UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from____to____
Commission File Number 0-18645
TRIMBLE NAVIGATION LIMITED
(Exact name of registrant as specified in its charter)
California 94-2802192
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) identification No.)
645 North Mary Avenue, Sunnyvale, California 94088
(Address of Principal Executive Offices) (Zip Code)
(408)481-8000
(Registrant's telephone number, including area code)
Not Applicable
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter periods that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
As of June 30, 1996, there were 21,887,400 shares of Common Stock (no par value)
outstanding.
(1)
TRIMBLE NAVIGATION LIMITED
This report contains forward-looking statements within the meaning of Section
27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act
of 1934. Actual results could differ materially from those indicated in the
forward-looking statements as a result of the risk factors set forth in this
report. The Company has attempted to identify forward-looking statements in this
report by placing an asterisk (*) preceding the sentence containing those
statements.
INDEX
Page
PART I. FINANCIAL INFORMATION Number
Item 1. Financial Statements
Condensed Consolidated Balance Sheets -
June 30, 1996 and December 31, 1995 3
Condensed Consolidated Statements of Operations -
Three and Six Months ended June 30, 1996
and 1995 4
Condensed Consolidated Statements of Cash Flows -
Six Months ended June 30, 1996 and 1995 5
Notes to Condensed Consolidated Financial
Statements 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 10
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders 17
Item 6. Exhibits and Reports on Form 8-K 18
SIGNATURES 19
(2)
TRIMBLE NAVIGATION LIMITED
CONDENSED CONSOLIDATED BALANCE SHEETS
June 30, December 31,
1996 1995
- ------------------------------------------------------------------------
(In thousands) (Unaudited) (Note)
ASSETS
Current assets:
Cash and cash equivalents $ 20,080 $ 29,711
Short term investments, at market 64,537 67,451
Accounts receivable, net 37,040 39,123
Inventories 40,633 31,201
Deferred income taxes 726 722
Other current assets 2,407 3,198
------------- -------------
Total current assets 165,423 171,406
------------- -------------
Net property and equipment 22,243 19,751
Intangible assets 1,748 870
Deferred income taxes 867 852
Other assets 3,968 3,884
------------- -------------
Total assets $ 194,249 $ 196,763
------------- -------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt $ 1,326 $ 2,014
Accounts payable 15,661 15,329
Accrued compensation and benefits 6,265 5,745
Other accrued liabilities 8,998 8,340
Customer advances - 1,080
Income taxes payable 2,001 3,002
------------- --------------
Total current liabilities 34,251 35,510
------------- --------------
Noncurrent liabilities:
Noncurrent portion of long-term debt and
other liabilities 30,965 31,316
------------- --------------
Total liabilities 65,216 66,826
-------------- --------------
Shareholders' equity:
Common stock, less notes receivable 123,322 120,449
Common stock warrants 700 700
Retained earnings 4,968 8,699
Unrealized gain (loss) on short
term investments (23) 102
Foreign currency translation adjustment 66 (13)
-------------- --------------
Total shareholders' equity 129,033 129,937
-------------- --------------
Total liabilities and shareholders' equity $ 194,249 $ 196,763
============= ==============
Note: The balance sheet at December 31, 1995, has been derived from the audited
financial statements at that date but does not include all of the information
and footnotes required by generally accepted accounting principles for complete
financial statements.
See accompanying notes to condensed consolidated financial statements.
(3)
TRIMBLE NAVIGATION LIMITED
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
------------------------- ---------------------------
1996 1995 1996 1995
- -------------------------------------------------------------------------------------------
(In thousands, except per share data)
Total revenue $ 58,602 $ 59,012 $ 115,324 $ 108,909
------------ ----------- ------------ -------------
Operating expenses:
Cost of sales 27,037 23,537 53,052 43,619
Research and development 9,144 8,120 17,969 15,944
Sales and marketing 16,844 15,913 32,908 29,724
General and administrative 9,057 5,962 16,468 11,387
------------ ----------- ------------ -------------
Total operating expenses 62,082 53,532 120,397 100,674
------------ ----------- ------------ -------------
Operating income (loss) (3,480) 5,480 (5,073) 8,235
------------ ----------- ------------ -------------
Non operating income (expense):
Interest income 1,150 612 2,397 1,071
Interest and other expenses (926) (1,024) (1,895) (2,097)
Foreign exchange gain (loss) 24 570 (93) 965
------------ ----------- ------------ -------------
Total non operating income (expense) 248 158 409 (61)
------------ ----------- ------------ -------------
Income (loss) before income taxes (3,232) 5,638 (4,664) 8,174
Income tax provision (benefit) (647) 1,351 (933) 1,960
------------ ----------- ------------ -------------
Net income (loss) $ (2,585) $ 4,287 $ (3,731) $ 6,214
============ =========== ============ =============
Net income (loss) per share $ (0.12) $ 0.21 $ (0.17) $ 0.31
============ =========== ============ =============
Weighted average common and
dilutive common equivalent shares 21,791 20,471 21,735 20,308
============ =========== ============ =============
See accompanying notes to condensed consolidated financial statements.
(4)
TRIMBLE NAVIGATION LIMITED
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Six Months Ended
June 30,
1996 1995
- --------------------------------------------------------------------------------
(In thousands)
Net cash provided (used) by operating activities $ (6,041) $ 8,421
-------------- --------------
Cash flow from investing activities:
Purchase of short term investments (46,551) (25,089)
Maturity of short term investments 34,252 14,950
Sales of short term investments 15,212 -
Equity investments (1,400) -
Acquisition of property and equipment (6,624) (6,642)
Capitalized patent expenditures (438) (522)
-------------- --------------
Net cash used in investing activities (5,549) (17,303)
-------------- --------------
Cash flow from financing activities:
Issuance of common stock 2,873 4,918
Collection of notes receivable 49 105
Payment of long-term debt (963) (779)
-------------- --------------
Net cash provided by financing activities 1,959 4,244
-------------- --------------
Net decrease in cash and cash equivalents (9,631) (4,638)
Cash and cash equivalents -- beginning of period 29,711 17,643
-------------- --------------
Cash and cash equivalents -- end of period $ 20,080 $ 13,005
============== ==============
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest $ 787 $ 1,940
Income taxes, net of refunds $ 83 $ 500
See accompanying notes to condensed consolidated financial statements.
(5)
TRIMBLE NAVIGATION LIMITED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - Basis of Presentation:
The condensed consolidated financial statements for the three and six months
ended June 30, 1996, and 1995 presented in this Quarterly Report on Form 10-Q
are unaudited. In the opinion of management, these statements include all
adjustments (consisting only of normal recurring adjustments) necessary for a
fair statement of the results for the interim periods presented. The condensed
consolidated financial statements should be read in conjunction with the audited
consolidated financial statements and notes thereto included in the Company's
Annual Report to Shareholders for the year ended December 31, 1995.
The results of operations for the three month and six month periods ended June
30, 1996 are not necessarily indicative of the results that may be expected for
the year ending December 31, 1996.
NOTE 2 - Inventories:
Inventories consist of the following:
June 30, December 31,
1996 1995
- ---------------------------------------------------------------------------
(In thousands)
Raw materials $ 19,974 $ 15,892
Work-in-process 7,709 6,782
Finished goods 12,950 8,527
------------ --------------
$ 40,633 $ 31,201
------------ --------------
NOTE 3 - New Accounting Standards:
Effective January 1, 1996, the Company adopted Statement of Financial Accounting
Standards ("SFAS") No. 121, "Accounting for the Impairment of Long-Lived Assets
and for Long-Lived Assets to Be Disposed Of." The implementation of this new
accounting standard did not have a material impact on the Company's consolidated
operating results or financial position.
NOTE 4 - Contingencies:
NovAtel Litigation
In November 1994, the Company was named as a defendant in an action
commenced in the United States District Court for the District of Rhode Island,
NovAtel Communication Ltd. v. Trimble Navigation Limited, C.A. No. 94-0498 (ML).
Plaintiff NovAtel sought preliminary and permanent injunctive relief,
unspecified damages and interest thereon, costs and disbursements, including
reasonable attorneys' fees, based upon the Company's alleged infringement of
U.S. Patent No. 5,101,416 (the `416 patent).
(6)
On April 21, 1995, the Company filed suit against NovAtel for infringement
of the Company's U.S. Patent No. 4,754,465 (the `465 patent) in the United
States District Court, Northern District of California, San Jose Division,
Trimble Navigation v. NovAtel Communications Ltd, C.A. No. C95-2405 SI. On
February 27, 1996, Trimble filed a Complaint against NovAtel at the
International Trade Commission in Washington, D.C., alleging unfair acts in the
importation of goods, namely, infringement of its `465 patent, and seeking a
permanent exclusion order to interdict the importation by or on behalf of
NovAtel into this country of infringing GPS receivers manufactured and sold by
NovAtel.
On July 16, 1996, the Company and NovAtel entered into an agreement
resolving all matters in dispute and cross-licensing certain technologies.
The agreement ends the litigation.
Shareholder Litigation
On December 6, 1995, two shareholders filed a class action lawsuit against the
Company and certain directors and officers of the Company. Subsequent to that
date, additional lawsuits were filed by other shareholders. The lawsuits were
subsequently amended and consolidated into one Complaint which was filed on
April 5, 1996. The amended consolidated Complaint asserts claims under the
federal securites laws as a putative class action consisting of all persons who
purchased the common stock of the Company during the period April 18, 1995,
through December 5, 1995 (the "Class Period"). The plaintiffs allege that the
defendants sought to induce the members of the Class to purchase the Company's
common stock during the Class Period at artificially inflated prices. The
plaintiffs seek unspecified recissory or compensatory damages with interest
thereon as well as reasonable attorneys' fees and extraordinary equitable and/or
injunctive relief. The Company has filed a motion to dismiss which is scheduled
to be heard by the Court on August 16, 1996. The Company does not believe that
it is possible to predict the outcome of this litigation.
DAC Arbitration and Litigation
In February 1995, DAC International Inc. ("DAC"), then a distributor and
sales representative of the Company, terminated its sales representative
agreement with the Company and thereafter filed an arbitration claim against the
Company in Palo Alto, California, seeking damages of approximately $2,100,000.
The damages alleged included claims for (i) damages resulting from the Company's
failure to assist DAC in depleting its inventory of the Company's products by
filling purchase orders from DAC's inventory list, (ii) unpaid commissions on
certain sales of Company products, (iii) reimbursement for certain marketing
expenses, and (iv) damages resulting from the Company's "debooking" of certain
orders for its TNL 8100 product. On July 15, 1996, the Arbitrator issued a Final
Liability and Opinion Award which called for the Company to pay a total of
$1,021,000 including interest, of which $712,000 had already been paid on June
26, 1996. The Company paid the additional $309,000 on July 16, 1996, in order to
satisfy the Arbitrator's award. In the second quarter of 1996 the company
charged $850,000 against income in addition to the $390,000 that was accrued in
1995 to cover the expected settlement.
(7)
On March 26, 1996, DAC filed a lawsuit entitled DAC International, Inc. v
Trimble Navigation Ltd., Case No. 96-02032, filed in the District Court of
Travis County, Texas. The Complaint includes those claims discussed above over
which the arbitrator did not have jurisdiction. In addition, the Complaint makes
claims of breach of contract, fraud and negligent misrepresentation. The
Complaint also seeks declaratory judgment that the claims asserted are not
subject to mandatory arbitration, unspecified compensatory and punitive damages,
and attorneys' fees and costs. In April 1996, the Company removed this case to
the Federal District Court for the Western District of Texas.
On August 6, 1996, Trimble agreed to pay DAC $500,000 which was charged to
income in the second quarter of 1996. As a result of this agreement all
litigation between the Company and DAC has been settled.
Other Litigation
In July 1993, an individual filed a Complaint against the Company in which
the individual alleges the Company has an obligation to him for commissions
earned and services provided in an amount in excess of $1,500,000. In June 1995,
the Company's motion for summary judgment on all claims was granted by the
court. The individual has filed an appeal for which no hearing date has yet been
set. The Company believes the Complaint is without merit and intends to continue
to defend itself vigorously.
A former shareholder has filed an action against the Company claiming rights to
shares that were previously canceled on the Company's stock records pursuant to
lost stock certificate indemnification agreements. The Company does not believe
that there will be any adverse consequences to the Company as a result of this
case.
In October 1995, an employee who was terminated by the Company in 1992 filed a
Complaint against the Company alleging that his incentive stock options
continued to vest and be exercisable subsequent to his termination. He seeks
damages in excess of $1,000,000. The Company has filed a general denial to the
Complaint, and the matter is currently in discovery. The Company believes that
the complaint is without merit and intends to defend itself vigorously.
Note 5 - Line of Credit
In August 1995, the Company entered into a $30,000,000 unsecured line of credit
agreement, that expires in July 1997, with two banks. The agreement enables the
Company to borrow up to $30,000,000 provided that certain financial and other
covenants are met. The agreement provides for payment of a commitment fee of
0.5% for the unused portion of the line of credit. Borrowings bear interest at
the higher of (i) one of the bank's annual prime rate and (ii) the federal funds
rate plus 0.5%. To date no borrowings have been made under the line of credit.
Under the current line of credit the Company is restricted from paying
dividends.
As of June 30, 1996, the Company was not in compliance with certain covenants of
the line of credit agreement. The agreement was subsequently amended and the
Company is currently in compliance.
Note 6 - Acquisition
On July 2, 1996, the Company acquired the net assets of Terra Corporation, a New
Mexico aviation corporation, in exchange for 140,860 shares of the Company's
common stock and options to purchase 12,000 shares of the Company's common
stock. This acquisition will be accounted for as a purchase and substantially
all of the purchase price is expected to be allocated to goodwill.
(8)
TRIMBLE NAVIGATION LIMITED
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Revenues
Revenues for the three month and six month periods ended June 30, 1996, were
$58,602,000 and $115,324,000 as compared with $59,012,000 and $108,909,000 in
the corresponding 1995 periods. The table below shows revenues during the
relevant period for each of the Company's business units:
Quarter Ended June 30, Six Months Ended June 30,
-------------------------------------- ----------------------------------------
Increase/ Increase/
1996 1995 (Decrease) 1996 1995 (Decrease)
- -----------------------------------------------------------------------------------------------------------------
(In thousands)
Surveying and mapping 34,213 35,674 (4%) 66,591 64,668 3%
Tracking and communications 15,588 13,384 16% 29,355 23,293 26%
Navigation, aviation and marine 6,102 6,879 (11%) 12,294 13,771 (11%)
Military 2,699 3,075 (12%) 7,084 7,177 (1%)
----------- ------------ ------------- -------------
Total $ 58,602 $ 59,012 (1%) $ 115,324 $ 108,909 6%
----------- ------------ ------------- -------------
Surveying and Mapping
The decrease in sales in the second quarter of 1996 compared to second quarter
of 1995 was due to a slowdown in sales in Europe and Japan. Also during the
quarter, the Company experienced delays in shipping newly introduced products
and was unable to ship them until late in the quarter. The decrease in sales of
survey and mapping products in the second quarter of 1996 was partially offset
by an additional $1,320,000 of revenue resulting from the early termination of a
contract by a customer in Japan.
Tracking and Communications
Tracking and communications revenues were higher primarily as a result of
revenues recognized related the contract with American Mobile Satellite
Corporation (AMSC) which is discussed in more detail below. Tracking and
communications revenues did not increase as much as expected due in part to
lower sales of in vehicle navigation GPS boards by the OEM group that were
expected to be sold as "after market" products. The Company believes that this
slowdown was as a result of a shift in demand from "after market" to new car
sales. There can be no assurance that the growth rates in either of these
markets will be sustained in the near future.
(9)
In April 1995, the Company signed a large contract for the supply of
Galaxy/GPS land mobile satellite terminals to American Mobile Satellite
Corporation (AMSC), a Reston, Virginia, based company that provides a variety of
voice and data services via satellite. AMSC contracted for delivery of product
beginning in mid-1995 and continuing through 1996. AMSC requested late in the
fourth quarter of 1995 that the Company cease delivery in part due to delays in
their completion of software. Shipments under the original contract were halted
in the fourth quarter of 1995 and the contract was amended. $1,080,000 of
contract renegotiation fees were recognized in the first quarter of 1996. The
amended contract between the Company and AMSC calls for production line shutdown
fees for the time that Trimble is not producing product for shipment to AMSC.
Due to the uncertainty about AMSC's ability to pay, revenues for products
shipped and contractual shutdown fees were not recognized until collection was
considered probable. In the second quarter of 1996, the Company recognized
$1,700,000 in revenue from products shipped in December 1995 and March 1996 and
$1,000,000 of shutdown fees all of which have been paid.
In June 1996, AMSC announced the conclusion of a round of financing sufficient
to continue operations and to initiate discussions about the resumption of
shipments of the Galaxy product. At this time management is not able to
determine when shipments under the amended contract will recur.
Aviation and Marine Navigation
Sales of navigation products were lower in the 1996 periods as compared
to the 1995 periods, due in part to lower sales of handheld products. Sales of
product acquired from Terra Corporation (see "Liquidity and Capital Resources"
for additional information) are expected to increase aviation revenues for the
rest of the year. *The Company considers its aviation products to be a long term
growth opportunity. *It believes that success in this area will be dependent
upon the success of a current strategic alliance with Honeywell. *Significant
shipments to Honeywell are expected to start in the third quarter of 1996. The
Company's ability to ship such products are dependent upon FAA certification of
these products. The Company expects to receive certification in the third
quarter of 1996.
Military
Military sales are highly dependent on contracts which are subject to government
approval and are, therefore, expected to continue to fluctuate from period to
period. The Company believes that opportunities in this market have been
substantially reduced by cutbacks in U.S. and foreign military spending.
Revenue outside the US
Sales to unaffiliated customers in locations outside the U.S. comprised
approximately 48% of revenue in the first six months of 1996 and approximately
55% in the first six months of 1995. During 1996, lower revenues in Europe
affected many of the Company's product lines, and in Japan revenues were lower,
which primarily relating to surveying and mapping products. The Company
anticipates that export revenue and sales made by its subsidiaries in locations
outside the U.S. will continue to account for a significant portion of its
revenue, and therefore the Company is subject to the risks inherent in these
sales, including unexpected changes in regulatory requirements, exchange rates,
governmental approval, tariffs or other barriers. Even though the U.S.
Government announced on March 29, 1996, that it would support and maintain the
GPS system, as well as eliminate the use of Selective Availability (S/A) (a
method of degrading GPS accuracy) in certain foreign markets, there may be a
reluctance to purchase products based on GPS technology given the control of GPS
by the U.S. Government. The Company's results of operations could be adversely
affected if the Company were unable to continue to generate significant sales in
locations outside the U.S.
(10)
Gross Margin
Gross margin varies on a quarterly basis due to a number of factors,
including product mix, domestic versus international sales, customer type, the
effects of production volumes and fixed manufacturing costs on unit product
costs and new product start-up costs. Gross margin as a percentage of total
product revenue was 54% in both the three month and six month periods ended June
30, 1996, as compared with 60% in both of the corresponding 1995 periods. These
margins are enhanced by the positive impact of revenues recognized of $2,300,000
and $1,080,000 in the second and first quarters of 1996, respectively. (See
"Results of Operations - Revenue" for more details.) While these items are large
and non- recurring, the Company has a history of recording such items in the
past, including revenues of $1,333,000 and $1,000,000 recorded in the third
quarter and fourth quarters of 1995, respectively. There can however be no
assurance that similar items will recur in the future. The lower gross margin
percentage in the 1996 period primarily reflects a shift in product mix from
higher margin surveying and mapping sales to lower margin tracking and
communications sales and decreases in the margins obtained on sales of surveying
and mapping products. There is no assurance that these margins will be sustained
because of mix changes within and among the business units, market pressures on
unit selling prices, fluctuations in unit manufacturing costs and other factors.
In the future the Company expects a higher percentage of its business to be
conducted through alliances with strategic partners, e.g. Honeywell. As a result
of volume pricing and the assumption of certain operating costs by the partner,
margins on this business are likely to be lower than sales directly to end
users.
Operating Expenses
The following table shows operating expenses for the periods indicated and
should be read in conjunction with the narrative descriptions of those operating
expenses below:
Quarter Ended June 30, Six Months Ended June 30,
------------------------------------- ----------------------------------------
1996 1995 Increase 1996 1995 Increase
- --------------------------------------------------------------------------------------------------------
(In thousands)
Research and development 9,144 8,120 13% 17,969 15,944 13%
Sales and marketing 16,844 15,913 6% 32,908 29,724 11%
General and administrative 9,057 5,962 52% 16,468 11,387 45%
----------- ------------ ------------- -------------
Total $ 35,045 $ 29,995 17% $ 67,345 $ 57,055 18%
----------- ------------ ------------- -------------
(11)
Research and Development
Research and development increased as a result of continued aggressive
development of future products.
The Company expects that a significant portion of future revenues will continue
to be derived from sales of newly introduced products. Consequently, the
Company's future success depends on its ability to continue to develop and
manufacture new competitive products. Advances in product technology will
require continued substantial investment in research and development in order to
maintain and enhance the Company's market position and achieve high gross profit
margins. Development and manufacturing schedules for technology products are
difficult to predict, and there can be no assurance that the Company will
achieve timely initial customer shipments of new products. The timely
availability of these products in volume and their acceptance by customers are
important to the future success of the Company. In addition, certain of the
Company's products are subject to governmental and similar certifications before
they can be sold. For example, FAA certification is required for all aviation
products. An inability or delay in obtaining such certifications could have an
adverse effect on the Company's operating results.
Sales and Marketing
The increased expense in the 1996 period is a primary result of the
expansion of the Company's selling efforts into new geographic areas.
The Company's future growth will depend upon the timely development and
continued viability of the markets in which the Company currently competes and
upon the Company's ability to continue to identify and exploit new markets for
its products. In addition, the Company has encountered significant competition
in selected markets, and the Company expects such competition to intensify as
the market for GPS applications receives acceptance. Several of the Company's
competitors are major corporations with substantially greater financial,
technical, marketing and manufacturing resources. Increased competition is
likely to result in reduced market share and in price reductions of GPS-based
products, which could adversely affect the Company's revenues and profitability.
The increase in competition has also led to a longer sales cycle which has the
effect of reducing the ratio of revenues to sales and marketing expenses.
General and Administrative
The increased general and administrative expense in the 1996 second quarter
primarily reflects higher legal fees and costs of settling litigation. The
Company expects that legal fees and settlement costs will decrease as a result
of the settlement of litigation with DAC and NovAtel in July 1996. Costs
associated with these settlements were accrued into the quarter ended June 30,
1996. See Note 4 of the Condensed Consolidated Financial Statements for more
details.
Income Taxes
The Company recorded a tax benefit of 20% of the loss before income taxes for
the six months ended June 30, 1996. The income tax rates of 20% and 24% for the
first six months ended June 30, 1996 and 1995 respectively, are less than the
federal statutory rate primarily due to the realization of previously reserved
deferred tax assets. The 1996 rate is lower than the 1995 rate due to lower
foreign taxes.
(12)
Liquidity and Capital Resources
For the six month period ended June 30, 1996, the cash used in operating
activities was $6,041,000 as compared to an inflow of $8,421,000 in the same
period in 1995. Cash provided by sales of Common Stock in 1996 represents
proceeds from purchases made pursuant to the Company's stock option and employee
stock purchase plans and totaled $2,873,000 for the six months ended June 30,
1996. During the last six months the Company has relied primarily on cash
provided by financing activities and net sales of short-term investments to fund
operations, capital expenditures and other investing activities. The Company's
ability to generate cash from operations will depend in a large part on revenues
and the rate of collections of accounts receivable. Management believes that its
cash, cash equivalents and short-term investment balances, with its existing
credit line, will be sufficient to meet its anticipated cash needs for at least
one year. At June 30, 1996, the Company had cash and cash equivalents of
$20,080,000 and short-term investments of $64,537,000.
In February 1996, the Company announced that it had approved a discretionary
program whereby up to 600,000 shares of its common stock may be repurchased to
offset potential dilutive effects to earnings per share from the issuance of
stock options. The Company intends to use existing cash, cash equivalents and
short-term investments to finance any stock repurchases under this program. No
shares have been purchased under this program to date.
On July 2, 1996, the Company acquired the net assets of Terra Corporation,
a New Mexico aviation corporation, in exchange for 140,860 shares of the
Company's common stock and options to purchase 12,000 shares of the Company's
common stock. This acquisition will be accounted for as a purchase and
substantially all of the purchase price is expected to be allocated to goodwill.
There can be no assurances that this acquisition will be successful.
Other Risk Factors
Revenue has tended to fluctuate on a quarterly basis due to the timing of
shipments of products under contracts, the sale of license rights and seasonal
patterns favoring spring and summer for the surveying and mapping business. This
pattern was not repeated in 1996 and the Company can give no assurances that
there will be any reversion to the seasonal revenue trends during the third
quarter of 1996. A significant portion of quarterly revenues occur from orders
received and immediately shipped to customers in the last few weeks and days of
a quarter. If orders are not received, or shipments were to be delayed a few
days at the end of a quarter, operating results would be significantly adversely
impacted. The visibility and predictability of future revenues are difficult to
predict and projections are primarily based on historical models which are not
necessarily accurate representations of the future.
A significant number of components used by the Company in the manufacture of its
products are obtainable only from sole sources. Furthermore, in many cases,
despite the availability of multiple sources, the Company may select a single
source in order to maintain quality control and to develop a strategic
relationship with the supplier. However, if the Company is unable to obtain a
sufficient supply of these components from its current vendors, it is likely the
Company could experience a delay in product shipments that would adversely
affect the Company's results of operations and damage customer relationships
until an alternative source could be obtained. In addition, the Company has in
the past experienced shortages of semiconductors and other components that have
impacted the Company's ability to build inventory to ship on demand.
(13)
Scarcity of certain components, especially semiconductors, has required the
Company to order greater quantities, for safety stock, than under normal supply
conditions. While in the past it was possible to delay receipt of these
components, or cancel orders, it may become increasingly difficult to do this
leaving the Company with an excess supply of these components. While the Company
does not believe that it has any major problems of supply at this time it is
possible that they may occur in the future.
The Company has a relatively fixed cost structure in the short term which is
determined by the business plans and strategies the Company intends to implement
in the markets it addresses. As a result percentage increases or decreases in
revenues have a significantly higher percentage impact on net income or losses
and earnings per share than a company with a more variable cost structure.
The current tax rate of 20% assumes a return to profitability in the second half
of the year. The tax rate could change significantly if this does not occur,
resulting in additional tax expense in future periods.
* In the longer term the Company believes that the OEM market will comprise
a significant portion of the Company's business. The OEM market differs in
nature from most of the Company's markets because volumes are high and margins
relatively low. OEM customers are extremely price sensitive. As costs decrease
through technological advances these advances will be passed on to the customer.
To compete in the OEM market requires high volume production and manufacturing
techniques. Customers expect high quality standards with very low defect rates.
The Company is relatively inexperienced compared to competitors with far greater
resources in such high volume manufacturing and associated support activities.
The Company's stock price is subject to significant volatility. If revenues
and/or earnings fail to meet the expectations of the investment community, there
could be an immediate and significant impact on the trading price of the
Company's stock.
The value of the Company's products relies substantially on the Company's
technical innovation in fields in which there are many current patent filings.
The Company recognizes that as new patents are issued or are brought to the
Company's attention by the holders of such patents, it may be necessary for the
Company to withdraw products from the market, take a license from such patent
holders, or redesign its products. The Company does not believe any of its
products infringe patents or other proprietary rights of third parties, but
cannot be certain they do not do so. In addition, the legal costs and
engineering time required to safeguard intellectual property or to defend
against litigation could become a significant expense of operations. Such events
could have a material adverse effect on the Company's revenues or profitability.
The Company is continually evaluating alliances and external investments in
technologies related to its business and has already entered into alliances and
made relatively small investments in GPS related technology companies.
Acquisitions of companies, divisions of companies, or products and alliances
entail numerous risks, including (i) the potential inability to successfully
integrate acquired operations and products or to realize anticipated synergies,
economies of scale or other value, (ii) diversion of management's attention, and
(iii) loss of key employees of acquired operations. Any such problems could have
a material adverse effect on the Company's business, financial condition and
results of operations. No assurances can be given that the Company will not
incur problems from current or future alliances, acquisitions, or investments.
Furthermore, there can be no assurance that the Company will realize value from
any such alliances, acquisitions, or investments.
(14)
The Company's products rely on signals from the GPS Navstar satellite system
built and maintained by the U.S. Department of Defense. Navstar satellites and
their ground support systems are complex electronic systems subject to
electronic and mechanical failures and possible sabotage. Some of these 24
satellites have exceeded their design lives of 7.5 years and are also subject to
damage by the hostile space environment in which they operate. Repair of damaged
or malfunctioning satellites is impossible. If a significant number of
satellites were to become inoperable, there could be a substantial delay before
they are replaced with new satellites. A reduction in the number of operating
satellites would impair the current utility of the GPS system and the growth of
current and additional market opportunities. In addition, there can be no
assurance that the U.S. Government will remain committed to the operation and
maintenance of GPS satellites over a long period of time, nor that policies of
the U.S. Government allowing for the use of GPS without charge will remain
unchanged. Because of ever increasing commercial applications of GPS, other U.S.
Government agencies may become involved in the administration or the regulation
of the use of GPS signals. Any of the foregoing factors could affect the
willingness of buyers of the Company's products to select GPS-based systems
instead of products based on competing technologies. Any resulting change in
market demand for GPS products would have a material adverse effect on the
Company's financial results. Certain European government organizations have
expressed concern regarding the susceptibility of GPS equipment to intentional
or inadvertent signal interference. Such concern could translate into reduced
demand for GPS products in certain geographic regions.
(15)
PART II. OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The annual meeting of shareholders of the company was held in
Sunnyvale, California, on May 2, 1996.
An election of Directors was held with the following individuals
being elected to the Company's Board of Directors.
VOTES
For Withheld
Robert S. Cooper 17,939,776 65,525
Zvonko Fazarinc 17,933,419 71,882
John B. Goodrich 17,896,188 109,113
William Hart 17,939,076 66,225
Bradford W. Parkinson 17,941,391 63,910
Charles R. Trimble 17,941,441 63,860
Other matters voted upon at the meeting and the results of the voting with
respect to each such matter were as follows:
(1) Approval of an increase of 600,000 shares of Common Stock available for
issuance under the Company's 1993 Stock Option Plan (16,040,908 in favor,
1,689,509 opposed, 256,619 abstentions, 18,265 broker non-votes).
(2) Approval of an increase of 100,000 shares of Common Stock available for
issuance under the Company's 1990 Director Stock Option Plan (17,016,236 in
favor, 708,737 opposed, 261,763 abstentions, 18,565 broker non-votes).
(3) Ratification of the appointment of Ernst & Young LLP as the Company's
independent auditors for the year ending December 31, 1996 (17,871,178 in favor,
77,244 opposed, 55,879 abstentions, 0 broker non-votes).
(16)
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
A. Exhibits Page
Number
10.54 Revolving Credit Agreement-First Amendment 19-21
10.55 Revolving Credit Agreement-Second Amendment 22-24
11.1 Computation of Earnings (Loss) Per Share 25
27 Financial Data Schedule 26
B. Report on Form 8-K
There were no reports on Form 8-K filed during the
quarter ended June 30, 1996.
(17)
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
TRIMBLE NAVIGATION LIMITED
(Registrant)
By: /s/ John H. Barnet
John H. Barnet
(Executive Vice President Finance and Chief Financial Officer)
DATE: August 12, 1996
(18)
TRIMBLE NAVIGATION LIMITED
FIRST AMENDMENT
to
REVOLVING CREDIT AGREEMENT
This FIRST AMENDMENT (the "Amendment"), dated as of April 30, 1996, is
among Trimble Navigation Limited (the "Borrower"), The First National Bank of
Boston ("FNBB"), Mellon Bank, N.A. ("Mellon" and together with FNBB, the
"Banks"), and The First National Bank of Boston as agent for itself and the
other Banks (the "Agent").
WHEREAS, the Borrower, the Banks and the Agent are parties to that
certain Revolving Credit Agreement, dated as of August 4, 1995 (the "Credit
Agreement"), pursuant to which the Banks, upon certain terms and conditions,
have made loans to and may issue letters of credit for the benefit of the
Borrower; and
WHEREAS, the Borrower had requested that the Banks agree, and the Banks
have agreed, on the terms and subject to the conditions set forth herein, to
make certain changes to the Credit Agreement;
NOW, THEREFORE, the parties hereto hereby agree as follows:
P 1. Defined Terms. Capitalized terms which are used herein
without definition and which are defined in the Credit Agreement shall
have the same meanings herein as in the Credit Agreement.
P 2. Amendment of Credit Agreement. Section 9.1 of the Credit
Agreement is hereby amended by deleting from clause (i) of such P 9.1
the parenthetical "(treated as a single accounting period)".
P 3. Affirmation and Acknowledgment of the Borrower. The Borrower
hereby ratifies and confirms all of its Obligations to the Banks, including,
without limitation, the Revolving Credit Loans, and the Borrower hereby affirms
its absolute and unconditional promise to pay to the Banks the Revolving Credit
Loans and all other amounts due under the Credit Agreement as amended hereby.
P 4. Representations and Warranties. The Borrower hereby represents
and warrants to the Banks as follows:
(a) The execution and delivery by the Borrower of this
Amendment and the performance by the Borrower of its obligations and
agreements under this Amendment and the Credit Agreement as amended
hereby, are within the corporate authority of the Borrower, have been
authorized by all necessary corporate proceedings on behalf of the
Borrower, and do not and will not contravene any provision of law or
any of the Borrower's charter, other incorporation papers, by-laws or
any stock provision or any amendment thereof or of any indenture,
agreement, instrument or undertaking binding upon the Borrower.
(19)
(b) This Amendment and the Credit Agreement as amended hereby
constitute legal, valid and binding obligations of the Borrower,
enforceable in accordance with their respective terms, except as
limited by bankruptcy, insolvency, reorganization, moratorium or
similar laws relating to or affecting generally the enforcement of
creditors' rights.
(c) No approval or consent of, or filing with, any
governmental agency or authority is required to make valid and legally
binding the execution, delivery or performance by the Borrower of this
Amendment or the Credit Agreement as amended hereby, or the
consummation by the Borrower of the transactions among the parties
contemplated hereby and thereby or referred to herein.
(d) The representations and warranties contained in P 6 of
the Credit Agreement were correct at and as of the date made. Except to
the extent that the facts upon which such representations and
warranties were based have changed in the ordinary course of business
(which changes, either singly or in the aggregate, have not been
materially adverse) and after giving effect to the provisions hereof,
such representations and warranties also are correct at and as of the
date hereof.
(e) The Borrower has performed and complied in all materials
respects with all terms and conditions herein required to be performed
or complied with by it prior to or at the time hereof, and as of the
date hereof, after giving effect to the provisions hereof, there exists
no Event of Default or Default.
P 6. Effectiveness. The effectiveness of this Amendment shall be
subject to the satisfaction of the following condition:
(a) Delivery. Each of the Borrower, the Banks and the
Agent shall have executed and delivered this Amendment.
P 7. Miscellaneous Provisions. (a) Except as otherwise expressly
provided by this Amendment, all of the terms, conditions and provisions of the
Credit Agreement shall remain the same. It is declared and agreed by each of the
parties hereto that the Credit Agreement, as amended hereby, shall continue in
full force and effect, and that this Amendment and the Credit Agreement shall be
read and construed as one instrument.
(b) THIS AMENDMENT IS INTENDED TO TAKE EFFECT AS AN AGREEMENT
UNDER SEAL AND SHALL BE CONSTRUED ACCORDING TO AND GOVERNED BY THE LAWS
OF THE COMMONWEALTH OF MASSACHUSETTS.
(c) This Amendment may be executed in any number of
counterparts, but all such counterparts shall together constitute but
one instrument. In making proof of this Amendment it shall not be
necessary to produce or account for more than one counterpart signed by
each party hereto by and against which enforcement hereof is sought.
(20)
(d) Pursuant to P 15 of the Credit Agreement, the Borrower
hereby agrees to pay to the Agent, on demand by the Agent, all
reasonable out-of-pocket costs and expenses incurred or sustained by
the Agent in connection with the preparation of this Amendment
(including reasonable legal fees).
IN WITNESS WHEREOF, the parties hereto have executed this Amendment as
of the date first written above.
TRIMBLE NAVIGATION LIMITED
By: /s/ John H. Barnet
Executive Vice President and
Chief Financial Officer
THE FIRST NATIONAL BANK OF
BOSTON, Individually, and as Agent
By: /s/ Lee A. Merkle
Vice President
MELLON BANK, N.A.
By: /s/ Jane R. Westrich
Vice President
(21)
TRIMBLE NAVIGATION LIMITED
SECOND AMENDMENT
to
REVOLVING CREDIT AGREEMENT
This SECOND AMENDMENT (the "Amendment"), dated as of June 30, 1996, is
among Trimble Navigation Limited (the "Borrower"), The First National Bank of
Boston ("FNBB"), Mellon Bank, N.A. ("Mellon" and together with FNBB, the
"Banks"), and The First National Bank of Boston as agent for itself and the
other Banks (the "Agent").
WHEREAS, the Borrower, the Banks and the Agent are parties to that
certain Revolving Credit Agreement, dated as of August 4, 1995 (as amended by
the First Amendment to Revolving Credit Agreement, dated as of April 30, 1996,
the "Credit Agreement"), pursuant to which the Banks, upon certain terms and
conditions, have made loans to and may issue letters of credit for the benefit
of the Borrower; and
WHEREAS, the Borrower had requested that the Banks agree, and the Banks
have agreed, on the terms and subject to the conditions set forth herein, to
make certain changes to the Credit Agreement;
NOW, THEREFORE, the parties hereto hereby agree as follows:
P. 1. Defined Terms. Capitalized terms which are used herein
without definition and which are defined in the Credit Agreement shall have
the same meanings herein as in the Credit Agreement.
P. 2. Amendment of Credit Agreement. Section 9.1 of the Credit
Agreement is hereby amended by adding the following proviso at the end of
such P. from clause (I) of such P. 9.1:
; provided, however, solely for the fiscal quarter ended June
30, 1996, so long as each of Consolidated Net Deficit and
Consolidated Net Operating Deficit shall not be greater than
$4,500,000, the Borrower shall not be required to comply with
clause (I) of this P. 9.1
P. 3. Affirmation and Acknowledgment of the Borrower. The Borrower
hereby ratifies and confirms all of its Obligations to the Banks, including,
without limitation, the Revolving Credit Loans, and the Borrower hereby affirms
its absolute and unconditional promise to pay to the Banks the Revolving Credit
Loans and all other amounts due under the Credit Agreement as amended hereby.
P. 4. Representations and Warranties. The Borrower hereby represents
and warrants to the Banks as follows:
(a) The execution and delivery by the Borrower of this
Amendment and the performance by the Borrower of its obligations and
agreements under this Amendment and the Credit Agreement as amended
hereby, are within the corporate authority of the Borrower, have been
authorized by all necessary corporate proceedings on behalf of the
Borrower, and do not and will not contravene any provision of law or
any of the Borrower's charter, other incorporation papers, by-laws or
any stock provision or any amendment thereof or of any indenture,
agreement, instrument or undertaking binding upon the Borrower.
(22)
(b) This Amendment and the Credit Agreement as amended hereby
constitute legal, valid and binding obligations of the Borrower,
enforceable in accordance with their respective terms, except as
limited by bankruptcy, insolvency, reorganization, moratorium or
similar laws relating to or affecting generally the enforcement of
creditors' rights.
(c) No approval or consent of, or filing with, any
governmental agency or authority is required to make valid and legally
binding the execution, delivery or performance by the Borrower of this
Amendment or the Credit Agreement as amended hereby, or the
consummation by the Borrower of the transactions among the parties
contemplated hereby and thereby or referred to herein.
(d) The representations and warranties contained in P. 6 of
the Credit Agreement were correct at and as of the date made. Except to
the extent that the facts upon which such representations and
warranties were based have changed in the ordinary course of business
(which changes, either singly or in the aggregate, have not been
materially adverse) and after giving effect to the provisions hereof,
such representations and warranties also are correct at and as of the
date hereof.
(e) The Borrower has performed and complied in all materials
respects with all terms and conditions herein required to be performed
or complied with by it prior to or at the time hereof, and as of the
date hereof, after giving effect to the provisions hereof, there exists
no Event of Default or Default.
P. 6. Effectiveness. The effectiveness of this Amendment shall be
subject to the agent of this Amendment executed by each of the Borrower,
the Banks and the Agent.
P. 7. Miscellaneous Provisions. (a) Except as otherwise expressly
provided by this Amendment, all of the terms, conditions and provisions of the
Credit Agreement shall remain the same. It is declared and agreed by each of the
parties hereto that the Credit Agreement, as amended hereby, shall continue in
full force and effect, and that this Amendment and the Credit Agreement shall be
read and construed as one instrument.
(b) THIS AMENDMENT IS INTENDED TO TAKE EFFECT AS AN AGREEMENT
UNDER SEAL AND SHALL BE CONSTRUED ACCORDING TO AND GOVERNED BY THE LAWS OF THE
COMMONWEALTH OF MASSACHUSETTS.
(c) This Amendment may be executed in any number of
counterparts, but all such counterparts shall together constitute but one
instrument. In making proof of this Amendment it shall not be necessary to
produce or account for more than one counterpart signed by each party hereto by
and against which enforcement hereof is sought.
(23)
(d) Pursuant to P. 15 of the Credit Agreement, the Borrower
hereby agrees to pay to the Agent, on demand by the Agent, all reasonable
out-of-pocket costs and expenses incurred or sustained by the Agent in
connection with the preparation of this Amendment (including reasonable legal
fees).
IN WITNESS WHEREOF, the parties hereto have executed this Amendment as
of the date first written above.
TRIMBLE NAVIGATION LIMITED
By: /s/ John H. Barnet
Executive Vice President
Chief Financial Officer
THE FIRST NATIONAL BANK OF
BOSTON, Individually, and as Agent
By: /s/Elizabeth C. Evertt
Vice President
MELLON BANK, N.A.
By: /s/ V. Charles Jackson
Senior Vice President
(24)
TRIMBLE NAVIGATION LIMITED
EXHIBIT 11.1
Computation of Earnings (Loss) Per Common Share
Three Months Ended Six Months Ended
June 30, June 30,
1996 1995 1996 1995
- -------------------------------------------------------------------------------------------------------------
(In thousands, except per share data)
PRIMARY EARNINGS (LOSS) PER COMMON SHARE
Computation of common and common
equivalent shares outstanding:
Common stock outstanding 21,791 19,079 21,735 18,970
Common stock options - 1,194 - 1,161
Common stock warrants - 198 - 177
------------ ------------ ------------ -------------
Total weighted average common
and dilutive common equivalent shares outstanding 21,791 20,471 21,735 20,308
============ ============ ============ =============
Net income (loss) $ (2,585) $ 4,287 $ (3,731) $ 6,214
============ ============ ============ =============
Primary earnings (loss) per share $ (0.12) $ 0.21 $ (0.17) $ 0.31
============ ============ ============ =============
FULLY DILUTED EARNINGS (LOSS) PER COMMON SHARE
Computation of common and common
equivalent shares outstanding:
Common stock outstanding 21,791 19,079 21,735 18,970
Common stock options - 1,255 - 1,203
Common stock warrants - 210 - 185
------------ ------------ ------------ -------------
Total weighted average common
and dilutive common equivalent shares outstanding 21,791 20,544 21,735 20,358
============ ============ ============ =============
Net income (loss) $ (2,585) $ 4,287 $ (3,731) $ 6,214
============ ============ ============ =============
Fully diluted earnings (loss) per share $ (0.12) $ 0.21 $ (0.17) $ 0.31
============ ============ ============ =============
(25)
5
1,000
6-MOS
DEC-31-1996
JUN-30-1996
20,080
64,537
37,040
0
40,633
165,423
22,243
0
194,249
34,251
0
0
0
123,322
5,711
194,249
115,324
115,324
53,052
53,052
67,345
0
1,895
(4,664)
(933)
(3,731)
0
0
0
(3,731)
(0.17)
(0.17)
