Trimble
Navigation Limited, a California corporation (“Trimble” or “the Company” or “we”
or “our” or “us”), provides advanced positioning product solutions, typically to
commercial and government users. The principal application areas
include surveying, agriculture, construction, asset management, mapping and
mobile resource management. Our products provide benefits that can include lower
operational costs, higher productivity, and improved quality. Product examples
include agricultural and construction equipment, guidance systems, surveying
instruments, systems that track fleets of vehicles, and data collection systems
that enable the management of large amounts of geo-referenced information. In
addition, we also manufacture components for in-vehicle navigation and
telematics systems, and timing modules used in the synchronization of wireless
networks.
Our
products often combine knowledge of location or position with a wireless link to
provide a solution for a specific application. Position is provided
through a number of technologies including the Global Positioning System (GPS)
and systems that use laser or optical technologies to establish
position. Wireless communication techniques include both public
networks, such as cellular, and private networks, such as business band radio.
Our products are augmented by our software; this includes embedded firmware that
enables the positioning solution and application software that allows the
customer to make use of the positioning information.
We design
and market our own products. Our manufacturing strategy includes a combination
of in-house assembly and third party subcontractors. Our global operations
include major development, manufacturing or logistics operations in the United
States, Sweden, Germany, New Zealand, France, Canada, the United Kingdom, the
Netherlands, China, and India. Products are sold through dealers,
representatives, joint ventures, and other channels throughout the world. These
channels are supported by our sales offices located in more than 18
countries.
We began
operations in 1978 and incorporated in California in 1981. Our common stock has
been publicly traded on NASDAQ since 1990 under the symbol TRMB.
On
January 17, 2007, Trimble’s board of directors approved a 2-for-1 split of all
outstanding shares of the Company’s Common Stock, payable February 22, 2007 to
stockholders of record on February 8, 2007. All shares and per share information
presented have been adjusted to reflect the stock split on a retroactive basis
for all periods presented.
Technology
Overview
A
significant portion of our revenue is derived from applying Global Navigation
Satellite System (GNSS) technology to terrestrial applications. The
GNSS includes the GPS network of 24 orbiting U.S. based satellites and
associated ground control that is funded and maintained by the U. S. Government
and is available worldwide free of charge, and the Russian GLONASS satellite
based system. Both Europe and China have announced plans to establish future
operational satellite navigation based systems. GNSS positioning is based on a
technique that precisely measures distances from four or more
satellites. The satellites continuously transmit precisely timed
radio signals using extremely accurate atomic clocks. A GNSS receiver
measures distances from the satellites in view by determining the travel time of
a signal from the satellite to the receiver, and then uses those distances to
compute its position. Under normal circumstances, a stand-alone GNSS receiver is
able to calculate its position at any point on earth, in the earth's atmosphere,
or in lower earth orbit, to approximately 10 meters, 24 hours a day. Much better
accuracies are possible through a technique called “differential GNSS.” In
addition to providing position, GNSS provides extremely accurate time
measurement.
GNSS
accuracy is dependent upon the locations of the receiver and the number of GNSS
satellites that are above the horizon at any given time. Reception of GNSS
signals requires line-of-sight visibility between the satellites and the
receiver, which can be blocked by buildings, hills, and dense foliage. The
receiver must have a line of sight to at least four satellites to determine its
latitude, longitude, attitude (angular orientation), and time. The accuracy of
GNSS may also be limited by distortion of GNSS signals from ionospheric and
other atmospheric conditions.
Our GNSS
products are based on proprietary receiver technology. Over time, the advances
in positioning, wireless communications, and information technologies have
enabled us to add more capability to our products and thereby deliver more value
to our users. For example, the developments in wireless technology
and deployments of next generation wireless networks have enabled less expensive
wireless communications. These developments provide the efficient
transfer of position data to locations away from the positioning field device,
allowing the data to be accessed by more users, thereby increasing
productivity. This allows us to integrate visualization and design
software into our systems, as well as offers positioning services, all of which
make our customers more efficient at what they do.
Our laser
and optical products either measure distances and angles to provide a position
in three dimensional space or they provide highly accurate laser references from
which a position can be established. The key element of these
products is typically a laser, which is generally a commercially available laser
diode and a complex mechanical assembly. These elements are augmented
by software algorithms.
Business Strategy
Our
business strategy is developed around an analysis of several key
elements:
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Attractive markets
– We
focus on underserved markets that offer potential for revenue growth,
profitability, and market
leadership.
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Innovative solutions that
provide significant benefits to our customers
– We seek to apply
our technology to applications in which position data is important and
where we can create unique value by enabling enhanced productivity in the
field or field to back office. We look for opportunities in
which the rate of technological change is high and which have a
requirement for the integration of multiple technologies into a
solution.
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Distribution channels to best
access our markets
– We select distribution channels that best
serve the needs of individual markets. These channels can include
independent dealers, direct sales, joint ventures, OEM sales, and
distribution alliances with key partners. We view international expansion
as an important element of our strategy and seek to develop international
channels.
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Business
Segments and Markets
We are
organized into four reporting segments encompassing our various applications and
product lines: Engineering and Construction, Field Solutions, Mobile Solutions
and Advanced Devices. Our segments are distinguished by the markets they serve.
Each segment consists of businesses which are responsible for product
development, marketing, sales, strategy, and financial
performance. The presentation of prior period’s segment operating
results has been conformed to our current segment presentation.
Engineering
and Construction
Products
in the Engineering and Construction segment improve productivity and accuracy
throughout the entire construction process including the initial survey,
planning, design, site preparation, and building phases. Our products
are intended to both improve the productivity of each phase, as well as
facilitate the entire process by improving information flow from one phase to
the next.
The
product solutions typically include multiple technologies. The elements of these
solutions may incorporate GPS, optical, laser, radio, or cellular
communications.
An
example of the customer benefits provided by our products is our GPS and robotic
optical surveying instruments which enable the surveyor to perform operations in
the field faster, more reliably than conventional surveying instruments and with
a smaller crew. Similarly, our construction machine guidance products
allow the operator to achieve the desired landform while eliminating stakeout
and reducing rework. These steps in the construction process can be readily
linked together with data collection modules to minimize the time and effort
required to maintain data accuracy throughout the entire construction
process.
We sell
and distribute our products in this segment through a global network of
independent dealers that are supported by Trimble personnel. This
channel is supplemented by relationships that create additional channel breadth
including our joint ventures with Caterpillar, Nikon, and private branding
arrangements with other companies.
We also
design and market handheld data collectors and data collection software for
field use by surveyors, contractors, and other professionals. These products are
sold directly through dealers and other survey manufacturers.
Competitors
in this segment are typically companies that provide optical, laser, or GPS
positioning products. Our principal competitors are Topcon Corporation, and
Leica Geosystems which was purchased by Hexagon. Price points in this
segment range from less than $1,000 for certain laser systems to approximately
$100,000 for a high-precision, three-dimensional, machine control
system.
Representative
products sold in this segment include:
Trimble S6 Total Station -
The
Trimble S6 total station is a technologically advanced optical surveying system.
Its advanced servo motors make the S6 total station fast, silent, and precise,
allowing surveyors to measure points and collect data in the field efficiently
and productively. The S6 total station offers unique new Trimble technologies
that enable cable-free operation, longer battery life, and accuracy assurance,
among many other features. Its detachable Trimble CU controller is utilized to
effectively collect, display, and manage field data.
Trimble VX Spatial Station
–
Trimble VX
™
Spatial
Station is an advanced positioning system that combines optical, 3D scanning,
and video capabilities—Trimble VISION™ technology—to measure objects in 3D to
produce 2D and 3D data sets for spatial imaging projects. The Trimble
VX Spatial Station enables users to blend extremely accurate ground-based
information with airborne data to provide comprehensive datasets for use in the
geospatial information industry.
SPS Site Positioning Solutions
–
The Trimble Site
Positioning Solutions family increases the productivity of construction
professionals and supervisors during site preparation, layout and grade checking
by simplifying workflows, eliminating unnecessary steps, and providing
intelligent data management between the field and the office, creating time
savings by providing data updates to all members of the team.
GCS Family of Grade Control Systems –
Grade control systems meet construction contractors' needs with
productivity-enhancing solutions for earthmoving, site prep, and roadwork. The
Trimble GCS family provides upgrade options that deliver earthmoving contractors
the flexibility to select a system that meets their daily needs today, and later
add on to meet their changing needs. For example, a single control system such
as the GCS300 can provide for low-cost point of entry into grade control, and
over time can be upgraded to the GCS400 dual sensor system or to the full 3D
GCS900 Grade Control System.
Spectra Precision Laser Portable
Tools –
Our Spectra Precision
®
Laser portfolio includes a
broad range of laser based tools for the interior, drywall and ceilings, HVAC,
and mechanical contractor. Designed to replace traditional methods of
measurement and leveling for a wide range of interior construction applications,
our laser tools are easy to learn and use. Our Spectra Precision Laser product
portfolio includes rotating lasers for horizontal leveling and vertical
alignment, as well as laser pointers and a laser based distance measuring
devices. They are available through independent and national construction supply
houses both in the U.S. and in Europe.
Proliance Software
-
Proliance
®
Software allows infrastructure-intensive organizations to optimize the
Plan-Build-Operate project lifecycle for complex capital projects, construction
and real estate programs, and extensive facility portfolios. The Proliance
Software was designed for large building owner/operators, real estate
developers, and engineering-driven organizations managing $250 million or more
annually in new project construction or facility renovations.
Field
Solutions
Our Field
Solutions segment addresses the agriculture and geographic information system
(GIS) markets.
Our
agriculture products consist of manual and automated navigation guidance for
tractors and other farm equipment used in spraying, planting, cultivation, and
harvesting applications. The benefits to the farmer include faster machine
operation, higher yields, and lower consumption of chemicals than conventional
equipment. We also provide positioning solutions for leveling agricultural
fields in irrigation applications and aligning drainage systems to better manage
water flow in fields.
We use
multiple distribution channels to access the agricultural market, including
independent dealers and partners such as CNH Global. Competitors in this market
are either vertically integrated implement companies such as John Deere, or
agricultural instrumentation suppliers such as Raven, Hemisphere GPS and
Novariant.
Our GIS
product line is centered on handheld data collectors that gather information in
the field to be incorporated into GIS databases. Typically this information
includes features, attributes, and positions of fixed infrastructure and natural
resource assets. An example would be a utility company performing a survey of
its transmission poles including the age and condition of each telephone pole.
Our handheld unit enables this data to be collected and automatically stored
while confirming the location of the asset. The data can then be downloaded into
a GIS database. This stored data could later be used to navigate back to any
individual asset or item for maintenance or data update. Our mobile GIS
initiative goes one step further by allowing this information to be communicated
from the field worker to the back-office GIS database through the combination of
wireless technologies, as well as giving the field worker the ability to
download information from the database. This capability provides significant
advantages to users including improved productivity, accuracy, and access to the
information in the field.
Distribution
for GIS products is primarily through a network of independent dealers and
business partners, supported by Trimble personnel. Primary markets for our GIS
products and solutions include both governmental and commercial users. Users are
most often municipal governments and natural resource
agencies. Commercial users include utility companies. Competitors in
this market are typically survey instrument companies utilizing GPS technology
such as Topcon and Thales.
Approximate
product price points in this segment range from $3,000 for a GIS handheld unit
to $35,000 for a fully automated, farm equipment control system.
Representative
products sold within this segment include:
Ag
GPS EZ-Guide 500
– A lightbar
guidance system with a color LCD display, data logging functions and multiple
accuracy options. Lightbar systems provide GPS-based guidance for vehicle
operators to steer tractors, sprayers, fertilizer applicators, air seeders, and
large tillage tools that require consistent pass-to-pass accuracy to help save
fuel, increase efficiency, and reduce input costs for agricultural
operations.
Ag
GPS EZ-Boom 2010
- The
Ag
GPS
®
EZ-Boom
®
2010
automated application control system is designed to help growers cut input costs
and reduce operator fatigue by providing precise automatic control of field
spraying applications. It works with the Trimble
Ag
GPS EZ-Guide
®
Plus
lightbar guidance system,
Ag
GPS
EZ-Steer
®
assisted
steering system, or the
Ag
GPS Autopilot™
automated steering system.
Ag
GPS Autopilot
System
– A GPS-enabled,
agricultural navigation system that connects to a tractor’s steering system and
automatically steers the tractor along a precise path to within three
centimeters or less. This enables both higher machine productivity
and more precise application of seed and chemicals, thereby reducing costs to
the farmer.
Ag
GPS EZ-Steer
System
– A value added
assisted steering system, that when combined with the EZ-Guide Plus system,
automatically steers agricultural vehicles along a path within 20 centimeters or
less. This system installs in less than thirty minutes and is
designed to reduce gaps and overlaps in spraying, fertilizing, and other field
applications, as well as reduce operator fatigue.
GeoExplorer
2005
Series
– Combines a GPS
receiver in a rugged handheld unit running industry standard Microsoft Windows
Mobile version 5.0, making it easy to collect and maintain data about objects in
the field. The GeoExplorer
®
series features three models
ranging in accuracy from subfoot to 1-3 meters, thereby allowing the user to
select the system most appropriate for their data collection and maintenance
needs.
Fieldport Software
– Focuses
on automating field service processes, operational efficiency and profitability
for water and wastewater utility customers. Sales and distribution of
Fieldport
®
software
solutions are direct to the customer. A Fieldport software installation involves
a degree of integration and professional services.
Software –
An enterprise suite
of modules oriented towards the electric and gas utilities market. Modules
include Outage Management (OMS), Mobile Asset Management, Data Collection,
Staking, Network Tracing & Isolation and Field-based GIS Editing. Sales and
distribution of UtilityCenter
®
software solutions are
direct to the customer. UtilityCenter software installation involves
a degree of integration and professional services.
Mobile
Solutions
Our
Mobile Solutions segment addresses gaps in technology for vehicles and mobile
workers by providing both hardware and software applications for managing
mobile work, mobile workers and mobile assets. The software is provided in both
a client server model or web-based. Our software is provided through
our hosted platform for a monthly subscription service fee or as a perpetual
license with annual maintenance and support fees.
Our
vehicle solutions typically include an onboard proprietary hardware
device consisting of a GPS receiver, business logic, sensor interface, and
a wireless modem. Our solution usually includes the communication service
from/to the vehicle to our data center and access over the internet to the
application software.
Our
mobile worker solutions include a rugged handset device and software designed to
automate service technician work in the field at the point of customer contact.
The mobile worker handset solutions also synchronize to a client
server at the back office for integration with other mission-critical business
applications.
Our
scheduling and dispatch solution is an enterprise software program to optimize
scheduling and routing of field service technicians. For dynamic capacity
management, our capacity planner, capacity controller, and intelligent appointer
modules round out this innovative service delivery automation
technology.
One
element of our market strategy targets opportunities in specific vertical
markets where we believe we can provide a unique value to the end-user by
tailoring our solutions for a particular industry. Sample markets include
Ready Mix Concrete, Direct Store Delivery and Public Safety. Our ready mix
concrete solution combines a suite of sensors with our in-vehicle wireless
platform providing fleets with updated vehicle status that requires no driver
interaction – referred to as “auto-status.”
We also
sell our vehicle solutions using a horizontal market strategy that
focuses on providing turnkey solutions to a broad range of service fleets that
span a large number of market segments. Here, we leverage our capabilities
without the same level of customization. These solutions are sold to the general
service fleets as well as transportation and distribution fleets both on a
direct basis and through dealer channels.
Our
enterprise strategy focuses on sales to large, enterprise accounts with more
than 1,000 vehicles or routes. Here, in addition to a Trimble-hosted solution,
we can also integrate our service directly into the customer’s IT
infrastructure, giving them improved control of their information. In this
market we sell directly to end-users. Sales cycles tend to be long due to field
trials followed by an extensive decision-making process.
Approximate
prices for hardware fall in the range of $400 to $3,000, while the monthly
subscription service fees range from approximately $25 to approximately $55,
depending on the customer service level.
We have
also entered into new markets by acquisitions of @Road Inc. (@Road),
Advanced Public Safety, Inc. (APS) and Visual Statement Inc. (VS). @Road
is a global provider of solutions designed to automate the management of mobile
resources and to optimize the service delivery process for customers across a
variety of industries. APS provides mobile and handheld
software products used by law enforcement, fire rescue and other public safety
agencies. VS provides desktop software and enterprise solutions for
collision and crime incident analysis, reporting and workflow
management.
Representative
products sold in this segment include:
Fleet Productivity -
Our fleet
productivity solution offerings are comprised of the TrimWeb
™,
GeoManager
™
, and TrimView
™
mobile platforms. The
TrimWeb and GeoManager systems provides different levels of service that run
from snapshots of fleet activity to real-time fleet dispatch capability via
access to the web-based platform through a secure internet connection. The
TrimWeb and GeoManager systems include truck communication service and computer
backbone support of the service. TrimView is sold to fleets where system
integration into back office applications is required for more robust
information flow.
Consumer Packaged Goods (CPG)-
This software solution operates in the Microsoft CE/Pocket or WinMobile
PC environment and addresses the pre-sales, delivery, route sales and full
service vending functions performed by mobile workers. Customers within
the CPG market purchase a combination of both license software and handheld
PCs. The software handles all communications from/to the mobile computer
as well as from/to the host and any other ERP or decision support
systems.
Field Service
- Our
handset-based mobile solution enables technicians to maintain and repair
residential and commercial appliances, office equipment, medical equipment,
refrigeration equipment, fountain, and manufacturing equipment, and manage a
variety of service functions including wireless dispatching of service calls,
real-time messaging, spare parts management, and work order and workflow
management. Trimble Field Service customers have benefited from
increased service calls per day, an increase in first call resolution and
reduction in administrative workload to name a few results.
Public Safety –
We provide a
suite of solutions for the public safety sector including our
PocketCitation
(TM)
s
ystem
which is an electronic ticketing system enables law enforcement officers to
issue traffic citations utilizing a mobile handheld device. This system scans
the traffic offender’s driver’s license and automatically populates the
appropriate information into the citation. We provide a variation of this
solution which enables law enforcement officers to complete electronic traffic
citations within 30 seconds. Within this sector we also provide desktop software
which enables accident investigators and other public safety professionals to
reconstruct and simulate vehicle accidents.
Taskforce –
The Taskforce
®
software solution provides
scheduling and dispatch solutions for field service technicians by synchronizing
the right human and physical resources required to optimize a field service
resource network. The system manages significant numbers of dynamic
scheduling resources in an unpredictable field service environment to increase
productivity, field force utilization and control-to-field employee
ratios.
Advanced
Devices
In the
first quarter of 2006, we began reporting a new segment called Advanced Devices
that combines our previously reported Component Technologies and Portfolio
segments. This was done in recognition of the small size of each of
the businesses comprising the new segment, relative to the total
company. Advanced Devices includes the product lines from our
Component Technologies, Applanix, Trimble Outdoors, and Military and Advanced
Systems (MAS) businesses. It is helpful to recognize that with the
exception of Trimble Outdoors and Applanix these businesses share several
characteristics: they are hardware centric, generally rely on OEM
distribution, and have products that can be utilized in a number of different
end-user markets.
Within
Component Technologies, we provide GPS-based components for applications that
require embedded position or time to market such as the telecommunications and
automotive industries where we supply modules, boards, custom integrated
circuits, or single application IP licenses to the customer according to the
needs of the application. Sales are made directly to original equipment
manufacturers (OEMs) and system integrators who incorporate our component into a
sub-system or a complete system-level product. Component Technologies has
developed GPS technologies which it is making available for license. These
technologies can run on certain digital signal processors (DSP) or
microprocessors, removing the need for dedicated GPS baseband signal processor
chips. We have a cooperative licensing deal with Nokia for Trimble's
Global Navigation Satellite System (GNSS) patents related to designated wireless
products and services involving location technologies, such as GPS, assisted GPS
or Galileo. The licensing agreement is exclusive to Nokia for the wireless
consumer product and service domain and includes sublicensing rights. In return,
Trimble receives a non-exclusive license to Nokia’s location-based patents for
use in Trimble's commercial products and services.
Our
Applanix business is a leading provider of advanced products and enabling
solutions that maximize productivity through mobile mapping and positioning to
professional markets worldwide. Applanix develops, manufactures, sells and
supports high-value, precision products that combine GPS with inertial sensors
for accurate measurement of position and attitude, flight management systems,
and scalable mobile mapping solutions used in airborne, land and marine
applications. Sales are made by our direct sales force to end users, systems
integrators, and OEMs, and through regional agents. Competitors include Leica,
IGI and Novatel.
Our MAS
business supplies GPS receivers and embedded modules that use the military’s GPS
advanced capabilities. The modules are principally used in aircraft navigation
and timing applications. Military products are sold directly to either the U.S.
Government or defense contractors. Sales are also made to authorized foreign end
users. Competitors in this market include Rockwell Collins, L3, and
Raytheon.
The
Trimble Outdoors business utilizes GPS-enabled cell phones to provide
information for outdoor recreational activities. Some of the recreational
activities include hiking, biking, backpacking, boating, and water sports.
Consumers purchase the Trimble Outdoors product through our wireless operator
partners which include Sprint-Nextel, SouthernLINC Wireless and Boost
Mobile.
Representative
products sold by this segment include:
Copernicus
GPS Receiver
–The
Copernicus
®
Receiver
is a full-function GPS receiver in a
surface mount package the size of a postage stamp.
TrimTrac Locator
- Our
TrimTrac
®
product is a
complete end user device that combines GPS functionality with global system for
mobile communications (GSM) wireless communications. In 2006, we added to the
TrimTrac locator full quad-band GSM and general packet radio service (GPRS)
support along with several important application level features. The
device is suitable for high volume personal vehicle and commercial asset
management applications that demand a low-cost locator.
Applanix POS/AV
System
- An integrated
GPS/inertial system for airborne surveying that measures aircraft position to an
accuracy of a few centimeters and aircraft attitude (angular orientation) to an
accuracy of 30 arc seconds or better. This system is typically interfaced to
large format cameras and scanning lasers for producing geo-referenced
topographic maps of the terrain.
Applanix DSS Digital Sensor System -
A digital airborne imaging solution that produces high-resolution
orthophoto map products. Certified by the USGS, the system consists
of a mapping grade digital camera that is tightly integrated with a
GNSS/Inertial system, flight management system (FMS) and processing software for
automatic geo-referencing of each pixel. The DSS can be used stand-alone or
integrated with other airborne mapping sensors such as LiDAR. The DSS
has been used by organizations worldwide in a variety of markets segments that
include ortho mapping, utility and transportation corridor mapping and rapid
response applications.
Force 524D Module
- A dual
frequency, embedded GPS module that is used in a variety of military airborne
applications.
Trimble Outdoors Service -
Trip planning and navigation software that works with GPS-enabled cell
phones and conventional GPS receivers. This software enables consumers to
research specific trips on-line as part of trip pre-planning. In addition, users
are able to share outdoor and off-road experiences on-line with their friends
and family.
Acquisitions
and Joint Ventures
Our
growth strategy is centered on developing and marketing innovative and complete
value-added solutions to our existing customers, while also marketing them to
new customers and geographic regions. In some cases, this has led to partnering
with or acquiring companies that bring technologies, products or distribution
capabilities that will allow us to establish a market beach head, penetrate a
market more effectively, or develop solutions more quickly than if we had done
so solely through internal development. Since 1999, this has led us to form
three joint ventures and acquire twenty seven companies through fiscal
2007. Most of these acquisitions have been small, both in dollar
terms and in number of people added to the Trimble employee base. No
assurance can be given that our previous or future acquisitions will be
successful or will not materially adversely affect our financial condition or
operating results. We acquired the following companies or assets in
the last twelve months:
HHK
On
December 19, 2007, we acquired privately-held HHK Datentechnik GmbH of
Braunschweig, Germany, a provider of customized office and field software
solutions for the cadastral survey market in Germany. HHK’s
performance is reported under our Engineering and Construction business
segment.
UtilityCenter
On
November 8, 2007, we acquired the UtilityCenter assets from privately-held UAI,
Inc. of Huntsville, Alabama. UAI is a leading provider of Geographic Information
System (GIS)-based workflow automation and outage management solutions for
electric and gas utilities. UtilityCenter’s performance is reported
under our Field Solutions business segment.
Ingenieurbüro
Breining GmbH
On
September 19, 2007, we acquired Ingenieurbüro Breining GmbH of Kirchheim,
Germany, a provider of customized field data collection and office software
solutions for the survey market in Germany. Ingenieurbüro Breining’s performance
is reported under our Engineering and Construction business
segment.
@Road,
Inc.
On
February 16, 2007, we acquired publicly-held @Road, Inc. of Fremont,
California. @Road, Inc. is a global provider of solutions designed to
automate the management of mobile resources and to optimize the service delivery
process for customers across a variety of industries. @Road is reported within
our Mobile Solutions business segment. It significantly increases our
presence in the mobile resource management, or MRM, market which Trimble
believes is a large and fast growing market.
INPHO
GmbH
On
February 13, 2007, we acquired INPHO GmbH of Stuttgart,
Germany. INPHO is a leader in photogrammetry and digital surface
modeling for aerial surveying, mapping and remote sensing
applications. INPHO is reported within Trimble’s Engineering and
Construction segment.
Patents,
Licenses and Intellectual Property
We hold
approximately 791 U.S. issued and enforceable patents and approximately 119
non-U.S. patents, the majority of which cover GPS technology and other
applications such as optical and laser technology.
We prefer
to own the intellectual property used in our products, either directly or
through subsidiaries. From time to time we license technology from third
parties.
There are
approximately 233 trademarks registered to Trimble and its subsidiaries
including "Trimble," "
Ag
GPS," “Spectra Precision,”
and "GeoExplorer," among others that are registered in the United States and
other countries. Additional trademarks are pending registration.
Sales
and Marketing
We tailor
the distribution channel to the needs of our products and regional markets
through a number of sales channel solutions around the world. We sell our
products worldwide primarily through dealers, distributors, and authorized
representatives, occasionally granting exclusive rights to market certain
products within specific countries. This channel is supported and supplemented
(where third party distribution is not available) by our regional sales offices
throughout the world. We also utilize distribution alliances, OEM relationships,
and joint ventures with other companies as a means to serve selected
markets.
During
fiscal 2007, sales to customers in the United States represented 50%, Europe
represented 27%, Asia Pacific represented 12%, and other regions represented 11%
of our total revenues. During fiscal 2006, sales to customers in the United
States represented 54%, Europe represented 25%, Asia Pacific represented 12%,
and other regions represented 9% of our total revenues. During fiscal 2005,
sales to customers in the United States represented 54%, Europe represented 25%,
Asia Pacific represented 11%, and other regions represented 10% of our total
revenues.
Warranty
The
warranty periods for our products are generally between 90 days and three years.
Selected military programs may require extended warranty periods up to 5.5 years
and certain Nikon products have a five-year warranty period. We support our GPS
products through a circuit board replacement program from locations in the
United Kingdom, Germany, Japan, and the United States. The repair and
calibration of our non-GPS products are available from company-owned or
authorized facilities. We reimburse dealers and distributors for all authorized
warranty repairs they perform.
While we
engage in extensive product quality programs and processes, including actively
monitoring and evaluating the quality of component suppliers, our warranty
obligation is affected by product failure rates, material usage, and service
delivery costs incurred in correcting a product failure. Should actual product
failure rates, material usage, or service delivery costs differ from the
estimates, revisions to the estimated warranty accrual and related costs may be
required.
Seasonality
of Business
*
Our
individual segment revenues may be affected by seasonal buying patterns.
Typically the second fiscal quarter has been the strongest quarter for the
Company driven by the construction buying season.
Backlog
In most
of our markets, the time between order placement and shipment is
short. Orders are generally placed by customers on an as-needed
basis. In general, customers may cancel or reschedule orders without
penalty. For these reasons, we do not believe that orders are an
accurate measure of backlog and, therefore, we believe that backlog is not a
meaningful indicator of future revenues or material to understanding our
business.
Manufacturing
Manufacturing
of many of our GPS products is subcontracted to Flextronics International
Limited. We utilize Flextronics for all of our Component Technologies products,
and for some of our Construction and Survey, Field Solutions, and handheld
products. We also utilize Flextronics for our high-end GPS products and new
product introduction services. Flextronics is responsible for substantially all
material procurement, assembly, and testing. We continue to manage product
design through pilot production for the subcontracted products, and we are
directly involved in qualifying suppliers and key components used in all our
products. Our current contract with Flextronics continues in effect until either
party gives the other ninety days written notice.
We
manufacture laser and optics-based products at our plants in Dayton, Ohio;
Danderyd, Sweden; Jena and Kaiserslautern, Germany; and Shanghai, China. Some of
these products or portions of these products are also subcontracted to third
parties for assembly.
Our
design and manufacturing sites in Dayton, Ohio; Sunnyvale, California; Danderyd,
Sweden; Jena and Kaiserslautern, Germany are registered to ISO9001:2000,
covering the design, production, distribution, and servicing of all our
products.
Research
and Development
We
believe that our competitive position is maintained through the development and
introduction of new products that incorporate improved features, better
performance, smaller size and weight, lower cost, or some combination of these
factors. We invest substantially in the development of new products. We also
make significant investment in the positioning, communication, and information
technologies that underlie our products and will likely provide competitive
advantages.
Our
research and development expenditures, net of reimbursed amounts were $131.5
million for fiscal 2007, $103.8 million for fiscal 2006, and $84.3 million for
fiscal 2005.
* We
expect to continue investing in research and development with the goal of
maintaining or improving our competitive position, as well as the goal of
entering new markets.
Employees
As of
December 28, 2007, we employed 3,606 employees, including 36% in manufacturing,
28% in engineering, 24% in sales and marketing, and 12% in general and
administrative positions. Approximately 43% of employees are in locations
outside the United States.
Our
employees are not represented by unions except for those in
Sweden. Some employees in Germany are represented by works councils.
We also employ temporary and contract personnel that are not included in the
above headcount numbers. We have not experienced work stoppages or similar labor
actions.
Available
Information
The
Company’s annual reports on Form 10-K, quarterly reports on Form 10-Q, current
reports on Form 8-K, and all amendments to those reports are available free of
charge on the Company’s web site through
www.trimble.com
/investors.html
, as
soon as reasonably practicable after such material is electronically filed with
or furnished to the Securities and Exchange Commission. Information contained on
our web site is not part of this annual report on Form 10-K.
In
addition, you may request a copy of these filings (excluding exhibits) at no
cost by writing or telephoning us at our principal executive offices at the
following address or telephone number:
Trimble
Navigation Limited
935
Stewart Drive, Sunnyvale, CA 94085
Attention:
Investor Relations Telephone: 408-481-8000
Executive
Officers
The
names, ages, and positions of the Company's executive officers as of February
21, 2008 are as follows:
|
Name
|
|
Age
|
|
Position
|
|
Steven
W. Berglund
|
|
56
|
|
President
and Chief Executive Officer
|
|
Rajat
Bahri
|
|
43
|
|
Chief
Financial Officer
|
|
Rick
Beyer
|
|
50
|
|
Vice
President
|
|
Bryn
A. Fosburgh
|
|
45
|
|
Vice
President
|
|
Mark
A. Harrington
|
|
52
|
|
Vice
President
|
|
Irwin
L. Kwatek
|
|
68
|
|
Vice
President and General Counsel
|
|
Julie
Shepard
|
|
50
|
|
Vice
President, Finance
|
|
Dennis
L. Workman
|
|
63
|
|
Vice
President and Chief Technical
Officer
|
Steven W.
Berglund
– Steven Berglund has served as president and chief executive
officer of Trimble since March 1999. Prior to joining Trimble, Mr. Berglund was
president of Spectra Precision, a group within Spectra Physics AB, and a pioneer
in the development of laser systems. He spent 14 years at Spectra Physics in a
variety of senior leadership positions. In the early 1980s, Mr.
Berglund spent a number of years at Varian Associates in Palo Alto, where he
held a variety of planning and manufacturing roles. Mr. Berglund
began his career as a process engineer at Eastman Kodak in Rochester, New York.
He attended the University of Oslo and the University of Minnesota where he
received a B.S. in chemical engineering. He later received his M.B.A.
from the University of Rochester. In December 2007, Mr. Berglund was
elected to the board of directors of Verigy Ltd. a semiconductor test equipment
manufacturer.
Rajat
Bahri
– Rajat Bahri joined Trimble as chief financial officer in January
2005. Prior to joining Trimble, Mr. Bahri served for more than 15
years in various capacities within the financial organization of several
subsidiaries of Kraft Foods, Inc. and General Foods Corporation. Most
recently, he served as the chief financial officer for Kraft Canada,
Inc. From June 2000 to June 2001 he served as chief financial officer
of Kraft Pizza Company. From 1997 to 2000, Mr. Bahri was Operations
Controller for Kraft Jacobs Suchard Europe. Mr. Bahri holds a Bachelor of
Commerce from the University of Delhi in 1985 and an M.B.A. from Duke University
in 1987. In 2005, he was elected to the board of STEC, Inc., a memory storage
manufacturer.
Rick Beyer
– Rick Beyer joined Trimble in March 2004 as president of Trimble Mobile
Solutions and in May 2006, Mr. Beyer was appointed a vice president of
Trimble. In October 2007 his role was expanded to include
responsibility for a number of Trimble’s mobile solutions business divisions.
Prior to joining Trimble, Mr. Beyer held senior executive positions within the
wireless mobile solutions industry since 1987. Part of the original senior
executive team that launched Qualcomm's OmniTRAC's mobile satellite
communication solution, Mr. Beyer also held the positions of general manager at
Rockwell Collins, on-board computing division, from 1994 to 1995; executive vice
president of Norcom Networks from 1995 to 1999; president of Husky Technologies,
now part of Itronix, from 1999 to 2000; and CEO of TracerNet, which was acquired
by Trimble, from 2002 to 2004. Mr. Beyer holds a B.A. from Olivet College and
was Chairman of the Board at the college from 2000 to 2003. He was elected
Trustee Emeritus in 2007. Rick also served as a member of the Council of Board
Chairs for the Association of Governing Boards for Colleges and Universities
from 2002 to 2005.
Bryn A.
Fosburgh
–
Bryn Fosburgh joined
Trimble in 1994 as a technical service manager for surveying, mining, and
construction. In 1997, Mr. Fosburgh was appointed director of development for
the Company’s land survey business unit where he oversaw the development of
field and office software that enabled the interoperability of Trimble survey
products. From October 1999 to July 2002, he served as division vice president
of survey and infrastructure. From 2002 to 2005, Mr. Fosburgh served as vice
president and general manager of Trimble's Geomatics and Engineering business
area, with responsibility for all the division-level activities associated with
survey, construction, and infrastructure solutions. In January 2005, he was
appointed vice president and general manager of the Engineering and Construction
Division. In October 2007 his role was expanded to include a number
of divisions, including construction and agriculture, as well as a
responsibility for a number of corporate functions and geographical
regions. Prior to Trimble, he was a civil engineer with the Wisconsin
Department of Transportation responsible for coordinating the planning, data
acquisition, and data analysis for statewide GPS surveying projects in support
of transportation improvement projects. He has also held various engineering,
research and operational positions for the U.S. Army Corps of Engineers and
Defense Mapping Agency. Mr. Fosburgh received a B.S. in geology from the
University of Wisconsin in Green Bay in 1985 and an M.S. in civil engineering
from Purdue University in 1989.
Mark A.
Harrington –
Mark Harrington joined Trimble in January 2004 as a vice
president, primarily responsible for strategy and business
development. In October 2007 his responsibilities were expanded to
include a number of divisions, including survey and mapping and geographical
information systems, as well as the responsibility for a number of corporate
functions and geographical regions. Prior to joining Trimble, Mr.
Harrington served as vice president of finance at Finisar Corporation and chief
financial officer for Cielo Communications, Inc., a photonics components
manufacturer, from February 1998 to September 2002, and Vixel Corporation, a
photonics manufacturer, from April 2003 to December 2003. His experience also
includes 11 years at Spectra-Physics where he served in a variety of roles
including vice president of finance for Spectra-Physics Lasers, Inc. and vice
president of finance for Spectra-Physics Analytical, Inc. Mr. Harrington began
his career at Varian Associates, Inc. where he held a variety of management and
individual positions in finance, operations and IT. Mr. Harrington received his
B.S. in Business Administration from the University of
Nebraska-Lincoln.
Irwin L.
Kwatek
–
Irwin Kwatek has served as vice president and general counsel of Trimble since
November 2000. Prior to joining Trimble, Mr. Kwatek was vice
president and general counsel of Tickets.com, a ticketing service provider, from
May 1999 to November 2000. Prior to Tickets.com, he was engaged in
the private practice of law for more than six years. During his
career, he has served as vice president and general counsel to several publicly
held high-tech companies including Emulex Corporation, Western Digital
Corporation and General Automation, Inc. Mr. Kwatek received his
B.B.A. from Adelphi College in Garden City, New York and an M.B.A. from the
University of Michigan in Ann Arbor. He received his J.D. from Fordham
University in New York City in 1968.
Julie
Shepard
–
Julie Shepard joined Trimble in December of 2006 as vice president of
finance, and was appointed principal accounting officer in May 2007. Ms.
Shepard brings with her over 20 years of experience in a broad range of finance
roles. She is responsible for Trimble's worldwide finance operations
including financial planning, accounting, and external
reporting. Prior to joining Trimble, Ms. Shepard served as vice
president of finance and corporate controller at Quantum Corporation, from 2005
to 2006, and prior to that, from 2004 to 2005, as an independent consultant to
Quantum Corporation. She was vice president of finance at Nishan
Systems from 2000 to 2003. Ms. Shepard began her career at Price
Waterhouse and is a Certified Public Accountant. She received a B.S from
California State University where she majored in Accounting.
Dennis L. Workman
–
Dennis
Workman has served as vice president of various business divisions, currently
including advanced devices and Applanix since September 1999. He was
appointed Trimble’s chief technical officer in March 2006. From
1998 to 1999, Mr. Workman was senior director and chief technical officer of the
newly formed Mobile and Timing Technologies business group, also serving as
general manager of Trimble's Automotive and Timing group. In 1997, he
was director of engineering for Software & Component Technologies. Mr.
Workman joined Trimble in 1995 as director of the newly created Timing vertical
market. Prior to Trimble, Mr. Workman held various senior-level
technical positions at Datum Inc. During his nine year tenure at Datum, he held
the position of CTO. Mr. Workman received a B.S. in mathematics and
physics from St. Mary’s College in 1967 and an M.S. in electrical engineering
from the Massachusetts Institute of Technology in 1969.
RISKS AND
UNCERTAINTIES
You
should carefully consider the following risk factors, in addition to the other
information contained in this Form 10-K and in any other documents to which we
refer you in this Form 10-K, before purchasing our securities. The risks and
uncertainties described below are not the only ones we face.
Our
Inability to Accurately Predict Orders and Shipments May Subject Our Results of
Operations to Significant Fluctuations From Quarter to Quarter
We have
not been able in the past to consistently predict when our customers will place
orders and request shipments so that we cannot always accurately plan our
manufacturing requirements. As a result, if orders and shipments differ from
what we predict, we may incur additional expenses and build excess inventory,
which may require additional reserves and allowances. Accordingly, we have
limited visibility into future changes in demand and our results of operations
may be subject to significant fluctuations from quarter to
quarter.
Our
Operating Results in Each Quarter May Be Affected by Special Conditions, such as
Seasonality, Late Quarter Purchases, Weather, and Other Potential
Issues
Due in
part to the buying patterns of our customers, a significant portion of our
quarterly revenues occurs from orders received and immediately shipped to
customers in the last few weeks and days of each quarter, although our operating
expenses tend to remain fairly predictable. Engineering and construction
purchases tend to occur in early spring, and governmental agencies tend to
utilize funds available at the end of the government’s fiscal year for
additional purchases at the end of our third fiscal quarter in September of each
year. Concentrations of orders sometimes also occur at the end of our other two
fiscal quarters. Additionally, a majority of our sales force earns commissions
on a quarterly basis which may cause concentrations of orders at the end of any
fiscal quarter. It could harm our operating results if for any reason expected
sales are deferred, orders are not received, or shipments are delayed a few days
at the end of a quarter.
We
Are Dependent on a Specific Manufacturer and Assembler for Many of Our Products
and on Specific Suppliers of Critical Parts for Our Products
We are
substantially dependent upon Flextronics International Limited as our preferred
manufacturing partner for many of our GPS products. Under the agreement, we
provide to Flextronics a twelve-month product forecast and place purchase orders
with Flextronics at least thirty calendar days in advance of the scheduled
delivery of products to our customers depending on production lead time.
Although purchase orders placed with Flextronics are cancelable, the terms of
the agreement would require us to purchase from Flextronics all inventory not
returnable or usable by other Flextronics customers. Accordingly, if we
inaccurately forecast demand for our products, we may be unable to obtain
adequate manufacturing capacity from Flextronics to meet customers’ delivery
requirements or we may accumulate excess inventories, if such inventories are
not usable by other Flextronics customers. Our current contract with Flextronics
continues in effect until either party gives the other ninety days written
notice
.
In
addition, we rely on specific suppliers for a number of our critical components.
We have experienced shortages of components in the past. Our current reliance on
specific or a limited group of suppliers involves several risks, including a
potential inability to obtain an adequate supply of required components and
reduced control over pricing. Any inability to obtain adequate deliveries or any
other circumstance that would require us to seek alternative sources of supply
or to manufacture such components internally could significantly delay our
ability to ship our products, which could damage relationships with current and
prospective customers and could harm our reputation and brand as well as our
operating results.
Our
Annual and Quarterly Performance May Fluctuate Which Could Negatively Impact Our
Operations and Our Stock Price
Our
operating results have fluctuated and can be expected to continue to fluctuate
in the future on a quarterly and annual basis as a result of a number of
factors, many of which are beyond our control. Results in any period could be
affected by:
|
·
|
changes
in market demand,
|
|
·
|
competitive
market conditions,
|
|
·
|
fluctuations
in foreign currency exchange rates,
|
|
·
|
the
cost and availability of
components,
|
|
·
|
the
mix of our customer base and sales
channels,
|
|
·
|
the
mix of products sold,
|
|
·
|
our
ability to expand our sales and marketing organization
effectively,
|
|
·
|
our
ability to attract and retain key technical and managerial employees,
and
|
|
·
|
general
global economic conditions.
|
In
addition, demand for our products in any quarter or year may vary due to the
seasonal buying patterns of our customers in the agricultural and engineering
and construction industries. The price of our common stock could decline
substantially in the event such fluctuations result in our financial performance
being below the expectations of public market analysts and investors, which are
based primarily on historical models that are not necessarily accurate
representations of the future.
Our
Gross Margin Is Subject to Fluctuation
Our gross
margin is affected by a number of factors, including product mix, product
pricing, cost of components, foreign currency exchange rates, and manufacturing
costs. For example, sales of Nikon-branded products generally have lower gross
margin as compared to our GPS survey products. Absent other factors, a shift in
sales towards Nikon-branded products would lead to a reduction in our overall
gross margin. A decline in gross margin could harm our results of operations and
financial condition.
We
Are Dependent on New Products and if we are Unable to Successfully Introduce
Them Into The Market Our Customer Base May Decline or Fail to Grow as
Anticipated
Our
future revenue stream depends to a large degree on our ability to bring new
products to market on a timely basis. We must continue to make significant
investments in research and development in order to continue to develop new
products, enhance existing products, and achieve market acceptance of such
products. We may incur problems in the future in innovating and introducing new
products. Our development stage products may not be successfully completed or,
if developed, may not achieve significant customer acceptance. If we were unable
to successfully define, develop and introduce competitive new products, and
enhance existing products, our future results of operations would be adversely
affected. Development and manufacturing schedules for technology products are
difficult to predict, and we might not achieve timely initial customer shipments
of new products. The timely availability of these products in volume and their
acceptance by customers are important to our future success. If we are unable to
introduce new products, if other companies develop similar technology products,
or if we do not develop compelling new products, the number of customers may not
grow as anticipated, or may decline, which could harm our operating
results.
We
Are Dependent on Proprietary Technology, which Could Result in Litigation that
Could Divert Significant Valuable Resources and Impair Our
Liquidity
Our
future success and competitive position is dependent upon our proprietary
technology, and we rely on patent, trade secret, trademark, and copyright law to
protect our intellectual property. The patents owned or licensed by us may be
invalidated, circumvented, and challenged. The rights granted under these
patents may not provide competitive advantages to us. Any of our pending or
future patent applications may not be issued within the scope of the claims
sought by us, if at all.
Others
may develop technologies that are similar or superior to our technology,
duplicate our technology or design around the patents owned by us. In addition,
effective copyright, patent, and trade secret protection may be unavailable,
limited or not applied for in certain countries. The steps taken by us to
protect our technology might not prevent the misappropriation of such
technology.
The value
of our products relies substantially on our technical innovation in fields in
which there are many current patent filings. We recognize that as new patents
are issued or are brought to our attention by the holders of such patents, it
may be necessary for us to withdraw products from the market, take a license
from such patent holders, or redesign our products. We do not believe any of our
products currently infringe patents or other proprietary rights of third
parties, but we cannot be certain they do not do so. In addition, the legal
costs and engineering time required to safeguard intellectual property or to
defend against litigation could become a significant expense of operations. Any
such litigation could require us to incur substantial costs and divert
significant valuable resources, including the efforts of our technical and
management personnel, which may impair our liquidity.
Investing
in and Integrating New Acquisitions Could be Costly and May Place a Significant
Strain on Our Management Systems and Resources
We have
recently acquired a number of companies, including @Road, and intend to continue
to acquire other companies. Acquisitions of companies entail numerous risks,
including:
|
·
|
potential
inability to successfully integrate acquired operations and products or to
realize cost savings or other anticipated benefits from
integration;
|
|
·
|
loss
of key employees of acquired
operations;
|
|
·
|
the
difficulty of assimilating geographically dispersed operations and
personnel of the acquired
companies;
|
|
·
|
the
potential disruption of our ongoing
business;
|
|
·
|
unanticipated
expenses related to acquisitions;
|
|
·
|
the
correct assessment of the relative percentages of in-process research and
development expense that can be immediately written off as compared to the
amount which must be amortized over the appropriate life of the
asset;
|
|
·
|
the
impairment of relationships with employees and customers of either an
acquired company or our own business;
and
|
|
·
|
the
potential unknown liabilities associated with acquired
business.
|
As a
result of such acquisitions, we have significant assets that include goodwill
and other purchased intangibles. The testing of these intangibles under
established accounting guidelines for impairment requires significant use of
judgment and assumptions. Changes in business conditions could require
adjustments to the valuation of these assets. In addition, losses incurred by a
company in which we have an investment may have a direct impact on our financial
statements or could result in our having to write-down the value of such
investment. Any such problems in integration or adjustments to the value of the
assets acquired could harm our growth strategy, and could be costly and place a
significant strain on our management systems and resources.
Our
Products May Contain Errors or Defects, which Could Result in Damage to Our
Reputation, Lost Revenues, Diverted Development Resources and Increased Service
Costs, Warranty Claims, and Litigation
We
warrant that our products will be free of defect for various periods of time,
depending on the product. In addition, certain of our contracts include epidemic
failure clauses. If invoked, these clauses may entitle the customer to return or
obtain credits for products and inventory, or to cancel outstanding purchase
orders even if the products themselves are not defective.
We must
develop our products quickly to keep pace with the rapidly changing market, and
we have a history of frequently introducing new products. Products and services
as sophisticated as ours could contain undetected errors or defects, especially
when first introduced or when new models or versions are released. In general,
our products may not be free from errors or defects after commercial shipments
have begun, which could result in damage to our reputation, lost revenues,
diverted development resources, increased customer service and support costs and
warranty claims and litigation.
We
Are Dependent on the Availability of Allocated Bands within the Radio Frequency
Spectrum
Our GNSS
technology is dependent on the use of satellite signals from space and on
terrestrial communication bands. International allocations of radio
frequency are made by the International Telecommunications Union (ITU), a
specialized technical agency of the United Nations. These allocations are
further governed by radio regulations that have treaty status and which may be
subject to modification every two to three years by the World Radio
Communication Conference. Each country also has regulatory authority
on how each band is used.
Any ITU
or local reallocation of radio frequency bands, including frequency band
segmentation or sharing of spectrum, may materially and adversely affect the
utility and reliability of our products. Many of our products use other radio
frequency bands, together with the GNSS signal, to provide enhanced GNSS
capabilities, such as real-time kinematic precision. The continuing availability
of these non-GNSS radio frequencies is essential to provide enhanced GNSS
products to our precision survey, agriculture and construction machine controls
markets. Any regulatory changes in spectrum allocation or in allowable operating
conditions could have a material adverse effect on our business, results of
operations, and financial condition.
We have
certain products, such as GPS RTK systems, and surveying and mapping systems
that use integrated radio communication technology requiring access to available
radio frequencies allocated to local government. Some bands are
experiencing congestion. In the US, the FCC announced that it will require
migration of radio technology from wideband to narrowband operations in these
bands. The rules require migration of users to narrowband channels by 2011. In
the meantime, congestion could cause FCC coordinators to restrict or refuse
licenses. An inability to obtain access to these radio frequencies by end users
could have a material adverse effect on our business, results of operations, and
financial condition.
Many
of Our Products Rely on GNSS technology, the GPS, and other Satellite Systems,
Which May Become Inoperable and Result in Lost Revenue
GNSS
technology, GPS satellites and their ground support systems are complex
electronic systems subject to electronic and mechanical failures and possible
sabotage. The GPS satellites currently in orbit were originally designed to have
lives of 7.5 years and are subject to damage by the hostile space environment in
which they operate. However, of the current deployment of 30 satellites in
place, some have already been in operation for more than 12 years. To repair
damaged or malfunctioning satellites is currently not economically feasible. If
a significant number of satellites were to become inoperable, there could be a
substantial delay before they are replaced with new satellites. A reduction in
the number of operating satellites may impair the current utility of the GPS
system and the growth of current and additional market
opportunities.
As the
only complete GNSS currently in operation, we are dependent on continued
operation of GPS. GPS is operated by the U. S. Government, which is
committed to maintenance and improvement of GPS; however if the policy were to
change, and GPS were no longer supported by the U. S. Government, or if user
fees were imposed, it could have a material adverse effect on our business,
results of operations, and financial condition.
Many of
our products also use signals from systems that augment GPS, such as the Wide
Area Augmentation System (WAAS) and National Differential GPS System (NDGPS).
Many of these augmentation systems are operated by the federal government and
rely on continued funding and maintenance of these systems. In addition, some of
our products also use satellite signals from the Russian Glonass System. Any
curtailment of the operating capability of these systems could result in
decreased user capability thereby impacting our markets.
The
European governments have begun development of an independent satellite
navigation system, known as Galileo. We have access to the preliminary signal
design, which is subject to change. Although an operational Galileo system is
several years away, if we are unable to develop a timely commercial product, it
could result in lost revenue which could harm our results of operations and
financial condition.
Our
Business is Subject to Disruptions and Uncertainties Caused by War or
Terrorism
Acts of
war or acts of terrorism, especially any directed at the GPS signals, could have
a material adverse impact on our business, operating results, and financial
condition. The threat of terrorism and war and heightened security and military
response to this threat, or any future acts of terrorism, may invoke a
redeployment of the satellites used in GPS or interruptions of the system. To
the extent that such interruptions result in delays or cancellations of orders,
or the manufacture or shipment of our products, it could have a material adverse
effect on our business, results of operations, and financial
condition.
We
Are Exposed to Fluctuations in Currency Exchange Rates and Although We Hedge
Against These Risks, Our Attempts to Hedge Could be Unsuccessful and Expose Us
to Losses
A
significant portion of our business is conducted outside the U.S., and as such,
we face exposure to movements in non-U.S. currency exchange rates. These
exposures may change over time as business practices evolve and could have a
material adverse impact on our financial results and cash flows. Fluctuation in
currency impacts our operating results.
Currently,
we hedge only those currency exposures associated with certain assets and
liabilities denominated in non-functional currencies. The hedging activities
undertaken by us are intended to offset the impact of currency fluctuations on
certain non-functional currency assets and liabilities. Our attempts to hedge
against these risks could be unsuccessful and expose us to losses.
Our
Debt Could Adversely Affect Our Cash Flow and Prevent Us from Fulfilling Our
Financial Obligations
On
February 16, 2007, we amended and restated our existing $200 million unsecured
revolving credit agreement to an aggregate availability of up to $300 million.
Our debt could have important consequences, such as:
|
·
|
requiring
us to dedicate a portion of our cash flow from operations and other
capital resources to debt service, thereby reducing our ability to fund
working capital, capital expenditures, and other cash
requirements;
|
|
·
|
increasing
our vulnerability to adverse economic and industry
conditions;
|
|
·
|
limiting
our flexibility in planning for, or reacting to, changes and opportunities
in, our industry, which may place us at a competitive disadvantage;
and
|
|
·
|
limiting
our ability to incur additional debt on acceptable terms, if at
all.
|
Additionally,
if we were to default under our amended credit agreement and were unable to
obtain a waiver for such a default, interest on the obligations would
accrue at an increased rate and the lenders could accelerate our
obligations under the amended credit agreement, however that acceleration
will be automatic in the case of bankruptcy and insolvency events of
default. Additionally, our subsidiaries that have guaranteed the amended
credit agreement could be required to pay the full amount of our
obligations under the amended credit agreement. Any such action on
the part of the lenders against us could harm our financial
condition.
We
May Not Be Able to Enter Into or Maintain Important Alliances
We
believe that in certain business opportunities our success will depend on our
ability to form and maintain alliances with industry participants, such as
Caterpillar, Nikon, and CNH Global. Our failure to form and maintain such
alliances, or the pre-emption of such alliances by actions of competitors or us,
will adversely affect our ability to penetrate emerging markets. If we
experience problems from current or future alliances it could harm our operating
results and we may not be able to realize value from any such strategic
alliances.
We
Face Competition in Our Markets Which Could Decrease Our Revenues and Growth
Rates or Impair Our Operating Results and Financial Condition
Our
markets are highly competitive and we expect that both direct and indirect
competition will increase in the future. Our overall competitive position
depends on a number of factors including the price, quality and performance of
our products, the level of customer service, the development of new technology
and our ability to participate in emerging markets. Within each of our markets,
we encounter direct competition from other GPS, optical and laser suppliers and
competition may intensify from various larger U.S. and non-U.S. competitors and
new market entrants, particularly from emerging markets such as China and India.
The competition in the future may, in some cases, result in price reductions,
reduced margins or loss of market share, any of which could decrease our
revenues and growth rates or impair our operating results and financial
condition. We believe that our ability to compete successfully in the future
against existing and additional competitors will depend largely on our ability
to execute our strategy to provide systems and products with significantly
differentiated features compared to currently available products. We may not be
able to implement this strategy successfully, and our products may not be
competitive with other technologies or products that may be developed by our
competitors, many of whom have significantly greater financial, technical,
manufacturing, marketing, sales and other resources than we do.
We
Are Subject to the Impact of Governmental and Other Similar Certifications and
Failure to Obtain the Requisite Certifications Could Harm Our Operating
Results
We market
certain products that are subject to governmental and similar certifications
before they can be sold. For example, CE certification for radiated emissions is
required for most GPS receiver and data communications products sold in the
European Union. An inability to obtain such certifications in a timely manner
could have an adverse effect on our operating results. Also, some of our
products that use integrated radio communication technology require product type
certification and some products require an end user to obtain licensing from the
FCC for frequency-band usage. These are secondary licenses that are subject to
certain restrictions. An inability or delay in obtaining such certifications or
changes to the rules by the FCC could adversely affect our ability to bring our
products to market which could harm our customer relationships and therefore,
our operating results. Any failure to obtain the requisite certifications could
also harm our operating results.
The
Volatility of Our Stock Price Could Adversely Affect Your Investment in Our
Common Stock
The
market price of our common stock has been, and may continue to be, highly
volatile. During fiscal 2007, our stock price ranged from $25.47 to $57.41, on a
post-split basis. We believe that a variety of factors could cause
the price of our common stock to fluctuate, perhaps substantially,
including:
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announcements
and rumors of developments related to our business or the industry in
which we compete;
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quarterly
fluctuations in our actual or anticipated operating results and order
levels;
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general
conditions in the worldwide
economy;
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acquisition
announcements;
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new
products or product enhancements by us or our competitors;
and
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developments
in patents or other intellectual property rights and
litigation;
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developments
in our relationships with our customers and suppliers;
and
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any
significant acts of terrorism against the United
States.
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In
addition, in recent years the stock market in general and the markets for shares
of "high-tech" companies in particular, have experienced extreme price
fluctuations which have often been unrelated to the operating performance of
affected companies. Any such fluctuations in the future could adversely affect
the market price of our common stock, and the market price of our common stock
may decline.
Provisions
in Our Charter Documents and Under California Law Could Prevent or Delay a
Change of Control, which Could Reduce the Market Price of Our Common
Stock
Certain
provisions of our articles of incorporation, as amended and restated, our
bylaws, as amended and restated, and the California General Corporation Law may
be deemed to have an anti-takeover effect and could discourage a third party
from acquiring, or make it more difficult for a third party to acquire, control
of us without approval of our board of directors. These provisions could also
limit the price that certain investors might be willing to pay in the future for
shares of our common stock. Certain provisions allow the board of directors to
authorize the issuance of preferred stock with rights superior to those of the
common stock.
We have
adopted a Preferred Shares Rights Agreement, commonly known as a "poison pill."
The provisions described above, our poison pill and provisions of the California
General Corporation Law may discourage, delay or prevent a third party from
acquiring us.