item
1
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6
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Item
1A
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17
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Item
1B
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23
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Item
2
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23
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Item
3
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24
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Item
4
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24
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PART
II
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Item
5
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24
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Item
6
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25
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Item
7
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26
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Item
7A
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41
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Item
8
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43
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Item
9
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82
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Item
9A
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82
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Item
9B
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82
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PART
III
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Item
10
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83
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Item
11
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83
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Item
12
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83
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Item
13
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83
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Item
14
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83
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PART
IV
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Item
15
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84
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TRADEMARKS
Trimble,
EZ-Guide, EZ-Boom, EZ-Steer, Proliance, UtilityCenter, TrimView, GeoManager,
Taskforce, Juno, GeoExplorer, AgGPS, Spectra Precision,
Autopilot, Fieldport, Copernicus, TrimTrac, EZ-Steer, PocketCitation, Trimble
Outdoors, Force, BlueOx, EZ-Office, VX, Vision, VRS, VRSNow, FastMap, FineLock,
R-Track, Agriculture Manager, Thunderbolt, Connected Site, Maxwell, Transcend,
AllTrak, Field-IQ, In-Fusion, Real Works, GreenSeeker, WeedSeeker, FarmWorks,
SITECH, FmX, and Lassen, among others are trademarks of Trimble Navigation
Limited and its subsidiaries. All other trademarks are the property
of their respective owners.
PART
I
Item 1. Business
Trimble
Navigation Limited, a California corporation (“Trimble” or “the Company” or “we”
or “our” or “us”), provides advanced positioning product solutions, typically to
commercial and government users. The principal application areas
include surveying, agriculture, construction, asset management, mapping and
mobile resource management. Our products provide benefits that can include lower
operational costs, higher productivity, improved quality, and compliance.
Product examples include agricultural and construction equipment, guidance
systems, surveying instruments, systems that track fleets of vehicles, and data
collection systems that enable the management of large amounts of geo-referenced
information. In addition, we also manufacture components for in-vehicle
navigation and telematics systems, and timing modules used in the
synchronization of wireless networks.
Our
products often combine knowledge of location or position with a wireless link to
provide a solution for a specific application. Position is provided
through a number of technologies including the Global Positioning System, or
GPS, other Global Navigation Satellite Systems, or GNSS and their augmentation
systems, and systems that use laser or optical technologies to establish
position. Wireless communication techniques include both public
networks, such as cellular, and private networks, such as business band radio.
Some of our products are augmented by our software; this includes embedded
firmware that enables the positioning solution and application software that
allows the customer to make use of the positioning information.
We design
and market our own products. Our manufacturing strategy includes a combination
of in-house assembly and third party subcontractors. Our global operations
include major development, manufacturing, or logistics operations in the United
States, Sweden, Germany, New Zealand, Canada, the United Kingdom, the
Netherlands, China, and India. Products are sold through dealers,
representatives, joint ventures, and other channels throughout the world. These
channels are supported by our sales offices located in 19
countries.
We began
operations in 1978 and incorporated in California in 1981. Our common stock has
been publicly traded on NASDAQ since 1990 under the symbol TRMB.
On
January 17, 2007, our board of directors approved a 2-for-1 split of all
outstanding shares of the Company’s Common Stock, payable February 22, 2007 to
stockholders of record on February 8, 2007. All shares and per share information
presented have been adjusted to reflect the stock split on a retroactive basis
for all periods presented.
Technology
Overview
A
significant portion of our revenue is derived from applying Global Navigation
Satellite System, or GNSS, technology to terrestrial
applications. The GNSS includes the network of 24 orbiting U.S.
Global Positioning System, or GPS, radio navigation satellites and associated
ground control that is funded and maintained by the U.S. Government and is
available worldwide free of direct user fees, and the Russian GLONASS radio
navigation satellite system. Both the European Community and China have
announced plans to establish future operational radio navigation satellite
systems. GNSS positioning is based on a technique that precisely measures
distances from four or more satellites. The satellites continuously
transmit precisely timed radio signals using extremely accurate atomic
clocks. A GNSS receiver measures distances from the satellites in
view by determining the travel time of a signal from the satellite to the
receiver, and then uses those distances to compute its position. Under normal
circumstances, a stand-alone GNSS receiver is able to calculate its position at
any point on earth, in the earth's atmosphere, or in lower earth orbit, to
approximately 10 meters, 24 hours a day. Much better accuracies are possible
through a technique called “differential GNSS.” In addition to providing
position, GNSS provides extremely accurate time measurement.
GNSS
accuracy is dependent upon the locations of the receiver and the number of GNSS
satellites that are above the horizon at any given time. Reception of GNSS
signals requires line-of-sight visibility between the satellites and the
receiver, which can be blocked by buildings, hills, and dense foliage. The
receiver must have a line of sight to at least four satellites to determine its
latitude, longitude, and time. The accuracy of GNSS may also be limited by
distortion of GNSS signals from ionospheric and other atmospheric
conditions.
Our GNSS
products are based on proprietary receiver technology. Over time, the advances
in positioning, wireless communications, and information technologies have
enabled us to add more capability to our products and thereby deliver more value
to our users. GPS is being modernized and GLONASS modernization is
planned. For example, the developments in wireless technology and
deployments of next generation wireless networks have
enabled less expensive wireless communications. These developments
provide the efficient transfer of position data to locations away from the
positioning field device, allowing the data to be accessed by more users,
thereby increasing productivity. This allows us to integrate
visualization and design software into some of our systems, as well as offer
positioning services, all of which make our customers more efficient at what
they do.
Our laser
and optical products either measure distances and angles to provide a position
in three dimensional space or are used as highly accurate laser references from
which a position can be established. The key elements of these
products are typically a laser, which is generally a commercially available
laser diode, and a complex mechanical assembly. These elements are
augmented by software algorithms to provide measurements and
application-specific solutions.
Business
Strategy
Our
business strategy is developed around an analysis of several key
elements:
|
·
|
Attractive markets – We
focus on underserved markets that offer potential for revenue growth,
profitability, and market
leadership.
|
|
·
|
Innovative solutions that
provide significant benefits to our customers – We seek to apply
our technology to applications in which position data is important and
where we can create unique value by enabling enhanced productivity in the
field or field to back office. We look for opportunities in
which the rate of technological change is high and which have a
requirement for the integration of multiple technologies into a
solution.
|
|
·
|
Distribution channels to best
access our markets – We select distribution channels that best
serve the needs of individual markets. These channels can include
independent dealers, direct sales, joint ventures, OEM sales, and
distribution alliances with key partners. We view international expansion
as an important element of our strategy and continue to develop
international channels.
|
Business
Segments and Markets
We are
organized into four reporting segments encompassing our various applications and
product lines: Engineering and Construction, Field Solutions, Mobile Solutions
and Advanced Devices. Our segments are distinguished by the markets they serve.
Each segment consists of businesses which are responsible for product
development, marketing, sales, strategy, and financial performance.
Engineering
and Construction
Products
in the Engineering and Construction segment improve productivity and accuracy
throughout the entire construction process including the initial survey,
planning, design, site preparation, and building phases. Our products
are intended to both improve the productivity of each phase, as well as
facilitate the entire process by improving information flow from one phase to
the next.
Our
Engineering and Construction product solutions typically integrate a wide range
of positioning technologies including GPS/GNSS, laser, optical, 3D scanning, and
inertial technologies with application software, wireless communications and
services to provide complete solutions. Our integrated solutions
allow customers to collect, manage, and analyze complex
information. An example is the Connected Site solutions for
development projects. The approach consists of mapping and
understanding the workflow of a specific industry segment and then ensuring
there is software and hardware integration between each segment of the workflow,
such as the building of a water supply and treatment plant for a
village. The work requires mapping and evaluation of water resources,
engineering and design, construction and life cycle management. The
Connected Site plays an important role at each and every stage. It
ensures fast, accurate exchange of data and information among field and office
teams, contractors, and management. Because of its inherent
flexibility and ability to evolve with a project, the Connected Site can deliver
significant contributions to the sustainable infrastructure
development.
To
introduce products in this segment, we have formed a joint venture with
Caterpillar, called VirtualSite Solutions (VSS). VSS develops software for fleet
management and connected worksite solutions.
We sell
and distribute our products in the Engineering and Construction segment
primarily through a global network of independent dealers that are supported by
Trimble personnel. This channel is supplemented by relationships that
create additional channel breadth including our joint ventures with Caterpillar
and Nikon, as well as private branding arrangements with other
companies.
We also
design and market handheld data collectors and data collection software for
field use by surveyors, contractors, and other professionals. These products are
sold directly through dealers and other survey manufacturers.
Competitors
in this segment are typically companies that provide optical, laser, or GNSS
positioning products. Our principal competitors are Topcon Corporation, and
Leica Geosystems, Inc. Price points in this segment range from less
than $1,000 for certain laser systems to approximately $100,000 for a
high-precision, three-dimensional, machine control system.
Representative
products sold in this segment include:
Trimble S8 Total Station – Our
S8 Total Station is our most advanced optical instrument designed to deliver
unsurpassed performance for both typical surveying and specialized engineering
applications such as monitoring and tunneling. It features Trimble FineLock™
technology, a smart tracker sensor with a narrow field of view that enables the
Trimble S8 to detect a target without interference from surrounding prisms. Our
S8 combined with our 4D Control software creates a powerful solution for
real-time and post-processed monitoring of permanent structures such as dams,
short-term construction activities, and side slopes in mines.
Trimble R8 GNSS System – Our
R8 GNSS System is a multi-channel, multi-frequency, multi-constellation Global
Navigation Satellite System (GNSS) receiver, antenna, and data-link radio
combined in one compact unit. It features Trimble R-Track™ technology, powered
by the most advanced RTK engine in the industry, supporting all GPS signals,
including GPS Modernization (L2C signal and L5 signals) as well as GLONASS and
the Galileo test signals GIOVE-A and GIOVE-B. This enhanced survey system also
features capabilities to customize, remotely configure, and connect to Trimble
R8 GNSS base and rover receivers from the office, saving additional trips to the
field. Our R8 GNSS combines advanced receiver technology and a proven system
design to provide maximum accuracy and productivity for a variety of surveying
applications.
Trimble VX Spatial Station –
Our VX™ Spatial Station
is an advanced spatial imaging system that combines optical, 3D scanning, and
imaging capabilities to measure objects in 3D to produce 2D and 3D deliverables
for spatial imaging projects. It enables users to blend extremely
accurate ground-based information with airborne data to provide comprehensive
datasets for use in the geospatial information industry. With Trimble VISION™
technology, surveyor productivity is enhanced with the ability to remotely see
and measure on their data controller via live video feed from the instrument and
verify that they have captured all the necessary data before leaving the
jobsite. By capturing metric images with the Trimble VX in the field, surveyors
can continue taking additional measurements back in the office and further
attribute data using the industry standard Trimble RealWorks™
software.
Trimble Access Software – Our
Trimble Access Software is a powerful field and office surveying solution that
expedites data collection, processing, analysis and project information delivery
through streamlined workflows and Internet-enabled collaboration and control
amongst project team members. With Trimble Access software, surveyors have
access to powerful yet familiar tools for typical work such as topographic
surveys, staking, or control as well as various streamlined workflows for
specialized applications, such as road surveying, tunneling, monitoring, and
mining. These specialized applications are designed to simplify a specific type
of project for reduced learning curves and improved efficiencies in the
field. Our Trimble Access Software brings the field and office teams
closer together by enabling data sharing and collaboration in a secure
environment - surveys can be completed faster with less time spent traveling
back and forth to the office.
GCS Family of Grade Control Systems –
Grade control systems meet construction contractors' needs with
productivity-enhancing solutions for earthmoving, site prep, and roadwork. Our
GCS family provides upgrade options that deliver earthmoving contractors the
flexibility to select a system that meets their daily needs today, and later add
on to meet their changing needs. For example, a single control system such as
the GCS300 can provide for low-cost point of entry into grade control, and over
time can be upgraded to the GCS400 dual sensor system or to the full 3D GCS900
Grade Control System.
Trimble Layout Solutions –
Trimble Layout solutions such as Trimble MEP and LM80 meet the needs of
general, concrete, mechanical, electrical, and plumbing
contractors. For example, using the Trimble MEP layout
solution, mechanical, electrical and plumbing contractors can increase
productivity significantly. Trimble MEP utilizes the Trimble RTS
Series Robotic Total Station, a Trimble Nomad, and our layout solutions provide
precise location of pipe, duct, and cable tray hangers. We
recently acquired Quickpen, which adds a line of estimating, CAD, fabrication,
and tool & equipment management solutions, such as AutoBid®, DuctDesigner 3D®, PipeDesigner 3D®, and Vulcan is designed to
make building contractors more efficient and productive.
Spectra Precision Laser Portable
Tools – Our Spectra Precision® Laser family includes a
broad range of laser based tools for the interior, drywall and ceilings, HVAC,
and mechanical contractor. Designed to replace traditional methods of
measurement and leveling for a wide range of interior construction applications,
our laser tools are easy to learn and use. Our Spectra Precision Laser product
portfolio includes rotating lasers for horizontal leveling and vertical
alignment, as well as laser pointers and a laser based distance measuring
device. They are available through independent and national construction supply
houses both in the U.S. and in Europe.
Proliance Software –
Proliance® Software allows infrastructure-intensive organizations to optimize
the Plan-Build-Operate project lifecycle for complex capital projects,
construction and real estate programs, and extensive facility portfolios. Our
Proliance Software was designed for large building owner/operators, real estate
developers, and engineering-driven organizations managing $250 million or more
annually in new project construction or facility renovations.
GeoSpatial Solutions – Our
GeoSpatial Solutions family enables mobile mapping companies to capture
georeferenced data, extract features and attributes, and analyze conditions and
change, thereby generating information to better manage assets and
operations. Aerial LIDAR / Imaging Systems and vehicle-based asset
inventory systems, combined with powerful photogrammetry software, generate high
accuracy as-built drawings for the transportation, utilities, energy
transmission, and distribution industries.
Trimble Construction Manager
Software – Trimble Construction Manager software enables the management
of construction assets from one centralized software interface. The
software works with one of several hardware locator devices to help track and
manage the use of assets on and off site, leading to improved equipment
productivity, fuel consumption, and maintenance
monitoring. VirtualSite Solutions, a joint venture between
Caterpillar and Trimble, was formed in October 2008 to develop the next
generation of software for fleet management and connected worksite solutions to
be sold through the SITECH dealer distribution channel.
Field
Solutions
Our Field
Solutions segment addresses the agriculture and geographic information system
(GIS) markets.
Our
agriculture products consist of guidance and positioning systems, automated
application systems, and information management solutions. We provide
manual and automated navigation guidance for tractors and other farm equipment
used in spraying, planting, cultivation, and harvesting applications. The
benefits to the farmer include faster machine operation, higher yields, and
lower consumption of chemicals than conventional equipment. We also provide
positioning solutions for leveling agricultural fields in irrigation
applications and aligning drainage systems to better manage water flow in
fields. In addition, we provide solutions to automate applications of
pesticide and seeding. Our information management products offer
solutions for data management, field to office data transfer, and record
keeping.
We use
multiple distribution channels to access the agricultural market, including
independent dealers and partners such as CNH Global. Competitors in this market
are either vertically integrated implement companies such as John Deere, or
agricultural instrumentation suppliers such as Raven, Hemisphere GPS, and
Novariant.
Our GIS
product line is centered on handheld data collectors that gather information in
the field to be incorporated into GIS databases. Our handheld unit enables this
data to be collected and automatically stored while confirming the location of
the asset. By utilizing a combination of wireless technologies this information
can be communicated from the field worker to the back-office GIS and also gives
the field worker the ability to download information from the database. This
capability provides significant advantages to users including improved
productivity, accuracy, and access to information in the field.
Distribution
for GIS products is primarily through a network of independent dealers and
business partners, supported by Trimble personnel. Primary markets for our GIS
products and solutions include both governmental and commercial users. Users are
most often municipal governments and natural resource
agencies. Commercial users include utility companies. Competitors in
this market are typically survey instrument companies utilizing GPS technology
such as Topcon and Thales.
Approximate
product price points in this segment range from $1,000 for a GIS handheld unit
to $35,000 for a fully automated, farm equipment control system.
Representative
products sold in this segment include:
AgGPS EZ-Guide 500 – Our AgGPS@ EZ-Guide@ 500 is a
lightbar guidance system with a color LCD display, data logging functions, and
multiple accuracy options. Lightbar systems provide GPS-based guidance for
vehicle operators to steer tractors, sprayers, fertilizer applicators, air
seeders, and large tillage tools that require consistent pass-to-pass accuracy
to help save fuel, increase efficiency, and reduce input costs for agricultural
operations.
AgGPS EZ-Boom 2010 – Our AgGPS EZ-Boom® 2010
automated application control system helps growers cut input costs and reduce
operator fatigue by providing precise automatic control of field spraying
applications. It works with our AgGPS EZ-Guide 500 lightbar
guidance system, AgGPS
FmX®™
integrated display, AgGPS EZ-Steer® assisted
steering system, or the AgGPS Autopilot™ automated
steering system.
AgGPS Autopilot System – Our GPS-enabled,
agricultural navigation system connects to a tractor’s steering system and
automatically steers the tractor along a precise path to within three
centimeters or less. This enables both higher machine productivity
and more precise application of seed and chemicals, thereby reducing costs to
the farmer.
AgGPS EZ-Steer System – Our value-added
assisted steering system, when combined with any of our guidance display
systems, automatically steers agricultural vehicles along a path within 20
centimeters or less. This system installs in less than thirty minutes
and is designed to reduce gaps and overlaps in spraying, fertilizing, and other
field applications, as well as reduce operator fatigue.
Trimble Connected Farm – Our end-to-end
solution combines in-cab precision control, field record-keeping, and seamless
field to office information management.
GreenSeeker and WeedSeeker
Sensors –
Our crop sensing technology reduces farmers’ costs and environmental
impact by controlling the application of nitrogen, herbicide, and other crop
inputs for optimum plant growth.
Juno Series – Our Juno family
includes compact and cost-effective GPS handhelds designed to equip an entire
workforce for data collection and fieldwork. The handhelds have a
high-sensitivity GPS receiver, Bluetooth and Wireless LAN technology, a built-in
3 Megapixel digital camera, a MicroSD/SDHC storage slot, and an optional 3.5G
broadband cellular modem for wireless data communications.
GeoExplorer 2008 Series – Our GeoExplorer
family combines a GPS receiver in a rugged handheld unit running industry
standard Microsoft Windows Mobile version 6.0, making it easy to collect and
maintain data about objects in the field. The GeoExplorer® series features three models
ranging in accuracy from a decimeter to 1-3 meters, thereby allowing the user to
select the system most appropriate for their data collection and maintenance
needs.
Fieldport Software – Our
Fieldport Software focuses on automating field service processes, operational
efficiency and profitability for water and wastewater utility
customers.
UtilityCenter Software – Our UtilityCenter Software
is a GIS-based enterprise suite of modules oriented towards the electric and gas
utilities market. Modules include Outage Management (OMS), Mobile Asset
Management, Data Collection, Staking, Network Tracing & Isolation and
Field-based Editing.
Mobile
Solutions
Our
Mobile Solutions segment provides both hardware and software applications for
managing mobile work, mobile workers, and mobile assets. The software is
provided in both a client server model or web-based. Our software is
provided through our hosted platform for a monthly subscription service fee or
as a perpetual license with annual maintenance and support fees.
Our
vehicle solutions typically include an onboard proprietary hardware device
consisting of a GPS receiver, business logic, sensor interface, and a wireless
modem. Our solution usually includes the communication service from/to the
vehicle to our data center and access over the internet to the application
software.
Our
mobile worker solutions include a rugged handset device and software designed to
automate service technician work in the field at the point of customer
contact. The mobile worker handset solutions also synchronize
to a client server at the back office for integration with other
mission-critical business applications.
Our
scheduling and dispatch solution is an enterprise software program to optimize
scheduling and routing of field service technicians. For dynamic capacity
management, our capacity planner, capacity controller, and intelligent appointer
modules round out this innovative service delivery automation
technology.
One
element of our market strategy targets opportunities in specific vertical
markets where we believe we can provide a unique value to the end-user by
tailoring our solutions for a particular industry. Sample markets
include telecommunications, utilities field service, construction supply, direct
store delivery, forestry, and public safety. For example, our
construction supply ready mix concrete solution combines a suite of sensors with
our in-vehicle wireless platform providing fleets with updated vehicle status
that requires no driver interaction – referred to as “auto-status.”
We also
sell our vehicle solutions using a horizontal market strategy that focuses on
providing turnkey solutions to a broad range of service fleets that span a large
number of market segments. Here, we leverage our capabilities without the same
level of customization. These solutions are sold to the general service fleets
as well as transportation and distribution fleets both on a direct basis and
through dealer channels.
Our
enterprise strategy focuses on sales to large enterprise accounts with more than
1,000 vehicles or routes. Here, in addition to a Trimble-hosted solution, we can
also integrate our service directly into the customer’s IT infrastructure,
giving them improved control of their information. In this market, we sell
directly to end-users. Sales cycles tend to be long due to field trials followed
by an extensive decision-making process.
Approximate
prices for hardware fall in the range of $400 to $3,000, while the monthly
subscription service fees range from approximately $25 to approximately $55 per
month per unit, depending on the customer service level.
Representative
products sold in this segment include:
Fleet Productivity – Our fleet
productivity solution offerings are comprised of the GeoManager and TrimView™
mobile platforms. The GeoManager system provides different levels of service
that run from snapshots of fleet activity to real-time fleet dispatch capability
via access to the web-based platform through a secure internet connection. The
GeoManager system includes truck communication service and computer backbone
support of the service. TrimView is sold to fleets where system integration into
back office applications is required for more robust information
flow.
Consumer Packaged Goods (CPG) –
This software solution operates in the Microsoft CE/Pocket or WinMobile
PC environment and addresses the pre-sales, delivery, route sales, and full
service vending functions performed by mobile workers. Customers
within the CPG market purchase a combination of both license software and
handheld PCs. The software handles all communications from/to the
mobile computer as well as from/to the host and any other ERP or decision
support systems.
Field Service – Our handset-based mobile
solution enables technicians to maintain and repair residential and commercial
appliances, office equipment, medical equipment, refrigeration equipment,
fountain, and manufacturing equipment, and manage a variety of service functions
including wireless dispatching of service calls, real-time messaging, spare
parts management, and work order and workflow management. Trimble
Field Service customers have benefited from increased service calls per day, an
increase in first call resolution, and reduction in administrative workload to
name a few results.
Public Safety – We provide a
suite of solutions for the public safety sector including our PocketCitation™
system which is an electronic ticketing system that enables law enforcement
officers to issue traffic citations utilizing a mobile handheld device. This
system scans the traffic offender’s driver’s license and automatically populates
the appropriate information into the citation. We provide a variation of this
solution which enables law enforcement officers to complete electronic traffic
citations within 30 seconds. Within this sector, we also provide desktop
software which enables accident investigators and other public safety
professionals to reconstruct and simulate vehicle accidents.
Taskforce – The Taskforce
software solution provides scheduling and dispatch solutions for field service
technicians by synchronizing the right human and physical resources required to
optimize a field service resource network. The system manages
significant numbers of dynamic scheduling resources in an unpredictable field
service environment to increase productivity, field force utilization, and
control-to-field employee ratios.
Blue Ox – Forestry Fleet Management
– The Blue Ox
system optimizes the efficiency with which wood is transported from the forest
to the mills. It utilizes real time information that is input into a
Trimble rugged handheld PC in the woods to communicate with Trimble tablet PCs
in each truck to identify available loads of wood. From this
information, the system then selects the most optimal delivery pattern, and
routes the trucks appropriately. In sum, a landowner is able to move
more wood with fewer trucks, all the while providing valuable operating
information through a full suite of reports. This solution creates an
immediate savings for the landowner.
Advanced
Devices
Advanced
Devices includes the product lines from our Component Technologies, Applanix,
Trimble Outdoors, and Military and Advanced Systems (MAS) businesses. With the
exception of Trimble Outdoors and Applanix these businesses share several common
characteristics: they are hardware centric, generally market to
original equipment manufacturers (OEM), system integrators or service providers,
and have products that can be utilized in a number of different end-user markets
and applications. The various operations that comprise this segment were
aggregated on the basis that no single operation accounted for more than 10% of
our total revenue, operating income or assets.
Within
Component Technologies, we supply GPS modules, licensing and complementary
technologies, and GPS-integrated sub-system solutions for applications requiring
precise position, time or frequency. Component Technologies serves a
broad range of vertical markets including telecommunications, automotive
electronics, and commercial electronics. Sales are made directly to
OEMs, system integrators, value-added resellers, and service providers who
incorporate our components into a complete system-level solution.
Component
Technologies has developed GPS technologies which it makes available for
license. These technologies can run on certain digital signal processors (DSP)
or microprocessors, removing the need for dedicated GPS baseband signal
processor chips. We have a cooperative licensing deal with Nokia for
our Global Navigation Satellite System (GNSS) patents related to designated
wireless products and services involving location technologies, such as GPS,
assisted GPS, or Galileo. We also have a licensing agreement with Marvell
Semiconductors for our full GPS Digital Signal Processor software as well as
tools for development support and testing.
Our MAS
business supplies GPS receivers and embedded modules that use the military’s GPS
advanced capabilities. The modules are principally used in aircraft navigation
and timing applications. Military products are sold directly to either the U.S.
Government or defense contractors. Sales are also made to authorized foreign end
users. Competitors in this market include Rockwell Collins, L3, and
Raytheon.
Our
Trimble Outdoors business utilizes GPS-enabled cell phones to provide
information for outdoor recreational activities. Some of the recreational
activities include hiking, biking, backpacking, boating, and water sports.
Consumers purchase the Trimble Outdoors product through our wireless operator
partners which include Sprint-Nextel, SouthernLINC Wireless, and Boost
Mobile.
Our
Applanix business is a leading provider of advanced products and enabling
solutions that maximize productivity through mobile mapping and positioning to
professional markets worldwide. Applanix develops, manufactures, sells, and
supports high-value, precision products that combine GPS with inertial sensors
for accurate measurement of position and attitude, flight management systems,
and scalable mobile mapping solutions used in airborne, land, and marine
applications. Sales are made by our direct sales force to end users, systems
integrators, and OEMs, and through regional agents. Competitors include Leica,
IGI, and Novatel.
Representative
products sold in this segment include:
GPS Receiver Modules – The
Lassen®, Copernicus® , CondorTM, and
PandaTM
families of GPS modules are full-function GPS modules in a variety of form
factors, some smaller than your fingertip.
TM3000 Asset Tracking Device – Our
TM3000 product
is a flexible, open platform that enables a broad range of applications such as:
fleet management, mobile asset tracking and recovery, and driver monitoring and
assistance. This device integrates wireless communications, a
positioning function, and an application engine in a package designed to improve
the profits for service-focused businesses.
Thunderbolt GPS Disciplined Clock
– Our Thunderbolt® clock is a fifth-generation product from our GPS
Timing and Synchronization division, which outputs precision time and
frequency. It also serves as the architectural basis for GPS
disciplined clocks sold to manufacturers of CDMA and WiMax
infrastructure.
Applanix POS/AV System – Our integrated
GPS/inertial system for airborne surveying measures aircraft position to an
accuracy of a few centimeters and aircraft attitude (angular orientation) to an
accuracy of 30 arc seconds or better. This system is typically interfaced to
large format cameras and scanning lasers for producing geo-referenced
topographic maps of the terrain.
Applanix DSS Digital Sensor System
– Our digital airborne imaging solution produces high-resolution
orthophoto map products. Certified by the USGS, the system consists
of a mapping grade digital camera that is tightly integrated with a
GNSS/Inertial system, flight management system (FMS), and processing software
for automatic geo-referencing of each pixel. Our DSS can be used stand-alone or
integrated with other airborne mapping sensors. Our DSS has been used by
organizations worldwide in a variety of market segments that include ortho
mapping, utility and transportation corridor mapping, and rapid response
applications.
Force 524D Module – This dual frequency,
embedded GPS module is used in a variety of military airborne
applications.
Trimble Outdoors Service – Our trip planning and
navigation software works with GPS-enabled cell phones and conventional GPS
receivers. This software enables consumers to research specific trips on-line as
part of trip pre-planning. In addition, users are able to share outdoor and
off-road experiences on-line with their friends and family.
Acquisitions
and Joint Ventures
Our
growth strategy is centered on developing and marketing innovative and complete
value-added solutions to our existing customers, while also marketing them to
new customers and geographic regions. In some cases, this has led to partnering
with or acquiring companies that bring technologies, products or distribution
capabilities that will allow us to establish a market beachhead, penetrate a
market more effectively, or develop solutions more quickly than if we had done
so solely through internal development. Since 1999, this has led us to form
five joint ventures and acquire forty three companies through the end of
fiscal 2009. Most of these acquisitions have been small, both in
dollar terms and in number of people added to the Trimble employee
base. The following companies and joint ventures were acquired or
formed during fiscal 2009 and are combined in the results of operations since
the date of acquisition or
formation:
Beijing
Kegong Trimble Navigation Technology
On
October 15, 2009, Beijing Kegong Trimble Navigation Technology, a joint venture
formed by the China Aerospace Science & Industry Academy of Information
Technology (CASIC-IT) and us, began operations. We and CASIC-IT both maintain a
50% ownership. Beijing Kegong Trimble Navigation Technology combines the
commercial expertise, knowledge and technologies of both CASIC-IT and Trimble.
The joint venture will develop, manufacture, and distribute Global Navigation
Satellite System (GNSS) receivers and systems based on the Chinese Compass
satellite system.
Farm
Works
On July
16, 2009, we acquired the assets of privately-held CTN Data Service, LLC,
creator of Farm Works software, located in Hamilton, Indiana. Farm Works
provides integrated office and mobile software solutions for both the farmer and
agriculture service professional. Farm Works’ performance is reported under our
Field Solutions business segment.
Accutest
On June
5, 2009, we acquired Accutest Engineering Solutions Ltd, based in Derbyshire,
UK. Accutest is a leading provider of vehicle diagnostics and telematics
technologies for the automotive industry. Accutest’s performance is reported
under our Mobile Solutions business segment.
NTech
On June
4, 2009, we acquired privately-held NTech Industries, based in Ukiah, Calif.
NTech is a leading provider of crop-sensing technology that allows farmers to
reduce costs and environmental impact by controlling the application of
nitrogen, herbicide, and other crop inputs. NTech’s performance is
reported under our Field Solutions business segment.
QuickPen
On March
12, 2009, we acquired privately-held QuickPen International based in Englewood,
Colorado. QuickPen is a leading provider of Building Information Modeling (BIM)
software for the heating, ventilation and air conditioning (HVAC), mechanical
construction, and plumbing industries. QuickPen’s performance is reported under
our Engineering and Construction business segment.
Patents,
Licenses and Intellectual Property
We hold
approximately 750 U.S. issued and enforceable patents and approximately 140
non-U.S. patents, the majority of which cover GPS technology and other
applications such as optical and laser technology.
We prefer
to own the intellectual property used in our products, either directly or
through subsidiaries. From time to time we license technology from third
parties.
There are
approximately 379 trademarks registered to Trimble and its subsidiaries
including "Trimble," the globe triangle design, SITECH, and Spectra Precision,
among others that are registered in the United States and other countries.
Additional trademarks are pending registration.
Sales
and Marketing
We tailor
the distribution channel to the needs of our products and regional markets
through a number of sales channel solutions around the world. We sell our
products worldwide primarily through dealers, distributors, and authorized
representatives, occasionally granting exclusive rights to market certain
products within specific countries. This channel is supported and supplemented
(where third party distribution is not available) by our regional sales offices
throughout the world. We also utilize distribution alliances, OEM relationships,
and joint ventures with other companies as a means to serve selected
markets.
During
fiscal 2009, sales to customers in the United States represented 50%, Europe
represented 23%, Asia Pacific represented 17%, and other regions represented 10%
of our total revenue. During fiscal 2008, sales to customers in the United
States represented 49%, Europe represented 25%, Asia Pacific represented 14%,
and other regions represented 12% of our total revenue. During fiscal 2007,
sales to customers in the United States represented 50%, Europe represented 27%,
Asia Pacific represented 12%, and other regions represented 11% of our total
revenue.
Warranty
The
warranty periods for our products are generally between 90 days and three years.
Selected military programs may require extended warranty periods up to 5.5 years
and certain Nikon products have a five-year warranty period. We support our GPS
products through a circuit board replacement program from locations in the
United Kingdom, Germany, Japan, and the United States. The repair and
calibration of our non-GPS products are available from company-owned or
authorized facilities. We reimburse dealers and distributors for all authorized
warranty repairs they perform.
While we
engage in extensive product quality programs and processes, including actively
monitoring and evaluating the quality of component suppliers, our warranty
obligation is affected by product failure rates, material usage, and service
delivery costs incurred in correcting a product failure. Should actual product
failure rates, material usage, or service delivery costs differ from the
estimates, revisions to the estimated warranty accrual and related costs may be
required.
Seasonality
of Business
* Our
individual segment revenue may be affected by seasonal buying patterns.
Typically, the second fiscal quarter has been the strongest quarter for the
Company driven by the construction buying season. However during the recent
past, this pattern has been disrupted by the global economic
crisis.
Backlog
In most
of our markets, the time between order placement and shipment is
short. Orders are generally placed by customers on an as-needed
basis. In general, customers may cancel or reschedule orders without
penalty. For these reasons, we do not believe that orders are an
accurate measure of backlog and, therefore, we believe that backlog is not a
meaningful indicator of future revenue or material to understanding our
business.
Manufacturing
Manufacturing
of many of our GNSS products is subcontracted
to Flextronics International Limited in Mexico. We utilize Flextronics for most
of Survey, Field Solutions, and Mobile Solutions products. We also utilize
Benchmark Electronics Inc. in China and Mexico for our Component
Technologies products
and many of our Construction products. Flextronics is responsible for
substantially all material procurement, assembly, and testing. We continue to
manage product design through pilot production for the subcontracted products,
and we are directly involved in qualifying suppliers and key components used in
all our products. Our current contract with Flextronics continues in effect
until either party gives the other ninety days written notice.
We
manufacture GPS, laser, and optics-based products at our plants in Dayton, Ohio;
Danderyd, Sweden; and Shanghai, China. Some of these products or portions of
these products are also subcontracted to third parties for
assembly.
Our
design and manufacturing sites in Dayton, Ohio; Sunnyvale, California; Danderyd,
Sweden; and Kaiserslautern, Germany are registered to ISO9001:2000, covering the
design, production, distribution, and servicing of all our
products.
Research
and Development
We
believe that our competitive position is maintained through the development and
introduction of new products that incorporate improved features, better
performance, smaller size and weight, lower cost, or some combination of these
factors. We invest substantially in the development of new products. We also
make significant investment in the positioning, communication, and information
technologies that underlie our products and will likely provide competitive
advantages.
Our
research and development expenditures, net of reimbursed amounts were $136.6
million for fiscal 2009, $148.3 million for fiscal 2008, and 131.5 million for
fiscal 2007.
* We
expect to continue investing in research and development with the goal of
maintaining or improving our competitive position, as well as the goal of
entering new markets.
Employees
As of
January 1, 2010, we employed 3,794 employees, including 20% in manufacturing,
28% in engineering, 39% in sales and marketing, and 13% in general and
administrative positions. Approximately 44% of employees are in locations
outside the United States.
Our
employees are not represented by unions except for those in
Sweden. Some employees in Germany are represented by works councils.
We also employ temporary and contract personnel that are not included in the
above headcount numbers. We have not experienced work stoppages or similar labor
actions.
Available
Information
The
Company’s annual reports on Form 10-K, quarterly reports on Form 10-Q, current
reports on Form 8-K, and all amendments to those reports are available free of
charge on the Company’s web site through www.trimble.com/investors.html, as
soon as reasonably practicable after such material is electronically filed with
or furnished to the Securities and Exchange Commission. Information contained on
our web site is not part of this annual report on Form 10-K.
In
addition, you may request a copy of these filings (excluding exhibits) at no
cost by writing or telephoning us at our principal executive offices at the
following address or telephone number:
Trimble
Navigation Limited
935
Stewart Drive, Sunnyvale, CA 94085
Attention:
Investor Relations Telephone: 408-481-8000
Executive
Officers
The
names, ages, and positions of the Company's executive officers as of February
21, 2010 are as follows:
Name
|
Age
|
Position
|
Steven
W. Berglund
|
58
|
President
and Chief Executive Officer
|
Rajat
Bahri
|
45
|
Chief
Financial Officer
|
Rick
Beyer
|
52
|
Vice
President
|
Bryn
A. Fosburgh
|
47
|
Vice
President
|
Christopher
W. Gibson
|
49
|
Vice
President
|
Mark
A. Harrington
|
54
|
Vice
President
|
Jürgen
Kliem
|
52
|
Vice
President
|
James
A. Kirkland
|
50
|
Vice
President and General Counsel
|
Julie
Shepard
|
52
|
Vice
President, Finance
|
Dennis
L. Workman
|
65
|
Vice
President and Chief Technical
Officer
|
Steven W.
Berglund – Steven Berglund has served as president and chief executive
officer of Trimble since March 1999. Prior to joining Trimble, Mr.
Berglund was president of Spectra Precision, a group within Spectra Physics
AB. Mr. Berglund’s business experience includes a variety of senior
leadership positions with Spectra Physics, manufacturing and planning roles at
Varian Associates, and began his career as a process engineer at Eastman Kodak.
He attended the University of Oslo and the University of Minnesota where he
received a B.S. in chemical engineering. Mr. Berglund received his
M.B.A. from the University of Rochester. In December 2007, Mr.
Berglund was elected to the board of directors of Verigy Ltd. a semiconductor
test equipment manufacturer.
Rajat
Bahri – Rajat Bahri joined Trimble as chief financial officer in January
2005. Prior to joining Trimble, Mr. Bahri’s business experience
includes 15 years within the financial organization of Kraft Foods, Inc. and
General Foods Corporation, including service as the chief financial officer for
Kraft Canada, Inc., chief financial officer of Kraft Pizza Company, and
operations controller for Kraft Jacobs Suchard Europe. Mr. Bahri
received a Bachelor of Commerce from the University of Delhi in 1985 and an
M.B.A. from Duke University in 1987. In 2005, he was elected to the
board of STEC, Inc., a memory storage manufacturer.
Richard A.
Beyer – Rick Beyer joined Trimble in March 2004 as president of Trimble
Mobile Solutions and in May 2006, Beyer was appointed a vice president of
Trimble. In 2007, Mr. Beyer was appointed vice president of the Mobile Resources
Sector, with responsibility for Trimble’s Mobile Solutions Business Divisions.
Prior to joining Trimble, Mr. Beyer held senior executive positions within the
wireless mobile solutions industry since 1987. Part of the original senior
executive team that launched Qualcomm's OmniTRAC's mobile satellite
communication solution, Mr. Beyer also held the positions of general manager at
Rockwell Collins, on-board computing division, executive vice president of
Norcom Networks president of Husky Technologies, now part of Itronix, and CEO of
TracerNet, which was acquired by Trimble. He holds a B.A. from Olivet
College.
Bryn A.
Fosburgh – Bryn Fosburgh joined
Trimble in 1994 as a technical service manager for surveying, mining, and
construction. In 2009, Mr. Fosburgh was appointed as vice president for
Trimble’s Construction Division, and he also has responsibility for a number of
corporate functions and geographical regions. From 2007 to 2009, Mr.
Fosburgh was vice president for Trimble’s Construction and Agriculture
Divisions, which included responsibility for a number of corporate functions and
geographical regions. Mr. Fosburgh served as vice president and
general manager of Trimble’s Engineering and Construction Division from 2005 to
2007. Mr. Fosburgh has held numerous other roles with Trimble,
including vice president and general manager of the Geomatics and Engineering
Division, division vice president of Survey and Infrastructure, and director of
development for Land Survey. Prior to Trimble, Mr. Fosburgh was a civil engineer
and also held various engineering, research and operational positions for the
U.S. Army Corps of Engineers and Defense Mapping Agency. Mr. Fosburgh
received a B.S. in geology from the University of Wisconsin in Green Bay in 1985
and an M.S. in civil engineering from Purdue University in 1989.
Christopher W.
Gibson – Christopher W. Gibson joined Trimble in 1998 as European finance
and operations director. In 2009, he was appointed to serve as vice
president responsible for Trimble’s Survey Division. Mr. Gibson has served in a
variety of leadership roles, including European managing director, division vice
president for worldwide sales, general manager of the Global Services Business,
and most recently, as general manager for the Survey Division. Prior
to Trimble, Mr. Gibson’s business experience includes a number of financial
management roles with Tandem Computers, and financial analyst roles with
Unilever subsidiaries. Mr. Gibson received a BA in Business Studies
in 1985 from Thames Polytechnic, now the University of Greenwich, and was
admitted as a Fellow to the Chartered Institute of Management Accountants in
1994.
Mark A.
Harrington – Mark Harrington joined Trimble in January 2004 as a vice
president, primarily responsible for strategy and business
development. In 2009, Mr. Harrington was appointed vice president for
Trimble’s Agriculture and Mapping and Geographical Information System Divisions,
and also has responsibility for a number of corporate functions and geographical
regions. From 2007 to 2009, Mr. Harrington’s was vice president for Trimble’s
Survey and Mapping and Geographical Information System, as well as the
responsibility for a number of corporate functions and geographical
regions. Prior to joining Trimble, Mr. Harrington held several
executive finance positions, including vice president of finance at
Finisar Corporation, chief financial officer for Cielo Communications,
Inc., and Vixel Corporation, vice president of finance for
Spectra-Physics Lasers, Inc. and vice president of finance for Spectra-Physics
Analytical, Inc. Mr. Harrington began his career at Varian Associates, Inc. Mr.
Harrington received his B.S. in Business Administration from the University of
Nebraska-Lincoln.
Jürgen Kliem
– Jürgen Kliem was appointed vice president of strategy and business
development in October 2008. From 2002 to 2008, Mr. Kliem served as general
manager of Trimble’s Survey Division, and prior to that, Mr. Kliem was
responsible for Trimble’s Engineering and Construction Division in Europe. Mr.
Kliem held various leadership roles Spectra Precision, which was acquired by
Trimble, and at Geotronics, a company acquired by Spectra Precision. Before
joining Geotronics, Mr. Kliem worked in a privately-held surveying firm
addressing cadastral, construction, plant and engineering
projects. Mr. Kliem received a Diplom Ingenieur degree from the
University of Essen, Germany in 1982.
James A.
Kirkland – James A.
Kirkland joined Trimble as vice president and general counsel in July 2008.
Prior to joining Trimble, he worked for SpinVox Ltd. from October 2007 to
January 2008 as Senior Vice President, Corporate Development. From
October 2003 to September 2007, he served as general counsel and executive vice
president, strategic development at Covad Communications. Mr.
Kirkland also served as senior vice president of spectrum development and
general counsel at Clearwire Technologies, Inc. Mr. Kirkland began his career in
1984 as an associate at Mintz Levin and in 1992 he was promoted to
partner. Mr. Kirkland received his BA from Georgetown University in
Washington, D.C. in 1981 and his J.D. from Harvard Law School in
1984.
Julie
Shepard –
Julie Shepard joined Trimble in December of 2006 as vice president of finance,
and was appointed principal accounting officer in May 2007. Prior to
joining Trimble, Ms. Shepard served as vice president of finance and corporate
controller at Quantum Corporation, from 2005 to 2006, and prior to that, from
2004 to 2005, as an independent consultant to Quantum
Corporation. Ms. Shepard brings with her over 20 years of experience
in a broad range of finance roles, including vice president of finance at Nishan
Systems. Ms. Shepard began her career at Price Waterhouse and is a Certified
Public Accountant. She received a B.S in Accounting from California State
University.
Dennis L.
Workman – Dennis Workman has served as vice president of Trimble since
1999. Mr. Workman was appoint as Trimble’s chief technical officer in March
2006, and also has responsibility for the Advanced Devices division. Since
joining Trimble in 1995, Mr. Workman has held a variety of management roles,
including senior director and chief technical officer of the Mobile and Timing
Technologies business group, general manager of Trimble's Automotive and Timing
group, director of engineering for Software & Component Technologies, and
director of the Timing vertical market. Prior to Trimble, Mr. Workman
held various senior-level technical positions at Datum Inc., including chief
technical officer. Mr. Workman received a B.S. in mathematics and physics from
St. Mary’s College in 1967.
Item 1A. Risk Factors.
RISKS AND
UNCERTAINTIES
You
should carefully consider the following risk factors, in addition to the other
information contained in this Form 10-K and in any other documents to which we
refer you in this Form 10-K, before purchasing our securities. The risks and
uncertainties described below are not the only ones we face.
Current
Economic Conditions May Have an Impact on Our Business and Financial Condition
in Ways that We Currently Cannot Predict.
The
Company’s operations and performance depend on worldwide economic conditions and
their impact on levels of business spending, which have deteriorated
significantly in many countries and regions and may remain depressed for the
foreseeable future. Uncertainties in the financial and credit markets have
caused our customers to postpone purchases, and continued uncertainties may
reduce future sales of our products and services. Continued adverse
economic conditions are likely to depress tax revenue of federal, state and
local government entities, which are significant purchasers of the Company’s
products. Protectionist trade measures that may be adopted in response to the
economic downturn could reduce demand for our products and services overseas.
With the exception primarily of our Mobile Solutions and Advanced Devices
segments, our products are generally sold through a dealer channel, and our
dealers depend on the availability of credit to finance purchases of our
products for their inventory.
Customer
collections are our primary source of cash. While we believe we have
a strong customer base and have experienced strong collections in the past, if
the current market conditions deteriorate, we may experience increased
collection times or greater write-offs, which could have a material adverse
effect on our cash flow. In addition, the Company's results may be
adversely affected if the Company is unable to market, manufacture, and ship new
products. Any write-off of goodwill could also negatively impact our financial
results. Finally, our ability to access the capital markets may be
restricted at a time when we would like, or need, to do so, which could have an
impact on our flexibility to pursue additional expansion opportunities and
maintain our desired level of revenue growth in the future. These and other
economic factors could have a material adverse effect on demand for the
Company’s products and services and on the Company’s financial condition and
operating results.
Our
Inability to Accurately Predict Orders and Shipments May Subject Our Results of
Operations to Significant Fluctuations From Quarter to Quarter
We have
not been able in the past to consistently predict when our customers will place
orders and request shipments so that we cannot always accurately plan our
manufacturing requirements. As a result, if orders and shipments differ from
what we predict, we may incur additional expense and build excess inventory,
which may require additional reserves and allowances. Accordingly, we have
limited visibility into future changes in demand and our results of operations
may be subject to significant fluctuations from quarter to quarter.
Our
Operating Results in Each Quarter May Be Affected by Special Conditions, such as
Seasonality, Late Quarter Purchases, Weather, and Other Potential
Issues
Due in
part to the buying patterns of our customers, a significant portion of our
quarterly revenue occurs from orders received and immediately shipped to
customers in the last few weeks and days of each quarter, although our operating
expense tends to remain fairly predictable. Engineering and Construction
purchases tend to occur in early spring, and governmental agencies tend to
utilize funds available at the end of the government’s fiscal year for
additional purchases at the end of our third fiscal quarter in September of each
year. Concentrations of orders sometimes also occur at the end of our other two
fiscal quarters. Additionally, a majority of our sales force earns commissions
on a quarterly basis which may cause concentrations of orders at the end of any
fiscal quarter. It could harm our operating results if for any reason expected
sales are deferred, orders are not received, or shipments are delayed a few days
at the end of a quarter.
We
Are Dependent on a Specific Manufacturer and Assembler for Many of Our Products
and on Specific Suppliers of Critical Parts for Our Products
We are
substantially dependent upon Flextronics International Limited as our preferred
manufacturing partner for many of our GPS products. Under the agreement, we
provide to Flextronics a twelve-month product forecast and place purchase orders
with Flextronics at least thirty calendar days in advance of the scheduled
delivery of products to our customers, depending on production lead time.
Although purchase orders placed with Flextronics are cancelable, the terms of
the agreement would require us to purchase from Flextronics all inventory not
returnable or usable by other Flextronics customers. Accordingly, if we
inaccurately forecast demand for our products, we may be unable to obtain
adequate manufacturing capacity from Flextronics to meet customers’ delivery
requirements or we may accumulate excess inventories, if such inventories are
not usable by other Flextronics customers. Our current contract with Flextronics
continues in effect until either party gives the other ninety days written
notice.
In
addition, we rely on specific suppliers for a number of our critical components.
We have experienced shortages of components in the past. Our current reliance on
specific or a limited group of suppliers involves several risks, including a
potential inability to obtain an adequate supply of required components, reduced
control over pricing, and economic conditions which may adversely impact the
viability of our suppliers. This situation may be exacerbated during any period
of economic recovery. Any inability to obtain adequate deliveries or any other
circumstance that would require us to seek alternative sources of supply or to
manufacture such components internally could significantly delay our ability to
ship our products, which could damage relationships with current and prospective
customers and could harm our reputation and brand as well as our operating
results.
Our
Annual and Quarterly Performance May Fluctuate Which Could Negatively Impact Our
Operations and Our Stock Price
Our
operating results have fluctuated and can be expected to continue to fluctuate
in the future on a quarterly and annual basis as a result of a number of
factors, many of which are beyond our control. Results in any period could be
affected by:
·
|
changes
in market demand,
|
·
|
competitive
market conditions,
|
·
|
fluctuations
in foreign currency exchange rates,
|
·
|
the
cost and availability of
components,
|
·
|
the
mix of our customer base and sales
channels,
|
·
|
the
mix of products sold,
|
·
|
pricing
of products,
|
·
|
our
ability to expand our sales and marketing organization
effectively,
|
·
|
our
ability to attract and retain key technical and managerial employees,
and
|
·
|
general
global economic conditions.
|
In
addition, demand for our products in any quarter or year may vary due to the
seasonal buying patterns of our customers in the agricultural and engineering
and construction industries. The price of our common stock could decline
substantially in the event such fluctuations result in our financial performance
being below the expectations of public market analysts and investors, which are
based primarily on historical models that are not necessarily accurate
representations of the future.
We
Are Dependent on New Products and if We are Unable to Successfully Introduce
Them Into The Market, Our Customer Base May Decline or Fail to Grow as
Anticipated
Our
future revenue stream depends to a large degree on our ability to bring new
products to market on a timely basis. We must continue to make significant
investments in research and development in order to continue to develop new
products, enhance existing products, and achieve market acceptance of such
products. We may incur problems in the future in innovating and introducing new
products. Our development stage products may not be successfully completed or,
if developed, may not achieve significant customer acceptance. If we were unable
to successfully define, develop and introduce competitive new products, and
enhance existing products, our future results of operations would be adversely
affected. Development and manufacturing schedules for technology products are
difficult to predict, and we might not achieve timely initial customer shipments
of new products. The timely availability of these products in volume and their
acceptance by customers are important to our future success. If we are unable to
introduce new products, if other companies develop similar technology products,
or if we do not develop compelling new products, our number of customers may not
grow as anticipated, or may decline, which could harm our operating
results.
The
Actions that We Have Taken in Response to The Global Economic Slowdown and Our
Related Business Slowdown May Not Be as Effective as Anticipated.
We have
taken actions to reduce our cost structure to more closely align our costs with
our revenue levels. In taking these actions, we are attempting to
balance the cost reductions from such initiatives against the risk of impairing
our ability to operate our business and capitalize on any
recovery. If we do not achieve the proper balance of these costs
reduction initiatives, we may impair critical elements our operations, the loss
of which could negatively impact our ability to remain competitive in the market
place or to benefit from an economic recovery. We cannot assure our
cost cutting efforts will achieve appropriate levels of expenses and we may take
additional actions in the future.
We
Are Dependent on Proprietary Technology, which Could Result in Litigation that
Could Divert Significant Valuable Resources
Our
future success and competitive position is dependent upon our proprietary
technology, and we rely on patent, trade secret, trademark, and copyright law to
protect our intellectual property. The patents owned or licensed by us may be
invalidated, circumvented, and challenged. The rights granted under these
patents may not provide competitive advantages to us. Any of our pending or
future patent applications may not be issued within the scope of the claims
sought by us, if at all.
Others
may develop technologies that are similar or superior to our technology,
duplicate our technology or design around the patents owned by us. In addition,
effective copyright, patent, and trade secret protection may be unavailable,
limited or not applied for in certain countries. The steps taken by us to
protect our technology might not prevent the misappropriation of such
technology.
The value
of our products relies substantially on our technical innovation in fields in
which there are many current patent filings. We recognize that as new patents
are issued or are brought to our attention by the holders of such patents, it
may be necessary for us to withdraw products from the market, take a license
from such patent holders, or redesign our products. We do not believe any of our
products currently infringe patents or other proprietary rights of third
parties, but we cannot be certain they do not do so. In addition, the legal
costs and engineering time required to safeguard intellectual property or to
defend against litigation could become a significant expense of operations. Any
such litigation could require us to incur substantial costs and divert
significant valuable resources, including the efforts of our technical and
management personnel, which harm our results of operations and financial
condition.
Investing
in and Integrating New Acquisitions Could be Costly and May Place a Significant
Strain on Our Management Systems and Resources Which Could Negatively Impact Our
Operating Results
We have
recently acquired a number of companies, and intend to continue to acquire other
companies. Acquisitions of companies entail numerous risks,
including:
·
|
potential
inability to successfully integrate acquired operations and products or to
realize cost savings or other anticipated benefits from
integration,
|
·
|
loss
of key employees of acquired
operations,
|
·
|
the
difficulty of assimilating geographically dispersed operations and
personnel of the acquired
companies,
|
·
|
the
potential disruption of our ongoing
business,
|
·
|
unanticipated
expense related to acquisitions; including significant transactions costs
which under the new accounting rules, are required to be expensed rather
than capitalized,
|
·
|
the
correct assessment of the relative percentages of in-process research and
development expense that can be immediately written off as compared to the
amount which must be amortized over the appropriate life of the
asset,
|
·
|
the
impairment of relationships with employees and customers of either an
acquired company or our own business,
and
|
·
|
the
potential unknown liabilities associated with acquired
business.
|
As a
result of such acquisitions, we have significant assets that include goodwill
and other purchased intangibles. The testing of this goodwill and intangibles
for impairment under established accounting guidelines requires significant use
of judgment and assumptions. Changes in business conditions could require
adjustments to the valuation of these assets. In addition, losses incurred by a
company in which we have an investment may have a direct impact on our financial
statements or could result in our having to write-down the value of such
investment. Any such problems in integration or adjustments to the value of the
assets acquired could harm our growth strategy, and could be costly and place a
significant strain on our management systems and resources.
Our
Products May Contain Errors or Defects, which Could Result in Damage to Our
Reputation, Lost Revenue, Diverted Development Resources and Increased Service
Costs, Warranty Claims, and Litigation
We
warrant that our products will be free of defect for various periods of time,
depending on the product. In addition, certain of our contracts include epidemic
failure clauses. If invoked, these clauses may entitle the customer to return or
obtain credits for products and inventory, or to cancel outstanding purchase
orders even if the products themselves are not defective.
We must
develop our products quickly to keep pace with the rapidly changing market, and
we have a history of frequently introducing new products. Products and services
as sophisticated as ours could contain undetected errors or defects, especially
when first introduced or when new models or versions are released. In general,
our products may not be free from errors or defects after commercial shipments
have begun, which could result in damage to our reputation, lost revenue,
diverted development resources, increased customer service and support costs,
warranty claims, and litigation.
We
Are Dependent on the Availability of Allocated Bands within the Radio Frequency
Spectrum
Our GNSS
technology is dependent on the use of satellite signals from space and on
terrestrial communication bands. International allocations of radio
frequency are made by the International Telecommunications Union (ITU), a
specialized technical agency of the United Nations. These allocations are
further governed by radio regulations that have treaty status and which may be
subject to modification every two to three years by the World Radio
Communication Conference. Each country also has regulatory authority
on how each band is used.
Any ITU
or local reallocation of radio frequency bands, including frequency band
segmentation or sharing of spectrum, may materially and adversely affect the
utility and reliability of our products. Many of our products use other radio
frequency bands, together with the GNSS signal, to provide enhanced GNSS
capabilities, such as real-time kinematics precision. The continuing
availability of these non-GNSS radio frequencies is essential to provide
enhanced GNSS products to our precision survey, agriculture, and construction
machine controls markets. In addition, emissions from other services and
equipment operating in adjacent frequency bands or in-band may impair the
utility and reliability of our products. Any regulatory changes in
spectrum allocation or in allowable operating conditions could have a material
adverse effect on our business, results of operations, and financial
condition.
We have
certain products, such as GPS RTK systems, and surveying and mapping systems
that use integrated radio communication technology requiring access to available
radio frequencies allocated to local government. Some bands are
experiencing congestion. In the U.S., the FCC announced that it will require
migration of radio technology from wideband to narrowband operations in these
bands. The rules require migration of users to narrowband channels by 2011. In
the meantime, congestion could cause FCC coordinators to restrict or refuse
licenses. An inability to obtain access to these radio frequencies by end users
could have a material adverse effect on our business, results of operations, and
financial condition.
Many
of Our Products Rely on GNSS technology, the GPS, and other Satellite Systems,
Which May Become Inoperable and Result in Lost Revenue
GNSS
technology, GPS satellites and their ground support systems are complex
electronic systems subject to electronic and mechanical failures and possible
sabotage. Many of the GPS satellites currently in orbit were
originally designed to have lives of 7.5 years and are subject to damage by the
hostile space environment in which they operate. However, of the current
deployment of 30 satellites in place, some have already been in operation for
more than 12 years. To repair damaged or malfunctioning satellites is currently
not economically feasible. If a significant number of satellites were to become
inoperable, there could be a substantial delay before they are replaced with new
satellites. A reduction in the number of operating satellites may impair the
current utility of the GPS system and the growth of current and additional
market opportunities. GPS satellites and ground control segments are
being modernized. GPS modernization software updates can cause
problems. We depend on public access to open technical specifications
in advance of GPS updates.
As the
only complete GNSS currently in operation, we are dependent on continued
operation of GPS. GPS is operated by the U. S. Government, which is
committed to maintenance and improvement of GPS; however if the policy were to
change, and GPS were no longer supported by the U. S. Government, or if user
fees were imposed, it could have a material adverse effect on our business,
results of operations, and financial condition.
Many of
our products also use signals from systems that augment GPS, such as the Wide
Area Augmentation System (WAAS) and National Differential GPS System (NDGPS).
Many of these augmentation systems are operated by the federal government and
rely on continued funding and maintenance of these systems. In addition, some of
our products also use satellite signals from the Russian GLONASS System. Any
curtailment of the operating capability of these systems could result in
decreased user capability thereby impacting our markets.
The
European community has begun development of an independent radio navigation
satellite system, known as Galileo. We have access to the preliminary signal
design, which is subject to change and which requires a commercial license from
Galileo authorities. Although an operational Galileo system is several years
away, if we are unable to develop a timely commercial product, or obtain a
timely commercial license, it could result in lost revenue which could harm our
results of operations and financial condition.
Our
Business is Subject to Disruptions and Uncertainties Caused by War or
Terrorism
Acts of
war or acts of terrorism, especially any directed at the GPS signals, could have
a material adverse impact on our business, operating results, and financial
condition. The threat of terrorism and war and heightened security and military
response to this threat, or any future acts of terrorism, may invoke a
redeployment of the satellites used in GPS or interruptions of the system. To
the extent that such interruptions result in delays or cancellations of orders,
or the manufacture or shipment of our products, it could have a material adverse
effect on our business, results of operations, and financial
condition.
We
Are Exposed to Fluctuations in Currency Exchange Rates and Although We Hedge
Against These Risks, Our Attempts to Hedge Could be Unsuccessful and Expose Us
to Losses
A
significant portion of our business is conducted outside the U.S., and as such,
we face exposure to movements in non-U.S. currency exchange rates. These
exposures may change over time as business practices evolve and could have a
material adverse impact on our financial results and cash flows. Fluctuation in
currency impacts our operating results.
Currently,
we hedge only those currency exposures associated with certain assets and
liabilities denominated in non-functional currencies. The hedging activities
undertaken by us are intended to offset the impact of currency fluctuations on
certain non-functional currency assets and liabilities. Our attempts to hedge
against these risks could be unsuccessful and expose us to losses.
Our
Debt Could Adversely Affect Our Cash Flow and Prevent Us from Fulfilling Our
Financial Obligations
We have
an existing unsecured revolving credit agreement, under which we have an ability
to borrow an aggregate amount of up to $300 million. As of January 1,
2010, $151.0 million was outstanding under this line of credit. Debt incurred
under this agreement could have important consequences, such as:
·
|
requiring
us to dedicate a portion of our cash flow from operations and other
capital resources to debt service, thereby reducing our ability to fund
working capital, capital expenditures, and other cash
requirements,
|
·
|
increasing
our vulnerability to adverse economic and industry
conditions,
|
·
|
limiting
our flexibility in planning for, or reacting to, changes and opportunities
in, our industry, which may place us at a competitive disadvantage,
and
|
·
|
limiting
our ability to incur additional debt on acceptable terms, if at
all.
|
Additionally,
if we were to default under our amended credit agreement and were unable to
obtain a waiver for such a default, interest on the obligations would accrue at
an increased rate and the lenders could accelerate our obligations under the
amended credit agreement, however that acceleration will be automatic in the
case of bankruptcy and insolvency events of default. Additionally,
our subsidiaries that have guaranteed the amended credit agreement could be
required to pay the full amount of our obligations under the amended credit
agreement. Any such action on the part of the lenders against us
could harm our financial condition.
We
May Not Be Able to Enter Into or Maintain Important Alliances
We
believe that in certain business opportunities our success will depend on our
ability to form and maintain alliances with industry participants, such as
Caterpillar, Nikon, and CNH Global. Our failure to form and maintain such
alliances, or the pre-emption of such alliances by actions of competitors or us,
will adversely affect our ability to penetrate emerging markets. If we
experience problems from current or future alliances it could harm our operating
results and we may not be able to realize value from any such strategic
alliances.
We
Face Competition in Our Markets Which Could Decrease Our Revenue and Growth
Rates or Impair Our Operating Results and Financial Condition
Our
markets are highly competitive and we expect that both direct and indirect
competition will increase in the future. Our overall competitive position
depends on a number of factors including the price, quality and performance of
our products, the level of customer service, the development of new technology
and our ability to participate in emerging markets. Within each of our markets,
we encounter direct competition from other GPS, optical and laser suppliers and
competition may intensify from various larger U.S. and non-U.S. competitors and
new market entrants, particularly from emerging markets such as China and India.
The competition in the future may, in some cases, result in price reductions,
reduced margins or loss of market share, any of which could decrease our revenue
and growth rates or impair our operating results and financial condition. We
believe that our ability to compete successfully in the future against existing
and additional competitors will depend largely on our ability to execute our
strategy to provide systems and products with significantly differentiated
features compared to currently available products. We may not be able to
implement this strategy successfully, and our products may not be competitive
with other technologies or products that may be developed by our competitors,
many of whom have significantly greater financial, technical, manufacturing,
marketing, sales, and other resources than we do.
We
Are Subject to the Impact of Governmental and Other Similar Certifications and
Failure to Obtain the Requisite Certifications Could Harm Our Operating
Results
We market
certain products that are subject to governmental and similar certifications
before they can be sold. For example, CE certification for radiated emissions is
required for most GPS receiver and data communications products sold in the
European community. An inability to obtain such certifications in a timely
manner could have an adverse effect on our operating results. Also, some of our
products that use integrated radio communication technology require product type
certification and some products require an end user to obtain licensing from the
FCC for frequency-band usage. These are secondary licenses that are subject to
certain restrictions. An inability or delay in obtaining such certifications or
changes to the rules by the FCC could adversely affect our ability to bring our
products to market which could harm our customer relationships and therefore,
our operating results. Any failure to obtain the requisite certifications could
also harm our operating results.
The
Volatility of Our Stock Price Could Adversely Affect An Investment in Our Common
Stock
The
market price of our common stock has been, and may continue to be, highly
volatile. During fiscal 2009, our stock price ranged from $12.09 to
$25.85. We believe that a variety of factors could cause the price of
our common stock to fluctuate, perhaps substantially, including:
·
|
announcements
and rumors of developments related to our business or the industry in
which we compete,
|
·
|
quarterly
fluctuations in our actual or anticipated operating results and order
levels,
|
·
|
general
conditions in the worldwide
economy,
|
·
|
acquisition
announcements,
|
·
|
new
products or product enhancements by us or our
competitors,
|
·
|
developments
in patents or other intellectual property rights and
litigation,
|
·
|
developments
in our relationships with our customers and suppliers,
and
|
·
|
any
significant acts of terrorism.
|
In
addition, in recent years the stock market in general and the markets for shares
of "high-tech" companies in particular, have experienced extreme price
fluctuations which have often been unrelated to the operating performance of
affected companies. Any such fluctuations in the future could adversely affect
the market price of our common stock, and the market price of our common stock
may decline.
Changes
in Our Effective Tax Rate May Reduce Our Net Income in Future
Periods
A number
of factors may increase our future effective tax rates, including:
·
|
the
jurisdictions in which profits are determined to be earned and
taxed,
|
·
|
the
resolution of issues arising from tax audits with various tax
authorities,
|
·
|
changes
in the valuation of our deferred tax assets and
liabilities,
|
·
|
increases
in expense not deductible for tax purposes, including transaction costs
and impairments of goodwill in connection with
acquisitions,
|
·
|
changes
in available tax credits,
|
·
|
changes
in share-based compensation,
|
·
|
changes
in tax laws or the interpretation of such tax laws, and changes in
generally accepted accounting
principles,
|
·
|
the
repatriation of non-U.S. earnings for which we have not previously
provided for U.S. taxes, and
|
·
|
challenges
to the transfer pricing policies related to our global supply chain
management structure.
|
We are
currently in various stages of multiple year examinations by federal, state, and
foreign taxing authorities, including an audit of our 2005 through 2008 tax
years by the U.S. Internal Revenue Service (IRS). Among other things,
the IRS is examining our intercompany transfer pricing. Our effective
tax rate is based on the geographic mix of earnings, statutory rates,
intercompany transfer pricing, and enacted tax rules. If the IRS or
the taxing authorities of any other jurisdiction were to successfully challenge
a material tax position, we could become subject to higher taxes and our
earnings would be adversely affected. In addition, proposals for
changes in U.S. tax laws that may be considered or adopted in the future could
subject the Company to higher taxes or result in changes to tax law provisions
that currently provide favorable tax treatment.
Item 1B. Unresolved
Staff Comments.
None
Item 2. Properties.
The
following table sets forth the significant real property that we own or lease as
of February 21, 2010:
Location
|
Segment(s)
served
|
Size
in Sq. Feet
|
Commitment
|
Sunnyvale,
California
|
All
|
160,000
|
Leased,
expiring in 2012
3
buildings
|
Huber
Heights (Dayton), Ohio
|
Engineering
& Construction
Field
Solutions
Mobile
Solutions
|
150,000
57,200
64,000
|
Owned,
no encumbrances
Leased,
expiring in 2011
Leased,
expiring in 2012
|
Westminster,
Colorado
|
Engineering
& Construction Field Solutions
|
86,000
|
Leased,
expiring in 2013
|
Corvallis,
Oregon
|
Engineering
& Construction
|
20,000
38,000
|
Owned,
no encumbrances
Leased,
month to month
|
Richmond
Hill, Canada
|
Advanced
Devices
|
50,200
|
Leased,
expiring in 2010
|
Danderyd,
Sweden
|
Engineering
& Construction
|
93,900
|
Leased,
expiring in 2010
|
Christchurch,
New Zealand
|
Engineering
& Construction Mobile Solutions
Field
Solutions
|
65,000
|
Leased,
expiring in 2010
2
buildings
|
Fremont,
California
|
Mobile
Solutions
|
102,544
|
Leased,
expiring in 2010
2
buildings
|
Chennai,
India
|
Engineering
& Construction Mobile Solutions
|
37,910
|
Leased,
expiring in 2012
|
In
addition, we lease a number of smaller offices around the world primarily for
sales and manufacturing functions. *All the locations with leases expiring in
2010, are either being relocated or the lease is being renegotiated without a
substantial increase in cost. For financial information regarding obligations
under leases, see Note 10 of the Notes to the Consolidated Financial
Statements.
* We
believe that our facilities are adequate to support current and near-term
operations.
Item 3. Legal
Proceedings.
From time
to time, the Company is involved in litigation arising out of the ordinary
course of its business. There are no known claims or pending litigation expected
to have a material adverse effect on our business, results of operations, and
financial condition.
Item 4. Submission of
Matters to a Vote of Security Holders.
No
matters were submitted to a vote of security holders during the fourth quarter
of 2009.
PART
II
Item 5. Market for Registrant's
Common Equity, Related Stockholder Matters and Issuer Purchases of Equity
Securities.
Our
common stock is traded on the NASDAQ under the symbol "TRMB." The
table below sets forth, during the periods indicated, the high and low per share
sale prices for our common stock as reported on the NASDAQ.
2009
|
2008
|
|||||||||||||||
Sales
Price
|
Sales
Price
|
|||||||||||||||
Quarter
Ended
|
High
|
Low
|
High
|
Low
|
||||||||||||
First
quarter
|
$ | 22.92 | $ | 12.09 | $ | 30.97 | $ | 21.47 | ||||||||
Second
quarter
|
22.79 | 15.30 | 41.42 | 26.09 | ||||||||||||
Third
quarter
|
25.71 | 17.97 | 36.34 | 27.66 | ||||||||||||
Fourth
quarter
|
25.85 | 20.97 | 28.04 | 14.43 |
Stock
Repurchase Program
In
January 2008, our board of directors authorized a stock repurchase program
(“2008 Stock Repurchase Program”), authorizing us to repurchase up to $250
million of Trimble’s common stock under this program. We repurchased
approximately 4,243,000 shares of common stock in open market purchases at an
average price of $29.67 per share, for a total of $125.9 million in
2008. No shares of common stock were repurchased in
2009. The purchase price was reflected as a decrease to common stock
based on the average stated value per share with the remainder to retained
earnings. Common stock repurchases under the program were recorded
based upon the trade date for accounting purposes. All common shares
repurchased under this program have been retired. As of January 1, 2010, the
2008 Stock Repurchase Program had remaining authorized funds of $124.1
million. The timing and actual number of future shares repurchased
will depend on a variety of factors including price, regulatory requirements,
capital availability, and other market conditions. The program does
not require the purchase of any minimum number of shares and may be suspended or
discontinued at any time without public notice.
As of
February 24, 2010, there were approximately 944 holders of record
of our common stock.
Dividend
Policy
We have
not declared or paid any cash dividends on our common stock during any period
for which financial information is provided in this Annual Report on Form 10-K.
At this time, we intend to retain future earnings, if any, to fund the
development and growth of our business and do not anticipate paying any cash
dividends on our common stock in the foreseeable future.
Under the
existing terms of our credit facility, we are allowed to pay dividends and
repurchase shares of our common stock without limitation so long as no default
or unmatured default then existed, the leverage ratio for the two most recently
completed periods was less than 2.00:1.00 and after giving pro forma effect to
such dividend or share repurchase, the leverage ratio will be less than
2.00:1.00. Should the leverage ratio be equal to or greater than 2.00:1.00
without exceeding a leverage ratio of 3.00:1.00, we can pay dividends and
repurchase shares of our common stock in any twelve (12) month period, in an
aggregate amount equal to fifty percent (50%) of net income (plus, to the extent
deducted in determining net income for such period, non-cash expenses in respect
of stock options) for the previous twelve-month period, plus an additional $50
million over the term of the credit facility subject to pro forma compliance
with our fixed charge coverage ratio covenant. Otherwise, dividends and share
repurchases are restricted by our Credit Agreement.
Item 6. Selected Financial
Data
The
following selected consolidated financial data should be read in conjunction
with “Management’s Discussion and Analysis of Financial Condition and Results of
Operations” and our consolidated financial statements and related notes
appearing elsewhere in this annual report. Historical results are not
necessarily indicative of future results. In particular, because the results of
operations and financial condition related to our acquisitions are included in
our Consolidated Statements of Income and Consolidated Balance Sheets data
commencing on those respective acquisition dates, comparisons of our results of
operations and financial condition for periods prior to and subsequent to those
acquisitions are not indicative of future results. In February 2007
we acquired @Road, Inc. Please refer to Note 4 to the Consolidated Financial
Statements for more information.
January
1,
|
January
2,
|
December
28,
|
December
29,
|
December
30,
|
||||||||||||||||
As
of And For the Fiscal Years Ended
|
2010
|
2009
|
2007
|
2006
|
2005
|
|||||||||||||||
(Dollar
in thousands, except per share data)
|
||||||||||||||||||||
Revenue
|
$ | 1,126,259 | $ | 1,329,234 | $ | 1,222,270 | $ | 940,150 | $ | 774,913 | ||||||||||
Gross
margin
|
$ | 549,868 | $ | 649,136 | $ | 612,905 | $ | 461,081 | $ | 389,805 | ||||||||||
Gross
margin percentage
|
48.8 | % | 48.8 | % | 50.1 | % | 49.0 | % | 50.3 | % | ||||||||||
Net
income attributable to Trimble Navigation Ltd.
|
$ | 63,446 | $ | 141,472 | $ | 117,374 | $ | 103,658 | $ | 84,855 | ||||||||||
Net
income
|
$ | 63,963 | $ | 140,973 | $ | 117,374 | $ | 103,658 | $ | 84,855 | ||||||||||
Per
common share (1):
|
||||||||||||||||||||
Net
income (1)
|
||||||||||||||||||||
-
Basic
|
$ | 0.53 | $ | 1.17 | $ | 0.98 | $ | 0.94 | $ | 0.80 | ||||||||||
-
Diluted
|
$ | 0.52 | $ | 1.14 | $ | 0.94 | $ | 0.89 | $ | 0.75 | ||||||||||
Shares
used in calculating basic earnings per share (1)
|
119,814 | 120,714 | 119,280 | 110,044 | 106,432 | |||||||||||||||
Shares
used in calculating diluted earnings per share (1)
|
122,208 | 124,235 | 124,410 | 116,072 | 113,638 | |||||||||||||||
Cash
dividends per share
|
$ | - | $ | - | $ | - | $ | - | $ | - | ||||||||||
Total
assets
|
$ | 1,753,277 | $ | 1,635,016 | $ | 1,539,359 | $ | 983,477 | $ | 749,265 | ||||||||||
Non-current
portion of long term debt and other non-current
liabilities
|
$ | 211,021 | $ | 213,017 | $ | 116,692 | $ | 28,000 | $ | 19,474 |
|
(1)
|
2-for-1
Stock Split - On January 17, 2007, Trimble’s board of directors approved a
2-for-1 split of all outstanding shares of the Company’s Common Stock,
payable February 22, 2007 to stockholders of record on February 8, 2007.
All shares and per share information presented has been adjusted to
reflect the stock split on a retroactive basis for all periods
presented.
|
Item 7. Management's
Discussion and Analysis of Financial Condition and Results of
Operations
The
following discussion should be read in conjunction with the consolidated
financial statements and the related notes. The following discussion contains
forward-looking statements that reflect our plans, estimates and beliefs. Our
actual results could differ materially from those discussed in the
forward-looking statements. Factors that could cause or contribute to these
differences include, but are not limited to, those discussed below and those
listed under "Risks Factors." We have attempted to identify forward-looking
statements in this report by placing an asterisk (*) before paragraphs
containing such material.
EXECUTIVE
LEVEL OVERVIEW
Trimble’s
focus is on combining positioning technology with wireless communication and
application capabilities to create system-level solutions that enhance
productivity and accuracy for our customers. The majority of our markets are
end-user markets, including engineering and construction firms, governmental
organizations, public safety workers, farmers, and companies who must manage
fleets of mobile workers and assets. In our Advanced Devices segment, we also
provide components to original equipment manufacturers to incorporate into their
products. In the end user markets, we provide a system that includes
a hardware platform that may contain software and customer support. Some
examples of our solutions include products that automate and simplify the
process of surveying land, products that automate the utilization of equipment
such as tractors and bulldozers, products that enable a company to manage its
mobile workforce and assets, and products that allow municipalities to manage
their fixed assets. In addition, we also provide software applications on a
stand-alone basis. For example, we provide software for project management on
construction sites.
Solutions
targeted at the end-user make up a significant majority of our revenue. To
create compelling products, we must attain an understanding of the end users’
needs and work flow, and how location-based technology can enable that end user
to work faster, more efficiently, and more accurately. We use this knowledge to
create highly innovative products that change the way work is done by the
end-user. With the exception of our Mobile Solutions and Advanced Devices
segments, our products are generally sold through a dealer channel, and it is
crucial that we maintain a proficient, global, third-party distribution
channel.
We
continued to execute our strategy with a series of actions that can be
summarized in three categories.
Reinforcing
our position in existing markets
We
believe these markets provide us with additional, substantial potential for
substituting our technology for traditional methods. We are continuing to
develop new products and to strengthen our distribution channels in order to
expand our market. In our Engineering and Construction segment, we
introduced a new portfolio of Robotic Total Stations (RTS555, RTS655, and
RTS633) for
construction layout applications, the AllTrak™ Asset Management system which is
designed to help contractors manage their construction equipment and tools, as
well as the new Nomad 800X series of rugged handheld computers that offer
cellular data transmission, digital photography, and bar-code
scanning.
In our
Field Solutions segment, we introduced a Variable Rate Application Option for
our EZ Guidance 500 Systems, new AgGPS Autopilot platform kits
for tractors, combines, and sprayers, as well as the new Ag 162/262 Receivers
that feature the Trimble proprietary Transcend Positioning
Technology. We also introduced the Field-IQ crop input control system
that combines input control capabilities into one comprehensive modular system,
reducing the need for complex calibrations.
In our
Mobile Solutions segment, we introduced Trimble® Performance Manager, a unique
alerting and business intelligence application that allows cost reductions
through fewer miles driven and better utilization of fleet vehicles, and
decreases an organization's carbon footprint. We also announced that Windstream
Corporation, DirectSat USA, Linfox Logistics and British Gas have selected
Trimble’s GeoManager for their MRM requirements.
In our
Advanced Devices segment, we introduced the new solutions that enable continuous
mobile positioning and high-accuracy orientation in poor signal
environments. We also released new versions of our AllSport GPS and
Trimble Outdoors applications for the Android phone. All of these
products strengthened our competitive position and created new value for the
user.
Extending
our position in new and existing markets through new product
categories
* We are
utilizing the strength of the Trimble brand in our markets to expand our revenue
by bringing new products to new and existing users. In our
Engineering and Construction segment, we introduced the PCS900 Paving Control
system, an automatic 3D screed control system which improves paving productivity
and rideability by directly referencing the road design and minimizing asphalt
usage. In our Field Solutions segment, the acquisition of NTech
Industries extends our Precision Agriculture Solutions business with the
addition of the GreenSeeker nitrogen application and WeedSeeker controlled
herbicide application systems, while the acquisition of CTN Data provided the
FarmWorks software solutions for information and farm operations
management. During the year, we also released the Ag GPS EZ Office
2010 software suite designed to help farmers easily map and manage field
data. In
our Mobile Solutions segment, we announced the acquisition of Accutest
Engineering Solutions Ltd that expanded our vehicle diagnostic
capabilities.
Bringing
existing technology to new markets
* We
continue to reinforce our position in existing markets and position ourselves in
newer markets that will serve as important sources of future growth. Our efforts
are focused in Africa, China, India, the Middle-East and
Russia. During the year, we conducted a highly successful User
Conference in China that had more than 1,600 registered attendees. We
formed a 50/50 joint venture, Beijing Kegong Trible Navigation Technology, with
China Aerospace Science & Industry Academy of Information Technology
(CASIC-IT) to develop, manufacture, and distribute Global Navigation Satellite
System (GNSS) receivers and systems based on the Chinese Compass satellite
system. We also signed a definitive agreement to form a 50/50 joint venture with
China Railway Eryuan Engineering Group Co. Ltd. (CREEC) to develop and provide
digital railway solutions that address the design, construction, and maintenance
for the China railway industry.
CRITICAL
ACCOUNTING POLICIES AND ESTIMATES
Our
accounting policies are more fully described in Note 2 of the Notes to the
Consolidated Financial Statements. The preparation of financial statements and
related disclosures in conformity with U.S. generally accepted accounting
principles requires us to make judgments, assumptions, and estimates that affect
the amounts reported in the Consolidated Financial Statements and accompanying
Notes to the Consolidated Financial Statements. We consider the accounting
polices described below to be our critical accounting policies. These critical
accounting policies are impacted significantly by judgments, assumptions, and
estimates used in the preparation of the Consolidated Financial Statements, and
actual results could differ materially from the amounts reported based on these
policies.
Revenue
Recognition
We
recognize product revenue when persuasive evidence of an arrangement exists,
shipment has occurred, the fee is fixed or determinable, and collectibility is
reasonably assured. In instances where final acceptance of the product is
specified by the customer or is uncertain, revenue is deferred until all
acceptance criteria have been met.
Contracts
and/or customer purchase orders are used to determine the existence of an
arrangement. Shipping documents and customer acceptance, when applicable, are
used to verify delivery. We assess whether the fee is fixed or determinable
based on the payment terms associated with the transaction and whether the sales
price is subject to refund or adjustment. We assess collectibility based
primarily on the creditworthiness of the customer as determined by credit checks
and analysis, as well as the customer’s payment history.
Revenue
for orders is not recognized until the product is shipped and title has
transferred to the buyer. We bear all costs and risks of loss or damage to the
goods up to that point. Our shipment terms for U.S. orders and international
orders fulfilled from our European distribution center typically provide that
title passes to the buyer upon delivery of the goods to the carrier named by the
buyer at the named place or point. If no precise point is indicated by the
buyer, we may choose within the place or range stipulated where the carrier will
take the goods into carrier’s charge. Other shipment terms may provide that
title passes to the buyer upon delivery of the goods to the
buyer. Shipping and handling costs are included in the cost of goods
sold.
Revenue
to distributors and resellers is recognized upon shipment, assuming all other
criteria for revenue recognition have been met. Distributors and resellers do
not typically have a right of return.
Revenue
from purchased extended warranty and support agreements is deferred and
recognized ratably over the term of the warranty/support period.
We
present revenue net of sales taxes and any similar assessments.
In
instances where the embedded software in our products is more than incidental to
the functionality of the hardware, we generally recognize revenue once the
product has shipped and title has transferred to the buyer, assuming all other
revenue recognition criteria have been met. The determination as to whether the
embedded software is more than incidental to our products requires significant
judgment including a consideration of factors such as marketing, research and
development efforts, and any post-customer contract support (PCS) relating to
the embedded software.
Our
software arrangements generally consist of a perpetual license fee and PCS. We
have established vendor-specific objective evidence (VSOE) of fair value for our
PCS contracts based on renewal rates. The remaining value of the software
arrangement is allocated to the license fee using the residual
method. License revenue is primarily recognized when the software has
been delivered, and fair value has been established for all remaining
undelivered elements. Revenue from PCS is recognized ratably over the term of
the PCS agreement.
Subscription
revenue related to our hosted arrangements is recognized ratably over the
contract period. Under our hosted arrangements, the customer typically does not
have the contractual right to take possession of the software at any time during
the hosting period without incurring a significant penalty and it is not
feasible for the customer to run the software either on its own hardware or on a
third-party’s hardware. Upfront fees related to our hosted solution primarily
consist of amounts for the in-vehicle enabling hardware device and peripherals,
if any. For upfront fees relating to this proprietary hardware where the
firmware is more than incidental to the functionality of the hardware, we defer
the upfront fees at installation and recognize them ratably over the minimum
service contract period, generally one to five years. Product costs are also
deferred and amortized over such period.
Allowance
for Doubtful Accounts and Sales Returns
Our
accounts receivable balance, net of allowance for doubtful accounts and sales
returns reserve, was $202.3 million as of January 1, 2010, as compared with
$204.3 million as of January 2, 2009. The allowance for doubtful accounts
was $3.9 million and $6.0 million as of January 1, 2010 and January 2, 2009,
respectively. We evaluate ongoing collectibility of our trade
accounts receivable based on a number of factors such as age of the accounts
receivable balances, credit quality, historical experience, and current economic
conditions that may affect a customer’s ability to pay. In circumstances where
we are aware of a specific customer’s inability to meet its financial
obligations to us, a specific allowance for bad debts is estimated and recorded
which reduces the recognized receivable to the estimated amount we believe will
ultimately be collected. In addition to specific customer identification of
potential bad debts, bad debt charges are recorded based on our recent past loss
history and an overall assessment of past due trade accounts receivable amounts
outstanding.
A reserve
for sales returns is established based on historical trends in product return
rates experienced in the ordinary course of business. The reserve for sales
returns as of January 1, 2010 and January 2, 2009 was $1.7 million and $1.8
million, respectively, for estimated future returns that were recorded as a
reduction of our accounts receivable and revenue. If the actual future returns
were to deviate from the historical data on which the reserve had been
established, our revenue could be adversely affected.
Inventory
Valuation
Our
inventories, net balance was $144.0 million as of January 1, 2010 as compared
with $160.9 million as of January 2, 2009. Our inventory allowances as of
January 1, 2010 were $28.1 million, as compared with $29.8 million as of January
2, 2009. Our inventories are stated at the lower of standard cost (which
approximates actual cost on a first-in, first-out basis) or
market. Adjustments to reduce the cost of inventory to its net
realizable value, if required, are made for estimated excess, obsolescence, or
impaired balances. Factors influencing these adjustments include
decline in demand, technological changes, product life cycle and development
plans, component cost trends, product pricing, physical deterioration, and
quality issues. If actual factors are less favorable than those projected by us,
additional inventory write-downs may be required.
Income
Taxes
Income
taxes are accounted for under the liability method whereby deferred tax assets
or liability account balances are calculated at the balance sheet date using
current tax laws and rates in effect for the year in which the differences are
expected to affect taxable income. A valuation allowance is recorded to reduce
the carrying amounts of deferred tax assets if it is more likely than not such
assets will not be realized.
Relative
to uncertain tax positions, we only recognize the tax benefit if it is more
likely than not that the tax position will be sustained on examination by the
taxing authorities, based on the technical merits of the position. The tax
benefits recognized in the financial statements from such positions are then
measured based on the largest benefit that has a greater than 50% likelihood of
being realized upon ultimate settlement.
Our
valuation allowance is primarily attributable to net operating loss and research
and development credit carryforwards. Management believes that it is
more likely than not that we will not realize these deferred tax assets, and,
accordingly, a valuation allowance has been provided for such
amounts. Beginning in 2009, we adopted the revised accounting
guidance for business combinations, under which such valuation allowance
adjustments associated with an acquisition closing after January 3, 2009 (and
after the measurement period) are recorded through income tax expense. Prior to
January 3, 2009, these adjustments were required to be recognized by adjusting
the purchase price related to the acquisition.
Goodwill
and Purchased Intangible Assets
Goodwill
represents the excess of the purchase price over the fair value of the net
tangible and identifiable intangible assets acquired in a business combination.
Beginning in fiscal 2009, our identifiable intangible assets now include
in-process research and development based on the revised accounting guidance for
business combinations. Intangible assets acquired individually, with a group of
other assets, or in a business combination, are recorded at fair value.
Identifiable intangible assets are comprised of distribution channels and
distribution rights, patents, licenses, technology, acquired backlog,
trademarks, and in-process research and development. Identifiable
intangible assets are being amortized over the period of estimated benefit using
the straight-line method, reflecting the pattern of economic benefits associated
with these assets, and have estimated useful lives ranging from one to fifteen
years with a weighted average useful life of 6.4 years. Goodwill is not subject
to amortization, but is subject to at least an annual assessment for impairment,
applying a fair-value based test.
Impairment
of Goodwill, Intangible Assets and Other Long-Lived Assets
We
evaluate goodwill, at a minimum, on an annual basis and whenever events and
changes in circumstances suggest that the carrying amount may not be
recoverable. The annual goodwill impairment testing is performed in the fourth
fiscal quarter of each year. Goodwill is reviewed for impairment
utilizing a two-step process. First, impairment of goodwill is tested
at the reporting unit level by comparing the reporting unit’s carrying amount,
including goodwill, to the fair value of the reporting
unit. The fair values of the reporting units are estimated
using a discounted cash flow approach. If the carrying amount of the
reporting unit exceeds its fair value, a second step is performed to measure the
amount of impairment loss, if any. In step two, the implied fair value of
goodwill is calculated as the excess of the fair value of a reporting unit over
the fair values assigned to its assets and liabilities. If the implied fair
value of goodwill is less than the carrying value of the reporting unit’s
goodwill, the difference is recognized as an impairment loss.
Depreciation
and amortization of the intangible assets and other long-lived assets is
provided using the straight-line method over their estimated useful lives,
reflecting the pattern of economic benefits associated with these assets.
Changes in circumstances such as technological advances, changes to our business
model, or changes in the capital strategy could result in the actual useful
lives of intangible assets or other long-lived assets differing from initial
estimates. In those cases where we determine that the useful life of an asset
should be revised, the net book value in excess of the estimated residual value
will be expensed and the residual value is depreciated over its revised
remaining useful life. These assets are evaluated for impairment whenever events
or changes in circumstances indicate that the carrying amount of such assets may
not be recoverable based on their future cash flows. The estimated future cash
flows are based upon, among other things, assumptions about expected future
operating performance and may differ from actual cash flows. The assets
evaluated for impairment are grouped with other assets to the lowest level for
which identifiable cash flows are largely independent of the cash flows of other
groups of assets and liabilities. If the sum of the projected undiscounted cash
flows (excluding interest) is less than the carrying value of the assets, the
assets will be written down to the estimated fair value.
Warranty
Costs
The
liability for product warranties was $14.7 million as of January 1, 2010, as
compared with $13.3 million as of January 2, 2009. We accrue for warranty costs
as part of cost of sales based on associated material product costs, technical
support labor costs, and costs incurred by third parties performing work on our
behalf. Our expected future cost is primarily estimated based upon historical
trends in the volume of product returns within the warranty period and the cost
to repair or replace the equipment. The products sold are generally
covered by a warranty for periods ranging from 90 days to three years, and in
some instances, up to 5.5 years.
While we
engage in extensive product quality programs and processes, including actively
monitoring and evaluating the quality of our component suppliers, our warranty
obligation is affected by product failure rates, material usage, and service
delivery costs incurred in correcting a product failure. Should actual product
failure rates, material usage, or service delivery costs differ from our
estimates, revisions to the estimated warranty accrual and related costs may be
required.
Stock-Based
Compensation
We
recognize compensation expense for all share-based payment awards made to our
employees and directors based on estimated fair values. Stock-based compensation
expense recognized in our Consolidated Statements of Income for fiscal 2009,
2008 and 2007 includes compensation expense for stock options granted prior to,
but not yet vested as of December 30, 2005. The grant date fair value
of these options was estimated using the Black-Scholes options-pricing
model. The grant date
fair value for options granted subsequent to December 30, 2005 is estimated
using a binomial valuation
model. The fair value of rights to purchase shares under stock
participation plans is estimated using the Black-Scholes option-pricing
model.
The
determination of fair value of share-based payment awards on the date of grant
using an option-pricing model is affected by our stock price as well as
assumptions regarding a number of highly complex and subjective
variables. These variables include our expected stock price
volatility over the term of the awards, actual and projected employee stock
option exercise behaviors, risk-free interest rates, and expected
dividends. In addition, the binomial model incorporates actual
option-pricing behavior and changes in volatility over the option’s contractual
term.
Beginning
in fiscal 2006, our expected stock price volatility for stock purchase rights
has been based on implied volatilities of traded options on our stock and our
expected stock price volatility for stock options is based on a combination of
our historical stock price volatility for the period commensurate with the
expected life of the stock option and the implied volatility of traded
options. The use of implied volatilities was based upon the
availability of actively traded options on our stock with terms similar to our
awards and also upon our assessment that implied volatility is more
representative of future stock price trends than historical
volatility. However, because the expected life of our stock options
is greater than the terms of our traded options, we used a combination of our
historical stock price volatility commensurate with the expected life of our
stock options and implied volatility of traded options.
We
estimated the expected life of the awards based on an analysis of our historical
experience of employee exercise and post-vesting termination behavior considered
in relation to the contractual life of the options and purchase
rights. The risk-free interest rate assumption is based upon observed
interest rates appropriate for the expected term of the awards.
We do not
currently pay cash dividends on our common stock and do not anticipate doing so
in the foreseeable future. Accordingly, our expected dividend yield
is zero.
Because
stock-based compensation expense recognized in the Consolidated Statement of
Income for fiscal 2009, 2008 and 2007 is based on awards ultimately expected to
vest, it has been reduced for estimated forfeitures. The stock-based
compensation guidance requires forfeitures to be estimated at the time of grant
and revised, if necessary, in subsequent periods if actual forfeitures differ
from those estimates. Forfeitures were estimated based on historical
experience.
If
factors change and we employ different assumptions to determine the fair value
of our share-based payment awards granted in future periods, the compensation
expense that we record under it may differ significantly from what we have
recorded in the current period. In addition, valuation models,
including the Black-Scholes and binomial models, may not provide reliable
measures of the fair values of our stock-based
compensation. Consequently, there is a risk that our estimates of the
fair values of our stock-based compensation awards on the grant dates may bear
little resemblance to the actual values realized upon the exercise, expiration,
early termination, or forfeiture of those stock-based payments in the
future. Certain stock-based payments, such as employee stock options,
may expire worthless or otherwise result in zero intrinsic value as compared to
the fair values originally estimated on the grant date and reported in our
financial statements. Alternatively, values may be realized from
these instruments that are significantly higher than the fair values originally
estimated on the grant date and reported in our financial
statements.
See Note
2 and Note 14 to the Consolidated Financial Statements for additional
information.
RESULTS
OF OPERATIONS
Overview
The
following table is a summary of revenue, gross margin and operating income for
the periods indicated and should be read in conjunction with the narrative
descriptions below.
January
1,
|
January
2,
|
December
28,
|
||||||||||
Fiscal
Years Ended
|
2010
|
2009
|
2007
|
|||||||||
(Dollars
in thousands)
|
||||||||||||
Total
consolidated revenue
|
$ | 1,126,259 | $ | 1,329,234 | $ | 1,222,270 | ||||||
Gross
margin
|
$ | 549,868 | $ | 649,136 | $ | 612,905 | ||||||
Gross
margin %
|
48.8 | % | 48.8 | % | 50.1 | % | ||||||
Total
consolidated operating income
|
$ | 85,820 | $ | 185,460 | $ | 178,267 | ||||||
Operating
income %
|
7.6 | % | 14.0 | % | 14.6 | % |
Basis
of Presentation
We have a
52-53 week fiscal year, ending on the Friday nearest to December 31, which for
fiscal 2009 was January 1, 2010. Fiscal 2009 and Fiscal 2007 were
both 52-week years. Fiscal 2008 was a 53-week year
.
Revenue
In fiscal
2009, total revenue decreased by $203.0 million, or 15%, to $1.13 billion from
$1.33 billion in fiscal 2008. The decrease in fiscal 2009 was primarily due
to slower sales in the Engineering and Construction segment. Engineering and
Construction revenue decreased $163.1 million, or 22.0%, Field Solutions
decreased $9.0 million, or 3%, Mobile Solutions decreased $12.2 million, or
7.3%, and Advanced Devices decreased $18.7 million, or 15.6%, as compared to
fiscal 2008. In fiscal 2009, the revenue decline was primarily due to
recessionary conditions in the U.S. and European markets.
Although
revenue decreased by 15% in fiscal 2009, our revenue in the fourth quarter
increased by $9.4 million or 3.5% over the corresponding quarter in the prior
year.
In fiscal
2008, total revenue increased by $107.0 million, or 9%, to $1.33 billion from
$1.22 billion in fiscal 2007. The increase in fiscal 2008 was due to
stronger performances in the Field Solutions and Mobile Solutions segments.
Engineering and Construction revenue decreased $1.6 million, or 0.2%; Field
Solutions increased $100.1 million, or 50%; Mobile Solutions increased $9.4
million, or 6%; and Advanced Devices decreased $0.9 million, or 1%, as compared
to fiscal 2007. In fiscal 2008, revenue growth was primarily driven
by new products, a strong agricultural environment, as well as the impact of
acquisitions partially offset by softness in European and U.S. markets in
Engineering and Construction.
* During
fiscal 2009, sales to customers in the United States represented 50%, Europe
represented 23%, Asia Pacific represented 17%, and other regions represented 10%
of our total revenue. During fiscal 2008, sales to customers in the United
States represented 49%, Europe represented 25%, Asia Pacific represented 14%,
and other regions represented 12% of our total revenue. During the
2007 fiscal year, sales to customers in the United States represented 50%,
Europe represented 27%, Asia Pacific represented 12%, and other regions
represented 11% of our total revenue. We anticipate that sales to international
customers will continue to account for a significant portion of our
revenue.
* No
single customer accounted for 10% or more of our total revenue in fiscal 2009,
2008, and 2007. It is possible, however, that in future periods the failure of
one or more large customers to purchase products in quantities anticipated by us
may adversely affect the results of operations.
Gross
Margin
Our gross
margin varies due to a number of factors including product mix, pricing,
distribution channel used, effects of production volumes, new product start-up
costs, and foreign currency translations.
In fiscal
2009, our gross margin decreased by $99.3 million as compared to fiscal 2008
primarily due to lower revenue. Gross margin as a percentage of total revenue
was 48.8% both in fiscal 2009 and fiscal 2008. The consistency in the gross
margin percentage was primarily due to manufacturing cost reductions in
Engineering and Construction and improved product mix in Field Solutions, offset
by lower revenue as a percentage of fixed costs.
In fiscal
2008, our gross margin increased by $36.2 million as compared to fiscal 2007
primarily due to higher revenue. Gross margin as a percentage of total revenue
was 48.8% in fiscal 2008 and 50.1% in fiscal 2007. The decrease in the gross
margin percentage was driven primarily by increased amortization of purchased
intangibles, and product mix.
* Because
of potential product mix changes within and among the industry markets, market
pressures on unit selling prices, fluctuations in unit manufacturing costs,
including increases in component prices and other factors, current level gross
margin cannot be assured.
Operating
Income
Operating
income decreased by $99.6 million for fiscal 2009 as compared to fiscal
2008. Operating income as a percentage of total revenue for fiscal
2009 was 7.6% as compared to 14.0% for fiscal 2008. The decrease in operating
income was primarily driven by lower revenue and associated gross margin. The
decrease in operating income percentage was primarily due by decreased operating
expense leverage, primarily in Engineering and Construction, due to lower
revenue.
Although
our operating income decreased in fiscal 2009, our operating income in the
fourth quarter increased by $2.2 million as compared to the corresponding
quarter in the prior year, due to strong expense control.
Operating
income increased by $7.2 million for fiscal 2008 as compared to fiscal
2007. Operating income as a percentage of total revenue for fiscal
2008 was 14.0% as compared to 14.6% for fiscal 2007. The increase in operating
income was primarily driven by higher revenue and associated gross margin. The
decrease in operating income percentage was primarily due by increased
amortization of purchased intangibles, product mix and foreign
exchange.
Results
by Segment
To
achieve distribution, marketing, production, and technology advantages in our
targeted markets, we manage our operations in the following four segments:
Engineering and Construction, Field Solutions, Mobile Solutions, and Advanced
Devices. Operating income equals net revenue less cost of sales and operating
expense, excluding general corporate expense, amortization of purchased
intangible assets, in-process research and development expense for acquisitions
completed prior to fiscal 2009, restructuring charges, non-operating income,
net, and income tax provision.
The
following table is a breakdown of revenue and operating income by segment for
the periods indicated and should be read in conjunction with the narrative
descriptions below.
January
1,
|
January
2,
|
December
28,
|
||||||||||
Fiscal
Years Ended
|
2010
|
2009
|
2007
|
|||||||||
(Dollars
in thousands)
|
||||||||||||
Engineering
and Construction
|
||||||||||||
Revenue
|
$ | 578,579 | $ | 741,668 | $ | 743,291 | ||||||
Segment
revenue as a percent of total revenue
|
51 | % | 56 | % | 61 | % | ||||||
Operating
income
|
$ | 58,282 | $ | 126,014 | $ | 174,177 | ||||||
Operating
income as a percent of segment revenue
|
10 | % | 17 | % | 23 | % | ||||||
Field
Solutions
|
||||||||||||
Revenue
|
$ | 291,752 | $ | 300,708 | $ | 200,614 | ||||||
Segment
revenue as a percent of total revenue
|
26 | % | 22 | % | 16 | % | ||||||
Operating
income
|
$ | 104,498 | $ | 109,489 | $ | 60,933 | ||||||
Operating
income as a percent of segment revenue
|
36 | % | 36 | % | 30 | % | ||||||
Mobile
Solutions
|
||||||||||||
Revenue
|
$ | 154,881 | $ | 167,113 | $ | 157,673 | ||||||
Segment
revenue as a percent of total revenue
|
14 | % | 13 | % | 13 | % | ||||||
Operating
income
|
$ | 14,341 | $ | 11,328 | $ | 12,517 | ||||||
Operating
income as a percent of segment revenue
|
9 | % | 7 | % | 8 | % | ||||||
Advanced
Devices
|
||||||||||||
Revenue
|
$ | 101,047 | $ | 119,745 | $ | 120,692 | ||||||
Segment
revenue as a percent of total revenue
|
9 | % | 9 | % | 10 | % | ||||||
Operating
income
|
$ | 17,227 | $ | 24,445 | $ | 17,276 | ||||||
Operating
income as a percent of segment revenue
|
17 | % | 20 | % | 14 | % |
A
reconciliation of our consolidated segment operating income to consolidated
income before income taxes follows:
January
1,
|
January
2,
|
December
28,
|
||||||||||
Fiscal
Years Ended
|
2010
|
2009
|
2007
|
|||||||||
(in
thousands)
|
||||||||||||
Consolidated
segment operating income
|
$ | 194,348 | $ | 271,276 | $ | 264,903 | ||||||
Unallocated
corporate expense
|
(45,102 | ) | (36,284 | ) | (42,914 | ) | ||||||
Restructuring
charges
|
(10,754 | ) | (4,641 | ) | (3,025 | ) | ||||||
Amortization
of purchased intangible assets
|
(52,672 | ) | (44,891 | ) | (38,585 | ) | ||||||
In-process
research and development expense
|
- | - | (2,112 | ) | ||||||||
Consolidated
operating income
|
85,820 | 185,460 | 178,267 | |||||||||
Non-operating
income, net
|
1,801 | 5,983 | 5,489 | |||||||||
Consolidated
income before taxes
|
$ | 87,621 | $ | 191,443 | $ | 183,756 |
Engineering
and Construction
Engineering
and Construction revenue decreased by $163.1 million, or 22.0%, while segment
operating income decreased by $67.7 million, or 53.7%, for fiscal 2009 as
compared to fiscal 2008. The revenue decrease was primarily due to recessionary
conditions in the U.S. and European markets. Operating income decreased as a
result of lower revenue, partially offset by a reduction in operating expense
resulting from our restructuring activities and overall expense
control.
Engineering
and Construction revenue decreased by $1.6 million, or 0.2%, while segment
operating income decreased by $48.0 million, or 28%, for fiscal 2008 as compared
to fiscal 2007. The revenue decrease was primarily due to recessionary
conditions in the U.S. and European markets partially offset by strength in the
rest of world markets. Operating income decreased as a result of the slight
decline in revenue, product mix and operating expense associated with
acquisitions in the last twelve months.
Field
Solutions
Field
Solutions revenue decreased by approximately $9.0 million, or 3%, while segment
operating income decreased by $5.0 million, or 4.6%, for fiscal year 2009 as
compared to fiscal 2008. The decrease in revenue was driven primarily by
slower sales of agriculture products, both in the U.S. and
internationally. Operating income decreased primarily due to lower
revenue.
Field
Solutions revenue increased by approximately $100.1 million, or 50%, while
segment operating income increased by $48.6 million, or 80%, for fiscal year
2008 as compared to fiscal 2007. The increase in revenue was driven
primarily by strong sales of agriculture products, both in the U.S. and
internationally. Operating income increased primarily due to
increased revenue, as well as improvement in product costs.
Mobile
Solutions
Mobile
Solutions revenue decreased by $12.2 million, or 7.3%, while segment operating
income increased by $3.0 million, or 26.6%, for fiscal 2009 as compared to
fiscal 2008. Revenue was down primarily due to decrease in ready mix
hardware and subscription revenue as well as the impact in the prior year of the
recognition of large non-recurring items. Operating income increased
primarily due to gross margin improvement and a reduction in operating
expenses.
Mobile
Solutions revenue increased by $9.4 million, or 6%, while segment operating
income decreased by $1.2 million, or 9%, for fiscal 2008 as compared to fiscal
2007. Revenue grew due to increased subscription revenue and a full first
quarter of @Road revenue as compared to a partial first quarter of @Road revenue
in fiscal 2007. Operating income decreased primarily due to increased
research and development and sales expense for the Field Service software,
partially offset by a reduction in operating expenses.
Advanced
Devices
Advanced
Devices revenue decreased by $18.7 million, or 15.6%, and segment operating
income decreased by $7.2 million, or 29.5%, for fiscal 2009 as compared to
fiscal 2008. The decrease in revenue was primarily driven by slower sales
of Component Technologies products. Operating income decreased
primarily due to the decrease in revenue, partially offset by lower spending due
to operating expense control.
Advanced
Devices revenue decreased by $0.9 million, or 1%, and segment operating income
increased by $7.2 million, or 42%, for fiscal 2008 as compared to fiscal
2007. The decrease in revenue was primarily driven by slower sales of
Component Technologies products. Operating income increased due to
product mix, royalty and licensing revenue.
Research
and Development, Sales and Marketing, and General and Administrative
Expenses
The
following table shows research and development (“R&D”), sales and marketing,
and general and administrative (“G&A”) expenses in absolute dollars and as a
percentage of total revenue for fiscal years 2009, 2008 and 2007 and should be
read in conjunction with the narrative descriptions of those operating expenses
below.
January
1,
|
January
2,
|
December
28,
|
||||||||||
Fiscal
Years Ended
|
2010
|
2009
|
2007
|
|||||||||
(Dollars
in thousands)
|
||||||||||||
Research
and development
|
$ | 136,639 | $ | 148,265 | $ | 131,468 | ||||||
Percentage
of revenue
|
12 | % | 11 | % | 11 | % | ||||||
Sales
and marketing
|
189,859 | 196,290 | 186,495 | |||||||||
Percentage
of revenue
|
17 | % | 15 | % | 15 | % | ||||||
General
and administrative
|
100,830 | 94,023 | 92,572 | |||||||||
Percentage
of revenue
|
9 | % | 7 | % | 8 | % | ||||||
Total
|
$ | 427,328 | $ | 438,578 | $ | 410,535 | ||||||
Percentage
of revenue
|
38 | % | 33 | % | 34 | % |
Overall,
R&D, sales and marketing, and G&A expenses decreased by approximately
$11.3 million in fiscal 2009 compared to fiscal 2008.
Research
and development expense decreased by $11.6 million in fiscal 2009, as compared
to fiscal 2008, primarily due to the impact of a decrease in compensation
related expense, a decrease in R&D materials and a decrease due to foreign
currency exchange rates, partially offset by new R&D expense as a result of
acquisitions not applicable in the prior year. All of our R&D costs have
been expensed as incurred. Overall research and development spending was
approximately 12% of revenue in fiscal 2009 and 11% in fiscal 2008.
Research
and development expense increased by $16.8 million in fiscal 2008, as compared
to fiscal 2007, primarily due to the impact of new R&D expense as a result
of acquisitions not applicable in the prior year, an increase in compensation
related expense, an increase in R&D materials and an increase due to foreign
currency exchange rates. All of our R&D costs have been expensed as
incurred. Overall research and development spending remained relatively constant
at approximately 11% of revenue.
* We
believe that the development and introduction of new products are critical to
our future success and we expect to continue active development of new
products.
Sales and
marketing expense decreased by $6.4 million in fiscal 2009 as compared to fiscal
2008. The decrease was primarily due to a decrease in travel and trade show
expense, and a decrease due to foreign currency exchange rates, partially offset
by new sales and marketing expenses as a result of acquisitions not applicable
in the prior year. Spending overall was approximately 17% of revenue in fiscal
2009 compared to 15% in fiscal 2008.
Sales and
marketing expense increased by $9.8 million in fiscal 2008 as compared to fiscal
2007. The increase was primarily due to new sales and marketing expenses as
a result of acquisitions not applicable in the prior year, an increase in
compensation related expense and an increase in trade shows and marketing
literature expense. Spending overall remained relatively constant at
approximately 15% of revenue.
* Our
future growth will depend in part on the timely development and continued
viability of the markets in which we currently compete as well as our ability to
continue to identify and develop new markets for our products.
General
and administrative expense increased by $6.8 million in fiscal 2009 compared to
fiscal 2008 primarily due to additional G&A expenses as a result of
acquisitions, increased deferred compensation plan liabilities, and stock
compensation expense, partially offset by foreign exchange rates. Spending
overall was at approximately 9% of revenue in fiscal 2009 compared to 7% in
fiscal 2008.
General
and administrative expense increased by $1.5 million in fiscal 2008 compared to
fiscal 2007 primarily due to new G&A expenses as a result of acquisitions,
partially offset by decreased compensation related expense and reduced deferred
compensation liabilities. Spending overall was at approximately 7% of revenue in
fiscal 2008 compared to 8% in fiscal 2007.
Other
Operating Expenses
Restructuring
expense
Restructuring
expense for the three years ended January 1, 2010 was as follows:
January
1,
|
January
2,
|
December
28,
|
||||||||||
2010
|
2009
|
2007
|
||||||||||
(in
thousands)
|
||||||||||||
Severance
and benefits
|
$ | 10,754 | $ | 4,641 | $ | 3,025 |
During
fiscal 2009, restructuring expense of $10.8 million was related to decisions to
streamline processes and reduce the cost structure of the Company, with
approximately 340 employees affected worldwide. Of the total restructuring
expense, $6.4 million is presented as a separate line within Operating expense
and $4.4 million is included within Cost of sales on the Company’s Consolidated
Statements of Income. Expense related to the decisions made through the fourth
quarter of fiscal 2009 is all accrued as of January 1, 2010.
During
fiscal 2008, restructuring expense of $4.6 million was related to decisions to
streamline processes and reduce the cost structure of the Company, with
approximately 100 employees affected worldwide. Of the total restructuring
expense, $2.7 million is presented as a separate line within Operating expense
on the Company’s Consolidated Statements of Income, and $1.9 million is included
within Cost of sales.
During
fiscal, 2007, restructuring expense of $3.0 million was for charges associated
with the Company’s acquisition of @Road. The restructuring expense was related
to the acceleration of vesting of employee stock options for certain terminated
@Road employees, of which $1.4 million was settled in cash and $1.6 million was
recorded in Shareholders’ equity.
Restructuring
costs associated with business combinations
In
addition to the restructuring expense in fiscal 2008, costs associated with
exiting activities of companies the Company acquired in fiscal 2008 were $0.4
million, consisting of severance and benefits costs. These costs were recognized
as a liability assumed in the purchase business combinations and were included
in the allocation of the cost to acquisitions and accordingly, resulted in an
increase to goodwill rather than an expense in fiscal 2008.
There
were $1.1 million of adjustments that decreased the restructuring liability
during fiscal 2008 and $0.2 million of adjustments that increased the
restructuring liability during fiscal 2009. The 2008 adjustments related to
differences between original estimates and actual payouts for severance and
benefits, $0.9 million of which related to the @Road acquisition.
Restructuring
liability
The
following table summarizes the restructuring activity for 2008 and 2009 (in
thousands):
Balance
as of December 28, 2007
|
$ |
1,326
|
||
Acquisition
related
|
355
|
|||
Charges
|
4,641
|
|||
Payments
|
(3,351)
|
|||
Adjustment
|
(1,054)
|
|||
Balance
as of January 2, 2009
|
$ |
1,917
|
||
Acquisition
related
|
-
|
|||
Charges
|
10,754
|
|||
Payments
|
(10,279)
|
|||
Adjustment
|
236
|
|||
Balance
as of January 1, 2010
|
$ |
2,628
|
As of
January 1, 2010, the $2.6 million restructuring accrual consists of severance
and benefits. Of the $2.6 million restructuring accrual, $2.1 million is
included in Other current liabilities and is expected to be settled by the
fourth quarter of fiscal 2010. The remaining balance of $0.5 million
is included in Other non-current liabilities and is expected to be settled by
the first quarter of fiscal 2011.
In-Process
Research and Development
During
fiscal 2009, the Company adopted the FASB’s revised accounting guidance on
business combinations, which requires the estimated fair value of in-process
research and development (IPR&D) acquired to be capitalized as an intangible
asset until the project is complete, at which point the asset is amortized over
its estimated useful life, or written-off, if abandoned. There was no
IPR&D capitalized in 2009. Prior to 2009, IPR&D was
expensed. In fiscal 2008, there was no IPR&D expense and in
fiscal 2007, Company recorded IPR&D expense of $2.1 million related to the
@Road acquisition.
Amortization
of Purchased and Other Intangible Assets
January
1,
|
January
2,
|
December
28,
|
||||||||||
Fiscal
Years Ended
|
2010
|
2009
|
2007
|
|||||||||
(in
thousands)
|
||||||||||||
Cost
of sales
|
$ | 22,337 | $ | 22,690 | $ | 19,778 | ||||||
Operating
expenses
|
30,335 | 22,376 | 18,966 | |||||||||
Total
|
$ | 52,672 | $ | 45,066 | $ | 38,744 |
Total
amortization expense of purchased and other intangible assets was $52.7 million
in fiscal 2009, of which $22.3 million was recorded in Cost of sales and $30.3
million was recorded in Operating expense. Total amortization expense of
purchased and other intangibles represented 4.7% of revenue in fiscal 2009, an
increase of $7.6 million from fiscal 2008 when it represented 3.4% of
revenue. The increase was primarily due to the acquisition of certain
technology and patent intangibles as a result of acquisitions made in fiscal
2009, as well as fiscal 2008 acquisition intangibles that included a full year
impact of amortization expense in fiscal 2009.
Total
amortization expense of purchased and other intangible assets was $45.1 million
in fiscal 2008, of which $22.7 million was recorded in Cost of sales and $22.4
million was recorded in Operating expense. Total amortization expense of
purchased and other intangibles represented 3.4% of revenue in fiscal 2008, an
increase of $6.3 million from fiscal 2007 when it represented 3.2% of
revenue. The increase was primarily due to the acquisition of certain
technology and patent intangibles as a result of acquisitions made in fiscal
2008, as well as fiscal 2007 acquisition intangibles that included a full year
impact of amortization expense in fiscal 2008.
Non-operating
Income, Net
The
following table shows non-operating income, net for the periods indicated and
should be read in conjunction with the narrative descriptions of those expenses
below:
January
1,
|
January
2,
|
December
28,
|
||||||||||
Fiscal
Years Ended
|
2010
|
2009
|
2007
|
|||||||||
(in
thousands)
|
||||||||||||
Interest
income
|
$ | 783 | $ | 2,044 | $ | 3,502 | ||||||
Interest
expense
|
(1,812 | ) | (2,760 | ) | (6,602 | ) | ||||||
Foreign
currency transaction gain (loss), net
|
463 | 1,509 | (1,351 | ) | ||||||||
Income
from joint ventures
|
429 | 7,981 | 8,377 | |||||||||
Other
income (expense), net
|
1,938 | (2,791 | ) | 1,563 | ||||||||
Total
non-operating income, net
|
$ | 1,801 | $ | 5,983 | $ | 5,489 |
Total
non-operating income, net decreased by $4.2 million during fiscal 2009 compared
with fiscal 2008. The decrease was due to lower income from joint
ventures and lower foreign exchange gains, partially offset by gains on assets
in our deferred compensation plan.
Total
non-operating income, net increased by $0.5 million during fiscal 2008 compared
with fiscal 2007. The increase was due to lower interest expense due
to lower average outstanding debt balances and interest rates, fluctuations in
foreign currencies, largely offset by a decrease in interest income and losses
on assets in our deferred compensation plan.
Income
Tax Provision
Our
effective income tax rate for fiscal years 2009, 2008 and 2007 was 27%, 26% and
36% respectively. The 2009 rate was less than the U.S. federal
statutory rate of 35% primarily due to the implementation of a global supply
chain management structure. Since 2007, we have licensed our US intellectual
property to a foreign affiliated legal entity and implemented a global supply
chain management structure which streamlined our worldwide
operations. We believe that the licensing of intellectual property
was effected for consideration that was equivalent to arms-length negotiated
pricing. This resulted, beginning in 2008, in a tax benefit due to a
lower foreign tax rate. The Company’s policy is to indefinitely
reinvest a portion of its undistributed foreign subsidiaries’ earnings and,
accordingly, no related provision for U.S. federal and state income taxes has
been provided for these earnings. The 2007 rate was different from
the U.S. federal statutory rate of 35% due to the impact of stock-based
compensation and state tax expense, reduced by the impact of federal and
California research credit.
Litigation
Matters
* From
time to time, we are involved in litigation arising out of the ordinary course
of our business. There are no known claims or pending litigation that are
expected to have a material effect on our overall financial position, results of
operations, or liquidity.
OFF-BALANCE
SHEET ARRANGEMENTS
Other
than lease commitments incurred in the normal course of business (see
Contractual Obligations table below), we do not have any off-balance sheet
financing arrangements or liabilities, guarantee contracts, retained or
contingent interests in transferred assets, or any obligation arising out of a
material variable interest in an unconsolidated entity. We do not have any
majority-owned subsidiaries that are not included in the consolidated financial
statements. Additionally, we do not have any interest in, or relationship with,
any special purpose entities.
In the
normal course of business to facilitate sales of its products, we indemnify
other parties, including customers, lessors, and parties to other transactions
with us, with respect to certain matters. We have agreed to hold the other party
harmless against losses arising from a breach of representations or covenants,
or out of intellectual property infringement or other claims made against
certain parties. These agreements may limit the time within which an
indemnification claim can be made and the amount of the claim. In addition, we
have entered into indemnification agreements with our officers and directors,
and our bylaws contain similar indemnification obligations to our
agents.
It is not
possible to determine the maximum potential amount under these indemnification
agreements due to the limited history of prior indemnification claims and the
unique facts and circumstances involved in each particular agreement.
Historically, payments made by us under these agreements were not material and
no liabilities have been recorded for these obligations on the Consolidated
Balance Sheets as of January 1, 2010 and January 2, 2009.
LIQUIDITY
AND CAPITAL RESOURCES
January
1,
|
January
2,
|
December
28,
|
||||||||||
As
of and for the Fiscal Year Ended
|
2010
|
2009
|
2007
|
|||||||||
(Dollars
in thousands)
|
||||||||||||
Cash
and cash equivalents
|
$ | 273,848 | $ | 142,531 | $ | 103,202 | ||||||
As
a percentage of total assets
|
15.6 | % | 9.0 | % | 6.7 | % | ||||||
Total
debt
|
$ | 151,483 | $ | 151,588 | $ | 60,690 | ||||||
Cash
provided by operating activities
|
$ | 194,631 | $ | 176,074 | $ | 186,985 | ||||||
Cash
used in investing activities
|
$ | (83,926 | ) | $ | (126,696 | ) | $ | (311,392 | ) | |||
Cash
provided by (used in) financing activities
|
$ | 16,125 | $ | (6,441 | ) | $ | 103,816 | |||||
Effect
of exchange rate changes on cash and cash equivalents
|
$ | 4,487 | $ | (3,608 | ) | $ | (5,828 | ) | ||||
Net
increase (decrease) in cash and cash equivalents
|
$ | 131,317 | $ | 39,329 | $ | (26,419 | ) |
Cash
and Cash Equivalents
As of
January 1, 2010, cash and cash equivalents totaled $273.8 million compared to
$142.5 million at January 2, 2009. We had debt of $151.5 million at
January 1, 2010 compared to $151.6 million at January 2, 2009.
* Our
ability to continue to generate cash from operations will depend in large part
on profitability, the rate of collections of accounts receivable, our inventory
turns, and our ability to manage other areas of working capital.
* We
believe that our cash and cash equivalents, together with our revolving credit
facilities will be sufficient to meet our anticipated operating cash needs and
stock purchases under the stock repurchase program for at least the next twelve
months.
* We
anticipate that planned capital expenditures primarily for computer equipment,
software, manufacturing tools and test equipment, and leasehold improvements
associated with business expansion, will constitute a partial use of our cash
resources. Decisions related to how much cash is used for investing
are influenced by the expected amount of cash to be provided by
operations.
Operating
Activities
Cash
provided by operating activities was $194.6 million for fiscal 2009, as compared
to $176.1 million for fiscal 2008. The increase of $18.6 million was due to
a decrease in inventories and an increase in accounts payable, accrued
compensation and benefits, and deferred revenue, partially offset by a decrease
in net income before non-cash depreciation and amortization and an increase in
accounts receivable.
Cash
provided by operating activities was $176.1 million for fiscal 2008, as compared
to $187.0 million for fiscal 2007. This decrease of $10.9 million was due
to a decrease in accounts payable, deferred revenue, income taxes payable, and
accrued compensation and benefits, partially offset by an
increase in net income before non-cash depreciation and amortization and a
decrease in accounts receivable.
Investing
Activities
Cash used
in investing activities was $83.9 million for fiscal 2009, as compared to $126.7
million for fiscal 2008. The decrease was primarily due to less cash used
for acquisitions in fiscal 2009.
Cash used
in investing activities was $126.7 million for fiscal 2008, as compared to
$311.4 million for fiscal 2007. The decrease was due to cash used for
acquisitions, attributable primarily to @Road which was acquired in the first
quarter of fiscal 2007.
Financing
Activities
Cash
provided by financing activities was $16.1 million for fiscal 2009, as compared
to cash used of $6.4 million during fiscal 2008. The increase of $22.6 million
was primarily due to prior year stock repurchase activities, partially offset by
prior year increase in debt.
Cash used
in financing activities was $6.4 million for fiscal 2008, as compared to cash
provided of $103.8 million during fiscal 2007, primarily due to stock repurchase
activities, partially offset by net cash borrowed from our credit
facilities.
Accounts
Receivable and Inventory Metrics
January
1,
|
January
2,
|
|||||||
As
of
|
2010
|
2009
|
||||||
Accounts
receivable days sales outstanding
|
66
|
69
|
||||||
Inventory
turns per year
|
3.4
|
4.2
|
Accounts
receivable days sales outstanding were down slightly at 66 days as of January 1,
2010, as compared to 69 days as of January 2, 2009. Our accounts receivable
days sales outstanding are calculated based on ending accounts receivable, net,
divided by revenue for the fourth fiscal quarter, times a quarterly average of
91 days. Our inventory turns were at 3.4 for fiscal 2009 as compared
to 4.2 for fiscal 2008. Our inventory turnover is based on the total cost of
sales for the fiscal period over the average inventory for the corresponding
fiscal period.
Debt
At the
end of fiscal 2009 and fiscal 2008, our total debt was comprised primarily of
our revolving credit line in the amount of $151.0 million. As of
January 1, 2010 and January 2, 2009, there were also notes payable totaling
approximately $483,000 and $588,000, respectively, consisting primarily of
government loans to foreign subsidiaries.
On July
28, 2005, we entered into a $200 million unsecured revolving credit agreement
(the 2005 Credit Facility) with a syndicate of 10 banks with The Bank of Nova
Scotia as the administrative agent. On February 16, 2007, we
amended our existing $200 million unsecured revolving credit agreement with a
syndicate of 11 banks with The Bank of Nova Scotia as the administrative agent
(the 2007 Credit Facility). Under the 2007 Credit Facility, we exercised the
option in the existing credit agreement to increase the availability under the
revolving credit line by $100 million, for an aggregate availability of up to
$300 million, and extended the maturity date of the revolving credit line by 18
months, from July 2010 to February 2012. Up to $25 million of
the availability under the revolving credit line may be used to issue letters of
credit, and up to $20 million may be used for paying off other debts or
loans. The maximum leverage ratio under the 2007 Credit Facility is
3.00:1.00. The funds available under the new 2007 Credit Facility may
be used by us for acquisitions, stock repurchases, and general corporate
purposes. As of August 20, 2008, we amended the 2007 Credit Facility to allow us
to redeem, retire or purchase Trimble common stock without limitation so long as
no default or unmatured default then existed, and leverage ratio for the two
most recently completed periods was less than 2.00:1.00. In addition, the
definition of the fixed charge was amended to exclude the impact of redemptions,
retirements, or purchases of Trimble common stock from the fixed charges
coverage ratio. For additional discussion of our debt, see Note 9 of Notes to
the Consolidated Financial Statements.
In
addition, during the first quarter of fiscal 2007 we incurred a five-year term
loan under the 2007 Credit Facility in an aggregate principal amount of $100
million, which was repaid in full during fiscal 2008.
We may
borrow funds under the 2007 Credit Facility in U.S. Dollars or in certain other
currencies, and borrowings will bear interest, at our option, at either: (i) a
base rate, based on the administrative agent's prime rate, plus a margin of
between 0% and 0.125%, depending on our leverage ratio as of our most recently
ended fiscal quarter, or (ii) a reserve-adjusted rate based on the London
Interbank Offered Rate (LIBOR), Euro Interbank Offered Rate (EURIBOR), Stockholm
Interbank Offered Rate (STIBOR), or other agreed-upon rate, depending on the
currency borrowed, plus a margin of between 0.625% and 1.125%, depending on our
leverage ratio as of the most recently ended fiscal quarter. Our obligations
under the 2007 Credit Facility are guaranteed by certain of our domestic
subsidiaries.
The 2007
Credit Facility contains customary affirmative, negative and financial covenants
including, among other requirements, negative covenants that restrict our
ability to dispose of assets, create liens, incur indebtedness, repurchase
stock, pay dividends, make acquisitions, make investments, enter into mergers
and consolidations and make capital expenditures, within certain limitations,
and financial covenants that require the maintenance of leverage and fixed
charge coverage ratios. The 2007 Credit Facility contains events of default that
include, among others, non-payment of principal, interest or fees, breach of
covenants, inaccuracy of representations and warranties, cross defaults to
certain other indebtedness, bankruptcy and insolvency events, material
judgments, and events constituting a change of control. Upon the occurrence and
during the continuance of an event of default, interest on the obligations will
accrue at an increased rate and the lenders may accelerate our obligations under
the 2007 Credit Facility, however that acceleration will be automatic in the
case of bankruptcy and insolvency events of default. As of January 1,
2010 we were in compliance with all financial debt covenants.
CONTRACTUAL
OBLIGATIONS
The
following table summarizes our contractual obligations at January 1,
2010:
Payments
Due By Period
|
||||||||||||||||||||
Less
than
|
1-3 | 3-5 |
More
than
|
|||||||||||||||||
Total
|
1
year
|
years
|
years
|
5
years
|
||||||||||||||||
(in
thousands)
|
||||||||||||||||||||
Total
debt including interest (1)
|
$ | 152,795 | $ | 449 | $ | 152,346 | $ | - | $ | - | ||||||||||
Operating
leases
|
46,950 | 19,063 | 20,779 | 5,860 | 1,248 | |||||||||||||||
Other
purchase obligations and commitments
|
61,082 | 49,275 | 11,587 | 220 | - | |||||||||||||||
Total
|
$ | 260,827 | $ | 68,787 | $ | 184,712 | $ | 6,080 | $ | 1,248 |
(1) We
may borrow funds under the 2007 Credit Facility in U.S. Dollars or in certain
other currencies, and will bear interest as described under Note 9 of Notes to
the Consolidated Financial Statements. Our obligations under the 2007 Credit
Facility are guaranteed by certain of our domestic subsidiaries. We estimate the
interest to be 0.9 % per annum, based upon a historical average.
Total
debt consists of a revolving credit line of $151.0 million under our credit
facilities and $0.5 million primarily of government loans to foreign
subsidiaries. (See Note 9 of the Notes to the Consolidated Financial Statements
for further financial information regarding long-term debt)
Other
purchase obligations and commitments represent open non-cancelable purchase
orders for material purchases with our vendors. Purchase obligations exclude
agreements that are cancelable without penalty. Our pension obligation, which is
not included in the table above, is included in “Other current liabilities” and
“Other non-current liabilities” on our Consolidated Balance Sheets.
Additionally, as of January 1, 2010, we had acquisition earn-outs of $2.2
million and holdbacks of $19.7 million recorded in “Other current liabilities”
and “Other non-current liabilities.” The maximum remaining payments,
which are not included in the table above, including the $2.2 million and $19.7
million recorded, will not exceed $46.6 million. The remaining
earn-outs and holdbacks are payable through 2012.
As of
January 1, 2010 we had unrecognized tax benefits (included in
Other non-current liabilities) of $37.0 million, including interest
and penalties. At this time, we cannot make a reasonably reliable
estimate of the period of cash settlement with tax authorities regarding this
liability, and, therefore, such amounts are not included in the contractual
obligations table above.
EFFECT
OF NEW ACCOUNTING PRONOUNCEMENTS
The
impact of recent accounting pronouncements is disclosed in Note 2 of the Notes
to Consolidated Financial Statements.
Item 7A. Quantitative
and Qualitative Disclosure about Market Risk
We are
exposed to market risk related to changes in interest rates and foreign currency
exchange rates. We use certain derivative financial instruments to manage these
risks. We do not use derivative financial instruments for speculative purposes.
All financial instruments are used in accordance with policies approved by our
board of directors.
Market
Interest Rate Risk
Our cash
equivalents consisted primarily of money market funds, treasury bills,
commercial paper (FDIC insured), interest and non-interest bearing bank deposits
as well as bank time deposits for fiscal 2008. The main objective of these
instruments was safety of principal and liquidity while maximizing return,
without significantly increasing risk.
* Due to
the short-term nature of our cash equivalents, we do not anticipate any material
effect on our portfolio due to fluctuations in interest rates.
We are
exposed to market risk due to the possibility of changing interest rates under
our senior secured credit facilities. Our credit facility is comprised of an
unsecured revolving credit agreement with a maturity date of February 2012. We
may borrow funds under the revolving credit agreement in U.S. Dollars or in
certain other currencies and borrowings will bear interest as described under
Note 9 of Notes to the Consolidated Financial Statements.
As of
January 1, 2010, we had an outstanding balance on the revolving credit line of
$151.0 million and during fiscal 2009, we repaid the remaining outstanding
principal balance on our term loan. A hypothetical 10% increase in the
three-month LIBOR rates could result in approximately $38,000 annual increase in
interest expense on the existing principal balances.
* The
hypothetical changes and assumptions made above will be different from what
actually occurs in the future. Furthermore, the computations do not
anticipate actions that may be taken by our management should the hypothetical
market changes actually occur over time. As a result, actual earnings effects in
the future will differ from those quantified above.
Foreign
Currency Exchange Rate Risk
We
enter into foreign exchange forward contracts to minimize the short-term impact
of foreign currency fluctuations on cash, certain trade and inter-company
receivables and payables, primarily denominated in Australian, Canadian and New
Zealand Dollars, Japanese Yen, Indian Rupee, South African Rand, Swedish Krona,
Euro, and British pound. These contracts reduce the exposure to fluctuations in
exchange rate movements as the gains and losses associated with foreign currency
balances are generally offset with the gains and losses on the forward
contracts. These instruments are marked to market through earnings every period
and generally range from one to three months in original maturity. We do not
enter into foreign exchange forward contracts for trading purposes.
Foreign
exchange forward contracts outstanding as of January 1, 2010 and January 2, 2009
are summarized as follows (in thousands):
January
1, 2010
|
January
2, 2009
|
|||||||||||||||
Nominal
Amount
|
Fair
Value
|
Nominal
Amount
|
Fair
Value
|
|||||||||||||
Forward
contracts:
|
||||||||||||||||
Purchased
|
$ | (20,444 | ) | $ | 153 | $ | (22,012 | ) | $ | 512 | ||||||
Sold
|
$ | 27,589 | $ | 389 | $ | 24,960 | $ | (1,660 | ) |
* We do
not anticipate any material adverse effect on our consolidated financial
position utilizing our current hedging strategy.
TRIMBLE
NAVIGATION LIMITED
INDEX
TO FINANCIAL STATEMENTS
Consolidated
Balance Sheets at January 1, 2010 and January 2, 2009
|
44
|
|
Consolidated
Statements of Income for the fiscal years ended
|
||
January
1, 2010, January 2, 2009 and December 28, 2007
|
45
|
|
Consolidated
Statements of Shareholders' Equity for the fiscal years
ended
|
||
January
1, 2010, January 2, 2009 and December 28, 2007
|
46
|
|
Consolidated
Statements of Cash Flows for the fiscal years ended
|
||
January
1, 2010, January 2, 2009 and December 28, 2007
|
47
|
|
Notes
to Consolidated Financial Statements
|
48
|
|
Reports
of Independent Registered Public Accounting Firm
|
81
|
Item 8. Financial
Statements and Supplementary Data
CONSOLIDATED
BALANCE SHEETS
January
1,
|
January
2,
|
|||||||
2010
|
2009
|
|||||||
(In
thousands)
|
||||||||
ASSETS
|
||||||||
Current
assets:
|
||||||||
Cash
and cash equivalents
|
$ | 273,848 | $ | 142,531 | ||||
Short-term
investments
|
- | 5,000 | ||||||
Accounts
receivable, less allowance for doubtful accounts of $3,875 and $5,999, and
sales return reserve of $1,743 and $1,819 at January 1, 2010 and January
2, 2009, respectively
|
202,293 | 204,269 | ||||||
Other
receivables
|
11,856 | 17,540 | ||||||
Inventories,
net
|
144,012 | 160,893 | ||||||
Deferred
income taxes
|
39,686 | 41,810 | ||||||
Other
current assets
|
18,383 | 16,404 | ||||||
Total
current assets
|
690,078 | 588,447 | ||||||
Property
and equipment, net
|
44,635 | 50,175 | ||||||
Goodwill
|
764,193 | 715,571 | ||||||
Other
purchased intangible assets, net
|
202,782 | 228,901 | ||||||
Other
non-current assets
|
51,589 | 51,922 | ||||||
Total
assets
|
$ | 1,753,277 | $ | 1,635,016 | ||||
LIABILITIES
|
||||||||
Current
liabilities:
|
||||||||
Current
portion of long-term debt
|
$ | 445 | $ | 124 | ||||
Accounts
payable
|
53,775 | 49,611 | ||||||
Accrued
compensation and benefits
|
43,272 | 41,291 | ||||||
Deferred
revenue
|
68,968 | 55,241 | ||||||
Accrued
warranty expense
|
14,744 | 13,332 | ||||||
Other
current liabilities
|
42,041 | 63,719 | ||||||
Total
current liabilities
|
223,245 | 223,318 | ||||||
Non-current
portion of long-term debt
|
151,038 | 151,464 | ||||||
Non-current
deferred revenue
|
15,599 | 12,418 | ||||||
Deferred
income taxes
|
38,857 | 42,207 | ||||||
Other
non-current liabilities
|
59,983 | 61,553 | ||||||
Total
liabilities
|
488,722 | 490,960 | ||||||
Commitments
and contingencies
|
||||||||
Shareholders'
equity:
|
||||||||
Preferred
stock no par value; 3,000 shares authorized; none
outstanding
|
||||||||
Common
stock, no par value; 180,000 shares authorized; 120,450 and 119,051 shares
issued and outstanding at January 1, 2010 and January 2, 2009,
respectively
|
720,248 | 684,831 | ||||||
Retained
earnings
|
491,367 | 427,921 | ||||||
Accumulated
other comprehensive income
|
48,297 | 27,649 | ||||||
Total
Trimble Navigation Ltd. shareholders' equity
|
1,259,912 | 1,140,401 | ||||||
Noncontrolling
interests
|
4,643 | 3,655 | ||||||
Total
equity
|
1,264,555 | 1,144,056 | ||||||
Total
liabilities and shareholders' equity
|
$ | 1,753,277 | $ | 1,635,016 |
See
accompanying Notes to the Consolidated Financial Statements.
CONSOLIDATED
STATEMENTS OF INCOME
January
1,
|
January
2,
|
December
28,
|
||||||||||
2010
|
2009
|
2007
|
||||||||||
(In
thousands, except per share data)
|
||||||||||||
Revenue (1)
|
$ | 1,126,259 | $ | 1,329,234 | $ | 1,222,270 | ||||||
Cost
of sales (1)
|
576,391 | 680,098 | 609,365 | |||||||||
Gross
margin
|
549,868 | 649,136 | 612,905 | |||||||||
Operating
expense
|
||||||||||||
Research
and development
|
136,639 | 148,265 | 131,468 | |||||||||
Sales
and marketing
|
189,859 | 196,290 | 186,495 | |||||||||
General
and administrative
|
100,830 | 94,023 | 92,572 | |||||||||
Restructuring
charges
|
6,385 | 2,722 | 3,025 | |||||||||
Amortization
of purchased intangible assets
|
30,335 | 22,376 | 18,966 | |||||||||
In-process
research and development
|
- | - | 2,112 | |||||||||
Total
operating expense
|
464,048 | 463,676 | 434,638 | |||||||||
Operating
income
|
85,820 | 185,460 | 178,267 | |||||||||
Non-operating
income, net
|
||||||||||||
Interest
income
|
783 | 2,044 | 3,502 | |||||||||
Interest
expense
|
(1,812 | ) | (2,760 | ) | (6,602 | ) | ||||||
Foreign
currency transaction gain (loss), net
|
463 | 1,509 | (1,351 | ) | ||||||||
Income
from joint ventures
|
429 | 7,981 | 8,377 | |||||||||
Other
income (expense), net
|
1,938 | (2,791 | ) | 1,563 | ||||||||
Total
non-operating income, net
|
1,801 | 5,983 | 5,489 | |||||||||
Income
before taxes
|
87,621 | 191,443 | 183,756 | |||||||||
Income
tax provision
|
23,658 | 50,470 | 66,382 | |||||||||
Net
income
|
63,963 | 140,973 | 117,374 | |||||||||
Less:
Net income (expense) attributable to noncontrolling
interests
|
517 | (499 | ) | - | ||||||||
Net
income attributable to Trimble Navigation Ltd.
|
$ | 63,446 | $ | 141,472 | $ | 117,374 | ||||||
Basic
earnings per share
|
$ | 0.53 | $ | 1.17 | $ | 0.98 | ||||||
Shares
used in calculating basic earnings per share
|
119,814 | 120,714 | 119,280 | |||||||||
Diluted
earnings per share
|
$ | 0.52 | $ | 1.14 | $ | 0.94 | ||||||
Shares
used in calculating diluted earnings per share
|
122,208 | 124,235 | 124,410 |
(1) Sales
to Caterpillar Trimble Control Technologies Joint Venture (CTCT) and
Nikon-Trimble Joint Venture (Nikon-Trimble) were $16.0 million, $27.0 million
and $24.1 million in fiscal 2009, 2008 and 2007, respectively, with associated
cost of sales of $10.4 million, $21.5 million and $17.0 million for fiscal 2009,
2008 and 2007, respectively. In addition, cost of sales associated
with CTCT net inventory purchases was $19.1 million, $21.4 million and $25.1
million in fiscal 2009, 2008 and 2007, respectively. See Note 5 to
these Consolidated Financial Statements regarding joint ventures for further
discussion.
See
accompanying Notes to the Consolidated Financial Statements.
CONSOLIDATED
STATEMENTS OF SHAREHOLDERS’ EQUITY
Accumulated
|
||||||||||||||||||||||||||||
Other
|
Total
|
|||||||||||||||||||||||||||
Common
stock
|
Retained
|
Comprehensive
|
Shareholders'
|
Noncontrolling
|
||||||||||||||||||||||||
Shares
|
Amount
|
Earnings
|
Income/(Loss)
|
Equity
|
Interest
|
Total
|
||||||||||||||||||||||
(In
thousands)
|
||||||||||||||||||||||||||||
Balance
at December 29, 2006
|
111,718 | $ | 435,371 | $ | 271,183 | $ | 41,111 | $ | 747,665 | $ | - | $ | 747,665 | |||||||||||||||
Components
of comprehensive income:
|
||||||||||||||||||||||||||||
Net
income attributable to Trimble Navigation Ltd.
|
117,374 | 117,374 | 117,374 | |||||||||||||||||||||||||
Unrealized
loss on investments
|
(33 | ) | (33 | ) | (33 | ) | ||||||||||||||||||||||
Foreign
currency translation adjustments, net of tax
|
18,655 | 18,655 | 18,655 | |||||||||||||||||||||||||
Unrecognized
actuarial loss
|
(13 | ) | (13 | ) | (13 | ) | ||||||||||||||||||||||
Total
comprehensive income
|
135,983 | - | 135,983 | |||||||||||||||||||||||||
Issuance
of common stock in connection with acquisitions and joint
venture, net
|
5,876 | 163,678 | 163,678 | 163,678 | ||||||||||||||||||||||||
Issuance
of common stock under employee plans and exercise of
warrants
|
4,002 | 31,913 | 31,913 | 31,913 | ||||||||||||||||||||||||
Stock
based compensation
|
15,099 | 15,099 | 15,099 | |||||||||||||||||||||||||
Tax
benefit from stock option exercises
|
14,637 | 14,637 | 14,637 | |||||||||||||||||||||||||
Other
|
51 | 51 | 51 | |||||||||||||||||||||||||
Balance
at December 28, 2007
|
121,596 | $ | 660,749 | $ | 388,557 | $ | 59,720 | $ | 1,109,026 | $ | - | $ | 1,109,026 | |||||||||||||||
Components
of comprehensive income:
|
||||||||||||||||||||||||||||
Net
income attributable to Trimble Navigation Ltd.
|
141,472 | 141,472 | 141,472 | |||||||||||||||||||||||||
Unrealized
loss on investments
|
(392 | ) | (392 | ) | (392 | ) | ||||||||||||||||||||||
Foreign
currency translation adjustments, net of tax
|
(31,722 | ) | (31,722 | ) | (31,722 | ) | ||||||||||||||||||||||
Unrecognized
actuarial gain
|
43 | 43 | 43 | |||||||||||||||||||||||||
Noncontrolling
interest
|
- | 3,655 | 3,655 | |||||||||||||||||||||||||
Total
comprehensive income
|
109,401 | 3,655 | 113,056 | |||||||||||||||||||||||||
Issuance
of common stock under employee plans and exercise of
warrants
|
1,698 | 22,804 | 22,804 | 22,804 | ||||||||||||||||||||||||
Stock
repurchase
|
(4,243 | ) | (23,780 | ) | (102,108 | ) | (125,888 | ) | (125,888 | ) | ||||||||||||||||||
Stock
based compensation
|
16,293 | 16,293 | 16,293 | |||||||||||||||||||||||||
Tax
benefit from stock option exercises
|
8,765 | 8,765 | 8,765 | |||||||||||||||||||||||||
Balance
at January 2, 2009
|
119,051 | $ | 684,831 | $ | 427,921 | $ | 27,649 | $ | 1,140,401 | $ | 3,655 | $ | 1,144,056 | |||||||||||||||
Components
of comprehensive income:
|
||||||||||||||||||||||||||||
Net
income attributable to Trimble Navigation Ltd.
|
63,446 | 63,446 | 63,446 | |||||||||||||||||||||||||
Unrealized
gain on investments
|
392 | 392 | 392 | |||||||||||||||||||||||||
Foreign
currency translation adjustments, net of tax
|
20,583 | 20,583 | 20,583 | |||||||||||||||||||||||||
Unrecognized
actuarial loss
|
(327 | ) | (327 | ) | (327 | ) | ||||||||||||||||||||||
Noncontrolling
interest
|
- | 988 | 988 | |||||||||||||||||||||||||
Total
comprehensive income
|
84,094 | 988 | 85,082 | |||||||||||||||||||||||||
Issuance
of common stock under employee plans and exercise of
warrants
|
1,399 | 14,855 | 14,855 | 14,855 | ||||||||||||||||||||||||
Stock
based compensation
|
18,862 | 18,862 | 18,862 | |||||||||||||||||||||||||
Tax
benefit from stock option exercises
|
1,700 | 1,700 | 1,700 | |||||||||||||||||||||||||
Balance
at January 1, 2010
|
120,450 | $ | 720,248 | $ | 491,367 | $ | 48,297 | $ | 1,259,912 | $ | 4,643 | $ | 1,264,555 |
See
accompanying Notes to the Consolidated Financial Statements.
CONSOLIDATED
STATEMENTS OF CASH FLOWS
January
1,
|
January
2,
|
December
28,
|
||||||||||
Fiscal
Years Ended
|
2010
|
2009
|
2007
|
|||||||||
(In
thousands)
|
||||||||||||
Cash
flows from operating activities:
|
||||||||||||
Net
income
|
$ | 63,963 | $ | 140,973 | $ | 117,374 | ||||||
Adjustments
to reconcile net income to net cash provided by operating
activities:
|
||||||||||||
Depreciation
|
18,795 | 19,047 | 17,212 | |||||||||
Amortization
|
52,672 | 45,066 | 38,744 | |||||||||
Provision
for doubtful accounts
|
4,139 | 2,709 | 1,410 | |||||||||
Amortization
of debt issuance cost
|
226 | 169 | 218 | |||||||||
Deferred
income taxes
|
(7,473 | ) | (17,356 | ) | 6,368 | |||||||
Non-cash
restructuring expense
|
- | - | 1,725 | |||||||||
Stock-based
compensation
|
18,659 | 16,166 | 15,016 | |||||||||
In-process
research and development
|
- | - | 2,112 | |||||||||
Equity
gain from joint ventures
|
(429 | ) | (7,981 | ) | (8,377 | ) | ||||||
Excess
tax benefit for stock-based compensation
|
(1,453 | ) | (5,970 | ) | (12,409 | ) | ||||||
Provision
for excess and obsolete inventories
|
3,530 | 4,426 | 4,352 | |||||||||
Other
|
(3,036 | ) | 151 | 651 | ||||||||
Add
decrease (increase) in assets:
|
||||||||||||
Accounts
receivable
|
(3,935 | ) | 33,414 | (35,696 | ) | |||||||
Other
receivables
|
3,516 | (7,422 | ) | 4,825 | ||||||||
Inventories
|
13,292 | (16,461 | ) | (18,678 | ) | |||||||
Other
current and non-current assets
|
(620 | ) | 779 | 7,650 | ||||||||
Add
increase (decrease) in liabilities:
|
||||||||||||
Accounts
payable
|
2,631 | (20,898 | ) | (3,521 | ) | |||||||
Accrued
compensation and benefits
|
245 | (12,487 | ) | 1,691 | ||||||||
Accrued
liabilities
|
4,433 | 3,183 | (4,635 | ) | ||||||||
Deferred
revenue
|
25,476 | (1,320 | ) | 32,400 | ||||||||
Income
taxes payable
|
- | (114 | ) | 18,553 | ||||||||
Net
cash provided by operating activities
|
194,631 | 176,074 | 186,985 | |||||||||
Cash
flows from investing activities:
|
||||||||||||
Acquisitions
of businesses, net of cash acquired
|
(52,018 | ) | (115,137 | ) | (295,848 | ) | ||||||
Acquisition
of property and equipment
|
(12,706 | ) | (16,196 | ) | (13,187 | ) | ||||||
Acquisitions
of intangible assets
|
(26,839 | ) | - | - | ||||||||
Net
(purchases) maturities of debt and equity securities
|
5,000 | (5,000 | ) | (5,576 | ) | |||||||
Investment
in joint venture
|
(750 | ) | - | - | ||||||||
Capital
infusion from minority investor
|
- | 4,200 | - | |||||||||
Proceeds
from dividends
|
2,896 | 10,648 | 2,888 | |||||||||
Other
|
491 | (5,211 | ) | 331 | ||||||||
Net
cash used in investing activities
|
(83,926 | ) | (126,696 | ) | (311,392 | ) | ||||||
Cash
flows from financing activities:
|
||||||||||||
Issuance
of common stock and warrants
|
14,855 | 22,802 | 31,864 | |||||||||
Excess
tax benefit for stock-based compensation
|
1,453 | 5,970 | 12,409 | |||||||||
Repurchase
and retirement of common stock
|
- | (125,888 | ) | - | ||||||||
Proceeds
from long-term debt and revolving credit lines
|
- | 151,000 | 250,000 | |||||||||
Payments
on long-term debt and revolving credit lines
|
(183 | ) | (60,314 | ) | (190,457 | ) | ||||||
Other
|
- | (11 | ) | - | ||||||||
Net
cash provided by (used in) financing activities
|
16,125 | (6,441 | ) | 103,816 | ||||||||
Effect
of exchange rate changes on cash and cash equivalents
|
4,487 | (3,608 | ) | (5,828 | ) | |||||||
Net
increase (decrease) in cash and cash equivalents
|
131,317 | 39,329 | (26,419 | ) | ||||||||
Cash
and cash equivalents, beginning of fiscal year
|
142,531 | 103,202 | 129,621 | |||||||||
Cash
and cash equivalents, end of fiscal year
|
$ | 273,848 | $ | 142,531 | $ | 103,202 |
See
accompanying Notes to the Consolidated Financial Statements.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE
1: DESCRIPTION OF BUSINESS
Trimble
Navigation Limited (Trimble or the Company) began operations in 1978 and
incorporated in California in 1981. The Company provides positioning product
solutions, most typically to commercial and government users. The principal
applications served include surveying, construction, agriculture, urban and
resource management, military, transportation and telecommunications. The
Company’s products typically provide its customers benefits that can include
lower operational costs, higher productivity, and improved quality. Examples of
products include systems that guide agricultural and construction equipment,
surveying instruments, systems that track fleets of vehicles, and data
collection systems that enable the management of large amounts of geo-referenced
information. In addition, the Company also manufactures components for
in-vehicle navigation and telematics systems, and timing modules used in the
synchronization of wireless networks.
NOTE 2:
ACCOUNTING POLICIES
Use
of Estimates
The
preparation of financial statements in accordance with U.S. generally accepted
accounting principles requires management to make estimates and assumptions that
affect the amounts reported in the financial statements and accompanying notes.
Estimates are used for allowances for doubtful accounts, sales returns reserve,
allowances for inventory valuation, warranty costs, investments, goodwill
impairments, stock-based compensation, and income taxes among others. Management
bases its estimates on historical experience and various other assumptions
believed to be reasonable. Although these estimates are based on management’s
best knowledge of current events and actions that may impact the company in the
future, actual results may differ materially from management’s
estimates.
Basis
of Presentation
The
Company has a 52-53 week fiscal year, ending on the Friday nearest to December
31. Fiscal 2009 and fiscal 2007 were both 52-week years, and ended on
January 1, 2010 and December 28, 2007, respectively. Fiscal 2008 was
a 53-week year and ended on January 2, 2009. Unless otherwise stated, all dates
refer to the Company’s
fiscal year.
These
Consolidated Financial Statements include the results of the Company and its
majority-owned subsidiaries. Inter-company accounts and transactions have been
eliminated. Noncontrolling interests represent the minority shareholders’
proportionate share of the net assets and results of operations of the Company’s
majority-owned subsidiaries.
The
Company has evaluated all subsequent events through the date that these
financial statements have been filed with the Securities and Exchange Commission
(“SEC”). No material subsequent events have occurred since January 1,
2010 that required recognition or disclosure in these financial
statements.
On
January 17, 2007, the Company’s board of directors approved a 2-for-1 split of
all outstanding shares of the Company’s Common Stock, payable February 22, 2007
to stockholders of record on February 8, 2007. All shares and per share
information presented has been adjusted to reflect the stock split on a
retroactive basis for all periods presented.
Certain
amounts from prior periods have been reclassified to conform to the current
period presentation.
Foreign
Currency Translation
Assets
and liabilities of non-U.S. subsidiaries that operate in local currencies are
translated to U.S. dollars at exchange rates in effect at the balance sheet
date, with the resulting translation adjustments directly recorded to a separate
component of accumulated other comprehensive income, net of tax in accumulated
other comprehensive income within the shareholders’ equity section of the
Consolidated Balance Sheets. Income and expense accounts are translated at
average exchange rates during the year.
Cash
and Cash Equivalents
Cash and
cash equivalents include all cash and highly liquid investments with
insignificant interest rate risk and maturities of three months or less at the
date of purchase. The carrying amount of cash and cash equivalents approximates
fair value because of the short maturity of those instruments.
Concentration
of Risk
Cash and
cash equivalents are maintained with several financial institutions. Deposits
held with banks may exceed the amount of insurance provided on such deposits.
Generally, these deposits may be redeemed upon demand and are maintained with
financial institutions of reputable credit and therefore bear minimal credit
risk.
The
Company is also exposed to credit risk in the Company’s trade receivables, which
are derived from sales to end user customers in diversified industries as well
as various resellers. The Company performs ongoing credit evaluations of its
customers’ financial condition and limits the amount of credit extended when
deemed necessary but generally does not require collateral.
With the
selection of Flextronics Corporation (formerly Solectron) in August 1999 as an
exclusive manufacturing partner for many of its GPS products, the Company became
dependent upon a sole supplier for the manufacture of many of its
products. In addition, the Company relies on sole suppliers for a
number of its critical components.
Allowance
for Doubtful Accounts
The
Company maintains an allowance for doubtful accounts for estimated losses
resulting from the inability of its customers to make required
payments.
The
Company evaluates the ongoing collectibility of its trade accounts receivable
based on a number of factors such as age of the accounts receivable balances,
credit quality, historical experience, and current economic conditions that may
affect a customer’s ability to pay. In circumstances where the Company is aware
of a specific customer’s inability to meet its financial obligations to the
Company, a specific allowance for bad debts is estimated and recorded which
reduces the recognized receivable to the estimated amount that the Company
believes will ultimately be collected. In addition to specific customer
identification of potential bad debts, bad debt charges are recorded based on
the Company’s recent past loss history and an overall assessment of past due
trade accounts receivable amounts outstanding.
Inventories
Inventories
are stated at the lower of standard cost (which approximates actual cost on a
first-in, first-out basis) or market. Adjustments to reduce the cost of
inventory to its net realizable value, if required, are made for estimated
excess, obsolescence or impaired balances. Factors influencing these adjustments
include declines in demand, technological changes, product life cycle and
development plans, component cost trends, product pricing, physical
deterioration and quality issues. If actual factors are less favorable than
those projected by us, additional inventory write-downs may be
required.
Goodwill
and Purchased Intangible Assets
Goodwill
represents the excess of the purchase price over the fair value of the net
tangible and identifiable intangible assets acquired in a business combination.
For acquisitions completed, beginning in fiscal 2009, identifiable intangible
assets now include in-process research and development based on the revised
accounting guidance on business combinations. Intangible assets acquired
individually, with a group of other assets, or in a business combination are
recorded at fair value. Identifiable intangible assets are comprised of
distribution channels and distribution rights, patents, licenses, technology,
acquired backlog, trademarks and in-process research and
development. Identifiable intangible assets are being amortized over
the period of estimated benefit using the straight-line method, reflecting the
pattern of economic benefits associated with these assets, and have estimated
useful lives ranging from one to fifteen years with a weighted average useful
life of 6.4 years. Goodwill is not subject to amortization, but is subject to at
least an annual assessment for impairment, applying a fair-value based
test.
Impairment
of Goodwill, Intangible Assets and Other Long-Lived Assets
The
Company evaluates goodwill, at a minimum, on an annual basis and whenever events
and changes in circumstances suggest that the carrying amount may not be
recoverable. The Company performs its annual goodwill impairment testing in the
fourth fiscal quarter of each year. Goodwill is reviewed for
impairment utilizing a two-step process. First, impairment of
goodwill is tested at the reporting unit level by comparing the reporting unit’s
carrying amount, including goodwill, to the fair value of the reporting
unit. The fair values of the reporting units are estimated
using a discounted cash flow approach. If the carrying amount of the
reporting unit exceeds its fair value, a second step is performed to measure the
amount of impairment loss, if any. In step two, the implied fair value of
goodwill is calculated as the excess of the fair value of a reporting unit over
the fair values assigned to its assets and liabilities. If the implied fair
value of goodwill is less than the carrying value of the reporting unit’s
goodwill, the difference is recognized as an impairment loss.
Depreciation
and amortization of the Company’s intangible assets and other long-lived assets
is provided using the straight-line method over their estimated useful lives,
reflecting the pattern of economic benefits associated with these assets.
Changes in circumstances such as technological advances, changes to the
Company’s business model, or changes in the capital strategy could result in the
actual useful lives differing from initial estimates. In those cases where the
Company determines that the useful life of an asset should be revised, the
Company will depreciate the net book value in excess of the estimated residual
value over its revised remaining useful life. These assets are evaluated for
impairment whenever events or changes in circumstances indicate that the
carrying amount of such assets may not be recoverable. The estimated future cash
flows are based upon, among other things, assumptions about expected future
operating performance and may differ from actual cash flows. The assets
evaluated for impairment are grouped with other assets to the lowest level for
which identifiable cash flows are largely independent of the cash flows of other
groups of assets and liabilities. If the sum of the projected undiscounted cash
flows (excluding interest) is less than the carrying value of the assets, the
assets will be written down to the estimated fair value.
Revenue
Recognition
The
Company recognizes product revenue when persuasive evidence of an arrangement
exists, shipment has occurred, the fee is fixed or determinable, and
collectibility is reasonably assured. In instances where final acceptance of the
product is specified by the customer or is uncertain, revenue is deferred until
all acceptance criteria have been met.
Contracts
and/or customer purchase orders are used to determine the existence of an
arrangement. Shipping documents and customer acceptance, when applicable, are
used to verify delivery. The Company assesses whether the fee is fixed or
determinable based on the payment terms associated with the transaction and
whether the sales price is subject to refund or adjustment. The Company assesses
collectibility based primarily on the creditworthiness of the customer as
determined by credit checks and analyses, as well as the customer’s payment
history.
Revenue
for orders is not recognized until the product is shipped and title has
transferred to the buyer. The Company bears all costs and risks of loss or
damage to the goods up to that point. The Company’s shipment terms for U.S.
orders and international orders fulfilled from the Company’s European
distribution center typically provide that title passes to the buyer upon
delivery of the goods to the carrier named by the buyer at the named place or
point. If no precise point is indicated by the buyer, the Company may choose
within the place or range stipulated where the carrier will take the goods into
carrier’s charge. Other shipment terms may provide that title passes to the
buyer upon delivery of the goods to the buyer. Shipping and handling
costs are included in the cost of goods sold.
Revenue
to distributors and resellers is recognized upon shipment, assuming all other
criteria for revenue recognition have been met. Distributors and resellers do
not typically have a right of return.
Revenue
from purchased extended warranty and support agreements is deferred and
recognized ratably over the term of the warranty/support period.
The
Company presents revenue net of sales taxes and any similar
assessments.
In
instances where the embedded software in the Company’s products is more than
incidental to the functionality of the hardware, the Company generally
recognizes revenue once the product has shipped and title has transferred to the
buyer, assuming all other revenue recognition criteria have been met. The
determination as to whether the embedded software is more than incidental to the
Company’s products requires significant judgment including a consideration of
factors such as marketing, research and development efforts and any post
contract support (PCS) relating to the embedded software.
The
Company’s software arrangements generally consist of a perpetual license fee and
PCS. The Company has established vendor-specific objective evidence (VSOE) of
fair value for the Company’s PCS contracts based on the renewal rate. The
remaining value of the software arrangement is allocated to the license fee
using the residual method. License revenue is primarily recognized
when the software has been delivered and fair value has been established for all
remaining undelivered elements. Revenue from PCS is recognized ratably over the
term of the PCS agreement.
Subscription
revenue related to our hosted arrangements is recognized ratably over the
contract period. Under our hosted arrangements, the customer typically does not
have the contractual right to take possession of the software at any time during
the hosting period without incurring a significant penalty and it is not
feasible for the customer to run the software either on its own hardware or on a
third-party’s hardware. Subscription revenue related to the Company’s hosted
arrangements is recognized ratably over the contract period. Upfront fees
related to the Company’s hosted solution primarily consist of amounts for the
in-vehicle enabling hardware device and peripherals, if any. For upfront fees
relating to this proprietary hardware where the firmware is more than incidental
to the functionality of the hardware in accordance with the guidance on software
revenue recognition, the Company defers the upfront fees at installation and
recognizes them ratably over the minimum service contract period, generally one
to five years. Product costs are also deferred and amortized over such
period.
Warranty
The
Company accrues for warranty costs as part of its cost of sales based on
associated material product costs, technical support labor costs, and costs
incurred by third parties performing work on the Company’s behalf. The Company’s
expected future cost is primarily estimated based upon historical trends in the
volume of product returns within the warranty period and the cost to repair or
replace the equipment. The products sold are generally covered by a
warranty for periods ranging from 90 days to three years, and in some instances
up to 5.5 years.
While the
Company engages in extensive product quality programs and processes, including
actively monitoring and evaluating the quality of component suppliers, its
warranty obligation is affected by product failure rates, material usage, and
service delivery costs incurred in correcting a product failure. Should actual
product failure rates, material usage, or service delivery costs differ from the
estimates, revisions to the estimated warranty accrual and related costs may be
required.
Changes
in the Company’s product warranty liability during the fiscal years ended
January 1, 2010 and January 2, 2009, are as follows:
January
1,
|
January
2,
|
|||||||
Fiscal
Years Ended
|
2010
|
2009
|
||||||
(in
thousands)
|
||||||||
Beginning
balance
|
$ | 13,332 | $ | 10,806 | ||||
Acquired
warranties
|
- | 930 | ||||||
Accruals
for warranties issued
|
20,530 | 22,214 | ||||||
Changes
in estimates
|
3,292 | - | ||||||
Warranty
settlements (in cash or in kind)
|
(22,410 | ) | (20,618 | ) | ||||
Ending
Balance
|
$ | 14,744 | $ | 13,332 |
Guarantees,
Including Indirect Guarantees of Indebtedness of Others
In the
normal course of business to facilitate sales of its products, the Company
indemnifies other parties, including customers, lessors, and parties to other
transactions with the Company, with respect to certain matters. The Company has
agreed to hold the other party harmless against losses arising from a breach of
representations or covenants, or out of intellectual property infringement or
other claims made against certain parties. These agreements may limit the time
within which an indemnification claim can be made and the amount of the claim.
In addition, the Company has entered into indemnification agreements with its
officers and directors, and the Company’s bylaws contain similar indemnification
obligations to the Company’s agents.
It is not
possible to determine the maximum potential amount under these indemnification
agreements due to the limited history of prior indemnification claims and the
unique facts and circumstances involved in each particular agreement.
Historically, payments made by the Company under these agreements were not
material and no liabilities have been recorded for these obligations on the
Consolidated Balance Sheets as of January 1, 2010 and January 2,
2009.
Advertising
Costs
The
Company expenses all advertising costs as incurred. Advertising expense was
approximately $20.4 million, $22.6 million, and $21.2 million, in fiscal 2009,
2008, and 2007, respectively.
Research
and Development Costs
Research
and development costs are charged to expense as incurred. Cost of software
developed for external sale subsequent to reaching technical feasibility were
not significant and were expensed as incurred. The Company received third party
funding of approximately $12.5 million, $9.2 million, and $8.5 million in fiscal
2009, 2008, and 2007, respectively. The Company offsets research and development
expense with any third party funding received. The Company retains the rights to
any technology developed under such arrangements.
Stock-Based
Compensation
The
following table summarizes stock-based compensation expense, net of tax, related
to employee stock-based compensation included in the Consolidated Statements of
Income.
January
1,
|
January
2,
|
December
28,
|
||||||||||
Fiscal
Years Ended
|
2010
|
2009
|
2007
|
|||||||||
(in
thousands)
|
||||||||||||
Cost
of sales
|
$ | 1,854 | $ | 1,920 | $ | 1,733 | ||||||
Research
and development
|
3,476 | 3,489 | 3,573 | |||||||||
Sales
and marketing
|
4,446 | 3,993 | 3,891 | |||||||||
General
and administrative
|
8,883 | 6,764 | 5,819 | |||||||||
Total
operating expenses
|
16,805 | 14,246 | 13,283 | |||||||||
Total
stock-based compensation expense
|
18,659 | 16,166 | 15,016 | |||||||||
Tax
benefit (1)
|
(3,376 | ) | (2,636 | ) | (1,857 | ) | ||||||
Total
stock-based compensation expense, net of tax
|
$ | 15,283 | $ | 13,530 | $ | 13,159 |
(1) Tax
benefit related to U.S. incentive and non-qualified stock options, employee
stock purchase plan (ESPP) and restricted stock units, applying a Federal
statutory and State (Federal effected) tax rate for the year ended January 1,
2010, January 2, 2009 and December 28, 2007.
Options
Stock
option expense recognized in the Consolidated Statements of Income is based on
the fair value of the portion of share-based payment awards that is expected to
vest during the period and is net of estimated forfeitures. For fiscal 2009,
2008 and 2007 stock option expense includes expense for stock options granted
prior to, but not yet vested as of December 30, 2005, as well as for stock
options granted beginning in fiscal 2006. In fiscal 2006, in
conjunction with the adoption of the FASB’s revised accounting guidance on stock
compensation, the Company changed its method of attributing the value of stock
options to expense from the accelerated multiple-option approach to the
straight-line single option method. Compensation expense for all stock options
granted on or prior to December 30, 2005 will continue to be recognized using
the accelerated multiple-option approach while compensation expense for all
stock options granted subsequent to December 30, 2005 is recognized using the
straight-line single-option method.
For
options granted prior to October 1, 2005, the fair value for these options was
estimated at the date of grant using the Black-Scholes option-pricing model. For
stock options granted on or after October 1, 2005, the fair value of each award
is estimated on the date of grant using a binomial valuation model. Similar to
the Black-Scholes model, the binomial model takes into account variables such as
volatility, dividend yield rate, and risk free interest rate. In addition, the binomial
model incorporates actual option-pricing behavior and changes in volatility over
the option’s contractual term.
Under the
binomial model, the weighted average grant-date fair value of stock options
granted during fiscal years 2009, 2008 and 2007 was $7.92, $8.80 and $12.37,
respectively. For options granted for the three years ending January 1, 2010,
the following weighted-average assumptions were used:
January
1,
|
January
2,
|
December
28,
|
|
Fiscal
Years Ended
|
2010
|
2009
|
2007
|
Expected
dividend yield
|
-
|
-
|
-
|
Expected
stock price volatility
|
45%
|
45%
|
37%
|
Risk
free interest rate
|
2.01%
|
2.50%
|
4.20%
|
Expected
life of options after vesting
|
1.3
years
|
1.3
years
|
1.3
years
|
Expected Dividend Yield – The
dividend yield assumption is based on the Company’s history and expectation of
dividend payouts.
Expected Stock Price
Volatility – The Company’s computation of expected volatility is based on
a combination of implied volatilities from traded options on the Company’s stock
and historical volatility. The Company used implied and historical volatility as
the combination was more representative of future stock price trends than
historical volatility alone.
Expected Risk Free Interest
Rate – The risk-free interest rate is based on the U.S. Treasury yield
curve in effect at the time of grant for the expected term of the
option.
Expected Life Of Option – The
Company’s expected term represents the period that the Company’s stock options
are expected to be outstanding and was determined based on historical experience
of similar stock options with consideration to the contractual terms of the
stock options, vesting schedules and expectations of future employee
behavior.
Restricted
Stock Units
Restricted
stock units are converted into shares of Trimble common stock upon vesting on a
one-for-one basis. Vesting of restricted stock units is subject to
the employee’s continuing service to the Company. The compensation
expense related to these awards was determined using the fair value of Trimble’s
common stock on the date of grant, and the expense is recognized on a
straight-line basis over the vesting period. Restricted stock units
typically vest at the end of three years.
Employee
Stock Purchase Plan
Under the
Employee Stock Purchase Plan, rights to purchase shares are generally granted
during the second and fourth quarter of each year. The fair value of rights
granted under the Employee Stock Purchase Plan was estimated at the date of
grant using the Black-Scholes option-pricing model. The estimated weighted
average value of rights granted under the Employee Stock Purchase Plan during
fiscal years 2009, 2008 and 2007 were $5.28, $8.30 and $7.54, respectively. The
fair value of rights granted during 2009, 2008 and 2007 was estimated at the
date of grant using the following weighted-average assumptions:
January
1,
|
January
2,
|
December
28,
|
|
Fiscal
Years Ended
|
2010
|
2009
|
2007
|
Expected
dividend yield
|
-
|
-
|
-
|
Expected
stock price volatility
|
53.1%
|
44.0%
|
36.5%
|
Risk
free interest rate
|
0.90%
|
2.70%
|
4.90%
|
Expected
life of purchase
|
0.5
years
|
0.5
years
|
0.5
years
|
Expected Dividend Yield – The
dividend yield assumption is based on the Company’s history and expectation of
dividend payouts.
Expected Stock Price
Volatility – The Company’s computation of expected volatility is based on
implied volatilities from traded options on the Company’s stock. The Company
used implied volatility because it is representative of future stock price
trends during the purchase period.
Expected Risk Free Interest
Rate – The risk-free interest rate is based on the U.S. Treasury yield
curve in effect at the time of grant for the expected term of the purchase
period.
Expected Life Of Purchase –
The Company’s expected life of the purchase is based on the term of the offering
period of the purchase plan.
Property
and Equipment, Net
Property
and equipment, net is stated at cost less accumulated depreciation. Depreciation
of property and equipment owned is computed using the straight-line method over
the shorter of the estimated useful lives or the lease terms. Useful lives
include a range from two to six years for machinery and equipment, five years
for furniture and fixtures, two to five years for computer equipment and
software, and the life of the lease for leasehold improvements. The Company
capitalizes eligible costs to acquire or develop internal-use software that are
incurred subsequent to the preliminary project stage. Capitalized costs related
to internal-use software are amortized using the straight-line method over the
estimated useful lives of the assets, which range from three to five years. The
costs of repairs and maintenance are expensed when incurred, while expenditures
for refurbishments and improvements that significantly add to the productive
capacity or extend the useful life of an asset are capitalized. Depreciation
expense was $
18.8 million in fiscal 2009, $19.0 million in
fiscal 2008 and $17.2 million in fiscal 2007.
Derivative
Financial Instruments
The
Company enters into foreign exchange forward contracts to minimize the
short-term impact of foreign currency fluctuations on cash, certain trade and
inter-company receivables and payables, primarily denominated in Australian,
Canadian and New Zealand Dollars, Japanese Yen, South African Rand, Swedish
Krona, Euro, and British pound. These contracts reduce the exposure to
fluctuations in exchange rate movements as the gains and losses associated with
foreign currency balances are generally offset with the gains and losses on the
forward contracts. These instruments are marked to market through earnings every
period and generally range from one to three months in original maturity. We do
not enter into foreign exchange forward contracts for trading
purposes.
Income
Taxes
Income
taxes are accounted for under the liability method whereby deferred tax assets
or liability account balances are calculated at the balance sheet date using
current tax laws and rates in effect for the year in which the differences are
expected to affect taxable income. A valuation allowance is recorded to reduce
the carrying amounts of deferred tax assets if it is more likely than not such
assets will not be realized.
Relative
to uncertain tax positions, the Company only recognizes the tax benefit if it is
more likely than not that the tax position will be sustained on examination by
the taxing authorities, based on the technical merits of the position. The tax
benefits recognized in the financial statements from such positions are then
measured based on the largest benefit that has a greater than 50% likelihood of
being realized upon ultimate settlement. See Note 12 to the
Consolidated Financial Statements for additional information.
Our
valuation allowance is primarily attributable to net operating loss and research
and development credit carryforwards. Management believes that is
more likely than not that we will not realize these deferred tax assets, and,
accordingly, a valuation allowance has been provided for such
amounts. Beginning in 2009, we adopted the revised accounting
guidance for business combinations, under which such valuation allowance
adjustments associated with an acquisition closing after January 3, 2009 (and
after the measurement period) are recorded through income tax
expense. Prior to January 3, 2009, these adjustments were required to
be recognized by adjusting the purchase price related to the
acquisition.
Computation
of Earnings Per Share
The
number of shares used in the calculation of basic earnings per share represents
the weighted average common shares outstanding during the period and excludes
any dilutive effects of options, non-vested restricted stock units and
restricted stock awards, warrants, and convertible securities. The dilutive
effects of options, non-vested restricted stock units and restricted stock
awards, warrants, and convertible securities are included in diluted earnings
per share.
Recent
Accounting Pronouncements
In
September 2006, the Financial Accounting Standards Board (“FASB”) issued
accounting guidance on fair value measurements. This standard, which is now
codified under the Fair Value Measurements and Disclosures Topic of the FASB
Accounting Standards Codification, clarifies the definition of fair value,
establishes a framework for measuring fair value within GAAP, and expands the
disclosures regarding fair value measurements. In February 2008, the
FASB deferred the effective date of the guidance to fiscal years beginning after
November 15, 2008 and interim periods within those fiscal years for nonfinancial
assets and nonfinancial liabilities that are recognized or disclosed at fair
value in the financial statements on a nonrecurring basis. The
Company adopted the fair value measurement guidance in its first quarter of
fiscal 2008, except for those items specifically deferred by the FASB, which
were adopted in the first quarter of fiscal 2009. The adoption did not have
a material impact on the Company’s financial position, results of operations, or
cash flows.
In
December 2007, the FASB issued revised accounting guidance on business
combinations. This revised standard, now codified under the Business Combination
Topic of the FASB Accounting Standards Codification, establishes principles and
requirements for how an acquirer recognizes and measures in its financial
statements the identifiable assets acquired, the liabilities assumed and any
noncontrolling interest in the acquiree, and recognizes and measures the
goodwill acquired in the business combination or a gain from a bargain
purchase. The guidance also sets forth the disclosures required to be
made in the financial statements to evaluate the nature and financial effects of
the business combination. The guidance applies prospectively to business
combinations for which the acquisition date is on or after the beginning of the
first annual reporting period beginning on or after December 15, 2008.
Accordingly, the Company adopted this guidance in its first quarter of fiscal
2009. In April 2009, the FASB amended this new accounting standard to
require that assets acquired and liabilities assumed in a business combination
that arise from contingencies be recognized at fair value, if the fair value can
be determined during the measurement period. The Company expects the
implementation of the new guidance to have an impact on the Company’s financial
position, results of operations, or cash flows, but the nature and magnitude of
the specific effects will depend largely upon the nature and size of the
Company’s business combinations. The adoption of the guidance did not have
a material impact during 2009.
In
December 2007, the FASB issued guidance related to the accounting for
noncontrolling interests in consolidated financial statements. The guidance, now
codified under the Consolidation Topic of the FASB Accounting Standards
Codification, changed the accounting and reporting for minority interests, which
were re-characterized as noncontrolling interests and classified as a component
of equity. This new consolidation method significantly changed the accounting
for transactions with minority interest holders. The guidance
required retroactive adoption of the presentation and disclosure requirements
for previously existing minority interests. All other requirements of the
guidance are applied prospectively. The Company adopted this
new accounting guidance in the first quarter of fiscal 2009. The
adoption of the guidance did not have a material impact on the Company’s
financial position, results of operations, or cash flows.
In March
2008, the FASB issued accounting guidance on disclosures about derivative
instruments and hedging activities. The new accounting guidance, now codified
under the Derivatives and Hedging Topic of the FASB Accounting Standards
Codification, requires enhanced disclosures about (a) how and why an entity uses
derivative instruments, (b) how derivative instruments and related hedged items
are accounted for, and (c) how derivative instruments and related hedged items
affect an entity’s financial position, financial performance, and cash
flows. The Company adopted this new accounting guidance in the first
quarter of fiscal 2009. The adoption of the guidance did not
have an impact on the Company’s financial position, results of operations, or
cash flows.
In May
2009, the FASB issued accounting guidance on subsequent events and then updated
this guidance in February 2010. The standard, now codified under the Subsequent
Events Topic of the FASB Accounting Standards Codification, became effective for
and was adopted by the Company during the second quarter of fiscal
2009. The guidance establishes the accounting for and disclosure of
events that occur after the balance sheet date but before financial statements
are issued or are available to be issued. Specifically, it sets forth
the period after the balance sheet date during which management of a reporting
entity should evaluate events or transactions that may occur for potential
recognition or disclosure in the financial statements, the circumstances under
which an entity should recognize events or transactions occurring after the
balance sheet date in its financial statements, and the disclosures that an
entity should make about events or transactions that occurred after the balance
sheet date. The guidance is effective for interim or annual financial
periods ending after June 15, 2009. The adoption of the guidance did
not have an impact on the Company’s financial position, results of operations or
cash flows, other than the disclosures required by the guidance.
In June
2009, the FASB issued accounting guidance which changes the consolidation
guidance applicable to a variable interest entity (“VIE”). The guidance, now
codified under the Consolidation Topic of the FASB Accounting Standards
Codification, also amends the guidance governing the determination of whether an
enterprise is the primary beneficiary of a VIE, and is, therefore, required to
consolidate an entity, by requiring a qualitative analysis rather than a
quantitative analysis. The qualitative analysis will include, among other
things, consideration of who has the power to direct the activities of the
entity that most significantly impact the entity’s economic performance and who
has the obligation to absorb losses or the right to receive benefits of the VIE
that could potentially be significant to the VIE. This guidance also requires
continuous reassessments of whether an enterprise is the primary beneficiary of
a VIE. Previously, GAAP required reconsideration of whether an enterprise was
the primary beneficiary of a VIE only when specific events had
occurred. The Company is required to adopt this guidance
beginning in fiscal 2010. The Company does not anticipate the
adoption of the guidance will have a material impact on its financial position,
results of operations and cash flows.
In June
2009, the FASB issued guidance which establishes the FASB Accounting Standards
Codification (the “Codification”) as the source of authoritative accounting
principles recognized by the FASB to be applied by non-governmental entities in
the preparation of financial statements in conformity with U.S. GAAP. Rules and
interpretive releases of the SEC under authority of federal securities laws are
also sources of authoritative U.S. GAAP for SEC registrants. The Codification is
effective for financial statements issued for interim and annual periods ending
after September 15, 2009. The Codification supersedes all accounting standards
in U.S. GAAP, aside from those issued by the SEC. The Company adopted
this guidance in the third quarter of fiscal 2009. The adoption did
not have an impact on the Company’s financial position, results of operations,
or cash flows.
In
October 2009, the FASB issued revised guidance on multiple-deliverable revenue
arrangements which requires entities to allocate revenue in an arrangement,
using estimated selling prices of the delivered goods and services based on a
selling price hierarchy, and eliminates the residual method of revenue
allocation. It also requires revenue to be allocated using the
relative selling price method. The FASB also issued accounting
guidance on the applicability of software revenue accounting for certain
arrangements that include software elements, which remove tangible products from
the scope of software revenue guidance and provides guidance on determining
whether software deliverables in an arrangement that includes a tangible product
are covered by the scope of the software revenue guidance. The
guidance on both of these topics, which are now codified under the Revenue
Recognition Topic of the FASB Accounting Standards Codification, should be
applied on a prospective basis for revenue arrangements entered into or
materially modified in fiscal years beginning on or after June 15, 2010, with
early adoption permitted. The Company is evaluating the expected impact of the
new revenue guidance on its financial position, results of operations and cash
flows, and when it will adopt the revised guidance.
NOTE 3: EARNINGS PER
SHARE
The
following data shows the amounts used in computing earnings per share and the
effect on the weighted-average number of shares of potentially dilutive common
stock.
January
1,
|
January
2,
|
December
28,
|
||||||||||
Fiscal
Years Ended
|
2010
|
2009
|
2007
|
|||||||||
(in
thousands, except per share amounts)
|
||||||||||||
Numerator:
|
||||||||||||
Net
income attributable to Trimble Navigation Ltd. available to common
shareholders:
|
$ | 63,446 | $ | 141,472 | $ | 117,374 | ||||||
Denominator:
|
||||||||||||
Weighted
average number of common shares used in basic earnings per
share
|
119,814 | 120,714 | 119,280 | |||||||||
Effect
of dilutive securities (using treasury stock method):
|
||||||||||||
Common
stock options and restricted stock units
|
2,394 | 3,516 | 4,907 | |||||||||
Common
stock warrants
|
- | 5 | 223 | |||||||||
Weighted
average number of common shares and dilutive potential
common shares used in diluted earnings per share
|
122,208 | 124,235 | 124,410 | |||||||||
Basic
earnings per share
|
$ | 0.53 | $ | 1.17 | $ | 0.98 | ||||||
Diluted
earnings per share
|
$ | 0.52 | $ | 1.14 | $ | 0.94 |
For
fiscal 2009, 2008, and 2007 the Company excluded 5.0 million shares, 2.2 million
shares and 0.5 million shares of outstanding stock options, respectively, from
the calculation of diluted earnings per share because the exercise prices of
these stock options were greater than or equal to the average market value of
the common shares during the respective periods. Inclusion
of these shares would be antidilutive. These options could be
included in the calculation in the future if the average market value of the
common shares increases and is greater than the exercise price of these
options.
NOTE
4: BUSINESS COMBINATIONS
@Road,
Inc.
On
December 10, 2006, the Company and @Road, Inc. (@Road) entered into a definitive
merger agreement. The acquisition became effective on February 16,
2007. @Road is a global provider of solutions designed to automate
the management of mobile resources and to optimize the service delivery process
for customers across a variety of industries. The acquisition of @Road has
expanded the Company’s investment and reinforces the existing growth strategy
for its Mobile Solutions segment. @Road’s results of operations since
February 17, 2007 have been included in the Company’s Consolidated Statements of
Income within the Mobile Solutions business segment.
Purchase
Price
Under the
terms of the agreement, the Company acquired all of the outstanding shares of
@Road common stock for $7.50 per share. The Company elected to issue
$2.50 per share of the consideration in the form of the Company’s common stock
(Common Stock) to be based upon the five-day average closing price of the
Company’s shares six trading days prior to the closing of the transaction and
the remaining $5.00 per share consideration was paid in cash. Further, each
share of Series A-1 and Series A-2 Redeemable Preferred Stock, par value $0.001
per share, of @Road was converted into the right to receive an amount in cash
equal to $100.00 plus all declared or accumulated but unpaid dividends with
respect to such shares outstanding immediately prior to the effective time of
the merger and each share of Series B-1 and B-2 Redeemable Preferred Stock, par
value $0.001 per share, of @Road was converted into the right to receive an
amount in cash equal to $831.39 plus all declared or accumulated but unpaid
dividends with respect to such shares as of immediately prior to the effective
time of the merger. In addition, all @Road vested stock options were terminated
and the holders of each such options were entitled to receive the excess, if
any, of the aggregate consideration over the exercise price. At the effective
time of the merger, all unvested @Road stock options with an exercise price in
excess of $7.50 were terminated and all unvested stock options that had exercise
prices of $7.50 or less were assumed by the Company.
Concurrent
with the merger, the Company amended its existing $200 million unsecured
revolving credit agreement with a syndicate of 11 banks with The Bank of Nova
Scotia as the administrative agent (the 2007 Credit Facility) and incurred a
five-year term loan under the 2007 Credit Facility. See Note 9 to the
Consolidated Financial Statements for additional information.
The
Company paid approximately $327.4 million in cash from debt and existing cash,
and issued approximately 5.9 million shares of the Company’s common stock based
on an exchange ratio of 0.0893 shares of the Company’s common stock for each
outstanding share of @Road common stock as of February 16, 2007. The common
stock issued had a fair value of $161.9 million and was valued using the average
closing price of the Company’s common stock of $27.69 over a range of two
trading days (February 14, 2007 through February 15, 2007) prior to, and
including, the close date (February 16, 2007) of the transaction, which is also
the date that the amount of the Company’s shares to be issued in accordance with
the merger agreement was settled. The total purchase price was estimated as
follows (in thousands):
Cash
consideration
|
$ | 327,370 | ||
Common
stock consideration
|
161,947 | |||
Merger
costs *
|
5,712 | |||
Total
purchase price
|
$ | 495,029 |
* Merger
costs consist of legal, advisory, accounting and administrative
fees.
Purchase
Price Allocation
In
accordance with accounting guidance on business combinations, the total purchase
price was allocated to @Road net tangible assets, identifiable intangible assets
and in-process research and development based upon their estimated fair values
as of February 16, 2007. The excess purchase price over the net tangible,
identifiable intangible assets and in-process research and development was
recorded as goodwill.
The total
purchase price has been allocated as follows (in thousands):
Value
to be allocated to assets, based upon merger consideration
|
$ | 495,029 | ||
Less:
value of @Road’s assets acquired:
|
||||
Net
tangible assets acquired
|
137,492 | |||
Amortizable
intangibles assets:
|
||||
Developed
product technology
|
66,600 | |||
Customer
relationships
|
75,300 | |||
Trademarks
and tradenames
|
5,200 | |||
Subtotal
|
147,100 | |||
In-process
research and development
|
2,100 | |||
Deferred
tax liability
|
(56,855 | ) | ||
Goodwill
|
$ | 265,192 |
Net
Tangible Assets
As
of
|
||||
February
16,
|
||||
(in
thousands)
|
2007
|
|||
Cash
and cash equivalents
|
$ | 74,729 | ||
Accounts
receivable, net
|
14,255 | |||
Other
receivables
|
8,774 | |||
Inventories,
net
|
15,272 | |||
Other
current assets
|
12,627 | |||
Property
and equipment, net
|
5,854 | |||
Deferred
income taxes
|
40,435 | |||
Other
non-current assets
|
7,935 | |||
Total
assets acquired
|
$ | 179,881 | ||
Accounts
payable
|
19,285 | |||
Deferred
revenue
|
7,365 | |||
Other
current liabilities
|
15,739 | |||
Total
liabilities assumed
|
$ | 42,389 | ||
Total
net assets acquired
|
$ | 137,492 |
The
Company reviewed and adjusted @Road's net tangible assets and liabilities to
fair value, as necessary, as of February 16, 2007, including the following
adjustments:
Fixed
assets – the Company decreased @Road's historical value of fixed assets by $2.1 million to
adjust fixed assets to an amount equivalent to fair value.
Deferred
revenue and cost of sales – the Company reduced @Road's historical value of
deferred revenue by $39.6 million to
adjust deferred revenue to the fair value of the direct cost associated with
servicing the underlying obligation plus a reasonable margin. @Road’s deferred
revenue balance consists of upfront payments of its hosted product, licensed
product, extended warranty and maintenance. The Company reduced @Road's
historical value of deferred product cost by $47.1 million to
adjust deferred product cost to the asset's underlying fair value. The deferred
product costs adjustment to fair value related to deferral of cost of sales of
hardware that have shipped, resulting in no fair value relating to the
associated deferred product costs.
Other
receivables and non-current assets – Other receivables and non-current assets
were increased by $15.4 million to
adjust for the fair value of future cash collections from customer contracts
assumed for products delivered prior to the acquisition date. As the
products were delivered prior to the acquisition date, revenue is not
recognizable in the Company’s Consolidated Statements of Income.
Intangible
Assets
Developed
product technology, which is comprised of products that have reached
technological feasibility, includes products in @Road's current product
offerings. @Road's technology includes hardware, software and services that
serve the mobile resource management market internationally. The Company expects
to amortize the developed and core technology over a weighted average estimated
life of seven years.
Customer
relationships represent the value placed on @Road’s distribution channels and
end users. The Company expects to amortize the fair value of these assets over a
weighted average estimated life of seven years.
Trademarks
and trade names represent the value placed on the @Road brand and recognition in
the mobile resource management market. The Company expects to amortize the fair
value of these assets over a weighted average estimated life of eight
years.
In-process Research and
Development
The
Company recorded an expense of $2.1 million relating to in-process research and
development projects in @Road’s license business. In-process research
and development represents incomplete @Road research and development projects
that had not reached technological feasibility and had no alternative future use
as of the consummation of the merger.
Goodwill
The
excess purchase price over the net tangible, identifiable intangible assets and
in-process research and development was recorded as goodwill. The goodwill was
attributed to the premium paid for the opportunity to expand and better serve
the global mobile resource management market and achieve greater long-term
growth opportunities than either company had operating alone. The Company
believes these opportunities could include accelerating the rate at which
products are brought to market and increasing the diversity and global reach of
those products. In addition, the Company expects that the combined companies may
be able to obtain greater operating leverage by reducing costs in areas of
redundancy. Of the total $265.2 million assigned to goodwill,
approximately $6.7 million is expected to be deductible for tax
purposes.
Restructuring
Liabilities
related to restructuring @Road's operations that meet the requirements of
recognition of liabilities in connection with a purchase business combination
were recorded as adjustments to the purchase price and an increase in goodwill.
Liabilities related to restructuring the Company's operations were recorded as
expense in the Company's Consolidated Statements of Income in the period that
the costs were incurred.
Deferred Income Tax
Assets/Liabilities
The
Company recognized $56.9 million in
net deferred tax liabilities for the tax effects of differences between assigned
values in the purchase price and the tax bases of assets acquired and
liabilities assumed.
@Road Stock Options
Assumed
In
accordance with the merger agreement, the Company assumed all @Road unvested
stock options that had exercise prices of $7.50 or less. The Company
issued approximately 795,000 stock options based on an exchange ratio of 0.268
shares of the Company’s common stock for each unvested stock option with
exercise prices of $7.50 or less as of February 16, 2007. The fair
value of these assumed options was determined to be $10.1 million which will be
expensed over the remaining vesting terms of the assumed options which is
approximately three to four years. The assumed options were valued
using the binomial model similar to previously granted Trimble stock
options.
Pro-Forma
Results
The
following table presents pro-forma results of operations of the Company and
@Road, as if the companies had been combined as of December 30,
2006. The unaudited pro-forma results of operations are not
necessarily indicative of results that would have occurred had the acquisition
taken place on December 30, 2006 or of future results. Included in
the pro-forma results are fair value adjustments based on the fair values of
assets acquired and liabilities assumed as of the acquisition date of February
16, 2007 and adjustments for interest expense related to debt and stock options
assumed as part of the merger consideration.
The
Company excluded the effect of non-recurring items for both periods presented as
the impact is short-term in nature. The pro-forma information is as
follows:
Fiscal
Year Ended
|
||||
December
28,
|
||||
2007
(a)
|
||||
(in
thousands, except per share data)
|
||||
Pro-forma
revenue
|
$ | 1,239,319 | ||
Pro-forma
net income
|
114,835 | |||
Pro-forma
basic net income per share
|
$ | 0.96 | ||
Pro-forma
diluted net income per share
|
$ | 0.92 |
(a)
|
The
pro-forma results of operations represent the Company’s results for fiscal
2007 together with @Road’s historical results through the acquisition date
of February 16, 2007 as though they had been combined as of December 30,
2006. Pro-forma adjustments have been made based on the fair
values of assets acquired and liabilities assumed as of February 16,
2007. Pro-forma revenue includes a $2.8 million
increase due to the timing of recognizing deferred revenue write-downs and
customer contracts where the product was delivered prior to the
acquisition date. Pro-forma net income includes a $0.7
million increase due to the timing of recognizing revenue write-downs and
related deferred cost of sales write-downs, amortization of intangible
assets related to the acquisition of $2.2 million, and interest expense
for debt used to purchase @Road of $1.4 million. The year to date
amounts provided herein include adjustments to previously filed pro-forma
numbers in the Company’s
10-Q’s.
|
Other
Acquisitions
The
following is a summary of business combinations other than @Road made by the
Company during fiscal 2009, 2008 and 2007:
Acquisition
|
Primary Service or Product
|
Operating Segment
|
Acquisition Date
|
|||
Farm
Works
|
Integrated
office and mobile software solutions for both the farmer and agriculture
service professional
|
Field
Solutions
|
July
16, 2009
|
|||
Accutest
|
Vehicle
diagnostics and telematics technologies for the automotive
industry
|
Mobile
Solutions
|
June
5, 2009
|
|||
NTech
|
Crop-sensing
technology controlling the application of nitrogen, herbicide and other
crop inputs
|
Field
Solutions
|
June
4, 2009
|
|||
Quickpen
|
Building
Information Modeling software
|
Engineering
& Construction
|
March
12, 2009
|
|||
Rawson
Control Systems
|
Hydraulic
and electronic controls for the agriculture equipment
industry
|
Field
Solutions
|
December
3, 2008
|
|||
FastMap
and
GeoSite
|
Field-based
software suite for GIS and software solution for land surveyors and
construction professionals
|
Field
Solutions
and
Engineering
& Construction
|
November
28, 2008
|
|||
Callidus
Precision Systems Assets
|
3D
laser scanning solutions
|
Engineering
& Construction
|
November
28, 2008
|
|||
Toposys
|
Aerial
data collection systems comprised of LiDAR and metric
cameras
|
Engineering
& Construction
|
November
13, 2008
|
|||
TruCount
|
Air
and electric clutches that automate individual planter row
shut-off
|
Field
Solutions
|
October
30, 2008
|
|||
RolleiMetric
|
Metric
camera systems for aerial imaging and terrestrial close range
photogrammetry
|
Engineering
& Construction
|
October
20, 2008
|
|||
SECO
|
Accessories
for the geomatics, surveying, mapping, and construction
industries
|
Engineering
& Construction
|
July
29, 2008
|
|||
Géo-3D
|
Roadside
infrastructure asset inventory solutions
|
Engineering
& Construction
|
January
22, 2008
|
|||
Crain
Enterprises
|
Accessories
for the geomatics, surveying, mapping, and construction
industries
|
Engineering
& Construction
|
January
8, 2008
|
|||
HHK
Datentechnik GmbH
|
Office
and field software solutions for the cadastral survey
market
|
Engineering
& Construction
|
December
19, 2007
|
|||
UtilityCenter
|
Field
service management software for utilities
|
Field
Solutions
|
November
8, 2007
|
|||
Ingenieurbüro
Breining GmbH
|
Office
and field software solutions for the cadastral survey
market
|
Engineering
& Construction
|
September
19, 2007
|
|||
Inpho
GmbH
|
Photogrammetry
and digital surface modeling software for aerial surveying, mapping and
remote sensing applications
|
Engineering
& Construction
|
February
13, 2007
|
The
Consolidated Financial Statements include the operating results of each of these
businesses from the date of acquisition. Pro-forma results of operations have
not been presented because the effects of each of these acquisitions were not
material to the Company’s results.
The total
purchase consideration for each of the above acquisitions was allocated to the
assets acquired and liabilities assumed based on their estimated fair values as
of the date of acquisition. The fair value of intangible assets acquired is
generally determined based on a discounted cash flow analysis. Acquisition costs
directly related to the acquisitions were capitalized during fiscal 2007 and
2008. In fiscal 2009 these costs were expensed as incurred in
accordance with the revised accounting guidance on business
combinations.
During
fiscal 2009 the Company adopted the revised accounting guidance on business
combinations, which requires in-process research and development (IPR&D)
acquired to be capitalized as an intangible asset until the project is complete,
at which point the asset is amortized over its estimated useful
life. There was no IPR&D capitalized in 2009. Prior to
2009, IPR&D was expensed. In fiscal 2008, there was no IPR&D
expense and in fiscal 2007, Company recorded IPR&D expense of $2.1 million
related to the @Road acquisition.
The
following table summarizes the Company’s business combinations completed during
fiscal years 2009, 2008 and 2007 other than @Road (in thousands):
January
1,
|
January
2,
|
December
28,
|
||||||||||
Fiscal
Years Ended
|
2010
|
2009
|
2007
|
|||||||||
Purchase
price
|
$ | 41,639 | $ | 99,948 | $ | 49,311 | ||||||
Acquisition
costs *
|
- | 2,623 | 956 | |||||||||
Total
purchase price
|
$ | 41,639 | $ | 102,571 | $ | 50,267 | ||||||
Purchase
price allocation:
|
||||||||||||
Fair
value of net assets acquired
|
$ | 1,187 | $ | 7,238 | $ | 9,504 | ||||||
Identified
intangible assets
|
21,475 | 50,242 | 19,937 | |||||||||
Deferred
tax liability
|
(7,766 | ) | (3,426 | ) | (2,763 | ) | ||||||
Goodwill
|
26,743 | 48,517 | 23,589 | |||||||||
Total
|
$ | 41,639 | $ | 102,571 | $ | 50,267 |
*
Acquisition costs consist of legal, advisory, and accounting fees as well as
$0.4 million of restructuring related liabilities in fiscal 2008. Such
costs were expensed during fiscal 2009 in accordance with the revised accounting
guidance on business combinations.
All of
the above business combinations were acquired with cash consideration. None of
the amounts assigned to goodwill above are expected to be deductible for tax
purposes.
Certain
acquisitions include additional earn-out cash payments based on future revenue
derived from existing products and other product milestones. In accordance with
the revised accounting guidance on business combinations, any earn-outs
associated with business combinations completed during fiscal 2009 are included
in the initial purchase price at fair value and must be remeasured to
fair value at each balance sheet date with subsequent changes recorded to
earnings. Prior to 2009, these earn-out payments were considered additional
purchase price consideration when, and if, any contingencies, such as the
achievement of certain earnings targets, were resolved. Earn-outs paid for
pre-2009 acquisitions and changes in purchase price allocation estimates were
recorded as purchase price adjustments and goodwill adjustments. Earn-out cash
payments made for these pre-2009 acquisitions were $8.5 million, $7.2 million
and $11.8 million in fiscal 2009, fiscal 2008 and fiscal 2007, respectively.
Pre-2009 acquisitions made by the Company have additional potential earn-out
cash payments in excess of that recorded on the Company’s Consolidated Balance
Sheet not to exceed approximately $24.7 million.
Intangible
Assets
The
following tables present details of the Company’s total intangible
assets:
January
1, 2010
|
||||||||||||
Gross
|
||||||||||||
Carrying
|
Accumulated
|
Net
Carrying
|
||||||||||
(in
thousands)
|
Amount
|
Amortization
|
Amount
|
|||||||||
Developed
product technology
|
$ | 213,696 | $ | (114,870 | ) | $ | 98,826 | |||||
Trade
names and trademarks
|
20,861 | (14,891 | ) | 5,970 | ||||||||
Customer
relationships
|
120,990 | (48,885 | ) | 72,105 | ||||||||
Distribution
rights and other intellectual properties (*)
|
46,702 | (20,821 | ) | 25,881 | ||||||||
$ | 402,249 | $ | (199,467 | ) | $ | 202,782 |
January
2, 2009
|
||||||||||||
Gross
|
||||||||||||
Carrying
|
Accumulated
|
Net
Carrying
|
||||||||||
(in
thousands)
|
Amount
|
Amortization
|
Amount
|
|||||||||
Developed
product technology
|
$ | 188,391 | $ | (78,867 | ) | $ | 109,524 | |||||
Trade
names and trademarks
|
20,254 | (13,100 | ) | 7,154 | ||||||||
Customer
relationships
|
124,596 | (40,263 | ) | 84,333 | ||||||||
Distribution
rights and other intellectual properties (*)
|
37,913 | (10,023 | ) | 27,890 | ||||||||
$ | 371,154 | $ | (142,253 | ) | $ | 228,901 |
(*)
Included within Other intellectual properties is a $25.0 million distribution
right that the Company bought from Caterpillar, a related party, during fiscal
2008. The fair value of the distribution right was estimated
using a discounted cash flow analysis. The distribution right is
being amortized over its estimated economic life of eight years.
The
weighted-average amortization period is six years for developed product
technology, eight years for trade names and trademarks, seven years for customer
relationships, and eight years for distribution rights and other
intellectual properties.
The
following table presents details of the amortization expense of purchased and
other intangible assets as reported in the Consolidated Statements of
Income:
January
1,
|
January
2,
|
December
28,
|
||||||||||
Fiscal
Years Ended
|
2010
|
2009
|
2007
|
|||||||||
(in
thousands)
|
||||||||||||
Reported
as:
|
||||||||||||
Cost
of sales
|
$ | 22,337 | $ | 22,690 | $ | 19,778 | ||||||
Operating
expenses
|
30,335 | 22,376 | 18,966 | |||||||||
Total
|
$ | 52,672 | $ | 45,066 | $ | 38,744 |
The
estimated future amortization expense of intangible assets as of January 1,
2010, is as follows (in thousands):
2010
|
$ | 52,992 | ||
2011
|
47,676 | |||
2012
|
39,919 | |||
2013
|
35,158 | |||
2014
|
14,309 | |||
Thereafter
|
12,728 | |||
Total
|
$ | 202,782 |
Goodwill
The
changes in the carrying amount of goodwill for fiscal 2009 are as follows (in
thousands):
Engineering
and Construction
|
Field
Solutions
|
Mobile
Solutions
|
Advanced
Devices
|
Total
|
||||||||||||||||
Balance
as of January 2, 2009
|
$ | 363,908 | $ | 10,651 | $ | 328,721 | $ | 12,291 | $ | 715,571 | ||||||||||
Additions
due to acquisitions
|
10,017 | 16,392 | 1,152 | - | 27,561 | |||||||||||||||
Purchase
price adjustments
|
5,632 | (296 | ) | 1,147 | - | 6,483 | ||||||||||||||
Foreign
currency translation adjustments
|
10,145 | 29 | 2,245 | 2,159 | 14,578 | |||||||||||||||
Balance
as of January 1, 2010
|
$ | 389,702 | $ | 26,776 | $ | 333,265 | $ | 14,450 | $ | 764,193 |
Total
purchase price adjustments of $6.5 million recorded during fiscal 2009 are
comprised of earn-out payments of $8.5 million, offset by tax adjustments of
$1.6 million, and $0.4 million for changes in purchase price allocation
estimates.
NOTE
5: JOINT VENTURES
Caterpillar
Trimble Control Technologies Joint Venture
On April
1, 2002, Caterpillar Trimble Control Technologies LLC (CTCT), a joint venture
formed by the Company and Caterpillar, began operations. CTCT develops advanced
electronic guidance and control products for earth moving machines in the
construction and mining industries. The joint venture is 50% owned by the
Company and 50% owned by Caterpillar, with equal voting rights. The joint
venture is accounted for under the equity method of accounting. Under the equity
method, the Company’s share of profits and losses are included in Income from
joint ventures in the Non-operating income, net section of the Consolidated
Statements of Income. The Company recorded income of $3.0 million, $8.0 million,
and $7.8 million as its proportionate share of CTCT net income in fiscal 2009,
2008, and 2007, respectively. During fiscal 2009, 2008, and 2007,
dividends received from CTCT amounted to $2.9 million, $10.5 million, and $2.3
million, and were recorded against Other non-current assets on the Consolidated
Balance Sheets. The carrying amount of the investment in CTCT was
$7.1 million at January 1, 2010 and $7.0 million at January 2, 2009, and is
included in Other non-current assets on the Consolidated Balance
Sheets.
The
Company acts as a contract manufacturer for CTCT. Products are manufactured
based on orders received from CTCT and are sold at direct cost plus a mark-up
for the Company’s overhead costs to CTCT. CTCT then resells products at cost
plus a mark-up in consideration for CTCT’s research and development efforts to
both Caterpillar and to the Company for sales through their respective
distribution channels. Generally, the Company sells products through its
after-market dealer channel, and Caterpillar sells products for factory and
dealer installation. CTCT does not have inventory on its balance sheet in that
the resale of products to Caterpillar and the Company occur simultaneously when
the products are purchased from the Company. In fiscal 2009, 2008, and 2007, the
Company recorded $2.2 million, $11.7 million, and $11.5 million of revenue,
respectively, and $2.1 million, $10.5 million, and $10.3 million of cost of
sales, respectively, for the manufacturing of products sold by the Company to
CTCT and then sold through the Caterpillar distribution channel. In
addition, in fiscal 2009, 2008, and 2007, the Company recorded $19.1 million,
$21.4 million, and $25.1 million in net cost of sales for the manufacturing of
products sold by the Company to CTCT and then repurchased by the Company upon
sale through the Company’s distribution channel.
In
addition, the Company received reimbursement of employee-related costs from CTCT
for company employees dedicated to CTCT or performance of work for CTCT totaling
$10.4 million, $13.6 million and $13.7 million in fiscal 2009, 2008 and 2007,
respectively. The reimbursements were offset against operating
expense.
At
January 1, 2010 and January 2, 2009, the Company had amounts due to and from
CTCT. Receivables and payables to CTCT are settled individually with
terms comparable to other non-related parties. The amounts due to and
from CTCT are presented on a gross basis in the Consolidated Balance
Sheets. At January 1, 2010 and January 2, 2009, the receivables from
CTCT were $3.5 million and $4.1 million, respectively, and are included within
Accounts receivable, net, on the Consolidated Balance Sheets. As of
the same dates, the payables due to CTCT were $4.4 million and $3.1 million,
respectively, and are included within Accounts payable on the Consolidated
Balance Sheets.
Nikon-Trimble
Joint Venture
On March
28, 2003, Nikon-Trimble Co., Ltd (Nikon-Trimble), a joint venture, was formed by
the Company and Nikon Corporation. The joint venture began operations in July
2003 and is 50% owned by the Company and 50% owned by Nikon, with equal voting
rights. It focuses on the design and manufacture of surveying instruments
including mechanical total stations and related products.
The joint
venture is accounted for under the equity method of accounting. In fiscal 2009,
2008, and 2007, the Company recorded income (loss) of $(2.5 million), $23,000,
and $0.6 million, respectively, as its proportionate share of Nikon-Trimble net
income (loss). During fiscal 2009, there are no dividends received from
Nikon-Trimble. During fiscal 2008 and 2007, dividends received from
Nikon-Trimble, amounted to $0.2 million and $0.6 million, and were recorded
against Other non-current assets on the Consolidated Balance Sheets. The
carrying amount of the investment in Nikon-Trimble was approximately $11.4
million at January 1, 2010 and $13.9 million at January 2, 2009, and is included
in Other non-current assets on the Consolidated Balance Sheets.
Nikon-Trimble
is the distributor in Japan for Nikon and the Company’s products. The Company is
the exclusive distributor outside of Japan for Nikon branded survey products.
For products sold by the Company to Nikon-Trimble, revenue is recognized by the
Company on a sell-through basis from Nikon-Trimble to the end customer. Profits
from these inter-company sales are eliminated.
The terms
and conditions of the sales of products from the Company to Nikon-Trimble are
comparable with those of the standard distribution agreements which the Company
maintains with its dealer channel and margins earned are similar to those from
third party dealers. Similarly, the purchases of product by the Company from
Nikon-Trimble are made on terms comparable with the arrangements which Nikon
maintained with its international distribution channel prior to the formation of
the joint venture with the Company. In fiscal 2009, 2008 and 2007,
the Company recorded $13.8 million, $15.3 million, and $12.6 million of revenue,
respectively, and $8.3 million, $11.0 million, and $6.7 million of cost of
sales, respectively, for the manufacturing of products sold by the Company to
Nikon-Trimble. The Company also purchases product from Nikon-Trimble for future
sales to third party customers. Purchases of inventory from Nikon-Trimble were
$10.5 million, $15.4 million, and $19.1 million for fiscal 2009, 2008, and 2007,
respectively.
At
January 1, 2010 and January 2, 2009, the Company had amounts due to and from
Nikon-Trimble. Receivables and payables to Nikon-Trimble are settled
individually with terms comparable to other non-related parties. The
amounts due to and from Nikon-Trimble are presented on a gross basis in the
Consolidated Balance Sheets. At January 1, 2010 and January 2, 2009, the amounts
due from Nikon-Trimble were $4.7 million and $2.0 million, respectively, and are
included within Accounts receivable, net on the Consolidated Balance
Sheets. As of the same dates, the amounts due to Nikon-Trimble were
$4.5 million and $2.3 million, respectively, and are included within Accounts
payable on the Consolidated Balance Sheets.
NOTE 6: CERTAIN BALANCE SHEET
COMPONENTS
The
following tables provide details of selected balance sheet items:
January
1,
|
January 2,
|
|||||||
As
of
|
2010
|
2009
|
||||||
(in
thousands)
|
||||||||
Inventories:
|
||||||||
Raw
materials
|
$ | 51,489 | $ | 71,319 | ||||
Work-in-process
|
4,869 | 5,551 | ||||||
Finished
goods
|
87,654 | 84,023 | ||||||
Total
inventories, net
|
$ | 144,012 | $ | 160,893 |
Deferred
costs of revenue are included within finished goods and were $16.8 million at
January 1, 2010 and $15.4 million at January 2, 2009.
January
1,
|
January 2,
|
|||||||
As
of
|
2010
|
2009
|
||||||
(in
thousands)
|
||||||||
Property
and equipment, net:
|
||||||||
Machinery
and equipment
|
$ | 97,134 | $ | 88,067 | ||||
Furniture
and fixtures
|
13,116 | 12,140 | ||||||
Leasehold
improvements
|
17,226 | 16,432 | ||||||
Buildings
|
6,530 | 6,519 | ||||||
Land
|
1,385 | 1,383 | ||||||
135,391 | 124,541 | |||||||
Less
accumulated depreciation
|
(90,756 | ) | (74,366 | ) | ||||
Total
|
$ | 44,635 | $ | 50,175 |
January
1,
|
January 2,
|
|||||||
As
of
|
2010
|
2009
|
||||||
(in
thousands)
|
||||||||
Other
non-current liabilities:
|
||||||||
Deferred
compensation
|
$ | 8,264 | $ | 6,631 | ||||
Pension
|
5,915 | 5,439 | ||||||
Deferred
rent
|
3,181 | 4,303 | ||||||
Unrecognized
tax benefits
|
36,968 | 34,275 | ||||||
Other
non-current liabilities
|
5,655 | 10,905 | ||||||
Total
|
$ | 59,983 | $ | 61,553 |
As of
January 1, 2010, the Company has $37.0 million of unrecognized tax benefits
included in Other non-current liabilities that, if recognized, would favorably
impact the effective income tax rate and interest and/or penalties related to
income tax matters in future periods.
NOTE 7:
REPORTING SEGMENT AND GEOGRAPHIC
INFORMATION
Trimble
is a designer and distributor of positioning products and applications enabled
by GPS, optical, laser, and wireless communications technology. The Company
provides products for diverse applications in its targeted markets.
To
achieve distribution, marketing, production, and technology advantages, the
Company manages its operations in the following four segments:
|
·
|
Engineering
and Construction — Consists of products currently used by survey and
construction professionals in the field for positioning, data collection,
field computing, data management, and machine guidance and control. The
applications served include surveying, road, runway, construction, site
preparation, and building
construction.
|
|
·
|
Field
Solutions — Consists of products that provide solutions in a variety of
agriculture and geographic information systems (GIS) applications. In
agriculture, these include precise land leveling and machine guidance
systems. In GIS, they include handheld devices and software that enable
the collection of data on assets for a variety of governmental and private
entities.
|
|
·
|
Mobile
Solutions — Consists of products that enable end users to monitor and
manage their mobile assets by communicating location and activity-relevant
information from the field to the office. Trimble offers a range of
products that address a number of sectors of this market including truck
fleets, security, and public safety
vehicles.
|
|
·
|
Advanced
Devices — The various operations that comprise this segment were
aggregated on the basis that no single operation accounted for more than
10% of Trimble’s total revenue, operating income and assets. This segment
is comprised of the Component Technologies, Military and Advanced Systems,
Applanix, and Trimble Outdoors
businesses.
|
Trimble
evaluates each of its segment's performance and allocates resources based on
segment operating income from operations before income taxes, and some corporate
allocations. Trimble and each of its segments employ consistent accounting
policies.
The
following table presents revenue, operating income, and identifiable assets for
the four segments. Operating income is net revenue less operating expense,
excluding general corporate expense, amortization of intangibles, amortization
of inventory step-up charges, in-process research and development expense,
restructuring charges, non-operating income (expense), and income taxes. The
identifiable assets that Trimble's Chief Operating Decision Maker, its Chief
Executive Officer, views by segment are accounts receivable, inventories, and
goodwill.
January
1,
|
January
2,
|
December
28,
|
||||||||||
Fiscal
Years Ended
|
2010
|
2009
|
2007
|
|||||||||
(in
thousands)
|
||||||||||||
Engineering
& Construction
|
||||||||||||
Revenue
|
$ | 578,579 | $ | 741,668 | $ | 743,291 | ||||||
Operating
income
|
58,282 | 126,014 | 174,177 | |||||||||
Field
Solutions
|
||||||||||||
Revenue
|
$ | 291,752 | $ | 300,708 | $ | 200,614 | ||||||
Operating
income
|
104,498 | 109,489 | 60,933 | |||||||||
Mobile
Solutions
|
||||||||||||
Revenue
|
$ | 154,881 | $ | 167,113 | $ | 157,673 | ||||||
Operating
income
|
14,341 | 11,328 | 12,517 | |||||||||
Advanced
Devices
|
||||||||||||
Revenue
|
$ | 101,047 | $ | 119,745 | $ | 120,692 | ||||||
Operating
income
|
17,227 | 24,445 | 17,276 | |||||||||
Total
|
||||||||||||
Revenue
|
$ | 1,126,259 | $ | 1,329,234 | $ | 1,222,270 | ||||||
Operating
income
|
194,348 | 271,276 | 264,903 |
Engineering
& Construction
|
||||||||
Accounts
receivable
|
$ | 118,033 | $ | 125,734 | ||||
Inventories
|
91,248 | 104,934 | ||||||
Goodwill
|
389,702 | 363,908 | ||||||
Field
Solutions
|
||||||||
Accounts
receivable
|
$ | 37,178 | $ | 37,791 | ||||
Inventories
|
22,025 | 21,778 | ||||||
Goodwill
|
26,776 | 10,651 | ||||||
Mobile
Solutions
|
||||||||
Accounts
receivable
|
$ | 29,572 | $ | 23,736 | ||||
Inventories
|
16,826 | 16,391 | ||||||
Goodwill
|
333,265 | 328,721 | ||||||
Advanced
Devices
|
||||||||
Accounts
receivable
|
$ | 17,510 | $ | 17,008 | ||||
Inventories
|
13,913 | 17,790 | ||||||
Goodwill
|
14,450 | 12,291 | ||||||
Total
|
||||||||
Accounts
receivable
|
$ | 202,293 | $ | 204,269 | ||||
Inventories
|
144,012 | 160,893 | ||||||
Goodwill
|
764,193 | 715,571 |
A
reconciliation of the Company’s consolidated segment operating income to
consolidated income before income taxes is as follows:
January
1,
|
January
2,
|
December
28,
|
||||||||||
Fiscal
Years Ended
|
2010
|
2009
|
2007
|
|||||||||
(in
thousands)
|
||||||||||||
Consolidated
segment operating income
|
$ | 194,348 | $ | 271,276 | $ | 264,903 | ||||||
Unallocated
corporate expense
|
(45,102 | ) | (36,284 | ) | (42,914 | ) | ||||||
Restructuring
charges
|
(10,754 | ) | (4,641 | ) | (3,025 | ) | ||||||
Amortization
of purchased intangible assets
|
(52,672 | ) | (44,891 | ) | (38,585 | ) | ||||||
In-process
research and development
|
- | - | (2,112 | ) | ||||||||
Consolidated
operating income
|
85,820 | 185,460 | 178,267 | |||||||||
Non-operating
income, net
|
1,801 | 5,983 | 5,489 | |||||||||
Consolidated
income before income taxes
|
$ | 87,621 | $ | 191,443 | $ | 183,756 |
The
geographic distribution of Trimble’s revenue and long-lived assets is
summarized in the tables below. Other non-US geographies include Canada, and
countries in South and Central America, the Middle East, and
Africa. Revenue is defined as revenue from external
customers.
January
1,
|
January
2,
|
December
28,
|
||||||||||
Fiscal
Years Ended
|
2010
|
2009
|
2007
|
|||||||||
(in
thousands)
|
||||||||||||
Revenue
(1):
|
||||||||||||
United
States
|
$ | 561,082 | $ | 646,734 | $ | 608,137 | ||||||
Europe
|
261,966 | 333,436 | 325,888 | |||||||||
Asia
Pacific
|
186,588 | 182,952 | 146,545 | |||||||||
Other
non-US countries
|
116,623 | 166,112 | 141,700 | |||||||||
Total
consolidated revenue
|
$ | 1,126,259 | $ | 1,329,234 | $ | 1,222,270 |
(1)
Revenue attributed to countries based on the location of the
customer.
No single
customer or country other than the United States accounted for 10% or more of
Trimble's total revenue in fiscal years 2009, 2008, and 2007.
Long-lived
assets indicated in the table below exclude deferred tax assets, inter-company
receivables, investments in subsidiaries, goodwill, and intangibles
assets.
January
1,
|
January
2,
|
|||||||
As
of
|
2010
|
2009
|
||||||
(in
thousands)
|
||||||||
Long-lived
assets:
|
||||||||
United
States
|
$ | 52,048 | $ | 58,559 | ||||
Europe
|
13,482 | 10,979 | ||||||
Asia
Pacific and other non-US countries
|
5,505 | 5,618 | ||||||
Total
long-lived assets
|
$ | 71,035 | $ | 75,156 |
NOTE
8: RESTRUCTURING CHARGES
Restructuring
expense
Restructuring
expense for the three years ended January 1, 2010 was as follows:
January
1,
|
January
2,
|
December
28,
|
||||||||||
2010
|
2009
|
2007
|
||||||||||
(in
thousands)
|
||||||||||||
Severance
and benefits
|
$ | 10,754 | $ | 4,641 | $ | 3,025 |
During
fiscal 2009, restructuring expense of $10.8 million was related to decisions to
streamline processes and reduce the cost structure of the Company, with
approximately 340 employees affected worldwide. Of the total restructuring
expense, $6.4 million is presented as a separate line within Operating expense
and $4.4 million is included within Cost of sales on the Company’s Consolidated
Statements of Income. Expense related to the decisions made through the fourth
quarter of fiscal 2009 is all accrued as of January 1, 2010.
During
fiscal 2008, restructuring expense of $4.6 million was related to decisions to
streamline processes and reduce the cost structure of the Company, with
approximately 100 employees affected worldwide. Of the total restructuring
expense, $2.7 million is presented as a separate line within Operating expense
on the Company’s Consolidated Statements of Income, and $1.9 million is included
within Cost of sales.
During
fiscal, 2007, restructuring expense of $3.0 million was for charges associated
with the Company’s acquisition of @Road. The restructuring expense was related
to the acceleration of vesting of employee stock options for certain terminated
@Road employees, of which $1.4 million was settled in cash and $1.6 million was
recorded in Shareholders’ equity.
Restructuring
costs associated with business combinations
In
addition to the restructuring expense in fiscal 2008, costs associated with
exiting activities of companies the Company acquired in fiscal 2008 were $0.4
million, consisting of severance and benefits costs. These costs were recognized
as a liability assumed in the purchase business combinations and were included
in the allocation of the cost to acquisitions and accordingly, resulted in an
increase to goodwill rather than an expense in fiscal 2008.
There
were $1.1 million of adjustments that decreased the restructuring liability
during fiscal 2008 and $0.2 million of adjustments that increased the
restructuring liability during fiscal 2009. The 2008 adjustments related to
differences between original estimates and actual payouts for severance and
benefits, $0.9 million of which related to the @Road acquisition.
Restructuring
liability
The
following table summarizes the restructuring activity for 2008 and 2009 (in
thousands):
Balance
as of December 28, 2007
|
$ | 1,326 | ||
Acquisition
related
|
355 | |||
Charges
|
4,641 | |||
Payments
|
(3,351 | ) | ||
Adjustment
|
(1,054 | ) | ||
Balance
as of January 2, 2009
|
$ | 1,917 | ||
Acquisition
related
|
- | |||
Charges
|
10,754 | |||
Payments
|
(10,279 | ) | ||
Adjustment
|
236 | |||
Balance
as of January 1, 2010
|
$ | 2,628 |
As of
January 1, 2010, the $2.6 million restructuring accrual consists of severance
and benefits. Of the $2.6 million restructuring accrual, $2.1 million is
included in Other current liabilities and is expected to be settled in fiscal
2010. The remaining balance of $0.5 million is included in Other
non-current liabilities and is expected to be settled in fiscal
2011.
NOTE
9: LONG-TERM DEBT
Long-term
debt consisted of the following:
January
1,
|
January
2,
|
|||||||
As
of
|
2010
|
2009
|
||||||
(in
thousands)
|
||||||||
Revolving
credit facility
|
$ | 151,000 | $ | 151,000 | ||||
Promissory
notes and other
|
483 | 588 | ||||||
Total
debt
|
151,483 | 151,588 | ||||||
Less
current portion of long-term debt
|
445 | 124 | ||||||
Non-current
portion
|
$ | 151,038 | $ | 151,464 |
On July
28, 2005, the Company entered into a $200 million unsecured revolving credit
agreement (the 2005 Credit Facility) with a syndicate of 10 banks with The Bank
of Nova Scotia as the administrative agent. On February 16, 2007, the
Company amended its existing $200 million unsecured revolving credit agreement
with a syndicate of 11 banks with The Bank of Nova Scotia as the administrative
agent (the 2007 Credit Facility). Under the 2007 Credit Facility, the Company
exercised the option in the existing credit agreement to increase the
availability under the revolving credit line by $100 million, for an aggregate
availability of up to $300 million, and extended the maturity date of the
revolving credit line by 18 months, from July 2010 to February
2012. Up to $25 million of the availability under the
revolving credit line may be used to issue letters of credit, and up to $20
million may be used for paying to pay off other debts or loans. The
maximum leverage ratio under the 2007 Credit Facility is
3.00:1.00. The funds available under the new 2007 Credit Facility may
be used by the Company for acquisitions, stock repurchases, and general
corporate purposes. As of August 20, 2008, the Company amended its 2007 Credit
Facility to allow it to redeem, retire or purchase common stock of the Company
without limitation so long as no default or unmatured default then existed, and
leverage ratio for the two most recently completed periods was less than
2.00:1.00. In addition, the definition of the fixed charge was amended to
exclude the impact of redemptions, retirements, or purchases common stock of the
Company from the fixed charges coverage ratio.
In
addition, during the first quarter of fiscal 2007 the Company incurred a
five-year term loan under the 2007 Credit Facility in an aggregate principal
amount of $100 million, which was repaid in full during fiscal
2008. As of January 2, 2009, the Company had an outstanding balance
on the revolving credit line of $151.0 million which was drawn down in fiscal
2008.
The
Company may borrow funds under the 2007 Credit Facility in U.S. Dollars or in
certain other currencies, and borrowings will bear interest, at the Company's
option, at either: (i) a base rate, based on the administrative agent's prime
rate, plus a margin of between 0% and 0.125%, depending on the Company's
leverage ratio as of its most recently ended fiscal quarter, or (ii) a
reserve-adjusted rate based on the London Interbank Offered Rate (LIBOR), Euro
Interbank Offered Rate (EURIBOR), Stockholm Interbank Offered Rate (STIBOR),
or other agreed-upon rate, depending on the currency borrowed, plus a
margin of between 0.625% and 1.125%, depending on the Company's leverage ratio
as of the most recently ended fiscal quarter. The Company's obligations under
the 2007 Credit Facility are guaranteed by certain of the Company's domestic
subsidiaries.
The 2007
Credit Facility contains customary affirmative, negative, and financial
covenants including, among other requirements, negative covenants that restrict
the Company's ability to dispose of assets, create liens, incur indebtedness,
repurchase stock, pay dividends, make acquisitions, make investments, enter into
mergers and consolidations, and make capital expenditures, within certain
limitations, and financial covenants that require the maintenance of leverage
and fixed charge coverage ratios. The 2007 Credit Facility contains events of
default that include, among others, non-payment of principal, interest or fees,
breach of covenants, inaccuracy of representations and warranties, cross
defaults to certain other indebtedness, bankruptcy and insolvency events,
material judgments, and events constituting a change of control. Upon the
occurrence and during the continuance of an event of default, interest on the
obligations will accrue at an increased rate and the lenders may accelerate the
Company's obligations under the 2007 Credit Facility, however that acceleration
will be automatic in the case of bankruptcy and insolvency events of default. As
of January 1, 2010 the Company was in compliance with all financial debt
covenants.
Notes
Payable
As of
January 1, 2010 and January 2, 2009, the Company had notes payable totaling
approximately $483,000 and $588,000, respectively, consisting primarily of
government loans to foreign subsidiaries.
NOTE 10: COMMITMENTS AND
CONTINGENCIES
Operating
Leases
The
Company's principal facilities in the United States are leased under various
cancelable and non-cancelable operating leases that expire at various dates
through 2015. For tenant improvement allowances and rent holidays, Trimble
records a deferred rent liability on the Consolidated Balance Sheets and
amortizes the deferred rent over the terms of the leases as reductions to rent
expense on the consolidated statements of income. The Company has options to
renew certain of these leases for an additional five years.
Future
minimum payments required under non-cancelable operating leases are as follows
(in thousands):
2010
|
$ | 19,063 | ||
2011
|
11,952 | |||
2012
|
8,827 | |||
2013
|
3,621 | |||
2014
|
2,239 | |||
Thereafter
|
1,248 | |||
Total
|
$ | 46,950 |
Net rent
expense under operating leases was $18.0 million in fiscal 2009, $16.2 million
in fiscal 2008, and $14.2 million in fiscal 2007. Sublease income was $38,000,
$49,000 and $39,000 for fiscal 2009, 2008, and 2007, respectively.
Additionally,
as of January 1, 2010, the Company had acquisition earn-outs of $2.2 million and
holdbacks of $19.7 million recorded in “Other current liabilities” and “Other
non-current liabilities.” The maximum remaining payments, including the $2.2
million and $19.7 million recorded, will not exceed $46.6 million. The remaining
payments are based upon targets achieved or events occurring over time that
would result in amounts paid that may be lower than the maximum remaining
payments. The remaining earn-outs and holdbacks are payable through
2012.
At
January 1, 2010, the company had unconditional purchase obligations of
approximately $61.1 million. These unconditional purchase obligations primarily
represent open non-cancelable purchase orders for material purchases with our
vendors. Purchase obligations exclude agreements that are cancelable
without penalty.
NOTE 11: FAIR VALUE
MEASUREMENTS
The
guidance on fair value measurements and disclosures defines fair value,
establishes a framework for measuring fair value, and requires enhanced
disclosures about assets and liabilities measured at fair value. Fair
value is defined as the price at which an asset could be exchanged in a current
transaction between knowledgeable, willing parties. A liability’s fair value is
defined as the amount that would be paid to transfer the liability to a new
obligor, not the amount that would be paid to settle the liability with the
creditor. Where available, fair value is based on observable market prices or
parameters or derived from such prices or parameters. Where observable prices or
inputs are not available, valuation models are applied. These valuation
techniques involve some level of management estimation and judgment, the degree
of which is dependent on the price transparency for the instruments or market
and the instruments’ complexity.
Assets
and liabilities recorded at fair value on a recurring basis in the Condensed
Consolidated Balance Sheets are categorized based upon the level of judgment
associated with the inputs used to measure their fair value. Hierarchical
levels, defined by the guidance on fair value measurements are directly related
to the amount of subjectivity associated with the inputs to fair valuation of
these assets and liabilities, and are as follows:
Level I –
Observable inputs such as unadjusted, quoted prices in active markets for
identical assets or liabilities at the measurement date.
Level II
– Inputs (other than quoted prices included in Level I) are either directly or
indirectly observable for the asset or liability. These include
quoted prices for similar assets or liabilities in active markets and quoted
prices for identical or similar assets or liabilities in markets that are not
active.
Level III
– Unobservable inputs that reflect management’s best estimate of what market
participants would use in pricing the asset or liability at the measurement
date. Consideration is given to the risk inherent in the valuation technique and
the risk inherent in the inputs to the model.
Fair
Value on a Recurring Basis
Assets
and liabilities measured at fair value on a recurring basis are categorized in
the tables below based upon the lowest level of significant input to the
valuations.
Fair
Values as of January 1, 2010
|
||||||||||||||||
(in
thousands)
|
Level
I
|
Level
II
|
Level
III
|
Total
|
||||||||||||
Assets
|
||||||||||||||||
Money
market funds(1)
|
$ | 18,011 | $ | - | $ | - | $ | 18,011 | ||||||||
Deferred
compensation plan assets (2)
|
- | 8,636 | - | 8,636 | ||||||||||||
Derivative
assets (3)
|
- | 594 | - | 594 | ||||||||||||
Total
|
$ | 18,011 | $ | 9,230 | $ | - | $ | 27,241 | ||||||||
Liabilities
|
||||||||||||||||
Deferred
compensation plan liabilities (2)
|
$ | - | $ | 8,264 | $ | - | $ | 8,264 | ||||||||
Derivative
liabilities (3)
|
- | 52 | - | 52 | ||||||||||||
Contingent
consideration liability (4)
|
- | - | 2,200 | 2,200 | ||||||||||||
Total
|
$ | - | $ | 8,316 | $ | 2,200 | $ | 10,516 |
(1)
|
The
Company may invest in highly liquid investments such as money market funds
and U.S. Treasury bills. The fair values are determined using observable
quoted prices in active markets. Money market funds are included in Cash
and cash equivalents on the Company’s Condensed Consolidated Balance
Sheets.
|
(2)
|
The
Company maintains a self-directed, non-qualified deferred compensation
plan for certain executives and other highly compensated employees. The
investment assets and liabilities included in Level II are valued using
quoted prices for similar assets or liabilities in active markets and
quoted prices for identical or similar assets or liabilities in markets
that are not active. Deferred compensation plan assets and liabilities are
included in Other non-current assets and Other non-current liabilities on
the Company’s Condensed Consolidated Balance
Sheets.
|
(3)
|
Derivative
assets and liabilities included in Level II primarily represent forward
currency exchange contracts. The Company enters into these contracts to
minimize the short-term impact of foreign currency fluctuations on cash,
certain trade and inter-company receivables and payables. The derivatives
are not designated as hedging instruments. The fair values are determined
using inputs based on observable quoted prices. Derivative assets and
liabilities are included in Other current assets and Other current
liabilities, respectively, on the Company’s Condensed Consolidated Balance
Sheets.
|
(4)
|
A
contingent consideration arrangement requires the Company to pay the
former owner of one of the companies it acquired during fiscal 2009 up to
an undiscounted maximum amount of $4.5 million, based on future revenues
over a 3 year period. The potential undiscounted amount of all
future payments that the Company could be required to make under the
contingent consideration arrangement is between $0 and $4.5
million. The Company estimated the fair value of this liability
using probability-weighted revenue projections and discount rates ranging
from 0.47% to 1.70%. Of the total contingent consideration liability,
$0.3 million and $1.9 million were included in Other current liabilities
and Other non-current liabilities, respectively, on the Company’s
Condensed Consolidated Balance
Sheets.
|
The table
below sets forth a summary of changes in the fair value of the Level III
contingent consideration liability for the twelve months ended January 1,
2010.
Level
III liabilities
|
||||
As
of
|
January
1, 2010
|
|||
(in
thousands)
|
||||
Balance
as of January 2, 2009
|
$ | - | ||
Acquisitions
|
2,200 | |||
Balance
as of January 1, 2010
|
$ | 2,200 |
Additional
Fair Value Information
The
following table provides additional fair value information relating to the
Company’s financial instruments outstanding:
Carrying
|
Fair
|
Carrying
|
Fair
|
|||||||||||||
Amount
|
Value
|
Amount
|
Value
|
|||||||||||||
As
of
|
January
1, 2010
|
January
2, 2009
|
||||||||||||||
(in
thousands)
|
||||||||||||||||
Assets:
|
||||||||||||||||
Cash
and cash equivalents
|
$ | 273,848 | $ | 273,848 | $ | 142,531 | $ | 142,531 | ||||||||
Short-term
investments
|
- | - | 5,000 | 5,000 | ||||||||||||
Forward
foreign currency exchange contracts
|
594 | 594 | 627 | 627 | ||||||||||||
Liabilities:
|
||||||||||||||||
Credit
facility
|
$ | 151,000 | $ | 147,144 | $ | 151,000 | $ | 127,754 | ||||||||
Forward
foreign currency exchange contracts
|
52 | 52 | 1,775 | 1,775 | ||||||||||||
Promissory
note and other
|
483 | 479 | 588 | 554 |
The fair
value of the bank borrowings and promissory notes has been calculated using an
estimate of the interest rate the Company would have had to pay on the issuance
of notes with a similar maturity and discounting the cash flows at that rate.
The fair values do not give an indication of the amount that Trimble would
currently have to pay to extinguish any of this debt.
NOTE
12: INCOME TAXES
The
components of income before income taxes are as follows:
January
1,
|
January
2,
|
December
28,
|
||||||||||
Fiscal
Years Ended
|
2010
|
2009
|
2007
|
|||||||||
(in
thousands)
|
||||||||||||
United
States
|
$ | 46,928 | $ | 89,177 | $ | 126,768 | ||||||
Foreign
|
40,693 | 102,266 | 56,988 | |||||||||
Total
|
$ | 87,621 | $ | 191,443 | $ | 183,756 | ||||||
The
Company's income tax provision consisted of the following:
|
||||||||||||
January
1,
|
January
2,
|
December
28,
|
||||||||||
Fiscal
Years Ended
|
2010 | 2009 | 2007 | |||||||||
(in
thousands)
|
||||||||||||
US
Federal:
|
||||||||||||
Current
|
$ | 25,357 | $ | 42,453 | $ | 48,833 | ||||||
Deferred
|
(6,465 | ) | (7,024 | ) | (1,658 | ) | ||||||
18,892 | 35,429 | 47,175 | ||||||||||
US
State:
|
||||||||||||
Current
|
3,709 | 5,165 | 6,374 | |||||||||
Deferred
|
(3,459 | ) | (2,271 | ) | (3,669 | ) | ||||||
250 | 2,894 | 2,705 | ||||||||||
Foreign:
|
||||||||||||
Current
|
3,638 | 13,976 | 10,403 | |||||||||
Deferred
|
878 | (1,829 | ) | 6,099 | ||||||||
4,516 | 12,147 | 16,502 | ||||||||||
Income
tax provision
|
$ | 23,658 | $ | 50,470 | $ | 66,382 |
The
income tax provision differs from the amount computed by applying the statutory
US federal income tax rate to income before taxes. The sources and tax effects
of the differences are as follows:
January
1,
|
January
2,
|
December
28,
|
||||||||||
Fiscal
Years Ended
|
2010
|
2009
|
2007
|
|||||||||
(in
thousands)
|
||||||||||||
Expected
tax from continuing operations at 35% in all years
|
$ | 30,667 | $ | 67,187 | $ | 64,446 | ||||||
US
State income taxes
|
1,247 | 3,339 | 1,654 | |||||||||
Export
sales incentives
|
- | - | (365 | ) | ||||||||
Foreign
tax rate differential
|
(7,943 | ) | (23,553 | ) | (711 | ) | ||||||
US
Federal and California research and development
credits
|
(4,204 | ) | (3,651 | ) | (2,206 | ) | ||||||
Stock
option compensation
|
3,061 | 3,550 | 3,889 | |||||||||
Other
|
830 | 3,598 | (325 | ) | ||||||||
Income
tax provision
|
$ | 23,658 | $ | 50,470 | $ | 66,382 | ||||||
Effective
tax rate
|
27 | % | 26 | % | 36 | % |
Deferred
income taxes reflect the net effects of temporary differences between the
carrying amounts of assets and liabilities for financial reporting purposes and
the amounts used for income tax purposes. Significant components of the
Company’s deferred tax assets and liabilities are as follows:
January
1,
|
January
2,
|
|||||||
As
of
|
2010
|
2009
|
||||||
(in
thousands)
|
||||||||
Deferred
tax liabilities:
|
||||||||
Purchased
intangibles
|
$ | 57,176 | $ | 64,737 | ||||
Depreciation
and amortization
|
28,144 | 24,085 | ||||||
Other
|
275 | 568 | ||||||
Total
deferred tax liabilities
|
85,595 | 89,390 | ||||||
Deferred
tax assets:
|
||||||||
Inventory
valuation differences
|
8,290 | 8,298 | ||||||
Expenses
not currently deductible
|
9,665 | 8,091 | ||||||
US
Federal credit carryforwards
|
2,314 | 2,314 | ||||||
Deferred
revenue
|
2,769 | 10,850 | ||||||
US
State credit carryforwards
|
15,482 | 14,451 | ||||||
Warranty
|
2,571 | 2,418 | ||||||
US
Federal net operating loss carryforward
|
10,506 | 16,272 | ||||||
Foreign
net operating loss carryforward
|
18,378 | 15,522 | ||||||
Net
foreign tax credits on undistributed foreign earnings
|
14,746 | 19,689 | ||||||
Accruals
not currently deductible
|
28,681 | 15,280 | ||||||
Total
deferred tax assets
|
113,402 | 113,185 | ||||||
Valuation
allowance
|
(27,011 | ) | (24,410 | ) | ||||
Total
deferred tax assets
|
86,391 | 88,775 | ||||||
Total
net deferred tax assets (liabilities)
|
$ | 796 | $ | (615 | ) |
The
amounts provided herein include adjustments to previously filed amounts in the
Company’s 2008 Form 10K.
As of
January 1, 2010, the Company has federal, California and foreign net operating
loss carryforwards (“NOLs”) of approximately $28.1 million, $6.3 million, and
$61.0 million, respectively. The federal and California NOLs expire in years
2019 through 2027. There is, generally, no expiration for the foreign NOLs.
Utilization of the Company’s federal and state NOLs are subject to annual
limitation in accordance with section 382 of the Internal Revenue Code of 1986,
as amended.
The
Company has federal research and development credit carryforwards of $2.0
million (expiring in years 2011 through 2024) and California research and
development credit carryforwards of approximately $11.7 million that can be
carried over indefinitely.
The
Company’s valuation allowance is primarily attributable to foreign net operating
loss carryforwards and research and development credit
carryforwards. The Company has determined that it is more likely than
not that the Company will not realize these deferred tax assets and,
accordingly, a valuation allowance has been established for such
amounts.
The
Company’s policy with respect to its undistributed foreign subsidiaries’
earnings is to consider some of those earnings to be indefinitely reinvested
and, accordingly, no related provision for U.S. federal and state income taxes
has been provided. Upon distribution of permanently reinvested
earnings in the form of dividends or otherwise, the Company may be subject to
U.S. income taxes and foreign withholding taxes (adjusted for foreign tax
credits). As of January 1, 2010, the Company’s foreign subsidiary
accumulated undistributed earnings that are intended to be indefinitely
reinvested outside the U.S. is approximately $85.4 million. The
amount of the unrecognized deferred tax liability on this amount is
approximately $27.5 million.
A
reconciliation of the change in the unrecognized tax benefits (“UTB”) from
December 29, 2006 to January 1, 2010 is as follows:
Federal,
State and Foreign Tax
|
Accrued
Interest and Penalties
|
Unrecognized
Income Tax Benefits
|
||||||||||
(in
thousands)
|
||||||||||||
Balance
at December 29, 2006
|
$ | 21,500 | $ | 2,200 | $ | 23,700 | ||||||
Additions
for tax positions related to the current year
|
2,800 | 1,000 | 3,800 | |||||||||
Additions
for tax positions related to prior year
|
3,828 | - | 3,828 | |||||||||
Other
reductions for tax positions related to prior years
|
(400 | ) | (100 | ) | (500 | ) | ||||||
Foreign
exchange
|
600 | - | 600 | |||||||||
Balance
at December 28, 2007
|
$ | 28,328 | $ | 3,100 | $ | 31,428 | ||||||
Total
UTBs that, if recognized, would impact the
|
||||||||||||
effective
tax rate as of December 28, 2007
|
$ | 28,328 | $ | 3,100 | $ | 31,428 | ||||||
Additions
for tax positions related to the current year
|
5,300 | 1,320 | 6,620 | |||||||||
Additions
for tax positions related to prior year
|
3,800 | - | 3,800 | |||||||||
Other
reductions for tax positions related to prior years
|
(900 | ) | (20 | ) | (920 | ) | ||||||
Foreign
exchange
|
(600 | ) | - | (600 | ) | |||||||
Balance
at January 2, 2009
|
$ | 35,928 | $ | 4,400 | $ | 40,328 | ||||||
Total
UTBs that, if recognized, would impact the
|
||||||||||||
effective
tax rate as of January 2, 2009
|
$ | 35,928 | $ | 4,400 | $ | 40,328 | ||||||
Additions
for tax positions related to the current year
|
3,495 | 871 | 4,366 | |||||||||
Additions
for tax positions related to prior years
|
699 | 41 | 740 | |||||||||
Other
reductions for tax positions related to prior years
|
(2,464 | ) | (277 | ) | (2,741 | ) | ||||||
Foreign
exchange
|
604 | - | 604 | |||||||||
Balance
at January 1, 2010
|
$ | 38,262 | $ | 5,035 | 43,297 | |||||||
Total
UTBs that, if recognized, would impact the
|
||||||||||||
effective
tax rate as of January 1, 2010
|
$ | 38,262 | $ | 5,035 | 43,297 |
The
Company and its subsidiaries are subject to U.S. federal, state, and foreign
income taxes. The Company has substantially concluded all U.S.
federal and state income tax matters for years through 1992. Non-U.S.
income tax matters have been concluded for years through 2000. The Company is
currently in various stages of multiple year examinations by federal, state, and
foreign (including France and Germany) taxing authorities. Although the
timing of resolution and/or closure on audits is highly uncertain, the Company
does not believe that the unrecognized tax benefits would materially change in
the next twelve months.
The
Company’s practice is to recognize interest and/or penalties related to income
tax matters in income tax expense. The Company’s liability includes interest and
penalties at January 1, 2010, January 2, 2009, and December 28, 2007 of $5.0
million, $4.4 million, and $3.1million, respectively, which were recorded in
Other non-current liabilities in the accompanying Consolidated Balance
Sheets.
NOTE 13: COMPREHENSIVE
INCOME
The
components of comprehensive income and related tax effects are as
follows:
January
1,
|
January
2,
|
December
28,
|
||||||||||
Fiscal
Years Ended
|
2010
|
2009
|
2007
|
|||||||||
(in
thousands)
|
||||||||||||
Net
income attributable to Trimble Navigation Ltd.
|
$ | 63,446 | $ | 141,472 | $ | 117,374 | ||||||
Foreign
currency translation adjustments, net of tax of $(2,551) in 2009, $4,849
in 2008, and $(1,384) in 2007
|
20,583 | (31,722 | ) | 18,655 | ||||||||
Net
unrealized actuarial gain (loss)
|
(327 | ) | 43 | (13 | ) | |||||||
Net
unrealized gain (loss) on investments
|
392 | (392 | ) | (33 | ) | |||||||
Comprehensive
income attributable to Trimble Navigation Ltd.
|
84,094 | 109,401 | 135,983 | |||||||||
Comprehensive
income attributable to the noncontrolling interests
|
988 | 3,655 | - | |||||||||
Total
comprehensive income
|
$ | 85,082 | $ | 113,056 | $ | 135,983 |
The
components of accumulated other comprehensive income, net of related tax were as
follows:
January
1,
|
January
2,
|
|||||||
Fiscal
Years Ended
|
2010
|
2009
|
||||||
(in
thousands)
|
||||||||
Accumulated
foreign currency translation adjustments
|
$ | 48,730 | $ | 28,147 | ||||
Net
unrealized loss on investments
|
- | (392 | ) | |||||
Net
unrealized actuarial losses
|
(433 | ) | (106 | ) | ||||
Total
accumulated other comprehensive income
|
$ | 48,297 | $ | 27,649 |
NOTE
14: EMPLOYEE STOCK BENEFIT PLANS
Employee
Stock Purchase Plan
The
Company has an Employee Stock Purchase Plan (“Purchase Plan”) under which an
aggregate of 15,550,000 shares of Common Stock have been reserved for sale to
eligible employees as approved by the shareholders to date. The plan permits
full-time employees to purchase Common Stock through payroll deductions at 85%
of the lower of the fair market value of the Common Stock at the beginning or at
the end of each offering period, which is generally six months. The amended
Purchase Plan terminates on September 30, 2018. In fiscal 2009, 2008 and 2007,
the shares issued under the Purchase Plan were 763,597, 437,833, and 430,068
shares, respectively. Compensation expense recognized during fiscal 2009, 2008,
and 2007 related to shares granted under the Employee Stock Purchase Plan was
$3.4 million, $3.4 million, and $2.6 million, respectively. At January 1, 2010,
the number of shares reserved for future purchases by eligible employees was
3,808,620.
Restricted
Stock Award
Trimble
did not grant any restricted stock awards in fiscal 2009, fiscal 2008, or fiscal
2007. During the second quarter of fiscal 2006, the Company granted
40,000 shares of restricted common stock. The award vests 20% on June 30, 2005
and an additional 20% each June 30 thereafter. The Company recorded compensation
expense in the Consolidated Statements of Income of $92,000, $155,000, and
$191,000 for fiscal 2009, 2008, and 2007, respectively.
2002
Stock Plan
In 2002,
Trimble’s board of directors adopted the 2002 Stock Plan (“2002 Plan”). The 2002
Plan approved by the shareholders provides for the granting of incentive and
non-statutory stock options and stock awards for up to 20,000,000 shares plus
any shares currently reserved but unissued to employees, consultants, and
directors of Trimble. Incentive stock options may be granted at exercise prices
that are not less than 100% of the fair market value of Common Stock on the date
of grant. Employee stock options granted under the 2002 Plan generally have
84-120 month terms, and vest at a rate of 20% at the first anniversary of grant
and monthly thereafter at an annual rate of 20%, with full vesting occurring at
the fifth anniversary of the grant. In certain instances, grants vest at a rate
of 40% at the second anniversary of grant and monthly thereafter at an annual
rate of 20% with full vesting occurring at the fifth anniversary of the grant.
The Company issues new shares for option exercises. The majority of the
restricted share units granted under this plan vest 100% after three
years. As of January 1, 2010, options to purchase 10,786,746 shares
were outstanding, 890,414 restricted stock units were unvested, and 7,683,688
were available for future grant under the 2002 Plan.
@Road
Plan
In
connection with the acquisition of @Road in February 2007, the Company assumed
all of the outstanding stock options of @Road’s 2000 Stock Option Plan (“@Road
Plan”) as well as the plan itself. The @Road Plan provides for the
granting of incentive and non-statutory stock options. Incentive
stock options may be granted at exercise prices that are not less than 100% of
the fair market value of Common Stock on the date of grant. Employee
stock options granted under the @Road Plan generally have 120-month terms, and
vest at a rate of 20% at the first anniversary of grant and monthly thereafter
at an annual rate of 20%, with full vesting occurring at the fifth anniversary
of the grant. The Company issues new shares for option
exercises. As of January 1, 2010, options to purchase 501,864 shares
were outstanding under the @Road Plan. Shares under this plan are no
longer available for grant due to the merger of @Road into Trimble.
1993
Stock Option Plan
In 1992,
Trimble's board of directors adopted the 1993 Stock Option Plan (“1993 Plan”).
The 1993 Plan, as amended to date and approved by shareholders, provided for the
granting of incentive and non-statutory stock options for up to 19,125,000
shares of Common Stock to employees, consultants, and directors of Trimble.
Incentive stock options may be granted at exercise prices that are not less than
100% of the fair market value of Common Stock on the date of grant. Employee
stock options granted under the 1993 Plan have 120-month terms, and vest at a
rate of 20% at the first anniversary of grant, and monthly thereafter at an
annual rate of 20%, with full vesting occurring at the fifth anniversary of
grant. The Company issues new shares for option exercises. As of January 1,
2010, options to purchase 835,161 shares were outstanding and no shares were
available for future grant.
1992
Employee Stock Bonus Plan
In 1992,
Trimble's board of directors approved the 1992 Employee Stock Bonus Plan ("Bonus
Plan"). As of January 1, 2010, there were no options outstanding to purchase
shares and 4,598 were available for future grant under the 1992 Employee Stock
Bonus Plan.
1990
Director Stock Option Plan
In
December 1990, Trimble adopted a Director Stock Option Plan under which an
aggregate of 1,140,000 shares of Common Stock have been reserved for
issuance to non-employee directors as approved by the shareholders to date. At
January 1, 2010, options to purchase 60,000 shares were outstanding, and no
shares were available for future grants under the Director Stock Option
Plan.
Options
Outstanding and Exercisable
Exercise
prices for options outstanding as of January 1, 2010, ranged from $3.35 to
$40.59. In view of the wide range of exercise prices, Trimble considers it
appropriate to provide the following additional information with respect to
options outstanding at January 1, 2010:
Options
Outstanding
|
Options
Exercisable
|
|||||||||||||||||||
Weighted-
|
Weighted-
|
Weighted-
|
||||||||||||||||||
Average
|
Average
|
Average
|
||||||||||||||||||
Number
|
Exercise
Price
|
Remaining
|
Number
|
Exercise
Price
|
||||||||||||||||
Range
|
Outstanding
|
per
Share
|
Contractual
Life (Years)
|
Exercisable
|
per
Share
|
|||||||||||||||
(in
thousands, except for per share data)
|
||||||||||||||||||||
$3.35
– $7.00
|
1,161 | $ | 5.41 | 2.01 | 1,161 | $ | 5.41 | |||||||||||||
$7.27
– $10.88
|
1,179 | 8.58 | 3.55 | 1,180 | 8.58 | |||||||||||||||
$11.24
– $14.53
|
1,267 | 14.05 | 3.85 | 1,267 | 14.05 | |||||||||||||||
$14.91
– $17.00
|
1,425 | 16.57 | 5.63 | 1,201 | 16.52 | |||||||||||||||
$17.06
– $19.78
|
329 | 18.70 | 5.47 | 288 | 18.73 | |||||||||||||||
$19.96
|
1,262 | 19.96 | 5.79 | 54 | 19.96 | |||||||||||||||
$20.01–
$21.68
|
1,674 | 20.96 | 6.77 | 88 | 20.73 | |||||||||||||||
$21.72
– $23.36
|
120 | 22.56 | 5.63 | 106 | 22.55 | |||||||||||||||
$23.44
|
1,175 | 23.44 | 3.80 | 727 | 23.44 | |||||||||||||||
$23.55
– $40.59
|
1,701 | 32.95 | 5.07 | 562 | 34.39 | |||||||||||||||
Total
|
11,293 | $ | 18.64 | 4.75 | 6,634 | $ | 15.24 |
Weighted-
|
||||||||||||||||
Weighted-
|
Average
|
Aggregate
|
||||||||||||||
Number
|
Average
|
Remaining
|
Intrinsic
|
|||||||||||||
Of
Shares
|
Exercise
Price
|
Contractual
Term
|
Value
|
|||||||||||||
(in
thousands)
|
per
Share
|
(in
years)
|
(in
thousands)
|
|||||||||||||
Options
outstanding
|
11,293 | $ | 18.64 | 4.75 | $ | 87,263 | ||||||||||
Options
outstanding and expected to vest
|
10,534 | 18.28 | 4.68 | 84,681 | ||||||||||||
Options
exercisable
|
6,634 | 15.24 | 4.03 | 71,294 |
Options
outstanding and expected to vest are adjusted for expected forfeitures. The
aggregate intrinsic value is the total pretax intrinsic value based on the
Company’s closing stock price of $25.20 as of January 1, 2010, which would have
been received by the option holders had all option holders exercised their
options as of that date.
As of
January 1, 2010, the total unamortized stock option expense is $30.4 million
with a weighted-average recognition period of 3.5 years.
Option
Activity
Activity
during fiscal 2009, under the combined plans was as follows:
Options
|
Weighted
average exercise price
|
|||||||
(in
thousands, except for per share data)
|
||||||||
Outstanding
at beginning of year
|
10,456 | $ | 17.76 | |||||
Granted
|
1,611 | 20.91 | ||||||
Exercised
|
(627 | ) | 9.10 | |||||
Cancelled
|
(147 | ) | 22.17 | |||||
Outstanding
at end of year
|
11,293 | $ | 18.64 | |||||
Available
for grant
|
7,688 |
The total
intrinsic value of options exercised during fiscal 2009, 2008, and 2007 was $7.8
million, $28.3 million, and $68.4 million, respectively. Compensation
expense recognized during fiscal 2009, 2008, and 2007 related to stock options
was $11.7 million, $11.8 million, and $12.3 million, respectively.
Restricted
Stock Unit Activity
Activity
during fiscal 2009 was as follows:
Restricted
Stock Units
|
Weighted
Average Grant-Date Fair Value
|
|||||||
(in
thousands, except for per share data)
|
||||||||
Unvested
at beginning of year
|
156 | $ | 27.78 | |||||
Granted
|
744 | 20.51 | ||||||
Vested
|
- | - | ||||||
Cancelled
|
(10 | ) | 24.85 | |||||
Unvested
at end of year
|
890 | $ | 22.29 |
Compensation
expense recognized during fiscal 2009, 2008, and 2007 related to restricted
stock units was $3.5 million, $1.0 million, and $65,000, respectively. As of
January 1, 2010, there was $12.4 million of total unamortized restricted stock
unit compensation expense related to unvested restricted stock units, with a
weighted-average recognition period of 2.31 years.
NOTE
15: BENEFIT PLANS
401(k)
Plan
Under the
Company’s 401(k) Plan, U.S. employee participants (including employees of
certain subsidiaries) may direct the investment of contributions to their
accounts among certain mutual funds and the Trimble Navigation Limited Common
Stock Fund. The Trimble Fund sold 85,452 net shares of Common Stock for an
aggregate of $1.9 million in fiscal 2009. The Company, at its discretion,
matches individual employee 401(k) Plan contributions at a rate of fifty cents
of every dollar that the employee contributes to the 401(k) Plan up to 5% of the
employee’s annual salary to an annual maximum of $2,500. The Company’s matching
contributions to the 401(k) Plan were $3.2 million in fiscal 2009, $3.3 million
in fiscal 2008 and $3.1 million in fiscal 2007.
Defined
Contribution Pension Plans
Certain
of the Company’s European subsidiaries participate in state sponsored pension
plans. Contributions are based on specified percentages of employee
salaries. For these plans, the Company contributed and charged to
expense approximately $0.9 million for fiscal 2009, $0.9 million for fiscal
2008, and $0.8 million for fiscal 2007.
Defined
Benefit Pension Plan
The
Company provides defined benefit pension plans in Sweden and Germany. The
largest of these plans is provided by the Swedish subsidiary which has an
unfunded defined benefit pension plan that covered substantially all of its
full-time employees through 1993. Benefits are based on a percentage of eligible
earnings. The employee must have had a projected period of pensionable service
of at least 30 years as of 1993. If the period was shorter, the pension benefits
were reduced accordingly. Active employees do not accrue any future benefits;
therefore, there is no service cost and the liability will only increase for
interest cost.
The
Company recognizes the funded status (i.e., the difference between the fair
value of plan assets and the projected benefit obligations) of its pension plan in the
Consolidated Balance Sheet and that the changes in the funded status in
Accumulated Other Comprehensive Income.
The
pension related balances on the Company’s Consolidated Balance Sheet at January
1, 2010 and January 2, 2009 are presented in the following table.
Fiscal
Years Ended
|
January
1,
|
January
2,
|
||||||
2010
|
2009
|
|||||||
(in
thousands)
|
||||||||
Current
accrued pension liability
|
$ | 382 | $ | 140 | ||||
Non-current
accrued pension liability
|
5,915 | 5,439 | ||||||
Unrecognized
actuarial loss
|
(433 | ) | (106 | ) |
The
changes in the benefit obligations and plan assets of the significant non-U.S.
defined benefit pension plans for fiscal 2009 and 2008 were as
follows:
January
1,
|
January
2,
|
|||||||
Fiscal
Years Ended
|
2010
|
2009
|
||||||
(in
thousands)
|
||||||||
Change
in benefit obligation:
|
||||||||
Benefit
obligation at beginning of year
|
$ | 6,939 | $ | 10,231 | ||||
Adjustment
to (exclude)/include benefit obligation for the Netherlands
subsidiary*
|
- | (2,334 | ) | |||||
Benefit
obligation at beginning of year (restated)
|
6,939 | 7,897 | ||||||
Service
cost
|
31 | 33 | ||||||
Interest
cost
|
326 | 337 | ||||||
Benefits
paid
|
(404 | ) | (303 | ) | ||||
Foreign
exchange impact
|
463 | (963 | ) | |||||
Actuarial
(gains) losses
|
354 | (62 | ) | |||||
Benefit
obligation at end of year
|
7,709 | 6,939 | ||||||
Change
in plan assets:
|
||||||||
Fair
value of plan assets at beginning of year
|
1,360 | 3,309 | ||||||
Adjustment
to include fair value of plan assets for the Netherlands
subsidiary*
|
- | (1,984 | ) | |||||
Fair
value of plan assets at beginning of year (restated)
|
1,360 | 1,325 | ||||||
Actual
return on plan assets
|
28 | 38 | ||||||
Employer
contribution
|
71 | 68 | ||||||
Plan
participants’ contributions
|
- | - | ||||||
Benefits
paid
|
(66 | ) | (59 | ) | ||||
Foreign
exchange impact
|
19 | (12 | ) | |||||
Fair
value of plan assets at end of year
|
1,412 | 1,360 | ||||||
Benefit
obligation in excess of plan assets at end of year
|
$ | 6,297 | $ | 5,579 | ||||
Current
portion (included in accrued compensation and benefits)
|
382 | 140 | ||||||
Non-current
portion (included in other non-current liabilities)
|
5,915 | 5,439 | ||||||
* The
Company changed its defined benefit pension plan in the Netherlands to a defined
contribution plan in fiscal 2008.
The
under-funded status of the plan of $6.3 million at January 1, 2010 is recognized
in the accompanying Consolidated Balance Sheets as a short-term and a long-term
accrued pension liability. No plan assets are expected to be returned
to Trimble during fiscal 2010.
Net
periodic benefit cost in fiscal 2009 was not material.
Actuarial
assumptions used to determine the net periodic pension costs for fiscal 2009
were as follows:
Swedish
Subsidiary
|
German
Subsidiaries
|
|
Discount
rate
|
3.5%
|
5.8%
|
Rate
of compensation increase
|
1.5%
|
2.0%
|
Measurement
date
|
1/1/2010
|
1/1/2010
|
The
Company’s accumulated benefits obligation was approximately $7.7 million and
$6.9 million for fiscal 2009 and fiscal 2008, respectively.
The
following table provides additional fair value information relating to the
Company’s plan assets:
|
Fair
Values as of January 1, 2010
|
|||||||||||||||
(in
thousands)
|
Level
I
|
Level
II
|
Level
III
|
Total
|
||||||||||||
Asset
Category
|
||||||||||||||||
Local
government bonds
|
$ | - | $ | 1,313 | $ | - | $ | 1,313 | ||||||||
Equity
securities
|
- | 57 | - | 57 | ||||||||||||
Real
estate
|
- | - | 42 | 42 | ||||||||||||
Total
|
$ | - | $ | 1,370 | $ | 42 | $ | 1,412 |
The
Company’s plan assets are primarily located in the Company's German
subsidiaries. For German subsidiaries, for fiscal 2009, the asset allocation of
the total plan assets was approximately as follows: 93% local
government bonds, 3% real estate and 4% equity securities. Long-term asset
allocation and expected return on assets assumptions are derived from detailed
annual studies conducted by the Company's asset management group and actuaries.
The Company’s asset management group limits allocation to equity securities and
real estate to a maximum of 10% and 25%, respectively, with the remaining assets
to be allocated to local government bonds. While the asset allocation give
appropriate consideration to recent performance and historical returns, the
strategy is focused primarily on conservative and sustainable long-term returns.
Based on historical returns, the Company expects future return on assets to be
approximately 4%.
The table
below sets forth a summary of changes in the fair value of the Level III plan
assets for the twelve months ended January 1, 2010.
Level
III plan assets
|
||||
As
of
|
January
1, 2010
|
|||
(in
thousands)
|
||||
Balance
as of January 2, 2009
|
$ | 95 | ||
Transfer
out of real estate
|
(53 | ) | ||
Balance
as of January 1, 2010
|
$ | 42 |
The
Company expects to contribute approximately $371,000 to plan assets in fiscal
year ended 2010.
The
following benefit payments, which reflect estimated future employee service, as
appropriate, are expected to be paid (in thousands):
2010
|
$ | 449 | ||
2011
|
459 | |||
2012
|
461 | |||
2013
|
491 | |||
2014
|
491 | |||
Thereafter
|
4,773 | |||
Total
|
$ | 7,124 |
NOTE
16: STATEMENT OF CASH FLOW DATA
January
1,
|
January
2,
|
December
28,
|
||||||||||
Fiscal
Years Ended
|
2010
|
2009
|
2007
|
|||||||||
(in
thousands)
|
||||||||||||
Supplemental
disclosure of cash flow information:
|
||||||||||||
Interest
paid
|
$ | 1,812 | $ | 2,451 | $ | 6,250 | ||||||
Income
taxes paid
|
$ | 26,703 | $ | 73,756 | $ | 35,170 | ||||||
Significant
non-cash investing activities:
|
||||||||||||
Issuance
of shares to acquire @Road
|
$ | - | $ | - | $ | 161,947 |
Note 17:
Litigation
From time
to time, the Company is involved in litigation arising out of the ordinary
course of its business. There are no known claims or pending litigation expected
to have a material effect on the Company’s overall financial position, results
of operations, or liquidity.
NOTE
18: SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
April
3,
|
July
3,
|
October
2,
|
January
1,
|
|||||||||||||
Fiscal
period ended
|
2009
|
2009
|
2009
|
2010
|
||||||||||||
(in
thousands, except per share data)
|
||||||||||||||||
Revenue
|
$ | 288,954 | $ | 290,063 | $ | 269,713 | $ | 277,529 | ||||||||
Gross
margin
|
143,958 | 142,800 | 132,458 | 130,652 | ||||||||||||
Net
income attributable to Trimble Navigation Ltd.
|
17,465 | 20,857 | 15,577 | 9,547 | ||||||||||||
Basic
net income per share
|
0.15 | 0.17 | 0.13 | 0.08 | ||||||||||||
Diluted
net income per share
|
0.14 | 0.17 | 0.13 | 0.08 |
March
28,
|
June
27,
|
September
26,
|
January
2,
|
|||||||||||||
Fiscal
period ended
|
2008
|
2008
|
2008
|
2009
|
||||||||||||
(in
thousands, except per share data)
|
||||||||||||||||
Revenue
|
$ | 355,296 | $ | 377,767 | $ | 328,087 | $ | 268,084 | ||||||||
Gross
margin
|
174,376 | 187,099 | 165,623 | 122,038 | ||||||||||||
Net
income attributable to Trimble Navigation Ltd.
|
40,067 | 48,599 | 39,067 | 13,739 | ||||||||||||
Basic
net income per share
|
0.33 | 0.40 | 0.32 | 0.12 | ||||||||||||
Diluted
net income per share
|
0.32 | 0.39 | 0.31 | 0.11 |
Trimble
has a 52-53 week fiscal year, ending on the Friday nearest to December 31.
Fiscal 2009 was a 52-week year and fiscal 2008 was a 53-week year. As a result
of the extra week, year-over-year results may not be comparable. Thus, due to
the inherent nature of adopting a 52-53 week fiscal year, the Company, analysts,
shareholders, investors, and others will have to make appropriate adjustments to
any analysis performed when comparing our activities and
results.
Report
of Independent Registered Public Accounting Firm
The
Board of Directors and Shareholders of Trimble Navigation Limited
We have
audited the accompanying consolidated balance sheets of Trimble Navigation
Limited as of January 1, 2010 and January 2, 2009, and the related consolidated
statements of income, shareholders’ equity, and cash flows for each of the three
years in the period ended January 1, 2010. Our audits also included the
financial statement schedule listed in the index at Item 15 (a) Schedule II.
These financial statements and schedule are the responsibility of the Company’s
management. Our responsibility is to express an opinion on these financial
statements and schedule based on our audits.
We
conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our
opinion, the financial statements referred to above present fairly, in all
material respects, the consolidated financial position of Trimble Navigation
Limited at January 1, 2010 and January 2, 2009, and the consolidated results of
its operations and its cash flows for each of the three years in the period
ended January 1, 2010, in conformity with U.S generally accepted accounting
principles. Also, in our opinion, the related financial statement schedule, when
considered in relation to the basic consolidated financial statements taken as a
whole, presents fairly in all material respects the information set forth
therein.
As
discussed in Note 2 to the consolidated financial statements, the Company
changed its method of accounting for noncontrolling interests and accounting for
business combinations during 2009, and its method of accounting for uncertain
tax positions as of December 30, 2006.
We also
have audited, in accordance with the standards of the Public Company Accounting
Oversight Board (United States), Trimble Navigation Limited’s internal control
over financial reporting as of January 1, 2010, based on criteria established in
Internal Control-Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission and our report dated February 26, 2010,
expressed an unqualified opinion thereon.
/s/ Ernst
& Young LLP
San Jose,
California
February
26, 2010
Report
of Independent Registered Public Accounting Firm
The
Board of Directors and Shareholders of Trimble Navigation Limited
We have
audited Trimble Navigation Limited’s internal control over financial reporting
as of January 1, 2010, based on criteria established in Internal
Control—Integrated Framework issued by the Committee of Sponsoring Organizations
of the Treadway Commission (the COSO criteria). Trimble Navigation Limited’s
management is responsible for maintaining effective internal control over
financial reporting, and for its assessment of the effectiveness of internal
control over financial reporting included in the accompanying Management’s
Report on Internal Control over Financial Reporting. Our responsibility is to
express an opinion on the Company’s internal control over financial reporting
based on our audit.
We
conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether effective
internal control over financial reporting was maintained in all material
respects. Our audit included obtaining an understanding of internal control over
financial reporting, assessing the risk that a material weakness exists, testing
and evaluating the design and operating effectiveness of internal control based
on the assessed risk, and performing such other procedures as we considered
necessary in the circumstances. We believe that our audit provides a reasonable
basis for our opinion.
A
company’s internal control over financial reporting is a process designed to
provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance
with generally accepted accounting principles. A company’s internal control over
financial reporting includes those policies and procedures that (1) pertain to
the maintenance of records that, in reasonable detail, accurately and fairly
reflect the transactions and dispositions of the assets of the company; (2)
provide reasonable assurance that transactions are recorded as necessary to
permit preparation of financial statements in accordance with generally accepted
accounting principles, and that receipts and expenditures of the company are
being made only in accordance with authorizations of management and directors of
the company; and (3) provide reasonable assurance regarding prevention or timely
detection of unauthorized acquisition, use, or disposition of the company’s
assets that could have a material effect on the financial
statements.
Because
of its inherent limitations, internal control over financial reporting may not
prevent or detect misstatements. Also, projections of any evaluation of
effectiveness to future periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree of compliance
with the policies or procedures may deteriorate.
In our
opinion, Trimble Navigation Limited maintained, in all material respects,
effective internal control over financial reporting as of January 1, 2010, based
on the COSO criteria.
We also
have audited, in accordance with the standards of the Public Company Accounting
Oversight Board (United States), the consolidated balance sheets of Trimble
Navigation Limited as of January 1, 2010 and January 2, 2009, and the related
consolidated statements of income, shareholders’ equity, and cash flows for each
of the three years in the period ended January 1, 2010 and our report dated
February 26, 2010 expressed an unqualified opinion thereon.
/s/ Ernst
& Young LLP
San Jose,
California
February
26, 2010
Item 9. Changes
in and Disagreements with Accountants on Accounting and Financial
Disclosure.
None
Item 9A. Controls and Procedures.
(a)
Evaluation of Disclosure Controls and Procedures
The
management, with the participation of our Chief Executive Officer and Chief
Financial Officer, has evaluated the effectiveness of our disclosure controls
and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under
the Securities Exchange Act of 1934, as amended (the "Exchange Act")) as of the
end of the period covered by this report. Based on such evaluation,
our Chief Executive Officer and Chief Financial Officer have concluded that, as
of the end of such period, our disclosure controls and procedures are
effective.
Inherent
Limitations on Effectiveness of Controls
The
Company’s management, including the CEO and CFO, does not expect that our
internal control over financial reporting will prevent or detect all error and
all fraud. A control system, no matter how well designed and operated, can
provide only reasonable, not absolute, assurance that the control system’s
objectives will be met. The design of any system of controls is based in part on
certain assumptions about the likelihood of future events, and there can be no
assurance that any design will succeed in achieving its stated goals under all
potential future conditions.
(b)
Management’s Report on Internal Control over Financial Reporting
The
Company’s management is responsible for establishing and maintaining adequate
internal control over financial reporting, as such term is defined in Exchange
Act Rule 13a-15(f). Our internal control over financial reporting is
designed to provide reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for external purposes in
accordance with generally accepted accounting principles.
The
Company’s management, including the CEO and CFO, conducted an evaluation of the
effectiveness of its internal control over financial reporting based on the
Internal Control – Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission. Based on the results of this
evaluation, the Company’s management concluded that its internal control over
financial reporting was effective as of January 1, 2010.
The
effectiveness of our internal control over financial reporting as of January 1,
2010 has been audited by Ernst & Young LLP, an independent registered public
accounting firm, as stated in their report which is included elsewhere
herein.
Changes
in Internal Control over Financial Reporting
During
the quarter ended January 1, 2010, there were no changes in the Company’s
internal control over financial reporting that have materially affected, or are
reasonably likely to materially affect, the Company’s internal control over
financial reporting.
Item 9B. Other Information.
None.
PART
III
Item 10. Directors,
Executive Officers and Corporate Governance.
The
information required by this item, insofar as it relates to Trimble’s directors,
will be contained under the captions “Election of Directors” and “Section 16(a)
Beneficial Ownership Reporting Compliance” in the Proxy Statement and is
incorporated herein by reference. The information required by this item relating
to executive officers is set forth above in Item 1 Business Overview under the
caption “Executive Officers.”
The
information required by this item insofar as it relates to the nominating and
audit committees will be contained in the Proxy Statement under the caption
“Board Meetings and Committees.”
Code
of Ethics
The
Company’s Business Ethics and Conduct Policy applies to, among others, the
Company’s Chief Executive Officer, Chief Financial Officer, Vice President of
Finance, Corporate Controller, and other finance organization employees. The
Business Ethics and Conduct Policy is available on the Company’s website at
www.trimble.com under the heading “Corporate Governance and Policies” on the
Investor Information page of our website. A copy will be provided, without
charge, to any shareholder who requests one by written request addressed to
General Counsel, Trimble Navigation Limited, 935 Stewart Drive, Sunnyvale, CA
94085.
If any
substantive amendments to the Business Ethics and Conduct Policy are made or any
waivers are granted, including any implicit waiver, from a provision of the
Business Ethics and Conduct Policy, to its Chief Executive Officer, Chief
Financial Officer, Vice President of Finance, or Corporate Controller, the
Company will disclose the nature of such amendment or waiver on the Company’s
website at www.trimble.com or in a report on Form 8-K.
Item 11. Executive
Compensation.
The
information required by this item will be contained in the Proxy Statement under
the caption “Executive Compensation” and is incorporated herein by
reference.
Item 12. Security
Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters.
The
information required by this item will be contained in the Proxy Statement under
the caption “Security Ownership of Certain Beneficial Owners and Management and
Related Stockholder Matters” and is incorporated herein by
reference.
Item 13. Certain
Relationships and Related Transactions, and Director
Independence.
The
information required by this item will be contained in the Proxy Statement under
the caption “Certain Relationships and Related Transactions, and Director
Independence” and is incorporated herein by reference.
Item 14. Principal
Accounting Fees and Services.
The
information required by this item will be contained in the Proxy Statement under
the caption “Principal Accounting Fees and Services” and is incorporated herein
by reference.
PART
IV
Item 15. Exhibits
and Financial Statement Schedules.
(a)
|
(1)
|
Financial
Statements
|
The
following consolidated financial statements required by this item are included
in Part II Item 8 hereof under the caption “Financial Statements and
Supplementary Data.”
Page
in this Annual Report
on Form 10-K
|
||
Consolidated
Balance Sheets at January 1, 2010 and January 2, 2009
|
44
|
|
Consolidated
Statements of Income for the fiscal years ended
January
1, 2010, January 2, 2009 and December 28, 2007
|
45
|
|
Consolidated
Statement of Shareholders’ Equity for the fiscal years ended
January 1, 2010, January 2, 2009 and December 28, 2007
|
46
|
|
Consolidated
Statements of Cash Flows for the fiscal years ended
January 1, 2010, January 2, 2009 and December 28, 2007
|
47
|
|
Notes
to Consolidated Financial Statements
|
48
|
|
Reports
of Independent Registered Public Accounting Firm
|
81
|
|
(2)
|
Financial Statement
Schedules
|
The
following financial statement schedule is filed as part of this
report:
|
Page
in this Annual
Report
on Form 10-K
|
|
Schedule
II – Valuation and Qualifying Accounts
|
S-1
|
All other
schedules have been omitted as they are either not required or not applicable,
or the required information is included in the consolidated financial statements
or the notes thereto.
(b)
|
Exhibits
|
Exhibit
Number
3.1
|
Restated
Articles of Incorporation of the Company filed June 25, 1986.
(4)
|
|
3.2
|
Certificate
of Amendment of Articles of Incorporation of the Company filed October 6,
1988. (5)
|
|
3.3
|
Certificate
of Amendment of Articles of Incorporation of the Company filed July 18,
1990. (6)
|
|
3.4
|
Certificate
of Determination of the Company filed February 19, 1999.
(7)
|
|
3.5
|
Certificate
of Amendment of Articles of Incorporation of the Company filed May 29,
2003. (13)
|
|
3.6
|
Certificate
of Amendment of Articles of Incorporation of the Company filed March 4,
2004. (15)
|
|
3.7
|
Certificate
of Amendment of Articles of Incorporation of the Company filed February
21, 2007. (20)
|
|
3.8
|
Bylaws
of the Company (amended and restated through July 20, 2006).
(14)
|
|
4.1
|
Specimen
copy of certificate for shares of Common Stock of the Company.
(1)
|
|
10.1+
|
Form
of Indemnification Agreement between the Company and its officers and
directors. (17)
|
|
10.
2+
|
1990
Director Stock Option Plan, as amended, and form of Outside Director
Non-statutory Stock Option Agreement. (3)
|
|
10.3+
|
1992
Management Discount Stock Option and form of Non-statutory Stock Option
Agreement. (2)
|
|
10.4+
|
1993
Stock Option Plan, as amended October 24, 2003. (10)
|
|
Trimble
Navigation Limited Amended and Restated Employee Stock Purchase Plan,
including forms of subscription agreements. (31)
|
||
10.6+
|
Employment
Agreement between the Company and Steven W. Berglund dated March 17, 1999.
(8)
|
|
10.7+
|
Trimble
Navigation Limited Deferred Compensation Plan effective December 30, 2004,
as amended and restated October 19, 2007.
(9)
|
10.8+
|
Trimble
Navigation Limited Australian Addendum to the Amended and Restated
Employee Stock Purchase Plan. (11)
|
|
Trimble
Navigation Limited Amended and Restated 2002 Stock Plan, including forms
of option and restricted stock unit agreements. (31)
|
||
10.10
|
Amended
and Restated Credit Agreement dated February 16, 2007 (amending and
restating the Credit Agreement dated as of July 28, 2005) among
Trimble Navigation Limited, the Subsidiary Borrowers, The Bank of Nova
Scotia (Administrative Agent, Issuing Bank and Swing Line Bank), Citibank
N.A. and BMO Capital Markets (Co-Syndication Agents), Bank of
America, N.A. and Wells Fargo Bank N.A. (Co-Documentation Agents), The
Bank of Nova Scotia and BNY Capital Markets, Inc. (Joint Lead Arrangers),
and The Bank of Nova Scotia (Sole Book Runner). (12)
|
|
10.11+
|
Employment
Agreement between the Company and Rajat Bahri dated December 6, 2004.
(16)
|
|
10.12+
|
Board
of Directors Compensation Policy effective April 24, 2009.
(23)
|
|
10.13+
|
Amended
and Restated form of Change in Control severance agreement between the
Company and certain Company officers. (27)
|
|
10.14+
|
Amendment
to Employment Agreement between the Company and Steven W. Berglund dated
December 19, 2008. (28)
|
|
10.15+
|
Amendment
to letter of employment between the Company and Rajat Bahri dated December
31, 2008. (29)
|
|
10.16
|
Lease
dated May 11, 2005 between CarrAmerica Realty Operating Partnership, L.P.
and the Company. (19)
|
|
10.17+
|
@Road,
Inc. 2000 Stock Option Plan, as amended May 16, 2000.
(21)
|
|
10.18
|
Amendment
No. 1 to the Amended and Restated Credit Agreement.
(26)
|
|
10.19+
|
Trimble
Navigation Limited Annual Management Incentive Plan Description.
(18)
|
|
10.20+
|
Australian
Addendum to the Trimble Navigation Limited Amended and Restated 2002 Stock
Plan. (30)
|
|
10.21
**
|
Master
Manufacturing Services Agreement by and between the Company and
Flextronics Corporation (formerly Solectron Corporation) dated March 12,
2004, as amended January 19, 2005, October 25, 2005 and June 20, 2007.
(24)
|
|
10.22
**
|
Consigned
Excess Inventory Addendum to the Master Manufacturing Services Agreement
by and between the Company and Flextronics Corporation (formerly Solectron
Corporation) dated July 6, 2009. (25)
|
|
21.1
|
Subsidiaries
of the Company. (31)
|
|
23.1
|
Consent
of Independent Registered Public Accounting Firm. (31)
|
|
24.1
|
Power
of Attorney included on signature page herein.
|
|
31.1
|
Certification
of CEO pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
(31)
|
|
31.2
|
Certification
of CFO pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
(31)
|
|
32.1
|
Certification
of CEO pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
(31)
|
|
32.2
|
Certification
of CFO pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
(31)
|
|
|
|
|
(1)
|
Incorporated
by reference to exhibit number 4.1 to the Company’s Registration Statement
on Form S-1, as amended (File No. 33-35333), which became effective July
19, 1990.
|
|
(2)
|
Incorporated
by reference exhibit number 10.46 to the Company’s Registration Statement
on Form S-1 (File No. 33-45990), which was filed February 25,
1992.
|
|
(3)
|
Incorporated
by reference to exhibit number 10.32 to the Company’s Annual Report on
Form 10-K for the fiscal year ended December 31, 1993.
|
|
(4)
|
Incorporated
by reference to exhibit number 3.1 to the Company’s Annual Report on Form
10-K for the fiscal year ended January 1, 1999.
|
|
(5)
|
Incorporated
by reference to exhibit number 3.2 to the Company’s Annual Report on Form
10-K for the fiscal year ended January 1, 1999.
|
|
(6)
|
Incorporated
by reference to exhibit number 3.3 to the Company’s Annual Report on Form
10-K for the fiscal year ended January 1, 1999.
|
|
(7)
|
Incorporated
by reference to exhibit number 3.4 to the Company’s Annual Report on Form
10-K for the fiscal year ended January 1, 1999.
|
|
(8)
|
Incorporated
by reference to exhibit number 10.67 to the Company’s Annual Report on
Form 10-K for the fiscal year ended January 1, 1999.
|
|
(9)
|
Incorporated
by reference to exhibit number 10.2 to the Company’s Quarterly Report on
Form 10-Q for the quarter ended September 28, 2007.
|
|
(10)
|
Incorporated
by reference to exhibit number 10.3 to the Company’s Quarterly Report on
Form 10-Q for the quarter ended October 3, 2003.
|
|
(11)
|
Incorporated
by reference to exhibit number 10.5 to the Company’s Quarterly Report on
Form 10-Q for the quarter ended July 3, 2009.
|
|
(12)
|
Incorporated
by reference to exhibit number 10.1 to the Company’s Quarterly Report on
Form 10-Q for the quarter ended March 30, 2007.
|
|
(13)
|
Incorporated
by reference to exhibit number 3.5 to the Company’s Quarterly Report on
Form 10-Q for the quarter ended July 4, 2003.
|
|
(14)
|
Incorporated
by reference to exhibit number 3.7 to the Company’s Quarterly Report on
Form 10-Q for the quarter ended September 29,
2006.
|
(15)
|
Incorporated
by reference to exhibit number 3.6 to the Company’s Quarterly Report on
Form 10-Q for the quarter ended April 2, 2004.
|
|
(16)
|
Incorporated
by reference to exhibit number 10.13 to the Company’s Annual Report on
Form 10-K for the year ended December 31, 2004.
|
|
(17)
|
Incorporated
by reference to exhibit number 10.1 to the Company’s Annual Report on Form
10-K for the year ended December 30, 2005.
|
|
(18)
|
Incorporated
by reference to exhibit number 10.4 to the Company’s Quarterly Report on
Form 10-Q for the quarter ended July 3, 2009.
|
|
(19)
|
Incorporated
by reference to exhibit number 10.17 to the Company’s Annual Report on
Form 10-K for the year ended December 30, 2005.
|
|
(20)
|
Incorporated
by reference to exhibit number 3.7 to the Company’s Quarterly Report on
Form 10-Q for the quarter ended March 30, 2007.
|
|
(21)
|
Incorporated
by reference to exhibit number 10.19 to the Company’s Annual Report on
Form 10-K for the year ended December 29, 2006.
|
|
(22)
|
Incorporated
by reference to exhibit 10.1 to the Company’s Quarterly Report on Form
10-Q for the quarter ended July 3, 2009.
|
|
(23)
|
Incorporated
by reference to exhibit 10.3 to the Company’s Quarterly Report on Form
10-Q for the quarter ended July 3, 2009.
|
|
(24)
|
Incorporated
by reference to exhibit number 10.6 to the Company’s Quarterly Report on
Form 10-Q for the quarter ended July 3, 2009.
|
|
(25)
|
Incorporated
by reference to exhibit number 10.1 to the Company’s Quarterly Report on
Form 10-Q for the quarter ended October 2, 2009.
|
|
(26)
|
Incorporated
by reference to exhibit number 10.19 to the Company’s Annual Report on
Form 10-K for the year ended January 2, 2009.
|
|
(27)
|
Incorporated
by reference to exhibit number 10.13 to the Company’s Annual Report on
Form 10-K for the year ended January 2, 2009.
|
|
(28)
|
Incorporated
by reference to exhibit number 10.14 to the Company’s Annual Report on
Form 10-K for the year ended January 2, 2009.
|
|
(29)
|
Incorporated
by reference to exhibit number 10.15 to the Company’s Annual Report on
Form 10-K for the year ended January 2, 2009.
|
|
(30)
|
Incorporated
by reference to exhibit number 10.7 to the Company’s Quarterly Report on
Form 10-Q for the quarter ended July 3, 2009.
|
|
(31)
|
Filed
herewith.
|
+
Indicates management contract or compensatory plan or arrangement required to be
filed as an exhibit to this Annual Report on Form 10K.
**
Portions of this document have been omitted and filed separately with the
Securities and Exchange Commission pursuant to a request for confidential
treatment under Rule 24b-2.
EXHIBIT
LIST
Exhibit
Number
3.1
|
Restated
Articles of Incorporation of the Company filed June 25, 1986.
(4)
|
|
3.2
|
Certificate
of Amendment of Articles of Incorporation of the Company filed October 6,
1988. (5)
|
|
3.3
|
Certificate
of Amendment of Articles of Incorporation of the Company filed July 18,
1990. (6)
|
|
3.4
|
Certificate
of Determination of the Company filed February 19, 1999.
(7)
|
|
3.5
|
Certificate
of Amendment of Articles of Incorporation of the Company filed May 29,
2003. (13)
|
|
3.6
|
Certificate
of Amendment of Articles of Incorporation of the Company filed March 4,
2004. (15)
|
|
3.7
|
Certificate
of Amendment of Articles of Incorporation of the Company filed February
21, 2007. (20)
|
|
3.8
|
Bylaws
of the Company (amended and restated through July 20, 2006).
(14)
|
|
4.1
|
Specimen
copy of certificate for shares of Common Stock of the Company.
(1)
|
|
10.1+
|
Form
of Indemnification Agreement between the Company and its officers and
directors. (17)
|
|
10.
2+
|
1990
Director Stock Option Plan, as amended, and form of Outside Director
Non-statutory Stock Option Agreement. (3)
|
|
10.3+
|
1992
Management Discount Stock Option and form of Non-statutory Stock Option
Agreement. (2)
|
|
10.4+
|
1993
Stock Option Plan, as amended October 24, 2003. (10)
|
|
10.5+
|
Trimble
Navigation Limited Amended and Restated Employee Stock Purchase Plan,
including forms of subscription agreements. (31)
|
|
10.6+
|
Employment
Agreement between the Company and Steven W. Berglund dated March 17, 1999.
(8)
|
|
10.7+
|
Trimble
Navigation Limited Deferred Compensation Plan effective December 30, 2004,
as amended and restated October 19, 2007. (9)
|
|
10.8+
|
Trimble
Navigation Limited Australian Addendum to the Amended and Restated
Employee Stock Purchase Plan. (11)
|
|
10.9+
|
Trimble
Navigation Limited Amended and Restated 2002 Stock Plan, including forms
of option and restricted stock unit agreements. (31)
|
|
10.10
|
Amended
and Restated Credit Agreement dated February 16, 2007 (amending and
restating the Credit Agreement dated as of July 28, 2005) among
Trimble Navigation Limited, the Subsidiary Borrowers, The Bank of Nova
Scotia (Administrative Agent, Issuing Bank and Swing Line Bank), Citibank
N.A. and BMO Capital Markets (Co-Syndication Agents), Bank of
America, N.A. and Wells Fargo Bank N.A. (Co-Documentation Agents), The
Bank of Nova Scotia and BNY Capital Markets, Inc. (Joint Lead Arrangers),
and The Bank of Nova Scotia (Sole Book Runner). (12)
|
|
10.11+
|
Employment
Agreement between the Company and Rajat Bahri dated December 6, 2004.
(16)
|
|
10.12+
|
Board
of Directors Compensation Policy effective April 24, 2009.
(23)
|
|
10.13+
|
Amended
and Restated form of Change in Control severance agreement between the
Company and certain Company officers. (27)
|
|
10.14+
|
Amendment
to Employment Agreement between the Company and Steven W. Berglund dated
December 19, 2008. (28)
|
|
10.15+
|
Amendment
to letter of employment between the Company and Rajat Bahri dated December
31, 2008. (29)
|
|
10.16
|
Lease
dated May 11, 2005 between CarrAmerica Realty Operating Partnership, L.P.
and the Company. (19)
|
|
10.17+
|
@Road,
Inc. 2000 Stock Option Plan, as amended May 16, 2000.
(21)
|
|
10.18
|
Amendment
No. 1 to the Amended and Restated Credit Agreement.
(26)
|
|
10.19+
|
Trimble
Navigation Limited Annual Management Incentive Plan Description.
(18)
|
|
10.20+
|
Australian
Addendum to the Trimble Navigation Limited Amended and Restated 2002 Stock
Plan. (30)
|
|
10.21
**
|
Master
Manufacturing Services Agreement by and between the Company and
Flextronics Corporation (formerly Solectron Corporation) dated March 12,
2004, as amended January 19, 2005, October 25, 2005 and June 20, 2007.
(24)
|
|
10.22
**
|
Consigned
Excess Inventory Addendum to the Master Manufacturing Services Agreement
by and between the Company and Flextronics Corporation (formerly Solectron
Corporation) dated July 6, 2009. (25)
|
|
Subsidiaries
of the Company. (31)
|
||
Consent
of Independent Registered Public Accounting Firm. (31)
|
||
Power
of Attorney included on signature page herein.
|
||
Certification
of CEO pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
(31)
|
||
Certification
of CFO pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
(31)
|
||
Certification
of CEO pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
(31)
|
||
Certification
of CFO pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
(31)
|
||
|
|
|
(1)
|
Incorporated
by reference to exhibit number 4.1 to the Company’s Registration Statement
on Form S-1, as amended (File No. 33-35333), which became effective July
19, 1990.
|
|
(2)
|
Incorporated
by reference exhibit number 10.46 to the Company’s Registration Statement
on Form S-1 (File No. 33-45990), which was filed February 25,
1992.
|
|
(3)
|
Incorporated
by reference to exhibit number 10.32 to the Company’s Annual Report on
Form 10-K for the fiscal year ended December 31,
1993.
|
(4)
|
Incorporated
by reference to exhibit number 3.1 to the Company’s Annual Report on Form
10-K for the fiscal year ended January 1, 1999.
|
|
(5)
|
Incorporated
by reference to exhibit number 3.2 to the Company’s Annual Report on Form
10-K for the fiscal year ended January 1, 1999.
|
|
(6)
|
Incorporated
by reference to exhibit number 3.3 to the Company’s Annual Report on Form
10-K for the fiscal year ended January 1, 1999.
|
|
(7)
|
Incorporated
by reference to exhibit number 3.4 to the Company’s Annual Report on Form
10-K for the fiscal year ended January 1, 1999.
|
|
(8)
|
Incorporated
by reference to exhibit number 10.67 to the Company’s Annual Report on
Form 10-K for the fiscal year ended January 1, 1999.
|
|
(9)
|
Incorporated
by reference to exhibit number 10.2 to the Company’s Quarterly Report on
Form 10-Q for the quarter ended September 28, 2007.
|
|
(10)
|
Incorporated
by reference to exhibit number 10.3 to the Company’s Quarterly Report on
Form 10-Q for the quarter ended October 3, 2003.
|
|
(11)
|
Incorporated
by reference to exhibit number 10.5 to the Company’s Quarterly Report on
Form 10-Q for the quarter ended July 3, 2009.
|
|
(12)
|
Incorporated
by reference to exhibit number 10.1 to the Company’s Quarterly Report on
Form 10-Q for the quarter ended March 30, 2007.
|
|
(13)
|
Incorporated
by reference to exhibit number 3.5 to the Company’s Quarterly Report on
Form 10-Q for the quarter ended July 4, 2003.
|
|
(14)
|
Incorporated
by reference to exhibit number 3.7 to the Company’s Quarterly Report on
Form 10-Q for the quarter ended September 29, 2006.
|
|
(15)
|
Incorporated
by reference to exhibit number 3.6 to the Company’s Quarterly Report on
Form 10-Q for the quarter ended April 2, 2004.
|
|
(16)
|
Incorporated
by reference to exhibit number 10.13 to the Company’s Annual Report on
Form 10-K for the year ended December 31, 2004.
|
|
(17)
|
Incorporated
by reference to exhibit number 10.1 to the Company’s Annual Report on Form
10-K for the year ended December 30, 2005.
|
|
(18)
|
Incorporated
by reference to exhibit number 10.4 to the Company’s Quarterly Report on
Form 10-Q for the quarter ended July 3, 2009.
|
|
(19)
|
Incorporated
by reference to exhibit number 10.17 to the Company’s Annual Report on
Form 10-K for the year ended December 30, 2005.
|
|
(20)
|
Incorporated
by reference to exhibit number 3.7 to the Company’s Quarterly Report on
Form 10-Q for the quarter ended March 30, 2007.
|
|
(21)
|
Incorporated
by reference to exhibit number 10.19 to the Company’s Annual Report on
Form 10-K for the year ended December 29, 2006.
|
|
(22)
|
Incorporated
by reference to exhibit 10.1 to the Company’s Quarterly Report on Form
10-Q for the quarter ended July 3, 2009.
|
|
(23)
|
Incorporated
by reference to exhibit 10.3 to the Company’s Quarterly Report on Form
10-Q for the quarter ended July 3, 2009.
|
|
(24)
|
Incorporated
by reference to exhibit number 10.6 to the Company’s Quarterly Report on
Form 10-Q for the quarter ended July 3, 2009.
|
|
(25)
|
Incorporated
by reference to exhibit number 10.1 to the Company’s Quarterly Report on
Form 10-Q for the quarter ended October 2, 2009.
|
|
(26)
|
Incorporated
by reference to exhibit number 10.19 to the Company’s Annual Report on
Form 10-K for the year ended January 2, 2009.
|
|
(27)
|
Incorporated
by reference to exhibit number 10.13 to the Company’s Annual Report on
Form 10-K for the year ended January 2, 2009.
|
|
(28)
|
Incorporated
by reference to exhibit number 10.14 to the Company’s Annual Report on
Form 10-K for the year ended January 2, 2009.
|
|
(29)
|
Incorporated
by reference to exhibit number 10.15 to the Company’s Annual Report on
Form 10-K for the year ended January 2, 2009.
|
|
(30)
|
Incorporated
by reference to exhibit number 10.7 to the Company’s Quarterly Report on
Form 10-Q for the quarter ended July 3, 2009.
|
|
(31)
|
Filed
herewith.
|
+
Indicates management contract or compensatory plan or arrangement required to be
filed as an exhibit to this Annual Report on Form 10K.
**
Portions of this document have been omitted and filed separately with the
Securities and Exchange Commission pursuant to a request for confidential
treatment under Rule 24b-2.
SIGNATURES
Pursuant
to the requirements of Section 13 or 15(d) of the Securities Exchange Act of
1934, the registrant has duly caused this Report on Form 10-K to be signed on
its behalf by the undersigned, thereunto duly authorized.
TRIMBLE
NAVIGATION LIMITED
By: /s/ Steven W.
Berglund
Steven W.
Berglund,
President
and Chief Executive Officer
February
26, 2010
SCHEDULE
II
TRIMBLE
NAVIGATION LIMITED
VALUATION
AND QUALIFYING ACCOUNTS
(in
thousands)
January
1,
|
January
2,
|
December
28,
|
||||||||||
Allowance for doubtful
accounts:
|
2010
|
2009
|
2007
|
|||||||||
Balance
at beginning of period
|
$ | 5,999 | $ | 5,221 | $ | 4,063 | ||||||
Acquired
allowance
|
114 | 131 | 1,812 | |||||||||
Bad
debt expense
|
4,070 | 2,667 | 1,303 | |||||||||
Write-offs,
net of recoveries
|
(6,308 | ) | (2,020 | ) | (1,957 | ) | ||||||
Balance
at end of period
|
$ | 3,875 | $ | 5,999 | $ | 5,221 | ||||||
Inventory allowance:
|
||||||||||||
Balance
at beginning of period
|
$ | 29,757 | $ | 29,626 | $ | 28,582 | ||||||
Acquired
allowance
|
464 | 1,720 | 560 | |||||||||
Additions
to allowance
|
3,302 | 4,892 | 4,524 | |||||||||
Write-offs,
net of recoveries
|
(5,410 | ) | (6,481 | ) | (4,040 | ) | ||||||
Balance
at end of period
|
$ | 28,113 | $ | 29,757 | $ | 29,626 | ||||||
Sales return reserve:
|
||||||||||||
Balance
at beginning of period
|
$ | 1,819 | $ | 1,684 | $ | 859 | ||||||
Acquired
allowance
|
- | - | 295 | |||||||||
Additions
(Reductions) to allowance
|
(61 | ) | 162 | 465 | ||||||||
Write-offs,
net of recoveries
|
(15 | ) | (27 | ) | 64 | |||||||
Balance
at end of period
|
$ | 1,743 | $ | 1,819 | $ | 1,683 |
90