UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(X) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934 (Fee Required)
For the fiscal year ended December 31, 1996
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934 (No Fee Required)
For the transition period from _____________ to ___________
Commission File Number: 0-18645
TRIMBLE NAVIGATION LIMITED
(Exact name of Registrant as specified in its charter)
California 94-2802192
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
645 North Mary Avenue Sunnyvale, CA 94088
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including are code: (408) 481-8000
Securities registered pursuant to Section 12(b) of the Act: NONE
Securities registered pursuant to Section 12(g) of the Act:
Common Stock
(Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]
The aggregate market value of the registrant's Common Stock held by
non-affiliates of the registrant was approximately $295,526,860 as of March 16,
1997, based upon the closing sale price of the common stock on the Nasdaq
National Market for that date.
There were 22,303,914 shares of the registrant's Common Stock issued
and outstanding as of March 16, 1997.
DOCUMENTS INCORPORATED BY REFERENCE
Items 10, 11, 12 and 13 of Part III incorporate information by reference
from the registrant's Proxy Statement for the Annual Meeting of Shareholders to
be held on May 15, 1997. Except with respect to information specifically
incorporated by reference into this Form 10-K, the Proxy Statement is not deemed
to be filed as a part here of.
<PAGE>
This report contains forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934. Actual results could differ materially from those
indicated in the forward-looking statements as a result of the risk factors set
forth in or incorporated by reference into, this report. The Company has
attempted to identify forward-looking statements in this report by placing an
asterisk (*) in the left-hand margin of paragraphs containing such material.
PART I
Item 1.Business
General
Trimble Navigation Limited, a California corporation (Trimble or the
Company), is a leader in the emerging markets for satellite-based navigation,
position and communication data products using the Global Positioning System
(GPS). Trimble designs, manufactures and markets electronic products which
determine precise geographic location. The Company's principal products, which
utilize substantial amounts of proprietary software and firmware, are integrated
systems for collecting, analyzing and displaying position data in forms
optimized for specific end-user applications.
* Trimble has defined and currently addresses a number of markets for its
GPS products: surveying, mapping, marine navigation, mining and construction,
tracking systems, aviation, military systems, OEM and cellular and mobile
computing platforms. The Company has developed or is developing systems for
seismology, geographic information systems, delivery fleets, buses, ships,
airplanes, automobiles and hand-held units. Trimble anticipates that additional
markets will emerge to make use of the highly accurate position data obtainable
from GPS.
Background
* Precise determination of locations both on and above the earth's surface
is a fundamental requirement for many human activities. For example, position
data isused for navigation on land, sea, and air, and to conduct surveys and
draw maps. Previous technologies have limited users to simultaneous
determination of only two dimensions--latitude and longitude--while altitude and
time required separate measurements with different equipment. GPS technology
provides users with all of these measurements using one instrument. GPS is a
system of 24 orbiting Navstar satellites established and funded by the U.S.
Government. On April 27, 1995, GPS was declared to have achieved Full
Operational Capability by the U.S. Air Force Space Command.The U.S.Government
intends for GPS to complement or replace many other forms of electronic
navigation and position data systems. GPS offers major advantages in precision
and accuracy with worldwide coverage in three dimensions (in addition to
providing time and velocity measurement capabilities).
GPS positioning is based on a triangulation technique that precisely
measures distances from three or more Navstar satellites. The satellites
continuously transmit precisely timed radio signals using extremely accurate
atomic clocks. A GPS receiver calculates distances from the satellites in view
by determining the travel time of the satellites' signals. The receiver then
triangulates its position using its known distance from various satellites and
calculates latitude, longitude and altitude. Under normal circumstances, a
stand-alone GPS receiver is able to calculate its position at any point on
earth, in the earth's atmosphere, or in lower earth orbit, to within 100 meters,
24 hours a day. When a GPS receiver is coupled with a known precise position,
accuracies of less than one centimeter are possible. In addition, GPS provides
highly accurate time measurement.
* The usefulness of GPS is dependent upon the number and locations of GPS
satellites which are above the horizon at any given time. The current deployment
of 24 satellites permits three-dimensional worldwide coverage 24 hours per day.
However, reception of GPS signals requires line-of-sight visibility between the
Navstar satellites and the receiver, which can be blocked by buildings, hills
and dense foliage. Each satellite must be above the horizon for the receiver to
collect a sufficient signal, and the receiver must have a line of sight to at
1
<PAGE>
least three satellites to determine its location in two dimensions--latitude and
longitude--and at least four satellites to determine its location in three
dimensions--latitude, longitude, and altitude. The accuracy of GPS may also be
limited by distortion of GPS signals from ionospheric and other atmospheric
conditions, and intentional or inadvertent signal interference or Selective
Availability (SA). Selective Availability, the largest component of GPS
distortion, is controlled by the Department of Defense and is a currently
activated, intentional system-wide degradation of stand-alone GPS accuracy from
approximately 25 meters to approximately 100 meters. Selective Availability may
be implemented by the Department of Defense in order to deny hostile forces the
highly accurate position, time and velocity information supplied by GPS. In
certain military applications, classified devices are utilized to decode the SA
degradation and return accuracies to their original levels.
By using a technique called "differential GPS" involving two or more GPS
receivers, accuracies can currently be improved to approximately one to five
meters for navigation and one centimeter for survey applications, even in the
presence of SA. This technique compensates for a number of potential measurement
distortions, including distortions caused by ionospheric and other atmospheric
conditions, as well as distortions intentionally introduced into the satellite
data itself, such as SA. Differential GPS involves placing one receiver at a
known location and continuously comparing its calculated location with its known
location to measure distortions in the signal transmission and errors in the
satellite data. At any one time such distortions and errors are reasonably
constant over large areas, so that one or more remote GPS receivers can use
these measurements to correct their own position calculations. Measurement
corrections can be transmitted either in real-time over a suitable communication
link such as radio or telephone, or integrated later with accumulated data, as
is frequently the practice in survey applications.
Each of Trimble's GPS products is based on proprietary GPS receivers.
Trimble's GPS receivers are capable of tracking all satellites in view and
automatically selecting the optimum combination of satellites. Communications
and computational modules, such as databases, database management systems, radio
and other communication equipment and various user interfaces, are added to
these receivers to create fully integrated application solutions.
Navstar satellites and their ground support systems are complex electronic
systems subject to electronic and mechanical failures and possible sabotage. The
satellites have design lives of 7.5 years and are subject to damage by the
hostile space environment in which they operate. The repair of damaged or
malfunctioning satellites is impossible. If a significant number of satellites
were to become inoperable, there could be substantial delay before they are
replaced with new satellites. A reduction in the number of operating satellites
would impair the current utility of the GPS system and the growth of current and
additional market opportunities. In addition, there can be no assurance that the
U.S. government will remain committed to the operation and maintenance of GPS
satellites over a long period of time, or that the policies of the U.S.
Government for the use of GPS without charge will remain unchanged. Because of
ever-increasing commercial applications of GPS, other U.S. Government agencies
may become involved in the administration or the regulation of the use of GPS
signals. Any of the foregoing factors could affect the willingness of buyers of
the Company's products to select GPS-based systems instead of products based on
competing technologies. Any resulting change in market demand for GPS products
would have a material adverse effect on the Company's financial results.
Recently, certain European government organizations have expressed concern
regarding the susceptibility of GPS equipment to intentional or inadvertent
signal interference. Such concern could translate into reduced demand for GPS
products in certain geographic regions.
Business Strategy
The Company sees GPS as an information utility. In order to exploit the
wide range of applications made possible by this information utility, the
Company has implemented the following strategies:
Targeted markets. The Company targets specific markets for its GPS products
based on end-user applications. The Company believes that by adding
application-specific features and functionality to its GPS technology, it can
deliver value-added products into its targeted markets. To date, the Company has
targeted markets which it believes represent significant economic opportunities
2
<PAGE>
due to the broad range of potential applications for accurate and cost-effective
position, velocity and time information. The Company also continuously seeks to
identify new markets into which GPS products and systems can be introduced. The
Company believes that its continued growth will depend in large part on its
ability to identify and penetrate new markets for GPS applications.
Differentiated Product Solutions. The Company seeks to establish and
sustain leadership in its targeted markets by offering products that are
differentiated through software, firmware, customized user interfaces and the
Company's service and support. The Company emphasizes application-specific
systems which solve specific sets of problems, where feasible, in its various
markets. The Company believes that a substantial portion of the value of its
products is derived from the firmware which is embedded in the product or
software provided along with the product for post-processing applications. In
addition, the Company incorporates other technologies into some of its products,
such as communications, computational capabilities and non-GPS positioning
technologies in order to optimize product features for specific markets.
Time-to-Market Advantage. The modular design of Trimble's products enables
the Company to create and maintain a broad line of products without necessarily
repeating development efforts or requiring extensive redesigns for product
upgrades. To facilitate fast product introduction while minimizing manufacturing
costs and maximizing quality, the Company has acquired advanced automated
manufacturing equipment that allows rapid turnaround of prototypes during
development and rapid changeovers between product lines during production.
Trimble further believes that its approach of providing many product software
features enables the Company to respond quickly to the needs of rapidly evolving
markets through software upgrades.
* Multichannel Distribution. The Company seeks direct communication with
its customers in order to develop and modify its product designs as necessary to
maximize utility and payback to the user. Trimble has built a worldwide sales
and service organization of Company employees, distributors and dealers for each
major market it addresses. In addition, the Company intends to continue to
develop new--and to strengthen existing--alliances and OEM relationships with
established foreign and domestic companies as part of its strategy to penetrate
certain targeted markets. The Company has pursued such alliances with several
companies in various markets, including Philips Car Systems, Pioneer Electronics
Corporation, Delco Electronics and Xanavi Informatics Corporation in car
navigation, Honeywell Inc. in aviation and military, E-systems, Inc. in transit,
PRC Public Sector, Inc. in public safety, Adobe Systems Incorporated, Intel
Corporation in the emerging consumer applications area, American Mobile
Satellite Corporation in long-haul fleet management, and Caterpillar, Inc. in
mining and construction.
Integration with Communication Technologies. GPS technology is increasingly
being integrated with wireless communication technologies, offering economic and
strategic advantages in areas such as navigation, vehicle fleet management,
long-haul trucking and public safety. Accordingly, the Company is currently
devoting research and development efforts to products which integrate the
Company's proprietary GPS receivers with wireless communication technologies.
Markets
Trimble currently addresses multiple markets for the application of GPS
technology, which have been divided into three business units: Commercial
Systems, Software and Component Technologies (including OEM) and Aerospace.
Although the Company believes that these markets have growth potential for sales
of GPS products, there can be no assurance that such markets will continue to
develop, particularly given that GPS-based systems are still in an early stage
of adoption in some of these markets. The Company's future growth will depend on
the timely development of the markets in which the Company currently competes,
and on the Company's ability to continue to identify and exploit new markets for
its products. Each business unit is managed by a vice president who has
responsibility for strategy, marketing, manufacturing, product development and
financial performance. The business units are further split into vertical
markets which address specific product markets.
3
<PAGE>
Commercial Systems
The Commercial Systems business unit consists of the previous Surveying and
Mapping business unit, the Tracking portion of the Tracking and Communications
business unit, and the Marine portion of the Navigation business unit.
Surveying involves the establishment of precise points and boundaries for
legal and construction purposes, while mapping involves more extensive but less
precise location and plotting of geographical and man-made features. Both
surveying and mapping consist primarily of the collection and processing of
position information. Typically, surveying accuracy is expected to be within a
centimeter. Required mapping accuracies are typically from twenty-five
centimeters to three meters. The Company believes that its products
substantially reduce the cost, time, and number of people required to obtain and
process surveying and mapping data points for a given level of accuracy,
compared to optical and laser products.
Surveying. Applications which the Company addresses in the surveying market
include control surveying, construction and engineering surveying, route
surveying and geodetic research. GPS does not require line-of-sight between
land-based reference points and is not affected by most adverse weather
conditions (as compared to traditional methods such as optical or laser
measurements), providing advantages in many survey applications.
The Company's GPS surveying products dominate the control surveying
instrumentation market. Control surveying is the precise determination of the
location of local geodetic reference points from which further local surveying
can be based. The GPS technique has reduced the cost of establishing control
points, compared to conventional techniques, and has become the preferred
technology for conducting control surveying.
The Company's surveying products are also used in large-scale construction
projects, such as new housing developments or public works projects where the
position of a large number of points needs to be cost-effectively established.
The Company's products are particularly efficient for applications in areas with
ground-level obstructions. The Company also supplies route surveying markets,
which require a cost-and time-effective means of precisely locating a large
number of points and physical features along routes and rights-of-way, such as
roads, pipelines, and telephone and power lines. The Company has introduced a
product with kinematic data collection features, which provides the capabilities
for surveying and mapping applications while the equipment is in motion. This
kinematic product is targeted at the engineering and topographic surveying
markets, which represent a major portion of the overall surveying market.
Through the use of the kinematic GPS surveying technique, large numbers of
points can be rapidly measured to accuracies approaching those for control
surveying. The kinematic product allows one surveyor, on foot, to collect the
data to create a construction-grade topographic map.
With conventional post-processed GPS techniques, GPS satellite signal data
are collected at the point, but the point coordinates aren't actually determined
until later, back in the office on a personal computer with specialized
software. In 1993 the Company introduced "real-time" GPS surveying
instrumentation. With real-time GPS surveying, the point coordinates are
generated virtually instantaneously as the surveyor surveys or "occupies" the
point. Real-time GPS surveying offers surveyors very large productivity
advantages. Compared to traditional post-processed GPS surveying and
conventional optical-based land surveying techniques (that can also generate
centimeter level coordinates as the point is surveyed), real-time GPS surveying
allows surveyors to enjoy the many field logistics advantages of GPS, such as
saving time by eliminating the data processing step in the office. The net
results are cost savings of as much as 50% or more, versus conventional methods
for everyday surveying.
In addition to serving the commercial surveying market, GPS has become a
standard technique for geodetic research. Research geodesists have found that
long baseline accuracies using GPS are significantly greater than those
obtainable with optical and electronic distance-measuring equipment. This
capability has led to programs to remeasure previous geodetic control points to
sharply increase precision and eliminate errors. High accuracy has also created
a significant market for GPS in seismic research where earth movements of less
than one centimeter are measured and monitored.
In the surveying market, the Company faces growing competition from other
GPS vendors, such as Ashtech, Inc.; and NovAtel Inc.; and from vendors of
traditional surveying products, such as Leica AG; Sokkia Company, Ltd.; Karl
4
<PAGE>
Zeiss; Topcon Instrument Corp. (a subsidiary of Tokyo Optical Co., Ltd.); and
Geotronics A.B. (a subsidiary of Spectra-Physics) who have all entered the GPS
surveying market and who are introducing GPS products of their own.
Mapping. For mapping applications, large amounts of position and attribute
data (such as color, size and condition of object) must be obtained. Mapping
applications include large-scale mapping of geographic and man-made features,
data collection for Geographic Information Systems (GIS) databases, natural
resource management and ground contour mapping.
Currently, large-scale accurate mapping is usually accomplished by
photogrammetric analysis of aerial photographs, a complex and expensive
technique. The Company supplies the mapping market with its products, enabling
the user to capture position data while in aircraft, or traversing terrain on
foot or in a vehicle. The Company is also developing additional products for the
mapping market. The Company believes that these products can lower the cost of
map production.
GIS databases are used by federal, state, county, and city governments and
by utility companies for a variety of applications requiring accurate
information on the location of natural resources and municipal infrastructure,
such as utilities and transport networks. Currently, building such a database
requires time-consuming compilation of data from numerous existing maps and
digitized photographs and costly physical surveys. The Company's products, used
in connection with commercially available databases, has the potential to
substantially reduce the cost of constructing GIS databases and to increase
their accuracy.
In the mapping market, the Company faces competition from Ashtech, Inc.;
NovAtel Inc.; CMT, Inc.; Garmin Corporation; Magellan Corporation (a subsidiary
of Orbital Sciences Corporation); Motorola, Inc.; Sokkia Company, Ltd.; and
others. Competition in the mapping market has increased as competitors have
introduced new products.
Tracking Systems. The Company has become a leader in vehicle tracking,
combining GPS technology with communications, software and firmware, and
integration capabilities. In the public sector, the Company's products are
installed in a variety of fleets, such as transit buses, police cars, fire
trucks, and ambulances. Other products are used for long-haul trucking and
marine markets. More recently, the Company's products have been introduced into
smaller commercial fleets for security applications.
In some instances the Company markets its products directly to end-users,
but the large majority of its products are sold through resellers. Direct sales
to end-users are focused on opportunities in which the Company's standard
product offering closely matches the customer's requirements. Public sector
sales often require significant customization, and the Company uses strategic
partners, such as E-Systems and PRC Public Sector, Inc., to interface directly
with the end-user. Other tracking and communication products are sold through
OEM integrators, and value-added resellers, some of whom address international
markets.
The public sector customers are highly dependent on government funding for
fleet modernization. Capital equipment funding for public transit operators
comes primarily from congressional appropriations under the Intermodal Surface
Transportation Efficiency Act. Public safety organizations are dependent largely
on local government funding. Failure of the funding authorities to appropriate
funds for these purposes could have substantial impact on the Company's future
revenue.
Since the availability of GPS is still new, its use and subsequent benefits
are not clearly understood in the sense of a broad vehicle tracking market. The
Company must therefore devote considerable resources to communicate these GPS
benefits and educate the market. This requirement can result in a delay in
market development.
Since the Company is involved in these market segments at the component,
subsystem, and system level, other companies, such as Motorola and QUALCOMM
Incorporated, have at various times been both customers and competitors. The
Company believes that its GPS technology is superior to that of its competitors
in these market segments. The Company intends to leverage its GPS technology to
continue to supply these market segments at the component, subsystem and system
levels. However, there is significant competition, and since the markets and
products are in the early phases of their maturity, with competition that has
far greater resources and is well established in these markets, there is no
assurance that the Company will be successful in its effort.
5
<PAGE>
In the Tracking market, the Company faces competition from Rockwell
International Corp.; AutoTrac; Thrane & Thrane; Motorola, Inc.; Coded
Communication; QUALCOMM Incorporated; Orbital Sciences Corporation; and others.
Marine GPS. Trimble is an active leader in the marine navigation, marine
survey and marine construction markets. The Company has pioneered many marine
markets.
Marine-Navigation. Trimble's GPS receivers are used on recreational,
commercial, research, and military vessels to provide real-time latitude,
longitude, time, course and speed information. This data may be displayed on
digital readouts or graphic displays and may be integrated with other on-board
electronic mapping databases to indicate vessel position and performance in an
easily understood manner. The Company's navigation products conform to the NMEA
0183 standard, which makes them capable of providing navigation information to
other on-board equipment such as radars and autopilots.
Traditionally, marine navigation has relied on celestial navigation, dead
reckoning, and electronic systems other than GPS. Currently, the two most widely
used electronic systems for marine navigation are LORAN C and SATNAV. LORAN C
depends on proximity to established chains of LORAN C transmitters and is
susceptible to interference from electrical storms and a wide variety of
man-made interference sources. SATNAV is a non-continuous navigation system,
providing periodic position updates and relying on dead reckoning between such
updates. By contrast, GPS effectively provides continuous worldwide coverage,
much greater accuracy, and freedom from electrical interference. As a result,
GPS may provide greater safety, fuel efficiency, and equipment utilization when
compared to other less accurate or localized marine navigation techniques. When
combined with radio or other communications links, GPS systems provide the basis
for worldwide monitoring and tracking systems by governmental and harbor
authorities, and shipping companies.
The Company faces competition in the GPS recreational marine navigation
market from manufacturers such as Furuno U.S.A., Inc. (a subsidiary of Furuno
Electric Co., Ltd.), Garmin Corporation, Magellan Corporation (a subsidiary of
Orbital Sciences Corporation), and Raytheon Company; in the GPS commercial
fishing market from Furuno, and Raytheon Company; and in the GPS commercial and
governmental navigation markets from Magnavox Advanced Products and Systems
Company (a subsidiary of North American Philips Corp.).
Marine-Survey. Marine survey, which is concerned with precise, dynamic
positioning includes such activities as oil exploration, hydrographic surveys,
environmental surveys, marine construction, cable and pipe laying, dredging,
barge positioning, ship trialing and much more. The Company provides complete
software solutions which utilize its GPS sensors--often in conjunction with
other equipment--for many of these applications. Trimble's marine survey
activities also include the design and marketing of MSK Radiobeacon Differential
GPS (DGPS) reference stations, and equipment to monitor the integrity of DGPS
broadcasts.
In marine survey applications, the Company faces competition from
Communication Systems International Inc, Dassault-Sercel NP, Leica, Ashtech Inc.
and Coastal Oceanographics, Inc.
Software and Component Technologies
This new business unit consists of the OEM business that was previously
included in Tracking and Communications. In addition, this business unit will be
responsible for selling software licenses and other rights for the use of GPS to
third parties.
The Company's Component Technologies group has built a leadership position
in the worldwide market for embedded GPS products. With two million R&D
person-hours invested in GPS technology, Component Technologies products provide
full-function, high-performance embedded engines for system integrators. The GPS
products are used in a diverse range of applications such as vehicle navigation,
vehicle and high-value cargo tracking, precision agriculture, and
synchronization of communications networks.
* The vehicle navigation market is expected to grow to 15 million units per
year by 2000. Trimble supplies GPS engines to some of the leading automotive
electronics suppliers, including Delco Electronics Corporation, Philips Car
6
<PAGE>
Systems, Pioneer Electronics, Magneti Marelli, and Xanavi Informatics
Corporation. GPS functionality is integrated with electronic maps to provide
sophisticated navigation systems.
Trimble's Component Technologies has a reputation for high-performance
products, high-level technical support and custom product engineering. Trimble
continues to maintain leadership in the embedded GPS board market for tracking
applications, securing a strong position through partnerships with key
customers. In the tracking market, new applications such as safety, loss
prevention, and emergency assistance systems, continue to emerge. The end-user
is typically the owner or manager of a fleet of vehicles, and needs to track his
vehicles. In some cases, the end-user may be an individual subscriber to a
service provider which can offer emergency assistance or can help locate lost or
stolen property. Trimble GPS provides the key technology into these
applications.
With the expansion of data and wireless communication networks, the demand
for GPS timing products has increased significantly. Trimble's GPS smart
antennas are popular with system integrators who require precise synchronization
of wireless network infrastructures. By accessing the cesium clocks on board the
GPS satellites, a GPS receiver can provide atomic clock accuracy at a fraction
of the cost of competing technologies. Trimble's Component Technologies is at
the forefront of this rapidly growing market, providing superior, technically
advanced timing products. By offering the first smart antenna directly to the
timing market, Trimble gained a reputation for leading-edge technology,
excellent support, high performance and superior quality products.
In the embedded GPS board market, the Company faces competition from
Motorola, Inc.; Rockwell International Corporation; Japan Radio Corporation; and
others.
Aerospace
This new business unit consists of the Avionics portion of the Navigation
business unit and the previous Military business unit.
Aviation. During 1994, the Federal Aviation Administration (FAA) adopted a
policy establishing GPS as the future standard for aviation navigation and
initiated the Wide Area Augmented System (WAAS) Program to allow the use of GPS
for primary navigation and precision approaches by 1998. This followed the
December 1992 FAA publication of certification procedures that allow GPS to be
used as a supplemental source of navigation information for aircraft operating
under Instrument Flight Rules (IFR). In 1995, the FAA published procedures for
approving GPS as a primary means of navigation for oceanic flights.
The Company was the first to certify its equipment under these regulations.
The Company also has certified equipment that is used in conjunction with other
FAA certified navigation systems incorporating Omega and LORAN C. Currently, the
Company believes it has received FAA Certification for the Technical Standard
Order C-129 covering more products than any competitor.
The Company believes GPS has significant advantages in terms of accuracy
and coverage over current primary and supplemental systems. However, because of
foreign government concern over U.S. government control of the GPS
constellation, there can be no assurance that GPS will be globally accepted as a
cost-effective, reliable solution in the aviation navigation market. During
1994, the U.S. Government issued statements to the International Civil Aviation
Organization (ICAO) guaranteeing the GPS signal for a minimum of 10 years. In
addition, GPS technology faces competition from more mature and established
technologies that are currently in widespread use and have in place the
infrastructure required to administer these systems.
* Currently, the primary FAA required navigation system is VOR/DME, a
ground-based transmitter network. Over the long term, the Company believes GPS
has the potential to replace VOR/DME as the primary FAA and ICAO-required
navigation system. Range for VOR/DME is only 50 to 150 miles, line of sight from
a transmitter, leaving large areas of the world uncovered; even in the U.S.,
significant parts of the airspace are not covered. Although VOR/DME accuracy is
adequate for two-dimensional navigation, GPS provides greater accuracy while
also providing time information.
Aviation navigation also utilizes supplemental technologies to VOR/DME
consisting of LORAN C, Omega, Inertial Navigation System (INS) and GPS. Of the
supplemental technologies, LORAN C is less accurate than GPS and currently lacks
7
<PAGE>
coverage when the aircraft is more than 1,000 miles from a LORAN C chain of
stations. Omega provides worldwide coverage, but its potential for large
position errors necessitates wide air lanes and can require in-course
corrections. Both LORAN C and Omega are scheduled to be decommissioned within
the next ten years. INS units are useable anywhere in the world, but cost as
much as $150,000 per unit and often require multiple units. GPS can provide
greater accuracy than LORAN C and Omega, and will give information which is not
available from any other radio-frequency-based aviation navigation system. GPS
provides worldwide coverage, which is not available from LORAN C, and is lower
in cost than either Omega or INS. In addition, the GPS infrastructure has lower
maintenance costs than existing navigation aids and can be used in remote
regions of the globe without additional investment. The net result is an air
traffic control system with lower operating costs and greater capacity.
The Company has recognized the potential of GPS for aviation and, in
addition to airborne navigation and flight management units, is also pursuing
GPS technology in flight trajectory truth systems, tracking systems, sensors and
other aviation applications. During 1995 the Company began an alliance with
Honeywell Corporation, a major supplier of aviation equipment, to produce
GPS-based equipment to the air carrier and business aviation markets.
The Company is modifying its previous strategy of concentrating solely on
higher-end avionics products. In 1996, Trimble acquired the assets of Terra
Corporation, a New Mexico aviation corporation. "Terra by Trimble" is an
advanced avionics equipment product line that gives Trimble the ability to serve
a range of avionics customers from sport aviation through the general aviation
market.
Competition in the airborne market comes from manufacturers of GPS products
and traditional navigation and flight management system manufacturers. Competing
manufacturers of GPS products include Rockwell Collins, AlliedSignal Aerospace
(through its General Aviation Avionics Division), Universal Navigation
Corporation, Canadian Marconi Company (a subsidiary of the General Electric
Company plc), Interstate Electronic Systems (a subsidiary of Figgie
International), Garmin Corporation, Northstar Avionics (a subsidiary of Canadian
Marconi), IIMorrow, Inc. (a division of United Parcel Service of America, Inc.),
Magellan Corporation (a subsidiary of Orbital Sciences Corporation) and Litton
Industries. Traditional navigation and flight management system manufacturers
include Honeywell, AlliedSignal Aerospace (through its Air Transport Avionics
Division) and Smiths Industries. Competition in the flight trajectory truth
system is from Ashtech; and in the fligh tracking system, from ARNAV.
Military Systems. The Company has been developing GPS receivers for
aerospace and military applications since 1986. The approach to the market has
been as a commercial manufacturer of GPS electronics that has tailored its
designs for military use. The Aerospace business unit designs and manufactures
GPS equipment capable of processing the civilian C/A code, as well as the P(Y)
code reserved for users authorized by the United States Department of Defense.
These Precise Positioning Service (PPS) receivers provide authorized users with
GPS equipment that removes the effects of Selective Availability (allowing
higher accuracy), as well as providing antispoofing protection and additional
immunity from jamming signals. The Company sells equipment to the United Sates
Department of Defense, Aerospace prime contractors, and foreign military
organizations.
Applications of GPS in aerospace and military markets include ground
vehicles, handheld units for dismounted personnel, aircraft, missiles, unmanned
air vehicles, and navy vessels. Military GPS equipment efficiently provides
accurate position, velocity, and time information to and from battlefield
management systems that coordinate and control the deployment of equipment and
personnel.
In the military market, Trimble faces competition from a number of
companies most of which have substantially greater financial and marketing
resources, and many of which have substantial experience and resources devoted
to sales to military organizations. Interstate Electronics, Magnavox (subsidiary
of Hughes) Ratheon, and Rockwell International Corp., as well as a number of
European companies, manufacture products which are competitive with the
Company's military products.
* Military sales are subject to various uncertainties, including the timing
and availability of funding for U.S. and foreign military contracts and the
competitive nature of government contracting generally. The Company expects that
8
<PAGE>
future sales of its current GPS products to U.S. military organizations may be
significantly limited, based on future requirements of new government
specifications. There is no assurance that the Company will be able to modify
existing product to develop new product to meet these military specifications
or, if it is able to do so, that the Company will be awarded future U.S.
military contracts.
The Company continues to sell to foreign military organizations. However,
sales to such organizations are subject to significant risks, timing
uncertainties and budget constraints. In addition, the U.S. government may
impose additional restrictions on the sale of GPS products to foreign military
organizations, and foreign governments may require military organizations to
purchase GPS products only from indigenous suppliers.
Products
The following is a list of the Company's principal products, organized by
its strategic markets:
Surveying and Mapping Products
4000 Series. The 4000 series products are GPS instruments which, in the
survey mode, provide position information that is accurate down to a centimeter.
The Company's 4000 SSE product, introduced in 1992, utilizes dual frequency, as
well as P(Y) code (a military code), and provides accurate position information.
In the fall of 1993, the Company introduced the Site Surveyor System, the first
real-time kinematic system for surveying. Based on the 4000 series receiver,
this system provides centimeter accuracy positions in real-time. With this
real-time accuracy, GPS applications have been extended into construction
stake-out. In 1996, the Company introduced the 4400 Real Time Kinematic System
and the 4600 Single Frequecny product for the survey and construction markets.
GPS Total Station Surveying System. In 1994 Trimble introduced the GPS
Total Station surveying system. This complete surveying system consists of two
or more survey grade GPS receivers (4000SSE's), GPS antennas, a handheld Survey
Controller for managing real-time GPS survey and collecting coordinates as a
land survey is conducted, plus radio modems for transmitting data between the
GPS receivers. The system incorporates advanced features that make real-time GPS
surveying more practical as an everyday surveying technique. The GPS Total
Station is the next generation up from the Site Surveyor System, which required
a post processing computer.
TRIMVEC, GPSurvey and TRIMMAP. TRIMVEC and GPSurvey are software programs
for post-processing survey data obtained with the Company's GPS survey products.
TRIMVEC Plus is an enhanced version of TRIMVEC that provides software support
for several phases of a survey operation, from project planning and baseline and
coordinating computations, to database management and network adjustment.
GPSurvey is a "Microsoft Windows" based enhancement of the product line. TRIMMAP
is an optional mapping software package which can generate detailed contour maps
automatically. These software programs are generally sold as part of survey
product systems.
GPS Pathfinder. The GPS Pathfinder series is a portable position data
collection system for the Mapping/GIS market. The collected information can be
entered into a personal computer or workstation to generate geographic
information such as rough survey data or topographical maps. Output from the GPS
Pathfinder can be downloaded into most GIS databases or can be processed by
Trimble's PC-compatible software that performs a wide variety of display and
plotting routines. The Geo Explorer is a lower cost product for the GIS market,
where it is used for natural resource management.
Hydrographic Systems. The Company's hydrographic systems combine the
Company's differential location products, a communications capability, and the
Company's proprietary HYDRO software into a product used in dredging operations
and other offshore surveying. With this product, a dredging vessel can more
accurately navigate the dredging area and measure material removed.
Tracking Systems Products
The Company offers a line of products designed to meet many of the needs of
customers desiring to track assets using wireless communications. These products
include GPS receivers, and GPS receivers integrated with other technologies such
as dead reckoning, industry specific applications processors, mobile radio
modems, cellular telephones, mobile data terminals, communications control
software, and automatic vehicle location (AVL) display software.
9
<PAGE>
GPS Receivers. The Company's tracking product line includes the Placer GPS
400, a stand-alone receiver, and the Placer 450 family, a receiver integrated
with a gyroscope and an odometer interface.
Integrated GPS and Modem Products. The Company offers the Starfinder GPS
Intelligent Vehicle Logic unit targeted at the mass transit market and the PSC
200 targeted at the police, fire and ambulance markets.
Integrated GPS and Cellular Phone Products. The Company offers a line of
GPS/cellular products known as GPS Cellular Messenger, targeted at small fleets
and transportation of high-value cargo.
Communications Control Software. The Company offers a software program
designed to manage communications between its Intelligent Communications
Controller mobile units and a customer's command center.
AVL Display Software. The Company offers three levels of AVL display
software. AVL Manager displays the locations of vehicles in tabular form.
FleetVision displays vehicle locations for small fleets graphically on scanned
maps. StarView displays large fleets on vector maps and offers advanced
AVL-oriented functionality.
Galaxy Inmarsat-C/GPS. Galaxy is the first system to combine Inmarsat-C
with GPS to provide rapid digital global communication with precise global
positioning. Inmarsat-C provides worldwide, two-way store-and-forward text
communication via Packet Switched Data Network (PSDN) or Public Switched
Telephone Network, and fax delivery of inbound messages. Galaxy is designed for
use by truck, rail and other land applications, as well as merchant ships,
commercial fishing boats, yachts and other vessels requiring cost-effective
two-way communication links plus precise position information for emergency,
safety, navigation and tracking needs.
Marine Products
NT Series. This is a series of three marine GPS navigation products which
provide position and graphical steering information on a high-resolution LCD
display. The models in the NT Series provide a range of price and performance to
satisfy the needs of a wide range of customers. The high-end version of this
product includes a built-in differential receiver. The NT 200D receives
international standard differential corrections broadcast on the marine beacon
band and greatly improves the accuracy of the position and velocity solution.
The NT Series GPS is sold to recreational boaters, coast guards, navies,
workboat operators, shipping lines, and operators of commercial fishing fleets.
NavGraphicXL GPS. The NavGraphicXL GPS integrates a high-resolution
graphics display, a compact disk system containing navigational charts, and
Trimble's basic GPS receiver into a single navigation instrument. The
NavGraphicXL GPS displays position information, including present location,
speed, heading, and drift, on standard National Oceanic and Atmosphere
Administration and other available government navigation charts. A graphics
processor is included to permit zooming (enlarging the current display and
providing a higher resolution chart) and panning (for following movement off the
current display). The NavGraphicXL GPS is sold to high-end recreational boaters,
marine researchers, commercial shipping companies, operators of commercial
fishing fleets, and various Government organizations and coast guards worldwide.
Acutis DGPS. Acutis DGPS is a marine navigation product consisting of a
differentially-capable GPS receiver and antenna in a marine-quality housing. The
system is sold as an add-on product for the recreational and fishing markets.
Marine Survey Products
7400RSi/DSi. The marine versions of the 7400 series products bring
centimeter level accuracy to the marine environment for the first time. The 7400
series products utilize Trimble's Real-Time Kinematic/On The Fly (RTK/OTF)
technology to achieve high accuracy even in the dynamic and fluid marine
environment by removing the need for static calibration stations. Excellent
dynamic performance is achieved by the 7400 RSi/DSi GPS sensors for applications
such as the control and docking of high-speed ferries, the positioning of large
marine structures such as bridge spans, and much more. See Target: Structures
below for more information.
10
<PAGE>
4000RSi/DSi. The 4000 series products provide sub-meter accuracy and are
well suited to marine survey applications which do not require the performance
of the 7400 series products described above. The 4000 series GPS sensors address
a broad segment of the marine survey market and provide customers with a choice
of price and performance in GPS sensors. The 4000 series products also integrate
well with total solutions, such as Hydro and Target: Structures products
discussed below.
The 4000 series products also form the basis of Trimble's DGPS Reference
Station and Integrity Monitoring offerings, which comply with internationally
accepted Radio Technical Committee Marine (RTCM) standards for broadcast on
radio beacon frequencies. Trimble equipment is in use in over 20 countries,
broadcasting DGPS corrections and monitoring their integrity.
DSM. These products are GPS sensors and reference stations targeted mainly
to value added resellers. They provide a source of accurate GPS data in the form
of a "black box." The DSM allows for comprehensive custom solutions developed by
third parties.
Hydro. This software program provides total solutions for many marine
survey applications. It incorporates the best of Trimble designed and built GPS
sensors with additional equipment, such as depth sounders, to provide customers
with highly customizable solutions to a wide range of marine survey and
construction challenges.
Target: Structures. This Windows and WindowsNT based program provides for
precise positioning of large mobile offshore structures or platforms. Utilizing
real-time GPS receivers such as the 7400Rsi and 7400Dsi, this innovative
software enables barge and crane operators to efficiently and safely guide large
structures to any target location.
Software & Component Technologies Products
Component Technologies Board Products. The newest board product is
Lassen-SK8, based on Trimble's new Sierra GPS technology and used in the
in-vehicle navigation market. Two-thirds the size of a business card, this
miniature 8-channel GPS board provides high performance, fast acquisition and
reacquisition time, low power consumption, and two-meter accuracy.
SVeeSix is a family of GPS boards and assemblies designed for
high-performance embedded GPS applications for tracking. The family includes
SVeeSix, SVeeSix-CM3, Trimble's third generation core modules for embedded
applications, and SVeeSix-Timing module, designed specifically for incorporation
in precise time/frequency standards, which are also known as station clocks.
Component Technologies Smart Antenna Products. Trimble revolutionized GPS
integration with the introduction of the first GPS smart antenna--the Acutis,
mainly used in the Marine market. Smart antennas combine a GPS receiver and an
antenna in one package. This provides OEMs and system integrators with a
"plug-in" GPS module, allowing them to quickly and easily add GPS capability to
their product lines.
Since the introduction of the Acutis, Trimble has developed and introduced
the Acutime and AcutimeII smart antennas to address the timing market. These
smart antennas are easily integrated standalone GPS time sources offering one
micro-second-level accuracy at a fraction of the cost of other time sources
offering similar performance.
Trimble's latest timing product is the Palisade smart antenna. Palisade is
designed to provide accurate synchronization and frequency control required by
wireless voice and data networks. Based on Trimble's Sierra GPS technology,
Palisade has an 8-channel architecture that the Company believes offers timing
performance superior to that of competing products.
OEM Starter Kits. Trimble offers Starter Kits for developers who want to
evaluate and integrate GPS receivers and antennas. The kits contain all
components required to evaluate the receiver's features and to begin integration
into the user's application. Generally, a starter kit will include a GPS
receiver, a GPS antenna, documentation and required cables and software.
Consumer Products
Scout and Scoutmaster. The Scout family consists of the Scout and
ScoutMaster, which are handheld GPS receivers designed exclusively for land
users to provide an affordable GPS solution in a broad range of professional and
11
<PAGE>
recreational applications. Scout and ScoutMaster include several patented
features. The Over and Up feature enables users to pinpoint their location on
any topographical map and to calculate specific map locations without having to
interpolate latitude/longitude coordinates. Scout and ScoutMaster can store up
to 250 locations and display navigation information in familiar terms, real-time
instructions for point-to-point travel, in addition to current speed, direction
and estimated time of arrival. Scout and ScoutMaster can also tell users where
the sun and moon will be at any time of any day, relative to any point on Earth,
and when they will rise and set. Scout and ScoutMaster use four AA batteries,
providing five to eight hours of continuous use. ScoutMaster is a real-time,
differential-capable receiver which offers the ability to upload, download, log,
and map field data, and features a unique combination of data gathering and map
capabilities.
Aviation Products
Trimble 1000DC. This product is a Visual Flight Rules (VFR) aviation
navigation system that provides GPS position, velocity and course data for the
general aviation market and incorporates an embedded or replaceable navigation
database. The system is capable of limited interface with other aircraft systems
to receive or send data.
Trimble 2000 A and 2000 Approach. This product family is an aviation
navigation system available in VFR or IFR FAA Certified Technical Standard Order
C-129 A1, which allows nonprecision IFR approaches. Both versions provide GPS
position, velocity and course data for the general aviation and lower end
commercial markets, and incorporate a replaceable navigation database. The
system is capable of limited interface with other aircraft systems to receive or
send data.
Trimble 2101 and 2101 I/O. This product family is an IFR certified C-129 A1
aviation navigation system; it provides GPS position, velocity and course data
for the general aviation, helicopter and middle commercial markets, and
incorporates a replaceable navigation database. The Trimble 2101 is capable of
limited interface with other aircraft systems to receive or send data or, with
expanded interface capability, to drive flight instruments. The 2101 I/O
provides extensive interfacing to other aircraft systems to drive flight
instruments and other aircraft systems in integrated digital and analog cockpit
settings. A version utilizing P(Y) code is available to U.S. Government approved
customers.
Trimble 8100. This product family is an IFR certified C-129 A1 aviation
navigation system and provides GPS position, velocity and course data plus
flight management information for the commercial and air transport markets. It
incorporates an electronically replaceable navigation database. The system is
capable of extensive interface with other compatible aircraft systems to drive
flight and other instruments. The Trimble 8100 is approved for Primary Oceanic
Navigation and nonprecision IFR Approaches.
Cargo Utility GPS Receiver (CUGR). This product is a Druz-mount P(Y) GPS
navigational system for world wide military aviation operations. It will provide
U.S. military helicopter pilots Precise Positioning Service (PPS) GPS navigation
and capabilities similar to Trimble's FAA certified 2101 I/O Approach and meets
the performance standards for Instrument Flight Rules (IFR) for enroute,
terminal and nonprecision approach phases of flight.
Honeywell/Trimble HT9100. This product enables air transport customers to
upgrade existing analog flight instruments to today's state-of-the-art digital
systems. It allows the customer to operate in any existing or future air
navigation environment safely and efficiently.
Terra by Trimble. This product brand is a sport and general avionics GPS
product line featuring a performance-proven line of audio panels, radios,
altimeters, and navigational devices.
Other aviation products. These include the Flightmate handheld product
family. Trimble also offers optional software packages for flight planning,
search and rescue, and custom applications.
Military Systems Products
TRIMPACK. The TRIMPACK is a four-pound, portable, ruggedized product,
approximately the size of a pair of binoculars (120 cubic inches). Position
information is displayed on a four-line, 20-character-per-line, back-lit LCD
screen. Troops deployed in Operation Desert Storm used TRIMPACK units to
determine their location in the featureless desert.
12
<PAGE>
CENTURION. The CENTURION is a precision positioning version of the Trimpack
developed for vehicle applications. The sale and distribution of this set is
restricted to the U.S. Forces and selected allies.
MUGR. MUGR (Military Underwater GPS Receiver) is a handheld product
developed under contract to the U.S. Navy. It is marketed primarily for Navy and
Marine special forces activities. The receiver is reduced in size and sealed so
that it can be carried by shallow water divers.
TANS Series. The Trimble Advanced Navigation System (TANS) series includes
a ruggedized sensor consisting of the basic GPS receiver, an antenna, and a
digital interface to transmit GPS information to various other devices; a
further ruggedized version with enhanced tolerance for vibration; and a version
which is upgradable to PPS. The TANS series has been sold to the military
primarily for vehicles piloted from a remote station, and was designed to
replace Omega systems currently used in such vehicles. Its primary purpose is to
add GPS to other systems.
TASMAN. A PPS version of the TANS III, TASMAN is used where high
anti-jamming and spoof requirements exist. It is sold primarily to U.S. forces
and selected allies.
Sales and Marketing
The Company recognizes that selling, marketing, and product distribution
are critical to its future success. In 1996, the Company expanded by adding an
office in Mexico. Also, in 1996 the Company closed offices in Beijing, Egypt,
and Poland as a result of the restructuring actions taken in September 1996. The
Company currently has eight regional sales offices in the United States and six
in Europe, plus offices in Australia, Canada, New Zealand, Japan, Russia,
Singapore, Brazil and Mexico. The Company has developed its sales and marketing
capabilities to anticipate and respond to customer needs as they arise in its
multiple markets. Each market requires specific attention to the needs of its
sales and distribution channels, which are rapidly changing. The Company must
continue to manage its future growth effectively, otherwise, customer support
and operating results may be adversely affected.
Domestic. The Company sells its products in the United States primarily
through dealers, distributors and authorized representatives, supplemented and
supported by the Company's direct sales force. The Company has also pursued
alliances and OEM relationships with established foreign and domestic companies
to assist it in penetrating certain markets.
International. Trimble markets to end-users through a network of over 150
dealers and distributors in more than 85 countries. Distributors carry one or
more product lines and are generally limited to selling either in one country or
in a portion of a country. Trimble occasionally grants exclusive rights to
market certain products within specified countries.
Sales to unaffiliated customers in foreign locations comprised
approximately 47%, 53%, and 51% of Trimble's total revenue in fiscal 1996, 1995,
and 1994, respectively. Sales to unaffiliated customers from shipments to Europe
represented 21%, 23%, and 22% of net revenue in such periods, and sales to
unaffiliated customers from shipments to the Far East represented 19%, 23%, and
22% of total revenue in such periods. See Note 2 to the Consolidated Financial
Statements.
Support. The Company's general terms and conditions for sale of its
products include a one-year warranty. Aviation navigation products, however,
generally are sold with three-year warranty periods, except for the HT9100
product, which has a five-year warranty period. The Company supports its
products on a board replacement level from locations in the United Kingdom,
Singapore, Japan, and Sunnyvale, California. The Company's dealers and
distributors also provide factory-trained third-party maintenance, including
warranty and nonwarranty repairs. The Company reimburses dealers and
distributors for all authorized warranty repairs they perform. The Company does
not derive a significant portion of its revenues from support activities.
Competition
In the markets currently being addressed by the Company, competition is
intense. Within each of its markets, the Company has encountered direct
competition from both foreign and domestic GPS suppliers, and expects
competition to continue to intensify. Specific competitors in each of the
13
<PAGE>
markets the Company currently addresses are mentioned in the section "Markets."
Due to competitive pressure, prices of certain of the Company's products have
declined substantially since their introduction, and increased competition is
likely to result in further price reduction and loss of market share, which
could adversely affect the Company's net revenue.
A number of these markets are also served primarily by non-GPS
technologies, many of which are currently more accepted and less expensive than
GPS-based systems. The success of GPS-based systems against these competing
technologies depends in part on whether GPS systems can offer significant
improvements in productivity, accuracy, and reliability in a cost-effective
manner.
The principal competitive factors in the markets which the Company
addresses include ease of use, physical characteristics (including size, weight,
and power consumption), product features (including differential GPS), product
reliability, price, size of installed base, vendor reputation and financial
resources. The Company believes that its products currently compete favorably
with other products on most of the foregoing factors, although they may be at a
competitive disadvantage against companies with greater financial, marketing,
service and support resources.
* The Company believes that its ability to compete successfully in the
future against existing and additional competitors will depend largely on its
ability to execute its strategy to provide systems and products having
significantly differentiated features more responsive to customer needs. There
can be no assurances that the Company will be able to implement this strategy
successfully, nor that the Company's competitors, many of whom have
substantially greater resources than the Company, will not apply those resources
to compete successfully against the Company on the basis of systems and product
features.
Research and Development
The Company's leadership position in commercial GPS technology is the
result, in large part, of its strong commitment to research and development. The
Company invests heavily in developing GPS technology, including the design of
proprietary software and integrated circuits for GPS receivers, and has spent
$36,705,000, $31,895,000 and $24,763,000 in 1996, 1995 and 1994, respectively,
on research and development. Moreover, Trimble develops substantial systems
expertise and user interfaces for a variety of applications.
Often a new product is initially developed for an individual customer who
is willing to purchase development stage products. The Company has used feedback
from such initial customers as a primary source of information in designing and
refining its products, and in defining, with greater precision, customer needs
in emerging market areas. During 1996, the company created Trimble Labs, where
it devotes a portion of its corporate research and development expenditures to
advance core GPS technology and its integration into synergistic technologies
such as communications, sensors, and computing technologies. These technological
advances are often financially supported through strategic alliances and
partnerships.
The Company expects that a significant portion of future revenues will be
derived from sales of newly introduced products. Consequently, the Company's
future success depends on its ability to continue to develop and manufacture new
competitive products with timely market introduction. Advances in product
technology will require continued substantial investment in research and
development in order to maintain and enhance the Company's market position and
achieve high gross profit margins. Development and manufacturing schedules for
technology products are difficult to predict, and there can be no assurance that
the Company will achieve timely initial customer sales of new products. The
timely availability of these products in volume, and their acceptance by
customers, are important to the future success of the Company. In addition,
certain of the Company's products are subject to governmental and similar
certifications before they can be sold. For example, FAA certification is
required for all aviation products. An inability or delay in obtaining such
certifications could have an adverse effect on the Company's operating results.
The Company has experienced delays in obtaining appropriate certifications for
products acquired as part of the Terra acquisition. Unless the Company receives
this certification, revenues from sales of Terra products may be lower than
expected.
14
<PAGE>
Manufacturing
The Company seeks to be a low-cost producer and to serve the growth in
demand for GPS-based products and systems through flexible automation of
assembly lines, semiconductor integration, and the design of products around a
common core of receivers.
* The Company's manufacturing operations consist primarily of assembly and
testing of products, material and procurement management, quality assurance and
manufacturing engineering. The Company first installed the surface mount
technology (SMT) assembly equipment in a dedicated facility in 1991. This
facility was upgraded in 1995, increasing its capacity by thirty percent. The
Company's experience with SMT has allowed it not only to reduce the reliance on
independent third parties for printed circuit board assembly but also to
significantly reduce the turnaround time to produce prototype printed circuit
board assemblies. The Company has developed relationships with certain outside
contract manufacturers through which it expects to complement its manufacturing
capacity in the future. There are no assurances that these manufacturers will be
able to perform in a timely or economical manner to meet the Company's needs.
The Company maintains quality control procedures for its products,
including testing during design, prototype, and pilot stages of production,
inspection of incoming raw materials and subassemblies, and testing of finished
products using automated test equipment in strife chambers.
The Company has historically manufactured its products in relatively small
quantities. However, the Company must successfully manage the transition to
higher volume manufacturing, including the establishment of adequate facilities,
the control of overhead expenses and inventories, and the management and
training of its employee base. Although the Company has substantially increased
the number of its senior manufacturing personnel and significantly expanded its
manufacturing capacity, there can be no assurance that the Company will not
experience manufacturing or other delays which could adversely affect the
Company's operating results.
The Company takes a modular and upgradable approach to its products,
building around a common core of GPS receivers with customized software and
hardware systems to analyze and present position data. The Company's core
receiver technology has evolved since the development of its first GPS receiver
product in 1984, as the Company has worked to reduce the size, weight, power
consumption, and cost of the basic GPS receiver. In this process, the Company
has designed its own semi-custom, single-chip GPS processor. However, the
Company attempts to utilize standard parts and components that are available
from multiple vendors, including RAM and ROM devices.
The Company believes there are a number of acceptable vendors for most of
the parts and components used in its products. However, a significant number of
components are available only from sole sources. Furthermore, in many cases,
despite the availability of multiple sources, the Company may select a single
source in order to maintain quality control and to develop a strategic
relationship with the supplier. Components for which the Company currently does
not have multiple sources include application-specific integrated circuits
manufactured to the Company's proprietary design by Lucent Technologies, and
Motorola Inc.; displays manufactured by Optrex Corporation, Kyocera Corporation
and Hosiden Corporation; and filters supplied by Murata Electronics of North
America, Inc.; Tokyo America, Inc.; Transtech, Inc.; and Motorola. The Company
is reviewing steps required to qualify alternative sources for these
microprocessors and other single-source components. However, if the Company is
unable to obtain a sufficient supply of such microprocessors or other sole or
single-source components from its current vendors, it is likely the Company
could experience a delay or interruption in product shipments which would
adversely affect the Company's operating results and damage customer
relationships until an alternative source could be obtained. Further, a
significant increase in the price of one or more of these components could
adversely affect the Company's operating results. In the past the Company has
also experienced delays in production caused by insufficient supply of certain
components, but to date, such delays have not caused significant adverse effects
on the Company's operating results.
The Company has experienced problems with the quality of certain high
volume electronic components that have required modification of products both in
manufacturing and in the field. Although the Company has instituted vendor audit
programs, there can be no assurance that the Company will not in the future face
15
<PAGE>
problems with the quality of components that could result in delays in supplies,
interrupt shipments and require modification of products already sold by the
Company, any of which could adversely affect the Company's operating results.
Backlog
The Company believes that backlog is not a meaningful indicator of future
business prospects due to the volume of products delivered from shelf
inventories and the shortening of product delivery schedules. Therefore, the
Company believes that backlog information is not material to an understanding of
its business.
Patents, Trademarks, and Licenses
The Company currently holds 102 patents and 13 related foreign patents,
that expire at various dates no earlier than 2005, and has numerous U.S. and
foreign patent applications pending. The Company currently licenses certain
peripheral aspects of its technology from the U.S. Navy and Spectrum Information
Technologies.
Although the Company believes that its patents and trademarks may have
value, there can be no assurance that the Company's patents and trademarks, or
any additional patents and trademarks that may be obtained in the future, will
provide meaningful protection from competition. The Company believes its success
will depend primarily on the experience, creative skills, technical expertise,
and marketing and sales ability of its personnel.
The Company does not believe that any of its products infringe patent or
other proprietary rights of third parties, but cannot be certain that they do
not do so. (See Note 13 to Consolidated Financial Statements.) If infringement
is alleged, legal defense costs could be material and there can be no assurance
that the necessary licenses could be obtained on terms or conditions that would
not have a material adverse effect on the Company.
In 1992, the Company entered into a Memorandum of Understanding with
Pioneer Electronic Corporation (Pioneer), pursuant to which the Company licensed
certain of the technology contained in its TANS product for inclusion in
in-vehicle navigation products sold in Japan to entities that integrate such
products into other products sold within or outside Japan under Japanese
trademarks. In the third quarter of 1995, a $1,333,000 licensing fee was
received from Pioneer Electronics Corporation in connection with expansion of
the original 1992 license for in-vehicle navigation technology.
The Company has also granted a license to DMT Marinetechnik GmbH, formerly
AEG Aktiengesellschaft, to design, manufacture, sell, and repair products
incorporating an improved version of the Company's TANS technology. The license
is exclusive as to such activities in Germany, and is nonexclusive in Austria
and Switzerland. The license terminates automatically (except as to the
licensee's right to replace, repair, and service existing products) after the
production of 10,000 units of such products, and may also be terminated by
either party upon six months prior notice, effective December 31 of any year
after December 31, 1994.
In 1993, the Company entered into a contract with Space Systems/Loral,
pursuant to which the Company licensed certain technology based on its TANS
product. The license is irrevocable, exclusive and limited to certain space
flight market applications.
The Company expects that it will continue to enter into licensing
arrangements relating to its technologies.
Trimble with the sextant logo, "TrimbleNavigation," "GeoExplorer,"
"Flightmate," "GPS Total Station," "Scout GPS," and "Aspen" are trademarks of
Trimble Navigation Limited, registered in the United States and other countries.
Other trademarks are pending. Trimble Navigation Limited acknowledges the
trademarks of other organizations for their respective products or services
mentioned in this document.
Employees
As of December 31, 1996, the Company employed 1,094 persons: 299 in
research and product development, 344 in sales and marketing, 320 in
manufacturing, and 131 in administration and finance. Of these, 69 were located
16
<PAGE>
in Europe, 136 in New Zealand, 20 in Japan, 8 in Singapore, 4 in Australia, and
857 in the U.S. The Company also currently employs temporary and contract
personnel. Usage of such personnel has increased over the last three years, and
are not included in the above headcount numbers. Competition in recruiting
personnel is intense. The Company believes that its continued ability to attract
and retain highly skilled management, marketing, and technical personnel is
essential to its future growth and success. None of the Company's employees is
represented by a labor union, and the Company has experienced no work stoppages.
The Company's future success depends in large part upon the continued
availability and participation of Charles R. Trimble, its President and Chief
Executive Officer. Mr. Trimble founded the Company and continues to be the only
executive with full responsibility for all aspects of the Company's operations,
including marketing and manufacturing strategies and resource allocation among
the Company's strategic business units. The loss of Mr. Trimble, for any reason,
could have a material adverse effect on the Company.
The Company's success also depends upon the continued contribution and
long-term effectiveness of its other executive officers and key technical,
sales, marketing, support, research and development, manufacturing, and
administrative personnel, many of whom would be difficult to replace.
Executive Officers of the Registrant
The names, ages, and positions of the Company's executive officers are as
follows:
Name Age Position
- ---- --- --------
Charles R. Trimble.................. 55 President, Chief Executive
Office, and Director
Dennis R. Ing....................... 49 Vice President, Finance,
and Chief Financial Officer
Charles E. Armiger, Jr. ............ 42 Vice President, Sales
Ralph F. Eschenbach................. 51 Vice President, Chief Technical
Officer
Michael P. Gagliardi................ 39 Vice President, General Manager,
Aerospace
David M. Hall....................... 48 Vice President, General Manager,
Software & Component Technologies
James L. Sorden..................... 59 Executive Vice President, General
Manager, Commercial Systems
David E. Vaughn .................... 51 Executive Vice President,
Business Development
All officers serve at the discretion of the Board of Directors. There are
no family relationships between any of the directors or officers of the Company.
Charles R. Trimble as President, Chief Executive Officer, one of the
Company's founders, and a director of the Company since November 1978 has
strategically guided Trimble to its dominant role in the GPS information
technology market. Prior to founding the Company, Mr. Trimble was Manager of
Integrated Circuit Research and Development at Hewlett Packard's Santa Clara
division. Mr. Trimble holds four patents in signal processing and one in GPS and
is currently serving as the Chairman of the United States GPS Industry Council
(USGIC). He received his B.S. degree in Engineering Physics with honors in 1963
and an M.S. degree in Electrical Engineering in 1964 from the California
Institute of Technology.
Dennis R. Ing joined Trimble in May 1996 as Vice President, Corporate
Controller. In September 1996 he was appointed Vice President of Finance, and
Chief Financial Officer. Prior to Trimble, Mr. Ing was employed by Amdahl
Corporation, a high technology company based in Sunnyvale, California, most
recently serving as Director of Alliances and Acquisitions. Prior to that, Mr.
Ing served as Chief Financial Officer of Open Enterprise Systems, a $200 million
division of Amdahl. Mr. Ing also served as Vice President of Finance and
Administration for both Amdahl Canada Limited and Amdahl Communications Inc.
Before joining Amdahl Corporation in 1979, Mr. Ing worked at Touche Ross & Co.,
Chicago & NorthWestern Transportation, and the Chicago Hospital Council. He
currently serves on the Board of Directors of Lexa Software Corporation. Mr. Ing
received his MBA from DePaul University in 1977 and a B.S. in Engineering from
the University of Illinois in 1972.
17
<PAGE>
Charles E Armiger, Jr. joined Trimble in January of 1989 as Sales and
Marketing Manager for aviation products. From January 1991 to December 1993, he
served as Director of U.S. Domestic Sales. Mr. Armiger held the post of Director
of Sales for North American West from January 1993 to November 1994. Then in
December 1994, he moved to Trimble's European office in Hook, England, to serve
as Director of Sales for Europe, the Middle East and Africa. In September of
1996, he was appointed to serve as Vice President for Commercial Systems Sales.
Prior to joining Trimble, Mr. Armiger was Director of Sales and Marketing for
ARNAV Systems, Inc. He received a B.S. degree in Business from the University of
the State of New York, Regents College in 1996.
Ralph F. Eschenbach joined Trimble as Vice President of Research and
Development in 1983. From November 1989 to February 1993, he served as Vice
President of Avionics and Sensor Products. From February 1993 to July 1994, he
served as Vice President of Navigation Products. In July 1994, Mr. Eschenbach
was appointed to the position of Vice President of Business Development, where
he was responsible for defining and developing business opportunities to create
new solutions for the GPS market in areas not covered by Trimble's current
product lines. In September 1996 he was appointed to the post of Vice President,
Chief Technology Officer. Prior to joining the Company, he was an engineer and
an engineering manager with Hewlett-Packard Company from June 1968, where he was
responsible for the development of a low-cost GPS receiver. In 1997, Mr.
Eschenbach was appointed Chairman of the Federal Aviation Administration's
Research, Engineering and Development (R,E,&D) Advisory Committee. He is also a
member of NASA's Research & Development Advisory Committee. Mr. Eschenbach
currently serves on the Boards of Directors of ProShot Golf, Inc.; Pinpoint Golf
Advertising; and Powerstream Techologies. He received a B.S. degree in
Electrical Engineering from the University of California at Berkeley in 1968 and
an M.S. degree in Electrical Engineering from Stanford University in 1970.
Michael P. Gagliardi joined Trimble as Vice President and General Manager
of the Aerospace business unit based in Austin, Texas, in January 1997. Mr.
Gagliardi joined Trimble from BFGoodrich Company,a diversified consumer and
industrial products company, where he served as Group Vice President of the
Water Systems and Services Group; President of Arrowhead Industrial Water, Inc.;
and President of FlightSystems, Inc. Prior to his tenure at BFGoodrich, he
worked for 11 years at The General Electric Company in several management
positions, including technical engineering assignments, progressing through
critical marketing roles, and on to general management and executive positions.
Mr. Gagliardi received his BS degree in Electrical Engineering from the
University of Pittsburgh in 1979, an MS degree in Electrical Engineering from
Southern Methodist University in 1981, and an MBA from Duke University in 1989.
David M. Hall joined Trimble in February 1994 as Managing Director, OEM
products. In November 1996 he was appointed Vice President and General Manager
of the Software and Component Technologies business unit. He previously worked
for Raychem Corporation, a diversified electronics company, for twenty-one years
in a variety of positions and divisions. He served as Director of Sales and
Marketing for the Automotive Division, National Distribution Manager for the
Electronics Sector, and Director of Marketing and Product Management for the
Interconnect Systems Division, as well as District Sales Manager, Area Sales
Manager, and Operations Manager. Mr. Hall received his B.S. degree in Industrial
Technology in 1971 and his MBA in Marketing and Finance in 1973 from the
California Polytechnic State University in San Luis Obispo, Ca.
James L. Sorden joined Trimble as Vice President of Product Development in
May 1987. From February 1993 to 1994, he served as Vice President of Surveying
and Mapping. In November 1994, Mr. Sorden was appointed to the position of
Executive Vice President of Surveying, Mapping, Military and Marine
Instrumentation Systems. In September 1996, he was appointed Executive Vice
President of Commercial Systems, which consolidates Surveying & Mapping and
Tracking & Communications. Prior to joining Trimble, Mr. Sorden worked in
various engineering, marketing and management positions at Hewlett-Packard
between 1964 and 1987. He holds U.S. and foreign patents in the fields of
electronic measurement, surveying instrumentation, and vehicle safety. Mr.
Sorden currently serves on the Board of Directors of Datacom Software Research,
New Zealand, and Aquila Mining Systems Ltd, Canada. He received his BSEE from
the University of Wisconsin in 1962 and undertook engineering graduate studies
at Wisconsin and Stanford.
18
<PAGE>
David E. Vaughn joined Trimble as Vice President of Operations in May 1991.
From 1993 to 1994, he served as Vice President of Tracking Systems and
Communications. In November 1994 he became Executive Vice President of Tracking
Systems and Communications. In September 1996 he was appointed to the post of
Executive Vice President of Business Development, which includes Trimble's newly
formed Trimble Labs. Prior to joining Trimble, Mr. Vaughn was President and
Chief Executive Officer of Magnesys, a manufacturer of integrated circuits, from
1987 to 1991. From 1985 to 1987 he was Vice President of Manufacturing for Asyst
Technologies, a manufacturer of clean room material handling robots. Prior to
1985, he worked in manufacturing management positions with Apple Computer and
Hewlett-Packard. Mr. Vaughn received his B.S. degree in Electronics in 1971 and
an M.B.A. in Operations Research in 1973 from California Polytechnic State
University.
Item 2. Properties
The Company currently leases and occupies 13 buildings in Sunnyvale,
California, totaling approximately 350,000 square feet. The leases on these
buildings expire at various dates through 2001. The Company leases and occupies
three buildings in Austin, Texas, approximately 50,600 square feet, to
manufacture GPS-based aviation products; the leases expire at various dates
through 2001. The Company also leases a 47,000 square-foot facility in
Christchurch, New Zealand, for software development. The two largest
international sales offices are those in the United Kingdom (13,400 square feet)
and Japan (5,900 square feet). The Company also leases sales offices in
Australia, France, Germany, Italy, Spain, Singapore, Russia, and Mexico, and in
various cities throughout the United States. The Company's international office
leases expire at various dates through 2005. Certain of the leases have renewal
options. The Company believes that its facilities are adequate to support its
current and anticipated future operations.
Item 3. Legal Proceedings
The information in respect to legal proceedings required by this item is
included in Part II, Item 8, Note 13 of the Notes to Consolidated Financial
Statements, hereof under the caption "Pending Matters."
Item 4. Submission of Matters to a Vote of Security Holders
Not applicable.
19
<PAGE>
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters
The Company's Common Stock is traded on the Nasdaq National Market under
the symbol TRMB. The following table sets forth, for the quarter indicated, the
range of high and low closing sales prices for the Company's Common Stock on the
Nasdaq National Market:
High Low
1995:
First 19 3/4 15 1/2
Second 30 3/4 15 1/2
Third 35 3/8 24 1/2
Fourth 25 1/2 14 1/2
1996:
First 24 15 3/4
Second 26 1/4 18 3/8
Third 21 3/8 14 3/4
Fourth 16 5/8 10 7/8
The Company had 1,760 shareholders of record as of March 16, 1997.
The Company's stock price is subject to significant volatility. If revenues
or earnings fail to meet the expectations of the investment community, there
could be an immediate and significant impact on the trading price for the
Company's stock. Due to stock market forces that are beyond the Company's
control, and the nature of the Company's business, such shortfalls can be
sudden.
The Company has never paid cash dividends on its Common Stock. The Company
presently intends to retain earnings to finance the development of the Company's
business and does not presently intend to declare any cash dividends in the
foreseeable future. Under the Company's current $30,000,000 revolving line of
credit agreement, the Company is restricted from paying dividends without the
lender's consent. Under the Company's Subordinated Promissory Notes Agreement
pursuaint to which the Company issued $30,000,000 of its subordinated promissory
notes in June 1994, the Company is also restricted from paying dividends. See
Notes 4 and 7 of Notes to Consolidated Financial Statements contained in Item 8.
20
<PAGE>
Item 6. Selected Financial Data
HISTORICAL FINANCIAL REVIEW
Summary Consolidated Statements of Operations Data
<TABLE>
<CAPTION>
Years ended December 31, 1996 1995 1994 1993 1992
- ----------------------------------------------------------------------------------------------------------------
(In thousands, except per share data)
<S> <C> <C> <C> <C> <C>
Revenue ........................................ $ 233,660 $ 235,360 $ 175,694 $ 149,491 $ 127,550
---------- ---------- ---------- ---------- ----------
Operating expenses:
Cost of sales .............................. 112,596 102,666 69,294 67,814 69,007
Research and development ................... 36,705 31,895 24,763 23,070 28,546
Sales and marketing ........................ 64,391 62,672 51,621 37,409 32,946
General and administrative ................. 30,142 24,824 14,735 13,414 12,120
Restructuring charges ...................... 2,134 -- -- -- 6,861
---------- ---------- ---------- ---------- ----------
Total operating expenses ............. 245,968 222,057 160,413 141,707 149,480
---------- ---------- ---------- ---------- ----------
Operating income (loss) ........................ (12,308) 13,303 15,281 7,784 (21,930)
Nonoperating income (expense), net ............. 706 773 (3,057) (3,580) (1,774)
---------- ---------- ---------- ---------- ----------
Income (loss) before income taxes and cumulative
effect of accounting change .................. (11,602) 14,076 12,224 4,204 (23,704)
Income tax provision (benefit) ................. (300) 2,815 2,200 755 (712)
---------- ---------- ---------- ---------- ----------
Income (loss) before cumulative effect of
accounting change ........................... (11,302) 11,261 10,024 3,449 (22,992)
Cumulative effect of accounting change (i) ..... -- -- -- -- (2,277)
---------- ---------- ---------- ---------- ----------
Net income (loss) .............................. $ (11,302) $ 11,261 $ 10,024 $ 3,449 $ (25,269)
========== ========== ========== ========== ==========
Net income (loss) per share:
Income (loss) before cumulative effect of
accounting change ......................... $ (0.51) $ 0.53 $ 0.53 $ 0.19 $ (1.37)
Cumulative effect of accounting change (i) -- -- -- -- (0.14)
---------- ---------- ---------- ---------- ----------
Net income (loss) ......................... $ (0.51) $ 0.53 $ 0.53 $ 0.19 $ (1.51)
========== ========== ========== ========== ==========
Weighted average common and dilutive
common equivalent shares .................. 22,005 21,306 19,062 18,444 16,726
========== ========== ========== ========== ==========
Cash dividends per share ....................... $ -- $ -- $ -- $ -- $ --
========== ========== ========== ========== ==========
</TABLE>
(i) Effective January 1, 1992, the Company changed its method of accounting
for income taxes from the deferred method to the liability method required by
Statement of Financial Accounting Standard No. 109, "Accounting for Income
Taxes" (FAS 109). The cumulative effect of adopting FAS 109 as of January 1,
1992, was to increase the 1992 net loss by $2,277,000 or $0.14 per share.
Selected Balance Sheet Data
<TABLE>
<CAPTION>
As of December 31, 1996 1995 1994 1993 1992
- --------------------------------------------------------------------------------------------
(In thousands)
<S> <C> <C> <C> <C> <C>
Working capital .................... $ 124,545 $ 135,896 $ 70,207 $ 29,251 $ 20,670
Total assets ....................... 189,841 196,763 109,363 67,647 69,548
Bank borrowings .................... -- -- -- 1,311 9,500
Noncurrent portion of long-term debt 29,507 29,739 31,736 4,539 5,853
Shareholders' equity ............... $ 124,045 $ 129,937 $ 53,574 $ 38,890 $ 29,483
</TABLE>
21
<PAGE>
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
In 1996, the Company's annual revenues decreased by less than 1% to $233.7
million. In 1996 the Company had a net loss of $11.3 million, or $0.51 per
share, compared to net income of $11.3 million, or $0.53 per share, in 1995.
In September 1996, the Company implemented a work force reduction of
approximately 10% and consolidated certain manufacturing facilities and
services. These actions reduced sales and general and administrative expenses by
approximately 10% in the fourth quarter, compared to the third quarter of 1996.
RESULTS OF OPERATIONS
The following table sets forth for the periods indicated certain financial
data as a percentage of total revenue:
Years ended December 31 1996 1995 1994 1993
- -------------------------------------------------------------------------------
Revenue 100 % 100 % 100 % 100 %
----------------------------------------------
Operating expenses:
Cost of sales 48 44 39 45
Research and development 16 13 14 15
Sales and marketing 27 27 30 25
General and administrative 13 10 8 9
Restructuring charges 1 0 0 0
----------------------------------------------
Total operating expenses 105 94 91 94
----------------------------------------------
Operating income (loss) (5) 6 9 6
Nonoperating income (expense), net 0 0 (2) (2)
----------------------------------------------
Income (loss) before income taxes (5) 6 7 8
Income tax provision (benefit) 0 1 1 1
----------------------------------------------
Net income (loss) (5)% 5 % 6 % 7 %
==============================================
Revenue. In 1996, total revenue decreased to $233.7 million from $235.4
million in 1995, which represents a percentage decrease of less than 1%. Total
revenue increased in 1995 to $235.4 million from $175.7 million in 1994, which
represents a percentage increase of 34%. The table below shows revenues under
the Company's new operating structure that was created in September 1996. Prior
periods revenues have been reclassified in order to make amounts comparable.
<TABLE>
<CAPTION>
Years Ended December 31,
----------------------------------------------------------------------------------
% Total % Total % Total
1996 Revenue 1995 Revenue 1994 Revenue
- ---------------------------------------------------------------------------------------------------------------------------
(In thousands)
<S> <C> <C> <C> <C> <C> <C>
Commercial Systems $ 158,273 68% $ 162,393 69% $ 127,817 73%
Software & Component Technologies 38,054 16% 35,416 15% 18,809 11%
Aerospace 37,333 16% 37,551 16% 29,068 16%
------------ ---------- ------------ ----------- ----------- ----------
Total revenue $ 233,660 100% $ 235,360 100% $ 175,694 100%
------------ ---------- ------------ ----------- ------------ ----------
</TABLE>
22
<PAGE>
Commercial Systems
The Commercial Systems business unit revenues decreased 3% in 1996 from
1995 and had a growth rate of 27% in 1995 over 1994. The decrease in 1996 as
compared to 1995 is primarily in the Land Survey and Tracking vertical markets.
The decrease in Land Survey sales in 1996 compared to 1995 was due to a
slowdown in sales in Europe and Japan. Europe experienced a downturn in
shipments due in part to construction spending in the major economies of Europe
being lower than traditional levels. Shipments of the higher-end Real-Time
Kinematic (RTK) survey product in Japan has slowed due to the Japanese
Government's decision to evaluate RTK survey methods before certifying its use
for official surveys. The Company is now selling at the low cost end of the
market as opposed to the high cost end of the market. Shipments in the U.S.,
Latin America, and Asia-Pacific outside Japan were higher than last year.
This decrease in Land Survey was partially offset by an increase in
revenues in the first quarter of 1996, compared to the first quarter of 1995,
which was due to increased acceptance of the Company's products, extension of
sales efforts into new geographic territories, and an increase in the number of
field sales employees.
Tracking revenues are lower in 1996 compared to 1995, primarily due to
lower sales to American Mobile Satellite Corporation (AMSC). In March 1995, the
Company signed a large contract for the supply of Galaxy/GPS land mobile
satellite terminals to AMSC, a Reston, Virginia, based company that provides a
variety of voice and data services via satellite. AMSC contracted for delivery
of product beginning in mid-1995 and continuing through 1996. Late in the fourth
quarter of 1995, AMSC requested that the Company cease delivery, in part due to
delays in AMSC's completion of software. Shipments under the original contract
were halted in the fourth quarter of 1995 and the contract was amended. Revenues
from shipments to AMSC under this contract during 1995 were $4,176,000 in the
second quarter and $3,125,000 in the third quarter. Contract renegotiation fees
of $1,080,000 were recognized in the first quarter of 1996. The amended contract
between the Company and AMSC calls for production line shutdown fees for the
time that Trimble is not manufacturing product for shipment to AMSC. Due to the
uncertainty about AMSC's ability to pay, revenues for products shipped and
contractual shutdown fees were not recognized until collection was considered
probable. In the second quarter of 1996, the Company recognized $1,700,000 in
revenue from products shipped in December 1995 and March 1996, and $1,000,000 of
shutdown fees, all of which have been paid. In the third quarter of 1996, the
Company recognized $100,000 of shutdown fees, all of which have been paid. In
the fourth quarter of 1996, the Company recognized $300,000 of shutdown fees,
all of which have been paid. On February 20, 1997, an agreement was signed
between Trimble and AMSC to resume shipments of its Galaxy/GPS terminals at the
rate of 500 units per month, beginning in March 1997. As a result of this
agreement the Company has dropped a complaint which was filed in October 1996
against AMSC in the Superior Court of California in Santa Clara County. (See
Note 13 of the Notes to the Consolidated Financial Statements for more details.)
* In September 1996, the Company entered into a contract with Caterpillar
Inc. to develop and market products for the construction and mining markets. The
Company agreed to develop, without funding from Caterpillar Inc., customized
equipment starting in the fourth quarter of 1996 and to sell it exclusively to
Caterpillar for use in this market. Shipments are expected to start in the first
half of 1997. The Company also expects average selling prices will likely
decline with increased competition. In addition to the markets the Company
currently addresses in the surveying and mapping arena (primarily land survey),
the Company is addressing new markets, including the mining and construction
market. If the Company cannot adequately compete in new markets through the
development and manufacture of new products, there can be no assurance that
growth will continue.
In 1995, Commercial Systems revenue was supplemented by $1.0 million
received under a contract with a customer whereby the Company agreed not to
compete, and sold exclusive distribution rights.
Software and Component Technologies
The Software and Component Technologies business unit revenues have grown
7% in 1996 from 1995 and 88% in 1995 over 1994. The increase in 1996 from 1995
was due to a slight increase in demand. The increase in 1995 from 1994 was due
to alliances with Philips Car System and Xanavi Informatics Corporation for
in-vehicle navigation and Glenayre Technologies in the timing market. The
Software and Component Technologies market consists of OEM (original equipment
manufacture) and consumer products.
23
<PAGE>
In 1995, Software & Component Technologies revenue was supplemented by
technology licenses of $1.3 million.
Aerospace
* Aerospace product sales slight decrease from 1995 to 1996 reflects weak
sales for military products in 1996, compared to a strong sales for 1995. These
sales were offset by strong sales for aviation products in 1996, compared with
weak aviation product sales for 1995. On September 18, 1996, the Company
received FAA certification of the HT9100 product allowing production and
installation to begin late in the third quarter. This product accounted for most
of the increase in Aerospace revenues for the second half of 1996, compared to
the second half of 1995. Aslo, Aviation product sales were higher in the second
half of 1996, as compared to 1995, due in part to sales of product acquired from
Terra Corporation (See Note 5 to the Consolidated Financial Statements for
additional information). The Company considers its Aerospace products to be a
long term growth opportunity. It believes that success in this area will be
dependent upon the success of a current strategic alliance with Honeywell.
Military sales are highly dependent on contracts which are subject to
government approval and are, therefore, expected to continue to fluctuate from
period to period. The Company believes that opportunities in this market have
been substantially reduced by cutbacks in U.S. and foreign military spending.
Export sales from domestic operations, as a percentage of total revenue,
were 25% in 1996, 21% in 1995 and 28% in 1994. Sales to unaffiliated customers
in foreign locations, as a percentage of total revenue, was 47% in 1996, 53% in
1995, and 51% in 1994. (See Note 2 to the Consolidated Financial Statements.)
The Company anticipates that export revenue and sales made by its subsidiaries
in locations outside the U.S. will continue to account for a significant portion
of its revenue, and, therefore, the Company is subject to the risks inherent in
these sales, including unexpected changes in regulatory requirements, exchange
rates, governmental approval, tariffs or other barriers. Even though the U.S.
Government announced on March 29, 1996, that it would support and maintain the
GPS system, as well as eliminate the use of Selective Availability (S/A) (a
method of degrading GPS accuracy), in certain foreign markets there may be a
reluctance to purchase products based on GPS technology, given the control of
GPS by the U.S. Government. The Company's results of operations could be
adversely affected if the Company were unable to continue to generate
significant sales in locations outside the U.S.
No single customer, including the U.S. Government and its agencies,
accounted for 10% or more of total revenue in 1996, 1995 or 1994. It is
possible, however, that in future periods the failure of one or more large
customers to purchase products in quantities anticipated by the Company may
adversely affect results of operations.
Gross Margin. Gross margin varies due to a number of factors, including
product mix, domestic versus international sales, customer type, the effects of
production volumes and fixed manufacturing costs on unit product costs and new
product start-up costs. In 1996, the gross margin percentage on product sales
was 52%, compared with 56% in 1995 and 61% in 1994. The 1996 margins are
enhanced by the positive impact of non-product revenues recognized from AMSC of
$2.48 million in 1996. (See "Results of Operations-Revenue" for more details.)
The Company has a history of recording such non-recurring items in the past,
including revenues of $2.3 million in 1995. There can be no assurance that
similar items will recur in the future. The decrease in the gross margin
percentages primarily reflects a shift in product mix from higher margin
Commercial Systems sales to lower margin Avionics and OEM products, and
decreases in the margins obtained on sales of Commercial Systems products. In
addition, because of mix changes within and among the business units, market
pressures on unit selling prices, fluctuations in unit manufacturing costs and
other factors, there is no assurance that current margins will be sustained.
While Commercial Systems products have the highest gross margins of all the
Company's products, their margins have decreased primarily due to the need to
lower prices in response to competition. The Company expects competition to
increase in its Commercial Systems markets and it is therefore likely that
further price erosion will occur, with consequent lower gross margins
percentages.
* In the future, the Company expects a higher percentage of its business to
be conducted through alliances with strategic partners, e.g. Honeywell and
Caterpillar, for example. As a result of volume pricing and the assumption of
certain operating costs by the partner, margins for this business are likely to
be lower than sales directly to end-users.
24
<PAGE>
Operating Expense. The following table shows operating expenses for the
periods indicated, and should be read in conjunction with the narrative
descriptions of those operating expenses below:
Years Ended December 31,
-------------------------------------------
1996 1995 1994
- ---------------------------------------------------------------------------
(In thousands)
Research and development $ 36,705 $ 31,895 $ 24,763
Sales and marketing 64,391 62,672 51,621
General and administrative 30,142 24,824 14,735
Restructuring charges 2,134 - -
------------ ------------ ------------
Total $ 133,372 $119,391 $ 91,119
------------ ------------ ------------
Research and Development. Research and development spending increased
during 1996, representing 16% of revenue as compared with 14% in both 1995 and
1994. The increase from 1995 to 1996 is due primarily to an increase in
personnel and the related expenses which accompany an increase in the number of
employees. There was also an increase in the number of specialized engineering
consultants and temporary employees. The increase in research and development is
part of the Company's continuing aggressive development of future products.
* Sales and Marketing. Sales and marketing expenses increased during 1996,
representing 28% of revenue, 27% in 1995, and 29% in 1994. The primary reason
for the dollar increases in expenses since 1994 is an increase in personnel and
advertising costs. Other less significant reasons for the increases are higher
marketing related and field service support costs. Selling and marketing
expenses are expected to decrease in the future as a percentage of revenue, as a
result of the restructuring actions taken in September 1996. Sales offices in
China, Egypt, Italy and Poland were closed, and the sizes of certain offices in
the US has been reduced.
The Company's future growth will depend on the timely development and
continued viability of the markets in which the Company currently competes, and
upon the Company's ability to continue to identify and exploit new markets for
its products. In addition, the Company has encountered significant competition
in selected markets, and the Company expects such competition to intensify as
the market for GPS applications receives acceptance. Several of the Company's
competitors are major corporations with substantially greater financial,
technical, marketing and manufacturing resources. Increased competition is
likely to result in reduced market share and in price reductions of GPS-based
products, which could adversely affect the Company's revenues and profitability.
General and Administrative. General and administrative expenses increased
in 1996 over 1995 primarily as a result of the higher litigation and legal
settlement costs incurred in the first six months of the year, as compared to
the same period in 1995, as well as an increase in the bad debt expense and
amortization of goodwill related to the Terra acquisition. The Company expects
legal fees to continue to be high, due to the Company's involvement in
litigation matters. (See Note 13 to the Consolidated Financial Statements.) The
increase in 1995 over 1994 was due to increased legal fees, information systems
support costs, an increase in the provision for uncollectible accounts
receivable, as well as an increase in administrative costs in the business
units.
Restructuring Charges. During the quarter ended September 30, 1996, the
Company recorded a restructuring charge of $2,046,000. An additional $88,000 was
added in the fourth quarter of 1996. As of December 31, 1996, $1,345,000 of
restructuring costs had been paid. Components of this restructuring reserve
included employee severance packages, the costs of redundant office space, and
write-downs of idle assets. The Company took this action in order to bring
operating expenses into line with revenues and to restructure existing
operations in a more efficient manner. As part of the restructuring, the Company
reorganized itself into three business units--Commercial Systems, Software and
Component Technologies, and Aerospace. There can be no guarantee that the
results of the restructuring will be successful and will have the intended
effect.
25
<PAGE>
Nonoperating income (expense), net. Nonoperating income (expense), net,
includes interest income and expense, as well as gains and losses on foreign
currency transactions and, in 1994, a royalty arbitration settlement charge.
Foreign exchange losses were $4,000 in 1996, compared with a gain of $1.1
million in 1995. In the second quarter of 1995 the Company adopted a policy of
hedging its exposure to foreign currency transactions to minimize the effect of
changes in foreign currency exchange rates on consolidated results of
operations. Gains and losses arising from foreign currency forward contracts
offset gains and losses resulting from the underlying hedged transactions. Most
of the foreign exchange gains recorded in 1995 were incurred in the period
before this policy was in place.
Interest income increased in 1996 due to higher interest income received on
cash and short term investments in the first half of 1996, compared with the
first half of 1995, primarily from the Company's public offering proceeds in
August 1995. Interest income increased in 1995 over 1994, primarily due to
higher interest income received on higher levels of cash and short term
investments resulting primarily from the Company's public offering proceeds.
Interest expense increased slightly in 1996 due to higher fees on unused
lines of credit. Interest expense includes interest on a $30 million note issued
in August 1995, and fees on unused lines of credit. (See Notes 4 and 7 to the
Consolidated Financial Statements for details of long-term debt and lines of
credit.)
During 1994, the Company recorded a charge of $1.4 million to reflect an
unfavorable court decision related to a dispute between the Company and Avion
Systems Inc. as to certain technology the Company licensed from Avion in 1991.
(See Notes 13 to the Consolidated Financial Statements.)
Income Tax Provision. The Company's combined federal, foreign and state
effective income tax benefit of 3% in 1996 is less than the federal statutory
tax rate of 35%, primarily due to limitations on the utilization of the 1996
operating loss. The income tax provision of 20% in 1995, and 18% in 1994 is less
than the statutory rate, primarily due to realization of previously reserved
deferred tax assets. The 1995 rate is higher than the 1994 rate, primarily due
to higher foreign taxes.
Inflation. The effects of inflation upon the Company's financial results
have not been significant to date.
LITIGATION
* The Company is involved in a number of legal matters that occupy an
increasing amount of management time and expense. These matters are more fully
discussed in Note 13 to the Consolidated Financial Statements. While the Company
does not expect to suffer significant adverse effects from this litigation, or
unasserted claims, the nature of litigation is unpredictable, and there can be
no assurance that it will not do so.
LIQUIDITY AND CAPITAL RESOURCES
* In 1996 the cash used in operating activities was $3.9 million. Cash
provided by sales of common stock in 1996 represents proceeds from purchases
made pursuant to the Company's stock option and employee stock purchase plans,
and totaled $5.8 million. During 1996 the Company has relied primarily on cash
provided by financing activities and net sales of short-term investments to fund
operations, capital expenditures and other investing activities. The Company's
ability to generate cash from operations will depend in large part on revenues
and the rate of collections of accounts receivable.
In 1995 operating activities provided cash flows of $11.4 million. Cash
flow from financing activities consisted primarily of $57.2 million from the
sale of 2.1 million shares of Common Stock in an underwritten public offering,
and $7.3 million from issuances under various employee stock plans. These
sources of cash flow were used primarily to pay down long-term debt of $1.6
million and purchase property and equipment of $14.6 million. The remaining cash
flow was used to increase cash, cash equivalents and short-term investments.
In August 1995, the Company entered into a $30.0 million unsecured line of
credit agreement with two banks; it expires in July 1997. The agreement enables
the Company to borrow up to $30.0 million provided that certain financial and
other covenants are met. The agreement provides for payment of a commitment fee
of 0.5% for the unused portion of the line of credit. Borrowings bear interest
at the higher of (i) one of the bank's annual prime rate, and (ii) the federal
26
<PAGE>
funds rate plus 0.5%. In August 1995 the Company terminated a prior $15 million
line of credit agreement originally entered into in January 1993. No borrowings
were made under either the old or new lines of credit during 1996 and 1995.
* In February 1996, the Company announced that it had approved a
discretionary program whereby up to 600,000 shares of its common stock may be
repurchased to offset potential dilutive effects to earnings per share from the
issuance of stock options. The Company intends to use existing cash, cash
equivalents and short-term investments to finance any stock repurchases under
this program. In 1996, 250,000 shares were purchased at a cost of $3,545,000 and
the Company intends to continue repurchasing its common stock under this
program.
* The Company presently expects 1997 capital expenditures to be
approximately $14.0 million, primarily for production equipment, computer
equipment, software, and leasehold improvements associated with business
expansion.
* At December 31, 1996, the Company had cash and cash equivalents of $22.7
million and $59.9 million in short term investments. The Company's long-term
debt consisted primarily of a $30.0 million note obligation due in 2001, and the
Company had no debt outstanding under its line of credit. The Company believes
that its current cash balances, available bank financing, and cash flow from
operations will be sufficient to meet its anticipated cash needs in the
foreseeable future.
CERTAIN OTHER RISK FACTORS
Revenue has tended to fluctuate on a quarterly basis due to the timing of
shipments of products under contracts, the sale of licensee rights, and seasonal
patterns favoring spring and summer for Commercial Systems business. This
pattern was not repeated in 1996 and the Company can give no assurances that
there will be any reversion to the seasonal revenue trends. A significant
portion of quarterly revenues occurs from orders received and immediately
shipped to customers in the last few weeks and days of a quarter. If orders are
not received, or if shipments were to be delayed a few days at the end of a
quarter, the operating results and reported earnings per share could be
significantly impacted. Future revenues are difficult to predict, and
projections are based primarily on historical models which are not necessarily
accurate representations of the future.
* The Company has a relatively fixed cost structure in the short term which
is determined by the business plans and strategies the Company intends to
implement in the markets it addresses. This effective leveraging means that
increases or decreases in revenues have more than a proportional impact on net
income or losses. The Company estimates that a change in product revenue of $1
million would change earnings per share by 2 to 3 cents.
A number of products that were previously being manufactured by Terra have
yet to be certified by the Federal Aviation Authority. Unless the Company
receives this certification, revenues from sales of Terra products may be lower
than expected.
* In the longer term, the Company believes that the Software and Component
Technologies business unit will comprise a significant portion of the Company's
business. The Software and Component Technologies business unit differs in
nature from most of the Company's markets because volumes are high and margins
relatively low. Software and Component Technologies customers are extremely
price sensitive. As costs decrease through technological advances, these
advances will be passed on to the customer. To compete in the Software and
Component Technologies market requires high-volume production and manufacturing
techniques. Customers expect high quality standards with very low defect rates.
The Company is relatively inexperienced compared to competitors with far greater
resources in such high-volume manufacturing and associated support activities.
The value of the Company's products relies substantially on the Company's
technical innovation in fields in which there are many current patent filings.
The Company recognizes that as new patents are issued or are brought to the
Company's attention by the holders of such patents, it may be necessary for the
Company to withdraw products from the market, take a license from such patent
holders, or redesign its products. The Company does not believe any of its
products infringe patents or other proprietary rights of third parties, but
cannot be certain that they do not. (See Note 13 to the Consolidated Financial
27
<PAGE>
Statements.) 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. Such events could have a material adverse
effect on the Company's revenues or profitability.
The Company is continually evaluating alliances and external investments in
technologies related to its business, and has already entered into alliances and
made relatively small investments in GPS related technology companies.
Acquisitions of companies, divisions of companies, or products and alliances
entail numerous risks, including (i) the potential inability to successfully
integrate acquired operations and products or to realize anticipated synergies,
economies of scale or other value, (ii) diversion of management's attention, and
(iii) loss of key employees of acquired operations. Any such problems could have
a material adverse effect on the Company's business, financial condition, and
results of operations. No assurances can be given that the Company will not
incur problems from current or future alliances, acquisitions, or investments.
Furthermore, there can be no assurance that the Company will realize value from
any such alliances, acquisitions, or investments.
Information with respect to GPS Navstar satellite system is included in
Part I hereof under the caption "Background" paragraph number 6.
NEW ACCOUNTING STANDARDS
In June 1996, the Financial Accounting Standards Board issued SFAS No. 125,
"Accounting for Transfers and Servicing of Financial Assets and Extinguishments
of Liabilities." This statement is effective for transfers and servicing of
financial assets and extinguishment of liabilities occurring after December 31,
1996. At December 31, 1996, the Company was contingently liable to a Japanese
bank for $4,146,000, at year end exchange rates arising from customers' notes
receivable which the Company sold with recourse to the bank. The implementation
of the new accounting standard, if adopted early, would have increased
liabilities and accounts receivable by this amount. (See Note 4 to the
Consolidated Financial Statements.) The Company will adopt this accounting
standard on January 1, 1997, as required.
28
<PAGE>
Item 8. Financial Statements
CONSOLIDATED BALANCE SHEETS
December 31, 1996 1995
- --------------------------------------------------------------------------------
ASSETS
Current assets:
Cash and cash equivalents $ 22,671 $ 29,711
Short-term investments 59,867 67,451
Accounts receivable, less allowance for doubtful
accounts of $2,393 and $1,074 34,374 39,123
Inventories 38,858 31,201
Deferred income taxes - 722
Other current assets 3,633 3,198
---------- ---------
Total current assets 159,403 171,406
Property and equipment, at cost less accumulated
depreciation 21,504 19,751
Intangible assets less accumulated amortization 4,493 870
Deferred income taxes 383 852
Other assets 4,058 3,884
---------- --------
Total assets $ 189,841 $ 196,763
========== =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt $ 316 $ 2,014
Accounts payable 13,763 15,329
Accrued compensation and benefits 6,552 5,745
Customer advances 3,000 1,080
Accrued liabilities 10,358 8,340
Income taxes payable 869 3,002
---------- --------
Total current liabilities 34,858 35,510
Noncurrent portion of long-term debt and other liabilities 30,938 31,316
---------- ---------
Total liabilities 65,796 66,826
---------- ---------
Commitments and contingencies
Shareholders' equity:
Preferred stock, no par value; 3,000 shares
authorized; none outstanding - -
Common stock, no par value; 40,000 shares
authorized; 22,063 and 21,642 outstanding,
respectively 125,535 120,449
Common stock warrants 700 700
Retained earnings (deficit) (2,603) 8,699
Unrealized gain (loss) on short-term investments 20 102
Foreign currency translation adjustment 393 (13)
---------- --------
Total shareholders' equity 124,045 129,937
---------- ---------
Total liabilities and shareholders' equity $ 189,841 $ 196,763
========== =========
See accompanying notes to consolidated financial statements.
29
<PAGE>
CONSOLIDATED STATEMENTS OF OPERATIONS
Years ended December 31, 1996 1995 1994
- --------------------------------------------------------------------------------
(In thousands, except per share data)
Revenue $ 233,660 $ 235,360 $ 175,694
----------- ----------- -----------
Operating expenses:
Cost of sales 112,596 102,666 69,294
Research and development 36,705 31,895 24,763
Sales and marketing 64,391 62,672 51,621
General and administrative 30,142 24,824 14,735
Restructuring charges 2,134 - -
----------- ----------- -----------
Total operating expenses 245,968 222,057 160,413
----------- ----------- -----------
Operating income (loss) (12,308) 13,303 15,281
Nonoperating income (expense):
Interest and investment income 4,635 3,594 965
Interest and other expense (3,925) (3,909) (2,825)
Foreign exchange gain (loss) (4) 1,088 203
Arbitration settlement and royalty charge - - (1,400)
----------- ----------- ----------
Total nonoperating income (expense) 706 773 (3,057)
----------- ----------- ----------
Income (loss) before income taxes (11,602) 14,07 12,224
Income tax provision (benefit) (300) 2,815 2,200
----------- ----------- ----------
Net income (loss) $ (11,302) $ 11,261 $ 10,024
=========== =========== =========
Net income (loss) per share $ (0.51) $ 0.53 $ 0.53
=========== =========== =========
Weighted average common and dilutive common
equivalent shares 22,005 21,306 19,062
=========== =========== =========
See accompanying notes to consolidated financial statements
30
<PAGE>
CONSOLIDATED STATEMENT OF SHAREHOLDERS EQUITY
<TABLE>
<CAPTION>
Notes Unrealized Foreign
Common stock receivable Retained loss on currency Total
and warrants from earnings short term translation shareholders
---------------------
Shares Amount shareholders (deficit) investments adjustment equity
- ------------------------------------------------------------------------------------------------------------------------------------
(In thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1993 ................... 18,068 $ 52,036 $(215) $(12,586) $ -- $ (345) $ 38,890
Issuance of stock .............................. 663 3,722 -- -- -- -- 3,722
Issuance of warrant ............................ -- 700 -- -- -- -- 700
Net income ..................................... -- -- (10,024) -- -- -- 10,024
Translation adjustments ........................ -- -- -- -- -- 309 309
Unrealized loss on short term investments ...... -- -- -- -- (71) -- (71)
-------- --------- --------- --------- --------- --------- --------
Balance at December 31, 1994 ................... 18,731 56,458 (215) (2,562) (71) (36) 53,574
Issuances of stock under employee plans ........ 811 7,283 -- -- -- -- 7,283
Issuance of stock under common stock offering .. 2,100 57,248 -- -- -- -- 57,248
Tax benefit from stock option exercises ........ -- 160 -- -- -- -- 160
Collection of notes receivable ................. -- -- 215 -- -- -- 215
Net income ..................................... -- -- -- (11,261) -- -- 11,261
Translation adjustments ........................ -- -- -- -- -- 23 23
Unrealized gain (loss) on short term investments -- -- -- -- 173 -- 173
-------- --------- --------- --------- --------- --------- --------
Balance at December 31, 1995 ................... 21,642 121,149 -- 8,699 102 (13) 129,937
Issuances of stock under employee plans ........ 530 5,774 -- -- -- -- 5,774
Issuance of stock in connection with acquisition 141 2,857 -- -- -- -- 2,857
Repurchases of common stock .................... (250) (3,545) -- -- -- -- (3,545)
Net income ..................................... -- -- -- (11,302) -- -- (11,302)
Translation adjustments ........................ -- -- -- -- -- 406 406
Unrealized gain (loss) on short term investments -- -- -- -- (82) -- (82)
======== ========== ========= ========= ========= ========= ========
Balance at December 31, 1996 ................... 22,063 $ 126,235 $ -- $ (2,603) $ 20 $ 393 $124,045
======== ========== ========= ========= ========= ========= ========
</TABLE>
See accompanying notes to consolidated financial statements
31
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Years ended December 31 1996 1995 1994
(In thousands)
<S> <C> <C> <C>
Cash flow from operating activities:
Net income (loss) ............................ ($ 11,302) $ 11,261 $ 10,024
Adjustments to reconcile net income (loss)
to cash flows from operating activities:
Depreciation and amortization expense ..... 10,140 8,042 7,692
Deferred revenue amortization ............. -- (79) (237)
Rental inducement receipts ............... -- (111) 720
Other ..................................... 178 673 63
Decrease (increase) in assets:
Accounts receivable, net .................. 5,501 (10,519) (2,178)
Inventories ............................... (7,073) (7,618) (242)
Other current and noncurrent assets ....... (2,603) (3,020) 58
Deferred income taxes ..................... 1,191 248 (1,822)
Increase (decrease) in liabilities:
Accounts payable .......................... (2,102) 5,180 (2,383)
Accrued compensation and benefits ......... 807 1,909 269
Customer advances ......................... 1,920 1,080 --
Accrued liabilities ....................... 1,608 2,777 1,110
Income taxes payable ...................... (2,133) 1,561 1,015
---------- --------- ---------
Net cash provided (used) by operating activities (3,868) 11,384 14,089
---------- --------- ---------
Cash flow from investing activities:
Acquisition of property and equipment ........ (10,359) (14,553) (7,869)
Costs of capitalized patents ................. (762) (915) (217)
Purchase of short-term investments ........... (75,663) (115,527) (26,524)
Maturities of short-term investments ......... 83,247 68,600 6,000
---------- --------- ---------
Net cash used by investing activities .......... (3,537) (62,395) (28,610)
---------- --------- ---------
Cash flow from financing activities:
Issuance of common stock ..................... 5,774 7,283 3,722
Net proceeds from common stock offering ...... -- 57,248 --
Repurchase of common stock ................... (3,545) -- --
Collection of notes receivable ............... 66 145 --
Bank loan repayments ......................... -- -- (1,311)
Proceeds from issuance of note ............... -- -- 29,348
Payment of long-term debt .................... (1,930) (1,597) (1,466)
---------- --------- ---------
Net cash provided by financing activities ...... 365 63,079 30,293
---------- --------- ---------
Increase (decrease) in cash and cash equivalents (7,040) 12,068 15,772
Cash and cash equivalents, beginning of period . 29,711 17,643 1,871
---------- --------- ---------
Cash and cash equivalents, end of period ....... $ 22,671 $ 29,711 $ 17,643
========== ========= =========
</TABLE>
See accompanying notes to consolidated financial statements
32
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1 -- Summary of significant accounting policies:
Use of estimates. The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the amounts reported in the financial
statements and accompanying notes. Due to the inherent nature of those
estimates, actual results could differ from expectations.
Principles of consolidation. The consolidated financial statements include
the accounts of Trimble Navigation Limited (the Company) and its wholly-owned
subsidiaries after elimination of all material intercompany balances and
transactions.
Foreign currency translation. Assets and liabilities of the Company's
foreign subsidiaries are translated into U.S. dollars at year-end exchange rates
and revenues and expenses are translated at average rates prevailing during the
year. Local currencies are considered to be the functional currencies for the
Company's non-U.S. subsidiaries. Translation adjustments are deferred in a
separate component of shareholders' equity. Foreign currency transaction gains
and losses are included in results of operations as incurred.
Forward foreign currency exchange contracts. In the second quarter of 1995,
the Company adopted a policy of hedging its exposure to foreign currency
transactions to minimize the effect of changes in foreign currency exchange
rates on consolidated results of operations. To date, the Company has entered
into forward foreign currency exchange contracts to offset the effects of
changes in exchange rates on foreign-denominated intercompany receivables.
Realized and unrealized gains and losses on the contracts are included in
results of operations. At December 31, 1996, the Company had forward foreign
currency exchange contracts to sell $7,895,000 of Japanese Yen and $1,290,000 of
German Marks, and to buy $2,380,000 of New Zealand dollars, at contracted rates
which mature over the next five months.
Cash and cash equivalents. Cash and cash equivalents include all cash and
highly liquid investments with original maturities of three months or less. The
carrying amount of cash and cash equivalents approximates fair value because of
the short maturity of those instruments.
Short-term investments. The Company has classified all its short-term
investments as "available for sale." Available-for-sale securities are carried
at fair value, with the unrealized holding gains and losses, net of tax effects,
reported in a separate component of shareholders' equity. Fair value is based on
quoted market prices. The cost of debt securities in this classification is
adjusted for amortization of premiums and accretion of discounts to maturity.
Such amortization, as well as interest, dividends, and realized gains and
losses, is included in interest and investment income. The cost of securities
sold is based on the specific identification method.
At December 31, 1996, the Company's short-term investments consisted of
U.S. Treasury securities totaling $59,867,000 at cost, which had unrealized
gains of $20,000 and had original maturities of less than one year from the date
of purchase. At December 31, 1995, the Company's short-term investments in U.S.
Treasury securities and Federal Government Agencies had a cost of $67,323,000
and had unrealized gains of $128,000.
Concentration of credit risk. In entering into forward foreign exchange
contracts, the Company has assumed the risk which might arise from the possible
inability of counterparties to meet the terms of their contracts. The
counterparties to these contracts are major multinational commercial banks, and
the Company does not expect any losses as a result of counterparty defaults. The
Company performs ongoing credit evaluations of its customers and generally does
not require collateral. The expenses recorded for doubtful accounts receivable
were $1,159,000 in 1996, and $352,000 in 1995, and a credit of $272,000 was
recorded in 1994.
Inventories. Inventories are stated at the lower of standard cost or
market. Standard costs approximate average actual costs.
In December 1995, the Company announced that it had temporarily halted
shipments of certain tracking and communications products deliverable under a
large contract with a single customer. Inventories included approximately
$3,348,000 of materials at December 31, 1996, and $5,400,000 of materials at
December 31, 1995, that had been received in anticipation of making shipments to
the customer. Shipments under this contract are expected to resume in the first
half of 1997 and, accordingly, the Company has not provided any reserves against
the products included in inventory. However, there can be no assurance that the
33
<PAGE>
shipments under this contract will be resumed. If shipments under the contract
are not resumed, related inventories would represent more than two years' sales
to other customers of the products.
Revenue recognition. The Company recognizes revenue from product sales at
the time of shipment, except as to revenue deferred for extended warranty
obligations. Substantially all technology licenses and research revenue have
consisted of initial license fees and royalties, and were recognized when
earned.
Product warranty. The Company provides for estimated warranty costs at the
time of sale. The warranty period is generally for one year from date of
shipment except for aviation products, for which the period is generally three
years and for the HT9100 product for Honeywell, which has a five year warranty
period.
Advertising Costs. The Company expenses the production costs of advertising
as incurred. Advertising expenses were $7,587,000, $7,683,000, and $7,136,000 in
1996, 1995, and 1994, respectively.
Stock Compensation. In accordance with the provisions of Statement of
Financial Accounting Standards (SFAS) No. 123, "Accounting for Stock-Based
Compensation," the Company applies Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees" (APB 25) and related Interpretations
in accounting for its stock option plans and stock purchase plan. Accordingly,
it does not recognize compensation cost for stock options granted at or above.
Note 11 to the Consolidated Financial Statements describes the plans operated by
the Company and contains a summary of the pro forma effects to reported net
income and earnings per share for 1996 and 1995 if the Company had elected to
recognize compensation cost based on the fair value of the options granted at
grant date as prescribed by SFAS No. 123.
Depreciation and amortization. Depreciation of property and equipment owned
or under capitalized leases is computed using the straight-line method over the
shorter of the estimated useful lives or the lease terms. Useful lives range
from three years for machinery and equipment to five years for furniture and
fixtures. Amortization of intangibles is computed using the straight-line method
over periods of four years or less.
Interest. All interest costs incurred have been charged to interest
expense.
Net income (loss) per share. Per share data is computed using the weighted
average number of shares of common stock outstanding and dilutive common
equivalent shares arising from the assumed exercise of stock options and
warrants using the treasury stock method.
Note 2 -- The Company, industry segment, geographic, and customer information:
The Company operates in a single industry segment as a leading supplier of
products that determine precise geographic location and time using the Global
Positioning System (GPS). The Company develops, manufactures and markets its
products for applications in surveying and mapping, tracking and communications,
OEM, avionics and military markets. The Company sells its products through a
direct sales force located in twelve countries, as well as through a worldwide
network of dealers, distributors and authorized representatives. Research and
development activities are conducted at the Company's facilities in Sunnyvale,
California; Austin, Texas; and Christchurch, New Zealand. Manufacturing is
performed primarily in Sunnyvale, California, and to a lesser extent in Austin,
Texas.
The following table sets forth revenue by market. Revenues in 1994 and 1995
have been reclassified to conform with the Company's organization structure in
1996.
1996 1995 1994
(In thousands)
Commercial Systems $158,273 $162,393 $127,817
Software & Component Technologies 38,054 35,416 18,809
Aerospace 37,333 37,551 29,068
-------- -------- --------
Total revenue $233,660 $235,360 $175,694
34
<PAGE>
Information regarding geographic areas is as follows:
<TABLE>
<CAPTION>
Geographic Area
--------------------------------------
Europe / Pac. Rim, Asia
Domestic Middle East and Japan Eliminations Total
- -------------------------------------------------------------------------------------------------
(In thousands)
<S> <C> <C> <C> <C> <C>
1996
Sales to unaffiliated customers $ 164,663 $ 47,972 $ 21,025 $ -- $ 233,660
Intergeographic transfers 70,366 -- 1,474 (71,840) $ --
---------- ----------- ---------- --------- ---------
Total revenue .......... $ 235,029 $ 47,972 $ 22,499 $ (71,840) $ 233,660
---------- ----------- ---------- --------- ---------
Operating income (loss) $ (18,670) $ 14,917 $ (8,382) $ (173) $ (12,308)
Identifiable assets .... $ 166,405 $ 14,355 $ 10,037 $ (956) $ 189,841
1996
Sales to unaffiliated customers $ 158,800 $ 51,040 $ 25,520 $ -- $ 235,360
Intergeographic transfers 42,621 -- 1,361 (43,982) $ --
---------- ----------- ---------- --------- ---------
Total revenue .......... $ 201,421 $ 51,040 $ 26,881 $ (43,982) $ 235,360
---------- ----------- ---------- --------- ---------
Operating income (loss) $ 3,902 $ 19,000 $ (8,858) $ (741) $ 13,303
Identifiable assets .... $ 170,390 $ 14,112 $ 13,105 $ (844) $ 196,763
1994
Sales to unaffiliated customers $ 134,112 $ 38,439 $ 3,143 $ -- $ 175,694
Intergeographic transfers 16,480 5 860 (17,345) --
---------- ------------ --------- --------- ---------
Total revenue .......... $ 150,592 $ 38,444 $ 4,003 $ (17,345) $ 175,694
---------- ------------ --------- --------- ---------
Operating income (loss) $ 7,279 $ 14,917 $ (6,841) $ (74) $ 15,281
Identifiable assets .... $ 92,109 $ 12,762 $ 4,540 $ (48) $ 109,363
</TABLE>
Transfers between domestic and foreign geographic areas are made at prices
based on total costs and contributions of the supplying geographic area. The
Company's subsidiaries in the Pacific Rim, Asia and Japan have derived revenue
from commissions from domestic operations in each of the periods presented.
These commission revenues and expenses are excluded from total revenue and
operating income (loss) in the table above. Commencing in April 1995, sales to
unaffiliated customers in Japan were made by the Company's Japanese subsidiary.
Previously, such sales were treated as domestic export sales.
Export revenue (defined as sales to unaffiliated customers in foreign
countries made by the Company's domestic operations) as a percentage of total
revenue was as follows:
1996 1995 1994
- ---------------------------------------------------------------------
Europe/Middle East 2 % 2 % 1 %
Pacific Rim, Asia and Japan 13 12 20
Other 10 7 7
--------- -------- ---------
25 % 21 % 28 %
No single customer accounted for 10% or more of total revenues in 1996,
1995 or 1994.
The geographic distribution of sales to unaffiliated customers by customer
location as a percentage of total revenue was as follows:
1996 1995 1994
- ----------------------------------------------------------------------
United States 53 % 47 % 49 %
Europe/Middle East 21 23 22
Pacific Rim, Asia and Japan 19 23 22
Other 7 7 7
---------- ----------- ----------
100 % 100 % 100 %
35
<PAGE>
Note 3 -- Balance sheet components:
December 31, 1996 1995
- -------------------------------------------------------
(In thousands)
Inventories
Raw materials ............... $24,145 $15,892
Work-in-process ............. 5,174 6,782
Finished goods .............. 9,539 8,527
------- -------
$38,858 $31,201
======= =======
Property and equipment
Machinery and equipment ..... $52,277 $45,516
Furniture and fixtures ...... 4,758 4,113
Leasehold improvements ...... 6,231 5,483
------- -------
63,266 55,112
Less accumulated depreciation 41,762 35,361
------- -------
$21,504 $19,751
======= =======
Note 4 -- Bank line of credit:
In August 1995, the Company entered into a $30,000,000 unsecured line of
credit agreement with two banks that expires in July 1997. The agreement enables
the Company to borrow up to $30,000,000 provided that certain financial and
other covenants are met. The agreement provides for payment of a commitment fee
of 0.5% for the unused portion of the line of credit. Borrowings bear interest
at the higher of (i) one of the bank's annual prime rate and (ii) the federal
funds rate plus 0.5%. No borrowings were made under the line of credit during
1996 and 1995. Under the line of credit the Company is restricted from paying
dividends.
At December 31, 1996, the Company was contingently liable to a Japanese
bank for $4,146,000 at year end exchange rates arising from customers' notes
receivable which the Company sold with recourse to the bank. The implementation
of a new accounting standard, if adopted early, would have increased liabilities
and accounts receivable by this amount. The Company will adopt this accounting
standard on January 1, 1997, as required.
Note 5 -- Acquisition
On July 2, 1996, the Company purchased certain assets and assumed certain
liabilities of Terra Corporation (Terra), a New Mexico corporation which
manufactured components for the aviation market, in exchange for 140,860 shares
of the Company's common stock and options to purchase 12,000 shares of the
Company's common stock. The Company's results of operations include the results
of operations of Terra Corporation from July 2, 1996. The Company recorded
$3,189,000 of goodwill on the acquisition. The Company is amortizing this
goodwill over five years. As of December 31, 1996, the Company had recorded
accumulated amortization of $318,900.
Prior to its acquition by the Company, Terra had limited revenues and
operated at loss. As of July 2, 1996, Terra had cumulative losses of
approximately $255,000. The amount of the loss is not determinable with respect
to individual periods. If the acquisition had occurred at January 1, 1995, based
on the purchase price recorded, the Company would have recorded amortization of
goodwill and a reduction of net income before taxes of $637,800 in 1995 or $0.
03 per share and addtional amortization of goodwill and an increase in net loss
before income taxes of $318,900 in 1996 or $ 0. 01 per share.
Note 6 -- Restructuring:
During 1996, the Company recorded restructuring charges of $2,134,000. As
of December 31, 1996, $1,345,000 of restructuring costs had been paid.
Components of this restructuring reserve included employee severance packages,
the costs of redundant office space, write-downs of idle assets, and the costs
of moving people.
36
<PAGE>
Note 7 -- Long-term debt and other noncurrent liabilities:
Long-term debt consists of the following:
December 31, 1996 1995
- ----------------------------------------------------
(In thousands)
Subordinated notes ............ $29,507 $29,423
Capitalized leases (Note 8) ... -- 631
Equipment financing obligations 316 1,699
Other ......................... 1,431 1,577
------- -------
31,254 33,330
Less-current portion .......... 316 2,014
------- -------
Noncurrent portion ............ $30,938 $31,316
======= =======
Scheduled payments of equipment loan obligations are as follows: $316,000
in 1997.
During June 1994, the Company issued $30 million of subordinated promissory
notes bearing interest at an annual rate of 10% and with principal due on June
15, 2001. Interest payments are due monthly in arrears. The notes are
subordinated to the Company's senior debt, which is defined as all pre-existing
indebtedness for borrowed money and certain future indebtedness for borrowed
money (including, subject to certain restrictions, secured bank borrowings and
borrowed money for the acquisition of property and capital equipment) and trade
debt incurred in the ordinary course of business. If the Company prepays any
portion of the principal, it is required to pay additional amounts if U.S.
Treasury obligations of a similar maturity exceed a specified yield. Under the
agreement the Company is restricted from paying dividends.
The issuance of the notes also included warrants entitling holders to
purchase 400,000 shares of common stock at a price of $10.95 per share at any
time through June 15, 2001. The warrants are included in shareholders' equity at
their appraised fair value of $700,000 at the time of issue. The net proceeds of
the notes were $29,348,000 after issuance costs of $652,000. The notes are shown
under noncurrent liabilities, net of appraised fair value attributed to the
warrants. The value of the warrants and the issuance costs are being amortized
and included in interest expense using the interest rate method over the term of
the subordinated promissory notes. The effective annual interest rate on the
notes is 11.5%. Under the terms of the note, the Company is required to, among
other things, meet certain specified amounts of tangible net worth.
Equipment financing obligations are payable over 60 month terms ending no
later than 1997, bear interest at annual rates ranging from approximately 10 to
11%, and are secured by the equipment financed. At December 31, 1996, equipment
financing obligations outstanding were $316,000, of which all is included in the
current portion of long-term debt.
Other long-term debt primarily represents deferred rent obligations and
rental inducements on certain of the Company's leased facilities. The lease
agreements provide for scheduled increases in lease payments over the terms of
the leases.
Note 8 -- Lease obligations and commitments:
The Company's principal facilities in the United States are leased under
noncancelable operating leases which expire at various dates from 1998 through
2001. The Company has options to renew these leases for an additional five
years. The Company's United Kingdom subsidiary leases a facility under an
operating lease which expires in 2015.
37
<PAGE>
At December 31, 1996, the Company had no outstanding equipment lease
obligations.
Future minimum payments required under noncancelable operating leases
are as follows:
Operating
Leases
- --------------------------------------------------------
(In thousands)
1997 $ 5,340
1998 5,220
1999 3,738
2000 3,308
2001 781
Thereafter 1,882
=======
Total $20,269
=======
Rent expense on operating leases was $6,004,800 in 1996, $5,577,000 in 1995
and $3,933,000 in 1994.
Note 9 -- Fair value of financial instruments:
Statement of Financial Accounting Standard No. 107, "Disclosures about Fair
Value of Financial Instruments," requires disclosure of the following
information about the fair value of certain financial instruments for which it
is practicable to estimate that value. None of the financial instruments are
held or issued for trading purposes. The carrying amounts and fair values of the
Company's financial instruments are as follows:
Carrying Fair
Amount Value
------------ ------------
December 31, 1996
- ----------------------------------------------------------------------------
(In thousands)
Assets:
Cash and cash equivalents (Note 1) ........ $ 22,671 $ 22,671
Short-term investments (Note 1) ........... 59,867 59,867
Forward foreign exchange contracts (Note 1) 429 76
Liabilities:
Subordinated notes (Note 7) ............... 29,507 30,838
Equipment financing obligations (Note 7) .. 316 318
The fair value of the subordinated notes has been estimated using an
estimate of interest rate the Company would have had to pay on issuance of notes
with a similar maturity, and discounting the cash flows at that rate. The fair
value of equipment loans have been estimated in a similar manner. The fair
values do not give an indication of the amount that the Company would have to
pay to extinguish any of this debt.
The fair value of forward foreign exchange contracts is estimated based on
quoted market prices of comparable contracts. The difference between fair value
and carrying amount primarily reflects the difference between the exchange rates
in effect when contracts were entered into and the exchange rates in effect at
December 31, 1996.
38
<PAGE>
Note 10 -- Income taxes:
The income tax provision (benefit) consists of the following:
Years ended December 31, 1996 1995 1994
- ---------------------------------------------------------------
(In thousands)
Federal:
Current ................... $(2,557) $1,380 $2,307
Deferred .................. 1,208 389 (1,597)
------- ------ -------
(1,349) 1,769 710
------- ------ -------
State:
Current ................... 5 4 303
Deferred .................. -- -- --
------- ------ -------
5 4 303
------- ------ -------
Foreign:
Current ................... 1,060 1,183 1,412
Deferred .................. (16) (141) (225)
------- ------ -------
1,044 1,042 1,187
------- ------ -------
Income tax provision (benefit) $(300) $2,815 $2,200
======= ====== =======
The domestic income (loss) before taxes (including royalty income subject
to foreign withholding taxes) was approximately ($13,300,000), $12,800,000, and
$8,800,000 in 1996, 1995 and 1994.
The income tax provision (benefit) differs from the amount computed by
applying the statutory federal income tax rate to income before taxes. The
sources and tax effects of the differences are as follows:
Years ended December 31, 1996 1995 1994
- ---------------------------------------------------------------------------
(In thousands)
Expected tax at 35% in all years ........ $(4,061) $4,926 $4,278
Tax account valuation adjustments ....... (1,630) (2,464) (2,419)
Operating loss not utilized ............. 4,577 -- --
Foreign withholding taxes ............... 170 242 --
Foreign tax rate differential ........... 277 356 (7)
State income taxes ...................... 5 4 303
Benefit of Foreign Sales Corporation, net -- (312) --
Other ................................... 362 63 45
------ ------ ------
Income tax provision (benefit) .......... $(300) $2,815 $2,200
====== ====== ======
Effective tax rate ................... (3%) 20% 18%
39
<PAGE>
The components of deferred taxes consist of the following:
December 31,
---------------
1996 1995
- ----------------------------------------------------------------------------
(In thousands)
Deferred tax liabilities:
Goodwill ...........................................$ 1,139 $ --
Individually immaterial items ...................... 229 650
------- -------
Total deferred tax liabilities ..................... 1,368 650
------- -------
Deferred tax assets:
Inventory valuation differences .................... 6,645 4,437
Federal credit carryforwards ....................... 5,793 5,575
State credit carryforwards ......................... 1,626 662
Federal net operating loss (NOL) carryforward....... 1,410 --
Deferred revenue ................................... 1,371 --
Other individually immaterial items ................ 4,847 4,152
------- -------
Total deferred tax assets .......................... 21,692 14,826
Valuation allowance ................................ (19,941) (12,602)
------- -------
Total deferred tax assets .......................... 1,751 2,224
------- -------
Total net deferred tax assets ..........................$ 383 $ 1,574
======= =======
The NOL and credit carryforwards listed above expire in the years 1999
through 2011.
The valuation allowances increased by $1.3 million in 1995. Approximately
$5.5 million of the valuation allowance at December 31, 1996 relates to the tax
benefits of stock option deductions which will be credited to equity when
realized.
Note 11 -- Shareholders' equity:
Employees and others have been granted options to purchase common shares
under stock option plans adopted in 1990, 1992 and 1993. Details of these plans,
the 1988 Employee Stock Purchase Plan and similar compensation plans are set out
below.
1993 Stock Option Plan In 1992, the Company's Board of Directors adopted
the 1993 Stock Option Plan to replace the 1983 Stock Option Plan which expired
in January 1993. The 1993 Stock Option Plan provides for the granting of
incentive and nonstatutory stock options for up to 2,000,000 shares of Common
Stock to employees, consultants and directors of the Company. Incentive stock
options may be granted for exercise prices that are not less than 100% of the
fair market value of Common Stock on the date of grant. All options granted have
63 month terms and vest at a rate of 20% at the first anniversary of grant and
monthly thereafter at an annual rate of 20%, with full vesting occurring at the
fifth anniversary of grant. The exercise price of nonstatutory stock options
must be at least 85% of the fair market value of Common Stock on the date of
grant. As of December 31, 1996, options on 1,919,481 shares were outstanding and
393,439 shares were available for future grant under the 1993 Stock Option Plan.
Options outstanding under the 1983 Stock Option Plan were for 455,265 shares.
1990 Director Stock Option Plan In December 1990, the Company adopted a
Director Stock Option Plan under which the Company has reserved 280,000 shares
of Common Stock for options to be granted to nonemployee directors. At December
31, 1996, options were outstanding on 158,333 shares and 175,833 shares were
available for future grants under the Director Stock Option Plan.
1992 Management Discount Stock Option Plan In 1992 the Company's Board of
Directors and shareholders approved the 1992 Management Discount Stock Option
Plan ("Discount Plan"). Under the Discount Plan, 300,000 nonstatutory stock
options were reserved for grant to management employees at exercise prices that
are significantly discounted from the fair market value of Common Stock on the
dates of grant. Options are generally exercisable six months from the date of
40
<PAGE>
grant. As of December 31, 1996, 129,974 shares were available for future grants.
For accounting purposes, compensation cost is measured by the excess over the
discounted exercise prices of the fair market value of Common Stock on the dates
of option grant. Noncash compensation cost related to options exercised in 1996
amounted to $48,744. Accrued compensation and benefits at December 31, 1996,
include $305,000 of compensation cost relating to outstanding options on 44,804
shares.
1988 Employee Stock Purchase Plan In 1988, the Company established an
employee stock purchase plan under which 1,700,000 shares of common stock were
reserved for issuance. The plan permits full-time employees to purchase Common
Stock through payroll deductions at 85% of the lower of the fair market value of
the Common Stock at the beginning or at the end of each six-month offering
period. In 1996, 194,323 shares were issued under the plan for aggregate
proceeds of $2,387,400. At December 31, 1996, the number of shares reserved for
future purchases was 305,779.
As stated in Note 1, the Company has elected to follow APB 25 and related
Interpretations in accounting for its employee stock options and stock purchase
plans. The alternative fair value accounting provided for under SFAS 123
requires use of option pricing models that were not developed for use in valuing
employee stock options. Under APB 25, because the exercise price of the
Company's employee stock options equals the market price of the underlying stock
on date of grant, no compensation expense is recognized.
Pro forma information regarding net income and earnings per share is
required by SFAS 123 and has been determined as if the Company had accounted for
its employee stock options and purchases under the Employee Stock Purchase Plan
using the fair value method of that Statement. The fair value for these options
was estimated at the date of grant using a Black-Scholes option pricing model
with the following weighted-average assumptions for 1995 and 1996:
1996 1995
------- -------
Expected dividend yield .............. $ -- $ --
Expected stock price volatility ...... 58.76% 59.48%
Risk-free interest rate .............. 6.29% 6.79%
Expected life of options after vesting 0.77 0.77
The Black-Scholes option valuation model was developed for use in
estimating the fair value of traded options which have no vesting restrictions
and are fully transferable. In addition, option valuation models require the
input of highly subjective assumptions including the expected stock price
volatility. Because the Company's employee stock options have characteristics
significantly different from those of traded options and because changes in the
subjective input assumptions can materially affect the fair value estimate, in
management's opinion, the existing models do not necessarily provide a reliable
single measure of its employee stock options.
For purposes of pro forma disclosures, the estimated fair value of the
options is amortized to expense over the options' vesting period. The estimated
fair value of purchases under the Employee Stock Purchase Plan is expensed in
the year of purchase. The Company's pro forma information (in thousands except
for per share data) is as follows:
1996 1995
---------------- ----------------
Net income - as reported $ (11,302) $ 11,261
Net income - pro forma $ (15,806) $ 9,166
Earnings per share - as reported $ (0.51) $ 0.53
Earnings per share - pro forma $ (0.72) $ 0.44
Because the fair value method is applicable only to options granted
subsequent to December 31, pro forma effects will not be fully reflected until
1997. Accordingly, these figures are unlikely to be representative of the
effects on reported net income for future years.
41
<PAGE>
Exercise prices for options outstanding as of December 31, 1996 ranged from
$5.00 to $29.625. The weighted average remaining contractual life of those
options is 3.63 years. In view of the wide range of exercise prices, the Company
considers it appropriate to provide the following additional information in
respect of options outstanding:
<TABLE>
<CAPTION>
Total Currently exercisable
Number Weighted-average Weighted- average Number Weighted- average
Range (in thousands) exercise price remaining contractul life (in thousands) exercise price
- ------------------- -------------- -------------------- ------------------------- -------------- ------------------
<S> <C> <C> <C> <C> <C>
$5.0000-$8.6250 560 $8.02 1.25 480 $7.98
$8.8750-$12.2500 447 $9.90 2.88 244 $9.90
$12.5000-$13.1250 201 $13.09 3.18 87 $13.04
$15.3750-$15.3750 1,080 $15.38 4.95 -- $--
$16.8750-$23.0000 285 $18.96 4.78 79 $18.81
$29.6250-$29.6250 3 $29.63 3.58 1 $29.63
- ------------------- -------------- -------------------- ------------------------ -------------- ------------------
$5.0000-$29.6250 2,576 $13.06 3.63 891 $9.99
</TABLE>
The fair value of each option granted is estimated on the date of grant
using the Black-Scholes option-pricing model with the following assumptions:
Activity during 1996, 1995 and 1994 under the combined plans was as
follows:
IN THOUSANDS, EXCEPT FOR PER SHARE DATA
<TABLE>
<CAPTION>
1996 1995 1994
Weighted average Weighted average Weighted average
Options exercise price Options exercise price Options exercise price
- -------------------------------------------------------- ---------------- ------- --------------- ------ ----------------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at beginning of year ............... 2,525 $13.49 2,392 $8.98 2,339 $7.46
Granted ................................... 1,522 $16.57 907 $21.19 667 $11.17
Exercised ................................. (316) $9.35 (663) $7.49 (470) $4.54
Canceled .................................. (1,154) $19.61 (111) $14.80 (144) $8.90
Outstanding at end of year ..................... 2,577 $13.06 2,525 $13.49 2,392 $8.98
Exercisable at end of year ..................... 886 $9.99 764 $9.13 938 $7.70
Weighted-average fair value of options
granted during year ........................ $5.24 $10.21
</TABLE>
During 1996, under a program approved by the Board of Directors (the
"Board"), all employees, with the exception of officers, were offered an
exchange option to replace the stock options previously issued to them with new
stock options (at an exchange ratio of 1 to 1, with a vesting period commencing
on the date of exchange) at a new lower price. Options on 825,456 shares were
canceled (reported above as cancellations) and replaced (reported above as
options granted).
401(k) Plan Under the Company's 401(k) Plan, U.S. employee participants may
direct the investment of contributions to their accounts among certain mutual
funds and the Trimble Navigation Limited Common Stock Fund. The Fund purchased
33,981 shares of Common stock for an aggregate of $582,000 in 1996. The Company,
at its discretion, matches individual employee 401(k) Plan contributions up to
$100 per month. Company matching contributions to the 401(k) Plan were
$1,031,000 in 1996, $827,000 in 1995 and $665,000 in 1994.
42
<PAGE>
Profit Sharing Plan In 1995, the Company introduced an employee profit
sharing plan in which all employees, excluding executives, participate. The plan
distributes approximately 5% of quarterly income before taxes to employees.
Payments under the plan during 1996 were $43,000, and during 1995 were $722,000.
Common shares reserved for future issuances As of December 31, 1996, the
Company has reserved 3,581,908 common shares for issuance upon exercise of
options outstanding and options available for grant under the 1983 and 1993
Stock Option, 1990 Director Stock Option, and 1992 Management Discount Stock
Option plans and available for issuance under the 1988 Employee Stock Purchase
plan.
Note 12 -- Statement of cash flows data:
<TABLE>
<CAPTION>
Years ended December 31, 1996 1995 1994
- -------------------------------------------------------------------------------------------
(In thousands)
<S> <C> <C> <C>
Supplemental schedule of noncash financing activities:
Warrants issued with subordinated promissory notes $ -- $ -- $ 700
---------- ----------- -----------
Tax benefit from stock options exercises $ -- $ 160 $ --
---------- ----------- -----------
Supplemental schedule of noncash investing activities:
Common stock issued for Terra Corporation $ 2,857 $ -- $ --
---------- ----------- -----------
Supplemental disclosure of cash flow information:
Interest paid $ 3,457 $ 3,678 $ 2,753
---------- ----------- -----------
Income taxes paid $ 483 $ 1,032 $ 3,586
---------- ----------- -----------
</TABLE>
Note 13 -- Litigation:
Settled Matters In July 1994, a Federal judge held that the Company had not
adequately complied with the terms of the July 1993 arbitration decision in
connection with an arbitration case related to a dispute between the Company and
Avion Systems, Inc. as to certain technology the Company licensed from Avion in
1991. On October 3, 1994, the Company entered into a settlement with Avion under
which Avion acknowledged Trimble's full satisfaction of a July 1993 arbitration
award. Under the October 1994 settlement agreement Trimble paid Avion a total of
$1,400,000. Trimble and Avion have also executed a mutual release of claims.
In November 1994, the Company was named as a defendant in an action
commenced in the United States District Court for the District of Rhode Island,
NovAtel Communication Ltd. v. Trimble Navigation Limited, C.A. No. 94-0498 (ML).
Plaintiff NovAtel sought preliminary and permanent injunctive relief,
unspecified damages and interest thereon, costs and disbursements, including
reasonable attorneys' fees, based upon the Company's alleged infringement of
U.S. Patent No. 5,101,416 (the `416 patent).
On April 21, 1995, the Company filed suit against NovAtel for infringement
of the Company's U.S. Patent No. 4,754,465 (the `465 patent) in the United
States District Court, Northern District of California, San Jose Division,
Trimble Navigation v. NovAtel Communications Ltd, C.A. No. C95-2405 SI. On
February 27, 1996, Trimble filed a Complaint against NovAtel at the
International Trade Commission in Washington, D.C. alleging unfair acts in the
importation of goods, namely, infringement of its `465 patent, and seeking a
permanent exclusion order to interdict the importation by or on behalf of
NovAtel into this country of infringing GPS receivers manufactured and sold by
NovAtel.
On July 16, 1996, the Company and NovAtel entered into an agreement
resolving all matters in dispute and cross-licensing certain technologies. The
agreement ends all litigation between the parties.
43
<PAGE>
In February 1995, DAC International Inc. ("DAC"), then a distributor and
sales representative of the Company, terminated its sales representative
agreement with the Company and thereafter filed an arbitration claim against the
Company in Palo Alto, California, seeking damages of approximately $2,100,000.
On July 15, 1996, the Arbitrator issued a Final Liability and Opinion Award
which called for the Company to pay a total of $1,021,000, including interest,
all of which has now been paid.
On March 26, 1996, DAC filed a lawsuit titled DAC International, Inc. v
Trimble Navigation Ltd., Case No. 96-02032, filed in the District Court of
Travis County, Texas. In April 1996, the Company removed this case to the
Federal District Court for the Western District of Texas. On August 6, 1996,
Trimble agreed to pay DAC $500,000 which was charged to income in the second
quarter of 1996. As a result of this agreement all litigation between the
Company and DAC has been settled.
Pending Matters On December 6, 1995, two shareholders filed a class action
lawsuit against the Company and certain directors and officers of the Company.
Subsequent to that date, additional lawsuits were filed by other shareholders.
The lawsuits were subsequently amended and consolidated into one Complaint which
was filed on April 5, 1996. The amended consolidated Complaint seeks to bring an
action as a class action consisting of all persons who purchased the common
stock of the Company during the period April 18, 1995, through December 5, 1995
(the "Class Period"). The plaintiffs allege that the defendants sought to induce
the members of the Class to purchase the Company's common stock during the Class
Period at artificially inflated prices. The plaintiffs seek recissory or
compensatory damages with interest thereon, as well as reasonable attorneys'
fees and extraordinary equitable and/or injunctive relief. The Company filed a
motion to dismiss, which was heard by the Court on August 16, 1996. The court
rejected the plaintiffs lawsuit, but allowed thirty days to resubmit its
complaint. On September 24, 1996, the plaintiffs filed an amended complaint. On
February 28, 1997, a hearing was held by the Court, which took the Company's
motion to dismiss the second amended complaint under submission and indicated an
order would be issued in the near future. The Company does not believe that it
is possible to predict the outcome of this litigation.
In March 1995, the Company signed a large contract for the supply of
Galaxy/GPS land mobile satellite terminals to American Mobile Satellite
Corporation (AMSC), a Reston, Virginia, based company that provides a variety of
voice and data services via satellite. AMSC contracted for delivery of product
beginning in mid-1995 and continuing through 1996. AMSC requested late in the
fourth quarter of 1995 that the Company cease delivery due in part to delays in
their completion of software. Shipments under the original contract were halted
in the fourth quarter of 1995 and the contract was modified. Since that time the
Company has made only limited shipments to AMSC.
In October 1996 the Company filed a complaint against AMSC in the Superior
Court of California in Santa Clara County. The complaint alleges that AMSC
breached its March 1995 contract with the Company by refusing to accept
additional deliveries of Galaxy product. The complaint also alleges that AMSC
fraudulently induced the Company to execute a modification to the March 1995
contract. The complaint seeks unspecified damages, including lost profits and
exemplary damages. AMSC has acknowledged receipt of the complaint but has not
yet filed a responsive pleading. On February 20, 1997, the Company and AMSC
signed an agreement to resume shipments of product to AMSC, and as a result of
this agreement the complaint has been dropped by the Company.
In July 1993, an individual filed a complaint against the Company in which
the individual alleges the Company has an obligation to him for commissions
earned and services provided in an amount in excess of $1,500,000. In June 1995
the Company's motion for summary judgment on all claims was granted by the
court. The individual filed an appeal with the California Court of Appeals for
the Sixth District. On November 26, 1996, the summary judgment was affirmed by
the California Court of Appeals for the Sixth District. On January 8, 1997, the
individual petitioned for review by the Supreme Court of California. The Company
believes the Complaint is without merit and intends to defend itself vigorously.
A former shareholder has filed an action against the Company claiming
rights to shares that were previously canceled on the Company's stock records
pursuant to lost stock certificate indemnification agreements. The Company does
not believe that there will be any adverse consequences to the Company as a
result of this case.
In October 1995, an employee who was terminated by the Company in 1992
filed a Complaint against the Company, alleging that his incentive stock options
continued to vest subsequent to his termination. He seeks damages in excess of
$1,000,000. The Company has filed a general denial in answer to the Complaint,
44
<PAGE>
and a trial date has been set for May 12, 1997. The Company does not believe
that the Complaint will be successful.
The Company is also a party to other disputes incidental to its business.
The Company believes the ultimate liability of the Company as a result of such
disputes, if any, would not be material to its overall financial position,
results of operations, or liquidity.
Note 14 -- Selected quarterly financial data (unaudited):
<TABLE>
<CAPTION>
First Second Third Fourth
Quarter Quarter Quarter Quarter
(In thousands, except per share data)
<S> <C> <C> <C> <C>
1996
Total revenue ........................ $56,722 $58,602 $54,086 $64,250
Gross margin ......................... $30,707 $31,565 $26,632 $32,160
Operating income (loss) .............. $(1,594) $(3,480) $(8,466) $ 1,232
Net income (loss) .................... $(1,146) $(2,585) $(8,834) $ 1,263
Net income (loss) per share .......... $ (0.05) $ (0.12) $ (0.40) $ 0.06
========= ======== ========= ========
1995
Total revenue ........................ $49,897 $59,012 $62,826 $63,625
Gross margin ......................... $29,815 $35,475 $35,290 $32,114
Operating income ..................... $ 2,755 $ 5,480 $ 4,717 $ 351
Net income ........................... $ 1,927 $ 4,287 $ 4,340 $ 707
Net income per share ................. $ 0.10 $ 0.21 $0.2 $ 0.03
========= ======== ========= ========
</TABLE>
Significant quarterly items include the following: (i) revenues in the
fourth quarter of 1995 were supplemented by proceeds from a covenant not to
compete, and the sale of exclusive distribution rights of $1,000,000; (ii) in
the third quarter of 1995 the Company recorded revenue of $1,333,000 from a
technology license; (iii) in the first quarter of 1996 the Company recorded
revenue of $1,080,000 from AMSC related to contract renegotation fees; (iv) in
the second quarter of 1996 the Company recorded $1,000,000 from AMSC related to
contractual shutdown fees. (v) in the third quarter of 1996 the Company recorded
$2,046,000 of restructuring charges and recorded an additional $88,000 in the
fourth quarter of 1996.
45
<PAGE>
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
The Board of Directors and Shareholders Trimble Navigation Limited
We have audited the accompanying consolidated balance sheets of Trimble
Navigation Limited as of December 31, 1996 and 1995, and the related
consolidated statements of operations, shareholders' equity, and cash flows for
each of the three years in the period ended December 31, 1996. Our audits also
included the financial statement schedule listed in the index at Item 14(a).
These financial statements and schedule are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements and schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and schedule referred to above
present fairly, in all material respects, the consolidated financial position of
Trimble Navigation Limited at December 31, 1996 and 1995, and the consolidated
results of its operations and its cash flows for each of the three years in the
period ended December 31, 1996, in conformity with generally accepted accounting
principles. Also, in our opinion, the related financial statement schedule, when
considered in relation to the basic financial statements taken as a whole,
presents fairly in all material respects the information set forth therein.
ERNST & YOUNG LLP
Palo Alto, California
January 28, 1997
46
<PAGE>
Item 9. Changes in and Disagreements with Accountants on Accounting Financial
Disclosure
Not applicable.
PART III
Item 10. Directors and Executive Officers of the Registrant
The section titled "Nominees" and the section titled "Section 16(a)
Benefical Ownership Reporting Compliance" in the Company's Proxy Statement for
its 1997 annual meeting of shareholders ("Proxy Statement") with respect to
directors of the Company and compliance of the directors and executive officers
of the Company with Section 16(a) of the Exchange Act required by this item are
incorporated herein by reference.
The information with respect to the executive officers of the Company
required by this item is included in Part I hereof under the caption "Executive
Officers of the Registrant."
Item 11. Executive Compensation
The following sections in the Proxy Statement are incorporated herein by
reference: "Compensation of Executive Officers"; "Compensation of Directors";
"Compensation Committee Interlocks and Insider Participation"; and "Compensation
Committee Report."
Item 12. Security Ownership of Certain Beneficial Owners and Management
The section titled "Security Ownership of Certain Beneficial Owners and
Management" in the Proxy Statement is incorporated herein by reference.
Item 13. Certain Relationships and Related Transactions
The section titled "Certain Relantionships and Related Transactions" in the
Proxy Statement is incorporated herein by reference.
47
<PAGE>
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
(a)1. Financial Statements
The following consolidated financial statements required by this item are
included in Part II Item 8 hereof under the caption "Financial Statements and
Supplementary Data."
Page In This
Annual Report
On Form 10-K
Consolidated Balance Sheets at December 31,
1996 and December 31, 1995................ 37
Consolidated Statements of Operations for
each of the three years in the period
ended December 31, 1996.................... 38
Consolidated Statement of Shareholders'
Equity for the three years
ended December 31, 1996.................... 39
Consolidated Statements of Cash Flows for
each of the three years in the period
ended December 31, 1996.................... 40
Notes to Consolidated Financial Statements 41-56
2. Financial Statement Schedules
The following financial statement schedule is filed as part of this report:
Page In This
Annual Report
On Form 10-K
Schedule II - Valuation and Qualifying Accounts....... S-1
All other schedules have been omitted as they are either not required or
not applicable, or the required information is included in the financial
statements or notes thereto.
48
<PAGE>
3. Exhibits
Exhibit
Number
3.1 Restated Articles of Incorporation of the Company filed June 25, 1986.(1)
3.2 Certificate of Amendment of Articles of Incorporation of the Company filed
October 6, 1988. (1)
3.3 Certificate of Amendment of Articles of Incorporation of the Company filed
July 17, 1990. (1)
3.4 Bylaws of the Company, as amended. (1)
3.5 Certificate of Amendment of Bylaws of the Company dated December 19,1990.(2)
3.6 Certificate of Amendment of Bylaws of the Company dated November 25,1991.(5)
4.1 Specimen copy of certificate for shares of Common Stock of the Company. (1)
10.1(a)+ 1983 Stock Option Plan. (4)
10.1(b)+ Forms of Incentive and Nonstatutory Stock Option Agreements under the
1983 Stock Option Plan. (8)
10.2+ 1988 Employee Stock Purchase Plan, as amended, and form of Subscription
Agreement. (8)
10.3 Form of Employee Restricted Stock Purchase Agreement. (1)
10.4 Form of Indemnification Agreement between the Company and its officers and
directors. (1)
10.5 Loan Agreement dated December 21, 1984, between the Company and certain
lenders. (1)
10.6 Note Purchase Agreement dated July 7, 1986, between the Company and certain
purchasers.(1)
10.7 Form of Common Stock Purchase Agreement dated March 1989 between the
Company and certain investors. (1)
10.8* Memorandum of Understanding dated March 11, 1988, and License Agreement
dated September 5, 1988, between the Company and AEG Aktiengesellschaft,
with Amendments No. 1, No. 2, and No. 3 thereto, and Letter Agreement
dated December 22, 1989, between Trimble and Telefunken Systemtechnik
GmbH. (1)
10.9 Note Purchase Agreement dated December 6, 1988, between the Company and AEG
Aktiengesellschaft. (1)
10.10 Master Equipment Lease Agreement dated April 26, 1990, between the Company
and MATSCO Financial Corporation, and schedule of lease extensions. (1)
10.11* Agreement dated February 6, 1989, between the Company and Pioneer
Electronic Corporation. (1)
10.15 International OEM Agreement dated May 30, 1989, between the Company and
Geotronics AB. (1)
10.16 Patent License Agreement dated January 18, 1990, between the Company and
the United States Navy. (1)
10.18 Asset Purchase Agreement dated April 19, 1990, between the Company; TR
Navigation Corporation,a subsidiary of the Company; and Tracor Aerospace,
Inc. (1)
10.19 Promissory Note dated April 20, 1990, for the principal amount of $400,000
issued by TR Navigation Corporation to DAC International, Inc. (1)
10.20 Guarantee dated April 20, 1990, between the Company and DAC International,
49
<PAGE>
10.21 Indemnification Agreement dated April 20, 1990, between the Company; TR
Navigation Corporation, a subsidiary of the Company; DAC International,
Inc.; and Banner Industries, Inc. (1)
10.22 Distributor Agreement dated April 20, 1990, between TR Navigation
Corporation, a subsidiary of the Company, and DAC International, Inc. (1)
10.23 Distributor Agreement dated December 6, 1989, between the Company and DAC
International, Inc. (1)
10.24 Lease Agreement dated April 26, 1990, between the Company and NCNB Texas
National Bank, Trustee for the Company's offices located at 2105 Donley
Drive, Austin, Texas. (1)
10.32 1990 Director Stock Option Plan, as amended, and form of Outside Director
Non statutory Stock Option Agreement. (8)
10.35 Sublease Agreement dated January 2, 1991, between the Company, Aetna
Insurance Company, and Poqet Computer Corporation for property located at
650 North Mary Avenue, Sunnyvale, California. (2)
10.36 Lease Agreement dated February 20, 1991, between the Company, John
Arrillaga Separate Property Trust , and Richard T. Peery Separate Property
Trust for property located at 880 West Maude, Sunnyvale, California. (2)
10.37 Share and Asset Purchase Agreement dated February 22, 1991, among the
Company and Datacom Group Limited and Datacom Software Research Limited.
(3)
10.38 License Agreement dated June 29, 1991 between the Company and Avion
Systems, Inc. (3)
10.40 Industrial Lease Agreement dated December 3, 1991 between the Company
and Aetna Life Insurance Company for property located at 585 North Mary
Avenue, Sunnyvale, California. (5)
10.41 Industrial Lease Agreement dated December 3, 1991 between the Company and
Aetna Life Insurance Company for property located at 570 Maude Court,
Sunnyvale, California. (5)
10.42 Industrial Lease Agreement dated December 3, 1991 between the Company and
Aetna Life Insurance Company for property located at 580 Maude Court,
Sunnyvale, California. (5)
10.43 Industrial Lease Agreement dated December 3, 1991 between the Company and
Aetna Life Insurance Company for property located at 490 Potrero Avenue,
Sunnyvale, California. (5)
10.44 Master Lease Agreement dated September 18, 1991 between the Company and
United States Leasing Corporation. (5)
10.45 Equipment Financing Agreement dated May 15, 1991 between the Company and
Corestates Bank, N.A. (5)
10.46+ 1992 Management Discount Stock Option and form of Nonstatutory Stock
Option Agreement (5).
10.48 Equipment Financing Agreement dated April 27, 1992 with AT&T Systems
Leasing Corporation. (7)
10.49** Memorandum of Understanding dated December 24, 1992 between the Company
and Pioneer Electronic Corporation. (7)
10.50+ 1993 Stock Option Plan, as amended, and Forms of Incentive and
Nonstatutory Stock Option Agreements. (14)
10.51 Revolving Credit Agreement for $15,000,000 dated January 27, 1993 with
Barclays Business Credit, Inc. (7)
10.52 $30,000,000 Note and Warrant Purchase Agreement dated June 13, 1994 with
John Hancock Life Insurance Company. (9)
10.53 Revolving Credit Agreement for $20,000,000 and $10,000,000, dated August
4, 1995, with The First National Bank of Boston and Mellon Bank N.A.,
respectively. (11)
10.54 Revolving Credit Agreement - First Amendment (12)
50
<PAGE>
10.55 Revolving Credit Agreement - Second Amendment (12)
10.56 Revolving Credit Agreement - Third Amendment (13)
11.1 Statement of computation of earnings per share. (14)
21.1 Subsidiaries of the Company. (14)
23.1 Consent of Ernst & Young LLP, Independent Auditors (see page 59).
24.1 Power of Attorney (included on page 53).
27 Financial Data Schedule (14)
* Confidential treatment has been previously granted for certain
portions of this exhibit pursuant to an order dated July 11, 1990.
** Confidential treatment has been previously granted for certain
portions of this exhibit pursuant to an order dated March 2, 1995.
+ Management contract or compensatory plan or arrangement required to be
filed as an exhibit to this Annual Report on Form 10-K pursuant to Item
14(c) thereof.
(1) Incorporated by reference to identically numbered exhibits filed in
response to Item 16(a), "Exhibits," of the registrant's Registration
Statement on Form S-1, as amended (File No. 33-35333), which became
effective July 19, 1990.
(2) Incorporated by reference to identically numbered exhibits filed in
response to Item 14(a), "Exhibits," of the registrant's Report on Form
10-K for the fiscal year ended December 31, 1990.
(3) Incorporated by reference to identically numbered exhibits filed in
response to Item 16, "Exhibits and Forms 8-K," of the registrant's
Report on 10-Q for the quarter ended September 30, 1991, as amended
on Form 8 filed February 11, 1992.
(4) Incorporated by reference to Exhibit No. 4.1 filed in response to Item 8,
"Exhibits," of the registrant's Registration Statement on Form S-8
(File No. 33-45167), which became effective January 21, 1992.
(5) Incorporated by reference to identically numbered exhibits filed in
response to Item 16(a) "Exhibits," of the registrant's Registration
Statement on Form S-1(File No. 33-45990), which was filed February 18, 1992.
(6) Incorporated by reference to Exhibits 4.1, 4.2 and 4.3 filed in
response to Item 8, "Exhibits," of the Registrant's Registration
Statement on Form S-8 (File No. 33-57522), which was filed on
January 28, 1993.
(7) Incorporated by reference to identically numbered exhibits filed in
response to Item 14(a), "Exhibits," of the Registrant's Report on Form
10-K for the fiscal year ended December 31, 1992.
(8) Incorporated by reference to identically numbered exhibits filed in
response to Item 14(a), "Exhibits," of the registrant's Report on Form
10-K for the fiscal year ended December 31, 1993.
(9) Incorporated by reference to identically numbered exhibits filed in
response to Item 6A, "Exhibits," of the registrant's Report on Form 10-Q
for the quarter ended June 30, 1994.
(10) Incorporated by reference to identically numbered exhibits filed in
response to Item 14(a), "Exhibits," of the Registrant's Report on Form
10-K for the fiscal year ended December 31, 1994.
(11) Incorporated by reference to identically numbered exhibits filed in
response to Item 14(a), "Exhibits," of the Registrant's Report on Form
10-K for the fiscal year ended December 31, 1995.
(12) Incorporated by reference to identically numbered exhibits filed in
response to Item 6A, "Exhibits," of the registrant's Report on Form 10-Q
for the quarter ended June 30, 1996.
(13) Incorporated by reference to identically numbered exhibits filed in
response to Item 6A, "Exhibits," of the registrant's Report on Form 10-Q
for the quarter ended September 30, 1996.
51
<PAGE>
(14) Filed herewith.
(b) Reports on Form 8-K
No reports on Form 8-K were filed by the registrant during the fourth
quarter ended December 31, 1996.
52
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this Report on Form 10-K to
be signed on its behalf by the undersigned, thereunto duly authorized.
TRIMBLE NAVIGATION LIMITED
By:/s/ Charles R. Trimble
Charles R. Trimble,
President and Chief
Executive Officer
March 24, 1997
POWER OF ATTORNEY
Know all persons by these presents, that each person whose signature
appears below constitutes and appoints Charles R. Trimble as his
attorney-in-fact, with the power of substitution, for him in any and all
capacities, to sign any amendments to this Report on Form 10-K, and to file the
same, with exhibits thereto and other documents in connection therewith, with
the Securities and Exchange Commission, hereby ratifying and confirming all that
said attorney-in-fact, or his substitute or substitutes, may do or cause to be
done by virtue hereof.
53
<PAGE>
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report on Form 10-K has been signed below by the following persons on behalf of
the registrant and in the capacities and on the dates indicated:
Signature Capacity in which Signed Date
President, Chief Executive March 24, 1997
/s/ Charles R. Trimble Officer (principal executive
officer) and Director
Vice President, Finance and March 24, 1997
/s/ Dennis R. Ing Chief Financial Officer
(principal financial and principal
accounting officer)
/s/ Robert S. Cooper Director March 17, 1997
/s/ John B. Goodrich Director March 24, 1997
/s William Hart Director March 17, 1997
/s/ Bradford W. Parkinson Director March 16, 1997
54
<PAGE>
SCHEDULE II
TRIMBLE NAVIGATION LIMITED
VALUATION AND QUALIFIYING ACCOUNTS
(IN THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
Balance at Balance at
beginning of (Reductions) end of
Allowance for doubtful accounts: period Additions Write-Offs * period
---------- ------------- ------------ -----------
<S> <C> <C> <C> <C>
Year ended December 31, 1994 $ 2,005 $ (272) $ 641 $ 1,092
Year ended December 31, 1995 1,092 165 183 1,074
Year ended December 31, 1996 1,074 1,595 276 2,393
</TABLE>
<TABLE>
<CAPTION>
Balance at Balance at
beginning of (Reductions) end of
Inventory Reserves: period Additions Write-Offs * period
---------- ------------- ------------ -----------
<S> <C> <C> <C> <C>
Year ended December 31, 1994 $ 5,980 $ 1,324 $ 2,173 $ 5,131
Year ended December 31, 1995 5,131 1,126 688 5,569
Year ended December 31, 1996 5,569 6,189 1,876 9,882
- -------------------------------------
* Net of recoveries
</TABLE>
S-1
55
<PAGE>
INDEX TO EXHIBITS
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER EXHIBIT PAGE
10.50 1993 Stock Option Plan
(amended as of March 19, 1997) 57-66
11.1 Statement of computation of earnings (loss)
per share 67
21.1 Subsidiaries of the Company 68
23 Consent of Ernst & Young LLP,
Independent Auditors 69
27 Financial Data Schedule 70
56
<PAGE>
TRIMBLE NAVIGATION LIMITED
EXHIBIT 10.50
1993 STOCK OPTION PLAN
(amended as of March 19, 1997)
I. Purposes of the Plan. The purposes of this Stock Option Plan are to
attract and retain the best available personnel for positions of substantial
responsibility, to provide additional incentive to the Employees and Consultants
of the Company and to promote the success of the Company's business.
Options granted hereunder may be either Incentive Stock Options or
Nonstatutory Stock Options, at the discretion of the Board and as reflected in
the terms of the written option agreement.
I. Definitions. As used herein, the following definitions shall apply:
A. "Administrator" means the Board or any of its Committees appointed
pursuant to Section 4 of the Plan.
A. "Board" shall mean the Committee, if one has been appointed, or the
Board of Directors of the Company, if no Committee is appointed.
A. "Code" shall mean the Internal Revenue Code of 1986, as amended.
A. "Committee" shall mean the Committee appointed by the Board of Directors
in accordance with paragraph (a) of Section 4 of the Plan, if one is appointed.
A. "Common Stock" shall mean the Common Stock of the Company.
A. "Company" shall mean Trimble Navigation Limited, a California
corporation.
A. "Consultant" shall mean any person who is engaged by the Company or any
Parent or Subsidiary to render consulting services and is compensated for such
consulting services, and any director of the Company whether compensated for
such services or not, provided that the term Consultant shall not include
directors who are not compensated for their services or are paid only a
director's fee by the Company.
A. "Continuous Status as an Employee or Consultant" shall mean the absence
of any interruption or termination of service as an Employee or Consultant.
Continuous Status as an Employee or Consultant shall not be considered
interrupted in the case of sick leave, military leave, or any other leave of
absence approved by the Company or any Parent or Subsidiary of the Company;
provided that such leave is for a period of not more than 90 days or
reemployment upon the expiration of such leave is guaranteed by contract or
statute.
57
<PAGE>
A. "Employee" shall mean any person, including officers and directors,
employed by the Company or any Parent or Subsidiary of the Company. The payment
of a director's fee by the Company shall not be sufficient to constitute
"employment" by the Company.
A. "Exchange Act" means the Securities Exchange Act of 1934, as amended.
A. "Fair Market Value" means, as of any date, the value of Common Stock
determined as follows:
1. If the Common Stock is listed on any established stock exchange or a
national market system including without limitation the National Market System
of the National Association of Securities Dealers, Inc. Automated Quotation
("NASDAQ") System, its Fair Market Value shall be the closing sales price for
such stock (or the closing bid, if no sales were reported, as quoted on such
system or exchange for the last market trading day prior to the time of
determination) as reported in the Wall Street Journal or such other source as
the Administrator deems reliable;
1. If the Common Stock is quoted on the NASDAQ System (but not on the
National Market System thereof) or regularly quoted by a recognized securities
dealer but selling prices are not reported, its Fair Market Value shall be the
mean between the high and low asked prices for the Common Stock or;
1. In the absence of an established market for the Common Stock, the Fair
Market Value thereof shall be determined in good faith by the Administrator.
A. "Incentive Stock Option" shall mean an Option intended to qualify as an
incentive stock option within the meaning of Section 422 of the Code.
A. "Nonstatutory Stock Option" shall mean an Option not intended to qualify
as an Incentive Stock Option.
A. "Option" shall mean a stock option granted pursuant to the Plan.
A. "Optioned Stock" shall mean the Common Stock subject to an Option.
A. "Optionee" shall mean an Employee or Consultant who receives an Option.
A. "Parent" shall mean a "parent corporation", whether now or hereafter
existing, as defined in Section 424(e) of the Code.
A. "Plan" shall mean this 1993 Stock Option Plan.
58
<PAGE>
A. "Share" shall mean a share of the Common Stock, as adjusted in
accordance with Section 11 of the Plan.
B. "Subsidiary" shall mean a "subsidiary corporation", whether now or
hereafter existing, as defined in Section 424(f) of the Code.
I. Stock Subject to the Plan. Subject to the provisions of Section 11 of
the Plan, the maximum aggregate number of shares which may be optioned and sold
under the Plan is 3,200,000 shares of Common Stock. The Shares may be
authorized, but unissued, or reacquired Common Stock.
If an Option should expire or become unexercisable for any reason without
having been exercised in full, the unpurchased Shares which were subject thereto
shall, unless the Plan shall have been terminated, become available for future
grant under the Plan. Notwithstanding any other provision of the Plan, shares
issued under the Plan and later repurchased by the Company shall not become
available for future grant or sale under the Plan.
I. Administration of the Plan.
A. Procedure.
1. Multiple Administrative Bodies. The Plan may be administered by
different Committees with respect to different groups of Employees and
Consultants.
1. Section 162(m). To the extent that the Administrator determines it to be
desirable to qualify Options granted hereunder as "performance-based
compensation" within the meaning of Section 162(m) of the Code, the Plan shall
be administered by a Committee of two or more "outside directors" within the
meaning of Section 162(m) of the Code.
1. Rule 16b-3. To the extent desirable to qualify transactions hereunder as
exempt under Rule 16b-3, the transactions contemplated hereunder shall be
structured to satisfy the requirements for exemption under Rule 16b-3.
A. Powers of the Administrator. Subject to the provisions of the Plan and
in the case of a Committee, the specific duties delegated by the Board to such
Committee, the Administrator shall have the authority, in its discretion:
1. to determine the Fair Market Value of the Common Stock, in accordance
with Section 2(k) of the Plan;
1. to select the officers, Consultants and Employees to whom Options may
from time to time be granted hereunder;
59
<PAGE>
1. to determine whether and to what extent Options are granted hereunder;
1. to determine the number of shares of Common Stock to be covered by each
such award granted hereunder;
2. to approve forms of agreement for use under the Plan;
1. to determine the terms and conditions, not inconsistent with the terms
of the Plan, of any award granted hereunder (including, but not limited to, the
share price and any restriction or limitation, or any vesting acceleration or
waiver of forfeiture restrictions regarding any Option and/or the shares of
Common Stock relating thereto, based in each case on such factors as the
Administrator shall determine, in its sole discretion);
1. to determine whether and under what circumstances an Option may be
settled in cash under subsection 9(e) instead of Common Stock;
1. to determine whether, to what extent and under what circumstances Common
Stock and other amounts payable with respect to an award under this Plan shall
be deferred either automatically or at the election of the participant
(including providing for and determining the amount, if any, of any deemed
earnings on any deferred amount during any deferral period);
1. to reduce the exercise price of any Option to the then current Fair
Market Value if the Fair Market Value of the Common Stock covered by such Option
shall have declined since the date the Option was granted; and
A. Effect of Administrator's Decision. All decisions, determinations and
interpretations of the Administrator shall be final and binding on all Optionees
and any other holders of any Options.
A. Grant Limits. The following limitations shall apply to grants of Options
under the Plan:
1. No employee shall be granted, in any fiscal year of the Company, Options
under the Plan to purchase more than 100,000 Shares, provided that the Company
may make an additional one-time grant of up to 250,000 Shares to newly-hired
Employees.
1. The foregoing limitations shall be adjusted proportionately in
connection with any change in the Company's capitalization as described in
Section 11.
1. If an Option is cancelled (other than in connection with a transaction
described in Section 11), the cancelled Option shall be counted against the
limits set forth in Section 4(d)(i). For this purpose, if the exercise price of
an Option is reduced, the transaction will be treated as a cancellation of the
Option and the grant of a new Option.
60
<PAGE>
I. Eligibility.
A. Nonstatutory Stock Options may be granted only to Employees, Directors,
and Consultants. Incentive Stock Options may be granted only to Employees. An
Employee, Director, or Consultant who has been granted an Option may, if he is
otherwise eligible, be granted an additional Option or Options.
A. Each Option shall be designated in the written option agreement as
either an Incentive Stock Option or a Nonstatutory Stock Option. However,
notwithstanding such designations, to the extent that the aggregate Fair Market
Value of the Shares with respect to which Options designated as Incentive Stock
Options are exercisable for the first time by any Optionee during any calendar
year (under all plans of the Company or any Parent or Subsidiary) exceeds
$100,000, such excess Options shall be treated as Nonstatutory Stock Options.
A. For purposes of Section 5(b), Incentive Stock Options shall be taken
into account in the order in which they were granted, and the Fair Market Value
of the Shares shall be determined as of the time the Option with respect to such
Shares is granted.
A. The Plan shall not confer upon any Optionee any right with respect to
continuation of employment or consulting relationship with the Company, nor
shall it interfere in any way with his right or the Company's right to terminate
his employment or consulting relationship at any time, with or without cause.
I. Term of Plan. The Plan shall become effective upon the earlier to occur
of its adoption by the Board of Directors or its approval by the shareholders of
the Company as described in Section 18 of the Plan. It shall continue in effect
for a term of ten (10) years unless sooner terminated under Section 14 of the
Plan.
I. Term of Option. The term of each Option shall be ten (10) years from the
date of grant thereof or such shorter term as may be provided in the Option
Agreement. However, in the case of an Incentive Stock Option granted to an
Optionee who, at the time the Option is granted, owns stock representing more
than ten percent (10%) of the voting power of all classes of stock of the
Company or any Parent or Subsidiary, the term of the Option shall be five (5)
years from the date of grant thereof or such shorter term as may be provided in
the Option Agreement.
I. Exercise Price and Consideration.
A. The per Share exercise price for the Shares to be issued pursuant to
exercise of an Option shall be such price as is determined by the Board, but
shall be subject to the following:
1. In the case of an Incentive Stock Option
61
<PAGE>
a) granted to an Employee who, at the time of the grant of such Incentive
Stock Option, owns stock representing more than ten percent (10%) of the voting
power of all classes of stock of the Company or any Parent or Subsidiary, the
per Share exercise price shall be no less than 110% of the Fair Market Value per
Share on the date of grant.
a) granted to any Employee, the per Share exercise price shall be no less
than 100% of the Fair Market Value per Share on the date of grant.
1. In the case of a Nonstatutory Stock Option, the per Share exercise price
shall be determined by the Administrator. In the case of a Nonstatutory Stock
Option intended to qualify as "performance-based compensation" within the
meaning of Section 162(m) of the Code, the per Share exercise price shall be no
less than 100% of the Fair Market Value per Share on the date of grant.
(iii) Notwithstanding the foregoing, Options may be granted with a per
Share exercise price of less than 100% of the Fair Market Value per Share on the
date of grant pursuant to a merger or other corporate transaction.
A. The consideration to be paid for the Shares to be issued upon exercise
of an Option, including the method of payment, shall be determined by the
Administrator and may consist entirely of (1) cash, (2) check, (3) promissory
note, (4)other Shares which (x) either have been owned by the Optionee for more
than six months on the date of surrender or were not acquired, directly or
indirectly, from the Company, and (y) have a Fair Market Value on the date of
surrender equal to the aggregate exercise price of the Shares as to which said
Option shall be exercised, (5) authorization from the Company to retain from the
total number of Shares as to which the Option is exercised that number of Shares
having a Fair Market Value on the date of exercise equal to the exercise price
for the total number of Shares as to which the Option is exercised, (6) delivery
of a properly executed exercise notice together with irrevocable instructions to
a broker to promptly deliver to the Company the amount of sale or loan proceeds
required to pay the exercise price, (7) delivery of an irrevocable subscription
agreement for the Shares which irrevocably obligates the option holder to take
and pay for the Shares not more than twelve months after the date of delivery of
the subscription agreement, (8) any combination of the foregoing methods of
payment, (9) or such other consideration and method of payment for the issuance
of Shares to the extent permitted under Applicable Laws. In making its
determination as to the type of consideration to accept, the Board shall
consider if acceptance of such consideration may be reasonably expected to
benefit the Company.
I. Exercise of Option.
A. Procedure for Exercise; Rights as a Shareholder. Any Option granted
hereunder shall be exercisable at such times and under such conditions as
determined by the Board, including performance criteria with respect to the
Company and/or the Optionee, and as shall be permissible under the terms of the
Plan.
62
<PAGE>
An Option may not be exercised for a fraction of a Share.
An Option shall be deemed to be exercised when written notice of such
exercise has been given to the Company in accordance with the terms of the
Option by the person entitled to exercise the Option and full payment for the
Shares with respect to which the Option is exercised has been received by the
Company. Full payment may, as authorized by the Board, consist of any
consideration and method of payment allowable under Section 8(b) of the Plan.
Until the issuance (as evidenced by the appropriate entry on the books of the
Company or of a duly authorized transfer agent of the Company) of the stock
certificate evidencing such Shares, no right to vote or receive dividends or any
other rights as a shareholder shall exist with respect to the Optioned Stock,
notwithstanding the exercise of the Option. The Company shall issue (or cause to
be issued) such stock certificate promptly upon exercise of the Option. No
adjustment will be made for a dividend or other right for which the record date
is prior to the date the stock certificate is issued, except as provided in
Section 11 of the Plan.
Exercise of an Option in any manner shall result in a decrease in the
number of Shares which thereafter may be available, both for purposes of the
Plan and for sale under the Option, by the number of Shares as to which the
Option is exercised.
A. Termination of Status as an Employee or Consultant. In the event of
termination of an Optionee's Continuous Status as an Employee or Consultant (as
the case may be), such Optionee may, but only within thirty (30) days (or such
other period of time, not exceeding three (3) months in the case of an Incentive
Stock Option or six (6) months in the case of a Nonstatutory Stock Option, as is
determined by the Board) after the date of such termination (but in no event
later than the date of expiration of the term of such Option as set forth in the
Option Agreement), exercise his Option to the extent that he was entitled to
exercise it at the date of such termination. To the extent that he was not
entitled to exercise the Option at the date of such termination, or if he does
not exercise such Option (which he was entitled to exercise) within the time
specified herein, the Option shall terminate.
A. Disability of Optionee. Notwithstanding the provisions of Section 9(b)
above, in the event of termination of an Optionee's Continuous Status as an
Employee or Consultant as a result of his total and permanent disability (as
defined in Section 22(e)(3) of the Code), he may, but only within six (6) months
(or such other period of time not exceeding twelve (12) months as is determined
by the Board) from the date of such termination (but in no event later than the
date of expiration of the term of such Option as set forth in the Option
Agreement), exercise his Option to the extent he was entitled to exercise it at
the date of such termination. To the extent that he was not entitled to exercise
the Option at the date of termination, or if he does not exercise such Option
(which he was entitled to exercise) within the time specified herein, the Option
shall terminate.
A. Death of Optionee. In the event of the death of an Optionee:
63
<PAGE>
1. during the term of the Option who is at the time of his death an
Employee or Consultant of the Company and who shall have been in Continuous
Status as an Employee or Consultant since the date of grant of the Option, the
Option may be exercised, at any time within twelve (12) months following the
date of death (but in no event later than the date of expiration of the term of
such Option as set forth in the Option Agreement), by the Optionee's estate or
by a person who acquired the right to exercise the Option by bequest or
inheritance, but only to the extent of the right to exercise that would have
accrued had the Optionee continued living and remained in Continuous Status as
an Employee or Consultant twelve (12) months after the date of death, subject to
the limitation set forth in Section 5(b); or 2. within thirty (30) days (or such
other period of time not exceeding three (3) months as is determined by the
Board) after the termination of Continuous Status as an Employee or Consultant,
the Option may be exercised, at any time within twelve (12) months following the
date of death (but in no event later than the date of expiration of the term of
such Option as set forth in the Option Agreement), by the Optionee's estate or
by a person who acquired the right to exercise the Option by bequest or
inheritance, but only to the extent of the right to exercise that had accrued at
the date of termination.
A. Buyout Provisions. The Administrator may at any time offer to buy out
for a payment in cash or Shares, an Option previously granted, based on such
terms and conditions as the Administrator shall establish and communicate to the
Optionee at the time that such offer is made.
I. Non-Transferability of Options. Options may not be sold, pledged,
assigned, hypothecated, transferred or disposed of in any manner other than by
will or by the laws of descent and distribution or pursuant to a qualified
domestic relations order as defined by the Code or Title I of the Employee
Retirement Income Security Act, or the rules thereunder. The designation of a
beneficiary by an Optionee does not constitute a transfer. An Option may be
exercised, during the lifetime of the Optionee, only by the Optionee or a
transferee permitted by this Section 10.
I. Adjustments Upon Changes in Capitalization or Merger. Subject to any
required action by the shareholders of the Company, the number of shares of
Common Stock covered by each outstanding Option, and the number of shares of
Common Stock which have been authorized for issuance under the Plan but as to
which no Options have yet been granted or which have been returned to the Plan
upon cancellation or expiration of an Option, as well as the price per share of
Common Stock covered by each such outstanding Option, shall be proportionately
adjusted for any increase or decrease in the number of issued shares of Common
Stock resulting from a stock split, reverse stock split, stock dividend,
combination or reclassification of the Common Stock, or any other increase or
decrease in the number of issued shares of Common Stock effected without receipt
of consideration by the Company; provided, however, that conversion of any
convertible securities of the Company shall not be deemed to have been "effected
without receipt of consideration." Such adjustment shall be made by the Board,
whose determination in that respect shall be final, binding and conclusive.
Except as expressly provided herein, no issuance by the Company of shares of
stock of any class, or securities convertible into shares of stock of any class,
shall affect, and no adjustment by reason thereof shall be made with respect to,
the number or price of shares of Common Stock subject to an Option.
64
<PAGE>
In the event of the proposed dissolution or liquidation of the Company, the
Board shall notify the Optionee at least fifteen (15) days prior to such
proposed action. To the extent it has not been previously exercised, the Option
will terminate immediately prior to the consummation of such proposed action. In
the event of a merger of the Company with or into another corporation, the
Option shall be assumed or an equivalent option shall be substituted by such
successor corporation or a parent or subsidiary of such successor corporation.
In the even the successor corporation does not agree to assume the option or the
substitute and equivalent option, the Board shall, in lieu of such assumption or
substitution, provide for the Optionee to have the right to vest in and exercise
the Option as to all of the Optioned Stock, including Shares as to which the
Option would not otherwise be vested or exercisable. If the Board makes an
Option fully vested and exercisable in lieu of assumption or substitution in the
event of a merger, the Board shall notify the Optionee that the Option shall be
fully vested and exercisable for a period of fifteen (15) days from the date of
such notice, and the Option will terminate upon the expiration of such period.
If, in such a merger, the Option is assumed or an equivalent option is
substituted by such successor corporation or a parent or subsidiary of such
successor corporation, and if during a one-year period after the effective date
of such merger, the Optionee's Continuous Status as an Employee or Consultant is
terminated for any reason other than the Optionee's voluntary termination of
such relationship, then the Optionee shall have the right within thirty days
thereafter to exercise the Option as to all of the Optioned Stock, including
Shares as to which the Option would not be otherwise exercisable, effective as
of the date of such termination.
I. Stock Withholding to Satisfy Withholding Tax Obligations. At the
discretion of the Administrator, Optionees may satisfy withholding obligations
as provided in this paragraph. When an Optionee incurs tax liability in
connection with an Option, which tax liability is subject to tax withholding
under applicable tax laws, and the Optionee is obligated to pay the Company an
amount required to be withheld under applicable tax laws, the Optionee may
satisfy the withholding tax obligation by electing to have the Company withhold
from the Shares to be issued upon exercise of the Option, if any, that number of
Shares having a Fair Market Value equal to the amount required to be withheld.
The Fair Market Value of the Shares to be withheld shall be determined on the
date that the amount of tax to be withheld is to be determined.
I. Time of Granting Options. The date of grant of an Option shall, for all
purposes, be the date on which the Board makes the determination granting such
Option. Notice of the determination shall be given to each Employee or
Consultant to whom an Option is so granted within a reasonable time after the
date of such grant.
I. Amendment and Termination of the Plan.
A. Amendment and Termination. The Board may at any time amend, alter,
suspend or discontinue the Plan, but no amendment, alteration, suspension or
discontinuation shall be made which would impair the rights of any Optionee
under any grant theretofore made, without his or her consent. In addition, to
65
<PAGE>
the extent necessary and desirable to comply with Section 422 of the Code (or
any other applicable law or regulation, including the requirements of the NASD
or an established stock exchange), the Company shall obtain shareholder approval
of any Plan amendment in such a manner and to such a degree as required.
A. Effect of Amendment or Termination. Any such amendment or termination of
the Plan shall not affect Options already granted and such Options shall remain
in full force and effect as if this Plan had not been amended or terminated,
unless mutually agreed otherwise between the Optionee and the Board, which
agreement must be in writing and signed by the Optionee and the Company.
I. Conditions Upon Issuance of Shares. Shares shall not be issued pursuant
to the exercise of an Option unless the exercise of such Option and the issuance
and delivery of such Shares pursuant thereto shall comply with all relevant
provisions of law, including, without limitation, the Securities Act of 1933, as
amended, the Exchange Act, the rules and regulations promulgated thereunder, and
the requirements of any stock exchange upon which the Shares may then be listed,
and shall be further subject to the approval of counsel for the Company with
respect to such compliance.
As a condition to the exercise of an Option, the Company may require the
person exercising such Option to represent and warrant at the time of any such
exercise that the Shares are being purchased only for investment and without any
present intention to sell or distribute such Shares if, in the opinion of
counsel for the Company, such a representation is required by any of the
aforementioned relevant provisions of law.
I. Reservation of Shares. The Company, during the term of this Plan, will
at all times reserve and keep available such number of Shares as shall be
sufficient to satisfy the requirements of the Plan.
The inability of the Company to obtain authority from any regulatory body
having jurisdiction, which authority is deemed by the Company's counsel to be
necessary to the lawful issuance and sale of any Shares hereunder, shall relieve
the Company of any liability in respect of the failure to issue or sell such
Shares as to which such requisite authority shall not have been obtained.
I. Option Agreement. Options shall be evidenced by written option
agreements in such form as the Board shall approve.
I. Shareholder Approval. Continuance of the Plan shall be subject to
approval by the shareholders of the Company within twelve (12) months before or
after the date the Plan is adopted. Such shareholder approval shall be obtained
in the degree and manner required under Applicable Laws.
66
<PAGE>
TRIMBLE NAVIGATION LIMITED
EXHIBIT 11.1
Computation of Earnings (Loss) Per Share
<TABLE>
<CAPTION>
Years Ended December 31,
--------------------------------------
1996 1995 1994
- --------------------------------------------------------------------------------------------
(In thousands, except per share data)
PRIMARY EARNINGS (LOSS) PER SHARE
<S> <C> <C> <C>
Computation of common and common
equivalent shares outstanding:
Common stock outstanding ........................ 22,005 19,949 18,340
Common stock options ............................ -- 1,159 689
Common stock warrants ........................... -- 198 33
----------- ------- -------
Total weighted average common
and dilutive common equivalent shares outstanding 22,005 21,306 19,062
=========== ======= =======
Net income (loss) .................................. $ (11,302) $11,261 $10,024
=========== ======= =======
Primary earnings (loss) per share .................. $ (0.51) $ 0.53 $ 0.53
=========== ======= =======
FULLY DILUTED EARNINGS (LOSS) PER SHARE
Computation of common and common
equivalent shares outstanding:
Common stock outstanding ........................ 22,005 19,949 18,340
Common stock options ............................ -- 1,193 728
Common stock warrants ........................... -- 204 35
----------- ------- -------
Total weighted average common
and dilutive common equivalent shares outstanding 22,005 21,346 19,103
=========== ======= =======
Net income (loss) .................................. $ (11,302) $11,261 $10,024
=========== ======= =======
Fully diluted earnings (loss) per share ............ $ (0.51) $ 0.53 $ 0.53
=========== ======= =======
</TABLE>
67
<PAGE>
TRIMBLE NAVIGATION LIMITED
EXHIBIT 21.1
LIST OF SUBSIDIARIES OF REGISTRANT
TR Navigation Corporation
(incorporated in California)
Trimble Specialty Products, Inc.
(incorporated in California)
Trimble Navigation Europe Limited
(organized under the laws of the United Kingdom)
Trimble Navigation International Foreign Sales Corporation
(organized under the laws of Barbados)
Trimble Navigation International Limited
(incorporated in California)
TNL Flight Services, Inc.
(incorporated in Texas)
Trimble Navigation New Zealand Limited
(organized under the laws of New Zealand)
DataCom Software Research Limited
(organized under the laws of New Zealand)
Trimble Navigation Italia s.r.l.
(organized under the laws of Italy)
Trimble Navigation Deutchland GmbH
(organized under the laws of Germany)
Trimble Navigation France S.A.
(organized under the laws of France)
Trimble Navigation Singapore PTE Limited
(organized under the laws of Singapore)
Trimble Navigation Iberica S.L.
(organized under the laws of Spain)
Trimble Navigation Australia Pty Limited
(organized under the laws of Australia)
Trimble Japan K.K.
(organized under the laws of Japan)
Trimble Export Limited
(incorporated in California)
Trimble Middle East WLL
(incorporated under the laws of Egypt)
Trimble Brasil Limitada
(incorporated under the laws of Brazil)
Trimble Mexico S. de R.L.
(incorporated under the laws of Mexico)
68
<PAGE>
TRIMBLE NAVIGATION LIMITED
EXHIBIT 23
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the use of our report dated January 28, 1997 in this Annual
Report(Form 10-K) of Trimble Navigation Limited for the year ended December 31,
1996.
We also consent to the incorporation by reference in the Registration
Statement (Form S-8 Nos. 33-37384, 33-39647, 33-45167, 33-45604, 33-46719,
33-50944, 33-57522, 33-62078, 33-78502, 33-84362, 33-91858 and 333-04670)
pertaining to the 1983 Stock Option Plan, the Trimble Navigation Savings and
Retirement Plan, the 1990 Director Stock Option Plan, the "Position for Us for
Progress" 1992 Employee Stock Bonus Plan, the 1992 Management Discount Stock
Option Plan, and the 1993 Stock Option Plan, and the related Prospectuses, of
our report dated January 28, 1997 with respect to the consolidated financial
statements and schedule of Trimble Navigation Limited included in the Annual
Report for the year ended December 31, 1996 (Form 10-K).
/s/ Ernst & Young LLP
Palo Alto, California
March 21, 1997
69
<PAGE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEET AND CONSOLIDATED STATEMENT OF EARNINGS AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<CASH> 22,671
<SECURITIES> 59,867
<RECEIVABLES> 34,374
<ALLOWANCES> 0
<INVENTORY> 38,858
<CURRENT-ASSETS> 159,403
<PP&E> 21,504
<DEPRECIATION> 0
<TOTAL-ASSETS> 189,841
<CURRENT-LIABILITIES> 34,858
<BONDS> 0
0
0
<COMMON> 129,080
<OTHER-SE> (5,035)
<TOTAL-LIABILITY-AND-EQUITY> 189,841
<SALES> 233,660
<TOTAL-REVENUES> 233,660
<CGS> 112,596
<TOTAL-COSTS> 112,596
<OTHER-EXPENSES> 133,372
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,925
<INCOME-PRETAX> (11,602)
<INCOME-TAX> (300)
<INCOME-CONTINUING> (11,302)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (11,302)
<EPS-PRIMARY> (0.51)
<EPS-DILUTED> (0.51)
</TABLE>
