UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended October 1, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from____to____
Commission File Number 0-18645
TRIMBLE NAVIGATION LIMITED
(Exact name of registrant as specified in its charter)
California 94-2802192
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) identification No.)
645 North Mary Avenue, Sunnyvale, California 94088
(Address of Principal Executive Offices) (Zip Code)
(408) 481-8000
(Registrant's telephone number, including area code)
Not Applicable
(Former name, former address and former fiscal year,
if changed since last report)
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 periods 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
As of November 5, 1999, there were 22,556,500 shares of Common Stock (no
par value) outstanding
1
<PAGE>
TRIMBLE NAVIGATION LIMITED
INDEX
Page
PART I. FINANCIAL INFORMATION Number
Item 1. Financial Statements
Condensed Consolidated Balance Sheets -
October 1, 1999 and January 1, 1999 3
Condensed Consolidated Statements of Operations -
Three and Nine Months ended October 1, 1999 and October 2, 1998 4
Condensed Consolidated Statements of Cash Flows -
Nine Months ended October 1, 1999 and October 2, 1998 5
Notes to Condensed Consolidated Financial Statement 6
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations 13
Item 3. Quantitative and Qualitative Disclosure of Market Risk 21
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 23
SIGNATURES 24
2
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
TRIMBLE NAVIGATION LIMITED
CONDENSED CONSOLIDATED BALANCE SHEETS
October 1, January 1,
1999 1999
------------------------------------------------------------------------------
(In thousands) (Unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 57,237 $ 40,865
Short term investments 39,654 16,269
Accounts and other receivable, net 41,818 33,431
Inventories 18,257 37,166
Other current assets 3,870 4,173
-------------- -----------
Total current assets 160,836 131,904
Net property and equipment 12,453 15,104
Intangible assets 1,137 1,320
Deferred income taxes 399 405
Other assets 7,302 7,546
-------------- -----------
Total assets $ 182,127 $ 156,279
============== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt $ 1,388 $ 1,388
Accounts payable 13,945 13,000
Accrued compensation and benefits 9,174 4,696
Customer advances - 808
Accrued liabilities 16,417 15,474
Deferred Gain on sale of assets 1,953 -
Accrued liabilities related to disposal of
General Aviation 2,819 6,743
Accrued warranty expense 6,197 5,681
Income taxes payable 3,984 2,158
-------------- -----------
Total current liabilities 55,877 49,948
-------------- -----------
Noncurrent portion of long-term debt and
other liabilities 33,992 31,640
-------------- -----------
Total liabilities 89,869 81,588
-------------- -----------
Shareholders' equity:
Common stock 124,249 122,201
Accumulated deficit (30,993) (46,718)
Unrealized gain (loss) on short term investments (64) 19
Foreign currency translation adjustment (934) (811)
-------------- -----------
Total shareholders' equity 92,258 74,691
-------------- -----------
Total liabilities and shareholders' equity $ 182,127 $ 156,279
============== ===========
See accompanying notes to condensed consolidated financial statements.
3
<PAGE>
<TABLE>
<CAPTION>
TRIMBLE NAVIGATION LIMITED
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended Nine Months Ended
October 1, October 2, October 1, October 2,
1999 1998 * 1999 1998 *
- ---------------------------------------------------------------------------------------------------------------------------------
(In thousands, except per share data)
<S> <C> <C> <C> <C>
Total revenue $ 69,636 $ 59,973 $ 209,245 $ 207,670
----------------- ------------- --------------- --------------
Operating expenses:
Cost of sales 32,657 34,445 99,088 107,557
Research and development 9,724 12,363 27,675 34,716
Sales and marketing 13,705 15,952 40,981 47,540
General and administrative 7,738 8,501 26,391 23,168
Restructuring charges - 2,453 - 2,453
----------------- ------------- --------------- --------------
Total operating expenses 63,824 73,714 194,135 215,434
----------------- ------------- --------------- --------------
Operating income (loss) 5,812 (13,741) 15,110 (7,764)
----------------- ------------- --------------- --------------
Nonoperating income (expense):
Interest income 1,108 839 2,493 2,853
Interest and other expenses (922) (2,362) (2,574) (4,039)
Foreign exchange gain, net 31 78 24 358
----------------- ------------- --------------- --------------
217 (1,445) (57) (828)
----------------- ------------- --------------- --------------
Income (loss) before income taxes from
continuing operations 6,029 (15,186) 15,053 (8,592)
Income tax provision 905 350 2,259 1,050
----------------- ------------- --------------- --------------
Net income (loss) from continuing operations $ 5,124 $ (15,536) $ 12,794 $ (9,642)
----------------- ------------- --------------- --------------
Discontinued operations:
Loss from operations (net of tax) $ - $ (2,036) $ - $ (5,760)
Estimated income (loss) on disposal 2,931 (19,862) 2,931 (19,862)
----------------- ------------- --------------- --------------
Loss on discontinued operations 2,931 (21,898) 2,931 (25,622)
----------------- ------------- --------------- --------------
Net income (loss) $ 8,055 $ (37,434) $ 15,725 $ (35,264)
================= ============= =============== ==============
Basic income (loss) per share from continuing operations $ 0.23 $ (0.70) 0.57 (0.43)
Basic income (loss) per share from discontinued operations 0.13 (0.98) 0.13 (1.13)
----------------- ------------- --------------- --------------
Basic net income (loss) per share $ 0.36 $ (1.68) $ 0.70 $ (1.56)
================= ============= =============== ==============
Shares used in calculating basic
income (loss) per share 22,519 22,305 22,367 22,593
================= ============= =============== ==============
Diluted income (loss) per share from continuing operations $ 0.22 $ (0.70) 0.57 (0.43)
Diluted income (loss) per share from discontinued operations 0.13 (0.98) 0.13 (1.13)
----------------- ------------- --------------- --------------
Diluted net income (loss) per share $ 0.35 $ (1.68) $ 0.70 $ (1.56)
================= ============= =============== ==============
Shares used in calculating diluted
income (loss) per share 22,860 22,305 22,573 22,593
================= ============= =============== ==============
</TABLE>
* Certain amounts in these periods have been restated for discontinued
operations (General Aviation) and subsequent to the restatement, certain amounts
in this period related to certain product lines have been reclassified to
include amounts in continuing operations that were previously included in
discontinued operations. See Note 4 for further explanation.
See accompanying notes to condensed consolidated financial statements.
4
<PAGE>
TRIMBLE NAVIGATION LIMITED
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
October 1, October 2,
1999 1998 *
- ------------------------------------------------------------------------------------------------------
(In thousands)
<S> <C> <C>
Net cash provided by operating activities of continuing operations $ 13,848 $ 8,158
Net cash provided (used) by operating activities /
disposal of discontinued operations 2,931 (5,760)
--------------- ----------------
Net cash provided by operating activities $ 16,779 $ 2,398
--------------- ----------------
Cash flow from investing activities:
Purchase of short term investments (40,735) (69,163)
Maturities of short term investments 17,350 104,712
Sales of short term investments - 8,473
Sales (purchases) of equity investments 752 (1,051)
Acquisition of property and equipment (4,887) (6,711)
Proceeds from sale of assets 26,863 -
Capitalized patent expenditures (717) (802)
--------------- ----------------
Net cash provided (used) in investing activities of
continuing operations (1,374) 35,458
Net cash used in investing activities of discontinued
operations - (952)
--------------- ----------------
Net cash provided (used) in investing activities (1,374) 34,506
--------------- ----------------
Cash flow from financing activities:
Issuance of common stock 2,048 3,415
Repurchase of common stock - (15,168)
(Payment)/collections of notes receivable 221 (14)
(Payment)/proceeds from long-term debt and revolving
credit facilities (1,302) 2,554
--------------- ----------------
Net cash provided (used) by financing activities of
continuing operations 967 (9,213)
--------------- ----------------
Net cash provided (used) by financing activities 967 (9,213)
--------------- ----------------
Net increase in cash and cash equivalents 16,372 27,691
Cash and cash equivalents -- beginning of period 40,865 19,951
--------------- ----------------
Cash and cash equivalents -- end of period $ 57,237 $ 47,642
=============== ================
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest $ 824 $ 790
Income taxes, net of refunds $ 200 $ 1,410
</TABLE>
* Certain amounts in this period have been restated for discontinued
operations (General Aviation) and subsequent to the restatement, certain amounts
in this period related to certain product lines have been reclassified to
include amounts in continuing operations that were previously included in
discontinued operations. See Note 4 for further explanation.
See accompanying notes to condensed consolidated financial statements.
5
<PAGE>
TRIMBLE NAVIGATION LIMITED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - Basis of Presentation:
The condensed consolidated financial statements for the three and nine
month periods ended October 1, 1999, and October 2, 1998, which are presented in
this Quarterly Report on Form 10-Q are unaudited. The balance sheet at January
1, 1999, has been derived from the audited financial statements at that date but
does not include all of the information and footnotes required by generally
accepted accounting principles for complete financial statements. In the opinion
of management, these statements include all adjustments (consisting only of
normal recurring adjustments) necessary for a fair statement of the results for
the interim periods presented. The condensed consolidated financial statements
should be read in conjunction with the audited consolidated financial statements
and notes thereto included in the Company's Annual Report on Form 10-K for the
year ended January 1, 1999. The three and nine months ended October 2, 1998 have
been restated to reflect a subsequently retained portion of discontinued
operations. See Note 4.
The Company has a 52-53 week fiscal year, which ends on the Friday nearest
to December 31, which for fiscal 1999 will be December 31, 1999.
The results of operations for the three and nine month periods ended
October 1, 1999 are not necessarily indicative of the results that may be
expected for the year ending December 31, 1999.
NOTE 2 - Disposition of Assets:
On August 10, 1999, Trimble Navigation Limited ("Trimble" or the "Company")
signed an Asset Purchase Agreement with Solectron Corporation and Solectron
Federal Systems, Inc. (collectively, "Solectron"). The closing of the
transaction occurred on August 13, 1999. At the closing of the Asset Purchase
Agreement, the Company transferred to Solectron substantially all of the
Company's tangible manufacturing assets located at the Company's Sunnyvale,
California campus, including but not limited to equipment, fixtures and work in
progress, and certain contract and other intangible assets and rights, together
with certain related obligations, including but not limited to real property
subleases covering the Company's manufacturing floor space, and outstanding
purchase order commitments. In addition, the Asset Purchase Agreement also
provided for Solectron's subsequent purchase, on August 30, 1999, of Trimble's
entire component inventory, on hand as of August 13, 1999.
The final purchase price for these assets was $26.9 million. As part of
this agreement the Company will incur some employee and facility related
liabilities, which have been accrued for and offset against the gain. The net
gain on the transaction to the Company of $5.9 million has been deferred and is
being recognized over the three-year exclusive life of the Supply Agreement
described below.
Concurrently with the closing of the Asset Purchase Agreement, the Company
and Solectron also entered into a Supply Agreement. The Supply Agreement
provides for the exclusive manufacture by Solectron of almost all Trimble
products for a period of three years. Solectron will initially manufacture such
Trimble products under the Supply Agreement in the same Trimble buildings in
which such products were previously manufactured by Trimble, and Trimble has
sublet such space to Solectron as part of this transaction. Solectron offered
employment to approximately 230 Trimble manufacturing, engineering and related
support personnel, and Trimble understands that substantially all such employees
accepted such employment with Solectron.
6
<PAGE>
NOTE 3 - Inventories:
Inventories from continuing operations consist of the following:
October 1, January 1,
1999 1999
- ---------------------------------------------------------------------------
(In thousands)
Raw materials $ 1,382 $ 22,480
Work-in-process 2,262 4,033
Finished goods 14,613 10,653
-------------- -------------------
$ 18,257 $ 37,166
-------------- -------------------
NOTE 4 - Discontinued Operations:
On October 2, 1998, the Company adopted a plan to discontinue its General
Aviation division. The Company currently anticipates that the division will be
disposed of by the first half of fiscal 2000. Accordingly, the General Aviation
division is being reported as a discontinued operation for all periods presented
in these financial statements. Net assets of the discontinued operation at
October 2, 1998 were written off and consisted primarily of inventory, property,
plant and equipment and intangible assets.
As of October 1, 1999, in connection with the discontinued operations, the
Company had incurred cumulative net expenses of approximately $5.5 million
consisting of $6.0 million for operating losses for the discontinued operation
through the estimated date of disposal, including severance costs and net of
receipts of $543,000 related to the sale of particular inventory items and fixed
assets. The Company has revised its accrual for the remaining costs now expected
to be incurred based on current status of the related liabilities. This resulted
in a reversal of approximately $2.9 million of prior amounts accrued related to
the discontinued operations. The Company has a remaining provision of $2.8
million which includes $1.5 million for the estimated operating losses through
the estimated date of disposal including remaining severance costs and $1.3
million for facility and certain other contractual costs.
On March 31, 1999 the Company made the decision to retain certain product
lines included within the General Aviation division which were part of the
previously planned discontinued operation. The basis of the decision was that
these products use common raw materials and labor which are necessary for the
Company's Air Transport products and, therefore, these particular product lines
could be retained without adding additional overhead from the overhead currently
required for the Air Transport products. The revenues and costs related to the
products retained have been included in the results of operations of continuing
operations in the periods presented.
The net revenues of the discontinued operation, which have been restated to
exclude the retained product lines, are not included in net revenues of
continuing operations in the accompanying statements of operations. The
operating results for the three and nine months ended October 2, 1998 of the
discontinued operation are summarized as follows:
Three Months Ended Nine Months Ended
October 2, October 2,
1998 1998
- --------------------------------------------------------------------------------
(In thousands)
Net revenues $ 2,046 $ 6,807
Loss before tax provision (2,036) (5,760)
Income tax provision - -
============ ============
Net loss $ (2,036) $ (5,760)
============ ============
Basic and diluted net loss per share $ (0.09) $ (0.25)
7
<PAGE>
NOTE 5 - Restructuring Charge:
In fiscal 1998, the Company recorded restructuring charges totaling $10.3
million in operating expenses.
These charges were a result of the Company's reorganization activities,
through which the Company has downsized its operations, including reducing
headcount and facilities space usage and canceling its enterprise wide
information system project and certain research and development projects. The
impact of these decisions was that significant amounts of the Company's fixed
assets, prepaid expenses, and purchased technology have been impaired and
certain liabilities incurred. The Company wrote down the related assets to their
net realizable values and made provisions for the estimated liabilities.
The activity in fiscal 1999 and 1998 related to the restructuring and the
amounts remaining at October 1, 1999 on the balance sheet are as follows (in
thousands):
Total
charged to Remaining in
expense in Amounts paid/ accrued liabilites
fiscal 1998 written off as of October 1, 1999
------------- ------------- ---------------------
Employee termination benefits $ 2,864 $ (1,973) $ 891
Facility space reductions 1,061 (897) 164
ERP system abandonment 6,360 (6,081) 279
========== ============ =====================
Subtotal $ 10,285 $ (8,951) $ 1,334
========== ============ =====================
NOTE 6 - Segment Information:
The Company currently manages its industry segment within two Business
Units: the Precision Positioning Group (PPG) and the Mobile and Timing
Technologies (MTT) Group.
The accounting policies applied by each of the markets are the same as
those used by the Company in general.
The following table presents revenues, operating income (loss), and
identifiable assets by the Company's Business Units. The Company has no
inter-Business Unit sales or transfers. As presented, operating income (loss)
consists of net sales less operating expenses, excluding general corporate
expenses, interest income (expense), and income taxes. The identifiable assets
that the Chief Operating Decision Maker (CODM) views by industry market are
accounts receivable and inventory. The Company does not report depreciation and
amortization or capital expenditures by industry markets to the CODM.
8
<PAGE>
<TABLE>
<CAPTION>
---------------------------------------- -------------------------------------------
Three Months Ended Nine Months Ended
October 1, 1999 October 1, 1999
---------------------------------------- -------------------------------------------
(in thousands) (in thousands)
---------------------------------------- -------------------------------------------
PPG MTT Total PPG MTT Total
---------------------------------------- -------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
External net revenue $ 41,478 $ 28,158 $ 69,636 $ 125,631 $ 83,614 $ 209,245
Operating profit before corporate
allocations 14,280 5,159 19,439 42,175 12,831 55,006
Corporate allocations (1) (6,120) (3,042) (9,162) (18,471) (8,405) (26,876)
---------------------------------------- -------------------------------------------
Operating profit from continuing
operations $ 8,160 $ 2,117 $ 10,277 $ 23,704 $ 4,426 $ 28,130
Assets:
Accounts recievable (2) $ 31,217 $ 21,713 $ 52,930
Inventory 7,961 9,491 17,452
---------------------------------------- -------------------------------------------
Three Months Ended Nine Months Ended
October 2, 1998 October 2, 1998
---------------------------------------- -------------------------------------------
(in thousands) (in thousands)
---------------------------------------- -------------------------------------------
PPG MTT Total PPG MTT Total
---------------------------------------- -------------------------------------------
External net revenue $ 37,581 $ 22,392 $ 59,973 $ 122,381 $ 85,289 $ 207,670
Operating profit/(loss) before corporate
allocations 2,613 (2,773) (160) 16,728 3,093 19,821
Corporate allocations (1) (3,343) (1,922) (5,265) (11,466) (5,913) (17,379)
---------------------------------------- -------------------------------------------
Operating profit/(loss) from continuing
operations $ (730) $ (4,695) $ (5,425) $ 5,262 $ (2,820) $ 2,442
-------------------------------------------
Twelve Months Ended
January 1, 1999
-------------------------------------------
(in thousands)
-------------------------------------------
Assets: PPG MTT Total
-------------------------------------------
Accounts recievable (2) $ 32,197 $ 14,837 $ 47,034
Inventory 10,042 16,251 26,293
</TABLE>
(1) For the three and nine months ended October 1, 1999, the Company
determined the amount of corporate allocations charged to its Business Units
based on a percentage of the Business Units' monthly revenue, gross profit, and
controllable spending (research and development, marketing, and general and
administrative). For the three and nine months ended October 2, 1998, the
Company determined the amount of the corporate allocations charged to its
Business Units based on a percentage of the Business Units' monthly inventory
balance and gross profit. Allocation percentages were determined at the
beginning of each of the respective fiscal years.
(2) As presented, the accounts receivable number excludes cash in advance
and reserves, which are not, allocated between Business Unit segments.
9
<PAGE>
Following are reconciliations corresponding to totals in the accompanying
consolidated financial statements (in thousands):
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
October 1, October 2, October 1, October 2,
Revenues: 1999 1998 1999 1998
- --------------------------------------------------------------------------- --------------- ------------- -------------
<S> <C> <C> <C> <C>
Total for reportable markets $ 69,636 $ 59,973 $ 209,245 $ 207,670
=============== =============== ============= =============
Operating profit/(loss) from continuing operations:
- ------------------------------------------------------------
Total for reportable markets $ 10,277 $ (5,425) $ 28,130 $ 2,442
Unallocated corporate expenses (4,465) (8,316) (13,020) (10,206)
=============== =============== ============= =============
Income before income taxes from continuing operations $ 5,812 $ (13,741) $ 15,110 $ (7,764)
=============== =============== ============= =============
Nine Months Twelve Months
Ended Ended
October 1, January 1,
Assets: 1999 1999
- ------------------------------------------------------------ ------------- -------------
Accounts receivable total for reportable markets $ 52,930 $ 47,034
Unallocated (1) (11,112) (13,603)
============= =============
Total $ 41,818 $ 33,431
============= =============
Inventory total for reportable markets $ 17,452 $ 26,293
Common inventory (2) 805 10,873
============= =============
Net inventory $ 18,257 $ 37,166
============= =============
</TABLE>
(1) Includes cash in advance and reserves that are not allocated by segment.
(2) Consists of inventory that is common between the Business Unit segments.
Parts can be used by either segment.
NOTE 7 - Comprehensive Income (Loss):
The components of comprehensive income, net of related tax for the three
and nine months ended October 1, 1999 and October 2, 1998 are as follows:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
October 1, October 2, October 1, October 2,
1999 1998 1999 1998
- ---------------------------------------------------------------------------- ----------------------------------
(In thousands)
<S> <C> <C> <C> <C>
Net income (loss) $ 8,055 $ (37,434) $ 15,725 $ (35,264)
Unrealized gains (losses) on securities (31) 56 (83) 44
Foreign currency translation adjustments 80 (13) (123) (475)
-------------- ------------------- -------------- ------------------
Comprehensive income (loss) $ 8,104 $ (37,391) $ 15,519 $ (35,695)
============== =================== ============== ==================
</TABLE>
The components of accumulated other comprehensive loss, net of related
taxes at October 1, 1999 and January 1, 1999 are as follows:
October 1, January 1,
1999 1999
- ----------------------------------------------------------------------------
(In thousands)
Unrealized gains (loss) on securities $ (64) $ 19
Foreign currency translation adjustments (934) (811)
-------------- -------------------
Accumulated comprehensive loss $ (998) $ (792)
============== ===================
10
<PAGE>
NOTE 8 - New Accounting Standards:
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, (SFAS 133) "Accounting for Derivative
Instruments and Hedging Activities." SFAS 133 will require the Company to record
all derivatives held on the balance sheet at fair value. Derivatives that are
not hedges must be adjusted to fair value through income. With respect to
derivatives which are hedges, then, depending on the nature of the hedge,
changes in the fair value of derivatives either will be offset against the
change in fair value of the hedged assets, liabilities, or firm commitments
through earnings, or will be recognized in other comprehensive income until the
hedged item is recognized in earnings. The ineffective portion of a derivative's
change in fair value will be immediately recognized in earnings. In June of 1999
the Financial Accounting Standards Board delayed the effective date of
implementation for one year; therefore, SFAS 133 is effective for fiscal years
beginning after June 15, 2000. The Company expects to adopt SFAS 133 as of the
beginning of its fiscal year 2001. The effect of adopting the Standard is
currently being evaluated, but is not expected to have a material adverse effect
on the Company's financial position or results of operations.
NOTE 9 - Earnings Per Share:
The following table sets forth the computation of basic and diluted
earnings per share:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
October 1, October 2, October 1, October 2,
1999 1998 1999 1998
- ------------------------------------------------------------------------------------------------------ ----------------------------
(In thousands, except per share amounts)
<S> <C> <C> <C> <C>
Numerator:
Income (loss) from continuing operations available to common
shareholders used in basic and diluted income (loss) per share $ 5,124 $ (15,536) $ 12,794 $ (9,642)
Income (loss) from discontinued operations available to common
shareholders used in basic and diluted income (loss) per share $ 2,931 $ (21,898) $ 2,931 $(25,622)
------------ -------------- ------------- --------------
Income (loss) from operations available to common
shareholders used in basic and diluted income (loss) per share $ 8,055 $ (37,434) $ 15,725 $(35,264)
============ ============== ============= ==============
Denominator:
Weighted-average number of common
shares used in calculating basic income (loss) per share 22,519 22,305 22,367 22,593
Effect of dilutive securities:
Common stock options 328 - 206 -
Common stock warrants 13 - - -
------------ -------------- ------------- --------------
Weighted-average number of common
shares and dilutive potential common shares
used in calculating diluted income (loss) per share 22,860 22,305 22,573 22,593
============ ============== ============= ==============
Basic income (loss) per share from continuing operations $ 0.23 $ (0.70) $ 0.57 $ (0.43)
Basic income (loss) per share from discontinued operations $ 0.13 $ (0.98) $ 0.13 $ (1.13)
------------ -------------- ------------- --------------
Basic income (loss) per share $ 0.36 $ (1.68) $ 0.70 $ (1.56)
============ ============== ============= ==============
Diluted income (loss) per share from continuing operations $ 0.22 $ (0.70) $ 0.57 $ (0.43)
Diluted income (loss) per share from discontinued operations $ 0.13 $ (0.98) $ 0.13 $ (1.13)
------------ -------------- ------------- --------------
Diluted income (loss) per share $ 0.35 $ (1.68) $ 0.70 $ (1.56)
============ ============== ============= ==============
</TABLE>
11
<PAGE>
NOTE 10 - Contingencies:
Shareholder Litigation
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 sought 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 alleged 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
April 28, 1997, the Court granted in part, and denied in part, the Company's
motion to dismiss. The Court further granted the plaintiffs leave to replead
certain dismissed claims. On June 19, 1997, the plaintiffs filed a third amended
and consolidated complaint. The Company has answered the complaint by denying
all liability. On March 19, 1999, the parties executed a Memorandum of
Understanding with respect to settlement of the litigation. The parties
negotiated a definitive stipulation of settlement which was formally approved by
the court on September 23, 1999. The final court-approved settlement was funded
by insurance proceeds and payment by the Company of $1.8 million. The entire
amount of the Company's obligation has been previously reserved and the final
settlement did not adversely effect the Company's financial position or results
of operations.
Other Litigation
On November 12, 1998, the Company brought suit in district court in San
Jose, California against Silicon RF Technology, Inc. (SiRF) for alleged patent
infringement of three Trimble patents. No action by the Court has taken place
yet.
On January 31, 1997, counsel for one Philip M. Clegg wrote to the Company
asserting that a license under Mr. Clegg's U.S. Patent No. 4,807,131, which was
issued February 21, 1989, would be required by the Company because of a joint
venture that the Company had previously entered into with Caterpillar
Corporation concerning the use of Trimble GPS products in combination with earth
moving equipment. To date, no infringement action has been initiated on behalf
of Mr. Clegg. The Company does not believe that there will be any adverse
consequences to the Company as a result of this inquiry.
Other Matters
Western Atlas, a Houston based supplier to the oil exploration business,
has accused the Company and other GPS manufacturers, suppliers and users of
infringing two U.S. Patents owned by it, namely U.S. Patent Nos. 5,014,066 and
5,619,212. Western Atlas contends that the foregoing patents cover certain
aspects of GPS receiver design. Lawsuits for infringement of these two patents
were filed in federal district court in Houston, Texas against Rockwell
International Corp and Garmin International Inc. and both have settled. Although
Trimble has not been sued by Western Atlas on the foregoing patents, the Company
has instructed its counsel thoroughly to investigate the infringement threat. At
the present time, the Company does not expect this threat to have adverse
consequences on the Company's business.
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This report contains forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. Actual results could differ
materially from those indicated in the forward-looking statements due to a
number of factors including, but not limited to, as a result of the risk factors
set forth below in this report as well as the Company's Annual Report on Form
10-K and other reports and documents that the Company files from time to time
with the Securities and Exchange Commission. The Company has attempted to
identify forward-looking statements in this report by placing an asterisk (*) in
the left-hand margin of paragraphs containing those statements.
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF CONTINUING OPERATIONS
Revenues
Revenues of continuing operations for the three and nine months ended
October 1, 1999 were $69,636,000 and $209,245,000 respectively, compared with
$59,973,000 and $207,670,000 in the corresponding 1998 periods. The table below
breaks out the Company's revenues by segment:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
-------------------------------------------- --------------------------------------------
October 1, October 2, Increase/ October 1, October 2, Increase/
1999 1998 (Decrease) 1999 1998 (Decrease)
- ----------------------------------------------------------------------------- --------------------------------------------
(In thousands)
<S> <C> <C> <C> <C> <C> <C>
Precision Positioning Group $ 41,478 $37,581 10% $ 125,631 $ 122,381 3%
Mobile and Timing Technologies 28,158 22,392 26% 83,614 85,289 (2%)
-------------- ------------- ------------- ------------- -------------- -------------
Total $ 69,636 $59,973 16% $ 209,245 $ 207,670 1%
-------------- ------------- ------------- ------------- -------------- -------------
</TABLE>
Precision Positioning Group
Precision Positioning Group revenues increased for both the three and nine
month periods ended October 1, 1999 as compared to the corresponding periods for
1998. The increase for the three month period was primarily due to significant
growth in the Land Survey market from continued strong demand of the Real-time
Kinematic (RTK) total stations; as well as strong shipments to the Company's
Japanese OEM partner. These increases were partially offset by anticipated
declines in machine guidance products due to the down turn in the mining and
agricultural markets.
The increase for the nine month period was primarily due to strong demand
in the Mapping and GIS market, as well as, significant growth in the Land Survey
market from continued strong demand of the Real-time Kinematic (RTK) total
stations.
Mobile and Timing Technologies
Mobile and Timing Technologies revenues increased for the three month
period ended October 1, 1999, as compared with the corresponding period in 1998.
The growth was primarily concentrated in in-vehicle navigation products sold to
the automotive market, embedded products sold into a wide variety of
applications, timing products, and sales to the military. These increases were
partially offset by declines in the commercial marine and air transport markets.
The Company made the decision to exit the commercial marine market in the fourth
quarter of 1998 and the remaining products in this market were sold in the
second quarter of 1999.
Mobile and Timing Technologies revenues decreased slightly for the nine
month period ended October 1, 1999, as compared with the corresponding period in
1998 due primarily to lower military shipments, lower Commercial Avionics sales,
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<PAGE>
and the Company's decision to exit the commercial marine market. These
decreases were not completely offset by increases in the remaining Automotive,
Timing, and Mobile Positioning product lines.
Revenues outside the U.S.
* Sales to unaffiliated customers from continuing operations in locations
outside the U.S. comprised approximately 50% and 45% of the Company's revenues
in the first nine months of fiscal 1999 and 1998, respectively. During the first
nine months of 1999, the Company experienced strong demand in Europe, Asia and
Latin America. The Company anticipates that export revenues and sales made by
its subsidiaries in locations outside the U.S. will continue to account for a
significant portion of its revenues and, therefore, the Company is subject to
the risks inherent in these international sales, including unexpected changes in
regulatory requirements, exchange rates, governmental approvals, 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), customers
in certain foreign markets may be reluctant to purchase products based on GPS
technology given the control of GPS by the U.S. government. The Company's
results of operations would be adversely affected if the Company were unable to
continue to generate significant sales in locations outside the U.S.
Gross Margin
* Gross margin from continuing operations varies on a quarterly basis due
to a number of factors, including product mix, technology license fees, 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.
Gross margin as a percentage of total product revenues was 53% for both the
three and nine month periods ending October 1, 1999 as compared with 43% and 48%
in the corresponding 1998 periods. The increases in gross margin percentages
primarily reflect improved manufacturing cost controls achieved through the
consolidation of the manufacturing organization resulting in improved
efficiencies and reduced inventory. 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 can be no assurance that the
Company's current margins will be sustained.
* The Company also expects that a higher percentage of its business in the
future may be conducted through alliances with larger strategic partners. As a
result of volume pricing and the assumption of certain operating costs in
connection with such partners, margins related to these revenues from strategic
alliances are likely to be lower than revenues from sales directly to end-users.
Operating Expenses
The following table shows operating expenses from continuing operations for
the periods indicated and should be read in conjunction with the narrative
descriptions of those operating expenses below:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
---------------------------------------------- -----------------------------------------------
October 1, October 2, Increase/ October 1, October 2, Increase/
1999 1998 (Decrease) 1999 1998 (Decrease)
- ------------------------------------------------------------------------------------------------------------------------------
(In Thousands)
<S> <C> <C> <C> <C> <C> <C>
Research and development $ 9,724 $ 12,363 (21)% $ 27,675 $ 34,716 (20)%
Sales and marketing 13,705 15,952 (14)% 40,981 47,540 (14)%
General and administrative 7,738 8,501 (9)% 26,391 23,168 14 %
Restructuring charges - 2,453 (100)% - 2,453 (100)%
-------------- -------------- ------------ -------------- -------------- -------------
Total $ 31,167 $ 39,269 (21)% $ 95,047 $ 107,877 (12)%
-------------- -------------- ------------ -------------- -------------- -------------
</TABLE>
Research and Development
* Research and development expenses decreased in the three and nine month
periods ended October 1, 1999, as compared with the corresponding periods in
fiscal 1998. The lower research and development expenses for the three and nine
14
<PAGE>
month periods of fiscal 1999 as compared with the corresponding periods in
fiscal 1998 are primarily due to the Company receiving increased funds from cost
reimbursement projects. Also, there was a decrease in the Company's expenses
related to personnel, consultants, outside engineering, travel, electronic parts
and other supplies as part of the Company's restructuring plan which was
implemented in the last half of fiscal 1998. The Company plans to continue its
aggressive development of future products.
* The Company expects that a significant portion of its future revenues and
operating income will continue to be derived from sales of newly introduced
products. Consequently, the Company's future success depends, in part, on its
ability to continue to advance product technology and to develop and manufacture
new competitive products with 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
shipments 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.
Sales and Marketing
The decrease in sales and marketing expenses for the three and nine month
periods ended October 1, 1999, as compared with the corresponding periods in
fiscal 1998 is due primarily to decreases in the Company's expenses related to
personnel, consultants, travel, advertising, trade shows, expensed demo
equipment, and other office supplies as part of the Company's restructuring plan
which was implemented in the last half of fiscal 1998.
* The Company's future growth will also depend upon the timely development
and continued viability of the Business Unit segments in which the Company
currently competes and upon the Company's ability to continue to identify and
penetrate new markets for its products. In addition, the Company has significant
competition in some markets, and the Company expects such competition to
intensify as the market for GPS applications receives greater acceptance.
Several of the Company's competitors are major corporations with substantially
greater financial, technical, and marketing 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
if the Company is unable to make corresponding changes to compete effectively.
General and Administrative
The decrease in general and administrative expenses for the three months
ended October 1, 1999, as compared with the corresponding period for fiscal
1998, is primarily due to decreases in outside services related to certain
litigation matters and travel expenses which have decreased as part the
Company's restructuring plan, which was implemented in the last half of fiscal
1998. Also, there was decrease in cash contributions and bank fee expenses in
the third quarter of 1999 as compared to the third quarter of 1998.
The increase in general and administrative expenses for the nine months
ended October 1, 1999, as compared with the corresponding period for fiscal
1998, is primarily due to an increase in the allowance for doubtful accounts
related to customers in South America for the first nine months of 1999. In
addition, the Company had an increase in expenditures associated with certain
litigation matters during the first nine months of 1999.
Restructuring Charges
During the quarter ended October 2, 1998, the Company recorded a
restructuring charge of $2,453,000. Components of this restructuring charge
included employee severance costs, including costs for the Company's former CEO
and certain other former senior employees of approximately $1,454,000, and
write-downs of idle assets of approximately $999,000.
Income Taxes
The Company's effective income tax rate from continuing operations for the
three months ended October 1, 1999 and the nine months ended October 1, 1999 is
15%. This rate is less than the federal statutory rate of 35% primarily due to
the utilization of net operating loss carryforwards and the realization of
previously reserved deferred tax assets. The effective income tax rates from
continuing operations for the corresponding periods in 1998 were (2.3%) and
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<PAGE>
(12.2%), respectively. These rates reflect foreign taxes on profits in foreign
jurisdictions and the inability to benefit the operating loss in the United
States.
Inflation
The effects of inflation on the Company's financial results have not been
significant to date.
Liquidity and Capital Resources
* At October 1, 1999, the Company had cash and cash equivalents of
$57,237,000 and short-term investments of $39,654,000. The Company has relied
primarily on cash provided by operating and financing activities and net sales
of short-term investments to fund capital expenditures, the repurchase of the
Company's common stock (see further explanation below), and other investing
activities. Management believes that its cash, cash equivalents and short-term
investment balances, together with its existing credit line, will be sufficient
to meet its anticipated cash needs for at least the next twelve months.
* For the nine months ended October 1, 1999, net cash provided from
operating activities was $16,779,000 as compared to cash provided of $2,398,000
in the corresponding period in 1998. Cash provided by operating activities in
1999 resulted primarily from decreases in inventories and increases in accrued
compensation and benefits. Inventory from continuing operations as of October 1,
1999 decreased by $18,909,000 from the 1998 year end levels primarily due to the
transition of substantially all of the Company's manufacturing to Solectron (See
Note 2 to the consolidated financial statements); as well as, a focused effort
by the Company to reduce inventory by supply chain synchronization, lead and
cycle times reduction, product line simplification, and tighter control over its
material forecasts. The Company's ability to continue to generate cash from
operations will depend in a large part on revenues, the rate of collections of
accounts receivable and the successful management of the Solectron manufacturing
relationship.
* During the third quarter of fiscal 1999, the Company received cash of
$26.9 million as part of an agreement with Solectron for the outsourcing of the
manufacturing operations located in Sunnyvale, California. The inflow of cash in
the third quarter of fiscal 1999 will be employed by the Company to fund capital
expenditures and for other investing activities (See Note 2 to the consolidated
financial statements).
Cash provided by sales of common stock in 1999 represents the proceeds from
purchases made by the Company's employees pursuant to the Company's stock option
plan and employee stock purchase plan and totaled $2,048,000 for the nine months
ended October 1, 1999.
* In August 1997, the Company entered into a three-year, $50,000,000
unsecured revolving credit facility with four banks (the "Credit Agreement").
The Credit Agreement enables the Company to borrow up to $50,000,000, provided
that certain financial and other covenants are met. As of October 20, 1999, the
Company, the Agent and the Lenders agreed to change and amend certain covenants
for the remaining life of the loan, which expires in August of 2000. The
$50,000,000 revolving credit facility was modified to include the Company's
prior separate $5,000,000 line of credit and to simplify the entire arrangement.
The Credit Agreement provides for payment of a commitment fee of 0.25% and
borrowings to bear interest at 1% over LIBOR if the total funded debt to EBITDA
is less than or equal to 1.00 times, 0.3% and borrowings to bear interest at
1.25% over LIBOR if the ratio is greater than 1.00 times and less than or equal
to 2.00 times, or 0.4% and borrowings to bear interest at 1.75% over LIBOR if
the ratio is greater than 2.00 times. In addition to borrowing at the specified
LIBOR rate, the Company has the right to borrow with interest at the higher of
(i) one of the bank's annual prime rate and (ii) the federal funds rate plus
0.5%. To date, the Company has not made any borrowings under the $50,000,000
unsecured revolving credit facility, but has issued certain letters of credit as
of October 1, 1999 amounting to approximately $133,000. In addition, the Company
is restricted from paying dividends under the terms of the Credit Agreement.
In June 1994, the Company issued $30.0 million of subordinated promissory
notes bearing interest at an annual rate of 10%, 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
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<PAGE>
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 also restricted from paying dividends.
The issuance of the subordinated promissory notes also included the
issuance of 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 net
proceeds of the notes were $29,348,000. The notes are recorded as noncurrent
liabilities, net of appraised fair value attributed to the warrants. The value
of the warrants and the issuance costs are being amortized to 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 meet a minimum consolidated net worth
requirement. If the Company falls below the minimum consolidated net worth
requirement the Company could be in default of its loan covenants. Such events
could have a material adverse effect on the Company's operations and liquidity.
In 1998, the Company approved the repurchase of 1.6 million shares on the
open market under a discretionary program to offset the potential dilutive
effects to earnings (loss) per share from the issuance of additional stock
options. The Company intends to use existing cash, cash equivalents and
short-term investments to finance any such stock repurchases under this program.
During 1998, the Company purchased 1.08 million shares at a cost of $16.1
million. During the first nine months of fiscal 1999, no shares have been
repurchased under the discretionary program.
The Company is continually evaluating potential external investments in
technologies related to its business and, to date, has made relatively small
strategic investments in a number of GPS related technology companies. There can
be no assurance that any such outside investments made to date nor any potential
future investments will be successful.
* The Company has evaluated the issues raised by the introduction of the
Single European Currency (Euro) for initial implementation as of January 1,
1999, and during the transition period through January 1, 2002. The Company does
not currently believe that the introduction of the Euro will have a material
effect on the Company's foreign exchange and hedging activities. The Company has
also assessed the potential impact the Euro conversion will have in regard to
its internal systems accommodating Euro-denominated transactions. The Company
will continue to evaluate the impact of the Euro introduction over time, based
on currently available information. The Company does not currently anticipate
any adverse impact of the Euro conversion on the Company.
Year 2000 and GPS Week Number Rollover Issues
GPS Week Number Rollover Issues
During the third quarter of 1999 another date-related issue, known as the
"GPS Week Number Roll-Over" or "WNRO" occurred. The WNRO issue is unrelated to
the Year 2000 issue and is unique to GPS technology. All GPS satellites, which
are operated by the U.S. government, broadcast time in the form of a "GPS week
number" and a time offset into each "GPS week." Week numbers range from 0 to
1023. Week 0 started on January 6, 1980, and week 1023 ended on August 21, 1999,
at which time the week number broadcast by all GPS satellites rolled over, back
to 0.
On Saturday, August 21, 1999, the Company was fully staffed to assist
customers and monitor the performance of over 100 products in real-time before,
during and after the GPS Rollover event. Testing was conducted at various sites
in the United States, New Zealand, the United Kingdom, Japan, Singapore and
Australia. The Company was pleased to report that, based on engineering
observations and field reports from preliminary data, its products performed as
expected or better.
Year 2000 Issues
Computers and software, as well as other equipment that relies on only two
digits to identify or represent a year may be unable to accurately process or
display certain information at or after the Year 2000. This is commonly referred
to as the "Year 2000 issue." The Year 2000 issue may materially affect Trimble's
vendors, suppliers, internal systems, products and customers. The Company
continues to address the Year 2000 issue to avoid what might otherwise be a
material and adverse effect on the Company's consolidated financial position,
results of operations, or cash flows.
The Company continues to assess the potential impact of the Year 2000 issue
on its vendors, suppliers, internal systems, products, and customers-and has
begun, and in many cases completed, corrective efforts in these areas.
17
<PAGE>
Year 2000 Remediation Plan
The Company's Board of Directors adopted a comprehensive Year 2000
Remediation Plan, the goal of which is to minimize business disruptions and risk
exposure that might otherwise arise as a consequence of moving into the
twenty-first century. The plan focuses on achieving Year 2000 readiness across
the Company's entire supply chain, and is designed to deal with the most
critical systems first. Additionally, the Company's Year 2000 remediation plan
calls for the development of contingency plans to address potential problem
areas with internal systems, and with suppliers and other third parties. To
these ends, a Y2K Program Management Office has been established to manage and
coordinate implementation of the plan on a company wide basis. It is expected
that assessment, remediation, and contingency planning activities will be
ongoing throughout 1999, with the objective of appropriately resolving all
material Year 2000 issues before the 21st century rollover.
Information Technology and Other Systems
The Company continues to assess the potential impact of the Year 2000 issue
on its internal systems, including information technology (IT) and non-IT
systems, and is nearing completion of corrective efforts in this area, as
follows:
o The Company upgraded its existing MRP/ERP information systems to a Year
2000 compliant version as of the end of the second quarter. As a
result of testing the upgrade it was determined that further upgrades are
required. The additional upgrades along with the final testing of the
upgraded systems for Year 2000 compliance will be completed before the
21st century rollover. In addition ancillary critical systems continue
to be upgraded during the fourth quarter of 1999 to be Year 2000 compliant.
o Assessment and remediation efforts in connection with the Company's other
IT and non-IT systems are in progress as part of the Company's general Y2K
Remediation Plan. This effort is expected to be completed before the 21st
century rollover.
* Additionally, the Company currently plans to complete renovation, testing
and implementation of critical systems, or successful execution of contingency
plans, during the fourth quarter of 1999. There can be no assurance, however,
that there will not be a delay in, or increased costs associated with,
renovation, testing, implementation or execution of the Year 2000 remediation
plan. The Company's inability to successfully and timely complete these tasks
could have a material adverse effect on future results of operations or
financial condition.
Products
To address and minimize the anticipated impact of the Year 2000 issue upon
the Company's products, the Company continues to assess the anticipated impact
this issue may have on the performance of its products, and resolve various of
its current products' related performance problems. In addition, the Company has
adopted a formal Year 2000 Policy to:
o Publish Year 2000 related product performance information on the Company's
public web site;
o Respond to individual customer inquiries regarding the anticipated
performance of particular Company products;
o Furnish upgrades to customers whose Trimble products are upgradable; and
o Provide information regarding available product alternatives to customers
with non-compliant products.
Assessment of products, resolution of certain products' Year 2000
performance problems, and implementation of the Company's Year 2000 Policy, are
ongoing, and as to many Company products is complete.
* The Company does not anticipate that the Year 2000 issue will have a
material adverse effect on sales of its products. The Company has incurred, and
will continue to incur, through 1999 and thereafter, increased expenses
associated with Year 2000 related product assessment, resolution of certain
products' Year 2000 performance problems, implementation of the Company's Year
2000 Policy, and fulfillment of Year 2000 related customer support and warranty
18
<PAGE>
obligations, in amounts that management believes has not had and will not have a
material adverse effect on the Company's historical or future results of
operations or financial condition.
Vendors and Suppliers
* For its successful operation, the Company materially relies on goods and
services purchased from certain vendors. If these vendors fail to adequately
address the Year 2000 issue such that their delivery of goods and services to
the Company is materially impaired, it could have a material adverse impact on
the Company's operations and financial results. The Company has sent a survey to
its principal vendors to assess the effect the Year 2000 issue will have on
their ability to supply their goods and services without material interruption,
and at this time the Company cannot determine or predict the outcome of this
effort. The Company is planning to increase inventory levels for certain
sole-sourced critical components. However, because the Company cannot be certain
that its vendors will be able to supply goods and services without material
interruption, and because the Company cannot be certain that execution of its
contingency plans will be capable of implementation or will result in a
continuous and adequate supply of such goods and services, the Company can give
no assurance that these matters will not have a material adverse effect on the
Company's future consolidated financial position, results of operations, or cash
flows.
Customers
* The Company has material relationships with certain customers. If the
Company's customers fail to achieve an adequate state of Year 2000 readiness in
their own operations, or if their Year 2000 readiness efforts consume
significant resources, their ability to purchase the Company's products may be
impaired. This could adversely affect demand for the Company's products and,
therefore, the Company's future revenues. The Company plans to assess the effect
the Year 2000 issue will have on its principal customers, and at this time
cannot determine the impact it will have.
Related Costs to the Company
* The Company currently expects that the supplementary total cost of Year
2000 remediation efforts will not exceed approximately $1.0 million. The Company
has been and will be expensing these costs as incurred. The total cost estimate
does not include potential costs related to any customer or other claims or the
cost of internal software and hardware replaced in the normal course of
business. The total cost estimate is based on the current assessment of the
projects, and is subject to change as the projects progress.
Overall Impact on the Company
* At the present time and subject to the cost estimates above, management
does not believe that the Year 2000 matters discussed above will have a material
adverse impact on the Company's financial condition or overall trends in results
of operation. As a result, internal system enhancements have been and continue
to be delayed and the extent of these delays can not be measured by the Company.
It is uncertain to what extent the Company maybe affected at the time of the
21st century rollover by such matters and, therefore, there can be no assurance
that these matters will not have a material adverse effect on the Company's
future consolidated financial position, results of operations, or cash flows.
Other Risk Factors
The Company's revenues have historically tended to fluctuate on a quarterly
basis due to the timing of shipments of products under contracts and the sale of
licensing rights. A significant portion of the Company's 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 for that quarter 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.
During the third quarter of fiscal 1999, the Company transitioned
substantially all of its manufacturing operations to an exclusive manufacturing
partner. The Company is now substantially dependent upon a sole supplier for the
manufacture of its precision positioning and mobile timing and technologies
products. In addition, the Company relies on sole suppliers for a number of its
critical Asics. The dependence upon these sole suppliers subjects the Company to
risks associated with an interruption of supply if the Company is not able to
find alternative sources on a timely basis. There can be no assurance that any
19
<PAGE>
delay, disruptions, or quality problems resulting from the use of a sole
supplier will not have a material adverse effect on the Company's business and
results of operations.
The Company's stock price is subject to significant volatility. If revenues
and/or earnings fail to meet the expectations of the investment community, there
could be an immediate and significant impact on the trading price of the
Company's stock.
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 currently infringe patents or other proprietary rights of third
parties, but cannot be certain they do not do so. In addition, the legal costs
and engineering time required to safeguard intellectual property or to defend
against litigation could become a significant expense of operations. Such events
could have a material adverse effect on the Company's revenues or profitability.
(See Note 10 to the Condensed Consolidated Financial Statements - Contingencies:
Other Litigation).
The Company is continuously evaluating alliances and external investments
in technologies related to its business, and has already entered into alliances
and made relatively small strategic investments in a number of GPS related
technology companies. Acquisitions of companies, divisions of companies, or
products and alliances and strategic investments 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; (iii) loss of key
employees of acquired operations; and (iv) inability to recover strategic
investments in development stage entities. 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.
* The ability of the Company to maintain its competitive technological
position will depend, in a large part, on its ability to attract, motivate and
retain highly qualified development and managerial personnel. Competition for
qualified employees in the Company's industry and location is intense, and there
can be no assurance that the Company will be able to attract, motivate and
retain enough qualified employees necessary for the future continued development
of the Company's business and products.
The Company has certain products that are subject to governmental and
similar certifications before they can be sold. For example, FAA certification
is required for all aviation products. Also, the Company's products that use
integrated radio communication technology require an end-user to obtain
licensing from the Federal Communications Commission (FCC) for frequency-band
usage. During the fourth quarter of 1998, the FCC temporarily suspended the
issuance of licenses for certain of the Company's Real-time Kinematic products
because of interference with certain other users of similar radio frequencies.
An inability or delay in obtaining such certifications or FCC's delays could
have an adverse effect on the Company's operating results.
The Company's GPS technology is dependent on the use of radio frequency
spectrum. The assignment of spectrum is controlled by an international
organization known as, the International Telecommunications Union (ITU). Any ITU
reallocation of radio frequency spectrum, including frequency band segmentation
or sharing of spectrum, may materially and adversely affect the utility and
reliability of the Company's products, which would, intern, cause a material
adverse effect on the Company's operating results. In addition, emissions from
mobile satellite service and other equipment operating in adjacent frequency
bands may materially and adversely affect the utility and reliability of the
Company's products, which could result in a material adverse effect on the
Company's operating results.
The Company's products rely on signals from the GPS NAVSTAR satellite
system built and maintained by the U.S. Department of Defense. 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 array of satellites
consists of 27 of which the oldest satellite has been in orbit for 21 years and
the youngest satellite has been in orbit for 5 years. To repair damaged or
malfunctioning satellites is currently not economically feasible. If a
significant number of satellites were to become inoperable, there could be a
substantial delay before they are replaced with new satellites. A reduction in
the number of operating satellites would impair the current utility of the GPS
20
<PAGE>
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. However, in 1996 the U.S. Administration announced
the first comprehensive national policy statement on GPS, known as the
Presidential Decision Directive, which confirms civilian, commercial, and
consumer access to the use of GPS free of direct user fees. The U.S. Congress
provided a statutory foundation for this access in the National Defense
Authorization Act for fiscal year 1998. 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 in the future. 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. In 1995, certain
European government organizations expressed concern regarding the susceptibility
of GPS equipment to intentional or inadvertent signal interference. Such similar
concern could translate into reduced demand for GPS products in certain
geographic regions in the future.
Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE OF MARKET RISK
The following is a discussion of the Company's exposure to market risk
related to changes in interest rates and foreign currency exchange rates. The
Company uses certain derivative financial instruments to manage these risks. The
Company does not use derivative financial instruments for speculative or trading
purposes. All financial instruments are used in accordance with board-approved
polices.
Market Interest Rate Risk
Short-term Investments Owned by the Company. As of October 1, 1999, the
Company had short-term investments of $39.7 million. These short-term
investments consist of highly liquid investments with original maturities at the
date of purchase between three and twelve months. These investments are subject
to interest rate risk and will decrease in value if market interest rates
increase. A hypothetical 10 percent increase in market interest rates from
levels at October 1, 1999 would cause the fair value of these short-term
investments to decline by an immaterial amount. Because the Company has the
ability to hold these investments until maturity the Company would not expect
the value of these investments to be affected to any significant degree by the
effect of a sudden change in market interest rates. Declines in interest rates
over time will, however, reduce the Company's interest income.
Outstanding Debt of the Company. As of October 1, 1999, the Company had
outstanding long-term debt of approximately $30.0 million of subordinated
promissory notes at a fixed interest rate of 10 percent. The interest rate of
this instrument is fixed. However, a hypothetical 10 percent decrease in the
interest rates would not have a material impact on the Company. Increases in
interest rates could, however, increase interest expense associated with future
borrowings of the Company, if any. The Company does not currently hedge against
interest rate increases.
Foreign Currency Exchange Rate Risk
The Company hedges risks associated with foreign currency transactions in
order to minimize the impact of changes in foreign currency exchange rates on
earnings. The Company utilizes forward contracts to hedge trade and intercompany
receivables and payables. These contracts reduce the exposure to fluctuations in
exchange rate movements, as the gains and losses associated with foreign
currency balances are generally offset with the gains and losses on the hedge
contracts. All hedge instruments are marked to market through earnings every
period.
* The Company does not anticipate any material adverse effect on its
consolidated financial position utilizing the Company's current hedging
strategy.
All contracts have a maturity of less than one year, and the Company does
not defer any gains and losses, as they are all accounted for through earnings
every period.
21
<PAGE>
The following table provides information about the Company's foreign
exchange forward contracts outstanding as of October 1, 1999:
Foreign Contract Value Fair Value
Buy/ Currency Amount USD in USD
Currency Sell (in thousands) (in thousands) (in thousands)
- --------------------------------------------------------------------------------
YEN Sell 273,900 $ 2,530 $ 2,618
NZD Buy 4,900 $ 2,587 $ 2,542
Euro Sell 1,945 $ 2,049 $ 2,082
STERLING Buy 1,250 $ 2,007 $ 2,069
* The hypothetical changes and assumptions made above will be different
from what actually occurs in the future. Furthermore, the computations do not
anticipate actions that may be taken by the Company's management, should the
hypothetical market changes actually occur over time. As a result, actual
earnings effects in the future will differ from those quantified above.
22
<PAGE>
PART II. OTHER INFORMATION
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
Number
A. Exhibits
10.68* Asset Purchase Agreement dated August 10, 1999 by and among
Trimble Navigation Limited and Solectron Corporation and
Solectron Federal Systems, Inc. (1)
10.69* Supply Agreement dated August 10, 1999 by and among Trimble
Navigation Limited and Solectron Corporation and Solectron
Federal Systems, Inc. (1)
10.70 Revolving Credit Agreement - Loan - Fourth Amendment
27.1 Financial Data Schedule for the quarters ended
October 1, 1999 and October 2, 1998
--------------------
* Confidential treatment has been requested for certain portions of
this exhibit.
(1) Incorporated by reference to identically numbered exhibits filed
in response Item 7(c), "Exhibits," of the registrant 's Current
Report on Form 8-K filed on August 25, 1999.
B. Reports on Form 8-K
On August 25, 1999, the Company filed a report on Form 8-K relating to
an Asset Purchase Agreement with Solectron Corporation and Solectron
Federal Systems, Inc. (collectively, "Solectron"). Under the agreement
the Company transferred to Solectron substantially all the
manufacturing assets, associated commitments, and manufacturing
technology located at its Sunnyvale, California campus to Solectron
for total cash of approximately $26.9 million. Concurrently with the
closing of the Asset Purchase Agreement, the Company and Solectron
also entered into a Supply Agreement. The Supply Agreement provides
for the exclusive manufacture by Solectron of almost all Trimble
products for a period of three years.
23
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
TRIMBLE NAVIGATION LIMITED
(Registrant)
By: /s/ John C. Zimmerman
--------------------------------------------------------
John C. Zimmerman
(Chief Financial Officer and Senior Vice President)
DATE: November 11, 1999
24
<PAGE>
Exhibit 10.70
TRIMBLE NAVIGATION LIMITED
FOURTH AMENDMENT
THIS FOURTH AMENDMENT (this "Amendment") is entered into as of October 20,
1999 by and among TRIMBLE NAVIGATION LIMITED, a California corporation having
its chief executive office at 645 North Mary Avenue, Sunnyvale, California 94086
(the "Borrower") and FLEET NATIONAL BANK, a national banking association
organized under the laws of the United States and having an office at One
Federal Street, Boston, Massachusetts 02110, as the Agent and as a Lender,
BANKBOSTON, N.A., a national banking association, organized under the laws of
the United States and having an office at One Hundred Federal Street, Boston,
Massachusetts 02110, as the Syndication Agent and as a Lender, SANWA BANK
CALIFORNIA, a banking corporation organized under the laws of the State of
California and having an office at 220 Almaden Boulevard, 2nd Floor, San Jose,
California 95113, as a Lender, and ABN AMRO BANK N.V., a Netherlands banking
corporation having an office at 101 California Street, Suite 4550, San
Francisco, California 94115, as a Lender, under the Loan Agreement (as defined
below), to which reference is made for the definitions of all capitalized terms,
used, but not otherwise defined, herein.
R E C I T A L S
WHEREAS, the parties have entered into a Loan Agreement dated as of August
27, 1997 among the Borrower, the Agent, the Syndication Agent, and the lenders
from time to time party thereto (the "Lenders"), as amended by a Letter of
Amendment dated December 17, 1997, and a Second Letter of Amendment dated August
11, 1998 and a Third Amendment dated as of February 16, 1999 (the "Agreement"),
pursuant to which the Lenders issued a Revolving Credit Loan Commitment to the
Borrower in the maximum principal amount of $50,000,000;
WHEREAS, pursuant to a certain Waiver Letter dated October 27, 1998 and a
certain Supplement to Loan Agreement and Additional Waiver Letter dated
December 9, 1998, the Borrower was granted a limited waiver with respect to the
Borrower's compliance with certain covenants contained in the Agreement for the
Borrower's fiscal quarters ended October 2, 1998 and January 1, 1999,
conditional upon the satisfaction of certain specified waiver conditions
contained therein on or prior to February 16, 1999, which was satisfied by the
above-referenced Third Amendment;
WHEREAS, the Borrower has requested the Agent and the Lenders to further
amend the Agreement as hereinafter set forth and the Agent and the Lenders are
willing to do so;
NOW THEREFORE, in consideration of the mutual benefits to be derived from
the parties' continuing relationship under the Agreement and for other good and
valuable consideration, the receipt and adequacy of which are hereby
acknowledged, the Borrower, the Agent, the Syndication Agent, and the Lenders
hereby agree that the Agreement is hereby amended, effective as of the date
first set forth above (the "Effective Date"), as follows:
1. Section 1.1 of the Agreement is hereby further amended by the addition
of the following new defined term to be added alphabetically thereto:
"Allowed Repurchase" means the repurchase by the Borrower from certain of
Borrower's stockholders of up to an aggregate of $30,000,000 of Borrower's
capital stock with the proceeds of the Borrower's sale of certain assets.
2. Section 5.1.10 of the Agreement is hereby amended in its entirety to
read as follows:
Section 5.1.10. Maximum Ratio of Total Funded Debt to Total Capitalization.
Commencing September 30, 1999, maintain a ratio of (i) Total Funded Debt to (ii)
Total Capitalization of less than .7:1.00.
3. Section 5.1.11 of the Agreement is hereby amended in its entirety to
read as follows:
Section 5.1.11. Minimum Consolidated Tangible Net Worth. (i) Maintain a
Consolidated Tangible Net Worth in an amount not less than the Borrower's
25
<PAGE>
Consolidated Tangible Net Worth as of the end of the Borrower's September 30,
1999 fiscal quarter minus the sum of $5,000,000 and the lesser of (a) the amount
of the Allowed Repurchase and (b) $30,000,000, and (ii) comply with Section 8K
of the Note Purchase Agreement dated as of June 13, 1994 among the Borrower,
John Hancock Mutual Life and John Hancock Life Insurance, as the same may be
amended, amended and restated, supplemented or otherwise modified from time to
time.
4. Section 5.1.12 of the Agreement is hereby amended in its entirety to
read as follows:
Section 5.1.12. Minimum Cash Balances. Maintain at all times on and after
the Effective Date unrestricted cash balances and Cash Equivalent Investments in
an amount equal to or greater than $50,000,000 of which unrestricted cash
balances and Cash Equivalent Investments (to the extent and of types issued by a
Lender) in an amount equal to or greater than the aggregate outstanding amount
of the Obligations (including without limitation the Revolving Credit Loan, the
aggregate outstanding amount of any Letters of Credit and any Unpaid Drawings)
must be kept in one or more accounts maintained by the Borrower with one or more
of the Lenders.
5. Section 5.2.8 of the Agreement is hereby amended in its entirety to read
as follows:
Section 5.2.8. Overall Aggregate Cap. Notwithstanding the terms and
conditions of Sections 5.2.4, 5.2.6, 5.2.7.3, 5.2.7.4 and 5.2.10, the
Consolidated Tangible Net Worth measurements of permitted transactions contained
therein are subject to an aggregate Consolidated Tangible Net Worth limitation
of thirty percent (30%) of Consolidated Tangible Net Worth for all such
transactions permitted by any of said Sections excluding, to the extent
otherwise includable therein, the Allowed Repurchase.
6. Exhibit 3.1.1.10 to the Agreement (Form of Compliance Certificate) is
hereby deleted and a new Exhibit 3.1.1.10 in the form attached hereto as "
Exhibit 3.1.1.10 " is substituted in its stead.
7. This Amendment shall take effect as of the Effective Date upon receipt
by the Agent of this Amendment duly executed by the parties hereto.
8. The Borrower hereby represents and warrants to the Agent and the Lenders
that no Default or Event of Default exists
under the Agreement.
9. This Amendment is executed as an instrument under seal and shall be
governed by and construed in accordance with the laws of The Commonwealth of
Massachusetts without regard to its conflicts of law rules. All parts of the
Agreement not affected by this Amendment are hereby ratified and affirmed in all
respects, provided that if any provision of the Agreement shall conflict or be
inconsistent with this Amendment, the terms of this Amendment shall supersede
and prevail. Upon and after the date of this Amendment all references to the
Agreement in that document, or in any related document, shall mean the Agreement
as amended by this Amendment. Except as expressly provided in this Amendment,
the execution and delivery of this Amendment does not and will not amend, modify
or supplement any provision of, or constitute a consent to or a waiver of any
noncompliance with the provisions of the Agreement, and, except as specifically
provided in this Amendment, the Agreement shall remain in full force and effect.
This Amendment may be executed in one or more counterparts with the same effect
as if the signatures hereto and thereto were upon the same instrument.
[THE BALANCE OF THIS PAGE IS INTENTIONALLY LEFT BLANK]
26
<PAGE>
IN WITNESS WHEREOF, each of the Borrower, the Agent, the Syndication Agent,
and the Lenders in accordance with Section 9.5 of the Agreement, has caused this
Amendment to be executed and delivered by their respective duly authorized
officers as an instrument under seal as of the Effective Date.
BORROWER:
TRIMBLE NAVIGATION LIMITED
By: /s/ John E. Huey________________________
John E. Huey
Treasurer
AGENT:
FLEET NATIONAL BANK
By: /s/ Mathew M. Glauninger________________
Mathew M. Glauninger
Senior Vice President
SYNDICATION AGENT:
BANKBOSTON, N.A.
By:/s/ Anthony B. Kwee______________________
Anthony B. Kwee
Vice President
27
<PAGE>
LENDERS:
FLEET NATIONAL BANK
By: /s/ Mathew M. Glauninger
Mathew M. Glauninger
Senior Vice President
BANKBOSTON, N.A.
By: /s/ Anthony B. Kwee_____________________
Anthony B. Kwee
Vice President
SANWA BANK CALIFORNIA
By: /s/ Jillian Mathur______________________
Jillian Mathur
Vice President
ABN AMRO BANK N.V.
By:_________________________________________
_____________________________________
Print Name
Title:______________________________________
By:_________________________________________
_____________________________________
Print Name
Title:______________________________________
28
<PAGE>
EXHIBIT 3.1.1.10 - FORM OF COMPLIANCE CERTIFICATE
Fleet National Bank
One Federal Street
Boston, MA 02110
Attention:________Mathew M. Glauninger, Senior Vice President
High Technology Group, MA OF DO7A
Re: Compliance Certificate Required by Sections 3.1.1.10 or 5.3.4 of the Loan
Agreement dated as of August 27, 1997 by and among you as Agent,
BankBoston, N.A., as the Syndication Agent, the undersigned and the
Lenders from time to time party thereto, as amended from time to time
(the "Loan Agreement")
Gentlemen:
This certificate is submitted by the undersigned (the "Borrower") pursuant
to Sections 3.1.1.10 or 5.3.4 of the Loan Agreement. Capitalized terms used
herein have the same meaning as in the Loan Agreement.
The Borrower hereby certifies to the Agent and the Lenders that the
following information is true, accurate and complete as of the Borrower's fiscal
quarter ending ____________, ________ (the "Quarter").
Section 5.1.10. Maximum Ratio of Total Funded Debt to Total
Capitalization (Calculated as at end of the Quarter)
(a) Obligations (all Indebtedness under
Financing Documents)................................$___________________
(b) Subordinated Debt...................................$___________________
(c) Capitalized Lease Obligations.......................$___________________
(d) Total Funded Debt [Sum of Lines (a) - (c)]..........$___________________
(e) Consolidated Net Worth..............................$___________________
(f) Total Capitalization [Sum of Line (d) + Line (e)]...$___________________
(g) Actual Ratio: [Line (d) divided by Line (f)]........ :1.0
(h) Maximum Ratio Permitted by Agreement................ :1.0
29
<PAGE>
Section 5.1.11. Minimum Consolidated Tangible Net Worth
(Calculated as at end of the Quarter)
(a) Total assets of Borrower and Subsidiaries...............$______________
(b) Consolidated Total Liabilities..........................($_____________)
(c) Consolidated Net Worth
[Line (a) minus Line (b)]...............................$______________
(d) Excluded items (if any)* ...............................($_____________)
(e) Consolidated Tangible Net Worth.........................$______________
(f) Minimum Permitted by Agreement:
(i) Consolidated Tangible Net Worth
as at September 30, 1999 quarter end minus sum of $5,000,000
and lesser of Allowed Repurchase and
$30,000,000, i.e., $________............................$______________
(ii) Minimum "Consolidated Net Worth"
Required Under Section 8K of Note Purchase Agreement
dated 6/13/94 ("NPA")...................................$______________
Section 5.1.12. Minimum Cash Balances..
(Calculated on any date after September 30, 1999)
(a) Obligations (under Financing Documents)..................$______________
(i) Revolving Loans $_____________________
(ii) Letters of Credit $_____________________
(b) Total Cash Balances and Cash Equivalent Investments.........$______________
(c) Minimum Required by Agreement.................................$50,000,000.
(d) Total Cash Balances and qualified Cash Equivalent Investments
in accounts with Lenders.......................................$____________
(e) Minimum Required is amount of (a)
- --------
* Excluded items are (a)book value of intangible assets, including goodwill,
unamortized debt discount and expense, patents, trade and service marks
and names, copyrights, franchises, etc. of $_______________________;
and (b) other (describe) of $__________________________.
30
<PAGE>
Section 5.1.13. Minimum Quick Ratio.
(Calculated as at end of the Quarter)
(a) Cash.....................................................$______________
(b) Cash Equivalent Investments..............................$______________
(c) Net outstanding amount of
accounts receivable......................................$______________
(d) Sum of Lines (a), (b) and (c)............................$______________
(e) Current Liabilities......................................$______________
(f) Less Current Liabilities consisting of Revolving Credit Loans..($_______)
(g) Line (e) minus Line (f)........................................$________
(h) Quick Ratio [Line (d) divided by Line(g)....................... :1.0
(g) Minimum Quick Ratio Permitted by Agreement..................... :1.0
Section 5.2.9. Minimum Operating and Net Income.
Calculated as at end of the Quarter:
(a) Net income (loss) (GAAP) as at end of the Quarter............$__________
(b) Less extraordinary or other non-recurring gains
as at end of the Quarter.....................................($_________)
(c) Less gains from sale or other non-ordinary course
disposition of assets as at end of the Quarter...............($_________)
(d) Net Income as at end of the Quarter
[Line (a) minus sum of Lines (b) and (c)]....................$__________
Calculated as at End of Immediately Preceding Quarter:
(e) Net income (loss) (GAAP) as at end of the fiscal quarter
immediately preceding the Quarter............................$__________
(f) Less extraordinary or other non-recurring gains as at end of
the fiscal quarter immediately preceding the Quarter.........($_________)
31
<PAGE>
(g) Less gains from sale or other non-ordinary course
disposition of assets as at end of the fiscal quarter
immediately preceding the Quarter.............................($________)
(h) Net Income as at end of the fiscal quarter immediately
preceding the Quarter
[Line (e) minus sum of Lines (f) and (g)].....................$_________
Calculated as at End of Second Immediately Preceding Quarter:
(i) Net income (loss) (GAAP) as at end of the fiscal quarter
immediately preceding the Quarter.............................$_________
(j) Less extraordinary or other non-recurring gains as at end of
the fiscal quarter immediately preceding the Quarter..........($________)
(k) Less gains from sale or other non-ordinary course
disposition of assets as at end of the fiscal quarter
immediately preceding the Quarter.............................($________)
(l) Net Income as at end of the fiscal quarter immediately
preceding the Quarter
[Line (i) minus sum of Lines (l) and (k)].....................$_________
Calculated as at End of Third Immediately Preceding Quarter:
(m) Net income (loss) (GAAP) as at end of the fiscal quarter
immediately preceding the Quarter.............................$_________
(n) Less extraordinary or other non-recurring gains as at end of
the fiscal quarter immediately preceding the Quarter..........($________)
(o) Less gains from sale or other non-ordinary course
disposition of assets as at end of the fiscal quarter
immediately preceding the Quarter.............................($________)
(p) Net Income as at end of the fiscal quarter
immediately preceding the Quarter
[Line (m) minus sum of Lines (n) and (o)].....................$_________
32
<PAGE>
(q) Net Income
The Quarter [line (d)], plus Excluded items (if any)** of $___....$_____
Immediately Preceding Quarter [line (e)]
plus excluded items (if any)** of $__________.................$_______
Second Immediately Preceding Quarter [line (i)]
plus Excluded items (if any)** of $__________.................$_______
Third Immediately Preceding Quarter [line (m)]
plus excluded items (if any)** of $__________.................$_______
(r) Operating Income
The Quarter plus Excluded items (if any) **
of $_________________________.................................$_______
Immediately Preceding Quarter plus excluded items (if any)**
of $_________________________.................................$_______
Second Immediately Preceding Quarter plus
Excluded items (if any) ) ** of $___________________..........$_______
Third Immediately Preceding Quarter
plus excluded items (if any)** of $_________________..........$_______
(s) Minimum Operating Income and Net Income
Required under the Agreement:
(i) during the period beginning with the Borrower's fiscal quarter ending
March, 1999 and ending on the fiscal quarter ending December, 1999,
have a negative Operating Income or a negative Net Income for any two
fiscal quarters, and
(ii) as of the end of each fiscal quarter of the Borrower commencing with
the Borrower's fiscal quarter ending in March, 2000, have a negative
Operating Income, or a negative Net Income for the rolling four
quarter fiscal period consisting of such fiscal quarter and the three
immediately preceding fiscal quarters.
- -------------
** Excluded items are any amount taken as a one-time charge against
earnings attributable to (a) settlement of class action litigation;
(b) closing of commercial marine division; and (c) reduction in
employees resulting from switch to contract manufacturing, (a) - (c) not
to exceed $2,000,000 in the aggregate.
33
<PAGE>
The Borrower further certifies to the Lenders that as of the date hereof no
Event of Default or Default has occurred without having been waived in writing.
TRIMBLE NAVIGATION LIMITED
By:
Name: [ ]
Title: [ ]
34
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONDENSED CONSOLIDATED BALANCE SHEET AND CONDENSED CONSOLIDATED STATEMENT
OF EARNINGS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 9-MOS 9-MOS
<FISCAL-YEAR-END> DEC-31-1999 JAN-01-1999
<PERIOD-END> OCT-01-1999 OCT-02-1998
<CASH> 57,237 47,642
<SECURITIES> 39,654 9,149
<RECEIVABLES> 41,818 37,121
<ALLOWANCES> 0 0
<INVENTORY> 18,257 46,200
<CURRENT-ASSETS> 160,836 144,412
<PP&E> 12,453 17,203
<DEPRECIATION> 0 0
<TOTAL-ASSETS> 182,127 170,558
<CURRENT-LIABILITIES> 55,877 46,792
<BONDS> 0 0
0 0
0 0
<COMMON> 124,249 121,602
<OTHER-SE> (31,991) (29,567)
<TOTAL-LIABILITY-AND-EQUITY> 182,127 170,558
<SALES> 209,245 207,670
<TOTAL-REVENUES> 209,245 207,670
<CGS> 99,088 107,557
<TOTAL-COSTS> 99,088 107,557
<OTHER-EXPENSES> 95,047 107,877
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 2,545 2,550
<INCOME-PRETAX> 15,053 (8,592)
<INCOME-TAX> 2,259 1,050
<INCOME-CONTINUING> 12,794 (9,642)
<DISCONTINUED> 2,931 (25,622)
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 15,725 (35,264)
<EPS-BASIC> 0.70 (1.56)
<EPS-DILUTED> 0.70 (1.56)
</TABLE>
