UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K/A
Amendment No.1
(X) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended January 2, 2004
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ___________to______________
Commission File Number: 0-18645
TRIMBLE NAVIGATION LIMITED
(Exact name of Registrant as specified in its charter)
California 94-2802192
(State or other jurisdiction of incorporation or organization)
(I.R.S. Employer Identification No.)
749 North Mary Avenue, Sunnyvale, CA 94085
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (408) 481-8000
Securities registered pursuant to Section 12(b) of the Act: NONE
Securities registered pursuant to Section 12(g) of the Act:
Common Stock
Preferred Share Purchase Rights
(Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Act). Yes [X] No [ ]
The aggregate market value of the Common Stock held by non-affiliates of the
registrant, based upon the last sale price of the Common Stock reported on the
Nasdaq National Market on July 3, 2003 was approximately $795 million.
There were 50,537,119 shares of the registrant's Common Stock issued and
outstanding as of March 11, 2004.
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, 2004 (the "Proxy
Statement") are incorporated by reference into Part III of this Annual Report on
Form 10-K.
EXPLANATORY NOTE
This Amendment No.1 to Trimble Navigation Limited's Annual Report on Form 10-K
for the year ended January 2, 2004 (the "Original Form 10-K") is being filed
solely to change the date of the Report of Ernst & Young LLP, Independent
Auditors from March 11, 2004, which was reported in error, to January 23, 2004.
In all other respects, the text of Item 8 and the remainder of the Original Form
10-K is unchanged.
This Amendment No. 1 continues to reflect circumstances as of the date of the
Original Form 10-K and does not reflect events occurring after the filing of the
Original Form 10-K or modify or update those disclosures in any way.
Item 8. Financial Statements and Supplementary Data
CONSOLIDATED BALANCE SHEETS
January 2, January 3,
As at 2004 2003
----- ---- ----
(in thousands)
ASSETS
Current assets:
Cash and cash equivalents $ 45,416 $ 28,679
Accounts receivable, less allowance for doubtful accounts of $9,953
and $9,900, respectively 103,350 79,645
Inventories, net 70,826 61,144
Deferred income taxes 4,380 76
Other current assets 5,659 8,401
----- -----
Total current assets 229,631 177,945
Property and equipment, at cost less accumulated depreciation 27,379 22,037
Goodwill 241,425 205,933
Other purchased intangible assets, less accumulated amortization 19,741 23,238
Deferred income taxes 4,173 417
Other assets 22,554 12,086
------ ------
Total non-current assets 315,272 263,711
------- -------
Total assets $ 544,903 $ 441,656
=========== =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Bank and other short-term borrowings $ - $ 6,556
Current portion of long-term debt 12,885 24,104
Accounts payable 26,019 30,669
Accrued compensation and benefits 25,950 17,728
Accrued liabilities 15,599 21,000
Accrued warranty expense 5,147 6,394
Deferred income taxes 1,136 -
Income taxes payable 9,969 6,450
----- -----
Total current liabilities 96,705 112,901
Non-current portion of long-term debt 77,601 107,865
Deferred gain on joint venture 9,845 10,792
Deferred income tax 4,229 2,561
Other non-current liabilities 8,279 6,186
----- -----
Total liabilities 196,659 240,305
------- -------
Commitments and Contingencies
Shareholders' equity:
Preferred stock no par value; 3,000 shares authorized; none outstanding - -
Common stock, no par value; 90,000 shares authorized; 49,988, and 43,965
shares outstanding, respectively 303,015 225,872
Retained earnings (accumulated deficit) 14,990 (23,495)
Accumulated other comprehensive income (loss) 30,239 (1,026)
------ ------
Total shareholders' equity 348,244 201,351
------- -------
Total liabilities and shareholders' equity $ 544,903 $ 441,656
=========== =========
See accompanying Notes to the Consolidated Financial Statements.
CONSOLIDATED STATEMENTS OF OPERATIONS
January 2, January 3, December 28,
Fiscal Years Ended 2004 2003 2001
------------------ ---- ---- ----
(in thousands, except per share data)
Revenue (1) $ 540,903 $ 466,602 $ 475,292
Cost of revenue 272,873 232,170 238,057
------- ------- -------
Gross margin 268,030 234,432 237,235
Operating expenses
Research and development 67,641 61,232 62,881
Sales and marketing 97,870 89,344 103,778
General and administrative 39,253 40,634 37,407
Restructuring charges 2,019 1,099 3,599
Amortization of purchased intangible assets and goodwill 7,312 8,300 29,389
----- ----- ------
Total operating expenses 214,095 200,609 237,054
------- ------- -------
Operating income from continuing operations 53,935 33,823 181
Non-operating income (expense), net
Interest income 465 659 1,118
Interest expense (11,938) (14,710) (22,224)
Foreign currency transaction loss, net (592) (823) (237)
Expenses for affiliated operations, net (6,403) (3,954) -
Other income (expense), net 118 (1,171) (430)
--- ------ ----
Total non-operating expense, net (18,350) (19,999) (21,773)
------- ------- -------
Income (loss) before income taxes from continuing operations 35,585 13,824 (21,592)
Income tax provision (benefit) (2,900) 3,500 1,900
------- ----- -----
Income (loss) from continuing operations 38,485 10,324 (23,492)
Gain on disposal of discontinued operations (net of tax) - - 613
---
Net income (loss) $ 38,485 $ 10,324 $ (22,879)
========== ========== ==========
Basic earnings (loss) per share from continuing operations $ 0.81 $ 0.24 $ (0.63)
Basic earnings per share from discontinued operations - 0.01
====
Basic earnings (loss) per share $ 0.81 $ 0.24 $ (0.62)
========== ========== ==========
Shares used in calculating basic earnings per share 47,505 42,860 37,091
Diluted earnings (loss) per share from continuing operations $ 0.77 $ 0.24 $ (0.63)
Diluted earnings per share from discontinued operations - - 0.01
====
Diluted earnings (loss) per share $ 0.77 $ 0.24 $ (0.62)
========== ========== ==========
Shares used in calculating diluted earnings per share 50,012 43,578 37,091
(1) Includes sales to related parties of $4.0 million for fiscal 2003. None in
fiscal 2001 and 2002.
See accompanying Notes to the Consolidated Financial Statements.
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
Common stock and warrants Accumulative
Retained Other Total
Earnings Comprehensive Shareholders'
Shares Amount (Deficit) Income/(Loss) Equity
------ ------ --------- ------------- ------
(in thousands)
Balance at December 29, 2000 36,243 $154,846 $(10,940) $(8,963) $134,943
Components of comprehensive income (loss):
Net loss (22,879) (22,879)
Loss on interest rate swap (203) (203)
Unrealized gain on investments 16 16
Foreign currency translation adjustments (9,766) (9,766)
------ ------
Comprehensive loss (32,832)
-------
Subtotal 102,111
Issuance of stock under employee plans
and exercise of warrants 1,376 11,344 11,344
Issuance of stock in private placement 2,675 25,034 25,034
----- ------ ------
Balance at December 28, 2001 40,294 191,224 (33,819) (18,916) 138,489
Components of comprehensive income (loss):
Net income 10,324 10,234
Gain on interest rate swap 210 210
Unrealized loss on investments (17) (17)
Foreign currency translation adjustments 17,697 17,697
------ ------
Comprehensive income 28,214
------
Subtotal 166,703
Issuance of stock for
acquisition 1,190 12,033 12,033
Issuance of stock under employee plans
exercise of warrants 561 4,091 4,091
Issuance of warrants 1,528 1,528
Issuance of stock in private placement 1,920 16,996 16,996
----- ------ ------
Balance at January 3, 2003 43,965 225,872 (23,495) (1,026) 201,351
Components of comprehensive income (loss):
Net income 38,485 38,485
Gain on interest rate swap (7) (7)
Unrealized gain on investments 74 74
Foreign currency translation adjustments 31,198 31,198
------ ------
Comprehensive income 69,750
------
Subtotal 271,101
Issuance of stock for
acquisition 825 18,524 18,524
Issuance of stock for Joint Venture with
Nikon 350 5,922 5,922
Issuance of stock under employee plans
and exercise of warrants 1,593 13,929 13,929
Issuance of stock for Levelite 107 1,349 1,349
Issuance of warrants 836 836
Issuance of stock in private placement 3,148 36,583 36,583
----- ------ ------
Balance at January 2, 2004 49,988 $303,015 $ 14,990 $ 30,239 $348,244
====== ======== ========= ======== ========
See accompanying Notes to the Consolidated Financial Statements.
CONSOLIDATED STATEMENTS OF CASH FLOWS
January 2, January 3, December 28,
Fiscal Years Ended 2004 2003 2001
------------------ ---- ---- ----
(In thousands)
Cash flow from operating activities:
Net income (loss) $ 38,485 $ 10,324 $(22,879)
Adjustments to reconcile net income (loss) to cash
flows provided by operating activities:
Depreciation expense 8,864 9,850 11,218
Amortization expense 7,916 9,168 30,306
Provision for doubtful accounts (32) 5,443 5,077
(Gain) loss on sale of fixed assets - 423 (135)
Amortization of deferred gain - (1,061) (1,584)
Amortization of debt issuance cost 3,515 1,197 960
Deferred income taxes (6,532) 1,464 (887)
Other 2,533 193 (508)
Decrease (increase) in assets:
Accounts receivable (16,683) (10,615) 6,842
Inventories (4,862) (7,649) 7,442
Other current and non-current assets (792) (3,920) 2,393
Effect of foreign currency translation adjustment 6,895 438 (3,261)
Increase (decrease) in liabilities:
Accounts payable (6,387) 8,593 (4,954)
Accrued compensation and benefits 6,723 3,452 (3,112)
Deferred gain on joint venture (947) 10,792 -
Accrued liabilities (6,437) (4,823) (2,946)
Income taxes payable 4,201 (953) 2,398
----- ---- -----
Net cash provided by operating activities 36,460 32,316 26,370
------ ------ ------
Effect of exchange rate changes on cash and cash 2,876 2,780 (1,277)
equivalents
Cash flow from investing activities:
Acquisition of property and equipment (10,901) (7,157) (7,254)
Proceeds from sale of assets 334 1,407 1,177
Acquisitions, net of cash acquired (6,606) 1,718 (4,430)
Investment in Nikon-Trimble Joint Venture (4,810) - -
Costs of capitalized patents (670) (1,734) (934)
----- ------- -----
Net cash used by investing activities (22,653) (5,766) (11,441)
-------- ------- --------
Cash flow from financing activities:
Issuance of common stock and warrants 50,514 21,393 36,378
(Payment)/collection of notes receivable 1,326 (1,082) 872
Proceeds from long-term debt and revolving credit lines 138,288 18,000 30,062
Payments on long-term debt and revolving credit lines (190,074) (70,040) (90,762)
--------- -------- --------
Net cash provided (used) by financing activities 54 (31,729) (23,450)
-- -------- --------
Net increase (decrease) in cash and cash equivalents 16,737 (2,399) (9,798)
Cash and cash equivalents, beginning of period 28,679 31,078 40,876
------ ------ ------
Cash and cash equivalents, end of period $ 45,416 $ 28,679 $ 31,078
======== ======== =========
See accompanying Notes to the Consolidated Financial Statements.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1 - Summary of Significant Accounting Policies:
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the amounts reported in the financial statements and accompanying notes.
Due to the inherent nature of those estimates, actual results could differ from
expectations.
Basis of Presentation
Trimble has a 52-53 week fiscal year, ending on the Friday nearest to December
31, which for fiscal 2003 was January 2, 2004. Fiscal 2002 was a 53-week year.
The financial results of fiscal year 2002 have an extra week, and therefore will
not be exactly comparable to the prior and subsequent 52-week fiscal years.
Fiscal year 2001 comprised 52 weeks.
The consolidated financial statements include the results of Trimble and its
subsidiaries. Inter-company accounts and transactions have been eliminated.
Certain amounts from prior years have been reclassified to conform to the
current year presentation.
Foreign Currency
Assets and liabilities of the Company's non-US subsidiaries are translated into
US dollars at year-end exchange rates, and revenues and expenses are translated
at average rates prevailing during the year. Local currencies are considered to
be the functional currencies for the Company's non-US subsidiaries. Translation
adjustments are included in shareholders' equity in the consolidated balance
sheet caption "Accumulated other comprehensive income (loss)." Foreign currency
transaction gains and losses are included in results of operations as incurred
and have not been significant to the Company's operating results in any fiscal
year presented. The effect of foreign currency rate changes on cash and cash
equivalents is not material. Cumulative translation adjustment increased by
approximately $31.2 million due to weakening US dollar against other currencies
affecting the translation of our assets dominated in non-US currencies.
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
In entering into forward foreign exchange contracts, Trimble has assumed the
risk that might arise from the possible inability of counter-parties to meet the
terms of their contracts. The counter-parties to these contracts are major
multinational investment and commercial banks, and the Company does not expect
any losses as a result of counter-party defaults (see Note 6 of the Notes to the
Consolidated Financial Statements). 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. Trimble
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 Solectron Corporation in August 1999 as an exclusive
manufacturing partner for many of its GPS products, Trimble became substantially
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.
Many of Trimble's products use GPS as the positioning technology. GPS is a
system of 24 orbiting satellites established and funded by the US Government,
which has been fully operational since March 1995. A significant reduction in
the number of operating satellites would impair the current utility of the GPS
system and the growth of current and additional market opportunities. In
addition, the US Government may not remain committed to the operation and
maintenance of GPS satellites over a long period, and the policy of the US
Government for the use of GPS without charge may change.
Allowance for Doubtful Accounts
Trimble maintains allowances for doubtful accounts for estimated losses
resulting from the inability of its customers to make required payments.
Trimble evaluates the collectibility of its trade accounts receivable based on a
number of factors. 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 Trimble 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. The amount was not significant in fiscal 2003 and the expenses
recorded for doubtful accounts were $5.4 million in fiscal 2002 and $5.1 million
in fiscal 2001.
Inventories
Inventories are stated at the lower of standard cost or market (net realizable
value). Standard costs approximate average actual costs. The Company uses a
standard cost accounting system to value inventory and these standards are
reviewed at a minimum of once a year and multiple times a year in the most
active manufacturing plants. The Company provides for the inventory value for
estimated excess and obsolete inventory, based on management's assessment of
future demand and market conditions. If actual future demand or market
conditions are less favorable than those projected by management, additional
inventory write-downs may be required.
Intangible and Non-Current Assets
Intangible assets include goodwill, assembled workforce, distribution channels,
patents, licenses, technology, and trademarks which are capitalized at cost.
Intangible assets with definite lives are amortized on the straight-line basis.
Useful lives generally range from five to seven years, with weighted average
useful life of 5.7 years. Prior to December 29, 2001, goodwill was amortized
over 20 years, except for goodwill from the Grid Data purchase, which was
amortized over five years.
If facts and circumstances indicate that the goodwill, other intangible assets,
or property and equipment may be impaired, an evaluation of continuing value
would be performed. If an evaluation is required, the estimated future
undiscounted cash flows associated with these assets would be compared to their
carrying amount to determine if a write-down to fair market value or discounted
cash flow value is required. Trimble performed an impairment test of goodwill
upon transition to FAS No. 142 on December 29, 2001, and an annual impairment
test at the end of the third fiscal quarter of 2002 and 2003, respectively, and
found no impairment. Trimble will continue to evaluate its goodwill for
impairment on an annual basis at the end of each fiscal third quarter and
whenever events and changes in circumstances suggest that the carrying amount
may not be recoverable.
Trimble adopted SFAS No. 142 on December 29, 2001. As a result, goodwill is no
longer amortized and intangible assets with indefinite lives were reclassified
to goodwill.
Revenue Recognition
Trimble's revenues are recorded in accordance with the Securities and Exchange
Commission's (SEC) Staff Accounting Bulletin (SAB) No. 104, "Revenue
Recognition." The Company recognizes product revenue when persuasive evidence of
an arrangement exists, delivery has occurred, the fee is fixed or determinable,
and collectibility is reasonably assured. In instances where final acceptance of
the product is specified by the customer or is uncertain, revenue is deferred
until all acceptance criteria have been met.
Revenues from purchased extended warranty and support agreements are deferred
and recognized ratably over the term of the warranty/support period.
Substantially all technology licenses and research revenue have consisted of
initial license fees and royalties, which were recognized when earned, provided
we had no remaining obligations.
Contracts and customer purchase orders are generally used to determine the
existence of an arrangement. Shipping documents and customer acceptance, when
applicable, are used to verify delivery. 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 analysis, as well as the customer's payment
history.
Trimble's shipment terms for US orders, and international orders fulfilled from
its European distribution center are typically FCA (Free Carrier) shipping
point, except certain sales to US government agencies which are shipped FOB
destination. FCA shipping point means that Trimble fulfills the obligation to
deliver when the goods are handed over, cleared for export, and into the charge
of the carrier named by the buyer at the named place or point. If no precise
point is indicated by the buyer, Trimble may choose within the place or range
stipulated where the carrier will take the goods into carrier's charge. Shipping
and handling costs are included in the cost of goods sold.
Other international orders are shipped FOB destination, which means these
international orders are not recognized as revenue until the product is
delivered and title has transferred to the buyer or FCA shipping point. FOB
destination means that Trimble bears all costs and risks of loss or damage to
the goods up to that point.
Revenue to distributors and resellers is recognized upon delivery, assuming all
other criteria for revenue recognition have been met. Distributors and resellers
do not have a right of return.
When a sale involves multiple elements the entire fee from the arrangement is
allocated to each respective element based on its relative fair value and
recognized when revenue recognition criteria for each element are met. The
amount of product revenue allocated to an individual element is limited to the
lesser of its relative fair value or the amount not contingent on the Company's
delivery of other elements under the arrangement, regardless of the probability
of the Company's performance.
Trimble's software arrangements generally consist of a license fee and post
contract customer support (PCS). Trimble has established vendor-specific
objective evidence (VSOE) of fair value for its PCS contracts based on the
renewal rate. The remaining value of the software arrangement is allocated to
the license fee using the residual method, which revenue is primarily recognized
when the software has been delivered and there are no remaining obligations.
Revenue from PCS is recognized ratably over the term of the PCS agreement.
Support and Warranty
The warranty periods for the Company's products are generally between one and
three years from date of shipment. Selected military programs may require
extended warranty periods up to 5.5 years, certain TDS products have a five year
or 90-day warranty period, and certain Nikon products have a five year warranty
period. Trimble supports its 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 Trimble's non-GPS products are available
from company- owned or authorized facilities. The Company reimburses dealers and
distributors for all authorized warranty repairs they perform.
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 12 months, ended
January 2, 2004 and January 3, 2003, are as follows:
January 2, January 3,
Fiscal Years Ended 2004 2003
------------------ ---- ----
(In thousands)
Beginning balance $ 6,394 $ 6,827
Warranties accrued 4,417 2,821
Warranty claims (5,664) (3,254)
------ ------
Ending Balance $ 5,147 $ 6,394
========== ==========
Guarantees, Including Indirect Guarantees of Indebtedness of Others
In addition to product warranties, the Company, from time to time, in the normal
course of business, indemnifies other parties with whom it enters into
contractual relationships, 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 specified losses, such as those
arising from a breach of representations or covenants, third party claims that
the Trimble's products when used for their intended purpose(s) infringe the
intellectual property rights of such third party or other claims made against
certain parties. It is not possible to determine the maximum potential amount of
liability under these indemnification obligations due to the limited history of
prior indemnification claims and the unique facts and circumstances that are
likely to be involved in each particular claim. Historically, payments made by
the Company under these obligations were not material and no liabilities have
been recorded for these obligations on the balance sheets as of January 2, 2004
and January 3, 2003.
Advertising Costs
Trimble expenses advertising costs as incurred. Advertising expenses were
approximately $9.2 million, $6.3 million, and $6.8 million in fiscal 2003, 2002,
and 2001, respectively.
Research and Development Costs
Research and development costs are charged to expense as incurred. Trimble
received third party funding of approximately $4.9 million, $5.3 million, and
$4.1 million in fiscal 2003, 2002, and 2001, respectively. The Company offsets
research and development expenses with any third party funding received.
The Company retains the rights to any technology developed.
Stock Compensation
In accordance with the provisions of Statement of Financial Accounting Standards
No. 123 ("SFAS 123"), "Accounting for Stock-Based Compensation" and "Statement
of Financial Accounting Standards No. 148" ("SFAS 148"), "Accounting for
Stock-Based Compensation - Transition and Disclosure," Trimble applies
Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to
Employees" ("APB 25") and related interpretations in accounting for its stock
option plans and stock purchase plan. Accordingly, the Company does not
recognize compensation cost for stock options granted at fair market value. Note
13 of the Consolidated Financial Statements describe the plans operated by
Trimble.
For purposes of pro forma disclosures, the estimated fair value of the options
is amortized to expense over the options' vesting period, and the estimated fair
value of purchases under the employee stock purchase plan is expensed in the
year of purchase as well as the stock-based employee compensation cost, net of
related tax effects, that would have been included in the determination of net
income if the fair value based method had been applied to all awards. The
effects on pro forma disclosure of applying SFAS No. 123 are not likely to be
representative of the effects on pro forma disclosure of future years.
Pro forma information regarding net income (loss) and earnings (loss) per share
is required by SFAS No. 123 and has been determined as if Trimble had accounted
for its employee stock options and purchases under the employee stock purchase
plan using the fair value method of SFAS No.123. The fair value for these
options was estimated at the date of grant using a Black-Scholes option-pricing
model with the following weighted-average assumptions for fiscal 2003, 2002, and
2001:
January 2, January 3, December 28,
2004 2003 2001
---- ---- ----
Expected dividend yield - - -
Expected stock price volatility 59.87% 52.70% 69.59%
Risk free interest rate 3.34% 3.13% 4.15%
Expected life of options after vesting 1.56 1.18 1.20
The Black-Scholes option valuation model was developed for use in estimating the
fair value of traded options that have no vesting restrictions and are fully
transferable. In addition, option valuation models require the input of highly
subjective assumptions including the expected stock price volatility. Because
Trimble's employee stock options have characteristics significantly different
from those of traded options, and because changes in the subjective input
assumptions can materially affect the fair value estimate, in management's
opinion, the existing models do not necessarily provide a reliable single
measure of its employee stock options.
Trimble's pro forma information is as follows:
January 2, January 3, December 28,
Fiscal Years Ended 2004 2003 2001
------------------ ---- ---- ----
(dollars in thousands)
Net income (loss) - as reported $ 38,485 $ 10,324 $(22,879)
Stock-based employee compensation expense
determined under fair value method based for all
awards, net of related tax effects 11,549 11,641 12,718
------ ------ ------
Net earnings (loss) - pro forma $ 26,936 $ (1,317) $(35,597)
Basic earnings (loss) per share - as reported 0.81 0.24 (0.62)
Basic earnings (loss) per share - pro forma 0.57 (0.03) (0.96)
Diluted earnings (loss) per share - as reported 0.77 0.24 (0.62)
Diluted earnings (loss) per share - pro forma 0.54 (0.03) (0.96)
Depreciation
Depreciation of property and equipment owned or under capitalized leases 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.
Income Taxes
Income taxes are accounted for under the liability method whereby deferred tax
asset or liability account balances are calculated at the balance sheet date
using current tax laws and rates in effect for the year in which the differences
are expected to affect taxable income. A valuation allowance is recorded to
reduce the carrying amounts of deferred tax assets if it is more likely than
not, that such assets will not be realized.
Earnings (Loss) Per Share
Number of shares used in calculation of basic earnings per share represents the
weighted average common shares outstanding during the period and excludes any
dilutive effects of options, warrants, and convertible securities. The dilutive
effects of options, warrants, and convertible securities are included in diluted
earnings per share. (See Note 21 to the Consolidated Financial Statements
regarding a 3 for 2 stock split subsequent to year end.)
New Accounting Standards
In November of 2002, the EITF reached a consensus on Issue No. 00-21, "Revenue
Arrangements with Multiple Deliverables." EITF Issue No. 00-21 provides guidance
on how to account for arrangements that involve the delivery or performance of
multiple products, services and/or rights to use assets. The provisions of EITF
Issue No. 00-21 apply to revenue arrangements entered into after June, 2003. The
effect of adoption of EITF Issue No. 00-21 on Trimble's results of operations
and financial condition was immaterial.
Financial Accounting Standards Board (FASB) Interpretation No. 46 (FIN 46),
"Consolidation of Variable Interest Entities," was issued in January 2003, and a
revised interpretation of FIN 46 (FIN 46-R) was issued in December 2003. FIN 46
requires certain variable interest entities to be consolidated by the primary
beneficiary of the entity if the equity investors in the entity do not have the
characteristics of a controlling financial interest or do not have sufficient
equity at risk for the entity to finance its activities without additional
subordinated financial support from other parties. The provisions of FIN 46 are
effective immediately for all arrangements entered into after January 31, 2003.
Since January 31, 2003, Trimble has not obtained any variable interests in any
entities it believes are variable interest entities. For arrangements entered
into prior to February 1, 2003, Trimble would be required to adopt the
provisions of FIN 46-R in the first quarter of fiscal 2004. Trimble is in the
process of determining the effect, if any, the adoption of FIN 46-R will have on
its financial statements.
In April 2003, the FASB issued SFAS No. 149, "Amendment of Statement 133 on
Derivative Instruments and Hedging Activities." SFAS No. 149 amends and
clarifies financial accounting and reporting for derivative instruments,
including certain derivative instruments embedded in other contracts
(collectively referred to as derivatives) and for hedging activities under SFAS
No. 133, "Accounting for Derivative Instruments and Hedging Activities." SFAS
No. 149 is effective for contracts entered into or modified after June 30, 2003,
and for hedging relationships designated after June 30, 2003. The adoption of
this Statement did not have an effect on Trimble's financial statements.
In May 2003, the FASB issued SFAS No. 150, "Accounting for Certain Financial
Instruments with Characteristics of Both Liabilities and Equity." SFAS No. 150
establishes standards for how an issuer classifies and measures certain
financial instruments with characteristics of both liabilities and equity. Many
of these instruments were previously classified as equity. SFAS No. 150 is
effective for financial instruments entered into or modified after May 31, 2003
and otherwise was effective at the beginning of the first interim period
beginning after June 15, 2003, which for Trimble, was the fourth quarter of
2003. The adoption of this Statement did not have an effect on Trimble's
financial statements.
Note 2 - Acquisitions:
The following is a summary of acquisitions made by Trimble during fiscal 2003,
2002, and 2001, all of which were accounted for as purchases:
Acquisition Primary Service or Product Acquisition Date
----------- -------------------------- ----------------
Grid Data Wireless application service provider April 2, 2001
LeveLite Low-end construction instrument products August 15, 2002
Applanix Inertial navigation systems and GPS July 7, 2003
MENSI 3D laser scanning technology December 9, 2003
The consolidated financial statements include the results of operations of
acquired companies commencing on the date of acquisition. Pro forma information
is not presented, as these acquisitions did not have a material effect on the
Company's results of operations.
Allocation of Purchase Consideration
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 following is a summary
of purchase price, acquisition costs and purchase price allocation of the Grid
Data, and LeveLite, Applanix, and MENSI acquisitions:
Grid Data LeveLite Applanix MENSI
--------- -------- -------- -----
(In thousands)
Purchase price $ 8,248 $ 7,506 $ 17,401 $ 4,273
Acquisition costs 50 144 438 372
Restructuring costs - 555 - -
---
Total purchase price $ 8,298 $ 8,205 $ 17,839 $ 4,645
======== ======== ======== ========
Purchase price allocation:
Fair value of tangible net assets
acquired (141) 6,115 3,742 1,434
Deferred tax - - (1,153) -
Identified intangible assets:
Existing technology - - 3,440 -
Goodwill 8,439 2,090 11,810 3,211
----- ----- ------ -----
Total $ 8,298 $ 8,205 $ 17,839 $ 4,645
======== ======== ======== ========
Grid Data, Inc.
On April 2, 2001, Trimble acquired certain assets of Grid Data, an Arizona
corporation, for approximately $3.5 million in cash and the assumption of
certain liabilities. In addition, the purchase agreement provided for Trimble to
make earn-out payments based upon the completion of certain business milestones.
In June 2002, Trimble issued 402,528 shares of common stock in settlement of all
earn-out payments, which resulted in additional goodwill of $4.8 million, with a
final purchase price of approximately $8.3 million.
LeveLite Technology, Inc.
On August 15, 2002, Trimble acquired LeveLite Technology, Inc., a California
corporation, for approximately $5.7 million. This strategic acquisition
complements Trimble's entry-level construction instrument product line. The
purchase price consisted of 655,626 shares of common stock. The merger agreement
provides for Trimble to make additional earn-out payments not to exceed $3.9
million (in common stock and cash payment) based on future revenues derived from
existing product sales to a certain customer and a share of the payments
received from the settlement of potential litigation. As of January 2, 2004, the
total earn-out amount was approximately $1.8 million resulting in additional
goodwill and a final purchase price of approximately $7.5 million.
Applanix Corporation
* On July 7, 2003, Trimble acquired privately held Applanix Corporation of
Ontario, Canada for approximately $17.8 million. Applanix develops systems that
integrate inertial navigation system (INS) and GPS technologies. The purchase
price consisted of 1,154,240 shares of Trimble common stock, of which 720,404
were issued. Former Applanix shareholders have the right to receive the
remaining 433,836 shares of Trimble common stock upon the surrender of
exchangeable shares of a Trimble subsidiary. Trimble expects the Applanix
acquisition to extend its technology portfolio and enable increased robustness
and capabilities in its future positioning products. Applanix's performance is
reported under the Company's Portfolio Technologies segment. Trimble's allocated
a portion of the purchase price to existing technology, which is being amortized
over seven years.
MENSI S.A.
On December 9, 2003, we acquired privately held MENSI S.A., a French developer
of terrestrial 3D laser scanning technology. This strategic acquisition will
enhance our technology portfolio and expand our product offerings. The purchase
price consisted of an initial cash payment of approximately Euro 3.5 million
(approximately US$4.3 million on December 9, 2003). The acquisition agreement
provides for Trimble to make additional earn-out cash payments not to exceed
Euro 3 million (approximately US$3.7 million on December 9, 2003) based on
future revenue derived from existing product sales. The additional payments, if
earned, will result in additional goodwill. MENSI's performance is reported
under our Engineering and Construction segment.
NOTE 3 - Joint Ventures:
Caterpillar Trimble Control Technologies Joint Venture
On April 1, 2002, Caterpillar Trimble Control Technologies LLC ("CTCT"), a joint
venture formed by Trimble and Caterpillar began operations. CTCT, based in
Dayton, Ohio, is 50% owned by Trimble and 50% owned by Caterpillar, with equal
voting rights. It develops and markets next generation advanced electronic
guidance and control products for earthmoving machines in the construction,
mining, and waste industries. Under the terms of the joint venture agreement,
Caterpillar contributed $11.0 million cash plus selected technology, for a total
contributed value of $14.5 million, and Trimble contributed selected existing
machine control product technologies valued at $25.5 million. Additionally, both
companies have licensed patents and other intellectual property from their
portfolios to CTCT. During the first fiscal quarter of 2002, Trimble received a
special cash distribution of $11.0 million from CTCT.
Trimble has recorded the cash distribution of $11.0 million as a deferred gain,
being amortized to the extent that losses are attributable from CTCT under the
equity method of accounting. When and if CTCT is profitable on a sustainable
basis, and future operating losses are not anticipated, then Trimble will
recognize as a gain, the un-amortized portion of the $11.0 million. To the
extent that it is possible that the Company will have any future-funding
obligation relating to CTCT, then the relevant amount of the $11.0 million will
be deferred until such a time, as the funding obligation no longer exists. Both
Trimble's share of profits (losses) under the equity method and the amortization
of the $11.0 million deferred gain are recorded under the heading of "Expense
for affiliated operations, net" in Non-operating income (expense).
The expenses for affiliated operations at CTCT, net also includes incremental
costs as a result of purchasing products from CTCT at a higher price than
Trimble's original manufacturing costs, partially offset by contract
manufacturing fees charged to CTCT. In addition, Trimble received reimbursement
of employee-related costs from CTCT for Trimble employees devoted to CTCT
totaling $7.9 million in fiscal 2003 and $3.9 million in fiscal 2002. The
reimbursements were offset against operating expenses.
January 2, January 3,
Fiscal year ended 2004 2003
----------------- ---- ----
(In millions)
CTCT incremental pricing effects, net $ 5.9 $ 4.0
Trimble's 50% share of CTCT's reported gain (loss) (0.9) (0.2)
Amortization of deferred gain 0.9 0.2
--- ---
Total CTCT expense for affiliated operations, net (1) $ 5.9 $ 4.0
===== =====
(1) Due to the nature of the relationship between Trimble and CTCT, a related
party, the impact of these agreements is classified under non-operating income
(expense) under the heading of "Expense for affiliated operations, net".
At January 2, 2004, the net outstanding balance due from CTCT to Trimble was
approximately $0.8 million.
Nikon-Trimble Joint Venture
On March 28, 2003, Trimble and Nikon Corporation entered into an agreement to
form a joint venture in Japan, Nikon-Trimble Co., Ltd., which assumed the
operations of Nikon Geotecs Co., Ltd., a Japanese subsidiary of Nikon
Corporation and Trimble Japan KK, a Japanese subsidiary of Trimble.
Nikon-Trimble began operations in July 2003.
Under the terms of the Nikon-Trimble agreement, Nikon contributed (Y)1.2 billion
(approximately US$10 million on June 30, 2003) in cash, while Trimble
contributed (Y)500 million (approximately US$4.1 million on June 30, 2003) in
cash and (Y)700 million of its common stock or 349,251 shares valued at
approximately US$5.9 million on June 30, 2003. The Nikon-Trimble joint venture
purchased certain tangible and intangible assets from Nikon Geotecs Co., Ltd.
and Trimble Japan KK.
Nikon-Trimble is 50% owned by Trimble 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. In Japan, this joint
venture will distribute Nikon's survey products as well as Trimble's GPS survey
products and other Engineering and Construction products, including robotic
total stations. Outside Japan, Trimble is the exclusive distributor of Nikon
survey and construction products.
Trimble has adopted the equity method of accounting for its investment in
Nikon-Trimble, with 50% share of profit or loss from this joint venture to be
reported by Trimble in the Non-operating section of the Consolidated Statement
of Operations under the heading of "Expenses for affiliated operations, net."
During fiscal 2003, and the first year of its operations, Nikon-Trimble reported
a loss of $0.6 million of which Trimble's share is $0.3 million. At January 2,
2004, the outstanding balance from Nikon-Trimble due to Trimble was
approximately $1.4 million related to the transfer of certain tangible and
intangible assets from Trimble Japan KK, recorded under the heading of "Accounts
and other receivables, net" and $2.0 million net payable by Trimble to
Nikon-Trimble related to the purchase and sale of products from and to
Nikon-Trimble recorded under the heading of "Other accrued liabilities" on the
Consolidated Balance Sheets.
Note 4 - Goodwill and Intangible Assets:
Goodwill and purchased intangible assets consisted of the following:
January 2, January 3,
As of 2004 2003
----- ---- ----
(in thousands)
Intangible assets:
Intangible assets with definite life:
Existing technology $ 32,389 $ 25,986
Trade names, trademarks, patents, and other
intellectual properties 20,911 21,594
------ ------
Total intangible assets with definite life 53,300 47,580
Less accumulated amortization (33,559) (24,342)
------- -------
Total net intangible assets $ 19,741 $ 23,238
======== ========
Goodwill:
Goodwill, Spectra Precision acquisition 205,562 185,277
Goodwill, other acquisitions 35,863 20,656
------ ------
Total goodwill 241,425 205,933
======= =======
The increase in goodwill of approximately $35.5 million during fiscal 2003 was
primarily due to the acquisition of Applanix and MENSI of approximately $15.0
million and the exchange rate impact of approximately $18.0 million on non-US
currency denominated goodwill assets.
The intangible asset amortization expense as of January 2, 2004 for the five
years following fiscal 2003 is projected as follows:
Amortization
Expense
(In thousands)
2004 $8,177
2005 5,384
2006 2,522
2007 1,747
2008 824
Thereafter 1,087
-----
Total $ 19,741
========
For comparative purposes, the pro forma adjusted net income (loss) per share
excluding amortization of goodwill, distribution channel, and assembled
workforce is as follows:
January 2, January 3, December 28,
Fiscal Years Ended 2004 2003 2001
------------------ ---- ---- ----
(in thousands, except per share data)
Net income (loss) $ 38,485 $ 10,324 $(22,879)
Add back SFAS 142 adjustments:
Amortization of goodwill - - 7,817
Amortization of distribution channel - - 11,230
Amortization of assembled workforce - - 1,834
-----
Adjusted net income (loss) $ 38,485 $ 10,324 $ (1,998)
========= ========= =========
Weighted average shares outstanding
Basic 47,505 42,860 37,091
Diluted 50,012 43,578 37,091
Diluted net income (loss) per share $ 0.81 $ 0.24 $ (0.05)
Pro forma adjusted diluted net income (loss) per share $ 0.77 $ 0.24 $ (0.05)
Note 5 - Certain Balance Sheet Components:
Inventories consisted of the following:
January 2, January 3,
As of 2004 2003
----- ---- ----
(in thousands)
Raw materials $ 20,927 $ 21,098
Work-in-process 3,876 5,187
Finished goods 46,023 34,859
------ ------
$ 70,826 $ 61,144
========= ==========
Property and equipment consisted of the following:
January 2, January 3,
As of 2004 2003
----- ---- ----
(in thousands)
Machinery and equipment $ 66,634 $ 70,660
Furniture and fixtures 9,085 6,538
Leasehold improvements 4,502 6,451
Buildings 5,236 2,905
Land 1,391 1,391
----- -----
86,848 87,945
Less accumulated depreciation (59,469) (65,908)
-------- --------
$ 27,379 $ 22,037
========= =========
Other current assets consisted of the following:
January 2, January 3,
As of 2004 2003
----- ---- ----
(in thousands)
Notes receivable $ 446 $ 1,685
Prepaid expenses
4,566 5,495
Other 647 1,221
--- -----
$ 5,659 $ 8,401
========= =========
Other non-current assets consisted of the following:
January 2, January 3,
As of 2004 2003
----- ---- ----
(in thousands)
Debt issuance costs, net $ 1,691 $ 2,493
Nikon-Trimble joint venture investment* 10,717 -
Other investments 1,216 1,381
Deposits 925 1,196
Demonstration equipment, net 3,226 2,665
Receivables from employees 801 1,223
Other 3,978 3,128
----- -----
$ 22,554 $ 12,086
========= =========
* Includes transaction costs of approximately $0.7 million.
Note 6 - Derivative Financial Instruments:
Trimble transacts business in various foreign currencies and hedges identified
risks associated with foreign currency transactions in order to minimize the
impact of changes in foreign currency exchange rates on earnings. Trimble
utilizes forward contracts to hedge certain trade and inter-company receivables
and payables. 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 hedge contracts
and are marked to market through earnings every period and generally range from
one to three months in original maturity. These hedge instruments are marked to
market through earnings every period. Gains and losses are not material to the
Company's financial position or results of operation.
From time to time, Trimble may also utilize forward foreign exchange contracts
designated as cash flow hedges of operational exposures represented by firm
backlog orders to specific accounts over a specific period of time. Trimble
records changes in the fair value of cash flow hedges in accumulated other
comprehensive income (loss), until the firm backlog transaction ships. Upon
recognition of revenue, the Company reclassifies the gain or loss on the cash
flow hedge to the statement of operations. For the fiscal year ended January 3,
2003, Trimble recorded a gain of $57,000 reflecting the net change and ending
balance in relation to a firm backlog hedge. The critical terms of the cash flow
hedging instruments are the same as the underlying forecasted transactions. The
changes in fair value of the derivatives are intended to offset changes in the
expected cash flow from the forecasted transactions. All forward contracts have
maturity of less than 12 months. As of January 3, 2003, the effect of all
outstanding derivative instruments did not have a material impact on the
Company's financial position or results of operations and none are outstanding
as of January 2, 2004.
Note 7 - The Company, Industry Segment, Geographic, and Customer Information:
Trimble is a designer and distributor of positioning products and applications
enabled by GPS, optical, laser, and wireless communications technology. The
Company designs and markets products, by delivering integrated information
solutions such as collecting, analyzing, and displaying position data to its end
users. Trimble offers an integrated product line for diverse applications in its
targeted markets.
To achieve distribution, marketing, production, and technology advantages in
Trimble's targeted markets, the Company manages its operations in the following
five segments:
o 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 automated machine
guidance and control. These products provide solutions for numerous
construction applications including surveying, general construction,
site preparation and excavation, road and runway construction, and
underground construction.
o Field Solutions -- Consists of products that provide solutions in a
variety of agriculture and fixed asset applications, primarily in the
areas of precise land leveling, machine guidance, yield monitoring,
variable-rate applications of fertilizers and chemicals, and fixed
asset data collection for a variety of governmental and private
entities. This segment is an aggregation of the mapping and geographic
information systems (GIS) and agriculture businesses. Trimble has
aggregated these business operations under a single general manager in
order to continue to leverage its research and development activities
due to the similarities of products across the segment.
o Mobile Solutions -- Consists of products that enable end users to
monitor and manage their mobile assets by communicating
location-relevant information from the field to the office. Trimble
offers a range of products that address a number of sectors of this
market including truck fleets, security, telematics, and public safety
vehicles.
o Component Technologies -- Currently, Trimble markets its GPS component
products through an extensive network of OEM relationships. These
products include proprietary chipsets, modules, and a variety of
intellectual property. The applications into which end users currently
incorporate the component products include: timing applications for
synchronizing wireless and computer systems; in-vehicle navigation and
telematics (tracking) systems; fleet management; security systems; data
collection networks; and wireless handheld consumer products.
o Portfolio Technologies -- The various operations that comprise this
segment were aggregated on the basis that no single operation accounted
for more than 10% of the total revenue. During the first two fiscal
quarters of 2003, this segment was comprised solely of the Military and
Advanced Systems business. Beginning with the third quarter of fiscal
2003, Applanix's performance is reported in this business segment.
At the beginning of fiscal 2003, Trimble realigned two of its reportable
segments. The Tripod Data Systems business is now included in the Engineering
and Construction segment, while previously it was included in the Portfolio
Technologies segment. The following table has been restated to reflect this
realignment.
Trimble evaluates each of its segment's performance and allocates resources
based on profit and loss from operations before income taxes, and some corporate
allocations. Trimble and each of its segments employ the same accounting
policies.
The following table presents revenues, operating income (loss), and identifiable
assets for the five segments. The information includes the operations of Grid
Data after April 2, 2001, LeveLite after August 15, 2002, Applanix after July 7,
2003 and MENSI after December 9, 2003. Operating income (loss) is net revenue
less operating expenses, excluding general corporate expenses, goodwill
amortization, restructuring charges, non-operating income (expense), and income
taxes. The identifiable assets that Trimble's Chief Operating Decision Maker
views by segment are accounts receivable and inventory.
Reporting Segments
------------------
Engineering and Field Mobile Component Portfolio
Fiscal Years Ended Construction Solutions Solutions Technologies Technologies Total
------------------ ------------ --------- --------- ------------ ------------ -----
(In thousands)
January 2, 2004
External net revenues $ 367,058 $ 79,879 $ 12,981 $ 64,193 $ 16,792 $ 540,903
Operating income (loss)
before corporate
allocations 60,664 14,500 (6,452) 16,560 (1,686) 83,586
Accounts receivable (1) 84,897 16,589 4,103 10,003 7,321 122,913
Inventories 56,008 3,398 3,038 2,021 6,361 70,826
January 3, 2003
External net revenues $ 319,615 $ 67,259 $ 8,486 $ 59,755 $ 11,487 $ 466,602
Operating income (loss)
before corporate
allocations 53,453 9,676 (12,039) 10,673 557 62,320
Accounts receivable (1) 73,474 11,598 1,960 11,276 1,966 100,274
Inventories 46,332 7,337 1,986 2,853 2,636 61,144
December 28, 2001
External net revenues $ 317,849 $ 68,519 $ 13,791 $ 58,083 $ 17,050 $ 475,292
Operating income (loss)
before corporate
allocations 49,849 11,349 (9,990) 10,359 738 62,306
Accounts receivable (1) 64,185 10,191 4,274 7,392 5,535 91,577
Inventories 38,921 4,639 1,992 2,490 3,438 51,480
(1) As presented, accounts receivable excludes cash received in advance and
allowances for doubtful accounts, which are not allocated between segments.
The following are reconciliations corresponding to totals in the accompanying
consolidated financial statements:
January 2, January 3, December 28,
Fiscal Years Ended 2004 2003 2001
------------------ ---- ---- ----
(in thousands)
Operating income from continuing operations:
Total for reportable divisions (1) $ 83,586 $ 62,320 $ 62,306
Unallocated corporate expenses (29,651) (28,497) (62,125)
------- ------- -------
Operating income from continuing operations $ 53,935 $ 33,823 $ 181
========== ========= =========
(1) Segment operating income for fiscal 2002 and fiscal 2001 have been restated
to reflect the allocations of certain corporate expenses so as to be comparable
with the allocation methodology in fiscal 2003.
January 2, January 3,
As of 2004 2003
----- ---- ----
(in thousands)
Assets:
Accounts receivable total for reportable segments $ 122,913 $ 100,274
Unallocated (1) (19,563) (20,629)
------- -------
Total $ 103,350 $ 79,645
========== =========
(1) Includes cash received in advance, other receivables, and accruals that are
not allocated by segment.
The following table presents revenues by product groups.
January 2, January 3, December 28,
Fiscal Years Ended 2004 2003 2001
------------------ ---- ---- ----
(in thousands)
GPS Products $ 320.9 $ 274.5 $ 274.2
Laser and Optical Products 199.7 186.9 93.9
Other 20.3 13.9 1.7
---- ---- ---
Total revenue $ 540.9 $ 475.3 $ 369.8
======= ======= =======
The geographic distribution of Trimble's revenues and identifiable assets is
summarized in the table below. Other foreign countries include Canada and
countries within South and Central America. Identifiable assets indicated in the
table below exclude inter-company receivables, investments in subsidiaries,
goodwill, and intangibles assets.
Geographic Area
---------------
Europe Other
Middle East Non-US
Fiscal Years Ended US Africa Asia Countries Eliminations Total
------------------ -- ------ ---- --------- ------------ -----
(In thousands)
January 2, 2004
Sales to unaffiliated customers (1)
$ 265,846 $ 166,153 $ 70,257 $ 38,648 $ - $ 540,903
Inter-geographic transfers 112,623 116,185 - 3,755 (232,563) -
------- ------- ----- --------
Total revenue $ 378,469 $ 282,338 $ 70,257 $ 42,403 (232,563) $ 540,903
Identifiable assets $ 172,850 $ 91,008 $ 7,549 $ 12,330 $ - $ 283,737
January 3, 2003
Sales to unaffiliated customers (1) $ 235,716 $ 136,551 $ 60,878 $ 33,457 $ - $ 466,602
Inter-geographic transfers $ 62,843 73,625 - 4,121 (140,589) -
--------- ------ ----- --------
Total revenue $ 298,559 $ 210,176 $ 60,878 $ 37,578 (140,589) $ 466,602
Identifiable assets $ 127,594 $ 70,057 $ 9,955 $ 5,743 $ (864) $ 212,485
December 28, 2001
Sales to unaffiliated customers (1) $ 236,665 $ 143,051 $ 54,710 $ 40,866 $ - $ 475,292
Inter-geographic transfers 57,481 49,940 2,137 - (109,558) -
------ ------ ----- --------
Total revenue $ 294,146 $ 192,991 $ 56,847 $ 40,866 $(109,558) $ 475,292
Identifiable assets $ 120,403 $ 71,081 $ 10,048 $ 3,829 $ (5,494) $ 199,867
(1) Sales attributed to countries based on the location of the customer.
Transfers between US and non-US geographic areas are made at prices based on
total costs and contributions of the supplying geographic area. The Company's
subsidiaries in Asia, except for Japan, which is a buy/sell entity, have derived
revenue from commissions from US operations in each of the periods presented.
These commission revenues and expenses are excluded from total revenue and
operating income (loss) in the preceding table. The Japanese entity's revenues
and expenses are included in total revenue and operating income (loss) in the
preceding table. In fiscal 2002, Germany comprised approximately 16% of sales to
unaffiliated customers. Other than the United States, no other country comprised
more than 10% of sales to unaffiliated customers for any periods presented,
except as disclosed above.
No single customer accounted for 10% or more of Trimble's total revenues in
fiscal years 2003, 2002, and 2001.
Note 8 - Restructuring Charges:
Restructuring charges of $2.0 million were recorded in fiscal 2003, $1.1 million
in fiscal 2002, and $3.6 million in fiscal 2001, all of which related to
severance costs, except for $0.3 in 2003 which related to lease costs of
Trimble's Japanese office closure due to the Nikon joint venture. As a result of
the restructuring activities, the Company's headcount decreased in fiscal 2003
by 77, 49 and 207 in fiscal 2003, 2002, and 2001, respectively. As of January 2,
2004, the restructuring accrual balance was approximately $0.4 million which
will be paid over the remaining term of the lease through 2006.
Note 9 - Long-term Debt:
Long-term debt consisted of the following:
January 2, January 3,
As of 2004 2003
(In thousands)
Credit Facilities:
Term loan $ 43,750 $ 32,600
Revolving credit facility 44,000 35,000
Subordinated note - 69,136
Promissory notes and other 2,736 1,789
----- -----
90,486 138,525
Less bank and other short-term borrowings - 6,556
Less current portion of long-term debt 12,885 24,104
------ ------
Non-current portion $ 77,601 $107,865
========= ========
The following summarizes the future cash payment obligations (excluding
interest) as of January 2, 2004:
2009 and
Total 2004 2005 2006 2007 2008 Beyond
----- ---- ---- ---- ---- ---- ------
(in thousands)
Credit Facilities:
Term loan $ 43,750 $ 12,500 $ 12,500 $ 12,500 $ 6,250 $ - $ -
Revolving credit facility 44,000 - - 44,000 - - -
Subordinated note - - - - - - -
Promissory note and other 2,736 385 165 285 110 110 1,681
----- --- --- --- --- --- -----
Total contractual cash obligations $ 90,486 $ 12,885 $ 12,665 $ 56,785 $ 6,360 $ 110 $ 1,681
========= ========= ======== ======== ======= ====== =======
Credit Facilities
On June 25, 2003, Trimble obtained a $175 million secured Credit Facility ("2003
Credit Facility") from a syndicate of nine banks to repay the Subordinated Note
and refinance certain existing higher interest credit facilities, pay fees and
expenses related to this new credit facility, and for ongoing working capital
and general corporate needs.
At January 2, 2004, Trimble had approximately $87.8 million of borrowings under
the 2003 Credit Facility, comprised of a $43.8 million term loan and $44.0
million of a $125 million revolver. The Company has access to an additional $81
million of cash under the terms of the revolving credit facility. The Company
has commitment fees on the unused portion of 0.5% if the Leverage Ratio (which
is defined as total indebtedness to Earnings before Interest, Taxes,
Depreciation and Amortization (EBITDA), as defined in the related agreement) is
2.0 or greater and 0.375% if the Leverage Ratio is less than 2.0.
Pricing of interest for any borrowings under the 2003 Credit Facility was fixed
for the first six months at LIBOR plus 175 basis points (1.5% at January 2,
2004) and now is thereafter tied to a formula, based on the Leverage Ratio.
The Credit Facility is secured by all of the Company's material assets, except
for assets that are subject to foreign tax considerations. Financial covenants
of the 2003 Credit Facility include leverage, fixed charge, and minimum net
worth tests. At January 2, 2004, Trimble was in compliance with all financial
debt covenants. The amount due under the revolver loan is paid as the loan
matures on June 25, 2006, and the loan commitment fees are paid on a quarterly
basis.
Under the terms of the 2003 Credit Facility, the Company is allowed to pay
dividends and repurchase shares of common stock up to 25% of net income in the
previous fiscal year, under the existing terms of the credit facilities.
In July of 2000, Trimble obtained $200 million of senior, secured credit
facilities (the "2000 Credit Facility") from a syndicate of banks to support the
acquisition of Spectra Precision Group and its ongoing working capital
requirements and to refinance certain existing debt. At January 3, 2003, Trimble
had approximately $67.6 million outstanding under the 2000 Credit Facility,
comprised of $32.6 million under a $100 million five-year term loan, $25 million
under a $50 million US dollar only revolving credit facility ("revolver"), and
$10 million under a $50 million multi-currency revolver. The Company had
commitment fees on the unused portion of 0.5% assuming certain ratios were met.
Pricing for any borrowings under the 2000 Credit Facility was fixed for the
first six months at LIBOR plus 275 basis points and was thereafter tied to a
formula, based on the leverage ratio.
Due to the full repayment of the Subordinated Note and the refinancing of the
2000 Credit Facility, the Company wrote off approximately $3.6 million of
unamortized debt issuance costs and warrants issued in connection with the
Subordinated Note, as interest expense in fiscal 2003.
Subordinated Note
In July of 2000, as part of the acquisition of Spectra Precision Group, the
Company issued Spectra-Physics Holdings USA, Inc., a subordinated seller note
that had a stated two-year maturity. On March 20, 2002, the Company renegotiated
the terms of the subordinated note. Under the revised agreement, Spectra-Physics
Holdings, Inc., a subsidiary of Thermo Electron, extended the due date of the
note until July 14, 2004, at the current interest rate of approximately 10.4%
per year.
As of January 3, 2003 the principal amount outstanding was approximately $69.1
million. As permitted by the 2000 Credit Facility, Trimble repaid the
subordinated note during fiscal 2003.
Promissory Note and Others
The promissory note and others mainly consists of a $1.7 million liability
arising from the purchase of a building for Trimble's Corvallis, Oregon site and
other government loans in our foreign subsidiaries. The $1.7 million note is
payable in monthly installments through April 2015, bearing a 3.99% variable
interest rate as of January 2, 2004.
Weighted Average Cost of Debt
The weighted average cost of debt is approximately 2.9% for fiscal 2003 and 7.6%
for fiscal 2002.
Note 10 - Lease Obligations and Commitments:
Trimble's principal facilities in the United States are leased under
non-cancelable operating leases that expire at various dates through 2011. The
Company has options to renew certain of these leases for an additional five
years. Trimble also leases facilities under operating leases in the United
Kingdom, Sweden, and Germany that expire in 2005.
Future minimum payments required under non-cancelable operating leases are as
follows:
Operating
Lease Payments
--------------
(In thousands)
2004 $ 10,129
2005 9,401
2006 2,322
2007 1,643
2008 1,489
Thereafter 3,157
-----
Total $ 28,141
--------
Net rent expense under operating leases was $13.2 million in fiscal 2003, $5.9
million in fiscal 2002, and $9.6 million in fiscal 2001. Sublease income was
$1.7 million, $4.7 million, and $3.5 million, respectively.
Note 11 - Fair Value of Financial Instruments:
The carrying amounts and fair values of Trimble's financial instruments are as
follows:
Carrying Fair Carrying Fair
Amount Value Amount Values
------ ----- ------ ------
January 2, 2004 January 3, 2003
--------------- ---------------
(In thousands)
Assets:
Cash and cash equivalents (See Note 1) $ 45,416 $ 45,416 $ 28,679 $ 28,679
Forward foreign currency exchange contracts 1,412 1,328 125 297
(See Note 6)
Accounts receivable 103,350 103,350 79,645 79,645
Liabilities:
Subordinated notes (See Note 9) - - 69,136 65,798
Credit facilities (See Note 9) 87,750 87,750 67,600 67,600
Promissory note and other (See Note 9) 2,736 2,335 1,789 1,421
Accounts payable 26,019 26,019 30,669 30,669
The fair value of the subordinated notes, bank borrowings, and promissory notes
have been estimated using an estimate of the interest rate Trimble 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.
The fair value of forward foreign exchange contracts is estimated based on the
difference between the market price and the carrying amount of comparable
contracts. These contracts are adjusted to fair value at the end of every month.
Note 12 - Income Taxes:
Trimble's income tax provision (benefit) consisted of the following:
January 2, January 3, December 28,
Fiscal Years Ended 2004 2003 2001
------------------ ---- ---- ----
(In thousands)
US Federal:
Current $ 513 $ - $ -
Deferred (7,000) - -
-------
(6,487) - -
-------
US State:
Current 250 142 58
Deferred (600) - -
-----
(350) 142 58
----- --- --
Non-US:
Current 1,594 2,052 2,729
Deferred 2,343 1,306 (887)
----- ----- ----
3,937 3,358 1,842
----- ----- -----
Income tax provision (benefit) $ (2,900) $ 3,500 $1,900
========= ======= ======
The pre-tax US income (loss) from continuing operations was approximately $39.5
million, $3.3 million and $(29.3) million in fiscal years 2003, 2002 and 2001,
respectively.
The income tax provision (benefit) differs from the amount computed by applying
the statutory federal income tax rate to income before taxes. The sources and
tax effects of the differences are as follows:
January 2, January 3, December 28,
Fiscal Years Ended 2004 2003 2001
------------------ ---- ---- ----
(In thousands)
Expected tax from continuing operations at $ 12,455 $ 4,839 $(7,557)
35% in all years
Change in valuation allowance (15,028) (1,156) 9,704
Non-US tax rate differential - (137) (855)
Goodwill amortization - - 747
Other (327) (46) (139)
---- --- ----
Income tax provision (benefit) $ (2,900) $ 3,500 $ 1,900
========= ======== ========
Effective tax rate (8%) 25% (9%)
=== == ===
The components of deferred taxes consist of the following:
January 2, January 3,
As of 2004 2003
----- ---- ----
(In thousands)
Deferred tax liabilities:
Purchased intangibles $ 1,338 $ 381
Depreciation and amortization 3,776 2,258
Other individually immaterial items 251 (78)
--- ---
Total deferred tax liabilities 5,365 2,561
----- -----
Deferred tax assets:
Inventory valuation differences 9,001 12,069
Expenses not currently deductible 5,528 5,762
US Federal credit carryforwards 9,150 8,172
Deferred revenue 4,280 4,317
US State credit carryforwards 6,999 6,215
Warranty 2,374 2,374
Depreciation and amortization 2,871 3,184
US Federal net operating loss (NOL) carryforward - 4,451
Other individually immaterial items 3,106 1,827
----- -----
Total deferred tax assets 43,309 48,371
Valuation allowance (34,756) (47,878)
------- -------
Total deferred tax assets 8,553 493
----- ---
Total net deferred tax assets/(liabilities) $ 3,188 $(2,068)
========== =======
The Company has US Federal credit carryforwards of approximately $9.1 million
that expire beginning in 2004. The Company has state research and development
credit carryforwards of approximately $10.4 million which do not expire.
The change in valuation allowance in 2003 includes net operating losses realized
as well as the benefit given to certain deferred tax assets in the amount of
$7.6 million based on management's assessment that it is more likely than not
that such assets will be realized. The valuation allowance decreased by $13.1
million in 2003 and decreased by $3.1 million in 2002. Approximately $14.1
million of the valuation allowance at January 2, 2004 relates to the tax
benefits of stock option deductions, which will be credited to equity if and
when realized.
Note 13 - Shareholders' Equity:
3-for-2 Stock Split
Trimble's Board of Directors approved a 3-for-2 split of all outstanding shares
of the Company's Common Stock, payable March 4, 2004 to stockholders of record
on February 17, 2004. Cash will be paid in lieu of fractional shares. All share
and per share information have been adjusted to reflect the stock split on a
retroactive basis for all periods presented.
Common Stock
On April 14, 2003, Trimble sold 3,148,000 shares of its Common Stock, no par
value per share, to an investor at a price of $12.17 per share in an offering
pursuant to its shelf registration statement. The offering resulted in net
proceeds to Trimble of approximately $36.6 million, approximately $31 million of
which was used to pay down the principal balance and $5.6 million was used to
pay down the accrued interest due on the Subordinated Note (see Note 9 to the
Consolidated Financial Statements).
On December 21, 2001, Trimble completed a private placement of 2,675,006 shares
of its Common Stock at a price of $10.00 per share to certain qualified
investors, resulting in gross proceeds of approximately $26.8 million to the
Company. On January 15, 2002, Trimble had a second closing of the private
placement issuing 1,920,006 shares of Common Stock at $10.00 per share resulting
in gross proceeds of an additional $19.2 million.
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 for up to 3,000,000 shares plus any
shares currently reserved but un-issued 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 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 exercise price of non-statutory stock options
issued under the 2002 Plan must be at least 85% of the fair market value of
Common Stock on the date of grant. As of January 2, 2004, options to purchase
2,326,742 shares were outstanding and 619,949 were available for future grant
under the 2002 Plan.
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, provides
for the granting of incentive and non-statutory stock options for up to
9,562,500 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 exercise price of non-statutory stock options issued under the
1993 Plan must be at least 85% of the fair market value of Common Stock on the
date of grant. As of January 2, 2004, options to purchase 4,799,045 shares were
outstanding, and 980,627 shares were available for future grant under the 1993
Plan.
1990 Director Stock Option Plan
In December 1990, Trimble adopted a Director Stock Option Plan under which an
aggregate of 570,000 shares of Common Stock have been reserved for issuance to
non-employee directors as approved by the shareholders to date. At January 2,
2004, options to purchase 287,501 shares were outstanding, and no shares were
available for future grants under the Director Stock Option Plan.
1992 Management Discount Stock Option Plan
In 1992, Trimble's Board of Directors approved the 1992 Management Discount
Stock Option Plan ("Discount Plan"). Under the Discount Plan, 450,000
non-statutory stock options were reserved for grant to management employees at
exercise prices that may be significantly discounted from the fair market value
of Common Stock on the dates of grant. Options are generally exercisable six
months from the date of grant. As of January 2, 2004, there were no shares
available for future grants. For accounting purposes, compensation cost on these
grants is measured by the excess over the discounted exercise prices of the fair
market value of Common Stock on the dates of option grants. There were no
discounted options granted in the plan in fiscal 2003, 2002, and 2001. As of
January 2, 2004, options to purchase 187,500 shares were outstanding under the
1992 Management Discount Stock Option Plan.
1988 Employee Stock Purchase Plan
In 1988, Trimble established an employee stock purchase plan under which an
aggregate of 5,025,000 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 six-month offering period. In fiscal 2003 and 2002, 328,044
shares and 362,412 shares, respectively, were issued under the plan for
aggregate proceeds to the Company of $3.1 million and $2.9 million,
respectively. At January 2, 2004, the number of shares reserved for future
purchases by eligible employees was 428,216.
SFAS 123 Disclosures
As stated in Note 1 of the Notes to the Consolidated Financial Statements,
Trimble has elected to follow APB 25 and related interpretations in accounting
for its employee stock options and stock purchase plans. The alternative fair
value accounting provided for under SFAS 123 requires use of option pricing
models that were not developed for use in valuing employee stock options. Under
APB 25, because the exercise price of Trimble's employee stock options equals
the market price of the underlying stock on date of grant, no compensation
expense is recognized.
Exercise prices for options outstanding as of January 2, 2004, ranged from $5.33
to $34.46. The weighted average remaining contractual life of those options is
6.91 years. In view of the wide range of exercise prices, Trimble considers it
appropriate to provide the following additional information in respect of
options outstanding:
Options Outstanding Options Exercisable
------------------- -------------------
Weighted- Weighted- Weighted-
Average Average Average
Number Exercise Price Remaining Number Exercise Price
Range Outstanding(1) per Share Contractual Life Exercisable(1) per Share
----- -------------- --------- ---------------- -------------- ---------
$ 5.33 - 6.63 908 5.70 5.01 873 $ 5.71
6.67 - 8.53 861 7.91 6.03 614 7.89
8.75 - 9.33 111 9.10 6.07 65 8.94
10.23 843 10.23 8.47 228 10.23
10.25 - 11.43 957 10.81 6.13 585 10.66
11.65 - 11.67 780 11.65 6.74 426 11.65
11.93 - 15.71 783 13.29 6.18 525 13.13
16.04 21 16.04 6.02 17 16.04
17.00 1,064 17.00 9.53 5 17.00
17.55 - 34.46 1,274 26.37 6.86 800 27.01
----- ----- ---- --- -----
Total 7,601 13.61 6.91 4,136 $ 12.76
===== ===== ==== ===== =======
(1) In thousands
Activity during fiscal 2003, 2002, and 2001, under the combined plans was as
follows:
January 2, 2004 January 3, 2003 December 28, 2001
--------------- --------------- -----------------
Weighted Weighted Weighted
average average average
exercise exercise exercise
Fiscal Years Ended Options price Options price Options price
------------------ ------- ----- ------- ----- ------- -----
(In thousands, except for per
share data)
Outstanding at beginning of year 7,691 $ 12.35 6,932 $ 12.69 6,390 $ 12.73
Granted 1,298 16.87 1,275 9.88 1,605 11.39
Exercised (1,263) 8.90 (199) 6.67 (436) 8.61
Cancelled (125) 15.51 (317) 13.46 (627) 12.37
---- ----- ----- ----- ---- -----
Outstanding at end of year 7,601 $ 13.61 7,691 $ 12.35 6,932 $ 12.69
Exercisable at end of year 4,136 $ 12.76 4,005 $ 11.69 3,009 $ 10.84
Available for grant 1,605 2,790 1,565
Weighted-average fair value of
options granted during year $ 10.03 $ 5.64 $ 6.39
Non-statutory Options
On May 3, 1999, Trimble entered into an agreement to grant a non-statutory
option to purchase up to 45,000 shares of common stock at an exercise price of
$6.50 per share, with an expiration date of March 29, 2004.
As of January 2, 2004, these non-statutory options have not been exercised.
Warrants
On April 12, 2002, the Company issued to Spectra-Physics Holdings USA, Inc., a
warrant to purchase up to 564,350 shares of Trimble's Common Stock over a fixed
period of time. Initially, Spectra-Physics' warrant entitles it to purchase
300,000 shares of Common Stock over a five-year period at an exercise price of
$10.07 per share. On a quarterly basis beginning July 14, 2002, Spectra-Physics'
warrant became exercisable for an additional 375 shares of Common Stock for
every $1 million of principal and interest outstanding to Spectra-Physics until
the obligation is paid off in full. These shares are purchasable at a price
equal to the average of Trimble's closing price for the five days immediately
preceding the last trading day of each quarter. On July 14, 2002 an additional
26,046 shares became exercisable at an exercise price of $9.64 per share. On
October 14, 2002 an additional 26,736 shares became exercisable at an exercise
price of $6.12. On January 14, 2003, an additional 27,426 shares became
exercisable at an exercise price of $9.03. On April 14, 2003, an additional
14,312 shares became exercisable at an exercise price of $13.37. The additional
shares are exercisable over a 5-year period. No additional shares will be
issuable under the warrant to Spectra-Physics as the underlying obligation has
been paid off in full.
The approximate fair value of the warrants of $2.4 million was determined using
the Black-Scholes pricing model with the following assumptions: contractual life
of 5-year period, risk-free interest rate of 4%; volatility of 65%; and no
dividends during the contractual term. The value of the warrants was being
amortized to interest expense over the term of the subordinated note and the
unamortized balances was written off to interest expense on June 2003 upon
repayment of the note.
On December 21, 2001 and January 15, 2002, in connection with the first and
second closing of the private placement of the Company's Common Stock, Trimble
granted five-year warrants to purchase an additional 919,008 shares of Common
Stock, subject to certain adjustments, at an exercise price of $12.97 per share.
Common Stock Reserved for Future Issuances
As of January 2, 2004, Trimble had reserved 11,371,652 common shares for
issuance upon exercise of options and warrants outstanding and options available
for grant under the 2002 Plan, the 1993 Plan, the 1990 Director Plan, and the
1992 Management Discount Plan, and available for issuance under the 1988
Employee Stock Purchase Plan.
Note 14 - Benefit Plans:
401(k) Plan
Under Trimble's 401(k) Plan, US 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 net 61,238 shares of Common Stock for an
aggregate of $0.9 million in fiscal 2003. Trimble, 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. Trimble's matching
contributions to the 401(k) Plan were $1.8 million in fiscal 2003, $1.8 million
in fiscal 2002, and $1.7 million in fiscal 2001.
Profit-Sharing Plan
In 1995, Trimble introduced an employee profit-sharing plan in which all
employees, excluding executives and certain levels of management, participate.
The plan distributes to employees approximately 5% of quarterly adjusted pre-tax
income. Payments under the plan during fiscal 2003, 2002 and 2001 were $2.5
million, $1.1 million, and $0.9 million, respectively.
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, Trimble contributed and charged to expense
approximately $2.0 million for fiscal 2003, $1.4 million for fiscal 2002, and
$1.4 million for fiscal 2001.
Defined Benefit Pension Plan
The Swedish and German subsidiaries have an unfunded defined benefit pension
plan that covered substantially all of their 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.
Net periodic benefit costs in fiscal 2003, 2002, and 2001 were not material.
The changes in the benefit obligations and plan assets of the significant non-US
defined benefit pension plans for fiscal 2003 and 2002 were as follows:
Fiscal Years Ended January 2, 2004 January 3, 2003(1)
------------------ --------------- -----------------
(in thousands)
Change in benefit obligation:
Benefit obligation at beginning of year $ 4,972 $ 4,105
Interest cost 328 317
Benefits paid (256) (212)
Foreign exchange impact 1,102 814
Actuarial (gains) losses 58 (52)
-- ---
Benefit obligation at end of year 6,204 4,972
----- -----
Change in plan assets:
Fair value of plan assets at beginning of year 787 731
Actual return on plan assets 29 122
Employer contribution 150 121
Plan participants' contributions - -
Benefits paid (256) (212)
Foreign exchange impact 162 24
Fair value of plan assets at end of year 872 786
Benefit obligation in excess of plan assets 5,332 4,186
----- -----
Unrecognized prior service cost - -
Unrecognized net actuarial gain 35 25
-- --
Accrued pension costs (included in accrued liabilities) $ 5,297 $ 4,161
------- -------
(1) Prior year's disclosure has been restated to correct for a clerical error.
Actuarial assumptions used to determine the net periodic pension costs for the
year ended January 2, 2004 were as follows:
Swedish Subsidiary German Subsidiaries
------------------ -------------------
Discount rate 5.5% 6.0%
Rate of compensation increase 2.5% 1.5%
Note 15 - Earnings Per Share:
The following data show the amounts used in computing earnings (loss) per share
and the effect on the weighted-average number of shares of potentially dilutive
Common Stock.
January 2, January 3, December 28,
Fiscal Years Ended 2004 2003 2001
------------------ ---- ---- ----
(in thousands, except per share data)
Numerator:
Income available to common shareholders:
Used in basic and diluted earnings (loss) per
share from continuing operations $ 38,485 $ 10,324 $ (23,492)
Used in basic and diluted earnings per share
from discontinued operations - - 613
---
Used in basic and diluted earnings (loss) per
share $ 38,485 $ 10,324 $ (22,879)
========== =========== ===========
Denominator:
Weighted-average number of common shares used in
basic earnings (loss) per share 47,505 42,860 37,091
Effect of dilutive securities (using treasury stock
method):
Common stock options 2,058 705 -
Common stock warrants 449 13 -
Weighted-average number of common shares and dilutive
potential common shares used in diluted income per
share 50,012 43,578 37,091
====== ====== ======
Basic earnings (loss) per share from continuing operations $ 0.81 $ 0.24 $ (0.63)
Basic earnings per share from discontinued operations - - 0.01
Basic earnings (loss) per share $ 0.81 $ 0.24 $ (0.62)
Diluted earnings (loss) per share from continuing
operations $ 0.77 $ 0.24 $ (0.63)
Diluted earnings per share from discontinued operations - - 0.01
Diluted income (loss) per share $ 0.77 $ 0.24 $ (0.62)
Due to the fact that the Company reported a net loss in fiscal 2001, options and
warrants were not included in the computation of earnings per share in fiscal
2001. If the Company had reported net income in 2001, additional 1,407,000
common equivalent shares related to outstanding options and warrants would have
been included in the calculation of diluted loss per share.
Note 16 - Comprehensive Income (Loss):
The components of comprehensive income (loss), net of related tax as follows:
January 2, January 3, December 28,
Fiscal Years Ended 2004 2003 2001
------------------ ---- ---- ----
(in thousands)
Net income (loss) $ 38,485 $10,324 $(22,879)
Foreign currency translation adjustments 31,198 17,697 (9,766)
Net gain (loss) on hedging transactions (7) 210 (203)
Net unrealized gain (loss) on investments 74 (17) 16
-- --- --
Comprehensive income (loss) $ 69,750 $28,214 $(32,832)
======== ======= ========
The components of accumulated other comprehensive (loss), net of related tax as
follows:
January 2, January 3,
Fiscal Years Ended 2004 2003
------------------ ---- ----
(in thousands)
Cumulative foreign currency translation adjustments $ 30,166 $ (1,032)
Net gain on hedging transactions - 7
Net unrealized gain (loss) on investments 73 (1)
-- --
Accumulated other comprehensive income (loss) $ 30,239 $ (1,026)
========= =========
Note 17 - Related-Party Transactions:
Related-Party Lease
Trimble currently leases office space in Ohio from an association of three
individuals, one of whom is an employee of one of the US operating units, under
a non-cancelable operating lease arrangement expiring in 2011. The annual rent
is subject to adjustment based on the terms of the lease. The Consolidated
Statements of Operations include expenses from this operating lease of $0.35
million for fiscal 2003, fiscal 2002, and fiscal 2001.
Related -Party Notes Receivable
Trimble has notes receivable from officers and employees of approximately $0.8
million as of January 2, 2004 and $1.2 million as of January 3, 2003. The notes
bear interest from 4.49% to 6.62% and have an average remaining life of 1.47
years as of January 2, 2004.
See Note 3 to the Notes to the Consolidated Financial Statements for additional
information regarding Trimble's related party transactions with joint venture
partners.
Note 18 - Statement of Cash Flow Data:
January 2, January 3, December 28,
Fiscal Years Ended 2004 2003 2001
------------------ ---- ---- ----
(in thousands)
Supplemental disclosure of cash flow information:
Interest paid $ 10,208 $ 12,215 $ 17,363
Income taxes paid $ 688 $ 2,635 $ 825
Significant non-cash investing activities:
Issuance of shares related to invest in joint venture $ 5,922 $ - $ -
Issuance of shares related to LeveLite earn-out
payments $ 1,349 $ 336 $ -
Note 19 - 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 20 - Selected Quarterly Financial Data (unaudited):
First Second Third Fourth
Quarter Quarter Quarter Quarter
------- ------- ------- -------
(in thousands, except per share data)
Fiscal 2003
Revenue $ 127,325 $ 138,132 $ 139,569 $ 135,877
Gross margin 61,755 71,095 69,112 66,068
Net income 5,353 8,105 9,936 15,091
Basic net income per share 0.12 0.17 0.20 0.30
Diluted net income per share 0.12 0.16 0.19 0.28
Fiscal 2002
Revenue $ 104,029 $ 123,256 $ 114,748 $ 124,569
Gross margin 54,333 60,951 57,581 61,567
Net income (loss) (715) 4,326 2,708 4,005
Basic net income (loss) per share (0.02) 0.10 0.06 0.09
Diluted net income (loss) per share (0.02) 0.10 0.06 0.09
Significant quarterly items for fiscal 2003 include the following: (i) in the
first quarter of 2003 a $0.4 million charge or $0.01 per diluted share relating
to workforce reduction; (ii) in the second quarter of 2003 a $0.7 million
charge, or $0.01 per diluted share relating to work force reduction and $3.6
million of interest expenses, or $0.07 per diluted share relating to the
Company's debt refinancing; (iii) in the third quarter of 2003 a $0.6 million
charge, or $0.01 per diluted share relating to work force reduction; (iv) in the
fourth quarter of 2003 a $0.3 million charge, or less than $0.01 per diluted
share relating to work force reduction.
Significant quarterly items for fiscal 2002 include the following: (i) in the
first quarter of 2002 a $0.3 million charge or $0.01 per diluted share relating
to workforce reduction; (ii) in the second quarter of 2002 a $0.2 million
charge, or less than $0.01 per diluted share relating to work force reduction;
(iii) in the third quarter of 2002 a $0.2 million charge, or less than $0.01 per
diluted share relating to work force reduction and a $0.2 million gain, or less
than $0.01 per diluted share relating to the sale of an investment; (iv) in the
fourth quarter of 2002 a $0.5 million charge, or $0.01 per diluted share
relating to work force reduction and a $1.5 million charge, or $0.03 per diluted
share relating to the write-down of an investment.
Note 21 - Subsequent Events
3-for-2 Stock Split
Trimble's Board of Directors approved a 3-for-2 split of all outstanding shares
of the Company's Common Stock, payable March 4, 2004 to stockholders of record
on February 17, 2004. Cash will be paid in lieu of fractional shares. All share
and per share information have been adjusted to reflect the stock split on a
retroactive basis for all periods presented.
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
The Board of Directors and Shareholders, Trimble Navigation Limited
We have audited the accompanying Consolidated Balance Sheets of Trimble
Navigation Limited as of January 2, 2004 and January 3, 2003, and the related
Consolidated Statements of Operations, Shareholders' Equity, and Cash Flows for
each of the three years in the period ended January 2, 2004. Our audits also
included the financial statement schedule listed in the index at Item 15(a)(2).
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 auditing standards generally accepted
in the 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 and schedule referred to above present
fairly, in all material respects, the consolidated financial position of Trimble
Navigation Limited at January 2, 2004 and January 3, 2003, and the consolidated
results of its operations and its cash flows for each of the three years in the
period ended January 2, 2004, in conformity with accounting principles generally
accepted in the United States. 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 1 to the consolidated financial statements, effective
December 29, 2001, the company adopted Statement of Financial Accounting
Standards No. 142, "Goodwill and Other Intangible Assets."
/s/ Ernst & Young LLP
January 23, 2004
Palo Alto, California
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
March 25, 2004
EXHIBIT INDEX
Exhibit
Number
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23.1 Consent of Ernst & Young LLP, independent auditors.
31.1 Certification of CEO pursuant to Section 302 of the Sarbanes-Oxley Act of
2002.
31.2 Certification of CFO pursuant to Section 302 of the Sarbanes-Oxley Act of
2002.
32.1 Certification of CEO pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.
32.2 Certification of CFO pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.