UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
September 21, 2000 (July 14, 2000)
Date of Report (Date of earliest event reported)
TRIMBLE NAVIGATION LIMITED
(Exact name of registrant as specified in its charter)
California 0-18645 94-2802192
(State or other jurisdiction of (Commission File Number) (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)
1
<PAGE>
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 those set forth in the Company's Annual Report on Form
10-K, quarterly reports on Form 10-Q, and the other reports and documents that
the Company files from time to time with the Securities and Exchange Commission.
On July 28, 2000 the Registrant, Trimble Navigation Limited filed a Current
Report on Form 8-K reporting the acquisition of Spectra Precision Group. By this
amendment, the Registrant is filing the required financial statements and pro
forma financial information.
Item 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements of Business Acquired:
1. Audited financial statements of Spectra Precision:
Audited combined financial statements of Spectra
Precision as of January 1, 2000 and for the period
from February 22, 1999 through January 1, 2000
(period when they were wholly-owned by Thermo
Instruments Inc.), and audited combined financial
statements of the Predecessor as of December 31, 1998
and for the period from January 1, 1999 through
February 21, 1999 and the years ending December 31,
1998 and 1997.
Notes to Spectra Precision's Financial Statements.
2. Unaudited financial statements of Spectra Precision:
Unaudited condensed combined financial statements of
Spectra Precision as of June 30, 2000 and for the
three and six-month periods ended June 30, 2000.
Notes to Spectra Precision's unaudited condensed combined financial
statements.
(b) Pro Forma Financial Information:
1. Unaudited pro forma condensed combined financial information
of Trimble Navigation Limited.
Unaudited Pro Forma condensed combined statement of operations:
o Year Ended December 31, 1999
o Six Months Ended June 30, 2000
Unaudited Pro Forma condensed combined balance sheet at:
o June 30, 2000
Notes to Unaudited Pro Forma condensed combined financial information.
2
<PAGE>
(c) EXHIBITS
10.72 Stock and Asset Purchase Agreement, dated as of May 11, 2000,
between Trimble Acquisition Corp., and Spectra Physics
Holdings USA, Inc., Spectra Precision AB, and Spectra
Precision Europe Holdings, BV. (1)
10.73 Asset Purchase Agreement dated May 11, 2000, between Trimble
Acquisition Corp. and Spectra Precision AB. (1)
10.74 $200.0 million Credit Agreement, dated July 14, 2000, between
Trimble Navigation Limited and ABN AMRO Bank N.V., Fleet
National Bank, and The Bank of Nova Scotia. (1)
10.75 Subordinated Seller Note, dated July 14, 2000, for the
principal amount of $80,000,000 issued by Trimble Navigation
Limited to Spectra Precision Holdings, Inc. (1)
23.1 Consent of Arthur Andersen LLP, Independent Auditors of
Spectra Precision
-------------------------------------------------------
(1) Filed as an exhibit to Registrant's Report on Form 8-K dated July
14, 2000 filed on July 28, 2000, and incorporated herein by reference.
3
<PAGE>
Report of Independent Public Accountants
To the Shareholders of Spectra Precision:
We have audited the accompanying combined balance sheet of Spectra
Precision, which is wholly-owned by Thermo Instrument Systems Inc. as of January
1, 2000, and the related combined statements of operations, cash flows,
comprehensive income, and shareholders' investment for the period from February
22, 1999, through January 1, 2000. We have also audited the accompanying
combined balance sheet of the Predecessor as of December 31, 1998, and the
related combined statements of operations, cash flows, comprehensive income, and
shareholders' investment for the period from January 1, 1999, through February
21, 1999, and for the years ended December 31, 1998, and December 31, 1997.
These combined financial statements are the responsibility of the Company's and
Predecessor's management. Our responsibility is to express an opinion on these
combined financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the combined financial statements referred to above present
fairly, in all material respects, the financial position of Spectra Precision as
of January 1, 2000, and the results of its operations and cash flows for the
period from February 22, 1999, through January 1, 2000, and the financial
position of the Predecessor as of December 31, 1998, and the results of
operations and cash flows of the Predecessor for the period from January 1,
1999, through February 21, 1999, and for the years ended December 31, 1998, and
December 31, 1997, in conformity with accounting principles generally accepted
in the United States.
/s/ Arthur Andersen LLP
Boston, Massachusetts
July 5, 2000
4
<PAGE>
SPECTRA PRECISION
Combined Balance Sheet
<TABLE>
<CAPTION>
The Company Predecessor
----------------- --------------
(In thousands) 1999 1998
------------------------------------------------------------------------------ ----------------- ---------------
<S> <C> <C>
Assets
Current Assets:
Cash and cash equivalents $ 7,685 $ 10,634
Accounts receivable, less allowances of $4,488 and $3,844 40,136 37,974
Inventories 27,251 27,361
Deferred tax asset (Note 5) 8,477 3,444
Other current assets 1,412 1,352
Due from parent company and affiliated companies 13,590 53,930
--------- ---------
98,551 134,695
--------- ---------
Property, Plant, and Equipment, at Cost, Net 21,150 23,218
--------- ---------
Other Assets 5,081 2,424
--------- ---------
Cost in Excess of Net Assets of Acquired Companies (Note 2) 99,265 8,938
--------- ---------
$ 224,047 $ 169,275
========= =========
Liabilities and Shareholders' Investment
Current Liabilities:
Short-term obligations and current maturities of long-term
obligations (includes advance from affiliate of $1,868 in 1999) $ 11,461 $ 3,852
Accounts payable 7,332 6,057
Accrued payroll and employee benefits 10,796 9,979
Accrued income taxes 4,218 3,608
Other accrued expenses (Notes 2 and 3) 14,367 12,272
Due to parent company and affiliated companies 31,699 86,612
--------- ---------
79,873 122,380
--------- ---------
Deferred Income Taxes (Note 5) 1,824 3,084
--------- ---------
Accrued Pension Costs (Note 4) 3,780 3,952
--------- ---------
Long-term Obligations (Note 7) 8,121 395
--------- ---------
Commitments and Contingency (Notes 3 and 8)
Shareholders' Investment:
Net parent company investment 132,630 40,125
Accumulated other comprehensive items (2,181) (661)
--------- ---------
130,449 39,464
--------- ---------
$ 224,047 $ 169,275
========= =========
<FN>
The accompanying notes are an integral part of these combined financial statements.
</FN>
</TABLE>
5
<PAGE>
SPECTRA PRECISION
Combined Statement of Operations
<TABLE>
<CAPTION>
The Company Predecessor
------------------ ------------------------------------------------------------------
February 22, 1999 January 1, 1999
through through
(In thousands) January 1, 2000 February 21, 1999 1998 1997
---------------------------------- ---------------------- ---------------------- --------------------- ---------------------
<S> <C> <C> <C> <C>
Revenues $ 198,080 $ 21,664 $ 197,999 $ 197,908
---------- ---------- --------- ----------
Costs and Operating Expenses:
Cost of revenues 100,838 11,750 108,408 104,028
Selling, general, and
administrative expenses (Note 6) 67,488 11,075 73,287 75,072
Research and development
expenses 15,177 2,015 16,664 15,777
Other unusual costs (income), net
(Note 3) (616) 5 (2,841) -
---------- ---------- --------- ----------
182,887 24,845 195,518 194,877
---------- ---------- --------- ----------
Operating Income (Loss) 15,193 (3,181) 2,481 3,031
Interest Income (includes $380,
$448, $3,999, and $114 from
related parties; Note 6) 617 728 4,278 485
Interest Expense (includes
$1,321, $399, $4,388, and $1,388
to related parties; Notes 6 and 7) (2,242) (678) (5,639) (2,447)
Other Income, Net 196 64 45 289
---------- ---------- --------- ----------
Income (Loss) Before Income Taxes 13,764 (3,067) 1,165 1,358
Income Tax (Provision) Benefit
(Note 5) (5,748) 1,315 (1,652) (1,436)
---------- ---------- --------- ----------
Net Income (Loss) $ 8,016 $ (1,752) $ (487) $ (78)
========== ========== ========= ==========
<FN>
The accompanying notes are an integral part of these combined financial statements.
</FN>
</TABLE>
6
<PAGE>
SPECTRA PRECISION
Combined Statement of Cash Flows
<TABLE>
<CAPTION>
The Company Predecessor
------------------ ------------------------------------------------------------------
February 22, 1999 January 1, 1999
through through
(In thousands) January 1, 2000 February 21, 1999 1998 1997
------------------------------------- --------------------- ---------------------- --------------------- ---------------------
<S> <C> <C> <C> <C>
Operating Activities
Net income (loss) $ 8,016 $ (1,752) $ (487) $ (78)
Adjustments to reconcile net income
to net cash provided by
operating activities:
Depreciation and amortization 7,919 954 6,397 7,281
Provision for losses on
accounts receivable 257 150 182 530
Gain on sale of business
(Note 3) - - (2,922) -
Increase (decrease) in
deferred income taxes (1,070) (28) 262 2,497
Other noncash items 2,418 (235) 1,340 128
Changes in current accounts,
excluding the effects of
acquisitions and
dispositions:
Accounts receivable (6,843) 1,626 (3,611) (4,224)
Inventories 1,604 850 (1,179) 528
Other current assets (5,231) (396) 781 (3,235)
Accounts payable 844 1,050 1,018 375
Other current liabilities 4,689 (1,349) 6,841 4,620
Other (510) (731) (785) (2,121)
--------- ---------- --------- ----------
Net cash provided by
operating activities 12,093 139 7,837 6,301
--------- ---------- --------- ----------
Investing Activities
Advance from affiliated company 1,868 - - -
Acquisitions, net of cash acquired
(Note 2) - (570) (389) (8,459)
Proceeds from sale of business, net
of cash sold (Note 3) - - 3,082 -
Purchases of property, plant, and
equipment (3,355) - (4,292) (3,653)
--------- ---------- --------- ----------
Net cash used in
investing activities $ (1,487) $ (570) $ (1,599) $ (12,112)
--------- ---------- --------- ----------
</TABLE>
7
<PAGE>
SPECTRA PRECISION
Combined Statement of Cash Flows (continued)
<TABLE>
<CAPTION>
The Company Predecessor
------------------ -------------------------------------------------------------------
February 22, 1999 January 1, 1999
through through
(In thousands) January 1, 2000 February 21, 1999 1998 1997
------------------------------------- --------------------- ---------------------- ---------------------- ---------------------
<S> <C> <C> <C> <C>
Financing Activities
Decrease in due to/from parent
company and affiliated companies $ (9,324) $ (3,382) $ (1,095) $ 3,635
Net increase (decrease) in
short-term obligations 2,715 (898) (3,765) 1,235
Issuance (repayment) of long-term
obligations (1,650) (71) (337) 750
Other (730) 235 (1,340) (1,285)
--------- ---------- ---------- ----------
Net cash provided by
(used in) financing
activities (8,989) (4,116) (6,537) 4,335
--------- ---------- ---------- ----------
Exchange Rate Effect on Cash 521 (540) 832 2,572
--------- ---------- ---------- ----------
Increase (Decrease) in Cash and Cash
Equivalents 2,138 (5,087) 533 1,096
Cash and Cash Equivalents at
Beginning of Period 5,547 10,634 10,101 9,005
--------- ---------- ---------- ----------
Cash and Cash Equivalents at End of
Period $ 7,685 $ 5,547 $ 10,634 $ 10,101
========= ========== ========== ==========
Cash Paid For
Interest $ 2,242 $ 678 $ 5,639 $ 2,447
Income taxes $ 3,225 $ 191 $ 2,457 $ 1,597
Noncash Activities
Fair value of assets of acquired
companies $ 15,177 $ 570 $ 389 $ 10,254
Issuance of short- and long-term
obligations for acquired company (14,852) - - -
Cash paid for acquired companies - (570) (389) (9,057)
--------- ---------- ---------- ----------
Liabilities assumed of
acquired companies $ 325 $ - $ - $ 1,197
========= ========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these combined financial
statements.
8
<PAGE>
SPECTRA PRECISION
Combined Statement of Comprehensive Income
<TABLE>
<CAPTION>
The Company Predecessor
------------------ ------------------------------------------------------------------
February 22, 1999 January 1, 1999
through through
(In thousands) January 1, 2000 February 21, 1999 1998 1997
-------------------------------------- ---------------------- --------------------- ---------------------- ---------------------
<S> <C> <C> <C> <C>
Net Income (Loss) $ 8,016 $ (1,752) $ (487) $ (78)
--------- -------- --------- ---------
Other Comprehensive Items:
Foreign currency translation
adjustment (976) (544) 133 (1,593)
--------- --------- --------- ---------
Comprehensive Income (Loss) $ 7,040 $ (2,296) $ (354) $ (1,671)
========= ========= ========= =========
</TABLE>
The accompanying notes are an integral part of these combined financial
statements.
9
<PAGE>
SPECTRA PRECISION
Combined Statement of Shareholders' Investment
<TABLE>
<CAPTION>
Accumulated
Net Parent Other
Company Comprehensive
(In thousands) Investment Items
------------------------------------------------------------------------- ---------------------- ---------------------
PREDECESSOR
<S> <C> <C>
Balance December 31, 1996 $ 40,690 $ 799
Net Loss (78) -
Translation Adjustment - (1,593)
----------- ----------
Balance December 31, 1997 40,612 (794)
Net Loss (487) -
Translation Adjustment - 133
----------- ----------
Balance December 31, 1998 40,125 (661)
Net Loss (1,752) -
Translation Adjustment - (544)
----------- ----------
Balance February 21, 1999 38,373 (1,205)
THE COMPANY
Net Equity Investment by Thermo Instrument in Excess of the
Net Assets of the Predecessor 86,241 -
Net Income 8,016 -
Translation Adjustment - (976)
----------- ----------
Balance January 1, 2000 $ 132,630 $ (2,181)
=========== ==========
</TABLE>
The accompanying notes are an integral part of these combined financial
statements.
10
<PAGE>
SPECTRA PRECISION
Notes to Combined Financial Statements
1. Nature of Operations and Summary of Significant Accounting Policies
----------------------------------------------------------------------------
Nature of Operations
Spectra Precision represents certain businesses owned by Spectra-Physics
AB, which develop, manufacture, and market complete positioning solutions for
the construction, surveying, and agricultural markets. Products include laser
alignment instruments, machine control systems, and survey instruments.
Relationship with Thermo Instrument Systems Inc. and Thermo Electron Corporation
On February 22, 1999, Thermo Instrument Systems Inc. acquired
Spectra-Physics (Note 2). Thermo Instrument is an 88% owned subsidiary of Thermo
Electron Corporation.
The accompanying financial statements prior to February 22, 1999,
represent the assets, liabilities, income and expenses of Spectra Precision as
included in Spectra-Physics' financial statements prior to Spectra-Physics'
acquisition by Thermo Instrument (the Predecessor). The accompanying financial
statements subsequent to February 21, 1999, represent the assets, liabilities,
income and expenses of Spectra Precision as included in Thermo Instrument's
combined financial statements (the Company). The accompanying financial
statements do not include Thermo Instrument's or Spectra-Physics' general
corporate debt, which is used to finance the operations of these companies'
respective businesses, or an allocation of Thermo Instrument's or
Spectra-Physics' interest expense.
Principles of Combination
The accompanying financial statements include the combined accounts of the
Spectra Precision businesses, which are subject to a definitive agreement in
which the Company will be sold to Trimble Navigation Ltd. (Note 9). All material
intercompany accounts and transactions have been eliminated.
Basis of Accounting
The principal difference in the basis of accounting between the Predecessor
and the Company relates to the cost in excess of net assets of acquired
companies, the amortization of which approximates $2,100,000 per year. The
significant accounting policies of the Company described herein apply to both
the Company and the Predecessor, except where stated otherwise.
Fiscal Year and Periods Presented
The Company has adopted a fiscal year ending the Saturday nearest December
31. The Predecessor had a fiscal year ending December 31. The accompanying
financial statements include the Company's financial results for the period from
February 22, 1999, the date Spectra-Physics was acquired by Thermo Instrument,
through January 1, 2000, and the Predecessor's financial results for the fiscal
years ended December 31, 1997, and December 31, 1998, and for the period from
January 1, 1999, through February 21, 1999. References to year-end 1999 are for
January 1, 2000. References to 1998 and 1997 are for the fiscal years ended
December 31, 1998, and December 31, 1997, respectively.
Revenue Recognition
The Company generally recognizes product revenues upon shipment of its
products or upon installation if required by contract. The Company provides a
reserve for its estimate of warranty costs and returns at the time of shipment.
In accordance with Statement of Position No. 97-2, "Software Revenue
Recognition," revenue from software is recognized upon execution of the license
agreement and delivery of the software when any ongoing service commitments are
not critical to the functionality of the software; otherwise revenue on the
service component is recognized over the life of the contract.
Income Taxes
In accordance with Statement of Financial Accounting Standards (SFAS) No.
109, "Accounting for Income Taxes," the Company recognizes deferred income taxes
based on the expected future tax consequences of differences between the
financial statement basis and the tax basis of assets and liabilities,
calculated using enacted tax rates in effect for the year in which the
differences are expected to be reflected in the tax return.
11
<PAGE>
1. Nature of Operations and Summary of Significant Accounting Policies
(continued)
-----------------------------------------------------------------------------
Cash and Cash Equivalents
The Company, along with other European-based subsidiaries of Thermo
Electron, participates in a notional pool arrangement in the U.K. with Barclays
Bank. Under this arrangement, Barclays notionally combines the positive and
negative cash balances held by the participants to calculate the net interest
yield/expense for the group. The benefit derived from this arrangement is then
allocated based on balances attributable to the respective participants. The
Company has access to a $3,881,000 bank line of credit under this arrangement.
Thermo Electron guarantees all of the obligations of each participant in this
arrangement. At year-end 1999, the Company had borrowed $3,058,000 under this
arrangement (Note 6).
At year-end 1999 and 1998, the Company's and the Predecessor's cash
equivalents included investments in interest-bearing accounts at the Company's
foreign operations, which have an original maturity of three months or less.
Cash equivalents are carried at cost, which approximates market value.
Advance from Affiliate
Effective June 1999, certain of the Company's European-based subsidiaries
participate in a new cash management arrangement with a wholly owned subsidiary
of Thermo Electron. Under the new arrangement, amounts advanced to or from
Thermo Electron for cash management purposes bear interest based on Euro market
rates, which was 3.95% at year-end 1999. Thermo Electron is contractually
required to maintain cash, cash equivalents, and/or immediately available bank
lines of credit equal to at least 50% of all funds invested under this cash
management arrangement by all Thermo Electron subsidiaries other than wholly
owned subsidiaries. The Company has the contractual right to withdraw its funds
invested in the cash management arrangement upon 30 days' prior notice. The
Company had no funds invested in this arrangement as of January 1, 2000. The
Company has access to a $2,568,000 line of credit under this arrangement, of
which the Company had borrowed $1,868,000 at year-end 1999.
Inventories
Inventories are stated at the lower of cost (on a weighted average basis)
or market value and include materials, labor, and manufacturing overhead. The
components of inventories are as follows:
The Company Predecessor
------------- ---------------
(In thousands) 1999 1998
---------------------------------------------------------- ---------------
Raw Material and Supplies $ 10,287 $ 11,742
Work in Process 4,287 4,525
Finished Goods 12,677 11,094
--------- --------
$ 27,251 $ 27,361
========= ========
The Company periodically reviews its quantities of inventories on hand and
compares these amounts to expected usage of each particular product or product
line. The Company records as a charge to cost of revenues any amounts required
to reduce the carrying value of inventories to net realizable value.
12
<PAGE>
1. Nature of Operations and Summary of Significant Accounting Policies
(continued)
-----------------------------------------------------------------------------
Property, Plant, and Equipment
The costs of additions and improvements are capitalized, while maintenance
and repairs are charged to expense as incurred. The Company provides for
depreciation and amortization using the straight-line method over the estimated
useful lives of the property as follows: buildings, 25 to 50 years; machinery
and equipment, 4 to 8 years; and leasehold improvements, the shorter of the term
of the lease or the life of the asset. Property, plant, and equipment consists
of the following:
The Company Predecessor
----------- ----------------
(In thousands) 1999 1998
------------------------------------------------------------- ----------------
Land $ 3,280 $ 3,488
Buildings 17,288 19,562
Machinery, Equipment, and Leasehold Improvements 32,223 32,136
--------- ---------
52,791 55,186
Less: Accumulated Depreciation and Amortization 31,641 31,968
--------- ---------
$ 21,150 $ 23,218
========= =========
Other Assets
Other assets in the accompanying balance sheet at year-end 1999 and 1998
includes $1,765,000 and $1,808,000, respectively, of deposits for the purchase
of a building. Other assets also includes the cost of acquired patents and
trademarks that are being amortized using the straight-line method over their
estimated useful life of 15 years. The acquired patents and trademarks were
$1,738,000, net of accumulated amortization of $106,000 at year-end 1999.
Cost in Excess of Net Assets of Acquired Companies
The excess of cost over the fair value of net assets of acquired companies
is amortized over periods of 5 to 40 years using the straight-line method.
Accumulated amortization was $13,889,000 and $9,074,000 at year-end 1999 and
1998, respectively. The Company assesses the future useful life of this and
other long-lived assets whenever events or changes in circumstances indicate
that the current useful life has diminished. Such events or circumstances
generally include the occurrence of operating losses or a significant decline in
earnings associated with the acquired business or asset. The Company considers
the future undiscounted cash flows of the acquired companies in assessing the
recoverability of this asset. The Company assesses cash flows before interest
charges and when impairment is indicated, writes the asset down to fair value.
If quoted market values are not available, the Company estimates fair value by
calculating the present value of future cash flows. If impairment has occurred,
any excess of carrying value over fair value is recorded as a loss.
Foreign Currency
All assets and liabilities of the Company's foreign subsidiaries are
translated at year-end exchange rates, and revenues and expenses are translated
at average exchange rates for the year, in accordance with SFAS No. 52, "Foreign
Currency Translation." Resulting translation adjustments are reflected in the
"Accumulated other comprehensive items" component of shareholders' investment.
Foreign currency transaction gains and losses are included in the accompanying
statement of operations and are not material for the three years presented.
Comprehensive Income
Comprehensive income combines net income and "Other comprehensive items,"
which represents foreign currency translation adjustments, reported as a
component of shareholders' investment in the accompanying balance sheet. At
year-end 1999 and 1998, the balance of accumulated other comprehensive items
represents the Company's cumulative translation adjustment.
13
<PAGE>
1. Nature of Operations and Summary of Significant Accounting Policies
(continued)
-----------------------------------------------------------------------------
Forward Contracts
The Company uses short-term forward foreign exchange contracts to manage
certain exposures to foreign currencies. The Company enters into forward foreign
exchange contracts to hedge firm purchase and sale commitments denominated in
currencies other than its subsidiaries' local currencies. These contracts
principally hedge transactions denominated in United States dollars and German
deutsche marks. The purpose of the Company's foreign currency hedging activities
is to protect the Company's local currency cash flows related to these
commitments from fluctuations in foreign exchange rates. Gains and losses
arising from forward foreign exchange contracts are recognized as offsets to
gains and losses resulting from the transactions being hedged. The Company does
not enter into speculative foreign currency agreements. The Company and the
Predecessor had no foreign exchange contracts outstanding at year-end 1999 or
1998.
Fair Value of Financial Instruments
The Company's financial instruments consist primarily of cash and cash
equivalents, accounts receivable, short-term obligations and current maturities
of long-term obligation, accounts payable, due to/from parent company and
affiliated companies, and long-term obligations. The carrying amounts of the
Company's financial instruments, with the exception of long-term obligations,
approximate fair value due to their short-term nature. The fair value of the
Company's long-term obligations approximates par value. The fair value of
long-term obligations was determined based on quoted market prices and on
borrowing rates available to the Company at year-end 1999.
Recent Accounting Pronouncements
In December 1999, the Securities and Exchange Commission issued Staff
Accounting Bulletin (SAB) 101, "Revenue Recognition in Financial Statements."
SAB 101 includes requirements for when shipments may be recorded as revenue when
the terms of the sale include customer acceptance provisions or an obligation of
the seller to install the product. In such instances, SAB 101 generally requires
that revenue recognition occur upon customer acceptance and/or at completion of
installation. SAB 101 requires that companies conform their revenue recognition
practices to the requirements therein no later than the fourth quarter of
calendar 2000 through recording a cumulative net of tax effect of the change in
accounting as of January 2, 2000. The Company has not completed the analysis to
determine the effect that SAB 101 will have on its financial statements.
Effective in 2001, the Company will be required to adopt SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities." The Company has
not completed the analysis to assess the effect of the new pronouncement on its
financial statements.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities,
disclosure of contingent assets and liabilities at the date of the financial
statements, and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
2. Acquisitions
---------------------
On September 30, 1999, the Company formed a joint venture with Carl Zeiss
Jena GmbH called ZSP Geodetic Systems GmbH (ZSP). ZSP manufactures and develops
survey-instrumentation equipment. Carl Zeiss contributed certain assets of its
Geodetic Systems Division to the joint venture and received nonvoting shares of
ZSP and the right to receive $14,852,000 payable in eight quarterly
installments, plus six percent interest, beginning October 4, 1999 (the Note
Payable). The Note Payable is denominated in Euros. The Company contributed
$1,000,000 in exchange for all of the voting common stock of ZSP and entered
into an arrangement which provided both the right and obligation to acquire the
nonvoting shares of ZSP for $14,852,000. Carl Zeiss entered into an arrangement,
which provided for both the right and obligation to sell the nonvoting shares of
ZSP for $14,852,000. Under this arrangement, the right to sell or acquire the
nonvoting shares of ZSP may not be exercised earlier than 2 years or later than
3 years after September 30, 1999. The purchase price of the nonvoting shares
under this
14
<PAGE>
2. Acquisitions (continued)
----------------------------------
arrangement is subject to reduction by the amounts received by Carl Zeiss under
the Note Payable through the date of the purchase. The Company has accounted for
the transaction as an acquisition of the assets of ZSP and has recorded the
obligation to Carl Zeiss as debt in the accompanying 1999 balance sheet. The
cost of this acquisition exceeded the estimated fair value of the acquired net
assets by $10,120,000 at the date of acquisition, which is being amortized over
20 years.
In January 1997, the Predecessor purchased 92 percent of Plus 3 Software,
Inc. for $7,772,000, net of cash acquired. In 1998 and 1999, the Predecessor
purchased the remaining eight percent of Plus 3 Software, in two installments of
$262,000 and $570,000, respectively. Plus 3 Software has been renamed Spectra
Precision Software, Inc. Spectra Precision Software is an Atlanta, Georgia-based
developer of software for civil engineering applications and also develops
internal software applications for survey and machine control products. The cost
of this acquisition exceeded the estimated fair value of the acquired net assets
by $9,820,000, which is being amortized over five years.
In June 1995, the Predecessor purchased 51 percent of Quadriga
Sensortechnik GmbH, for $802,000. In December 1996, the Predecessor purchased an
additional 39 percent of Quadriga for $2,905,000. The Predecessor purchased the
remaining 10 percent of Quadriga in two installments in 1997 and 1998, of
$687,000 and $127,000, respectively. Quadriga has been renamed Spectra Precision
Kaiserslautern GmbH. Spectra Precision Kaiserslautern is a Germany-based
developer and manufacturer of construction lasers for contractors and
homebuilders used in leveling and measurement. The cost of this acquisition
exceeded the estimated fair value of the acquired net assets by $3,965,000,
which is being amortized over ten years.
These acquisitions have been accounted for using the purchase method of
accounting and their results have been included in the accompanying financial
statements from the date of acquisition. Allocation of the purchase price was
based on an estimate of the fair value of the net assets acquired.
In February 1999, Thermo Instrument acquired 99% of the outstanding shares
of Spectra-Physics, a Stockholm Stock Exchange-listed company, in completion of
Thermo Instrument's cash tender offer to acquire all of the outstanding shares
of Spectra-Physics. In March 2000, Thermo Instrument completed the acquisition
of the remaining Spectra-Physics shares outstanding pursuant to the compulsory
acquisition rules applicable to Swedish companies. The aggregate purchase price
was $351,513,000 including related expenses. The accompanying Company financial
statements include the assets and liabilities of the Company at their estimated
fair values including an allocation of Thermo Instrument's total cost in excess
of net assets of acquired companies arising from the acquisition of
Spectra-Physics. The allocation of cost in excess of net assets of acquired
companies was made based on the Company's revenues, net worth, and assets
relative to the total revenues, net worth, and assets of Spectra-Physics. The
Company believes this methodology is reasonable and in accordance with the
guidance provided by SEC SAB 55 (Topic 1:B). The cost in excess of net assets of
acquired companies totaled $84,369,000 and is being amortized over 40 years.
The Company has undertaken restructuring actions in connection with its
acquisition by Thermo Instrument. The Company's restructuring activities, which
were accounted for in accordance with Emerging Issues Task Force Pronouncement
(EITF) 95-3, have included a reduction in staffing levels across all functions,
relocation of personnel, and abandonment of excess facilities. In connection
with these restructuring activities, the Company established reserves, primarily
for severance and excess facilities. In accordance with the requirements of EITF
95-3, the Company finalized its restructuring plans by February 2000. Accrued
acquisition expenses are included in other accrued expenses in the accompanying
1999 balance sheet.
15
<PAGE>
2. Acquisitions (continued)
---------------------------------
The Company established reserves for severance for 24 employees and
completed payments for severance in the first quarter of 2000. A summary of the
change in accrued acquisition expenses for severance is as follows:
(In thousands) The Company
--------------------------------------------------------- ----------------
Reserves Established $ 829
Usage (757)
--------
Balance at January 1, 2000 $ 72
========
The Company established reserves for excess facilities, primarily for
expenses related to unoccupied space in a facility in Darmstadt, Germany. The
Company expects to expend costs related to the facility through February 2001. A
summary of the change in accrued acquisition expenses for excess facilities is
as follows:
(In thousands) The Company
------------------------------------------------------------ ----------------
Reserves Established $ 737
Usage (111)
Currency Translation (111)
-------
Balance at January 1, 2000 $ 515
=======
The Company established reserves for other acquisition expenses, primarily
for employee relocation expenses. A summary of the change in accrued acquisition
expenses for other expenses is as follows:
(In thousands) The Company
-------------------------------------------------------------- ---------------
Reserves Established $ 300
Usage (300)
-------
Balance at January 1, 2000 $ -
=======
Based on unaudited data, the following table presents selected financial
information on a pro forma basis, assuming the Company and ZSP had been combined
since the beginning of 1998. The effect of the acquisitions not included in the
pro forma data, were not material to the Company's results of operations.
<TABLE>
<CAPTION>
The Company Predecessor
------------------ -------------------------------------------
February 22, 1999 January 1, 1999
through through
(In thousands) January 1, 2000 February 21, 1999 1998
-------------------------------------------------- ---------------------- --------------------- ---------------------
<S> <C> <C> <C>
Revenues $ 219,391 $ 27,753 $ 236,899
Net Income (Loss) 6,351 (2,228) (2,479)
</TABLE>
The pro forma results are not necessarily indicative of future operations
or the actual results that would have occurred had the acquisition of ZSP been
made at the beginning of 1998.
16
<PAGE>
3. Dispositions
-----------------------
In June 1998, the Predecessor sold the assets and certain liabilities of
its Spectra-Physics Credit Corp. (SPCC) subsidiary for proceeds of $3,082,000,
net of cash disposed of $3,858,000. The Predecessor realized a gain of
$2,922,000 on the transaction. In connection with the sale of SPCC in 1998, the
Predecessor entered into an arrangement which resulted in the receipt of a
payment based on business provided to SPCC in excess of $25 million and up to
$50 million. In the third quarter of 1999, the Company reached the $25 million
threshold and began to receive payments under this arrangement. The Company
received payments from the buyer of $632,000 in the period ending January 1,
2000, and $599,000 in the first quarter of 2000. The gain on the sale of SPCC
and the 1999 payment were recorded in other unusual costs (income), net, in the
accompanying statement of operations. SPCC provided capital leasing services to
the Predecessor's customers. The Predecessor retained recourse to the buyer for
certain leases provided by SPCC in the event of default by SPCC customers. At
the time of the sale of SPCC, the Predecessor had recourse for outstanding
leases of approximately $5,000,000. At year-end 1999 and 1998, the
Company/Predecessor had recourse for outstanding loans of approximately
$2,300,000 and $3,900,000, respectively. The Company/Predecessor has established
reserves for this contingent liability.
In October 1999, the Company sold the assets of its Spectra Precision SRL
subsidiary in Italy for book value. The Company received a note receivable
denominated in Italian lira for $2,241,000 at the date of sale, payable in eight
quarterly installments. The note bears interest at an annual rate of 6.5%.
Spectra Precision SRL was a sales office which sold products produced primarily
in the U.S. and Germany.
4. Employee Benefit Plans
--------------------------------
Employee Stock Purchase Program
Beginning November 1, 1999, substantially all of the Company's full-time
U.S. employees are eligible to participate in an employee stock purchase program
sponsored by Thermo Instrument and Thermo Electron. Under this program, shares
of Thermo Instrument's and Thermo Electron's common stock may be purchased at
85% of the lower of the fair market value at the beginning or end of the period,
and the shares purchased are subject to a one-year resale restriction. Shares
are purchased through payroll deductions of up to 10% of each participating
employee's gross wages.
401(k) Savings Plan
Certain of the Predecessor's and the Company's full-time U.S. employees are
eligible to participate in 401(k) savings plans. Contributions to the plans are
made by both the employee and the employer. Company contributions are based upon
the level of employee contributions. The Company/Predecessor contributed and
charged to expense for these plans $492,000 from February 22, 1999, through
January 1, 2000; $112,000 from January 1, 1999, through February 21, 1999; and
$593,000 and $547,000 in 1998 and 1997, respectively.
Defined Contribution Pension Plans
In addition, certain of the Company's subsidiaries participate in European
state sponsored pension plans. Contributions are based on specified percentages
of employee salaries. For these plans, the Company/Predecessor contributed and
charged to expense $1,046,000 from February 22, 1999, through January 1, 2000;
$150,000 from January 1, 1999, through February 21, 1999; and $862,000 and
$849,000 in 1998 and 1997, respectively.
Defined Benefit Pension Plan
The Company's Swedish subsidiary has an unfunded defined benefit pension
plan that covered substantially all of its full-time employees through 1993.
Benefits are based on a percentage of eligible earnings. The employee
17
<PAGE>
4. Employee Benefit Plans (continued)
--------------------------------------------
must have had a projected period of pensionable service of at least 30 years as
of 1993. If the period was shorter, the pension benefits are reduced
accordingly. Active employees do not accrue any future benefits, therefore there
is no service cost and the liability will only increase with interest cost.
Net periodic benefit costs included the following components:
<TABLE>
<CAPTION>
The Company Predecessor
------------------ -----------------------------------------------------------------
February 22, 1999 January 1, 1999
through through
(In thousands) January 1, 2000 February 21, 1999 1998 1997
----------------------------- ---------------------- ----------------------- ------------------- ----------------------
<S> <C> <C> <C> <C>
Interest Cost $ 165 $ 27 $ 208 $ 251
Amortization of Prior
Service Cost (49) (8) (62) (64)
------ ------ ---- ------
$ 116 $ 19 $ 146 $ 187
====== ====== ===== =======
</TABLE>
The Company's defined benefit plan activity was as follows:
The Company Predecessor
(In thousands) 1999 1998
----------------------------------------------------------- -------------------
Change in Benefit Obligation:
Benefit obligation at beginning of year $ 3,850 $ 3,525
Interest cost 192 208
Translation adjustment (173) (79)
Actuarial (gain) loss (117) 84
Benefits paid (115) (119)
------- --------
Benefit obligation at end of year 3,637 3,619
Unrecognized Prior Service Cost - 302
Unrecognized Net Actuarial Gain 143 31
------- --------
Accrued Pension Costs $ 3,780 $ 3,952
======= ========
Actuarial assumptions used to determine the net periodic pension costs were
as follows:
<TABLE>
<CAPTION>
The Company Predecessor
------------------ -------------------------------------------------------------------
February 22, 1999 January 1, 1999
through through
(In thousands) January 1, 2000 February 21, 1999 1998 1997
--------------------------- ---------------------- --------------------- ---------------------- ----------------------
<S> <C> <C> <C> <C>
Discount Rate 5.5% 5.5% 6.0% 7.0%
</TABLE>
18
<PAGE>
5. Income Taxes
-------------------------
The components of income (loss) before income taxes are as follows:
<TABLE>
<CAPTION>
The Company Predecessor
------------------ ------------------------------------------------------------------
February 22, 1999 January 1, 1999
through through
(In thousands) January 1, 2000 February 21, 1999 1998 1997
----------------------------- ---------------------- ---------------------- --------------------- ---------------------
<S> <C> <C> <C> <C>
Domestic $ (197) $ 683 $ (1,417) $ 333
Foreign 13,961 (3,750) 2,582 1,025
--------- --------- -------- ---------
$ 13,764 $ (3,067) $ 1,165 $ 1,358
========= ========= ======== =========
</TABLE>
The components of the income tax (provision) benefit are as follows:
<TABLE>
<CAPTION>
The Company Predecessor
------------------ ------------------------------------------------------------------
February 22, 1999 January 1, 1999
through through
(In thousands) January 1, 2000 February 21, 1999 1998 1997
--------------------------- ---------------------- --------------------- ---------------------- ---------------------
<S> <C> <C> <C> <C>
Currently
Payable:
Federal $ (1,774) $ (660) $ 234 $ (1,082)
State (465) (71) 103 (250)
Foreign (5,792) 1,502 (1,986) (1,041)
--------- -------- --------- ---------
(8,031) 771 (1,649) (2,373)
--------- -------- --------- ---------
Net Deferred
(Prepaid):
Federal 1,689 426 (2) 750
State 441 88 (1) 187
Foreign 153 30 - -
--------- -------- --------- ---------
2,283 544 (3) 937
--------- -------- --------- ---------
$ (5,748) $ 1,315 $ (1,652) $ (1,436)
========= ======== ========= =========
</TABLE>
19
<PAGE>
5. Income Taxes (continued)
----------------------------------
The income tax (provision) benefit in the accompanying statement of
operations differs from the provision calculated by applying the statutory
federal income tax rate of 35% to income (loss) before income taxes due to the
following:
<TABLE>
<CAPTION>
The Company Predecessor
------------------ ------------------------------------------------------------------
February 22, 1999 January 1, 1999
through through
(In thousands) January 1, 2000 February 21, 1999 1998 1997
------------------------------ ---------------------- ---------------------- ---------------------- --------------------
<S> <C> <C> <C> <C>
(Provision) Benefit for
Income Taxes at Statutory
Rate $ (4,817) $ 1,074 $ (408) $ (475)
Differences Resulting From:
Foreign losses not
benefited (691) 115 (571) (307)
Foreign tax rate and tax
law differential (62) 103 (511) (375)
Amortization of cost in
excess of net assets of
acquired companies (217) (43) (565) (375)
Tax benefit of foreign
sales corporation 116 23 337 137
State income taxes, net
of federal tax (16) 11 66 (41)
Other (61) 32 - -
--------- --------- --------- --------
$ (5,748) $ 1,315 $ (1,652) $ (1,436)
========= ========= ========= ========
</TABLE>
Deferred tax asset and liability in the accompanying balance sheet consist
of the following:
The Company Predecessor
(In thousands) 1999 1998
------------------------------------------------------- --------------------
Deferred Tax Asset:
Reserves and accruals $ 5,462 $ 1,883
Inventory basis difference 313 698
Accrued compensation 2,702 863
Foreign tax loss carryforwards 2,134 1,197
--------- ---------
10,611 4,641
Less: Valuation allowance (2,134) (1,197)
--------- ---------
$ 8,477 $ 3,444
========= =========
Deferred Income Taxes:
Depreciation and amortization $ 1,824 $ 3,084
========= =========
The valuation allowance relates to uncertainties surrounding the
realization of foreign net operating losses, which is dependent on the future
income of certain subsidiaries of the Company. The Company believes that it is
20
<PAGE>
5. Income Taxes (continued)
----------------------------------
more likely than not that these deferred tax assets will not be realized. Any
tax benefit resulting from use of acquired foreign net operating loss
carryforwards will be recorded as a reduction of cost in excess of net assets of
acquired companies. As of January 1, 2000, the Company had $4,800,000 of foreign
tax loss carryforwards of which $3,600,000 expire in various amounts through
2004 and $1,200,000 does not expire.
6. Related-party Transactions
-------------------------------------
Corporate Services Agreement
The Company and Thermo Electron have a corporate services agreement under
which Thermo Electron's corporate staff provides certain administrative
services, including certain legal advice and services, risk management, certain
employee benefit administration, tax advice and preparation of tax returns,
centralized cash management, and certain financial and other services, for which
the Company pays Thermo Electron annually an amount equal to 0.8% of the
Company's revenues. For these services, the Company was charged $1,585,000 for
the period from February 22, 1999, through January 1, 2000. The fee is reviewed
and adjusted annually by mutual agreement of the parties. The corporate services
agreement is renewed annually but can be terminated upon 30 days' prior notice
by the Company or upon the Company's withdrawal from the Thermo Electron
Corporate Charter (the Thermo Electron Corporate Charter defines the
relationships among Thermo Electron and its majority-owned subsidiaries).
Management believes that the service fee charged by Thermo Electron is
reasonable and that such fees are representative of the expenses the Company
would have incurred on a stand-alone basis. For additional items such as
employee benefit plans, insurance coverage, and other identifiable costs, Thermo
Electron charges the Company based upon costs attributable to the Company.
Related-party Lease
The Company leases office space in Ohio from an association of three
individuals, two of which are vice presidents of one of the Company's U.S.
operating units, under a noncancellable operating lease arrangement expiring in
2011. The annual rent is $345,000, and is subject to adjustment based on the
terms of the lease. The accompanying statement of operations includes expenses
from this operating lease of $290,000 from February 22, 1999, through January 1,
2000, $55,000 from January 1, 1999, through February 21, 1999, and $345,000 and
$210,000 in 1998 and 1997, respectively.
Cash Management
The Company invests excess cash and borrows short-term funds under
arrangements with Thermo Electron as discussed in Note 1.
The Predecessor and the Company borrowed and lent funds from/to other
subsidiaries of Spectra Physics. Such borrowings and advances were at variable
market rates and were classified as due to/from parent company and affiliated
companies in the accompanying balance sheet.
7. Short- and Long-term Obligations
-------------------------------------------
Short-term Obligations
Short-term obligations and current maturities of long-term obligation in
the accompanying balance sheet includes $1,238,000 and $1,412,000 at year-end
1999 and 1998, respectively, of amounts borrowed under lines of credit. The
weighted average interest rate for these borrowings at year-end 1999 and 1998
was 6.5%. The Company had no unused lines of credit with unrelated parties at
January 1, 2000.
In addition, at year-end 1999, the Company has borrowings of $4,926,000
under arrangements discussed in Note 1. The weighted average interest rate for
these borrowings was 5.1% at year-end 1999.
Long-term Obligations
In September 1999, the Company obtained a controlling interest in the
assets of ZSP, which issued Euro-denominated debt (Note 2). At year-end 1999,
$13,141,000 of this obligation was outstanding, of which $5,020,000 was current.
This debt is payable in eight quarterly installments, and bears interest at six
percent.
The Company/Predecessor also had a long-term capital lease obligation of
$277,000 and $395,000 outstanding at year-end 1999 and 1998, respectively. This
obligation bears interest at 7.5% and is payable in 2000.
21
<PAGE>
8. Commitments
-----------------------
The Company leases portions of its office and operating facilities under
various operating lease arrangements. The accompanying statement of operations
includes expenses from operating leases with unrelated parties of $3,189,000
from February 22, 1999, through January 1, 2000, $456,000 from January 1, 1999
through February 21, 1999, and $3,675,000, and $2,742,000 in 1998 and 1997,
respectively. Future minimum payments due under noncancelable operating leases
at January 1, 2000, are $2,754,000 in 2000, $2,371,000 in 2001, $1,752,000 in
2002, $1,394,000 in 2003, $1,368,000 in 2004, and $1,039,000 in 2005 and
thereafter. Total future minimum lease payments are $10,678,000.
9. Subsequent Event
----------------------------
On May 11, 2000, Thermo Instrument entered into a definitive agreement to
sell the Company to Trimble Navigation Ltd.
22
<PAGE>
UNAUDITED FINANCIAL STATEMENTS OF SPECTRA PRECISION
SPECTRA PRECISION
CONDENSED COMBINED BALANCE SHEET
<TABLE>
<CAPTION>
June 30,
(In thousands) 2000
--------------------------------------------------------------------------------------
(Unaudited)
<S> <C>
Assets
Current Assets:
Cash and cash equivalents $ 7,552
Accounts receivable, less allowance of $5,659 54,316
Inventories 27,770
Deferred tax asset 613
Other current assets 1,689
Due from parent company and affiliated companies 8,862
---------------
100,802
---------------
Property, Plant, and Equipment, at Cost, Net 19,367
---------------
Other Assets 7,091
---------------
Cost in Excess of Net Assets of Acquired Companies (Note 2) 95,855
---------------
---------------
$ 223,115
===============
Liabilities and Shareholders' Investment
Current Liabilities:
Short-term obligations and current maturities of long-term
obligations (includes advance from affiliate of $1,338 in 2000) $ 11,884
Accounts payable 7,317
Accrued payroll and employee benefits 9,819
Accrued income taxes 3,954
Other accrued expenses 14,484
Due to parent company and affiliated companies 18,330
---------------
65,788
---------------
Deferred Income Taxes 1,991
---------------
Accrued Pension Costs 4,397
---------------
Long-term Obligations -
---------------
Commitments and Contingency
Shareholders' Investment:
Net parent company investment 152,138
Accumulated other comprehensive items (1,199)
---------------
150,938
---------------
---------------
$ 223,115
===============
</TABLE>
The accompanying notes are an integral part of these condensed combined
financial statements.
23
<PAGE>
SPECTRA PRECISION
CONDENSED COMBINED STATEMENTS OF OPERATIONS
(Unaudited)
Three Six
Months Months
Ended Ended
June 30, June 30,
(In thousands) 2000 2000
------------------------------------------------------------ -------------------
Revenues $ 63,167 $ 116,788
--------------- -------------------
Cost and Operating Expenses:
Cost of revenues 30,496 56,589
Selling, general, and
administrative expenses 18,793 39,054
Research and development
expenses 5,342 10,865
--------------- -------------------
54,631 106,508
--------------- -------------------
Operating Income 8,536 10,280
--------------- -------------------
Interest Income 59 476
Interest Expense (782) (1,639)
Other Income, net 1,098 951
--------------- -------------------
Income Before Income
Taxes 8,911 10,068
Income Tax Provision 1,212 1,887
--------------- -------------------
Net Income $ 7,699 $ 8,181
=============== ===================
The accompanying notes are an integral part of these condensed combined
financial statements.
24
<PAGE>
UNAUDITED FINANCIAL STATEMENTS OF SPECTRA PRECISION
SPECTRA PRECISION
CONDENSED COMBINED STATEMENT OF CASHFLOWS
<TABLE>
<CAPTION>
June 30,
(In thousands) 2000
-------------------------------------------------------------------------------------------------------------------------------
(Unaudited)
<S> <C>
Operating Activities:
Net income (loss) $ 8,181
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 5,715
Provision for losses on accounts receivable 1,171
Gain on disposal of fixed assets 1,846
Increase (decrease) in deferred income taxes 8,031
Other noncash items -
Changes in current accounts, excluding the effects of acquisitions and dispositions:
Accounts receivable (15,351)
Inventories (519)
Other current assets (277)
Accounts payable (15)
Other current liabilities (1,124)
Other (1,393)
------------
Net cash provided by operating activities 6,265
Investing Activities:
Advance from affiliated company 1,338
Purchases of property, plant, and equipment (2,884)
------------
Net cash used in investing activities (1,546)
Financing Activities:
Decrease in due to/from parent company and affiliated companies (8,641)
Net increase (decrease) in short-term obligations (915)
Issuance (repayment) of long-term obligations (8,121)
Increase in Net parent company investment 11,327
Other -
------------
Net cash provided by (used in) financing activities (6,350)
Exchange Rate Effect on Cash 1,498
------------
Increase (Decrease) in Cash and Cash Equivalents (133)
Cash and Cash Equivalents at Beginning of Period 7,685
------------
Cash and Cash Equivalents at End of Period $ 7,552
============
</TABLE>
The accompanying notes are an integral part of these condensed combined
financial statements.
25
<PAGE>
SPECTRA PRECISION
NOTES TO CONDENSED COMBINDED FINANCIAL STATEMENTS
(UNAUDITED)
1. Nature of Operations and Summary of Significant Accounting Policies
-----------------------------------------------------------------------------
Nature of Operations
Spectra Precision represents certain businesses owned by Spectra-Physics
AB, which develop, manufacture, and market complete positioning solutions for
the construction, surveying, and agricultural markets. Products include laser
alignment instruments, machine control systems, and survey instruments.
Relationship with Thermo Instrument Systems Inc. and Thermo Electron Corporation
On February 22, 1999, Thermo Instrument Systems Inc. acquired
Spectra-Physics (Note 2). Thermo Instrument is an 88% owned subsidiary of Thermo
Electron Corporation.
The accompanying financial statements prior to February 22, 1999 represent
the assets, liabilities, income and expenses of Spectra Precision as included in
Spectra-Physics' financial statements prior to Spectra-Physics' acquisition by
Thermo Instrument (the Predecessor). The accompanying financial statements
subsequent to February 21, 1999, represent the assets, liabilities, income and
expenses of Spectra Precision as included in Thermo Instrument's combined
financial statements (the Company). The accompanying financial statements do not
include Thermo Instrument's or Spectra-Physics' general corporate debt, which is
used to finance the operations of these companies' respective businesses, or an
allocation of Thermo Instrument's or Spectra-Physics' interest expense.
Principles of Combination
The accompanying financial statements include the combined accounts of the
Spectra Precision businesses, which are subject to a definitive agreement in
which the Company will be sold to Trimble Navigation Ltd. (Note 5). All material
intercompany accounts and transactions have been eliminated.
Basis of Accounting
The principal difference in the basis of accounting between the Predecessor
and the Company relates to the cost in excess of net assets of acquired
companies, the amortization of which approximates $2,100,000 per year. The
significant accounting policies of the Company described herein apply to both
the Company and the Predecessor, except where stated otherwise.
Fiscal Year and Periods Presented
Spectra Precision has a 52-53 week fiscal year, which ends on the Saturday
nearest to December 31, which for fiscal 2000 will be December 30, 2000. The
Company's fiscal year normally consists of 52 weeks split into four equal
quarters of 13 weeks each; however, due to the fact that there are not exactly
52 weeks in a calendar year and that there is at least slightly more than one
additional day per calendar year, as compared to a 52-week fiscal year, the
Company will have a fiscal year composed of 53 weeks in certain fiscal years.
In those resulting fiscal years that have 53 weeks, one quarter of the
fiscal year will have 14 weeks and the Company will record an extra week of
revenues, costs and related financial activity. Therefore, the financial results
of those fiscal years, and the associated quarter, having the extra week, will
not be exactly comparable to the prior and subsequent 52-week fiscal years, and
the associated quarters having only 13 weeks. Thus, due to the inherent nature
of a 52-53 week fiscal year, the Company, analysts, shareholders, investors and
others will have to make appropriate adjustments to any analysis performed when
comparing the Company's activities and results in fiscal years that contain 53
weeks, to those that contain only the standard 52 weeks. The next 53-week year
will be fiscal year 2002.
The results of operations for the three and six months ended June 30, 2000
are not necessarily indicative of the results that may be expected for the year
ending December 30, 2000.
26
<PAGE>
Revenue Recognition
The Company generally recognizes product revenues upon shipment of its
products or upon installation if required by contract. The Company provides a
reserve for its estimate of warranty costs and returns at the time of shipment.
In accordance with Statement of Position No. 97-2, "Software Revenue
Recognition," revenue from software is recognized upon execution of the license
agreement and delivery of the software when any ongoing service commitments are
not critical to the functionality of the software; otherwise revenue on the
service component is recognized over the life of the contract.
Cash and Cash Equivalents
The Company, along with other European-based subsidiaries of Thermo
Electron, participates in a notional pool arrangement in the U.K. with Barclays
Bank. Under this arrangement, Barclays notionally combines the positive and
negative cash balances held by the participants to calculate the net interest
yield/expense for the group. The benefit derived from this arrangement is then
allocated based on balances attributable to the respective participants. The
Company has access to a $3,881,000 bank line of credit under this arrangement.
Thermo Electron guarantees all of the obligations of each participant in this
arrangement. At June 30, 2000, the Company had borrowed $3,085,226 under this
arrangement.
At June 30, 2000 and January 1, 2000, the Company's and the Predecessor's
cash equivalents included investments in interest-bearing accounts at the
Company's foreign operations, which have an original maturity of three months or
less. Cash equivalents are carried at cost, which approximates market value.
Advance from Affiliate
Effective June 1999, certain of the Company's European-based subsidiaries
participate in a new cash management arrangement with a wholly owned subsidiary
of Thermo Electron. Under the new arrangement, amounts advanced to or from
Thermo Electron for cash management purposes bear interest based on Euro market
rates, which were .9525% % at June 30, 2000. Thermo Electron is contractually
required to maintain cash, cash equivalents, and/or immediately available bank
lines of credit equal to at least 50% of all funds invested under this cash
management arrangement by all Thermo Electron subsidiaries other than wholly
owned subsidiaries. The Company has the contractual right to withdraw its funds
invested in the cash management arrangement upon 30 days' prior notice. The
Company had no funds invested in this arrangement as of June 30, 2000. The
Company has access to a $2,568,000 line of credit under this arrangement, of
which the Company had borrowed $1,338,276 at June 30, 2000.
Inventories
Inventories are stated at the lower of cost (on a weighted average basis)
or market value and include materials, labor, and manufacturing overhead. The
components of inventories are as follows:
June 30,
(In thousands) 2000
-----------------------------------------------------
Raw Material and Supplies $ 10,239
Work in Process 4,419
Finished Goods 13,112
-------------
$ 27,770
=============
The Company periodically reviews its quantities of inventories on hand and
compares these amounts to expected usage of each particular product or product
line. The Company records, as a charge to cost of revenues any amounts required
to reduce the carrying value of inventories to net realizable value.
27
<PAGE>
Property, Plant, and Equipment
The costs of additions and improvements are capitalized, while maintenance
and repairs are charged to expense as incurred. The Company provides for
depreciation and amortization using the straight-line method over the estimated
useful lives of the property as follows: buildings, 25 to 50 years; machinery
and equipment, 4 to 8 years; and leasehold improvements, the shorter of the term
of the lease or the life of the asset. Property, plant, and equipment consists
of the following:
June 30,
(In thousands) 2000
--------------------------------------------------------------------------------
Land $ 2,089
Buildings 13,550
Machinery, Equipment, and Leasehold Improvments 29,298
-------------
44,937
Less: Accumulated Depreciation and Amortization 25,570
-------------
$ 19,367
=============
Other Assets
Other assets in the accompanying balance sheet at June 30, 2000 include
$1,777,000 of deposits for the purchase of a building. Other assets also
includes the cost of acquired patents and trademarks that are being amortized
using the straight-line method over their estimated useful life of 15 years. The
acquired patents and trademarks were $1,677,000, net of accumulated amortization
of $167,000 at June 30, 2000.
Cost in Excess of Net Assets of Acquired Companies
The excess of cost over the fair value of net assets of acquired companies
is amortized over periods of 5 to 40 years using the straight-line method.
Accumulated amortization was $16,994,000 at June 30, 2000. The Company assesses
the future useful life of this and other long-lived assets whenever events or
changes in circumstances indicate that the current useful life has diminished.
Such events or circumstances generally include the occurrence of operating
losses or a significant decline in earnings associated with the acquired
business or asset. The Company considers the future undiscounted cash flows of
the acquired companies in assessing the recoverability of this asset. The
Company assesses cash flows before interest charges and when impairment is
indicated, writes the asset down to fair value. If quoted market values are not
available, the Company estimates fair value by calculating the present value of
future cash flows. If impairment has occurred, any excess of carrying value over
fair value is recorded as a loss.
Comprehensive Income
Comprehensive income combines net income and "Other comprehensive items,"
which represents foreign currency translation adjustments, reported as a
component of shareholders' investment in the accompanying balance sheet. At June
30, 2000, the balance of accumulated other comprehensive items represents the
Company's cumulative translation adjustment.
Recent Accounting Pronouncements
In December 1999, the Securities and Exchange Commission issued Staff
Accounting Bulletin (SAB) 101, "Revenue Recognition in Financial Statements."
SAB 101 includes requirements for when shipments may be recorded as revenue when
the terms of the sale include customer acceptance provisions or an obligation of
the seller to install the product. In such instances, SAB 101 generally requires
that revenue recognition occur upon customer acceptance and/or at completion of
installation. SAB 101 requires that companies conform their revenue recognition
practices to the requirements therein no later than the fourth quarter of
calendar 2000 through recording a cumulative net of tax effect of the change in
accounting as of January 2, 2000. The Company has not completed the analysis to
determine the effect that SAB 101 will have on its financial statements.
Effective in 2001, the Company will be required to adopt SFAS No. 133,
"Accounting for Derivative
28
<PAGE>
Instruments and Hedging Activities." The Company has not completed the
analysis to assess the effect of the new pronouncement on its financial
statements.
2. Acquisitions
-----------------------
In February 1999, Thermo Instrument acquired 99% of the outstanding shares
of Spectra-Physics, a Stockholm Stock Exchange-listed company, in completion of
Thermo Instrument's cash tender offer to acquire all of the outstanding shares
of Spectra-Physics. In March 2000, Thermo Instrument completed the acquisition
of the remaining Spectra-Physics shares outstanding pursuant to the compulsory
acquisition rules applicable to Swedish companies. The aggregate purchase price
was $351,513,000 including related expenses. The accompanying Company financial
statements include the assets and liabilities of the Company at their estimated
fair values including an allocation of Thermo Instrument's total cost in excess
of net assets of acquired companies arising from the acquisition of
Spectra-Physics. The allocation of cost in excess of net assets of acquired
companies was made based on the Company's revenues, net worth, and assets
relative to the total revenues, net worth, and assets of Spectra-Physics. The
Company believes this methodology is reasonable and in accordance with the
guidance provided by SEC SAB 55 (Topic 1:B). The cost in excess of net assets of
acquired companies totaled $84,369,000 and is being amortized over 40 years.
The Company has undertaken restructuring actions in connection with its
acquisition by Thermo Instrument. The Company's restructuring activities, which
were accounted for in accordance with Emerging Issues Task Force Pronouncement
(EITF) 95-3, have included a reduction in staffing levels across all functions,
relocation of personnel, and abandonment of excess facilities. In connection
with these restructuring activities, the Company established reserves, primarily
for severance and excess facilities. In accordance with the requirements of EITF
95-3, the Company finalized its restructuring plans by February 2000. Accrued
acquisition expenses are included in other accrued expenses in the accompanying
June 30, 2000 balance sheet.
The Company established reserves for severance for 24 employees and
completed payments for severance in the first quarter of 2000. A summary of the
change in accrued acquisition expenses for severance is as follows:
(In thousands) The Company
-----------------------------------------------------
Reserves Established $ 829
Usage (757)
-----------------
Balance at June 30, 2000 $ 72
=================
The Company established reserves for excess facilities, primarily for
expenses related to unoccupied space in a facility in Darmstadt, Germany. The
Company expects to expend costs related to the facility through February 2001. A
summary of the change in accrued acquisition expenses for excess facilities is
as follows:
(In thousands) The Company
-----------------------------------------------------
Reserves Established $ 737
Usage (228)
Currency Translation (111)
-----------------
Balance at June 30, 2000 $ 398
=================
29
<PAGE>
3. Dispositions
----------------------
In June 1998, the Predecessor sold the assets and certain liabilities of
its Spectra-Physics Credit Corp. (SPCC) subsidiary for proceeds of $3,082,000,
net of cash disposed of $3,858,000. The Predecessor realized a gain of
$2,922,000 on the transaction. In connection with the sale of SPCC in 1998, the
Predecessor entered into an arrangement that resulted in the receipt of a
payment based on business provided to SPCC in excess of $25 million and up to
$50 million. In the third quarter of 1999, the Company reached the $25 million
threshold and began to receive payments under this arrangement. The Company
received payments from the buyer of $600,000 and $600,000 in the first three and
six months of 2000, respectively. The gain on the sale of SPCC and the 1999
payment were recorded in other costs (income), net, in the accompanying
statement of operations. SPCC provided capital leasing services to the
Predecessor's customers. The Predecessor retained recourse to the buyer for
certain leases provided by SPCC in the event of default by SPCC customers. At
the time of the sale of SPCC, the Predecessor had recourse for outstanding
leases of approximately $5,000,000. At June 30, 2000, the Company had recourse
for outstanding loans of approximately $2,000,000. The Company has established
reserves for this contingent liability.
In October 1999, the Company sold the assets of its Spectra Precision SRL
subsidiary in Italy for book value. The Company received a note receivable
denominated in Italian lira for $2,241,000 at the date of sale, payable in eight
quarterly installments. The note bears interest at an annual rate of 6.5%.
Spectra Precision SRL was a sales office that sold products produced primarily
in the U.S. and Germany.
4. Related-party Transactions
------------------------------------
Corporate Services Agreement
The Company and Thermo Electron have a corporate services agreement under
which Thermo Electron's corporate staff provides certain administrative
services, including certain legal advice and services, risk management, certain
employee benefit administration, tax advice and preparation of tax returns,
centralized cash management, and certain financial and other services, for which
the Company pays Thermo Electron annually an amount equal to 0.8% of the
Company's revenues. For these services, the Company was charged $0 and $434,944
for the three and six month periods ended June 30, 2000, respectively. The fee
is reviewed and adjusted annually by mutual agreement of the parties. The
corporate services agreement is renewed annually but can be terminated upon 30
days' prior notice by the Company or upon the Company's withdrawal from the
Thermo Electron Corporate Charter (the Thermo Electron Corporate Charter defines
the relationships among Thermo Electron and its majority-owned subsidiaries).
Management believes that the service fee charged by Thermo Electron is
reasonable and that such fees are representative of the expenses the Company
would have incurred on a stand-alone basis. For additional items such as
employee benefit plans, insurance coverage, and other identifiable costs, Thermo
Electron charges the Company based upon costs attributable to the Company.
Related-party Lease
The Company leases office space in Ohio from an association of three
individuals, two of which are vice presidents of one of the Company's U.S.
operating units, under a noncancellable operating lease arrangement expiring in
2011. The annual rent is $345,000, and is subject to adjustment based on the
terms of the lease. The accompanying statement of operations includes expenses
from this operating lease of $86,347 and $172,700 for the three and six month
periods ended June 30, 2000, respectively.
Cash Management
The Company invests excess cash and borrows short-term funds under
arrangements with Thermo Electron as discussed in Note 1.
The Predecessor and the Company borrowed and lent funds from/to other
subsidiaries of Spectra Physics. Such borrowings and advances were at variable
market rates and were classified as due to/from parent company and affiliated
companies in the accompanying balance sheet.
30
<PAGE>
5. Subsequent Event
----------------------------
On July 14, 2000, Thermo Instrument completed the sell of the Company to
Trimble Navigation Ltd., pursuant to the definitive agreement entered into on
May 11, 2000 between Thermo Instrument and Trimble Navigation Ltd.
31
<PAGE>
TRIMBLE NAVIGATION LIMITED
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION
Introduction to Pro Forma Financial Information
Effective as of July 14, 2000, Trimble Navigation Limited, a California
Corporation ("Trimble" or the "Company") completed the acquisition of the
Spectra Precision wholly owned businesses formerly owned by Thermo Electron
Corporation ("Thermo Electron"), collectively known as the "Spectra Precision
Group" for an aggregate purchase price of approximately $294 million, which is
subject to a final adjustment in the purchase price as provided for in the
acquisition agreements. The acquisition includes 100% of the stock of Spectra
Precision Inc., a Delaware corporation, Spectra Precision SRL, an Italian
corporation, Spectra Physics Holdings GmbH, a German corporation, and Spectra
Precision BV, a Netherlands corporation. The acquisition also consists of
certain assets and liabilities of Spectra Precision AB, a Swedish corporation,
including 100% of the shares of Spectra Precision SA, a French corporation,
Spectra Precision Scandinavia AB, a Swedish corporation, Spectra Precision of
Canada Ltd., a Canadian corporation, and Spectra Precision Handelsges mbH, an
Austrian corporation.
The acquisition will be treated as a purchase for accounting purposes;
accordingly, Trimble's consolidated results of operations will include the
operating results of the Spectra Precision Group subsequent to the effective
acquisition date. The acquisition was financed with $80 million in seller
subordinated debt, $140 million of cash provided through a syndicate of banks,
and $74 million of the Company's available cash on hand. The Company acquired
approximately $133 million of identifiable intangible assets as part of the
acquisition which the Company expects to amortize over various time periods
ranging from 5 to 10 years and expects to record approximately $121 million of
goodwill due to the acquisition which will be amortized over 20 years. The
Company also expects to incur $7 to $8 million of costs and expenses in
connection with the acquisition.
The following unaudited pro forma condensed consolidated financial data
present the effect of Trimble`s acquisition of Spectra Precision Group. The
unaudited pro forma condensed consolidated balance sheet presents the
consolidated financial position of Trimble as of June 30, 2000, assuming that
the acquisition had occurred as of that date. Such pro forma information is
based upon the historical balance sheet data of Trimble as of June 30, 2000 and
Spectra Precision Group as of June 30, 2000. The historical balance sheet of the
Spectra Precision Group at June 30, 2000 and the historical statements of
operations for the year ended January 1, 2000 (which includes Spectra Precision
Group results for the period from February 22, 1999 through January 1, 2000 and
its predecessor for the period from January 1, 1999 through February 21, 1999)
and the six months ended June 30, 2000 do not agree with the financial
statements included in Item 7(a) of this Form 8-K/A because certain
insignificant net assets and operations of the Spectra Precision Group were not
purchased by Trimble. The unaudited pro forma condensed consolidated statements
of income for the year ended December 31, 1999 and for the six months ended June
30, 2000 give effect to earnings as if the acquisition had occurred on January
2, 1999. The unaudited pro forma condensed consolidated financial data are
prepared using the purchase method of accounting.
The unaudited pro forma condensed consolidated financial data are based on
the estimates and assumptions set forth in the notes to such statements, which
are preliminary and have been made solely for purposes of developing such pro
forma information. The unaudited pro forma condensed consolidated financial data
are not necessarily an indication of the results that would have been achieved
had the transaction been consummated as of the dates indicated.
The unaudited pro forma condensed consolidated financial data should be
read in conjunction with the historical financial statements and notes thereto
of Trimble, including the Annual Report on Form 10-K for the year ended December
31, 1999 and the Quarterly Report on Form 10-Q for the quarter ended June 30,
2000, and the historical financial statements of the Spectra Precision Group at
December 31, 1999 and for the three years then ended and at June 30, 2000 and
for the three and six months then ended included herein.
32
<PAGE>
TRIMBLE NAVIGATION LIMITED
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
Historical
----------------------------------
Trimble Navigation Spectra Precision
Limited Group
---------------------------------- Pro Forma
June 30, June 30, Pro Forma June 30,
2000 2000 Adjustments Notes 2000
--------------------------------------------------------------- --------------- --------------------------------
(In thousands)
<S> <C> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 94,438 $ 7,552 $ (73,757) (A) $ 37,702
(31,069) (B)
30,000 (B)
(4,778) (D)
15,316 (A)
Short term investments 24,900 - (15,316) (A) 9,584
Accounts and other receivable, net 45,651 54,929 100,580
Inventories 19,042 27,770 3,957 (E) 50,769
Other current assets 3,881 1,689 5,570
----------------- --------------- ----------- --------------
Total current assets 187,912 91,939 (75,647) 204,204
Net property and equipment 11,660 8,976 4,995 (E) 25,631
Net Buildings and Land - 7,094 231 (E) 7,325
Goodwill and Intangible assets 1,135 - 1,135
Goodwill on purchase 121,301 (F) 121,301
Inatangible assets on purchase 132,900 (G) 132,900
Deferred income taxes 350 (350) (K) -
Other assets 8,541 107 4,778 (D) 13,426
----------------- --------------- ----------- --------------
Total assets $ 209,598 $ 108,117 $ 188,208 $ 505,923
================= =============== =========== ==============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt $ - $ 11,674 $ 8,000 (C) $ 19,674
Revolving credit facility 40,000 (C) 40,000
Accounts payable 12,438 7,317 19,755
Accrued compensation and benefits 8,295 9,819 18,114
Accrued liabilities 14,520 13,070 8,000 (H) 44,857
9,450 (I)
(183) (B)
Accrued liabilities related to disposal of
General Aviation 1,389 - 1,389
Accrued warranty expense 5,989 1,415 7,404
Income taxes payable 2,343 3,954 6,297
Deferred gain on sale of assets 1,953 - 1,953
----------------- --------------- ----------- --------------
Total current liabilities 46,927 47,248 65,267 159,442
----------------- --------------- ----------- --------------
Noncurrent portion of long-term debt and other
liabilities 30,724 - (30,000) (B) 202,724
30,000 (B)
92,000 (C)
80,000 (C)
Pensions - 4,397 4,397
Noncurrent portion of gain on sale of assets 2,279 - 2,279
Deferred income taxes - 792 7,508 (K) 8,300
----------------- --------------- ----------- --------------
Total liabilities 79,930 52,437 244,775 377,142
----------------- --------------- ----------- --------------
Shareholders' equity:
Common stock 135,419 57,300 (57,300) (J) 135,419
Accumulated deficit (4,056) (420) 420 (J) (4,942)
(886) (B)
Accumulated other comprehensive loss (1,695) (1,199) 1,199 (J) (1,695)
----------------- --------------- ----------- --------------
Total shareholders' equity 129,668 55,680 (56,567) 128,781
----------------- --------------- ----------- --------------
Total liabilities and shareholders'
equity $ 209,598 $ 108,117 $ 188,208 $ 505,923
================= =============== =========== ==============
</TABLE>
See accompanying notes to condensed consolidated financial statements.
33
<PAGE>
TRIMBLE NAVIGATION LIMITED
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Historical
-----------------------------------------
Trimble Navigation Spectra Precision
Limited Group
-----------------------------------------
-----------------------------------------
Six Months Ended Six Months Ended
----------------------------------------- Pro Forma
June 30, June 30, Pro Forma June 30,
2000 2000 Adjustments Notes 2000
----------------------------------------------- ----------------------------------------- -----------------------------------------
(In thousands, except per share data)
<S> <C> <C> <C> <C> <C>
Total revenue $ 136,404 $ 116,788 $ (189) (L) $ 253,003
------------------ -------------------- --------------- ---------------
Operating expenses:
Cost of sales 57,474 56,589 (61) (L) 114,002
Research and development 18,059 11,030 29,089
Sales and marketing 26,679 30,780 57,459
General and administrative 12,947 5,167 18,114
Depreciation on Personal Property on
purchase - - 1,249 (M) 1,249
Amortization of goodwill on purchase 3,033 (M) 3,033
Amortization of intangible assets on
purchase 9,821 (M) 9,821
------------------ -------------------- --------------- ---------------
Total operating expenses 115,159 103,567 14,041 232,767
------------------ -------------------- --------------- ---------------
Operating income 21,245 13,222 (14,230) 20,237
------------------ -------------------- --------------- ---------------
Nonoperating income (expense):
Interest income 3,206 476 (2,264) (O) 1,418
Interest and other expenses (1,107) (313) (12,022) (N)(1) (12,224)
(478) (N)(3)
1,696 (N)(2)
Foreign exchange gain (loss) , net 66 (210) (144)
------------------ -------------------- --------------- --------------
Total nonoperating income (expenses) 2,165 (47) (13,068) (10,950)
------------------ -------------------- --------------- --------------
Income before income taxes 23,410 13,175 (27,298) 9,287
Income tax provision 2,341 1,887 (3,299) (P) 929
------------------ -------------------- --------------- --------------
Net income $ 21,069 $ 11,288 $ (23,999) $ 8,358
================== ==================== =============== ==============
------------------ --------------
Basic net income per share $ 0.92 $ 0.36
================== ==============
Shares used in calculating basic
income per share 23,003 23,003
================== ==============
------------------ --------------
Diluted net income per share $ 0.83 $ 0.33
================== ==============
Shares used in calculating diluted
income per share 25,491 25,491
================== ==============
</TABLE>
See accompanying notes to condensed consolidated financial statements.
34
<PAGE>
TRIMBLE NAVIGATION LIMITED
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Historical
------------------------------------
Trimble Navigation Spectra Precision
Limited Group
------------------------------------
------------------------------------
Twelve Months Ended Twelve Months Ended
------------------------------------ Pro Forma
December 31, January 1, Pro Forma December 31,
1999 2000 Adjustments Notes 1999
---------------------------------------------------------------------- ------------------ ---------------------------------------
(In thousands, except per share data)
<S> <C> <C> <C> <C> <C>
Total revenue $ 271,364 $ 217,468 $ (104) (L) $ 488,728
----------- ------------------ ------------- --------------
Operating expenses:
Cost of sales 127,117 111,129 (28) (L) 238,218
Research and development 36,493 17,192 53,685
Sales, marketing, and general an
administrative 87,293 72,839 160,132
Depreciation on Personal Property - - 2,498 (M) 2,498
Amortization of goodwill on purchase - - 6,065 (M) 6,065
Amortization of intangible assets
on purchase 19,641 (M) 19,641
----------- ------------------ ------------- --------------
Total operating expenses 250,903 201,160 28,176 480,239
----------- ------------------ ------------- --------------
Operating income from continuing operations 20,461 16,308 (28,280) 8,489
----------- ------------------ ------------- --------------
Nonoperating income (expense):
Interest income 3,857 1,345 (2,813) (O) 2,389
Interest and other expenses (3,611) (496) (24,133) (N)(1) (25,822)
(956) (N)(3)
3,374 (N)(2)
Foreign exchange gain (loss) , net 28 (1,520) (1,492)
----------- ------------------ ------------- ---------------
Total nonoperating expenses 274 (671) (24,528) (24,925)
----------- ------------------ ------------- ---------------
Income (loss) before income taxes from continuing
operations 20,735 15,637 (52,808) (16,436)
Income tax provision 2,073 4,433 (5,281) (P) 1,225
------------ ------------------ ------------- ---------------
Net income (loss) from continuing operations $ 18,662 $ 11,204 $ (47,527) $ (17,661)
------------ ------------------ ------------- ---------------
Discontinued Operations:
Estimated gain (loss) on disposal of discontinued
operations (net of tax) $ 2,931 $ - $ - $ 2,931
------------ ------------------ ------------- ---------------
Net income (loss) $ 21,593 $ 11,204 $ (47,527) $ (14,730)
============ ================== ============= ===============
Basic net income (loss) per share from continuing
operations $ 0.83 $ (0.79)
Basic net income (loss) per share from discontinued
operations $ 0.13 $ 0.13
------------ ---------------
Basic net income (loss) per share $ 0.96 $ (0.66)
============ ===============
Shares used in calculating basic
net income (loss) per share 22,424 22,424
============ ===============
Diluted net income (loss) per share from continuing
operations $ 0.82 $ (0.79)
Diluted net income (loss) per share from discontinued
operations $ 0.13 $ 0.13
------------ ---------------
Diluted net income (loss) per share $ 0.95 $ (0.66)
============ ===============
Shares used in calculating diluted
net income (loss) per share 22,852 22,424
============ ===============
</TABLE>
See accompanying notes to condensed consolidated financial statements.
35
<PAGE>
TRIMBLE NAVIGATION LIMITED
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION
Note 1 - Basis of Presentation
On July 14, 200, the Closing Date, Trimble Navigation Limited, ("Trimble"
or the "Company") completed the acquisition of the Spectra Precision wholly
owned businesses formerly owned by Thermo Electron Corporation ("Thermo
Electron"), collectively known as the "Spectra Precision Group" (see "Item 2.
Acquisition") in a transaction accounted for as a purchase. The purchase
consideration of the Spectra Precision Group acquisition is estimated to be
approximately $294 million, which is subject to a final adjustment in the
purchase price as provided for in the acquisition agreements. The Company also
expects to incur and estimated $7 to $8 million of costs and expenses in
connection with the acquisition. The total purchase price including cost and
expenses is expected to be approximately $302 million.
The preliminary allocation of the purchase price using balances at June 30,
2000 is summarized below (in thousands):
Historical value of net assets acquired $ 55,680
Step up in Assets acquired 9,183
Distribution Channels 78,600
Existing Technology 25,200
Assembled Workforce 18,300
Trade Name/Trademarks 10,800
Goodwill 121,301
Restructuring charges accrued in
opening Balance Sheet (9,450)
Increase in Deferred tax liability for
non-goodwill intangibles (7,858)
-----------------
Total Purchase Price $ 301,756
=================
The preliminary purchase price allocation is based on the estimated fair
values of the acquired assets and assumed liabilities and an independent
appraisal of intangible assets and certain tangible assets. The Company expects
to finalize the purchase price allocation within six months and does not
anticipate material adjustments to the preliminary purchase price allocation
presented. This preliminary allocation has resulted in acquired goodwill of
approximately $121 million, which is being amortized on a straight-line basis
over 20 years and other acquired intangible assets of $133 million which are
being are being amortized over expected useful lives ranging from 5 to 10 years.
Note 2 - Pro Forma Adjustments
(A) Net cash used to acquire Spectra Precision Group and to pay transaction fees
and expenses (includes sale of short-term investments to provide cash for
purchase).
(B) Reflects prepayment of an existing outstanding subordinated promissory note
of $30 million in principal, $183,000 in accrued interest and $886,000 as a
prepayment penalty. Prepayment of the subordinated promissory note was done in
order to effect the acquisition of the Spectra Precision Group and as part of
obtaining the New Credit Facilities. (Trimble immediately used approximately
$170 million available under the New Credit Facilities to fund the acquisition
of the Spectra Precision Group. $30 million was used to pay off the principal
portion of Company's existing subordinated notes to John Hancock and $140
million was paid in cash to the seller. See note (C) below for discussion of
$140 million.)
36
<PAGE>
(C) Represents an increase in short-term and long-term debt as the result of
financing of the transaction with $140 million of new secured bank debt and $80
million in a seller subordinated note. The following table represents break out
between short-term and long-term (in thousands):
Short Term Debt
Senior secured revolving credit facility $ 40,000
Current Portion $100 million Senior secured term loan 8,000
--------------
Total short term-debt $ 48,000
--------------
Long Term Debt
Long Term Portion $100 million Senior secured term loan $ 92,000
Seller Subordinated Debt 80,000
--------------
Total long term-debt $ 172,000
--------------
--------------
Total Debt as result of financing for acquistion $ 220,000
==============
(D) Debt related transaction fees and expenses, which have been recorded as
prepaid financing costs and will be amortized over the terms of the debt
financing.
(E) Represents the net increase in inventory and value of fixed assets based on
the preliminary independent appraisal.
(F) Reflects goodwill resulting from the acquisition based on the preliminary
purchase price allocation described in Note 1 as if the acquisition had occurred
on June 30, 2000.
(G) Reflects other intangible assets resulting from the acquisition based on the
preliminary purchase price allocation described in Note 1 as if the acquisition
had occurred on June 30, 2000.
(H) Reflects an increase in accrued expenses for acquisition-related expenses
such as legal, accounting, registration and miscellaneous fees incurred by
Trimble.
(I) Reflects an increase in accrued expenses for restructuring costs accrued on
the opening balance sheet in accordance with EITF 95-3.
(J) Reflects the elimination of Spectra Precision Group's equity.
(K) Represents adjustment to deferred tax liability for non-goodwill intangibles
in jurisdictions with a lower tax basis in assets and an adjustment to net
deferred income taxes.
(L) We have eliminated the intercompany sales and cost of sales on products that
we have purchased from the Spectra Precision Group, because the net revenue from
the sale of these products to our customers is already reflected in our
historical net revenues and cost of sales. No intercompany inventory was on hand
at June 30, 2000.
(M) Represents amortization of goodwill, intangible assets and depreciation
expense based on the preliminary allocation of the purchase price and other
costs over their estimated useful lives as if the acquisition had occurred as of
the beginning of the periods presented. The fair value for fixed assets
represents the net increase in value of fixed assets based on a preliminary
valuation.
37
<PAGE>
(in thousands)
<TABLE>
<CAPTION>
Pro Forma Pro Forma
Expense Expense
Estimated Remaining Six Months Twelve Months
Fair Asset Ended Ended
Value Life June 30, 2000 December 31, 1999
-----------------------------------------------------------------------
<S> <C> <C> <C> <C>
Identifiable Intangibles:
Distribution Channels $ 78,600 7 $ 5,614 $ 11,229
Existing Technology 25,200 5 2,520 5,040
Assembled Workforce 18,300 10 915 1,830
Trade Name/Trademarks 10,800 7 771 1,543
----------------- -----------------------------------------
Total Identifiable Intangibles 132,900 9,821 19,641
Goodwill 121,301 20 3,033 6,065
----------------- -----------------------------------------
Total Intangible and goodwill 254,201 12,853 25,706
----------------- -----------------------------------------
Fixed Asset Valuation Adjustment 4,995 2 1,249 2,498
-----------------------------------------
Total Proforma Expense $ 14,102 $ 28,204
=========================================
</TABLE>
(N) Represents:
(1) increase in interest expense resulting from interest on $140 million of
new secured bank debt and $80 million of subordinated seller note:
(dollars in thousands)
<TABLE>
<CAPTION>
Pro Forma Pro Forma
Expense Expense
Six Months Twelve Months
Principal Interest Ended Ended
Amount Rate June 30, 2000 December 31, 1999
--------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Seller subordinated note $ 80,000 10% $ 4,000 $ 8,000
Senior secured revolving credit facility 70,000 9.49% 3,303 6,643
Senior secured term loan 100,000 9.49% 4,719 9,490
----------------------------------------
Total $ 12,022 $ 24,133
</TABLE>
(2) decrease of prior interest expense recorded on terminated $50 million
unsecured credit facility and prepayment of existing $30 million
subordinated notes
(in thousands)
Termination of $50 million Unsecured
Credit Facility $ (75) $ (150)
Prepayment of existing $30 million
Subordinated notes (1,621) (3,224)
-----------------------------------
Total $ (1,696) $ (3,374)
===================================
38
<PAGE>
(3) amortization on $4.8 million of debt financing costs, which are
amortized over the life of the respective debt.
(dollars in thousands)
<TABLE>
<CAPTION>
Pro Forma Pro Forma
Expense Expense
Six Months Twelve Months
Life of Ended Ended
Amount the Debt June 30, 2000 December 31, 1999
--------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Debt financing Cost $ 4,778 5 $ 478 $ 956
</TABLE>
(O) To eliminate interest income which would not have been earned on the cash,
cash equivalents, and short term investments expended for the transaction.
(P) Income taxes in the Pro Forma Condensed Consolidated Statements of
Operations have been adjusted to reflect the tax effect of the pro forma
adjustments using an effective tax rate of 10%.
39
<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 hereunto duly authorized.
TRIMBLE NAVIGATION LIMITED
(Registrant)
By: /s/ Mary Ellen Genovese
------------------------------------------------------------
Mary Ellen Genovese
(Vice President Finance, Chief Financial Officer, and
Corporate Controller)
Dated: September 22, 2000
40
<PAGE>
