UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
10-K
T ANNUAL
REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE
ACT OF 1934
For the
fiscal year ended December 28,
2007
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)
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California
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94-2802192
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(State
or other jurisdiction of incorporation or organization)
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(I.R.S.
Employer Identification No.)
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935 Stewart Drive, Sunnyvale,
CA
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94085
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(Address
of principal executive offices)
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(Zip
Code)
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Registrant’s
telephone number, including area code: (408) 481-8000
Securities
registered pursuant to Section 12(b) of the Act:
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Title
of each class
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Name
of each exchange on which stock registered
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Common
Stock
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NASDAQ
Global Select Market
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Preferred
Share Purchase Rights
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NASDAQ
Global Select Market
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(Title
of Class)
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Securities
registered pursuant to Section 12(g) of the Act: NONE
Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in
Rule 405 of the Securities Act.
Indicate
by check mark if the registrant is not required to file reports pursuant to
Section 13 or Section 15(d) of the Exchange Act.
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.
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.T
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, or a non-accelerated filer.
Large
Accelerated Filer T
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Accelerated
Filer £
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Non-accelerated
Filer £
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Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act).
As of
June 29, 2007, the aggregate market value of the Common Stock held by
non-affiliates of the registrant was approximately $3.9 billion based on the
closing price as reported on the NASDAQ Global Select Market.
Indicate
the number of share outstanding of each of the issuer’s classes of common stock,
as of the latest practicable date.
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Class
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Outstanding
at February 21, 2008
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Common
stock, no par value |
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121,161,625 shares
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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 22, 2008 (the "Proxy Statement") are
incorporated by reference into Part III of this Annual Report on Form
10-K.
SPECIAL
NOTE ON FORWARD-LOOKING STATEMENTS
This
Annual Report on Form 10-K contains forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933 and Section 21E
of the Securities Exchange Act of 1934, which are subject to the "safe harbor"
created by those sections. The forward-looking statements regarding future
events and the future results of Trimble Navigation Limited (“Trimble” or “The
Company” or “We” or “Our” or “Us”) are based on current expectations, estimates,
forecasts, and projections about the industries in which Trimble operates and
the beliefs and assumptions of the management of Trimble. Discussions
containing such forward-looking statements may be found in "Management's
Discussion and Analysis of Financial Condition and Results of Operations." In
some cases, forward-looking statements can be identified by terminology such as
"may," "will," "should," "could," "predicts," "potential," "continue,"
"expects," "anticipates," "future," "intends," "plans," "believes," "estimates,"
and similar expressions. These forward-looking statements involve certain risks
and uncertainties that could cause actual results, levels of activity,
performance, achievements and events to differ materially from those implied by
such forward-looking statements, but are not limited to those discussed in this
Report under the section entitled “ Risk Factors” and elsewhere, and in other
reports Trimble files with the Securities and Exchange Commission (“SEC”),
specifically the most recent reports on Form 8-K and Form 10-Q, each as it
may be amended from time to time. These forward-looking statements are made as
of the date of this Annual Report on Form 10-K. We reserve the right to
update these statements for any reason, including the occurrence of material
events. The risks and uncertainties under the caption "Risks and
Uncertainties" contained herein, among other things, should be considered in
evaluating our prospects and future financial performance. We have attempted to
identify forward-looking statements in this report by placing an asterisk (*)
before paragraphs containing such material.
TRIMBLE
NAVIGATION LIMITED
2007
FORM 10-K ANNUAL REPORT
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PART
I
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Item
1
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5
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Item
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PART
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PART
III
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Item
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PART
IV
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84
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TRADEMARKS
Trimble,
EZ-Guide, EZ-Boom, Proliance, UtilityCenter, TrimWeb, TrimView, GEOManager,
Taskforce, Juno, GeoExplorer, AgGPS,
Spectra Precision, Autopilot, Fieldport, Copernicus, TrimTrac, EZ-Steer,
PocketCitation, Trimble Outdoors, and Force, among others are trademarks of
Trimble Navigation Limited and its subsidiaries. All other trademarks
are the property of their respective owners.
PART
I
Trimble
Navigation Limited, a California corporation (“Trimble” or “the Company” or “we”
or “our” or “us”), provides advanced positioning product solutions, typically to
commercial and government users. The principal application areas
include surveying, agriculture, construction, asset management, mapping and
mobile resource management. Our products provide benefits that can include lower
operational costs, higher productivity, and improved quality. Product examples
include agricultural and construction equipment, guidance systems, surveying
instruments, systems that track fleets of vehicles, and data collection systems
that enable the management of large amounts of geo-referenced information. In
addition, we also manufacture components for in-vehicle navigation and
telematics systems, and timing modules used in the synchronization of wireless
networks.
Our
products often combine knowledge of location or position with a wireless link to
provide a solution for a specific application. Position is provided
through a number of technologies including the Global Positioning System (GPS)
and systems that use laser or optical technologies to establish
position. Wireless communication techniques include both public
networks, such as cellular, and private networks, such as business band radio.
Our products are augmented by our software; this includes embedded firmware that
enables the positioning solution and application software that allows the
customer to make use of the positioning information.
We design
and market our own products. Our manufacturing strategy includes a combination
of in-house assembly and third party subcontractors. Our global operations
include major development, manufacturing or logistics operations in the United
States, Sweden, Germany, New Zealand, France, Canada, the United Kingdom, the
Netherlands, China, and India. Products are sold through dealers,
representatives, joint ventures, and other channels throughout the world. These
channels are supported by our sales offices located in more than 18
countries.
We began
operations in 1978 and incorporated in California in 1981. Our common stock has
been publicly traded on NASDAQ since 1990 under the symbol TRMB.
On
January 17, 2007, Trimble’s board of directors approved a 2-for-1 split of all
outstanding shares of the Company’s Common Stock, payable February 22, 2007 to
stockholders of record on February 8, 2007. All shares and per share information
presented have been adjusted to reflect the stock split on a retroactive basis
for all periods presented.
Technology
Overview
A
significant portion of our revenue is derived from applying Global Navigation
Satellite System (GNSS) technology to terrestrial applications. The
GNSS includes the GPS network of 24 orbiting U.S. based satellites and
associated ground control that is funded and maintained by the U. S. Government
and is available worldwide free of charge, and the Russian GLONASS satellite
based system. Both Europe and China have announced plans to establish future
operational satellite navigation based systems. GNSS positioning is based on a
technique that precisely measures distances from four or more
satellites. The satellites continuously transmit precisely timed
radio signals using extremely accurate atomic clocks. A GNSS receiver
measures distances from the satellites in view by determining the travel time of
a signal from the satellite to the receiver, and then uses those distances to
compute its position. Under normal circumstances, a stand-alone GNSS receiver is
able to calculate its position at any point on earth, in the earth's atmosphere,
or in lower earth orbit, to approximately 10 meters, 24 hours a day. Much better
accuracies are possible through a technique called “differential GNSS.” In
addition to providing position, GNSS provides extremely accurate time
measurement.
GNSS
accuracy is dependent upon the locations of the receiver and the number of GNSS
satellites that are above the horizon at any given time. Reception of GNSS
signals requires line-of-sight visibility between the satellites and the
receiver, which can be blocked by buildings, hills, and dense foliage. The
receiver must have a line of sight to at least four satellites to determine its
latitude, longitude, attitude (angular orientation), and time. The accuracy of
GNSS may also be limited by distortion of GNSS signals from ionospheric and
other atmospheric conditions.
Our GNSS
products are based on proprietary receiver technology. Over time, the advances
in positioning, wireless communications, and information technologies have
enabled us to add more capability to our products and thereby deliver more value
to our users. For example, the developments in wireless technology
and deployments of next generation wireless networks have enabled less expensive
wireless communications. These developments provide the efficient
transfer of position data to locations away from the positioning field device,
allowing the data to be accessed by more users, thereby increasing
productivity. This allows us to integrate visualization and design
software into our systems, as well as offers positioning services, all of which
make our customers more efficient at what they do.
Our laser
and optical products either measure distances and angles to provide a position
in three dimensional space or they provide highly accurate laser references from
which a position can be established. The key element of these
products is typically a laser, which is generally a commercially available laser
diode and a complex mechanical assembly. These elements are augmented
by software algorithms.
Business Strategy
Our
business strategy is developed around an analysis of several key
elements:
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Attractive markets – We
focus on underserved markets that offer potential for revenue growth,
profitability, and market
leadership.
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Innovative solutions that
provide significant benefits to our customers – We seek to apply
our technology to applications in which position data is important and
where we can create unique value by enabling enhanced productivity in the
field or field to back office. We look for opportunities in
which the rate of technological change is high and which have a
requirement for the integration of multiple technologies into a
solution.
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Distribution channels to best
access our markets – We select distribution channels that best
serve the needs of individual markets. These channels can include
independent dealers, direct sales, joint ventures, OEM sales, and
distribution alliances with key partners. We view international expansion
as an important element of our strategy and seek to develop international
channels.
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Business
Segments and Markets
We are
organized into four reporting segments encompassing our various applications and
product lines: Engineering and Construction, Field Solutions, Mobile Solutions
and Advanced Devices. Our segments are distinguished by the markets they serve.
Each segment consists of businesses which are responsible for product
development, marketing, sales, strategy, and financial
performance. The presentation of prior period’s segment operating
results has been conformed to our current segment presentation.
Engineering
and Construction
Products
in the Engineering and Construction segment improve productivity and accuracy
throughout the entire construction process including the initial survey,
planning, design, site preparation, and building phases. Our products
are intended to both improve the productivity of each phase, as well as
facilitate the entire process by improving information flow from one phase to
the next.
The
product solutions typically include multiple technologies. The elements of these
solutions may incorporate GPS, optical, laser, radio, or cellular
communications.
An
example of the customer benefits provided by our products is our GPS and robotic
optical surveying instruments which enable the surveyor to perform operations in
the field faster, more reliably than conventional surveying instruments and with
a smaller crew. Similarly, our construction machine guidance products
allow the operator to achieve the desired landform while eliminating stakeout
and reducing rework. These steps in the construction process can be readily
linked together with data collection modules to minimize the time and effort
required to maintain data accuracy throughout the entire construction
process.
We sell
and distribute our products in this segment through a global network of
independent dealers that are supported by Trimble personnel. This
channel is supplemented by relationships that create additional channel breadth
including our joint ventures with Caterpillar, Nikon, and private branding
arrangements with other companies.
We also
design and market handheld data collectors and data collection software for
field use by surveyors, contractors, and other professionals. These products are
sold directly through dealers and other survey manufacturers.
Competitors
in this segment are typically companies that provide optical, laser, or GPS
positioning products. Our principal competitors are Topcon Corporation, and
Leica Geosystems which was purchased by Hexagon. Price points in this
segment range from less than $1,000 for certain laser systems to approximately
$100,000 for a high-precision, three-dimensional, machine control
system.
Representative
products sold in this segment include:
Trimble S6 Total Station - The
Trimble S6 total station is a technologically advanced optical surveying system.
Its advanced servo motors make the S6 total station fast, silent, and precise,
allowing surveyors to measure points and collect data in the field efficiently
and productively. The S6 total station offers unique new Trimble technologies
that enable cable-free operation, longer battery life, and accuracy assurance,
among many other features. Its detachable Trimble CU controller is utilized to
effectively collect, display, and manage field data.
Trimble VX Spatial Station –
Trimble VX™ Spatial
Station is an advanced positioning system that combines optical, 3D scanning,
and video capabilities—Trimble VISION™ technology—to measure objects in 3D to
produce 2D and 3D data sets for spatial imaging projects. The Trimble
VX Spatial Station enables users to blend extremely accurate ground-based
information with airborne data to provide comprehensive datasets for use in the
geospatial information industry.
SPS Site Positioning Solutions
– The Trimble Site
Positioning Solutions family increases the productivity of construction
professionals and supervisors during site preparation, layout and grade checking
by simplifying workflows, eliminating unnecessary steps, and providing
intelligent data management between the field and the office, creating time
savings by providing data updates to all members of the team.
GCS Family of Grade Control Systems –
Grade control systems meet construction contractors' needs with
productivity-enhancing solutions for earthmoving, site prep, and roadwork. The
Trimble GCS family provides upgrade options that deliver earthmoving contractors
the flexibility to select a system that meets their daily needs today, and later
add on to meet their changing needs. For example, a single control system such
as the GCS300 can provide for low-cost point of entry into grade control, and
over time can be upgraded to the GCS400 dual sensor system or to the full 3D
GCS900 Grade Control System.
Spectra Precision Laser Portable
Tools – Our Spectra Precision® Laser portfolio includes a
broad range of laser based tools for the interior, drywall and ceilings, HVAC,
and mechanical contractor. Designed to replace traditional methods of
measurement and leveling for a wide range of interior construction applications,
our laser tools are easy to learn and use. Our Spectra Precision Laser product
portfolio includes rotating lasers for horizontal leveling and vertical
alignment, as well as laser pointers and a laser based distance measuring
devices. They are available through independent and national construction supply
houses both in the U.S. and in Europe.
Proliance Software -
Proliance®
Software allows infrastructure-intensive organizations to optimize the
Plan-Build-Operate project lifecycle for complex capital projects, construction
and real estate programs, and extensive facility portfolios. The Proliance
Software was designed for large building owner/operators, real estate
developers, and engineering-driven organizations managing $250 million or more
annually in new project construction or facility renovations.
Field
Solutions
Our Field
Solutions segment addresses the agriculture and geographic information system
(GIS) markets.
Our
agriculture products consist of manual and automated navigation guidance for
tractors and other farm equipment used in spraying, planting, cultivation, and
harvesting applications. The benefits to the farmer include faster machine
operation, higher yields, and lower consumption of chemicals than conventional
equipment. We also provide positioning solutions for leveling agricultural
fields in irrigation applications and aligning drainage systems to better manage
water flow in fields.
We use
multiple distribution channels to access the agricultural market, including
independent dealers and partners such as CNH Global. Competitors in this market
are either vertically integrated implement companies such as John Deere, or
agricultural instrumentation suppliers such as Raven, Hemisphere GPS and
Novariant.
Our GIS
product line is centered on handheld data collectors that gather information in
the field to be incorporated into GIS databases. Typically this information
includes features, attributes, and positions of fixed infrastructure and natural
resource assets. An example would be a utility company performing a survey of
its transmission poles including the age and condition of each telephone pole.
Our handheld unit enables this data to be collected and automatically stored
while confirming the location of the asset. The data can then be downloaded into
a GIS database. This stored data could later be used to navigate back to any
individual asset or item for maintenance or data update. Our mobile GIS
initiative goes one step further by allowing this information to be communicated
from the field worker to the back-office GIS database through the combination of
wireless technologies, as well as giving the field worker the ability to
download information from the database. This capability provides significant
advantages to users including improved productivity, accuracy, and access to the
information in the field.
Distribution
for GIS products is primarily through a network of independent dealers and
business partners, supported by Trimble personnel. Primary markets for our GIS
products and solutions include both governmental and commercial users. Users are
most often municipal governments and natural resource
agencies. Commercial users include utility companies. Competitors in
this market are typically survey instrument companies utilizing GPS technology
such as Topcon and Thales.
Approximate
product price points in this segment range from $3,000 for a GIS handheld unit
to $35,000 for a fully automated, farm equipment control system.
Representative
products sold within this segment include:
AgGPS EZ-Guide 500 – A lightbar
guidance system with a color LCD display, data logging functions and multiple
accuracy options. Lightbar systems provide GPS-based guidance for vehicle
operators to steer tractors, sprayers, fertilizer applicators, air seeders, and
large tillage tools that require consistent pass-to-pass accuracy to help save
fuel, increase efficiency, and reduce input costs for agricultural
operations.
AgGPS EZ-Boom 2010 - The AgGPS®
EZ-Boom® 2010
automated application control system is designed to help growers cut input costs
and reduce operator fatigue by providing precise automatic control of field
spraying applications. It works with the Trimble AgGPS EZ-Guide® Plus
lightbar guidance system, AgGPS
EZ-Steer® assisted
steering system, or the AgGPS Autopilot™
automated steering system.
AgGPS Autopilot System – A GPS-enabled,
agricultural navigation system that connects to a tractor’s steering system and
automatically steers the tractor along a precise path to within three
centimeters or less. This enables both higher machine productivity
and more precise application of seed and chemicals, thereby reducing costs to
the farmer.
AgGPS EZ-Steer System – A value added
assisted steering system, that when combined with the EZ-Guide Plus system,
automatically steers agricultural vehicles along a path within 20 centimeters or
less. This system installs in less than thirty minutes and is
designed to reduce gaps and overlaps in spraying, fertilizing, and other field
applications, as well as reduce operator fatigue.
GeoExplorer 2005 Series – Combines a GPS
receiver in a rugged handheld unit running industry standard Microsoft Windows
Mobile version 5.0, making it easy to collect and maintain data about objects in
the field. The GeoExplorer® series features three models
ranging in accuracy from subfoot to 1-3 meters, thereby allowing the user to
select the system most appropriate for their data collection and maintenance
needs.
Fieldport Software – Focuses
on automating field service processes, operational efficiency and profitability
for water and wastewater utility customers. Sales and distribution of
Fieldport® software
solutions are direct to the customer. A Fieldport software installation involves
a degree of integration and professional services.
Software – An enterprise suite
of modules oriented towards the electric and gas utilities market. Modules
include Outage Management (OMS), Mobile Asset Management, Data Collection,
Staking, Network Tracing & Isolation and Field-based GIS Editing. Sales and
distribution of UtilityCenter® software solutions are
direct to the customer. UtilityCenter software installation involves
a degree of integration and professional services.
Mobile
Solutions
Our
Mobile Solutions segment addresses gaps in technology for vehicles and mobile
workers by providing both hardware and software applications for managing
mobile work, mobile workers and mobile assets. The software is provided in both
a client server model or web-based. Our software is provided through
our hosted platform for a monthly subscription service fee or as a perpetual
license with annual maintenance and support fees.
Our
vehicle solutions typically include an onboard proprietary hardware
device consisting of a GPS receiver, business logic, sensor interface, and
a wireless modem. Our solution usually includes the communication service
from/to the vehicle to our data center and access over the internet to the
application software.
Our
mobile worker solutions include a rugged handset device and software designed to
automate service technician work in the field at the point of customer contact.
The mobile worker handset solutions also synchronize to a client
server at the back office for integration with other mission-critical business
applications.
Our
scheduling and dispatch solution is an enterprise software program to optimize
scheduling and routing of field service technicians. For dynamic capacity
management, our capacity planner, capacity controller, and intelligent appointer
modules round out this innovative service delivery automation
technology.
One
element of our market strategy targets opportunities in specific vertical
markets where we believe we can provide a unique value to the end-user by
tailoring our solutions for a particular industry. Sample markets include
Ready Mix Concrete, Direct Store Delivery and Public Safety. Our ready mix
concrete solution combines a suite of sensors with our in-vehicle wireless
platform providing fleets with updated vehicle status that requires no driver
interaction – referred to as “auto-status.”
We also
sell our vehicle solutions using a horizontal market strategy that
focuses on providing turnkey solutions to a broad range of service fleets that
span a large number of market segments. Here, we leverage our capabilities
without the same level of customization. These solutions are sold to the general
service fleets as well as transportation and distribution fleets both on a
direct basis and through dealer channels.
Our
enterprise strategy focuses on sales to large, enterprise accounts with more
than 1,000 vehicles or routes. Here, in addition to a Trimble-hosted solution,
we can also integrate our service directly into the customer’s IT
infrastructure, giving them improved control of their information. In this
market we sell directly to end-users. Sales cycles tend to be long due to field
trials followed by an extensive decision-making process.
Approximate
prices for hardware fall in the range of $400 to $3,000, while the monthly
subscription service fees range from approximately $25 to approximately $55,
depending on the customer service level.
We have
also entered into new markets by acquisitions of @Road Inc. (@Road),
Advanced Public Safety, Inc. (APS) and Visual Statement Inc. (VS). @Road
is a global provider of solutions designed to automate the management of mobile
resources and to optimize the service delivery process for customers across a
variety of industries. APS provides mobile and handheld
software products used by law enforcement, fire rescue and other public safety
agencies. VS provides desktop software and enterprise solutions for
collision and crime incident analysis, reporting and workflow
management.
Representative
products sold in this segment include:
Fleet Productivity - Our fleet
productivity solution offerings are comprised of the TrimWeb™, GeoManager™, and TrimView™ mobile platforms. The
TrimWeb and GeoManager systems provides different levels of service that run
from snapshots of fleet activity to real-time fleet dispatch capability via
access to the web-based platform through a secure internet connection. The
TrimWeb and GeoManager systems include truck communication service and computer
backbone support of the service. TrimView is sold to fleets where system
integration into back office applications is required for more robust
information flow.
Consumer Packaged Goods (CPG)-
This software solution operates in the Microsoft CE/Pocket or WinMobile
PC environment and addresses the pre-sales, delivery, route sales and full
service vending functions performed by mobile workers. Customers within
the CPG market purchase a combination of both license software and handheld
PCs. The software handles all communications from/to the mobile computer
as well as from/to the host and any other ERP or decision support
systems.
Field Service - Our
handset-based mobile solution enables technicians to maintain and repair
residential and commercial appliances, office equipment, medical equipment,
refrigeration equipment, fountain, and manufacturing equipment, and manage a
variety of service functions including wireless dispatching of service calls,
real-time messaging, spare parts management, and work order and workflow
management. Trimble Field Service customers have benefited from
increased service calls per day, an increase in first call resolution and
reduction in administrative workload to name a few results.
Public Safety – We provide a
suite of solutions for the public safety sector including our
PocketCitation(TM)
system
which is an electronic ticketing system enables law enforcement officers to
issue traffic citations utilizing a mobile handheld device. This system scans
the traffic offender’s driver’s license and automatically populates the
appropriate information into the citation. We provide a variation of this
solution which enables law enforcement officers to complete electronic traffic
citations within 30 seconds. Within this sector we also provide desktop software
which enables accident investigators and other public safety professionals to
reconstruct and simulate vehicle accidents.
Taskforce – The Taskforce® software solution provides
scheduling and dispatch solutions for field service technicians by synchronizing
the right human and physical resources required to optimize a field service
resource network. The system manages significant numbers of dynamic
scheduling resources in an unpredictable field service environment to increase
productivity, field force utilization and control-to-field employee
ratios.
Advanced
Devices
In the
first quarter of 2006, we began reporting a new segment called Advanced Devices
that combines our previously reported Component Technologies and Portfolio
segments. This was done in recognition of the small size of each of
the businesses comprising the new segment, relative to the total
company. Advanced Devices includes the product lines from our
Component Technologies, Applanix, Trimble Outdoors, and Military and Advanced
Systems (MAS) businesses. It is helpful to recognize that with the
exception of Trimble Outdoors and Applanix these businesses share several
characteristics: they are hardware centric, generally rely on OEM
distribution, and have products that can be utilized in a number of different
end-user markets.
Within
Component Technologies, we provide GPS-based components for applications that
require embedded position or time to market such as the telecommunications and
automotive industries where we supply modules, boards, custom integrated
circuits, or single application IP licenses to the customer according to the
needs of the application. Sales are made directly to original equipment
manufacturers (OEMs) and system integrators who incorporate our component into a
sub-system or a complete system-level product. Component Technologies has
developed GPS technologies which it is making available for license. These
technologies can run on certain digital signal processors (DSP) or
microprocessors, removing the need for dedicated GPS baseband signal processor
chips. We have a cooperative licensing deal with Nokia for Trimble's
Global Navigation Satellite System (GNSS) patents related to designated wireless
products and services involving location technologies, such as GPS, assisted GPS
or Galileo. The licensing agreement is exclusive to Nokia for the wireless
consumer product and service domain and includes sublicensing rights. In return,
Trimble receives a non-exclusive license to Nokia’s location-based patents for
use in Trimble's commercial products and services.
Our
Applanix business is a leading provider of advanced products and enabling
solutions that maximize productivity through mobile mapping and positioning to
professional markets worldwide. Applanix develops, manufactures, sells and
supports high-value, precision products that combine GPS with inertial sensors
for accurate measurement of position and attitude, flight management systems,
and scalable mobile mapping solutions used in airborne, land and marine
applications. Sales are made by our direct sales force to end users, systems
integrators, and OEMs, and through regional agents. Competitors include Leica,
IGI and Novatel.
Our MAS
business supplies GPS receivers and embedded modules that use the military’s GPS
advanced capabilities. The modules are principally used in aircraft navigation
and timing applications. Military products are sold directly to either the U.S.
Government or defense contractors. Sales are also made to authorized foreign end
users. Competitors in this market include Rockwell Collins, L3, and
Raytheon.
The
Trimble Outdoors business utilizes GPS-enabled cell phones to provide
information for outdoor recreational activities. Some of the recreational
activities include hiking, biking, backpacking, boating, and water sports.
Consumers purchase the Trimble Outdoors product through our wireless operator
partners which include Sprint-Nextel, SouthernLINC Wireless and Boost
Mobile.
Representative
products sold by this segment include:
Copernicus GPS Receiver–The
Copernicus® Receiver is a full-function GPS receiver in a
surface mount package the size of a postage stamp.
TrimTrac Locator - Our
TrimTrac® product is a
complete end user device that combines GPS functionality with global system for
mobile communications (GSM) wireless communications. In 2006, we added to the
TrimTrac locator full quad-band GSM and general packet radio service (GPRS)
support along with several important application level features. The
device is suitable for high volume personal vehicle and commercial asset
management applications that demand a low-cost locator.
Applanix POS/AV System - An integrated
GPS/inertial system for airborne surveying that measures aircraft position to an
accuracy of a few centimeters and aircraft attitude (angular orientation) to an
accuracy of 30 arc seconds or better. This system is typically interfaced to
large format cameras and scanning lasers for producing geo-referenced
topographic maps of the terrain.
Applanix DSS Digital Sensor System -
A digital airborne imaging solution that produces high-resolution
orthophoto map products. Certified by the USGS, the system consists
of a mapping grade digital camera that is tightly integrated with a
GNSS/Inertial system, flight management system (FMS) and processing software for
automatic geo-referencing of each pixel. The DSS can be used stand-alone or
integrated with other airborne mapping sensors such as LiDAR. The DSS
has been used by organizations worldwide in a variety of markets segments that
include ortho mapping, utility and transportation corridor mapping and rapid
response applications.
Force 524D Module - A dual
frequency, embedded GPS module that is used in a variety of military airborne
applications.
Trimble Outdoors Service -
Trip planning and navigation software that works with GPS-enabled cell
phones and conventional GPS receivers. This software enables consumers to
research specific trips on-line as part of trip pre-planning. In addition, users
are able to share outdoor and off-road experiences on-line with their friends
and family.
Acquisitions
and Joint Ventures
Our
growth strategy is centered on developing and marketing innovative and complete
value-added solutions to our existing customers, while also marketing them to
new customers and geographic regions. In some cases, this has led to partnering
with or acquiring companies that bring technologies, products or distribution
capabilities that will allow us to establish a market beach head, penetrate a
market more effectively, or develop solutions more quickly than if we had done
so solely through internal development. Since 1999, this has led us to form
three joint ventures and acquire twenty seven companies through fiscal
2007. Most of these acquisitions have been small, both in dollar
terms and in number of people added to the Trimble employee base. No
assurance can be given that our previous or future acquisitions will be
successful or will not materially adversely affect our financial condition or
operating results. We acquired the following companies or assets in
the last twelve months:
HHK
On
December 19, 2007, we acquired privately-held HHK Datentechnik GmbH of
Braunschweig, Germany, a provider of customized office and field software
solutions for the cadastral survey market in Germany. HHK’s
performance is reported under our Engineering and Construction business
segment.
UtilityCenter
On
November 8, 2007, we acquired the UtilityCenter assets from privately-held UAI,
Inc. of Huntsville, Alabama. UAI is a leading provider of Geographic Information
System (GIS)-based workflow automation and outage management solutions for
electric and gas utilities. UtilityCenter’s performance is reported
under our Field Solutions business segment.
Ingenieurbüro
Breining GmbH
On
September 19, 2007, we acquired Ingenieurbüro Breining GmbH of Kirchheim,
Germany, a provider of customized field data collection and office software
solutions for the survey market in Germany. Ingenieurbüro Breining’s performance
is reported under our Engineering and Construction business
segment.
@Road,
Inc.
On
February 16, 2007, we acquired publicly-held @Road, Inc. of Fremont,
California. @Road, Inc. is a global provider of solutions designed to
automate the management of mobile resources and to optimize the service delivery
process for customers across a variety of industries. @Road is reported within
our Mobile Solutions business segment. It significantly increases our
presence in the mobile resource management, or MRM, market which Trimble
believes is a large and fast growing market.
INPHO
GmbH
On
February 13, 2007, we acquired INPHO GmbH of Stuttgart,
Germany. INPHO is a leader in photogrammetry and digital surface
modeling for aerial surveying, mapping and remote sensing
applications. INPHO is reported within Trimble’s Engineering and
Construction segment.
Patents,
Licenses and Intellectual Property
We hold
approximately 791 U.S. issued and enforceable patents and approximately 119
non-U.S. patents, the majority of which cover GPS technology and other
applications such as optical and laser technology.
We prefer
to own the intellectual property used in our products, either directly or
through subsidiaries. From time to time we license technology from third
parties.
There are
approximately 233 trademarks registered to Trimble and its subsidiaries
including "Trimble," "AgGPS," “Spectra Precision,”
and "GeoExplorer," among others that are registered in the United States and
other countries. Additional trademarks are pending registration.
Sales
and Marketing
We tailor
the distribution channel to the needs of our products and regional markets
through a number of sales channel solutions around the world. We sell our
products worldwide primarily through dealers, distributors, and authorized
representatives, occasionally granting exclusive rights to market certain
products within specific countries. This channel is supported and supplemented
(where third party distribution is not available) by our regional sales offices
throughout the world. We also utilize distribution alliances, OEM relationships,
and joint ventures with other companies as a means to serve selected
markets.
During
fiscal 2007, sales to customers in the United States represented 50%, Europe
represented 27%, Asia Pacific represented 12%, and other regions represented 11%
of our total revenues. During fiscal 2006, sales to customers in the United
States represented 54%, Europe represented 25%, Asia Pacific represented 12%,
and other regions represented 9% of our total revenues. During fiscal 2005,
sales to customers in the United States represented 54%, Europe represented 25%,
Asia Pacific represented 11%, and other regions represented 10% of our total
revenues.
Warranty
The
warranty periods for our products are generally between 90 days and three years.
Selected military programs may require extended warranty periods up to 5.5 years
and certain Nikon products have a five-year warranty period. We support our GPS
products through a circuit board replacement program from locations in the
United Kingdom, Germany, Japan, and the United States. The repair and
calibration of our non-GPS products are available from company-owned or
authorized facilities. We reimburse dealers and distributors for all authorized
warranty repairs they perform.
While we
engage in extensive product quality programs and processes, including actively
monitoring and evaluating the quality of component suppliers, our warranty
obligation is affected by product failure rates, material usage, and service
delivery costs incurred in correcting a product failure. Should actual product
failure rates, material usage, or service delivery costs differ from the
estimates, revisions to the estimated warranty accrual and related costs may be
required.
Seasonality
of Business
* Our
individual segment revenues may be affected by seasonal buying patterns.
Typically the second fiscal quarter has been the strongest quarter for the
Company driven by the construction buying season.
Backlog
In most
of our markets, the time between order placement and shipment is
short. Orders are generally placed by customers on an as-needed
basis. In general, customers may cancel or reschedule orders without
penalty. For these reasons, we do not believe that orders are an
accurate measure of backlog and, therefore, we believe that backlog is not a
meaningful indicator of future revenues or material to understanding our
business.
Manufacturing
Manufacturing
of many of our GPS products is subcontracted to Flextronics International
Limited. We utilize Flextronics for all of our Component Technologies products,
and for some of our Construction and Survey, Field Solutions, and handheld
products. We also utilize Flextronics for our high-end GPS products and new
product introduction services. Flextronics is responsible for substantially all
material procurement, assembly, and testing. We continue to manage product
design through pilot production for the subcontracted products, and we are
directly involved in qualifying suppliers and key components used in all our
products. Our current contract with Flextronics continues in effect until either
party gives the other ninety days written notice.
We
manufacture laser and optics-based products at our plants in Dayton, Ohio;
Danderyd, Sweden; Jena and Kaiserslautern, Germany; and Shanghai, China. Some of
these products or portions of these products are also subcontracted to third
parties for assembly.
Our
design and manufacturing sites in Dayton, Ohio; Sunnyvale, California; Danderyd,
Sweden; Jena and Kaiserslautern, Germany are registered to ISO9001:2000,
covering the design, production, distribution, and servicing of all our
products.
Research
and Development
We
believe that our competitive position is maintained through the development and
introduction of new products that incorporate improved features, better
performance, smaller size and weight, lower cost, or some combination of these
factors. We invest substantially in the development of new products. We also
make significant investment in the positioning, communication, and information
technologies that underlie our products and will likely provide competitive
advantages.
Our
research and development expenditures, net of reimbursed amounts were $131.5
million for fiscal 2007, $103.8 million for fiscal 2006, and $84.3 million for
fiscal 2005.
* We
expect to continue investing in research and development with the goal of
maintaining or improving our competitive position, as well as the goal of
entering new markets.
Employees
As of
December 28, 2007, we employed 3,606 employees, including 36% in manufacturing,
28% in engineering, 24% in sales and marketing, and 12% in general and
administrative positions. Approximately 43% of employees are in locations
outside the United States.
Our
employees are not represented by unions except for those in
Sweden. Some employees in Germany are represented by works councils.
We also employ temporary and contract personnel that are not included in the
above headcount numbers. We have not experienced work stoppages or similar labor
actions.
Available
Information
The
Company’s annual reports on Form 10-K, quarterly reports on Form 10-Q, current
reports on Form 8-K, and all amendments to those reports are available free of
charge on the Company’s web site through www.trimble.com/investors.html, as
soon as reasonably practicable after such material is electronically filed with
or furnished to the Securities and Exchange Commission. Information contained on
our web site is not part of this annual report on Form 10-K.
In
addition, you may request a copy of these filings (excluding exhibits) at no
cost by writing or telephoning us at our principal executive offices at the
following address or telephone number:
Trimble
Navigation Limited
935
Stewart Drive, Sunnyvale, CA 94085
Attention:
Investor Relations Telephone: 408-481-8000
Executive
Officers
The
names, ages, and positions of the Company's executive officers as of February
21, 2008 are as follows:
Name
|
|
Age
|
|
Position
|
Steven
W. Berglund
|
|
56
|
|
President
and Chief Executive Officer
|
Rajat
Bahri
|
|
43
|
|
Chief
Financial Officer
|
Rick
Beyer
|
|
50
|
|
Vice
President
|
Bryn
A. Fosburgh
|
|
45
|
|
Vice
President
|
Mark
A. Harrington
|
|
52
|
|
Vice
President
|
Irwin
L. Kwatek
|
|
68
|
|
Vice
President and General Counsel
|
Julie
Shepard
|
|
50
|
|
Vice
President, Finance
|
Dennis
L. Workman
|
|
63
|
|
Vice
President and Chief Technical
Officer
|
Steven W.
Berglund – Steven Berglund has served as president and chief executive
officer of Trimble since March 1999. Prior to joining Trimble, Mr. Berglund was
president of Spectra Precision, a group within Spectra Physics AB, and a pioneer
in the development of laser systems. He spent 14 years at Spectra Physics in a
variety of senior leadership positions. In the early 1980s, Mr.
Berglund spent a number of years at Varian Associates in Palo Alto, where he
held a variety of planning and manufacturing roles. Mr. Berglund
began his career as a process engineer at Eastman Kodak in Rochester, New York.
He attended the University of Oslo and the University of Minnesota where he
received a B.S. in chemical engineering. He later received his M.B.A.
from the University of Rochester. In December 2007, Mr. Berglund was
elected to the board of directors of Verigy Ltd. a semiconductor test equipment
manufacturer.
Rajat
Bahri – Rajat Bahri joined Trimble as chief financial officer in January
2005. Prior to joining Trimble, Mr. Bahri served for more than 15
years in various capacities within the financial organization of several
subsidiaries of Kraft Foods, Inc. and General Foods Corporation. Most
recently, he served as the chief financial officer for Kraft Canada,
Inc. From June 2000 to June 2001 he served as chief financial officer
of Kraft Pizza Company. From 1997 to 2000, Mr. Bahri was Operations
Controller for Kraft Jacobs Suchard Europe. Mr. Bahri holds a Bachelor of
Commerce from the University of Delhi in 1985 and an M.B.A. from Duke University
in 1987. In 2005, he was elected to the board of STEC, Inc., a memory storage
manufacturer.
Rick Beyer
– Rick Beyer joined Trimble in March 2004 as president of Trimble Mobile
Solutions and in May 2006, Mr. Beyer was appointed a vice president of
Trimble. In October 2007 his role was expanded to include
responsibility for a number of Trimble’s mobile solutions business divisions.
Prior to joining Trimble, Mr. Beyer held senior executive positions within the
wireless mobile solutions industry since 1987. Part of the original senior
executive team that launched Qualcomm's OmniTRAC's mobile satellite
communication solution, Mr. Beyer also held the positions of general manager at
Rockwell Collins, on-board computing division, from 1994 to 1995; executive vice
president of Norcom Networks from 1995 to 1999; president of Husky Technologies,
now part of Itronix, from 1999 to 2000; and CEO of TracerNet, which was acquired
by Trimble, from 2002 to 2004. Mr. Beyer holds a B.A. from Olivet College and
was Chairman of the Board at the college from 2000 to 2003. He was elected
Trustee Emeritus in 2007. Rick also served as a member of the Council of Board
Chairs for the Association of Governing Boards for Colleges and Universities
from 2002 to 2005.
Bryn A.
Fosburgh – Bryn Fosburgh joined
Trimble in 1994 as a technical service manager for surveying, mining, and
construction. In 1997, Mr. Fosburgh was appointed director of development for
the Company’s land survey business unit where he oversaw the development of
field and office software that enabled the interoperability of Trimble survey
products. From October 1999 to July 2002, he served as division vice president
of survey and infrastructure. From 2002 to 2005, Mr. Fosburgh served as vice
president and general manager of Trimble's Geomatics and Engineering business
area, with responsibility for all the division-level activities associated with
survey, construction, and infrastructure solutions. In January 2005, he was
appointed vice president and general manager of the Engineering and Construction
Division. In October 2007 his role was expanded to include a number
of divisions, including construction and agriculture, as well as a
responsibility for a number of corporate functions and geographical
regions. Prior to Trimble, he was a civil engineer with the Wisconsin
Department of Transportation responsible for coordinating the planning, data
acquisition, and data analysis for statewide GPS surveying projects in support
of transportation improvement projects. He has also held various engineering,
research and operational positions for the U.S. Army Corps of Engineers and
Defense Mapping Agency. Mr. Fosburgh received a B.S. in geology from the
University of Wisconsin in Green Bay in 1985 and an M.S. in civil engineering
from Purdue University in 1989.
Mark A.
Harrington – Mark Harrington joined Trimble in January 2004 as a vice
president, primarily responsible for strategy and business
development. In October 2007 his responsibilities were expanded to
include a number of divisions, including survey and mapping and geographical
information systems, as well as the responsibility for a number of corporate
functions and geographical regions. Prior to joining Trimble, Mr.
Harrington served as vice president of finance at Finisar Corporation and chief
financial officer for Cielo Communications, Inc., a photonics components
manufacturer, from February 1998 to September 2002, and Vixel Corporation, a
photonics manufacturer, from April 2003 to December 2003. His experience also
includes 11 years at Spectra-Physics where he served in a variety of roles
including vice president of finance for Spectra-Physics Lasers, Inc. and vice
president of finance for Spectra-Physics Analytical, Inc. Mr. Harrington began
his career at Varian Associates, Inc. where he held a variety of management and
individual positions in finance, operations and IT. Mr. Harrington received his
B.S. in Business Administration from the University of
Nebraska-Lincoln.
Irwin L.
Kwatek –
Irwin Kwatek has served as vice president and general counsel of Trimble since
November 2000. Prior to joining Trimble, Mr. Kwatek was vice
president and general counsel of Tickets.com, a ticketing service provider, from
May 1999 to November 2000. Prior to Tickets.com, he was engaged in
the private practice of law for more than six years. During his
career, he has served as vice president and general counsel to several publicly
held high-tech companies including Emulex Corporation, Western Digital
Corporation and General Automation, Inc. Mr. Kwatek received his
B.B.A. from Adelphi College in Garden City, New York and an M.B.A. from the
University of Michigan in Ann Arbor. He received his J.D. from Fordham
University in New York City in 1968.
Julie
Shepard –
Julie Shepard joined Trimble in December of 2006 as vice president of
finance, and was appointed principal accounting officer in May 2007. Ms.
Shepard brings with her over 20 years of experience in a broad range of finance
roles. She is responsible for Trimble's worldwide finance operations
including financial planning, accounting, and external
reporting. Prior to joining Trimble, Ms. Shepard served as vice
president of finance and corporate controller at Quantum Corporation, from 2005
to 2006, and prior to that, from 2004 to 2005, as an independent consultant to
Quantum Corporation. She was vice president of finance at Nishan
Systems from 2000 to 2003. Ms. Shepard began her career at Price
Waterhouse and is a Certified Public Accountant. She received a B.S from
California State University where she majored in Accounting.
Dennis L. Workman
– Dennis
Workman has served as vice president of various business divisions, currently
including advanced devices and Applanix since September 1999. He was
appointed Trimble’s chief technical officer in March 2006. From
1998 to 1999, Mr. Workman was senior director and chief technical officer of the
newly formed Mobile and Timing Technologies business group, also serving as
general manager of Trimble's Automotive and Timing group. In 1997, he
was director of engineering for Software & Component Technologies. Mr.
Workman joined Trimble in 1995 as director of the newly created Timing vertical
market. Prior to Trimble, Mr. Workman held various senior-level
technical positions at Datum Inc. During his nine year tenure at Datum, he held
the position of CTO. Mr. Workman received a B.S. in mathematics and
physics from St. Mary’s College in 1967 and an M.S. in electrical engineering
from the Massachusetts Institute of Technology in 1969.
RISKS AND
UNCERTAINTIES
You
should carefully consider the following risk factors, in addition to the other
information contained in this Form 10-K and in any other documents to which we
refer you in this Form 10-K, before purchasing our securities. The risks and
uncertainties described below are not the only ones we face.
Our
Inability to Accurately Predict Orders and Shipments May Subject Our Results of
Operations to Significant Fluctuations From Quarter to Quarter
We have
not been able in the past to consistently predict when our customers will place
orders and request shipments so that we cannot always accurately plan our
manufacturing requirements. As a result, if orders and shipments differ from
what we predict, we may incur additional expenses and build excess inventory,
which may require additional reserves and allowances. Accordingly, we have
limited visibility into future changes in demand and our results of operations
may be subject to significant fluctuations from quarter to
quarter.
Our
Operating Results in Each Quarter May Be Affected by Special Conditions, such as
Seasonality, Late Quarter Purchases, Weather, and Other Potential
Issues
Due in
part to the buying patterns of our customers, a significant portion of our
quarterly revenues occurs from orders received and immediately shipped to
customers in the last few weeks and days of each quarter, although our operating
expenses tend to remain fairly predictable. Engineering and construction
purchases tend to occur in early spring, and governmental agencies tend to
utilize funds available at the end of the government’s fiscal year for
additional purchases at the end of our third fiscal quarter in September of each
year. Concentrations of orders sometimes also occur at the end of our other two
fiscal quarters. Additionally, a majority of our sales force earns commissions
on a quarterly basis which may cause concentrations of orders at the end of any
fiscal quarter. It could harm our operating results if for any reason expected
sales are deferred, orders are not received, or shipments are delayed a few days
at the end of a quarter.
We
Are Dependent on a Specific Manufacturer and Assembler for Many of Our Products
and on Specific Suppliers of Critical Parts for Our Products
We are
substantially dependent upon Flextronics International Limited as our preferred
manufacturing partner for many of our GPS products. Under the agreement, we
provide to Flextronics a twelve-month product forecast and place purchase orders
with Flextronics at least thirty calendar days in advance of the scheduled
delivery of products to our customers depending on production lead time.
Although purchase orders placed with Flextronics are cancelable, the terms of
the agreement would require us to purchase from Flextronics all inventory not
returnable or usable by other Flextronics customers. Accordingly, if we
inaccurately forecast demand for our products, we may be unable to obtain
adequate manufacturing capacity from Flextronics to meet customers’ delivery
requirements or we may accumulate excess inventories, if such inventories are
not usable by other Flextronics customers. Our current contract with Flextronics
continues in effect until either party gives the other ninety days written
notice.
In
addition, we rely on specific suppliers for a number of our critical components.
We have experienced shortages of components in the past. Our current reliance on
specific or a limited group of suppliers involves several risks, including a
potential inability to obtain an adequate supply of required components and
reduced control over pricing. Any inability to obtain adequate deliveries or any
other circumstance that would require us to seek alternative sources of supply
or to manufacture such components internally could significantly delay our
ability to ship our products, which could damage relationships with current and
prospective customers and could harm our reputation and brand as well as our
operating results.
Our
Annual and Quarterly Performance May Fluctuate Which Could Negatively Impact Our
Operations and Our Stock Price
Our
operating results have fluctuated and can be expected to continue to fluctuate
in the future on a quarterly and annual basis as a result of a number of
factors, many of which are beyond our control. Results in any period could be
affected by:
·
|
changes
in market demand,
|
·
|
competitive
market conditions,
|
·
|
fluctuations
in foreign currency exchange rates,
|
·
|
the
cost and availability of
components,
|
·
|
the
mix of our customer base and sales
channels,
|
·
|
the
mix of products sold,
|
·
|
our
ability to expand our sales and marketing organization
effectively,
|
·
|
our
ability to attract and retain key technical and managerial employees,
and
|
·
|
general
global economic conditions.
|
In
addition, demand for our products in any quarter or year may vary due to the
seasonal buying patterns of our customers in the agricultural and engineering
and construction industries. The price of our common stock could decline
substantially in the event such fluctuations result in our financial performance
being below the expectations of public market analysts and investors, which are
based primarily on historical models that are not necessarily accurate
representations of the future.
Our
Gross Margin Is Subject to Fluctuation
Our gross
margin is affected by a number of factors, including product mix, product
pricing, cost of components, foreign currency exchange rates, and manufacturing
costs. For example, sales of Nikon-branded products generally have lower gross
margin as compared to our GPS survey products. Absent other factors, a shift in
sales towards Nikon-branded products would lead to a reduction in our overall
gross margin. A decline in gross margin could harm our results of operations and
financial condition.
We
Are Dependent on New Products and if we are Unable to Successfully Introduce
Them Into The Market Our Customer Base May Decline or Fail to Grow as
Anticipated
Our
future revenue stream depends to a large degree on our ability to bring new
products to market on a timely basis. We must continue to make significant
investments in research and development in order to continue to develop new
products, enhance existing products, and achieve market acceptance of such
products. We may incur problems in the future in innovating and introducing new
products. Our development stage products may not be successfully completed or,
if developed, may not achieve significant customer acceptance. If we were unable
to successfully define, develop and introduce competitive new products, and
enhance existing products, our future results of operations would be adversely
affected. Development and manufacturing schedules for technology products are
difficult to predict, and we might not achieve timely initial customer shipments
of new products. The timely availability of these products in volume and their
acceptance by customers are important to our future success. If we are unable to
introduce new products, if other companies develop similar technology products,
or if we do not develop compelling new products, the number of customers may not
grow as anticipated, or may decline, which could harm our operating
results.
We
Are Dependent on Proprietary Technology, which Could Result in Litigation that
Could Divert Significant Valuable Resources and Impair Our
Liquidity
Our
future success and competitive position is dependent upon our proprietary
technology, and we rely on patent, trade secret, trademark, and copyright law to
protect our intellectual property. The patents owned or licensed by us may be
invalidated, circumvented, and challenged. The rights granted under these
patents may not provide competitive advantages to us. Any of our pending or
future patent applications may not be issued within the scope of the claims
sought by us, if at all.
Others
may develop technologies that are similar or superior to our technology,
duplicate our technology or design around the patents owned by us. In addition,
effective copyright, patent, and trade secret protection may be unavailable,
limited or not applied for in certain countries. The steps taken by us to
protect our technology might not prevent the misappropriation of such
technology.
The value
of our products relies substantially on our technical innovation in fields in
which there are many current patent filings. We recognize that as new patents
are issued or are brought to our attention by the holders of such patents, it
may be necessary for us to withdraw products from the market, take a license
from such patent holders, or redesign our products. We do not believe any of our
products currently infringe patents or other proprietary rights of third
parties, but we cannot be certain they do not do so. In addition, the legal
costs and engineering time required to safeguard intellectual property or to
defend against litigation could become a significant expense of operations. Any
such litigation could require us to incur substantial costs and divert
significant valuable resources, including the efforts of our technical and
management personnel, which may impair our liquidity.
Investing
in and Integrating New Acquisitions Could be Costly and May Place a Significant
Strain on Our Management Systems and Resources
We have
recently acquired a number of companies, including @Road, and intend to continue
to acquire other companies. Acquisitions of companies entail numerous risks,
including:
·
|
potential
inability to successfully integrate acquired operations and products or to
realize cost savings or other anticipated benefits from
integration;
|
·
|
loss
of key employees of acquired
operations;
|
·
|
the
difficulty of assimilating geographically dispersed operations and
personnel of the acquired
companies;
|
·
|
the
potential disruption of our ongoing
business;
|
·
|
unanticipated
expenses related to acquisitions;
|
·
|
the
correct assessment of the relative percentages of in-process research and
development expense that can be immediately written off as compared to the
amount which must be amortized over the appropriate life of the
asset;
|
·
|
the
impairment of relationships with employees and customers of either an
acquired company or our own business;
and
|
·
|
the
potential unknown liabilities associated with acquired
business.
|
As a
result of such acquisitions, we have significant assets that include goodwill
and other purchased intangibles. The testing of these intangibles under
established accounting guidelines for impairment requires significant use of
judgment and assumptions. Changes in business conditions could require
adjustments to the valuation of these assets. In addition, losses incurred by a
company in which we have an investment may have a direct impact on our financial
statements or could result in our having to write-down the value of such
investment. Any such problems in integration or adjustments to the value of the
assets acquired could harm our growth strategy, and could be costly and place a
significant strain on our management systems and resources.
Our
Products May Contain Errors or Defects, which Could Result in Damage to Our
Reputation, Lost Revenues, Diverted Development Resources and Increased Service
Costs, Warranty Claims, and Litigation
We
warrant that our products will be free of defect for various periods of time,
depending on the product. In addition, certain of our contracts include epidemic
failure clauses. If invoked, these clauses may entitle the customer to return or
obtain credits for products and inventory, or to cancel outstanding purchase
orders even if the products themselves are not defective.
We must
develop our products quickly to keep pace with the rapidly changing market, and
we have a history of frequently introducing new products. Products and services
as sophisticated as ours could contain undetected errors or defects, especially
when first introduced or when new models or versions are released. In general,
our products may not be free from errors or defects after commercial shipments
have begun, which could result in damage to our reputation, lost revenues,
diverted development resources, increased customer service and support costs and
warranty claims and litigation.
We
Are Dependent on the Availability of Allocated Bands within the Radio Frequency
Spectrum
Our GNSS
technology is dependent on the use of satellite signals from space and on
terrestrial communication bands. International allocations of radio
frequency are made by the International Telecommunications Union (ITU), a
specialized technical agency of the United Nations. These allocations are
further governed by radio regulations that have treaty status and which may be
subject to modification every two to three years by the World Radio
Communication Conference. Each country also has regulatory authority
on how each band is used.
Any ITU
or local reallocation of radio frequency bands, including frequency band
segmentation or sharing of spectrum, may materially and adversely affect the
utility and reliability of our products. Many of our products use other radio
frequency bands, together with the GNSS signal, to provide enhanced GNSS
capabilities, such as real-time kinematic precision. The continuing availability
of these non-GNSS radio frequencies is essential to provide enhanced GNSS
products to our precision survey, agriculture and construction machine controls
markets. Any regulatory changes in spectrum allocation or in allowable operating
conditions could have a material adverse effect on our business, results of
operations, and financial condition.
We have
certain products, such as GPS RTK systems, and surveying and mapping systems
that use integrated radio communication technology requiring access to available
radio frequencies allocated to local government. Some bands are
experiencing congestion. In the US, the FCC announced that it will require
migration of radio technology from wideband to narrowband operations in these
bands. The rules require migration of users to narrowband channels by 2011. In
the meantime, congestion could cause FCC coordinators to restrict or refuse
licenses. An inability to obtain access to these radio frequencies by end users
could have a material adverse effect on our business, results of operations, and
financial condition.
Many
of Our Products Rely on GNSS technology, the GPS, and other Satellite Systems,
Which May Become Inoperable and Result in Lost Revenue
GNSS
technology, GPS satellites and their ground support systems are complex
electronic systems subject to electronic and mechanical failures and possible
sabotage. The GPS satellites currently in orbit were originally designed to have
lives of 7.5 years and are subject to damage by the hostile space environment in
which they operate. However, of the current deployment of 30 satellites in
place, some have already been in operation for more than 12 years. To repair
damaged or malfunctioning satellites is currently not economically feasible. If
a significant number of satellites were to become inoperable, there could be a
substantial delay before they are replaced with new satellites. A reduction in
the number of operating satellites may impair the current utility of the GPS
system and the growth of current and additional market
opportunities.
As the
only complete GNSS currently in operation, we are dependent on continued
operation of GPS. GPS is operated by the U. S. Government, which is
committed to maintenance and improvement of GPS; however if the policy were to
change, and GPS were no longer supported by the U. S. Government, or if user
fees were imposed, it could have a material adverse effect on our business,
results of operations, and financial condition.
Many of
our products also use signals from systems that augment GPS, such as the Wide
Area Augmentation System (WAAS) and National Differential GPS System (NDGPS).
Many of these augmentation systems are operated by the federal government and
rely on continued funding and maintenance of these systems. In addition, some of
our products also use satellite signals from the Russian Glonass System. Any
curtailment of the operating capability of these systems could result in
decreased user capability thereby impacting our markets.
The
European governments have begun development of an independent satellite
navigation system, known as Galileo. We have access to the preliminary signal
design, which is subject to change. Although an operational Galileo system is
several years away, if we are unable to develop a timely commercial product, it
could result in lost revenue which could harm our results of operations and
financial condition.
Our
Business is Subject to Disruptions and Uncertainties Caused by War or
Terrorism
Acts of
war or acts of terrorism, especially any directed at the GPS signals, could have
a material adverse impact on our business, operating results, and financial
condition. The threat of terrorism and war and heightened security and military
response to this threat, or any future acts of terrorism, may invoke a
redeployment of the satellites used in GPS or interruptions of the system. To
the extent that such interruptions result in delays or cancellations of orders,
or the manufacture or shipment of our products, it could have a material adverse
effect on our business, results of operations, and financial
condition.
We
Are Exposed to Fluctuations in Currency Exchange Rates and Although We Hedge
Against These Risks, Our Attempts to Hedge Could be Unsuccessful and Expose Us
to Losses
A
significant portion of our business is conducted outside the U.S., and as such,
we face exposure to movements in non-U.S. currency exchange rates. These
exposures may change over time as business practices evolve and could have a
material adverse impact on our financial results and cash flows. Fluctuation in
currency impacts our operating results.
Currently,
we hedge only those currency exposures associated with certain assets and
liabilities denominated in non-functional currencies. The hedging activities
undertaken by us are intended to offset the impact of currency fluctuations on
certain non-functional currency assets and liabilities. Our attempts to hedge
against these risks could be unsuccessful and expose us to losses.
Our
Debt Could Adversely Affect Our Cash Flow and Prevent Us from Fulfilling Our
Financial Obligations
On
February 16, 2007, we amended and restated our existing $200 million unsecured
revolving credit agreement to an aggregate availability of up to $300 million.
Our debt could have important consequences, such as:
·
|
requiring
us to dedicate a portion of our cash flow from operations and other
capital resources to debt service, thereby reducing our ability to fund
working capital, capital expenditures, and other cash
requirements;
|
·
|
increasing
our vulnerability to adverse economic and industry
conditions;
|
·
|
limiting
our flexibility in planning for, or reacting to, changes and opportunities
in, our industry, which may place us at a competitive disadvantage;
and
|
·
|
limiting
our ability to incur additional debt on acceptable terms, if at
all.
|
Additionally,
if we were to default under our amended credit agreement and were unable to
obtain a waiver for such a default, interest on the obligations would
accrue at an increased rate and the lenders could accelerate our
obligations under the amended credit agreement, however that acceleration
will be automatic in the case of bankruptcy and insolvency events of
default. Additionally, our subsidiaries that have guaranteed the amended
credit agreement could be required to pay the full amount of our
obligations under the amended credit agreement. Any such action on
the part of the lenders against us could harm our financial
condition.
We
May Not Be Able to Enter Into or Maintain Important Alliances
We
believe that in certain business opportunities our success will depend on our
ability to form and maintain alliances with industry participants, such as
Caterpillar, Nikon, and CNH Global. Our failure to form and maintain such
alliances, or the pre-emption of such alliances by actions of competitors or us,
will adversely affect our ability to penetrate emerging markets. If we
experience problems from current or future alliances it could harm our operating
results and we may not be able to realize value from any such strategic
alliances.
We
Face Competition in Our Markets Which Could Decrease Our Revenues and Growth
Rates or Impair Our Operating Results and Financial Condition
Our
markets are highly competitive and we expect that both direct and indirect
competition will increase in the future. Our overall competitive position
depends on a number of factors including the price, quality and performance of
our products, the level of customer service, the development of new technology
and our ability to participate in emerging markets. Within each of our markets,
we encounter direct competition from other GPS, optical and laser suppliers and
competition may intensify from various larger U.S. and non-U.S. competitors and
new market entrants, particularly from emerging markets such as China and India.
The competition in the future may, in some cases, result in price reductions,
reduced margins or loss of market share, any of which could decrease our
revenues and growth rates or impair our operating results and financial
condition. We believe that our ability to compete successfully in the future
against existing and additional competitors will depend largely on our ability
to execute our strategy to provide systems and products with significantly
differentiated features compared to currently available products. We may not be
able to implement this strategy successfully, and our products may not be
competitive with other technologies or products that may be developed by our
competitors, many of whom have significantly greater financial, technical,
manufacturing, marketing, sales and other resources than we do.
We
Are Subject to the Impact of Governmental and Other Similar Certifications and
Failure to Obtain the Requisite Certifications Could Harm Our Operating
Results
We market
certain products that are subject to governmental and similar certifications
before they can be sold. For example, CE certification for radiated emissions is
required for most GPS receiver and data communications products sold in the
European Union. An inability to obtain such certifications in a timely manner
could have an adverse effect on our operating results. Also, some of our
products that use integrated radio communication technology require product type
certification and some products require an end user to obtain licensing from the
FCC for frequency-band usage. These are secondary licenses that are subject to
certain restrictions. An inability or delay in obtaining such certifications or
changes to the rules by the FCC could adversely affect our ability to bring our
products to market which could harm our customer relationships and therefore,
our operating results. Any failure to obtain the requisite certifications could
also harm our operating results.
The
Volatility of Our Stock Price Could Adversely Affect Your Investment in Our
Common Stock
The
market price of our common stock has been, and may continue to be, highly
volatile. During fiscal 2007, our stock price ranged from $25.47 to $57.41, on a
post-split basis. We believe that a variety of factors could cause
the price of our common stock to fluctuate, perhaps substantially,
including:
·
|
announcements
and rumors of developments related to our business or the industry in
which we compete;
|
·
|
quarterly
fluctuations in our actual or anticipated operating results and order
levels;
|
·
|
general
conditions in the worldwide
economy;
|
·
|
acquisition
announcements;
|
·
|
new
products or product enhancements by us or our competitors;
and
|
·
|
developments
in patents or other intellectual property rights and
litigation;
|
·
|
developments
in our relationships with our customers and suppliers;
and
|
·
|
any
significant acts of terrorism against the United
States.
|
In
addition, in recent years the stock market in general and the markets for shares
of "high-tech" companies in particular, have experienced extreme price
fluctuations which have often been unrelated to the operating performance of
affected companies. Any such fluctuations in the future could adversely affect
the market price of our common stock, and the market price of our common stock
may decline.
Provisions
in Our Charter Documents and Under California Law Could Prevent or Delay a
Change of Control, which Could Reduce the Market Price of Our Common
Stock
Certain
provisions of our articles of incorporation, as amended and restated, our
bylaws, as amended and restated, and the California General Corporation Law may
be deemed to have an anti-takeover effect and could discourage a third party
from acquiring, or make it more difficult for a third party to acquire, control
of us without approval of our board of directors. These provisions could also
limit the price that certain investors might be willing to pay in the future for
shares of our common stock. Certain provisions allow the board of directors to
authorize the issuance of preferred stock with rights superior to those of the
common stock.
We have
adopted a Preferred Shares Rights Agreement, commonly known as a "poison pill."
The provisions described above, our poison pill and provisions of the California
General Corporation Law may discourage, delay or prevent a third party from
acquiring us.
|
Unresolved
Staff Comments.
|
None
The
following table sets forth the significant real property that we own or lease as
of February 21, 2008:
Location
|
|
Segment(s)
served
|
|
Size
in Sq. Feet
|
|
Commitment
|
Sunnyvale,
California
|
|
All
|
|
160,000
|
|
Leased,
expiring in 2012
3
buildings
|
Huber
Heights (Dayton), Ohio
|
|
Engineering
& Construction
Field
Solutions
Distribution
|
|
150,000
57,200
42,600
|
|
Owned,
no encumbrances
Leased,
expiring in 2011
Leased,
expiring in 2008
|
Westminster,
Colorado
|
|
Engineering
& Construction, Field Solutions
|
|
76,000
|
|
Leased,
expiring in 2013
|
Corvallis,
Oregon
|
|
Engineering
& Construction
|
|
20,000
38,000
|
|
Owned,
no encumbrances
Leased,
expiring in 2008
|
Richmond
Hill, Canada
|
|
Advanced
Devices
|
|
50,200
|
|
Leased,
expiring in 2010
|
Danderyd,
Sweden
|
|
Engineering
& Construction
|
|
93,900
|
|
Leased,
expiring in 2010
|
Christchurch,
New Zealand
|
|
Engineering
& Construction, Mobile Solutions, Field Solutions
|
|
65,000
|
|
Leased,
expiring in 2010
2
buildings
|
Fremont,
California (@Road)
|
|
Mobile
Solutions
|
|
102,544
|
|
Leased,
expiring in 2010
2
buildings
|
Chennai,
India
(@Road)
|
|
Mobile
Solutions
|
|
37,910
|
|
Leased,
expiring in 2009
|
In
addition, we lease a number of smaller offices around the world primarily for
sales and manufacturing functions. For financial information regarding
obligations under leases, see Note 10 of the Notes to the Consolidated Financial
Statements.
* We
believe that our facilities are adequate to support current and near-term
operations.
From time
to time, the Company is involved in litigation arising out of the ordinary
course of its business. There are no known claims or pending litigation expected
to have a material adverse effect on our business, results of operations, and
financial condition.
|
Submission
of Matters to a Vote of Security
Holders.
|
No
matters were submitted to a vote of security holders during the fourth quarter
of 2007.
PART
II
|
Market
for Registrant's Common Equity, Related Stockholder Matters and Issuer
Purchases of Equity Securities.
|
On
October 12, 2007, we issued 48,670 shares of our common stock to a warrantholder
pursuant to the exercise of warrants held by such warrantholder. The
holder of the warrants exercised the warrants on a cashless basis by
surrendering their right to purchase a portion of the shares of the common stock
based on a value of $40.06 per share, representing the average closing price of
our common stock on the ten-day period prior to the exercise date of October 9,
2007. In connection with the cashless exercise of the warrants, the
warrants were surrendered and no underwriting discounts or commissions were
paid. We offered and sold the common stock issued in connection with
these cashless exercise of warrants in reliance on the exemption from
registration for exchanges of securities with existing security holders by
virtue of Section 3(a)(9) of the Securities Act of 1933, as
amended.
Our
common stock is traded on the NASDAQ National Market under the symbol
"TRMB." The table below sets forth, during the periods indicated, the
high and low per share sale prices for our common stock as reported on the
NASDAQ National Market.
|
|
2007
|
|
|
2006
|
|
|
|
Sales
Price
|
|
|
Sales
Price
|
|
Quarter
Ended
|
|
High
|
|
|
Low
|
|
|
High
|
|
|
Low
|
|
First
quarter
|
|
$ |
57.41 |
|
|
$ |
25.47 |
|
|
$ |
22.53 |
|
|
$ |
17.51 |
|
Second
quarter
|
|
|
32.65 |
|
|
|
26.83 |
|
|
|
24.26 |
|
|
|
19.68 |
|
Third
quarter
|
|
|
41.33 |
|
|
|
32.24 |
|
|
|
25.55 |
|
|
|
21.29 |
|
Fourth
quarter
|
|
|
43.15 |
|
|
|
30.40 |
|
|
|
26.18 |
|
|
|
22.10 |
|
Stock
Repurchase Program
On
January 23, 2008, the Company announced that its board of directors has
authorized a stock repurchase program for up to $250 million, effective February
1, 2008. The timing and actual number of shares repurchased will
depend on a variety of factors including price, regulatory requirements, capital
availability, and other market conditions. The program does not require the
purchase of any minimum number of shares and may be suspended or discontinued at
any time without public notice.
As of
February 21, 2008, there were approximately 986 holders of
record of our common stock.
Dividend
Policy
We have
not declared or paid any cash dividends on our common stock during any period
for which financial information is provided in this Annual Report on
Form 10-K. At this time, we intend to retain future earnings, if any, to
fund the development and growth of our business and do not anticipate paying any
cash dividends on our common stock in the foreseeable future.
Under the
existing terms of our credit facility, we are allowed to pay dividends and
repurchase shares of our common stock in any twelve (12) month period, in an
aggregate amount equal to fifty percent (50%) of net income (plus to the extent
deducted in determining net income for such period, non-cash expenses in respect
of stock options) for the previous twelve month period. Also, we are
allowed to spend an additional $50 million to pay dividends and repurchase
shares if we are in compliance with our fixed charge coverage
ratio.
The
following selected consolidated financial data should be read in conjunction
with “Management’s Discussion and Analysis of Financial Condition and Results of
Operations” and our consolidated financial statements and related notes
appearing elsewhere in this annual report. Historical results are not
necessarily indicative of future results. In particular, because the results of
operations and financial condition related to our acquisitions are included in
our Consolidated Statements of Income and Consolidated Balance Sheets data
commencing on those respective acquisition dates, comparisons of our results of
operations and financial condition for periods prior to and subsequent to those
acquisitions are not indicative of future results. In February 2007
we acquired @Road, Inc. which significantly impacted the trends shown
below. Please refer to Note 4 to the Consolidated Financial
Statements for more information.
|
|
December
28,
|
|
|
December
29,
|
|
|
December
30,
|
|
|
December
31,
|
|
|
January
2,
|
|
As
of And For the Fiscal Years Ended
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
2004
|
|
(Dollar
in thousands, except per share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
$ |
1,222,270 |
|
|
$ |
940,150 |
|
|
$ |
774,913 |
|
|
$ |
668,808 |
|
|
$ |
540,903 |
|
Gross
margin
|
|
$ |
612,905 |
|
|
$ |
461,081 |
|
|
$ |
389,805 |
|
|
$ |
324,810 |
|
|
$ |
268,030 |
|
Gross
margin percentage
|
|
|
50.1 |
% |
|
|
49.0 |
% |
|
|
50.3 |
% |
|
|
48.6 |
% |
|
|
49.6 |
% |
Income
from continuing operations
|
|
$ |
117,374 |
|
|
$ |
103,658 |
|
|
$ |
84,855 |
|
|
$ |
67,680 |
|
|
$ |
38,485 |
|
Net
income
|
|
$ |
117,374 |
|
|
$ |
103,658 |
|
|
$ |
84,855 |
|
|
$ |
67,680 |
|
|
$ |
38,485 |
|
Per
common share (1):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income (1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
Basic
|
|
$ |
0.98 |
|
|
$ |
0.94 |
|
|
$ |
0.80 |
|
|
$ |
0.66 |
|
|
$ |
0.41 |
|
-
Diluted
|
|
$ |
0.94 |
|
|
$ |
0.89 |
|
|
$ |
0.75 |
|
|
$ |
0.62 |
|
|
$ |
0.38 |
|
Shares
used in calculating basic earnings per share (1)
|
|
|
119,280 |
|
|
|
110,044 |
|
|
|
106,432 |
|
|
|
102,326 |
|
|
|
95,010 |
|
Shares
used in calculating diluted earnings per share (1)
|
|
|
124,410 |
|
|
|
116,072 |
|
|
|
113,638 |
|
|
|
109,896 |
|
|
|
100,024 |
|
Cash
dividends per share
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
assets
|
|
$ |
1,539,359 |
|
|
$ |
983,477 |
|
|
$ |
749,265 |
|
|
$ |
657,975 |
|
|
$ |
553,083 |
|
Non-current
portion of long term debt and other non-current
liabilities
|
|
$ |
116,692 |
|
|
$ |
28,000 |
|
|
$ |
19,474 |
|
|
$ |
38,226 |
|
|
$ |
85,880 |
|
|
(1)
|
2-for-1
Stock Split - On January 17, 2007, Trimble’s board of directors approved a
2-for-1 split of all outstanding shares of the Company’s Common Stock,
payable February 22, 2007 to stockholders of record on February 8, 2007.
All shares and per share information presented has been adjusted to
reflect the stock split on a retroactive basis for all periods
presented.
|
|
Management's
Discussion and Analysis of Financial Condition and Results of
Operations
|
The
following discussion should be read in conjunction with the consolidated
financial statements and the related notes. The following discussion contains
forward-looking statements that reflect our plans, estimates and beliefs. Our
actual results could differ materially from those discussed in the
forward-looking statements. Factors that could cause or contribute to these
differences include, but are not limited to, those discussed below and those
listed under "Risks Factors."
EXECUTIVE
LEVEL OVERVIEW
Trimble’s
focus is on combining positioning technology with wireless communication and
application capabilities to create system-level solutions that enhance
productivity and accuracy for our customers. The majority of our markets are
end-user markets, including engineering and construction firms, governmental
organizations, public safety workers, farmers and companies who must manage
fleets of mobile workers and assets. In our Advanced Devices segment, we also
provide components to original equipment manufacturers to incorporate into their
products. In the end user markets, we provide a system that includes
a hardware platform that may contain software and customer support. Some
examples of our solutions include products that automate and simplify the
process of surveying land, products that automate the utilization of equipment
such as tractors and bulldozers, products that enable a company to manage its
mobile workforce and assets, and products that allow municipalities to manage
their fixed assets.
Solutions
targeted at the end-user make up a significant majority of our revenue. To
create compelling products, we must attain an understanding of the end users’
needs and work flow, and how location-based technology can enable that end user
to work faster, more efficiently, and more accurately. We use this knowledge to
create highly innovative products that change the way work is done by the
end-user. With the exception of our Mobile Solutions and Advanced Devices
segments, our products are generally sold through a dealer channel, and it is
crucial that we maintain a proficient global, third-party distribution
channel.
During
2007 we continued to execute our strategy with a series of actions that can be
summarized in four categories.
Reinforcing
our position in existing markets
* We
believe that our markets provide us with additional, substantial potential for
substituting our technology for traditional methods. In 2007, we continued to
develop new products and to strengthen our distribution channels in order to
expand our market opportunity. A number of new products such as the AgGPS EZ-Guide 500 system, Juno™ST handheld
computer, Spectra Precision GL412 and 422 grade lasers, and Trimble CCS900
Compaction Control System, strengthened our competitive position and created new
value for the user.
Extending
our position in existing markets through new product categories
* We are utilizing the
strength of the Trimble brand in our markets to expand our revenues by bringing
new products to existing users. In fiscal 2007, we introduced the Trimble
VX Spatial Station and a suite of interactive product training modules for the
engineering and construction industry.
Bringing
existing technology to new markets
* We
continue to reinforce our position in existing markets and position ourselves in
newer markets that will serve as important sources of future growth. Our efforts
in Asia Pacific, including China, India and Russia, and Europe, including
Eastern Europe, all reflected improving financial results, with the promise of
more in the future.
Entering
new market segments
* In
2007, we acquired @Road, a global provider of solutions designed to automate the
management of mobile resources and to optimize the service delivery process for
customers across a variety of industries, INPHO, a leader in photogrammetry and
digital surface modeling for aerial surveying, mapping and remote sensing
applications, Ingenieurbüro Breining, a provider of customized field data
collection and office software solutions for the cadastral survey market in
Germany. We also acquired UtilityCenter assets from UAI, Inc. which is a leading
provider of Geographic Information System (GIS)-based workflow automation and
outage management solutions for electric and gas utilities and HHK Datentechnik,
a provider of customized office and field software solutions for the cadastral
survey market in Germany.
CRITICAL
ACCOUNTING POLICIES AND ESTIMATES
Our
accounting policies are more fully described in Note 2 of the Notes to the
Consolidated Financial Statements. The preparation of financial statements and
related disclosures in conformity with accounting principles generally accepted
in the United States requires us to make judgments, assumptions, and estimates
that affect the amounts reported in the Consolidated Financial Statements and
accompanying Notes to the Consolidated Financial Statements. We consider the
accounting polices described below to be our critical accounting polices. These
critical accounting policies are impacted significantly by judgments,
assumptions, and estimates used in the preparation of the Consolidated Financial
Statements, and actual results could differ materially from the amounts reported
based on these policies.
Revenue
Recognition
We
recognize product revenue when persuasive evidence of an arrangement exists,
shipment has occurred, the fee is fixed or determinable, and collectibility is
reasonably assured. In instances where final acceptance of the product is
specified by the customer or is uncertain, revenue is deferred until all
acceptance criteria have been met.
Contracts
and/or customer purchase orders are used to determine the existence of an
arrangement. Shipping documents and customer acceptance, when applicable, are
used to verify delivery. We assess whether the fee is fixed or determinable
based on the payment terms associated with the transaction and whether the sales
price is subject to refund or adjustment. We assess collectibility based
primarily on the creditworthiness of the customer as determined by credit checks
and analysis, as well as the customer’s payment history.
Revenue
for orders is not recognized until the product is shipped and title has
transferred to the buyer. We bear all costs and risks of loss or damage to the
goods up to that point. Our shipment terms for U.S. orders and international
orders fulfilled from our European distribution center typically provide that
title passes to the buyer upon delivery of the goods to the carrier named by the
buyer at the named place or point. If no precise point is indicated by the
buyer, we may choose within the place or range stipulated where the carrier will
take the goods into carrier’s charge. Other shipment terms may provide that
title passes to the buyer upon delivery of the goods to the
buyer. Shipping and handling costs are included in the cost of goods
sold.
Revenue
to distributors and resellers is recognized upon shipment, assuming all other
criteria for revenue recognition have been met. Distributors and resellers do
not have a right of return.
Revenue
from purchased extended warranty and support agreements is deferred and
recognized ratably over the term of the warranty/support period.
We
present revenue net of sales taxes and any similar assessments.
We apply
Statement of Position (SOP) No. 97-2, “Software Revenue Recognition” to products
where the embedded software is more than incidental to the functionality of the
hardware. This determination requires significant judgment including a
consideration of factors such as marketing, research and development efforts and
any post-customer contract support (PCS) relating to the embedded
software.
Our
software arrangements generally consist of a perpetual license fee and PCS. We
have established vendor-specific objective evidence (VSOE) of fair value for our
PCS contracts based on renewal rates. The remaining value of the software
arrangement is allocated to the license fee using the residual
method. License revenue is primarily recognized when the software has
been delivered and there are no remaining obligations. Revenue from PCS is
recognized ratably over the term of the PCS agreement.
We apply
EITF Issue 00-3, "Application of AICPA Statement of Position 97-2 to
Arrangements That Include the Right to Use Software Stored on Another Entity's
Hardware" for hosted arrangements which the customer does not have the
contractual right to take possession of the software at any time during the
hosting period without incurring a significant penalty and it is not feasible
for the customer to run the software either on its own hardware or on a
third-party’s hardware. Subscription revenue related to our hosted arrangements
is recognized ratably over the contract period. Upfront fees for our hosted
solution primarily consist of amounts for the in-vehicle enabling hardware
device and peripherals, if any. For upfront fees relating to propriety hardware
where the firmware is more than incidental to the functionality of the hardware
in accordance with SOP No. 97-2, “Software Revenue Recognition,” we defer the
upfront fees at installation and recognize them ratably over the minimum service
contract period, generally one to five years. Product costs are also deferred
and amortized over such period.
In
accordance with EITF Issue 00-21, “Accounting for Revenue Arrangements with
Multiple Deliverables,” when a non-software 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 is met.
Allowance
for Doubtful Accounts and Sales Returns
Our
accounts receivable balance, net of allowance for doubtful accounts and sales
returns reserve, was $239.9 million as of December 28, 2007, as compared with
$177.1 million as of December 29, 2006. The allowance for doubtful accounts was
$5.2 million and $4.1 million as of December 28, 2007 and December 29, 2006,
respectively. We evaluate the collectibility of our trade accounts
receivable based on a number of factors such as age of the accounts receivable
balances, credit quality, historical experience, and current economic conditions
that may affect a customer’s ability to pay. In circumstances where we are aware
of a specific customer’s inability to meet its financial obligations to us, a
specific allowance for bad debts is estimated and recorded which reduces the
recognized receivable to the estimated amount we believe will ultimately be
collected. In addition to specific customer identification of potential bad
debts, bad debt charges are recorded based on our recent past loss history and
an overall assessment of past due trade accounts receivable amounts
outstanding.
A reserve
for sales returns is established based on historical trends in product return
rates experienced in the ordinary course of business. The reserve for sales
returns as of December 28, 2007 and December 29, 2006 were $1.7 million and
$859,000, respectively, for estimated future returns that were recorded as a
reduction of our accounts receivable and revenue. If the actual future returns
were to deviate from the historical data on which the reserve had been
established, our revenue could be adversely affected.
Inventory
Valuation
Our
inventories, net balance was $143.0 million as of December 28, 2007 compared
with $112.6 million as of December 29, 2006. Our inventory allowances as of
December 28, 2007 were $29.6 million, as compared with $28.6 million as of
December 29, 2006. Our inventories are stated at the lower of standard cost
(which approximates actual cost on a first-in, first-out basis) or
market. Adjustments to reduce the cost of inventory to its net
realizable value, if required, are made for estimated excess, obsolescence, or
impaired balances. Factors influencing these adjustments include
decline in demand, technological changes, product life cycle and development
plans, component cost trends, product pricing, physical deterioration, and
quality issues. If actual factors are less favorable than those projected by us,
additional inventory write-downs may be required.
Income
Taxes
Income
taxes are accounted for under the liability method whereby deferred tax assets
or liability account balances are calculated at the balance sheet date using
current tax laws and rates in effect for the year in which the differences are
expected to affect taxable income. A valuation allowance is recorded to reduce
the carrying amounts of deferred tax assets if it is more likely than
not such assets will not be realized.
Our
valuation allowance is attributable to, primarily, acquisition related Net
Operating Loss and Research and Development Credit carryforwards.
Management believes that it is more likely than not that we will not realize
these deferred tax assets, and, accordingly, a valuation allowance has been
provided for such amounts. When the tax attributes are utilized and
the valuation allowance is released, the benefit of the release of the valuation
allowance will be accounted for as a credit to goodwill rather than as a
reduction of the income tax provision.
Goodwill
and Purchased Intangible Assets
Goodwill
represents the excess of the purchase price over the fair value of the net
tangible and identifiable intangible assets acquired in a business combination.
Intangible assets resulting from the acquisitions of entities accounted for
using the purchase method of accounting are estimated by management based on the
fair value of assets received. Identifiable intangible assets are comprised of
distribution channels, patents, licenses, technology, acquired backlog and
trademarks. Identifiable intangible assets are being amortized over the
period of estimated benefit using the straight-line method and estimated useful
lives ranging from one to ten years with a weighted average useful life of 6.2
years. Goodwill is not subject to amortization, but is subject to at least an
annual assessment for impairment, applying a fair-value based
test.
Impairment
of Goodwill, Intangible Assets and Other Long-Lived Assets
We
evaluate goodwill, at a minimum, on an annual basis and whenever events and
changes in circumstances suggest that the carrying amount may not be
recoverable. The annual goodwill impairment testing is performed in the fourth
fiscal quarter of each year. Goodwill is reviewed for impairment
utilizing a two-step process. First, impairment of goodwill is tested at
the reporting unit level by comparing the reporting unit’s carrying amount,
including goodwill, to the fair value of the reporting unit. The
fair values of the reporting units are estimated using a discounted cash flow
approach. If the carrying amount of the reporting unit exceeds its fair
value, a second step is performed to measure the amount of impairment loss, if
any. In step two, the implied fair value of goodwill is calculated as the excess
of the fair value of a reporting unit over the fair values assigned to its
assets and liabilities. If the implied fair value of goodwill is less than the
carrying value of the reporting unit’s goodwill, the difference is recognized as
an impairment loss. Our evaluation resulted in no impairment of
goodwill.
Depreciation
and amortization of the intangible assets and other long-lived assets is
provided using the straight-line method over their estimated useful lives,
reflecting the pattern of economic benefits associated with these assets.
Changes in circumstances such as technological advances, changes to our business
model, or changes in the capital strategy could result in the actual useful
lives of intangible assets or other long-lived assets differing from initial
estimates. In those cases where we determine that the useful life of an asset
should be revised, the net book value in excess of the estimated residual value
will be expensed and the residual value is depreciated over its revised
remaining useful life. These assets are evaluated for impairment whenever events
or changes in circumstances indicate that the carrying amount of such assets may
not be recoverable based on their future cash flows. The estimated future cash
flows are based upon, among other things, assumptions about expected future
operating performance and may differ from actual cash flows. The assets
evaluated for impairment are grouped with other assets to the lowest level for
which identifiable cash flows are largely independent of the cash flows of other
groups of assets and liabilities. If the sum of the projected undiscounted cash
flows (excluding interest) is less than the carrying value of the assets, the
assets will be written down to the estimated fair value. No
indicators of impairment have been identified.
Warranty
Costs
The
liability for product warranties was $10.8 million as of December 28, 2007, as
compared with $8.6 million as of December 29, 2006. We accrue for warranty costs
as part of cost of sales based on associated material product costs, technical
support labor costs, and costs incurred by third parties performing work on our
behalf. Our expected future cost is primarily estimated based upon historical
trends in the volume of product returns within the warranty period and the cost
to repair or replace the equipment. The products sold are generally
covered by a warranty for periods ranging from 90 days to three years, and in
some instances up to 5.5 years.
While we
engage in extensive product quality programs and processes, including actively
monitoring and evaluating the quality of our component suppliers, our warranty
obligation is affected by product failure rates, material usage, and service
delivery costs incurred in correcting a product failure. Should actual product
failure rates, material usage, or service delivery costs differ from our
estimates, revisions to the estimated warranty accrual and related costs may be
required.
Stock
Compensation
Beginning
in fiscal 2006, we adopted Statement of Financial
Accounting Standards (SFAS) No. 123(R), “Share-Based Payment” (SFAS
123(R)), which requires the measurement and recognition of compensation expense
for all share-based payment awards made to our employees and directors,
including stock option and rights to purchase shares under stock participation
plans, based on estimated fair values. We adopted SFAS 123(R) using
the modified prospective application method, under which prior periods are not
revised for comparative purposes. Prior to fiscal 2006, we applied
Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to
Employees" (APB 25) and the disclosure provisions of SFAS No. 123, “Accounting
for Stock-Based Compensation” (SFAS 123). As a result, the Company’s
financial statements for fiscal 2006 include stock-based compensation expenses
that are not comparable to financial statements prior to fiscal
2006.
Stock-based
compensation expense recognized in the Company’s Consolidated Statements of
Income for the period includes compensation expense for awards granted prior to,
but not yet vested as of December 30, 2005 based on the grant date fair value
estimated in accordance with the provisions of SFAS 123 and compensation expense
for awards granted subsequent to December 30, 2005 based on the grant date fair
value estimated in accordance with the provisions of SFAS 123(R). The
fair value of rights to purchase shares under stock participation plans was
estimated using the Black-Scholes option-pricing model. For stock
options granted prior to October 1, 2005, the fair value was estimated at the
date of grant using the Black-Scholes option-pricing model. For stock
options granted on or after October 1, 2005, the fair value is estimated on the
date of grant using a binomial valuation model.
The
determination of fair value of share-based payment awards on the date of grant
using an option-pricing model is affected by our stock price as well as
assumptions regarding a number of highly complex and subjective
variables. These variables include our expected stock price
volatility over the term of the awards, actual and projected employee stock
option exercise behaviors, risk-free interest rates, and expected
dividends. In addition, the binomial model incorporates actual
option-pricing behavior and changes in volatility over the option’s contractual
term.
Beginning
in fiscal 2006, our expected stock price volatility for stock purchase rights is
based on implied volatilities of traded options on our stock and our expected
stock price volatility for stock options is based on a combination of our
historical stock price volatility for the period commensurate with the expected
life of the stock option and the implied volatility of traded
options. The use of implied volatilities was based upon the
availability of actively traded options on our stock with terms similar to our
awards and also upon our assessment that implied volatility is more
representative of future stock price trends than historical
volatility. However, because the expected life of our stock options
is greater than the terms of our traded options, we used a combination of our
historical stock price volatility commensurate with the expected life of our
stock options and implied volatility of traded options. Prior to
fiscal 2006, we used our historical stock price volatility in accordance with
SFAS 123 for purposes of our pro-forma information.
We
estimated the expected life of the awards based on an analysis of our historical
experience of employee exercise and post-vesting termination behavior considered
in relation to the contractual life of the options and purchase
rights. The risk-free interest rate assumption is based upon observed
interest rates appropriate for the expected term of the awards.
We do not
currently pay cash dividends on our common stock and do not anticipate doing so
in the foreseeable future. Accordingly, our expected dividend yield
is zero.
Because
stock-based compensation expense recognized in the Consolidated Statement of
Operations for fiscal 2007 and 2006 is based on awards ultimately expected to
vest, it has been reduced for estimated forfeitures. SFAS 123(R)
requires forfeitures to be estimated at the time of grant and revised, if
necessary, in subsequent periods if actual forfeitures differ from those
estimates. Forfeitures were estimated based on historical
experience.
If
factors change and we employ different assumptions in the application of SFAS
123(R) in future periods, the compensation expense that we record under SFAS
123(R) may differ significantly from what we have recorded in the current
period. In addition, valuation models, including the Black-Scholes
and binomial models, may not provide reliable measures of the fair values of our
stock-based compensation. Consequently, there is a risk that our
estimates of the fair values of our stock-based compensation awards on the grant
dates may bear little resemblance to the actual values realized upon the
exercise, expiration, early termination, or forfeiture of those stock-based
payments in the future. Certain stock-based payments, such as
employee stock options, may expire worthless or otherwise result in zero
intrinsic value as compared to the fair values originally estimated on the grant
date and reported in our financial statements. Alternatively, value
may be realized from these instruments that are significantly higher than the
fair values originally estimated on the grant date and reported in our financial
statements.
See Note
2 and Note 14 to the Consolidated Financial Statements for additional
information.
RECENT
BUSINESS DEVELOPMENTS
During
fiscal 2007, we acquired the following companies or assets, and results of their
operations have been combined in the results of our operations from the date of
the acquisition.
HHK
On
December 19, 2007, we acquired privately-held HHK Datentechnik GmbH of
Braunschweig, Germany, a provider of customized office and field software
solutions for the cadastral survey market in Germany. HHK’s
performance is reported under our Engineering and Construction business
segment.
UtilityCenter
On
November 8, 2007, we acquired the UtilityCenter assets from privately-held UAI,
Inc. of Huntsville, Alabama. UAI is a leading provider of Geographic Information
System (GIS)-based workflow automation and outage management solutions for
electric and gas utilities. UtilityCenter’s performance is reported
under our Field Solutions business segment.
Ingenieurbüro
Breining GmbH
On
September 19, 2007, we acquired Ingenieurbüro Breining GmbH of Kirchheim,
Germany, a provider of customized field data collection and office software
solutions for the survey market in Germany. Ingenieurbüro Breining’s performance
is reported under our Engineering and Construction business
segment.
@Road,
Inc.
On
February 16, 2007, we acquired publicly-held @Road, Inc. of Fremont,
California. @Road, Inc. is a global provider of solutions designed to
automate the management of mobile resources and to optimize the service delivery
process for customers across a variety of industries. @Road is reported within
our Mobile Solutions business segment. @Road significantly increases
our presence in the mobile resource management, or MRM, market which Trimble
believes is a large and fast growing market.
INPHO
GmbH
On
February 13, 2007, we acquired INPHO GmbH of Stuttgart,
Germany. INPHO is a leader in photogrammetry and digital surface
modeling for aerial surveying, mapping and remote sensing
applications. INPHO is reported within Trimble’s Engineering and
Construction segment.
RESULTS
OF OPERATIONS
Overview
The
following table is a summary of revenue, gross margin and operating income for
the periods indicated and should be read in conjunction with the narrative
descriptions below.
|
|
December 28,
|
|
|
December 29,
|
|
|
December 30,
|
|
Fiscal
Years Ended
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
(Dollars
in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
consolidated revenue
|
|
$ |
1,222,270 |
|
|
$ |
940,150 |
|
|
$ |
774,913 |
|
Gross
Margin
|
|
$ |
612,905 |
|
|
$ |
461,081 |
|
|
$ |
389,805 |
|
Gross
Margin %
|
|
|
50.1 |
% |
|
|
49.0 |
% |
|
|
50.3 |
% |
Total
consolidated operating income
|
|
$ |
178,267 |
|
|
$ |
135,366 |
|
|
$ |
124,944 |
|
Operating
Income %
|
|
|
14.6 |
% |
|
|
14.4 |
% |
|
|
16.1 |
% |
Basis
of Presentation
We have a
52-53 week fiscal year, ending on the Friday nearest to December 31, which for
fiscal 2007 was December 28, 2007. Fiscal 2007, 2006 and 2005 were
all 52-week years.
Revenue
In fiscal
2007, total revenue increased by $282.1 million, or 30%, to $1,222.3 million
from $940.2 million in fiscal 2006. The increase in fiscal 2007 was due to
stronger performances across all our operating segments. Engineering and
Construction revenue increased $106.2 million, or 17%; Field Solutions increased
$61.4 million, or 44%; Mobile Solutions increased $96.8 million, or 159%; and
Advanced Devices increased $17.7 million, or 17%, as compared to the
corresponding period in fiscal 2006. Revenue growth within these
segments was primarily driven by new products, a robust agricultural
environment, strong international growth, as well as the impact of acquisitions
of $97.8 million, partially offset by regional pockets of softness in the U.S.
markets.
In fiscal
2006, total revenue increased by $165.2 million, or 21%, to $940.2 million from
$774.9 million in fiscal 2005. The increase in fiscal 2006 was primarily due to
stronger performance across all our operating segments. The
Engineering and Construction, Field Solutions, Mobile Solutions and Advanced
Devices segments increased 21%, 9%, 93%, and 13% respectively, as compared to
fiscal 2005. Revenue growth within these segments was driven by new product
introductions, increased penetration of existing markets, and geographical
expansion. Mobile Solutions growth in particular benefited from the
prior year acquisitions. Overall, 2006 acquisitions impacted total
company revenue growth by approximately 2%.
* During
fiscal 2007, sales to customers in the United States represented 50%, Europe
represented 27%, Asia Pacific represented 12%, and other regions represented 11%
of our total revenues. During the 2006 fiscal year, sales to
customers in the United States represented 54%, Europe represented 25%, Asia
Pacific represented 12%, and other regions represented 9% of our total revenues.
During fiscal 2005, sales to customers in the United States represented 54%,
Europe represented 25%, Asia Pacific represented 11%, and other regions
represented 10% of our total revenues. We anticipate that sales to international
customers will continue to account for a major portion of our
revenues.
* No
single customer accounted for 10% or more of our total revenues in fiscal 2007,
2006, and 2005. It is possible, however, that in future periods the failure of
one or more large customers to purchase products in quantities anticipated by us
may adversely affect the results of operations.
Gross
Margin
Our gross
margin varies due to a number of factors including product mix, pricing,
distribution channel used, effects of production volumes, new product start-up
costs, and foreign currency translations.
In fiscal
2007, our gross margin increased by $151.8 million as compared to fiscal 2006
due to higher revenue, higher margin products, including software and
subscription revenue, and improved manufacturing utilization, partially offset
by an increase of $14.5 million in amortization of purchased intangibles
primarily due to the acquisition of @Road. Gross margin as a
percentage of total revenue was 50.1% in fiscal 2007 and 49.0% in fiscal 2006.
The increase in the gross margin percentage was driven primarily by a 2
percentage point increase due to higher margin products including software and
subscription revenue, offset by a decrease of 1 percentage point due to
increased amortization of purchased intangibles.
In fiscal
2006, our gross margin increased by $71.3 million as compared to fiscal 2005 due
to higher revenue and the success of higher margin products, including survey
and machine control products and higher subscription revenues. The
increase was partially offset by decreases due to the impact of the
reclassification of the Caterpillar Trimble Control Technologies (CTCT)
transactions of $18.1 million previously recorded in non-operating expenses,
amortization of software-related purchased intangibles of $5.2 million, and
stock-based compensation expense of $1.2 million that were not included in gross
margin during the same period in fiscal 2005. Gross margin as a
percentage of total revenues was 49.0% in fiscal 2006 and 50.3% in fiscal 2005.
The decrease in the gross margin percentage was driven primarily by a decrease
of 3 percentage points due to the CTCT impact, amortization of purchased
intangibles and stock-based compensation, offset by an increase of 2 percentage
points due to higher margin products and subscription revenues.
* Because
of potential product mix changes within and among the industry markets, market
pressures on unit selling prices, fluctuations in unit manufacturing costs,
including increases in component prices and other factors, current level gross
margin cannot be assured.
Operating
Income
Operating
income increased by $42.9 million for fiscal 2007 as compared to fiscal
2006. Operating income as a percentage of total revenue for fiscal
2007 was 14.6% as compared to 14.4% for fiscal 2006 due to higher revenue and
associated gross margin, and software and subscription revenue, partially offset
by additional amortization of purchased intangibles.
Operating
income increased by $10.4 million for fiscal 2006 as compared to fiscal 2005 due
to higher revenues and the success of higher margin products, offset by
decreases due to the impact of the reclassification of the CTCT transactions
previously recorded in non-operating expenses, and stock-based compensation
expense that was not included in the operating income during fiscal
2005.
Operating
income as a percentage of total revenue was 14.4% for fiscal 2006 compared to
16.1% in fiscal 2005. The decrease in operating
income was due to a 4 percentage point CTCT transaction reclassification impact,
amortization of purchased intangibles, increased acquisition expenses, and
stock-based compensation impact, partially offset by 2 percentage point increase
driven by gross margin expansion.
Results
by Segment
To
achieve distribution, marketing, production, and technology advantages in our
targeted markets, we manage our operations in the following four segments:
Engineering and Construction, Field Solutions, Mobile Solutions, and Advanced
Devices. Operating income (loss) equals net revenue less cost of sales and
operating expenses, excluding general corporate expenses, amortization of
purchased intangibles, in-process research and development expenses,
restructuring charges, non-operating income (expense), and income
taxes.
In the
first fiscal quarter of 2006, we combined the operating results of the former
Component Technologies and Portfolio Technologies segments and included the
combined operating results in the Advanced Devices segment. The change in
presentation was made in recognition of the small size of each of the businesses
relative to the total company. The presentation of prior periods’ segment
operating results has been changed to conform to our current segment
presentation.
The
following table is a breakdown of revenue and operating income by segment for
the periods indicated and should be read in conjunction with the narrative
descriptions below.
|
|
December 28,
|
|
|
December 29,
|
|
|
December 30,
|
|
Fiscal
Years Ended
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
(Dollars
in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Engineering
and Construction
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
$ |
743,291 |
|
|
$ |
637,118 |
|
|
$ |
524,461 |
|
Segment
revenue as a percent of total revenue
|
|
|
61 |
% |
|
|
68 |
% |
|
|
68 |
% |
Operating
income
|
|
$ |
174,177 |
|
|
$ |
136,157 |
|
|
$ |
117,993 |
|
Operating
income as a percent of segment revenue
|
|
|
23.4 |
% |
|
|
21.4 |
% |
|
|
22.5 |
% |
Field
Solutions
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
$ |
200,614 |
|
|
$ |
139,230 |
|
|
$ |
127,843 |
|
Segment
revenue as a percent of total revenue
|
|
|
16 |
% |
|
|
15 |
% |
|
|
16 |
% |
Operating
income
|
|
$ |
60,933 |
|
|
$ |
37,377 |
|
|
$ |
32,527 |
|
Operating
income as a percent of segment revenue
|
|
|
30.4 |
% |
|
|
26.8 |
% |
|
|
25.4 |
% |
Mobile
Solutions
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
$ |
157,673 |
|
|
$ |
60,854 |
|
|
$ |
31,481 |
|
Revenue
as a percent of total consolidated revenue
|
|
|
13 |
% |
|
|
6 |
% |
|
|
4 |
% |
Operating
income (loss)
|
|
$ |
12,517 |
|
|
$ |
2,550 |
|
|
$ |
(3,072 |
) |
Operating
income (loss) as a percent of segment revenue
|
|
|
7.9 |
% |
|
|
4.2 |
% |
|
|
(9.8 |
%) |
Advanced
Devices
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
$ |
120,692 |
|
|
$ |
102,948 |
|
|
$ |
91,128 |
|
Segment
revenue as a percent of total revenue
|
|
|
10 |
% |
|
|
11 |
% |
|
|
12 |
% |
Operating
income
|
|
$ |
17,276 |
|
|
$ |
10,084 |
|
|
$ |
13,212 |
|
Operating
income as a percent of segment revenue
|
|
|
14.3 |
% |
|
|
9.8 |
% |
|
|
14.5 |
% |
A
reconciliation of our consolidated segment operating income to consolidated
income before income taxes follows:
Fiscal
Years Ended
|
|
December 28,
2007
|
|
|
December 29,
2006
|
|
|
December 30,
2005
|
|
(In
thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated
segment operating income
|
|
$ |
264,903 |
|
|
$ |
186,168 |
|
|
$ |
160,660 |
|
Unallocated
corporate expense
|
|
|
(42,914 |
) |
|
|
(35,798 |
) |
|
|
(27,483 |
) |
Restructuring
charges
|
|
|
(3,025 |
) |
|
|
-- |
|
|
|
(278 |
) |
Amortization
of purchased intangible assets
|
|
|
(38,585 |
) |
|
|
(13,074 |
) |
|
|
(6,855 |
) |
In-process
research and development
|
|
|
(2,112 |
) |
|
|
(1,930 |
) |
|
|
(1,100 |
) |
Consolidated
operating income
|
|
|
178,267 |
|
|
|
135,366 |
|
|
|
124,944 |
|
Non-operating
income (expense), net
|
|
|
5,489 |
|
|
|
12,726 |
|
|
|
(156 |
) |
Consolidated
income before income taxes
|
|
$ |
183,756 |
|
|
$ |
148,092 |
|
|
$ |
124,788 |
|
Engineering
and Construction
Engineering
and Construction revenues increased by $106.2 million, or 17%, while segment
operating income increased by $38.0 million, or 28%, for fiscal 2007 as compared
to fiscal 2006. The revenue growth was driven by all business units within the
segment, strong international markets, acquisitions made during the last twelve
months and foreign exchange gains. Segment operating income increased
as a result of higher revenue and increased sales of higher margin products
including software revenue and operating expense control.
Engineering
and Construction revenues increased by $112.7 million, or 21%, while segment
operating income increased by $18.2 million, or 15%, for fiscal 2006 as compared
to fiscal 2005. The revenue growth was driven by the continued strength in
survey products as well as increased sales of machine control products,
aggressive marketing programs and geographic expansion. Segment operating income
increased as a result of higher revenues and increased sales of higher margin
products, partially offset by expenses related to CTCT transactions, and
stock-based compensation expense that were not present in fiscal
2005.
Field
Solutions revenues increased by approximately $61.4 million, or 44%, while
segment operating income increased by $23.6 million, or 63%, for fiscal year
2007 as compared to fiscal 2006. Revenue was driven primarily by the
introduction of new agricultural products and a robust agricultural market, both
in the U.S. and internationally. Operating income increased primarily
due to higher revenue and operating expense control.
Field
Solutions revenues increased by approximately $11.4 million, or 9%, while
segment operating income increased by $4.9 million, or 15%, for fiscal year 2006
as compared to fiscal 2005. Revenue increased primarily due to growth in our GIS
business. In GIS, growth was due to new products and a continuing
shift to a higher value, differentiated distribution
channel. Operating income increased primarily due to increased
revenue, partially offset by the inclusion of stock-based compensation that was
not present in fiscal 2005.
Mobile
Solutions revenues increased by $96.8 million, or 159%, while segment operating
income increased by $10.0 million, or 391%, for fiscal 2007 as compared to
fiscal 2006. Revenue grew due to increased subscription revenue due
primarily to the @Road acquisition. Operating income increased
primarily due to higher subscription revenue and associated gross
margin.
Mobile
Solutions revenues increased by $29.4 million, or 93%, while segment operating
income increased by $5.6 million, or 183%, for fiscal 2006 as compared to fiscal
2005. Revenue increased due to increased subscriber growth, an increase in
recurring subscription revenues, the benefit of acquisitions, and entry into new
vertical markets. Operating income increased primarily due to higher
subscription revenue and associated gross margin, partially offset by the
inclusion of stock-based compensation that was not present in fiscal
2005.
Advanced
Devices
Advanced
Devices revenues increased by $17.7 million, or 17%, and segment operating
income increased by $7.2 million, or 71%, for fiscal 2007 as compared to fiscal
2006. The increase in revenue was primarily driven by stronger performance in
our Component Technologies timing and embedded product
revenue. Operating income increased due to strong timing and embedded
product revenue, licensing revenue associated with a Nokia intellectual property
agreement signed in the third quarter of 2006, and strong operating expense
control.
Advanced
Devices revenues increased by $11.8 million, or 13%, while segment operating
income decreased by $3.1 million, or 24%, for fiscal 2006 as compared to fiscal
2005. The increase in revenue was primarily due to stronger performance in our
embedded and airborne products as well as licensing revenues associated with a
Nokia intellectual property agreement signed in the third quarter of fiscal
2006. Operating income decreased for fiscal 2006 due to sales of
lower gross margin products, a reduction in revenue in our Military and Advanced
Systems product line, increased costs related to the TrimTrac product line and
inclusion of stock-based compensation that were not present in the corresponding
periods of fiscal 2005, partially offset by stronger embedded and airborne
product revenue and intellectual property licensing
revenue.
Research
and Development, Sales and Marketing, and General and Administrative
Expenses
The
following table shows research and development (“R&D”), sales and marketing,
and general and administrative (“G&A”) expenses in absolute dollars and as a
percentage of total revenues for the fiscal years ended 2007, 2006,
and 2005 and should be read in conjunction with the narrative descriptions of
those operating expenses below.
Fiscal
Years Ended
|
|
December
28,
2007
|
|
|
December
29,
2006
|
|
|
December
30,
2005
|
|
(In
thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research
and development
|
|
$ |
131,468 |
|
|
|
11 |
% |
|
$ |
103,840 |
|
|
|
11 |
% |
|
$ |
84,276 |
|
|
|
11 |
% |
Sales
and marketing
|
|
|
186,495 |
|
|
|
15 |
% |
|
|
143,623 |
|
|
|
15 |
% |
|
|
120,215 |
|
|
|
15 |
% |
General
and administrative
|
|
|
92,572 |
|
|
|
8 |
% |
|
|
68,416 |
|
|
|
7 |
% |
|
|
52,137 |
|
|
|
7 |
% |
|
|
|
410,535 |
|
|
|
34 |
% |
|
|
315,879 |
|
|
|
34 |
% |
|
$ |
256,628 |
|
|
|
33 |
% |
Overall,
R&D, sales and marketing, and G&A expenses increased by approximately
$94.7 million in fiscal 2007 compared to fiscal 2006.
Research
and development expenses increased by $27.6 million in fiscal 2007 compared to
fiscal 2006 primarily due to the inclusion of expenses of $16.8 million from
acquisitions not applicable in the prior year, a $9.7 million increase in
compensation related expenses, and a $3.2 million increase due to foreign
currency exchange rates, partially offset by decreased consulting
fees. Cost of software developed for external sale subsequent to
reaching technical feasibility were not considered material and were expensed as
incurred.
Research
and development expenses increased by $19.6 million in fiscal 2006 as compared
to fiscal 2005 primarily due to the inclusion of expenses of $4.6 million from
acquisitions not applicable in the prior year, a $4.9 million increase in
compensation related expenses, a $2.6 million in stock-based compensation
expense not present in fiscal 2005, and a $2.3 million increase in R&D
materials, primarily due to compliance with the European lead free
initiative.
* Overall
research and development spending remained relatively constant at approximately
11% of revenues. We expect to continue to devote resources to the development of
new products and the enhancement of existing products. We believe that research
and development is critical to our strategic product development objectives and
that to leverage our leading technology and to meet the changing requirements of
our customers, we will need to fund investments in several development projects
in parallel.
Sales and
marketing expenses increased by $42.9 million in fiscal 2007 as compared to
fiscal 2006. The increase was primarily due to the inclusion of
expenses of $20.7 million from acquisitions not applicable in the prior period,
a $9.9 million increase in compensation-related expenses, a $4.3 million
increase due to foreign currency exchange rates and a $3.4 million increase in
marketing expenses. Spending overall remained relatively constant at
approximately 15% of revenues.
Sales and
marketing expenses increased by $23.4 million in fiscal 2006 as compared to
fiscal 2005. The increase was primarily due to the inclusion of
expenses of $7.5 million from acquisitions not applicable in the prior period,
an $8.0 million increase in compensation-related expenses, a $2.8 million in
stock-based compensation expense not present in fiscal 2005, and a $1.9 million
increase in customer trade show expenses due to increased size and attendance at
the shows.
* We
intend to continue to focus and expand our sales and marketing efforts across
all the geographies and markets we serve in order to increase market awareness
of our products and to better support our existing customers worldwide. Our
future growth will depend in part on the timely development and continued
viability of the markets in which we currently compete as well as our ability to
continue to identify and exploit new markets for our products.
General
and administrative expenses increased by $24.2 million in fiscal 2007 compared
to fiscal 2006 primarily due to the inclusion of expenses of $10.0 million from
acquisitions not applicable in the prior year, a $4.8 million increase in
compensation-related expenses, and a $5.4 million increase in tax and legal
fees. Spending overall was at approximately 8% of
revenues.
General
and administrative expenses increased by $16.3 million in fiscal 2006 compared
to fiscal 2005 primarily due to the inclusion of expenses of $4.3 million from
acquisitions not applicable in the prior year, a $3.9 million increase in
compensation-related expenses, and $6.0 million in stock-based compensation
expense not present in fiscal 2005.
Other
Operating Expenses
Restructuring
Charges
Included
in Other accrued liabilities on our Consolidated Balance Sheet is a
restructuring accrual of $1.3 million as of December 28, 2007. In
conjunction with the acquisition of @Road, we accrued $3.6 million for severance
and benefits. These restructuring costs were recorded in accordance
with EITF 95-3 as part of the purchase price with no impact on our Consolidated
Statements of Income. During fiscal 2007 we paid $2.3 million against
this restructuring accrual. The remaining restructuring accrual of
$1.3 million is expected to be settled by the first half of fiscal
2008.
Included
in our Consolidated Statements of Income for fiscal 2007 under “Restructuring
charges” is a restructuring cost of $3.0 million for charges associated with the
acceleration of vesting of employee stock options for certain terminated @Road
employees. Of the total amount, $1.4 million was settled in cash and
$1.6 million was recorded as Shareholder’s Equity.
There
were no restructuring charges recorded in fiscal 2006. Restructuring
charges of $0.3 million were recorded in fiscal 2005, primarily related to
office closure costs due to integration efforts of the Mensi
acquisition.
In-Process
Research and Development
We
recorded in-process research and development (IPR&D) expenses of $2.1
million, $1.9 million, and $1.1 million related to acquisitions made in fiscal
2007, 2006 and 2005 respectively. At the date of each acquisition,
the projects associated with the IPR&D efforts had not yet reached
technological feasibility and the research and development in process had no
alternative future uses. The value of the IPR&D was determined using a
discounted cash flow model similar to the income approach, focusing on the
income producing capabilities of the in-process technologies. Accordingly, the
value assigned to these IPR&D amounts were charged to expense on the
respective acquisition date of each of the acquired companies.
Amortization
of Purchased and Other Intangible Assets
|
|
December 28,
|
|
|
December 29,
|
|
|
December 30,
|
|
Fiscal
Years Ended
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
(in
thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost
of sales
|
|
$ |
19,778 |
|
|
$ |
5,353 |
|
|
$ |
165 |
|
Operating
expenses
|
|
|
18,966 |
|
|
|
7,906 |
|
|
|
6,855 |
|
Total
|
|
$ |
38,744 |
|
|
$ |
13,259 |
|
|
$ |
7,020 |
|
Total
amortization expense of purchased and other intangible assets was $38.7 million
in fiscal 2007, of which $19.8 million was recorded in cost of sales and $19.0
million was recorded in operating expenses. Total amortization
expense of purchased and other intangibles represented 3.2% of revenue in fiscal
2007, an increase of $25.5 million from fiscal 2006 when it represented 1.4% of
revenue. The increase was primarily due to the acquisition of certain technology
and patent intangibles as a result of acquisitions made in fiscal 2007,
primarily @Road and to a lesser extent, fiscal 2006 acquisition intangibles that
included a full year of amortization expense in fiscal 2007, but only partial
year amortization expense in fiscal 2006 due to the timing of the
acquisitions.
Total
amortization expense of purchased and other intangibles represented 1.4% of
revenue in fiscal 2006, an increase of $6.2 million from fiscal 2005 when it
represented 0.9% of revenue. The increase was primarily due to the acquisition
of certain technology and patent intangibles as a result of acquisitions made in
fiscal 2006 as well as fiscal 2005 acquisition intangibles that included a full
year of amortization expense in fiscal 2006, but only partial year amortization
expense in fiscal 2005 due to the timing of the acquisitions.
Non-operating
Income (Expense)
The
following table shows non-operating income (expense) for the periods indicated
and should be read in conjunction with the narrative descriptions of those
expenses below:
|
|
December 28,
|
|
|
December 29,
|
|
|
December 30,
|
|
Fiscal
Years Ended
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
(in
thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
income
|
|
$ |
3,502 |
|
|
$ |
3,799 |
|
|
$ |
836 |
|
Interest
expense
|
|
|
(6,602 |
) |
|
|
(558 |
) |
|
|
(2,331 |
) |
Foreign
exchange gain (loss)
|
|
|
(1,351 |
) |
|
|
1,719 |
|
|
|
1,022 |
|
Income
(expenses) for joint ventures, net
|
|
|
8,377 |
|
|
|
6,989 |
|
|
|
(291 |
) |
Other
income, net
|
|
|
1,563 |
|
|
|
777 |
|
|
|
608 |
|
Total
non-operating income (expense)
|
|
$ |
5,489 |
|
|
$ |
12,726 |
|
|
$ |
(156 |
) |
Total
non-operating income (expense) decreased by $7.2 million during fiscal 2007
compared with fiscal 2006. Of this decrease, $6.0 million was due to
higher interest expense due to an increase in debt associated with the @Road
acquisition, $3.1 million was due to a change in foreign currency transactions
due to fluctuations in the U.S. to Canadian and Euro currencies, and these
decreases were partially offset by increased profits from our CTCT joint
venture.
Total
non-operating income (expense) increased by $12.9 million during fiscal 2006
compared with fiscal 2005. Of this increase, $4.7 million was due to
higher interest income and lower interest expense as a result of interest income
earned on higher cash balances and debt repaid in fiscal 2005 and also a $0.7
million increase in foreign currency transaction gains. In addition,
expenses for joint ventures, net increased by $7.3 million due a $5.2 million
increase in income from joint ventures and the absence of $11.6 million of net
transfer pricing expense with CTCT that was included in fiscal 2005, but is now
included in operating income, partially offset by the recognition of a one-time
deferred gain on the CTCT joint venture of $9.3 million in fiscal
2005.
Income
Tax Provision
Our
effective income tax rate for fiscal years 2007, 2006 and 2005 was 36%, 30% and
32% respectively. The 2007 rate was greater than the U.S. federal
statutory rate of 35% due to impacts resulting from SFAS No. 123(R),
“Share-Based Payment.” The 2006 rate was less than the US federal statutory rate
primarily due to operations in foreign jurisdictions subject to an effective tax
rate lower than the U.S. and the Extraterritorial Income Exclusion (ETI)
deduction. The 2005 income tax rate was less than the U.S. federal statutory
rate, primarily due to the benefit from the repatriation of undistributed
foreign subsidiary earnings provided by the American Jobs Creation Act of
2004.
Litigation
Matters
* From
time to time, we are involved in litigation arising out of the ordinary course
of our business. There are no known claims or pending litigation that are
expected to have a material effect on our overall financial position, results of
operations, or liquidity.
OFF-BALANCE
SHEET ARRANGEMENTS
Other
than lease commitments incurred in the normal course of business (see
Contractual Obligation table below), we do not have any off-balance sheet
financing arrangements or liabilities, guarantee contracts, retained or
contingent interests in transferred assets, or any obligation arising out of a
material variable interest in an unconsolidated entity. We do not have any
majority-owned subsidiaries that are not included in the consolidated financial
statements. Additionally, we do not have any interest in, or relationship with,
any special purpose entities.
In the
normal course of business to facilitate sales of its products, we indemnify
other parties, including customers, lessors, and parties to other transactions
with the Company, with respect to certain matters. We have agreed to hold the
other party harmless against losses arising from a breach of representations or
covenants, or out of intellectual property infringement or other claims made
against certain parties. These agreements may limit the time within which an
indemnification claim can be made and the amount of the claim. In addition, we
have entered into indemnification agreements with its officers and directors,
and the Company’s bylaws contain similar indemnification obligations to our
agents.
It is not
possible to determine the maximum potential amount under these indemnification
agreements due to the limited history of prior indemnification claims and the
unique facts and circumstances involved in each particular agreement.
Historically, payments made by us under these agreements were not material and
no liabilities have been recorded for these obligations on the Consolidated
Balance Sheets as of December 28, 2007 and December 29, 2006.
LIQUIDITY
AND CAPITAL RESOURCES
As
of and for the Fiscal Year Ended
|
|
December 28,
2007
|
|
|
December 29,
2006
|
|
|
December 30,
2005
|
|
(dollars
in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
and cash equivalents
|
|
$ |
103,202 |
|
|
$ |
129,621 |
|
|
$ |
73,853 |
|
As
a percentage of total assets
|
|
|
6.7 |
% |
|
|
13.2 |
% |
|
|
9.9 |
% |
Total
debt
|
|
$ |
60,690 |
|
|
$ |
481 |
|
|
$ |
649 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
provided by operating activities
|
|
$ |
186,985 |
|
|
$ |
135,843 |
|
|
$ |
92,365 |
|
Cash
used in investing activities
|
|
$ |
(311,392 |
) |
|
$ |
(114,188 |
) |
|
$ |
(74,403 |
) |
Cash
provided by (used in) financing activities
|
|
$ |
103,816 |
|
|
$ |
34,162 |
|
|
$ |
(13,402 |
) |
Effect
of exchange rate changes on cash and cash equivalents
|
|
$ |
(5,828 |
) |
|
$ |
(49 |
) |
|
$ |
(2,579 |
) |
Net
increase (decrease) in cash and cash equivalents
|
|
$ |
(26,419 |
) |
|
$ |
55,768 |
|
|
$ |
1,981 |
|
Cash
and Cash Equivalents
As of
December 28, 2007, cash and cash equivalents totaled $103.2 million compared to
$129.6 million at December 29, 2006. We had debt of $60.7 million at
December 28, 2007 compared to $481,000 at December 29, 2006.
* Our
ability to continue to generate cash from operations will depend in large part
on profitability, the rate of collections of accounts receivable, our inventory
turns, and our ability to manage other areas of working capital.
* We
believe that our cash and cash equivalents, together with our revolving credit
facilities will be sufficient to meet our anticipated operating cash needs and
stock purchases under the stock repurchase program for at least the next twelve
months.
* We
anticipate that planned capital expenditures primarily for computer equipment,
software, manufacturing tools and test equipment, and leasehold improvements
associated with business expansion, will constitute a partial use of our cash
resources. Decisions related to how much cash is used for investing
are influenced by the expected amount of cash to be provided by
operations.
Operating
Activities
Cash
provided by operating activities was $187.0 million for fiscal 2007, as compared
to $135.8 million for fiscal 2006. This increase of $51.1 million was primarily
driven by an increase in net income before non-cash depreciation and
amortization and increases in deferred revenue and income taxes
payable. This was, partially offset by an increase in accounts
receivable due to increased revenue.
Cash
provided by operating activities was $135.8 million for fiscal 2006, as compared
to $92.4 million for fiscal 2005. This increase of $43.4 million was primarily
driven by an increase in net income before stock-based compensation expense and
associated excess tax benefits, with the remainder due to working capital
improvements in inventories and account receivables.
Investing
Activities
Cash used
in investing activities was $311.4 million for fiscal 2007, as compared to
$114.2 million for fiscal 2006. The increase was primarily
attributable to cash used for the @Road acquisition.
Cash used
in investing activities was $114.2 million in fiscal 2006, as compared to $74.4
million in fiscal 2005. The $39.8 million increase in spending was
due to an increase of $48.5 million in cash used for acquisitions, partially
offset by a decrease of $6.9 million in capital equipment
spending.
Financing
Activities
Cash
provided by financing activities was $103.8 million for fiscal 2007, as compared
to $34.2 million for fiscal 2006, primarily related to outstanding debt that was
incurred for the @Road acquisition.
Cash
provided by financing activities was $34.2 million for fiscal 2006 compared to
cash used of $13.4 million for fiscal 2005. The $47.6 million
improvement was primarily due to a $38.3 million decrease in repayment of net
debt and $8.8 million in excess tax benefits relating to stock-based
compensation upon the exercise of stock options which were not present in fiscal
2005.
Accounts
Receivable and Inventory Metrics
As
of
|
|
December 28, 2007
|
|
|
December 29,
2006
|
|
|
|
|
|
|
|
|
Accounts
receivable days sales outstanding
|
|
|
70 |
|
|
|
69 |
|
Inventory
turns per year
|
|
|
4.3 |
|
|
|
4.1 |
|
Accounts
receivable days of sales outstanding were relatively flat at 70 days as of
December 28, 2007, as compared to 69 days as of December 30, 2006 with a slight
increase due to a larger percentage of international business in the fourth
quarter of fiscal 2007. Our accounts receivable days of sales
outstanding are calculated based on ending accounts receivable, net, divided by
revenue for the fourth fiscal quarter, times 91 days. Our inventory
turns were at 4.3 for fiscal 2007 as compared to 4.1 for fiscal 2006 due to
operational efficiencies. Our inventory turnover is based on the
total cost of sales for the fiscal period over the average inventory for the
corresponding fiscal period.
Debt
At the
end of fiscal 2007, our total debt was comprised primarily of our term loan
related to the acquisition of @Road in the amount of approximately $60.7 million
as compared with approximately $481,000 at the end of fiscal 2006.
On July
28, 2005, we entered into a $200 million unsecured revolving credit agreement
(the 2005 Credit Facility) with a syndicate of 10 banks with The Bank of Nova
Scotia as the administrative agent. The funds available under the
2005 Credit Facility may be used for our general corporate purposes and up to
$25 million of the 2005 Credit Facility may be used for letters of
credit. We incurred a commitment fee when the 2005 Credit Facility
was not used. The commitment fee is not material to our results
during all periods presented.
On
February 16, 2007, the Company amended and restated its existing $200 million
unsecured revolving credit agreement with a syndicate of 11 banks with The Bank
of Nova Scotia as the administrative agent (the 2007 Credit Facility). Under the
2007 Credit Facility, the Company exercised the option in the existing credit
agreement to increase the availability under the revolving credit line by $100
million, for an aggregate availability of up to $300 million, and extended the
maturity date of the revolving credit line by 18 months, from July 2010 to
February 2012. Up to $25 million of the availability under the revolving
credit line may be used to issue letters of credit, and up to $20 million may be
used for swing line loans. In addition, during the first quarter of
fiscal 2007 the Company incurred a five-year term loan under the 2007 Credit
Facility in an aggregate principal amount of $100 million, which will mature
concurrently with the revolving credit line. The term loan will be repaid
in quarterly installments, with principal being amortized at the following
annual rates: year 1 at 10%, year 2 at 15%, year 3 at 15%, year 4 at 20%, year 5
at 20%, and the last quarterly payment to be made at maturity, together with a
final payment of 20%. The maximum leverage ratio under the 2007
Credit Facility is 3.00:1. The funds available under the new 2007
Credit Facility may be used by the Company for acquisitions, stock repurchases,
and general corporate purposes. For additional discussion of our
debt, see Note 9 of Notes to the Consolidated Financial Statements.
The
Company may borrow funds under the 2007 Credit Facility in U.S. Dollars or in
certain other currencies, and borrowings will bear interest, at the Company's
option, at either: (i) a base rate, based on the administrative agent's prime
rate, plus a margin of between 0% and 0.125%, depending on the Company's
leverage ratio as of its most recently ended fiscal quarter, or (ii) a
reserve-adjusted rate based on the London Interbank Offered Rate (LIBOR), Euro
Interbank Offered Rate (EURIBOR), Stockholm Interbank Offered Rate (STIBOR), or other
agreed-upon rate, depending on the currency borrowed, plus a margin of between
0.625% and 1.125%, depending on the Company's leverage ratio as of the most
recently ended fiscal quarter. The Company's obligations under the 2007 Credit
Facility are guaranteed by certain of the Company's domestic
subsidiaries.
The 2007
Credit Facility contains customary affirmative, negative and financial covenants
including, among other requirements, negative covenants that restrict the
Company's ability to dispose of assets, create liens, incur indebtedness,
repurchase stock, pay dividends, make acquisitions, make investments, enter into
mergers and consolidations and make capital expenditures, within certain
limitations, and financial covenants that require the maintenance of leverage
and fixed charge coverage ratios. The 2007 Credit Facility contains events of
default that include, among others, non-payment of principal, interest or fees,
breach of covenants, inaccuracy of representations and warranties, cross
defaults to certain other indebtedness, bankruptcy and insolvency events,
material judgments, and events constituting a change of control. Upon the
occurrence and during the continuance of an event of default, interest on the
obligations will accrue at an increased rate and the lenders may accelerate the
Company's obligations under the 2007 Credit Facility, however that acceleration
will be automatic in the case of bankruptcy and insolvency events of
default. As of December 28, 2007 we were in compliance with all
financial debt covenants.
CONTRACTUAL
OBLIGATIONS
The
following table summarizes our contractual obligations at December 28,
2007:
|
|
Payments
Due By Period
|
|
|
|
|
|
|
Less
than
|
|
|
2-3 |
|
|
4-5
|
|
|
More
than
|
|
|
|
Total
|
|
|
1
year
|
|
|
Years
|
|
|
years
|
|
|
5
years
|
|
(in
thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
debt including interest (1)
|
|
$ |
70,220 |
|
|
$ |
3,203 |
|
|
$ |
20,749 |
|
|
$ |
46,268 |
|
|
$ |
- |
|
Operating
leases
|
|
|
53,991 |
|
|
|
16,592 |
|
|
|
23,314 |
|
|
|
12,653 |
|
|
|
1,432 |
|
Other
purchase obligations and commitments
|
|
|
60,570 |
|
|
|
41,924 |
|
|
|
14,494 |
|
|
|
4,084 |
|
|
|
68 |
|
Total
|
|
$ |
184,781 |
|
|
$ |
61,719 |
|
|
$ |
58,557 |
|
|
$ |
63,005 |
|
|
$ |
1,500 |
|
(1) We
may borrow funds under the 2007 Credit Facility in U.S. Dollars or in certain
other currencies, and will bear interest, at our option, at either: (i) a base
rate, based on the administrative agent's prime rate, plus a margin of between
0% and 0.125%, depending on our leverage ratio as of its most recently ended
fiscal quarter, or (ii) a reserve-adjusted rate based on the London Interbank
Offered Rate (LIBOR), Euro Interbank Offered Rate (EURIBOR), Stockholm Interbank
Offered Rate (STIBOR) or other agreed-upon rate, depending on the currency
borrowed, plus a margin of between 0.625% and 1.125%, depending on our leverage
ratio as of the most recently ended fiscal quarter. Our obligations under the
2007 Credit Facility are guaranteed by certain of our domestic subsidiaries. We
estimate the interest to be 5.0% per annum.
Total
debt consists of term loans of $60.0 million under our credit facilities and
government loans of $0.7 million to foreign subsidiaries. (See Note 9 of the
Notes to the Consolidated Financial Statements for further financial information
regarding long-term debt)
Other
purchase obligations and commitments represent open non-cancelable purchase
orders for material purchases with our vendors. Purchase obligations exclude
agreements that are cancelable without penalty. Our pension obligation, which is
not included in the table above, is included in “Other current liabilities” and
“Other non-current liabilities” on our Consolidated Balance
Sheets. Additionally, as of December 28, 2007, we had acquisition
earn-outs of $7.6 million and holdbacks of $10.3 million recorded in “Other
current liabilities” and “Other non-current liabilities.” The maximum
remaining payments, including the $7.6 million and $10.3 million recorded, will
not exceed $71.5 million. The remaining earn-outs and holdbacks are
payable through 2010.
We
adopted FASB Interpretation No. 48, “Accounting for Uncertainty in Income
Taxes,” (FIN 48), on December 30, 2006. A total of $28.4 million,
including interests and penalties, represents the FIN 48 liability at December
28, 2007. At this time, we cannot make a reasonably reliable estimate
of the period of cash settlement with tax authorities regarding this
liability.
EFFECT
OF NEW ACCOUNTING PRONOUNCEMENTS
The
impact of recent accounting pronouncements is disclosed in Note 2 of the
Notes to Consolidated Financial Statements.
|
Quantitative
and Qualitative Disclosure about Market
Risk
|
We are
exposed to market risk related to changes in interest rates and foreign currency
exchange rates. We use certain derivative financial instruments to manage these
risks. We do not use derivative financial instruments for speculative purposes.
All financial instruments are used in accordance with policies approved by our
board of directors.
Market
Interest Rate Risk
Our cash
equivalents and short-term investments consisted primarily of money market funds
and certificate of deposits for fiscal 2007 and 2006. The main
objective of these instruments was safety of principal and liquidity while
maximizing return, without significantly increasing risk.
* Due to the short-term nature of our cash equivalents and short-term
investments, we do not anticipate any material effect on our portfolio due to
fluctuations in interest rates.
We are
exposed to market risk due to the possibility of changing interest
rates under our senior secured credit facilities. Our
credit facilities are comprised of an unsecured revolving credit agreement
with a maturity date of February 2012, and a five-year term loan which will
mature concurrently with the revolving credit line. We may borrow
funds under the revolving credit agreement in U.S. Dollars or in certain other
currencies, and borrowings will bear interest, at our option, at either: (i) a
base rate, based on the administrative agent's prime rate, plus a margin of
between 0% and 0.125%, depending on our leverage ratio as of its most recently
ended fiscal quarter, or (ii) a reserve-adjusted rate based on the London
Interbank Offered Rate (“LIBOR”), Euro Interbank Offered Rate (“EURIBOR”),
Stockholm Interbank Offered Rate (“STIBOR”), or
other agreed-upon rate, depending on the currency borrowed, plus a margin of
between 0.625% and 1.125%, depending on our leverage ratio as of the most
recently ended fiscal quarter.
As
of December 28, 2007, we did not have an outstanding balance on the
revolving credit lines and the worldwide outstanding principal balance on the
term loan was $60.0 million. A hypothetical 10% increase in
the three-month LIBOR rates could result in approximately $0.3 million annual
increase in interest expense on the existing principal balances.
*
The hypothetical changes and assumptions made above will be
different from what actually occurs in the future.
Furthermore, the computations do not anticipate actions that may
be taken by our management should the hypothetical market changes actually
occur over time. As a result, actual earnings effects in the future will differ
from those quantified above.
Foreign
Currency Exchange Rate Risk
We enter
into foreign exchange forward contracts to minimize the short-term impact of
foreign currency fluctuations on certain trade and inter-company receivables and
payables, primarily denominated in Australian, Canadian, Japanese, New Zealand,
South African and Swedish currencies, the Euro, and the British pound. These
contracts reduce the exposure to fluctuations in exchange rate movements as the
gains and losses associated with foreign currency balances are generally offset
with the gains and losses on the forward contracts. These instruments are marked
to market through earnings every period and generally range from one to three
months in original maturity. We do not enter into foreign exchange forward
contracts for trading purposes.
Foreign
exchange forward contracts outstanding as of December 28, 2007 and December 29,
2006 are summarized as follows (in thousands):
|
December 28,
2007
|
|
December 29,
2006
|
|
|
Nominal
Amount
|
|
Fair
Value
|
|
Nominal
Amount
|
|
Fair
Value
|
|
Forward
contracts:
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchased
|
|
$ |
(34,865 |
) |
|
$ |
325 |
|
|
$ |
(21,442 |
) |
|
$ |
201 |
|
Sold
|
|
$ |
34,946 |
|
|
$ |
(782 |
) |
|
$ |
38,579 |
|
|
$ |
(358 |
) |
* We do
not anticipate any material adverse effect on our consolidated financial
position utilizing our current hedging strategy.
TRIMBLE
NAVIGATION LIMITED
INDEX
TO FINANCIAL STATEMENTS
Consolidated
Balance Sheets at December 28, 2007 and December 29,
2006
|
|
42
|
|
|
|
Consolidated
Statements of Income for the fiscal years ended December 28, 2007,
December 29, 2006 and December 30, 2005
|
|
43
|
|
|
|
Consolidated
Statements of Shareholders' Equity for the fiscal years ended
December 28, 2007, December 29, 2006 and December 30,
2005
|
|
44
|
|
|
|
Consolidated
Statements of Cash Flows for the fiscal years ended December 28,
2007, December 29, 2006 and December 30, 2005
|
|
45
|
|
|
|
Notes
to Consolidated Financial Statements
|
|
46
|
|
|
|
Reports
of Ernst & Young LLP, Independent Registered Public Accounting
Firm
|
|
80
|
|
Financial
Statements and Supplementary Data
|
CONSOLIDATED
BALANCE SHEETS
|
|
December 28,
|
|
|
December 29,
|
|
|
|
2007
|
|
|
2006
|
|
(in
thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ASSETS
|
|
|
|
|
|
|
Current
assets:
|
|
|
|
|
|
|
Cash
and cash equivalents
|
|
$ |
103,202 |
|
|
$ |
129,621 |
|
Accounts
receivable, less allowance for doubtful accounts
of $5,221 and $4,063, and sales return reserve of $1,683 and $859 at
December 28, 2007 and December 29, 2006, respectively
|
|
|
239,884 |
|
|
|
177,054 |
|
Other
receivables
|
|
|
10,201 |
|
|
|
6,014 |
|
Inventories,
net
|
|
|
143,018 |
|
|
|
112,552 |
|
Deferred
income taxes
|
|
|
44,333 |
|
|
|
25,905 |
|
Other
current assets
|
|
|
15,661 |
|
|
|
13,026 |
|
Total
current assets
|
|
|
556,299 |
|
|
|
464,172 |
|
Property
and equipment, net
|
|
|
51,444 |
|
|
|
47,998 |
|
Goodwill
|
|
|
675,850 |
|
|
|
374,510 |
|
Other
purchased intangible assets, net
|
|
|
197,777 |
|
|
|
67,172 |
|
Other
non-current assets
|
|
|
57,989 |
|
|
|
29,625 |
|
Total
assets
|
|
$ |
1,539,359 |
|
|
$ |
983,477 |
|
|
|
|
|
|
|
|
|
|
LIABILITIES
AND SHAREHOLDERS' EQUITY
|
|
|
|
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
|
|
|
|
Current
portion of long-term debt
|
|
$ |
126 |
|
|
$ |
-- |
|
Accounts
payable
|
|
|
67,589 |
|
|
|
49,194 |
|
Accrued
compensation and benefits
|
|
|
55,133 |
|
|
|
47,006 |
|
Income
taxes payable
|
|
|
14,802 |
|
|
|
23,814 |
|
Deferred
revenue
|
|
|
49,416 |
|
|
|
28,060 |
|
Accrued
warranty expense
|
|
|
10,806 |
|
|
|
8,607 |
|
Deferred
income taxes
|
|
|
4,129 |
|
|
|
4,525 |
|
Other
accrued liabilities
|
|
|
47,851 |
|
|
|
24,973 |
|
Total
current liabilities
|
|
|
249,852 |
|
|
|
186,179 |
|
Non-current
portion of long-term debt
|
|
|
60,564 |
|
|
|
481 |
|
Non-current
deferred revenue
|
|
|
15,872 |
|
|
|
-- |
|
Deferred
income tax
|
|
|
47,917 |
|
|
|
21,633 |
|
Other
non-current liabilities
|
|
|
56,128 |
|
|
|
27,519 |
|
Total
liabilities
|
|
|
430,333 |
|
|
|
235,812 |
|
Commitments
and contingencies
|
|
|
|
|
|
|
|
|
Shareholders'
equity:
|
|
|
|
|
|
|
|
|
Preferred
stock no par value; 3,000 shares authorized; none
outstanding
|
|
|
-- |
|
|
|
-- |
|
Common
stock, no par value; 180,000 shares authorized; 121,596 and 111,718 shares
issued and outstanding at December 28, 2007 and December 29, 2006,
respectively
|
|
|
660,749 |
|
|
|
435,371 |
|
Retained
earnings
|
|
|
388,557 |
|
|
|
271,183 |
|
Accumulated
other comprehensive income
|
|
|
59,720 |
|
|
|
41,111 |
|
Total
shareholders' equity
|
|
|
1,109,026 |
|
|
|
747,665 |
|
Total
liabilities and shareholders' equity
|
|
$ |
1,539,359 |
|
|
$ |
983,477 |
|
See
accompanying Notes to the Consolidated Financial Statements.
CONSOLIDATED
STATEMENTS OF INCOME
|
|
December 28
|
|
|
December 29,
|
|
|
December 30,
|
|
Fiscal
Years Ended
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
(in
thousands, except per share amounts)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue (1)
|
|
$ |
1,222,270 |
|
|
$ |
940,150 |
|
|
$ |
774,913 |
|
Cost
of sales (1)
|
|
|
609,365 |
|
|
|
479,069 |
|
|
|
385,108 |
|
Gross
margin
|
|
|
612,905 |
|
|
|
461,081 |
|
|
|
389,805 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
Research
and development
|
|
|
131,468 |
|
|
|
103,840 |
|
|
|
84,276 |
|
Sales
and marketing
|
|
|
186,495 |
|
|
|
143,623 |
|
|
|
120,215 |
|
General
and administrative
|
|
|
92,572 |
|
|
|
68,416 |
|
|
|
52,137 |
|
Restructuring
charges
|
|
|
3,025 |
|
|
|
-- |
|
|
|
278 |
|
Amortization
of purchased intangible assets
|
|
|
18,966 |
|
|
|
7,906 |
|
|
|
6,855 |
|
In-process
research and development
|
|
|
2,112 |
|
|
|
1,930 |
|
|
|
1,100 |
|
Total
operating expenses
|
|
|
434,638 |
|
|
|
325,715 |
|
|
|
264,861 |
|
Operating
income
|
|
|
178,267 |
|
|
|
135,366 |
|
|
|
124,944 |
|
Non-operating
income (expense)
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
income
|
|
|
3,502 |
|
|
|
3,799 |
|
|
|
836 |
|
Interest
expense
|
|
|
(6,602 |
) |
|
|
(558 |
) |
|
|
(2,331 |
) |
Foreign
currency transaction gain (loss), net
|
|
|
(1,351 |
) |
|
|
1,719 |
|
|
|
1,022 |
|
Income
(expenses) for joint ventures, net
|
|
|
8,377 |
|
|
|
6,989 |
|
|
|
(291 |
) |
Other
income
|
|
|
1,563 |
|
|
|
777 |
|
|
|
608 |
|
Total
non-operating income (expense)
|
|
|
5,489 |
|
|
|
12,726 |
|
|
|
(156 |
) |
Income
before taxes
|
|
|
183,756 |
|
|
|
148,092 |
|
|
|
124,788 |
|
Income
tax provision
|
|
|
66,382 |
|
|
|
44,434 |
|
|
|
39,933 |
|
Net
income
|
|
$ |
117,374 |
|
|
$ |
103,658 |
|
|
$ |
84,855 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
earnings per share
|
|
$ |
0.98 |
|
|
$ |
0.94 |
|
|
$ |
0.80 |
|
Shares
used in calculating basic earnings per share
|
|
|
119,280 |
|
|
|
110,044 |
|
|
|
106,432 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
earnings per share
|
|
$ |
0.94 |
|
|
$ |
0.89 |
|
|
$ |
0.75 |
|
Shares
used in calculating diluted earnings per share
|
|
|
124,410 |
|
|
|
116,072 |
|
|
|
113,638 |
|
(1) Sales
to Caterpillar Trimble Control Technologies Joint Venture (CTCT) and
Nikon-Trimble Joint Venture (Nikon-Trimble) were $24.1 million, $22.3 million
and $9.1 million in fiscal 2007, 2006 and 2005, respectively, with associated
cost of sales of $17.0 million, $13.9 million and $4.0 million for fiscal 2007,
2006 and 2005, respectively. In addition, cost of sales associated
with CTCT net inventory purchases was $25.1 million and $19.5 million in fiscal
2007 and 2006, respectively. Prior to fiscal 2006, the transactions
with CTCT were included in Non-operating income (expense), net. See
Note 5 to these Consolidated Financial Statements regarding joint ventures for
further discussion.
See
accompanying Notes to the Consolidated Financial Statements.
CONSOLIDATED
STATEMENTS OF SHAREHOLDERS’ EQUITY
|
|
|
|
|
|
|
|
|
|
|
Accumulative
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
|
|
|
Total
|
|
|
|
Common stock
|
|
|
|
|
|
Retained
|
|
|
Comprehensive
|
|
|
Shareholders'
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Earnings
|
|
|
Income/(Loss)
|
|
|
Equity
|
|
(in
thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
at December 31, 2004
|
|
|
104,426 |
|
|
$ |
345,127 |
|
|
$ |
82,670 |
|
|
$ |
44,364 |
|
|
$ |
472,161 |
|
Components
of comprehensive income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income
|
|
|
|
|
|
|
|
|
|
|
84,855 |
|
|
|
|
|
|
|
84,855 |
|
Loss
on interest rate swap
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(106 |
) |
|
|
(106 |
) |
Unrealized
loss on investments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(34 |
) |
|
|
(34 |
) |
Foreign
currency translation adjustments, net of tax
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(24,690 |
) |
|
|
(24,690 |
) |
Total
comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
60,025 |
|
Issuance
of common stock in connection with acquisitions and joint venture,
net
|
|
|
20 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- |
|
Issuance
of common stock under employee plans and exercise of
warrants
|
|
|
3,374 |
|
|
|
24,582 |
|
|
|
|
|
|
|
|
|
|
|
24,582 |
|
Tax
benefit from stock option exercises
|
|
|
|
|
|
|
14,487 |
|
|
|
|
|
|
|
|
|
|
|
14,487 |
|
Balance
at December 30, 2005
|
|
|
107,820 |
|
|
$ |
384,196 |
|
|
$ |
167,525 |
|
|
$ |
19,534 |
|
|
$ |
571,255 |
|
Components
of comprehensive income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income
|
|
|
|
|
|
|
|
|
|
|
103,658 |
|
|
|
|
|
|
|
103,658 |
|
Unrealized
gain on investments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4 |
|
|
|
4 |
|
Foreign
currency translation adjustments, net of tax
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
21,709 |
|
|
|
21,709 |
|
Total
comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
125,371 |
|
Adjustment
to initially apply FASB Statement No. 158, net of tax
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(136 |
) |
|
|
(136 |
) |
Issuance
of common stock in connection with acquisitions, net
|
|
|
52 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- |
|
Issuance
of common stock under employee plans and exercise of
warrants
|
|
|
3,846 |
|
|
|
26,781 |
|
|
|
|
|
|
|
|
|
|
|
26,781 |
|
Stock
based compensation
|
|
|
|
|
|
|
12,705 |
|
|
|
|
|
|
|
|
|
|
|
12,705 |
|
Tax
benefit from stock option exercises
|
|
|
|
|
|
|
11,689 |
|
|
|
|
|
|
|
|
|
|
|
11,689 |
|
Balance
at December 29, 2006
|
|
|
111,718 |
|
|
$ |
435,371 |
|
|
$ |
271,183 |
|
|
$ |
41,111 |
|
|
$ |
747,665 |
|
Components
of comprehensive income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income
|
|
|
|
|
|
|
|
|
|
|
117,374 |
|
|
|
|
|
|
|
117,374 |
|
Unrealized
loss on investments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(33 |
) |
|
|
(33 |
) |
Foreign
currency translation adjustments, net of tax
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
18,655 |
|
|
|
18,655 |
|
Unrecognized
actuarial loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(13 |
) |
|
|
(13 |
) |
Total
comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
135,983 |
|
Issuance
of common stock in connection with acquisitions, net
|
|
|
5,876 |
|
|
|
163,678 |
|
|
|
|
|
|
|
|
|
|
|
163,678 |
|
Issuance
of common stock under employee plans and exercise of
warrants
|
|
|
4,002 |
|
|
|
31,913 |
|
|
|
|
|
|
|
|
|
|
|
31,913 |
|
Stock
based compensation
|
|
|
|
|
|
|
15,099 |
|
|
|
|
|
|
|
|
|
|
|
15,099 |
|
Tax
benefit from stock option exercises
|
|
|
|
|
|
|
14,637 |
|
|
|
|
|
|
|
|
|
|
|
14,637 |
|
Minority
interest
|
|
|
|
|
|
|
51 |
|
|
|
|
|
|
|
|
|
|
|
51 |
|
Balance
at December 28, 2007
|
|
|
121,596 |
|
|
$ |
660,749 |
|
|
$ |
388,557 |
|
|
$ |
59,720 |
|
|
$ |
1,109,026 |
|
See
accompanying Notes to the Consolidated Financial Statements.
CONSOLIDATED
STATEMENTS OF CASH FLOWS
|
|
December 28,
|
|
|
December 29,
|
|
|
December 30,
|
|
Fiscal
Years Ended
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
(In
thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
flows from operating activities:
|
|
|
|
|
|
|
|
|
|
Net
income
|
|
$ |
117,374 |
|
|
$ |
103,658 |
|
|
$ |
84,855 |
|
Adjustments
to reconcile net income to net cash provided
by operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation
|
|
|
17,212 |
|
|
|
13,523 |
|
|
|
10,671 |
|
Amortization
|
|
|
38,744 |
|
|
|
13,259 |
|
|
|
7,020 |
|
Provision
for doubtful accounts
|
|
|
1,410 |
|
|
|
163 |
|
|
|
(502 |
) |
Amortization
of debt issuance cost
|
|
|
218 |
|
|
|
180 |
|
|
|
1,270 |
|
|