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, or
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.
Some of 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 17
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, our 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, or GNSS, technology to terrestrial
applications. The GNSS includes the network of 24 orbiting U.S.
Global Positioning System, or GPS, radio navigation satellites and associated
ground control that is funded and maintained by the U.S. Government and is
available worldwide free of direct user fees, and the Russian GLONASS radio
navigation satellite system. Both the European Community and China have
announced plans to establish future operational radio navigation satellite
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, 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 some of our systems, as well as offer 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 are used as highly accurate laser references from
which a position can be established. The key elements of these
products are typically a laser, which is generally a commercially available
laser diode, and a complex mechanical assembly. These elements are
augmented by software algorithms to provide measurements and
application-specific solutions.
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.
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 and Nikon, as well
as 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, Inc. 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 S8 Total Station
– Our
S8 Total Station is our most advanced optical instrument designed to deliver
unsurpassed performance for both typical surveying and specialized engineering
applications such as monitoring and tunneling. It features Trimble FineLock™
technology, a smart tracker sensor with a narrow field of view that enables the
Trimble S8 to detect a target without interference from surrounding prisms. Our
S8 combined with our 4D Control software creates a powerful solution for
real-time and post-processed monitoring of permanent structures such as dams,
short-term construction activities, and side slopes in mines.
Trimble
I.S. Rover
– Our I.S. Rover
combines GNSS and optical data collection on a rover pole, enabling surveyors to
harness the unique strengths of both technologies. With it, surveyors can
increase flexibility and save time by seamlessly switching between technologies
to adapt to local jobsite conditions as well as independently verify
measurements for quality control. Our I.S. Rover is a unique patented
Trimble solution that offers land surveyors increased efficiency, flexibility
and versatility.
Trimble
R8
GNSS
System
– Our R8 GNSS System
is a multi-channel, multi-frequency, Global Navigation Satellite System (GNSS)
receiver, antenna, and data-link radio combined in one compact unit. It features
Trimble R-Track™ technology, powered by the most advanced RTK engine in the
industry, supporting all GPS signals, including GPS Modernization (L2C signal
and L5 signals) as well as GLONASS. Our R8 GNSS combines advanced receiver
technology and a proven system design to provide maximum accuracy and
productivity for a variety of surveying applications.
Trimble VX Spatial Station
–
Our Trimble VX
™
Spatial
Station is an advanced spatial imaging 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. It
enables users to blend extremely accurate ground-based information with airborne
data to provide comprehensive datasets for use in the geospatial information
industry. An entry-level model of our VX Spatial Station offers integrated
imaging and surveying functionality only, with a scalable upgrade to 3D
scanning.
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. Our
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 family 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
device. 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. Our
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.
GeoSpatial Solutions –
Our
GeoSpatial Solutions family enables mobile mapping companies to capture
georeferenced data, extract features and attributes, and analyze conditions and
change, thereby generating information to better manage assets and
operations. Aerial LIDAR / Imaging Systems and vehicle-based asset
inventory systems, combined with powerful photogrammetry software, generate high
accuracy as-built drawings for the transportation, and utilities and energy
transmission and distribution industries.
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 also provide solutions to automate applications of
pesticide and seeding.
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.
Our
Utilities Field Solutions product line is focused on integrated field and back
office software solutions for managing utility mobile workers and their field
work activities, including asset maintenance, GIS mapping, outage response, and
automated vehicle locating (AVL). Our software is typically installed on a
server and on mobile computers that are used by utility field workers for
conducting routine and emergency work, locating and mapping infrastructure, and
performing utility asset maintenance, inspection, and field service.
Through the use of GIS and location-based technologies combined with
mobile and wireless communications, our products connect utility field workers
to the office. Typically our products automate existing manual and paper
based processes and are implemented to meet utility regulatory requirements,
improve efficiency and reduce costs, and improve customer service and
response.
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.
Sales and
distribution of both our Fieldport® and UtilityCenter® software solutions are
direct to the customer. Installation of both solutions generally
involves a degree of integration and professional services. Primary
markets include government and commercial electric, gas, water and wastewater
utilities. Competitors are typically utility industry GIS software and
service companies.
Approximate
product price points in this segment range from $1,000 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
– Our
Ag
GPS EZ-Guide 500 is 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
–
Our
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 our
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
– Our GPS-enabled,
agricultural navigation system 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
– Our value added
assisted steering system, when combined with our 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.
Juno
Series
– Our Juno family
includes compact and cost-effective GPS handhelds designed to equip an entire
workforce for data collection and fieldwork. The handhelds have a
high-sensitivity GPS receiver, Bluetooth and Wireless LAN technology, a built-in
3 Megapixel digital camera, a MicroSD/SDHC storage slot and an optional 3.5G
broadband cellular modem for wireless data communications.
GeoExplorer
2008
Series
– Our GeoExplorer
family combines a GPS receiver in a rugged handheld unit running industry
standard Microsoft Windows Mobile version 6.0, making it easy to collect and
maintain data about objects in the field. The GeoExplorer
®
series features three models
ranging in accuracy from a decimeter to 1-3 meters, thereby allowing the user to
select the system most appropriate for their data collection and maintenance
needs.
Fieldport Software –
Our
Fieldport Software focuses on automating field service processes, operational
efficiency and profitability for water and wastewater utility customers.
UtilityCenter Software
–
Our UtilityCenter
Software is a GIS-based 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 Editing.
Mobile
Solutions
Our
Mobile Solutions segment provides 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
Construction Supply, Direct Store Delivery and Public Safety. For example,
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 per
month per unit, depending on the customer service level.
We have
also entered into new markets by acquisitions of @Road, Inc. (@Road) in
2007, and Eleven Technology, Inc., Advanced Public Safety, Inc. (APS) and Visual
Statement, Inc. (VS) in 2006. @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 under the
GeoManager™ and Taskforce® brand names. Eleven Technology is a mobile
application software company with market and technology position in the Consumer
Packaged Goods (CPG) industry. 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 provide 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
™
system,
which is an electronic ticketing system that 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
Advanced
Devices includes the product lines from our Component Technologies, Applanix,
Trimble Outdoors, and Military and Advanced Systems (MAS) businesses. With the
exception of Trimble Outdoors and Applanix these businesses share several common
characteristics: they are hardware centric, generally market to
original equipment manufacturers (OEM), system integrators or service providers,
and have products that can be utilized in a number of different end-user markets
and applications. The various operations that comprise this segment were
aggregated on the basis that no single operation accounted for more than 10% of
our total revenue, operating income or assets.
Within
Component Technologies, we supply GPS modules, licensing and complementary
technologies, and GPS-integrated sub-system solutions for applications requiring
precise position, time or frequency. Component Technologies serves a
broad range of vertical markets including telecommunications automotive
electronics, and commercial electronics. Sales are made directly to
OEMs
,
system integrators,
value-added resellers and service providers who incorporate our components into
a complete system-level solution.
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
our 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. We
also have a licensing agreement with Marvell Semiconductors for our full GPS
Digital Signal Processor software as well as tools for development support and
testing. Access to our GPS technology complements Marvell's wireless and
application processor initiatives for WiFi, Bluetooth, FM, multi-function radio,
application processors and cellular processor devices.
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.
Our
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.
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.
Representative
products sold by this segment include:
GPS Receiver Modules
– The
Lassen®, Copernicus® , Condor
TM
and
Panda
TM
families of GPS modules are full-function GPS modules in a variety of form
factors, some smaller than your fingertip.
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.
TM3000
Asset Tracking Device –
Our TM3000
product
is a flexible, open platform that enables a broad range of applications such as:
fleet management, mobile asset tracking and recovery and driver monitoring and
assistance. This device integrates wireless communications, a
positioning function and an application engine in a package designed to improve
the profits for service-focused businesses.
Thunderbolt GPS Disciplined Clock
– Our Thunderbolt® clock is a fifth-generation product from our GPS
Timing and Synchronization division, which outputs precision time and
frequency. It also serves as the architectural basis for GPS
disciplined clocks sold to manufacturers of CDMA and WiMax
infrastructure.
Applanix POS/AV
System
– Our integrated
GPS/inertial system for airborne surveying 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
– Our digital airborne imaging solution 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. Our DSS can be used
stand-alone or integrated with other airborne mapping sensors. Our DSS has been
used by organizations worldwide in a variety of market segments that include
ortho mapping, utility and transportation corridor mapping and rapid response
applications.
Force 524D Module
– This dual frequency,
embedded GPS module is used in a variety of military airborne
applications.
Trimble Outdoors Service
– Our trip planning and
navigation software 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 four
joint ventures and acquire thirty seven companies through the end of fiscal
2008. 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. The following companies and joint ventures were
acquired or formed during fiscal 2008 and are combined in the results of
operations since the date of acquisition or formation:
Rawson
Control Systems
On
December 3, 2008, we acquired the assets of privately-held Rawson Control
Systems based in Oelwein, Iowa. Rawson manufactures hydraulic and electronic
controls for the agriculture equipment industry, including variable rate planter
drives and controllers, variable rate fertilizer controllers, mechanical remote
electric control valves and speed reducers. Rawson Control Systems’
performance is reported under our Field Solutions business segment
.
FastMap
and GeoSite
On
November 28, 2008, we acquired the FastMap and GeoSite software assets from
Korec, a privately-held Trimble distributor serving the United Kingdom and
Ireland. FastMap and GeoSite performance is reported under our Engineering and
Construction and Field Solutions business segments, respectively.
Callidus
Precision Systems
On
November 28, 2008, we acquired the assets of privately-held Callidus Precision
Systems GmbH of Halle, Germany. Callidus is a provider of 3D laser scanning
solutions for the industrial market. Callidus performance is reported under our
Engineering and Construction business segment.
Toposys
On
November 13, 2008, we acquired TopoSys GmbH of Biberach an der Riss, Germany.
TopoSys is a leading provider of aerial data collection systems comprised of
LiDAR and metric cameras. TopoSys’s performance is reported under our
Engineering and Construction business segment.
TruCount
On
October 30, 2008, we acquired the assets of privately-held TruCount, Inc., of
Ames, Iowa. TruCount is a leading manufacturer of air and electric clutches that
automate individual planter row shut-off. TruCount’s performance is reported
under our Field Solutions business segment.
RolleiMetric
On
October 20, 2008, we acquired the assets of RolleiMetric from Rollei GmbH of
Braunschweig, Germany. RolleiMetric is a leading provider of metric camera
systems for aerial imaging and terrestrial close range photogrammetry.
RolleiMetric is reported within our Engineering and Construction business
segment.
VirtualSite
Solutions
On
October 3, 2008, VirtualSite Solutions (VSS), a joint venture formed by
Caterpillar and us began operations. We contributed $7.8 million in
exchange for a 65% ownership and Caterpillar contributed $4.2 million for a 35%
ownership in VSS. VSS develops software for fleet management and
connected worksite solutions for both Caterpillar and us, and in turn, sells
software subscription services to Caterpillar and us, which we both sell through
our respective distribution channels. For financial reporting purposes,
VSS’s assets and liabilities are consolidated with ours, as are its results of
operations, which are reported under our Engineering and Construction
segment. Caterpillar’s 35% interest is included in our Consolidated
Financial Statements as minority interests in consolidated
subsidiaries.
SECO
On July
29, 2008, we acquired privately-held SECO Manufacturing Company of Redding,
California. SECO is a leading manufacturer of accessories for the geomatics,
surveying, mapping, and construction industries. SECO’s performance
is reported under our Engineering and Construction business
segment.
Géo-3D
On
January 22, 2008, we acquired privately-held Géo-3D Inc. of Montreal,
Canada. Géo-3D is a leader in roadside infrastructure asset
inventory solutions. Géo-3D’s performance is reported under our
Engineering and Construction business segment.
Crain
Enterprises
On
January 8, 2008, we acquired privately-held Crain Enterprises, Inc. of Mound
City, Illinois. Crain is a leading manufacturer of accessories for the
geomatics, surveying, mapping, and construction industries. Crain
Enterprises is reported under our Engineering and Construction business
segment.
Patents,
Licenses and Intellectual Property
We hold
approximately 720 U.S. issued and enforceable patents and approximately 121
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 236 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 2008, sales to customers in the United States represented 49%, Europe
represented 25%, Asia Pacific represented 14%, and other regions represented 12%
of our total revenue. 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 revenue. 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
revenue.
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 revenue 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 revenue 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 Mobile
Solutions 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; and 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 $148.3
million for fiscal 2008, $131.5 million for fiscal 2007, and $103.8 million for
fiscal 2006.
* 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
January 2, 2009, we employed 3,940 employees, including 24% in manufacturing,
29% in engineering, 35% 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, 2009 are as follows:
|
Name
|
Age
|
Position
|
|
Steven
W. Berglund
|
57
|
President
and Chief Executive Officer
|
|
Rajat
Bahri
|
44
|
Chief
Financial Officer
|
|
Rick
Beyer
|
51
|
Vice
President
|
|
Bryn
A. Fosburgh
|
46
|
Vice
President
|
|
Mark
A. Harrington
|
53
|
Vice
President
|
|
Jürgen Kliem
|
51
|
Vice
President
|
|
James
A. Kirkland
|
49
|
Vice
President and General Counsel
|
|
Julie
Shepard
|
51
|
Vice
President, Finance
|
|
Dennis
L. Workman
|
64
|
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.
Richard
A.
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.
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.
Jürgen Kliem
– Jürgen Kliem was appointed vice president of strategy and business
development in October 2008. From 2002 to 2008, Mr. Kliem served as general
manager of Trimble’s Survey Division. Mr. Kliem joined Trimble in
July 2000 as part of the Spectra Precision acquisition. From 2000 to 2002, he
was responsible for the Engineering and Construction segment’s European
operations. Prior to Spectra Precision, Mr. Kliem held various leadership roles
at Geotronics, a company acquired by Spectra Precision, directing the European
sales and marketing activities. Before joining Geotronics, Mr. Kliem worked in a
privately-held surveying firm addressing cadastral, construction, plant and
engineering projects. Mr. Kliem received a Diplom Ingenieur degree
from the University of Essen, Germany in 1982.
James A.
Kirkland
–
James A. Kirkland joined Trimble as vice president and general counsel
in July 2008. Prior to joining Trimble, he worked for SpinVox Ltd. from October
2007 to January 2008 as Senior Vice President, Corporate
Development. From October 2003 to September 2007, he served as
general counsel and executive vice president, strategic development at Covad
Communications. Mr. Kirkland also served as senior vice president of
spectrum development and general counsel at Clearwire Technologies, Inc. from
March 2001 to October 2003. Mr. Kirkland began his career in 1984 as an
associate at Mintz Levin and in 1992 he was promoted to partner.
Mr. Kirkland received his BA from Georgetown University in Washington,
D.C. in 1981 and his J.D. from Harvard Law School in
1984.
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 Component Technologies 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.
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.
Current
Economic Conditions and the Global Financial Crisis May Have an Impact on Our
Business and Financial Condition in Ways that We Currently Cannot
Predict.
The
Company’s operations and performance depend on worldwide economic conditions and
their impact on levels of business spending, which have deteriorated
significantly in many countries and regions and may remain depressed for the
foreseeable future. Uncertainties in the financial and credit markets have
caused our customers to postpone purchases, and continued uncertainties may
reduce future sales of our products and services. Continued adverse
economic conditions are likely to depress tax revenue of federal, state and
local government entities, which are significant purchasers of the Company’s
products. Protectionist trade measures that may be adopted in response to the
economic downturn could reduce demand for our products and services overseas.
With the
exception of our Mobile Solutions and Advanced Devices segments, our products
are generally sold through a dealer channel, and our dealers depend on the
availability of credit to finance purchases of our products for their
inventory.
Customer
collections are our primary source of cash. While we believe we have a
strong customer base and have experienced strong collections in the past, if the
current market conditions continue to deteriorate we may experience increased
collection times or greater write-offs, which could have a material adverse
effect on our cash flow. In addition, the Company's results may be
adversely affected if the Company is unable to market, manufacture and ship new
products. Any write-off of goodwill could also negatively impact our financial
results. Finally, our ability to access the capital markets may be
restricted at a time when we would like, or need, to do so, which could have an
impact on our flexibility to pursue additional expansion opportunities and
maintain our desired level of revenue growth in the future. These and other
economic factors could have a material adverse effect on demand for the
Company’s products and services and on the Company’s financial condition and
operating results.
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 expense 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 revenue occurs from orders received and immediately shipped to
customers in the last few weeks and days of each quarter, although our operating
expense tends 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, reduced
control over pricing, and economic conditions which may adversely impact the
viability of our suppliers. 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, our 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
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 harm our results of operations and financial
condition.
Investing
in and Integrating New Acquisitions Could be Costly and May Place a Significant
Strain on Our Management Systems and Resources Which Could Negatively Impact Our
Operating Results
We have
recently acquired a number of companies, 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
expense related to acquisitions; including significant transactions costs
which under the new accounting rules, are required to be expensed rather
than capitalized;
|
|
·
|
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 this goodwill and intangibles
for impairment under established accounting guidelines 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 Revenue, 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 revenue,
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 kinematics 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 U.S., 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. Many of 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 community has begun development of an independent radio navigation
satellite system, known as Galileo. We have access to the preliminary signal
design, which is subject to change and which requires a commercial license from
Galileo authorities. Although an operational Galileo system is several years
away, if we are unable to develop a timely commercial product, or obtain a
timely commercial license, 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
We have
an existing unsecured revolving credit agreement, under which we have an ability
to borrow an aggregate amount of up to $300 million. As of January 2,
2009, $151.0 million was outstanding under this line of credit. Debt incurred
under this agreement could have important consequences, such as:
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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;
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increasing
our vulnerability to adverse economic and industry
conditions;
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limiting
our flexibility in planning for, or reacting to, changes and opportunities
in, our industry, which may place us at a competitive disadvantage;
and
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limiting
our ability to incur additional debt on acceptable terms, if at
all.
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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 Revenue 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 revenue
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 community. 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 2008, our stock price ranged from $14.43 to $41.42, 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;
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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.
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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.
Changes
in Our Effective Tax Rate May Reduce Our Net Income in Future
Periods
A number
of factors may increase our future effective tax rates, including:
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the
jurisdictions in which profits are determined to be earned and
taxed;
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the
resolution of issues arising from tax audits with various tax
authorities;
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changes
in the valuation of our deferred tax assets and
liabilities;
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increases
in expense not deductible for tax purposes, including write-offs of
acquired in-process
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R&D
and impairments of goodwill in connection with
acquisitions;
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changes
in available tax credits;
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changes
in share-based compensation;
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changes
in tax laws or the interpretation of such tax laws, and changes in
generally accepted
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the
repatriation of non-U.S. earnings for which we have not previously
provided for U.S. taxes; and
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challenges
to the transfer pricing policies related to our global supply chain
management structure.
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The
Company is currently in various stages of multiple year examinations by federal,
state, and foreign taxing authorities, including an audit of its 2005 through
2007 tax years by the U.S. Internal Revenue Service (IRS). If the IRS or
the taxing authorities of any other jurisdiction were to successfully challenge
a material tax position, we could become subject to higher taxes and our
earnings would be adversely affected. In addition, proposals for changes in U.S.
tax laws that may be considered or adopted in the future could subject the
Company to higher taxes or result in changes to tax law provisions that
currently provide favorable tax treatment.